ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT.

Orders Issued Under Section 3 of the Bank Holding Company Act

Banco Comercial Portugues, S.A. Oporto, Portugal

Banco Portugues do Atlantico, S.A. Oporto, Portugal

BCP-IF S.G.P.S., Lda Lisbon, Portugal

BPA Internacional, S.G.P.S. Sociedade Unipessoal Lda Funchal, Madeira, Portugal

Banco Portugues do Atlantico (USA), Inc. Newark, New Jersey

Order Approving Formation of Bank Holding Companies and Acquisition of a Bank

Banco Comercial Portugues, S.A. ("Banco Comercial"), Banco Portugues do Atlantico, S.A. ("Atlantico"), BCP-IF S.G.P.S., Lda, BPA Internacional, S.G.P.S. Sociedade Unipessoal Lda, and Banco Portugues do Atlantico (USA), Inc. ("BPA-USA") (collectively, "Applicants"), have requested the Board's approval under section 3(a)(1) of the Bank Holding Company Act ("BHC Act") (12 U.S.C. [sections] 1842(a)(1)) to become bank holding companies by acquiring up to 100 percent of the voting shares of BPABank, National Association, Newark, New Jersey ("Bank"), a de novo national bank to be established by Atlantico.(1) BPA-USA would be the direct parent company of Bank.

Notice of the application, affording interested persons an opportunity to comment, has been published (64 Federal Register 53,390 (1999)). The time for filing comments has expired, and the Board has considered the application and all comments received in light of the factors enumerated in section 3 of the BHC Act.

Banco Comercial, with consolidated assets of $62 billion, is the largest banking organization in Portugal.(2) Atlantico, a Banco Comercial subsidiary, operates internationally through numerous branches and agencies, including a state-licensed branch in New York, New York, and a state-licensed agency in Miami, Florida. Through their subsidiaries and affiliates, Banco Comercial and Atlantico also engage in and outside Portugal in a variety of nonbanking activities, including asset management, real estate and equipment leasing, and investment banking.

Competitive and Convenience and Needs 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 acquisition that would substantially lessen competition or tend to create a monopoly in any relevant banking market, unless the anticompetitive effects of the proposal clearly are outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served.(3)

Consummation of the proposed transaction would result in the establishment of a de novo bank in the relevant banking market and thereby would increase the number of alternative sources of banking products and services available to customers. In addition, the Board previously has noted that the establishment of a de novo bank enhances competition in affected banking markets and reflects positively on competitive considerations in an application under section 3 of the BHC Act.(4) Moreover, there is no evidence that the proposed transaction would create or further a monopoly or lessen competition in any relevant banking market. Accordingly, the Board concludes that consummation of the proposal would not have a significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market and that competitive considerations are consistent with approval.(5)

The BHC Act also requires the Board to consider the effect of the transaction on the convenience and needs of the communities to be served, and the Board has reviewed the information presented by Banco Comercial related to the convenience and needs factor. The Board concludes, based on all the facts of record, that the considerations relating to the convenience and needs of the communities to be served are consistent with approval.

Financial, Managerial, and Supervisory Considerations

The BHC Act requires the Board to consider the financial and managerial resources and future prospects of the companies and banks involved in a bank acquisition proposal. In assessing the financial and managerial strength of Banco Comercial. Atlantico, and their affiliates, the Board has reviewed information provided by Applicants, confidential supervisory and examination information, and publicly reported and other financial information. The capital ratios of Banco Comercial and Atlantico exceed the minimum levels that would be required under the Basle Capital Accord and are considered equivalent to the capital ratios that would be required of a U.S. banking organization. In light of these and all the facts of record, the Board concludes that the financial and managerial resources and future prospects of Applicants and Bank are consistent with approval.

Section 3 of the BHC Act also provides that the Board may not approve an application involving a foreign bank unless the bank is "subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in the bank's home country."(6) The home country supervisor of Banco Comercial is the Bank of Portugal. In approving applications under the BHC Act and the IBA, the Board has determined that other Portuguese banks were subject to comprehensive consolidated supervision by the Bank of Portugal.(7) In this case, the Board finds that the Bank of Portugal supervises Banco Comercial in substantially the same manner as it supervises those other banks. Based on this finding and all the facts of record, the Board concludes that Banco Comercial is subject to comprehensive supervision on a consolidated basis by their home country supervisor.

In addition, section 3 of the BHC Act requires the Board to determine that a foreign bank has provided adequate assurances that it will make available to the Board such information on its operations and activities and those of its affiliates that the Board deems appropriate to determine and enforce compliance with the BHC Act.(8) The Board has reviewed the restrictions on disclosure in relevant jurisdictions in which Banco Comercial and Atlantico operate and has communicated with relevant government authorities concerning access to information. In addition, Banco Comercial and Atlantico have committed to make available to the Board such information on the operations of Banco Comercial, Atlantico, and any of their affiliates that the Board deems necessary to determine and enforce compliance with the BHC Act, the IBA, and other applicable federal law. Banco Comercial and Atlantico also have committed to cooperate with the Board to obtain any waivers or exemptions that may be necessary to enable Banco Comercial and Atlantico to make such information available to the Board. In light of these commitments, the Board concludes that Banco Comercial and Atlantico have provided adequate assurances of access to any appropriate information that the Board may request. Based on these and all the facts of record, the Board concludes that the supervisory factors it is required to consider are consistent with approval.

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.(9) The Board's approval specifically is conditioned on compliance by Banco Comercial and Atlantico with all the commitments made in connection with this application and on the Board's receiving access to information on the operations or activities of Banco Comercial, Atlantico, and any of their affiliates that the Board deems to be appropriate to determine and enforce compliance by Banco Comercial, Atlantico, and their affiliates with applicable federal statutes. If any restrictions on access to information on the operations or activities of Banco Comercial, Atlantico, and their affiliates subsequently interfere with the Board's ability to obtain information to determine and enforce compliance by Banco Comercial, Atlantico, or their affiliates with applicable federal statutes, the Board may require or, when appropriate, recommend to the Office of the Comptroller of the Currency, termination of any of Banco Comercial's or Atlantico's direct or indirect activities in the United States. All the commitments and conditions on which the Board has relied in reaching its decision 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.

This transaction shall 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 Federal Reserve Bank of New York, acting pursuant to delegated authority.

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

(1.) Banco Comercial recently has consummated mergers with other Portuguese banking organizations and is in the process of completing an internal corporate reorganization. Banco Comercial has provided the Board with assurances that the acquisition of Bank by the resulting organization will be done in compliance with the BHC Act.

(2.) Asset and ranking data are as of January 1, 2000, adjusted to reflect transactions recently consummated by Banco Comercial, and use exchange rates then in effect.

(3.) 12 U.S.C. [sections] 1842(c)(1).

(4.) See Canadian Imperial Bank of Commerce, 85 Federal Reserve Bulletin 733 (1999); see also Wilson Bank Holding Company, 82 Federal Reserve Bulletin 568 (1996).

(5.) On consummation of the proposal, New Jersey will be the home state of Applicants and Bank for purposes of the BHC Act. The proposed transaction therefore is not barred by section 3(d) of the BHC Act. See 12 U.S.C. [subsections] 1841(o)(4), 1842(d). New York is Atlantico's home state for purposes of the International Banking Act ("IBA") and the Board's Regulation K, See 12 U.S.C. [sections] 3101 et seq. and 12 CFR. [sections] 211 et seq.

(6.) 12 U.S.C. [sections] 1842(c)(3)(B). Under Regulation Y, the Board uses the standards enumerated in Regulation K to determine whether a foreign bank that has applied under section 3 of the BHC Act is subject to consolidated home country supervision. See 12 C.F.R. [sections] 225.13(a)(4). Regulation K provides that a foreign bank will be considered to be subject to comprehensive supervision or regulation on a consolidated basis if the Board determines that the bank is supervised and regulated in such a manner that its home country supervisor receives sufficient information on the worldwide operations of the bank, including its relationship to any affiliates, to assess the bank's overall financial condition and its compliance with law and regulation. See 12 C.F.R. 211.24(c)(1).

(7.) See Banco Espirito Santo, et. al., 86 Federal Reserve Bulletin 418 (2000): see also Caixa Geral de Depositos S.A., 85 Federal Reserve Bulletin 774 (1999).

(8.) See 12 U.S.C. [sections] 1842(c)(3)(A).

(9.) In a separate action, the Board today approved under the IBA the application of Banco Comercial to establish a representative office in Miami, Florida.

Voting for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Kelley and Gramlich. Absent and not voting: Governor Meyer.

ROBERT DEV. FRIERSON Associate Secretary of the Board

Compass Bancshares, Inc. Birmingham, Alabama

Compass Bank Birmingham, Alabama

Order Approving Acquisition of a Bank Holding Company and Merger of Banks

Compass Bancshares, Inc. ("Compass"), 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 all the voting shares of Founders Bancorp, Inc., ("Founders"), and thereby to acquire its wholly owned subsidiary, Founders Bank of Arizona ("Founders Bank"), both in Scottsdale, Arizona. Compass Bank, a subsidiary bank of Compass, also has requested the Board's approval under section 18(c) of the Federal Deposit Insurance Act (the "Bank Merger Act") (12 U.S.C. [sections] 1828(c)) to merge with Founders Bank and to retain and operate branches at the current locations of Founders Bank's offices as listed in Appendix A.

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (65 Federal Register 25,329 (2000)) in accordance with the Board's Rules of Procedure (12 C.F.R. 262.3(b)). As required by the Bank Merger Act, notice of the proposal also has been published in relevant newspapers, and reports on the competitive effects of the bank merger have been requested from the United States Attorney General, the Office of the Comptroller of the Currency ("OCC"), and the Federal Deposit Insurance Corporation ("FDIC"). 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 the BHC Act and the Bank Merger Act.

Compass, with total consolidated assets of $18.5 billion, is the forty-third largest commercial banking organization in the United States, controlling less than 1 percent of the total assets of insured commercial banks in the United States.(1) Compass operates banks in Alabama, Arizona, Colorado, Florida, New Mexico, and Texas. Compass is the sixth largest banking organization in Arizona, controlling $1.1 billion in deposits, representing approximately 2.7 percent of total deposits in insured depository institutions in the state ("state deposits").(2)

Founders is the twelfth largest banking organization in Arizona, controlling deposits of $302.5 million, representing less than 1 percent of state deposits. After consummation of the proposal, Compass would become the fifth largest banking organization in Arizona, controlling deposits of $1.4 billion, representing approximately 3.4 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 the bank holding company if certain conditions are met.(3) For purposes of the BHC Act, the home state of Compass is Alabama,(4) and Compass proposes to acquire Founders Bank in Arizona.(5) All the conditions for an interstate acquisition enumerated in section 3(d) 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

The BHC Act and the Bank Merger Act prohibit the Board from approving a proposal if it would result in or be in furtherance of a monopoly. These acts also prohibit the Board from approving a proposal if the effect of the proposal may be substantially to lessen competition in any relevant market unless the Board finds that the anticompetitive effects of the proposed transaction are clearly out-weighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served.(7)

Compass and Founders compete directly in the Payson, Phoenix, and Prescott banking markets, all in Arizona.(8) Consummation of the proposal would be consistent with the Department of Justice Merger Guidelines ("DOJ Guidelines")(9) and Board precedent in the Phoenix and Prescott banking markets.(10)

In the Payson banking market, Compass is the third largest of seven banking organizations, and controls deposits of $31.7 million, representing approximately 15.9 percent of total deposits in insured depository institutions in the market ("market deposits").(11) Founders is the fifth largest banking organization in the market and controls deposits of $13.4 million, representing approximately 6.7 percent of market deposits. On consummation of the proposal, Compass would become the second largest banking organization in the market with deposits of $45.1 million, representing approximately 22.6 percent of market deposits. The HHI would increase by 212 points to 2756.

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 Payson banking market. Six depository institutions would remain in the market after consummation of the proposal, including four large multistate banking organizations other than Compass, and three of these organizations would each have market shares of more than 15 percent. The Payson banking market also has characteristics that make it attractive for entry. The market's population has increased 52 percent since 1990, significantly more than the 30 percent increase for Arizona as a whole. In 1999, per capita and median household income were higher in the market than in non-metropolitan statistical areas in Arizona as a whole. Since 1996, five banking organizations have entered the Payson banking market, three (including Compass Bank) by branching and two (including Founders Bank) by acquisition.(12) Two organizations have entered the market in the past year.

The Justice Department reviewed the proposal and advised the Board that consummation of the proposal would not likely have any significantly adverse competitive effects in the Payson banking market or any other relevant banking market. The FDIC and OCC have not objected to the proposal.

Based on all the facts of record, and for the reasons discussed in this order, the Board concludes that consummation of the proposal is not likely to result in any significantly adverse effects on competition or on the concentration of banking resources in the Payson banking market or any other relevant market. In this light, the competitive factors are consistent with approval.

Other Considerations

The BHC Act and the Bank Merger Act require 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 Compass. Based on all the facts of record, the Board concludes that the financial and managerial resources and the future prospects of Compass and Compass Bank 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, 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 applications in this case should be, and hereby are, approved. The Board's approval is specifically conditioned on compliance by Compass with all the commitments made in connection with these applications. For purposes of this action, the commitments and conditions relied on by the Board in reaching its decision 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 acquisitions shall not be consummated before the fifteenth calendar day after the effective date of this order, or more 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 Atlanta, acting pursuant to delegated authority.

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

(1.) All asset data are as of March 31, 2000. All deposit data are as of June 30, 1999.

(2.) In this context, depository institutions include commercial banks, savings banks, and savings associations.

(3.) See 12 U.S.C. 1842(d).

(4.) A bank holding company's home state is that 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), 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)(A) and (d)(2)(B).

(6.) Compass is adequately capitalized and adequately managed, as defined by applicable law. 12 U.S.C. [sections] 1842(d)(1)(A). Founders Bank has been in existence and operated for more than the minimum period of time required by applicable state law. 12 U.S.C. [sections] 1842(d)(1)(B); Ariz. Rev. Stat. Ann. [sections] 6-324 (five years). On consummation of the proposal, Compass 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 deposits held by insured depository institutions in Arizona. 12 U.S.C. [sections] 1842(d)(2); Ariz. Rev. Stat. Ann. [sections] 6-328. All other requirements of section 3(d) of the BHC Act would be met on consummation of the proposal.

(7.) 12 U.S.C. [subsections] 1842(c)(1)(B) and 1828(c)(5)(B).

(8.) The Payson banking market is defined as the northwest corner of Gila County, and includes all banking offices in Payson and Pine. The Phoenix banking market is defined as the Phoenix-Mesa Metropolitan Statistical Area. The Prescott banking market is defined as Central Yavapai County and includes all banking offices in Chino Valley, Mayer, Prescott, and Prescott Valley.

(9.) Under the revised DOJ Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger Herfindahl-Hirschman Index ("HHI") is above 1800 is considered highly concentrated. The Department of Justice has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger 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 effect of limited-purpose lenders and other nondepository financial entities.

(10.) The competitive effects of the proposal in these banking markets are summarized in Appendix B. The data are based on calculations in which the deposits of thrift institutions are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly included thrift deposits in the calculation of market share on a 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991).

(11.) Deposit data for this market are adjusted to include branches opened after June 30, 1999.

(12.) During this period, the market has become less concentrated as measured by the HHI.

Voting for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Kelley and Gramlich. Absent and not voting: Governor Meyer.

ROBERT DEV. FRIERSON Associate Secretary of the Board

Appendix A

Branches of Compass Bank to be established at Founders Bank's current offices in Arizona:

1. 104 East Highway 260, Payson.

2. 21640 North 19th Avenue, Phoenix.

3. 923 East Gurley Street, Prescott.

4. 7335 East Doubletree Ranch Road, Scottsdale.

5. 15685 North Greenway-Hayden Loop, Suite 100-A, Scottsdale.

6. 23305 North Pima Road, Scottsdale.

7. 19202 R.H. Johnson Boulevard, Sun City.

8. 9915 West Bell Road, Sun City.

9. 12026 North 111th Avenue, Youngtown.

Appendix B

Summary of Market Structure

Phoenix banking market. Compass is the eleventh largest banking organization in the market, controlling deposits of approximately $222.5 million, representing less than 1 percent of market deposits. Founders is the ninth largest banking organization in the market, controlling deposits of approximately $281.3 million, representing 1 percent of market deposits. After consummation of the proposal, Compass would become the sixth largest banking organization in the market, controlling deposits of approximately $503.8 million, representing 1.8 percent of market deposits. The HHI would increase by 2 points to 2282.

Prescott banking market. Compass is the ninth largest banking organization in the market, controlling deposits of approximately $14.8 million, representing 1.5 percent of market deposits. Founders is the eleventh largest banking organization in the market, controlling deposits of approximately $7.8 million, representing less than 1 percent of market deposits. After consummation of the proposal, Compass would become the eighth largest banking organization in the market, controlling deposits of approximately $22.6 million, representing 2.3 percent of market deposits. The HHI would increase by 2 points to 1886.

National Commerce Bancorporation Memphis, Tennessee

Order Approving Merger of Bank Holding Companies

National Commerce Bancorporation ("National Commerce"), 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 merge with CCB Financial Corporation ("CCB Financial"), and thereby acquire Central Carolina Bank and Trust Company ("CCB Bank"), both of Durham, North Carolina.(1)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (65 Federal Register 24,959 (2000)). The time for filing comments has expired, and the Board has considered the proposal in light of the factors set forth in section 3 of the BHC Act.

National Commerce, with total consolidated assets of $6.8 billion, is the 105th largest commercial banking organization in the United States, controlling less than 1 percent of the total assets of insured commercial banks in the United States.(2) National Commerce operates subsidiary depository institutions in Tennessee, North Carolina, Georgia, Virginia, West Virginia, Arkansas, and Mississippi. The depository institution controlled by National Commerce is the 22nd largest depository institution in North Carolina, controlling deposits of $335.4 million, representing less than 1 percent of total deposits in depository institutions in the state.(3)

CCB Financial, with total consolidated assets of $8.2 billion, is the 91 st largest commercial banking organization in the United States, controlling less than 1 percent of the total assets of insured commercial banks in the United States. CCB Financial operates subsidiary depository institutions in North Carolina and South Carolina.(4) CCB Bank is the seventh largest depository institution in North Carolina, controlling deposits of $5.5 billion, representing approximately 5.4 percent of total deposits in depository institutions in the state.

After consummation of the proposal, National Commerce would become the 62nd largest commercial banking organization in the United States, with total consolidated assets of $15 billion, representing less than 1 percent of total banking assets. National Commerce would control the seventh largest depository institution in North Carolina, with deposits of $5.9 billion, representing approximately 5.8 percent of total deposits in depository institutions in the state.

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.(5) For purposes of the BHC Act, the home state of National Commerce is Tennessee, and National Commerce proposes to acquire CCB Bank, which is located in North Carolina and South Carolina. All the conditions for an interstate acquisition enumerated in section 3(d) 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 Factors

Section 3 of the BHC Act prohibits the Board from approving a proposal that would result in a monopoly or be in furtherance of a monopoly. 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)

National Commerce and CCB Financial compete directly in the Greensboro-High Point, Raleigh, and Durham banking markets, all in North Carolina.(8) The Board has carefully reviewed 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, the share of total deposits in depository institutions ("market deposits") controlled by each competitor in the markets,(9) the concentration level of market deposits and the increase in this level as measured by the Herfindahl-Hirschman Index ("HHI"),(10) attractiveness for entry, and other characteristics.

Consummation of the proposal would be consistent with Board precedent and the DOJ Guidelines in the Greensboro-High Point and Raleigh banking markets.(11) Each of these banking markets would remain moderately concentrated after consummation of the proposal and numerous competitors would remain in each market relative to the size of the market.

Consummation of the proposal in the Durham banking market would exceed the DOJ Guidelines as measured by the HHI. National Commerce controls the seventh largest depository institution in the Durham banking market, controlling deposits of $146.8 million, representing approximately 3.7 percent of market deposits. CCB Financial controls the largest depository institution in the Durham banking market, controlling deposits of $1.3 billion, representing approximately 33.5 percent of market deposits. On consummation of the proposal, National Commerce would control the largest depository institution in the Durham banking market, with approximately $1.5 billion of deposits, representing 37.2 percent of market deposits. Concentration in the market, as measured by the HHI, would increase 246 points to 2055.

In evaluating the competitive effects of the proposal in the Durham banking market, the Board has considered several factors. After consummation of the proposal, 15 depository institutions would remain in the market, including six other multistate bank holding companies. Three of these multistate bank holding companies would each control over 10 percent of market deposits and two other multistate bank holding companies would each control over 5 percent of market deposits. In addition, the attractiveness for entry into the Durham banking market is demonstrated by the entry of two depository institutions into the banking market since 1999, one through de novo entry and one by acquisition.

The Department of Justice has reviewed the proposal, including its effect on competition in the Durham banking market, and advised the Board that consummation of the proposal would not likely have a significantly adverse competitive effect in any banking market. The Office of the Comptroller of the Currency ("OCC") and the Federal Deposit Insurance Corporation ("FDIC") have been afforded an opportunity to comment and have not objected to consummation of the proposal.

Based on these and all other 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 the Durham banking market. For the reasons explained above, the Board also has concluded that consummation of the proposal would not likely have a significantly adverse effect on competition or on the concentration of banking resources in the other banking markets in which National Commerce and CCB Financial both compete or any other relevant banking market.

Financial, Managerial, and Other Supervisory Factors

Section 3 of the BHC Act also requires that the Board consider the financial and managerial resources and future prospects of the companies and banks involved in a proposal and certain other supervisory factors. The Board has carefully considered the financial and managerial resources and future prospects of National Commerce, CCB Financial, and their respective subsidiary banks and other supervisory factors in light of all the facts of record, including reports of examination, other confidential supervisory information assessing the financial and managerial resources of the organizations, and financial information provided by National Commerce. The Board notes that National Commerce and CCB Financial and their subsidiary depository institutions currently are well capitalized and are expected to remain so on consummation of the proposal. Based on these and all other facts of record, the Board concludes that the financial and managerial resources and future prospects of National Commerce, CCB Financial, and their subsidiary banks are consistent with approval, as are the other supervisory factors that the Board must consider under section 3 of the BHC Act.

Convenience and Needs Factor

In acting on a proposal under section 3 of the BHC Act, the Board is required to consider the effect of the proposal on the convenience and needs of the communities to be served. The Board has long held that consideration of the convenience and needs factor includes a review of the records of the relevant depository institutions under the Community Reinvestment Act (12 U.S.C. [sections] 2901 et seq.) ("CRA"). Accordingly, the Board has carefully considered the effect of the proposed merger on the convenience and needs of the communities to be served and the CRA records of performance of the institutions involved in light of all the facts of record.(12)

As provided in the CRA, the Board has evaluated the convenience and needs factor in light of examinations of the CRA performance records of the relevant depository institutions by the appropriate federal financial supervisory agency.(13) National Bank of Commerce, the lead depository institution of National Commerce, received a "satisfactory" rating at its most recent CRA performance examination by the OCC, as of July 1998.(14) CCB Bank received a "satisfactory" rating at its most recent CRA performance examination by the FDIC, as of January 2000.(15)

National Commerce has indicated that CCB Bank would continue in operation after consummation of the proposal and that National Commerce would use the strengths of the CRA programs of National Commerce and CCB Financial at all of its subsidiary depository institutions. Consequently, the Board has considered the CRA performance records of the subsidiary depository institutions of National Commerce and CCB Financial in evaluating the proposal.

Examiners at the most recent CRA performance examination of National Bank of Commerce indicated that the residential real estate lending and small business lending of the bank reflected a reasonable penetration in LMI geographies and an adequate distribution of loans to LMI borrowers that were reportable under the Home Mortgage Disclosure Act.(16) Examiners favorably noted two flexible lending programs designed to deliver real estate loans to LMI individuals. The affordable mortgage program offers mortgages that feature lower downpayments and flexible debt ratios to qualified borrowers. During the evaluation period, the bank made 50 loans totaling $2.5 million under this program. The first mortgage refinance program offers mortgages with lower downpayments, flexible loan-to-value ratios, no application or origination fees, and no private mortgage insurance to qualified borrowers. Between February 1998 and June 1998, the bank made 192 loans under this program totaling $17 million.(17)

In addition, examiners indicated that National Bank of Commerce made qualified community development loans totaling $4.9 million during the evaluation period to provide affordable housing to LMI individuals. Examiners also indicated that National Bank of Commerce made an adequate number of qualified investments in its assessment areas during the examination period. Examiners stated that the bank's delivery of retail banking services was reasonably accessible to LMI individuals through the bank's branch network in grocery stores. Examiners also indicated that a fair lending examination was conducted concurrently with the CRA performance examination and did not detect any evidence of discriminatory or other illegal credit practices.

Examiners at the most recent CRA performance examination of CCB Bank stated that the bank responded well to community credit needs as evidenced by the level of lending inside the bank's assessment area. CCB Bank originated 87 percent of its mortgage loans and 89 percent of the c[dollar volume of mortgage loans in its assessment areas in 1998 and 1999. Examiners indicated that CCB Bank demonstrated good geographic distribution of lending throughout its assessment areas and had a good distribution of loans to borrowers with different incomes. Examiners also commended the bank for offering innovative or flexible lending programs, including flexible mortgage programs. In 1998 and 1999, CCB Bank made 4,621 loans under these programs totaling $401 million.

Examiners favorably noted that CCB Bank made 163 community development loans totaling $21 million in 1998 and 1999. Examiners also indicated that the bank made a significant level of community development investments, including making more than $500,000 in qualified donations to LMI individuals and families in its assessment areas. Examiners described CCB Bank's delivery of retail banking services as outstanding. In connection with the CRA performance evaluation, examiners noted that the current compliance examination of CCB Bank did not reveal any substantive violations of the fair lending laws and regulations.

In its review of the convenience and needs factor under the BHC Act, the Board has carefully considered the entire record. Based on all the facts of record, the Board concludes that considerations relating to the convenience and needs factor, including the CRA performance records of the relevant insured depository institutions, 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 National Commerce with all the commitments made in connection with the application and on the receipt by National Commerce of all necessary approvals from state regulators. For purposes of this action, the commitments and conditions relied on by the Board in reaching its decision 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 CCB Financial 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 St. Louis, acting pursuant to delegated authority.

By order of the Board of Governors, effective June 19, 2000.

(1.) Under the proposal, National Commerce would merge with CCB Financial, with National Commerce as the surviving corporation. National Commerce also has requested the Board's approval to hold and exercise an option to acquire up to 19.9 percent of CCB Financial's voting shares. This option would expire on consummation of the proposed merger.

(2.) All asset data are as of December 31, 1999, and all deposit data are as of June 30, 1999.

(3.) In this context, depository institutions include commercial banks, savings banks, and savings associations.

(4.) American Federal Bank, F.S.B., Greenville, South Carolina, a subsidiary of CCB Financial, would be merged into CCB Bank before consummation of the proposal.

(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 such company were the largest on July 1, 1966, or the date on which the company became a bank holding company, whichever is later. t2 U.S.C. [sections] 1841(o)(4)(C).

(6.) 12 U.S.C. [subsections] 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). National Commerce meets the capital and managerial requirements established under applicable law. On consummation, National Commerce 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 total deposits held by insured depository institutions in North Carolina, the state in which National Commerce and CCB Financial both operate insured depository institutions. All other requirements under section 3(d) of the BHC Act, including applicable state age limitations, would be met on consummation of the proposal.

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

(8.) The Greensboro-High Point banking market is defined as the Greensboro-Highpoint Ranally Metropolitan Area ("RMA") and the non-RMA portions of Davidson and Randolph Counties. The Raleigh banking market is defined as the Raleigh RMA, and the non-RMA portions of Franklin, Johnston, Wake, and Harnett Counties. The Durham banking market is defined as the Durham RMA and the non-RMA portions of Durham, Orange, and Chatham Counties.

(9.) Market share data are based on calculations that include the deposits of thrift institutions, which include savings banks and savings associations, weighted 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 regularly has 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 Department of Justice Merger Guidelines ("DOJ Guidelines"), 49 Federal Register 26,923 (June 29, 1984), a market in which the post-merger HHI is more than 1800 is considered to be 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 competitive effects of the proposal in. these banking markets are summarized in the Appendix.

(12.) The Board received one letter filed after the close of the comment period on the application from thirteen community organizations and churches in North Carolina. The letter included comments on the record of mortgage and community development lending to low- and moderate-income ("LMI") and minority borrowers of National Commerce's subsidiary depository institutions and the lack of branches of National Bank of Commerce, Memphis, Tennessee, in LMI areas. In addition, the letter included comments on the level of qualified investments made by the subsidiary depository institutions of National Commerce and CCB Financial and the impact of the loss of CCB Financial's corporate headquarters in North Carolina. The letter also commented on the possible loss of jobs resulting from consummation of the proposal and concerns about the promotion of minority employees and use of minority vendors by National Commerce and CCB Financial. Several of these comments relate to factors that are not within the statutory factors that the Board is permitted to consider under section 3 of the BHC Act. See, e.g., First Security Corporation, 86 Federal Reserve Bulletin 122, 132 n.56 (2000); Community Capital Bancshares. Inc., 85 Federal Reserve Bulletin 444, 445 n.3 (1999). A public meeting or hearing on the proposal was also requested. Section 3 of the BHC Act requires the Board to hold a public hearing on an application only on a timely written recommendation of denial from the appropriate supervisory authority for the bank to be acquired. The Board has not received such a recommendation in this case. The Board has accumulated a significant record on the proposal, including reports of examination, supervisory information, and public reports and information. In light of the record accumulated and based on all the facts of record, the Board has determined that a public meeting or hearing is not required or otherwise warranted in this case.

(13.) The Interagency Questions and Answers Regarding Community Reinvestment provides that an institution's most recent CRA performance evaluation is an important and often controlling factor in the consideration of an institution's CRA record because it represents a detailed evaluation of the institution's overall record of performance under the CRA by its appropriate federal banking supervisor. 64 Federal Register 23,618 and 23,641 (1999).

(14.) The other subsidiary depository institutions of National Commerce also have received "satisfactory" ratings at their most recent CRA performance examinations. NBC Bank, FSB, Memphis, Tennessee, received a "satisfactory" rating from the Office of Thrift Supervision ("OTS"), as of July 1998; First Market Bank, FSB, Memphis, Tennessee, received a "satisfactory" rating from the OTS, as of July 1998; and Hillsborough Savings Bank, Inc., SSB, Hillsborough, North Carolina, which National Commerce acquired on April 11, 2000, received a "satisfactory" rating from the Federal Deposit Insurance Corporation, as of August 1998. NBC Bank, FSB, Knoxville, Tennessee ("NBC-Knoxville"), which was merged into National Bank of Commerce on May 9, 2000, received a "satisfactory" rating from the OTS, as of July 1998.

(15.) American Federal Bank received a "satisfactory" rating from the OTS at its most recent CRA performance examination, as of August 1999.

(16.) The 1998 examination of National Bank of Commerce reviewed the bank's activities from July 31, 1996, through June 30, 1998. During this period, the bank's assessment area consisted of portions of the Memphis and Jackson Metropolitan Statistical Areas and portions of Bradley County, all in Tennessee.

(17.) NBC-Knoxville operated branches in Tennessee, North Carolina, Mississippi, and Georgia. Examiners noted that the lending activity of NBC-Knoxville reflected an adequate responsiveness to the credit needs of the bank's assessment areas.

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

ROBERT DEV. FRIERSON Associate Secretary of the Board

Appendix

Summary of Market Structure

Greensboro-High Point: National Commerce is the 17th largest depository institution in the market, controlling deposits of $51.9 million, representing approximately less than 1 percent of market deposits. CCB Financial is the third largest depository institution in the market, controlling deposits of $831.6 million, representing approximately 10.1 percent of market deposits. After the proposed merger, National Commerce would become the third largest depository institution in the market, controlling deposits of $883.4 million, representing approximately 10.7 percent of market deposits. The HHI would increase 13 points to 1130 and 24 other competitors would remain in the market.

Raleigh: National Commerce is the tenth largest depository institution in the market, controlling deposits of $128.8 million, representing approximately 1.6 percent of market deposits. CCB Financial is the sixth largest depository institution in the market, controlling deposits of $659.3 million, representing approximately 8.1 percent of market deposits. After the proposed merger, National Commerce would become the sixth largest depository institution in the market, controlling deposits of approximately $788.1 million, representing approximately 9.7 percent of market deposits. The HHI would increase 26 points to 1251 and 21 other competitors would remain in the market.

Popular, Inc. Hato Rey, Puerto Rico

Popular International Bank Hato Rey; Puerto Rico

Popular North America, Inc. Mount Laurel, New Jersey

Banco Popular, National Association Orlando, Florida

Order Approving the Acquisition of a Bank and Establishment of a Branch and an Agreement Corporation

Popular, Inc., Popular International Bank, and Popular North America, Inc., (collectively "Popular"), bank holding companies within the meaning of the Bank Holding Company Act ("BHC Act"), have requested the Board's approval under section 3 of the BHC Act (12 U.S.C. [sections] 1842) to acquire Banco Popular, National Association, Orlando, Florida ("Bank"), a de novo national bank.

Bank also has applied under section 211.4 of Regulation K (12 C.F.R. 211.4) to establish an agreement corporation under section 25 of the Federal Reserve Act (12 U.S.C. [sub sections] 601-604a) ("FRA"). In addition, Bank has applied under section 25 of the FRA and section 211.3 of Regulation K (12 C.F.R. 211.3) to establish a foreign branch in Culebra, Puerto Rico.

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (64 Federal Register 47,191 (1999)). 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 the FRA and the BHC Act.

Popular, with total consolidated assets of $25.5 billion is the 35th largest commercial banking organization in the United States, controlling less than 1 percent of total assets of insured commercial banks in the United States.(1) Popular operates depository institutions and branches in California, Florida, Illinois, New York, New Jersey, Texas, Puerto Rico, the U.S. Virgin Islands, and the British Virgin Islands. Popular is the 126th largest commercial banking organization in Florida, controlling deposits of $114.1 million, representing less than 1 percent of total deposits in depository institutions in the state.(2) Bank's de novo entry into the Orlando, Florida, banking market would enhance competition in that market.(3) Based on all the facts of record, the Board concludes that consummation of the proposal would not have a significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market and that competitive considerations are consistent with approval.

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.(4) For purposes of the BHC Act, the home state of Popular is New York, and Bank would be located in Florida. All the conditions for an interstate acquisition enumerated in section 3(d) of the BHC Act are met in this case.(5) In view of all the facts of record, the Board is permitted to approve the proposal under section 3(d) of the BHC Act.

The Board has carefully considered the financial and managerial resources and future prospects of Popular and Bank and other supervisory factors, in light of all the facts of record. As part of this consideration, the Board has reviewed relevant reports of examination and other supervisory information prepared by the Federal Reserve Bank of New York and other federal banking supervisory agencies, including Popular's compliance with the Currency and Foreign Transactions Reporting Act and related regulations.(6)

The Board also has considered other aspects of the financial condition and resources of Popular and other aspects of their managerial resources. The Board notes that the bank holding companies and their subsidiary banks are well capitalized and are expected to remain so after consummation of the proposal. Based on all the facts of record, the Board concludes that considerations relating to the financial and managerial resources and future prospects of Popular, and its subsidiaries are consistent with approval of the proposal.

Considerations relating to the convenience and needs of the community, including the performance records of Popular's subsidiary banks under the Community Reinvestment Act ("CRA") (12 U.S.C. [sections] 2901 et seq.), and other supervisory factors that the Board must consider under section 3 of the BHC Act also are consistent with approval.

Bank has applied to establish Popular Insurance, Inc. ("PII"), an agreement corporation under section 25 of the FRA. Based on all the facts of record, the Board concludes that the financial and managerial resources of Popular are consistent with the establishment of this corporation. Accordingly, the Board finds that the establishment of PII by Popular is consistent with the FRA and Regulation K.

Bank also has applied pursuant to section 25 of the FRA and section 211.3 of Regulation K (12 C.F.R. 211.3) to establish a branch in Culebra, Puerto Rico. The Board has concluded, based on all the facts of record, that the financial and managerial resources and future prospects of the institutions involved as well as other factors it is required to consider when reviewing an application to establish a branch under section 25 of the FRA are consistent with approval.

Based on the foregoing, and in light of all the facts of record, the Board has determined that the applications should be, and hereby are, approved. Approval of the applications is specifically conditioned on compliance by Popular with all the commitments made in connection with the proposal and with the conditions stated or referred to in this order.

The acquisition of Bank shall not be consummated before the fifteenth calendar day after the effective date of this order, or later than three months after the effective date of this order, and Bank shall be open for business within six 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 New York, acting pursuant to delegated authority.

By order of the Board of Governors, effective June 5, 2000.

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

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

(3.) The Orlando, Florida, banking market is defined as Orange, Osceola, and Seminole Counties; the Western half of Volusia County; and the towns of Clermont and Groveland in Lake County.

(4.) See 12 U.S.C. [sections] 1842(d). A bank holding company's home state is that 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).

(5.) See 12 U.S.C. [subsections] 1842(d)(1)(A) and (B) and 1842(d)(2)(A). Popular is adequately capitalized and adequately managed, as defined in the BHC Act. Popular has operated banking offices in Florida since 1997, and the Florida Department of Banking and Finance has indicated that this transaction would comply with applicable Florida law. See Fla. Stat. Ann. [sections] 658.295 (West 1999). See also Letter from Richard T. Donelan, Chief Banking Counsel, Department of Banking and Finance, State of Florida, to Donald J. Toumey, Esq., counsel for Popular (September 14, 1999). On consummation of the proposal, Popular would control less than 10 percent of the total amount of deposits in insured depository institutions in the United States. All other requirements of section 3(d) of the BHC Act also would be met on consummation of the proposal.

(6.) 31 U.S.C. [sections] 5311 et seq. On March 9, 2000, Popular's subsidiary bank, Banco Popular de Puerto Rico, Hato Rey, Puerto Rico ("Banco Popular"), entered into a written agreement (the "Written Agreement"), pursuant to section 8 of the Federal Deposit Insurance Act (12 U.S.C. [sections] 1818), to address the deficiencies in its anti-money laundering programs. See Written Agreements Approved by Federal Reserve Banks, 86 Federal Reserve Bulletin 351 (2000). In response to the Written Agreement, Banco Popular, with the assistance of independent auditors, conducted a review of its anti-money laundering policies and submitted a report to the Board on the adequacy of its procedures and a plan designed to ensure full compliance with all applicable anti-money laundering laws and regulations. In reviewing this proposal, the Board has considered this report and the steps already taken by Banco Popular to ensure compliance with anti-money laundering laws and the Written Agreement and will continue to monitor Banco Popular's ongoing efforts in this area.

Voting for this action: Chairman Greenspan and Governors Kelley, Meyer, and Gramlich. Absent and not voting: Vice Chairman Ferguson.

ROBERT DEV. FRIERSON Associate Secretary of the Board

Wells Fargo & Company San Francisco, California

Order Approving 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 all the voting shares of National Bancorp of Alaska ("National Bancorp") and thereby acquire National Bank of Alaska ("Alaska Bank"), both of Anchorage, Alaska.

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (65 Federal Register 20,168 (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.

Wells Fargo, with total consolidated assets of approximately $222 billion, is the seventh largest commercial banking organization in the United States.(1) Wells Fargo operates a large network of banking and nonbanking subsidiaries and operates banks in 21 western and midwestern states, but does not have a subsidiary bank in Alaska. National Bancorp, with total consolidated assets of approximately $3 billion, operates in the States of Alaska and Washington. National Bancorp is the largest banking organization in Alaska, controlling deposits of $2.1 billion, representing approximately 45.2 percent of total deposits in depository institutions in the state ("state deposits").(2) On consummation of the proposal, Wells Fargo would become the largest banking organization in Alaska.

In the State of Washington, Wells Fargo is the fifth largest banking organization, controlling deposits of $2 billion, representing approximately 3.4 percent of state deposits. National Bancorp is the 103rd largest banking organization, controlling $2 million in deposits, representing less than 1 percent of state deposits. On consummation of the proposal, Wells Fargo would remain the fifth largest banking organization in the state.

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 provided that certain conditions are met.(3) For purposes of the BHC Act, the home state of Wells Fargo is California, and Wells Fargo proposes to acquire a bank in Alaska that operates a branch in the State of Washington.(4) All the conditions for an interstate acquisition enumerated in section 3(d) are met in this case.(5) 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

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.(6)

Wells Fargo and National Bancorp own depository institutions that compete directly in the Seattle, Washington, banking market ("Seattle banking market").(7) Wells Fargo is the fifth largest depository institution in the Seattle banking market, controlling deposits of $1.5 billion, representing approximately 4.9 percent of total deposits of depository institutions in the market ("market deposits").(8) National Bancorp is the 55th largest depository institution in the market, controlling deposits of $2 million, representing less than 1 percent of market deposits. On consummation of the proposal, Wells Fargo would remain the fifth largest depository institution in the Seattle banking market, controlling deposits of $1.5 billion, representing approximately 4.9 percent of market deposits. The concentration of market deposits in the market, as measured by the Herfindahl-Hirschman Index ("HHI") would remain unchanged at 1675 and would be consistent with approval under the Department of Justice Merger Guidelines ("DOJ Guidelines") and the Board's precedent.(9)

Several commenters asserted that Wells Fargo's acquisition of National Bancorp would have an adverse effect on competition in home mortgage and consumer finance lending in Alaska, because several nondepository institution affiliates of Wells Fargo provide these products in Alaska. The Board concludes that this contention does not accurately reflect the competitive effects of a proposal by a banking organization to acquire a bank. As stated previously by the Board, the appropriate product market for analyzing the competitive effects of a proposal to acquire a bank is the complete cluster of banking products and services provided by banks, and not submarkets for individual products or services.(10) On this basis, and for the reasons discussed above, the Board concludes that this proposal would not have a significantly adverse effect on competition in any relevant banking market.

The Board also has considered that, even under the framework suggested by the commenters, the level of market share, number of competitors, and characteristics of the home mortgage and consumer finance lending markets indicate that the proposal would not likely have a significantly adverse effect on competition in either of these markets. An analysis of these factors is included in the Appendix.

Convenience and Needs Considerations

In acting on a proposal under section 3 of the BHC Act, the Board is required to consider the effect of the proposal on the convenience and needs of the community to be served and take into account the records of the relevant depository institutions under the Community Reinvestment Act ("CRA").(11) The CRA requires the federal financial supervisory authorities to encourage financial institutions to help meet the credit needs of local communities in which they operate, consistent with their safe and sound operation, and requires the appropriate federal supervisory authority to take into account an institution's record of meeting the credit needs of its entire community, including low- and moderate-income ("LMI") neighborhoods, in evaluating bank expansion proposals. The Board has carefully considered the convenience and needs factor and the CRA performance records of the subsidiary depository institutions of Wells Fargo and National Bancorp in light of all the facts of record, including public comments on the proposal.

Comments on the proposal were submitted by several community groups and individuals. Some commenters expressed concern that Wells Fargo would close branches and fail to provide adequate service to National Bancorp's customers in sparsely populated or remote areas of Alaska, including Alaskan Native communities. Other commenters questioned whether Wells Fargo's experience serving rural areas and Native American reservations elsewhere in the United States prepared it to address the unique banking needs of residents of remote areas of Alaska.(12)

Several commenters also asserted, based in part on their analyses of data filed under the Home Mortgage Disclosure Act ("HMDA"),(13) that Wells Fargo's record of housing-related lending inside and outside Alaska indicated disparities between the organization's treatment of white and minority loan applicants, including the origination of subprime loans.(14) These commenters alleged that Wells Fargo and, to a lesser extent, National Bancorp, have inadequate records of meeting the banking and credit needs of the communities they serve.(15)

A. CRA Performance Examinations

As provided in the CRA, the Board has evaluated the records of Wells Fargo and National Bancorp in serving the convenience' and needs of their communities in light of examinations by the appropriate federal supervisors of the CRA performance records of their respective subsidiary depository institutions. An institution's most recent CRA performance review 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 the appropriate federal supervisory agency.(16) Wells Fargo's lead bank, Wells Fargo Bank, NA, San Francisco, California ("Wells Fargo Bank"), received an "outstanding" rating in its most recent CRA examination by its primary federal banking supervisory agency, the Office of the Comptroller of the Currency ("OCC"), as of June 8, 1998.(17) National Bancorp's only bank subsidiary, Alaska Bank, also received an "outstanding" rating in its most recent CRA examination by the OCC, as of March 8, 1999.

Wells Fargo has stated that it would adopt and continue all of Alaska Bank's CRA programs designed to meet the credit needs of rural Alaskans. Wells Fargo also has represented that, after a transition period, it would apply its own marketing program, which includes initiatives for meeting the convenience and needs of the communities it serves, to Alaska Bank.

1. CRA Performance Record of Wells Fargo Bank Lending Test. Wells Fargo Bank received an examination rating of "outstanding" for its lending activities. Examiners stated that the bank's lending record was strong and based on innovative underwriting of small business loans that enabled it to penetrate most segments of the small business community, an excellent level of community development lending, and good penetration in LMI communities and among LMI borrowers. During the review period, which included 1996, 1997, and the first quarter of 1998, Wells Fargo Bank made approximately 239,000 small business loans, totaling $9.3 billion.(18) Ninety-two percent of these loans were in amounts less than $100,000, with an average loan amount of $39,000, and 26 percent were made to businesses located in LMI census tracts. The bank originated 149 community development loans, totaling approximately $651 million. Wells Fargo Bank made 6,862 residential mortgage loans, or 36 percent of all such loans it made, totaling $240 million, to LMI borrowers. In the aggregate, the bank made 25 percent by number and 27 percent by dollar amount of its small business, community development, and residential mortgage loans in LMI census tracts.

Examiners found that Wells Fargo Bank had a strong lending record in California, the bank's primary geographic market, based on a large volume of community development lending to support low-income and very low-income housing development and a large volume of small business loans in LMI areas. In California, the bank originated 99 community development loans, totaling $469 million, including 64 loans to affordable housing projects to create more than 4,300 LMI housing units.(19) The bank also made more than 198,000 small business loans, totaling approximately $8 billion, in the state. Wells Fargo Bank's market share of small business loans in LMI areas exceeded its market share of small business loans in its assessment area overall, and the bank made a larger proportion of its small business loans in LMI areas than the proportion of small businesses in its assessment area to be found in LMI areas.(20)

The examination report also stated that, for more than ten years, Wells Fargo Bank has provided financing, including complex arrangements using low-income housing tax credits ("LIHTC"), for affordable housing projects.(21) Examiners commended Wells Fargo Bank for its assistance to these transactions and also cited the volume and complexity of financing packages in which Wells Fargo Bank participated.

Examiners also commented favorably on Wells Fargo Bank's record of innovation in small business lending. During the review period, Wells Fargo Bank developed new loan products, including a low-documentation small business loan, and marketing programs focused on underserved groups of small business customers, including women- and minority-owned small businesses. Wells Fargo Bank also took a leading role in developing and promoting the Capital Access Program, a partnership of state government and private lenders created to increase the availability of credit to small business borrowers through guaranty fund arrangements.

Investment Test. Wells Fargo Bank received an "outstanding" examination rating for its investment activities. The examination report stated that Wells Fargo Bank exhibited strong levels of community development investments, especially in California, Arizona, and Washington, where the bank made 83 percent by number and 76 percent by dollar volume of its total investments. Overall, the bank made approximately 2,400 qualifying investments, totaling more than $227 million. Examiners noted that, for many community development projects in California, Wells Fargo Bank was either the first, the largest, or the only investor. Through its affordable housing investments, Wells Fargo Bank helped create more than 6,500 housing units for LMI households. The bank also invested almost $26 million in regional and national organizations addressing affordable housing and small business credit needs in the bank's assessment areas. In addition, Wells Fargo Bank contributed more than $21 million to government-subsidized programs, nonprofit developers, and social service groups.

Service Test. Wells Fargo Bank received an examination rating of "high satisfactory" for its retail banking services in its CRA assessment areas. Examiners reported that, during the review period, Wells Fargo Bank's service delivery systems were reasonably accessible to individuals of different income levels and often were located in popular shopping areas that were accessible by public transportation.(22)

Wells Fargo Bank used a variety of formats for its branches, but the formats it used most frequently offered the full array of the bank's products and services. According to the examination report, Wells Fargo Bank maintained branch hours that were reasonable and convenient to LMI communities and individuals, including Saturday hours at most branches.

The report stated that Wells Fargo Bank offered a variety of loan and deposit products through its branch network and also maintained alternative delivery systems, including 24-hour telephone banking, internet banking, and banking by mail. Wells Fargo Bank offered products and services such as no-fee checking accounts for individuals, basic small business checking, ATM-based international remittance services, and home mortgage loan centers in LMI communities.

Examiners found that Wells Fargo Bank had a satisfactory record of branch openings and closings. The bank's branch closure policy provided for local management to review the impact of any proposed branch closing, and branch closings during the review period did not adversely affect the accessibility of the bank's delivery systems. During the review period, the bank opened 78 branches, or 17 percent of all its new branches, in LMI communities, and installed seven off-site ATMs in LMI communities. The bank retained 22 branches in LMI areas that were experiencing low growth and profitability to ensure adequate service in these communities. Wells Fargo Bank also closed 63 branches, or 25 percent of all branches that it closed, in LMI communities.(23) Wells Fargo has indicated to the Board that it does not intend to close any rural branches of Alaska Bank or reduce Alaska Bank's array of services to rural areas.

2. Alaska Bank's CRA Performance Record

Examiners commended Alaska Bank for its responsiveness to the lending, investment, and service needs of businesses and individuals throughout its service area, including LMI individuals. Alaska Bank received high ratings for offering a range of residential loan products and for meeting the credit needs of communities in a state whose geography posed significant challenges. Examiners stated that Alaska Bank received its "outstanding" rating in large part because of its performance in the rural portion of its assessment area, which constitutes all the state outside the Anchorage MSA.

Lending Test. Alaska Bank had a strong record of lending to individuals and businesses throughout its assessment area, including those in LMI communities. According to examiners, Alaska Bank made a high volume of residential mortgage, consumer, community development, and small business loans, particularly home improvement and home refinancing loans. During the review period, which extended from 1997 through 1998, the institution made approximately 11,000 home purchase, rehabilitation, and refinance loans, totaling more than $1 billion, and 20 loans, totaling $39 million, to support the development of affordable housing and other community revitalization projects.(24) The examination report noted that Alaska Bank was the leader in home mortgage originations in each of its assessment areas and had an excellent system for distributing home purchase and home improvement loans to borrowers at various income levels in rural communities. Despite the inclusion of large rural regions with low population densities in its assessment areas, and a severe shortage of affordable housing in those areas, Alaska Bank had no significant gaps in its lending activities. In fact, Alaska Bank's market share of home purchase and home improvement lending in LMI communities in rural areas was larger than its overall market share for these types of loans. Alaska Bank also originated or purchased 3,415 small business loans, totaling $254.6 million.(25)

Alaska Bank used flexible underwriting procedures consistent with safe and sound lending practices to help meet the credit needs of LMI home buyers and small businesses in its assessment area. Alaska Bank participated in eight flexible lending programs, including a U.S. Department of Agriculture ("USDA") rural development program, a U.S. Department of Housing and Urban Development program focused to assist Native American and Alaskan Native borrowers, state-sponsored housing finance programs, a partnership with Anchorage Neighborhood Housing Services, and a proprietary consumer loan program.(26)

Investment Test. Alaska Bank received a rating of "high satisfactory" on the investment test of its CRA examination. The examination report stated that Alaska Bank had a favorable record of investing and making grants in communities in its assessment area. The bank made approximately $20.8 million in qualified investments, including $279,000 in grants and donations to community housing and development organizations. The bank also assisted a rural municipality in a complex bond transaction that raised $18 million to provide construction financing for two rural health clinics and an administrative center to serve low-income communities.

Service Test. Alaska Bank received an "outstanding" examination rating for providing retail banking services to its assessment areas. Examiners stated that the bank was a leader in providing community development services throughout the state.(27) In addition, 70 percent of Alaska Bank's branches and 64 percent of its ATMs were located outside the Anchorage MSA. In the Anchorage MSA, although only approximately 26 percent of the population were LMI individuals, almost half of Alaska Bank's branches were located in LMI census tracts. Nineteen of the bank's branches maintained Saturday business hours. Alaska Bank did not close any branches during the review period.

Alaska Bank also operated 122 ATMs within its assessment area, 55 of which were deposit-taking facilities. Examiners found that the ATM distribution was reasonable for both the Anchorage MSA and the rural regions in the bank's assessment area.

Examiners noted that the geography of Alaska presented major obstacles for Alaska Bank and other Alaskan banking organizations, including high transportation and communication costs, particularly in remote areas; lack of a developed infrastructure; a fragmented population; and fragile economic conditions. To meet these challenges, Alaska Bank developed alternative products and service delivery systems, including telephone loan origination programs, internet banking, and banking by mail.(28) Alaska Bank's Community Agent Program assigned five employees to remote village locations to provide basic banking services and financial education to residents and ongoing advice to the bank about the credit needs of the villages.

Alaska Bank also offered bilingual services through a network of employees throughout the bank who spoke Chinese, Tagalog, Korean, Russian, Spanish, and Yupik. The bank also created a Yupik-language loan application for use in branches in southwest Alaskan villages.

The bank offered a range of home-buying and financial education classes at locations in the Anchorage MSA. More than 500 prospective homeowners, 50 percent of whom were LMI individuals, attended the program during the review period. Alaska Bank also supported and subsidized affordable housing programs and groups throughout its assessment area.(29)

B. Fair Lending Records

1. Wells Fargo Bank

OCC examiners analyzed Wells Fargo Bank's compliance with federal fair lending laws. The examination included a sampling of residential home improvement and automobile loans and a review of fair housing complaints registered against the bank.

Examiners found no evidence of prohibited discrimination or illegal credit practices at Wells Fargo Bank in the underwriting of home improvement and automobile loans. Examiners reported that the bank's loan review process and training of employees were adequate to ensure compliance with federal fair lending laws and that the bank complied with fair lending laws and regulations.

2. Alaska Bank

Examiners evaluated Alaska Bank's compliance with federal fair lending laws by reviewing a sample of applications for mobile home financing made by white and Alaskan Native applicants. Examiners concluded that Alaska Bank complied with fair lending laws and found no evidence of disparate treatment. Examiners found no violations of fair lending laws by Alaska Bank and also determined that the bank had satisfactory procedures in place to ensure compliance with federal fair lending laws.

C. HMDA Data

The Board also has considered carefully the lending records of Wells Fargo and National Bancorp in light of comments regarding 1998 HMDA data for certain subsidiaries of the organizations. In general, the HMDA data indicate good penetration by both organizations of all geographic areas they serve, including LMI areas, and of groups of borrowers at all income levels. The data also reflect, however, certain disparities in the rates of loan applications, originations, and denials by racial group.(30)

The Board is concerned when the record of an institution indicates such disparities in lending and believes that all banks are obligated to ensure that their lending practices are based on criteria that ensure not only safe and sound lending but also equal access to credit by creditworthy applicants regardless of their race. The Board recognizes, however, that HMDA data alone provide an incomplete measure of an institution's lending in its community, because these data cover only a few categories of housing-related lending. HMDA data, moreover, provide only limited information about the covered loans.(31) HMDA data, therefore, have limitations that make them an insufficient basis, absent other information, for concluding that an institution has not adequately assisted in meeting its community's credit needs or has engaged in illegal lending discrimination.

Because of the limitations of HMDA data, the Board has considered these data carefully in light of other information, including examination reports that provide an on-site evaluation of the compliance by the subsidiary banks of National Bancorp and Wells Fargo with fair lending laws and the overall lending and community development activities of the banks. As discussed, examiners found compliance with fair lending laws at the most recent examinations of the subsidiary depository institutions of Wells Fargo and National Bancorp. The Board also has considered the HMDA data in light of the overall lending records of Wells Fargo and National Bancorp. Both organizations have records that demonstrate strong CRA performance and the provision of substantial assistance in meeting the credit needs of their communities.

D. Conclusion on Convenience and Needs Analysis

In reviewing the proposal's effect on the convenience and needs of the communities to be served by the combined organization, the Board has considered carefully all facts of record, including the public comments received, responses to comments, and reports of examinations of the CRA performance of the institutions involved. Based on a review of the entire record, and for the reasons discussed above, the Board concludes that convenience and needs considerations, including CRA performance records of the subsidiary depository institutions of Wells Fargo and National Bancorp, are consistent with approval.

Financial, Managerial, and Other Supervisory Factors

The BHC Act also requires the Board, in acting on an application, to consider the financial and managerial resources and future prospects of the companies and banks involved in a proposal, and certain other supervisory factors. The Board has carefully considered the financial and managerial resources and future prospects of Wells Fargo and National Bancorp and their respective subsidiary depository institutions, and other supervisory factors in light of all the facts of record, including confidential reports of examination and other supervisory information received from the primary federal supervisors of the organizations.

Based on these and other facts of record, the Board concludes that considerations relating to the financial and managerial resources and future prospects of Wells Fargo, National Bancorp, and their respective subsidiaries are consistent with approval of the proposal, as are the other supervisory factors that the Board must consider under section 3 of the BHC Act.

Conclusion

Based on the foregoing, the Board has determined that the application should be, and hereby is, approved.(32) Commenters also allege that public meetings or hearings are necessary to present the views of residents of remote native villages in which English is not spoken fluently. Under its rules, the Board may, in its discretion, hold a public meeting or heating 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. [sections] 225.16(e). The Board has considered carefully the commenters' requests in light of all the facts of record. In the Board's view, commenters have had ample opportunity to submit their views, and have submitted written substantial comments that have been considered carefully by the Board in acting on the proposal. Commenters' requests fail to demonstrate why their comments do not present their views adequately and fail to identify disputed issues of fact that are material to the Board's decision that would be clarified by a public meeting or hearing or to indicate the additional material issues that would be brought forward by other members of the public. Commenters also have not demonstrated, in view of the substantial record in this case, the need to extend the public comment period. For these reasons, and based on all the facts of record, the Board has determined that a public meeting or hearing and an extension of the public comment period are not required or warranted in this case. Accordingly, the requests for a public meeting or hearing and an extension of the comment period are denied. The Board's approval of the proposal is specifically conditioned on compliance by Wells Fargo with all the commitments made in connection with the proposal. These commitments and conditions are deemed to be conditions imposed in writing by the Board in connection with its findings and decisions and, as such, may be enforced in proceedings under applicable law.

The acquisition may not be consummated before the fifteenth calendar day after 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 San Francisco, acting pursuant to delegated authority.

By order of the Board of Governors, effective June 21, 2000.

(1.) Asset and ranking data are as of March 31, 2000.

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

(3.) A bank holding company's home state is that state in which the total deposits of all banking subsidiaries of such company were the largest on July l, 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).

(4.) For purposes of section 3(d), the Board considers a bank to be located in the states in which the bank is chartered or headquartered or operates a branch. See 12 U.S.C. [subsections] 1841 (0)(4)-(7) and 1842(d)(1)(A) and (d)(2)(B).

(5.) See 12 U.S.C. [subsections] 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). Wells Fargo is adequately capitalized and adequately managed, as defined by applicable law. Alaska Bank has been in existence and operated continuously for the minimum period of time required under applicable state law. See Alaska Stat. Ann. [sections] 06.05.570 (Lexis 2000) (three years). On consummation of the proposal, Wells Fargo 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 total deposits held by insured depository institutions in Washington, where Wells Fargo and National Bancorp both operate branches of insured depository institutions. All other requirements under section 3(d) of the BHC Act would be met on consummation of the proposal.

(6.) 12 U.S.C. [sections] 1842(c).

(7.) The Seattle banking market is defined as the Seattle-Tacoma Ranally Metropolitan Area and the towns of Camano City and Eatonville, Washington.

(8.) Market share data are as of June 30, 1999.

(9.) Under the DOJ Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is more than 1000 and less than 1800 is considered to be moderately 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 entities.

(10.) For bank mergers and acquisitions, the Board and the courts have recognized consistently that the appropriate product market for analyzing the competitive effects of a transaction is the cluster of products (various kinds of credit) and services (such as checking accounts and trust administration) offered by banking institutions. See Chemical Banking Corporation, 82 Federal Reserve Bulletin 239 (1996); United States v. Philadelphia National Bank, 374 U.S. 321, 357 (1963). According to the Supreme Court, the clustering of banking products and services facilitates convenient access to these products and services and vests the cluster with economic significance beyond the individual products and services that constitute the cluster. See United States v. Phillipsburg National Bank, 399 U.S. 350, 361 (1969). Several studies support the conclusion that households continue to seek this cluster of services. See Elliehausen and Wolken, Banking Markets and the Use of Financial Services by Households, 78 Federal Reserve Bulletin 169 (1992).

(11.) 12 U.S.C. [sections] 2901 et seq.

(12.) One commenter criticized NBA for its alleged practice of requiring collateral in excess of the loan amount when securing loans in remote communities. Wells Fargo has indicated that it is investigating the allegations, that its own collateral requirements apply uniformly in urban and rural areas, and that it regularly extends credit to isolated tribal borrowers without such a requirement.

(13.) 12 U.S.C. [sections] 2801 et seq.

(14.) Wells Fargo also was criticized for its association as bond indenture trustee for certain unaffiliated subprime lenders. Wells Fargo has stated that as trustee it has no knowledge of or control over the credit criteria of the bond issuer.

(15.) According to some commenters, Wells Fargo and National Bancorp improperly excluded Alaskan Natives in their conventional housing-related lending.

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

(17.) Wells Fargo Bank operates in California, where it derives 81 percent of its deposits, and eight other western states. The bank accounts for 45 percent of the total consolidated assets of Wells Fargo. As of March 31, 2000, Wells Fargo subsidiary banks with "outstanding" ratings in their most recent CRA examinations accounted for 84 percent of the organization' s total consolidated assets.

(18.) In this context, "small business loans" means loans in amounts less than $1 million. Wells Fargo Bank also made 33 percent of its small business loans to businesses with gross annual revenues less than $1 million ("loans to small businesses").

(19.) In rural areas, Wells Fargo Bank provided $7.3 million of construction financing for 81 affordable single-family housing units in a very low-income community of farm workers and extended a $1.5 million line of credit to a nonprofit developer of self-help housing in an area with a large population of farm workers.

(20.) Commenters expressed concern that Wells Fargo's lending policies and practices developed outside Alaska would not take local needs and conditions fully into account. Wells Fargo has stated that all decisions about small business models, risks, and pricing strategies would be made in Alaska.

(21.) In 2000, Wells Fargo Bank committed to make a $6 million LIHTC investment to provide affordable single-family rental housing in rural areas to Native Americans.

(22.) One commenter alleged that Wells Fargo failed to hire additional community development loan officers to serve LMI and predominately minority communities despite Wells Fargo's indication in a previous transaction that it would do so. Wells Fargo has indicated in this case that it has achieved those hiring goals.

(23.) Section 42 of the Federal Deposit Insurance Act (12 U.S.C. [sections] 1831r-1), as implemented by the Joint Policy Statement Regarding Branch Closings (64 Federal Register 34,844 (1999)), requires that a bank provide its customers and the appropriate federal supervisory agency with at least 90 days notice before the date of the proposed branch closing and the general public with at least 30 days notice. The bank also is required to provide reasons and other supporting data for the closure, consistent with the institution's written policy for branch closings. The law does not authorize federal regulators to prevent closing of any branch.

(24.) Funded projects included the development of 24 housing units for very low-income households, the purchase of a power generation system for a subsistence-level fishing village, and the purchase of a primary health care center to serve native villages.

(25.) Examiners also noted that Alaska Bank had the largest portfolio of consumer loans in the state, which was particularly significant because such loans in rural areas often helped to provide equipment and supplies needed for subsistence-level occupations.

(26.) Under the Alaska Housing Finance Corporation ("AHFC") Tax-Exempt First-Time Home Buyers Program, featuring reduced interest rates and down payments, and the AHFC Interest Rate Reduction for Low-Income Borrowers Program, featuring reduced interest rates determined by the borrower's income, the bank made 832 loans, totaling $75.8 million. In 1999, the bank made 369 loans, totaling $36.3 million. Alaska Bank was the first bank in Alaska to be certified under a USDA partial guarantee program for small business loans and loans to nonprofit organizations in small rural communities, and made 23 loans, totaling $22 million, under this program during the review period.

(27.) For example, Alaska Bank entered into a partnership with the Arctic Development Council to plan and promote regional economic development in the North Slope borough and participated in several consortia to expand affordable housing opportunities in areas outside Anchorage.

(28.) Although the area outside the Anchorage MSA provided 42 percent of the bank's deposits, it accounted for 67 percent of the bank' s loans and 61 percent of its lending by dollar volume.

(29.) For example, Alaska Bank provided free loan servicing for loans originated by Habitat for Humanity.

(30.) For example, in certain MSAs, Wells Fargo's denial rate for African-American applicants for home mortgage loans is higher than its denial rate for white applicants.

(31.) The data, for example, do not account for the possibility that an institution's outreach efforts may attract a larger proportion of marginally qualified applicants than other institutions attract and do not provide a basis for an independent assessment of the creditworthiness of applicants.

(32.) Commenters requested that the Board hold a public meeting or hearing on the proposal and extend the public comment period. 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.

Voting for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Kelley and Meyer. Absent and not voting: Governor Gramlich.

JENNIFER J. JOHNSON Secretary of the Board

Appendix

Competitive Analysis of Individual Banking Products

Home mortgage lending. The Board has determined previously that the geographic market for home mortgage lending is local.(1) The Anchorage, Alaska, MSA is the only area of Alaska for which all home mortgage lenders are required to report lending data under the HMDA. Based on 1998 HMDA data, National Bancorp originated 18.2 percent of all home mortgage loans made in the Anchorage MSA, and Wells Fargo originated 5.4 percent of all such loans. Were an HHI constructed for home mortgage lending in the Anchorage MSA, consummation of the proposal would increase the HHI by 195 points to 1247, and the market for home mortgage lending would remain moderately concentrated. During 1999, Wells Fargo closed all its home mortgage lending offices in Anchorage. Accordingly, the competitive effects of the proposal in the Anchorage MSA apparently would be smaller than indicated by the HHI.(2)

Outside the Anchorage MSA, HMDA data are not a reliable basis for calculating the market share of home mortgage lenders, because in non-MSA areas only larger depository institutions are required to report. For example, in the borough of Juneau, Alaska, where Wells Fargo has its only home mortgage lending office in the state, there are five commercial banks, of which the second and fifth largest are not HMDA reporters. There also are more than 30 home mortgage lenders in the borough of Juneau that are not banks. In addition, barriers to entry into home mortgage lending in the borough appear to be low. The competitive effects of the proposal on home mortgage lending in the borough of Juneau, therefore, are not expected to be significantly adverse.

The Wells Fargo home mortgage lending office in Juneau does not serve areas outside the borough of Juneau to a significant degree.(3) Wells Fargo serves Alaska outside Juneau through a variety of remote delivery channels, including mortgage brokers, national telephone centers, solicitation of affinity groups and existing customers, corporate relocation services, and the internet. These delivery channels do not use marketing strategies focused on geographic markets, and their loan pricing is not based on local market conditions.(4) The number and dollar volume of home mortgage loans made by Wells Fargo through these delivery channels is less than 1 percent of all such loans made by Wells Fargo in Alaska. In the less populated or more inaccessible areas of Alaska, therefore, Wells Fargo participates only in a submarket of remotely delivered home mortgage lending that is regional or national in scope and for which barriers to entry are low. Consummation of the proposal would not have a signifcantly adverse effect on competition in this submarket.

Consumer lending. The market for consumer lending includes many competitors of depository institutions, including credit card companies, consumer finance companies, and seller financing affiliates of commercial firms, that operate on a regional or national level. Many local competitors of depository institutions also exist, including credit unions in particular and smaller consumer finance companies, and Wells Fargo's market share is small. For example, at year end 1999, Wells Fargo's consumer finance subsidiary, Norwest Financial, Inc., had approximately $32.3 million of loans and sales finance contracts booked at its three offices in the Anchorage MSA, while Alaska USA Federal Credit Union, Anchorage, Alaska, the largest credit union in the Anchorage MSA, held $659 million of non-mortgage loans. The competitive effects of the proposal on consumer lending are not expected to be significantly adverse.

(1.) See Norwest Corporation, 82 Federal Reserve Bulletin 683 (1996) ("Norwest Order").

(2.) Barriers to entry also appear to be low. There are six depository institutions in the Anchorage MSA, but 199 lenders reported under the HMDA that they received mortgage loan applications from the MSA in 1998.

(3.) In 1999, the office originated 268 loans, totaling $42.5 million, of which 215, totaling $34.8 million, were made in the borough.

(4.) See Norwest Order at 683 n.8.

Orders Issued Under Section 4 of the Bank Holding Company Act

Northern Star Financial, Inc. Mankato, Minnesota

Order Denying the Acquisition of a Savings Association

Northern Star Financial, Inc. ("Northern Star"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), 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 all the voting shares of First Federal Holding Company of Morris, Inc. ("First Federal"), and thereby acquire First Federal Savings Bank ("First Federal Savings"), Morris, Minnesota.

Notice of the proposal, affording interested persons an opportunity to submit comments has been published (65 Federal Register 5873 (2000)). The time for filing comments has expired, and the Board has considered the notice and all comments received in light of the factors set forth in section 4 of the BHC Act.

Northern Star's banking subsidiary, Northern Star Bank, Mankato, Minnesota ("Bank"), is the 417th largest depository institution in Minnesota, controlling deposits of $6.9 million, representing less than 1 percent of the total deposits in depository institutions in the state ("state deposits").(1) First Federal Savings is the 174th largest depository institution in Minnesota, controlling deposits of $48.3 million, representing less than 1 percent of state deposits.

Section 4(j) of the BHC Act requires that, in reviewing a proposal to acquire a savings association,(2) the Board consider whether the acquisition "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 interest, or unsound banking practices."(3) The Board's rules and longstanding practice provide that the evaluation of possible public benefits and adverse effects must include an evaluation of the financial and managerial resources of the notificant, including its subsidiaries and any company to be acquired, and the effect of the proposed transaction on those resources, as well as an evaluation of the management expertise, internal-control and risk-management systems, and capital of the notificant.(4)

In connection with its review of the factors under section 4 of the BHC Act in this case, the Board has carefully reviewed the financial and managerial resources of Northern Star, First Federal, and their respective subsidiaries and the effect the transaction would have on those resources.

Northern Star contends that consummation of this proposal can reasonably be expected to result in public benefits that justify approval. In particular, Northern Star points out that Bank is currently well capitalized and that this proposal includes an exchange of stock and a stock offering that would raise a significant amount of additional capital for both Bank and First Federal Savings, which in turn would provide a source of funds to increase earning assets. Northern Star also asserts that the proposal would bring additional management to Northern Star, and expand its market and potential new business opportunities.

The Board has carefully considered all the facts of record, including relevant examination reports, information obtained from other federal and state banking authorities, other confidential supervisory information, and information provided by the management of Northern Star. This proposal represents a substantial expansion by a bank holding company that is considerably smaller than the company to be acquired, and is located in a community more than 100 miles from Bank. Bank began operations in January 1999, has had poor earnings, and has never met its earnings projections. The Board has considered the challenge that integrating the two organizations would pose, the history of current management, the earnings projections, and the history of Northern Star's management in achieving earnings projections. Management is working to improve earnings and an expansion by Northern Star at this time, in particular the acquisition of an institution that is substantially larger than and distant from Bank, would divert Northern Star's management from effectively attending to the management of Bank. Based on this review, the Board concludes that the financial and managerial resources at this time are not consistent with approval of the proposed expansion by Northern Star. The Board believes that the potential benefits of consummation of this proposal, which are speculative and could be achieved in other ways, would not outweigh the adverse effects in this case.

Northern Star and First Federal do not compete directly in any banking market. Consummation of the proposal would not result in any significantly adverse effects on competition in any relevant banking market. On the other hand, there are no facts that indicate that the effects of this proposal on competition in any relevant market would result in public benefits that would outweigh the potential adverse effects discussed above. As noted above, to the extent this expansionary proposal distracts the attention of the management of Northern Star from focusing on Bank, it could have adverse effects on competition. The Board also has considered the CRA performance records of Bank and First Federal Savings and the other factors required under section 4(j)(2)(A) of the BHC Act. While these factors are consistent with approval, the Board concludes that they do not outweigh the adverse considerations discussed above.

For these reasons and based on all the facts of record, the Board has determined that the proposal does not meet the statutory requirements for approval under section 4 of the BHC Act that the notice should be and hereby is, denied.

By order of the Board of Governors, effective June 26, 2000.

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

(2.) The Board previously has determined by regulation that operating a savings association is closely related to banking for purposes of section 4(c)(8) of the BHC Act. 12 C.F.R. 225.28(b)(4)(ii).

(3.) 12 U.S.C. [sections] 1843(j)(2)(A).

(4.) 12 C.F.R. 225.26(b). In assessing notices by small bank holding companies, the Board will take into account a full range of financial and other information about the notificant and its current and proposed subsidiaries, including the recent trend and stability of earnings, past and prospective growth, and the record and competency of management. See Appendix C to Regulation Y (12 C.F.R. Part 225, Appendix C). See also The Cedar Vale Bank Holding Company, 75 Federal Reserve Bulletin 257 (1990).

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

JENNIFER J. JOHNSON
Secretary of the Board