For immediate release

The Federal Reserve Board announced today its approval of the application of PAB Bankshares, Inc., Valdosta, Georgia, to merge with Investors Financial Corporation, and thereby acquire Bainbridge National Bank, both in Bainbridge, Georgia. Attached is the Board's Order relating to this action.

PAB Bankshares, Inc. Valdosta, Georgia Order Approving Merger of Bank Holding Companies

PAB Bankshares, Inc. ("PAB"), 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 to merge with Investors Financial Corporation ("Investors"), and thereby acquire Bainbridge National Bank, both in Bainbridge, Georgia. Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (63 Federal Register 11,446 (1998)). 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. PAB owns three depository institutions in Georgia and is the 28th largest depository institution in the state, controlling approximately $247.3 million in deposits, representing less than 1 percent of total deposits in depository institutions in Georgia.1 Investors is the 130th largest depository institution in Georgia, controlling approximately $64.3 million in deposits, representing less than 1 percent of total deposits in depository institutions in the state. On consummation of the proposal, PAB would become the 20th largest depository institution, controlling deposits of $311.6 million, representing less than 1 percent of total deposits in depository institutions in Georgia. Competitive Considerations The BHC Act prohibits the Board from approving a proposal if it would result in a monopoly or if the effect of the proposal may be substantially to lessen competition 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.2 PAB and Investors compete in the Bainbridge banking market, which is defined by the Federal Reserve Bank of Atlanta ("Reserve Bank") as an area approximated by Decatur and Seminole Counties in Georgia.3 PAB contends that the area delineated by the Reserve Bank should be expanded to include adjacent areas that encompass Tallahassee, Florida ("Tallahassee"); Dothan, Alabama ("Dothan"); and Albany and Cairo, Georgia. The Board concludes, however, that the appropriate market for analyzing the competitive effects of the proposal is the Bainbridge banking market as previously defined.4 The Board bases its conclusion on an analysis of employment opportunities, commuting data, shopping patterns, check clearing and deposit data, interviews with local bankers, and other facts of record indicating that there is substantial commuting, travel, and commercial interaction between Decatur and Seminole Counties. Decatur County has a significantly larger population than Seminole County,5 and some of the area's largest employers are in Bainbridge, which is in Decatur County.6 Commuting data from the Census Bureau for 1990 show that more than 20 percent of Seminole County residents commute to Decatur County for employment. Decatur County also offers area residents the opportunity to purchase products and services at six shopping centers, several major department stores, and a number of restaurants. Data from the Georgia Highway Department for 1996 show that approximately 22 percent of Seminole County's residents travel daily to Decatur County. Residents of Decatur and Seminole Counties also have access to the same newspapers and radio stations.7 Check clearing data for a two-day period from the subsidiary banks of PAB and Investors in Decatur County also show that approximately 10 percent of the checks processed were drawn on banks in Seminole County. In addition, deposit data from PAB's subsidiary bank in Decatur County show that the bank has a deposit relationship with approximately 8 percent of the households in Seminole County. Interviews with senior managers of banks in Decatur County and in Seminole County, moreover, indicated that the banks in each county substantially compete for customers in the other county and that the banks have significant customer bases in the other county. The facts of record, however, do not support expanding the banking market as suggested by PAB. Bainbridge is approximately 42 miles northwest of Tallahassee; 52 miles southeast of Dothan; and 57 miles southwest of Albany. Commuting data indicate that approximately 4 percent of the employees in the Bainbridge area commute to jobs in the Tallahassee Metropolitan Statistical Area ("MSA"), and data from the Georgia Highway Department indicate that less than 3.5 percent of residents in the Bainbridge area travel daily to Tallahassee. Neither the Tallahassee MSA nor the Tallahassee Ranally Metropolitan Area ("RMA") include either Decatur or Seminole Counties, confirming that there is insufficient economic integration to warrant considering these counties to be within the same banking market as Tallahassee.8 Commuting data also indicate that a de minimis percentage of Bainbridge area residents commute to the Dothan MSA, the Albany MSA, or Cairo, Georgia, and there are no other indications of economic integration to support including these areas within the Bainbridge banking market.9 In light of these, and all facts of record, the Board concludes that the Bainbridge banking market reflects commercial and banking realities and represents an area where local customers can practicably turn for alternatives. Accordingly, the relevant banking market for considering the competitive effects of the proposal is the Bainbridge banking market as defined above. Consummation of the proposal would exceed the Department of Justice Merger Guidelines ("DOJ Guidelines") in the Bainbridge banking market.10 In the Bainbridge banking market, PAB is the third largest depository institution, controlling $52.9 million in deposits, representing 15.1 percent of total deposits in depository institutions in the market ("market deposits").11 Investors is the largest depository institution in the market, controlling $64.3 million in deposits, representing 18.4 percent of market deposits. On consummation of the proposal, PAB would become the largest depository institution in the market, controlling $117.2 million in deposits, representing 33.6 percent of market deposits. The HHI would increase by 557 points to 2036. The Bainbridge banking market presents unique considerations in analyzing the competitive effects of the proposal. Although it is a small rural banking market with total market deposits of approximately $350 million, seven competitors would remain in the market after consummation of the proposal. Five competitors each would control significant shares of market deposits after consummation of the proposal that range from approximately 10 percent to approximately 18 percent of market deposits. Given the size of the market, the number of competitors and the relative size of the remaining competitors are significant and unique factors that substantially mitigate the potential competitive effects of the transaction. The Bainbridge banking market also has some characteristics that make it attractive for entry. Data for 1997 show that deposits per office in the Bainbridge banking market are greater than the averages for other non-MSA counties in Georgia. In the Bainbridge banking market, total banking deposits have increased by 39.6 percent between 1993 and 1997, compared to 20.9 percent in other non-MSA counties in Georgia. Since 1995, three bank holding companies, including PAB, have entered the banking market by acquiring banks that only operated in the Bainbridge banking market. The Board concludes that the potential adverse competitive effects of the proposal would be substantially mitigated by these considerations. The Justice Department reviewed the proposal and advised the Board that consummation of the proposal would not likely have any significantly adverse competitive effects in the Bainbridge banking market or any other relevant banking market. Based on all the facts of record, and for the reasons discussed above, the Board concludes that consummation of the proposal is not likely to result in any significantly adverse effects on competition or on the concentration of banking resources in the Bainbridge banking market or any other relevant banking market. Other Considerations The BHC Act requires the Board, in acting on an application, to consider 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 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. Based on all the facts of record, the Board concludes that the financial and managerial resources and the future prospects of PAB, Investors, 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. In addition, considerations related to the convenience and needs of the communities to be served, including the records of performance of the institutions under the Community Reinvestment Act, 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 application should be, and hereby is, approved. The Board's approval is specifically conditioned on compliance by PAB with all the commitments made in connection with the application. For the 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 the banks 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 Reserve Bank, acting pursuant to delegated authority.

By order of the Board of Governors,12 effective April 27, 1998. (signed) Jennifer J. Johnson Jennifer J. Johnson Deputy Secretary of the Board

Footnotes 1 State deposit data are as of June 30, 1997. In this context, depository institutions include commercial banks, savings banks, and savings associations. 2 12 U.S.C. § 1842(c)(1)(B). 3 Decatur and Seminole Counties are adjacent rural counties in the southwestern corner of Georgia. Both counties border Florida, and Seminole County also borders Alabama. 4 The Board and the courts have found that the relevant banking market for analyzing the competitive effects of a proposal must reflect commercial and banking realities and should consist of the local area where local customers can practicably turn for alternatives. See St. Joseph Valley Bank, 68 Federal Reserve Bulletin 673, 674 (1982). See also 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). 5 Data from the United States Census Bureau for 1990 show that Decatur County has a population of approximately 26,500 and Seminole County has a population of approximately 9,250. 6 Bainbridge has a population of 11,231 and is the largest town in the two counties. Employers in Bainbridge include one manufacturer that employs more than 1000 workers and four organizations that each employ 400 workers. 7 A free weekly newspaper published in Bainbridge circulates to a significant percentage of households in Seminole County. In addition, two radio stations in Decatur County broadcast to surrounding areas, including Seminole County. Decatur and Seminole Counties also are in the same local telephone calling area. 8 An MSA designation is made by the Office of Management and Budget on the basis of an area's population and includes surrounding counties with strong economic and social ties to a central county. An RMA is a privately defined compact geographic area with relatively high population density that is linked by commuting, retail, and wholesale trade patterns. 9 The MSA designations for Albany and Dothan do not include Decatur or Seminole Counties. The RMA designations that include these cities also do not include Decatur or Seminole Counties. 10 Under the revised DOJ Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger Herfindahl-Hirschman Index ("HHI") exceeds 1800 is considered 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. 11 Market share data used to analyze the competitive effects of the proposal are as of June 30, 1997. These 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). 12 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Phillips, Meyer, Ferguson, and Gramlich.

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1998 Orders on banking applications