FEDERAL DEPOSIT INSURANCE CORPORATION
RE: The Heritage Bank
Hinesville, Georgia
Application for Consent to Purchase Certain Assets and
Assume the Liability to pay Deposits, and to Establish One Branch
ORDER AND BASIS FOR CORPORATION APPROVAL
Pursuant to Section 18(c) and other provisions of the Federal
Deposit Insurance Act ("FDI Act"), The Heritage Bank, Hinesville,
Georgia ("Heritage"), an insured State nonmember bank with total
resources of $170,817,000 and total deposits of $149,129,000 as
of June 30, 1997, has filed an application for the Corporation's
consent to purchase certain assets of and to assume the liability
to pay deposits made in the Ludowici, Georgia, branch of The
Coastal Bank, Hinesville, Georgia ("Coastal"), an insured State
nonmember bank with total resources of $74,974,000 and total
deposits of $67,183,000 as of June 30, 1997, and to establish the
Ludowici, Georgia, branch of Coastal as a branch of Heritage.
Notice of the proposed transaction, in a form approved by the
Corporation, has been published pursuant to the FDI Act.
Competition
Six commercial banks operate 13 offices in Long County, Jesup
City, and Hinesville City which have been identified as the
relevant geographic market (RGM). Heritage's main office and six
branches are located in the RGM. Coastal's main office and one
branch are located in the RGM. Suntrust Bank, Southeast Georgia,
National Association, Brunswick, Georgia, Barnett Bank, National
Association, Jacksonville, Florida, Wayne National Bank, Jesup,
Georgia, and First Union National Bank, Charlotte, North
Carolina, each operate one branch within the RGM. Based on
June 30, 1996 Summary of Deposits data for banks, Heritage and
Coastal control 44.8 and 11.5 percent of RGM deposits,
respectively. The proposed transaction would increase Heritage's
share of RGM deposits to 47.2 percent and would result in a 174
point increase in the RGM's Herfindahl-Hirschman Index ("HHI") to
a post-merger level of 2,845.
The United States Department of Justice concluded that the
proposed transaction would not have a significantly adverse
effect on competition. The Federal Reserve Bank of Atlanta
("Federal Reserve") concluded that the proposed transaction could
have significantly anti-competitive effects, but advised that it
did not consider all of the economic factors that may be relevant
to the competitive effects of the proposed transaction. The
Federal Reserve defined the RGM as Long and Liberty Counties.
The other federal regulatory authorities offered no comments.
The Department of Banking and Finance for the State of Georgia
gave its approval to the proposed transaction on July 25, 1997.
The proposed transaction involves Coastal's Ludowici, Georgia,
branch. The city of Ludowici is in the geographic center of Long
County. Roughly two-thirds of Long County is bordered by Wayne
and Liberty Counties. The primary highway connecting these
counties is Federal Highway 84. Federal Highway 84 connects
Jesup City (Wayne County), Ludowici City (Long County), and
Hinesville City (Liberty County). Ludowici City is approximately
10 miles from either city.
The 1990 Census reported that only 18 percent of Long County's
employed residents work within this county. In fact, the 1990
Census indicated that 51 percent and 8 percent of Long County's
employed residents worked within Liberty and Wayne counties,
respectively. The significant number of Long County residents
working in Liberty County is largely due to the Fort Stewart
military installation and surrounding businesses located near
Hinesville City. The commute to work in Wayne County appears to
result from a number of manufacturing companies located near
Jesup City. Further review of the Cities of Hinesville and Jesup
revealed they provide various retail services not available in
Long County.
The considerable business activities, additional retail services,
and close proximity of Jesup and Hinesville Cities strongly
suggest banking offices located in these cities provide
reasonable banking alternatives to Long County residents. Based
on the aforementioned information, the Federal Deposit Insurance
Corporation concluded that the appropriate RGM for the proposed
transaction is Long County plus Jesup and Hinesville Cities.
The proposed transaction will increase the market concentration
within the RGM; however, there are other important factors that
should be considered when assessing the competitive effect of the
proposed transaction. The elevated pre- and post-merger HHI are
reflective of general market conditions within the State of
Georgia. An analysis of market concentration (bank only)
revealed 146 of the 157 Georgia Counties, or 93 percent, had an
HHI above 1,800. The number of banks and banking offices will
not be reduced. The most recent regulatory examinations of these
financial institutions indicate they are financially sound,
adequately capitalized, and satisfactorily managed. The Fort
Stewart Credit Union, which offers a variety of consumer banking
products, also operates within the RGM. Given the number and
capacity of financial institutions, it is believed competitive
conditions will not be significantly reduced within the RGM.
Coastal's Ludowici branch offers limited banking services.
Heritage plans to expand lending activities and banking services
offered at the Ludowici branch.
After giving consideration to the aforementioned factors, the
Board of Directors is of the opinion that the proposed
transaction will not substantially lessen competition, tend to
create a monopoly, or in any other manner restrain trade or
otherwise have an adverse competitive impact that would require
disapproval under the Bank Merger Act.
Financial and Managerial Resources; Future Prospects
Heritage is financially sound with solid capital, good asset
quality, healthy earnings, and strong management. Future
prospects are favorable.
Convenience and Needs of the Community to be Served
The scope and convenience of banking services offered to the
general public should not be significantly affected by the
proposal. Six financially sound banks, as well as the Fort
Stewart Credit Union, will remain within the RGM. Heritage will
expand banking services offered to Long County residents and
maintain the same level of banking services throughout the
remainder of the RGM. There have been no protests to the
proposed transaction from either the public or the banking
community. A review of available information revealed no
inconsistencies with the purposes of the Community Reinvestment
Act. The resultant institution is expected to continue to meet
the credit needs of its entire community, consistent with the
safe and sound operation of the institution.
Upon consideration of all relevant material, the Board of
Directors has concluded that the application should be and hereby
is approved, subject to the following conditions:
1. That the transaction shall not be consummated before the
fifteenth calendar day following the date of this Order
or no later than six months after the date of this Order
unless such period is extended for good cause by the
Corporation;
2. That all necessary and final approvals be received from
other regulatory authorities; and
3. That, until the proposed transaction becomes effective,
the Corporation shall have the right to alter, suspend,
or withdraw its approval should any interim development
be deemed by the Board of Directors to warrant such
action.
Dated at Washington, D.C., this 14th day of October, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
James D. LaPierre
Deputy Executive Secretary
