For immediate release

The Federal Reserve Board today announced its approval of the application by WestStar Bank, Bartlesville, Oklahoma, to merge with Victory Bank of Nowata, Nowata, Oklahoma, and also to establish a branch at the main office of Victory Bank, at 108 North Maple, Nowata, Oklahoma. Attached is the Board's Order relating to this action.

WestStar Bank Bartlesville, Oklahoma Order Approving the Merger of a Bank and Establishment of a Branch

WestStar Bank, Bartlesville, Oklahoma ("WestStar"), a state member bank, has requested the Board's approval under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. § 1828(c)) (the "Bank Merger Act") to merge with Victory Bank of Nowata, Nowata, Oklahoma ("Victory Bank"). WestStar also has applied under section 9 of the Federal Reserve Act (12 U.S.C. § 321) to establish a branch at the main office of Victory Bank, which is located at 108 North Maple, Nowata, Oklahoma.1 Notice of the applications, affording interested persons an opportunity to submit comments, has been given in accordance with the Bank Merger Act and the Board's Rules of Procedure (12 C.F.R. 262.3(b)). As required by the Bank Merger Act, reports on the competitive effects of the merger were requested from the United States Attorney General, the Office of the Comptroller of the Currency ("OCC"), and the Federal Deposit Insurance Corporation ("FDIC"). The time for filing comments has expired, and the Board has considered the applications and all comments received in light of the factors set forth in the Bank Merger Act and the Federal Reserve Act. WestStar is a wholly owned subsidiary of Arvest Bank Group, Bentonville, Arkansas, which is the sixth largest commercial banking organization in Oklahoma, controlling $775.5 million of deposits, representing 2.6 percent of total deposits in commercial banking organizations in the state.2 Victory Bank controls deposits of $19.7 million, representing less than 1 percent of deposits in the state. On consummation of the proposal, Arvest Bank Group would remain the sixth largest commercial banking organization in Oklahoma. Competitive Considerations The Bank Merger Act provides that the Board may not approve an application if the effect of the acquisition is to create a monopoly or substantially to lessen competition in any section of the country unless the Board finds 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.3 WestStar asserts that WestStar and Victory Bank operate in separate banking markets. Alternatively, WestStar contends that the appropriate banking market should include the Bartlesville banking market as previously defined by the Federal Reserve Bank of Kansas City ("Reserve Bank") plus the town of Coffeyville, Kansas.4 The Board believes, however, that the appropriate market for analyzing the competitive effects of the proposal is the Bartlesville banking market as previously defined.5 The Board bases its conclusion on an analysis of employment opportunities, commuting data, shopping patterns, loan and deposit data, an on-site investigation of the banking market conducted by the Reserve Bank in January 1998, and other facts of record that indicate that there is substantial commuting, travel, and interaction between Bartlesville and Nowata.6 In light of these, and all facts of record, the Board concludes that the Bartlesville banking market reflects commercial and banking realities and represents an area where local customers can practicably turn for alternatives. Accordingly, the relevant banking market for considering the competitive effects of the proposal is the Bartlesville banking market as defined above.7 WestStar is the largest depository institution in the Bartlesville banking market, controlling deposits of approximately $349 million, representing approximately 47 percent of the total deposits in depository institutions in the market ("market deposits").8 Victory Bank is the tenth largest depository institution in the market, controlling deposits of $19.7 million, representing approximately 3 percent of market deposits. On consummation of the proposal, WestStar would remain the largest depository institution in the Bartlesville banking market, controlling deposits of approximately $358.7 million, representing approximately 50 percent of market deposits. Concentration in the market, as measured by the Herfindahl-Hirschman Index ("HHI"), would increase 262 points to 2892.9 The Board has taken into account considerations that materially mitigate the competitive effect of the proposal. The Bartlesville banking market, for example, is a rural banking market with a significant number of competing depository institutions relative to its total market deposits of $715 million. After consummation of the proposal, 11 depository institution competitors, in addition to WestStar, would remain in the banking market. The remaining competitors include two of Oklahoma's largest commercial banking organizations that operate throughout the state. The Board also notes that a large credit union has a substantial effect on competition in the banking market.10 The credit union controls a substantial amount of deposits in the banking market, and actively engages in home mortgage and consumer lending.11 The Board believes that these factors mitigate the potentially adverse effects of the proposal. The Department of Justice has reviewed the proposal and advised the Board that consummation of the proposal would not likely have any significantly adverse competitive effects in the Bartlesville banking market or any relevant banking market. The OCC and the FDIC also have not objected to the proposal. Based on all the facts of record, and for the reasons discussed above, the Board concludes that consummation of the proposal would not have a significantly adverse effect on competition or on the concentration of banking resources in the Bartlesville banking market or any other relevant banking market. Other Considerations The Bank Merger Act also requires the Board to consider the financial and managerial resources and future prospects of the existing and proposed institutions and the convenience and needs of the community to be served. The Board has carefully considered these factors in light of all the facts of record. The facts of record include supervisory reports of examination that assess the financial and managerial resources of the organizations and financial information provided by WestStar. Based on these and all other facts of record, the Board concludes that financial and managerial resources and future prospects of the institutions involved are consistent with approval, as are other supervisory factors. WestStar intends to increase Victory Bank's hours of operation and would offer its expanded products and services to the bank's customers and residents in the Nowata area, including access to ATMs, cash management services, trust services, and a greater array of retail and commercial checking accounts. WestStar also has a satisfactory record of performance under the Community Reinvestment Act of helping to meet the credit needs of all its communities, including low- and moderate-income areas.12 Based on all the facts of record, the Board concludes that considerations relating to convenience and needs are consistent with approval. The Board also concludes that all the factors that must be considered under section 9 of the Federal Reserve Act are consistent with approval.13 Conclusion Based on the foregoing and all the facts of record, the Board has determined that the applications should be, and hereby are, approved. The Board's approval of the proposal is specifically conditioned on compliance by WestStar with all the commitments made in connection with this application. For purposes of this action, the commitments and conditions relied on in reaching this decision are both conditions imposed in writing by the Board, and as such, may be enforced in proceedings under applicable law. The proposed acquisition shall not be consummated before the fifteenth calendar day following the effective date of this order, or later than three months after the effective date of this order, unless such period is extending for good cause by the Board or by the Reserve Bank, acting pursuant to delegated authority.

By order of the Board of Governors,14 effective February 18, 1998. (signed) Jennifer J. Johnson Jennifer J. Johnson Deputy Secretary of the Board

Footnotes 1 Victory Bank is owned indirectly by Victory Bancorp ("Bancorp") through an intermediate bank holding company, Victory Bancshares ("Bancshares"). In connection with the bank merger, WestStar would acquire all the voting shares of Bancorp; Bancshares would merge with and into Bancorp; and Bancorp would merge with and into WestStar. Because this transaction is in substance a merger of banks that is subject to Board review under the Bank Merger Act, the steps of the transaction would occur in immediate succession, Victory Bank would never be operated by WestStar as a separate bank, and the transaction does not raise issues that would bar Board approval under the Bank Holding Company Act ("BHC Act"), the Board has waived the applications required under section 3 of the BHC Act for the intermediate steps for this transaction. 2 State data are as of June 30, 1997, and market data are as of June 30, 1996. 3 12 U.S.C. § 1828(c)(5). 4 The Reserve Bank defines the Bartlesville banking market as an area approximated by Nowata and Washington Counties and the northeastern quadrant of Osage County in Oklahoma; and the town of Caney, Kansas. 5 The Board and the courts have found that the relevant banking market for analyzing the competitive effects of a proposal must reflect commercial and banking realities and should consist of the local area where local customers can practicably turn for alternatives. See St. Joseph Valley Bank, 68 Federal Reserve Bulletin 673, 674 (1982). The key question to be considered in making this selection "is not where the parties to the merger do business or even where they compete, but where, within the area of competitive overlap, the effect of the merger on competition will be direct and immediate." United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 374 (1963); United States v. Phillipsburg Nat'l Bank, 399 U.S. 350 (1969). 6 Bartlesville is the center of economic activity for a commercially integrated area generally encompassed by Washington, Nowata, and the northeastern portion of Osage Counties. Bartlesville is in Washington County, which is between Osage County to the west and Nowata County to the east, and has a population of 33,000 residents making it the largest town in the banking market. The area's largest employers, including a petroleum company with approximately 3100 employees and a medical center and school district office with more than 800 employees each, are in Bartlesville. Commuting data from the Census Bureau for 1990 show that approximately 27 percent of the residents in the Nowata community, where Victory Bank is located, commute to work in the Bartlesville area. Area residents also may obtain a variety of goods and services from large retail stores in an enclosed mall, restaurants, automobile dealerships, entertainment complexes, and a medical center that are unavailable in the smaller communities within a 40 mile radius of Bartlesville. Data from the Oklahoma Transportation Department indicate that in 1995, the average daily traffic count between Nowata and Bartlesville on State Highway 60 was 3,400 vehicles, which was more than twice the number of vehicles that used the highway to travel from Nowata in the opposite direction. In addition, loan and deposit data indicated that residents of Nowata obtain products and services from banking organizations in Bartlesville. 7 The facts of record do not support including Coffeyville within the Bartlesville banking market. Coffeyville, a mid-size town in Kansas with a population of approximately 13,000 residents, is approximately 40 miles northeast of Bartlesville. No highway directly connects the town with Bartlesville. In addition, Census Bureau commuting data for 1990 show that almost all the people who commute from Nowata County to Coffeyville reside in South Coffeyville, which is a small town in Nowata County approximately five miles from Coffeyville. Coffeyville also has a hospital and a full complement of retail stores. 8 In this context, depository institutions include commercial banks, savings banks, and savings associations. Market share data before consummation are based on calculations in which the deposits of thrift institutions are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin 788 (1990); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). 9 Under the revised Department of Justice Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984) ("DOJ Guidelines"), a market in which the post-merger HHI is above 1800 is considered highly concentrated. The Justice Department has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by more than 200 points. The Justice Department has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effect of limited-purpose lenders and other non-depository financial entities. 10 The credit union was originally established for the employees of the petroleum company in Bartlesville but has broadened its membership criteria to include employees of other companies. Approximately 26,900 residents in the Bartlesville banking market, representing approximately 39 percent of the market's total population, are credit union members. 11 If deposits for the credit union were weighted at 50 percent, WestStar would control 44.5 percent of market deposits, and the HHI would increase by 206 points to 2405. 12 12 U.S.C. § 2901 et seq. ("CRA"). WestStar and Victory Bank received a satisfactory rating under the CRA at their most recent performance examinations. 13 Under Oklahoma law, a bank is permitted to branch into another county by acquisition if the bank to be acquired has operated for at least five years. See Okla. Stat. Tit. 6 § 501.1. Victory Bank has operated for at least five years, and Oklahoma banking officials have confirmed that the proposal would be consistent with state branching law. 14 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Phillips, Ferguson, and Gramlich. Absent and not voting: Governor Meyer.

Return to top

1998 Orders on banking applications