For immediate release

The Federal Reserve Board today announced its approval of the application by Centura Bank, Rocky Mount, North Carolina, to acquire five branches of NationsBank, N.A., Charlotte, North Carolina, and to establish branches at those locations of NationsBank, N.A. Attached is the Board's Order relating to this action.

Centura Bank Rocky Mount, North Carolina Order Approving Acquisition and Establishment of Bank Branches

Centura Bank, a state member bank in Rocky Mount, North Carolina ("Centura"), has requested the Board's approval under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. § 1828(c)) (the "Bank Merger Act") to acquire five branches of NationsBank, N.A., Charlotte, North Carolina ("NationsBank NC"). Centura also has applied under section 9 of the Federal Reserve Act (12 U.S.C. § 321) to establish branches at the locations of the NationsBank NC branches to be acquired.1 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 merger were requested from the United States Attorney General, the Office of the Comptroller of the Currency ("OCC"), and the Federal Deposit Insurance Corporation ("FDIC"). The time for filing comments has expired, and the Board has considered the applications and all comments received in light of the factors set forth in the Bank Merger Act and section 9 of the Federal Reserve Act. Centura is a subsidiary of Centura Banks, Inc., Rocky Mount, North Carolina, which is the sixth largest commercial banking organization in North Carolina, controlling $4.6 billion of deposits, representing 6 percent of total deposits in commercial banking organizations in the state.2 The five branches of NationsBank NC to be acquired control deposits of $98.7 million, representing less than 1 percent of deposits in the state. On consummation of the proposal, Centura Banks, Inc., would remain the sixth largest commercial banking organization in North Carolina, controlling $4.7 billion of deposits, representing 6 percent of total deposits in commercial banking organizations in the state. Competitive Considerations The Bank Merger Act provides that the Board may not approve an application if the effect of the acquisition is to create a monopoly or substantially to lessen competition in any section of the country 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.3 In evaluating the competitive factors in this case, the Board has carefully considered the comments of individuals ("commenters") who maintain that the proposal would create a monopoly for banking services in the town of Hertford in Perquimans County, North Carolina. The Board and the courts have found that the relevant geographic market for analyzing the competitive effect of a proposal must reflect commercial and banking realities and should consist of the local area where the banks involved offer their services and where local customers can practicably turn for alternatives.4 In making a determination on the geographic market in this case, the Board has considered worker commuting patterns (as indicated by census data) and other indicia of economic integration and transmission of competitive forces among depository institutions. Perquimans County is a small county in the northeast corner of North Carolina.5 Census Bureau data for 1990 indicate that 58 percent of the workers who reside in Perquimans County work outside the county and that 27 percent of Perquimans County residents commute to Elizabeth City in the adjacent county of Pasquotank County, North Carolina. Elizabeth City is approximately 15 miles from Hertford and has a population of approximately 19,700. Hertford, which has a population of approximately 2244, is connected to Elizabeth City by U.S. Highway 17. In addition to having the area's major employers, Elizabeth City has a shopping mall, hospital, and movie theaters. Perquimans County has none of these facilities. Elizabeth City also has the area's only daily newspaper and radio station, thereby providing the primary advertisement media for Perquimans County residents. Based on all the facts of record, and for the reasons discussed above, the Board concludes that the relevant banking market for assessing the competitive effects of this proposal includes Perquimans and Pasquotank Counties, in addition to Camden County ("Tri-County banking market"). Centura is the second largest depository institution in the Tri-County banking market, controlling deposits of approximately $89 million, representing approximately 19 percent of the total deposits in depository institutions in the market ("market deposits").6 The NationsBank NC branch to be acquired is the seventh largest depository institution in the banking market, controlling deposits of approximately $17 million, representing approximately 4 percent of market deposits. On consummation of the proposal, Centura would remain the second largest depository institution in the Tri-County banking market, controlling deposits of approximately $106 million, representing approximately 23 percent of market deposits. The market, as measured by the Herfindahl-Hirschman Index ("HHI"), would remain moderately concentrated after consummation of the transaction, and the HHI would increase 145 points to 1765.7 Eight other depository institutions would remain as competitors in the Tri-County banking market. Centura and NationsBank NC also compete in the Jacksonville, Raleigh, Statesville and Wilmington banking markets, all in North Carolina. See Appendix B. Numerous competitors would remain in each market; in each market, the branch to be acquired is small in relation to the total market deposits; and consummation of the transaction would not alter relevant measures of market concentration. The Department of Justice has reviewed the proposal and advised the Board that consummation of the proposal would not likely have any significantly adverse competitive effects in these banking markets or any relevant banking market.8 In light of all the facts of record, the Board concludes that consummation of the proposal would not result in any significantly adverse effects on competition or the concentration of banking resources in the Tri-County banking market or any other relevant banking market.9 Other Considerations The Board has carefully considered the financial and managerial resources and future prospects of Centura and NationsBank NC in light of all the facts of record. The facts of record include supervisory reports of examination assessing the financial and managerial resources of the organizations and financial information provided by Centura. The Board notes that Centura is in satisfactory financial condition and would remain so after consummation of the proposal. In addition, reports of examination assessing the managerial resources of Centura indicate this factor is consistent with approval. Based on all the facts of record, the Board concludes that considerations related to the financial and managerial resources and future prospects of the institutions involved are consistent with approval. Considerations relating to the convenience and needs of the communities to be served also are consistent with approval of this application, as are the factors required to be considered under the Federal Reserve Act. Conclusion Based on the foregoing and all the facts of record, the Board has determined that this application should be, and hereby is, approved. The Board's approval of the proposal is specifically conditioned on compliance by Centura with all the commitments made in connection with this application. For purposes of this action, the commitments and conditions relied on in reaching this decision are both conditions imposed in writing by the Board and, as such, may be enforced in proceedings under applicable law. The proposed acquisition of the NationsBank NC branches 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 by the Federal Reserve Bank of Richmond, acting pursuant to delegated authority.

By order of the Board of Governors,10 effective October 6, 1997. (signed) Barbara R. Lowrey Barbara R. Lowrey Associate Secretary of the Board

---

Appendix A
Branch Offices of NationsBank NC to Be Established by Centura

	Address	City	Zip
1.	10267 Beach Drive, SW	Calabash	28467
2.	100 East Cumberland Street	Dunn	28334
3.	3364 Harmony Highway	Harmony	28634
4.	8800 Richland Highway	Richlands	28574
5.	400 West Grubb Street11	Hertford	27944

Appendix B Other Local Banking Markets Where Centura and NationsBank NC Compete, All in North Carolina Jacksonville -- approximated by the Jacksonville RMA and the rest of Onslow County. After consummation of the proposal, Centura would control 17.6 percent of the market deposits and would remain the fourth largest depository institution in the market. The HHI would not increase and would be 2484 points. Raleigh -- approximated by the Raleigh RMA and the rest of Franklin, Harnett, Johnston, and Wake Counties. After consummation of the proposal, Centura would control 6.5 percent of the market deposits and would remain the seventh largest depository institution in the market. The HHI would not increase and would be 1390 points. Statesville -- approximated by Iredell County, excluding the portion of Iredell County that is in the Charlotte-Rock Hill banking market. After consummation of the proposal, Centura would control 6.6 percent of the market deposits and would become the fourth largest depository institution in the market. The HHI would not increase and would be 2110 points. Wilmington -- approximated by the Wilmington RMA and the rest of Brunswick and Pender Counties. After consummation of the proposal, Centura would control 8.5 percent of the market deposits and would remain the fifth largest depository institution in the market. The HHI would not increase and would be 1679 points.

Footnotes 1 The branches are listed in Appendix A. 2 State data are as of June 30, 1996, and have been updated to reflect transactions as of June 30, 1997. 3 12 U.S.C. § 1828(c)(5). 4 See St. Joseph Valley Bank, 68 Federal Reserve Bulletin 673 (1982). The key question to be considered in making this selection "is not where the parties to the merger do business or even where they compete, but where, within the area of competitive overlap, the effect of the merger on competition will be direct and immediate." United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 374 (1963); United States v. Phillipsburg Nat'l Bank, 399 U.S. 350 (1969). 5 The county has an area of approximately 247 square miles and a population of approximately 10,900. 6 Market data are as of June 30, 1996. In this context, depository institutions include commercial banks, savings banks, and savings associations. Market share data before consummation are based on calculations in which the deposits of thrift institutions are included 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 WM Bancorp, 76 Federal Reserve Bulletin 788 (1990); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). 7 As discussed in Appendix B, the HHI for the Jacksonville, Raleigh, Statesville and Wilmington banking markets would not increase as a result of the proposal. Under the revised Department of Justice Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is between 1000 and 1800 is considered moderately concentrated. The Justice Department 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 Justice Department has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effect of limited-purpose lenders and other non-depository financial entities. 8 The OCC and the FDIC also have not objected to the proposal. 9 Some commenters contend that no alternative provider of banking services would remain in Hertford if the acquisition was made. Another commenter maintains that the loss of a banking organization would adversely affect economic development in Perquimans County. As discussed, eight depository institution competitors would remain in the relevant banking market, including a savings association in Hertford. In addition, Centura received a "satisfactory" rating under the Community Reinvestment Act at its most recent performance rating and offers a wide range of services and products to help in meeting the credit needs of all its communities. Examiners noted that Centura offered a variety of products, including residential mortgages, residential construction, home improvement, small business, commercial, consumer, agricultural, and community development loans and that these products were considered responsive to the significant credit needs in the various communities. 10 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, Governors Kelley and Phillips. Absent and not voting: Governor Meyer. 11 The loans and deposits of the NationsBank NC Hertford branch will be transferred to the existing Centura branch, which is less than one mile away.

Return to top

1997 Orders on banking applications