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

Federal Reserve Bulletin, Nov, 1998 by Robert Dev. Frierson

In considering the competitive effects of the proposal, the Board has evaluated the competition provided by savings associations in the Indianapolis banking market and has concluded that the deposits controlled by three of the eleven savings associations that compete in the market should be weighted at 100 percent.(23) In this light, the post-merger HHI would increase by 441 points to 1881.(24)

The Board believes that several factors mitigate the potential adverse effects that may result from the proposal in the Indianapolis banking market.(25) The market has characteristics that make it attractive for entry. Indianapolis is the largest banking market in Indiana and the 35th largest Metropolitan Statistical Area ("MSA") in the United States.(26) The population of the Indianapolis MSA increased by approximately 9 percent from 1990 to 1997, more than almost all other MSAs in Indiana and more than the national average. Other measures indicate economic growth in the banking market. Since 1990, the number of jobs in the MSA has increased by 106,000, or approximately 15 percent. Per capita income in Indianapolis, which is greater than any other MSA in Indiana, has increased on average 6.7 percent over the last ten years, which is more than the national average.

Recent entries by depository institutions appear to confirm that the Indianapolis banking market is attractive for entry by depository institutions. Since 1996, five depository institutions have entered the Indianapolis banking market de novo. In addition, since June 1997, depository institutions that currently compete in the Indianapolis banking market with Banc One and First Chicago have opened or announced plans to open 29 new branches in the banking market.

The proposed divestiture of approximately 5.8 percent of market deposits to an out-of-market commercial banking organization would create another market entrant, and the number of depository institutions competing in the market would remain unchanged. The purchaser of the divested branches also would immediately become the fourth largest competitor in the market and would have sufficient assets and offices immediately to be an effective competitor to New Bank One.

In addition, after consummation of the proposal, 42 bank and savings association competitors would remain in the market, including at least four large multistate banking organizations, other than New Bank One. These large multistate bank holding companies would control at least 31.3 percent of market deposits and operate 163 branches in the Indianapolis banking market.(27)

Lafayette. Consummation of the proposal in the Lafayette banking market also would exceed the DOJ Guidelines after accounting for the proposed divestitures. In the Lafayette banking market, Banc One is the largest depository institution in the market, controlling deposits of $510.8 million, representing 32 percent of market deposits. First Chicago is the second largest depository institution in the market, controlling deposits of $408.8 million, representing 25.6 percent of market deposits. Banc One will divest seven branches with deposits of approximately $286 million in the Lafayette banking market to an out-of-market competitor. On consummation of the proposal, and after accounting for the proposed divestitures, Banc One would remain the largest depository institution in the market, controlling deposits of $633.6 million, representing 39.7 percent of market deposits. The HHI would increase by 217 points to 2306.