| For immediate release |
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GB Bancorporation |
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GB Bancorporation, San Diego, California ("GBB"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has applied under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire up to 24.9 percent of the voting shares of Rancho Vista National Bank, Vista, California ("Rancho Bank"). Notice of the application, affording interested persons an opportunity to submit comments, has been published (61 Federal Register 52,947 (1996)). The time for filing comments has expired, and the Board has considered the application and all comments received in light of the factors set forth in section 3 of the BHC Act. GBB, with consolidated assets of approximately $527 million, is the 37th largest commercial banking organization in California, controlling deposits of approximately $415 million, representing less than 1 percent of total deposits in commercial banking organizations in the state.1 Rancho Bank, with assets of approximately $93 million, is the 172d largest commercial banking organization in California, controlling approximately $81 million in deposits, representing less than 1 percent of total deposits in commercial banking organizations in the state. Rancho Bank has objected to the proposal, contending that GBB intends to acquire control of the bank. Rancho Bank also has asserted that the proposed investment would cause experienced officers and employees to leave Rancho Bank and create uncertainty about its long-term prospects, thereby adversely affecting the bank's ability to compete for and retain customers. The Board notes that the BHC Act does not bar GBB from acquiring control of Rancho Bank, if it obtains prior Board approval. As noted above, however, GBB would acquire less than 25 percent of the voting shares of Rancho Bank, and GBB does not propose to control Rancho Bank without the prior approval of the Board. GBB also has made a number of commitments that are similar to commitments previously relied on by the Board to determine that an investing bank holding company would not exercise a controlling influence over another bank holding company or bank for purposes of the BHC Act.2 GBB has committed not to exercise or attempt to exercise a controlling influence over the management or policies of Rancho Bank; not to seek or accept representation on the board of directors of Rancho Bank; not to challenge a nominee of management for the board of directors of Rancho Bank; and not to have any representative of GBB serve as an officer, agent or employee of Rancho Bank. GBB also has committed not to attempt to influence the dividend policies, loan decisions, personnel decisions, or operations of Rancho Bank; and not to dispose or threaten to dispose of shares of Rancho Bank in response to any action or non-action by the bank. The Board has adequate supervisory authority to monitor GBB's compliance with its commitments, and retains express authority to initiate a control proceeding against GBB if facts presented later indicate that GBB or any of its subsidiaries or affiliates in fact controls Rancho Bank for purposes of the BHC Act.3 The Board notes that the bank's managerial resources are adequate, and that management of Rancho Bank has clearly expressed its intention to remain independent. Based on these commitments and all other facts of record, it is the Board's judgment that, for purposes of the BHC Act, GBB would not acquire control of Rancho Bank on consummation of the proposal.4 The Board has noted that one company need not acquire control of another company in order substantially to lessen competition between them, and that the specific facts of each case will determine whether a minority investment would have significant anticompetitive effects.5 GBB and Rancho Bank compete directly in the Oceanside, California, banking market.6 As a combined organization, GBB would become the fourth largest commercial banking organization in the market, controlling deposits of approximately $87 million, representing 6.4 percent of total deposits in commercial banks or thrift institutions in the market.7 Based on all the facts of record, including the increase in market concentration as measured by the Herfindahl-Hirschman Index ("HHI")8 and the number of competitors that would remain in the market, if GBB were to control Rancho Bank, the elimination of competition between the two entities would not substantially lessen competition in the Oceanside banking market or any other relevant banking market. In light of all the facts of record, the Board concludes that competitive considerations are consistent with approval. The financial and managerial resources and future prospects of GBB and its subsidiaries and Rancho Bank also are consistent with approval, as are considerations related to the convenience and needs of the communities to be served and other supervisory factors the Board must consider under section 3 of the BHC Act. Based on all the facts of record, the Board has determined that the application should be, and hereby is, approved. The Board's approval is expressly conditioned on compliance by GBB with all the commitments made in connection with this application, including the commitments discussed in this order. 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. The transaction 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 San Francisco, acting pursuant to delegated authority. |
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By order of the Board of Governors,9 effective December 18, 1996.
Deputy Secretary of the Board |
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Appendix GBB commits that it will not, directly or indirectly, without the Board's prior approval: 1. Take any action that would cause Rancho Bank or any of its subsidiaries to become a subsidiary of GBB or any of its subsidiaries; 2. Acquire or retain shares of Rancho Bank that would cause the combined interests of GBB and any of its subsidiaries and any of its officers, directors, principal shareholders, and affiliates to equal or exceed 25 percent of the outstanding voting shares of Rancho Bank or any of its subsidiaries; 3. Seek or accept any representation on the board of directors of Rancho Bank or any of its subsidiaries; 4. Exercise or attempt to exercise a controlling influence over the management or policies of Rancho Bank or any of its subsidiaries; 5. Have or seek to have any representative serve as an officer, agent, or employee of Rancho Bank or any of its subsidiaries; 6. Propose a director or slate of directors in opposition to a nominee or slate of nominees proposed by the management or board of directors of Rancho Bank or any of its subsidiaries; 7. Solicit or participate in soliciting proxies with respect to any matter presented to the shareholders of Rancho Bank or any of its subsidiaries; 8. Attempt to influence the dividend policies or practices; the investment, loan, or credit decisions or policies; the pricing of services; personnel decisions; operating activities (including the location of any offices or branches or their hours of operation, etc.); or any similar activities or decisions of Rancho Bank or any of its subsidiaries; 9. Enter into any other banking or nonbanking transactions with Rancho Bank or any of its subsidiaries, except that GBB may establish and maintain deposit accounts with Rancho Bank, provided that the aggregate balance of all such deposit accounts does not exceed $500,000 and that the accounts are maintained on substantially the same terms as those prevailing for comparable accounts of persons unaffiliated with Rancho Bank or any of its subsidiaries; and 10. Dispose or threaten to dispose of shares of Rancho Bank or any of its subsidiaries in any manner as a condition of specific action or non-action by Rancho Bank or any of its subsidiaries. |
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Footnotes 1 Asset data are as of June 30, 1996. Deposit data are as of June 30, 1995, and reflect transactions through September 30, 1996. 2 See, e.g., Mansura Bancshares, Inc., 79 Federal Reserve Bulletin 37 (1993) ("Mansura"). The commitments provided by GBB are set forth in the Appendix. 3 Rancho Bank alleged that GBB's continued expression of interest in acquiring Rancho Bank conflicts with the commitments made by GBB, and that this alleged conflict raises adverse managerial considerations. GBB responded that its actions were intended only to explore the feasibility of acquiring Rancho Bank through a transaction that would be negotiated with the bank's board of directors. The Board does not believe that such general expressions of interest violate the commitments or the BHC Act's prohibition against exercising a controlling influence over the management or policies of a banking organization. Under the BHC Act and the Board's regulations, GBB may not actually acquire ownership of, control, or vote shares of Rancho Bank without the Board's prior approval. The Board also has considered Rancho Bank's concerns in light of a review of the managerial resources of GBB by the Federal Reserve Bank of San Francisco in its most recent examination and management's record for complying with applicable rules and regulations. 4 The Board previously has indicated that the acquisition of less than a controlling interest in a bank or bank holding company is not a normal acquisition for a bank holding company. See, e.g., North Fork Bancorporation, Inc., 81 Federal Reserve Bulletin 734 (1995) ("North Fork"); State Street Boston Corporation, 67 Federal Reserve Bulletin 862 (1981). Nonetheless, the requirement in section 3(a)(3) of the BHC Act that the Board's approval be obtained before a bank holding company acquires more than 5 percent of the voting shares of a bank suggests that Congress contemplated the acquisition by bank holding companies of between 5 and 25 percent of the voting shares of a bank or a bank holding company. See 12 U.S.C. § 1842(a)(3); 12 C.F.R. 225.11(c). Nothing in section 3(c) of the BHC Act, moreover, requires the Board to deny an application solely because a bank holding company proposes to acquire less than a controlling interest in a bank or bank holding company. Accordingly, the Board previously has approved the acquisition by a bank holding company of less than a controlling interest in a bank or a bank holding company. See, e.g., North Fork (acquisition of 19.9 percent of the voting shares of a bank holding company); Mansura (acquisition of 9.7 percent of the voting shares of a bank holding company); and SunTrust Banks, Inc., 76 Federal Reserve Bulletin 542 (1990) ("SunTrust") (acquisition of up to 24.99 percent of the voting shares of a bank). 5 See, e.g., North Fork; Mansura; SunTrust. For example, the acquisition of a substantial ownership interest in a competitor or a potential competitor of the acquiring firm might alter the market behavior of both firms in such a way as to weaken or eliminate independent action at each organization and increase the likelihood of cooperative operations. See Mansura at 38. 6 The Oceanside banking market consists of the Oceanside RMA and the towns of Bonsall and Fallbrook, all in California. 7 Market share data are as of June 30, 1995, and are based on calculations in which the deposits of thrift institutions 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). 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). 8 The HHI would increase 11 points to 1418. 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 between 1000 and 1800 is considered to be moderately concentrated. The Justice Department 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 Justice Department has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognizes the competitive effect of limited-purpose lenders and other non-depository financial entities. 9 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Lindsey, Phillips, Yellen, and Meyer. |
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