Hundreds of hours’ worth of changes and additions proposed for applicants
On March 21, 2024, the Federal Deposit Insurance Corporation (“FDIC”) published a proposed update to its Statement of Policy on Bank Merger Transactions, detailed in our March 27, 2024 Debevoise In Depth.[1] As previewed in that proposal, on April 19, 2024, the FDIC proposed an update to its Supplement to the Interagency Bank Merger Act Application Form (“Proposed Supplement”).[2] The comment period on the Proposed Supplement and Proposed Statement of Policy ends on June 18, 2024. The FDIC estimates that all these changes in the Proposed Supplement will result in a “234-hour increase in burden hours” for applicants required to file the Proposed Supplement.
As expected, the FDIC’s Proposed Supplement dramatically expands the scope of relevant geographic markets for entities involved in the merger transaction and, as previewed in our Debevoise In Depth, contains a new section requiring documentation prepared by management, consultants and others in support of the merger transaction. The proposed changes will only apply to (1) transactions where the acquirer is a bank whose primary federal regulator is the FDIC; and (2) nonbank “merger” and other transactions involving an insured bank over which the FDIC broadly asserts its jurisdiction, as described further in the Debevoise In Depth, although as a practical matter, the application of the Proposed Supplement will be more limited if a nonbank affiliate (rather than an unaffiliated party) is merging with an insured bank. Nonetheless, as with the FDIC’s proposed merger rules, the coordination of the federal banking agencies could lead to a broader application in practice by other banking agencies of at least elements of the Proposed Supplement.
Changes in the Proposed Supplement
An overview of the proposed changes in the Proposed Supplement is as follows:
- Identifying relevant geographic markets
- The definition of “geographic market” would be significantly expanded from its current focus on the “offices” of the target only. The Proposed Supplement includes the geographic markets of both the applicant and target entities, and their main offices and branches.
- Geographic markets for “banking services” would now also include “banking products or services” including private wealth management services.
- For each identified geographic market, the Proposed Supplement would require more information than currently, including: Federal Reserve System defined geographic markets, counties, cities, geographic code(s) and census tracks that constitute that market; a list of banking products or services provided in each market; the total dollar volume of deposits as reported in the most recent FDIC Summary of Deposits data book; the total number and dollar volume of loans according to the recorded address of the borrower; and “a narrative description of the relevant geographic market(s).”
- Competition in the relevant geographic market(s)
- The Proposed Supplement would require that the participating and competing institution schedules provided now be in relation to all of the relevant entities’ main offices and branches, not just the “institutions’ offices.” The Proposed Supplement specifies that this means the applicant’s, target’s and competitors’ main office and branches participating and competing within the relevant geographic market(s).
- Additional submission of transaction-related documents
- As previewed in the Debevoise in Depth, a new section, “Additional Information Related to the Transaction,” was added to the Proposed Supplement.
- Applicants would need to provide “all studies, surveys, analyses and reports” prepared for analyzing the merger transaction “by or for any officer(s), director(s), or supervisory deal team lead(s), including those prepared by investment bankers, consultants, or other third party advisors.”
- These required documents should be related to the merger transaction with respect to “market shares, competition, competitors, markets, potential for sales growth or expansion into product or geographic markets, and exit from, or curtailment of, products, services, or geographic markets.”
- Applicants would need to identify which of these documents relate to the “purpose(s)” of the transaction as described in Question 1 of the main Interagency Bank Merger Act Application, which asks for a description of the transaction’s “purpose, structure, significant terms, conditions, and termination dates of related contracts or agreement; and financing arrangements, including any plan to raise additional equity or incur debt.” [3]
We are happy to discuss.
[1] See our Debevoise In Depth on the FDIC’s Proposed Statement of Policy here.
[2] 89 Fed. Reg. 29245, available here.
[3] See the Interagency Bank Merger Act Application, available here.
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