Magazine article American Banker

Fed Blocks Iowa Merger, Citing Overconcentration

Magazine article American Banker

Fed Blocks Iowa Merger, Citing Overconcentration

Article excerpt

The Federal Reserve Board on Dec. 9 stopped a proposed banking merger for fear the new entity would dominate tiny Marshall County in central Iowa.

In its ruling, the Fed argued that BancSecurity Corp.'s acquisition of Marshalltown Financial Corp. would have created excessive loan and deposit concentration in the marketplace, which has a population of about 25,000. "The board concludes that consummation of this proposal would result in significantly adverse effects on competition in the relevant banking market," the Fed said in a 19-page order.

Executives of the two institutions expressed bitterness and repeated a complaint often uttered by community bankers: that in-market mergers by small banks in small towns are difficult if not impossible under current regulations.

The Fed earlier this year rejected a similar application in Georgia. "It's a big disappointment to us," said Richard A. Rathke, chief executive of Marshalltown Financial. "The megamergers seem to be approved automatically; the little ones that seem to be more reasonable get turned down."

"It's irritating because we really feel they have reached the wrong decision," said BancSecurity chief executive Ronald E. Fenton. "The whole system needs reforming."

If $516.1 million-asset BancSecurity had acquired the $124.1 million asset thrift, the combined institution would have become the ninth-largest depository in the state.

According to Fed documents, BancSecurity would have controlled about 50% of Marshalltown deposits and about 60% of residential mortgages. …

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