Decisions on Bank Applications
FEDERAL DEPOSIT INSURANCE CORPORATION
RE: Plumas Bank Quincy, California
Applications for Consent to Purchase Certain Assets and Assume the Liability to Pay Deposits, to Establish One Branch, and to Relocate a Branch
ORDER AND BASIS FOR CORPORATION APPROVAL
Pursuant to Section 18(c) and other provisions of the Federal Deposit Insurance Act ("FDI Act"), Plumas Bank, Quincy, California ("Plumas"), has filed an application for the Federal Deposit Insurance Corporation's ("FDIC") consent to purchase certain assets of and to assume the liability to pay deposits made in the Chester, California, and Fall River Mills, California, branches of Bank of America, National Trust and Savings Association, San Francisco, California ("BOA"). Plumas, an insured state nonmember bank, has total assets of $153,122,000 and total deposits of $140,101,000 as of June 30, 1997. As a result of the transaction, Plumas will acquire assets of approximately $902,000 and deposits of approximately $27,400,000. BOA is an insured national bank with total assets of $224,342,000,000 and total deposits of $111,413,000,000 as of June 30, 1997. Additionally, Plumas has applied for the FDIC's consent to establish the Fall River Mills office of BOA as a branch. Plumas has also requested consent to relocate its Chester branch from 125 Main Street to 255 Main Street, Chester, California, the location of the office acquired from BOA. Notice of the proposed transaction, in a form approved by the Corporation, has been published pursuant to the FDI Act.
In considering this application, the FDIC defined two relevant geographic markets ("RGM"), otherwise known as the Chester and Fall River Mills markets. Five insured depository institutions operate nine offices in the Chester market, which consists of the towns of Chester, Westwood, and Susanville, California. Four depository institutions operate six offices in the Fall River Mills market, which is comprised of the towns of Fall River Mills, Burney, and Bieber, California. Two of Plumas' seven branches are located in the Chester market. Plumas does not currently operate in the Fall River Mills market. BOA operates two branches in the Chester market and one branch in the Fall River Mills market.
Based on June 30, 1997, Summary of Deposits data for banks, Plumas and BOA controlled 34.0 and 33.8 percent of deposits, respectively, in the Chester market. This transaction would increase Plumas' market share to 43.24 percent and result in a 168- point increase in the market's Herfindahl-Hirschman Index ("HHI'l) to a post-merger level of 3,060.
BOA currently operates two branches in the Chester market, only one of which is to be acquired by Plumas. BOA is to retain its office in Susanville. Thus, the number of banks competing in the market will remain the same after the sale. Moreover, it is anticipated that some of BOA's deposits from its Chester branch will be retained by BOA and will not transfer to Plumas. Because it will retain an office in the Chester market, BOA can continue to attract banking customers from throughout the market area.
Based on June 30, 1997, Summary of Deposits data for banks, BOA controlled 21.1 percent of deposits in the Fall River Mills market. Plumas would simply be entering the Fall River Mills market and assuming BOA's market share. The HHI would remain unchanged at 3,780.
The U.S. Department of Justice concluded that the proposed transaction would not have a significantly adverse effect on competition. The Federal Reserve Bank of San Francisco concluded that the proposed transaction could have significant 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 transaction. Other federal regulatory authorities offered no comments. The California State Department of Financial Institutions approved the transaction on October 16, 1997.
After giving consideration to the factors cited above, the Board of Directors concludes 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
Plumas is in generally satisfactory condition with adequate capital and satisfactory management. Future prospects appear 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 transaction. The number of banking institutions will not change in either market. Five banks in the Chester market, including BOA, and four in the Fall River Mills market, will remain.
Absent the sale of the BOA branches, BOA has stated its intention to close the branches and merge their operations into other BOA operating facilities. The sale of the Fall River Mills branch will be less disruptive to the communities than closing the branch. Closure of BOA's Fall River Mills branch would require residents of that town to travel to another town in the market to find an alternative to the single bank left in Fall River Mills.
Plumas currently provides and will continue to provide similar services offered by BOA. In Chester, Plumas will combine its operations with and into BOA's branch. The two branches are within one-half mile of each other. There have been no protests to the 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 communities, consistent with the safe and sound operation of the institution.
Upon consideration of all relevant material, the Board of Directors has concluded that the applications should be and hereby are 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 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 10th day of February, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
Robert E. Feldman