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FEDERAL RESERVE SYSTEM
The PNC Financial Services Group, Inc.
Pittsburgh, Pennsylvania
Order Approving the Merger of Bank Holding Companies
The PNC Financial Services Group, Inc. ("PNC"), a financial 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 Act1
[Footnote 1. 12 U.S.C. § 1842. End footnote 1.] to acquire National City
Corporation ("National City") and thereby indirectly acquire National City's subsidiary
bank, National City Bank ("NC Bank"), both of Cleveland, Ohio.2
[Footnote 2. PNC also proposes to acquire Ohio National Corporation Trade Services, Cleveland,
the agreement corporation subsidiary of National City under section 25 of the Federal Reserve Act
("FRA") and the Board's Regulation K, 12 U.S.C. §§ 601 et seq. and 12 CFR 211.5(g). In addition,
PNC proposes to acquire the nonbanking subsidiaries of National City in accordance with section
4(k) of the BHC Act. 12 U.S.C. § 1843(k). End footnote 2.]
Notice of the proposal, affording interested persons an opportunity to submit
comments, has been published (73 Federal Register 65,854 (2008)). 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 the BHC Act.3
[Footnote 3. Ninety-four commenters expressed concerns about certain aspects of the proposal.
End footnote 3.]
PNC, with total consolidated assets of approximately $145.6 billion, is
the 14th largest depository organization in the United States, controlling deposits of
approximately $84.6 billion, which represent less than 1 percent of the total amount
of deposits of insured depository institutions in the United States.4
[Footnote 4. Asset, national deposit, and ranking data are as of September 30, 2008. In this context,
insured depository institutions include commercial banks, savings banks, and savings associations.
End footnote 4.] PNC controls two
insured depository institutions that operate in nine states and the District of Columbia.5
[Footnote 5. PNC's subsidiary insured depository institutions are PNC Bank, National Association ("PNC Bank"), Pittsburgh,
Pennsylvania; and PNC Bank, Delaware, Wilmington, Delaware. End footnote 5.]
PNC is the 12th largest depository organization in Ohio, controlling deposits of
approximately $2.2 billion.6
[Footnote 6. Statewide deposit and ranking data are as of June 30, 2008. End footnote 6.]
National City, with total consolidated assets of approximately $143.7 billion,
is the 16th largest depository organization in the United States. NC Bank, its only
depository institution, operates in nine states and controls deposits of approximately
$94.3 billion. National City is the largest depository organization in Ohio, controlling
deposits of $34.7 billion.
On consummation of this proposal, and after taking into account the
proposed divestitures, PNC would become the eighth largest depository organization in the
United States, with total consolidated assets of approximately $288.5 billion. PNC would
control total deposits of $174.8 billion, representing less than 1 percent of the total amount
of deposits of insured depository institutions in the United States. In Ohio, PNC would
become the largest depository organization, controlling deposits of approximately
$36.9 billion, which represent approximately 17.4 percent of the total amount of deposits
of insured depository institutions in the state.
Factors Governing Board Review of the Transaction
The BHC Act enumerates the factors the Board must consider when
reviewing the merger of bank holding companies or the acquisition of banks. These factors
are the competitive effects of the proposal in the relevant geographic markets; the financial
and managerial resources and future prospects of the companies and banks involved in the
transaction; the convenience and needs of the communities to be served;7
[Footnote 7. A majority of commenters expressed concern that the proposed acquisition
would result in the loss of jobs. The effect of a proposed transaction on employment in a
community is not among the factors that the Board is authorized to consider under the
BHC Act, and the federal banking agencies, courts, and the Congress consistently have
interpreted the convenience and needs factor to relate to the effect of a proposal on the
availability and quality of banking services in the community. See, e.g., Wells Fargo &
Company, 82 Federal Reserve Bulletin 445, 457 (1996). End footnote 7.]
the records of performance under the Community Reinvestment Act ("CRA")8
[Footnote 8. 12 U.S.C. § 2901 et seq. End footnote 8.] of the insured depository
institutions involved in the transaction; and the availability of information needed to
determine and enforce compliance with the BHC Act.9 [Footnote 9. Some commenters urged
the Board to deny the proposal because National City's board of directors allegedly breached
its fiduciary duties in entering into the merger agreement with PNC and because the purchase
price was inadequate and would harm the interests of National City's shareholders. These
allegations are subject to litigation before a court of competent jurisdiction and are not within
the discretion of the Board to resolve. See Western Bancshares, Inc. v. Board of Governors,
480 F.2d 749 (10th Cir. 1973). The Board also notes that approval of the National City
shareholders is required to consummate the proposal. End footnote 9.]
In cases involving interstate bank
acquisitions, the Board also must consider the concentration of deposits nationwide and in
certain individual states, as well as compliance with other provisions of section 3(d) of the
BHC Act.10 [Footnote 10. 12 U.S.C. § 1843(d). End footnote 10.]
Interstate Analysis
Section 3(d) of the BHC Act allows the Board to approve an application
by a bank holding company to acquire control of a bank located in a state other than the
home state of such bank holding company if certain conditions are met. For purposes
of the BHC Act, the home state of PNC is Pennsylvania,11 [Footnote 11. A bank holding
company's home state is the state in which the total deposits of all subsidiary banks of the
company were the largest on July 1, 1966, or the date on which the company became a bank
holding company, whichever is later. See 12 U.S.C. § 1841(o)(4)(C). End footnote 11.]
and NC Bank is located in nine states.12 [Footnote 12. For purposes of section 3(d), the Board
considers a bank to be
located in the states in which the bank is chartered or headquartered or operates a branch.
See 12 U.S.C. §§ 1841(o)(4)-(7) and 1842(d)(1)(A) and (d)(2)(B). NC Bank operates branches
in Florida, Illinois, Indiana, Kentucky, Michigan, Missouri, Ohio, Pennsylvania, and Wisconsin.
End footnote 12.] Based on a review of all the facts of record, including relevant state statutes,
the Board finds that the conditions for an interstate acquisition enumerated in section 3(d)
of the BHC Act are met in this case.13 [Footnote 13. 12 U.S.C. §§ 1842(d)(1)-(3). Applicant is
adequately capitalized and adequately managed, as defined by applicable law. NC Bank has
been in existence and operated for the minimum period of time required by applicable state
laws. See 12 U.S.C. § 1842(d)(1)(B). On consummation of the proposal, applicant would
control less than 10 percent of the total amount of deposits of insured depository institutions
in the United States. 12 U.S.C. § 1842(d)(2)(A). Applicant also would control less than 30
percent of, and less than the applicable state deposit cap for, the total amount of deposits in
insured depository institutions in the relevant states. 12 U.S.C. §§ 1842(d)(2)(B)-(D). All other
requirements of section 3(d) of the BHC Act would be met on consummation of the proposal.
End footnote 13.] In light of all the facts of record, the Board is
permitted to approve the proposal under section 3(d) of the BHC Act.
Competitive Considerations
The Board has considered carefully the competitive effects of the proposal
in light of all the facts of record. Section 3 of the BHC Act prohibits the Board from
approving a proposal that would result in a monopoly or would be in furtherance of an
attempt to monopolize the business of banking in any relevant banking market. The
BHC Act also prohibits the Board from approving a bank acquisition that would
substantially lessen competition in any relevant banking market, unless the anticompetitive
effects of the proposal are clearly outweighed in the public interest by the probable effect
of the transaction in meeting the convenience and needs of the community served.14
[Footnote 14. 12 U.S.C. § 1842(c)(1). End footnote 14.]
PNC's subsidiary depository institutions and NC Bank directly compete in
10 banking markets, including markets in Florida, Kentucky, Ohio, and Pennsylvania.
The Board has reviewed carefully the competitive effects of the proposal in each of these
banking markets in light of all the facts of record and public comments on the proposal.15
[Footnote 15. Several commenters expressed general concerns about the competitive effects of this
proposal and the effects it could have on consumer choices for banking services. End footnote 15.]
In particular, the Board has considered the number of competitors that would remain in
the banking markets, the relative shares of total deposits in depository institutions in the
markets ("market deposits") controlled by PNC's insured depository institutions and
NC Bank,16 the concentration levels of market deposits and the increase in those levels
as measured by the Herfindahl-Hirschman Index ("HHI") under the Department of Justice Merger Guidelines
("DOJ Guidelines"),17 and other characteristics of the markets. [Footnote 16. Deposit and market share data are as of June 30,
2008, adjusted to reflect mergers and acquisitions through November 4, 2008, and generally are based on calculations in which the
deposits of thrift institutions are included at 50 percent. In recognition that thrift institutions have become, or have the potential to
become, significant competitors of commercial banks, the Board regularly has included thrift deposits in the market concentration
and market share calculations on a 50 percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52,
55 (1991). In some markets noted in this order, the market concentration and market share are based on calculations in which the
deposits of certain thrift institutions are weighted at 100 percent. The Board previously has indicated that it may consider the
competitiveness of a thrift institution at a level greater than 50 percent of its deposits when appropriate if competition from the
institution closely approximates competition from a commercial bank. See, e.g., Banknorth Group, Inc., 75 Federal Reserve
Bulletin 703 (1989). In evaluating when it is appropriate to increase the weighting of a thrift's deposits in a banking market, the
Board considers whether the thrift serves as a significant source of commercial loans in the market and provides a broad range of
consumer, mortgage, and other banking products. See, e.g., The PNC Financial Services Group, Inc., 93 Federal Reserve Bulletin
C65 (2007); First Union Corporation, 84 Federal Reserve Bulletin 489 (1998). End footnote 16.]
[Footnote 17. Under the DOJ Guidelines, a market is considered unconcentrated if the post-merger HHI is less than 1000,
moderately concentrated if the post-merger HHI is between 1000 and 1800, and highly concentrated if the post-merger HHI is more
than 1800. The Department of Justice ("DOJ") 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 DOJ has stated that the higher-than-normal HHI thresholds for screening
bank mergers for anticompetitive effects implicitly recognize the competitive effects of limited-purpose lenders and other
nondepository financial entities. End footnote 17.]
In addition, the Board has considered commitments made by PNC to the Board to reduce the potential that the proposal would have
adverse effects on competition by divesting 61 NC Bank branches (the "divestiture branches"), which account for approximately $4
billion in deposits, in five banking markets in Pennsylvania.
A. Banking Markets within Established Guidelines
Consummation of the proposal would be consistent with Board precedent and
within the thresholds in the DOJ Guidelines in five of the banking markets in which PNC's
subsidiary depository institutions and NC Bank directly compete.18
[Footnote 18. These banking markets and the effects of the proposal on their concentrations of banking resources are described in
Appendix A. End footnote 18.] On consummation of
the proposal, one market would remain highly concentrated, two markets would remain
moderately concentrated, and two would remain unconcentrated, as measured by the HHI.
The change in HHI in the one highly concentrated market would be small and consistent
with Board precedent and the thresholds in the DOJ Guidelines. In each of the banking
markets, numerous competitors would remain.
B. Certain Banking Markets with Divestitures
After accounting for the branch divestitures, consummation of the merger
would be consistent with Board precedent and the thresholds in the DOJ Guidelines in two
banking markets in Pennsylvania: Franklin-Titusville-Oil City ("FTO") and Warren.19
[Footnote 19. These banking markets and the effects of the proposal on their
concentrations of banking resources are described in Appendix B. The analysis of the
effects of the proposal in these markets includes the weighting of deposits controlled by
one thrift institution operating in both the markets at 100 percent. The thrift was deemed
to be an active commercial lender based on lending data and discussions with personnel
of the thrift and commercial bank competitors indicating that it was an active commercial
lender in both markets. End footnote 19.]
Although both markets would remain highly concentrated, the HHI would not increase
in either market. In addition, six competitors would remain in the FTO banking market,
including a depository institution that would control 33 percent of market deposits.
Although only four competitors would remain in the Warren banking market, one
depository institution competitor of PNC would control 52 percent of market deposits.
C. Three Banking Markets Warranting Special Scrutiny
PNC's subsidiary depository institutions and NC Bank compete directly
in three banking markets in Pennsylvania that warrant a detailed review: Pittsburgh,
Erie, and Meadville. In each of these markets, all with proposed divestitures, the
concentration levels on consummation of the proposal would exceed the threshold levels
in the DOJ Guidelines or the resulting market share of PNC would exceed 35 percent.
For each of these markets, the Board has considered carefully whether other
factors either mitigate the competitive effects of the proposal or indicate that the proposal
would have a significantly adverse effect on competition in the market. The number and
strength of factors necessary to mitigate the competitive effects of a proposal depend on
the size of the increase in and resulting level of concentration in a banking market.20
[Footnote 20. See Regions Financial Corp., 93 Federal Reserve Bulletin C16 (2007);
NationsBank Corporation, 84 Federal Reserve Bulletin 129 (1998). End footnote 20.]
In each of these markets, the Board has identified factors that indicate the proposal
would not have a significantly adverse impact on competition, notwithstanding the
post-consummation increase in the HHI and market share.
Among the factors reviewed, the Board has considered the competitive
influence of community credit unions in these banking markets. Those credit unions offer
a wide range of consumer products, operate street-level branches, and have membership
open to almost all residents in the applicable market. The Board has concluded that the
activities of such credit unions in the three markets exert competitive influence that
mitigates, in part, the potential effects of the proposal.21
[Footnote 21. The Board previously has considered the competitiveness of certain active
credit unions as a mitigating factor. See, e.g., Wells Fargo & Company, 94 Federal
Reserve Bulletin ___ (order dated October 21, 2008); The PNC Financial Services Group,
Inc., 93 Federal Reserve Bulletin C65 (2007); Regions Financial Corp., 93 Federal Reserve
Bulletin C16 (2007); Wachovia Corp., 92 Federal Reserve Bulletin C183 (2006).
End footnote 21.]
Pittsburgh. The structural effects of the proposal in the Pittsburgh banking
market ("Pittsburgh Market") as measured by applying the HHI to the June 30, 2008,
Summary of Deposit data ("SOD") would substantially exceed the DOJ Guidelines.
According to those data, PNC operates the largest insured depository institution in the
Pittsburgh Market,22
[Footnote 22. The Pittsburgh Market is defined as the counties of Allegheny, Armstrong,
Beaver, Butler, Fayette (except Point Marion Borough and Springhill Township), Greene,
Lawrence, Washington, and Westmoreland. End footnote 22.] controlling approximately
$26 billion in deposits, which represents
approximately 37 percent of market deposits. NC Bank operates the second largest insured
depository institution in the Pittsburgh Market, controlling approximately $11 billion in
deposits, which represents approximately 16 percent of market deposits. After the
proposed merger, PNC would remain the largest depository institution in the market,
controlling deposits of approximately $38 billion, representing approximately 53 percent
of market deposits.23
[Footnote 23. These market concentration and market share calculations include the weighting of deposits controlled
by five thrift institutions in the market at 100 percent. Two of these thrifts were considered to be active in the
Pittsburgh commercial lending market as a result of having a ratio of commercial and industrial ("C&I") loans to assets
of at least 5 percent. A third thrift had ratios of C&I loans to total loans of more than 10 percent, which is comparable to
the national average for all commercial banks. The remaining two thrifts had C&I loan-to-asset ratios slightly below 5
percent and were deemed to be active commercial lenders based on discussions with personnel of the thrifts and
commercial bank competitors in the Pittsburgh Market, who indicated that the thrifts were active participants in the
market's commercial lending sector. End footnote 23.]
To reduce the potential adverse effects on competition in the Pittsburgh
Market, PNC has proposed to divest 50 of NC Bank's branches that account for
approximately $3.5 billion in deposits. On consummation of the merger and after
accounting for the proposed divestiture, PNC would remain the largest depository
institution in the market, controlling deposits of approximately $34 billion, which
represent approximately 48 percent of market deposits. The HHI would increase
752 points to 2640.
The proposal raises special concerns in the Pittsburgh Market because PNC,
the largest institution in the banking market, proposes to merge with the market's second
largest competitor and all other competitors in the market have significantly smaller market
shares. The Board has previously recognized that merger proposals involving the largest
depository institutions in markets structured like the Pittsburgh Market warrant close
review due to the size of those institutions relative to other market competitors.24
[Footnote 24. See First Busey Corporation, 93 Federal Reserve Bulletin C90, C91 (2007);
Firstar Corporation, 87 Federal Reserve Bulletin 236, 238 (2001). End footnote 24.] The
Board, therefore, has carefully considered whether other factors indicate that the increase
in market concentration, as measured by SOD data, overstates the potential competitive
effects of the proposal in the market.
The Board has considered PNC's assertion that inclusion of certain deposits
that were received and booked at PNC's head office in the Pittsburgh Market in
calculations of market share indices for this transaction would distort the measures of the
competitive effect of the proposal on the Pittsburgh Market. PNC has argued that, for
purposes of evaluating the proposal's competitive effect in the Pittsburgh Market, the
Board should exclude those deposits booked at PNC's head office that have no relation
to the Pittsburgh Market. Approximately $17 billion of the deposits at PNC's head office
are government deposits, out-of-market escrow deposits, correspondent banking deposits,
wholesale certificates of deposit and related accounts ("CDs"), broker-dealer trust
accounts, and certain corporate deposits.
In conducting its competitive analysis in previous cases, the Board generally
has not adjusted its market share calculations to exclude out-of-market deposits because
all deposits are typically available to support lending and other banking activities at any
location. The Board has adjusted the market deposits held by an applicant to exclude
specific types of deposits only in limited situations, such as when evidence supported a
finding that the excluded deposits were not legally available for use in that market and
data were available to make comparable adjustments to the market shares for all other
market participants.25 [Footnote 25. See First Security Corp., 86 Federal Reserve Bulletin
122 (2000). End footnote 25.] The Board also has adjusted deposit data in the limited
circumstance
when there was strong evidence that a depository organization moved its national businessline deposits to a particular branch for business reasons unrelated to its efforts to compete
in that market and did not use those deposits to enhance its competitive ability in that
market or to manipulate SOD data used in competitive analyses by a federal supervisory
agency.26 [Footnote 26. See Bank of America Corporation, 94 Federal Reserve Bulletin C81,
C84-C85 (2008); J.P. Morgan Chase & Co., 90 Federal Reserve Bulletin 352, 355 (2004).
End footnote 26.]
PNC has stated that approximately $10 billion in out-of-market deposits was
assigned to PNC's head office for business reasons unrelated to its efforts to compete in the
Pittsburgh Market. PNC has represented that these deposits were transferred because that
office houses the "Intrader" accounting system, which is used to track PNC's wholesale
CDs and broker-dealer trust accounts, both nationally and internationally. In addition,
PNC has represented that the deposits maintained by the Intrader system are segregated
from the deposit account system on which the head office generally operates. Furthermore,
the head office systems are separate from the retail branch located in the same building,
and the retail branch personnel cannot access the Intrader system.27 [Footnote 27. The
wholesale funds booked to PNC's head office support the entire multistate branch
footprint of PNC and its national and international nonbank operational footprint.
End footnote 27.] PNC has represented
that it placed the Intrader deposits in its head office for administrative convenience
unrelated to PNC's efforts to compete in the Pittsburgh Market and that none of the
account holders booked on Intrader are domiciled in the Pittsburgh Market.
PNC has also argued that other deposits associated with out-of-market
customers should be excluded from PNC's head office deposits, including deposits that
were generated from various municipalities and governments outside the Pittsburgh
Market, that involve escrow accounts for mortgages and other transactions outside the
market, or that represent correspondent banking accounts with institutions outside the
market. PNC is limited by law, contract, or duration of relationship from using these
deposits for any activity other than to support the deposit account.28
[Footnote 28. See First Security Corp., 86 Federal Reserve Bulletin 122, 126-127 (2000).
End footnote 28.] Other deposits PNC
asserted should be excluded are accounts from large corporations located outside the
Pittsburgh Market.
There is no evidence in the record that PNC moved the deposits in question
to the head office from another branch in an attempt to manipulate the SOD data used for
competitive analyses by the appropriate federal supervisory agency. Although PNC holds
approximately $26 billion in deposits in the Pittsburgh Market based on SOD data, it holds
loans in the Pittsburgh Market ("market loans") totaling approximately $2 billion, which
represents a loan-to-deposit ratio of 8.1 percent for PNC in the Pittsburgh Market. In
contrast, PNC's ratio of market loans to deposits associated with customers in the
Pittsburgh Market is 22.4 percent. In addition, PNC's total market loans have decreased
by 3 percent in the period since December 31, 2006, while its total deposits held at the
Pittsburgh office have increased by 29 percent. Furthermore, the market deposits of PNC
associated with out-of-market customers increased 41 percent during the same period
while its market deposits associated with customers in the Pittsburgh Market increased
by 13 percent. These facts, and in particular the fact of the decrease in loan market share
in comparison to a significant increase in the deposits held by the Pittsburgh head office
from out-of-market customers, is consistent with the conclusion that the SOD deposit data
significantly overstate PNC's competitive presence in the Pittsburgh Market.
The Board has also taken into consideration the fact that the next largest
competitor (other than NC Bank) to PNC in the Pittsburgh Market has significantly more
branches than PNC in the market but has average market deposits per branch of less than
17 percent of PNC's average market deposits per branch. The other commercial bank and
thrift competitors of PNC that have at least half as many branches as PNC have average
market deposits per branch of less than 14 percent of PNC's average market deposits per
branch. PNC's high average market deposits per branch further supports the conclusion
that the SOD deposit data significantly overstate PNC's competitive presence in the
Pittsburgh Market.
Based on a careful review of these and all other facts of record, the Board
concludes that the concentration level for PNC in the Pittsburgh Market, as measured
by the HHI using SOD data without adjustment, overstates the competitive effect of the
proposal in the Pittsburgh Market. If the $17 billion in deposits discussed above with
no relation to the Pittsburgh Market is excluded from the calculation of its market
concentration, the market share held by PNC on consummation of the proposal would be
approximately 38 percent, after accounting for the effects of the proposed divestitures.
PNC would remain the largest insured depository institution in the market on
consummation of the proposal, controlling adjusted market deposits of approximately
$21 billion. If PNC's proposed divestitures were purchased by the largest in-market
institution, the resulting HHI would increase 529 points to 1835.
The Board also examined other mitigating factors in the Pittsburgh Market.
A large number of commercial bank and thrift competitors (57) would remain in the
market after consummation of the proposal, including two competitors that each have
more than a 12 percent market share.29
[Footnote 29. The Board also has concluded that the activity of one community credit union
in the market exerts sufficient competitive influence to mitigate, in part, the potential adverse
competitive effects of the proposal. This active credit union controls approximately $554
million of deposits in the market. Accounting for a 50 percent weighting of these deposits,
PNC would control approximately 37 percent of market deposits, and the HHI would increase
522 points to 1813. End footnote 29.] The proposed divestiture of 50 branches would
significantly strengthen the competitive position of a banking organization operating in
the Pittsburgh Market or bring a new, sizeable competitor into the market. Furthermore,
the record of recent entry into the Pittsburgh Market is evidence of its attractiveness for
entry by out-of-market competitors. Six banking organizations have entered the market
in the past four years.
Based on a careful review of these and all other factors of record, the Board
concludes that, with the proposed divestitures, appropriate adjustment, and consideration
of other mitigating factors, consummation of the proposal would have no significantly
adverse effects in the Pittsburgh Market.
Erie. In the Erie banking market ("Erie Market"),30
[Footnote 30. The Erie Market is defined as Erie County. End footnote 30.]
PNC operates the largest
depository institution in the market, controlling deposits of approximately $820 million,
which represent approximately 27 percent of market deposits. NC Bank operates the
second largest depository institution in the market, controlling deposits of approximately
$459 million, which represent approximately 15 percent of market deposits. To reduce
the potential for adverse effects on competition in the Erie Market, PNC Bank has
proposed to divest six of NC Bank's branches that account for $294.6 million in total
deposits. On consummation of the merger and after accounting for the proposed
divestitures, PNC would remain the largest depository institution in the market, controlling
deposits of approximately $985 million, which represent approximately 32 percent of
market deposits. The HHI would increase 246 points to 2060.31
[Footnote 31. This analysis includes the weighting of deposits controlled by one thrift institution in the market at
100 percent. The thrift was deemed to be an active commercial lender based on lending data and discussions with
personnel of the thrift and other commercial banking competitors indicating that the thrift was an active commercial
lending participant in the Erie Market. End footnote 31.]
Several factors indicate that the increase in concentration in the Erie Market,
as measured by the HHI and PNC's market share, overstates the potential competitive
effects of the proposal in the market. After consummation of the proposal, eight other
commercial bank and thrift competitors would remain in the market, including two other
competitors with a significant presence in the market. The second and third largest
depository institution organizations in the market would control approximately 24 percent
and 12 percent of market deposits, respectively. The second largest depository
organization would also control 22 branches, the largest branch network of any depository
institution in the Erie Market.
In addition, the Board has evaluated the competitive influence of four active
community credit unions in the Erie Market. These credit unions control approximately
$467 million in deposits in the market that, on a 50 percent weighted basis, represent
approximately 7.14 percent of market deposits. Accounting for the revised weightings
of these deposits, PNC would control approximately 30.1 percent of market deposits, and
the HHI would increase 212 points to 1795.
In addition, the record of recent entry into the Erie Market is evidence of the
market's attractiveness for entry. Two depository institutions have entered the market
since 2004.
Based on a careful review of all the facts of record, and taking into account
the proposed divestitures, the Board concludes that consummation of the proposal would
not substantially lessen competition in the Erie Market.
Meadville. In the Meadville banking market ("Meadville Market"),32
[Footnote 32. The Meadville Market is defined as Crawford County,
excluding the city of Titusville. End footnote 32.] PNC
operates the third largest depository institution in the market, controlling deposits of
approximately $113 million, which represent approximately 13 percent of market deposits.
NC Bank operates the largest depository institution in the market, controlling deposits of
approximately $341 million, which represent approximately 40 percent of market deposits.
To reduce the potential for adverse effects on competition in the Meadville Market, PNC
has proposed to divest three of NC Bank's branches that account for $93.9 million in total
deposits. On consummation of the merger and after accounting for the proposed
divestiture, PNC would become the largest depository institution in the market, controlling
deposits of approximately $360 million, which represent approximately 43 percent of
market deposits. The HHI would increase 130 points to 2498.33
[Footnote 33. This analysis includes the weighting of deposits controlled by one thrift
institution in the market at 100 percent. The thrift institution is the same institution weighted
at 100 percent in the Erie Market and the basis for weighting this institution's deposits at
100 percent in the Meadville Market is the same as the basis in the Erie Market.
See footnote 31 above. End footnote 33.]
Several factors indicate that the increase in concentration in the Meadville
Market, as measured by PNC's market share, overstates the potential competitive effects
of the proposal in the market. After consummation of the proposal, five other commercial
banking and thrift competitors would remain in the market. The Board notes that there are
other competitors with a significant presence in the market. The second and third largest
depository institution organizations in the market would control approximately 16 percent
and 14 percent of market deposits, respectively. Furthermore, a commercial bank
competitor would have a larger number of branches in the Meadville Market than PNC,
and four other institutions would have branch networks comparable to PNC's network.
In addition, the Board has evaluated the competitive influence of
one active community credit union in the market. This credit union controls approximately
$39 million in deposits in the market that, on a 50 percent weighted basis, represents
approximately 2.3 percent of market deposits. Accounting for the revised weightings of
these deposits, PNC would control 41.6 percent of market deposits, and the HHI would
increase 124 points to 2390.
Based on a careful review of all the facts of record, and taking into account
the proposed divestitures, the Board concludes that consummation of the proposal would
not substantially lessen competition in the Meadville Market.
D. View of Other Agencies and Conclusion on Competitive Considerations
The DOJ also has conducted a detailed review of the potential competitive
effects of the proposal and has advised the Board that, in light of the proposed divestitures,
consummation of the proposal would not likely have a significantly adverse effect on
competition in any relevant banking market.34
[Footnote 34. PNC has committed to the Board that it will comply with the divestiture
agreement between the DOJ and PNC dated December 11, 2008. End footnote 34.]
In addition, the appropriate banking agencies have been afforded an opportunity to comment
and have not objected to the proposal.
Based on these and all other facts of record, the Board has concluded that
consummation of the proposal would not have a significantly adverse effect on competition
or on the concentration of resources in any relevant banking market. Accordingly, based
on all the facts of record and subject to completion of the proposed divestitures, the Board
has determined that competitive considerations are consistent with approval.
Financial, Managerial, and Supervisory Considerations
Section 3 of the BHC Act requires the Board to consider the financial and
managerial resources and future prospects of the companies and banks involved in the
proposal and certain other supervisory factors. The Board has carefully considered
these factors in light of all the facts of record, including confidential supervisory and
examination information received from the relevant federal and state supervisors of the
organizations involved, publicly reported and other financial information, information
provided by PNC, and public comments received on the proposal.35
[Footnote 35. Many commenters expressed concern that National City was not provided
federal financial assistance to help it remain an independent organization while PNC is
scheduled to receive federal funding under the Department of the Treasury's Capital
Purchase Program ("CPP"), which would help PNC finance the proposed transaction.
As explained in more detail above, the Board has carefully considered all the facts of record
in assessing the financial and managerial resources and future prospects of the companies
involved. End footnote 35.]
In evaluating the financial resources in expansion proposals by banking
organizations, the Board reviews the financial condition of the organizations involved
on both a parent-only and consolidated basis, as well as the financial condition of the
subsidiary depository institutions and significant nonbanking operations. In this
evaluation, the Board considers a variety of information, including capital adequacy,
asset quality, and earnings performance. In assessing financial resources, the Board
consistently considers capital adequacy to be especially important. The Board also
evaluates the financial condition of the resulting organization at consummation, including
its capital position, asset quality, earnings prospects, and the impact of the proposed
funding of the transaction. In addition, the Board considers the ability of the organization
to absorb the costs of the proposal and the plans for integrating operations after
consummation.
The Board has carefully considered the financial resources of the
organizations involved in the proposal in light of information provided by PNC and
National City and supervisory information available to the Federal Reserve through its
supervision of these companies and from the OCC, the primary supervisor of the
depository institution subsidiaries of these organizations. The Board has considered that,
although National City is well capitalized, it has experienced severe financial strains and
liquidity pressures during the last year that have weakened its condition and stressed its
operations. National City has had difficulty raising sufficient private capital to address
these issues without a merger partner. PNC is well capitalized, would remain well
capitalized after consummation of this proposal, and would provide operational and
capital strength to National City. Consummation of this proposal would create a combined
organization that can withstand the financial pressures in the present exigent market
conditions and restore a strong provider of banking and other financial services in the
markets served by National City. The proposed transaction is structured as a share
exchange. Based on its review of the record, the Board finds that PNC has sufficient
resources to effect the proposal.
The Board also has considered the managerial resources of the organizations
involved in the proposed transaction. The Board has reviewed the examination records of
PNC, its subsidiary depository institutions, and NC Bank and other nonbanking companies
involved in the proposal. In addition, the Board has considered its supervisory experience
and that of other relevant banking supervisory agencies, including the OCC, with the
organizations and their records of compliance with applicable banking law and anti-money
laundering laws.36 [Footnote 36. Several commenters expressed concern over reports of
large payments to be made to certain National City executives on the acquisition by PNC.
As part of its review of financial factors, the Board has reviewed the proposed severance
payments to be provided by PNC as well as the limitations imposed on those payments in
connection with the request for funding under the CPP. End footnote 36.]
The Board also has considered carefully the future prospects of the
organizations involved in the proposal. Moreover, the Board has considered information
on PNC's plans to implement its risk-management policies, procedures, and controls at
National City and how PNC would manage the integration of National City into PNC. The
Board also considered PNC's extensive experience in acquiring bank holding companies
and successfully integrating them into its organization.
PNC does not have a significant presence in many of the markets served by
National City. In particular, PNC does not compete in the markets in Ohio and Indiana
where National City has the majority of its operations. Consummation of this proposal
will benefit those markets by providing financial strength and stability to National City
that will allow it to continue to provide banking services to households, businesses, and
other customers. The proposed acquisition will also allow those NC Bank offices to
provide additional services currently offered by PNC. The record indicates that PNC
has the financial and managerial resources to serve as a source of strength to NC Bank
and the other operations of National City.
Based on all the facts of record, the Board has concluded that the financial
and managerial resources and the future prospects of the organizations involved in the
proposal are consistent with approval, as are the other supervisory factors.
Convenience and Needs Considerations and CRA Performance
In acting on a proposal under section 3 of the BHC Act, the Board also must
consider the effects of the proposal on the convenience and needs of the communities to
be served and take into account the records of the relevant insured depository institutions
under the CRA.37 [Footnote 37. 12 U.S.C. § 1842(c)(2). End footnote 37.]
The CRA requires the federal financial supervisory agencies to
encourage insured depository institutions to help meet the credit needs of the local
communities in which they operate, consistent with their safe and sound operation,
and requires the appropriate federal financial supervisory agency to take into account
a relevant depository institution's record of meeting the credit needs of its entire
community, including low- and moderate-income ("LMI") neighborhoods, in evaluating
bank expansionaryproposals.38[Footnote38.12U.S.C.§2903.Endfootnote38.]
The Board has considered carefully all the facts of record, including
reports of examination of the CRA performance records of the subsidiary banks
of PNC and National City, data reported by PNC and National City under the Home
Mortgage Disclosure Act ("HMDA"),39 [Footnote 39. 12 U.S.C. § 2801 et seq.
End footnote 39.] as well as other information provided by PNC,
confidential supervisory information, and public comments received on the proposal.
Several commenters expressed general concerns regarding the effect of the proposal on
the amount of community development lending or investment and charitable donations
in areas served by NC Bank.40
[Footnote 40. Two commenters also urged the Board to require or encourage PNC to enter into agreements to provide CRA loans,
investments, and services to low-income communities or to require it to take certain actions in the future. A community group
commenter generally supported National City's CRA record in Milwaukee but requested that PNC meet with the group to discuss
CRA-related concerns. The Board consistently has stated that neither the CRA nor the federal banking agencies' CRA regulations
require depository institutions to make pledges or enter into commitments or agreements with any organization and that the
enforceability of any such third-party pledges, initiatives, or agreements are matters outside the CRA. See, e.g., Wachovia
Corporation, 91 Federal Reserve Bulletin 77 (2005). Instead, the Board focuses on the existing CRA performance record of an
applicant and the programs that an applicant has in place to serve the credit needs of its assessment areas at the time the Board
reviews a proposal under the convenience and needs factor. End footnote 40.]
Two commenters also expressed concern regarding the
potential impact of branch closures. One commenter expressed concern that the proposal
would inhibit small business lending in Michigan and Ohio.41 [Footnote 41. One
commenter expressed concern that the proposal would have an adverse effect on loss
mitigation efforts for assumed and outstanding subprime mortgage loans from NC Bank.
End footnote 41.] In addition, one commenter
criticized PNC's and National City's records of home mortgage lending in LMI and
minority communities in Ohio, PNC's home mortgage lending to minorities in Pittsburgh
and Philadelphia, and National City's home mortgage lending to minorities in Cleveland.
A. CRA Performance Evaluations
As provided in the CRA, the Board has considered the convenience and
needs factor in light of the evaluations by the appropriate federal supervisors of the
CRA performance records of the insured depository institutions of PNC and National City.
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 appropriate federal
supervisor.42 [Footnote 42. The Interagency Questions and Answers Regarding Community
Reinvestment provide that a CRA examination is an important and often controlling factor in
the consideration of an institution's CRA record. See Interagency Questions and Answers
Regarding Community Reinvestment, 66 Federal Register 36,620 at 36,640 (2001).
End footnote 42.]
PNC's lead subsidiary insured depository institution, PNC Bank, received
an "outstanding" rating at its most recent CRA performance evaluation by the OCC, as
of May 16, 2006 ("PNC 2006 Evaluation"). Both of PNC's other subsidiary insured
depository institutions received an "outstanding" or "satisfactory" rating at their most
recent CRA performance evaluations.43 [Footnote 43. PNC Bank, Delaware received an
"outstanding" rating at its most recent evaluation by the Federal Reserve Bank of Cleveland,
as of February 4, 2008. End footnote 43.] NC Bank received an "outstanding" rating at
its most recent CRA performance evaluation by the OCC, as of June 30, 2005 ("NC Bank
2005 Evaluation").44 [Footnote 44. One commenter expressed concern that NC Bank's
2005 Evaluation excluded the Pittsburgh Metropolitan Statistical Area ("MSA"). The
commenter also criticized the length of time since the most recent exam and requested that
the OCC conduct a targeted CRA exam for the Pittsburgh MSA. At the time of the 2005
Evaluation, NC Bank had a minimal presence in Pennsylvania, consisting of a single branch
in Philadelphia. An affiliated but separate institution, National City Bank of Pennsylvania,
Pittsburgh, held a significant market share in the state. The two institutions merged in 2006,
providing NC Bank with much of its share of market deposits in Pennsylvania.
End footnote 44.]
CRA Performance of PNC Bank. PNC Bank's 2006 Evaluation was
discussed in the Board's order approving PNC's acquisition of Sterling Financial
Corporation, Lancaster, Pennsylvania, in 2008.45
[Footnote 45. See The PNC Financial Services Group, Inc., 94 Federal Reserve Bulletin
C38 (2008) ("PNC-Sterling Order"). End footnote 45.]
Based on a review of the record in this
case, the Board hereby reaffirms and adopts the facts and findings detailed in that order
concerning PNC Bank's CRA performance record. PNC also provided the Board with
additional information about its CRA performance since the Board last reviewed such
matters in the PNC-Sterling Order. In addition, the Board has consulted with the OCC
with respect to PNC Bank's CRA performance since the PNC-Sterling Order and has
reviewed information provided by PNC regarding its CRA-related activities since that
order.
In addition to PNC Bank's overall "outstanding" rating in the PNC 2006
Evaluation,46 the bank received an overall "outstanding" rating in Pennsylvania and in
the Cincinnati Metropolitan Area ("MA").
[Footnote 46. The PNC 2006 Evaluation focused on PNC Bank's performance in
assessment areas throughout Pennsylvania and New Jersey and in the
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Multistate Metropolitan Area, which
together represented approximately 83 percent of the bank's deposits. The evaluation periods
for different aspects of PNC Bank's CRA performance ranged from January 1, 2002, to
April 30, 2006. End footnote 46.] Examiners reported that PNC Bank's overall
lending performance was good, as reflected by the bank's loan volume and loan
distribution by geography and borrower income, and that its performance in the Pittsburgh
and Cincinnati assessment areas was excellent. They further noted that PNC Bank's level
of community development lending in Pennsylvania and in the Cincinnati MA was
excellent and had a positive impact on the bank's overall performance under the lending
test.
Examiners reported that the bank's distribution of small loans to businesses
was excellent in Pennsylvania.47
[Footnote 47. "Small loans to businesses" are loans with original amounts of $1 million
or less that are either secured by nonfarm, nonresidential properties or classified as
commercial and industrial loans. End footnote 47.]
They noted that the bank's market share of small loans
to businesses in LMI areas exceeded the bank's overall market share of loans across its
Pennsylvania assessment areas in each year of the evaluation period. In Pennsylvania,
examiners also noted that PNC Bank placed significant community development lending
emphasis on economic revitalization and affordable housing. Since the PNC 2006
Evaluation, PNC Bank has continued its high level of CRA lending activity by making
more than $230 million in community development loans in its assessment areas in 2006
and 2007.
In the PNC 2006 Evaluation, examiners also commended PNC Bank's
overall level of qualified investments and concluded that the bank's performance under
the investment test was "high satisfactory" in the Pennsylvania assessment area and was
"outstanding" in the Cincinnati MA. They noted that the bank's level of qualifying
investments represented excellent responsiveness to the needs of the Cincinnati MA
community, particularly in relation to affordable housing. Since the 2006 Evaluation,
PNC Bank has continued to make a significant amount of CRA-qualified investments
in community development projects. In 2006 and 2007, PNC Bank made more than
160 investments totaling approximately $370 million.
Examiners also concluded that the bank's delivery systems overall were
accessible to its customers. In the Pennsylvania assessment area, examiners rated
PNC Bank's performance under the service test as "outstanding" and reported that the
bank's performance in the Pittsburgh assessment area was excellent for both retail banking
services and community development services. PNC represented that there have been
no material changes to its CRA programs since the 2006 evaluation.
CRA Performance of NC Bank. The NC Bank 2005 Evaluation was
discussed in the Board's order approving National City's acquisition of Mid America
Bank fsb, Clarendon Hills, Illinois, in 2007.48
[Footnote 48. See National City Corporation, 93 Federal Reserve Bulletin C127 (2007).
End footnote 48.] Based on a review of the record in this
case, the Board hereby reaffirms and adopts the facts and findings detailed in that order
concerning NC Bank's CRA performance record.
In addition to the overall "outstanding" rating that NC Bank received in its
2005 evaluation, the bank received separate overall "outstanding" or "satisfactory" ratings
for its CRA performance in each of the states reviewed. Examiners reported that the
bank's distribution of HMDA loans to borrowers of different income levels was excellent.
Examiners also stated that the bank's record of community development lending and
qualified community development investments demonstrated excellent responsiveness
to community credit and investment needs.
Examiners rated NC Bank's performance under the investment test as
"outstanding" or "high satisfactory" in most of the states reviewed.49
[Footnote 49. Two commenters expressed concern about the impact of the proposal on
charitable donations made by NC Bank. PNC represented that it plans to surpass NC
Bank's 2008 goal for charitable donations across all markets. The Board notes that neither
the CRA nor the agencies' implementing rules require institutions to engage in charitable
donations. End footnote 49.] They reported
that the bank's investments demonstrated excellent responsiveness to the needs of the
community. Examiners concluded that NC Bank's retail banking services generally were
accessible to geographies and individuals with different income levels. They also reported
that the bank generally provided a high level of community development services.
B. Branch Closings
Two commenters expressed general concern that the proposal, or the eventual
merger of PNC Bank and NC Bank after consummation of the proposal, would lead to
branch closures and adversely affect banking services in LMI areas. PNC has stated that
it has not made any decisions regarding potential branch closures but that any closures
would not take place until PNC merges PNC Bank and NC Bank at some point after
consummation of the proposal. PNC also stated that it intends to continue to serve
LMI communities through its branch network.
In addition, PNC has stated that, on consummation of the proposal, it expects
to implement its current branch closing policy at NC Bank. PNC's branch closing policy
requires the bank to make every effort to minimize the customer impact in the local market
and to provide a reasonable alternative to acquire similar services. The policy requires
that, before a final decision is made to close a branch, management consult with members
of the community in an effort to minimize the impact of the branch closing.
The Board also has considered that federal banking law provides a specific
mechanism for addressing branch closings.50
[Footnote 50. Section 42 of the Federal Deposit Insurance Act, 12 U.S.C. § 1831r-1
("FDI Act"), as implemented by the Joint Policy Statement Regarding Branch Closings
(64 Federal Register 34,844 (1999)), requires that a bank provide the public with at least
30 days' notice and the appropriate federal supervisory agency and customers of the branch
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 closings. End footnote 50.]
Federal law requires an insured depository
institution to provide notice to the public and to the appropriate federal supervisory agency
before closing a branch and to adopt a policy regarding branch closures.51
[Footnote 51. One commenter requested the Federal Reserve to hold hearings under the FDI
Act before any branch in a LMI area is closed. The FDI Act provides that, in cases where an
interstate bank proposes to close a branch in an LMI area, an individual from the area where
such branch is located may request a meeting between the bank's primary federal regulator
and community leaders. Such requests must be made to the bank's primary federal regulator
after notice of a branch closure has been made to its customers. As noted above, PNC has not
made any decisions regarding potential branch closures, which makes such a request
premature. In addition, any such requests for a hearing with regard to branch closures by
either PNC Bank or NC Bank must be made to the OCC, the primary federal regulator of
both banks. The Board has forwarded the commenter's letter to the OCC for consideration.
End footnote 51.]
In the most recent CRA performance examinations, examiners found that the
banks' records of opening or closing branches had not adversely affected the accessibility
of delivery systems, particularly in LMI areas and to LMI individuals. In addition, the
Board notes that the OCC will continue to review the branch closing record of PNC Bank
and NC Bank in the course of conducting CRA performance evaluations.
C. HMDA and Fair Lending Record
In light of the public comments received on the proposal, the Board has
considered carefully the compliance records of PNC and National City with fair lending
and other consumer protection laws in its evaluation of the public interest factors.
Two commenters alleged, based on HMDA data, that PNC and National City denied
the home mortgage loan applications of African American and Hispanic borrowers
more frequently than those of nonminority applicants in certain MSAs. A commenter also
alleged, based on 2007 HMDA data, that NC Bank made disproportionately higher-cost
loans to African American and Hispanic borrowers than to nonminority borrowers.52
[Footnote 52. Beginning January 1, 2004, the HMDA data required to be reported by lenders
were expanded to include pricing information for loans on which the annual percentage rate
(APR) exceeds the yield for U.S. Treasury securities of comparable maturity by 3 or more
percentage points for first-lien mortgages and by 5 or more percentage points for second-lien
mortgages. 12 CFR 203.4. End footnote 52.] One
commenter also alleged that PNC extended a disproportionately small percentage of loans
to African Americans in Pittsburgh when compared to the percentage of African American
households in that area.
The Board's analysis of the lending-related concerns included a review
of HMDA data reported by PNC Bank and NC Bank and their lending affiliates.53
[Footnote 53. The Board reviewed HMDA data for 2006 and 2007 for PNC Bank in the
Pittsburgh assessment area and the Cincinnati and Philadelphia MSAs; for NC Bank in
the Cincinnati, Cleveland, and Pittsburgh MSAs; and for both PNC Bank and NC Bank in
Pennsylvania and Ohio. End footnote 53.]
Although the HMDA data might reflect certain disparities in the rates of loan applications,
originations, and denials among members of different racial or ethnic groups in certain
local areas, or in the pricing of loans to such groups, they provide an insufficient basis by
themselves on which to conclude whether or not PNC Bank or NC Bank has excluded or
imposed higher costs on any group on a prohibited basis. The Board recognizes that
HMDA data alone, even with the recent addition of pricing information, provide only
limited information about the covered loans.54
[Footnote 54. The data, for example, do not account for the possibility that an institution's
outreach efforts may attract a larger proportion of marginally qualified applicants than other
institutions attract and do not provide a basis for an independent assessment of whether an
applicant who was denied credit was, in fact, creditworthy. In addition, credit history
problems, excessive debt levels relative to income, and high loan amounts relative to the
value of the real estate collateral (reasons most frequently cited for a credit denial or higher
credit cost) are not available from HMDA data. End footnote 54.]
HMDA data, therefore, have limitations
that make them an inadequate basis, absent other information, for concluding that an
institution has engaged in illegal lending discrimination.
The Board is nevertheless concerned when HMDA data for an institution
indicate disparities in lending and believes that all lending institutions 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 their race or
ethnicity. Moreover, the Board believes that all bank holding companies and their affiliates
must conduct their mortgage lending operations without any abusive lending practices and
in compliance with all consumer protection laws.
In carefully reviewing the concerns about the organizations' lending
activities, the Board has taken into account other information, including examination
reports that provide on-site evaluations of compliance with fair lending and other consumer
protection laws and regulations by PNC Bank, NC Bank, and their lending affiliates. The
Board also has consulted with the OCC, the primary federal supervisor of both PNC Bank
and NC Bank. In addition, the Board has considered information provided by PNC,
including its plans for managing the consumer compliance operations of PNC Bank and
NC Bank after consummation of the proposal.
The record, including confidential supervisory information, indicates that
PNC has implemented many processes to help ensure compliance with all consumer
protection laws and regulations. PNC's compliance program includes employee training;
review by senior management of credit decisions, pricing, and marketing; and fair lending
policies and procedures to help ensure compliance with consumer protection laws. PNC's
fair-lending compliance program that includes a second-review process to identify any
discriminatory practices with respect to the company's home mortgage lending.
In addition, PNC has a process for resolving fair lending complaints and conducts
periodic internal audits of its fair lending program. PNC requires its employees to
complete fair-lending training sessions. PNC has stated that NC Bank operations will
be integrated into PNC's existing fair-lending and consumer-protection compliance
programs after consummation of the proposal.55
[Footnote 55. One commenter reiterated concerns regarding alleged disparate pricing of
subprime loans originated by a former National City subsidiary, First Franklin, that the
commenter made in connection with National City Corporation's application to acquire
Provident Bank. The Board considered those comments when it approved that proposal.
See National City Corporation, 90 Federal Reserve Bulletin 382, 384 (2004). National
City sold First Franklin to Merrill Lynch & Co., Inc. in 2006. End footnote 55.]
The Board also has considered the HMDA data in light of other
information, including the overall performance records of the subsidiary banks of
PNC and National City under the CRA. These established efforts and record of
performance demonstrate that the institutions are active in helping to meet the credit
needs of their entire communities.
D. Conclusion on Convenience and Needs and CRA Performance
The Board has considered carefully all the facts of record, including reports
of examination of the CRA performance records of the institutions involved, information
provided by PNC, comments received on the proposal, and confidential supervisory
information. PNC represented that the proposal would result in greater convenience for
customers of PNC and National City through expanded delivery channels and a broader
range of products and services. In addition, the Board previously noted the severe
financial strains and liquidity pressures that National City has been experiencing, which
are likely to adversely affect services to its customers. In light of these circumstances,
the Board recognizes that the proposed merger would allow the combined organization
to continue to provide banking and other financial services in support of the convenience
and needs of the communities currently served by both organizations. Based on a review
of the entire record, and for the reasons discussed above, the Board concludes that
considerations relating to the convenience and needs factor and the CRA performance
records of the relevant insured depository institutions are consistent with approval of the
proposal.
Agreement Corporation
As noted, PNC also has provided notice under section 25 of the FRA and the
Board's Regulation K to acquire the agreement corporation subsidiary of National City.
The Board concludes that all factors required to be considered under the FRA and the
Board's Regulation K are consistent with approval.
Conclusion
Based on the foregoing, the Board has determined that the applications under
section 3 of the BHC Act and section 25 of the FRA should be, and hereby are, approved.56
[Footnote 56. A number of commenters requested an extension of the comment period or delayed action on the
proposal, and one commenter has requested Board review of a decision under authority delegated by the Board
that denied his request for an extension of the comment period. See letter dated November 26, 2008, from
Robert deV. Frierson, Deputy Secretary of the Board, to the Hon. Dennis J. Kucinich. As previously noted, notice
of the proposal was published in the Federal Register on November 5, 2008. Newspaper notices were published
on October 30 and November 3 in the appropriate newspapers of record, and the comment period ended on
December 2. Accordingly, interested persons had approximately 33 days to submit their views. This period provided
sufficient time for commenters to prepare and submit their comments and, as noted above, many commenters have
provided written submissions, all of which the Board has considered carefully in acting on the proposal. The Board
also has accumulated a significant record in this case, including reports of examination, confidential supervisory
information and public reports and information, in addition to public comments. Moreover, the Board is required
under applicable law and its regulations to act on applications submitted under the BHC Act within specified time
periods. Based on all the facts of record, the Board has concluded that the record in this case is sufficient to warrant
action at this time and that neither an extension of the comment period nor further delay in considering the proposal
is necessary. End footnote 56.]
In reaching its conclusion, the Board considered all the facts of record in light of the factors
that the Board is required to consider under the BHC Act, the FRA, and other applicable
statutes.57
[Footnote 57. A number of commenters requested that the Board hold a public meeting or hearing on the
proposal. Section 3 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 written recommendation of
denial of the application. The Board has not received such a recommendation from the OCC. Under its rules,
the Board also may, in its discretion, hold a public meeting or hearing on an application to acquire a bank if
necessary or appropriate to clarify material factual issues related to the application and to provide an opportunity
for testimony. 12 CFR 225.16(e), 262.25(d). The Board has considered carefully the commenters' requests in
light of all the facts of record. As noted, the commenters had ample opportunity to submit their views and, in fact,
submitted written comments that the Board has considered carefully in acting on the proposal. The commenters'
requests fail to demonstrate why written comments do not present their views adequately or why a meeting or
hearing otherwise would be necessary or appropriate. For these reasons, and based on all the facts of record, the
Board has determined that a public meeting or hearing is not required or warranted in this case. Accordingly, the
requests for a public meeting or hearing on the proposal are denied. End footnote 57.]
The Board's approval is specifically conditioned on compliance by PNC with
the conditions imposed in this order and all the commitments made to the Board in
connection with the proposal. These conditions and commitments are 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 National City may not be consummated before the
fifteenth calendar day, 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 Cleveland, acting pursuant to delegated authority.
By order of the Board of Governors,58 effective December 15, 2008.
[Footnote 58. Voting for this action: Chairman Bernanke, Vice Chairman Kohn, and
Governors Warsh, Kroszner, and Duke. End footnote 58.]
(SIGNED)
Robert deV. Frierson
Deputy Secretary of the Board
Appendix A
PNC/National City Banking Markets Consistent
with Board Precedent and DOJ Guidelines Without Divestitures
Data are as of June 30, 2008. All amounts of deposits are unweighted. All rankings, market deposit
shares, and HHIs are based on thrift deposits weighted at 50 percent.
Indian River County, Florida - Indian River County.
Market
Amount of
Rank
Deposit
Deposits
Shares (%)
PNC PreConsummation
14
$30.9 mil.
0.9
National City
PNC PostConsummation
3
$361.2 mil.
10.1
2
$392.1 mil.
11.0
Resulting
HHI
1,753
Change
in HHI
18
1,753
1,753
18
18
[see footnote 59]
42
$0
0
PNC PostConsummation
34
$15.5
0.2
993
993
17
17
Naples Area, Florida - Collier County, excluding the town of Immokalee.
Market
Amount of
Resulting
Change
Rank
Deposit
Deposits
HHI
in HHI
Shares (%)
993
0
PNC Pre34
$15.5 mil.
0.2
Consummation
National City
Remaining
Number of
Competitors
17
I
Remaining
Number of
Competitors
43
0
0
43
43
Lexington, Kentucky- Bourbon, Clark, Fayette, Jessamine, Nicholas, Powell, Scott, and Woodford
Counties.
Market
Remaining
Amount of
Resulting
Change
Rank
Deposit
Number of
Deposits
HHI
in HHI
Shares (%)
Competitors
848
27
35
PNC PreConsummation
15
$123.7 mil.
1.6
National City
PNC PostConsummation
4
$670.2 mil.
8.5
4
$793.9 mil.
10.1
848
848
27
27
35
35
[Footnote 59. National City established a branch in the Naples Area banking market in late 2007.
As of June 30, 2008, no deposits had been recorded. End Footnote 59.]
Louisville, Kentucky-Indiana- Bullitt, Henry, Jefferson, Meade, Nelson, Oldham, Shelby, and Spencer
Counties, the Bedford census county division in Trimble County, the West Point census county division
and the cities of Vine Grove and Radcliff in Hardin County, and the city of Irvington in Breckinridge
County, all in Kentucky; Clark, Floyd, Harrison, and Washington Counties, and Crawford County,
excluding Patoka township, all in Indiana.
Market
Remaining
Amount of
Resulting
Change
Rank
Deposit
Number of
Deposits
HHI
in HHI
Shares (%)
Competitors
1239
378
53
PNC PreConsummation
3
$2.2 bil.
10.1
National City
PNC PostConsummation
1
$4.0 bil.
18.8
1
$6.2 bil.
28.8
1239
1239
378
378
53
53
Cincinnati, Ohio-Indiana-Kentucky- Brown, Butler, Clermont, Hamilton, and Warren Counties in
Ohio; Dearborn County in Indiana; Boone, Bracken, Campbell, Gallatin, Grant, Kenton, and Pendleton
Counties, and the New Liberty and Owenton census county divisions in Owen County,all in Kentucky.
Market
Remaining
Amount of
Resulting
Change
Rank
Deposit
Number of
Deposits
HHI
in HHI
Shares (%)
Competitors
2421
48
82
PNC PreConsummation
4
$2.4 bil.
4.4
National City
PNC PostConsummation
3
$2.9 bil.
5.5
3
$5.3 bil.
9.9
2421
2421
48
48
82
82
Appendix B
PNC/National City Banking Markets in Pennsylvania Consistent
with Board Precedent and DOJ Guidelines After Divestitures
Data are as of June 30, 2008. All amounts of deposits are unweighted. All rankings, market deposit
shares, and HHIs are based on thrift deposits weighted at 50 percent, except for one thrift operating in
both markets for which deposits are weighted at 100 percent.
Franklin-Titusville-Oil City - Venanqo County and the city of Titusville in Crawford County.
Market
Remaining
Amount of
Resulting
Change
Rank
Deposit
Number of
Deposits
HHI
in HHI
Shares (%)
Competitors
Pre-Divestiture
2,319
+ 254
8
PNC PreConsummation
Pre-Divestiture
National
City
Pre-Divestiture
PNC PostConsummation
Post-Divestiture
PNC PostConsummation
Post-Divestiture
Branches
Divested to Outof-Market
Purchaser
7
$40.8 mil.
4.5
2
$250.8 mil.
27.9
1
$291.6 mil.
32.5
2
$199.2 mil.
22.2
3
$92.4 mil.
(1 branch)
10.3
2,319
+ 254
8
2,319
+ 254
8
1,863
-202
9
1,863
-202
Resulting
HHI
Change
in HHI
9
Warren - Warren County.
Rank
Pre-Divestiture
PNC PreConsummation
Amount of
Deposits
Market
Deposit
Shares (%)
4,766
3
$92.5 mil.
13.7
Pre-Divestiture
National City
2
$216.3 mil.
31.9
Pre-Divestiture
PNC PostConsummation
2
$308.8 mil.
45.6
Post-Divestiture
PNC PostConsummation
Post-Divestiture
Branches
Divested to Outof-Market
Purchaser
2
$188.4 mil.
27.8
3
$120.5 mil.
(1 branch)
17.8
4,766
+ 871
Remaining
Number of
Competitors
4
+ 871
4
4,766
+ 871
4
3,779
-117
5
3,779
-117
5