For immediate release

The Federal Reserve Board today announced its approval of the application of U.S. Bancorp, Minneapolis, Minnesota, to acquire Northwest Bancshares, Inc., and its wholly owned subsidiary bank, Northwest National Bank, both of Vancouver, Washington. The Board's approval is conditioned on the divestiture of one branch in the Portland, Oregon, banking market. Attached is the Board's Order relating to this action.

U.S. Bancorp Minneapolis, Minnesota Order Approving the Acquisition of a Bank Holding Company

U.S. Bancorp ("Applicant"), 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. § 1842) to acquire Northwest Bancshares, Inc. ("Northwest"), and its wholly owned subsidiary bank, Northwest National Bank ("NNB"), both of Vancouver, Washington. Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (63 Federal Register 27,286 (1998)). 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. Applicant, with total consolidated assets of approximately $70.9 billion, is the 17th largest commercial banking organization in the United States, controlling approximately 1.4 percent of total banking assets of insured commercial banks in the United States ("total banking assets").1 Applicant operates subsidiary banks in 17 states and engages in a broad range of permissible nonbanking activities. Applicant also is the second largest commercial banking organization in the state of Washington, controlling approximately $6.4 billion in deposits, representing approximately 17.6 percent of total deposits in commercial banking organizations in the state ("state deposits"). Northwest is the tenth largest commercial banking organization in Washington, controlling deposits of approximately $321 million in deposits, representing less than 1 percent of state deposits. On consummation of the proposal, and accounting for the proposed divestiture, Applicant would continue to be the second largest commercial banking organization in Washington, controlling approximately $6.7 billion in deposits in the state of Washington, representing approximately 18.5 percent of state deposits. Interstate Analysis Section 3(d) of the BHC Act allows the Board to approve an application by a bank holding company to acquire control of a bank located in a state other than the home state of such bank holding company if certain conditions are met.2 For purposes of the BHC Act, the home state of Applicant is Minnesota, and Applicant proposes to acquire a bank in Washington. All of the conditions for an interstate acquisition enumerated in section 3(d) are met in this case.3 In view of the facts of record, the Board is permitted to approve this 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 effect of the proposal in meeting the convenience and needs of the community to be served.4 Applicant and Northwest compete directly in the Portland, Oregon, banking market ("Portland banking market").5 Applicant is the largest depository institution in the Portland banking market, controlling deposits of $6.6 billion, representing 46 percent of the total deposits in commercial banks in the market ("market deposits").6 Northwest is the eighth largest depository institution in the market, controlling $321 million of deposits, representing 2.2 percent of total market deposits.7 To mitigate the potential anticompetitive effects of the proposal, Applicant has committed to divest one branch, which accounts for approximately $35 million in deposits and represents approximately 10.9 percent of the total deposits controlled by Northwest in the Portland banking market. Applicant has committed to make this divestiture to an organization that is competitively suitable to the Board.8 After accounting for the proposed divestiture, consummation of the proposal would be consistent with the market index thresholds applied under the Department of Justice Merger Guidelines ("DOJ Guidelines").9 In this case, after accounting for the proposed divestiture, the HHI would increase by not more than 186 points to not more than 2761. At least 27 competitors would remain in the market after consummation of the proposal. These competitors include several large national and regional banking organizations that have significant market shares and extensive branch networks in the market. Portland is the largest banking market in Oregon and the 27th largest Metropolitan Statistical Area ("MSA") in the country. The population of the Portland MSA increased 17.3 percent from 1990 to 1997, more than any of the other MSAs in Oregon. That portion of the Portland MSA located in Washington State, in which Northwest is located, increased by more than 30 percent over the same period, more than any MSA in Washington. In addition, among the 11 MSAs in Washington and Oregon, Portland ranks second in terms of percentage of households with incomes more than $55,000, and second in median household income. Since 1994, ten new competitors have entered the market; nine commercial banks have entered the market de novo, and one commercial bank entered the market by acquiring branches that were divested by Applicant in a previous acquisition.10 The Department of Justice conducted a detailed review of the proposal and advised the Board that, with the proposed divestiture, consummation of the proposal would not be likely to have a significantly adverse effect on competition in any relevant market.11 The Office of the Comptroller of the Currency ("OCC") and the Federal Deposit Insurance Corporation also have not objected to consummation of the proposal. The Board believes that this is a very close case and that the mitigating factors in this case only slightly outweigh the potential for significantly adverse competitive effects in this market. Applicant is the largest competitor in this market, with more than a 45-percent market share before the proposed acquisition. This market share is more than three times the market share of the second largest banking organization in the market. Although the increase in market share represented by this acquisition would be relatively small, this transaction would remove a vigorous competitor in a strategic location in the market. Moreover, apart from Applicant and two other competitors, this market is comprised of many relatively small banking organizations, and the Board is concerned that a strict reliance on an HHI analysis would permit a significant number of these institutions to be acquired by the largest banking organizations in the market without recognizing the potentially adverse effects that these acquisitions could have on competition in the market. In approving this case, the Board has placed significant reliance on the divestiture proposal, which was a major factor in the determination by the Department of Justice that the transaction would not likely violate the federal antitrust laws. The Board also has considered the mitigating factors noted above, and the fact that Applicant has increased its market share recently as a result largely of effective competition in the market rather than through one or more acquisitions.12 Based on all the facts of record, and for the reasons discussed above, the Board has determined that competitive factors are consistent with approval of the proposal. The Board will view any further acquisitions in this market very critically and believes that the effects of any proposed acquisition by Applicant in this market would require compelling evidence that the transaction would not be likely to result in anticompetitive effects. Other Factors Under the BHC Act 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, the convenience and needs of the community to be served, and certain other supervisory factors. A. Financial, Managerial, and Other Supervisory Factors The Board has carefully considered the financial and managerial resources and future prospects of Applicant and Northwest, and their respective subsidiary banks, 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 Reserve Banks and other federal agencies. The Board notes that the bank holding companies and their subsidiary banks are currently well capitalized and are expected to remain so after consummation of the proposal. The Board also has considered other aspects of the financial condition and resources of the two organizations, the structure of the proposed transaction, and the managerial resources of each of the entities and the combined organization. Based on these and other facts of record, the Board concludes that considerations relating to the financial and managerial resources and future prospects of Applicant, Northwest, 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. B. Convenience and Needs Considerations The Board has carefully considered the effect of the proposed acquisition on the convenience and needs of the community to be served in light of all the facts of record. Based on all the facts of record, including the performance records of the subsidiary banks of Applicant and Northwest under the Community Reinvestment Act ("CRA") (12 U.S.C. § 2901 et seq.), the Board concludes that convenience and needs considerations are consistent with approval of the proposal.13 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. Approval of the application is specifically conditioned on compliance by Applicant with all the commitments made in connection with the proposal and with the conditions stated or referred to in this order, including Applicant's divestiture commitment. For purposes of this transaction, the commitments and conditions referred to in this order shall be deemed to be conditions imposed in writing by the Board in connection with its findings and decision, and, as such, may be enforced in proceedings under applicable law. The acquisition shall not be consummated before the fifteenth calendar day following the effective date of this order, and the proposal shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Minneapolis, acting pursuant to delegated authority.

By order of the Board of Governors,14 effective October 26, 1998. (signed) Robert deV. Frierson Robert deV. Frierson Associate Secretary of the Board

Footnotes 1 Asset, ranking, and deposit data are as of June 30, 1997. 2 A bank holding company's home state is that state in which the operations of the bank holding company's banking subsidiaries were principally conducted on July 1, 1996, or the date on which the company became a bank holding company, whichever is later. 12 U.S.C. § 1841(o)(4)(C). 3 12 U.S.C. §§ 1842(d)(1)(A) & (B) and 1842(d)(2)(A) & (B). Applicant is adequately capitalized and adequately managed, as defined by applicable law. On consummation of the proposal, Applicant and its affiliates would control less than 10 percent of the total amount of deposits of insured depository institutions in the United States, and less than 30 percent of the total amount of deposits in Washington. In addition, Northwest's subsidiary bank, NNB, has been in existence and has operated continuously for at least five years. All other requirements of section 3(d) of the BHC Act also would be met on consummation of the proposal. 4 12 U.S.C. § 1842(c)(1)(B). 5 The Portland banking market is defined as the Portland Ranally Metro Area ("RMA") and the remainder of Clark County in Washington, and the city of Mount Angel in Marion County, Oregon, and the cities of Saint Helens, Scappoose, and Vernonia in Columbia County, Oregon. 6 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). 7 Northwest operates solely in the portion of the Portland banking market that is located in Washington State. 8 Applicant has committed to execute a sales agreement for the proposed divestiture with a purchaser determined by the Board to be competitively suitable prior to consummation of the proposal, and to complete the divestiture within 180 days of consummation. Applicant also has committed that, in the event it is unsuccessful in completing the divestiture within 180 days of consummation, it will transfer the unsold branch to an independent trustee that is acceptable to the Board and will instruct the trustee to sell the branch promptly to one or more alternative purchasers acceptable to the Board. See BankAmerica Corporation, 78 Federal Reserve Bulletin 338 (1992); United New Mexico Financial Corporation, 77 Federal Reserve Bulletin 484 (1991). 9 Under DOJ Guidelines, 49 Federal Register 26,823 (1984), a market in which the post-merger HHI is more than 1800 is considered highly concentrated. The Department of Justice has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by more than 200 points. The Justice Department 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 institutions. 10 See U.S. Bancorp, 82 Federal Reserve Bulletin 177 (1996). 11 The Department of Justice focused its analysis on the effect of the proposal on small business lending in Clarke County, Washington. As explained above, the Board has analyzed the effect of the transaction on competition in the market for the cluster of banking products and services in the Portland banking market. 12 The Board also notes that pricing and profitability data for the Portland market are inconclusive on whether current conditions have resulted in significant adverse anticompetitive effects or performance. 13 All of Applicant's subsidiary banks have received "outstanding" or "satisfactory" ratings for their appropriate federal supervisors at the most recent examinations of their CRA performance. Applicant's lead bank, U.S. Bank National Association, Minneapolis, Minnesota, received a "satisfactory" performance rating from its appropriate federal supervisor, the OCC. In addition, NNB received a "satisfactory" performance rating from the OCC. 14 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Meyer, Ferguson, and Gramlich.

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1998 Orders on banking applications