Orders issued under Bank Holding Company Act - Legal Developments - acquisition of RBC Centura Bank by Royal Bank of Canada

Federal Reserve Bulletin, August, 2002 by Robert DeV. Frierson

Orders Issued Under Section 4 of the Bank Holding Company Act

Royal Bank of Canada
Montreal, Canada

RBC Centura Banks, Inc.
Rocky Mount, North Carolina

RBC Centura Bank
Rocky Mount, North Carolina

Order Approving the Acquisition of a Savings Association, Merger of Depository Institutions, and Establishment of Branches

Royal Bank of Canada ("Royal Bank"), a foreign banking organization subject to the provisions of the Bank Holding Company Act ("BHC Act"), and its wholly owned subsidiary, RBC Centura Banks, Inc. ("RBC") (collectively, "Notificants"), have requested the Board's approval under sections 4(c)(8) and 4(j) of the BHC Act (12 U.S.C. [subsections] 1843(c)(8) and 18430)) and sections 225.14 and 225,24 of the Board's Regulation Y (12 C.F.R. 225.14 and 225.24) to acquire Eagle Bancshares, Inc. ("Eagle") and its wholly owned subsidiary, Tucker Federal Bank ("Tucker"), both in Tucker, Georgia, and thereby engage in operating a savings association and conducting certain nonbanking activities as a result of the acquisition. (1) RBC Centura Bank ("Bank"), Rocky Mount, North Carolina, RBC's wholly owned subsidiary, has requested the Board's approval under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. [section] 1828(c)) ("Bank Merger Act") to acquire the assets of, and to subsequently merge with, Tucker. (2) Bank also has applied under section 9 of the Federal Reserve Act (12 U.S.C. [section] 321) ("FRA") to retain and operate branches at the main and branch offices of Tucker. (3)

Notice of the proposal, affording interested persons an opportunity to comment, has been published in the Federal Register (67 Federal Register 21,243; 67 Federal Register 30,928-929 (2002)) and locally in accordance with the Bank Merger Act and the Board's Rules of Procedure (12 C.F.R. 262.3(b)). As required by the Bank Merger Act, reports on the competitive effects of the merger were requested from the United States Attorney General and relevant banking agencies. The time for filing comments has expired, and the Board has considered the application and notices and all comments received in light of the factors set forth in section 4 of the BHC Act, the Bank Merger Act, and the FRA.

Royal Bank, with total assets of $226.1 billion, is the largest banking organization in Canada. (4) RBC operates depository institutions in Georgia, Florida, North Carolina, South Carolina, and Virginia. RBC's subsidiary, Bank, controls deposits of $204.2 million in Georgia, representing less than 1 percent of total deposits of insured depository institutions in the state ("state deposits"). (5)

Eagle's subsidiary, Tucker, controls deposits of $829.6 million in Georgia, representing less than 1 percent of state deposits. On consummation of the proposal, Bank would become the tenth largest depository institution in Georgia, controlling deposits of approximately $1 billion, representing less than 1 percent of state deposits.

The Board previously has determined by regulation that the operation of a savings association by a bank holding company is closely related to banking for purposes of section 4(c)(8) of the BHC Act. (6) The Board requires that savings associations acquired by bank holding companies conform their direct and indirect activities to those permissible for bank holding companies under section 4 of the BHC Act. RBC has committed to conform all the activities of Tucker to those permissible under section 4(c)(8) of the BHC Act and Regulation Y. Eagle engages in mortgage lending and related activities, discount brokerage, and community development activities that the Board also has determined to be closely related to banking. (7)

In reviewing the proposal, the Board is required by section 4(j)(2)(A) of the BHC Act to determine that the acquisition of Eagle and Tucker by Notificants "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." (8) As part of its evaluation of a proposal under these public interest factors, the Board reviews the financial and managerial resources of the companies involved, as well as the effect of the proposal on competition in the relevant markets.

Financial, Managerial, and Future Prospects

In reviewing the proposal under section 4 of the BHC Act and the Bank Merger Act, the Board also has carefully reviewed the financial and managerial resources and the future prospects of the institutions involved. (9) The Board has reviewed, among other things, confidential reports of examination and confidential supervisory information assessing the financial and managerial resources of the organizations received from their primary federal supervisors, and information provided by RBC and Bank. (10) The Board notes that Bank is and will remain well capitalized on consummation of the proposal. Based on all the facts of record, the Board concludes that the financial and managerial resources and future prospects of the institutions involved and other supervisory factors are consistent with approval of the proposal. (11)