Orders Issued Under Bank Holding Company Act - BB and T Corp.'s acquisition of F and M National Corp - Statistical Data Included

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

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

BB& T Corporation Winston-Salem, North Carolina

Order Approving the Acquisition of a Bank Holding Company

BB&T Corporation, Winston-Salem, North Carolina ("BB&T"), a financial 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 acquire F&M National Corporation, Winchester, Virginia ("F&M"),(1) and its eleven wholly owned subsidiary banks.(2) BB&T also has requested the Board's approval under sections 4(c)(8) and 4(j) of the BHC Act (12 U.S.C. [subsections] 1843(c)(8) and (j)) to acquire F&M's nonbanking subsidiaries:

(1) F&M Trust Company, also in Winchester, Virginia, and thereby engage in trust company activities pursuant to section 225.28(b)(5) of Regulation Y (12 C.F.R. [sections] 225.28(b)(5)), and

(2) Johnson Mortgage Company, LLC, Newport News, Virginia, and thereby engage in mortgage banking activities pursuant to section 225.28(b)(1) of Regulation Y (12 C.F.R. [sections] 225(b)(1)).

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (66 Federal Register 23,255, and 28,163 (2001)). 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.

BB&T, with total consolidated assets of $59.3 billion, operates depository institutions in Alabama, North Carolina, Georgia, South Carolina, Maryland, Tennessee, Kentucky, Virginia, West Virginia, and the District of Columbia.(3) BB&T is the sixth largest commercial banking organization in Virginia, controlling deposits of $5.1 billion, representing approximately 6.3 percent of total deposits in insured depository institutions in the state ("state deposits").(4) BB&T is the largest commercial banking organization in West Virginia, controlling deposits of $3.8 billion, representing 18.9 percent of state deposits. BB&T is the eighth largest commercial banking organization in Maryland, controlling deposits of $2.6 billion, representing 4.4 percent of state deposits.

F&M is the seventh largest commercial banking organization in Virginia, controlling total deposits of approximately $3 billion, representing approximately 3.7 percent of state deposits. F&M is the eleventh largest commercial banking organization in West Virginia, controlling deposits of $266 million, representing 1.3 percent of state deposits. F&M is the 25th largest commercial banking organization in Maryland, controlling deposits of $193 million, representing less than 1 percent of state deposits.

On consummation of the proposal, and after taking the proposed divestitures into account, BB&T would become the fifth largest commercial banking organization in Virginia, controlling deposits of $8 billion, representing approximately 9.8 percent of state deposits. BB&T would remain the largest commercial banking organization in West Virginia, controlling deposits of approximately $4 billion, representing approximately 20 percent of state deposits. BB&T would remain the eighth largest commercial banking organization in Maryland, controlling deposits of $2.8 billion, representing approximately 4.7 percent of state deposits.

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 BB&T is North Carolina, and F&M's subsidiary banks are located in Virginia, West Virginia and Maryland.(6) Based on a review of the facts of record, including a review of the relevant state statutes, the Board finds that all the conditions enumerated in section 3(d) of the BHC Act for an interstate acquisition are met in this case.(7) In light of all the facts of record, the Board is permitted to approve the proposal under section 3(d) of the BHC Act.

Competitive Considerations

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 an attempt to monopolize the business of banking. Section 3 also prohibits the Board from approving a proposal that would substantially lessen competition in any relevant banking market unless 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.(8)

BB&T and F&M compete directly in the following seventeen banking markets: Annapolis, Maryland; Alleghany, Charlotte, Charlottesville, Danville, Emporia, Fredericksburg, Harrisonburg, Lynchburg, Newport News-Hampton, Norfolk-Portsmouth, Richmond, Roanoke, Staunton, and Winchester, all in Virginia; Martinsburg, West Virginia; and Metropolitan Washington, D.C.(9) The Board has reviewed carefully the competitive effects of the proposal in each of these banking markets in light of all the facts of record, including the number of competitors that would remain in the market, the share of total deposits in depository institutions in the market ("market deposits") controlled by the companies involved in the proposal,(10) the concentration level of deposits in the market and the increase in this level as measured by the Herfindahl-Hirschman Index ("HHI") under the Department of Justice Merger Guidelines ("DOJ Guidelines"), and other characteristics of each markets.(11)