RE: Stockman Bank of Montana
Miles City, Custer County, Montana
Applications for Consent to Purchase Certain Assets and Assume Certain Liabilities,
Establish Three Branches, and Participate in an Optional Conversion Transaction
ORDER AND BASIS FOR CORPORATION APPROVAL
Pursuant to Section 18(c) and other provisions of the Federal Deposit Insurance Act
("FDI Act"), Stockman Bank of Montana, Miles City, Custer County, Montana
("Stockman"), an insured state nonmember bank and Bank Insurance Fund member
with total assets of $485,788,000 and total deposits of $375,749,000 as of December 31,
1999, has filed applications for the Federal Deposit Insurance Corporation's
("FDIC" or "Corporation") consent to purchase certain assets of and
assume certain liabilities of the Glasgow, Hardin, Malta, Miles City, Plentywood, and
Sidney, Montana, branches of Western Security Bank, Missoula, Montana
("Western"), a state-chartered savings bank and Savings Association Insurance
Fund ("SAIF") member with total assets of $997,107,000 and total deposits of
$659,541,000 as of December 31, 1999, establish the Miles City, Plentywood, and Sidney
branches of Western as branches of Stockman, and participate in an optional conversion
transaction. 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. Incident to the transaction, Stockman intends to assign to other
FDIC-insured institutions the right to purchase the Glasgow, Hardin, and Malta branches.
Notice of the proposed transaction, in a form approved by the Corporation, has been
published pursuant to the FDI Act.
Stockman does not have offices in the Glasgow, Malta, and Plentywood Relevant
Geographic Markets ("RGM"), and, therefore, the proposed transaction would not
impact competition there. Stockman does have offices in the Hardin, Miles City, and Sidney
RGMs, where the branches Stockman is proposing to acquire from Western are also located.
Stockman's acquisition of Western's Hardin branch in the Billings, Montana, banking
market would increase the pre-merger Herfmdahl-Hirschman Index ("HHI") in that
market by six points, from 1,747 to 1,753. Thus, the proposed transaction would have no
appreciable competitive impact in that market.
As of June 30, 1999, four insured depository financial
institutions (three commercial banks and one thrift) operated five offices in the Miles
City RGM. Stockman holds the largest share with 45.8 percent. Of the remaining financial
institutions, U. S. Bank National Association MT, Billings, Montana, holds 28.2 percent;
First Interstate Bank, Billings, Montana, holds 19 percent; and Western holds 7 percent of
deposits. As a result of the merger, Stockman's share of total area deposits would
increase to 52.8 percent. The pre-merger HHI would increase by 637, from 3,304 to 3,941.
Following the proposed acquisition, there would be three commercial banks in the market.
Stockman would continue to hold the largest market share, with 52.8 percent of market
deposits. Its remaining competitors in serving a population of approximately 12,000
persons would be the first and third largest banks in the state. These institutions would
each hold a significant share of market deposits, approaching 20 percent and 30 percent
Market share data notwithstanding, the proposed transaction would not have a
significantly adverse effect in the Miles City RGM. As indicated by the Miles City
branch's loan portfolio, Western does not compete in agricultural lending, Stockman's
primary business line and a significant industry in the RGM. Two of the largest banks in
the state, with very significant local market shares, would continue to provide direct
competition to Stockman after the acquisition. The presence of two small credit unions
provides an additional source of consumer banking services.
As of June 30, 1999, five insured depository financial institutions (four commercial
banks and one thrift) operated six offices in the Sidney RGM. Stockman holds the largest
share with 40.6 percent. Of the remaining financial institutions, 1st Bank, Sidney,
Montana, holds 25 percent; Norwest Bank Montana, National Association, Billings, Montana,
holds 20.3 percent; Fairview Bank, Fairview, Montana, holds 6.9 percent, and Western holds
7.3 percent of deposits. As a result of the merger, Stockman's share of total area
deposits would increase to 47.9 percent. The pre-merger HHI would increase by 622, from
2,785 to 3,407. Following the transaction there would still be four commercial banks
serving a population of approximately 10,000 persons.
As with the Miles City RGM, the market share data for the Sidney RGM overstates the
competitive impact of the transaction. As indicated by the Sidney branch's loan portfolio,
Western does not compete in agricultural lending, Stockman's primary business line and a
significant industry in the RGM. The second largest bank in the state, with a very
significant local market share, would continue to provide direct competition to Stockman
after the acquisition. The presence of a small credit union provides an additional source
of banking services to the consumers in the market.
In its advisory report on competitive effects, 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 Minneapolis's Competitive Effects report
concluded that the proposed transaction could have significantly anti-competitive 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. The Office of Thrift Supervision
offered no comments and the Commissioner of Banking and Financial Institutions does not
object to the proposal.
Stockman is in sound financial condition with adequate capital and satisfactory
management. Future prospects appear favorable.
Convenience and Needs Factor
A customer of Western's Miles City branch filed a CRA protest, however, it was
concluded that the issues raised are insubstantial and that Stockman's acquisition would
not adversely impact the banking services of Miles City.
The scope and convenience of banking services offered to the general public should not
be significantly affected by the proposal. Stockman would provide no lesser amount of
services than is currently offered by Western.
Upon consideration of all relevant material, the Board of Directors has concluded that
the applications should be and hereby are 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 no 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
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., this 18th day of April, 2000.