Orders issued under bank holding company act

Federal Reserve Bulletin, Nov, 2001 by Robert Dev. Frierson

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

Native American Bancorporation Co. Denver, Colorado

Order Approving the Formation of a Bank Holding Company and the Acquisition of a Bank

Native American Bancorporation Co. ("Bancorporation") has requested the Board's approval under section 3(a)(1) of the Bank Holding Company Act ("BHC Act")(12 U.S.C. [section] 1842(a)(1)) to become a bank holding company by acquiring all the voting shares of Blackfeet National Bank, Browning, Montana ("Blackfeet Bank"). (1) Bancorporation also has requested the Board's approval under sections 4(c)(8) and 4(j) of the BHC Act (12 U.S.C. [subsection] 1843(c)(8) and 1843(j)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to retain control of Native American Community Development Corporation ("Native American CDC"), which is a nonprofit corporation established by Bancorporation to engage in community and economic development activities on tribal reservations.

Notice of the proposal, affording interested persons an opportunity to comment, has been published (66 Federal Register 9,705 and 12,797 (2001)). The time for filing comments has expired, and the Board has considered all the comments received on the application and notice in light of the factors enumerated in sections 3 and 4 of the BHC Act.

Considerations Relating to Competition and Convenience and Needs

Section 3 of the BHC Act prohibits the Board from approving a proposal that would result in a monopoly or would be in furtherance of any attempt to monopolize the business of banking in any relevant banking market. The BHC Act also prohibits the Board from approving a proposed bank acquisition that would substantially lessen competition in any relevant banking market, unless the Board finds that the anticompetitive effects of the proposal clearly are outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served. (2)

Bancorporation is a newly organized corporation that currently does not control any depository institutions and has been formed for the purpose of acquiring Blackfeet Bank and establishing Native American CDC. Blackfeet Bank is the 70th largest depository institution in Montana, (3) controlling $16.4 million in deposits. (4) Bancorporation has indicated that it intends to expand the scope of Blackfeet Bank's operations to banking markets in other states. The Board has reviewed carefully all the facts of record and has concluded that consummation of the proposal likely would not have a significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market. Accordingly, the Board has determined that competitive factors are consistent with approval of the proposal.

Section 3 of the BHC Act also requires the Board to consider the effect of the transaction on the convenience and needs of the community to be served. (5) In evaluating this factor, the Board places particular emphasis on the ratings the banks involved in a proposal received at their most recent examinations under the Community Reinvestment Act (12 U.S.C. [section] 2901 et seq.) ("CRA"). Blackfeet Bank received an outstanding CRA rating from its primary federal supervisor, the Office of the Comptroller of the Currency ("OCC"), as of May 10, 1999. In addition, Blackfeet Bank qualifies as a community development financial institution ("CDFI") under applicable federal banking law, (6) and Bancorporation proposes either to retain Blackfeet Bank's CDFI status or request that the OCC designate the bank as a national bank with a community development focus. (7)

Bancorporation also has stated that it intends to retain Blackfeet Bank's current community development initiatives and retail banking activities in the Browning community and to expand the bank's products and services to respond to the needs of Native American tribes and tribal businesses nationwide. Bancorporation does not, however, intend to focus on tribes and tribal affiliates exclusively and has developed a CRA plan designed to ensure that the bank advertises and provides products and services to all demographic groups and communities in its proposed assessment areas.

After reviewing all the information submitted by Bancorporation related to the convenience and needs factor and based on all the facts of record, the Board concludes that considerations relating to convenience and needs are consistent with approval.

Financial, Managerial, and Other Supervisory Factors

Section 3 of the BHC Act requires the Board to consider the financial and managerial resources and future prospects of the companies and banks involved in a bank acquisition proposal. (8) As part of this analysis, the Board has reviewed Bancorporation's operating plan and the proposed management of Bancorporation and Blackfeet Bank. In addition, the Board has taken into account Bancorporation's financial resources, including its capital levels and ability to serve as a source of strength to Blackfeet Bank. Bancorporation's plan to provide Blackfeet Bank with new capital is particularly significant. The Board also has reviewed confidential supervisory and examination information on Blackfeet Bank and publicly reported financial and other information on the bank and Bancorporation. (9) Moreover, the Board has consulted with the OCC concerning the financial and managerial resources and operating plan of Blackfeet Bank, particularly regarding Bancorporation's proposal to offer additional banking products and services over a broader area.