Federal Reserve Release, Press Release; image with eagle logo links to home page
Release Date: February 24, 1997

For immediate release

The Federal Reserve Board today announced its approval of the application of Union Planters Corporation, Memphis, Tennessee, to acquire at least 19 percent and up to 100 percent of the voting shares of First National Bank, Pontotoc, Mississippi.

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

Union Planters Corporation
Memphis, Tennessee

Order Approving Acquisition of a Bank

Union Planters Corporation, Memphis, Tennessee ("Union Planters"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire at least 19 percent and up to 100 percent of the voting shares of First National Bank, Pontotoc, Mississippi ("Bank").1

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (61 Federal Register 69,096 (1996)). The time for filing comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in section 3 of the BHC Act.

Union Planters, controlling assets of $11.2 billion,2 operates depository institutions in Tennessee, Alabama, Arkansas, Kentucky, Louisiana, Mississippi, and Missouri. Union Planters is the third largest commercial banking organization in Mississippi, controlling deposits of $2.1 billion, representing approximately 9.7 percent of total deposits in commercial banking organizations in the state.3 Bank is the 30th largest commercial banking organization in Mississippi, controlling deposits of $115.2 million, representing less than 1 percent of total deposits in commercial banking organizations in the state. On consummation of this proposal, Union Planters would remain the third largest commercial banking organization in the state, and would control deposits of $2.2 billion, representing approximately 10.2 percent of total deposits in commercial banking organizations in the state.

Section 3(d) of the BHC Act, as amended by section 101 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, allows the Board to approve an application by a bank holding company to acquire control of a bank located in a state other than the home state of such bank holding company, if certain conditions are met.4 For purposes of the BHC Act, the home state of Union Planters is Tennessee, and Union Planters proposes to acquire a bank in Mississippi. The conditions for an interstate acquisition enumerated in section 3(d) are met in this case.5 In view of all the facts of record, the Board is permitted to approve the proposal under section 3(d) of the BHC Act.

Competitive Considerations
The BHC Act prohibits the Board from approving an application under section 3 of the BHC Act if the proposal would result in a monopoly or substantially lessen competition in any relevant banking market, unless the Board finds that the anticompetitive effects of the proposal are clearly outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served. Union Planters and Bank do not compete with each other in any relevant banking market. Based on all the facts of record, the Board concludes that consummation of this proposal would not result in any significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market.

Other Factors Under the BHC Act
The BHC Act also requires the Board to consider the financial and managerial resources of the companies and banks involved, the convenience and needs of the communities to be served, and certain other supervisory factors.

A. Supervisory Factors

The Board has carefully considered the financial and managerial resources and future prospects of Union Planters and Bank, and other supervisory factors in light of all the facts of record. The facts include comments from the management of Bank opposing the acquisition by Union Planters of at least 19 percent of Bank's voting shares.6

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In cases similar to this one, the Board has indicated that the BHC Act contemplates proposals that would allow a bank holding company to acquire less than a majority of the voting shares of a bank or bank holding company.7 Union Planters proposes to become the largest shareholder of Bank and has the capacity to serve as a source of managerial and financial strength to Bank. Union Planters contends, moreover, that the acquisition of at least 19 percent of Bank's voting shares is a first step in acquiring control of Bank.8 The Board has considered the financial and managerial resources of Bank in light of relevant reports of examination, and other supervisory information. Based on all the facts of record, the Board concludes that the financial and managerial resources of the organizations involved in this proposal are consistent with approval, as are the other supervisory factors that the Board is required to consider under section 3 of the BHC Act.

B. Convenience and Needs Factor

The Board also has carefully considered the effect of the proposed acquisition on the convenience and needs of the community to be served in light of all the facts of record. As part of that review, the Board has considered comments opposing the proposal from Bank's management and a number of local residents who commended the products and services offered by Bank and objected to the acquisition of a locally owned bank.9

In reviewing the convenience and needs considerations in the proposal, the Board notes that Union Planters provides a full range of financial services through its banking and nonbanking subsidiaries, including credit card services, housing-related loans from its mortgage subsidiary, discount brokerage and trust services, large credit limits, and an extensive ATM network. Union Planters has stated that if it acquires Bank, it would offer these services, some of which are not available through Bank, in communities currently served by Bank. Union Planters also states that if Bank were merged into a Union Planters subsidiary bank, Union Planters anticipates that operational decisions would continue to be made by local management, and that Union Planters has no current intention to alter the pricing of loans or deposits or discontinue other services provided by Bank.

The Board also has long held that consideration of the convenience and needs factor includes a review of the records of the relevant depository institutions under the Community Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). As provided in the CRA, the Board evaluates this factor in light of examinations by the primary federal supervisor of the CRA performance records of the relevant institutions. An institution's most recent CRA performance evaluation is a particularly important consideration in the applications process because it represents a detailed on-site evaluation of the institution's overall record of performance under the CRA by its primary federal supervisor.10

All of Union Planters's subsidiary banks that have been examined for CRA performance received "satisfactory" or better ratings from their primary federal supervisor in their most recent performance examinations. In particular, Union Planters's five subsidiary banks in Mississippi received "satisfactory" ratings in their most recent examinations for CRA performance. Bank also received a "satisfactory" rating from its primary federal supervisor, the Office of the Comptroller of the Currency ("OCC"), at its most recent examination for CRA performance.

The Board has also considered the CRA-related activities of Union Planters Bank of Northeast Mississippi, New Albany, Mississippi ("UP Northeast"), a relatively small Union Planters subsidiary that serves communities near Bank.11 OCC examiners concluded that ascertainment efforts by UP Northeast, though limited, were generally effective in identifying credit needs within the community. The examiners particularly noted the bank's ascertainment efforts that resulted in the creation of a low-income, first-time homebuyers program to assist in addressing housing-related credit needs.

Examiners also found that UP Northeast's overall CRA-related lending efforts were sufficient to address affirmatively a significant portion of identified community credit needs through a number of products. The bank's geographic distribution of loans, applications and declinations were considered by examiners to be reasonable, and its community delineation did not exclude low- and moderate-income neighborhoods. There was no evidence of practices that were intended to discourage potential applicants, and UP Northeast was found to be in compliance with the substantive provisions of fair lending laws. Based on all the facts of record, the Board concludes that convenience and needs considerations are consistent with approval.

In light of the foregoing and all the facts of record, the Board has determined that the application should be, and hereby is, approved.12 The Board's approval of the proposal is conditioned on compliance by Union Planters with the commitments made in connection with the application and with the conditions stated or referenced in this order. The commitments and conditions relied on by the Board in reaching this decision shall be deemed to be conditions imposed in writing by the Board in connection with its findings and decision, and, as such, may be enforced in proceedings under applicable law.

The acquisition shall not be consummated before the fifteenth calendar day following the effective date of this order, or later than three months after the effective date of this order, unless such period is extended for good cause by the Board or the Federal Reserve Bank of St. Louis, acting pursuant to delegated authority.

By order of the Board of Governors,13 effective February 24, 1997.

(signed) Jennifer J. Johnson

Jennifer J. Johnson

Deputy Secretary of the Board


1 Union Planters has contracted to purchase at least 19 percent of Bank's voting shares and intends to acquire all the bank's voting stock. Union Planters also has requested approval to acquire voting shares of Bank's proposed parent holding company, Pontotoc Bancshares, Pontotoc, Mississippi, which currently is seeking the Board's approval to become a bank holding company.

2 All asset data are as of March 31, 1996.

3 All deposit data are as of June 30, 1995, adjusted to reflect acquisitions approved and mergers consummated through December 31, 1996.

4 Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding company's home state is that state in which the operations of the bank holding company's banking subsidiaries were principally conducted on July 1, 1966, or the date on which the company became a bank holding company, whichever is later.

5 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). Union Planters is adequately capitalized and adequately managed. Bank has been in existence and continuously operated for more than five years, as required by Mississippi law. Miss. Code Ann. § 81-7-19(2) (1995). On consummation, Union Planters and its affiliates would control less than 10 percent of the total amount of deposits of insured depository institutions in the United States, and less than 25 percent of the total deposits of all offices located in Mississippi of commercial banks, savings banks, savings and loan associations, and credit unions, as required by state law. See Miss. Code Ann. § 81-7-19(4) (1995).

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6 Bank's management contends that Union Planters' proposed approximately 19 percent interest would make Bank less attractive to prospective purchasers thereby lowering the price of the bank's stock. The Board is required to review proposals under the BHC Act in light of all the facts of record and the statutory factors specified in section 3 of the Act. Courts have concluded that issues relating only to the price received by shareholders for their voting securities, as raised by the comments in this case, do not relate to a factor required to be considered under the BHC Act. See Western Bancshares v. Board of Governors, 480 F.2d 749 (10th Cir. 1973). Management also maintains that the Union Planters application is incomplete because it fails to describe how Union Planters would acquire the remaining voting shares of Bank. The Board concludes that the facts of record, including information on the financial and managerial resources of Union Planters, are sufficient for the Board to make a determination regarding the statutory factors in the BHC Act, and that these factors do not require the Board to review Union Planters' strategy for acquiring additional voting shares of Bank.

7 See Hudson Financial Associates, 72 Federal Reserve Bulletin 150 (1986); City Holding Company, 71 Federal Reserve Bulletin 575 (1985).

8 Mississippi law requires a bank holding company to acquire, within six months of acquiring an interest in a bank in Mississippi, sufficient voting shares to lawfully vote to merge the acquired institution with a subsidiary of the bank holding company, even if such merger does not occur. If an acquiring institution is unable to fulfill the requirement within the statutory time period or extension of the time period granted by the Mississippi Commissioner of Banking and Consumer Finance, the acquiring institution must reduce its interest to below 5 percent of the acquired institution's voting shares. See Miss. Code. Ann. § 81-7-19(3) (1995).

9 Several commenters stated that community banks acquired by Union Planters stopped providing personalized customer services.

10 The Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act (54 Federal Register 13,742 and 13,745 (1989)) provides that a CRA examination is an important and often controlling factor in the consideration of an institution's CRA record and that reports of these examinations will be given great weight in the applications process.

11 UP Northeast has deposits of approximately $270 million and is located 25 miles from Bank. Union Planters indicates that a merger of Bank and UP Northeast would be likely if Union Planters acquires voting shares sufficient to require the merger. UP Northeast received a "satisfactory" CRA performance rating from the OCC as of September 1994. UP Northeast was named First National Bank of New Albany at the time of the examination and changed its name in 1995.

12 Some commenters requested that the Board hold a public meeting or hearing on this application. Section 3(b) of the BHC Act does not require the Board to hold a public hearing or meeting on an application unless the appropriate supervisory authority for the bank to be acquired makes a timely written recommendation of denial of the proposal. No supervisory agency has recommended denial of the proposal.

Under the Board's Rules of Procedure, the Board may, in its discretion, hold a public hearing or meeting on an application to clarify factual issues relating to the application and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e) and 262.25(d). Commenters have had an ample opportunity to present their views, and have submitted substantial written comments that have been carefully considered by the Board. Those comments fail to demonstrate why the written submissions do not adequately present the commenters' views and what, if any, additional matters would be addressed at a hearing or meeting. For these reasons, and based on all the facts of record, the Board has determined that a public meeting or hearing is not required or warranted to clarify the factual record in the proposal or otherwise warranted in this case. Accordingly, commenters' requests for a public meeting or hearing on the proposal are denied.

13 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Phillips, and Meyer.

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