|For immediate release|
The Federal Reserve Board announced today its approval of the application of Norwest Corporation, Minneapolis, Minnesota, to acquire Star Bancshares, Inc., and thereby acquire First State Bank, both of Austin, Texas.
Attached is the Board's Order relating to this action.
Norwest Corporation ("Norwest"), 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. §: 1842) to acquire all of the voting shares of Star Bancshares, Inc, Austin, Texas ("Star"), and thereby acquire Star Bancshares of Nevada, Inc., Carson City, Nevada, and its subsidiary bank, First State Bank, Austin, Texas.
Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (63 Federal Register 34,651 (1998)). 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 section 3 of the BHC Act.
Norwest, with total consolidated assets of $98.5 billion, is the eleventh largest commercial banking organization in the United States. Norwest is the fourth largest commercial banking organization in Texas, controlling approximately $6.5 billion in deposits, representing 4 percent of total deposits in commercial banking organizations in the state.1 Star is the twenty-eighth largest commercial banking organization in Texas, controlling approximately $487.3 million in deposits, representing less than 1 percent of total deposits in commercial banking organizations in the state. On consummation of the proposal, Norwest would remain the fourth largest commercial banking organization in Texas, controlling deposits of approximately $7 billion, representing 4.3 percent of commercial bank deposits in the state.
Section 3(d) of the BHC Act, as amended by Section 101 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Riegle-Neal Act"), allows the Board to approve an application by a bank holding company to acquire a bank located in a state other than the home state of such bank holding company if certain conditions are met.2 For purposes of the BHC Act, the home state of Norwest is Minnesota, and Norwest proposes to acquire a bank in Texas. The conditions for an interstate acquisition under section 3(d) of the BHC Act are met in this case.3
The BHC Act prohibits the Board from approving a proposal under section 3 of the BHC Act that if would result in a monopoly that would substantially lessen competition 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 effect of the transaction in meeting the convenience and needs of the community to be served.4
Norwest and Star compete in fifteen banking markets in Texas. The Board has carefully reviewed the competitive effects of the proposal in those markets in light of all the facts of record, including the projected increase in the concentration of total deposits in depository institutions in the market ("market deposits"),5 as measured by the Herfindahl-Hirschman Index ("HHI") under the Department of Justice Merger Guidelines ("DOJ Guidelines"), and the number of competitors that would remain in the markets.6 As described in more detail in the Appendix and below, the increase in the HHI does not exceed the DOJ Guidelines in the banking markets in which Norwest and Star compete. In addition, numerous competitors would remain in those banking markets.
In the Kerr County banking market, Norwest is the largest depository institution, controlling deposits of $210.1 million, representing 40.2 percent of market deposits.7 Star is the sixth largest depository institution in the banking market, controlling deposits of $7.1 million, representing 1.4 percent of market deposits. On consummation of the proposal, Norwest would remain the largest depository institution in the banking market, controlling deposits of $217.2 million, representing 41.6 percent of market deposits. Concentration in the Kerr County banking market, as measured by the HHI, would increase by 110 points to 2896.
In evaluating the competitive effects of the proposal in the Kerr County banking market, the Board has considered several factors that tend to mitigate the concentration of banking resources in the market. Five competitors would remain in the market after consummation of the proposal. Four competitors other than Norwest would have market shares of at least 5 percent, including two bank holding companies that would have market shares of 29.3 percent and 13.7 percent, respectively. In addition, the market appears to be attractive for entry.8 In April 1998, a commercial bank entered the Kerr County banking market de novo and received approximately $13 million in deposits in less than three months. The Board also notes that Star is a recent entrant to the Kerr County banking market with a relatively small market presence of less than 2 percent of market deposits.
As in other cases, the Board sought comments from the Department of Justice and the Federal Deposit Insurance Corporation ("FDIC") on the competitive effects of the proposal. The Department of Justice has reviewed the proposal and advised the Board that consummation of the proposal would not likely have any significantly adverse competitive effects in the Kerr County banking market or any other relevant banking market. The FDIC has been consulted and has not objected to consummation of the proposal.
Based on all the facts of record, and for the reasons discussed in this order, the Board concludes that consummation of the proposal is not likely to result in any significantly adverse effects on competition or on the concentration of banking resources in the Kerr County banking market or any other relevant banking market.
The BHC Act also requires the Board to consider the financial and managerial resources and future prospects of the companies and banks involved in the proposal, the convenience and needs of the communities to be served, and certain supervisory factors. The Board has reviewed these factors in light of the record, including supervisory reports of examination assessing the financial and managerial resources of the organizations and financial information provided by Norwest. Based on all the facts of record, the Board concludes that the financial and managerial resources and the future prospects of Norwest, Star, and their respective subsidiary banks are consistent with approval, as are the other supervisory factors the Board must consider under section 3 of the BHC Act. Considerations related to the convenience and needs of the communities to be served also are consistent with approval of the proposal.
The proposed acquisition of Star shall not be consummated before the fifteenth calendar day following the effective date of this order, or later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Minneapolis, acting pursuant to delegated authority.
By order of the Board of Governors,9 effective August 12, 1998.
(signed) Robert deV. Frierson
Robert deV. Frierson
1 Asset and state deposit data are as of June 30, 1997, unless otherwise indicated.
2 12 U.S.C. §: 1842(d). A bank holding company's home state is the state in which the operations of the bank holding company's banking subsidiaries were principally conducted on July 1, 1966, or the date on which the company became a bank holding company, whichever is later.
3 Norwest is adequately capitalized and adequately managed as defined in the Riegle-Neal Act. 12 U.S.C. §: 1842(d)(1)(A). On consummation of the proposal, Norwest would control less than 10 percent of the total amount of deposits of insured depository institutions in the United States. In addition, First State Bank has been in existence for the minimum period of time necessary to satisfy age requirements established by applicable state law. See Tex. Fin. Code Ann. §: 38.003 (West 1998). Norwest also would control less than 20 percent of the total deposits of insured depository institutions in Texas. See Tex. Fin. Code Ann. §: 38.002 (West 1998). The Board has considered Norwest's record of compliance with the applicable state community reinvestment provisions. All other requirements of section 3(d) of the BHC Act also would be met on consummation of the proposal.
4 12 U.S.C. §: 1842(c).
5 All market data are as of June 30, 1997. In this context, depository institutions include commercial banks, savings banks, and savings associations. Market share data are based on calculations in which the deposits of thrift institutions are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly included thrift deposits in the calculation of market share on a 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991).
6 Under the revised DOJ Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger is above 1800 is considered highly concentrated. The Department of Justice has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger is at least 1800 and the merger increases the HHI by more than 200 points. The Department of Justice has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effects of limited-purpose lenders and other non-depository financial entities.
7 The Kerr County banking market is approximated by Kerr County, Texas.
8 Kerr County's population increased by 15.4 percent from 1990 to 1997, compared with an average increase in population of 13.5 percent for the state. The population of Kerr County is projected to increase 12.2 percent from 1997 to 2001, compared with a projected average increase in population of 7.9 percent for the state.
9 Voting for this action: Chairman Greenspan and Governors Kelley, Meyer, Ferguson, and Gramlich. Absent and not voting: Vice Chair Rivlin.
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1998 Orders on banking applications