RE: The Central Trust Bank
Jefferson City, Missouri
Application for Consent to Merge, to Establish
One Branch, and to Participate
in an Optional Conversion Transaction
ORDER AND BASIS FOR CORPORATION APPROVAL
Pursuant to Section 18(c) and other provisions of the Federal Deposit Insurance
Act ("FDI Act"), The Central Trust Bank, Jefferson City, Missouri
("Applicant"), a state nonmember bank and Bank Insurance Fund ("BIF")
member with total resources of $998,953,000 and total deposits of $589,079,000 as of June
30, 1999, has filed an application for the Corporation's consent to merge, under its
charter and title, with Fulton Savings Bank, FSB, Fulton, Missouri ("Other
Institution"), an insured federal savings bank and Savings Association Insurance Fund
("SAIF") member with total resources of $118,402,000 and total deposits of
$76,691,000 as of June 30, 1999; and for consent to establish the main office of Other
Institution as a branch of the resultant bank, with Other Institution's Holts Summit
branch to be closed upon consummation of the merger. Notice of the proposed transaction,
in a form approved by the Corporation, has been published pursuant to the FDI Act. There
will be no insurance fund conversion concurrent with the proposed transaction, and
assessments will continue to be paid to the SAIF pursuant to Section 5(d)(3) of the FDI
Other Institution's main office and branch (Holts Summit) are both located in
Callaway County. The relevant geographic market of Other Institution's main office in
Fulton consists of Callaway County, less the cities of Holts Summit, Mokane, New
Bloomfield, and Steedman. Applicant does not currently have an office in this market,
which consists of four banks and two thrifts. Subsequent to the proposed merger, the
market will consist of five banks and one thrift. Currently, Other Institution has 24.76
percent of the market's total deposits and is the second largest financial institution in
the market. There should be no significant adverse effect on competition in this market,
as Applicant is simply replacing Other Institution.
The relevant geographic market for the Applicant and Other Institution's Holts
Summit branch is the Jefferson City banking market, which consists of Cole County plus the
cities. of Linn, Loose Creek, Freeburg, Meta, and Westphalia in Osage County, and Holts
Summit, Mokane, New Bloomfield, and Steedman in Callaway County. The Federal Reserve Bank
of St. Louis used the same relevant geographic market. The market consists of 15 banks and
three thrifts. Subsequent to the merger, the market will consist of 15 banks and two
thrifts. Two of the competing banks are subsidiaries of the largest and fourth largest
bank holding companies in the state. Central Bancompany, Inc., Applicant's parent, is the
fifth largest holding company in the state.
Applicant has 32.32 percent of the Jefferson City market's total deposits.
Applicant and one of its affiliate banks, Jefferson Bank of Missouri, Jefferson City,
Missouri ("Affiliate"), have a combined 49.60 percent of the market's total
deposits. Other Institution's market share is only 0.46 percent. Subsequent to the merger,
Applicant and Affiliate would hold 50.06 percent of the market's total deposits. The
pre-merger Herfindahl-Hirschmann Index (HHI) is 2,837. The postmerger HHI would rise by
only 46 points to 2,883. The FDIC has a long-stated policy that it will not normally deny
a proposed merger transaction on antitrust grounds (absent objection from the Department
of Justice) where the post-merger HHI in the relevant geographic market(s) is 1,800 points
or less or, if it is more than 1,800, it reflects an increase of less than 200 points from
the pre-merger HHI.
Along with other institutions, the affiliates of four large multi-billion dollar
bank holding companies will compete with Applicant in the relevant geographic markets.
Although Applicant will have a significant market share among the specific competing
institutions, as measured* by the HHI, it is believed these organizations could exercise
significant competitive strength.
The primary banking products provided by Other Institution, a federal savings
bank, are mortgage loans and deposit instruments. Other Institution, with deposits of only
approximately $6.8 million in its branch in the Jefferson City market, is the smallest
insured depository institution in the market. It is not expected that the merger would
eliminate a significant amount of competition in the provision of banking services to
commercial customers in the Jefferson City market, where 14 competing commercial banks
will continue to operate after the merger.
On the consumer side, even the small increase in market concentration overstates
the competitive impact of the merger. In addition to the 16 competing banks and thrifts
that will continue to operate after the merger, there are also a number of credit unions
and other suppliers of consumer financial services in the Jefferson City market.
In its advisory report on competitive effects, the U.S. Department of Justice
concluded that the proposed transaction would not have a significantly adverse effect on
competition. The Federal Reserve Bank of St. Louis' Competitive Effects report concluded
that the proposed transaction could have significantly anti-competitive effects, but
advised that it did not consider all of the economic factors that may be relevant to the
competitive effects of the proposed transaction. Other federal regulatory authorities
offered no comments.
In sum, the merger would not have a meaningful adverse effect on competition. It
would increase Applicant/Affiliate's market share less than half a percent and would
increase the HHI by only 46 points. Moreover, even these small increases appear to
overstate the real effect of the transaction. Other Institution is not a significant
competitor in the provision of services to commercial customers in the Jefferson City
market, and there are a number of other competitors that offer consumer banking services
that are not reflected in the market concentration measures, including credit unions and
Financial and Managerial Resources: Future Prospects
Applicant is financially sound with solid capital, good asset quality, healthy
earnings, and capable management. Future prospects are favorable.
Convenience and Needs of the Community to be Served
The ability of the Applicant and Other Institution to meet the needs of their
community are presently considered satisfactory and are not expected to change. There have
been no protests to the proposed transaction. Both of the institutions have a favorable
history of community service, and a review of available information revealed no
inconsistencies with the purposes of the Community Reinvestment Act. There are no
anticipated changes in fees charged resulting from the proposed transaction. The resultant
institution will enhance banking services offered to the public in the Fulton area by the
addition of banking services not currently available from Other Institution.
Upon consideration of all relevant material, the Board of Directors has
concluded that the application should be and hereby is approved subject to the following
1. That the transaction not be consummated before the fifteenth calendar day
following the date of this Order or no later than six months after the date of this Order
unless such period is extended for good cause by the Corporation;
2. That all necessary and final approvals be received from other regulatory
3. That, until the proposed transaction becomes effective, the Corporation shall
have the right to alter, suspend, or withdraw its approval should any interim development
be deemed by the Board of Directors to warrant such action.
Dated at Washington, D.C., this 8th day of November, 1999.