Gerald P. Hurst, Esq.
Associate General Counsel
NationsBank Corporation
Legal Department
NC1-007-20-01
NationsBank Corporate Center
Charlotte, North Carolina 28255

Dear Mr. Hurst:

This is in response to your letter dated December 11, 1998, regarding the proposal by BankAmerica Corporation, Charlotte, North Carolina ("BankAmerica") (formerly NationsBank Corporation ("NationsBank")), to purchase additional nonvoting, nonconvertible securities of Commonwealth National Bank, a minority-owned bank in Mobile, Alabama ("Commonwealth"). You have requested confirmation that BankAmerica would not be deemed to control Commonwealth for purposes of the Bank Holding Company Act ("BHC Act") as a result of the proposed additional investment.

In a letter dated May 6, 1993, the Board confirmed that NationsBank's initial [amount redacted] investment in Commonwealth's nonvoting, nonconvertible securities would not result in a determination that NationsBank controlled Commonwealth for purposes of the BHC Act. At the time the Board made this decision, NationsBank's proposed investment would have represented approximately [amount deleted] percent of Commonwealth's total equity. In reaching its conclusion, the Board relied on a number of factors, including the unique facts regarding the ownership structure and purpose of Commonwealth, as well as the commitments made by NationsBank to ensure that NationsBank would not exert a controlling influence on Commonwealth.¹ The Board particularly noted that NationsBank's investment would provide additional capital to Commonwealth, which was operating under a cease and desist order from the Office of the Comptroller of the Currency ("OCC"). Because of various transactions by Commonwealth to raise additional capital, as of December 31, 1998, the original [amount deleted] investment would represent approximately [amount deleted] percent of Commonwealth's total equity.

It is our understanding that the OCC's order remains in effect,² and that BankAmerica now proposes to invest an additional [amount deleted] in Commonwealth's nonvoting, nonconvertible preferred stock to further improve Commonwealth's capital position. Upon making the proposed investment, BankAmerica's aggregate investment in Commonwealth's securities would be [amount deleted], representing approximately [amount deleted] percent of Commonwealth's total equity. BankAmerica represents that it intends to reduce its ownership interest to less than 25 percent when Commonwealth stabilizes its capital position and attracts additional investors. In connection with the additional investment, BankAmerica has agreed to continue to comply with the commitments that NationsBank made regarding its initial investment in 1993.

Board staff has reviewed this transaction in light of the Board's previous precedents and the facts of this case, including the commitments and representations made by BankAmerica. The staff believes that the proposed additional investment is consistent with the Board's determination dated .May 6, 1993, and will not recommend that the Board initiate a proceeding to find that BankAmerica is in control of Commonwealth for purposes of the BHC Act as a result of the additional investment.

The staff's opinion is based on all the facts of record, including the representations and commitments made by BankAmerica in its December 11, 1998, correspondence to the Board's General Counsel, and particularly on BankAmerica's reaffirmation of the representations and commitments made by NationsBank in connection with the original investment in Commonwealth. These representations and commitments remain conditions imposed in writing in connection with the Board's original findings and decision. Any changes to the terms of BankAmerica's proposed investment should be presented to Board staff as soon as possible and may require a revision of the staff's opinion that the proposed additional investment is consistent with the Board's earlier determination.

Very truly yours,

(Signed) J. Virgil Mattingly

J. Virgil Mattingly

1. As explained in the Board's letter of May 6, 1993 and reiterated in your letter of December 11, 1998, NationsBank committed that it would neither have any representative on Commonwealth's board of directors nor have any observer attend meetings of the board of directors. NationsBank also committed that it would not participate in the management or operation of Commonwealth or attempt to exercise a controlling influence over the management or policies of Commonwealth in any manner, including through the acquisition of nonvoting, nonconvertible securities. NationsBank further committed that all correspondent services it provided to Commonwealth would be of the same type and provided on the same terms and conditions as correspondent services provided to other banks. Return to text

2. [After this letter was sent, it was learned that the cease and desist order was lifted on October 28, 1994.]Return to text