month between Firstar Corp. and Mercantile Bancorp., certifying that the two companies' combined deposits on June 30 met the state's legal limit.

To comply with Iowa law, Firstar, which is based in Milwaukee, and St. Louis-based Mercantile transferred more than $1 billion of Iowa deposits by the end of the second quarter.

The goal was for the companies together to control less than 10% of the state's deposits. Iowa prohibits any bank from exceeding the 10% cap through an acquisition.

Steven Moser, Iowa's deputy superintendent of banking, had estimated that Firstar and Mercantile, without the transfers, would have had combined deposits of $5.65 billion in the second quarter, about 13% of the state's total.

However, at June 30, the companies' total deposits in Iowa were $4.05 billion, or 9.36% of the total.

Shortly after the companies announced in May that they intended to merge, Firstar asked its customers' permission to have some of their deposits transferred from Iowa to Firstar Bank in Cincinnati.

But Mr. Moser needed proof from the June 30 call report data, which were released Wednesday.

If Firstar and Mercantile together had exceeded the cap, Iowa regulators would have recommended to the Federal Reserve that the merger be postponed until the companies could show they are in compliance, Mr. Moser said.

A no-go recommendation from Iowa regulators would have foiled Firstar's plan to close the Mercantile deal in early September. Mr. Moser said the companies would then have had to wait until third-quarter call report data were tabulated -- as late as mid-December -- before they could prove to state regulators that the merger is legal.

Firstar and Mercantile are not the first companies to be forced to sell or move deposits to comply with Iowa law. Wells Fargo & Co.'s predecessor Norwest first bumped up against the cap in 1992.

After its deal to buy Davenport Bank and Trust in 1993, Norwest reduced its Iowa deposits by transferring some accounts to its Minneapolis bank.

Bank analysts said they had expected Firstar and Mercantile to show they were in compliance with the cap.

Firstar, a disciplined acquirer, "is pretty careful about that stuff," said Kenneth M. Hemauer, a bank analyst at Robert W. Baird & Co. in Milwaukee.

Mr. Hemauer said the merger appears to be on track, with Firstar gearing up to improve Mercantile's faltering retail banking operation.

"Firstar has a good history of outperforming customer expectations," he said. "From a retail standpoint, they're going to do everything they can to make customers like them."

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