For immediate release

The Federal Reserve Board today announced its approval of the applications of ANB Holding Company, Ltd., and ANB Corporation, both in Terrell, Texas, to acquire up to approximately 41 percent of the voting shares of Lakeside Bancshares, Inc., and thereby acquire its subsidiary, Lakeside National Bank, both in Rockwall, Texas. Attached is the Board's Order relating to this action.

ANB Holding Company, Ltd., ANB Corporation Terrell, Texas Order Approving Acquisition of Shares of a Bank Holding Company

ANB Holding Company, Ltd. and ANB Corporation, both in Terrell, Texas (collectively, "Applicant"), bank holding companies within the meaning of the Bank Holding Company Act ("BHC Act"), have requested the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire up to approximately 41 percent of the voting shares of Lakeside Bancshares, Inc. ("Bancshares"), and thereby acquire its subsidiary bank, Lakeside National Bank, both in Rockwall, Texas ("Bank").1 Notice of this proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 42,130 (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 3 of the BHC Act. Applicant is the 44th largest depository institution in Texas, controlling approximately $413 million in deposits, representing less than 1 percent of total deposits in depository institutions in the state.2 Bancshares is the 638th largest depository institution in Texas, controlling approximately $23.4 million in deposits, representing less than 1 percent of total deposits in depository institutions in the state. On consummation of this proposal, Applicant would become the 41st largest depository institution in Texas, controlling deposits of $436.4 million, representing less than 1 percent of the total deposits in depository institutions in the state. Competitive Considerations The BHC Act provides that the Board may not approve a proposal submitted under section 3 of the Act if the proposal would result in a monopoly or if the effect of the proposal may be to lessen competition substantially in any relevant market unless the Board finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served. In evaluating the competitive effects of this proposal, the Board has carefully considered Bank's contentions that consummation of this proposal would result in significantly adverse effects on the concentration of resources and competition for banking services. Bank contends that the appropriate product market for analyzing the competitive effects of this transaction is small business lending and that the appropriate geographic market for analyzing these effects is Rockwall County, Texas.3 The Board and the courts consistently have recognized that the appropriate product market for evaluating the competitive effects of bank mergers and acquisitions is the cluster of products (various kinds of credit) and services (such as checking accounts and trust administration) offered by banking institutions.4 Bank presents no facts to support an alternative product market of small business loans in this case, and the institutions to be combined are both commercial banks that offer a wide range of banking products and services. Based on all the facts of record, the Board concludes that the appropriate product market in this case is the cluster of banking products and services. The Board and the courts have found that the relevant geographic market for analyzing the competitive effect of a proposal must reflect commercial and banking realities and should consist of the local area where the banks involved offer their services and where local customers can practicably turn for alternatives.5 In making a determination on the geographic market in this case, the Board has considered worker commuting patterns (as indicated by census data) and other indicia of economic integration and transmission of competitive forces among depository institutions. Census Bureau data for 1990 indicate that 56.3 percent of Rockwall County's residents commute to jobs in the adjacent Dallas County. Rockwall County is connected to Dallas County by two highways,6 and the community of Rockwall, where almost all of the county's banking offices are located, is approximately five miles from the Dallas County line. Rockwall and Dallas Counties also have a significant amount of common advertising media, including newspapers, radio, and television. Of the approximately 11,000 households in Rockwall County, for example, 5,023 receive the Dallas Morning News daily, and 8,304 receive the newspaper on Sundays. This newspaper prints a survey of Dallas area lenders' mortgage rates every Friday and features regular advertisements by Dallas area banks and nonbanks for both loan and deposit products.7 These demographic data are corroborated by the inclusion of Rockwall County in the definition of the Dallas Metropolitan Statistical Area ("MSA"). MSAs are defined by the Office of Management and Budget based on an area's population and include surrounding counties with strong economic and social ties to the central county. Rockwall County also is included within the Dallas-Ft. Worth Ranally Metropolitan Area ("RMA"). An RMA is a privately defined geographic area that is compact, with relatively high population density that is linked by commuting, retail and wholesale trade patterns. The Board previously has used RMA designations as guides in defining relevant geographic banking markets.8 Based on all the facts of record, and for the reasons discussed above, the Board concludes that the relevant banking market for assessing the competitive effects of this proposal is the Dallas, Texas, banking market ("Dallas banking market") which is an area approximately equivalent to the Dallas-Ft. Worth RMA and includes Rockwall County.9 Applicant is the 19th largest depository institution in the Dallas banking market, controlling deposits of approximately $277 million, representing less than 1 percent of the total deposits in depository institutions in the market ("market deposits").10 Bank is the 79th largest depository institution in the market, controlling deposits of approximately $23.4 million, representing less than 1 percent of market deposits. On consummation of this proposal, Applicant would become the 18th largest depository institution in the Dallas banking market, controlling deposits of approximately $300.4 million, representing less than 1 percent of market deposits. The market, as measured by the Herfindahl-Hirschman Index ("HHI"), would remain moderately concentrated after consummation of this transaction, and the HHI would remain unchanged at 1444 points.11 Approximately 100 depository institutions would remain as competitors in the Dallas banking market. The Department of Justice has reviewed the proposal and advised the Board that consummation of the proposal would not likely have any significantly adverse competitive effects in the Dallas banking market or any other relevant banking market.12 In light of all the facts of record, and after carefully considering the comments of Bank, the Board concludes that consummation of the proposal would not result in any significantly adverse effects on competition or the concentration of banking resources in the Dallas banking market, or any other relevant banking market. Other Factors The Board has carefully reviewed the financial and managerial resources and future prospects of Applicant and Bancshares, and their subsidiary banks, in light of all the facts of record. The Board notes that Applicant, Bancshares and Bank are in satisfactory financial condition and would remain so after consummation of the proposal. In addition, reports of examination assessing the managerial resources of Applicant indicate this factor is consistent with approval. Based on all the facts of record, the Board concludes that considerations related to the financial and managerial resources and future prospects of Applicant, Bancshares, and their subsidiary banks are consistent with approval, as are other supervisory factors the Board must consider.13 Considerations relating to the convenience and needs of the communities to be served also are consistent with approval of this application.14 Conclusion Based on all the facts of record, the Board has determined that this application should be, and hereby is, approved.15 The Board's approval is specifically conditioned on compliance by Applicant with all the commitments made in connection with this application. For the purpose 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 proposed acquisition of Bancshares shall not be consummated before the fifteenth calendar day following the effective date of this order, and not 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 Atlanta, acting pursuant to delegated authority.

By order of the Board of Governors,16 effective September 29, 1997. (signed) William W. Wiles William W. Wiles Secretary of the Board

Footnotes 1 Bancshares owns 94.5 percent of the voting shares of Bank. Applicant also proposes to acquire less than 1 percent of the voting shares of Bank. 2 Asset and deposit data are as of June 30, 1996. In this context, depository institutions include commercial banks, savings banks, and savings associations. 3 Bank states that Applicant's substantial ownership interest in a competitor could weaken or eliminate the independent actions of a direct competitor. For purposes of the BHC Act, a company controls another company if that company owns more than 25 percent of the outstanding voting shares of another company. 12 U.S.C. § 1841(a)(2(A). In this light, the Board's analysis of the competitive effects of the proposal assumes that Bank would not compete independently with Applicant. 4 See United States v. Philadelphia National Bank, 374 U.S. 321, 357 (1963). Accord United States v. Connecticut National Bank, 418 U.S. 656 (1974); United States v. Phillipsburg National Bank, 399 U.S. 350 (1969) ("U.S. v. Phillipsburg"). See also Chemical Banking Corporation, 82 Federal Reserve Bulletin 239 (1997). 5 See St. Joseph Valley Bank, 68 Federal Reserve Bulletin 673 (1982). The key question to be considered in making this selection "is not where the parties to the merger do business or even where they compete, but where, within the area of competitive overlap, the effect of the merger on competition will be direct and immediate." United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 374 (1963); United States v. Phillipsburg Nat'l Bank, 399 U.S. 350 (1969). 6 Bank maintains that Rockwall County is physically separated from Dallas County by a lake and that two roads do not provide sufficient access to Dallas County. Rockwall County and the Dallas area are connected by U.S. Interstate Highway 30 ("Interstate 30"), which runs south from Rockwall County to downtown Dallas, and State Highway 66, which runs west from Rockwall County to the north Dallas area. Interstate 30 has been and continues to be widened to six lanes, and in some areas to eight lanes. Traffic count data show extensive driving activity between the two counties. 7 Bank contends that the business focus of Applicant's Rockwall County branches and Bank is local and that these banking offices only advertise their services in local newspapers. Bank also notes that its designated service area under the Community Reinvestment Act (12 U.S.C. 2901 et seq.)("CRA") is limited to Rockwall County. As discussed previously, the key question when identifying the relevant geographic market for analyzing the competitive effects of a transaction is where will the effect of the merger on competition be direct and immediate within the area of competitive overlap rather than where will the institutions actually do business. Economic and demographic factors in this case, including the availability of media sources for information on competing banking products and the widespread commuting and travel in the area, show that customers of Rockwall County banks have access to competitors of and reasonable substitutes for these banks in an area much larger than Rockwall County. The Board also has noted that a bank's delineated community under the CRA does not necessarily represent the appropriate geographic market for analyzing the competitive effects of a proposal. See Flathead Holding Company, 82 Federal Reserve Bulletin 741, n.11 (1996). 8 See St. Joseph Valley Bank, 68 Federal Reserve Bulletin at 647. 9 The Dallas banking market is approximated by Dallas County, the southeastern quadrant of Denton County (including Denton and Lewisville), the southwest quadrant of Collin County (including McKinney and Plano), Rockwall County, the communities of Forney and Terrell in Kaufman County, Midlothian, Waxahachie and Ferris in Ellis County, and Grapevine and Arlington in Tarrant County. 10 Market share data are as of June 30, 1996. These data are based on calculations in which the deposits of thrift institutions are included at 50 percent. The Board has previously 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). 11 Under the revised 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, and a market above 1800 is considered to be highly 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 effect of limited-purpose lenders and other non-depository financial entities. 12 The Office of the Comptroller of the Currency ("OCC") and the Federal Deposit Insurance Corporation also have not objected to the proposal. 13 Bank questions whether Applicant should be permitted to acquire a minority interest in Bancshares without committing to be a passive investor. The BHC Act contemplates that a bank holding company may seek to acquire less than a majority interest in another bank holding company or bank, and does not require that these less-than-majority investments be passive. To the contrary, the BHC Act defines a bank holding company as controlling any company in which the bank holding company owns a greater than 25 percent voting interest. As noted above, the Board has analyzed this proposal in light of the BHC Act's definition that the acquisition would cause Applicant to control Bancshares and Bank. 14 The Board notes that the most recent performance evaluation of Applicant's subsidiary bank, American National Bank of Texas, Terrell, Texas ("ANBT"), under the CRA by its primary federal supervisor, the OCC, was "outstanding." Examiners found that the bank offered a number of products to assist in meeting the credit needs of its communities and stated that ANBT has an excellent record of lending to small businesses. 15 Bank has requested a hearing on the proposal. Section 3(b) of the BHC Act does not require the Board to hold a public hearing on an application unless the appropriate supervisory authority for the bank to be acquired makes a timely written recommendation of denial of the application. In this case, the Board has not received such a recommendation from the OCC, Bank's primary federal supervisor. Under its rules, the Board may also, in its discretion, hold a public hearing or meeting on an application to clarify factual issues related to the application and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 225.16(e). The Board has carefully considered Bank's request for a hearing in light of all the facts of record. In the Board's view, Bank has had ample opportunity to submit its views, and has submitted written comments that have been carefully considered by the Board in acting on this application. Bank's request fails to demonstrate why its written presentations do not adequately present its evidence, allegations and views. After a careful review of all the facts of record, moreover, the Board has concluded that Bank disputes the weight that should be accorded to, and the conclusions that the Board should draw from, the facts of record, but does not identify disputed issues of fact that are material to the Board's decision. For these reasons, and based on all the facts of record, the Board has determined that a public hearing or meeting is not required or warranted to clarify the factual record in the application, or otherwise warranted in this case. Accordingly, the request for a hearing on the proposal is hereby denied. 16 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Phillips, and Meyer.

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1997 Orders on banking applications