Orders issued under Bank Merger Act - Legal Developments

Federal Reserve Bulletin, Feb, 2002

SunTrust Bank Atlanta, Georgia

Order Approving the Acquisition and Establishment of Branches

SunTrust Bank ("Bank"), a state member bank and a wholly owned subsidiary of SunTrust Banks, Inc., Atlanta, Georgia ("SunTrust"), has applied under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. [section] 1828(c)) ("Bank Merger Act") to acquire the Florida operations of The Huntington National Bank, Columbus, Ohio ("Huntington"). (1) Bank also has applied under section 9 of the Federal Reserve Act (12 U.S.C. [section] 321) ("FRA") to establish branches at the Florida locations of Huntington described in Appendix A.

Notice of the transaction, affording interested persons an opportunity to submit comments, has been given in accordance with the Bank Merger Act and the Board's Rules of Procedure (12 C.F.R. 262.3(b)). As required by the Bank Merger Act, reports on the competitive effects of the merger were requested from the United States Attorney General and the other federal banking agencies. The time for filing comments has expired, and the Board has considered the application and all the facts of record in light of the factors set forth in the Bank Merger Act and section 9 of the FRA.

SunTrust is the twelfth largest banking organization in the United States, with $103 billion in total assets. (2) Bank is the third largest depository institution in Florida, controlling deposits of $20.9 billion, representing 10.1 percent of the total deposits in depository institutions in the state ("state deposits"). Huntington is the eighth largest depository institution in Florida, controlling deposits of $4.3 billion, representing 2.1 percent of state deposits. (3) Following consummation, Bank would remain the third largest depository institution in Florida, controlling deposits of approximately $25.3 billion, representing 12.2 percent of state deposits.

Interstate Analysis

Section 102 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Riegle-Neal Act") authorizes a bank to merge with another bank under certain conditions unless, before June 1, 1997, the home state of one of the banks involved in the transaction adopted a law expressly prohibiting merger transactions involving out-of-state banks. (4) For the purposes of the Riegle-Neal Act, the home state of Bank is Georgia, and the home state of the Huntington branches is Florida. (5) Florida and Georgia have enacted legislation allowing interstate mergers between banks in their states and out-of-state banks pursuant to the provisions of the Riegle-Neal Act. Bank has provided a copy of its Bank Merger Act application to all the relevant state agencies. The proposal also complies with all the other requirements of the Riegle-Neal Act. (6) Accordingly, the Riegle-Neal Act authorizes the proposed transaction.

Competitive Considerations

The Bank Merger Act prohibits the Board from approving an application if the proposal would result in a monopoly or would be in furtherance of any attempt to monopolize the business of banking. (7) The Bank Merger Act also prohibits the Board from approving a proposal that would substantially lessen competition or tend to create a monopoly in any relevant market, unless the Board finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effects of the transaction in meeting the convenience and needs of the communities to be served. (8)

Bank and Huntington compete with each other in twelve banking markets in Florida. (9) The Board has reviewed carefully the competitive effects of the proposal in each of the banking markets in which Bank and Huntington compete in light of all the facts of record, including the number of competitors that would remain in the market, the relative share of the total deposits in depository institutions in the market ("market deposits") that Bank would control, (10) the concentration level of market deposits and the increase in this level as measured by the Herfindahl-Hirschman Index ("HHI") under the Department of Justice Guidelines ("DOJ Guidelines"), (11) the size and likely effect of the proposed divestiture in relevant banking markets, and other characteristics of the markets. (12)

To reduce the possibility that the proposal would have adverse effects on competition, Bank has committed to divest seven branches, which account for approximately $168 million in deposits, in three banking markets ("divestiture markets"). (13) After accounting for the proposed divestitures, the proposal would be consistent with the DOJ Guidelines in all twelve banking markets in which Bank and Huntington compete.

After consummation of the proposal in the markets without divestitures, six banking markets would remain moderately concentrated as measured by the HHI, (14) and three banking markets would be highly concentrated as measured by the HHI. (15) In each of these markets, the increase in the HHI would be consistent with the DOJ Guidelines and Board precedent. In addition, numerous competitors would remain in all these markets.