Magazine article American Banker

Fed Approves Change-in-Control Application against Wishes of Minn. Bank

Magazine article American Banker

Fed Approves Change-in-Control Application against Wishes of Minn. Bank

Article excerpt

Byline: Hilary Burns

The Federal Reserve has approved an acquisition in Minnesota that goes against the wishes of the targeted institution.

Natcom Bancshares in Superior, Wis., had applied to buy 49% of the voting shares of Republic Bancshares in Duluth, Minn. The transaction, which the Fed approved on Monday, will give Natcom indirect control over the $399 million-asset Republic's bank.

Republic's management opposed the application, warning that it could lose its status as an S corporation if a change in control took place. Such a change could have negative tax implications for other Republic investors and lead to shareholder litigation, it claimed.

Critics said the transaction could give Natcom's $610 million-asset bank access to sensitive Republic data. They also noted that both banks currently operate in Duluth.

The Fed pushed back against those objections, starting its review under the Bank Holding Company Act does not take into account the wishes of the targeted bank's management team.

Republic's corporate status, and its impact on investors, is a legal matter that does not "fall within the scope of statutory factors" the Fed is required to consider, the approval said. The Fed noted that Natcom and Republic will run separate banks and that Natcom has no plans to change Republic's programs, products and services.

Natcom had already entered into a consent order with the Minnesota Department of Commerce that limits its access to competitive information that would normally be available to Republic shareholders, including records of shareholder and board proceedings and certain financial statements. …

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