ORDERS ISSUED UNDER BANK MERGER ACT.

Arizona Bank Tucson, Arizona

Order Approving Acquisition and Establishment of Branches

Arizona Bank ("Bank"), a state member bank,(1) has applied under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. [sections] 1828(c)) (the "Bank Merger Act" or "BMA") to acquire 15 branches in Arizona owned by subsidiary banks of Wells Fargo & Company, San Francisco, California ("Wells").(2) Bank also has applied under section 9 of the Federal Reserve Act (12 U.S.C. [sections] 321) ("FRA") to establish branches at the locations of the branches to be acquired, as described in Appendix A.

Notice of the applications, affording interested persons an opportunity to submit comments, has been given in accordance with the BMA and the Board's Rules of Procedure (12 C.F.R. 262.3(b)). As required by the BMA, reports on the competitive effects of the acquisitions were requested from the United States Attorney General and the other federal banking agencies. The time for filing comments has expired, and the Board has considered the application and all facts of record in light of the factors set forth in the BMA and section 9 of the FRA.

The BMA prohibits the Board from approving an application if the proposal would result in a monopoly or would be in furtherance of any attempt to monopolize the business of banking.(3) The BMA also prohibits the Board from approving a proposal that would substantially lessen competition or tend to create a monopoly in any relevant market, unless the Board finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effects of the transaction in meeting the convenience and needs of the community to be served.(4)

Bank and the subsidiary banks of Wells compete with each other in the Casa Grande, Flagstaff, Phoenix, and Yuma banking markets, all in Arizona.(5) Consummation of the proposal would not exceed the Department of Justice Merger Guidelines ("DOJ Guidelines") in these markets and numerous competitors would remain in each market.(6)

The Department of Justice has advised the Board that consummation of the proposal would not likely have a significant adverse effect on competition in any relevant banking market. The other federal banking agencies also have been afforded an opportunity to comment and have not objected to consummation of the proposal.

After carefully reviewing these and all other facts of record, the Board concludes that consummation of the proposed transaction would not be likely to result in a significantly adverse effect on competition or on the concentration of banking resources in the Casa Grande, Flagstaff, Phoenix, or Yuma banking markets or any other relevant banking market. Accordingly, the Board has determined that competitive factors are consistent with approval.

In reviewing this proposal under the BMA and section 9 of the FRA, the Board has considered the financial and managerial resources and future prospects of the existing and proposed institutions. The Board has reviewed these factors in light of all the facts of record, including supervisory reports of examination assessing the financial and managerial resources of Bank. The Board notes that Bank would remain well capitalized on 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 the institutions involved are consistent with approval.

The Board also must consider the convenience and needs of the communities to be served and take into account the records of the relevant institutions under the Community Reinvestment Act (12 U.S.C. [sections] 2901 et seq.) ("CRA"). The CRA requires the federal financial supervisory agencies to encourage financial institutions to help meet the credit needs of local communities in which they operate, consistent with their safe and sound operation, by requiring 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 acquisitions.

The Board has carefully considered the convenience and needs factor and the CRA performance records of the institutions involved in light of all the facts of record, including comments received on the applications. These comments maintained that CRA performance records of Wells's predecessor organizations in Arizona were deficient in several areas, including outreach efforts, housing-related and small-business lending, community development, and low-cost banking services.(7)

The Board carefully reviewed the CRA performance records of Norwest Corporation and the former Wells Fargo & Company generally and specifically in Arizona in the Norwest/Wells Order. Based on all the facts of record, and for the reasons described in detail in that order, which are incorporated herein by reference, the Board concluded that the CRA performance records of both banking organizations were consistent with approval of that application.

The Board also has considered the CRA performance record of Bank, which intends to extend its CRA-related lending programs to the branches involved in this proposal, in light of all the facts of record, including the performance evaluation by its appropriate federal supervisor. An institution's most recent CRA performance evaluation is a particularly important consideration in the applications process because it represents a detailed on-site evaluation of the institution's overall record of performance under the CRA by the appropriate federal :financial supervisory agency.(8)

Bank received an "outstanding" rating in its most recent CRA performance examination by its primary federal supervisor at the time, the Federal Deposit Insurance Corporation, as of May 9, 1996.(9) Examiners noted that Bank's credit applications, extensions, and denials were evenly distributed throughout its communities, and that data submitted under the Home Mortgage Disclosure Act (12 U.S.C. [sections] 2801 et seq.) ("HMDA") showed favorable approval rates for minority applicants.(10) In addition, examiners found no evidence of illegal credit practices or practices that would discourage credit applications from any segment of Bank's delineated communities. A review of Bank's credit originations, denials, and underwriting policies and procedures showed that Bank was in compliance with the substantive provisions of fair lending laws and that management had implemented a fair lending policy and training program.

Bank offers an affordable housing program jointly with several southern Arizona nonprofit organizations.(11) From 1996 through 1998, the bank originated 224 loans totaling $11.7 million through the program, which averaged approximately 25 percent of the bank's mortgage lending over the three-year period. In addition, Bank received almost $3 million in grants from the Federal Home Loan Bank of San Francisco (the "FHLB") during this period, in many cases jointly with nonprofit organizations, to support the construction of affordable housing by area community groups. Bank also offers loans under several government-sponsored programs, including Federal Housing Administration and Veterans Administration loans and loans under the Federal National Mortgage Association's Community Home Buyers Program.

Bank participates in loan programs sponsored by the Small Business Administration ("SBA"), including the SBA's 7A and 504 loan programs. Small business lending data for 1996 and 1997 show that Bank increased the number of its small business loans (loans in amounts of less than $1 million) in its. Tucson assessment area in 1997. Bank's performance in LMI census tracts in this area, as a percentage of its total small business lending, was generally consistent with or exceeded that of lenders in the aggregate in 1996 and 1997.(12)

Examiners found that Bank engaged in a number of community development programs through loans or equity financing, including construction financing for an affordable housing project developed by a nonprofit organization. Examiners also noted that Bank contracted with a nonprofit organization to counsel applicants on home ownership. Bank offers low-cost checking accounts, and examiners concluded that services and hours of operation at Bank's branches were adequate to meet the needs of the communities served.

Since its most recent performance examination, Bank has continued to engage in community development activities, including affordable housing projects funded partly by grants from the FHLB, with Bank's financing commitments totaling more than $19 million in 1996 and 1997. In 1998, Bank received a grant from the FHLB for construction of affordable housing for homeless individuals and couples newly reentering employment, and will offer a bridge/construction loan with concessionary rates and fee waivers.

The Board has considered the effects of the proposed acquisition on the convenience and needs of the communities to be served in light of all the facts of record. Based on its review, and for the reasons discussed above, the Board concludes that convenience and needs considerations, including the CRA performance records of the institutions involved, are consistent with approval.

The Board also concludes that the proposal is consistent with approval under the considerations in the FRA. Based on the foregoing and all the facts of record, the Board approves these applications. For purposes of this action, the commitments and conditions relied on in reaching this decision are conditions imposed in writing by the Board and, as such, may be enforced in proceedings under applicable law.

The acquisition of the branches 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 by the Board or by the Federal Reserve Bank of Atlanta, acting pursuant to delegated authority.

By order of the Board of Governors, effective March 3, 1999.

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

ROBERT DEV. FRIERSON Associate Secretary of the Board

(1.) Bank is a wholly owned subsidiary of Compass Bancshares, Birmingham, Alabama.

(2.) In October 1998, the Board approved the application by Norwest Corporation, Minneapolis, Minnesota, to acquire Wells Fargo & Company, San Francisco, California. See Norwest Corporation, 84 Federal Reserve Bulletin 1088 (1998) ("Norwest/Wells Order"). After consummation of the acquisition, Norwest changed its name to "Wells Fargo & Company." Bank would purchase 14 branches from Norwest Bank Arizona, Phoenix, Arizona, and one branch from Wells Fargo Bank, N.A., San Francisco, California.

(3.) 12 U.S.C. [sections] 1828(c)(5)(A).

(4.) 12 U.S.C. [sections] 1828(c)(5)(B).

(5.) Banking market definitions and data are discussed in Appendix B. Bank also would acquire four branches in banking markets with no competitive overlap. The Board notes that Bank's proposed branch acquisitions would comply with the divestiture commitments discussed in the Norwest/Wells Order.

(6.) Under the DOJ Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger Herfindahl-Hirschman Index ("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 postmerger 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 threshold for an increase in the HHI when screening bank mergers and acquisitions for anticompetitive effects implicitly recognizes the competitive effects of limited-purpose and other nondepository financial entities.

(7.) The commenter also expressed concerns about branch closures in LMI neighborhoods, particularly in Phoenix and Tucson. The Board notes that no branches would be closed as a result of Bank's proposed transaction.

(8.) The Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act provides that a CRA examination is an important and often controlling factor in the consideration of an institution's CRA record and that reports of these examinations will be given great weight in the applications process. 54 Federal Register 13,742 and 13,745 (1989); see also Interagency Questions and Answers Regarding Community Reinvestment, 62 Federal Register 52,105 and 52,121 (1997).

(9.) This was Bank's third consecutive "outstanding" rating. Compass Bancshares's other subsidiary bank, Compass Bank, Birmingham, Alabama, was rated "satisfactory," as of May 5, 1997.

(10.) In 1997, Bank's percentage of mortgage originations to LMI borrowers and in LMI census tracts in its Tucson assessment area exceeded the percentage of originations by lenders in the aggregate in that area.

(11.) Nonprofit organizations refer prospective LMI borrowers to Bank and Bank waives the origination, underwriting, and document preparation fees on adjustable rate mortgages. Bank will make mortgages with loan-to-value ratios of up to 89 percent without mortgage insurance for borrowers referred by some of the participating organizations.

(12.) The number of loans to small businesses (businesses with annual revenues of $1 million or less) decreased in 1997 for Bank and for lenders in the aggregate, both in Bank's overall assessment area and in LMI areas.

Appendix A

Branch Locations in Arizona

1. 419 West Central Avenue, Coolidge 85228.

2. 2 East Birch Avenue, Flagstaff 86001.

3. 1992 McCulloch Boulevard North, Lake Havasu City 86403.

4. 1325 West Southern, Mesa 85202.

5. 4450 East Main Street, Mesa 85205.

6. 613 South Beeline Street Parkway, Payson 85441.

7. 3348 West Thomas Road, Phoenix 85017.

8. 6002 South Central Avenue, Phoenix 85040.

9. 302 North First Avenue, Phoenix 85003.

10. 781 East White Mountain Boulevard, Pinetop 85935.

11. 7201 East McDowell Road, Scottsdale 85251.

12. 7315 East Osborn Road, Scottsdale 85251.

13. 211 South Carmichael Avenue, Sierra Vista 85635.

14. 7605 South McClintock Drive, Tempe 85284.

15. 1599 South Fourth Avenue, Yuma 85364.

Appendix B

Arizona Banking Market Definitions and Data

Casa Grande

The Casa Grande banking market is approximated by the towns of Arizona City, Casa Grande, Coolidge, Eloy, Florence, and Sacaton. Bank is the eighth largest banking and thrift institution ("depository institution") in the market, controlling deposits of $600,000, and would purchase one branch controlling deposits of $9.9 million.(1) After consummation of the proposal, Bank would become the seventh largest of eight competitors in the market, controlling deposits of $10.6 million, representing 3.2 percent of total deposits controlled by depository institutions in the market ("market deposits"). The HHI would increase by one point to 1985.

Flagstaff

The Flagstaff banking market is approximated by the towns of Flagstaff and Williams. Bank is the seventh largest depository institution in the market, controlling deposits of $800,000, and would purchase one branch controlling deposits of $50.4 million. After consummation of the proposal, Bank would become the fifth largest of seven competitors in the market, controlling deposits of $51.2 million, representing 13.2 percent of market deposits. The HHI would not increase.

Phoenix

The Phoenix banking market is approximated by the Phoenix Ranally Metropolitan Area ("RMA"). Bank is the 32nd largest depository institution in the market, controlling deposits of $2.6 million, and would purchase eight branches controlling deposits of $256.7 million. After consummation of the proposal, Bank would become the ninth largest of 42 competitors in the market, controlling deposits of $259.3 million, representing 1.1 percent of market deposits. The HHI would not increase.

Yuma

The Yuma banking market is approximated by the Yuma RMA and the town of Welton. Bank is the ninth largest depository institution in the market, controlling deposits of $28,000, and would purchase one branch controlling deposits of $28.7 million. After consummation of the proposal, Bank would become the sixth largest of ten competitors in the market, controlling deposits of $28.7 million, representing 4.1 percent of market deposits. The HHI would not increase.

Westdeutsche ImmobilienBank Mainz, Germany

(1.) All deposit data are as of June 30, 1997, adjusted for structural changes through December 1, 1998, and rounded to the nearest $100,000. Market share data are based on calculations that include the deposits of thrift institutions at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See, e.g., Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly included thrift deposits in the calculation of market share on a 50 percent-weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991).

Order Approving Establishment of a Representative Office

Westdeutsche ImmobilienBank ("Bank"), Mainz, Germany, a foreign bank within the meaning of the International Banking Act ("IBA"), has applied under section 10(a) of the IBA (12 U.S.C. [sections] 3107(a)) to establish a representative office in New York, New York. The Foreign Bank Supervision Enhancement Act of 1991, which amended the IBA, provides that a foreign bank must obtain the approval of the Board to establish a representative office in the United States.

Notice of the application, affording interested persons an opportunity to submit comments, has been published in a newspaper of general circulation in New York, New York (New York Times, July 24, 1998). The time for filing comments has expired, and the Board has considered the application and all comments received.

Bank, with assets of $7 billion,(1) was established in January 1995, and is owned by three German Landesbanken, which are in turn owned by various savings banks associations and municipal and state authorities. Landesbank Rheinland-Pfalz Girozentrale ("LB Rh- Pfalz") owns 25 percent of Bank; Westdeutsche Landesbank Girozentrale ("WestLB") owns 50 percent of Bank; and Landesbank Baden-Wurttemberg ("LBW") owns 25 percent of Bank.(2) All three Landesbanken are public law institutions that serve as the central and clearing bank for the savings banks in their respective states. The Landesbanken also provide commercial and investment banking services regionally, nationally, and internationally to both public and private entities and individuals.

Bank engages principally in real estate activities. Bank provides real estate financing, consulting and service activities, project development, construction and property management, and portfolio management. Bank has twelve offices in Germany, a branch in Great Britain, and a representative office in the Netherlands.

The proposed representative office would act as a liaison with customers and potential customers. It would also solicit new business, conduct research, make property inspections, verify external appraisals, secure title information, prepare applications: for loans, and solicit investors to purchase such loans.

In acting on an application to establish a representative office, the IBA and Regulation K provide that the Board shall take into account whether the foreign bank engages directly in the business .of banking outside of the United States, and has furnished to the Board the information it needs to assess the application adequately. The Board also shall take into account whether the foreign bank and any foreign bank parent is subject to comprehensive supervision or regulation on a consolidated basis by its home country supervisor (12 U.S.C. [sections] 3107(a)(2); 12 C.F.R. 211.24(d)(2)).(3) The Board also may take into account additional standards as set forth in the IBA and Regulation K (12 U.S.C. [sections] 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)).

As noted above, LB Rh-Pfalz, WestLB, LBW, and Bank engage directly in the business of banking outside the United States. Bank also has provided the Board with information necessary to assess the application through submissions that address the relevant issues. With respect to supervision by home country authorities, the Board previously has determined, in connection with applications involving other banks in Germany, including WestLB and LBW, that those banks were subject to home country supervision on a consolidated basis.(4) Bank and LB Rh-Pfalz are supervised by the German regulators on substantially the same terms and conditions as those other banks. Based on all the facts of record, the Board has determined that Bank and LB Rh-Pfalz are subject to comprehensive supervision and regulation on a consolidated basis by their home country supervisors.

The Board also has taken into account the additional standards set forth in section 7 of the IBA and Regulation K (see 12 U.S.C. [sections] 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). In this regard, the German Federal Banking Supervisory Office has no objection to the establishment of the proposed representative office.

With respect to the financial and managerial resources of Bank, taking into consideration Bank's record of operation in its home country, its overall financial resources, and its standing with its home country supervisors, the Board also has determined that financial and managerial factors are consistent with approval of the proposed representative office. Bank appears to have the experience and capacity to support the proposed representative office and has established controls and procedures for the proposed representative office to ensure compliance with U.S. law.

With respect to access to information about Bank's operations, the Board has reviewed the restrictions on disclosure in relevant jurisdictions in which Bank operates and has communicated with relevant government authorities regarding access to information. Bank and its parents have committed to make available to the Board such information on the operations of Bank and any of its affiliates that the Board deems necessary to determine and enforce compliance with the IBA, the Bank Holding Company Act of 1956, as amended, and other applicable federal law. To the extent that the provision of such information may be prohibited by law, Bank and its parents have committed to cooperate with the Board to obtain any necessary consents or waivers that might be required from third parties for disclosure of such information. In addition, subject to certain conditions, the German supervisors may share information on Bank's operations with other supervisors, including the Board. In light of these commitments and other facts of record, and subject to the condition described below, the Board concludes that Bank has provided adequate assurances of access to any necessary information the Board may request.

On the basis of all the facts of record, and subject to the commitments made by Bank and its parents as well as the terms and conditions set forth in this order, the Board has determined that Bank's application to establish the representative office should be, and hereby is, approved. Should any restrictions on access to information on the operations or activities of Bank and its affiliates subsequently interfere with the Board's ability to obtain information to determine and enforce compliance by Bank or its affiliates with applicable federal statutes, the Board may require termination of any of Bank's or its affiliates' direct or indirect activities in the United States. Approval of this application also is specifically conditioned on compliance by Bank and its parents with the commitments made in connection with this application, and with the conditions in this order.(5) The commitments and conditions referred to above are conditions imposed in writing by the Board in connection with its decision, and may be enforced in proceedings under 12 U.S.C. [sections] 1818 against Bank and its affiliates.

By order of the Board of Governors, effective March 1, 1999.

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

ROBERT DEV. FRIERSON Associate Secretary of the Board

(1.) Data are as of June 30, 1998.

(2.) On January 1, 1999, Landeskreditbank Baden-Wurttemberg and Landesgirokasse-Offentliche Bank und Landessparkasse were merged into Sudwestdeutsche Landesbank Girozentrale ("SudwestLB"). SudwestLB, which has been renamed Landesbank Baden-Wurttemberg ("LBW"), is the surviving legal entity.

(3.) In assessing this standard, the Board considers, among other factors, the extent to which the home country supervisors:

   (i) ensure that the bank has adequate procedures for monitoring and
   controlling its activities worldwide;

   (ii) obtain information on the condition of the bank and its subsidiaries
   and offices through regular examination reports, audit reports, or
   otherwise;

   (iii) obtain information on the dealings with and relationship between the
   bank and its affiliates, both foreign and domestic:

   (iv) receive from the bank financial reports that are consolidated on a
   worldwide basis or comparable information that permits analysis of the
   bank's financial condition on a worldwide consolidated basis;

   (v) evaluate prudential standards, such as capital adequacy and risk asset
   exposure, on a worldwide basis. These are indicia of comprehensive,
   consolidated supervision. No single factor is essential, and other elements
   may inform the Board's determination.

(4.) See West Merchant Bank Limited, 81 Federal Reserve Bulletin 519 (1995); Sudwestdeutsche Landesbank Girozentrale, 83 Federal Reserve Bulletin 937 (1997). No material change has occurred in the manner of supervision of the banks since those determinations.

(5.) The Board's authority to approve the establishment of the proposed representative office parallels the continuing authority of the State of New York to license offices of a foreign bank. The Board's approval of this application does not supplant the authority of the State of New York and the New York State Banking Department ("Department") to license the proposed office of Bank in accordance with any terms or conditions that the Department may impose.3