Orders Issued Under Sections 3 and 4 of the Bank Holding Company Act

Federal Reserve Bulletin, Nov, 1999

Firstar and Mercantile compete directly in ten banking markets.(14) The Board has carefully reviewed the competitive effects of the proposal in each of these banking markets in light of all the facts of record, including the number of competitors that would remain in the market, the share of total deposits in depository institutions in the market ("market deposits") controlled by each competitor in the market,(15) the concentration level of market deposits in the market and the increase in this level, as measured by the Herfindahl-Hirschman Index ("HHI"),(16) and other characteristics of the markets.

Consummation of the proposal without divestitures would be consistent with Board precedent and the DOJ Guidelines in six of the ten banking markets in which Firstar and Mercantile directly compete: Ames, Cedar Rapids, Des Moines, Omaha-Council Bluffs, and Rock Island-Davenport, each located in whole or in part in Iowa; and Clarksville-Hopkinsville, located in Tennessee and Kentucky.(17) In each of these markets, a large number of competitors relative to the size of the market would remain after consummation of the proposal. These banking markets, with the exception of the Des Moines and Omaha-Council Bluffs markets, also would remain moderately concentrated, as measured by the HHI, after consummation of the proposal.(18)

In the four remaining banking markets in which Firstar and Mercantile directly compete, the resulting HHI would exceed the DOJ Guidelines. To mitigate the potential anticompetitive effects of the proposal in three of these markets (Dubuque-East Dubuque, Mount Pleasant, and Waterloo, each located in whole or in part in Iowa), Firstar has committed to divest in these markets a total of seven branches that currently control a total of $137 million in deposits.(19) After accounting for the proposed divestitures, consummation of the proposal would be consistent with Board precedent and the DOJ Guidelines in these three markets. In addition, other factors present in each of the three markets would tend to mitigate the anticompetitive effects of the proposal.(20)

Consummation of the proposal in the Clinton banking market, located in Iowa and Illinois, would exceed the DOJ Guidelines. In this market, the Board has considered whether other factors either mitigate the competitive effects of the proposal in the market or indicate that the proposal would have a significantly adverse effect on competition in the market.(21)

Firstar's bank subsidiary is the fourth largest depository institution in the Clinton banking market, controlling deposits of $82 million, representing approximately 11.2 percent of market deposits. Mercantile's bank subsidiary is the sixth largest depository institution in the market, controlling deposits of $71.1 million, representing approximately 9.7 percent of market deposits. After the proposed merger, Firstar's subsidiary bank would become the second largest depository institution in the market, controlling deposits of $153.1 million, representing approximately 20.9 percent of market deposits. The HHI would increase 218 points to 1835.