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ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT.

Orders Issued Under Section 3 of the Bank Holding Company Act

Old Kent Financial Corporation Grand Rapids, Michigan

Order Approving Merger of Bank Holding Companies, Merger of Banks, and Establishment of Branches

Old Kent Financial Corporation ("Old Kent"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. [sections] 1842) to merge with Merchants Bancorp, Inc., ("Merchants"), and thereby acquire Merchants's subsidiary bank, Merchants National Bank of Aurora ("Merchants Bank"), both in Aurora, Illinois. Old Kent Bank, Grand Rapids, Michigan ("Old Kent Bank"), a state member bank, has applied under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. [sections] 1828(c)) (the "Bank Merger Act") to merge with Merchants Bank, and to retain and operate branches at the locations of the main office and branches of Merchants Bank.(1)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (64 Federal Register 66,189 (1999)). As required by the Bank Merger Act and the Board's Rules of Procedure (12 C.F.R. 262.3(b)), reports on the competitive effects of the merger were requested from the U.S. Attorney General and the other federal banking agencies. The time for filing comments has expired, and the Board has considered the proposal in light of the factors set forth in section 3 of the BHC Act and the Bank Merger Act.

Old Kent, with total consolidated assets of $17.7 billion, is the 47th largest commercial banking organization in the United States, controlling less than 1 percent of the total assets of insured commercial banks in the United States.(2) Old Kent operates in Michigan, Illinois, and Indiana. Old Kent is the seventh largest depository institution in Illinois, controlling deposits of $4.2 billion, representing approximately 2 percent of total deposits in depository institutions in the state.(3)

Merchants, with total consolidated assets of $987.9 million, is the 43rd largest depository institution in Illinois, controlling deposits of $686.3 million, representing less than 1 percent of total deposits in depository institutions in the state.

After consummation of the proposal, Old Kent would become the 44th largest commercial banking organization in the United States, with total consolidated assets of $18.7 billion, representing less than 1 percent of total banking assets. Old Kent would become the fifth largest depository institution in Illinois, controlling deposits of $4.9 billion, representing approximately 2.3 percent of total deposits in depository institutions in the state.

Interstate Analysis

Section 3(d) of the BHC Act allows the Board to approve an application by a bank holding company to acquire control of a bank located in a state other than the home state of such bank holding company if certain conditions are met.(4) For purposes of the BHC Act, the home state of Old Kent is Michigan, and Old Kent proposes to acquire Merchants Bank, which is located in Illinois. All the conditions for an interstate acquisition enumerated in section 3(d) are met in this case.(5) In light of all the facts of record, the Board is permitted to approve the proposal under section 3(d) of the BHC Act.

Competitive Factors

Section 3 of the BHC Act and the Bank Merger Act prohibit the Board from approving a proposal that would result in a monopoly or be in furtherance of a monopoly. Both the BHC Act and the Bank Merger Act also prohibit the Board from approving a proposal that would substantially lessen competition in any relevant banking market unless the anticompetitive effects of the proposal in that banking market are clearly outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served.(6)

Old Kent and Merchants compete directly in the Aurora, Illinois banking market.(7) Old Kent is the fifth largest depository institution in the Aurora banking market, controlling deposits of $205.6 million, representing approximately 5.7 percent of total deposits in the market ("market deposits").(8) Merchants is the second largest depository institution in the Aurora banking market, controlling deposits of $641.2 million, representing approximately 17.7 percent of market deposits. On consummation of the proposal, Old Kent would become the largest depository institution in the Aurora banking market, controlling $846.7 million of deposits, representing 23.3 percent of market deposits. The change in market concentration, as measured by the Herfindahl-Hirschman Index ("HHI"), is consistent with prior Board precedent and the Department of Justice Merger Guidelines ("DOJ Guidelines").(9)

The Department of Justice has reviewed the proposal and advised the Board that consummation of the proposal would not likely have a significantly adverse competitive effect in the Aurora banking market.

Based on these and all other facts of record, the Board concludes that consummation of the proposal would not result in any significantly adverse effects on competition or on the concentration of banking resources in the Aurora banking market or any other relevant banking market.

Other Factors

Both the BHC Act and the Bank Merger Act require the Board to consider the financial and managerial resources and future prospects of the companies and banks involved in the proposal and certain other supervisory factors. The Board has reviewed these factors in light of all the facts of record, including reports of examination, other confidential supervisory information assessing the financial and managerial resources of the organizations, and financial information provided by Old Kent. The Board notes that Old Kent and Merchants and their subsidiary banks currently are well capitalized and are expected to remain so on consummation of the proposal. Based on all the facts of record, the Board concludes that the financial and managerial resources and the future prospects of Old Kent, Merchants, and their respective subsidiary banks, are consistent with approval, as are the other supervisory factors the Board must consider under section 3 of the BHC Act and the Bank Merger Act.

In addition, the Board is required to consider the effect of the proposal on the convenience and needs of the communities to be served. The Board has carefully considered the effect of the proposal on the convenience and needs of the communities to be served in light of all the facts of record, including the records of performance of the depository institutions of Old Kent under the Community Reinvestment Act (12 U.S.C. [sections] 2901 et seq.) ("CRA"),(10) the lending records of Old Kent Bank and its subsidiaries, the policies and

programs designed to ensure compliance with the fair lending laws, recent data provided by Old Kent's depository institutions in regulatory reports, confidential supervisory information, and information provided by Old Kent. Based on all the facts of record, the Board concludes that considerations relating to the convenience and needs factor are consistent with approval of the proposal.

Conclusion

Based on the foregoing, and in light of all the facts of record, the Board has determined that the applications should be, and hereby are, approved. The Board's approval is specifically conditioned on compliance by Old Kent with all the commitments made in connection with these applications, and on the receipt by Old Kent of all necessary approvals from state regulators. For purposes of this action, the commitments and conditions relied on by the Board in reaching its decision are deemed to be conditions imposed in writing by the Board in connection with its findings and decision and, as such, may be enforced in proceedings under applicable law.

The acquisition of Merchants shall not be consummated before the fifteenth calendar day following the effective date of this order, or later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Chicago, acting pursuant to delegated authority.

By order of the Board of Governors, effective January 27, 2000.

Voting for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Kelley, and Gramlich. Absent and not voting: Governor Meyer.

ROBERT DEV. FRIERSON Associate Secretary of the Board

(1.) Old Kent proposes to merge a wholly owned acquisition subsidiary with and into Merchants, with Merchants as the surviving corporation. Immediately thereafter, Merchants would be liquidated and Merchants Bank would be merged with and into Old Kent Bank, with Old Kent Bank as the surviving depository institution.

(2.) All asset data are as of September 30, 1999, and all deposit data are as of June 30, 1998.

(3.) In this context, depository institutions include commercial banks, savings banks, and savings associations.

(4.) See 12 U.S.C. [sections] 1842(d). A bank holding company's home state is the state in which the total deposits of all banking subsidiaries of such company were the largest on July l, 1966, or the date on which the company became a bank holding company, whichever is later. 12 U.S.C. [sections] 1841(o)(4)(C).

(5.) 12 U.S.C. [subsections] 1842(d)(l)(A) and (B) and 1842(d)(2)(A) and (B). Old Kent meets the capital and managerial requirements established under applicable law. Merchants Bank has been in existence and operated for the minimum period of time required by applicable state law. On consummation, Old Kent would control less than 10 percent of the total amount of deposits of insured depository institutions in the United States and less than 30 percent of total deposits held by insured depository institutions in Illinois, the state in which Old Kent and Merchants both operate insured depository institutions. See 205 Ill. Comp. Stat. 5/21.3 (West 1999). All other requirements under section 3(d) of the BHC Act would be met on consummation of the proposal.

(6.) See 12 U.S.C. [sections] 1842(c).

(7.) The Aurora banking market is defined as the southern part of Kane County; Plano, Bristol, Oswego, Fox, and Kendall Townships in Kendall County; and Sandwich Township in DeKalb County, all in Illinois.

(8.) Market share data are based on calculations that include the deposits of thrift institutions, which include savings banks and savings associations, weighted at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See, e.g., Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the Board regularly has included thrift deposits in the calculation of market share on a 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991).

(9.) Under the DOJ Guidelines (49 Federal Register 26,923 (June 29, 1984)), a market in which the post-merger HHI is more than 1000 and less than 1800 is considered to be moderately concentrated. The Department of Justice has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by more than 200 points. The Department of Justice has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effects of limited-purpose lenders and other nondepository financial institutions. On consummation of this proposal, the HHI would increase by 199 points to 1315 and the Aurora banking market would remain moderately concentrated, as measured by the HHI.

(10.) The Interagency Questions and Answers Regarding Community Reinvestment provides that an institution's most recent CRA performance evaluation is an important and often controlling factor in the consideration of an institution's CRA record because it represents a detailed evaluation of the institution's overall record of performance under the CRA by its appropriate federal banking supervisor. 64 Federal Register 23,618 and 23,641 (1999). Old Kent Bank received a "satisfactory" rating at its most recent CRA performance examination by the Federal Reserve Bank of Chicago, as of August 1997. Old Kent Bank, National Association, Jonesville, Michigan, received a "satisfactory" rating at its most recent CRA performance examination by the Office of the Comptroller of the Currency, as of April 1999.

Orders Issued Under Section 4 of the Bank Holding Company Act

First National Corp. of Ardmore, Inc. Ardmore, Oklahoma

Order Approving Notice to Engage in Nonbanking Activities

First National Corp. of Ardmore, Inc. ("FNC"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. [sections] 1843(c)(8)) and section 225.23 of the Board's Regulation Y (12 C.F.R. 225.23) to acquire 33.3 percent of the outstanding voting shares of Southern Land Title Services, Inc., Ardmore, Oklahoma ("Southern"),(1) and thereby engage in real estate settlement and title abstracting activities.(2) FNC, with total consolidated assets of approximately $243.9 million, controls one subsidiary bank in Oklahoma.(3)

The Board previously has determined by order that real estate settlement and title abstracting activities are closely related to banking and permissible for bank holding companies under section 4(c)(8) of the BHC Act.(4) Notificant has committed that it will conduct these activities in accordance with the limitations set forth in Regulation Y and the Board's orders and interpretations relating to these activities.

In order to approve the proposal, the Board also must determine that performance of the proposed activities is a proper incident to banking, that is, that the performance of the proposed activity by FNC "can reasonably be expected to produce benefits to the public ... that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."(5)

As part of its evaluation of these factors, the Board has considered the financial and managerial resources of FNC and the effect of the transaction on those resources. Management of Southern would not change as a result of this transaction, and the acquisition would not require additional managerial resources from FNC. There is no evidence in the record indicating that consummation of this proposal is likely to result in significantly adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices.

FNC has indicated that combining the resources and operations of FNC with the real estate settlement and title abstracting activities of Southern, Carter and Executive will result in enhanced real estate settlement and title abstracting services, including better recordkeeping of real estate related transactions. In addition, as the Board has previously noted, there are public benefits to be derived from permitting capital markets to operate so that bank holding companies can make potentially profitable investments in nonbanking companies and from permitting banking organizations to allocate their resources in the manner they consider to be most efficient when such investments and actions are consistent, as in this case, with the relevant considerations under the BHC Act.(6)

Based on the foregoing and all the other facts of record, including the commitments made by FNC, the Board has determined that the performance of the proposed activity by FNC can reasonably be expected to produce benefits to the public that would outweigh any likely adverse effects under the proper incident to banking standard of section 4(c)(8) of the BHC Act.

Based on all the facts of record, including the commitments and representations made by FNC, and subject to the terms and conditions set forth in this order, the Board has determined that the notice should be, and hereby is, approved. This determination is subject to all the conditions set forth in the Board's Regulation Y, including those in sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and 225.25(c)), the conditions in related orders governing the proposed activities, and the Board's authority to require modification or termination of the activity of a bank holding company or any of its subsidiaries, as the Board finds necessary to ensure compliance with, or to prevent evasion of, the provisions and purposes of the BHC Act and the Board's regulations and orders issued thereunder. The Board's decision is specifically conditioned on compliance with all the commitments made in the notice, including the commitments and conditions discussed in this order. The commitments and conditions relied on in reaching this decision shall be deemed to be conditions imposed in writing by the Board in connection with its findings and decision and, as such, may be enforced in proceedings under applicable law.

The proposal shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or the Federal Reserve Bank of Kansas City, acting pursuant to delegated authority.

By order of the Board of Governors, effective January 10, 2000.

Voting for this action: Chairman Greenspan and Governors Kelley, Meyer, and Gramlich. Absent and not voting: Vice Chairman Ferguson.

ROBERT DEV. FRIERSON Associate Secretary of the Board

(1.) Southern owns four subsidiaries, Ardmore Abstract Company ("Ardmore"), Carter County Abstract Company ("Carter"), Executive Escrow and Closing Services, Inc. ("Executive"), and Consolidated Abstract Company, Inc. ("Consolidated"), all in Ardmore, Oklahoma. FNC proposes to acquire Southern, Carter, and Executive, which would provide abstracting and real estate settlement services to the public without preference for customers of FNC. FNC would also acquire Consolidated, which is inactive and would remain so after consummation of this proposal. The current owners of Southern would retain Ardmore, which would provide title insurance, and neither FNC nor Southern would have any ownership interest in Ardmore or provide title insurance. In addition, neither NFC nor Southern would provide any insurance against title detects, guarantee any title, provide any certification with respect to a title, ar be responsible for any detects in a title.

(2.) Real estate title abstracting, as proposed by Notificant, is limited to reporting factual information concerning the interests in or ownership of selected real property.

(3.) Banking data are as of September 30, 1999.

(4.) See, 12 C.F.R. 225.28(b)(2), and The First National Company, 81 Federal Reserve Bulletin 805 (1995).

(5.) 12 U.S.C. [sections] 1843(c)(8).

(6.) See, e.g., Bane One Corporation, 84 Federal Reserve Bulletin 553 (1998); First Union Corporation, 84 Federal Reserve Bulletin 489 (1998).

North Fork Bancorporation, Inc. Melville, New York

Order Approving the Acquisition of a Savings Association

North Fork Bancorporation, Inc., Melville, New York ("North Fork"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. [sections] 1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire all the voting shares of JSB Financial, Inc. ("JSB") and thereby acquire JSB's wholly owned subsidiary, Jamaica Savings Bank FSB ("Jamaica Savings"), both of Lynbrook, New York.(1)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (64 Federal Register 56,791 (1999)). The time for filing comments has expired, and the Board has considered the notice and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act.

North Fork, with total consolidated assets of $11.5 billion, is the 15th largest depository institution in New York, controlling deposits of approximately $6.3 billion, representing 1.5 percent of total deposits in depository institutions in the state ("state deposits").(2) JSB is the 39th largest depository institution in New York, controlling deposits of $1.2 billion, representing less than 1 percent of state deposits. On consummation of the proposal and the Reliance transaction, North Fork would become the 11th largest depository institution in New York, controlling deposits of approximately $9.1 billion, representing approximately 2.2 percent of state deposits.

The Board previously has determined by regulation that the operation of a savings association by a bank holding company is closely related to banking for purposes of section 4(c)(8) of the BHC Act.(3) The Board requires that savings associations acquired by bank holding companies conform their direct and indirect activities to those permissible for bank holding companies under section 4 of the BHC Act. North Fork has committed to conform all the activities of Jamaica Savings to those permissible under section 4(c)(8) of the BHC Act and Regulation Y.

Competitive Considerations

In order to approve the proposal, the Board also is required by section 4(c)(8) of the BHC Act to determine that the acquisition of JSB by North Fork "can reasonably be expected to produce benefits to the public ... that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices."(4) As part of its consideration of these factors, the Board has considered carefully the competitive effects of the proposal in light of all the facts of record.(5)

North Fork and JSB compete directly in the Metropolitan New York/New Jersey banking market.(6) On consummation of the proposal and the Reliance transaction, North Fork would be the 10th largest depository institution in the Metropolitan New York/New Jersey banking market, controlling deposits of $9.3 billion, representing approximately 2.2 percent of market deposits.(7) The Herfindahl-Hirschman Index ("HHI") would decrease by 3 points to 783, and numerous competitors would remain in the market.(8) Based on these and all other facts of record, the Board concludes that consummation of the proposal would not result in any significantly adverse effects on competition or on the concentration of banking resources in the New York banking market or any other relevant banking market.

Record of Performance Under the Community Reinvestment Act

In acting on notices to acquire a savings association, the Board reviews the records of performance of the relevant depository institutions under the Community Reinvestment Act (12 U.S.C. [sections] 2901 et seq.)("CRA").(9) The Board has reviewed the record of performance of North Fork Bank in light of all the facts of record, including comments received from Inner City Press/Community on the Move ("ICP"). ICP contends that the number and volume of small business loans made by North Fork Bank in the Bronx and in predominantly minority and low- and moderate-income ("LMI") areas of New York City are inadequate in comparison to North Fork Bank's market share of deposits in these areas and in comparison to North Fork Bank's lending record in other parts of its assessment area. ICP also maintains, based primarily on data filed under the Home Mortgage Disclosure Act (12 U.S.C. [sections] 280l et seq.) ("HMDA"), that North Fork Bank's record of home mortgage lending indicates disparities in the bank's treatment of minorities in New York City and in Nassau and Suffolk Counties.

A. CRA Performance Examinations

As provided in the CRA, the Board evaluates an institution's record of performance in light of examinations for CRA performance conducted by the appropriate federal supervisors. An institution's most recent CRA performance evaluation is a particularly important consideration in the application process, because it represents a detailed on-site evaluation of the institution's overall record of performance under the CRA by its appropriate federal supervisor.(10)

North Fork Bank received an overall rating of "satisfactory" from its primary federal supervisor, the FDIC, at its most recent evaluation for CRA performance, as of March 1997 ("1997 Examination"). As of the same date, theNYSBD rated as "satisfactory" North Fork Bank's performance in helping to meet the credit needs of its entire community pursuant to New York law ("State Examination").(11) Jamaica Savings also received an overall rating of "satisfactory" from its primary federal supervisor, the Office of Thrift Supervision, at its most recent evaluation for CRA performance, as of August, 1996.

B. Lending Record of North Fork Bank

During 1998, the Board twice reviewed North Fork's record of CRA performance in light of comments submitted by ICP.(12) For reasons set forth in detail in those orders, the Board concluded that the CRA performance record of North Fork was consistent with approval under the BHC Act.(13)

The 1997 Examination commended North Fork Bank for its record of lending in LMI areas and to LMI individuals, based on HMDA data for 1995 and 1996. In 1997 and 1998, North Fork Bank continued to make a higher percentage of HMDA-related loans(14) in LMI census tracts than did lenders in the aggregate.(15) In 1998, North Fork Bank made 30.9 percent of its HMDA-related loans in LMI census tracts, compared with 14.1 percent by lenders in the aggregate.(16) North Fork Bank also increased the percentage of its HMDA-related loans that it made to LMI individuals from 17 percent in 1995 to 22 percent in each of 1997 and 1998.(17)

Mortgage loans on multifamily rental dwellings ("multifamily loans") constituted a primary credit product offered by North Fork Bank to address housing-related credit needs in its assessment area. The State Examination of North Fork Bank found that multifamily loans represented 71 percent by dollar volume of all HMDA-related loans made by the bank in 1996. In 1998, North Fork Bank originated $293 million in multifamily loans, which accounted for 49.3 percent by dollar volume of all North Fork Bank's HMDA-related loans for the year.(18) Also in 1998, North Fork Bank originated 48 percent of its multifamily loans in LMI census tracts, and 43 percent of its multifamily loans in minority census tracts.

North Fork Bank engages in a significant amount of small business lending. In 1998, North Fork Bank made 2,075 loans to small businesses.(19) Of those loans, 23 percent were made in LMI census tracts in North Fork Bank's assessment area, compared with 17 percent for lenders in the aggregate. In 1998, North Fork Bank also increased its loans to small businesses in minority census tracts in its assessment area, to 136, from 104 in 1997.(20)

ICP alleges that HMDA data from North Fork Bank indicate that the bank discriminates against minorities in violation of fair lending laws. North Fork denies these allegations and has provided HMDA data and other information on its lending programs designed to serve minority and LMI communities. In 1998 in North Fork Bank's assessment area in the New York City Metropolitan Statistical Area, for example, North Fork Bank's denial disparity ratio for African Americans was 1.32:1, compared with 1.69:1 for lenders in the aggregate, and North Fork Bank's denial disparity ratio for Hispanics was 0.9:1, compared with 1.52:1 for lenders in the aggregate.(21) In the Nassau-Suffolk Metropolitan Statistical Area, however, North Fork Bank's denial disparity ratios in 1998 were 2.27:1 for African Americans and 2.92:1 for Hispanics, compared with denial disparity ratios of 1.82:1 and 1.48:1, respectively, for lenders in the aggregate. For its assessment area overall, North Fork Bank's 1998 denial disparity ratios were 1.70:1 for African Americans and 1.81:1 for Hispanics, compared with 1.74:1 and 1.52:1 for lenders in the aggregate.(22)

The Board is concerned when an institution's record indicates any such disparities and believes that all banks are obligated to ensure that their lending practices are based on criteria that assure not only safe and sound banking, but also equal access to credit by creditworthy applicants regardless of race. The Board recognizes, however, that HMDA data alone provide an incomplete measure of an institution's lending in its community and have limitations that make the data an inadequate basis, absent other information, for concluding that an institution has engaged in illegal discrimination in making lending decisions.(23)

Because of the limitations of HMDA data, the Board has carefully reviewed other information concerning North Fork Bank's record of lending to minority and LMI individuals. In particular, the Board has carefully reviewed examination reports, which provide on-site evaluations of compliance by North Fork Bank with the fair lending laws. In the 1997 Examination, FDIC examiners found no evidence of prohibited discriminatory practices or of any practices intended to discourage applications for the types of credit set forth in the bank's CRA statement.(24) NYSBD examiners also found no evidence of any prohibited discriminatory or illegal credit practices in their 1997 evaluation of North Fork Bank. In addition, FDIC examiners concluded that North Fork Bank's management had demonstrated a commitment to making loans in LMI census tracts and to LMI individuals and favorably noted that the bank had a formal "second review" process for all residential mortgage loan applications before issuing an adverse action letter.

The Board also has considered the quarterly reports concerning the lending activity of North Fork Bank during 1998 and the first quarter of 1999 that were submitted by North Fork to the Federal Reserve Bank of New York as required in the New York Bancorp Order, and confidential information provided by the FDIC and the NYSBD concerning North Fork Bank's lending activities. These reports and information also indicate in general that North Fork Bank continues to address the disparities in its lending record.

North Fork Bank also is involved in several initiatives to assist in meeting the credit needs of LMI communities and individuals. North Fork Bank continues to offer mortgage loans through State of New York Mortgage Agency programs, originating a total of 48 such loans in 1998 and the first three quarters of 1999. North Fork Bank also originated 171 loans during the first three quarters of 1999 through its proprietary Affordable Housing Programs, which provide below market interest rate loans to LMI borrowers, and reduced private mortgage insurance requirements. North Fork Bank also has invested $4.2 million in the Community Preservation Corporation, a private, nonprofit lender focusing on financing LMI housing, and has outstanding commitments of $800,000 to Neighborhood Housing Services of New York City, which assists in creating and preserving affordable housing in New York City neighborhoods.

C. Branch Closings

ICP also expresses concern that consummation of the proposal would result in branch closings. North Fork has stated that the proposal is likely to result in some consolidation involving pairs of newly acquired and existing North Fork Bank branches. North Fork has submitted preliminary and confidential information identifying these branches and has indicated that it has not made a final determination on the consolidation of any branch.(25)

The Board has carefully considered all the facts of record concerning branch closings, including the preliminary branch consolidation information submitted by North Fork and North Fork's record in opening and closing branches. The Board notes that only one pair of branches under consideration for consolidation is in an LMI area. Furthermore, examiners at the most recent CRA examination of North Fork Bank reviewed its record of opening and closing branches and found that none of the branches closed from 1995 to 1997 were in an LMI census tract. Examiners also found that in all instances of branch closings, North Fork Bank had an existing branch near the closed branch. The Board notes that any branches closed would be closed pursuant to North Fork Bank's branch closing policy, which requires consideration of the community's needs and the impact of the closing on the neighborhood. The FDIC has reviewed North Fork Bank's branch closing policy and found it satisfactory.

The Board also has considered that federal banking law provides a specific mechanism for addressing branch closings. Federal law requires an insured depository institution to provide notice to the public and to the appropriate federal supervisory agency before closing a branch.(26) The law does not authorize federal regulators to prevent the closing of any branch. Any branch closings resulting from the proposal will be considered by the appropriate federal supervisor at the next CRA examination of the relevant subsidiary depository institution.

D. Conclusion on CRA Performance Records

The Board has carefully considered all the facts of record, including ICP's comments, in reviewing the CRA performance records of the institutions involved. Based on a review of the entire record, and for the reasons discussed above, the Board concludes that the CRA performance records of the institutions involved, including North Fork Bank, are consistent with approval of the proposal.

Other Considerations

In connection with its review of the public interest factors under section 4 of the BHC Act, the Board also has carefully reviewed the financial and managerial resources of North Fork and JSB and their respective subsidiaries and the effect the transaction would have on such resources in light of all the facts of record.(27) The Board has reviewed, among other things, confidential reports of examination and other supervisory information received from the primary federal supervisors of the organizations. Based on all the facts of record, the Board concludes that the financial and managerial resources of the organizations involved in the proposal are consistent with approval.

The record indicates that consummation of the proposal would result in benefits to consumers and businesses. The proposal would enable North Fork to provide Jamaica Savings' customers with access to a broad array of products and services, including commercial bank products, throughout an expanded service area. Additionally, there are public benefits to be derived from permitting capital markets to operate so that bank holding companies may make potentially profitable investments in nonbanking companies and from permitting banking organizations to allocate their resources in the manner they believe is most efficient when, as in this case, those investments are consistent with the relevant considerations under the BHC Act. Based on all the facts of record, the Board has determined that consummation of this proposal can reasonably be expected to produce public benefits that would outweigh any likely adverse effects under the proper incident to banking standard of section 4(c)(8) of the BHC Act.

Conclusion

Based on the foregoing and all the facts of record, the Board has determined that the notice should be, and hereby is, approved. The Board's approval of the proposal is specifically conditioned on compliance by North Fork with the commitments made in connection with this notice. The Board's determination also is subject to all the conditions in Regulation Y, including those in sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and 225.25(c)), and to the Board's authority to require such modification or termination of the activities of a holding company or any of its subsidiaries as the Board finds necessary to ensure compliance with, or to prevent evasion of, the provisions and purposes of the BHC Act and the Board's regulations and orders issued thereunder. The commitments and conditions relied on by the Board in reaching this decision shall be deemed to be conditions imposed in writing by the Board in connection with its findings and decision and, as such, may be enforced in proceedings under applicable law.

This transaction shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or the Federal Reserve Bank of New York, acting pursuant to delegated authority.

By order of the Board of Governors, effective January 10, 2000.

Voting for this action: Chairman Greenspan and Governors Kelley, Meyer, and Gramlich. Absent and not voting: Vice Chairman Ferguson.

ROBERT DEV. FRIERSON Associate Secretary of the Board

(1.) North Fork's wholly owned subsidiary bank, North Fork Bank, Mattituck, New York, would merge with Jamaica Savings, and North Fork Bank would be the surviving institution. The merger is subject to approval by the Federal Deposit Insurance Corporation ("FDIC") under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. [sections] 1828(c)) ("Bank Merger Act") and by the New York State Banking Department ("NYSBD"). In addition, North Fork has filed a separate notice with the Board to merge with Reliance Bancorp, Inc. ("Reliance") and thereby acquire Reliance Federal Savings Bank ("Reliance Savings"), both of Garden City, New York ("the Reliance transaction").

(2.) Asset data are as of June 30, 1999, and state deposit data are as of June 30, 1998. In this context, depository institutions include commercial banks, savings banks, and savings associations.

(3.) 12 C.F.R. 225.28(b)(4).

(4.) 12 U.S.C. [sections] 1843(c)(8).

(5.) See First Hawaiian, Inc., 79 Federal Reserve Bulletin 966 (1993).

(6.) The Metropolitan New York/New Jersey banking market includes Bronx, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Suffolk, Sullivan, Ulster, and Westchester Counties in New York; Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, Warren, and a portion of Mercer Counties in New Jersey; Pike County in Pennsylvania; and portions of Fairfield and Litchfield Counties in Connecticut.

(7.) Market share data are as of June 30, 1998, and are based on calculations in which the deposits of thrift institutions, other than Jamaica Savings and Reliance Savings, are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin 788 (1990); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Because the Board has analyzed the competitive factors in this case as if North Fork Bank, Jamaica Savings, and Reliance Savings were a combined entity, the deposits of Jamaica Savings and Reliance Savings are included at 100 percent in the calculation of pro forma market share. See Norwest Corporation, 78 Federal Reserve Bulletin 452 (1992); First Banks, Inc., 76 Federal Reserve Bulletin 669 (1990).

(8.) Under the revised Department of Justice Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post- merger HHI is less than 1000 is considered to be unconcentrated. The Department of Justice has informed the Board that, as a general matter, a bank merger or acquisition will not be challenged in the absence of other factors indicating anticompetitive effects, unless the post-merger HHI is at least 1800 and the merger or acquisition increases the HHI by 200 points. The Department of Justice has stated that the higher than average HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effects of limited-purpose lenders and other nondepository financial entities.

(9.) See, e.g.. Banc One Corporation, 83 Federal Reserve Bulletin 602 (1997).

(10.) Interagency Questions and Answers Regarding Community Reinvestment, 64 Federal Register 23,618 and 23,641 (1999) ("Interagency Questions and Answers").

(11.) N.Y. Banking Law [sections] 28-b.

(12.) See North Fork Bancorporation, Inc., 84 Federal Reserve Bulletin 290 (1998) ("New York Bancorp Order"); North Fork Bancorporation, Inc., 84 Federal Reserve Bulletin 477 (1998) (acquisition of up to 9.9 percent of the voting shares of Long Island Bancorp, Inc.).

(13.) In the New York Bancorp Order, the Board stated that it expected North Fork to address the lending areas criticized by the NYSBD in the State Examination, and that the Board would consider North Fork's progress in this regard when considering future applications by North Fork. The Board has reviewed information received from other supervisory agencies on North Fork Bank's efforts in these areas, including North Fork Bank's progress in fulfilling its commitments to the NYSBD. Based on all the facts of record, the Board concludes that North Fork Bank's progress in the lending areas noted in the New York Bancorp Order is consistent with approval of this notice.

(14.) HMDA-related loans include loans reported under HMDA as well as modification, extension, and consolidation agreements ("MECA loans") for HMDA-reported loans. MECA loans are not reported under HMDA, but may be considered in evaluating an institution's CRA performance. See Interagency Questions and Answers, 64 Federal Register at 23,634.

(15.) The aggregate represents the cumulative lending for all institutions that have reported HMDA data in a given market.

(16.) LMI census tracts comprise approximately 28 percent of the total number of census tracts in North Fork Bank's current assessment area.

(17.) Lenders in the aggregate in North Fork Bank's assessment area made 16.2 percent of their HMDA-related loans to LMI individuals in 1998.

(18.) In 1998, North Fork Bank originated $76 million of multifamily loans in the Bronx, accounting for 26 percent of all multifamily loans made by North Fork Bank in its assessment area.

(19.) For purposes of this order, a loan to a small business means a loan made to a business with gross annual revenues of $1 million of less.

(20.) ICP contends that North Fork Bank gathers deposits in less affluent and predominantly minority areas, such as the Bronx, and concentrates its loans and investments in more affluent and nonminority areas. In ICP's view, North Fork Bank should be required to increase its small business lending in the Bronx and similar areas to reflect more closely its level of deposits in those areas. The Board has reviewed North Fork Bank's record of lending to small businesses throughout its assessment area, including minority and LMI census tracts in all portions of its assessment area. While North Fork Bank's lending to small businesses in specific segments of its assessment area may not closely correspond to the bank's market share of deposits in those segments at a particular point in time, small business lending is not the only use made of deposits. As explained above, the Board also has considered that North Fork Bank provides significant multifamily housing credit and provides other types of credit, including consumer loans and single family housing loans, throughout North Fork Bank's assessment area.

(21.) North Fork Bank's assessment area in the New York City Metropolitan Statistical Area is composed of the entire metropolitan statistical area except for Putnam County, New York.

(22.) The record also reflects that North Fork Bank received a significantly smaller percentage of HMDA-related loan applications from minority and LMI individuals than did lenders in the aggregate, and that the bank made a correspondingly smaller percentage of its HMDA-related loans to minority and LMI borrowers. For example, in 1998, North Fork Bank made 3.3 percent of its HMDA-related loans to African Americans and 2.6 percent of such loans to Hispanics, compared with rates of 10 percent and 5.8 percent, respectively, for lenders in the aggregate. As discussed in this order, however, in 1998 North Fork Bank made approximately half of its HMDA-related loans by dollar volume as multifamily loans rather than as 1- to 4-family home mortgage loans, and 43 percent of its multifamily loans were made in minority census tracts.

(23.) The data, for example, do not provide a basis for an independent assessment of whether an applicant who was denied credit was, in fact, creditworthy. Information about credit history problems and excessive debt levels relative to income (reasons most frequently cited for a credit denial) are not available from HMDA data.

(24.) As noted in the New York Bancorp Order, FDIC examiners identified certain technical violations of the fair lending laws during the Examination, but stated that these matters were addressed by the bank's management during that examination.

(25.) ICP asserts that North Fork should make public a list of branches under consideration for consolidation or closure. The release of preliminary branch closing data may cause competitive harm to North Fork, and such data is exempt from public disclosure under the Freedom of Information Act (5 U.S.C. [sections] 552(b)(4)) and the Board's Rules Regarding Availability of Information (12 C.F.R. 261.14(a)(4)).

(26.) Section 42 of the Federal Deposit Insurance Act (12 U.S.C. [sections] 1831r-1), as implemented by the Joint Policy Statement Regarding Branch Closings (64 Federal Register 34,844 (1999)), requires that a bank provide the public with at least 30 days notice and the appropriate federal supervisory agency with at least 90 days notice before the date of the proposed branch closing. The bank also is required to provide masons and other supporting data for the closure, consistent with the institution's written policy for branch closings.

(27.) See 12 C.F.R. 225.26.

North Fork Bancorporation, Inc. Melville, New York

Order Approving the Acquisition of a Savings Association

North Fork Bancorporation, Inc., Melville, New York ("North Fork"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. [sections] 1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire all the voting shares of Reliance Bancorp, Inc. ("Reliance") and thereby acquire Reliance's wholly owned subsidiary, Reliance Federal Savings Bank ("Reliance Savings"), both of Garden City, New York.(1)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (64 Federal Register 56,791 (1999)). The time for filing comments has expired, and the Board has considered the notice and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act.

North Fork, with total consolidated assets of $11.5 billion, is the 15th largest depository institution in New York, controlling deposits of approximately $6.3 billion, representing 1.5 percent of total deposits in depository institutions in the state ("state deposits").(2) Reliance is the 32nd largest depository institution in New York, controlling deposits of $1.6 billion, representing less than 1 percent of state deposits. On consummation of the proposal and the JSB transaction, North Fork would become the 11th largest depository institution in New York, controlling deposits of approximately $9.1 billion, representing approximately 2.2 percent of state deposits.

The Board previously has determined by regulation that the operation of a savings association by a bank holding company is closely related to banking for purposes of section 4(c)(8) of the BHC Act.(3) The Board requires that savings associations acquired by bank holding companies conform their direct and indirect activities to those permissible for bank holding companies under section 4 of the BHC Act. North Fork has committed to conform all the activities of Jamaica Savings to those permissible under section 4(c)(8) of the BHC Act and Regulation Y.

In order to approve the proposal, the Board also is required by section 4(c)(8) of the BHC Act to determine that that the acquisition of Reliance by North Fork "can reasonably be expected to produce benefits to the public ... that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices."(4) As part of its consideration of these factors, the Board has considered carefully the competitive effects of the proposal in light of all the facts of record.(5)

North Fork and Reliance compete directly in the Metropolitan New York/New Jersey banking market.(6) On consummation of the proposal and the JSB transaction, North Fork would be the 10th largest depository institution in the Metropolitan New York]New Jersey banking market, controlling deposits of $9.3 billion, representing approximately 2.2 percent of market deposits.(7) The Herfindahl-Hirschman Index ("HHI") would decrease by 3 points to 783, and numerous competitors would remain in the market.(8) Based on these and all other facts of record, the Board concludes that the consummation of the proposal would not result in any significantly adverse effects on competition or on the concentration of banking resources in the New York banking market or any other relevant banking market.

In acting on notices to acquire a savings association, the Board also reviews the records of performance of the relevant depository institutions under the Community Reinvestment Act (12 U.S.C. [sections] 2901 et seq.) ("CRA").(9) In its order approving the notice filed by North Fork in connection with the JSB transaction ("JSB Order"), the Board reviewed the record of CRA performance of North Fork Bank in light of all the facts of record, including comments received from Inner City Press/Community on the Move ("ICP"). The comments received from ICP on this proposal are identical to the comments filed with the Board in connection with the JSB transaction. Accordingly, for reasons set forth in detail in the JSB Order, and after considering the CRA record of Reliance Savings, the Board concludes that the CRA performance records of North Fork Bank and Reliance Savings are consistent with approval of the proposal.(10)

In connection with its review of the public interest factors under section 4 of the BHC Act, the Board also has carefully reviewed the financial and managerial resources of North Fork and Reliance and their respective subsidiaries and the effect the transaction would have on such resources in light of all the facts of record.(11) The Board has reviewed, among other things, confidential reports of examination and other supervisory information received from the primary federal supervisors of the organizations. Based on all the facts of record, the Board concludes that the financial and managerial resources of the organizations involved in the proposal are consistent with approval.

The record indicates that consummation of the proposal would result in benefits to consumers and businesses. The proposal would enable North Fork to provide Reliance Savings' customers with access to a broad array of products and services, including commercial bank products, throughout an expanded service area. Additionally, there are public benefits to be derived from permitting capital markets to operate so that bank holding companies may make potentially profitable investments in nonbanking companies and from permitting banking organizations to allocate their resources in the manner they believe is most efficient when, as in this case, those investments are consistent with the relevant considerations under the BHC Act.

Based on all the facts of record, the Board has determined that consummation of this proposal can reasonably be expected to produce public benefits that would outweigh any likely adverse effects under the proper incident to banking standard of section 4(c)(8) of the BHC Act.

Based on the foregoing and all the facts of record, the Board has determined that the notice should be, and hereby is, approved. The Board's approval of the proposal is specifically conditioned on compliance by North Fork with the commitments made in connection with this notice. The Board's determination also is subject to all the conditions in Regulation Y, including those in sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and 225.25(c)), and to the Board's authority to require such modification or termination of the activities of a holding company or any of its subsidiaries as the Board finds necessary to ensure compliance with, or to prevent evasion of, the provisions and purposes of the BHC Act and the Board's regulations and orders issued thereunder. The commitments and conditions relied on by the Board in reaching this decision shall be deemed to be conditions imposed in writing by the Board in connection with its findings and decision and, as such, may be enforced in proceedings under applicable law.

This transaction shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or the Federal Reserve Bank of New York, acting pursuant to delegated authority.

By order of the Board of Governors, effective January 10, 2000.

Voting for this action: Chairman Greenspan and Governors Kelley, Meyer, and Gramlich. Absent and not voting: Vice Chairman Ferguson.

ROBERT DEV. FRIERSON Associate Secretary of the Board

(1.) North Fork's wholly owned subsidiary bank, North Fork Bank, Mattituck, New York, would merge with Jamaica Savings, and North Fork Bank would be the surviving institution. The merger is subject to approval by the Federal Deposit Insurance Corporation ("FDIC") under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. [sections] 1828(c)) ("Bank Merger Act") and by the New York State Banking Department ("NYSBD"). In addition, North Fork has filed a separate notice with the Board to merge with Reliance Bancorp, Inc. ("Reliance") and thereby acquire Reliance Federal Savings Bank ("Reliance Savings"), both of Garden City, New York ("the Reliance transaction").

(2.) Asset data are as of June 30, 1999, and state deposit data are as of June 30, 1998. In this context, depository institutions include commercial banks, savings banks, and savings associations.

(3.) 12 C.F.R. 225.28(b)(4).

(4.) 12 U.S.C. [sections] 1843(c)(8).

(5.) See First Hawaiian, Inc., 79 Federal Reserve Bulletin 966 (1993).

(6.) The Metropolitan New York/New Jersey banking market includes Bronx, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Suffolk, Sullivan, Ulster, and Westchester Counties in New York; Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, Warren, and a portion of Mercer Counties in New Jersey Pike County in Pennsylvania; and portions of Fairfield and Litchfield Counties in Connecticut.

(7.) Market share data are as of June 30, 1998, and are based or calculations in which the deposits of thrift institutions, other that Jamaica Savings and Reliance Savings, are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin 788 (1990); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Because the Board has analyzed the competitive factors in this case as if North Fork Bank, Jamaica Savings, and Reliance Savings were a combined entity, the deposits of Jamaica Savings and Reliance Savings are included at 100 percent in the calculation of pro forma market share. See Norwest Corporation, 78 Federal Reserve Bulletin 452 (1992); First Banks, Inc., 76 Federal Reserve Bulletin 669 (1990).

(8.) Under the revised Department of Justice Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post- merger HHI is less than 1000 is considered to be unconcentrated. The Department of Justice has informed the Board that, as a general matter, a bank merger or acquisition will not be challenged in the absence of other factors indicating anticompetitive effects, unless the post-merger HHI is at least 1800 and the merger or acquisition increases the HHI by 200 points. The Department of Justice has stated that the higher than average HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effects of limited-purpose lenders and other nondepository financial entities.

(9.) See, e.g., Banc One Corporation 83 Federal Reserve Bulletin 602 (1997).

(10.) The Board also notes that Reliance Savings received an overall rating of "satisfactory" from its primary federal supervisor, the Office of Thrift Supervision, at its most recent evaluation for CRA performance, as of November, 1998.

(11.) See 12 C.F.R. 225.26.

Orders Issued Under Sections 3 and 4 of the Bank Holding Company Act

Centura Banks, Inc. Rocky Mount, North Carolina

Centura Bank Rocky Mount, North Carolina

Order Approving the Acquisition of a Bank Holding Company, Merger of Banks, and Establishment of Branches

Centura Banks, Inc. ("CBI"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. [sections] 1842) to merge with Triangle Bancorp, Inc., Raleigh, North Carolina ("Triangle"), and thereby acquire Triangle's wholly owned subsidiary banks, Triangle Bank, Raleigh, and Bank of Mecklenburg ("Mecklenburg"), Charlotte, both in North Carolina. CBI's lead bank, Centura Bank, a state member bank, has applied under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. [sections] 1828(c)) (the "Bank Merger Act") to merge with Triangle Bank and Mecklenburg, with Centura Bank as the survivor. Centura Bank has also applied under section 9 of the Federal Reserve Act (12 U.S.C. [sections] 321) to retain and operate branches at the locations of the main offices and branches of Triangle Bank and Mecklenburg.

In addition, CBI has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. [sections] 1843(c)(8)) to acquire Triangle's wholly owned nonbanking subsidiary, Coastal Leasing, L.L.C., Greenville, North Carolina ("Coastal Leasing"), and thereby engage in leasing activities in accordance with section 225.28(b)(3) of Regulation Y.

Notice of the applications, affording interested persons an opportunity to submit comments, has been published (64 Federal Register 63,814 (1999)). As required by the Bank Merger Act and the Board's Rules of Procedure (12 C.F.R. 262.3(b)), reports on the competitive effects of the merger were requested from the U.S. Attorney General and the other federal banking agencies. The time for filing comments has expired, and the Board has considered the applications and all the facts of record in light of the factors set forth in sections 3 and 4 of the BHC Act, the Bank Merger Act, and section 9 of the Federal Reserve Act.

CBI, with consolidated assets of approximately $8.8 billion, is the 64th largest commercial banking organization in the United States.(1) CBI is the sixth largest commercial banking organization in North Carolina, controlling deposits of $5.5 billion, representing 5.5 percent of the total deposits in commercial banking organizations in North Carolina. Triangle, with consolidated assets of approximately $2.3 billion, is the 144th largest commercial banking organization in the United States. Triangle is the eighth largest commercial banking organization in North Carolina, controlling deposits of $1.8 billion, representing 1.7 percent of the total deposits in commercial banking organizations in North Carolina.

After consummation of the proposal, CBI would become the 58th largest commercial banking organization in the United States, with consolidated assets of approximately $11 billion and would remain the sixth largest commercial banking organization in North Carolina, controlling deposits of $7 billion, representing 6.9 percent of the total deposits in commercial banking organizations in North Carolina.

Competitive Considerations

Section 3 of the BHC Act prohibits the Board from approving a proposal that would result in a monopoly or be in furtherance of an attempt to monopolize the business of banking. The BHC Act also prohibits the Board from approving a proposal that would substantially lessen competition in any relevant banking market unless the anticompetitive effects of the proposal in that banking market are clearly outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served.(2)

CBI and Triangle compete directly in eighteen banking markets.(3) The Board has carefully reviewed the competitive effects of the proposal in each of these banking markets in light of all the facts of record, including the number of competitors that would remain in the market, the share of total deposits in depository institutions(4) in the market ("market deposits") controlled by each competitor in the market, the concentration level of market deposits in the market and the increase in this level as measured by the Herfindahl-Hirschman Index ("HHI") under the Department of Justice Merger Guidelines ("DOJ Guidelines"),(5) and other characteristics of the market.

Banking Markets without Divestitures. Consummation of the proposal without divestitures would be consistent with Board precedent and the DOJ Guidelines in eleven banking markets: Charlotte-Rock Hill, Durham-Chapel Hill, Fayetteville, Goldsboro, Greenville, New Bern, Raleigh, Richmond County, Robeson County, Wilmington, and Sanford.(6) In these markets, the Board has determined, in light of the number of competitors that would remain in each market, the characteristics of each market, the projected increase in the concentration of total deposits in depository institutions in each market, and the resulting market share, that consummation of the proposal would not likely result in a significantly adverse effect on competition.

Banking Markets with Proposed Divestitures. In the seven remaining banking markets in which CBI and Triangle directly compete, the resulting HHI would exceed the DOJ Guidelines. In order to mitigate the potential anticompetitive effects of the proposal in five of these markets (Columbus County, Granville County, Roanoke Rapids, Warren County, and Washington County), CBI has committed to divest a total of eight branches, controlling $129.5 million in deposits.(7) After accounting for the proposed divestitures, consummation of the proposal would be consistent with Board precedents and the DOJ Guidelines in these five markets.(8)

Taking into account market size, the number of competitors in each market and the share of total deposits in depository institutions in each market controlled by each competitor, consummation of the proposal would not likely result in a significantly adverse effect on competition in any of the five markets.

Rocky Mount and Duplin County Markets. Consummation of the proposal in the Rocky Mount and Duplin County markets would exceed the DOJ Guidelines. In both markets, the Board has considered whether other factors either mitigate the competitive effects of the proposal in the markets or indicate that the proposal would have a significantly adverse effect on competition.(9) In the Rocky Mount market, CBI has committed to divest ten Triangle Bank branches that control a total of $188.1 million in deposits to two in-market competitors. With these divestitures, the pro forma HHI increase in the banking market would exceed DOJ Guidelines by a moderate amount.

Centura Bank is the largest depository institution in the Rocky Mount market, controlling deposits of $733 million, representing approximately 34.4 percent of market deposits. Triangle Bank is the fourth largest depository institution in the market, controlling deposits of $284.9 million, representing approximately 13.4 percent of market deposits. On consummation of the proposal, and after accounting for the proposed divestitures, Centura Bank would remain the largest depository institution in the market, controlling deposits of $829.8 million, representing approximately 39 percent of market deposits. The HHI would increase 277 points to 2323.

A number of factors indicate that the competitive effects of the proposal are not likely to be significantly adverse in the Rocky Mount market. After consummation of the proposal and the divestitures, ten depository institutions would operate in the market. Two depository institutions other than Centura Bank each would control more than 10 percent of market deposits and another three institutions each would control more than 5 percent of market deposits. In addition, the Rocky Mount banking market appears to be attractive for entry. In December 1998, a de novo savings bank began operations in the banking market, and another commercial savings bank has received a charter and plans to open in February 2000.

CBI does not propose any divestitures in the Duplin County market, and the post-consummation increase in the HHI would exceed the DOJ Guidelines by a small margin. Centura Bank is the second largest depository institution in the Duplin County market, controlling deposits of $46.7 million, representing approximately 15.8 percent of market deposits. Triangle Bank is the sixth largest depository institution in the market, controlling deposits of $19 million, representing approximately 6.5 percent of market deposits. After consummation of the proposal, Centura Bank would become the second largest depository institution in the market, controlling deposits of $65.7 million, representing 22.3 percent of market deposits. The HHI would increase 204 points to 2910, and the market would remain highly concentrated.

Although consummation of this proposal would eliminate some existing competition, certain factors indicate that the competitive effects of the proposal are not likely to be significantly adverse. After consummation of the proposal, five depository institutions would remain in the Duplin County market, including a depository institution other than Centura Bank that would control 45.1 percent of market deposits. Two other depository institutions in the market would each control more than 10 percent of market deposits, and one would have a market share of more than 7 percent.

The Department of Justice has reviewed the proposal, including its effects on the Rocky Mount and Duplin County banking markets, and advised the Board that, in light of the proposed divestitures, consummation of the proposal likely would not have a significantly adverse effect on competition in any relevant banking market. The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have been afforded an opportunity to comment and have not objected to consummation of the proposal.

After carefully reviewing all the facts of record, including CBI's divestiture commitments and other the mitigating factors in the Rocky Mount and Duplin County banking markets, the Board concludes that consummation of the proposal would not result in any significantly adverse effects on competition or on the concentration of banking resources in the banking markets in which CBI and Triangle directly compete or in any other relevant banking market.

Other Considerations

In reviewing this proposal under the BHC Act and section 9 of the Federal Reserve Act the Board also has considered the financial and managerial resources and future prospects of the companies and banks involved, the convenience and needs of the communities to be served, and certain other supervisory factors. The Board has reviewed these factors in light of the record, including supervisory reports of examination assessing the financial and managerial resources of the organizations and financial information provided by CBI. Based on all the facts of record, the Board concludes that the financial and managerial resources and the future prospects of CBI, Triangle, and their respective subsidiary banks are consistent with approval, as are the other supervisory factors the Board must consider. In addition, considerations related to the convenience and needs of the communities to be served,(10) including the records of performance of the institutions involved under the Community Reinvestment Act (12 U.S.C. [sections] 2901 et seq.), are consistent with approval of the proposal.(11)

Nonbanking Activities

CBI also has filed a notice under section 4(c)(8) of the BHC Act to acquire Triangle's wholly owned nonbanking subsidiary, Coastal Leasing, and thereby engage in leasing activities. The Board has determined by regulation that leasing is closely related to banking for the purposes of the BHC Act.(12) CBI has committed to conduct this nonbanking activity in accordance with the limitations set forth in Regulation Y and the Board's orders and interpretations governing leasing activities.

In order to approve a notice under section 4(c)(8) of the BHC Act, the Board also must determine that the proposed activities are a proper incident to banking, that is, that the proposal "can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."(13)

As part of its evaluation of these factors, the Board considers the financial and managerial resources of the notificant and its subsidiaries, including the companies to be acquired, and the effect of the proposed transaction on those resources. For the reasons noted above, and based on all the facts of record, the Board has concluded that financial and managerial considerations are consistent with approval of the notice.

The Board also has considered the competitive effects of the proposed acquisition by CBI of Coastal Leasing. Because CBI does not currently compete with Coastal Leasing in its marketing area, the Board concludes that it is unlikely that significantly adverse competitive effects would result from the nonbanking acquisition proposed in the transaction.

The Board expects that the proposed transaction would give CBI an increased ability to serve the needs of its customers. In addition, there are public benefits to be derived from permitting capital markets to operate so that bank holding companies can make potentially profitable investments in nonbanking companies and from permitting banking organizations to allocate their resources in the manner they consider to be most efficient when such investments are consistent, as in this case, with the relevant considerations under the BHC Act.

The Board also concludes that the conduct of the proposed nonbanking activity within the framework of Regulation Y and Board precedent is not likely to result in adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices, that would outweigh the public benefits of the proposal, such as increased customer convenience and gains in efficiency. Accordingly, based on all the facts of record, the Board has determined that the balance of public interest factors that the Board must consider under the proper incident to banking standard of section 4(c)(8) of the BHC Act is favorable and consistent with approval of this proposal.

Conclusion

Based on the foregoing and all the facts of record, the Board has determined that the applications and notice should be, and hereby are, approved. The Board's approval is specifically conditioned on compliance by CBI with all the commitments made in connection with this application and with the conditions in this order, including CBI's divestiture commitments. The Board's determination on the nonbanking activity also is subject to all the terms and conditions set forth in Regulation Y, including those in sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and 225.25(c)), and to the Board's authority to require such modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to ensure compliance with, and to prevent evasion of, the provisions of the BHC Act and the Board's regulations and orders thereunder. For purposes of this action, the commitments and conditions relied on by the Board in reaching its decision are deemed to be conditions imposed in writing by the Board in connection with its findings and decision and, as such, may be enforced in proceedings under applicable law.

The banking acquisitions shall not be consummated before the fifteenth calendar day following the effective date of this order, and the proposal shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Richmond, acting pursuant to delegated authority.

By order of the Board of Governors, effective January 27, 2000.

Voting for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Kelley, and Gramlich. Absent and not voting: Governor Meyer.

ROBERT DEV. FRIERSON Associate Secretary of the Board

(1.) Asset data are as of September 30, 1999, and deposit data are as of June 30, 1998.

(2.) See 12 U.S.C. [sections] 1842(c).

(3.) These banking markets are described in Appendix A.

(4.) In this context, depository institutions include commercial banks, savings banks, and savings associations. Market share data are based on calculations that include the deposits of thrift institutions at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See, e.g., Midwest Financial Group 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1983). Thus, the Board has regularly included thrift deposits in the calculation of market share on a 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991).

(5.) Under the DOJ Guidelines, 49 Federal Register 26,923 (1984), a market is considered moderately concentrated when the post-merger HHI is between 1000 and 1800, and is considered highly concentrated when the post-merger HHI is more than 1800. The Department of Justice has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by more than 200 points. The Department of Justice has stated that the higher than normal HHI thresholds for screening bank mergers for anitcompetitive effects implicitly recognize the competitive effects of limited-purpose lenders and other nondepository financial institutions.

(6.) The effects of the proposal on the concentration of banking resources in these markets are described in Appendix B.

(7.) The competitive effects of the proposal in the Granville County, Washington County, Roanoke Rapids, Columbus County, and Warren County markets are summarized in Appendix B.

(8.) Centura has committed that, if it is unsuccessful in completing the divestitures within the 180-day period, it will transfer the unsold branch(es) to an independent trustee that is acceptable to the Board and will instruct the trustee to sell the branch(es) promptly to an alternative purchaser, or alternative purchasers, acceptable to the Board. See BankAmerica Corporation, 78 Federal Reserve Bulletin 338 (1992); United New Mexico Financial Corporation, 77 Federal Reserve Bulletin 484 (1991).

(9.) The number and strength of factors necessary to mitigate the competitive effects of a proposal depend on the level of concentration and magnitude of the increase in market concentration. See NationsBank Corporation, 84 Federal Reserve Bulletin 129 (1998).

(10.) The Board received comments from the Southern Rural Development Initiative ("SRDI") and the Community Reinvestment Association of North Carolina ("CRANC"), both in Raleigh, North Carolina. CRANC commented favorably on the records of CBI and Centura Bank in meeting the credit needs of communities in North Carolina, and commended CBI's interest in maintaining a presence in rural North Carolina banking markets. Both commenters stated that they were not protesting the proposal; nevertheless, they expressed concern about CBI's minority equity interest in a subprime lender. SRDI and CRANC noted, however, that CBI and the subprime lender appeared committed to conducting their operations in accordance with applicable law. CRANC also encouraged Centura Bank to improve its lending record to African Americans and in low-income communities, and noted that the bank intended to work with community groups to address concerns in these areas.

(11.) Centura Bank, Triangle Bank, and Mecklenburg each received a rating of "satisfactory" at their most recent CRA performance evaluations as of January 20, 1998, September 15, 1997, and September 14, 1998, respectively.

(12.) See 12 C.F.R. 225.28(b)(3).

(13.) 12 U.S.C. [sections] 1843(c)(8).

Appendix A

North Carolina Banking Markets in Which CBI and Triangle Directly Compete

Charlotte: Charlotte, North and South Carolina Rand McNally Marketing Area ("RMA").

Columbus County: Columbus County.

Duplin County: Duplin County.

Durham: Durham, North Carolina RMA and the non-RMA portions of Durham and Orange Counties, and Chatham County.

Fayetteville: Fayetteville, North Carolina RMA and the non-RMA portion of Cumberland County.

Goldsboro: Goldsboro, North Carolina RMA and the non-RMA portion of Wayne County.

Granville County: Granville County, excluding the Durham RMA.

Greenville: Greenville, North Carolina RMA and the non-RMA portion of Pitt County.

New Bern: Craven, Pamlico, and Carteret Counties, and the eastern half of Jones County.

Raleigh: Raleigh, North Carolina RMA and the non-RMA portions of Franklin, Johnston, Wake, and Harnett Counties, excluding the Fayetteville RMA.

Richmond County: Richmond County.

Roanoke Rapids: Halifax and Northampton Counties.

Robeson County: Robeson County.

Rocky Mount: the Rocky Mount RMA, and the non-RMA portions of Edgecombe, Nash, and Wilson Counties.

Sanford: Lee County.

Warren County: Warren County.

Washington County: Washington County.

Wilmington: Wilmington, North Carolina RMA and the non-RMA portion of Brunswick County, excluding the Myrtle Beach-Conway RMA, and Pender County.

Appendix B

Summary of Pro Forma Market Structure

A. Banking Markets Without Divestitures and HHIs Within DOJ Guidelines

Charlotte

CBI is the tenth largest depository institution in the market, controlling deposits of approximately $252.3 million, representing less than 1 percent of market deposits. Triangle is the eleventh largest depository institution in the market, controlling approximately $196.7 million in deposits, representing less than 1 percent of market deposits. After consummation of the proposal, CBI would be the ninth largest depository institution in the market, controlling approximately $449 million, representing 1.7 percent of market deposits. The HHI would increase 1 point to 3534.

Durham

CBI is the sixth largest depository institution in the market, controlling deposits of approximately $197.1 million, representing 5.1 percent of market deposits. Triangle is the seventh largest depository institution in the market, controlling approximately $160.6 million in deposits, representing 4.1 percent of market deposits. After consummation of the proposal, CBI would be the fifth largest depository institution in the market, controlling approximately $357.6 million, representing 9.2 percent of market deposits. The HHI would increase 42 points to 1710.

Fayetteville

CBI is the fourth largest depository institution in the market, controlling deposits of approximately $160.3 million, representing 10.8 percent of market deposits. Triangle is the eighth largest depository institution in the market, controlling approximately $30.2 million in deposits, representing 2 percent of market deposits. After consummation of the proposal, CBI would be the third largest depository institution in the market, controlling approximately $190.4 million, representing 12.8 percent of market deposits. The HHI would increase 44 points to 1942.

Goldsboro

CBI is the fourth largest depository institution in the market, controlling deposits of approximately $88.4 million, representing 9.8 percent of market deposits. Triangle is the fifth largest depository institution in the market, controlling approximately $72.1 million in deposits, representing 8 percent of market deposits. After consummation of the proposal, CBI would be the third largest depository institution in the market, controlling $160.5 million, representing approximately 17.9 percent of market deposits. The HHI would increase 157 points to 2215.

Greenville

CBI is the fifth largest depository institution in the market, controlling deposits of approximately $100.3 million, representing 10 percent of market deposits. Triangle is the sixth largest depository institution in the market, controlling approximately $47.9 million in deposits, representing 4.8 percent of market deposits. After consummation of the proposal, CBI would be the third largest depository institution in the market, controlling $148.2 million, representing 14.8 percent of market deposits. The HHI would increase 95 points to 1754.

New Bern

CBI is the fifth largest depository institution in the market, controlling deposits of approximately $85.6 million, representing 6.2 percent of market deposits. Triangle is the sixth largest depository institution in the market, controlling approximately $58.6 million in deposits, representing 4.2 percent of market deposits. After consummation of the proposal, CBI would be the fourth largest depository institution in the market, controlling $144.2 million, representing 10.4 percent of market deposits. The HHI would increase 51 points to 2123.

Raleigh

CBI is the seventh largest depository institution in the market, controlling deposits of approximately $484.7 million, representing 6.4 percent of market deposits. Triangle is the eighth largest depository institution in the market, controlling approximately $350.9 million in deposits, representing 4.7 percent of market deposits. After consummation of the proposal, CBI would be the fourth largest depository institution in the market, controlling $835.6 million, representing 11.1 percent of market deposits. The HHI would increase 60 points to 1217.

Richmond County

CBI is the third largest depository institution in the market, controlling deposits of approximately $50.7 million, representing 15 percent of market deposits. Triangle is the sixth largest depository institution in the market, controlling approximately $16.3 million in deposits, representing 4.8 percent of market deposits. After consummation of the proposal, CBI would be the third largest depository institution in the market, controlling $67 million, representing 19.8 percent of market deposits. The HHI would increase 144 points to 2379.

Robeson County

CBI is the sixth largest depository institution in the market, controlling deposits of approximately $36.1 million, representing 5.5 percent of market deposits. Triangle is the fourth largest depository institution in the market, controlling approximately $78.9 million in deposits, representing 11.9 percent of market deposits. After consummation of the proposal, CB! would be the third largest depository institution in the market, controlling $115 million, representing 17.4 percent of market deposits. The HHI would increase 130 point to 2403.

Sanford

CBI is the second largest depository institution in the market, controlling deposits of approximately $106.1 million, representing 19.6 percent of market deposits. Triangle is the eighth largest depository institution in the market, controlling approximately $13.6 million in deposits, representing 2.5 percent of market deposits. After consummation of the proposal, CBI would be the second largest depository institution in the market, controlling $119.7 million, representing 22.1 percent of market deposits. The HHI would increase 99 points to 2174.

Wilmington

CBI is the fifth largest depository institution in the market, controlling deposits of approximately $227.9 million, representing 8.9 percent of market deposits. Triangle is the twelfth largest depository institution in the market, controlling approximately $31.4 million in deposits, representing 1.2 percent of market deposits. After consummation of the proposal, CBI would be the fifth largest depository institution in the market, controlling $259.3 million, representing approximately 10.2 percent of market deposits. The HHI would increase 22 points to 1539.

B. Banking Markets With Divestitures and HHIs Within DOJ Guidelines.

Columbus County

CBI is the second largest depository institution in the market, controlling deposits of $66.6 million, representing approximately 14.4 percent of market deposits. Triangle is the fourth largest depository institution in the market, controlling deposits of $47.2 million, representing approximately 10.2 percent of market deposits. CBI proposes to divest one branch with total deposits of approximately $24.5 million to an in-market competitor. On consummation of the proposal, and after accounting for the proposed divestiture, CBI would remain the second largest depository institution in the market, controlling deposits of $89.3 million, representing approximately 19.3 percent of market deposits. The HHI would increase 146 points to 3739.

Granville County

CBI is the third largest depository institution in the market, controlling deposits of $50.6 million, representing approximately 20.2 percent of market deposits. Triangle is the fourth largest depository institution in the market, controlling deposits of $40.1 million, representing approximately 16 percent of market deposits. CBI proposes to divest Triangle's two branches in the market to an out-of-market competitor. On consummation of the proposal, and after accounting for the proposed divestitiures, CBI would remain the third largest depository institution in the market, controlling deposits of $50.6 million, representing approximately 20.2 percent of market deposits. The HHI would remain unchanged at 2338.

Roanoke Rapids

CBI is the largest depository institution in the market, controlling deposits of $190.7 million, representing approximately 36.3 percent of market deposits. Triangle is the fourth largest depository institution in the market, controlling deposits of $39.1 million, representing approximately 7.4 percent of market deposits. CBI proposes to divest two branches with total deposits of approximately $23.9 million to an out-of-market competitor. On consummation of the proposal, and after accounting for the proposed divestitures, CBI would remain the largest depository institution in the market, controlling deposits of $205.9 million, representing approximately 39.2 percent of market deposits. The HHI would increase 183 points to 2772.

Warren County

CBI is the second largest depository institution in the market, controlling deposits of $20.9 million, representing approximately 20.3 percent of market deposits. Triangle is the fourth largest depository institution in the market, controlling deposits of $11.1 million, representing approximately 10.8 percent of market deposits. CBI proposes to divest Triangle's one branch in the market to an out-of-market competitor. On consummation of the proposal, and after accounting for the proposed divestiture, CBI would remain the second largest depository institution in the market, controlling deposits of $20.9 million, representing approximately 20.3 percent of market deposits. The HHI would remain unchanged 3500.

Washington County

CBI is the third largest depository institution in the market, controlling deposits of $26.4 million, representing approximately 23.8 percent of market deposits. Triangle is the second largest depository institution in the market, controlling deposits of $30 million, representing approximately 27.1 percent of market deposits. CBI proposes to divest Triangle's two branches in the market to an out-of-market competitor. On consummation of the proposal, and after accounting for the proposed divestitures, CBI would remain the third largest depository institution in the market, controlling deposits of $26.4 million, representing approximately 23.8 percent of market deposits. The HHI would remain unchanged at 2469.
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Publication:Federal Reserve Bulletin
Geographic Code:1USA
Date:Mar 1, 2000
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