percent of their aggregate deposits; Chester Bank was 68th largest of the State's 71 commercial banks, with 0.05 percent of their total deposits.

The most appropriate geographic area in which to assess the competitive effects of the proposed transaction would be the town of Chester and the surrounding towns within a radius of approximately 10 road-miles, this being a segment of southeastern Middlesex County and the town of Lyme in adjacent New London County. Chester is located 31 road-miles south of Hartford, the capital and largest city in the State, and a similar distance east of New Haven. The local market is largely residential and rural. Its population approximated 26,300 in 1970, having increased about 30 percent during the 1960s, in contrast to the statewide increase of 19.6 percent. Middlesex County's 1974 median household buying level of $14,518 closely approximated that of the State.

The Chester banking market is served by six commercial banks and six mutual savings banks. Chester Bank has 12.8 percent of the $26.6-million IPC deposits held by the seven area offices of these commercial banks; Chester Savings Bank has 22.4 percent of the $74.6-million deposits held by the six area offices of the savings banks. The resulting bank would control 19.9 percent of the total IPC deposits in the market, representing the second largest share within the market.

There is no significant competition between the proponents. These banks enjoy a unique exception to the Connecticut statute which prohibits interlocking directorates of financial institutions. In view of their current common management, there appears to be no potential for competition to increase between them.

Chester is currently closed to de novo expansion by outside banks as a result of Connecticut's home office protection law. Consummation of this proposal would result in the abandonment by Chester Savings Bank of its charter, thereby permitting branching into Chester by other savings banks.

In view of the foregoing, the Board of Directors is of the opinion that the proposed transaction would not, in any section of the country, substantially lessen competition, tend to create a monopoly, or in any other manner be in restraint of trade.

Financial and Managerial Resources: Future Prospects. Chester Bank and Chester Savings Bank have satisfactory financial and managerial resources under their present operational arrangement, as would the resulting bank.

Initially there may be a reduction in the resulting bank's savings and time accounts since by regulation it would not be able to pay the maximum rates of interest allowed mutual savings banks on similar accounts. However, the deposit attrition may be slight in view of the interest that present depositors of Chester Savings Bank would have, as stockholders, in the success of the resulting bank. The future prospects of the resulting bank are considered satisfactory.

Convenience and Needs of the Community to be Served. The proposed transaction would have little effect on the convenience and needs of the Chester market. The resulting bank would offer no services that are not presently offered by the proponents, but its increased legal lending limit would enable it to make larger commercial loans.

Based on the foregoing, the Board of Directors has concluded that approval of the application is warranted.

Merger transactions were involved in the acquisitions of banks by holding companies in the following approvals in 1976. In each instance, the Attorney General's report stated that the proposed transaction would have no effect on competition. The Corporation's basis for approval in each case stated that the proposed transaction would not, per se, change the competitive structure of banking, nor affect the banking services that the (operating) bank has provided in the past, and that all other factors required to be considered pertinent to the application were favorably resolved.

Tuscaloosa County Bank, Tuscaloosa, Alabama, in organization; offices: 0; resources: 100($000); to merge with and change title to Peoples Bank of Tuscaloosa, Tuscaloosa; offices: 1; resources: 7,462($000). Approved: January 23.

Etowah County Bank, Gadsden, Alabama, in organization; offices: 0; resources: 100($000); to merge with and change title to Gadsden Mall Bank, Gadsden; offices: 2; resources: 6,022 ($000). Approved: January 28.

First National Bank & Trust Company of Midland (upon conversion to a State-chartered institution with the title First Midland Bank & Trust Company), Midland, Michigan; offices: 5; resources: 61,175($000); to consolidate with First MBT Bank, Midland, in organization; offices: 0; resources: 120($000). Approved: March 29.

Second Street Bank and Trust Company, Harrisburg, Pennsylvania, in organization; offices: 0; resources: 512($000); to merge with Dauphin Deposit Trust Company (change title to Dauphin Deposit Bank and Trust Company), Harrisburg; offices: 32; resources: 444,921 ($000). Approved: April 12.

The Savings Deposit Bank Company, Medina, Ohio; offices: 2; resources: 20,652 ($000); to merge with SDB Bank, Medina, in organization; offices: 0; resources: 647($000). Approved: April 16.

Galleria New Bank, Houston, Texas, in organization; offices: 0; resources: 200 ($000); to merge with and change title to Galleria Bank, Houston; offices: 2; resources: 39,894 ($000). Approved: April 21.

1st & Devine State Bank, Groveton, Texas, in organization; offices: 0; resources: 50($000); to merge with and change title to First Bank in Groveton, Groveton; offices: 1; resources: 12,189($000). Approved: August 30.

First and Townsend State Bank, Lufkin, Texas, in organization; offices: 0; resources: 75($000); to

merge with and change title to First Bank & Trust, Lufkin; offices: 1; resources: 74,865 ($000). Approved: August 30.

The Commercial Savings Bank, Adrian, Michigan; offices: 4; resources: 66,200($000); to consolidate with CSB State Bank (change title to Commercial Savings Bank), Adrian, in organization; offices: 0; resources: 120($000). Approved: October 28.

Constitution Bank and Trust Company, Hartford, Connecticut; offices: 6; resources: 35,356 ($000); to merge with The Colonial Bank and Trust Company of Hartford, Hartford, in organization; offices: 0; resources: 4,697($000). Approved: November 3.

Metropolitan Bank & Trust Company, Bridgeport, Connecticut; offices: 1; resources: 13,023 ($000); to merge with Union Trust Company of Bridgeport, Inc. (change title to Union Trust Company of Bridgeport), Bridgeport, in organization; offices: 0; resources: 3,000($000). Approved: November 29.

Garland Commerce Bank, Garland, Texas, in organization; offices: 0; resources: 200($000); to merge with and change title to Southern Bank and Trust Company, Garland; offices 1; resources: 21,138 ($000). Approved: November 17.

Gladwin County Bank, Beaverton, Michigan; offices: 2; resources: 15,720($000); to consolidate with CFC Bank, Beaverton, in organization; offices: 0; resources: 120($000). Approved: November 23.

BN Bank of Northfield, Northfield, Illinois, in organization; offices: 0; resources: 88($000); to merge with and change title to Bank of Northfield, Northfield; offices: 1; resources: 20,795($000). Approved: November 29.

Western State Bank, Howard City, Michigan; offices: 3; resources: 14,092($000); to consolidate with WSB Bank, Howard City, in organization; offices: 0; resources: 120($000). Approved: November 29.

Community State Bank of Dowagiac, Dowagiac, Michigan; offices: 2; resources: 17,098 ($000); to consolidate with DSB Bank, Dowagiac, in organization; offices: 0; resources: 120($000). Approved: November 30.

The Peoples State Bank of Caro, Michigan, Caro, Michigan; offices: 2; resources: 24,415($000); to consolidate with P.S.B. State Bank, Caro, in organization; offices: 0; resources: 120($000). Approved: December 23.

Basis for Corporation denial,
March 15, 1976

State Bank of Standish, Standish, Michigan ("Standish Bank"), a State nonmember insured bank with total resources of $36,424,000 and total IPC deposits of $28,262,000, has applied, pursuant to section 18(c) and other provisions of the Federal Deposit Insurance Act for the Corporation's prior consent to acquire the assets of and assume the liability to pay deposits made in The Au Gres State Bank, Au Gres, Michigan ("Au Gres Bank'), also a State nonmember insured bank, having total resources of $8,158,000 and total IPC deposits of $6,246,000, the transaction to be effected under the charter and with the title of Standish Bank. The sole office of Au Gres Bank would be established as a branch of the resulting bank. Consent has also been requested to issue subordinated capital notes as an addition to resulting bank's capital structure and to retire these notes at maturity, seven years after date of issue. These notes constitute part of the consideration being offered to shareholders of Au Gres Bank.

Competition. Standish Bank has its main office and a drive-in facility in Standish (population 1,184), the county seat of Arenac County, which borders Saginaw Bay north of Bay City in eastcentral Michigan. Standish Bank also has a branch at Skidmore Lake in Mills Township, Ogemaw County, 20 road-miles north of its main office. At year-end 1974, Standish Bank was 129th largest of the commercial banks in the State of Michigan, with 0.1 percent of their total deposits. Au Gres Bank, a unit bank located in the city of Au Gres

(population 564), 16 road-miles northeast of Standish, is the only other bank in Arenac County.

Arenac County had a 1970 population of 11,149, which represented an increase of 13.1 percent over its population in 1960. The county, which has been primarily agricultural, continues to grow at about the same rate, as light manufacturing, touring, and recreational activities become more important. Arenac County's most recent median household buying level, however, was about 33 percent below the statewide median.

The area in which the competitive effects of the proposed transaction would be most immediate and direct may be approximated by the area within a 20-25 mile radius of Au Gres. This would include all of Arenac County, the southern portion of losco County, the southeastern portion of Ogemaw County, and the northern half of Bay County. The total population of this local market which is bounded on the east by Saginaw Bay approximated 28,000 people in 1970. Except for Bay County, income levels are well below the State median, but economic prospects throughout the market are reasonably good. Both Standish Bank and Au Gres Bank, for example, have seen their deposits grow substantially since 1970-more than doubling for the former and increasing by over 80 percent for the latter.

Both Standish Bank and Au Gres Bank compete within the relevant market, and each draws a not insignificant portion of its total loans and deposits from the primary service area of the other. Altogether, six commercial banks compete in the relevant market. Two of these are affiliates of Peoples Banking Corporation, which presently controls about 15.9 percent of the market's total IPC deposits, while Standish Bank has the largest market share of all six (34.8 percent). Peoples State Bank of East Tawas controls about 27.0 percent of such deposits; Farmers and Merchants State Bank of Hale, about 14.7 percent; and Au Gres Bank, 7.6 percent. Standish Bank and Au Gres Bank are the closest of these six banks.

Although the market involved is relatively sparse in population, the proposed transaction would, if consummated, (i) eliminate a modest amount of existing competition between Standish Bank and Au Gres Bank, (ii) add substantially to the market share presently held by Standish Bank, the leading local bank, (iii) increase substantially the advantage in local market share which Standish Bank presently enjoys over all of its local competitors, namely Peoples Banking Corporation, Peoples State Bank of East Tawas, and Farmers and Merchants State Bank of Hale, and (iv) reduce from five to four the number of other banking sources from which residents and businessmen in the Au Gres area have to choose for banking services, the nearest of which would then be 19 roadmiles away.

Even if no significant potential exists for increased competition between Standish Bank and Au Gres Bank in the future through de novo branching by either or both, and even if some consolidation appears desirable for Au Gres Bank, the Board of Directors understands that Standish Bank is not the only legally available partner for such an acquisition and believes it extremely desirable as a competitive matter not to increase Standish Bank's present advantage over its nearest competitors within the market. The Board also notes that the trust department of Peoples National Bank & Trust Company of Bay City, an affiliate of Peoples Banking Corporation, annually votes a substantial, although possibly not controlling, block of stock in Standish Bank, thereby raising a question in its mind of the vigor of competition between the two banking organizations.

Based on the foregoing and on the standards established by the Supreme Court in cases involving horizontal mergers of banks already competing in the same local market, the Board of Directors is of the opinion that the proposed transaction would "substantially lessen competition" in the relevant local banking market.

Financial and Managerial Resources; Future Prospects. Both banks have satisfactory financial resources, with the earnings performance of Au Gres Bank being particularly strong. The latter bank claims a management succession problem, with one senior officer due to retire shortly and the other, presently in his late 50s, in somewhat precarious health. The Board notes in this regard that the application contemplates that both officers will continue on the board of directors of the resulting institution and that the younger of the two will continue in charge of the proposed Au Gres branch for 4 or 5 years if his health permits. The succession problem does not appear either imminent or insurmountable, and lends only slight weight in favor of the application. Standish Bank has managerial resources in depth, and the future prospects of both banks, as well as the resulting bank, must be regarded as favorable in this developing area.

Convenience and Needs of the Community to be Served. Banking premises at the Au Gres location would be renovated and refurbished. At this office, policies of a more aggressive, sophisticated management would be reflected and improved loan services, particularly in the field of agricultural credit, would be available. Standish Bank's $180,000 statutory loan limit and Au Gres Bank's $60,000 limit would, for the resulting bank, be increased to $270,000 (subject in each case to the discretionary 100 percent increase legally permitted a board of directors). Time deposit open accounts would become available at the Au Gres location, as would time certificates of deposit in a minimum amount reduced from $5,000 to $1,000, a costless checking plan, and interest on Christmas

Club deposits. However, since Standish Bank already competes within the relevant market, these additional services are presently available to residents and businessmen in and around Au Gres, albeit with some inconvenience. Greater convenience for a limited portion of the public within the market area does not, in the opinion of the Board, outweigh the adverse competitive effects previously recited.

The Board of Directors believes accordingly that the application should be, and it hereby is, denied. Statement upon reconsideration, June 25, 1976

State Bank of Standish, Standish, Michigan ("Standish Bank"), a State nonmember insured bank with total resources of $36,424,000 and total IPC deposits of $28,262,000, was denied, on March 15, 1976, the Corporation's prior approval to acquire the assets of and assume the liability to pay deposits made in The Au Gres State Bank, Au Gres, Michigan ("Au Gres Bank"), a State nonmember insured bank having total resources of $8,158,000 and total IPC deposits of $6,246,000 (see page 107 for Basis for Corporation Denial). Standish Bank and Au Gres Bank thereafter petitioned the Corporation to reconsider its original denial. The Corporation's Board of Directors, having reconsidered its earlier decision, affirms its original denial with the following additional statement.

The Board of Directors concluded in its original decision that the proposed transaction would, if consummated, (i) eliminate a modest amount of existing competition between Standish Bank and Au Gres Bank, (ii) add substantially to the market shares presently held by Standish Bank, the leading local bank, (iii) increase substantially the advantage in the local market share that Standish Bank presently enjoys over all of its local competitors, and (iv) reduce from five to four the number of other banking sources from which residents and businessmen in the Au Gres area have to choose for banking services. Based on those conclusions and on the standards established by the Supreme Court in cases involving horizontal mergers of banks already competing in the same local market, the Board of Directors was of the opinion that the proposed transaction would "substantially lessen competition" within the relevant local banking market, which was described as the area within a 20-25 mile radius of Au Gres. This included all of Arenac County, the southern portion of losco County, the southeastern portion of Ogemaw County, and the northern half of Bay County.

The applicants' requested reconsideration is based, principally, on the ground that the market defined in the Basis for Corporation Denial was too narrow and should be expanded to include additional parts of all adjoining counties, particularly the southern half of Bay County with its principal trade and population center, Bay City. Additionally, the argument was again made that Au Gres

Bank faced serious management succession problems and that residents of the Au Gres area were not receiving full banking services. Further, it was stated that there were no less anticompetitive alternatives available.

In support of the argument that the market should be expanded, particularly southward to inIclude Bay City, surveys were presented which purportedly indicated substantial commutation between the Bay City area and Standish for banking and other services. The statistics in these surveys were contained in the original application and were carefully considered at the time the application was denied. It was recognized that some residents of the Standish area do commute to large shopping complexes in the Bay City area for shopping needs, but no conclusion could be drawn from the statistics submitted that any meaningful number of persons traveled there for banking services or that residents of the Bay City area found Standish Bank a convenient banking alternative. On the contrary, the surveys showed that 72 percent of Standish Bank's main office customers were located within 10 miles of that office and 99 percent were located within 25 miles. The survey further indicated that 91 percent of Au Gres Bank's customers were contained within a 10-mile radius of Au Gres and that the one branch operated by Standish Bank obtained 96 percent of its deposits from customers located within a 10-mile radius of that office.

While the Bay City trade area does have some economic impact on competition in the service areas of the applicants, for purposes of section 7 of the Clayton Act (15 U.S.C. 18), the relevant geographic market is where "the effect of the merger will be direct and immediate" (United States v. Philadelphia National Bank. 374 U.S. 321, 359 (1963)). In view of the direct effect the proposed merger would have within the originally defined market area, the Board of Directors sees nothing in the record supporting the argument for an expanded market.*

It is noted, however, that even were the relevant market redefined to include that area within a 25-mile radius of Standish, which would correspond to Standish Bank's legal branching area, the basis for the original denial would still be true.

Standish Bank and Au Gres Bank hold a combined 30.1 percent share of that market, second only to the 39.6 percent combined share held by the two subsidiary banks of Peoples Banking Corporation represented therein. While the resultant bank would not hold the leading share of deposits in this market, the combined share of the two largest banking organizations in that market would be increased to 69.7 percent, existing competition would be eliminated, and banking sources would be reduced from six to five. The Board of Directors is of the opinion that consummation of the proposal, even if such a redefined market were considered relevant, would present anticompetitive problems too severe to warrant approval of the application.

The Corporation has again reviewed the convenience and needs factor and the banking factors, and it adheres to its original conclusion on these points and finds nothing in the record to warrant a conclusion that the proposed transaction would result in the realization of significant public benefit under these factors. Again, the management succession problem does not appear to be imminent or insurmountable and lends only a slight weight in favor of the application. Alternative purchasers include 3 other banks headquartered within 25 miles of Au Gres and thus capable of consummating the transaction under present Michigan law, and with the exception of Peoples Banking Corporation, any of the other 41 bank holding companies operating in Michigan could be considered potential purchasers. Since Standish Bank already competes in the relevant market, any additional services are presently available to residents and businessmen in and around Au Gres, albeit with some inconvenience. Therefore, there is no basis in the record for concluding that the public cannot obtain such benefits from other sources at the present time or that the same benefits could not be achieved through other, less anticompetitive means.

Based on all of the foregoing and on the record before it, the Corporation's Board of Directors again concludes that approval of the proposed purchase of assets and assumption of liabilities of Au Gres Bank by Standish Bank is not warranted and should accordingly be denied.

*Although the population of this relevant geographic market is quite small, the Au Gres banking market would constitute an economically significant "section of the country." See United States v. Phillipsburg National Bank & Trust Co., 339 U.S. 350 (1970); United States v. County National Bank of Bennington, 330 F. Supp. 155 (D. Vt. 1971), 339 F. Supp. 85 (D. Vt. 1972).