For immediate release

The Federal Reserve Board today announced its approval of the notice by Barnett Banks, Inc., Jacksonville, Florida, to acquire First of America Bank-Florida, FSB, Tampa, Florida, and thereby engage in operating a savings association. Attached is the Board's Order relating to this action, together with the Concurring Statement of Governor Meyer. Attachments

Barnett Banks, Inc. Jacksonville, Florida Order Approving Notice to Acquire a Savings Association

Barnett Banks, Inc., Jacksonville ("Barnett"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire First of America Bank-Florida, FSB, Tampa, both in Florida ("Thrift"), and thereby engage in operating a savings association pursuant to section 225.28(b)(4) of Regulation Y (12 C.F.R. 225.28 (b)(4)). Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 39,243 (1997)). 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 4 of the BHC Act. Barnett, with total consolidated assets of approximately $42 billion, operates four subsidiary banks in Florida and Georgia. Barnett is the largest depository institution in Florida, controlling deposits of $34.2 billion, representing approximately 19.2 percent of total deposits in depository institutions in the state. Thrift is the 23d largest depository institution in Florida, controlling deposits of $953.7 million, representing less than 1 percent of total deposits in the state.1 On consummation of the proposal, Barnett would remain the largest depository institution in Florida, controlling total deposits of $35.2 billion, representing approximately 19.7 percent of the total deposits in depository institutions in Florida. 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.2 The Board requires savings associations that are acquired by bank holding companies to conform their direct and indirect activities to those permissible for bank holding companies under section 4 of the BHC Act and Regulation Y. Barnett has committed to conform all of Thrift's activities of Thrift to those requirements.3 Competitive Considerations In order to approve the proposal, the Board also must determine that the performance of the proposed activities is a proper incident to banking, that is, that the proposed transaction "can reasonably be expected to produce benefits to the public . . . that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."4 As part of the Board's evaluation of these factors, the Board has carefully considered the competitive effects of the proposed transaction in light of all the facts of record. Barnett and Thrift compete directly in nine banking markets in Florida. The Board has carefully reviewed the competitive effects of the proposal in these banking markets5 in light of all the facts of record, including the number of competitors that would remain in the markets, the characteristics of the markets, and the projected increase in the concentration of total deposits in depository institutions in the markets ("market deposits"),6 as measured by the Herfindahl-Hirschman Index ("HHI"), under the Department of Justice Merger Guidelines ("DOJ Guidelines").7 In the Punta Gorda banking market, consummation of the proposal would exceed the DOJ Guidelines.8 The HHI would increase by 653 points to 2143 points, and Barnett would become the largest depository institution in the market, controlling approximately 36 percent of market deposits. In evaluating the competitive effects of the proposal in the Punta Gorda banking market, the Board has considered that, after consummation of the proposal, 12 depository institutions would remain in the market. Three of the competitors, other than Barnett, are large multi-state commercial banking organizations that would each control more than 10 percent of market deposits. The Punta Gorda banking market also has characteristics that make it attractive for entry for out-of-market firms. The rates of increase in population for the Punta Gorda Metropolitan Statistical Area ("MSA") and in deposits in depository institutions for the Punta Gorda banking market have exceeded the averages for these statistics for Florida MSAs and for the state of Florida. Since 1991, three commercial banks have entered the Punta Gorda banking market de novo, and four depository institutions have entered through acquisitions.9 In the De Soto County banking market, consummation of the proposal would exceed the DOJ Guidelines, and the HHI would increase by 299 points to 3241 points.10 Barnett would become the third largest depository institution in the De Soto County banking market, controlling approximately 24 percent of market deposits. Four depository institutions, including two large multi-state commercial banking organizations, would remain in the banking market. Two competitors would have market shares larger than Barnett's, one controlling approximately 43 percent of market deposits and one, a large multi-state commercial banking organization, controlling approximately 28 percent of market deposits. The market also has characteristics that make it attractive for entry for out-of-market firms. In De Soto County, deposits statewide and in non-MSAs have increased at a higher rate than the average for deposit growth. De Soto County's population per branch office and deposits per branch office also are higher than the average for other non-MSAs. Since 1991, two depository institutions have entered the banking market through acquisitions. Based on these and all the other 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 the Punta Gorda or the De Soto County banking markets. Consummation of the proposal would not exceed the DOJ Guidelines in the seven other banking markets in which Barnett and Thrift compete and numerous competitors would remain in these markets. Accordingly, consummation of the proposal would not have a significantly adverse effect on competition in any other relevant banking market. Other Considerations As part of its evaluation of the public interest factors, the Board has carefully considered the financial and managerial resources of Barnett, its subsidiaries and Thrift, and the effect the transaction would have on such resources in light of all the facts of record. These facts of record include supervisory reports of examination assessing the financial and managerial resources of the organizations and recent pro forma financial information provided by Barnett. The Board notes that Barnett, Thrift, and Barnett's insured depository institutions, meet or exceed the "well capitalized" thresholds under applicable law, and Barnett would continue to do so after consummation of the proposal. Based on all the facts of record, the Board has concluded that the financial and managerial resources of the organizations involved in the proposal are consistent with approval. The record also indicates that consummation of the proposal would result in public benefits. Barnett intends to offer Thrift's current and potential customers an expanded branch network and a broader array of banking products and services. Thrift customers would gain access to consumer and commercial investment services, consumer leasing services, commercial lending services, cash management services, international banking services, and electronic banking services and products. Based on all the facts of record, the Board has determined that the proposal by Barnett can reasonably be expected to produce public benefits that outweigh possible adverse effects under the proper incident to banking standard of section 4(c)(8) of the BHC Act. Accordingly, the Board has determined that the balance of public interest factors it must consider under section 4(c)(8) of the BHC Act is favorable and consistent with approval. Conclusion Based on the foregoing and all the facts of record, the Board has determined that the notice should be, and hereby is, approved. The Board's approval of the notice is specifically conditioned on compliance by Barnett and Thrift with commitments made in connection with the notice. The Board's determination also is subject to all the conditions in Regulation Y, including those in sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and 225.25(c)) and to the Board's authority to require such modification or termination of the activities of a holding company or any of its subsidiaries as the Board finds necessary to assure compliance with, or to prevent evasion of, the provisions and purposes of the BHC Act and the Board's regulations and orders issued thereunder. The commitments and conditions relied on by the Board in reaching this 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 proposal shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Atlanta, acting pursuant to delegated authority.

By order of the Board of Governors,11 effective September 15, 1997. (signed) Jennifer J. Johnson Jennifer J. Johnson Deputy Secretary of the Board

Appendix Local banking markets where Barnett and Thrift's subsidiary depository institutions compete, all in Florida: Beverly Hills -- approximated by Citrus County, excluding the town of Citrus Springs. After consummation of the proposal, Barnett would control 21.3 percent of the market deposits and would remain the second largest depository institution in the market. The HHI would increase 43 points to 1731. Fort Myers -- approximated by Lee County, excluding the town of Boca Grande, but including the town of Immokalee in Collier County. After consummation of the proposal, Barnett would control 18.5 percent of the market deposits and would remain the third largest depository institution in the market. The HHI would increase 40 points to 1677. Jacksonville -- approximated by Baker, Clay, Duval and Nassau Counties, and the towns of Fruit Cove, Ponte Vedra, and Ponte Vedra Beach in St. Johns County, plus the city of Folkston in Charlton County, Georgia. After consummation of the proposal, Barnett would control 23.4 percent of the market deposits and would remain the second largest depository institution in the market. The HHI would remain unchanged. Orlando -- approximated by Orange, Osceola and Seminole Counties, plus the western half of Volusia County and the towns of Clermont and Groveland in Lake County. After consummation of the proposal, Barnett would control 21 percent of the market deposits and would remain the second largest depository institution in the market. The HHI would increase by 1 point to 1618. Sarasota -- approximated by Sarasota and Manatee Counties, excluding the town of North Port in Sarasota County, and including the towns of Cape Haze, Englewood, Englewood Beach, Grove City, New Point Comfort, Placida, and Rotonda West in Charlotte County, and the town of Boca Grande in Lee County. After consummation of the proposal, Barnett would control 25.1 percent of the market deposits and would remain the largest depository institution in the market. The HHI would increase by 195 points to 1590. Tampa Bay -- approximated by Hernando, Hillsborough, Pinellas and Pasco Counties. After consummation of the proposal, Barnett would control 25.5 percent of the market deposits and would remain the largest depository institution in the market. The HHI would increase by 44 points to 1485. West Palm Beach -- approximated by Palm Beach County east of Loxahatchee and the towns of Indiantown and Hobe Sound in Martin County. After consummation of the proposal, Barnett would control 18.3 percent of the market deposits and would remain the second largest depository institution in the market. The HHI would increase by 7 points to 1036.

Concurring Statement of Governor Meyer I believe that the proposed acquisition presents a close case because of the concentration results in two markets: Punta Gorda and DeSoto. In the Punta Gorda market, there will be a very large increase in the HHI of 653 points, which in itself raises concerns about the potential competitive effects. Furthermore, following the merger, the market will be in the highly concentrated range based on the Department of Justice merger guidelines. The DeSoto market is already so highly concentrated that the more modest but still substantial increase in the HHI resulting from the merger raises concerns about the potential competitive effects. Were it not for unusually strong mitigating factors in both of these markets, I could not support approval of this acquisition without appropriate divestiture.

Footnotes 1 Asset data are as of March 31, 1997, and state deposit data are as of June 30, 1996. These data have been updated to account for structural changes as of July 25,1997. In this context, the term depository institutions includes commercial banks, savings banks, and savings associations. 2 See 12 C.F.R. 225.28(b)(4). 3 Thrift currently does not engage in any impermissible activities. 4 12 U.S.C. § 1843(c)(8). 5 These banking markets are discussed in the Appendix. 6 Market share data are as of June 30, 1996. Market share data before consummation 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). Because Thrift is currently affiliated with and would be acquired by a commercial banking organization, Thrift's deposits are included at 100 percent in the calculations of market share. See Norwest Corporation, 78 Federal Reserve Bulletin 452 (1992). First Banks, Inc., 76 Federal Reserve Bulletin 669, 670 n.9 (1990). 7 Under the DOJ Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is more than 1800 is considered highly concentrated. The Justice Department 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 Justice Department 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 lenders and other non-depository financial entities. 8 The Punta Gorda, Florida, banking market is approximated by Charlotte County excluding the towns of Cape Haze, Englewood, Englewood Beach, Grove City, New Point Comfort, Placida, and Rotonda West, and including the town of North Port in Sarasota County. 9 The Board notes that if Thrift's deposits were weighted at 50 percent on a pre-merger basis, the HHI in the De Soto banking market would increase by only 42 points to 3241. 10 The De Soto County, Florida, banking market is approximated by De Soto County, Florida. 11 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Phillips, and Meyer.

Return to top

1997 Orders on banking applications