Decisions on Bank Applications
FEDERAL DEPOSIT INSURANCE CORPORATION
RE: BancorpSouth Bank Tupelo, Mississippi
Application for Consent to Merge and Establish Six Branch Offices
ORDER AND BASIS FOR CORPORATION APPROVAL
Pursuant to Section 18(c) and other provisions of the Federal Deposit Insurance Act ("FDI Act"), BancorpSouth Bank, Tupelo, Lee County, Mississippi ("Bancorp"), an insured state nonmember bank and Bank Insurance Fund ("BIF") member with total resources of $4,515,166,000 and total deposits of $3,364,788,000 as of June 30, 1998, has filed an application for the Corporation's consent to merge, under its charter and title, with Merchants Bank, Vicksburg, Warren County, Mississippi ("Merchants"), an insured state-chartered member bank with total resources of $222,156,000 and total deposits of $162,814,000 as of June 30, 1998, and to establish the six offices of Merchants as branches of Bancorp. Notice of the proposed transaction, in a form approved by the Corporation, has been published pursuant to the FDI Act.
The relevant geographic markets have been identified as Warren County, Mississippi, and Hinds County, Mississippi. Warren County, with a population of 49,500 is served by five commercial banks with a combined total of 19 branches. The largest of these banks in terms of deposits held, as of June 30, 1997, is Trustmark National Bank, with 47.68 percent of the deposits held by commercial banks in Warren County. Merchants and Bancorp rank second and third, with 32.65 percent and 9.44 percent, respectively. All five of the banks are strong, viable competitors with substantial resources.
As measured in terms of deposits held by commercial banks, the Warren County market is highly concentrated, with a pre-merger Herfindahl-Hirschman Index ("HHI") of 3510. As a result of the merger, concentration would increase by 617 to a post-merger level of 4127. However, these indicia overstate the competitive impact of the proposed transaction. Among all depository institutions in Warren County, Mutual Credit Union has the second largest deposit base. Together with another credit union, it provides an alternative source of financial services to a substantial portion of the county's population. With regard to alternative sources of banking services for locally limited business customers, Community Reinvestment Act ("CRA") data on small business loans in Warren County identifies 19 CRA-reporting lenders that originate such loans. Moreover, in addition to the four commercial banks that would continue to exist after the merger, there is a potential entry into Warren County by an out-of-market commercial bank.
Over ten commercial banks and thrifts and numerous credit unions serve Hinds County. Merchants has two branches on the western border of Hinds County which constitute 0.73 percent of the county's deposit base. Bancorp's Hinds County branch network holds 6.85 percent of the county's deposit base. Although commercial banking in Hinds County is highly concentrated, with a pre-merger HHI of 3179, the proposed merger would result in an increase of only 10, to a post-merger level of 3189.
The U.S. Department of Justice concluded that the proposed transaction would not have a significantly adverse effect on competition. The Board of Governors of the Federal Reserve System concluded that the proposed transaction could have significant adverse effects on competition in Warren County, but advised that all of the economic factors that may be relevant to the competitive effects of the transaction were not considered. Other federal regulatory authorities offered no comments. The state banking authority approved the transaction pending approval of the other regulatory authorities.
Taking into account the very limited impact of the proposed merger in Hinds County and, for Warren County, the number and resources of the remaining commercial banks, the availability of alternative sources of banking services for both consumers and commercial customers, and the likelihood of new entry, the Board of Directors is of the opinion that the transaction would not substantially lessen competition, tend to create a monopoly, or otherwise have an adverse competitive impact that would require disapproval.
Financial and Managerial Resources; Future Prospects
Bancorp is in generally satisfactory condition with adequate capital and satisfactory management. Future prospects appear favorable.
Convenience and Needs of the Community to be Served
The scope and convenience of banking services offered to the general public should not be significantly affected by the proposal. Bancorp will provide the same services offered by Merchants. There have been no protests to the proposed transaction from either the public or the banking community. A review of available information revealed no inconsistencies with the purposes of the Community Reinvestment Act. The resultant institution is expected to continue to meet the credit needs of its entire community, consistent with the safe and sound operation of the institution.
Upon consideration of all relevant material, the Board of Directors has concluded that the application should be and hereby is approved subject to the following conditions:
1. That the transaction shall not be consummated before the fifteenth calendar day following the date of this Order or no later than six months after the date of this Order unless such period is extended for good cause by the Corporation;
2. That all necessary and final approvals be received from other regulatory authorities; and
3. That until the proposed transaction becomes effective, the Corporation shall have the right to alter, suspend, or withdraw its approval should any interim development be deemed by the Board of Directors to warrant such action.
Dated at Washington, this 17th day of November, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
Robert E. Feldman