Before they will process NationsBank Corp.'s application to buy MNC Financial Inc., federal regulators have some more questions for the Charlotte, N.C., banking company.
The Federal Reserve Bank of Richmond asked NationsBank's general counsel last week to clarify more than a dozen items -- some minor and some substantial -- before the company's application to buy MNC "can be accepted for processing," according to a letter from the Fed bank, which The Sun obtained yesterday.
In February, NationsBank offered to buy MNC for $1.36 billion, or $15.17 a share. MNC's shareholders are scheduled to vote on the deal at their annual meeting June 10. But approval also is needed from federal and state banking regulators.
The items that the Fed bank is seeking include more information from NationsBank about how its estimated tax liability was calculated; an explanation of how debt incurred in the merger will affect NationsBank's subsidiaries; and more details on a $342 million charge stemming from the merger that NationsBank said it will "push down to [its] subsidiaries," the letter states.
The regulators also want to know which subsidiaries of the two banking companies will be merged and details about the due diligence that NationsBank performed on MNC's loan portfolio, including "asset quality projections as of the consummation date" of the merger. From a peak of more than $1.8 billion in 1990, MNC's nonperforming assets had fallen to about $898 million by March 31.
Further, the Fed bank wants to know how many small- and medium-sized businesses the two banking companies have in certain markets in Virginia, and an estimate of their combined market share in those areas.
NationsBank had until Wednesday to respond, but a Federal Reserve official said the company's reply arrived late yesterday. The Fed has five business days to examine the response and decide whether to accept the application, said A. Linwood Gill III, the Federal Reserve Bank examining officer who sent the letter to Paul Polking, NationsBank's executive vice president and general counsel.
"It's fairly routine in a complex case that we would ask for additional information," Mr. Gill said.
NationsBank officials were out of the office and could not be reached for comment late yesterday.
If the application is deemed complete, as expected, the Richmond regulators will have 30 days to process it and decide whether to forward it to the Federal Reserve Board in Washington for an additional 30 days of examination, Mr. Gill said. One factor that automatically would send the application to Washington would be the receipt of an "adverse comment letter" from a member of the public, he said.
If the Federal Reserve system approves the application, there will be a final 30-day waiting period to allow the Justice Department to weigh the antitrust implications of the merger, Mr. Gill said.
The state of Maryland also has the right to determine whether the deal would be anti-competitive, and Maryland Attorney General J. Joseph Curran Jr. has indicated that his office was exploring that issue.