Orders issued under Bank Holding Company Act - Legal Developments - Statistical Data Included

Federal Reserve Bulletin, Dec, 2001 by Robert Dev. Frierson

Orders Issued Under Section 3 of the Bank Holding Company Act

International Bancshares Corporation Laredo, Texas

Order Approving the Acquisition of a Bank Holding Company

International Bancshares Corporation ("IBC"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3(a)(3) of the BHC Act (12 U.S.C. [section] 1842(a)(3)) to acquire all the voting shares of National Bancshares Corporation of Texas, San Antonio ("NBC"), a bank holding company, and thereby acquire NBC's subsidiary bank, NBC Bank, N.A., Eagle Pass, both in Texas ("Bank"). (1)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (66 Federal Register 44,637 (2001)). 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.

IBC, with total consolidated assets of $5.8 billion, is the seventh largest commercial banking organization in Texas, controlling four subsidiary banks with total deposits of $3.6 billion, representing 2 percent of total deposits of insured depository institutions in the state ("state deposits"). (2) NBC, with total consolidated assets of $595 million, is the 38th largest commercial banking organization in Texas, controlling one subsidiary bank with total deposits of $510 million, representing less than 1 percent of state deposits. On consummation of the proposal, IBC would remain the seventh largest banking organization in Texas, controlling deposits of $4.1 billion, representing 2.3 percent of total state deposits.

Competitive Considerations

Section 3 of the BHC Act prohibits the Board from approving a proposal that would result in a monopoly or would be in furtherance of any attempt to monopolize the business of banking in any relevant banking market. Section 3 also prohibits the Board from approving a proposed bank acquisition that would substantially lessen competition in any relevant banking market, unless the Board finds that the anticompetitive effects of the proposal are clearly outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served. (3)

IBC and NBC have depository institutions that compete directly in three Texas banking markets, the San Antonio banking market, the Maverick County banking market, and the Laredo banking market. (4) Consummation of the proposal would be consistent with the Department of Justice Merger Guidelines ("DOJ Guidelines") (5) and Board precedent in the San Antonio banking market. IBC would remain the eighth largest banking organization on consummation of the proposal, and would control $475 million in deposits, representing approximately 3.4 percent of total deposits in depository institutions in the market ("market deposits"). The HHI would increase 1 point to 1357. (6)

In the Maverick County banking market, consummation of the proposal also would be consistent with the DOJ Guidelines and Board precedent, and result in little reduction in competition in Maverick County. NBC is the largest of five banking organizations in the Maverick County banking market, controlling 59.2 percent of market deposits. Deposit data provided by IBC as of July 31, 2001, indicate that IBC ranks fifth of five organizations in the banking market, controlling $714,000 in deposits, representing less than 1 percent of market deposits. (7) IBC has operated its office in this market for only four months, and its market share is substantially smaller than the next largest competitor, Del Rio National Bancshares, which controls $15.5 million in deposits, representing 4.4 percent of market deposits. On consummation of the proposal, IBC would become the largest banking organization in the Maverick County banking market, controlling $210 million in deposits, representing 59.4 percent of market deposits. The HHI would increase 23 points to 4352.

In the Laredo banking market, consummation of the proposal would increase the level of market concentration, as measured by the HHI, to levels that exceed the DOJ Guidelines. IBC is the second largest of five banking organizations in the Laredo banking market and controls deposits of approximately $1.4 billion, representing 38.8 percent of market deposits. NBC is the fifth largest banking organization in the market and controls deposits of $99.2 million, representing approximately 2.8 percent of market deposits. On consummation of the proposal IBC would remain the second largest banking organization and control deposits of $1.5 billion, representing 41.6 percent of market deposits. The HHI would increase 218 points to 4003.

As the Board has indicated in previous cases, in a market in which the measures of the competitive effects of a proposal exceed the DOJ Guidelines, it 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.