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Release Date: September 7, 1999


For immediate release

The Federal Reserve Board today announced its approval of the application of United Bank of Philadelphia, Philadelphia, Pennsylvania, to acquire four branches of First Union National Bank, Charlotte, North Carolina, located in Philadelphia and to establish branches at the acquired locations.

Attached is the Board's Order relating to this action.


FEDERAL RESERVE SYSTEM

United Bank of Philadelphia
Philadelphia, Pennsylvania

Order Approving Acquisition and
Establishment of Branches

United Bank of Philadelphia ("United"), a state member bank,1 has applied under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. 1828(c)) (the "Bank Merger Act") to acquire four branches of First Union National Bank, Charlotte, North Carolina ("First Union") Philadelphia, Pennsylvania. United also has applied under section 9 of the Federal Reserve Act (12 U.S.C. 321) to establish branches at the locations of the branches to be acquired, as described in the Appendix.

Notice of the applications, affording interested persons an opportunity to submit comments, has been given in accordance with the Bank Merger Act and the Board's Rules of Procedure (12 C.F.R. 262.3(b)). As required by the Bank Merger Act, reports on the competitive effects of the acquisitions were requested from the United States Attorney General and the other federal banking agencies. The time for filing comments has expired, and the Board has considered the application and all facts of record in light of the factors set forth in the Bank Merger Act and section 9 of the Federal Reserve Act.

The Bank Merger Act prohibits the Board from approving an application if the proposal would result in a monopoly or would be in furtherance of an attempt to monopolize the business of banking.2 The Bank Merger Act also prohibits the Board from approving a proposal that would substantially lessen competition or tend to create a monopoly in any relevant market, unless the Board finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effects of the transaction in meeting the convenience and needs of the community to be served. 3

United is the 58th largest depository institution in the Philadelphia market,4 controlling deposits of $107.5 million, representing less than 1 percent of total deposits controlled by depository institutions in the market ("market deposits").5 First Union is the largest depository institution in the market, controlling deposits of $25.6 billion, representing approximately 37.6 percent of market deposits. The four branches that United proposes to acquire control approximately $61.1 million of deposits, representing less than 1 percent of market deposits. On consummation of the proposal, United would become the 40th largest depository institution in the Philadelphia banking market, controlling deposits of $168.6 million, representing less than 1 percent of market deposits. The Herfindahl-Hirschman Index ("HHI") would not increase and would be 1767 after consummation of the proposal. The proposal would be consistent with the Department of Justice Merger Guidelines ("DOJ Guidelines"),6 and the Department has advised the Board that consummation of the proposal would not likely have a significant adverse effect on competition in any relevant banking market. The other federal banking agencies also have been afforded an opportunity to comment and have not objected to consummation of the proposal.

After carefully reviewing these and all other facts of record, the Board concludes that consummation of the proposed transaction would not be likely to result in a significantly adverse effect on competition or on the concentration of banking resources in the Philadelphia banking market or any other relevant banking market. Accordingly, the Board has determined that competitive factors are consistent with approval.

In reviewing this proposal under the Bank Merger Act and section 9 of the Federal Reserve Act, the Board also has considered the financial and managerial resources and future prospects of United. The Board has reviewed these factors in light of all the facts of record, including supervisory reports of examination assessing the financial and managerial resources of the bank.

The Board has stated and continues to believe that capital adequacy is an especially important factor in analyzing the expansion proposals of banking organizations.7 The Board notes that United has raised additional capital in anticipation of and as part of the proposal and would remain well capitalized on consummation of the proposal. The Board also has carefully considered projections provided by United of the financial benefits that are expected to result from the proposal, including projected operating revenues and expenses. Based on all the facts of record, including the commitments provided by United in connection with this case, the Board concludes that considerations relating to the financial and managerial resources and future prospects of United are consistent with approval.

The Bank Merger Act also requires the Board to consider the convenience and needs of the communities to be served. In considering this factor, the Board has reviewed United's record of performance under the Community Reinvestment Act, 12 U.S.C. 2901 et seq. ("CRA"). United received an "outstanding" rating at its most recent examination for CRA performance by the Federal Reserve Bank of Philadelphia, as of March 1997.

The Board also notes United's role in serving the banking and credit needs of low-income individuals and minority individuals in Philadelphia. Sixty-six percent of the census tracts in United's service area are designated as low-income. United offers products and services tailored to meet the needs of the community it serves, including checking accounts with no monthly service charges for customers who maintain a $100 minimum balance. United and its affiliates also provide traditionally underserved individuals with credit counseling and financial workshops that address such subjects as personal finances, small business financial management, and the fundamentals of maintaining a banking relationship. Based on its review, and for the reasons discussed above, the Board concludes that convenience and needs considerations, including the CRA performance records of the institutions involved, are consistent with approval.

As part of its review of the proposal under section 9 of the Federal Reserve Act, the Board also has considered the location of each of the branches to be established by United. As a state member bank, United is authorized to establish a branch at the location of each branch it proposes to acquire. The proposal also is consistent with all other provisions of section 9 of the Federal Reserve Act and the Board's regulations thereunder.8

Based on the foregoing and all the facts of record, the Board has determined that the proposal should be, and hereby is, approved. The Board's approval is specifically conditioned on compliance by United with all the commitments made in connection with the applications. For purposes of this action, the commitments and conditions relied on in reaching this decision are conditions imposed in writing by the Board and, as such, may be enforced in proceedings under applicable law.

The acquisition of the branches may not be consummated before the fifteenth calendar day after the effective date of this order, or later than three months after the effective date of this order, unless such period is extended by the Board or by the Federal Reserve Bank of Philadelphia, acting pursuant to delegated authority.

By order of the Board of Governors,9 effective September 7, 1999.

(signed)

Robert deV. Frierson

Associate Secretary of the Board


Footnotes

1 United is a wholly owned subsidiary of United Bancshares, Inc., Philadelphia, Pennsylvania.

2 12 U.S.C. 1828(c)(5)(A).

3 12 U.S.C. 1828(c)(5)(B).

4 The Philadelphia banking market comprises Philadelphia, Bucks, Chester, Delaware, and Montgomery Counties, in Pennsylvania; and Burlington, Camden, Gloucester, and Salem Counties and the southwestern portion of Mercer County, in New Jersey.

5 In this context, depository institutions include community banks, savings banks, and savings associations. All deposit data are as of June 30, 1998, and are adjusted for structural changes since that date. 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).

6 Under the DOJ Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is between 1000 and 1800 is considered to be moderately 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 Department of Justice has stated that the higher than normal thresholds for an increase in the HHI when screening bank mergers and acquisitions for anticompetitive effects implicitly recognize the competitive effects of limited-purpose and other nondepository financial entities.

7 See, e.g., Deutsche Bank AG, 85 Federal Reserve Bulletin 509, 511 (1999); Chemical Banking Corporation, 82 Federal Reserve Bulletin 239, 243 (1996); BankAmerica Corporation, 78 Federal Reserve Bulletin 338, 343 (1992).

8 See 12 C.F.R. 208.6.

9 Voting for this action: Chairman Greenspan and Governors Kelley, Meyer, Ferguson, and Gramlich.

Appendix

Branch locations to be acquired by United Bank of Philadelphia, all in Philadelphia, Pennsylvania.

1. 1620 Wadsworth Avenue.
2. 2836 West Girard Avenue.
3. 3945-49 Chestnut Street.
4. 1501 North Broad Street.

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1999 Orders on banking applications


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