For immediate release

The Federal Reserve Board today announced its approval of the applications and notices of Norwest Corporation, Minneapolis, Minnesota, to acquire (1) all the voting shares of Central Bancorporation, Inc., Ft. Worth, Texas ("Central Bancorp"); Central Bancorporation of Delaware, Inc., Wilmington, Delaware; and Central Bank and Trust Company, Ft. Worth, Texas; and (2) the nonbanking businesses of Central Bancorp and thereby engage in securities brokerage and mortgage lending activities. Attached is the Board's Order relating to this action.

Norwest Corporation Minneapolis, Minnesota Order Approving the Acquisition of a Bank Holding Company

Norwest Corporation, Minneapolis, Minnesota ("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 the voting shares of Central Bancorporation, Inc. ("Central Bancorp"), and its wholly owned subsidiary bank, Central Bank and Trust Company ("Central Bank"), both of Fort Worth, Texas.1 Norwest also has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Board's Regulation Y (12 C.F.R. 225.23) to acquire the nonbanking businesses of Central Bancorp and thereby engage in securities brokerage and mortgage lending activities. Notice of the proposal, affording interested persons an opportunity to submit comments, has been published in accordance with the Board's rules (61 Federal Register 57,432 and 68,266 (1996)). 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. Norwest, with total consolidated assets of $78.4 billion, operates subsidiary banks in 16 states: Arizona, Colorado, Iowa, Illinois, Indiana, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, South Dakota, Texas, Wisconsin, and Wyoming.2 Norwest is the 12th largest commercial banking organization in the United States, controlling deposits of $46.3 billion, and the fourth largest in Texas, controlling deposits of $6.2 billion in the state.3 Norwest also engages in a number of permissible nonbanking activities nationwide. Central Bancorp, with total consolidated assets of $1.1 billion, is the 15th largest commercial banking organization in Texas, controlling deposits of $961.5 million, representing less than 1 percent of total deposits in commercial banks in the state. After consummation of the proposal, Norwest would remain the fourth largest commercial banking organization in Texas, controlling deposits of $7.2 billion, representing 4.7 percent of total deposits in the state. Norwest also would control 1.4 percent of the total deposits in banks and savings associations insured by the Federal Deposit Insurance Corporation.

Return to top

Interstate Analysis Section 3(d) of the BHC Act, as amended by section 101 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, 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.4 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 enumerated in section 3(d) are met in this case.5 In view of the facts of record, the Board is permitted to approve this proposal under section 3(d) of the BHC Act. Competitive Considerations The BHC Act prohibits the Board from approving an application under section 3 of the BHC Act if the proposal would result in a monopoly, or would substantially lessen competition in any relevant banking market, unless the Board finds that the anticompetitive effects of the proposal 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. Norwest and Central Bancorp do not compete directly in any relevant banking market. Based on all the facts of record, the Board concludes that consummation of the proposal would not result in any significantly adverse effects on competition or the concentration of banking resources in any relevant banking market. Other Factors Under the BHC Act The BHC Act also requires the Board to consider the financial and managerial resources of the companies and banks involved, the convenience and needs of the communities to be served, and certain other supervisory factors. A. Supervisory Factors The Board has carefully considered the financial and managerial resources and future prospects of Norwest, Central Bancorp, and their respective subsidiaries, and other supervisory factors in light of all the facts of record. The facts include supervisory reports of examination assessing the financial and managerial resources of the organizations and confidential financial information provided by Norwest. Based on these and all the other facts of record, the Board concludes that all the supervisory factors under the BHC Act, including financial and managerial resources, weigh in favor of approving the proposal. B. Convenience and Needs Factor The Board also has carefully considered the effect of the proposed acquisition on the convenience and needs of the community to be served in light of all the facts of record. As part of that review, the Board has considered comments from the Minnesota Association of Organizations for Reform Now ("Protestant") contending that Norwest has engaged in banking practices in the Minneapolis/St. Paul, Minnesota, area that discriminate against low- and moderate-income ("LMI") consumers. Protestant alleges that Norwest's lead bank, Norwest Bank Minnesota, N.A., Minneapolis, Minnesota ("Norwest Minnesota"), has unreasonable fees for certain consumer accounts and services that disadvantage LMI consumers or discourage LMI consumers from using the bank's services; that Norwest Minnesota's Minneapolis/St. Paul branches have banking hours that discriminate against LMI consumers; and that Norwest's consumer finance subsidiary, Community Credit Co., Edina, Minnesota ("Community Credit"), engages in improper credit practices.

Return to top

Norwest provides a full range of financial services through its bank and nonbank subsidiaries, including commercial and retail banking, insurance agency, venture capital, mortgage, consumer finance, trust, international trade finance, leasing, asset-backed lending, and corporate and investment banking services. Norwest has stated that the proposed acquisition would result in these services, some of which are not available through Central Bancorp, being offered in the markets currently served by Central Bancorp. Performance Examinations The Board has long held that consideration of the convenience and needs factor includes a review of the records of the relevant depository institutions under the Community Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). As provided in the CRA, the Board evaluates this factor in light of examinations by the primary federal supervisor of the CRA performance records of the relevant institutions. An institution's most recent CRA performance evaluation is a particularly important consideration in the applications process because it represents a detailed on-site evaluation of the institution's overall record of performance under the CRA by its primary federal supervisor. 6 All of Norwest's subsidiary banks have received CRA performance ratings of "satisfactory" or "outstanding" in their most recent evaluations by their primary federal supervisors. Specifically, Norwest Minnesota received an "outstanding" rating in each of its last three examinations, the most recent of which was conducted in October 1996 by the Office of the Comptroller of the Currency ("OCC"), the bank's primary federal supervisor. The October 1996 examination noted that Norwest Minnesota offered a full range of credit products to address the housing, small business, and consumer credit needs of the community.7 A substantial majority of Norwest Minnesota's loans, when measured either as a percentage of the total number of loans or as a percentage of the total dollar amounts of loans, are within its assessment area. The examination also indicated that Norwest Minnesota, and its affiliate, Norwest Mortgage, Inc., showed a good distribution of loans within and throughout its delineated community, including in LMI areas. Examiners also found that Norwest Minnesota's community outreach efforts were effective in attempting to reach all parts of the bank's delineated community. According to the October 1996 examination, for example, Norwest Minnesota received ongoing information on community credit needs through a process that incorporated surveys, focus groups, and direct contacts with representatives of LMI neighborhoods, housing services, and small business, community development, and government agencies.8 The OCC found that Norwest Minnesota also had developed a sound marketing plan to reach all segments of the bank's service community. Norwest Minnesota sponsored radio advertisements specifically adapted to reach the African-American and Spanish-speaking communities; printed advertisements in American Indian, Hmong, and Spanish language publications; and printed brochures in languages other than English. Many of the bank's branches have bilingual staff to meet the needs of non-English speaking customers.

Return to top

The October 1996 examination evaluated Norwest Minnesota's branch locations and hours, and concluded that the bank's offices are readily accessible to all segments of the community. Examiners found that, as of December 1995, Norwest Minnesota operated 76 branches throughout its delineated community, of which 13 (or 17 percent) were in LMI areas. The examination also found that Norwest Minnesota ensured that branch hours met local community needs through a regular management review process. In addition, the examination stated that Norwest Minnesota offers 24-hour toll-free telephone services for taking loan applications, making deposits, and conducting limited credit transactions.9 Community Credit Protestant contends, without substantiation, that Norwest Minnesota deliberately denies credit to low-income customers and routinely "steers" low-income credit applicants to Community Credit, which charges higher loan rates than its affiliated bank.10 Norwest denies this allegation and states that, if a loan is denied by Norwest Minnesota, the credit applicant is asked whether he or she would like to be referred to Community Credit. If the applicant agrees to the referral and meets Community Credit's lending criteria, Community Credit will approve the loan.11 Protestant has not alleged, nor is there any evidence in the record to indicate, that Norwest denies credit to applicants based on any prohibited factor, such as gender or race. The October 1996 examination of Norwest Minnesota found no practices intended to discourage applications for any type of credit. Examiners also found no evidence of discrimination in the credit decision process. Rather, examiners found that Norwest Minnesota solicits applications from all portions of its community, including LMI neighborhoods, and that all employees within the lending function receive appropriate and comprehensive training on fair lending regulations.12 Conclusion on the Convenience and Needs Factor The Board has carefully considered the entire record in its review of the convenience and needs factor under section 3 of the BHC Act, including all the information provided by Protestant. Based on all the facts of record, and for the reasons discussed above, the Board concludes that considerations relating to the convenience and needs factor, including the CRA performance records of Norwest Minnesota and Norwest's other banking subsidiaries, are consistent with approval of the proposal.13 Nonbanking Activities Norwest also has filed notices, pursuant to section 4(c)(8) of the BHC Act, to acquire the nonbanking businesses of Central Bancorp and thereby to engage in providing full-service securities brokerage and mortgage lending services. The Board has determined that these activities are closely related to banking,14 and Norwest has committed to conduct the nonbanking activities in accordance with Regulation Y.

Return to top

In order to approve the proposal under section 4(c)(8) of the BHC Act, the Board also must determine that the proposed activities are a proper incident to banking, that is, that the proposal "can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices." As part of its evaluation of these factors, the Board considers the financial condition and managerial resources of the notificant and its subsidiaries, including the companies to be acquired, and the effect of the proposed transaction on those resources.15 As noted above, based on all the facts of record, the Board has concluded that financial and managerial considerations are consistent with approval of these notices. The Board also has concluded that the proposal would not have a significantly adverse effect on competition in any relevant market. In addition, the Board expects that the acquisition would provide added convenience to Central Bancorp's customers and the public. Norwest notes that consumers in the markets currently served by Central Bank would have access to a variety of securities brokerage and mortgage servicing and origination services through Norwest that are not available through Central Bancorp. Accordingly, based on all the facts of record, the Board has determined that the balance of public benefits is favorable under the proper incident to banking standard of section 4(c)(8) of the BHC Act. Conclusion Based on the foregoing, and in light of all the facts of record, the Board has determined that the application and notice should be, and hereby are, approved. Approval of this application and notice is specifically conditioned on compliance by Norwest with all the commitments made in connection with this proposal and with the conditions stated or referred to in this order. The Board's determination on the nonbanking activities also is subject to all the terms and conditions set forth in Regulation Y, including those in sections 225.7 and 225.23(b) (12 C.F.R. 225.7 and 225.23(b)), and to the Board's authority to require such modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to ensure compliance with, and to prevent evasion of, the provisions of the BHC Act and the Board's regulations and orders thereunder. For purposes of this transaction, the commitments and conditions referred to above shall be deemed to be conditions imposed in writing by the Board in connection with its findings and decision, and, as such, may be enforced in proceedings under applicable law.

Return to top

The acquisition of Central Bancorp shall not be consummated before the fifteenth calendar day following the effective date of this order, and this proposal shall not be consummated 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,16 effective January 13, 1997. (signed) Jennifer J. Johnson Jennifer J. Johnson Deputy Secretary of the Board

Footnotes 1 Central Bancorp directly owns all the voting shares of Central Bancorporation of Delaware, Inc., a Delaware corporation, which owns all the voting shares of Central Bank. Norwest also has applied under section 3 of the BHC Act to acquire this Delaware bank holding company. 2 Asset data are as of September 30, 1996. 3 State deposit data and rankings are as of June 30, 1996. 4 Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding company's home state is that state in which the operations of the bank holding company's banking subsidiaries were principally conducted on July 1, 1996, or the date on which the company became a bank holding company, whichever is later. 5 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). Norwest is adequately capitalized and adequately managed. Central Bancorp's subsidiary bank has been in existence and has continuously operated for more than five years, as required under Texas law. In addition, on consummation of the proposal, Norwest and its affiliates would control less than 10 percent of the total amount of deposits of insured depository institutions in the United States, and less than 20 percent of the total amount of deposits of insured depository institutions in Texas, as required by state law. 6 The Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act (54 Federal Register 13,742 and 13,745 (1989)) ("Agency CRA Statement") provides that a CRA examination is an important and often controlling factor in the consideration of an institution's CRA record and that reports of these examinations will be given great weight in the applications process. 7 Norwest Minnesota designated its community delineation to include all of Anoka, Washington, Ramsey, and Dakota Counties; a majority of Scott, Hennepin, and Carver Counties; and a portion of Isanti County. All the counties are within the Minneapolis/St. Paul Metropolitan Statistical Area. Examiners found that the community delineation was reasonable and did not arbitrarily exclude any LMI areas. 8 Protestant contends that it has been excluded from Norwest Minnesota's Community Marketing Initiative ("CMI"), an annual planning process designed to assess the needs of the communities that the bank serves. Protestant also alleges that Norwest Minnesota is unwilling to address community needs that are brought to the bank's attention in the CMI process. The record indicates that meetings took place between Norwest Minnesota management and Protestant in 1996, and that Norwest Minnesota repeatedly has invited Protestant's members to participate in the CMI process. The OCC's October 1996 examination concluded that the Norwest Minnesota CMI planning process provided an adequate framework not only for determining community needs but also for developing the bank's response to those needs. Examiners noted that the CMI plan incorporates information such as demographic data, ascertainment efforts, marketing strategies, and lending goals; is prepared for each branch to respond to special local needs; and is monitored quarterly, and updated and approved regularly by Norwest Minnesota's board of directors.

Return to top

9 Protestant also contends that Norwest Minnesota charges excessive fees for checks returned due to insufficient funds and for checks the bank pays against a customer's overdraft, and assesses excessive fees for money orders to discourage LMI customers from using the bank's money order services. The Board believes that these comments provide an incomplete picture of Norwest Minnesota's products and services. As previously noted by the Board, Norwest Minnesota offers special accounts with no minimum deposit and no fees, and offers overdraft protection to all checking account customers based on underwriting criteria similar to that used for other unsecured extensions of credit. See Norwest Corporation, 82 Federal Reserve Bulletin 667, 672 n.23 (1996). Although the Board has recognized that banks help serve the needs of their communities by offering basic services at nominal or no charge, the CRA does not impose any limitation on the fees or surcharges that can be charged for services. The record indicates that Norwest Minnesota offers a full range of banking services in its delineated community, and there is no evidence in the October 1996 examination of Norwest Minnesota, or in the record of this proposal, that the fees charged by Norwest Minnesota are discriminatory or based on any factor that would be prohibited by law. 10 Protestant indicates that Norwest has not disclosed statistics on the number of referrals made by Norwest Minnesota to Community Credit or the bank's policy for making referrals to its consumer finance affiliate. 11 Norwest indicates that Community Credit may make loans to consumers denied credit by Community Credit's affiliated bank because Community Credit is a consumer finance company in the business of lending to higher risk borrowers. 12 Protestant also alleges that Norwest and Community Credit engage in other improper credit practices, including requiring borrowers to purchase credit life insurance in connection with loans; engaging in improper loan collection techniques; and failing to report timely loan payments of borrowers to credit bureaus. Norwest denies engaging in any illegal or improper practices and specifically denies that Community Credit requires its borrowers to purchase credit insurance. The Board has carefully considered Protestant's comments in light of all the facts of record, including reports of examination and other supervisory information from the Minnesota Department of Commerce, the state agency that regularly examines Community Credit for compliance with state and federal consumer protection laws. Based on all the facts, the Board concludes that Protestant's allegations do not warrant denial of the proposal. 13 Protestant has requested that the Board hold a public hearing on the convenience and needs effects of the proposal. Section 3(b) of the BHC Act does not require the Board to hold a public meeting or hearing on an application unless the appropriate supervisory authority for the bank to be acquired makes a timely written recommendation of denial of the application. No supervisory agency has recommended denial in this case. In addition, under the Board's Rules of Procedure, the Board, in its discretion, may hold a public hearing or meeting on an application to clarify factual issues relating to the application and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e) and 262.25(d). Protestant has had an ample opportunity to present its views, and Protestant has submitted substantial written comments that have been carefully considered by the Board. Protestant has not demonstrated why its written submissions do not adequately present its allegations and what, if any, additional matters would be addressed at a hearing or meeting. For these reasons, and based on all the facts of record, the Board has determined that a public hearing or meeting is not required or warranted to clarify the factual record in the proposal or otherwise warranted in this case. Accordingly, Protestant's request for a hearing on the proposal is denied. 14 See 12 C.F.R. 225.25(b)(1) and (b)(15). 15 See 12 C.F.R. 225.24; see also The Fuji Bank, Limited, 75 Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve Bulletin 155 (1987). 16 Voting for this action: Vice Chair Rivlin and Governors Kelley, Lindsey, Phillips, Yellen, and Meyer. Absent and not voting: Chairman Greenspan.

Return to top

1997 Orders on banking applications