A Missouri law that prohibits banks from holding more than 13% of the state's deposits wasn't meant to exempt thrift acquisitions.
At least that's what Missouri's General Assembly has decided by voting to close a loophole in the law that had allowed banks to buy thrifts even when that would put them over the 13% limit. The General Assembly last month sent the measure to Gov. Mel Carnahan, who is expected to sign it.
Missouri's two largest banking companies, NationsBank Corp. and Mercantile Bancorp., exceed the state limit on deposits but in ways permitted under the law. They are prohibited, however, from acquiring within Missouri.
Boatmen's Bancshares, acquired in January by NationsBank, hit the cap years ago, then grew to $12.6 billion of deposits, or about 17% of the state's total. (Banks that reach the limit are allowed to continue increasing deposits through internal growth but not through acquisitions.)
Mercantile would exceed the cap through its planned purchase of Roosevelt Financial Group Inc., a $9 billion-asset St. Louis thrift, which would give it more than 23% of the state's deposits.
State Commissioner of Finance Earl Manning said he told Mercantile it could acquire Roosevelt, since the deal was announced under current law. Although it isn't scheduled to close until the third quarter, the deal won't be affected by the new legislation.
"The cow was already out of the barn before the door was shut," said Jerry Sage, executive director of the Missouri Independent Bankers.
The deal did, however, infuriate the bank group, a North Kansas City association of mostly small banks that accused St. Louis-based Mercantile of sidestepping the law's intent.
Mr. Sage suggested the pending legislation, which was offered as an amendment to another bill, and it drew little opposition.
The state's large-bank trade group, the Missouri Bankers Association, remained neutral on the measure, as it has done historically on the deposit cap issue. Bill Ratliff, the association's senior vice president, said his members had "no complaints" about the change in law. Mr. Manning also remained neutral.
The deposit cap has been a contentious issue for several years. St. Louis-based Boatmen's had lobbied since 1993 to raise the 13% limit to 30%. Each year such proposals were soundly defeated. This year, however, neither NationsBank nor Mercantile proposed raising the limit.
Mr. Sage said he believes the big banking companies, which each plan layoffs associated with their acquisitions, didn't want to draw attention to themselves while cutting jobs in the state.
Without the big banks leading the charge, no other banking company got into the deposit cap issue this year. However, some are sympathetic. "I'd rather see them expand capabilities than restrict them," said Gary Hemmer, executive vice president of administration at St. Louis-based Magna Group.
