Decisions on Bank Applications
The Central Trust Bank
FEDERAL DEPOSIT INSURANCE CORPORATION
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 Act.
Competition
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 mortgage companies.
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 conditions:
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 authorities; and
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.
BY ORDER OF THE BOARD OF DIRECTORS
Robert E. Feldman
Executive Secretary