Decisions on Bank Applications

Peninsula Bank

FEDERAL DEPOSIT INSURANCE CORPORATION

Re: Peninsula Bank, Princess Anne, Maryland
Application for Consent to Merge and Establish Seven Branches

ORDER AND BASIS FOR CORPORATION APPROVAL

Pursuant to Section 18(c) and other provisions of the Federal Deposit Insurance ("FDI") Act, Peninsula Bank, Princess Anne, Somerset County, Maryland, an insured state nonmember bank with total resources of $541,898,000 and total deposits of $454,082,000 as of September 30, 2000, has filed an application for the Corporation's consent to merge under its charter and title with The Bank of Fruitland, Fruitland, Wicomico County, Maryland, an insured state nonmember bank with total resources of $134,476,000 and total deposits of $117,294,000 as of September 30, 2000, and to establish the seven offices of The Bank of Fruitland as branches of the resultant bank. Notice of the proposed transaction, in a form approved by the Corporation, has been published pursuant to the FDI Act.

A review of available information, including the Community Reinvestment Act ("CRA") Statements of the proponents, discloses no inconsistencies with the purposes of the Community Reinvestment Act. The resultant bank is expected to continue to meet the credit needs of its entire community, consistent with the safe and sound operation of the institution.

The Corporation has taken into consideration the competitive effects of the proposed transaction in the relevant geographic market, which consists of three contiguous counties in Maryland's lower Eastern Shore: Somerset, Wicomico, and Worcester. The applicant has a branch network in each of the three counties and draws from 25 percent to 36 percent of its deposits from each county. The proposed transaction would result in a 311 point increase in the Herfindahl Hirschman Index for a post-merger level in the relevant geographic market of 1,413, based on deposit figures as of June 30, 1999. Peninsula Bank controls the largest percentage of deposits in the market area with 23 percent, which will increase to 30 percent post-merger.

Despite the increase in Peninsula Bank's market share, the merger will not have a significantly adverse impact on competition. Fifteen other banks and thrifts compete in the relevant geographic market as well as six credit unions and eleven finance companies. The three-county area is served by two major highways that converge at Salisbury in Wicomico County. Residents and business owners in each of the three counties have easy access to Salisbury, which serves as the center for shopping, medicine, education, and finance. Approximately 25 percent of the workers of Somerset and Worcester Counties are employed outside of their county of residence; many work in Salisbury, or in the case of Somerset County workers, in Ocean City, Maryland. Eight radio stations, four television stations, and the market's largest newspaper are located in Salisbury, and alternative suppliers of financial services use this centralized media network to advertise their products throughout the three-county area. The market's highway system, employment and shopping patterns, and media facilitate the opportunity for consumers to make informed buying decisions of banking products from alternative suppliers.

In addition to the competitive impact of the proposed transaction, the Corporation has considered Peninsula Bank's financial and managerial resources, the future prospects of the resultant bank; and the convenience and needs of the community to be served. Having found favorably on all statutory factors and having considered other relevant information, including reports on the competitive factors furnished by the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Director of the Office of Thrift Supervision and the Attorney General of the United States, it is the Corporation's judgment that the application should be and hereby is approved.

The transaction shall not be consummated before the fifteenth calendar day following the date of this Order or later than six months after the date of this Order, unless such period is extended for good cause by the Corporation. 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 to warrant such action.

By Order of the Associate Director of the Division of Supervision, acting pursuant to delegated authority for the Board of Directors of the Corporation.

Dated at Washington, D.C., this 15th day of November, 2000.

John M. Lane
Associate Director
Division of Supervision