Will Mercantile Join the Holding Pattern?

Maybe Mercantile National Bank’s reluctance to jump into the bank holding company boom wasn’t such a bad move after all. Any day now the bank should announce whether it’s going to merge with Houston’s Federated Capital Corporation, a package deal which overnight would bring Mercantile to the front rank of Texas bank holding companies.

Here’s the deal. Mercantile is the state’s sixth largest bank and it needs a handful of smaller banks to vault itself into the holding company scramble. Federated Capital is a moderate size holding company with four $200-$300 million banks which have been drifting because they have no big lead bank. Mercantile can acquire major banks in Houston, Austin, San Antonio and Corpus Christi in one package deal. Federated can get a lead bank, which it desperately needs.

The Federated Capital proposal is the work of Mer-cantile’s new president, Gene Bishop, who was brought in last January specifically to make Mercantile more aggressive. “Mercantile management had resisted the holding company movement,” Bishop said. “But I think the feeling is that Mercantile hasn’t achieved the percentage growth Republic and First National have attained during the holding company movement.”

One side benefit of the merger – the number of shareholders of the new corporation would more than double the current number of Mercantile shareholders. This should greatly increase trading in Mercantile stock, which languishes because it is owned by too few investors.