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Decisions on Bank Applications

Untitled Document

The Heritage Bank


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


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.


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.


James D. LaPierre
Deputy Executive Secretary