| For immediate release |
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The Federal Reserve Board today announced its approval of the application of Shoreline Financial Corporation, Benton Harbor, Michigan, to acquire: (1) SJS Bancorp, Inc., St. Joseph, Michigan, and its wholly owned subsidiary, SJS Federal Savings Bank, and thereby engage in operating a savings association; and (2) SJS Financial Corporation, a nonbanking subsidiary of SJS Bank, and thereby engage in the reinsurance of life insurance that is limited to insuring the repayment of the outstanding balance due on mortgages made by SJS Bank on the death of the mortgagor. Attached is the Board's Order relating to this action. |
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Shoreline Financial Corporation |
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Shoreline Financial Corporation, Benton Harbor, Michigan ("Shoreline"), 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. §�1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire: (1) SJS Bancorp, Inc., St. Joseph, Michigan, and its wholly owned subsidiary, SJS Federal Savings Bank ("SJS Bank"), and thereby engage in operating a savings association; and (2) SJS Financial Corporation, a nonbanking subsidiary of SJS Bank, and thereby engage in the reinsurance of life insurance that is limited to insuring the repayment of the outstanding balance due on mortgages made by SJS Bank on the death of the mortgagor ("credit-related life insurance"). Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 8960 (1997)). The time for filing comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in section�4(c)(8)�of the BHC Act. The Board previously has determined by regulation that operating a savings association and acting as a principal for credit-related life insurance are activities closely related to banking for purposes of section 4(c)(8) of the BHC Act.1 The Board requires savings associations acquired by bank holding companies to conform their direct and indirect activities to those permissible for bank holding companies under section 4 of the BHC Act and Regulation Y. Shoreline has indicated that SJS Bank does not engage in any activities that are not permissible for bank holding companies under the BHC Act.2 Shoreline is the 19th largest depository institution in Michigan, controlling deposits of $605.9 million, representing less than 1 percent of total deposits in depository institutions in the state.3 SJS Bancorp is the 65th largest depository institution in the state, controlling deposits of $110.2 million. On consummation of the proposal, Shoreline would become the 15th largest depository institution in Michigan, controlling total deposits of $716.1 million, representing less than 1 percent of the total deposits in depository institutions in the state. Competitive Considerations
Shoreline Bank is the largest depository institution in the Benton Harbor banking market, controlling deposits of approximately $388.7 million, representing 30.5 percent of total deposits in depository institutions in the market ("market deposits").5 SJS Bank is the fifth largest depository institution in the market, controlling deposits of approximately $110.2 million, representing 4.3 percent of market deposits. On consummation of this proposal, Shoreline would control deposits of approximately $498.9 million, representing 37.5 percent of market deposits. Market concentration, as measured by the Herfindahl-Hirschman Index ("HHI"), would increase by 376 points to 2348 points. The market indexes in this case exceed the levels suggested in the DOJ Guidelines for identifying cases that ordinarily would not have a significantly adverse effect on competition.6 As the Board has previously indicated, HHI levels are only guidelines that are used by the Board, the Department of Justice, and other banking agencies to help identify cases in which a more detailed competitive analysis is appropriate to assure that the proposal would not have a significantly adverse effect on competition in any relevant market. A proposal that fails to pass the HHI market screen may nonetheless be approved because other information may indicate that the proposal would not have a significantly adverse effect on competition. A number of considerations indicate that the market concentration as measured by the HHI tends to overstate the competitive effects of this proposal. After consummation of the proposal, for example, twelve depository institutions would remain in the market. Six of these competitors are multi-billion dollar banking organizations. In addition, three of the remaining competitors would each control significant percentages of market deposits.7 Several factors also indicate that the Benton Harbor banking market is attractive for entry. Five new entries into the market have occurred within the last 18 months. Three of the new entries (two by acquisition and one de novo) were for the purpose of entering the market and were not incidental to an acquisition in another market. In addition, the Benton Harbor banking market comprises parts of two Michigan Metropolitan Statistical Areas ("MSA") that have characteristics that make them attractive for entry to potential competitors.8 From 1990 to 1994, the population in the Benton Harbor banking market increased at a higher rate than the statewide rate, and the percentage increase in the amount of deposits in the Benton Harbor banking market during the same period was substantially higher than the percentage increase in market deposits for MSA and non-MSA banking markets in the state.9 Moreover, legal barriers to entry into banking markets are low in Michigan.10 The Board also has considered the competitive effect of credit unions operating in the Benton Harbor banking market. Seven credit unions control approximately 14.3 percent of the market deposits and offer a full range of retail banking products. The largest credit union, which controls approximately $129 million in deposits, representing approximately 8 percent of market deposits, would be the fourth largest depository institution in the market. The Department of Justice has reviewed the proposal and advised the Board that consummation of the proposal would not have a significantly adverse effect on competition in the Benton Harbor banking market or any other relevant banking market. Based on these and all the other facts of record, the Board concludes that consummation of this proposal is not likely to have a significantly adverse effect on competition or on the concentration of banking resources in the Benton Harbor banking market, or any other relevant banking market.11
Other Considerations
In light of all the facts of record, the Board finds that consummation of the proposal is not likely to result in any significantly 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. Accordingly, the Board has determined that the Shoreline proposal can reasonably be expected to produce public benefits that outweigh possible 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 notice is specifically conditioned on compliance by Shoreline and SJS Bancorp with commitments made in connection with this notice. The Board's determination 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, or to prevent evasion of, the provisions of the BHC Act and the Board's regulations and orders issued thereunder. For purposes of this transaction, the commitments and conditions relied on by the Board in reaching this 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. This 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 Chicago, acting pursuant to delegated authority. |
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By order of the Board of Governors,12 effective April 21, 1997.
(signed) Jennifer J. Johnson
Jennifer J. Johnson
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Footnotes 1 12 C.F.R. 225.28(b)(4)(ii) and (b)(11). 2 Shoreline would conduct thrift insurance activity in accordance with the Board's regulations. 3 Deposit data are as of June 30, 1996. In this context, the term depository institutions includes commercial banks, savings banks, and savings associations. 4 The Benton Harbor banking market is approximated by Van Buren County, Michigan, excluding the western townships of Bloomingdale, Pine Grove, Waverly, Almena, Paw Paw, Antwerp, Decatur, and Porter; plus the northwestern portion of Berrien County, Michigan, including the townships of Watervliet, Coloma, Hagar, Bainbridge, Benton, St. Joseph, Pipestone, Sodus, Royalton, Lincoln, Baroda, Lake and Chikaming. 5 Market share data are as of June 30, 1996, and take into account proposals approved by the Board through April 15, 1997. The data 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 Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); 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). Because the deposits of SJS Bank would be acquired by a commercial banking organization under the proposal, those deposits are included at 100 percent in the calculation of Shoreline's pro forma market share. See Norwest Corporation, 78 Federal Reserve Bulletin 452 (1992). First Banks, Inc., 76 Federal Reserve Bulletin 669, 670 n.9.(1990). 6 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 greater than 1800 is considered highly 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 threshold for an increase in the HHI when screening bank mergers and acquisitions for anticompetitive effects implicitly recognizes the competitive effects of limited-purpose lenders and other non-depository financial entities. 7 Three competitors would control 26.4 percent, 14.1�percent, and 9.6 percent of the market deposits. 8 These two MSAs are the Berrien County MSA and the Van Buren County MSA. The per capita income of residents in the Berrien County MSA has increased more than the average increase in other Michigan MSAs. The Van Buren County MSA has experienced an above average increase in deposits, population, and profitability for banking organizations as compared to other Michigan MSAs. 9 The sources for the data on this banking market, all per capita income, and other Michigan information are as follows, respectively: Department of Commerce, US Bureau of the Census, Press Release CB95-179, Population Distribution and Population Estimates Branches (October 2, 1995); Bureau of Economic Analysis, Survey of Current Business, "Local Area Personal Income", April 1994 and June 1996; and Department of Commerce, US Bureau of the Census, Press Release CB96-224, Population Estimates Program, Population Division (December 30, 1996). 10 Michigan permits statewide de novo branching and permits the acquisition of both existing branches and de novo branches by out-of-state banks on a reciprocal basis. Mich. Stat. Ann. § 23.710 (122), (171) (Law Co-op. Supp. May 1996). 11 The Board notes that the market for mortgage life insurance is national in scope and that there are numerous competitors in the market. 12 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Phillips, and Meyer. |
1997 Orders on banking applications
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