Decisions on Bank Applications
Commerce Bank
FEDERAL DEPOSIT INSURANCE CORPORATION
RE: Commerce Bank Laredo, Texas
Application for Consent to Purchase Certain Assets and to Assume Certain Liabilities
ORDER AND BASIS FOR CORPORATION APPROVAL
Pursuant to section 18(c) and other provisions of the Federal Deposit Insurance Act ("FDI Act"), Commerce Bank, Laredo, Webb County, Texas ("Commerce"), an insured state nonmember bank with total resources of $178,278,000 and total deposits of $150,265,000 as of September 30, 1998, has filed an application for the Corporation's consent to purchase certain assets of and assume the liability to pay deposits made in the Laredo, Texas, branch of Pacific Southwest Bank, Corpus Christi, Texas ("Pacific"), a federally-chartered stock savings bank and Savings Association Insurance Fund ("SAIF") member with total assets of $1,102,557,000 and total deposits of $906,860,000 as of September 30, 1998. Commerce's main office is located adjacent to Pacific's Laredo branch office and, therefore, upon consummation of the transaction, Commerce will close the acquired branch office. Notice of the proposed transaction, in a form approved by the Corporation, has been published pursuant to the FDI Act. There will be no insurance fund conversion concurrent with the proposed transaction and assessments will continue to be paid to the SAIF pursuant to section 5(d)(3) of the FDI Act.
Competition
As of June 30, 1998, eight financial institutions operated 21 offices in Webb County, which has been identified as the relevant geographic market ("RGM"). The Laredo National Bank, Laredo Texas, and its affiliate, South Texas National Bank of Laredo, Laredo, Texas, held the largest share of the market at 47.8 percent; Commerce and its affiliate, International Bank of Commerce, held the second largest share of the market at 38.2 percent. Norwest Bank Texas, National Association, San Antonio, Texas, Falcon National Bank, Laredo, Texas, and NBC Bank-Laredo, National Association, Laredo, Texas, held market shares of 8.5 percent, 2.3 percent, and 2.2 percent, respectively. Pacific held the smallest market share at 1.0 percent.
The proposed transaction will increase Commerce's market share by 1 percent from 38.2 to 39.2 percent, increase the Herfindahl-Hirschman Index by 78 points from 3,822 to 3,900, and reduce the number of financial institutions within the RGM by one from eight to seven. While the proposed transaction will increase the market concentration within the RGM, there are other important factors that should be considered when assessing its effect on competitive conditions.
The proposed transaction affects only 1 percent of the deposits within the RGM. After the proposed transaction, seven financial institutions will remain. The most recent regulatory examinations of these entities indicate they are financially sound, adequately capitalized, and satisfactorily managed. The number of financially sound financial institutions appears sufficient to provide the necessary competitive interplay and to furnish a variety of financial choices within the community. For this reason, it is believed that the competition among the financial service providers will not be significantly reduced.
The U.S. Department of Justice concluded that the proposed transaction would not have a significantly adverse effect on competition. The Federal Reserve Bank of Dallas concluded that the proposed transaction could have significantly anticompetitive effects, but advised that it did not consider all of the economic factors that may be relevant to the competitive effects of the proposed transaction. Other federal regulatory authorities offered no comments. The Texas Department of Banking and Finance approved the proposed transaction on November 24, 1998.
After giving consideration to the factors cited above, the Board of Directors is of the opinion that the proposed transaction will not substantially lessen competition, tend to create a monopoly, or in any other manner restrain trade or otherwise have an adverse competitive impact that would require disapproval under the Bank Merger Act.
Financial and Managerial Resources; Future Prospects
Commerce is in sound financial condition with adequate capital and satisfactory management. Future prospects appear favorable.
Convenience and Needs of the Community to be Served
The scope and convenience of banking services offered to the general public should not be significantly affected by the proposal. Seven financially sound banks will remain within the RGM. Commerce will provide the same services offered by Pacific. Commerce's close proximity to Pacific's Laredo branch will largely eliminate any inconvenience regarding customers from the closed branch having to access their accounts at the new location. There have been no protests to the proposed transaction from either the public or the banking community. A review of available information revealed no inconsistencies with the purposes of the Community Reinvestment Act. The resultant institution is expected to continue to meet the credit needs of its entire community, consistent with the safe and sound operation of the institution.
Upon consideration of all relevant material, the Board of Directors has concluded that the application should be and hereby is approved subject to the following conditions:
1. That the transaction shall not be consummated before the fifteenth calendar day following the date of this order or later than six months after the date of this order unless such period is extended for good cause by the Corporation;
2. That all necessary and final approvals be received from other regulatory authorities; and
3. That, until the proposed transaction becomes effective, the Corporation shall have the right to alter, suspend, or withdraw its approval should any interim development be deemed by the Board of Directors to warrant such action.
Dated at Washington, D.C., Dated this 11th day of January, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
Robert E. Feldman
Executive Secretary