Fed Approves Laredo Merger

WASHINGTON - Making an unusual exception because of a banking market's special characteristics, the Federal Reserve Board approved last week a merger that will give a Texas border-town bank control of nearly half the deposits in its market.

Laredo National Bancshares, the state's 10th-largest bank, with $1.1 billion in deposits, got the go-ahead to acquire Southshares Inc., the parent of South Texas National Bank of Laredo, with $93.9 million.

Already the market's largest bank, Laredo National will control 49% of local deposits upon consummation of the deal. Regulators usually discourage such market-share dominance.

Dissent from Angell

The board approved the merger on a 3-to-1 vote, outvoting Fed Governor Wayne Angell, who wrote a dissent.

The Fed factored in competition from financial institutions operating in Nuevo Laredo, a community across the Mexico border.

Thirteen Mexican banks operate 32 offices in the Mexican town. Ten have consolidated assets of more than $1 billion, the Fed noted. Five commercial banks and two thrifts operate on the U.S. side.

The Fed also said that Laredo National, like most banks in the cross-border market, has a substantial portion of its deposits in short-term jumbo accounts, most from foreign investors.

"These types of deposits do not serve as a base for significant lending by banks in this market, and tend to overstate the competitive influence of banks in the market," the Fed said.

Given the market's unique characteristics, the Fed ruled that consummation of the proposal "would not have a significantly adverse effect on competition or concentration of banking resources."

A bank official praised the ruling. "We're a very poor border community, but nevertheless an active and aggressive banking market," said Abe S. Wilson, Laredo National's general counsel. "There is a great deal of business created by international trade and commerce."

Mr. Wilson said the deal was struck in December 1990 and initially was to be consummated bu August, but a long review by the Fed forced a postponement. He now expects the deal to closed in January.

The Fed said this is not the first time it has considered the unique characteristics of a banking market in evaluating the competitive effects of a merger. In 1987, it did so in a case involving Hartford National Corp.

In that year the Fed approved Hartford National's acquisition of Chester Bank in Connecticut, even though the deal raised the acquirer's share in the market, Old Saybrook, to 58%.

The Fed said the anticompetitive effects of the merger would be minimal because customers in Old Saybrook had easy access to services provided by institutions in nearby New Haven, New London, and Hartford, the Fed said.

In his two-sentence dissent, Mr. Angell objected to the Laredo deal because of "concerns about certain minority shareholder interests in this bank holding company."

Mr. Angell could not be reached for comment Friday, but Mr. Wilson said the Fed governor appeared to be concerned about certain shares that are controlled by nominees.

Voting for the action were David Mullins, vice chairman, and governors John LaWare and Susan Phillips. Three board members - Chairman Alan Greenspan and Governors Edward Kelley and Lawrence Lindsey - were absent and not voting.

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