Tuesday, June 16, 1998

NationsBank denies Dallas holdings were moved to circumvent merger rules

By Richard A. Oppel Jr.

The Dallas Morning News

(KRT)

AUSTIN, Texas - In April, around the time NationsBank Corp. announced it would acquire BankAmerica Corp., NationsBank began to transfer almost half of the bank's Dallas deposits to corporate headquarters in Charlotte, N.C.

By the time it finished in May, $5.8 billion had been shipped to Charlotte.

Now Texas banking regulators say they believe the transfers were meant to circumvent a state law that could force NationsBank, the largest lender in the state, to divest branch offices in Dallas before completing the BankAmerica deal. The law was enacted in 1995 to prevent a single bank from gaining control as the result of an acquisition of more than 20 percent of the bank deposits in the state.

Regulators also say the transfers potentially could hurt lending in metropolitan Dallas by shrinking the area's base of deposits.

NationsBank executives defend the move as proper and say it won't have any effect on lending in Texas because the money transferred to North Carolina wasn't from typical customer deposits and was never used as a basis for loans.

However, at the same time, the bank contends that it shouldn't be required to sell any branches because of the merger citing the deposit transfers as one supporting reason, according to documents NationsBank submitted to federal regulators.

Because of the deposit transfers, NationsBank should have close to 20 percent of the state's total deposits after the BankAmerica deal. But Texas regulators say they intend to raise the transfer matter with federal banking officials and may seek divestiture of some branches, anyway.

"It seems like a game to me. I'm concerned the concentration they represent isn't really diminished by moving deposits," said Cathy Ghiglieri, the state banking commissioner. Ghiglieri lost a court fight last month and a measure of her own oversight powers when a federal judge allowed NationsBank to fold its Texas subsidiary into its main holding company.

"Why should that money go to North Carolina? Why should that money not be put back into this economy?" Ghiglieri said. "The problem in the '80s was with banks gathering up deposits and putting them in other places."

NationsBank officials say the deposits were solely related to a real estate investment trust and a national corporate cash-management product. They also defend their lending in Texas, citing what federal banking regulators and some independent groups say is a good record for making loans in lower- and middle-income areas.

"We have not relocated any Texas depositor's money as a result of this," said Tim Arnoult, president of NationsBank's Southwest operations, which include Texas. Arnoult said Ghiglieri hasn't returned telephone calls from bank officials who want to explain the matter.

He accuses the commissioner of "continuing to pursue her NationsBank agenda in the media, in spite of the fact that she has been unsuccessful to date in the courts." Bank officials, Arnoult said, would like "to clear up the many misunderstandings she has about the facts related to our Texas bank charter consolidation and our recent application for a merger with BankAmerica."

Federal regulators will rule on the proposed merger later this year.

Since landing in Texas a decade ago, NationsBank has become the dominant player in the state, with more deposits than the next two largest banks combined. NationsBank's share of deposits at federally insured institutions in Texas was 21 percent at the end of March, up from from 14.1 percent in December 1992. Adding San Francisco-based BankAmerica's Bank of America branches would have boosted the total to 23 percent, had it not been for the deposit transfers.

Increasingly, the wave of bank mergers has helped concentrate Texas deposits at a handful of bigger banks.

After completion of the NationsBank-BankAmerica deal and Wells Fargo & Co.'s proposed merger with Norwest Corp., almost 46 percent of the state's $223 billion in deposits will be controlled by four banks all with headquarters in other states.

The deposit concentration is even greater in Dallas, where the same four banks will have 69 percent of deposits in the city, according to the FDIC. By itself, NationsBank has about 45 percent, although that number falls to about 31 percent if the deposit transfers are deducted.

Coming as industry consolidation continues, Texas officials said, issues raised by the transfers highlight concerns over the growing concentration of lending power within a few big banks just as the state finds itself stripped by a judge of much of its oversight authority.

In a May 6 ruling, U.S. District Judge Jorge Solis of Dallas upheld a decision by the Office of the Comptroller of the Currency allowing NationsBank to merge its Texas subsidiary into its Charlotte operations. Ghiglieri says the ruling could make it easier for multistate banks to deploy Texas depositors' money elsewhere.

The continuing pace of bank mergers also has drawn the attention of advocates for low-income consumers and minority borrowers.

The NationsBank-BankAmerica deal could lead to fewer branches in lower- to middle-income areas of Dallas, said Liz Wolff, state director of the Association of Community Organizations for Reform Now. Better known as Acorn, the group has been a major force in helping pressure banks to lend more money in minority and poor areas.

"We want to make sure there isn't a net loss of branches," said Wolff, who said she has been in talks with bank officials in hopes of extracting commitments to keep certain branches open or replace shuttered locations with new sites in other needy areas.

But while bank mergers in general concern her, Wolff praises NationsBank, which she said had a good record for making home mortgage and small-business loans in poor areas, compared with other banks. According to Federal Reserve Board officials, NationsBank's Texas locations were rated "outstanding" in their last review for compliance with the federal Community Reinvestment Act.

In at least that respect, the proposed merger could be good for low-income borrowers, Wolff said, because BankAmerica has been "much less flexible" in working with Acorn to help such communities.

While NationsBank said it hoped not to have to divest any Dallas branches, closing some that are close to others is another matter. As of June 1997, NationsBank had 71 branches in Dallas County, while BankAmerica had 43.

Arnoult said NationsBank is "extremely sensitive to maintaining our current levels of service in the southern sector of Dallas."

But he adds: "That does not always mean you leave all your locations open. We've mapped our locations and the BankAmerica locations, and many of them are across street from one another."

(c) 1998, The Dallas Morning News.

Visit The Dallas Morning News on the World Wide Web at http://www.dallasnews.com/

Distributed by Knight Ridder/Tribune Information Services.