For immediate release

The Federal Reserve Board today announced its approval of the application and notice of First Union Corporation, Charlotte, North Carolina, to acquire Signet Banking Corporation, Richmond, Virginia, and thereby acquire Signet Banking Corporation's banking and nonbanking subsidiaries. Attached is the Board's Order relating to this action.

First Union Corporation Charlotte, North Carolina Order Approving the Acquisition of a Bank Holding Company

First Union Corporation, Charlotte, North Carolina ("First Union"), 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 Signet Banking Corporation ("Signet") and thereby acquire its subsidiary bank, Signet Bank, both of Richmond, Virginia.1 First Union also has requested approval under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire the nonbanking subsidiaries of Signet and thereby engage in the nonbanking activities listed in Appendix A. Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 45,421 (1997)). The time for filing comments has expired, and the Board has considered the notice and all comments received in light of the factors set forth in sections 3 and 4(c)(8) of the BHC Act.2 First Union, with total consolidated assets of approximately $136.7 billion, is the sixth largest commercial banking organization in the United States, controlling 3.6 percent of the total banking assets of insured commercial banks in the nation ("total banking assets").3 The subsidiary banks of First Union operate in North Carolina, Florida, Georgia, South Carolina, Tennessee, Virginia, Maryland, Delaware, Pennsylvania, New Jersey, New York, Connecticut, and Washington, D.C. First Union also engages through other subsidiaries in a number of permissible nonbanking activities. Signet, with total consolidated assets of approximately $11.7 billion, is the 56th largest commercial banking organization in the United States, controlling less than 1 percent of total banking assets in the nation. Signet Bank operates in Virginia, Maryland, and Washington, D.C., and Signet engages through subsidiaries in permissible nonbanking activities. On consummation of the proposal, First Union would remain the sixth largest commercial banking organization in the United States, with total consolidated assets of approximately $148.4 billion, representing 3.9 percent of total banking assets in the United States. First Union would control 17.3 percent, 18.5 percent, and 9.1 percent of the total deposits held by insured depository institutions in Virginia, Maryland, and Washington, D.C., respectively. Interstate Banking Analysis Section 3(d) of the BHC Act, as amended by Section 101 of the Reigle-Neal Interstate Banking and Branching Efficiency Act of 1994, allows the Board to approve an application by a bank holding company to acquire 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 First Union is North Carolina, and First Union proposes to acquire Signet Bank, which has operations in Virginia, Maryland, and Washington, D.C. The conditions for an interstate acquisition under section 3(d) of the BHC Act are met in this case.5 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 if the effect of the proposal may be substantially to lessen competition in any relevant 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.6 As part of the Board's evaluation of these factors, the Board has carefully considered the competitive effects of the proposed transaction in light of comments received from interested persons on the potential effects of the proposal on competition in various markets.7 First Union and Signet compete directly in 13 banking markets in Virginia, Maryland, and Washington, D.C.8 The Board has carefully reviewed the competitive effects of the proposal in these banking markets in light of all the facts of record, including the number of competitors that would remain in the markets, the characteristics of the markets, the projected increase in the concentration of total deposits in depository institutions in the markets ("market deposits"),9 as measured by the HHI, under the Department of Justice Merger Guidelines ("DOJ Guidelines"), and commitments made by First Union to divest certain branches.10 Consummation of the proposal, without divestitures, would be consistent with DOJ Guidelines in ten of the banking markets in which First Union and Signet compete.11 In order to mitigate the potential anticompetitive effects of the proposal in other markets, First Union has committed to divest a total of four branches in three Virginia banking markets to an out-of-market competitor.12 With the proposed divestitures, the concentration levels in the remaining banking markets would be consistent with DOJ Guidelines following consummation of the proposal.13 Based on all the facts of record, including the proposed divestitures, the Board concludes that consummation of the proposal would not have a 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, in acting on an application, 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. Financial, Managerial, and Other Supervisory Factors The Board has carefully considered the financial and managerial resources and future prospects of First Union, Signet, and their respective subsidiary banks, and other supervisory factors in light of all the facts of record. The Board notes that the bank holding companies and their subsidiary banks are currently well capitalized and are expected to remain so after consummation of the proposal. The Board also has considered other aspects of the financial condition and resources of the two organizations, the structure of the proposed transactions, and the managerial resources of each of the entities and the combined organization, the Board's supervisory experience with First Union and Signet, and examinations by the OCC and other banking authorities assessing the financial and managerial resources of the entities.14 Based on all the facts of record, including all comments received and relevant reports of examination of the companies and banks involved in this proposal, the Board has concluded that considerations relating to the financial and managerial resources and future prospects of First Union, Signet, and their respective subsidiaries are consistent with approval of the proposal, as are the other supervisory factors that the Board must consider under section 3 of the BHC Act.15 B. Convenience and Needs Considerations The Board has carefully considered the effect of the proposal on the convenience and needs of the communities to be served in light of all the facts of record. The Board notes that First Union and Signet assist in meeting the convenience and needs of their communities by providing a full range of financial services, including commercial and retail banking services, trust and investment management services, through various bank and nonbank subsidiaries. After consummation of the transaction, First Union would meet the needs of its communities and the communities formerly served by Signet through the First Union CRA program under the Community Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). First Union's CRA program requires local management to develop community reinvestment plans for delineated communities. The combined organization would continue to have a CRA state community reinvestment coordinator who would review annual plans and quarterly progress reports developed by local management to meet the needs of its communities. In addition, senior management and the board of directors of the combined organization would continue to oversee CRA policy through First Union's State Self-Assessment Committee and Audit Committee. First Union also states that the combined organization would enhance the products and services available to customers, including products for low- to moderate-income ("LMI") households, small businesses and small farms. In this light, the Board has given substantial consideration to the existing record of First Union, as reflected in its programs and in the supervisory assessments of its performance, of helping to meet the convenience and needs of all its communities, including LMI communities.16 CRA Performance Record of First Union The Board has long held that consideration of the convenience and needs factor includes a review of the records of the relevant depository institutions under the CRA. As provided in the CRA, the Board has evaluated this factor in light of examinations by the primary federal supervisors 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.17 In evaluating this proposal, the Board has carefully considered First Union's CRA performance record, and, in particular, the record of its lead subsidiary bank, First Union National Bank, formerly, First Union National Bank of North Carolina ("FUNB").18 The predecessor institution to FUNB received an "outstanding" rating from its primary federal supervisor, the OCC, at its most recent publicly available examination for CRA performance in April 1994; and First Union's other subsidiary banks received "satisfactory" ratings from the OCC or the Federal Deposit Insurance Corporation ("FDIC").19 Signet Bank received a "satisfactory" rating at its most recent CRA performance evaluation by its primary federal supervisor. The Board recently reviewed First Union's record of CRA performance in connection with its approval of First Union's notice to acquire Society First Federal Savings Bank, Fort Myers, Florida (order dated February 26, 1996), and again in connection with approving First Union's notice to acquire Home Financial Corporation and its wholly owned subsidiary, Home Savings Bank, FSB, both of Hollywood, Florida (order dated October 15, 1996).20 In the First Union/HFC Order and First Union/Society First Order, the Board considered a number of aspects of the CRA performance of First Union, including First Union's lending, marketing, and outreach activities, the services provided through branches, branch closing policies, and initiatives to increase lending in LMI areas. In the First Union/HFC Order, furthermore, the Board carefully reviewed the policies and procedures of First Union's subsidiary banks for assuring compliance with the fair lending laws, and the community development activities of First Union. The Board also has considered supervisory information concerning First Union's record of CRA performance, which includes public and confidential examination information that assesses the following aspects of First Union's lead bank's CRA performance: (1) lending record and geographic distribution of loans throughout the bank's communities, including LMI areas; (2) efforts designed to assist in meeting the credit needs of the bank's communities, including affordable mortgage, government-sponsored and small business lending programs; (3) community development activities; (4) record of compliance with fair lending laws, and fair lending law policies and programs; and (5) branch closing policies and procedures, and record of closing branches since the 1994 performance evaluations.21 Comments on the Proposal The Board has carefully considered comments received on the proposal, the performance records of First Union and Signet under the CRA, and the effect of the proposal on the convenience and needs of the community. Commenters contend that branch closings that would result from the proposal would disproportionately disadvantage communities with predominately LMI and minority residents. Commenters also criticize First Union's record of compliance with fair lending laws and of making CRA-related loans on the basis of data filed by First Union's affiliates under the Home Mortgage Disclosure Act (12 U.S.C. § 2801 et seq.) ("HMDA"), particularly in Delaware, Virginia, and Washington, D.C.22 First Union has indicated that it has not developed final plans for branches after acquiring Signet. First Union has preliminarily and confidentially identified branches under review.23 The Board has carefully reviewed First Union's branch closing policy. The policy provides for an objective determination of branches to be closed, consideration of alternative solutions, examination of options to minimize potential adverse effects on and inconvenience to the communities, and sufficient notice to the communities. The policy also requires additional analyses, community contacts and/or review of need ascertainment calls when any branch closing affects a LMI community. In connection with its examination of the First Union's subsidiary banks, the OCC has considered the effect of branch closings under the policy on the communities served by the banks. The OCC's most recent publicly available CRA performance examinations concluded that First Union's subsidiary banks have satisfactory records of opening and closing branches and that First Union's subsidiary banks provide reasonable access to services for all segments of the banks' communities.24 The most recent publicly available CRA performance evaluations also noted no materially adverse effects on LMI neighborhoods from branch closings by First Union. The Board also has carefully reviewed supervisory information from the OCC regarding branch closings by First Union's subsidiary banks since the 1994 public CRA performance evaluations. The Board notes, moreover, that federal banking law addresses branch closings by specifically requiring an insured depository institution to provide notice to the appropriate regulatory agency prior to closing a branch, but does not authorize federal regulators to prevent the closing of any branch.25 The Board also has reviewed First Union's HMDA data for 1995 and 1996 in light of commenters' contentions that these data indicate noncompliance with fair lending laws and an inadequate record of CRA-related lending.26 The HMDA data for First Union reflect some disparities in the rate of loan originations, denials and applications by racial group and income level. The Board is concerned when the record of an institution indicates such disparities in lending, and believes that all banks are obligated to ensure that their lending practices are based on criteria that ensure not only safe and sound lending but also equal access to credit by creditworthy applicants regardless of race. The Board recognizes, however, that HMDA data alone provide an incomplete measure of an institution's lending in its community because these data cover only a few categories of housing-related lending. HMDA data, moreover, provide only limited information about the covered loans.27 HMDA data, therefore, have limitations that make the data an inadequate basis, absent other information, for concluding that an institution has engaged in illegal lending discrimination. Because of the limitations of HMDA data,28 the Board has carefully considered that data in light of other information, particularly examination reports and other supervisory information that provide an on-site evaluation of compliance within the fair lending laws by First Union. As discussed in the First Union/HFC Order, examiners found no evidence of prohibited discrimination or other illegal credit practices at the institutions.29 Moreover, the 1994 examinations of First Union's subsidiary banks found that the banks' delineations of their local communities were reasonable and did not arbitrarily exclude LMI communities, and that the banks solicited and accepted credit applications from all segments of their delineated communities. First Union also has taken a number of steps to increase lending by its subsidiary banks to LMI and minority borrowers. First Union, for example, has a second review of denied loans for mortgages and consumer loans to ensure that consistent decisions are made. Other corporate fair lending programs include semi-annual reviews of files to assess the level of assistance to applicants and the basis for lending decisions, regression modeling to test for variances in rates charged to borrowers, matched-pair shopping to gauge the quality and level of assistance provided to loan applicants, and annual policy reviews to ensure that policies are nondiscriminatory. Examiners noted in First Union's 1994 examinations that management of all the subsidiary banks had implemented comprehensive training and compliance programs to support equal treatment in lending and to ensure that all applicants were treated fairly. The Board also has reviewed supervisory information assessing First Union's record of fair lending law compliance since the 1994 examinations. In addition, the Board has considered supervisory information assessing First Union's record of helping to meet the credit needs of all its communities, including areas with predominately LMI and minority residents, in Delaware, Virginia, and Washington, D.C.30 First Union's programs include outreach and marketing efforts that focus on LMI areas and specialized lending programs such as the Affordable Home Mortgage Loan, which offers flexible debt-to-income requirements and lower down payments. First Union's Special Home Improvement Loan Program offers rebates for timely payments, flexible debt-to-income ratios, and no origination fee. In addition to lending products, the record indicates that, in 1996, First Union invested more than $3.5 million in minority-owned banks, credit unions, community development financial institutions, and community development corporations. First Union also has established a Small Business Banking Division that can guarantee conditional approval or denial of a credit application within 24 hours. The record indicates that First Union originated $4.7 billion in small business lending, in 1996, and that two-thirds of the loans were for amounts less than $100,000. First Union also has played a major role in initiating micro-lending programs in the District of Columbia and Virginia. These programs are designed to assist start-up business owners and individuals who need small loans. First Union also has invested over $2.8 million in small business investment corporations. Conclusion on Convenience and Needs Considerations The Board has carefully considered all the facts of record, including the comments received, responses to those comments, and the CRA performance records of the subsidiary depository institutions of First Union and Signet, including relevant reports of examination and other supervisory information.31 Based on a review of the entire record and for the reasons discussed above and in the First Union/HFC Order and the First Union/Society First Order, the Board concludes that convenience and needs considerations, including the CRA records of performance of each organization's subsidiary depository institutions, are consistent with approval of this proposal.32 Nonbanking Activities First Union also has filed notice, pursuant to section 4(c)(8) of the BHC Act, to acquire the nonbanking subsidiary of Signet and thereby engage in providing lending, trust and fiduciary, investment advisory, discount brokerage, insurance, futures commission merchant, foreign exchange advisory, and transactional services. The Board previously has determined by regulation that each of these activities is closely related to banking within the meaning of section 4(c)(8) of the BHC Act.33 First Union proposes to conduct the activities in accordance with Regulation Y and relevant Board interpretations and orders. In order to approve this proposal, the Board also must determine that the performance of the proposed activities is a proper incident to banking, that is, that the proposed transaction "can reasonably be expected to produce benefits to the public . . . that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."34 As part of its evaluation of these factors, the Board considers the financial and managerial resources of the notificant, its subsidiaries, and any company to be acquired; the effect the transaction would have on such resources; and the management expertise, internal control and risk-management systems, and capital of the entity conducting the activity.35 For the reasons discussed above, and based on all the facts of record, the Board has concluded that financial and managerial considerations are consistent with approval of these notices. The Board also has carefully considered the competitive effects of the proposed acquisition of Signet's nonbanking subsidiaries. The Board notes that each of the markets for the nonbanking services is unconcentrated, and that there are numerous providers of the services. Consummation of the proposal, therefore, would have a de minimis effect on competition, and the Board has determined that the proposal would not have a significantly adverse effect on competition in any relevant market. First Union has indicated that the proposed transaction would result in an increased ability to serve the needs of its customers, and would allow the combined organization to provide both existing and new customers with a broader range of products and services through an expanded delivery system and enhanced technology. First Union also has indicated that the proposed acquisition would create a stronger organization and result in operational efficiencies, allowing the combined organization to be a more effective competitor. Additionally, there are public benefits to be derived from both permitting capital markets to operate so that bank holding companies can make potentially profitable investments in nonbanking companies when those investments are consistent, as in this case, with the relevant considerations under the BHC Act, and from permitting banking organizations to allocate their resources in the manner they consider most efficient. Based on the foregoing and all the other facts of record, the Board has concluded that consummation of the proposal would not result in adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices, that would not be outweighed by the public benefits of the proposal. Accordingly, based on all the facts of record, the Board has determined that the balance of public benefits that the Board must consider under the proper incident to banking standard of section 4(c)(8) of the BHC Act is favorable and consistent with approval of the proposal. Conclusion The Board has carefully considered all the facts of record, including all comments received on the proposal and responses from First Union. Based on all these facts, including all the commitments and representations made by First Union, and subject to all of the terms and conditions set forth in this order, the Board has determined that the application and notice should be, and hereby are, approved.36 This determination is subject to all the conditions set forth in the Board's Regulation Y, including those in sections 225.7 and 225.25(c), and to the Board's authority to require modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to assure compliance with, or to prevent evasion of, the provisions and purposes of the BHC Act and the Board's regulations and orders issued thereunder. The Board's decision is specifically conditioned on compliance with all the commitments and representations made in the notice, including the commitments and conditions discussed in this order. The commitments, representations, and conditions relied on 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 of Signet Bank may not be consummated before the fifteenth calendar day after the effective date of this order, and the proposal may not be consummated 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 Richmond, acting pursuant to delegated authority.

By order of the Board of Governors,37 effective October 14, 1997. (signed) Jennifer J. Johnson Jennifer J. Johnson Deputy Secretary of the Board

Appendix A Nonbanking Subsidiaries and Activities of Signet First Union proposes to acquire all the voting shares of the following nonbanking subsidiaries of Signet:38 (a) Signet Commercial Credit Corporation, Richmond, Virginia, and thereby engage in making revolving extensions of credit secured by inventory, accounts receivable and similar security interests, pursuant to section 225.28(b)(1) of Regulation Y. (b) Signet Financial Services, Inc., Richmond, Virginia, and thereby engage in providing discount brokerage services, pursuant to section 225.28(b)(7) of Regulation Y. (c) Signet Insurance Services, Inc., Richmond, Virginia, a grandfathered insurance subsidiary, and thereby engage in providing life and property/casualty insurance, as agent, pursuant to section 225.28(b)(11)(iv) of Regulation Y. (d) Signet Strategic Capital Corporation, Richmond, Virginia, and thereby engage in providing futures commission merchant services and foreign exchange advisory and transactional services, pursuant to sections 225.28(b)(7) and (8) of Regulation Y. (e) Signet Trust Company, Richmond, Virginia, and thereby engage in providing trust services, pursuant to section 225.28(b)(5) of Regulation Y. (f) Virtus Capital Management, Inc., Baltimore, Maryland, and thereby engage in providing investment advisory services, pursuant to section 225.28(b)(6) of Regulation Y.

Appendix B 1. Banking markets in which consummation of the proposal would not exceed DOJ Guidelines without divestitures. Annapolis: Approximated by the Annapolis, Maryland, Ranally Metropolitan Area ("RMA"). After consummation of the proposal, First Union would control 2.3 percent of the market deposits and would become the third largest depository institution in the market. The HHI would increase 3 points to 1112. Baltimore: Approximated by the Baltimore, Maryland, RMA and the rest of Harford County. After consummation of the proposal, First Union would control 14.5 percent of the market deposits and would become the third largest depository institution in the market. The HHI would increase 101 points to 1185. Fredericksburg: Approximated by Fredericksburg, Virginia, and the counties of Caroline, King George, Spotsylvania, and Stafford, excluding the Washington, D.C.-Maryland-Virginia RMA portion. After consummation of the proposal, First Union would control 7.8 percent of the market deposits and would become the third largest depository institution in the market. The HHI would increase 25 points to 1302. Johnson City/Kingsport/Bristol: Approximated by the Johnson City-Kingsport-Bristol, Tennessee-Virginia, RMA and Unicoi County, Tennessee, and the rest of the Tennessee counties of Carter and Washington and Scott County, Virginia. After consummation of the proposal, First Union would control 8.2 percent of the market deposits and would become the third largest depository institution in the market. The HHI would increase 32 points to 1332. Newport News/Hampton: Approximated by the Newport News-Hampton, Virginia, RMA and the rest of James City County. After consummation of the proposal, First Union would control 11.7 percent of the market deposits and would become the third largest depository institution in the market. The HHI would increase 68 points to 1477. Norfolk/Portsmouth: Approximated by the Norfolk-Portsmouth, Virginia, RMA and Currituck County, North Carolina. After consummation of the proposal, First Union would control 12.0 percent of the market deposits and would become the third largest depository institution in the market. The HHI would increase 68 points to 1174. Norton: Approximated by Norton, Virginia, and Wise County, Virginia. After consummation of the proposal, First Union would control 33.7 percent of the market deposits and would become the third largest depository institution in the market. The HHI would increase 135 points to 2058. Pulaski/Radford: Approximated by Pulaski-Radford, Virginia, and the counties of Montgomery and Pulaski. After consummation of the proposal, First Union would control 11.1 percent of the market deposits and would become the third largest depository institution in the market. The HHI would increase 62 points to 1408. Richmond/Petersburg: Approximated by the Richmond-Petersburg, Virginia, RMA and the rest of the counties Chesterfield, Dinwiddie, Goochland, Hanover, Henrico, Powhatan, and Prince George, and the counties of Charles City, King William, and New Kent, Virginia. After consummation of the proposal, First Union would control 25.7 percent of the market deposits and would become the third largest depository institution in the market. The HHI would increase 125 points to 1606. Washington, D.C.: Approximated by the Washington, D.C.-Maryland-Virginia RMA and the rest of Loudoun County, Virginia. After consummation of the proposal, First Union would control 15.1 percent of the market deposits and would become the third largest depository institution in the market. The HHI would increase 61 points to 1103. 2. Banking markets in which consummation of the proposal would not exceed DOJ Guidelines with divestitures, all in Virginia. Roanoke: Approximated by the Roanoke RMA and the rest of the counties of Botetourt and Roanoke, and Boones Mill in Franklin County. After consummation of the proposal and the proposed divestitures to an out-of-market competitor, First Union would control 38.9 percent of the market deposits and would become the largest depository institution in the market. The HHI would increase 175 points to 1968. Galax: Approximated by Galax and the counties of Carroll and Grayson, excluding the portion that is within the Mount Airy, North Carolina, banking market. After consummation of the proposal and the proposed divestitures to an out-of-market competitor, First Union would control 22.5 percent of the market deposits and would become the largest depository institution in the market. The HHI would increase 186 points to 1759. Russell: Approximated by Russell County. After consummation of the proposal and the proposed divestitures to an out-of-market competitor, First Union would control 30.3 percent of the market deposits and would become the largest depository institution in the market. The HHI would increase 175 points to 2916.

Footnotes 1 First Union proposes to exchange its shares for all the outstanding shares of Signet. On consummation of the proposal, Signet would be merged with and into First Union. First Union also has requested the Board's approval to exercise an option to purchase up to 19.9 percent of the voting shares of Signet. The option would become moot on consummation of the proposal. First Union also proposes to merge Signet Bank into its lead subsidiary bank, First Union National Bank, Charlotte, North Carolina, and has requested the approval of the Office of the Comptroller of the Currency ("OCC"), the bank's primary federal supervisor, under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. § 1828). 2 A commenter objected that notice of the proposal was not published in the Washington, D.C., area. Notice of the proposal was published in accordance with the Board's Regulation Y and Rules of Procedure in the Federal Register and in newspapers of general circulation in Charlotte, North Carolina, and in Richmond, Virginia, the location of the head offices of First Union National Bank, Charlotte, North Carolina, and Signet Bank. See 12 C.F.R. 225.16(b) and 262.3(b). Notice also was provided in the Board's H.2A publication, which is available by mail, fax-on-demand, and on the Board's Internet Home Page. The commenter, moreover, submitted timely comments that were considered by the Board. 3 Asset and ranking data are as of March 31, 1997; deposit data are as of June 30, 1996. 4 Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding company's home state is the 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(c)(1)(A) and (B) and 1842(d)(2)(A) and (B). First Union is adequately capitalized and adequately managed. On consummation of the proposal, First Union would control less than 10 percent of the total amount of deposits of insured depository institutions in the United States, and less than 30 percent of the total amount of deposits of insured depository institutions in Virginia, Maryland, and Washington, D.C., respectively. See Md. Code Ann., (Financial Institutions) § 5-1013. In addition, Signet Bank has been in existence for the minimum period of time necessary to satisfy age requirements established by applicable state law. All other requirements of section 3(d) of the BHC Act also would be met on consummation of the proposal. 6 12 U.S.C. § 1842(c)(1). 7 Commenters maintain that consummation of the proposal would have anticompetitive effects in the Roanoke, Galax, and Russell, Virginia, banking markets, notwithstanding the proposed divestitures. One commenter also maintains that the proposal would be anticompetitive because three banking organizations in Virginia would control approximately 40 percent of the insured deposits in that state. The Board and the courts have concluded that the commercial realities in the banking industry require consideration of the effects of a proposed acquisition in the local geographic banking markets where the acquiring and acquired institutions compete, as previously discussed. See also United States v. Phillipsburg Nat'l Bank, 399 U.S. 350, 362. The Board notes, moreover, that, even if the state and Washington, D.C., borders delineated an appropriate banking market, each would be unconcentrated as measured by the Herfindahl-Hirschman Index ("HHI"), the effects would not be significant, and numerous competitors would remain in each area. 8 The banking markets and market data are discussed in Appendix B. 9 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 Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly included thrift deposits in the calculation of market share on a 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991). 10 Under the revised DOJ Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is more than 1800 is considered highly concentrated. The Department of Justice 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 Department of Justice has stated that the higher than normal threshold for an increase in the HHI when screening bank mergers and acquisitions for anticompetitive effects implicitly recognizes the competitive effects of limited-purpose lenders and other nondepository financial entities. 11 A commenter contends that the proposal would have an anticompetitive effect on small business lending in the Roanoke, Virginia, Metropolitan Statistical Area ("MSA"). The Board and the courts traditionally have recognized that the appropriate product market for evaluating the competitive effects of bank mergers and acquisitions is the cluster of products (various kinds of credit) and services (such as checking accounts and trust administration) offered by banking institutions. See Chemical Banking Corporation, 83 Federal Reserve Bulletin 239 (1997), and the discussion of the relevant case law and economic studies therein. Commenter presents no facts to support a separate product market for small business lending, and the Board finds none in this case. 12 First Union has committed to execute sales agreements for each of the proposed divestitures prior to consummation of this transaction, and to complete the divesture within 180 days of consummation. First Union also has committed that, in the event it is unsuccessful in completing the divestitures within 180 days of consummation, it will transfer the unsold branches to an independent trustee that is acceptable to the Board and that will be instructed to sell the branches promptly. First Union also has committed to submit to the Board, before consummation of this proposal, an executed trust agreement acceptable to the Board stating the terms of these divestitures. 13 A commenter maintains, without providing any facts, that the Roanoke, Virginia, banking market ("Roanoke banking market") is smaller than the banking market defined by the Board (see Appendix B). 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. See St. Joseph Valley Bank, 68 Federal Reserve Bulletin 673 (1982); United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 357 (1963); and United States v. Phillipsburg Nat'l Bank, supra (1969). 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. These data indicate that the Roanoke banking market includes the city of Roanoke, the rest of Botetourt and Roanoke Counties, and the northern portion of Franklin County. Roanoke is the largest metropolitan area in Virginia west of Richmond, and is the center of a Ranally Metropolitan Area. A major highway travels through Botetourt County and south through portions of Roanoke County. More than 78 percent of the workers living in Roanoke County work either in Roanoke County or the city of Roanoke, and 14.5 percent commute to the city of Salem, which is also within the Roanoke banking market. Based on all the facts of record, the Board concludes that the relevant banking market for assessing the competitive effects of the proposal is the Roanoke banking market as defined above. 14 One commenter contends that guidance provided by the Federal Trade Commission and by the Federal Financial Institutions Examination Council under the Fair Credit Reporting Act (15 U.S.C. § 1861 et seq.) on access to consumer credit information in connection with pre-approved credit offers is illegal, and that First Union and Signet, relying on this agency guidance, acted illegally. The commenter also contends that the Board should consider the financial impact on First Union and its shareholders that could result if that commenter or another consumer succeeded in challenging the agency interpretations. The Board notes that this guidance by the agencies was provided pursuant to their interpretive authority. 15 Commenters cite, as indications of concern regarding the managerial resources of First Union, one lawsuit alleging age discrimination and another lawsuit alleging racial discrimination in decisions by First Union to terminate the employment of certain employees. The Board previously has stated that its limited jurisdiction to review applications under the BHC Act does not authorize the Board to adjudicate disputes involving an applicant that arise under statutes administered and enforced by another agency in areas such as employment discrimination. 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). One commenter also states that the board of directors and employees of the First Union National Bank of Virginia lack racial diversity. Under the Department of Labor's regulations, First Union is required to file an annual report with the Equal Employment Opportunity Commission ("EEOC") covering all employees in its corporate structure. See 41 C.F.R. 60-1.7(a) and 60-1.40. The Department of Labor, and the EEOC in particular, have the statutory authority to address disputes regarding illegal discriminatory labor practices. 16 Commenters maintain that Signet has a better record of making housing-related and community development loans, and that First Union has an insufficient record of improving the housing-related lending record of acquired institutions. 17 The Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act ("Agency CRA Statement") 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. See 54 Federal Register 13,742 and 13,745 (1989). 18 As of July 31, 1997, First Union merged FUNB with First Union National Bank of Florida, Jacksonville, Florida; First Union National Bank of Georgia, Atlanta, Georgia; First Union National Bank of Maryland, Rockville, Maryland; First Union National Bank of South Carolina, Greenville, South Carolina; First Union National Bank of Tennessee, Nashville, Tennessee; First Union National Bank of Virginia, Roanoke, Virginia; First Union National Bank of Washington, D.C., District of Columbia; and First Union Bank of Connecticut, Stamford, Connecticut. 19 The OCC conducted a joint CRA examination of eight of First Union's subsidiary banks in April 1994. In addition to FUNB, First Union's remaining seven subsidiary banks, First Union National Bank of Florida, First Union National Bank of Georgia, First Union National Bank of Maryland, First Union National Bank of South Carolina, First Union National Bank of Tennessee, First Union National Bank of Virginia, and First Union National Bank of Washington, D.C., each received a "satisfactory" rating from the OCC in the joint performance examination as of April 1994. First Union Bank of Connecticut and First Union Bank of Delaware, Wilmington, Delaware, each formerly a First Fidelity bank, each received a "satisfactory" rating from their primary federal supervisor, the FDIC, at their most recent examinations for CRA performance, as of January 1997 and April 1995, respectively. In addition, First Union National Bank, Avondale, Pennsylvania, and Boca Raton First National Bank, Boca Raton, Florida, each received a "satisfactory" rating from the OCC for CRA performance, as of July 1994 and September 1995, respectively. First Union Direct, Augusta, Georgia, a newly-chartered credit card bank, has not been examined for CRA performance. 20 See First Union Corporation, 82 Federal Reserve Bulletin 353 (1996) ("First Union/Society First Order") and 82 Federal Reserve Bulletin 1123 (1996) ("First Union/HFC Order"). 21 This supervisory information includes information developed by the OCC during its regularly scheduled examination of the CRA performance of First Union's subsidiary banks, which commenced in January 1997. 22 One commenter contends that First Union Home Equity Bank, N.A., Charlotte, North Carolina ("FUHE"), does not comply with HMDA reporting requirements because a substantial percentage of its loans does not indicate the race or national origin of the borrower. First Union responds that it is unable to report race information because the mortgage applications are received from brokers who submit loan applications by facsimile or telephone. Under regulations implementing the HMDA and the Equal Credit Opportunity Act (15 U.S.C. § 1691 et seq.), a HMDA reporter is not required to report the race or gender of an applicant if the information is not provided by the applicant in a written application form received by mail, if an application is taken by telephone, or if an application is received by other means that do not involve face-to-face communication. See, e.g., 12 C.F.R. 203, Appendix A, § V(D)(2), and Appendix B § I(B)(4). Commenter has provided the information to the OCC, and the OCC has sufficient supervisory authority as FUHE's primary federal supervisor to address compliance deficiencies, if any, in the HMDA data. 23 One commenter asserts that branch closings should be disclosed under the Board's rules governing ex parte communications. The Board notes that its rules regarding access to information, which are governed by the Freedom of Information Act ("FOIA"), provide the appropriate framework for considering a commenter's challenge to confidential treatment accorded an applicant's submissions, and that commenter's challenge here was reviewed under those rules and denied. The Board's rules do not provide a commenter access to information that is otherwise exempt from disclosure under FOIA. 24 One commenter alleges, without providing specific facts, that inferior services are provided at branches located in communities with predominately LMI and minority residents. As noted, the general allegation is not supported by the supervisory record for First Union's subsidiary banks. Commenter has provided the OCC a copy of the contentions for its consideration. 25 Section 42 of the Federal Deposit Insurance Act (12 U.S.C. § 1831r-1), as implemented by the Joint Policy Statement Regarding Branch Closing (58 Federal Register 49,083 (1993)), requires that a bank provide the public with at least 30 days notice and the primary federal supervisor with at least 90 days notice before the date of the proposed branch closing. The bank also is required to provide reasons and other supporting data for the closure, consistent with the institution's written policy for branch closing. 26 Commenters also contend that First Union's subsidiary banks charge excessive fees that disproportionately disadvantage low-income individuals. The Board previously has noted that First Union provides a full range of credit products and banking services to assist in meeting the credit and banking needs of its communities; and First Union recently introduced new products to lower the cost of maintaining banking relationships with First Union subsidiary banks. Commenters present no evidence that the fees and practices are illegally discriminatory, and there is no evidence in the record that the fees are based on any factor that would be prohibited by law. While the Board has recognized that banks help serve the needs of their community by offering basic services at nominal or no charge, the CRA does not impose any limitation on the fees or surcharges that can be assessed for services. Commenters also object to First Union's policy of requiring a thumbprint from noncustomers on any check cashed at a First Union subsidiary bank. First Union explains that the policy is designed to reduce fraud in check cashing, and commenters have not provided evidence that the policy is based on factors or applied in a manner that would be prohibited by law. 27 The data, for example, do not provide a basis for an independent assessment of whether an applicant who was denied credit was, in fact, creditworthy. Credit history problems and excessive debt levels relative to income (reasons most frequently cited by a credit denial) are not available from HMDA data. 28 Commenters provide no facts to show violations of fair lending laws or other practices that discourage applications for credit on a prohibited basis. Commenters, however, argue that First Union's HMDA data raise sufficient "red flags" to warrant a closer scrutiny of fair lending law compliance by First Union's banking and nonbanking subsidiaries. 29 One commenter contends that FUHE focuses on minority communities in making higher-than-normal interest rate loans. Another commenter contends that FUNB has entered into a three-year, $800 million revolving credit facility as a co-agent with an unscrupulous consumer and commercial finance company. The commenter does not provide facts to show illegal discriminatory or other illegal credit practices. These comments have been submitted to the OCC for consideration. 30 A commenter contends that anecdotal evidence from the organization's credit counsellors shows that First Union makes mortgages on property in Prince Georges County, Maryland, but rejects comparable mortgages on property in Washington, D.C. The commenter also describes a case in which a husband and wife were denied a loan by First Union because the husband had no credit history, and several commenters cite a complaint of substandard service to an accountholder of Home Savings Bank after the savings association was acquired by First Union. These matters have been considered in light of the overall record of First Union. 31 Commenters contend that consummation of the proposal could result in significant job losses. The convenience and needs factor has been consistently interpreted by the federal banking agencies, the courts, and Congress to relate to the effect of a proposal on the availability and quality of banking services in the community, and does not extend to the effect of a proposed acquisition on employment in a community. See Wells Fargo & Company, 82 Federal Reserve Bulletin 445, 457 (1996). 32 The Board has considered commenters' requests to delay consideration of the proposal until they have had an opportunity to receive and comment on the 1997 CRA performance evaluations of First Union's subsidiary banks by the OCC and the report of First Union's small business lending data for 1996. The Board also has considered one commenter's contentions that the record contains insufficient information regarding litigation involving First Union. To allow interested persons to provide information, analyses, and arguments regarding the record of an applicant and other relevant companies, the Board provides a public comment period for all bank acquisition proposals. In this case, the Board has provided interested persons a period of approximately 47 days to submit their views, and any relevant information and analyses regarding the proposal. Delay of consideration of this proposal to permit commenters to obtain and comment on information that may become available in the future is unwarranted in this case and would prevent consideration of this proposal at any time because new information and reports are continuously available. Commenters have provided substantial submissions that have been considered by the Board as discussed above. Based on all the facts available to the Board, including supervisory information, and for all the reasons discussed in the order, the Board concludes that the record of the proposal contains sufficient facts to warrant action at this time, and that delay or denial of the proposal on the basis that the record is factually incomplete is not warranted. 33 See 12 C.F.R. 225.28(b)(1), (b)(5), (b)(6), (b)(7), (b)(8) and (b)(11)(iv). 34 See 12 U.S.C. § 1843(c)(8). 35 See 12 C.F.R. 225.26. 36 Several commenters have requested a hearing on the proposal. Section 3(b) of the BHC Act does not require the Board to hold a public hearing on an application unless the appropriate supervisory authority for the bank to be acquired makes a timely written recommendation of denial. In this case, the Board has not received such a recommendation from any state supervisory authority. The BHC Act, furthermore, and the Board's rules thereunder, provide for a hearing on a notice under section 4 of the BHC Act only if the proposal involves the acquisition of a savings association. See 12 U.S.C. § 1843(c)(8). This case does not involve the acquisition of a savings association. Under its rules, the Board may, in its discretion, hold a public hearing or meeting on an application to clarify factual issues related to the application and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 225.16(e) and 225.25(a)(2). The Board has carefully considered commenters' requests for a hearing in light of all the facts of record. In the Board's view, the commenters had ample opportunity to submit their views, and have submitted written comments that have been carefully considered by the Board in acting on the application. The requests of the commenters fail to demonstrate why their written presentations do not adequately present their evidence, allegations, and views. After a careful review of all the facts of record, moreover, the Board has concluded that commenters dispute the weight that should be accorded to, and the conclusions that the Board should draw from, the facts of record, but do not identify disputed issues of fact that are material to the Board's decision. For these reasons, and based on all the facts of record, the Board has determined that a public hearing or meeting is not required or warranted to clarify the factual record in the application, or otherwise warranted in this case. Accordingly, the request for a hearing on the proposal is hereby denied. 37 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: Vice Chair Rivlin and Governors Phillips and Meyer. Absent and not voting: Chairman Greenspan and Governor Kelley. 38 First Union also proposes to acquire Signet Nequity Corporation, an inactive subsidiary of Signet. First Union has no present plans to conduct any activities through this company.

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1997 Orders on banking applications