Orders Issued Under Bank Merger Act

Federal Reserve Bulletin, July, 2001 by Robert Dev. Frierson

Old Kent Bank, National Association Jonesville, Michigan

Old Kent Bank Grand Rapids, Michigan

Order Approving Membership in the Federal Reserve System and Merger of Banks

This proposal represents an internal reorganization by Fifth Third Bancorp, Cincinnati, Ohio ("Fifth Third"), after its acquisition of Old Kent Financial Corporation, Grand Rapids, Michigan ("Old Kent").(1) The reorganization would realign geographically the branches of three subsidiary banks. Old Kent Bank, National Association, Jonesville, Michigan ("OKB-NA"), would convert to an Indiana banking charter, become a member of the Federal Reserve System, merge with another subsidiary bank of Fifth Third, and acquire certain branches in Indiana from Old Kent Bank, Grand Rapids, Michigan ("OKB").(2) OKB would acquire certain branches in Illinois, Indiana, and Michigan from OKB-NA.(3) Accordingly, OKB-NA has applied under section 9 of the Federal Reserve Act (12 U.S.C. [sections] 321) to become a member of the Federal Reserve System on consummation of its conversion to an Indiana banking charter. OKB-NA also has applied under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. [sections] 1828(c)) ("Bank Merger Act") for approval, after its conversion and relocation, to merge with Fifth Third Bank, Indiana, St. Joseph, Michigan ("FTBI"), and to acquire certain branches from OKB. In addition, OKB has applied under the Bank Merger Act to acquire certain branches from OKB-NA.

Notice of the applications, 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 applications and all the facts of record in light of the factors set forth in the Bank Merger Act and Federal Reserve Act.

Fifth Third, with total consolidated assets of approximately $70.8 billion, is the 21st largest commercial banking organization in the United States.(4) Fifth Third operates subsidiary depository institutions in Arizona, Florida, Kentucky, Illinois, Indiana, Michigan, and Ohio. As noted, the proposal would reorganize three of Fifth Third's subsidiary banks.

Riegle-Neal Analysis

Section 102 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Pub. L. No. 103-328, 108 Stat. 2338 (1994)) ("Riegle-Neal Act") authorizes banks to conduct an interstate merger with another bank 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.(5) The Riegle-Neal Act also authorizes the acquiring bank to retain and operate, as a main office or branch, any bank offices of the acquired bank.(6)

All the states involved in the proposal (Illinois, Indiana, Kentucky, and Michigan) enacted legislation before June 1, 1997, allowing interstate mergers between banks located in their states and out-of-state banks pursuant to the provisions of the Riegle-Neal Act.(7) In light of the foregoing, the Board is authorized to approve the proposal under the Riegle-Neal Act.(8)

Financial, Managerial, and Other Supervisory Considerations

As noted above, this case involves a reorganization of affiliated banks. The Board has concluded that consummation of the proposal would not have any significantly adverse effects on competition or on the concentration of banking resources in any relevant banking market.(9) In its review of the proposal under the Bank Merger Act, the Board also has considered the financial and managerial resources and future prospects of the financial institutions involved. The Board has reviewed these factors in light of the facts of record, including public comments, supervisory reports of examination assessing the financial and managerial resources of OKB-NA, OKB, and FTBI, and other information provided by Fifth Third. Based on all the facts of record, including the fact that the proposal represents the reorganization of banking operations already under common control, the Board concludes that the financial and managerial resources and future prospects of OKB-NA, OKB, and FTBI are consistent with approval of the proposal.

Convenience and Needs Considerations

In acting on a proposal under the Bank Merger Act, the Board is required to consider the effects of the proposal on the convenience and needs of the communities to be served and take into account the records of the relevant insured depository institutions under the Community Reinvestment Act ("CRA").(10) The CRA requires the federal financial supervisory agencies to encourage financial institutions to help meet the credit needs of local communities in which they operate, consistent with safe and sound operation, and requires the appropriate federal supervisory agency to take into account an institution's record of meeting the credit needs of its entire community, including low- and moderate-income ("LMI") neighborhoods, in evaluating bank expansion proposals. The Board has considered carefully the convenience and needs factor and the CRA performance records of the relevant insured depository institutions in light of all the facts of record, including a public comment received concerning the record of OKB in meeting the credit needs of African Americans in Chicago.