|For immediate release|
The Federal Reserve Board today announced its approval of the notice and application of Banc One Corporation, Columbus, Ohio, to acquire First Commerce Corporation, New Orleans, Louisiana, and its wholly owned banking and nonbanking subsidiaries.
Attached is the Board's Order relating to this action.
Banc One Corporation
Banc One Corporation ("Banc One"), 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 (12 U.S.C. § 1842) to acquire First Commerce Corporation, New Orleans, Louisiana ("First Commerce"), and its wholly owned subsidiary banks: First National Bank of Commerce, New Orleans; City National Bank of Baton Rouge, Baton Rouge; Rapides Bank & Trust Company in Alexandria, Alexandria; The First National Bank of Lafayette, Lafayette; The First National Bank of Lake Charles, Lake Charles; and Central Bank, Monroe, all in Louisiana.1 Banc One also 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 First Commerce Service Corporation, New Orleans, Louisiana, and thereby engage in data processing activities that are permissible for bank holding companies under section 225.28(b)(14) of Regulation Y (12 C.F.R. 225.28(b)(14)).2
Notice of the proposal, affording interested persons an opportunity to submit comments, has been published in accordance with the Board's rules (63 Federal Register 3896 (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 sections 3 and 4 of the BHC Act.
Banc One, with total consolidated assets of $116.2 billion, is the eighth largest commercial banking organization in the United States, controlling approximately 2.3 percent of total banking assets of insured commercial banks ("total banking assets") in the United States.3 Banc One operates subsidiary banks in Arizona, Colorado, Illinois, Indiana, Kentucky, Louisiana, Ohio, Oklahoma, Texas, Utah, West Virginia, and Wisconsin. Banc One also engages in a broad range of permissible nonbanking activities in the United States through subsidiaries.
First Commerce, with total consolidated assets of $9.5 billion, is the 62d largest commercial banking organization in the United States, controlling less than 1 percent of the total banking assets in the United States. First Commerce operates six banks in Louisiana and engages in permissible nonbanking activities. On consummation of the proposal, and after accounting for the proposed divestitures, Banc One would remain the eighth largest commercial banking organization in the United States, with total consolidated assets of approximately $125.7 billion, representing approximately 2.5 percent of total nationwide banking assets.
Banc One is the third largest depository institution in Louisiana, controlling $4.2 billion in deposits, representing approximately 9.8 percent of total deposits in insured depository institutions in the state.4 First Commerce is the largest depository institution in Louisiana, controlling $7.7 billion of deposits, representing approximately 18 percent of total deposits in the state. On consummation of the proposal, and accounting for the proposed divestitures, Banc One would become the largest commercial banking organization in Louisiana, controlling approximately $11.2 billion in deposits, representing approximately 26.3 percent of the total deposits in the state.
Banc One and First Commerce compete in the following banking markets in Louisiana: Baton Rouge, Iberia, Lafayette, Lake Charles, Lincoln, Monroe, Morehouse, Shreveport-Bossier City, and New Orleans.8 The Board has carefully reviewed the competitive effects of the proposal in each of the Louisiana banking markets in which Banc One and First Commerce compete in light of all the facts of record, including the characteristics of the markets and the projected increase in the concentration of total deposits in depository institutions in these markets ("market deposits"),9 as measured by the Herfindahl-Hirschman Index ("HHI") under the Department of Justice Merger Guidelines ("DOJ Guidelines").10 The Board also has carefully examined the number of competitors that would remain in each of the banking markets following consummation of the proposal. Consummation of the proposal, without divestitures, would be consistent with the DOJ Guidelines in the Iberia, Morehouse, and Shreveport-Bossier City banking markets.11
To mitigate the anticompetitive effects of the proposal in the Lafayette, Lake Charles, Lincoln, and Monroe banking markets, Banc One has committed to divest 25 branches that control approximately $614.5 million in deposits.12 With the proposed divestitures, the concentration levels in each of the markets would be consistent with the DOJ Guidelines after consummation of the proposal.13
Consummation of the proposal would exceed the DOJ Guidelines, as measured by the HHI, in the Baton Rouge and New Orleans banking markets. As the Board has indicated in previous cases, in a market in which the competitive effects of a proposal as measured by market indexes and market share exceed the DOJ Guidelines, the Board will consider whether other factors tend to mitigate the competitive effects of the proposal. The number and strength of factors necessary to mitigate the competitive effects of a proposal depend on the level of market concentration and size of the increase in market concentration.14
Baton Rouge Banking Market. Banc One is the third largest of 25 depository institutions in the Baton Rouge banking market, and controls deposits of $895.9 million, representing 15.4 percent of market deposits. First Commerce is the second largest depository institution in the market, and controls deposits of $971.7 million, representing 16.7 percent of market deposits. After consummation of the proposal, Banc One would become the largest depository institution in the market, controlling 32.1 percent of the market deposits, and the HHI would increase 515 points to 1895.
Twenty-four depository institutions, including several large multi-state banking organizations other than Banc One, would remain in the Baton Rouge banking market after consummation of the proposal. In addition, one of Louisiana's largest banking organization would be the second largest depository institution in the market and would control more than 25 percent of market deposits.
The Baton Rouge banking market also has characteristics that make it attractive for entry. Baton Rouge is Louisiana's second largest city. The rate of growth in population and market deposits and the level of per capita income in this market exceed, on average, those of other Louisiana Metropolitan Statistical Areas ("MSAs"). Recent entries by depository institutions also indicate that the market is attractive. Since 1994, four commercial banks have entered the market de novo, and four have entered by acquisition. In addition, another commercial bank has received regulatory approval and plans to enter the market de novo in June 1998.
New Orleans Banking Market. Banc One is the fifth largest of 41 depository institutions in the New Orleans banking market and controls deposits of $627.3 million, representing 4.4 percent of market deposits. First Commerce is the largest depository institution in the market and controls deposits of $4.4 billion, representing 30.8 percent of market deposits. After consummation of the proposal, Banc One would become the largest depository institution in the market, controlling 35.2 percent of market deposits, and the HHI would increase 272 points to 2099.
The New Orleans banking market is the largest banking market in Louisiana. Approximately 39 competitors other than Banc One would remain in the market after consummation of the proposal, including all of the state's largest depository institutions. Three of these competitors would each have market shares of over 15 percent of market deposits, and the second largest depository institution in the market would have over 23 percent of market deposits. In addition, per capita income, deposits per branch, population per branch, and deposit growth in the market are above the averages in other Louisiana MSAs. Since 1994, three depository institutions have entered the market de novo, and six have entered by acquisition, which indicates that the market is attractive for entry.
Views of Other Agencies and Conclusion. The Department of Justice conducted a detailed review of the proposal and advised the Board that, in light of the proposed divestitures, consummation of the proposal would not likely have a significantly adverse effect on competition in any relevant market. The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation also have not objected to consummation of the proposal.
Based on all the facts of record, and for the reasons discussed above, the Board has determined that consummation of the proposal would not be likely to result in a significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market. Accordingly, subject to completion of the proposed divestitures, the Board has determined that competitive factors are consistent with approval of the proposal.
Other Factors Under the BHC Act
A. Financial, Managerial, and Other Supervisory Factors
The Board also has considered other aspects of the financial condition and resources of the two organizations, the structure of the proposed transaction, and the managerial resources of each of the entities and the combined organization. Based on these and other facts of record, the Board concludes that considerations relating to the financial and managerial resources and future prospects of Banc One, First Commerce, and their respective subsidiaries are consistent with approval of the proposal, as are the other supervisory factors that the Board must consider under section 3 of the BHC Act.
B. Convenience and Needs Considerations
All of Banc One's subsidiary banks have received "outstanding" or "satisfactory" ratings for their appropriate federal supervisors at the most recent examinations of their CRA performance. Banc One's lead bank, Bank One, N.A., Columbus, Ohio, received an "outstanding" performance rating and Banc One's largest bank in terms of assets, Bank One, Texas, N.A., Dallas, Texas, received a "satisfactory" performance ratings from their appropriate federal supervisor, the Office of the Comptroller of Currency ("OCC"). In addition, Banc One, Louisiana, N.A., New Orleans, Louisiana, received a "satisfactory" performance rating from the OCC. All of First Commerce's subsidiary banks also have received "outstanding" or "satisfactory" ratings for CRA performance from their appropriate federal supervisors.
The Board also has carefully reviewed Banc One's lending activities and its compliance with fair lending laws. As part of that review, the Board has considered information developed in the course of its supervision of Banc One regarding the institution's fair lending oversight, procedures, and practices and, in light of all the facts of record, the Board has concluded that Banc One's record of fair lending is consistent with approval of this proposal.
The Board has considered all the facts of record, including the CRA performance records of the subsidiary banks of Banc One and First Commerce, relevant reports of examination, and the comments received.16 Based on all the facts of record, and for the reasons discussed above, the Board concludes that convenience and needs considerations are consistent with approval of the proposal.
In order to approve the proposal under section 4(c)(8) of the BHC Act, the Board also must determine that the proposed activities are a proper incident to banking, that is, that the proposal "can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."18 As part of its evaluation of these factors, the Board considers the financial condition and managerial resources of the notificant and its subsidiaries, including the companies to be acquired, and the effect of the proposed transaction on those resources.19 For the reasons noted above, and based on all the facts of record, the Board has concluded that financial and managerial considerations are consistent with approval of the notice.
The Board also has considered the competitive effects of the proposed acquisition by Banc One of First Commerce Service Corporation. The market for data processing services is unconcentrated and that there are numerous providers of the services. As a result, consummation of the proposal would have a de minimis effect on competition. The Board also expects that the acquisition would provide added convenience to First Commerce's customers and to other members of the public by increasing operating efficiencies and providing expanded services to customers of First Commerce and Banc One. Additionally, there are public benefits to be derived from permitting capital markets to operate so that bank holding companies may make potentially profitable investments in nonbanking companies where these investments are consistent, as in this case, with the relevant considerations of the BHC Act and from permitting banking organizations to allocate their resources in a manner they believe most efficient.
Accordingly, based on all the facts of record, the Board has determined that the balance of public benefits that the Board must consider under the proper incident to banking standard of section 4(c)(8) of the BHC Act is favorable and consistent with approval of the proposal.
The Board's determination on the nonbanking activities 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, and to prevent evasion of, the provisions of the BHC Act and the Board's regulations and orders thereunder. For purposes of this transaction, the commitments and conditions referred to above 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 acquisition of First Commerce's subsidiary banks shall not be consummated before the fifteenth calendar day following the effective date of this order, and the 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 Cleveland, acting pursuant to delegated authority.
By order of the Board of Governors,21 effective May 26, 1998.
(signed) Jennifer J. Johnson
Jennifer J. Johnson
Banking Markets in which Banc One and First Commerce Compete
Baton Rouge: Ascension, East Baton Rouge, Iberville, Livingston, and West Baton Rouge Parishes plus the northern half of Assumption Parish, and the town of Union in St. James Parish.
A. Banking Markets In Which Consummation of the Proposal Would Not Exceed the DOJ Guidelines Without Divestitures.
Iberia: After consummation of the proposal, Banc One would control 18.4 percent of the market deposits and would become the third largest of nine depository institutions in the market. The HHI would increase 166 points to 2515.
B. Banking Markets In Which Consummation of the Proposal Would Not Exceed the DOJ Guidelines With Proposed Divestitures.
Lafayette: Banc One proposes to divest seven branches, controlling deposits of $195.0 million, to a competitor suitable to the Board. Following such divestiture, and after consummation of the proposal, Banc One would control 24.5 percent of the market deposits and would become the largest of 40 depository institutions in the market. The HHI would increase not more than 276 to 896.
1 Banc One intends to merge First Commerce with a wholly owned non-operating subsidiary of Banc One. First Commerce would be the surviving corporation and a wholly owned subsidiary of Banc One that would be renamed Louisiana Banc One Corporation. In addition, Banc One has requested the Board's approval to hold and exercise options to purchase up to 19.9 percent of the voting shares of First Commerce if certain events occur. The options would expire on consummation of the proposal.
2 Banc One also would acquire 9.9 percent of the voting shares of First United Bank of Farmerville, Farmerville, Louisiana ("First United") from First Commerce. Banc One has agreed to abide by certain commitments made by First Commerce that were relied on by the Board to ensure that First Commerce would not exercise a controlling influence over the management and policies of First United and to divest the shares of First United within six months after consummating the acquisition of First Commerce.
3 Asset data are as of December 31, 1997, and deposit data are as of June 30, 1997.
4 In this context, depository institutions include commercial banks, savings banks, and savings associations.
5 A bank holding company's home state is that state in which the operations of the bank holding company's banking subsidiaries were principally conducted on July 1, 1996, or the date on which the company became a bank holding company, whichever is later. 12 U.S.C. § 1841(o)(4)(C).
6 12 U.S.C. §§ 1842(d)(1)(A) & (B) and 1842(d)(2)(A) & (B). Banc One is adequately capitalized and adequately managed, as defined by applicable law. On consummation of the proposal, Banc One and its affiliates would control less than 10 percent of the total amount of deposits of insured depository institutions in the United States, and less than 30 percent of the total amount of deposits in Louisiana. In addition, First Commerce's subsidiary banks have been in existence and have continuously operated for at least five years, as required by Louisiana law. La. Rev. Stat. § 6:538 (1997). All other requirements of section 3(d) of the BHC Act also would be met on consummation of the proposal.
7 12 U.S.C. § 1842(c)(1)(B).
8 These banking markets are described in Appendix A.
9 Market share data are based on calculations that include the deposits of thrift institutions 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, e.g., 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).
10 Under the DOJ Merger Guidelines, 49 Federal Register 26,823 (1984), a market in which the post-merger HHI is more than 1800 is considered highly concentrated. The DOJ 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 DOJ 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 institutions.
11 Market data for these banking markets after consummation of the proposal are described in Appendix B.
12 Banc One has committed to execute sales agreements with an out-of-market competitor in the Lincoln banking market and a competitively suitable purchaser in the Lafayette, Lake Charles and Monroe banking markets and to complete divestitures within 180 days of consummation of the acquisition. Banc One also has committed that, in the event it is unsuccessful in completing any divestiture within 180 days of consummation, it will transfer the unsold branch(es) to an independent trustee that is acceptable to the Board and that will be instructed to sell the branches promptly. See, e.g., First Union Corporation, 84 Federal Reserve Bulletin __ (Order dated April 13, 1998).
13 Market data for these banking markets after consummation of the proposal are also described in Appendix B.
14 See First Union Corporation, 84 Federal Reserve Bulletin __ (Order dated April 13, 1998); NationsBank Corporation, 84 Federal Reserve Bulletin 129 (1998).
15 The Board notes that the Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act ("Agency CRA Statement") provides that a CRA examination is an important and often controlling factor in the consideration of an institution's CRA record and that reports of these examinations will be given great weight in the applications process. See 54 Federal Register 13,742 and 13,745 (1989).
16 A commenter contends that he has had unsatisfactory experiences with a Banc One subsidiary bank in business and personal banking transactions. The Board has carefully reviewed the comment in light of all the facts of record, and has provided the comment to the OCC, which is the appropriate federal supervisor of the bank.
17 See 12 C.F.R. 225.28(b)(14).
18 12 U.S.C. § 1843(c)(8).
19 See 12 C.F.R. 225.26.
20 One commenter requests that the Board not act on the Banc One/ First Commerce proposal until his employment discrimination lawsuit against Banc One and one of its subsidiary banks is settled and until the Board investigates pending employment discrimination complaints filed against Banc One with the Equal Employment Opportunity Commission. Commenter's lawsuit was dismissed by a federal district court and the dismissal was upheld on appeal. The Board previously has noted, moreover, that disputes that arise under a statute administered and enforced by another agency in areas such as employment discrimination are beyond the Board's jurisdiction under the statutory factors in the BHC Act. Based on a review of all the facts of record, the Board concludes that the record in this case is sufficient to warrant Board consideration and action on the proposal at this time, and that further delay of consideration of the proposal or denial of the proposal on the basis of informational insufficiency is not warranted.
21 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Ferguson and Gramlich. Absent and not voting: Governors Kelley, Phillips, and Meyer.
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1998 Orders on banking applications