The Federal Reserve Board on Friday approved Magnolia Banking Corporation’s acquisition of Prescott Bankshares, Inc.
Magnolia Banking Corporation is the holding company of Farmers Bank & Trust. Prescott Bankshares owns Bank of Prescott.
The Federal Reserve Board’s action authorizes Farmers to operate Bank of Prescott as a branch of the Magnolia-based bank.
Magnolia Banking Corporation, with consolidated assets of approximately $1.6 billion, is the 508th largest insured depository organization in the United States, controlling deposits of approximately $907.2 million.
Prescott Bankshares, with consolidated assets of approximately $67 million, is the 4,631th largest insured depository institution in the nation, controlling deposits of approximately $58.6 million.
On consummation of the proposal, Magnolia would remain the 508th largest insured depository organization in the United States, with consolidated assets of approximately $1.7 billion. Magnolia would control approximately $965.8 million in deposits.
Farmers Bank would remain the 14th largest insured depository institution in Arkansas, controlling deposits of approximately $965.8 million.
The Federal Reserve’s order notes that Farmers Bank and Bank of Prescott compete directly in the Hope banking market. Farmers Bank is the largest competitor in the Hope market, controlling approximately $117.6 million in deposits, which represent approximately 28.9 percent of market deposits. Bank of Prescott is the third largest depository institution in the Hope market, controlling approximately $58.6 million in deposits, which represent approximately 14.2 percent of market deposits.
On consummation of the acquisition, Farmers Bank would remain the largest depository institution in the Hope market, controlling approximately $176.2 million in deposits, which would represent approximately 42.6 percent of market deposits.
“Although consummation of this proposal would eliminate one existing competitor, the Hope market would continue to be served by seven depository institutions. Excluding Farmers Bank, these competitors would include a depository institution with more than 20 percent of market deposits and two depository institutions each with more than 10 percent of market deposits. The presence of these viable competitors suggests that Farmers Bank would have limited ability to offer less attractive terms to consumers unilaterally, and these competitors would be able to exert competitive pressure on Farmers Bank in the Hope market.
“Furthermore, the branch locations and commuting patterns of consumers within the market suggest that Farmers Bank and Bank of Prescott do not compete as closely with each other as they do with other competitors. These circumstances suggest that the analysis of market concentration overstates the likely effects of the proposal on competition,” the order said.
A Department of Justice review of the potential competitive effects of the merger concluded that it would not likely have a significantly adverse effect on competition in any relevant banking market, including the Hope market.
“Magnolia, Prescott, and their subsidiary depository institutions are well capitalized, and the combined organization would remain so on consummation of the proposal. The proposed transaction is a bank holding company merger that is structured as a cash exchange, with a subsequent merger of the subsidiary depository institutions. The asset quality, earnings, and liquidity of Magnolia and Farmers Bank are consistent with approval, and Magnolia appears to have adequate resources to absorb the related costs of the proposal and to complete the integration of the institutions’ operations,” the order said.
“Magnolia and Farmers Bank are considered to be well managed. The directors and senior executive officers of Magnolia have substantial knowledge of and experience in the banking and financial services sectors, and Magnolia’s risk management program appears consistent with approval of this expansionary proposal. The (Federal Reserve) Board also has considered Magnolia’s plans for implementing the proposal. Magnolia has conducted comprehensive due diligence and is devoting financial and other resources to address all aspects of the post-acquisition integration process for this proposal. Magnolia would implement its risk-management policies, procedures, and controls at the combined organization, and these are considered acceptable from a supervisory perspective.
“In addition, Magnolia’s management has the experience and resources to ensure that the combined organization operates in a safe and sound manner. Magnolia would retain the existing management of Prescott. Based on all of the facts of record, including the supervisory records of Magnolia and Farmers Bank, their managerial and operational resources, and their plans for operating the combined organization after consummation, the board concludes that considerations relating to the financial and managerial resources and the future prospects of the organizations involved in the proposal, as well as the records of effectiveness of Magnolia and Prescott in combatting money-laundering activities, are consistent with approval. “
The order said Magnolia Banking Corporation “represents that it does not anticipate making significant changes in or discontinuing any existing products or services of either Farmers Bank or Bank of Prescott following consummation of the bank merger. Magnolia also represents that customers of Bank of Prescott would gain access to a larger array of products and services and an expanded branch network.”
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