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Release Date: March 3, 1997

For immediate release

The Federal Reserve Board today announced its approval of the application of Pontotoc BancShares Corp. to become a bank holding company by acquiring First National Bank of Pontotoc, both of Pontotoc, Mississippi.

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

Pontotoc BancShares Corp.
Pontotoc, Mississippi

Order Approving Formation of a Bank Holding Company

Pontotoc BancShares Corp. ("Pontotoc"), has requested the Board's approval under section 3 of the Bank Holding Company Act ("BHC Act") to become a bank holding company by acquiring up to 100 percent of the voting shares of First National Bank of Pontotoc ("Bank"), both of Pontotoc, Mississippi.1

Notice of the proposal, affording interested persons the 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.

Pontotoc is a nonoperating corporation established to acquire Bank. 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.2 On consummation of the proposal, Pontotoc would become the 30th largest commercial banking organization in Mississippi. Pontotoc and Bank do not compete with each other in any relevant market. Based on all the facts of record, including the fact that the transaction represents a corporate reorganization of Bank into a holding company structure, the Board concludes that consummation of the proposal would not result in any significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market.

The Board has carefully considered the financial and managerial resources of Pontotoc and Bank, and the effect of the proposed acquisition on the future prospects of these organizations in light of the facts of record, including comments submitted by Union Planters Corporation, Memphis, Tennessee ("Union Planters").3 This proposal involves part of a contested attempt by Pontotoc and Union Planters to acquire control of the same bank. Union Planters contends that the proposed formation of Pontotoc, employment agreements negotiated by Pontotoc with two senior Bank officials, and Bank's efforts to obtain right of first refusal agreements reflect attempts by Bank's management to thwart the efforts of Union Planters to make a tender offer for all of Bank's voting shares. Union Planters maintains that the proposal would not provide Bank with a competitive advantage and that the pro forma financial information in the application is insufficient to analyze the proposal because it does not account for the potential financial effects if a large percentage of shareholders dissent from the Pontotoc offer.

The BHC Act requires the Board to consider each proposal presented. The Board, therefore, has a long-standing policy of considering competing proposals individually, and of approving each proposal that meets the statutory criteria.4

Bank currently exceeds the "well capitalized" thresholds under applicable law, and Pontotoc would be "well capitalized" after the acquisition of Bank. Pontotoc proposes to exchange its shares for outstanding shares of Bank and expects to acquire a portion of the shares for cash. The Board has considered Pontotoc's proposal in light of the financial resources of Bank and Pontotoc's expectations regarding the number of Bank shareholders who may tender their shares for cash. Based on all the facts of record, including commitments and representations made by Pontotoc, the Board concludes that considerations relating to the financial and managerial resources of Pontotoc and Bank and the anticipated effect of the proposed acquisition on the future prospects of these organizations are consistent with approval. Considerations relating to the convenience and needs of the community are also consistent with approval,5 as are the other supervisory factors that the Board must consider under section 3 of the BHC Act.6

In light of the foregoing and all the facts of record, the Board has determined that the application should be, and hereby is, approved. The Board's approval of the proposal is conditioned on compliance by Pontotoc with all commitments made in connection with the application. 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,7 effective March 3, 1997.

(signed) Jennifer J. Johnson

Jennifer J. Johnson

Deputy Secretary of the Board


1 Pontotoc would acquire Bank by merging Pontotoc's wholly owned subsidiary, First Interim National Bank of Pontotoc ("Interim Bank"), with Bank. Interim Bank would survive the merger and shareholders of Bank would receive shares of Pontotoc in exchange for their Bank shares. The merger requires the approval of the Office of the Comptroller of the Currency ("OCC") under the Bank Merger Act (12 U.S.C. § 1828(c)).

2 All banking data are as of June 30, 1995.

3 Union Planters has agreements to acquire approximately 19.8 percent of Bank's voting shares, and has received Board approval to acquire up to 100 percent of the outstanding voting shares of Bank. See Union Planters Corporation, 83 Federal Reserve Bulletin _ (1997) (Order dated February 24, 1997).

4 Union Planters also maintains that registration materials filed by Pontotoc with the Securities and Exchange Commission ("SEC") do not give shareholders a complete and accurate description of the financial impact of the proposal on Bank or adequately disclose the potential adverse financial effect on shareholders entering into right of first refusal agreements with Bank if they are precluded from accepting Union Planters's offer. Pontotoc states that it has provided Bank's shareholders, including shareholders entering into right of first refusal agreements, with all relevant information required by law. The Board previously has stated that its limited jurisdiction to review applications under the BHC Act does not authorize the Board to adjudicate disputes between a commenter and an applicant that arise under a statute administered and enforced by another federal regulatory agency like the SEC. See, e.g.,  Norwest Corporation, 82 Federal Reserve Bulletin 580 (1996); see also Western Bancshares v. Board of Governors, 480 F.2d 749 (10th Cir. 1973). The SEC is reviewing the registration statement of Pontotoc and has the statutory authority to address the disclosure issues raised by Union Planters. The Board has provided the SEC with a copy of the comments for review and consideration.

5 Union Planters asserts that this proposal would not be in the best interest of the community served by Bank, but provides no facts to support its assertion. Pontotoc states that the formation of the holding company would enable Pontotoc to offer new services in the community Bank serves. The Board notes that Bank received a "satisfactory" rating from its primary federal supervisor, the OCC, at its most recent examination for CRA performance.

6 Union Planters also questions whether Bank's management is acting in concert with, or has entered into agreements with, unaffiliated third parties to acquire voting shares of Bank. Bank denies that there are any arrangements, understandings or agreements for Bank to assign any rights to acquire shares to a third party, and Union Planters has provided no facts to support its concerns.

7 This action was taken pursuant to the Board's Rules Regarding Delegation of Authority (12 C.F.R. 265.4(b)(1)) by a committee of Board members. Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governor Phillips. Absent and not voting: Governors Kelley and Meyer.

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