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Release Date: December 8, 1999


For immediate release

The Federal Reserve Board today announced its approval of the application of Exchange Bancshares of Moore, Inc., Moore, Oklahoma, to become a bank holding company by acquiring all the outstanding voting shares of Exchange National Bank of Moore, Moore, Oklahoma.

Attached is the Board's Order relating to this action.


FEDERAL RESERVE SYSTEM

Exchange Bancshares of Moore, Inc.
Moore, Oklahoma

Order Approving the Formation of a Bank Holding Company

Exchange Bancshares of Moore, Inc. ("Applicant") has requested the Board's approval under section 3 of the Bank Holding Company Act ("BHC Act") (12 U.S.C. 1842) to become a bank holding company by acquiring all the outstanding voting shares of Exchange National Bank of Moore, Moore, Oklahoma ("Bank").

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (64 Federal Register 51,125 (1999)). The time for filing comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in section 3 of the BHC Act.

Applicant is a newly organized corporation formed for the purpose of acquiring control of Bank. Bank is the 167th largest depository institution in Oklahoma, controlling $37.4 million in deposits, representing less than 1 percent of total deposits in depository institutions in the state.1

As noted above, Applicant is a de novo corporation and does not control another depository institution. Accordingly, based on all the facts of record, 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 any relevant banking market, and that competitive considerations are consistent with approval.

The BHC Act also requires the Board to consider the financial and managerial resources and future prospects of the companies and banks involved in the proposal, the convenience and needs of the community to be served, and certain other supervisory factors. The Board has carefully considered these factors in light of all the facts of record, including comments from a Bank shareholder and director ("Protestant"), who contends that Applicant has undervalued his shares and, consequently, underestimated the cost of acquiring Bank.2  The Board has also carefully reviewed all the financial and managerial information provided by Applicant and Protestant about the proposal, assessments of the financial resources of Bank contained in confidential reports of examination by the Office of the Comptroller of the Currency ("OCC"), and other supervisory information. Because the resulting organization has total assets of less than $150 million, the Board has reviewed the proposal in light of the its Policy Statement on the Formation of Small Bank Holding Companies.3

The Board notes that Bank currently is well capitalized. In addition, under the proposal submitted by Applicant, the projected financial condition of Applicant and Bank and the projected debt-service obligation of Applicant are reasonable and consistent with the Board's guidelines. The Board also has reviewed Applicant's ability to service the debt if a court determines that a higher valuation of Protestant's shares is appropriate, and concludes that Applicant appears to have sufficient resources to service any increased debt likely to result from a larger payment to Protestant.

The Board has also reviewed relevant reports of examination of Bank and the managerial resources of Applicant's organizers, all of whom currently are officers and directors of Bank. Based on these and all the other facts of record, the Board concludes that financial and managerial considerations and future prospects of Applicant and Bank are consistent with approval.4   Considerations relating to the convenience and needs of the community, including the performance record of Bank under the Community Reinvestment Act (12 U.S.C. 2901 et seq.), and the other supervisory factors the Board must consider under section 3 of the BHC Act, also are consistent with approval.

Based on the foregoing, and in light of all the facts of record, the Board has determined that the application should be, and hereby is, approved. The Board's approval is specifically conditioned on compliance by Applicant with all the commitments made in connection with the application. For the purpose of this action, the commitments and conditions relied on by the Board in reaching its decision are deemed to be conditions imposed in writing by the Board in connection with its findings and decision and, as such, may be enforced in proceedings under applicable law.

The proposed transaction shall not be consummated before the fifteenth calendar day after the effective date of this order, or later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Kansas City, acting pursuant to delegated authority.

By order of the Board of Governors,5 effective December 8, 1999.

(signed)

Robert deV. Frierson

Associate Secretary of the Board


Footnotes

1 Deposit data are as of June 30, 1998. In this context, depository institutions include commercial banks, savings associations, and savings banks.

2 Under state law, a shareholder dissenting from a share acquisition is entitled to fair market value for the shareholder's shares, as determined by a state district court. See Okla. Stat. Ann. tit. 18, 1091 (West 1999). Protestant argues that Applicant has not established its ability to finance the proposal without adversely affecting the Bank's financial condition if fair market value of Protestant's shares exceeds the value assigned to the shares by Applicant's appraiser.

3 12 C.F.R. 225, app. c.

4 Protestant maintains that actions taken by Applicant in connection with the proposal raise adverse managerial considerations. Protestant alleges that Applicant's principals are in violation of the bank's shareholder and voting agreements. These questions involve the interpretation of state law and, as such, are matters appropriately adjudicated by the courts. Protestant also argues that the voting agreement constitutes a voting trust that requires a notice to the OCC under the Change in Bank Control Act, 12 U.S.C. 1817(j), and that Applicant has failed to file a notice with the OCC. The Board provided the OCC with Protestant's comments, and the OCC did not file any comments with respect to this proposal.

5 Voting for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Kelley, Meyer, and Gramlich.

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