Decisions on Bank Applications
Stockman Bank of Montana
FEDERAL DEPOSIT INSURANCE CORPORATION
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 respectively.
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 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., this 18th day of April, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
James D. LaPierre
Deputy Executive Secretary