ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT.

Orders Issued Under Section 3 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 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. [sections] 1842) to acquire One Valley Bancorp, Inc., Charleston, West Virginia ("One Valley"),(1) and its nine wholly owned subsidiary banks.(2)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (65 Federal Register 12,554 (2000)). 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.

BB&T, with total consolidated assets of $43.5 billion, operates depository institutions in North Carolina, Georgia, South Carolina, Maryland, Kentucky, Virginia, West Virginia, and the District of Columbia. BB&T operates the sixth largest commercial banking organization in Virginia, controlling deposits of $3.7 billion, representing approximately 4.8 percent of total deposits in insured depository institutions in the state ("state deposits").(3) BB&T operates the tenth largest depository institution in West Virginia, controlling deposits of $318.5 million, representing 1.6 percent of state deposits.

One Valley is also the tenth largest commercial banking organization in Virginia, controlling total deposits of $1.1 billion, representing approximately 1.5 percent of state deposits. One Valley is the largest commercial banking organization in West Virginia, controlling deposits of $3.4 billion, representing 17.1 percent of state deposits.

On consummation of the proposal, and accounting for the proposed divestitures, BB&T would remain the sixth largest depository institution in Virginia, controlling deposits of $4.8 billion, representing approximately 6.2 percent of state deposits. BB&T would become the largest depository institution in West Virginia, controlling deposits of approximately $3.8 billion, representing 18.7 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.(4) For purposes of the BHC Act, the home state of BB&T is North Carolina, and One Valley's subsidiary banks are located in Virginia and West Virginia.(5) All of the conditions for an interstate acquisition enumerated in section 3(d) of the BHC Act are met in this case.(6) 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.(7)

BB&T and One Valley compete directly in the following five banking markets: Bluefield, West Virginia; Emporia, Lynchburg, and Roanoke, all in Virginia; and Metropolitan Washington, D.C. (Metropolitan D.C.).(8) 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,(9) 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 the markets.(10)

Consummation of the proposal without divestitures would be consistent with Board precedent and the DOJ Guidelines in the Bluefield, Roanoke, and, Metropolitan D.C. banking markets. In each of these markets, the change in the HHI as a result of this proposal would be less than 50 points. In addition, numerous competitors would remain in each of these banking markets.(11)

In the Emporia and Lynchburg banking markets, consummation of the proposal would exceed the DOJ Guidelines. BB&T is the third largest depository institution in the Emporia banking market, controlling deposits of $27.8 million, representing approximately 15.4 percent of market deposits. One Valley is the second largest depository institution in the market, controlling deposits of $47.2 million, representing approximately 26.2 percent of market deposits. The HHI would increase 804 points to 3166.

In order to mitigate the potential anticompetitive effects of the proposal in the Emporia banking market, BB&T has committed to divest one branch that controls $17 million in deposits to a commercial banking organization that does not currently compete in the market.(12) On consummation of the proposal, and accounting for the proposed divestiture, BB&T would become the second largest depository institution in the banking market, controlling deposits of $58 million, representing approximately 32.1 percent of market deposits, and the HHI in the Emporia banking market would increase 200 points to 2562. At least six competitors would remain in the banking market, including five competitors other than BB&T that each would control 8 percent or more of market deposits.

In the Lynchburg banking market, BB&T is the sixth largest depository institution, controlling deposits of $130.3 million, representing approximately 6.2 percent of market deposits. One Valley is the second largest depository institution in the market, controlling deposits of $446.7 million, representing approximately 21.3 percent of market deposits. The HHI would increase 265 points to 2329.

In order to mitigate the potential anticompetitive effects of the proposal in the Lynchburg banking market, BB&T has committed to divest two branches that control approximately $29.2 million in deposits to an in-market commercial banking organization. On consummation of the proposal and accounting for the proposed divestiture, BB&T would become the second largest depository institution in the banking market, controlling deposits of $547.9 million, representing approximately 26.1 percent of market deposits. The HHI in the Lynchburg banking market would increase by 210 points to 2274. Fourteen competitors would remain in the banking market, including two competitors other than BB&T that each would control 10 percent or more of market deposits and three additional competitors that each would control at least approximately 5 percent of market deposits. In addition, the Lynchburg market appears to be attractive for new entry. Three banking firms have entered the market de novo since June 1997, with two of those market entries occurring since June 1999.

The Board has considered the views of the Department of Justice and the other banking agencies on the competitive effects of the proposal in each relevant banking market. The Department of Justice has advised the Board that, in light of the proposed divestitures, consummation of the proposal would not be likely to have a significantly adverse effect on competition in any relevant banking market. The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have been afforded an opportunity to comment and have not objected to consummation of the proposal.

Based on all the facts of record, including the proposed divestitures in the Emporia and Lynchburg banking markets and the number and size of the competitors remaining in the markets, the Board concludes that consummation of the proposal is not likely to have a significantly adverse effect on competition or on the concentration of banking resources in the banking markets in which BB&T and One Valley directly compete or in any other relevant banking market.

Other Considerations

The BHC Act requires the Board, in acting on an application, to consider the financial and managerial resources and future prospects of the companies and banks involved, 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 BB&T. Based on all the facts of record, the Board concludes that the financial and managerial resources and the future prospects of BB&T, One Valley, and their respective subsidiary banks are consistent with approval, as are the other supervisory factors the Board must consider under the BHC Act. In addition, considerations related to the convenience and needs of the communities to be served, including the records of performance of the institutions involved under the Community Reinvestment Act (12 U.S.C. [sections] 2901 et seq.), are consistent with approval of the proposal.

Conclusion

Based on the foregoing, and in light of all the facts of record, the Board has determined that the application should be, and hereby is, approved. The Board's approval is specifically conditioned on compliance by BB&T with all the commitments made in connection with the proposal and with the conditions discussed in this order, including BB&T's divestiture commitments. For the purpose of this action, the commitments and conditions referred to above are 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.

The proposed transaction 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 Richmond, acting pursuant to delegated authority.

By order of the Board of Governors, effective May 30, 2000.

(1.) BB&T also has requested the prior approval of the Board to hold and exercise an option to acquire up to 19.9 percent of One Valley's voting shares. The option would expire on consummation of the proposal.

(2.) The subsidiary banks of One Valley are listed in Appendix A.

(3.) Deposit and ranking data are as of June 30, 1999, and reflect acquisitions as of April 20, 2000. Asset data are as of December 31, 1999. In this context, depository institutions include commercial banks, savings banks, and savings associations.

(4.) See 12 U.S.C. [sections] 1842(d). A bank holding company's home state is the state in which the total deposits of all banking subsidiaries of such company were the largest on July 1, 1966, or the date on which the company became a bank holding company, whichever is later. 12 U.S.C. [sections] 1841(o)(4)(C).

(5.) For purposes of section 3(d) of the BHC Act, the Board considers a bank to be located in the states in which the bank is chartered, headquartered, or operates a branch. See 12 U.S.C. [subsections] 1841(o)(4)(7) and 1842(d)(1) and (2); NationsBank Corporation, 84 Federal Reserve Bulletin 858 (1998).

(6.) See 12 U.S.C. [subsections] 1842(d)(1)(A) and (B) and 1842(d)(2)(A). BB&T is adequately capitalized and adequately managed. On consummation of the proposal, BB&T would control less than 10 percent of the total amount of deposits of insured depository institutions in the United States and less than 30 percent of the total amount of deposits of insured depository institutions in each of Virginia and West Virginia. All of One Valley's banks have been in existence and continuously operated for at least the minimum period required under Virginia and West Virginia law. See Va. Code Ann. [sections] 6.1-44.20 (Michie 1999); W. Va. Code [subsections] 1A-2-12a(c) and 31A-8A-5d (Michie 1996).

(7.) See 12 U.S.C. [sections] 1842(c).

(8.) The banking markets are defined in Appendix B.

(9.) Market share data for all banking markets are as of June 30, 1999. These data are based on calculations that include the deposits of thrift institutions 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, e.g., 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).

(10.) Under the DOJ Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market is considered moderately concentrated when the post-merger HHI is between 1000 and 1800, and is considered highly concentrated when the post-merger HHI is more than 1800. 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 HHI 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 nondepository financial institutions.

(11.) The competitive analyses for the Bluefield, Emporia, Roanoke, and Metropolitan D.C. banking markets are provided in Appendix C.

(12.) BB&T has executed sales agreements for the proposed divestitures discussed in this order with purchasers that are competitively suitable, and has committed to complete the divestitures within 180 days of consummation of the proposal. BB&T also has committed that, if it is unsuccessful in completing the divestitures within the 180-day period, it will transfer the unsold branches to an independent trustee that is acceptable to the Board and will instruct the trustee to sell the branches promptly to an alternative purchaser acceptable to the Board. See BankAmerica Corporation, 78 Federal Reserve Bulletin 338 (1992); United New Mexico Financial Corporation, 77 Federal Reserve Bulletin 484 (1991). BB&T also has committed to submit to the Board, within 180 days after consummation of the proposal, executed trust agreements acceptable to the Board stating the terms of the proposed divestitures.

This action was taken pursuant to the Board's Rules Regarding Delegation of Authority (12 C.F.R. 265.4(b)(1)) by a committee of Board members. Voting for this action: Governors Kelley, Meyer, and Gramlich. Absent and not voting: Chairman Greenspan and Vice Chairman Ferguson.

ROBERT DEV. FRIERSON Associate Secretary of the Board

Appendix A

Subsidiary Banks of One Valley

West Virginia

One Valley Bank, Inc., Morgantown
One Valley Bank of Huntington, Inc., Huntington
One Valley Bank of Mercer County, Inc., Princeton
One Valley Bank-South, Inc., Summersville
One Valley Bank-North, Inc., Moundsville
One Valley Bank, National Association, Charleston
One Valley Bank-East, National Association, Martinsburg

Virginia

One Valley Bank-Shenandoah, Raphine
One Valley Bank-Central Virginia, National Association,
  Lynchburg

Appendix B

Banking Markets in Which BB&T and One Valley
Directly Compete

Bluefield: Mercer County, West Virginia, and Tazewell
County, Virginia.

Emporia: Greenville County and the city of Emporia, all in
Virginia.

Lynchburg: Lynchburg, Virginia, Rand McNally Marketing
Area ("RMA") and the non-RMA portions of the
counties of Amherst and Campbell, all in Virginia.

Roanoke: Roanoke, Virginia, RMA, the non-RMA portions
of the counties of Botetourt and Roanoke, and the
town of Boones Mill in Franklin County, all in Virginia.

Metropolitan D.C.: The DC-MD-VA RMA and the non-RMA
portions of the counties of Fauquier and Loudoun,
Virginia, and Calvert, Charles, and St. Mary's, Maryland.

Appendix C Summary of Pro Forma Market Structure

Bluefield

BB&T is the tenth largest depository institution in the Bluefield banking market, controlling deposits of $19.2 million, representing 1.4 percent of market deposits. One Valley is the second largest depository institution in the market, controlling deposits of $237 million, representing 17 percent of market deposits. On consummation of the proposal, BB&T would become the second largest depository institution in the market, controlling deposits of approximately $256.2 million, representing approximately 18.4 percent of market deposits. The HHI would increase 47 points to 1724.

Roanoke BB&T is the eighth largest depository institution in the Roanoke banking market, controlling deposits of $131.4 million, representing 2.8 percent of market deposits. One Valley is the seventeenth largest depository institution in the market, controlling deposits of $12.5 million, representing less than 1 percent of market deposits. On consummation of the proposal, BB&T would remain the eighth largest depository institution in the market, controlling deposits of approximately $143.9 million, representing approximately 3.1 percent of market deposits. The HHI would increase 1 point to 2529.

Metropolitan D.C. BB&T is the tenth largest depository institution in the Metropolitan D.C. banking market, controlling deposits of $1.6 billion, representing 2.9 percent of market deposits. One Valley is the seventy-fifth largest depository institution in the market, controlling deposits of $14.7 million, representing less than 1 percent of market deposits. On consummation of the proposal, BB&T would remain the tenth largest depository institution in the market, with no change in deposits or market share. The HHI would remain unchanged at 882.

The Charles Schwab Corporation San Francisco, California

Order Approving Formation of a Bank Holding Company and Notice to Acquire Nonbanking Companies

The Charles Schwab Corporation ("Schwab") has requested the Board's approval under section 3 of the Bank Holding Company Act ("BHC Act") (12 U.S.C. [sections] 1842) to become a bank holding company by acquiring all the voting shares of U.S. Trust Corporation, New York, New York ("US Trust"), and of US Trust's subsidiary banks, including its lead subsidiary bank, United States Trust Company of New York, New York, New York ("UST-NY").(1) As part of its proposal to become a bank holding company, Schwab also has filed with the Board an election to become a financial holding company pursuant to sections 4(k) and (1) of the BHC Act (12U. S.C. [sections] 1843(k) and (1)) and section 225.82 of the Board's Regulation Y (12 C.F.R. 225.82).

Schwab also has requested the Board's approval under section 4(c)(8) and 4(j) of the BHC Act (12 U.S.C. [sections] 1843(c)(8) and (j)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire certain nonbanking subsidiaries of US Trust, including U.S. Trust Company of Florida Savings Bank, Palm Beach, Florida ("UST-FL").(2) In addition, Schwab proposes to acquire the Edge Act corporation of US Trust pursuant to section 25A of the Federal Reserve Act (12 U.S.C. [sections] 611 et seq.) and the Board's Regulation K (12 C.F.R. 211).(3)

Notice of the proposal under sections 3 and 4, affording interested persons an opportunity to submit comments, has been published (65 Federal Register 13,765 (2000)). 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.

Schwab, with total consolidated assets of $29.3 billion, is a securities firm engaged principally in the business of providing securities brokerage services to individuals and institutions.(4) Schwab also engages in a variety of other financial activities in the United States and overseas, including securities underwriting and dealing, investment advisory activities, insurance agency activities, employee benefit plan consulting, and trust company functions.

US Trust, with total consolidated assets of $5 billion, is the 12th largest commercial banking organization in New York, controlling deposits of approximately $2.6 billion in the state.(5) US Trust's subsidiary banks and savings association conduct primarily trust activities, and are located in California, Connecticut, Florida, New Jersey, New York, Oregon, Pennsylvania, and Texas. US Trust also engages in trust company functions and provides investment and financial advisory services in the United States.

Factors Governing Board Review of Transaction

The BHC Act sets forth the factors that the Board must consider when reviewing the formation of a bank holding company or the acquisition of banks. These factors are the competitive effects of the proposal in the relevant geographic markets; the financial and managerial resources and future prospects of the companies and banks involved in the proposal; the convenience and needs of the community to be served, including the records of performance under the Community Reinvestment Act (12 U.S.C. [sections] 2901 et seq.) ("CRA") of the insured depository institutions involved in the transaction; and the availability of information needed to determine and enforce compliance with the BHC Act and other applicable federal banking laws.(6)

Competitive Considerations

Section 3 of the BHC Act prohibits the Board from approving a proposal that would result in a monopoly. The BHC Act also prohibits the Board from approving a proposed bank acquisition that would substantially lessen competition in any relevant banking market unless 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.(7)

The proposal involves the acquisition of banks by Schwab, which owns a nondeposit trust company and a variety of nonbanking companies, but does not own a commercial bank or savings association. 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 on the concentration of banking resources in any relevant banking market. Accordingly, the Board has determined that competitive factors under section 3 of the BHC Act are consistent with approval of the proposal. The competitive effects of the proposed nonbanking activities are discussed below.

Financial and Managerial Considerations

The Board has carefully considered the financial and managerial resources and future prospects of the companies and banks involved in the proposal, the effect the proposed transaction would have on such resources, and other supervisory factors in light of all the facts of record. In evaluating the financial and managerial factors, the Board has reviewed confidential examination and other supervisory information assessing the financial and managerial strength of Schwab and its subsidiaries and of US Trust and its subsidiaries, including UST-NY in particular. In addition, the Board has reviewed public and confidential supervisory reports and information regarding the activities and financial position of the regulated subsidiaries of Schwab.

The Board consistently has considered capital adequacy to be an especially important aspect in analyzing financial factors.(8) US Trust and all the subsidiaries of US Trust and Schwab that are subject to regulatory capital requirements currently exceed the relevant requirements. In addition, US Trust and all its subsidiary depository institutions currently are well capitalized under applicable federal guidelines. Schwab also would be well capitalized on a pro forma basis on consummation of the proposal. Moreover, the proposed transaction is structured as a stock-for-stock combination and would not increase the debt service requirements of the combined company and is not expected to have a significantly adverse effect on the financial resources of Schwab. Other financial factors are consistent with approval.

The Board also has carefully considered the managerial resources of Schwab and US Trust in light of all the facts of record, including confidential examination and other supervisory information and information provided by Schwab regarding its existing and proposed risk-management policies and processes. Based on all the facts of record, the Board concludes that considerations relating to the financial and managerial resources and future prospects of the organizations involved are consistent with approval.

In view of the fact that, on a pro forma basis, a large majority of Schwab's activities are conducted in subsidiaries that are functionally regulated by the Securities and Exchange Commission, the Board expects, in carrying out its responsibilities as umbrella supervisor, to rely heavily on the Securities and Exchange Commission for examination and other supervisory information.

Convenience and Needs Factor

The Board also has carefully considered the effect of the proposal on the convenience and needs of the communities to be served in light of all the facts of record, including comments received on the effect the proposal would have on the communities to be served by the combined organization.

A. CRA 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 CRA. As provided in the CRA, the Board evaluates the record of performance of an institution in light of examinations by the appropriate federal supervisors 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 appropriate federal supervisor.(9)

Schwab currently does not control an institution subject to evaluation under the CRA. The Board has reviewed in detail, however, the CRA performance records of the insured depository institutions of US Trust (the "UST Banks"). The UST Banks all received "satisfactory" ratings at their most recent examinations for CRA performance. In particular, UST-NY received a "satisfactory" CRA performance rating from the Federal Reserve Bank of New York at its most recent examination, as of May 26, 1998 (the "1998 Examination"). In addition, the New York State Banking Department, as of May 26, 1998, rated UST-NY's CRA performance "satisfactory" pursuant to section 28-b of New York state banking law.(10)

B. Community Development Record of US Trust

The UST Banks are wholesale banking institutions that provide investment management, corporate trust, financial and estate planning, fiduciary, and private banking services for institutions and high net worth individuals. Each of the UST Banks has been designated a "wholesale bank" and has been evaluated as such under the CRA regulations of the federal banking agencies. Schwab proposes to continue to operate the UST Banks as wholesale banks and to maintain their CRA policies. Designation as a wholesale bank requires the appropriate federal banking agency to evaluate a bank's record of CRA performance under a separate "community development test."(11) Community development activities as a general matter must benefit areas within an institution's assessment area(s) or a broader statewide or regional area that includes the institution's assessment area(s).(12)

Inner City Press/Community on the Move ("Protestant") questioned the appropriateness of the wholesale bank designations of the UST Banks. Protestant argued that the UST Banks are in the business of making mortgage and small business loans and, therefore, should not be able to maintain their wholesale bank status. Protestant also suggested that at least UST-NY and UST-CT hold themselves out to the public as mortgage lenders. Although the UST Banks do originate some mortgage loans, the CRA Q&A make clear that "wholesale institutions may engage in some retail lending without losing their wholesale designation if this activity is incidental and done on an accommodation basis."(13) The CRA Q&A also set forth criteria that the federal banking agencies use to assess whether an institution's retail lending activities are inconsistent with a wholesale bank designation under the CRA.(14) An analysis of the retail lending of the UST Banks in light of these factors indicates that such lending is not inconsistent with their wholesale designations. The most recent CRA performance examinations of the institutions indicate that their lending is provided as an incident to their other services and that the loans provided by the institutions are provided as an accommodation to their wholesale customers or as a means of soliciting trust, asset management, and private banking business from new customers.(15) The record also indicates that the number of retail loans originated by each UST Bank represents less than 2 percent of the bank's noninstitutional accounts, and that the UST Banks do not hold themselves out as offering mortgage or other retail loans. The Board will continue to monitor the retail lending activities of UST-NY, the only UST Bank for which the Board is the appropriate federal financial supervisory agency, and retains sufficient authority to revoke the bank's wholesale status if the facts and circumstances so warrant.(16)

Community Development Record of UST-NY. The 1998 Examination indicated that UST-NY's community development loan commitments during the examination period (May 20, 1996, through May 26, 1998) totalled $5.6 million and represented a 27-percent increase since the previous examination. Consistent with UST-NY's wholesale bank operations, a substantial portion of these loans were indirect, i.e., they were made to intermediaries supporting affordable housing and economic development and revitalization within the bank's assessment area.(17) Examiners also indicated that UST-NY exhibited innovative lending practices and exhibited excellent responsiveness to the credit needs in its assessment area.

The 1998 Examination determined that UST-NY had an adequate level of community development investments. Qualified investments totalled $2.7 million, including $580,000 in charitable grants and contributions. Examiners noted, in particular, UST-NY's innovative tax credit investments of $880,000 made through the New York Equity Fund, an investment pool for corporate equity investments supporting low-income housing development.

Examiners also found that UST-NY provided community development services in its assessment area--including technical assistance, investment advisory services, and in-kind donations--and that the bank's services exhibited an excellent responsiveness to the needs of its assessment area.(18) Examiners noted that the bank provided fundraising, advisory, and trustee services for Brooklyn Legal Services, Children's House Inc., Big Brothers/Big Sisters, Little Sisters of the Assumption Family Health Services, Inc., and American Red Cross of Greater New York. Examiners made special mention of the financial expertise provided by bank employees to various community development organizations, including Mercy Haven, Inc., an organization that operates residences on Long Island for the mentally ill, formerly homeless, and AIDS patients.(19)

According to information provided by US Trust, UST-NY had a total of $17.8 million of community development lending and investments as of February 2000, an increase of 114 percent over the levels credited to the bank in the 1998 Examination. The lending activities include a $1 million line of credit for the working capital needs of Henry Street Settlement, a nonprofit social agency serving the community development needs of LMI areas in lower Manhattan; a $1.58 million line of credit issued for the benefit of the New York State Housing Finance Agency as security for debt payments on financing for an LMI housing project in the Bronx; and a $500,000 loan to Nonprofit Finance Fund, a financial intermediary that provides advisory services and loans to nonprofit organizations that offer community development services to LMI families and areas in New York City. US Trust also indicated that it has made $12.4 million in qualified community development investments and $805,000 in CRA-eligible grants since the 1998 Examination.

HMDA Data. Protestant maintained that Home Mortgage Disclosure Act (12 U.S.C. [sections] 2801 et seq.) ("HMDA") data demonstrate that the UST Banks make substantially all of their loans to nonminority borrowers outside LMI census tracts. Protestant stated, in particular, that UST-NY 1does not lend in Bronx County, the lowest income and most predominantly minority county in the New York City Metropolitan Statistical Area.(20) The Board has recognized that HMDA data alone provide an incomplete measure of an institution's lending in its community, and that these data have limitations that make them an inadequate basis, absent other information, for concluding that an institution has engaged in illegal lending discrimination. The limitations of HMDA data are even greater when, as here, the relevant institutions are not engaged in the business of mortgage lending. In light of the limitations of HMDA data, particularly as applied to wholesale banks, the Board has carefully reviewed other information, particularly examination reports that provide an on-site evaluation of compliance with the fair lending laws by the subsidiaries of US Trust. Examiners found no evidence of prohibited discrimination or other illegal credit practices at UST-NY or any other UST Bank and found no substantive violations of fair lending laws.

C. Conclusion on Convenience and Needs

The Board has carefully considered all the facts of record, including the public comments received, responses to the comments, and reports of examinations of CRA performance of the institutions involved, in reviewing the proposal's effect on the convenience and needs of the communities to be served by the combined organization. The Board also has carefully considered the effect of the proposed acquisition of US Trust by Schwab on the future performance of the UST Banks under the CRA. In connection with the proposal, Schwab has indicated that it intends to continue US Trust's record of CRA performance.

The Board expects that, after the proposed acquisition by Schwab, UST-NY and the other UST Banks will demonstrate the same commitment to serving the community development needs of their communities that they have demonstrated to date. Schwab is a large financial organization with a satisfactory record of legal and regulatory compliance, and has financial and managerial resources that are sufficient to ensure compliance by the UST Banks with all relevant regulatory requirements, including the CRA. Based on a review of the entire record, and for the reasons discussed above, the Board concludes that convenience and needs considerations, including the CRA performance records of the UST Banks, are consistent with approval of the proposal.

Nonbanking Activities

Schwab also has filed notice under section 4(c)(8) and 4(j) of the BHC Act to acquire the nonbank subsidiaries of US Trust, including UST-FL, and thereby engage in a number of nonbanking activities, including extending credit, operating a savings association, performing trust company functions, and providing investment and financial advisory services.(21) The Board determined by regulation before November 12, 1999, that the types of activities for which notice has been provided are so closely related to banking as to be a proper incident thereto for purposes of section 4(c)(8) of the BHC Act.(22) Schwab has committed that it will conduct these activities in accordance with the Board's regulations and orders approving these activities for bank holding companies.(23)

In order to approve the notice, the Board also must determine that the acquisition of the nonbank subsidiaries of US Trust and the performance of the proposed activities by Schwab can reasonably be expected to produce benefits to the public that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices.(24)

Schwab has indicated that the proposed transaction would create a stronger and more diversified financial services organization and would provide the current and future customers of Schwab and US Trust with improved financial products and services and with a comprehensive and integrated asset management service. Schwab has stated that its current and prospective clients would benefit from referrals to US Trust's financial planning, tax and estate planning, private banking, investment management, fiduciary, and equity research services. Schwab also has stated that US Trust's current and prospective customers would benefit from Schwab's marketing efficiency, multichannel distribution capacity, and ability to develop and implement innovative technology. In addition, there are public benefits to be derived from permitting capital markets to operate so that bank holding companies can make potentially profitable investments in nonbanking companies and from permitting banking organizations to allocate their resources in the manner they consider to be most efficient when such investments and actions are consistent, as in this case, with the relevant considerations under the BHC Act.

As part of its evaluation of the statutory factors, the Board considers the financial and managerial resources of the notificant, its subsidiaries, and any company to be acquired; the effect the transaction would have on such resources; and the management expertise, internal control and risk management systems, and capital of the entity conducting the activity.(25) For the reasons discussed above, and based on all the facts of record, the Board has concluded that financial and managerial considerations are consistent with approval of the notice.

The Board has carefully considered the competitive effects of the proposed transaction under section 4 of the BHC Act. To the extent that Schwab and US Trust offer different types of nonbanking products, the proposed acquisition would result in no loss of competition. Certain nonbanking subsidiaries of Schwab and US Trust do compete, however, in securities brokerage, investment advisory, mutual funds, and asset management and fiduciary services. The markets for each of these nonbanking activities are regional or national in scope. The record in this case indicates that there are numerous providers of these services and that the markets for these nonbanking services are unconcentrated. For these reasons, and based on all the facts of record, the Board concludes that consummation of the proposal would have a de minimis effect on competition.

The Board also believes that the conduct of the proposed nonbanking activities within the framework established in this order, prior orders, and Regulation Y is not likely to result in adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices, that would not be outweighed by the public benefits of the proposal, such as increased customer convenience and gains in efficiency. Accordingly, based on all the facts of record, the Board has determined that the balance of public interest factors that the Board must consider under the standard of section 4(j) of the BHC Act is favorable and consistent with approval.

Schwab also has proposed to acquire US Trust's Edge Act corporation, and the Board has no objection to such acquisition. Conclusion

Based on the foregoing, the Board has determined that the application under section 3 of the BHC Act and the notice under section 4(c)(8) of the BHC Act should be, and hereby are, approved.(26) In reaching its conclusion, the Board has considered all the facts of record in light of the factors that the Board is required to consider under the BHC Act and other applicable statutes.(27) The Board's approval is specifically conditioned on compliance by Schwab with all the commitments made in connection with the application and notice, including the commitments and conditions discussed in this order.(28) The Board's approval of the nonbanking aspects of the proposal also is subject to all the conditions set forth in Regulation Y, including those in sections 225.7 and 225.25(c) of Regulation Y (12 C.F.R. 225.7 and 225.25(c)), 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 issued thereunder. These commitments and conditions are 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.

The acquisition of US Trust's subsidiary banks may not be consummated before the fifteenth calendar day after the effective date of this order, and the proposal may 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 San Francisco, acting pursuant to delegated authority.

Financial Holding Company Declaration

Schwab also has filed with the Board an election to become a financial holding company pursuant to sections 4(k) and (1) of the BHC Act and section 225.82 of Regulation Y. Schwab has certified that all depository institutions controlled by US Trust are well capitalized and well managed, and has provided all the information required under Regulation Y.

The Board has reviewed the examination ratings received by each insured depository institution controlled by US Trust under the CRA, and other relevant examinations and information. Based on all the facts of record, the Board has determined that this election to become a financial holding company will become effective on consummation of the acquisition of US Trust by Schwab.

By order of the Board of Governors, effective May 1, 2000.

(1.) Schwab proposes to acquire US Trust by merging a wholly owned acquisition subsidiary with and into US Trust, with US Trust as the surviving company. The subsidiary banks of US Trust that Schwab proposes to acquire are UST-NY; U.S. Trust Company National Association, Los Angeles, California ("UST-CA"); U.S. Trust Company of Texas, National Association, Dallas, Texas ("UST-TX"); U.S. Trust Company, Greenwich, Connecticut ("UST-CT"); U.S. Trust Company of New Jersey, Princeton, New Jersey ("UST-NJ"); and U.S. Trust Company of North Carolina, Greensboro, North Carolina ("UST-NC"). Schwab has requested approval to acquire UST-NC, a nondepository trust company that Schwab intends to convert to a commercial bank within six months of consummation of the proposal, under sections 3 and 4 of the BHC Act. Schwab also proposes to acquire U.S.T. L.P.O. Corp., New York, New York, a wholly owned subsidiary of US Trust that is an intermediate bank holding company over UST-TX; and NCT Holdings Inc., Greensboro, North Carolina, a wholly owned subsidiary of US Trust that would be an intermediate bank holding company over UST-NC.

(2.) US Trust's nonbanking subsidiaries and nonbanking activities for which Schwab has sought Board approval under section 4(c)(8) and 4(j) of the BHC Act are listed in the Appendix.

(3.) Schwab also has requested the Board's approval to hold and exercise an option to acquire up to 19.9 percent of the shares of US Trust's common stock. The option would expire on consummation of the proposal.

(4.) Asset data are as of December 31, 1999.

(5.) Ranking data are as of December 31, 1999. Deposit data are as of June 30, 1999.

(6.) In cases involving interstate bank acquisitions by bank holding companies, the Board also must consider the concentration of deposits in the nation and relevant individual states, as well as compliance with the other provisions of section 3(d) of the BHC Act.

(7.) 12 U.S.C. [sections] 1842(c)(1).

(8.) See Chemical Banking Corporation, 82 Federal Reserve Bulletin 230 (1996).

(9.) The Interagency Questions and Answers Regarding Community Reinvestment ("CRA Q&A") provide that a CRA examination is an important and often controlling factor in the consideration of an institution's CRA record. See 64 Federal Register 23,641 (1999).

(10.) UST-CT received a "satisfactory" rating from its appropriate federal supervisor, the Office of the Comptroller of the Currency ("OCC"), at its most recent examination for CRA performance, as of June 16, 1999. UST-TX received an overall rating of "satisfactory" from its appropriate federal supervisor, the OCC, at its most recent evaluation for CRA performance, as of June 25, 1997. UST-CA received a "satisfactory" rating from the Federal Deposit Insurance Corporation ("FDIC") at its most recent CRA examination, as of October 12, 1999. UST-NJ received a "satisfactory" rating from the FDIC at its most recent CRA examination, as of April 27, 1999. Finally, UST-FL received a "satisfactory" rating from the Office of Thrift Supervision at its most recent CRA examination, as of November 12, 1997.

(11.) See 12 C.F.R. 228.25(a). This test evaluates a wholesale bank on its record of community development services, community development investments, and community development lending. 12 C.F.R. 228.25(c). The primary purpose of any service, investment, or loan considered under the test must be "community development," which is defined in terms of specific categories of activities that benefit low- and moderate-income ("LMI") individuals, LMI areas, or small businesses or farms. See 12 C.F.R. 228.12(h).

(12.) Community development activities outside an institution's assessment area(s) may also be considered if the institution has adequately addressed the needs of its assessment area(s). See 12 C.F.R. 228.25(e).

(13.) See CRA Q&A at .12(o).

(14.) Id.

(15.) Schwab has represented that the UST Banks continue to make retail loans only as an incident to the institutions' asset management business and that substantially all of the loans originated by the institutions in 1999 were made as accommodations to existing customers or to individuals conducting an active dialogue with the institutions regarding the establishment of an asset management relationship.

(16.) 12 C.F.R. 228.25(b). Protestant contended that the proposal represents an evasion of the CRA because the UST Banks are assessed as wholesale banks while Schwab is primarily a retail operation. The Board notes that the CRA applies only to insured depository institutions and not to Schwab's brokerage and other subsidiaries that are not insured depository institutions. Moreover, the CRA regulations and written guidance of the federal banking agencies specifically require wholesale bank determinations to be made on the basis of the activities of the bank and do not restrict the affiliations of a wholesale bank. See, e.g., 12 C.F.R. 228.12(w) and 228.25(b).

(17.) Protestant criticized US Trust for fulfilling a large proportion of its community development lending obligations by providing standby letters of credit rather than loans. The Board notes that the CRA does not require an institution to offer any specific credit products but allows an institution to help serve the credit needs of the institution's community by providing credit of the types consistent with the institution's overall business strategy and expertise.

(18.) Protestant complained that UST-NY does not have a branch in Bronx County or Brooklyn. As discussed above, UST-NY has been designated as a wholesale bank by its appropriate federal financial supervisory agency. Accordingly, federal regulators assess UST-NY's provision of community development services rather than its provision of general banking services to its assessment area.

(19.) Examiners also noted that the bank participated in cooperative work study programs and provided free investment advisory services for the Lower East Side People's Federal Credit Union.

(20.) Protestant also contended that UST-NY failed to comply with the requirements of HMDA to report the race of borrowers receiving mortgage loans. Most of the mortgage applications received by UST-NY are received by telephone. Under regulations implementing HMDA, an institution is specifically exempted from the requirement of recording the race of an applicant when a mortgage application is made entirely by telephone. See 12 C.F.R. 203, Appendix A, [sections] V(D)(2), and Appendix B, [sections] I(B)(4). Furthermore, an institution is not required to record race data under this exemption even if the telephone applicant has an existing banking relationship with the institution. For these reasons, the Board concludes that the reporting practices with respect to the collection of race data used in mortgage applications taken by UST-NY do not violate HMDA.

(21.) Schwab has indicated that its current activities are permissible under section 4(k) of the BHC Act.

(22.) See 12 C.F.R. 225.28(b)(1), (4)(ii), (5), and (6).

(23.) In connection with its August 1999 acquisition of NCT Holdings, Inc., Greensboro, North Carolina ("NCT"), US Trust committed to conform the activities and investments of NCT and its subsidiaries to those permissible for bank holding companies under section 4 of the BHC Act and Regulation Y within two years of acquiring NCT. Schwab has committed to conform the activities and investments of NCT and its subsidiaries within two years of US Trust's acquisition of NCT.

(24.) See 12 U.S.C. [sections] 1843(j)(2)(A).

(25.) See 12 C.F.R. 225.26.

(26.) Protestant requested that the Board hold a public meeting or hearing on the proposal. Section 3(b) of the BHC Act does not require the Board to hold a public 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. The Board has not received such a recommendation from the appropriate supervisory authorities.

Under its rules, the Board also may, in its discretion, hold a public meeting or hearing on an application to acquire a bank if a meeting or hearing is necessary or appropriate to clarify factual issues related to the application and to provide an opportunity for testimony. 12 C.F.R. 225.16(e). Section 4 of the BHC Act and the Board's rules thereunder provide for a hearing on a notice to acquire nonbanking companies if there are disputed issues of material fact that cannot be resolved in some other manner. 12 U.S.C. [sections] 1843(c)(8); 12 C.F.R. 225.25(a)(2). The Board has considered carefully Protestant's request in light of all the facts of record. In the Board's view, Protestant has had ample opportunity to submit its views, and, in fact, submitted written comments that have been considered carefully by the Board in acting on the proposal. Protestant's request fails to demonstrate why its written comments do not present its views adequately and fails to identify disputed issues of fact that are material to the Board's decision that would be clarified by a public meeting or hearing. For these reasons, and based on all the facts of record, the Board has determined that a public meeting or hearing is not required or warranted in this case. Accordingly, the request for a public meeting on the proposal is denied.

(27.) Protestant requested that the Board consider Schwab's recent acquisition of CyBerCorp. Protestant provided no basis or reason for the Board to deny the application because of this acquisition.

Protestant also requested that the Board delay action and extend the comment period on the proposal for a variety of reasons. The request for delay does not warrant postponement of the Board's consideration of the proposal. The Board has accumulated a significant record in this case, including reports of examination, supervisory information, public reports and information, and public comment. In the Board's view, for the reasons discussed above, Protestant has had ample opportunity to submit its views, and, in fact, has provided substantial written submissions that have been considered carefully by the Board in acting on the proposal. Moreover, the BHC Act and Regulation Y require the Board to act on proposals submitted under those provisions within certain time periods. Based on a review of all the facts of record, the Board concludes that the record in this case is sufficient to warrant Board action at this time, and that further delay of consideration of the proposal, extension of the comment period, or denial of the proposal is not warranted.

(28.) Protestant also expressed concern about the fairness of the Board's processing of the proposal because of discussions that occurred between Federal Reserve staff and representatives of Schwab and US Trust before the application and notice were filed. Protestant claimed that Schwab may have received prior determinations on certain issues raised by the proposal in these discussions. The Board has carefully considered this contention and has found no factual basis for Protestant's claims that any aspect of the proposal was predetermined. Moreover, the Board finds that any prefiling meetings were proper both as a matter of Board policy and as a matter of administrative law. See Action for Children's Television v. FCC, 564 F.2d 458, 474 n.28, and 477 (D.C. Cir. 1977).

Voting for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Kelley, Meyer, and Gramlich.

ROBERT DEV. FRIERSON Associate Secretary of the Board

Appendix

Nonbanking Subsidiaries of US. Trust Corporation

(1) Fernhill Holding, Inc., Larkspur, California, and thereby engage in extending credit, in accordance with section 225.28(b)(1) of Regulation Y (12 C.F.R. 225.28(b)(1));

(2) U.S. Trust Company of Florida Savings Bank, Palm Beach, Florida, and thereby engage in operating a savings association, in accordance with section 225.28(b)(4)(ii) of Regulation Y (12 C.F.R. 225.28(b)(4)(ii));

(3) U.S. Trust Company of North Carolina, Greensboro, North Carolina, and thereby engage in performing trust company functions, in accordance with section 225.28(b)(5) of Regulation Y (12 C.F.R. 225.28(b)(5));

(4) U.S. Trust Company of Delaware, Wilmington, Delaware, and thereby engage in performing trust company functions, in accordance with section 225.28(b)(5) of Regulation Y (12 C.F.R. 225.28(b)(5));

(5) NCT Opportunities, Inc., Greensboro, North Carolina, and thereby provide investment and financial advisory services, in accordance with section 225.28(b)(6) of Regulation Y (12 C.F.R. 225.28(b)(6)); and

(6) CTC Consulting, Inc., Portland, Oregon, and thereby provide investment and financial advisory services, in accordance with section 225.28(b)(6) of Regulation Y (12 C.F.R. 225.28(b)(6)).

Wells Fargo & Company San Francisco, California

Order Approving the Acquisition of a Bank Holding Company

Wells Fargo & Company ("Wells Fargo"), 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. [sections] 1842) to acquire First Commerce Bancshares, Inc., Lincoln, Nebraska ("First Commerce"); First Commerce Bancshares of Colorado, Inc., Colorado Springs, Colorado; and their wholly owned subsidiary banks. Wells Fargo 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 1843(j)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire First Commerce's nonbanking subsidiaries.(1)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (65 Federal Register 18,996 (2000)). 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.

Wells Fargo, with total consolidated assets of $222.3 billion is the seventh largest commercial banking organization in the United States, controlling 3.9 percent of total assets of insured commercial banks in the United States.(2) Wells Fargo operates a large network of subsidiary banks in 21 states, including Nebraska and Colorado.(3) Wells Fargo is the fourth largest commercial banking organization in Nebraska, controlling deposits of $1.8 billion, representing approximately 6.6 percent of total deposits in depository institutions in the state ("state deposits").(4) In Colorado, Wells Fargo is the largest commercial banking organization, controlling deposits of $8.8 billion, representing approximately 19.2 percent of state deposits. First Commerce, with total consolidated assets of $3.9 billion, also operates depository institutions in Nebraska and Colorado. It is the third largest commercial banking organization in Nebraska, controlling deposits of $1.8 billion, representing approximately 6.6 percent of state deposits. In Colorado, First Commerce is the 160th largest commercial banking organization, controlling deposits of $978,000, representing less than 1 percent of state deposits. On consummation of the proposal, and accounting for the proposed divestitures discussed in this order, Wells Fargo would become the second largest commercial banking organization in Nebraska, controlling deposits of $3.4 billion, representing approximately 12.4 percent of state deposits. Wells Fargo would remain the largest commercial banking organization in Colorado, controlling deposits of $8.8 billion.

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 the bank holding company if certain conditions are met.(5) For purposes of the BHC Act, the home state of Wells Fargo is California, and First Commerce's subsidiary banks are located in Nebraska and Colorado.(6)

All the conditions for an interstate acquisition enumerated in section 3(d) of the BHC Act are met in this case.(7) In view of all the facts of record, the Board is permitted to approve the 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 be in furtherance of any attempt to monopolize the business of banking. The BHC Act also prohibits the Board from approving a proposed combination that would substantially lessen competition or tend to create a monopoly 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 effects of the proposal in meeting the convenience and needs of the community to be served.(8)

The Board has carefully reviewed the competitive effects of the proposal in the relevant banking markets in light of all the facts of record, including the number of competitors that would remain in the markets, the relative shares of total deposits in depository institutions in the markets ("market deposits") controlled by the companies involved in this transaction,(9) the concentration levels of market deposits and the increase in these levels as measured by the Herfindahl-Hirschman Index ("HHI") under the Department of Justice Merger Guidelines ("DOJ Guidelines"), and other characteristics of the markets.(10)

Wells Fargo and First Commerce compete directly in four banking markets: Adams County,(11) Hall County,(12) and Lincoln,(13) all in Nebraska; and Colorado Springs, Colorado.(14) Consummation of the proposal without divestitures would be consistent with the DOJ Guidelines and Board precedent in the Colorado Springs and Hall County banking markets.(15)

Wells Fargo's subsidiary bank, Norwest Bank Nebraska, N.A., Omaha, Nebraska ("Norwest Bank Nebraska"), is the largest depository institution in the Adams County banking market and controls deposits of $165.3 million, representing 34.3 percent of market deposits. In order to mitigate the potential anticompetitive effects of the proposal in this market, Wells Fargo has committed to divest City National Bank and Trust Company, Hastings, Nebraska, which controls all of First Commerce's deposits in the market ($135.4 million), to a purchaser that does not currently compete in the market. Accordingly, the HHI for the market would remain unchanged at 2353, and consummation of the proposal would be consistent with Board precedent and the DOJ Guidelines.

In the Lincoln banking market, Wells Fargo has committed to sell one branch that controls $94.7 million in deposits to a commercial bank that currently operates in the market.(16) On consummation of the proposal, and accounting for the proposed divestiture, Norwest Bank Nebraska, would become the largest depository institution in the market, controlling deposits of $1.1 billion, representing approximately 39.5 percent of market deposits. The HHI would increase 234 points to 2282.

In reviewing the competitive effects of this proposal, the Board has considered that several factors appear to mitigate the likely effect of the proposal on competition in the Lincoln banking market, in particular, the number and size of competing institutions in the banking market. Seventeen depository institutions besides Norwest Bank Nebraska would remain in the market after the proposed acquisition. Two of these organizations would each control more than 14 percent of market deposits. The market also appears to be attractive for entry by out-of-market competitors. From 1990 to 1999, the population of the Lincoln banking market increased by 10.9 percent, compared with an increase of 9.1 percent in the population of Omaha, the other metropolitan area in Nebraska, and a 5.7 percent increase in population for the state as a whole. From 1999 to 2004, Lincoln's population is expected to continue to increase at almost twice the state rate.(17)

The Department of Justice has conducted a detailed review of the proposal and advised the Board that, conditioned on completion of the proposed divestitures in the Adams County and Lincoln banking markets, consummation of the proposal would not likely have a significantly adverse effect on competition in any relevant banking market. The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation also have been afforded an opportunity to comment and have not objected to consummation of the proposal.

After carefully reviewing all the facts of record, and for the reasons discussed in this order, the Board concludes that consummation of the proposal would not likely result in a significantly adverse effect on competition or on the concentration of banking resources in any of the banking markets in which Wells Fargo and First Commerce directly compete or in any other relevant banking market. Accordingly, based on all the facts of record, and subject to completion of the proposed divestitures and compliance with the related commitments, the Board has determined that competitive factors are consistent with approval of the proposal.

Other Considerations

The BHC Act requires the Board, in acting on an application, to consider the financial and managerial resources and future prospects of the companies and banks involved, 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 Wells Fargo. Based on all the facts of record, the Board concludes that the financial and managerial resources and the future prospects of Wells Fargo, First Commerce, 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. In addition, considerations related to the convenience and needs of the communities to be served, including the records of performance of the institutions under the Community Reinvestment Act (12 U.S.C. [sections] 2901 et seq.), are consistent with approval of the proposal.

Nonbanking Activities

Wells Fargo has filed notice under sections 4(c)(8) and 4(j) of the BHC Act to acquire First Commerce's wholly owned nonbanking subsidiaries and thereby engage in a number of nonbanking activities. The Board has determined by regulation that extending credit and servicing loans, providing financial and investment advisory services, certain insurance agency and underwriting activities, and data processing activities are closely related to banking for purposes of the BHC Act.(18) Moreover, the Federal Reserve System previously has approved applications by First Commerce to engage in all the proposed activities. Wells Fargo has committed to conduct these nonbanking activities in accordance with the limitations set forth in Regulation Y and the Board's orders and interpretations.

In order to approve this notice, the Board is required by section 4(j)(2)(A) of the BHC Act to determine that the acquisition of the nonbanking subsidiaries of First Commerce by Wells Fargo "can reasonably be expected to produce benefits to the public ... that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."(19)

As part of its evaluation of these factors, the Board considers the financial and managerial resources of Wells Fargo and its subsidiaries, including the companies to be acquired, and the effect of the proposed transaction on those resources. For the reasons noted above, and based on all the facts of record, the Board has concluded that financial and managerial considerations are consistent with approval of the notice.

The Board also has considered the competitive effects of Wells Fargo's proposed acquisition of the nonbanking subsidiaries of First Commerce in light of all the facts of record. Most of the markets in which the nonbanking subsidiaries of First Commerce and Wells Fargo directly compete are national or regional in scope and are unconcentrated, and there are numerous providers of all of these services. One of First Commerce's nonbanking subsidiaries originates mortgages in the Lincoln, Nebraska, market. There are numerous Competitors in the market for mortgage originations in Lincoln, and there are few barriers to entry. As a result, the Board expects that consummation of the proposal would have a de minimis effect on competition for all these services. Based on all the facts of record, the Board concludes that it is unlikely that significantly adverse competitive effects would result from the nonbanking acquisitions proposed in this transaction.

The Board also expects that the proposed transaction would give Wells Fargo an increased ability to serve the needs of its customers. In addition, there are public benefits to be derived from permitting capital markets to operate so that bank holding companies can make potentially profitable investments in nonbanking companies and from permitting banking organizations to allocate their resources in the manner they consider to be most efficient when such investments are consistent, as in this case, with the relevant considerations under the BHC Act.

The Board also concludes that the conduct of the proposed nonbanking activities within the framework of Regulation Y and Board precedent is not likely to result in adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices, that would outweigh the public benefits of the proposal, such as increased customer convenience and gains in efficiency. Accordingly, based on all the facts of record, the Board has determined that the balance of public interest factors that the Board must consider under section 4(j)(2)(A) of the BHC Act is favorable and consistent with approval of this proposal.

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 the application and notice is specifically conditioned on compliance by Wells Fargo with all the commitments made in connection with the proposal and with the conditions stated or referred to in this order, including Wells Fargo's divestiture commitments. 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 225.25(c) (12 C.F.R. 225.7 and 225.25(c)), and 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 in this order 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.

The acquisition of the subsidiary banks of First Commerce shall not be consummated before the fifteenth calendar day after the effective date of this order, and the 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 San Francisco, acting pursuant to delegated authority.

By order of the Board of Governors, effective May 30, 2000.

(1.) The subsidiary banks and nonbanking subsidiaries of First Commerce are listed in the Appendix.

(2.) Asset data are as of December 31, 1999, and ranking data are as of December 31, 1999.

(3.) Wells Fargo operates in Arizona, California, Colorado, Idaho, Iowa, Illinois, Indiana, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oregon, South Dakota, Texas, Utah, Washington, Wisconsin, and Wyoming.

(4.) Deposit data are as of June 30, 1999. In this context, depository institutions include commercial banks, savings banks, and savings associations.

(5.) See 12 U.S.C. [sections] 1842(d). A bank holding company's home state is the state in which the total deposits of all banking subsidiaries of the company were the largest on July 1, 1966, or on the date on which the company became a bank holding company, whichever is later. 12 U.S.C. [sections] 1841(o)(4)(C).

(6.) For purposes of section 3(d) of the BHC Act, the Board considers a bank to be located in the states in which the bank is chartered or headquartered or operates a branch. NationsBank Corporation, 84 Federal Reserve Bulletin 858 (1998).

(7.) See 12 U.S.C. [subsections] 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). First Commerce's subsidiary banks have been in existence and continuously operated for the minimum period of time required under state law. See Neb. Rev. Stat. [sections] 8-911 (five years); Colo. Rev. Stat. 11-6.4-103 (permits acquisition of a depository institution that has been in operation for less than five years when it is in conjunction with the acquisition of a Colorado bank holding company). In addition, on consummation of the proposal, Wells Fargo and its affiliates would control less than 10 percent of the total amount of deposits of insured depository institutions in the United States, and would not exceed applicable deposit limitations as calculated under state law. See Neb. Rev. Stat. [sections] 8-910 (14 percent); Colo. Rev. Stat. 11-6.4-103 (25 percent). Wells Fargo also meets the capital, managerial, and other requirements established under applicable law. In making this determination, the Board has relied on all the facts of record, including the views of the Colorado Division of Banking and the Nebraska Department of Banking and Finance concerning the permissibility of the proposed transaction under applicable state laws.

(8.) 12 U.S.C. [sections] 1842(c).

(9.) Market share data are as of June 30, 1999, and are based on calculations that include the deposits of thrift institutions 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, e.g., 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).

(10.) Under the DOJ Guidelines, 49 Federal Register 26,823 (1984), a market in which the post merger HHI is more than 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 HHI 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 nondepository financial institutions.

(11.) The Adams County banking market is defined as Adams County, Nebraska.

(12.) The Hall County banking market is defined as Hall County, Nebraska.

(13.) The Lincoln banking market is defined as Lancaster County, Nebraska.

(14.) The Colorado Springs banking market is defined as El Paso and Teller Counties, Colorado.

(15.) On consummation of the proposal, Wells Fargo's subsidiary bank, Norwest Bank Colorado, N.A., Denver, Colorado, would remain the largest depository institution in the Colorado Springs banking market and control $700.3 million in deposits, representing 22.7 percent of market deposits. The HHI would increase one point to 961. In the Hall County banking market, Wells Fargo's subsidiary bank, Norwest Bank Nebraska, N.A., Omaha, Nebraska, would become the largest depository institution in the market and control $223.1 million in deposits, representing 27.3 percent of market deposits. The HHI would increase 171 points to 1591.

(16.) In each market in which Wells Fargo has committed to divest offices to mitigate the anticompetitive effects of the proposal, Wells Fargo has committed to execute sales agreements for the proposed divestitures with a purchaser determined by the Board to be competitively suitable before consummation. Wells Fargo also has committed that, if it is unsuccessful in completing any divestiture within 180 days of consummation, it will transfer the unsold offices to an independent trustee that is acceptable to the Board and will instruct the trustee to sell the offices promptly to one or more alternative purchasers acceptable to the Board. See BankAmerica Corporation, 78 Federal Reserve Bulletin 338 (1992); United New Mexico Financial Corporation, 77 Federal Reserve Bulletin 484 (1991).

(17.) Rand McNally Commercial Atlas & Marketing Guide (2000).

(18.) See 12 C.F.R. 225.28(b)(1), (6), (11)(i), and (14).

(19.) 12 U.S.C. [sections] 1843(j)(2)(A).

This action was taken pursuant to the Board's Rules Regarding Delegation of Authority (12 C.F.R. 265.4(b)(1)) by a committee of Board members. Voting for this action: Governors Kelley, Meyer, and Gramlich. Absent and not voting: Chairman Greenspan and Vice Chairman Ferguson.

ROBERT DEV. FRIERSON Associate Secretary of the Board

Appendix

Subsidiary Banks of First Commerce

City National Bank and Trust Company, Hastings,
  Nebraska

First Commerce Bank of Colorado, N.A., Colorado
  Springs, Colorado

First National Bank and Trust Company of Kearney,
  Kearney, Nebraska

National Bank of Commerce Trust and Savings
  Association, Lincoln, Nebraska

The First National Bank of McCook, McCook, Nebraska

The First National Bank of West Point, West Point,
  Nebraska

The Overland National Bank of Grand Island, Grand
  Island, Nebraska

Western Nebraska National Bank, North Platte, Nebraska

Nonbanking Subsidiaries of First Commerce

Cabella's Card, LLC; Community Mortgage Corp.; and First Commerce Mortgage, Inc., all in Lincoln, Nebraska, which extend credit and service loans in accordance with section 225.28(b)(1) of Regulation Y (12 C.F.R. 225.28(b)(1)).

First Commerce Investors, Inc., Lincoln, Nebraska, which provides financial and investment advisory services in accordance with section 225.28(b)(6) of Regulation Y (12 C.F.R. 225.28(b)(6)).

Commerce Affiliated Life Insurance Co., Lincoln, Nebraska, which engages in credit related insurance agency and underwriting activities in accordance with section 228.28(b)(11)(i) of Regulation Y (12 C.F.R. 225.28(b) (11)(i)).

First Commerce Technology, Inc., Lincoln, Nebraska, which provides data processing services in accordance with section 225.28(b)(14) of Regulation Y (12 C.F.R. 225.28(b)(14)).