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YEARS OF REFORM
A Prelude to Progress
101st ANNUAL REPORT 1963
COMPTROLLER OF THE CURRENCY
UNITED STATES TREASURY • WASHINGTON, D. C.
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C., 20402 • Price $2.75
Letter of Transmittal
TREASURY DEPARTMENT,
OFFICE OF THE COMPTROLLER OF THE CURRENCY,
Washington, D.C.t September 1,1964.
SIRS: Pursuant to the provisions of section 333 of the United States
Revised Statutes, I am pleased to submit the 101st Annual Report of the
Comptroller of the Currency, which covers operations for the year 1963.
I have also included in this Report a survey of the program of reform which
we have undertaken over the past several years, together with a series of
appendices reproducing the major public expressions of the policies of this
Office since I have assumed the responsibilities of the Comptroller of the
Currency.
Respectfully,
JAMES J. SAXON,
COMPTROLLER OF THE CURRENCY.
T H E PRESIDENT OF THE SENATE
THE SPEAKER OF THE HOUSE OF REPRESENTATIVES
iii
Contents
Title of Section
Tears of Reform:
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XL
XII.
Page
A Prelude to Progress
Lending Limits
Real Estate Loans
Trust Powers
Investment and Underwriting Powers
Corporate Practices and Procedures
Bank Promissory Notes
Leasing of Personal Property
Insurance and Debt Cancellation
Corporate Savings Accounts
International Operations
Bank Service Charges and Banking Hours
Miscellaneous Powers
l
4
8
13
17
19
22
23
25
27
28
29
30
Annual Report, ig6j
1.
2.
3.
4.
5.
6.
7.
8.
State of the National Banking System
Assets, Deposits, and Capital Accounts
New Charters, Branches, and Mergers
Income and Expenses of National Banks
Litigation
Fiduciary Activities of National Banks
Administration
Issue and Redemption of Currency
35
36
39
46
48
54
56
61
Appendices
A.
B.
C.
D.
Merger Decisions, 1963
Statistical Tables
Addresses of James J. Saxon, Comptroller of the Currency
Selected Congressional Testimony of James J. Saxon, Comptroller
of the Currency
E. Selected Congressional Correspondence of James J. Saxon,
Comptroller of the Currency
F. Selected Letters to the Presidents of National Banks by
James J. Saxon, Comptroller of the Currency
Index....
63
233
311
353
401
453
505
YEARS OF REFORM
A Prelude to Progress
YEARS OF REFORM
A Prelude to Progress
F
OR NEARLY THREE YEARS we have been engaged
in an endeavor to equip the National Banking
System for a second century of progress. It is
fitting that we should introduce this 101st Annual
Report to the Congress with a portrayal of these
efforts which in their essential outlines have now
been largely completed.
A. The Underlying Goals
No principle of our private enterprise system is
more fundamental than the presumption that public
controls will be imposed only where they are clearly
needed to serve carefully defined public objectives.
This principle is reflected in the settled policy of this
country to place primary reliance on individual
initiative safeguarded by efforts to secure the maintenance of competition. We have departed from
this basic policy only in industries which unmistakably call for special treatment. Banking has been
one of those industries.
The forms of public control applied to banking
are in marked contrast to those applied in the unregulated or the fully regulated industries. The
differences in these forms of public control are vital
to an understanding of the needs and purposes of
bank regulation. In the fully regulated industries,
the natural tendencies toward monopoly are considered to be so strong that monopoly powers are
deliberately granted, and conditions of price and
service are explicitly and closely controlled. In banking, although entry is regulated and many operating
practices are carefully supervised, there is no deliberate effort to create or safeguard monopoly power,
there are no mandatory requirements for the provision of service, and price controls are not applied
725-698—^64
2
to the services offered by banks. Thus, although
in banking there is not the same degree of reliance
upon private enterprise as in the unregulated industries, individuals are entrusted with greater responsibility than in the fully regulated industries.
This unique treatment of banking stems from the
dual and somewhat disparate needs for bank regulation.
Banks provide the principal payments medium through
which commercial and industrial transactions are conducted; they serve as the chief instrumentality for
gathering and channeling the Nation's savings into productive uses; and they have credit-creating powers essential to our economic progress. Without public confidence, individuals would not entrust banks with their
savings; nor, without such confidence, could the check
mechanism function effectively as a payments medium.
One purpose of bank regulation is to maintain this'
essential confidence in the banking system by sustaining
its solvency and liquidity.
There is, however, another and equally significant
public objective which must be assured under bank
regulation. Since bank regulation does not directly
safeguard the provision of adequate service, banks must
have the discretionary power to adapt their operations
sensitively and efficiently to emerging needs. A second
criterion for bank regulation is thus to fashion the cotrols so that proper scope is allowed for the exercise of
individual initiative and innovation.
These dual objectives of bank regulation entail a balancing of considerations which may in some degree
conflict. If it were the sole purpose of banking controls to preserve the viability of banking institutions
without regard to their performance in meeting public
needs, there indeed would be justifiable reasons for
severe restrictions over added competition through new
bank entry or bank expansion, and for the closest controls over bank operating practices so as to avoid risks
1
of every nature. However, since the regulation of
banking is also directed to the performance of banks in
satisfying public needs, the controls imposed upon
banks must be judged as well according to whether they
have contributed to or impaired that performance.
One clear principle emerges from these broad criteria. Any unique form of bank regulation which is
not essential to the preservation of the solvency and
liquidity of the banking system must be regarded as a
harmful impediment upon the capacity of banks to
meet the public requirements which they are designed
to serve. There are, of course, forms of public control which are broadly applied to all industries, but
these are not at issue here.
B. The Sources of Difference
Changes of law and policy ordinarily take place in a
context of opposing forces, and the events of the past
several years in banking are no exception. Many of
the differences which have arisen may be traced to the
competitive effects of the new policies which have
been instituted or advocated.
Commercial banks, in virtually every phase of their
operation, confront competition from other financial
institutions which function under less severe public
controls. During the great period of our economic
development over the past three decades, the commercial banks have been subjected to restrictive public
controls designed in response to the emergency conditions which prevailed in the early Thirties. With
the commercial banks thus barred from the full use of
their capabilities, other financial institutions emerged
or expanded to meet the public needs. These nonbank financial institutions, which grew to their present
stature while sheltered from full commercial bank
competition, have viewed with some misgiving the
enhanced competitive capacity of the commercial
banks under the new powers which have been conferred upon them.
Within the banking community, there are differences of attitude which spring from the fact that the
laws applied to state-chartered banks differ in many
material respects from those applied to national banks.
Moreover, when the powers of one class of banks are
enlarged, the competitive position of the other class
may be affected. The disagreements in this respect,
however, have related, not to the substantive validity
of the enlarged powers, but to the scope of their application.
One further source of difference has its origin in
the sometimes divergent purposes of monetary policy
and bank regulation. Both represent significant
phases of our public policy, but their aims do not always coincide. The differences are most apparent
with respect to such matters as interest rate regulation and the standards for bank lending and investment. Controls of this nature restrict the discretionary powers and the competitive capacities of banks.
If they are employed as instruments of monetary
policy, they may needlessly limit the authority of
banks to compete for deposits and safely to meet public needs—thus distorting the allocation of the Nation's productive resources and impairing its productive capacity and performance.
G. The Basic Philosophy
In the period since the depression-inspired banking
legislation of the Thirties the structure of public control in the field of banking has been dominantly influenced by the restrictive attitudes of fear and doubt
which led to that legislation. Early in 1962, we undertook a broad-scale inquiry into the functioning of
the National Banking System under the laws, policies,
practices, and procedures which then had been in
effect for many years. National banks throughout the
country were requested to review their experience and
to suggest modifications of policy or practice which
they believed would promote a more effective operation of the System. An Advisory Committee reviewed
these reports and presented recommendations for action which were published under the title National
Banks and the Future. These recommendations were
subsequently subjected to intensive review within this
Office, and have served as an essential basis for the
actions and proposals which we have carried out and
advanced during the intervening period.
One central theme has guided our efforts to reform
the structure of banking regulation and procedures. In
our review of past policies and practices, we have put
them to the fundamental test of whether they were
needed in order to maintain the solvency and liquidity
of the banking system. Wherever a restrictive control
did not meet this test, we have endeavored to broaden
the discretionary powers of the national banks, insofar
as this appeared desirable and was permissible under
existing law. Wherever existing law appeared unduly
restrictive in terms of this basic philosophy, we have
advocated legislative changes to the Congress.
The purpose throughout has been to secure for the
Nation the fullest benefit of the capabilities, the initiative, and the enterprise of bankers in the National effort
to promote the maximum growth and development of
the economy. The commercial banks lie at the heart of
the Nation's productive mechanism, and the manner
in which they exercise their financial functions critically influences the entire performance of the economy.
The enlarged discretionary powers of bankers should
provide them with the tools necessary to the performance of the role which they must play in furthering the
Nation's economic progress.
We turn now to the key individual changes of policy
and procedure which were undertaken. The basic concepts which have guided the reforms we have instituted
and proposed will be seen in greater detail in the
course of this presentation. A further elaboration of
these ideas will be found in Appendix G which presents the principal addresses of the Comptroller of the
Currency since November 1961, in Appendix D which
presents testimony on legislative matters, in Appendix
E which reproduces selected Congressional correspondence of the Comptroller, and in Appendix F which
reproduces selected communications to the national
banks.
I. Lending Limits
I
N PURSUIT OF THE PRINCIPLES outlined in the pre-
ceding section, we conducted an extensive examination of the regulations which limit the size of
loans national banks may make to individuals, partnerships and corporations. These regulations, with
certain defined exceptions, essentially limit the size
of loans to a single borrower to 10 percent of the
bank's capital and surplus, and are based upon legislation that was passed more than half a century
xago. The examination of these regulations revealed
a clear need for liberalization of restrictions that
had accumulated over the years, restrictions which
imposed burdens on national banks unjustified for
the purpose of preserving the liquidity and solvency
of the banking system.
We have sought to modify these restrictions in two
ways: first, through reinterpretation of the regulations, given our authority and responsibility under
existing statutes; and, second, through support of
legislation which would raise the one-borrower limit
from 10 percent to 20 percent of a national bank's
capital and surplus.
The present statutory provision (Section 84 of 12
U.S.G.) frequently has the effect of placing national
banks at a disadvantage in relation to competitor
state-chartered banks and other financial institutions
which have more liberal authority to lend to their
customers. This disadvantage has been greatly aggravated by unduly restrictive administrative interpretations of the provisions of Section 84. After
careful study, we undertook, through interpretative
rulings consistent with the purposes of Section 84,
to improve the capacity of national banks to compete more effectively in serving community needs.
Some of the more important of these interpretations
follow.
A. Obligations within
Limitation
the Ten Percent
Section 84 provides that the term "obligations," with
respect to which the ten percent limitation applies,
means, among other things, the direct liability of the
maker or acceptor of paper discounted with or sold to
a national banking association, and the liability of the
endorser, drawer, or guarantor who obtains a loan
from, or discounts paper with, or sells paper under his
guaranty to such an association. Previous Comptrollers have ruled that, if a national bank purchased
third party paper which the seller agreed to repurchase
upon a default in payment by the third party, the liability of the seller to the bank was co-extensive with the
total amount of such paper purchased by the bank.
Therefore, for the purpose of applying the ten percent
limitation prescribed by Section 84, this amount was an
obligation by the seller to the bank.
We have ruled that, in such a situation, the seller's
obligation to the bank is limited to the total unpaid
balance of the paper owned by the bank, less any applicable seller's reserve against defaulted paper. With
respect to such a reserve, we have ruled that, if the seller of third party paper agrees with the purchasing
bank that it may retain an agreed portion or percentage
of the purchase price paid for the paper as collateral security against uncollectibility, and the bank has no
right of recourse, direct or indirect, against the seller
for uncollectibility, then neither the reserve nor the
obligations of the third parties on such non-recourse
paper constitutes an obligation of the seller subject to
the lending limit.
In a related situation, we have taken the position that
where the liability of a borrower to repay a loan is
limited to the proceeds of a contract, or to an asset
transferred as security for the loan, and his obligation
with respect to the asset is limited to a warranty of
validity as of the date of its transfer, neither the described obligations of the customer, nor the collateral,
represent obligations of the customer subject to the
lending limit. However, banks have been cautioned
that they should exercise prudent judgment in order to
avoid undue concentration of underlying collateral in a
limited area of economic activity.
Previous Comptrollers had ruled that, if a person
signed a note as a co-maker, even though he did so
as an accommodation for the other co-maker, and
notwithstanding that this fact was indicated upon the
note, the person was, nevertheless, regarded as a
maker of the note, and the amount was to be included in determining whether his obligations to the
bank exceeded the statutory limit. Our position is
that, if the accommodation party has merely lent his
name and credit to the transaction, and has not
shared in the proceeds of the bank loan represented
by the note, his liability, however evidenced, is not
an obligation within the meaning of 12 U.S.C. 84 in
determining the bank's lending limit to the accommodation party.
Earlier Comptrollers took the position that, when
a national bank acquired, through "purchase," Federal Reserve funds from another bank, this acquisition taking the form of a transfer of the funds from
the "seller's" account to the "buyer's" account in the
Federal Reserve Bank, with payment to be made by
the "buyer," usually with a specified fee, the transaction was a loan by the "seller" bank to the "buyer"
bank, and the "seller" had to treat the loan as an
obligation due to it from the "buyer" for the purpose
of applying the statutory lending limit with respect
to the "buyer." Reversing this position, we held
that, consistent with custom and practice within the
banking industry, transactions of this nature constitute purchases and sales of funds under which no
obligations arise which are subject to the lending
limitation of 12 U.S.C. 84. Similarly, such transactions are not subject to 12 U.S.C. 82 which imposes
borrowing limitations on national banks. Also, we
have taken the position that the purchase or sale of
securities by a bank, under an agreement to resell or
repurchase at the end of a stated period, is not a
borrowing subject to 12 U.S.C. 82, nor an obligation
subject to the lending limit of 12 U.S.C. 84.
Frequently, national banks agree to lend to a customer, such as a building contractor or an automobile
dealer, a designated amount which is in excess of the
bank's ten percent limit, although the amount of advances actually outstanding under such an agreement
does not, at any one time, exceed that limit. Although previous Comptrollers recognized that agreements of this nature did not, in themselves, constitute
a violation of the limitations prescribed by Section 84,
they took the view that national banks were powerless
to make such agreements because excessive loans to individual customers could result. We have taken the
view that national banks are authorized to enter into
such agreements, although we recognize that their
management requires the exercise of prudent banking
judgment to prevent loans in excess of the lending
limit.
B. Combining Loans to Separate Borrowers
Section 84 provides that the term "obligation,"
with respect to which the statutory limitations apply,
means, in the case of a corporation, all obligations of
all subsidiaries in which the corporation owns or controls a majority interest and, in the case of obligations
of a copartnership or an association, the obligations
of the several members.
Previous Comptrollers took the position that, in
applying the limitations of Section 84 with respect to
obligations owed by a corporation to a national bank,
the obligations must be combined with loans made by
the bank to other corporations, when such other corporations, although not subsidiaries of the first corporation, were wholly or predominantly owned by the
same individual or group of individuals, and the proceeds of the loan were to be used in one or more common or closely connected enterprises. It was also held
that, for purposes of the limitations of Section 84,
loans made to a corporation must be combined with
extensions of credit to its shareholders owning or controlling substantially all the stock of the corporation,
if the proceeds of the loans to the individuals were to
be used for the benefit of the corporation or in furtherance of an enterprise closely related to the operation of the corporation.
We have eliminated these rules, all of which were
without any statutory basis. Today, in accordance
with statutory requirements, when a corporation is indebted to a national bank, its obligations must be combined with the obligations of all subsidiary corporations in which it owns and controls a majority interest.
With this exception, separate loans to separate corporations are generally not combined in applying the limitations of Section 84. For example, the obligations of
two corporations owned by the same individual or
group of individuals are not combined, although the
loans were based, not upon the financial net worth of
either, but upon collateral or other repayment arrangements satisfactory to the bank as a credit matter. We
also take the view that individual loans to members of
a partnership or association, for purposes other than the
business of the partnership or association, should be
disregarded in determining the application of the ten
percent limitation to obligations of the partnership.
G. Meaning of Unimpaired Capital Stock and
Surplus Funds
We have ruled that the proceeds of capital notes,
capital debentures, and other similar obligations issued
by a national bank, which are subordinate in right of
payment to prior payment in full of all deposit liabilities
of the bank, may be included as part of the aggregate
amount of unimpaired capital stock and unimpaired
surplus funds for the purpose of determining the limit
of obligations of any obligor of the bank prescribed by
Section 84. A study of the legislative history underlying the restrictions on loans to one borrower set forth
in Section 84 disclosed that protection of depositors
was their primary purpose. Consequently, since capital debentures and notes, to the extent that they are
subordinate to deposit liabilities, stand in the same
relationship to depositors as traditionally recognized
forms of capital and surplus, they may properly be included in the loan base.
We have also ruled that, for the purpose of applying the lending limitation of 12 U.S.G. 84, the term
"unimpaired surplus fund" as used in Section 84
includes all capital accounts (other than capital
stock), derived either from paid-in capital funds or
from retained earnings, not subject to known
charges, and which are considered interchangeable
by resolution of the bank's board of directors.
Some examples of capital accounts which are included in the term "unimpaired surplus fund" are:
(1) Surplus (paid-in or earned);
(2) Undivided profits (paid-in or earned-unearned income must be deducted);
(3) Tax-paid portion of valuation reserve for
loans (includes amounts in reserve for
loan losses for which no Federal tax deduction has been or may be taken);
(4) Valuation reserve for securities;
(5) Reserve for contingencies.
Accounts which are subject to known specific
charges are not includable in the "unimpaired surplus fund." Some examples of such accounts are:
(1) Internal Revenue formula bad-debt reserve
to the extent taxable;
(2) Reserve for dividends declared;
(3) Reserve for taxes, interest and expenses.
D. Exceptions to the Lending Limit
Certain of the 13 statutory exceptions to the 10percent lending limit have been modified in their
interpretation and application to meet the needs of
both the business and banking communities.
Exception 2 paper (12 U.S.C. 84(2)), which includes obligations arising out of the discount of commercial or business paper which bears the full recourse
endorsement of an actual owner, was formerly regarded
as being applicable to negotiable obligations given in
payment of the purchase price of articles purchased for
resale or to be used in the fabrication of a product.
Using this self-liquidating criterion, exception 2 is now
regarded as being applicable also to negotiable paper
which is given in payment of the purchase price of commodities to be used for any other business purpose
which may reasonably be expected to provide funds for
payment of the paper and which bears the full recourse
endorsement of an actual owner.
Based on this same self-liquidating criterion, we have
ruled that section 84(2) encompasses negotiable paper
received as payment of the purchase price of commodities in export transactions, when such paper is
negotiated by an actual owner without recourse or with
limited recourse and is supported by an assignment of
appropriate insurance covering the foreign, political,
and credit risks applicable to the paper, such as the insurance provided by the Export-Import Bank or the
Foreign Credit Insurance Corporation. This ruling
enables national banks to compete with increased lines
of credit in the area of international trade, while retaining substantially the same protection of a full recourse
endorsement as prescribed by Section 84(2).
We have also held that exception 2 may be applicable to the renewal of such paper when the renewal is
consistent with these conditions. Previously, the renewal of such paper was regarded as removing the
justification of exception 2, even though there was no
default, the paper discounted and renewed was negotiable, and there continued to exist a business purpose
which could reasonably be expected to provide funds
for payment of the paper. Under this previous position, the renewal of such paper meant that only exception 4 (12 U.S.C. 84(4)) had application. That exception, which is applicable only to paper having a
maturity of not more than 6 months, affords an additional lending limit of only 15 percent in addition to
the basic limit of 10 percent of the bank's capital and
surplus.
Exception 13, (12 U.S.G. 84(13)), which is applicable to two-name installment consumer paper,
provides that the obligations of the maker shall be
the sole applicable loan limitation where an officer
of the bank has certified that the maker's responsibility has been evaluated and that the bank is relying primarily on the maker for payment. In recognition of the modern-day practice of large-scale
discounting of installment consumer paper, we have
ruled that, where such paper is purchased in substantial quantities, the evaluation and certification as
well as the records of the maker's financial condition
may be in such form as is appropriate for the class
and quantity of paper involved.
In all of these administrative rulings, the paramount concern has been to give national banks the
potential to provide for modern credit needs of a
highly industrialized and commercial economy without endangering bank solvency and the integrity of
bank deposit liabilities. Providing additional leeway
for the exercise of prudent judgment on the part of
bank management, they naturally involve modest
additional risks. But these are certainly more than
compensated for by increasingly professional bank
management, improved bank examination procedures, and deposit insurance; furthermore, the elimination of distortions in the flow of funds arising
from unduly restrictive administrative rulings will
result in net social gains that far outweigh the
marginal addition to banking risks.
E. Legislation to Increase National Bank
Lending Limits
Testimony supporting H.R. 8247, a bill that would
raise loan limits from 10 percent to 20 percent of a
national bank's capital and surplus, was offered by
the Comptroller before the House Banking and Currency Committee on September 23, 1963. This testimony is reproduced in Appendix D, p. 379 of this
report. To summarize the arguments presented at
that time, we expressed the view that increasing the
lending limit would:
(1) Enable national banks to compete more effectively with state-chartered banks which
are for the most part subject to less restrictive lending limits.
(2) Enable national banks to compete more effectively with other financial institutions
and in various money and capital
markets.
(3) Enable smaller banks to compete more effectively for commercial customers vis-avis larger banks in financial centers.
(4) Reduce pressures generated by unrealistically low loan limits toward merger and
consolidation.
(5) Encourage resource mobility and consequently lead to a fuller realization of the
potential of the American economy.
II. Real Estate Loans
T
HE STATUTORY PROVISIONS (contained in
12
U.S.C. 371) governing the conditions under
which national banks may make real estate loans
have also been reassessed, and new interpretations
provided. Earlier regulatory concepts, it has been
recognized, were molded by past custom and past economic conditions, and in part by unnecessary conservatism, rather than by statutory mandate. As in
the case of lending limits, we have both liberalized
regulations under our statutory authority and supported legislation to amend unduly restrictive statutes.
A. Definition of Real Estate Loans
Federal law requires that loans made by national
banks on the security of real estate must meet certain
requirements with respect to the nature and value of
the security, the term of the loan, and the manner
of its repayment. The law recognizes, however, that in
certain circumstances loans secured by real estate are
not made primarily on the security of real estate and
are to be treated as ordinary commercial loans. From
these provisions, and from a careful examination of
Congressional action and administrative interpretation with respect to real estate loans, we have developed
a general definition that a real estate loan within the
meaning of the Federal law is any loan secured by real
estate where the bank relies upon such real estate as
the primary security for the loan. Where the bank in
its judgment relies substantially upon other factors,
such as the general credit standing of the borrower, the
loan does not constitute a real estate loan within the
meaning of the Federal law, although as a matter of
prudent banking practice it may also be secured by real
estate.
The notion that a real estate loan as contemplated by
12 U.S.C. 371 is any loan supported by a mortgage on
real estate, has frequently resulted in a bank's inability
to take an available first or second mortgage as additional security for a loan made primarily on other
security. In this connection, we have taken note of the
fact that loans for home improvement purposes are
generally made substantially in reliance upon the credit
standing of the borrower, insurance, collateral, or a
combination of these factors. We have therefore ruled
that such loans are not to be considered real estate loans
within the meaning of 12 U.S.C. 371, even though, as
a matter of prudent banking practice, the bank takes
additional security in the form of a real estate lien. We
have, however, held that where a bank relies substantially on private insurance or guaranty as security for a
loan, its files should contain evidence to demonstrate
that the bank is justified in placing such reliance on the
insurance or guaranty contract.
B. Improved Real Estate
Departing somewhat from the concept that real
estate is "improved" only when there is a completed
structure erected thereon, and in recognition of economic realities, we have ruled that real estate may be
considered "improved" within the meaning of the applicable statute when construction or development has
contributed substantially to its value. Farm land is
now deemed "improved" when it is useful for agricultural purposes without further substantial improvement. Furthermore, business and residential property
may now be regarded as "improved" when substantial
and permanent improvements have been constructed or
developed on the property, or when its value has been
enhanced by such improvements in its immediate vicinity. Whether on-site or off-site improvements have enhanced the value of property, so as to make it "improved" real estate, is regarded as a question of prudent banking judgment to be resolved in light of the
facts of each particular case.
C. Construction Loans
A national bank may, under the provisions contained in the third paragraph of 12 U.S.G. 371, make
construction loans which are not subject to the usual
first lien security, improved real estate, and amortization requirements of the real estate loan requirements of that section. Such construction loans must
have maximum maturities of not more than 18
months, and there must be a valid and binding agreement entered into by a financially responsible lender
to advance the full amount of the bank's loan upon
completion of the buildings. However, consistent
with the foregoing definition and policy relating to
real estate loans, we have held that, if a national
bank, in extending interim credit to finance the construction of an industrial, commercial, residential, or
farm building, relies primarily for repayment of the
loan on a firm commitment by a financially responsible lender to take up the loan upon the completion
of construction, the loan is not a real estate loan and
is not subject to the limitations contained in the
third paragraph of 12 U.S.G. 371.
In this connection, it is also our position that national banks may make loans where the proceeds
are to be used to acquire and convert undeveloped
property into improved real estate. However, at
such time as the proceeds of the loan have been
paid out and the improvements completed, the loan
must be secured by improved real estate within the
meaning of 12 U.S.C. 371.
D. Participation in Real Estate Loans
Participations in real estate loans by banks have,
over the years, been the source of many problems.
National banks have been allowed to participate at
the outset with others in the making of a real estate
loan, or to purchase an outstanding real estate loan
in its entirety. They have also been permitted to
purchase portions of a real estate loan when the bank
thereby became the owner of the entire loan. We
have concluded that it is further a prudent and often
necessary banking practice to purchase or sell participations in existing real estate loans, even when
the purchasing bank does not thereby become the
owner of the entire loan. In such cases, the participation has only some of the characteristics of a
real estate loan. These transactions have recently
been recognized as being within the power of a national bank where the interests of the participating
banks are adequately protected by the terms of the
participation agreement.
E. Intervening Liens
Historically, national banks have been permitted
to hold both first and second liens on real estate given
as security, if there is no intervening lien and the
aggregate of the amounts due on both mortgages
and the terms of payment conform with the provisions of 12 U.S.G. 371. In such a case the combined mortgages are regarded as merging into one
qualifying first lien. We have expressed the opinion
that where there exists an alternative intervening
lien, such as in the case where the bank may compel
the lessee of the mortgaged property to take over the
first mortgage, the takeover agreement does not
represent an intervening lien within the meaning of
the statute. In another ruling which relates to the
merger of first and second liens on real estate, we
have stated that a lien which would be foreclosed
only upon the election of the bank is not an intervening lien.
F. Amortization Regulations
Amortization of real estate loans has long been
thought to require a payment of principal on a mechanically regular-and-equal-basis throughout the life of the
loan. Such a view has been a source of much difficulty
to both the bank and its customer, especially in the case
of business situations where returns are received on a
different basis. Amortization is now defined as a reduction of the debt principal during the life of the loan.
Although it is contemplated that amortization will ordinarily be on a regular schedule of payments, deviations from such a schedule, when based on prudent
banking judgment, are permitted. This ruling is designed to allow banks to take account of situations in
which there are low profits at the outset, initial heavy
capital investments, and periods of costly research or
development.
Two other significant rulings also relate to the
amortization of demand and short-term real estate and
construction loans. In one ruling, we held that a real
estate loan, in an amount in excess of 50 percent but not
more than 75 percent of the appraised value of the real
estate security, may be made on a demand basis if
provision is made whereby, in the absence of demand,
the entire principal of the loan will be liquidated by
regular payments of principal within a stated period of
time not exceeding 20 years. In the second ruling, we
held that loans made to finance the construction
of industrial or commercial buildings, or of residential
or farm properties, may come within the real estate
lending statute (third paragraph of 12 U.S.G. 371),
even though they are made payable on demand instead
of having a stated maturity of not more than 18
months, provided that the parties intend that the loan
be paid off or refinanced within the 18-month period,
and provided that demand is made or the loan paid
within that period.
G. Leasehold Security
National banks are permitted under 12 U.S.G. 371
to make a real estate loan secured by a leasehold
where: (1) the leasehold is on improved real estate;
(2) the security is a first lien on the leasehold; (3) the
security instrument is a mortgage, trust deed or similar
instrument; (4) the loan matures at least 10 years
before the date the lease is due to expire; (5) amortization of the loan is provided as in the case of loans
secured by first liens on real estate owned in fee simple; and (6) there is compliance with such rules and
regulations as may be prescribed by the Comptroller
under the authority of the real estate lending statute.
A major revision in our regulation (12 G.F.R. 5)
issued under 12 U.S.G. 371, affecting the authority
of national banks to make real estate loans secured by
a leasehold, became effective on December 24, 1963.
The principal effect of the new regulation is to replace a previously-used standard for appraising leasehold values which had frequently resulted in appraisals substantially below the market value of the
leasehold. The new regulation provides that the
"appraised value" of a leasehold, for the purpose of
the statutory requirements (of 12 U.S.G. 371), shall
be determined by the use of accepted and reliable
methods of appraising leasehold values, including, in
areas where such information is available, a consideration of the sale prices of comparable leaseholds.
Another important change in the regulation provides that where leasehold loans are made in principal reliance on the insurance or guaranty of a governmental agency, they are not subject to any of the
other provisions of the leasehold loan regulation.
This applies to leasehold loans, the definition contained in other rulings to the effect that a loan is not
a "real estate loan" within the meaning of the statute
merely because it is secured by real estate, but only
10
where the bank relies upon a first lien on real estate
as the primary security for the loan.
These changes in the leasehold regulation are designed to enable national banks to apply standards of
prudent banking judgment in making sound loans secured by leaseholds, and at the same time compete
with those financial institutions which operate under
less stringent rules.
H. Miscellaneous Rulings
Other rulings relating to real estate loans have been
issued in order to enable national banks lawfully to
meet present day demands of the business world and
at the same time adhere to standards of prudent banking judgment.
One such ruling permits the use of pledged collateral as an offset to any excessive portion of a real estate
loan. For example, a real estate loan will not be considered in violation of the statute where the amount of
the loan exceeds the limitations of that statute, if the
excessive portion of the loan is fully secured by pledged
collateral, in the form of a savings account, certificate
of deposit, or other security to which the bank has
ready access and first claim.
Under another ruling, where state law permits or
recognizes condominium ownership, the purchaser of
a condominium apartment takes title to real estate eligible as security for a real estate loan by a national
bank. In condominium ownership, the owner-mortgagor owns separately one or more single dwelling units
in a multiple apartment, and has an undivided interest
with the owners of the other apartments in common
areas and facilities serving the building.
Ownership of real property by national banks has
been the subject of intensive review, and we have clarified and expanded our rulings and interpretations in
order to permit banks effectively and efficiently to operate within the applicable statutory limitations contained in 12 U.S.G. 29. We have held that real estate
necessary to the accommodation of a bank's business
includes real estate other than that upon which bank
buildings are located. Thus, real estate used for parking facilities and data processing centers is treated as
necessary in the transaction of the banking business.
Also included in that category is real estate held for
future banking use, where the bank in good faith expects to utilize such property as bank premises. This
will permit a prudent program of property acquisition
for future bank use.
The disposal of "salvage" real estate by national
banks has long been a source of some misunderstanding and much loss in past years where banks
were required to dispose of such real estate on an
untimely basis. In order to facilitate the attainment
of the greatest possible benefit to the bank and its
shareholders, we have ruled that a national bank
may comply with 12 U.S.G. 29 by retaining or transferring to a subsidiary or affiliate, for use in the business of the bank, subsidiary or affiliate, real estate
acquired by the bank for a debt previously contracted. Compliance with 12 U.S.G. 29 may also be
accomplished, subject to prior approval of the Regional Comptroller of the Currency, by disposal of
real estate so acquired under an arrangement by
which the bank will realize additional compensation
upon the ultimate disposition of the property by the
transferee where: (1) the bank has been unable to
dispose of the real estate except at an unreasonably
low price resulting in a substantial loss to the bank;
and (2) there is no reason to believe that a substantially higher price is obtainable for such real estate
within a reasonable period. To this same end, it
has also been held that a national bank may assume
or pay off encumbrances on real estate which it
properly acquired as salvage in connection with a
debt previously contracted, provided the bank's
interest in the property is sufficient to justify such
action.
I. Ownership of Bank Premises
We have held that real estate for bank premises
may be acquired and held directly by a national
bank, by any reasonable and prudent means, including ownership in fee, a leasehold estate, or interest in a cooperative. Such real estate may be
held either directly by the bank or by one or more
subsidiaries or other affiliates.
Investment by national banks in bank premises is
the subject of 12 U.S.C. 37Id. When a national
bank proposes to make an investment in bank
premises in any of the ways described in the statute,
then the aggregate of all such investments must be
added to the indebtedness incurred by any corporation holding the bank's premises in which the bank
has invested and which is affiliated with the bank in
the manner described in 12 U.S.C. 221a, in order to
determine whether the approval of the Comptroller
is required. No such approval is required for investments made by an affiliated corporation holding the
premises of the bank, if the bank itself has made no
investment in the affiliated corporation in any of the
ways described in the statute.
The approval of the Comptroller must be obtained
before the consummation of any plans under which
the bank's investment in bank premises will be increased to an amount exceeding its capital stock.
We will ordinarily approve an investment in premises
aggregating in amount up to 50 percent of its capital
stock, surplus and undivided profits, where a reasonable need for such investment can be shown.
J. Mortgage Loan Limits
The law (12 U.S.C. 371) pertaining to the mortgage loan activity of national banks had specified
that conventional loans could not be made in excess
of 75 percent of the appraised value of improved
real estate, or for a term longer than 20 years. We
gave strong support to legislation which would
modify these limitations so as to permit national
banks to make conventional real estate loans for not
more than 80 percent of the appraised value of the
property, and for a term of not more than 30 years.
(See Appendix D, p. 382.) The 88th Congress
adopted a provision extending the maximum term of
such loans to 25 years, and setting a maximum loan
amount at 80 percent of appraised value.
We supported such legislation as a means of enabling national banks to fulfill more effectively their
proper functions in the economy. Liberalized mortgage lending powers serve the social goal of a high
rate of real income growth, which includes adding to
the nation's stock of housing and nonresidential productive capital in commercial and industrial buildings.
K. Forest Tract Loans
Until recently, national banks had been allowed to
make loans (pursuant to 12 U.S.C. 371) on forest
tracts only up to 40 percent of the appraised value of
the economically marketable timber offered as security. The maximum term of such loans was 2 years
for unamortized loans, and 10 years for fully amortized loans. We sponsored and gave strong endorsement to legislation which would permit national banks
to make real estate loans secured by first liens upon
forest tracts which are properly managed in all respects. (See Appendix D, p. 390.) This legislation
was passed by the 88th Congress as P.L. 88-341. It
11
increased the maximum permissible loan to 60 percent of the appraised fair market value of the growing timber, plus the value of the lands and improvements thereon offered as security. The maximum
term was increased to 3 years for unamortized loans,
and to 15 years for amortized loans.
Our support for this legislation stemmed not only
from the competitive disadvantage at which national
banks were operating in comparison with most state
12
banks in the field of forest tract loans. The lengthening of the term of forest tract loans was also fostered
as a significant step toward meeting the long-term
credit needs of the forest-related industries. Lack of
adequate long-term credit had handicapped the efforts
of forest owners to place their holdings on a sustained
yield basis under scientific forest management techniques. Such a basis is essential if adequate supplies
of forest resources are to be available for the economy.
III. Trust Powers
HE TRUST DEPARTMENTS of banks have long
been prevented, by mythology, and by the structure of law and regulation within which they have
had to operate, from offering the full range of fiduciary
services of which they were capable. Regulations governing national banks acting in their fiduciary capacities had gone virtually unchanged for almost 30 years
preceding 1961. Regulatory controls, which were
adopted following the debacle of the Great Depression,
came to be regarded as the ultimate desideratum, without extensive thought as to their basic desirability or
justification. As a result, banks were prevented from
engaging in many legitimate fiduciary functions. As
was the case in many other potential areas of banking
endeavor, functions which could best be served by the
expertise of banks, with their safety assured through
bank regulation, were taken up instead by competing or
new types offinancialinstitutions.
T
A. Transfer of Authority to the Comptroller
of the Currency
In the Spring of 1962, this Office drafted legislation to provide for the transfer of the authority over
the trust powers of national banks to the Comptroller.
This legislation, which also transferred to the Comptroller the authority to prescribe the rules and regulations to which all banks must conform in the operation of their common trust funds in order to achieve
tax-exempt status for those funds, was enacted on September 28,1962.
Following this legislation, all national banks and all
state banks operating common trust funds were asked
for suggestions for amendments to the trust regulations
which would enable bank trust departments to keep
abreast of the changing needs of the public for fiduciary services. A Technical Advisory Committee, composed of men of recognized ability from the legal
profession and trust departments of state and national
banks across the country, was appointed to assist in this
reexamination. The study culminated in the publication in the Federal Register of February 5, 1963, of
proposed revisions of Regulation 9. After taking
account of the comments received, the revision was put
into effect on April 5,1963.
The revisions comprising the new Regulation 9, and
the rulings subsequently instituted, may be classified in
three categories: management supervision; conflicts of
interest; and collective investment.
B. Management Supervision
The revised regulation emphasizes the responsibility
of the board of directors of a bank for the proper supervision of the fiduciary activities of the bank. While
the board may not delegate these duties, it may assign
their performance to directors, officers, employees or
committees as it may choose. If such tasks are assigned, the assignment must be a matter of record, in
bylaws or resolutions. In this manner, provision was
made for more efficient operation and administration.
Each board was advised to make an annual reassessment of trust department organization and administration. If the organization and administration of the
trust department are found to be inconsistent with
procedures set forth in the bylaws or board resolutions,
appropriate amendments are to be adopted. We also
emphasized that where the board assigns functions to
individuals or committees, it must thereafter take such
action as is necessary to inform itself concerning the
manner in which such assignments are performed.
G. Conflicts of Interest
Provision was made in the regulation to permit conflict of interest transactions where they are lawfully
authorized by the governing instrument, court order
13
or local law. This supplanted the prior rule that these
must be "expressly required" by the governing instrument. The referral to local law was made in order
that national banks not be subject to a more restrictive rule than that which decisional or statute law of
a state imposed. Thus, divided loyalty transactions
which are effectively authorized under local law are
permitted, and it is not necessary that the governing
instrument "expressly require" such actions. This
removed one of the stumbling blocks which had
existed to effective trust department operation. The
"expressly required" rule had imposed an unnatural
restraint upon a number of proper transactions, without regard to whether trust law was being violated,
or the desirability of the transaction from the viewpoint of public policy.
To illustrate, in a subsequent ruling concerning the
propriety of the retention of the stock of a fiduciary
bank or its affiliates in trust department accounts, it
was held that such stock may be retained in fiduciary
accounts where lawfully authorized by the instrument
creating the relationship, or by court order, or by
local law. The ruling noted, however, that holdings
which are otherwise properly authorized may nonetheless be criticized by this Office where it appears that
the amount of such holdings is excessive, or the retention is otherwise inappropriate.
D. Collective Investments
The revised regulation effected significant and farreaching improvements, and recognized the proper
place of banks, in the field of collective investments.
Collective investment funds are established for the
purpose of achieving a more efficient and diversified
investment of assets held by a bank in a fiduciary capacity, than would be possible were the same assets
managed and invested individually. Such funds are
a mechanism to permit banks better to provide traditional fiduciary services at lower cost.
The new regulation permits three types of collective
investment funds. The first is the now familiar type
of common trust fund in which the bank is allowed
to place the funds of individual accounts held by the
bank in a formal capacity as trustee, executor, administrator, or guardian. The second consists solely of
assets from retirement, pension, profit sharing, stock
bonus or other trusts which are themselves exempt
from income taxation under the Internal Revenue
Code. In this category are trusts established by the
self-employed as permitted by the Self-Employed In14
dividual's Tax Retirement Act of 1962. The requirements applicable heretofore solely to traditional funds
were modernized and made applicable to all types of
funds.
The third type of collective investment fund permits investment in a common trust of the monies of
certain managing agency accounts. "Managing
agent" is defined in the regulation as the fiduciary
relationship assumed by the bank upon the creation
of an account so entitled, which confers investment
discretion on the bank and imposes on it the fiduciary
responsibilities imposed upon trustees under will or
deed. Therefore, only monies of agency accounts
where the bank has assumed fiduciary duties identical
to those of formally designated trustees, executors,
administrators or guardians qualify as managing
agency accounts. As a further restriction, the agreement establishing such an account must expressly
provide that funds of the account are received by the
bank in trust before the funds of such accounts may
be collectively invested. The prior requirement that
there could not be invested in a common trust fund,
monies of trusts which were established for other
than "bona fide fiduciary purposes," was discarded.
This was done because of the vagueness of the
phrase and the fact that it gave rise to the inference
that it was improper to establish a trust for the purpose of obtaining the advantages of the investment
acumen of a bank. At the same time, specific restrictions were imposed in order to preserve the
desirable limitations which had been considered as
implicit in "bona fide fiduciary purposes." These
limitations were supplemented by rulings of this Office. In total, they were designed to make clear that
the abandonment of the "bona fide fiduciary purpose" language was not intended to permit banks to
engage in the selling of interests in pooled funds.
Accordingly, there may be no agreement between the
bank and the customer that the latter's funds will be
invested in collective investment funds, nor may
managing agency contracts be operated or held out
as interests in a collective investment fund. Moreover, the bank, as trustee of the collective investment
fund, may not issue any document which represents
an interest in a collective investment fund, and the
sale by the bank of interests in a collective investment
fund is prohibited.
The revised regulation does not abandon the advertising prohibitions of the old regulation. Reference
to collective investment funds may appear in advertisements of a bank only in very restricted form. A bank
may state as a part of an advertisement of the fiduciary
services generally being offered, that it operates collective investment funds and will furnish copies of the
plans and financial reports pertaining to them upon
request. However, advertising which has reference to
collective investment funds as one of its main or prominent features or purposes would violate Regulation 9.
This applies to all forms of advertising. The use of
agents by a bank solely or primarily to promote its
collective investment funds is also prohibited. Thus,
the revisions in the common trust area embody no
more than the removal of the artificial restraints upon
the development of the services of the corporate fiduciary. The common trust fund, including the common trust fund for managing agency accounts, remains but a vehicle to enable the bank trust department
to bring its services to more and more people, and has
not become a new type of instrument.
The revised regulation requires that full information
concerning the performance and operation of collective
investment funds must be made available, so that potential estate planners would have knowledge of a
bank's operation of such funds. Inasmuch as banks
may not sell interests in pooled funds, it is not necessary
that disclosure requirements be imposed identical to
those applicable to mutual funds. Neither is it necessary that common trust funds be operated in the mode
adopted for investment companies. On the other
hand, any potential customer contemplating the utilization of the skill and specialized knowledge of the corporate trustee is entitled to an awareness of the circumstances under which the bank trust department
operates.
A full financial report must be prepared annually for
each fund, containing a list of investments in the fund
and showing the current market value of each investment. The report must also contain a statement showing purchases, sales, and any other investment changes,
income and disbursements, and appropriate notations
as to investments in default and those which are nonincome producing. It should include a description
of the fund's value on previous dates, and the income
and disbursements of previous accounting periods, and
must reveal any material changes in the position of the
fund. The report may contain no reference to the performance of funds other than those administered by the
bank, nor representations or predictions as to future
results. A bank subject to the regulation is also required to publish a summarized annual report of its
collective investment funds in a form prescribed by this
Office.
Each Plan for a collective investment fund must
meet the requirements of section 9.18(b) (1). That
section requires, among other things, that the Plan include provisions relating to the investment powers of
the bank with respect to the fund. In order to comply
with this requirement, all Plans should state clearly
the investment policy to be followed with respect to
the fund: for example, the kinds of securities in
which the monies of the funds are to be invested.
The Plan must also reveal the allocation of income,
profits and losses, the terms and conditions governing
the admission and withdrawal of participations in the
fund, and the auditing of accounts of the bank with
respect to the fund. It must provide for a minimum
frequency for valuation of the assets of the fund,
which in no case shall be less often than once every 3
months. The basis and method of valuing assets in
the fund should be explained, and the Plan must
include all other information necessary to define
clearly the rights of the participating fiduciary accounts in the fund.
E. Revision of Manual of Instructions for
Representatives in Trusts
Another result of the intensive study of trust regulations conducted by this Office was the revision of the
Manual of Instructions for Representatives in Trusts.
This was the first comprehensive updating of that
booklet since 1938. Increased flexibility was effected
through the discard of the rigid standards for investments which had been mechanically applied all too
often in examinations. The Manual has been made
generally available and has been well received in the
industry.
F. Reorganization of the Trust Division
Following the passage of the Act of September 28,
1962, a complete reorganization of the Trust Division
was undertaken. The trust examination function
was made entirely separate from commercial department examinations and placed under the direction of
a newly created position, the Deputy Comptroller of
the Currency for Trusts. By the end of 1963, the
complement of field personnel was brought to the desired strength, and the goal of completing the examination of every national bank trust department by
trust examiners during the calendar year was achieved.
In the statistical area, two steps of great significance
were taken. The Trust Department Annual Report
15
was revised to call for market values of trust department assets, as of the date of the annual review for
each account, or in the alternative, as of December
31. This revision provided, for the first time, meaningful figures for trust department asset totals. Previously, because no uniform system for carrying values
of these assets existed, these figures were of little use.
This Office has also assumed the responsibility for
the collation and publication of the annual survey
16
of common trust funds, heretofore published by the
Board of Governors of the Federal Reserve System,
Regulation 9, as revised, requires all banks whose
funds qualify for tax-exempt status as common trust
funds to file an annual report for each fund with this
Office. These reports were the basis for the first trust
department survey conducted by this Office which was
published in the June 1964 issue of The National
Banking Review.
IV. Investment and Underwriting Powers
A. New Powers
U
NDER THE PROVISIONS of the National Bank
Act, national banks are empowered to underwrite and generally trade in those securities
which constitute general obligations of a state or a
political subdivision of a state. After a thorough study
of the issues, we ruled that a number of types of municipal securities hitherto thought to be unavailable for
underwriting and general trading by national banks
had sufficient elements of a "general obligation" to
qualify them for such underwriting and trading.
Further, in the first major revision since 1934, the
broad authority of national banks to purchase investment securities was restated and reinterpreted in a new
regulation which became effective on September 12,
1963. National banks are permitted to purchase investment securities for their own account, under such
limitations and restrictions as the Comptroller of the
Currency may by regulation prescribe (12 U.S.C. 24).
Pursuant to 12 U.S.C. 335, that regulation is applicable
to state banks which are members of the Federal
Reserve System.
Under the new regulation, which is designed to conform banking practices to modern needs, the term
"investment security" is defined as a marketable obligation in the form of a bond, note, or debenture which is
commonly regarded as an investment security. Predominately speculative investments are excluded from
this definition. The term "public security" includes
obligations of the United States, general obligations of
any state of the United States, or of any political subdivision of a state, and other obligations listed in paragraph Seventh of 12 U.S.C. 24. The term "political
subdivsion of any state" is defined to include a county,
city, town, or other municipal corporation, a public
authority, and, generally, any publicly-owned entity
which is an instrumentality of a state or of a municipal corporation. The phrase "general obligation of
any State or of any political subdivision of a State,"
which is defined as "an obligation supported by the full
faith and credit of the obligor," includes "an obligation payable from a special fund when the full faith
and credit of a State or any political subdivision thereof
is obligated for payments into the fund sufficient to provide for the payments required in connection with the
obligation."
The regulation provides that a bank may deal in,
underwrite, purchase, and sell public securities for its
own account, subject only to the exercise of prudent
banking judgment. In the case of underwriting or
investment, such prudence is considered to require a
consideration of the obligor's resources and obligations,
as well as a determination that such resources are sufficient to provide for all required payments in connection
with the obligation.
In purchasing an investment security, a bank is
required to make certain determinations with respect
to the obligor's ability to perform. These determinations may be based, in part, upon estimates.
Ordinarily, a bank's holdings of the investment securities of any one obligor are limited to 10 percent of
the bank's capital and surplus. However, when the
bank's determinations are based predominately upon
estimates, the bank's total holdings of all such obligors is limited to 5 percent of the bank's capital
and surplus.
This new authority for national banks reflects our
effort, within our statutory authority, to enable the
banking system to perform more effectively, yet
safely, the vital function of facilitating the flow of
investment funds into their most productive uses.
In a private enterprise economy, this task of aiding
the mobility of capital is one of the most significant
responsibilities of the banking system.
B. Underwriting Revenue Bonds
We have also strongly supported legislation designed to enable national banks (and state-chartered
17
banks which are members of the Federal Reserve
System) to underwrite revenue bonds (see Appendix D, p. 380. This support was based on a recognition of many past and present day economic
realities.
Borrowing by state and local governments has
proceeded at a rapid pace since the end of World
War II. Much of this borrowing was to finance a
great backlog of projects for which funds were not
available in the 1930's, and for which materials were
not available during the war. The rapid population growth since 1940, and the significant movement
of population (and industry) to the suburbs during
the 1950's, created further needs for new public
facilities. As needs for schools, highways, sewers,
etc., increased, annual spending by state and local
governments rose from under $8 billion in 1941 to
over $60 billion now. Obviously, not all of this
could be met out of current taxation, and since many
of the projects have had a long useful life, state and
local governments have been borrowing sizeable
amounts of money. New issues of securities sold by
state and local governments amounted to nearly $9
billion in 1962, and approximately $10 billion in
1963.
In recent years, an increasing reliance has been
placed on revenue bonds as a means to finance selfliquidating projects. While in the late 1940's revenue bonds accounted for under J/5 of state and local
bond issues, they are now running about l/<$ of the
total.
The major reason for the increased use of revenue
bonds by state and local governments is the greater
need that has emerged for public facilities. Where
these facilities were expected to produce revenue
which could be pledged for the repayment of the
costs of construction, the facility could be built sooner
18
than would be possible if repayment had to come
from general property taxation. Such self-liquidating projects could thus be financed on a sound basis
outside the debt limitations which were related to
the property tax resources of the local governments.
As soon as the soundness of this method of financing
became apparent, it was applied to public facilities
which had to find their ultimate support from tax revenues. Gasoline taxes differ only slightly from tolls
charged for the use of highways. Dedicated gasoline
taxes could thus be considered as revenues which could
be properly pledged for the payment of highway bonds.
Later, other special taxes were pledged for the repayment of school bonds. All of this represents the allocation by state and local governments of their tax resources to the repayment of the construction costs of
necessary public facilities.
Because of the importance of revenue bond financing to state and local governments, any measure which
would lower the cost of such financing would be of
great benefit to them. It is our view that legislation
permitting banks to underwrite revenue bonds would
provide considerable savings to state and local governments and to their taxpayers. Ending the present restrictions on revenue bond financing would increase
competition in the bidding for and distribution of revenue bonds, and competition is a powerful force making for lower costs to consumers.
The legislation which has received our support
would entail no substantial increase in the risks which
may be incurred by commercial banks. It relates only
to bonds which are "eligible for purchase by a national
bank for its own account"; it would not allow a bank
to buy any security which it may not now buy; and it
would limit the total amount of securities of any one
issuer which may be held.
V. Corporate Practices and Procedures
A
SURVEY WHICH WE GONDUGTED indicated that
the procedures under which national banks
were required to perform their normal functions as corporations were outdated and were imposing severe handicaps on management. Accordingly,
we instituted a number of revisions designed to
bring national bank corporate practice into line
with accepted practice in other industries. Eighteen
months of experience with many of these new rulings
has served to gain their acceptance as part of the
day-to-day operations of national banks.
A. Stock Dividend Policy
For many years, the Office had regarded stock
dividends with vague disapproval. Even the most
routine distribution was subjected to laborious review. Stock dividends on a recurring basis were not
approved unless the greater of market or book value
of the stock to be distributed, plus any cash dividends
declared during the same year, did not exceed 80
percent of the bank's net earnings after taxes for that
year, with allowance made for net transfers to valuation reserves, for bond losses, and for reserves for bad
debts. We found that the effect of this restrictive
policy was, in many cases, actually to discourage the
retention of earnings by means of stock dividends.
Early in 1962, a thorough-going reform of the
policy and procedure relating both to recurring and
nonrecurring stock dividends was instituted. Authority to approve stock dividends was delegated to
the Regional Comptrollers of the Currency, with instructions to act upon such applications within 15
days. The policy of relating recurring stock dividends to current earnings was discontinued, and such
distributions are now automatically approved if the
bank has sufficient retained earnings available to
capitalize the distribution.
These procedural and policy changes have served
to bring national bank practice in this area into
line with generally accepted principles of accounting
and corporate law.
B. Senior Securities
A significant change was instituted in the official
recognition accorded alternative means of raising
capital. The use of preferred stock, subordinated
notes, and convertible notes, had been discouraged
by this Office to such a degree that virtually no
national bank had issued such securities since the
1930's.
Although so-called "senior" securities are considered entirely acceptable capital instruments in other
industries, the attitude of this Office had been that
they were inappropriate for banks. Apparently,
this attitude stemmed from the fact that the Reconstruction Finance Corporation had purchased preferred stock and capital notes from banks during the
depression, so that the issuance of such securities
was viewed somehow as a reflection on the banks'
soundness. We rejected this reasoning and issued
an opinion that it was both legal and appropriate for
national banks to raise capital by these means, when
normal business considerations indicated that their
use would be financially beneficial to the bank.
Since the issuance of that ruling, several of the
Nation's strongest, best-known banks have employed
capital notes or debentures to help finance their
growth. During the final months of 1963, and the
first half of 1964, some 35 banks have publicly announced the sale of debentures to raise over $500
million in the aggregate.
Following our original ruling that capital notes were
an acceptable means for raising bank capital, we later
ruled that the proceeds of such notes were properly includable as part of the total capital funds for the purpose of computing loan limits.
19
Although, largely as a result of money market conditions, straight capital debenture and note issues have
proved most acceptable to banks, several large institutions have also utilized preferred stock and convertible debentures since our ruling.
G. Employee Stock Option Plans and Stock
Purchase Plans
National banks have long been handicapped in
obtaining and retaining competent executives because
they were not permitted to offer stock options as a
form of incentive compensation. The obstacle had
been the legal prohibition against the holding of treasury stock, and the apparent unwillingness of the Office
to permit the banks to have authorized but unissued
stock. In order to implement a stock option plan, it
is necessary for a bank to have a supply of shares ready
for issuance when and as the employees elect to exercise their options.
We have ruled that it is permissible for national
banks to adopt employee incentive stock option or
stock purchase plans, provided that the plans meet certain standards and conditions. These requirements include: (1) approval by the Comptroller of the Currency; (2) approval by the holders of two-thirds of the
outstanding shares; (3) administration of the plan by
a disinterested committee of directors; (4) qualification of the plan under existing Internal Revenue Code
provisions; (5) a minimum option price of 100 percent
of market value as of the day the option is granted in
the case of stock options, and 85 percent of market
value in the case of stock purchase plans. (Under a
stock purchase plan, the employee ordinarily contracts to buy a certain number of shares at a specified
price without having an option on whether to complete
the purchase or not.)
D. Other Reforms in Corporate Practices
(1) Annual Meetings
For decades, the officers of national banks have
had to cram weeks of work into days because of an
archaic statutory requirement that the annual meeting
of shareholders had to be held during the month of
January. We sponsored legislation to permit the shareholder meetings to be held in any month of the year
specified in the bylaws. That bill was passed and became law in December of 1963. Banks previously un20
able to supply their shareholders with year-end statements prior to the annual meeting will now be able to
do so.
(2) Capital Increase Procedure
In the past, even proposals to sell additional common stock for cash were subject to lengthy delays in
the Comptroller's Office, despite the fact that there are
virtually no grounds for the denial of such capital increases. The Regional Comptrollers of the Currency
have now been delegated final authority to approve
such capital increases without reference to the Washington Office.
E. Disclosure to Shareholders
On December 20, 1962, this Office issued the first
set of regulations ever adopted by a bank supervisory
agency on the subject of minimum disclosure of financial information to investors. These regulations required national banks, with total deposits exceeding
$25,000,000 (later changed to banks with 750 or more
shareholders), to supply their shareholders and this
Office with proxy statements, prescribed annual financial reports, and reports of major changes in owner, ship.
The response of banks over the prescribed size
limit, and of many hundreds of smaller banks who
voluntarily complied with the regulation, has amply
demonstrated that investor protection may be well
handled under the existing authority of this Office.
The recently enacted P.L. 88-467, which subjects
banks to certain provisions of the Securities and Exchange Act, partially duplicates the protection given
bank investors by our disclosure regulations as supplemented by the additional rulings described below.
In August 1964, we announced important amendments to our disclosure regulations. These amendments implemented the provisions of the new statute,
and also covered areas where the Act is deficient
(such as provisions governing the issuance of new bank
stock issues):
(1) Rules were established for the use of registration statements and offering circulars by banks issuing
new securities to the public. Any new national bank
seeking to raise one million dollars or more, and any
existing national bank with a class of securities held
by 750 or more persons and seeking to raise one million dollars or more, were required to file with our
Office a registration statement containing information
concerning the management, financial history and
other items of interest to prospective shareholders.
Similar information was required to be contained in
an offering circular, to be made available to any prospective purchaser of the new securities before he became legally bound to pay the purchase price.
(2) Ground rules and minimum disclosure requirements were established to cover proxy contests involving the election of directors. Because of the
mandatory cumulative voting provision of the National Bank Act, it is possible for the holders of a
comparatively small percentage of outstanding stock
to elect directors. It becomes doubly important,
therefore, for both the existing management and other
shareholders to have full information as to the character of all participants in a nonmanagement solicitation of proxies. The regulation requires that full
personal histories of all such participants be filed with
this Office and mailed to all shareholders prior to any
nonmanagement solicitation.
(3) Detailed disclosure requirements were established for shareholders' meetings at which merger
transactions are to be approved. The shareholders
are required to be informed as to all of the material
features of the agreement of merger, dissenters' rights,
comparable market values of the stock involved in
the merger, and comparative balance sheets and operating statements of each institution.
(4) Reports were required from officers, directors
and holders of 10 percent or more of outstanding
stock, whenever such "insiders" bought or sold a substantial amount of the bank's shares. "Substantial
amount" is defined in the regulation as 500 shares, or
5 percent of the total outstanding shares, whichever is
the lesser figure in the case of a particular bank.
Initial reports are required of the beneficial holdings
of such insiders as of October 1, 1964.
With the publication of the August 1964 amendments, the program of investor protection initiated by
this Office in 1962 was substantially completed. In
this program we endeavored to follow our basic policy
of imposing no regulation merely for the sake of regulating, while at the same time serving the legitimate
needs of the investing public for information.
21
VI. Bank Promissory Notes
I
N FURTHERANCE OF OUR GENERAL POLICY of giving
national banks maximum access to the normal financing tools of the domestic and international
money markets, we ruled that it is within the corporate
powers of a national bank to borrow money for general
banking purposes by means of issuing unsecured promissory notes. Such notes are a method of raising shortand medium-term capital commonly used by industrial
and nonbanking financial institutions. "Commercial
paper/' as such notes are commonly described, is a well
recognized, useful, and flexible instrument for the
acquisition of available short-term capital. It was a
logical development to permit the banks to employ this
instrument at any time that money market conditions
permit its profitable use.
Our ruling provides that these notes may be issued
at face amount or at a discount, in negotiable or nonnegotiable form, and in any maturity. The proceeds
may be used for any normal banking purpose. Such
notes, unlike the capital notes and debentures described
above, are not subordinated to the rights of depositors
and other general creditors. The amounts which banks
may borrow by means of unsecured notes are limited by
the borrowing limitations contained in 12 U.S.G. 82.
Those limitations provide an effective ceiling against
possible overuse of this new borrowing power by
smaller institutions.
22
Vital to the effective utilization of these new instruments is freedom from the artificial restraints of Federal Reserve Regulations Q and D. Since these notes
represent borrowings subject to the borrowing limitations of 12 U.S.C. 82, they cannot be considered deposits. Therefore, the ceiling on the payment of
interest contained in Regulation Q, and the requirements for the maintenance of reserves contained in
Regulation D, are inapplicable and we so ruled. The
Federal Reserve Board issued similar rulings following
our own.
The notes of the type authorized are commonly
privately placed in large denominations to institutional
investors and therefore are considered exempt from the
securities laws. However, any national bank proposing
to issue the notes in comparatively small denominations, by means of advertising to the general public,
would be required under our regulations to obtain a
prior ruling from the Comptroller as to whether or not
an offering circular and registration statement should
be used for the protection of the investing public.
Immediately following the issuance of the ruling on
unsecured promissory notes, several banks in the larger
cities commenced the offering and issuing of such notes
to existing commercial customers with short-term funds
to invest. The unsecured bank note gives indications
of becoming a most important new money market
instrument.
VII. Leasing of Personal Property
R
ECOGNITION OF THE AUTHORITY of national banks
to engage in direct lease financing of personal
property, which was the result of a long period
of study, culminated in a ruling which stated that "the
leasing by the bank of personal property acquired upon
the specific request of and for the use of its customer,
and the incurring of such additional obligations as may
be incident to becoming an owner of personal property
and the lessor thereof, is a lawful exercise of the powers
of a national bank and necessary to the business of
banking."
From the beginning of commercial banking, banks
have financed the acquisition and use of personal
property. They have lent money on the security of
some form of ownership or control of the property
financed. They have also lent money to lessors on the
security of the lessee's agreement to pay rent. However, prior to our ruling on direct leasing, a lease financing transaction had been considered within the authority of a national bank only to the extent that the transaction could be regarded as the discount or the negotiation of an evidence of debt. It followed, of course,
that such transactions were subject to the lending limits
contained in 12 U.S.G. 84. It was, however, recognized that certain lease paper could be discounted or
negotiated and would qualify under exception 13 of 12
U.S.G. 84, and that under some circumstances the
obligation of the discounter or negotiator of such paper
(ordinarily the lessor) is not subject to the lending
limit.
Our study of lease financing indicated that transactions in which the economic function of the lessor
had been reduced to a minimum were already an important part of the business of banking. In these transactions, a bank lent money to a lessor solely upon the
credit of a lessee for the purchase of property specifically requested by the lessee for his immediate possession and use. The lessor acted solely as a holder of title
and as a nominal debtor. He was a relatively expensive
retailer of bank credit, necessary only because a lease
transaction required an owner and lessor of property,
and because the bank supervisors required an evidence
of debt.
Paragraph Seventh of 12 U.S.G. 24 authorizes a
national bank to exercise "all such incidental powers as
shall be necessary to carry on the business of banking;
by discounting and negotiating * * * evidences of
debt; * * *." It is our interpretation that the use of a
semicolon at the end of thefirstclause of the paragraph
indicates that the "business of banking" is not limited
to the transactions described in the succeeding clauses;
that it is not necessary tofitleasefinancinginto the narrow confines of the negotiation of an evidence of debt.
The lending limitation contained in 12 U.S.G. 84
applies specifically to the discounting, negotiation and
guaranty of evidences of debt. If, as indicated in the
preceding paragraphs, lease financing is not the negotiation of an evidence of debt for the purposes of 12
U.S.G. 24, there is no reason to regard it as such for the
purpose of bringing it within the limitation of 12
U.S.G. 84. Certainly, the acquisition of personal property is not within this limitation, and the payment of
rent is ordinarily regarded as compensation for the use
of property and not as the payment of a debt.
There remains only the question of the need for
limits on the acquisition of property for lease. During the period which has elapsed since the publication of the direct leasing ruling, banks have proceeded prudently. These transactions are not new
to them. Banks have lent money to lessors and have
been aware of the risks incurred by lessors. There
has been no indication of any need to establish either
statutory or administrative limits comparable to the
lending limits for these transactions. This is not
an unusual situation. A number of lending transactions are by statute completely excepted from the
lending limits, and certain investments are by statute
completely excepted from the investment limitations.
All such transactions, however, are subject to prudent
banking standards. These standards will provide for
23
the immediate future a sufficient guide for the development of direct lease financing by national banks.
There are, of course, problems involved in the
widespread conduct of lease financing business.
These relate to the transaction of business in other
states; taxation; and the liabilities resulting from
the ownership of property. Similar problems arise
in widespread financing of any kind. Thus far,
banks proposing to engage in these activities have
demonstrated that they are aware of these problems.
It seems to us desirable to allow the initiative of
bankers and their counsel to develop the techniques
for handling these problems before considering the
establishment of statutory or administrative standards.
This recognition of the authority of national banks
to engage in direct lease financing has provoked
criticism from some automobile dealers and lease
financing companies engaged in the leasing of automobiles. It has been asserted that it is not a proper
function of banks to engage in the purchase and lease
of merchandise of any sort; that the "intrusion" of
banks into the business of leasing constitutes "unfair"
competition for those now engaged in the business
and deprives those in that business of access to necessary financing.
The power which national banks possess to engage
in direct lease financing transactions does not carry
with it the power to purchase merchandise for the
purpose of stocking in anticipation of future leasing.
This is the essence of a merchandising operation.
The precise function of the merchant in the distributive process is to provide the consumer with a stock of
merchandise at convenient locations and in quantities
which make supplies readily available—so-called
"place utility." This is the function for which he is
compensated as a merchant. The financing of his
operations is a separate function. Most merchants
rely on external funds in some degree to finance both
their purchases and their sales—and banks have been
a chief source of such financing.
24
The power of national banks to engage in lease
financing transactions is entirely a financing power.
While national banks may become the owner of commodities, they may not carry out the functions of the
merchant. Thus, when national banks enter into direct lease financing arrangements they compete not
with leasing companies, but with other sources of
financing. The distributive and property management functions, as contrasted with financing, are
really performed by the lessee himself where the transaction is handled directly by a bank.
No bank is in a position to assure effective denial
of financing to any prospective borrower unless the
bank is in a monopoly position or acts in concert with
other banks. Such power, where it may exist, cannot
be derived from the fact that banks are authorized to
enter into leasing transactions—and should be attacked irrespective of the manner in which it is employed. So long as there is competition among banks,
it can never be to the advantage of any bank to withhold profitable loans—but only to seek the most profitable outlets for their lendable resources.
The question whether national banks would become "unfairly" competitive under this authority
raises a different set of issues. Throughout our private enterprise economy, under the influence of competitive forces, there is a constant search for improved
means both of production and distribution. It is not
"unfair" for any entrepreneur to devise less costly or
more effective means of serving consumers, for this is
indeed the basic aim we seek under our private enterprise system. If national banks are able, under their
leasing authority, to provide a less costly means of financing the distribution of commodities and services, that can only be to the advantage of the
consuming public. It is the consumer, and not any particular class of producers or distributors, who ought
to be safeguarded.
tional bank's right to protect itself against anticipated
losses in connection with its lending activities,
through the establishment and maintenance of appropriate reserves. The necessity to maintain such
reserves, and to adjust charges in relation to the risk
involved in a particular transaction, has long been
recognized as an essential part of the prudent conduct of the banking business. Although a particular
lending transaction by a national bank may appear
to fall within the definition of insurance as that
word is defined by a state statute, in our view that
26
fact alone does not make the transaction a part of
the business of insurance such as would subject it to
regulation by state insurance authorities. All banking activities of a national bank, including the execution of loan agreements with debt cancellation
clauses, are performed under its corporate powers
and are governed by federal legislation and regulations pertaining to the banking activities of national
banks. Any state law which purports to license or
regulate a banking activity of national banks would
not be applicable to or binding upon them.
VIII. Insurance and Debt Cancellation
W
E HAVE REVIEWED BOTH the statute and regula-
tions concerning the insurance functions of
national banks. In a number of areas the regulations were found to be archaic and, in some cases, at
variance with the purpose and intent of 12 U.S.C. 92.
A. Location of General Insurance Agency
In the past, a national bank was permitted to act as
an insurance agent only in a community the population
of which did not exceed 5,000 inhabitants, and only
when its home office was in such a community. We
have ruled that a national bank may act as an insurance agent at any office of the bank located in a community having a population of less than 5,000, irrespective of the size of the community in which its home
office is located. This ruling is consistent with the clear
purpose of the statute (12 U.S.C. 92), which was enacted so that communities with a population of less
than 5,000 would have available the services of a general insurance agent.
B. Insurance Incident to Banking
We have also ruled that national banks, in any location, may act as agent for the issuance of insurance
which is incident to banking transactions, and that
they may retain the commissions received therefrom
or impose and retain service charges. This ruling was
designed to correct the erroneous impression of some
bankers that, in arranging for insurance coverage incident to a banking transaction, a national bank was not
permitted to receive or to retain such commissions and
charges, even though certain necessary services in connection with the insurance were performed through the
bank, its employees, and facilities.
G. Life Insurance on Officers
National banks have been advised that they may
purchase insurance for the benefit of the bank on the
life of an officer whose death would be of such consequence to the bank as to give it an insurable interest
in his life. However, the banks have been cautioned that the amount of such coverage must bear
a direct relation to the bank's risk of loss of key
personnel, and under no circumstances may such a
policy represent a part of the investment program of
the bank, such as some insurance agents have represented to their banking customers.
D. Debt Cancellation Clauses
We have held that, as a means of protecting itself
against losses from its lending transactions, national
banks may provide for losses arising from the cancellation of outstanding loans upon the death of
borrowers. The imposition of an additional charge,
and the establishment of necessary reserves in order
to enable the bank to agree to such debt cancellation clauses, are a lawful exercise of the powers of
a national bank and necessary to the business of
banking. This ruling is founded on paragraph
Seventh of 12 U.S.C 24, which authorizes a national
bank to exercise "all such incidental powers as shall
be necessary to carry on the business of banking; * * *." The execution of loan agreements
with debt cancellation clauses pursuant to section
24 is an exercise of a national bank's corporate
powers precisely as in the case of its other banking
activities.
The debt cancellation ruling is not intended as a
means of enabling national banks to invade the field
of insurance. Rather, it is a recognition of a na-
25
I X . Corporate Savings Accounts
A FURTHER AREA IN WHIGH anachronistic restraints
/A
have impeded the progress of modem commercial banking embraces Federal Reserve Board
interpretations of 12 U.S.C. 461, which gives the Board
certain authority to determine the conditions under
which banks may accept savings deposits. One of
these interpretations has been that member banks may
not receive savings deposits from profit-making corporations. This interpretation has harmed the small
entrepreneur subject to seasonal fluctuations in his
cash flow, as well as commercial banks in competition
with financial intermediaries not subject to this
restriction.
After intensive study of the legal issues, we concluded that the authority of the Board of Governors
of the Federal Reserve System to define the terms
"time deposits" and "savings deposits" extends only
to the terms of the deposit contract, such as a description of withdrawal requirements and interest
rate limitations, and that there is nothing contained
in the statute that would preclude, or that would
authorize a regulation which would preclude, the
maintenance of such accounts by any class of depositor. The study made by our Office revealed that
neither the provisions nor the legislative history of
12 U.S.G. 461, enacted in 1935, provide any basis
for concluding that this statute was intended to give
the Board the authority to define "savings deposits"
by the character or general purpose of the depositor.
Accordingly, we have stated that a national bank
may, subject to withdrawal requirements and interest
rate limitations imposed by applicable regulations,
accept savings accounts without regard to whether
the funds deposited are to the credit of one or more
individuals, or of a corporation, association, or other
organization, whether operated for profit or otherwise.
Our interpretation, although issued following a
thorough analysis of the legal issues, was prompted by
economic considerations and the need for national
banks to serve the public in their own service areas.
The position of the Federal Reserve Board appears
to be based on the view that business corporations do
not accumulate funds for general thrift purposes,
while individuals and other entities, regardless of their
size or worth, are motivated to open savings accounts
in order to accumulate funds for such purposes. This
position enables the Board to extend the "privilege
of maintaining savings deposits" to individuals of unlimited means and to nonprofit corporations, associations, or other organizations possessing vast fortunes, while it refuses such "privilege" to a small business enterprise. This view ignores the fact that the
small business firm is usually ill-equipped to operate
in short-term money markets. Large business firms,
on the other hand, generally have knowledgeable and
sophisticated corporate treasurers, and are not significantly handicapped by the elimination of corporate
savings accounts in commercial banks as an alternate
place for the investment of their funds.
Our ruling thus eliminates two types of discrimination: between large and small firms; and between
commercial banks and other financial intermediaries.
The Board's position in this matter, it should be
noted, is somewhat paradoxical. For, if the ruling is
based upon fear that large deposits will shift into and
out of savings accounts at some peril to individual
banks (it would be simply incorrect to be concerned
in this respect for the banking system), the Board is
in effect dictating the flow of funds and directly substituting its judgement for that of commercial bankers
who otherwise would accept or refuse corporate deposits on an ad hoc basis. The paradox lies in the
fact that the Board, in its public statements, has been
an ardent champion of free markets.
27
X. International Operations
A. Direct Acquisition of Foreign Bank Stock
T is A COMMON PRAGTICE of banks to extend their
operations into foreign countries through the
purchase of the stock of indigenous banks. National banks are authorized to acquire the stock of foreign banks indirectly through subsidiary Edge Act or
agreement corporations. Some banks, however, have
found that this method of expanding their international operations entails burdensome administrative
and organizational difficulties which could be avoided
through direct acquisition of foreign bank stock.
In a ruling on this matter, we have explicitly recognized the fact that the direct acquisition of foreign
bank stock is a lawful exercise of the corporate powers
of national banks. We have noted that the direct
acquisition of foreign bank stock may represent a practical supplement or alternative to indirect acquisitions,
and that direct acquisitions may simplify the examination, supervision, and regulatory procedures applied to
national banks. In principle, it is apparent that no
public purpose can be served by requiring banks to resort to indirect methods of expanding their foreign
operations when the direct approach is more effective
and more efficient.
I
B. Examination and Supervision of International Operations
The international activities of national banks have
undergone significant expansion in recent years. As
the volume of international operations has grown, the
importance of these activities to the soundness of banks
has been enhanced. In response to these considerations, we have inaugurated a more intensive program
of examination and supervision of the international
operations of national banks.
28
A new Department of International Banking Operations, under the supervision of a Deputy Comptroller
of the Currency, has been established. A special corps
of national bank examiners has been assigned to the
new department. These examiners will conduct required examinations directly in foreign countries of the
international operations of national banks.
In order to facilitate the effective supervision of the
foreign operations of national banks, there were also
instituted requirements for prior notification of intention to engage in certain types of international activities. The activities subject to prior notification include the following: the establishment of a branch in a
foreign country; the direct acquisition of a controlling
interest in an Edge Act corporation, an agreement
corporation, or a foreign bank; the establishment of
offices of such controlled corporations or foreign banks;
and the acquisition of a controlling interest in banks
or other enterprises through such corporations or foreign banks. With advance knowledge of these transactions, we shall be better able to direct our examination
procedures and to issue appropriate instructions designed to safeguard the soundness of the banks engaged
in international operations.
The prior notification procedure was chosen as the
least burdensome means of supervising the international activities of national banks, considering the chartering and licensing authority over foreign branches
and Edge Act corporations which rests with the Federal Reserve Board. The regulation of the international activities of national banks would be greatly simplified if this chartering and licensing authority were
transferred to the Comptroller of the Currency where
the other powers relating to foreign branch operations
of national banks reside. The 88th Congress had
under consideration a bill to provide for such a transfer and unification of authority, but no hearings
were held on that bill.
X I . Bank Service Charges and Banking Hours
A
BASIC REQUIREMENT OF industrial and
com-
mercial competition is the absence of collusion
among potential competitors. The efficient
allocation of resources and the provision of goods and
services at minimum cost demand independence of
pricing and output decisions on the part of individual
firms in an industry. Collusion leads either to higher
prices than costs would dictate, or to smaller than
optimum provision of goods and services, or both.
It may, and often does, lead to greater profits on
invested capital than are required to bring forth the
volume of goods or services that the public demands.
Of equal significance, in a regulated industry such as
banking, collusion may defeat public regulatory
objectives.
In order to help maintain a healthy competitive
atmosphere in the banking community, we have ruled
that any agreements, arrangements, undertakings, or
understandings among national banks, or with their
competitors, whether made through clearing house
associations or otherwise, concerning bank service
charges and hours or days when the banks may be
open for business, are not permissible in any form.
We have cautioned the national banks that,
wherever they have been involved in any of these restrictive practices, the board of directors of the bank
should review its service charges or banking hours
independently of any other bank, and take appropriate action to establish independently a scale of service
charges or schedule of banking hours. In taking
such action, it is considered appropriate for the
banks involved to make such changes in the bank's
service charges or business hours as are deemed
necessary or desirable in the light of the individual
bank's costs and competitive position.
We are maintaining a close surveillance on the
practices of all national banks in these respects, and
wherever an investigation has revealed a violation of
our policy the banks involved have cooperated
promptly with our request that they unilaterally reestablish their scale of service charges or schedule of
business hours.
29
XII. Miscellaneous Powers
A. Community Development
F
EDERAL LAW AUTHORIZES a national bank to con-
tribute to community funds, or to charitable,
philanthropic, or benevolent instrumentalities
conducive to the public welfare. The authority to
make such contributions is limited to national banks
located in states which do not expressly prohibit state
banking institutions from making such contributions.
The bank's board of directors must determine whether
the contribution is expedient and in the interest of
the bank.
In response to inquiries from national banks, many
of which are deeply involved in problems relating to
depressed economic conditions, urban renewal, and
population shifts and changes, we have held that, as a
necessary business expense, a national bank may make
reasonable contributions to local community agencies
and groups to further the physical, economic, and
social development of their communities. These contributions may take the form of a donation of real
and personal property, as well as cash; they may also
take the form of an investment in a corporation organized to carry on such community development
activities.
Although Federal law (15 U.S.G. 682 (b)) authorizes a national bank to invest, in an amount aggregating not more than two percent of its capital
and surplus, in the stock of small business investment
companies which satisfy certain standards of Federal
law, many national banks are located in depressed
areas in which such companies do not exist. Accordingly, we have advised national banks that they may
invest an amount not in excess of 2 percent of their
paid in capital and surplus in a state business development corporation which is organized to promote
the economic welfare of the community in which the
bank is located, irrespective of whether such a company is a small business investment company within
the meaning and in accordance with the standards of
Federal law.
30
B. Data Processing Services
National banks were among the first to appreciate
the magnitude of benefits to be derived from the use
of automatic data processing equipment in coping
with the ever-increasing volume of record keeping.
However, the high cost of the equipment placed it
beyond the reach of the majority of banks. In some
cases, banks were able to lease the equipment or to
have their data processed by a clearing house, a bankers' association, or a service bureau. In many cases,
however, these were not practicable or desirable
alternatives.
By lifting certain restrictions upon investments by
national banks, the Bank Service Corporation Act of
October 23, 1962 (12 U.S.C. 1861-1865) permitted
small and medium-sized banks to organize and invest
in bank service corporations to provide service comparable to that offered by the largest banks. Under
that Act, national banks are permitted to invest an
amount not exceeding 10 percent of capital and surplus
in the stock of a corporation organized to perform bank
services for two or more banks. "Invest," as used in the
Act, includes both the purchase of stock in and loans
to a service corporation. Nothing in the Act or legislative history would preclude banks from sharing in the
ownership of the corporation with individuals or with
corporations other than banks. The term "bank services" is defined to include check and deposit sorting and
posting, computation and posting of interest and other
credits and charges, preparation and mailing of checks,
statements, and notices, and similar items, or any other
clerical, bookkeeping, accounting, statistical or similar
functions, performed for a bank. The discriminatory
denial of bank services by a bank service corporation to a competitor of any bank holding stock in the
corporation is prohibited. In addition, these corporations may perform bank services only for banks. "Bank
services," however, are defined in the Act to include
any service which a bank would ordinarily perform for
a customer. Accordingly, if a bank undertakes to
handle the payroll accounts or the accounts receivable
of a customer, a bank service corporation may perform for the bank the service necessary to enable the
bank to fulfill that undertaking.
We have ruled that a bank premises corporation
may own bank furniture and equipment (including
data processing equipment) in addition to real estate.
Such a corporation, owning electronic data processing
equipment leased to the bank for operation by the bank,
could not be considered a bank service corporation
within the meaning of the Bank Service Corporation
Act. We recognized that, if banks were to achieve
the full utilization of their investment in such equipment, they would have to make it available for the use
of others even though it was acquired for the primary
purpose of performing services incidental to banking.
It was counseled, however, that precautions should be
taken to indemnify the bank against any liability which
might arise from the performance of such services
for customers.
G. Loans to Executive Officers
Under the definition of the term "executive officer"
adopted by the Federal Reserve Board, many employees of national banks are classified as "executive
officers" even though they do not have responsibilities
and duties commensurate with that title. The effect
of this policy has been to deprive many bank employees
of the opportunity of obtaining their home mortgage
and other normal borrowing needs from the bank for
which they work.
We have expressed the opinion that the term
"executive officer," as contemplated by 12 U.S.G.
375 a, means any officer of a bank who, by virtue of
his position, has both voice in the formulation of the
policy of the bank and responsibility for the implementation of that policy. Under this definition,
a person who acts solely as a director would not
be an "executive officer." Similarly, those officers
whose sole responsibility is for the administration of
the bank's policies are excluded from the definition.
It is the responsibility of and the function performed
by the individual, and not his title, which determines
whether he is an "executive officer."
Banks, unlike most other businesses, often have a
number of responsible employees who are given official titles. Many of these employees perform only
administrative functions and have no executive responsibility. The provisions of 12 U.S.G. 375a do
not authorize the expansion, by definition, of the
term "executive officers" to include persons who do
not in fact and in law exercise executive functions.
Accordingly, we have held that when a national
bank makes a loan or extends credit to one of its
officers, it should apply the standards we have indicated in determining whether the loan or extension
of credit is subject to the limitations of 12 U.S.G.
375a.
D. Mobile Services
Rulings of this Office dating back to 1929 have
held that the pickup of deposits and the delivery of
cash by armored car service is authorized, provided
that certain safeguards are met to insure that such
activities do not constitute unauthorized branch
banking. We have reaffirmed the opinion that such
service is a proper incident of the business of banking.
Section 36 (f) of Title 12, U.S.G., defines a branch
bank as any place at which deposits are received, or
checks paid, or money lent. Thus, we have ruled
that agreements to provide armored car service must
make it clear that the funds are being received by
the armored carrier as agent for the customer and not
the bank. As an element of this ruling, we have also
held that a national bank may absorb the cost of the
service, and that such payments do not constitute the
payment of interest in violation of Regulation Q.
The Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System
have issued substantially the same rulings applicable
to state banks under their jurisdiction.
E. Sale of Money Orders
We have ruled that the sale by a national bank of
bank money orders, cashier's checks, traveler's checks,
and register checks-personal money orders, as well
as other credit instruments, is an essential part of the
business of banking authorized by paragraph Seventh
of 12 U.S.C. 24.
In recent years, several states have enacted a check
sellers and cashiers law, the effect of which is to confine the business of selling money orders and travelers
checks to banks, railroads, steamship and express
companies, and their agents, or to persons expressly
licensed to carry on such business. There is usually
a provision that the agents of banks shall not be
31
deemed branches of the bank. However, in order for
the agent of a national bank to be exempt from the
licensing requirement, it must be an agent for whose
acts in selling checks the bank will be fully responsible.
We have issued appropriate rulings to national banks
so that they might meet these requirements and be
accorded the same opportunity to compete as statechartered banks enjoy under state statutes.
This recital of reforms undertaken and advocated must not be regarded as a
formulation of ideals achieved. No system of public control can remain stagnant
in an economy of free enterprise without peril to its purpose. Nowhere is this principle more critical than in the case of banking3 where a delicate and continuously
changing balance must be maintained between public control and private initiative.
In these years of reform, we have endeavored to carry out a program of adaptation designed to accommodate the bank regulatory structure to the needs of the modern
economy for banking services and banking facilities. Three decades of experience
had revealed how obsolescence can overtake fixed regulatory concepts in the face
of change. As the economy developed and expanded, the needs and opportunities
for banks grew and altered in form. New concepts of bank regulation and new applications of public control were required. This is a continuing process which will
persist so long as our needs change and we endeavor to meet them. The central
role which the banking system performs in the economy necessitates constant vigilance
to assure the fashioning of the bank regulatory structure so as to provide the needed
scope for individual initiative while sustaining the essential soundness of the banking
system.
32
ANNUAL REPORT, 1963
1. State of the National Banking System
The state of the national banking system should be
appraised from both a qualitative and quantitative
point of view. The first view, which is difficult to
measure precisely, involves the additional areas in
which national banks are now permitted to serve both
local and national needs. These were discussed in the
preceding section of this report.
The quantitative aspects of the state of the national
banking system show clearly the advances made by
national banks. Between the surprise call for reports
of condition as of December 28, 1962, and December
20, 1963, assets of national banks rose by $9.6 billion
to $170.2 billion,1 6 percent more than the December
1962 level, but a half percentage point less than the
increase between December 1961 and December 1962.
For the second time in at least 4 years, the assets of
national banks rose more than those of state member
banks (2.7 percent). To a very minor extent these
changes reflect the fact that the number of national
banks in operation at this call was 4,615—a 2.4 percent
increase over the year. The number of State member
banks declined in 1963, as it has for at least the last 4
years, averaging a 3 percent decline per year. The
assets of insured nonmember banks also rose less
rapidly in 1963 (8.2 percent) than in 1962. The level
of growth of the banking system and the economy was
favorably affected by the larger rise in the money
supply during 1963 than in any of the last 5 years.
1
If the 7 nonnational banks in the District of Columbia, all
of which are supervised by the Comptroller of the Currency,
are added, this total rises to $171.2 billion.
T A B L E 1.—Number of commercial banks, and banking offices, and totat§pssets, by class of bank, end of 7962 and
and percent change 1962-63 A
1963,
[Dollar amounts in billions]
Number of bankitig offices
Number of banks
Value of assets
Item
1962
13,412
4 622
1,493
7, 177
274
Percent
change,
1962-63
1962
1963
1.15
25, 603
26, 905
2.44
— 3.05
1.43
— 3.52
10, 959
4,496
9,808
340
11,859
4,632
10, 084
330
13, 566
4 512
1,540
7,076
284
All commercial banks
National banks*
State member banks
Insured nonmember banks
Noninsured banks
1963
Percent
change,
1962-63
5.08
8.21
3.02
2.81
— 2.94
Percent
change,
1962-63
1962
1963
$298.2
$314.1
5.33
161.5
88.2
46.3
2.2
171.2
90.5
50.1
2.3
6.01
2.61
8.21
4.55
•Includes 7 nonnational banks in the District of Columbia.
T A B L E 2 . — T o t a l assets of commercial banks, mutual savings banks, savings and loan associations, and credit unions; end of
December 1967, 7962, and 7963, and percent change 7962-63
[Dollar amounts in millions]
Item
Commercial banks
Mutual savings banks
Savings and loan associations
Credit unions
Dec. 30,
1961
Dec. 28,
1962
Dec. 20,
1963
$279, 503
42, 833
82,135
6,382
$298,196
46, 086
93, 605
7,188
$314, 056
49, 622
•107, 431
•8,128
Percent
increase,
1962-63
5.32
7.67
•14. 77
•13.08
•Based on preliminary December 1963 data.
35
While commercial banks continued to compete with
other financial institutions, such as mutual savings
banks, savings and loan associations, and credit unions
during 1963, national banks are still at a competitive
disadvantage in such areas as the rate they may pay on
time and savings deposits, the terms of mortgage loans,
etc. One measure of the preferential treatment given
to other financial institutions is the fact that each of
them grew at a faster rate during 1963 than did commercial banks. This was also true in 1962.
For the first time in recent years, the number of
commercial banks rose in 1963. To a considerable
extent this reflects the 2.4 percent rise in the number
of national banks, which totaled 4,615 at the end of
the year. It was only because of the rise in national
banks that membership in the Federal Reserve System
did not decline. The number of insured nonmember
commercial banks rose by 1.4 percent, as compared to
1.1 percent in 1962 and less than 1 percent in 1961.
The number of noninsured commercial banks continued their decline in 1963, as they did in the 2 previous years. The number of banking offices (head
offices plus branch offices) is widely recognized as a
better index of the services available to the public
than the number of banks. During 1963, banking
offices of national banks increased by 8 percent as compared with 5.5 percent in 1962. Banking offices of
both state member banks and insured nonmember
banks increased by 3 percent during 1963—as compared with 2.2 percent and 3.3 percent, respectively,
for 1962.
2. Assets, Deposits, and Capital Accounts
The assets of national banks, state member banks,
and insured nonmember banks all rose in 1963, but
in each case the rise was less than in 1962. National
banks experienced a smaller decline in their rate of
increase than either of the other two groups of commercial banks. Some of the structural changes of
the last several years were continued in 1963. Loans
of national banks rose by 12.3 percent during 1963—
about the same rate of increase as in 1962. State
member banks' loans increased by 8.8 percent and insured nonmember banks' loans rose by 13.3 percent;
in both of these groups, the rise was significantly less
than in 1962. Only insured nonmember banks held
more direct obligations of the U.S. Government at
the end of 1963 than 1962; national banks' holdings
of these securities declined by 6.3 percent, less than
the 7.8 percent decline of state member banks. All
classes of commercial banks continued to increase
their holdings of obligations of state and local governments during 1963—national banks by 20.4 percent; state member banks by 23.3 percent; and
insured nonmember banks by 15.5 percent.
At the end of 1963, national banks held 31 percent
of their assets in securities, as compared with 32.2
percent in 1962 and 32.6 percent in 1961. In each
of the last 3 years, these changes for state member
banks were similar to those for national banks; the
comparable percentages for state member banks were
28.3,28.5, and 28.8. Also, insured nonmember banks,
36
typically much smaller than national banks, held
smaller fractions of their assets in securities—37.9
percent in 1963, 38.4 percent in 1962, and 38.6 percent in 1961.
All classes of banks had such relative increases in
their holdings of state and local obligations. At the
year's end, national banks held 9.6 percent of their
assets in these state and local obligations—up from
8.5 percent at the end of 1962; state member banks
had 9.7 percent as compared with 8.1 percent a year
earlier; and insured nonmember banks' proportion
rose to 8.8 percent in 1963 as compared with 8.2 percent at the end of 1962. These shifts away from securities to loans, and within the securities classification
to state and local obligations, represent a continuation
of trends started several years ago. Banks continue to
react to more favorable economic opportunities and
the sustained demand for loans from their customers.
Over the last decade the loan/deposit ratios of
national banks have risen steadily. In 1954, the ratio
was 0.375; by the end of 1963, it rose to 0.553. The
ratio for state member banks at the end of 1963 was
0.600, and for insured nonmember banks it was 0.535.
All classes of banks have had very substantial increases
in this ratio, and there are good reasons to expect the
loan/deposit ratio to continue to rise.
In both 1962 and 1963, calls for reports of condition
were issued in December at dates other than the last
TABLE 3.—Assets and liabilities of national banks on Dec. 28, 1962; Dec. 20, 1963; and percent change December 1962
to December 1963
[Dollar amounts in millions]
Dec. 28, 1962
Dec. 20, 1963
4,505 banks
4,615 banks
Percent change
1962 to 1963
Loans and discounts (including overdrafts)
U.S. Government securities, direct obligations
Obligations guaranteed by U.S. Government
Obligations of States and political subdivisions
Other bonds, notes, and debentures
Corporate stocks, including stock of Federal Reserve bank.
Total assets
$84, 845
33,311
73
16,380
2,408
431
12.31
—6.30
—34. 82
20.38
18.10
8.84
127,254
Total loans and securities.
Reserve with Federal Reserve bank
Currency and coin
Balances with other banks, and cash items in process of collection
Bank premises owned, furniture and fixtures
Real estate owned other than bank premises
Investments and other assets indirectly representing bank premises or other
real estate
Customers' liability on acceptances outstanding
Other assets
$75, 548
35,551
112
13, 607
2,039
396
137,448
8.01
29, 684
28, 635
—3.53
2,028
68
2,324
46
14.60
—32. 35
191
542
891
225
575
981
17.80
6.09
10.10
160, 657
5.96
LIABILITIES
Demand deposits of individuals, partnerships, and corporations
Time and savings deposits of individuals, partnerships, and corporations.
Postal savings deposits
Deposits of U.S. Government
Deposits of States and political subdivisions
Deposits of banks
Certified and officers' checks, etc
Demand deposits
Time and savings deposits
Mortgages or other liens on bank premises and other real estate
Rediscounts and other liabilities for borrowed money
Acceptances executed by or for account of reporting banks and outstanding.. ..
Other liabilities
67, 740
56, 606
142, 825
Total deposits. .
67, 338
49, 859
3,922
10, 629
9,282
1,795
150, 823
5.60
88,964
53, 861
4
1,636
552
2,891
89,389
.48
14.06
0
Total capital accounts
Total liabilities and capital accounts.
61,434
4
8.41
—2.94
15.43
4.16
5.80
23.45
156, 685
5.93
45
3,959
25
6.00
8.70
6,700
2,529
290
'6.23
5.11
3.94
12, 750
13, 548
6.26
160, 657
170, 233
5.96
CAPITAL ACCOUNTS
Debentures
Common stock
Preferred stock
Retirable value of preferred capital stock.
Surplus
rplus.
Undivided profits
Reserves and retirement account for preferred stock
3,874
11,523
9,009
2,072
1,704
584
3,569
147, 907
Total liabilities.
.60
13.53
3,735
23
23
6,307
2,406
279
37
T A B L E 4.—Percent distribution of assets, and liabilities^
of national banks, December 1962 and 1963
Item
December
1962
December
1963
ASSETS
Percent
Securities:
U.S. Government, direct and guranteed
22.20
Obligations of States and political
8.47
subdivisions
,
.19
Stock of Federal Reserve banks
1.32
Other bonds and securities
Total securities
Loans and discounts
Cash and balances with other banks, excluding reserves
Reserve with Reserve banks
Bank premises, furniture, and fixtures
Other real estate owned
All other assets
Total assets
Percent
19.61
9.62
.19
1.48
32.18
47.03
30.90
49.84
11.58
6.90
1.26
.04
1.01
10.37
6.45
1.37
.03
1.05
100. 00
100. 00
41.91
39.79
31.03
2.44
6.62
5.78
33.25
2.27
6.77
5.29
LIABILITIES
Deposits:
Demand of individuals, partnerships,
and corporations
Time of individuals, partnerships,
and corporations
U.S. Government
States and political subdivisions
Banks
Other deposits (including postal savings)
Total deposits
Demand deposits
Time deposits
1.12
1.22
88.90
88.60
55.38
33.52
52.51
36.09
2.34
3.93
1.67
2.37
3.94
1.66
Other liabiUties
Capital funds:
Capital stock
Surplus
Undivided profits and reserves
Total capital accounts
7.94
Total liabilities and capital accounts
business date of the year. It is our view that such
surprise calls serve important supervisory and public
functions by lessening or eliminating "window dressing" in bank statements. Since all national banks—
but not insured nonmember banks—must publish their
reports of condition, the public is more fully and accurately apprised of the condition of national banks.
On December 20, 1963, national banks held $89.4
billion in demand deposits, or only $0.4 billion more
than in December 28,1962. This increase in demand
38
deposits held by national banks represented a rise of
0.5 percent in 1963, as compared with a decline of 1.1
percent the previous year. In 1963, demand deposits
of state member banks declined by 3.5 percent, and
those of insured nonmember banks rose by 4.5 percent;
these changes were similar to those for the previous
year.
Time and savings deposits held by national banks
rose by 14.1 percent last year, as compared with 18.3
percent during 1962. The other two classes of insured commercial banks experienced comparable percentage increases in these deposits, but, as with national banks, at a lower rate than in 1962. Effective
with the September 1963 reports of condition, national
banks have been required to report and publish data
regularly on their holdings of time certificates of
deposit outstanding. On December 20,1963, national
banks held $11.8 billion of these certificates. The
trend in the distribution of deposits between demand
and time and savings deposits continued in 1963. By
December 1963, national banks had 40.7 percent of
their deposits, or $61.4 billion, in time and savings
deposits. This percentage has been rising steadily in
recent years. In 1958, time and savings deposits accounted for only 30.5 percent of total deposits. The
trend has been the same for the other classes of commercial banks. The growth in assets of other financial
institutions is associated with their ability to acquire
liabilities similar to banks' time and savings deposits
by paying rates unhampered by Regulation Q.
Total capital of national banks rose by more than
6 percent during 1963, to $13.6 billion. This was 8
percent of the total liabilities and capital accounts, the
same as last year. Included in this total are undivided
profits which increased by almost 4 percent, and surplus which rose by 5 percent. In late 1962, the Comptroller announced that he would permit national
banks, under careful supervision, to raise additional
capital by issuing debentures. By December 1963,
national banks had outstanding $45 million of debentures, whereas the year before there were none. It is
anticipated that this method of raising capital will become more common, as it has in other sectors of the
economy. By mid-1964, this technique for raising
bank capital had become more widely understood and
used. Within proper restraints, it is expected to
develop into another tool which will allow national
banks to function in the present competitive financial
TABLE 5.—Demand and time deposits; dollar amount, and percent distribution, by type of bank, December 1962 and 1963
[Dollar amounts in millions]
December 1963
December 1962
Item
Dollar
amount
All commercial banks:
Total deposits
Demand
Time
Dollar
amount
Percent
distribution
263, 060
State member banks:
Demand
Time
Insured nonmember banks:
Total deposits
.
Noninsured banks:
Total deposits
Demand
Time
.
..
60.2
39.8
100.0
150, 823
100.0
62.3
37.7
89, 389
61, 434
59.3
40.7
100.0
78, 553
100.0
65.8
34.2
48, 675
29, 878
62.0
38.0
100.0
45, 270
100.0
23, 823
18,153
56.8
43.2
24, 887
20, 383
55.0
45.0
100.0
1,583
100.0
1,099
517
Demand
Time
100.0
138,064
91,312
1,616
National Banks:
Total deposits
229, 376
63.5
36.5
41, 976
••
Demand
Time
100.0
50, 429
26, 214
Members of Federal Reserve System:
Total deposits
59.4
40.6
219,468
. .
100.0
164,050
112,180
76, 643
..
276, 230
62.5
37.5
88, 964
53, 861
.
100.0
142, 825
.
164, 316
98, 744
139,393
80, 074
.
Demand
Time
.
Percent
distribution
68.0
32.0
1,098
485
69.4
30.6
3. New Charters, Branches, and Mergers
This Office has long been concerned with the provision of adequate banking services. In attempting to
achieve the best banking structure, it should be made
clear that we do not initiate actions. Individuals and
groups representing existing ownership initiate requests for branch offices or mergers, and prospective
entrants into banking apply for national bank charters.
It is our function to review these requests and act upon
them in light of the law and the convenience and needs
of the public.
Some states prohibit or severely limit the ability of
commercial banks to establish offices. Growing communities or areas in need of additional financial resources, which might best be served by a branch office
of an existing national bank, often do not have this
choice. If these communities are to have adequate
banking services, we have to await applications to
establish new national banks.
39
TABLE 6.—Number of national banks and banking offices, by states, Dec. 31, 7963
National Banks
State
Total
Unit
With
branches %
Number of
Number of
branches of national bankrational banks
United Statesf
4,615
3,483
1,132
7,211
11,826
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia.
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Virgin Islands
73
5
3
60
54
104
23
5
7
161
55
2
10
405
124
100
167
83
44
22
46
93
87
188
29
84
47
121
3
52
144
30
211
31
39
217
211
11
408
4
25
33
74
519
10
28
123
25
76
104
34
1
52
0
0
40
30
104
8
4
3
161
34
0
4
405
69
83
143
45
16
8
25
39
44
186
8
72
47
104
1
50
54
14
120
10
36
102
190
7
264
0
9
28
35
519
7
21
69
9
76
94
34
0
21
5
3
20
24
0
15
1
4
0
21
2
6
0
55
17
24
38
28
14
21
54
43
2
21
12
0
17
2
2
90
16
91
21
3
115
21
4
144
4
16
5
39
0
3
7
54
16
0
10
0
1
96
38
154
35
1,546
0
132
3
35
0
96
38
84
0
218
19
24
101
118
61
155
271
302
6
36
12
0
17
28
2
344
40
689
231
3
423
21
191
616
52
146
34
161
0
48
22
243
296
0
22
0
2
169
43
157
95
1,600
104
155
8
42
161
151
40
94
405
342
119
191
184
162
83
201
364
389
194
65
96
47
138
31
54
488
70
900
262
42
640
232
202
1,024
56
171
67
235
519
58
50
366
321
76
126
34
3
11
70
84
D.C.—all*
14
•Includes national and nonnational banks in the District of Columbia, all of which are supervised by the Comptroller of the
Currency.
flncludes Virgin Islands.
j"The term 'branch' as used in this section shall be held to include any branch bank, branch office, branch agency, additional
office, or any branch place of business located in any State or Territory of the United States or in the District of Columbia at which
deposits are received, or checks paid, or money lent." 12 U.S.C. 36(f).
§Number of banking offices is the sum of total national banks and number of branches of national banks.
40
TABLE 7.—National bank charter applications, and charters issued,* by states, calendar 1963; received, approved, rejected,
abandoned, and pending Dec. 31, 1963
State
Received^
Approved
Rejected
Abandoned
Pending
Dec. 31,1963
Charters
issued
United States. .
549
258
175
46
70
190
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia. .
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
6
0
2
4
80
28
6
0
2
3
32
16
4
0
2
30
1
0
1
3
1
5
2
0
2
0
4
0
4
11
1
10
4
1
0
0
3
3
5
1
1
1
18
0
1
0
2
0
0
45
4
0
13
5
1
3
7
0
0
0
0
32
6
0
1
2
42
1
0
1
1
0
4
2
0
2
0
1
0
0
7
2
6
1
2
0
0
0
2
0
0
0
0
13
0
0
0
1
0
0
40
0
0
4
1
0
1
0
0
0
0
0
1
4
1
0
0
14
0
1
0
1
0
2
0
1
1
0
1
0
0
0
0
0
0
0
0
0
0
0
2
0
0
0
4
1
0
0
0
0
0
10
0
0
1
0
1
0
0
0
0
0
1
15
2
0
0
1
8
1
0
0
5
0
0
0
0
0
0
0
0
2
2
1
0
1
1
1
0
1
0
1
0
0
1
13
0
0
0
0
0
0
9
1
0
0
1
0
0
2
3
0
0
2
12
16
0
1
2
30
2
0
1
2
0
5
0
0
0
0
4
1
5
8
2
7
4
1
0
1
1
1
2
2
1
2
10
1
0
0
2
1
1
37
3
0
6
1
0
3
7
5
1
5
94
3
1
2
10
1
11
4
1
5
0
6
0
6
20
4
16
6
4
1
0
4
5
8
1
1
2
48
1
1
0
3
0
0
104
5
0
18
7
2
4
9
* Includes conversions.
flncludes applications pending as of the end of 1962.
41
T A B L E 8.—Charters, liquidations,
and capital stock changes of national banks, calendar 1963
Capital stock*
Number
of banks
Common
Increases:
Banks newly organized:
Primary organizations
Reorganizations
Conversions of State banks
Capital stock:
Preferred: 6 cases by new issue
Common:
144 cases by statutory sale
499 cases by statutory stock dividend
13 cases by statutory consolidation
55 cases by statutory merger
Capital notes and debentures: 3 cases by new issue
Total increases
164
0
26
$55, 763, 750
0
11,990,820
Preferred
0
0
0
$1,775,000
18, 052,143
126,084, 572
5, 601, 390
28, 879, 710
45, 300, 000
291,672,385
1, 775, 000
220, 000
1,531,700
50,000
0
0
2, 550,000
2,145, 000
0
190
Decreases:
Banks ceasing operations:
Voluntary liquidations:
Succeeded by national banks
Succeeded by State banks
No successor
Statutory consolidations
Statutory mergers
Conversions into State banks
Merged or consolidated with State banks (Public Law 706)
Receiverships
Capital stock:
Preferred: 1 case by retirement
Common:
1 case by statutory consolidation
6 cases by statutory merger
0
0
0
0
0
0
0
0
0
0
0
0
0
7,170
10, 000
10, 387, 500
0
0
16,894,200
7,170
Net change
Charters in force Dec. 31, 1962, and authorized capital stock
122
4,503
274,778,185
3, 736, 409, 830
1, 767, 830
23,127, 640
Charters in force Dec. 31, 1963, and authorized capital stock
4,625
4,011,188,015
24, 895, 470
Total decreases
•Includes capital notes and debentures.
During 1963, we gave preliminary approval to 258
and rejected 175 applications for national bank charters; these include the applications of state chartered
banks to convert to national banks. There are several steps between preliminary approval and the final
approval which ordinarily coincides with the issuance of a charter. National banks chartered in 1963
numbered 190, as compared with 83 in 1962. Of
these, 26 were conversions of state chartered banks
in 1963, and 18 in 1962. There were 164 primary
national bank charters issued in 1963. This includes
12 in California, 15 in Colorado, 26 in Florida, and
34 in Texas, for a total of 87, or 53 percent of all
primary national bank charters. Of these 87, 75
were in 3 States (Colorado, Florida, and Texas)
where branch banking is prohibited. The remaining
42
77 were distributed among 31 states. In 15 states
no new national banks were chartered in 1963.
New procedures were adopted during 1963 with
respect to the supervision of all new national banks.
Within 10 days of the opening of a new national bank,
a National Bank Examiner is now required to call
at the bank, at which time he makes a general review
of the policies and practices pursued by the bank with
particular emphasis being given to the responsibility
of management, the efficiency and performance of
the bank's operations and the earning and expense
picture in light of current circumstances and projected activity of the bank. Any specific weaknesses
noted are reviewed in detail with the directors of the
bank. A report is furnished to the Comptroller of
the Currency, and a copy is sent to the Regional
TABLE 9.—Branches of national banks; in operation Dec. 31, 1962, opened for business, discontinued, or consolidated,
Jan. 1-Dec. 31, 1963, and branches in operation Dec. 31, 1963
State
Branches in
operation
Dec. 37, 7962
United Statesf
6,415
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia.
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Virgin Islands
82
29
144
27
1,437
0
118
2
34
0
88
36
69
0
197
10
21
94
104
55
134
246
268
6
32
11
0
14
25
1
307
33
586
173
2
377
21
174
556
51
117
34
147
0
44
19
187
279
0
22
0
2
Branches opened
for business
during 7963
D.C.—all*
66
Existing branches
discontinued or
consolidated
during 7963
44
14
9
10
8
115
0
15
1
2
0
8
2
15
0
21
10
3
8
15
6
25
26
35
0
4
4
0
4
3
1
37
7
107
63
2
49
1
17
69
1
29
0
14
0
4
3
56
17
0
0
0
0
Branches in
operation
Dec. 37, 7963
7,211
96
38
154
35
1,546
0
132
3
35
0
96
38
84
0
218
19
24
101
118
61
155
271
302
6
36
12
0
17
28
2
344
40
689
231
3
423
21
191
616
52
146
34
161
0
48
22
243
296
0
22
0
2
70
*Includes national and nonnational banks in the District of Columbia, all of which are supervised by the Comptroller of the
Currency.
flncludes Virgin Islands.
43
Comptroller of the Currency. In addition, each new
bank is now examined on or about the 60th day from
the date it opened for business, at which time a complete examination is conducted of the bank's affairs
and the usual examination report is submitted- A
second complete examination of each new bank must
be conducted within a year of the date it opened for
business.
At the end of 1963, there were 7,211 branches of
national banks in operation, or 796 more than at the
end of 1962. This compares with an increase of 597
for the previous year. California and New York,
with net increases of 109 and 103, respectively, led
the States. Besides California and New York, net
increases in Indiana (21), Maryland (21), Massachusetts (25), Michigan (34), New Jersey (37),
North Carolina (58), Ohio (46), Pennsylvania (60),
South Carolina (29), and Virginia (56) exceeded the
average increase in the number of branches.
There were 840 branches of national banks opened
for business, and 44 branches discontinued or consolidated in 1963. Of the 840 branches opened in
1963, 510 or 61 percent were in communities with a
population of less than 25,000. At the same time,
230 or 27 percent of the new branches opened belong
to banks with total resources of less than $25 million.
Hence, national banks of all sizes have been authorized to open branches.
44
During 1963, the Comptroller of the Currency
approved 90 consolidations, mergers, and absorptions
involving national banks, as compared with 111 in
1962 and 72 in 1961. One decision was withdrawn,
and one was rescinded by the Comptroller. This
Office denied two applications for national banks to
merge. Appendix A contains the Comptroller's decision in each case consummated during 1963.
TABLE 10.—Branches of national banks openedfor business,
by community population and size of bank, calendar 1963
Category
Jan. 7 to
Dec. 31, 1963
In cities with population:
Less than 5,000
5,000 to 24,900
25,000 to 49,900
50,000 to 99,900
100,000 to 249,900
250,000 to 499,900
500,000 to 1,000,000
Over 1,000,000
Total
By banks with total resources (in millions of dollars):
Less than $10.0
$10.0 to $24.9
$25.0 to $49.9.
$50.0 to $99.9. .
$100.0 to $999.9.
Over $1,000
Total
219
291
82
79
52
30
57
30
840
106
124
82
76
321
131
840
TABLE 11.—De novo branch applications of national banks, by states, calendar 1963; received, approved, rejected, abandoned,
and pending as of Dec. 31, 1963
State
United Statesf
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Virgin Islands
Received*
1,028
11
13
24
12
157
0
29
1
7
0
15
1
7
0
23
8
1
18
19
6
39
34
68
0
4
5
0
2
5
14
52
3
118
24
7
52
2
19
103
0
15
1
24
0
4
4
42
34
0
1
0
0
Approved
674
Rejected
Abandoned
Pending
Dec. 37,1963
148
1
0
4
1
17
0
2
0
1
0
2
0
0
0
3
0
0
2
2
0
10
4
12
0
0
1
0
0
0
7
6
0
14
4
1
14
1
6
18
0
2
1
2
0
2
1
5
2
0
0
0
0
D.C.—allj
*Includes applications pending as of the end of 1962.
flncludes Virgin Islands.
jlncludes national and nonnational banks in the District of Columbia, all of which are supervised by the Comptroller of
the Currency.
45
4. Income and Expenses of National Banks
During 1963, national banks shared in the general
expansion of business. Corporate profits after taxes
rose by 12.2 percent for all corporations and 12.8 percent for national banks, between the end of 1962 and
1963. Net income of national banks increased by 2.6
percent between 1961-62, following a decline by 0.4
percent between 1960-61.
To a considerable extent the more favorable earnings of national banks were associated with a larger
increase in the money supply (currency plus demand
deposits) during 1963 than in any of the lastfiveyears.
In 1963, the money supply increased by almost 4
percent.
Within the various components of the income and
dividend reports of national banks were interesting
movements reflecting factors familiar to bankers, students of banking, and financial analysts.
Current operating revenue of national banks rose
to $7.3 billion at the end of 1963, a 10.7 percent rise
over 1962. This percent increase was similar to the
one for 1961-62, and reflected, in part, shifts in the
portfolios of banks to more loans and larger holdings
of State and local securities. Interest and discount on
loans accounted for 63 percent of current operating
revenue, and interest on U.S. Government obligations
for about 16 percent.
TABLE 12.—Current operating revenue, expenses, and dividends of national banks, December 1962 and 1963, and dollar and
percent changes, 7962-63
[Dollar amounts in millions]
Item
December
1962
Change 1962-63
December
1963
Dollar
Number of banks*
Capital stock (par value)f
Capital accountsf
Current operating revenue:
Interest and dividends on—
U.S. Government obligations
Other securities
Interest and discount on loans
Service charges on deposit accounts
Other current operating revenue
Total
Current operating expenses:
Salaries, wages, and feesj
Officer and employee benefits!
Interest on time and savings deposits
Net occupancy expense of bank premises
Other current operating expenses
Total
Net current operating earnings
Recoveries, transfers from valuation reserves, and profits:
On securities:
Profits on securities sold or redeemed
Recoveries
Transfers from valuation reserves
On loans:
Recoveries
Transfers from valuation reserves
All other
Total
See footnotes at end of table.
46
Percent
4,503
3, 672. 5
12, 289. 3
4,615
3, 886. 0
13,102. 0
112
213.5
812.7
2.49
5.81
6.61
1,136. 5
414.9
4,134.5
380.4
530.1
1,171.3
504.9
4,621.6
408.8
596.0
34.8
90.0
487.1
28.4
65.9
3.06
21.69
11.78
7.47
12.43
6, 596. 4
7, 302. 5
706.1
10.70
1, 646. 0
221.2
1,588.7
286.0
874.3
1, 770. 0
242.6
1, 917. 3
313.6
985.3
124.0
21.4
328.6
27.6
111.0
7.53
9.67
20.68
9.65
12. 70
4, 616. 2
5, 228. 8
612.6
13.27
1, 980. 2
2, 073. 7
93.5
4.72
128.1
3.4
41.7
88.1
2.3
44.8
— 40.0
-1.1
3.1
— 31.23
-32.35
7.43
8.1
27.3
40.4
8.1
105.0
55.5
0
77.7
15.1
0
284. 62
37.38
249.0
303.8
54.8
22.01
T A B L E 12.—Current operating revenue, expenses, and dividends of national banks, December 1962 and 1963, and dollar
and percent changes,
1962-63—Continued
Change 1962-63
December
1962
Item
December
1963
Dollar
Losses, chargeoffs, and transfers to valuation reserves:
On securities:
Losses and chargoffs
Transfers to valuation reserves
On loans:
Losses and chargeoffs
Transfers to valuation reserves
All other
40.4
59.1
34.1
39.3
— 6.3
-19.8
-15.59
-33.50
13.5
292.2
67.1
12.5
329.6
68.1
— 1.0
37.4
1.0
—7.41
12.80
1.49
472.3
483.6
11.3
2.39
1,756.9
1,893.9
137.0
7.80
637.7
50.3
Total
Net income before related taxes
Taxes on net income:
Federal
State
637.1
50.9
— .6
.6
-.09
1.19
0
0
688.0
137.0
12.82
547.1
1.1
29.6
.9
5.72
450. 00
517.7
Total
1, 205. 9
517. 5
.2
Memoranda items:
Recoveries credited to valuation reserves (not included in recoveries
above):
On securities
On loans
.
.
Losses charged to valuation reserves (not included in losses above):
On securities
On loans. .
. .
Stock dividends (increases in capital)
688.0
1,068.9
Total
Net income before dividends
Cash dividends declared:
On common stock
On preferred stock
Ratios:
Current operating expenses to current operating revenue
Net income before dividends to capital accounts
Cash dividends to capital stock
Cash dividends to capital accounts
Percent
548.2
30.5
5.89
2.9
51.3
5.3
60.4
2.4
9.1
82.76
17.74
7.6
143 6
94.1
11.9
177.7
126.3
4.3
34.1
32.2
56.58
23.75
34.22
Percent
. . . .
69.98
8.70
14.10
4.21
Percent
71.60
9.20
14.11
4.18
Percent
Percent
+ 1.62
+ .50
+ .01
-.03
*Number of banks as of end of year, but figures of income, expenses, etc., include banks which were in operation a part of
the year but were inactive at the close of the year.
f Figures are averages of amounts reported for the June and December call dates in the year indicated and the December
call date in the previous year.
JExclusive of building employees.
Current operating expenses of national banks rose
by 13.3 percent in 1963 to $5.2 billion. In 1962, these
expenses rose more rapidly—by 16.1 percent. In
1963, as in 1962, the expense that increased the greatest was interest on time and savings deposits (37.1
percent in 1962 and 20.7 percent in 1963). Percent
increases in expenses other than interest costs (wages
and salaries, occupancy expense, etc.) were greater in
1963 than in 1962.
In 1963, interest on time and savings deposits rose
to 36.7 percent of current operating expenses as compared to 34.4 percent in 1962. Salaries and wages
fell from 35.0 percent to 33.3 percent. There also
were declines in the fraction of expenses going for offi-
cer and employee benefits, interest on borrowed
money, and occupancy expense.
Net current operating earnings (the difference between current operating revenue and expenses of
national banks) were $2.1 billion for the year ending
December 1963. This is a 4.7 percent rise from the
previous year. Between 1961-62, the increase in net
current operating earnings was only 0.06 percent, and
in 1960-61 it declined by 3.3 percent. Net income
before related taxes was $1.9 billion, or 7.8 percent
above 1962.
The ratio for national banks of net losses to loans at
the end of the year was 0.15 percent for 1963. This
is not significantly different from the 0.13 percent for
47
1962, 0.17 percent for 1961, or 0.20 percent for 1960.
The yearly average for the period 1944-63 is 0.10
percent.
The ratio for national banks of net losses to total
securities at the end of the year was 0.07 percent for
1963. This was virtually unchanged in the last 2 years.
The yearly average for the last 20 years is 0.19 percent.
The ratio of current operating expenses to current
operating revenue for national banks has increased in
each of the last 4 years: 64.4 in 1960; 66.8 in 1961;
70.0 in 1962; and 71.6 in 1963. The ratios of net
income before dividends to capital accounts, cash dividends to capital stock, and cash dividends to capital
accounts in 1963 were very similar to those for the
years 1960-62.
5. Litigation
a. Merger Litigation
Two proposed mergers involving national banks,
both of which were approved by Comptroller of the
Currency James J. Saxon pursuant to the provisions
of the Bank Merger Act of 1960 (12 U.S.C. 1828[c]),
have been challenged in the courts as possible violations of Section 1 of the Sherman Act (15 U.S.C.
1) and Section 7 of the Clayton Act (15 U.S.C. 18).
In one action, the Crocker-Citizens case, the illegality of a proposed merger of two national banks in
California, as well as several earlier mergers involving the participating banks, was alleged. The United
States sought (1) preliminary and permanent injunctions against the merger, (2) an adjudication that certain earlier mergers completed by the defendant banks
were illegal, and (3) a judgement requiring the defendants to take such action as might be necessary
and appropriate to dissipate the effects of the alleged
unlawful activities. A three-judge court unanimously denied the government's motion for a preliminary injunction against the merger.
For the purpose of deciding that motion, the court
assumed the correctness of the government's contentions that the "line of commerce" was commercial
banking, and that the relevant "sections of the country" included the entire State of California, the Los
Angeles metropolitan area, and the San Francisco
Bay area. Addressing itself to the primary question
of whether the merger might have the effect of lessening existing competition, the court noted that the participating banks were located in widely separated
areas, and that there was no solid evidence that the
banks competed against each other except in one
county where the lessening of existing competition as
a result of the merger would be de minimis.
The court concluded that there was no showing
that the effect of the proposed merger would be to
lessen any existing competition substantially or at all,
48
and it further concluded that the evidence with respect to the alleged potential competition by de novo
branching on the part of the defendant banks was
wholly insufficient to permit a finding of any lessening of competition in consequence of the merger. The
court held that there was nothing before it which
would permit a finding "that there was even a prima
facie case that could' be made or even any suggestion
of doubt as to there having been a violation of Section 7 of the Clayton Act." It further held that
there was no basis for a prima facie case showing a
contract, combination or conspiracy in restraint of
trade in violation of Section 1 of the Sherman Act.
After denial of the motion for preliminary injunction, pre-trial discovery proceedings were commenced
and the case has not yet gone to trial. United States
v. Crocker-Anglo National Bank, Citizens National
Bank, and Transamerica Corporation, Civil Action
No. 41808 (D.C.N.D. Cal. 1963).
In the second case, the Hammond case, the complaint alleged that the proposed merger of two national banks in Hammond, Indiana, would eliminate
all competition between the participating banks in
violation of Section 1 of the Sherman Act. It was
further alleged that the effect of the merger may be
substantially to lessen competition or to tend to create
a monopoly in violation of Section 7 of the Clayton
Act in the following ways, among others: (a) competition between the defendant banks will be completely
and permanently eliminated; (b) competition generally in commercial banking in Hammond, Indiana,
and in the service area of the defendant banks will
be substantially lessened and a tendency to monopoly
created; and (c) concentration in commercial banking in Hammond, Indiana, and in the service area
of the defendant banks, will be substantially increased.
United States v. The Calumet National Bank of Hammond and Mercantile National Bank of Hammond,
Civil Action No. 3727 (D.C.N.D. Ind. 1963). In
this case, a motion for a temporary restraining order
was denied. Before the motion for preliminary injunction came on for hearing, the Comptroller of the
Currency who had found the proposed consolidation
to be in the public interest, rescinded his approval of
the application to consolidate. This rescission was
in response to a request by the boards of directors of
the applying banks. That request, the banks stated1,
was "motivated by the fact that the practicalities of
such consolidation have been made utterly impossible
of accomplishment in the light of injunction proceedings instituted . . . ." The specific reasons given by
the banks in making their request for the rescission
included: the cost of the litigation; the long delay
involved before the matter could finally be resolved
in the courts; the difficulty of extending the agreement of consolidation until the litigation is terminated; and the possible effect of the litigation on the
sale of additional capital stock as called for by the
agreement of consolidation.
Three proposed mergers involving national banks
which had been approved by former Comptroller of
the Currency Ray M. Gidney pursuant to the provisions of the Bank Merger Act have also been challenged in the courts as possible violations of Section 1
of the Sherman Act and Section 7 of the Clayton Act.
All three cases were discussed briefly on page 18 of
the 1962 Annual Report of the Comptroller of the
Currency.
In one case, involving a proposed merger of two
Philadelphia banks, the district court entered a judgment dismissing the complaint, and concluded that
the proposed merger was not within the scope of Section 7 of the Clayton Act. The Court held further
that even if the proposed merger were within the
scope of Section 7, it would not constitute a violation
of that section. United States v. Philadelphia National Bank, 201 F. Supp. 348 (E.D. Pa. 1962). The
government appealed to the United States Supreme
Court under Section 2 of the Expediting Act (15
U.S.C. 29). That court reversed the judgment of
the district court and held that the proposed merger
was forbidden by Section 1 of the Clayton Act and
must therefore be enjoined. The Supreme Court
stated that it need not reach the further question of
an alleged violation of Section 1 of the Sherman Act.
U.S. v. Philadelphia Nat. Bank, 374 U.S. 321 (1963).
The United States Supreme Court has held a bank
merger, previously approved by Comptroller of the
Currency Gidney and sustained by a United States
District Court, to be a violation of Section 1 of the
Sherman Act. This holding was based on the Court's
finding that the merger involved the elimination of
significant competition between the merging companies which were major competitive factors in a
relevant market. The Court did not reach the question of whether there was a violation of Section 2
of the Sherman Act, U.S. v. National Bank of Lexington, 84 S. Ct. 1033 (1964).
The last of these cases involving the applicability of
the antitrust laws to bank mergers approved by Comptroller Gidney is United States v. Continental Illinois
National Bank and Trust Company of Chicago et al.,
Civil Action No. 61 C 1441 (D.C.N.D. 111. 1961).
The merger has been consummated, and the case is
awaiting trial, the court having denied the government's motion for a preliminary injunction. There
has been no change in the status of this case since the
publication of the 1962 Annual Report.
b. New Bank Litigation
In a recently decided case, it was held that the
chartering and establishment of a new national bank
in Louisiana owned by a bank holding company would,
in the circumstances of the particular case, be in violation of the applicable branching laws. The court of
appeals did not pass directly on the district court's
decision (Bank of New Orleans and Trust Company v.
Saxon, 211 F. Supp. 576 p.D.C. 1962]) that such
chartering and establishment of a new national bank
would be in violation of Louisiana Statute 275 which
made it a criminal offense for a bank holding company
to own or operate a bank in Louisiana. Whitney National Bank v. Bank of New Orleans and Trust Company et al. and James J. Saxon v. Bank of New Orleans and Trust Company et al, 323 F. 2d 290 (D.C.
Cir. 1963). Petitions for a writ of certiorari have
been granted by the United States Supreme Court.
These petitions were filed by the Comptroller and the
national bank, the chartering and establishment of
which was held to have been in violation of the
applicable branching laws. The factual background
of this case was discussed in some detail on pages 16
and 17 of the 1962 Annual Report of the Comptroller
of the Currency.
In a recently decided case in New Jersey, a state
bank sought permanently to enjoin the issuance by the
Comptroller of a certificate to the organizers of a new
national bank. The district court, in denying the
plaintiff's motion for a permanent injunction and in
granting the motions to dismiss of the defendant
Comptroller and the other defendants, held that (1)
the Comptroller is not required by either the Administrative Procedure Act (5 U.S.C. 1001 et seq.) or any
49
other statute to hold public hearings on applications
for national bank charters; (2) the Comptroller is not
required to publish regulations regarding the manner
in which he passes on charter applications; and (3)
there is no right to judicial review of an exercise of the
Comptroller's discretion in deciding that a new national bank should be chartered. The Trust Company of New Jersey v. James J. Saxon et al., Civil No.
532-63 (D.D.D.NJ. 1963).
In another action, the applicants for a state banking
charter who had previously been denied a national
banking charter in Ardmore, Oklahoma, sought ternporarily to enjoin the Comptroller's administrative
action with respect to an application for reconsidera-*
tion of the request for a national banking charter in
Ardmore by a competing group. The plaintiffs sought
a stay of administrative action pending a final disposition of their application for a state banking charter.
The Comptroller thereafter agreed to reconsider the
plaintiffs' application for a national banking charter
jointly with the application of the other bank organizers. This suit was dismissed following the Comptroller's re-denial of both applications. John W.
Grissom, et al., v. James J. Saxon, Comptroller of the
Currency. Civil Action No. 674-64 (D.D.C. 1964).
c. Branch Litigation
In two actions, the plaintiffs sought to enjoin the
operation by a national bank located in New Jersey
of a branch in a particular municipality, on the ground
that state law did not permit the establishment of a
branch in a municipality in which an existing bank
has its principal office or a branch office. It was contended that the plaintiff state bank was the only bank
which had legal authority to operate a branch in the
municipality, inasmuch as it had received a certificate
of authority to establish a branch in the municipality
prior to the time that the national bank either received
a branch certificate or commenced its branch operation. See Suburban Trust Company v. National Bank
of Westfield, 211 F. Supp. 694 (D.N.J. 1962). In affirming the national bank's right to establish and operate a branch in a particular municipality, and in
denying the right of the state bank to establish and
operate a branch in that same municipality, the court
noted that the applicable state branching law authorized a bank to establish a branch anywhere in the
county in which the bank's principal office is located
but prohibited the establishment of a branch in a
municipality (other than where the bank's home office
is located) in which any banking institution has its
principal office or a branch office. The court held
50
that the language of the applicable statutes "requires
the interpretation that a bank 'has' a branch in a
municipality, for the purpose of determining the right
of another bank to open a branch there, only when it
has a branch in operation and not when it merely has
the approval of the appropriate governmental authority to open a branch." Suburban Trust Company v.
National Bank of Westfield,222 F. Supp. 269 (D.N J .
1963). This case was previously discussed on pages
17 and 18 of the 1962 Annual Report of the Comptroller of the Currency.
The Comptroller's issuance of a branch certificate to
a national bank located in the State of New York was
contested in a case where the new branch was located
in an unincorporated area adjacent to an incorporated
village in which competitor banks enjoyed home office
protection. It was contended by three of the defendant national bank's competitors that the area was
prohibited as a branch location for the defendant bank
because, although the area could qualify for incorporation as a village under state law, it lacked the required
physical characteristics of a village in the community
sense. It was also contended that the issuance of the
branch certificate was illegal because the Comptroller
violated his own rules and regulations in processing the
branch application. Granting the Comptroller's motion for summary judgment, the district court held
that the Comptroller had complied with the branch
location requirements of 12 U.S.C. 36 that ex parte
contacts such as were made with the Comptroller were
not prohibited, and that the opening by the defendant
national bank in temporary quarters did not constitute
a new branch application such as might have required
investigations by lower echelons in the Office of the
Comptroller. The Union Savings Bank of Patchogue,
et al. v. James J. Saxon, Comptroller of the Currency,
et al, Civil Action No. 245-62 (D.C.D.C. 1962).
The judgment in favor of the Comptroller and the
defendant national bank was appealed to the United
States Court of Appeals for the District of Columbia
which vacated the judgment of the district court and
remanded the case for further proceedings. The
Court of Appeals, which did not decide the question
relating to the Comptroller's administrative procedures, held that the word village as used in New York
statute law must be given its natural meaning, i.e., an
area possessed of some attributes of a community. In
reaching this conclusion, the Court of Appeals rejected
the administrative interpretation of the New York
Banking Law on the part of the New York Banking
Department, an interpretation which was followed
by the Comptroller's Office in approving the dis-
puted branch application of the defendant national
bank. A discussion of this case appeared on page 16
of the 1962 Annual Report of the Comptroller of the
Currency.
In two recently decided cases in New Jersey involving State law which permits the establishment
of a branch only in a municipality where an existing
bank does not have its principal office or a branch
office, it was argued that the operation of a "seasonal
agency" in a resort area precluded the establishment
of a branch in the same municipality by the defendant
national bank. However, in sustaining the Comptroller's position, the court held that a seasonal agency
was not a branch office or a branch bank within the
meaning of applicable law, and therefore the Comptroller was legally justified in authorizing the defendant national bank to establish, maintain and operate'
a branch office in the same municipality in which the
seasonal agency was located. Charles R. Howell, et
al. v. The National Union Bank of Dover, Civil Action No. 16-63 (D.C.D.N.J. 1963). The facts of
this case were more fully discussed on page 18 of
the 1962 Annual Report of the Comptroller of the
Currency.
In a recently decided case, the State of South
Dakota sought permanently to enjoin a national bank
from operating as branches three State banks which it
had acquired through merger. It was contended that
the merger was illegal, and that the operation of the
three State banks as branches of the national bank
was in violation of certain rules and regulations of
the State Banking Commission concerning branch location. It was also alleged that this merger by the
defendant national bank, the stock of which was
owned by a bank holding company, was in violation
of the Bank Holding Company Act of 1956, 12 U.S.C.
1841-1848. Although the court was of the opinion
that the state had no standing to challenge the validity of the establishment and operation of the three
bank branches by the defendant national bank, or
to maintain an action to enforce the provisions of
the Bank Holding Company Act of 1956, the court
discussed the other contentions of the parties. The
court stated that the rules and regulations of the State
Banking Commission concerning branch locations
were not determinative as to branch locations of national banks, and were themselves invalid because they
were in conflict with the statutory plan for branch
banking in the state. The court further stated that
the acquisition was lawful, inasmuch as the transaction fell within the exception contained in Section
1842(a) (3) of the Bank Holding Company Act of
1956, which provides that approval by the Board of
Governors of the Federal Reserve System is not required when the subsidiary bank of a holding company acquires the assets of another bank. State of
South Dakota v. The National Bank of South Dakota,
et al, 219 F. Supp. 842 (D. S. Dakota 1963). An
appeal has been taken to the United States Court of
Appeals for the Eighth Circuit from the decision of
the district court. In another action for a declaratory
judgment, the South Dakota Supreme Court has held
that the rule of the State Banking Commission which
prohibited the establishment of a branch bank more
than 50 miles from the bank's main office was invalid
as an unlawful attempt by the Commission to exercise legislative power. Livestock State Bank v. State
Banking Commission, 127 N.W. 2d 139 (S. Dakota
1964). Accordingly, the branch banking issue has
been dropped in the Eighth Circuit appeal and the
State of South Dakota in this appeal has now raised
de novo the issue of whether the merger was a stock
acquisition such as required1 the prior approval of the
Board of Governors of the Federal Reserve System
under the Bank Holding Company Act of 1956.
Two cases have been instituted in which it is alleged that the Comptroller's authorization of a branch
in the same city in which the principal office of the
bank is located would be in violation of a Utah statute which provides, in part, that ". . . no branch
bank shall be established in any city or town in which
is located a bank or banks . . . regularly transacting
a customary banking business, unless the bank seeking to establish such branch shall take over an existing bank . . ." In one case, the defendant bank is
the only bank with its home office within the same
city in which it seeks to establish a branch. Two outof-town banks, including the plaintiff, each have one
branch located in this city. The disputed branch is
in operation and the parties are awaiting a trial of
the case. Walker Bank & Trust Company v. James
J. Saxon et al, Civil Action No. 137-63 (D.C.D. Utah
1963). In the other case, four banks, including the
national bank which seeks to establish a new branch,
have their home offices located in the same city where
the proposed new branch would be located. The
plaintiff bank also has a branch within this home office
city. The case is awaiting disposition by either summary judgment or a trial. Commercial Security
Bank v. James J. Saxon, Civil Action No. 1815-63
(D.C.D.C. 1963).
In six actions brought in North Carolina, competitor banks seek permanently to enjoin the Comptroller's issuance of branch certificates. In four cases
51
it is contended that issuance of the branch certificates
would be in violation of the capital requirements of
the state statute as incorporated into the applicable
Federal branching legislation. The plaintiffs also
question the necessity of the proposed banking offices.
They also claim that in connection with the disputed
branch applications they are entitled to agency hearings, to present evidence, to examine the branch applications, to cross-examine witnesses, to have a record
made of the proceedings and to have the Comptroller
issue an order adjudicating the branch applications.
Three of these cases are awaiting disposition by either
summary judgment or trial. First National Bank of
Smithfield v. First National Bank of Eastern North
Carolina and James J. Saxon, Comptroller of the
Currency, Civil Action No. 1460 (D.C.E.D.N.C.
1963); First-Citizens Bank and Trust Company v.
James J. Saxon, Civil Action No. 1476 (D.C.E.D.N.C.
1963); and First National Bank of Smithfield v. First
National Bank of Eastern North Carolina and James
J. Saxon, Civil Action No. 1477 (D.C.E.D.N.C.
1963). A fourth case has been dismissed following
the withdrawal by the bank of its application for a
branch. First-Citizens Bank and Trust Company v.
James J. Saxon, and First National Bank of Eastern
North Carolina, Civil Action No. 1496 (D.C.E.D.N.C.
1963).
A fifth action brought in North Carolina involves a
State bank which is seeking an injunction to restrain
the Comptroller from approving an application for a
branch. Plaintiff raises procedural issues similar to
those involved in the foregoing cases. Peoples Bank
and Trust Company v. James J. Saxon, Civil Action
No. 867, (D.C.E.D.N.C. 1964). In a sixth action,
two state banks are seeking a judgment that (1) the
Comptroller's approval of the intervenor bank's branch
application was invalid in that the intervenor did not
have sufficient capital at the time the application was
filed, and (2) the plaintiffs were entitled to appear
formally as advisory parties in the administrative proceedings. Plaintiffs ask therefore that the court
enjoin the Comptroller from issuing a branch certificate. The Farmers Bank and Trust Company and
Richmond County Bank v. James J. Saxon and Southern National Bank of North Carolina, Intervenor,
Civil Action No. 16-R-64 (D.C.M.D.N.C. 1964).
Both of these cases are awaiting disposition either by
summary judgment or trial.
In an action brought in Georgia, a state banking
superintendent sought a judgment declaring that a
proposed drive-in facility of defendant was contrary to
the applicable branch banking laws, and an order re52
straining the defendant national bank from operating
this facility which was authorized by the Comptroller
as an extension of its main bank office. The defendant bank contended that the facility was not a separate
branch within the meaning of the law, such as either
required a separate branch certificate or was prohibited by the location restrictions of the branching laws.
The district court, vacating a temporary restraining
order, and without deciding the case on its merits, held
that the state banking superintendent was not a proper
party plaintiff, i.e., that he did not have standing to
bring the action. W. M. Jackson, Superintendent of
Banks of The State of Georgia v. First National Bank
of Valdosta, Civil Action No. 647 (D.C.M.D. Ga.
1964).
The Comptroller's issuance of a branch certificate
has recently been contested in two actions in the State
of Michigan. In one action, a national bank sought
(1) a declaratory judgment that the approval granted
by the Comptroller to another national bank to establish a branch is in violation of the applicable branching laws, and that the issuance of a certificate for the
establishment of the branch would likewise be in violation of such laws; (2) to enjoin the defendant Comptroller from issuing the branch certificate; and (3) to
enjoin the defendant bank from establishing or operating the branch. The only issue raised by the complaint is whether the Comptroller abused his discretion
in finding that the branch of the defendant national
bank would be in a village separate and distinct from
the village in which plaintiff's branch is located, and
therefore unlawful. A final judgment for the Comptroller and the defendant national bank has been
entered and no appeal has been noted. Manufacturers National Bank of Detroit v. James J. Saxon,
Comptroller of the Currency, and Michigan Bank,
N.A., Civil Action No. 2460 (D.C.E.D. Mich. 1963).
In a second such action, a national bank sought a
declaratory judgment that approval by the Comptroller to defendant bank to establish a branch was illegal.
It also sought a permanent injunction restraining the
Comptroller from issuing such certificate. The only
issue raised by the complaint was whether the Comptroller was arbitrary, capricious, abused his discretion
or otherwise acted illegally in finding that the disputed
branch will be located in a village separate from plaintiff bank's village. Following the court's action in the
foregoing case the plaintiff has, with the consent of all
parties, consented to a dismissal of this case. Manufacturers National Bank of Detroit v. James J. Saxon
and Community National Bank of Pontiac, Civil Action No. 25172 (D.C.E.D. Mich. 1964).
In another action, an Indiana state banking corporation is seeking (1) a declaratory judgment that
the issuance by the Comptroller of a certificate authorizing the establishment and operation by a national bank of a branch bank is in violation of the
applicable branching laws, and (2) to enjoin the defendant national bank from operating the branch.
The complaint also requests a temporary restraining
order against continued operation of the branch during the pendency of the action. In this action, the
plaintiff bank also contends that the state law authorizing branch banking in certain localities is unconstitutional, and that the Comptroller of the Currency
was required to hold a public hearing in connection
with the contested branch application. This case is
awaiting disposition by either summary judgment or
trial. North Madison Bank v. National Bank of
Madison, Indiana, and James J. Saxon, Comptroller
of the Currency, Civil Action No. NA 63-C-76
(D.C.S.D. Ind. 1963).
d. Office Relocation Litigation
Three cases pending in Michigan involve the relocation of a banking office to a place where a new
or additional branch would be prohibited to the defendant national bank. In one such case, it is contended that the Comptroller should be permanently
enjoined from authorizing the defendant national
bank to relocate a branch office at another site in the
same city. It is contended that the branch relocation
constitutes the establishment of a new branch at a
prohibited location. Bank of Dearborn v. James J.
Saxon et al, Civil Action No. 23628, (D.C.E.D. Mich.
1962). In the other two cases, it was alleged that
the relocation of the defendant national bank's principal office to a location where applicable law would
prohibit the establishment of a new branch constitutes
the establishment of a new branch at a prohibited
location. Judgments sustaining the Comptroller's action have been entered in both cases. Traverse City
State Bank v. The Empire National Bank, Civil Action No. 4036 (D.C.W.D. Mich. 1961) and National
Bank and Trust Company of Traverse City v. The
Empire National Bank and James J. Saxon, Comptroller of the Currency, Civil Action No. 4038
(D.C.W.D. Mich. 1961).
e. Conservatorship Litigation
A law suit has been brought as the result of a national bank in Oklahoma being placed in conservaTtorship in 1963 by the Comptroller. Following the
termination of the conservatorship and the transfer
of the old bank's assets and liabilities to a new national
bank, a complaint was filed by an organizer, director
and stockholder of the old national bank. The relief
sought includes a rescission of all the documents evidencing the sale of assets to and assumption of liabilities by the new bank, damages from the defendant
conservator and the new national bank, and the appointment of a receiver to take charge of the operations of the new bank for the preservation of the
assets of the old bank. This action was originally
brought in a state court but has been since removed
to a Federal district court. S. Paul Hazen v. Southern Hills National Bank of Tulsa and William H.
Greenfield, Conservator of Southern Hills National
Bank, Civil Action 5842 (D.C.N.D. Okla. 1963). In
this case, the Comptroller placed a newly opened national bank in conservatorship under the authority
vested in him by the Bank Conservation Act (12
U.S.C. 201 et seq.). The circumstances which gave
rise to this conservatorship were unusual in that it was
caused by the bank receiving more deposits in a short
space of time than it could administratively handle.
When a new national bank opened for business in
Tulsa, Okla., on August 12, 1963, it invited legal and
natural persons to become charter depositors with the
privilege of having checking accounts free of service
charges and without a minimum balance requirement.
More than 20,000 charter accounts were opened during the three weeks of this offer, and the bank fell
behind in its posting of items. Additional personnel
required to service these accounts produced a heavy
drain on the bank's initial capital. On November 8,
1963, the Comptroller concluded that although the
bank was solvent, it was his duty to conserve the assets
of the bank for the benefit of the depositors and other
creditors, and he, therefore, on that date appointed a
conservator.
As the conservatorship progressed, it became increasingly apparent that, before the bank could be
permitted to reopen, additional capital and new management would be required. When a proposal was
made to supply these needs through the organization
of a new national bank which would purchase the
assets and assume the liabilities of the old bank, the
Comptroller upon the request of the directors of the
old bank returned the affairs of the bank to the directors in order to permit them to accept the proposal
and enter into the purchase and sale agreement. Pursuant to the emergency authority contained in 12
U.S.C. 181, the Comptroller waived the requirement
for approval of the agreement by the old bank's share53
holders. The new bank commenced the business of
banking on December 2, 1963. This case is awaiting
disposition either by summary judgment or trial.
Another case arising out of a national bank's being
placed in conservatorship in 1962 by the Comptroller,
which was discussed on pages 16, 18, and 19 of the
1962 Annual Report of the Comptroller of the Currency, is pending in the United States Court of Appeals
for the Third Circuit. The district court, in a derivative action by stockholders of a national bank located
in Pennsylvania, held that the Comptroller had an
exclusive and unreviewable power of discretion in
determining whether or not to appoint a conservator,
to terminate a conservatorship, or to approve or disapprove a sale of the assets of a national bank. The
district court, which dismissed the action against the
Comptroller, stated that the Comptroller's jurisdiction
in respect to all matters properly within his discretion
is exclusive, and he is in respect thereto in no manner
amenable to any court nor is his action subject to
review therein. Minichello v. Saxon, 207 F. Supp.
299 (MD. Pa. 1962).
6. Fiduciary Activities of National Banks
At the time of the appointment of the Advisory
Committee to the Comptroller of the Currency in
early 1962, one of the topics upon which the views
and recommendations of national banks were solicited
was the fiduciary activities of national banks. Many
banks offered recommendations on this subject. In
the report of the Advisory Committee, it was recommended that the authority over the trust operations
of national banks be transferred from the Board of
Governors of the Federal Reserve System to the
Comptroller of the Currency, and that there was a
need for a re-examination of the trust regulations.
Legislation which would carry out the transfer of authority was drafted by this Office. This proposal was
transmitted to the Congress by Secretary of the Treasury Dillon and enacted on September 28, 1962. (P.L.
87-722, 76 Stat. 668, 12 U.S.C. 92a.)
Immediately upon passage of the bill an intensive
study of the trust regulations was launched. This
included: the solicitation of comments from all national banks and all state banks operating common
trust funds (under the provisions of Section 584 of
the Internal Revenue Code, all banks operating common trust funds must do so in conformity with the
regulations applicable to national banks in order to
obtain tax-exempt status for such funds) for suggestions as to needed improvements; analysis of current
and past literature pertaining to trust department operations which suggested revisions of the regulations;
and the appointment of a Technical Advisory Committee composed of men of recognized ability from
the legal profession and the trust departments of
state and national banks to assist in this study. This
culminated in the publication in the Federal Register
of February 5, 1963, of the proposed revisions of
54
Regulation 9. The many comments received from
interested parties were given careful study, and on
April 5, 1963, the revision was put into effect.
Regulation 9 as so revised contains far-reaching
changes. Structurally, it was improved by the addition of a definitions section, and the incorporation by
reference of the more extensive and dtetailed Manual
of Instructions for Representatives in Trusts. Many
of the administrative procedures of the former Regulation were eliminated, such as the practice of granting certain trust powers and denying others. The detailed requirements for trust department organization
were eliminated in favor of increased flexibility. The
"group judgment" rule, which had required that virtually all significant trust department operations be
conducted by Committees, was discarded. This
cleared the way for more efficient operation and administration, by permitting the establishment of individual organizational concepts, while preserving
necessary regulatory controls. The unnecessarily rigid
rules governing conflict of interest situations were
removed and the requirements of local law established as the standard. The regulations concerning
collective investments were reworked to remove several artificial restrictions which ha$ no relationship
to the dictates of proper banking activity. The prior
requirement that there could not be invested in a
common trust fund moneys of trusts which were established for other than "bona fide fiduciary purposes" was deleted. This was done because of the
vagueness of the phrase and the fact that it had given
rise to the erroneous inference that the establishment
of a trust for the express purpose of obtaining the
advantages of the investment acumen of a bank was
improper. At the same time specific restrictions were
placed in the regulation in order to preserve the desirable limitations which had been considered as implicit in the "bona fide fiduciary purpose" rule. The
limits on participations on behalf of a particular account were removed. In addition, specific publication and disclosure requirements were imposed.
Experience has shown the revisions to be salutary.
However, in certain areas, interpretations or policy
statements as to the application of the new rules to
specific situations have been necessary. Therefore, a
number of such interpretations and policy statements
were distributed on May 1, 1964, in the form of a
"Supplement" to the Manual of Instructions for Representatives in Trusts. Additional supplements will
be issued as the need arises.
Another result of the intensive study of trust regulations was the revision of the Manual of Instructions
for Representatives in Trusts. This was the first comprehensive updating of this volume since 1938. As
revised, it has been made generally available and has
been well received by the industry. It contains, in
looseleaf form, all applicable laws and regulations, revised instructions for conducting examinations, forms,
and interpretations. At the same time this Manual
was published, a revised form for the Trust Department Report of Examination was put into use. This
form reflects the new regulations, interpretations and
examination procedures. In its discussion of each
point covered in the trust department examination,
the Manual itself constitutes an authoritative interpretation of Regulation 9. Increased flexibility has
been effected by discarding the rigid standards for
investment composition which had heretofore been
applied mechanically in too many examinations.
Also outlined in the Manual are specific requirements
for satisfactory audit and control systems. Discretion
is given the examiner in determining what may be
necessary in each specific application. Since their
institution, numerous indications have been received
that these innovations have significantly added to the
value of a trust department examination.
The passage of the Act of September 28, 1962,
signaled the beginning of a complete reorganization
of the Trust Division. The trust examination function was made completely separate from commercial
department examinations and placed under the direction of a newly established office, the Deputy Comptroller for Trusts. To emphasize the fact of this separation, trust department examiners were given the
title of Representative in Trusts, and' assistant trust
examiners were divided into two categories of qualification entitled: Associate in Trusts, and Assistant
in Trusts. In recognition of the fact that operations
of trust department have become increasingly complex, an intensive recruiting drive primarily aimed at
attracting law school graduates as Assistants and Associates in Trusts was instituted. Salary scales were
made competitive with industry and barriers to promotions were removed. In order to expedite the
training of new men, a trust examination school was
instituted in September of 1963, with a distinguished
faculty composed of bankers, lawyers and professors
of law providing the instruction. By the end of 1963,
the complement of field personnel was brought to the
desired strength and the goal of completing the examination of every national bank trust department
by specialized trust examiners during the calendar
year was achieved.
One of the problems which was revealed by examination reports was the need for standardization of procedures among the trust examiners across the country.
This was in some measure achieved through the issuance of the Manual of Instructions. In addition, a
conference of all Representatives in Trusts was held
in February of 1964 in Washington to deal with this
problem. At that time all aspects of the new Regulation, policies and procedures, as well as the new
report form, were explained in detail. The opportunity was also utilized to acquaint the Representative
in Trusts with the problems of automation, through a
2-day seminar conducted by representatives of the
Burroughs Corporation.
In the statistical area, two steps of great significance
have been taken. The Trust Department Annual
Report was revised to call for market values of trust
department assets, as of the date of the annual review
of the account, or alternatively, as of December 31.
This revision enabled this Office to provide meaningful figures for trust department asset totals for the first
time. These figures, along with an analysis of their
significance, appeared in the June 1964 issue of The
National Banking Review. Heretofore, because no
uniform system existed for carrying values of trust
department assets, trust data afforded only limited
usefulness.
This Office also assumed the responsibility for collection and publication of data on Common Trust
Funds, heretofore handled by the Board of Governors
of the Federal Reserve System. Regulation 9 as revised requires all banks to file the annual report for
each common trust fund with this Office. These
reports provided the basis for a report on the assets,
growth and performance of common trust funds in
55
1963, which appeared in the June 1964 issue of The
National Banking Review. It is anticipated that in
future years Common Trust Fund Annual Reports will
be supplemented with a questionnaire which will pro-*
vide the basis for a more detailed analysis of common
trust funds which will appear annually in The National
Banking Review.
Appendix Table B-22 summarizes data collected by
the Office on trust department assets of National Banks
and on assets of collective investment funds.
7. Administration
The relationship of administration to the efficient
and effective handling of substantive affairs was recognized by the establishment of the position of Administrative Assistant to the Comptroller of the Currency
at the highest organizational level in this Office. This
eliminated a long-standing management weakness of
having responsibilities for general administration distributed widely and scantily among top level supervisory technical personnel. Sufficient authority and
responsibility were placed in the newly established position and members of the administrative staff to assure
timely, efficient, and effective support to this Office.
a. Strengthening Administration in the Field
Offices
The field organization was changed from 12 districts to 14 regions. This reorganization (1) eliminated situations where parts of the same state had
been in different districts; (2) resulted in a better distribution of bank examination work among field
offices; (3) facilitated optimum utilization of bank
examining manpower; (4) made possible the more
effective and efficient management of bank examining
functions; and (5) gave long overdue recognition to
the economic growth in the Northwestern States, the
Rocky Mountain States, and the Southern States.
The titles of heads of national bank regions were
changed from Regional Chief National Bank Examiners to Regional Comptrollers of the Currency. This
new title conveys a more meaningful indication of the
scope of activities and responsibilities discharged in the
field offices.
Regional Comptrollers were authorized to deal
directly with national bank officials on matters requiring attention as the result of bank examinations made
by examining personnel of the Comptroller's Office.
Under prior procedures, the bank examination reports
were sent to the Washington headquarters of the
Comptroller's Office where members of the central
office dealt with the national bank officials on matters
requiring attention. This delegation of authority to
56
Regional Comptrollers (1) strengthened their role;
(2) resulted in faster notifications to national banks;
(3) facilitated more effective relationships with national bank officials; and (4) in accordance with sound
management principles, resulted in the resolving of
issues and the making of decisions at the regional level
as far as compatible with applicable laws, policies, and
views of the Comptroller.
- Additional responsibilities were delegated to Regional Comptrollers for the purpose of strengthening
administration at the local level. This included
responsibility for (1) the training of newly appointed
Examiners; (2) appointment of National Bank Examiners who meet prescribed high standards; (3) transfer of personnel within Regions; (4) acting on requests for extension of time, in connection with the
opening of approved branches; (5) acting on requests
for prior approval of contemplated cash dividends
under the provisions of 12 U.S.C. 60(b); (6) approving banking house investments under 12 U.S.C. 37Id;
(7) granting preliminary approvals for the payment
of stock dividends and the sale of additional common
stock; (8) issuing certificates of final approval of capital increases by stock dividends and sales of additional
common stock for cash; and (9) all Regional Comptrollers were instructed to participate in the program
of Federal Executive Boards to assure that this Office
assists in the coordination of Federal activities at local
levels.
b. Strengthening Administration
National Office
in
the
Comptroller's Manuals were issued containing upto-date laws, regulations, and rulings, so that national
banks would be fully informed. These new Manuals
include important revisions of regulations, rulings, and
interpretations. Two new Manuals issued were: the
Comptroller's Policy Guidelines for National Bank
Directors; and Instructions, Procedures, and Forms
for National Bank Examiners, which were widely
distributed.
Prompt action on applications for national bank
charters, branches, and mergers was made possible by
new procedures and time standards for investigation
and decision making.
Improvements were made in reports of condition
forms and in the procedures used for obtaining reports
of condition from banks, resulting in more meaningful
information and the saving of time in handling. In
addition, the procedures for tabulating reports of condition information were improved, more meaningful
tabulations were devised, and greater utilization was
made of tabulations. This Office inaugurated and
regularly issues a "Summary of Actions," which shows
decisions of the Comptroller with respect to applications for charters, branches, mergers, etc. This service is valuable to the banking community and eliminates requests for information via correspondence and
telephone from many areas of the country. Agreements have been reached with 46 of the 50 supervisors of state banking for the reciprocal exchange of
information on applications for bank charters, bank
branches, and bank mergers. This has resulted in
sound working relationships with state supervisors,
facilitating the exchange of information, and minimizing opportunities for misunderstandings.
A program to renovate and refurbish assigned office
space in the Treasury building was completed. In
connection with this program, greater utilization of
available space was planned and accomplished. The
remodeling program, in addition to utilizing assigned
space to the optimum extent possible, has improved
employee morale and has contributed to increased
efficiency. However, the present available space in
the Treasury building is clearly inadequate. A comprehensive survey of field space utilization, costs, and
location requirements was undertaken with the view
of minimizing rented space and, in relation to scheduling bank examinations and manpower needs, the
consolidation or elimination of subregional offices. As
a result, arrangements were made to obtain free space
in several cities, and some subregional offices were
eliminated as the result of consolidations.
To plan for the future and keep abreast of the electronic modernization of operations by banks, the Office
of the Comptroller of the Currency embarked on a
program aimed at familiarizing bank examining personnel with automatic data processing. As the initial
effort, selected bank examiners completed a special
course in automatic data processing conducted by the
International Business Machines Corporation. These
graduates then cooperated in writing a manual to help
bank examining personnel throughout the country.
This manual, Examination of Automation in National
Banks, was distributed to all national banks. In response to many requests, copies were furnished to
state banks, state banking authorities, banking associations, auditing associations, and Federal agencies.
Additional classes were scheduled with the cooperation
of IBM. The Comptroller's Office now has a substantial number of examiners with special training to
cope with examining problems resulting from automation. The responsibility for this program has been
transferred to the field.
Conferences of Regional Comptrollers were held
for the purpose of exchanging views on facilitating
the policies and operation of this Office.
On September 1, 1964, a complete re-alignment of
the organization of the Office was placed in operation.
Two new Deputy Comptrollers were appointed, and
all Deputy Comptrollers were assigned duties on a
functional rather than a geographical basis. The
chart on page 58 sets forth the new organizational
arrangement.
c. Personnel Management
This Office established a manpower control program which includes the following:
(1) A continual appraisal of work load and work
procedure is carried on through 14 regional offices.
Each Regional Comptroller of the Currency is responsible for the scheduling of staff assignments, and the
efficient and effective conduct of the examination program for the Region.
(2) Manpower requirements are determined by the
size, complexity, and number of banks to be examined.
Each Regional Comptroller is required to maintain a
complement of competent examiners to meet the
examination schedule for his Region. His recommendations for staff assignments are reviewed at the
national office to determine their conformance to the
staffing policies established by the Office. Regional
recommendations are based on appraisal of the work
to be performed within the Region, the work schedule
set for the Region, and the organizational structure
needed to meet the schedule.
(3) Manpower control is facilitated through a system of management review and evaluation. Visits
are made to each Region regularly in order to (a)
make a general appraisal of the efficiency, effectiveness, and productivity with which the Region carries
out its function; (b) determine the degree to which the
Region complies with requirements and instructions;
(c) evaluate the quality of the Region's technical
57
COMPTROLLER OF THE CURRENCY
Chart of Organization
September 1, 1964
Regional Comptrollers of the Currency
National Advisory Committee
to the Comptroller of
the Currency
Comptroller of the Currency
James J. Saxon
Regional Advisory Committees
First Deputy Comptroller
Director, Department of Banking
and Economic Research
William B. Camp
Deputy Comptroller
for Bank Supervision
and Examination
Deputy Comptroller
for New Charters
Chief Counsel
Administrative Assistant to
the Comptroller
Albert J . Foulstich
Victor Abramson
Robert Bloom
Deputy Comptrollei
for Trusts
1
Personnel Planning
and Development
Daniel D. Moore
Bank Or
ization
Div isi on
T. M. Bre zinski
Dir ec or
Eugene G. Dawson
E. RadcliffePark
Special Assistant
to the Comptroller
Currency
Issue and Redemption
Richard T. Carr
Chief National
Bank Examiner
Deputy Comptroller
for International
Banking and Finance
R. Coleman Egertso
Richard J. Blanchard
Thomas G. DeShaz<
Justin T. Watson
Deputy Comptrollei
for Domestic
Bank Operations
Deputy Comptroller
for Mergers & Branches
Internationa
Operations
Ronald E. Cove
Director
W. Robert Grubb
Regional Comptrollers of the Curr ency
JR.g ion
Norn*
Heodq uorfer.
Stores
Regfor
Srafe*
Name
R e g/on
Hee
State*
Jquarrer,
n
2
3
7
h r e
M
V
M ° l n Ab °h
n HOn
4
5
nsy.vonia
Jos
8
G. Lu
tz
Chicago, I I I .
Illinois, Mich
12
Dou
Joh
Ken
neth W.
L
Wyo.,
, Colo.
n R. Thon
13
gon
Wil
9
eph
eof
Portlar
1
olif.
, Missouri
Wash
Cali,(
Colo
,
Ore
., Utah, N . M . , Ariz.
.Idaho, Mont., Alaska
Nevada, Hawaii
work; (d) evaluate the Region's relationships with
banks; (e) identify problems; and (f) take action or
make recommendations to bring about improvements.
. One of the most effective incentive measures taken
by this Office was to accelerate the advancement of
Examiners to National Bank Examiners. Over the
years, advancement to positions of full responsibility
for bank examinations had been very slow. Advancement now is more rapid, due to higher recruiting
standards and improved training. Another incentive
measure has been to send our most promising young
staff to the summer programs developed by the graduate schools of banking. The work begun there is
continued by correspondence during the year. With
the completion of 3 years of work, a certificate is
awarded.
We planned and installed an improved training program aimed at rapid development of recruits to satisfy manpower needs. Emphasis was placed on the
specialized techniques and methods utilized in the
examination of national banks. This training is more
appropriate than the former training at a school conducted jointly by the Federal Reserve System, the
Federal Deposit Insurance Corporation, and the
Comptroller's Office.
To improve the quality of new personnel, recruiting
standards were raised for National Bank Examiners.
Candidates for employment must have completed a
full 4-year course in an accredited school; received
a degree in accounting, economics, banking, finance,
or business administration; and graduated in the
upper 50 percent of the class, or with an average of
B or better.
In our support of the Employment Policy Program
of the Federal Government, we have set the precedent for the employment of Negroes in technical and
professional banking occupations.
This Office has maintained an outstanding safety
record for more than 10 years. To further our safety
efforts, we recently made safety belts a requirement
TABLE 13.—Statement of comparative assessment and other operating income, and expenses of the Office of the Comptroller of the
Currency, by calendar years 1958 through 1963
Item
1963
1962
1961
1960
1959
INCOME
Assessments
Trust examinations
Trust investigations
Branch investigations
Charter investigations
Merger and consolidation fees
Affiliate examinations
Extra examinations
Examination reports sold
Manuals and publications
Currency issue management
Other
$14,245,418 $13, 289, 291 $10,686,750 $10,213,494 $9,247, 563
953, 889
511,121
1,077,018
540,772
477,364
0
0
16,090
0
0
156,116
100, 230
166,962
98,183
86,153
108, 063
37, 732
243, 899
31,800
25,469
49, 000
4,000
47, 500
0
0
3,324
2,326
4,362
2,354
3,606
7,987
5,537
2,850
2,375
9,416
238,750
86, 768
466,120
84,480
93,110
0
0
212,683
0
0
0
0
32, 282
0
0
4,222
2,303
2,588
966
3,011
16,517,772 14,810,642 11,436,767 10, 974,424
353,113
172,106
169, 865
216,414
$8, 224, 237
422,046
0
63,162
32,038
0
2,038
8,124
89, 642
0
0
732
Total
EXPENSES
Salaries
Employer's retirement, insurance and
F.I.C.A. contribution
Per diem
Travel
Rent
Supplies
Printing, books and periodicals
Furniture and fixtures
Depreciation
Remodeling
Office machines, rentals and repairs
Communications
Shipping expenses
Other
Total
Net Income (+) or Loss (—)
9,945, 692
155,651
8,842,019
173, 675
16,870,885 14, 982, 748 11, 606, 632 11,190,838 10,101, 343
Subtotal
Investment Income
9,015,694
10, 900, 824 9,490, 714
8, 527,136
8,192, 979
7,493, 358
712,535
2,174,488
708, 776
180, 069
7i; 806
111,272
205, 930
0
0
0
118,304
55, 559
80, 662
645, 641
1,841,168
654, 657
162,837
30, 544
84,418
31, 324
0
0
0
74,449
19,346
38, 904
581, 450
509, 768
1, 684, 544 1, 590, 753
577, 362
557, 062
157,496
153,333
27, 268
27, 539
85, 562
75, 908
42, 733
26, 864
0
0
0
0
0
0
74,284
72, 820
24,814
21,379
49,411
37, 681
818, 243
2,402,914
866, 591
190,477
76, 869
303, 506
0
31,617
69,094
13,492
118,658
53,106
69, 933
7,511,943
15,915,324 13,910,115 12,110,424 11,497,903 10,585,050
+ 955,561 + 1,072,633
-503,792
-307,065
505, 994
1,597,819
522, 031
142,057
22, 236
65, 368
28,741
0
0
0
59, 499
20,446
21, 907
10,479,456
-483, 707 -1,463,862
5
9
TABLE 14.—Comparative statement of financial operations of the Office of the Comptroller of the Currency, by calender
years 1958 through 1963
Item
1963
1962
1961
1960
1959
$350,295
125,454
7,139,008
83,018
4,716
SI, 225, 955
89, 912
5,542,450
30,479
527
$812,139
47,148
4,748,866
24,543
2,404
$957,281
45,715
5,098,809
56,047
4,441
SI, 125,864
57,826
5,035,126
75,106
0
$747,272
47,151
5, 951, 940
44, 968
0
7,702,491
6,889, 323
5, 635,100
6,162,293
6,293, 922
6,791, 331
426,475
41,914
0
0
0
0
0
0
0
0
0
0
384,561
0
0
0
0
0
8,087,052
6,889,323
5,635,100
6,162,293
6, 293, 922
6,791, 331
117,961
314,611
119,209
260,959
49,000
179, 732
41,760
175, 690
43,157
123, 008
32,000
94,000
38,554
209, 527
6,154
38,161
190,268
0
31,557
215,000
0
44,473
191,636
0
45, 317
165,000
0
36, 828
176,000
0
686,807
608,597
475,289
453, 559
376,482
338,828
2,702,902
1,070,836
2,687,754
1,117,659
2, 692,094
1,062,940
2,695,165
1,105,000
2,648, 206
1,054,000
2,657,362
1,095,000
3,773,738
3,805,413
3,755,034
3,800,165
3,702,206
3,752,362
4,460, 545
4,414,010
4,230,323
4,253,724
4,078, 688
4,091,190
3,626,507
2,475,313
1,404,777
1, 908,569
2,215,234
2,700,141
8,087,052
6,889, 323
5, 635,100
6,162, 293
6, 293, 922
6,791, 331
1958
ASSETS
Current Assets:
Cash on hand and on deposit
Accounts receivable
Investments
Accrued interest receivable
PreDaid exDcnscs
..
Total current assets
Fixed Assets:
Furniture, fixtures, and equipment
Less: accumulated depreciation
Total fixed assets
Total assets
LIABILITIES
Current liabilities:
Accounts navable
Payroll deductions for bonds and taxes,
etc
Accrued travel expenses
Deferred Income
Total current liabilities
Other Liabilities:
Closed receivership trust funds
Employees accumulated annual leave.
Total other liabilities
Total liabilities
Equity:
Comptroller's equity
Total liabilities and equity
in all automobiles used for official purposes. This
applies to some 800 automobiles used in the travel
of some 1,100 bank examining personnel.
More than 90 percent of the employees of this Office are participating in the Payroll Savings Plan.
This Office received the United Givers Fund Special
Merit Award, in recognition of the support manifested by 100 percent of employee participation and
100 percent of goal attainment. Employees of this
Office also were generous in other fund raising campaigns, including the program for the John Fitzgerald
Kennedy Library, and many of them participated in
the blood donor campaign.
d. Financial Management
The internal accounting system of this Office was
modernized. Accounts are now maintained, and
financial statements are now prepared on an accrual
60
basis, which is in accordance with modern principles
of financial management. This improvement constituted a departure from the practice for 100 years
of accounting on a cash basis.
This Office originated an investment program to
realize earnings on income not immediately needed
to pay expenses. Under this plan, income is invested
in short-term securities maturing on dates corresponding to the time at which expense obligations arise.
Substantial earnings have been realized in this
manner.
Payroll functions were transferred from regional
offices and centralized in the Washington office. This
resulted in greater efficiency and economy. It also
will facilitate conversion to automatic data processing.
Our travel regulations were revised! to achieve
greater efficiency and economy.
8. Issue and Redemption of Currency
During the year ending December 31, 1963, the
Comptroller's Office made 1,016 shipments of new
Federal Reserve notes (798,384,000 notes with an
aggregate value of $8,479,960,000) to the Federal Reserve agents and the Federal Reserve branch banks. In
addition, 47 deliveries of such notes (19,820,000 notes
with an aggregate value of $261,900,000) were made
to the Treasurer of the United States. There were
4,840 shipments of unfit Federal Reserve notes and
Federal Reserve bank notes (597,896,365 notes with
an aggregate value of $6,666,165,340) received for
verification and certification for destruction; 410,339
badly damaged Federal Reserve notes and Federal
Reserve bank notes with an aggregate value of
$7,875,089 were presented by the Treasurer of the
United States for identification approval.
The Comptroller's Office also received 46 shipments of national bank notes (5,680 notes with an
aggregate value of $969,332) for verification and de-
struction. As of December 31, 1963, $36,744,463 of
national bank notes were still outstanding.
The issuance of the new Federal Reserve $1 note,
authorized by Congress in June 1963, has begun at
the Federal Reserve Banks and their branches. It
was originally hoped that there would be no need
to ship any of the $1 Federal Reserve notes to the
banks until the late spring of 1964, at which time the
issuance of the $1 Silver Certificates would be discontinued. The increased demand for $1 notes coupled with a shortage of free silver required this Office
to ship the initial supply of these notes to enable the
banks to put them into circulation by November 25,
1963. The shipment and issue of $1 notes are now
on a continuing basis.
The receipt from the Bureau of Engraving and
Printing, the storage, and the shipment of the $1
Federal Reserve notes will double the volume of new
Federal Reserve notes handled by this Office in 1964.
61
APPENDIX A
Merger Decisions, 1963
INDEX
Merger1 Decisions, 1963
I. Approvals:2
Page
Commercial Bank of Lexington, Lexington, N.G., and
the First Union National Bank of North Carolina,
Charlotte, N.C. (9164), which had merged under
charter and title of the latter bank (9164), January 2,
1963
The Peoples National Bank in Brunswick, Brunswick,
Md. (14044), and the Farmers & Mechanics-Citizens
National Bank of Frederick, Frederick, Md. (1267),
which had merged under charter and title of the
latter bank (1267), January 11,1963
First National City Trust Company, New York, N.Y.
(14853), and the First National City Bank, New
York, N.Y. (1461), which had merged under charter
and title of the latter bank (1461), January 15,1963..
The First National Bank of LeRaysville, LeRaysville, Pa.
(6350), and The County National Bank of Montrose,
Montrose, Pa. (2223), which had merged under
charter of the latter bank (2223), and under title of
"County National Bank of Montrose," January 16,
1963
The Gotham Bank, New York, N.Y., and the Royal
National Bank of New York, New York, N.Y. (15029),
which had merged under charter and title of the
latter bank (15029), January 31, 1963
The Peoples National Bank & Trust Co. of Lynchburg,
Lynchburg, Va. (2760), and the First & Merchants
National Bank of Richmond, Richmond, Va. (1111),
which had merged under charter and title of the
latter bank (1111), January 31,1963
The First National Bank of La Verne, La Verne, Calif.
(9599), and The United States National Bank of San
Diego, San Diego, Calif. (10391), which had merged
under charter and title of the latter bank (10391),
February 8,1963
The First National Bank of Dolgeville, Dolgeville, N.Y.
(6447), and The Oneida National Bank & Trust Company of Central New York, Utica, N.Y. (1392), which
had merged under charter and title of the latter bank
(1392), February 21, 1963
The South Fallsburg National Bank, South Fallsburg,
N.Y. (11809), and The National Bank of Liberty,
Liberty, N.Y. (10037), which had consolidated February 21, 1963, under charter of the latter bank
(10037) and under title of "Community National
Bank," February 21,1963
The Dominion National Bank of Bristol, Bristol, Va.
(4477), and The First National Exchange Bank of
Virginia, Roanoke, Va. (2737), which had merged
under charter and title of the latter bank (2737),
February 28,1963
The Second National Bank of Cumberland, Cumberland, Md. (1519), and The First National Bank &
Trust Company of Cumberland, Cumberland, Md.
(381), which merged under charter of the latter bank
(381) and under title of "The First-Second National
Bank & Trust Company," March 8,1963
1
68
69
70
70
71
72
73
74
75
77
78
Includes mergers, consolidations, and purchase and sale
transactions where the emerging bank is a national bank.
Decisions are arranged chronologically by effective date.
2
Includes one decision rescinded by the Comptroller of the
Currency and one withdrawn by the banks.
64
^The First National Bank of Big Stone Gap, Big Stone
Gap, Va. (11765), and The First National Bank of
Appalachia, Appalachia, Va. (9379), which merged
under charter and title of the latter bank (9379),
March 9,1963
The American Bank & Trust Company, New Haven,
Conn., and The Second National Bank of New Haven,
New Haven, Conn. (227), which had merged under
charter and title of the latter bank (227), March
15,1963
The First National Bank of Southampton, Southampton,
N.Y. (10185), and Security National Bank of Long
Island, Huntington, N.Y. (6587), which had consolidated under charter and title of the latter bank
(6587), March 15, 1963
The Columbus Savings Bank, Columbus, Ohio, and The
Huntington National Bank of Columbus, Columbus,
Ohio (7745), which had merged under charter and
title of the latter bank (7745), March 16,1963
The Reynoldsburg Bank, Reynoldsburg, Ohio, and The
City National Bank & Trust Co. of Columbus, Columbus, Ohio (7621), which merged under charter and
title of the latter bank (7621), March 30,1963
The Home Savings Bank of Kalamazoo, Kalamazoo,
Mich., was purchased by The American National
Bank & Trust Co. of Kalamazoo, Kalamazoo, Mich.,
March 30,1963
The First National Bank of Middleburg, Pa., Middleburg, Pa. (4156), and the First National Bank of Selins
Grove, Selinsgrove, Pa. (357), which had merged
under charter of the latter bank (357), and under the
/title of "Tri-County National Bank," April 1,1963
VThe First National Farmers Bank of Wytheville, Wytheville, Va. (9012), and The First National Exchange
Bank of Virginia, Roanoke, Va. (2737), which had
merged under charter and title of the latter bank
i (2737), April 1,1963
vBank of Greensboro, Greensboro, N.C, and the First
Union National Bank of North Carolina, Charlotte,
N.C. (9164), which had merged under charter and
title of the latter bank (9164), April 9,1963
The National Mahaiwe Bank of Great Barrington,
Great Barrington, Mass. (1203), and the First Agricultural National Bank of Berkshire County, Pittsfield,
Mass. (1082), which had consolidated under the
charter and title of the latter bank (1082), April
12,1963
The Keystone National Bank of Manheim, Manheim,
Pa. (3635), and The Fulton National Bank of Lancaster, Lancaster, Pa. (2634), which had merged
under the charter and title of the latter bank (2634),
April 15,1963
The Shelby County Bank, Botkins, Ohio, and The
Citizens Baughman National Bank of Sidney, Sidney,
Ohio (7862), which had merged under charter of the
latter bank (7862) and under title of "The Citizens
Baughman National Bank," April 17, 1963
The Pompeii State Bank, Pompeii, Mich., and The
Commercial National Bank of Ithaca, Ithaca, Mich.
(9654), which had consolidated under charter of the
latter bank (9654) and under title of "Commercial
National Bank," April 17, 1963
80
81
82
85
86
88
89
90
91
93
95
96
97
Page
Page
The Home National Bank of Brockton, Brockton,
Mass. (2152), and The Plymouth National Bank,
Plymouth, Mass. (779), which had merged under
charter of the latter bank (779), and under title
"Plymouth-Home National Bank," April 18, 1963..
Community Trust Company, York, Maine, and the
- First National Bank of Portland, Portland, Maine
(4128), which had merged under charter and title of
the latter bank (4128), April 26, 1963
Walkersville Bank, Walkersville, Md., and Farmers &
Mechanics-Citizens National Bank of Frederick,
Frederick, Md. (1267), which had merged under
charter of the latter bank (1267), and under title of
"Farmers & Mechanics National Bank," April 26,
1963.....
Peoples National Bank of Central Virginia, Charlottesville, Va. (2594), and National Bank of Commerce
of Norfolk, Norfolk, Va. (9885), which had consolidated under charter of the latter bank (9885), and
under the title "Virginia National Bank," April 26,
1963
First National Bank of Farmingdale, Farmingdale,
N.Y., and The First National Bank of Farmingdale,
Farmingdale, N.Y.,» April 30,1963
The First National Bank of Heuvelton, Heuvelton, N.Y.
(10446), and The St. Lawrence County National
Bank, Canton, N.Y. (8531), which had merged under
charter and title of the latter bank (8531), May 3,
1963
The Canton National Bank, Baltimore, Md. (4799),
and the American National Bank of Silver Spring,
Silver Spring, Md. (14937), which had merged under
charter of the latter bank (14937) and under title of
"American National Bank of Maryland," May 17,
1963
The First Security Bank of Idaho, N.A., Boise, Idaho,
and The Weber Bank, Kellogg, Idaho, May 31,1963.
Windber Bank & Trust Co., Windber, Pa., was purchased by the United States National Bank in Johnstown, Johnstown, Pa., June 1,1963
Farmers-Deposit Bank of Sadieville, Sadieville, Ky., and
The First National Bank of Georgetown, Georgetown,
Ky. (2927), which had merged under charter of the
latter bank (2927), and under title of "First National
Bank and Trust Company," June 15, 1963
The Wyoming National Bank of Tunkhannock, Tunkhannock, Pa. (835), and The Wyoming National Bank
of Wilkes-Barre, Wilkes-Barre, Pa. (732), which had
merged under charter and title of the latter bank
(732), June 24,1963
First Bank of St. Maries, St. Maries, Idaho, and the
First Security Bank of Idaho, National Association,
Boise, Idaho (14444), which had merged under
charter and title of the latter bank (14444), June 28,
1963
Old National Bank of Washington, Spokane, Wash.
(4668), purchased the Security State Bank, Colton,
Wash., June 28, 1963
State Bank of Madison, Inc., Madison, Va., and the
National Bank & Trust Co. at Charlottesville, Charlottesville, Va. (10618), which had merged under
charter and title of the latter bank (10618), June 29,
1963
Farmers & Merchants Bank, Williamsburg, Ohio, and
The First National Bank of Batavia, Batavia, Ohio,
were purchased by the Clermont National Bank,
Milford, Ohio, June 29,1963
The Marion National Bank, Marion, Va. (6839), and
The First National Exchange Bank of Virginia,
Roanoke, Va. (2737), which had merged under
charter and title of the latter bank (2737), July 8,1963.
The First National Bank of Hudson Falls, Hudson Falls,
N.Y. (3244), and The First National Bank of Glens
Falls, Glens Falls, N.Y. (980), which had consolidated
8
Application withdrawn by banks.
725-698—64
6
98
99
100
102
103
104
105
106
107
108
109
110
Ill
113
114
115
under charter and title of the latter bank (980),
July 12, 1963
Marlboro Trust Co., Bennettsville, S.C., and The First
National Bank of South Carolina of Columbia,
Columbia, S.C. (13720), which had merged under the
charter and title of the latter bank (13720), July 20,
1963
The Northern Savings Bank, Columbus, Ohio, and
The Huntington National Bank of Columbus, Columbus, Ohio (7745), which had merged under charter
and title of the latter bank (7745), July 24, 1963....
The Nicodemus National Bank of Hagerstown, Hagerstown, Md. (12590), and The First National Bank of
Maryland, Baltimore, Md. (1413), which had merged
under charter and title of the latter bank (1413),
August 2, 1963
The Second National Bank of Hagerstown, Hagerstown,
Md. (4049), and Maryland National Bank, Baltimore,
Md. (13745), which had merged under charter and
title of the latter bank (13745), August 2, 1963
The Valley National Bank of Chambersburg, Chambersburg, Pa. (4272), and The National Bank of Chambersburg, Chambersburg, Pa. (593), which had merged
under charter of the latter bank (593) and under
title of "National Valley Bank and Trust Company,"
August 3,1963
The National Bank of Cohoes, Cohoes, N.Y. (1347),
and The Manufacturers National Bank of Troy, Troy,
N.Y. (721), which had merged under charter and title
of the latter bank (721), August 9,1963
Mercantile National Bank of Hammond, Hammond,
Ind., and The Calumet National Bank of Hammond,
Hammond, Ind. (14379), which were given approval
to consolidate under charter and title of the latter bank
(14379),* August 9, 1963
The Edisto Bank, Denmark, S.C, and The First National
Bank of South Carolina of Columbia, Columbia, S.C.
(13720), which had merged under charter and title
of the latter bank (13720), August 17,1963
National Bank of Suffolk, Suffolk, Va. (9733), and
the Virginia National Bank, Norfolk, Va. (9885),
which had merged under charter and title of the latter
bank (9885), August 23,1963
The First National Bank of Berryville, Berryville, Va.
(7338), and Farmers & Merchants National Bank,
Winchester, Va. (6084), which had merged under
charter and title of the latter bank (6084), August
29,1963
The Peoples National Bank of Margaretville, Margaretville, N.Y. (5924), and The National Bank&
Trust Co. of Norwich, Norwich, N.Y. (1354), which
had merged under charter and title of the latter bank
(1354), August 30,1963
The Hilliard Bank, Hilliard, Ohio, and The City National Bank & Trust Co. of Columbus, Columbus,
Ohio (7621), which had merged under charter and
title of the latter bank (7621), August 31, 1963
The Biglerville National Bank, Biglerville, Pa. (7917),
and The Gettysburg National Bank, Gettysburg, Pa.
(611), which had merged under charter and title of the
latter bank (611), August 31,1963
National County Bank of Closter, Closter, N J. (8394),
and Citizens National Bank of Englewood, Englewood,
N.J. (4365), which had consolidated under charter
and title of the latter bank (4365), August 31,1963..
Kaleva State Bank, Kaleva, Mich., and Security National Bank of Manistee, Manistee, Mich. (14843),
which had consolidated under charter and title of the
latter bank (14843), September 3,1963
Bamberg County Bank, Bamberg, S.C, and The South
Carolina National Bank of Charleston, Charleston,
S.C. (2044), which had merged under the charter and
title of the latter bank (2044), September 7,1963....
4
116
117
118
120
121
123
124
125
129
130
132
133
134
135
136
137
138
Decision rescinded by the Comptroller of the Currency.
65
Pags
Page
The First National Bank of Vincentown, Vincentown,
NJ. (370), and The Union National Bank & Trust Co.
at Mount Holly, Mount Holly, NJ. (2343), which had
merged under charter of the latter bank (2343) and
under title of "Union National Bank and Trust Company," September 13, 1963
Farmers Exchange Bank, Abingdon, Va., and Virginia
National Bank, Norfolk, Va. (9885), which had
merged under the charter and title of the latter bank
(9885), September 13, 1963
Citizens State Bank, Bennettsville, S.C., and The South
Carolina National Bank of Charleston, Charleston,
S.C. (2044), which had merged under charter and
title of the latter bank (2044), September 14, 1963...
Matteawan National Bank, Beacon, N.Y. (4914), and
The Farmers & Manufacturers National Bank of
Poughkeepsie, Poughkeepsie, N.Y. (1312), which had
consolidated under charter of the latter bank (1312),
and under title "Farmers-Matteawan National Bank,"
September 20, 1963
The Scottish Bank, Lumberton, N.C., and the First
Union National Bank of North Carolina, Charlotte,
N.C. (9164), which had merged under charter and
title of the latter bank (9164), September 21, 1963...
State Bank of Newfane, Newfane, N.Y., and the Liberty
National Bank & Trust Co., Buffalo, N.Y. (15080),
which had merged under charter and title of the latter
bank (15080), September 25, 1963
The First National Bank of Baltimore, Baltimore, Ohio
(7639), purchased The Pleasantville Bank, Pleasantville, Ohio, September 25, 1963
The Bank of Chapel Hill, Chapel Hill, N.C, and the
North Carolina National Bank, Charlotte, N.C.
(12761), which had merged under charter and title of
the latter bank (13761), September 27, 1963
The Massena Banking & Trust Co., Massena, N.Y., and
The Watertown National Bank, Watertown, N.Y.
(2657), which had merged under charter of the latter
bank (2657), and under title of "The National Bank of
Northern New York," September 30, 1963
Essex Trust Co., Essex Junction, Vt., and The Howard
National Bank & Trust Co. of Burlington, Burlington,
Vt. (1698), which had merged under charter of the
latter bank (1698), and under title of "The Howard
National Bank and Trust Company," September
30,1963
Campbell County Bank, Rustburg, Va., and The
Lynchburg National Bank & Trust Co., Lynchburg,
Va. (1522), which had merged under charter of the
latter bank (1522), and under the title of "The Fidelity
National Bank," September 30, 1963
The Hazelwood Bank, Pittsburgh, Pa., and Western
Pennsylvania National Bank, McKeesport, McKeesport, Pa. (2222), which had consolidated under the
charter of the latter bank (2222), and under title
"Western Pennsylvania National Bank," October
4,1963
Woodbury Bank & Trust Co., Sioux City, Iowa, and
First National Bank in Sioux City, Sioux City, Iowa
(13538), which had merged under the charter and
title of the latter bank (13538), October 11, 1963....
The Farmers Bank of Nansemond, Suffolk, Va., and
The Seaboard Citizens National Bank of Norfolk,
Norfolk, Va. (10194), which had merged under charter
of the latter bank (10194), and with title of "Seaboard
Citizens National Bank," October 18,1963
Long Branch Trust Co., Long Branch, NJ., and The
Monmouth County National Bank, Red Bank, Red
Bank, N J . (2257), which had consolidated under
charter and title of the latter bank (2257), October
22,1963
Clinton Trust Co., Clinton, Mass., and Worcester
County National Bank, Worcester, Mass. (14850),
which had consolidated under charter and title of
the latter bank (14850), October 25, 1963
66
139
140
141
142
144
145
146
147
148
149
150
152
153
154
155
156
The Fidelity National Bank of Twin Falls, Twin Falls,
Idaho (11100), purchased the Hazelton State Bank,
Hazelton, Idaho, October 25, 1963
The First National Bank of Oelwein, Oelwein, Iowa
(5778), purchased the State Savings Bank, Westgate,
Iowa, October 31, 1963
Piedmont National Bank of Spartanburg, Spartanburg,
S.C. (14594), and The South Carolina National Bank
of Charleston, Charleston, S.C. (2044), which had
merged under charter and title of the latter bank
(2044), October 31,1963
Citizens National Bank, Los Angeles, Calif. (5927), and
Crocker-Anglo National Bank, San Francisco, Calif.
(1741), which had merged under the charter of the
latter bank (1741), and under the title "Crocker
Citizens National Bank" (including the decision
thereon by the U.S. District Court, N.D. California,
S.D.), November 1, 1963
The Idaho First National Bank, Boise, Idaho (1668),
purchased the Largelliere Company Bankers, Soda
Springs, Idaho, November 1, 1963
The Johnsonburg National Bank, Johnsonburg, Pa.
(4544), and The Warren National Bank, Warren,
Pa. (4879), which had merged under the charter and
title of the latter bank (4879), November 29, 1963...
The Delta National Bank, Delta, Pa. (14201), and the
First National Bank & Trust Co. of Red Lion, Red
Lion, Pa. (5184), which had merged under the charter
of the latter bank (5184) and under title of "First
National Bank & Trust Company," November 30,
1963
The Peoples Bank of Rural Retreat, Rural Retreat, Va.,
and Wythe County National Bank of Wytheville,
Wytheville, Va. (12599), which had consolidated
under charter of the latter bank (12599), and under
title "Wythe County National Bank," November 30,
1963
The First National Bank of New Carlisle, New Carlisle,
Ind. (5639), absorbed by The National Bank & Trust
Co. of South Bend, South Bend, Ind. (13987), November 30,1963
Bank for Savings & Trusts, Birmingham, Ala., and
Birmingham Trust National Bank, Birmingham, Ala.
(14569), which had consolidated under charter and
title of the latter bank (14569), December 6, 1963...
The Tootle-Enright National Bank, St. Joseph, Mo.
(6272), and The American National Bank of St. Joseph,
St. Joseph, Mo. (9042), which had consolidated under
the charter of The Tootle-Enright National Bank
(6272), and under title of "The American National
Bank of St. Joseph," December 6, 1963
The Lancaster County National Bank, Lancaster, Pa.
(683), and Farmers Bank & Trust Company of Lancaster, Lancaster, Pa., which had consolidated under
the charter of The Lancaster County National Bank
(683), and under title of "Lancaster County Farmers
National Bank," December 11, 1963
Security State Bank of Turlock, Turlock, Calif., and
The Bank of California, National Association, San
Francisco, Calif. (9655), which had merged under
charter and title of the latter bank (9655), December 13, 1963
Farmers & Merchants Bank of Staunton, Staunton, Va.,
and The Virginia National Bank, Norfolk, Va. (9885),
which had merged under the charter and title of the
latter bank (9885), December 13, 1963
Tidewater Bank & Trust Co., Franklin, Va., and The
Virginia National Bank, Norfolk, Va. (9885), which
had merged under charter and title of the latter bank
(9885), December 13, 1963
The Mogadore Savings Bank, Mogadore, Ohio, and the
First National Bank of Akron, Akron, Ohio (14579),
which had merged under charter and title of the latter
bank (14579), December 20,1963
Pinconning State Bank, Pinconning, Mich., and Peoples
National Bank & Trust Co. of Bay City, Bay City,
Mich. (14641), which had merged under charter and
title of the latter bank (14641), December 31, 1963..
158
159
160
161
204
205
206
207
208
209
211
213
215
216
217
219
220
The Troy Citizens Bank, Troy, Ohio, and The TippCitizens National Bank of Tipp City, Tipp City, Ohio
(3004), and The Citizens National Bank & Trust Co.
of Piqua, Piqua, Ohio (1061), which had merged under
charter of The Citizens National Bank & Trust Co.
of Piqua, and under the title "The Miami Citizens
National Bank & Trust Company," December 31,
1963
**
" • DlSappYOVals
„ , ,
Riggs National Bank of Washington, D.C., Washington, D.C. (5046), and Bank of Commerce, Inc.,
Washington, D.C, May 23, 1963
Maryland National Bank, Baltimore, Md. (13745),
and the Chestertown Bank of Maryland, Chestertown, Md., December 23,1963
Page
The
221
223 .
229
67
/. Approvals
COMMERCIAL BANK OF LEXINGTON, N.G., AND FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
CHARLOTTE, N.C.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
Commercial Bank of Lexington, Lexington, N.C, with
and the First Union National Bank of North Carolina, Charlotte, N.C. (9164),
which had
merged Jan. 2, 1963, under charter and title of the latter bank (9164). The
merged bank at the date of merger had
COMPTROLLER'S DECISION
On October 2,1962, the First Union National Bank
of North Carolina, Charlotte, North Carolina, and the
Commercial Bank of Lexington, Lexington, North
Carolina, applied to the Comptroller of the Currency
for permission to merge under the charter and title of
the former.
First Union operates 49 offices in 22 municipalities
throughout the central portion of the State of North
Carolina. It competes in this area with the Wachovia
Bank and Trust Company, the North Carolina National Bank and the First Citizens Bank and Trust
Company.
It is obvious that the addition of the $19 million
in resources of Commercial Bank to First Union will
not significantly affect the statewide banking structure
in North Carolina.
The primary effect of this proposal will be felt in
Lexington. Located 22 miles south of WinstonSalem, Lexington, a city of 16,000, serves an estimated
63,000 people living within a 15-mile radius in the
heart of the Piedmont industrial triangle. The 18.6%
population increase of Lexington in the last decade
reflects the economic growth of the area during the
same period. What was once a strictly agricultural
community now enjoys a healthy balance of industry
and retail trade along with farming. The 247 retail
establishments in the city reported combined annual
sales totaling $30 million. The many industrial plants
in this area, engaged in making such assorted products
as furniture, textiles, apparel, ceramics, electronic
items and food stuffs, employ some 9,000 persons on an
$22,137,252
3
306,457,267
50
327,013,623
53
annual payroll of $30 million. Twenty or more of
these companies are estimated to have a financial
strength in excess of $1,000,000. This city appears to
be in the vanguard of the economic upsurge that is
now favoring the entire State of North Carolina.
Banking services in Lexington are furnished by the
merging bank with two branches, as well as by the
Lexington State Bank and the Industrial Bank of
Lexington, both single office institutions. Banking
offices in Thomasville and Salisbury, 10 and 17 miles
distant, some of which are branches of the larger statewide banks, also enjoy access to this growing area.
The approval of this application will not adversely
affect Lexington. It will, on the contrary, benefit the
community by making directly available broader services, presently beyond the capacities of the existing
banks. While the Commercial Bank has grown significantly in the last few years, it should be pointed out,
by way of example, that one-third of its loans have
been purchased from the Charter bank, indicating that
its local service could be more attentive. The increased meeting of local needs will definitely be to the
public good.
Having weighed this application in light of the
statutory criteria, we find that it is in the public interest
and it is hereby approved effective on or after January
2, 1963.
DECEMBER 18, 1962.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This merger would continue a trend toward banking
concentration in North Carolina. Applicant First
Union has been among the chief participants in this
trend, having acquired 10 banks with a total of 23
offices since 1958. First Union thus has entered new
areas through the acquisition of independent banks,
rather than by establishing new offices. The other
large North Carolina banks show similar patterns of
expansion.
This development can only inspire further mergers
and slow attrition in the number and competitive position of independent banks. So viewed, the merger is
likely to affect adversely competition in commercial
banking in North Carolina.
THE PEOPLES NATIONAL BANK IN BRUNSWICK, BRUNSWICK, MD., AND FARMERS & MECHANICS-CITIZENS
NATIONAL BANK OF FREDERICK, FREDERICK, MD.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Peoples National Bank in Brunswick, Brunswick, Md. (14044), with
and the Farmers & Mechanics-Citizens National Bank of Frederick, Frederick,
Md. (1267), which had
merged Jan. 11,1963, under charter and title of the latter bank (1267). The
merged bank at the date of merger had
COMPTROLLER'S DECISION
On November 14, 1962, the $54 million Farmers
and Mechanics-Citizens National Bank of Frederick,
Frederick, Maryland, and the $3.5 million Peoples
National Bank of Brunswick, Brunswick, Maryland,
applied to the Comptroller of the Currency for permission to merge under the charter and title of the former.
Frederick, the home of Farmers and Mechanics and
the seat of Frederick County, has a population of
22,000 and serves an estimated 100,000 in the area.
Approximately 45 miles from Baltimore and Washington, D.C., the area in the past has relied upon farming. The county is now experiencing light industrial
growth and there is an increasing amount of residential activity. The city is directly served by four banks
with Farmers and Mechanics, the largest, operating
six branches and two military facilities.
Brunswick, 15 miles southwest of Frederick, is a
railroad town of 3,000 lying along the north bank of
the Potomac River. The B & O Railroad employs
approximately 460, a decrease of 62% since 1956, and
a small knitting mill employs about 50 people. The
futuue expansion of the economy will be slow, relying
primarily upon the residential and service expansion
from the metropolitan area of the District of Columbia. The merging bank and the Bank of Brunswick
serve this town.
Although approval of this application will confirm
Farmers and Mechanics strong position in Frederick
County, adequate competitive banking will remain not
only from other commercial banks in the area, in addi-
$3,641,788
1
54,408,750
7
58,033,507
8
tion to many substantial nonbanking sources, but also
from the westward movement of the much larger
Baltimore banks. While the Bank of Brunswick will
undoubtedly notice the presence of Farmers and
Mechanics as a direct competitor, the availability of
broader services, the ability of a branch of a larger
bank to weather a slow economic pace, and the
strengthening of Farmers and Mechanics, will be in
the public interest.
In weighing this application in light of the statutory
criteria it is found to be in the public interest and is,
therefore, approved effective on or after December 27,
1962.
DECEMBER 20,
1962.
SUMMARY OF REPORT BY ATTORNEY GENERAL
There appears to be a degree of actual and potential
competition between the merging banks which would
of course be eliminated by the merger. Moreover,
Fanners is by far the largest bank in its service area, a
position obtained in part by merger with and acquisition of other banks. The Peoples National Bank is
the largest of two banks located in the town of Brunswick. Thus the merger will add to the dominant
position already held by Farmers in its immediate
service area and replace the largest bank in Brunswick
with its comparatively much larger resources. This
will further endanger the ability of much smaller institutions to effectively compete. The effect of this
merger on competition would be adverse.
69
FIRST NATIONAL CITY TRUST CO., NEW YORK, N.Y., AND FIRST NATIONAL CITY BANK, NEW YORK, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
First National City Trust Co., New York, N.Y. (14853), with
and the First National City Bank, New York, N.Y. (1461), which had
merged Jan. 15, 1963, under charter and title of the latter bank (1461). The
merged bank at the date of merger had
COMPTROLLER'S DECISION
On November 30, 1962, the First National City
Bank, New York, New York, and the First National
City Trust Company, New York, New York, applied
to the Comptroller of the Currency for permission to
merge under the charter and title of the former.
Since 1929 these two institutions have been affiliated,
the shares of the Trust Company, excepting qualifying
shares of directors, being held in trust for the shareholders of City Bank.
This proposal will merely make a corporate unity
of two institutions already regarded as one in the public
mind.
Having weighed this application in light of the statutory criteria it is found to be in the public interest
and it is, therefore, approved, effective on or after
January 15, 1962.
JANUARY 8, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The second largest bank in New York City and the
third largest in the United States, First National City
$95,914,163
8,599, 754, 558
8,663,926,141
1
105
105
Bank (FNCB) with 104 banking offices in the New
York metropolitan area and total assets exceeding $9
billion proposes to merge with its trust affiiliate, First
National City Trust Company (City Trust). The
latter bank has assets of $82 million and specializes
in providingfiduciaryand investment services. Stockholders of FNCB have owned, since 1929, a beneficial
interest in City Trust. Six directors serve both banks
in the same capacity and virtually all the officers of
City Trust hold similar positions with FNCB. In addition, the four banking offices of City Trust are physically located in offices of FNCB. The policy and
direction of both banks reflect their close and long
association.
It is our view, therefore, that the merger would
merely formalize an existing identity of interest and
would not eliminate any real competition between the
participating banks. However, merger would remove
any future possibility of separating the two institutions
from their common ownership and control.
T H E FIRST NATIONAL BANK OF LERAYSVILLE, LERAYSVILLE, PA., AND THE COUNTY NATIONAL BANK OF
MONTROSE, MONTROSE, P A .
Total assets
Name of bank and type of transaction
In operation To be operated
The First National Bank of LeRaysville, LeRaysville, Pa. (6350), with
and The County National Bank of Montrose, Montrose, Pa. (2223), which
had
merged Jan. 16, 1963, under charter of the latter bank (2223), and under
title of "County National Bank of Montrose." The merged bank at the
date of merger had
COMPTROLLER S DECISION
On November 8, 1962, the $1.1 million First National Bank of LeRaysville, LeRaysville, Pennsylvania,
and the $17.2 million County National Bank of Mont-
70
$1, 314,196
17,376,076
18, 690,272
rose, Montrose, Pennsylvania, applied to the Comptroller of the Currency for permission to merge under
the charter of the latter and with the title "County
National Bank of Montrose."
Montrose, the main office location of the Charter
bank, has a population of 2,500 and is located in
Susquehanna County, in northeastern Pennsylvania.
This is primarily an agricultural-residential community
with dairy farming and some industry offering economic support. The county has a population of
33,000 and is served by five banks. Although the
Charter bank is the largest bank in the county, it faces
adequate competitive banking both from other county
banks and from larger banks in Binghamton, New
York, 30 miles north. The Charter bank also operates
branches in Springville, 10 miles south, and in Thompson, 15 miles east.
LeRaysville, 24 miles west of Montrose, is a village
of 400 relying upon dairy farming for its subsistence.
The recent closing of a creamery has left the town
with a sawmill, employing eight, two auto dealers, an
equipment dealer, a garage and two grocery stores.
The town is served only by the merging bank which
has a lending limit of $15,000 and makes no installment loans on automobiles or consumer goods.
Although the service areas of the applicant banks
overlap to an extent, it cannot be gainsaid that the loss
of banking competition is minimal, if not non-existent.
There can be no question that the operation of the
LeRaysville bank as a branch of County National will
be of benefit to all concerned.
In weighing this application in light of the statutory
criteria it is found to be in the public interest and is,
therefore, approved effective on or after December 27,
1962.
DECEMBER 20,
1962.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger of The First National Bank
of LeRaysville, LeRaysville, Pennsylvania, and The
County National Bank of Montrose, Montrose, Pennsylvania, would not appear to have significant adverse
effects upon competition.
Each of the participating banks is a small bank and
the only bank in the towns in which they are located.
While they compete to some degree, the amount of
competition eliminated as a consequence of the merger
does not appear to be substantial.
THE GOTHAM BANK, NEW YORK, N.Y., AND ROYAL NATIONAL BANK OF NEW YORK, NEW YORK, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Gotham Bank, New York, N.Y., with
and the Royal National Bank of New York, New York, N.Y. (15029), which
had
merged Jan. 31,1963, under charter and title of the latter bank (15029). The
merged bank at the date of merger had
COMPTROLLER S DECISION
On November 30,1962, the Royal National Bank of
New York, New York, New York, and the Gotham
Bank, New York, New York, applied to the Comptroller of the Currency for permission to merge under
the charter and title of the former. Both of these
institutions are located in New York City.
Royal National Bank of New York, organized in
1925 as Royal Investment and Finance Company, was
chartered as an industrial bank in 1934, as a state bank
in 1954, and received a National charter in 1962. It
operates its main office in Manhattan and two
branches in the Bronx. The Gotham Bank, organized
$33,009,174
2
117,202,989
3
150, 357,056
5
in 1920, operates its main office and one branch in
Manhattan.
Approval of this merger will alleviate a problem of
management in the Gotham Bank created by the
recent loss of four of its most experienced officers.
Moreover, with a broader geographic operating base,
the resulting bank will be better able to face competition from the large and well managed Manhattan
banks to the obvious benefit of the banking structure
in the New York City metropolitan area.
Having weighed this application in light of the statutory criteria it is found to be in the public interest and
is hereby approved effective on or after January 18,
1963.
JANUARY 11, 1963.
71
SUMMARY OF REPORT BY ATTORNEY GENERAL
The Royal National Bank had, as of October 31,
1962, total assets of $115,082,000, total deposits of
$102,605,000 and net loans and discounts of $59,630,000. This bank has three banking offices; a head
office in Manhattan's garment district and two
branches in the Bronx.
As of October 11,1962, the Gotham Bank, with total
assets of $37,004,000, total deposits of $34,165,000 and
net loans and discounts of $12,820,000, had two banking offices in Manhattan; a head office in the wholesale jewelry district and a branch in the clothing
district.
The Manhattan offices of the participating banks
are located less than 2 miles apart in the midst of one
of the great commercial centers of the world. The
banks have shared in the financial success of these local
areas. The merger, however, would reduce the number of available commercial banks at a time when, in
view of the anticipated economic growth of the areas
involved, more rather than fewer banks are needed.
In addition, the merger by eliminating another independent bank, would eliminate existing competition
between the merging institutions and accelerate the
trend toward concentration of banking resources in
New York City. Thus the effect of the merger on
existing and potential competition would be adverse.
T H E PEOPLES NATIONAL BANK & TRUST CO. OF LYNCHBURG, LYNCHBURG, VA., AND FIRST & MERCHANTS
NATIONAL BANK OF RICHMOND, RICHMOND, VA.
Total assets
To be operated
The Peoples National Bank & Trust Co. of Lynchburg, Lynchburg, Va. (2760),
with
and the First & Merchants National Bank of Richmond, Richmond, Va.
(1111), which had
merged Jan. 31,1963, under charter and title of the latter bank (1111). The
merged bank at the date of merger had
COMPTROLLER'S DECISION
On November 6, 1962, the First & Merchants
National Bank of Richmond, Richmond, Virginia, and
the $35.4 million Peoples National Bank & Trust Company of Lynchburg, Lynchburg, Virginia, applied to
the Comptroller of the Currency for permission to
merge under the charter and title of the former.
First & Merchants is the largest bank in Virginia
and maintains its main office in Richmond. Its primary area of influence is in this city where it operates
19 branches with another approved but unopened.
These Richmond area branches include three in
Petersburg, two in Hopewell, and two in Colonial
Heights, all within 25 miles of Richmond. First &
Merchants also serves two other distinct areas of the
State. It has two branches in Staunton and five
branches in Newport News, all acquired this year
through merger and operated as branches under an
enlightened law passed by the Commonwealth of
Virginia early this year.
Throughout its present sphere of direct access, First
& Merchants faces strong financial competition from
many sources including individual banks, some of
72
$37,762,325
368,894,295
405,939,470
34
which are members of holding companies, and many
nonbank institutions. The addition of the resources
of Peoples National to the present stature of First &
Merchants will have no adverse impact on those areas
the bank now serves. It will, on the contrary, enhance
First & Merchants' position to a degree by broadening
its base of operations and additionally concentrating
resources necessary to compete with many sources
which, because of larger capabilities, are able to attract
many of Virginia's prime, local credits to financial
centers outside the State itself. The advent of increased resources in this and other Virginia banks will
add immensely to the retention of banking business
and profits so necessary to local and statewide growth.
The primary effect of this proposal will be felt in
Lynchburg, a city of 55,000 situated on the James
River. It is the main city in a four-county area in the
Piedmont region of west-central Virginia, encompassing an estimated 150,000 people. The city has had
a population growth of 15% in the last decade with
industrial payrolls leaping from $26,000,000 in 1954
to $90,000,000 in 1960. The local use of gas, water,
and electricity has tripled in the last 10 years. While
rural areas continue to offer economic support, the
city is primarily based upon industry. Industrial
expansion and relocation in this area is indicative, not
only of the past growth, but indeed of the future
potential of the entire area of southwest Virginia.
This 4-county area is primarily served by 8 banks
with 30 banking offices. In Lynchburg, itself, are
The Peoples National Bank, the $38.7 million First
National Trust & Savings Bank, a member of United
Virginia Bank Shares, and the $44.7 million Lynchburg National Bank & Trust Company. Four other
banks serve the further reaches of this area ranging in
size from $3 million to $12 million. Another important force is The First National Exchange Bank of
Virginia, headquartered in Roanoke. This bank has
two branches in Bedford which compete directly with
two branches of Peoples National located in Bedford
and Big Island. Effective competition for larger industrial credits also stems from out-state sources in
North Carolina, Maryland, and other areas.
The entry of First & Merchants directly into the
Lynchburg area will definitely be in the public interest.
The injection of needed resources directly into this
industrial community will provide broader services and
the ability to emphasize all areas of finance will be
especially beneficial both to individual and industrial
customers. The increase in banking competition in
Lynchburg itself, and especially in the Bedford area,
is also advantageous. The remaining banks in the
area will certainly feel the increased pace of First &
Merchants, but all should be able to grow within their
structural limitations.
Having weighed the facts of this case in light of the
statutory criteria, we find that the transaction is in the
public interest and it is hereby approved effective on or
after December 24,1962.
DECEMBER 17,
1962.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger of the Peoples National Bank
& Trust Company of Lynchburg, Lynchburg, Virginia,
into the First and Merchants National Bank of Richmond, Richmond, Virginia, would appear to have
probably serious adverse effects upon competition. It
would eliminate the third largest bank in Lynchburg
as an independent commercial banking facility. First
and Merchants would become the dominant bank in
Lynchburg, having over three times combined deposits
of the three other banks in Lynchburg. It would continue the trend toward concentration in commercial
banking in the State of Virginia and would result in
First and Merchants having over 9 percent of all IPC
deposits in the State of Virginia.
THE FIRST NATIONAL BANK OF LA VERNE, LA VERNE, CALIF., AND T H E UNITED STATES NATIONAL BANK OF
SAN DIEGO, SAN DIEGO, CALIF.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
The First National Bank of La Verne, La Verne, Calif. (9599), with
and The United States National Bank of San Diego, San Diego, Calif. (10391),
which had
merged Feb. 8,1963, under charter and title of the latter bank (10391). The
merged bank at the date of merger had
COMPTROLLER S DECISION
On November 20, 1962, the $194 million United
States National Bank of San Diego, San Diego, California, and the $7.9 million First National Bank of
La Verne, La Verne, California, applied to the Comptroller of the Currency for permission to merge under
the charter and with the title of the former.
San Diego is the third largest city in California with
an estimated population of 617,000. It is the seat of
San Diego County, which has a population in excess of
$8,060, 607
1
203,078, 860
27
211,139,467
28
1,120,000. The area economy is based primarily on
aircraft and related industries, United States Government military facilities, tourists, the tuna industry and
agriculture. The county serves as the trade center
for the lower half of southern California. Within this
trade area there are several very large banks competing
with United States National. Among these banks are
the First Western Bank and Trust Company of San
Francisco, the Bank of America National Trust &
Savings Association, the United California Bank,
Security First National Bank, The First National Trust
73
and Savings Bank of San Diego, and the San Diego
Trust & Savings Bank. Competition from nonbanking financial institutions is also substantial.
In addition to its main office in San Diego, the
United States National Bank operates 26 branches
throughout the southern half of California. Prior to
1950 it was a single unit bank, but since that time it
has merged with three small banks and thus acquired
six offices and approximately $46 million in deposits.
The remainder of its expansion was accomplished
through de novo branching.
La Verne is situated at the foot of the San Gabriel
mountains and is approximately 35 miles east of downtown Los Angeles and 90 miles north of San Diego.
Its population is approximately 6,500 and its trade
area includes an additional 25,000 to 30,000 people.
For many years the economy of the area was based
upon citrus fruit production. In recent years, however, the sale of land for residential and industrial
development has virtually eliminated the citrus business, and light manufacturing has increased steadily
in the area. Although The First National Bank of La
Verne is the only bank in the town, the Bank of America and Security First National Bank, the State's two
largest banks, have offices within First National's primary service area. Needless to say, these banks
provide formidable competition.
Unfortunately The First National Bank of La Verne
has had difficulty meeting this competition. It is
handicapped by severe personnel and management
succession problems which are brought into sharp focus
by the imminent retirement of its president. Because
of its size, this bank has been unable to provide a retirement plan or other employment benefits sufficiently
attractive to retain a competent staff and executive
officers. The Board, as a means of solving this problem proposed this merger.
It is quite clear that this merger will solve the management succession problem by providing depth and
continuity of competent replacements and will do
much to cure the personnel problem by offering a
satisfactory employee benefit plan. It will also improve the competitive situation in the area through
the establishment of an office of an additional relatively larger bank, better able to compete effectively
with the Bank of America and Security National Bank.
Opponents to this merger claim that this is another
instance where a small unit bank is being forced to
merge due to substantial competition from larger
banks. The operative cause of the difficulty of this
independent bank is not due to competition from the
large banks, but rather, it results from the failure of
the small bank to compete aggressively within the
scope of its capabilities. It has been demonstrated
time and again that relatively small banks can compete very effectively when managed by alert officers
who are responsive to the constantly changing needs
of the communities they serve. This demonstration
has been particularly noticable in California where
numerous small banks have established their own
branch networks and where 23 new banks were
granted charters during 1962, and where those opened
have enjoyed spectacular success in direct competition
with the large banks.
Applying the applicable statutory criteria to the circumstances of this case, I find that the merger is in the
public interest and it is therefore approved, effective
on or after February 8,1963.
FEBRUARY 1, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
In substance, the proposed merger would eliminate
potential competition between the merging institutions
and eliminate still another relatively small independent bank from a growing area by permitting its absorption by a large California bank, thus furthering the
trend toward concentration of all banking resources in
California in the hands of a few large banks. In this
light the effect of the merger on competition would be
adverse.
T H E FIRST NATIONAL BANK OF DOLGEVILLE, DOLGEVILLE, N.Y., AND T H E ONEIDA NATIONAL BANK & TRUST
Co. OF CENTRAL NEW YORK, UTICA, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The First National Bank of Dolgeville, Dolgeville, N.Y. (6447), with
and The Oneida National Bank & Trust Co. of Central New York, Utica, N.Y.
(1392), which had
merged Feb. 21, 1963, under charter and title of the latter bank (1392). The
merged bank at the date of merger had
74
$6, 553,245
1
143, 226,704
14
149,779,949
15
COMPTROLLER S DECISION
On December 6, 1962, The Oneida National Bank
and Trust Company of Central New York, Utica, New
York, and the $6.5 million First National Bank of
Dolgeville, Dolgeville, New York, applied to the
Comptroller of the Currency for permission to merge
under the charter and title of the former.
Utica, with a population of 100,000, is located in
central New York. Formerly a textile center, the area
has made a successful transition to heavy industry and
electronics. The estimated 145,000 people in the area
are supported by a well diversified and growing
economy.
Utica is served by the applicant Oneida National,
with 3 of its 13 branches in the city; by 3 offices of the
Marine Midland Trust Company of the Mohawk Valley, a subsidiary of the Marine Midland Corporation;
by the Savings Bank of Utica; and, by the smaller,
Bank of Utica. Savings and loan associations and
other nonbank financial sources complete the structure. The addition of the resources of First National
to those of Oneida National will cause no significant
effect upon banking in the Utica area.
Dolgeville, 30 miles east of Utica, has a population
of 3,000 with an additional 1,500 in the area. Four
local industries employing 1,000, and dairy farming,
support the steady economy. While First National is
the only bank in Dolgeville, two banks in Little Falls,
8 miles southeast, and branches of Marine Midland
in Ilion, Herkimer, and Middleville; 18, 15, 8 miles
from Dolgeville, also service the area. Approval of
this application should heighten the competitive
atmosphere in this section of the county.
First National, which operates no branches, has
shown a substantial decline in the quality and quantity of its loans. Its high loss rate has resulted in
unsatisfactory earnings, and its substantial decrease in
farm loans in the area in view indicates that it has not
been aggressively serving the convenience and needs
of the area.
Approval of this transaction will bring the direct
availability of increased sources coupled with sound
and aggressive management to the Dolgeville community. In addition, the city of Dolgeville, which, in
the past has been covered by the home office protection aspect of the New York Branch Law, will be open
to de novo branching, should conditions warrant. It
is not unlikely that First National would have been a
more competitive institution had it not been immunized by this law.
In weighing the facts of this case in light of the
statutory criteria it is found to be in the public interest
and is hereby approved, effective on or after January
30, 1963.
JANUARY 23, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The Oneida Bank is one of two dominant banks
located at Utica, New York, servicing through branch
offices all of Oneida and Herkimer Counties. It has
experienced substantial growth during the past two
decades, expanding its deposits tenfold. Since 1955,
it has consummated five acquisitions of formerly independent commercial banks, gaining thereby deposits in
excess of $31 million and loans in excess of $13 million.
The First National Bank is the only bank located in
Dolgeville. It too has had a substantial growth since
1940, expanding deposits by more than 200%. This
institution has always been a profitable venture, with
average annual net current operating income during
the past 5 years of $118,000.
Consummation of the proposed merger will transform the only bank at Dolgeville into a branch office,
increase the resources and power of Oneida Bank substantially, encourage further mergers which may eliminate the four independent banks remaining in the
resulting Bank's service area, and continue the series
of acquisitions by which Oneida Bank has substantially
augmented its resources and power during the past 7
years. Accordingly, the effect of this merger on
competition will be adverse.
THE SOUTH FALLSBURG NATIONAL BANK, SOUTH FALLSBURG, N.Y., AND T H E NATIONAL BANK OF LIBERTY,
LIBERTY, N.Y.
Name of bank and type of transaction
Banking offices
Total assets
In operation To be operated
The South Fallsburg National Bank, South Fallsburg, N.Y. (11809), with
and The National Bank of Liberty, Liberty, N.Y. (10037), which had
consolidated Feb. 21,1963, under charter of the latter bank (10037) and under
title of "Community National Bank." The consolidated bank at date of
consolidation had
$6, 591, 378
15,510,467
22, 060, 002
2
1
3
75
COMPTROLLER'S DECISION
On November 27, 1962, the $16.2 million National
Bank of Liberty, Liberty, New York, and the $7.4 million South Fallsburg National Bank, South Fallsburg,
New York, applied to the Comptroller of the Currency
for permission to consolidate under the charter of the
former and under the title, "Community National
Bank."
The National Bank of Liberty operates its sole office
in Liberty, New York, a town of 4,850. The consolidating bank, South Fallsburg National Bank, is the
only bank headquartered in South Fallsburg, a community of 1,400. In 1961 it established a branch
office in Woodbourne, a village of 1,000, about 4 miles
south of its main office and 7 miles southeast of the
charter bank. Neither bank has ever been a party to
a reorganization. Both are small, well and conservatively managed institutions, service conscious and alert
to the needs of their communities.
The subject banks are located in Sullivan County, a
prosperous, growing area 100 miles from the New York
City complex which can be reached in 2 hours by
car overfirst-classhighways. While Sullivan County
is a large producer of eggs and sold $13.5 million
worth in 1959, principally in the New York market, it
is best known because of its fortunate location in the
Catskills, as the resort center of the East. Originally
a summer resort whose woods and lakes offered a respite to city residents from the summer's heat, Sullivan
County in recent years has also become a winter resort
with the development of ski-slopes, indoor swimming
pools and variegated activities for its visitors allowing
many of the hotels to operate on a year-round basis.
The county is well-banked, with 7 commercial banks
operating 11 offices. The largest of these is the $26.5
million, 3-office Sullivan County National Bank.
While there are no savings banks in Sullivan County,
there are five small credit unions. Some competition
is offered by two commercial and one savings bank in
Ellenville, Ulster County, 17 miles east-southeast of
Liberty. The $58 million County National Bank located in Middletown, 26 miles southeast of Liberty,
also makes loans in Sullivan County. New York banks
are not as yet very active in the area.
It is not to be disputed that approval of the consolidation will eliminate a moderate amount of com-
76
petition between the participating banks. This loss
will be offset, however, by the intensified competition
the resulting bank will be capable of offering to the
Sullivan County National Bank. Though the consolidation will eliminate the only locally owned bank from
South Fallsburg, it will substitute in its stead a bank
more capable of satisfying the ever larger demands
for credit which accompany the costly development
of resort facilities. Loan participations between these
banks highlight their present difficulty in individually
servicing local borrowers. The demands of the area's
resort and poultry industries for an additional source
of adequate credit, more responsive to both their seasonal and long range needs, will be better satisfied by
the resulting bank than it could be by banks or lenders
from other regions.
The combined resources may also warrant the introduction of new services not presently offered by
either bank and the combined management will safeguard a growing future of both the banks and the
communities they serve.
Upon consideration of the factors of this case in
light of the relevant statutory criteria, it is our decision
that this consolidation is in the public interest, and
it is therefore approved, effective on or after February
8, 1963.
FEBRUARY 1,
1963.
SUMMARY OF REPORT BY THE ATTORNEY GENERAL
A consolidation of these banks would eliminate both
present and future competition between them. The
resulting Bank would be substantially larger than all
of its competitors save one, The Sullivan County National Bank. This latter bank and another competitor
of the resulting Bank, The Sullivan County Trust Company, have recently engaged in merger activity. Because of its relatively large size, the resulting Bank may
stimulate more merger activity by its competitors.
Thus, this consolidation of two growing independent
banks will continue a trend toward banking concentration now under way in Sullivan County, and will extinguish competition, present and prospective, between
the consolidating banks.
For these reasons, the effect of this consolidation on
banking competition in Sullivan County is likely to be
substantially adverse.
T H E DOMINION NATIONAL BANK OF BRISTOL, BRISTOL, VA., AND T H E FIRST NATIONAL EXCHANGE BANK OF
VIRGINIA, ROANOKE, VA.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Dominion National Bank of Bristol, Bristol, Va. (4477), with
and The First National Exchange Bank of Virginia, Roanoke, Va. (2737),
which had
merged Feb. 28,1963, under charter and title of the latter bank (2737). The
merged bank at the date of merger had
COMPTROLLER'S DECISION
On December 28, 1962, The First National Exchange Bank of Virginia, Roanoke, Virginia, and the
$23 million Dominion National Bank of Bristol, Bristol, Virginia, applied to the Comptroller of the Currency for permission to merge under the charter and
title of the former.
Roanoke, the fourth largest city in the Commonwealth, is the trading center for southwest Virginia.
It has a rapidly expanding economy, well diversified,
with a very bright future. The city is served by First
National Exchange with eight offices and one approved but unopened; by the smaller Colonial American National Bank with four offices, and by the
Mountain Trust Bank with five offices. A branch of
The Bank of Virginia, in Roanoke, and banks in Salem, adjoining Roanoke, one of which is included in
the recently approved Virginia Commonwealth Corporation, complete the competitive banking structure
of the Roanoke City area.
Bristol, 155 road miles southwest of Roanoke on the
Virginia-Tennessee State line, is located in the "TriCities" area of Bristol, Johnson City, Tennessee, and
Kingsport, Tennessee. The State line divides the city
into Bristol, Virginia, and Bristol, Tennessee. The
combined city has a population of 35,000, an increase
of 9.7% in the past 10 years, and serves an area containing an estimated 113,000 people. The diversified
economy, with a pool of industrial, agricultural, and
educational talent, provides a broad base for continued
economic expansion. Retail sales in the area have increased 82% since 1948. Bristol is served by Dominion National with three offices; by two branches of the
$63 million First National Bank of Sullivan County,
Kingsport, Tennessee; by a branch of the Tri-City
Bank and Trust Company, Blountville, Tennessee; by a
branch, 1 mile east of Bristol, of the Farmers Exchange
$24, 892, 600
3
148,534,162
10
172,061, 507
13
Bank, Abingdon, Virginia; and by the Washington
Trust and Savings Bank. The Virginia Commonwealth Corporation is now seeking to acquire the latter
institution. Seven savings and loan associations and
17 small loan companies complete thefinancialpicture.
Dominion National, while showing some growth in
the past, has remained static for the last 3 years.
Characterized by sound, but extremely conservative
management, it is only modestly loaned in a rapidly
expanding area and has a minimal commitment of its
funds in consumer credit in a growing city which supports 17 personal loan companies. The age of Dominion's management, plus its reluctance to pay
reasonable salaries, presents a real problem of management succession and management depth. Based
upon past performance, it appears that no change will
be initiated from within.
The inculcation of aggressive and highly competent
management, through merger with First National Exchange, will be of particular benefit to Dominion.
Increased emphasis on all phases of banking activity
can but improve banking service and stimulate this
growing community. The addition of the merging
bank to First National Exchange will further
strengthen the latter bank and will provide a portion
of the concentration of resources necessary to meet the
growing demands of the expanding economy of
southwest Virginia.
In weighing the factors of this case in light of the
statutory criteria it is found to be in the public interest
and is hereby approved, effective on or after February
13, 1963.
FEBRUARY 6, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The First National Exchange Bank of Virginia had,
as of November 30,1962, assets of $150.8 million, total
deposits of $135.5 million, and loans and discounts of
77
$79.3 million. It operates six offices in Roanoke, two
in Bedford and two in Blacksburg. Authorization has
been granted for a new branch at Salem, Virginia.
The Dominion National Bank of Bristol had, as of
November 30, 1962, assets of $23.8 million, total deposits of $21.6 million, and loans and discounts of $8.3
million. It operates three offices, all in Bristol.
Home offices for the two banks are over 150 miles
apart, thus they serve for the most part different areas.
Consummation of the merger will mean a further
advance in the trend toward supplanting small, independent banks in Virginia by large consolidations.
THE SECOND NATIONAL BANK OF CUMBERLAND, CUMBERLAND, MD., AND T H E FIRST NATIONAL BANK & TRUST
Co. OF CUMBERLAND, CUMBERLAND, MD.
Name of bank and type of transaction
Total assets
In operation To be operated
The Second National Bank of Cumberland, Cumberland, Md. (1519), with
and The First National Bank & Trust Co. of Cumberland, Cumberland, Md.
(381), which had
merged Mar. 8,1963, under charter of the latter bank (381) and under title of
"The First-Second National Bank & Trust Company." The merged bank
at the date of merger had
COMPTROLLER S DECISION
On November 26, 1962, The Second National Bank
of Cumberland, Cumberland, Maryland, and The
First National Bank and Trust Company of Cumberland, Cumberland, Maryland, applied to the Comptroller of the Currency for permission to merge under
the charter of the latter with the title, 'The FirstSecond National Bank and Trust Company."
Both of these banks are located in Cumberland, the
county seat of Allegany County. The city has a population of 33,400 and is located in westernmost Maryland at the West Virginia line, 5 miles south of the
Pennsylvania border. It is the largest city in Western
Maryland and the third largest in the State. Cumberland is now second only to Baltimore in value of
goods produced, having shown an increase of 35% in
the last 8 years. It ranks fifth in the State in total
bank deposits and the economy of the area is well
diversified, employment and payrolls doubling since
1956. The 183,000 people in the general service area
now enjoy a well-balanced economy with such companies as Celanese Corporation of America, KellySpringfield Tire Company, Pittsburgh Plate Glass, and
the Divisional headquarters of the Western Maryland
and the Baltimore and Ohio Railroads forming the
base.
Cumberland is served directly by the merging banks;
by the $35 million Liberty Trust Company with three
branches outside the city; by the $4 million Cumberland Savings Bank; and, by the First Federal Savings
78
$19,834,949
18,479,764
38, 386,461
and Loan with $22 million in withdrawable shares.
Also operating within a 25-mile radius of Cumberland
are 13 commercial banks, 21 credit unions, and 10
branches of national sales-finance and personal loan
companies. Additional banking competition for local
trust business and industrial credits stems from the
large banks in Baltimore and Pittsburgh. It should
be especially pointed out that the First Federal Savings
and Loan Association accounts for 26% of all savings
and 44% of all loans generated in Cumberland. This
fact is extremely salient to an appraisal of existing and
resulting banking competition in Cumberland.
First National, with $18 million in resources, was
chartered in 1812 as a State bank and received its
National charter in 1864. It operates a drive-in
branch in the city. Through retirement, the bank has
lost the services of both the president and cashier within the past year. While the present staff is competent,
there exists a vacuum between the chief executive
officer and the junior men in the bank.
Second National, with resources of $21 million,
received its National charter in 1865 and in 1957
opened its only branch in Cresaptown, seven miles
southwest of Cumberland. This bank recently lost
its president through death, and now faces a most serious management problem for which there is no reasonable hope of solution from within its present ranks.
Since the service areas of these banks are identical,
approval of this proposal would eliminate a certain
amount of direct competition which now exists be-
tween them. The extent of this loss is, however, not
as severe as would appear by a mere recitation of the
location of the two. An analysis of the loan portfolio
bears this out. While First National maintains approximately 55% of its loans in real estate and 21%
in installment credit, Second National on the other
hand essentially reverses this ratio with approximately
60% of its loans in installment credit and only 25%
in real estate. Thus, in the area of lending, the two
banks are more complementary than competitive.
This fact does not affect our appraisal of the effect of
the merger upon banking competition in the area.
Another factor to be considered is the management
situation at both banks. The problem of the availability of management depth has received attention in
many decisions reached by this Office. Management
is, above all else, the key to a bank's success. Without
adequate depth of management, and without the
capacity to provide incentive to attract management
trainees, many small institutions face a problem which
they can solve only through merger or consolidation;
such is the situation that Second National faces. The
gravity of its present management problem is alone
sufficient to compel approval of this merger.
While the banking structure as it now exists in Cumberland appears to be closely analogous to that which
prevailed in Roanoke, Virginia, at the time the First
National Exchange Bank of Roanoke sought to merge
the American Colonial Bank of Roanoke, there is a
vital difference which makes our decision on that
application inapposite. In contrast to the Virginia
banks, which serviced directly and through their correspondent system a 26-county area in the western
part of the State, these Cumberland banks, located in
the narrows of the panhandle of Maryland, can serve
only the two westernmost counties. Because of the
geographical location of the Virginia banks their
growth opportunities through merger and de novo
branching in this wide area of the State were excellent.
Thus, availability of growth opportunities outside the
city of Roanoke was a significant factor in our decision
denying the merger of the two large banks in that case.
This alternative means of growth for these Cumberland banks, however, is very limited. The restricted
number of towns presently of sufficient size to support
a branch or bank effectively circumscribe the ability to
grow through de novo branching, or through other
means of external expansion. Outside of Cumberland, in Garrett and Allegany counties which the participating banks serve, there are only six small individual banks. Hence, the growth requisite to service
adequately the increasing needs of the awakening
economy of Cumberland and to compete effectively
with the well-established and aggressive Liberty Trust
Company must come by other means.
While denial of this application would preserve the
competition existing between the participating banks,
it would perpetuate their management problems, and
would tend to make each of them more attentive to the
lure of the larger Baltimore banks seeking to move
westward on the merger route. Granting the application will, on the other hand, destroy some competition
between them but will resolve pressing internal problems that now vex both banks. The resulting bank,
with adequate management depth, will not only serve
the community better but will furnish more effective
competition for the Liberty Trust Company and the
larger savings and loan association. In addition, the
resulting bank, with new management vigor, can be
expected to resist the blandishments of the larger Baltimore banks and to embark upon an expansion plan
as will obviate any present necessity for entry by the
larger Baltimore banks, by any means, into western
Maryland.
Approval of this merger is responsive to the unique
factors present in the financial market in the Cumberland area. To interpret our decision here as favoring
the merger of the larger banking institutions in a community would be as unwarranted as would such an
interpretation of our decision approving the union of
the First National Bank of Michigan City and the
Merchants National Bank of Michigan City in Indiana. Not only does sound public policy demand
that effective banking competition must be preserved
within a city but also dictates that mergers between
the two of three largest banks in a community should,
in general, be discouraged to avoid all those serious
questions affecting the public interest which can arise
from their fusion. Departures from this policy can be
countenanced only in those unusual situations which
sometimes arise where the community demand for
greater banking resources overrides the benefits to be
derived from existing competition. The merger of two
of the larger Michigan City banks was justified as a
departure from the general rule because they were
clearly included within the primary Chicago trade area
and were part of that City'sfinancialcomplex. Then,
too, they were unable severally to compete effectively
with the large metropolitan banks for the attractive
credit business generated in their community. This
merger, a departure from the general policy, is warranted by the presence of four factors. Cumberland
79
needs more effective banking competition for the
larger credits and other banking needs originating
there. The geography of western Maryland precludes
growth through de novo branching or through mergers
with other banks in the area sufficient to meet the local
demands for greater banking resources. The Cumberland area needs a larger and aggressive bank capable
of giving the Liberty Trust effective and meaningful
competition. An almost complete management
vacuum exists in the Second National, which can
practically be met only through effectuation of this
merger.
In weighing the factors of this case in light of the
statutory criteria it is found to be in the public interest
and is hereby approved, effective on or after February
21,1963.
FEBRUARY 15, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This merger will eliminate the second largest bank
in Cumberland Allegany Counties from competition with the two other large banks in the City and
County. It will eliminate the substantial competition
presently existing between the two participating banks,
which are the second and third largest in the City and
County. It will also eliminate potential competition between the participating banks. Finally, the
proposed merger will concentrate control of over 75%
of total assets and deposits of all banks in Allegany County in the hands of but two banks. The
concentration in the City of Cumberland will be even
more pronounced.
So viewed, the effect of the proposed merger on
competition in the City of Cumberland and in Allegany County is substantially adverse.
T H E FIRST NATIONAL BANK OF BIG STONE GAP, BIG STONE GAP, VA V AND T H E FIRST NATIONAL BANK OF
APPALACHIA, APPALACHIA, VA.
Banking offices
Name of bank ami type of transaction
Total assets
In operation To be operated
The First National Bank of Big Stone Gap, Big Stone Gap, Va. (11765), with
and The First National Bank of Appalachia, Appalachia, Va. (9379), which
had
merged Mar. 9,1963, under charter and title of the latter bank (9379). The
merged bank at the date of merger had
COMPTROLLER S DECISION
On December 10, 1962, the $8.5 million First National Bank of Appalachia, Appalachia, Virginia, and
the $3.6 million First National Bank of Big Stone Gap,
Big Stone Gap, Virginia, applied to the Comptroller
of the Currency to merge under the charter of the
former and with the title, "First National Bank of
Southwest Virginia."
Wise County, in which the participating banks are
located, has a population of 44,000, and is situated in
southwest Virginia adjacent to the Kentucky border
and near the Tennessee border. The charter bank
and merging bank, which operate their sole offices in
Appalachia and Big Stone Gap, Virginia, respectively,
are separated by a distance of about 3 miles and a
large mountain through which there is a pass. The
economy of their common service area, long blighted
by substantial unemployment, historically hinges on
bituminous coal mining, but it also includes general
agriculture, raising beef cattle, tobacco, dairies, and
$3,743,969
1
8,867,207
1
12,611,176
2
lumbering. This service area is slowly emerging from
an economic paralysis caused by the depressed condition of the now mechanized coal mining industry.
Some new small industries, notably a small canning
plant in Big Stone Gap and a small garment factory
in Appalachia, have entered the area.
Both of the subject banks, which are conservatively
managed institutions, are service conscious and alert to
the needs of their communities. However, in recent
years both banks have experienced only limited growth.
The First National Bank of Appalachia, although the
largest commercial bank in Wise County, and one of
the largest located within a 40-mile radius, has been
unable to obtain certain accounts in the area because
of its limited lending capacity. The First National
Bank of Big Stone Gap, one of the smallest competitors
within this radial area, has an even more restrictive
lending capacity.
Although approval of this merger will eliminate
whatever competition which presently exists between
the participating banks, the absorption of The First
National Bank of Big Stone Gap will serve the convenience and needs of the people of Wise County.
The resulting bank will not only be better able to
weather a slow economic pace, but its combined resources of management and capital can serve as a
catalyst in the revitalization of the area's ailing economy. The introduction of new services not presently
offered by either bank, and the availability of greater
resources will enable the resulting bank to compete
more effectively with the non-banking financial institutions headquartered both within and without the
service area. These improvements will also help it to
solidify its competitive position in relation to the larger
commercial banks which are extending their sphere
of activity westward from Roanoke and other eastern
cities. The presence of five other banks in Wise
County and a total of nine other banks within a 40-mile
radius of the resulting bank will afford residents of
the service area ample alternative banking sources.
Having weighed the facts in this case in light of the
statutory criteria, it is our decision that this merger
is in the public interest and, therefore, a merger of the
participating banks under the charter and with the
title of "The First National Bank of Appalachia" is
approved, effective on or after February 25, 1963.
FEBRUARY 15, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The merging banks are unit institutions located 3
miles apart in a coal mining and agricultural area.
The proposed merger will result in the elimination of
some direct competition between the two banks and
will cause the resulting bank to become the largest
bank in the service area. However, the presence of
nine other banks within the service area of the resulting
bank indicates that sufficient alternative banking
sources will remain available. Also, the size of the
resulting bank will not be unduly disproportionate to
that of the remaining banks. We therefore conclude
that the proposed merger will not have a substantial
adverse effect upon competition.
THE AMERICAN BANK & TRUST CO., NEW HAVEN, CONN., AND T H E SECOND NATIONAL BANK OF NEW HAVEN,
NEW HAVEN, CONN.
Banking offices
Name of bank and type of transaction
Total assets
In operation
The American Bank & Trust Co., New Haven, Conn., with
and The Second National Bank of New Haven, New Haven, Conn. (227),
which had
merged Mar. 15, 1963, under charter and title of the latter bank (227). The
merged bank at the date of merger had
COMPTROLLER'S DECISION
On November 23, 1962, The American Bank and
Trust Company of New Haven, Connecticut, and The
Second National Bank of New Haven, New Haven,
Connecticut, applied to the Comptroller of the Currency for permission to merge under the charter and
title of the latter.
The Second National Bank presently operates seven
offices and has another under construction. It is second in size in New Haven. The larger First New
Haven has nine branches and services nearly double
the deposit volume of the charter bank, while the
Union and New Haven Trust Company, operating
five branches, is approximately equal to The Second
National.
The American Bank and Trust Company, fifth
among New Haven's six commercial banks, has shown
$14, 841, 322
2
86,134,983
To be operated
8
100,976, 305
10
little growth, and its lending limit has compelled it to
participate with the charter bank in a number of loans.
Although located in the same city, the merging bank's
service area is distinguishable from that of New
Haven's other banks as demonstrated by the absence
of other banking offices near its own. While the absence of directly competing offices may have helped the
American Bknk in the past, today it is evidence of the
fact that the bank's two locations are out of the main
current of growth and development in New Haven.
Banking in New Haven is highly competitive, with 6
commercial and 3 mutual savings banks operating 47
offices. Two of the savings banks, with combined
deposits in excess of $350 million, are substantially
larger than either the First New Haven National Bank
or the charter bank. Further competition is offered
by banks in nearby Hartford, Bridgeport and Water-
81
bury. New York City institutions, only an hour away
by car, also solicit business in the area.
New Haven and the surrounding area make up a
well-balanced economic complex. A commercial and
financial center, it is both a popular site for manufacturing and industries of all sizes, and the home of Yale
University. The city has been proceeding rapidly
with its extensive redevelopment program intended to
take advantage of its central location at the hub of a
number of super highways tying it to Boston and
nearby New York. While the population has decreased slightly over the last decade, the greater metropolitan area, including the numerous small communities which are economically and culturally
dependent on New Haven, has shown a very substantial increase in size. This shift in population has been
recognized by Second National Bank which is building
a branch in Westville to better serve the suburbs.
The merger will result in a stronger bank, able to
achieve economies of operation and better able to
compete with the First New Haven and the other substantial financial institutions located in the city. The
relative standing of the other area banks will remain
the same. In addition, Second National will gain
offices in areas not presently served by it and will be
able to contribute to the revitalization of those areas.
The stockholders and customers of The American
Bank and Trust Company will gain by its assimilation
into a progressive and growing organization, possessing
an active trust department, adequate reserves of youthful managerial talent and the benefits of automatic
data processing, the utilization of which Second National Bank has begun but which would be beyond the
smaller banks means.
On balancing the facts of this case in light of the
statutory criteria we are of the opinion that the merger
is in the public interest and it is therefore approved,
effective on or after February 7,1963.
FEBRUARY 1, 1963.
SUMMARY OF REFORT BY ATTORNEY GENERAL
The proposed merger would eliminate completely
the active competition existing between the participating banks. It would remove an active independent
competitor from the New Haven area, while adding to
the dominance and concentration in the hands of the
two largest New Haven banks. In light of the competition eliminated between American and Second National, and the degree of banking concentration
presently existing in the New Haven area, we believe
that the proposed merger will have a substantial adverse effect upon competition.
T H E FIRST NATIONAL BANK OF SOUTHAMPTON, SOUTHAMPTON, N.Y., AND SECURITY NATIONAL BANK OF
LONG ISLAND, HUNTINGTON, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The First National Bank of Southampton, Southampton, N.Y. (10185), with
and the Security National Bank of Long Island, Huntington, N.Y. (6587),
which had
consolidated Mar. 15, 1963, under charter and title of the latter bank
(6587). The consolidated bank at the date of consolidation had
COMPTROLLER'S FIRST DECISION
On December 12, 1962, Security National Bank of
Long Island, Huntington, New York, and The First
National Bank of Southampton, Southampton, New
York, applied to the Comptroller of the Currency for
permission to consolidate under the charter and title of
the former.
The Security National Bank of Long Island, whose
assets have grown from $10 million to $250 million
since 1952, was chartered in 1903 and maintained a
82
$15,571,668
1
256,088, 600
34
271, 660, 267
35
single location for half a century. Since 1952, however, it has consolidated with 11 banks and at present
maintains 30 offices, 1 Air Force facility, 3 limited
power branches and has 3 branches approved but unopened. Approval of this application would give
Security National one more branch—the present office
of The First National Bank of Southampton.
Security National's general service area includes the
2 Long Island counties, Nassau and Suffolk, in which
42 commercial and savings banks operate with total
assets of $2.8 billion. In addition, the 2 counties have
28 savings and loan associations, with total assets of
$1.3 billion. Several New York City commercial and
savings banks have established branches in Nassau
County, some on the border of Suffolk County. Numerous other nonbankingfinancialinstitutions saturate
the area.
Both Nassau and Suffolk Counties have experienced
a tremendous population growth in the past decade,
with Nassau doubling its population to 1.3 million,
and Suffolk to 700,000. The Nassau-Suffolk area,
originally devoted to residential and farming use, is
rapidly changing into a large industrial region. Nonfarm employment increased by 125% between 1950
and 1961. Of this amount, manufacturing employment increased by 166%. Now the 19th largest manufacturing center in the United States, it has 2,352 plants
and the payrolls of manufacturing firms, retail stores
and the service trades total almost $1 billion.
Indications are that Suffolk is now in the preferred
position for continued economic growth for many years
to come because it contains the only large undeveloped
region remaining on Long Island. It is anticipated
that Suffolk County will experience growth during the
next few years such as Nassau experienced during the
last decade. The Regional Plan Association has estimated that the population of the Nassau-Suffolk region
will reach 3.5 million by 1985, with almost all of the
increase of 1.4 million coming in Suffolk County.
The First National Bank of Southampton, the consolidating bank, was organized in 1912 and has had
a slow but steady growth to its present $15 million. It
has taken part in no mergers or consolidations, and
does not operate any branches. The bank is in excellent financial condition, but the present management,
all of retirement age, is faced with a severe problem of
succession. No plans have been made for succession
and, in an area characterized by constant economic
growth, aggressive executives will be needed to meet
changing community patterns.
Southampton is in Suffolk County near the eastern
tip of Long Island, and is approximately 65 miles
southwest of Huntington. It has not yet experienced
the growth which has characterized Nassau and the
western edge of Suffolk and which is moving eastward
at a rapid pace. The village is a summer resort, and
the surrounding area is devoted to potato farming,
which activity, however, is slowly decreasing. The
consolidating bank, as the only one in this community
of almost 5,000, is protected from direct banking competition within the limits of Southampton by reason of
the state's home office protection law. It does compete
with three independent banks located in Westhampton,
16 miles west; Hampton Bays, 8 miles west; and
Bridgehampton, 6 miles east. In addition, there is a
savings and loan association within the village of
Southampton.
Although many of the factors present in this case
favor approval of the application, the participation of
a broker in arranging this consolidation is contrary to
the public interest. The charter bank has agreed to
pay a brokerage fee in an amount equal to two-tenths
of one per cent of deposits or a minimum of $25,000,
for promotion of the proposed consolidation, contingent only on approval by this Office. In a recent
application approved by us, a fee in excess of $100,000
was paid. Had we been aware of that fee that merger
would not have been approved since we believe that
this practice in the business of banking is at variance
with the public interest.
Mergers and consolidations are statutory methods
of enabling banks to respond to the needs and convenience of the communities to be served. They are
effective tools whereby banks can either escape from
insoluble internal problems while protecting the public
or foster their growth to the benefit of their communities. It is ultimately the public interest which should
occasion an application to merge or consolidate. The
intervention of a broker raises a serious question as to
whether a particular transaction is in the interest of
the public, the bank, or the shareholders. The desire
of a broker or trader in banks to earn a commission in
generating or arranging the marriage of a bank to the
highest bidder cannot easily be reconciled with the
principle that mergers must serve the public interest.
In order to protect the dominant interest of the
public this Office must carefully weigh the effect of the
presence of such an agreement upon the proposal.
Whether such a brokerage contract to procure the
union of commercial banks is against public policy and
unenforceable in the courts is not for us to decide.
The presence of such a contract, however, is sufficient
to warrant the denial of an application on the grounds
that it does not comport with the public's interest.
After consideration of the unique circumstance of
this case in light of the statutory factors, we find that
the consolidation is not in the public interest and the
application is therefore denied.
FEBRUARY 15,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The Southampton, New York, community of 5,000
people is presently served only by First National, the
acquired bank. This area, along the southeast coast
83
of Long Island, like all of the eastern half of Suffolk
County, New York, is primarily undeveloped and is
composed of small communities. In the eastern half
of Suffolk County the acquiring bank is the largest
bank with nine offices, and a trend can be noted
wherein local control of banking is being eliminated by
acquisitions by large banking institutions, such as the
acquiring bank. It is significant to note that the
acquiring bank has obtained 21 of its present 34 facilities by merger, that in its service area it has over 59%
of the deposits and over 64% of the loan business, and
that it is the third largest bank serving all of Long
Island. The acquiring bank has its main office 60
miles northwest of Southampton, and from that point,
it would control the banking needs of this small town
and would increase to six the number of small towns
in eastern Suffolk County in which the acquiring bank
is the only commercial bank. Thus, Security National
Bank of Long Island would further increase its position in eastern Suffolk County and further affect the
trend toward monopoly control of that area.
COMPTROLLER'S FINAL DECISION
On February 15, 1963, the Comptroller of the
Currency denied the application to consolidate Security National Bank of Long Island, Huntington, New
York, and The First National Bank of Southampton,
Southampton, New York.
The decision noted that although many of the factors present in the case favored approval of the application, the participation of a broker in promoting the
consolidation was contrary to the public interest.
We said, at that time, that, "The intervention of a
broker raises a serious question as to whether a particular transaction is in the interest of the public, the
bank, or the shareholders. The desire of a broker or
trader in banks to earn a commission in generating or
arranging the marriage of a bank to the highest bidder
cannot easily be reconciled with the principle that
mergers must serve the public interest."
On February 28, 1963, the banks requested reconsideration of the application, providing this Office with
a copy of a letter written by the broker agreeing to
forego his fee in this matter. Letters from the banks
and their counsel, copies of which are attached hereto,
have assured the Comptroller that no compensation or
other thing of value has been or will be paid or delivered, either directly or indirectly, to a broker or
intermediary, for promoting or arranging this consolidation. Thus, the one factor present in the case which
was so contrary to the public interest that it compelled
disapproval of the application has been removed.
84
In reliance upon these assurances, we have agreed
to reconsider the application on the basis of the banking, economic and competitive factors which were
discussed in the February 15, 1963, decision. On
reconsideration of the circumstances of this case in
light of the statutory factors, we find that the consolidation is in the public interest and the application is
therefore approved, effective on or after March 14,
1963.
MARCH 7, 1963.
HUNTINGTON, N.Y., February 25,1963.
BOARD OF DIRECTORS,
Security National Bank,
Huntington, Long Island.
GENTLEMEN : President Herman H. Maas and your
Board of Directors have urged me to forego my fee in
connection with the consolidation of The First National Bank of Southampton and your institution.
You have urged this as a means toward facilitating the
consolidation.
I will make this sacrifice if it will be the means of
consummating the present application. This action
is taken in response to your solicitation and as an
expression of regard for both banks concerned.
Very sincerely yours,
PARKER J. LYNCH.
MILBANK, TWEED, HADLEY & MCCLOY,
New York, February 26,1963.
Re: Application to consolidate Security National
Bank of Long Island, Huntington, New York, and
The First National Bank of Southampton, Southampton, New York
Mr. JAMES J. SAXON,
Comptroller of the Currency,
Treasury Department, Washington, D.C.
DEAR MR. SAXON : With reference to your decision
of February 15,1963, this will confirm that Mr. Parker
J. Lynch, the broker referred to therein, has agreed in
writing to forego his fee in connection with the consolidation of Security National Bank of Long Island
and The First National Bank of Southampton. Accordingly, were you to approve the consolidation, no
compensation whatever would be paid to Mr. Lynch
by either Security National Bank or The First National
Bank of Southampton or by any person connected
with either.
On behalf of Security National Bank, I ask you to
reconsider your decision of February 15, 1963, taking
into consideration this change of fact, and most respectfully urge that the Application be approved.
Very truly yours,
FRANCIS H. MUSSELMAN.
MILBANK, TWEED, HANDLEY & MGCLOY,
New York, February 28,1963.
Re: Application to consolidate Security National Bank
of Long Island and The First National Bank of
Southampton
MR. JAMES J. SAXON,
that you reconsider and approve the application to
consolidate this bank and The First National Bank of
Southampton. I hereby confirm to you that no direct
or indirect compensation in any form has been or will
be paid to Mr. Parker J. Lynch in connection with the
proposed consolidation by this bank or by anyone
connected with it.
I most respectfully urge that you approve the
Application.
Very truly yours,
H. H. MAASS,
Comptroller of the Currency,
Treasury Department, Washington, D.C.
DEAR MR. SAXON : I enclose a photo copy of the
letter from Parker J. Lynch agreeing to forego his fee
in connection with the consolidation of Security National Bank and The First National Bank of Southampton. I understand that each bank is writing
directly to you to confirm that no direct or indirect
compensation has been or will be paid to Mr. Lynch
in connection with this consolidation in order that you
may be in a position to reconsider the Application on
the basis of the brokerage commission being eliminated.
Very sincerely yours,
FRANCIS H. MUSSELMAN.
SECURITY NATIONAL BIANK OF LONG ISLAND,
Huntington, N.Y., February 28,1963.
Re: Application to consolidate Security National
Bank of Long Island and The First National
Bank of Southampton
Mr. JAMES J. SAXON,
Comptroller of the Currency,
Treasury Department, Washington, D.C.
DEAR MR. SAXON : Please refer to the request made
on our behalf by our counsel, Francis H. Musselman,
President.
FIRST NATIONAL BANK OF SOUTHAMPTON,
Southampton, N.Y., February 28,1963.
Re: Application to Consolidate Security National
Bank of Long Island and The First National Bank
of Southampton, New York
Mr. JAMES J. SAXON,
Comptroller of the Currency,
Treasury Department, Washington, D.C.
DEAR MR. SAXON : This bank joins in the request of
Security National Bank of Long Island that you reconsider and approve the application to consolidate
Security National Bank of Long Island, and this bank
on the basis of no brokerage commission or fee being
paid to any person in connection with the proposed
consolidation. In doing so, we hereby confirm to you
that neither this bank nor anyone connected with it
has paid or will pay to Parker J. Lynch any direct or
indirect compensation in connection with said consolidation.
Respectfully yours,
J. LAWRENCE HALSEY,
Chairman of the Board.
THE COLUMBUS SAVINGS BANK, COLUMBUS, OHIO, AND T H E HUNTINGTON NATIONAL BANK OF COLUMBUS,
COLUMBUS, OHIO
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Columbus Savings Bank, Columbus, Ohio, with
and The Huntington National Bank of Columbus, Columbus, Ohio (7745),
which had
merged Mar. 16,1963, under charter and title of the latter bank (7745). The
merged bank at the date of merger had
$15,306,740
1
264,474,779
8
278,867,755
9
85
COMPTROLLER'S DECISION
On December 31, 1962, The Huntington National
Bank of Columbus, Columbus, Ohio, applied to the
Comptroller of the Currency for permission to merge,
under its charter and title, The Columbus Savings
Bank, Columbus, Ohio.
Both of these institutions are located in Columbus,
a city of 470,000, which is the capital of Ohio. Columbus, and the metropolitan area in general, has had
good growth and its economy, highly diversified among
industry, education and governmental establishments,
supports an estimated 1,000,000 people in the area.
Columbus Savings is located in the northern portion
of the city in an area which is undergoing necessary
urban redevelopment. This bank is primarily owned,
controlled, and managed by the family of the Chairman of the Board of Huntington National.
Huntington National, with seven branches and one
approved but unopened, is the second largest commercial bank in the city, trailing the Ohio National Bank,
a subsidiary of BancOhio Corporation, by one-half.
Primarily a wholesale bank until recent years, the bank
has felt the need of a broader operating base and has
undertaken a program of expansion into retail banking,
establishing branches within the county both de novo
and through merger.
Because of common ownership and the limited capacities of Columbus Savings, it cannot be said that
much, if any, real competition, either between the two
banks or in the area in general will be eliminated by
approval of this transaction. Nor will the addition of
the resources of Columbus Savings to those of Huntington National materially affect the commercial banking
structure of this area in which highly competent and
well managed BancOhio affiliates constitute the largest
and most influential factor. In addition, substantial
nonbank financial competition is present through 19
savings and loan associations with 25 branches, credit
unions, and numerous high cost small loan and sales
finance companies.
Approval of this transaction will give The Huntington National direct access to the rapidly improving area
under redevelopment now served by the Columbus
Savings which because of the growth will soon outstrip
the capacity of the merging bank. In addition, the
injection of broader resources should provide improved
and lower cost banking services to the area. Most of
all, however, reasonable external expansion by de novo
branching and appropriate publicly beneficial mergers
by the Huntington and the City National banks is
needed if we are to work toward a better balanced
and more competitive commercial banking structure
in the Columbus area.
In weighing the factors of this case in light of statutory criteria, it is found to be in the public interest
and it is therefore approved, effective on or after March
15, 1963.
MARCH 8, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This merger will concentrate control of over 94%
of total assets and total deposits of all banks in Franklin
County in the hands of three banks. The concentration in the City of Columbus will be even more intense.
The merger will eliminate the second largest independent bank in competition with the three large banks.
By so doing, it will give further stimulation to the already accelerated pace of merger and consolidation of
banks in Franklin County. The merger will eliminate
the not insubstantial competition presently existing
between the two participating banks.
So viewed, the effect of the proposed merger on
competition in the City of Columbus and in Franklin
County is substantially adverse.
T H E REYNOLDSBURG BANK, REYNOLDSBURG, OHIO, AND T H E CITY NATIONAL BANK & TRUST CO. OF
COLUMBUS, COLUMBUS, OHIO
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Reynoldsburg Bank, Reynoldsburg, Ohio, with
and The City National Bank & Trust Go. of Columbus, Columbus, Ohio (7621),
which had
merged Mar. 30,1963, under charter and title of the latter bank (7621). The
merged bank at the date of merger had
86
$6,485,751
1
184,249,212
8
190, 576,230
9
COMPTROLLER S DECISION
On November 27, 1962, The City National Bank
and Trust Company of Columbus, Columbus, Ohio,
and The Reynoldsburg Bank, Reynoldsburg, Ohio,
applied to the Comptroller of the Currency for permission to merge under the charter and title of the
former. On February 8, 1963, the applicants requested permission to file supplemental information
to their application. This request was granted by
the Comptroller of the Currency.
Columbus, the capital of Ohio, has a population
of 470,000 and is situated in Franklin County. The
general area encompasses a million people, is highly
industrial, and has a well balanced and diversified
economy.
Reynoldsburg, 10 miles east, is a residential suburb
of Columbus. Its population increased from 724 in
1950 to 7,700 in 1960, and it is now estimated at
10,500. Located in Reynoldsburg are the merging
bank, with resources of $7.2 million, a branch of the
$16 million Ohio State Bank of Columbus, and a
branch of the Ohio Federal Savings and Loan Association.
City National, with $184 million in resources and
six branches, is the third largest bank in the Columbus
area, trailing the $460 million Ohio National with 20
branches, and the $226 million Huntington National
Bank with five branches. Other smaller commercial
banks and a full complement of non-bank financial
institutions complete the competitive banking structure of the Columbus area.
The Reynoldsburg Bank was chartered in 1958.
Concentrating upon retail and installment credit, with
a policy of absolutely minimal service charges, the
bank has shown good growth in the years since its
organization. This growth, however, has now been
effectively stunted, both through internal and external
events.
The bulk of the earnings of The Reynoldsburg Bank
have been from retail installment paper. The loss
of a prime account involving the financing of house
trailers and a significant drop in cash originations of
installment paper in the latter half of 1962 will soon
be evident in the earnings picture of the bank. This
will not, of course, because of the nature of installment
paper, be immediately discernible. In addition, be-
cause of its emphasis on installment credit, The Reynoldsburg Bank has attempted to enter other fields and
is experiencing increased difficulties in competing in
these areas with the branches of Ohio State Bank
and Ohio Federal Savings and Loan Association. The
need for larger capital to properly fund this necessary
shift in emphasis is also a problem for the bank. This
situation is heightened by the construction of an Outerbelt road system which effectively limits the bank's
area of influence to Reynoldsburg itself.
Thus, the present needs of The Reynoldsburg Bank
and the need of The City National Bank for reasonable external expansion augur for approval of this
application if we are to work toward a better balanced
and more competitive commercial banking structure
in the Columbus area where the highly competent and
well-managed BancOhio affiliates constitute the largest and most influential factor.
In balancing the factors of this case in light of the
statutory criteria, the application is found to be in the
public interest and is hereby approved, effective on
or after March 15, 1963.
MARCH 8,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The geographic area in which the participating
banks are situated is characterized by an extremely
high degree of concentration. Three banking institutions, one of which is the acquiring bank, control
over 93% of IPC deposits and loans in Franklin
County, Ohio. Presently, nine banks, seven of which
are on the periphery of the greater Columbus area,
comprise the remaining 7% of the market. The acquired bank, since its incorporation 4 years ago, has
grown at a rate faster than that of the community
which it serves, Reynoldsburg, Ohio. Although this
community has more than tripled its size since 1958,
no evidence is presented indicating that the acquired
bank and its competitor in its main service area, Ohio
State Bank, cannot serve the banking needs of Reynoldsburg. Also, the acquisition would take from
the market a vigorous, young enterprise and would
increase concentration in Franklin County to 94%
being held by three institutions. For these reasons,
the effect of the proposed acquisition on competition
will be substantially adverse.
87
THE HOME SAVINGS BANK OF KALAMAZOO, KALAMAZOO, MICH., AND T H E AMERICAN NATIONAL BANK &
TRUST CO. OF KALAMAZOO, KALAMAZOO, MICH.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Home Savings Bank of Kalamazoo, Kalamazoo, Mich., with
was purchased Mar. 30,1963, by The American National Bank& Trust Go.
of Kalamazoo, Kalamazoo, Mich. (13820), which had
After the purchase was effected, the receiving bank had
COMPTROLLER S DECISION
On December 26, 1962, The American National
Bank and Trust Company of Kalamazoo, Kalamazoo,
Michigan, applied to the Comptroller of the Currency
for permission to purchase the assets and assume the
liabilities of The Home Savings Bank of Kalamazoo,
Kalamazoo, Michigan.
Both of these institutions are headquartered in Kalamazoo, a city of 85,000 people which, as the county
seat, serves an estimated 177,000 people in the area.
The city is in southwest Michigan, approximately 130
miles west of Detroit and 19 miles west of Battle Creek.
The economy of the area is based upon local, national,
and international manufacturing with pharmaceutical
and paper products as the core. Three colleges are
also located in the community. The city's growth has
been good; its population has increased 42% from
1950 to 1960; and its soundly based economy has a
bright future.
Thefinancialservices available to the area emanate
primarily from four commercial banks and three savings and loan associations. The large companies
operating in Kalamazoo, of course, satisfy their larger
credit needs from sources in such other cities as Chicago, Detroit and Cleveland. Applicant American
National, with resources of $69 million, operates seven
offices and has received permission to establish two
additional offices in the area. Home Savings, which
has resources of $8 million, operates only from its main
office in the city. Two other commercial banks, the
$98 million First National Bank and Trust Company
with 10 offices and the $33 million Industrial State
Bank with 9 offices, complete the commercial banking
picture in the city.
The three savings and loan associations with 14
offices have resources of $62, $33 and $31 million,
respectively, and are an effective competitive force for
funds and mortgage loans in the area.
Home Savings has not grown apace with either the
local economy or the other banks and its conservative
$10, 273,000
1
76,711,000
85,763,000
7
8
approach has contributed greatly to its present lack of
management succession. In addition, in the past year
the bank has lost three experienced men, two through
death and one through resignation. The President,
also the major stockholder, has been sole senior management of the bank since 1947, and now, recovering
from a recent illness, he makes the daily decisions by
telephone from Florida. The salaries the bank pays
are low, and responsibility is exercised by the President
alone. The willingness to attract management by
offering a reasonable chance for responsibility and advancement appears to be nonexistent and it strains
credulity to expect that these many years of too tight
control will suddenly change.
In view of this situation, the President was considering a voluntary dissolution of The Home Savings Bank
when the proposed purchase was offered as a substitute
for a long, drawn out, piecemeal dissolution, which
would, of course, bring considerable inconvenience to
its depositors.
The addition of the resources of Home Savings to
those of American National would not materially
change the relative position of the remaining banks,
either from the standpoint of capacity to compete or
preeminence in the banking structure. In addition,
although the office of Home Savings will be closed
when the accounts have been transferred, this diminution by one of banking offices in town will not materially affect the convenience of the banking public.
The availability of deeper management and trust
services, plus the service to be rendered to the community by the orderly resolution of the present problems facing Home Savings, outweigh any possible loss
to banking competition occasioned by the passing of
Home Savings. A well-balanced structure will remain and should serve the city well.
In balancing the factors of this case in light of the
statutory criteria the transaction is found to be in the
public interest and is hereby approved effective on or
after March 8,1963.
MARCH 1, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed purchase of assets and assumption of
liabilities of the Home Savings Bank of Kalamazoo,
Kalamazoo, Michigan, by the American National
Bank and Trust Company of Kalamazoo, Kalamazoo,
Michigan, would appear to have significant adverse
effects upon competition.
The proposed transaction would reduce the number
of banks located in Kalamazoo, Michigan, from four
to three. It would permanently deprive an area with
a highly favorable potential for economic growth and
expansion of the services of the acquired bank.
Finally, in consideration of the disparity in IPG deposits and loans and discounts that would exist among
the remaining banks the survival of Industrial State
Bank as a competitive independent banking facility
is doubtful.
THE FIRST NATIONAL BANK OF MIDDLEBURG, MIDDLEBURG, PA., AND T H E FIRST NATIONAL BANK OF SELINS
GROVE, SELINSGROVE., PA.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The First National Bank of Middleburg, Pa., Middleburg, Pa. (4156), with
and the First National Bank of Selins Grove, Selinsgrove, Pa. (357), which
had
merged Apr. 1, 1963, under charter of the latter bank (357), and under the
title of "Tri-County National Bank." The merged bank at the date of
merger had
COMPTROLLER S DECISION
On December 26, 1962, The First National Bank of
Middleburg, Pennsylvania, Middleburg, Pennsylvania,
and The First National Bank of Selins Grove, Selinsgrove, Pennsylvania, applied to the Comptroller of the
^Currency for permission to merge under the charter of
the latter and with the title "Tri-County National
Bank." Permission was also requested to relocate the
main office of the resulting institution in Middleburg.
The $10.7 million First National Bank of Middleburg is located in Middleburg, Pennsylvania, a town
of approximately 1,400 and the county seat of Snyder
County. During the past 10 years it has expanded by
consolidation with three banks which it now operates
as branches, two of which are in the same county and
the third in adjacent Juniata County. The economy
of the surrounding area is based primarily on agriculture, a variety of crops being raised in addition to fruit,
dairy and poultry farming.
The charter bank, the $5.3 million First National
Bank of Selins Grove, is located 10 miles east of Middleburg in the largest municipality in the county. Selinsgrove, with a population of 4,100, is the trading center
for the farming population in the eastern part of Snyder
County. The charter bank competes with the $10.4
million Snyder County Trust Company of Selinsgrove
and the Shamokin Dam Branch of the $26.7 million
First National Bank of Sundry. The Swineford Na725-698—64
T
$11, 584, 887
5, 760,
17, 354, 822
4
1
5
tional Bank, Middleburg, the Susquehanna Valley
Bank & Trust Co., and The Northumberland National
Bank, Northumberland, are also competitive. While
all of these banks compete to some extent with the
Middleburg Bank, only the Swineford National Bank,
located one-half mile east of Middleburg, is less than
10 miles away.
Competition between the merging banks, located 10
miles apart, is minimal. This competition will, of
course, be removed by the merger. The merger, however, will introduce into Selinsgrove, the larger community, a more aggressive bank able to compete with
the other strong banking institutions in the area and
more able to serve both the increasing variety of small
industries and the agricultural units in the area. The
competitive impact of this merger on the existing banks
in the area will not be detrimental to the public interest
for, while the resulting bank will be the largest institution in Snyder County, it will be but second in size
in the Tri-County area. Middleburg and Selinsgrove
will still have two banks each, in addition to numerous
other banking alternatives available to serve the convenience and needs of the people.
Customers of the Selins Grove Bank will benefit by
a variety of new facilities and services presently offered
by the Middleburg Bank but not by the Selins Grove
Bank. The increased availability of loans in larger
amounts should benefit the area which, because of its
proximity to the heavily traveled "Susquehanna Trail,"
89
is likely to show substantial gains in the future. No
adverse effects will accrue to the Middleburg
community.
The First National Bank of Selins Grove, through
its pursuit of ultraconservative policies for many years,
has seen a movement of business away from it to its
more progressive and active competitors. It is presently faced by almost insurmountable management
problems; the bank's present staff is overburdened, and
it is unable to attract new personnel to fill the existing
gaps or provide for adequate management succession.
The merging bank, on the other hand, is both well
managed and well staffed; it has a sufficient number of
experienced and aggressive senior officers and excellent
depth in its junior staff, promising well for the future
of the resulting institution.
In balancing the circumstances of this case in light
of the statutory criteria, we find this merger to be in
the public interest, and the application is, therefore,
approved effective on or after March 15, 1963.
The request to relocate the main office of the resulting institution from Selinsgrove, Pennsylvania, to
Middleburg, Pennsylvania, and to adopt the title
"Tri-County National Bank" are also approved.
MARCH 8, 1963.
THE
SUMMARY OF REPORT BY ATTORNEY GENERAL
The revelant area is in the northeast corner of Snyder
County, Pennsylvania, a region of moderate industrial
activity which is beginning to grow at a more rapid
rate. Four banks compete presently within this area,
with one bank controlling over 50% of the market.
Selins Grove National competes in this area, controlling 11 % of the market. The applicant has four facilities in the central and western part of the county but
not within the relevant area and grew at only a moderate rate until it began its merger activity in 1954.
Presently, it controls approximately 75% of the commercial banking business in the agricultural western
half of the county and 18% of the county-wide market.
There is significant competition both actual and potential between the participants since 7.5% of the applicant's deposits and 4.8% of its loans come from within
the Selinsgrove service area, and approximately 3%
of the Selinsgrove deposits and loans come from applicant's service area. This would be eliminated by the
consolidation. Since this competition between the
participants to the consolidation will be eliminated,
the effect of the consolidation on competition within
the relevant service area may be adverse.
FIRST NATIONAL FARMERS BANK OF WYTHEVILLE, WYTHEVILLE, VA., AND T H E FIRST NATIONAL
EXCHANGE BANK OF VIRGINIA, ROANOKE, VA.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
The First National Farmers Bank of Wytheville, Wytheville, Va. (9012), with....
and The First National Exchange Bank of Virginia, Roanoke, Va. (2737),
which had
merged Apr. 1, 1963, under charter and title of the latter bank (2737). The
merged bank at the date of merger had
COMPTROLLER'S DECISION
On February 11,1963, The First National Exchange
Bank of Virginia, Roanoke, Virginia, and The First
National Farmers Bank of Wytheville, Wytheville, Virginia, applied to the Comptroller of the Currency for
permission to merge under the charter and title of
the former.
First National Exchange is located in Roanoke, the
fourth largest city in the Commonwealth of Virginia.
The city is highly industrialized and has an expanding,
diversified economy which gives every indication of
continuing growth. The city is served by First Na90
$9,730, 602
2
172, 566, 272
13
181,631,616
15
tional Exchange with eight offices and one not yet
open; by a branch of the Bank of Virginia, a member
of the Virginia Commonwealth Corporation; and, by
the smaller, four-office Colonial-American National
Bank and the five-office Mountain Trust Bank. A
large savings and loan asociation and other nonbank
financial sources are also active.
Wytheville, 81 miles southwest of Roanoke, is a town
of 5,600 people with a population of an estimated 30,000 in the immediate trade area. While essentially
an agricultural community, since the 1950's it has made
heartening strides toward economic diversification.
It is located at the intersection of two major Interstate
highways, making the town an extremely desirable
location for industrial enterprises which will bring with
them service, educational and other new development.
The recent growth and the future of this area is
promising. The First National Farmers Bank, with
two offices and resources of $10 million, and the $8
million Wythe County National Bank serve the city
directly and smaller out-county banks offer some banking competition in the area, although it is primarily
localized.
Approval of this transaction will bring to Wytheville
resources, management and service equal to the present
and expected growth of the town. While the smaller
banks will undoubtedly feel more pressure, this is
unavoidable unless one is to deny the public the benefits to which they are entitled. The proposal will
also strengthen First National Exchange as a regional
bank and is a logical and proper step in providing
growing southwest Virginia with adequate, convenient
commercial banking facilities.
In weighing the factors of this case in light of the
statutory criteria it is found to be in the public interest
and is therefore approved, effective on or after March
29,1963.
MARCH 28,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The First National Exchange Bank of Virginia,
Roanoke, Virginia, has assets of $184,820,000, total
deposits of $166,212,000, loans and discounts of $90,192,000 and capital accounts of $13,893,000. It is
already by far the largest bank whose main office and
branches are located in southwestern Virginia. Its
increased size through merger with The First National
Fanners Bank, with assets of about $10 million, will
eliminate a strong independent bank from the area.
The trend toward eliminating small independent banks
will be advanced and the increased movement toward
domination of banking in Virginia by a handful of
large banking aggregations through mergers and consolidations will be fostered. Competitively the result
is substantially adverse.
BANK OF GREENSBORO, GREENSBORO, N.C., AND FIRST UNION NATIONAL BANK OF NORTH CAROLINA, CHARLOTTE, N.C.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Bank of Greensboro, Greensboro, N.C., with
and the First Union National Bank of North Carolina, Charlotte, N.C. (9164),
which had
merged Apr. 9, 1963, under charter and title of the latter bank (9164). The
merged bank at the date of merger had
COMPTROLLER S DECISION
On January 16, 1963, the First Union National
Bank of North Carolina, Charlotte, North Carolina,
and the Bank of Greensboro, Greensboro, North Carolina, applied to the Comptroller of the Currency for
permission to merge under the charter and with the
title of the former.
Since the mid-1950's, extensive economic expansion
in North Carolina has become unmistakably evident
with no observable abatement. Between 1955 and
1961 the State's percentage increase in Department of
Commerce economic indicators has been considerably
above the national average in most instances. Manufacturing facilities increased sharply, per capita per-
$26, 025, 049
6
306,474,892
56
331,360,202
62
sonal income advanced, wholesale and retail trade
multiplied and capital expenditures skyrocketed.
Such vitality is not attributable to chance and haphazard circumstances—it is the fruition of a deliberately enlightened State policy. It was recognized by
the State that if banks were effectively to initiate, foster and support this growth, it was necessary to increase
their facilities and resources.
The opportunity to obtain the necessary increase in
resources and facilities emanates in a large part from
the statewide branch banking laws. These laws constitute a deliberate expression of State policy, and,
although they were formulated prior to the upsurge in
economic development, there is no doubt that these
91
laws facilitated that development by creating an atmosphere in which banks were able to stimulate the
State's economy.
Prior to 1958, Wachovia Bank and Trust Company
was by far the most significant factor in the banking
structure of North Carolina. Through a long series
of mergers, approved by the Federal Reserve Board,
Wachovia had reached the point at which it accounted
for approximately 20% of total State deposits, while
the next three largest banks accounted for 8.1%, 4.6%,
and 2.7%, respectively. It is not improbable that this
seriously unbalanced banking structure reflected the
lack of adequate and aggressive competition.
In 1958, it became generally recognized that this
imbalance in the State banking structure needed correction in order to restore competition, and in order
to develop other banks with resources of sufficient
magnitude to allow them to service the increasing
economic vitality which was then becoming significant.
It was necessary to reduce the substantial domination
of the State banking structure by one bank.
The First Union National Bank had its origin during
this period. Although the 52 offices it now operates
are spread throughout the State, they are primarily
concentrated in the Charlotte area and in the regions
to the west and north thereof. North Carolina National Bank, Charlotte, First Citizens Bank & Trust
Company, Smithfield, The Northwestern Bank, North
Wilkesboro, and the Branch Banking & Trust Company, Wilson, also expanded considerably and rapidly
during this period.
The resulting realignment of the banking structure
of North Carolina is patent. While Wachovia, as of
June 20, 1962, had increased slightly from 1958 its
percentage of total State deposits, the increase in relative deposit growth of the other major banks, has
resulted in a more balanced banking structure on the
statewide level.
The overall effect was a substantial increase in
banking competition by which alternate sources of
credit and services of the magnitude required, were
made available to promote the expansion and diversification of the economy of North Carolina. The public interest has been the beneficiary. It is within this
framework that the immediate proposal must be
considered.
On a statewide level the consummation of this
merger would not significantly alter the present banking structure. First Union is now the third largest
bank in the State and it would continue to be so.
Moreover, the increase in deposits of $25 million
92
would not appreciably affect First Union's percentage
of total State deposits.
Charlotte, the main office location of First Union,
would likewise be unaffected. As the largest city in
the two Carolinas, and as the principal distribution
center for one of the most rapidly developing industrial and commercial areas in the south, it has numerous financial institutions competing vigorously to
provide the necessary financial services. Among these
institutions are 7 commercial banks operating 38 offices, insurance companies, and savings and loan associations, commercial finance companies, consumer
finance companies, credit unions, and many others
with more specialized functions.
It is, therefore, clear that the primary effects of this
merger will be mostly concentrated in Greensboro,
which has a population in excess of 119,000, making it
the second largest city in the State. It is located in
the Piedmont area, about 90 miles northeast of Charlotte, in the north central part of the State. Manufacturing accounts for the largest number of jobs and
showed the greatest numerical increase of any major
industry during the past 10 years. The primary industries are textiles, apparel, food, tobacco, electronics
and machinery which, in turn, have created a sizable
demand for secondary industries supplying machine
parts, paper products, electronic components and various other items. Since 1950 economic activity has
accelerated appreciably to a point where the Greensboro area is now recognized as the 19th largest market
in the country. Within this area there are over
50 companies with estimated financial strength of $1
million or more.
Aside from the Bank of Greensboro which operates
6 offices therein, Greensboro is served by 11 offices of
North Carolina National; 7 offices of Wachovia; 2
offices of First Citizens; and, the Scottish Bank has an
approved but unopened branch. These competing
commercial banks face formidable competition from
noncommercial financial institutions, including three
savings and loan associations, one of which is the largest in the State, with withdrawable balances of $111
million derived from eight different offices. It is
quite significant that these three associations have
share balances representing 30% of total combined
deposits of banks and share balances of savings and
loan associations in the Greensboro area, and 55% of
the total loans outstanding. Additional competition
derives from five locally established insurance companies having combined assets in excess of $1 billion.
The area is served by 31 finance companies, including
the country's largest commercial and consumer finance
companies. With such a financial structure, it cannot
seriously be contended that the introduction of First
Union will have an adverse effect on banking competition in Greensboro.
The approval of this application will provide
Greensboro with an alternative bank having resources
and facilities comparable to those of the other three
banks doing business there. The resulting bank, with
its full, statewide banking services, will be more able
to meet the banking needs and convenience of the
community, and it will be in a much stronger position to foster the continued economic growth of
Grennsboro.
In balancing the circumstances of this case in light
of the statutory criteria we find this merger to be in the
public interest, and the application is therefore approved, effective on or after April 9, 1963.
APRIL 2, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Bank of Greensboro is presently the smallest of the
four banks in its service area. Its merger with First
Union will make the resultant bank third in size in
Greensboro and slightly larger than the fourth bank.
Direct competition between First Union National
THE
Bank and the Bank of Greensboro appears to be only
nominal.
Branch banking is permitted in North Carolina.
The 4 largest banks in North Carolina as of June 30,
1962, had approximately 207 offices and almost completely blanketed North Carolina. They controlled
54 percent of the total deposits of all North Carolina
banks. The remaining 164 banks had 46 percent of
such deposits. First Union is one of these four. In
contrast, as of December 31, 1957, these same 4 banks
had 35.5 percent of the total deposits in the State, and
the remaining 204 banks had 64.5 percent.
The rapid growth of the four largest banks in this
4^-year period is not based on natural growth alone,
but includes that represented by mergers and consolidations which were part of a trend which reduced the
number of the remaining banks in the State from 204
to 164. While each single merger or consolidation
standing alone may not be serious, the cumulative
effect forecasts complete domination of banking in
North Carolina by a few extremely large banks.
It is the view of this Department that the effect of
the proposed merger on competition is seriously adverse and represents a continuation of the dangerous
trend toward oligopoly in commercial banking
throughout the State of North Carolina.
NATIONAL MAHAIWE BANK OF GREAT BARRINGTON, GREAT BARRINGTON, MASS., AND T H E FIRST
AGRICULTURAL NATIONAL BANK OF BERKSHIRE COUNTY, PITTSFIELD, MASS.
Bankin goffices
Name of bank and type of transaction
Total assets
In operation To b e operated
The National Mahaiwe Bank of Great Barrington, Great Barrington, Ma ss. (1203),
with
and The First Agricultural National Bank of Berkshire County, Pittsfield,
Mass. (1082), which had
consolidated Apr. 12, 1963, under the charter and title of the latter bank
(1082). The consolidated bank at the date of consolidation had
COMPTROLLER S DECISION
On February 6,1963, the First Agricultural National
Bank of Berkshire County, Pittsfield, Massachusetts,
and the National Mahaiwe Bank of Great Barrington,
Great Barrington, Massachusetts, applied to the Comptroller of the Currency for permission to consolidate
under the charter and with the title of the former.
The City of Pittsfield and the Town of Great Barrington are both in Berkshire County which is located
in western Massachusetts, bordered on the north by the
State of Vermont, on the south by the State of Con-
$8, 682, 722
2
38,118,726
46, 648,748
7
necticut, and on the west by the State of New York.
The topography of the 934 square miles of land, which
was originally part of the territory bought from the
Housatonic Indians in 1724 for 460 English pounds,
three barrels of hard cider and 30 quarts of rum, is such
that the county enjoys an ever-increasing development
of vacation and recreational resources. This development has reached the point where the service industry
is now the county's third largest in terms of employment, ranking behind wholesale and retail trade and
manufacturing. The financial needs of the county
93
•are served by 16 offices of 7 commercial banks and
26 offices of 8 savings banks, along with cooperative
banks, federal savings and loan associations, one of
which is the largest financial institution in the county,
numerous credit unions, finance companies and personal loan companies.
Pittsfield, with a population approximating 60,000,
is the county seat and trading center of Berkshire
County. Serving also as the industrial center, it is
involved in the manufacture of electrical machinery,
ordinance, textiles and the production of paper products. Its banking needs are served by the applicant
First Agricultural National Bank of Berkshire County,
the largest commercial bank in the county which operates its main office and one branch in Pittsfield,
one branch in Belton, 5/2 miles east, one branch in
Adams, 15 miles northeast, and one branch in North
Adams, 22 miles northeast; by the Berkshire Bank &
Trust Company, Pittsfield, the second largest commercial bank; and, by Pittsfield National Bank, one
savings and loan association and one cooperative bank.
Great Barrington has a population approximating
6,600 and it is located some 21 miles south of Pittsfield,
in the southern quarter of the county. It is the largest
community in, and the trading center for, this primarily rural area. Some minor manufacturing, concentrated principally in textiles, is done in this area.
At the present time, the community is served by the
National Mahaiwe Bank of Great Barrington, which
also operates one branch in Sheffield, 6 miles south of
Great Barrington; by the Housatonic Cooperative
Bank; and by the Great Barrington Savings Bank.
Moreover, the Berkshire Bank & Trust Company
operates a branch in Stockbridge, 7 miles north of
Great Barrington, and it has applied for a branch in
Great Barrington.
In determining whether the proposed merger is in
the public interest, considerable weight must be given
to the nature of Massachusetts' savings banks. They
are permitted to make real estate loans, installment
loans and collateral loans. Depositors may draw
drafts on their accounts, within certain limitations,
for which a fee is charged. In effect, the savings banks
are substantially undifferentiable from commercial
banks and competition between them is very keen.
The savings banks are by far the most substantial
force in the county banking structure. As compared
to the commercial banks, they hold 70 percent of total
county deposits, whereas in 1950 they held but 55 percent. Thus, in these circumstances the fact that First
94
Agricultural National Bank has 38 percent of commercial bank deposits is of minor significance when it
is realized that this represents only 11 percent of total
county deposits.
It appears that no significant amount of competition will be eliminated by approving this merger.
Quite the contrary, Great Barrington will now have
the county's two largest commercial banks competing
in the area. In addition, the resulting bank will be in
a better position to meet the competition provided by
the county savings banks and the Town of Great Barrington will be benefited by a larger bank with a more
diversified range of banking services.
In balancing the circumstances of this case in light
of the statutory criteria, we find this merger to be in
the public interest, and the application is, therefore,
approved effective on or after April 8, 1963.
APRIL 1,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed consolidation of the First Agricultural
National Bank of Berkshire County, Pittsfield, Massachusetts, and the National Mahaiwe Bank of Great
Barrington, Great Barrington, Massachusetts, would
substantially increase concentration of commercial
banking facilities and substantially reduce competition
among commercial banks in Berkshire County, Massachusetts.
Due in part to a series of mergers among banks
located in Berkshire County, commercial banking has
become very highly concentrated. At present two
banks hold about 68% of the deposits, loans and assets
held by all commercial banks in the county. The
First Agricultural National Bank is the largest bank
in the County, holding about 37% of the county's total
commercial banking deposits, loans and assets. This
concentration of commercial banking facilities in the
hands of these two banks has been brought about to
a considerable extent by mergers and acquisitions.
First Agricultural has made two acquisitions since
1961. The second largest commercial bank has made
three acquisitions in the past 5 years and has announced
plans to merge with the third largest commercial bank
in the county.
The National Mahaiwe Bank is the fourth largest
commercial bank in Berkshire County holding about
9% of all the deposits, loans and assets held by commercial banks in the county. Should the proposed
consolidation be approved, almost 47% of the deposits,
loans and assets of all commercial banks in the county
would be concentrated in the hands of the resulting
bank. The two largest commercial banks would control more than three-fourths of such deposits, loans
and assets, and the three largest more than 90%.
The probable competitive effect of the proposal, if
consummated, would be adverse, since it would materially increase concentration in commercial banking in
the area.
THE KEYSTONE NATIONAL BANK OF MANHEIM, MANHEIM, PA., AND T H E FULTON NATIONAL BANK OF
LANCASTER, LANCASTER, PA.
Bankin g offices
Name of bank and type of transaction
Total assets
In ojderation To be operated
The Keystone National Bank of Manheim, Manheim, Pa. (3635), with
and The Fulton National Bank of Lancaster, Lancaster, Pa. (2634), which
had
merged Apr. 15, 1963, under the charter and title of the latter bank (2634).
The merged bank at the date of merger had
COMPTROLLER S DECISION
On January 30, 1963, The Fulton National Bank of
Lancaster, Lancaster, Pennsylvania, and The Keystone
National Bank of Manheim, Manheim, Pennsylvania,
applied to the Comptroller of the Currency for permission to merge under the charter and with the title of the
former.
The city of Lancaster, with a population approximating 61,000, is an industrially diversified city located in
southeastern Pennsylvania about 35 miles southeast
of Harrisburg and 65 miles west of Philadelphia. It
is the industrial and trading center for an area which
is devoted principally to general farming on highly
productive land. Traditionally, Lancaster County has
had an agricultural economy, although the trend in
and around the city of Lancaster is toward an economy
based more on residential and industrial development.
This shift in the economic base has caused a population
shift from the city to suburban communities. Thus,
although the city of Lancaster had a 4.3 percent decrease in population since 1950, the county had an
18.6 percent increase. As a means of keeping pace
with the increasing industrialization, the city has undertaken an extensive urban renewal program. New
industrial tracts are being developed and downtown
parking facilities are being constructed. The five
commercial banks that serve the city are the prime
movers of this program. They include the applicant
Fulton National Bank of Lancaster, the Lancaster
County National Bank, Farmers Bank and Trust Company, Conestoga National Bank and a branch of the
Farmers National Bank of Lititz.
The Borough of Manheim, population 4,790, is lo-
$9,495, 628
1
59 174 708
6
68, 670, 336
7
cated 10 miles northeast of Lancaster, and so situated
it is susceptible to the economic changes emanating
from the city. There has been a noticeable increase
in residential development and a slight increase in industrial activity. Several small manufacturing concerns provide employment for some 2,000 workers and
future prospects for increased residential and industrial development are quite favorable. Although the
$8 million Keystone National Bank of Manheim and
the $7 million Manheim National Bank are the only
banks within the borough, the First National Bank of
Landisville and the Farmers National Bank of Lititz
have service areas bordering that of Manheim. All of
these banks would have some difficulty marshalling
resources sufficient to promote reasonable residential
and industrial development.
The proposed merger is, of course, substantially motivated by the outlined economic factors. Yet, motivation of comparable strength is provided by a serious
management succession problem in the Keystone National Bank of Manheim. While the senior management of the bank has competed effectively and served
the community successfully throughout the years, as
with many banks in rural areas, management has experienced difficulties in acquiring, developing and
retaining adequate successors.
Approval of this merger will solve the management
succession problem by establishing depth of management, assuring retention of competent personnel and
providing greater opportunity to attract replacement
personnel. Furthermore, since the proposed merger
represents recognition of the economic unity which is
developing between Lancaster and Manheim, the re-
95
suiting bank will be in a better position to foster the
economic factors upon which that development is
based. This will be accomplished without significant
alteration of the county banking structure.
In balancing the factors of this case in light of the
statutory criteria wefindthis merger to be in the public
interest, and the application is therefore approved
effective on or after April 11, 1963.
APRIL 4,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger of Keystone National Bank of
Manheim into Fulton National Bank of Lancaster, the
largest commercial bank in Lancaster County, will
eliminate substantial competition between banks serving the Lancaster-Manheim area. Keystone, the fifth
largest bank competing in the local area, would be the
fourth bank acquired by Fulton since 1955. The
merger would continue the trend thus under way, increase Fulton's competitive lead over its remaining
local competitors, and increase the pressure on the
three remaining Lancaster banks to stay within striking distance of Fulton by making similar acquisitions
of smaller banks in Lancaster County.
For the above reasons we conclude that the effect of
the proposed transaction on competition would be
adverse.
THE SHELBY COUNTY BANK, BOTKINS,, OHIO, AND T H E CITIZENS BAUGHMAN NATIONAL BANK OF SIDNEY,
SIDNEY, OHIO
Bankin t> offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Shelby County Bank, Botkins, Ohio, with
and The Citizens Baughman National Bank of Sidney, Sidney, Ohio (7862),
which had
merged Apr. 17, 1963, under charter of the latter bank (7862) and under
title of "The Citizens Baughman National Bank." The merged bank at the
date of merger had
COMPTROLLER'S DECISION
On January 28, 1963, the $13 million Citizens
Baughman National Bank of Sidney, Sidney, Ohio,
and the $1.8 million Shelby County Bank, Botkins,
Ohio, applied to the Comptroller of the Currency for
permission to merge under the charter of the former,
with the title "The Citizens Baughman National
Bank."
Both institutions are located in Shelby County in
west-central Ohio. Sidney, the county seat, has a
population of 15,000 people and an estimated 32,000
reside in the general area. Thirty-five industries employ 5,000 people and strong economic support and
stability is received from agricultural pursuits on the
excellent surrounding farm lands. Botkins, 13 miles
north of Sidney, is a community of 1,000 people, dependent primarily upon agriculture and some small
local industry.
Eleven commercial banks, five savings and loan
associations and other nonbank financial sources serve
the area and the consummation of this proposal would
not significantly affect this existing structure.
96
$1,753,647
1
13 597,041
3
15,348,569
4
With a lending limit of $12,000, the merging bank
has found itself handicapped in serving its customers,
many of whom now bank with larger, nearby banks.
In addition, it faces the difficulties of many small banks
located in areas of transition where farms are being*
combined into larger units and the trend is away from
an agricultural economy to one based more upon residential and industrial development. Approval of this
transaction will not only alleviate capacity and management problems of the merging bank but will enable
the charter bank to continue its balanced expansion in
Shelby County thus benefiting the banks involved and
the communities.
In weighing the factors of this case in light of the
statutory criteria, it is found to be in the public interest
and the application is therefore approved, effective on
or after April 4, 1963.
March 28, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The City of Sidney is the headquarters of the applicant Bank and the center of an expanding industrial
complex and rich agricultural trade area. The applicant Bank is the largest commercial bank in Shelby
County and presently controls, in its immediate service
area, 30.3% of the total IPG deposits and 34.5% of
the total loans. This bank had, as of December 31,
1962, total assets of $13,346,044, total deposits of
$11,639,238, and net loans and discounts of $6,134,734.
The Merging Bank is located 13 miles north of
Sidney in the City of Botkins. As of December 31,
1962, this bank had total assets of $1,881,739, total
deposits of $1,731,587 and net loans and discounts of
$1,140,820.
The merger, in addition to eliminating a degree of
competition presently existing between the participating banks, would further enhance the position of the
applicant Bank at the expense of the remaining smaller
rivals. Thus, its effect on competition would be adverse, but due to the size of the merging bank and the
slight amount of competition to be eliminated, it would
not be significantly adverse.
THE POMPEII STATE BANK, POMPEII, MICH., AND T H E COMMERCIAL NATIONAL BANK OF ITHACA, ITHACA,
MICH.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
The Pompeii State Bank, Pompeii, Mich., with
and The Commercial National Bank of Ithaca, Ithaca, Mich. (9654), which
had
consolidated Apr. 17,1963, under charter of the latter bank (9654) and under
title of "Commercial National Bank." The consolidated bank at date of
consolidation had
. .
COMPTROLLER S DECISION
On December 10, 1962, the $9.6 million Commercial National Bank of Ithaca, Ithaca, Michigan, and
the $2.9 million Pompeii State Bank, Pompeii, Michigan, applied to the Comptroller of the Currency for
permission to consolidate under the charter and title
of the former.
Ithaca, the county seat of Gratiot County, has a
population of 2,600 and is located in the center of
Michigan's lower peninsula. The trade area has a
population estimated at 16,500 and is primarily agricultural with some industrial support in Ithaca and
surrounding cities. Pompeii, also an agricultural area,
is 8 miles south of Ithaca with a population of 400.
The area around Ithaca and Pompeii is reasonably
well served by various banking offices. While Commercial National operates no branches, The Pompeii
State Bank operates one, 6 miles west of its main office,
in Middleton, a village of 375. Six other banks, ranging in size from $1.2 million in resources to the $22
million Bank of Alma, 8 miles north of Ithaca, offer
reasonably effective banking competition within the
limits of their capabilities.
In an agricultural community such as this, the increasing size of farms makes it more difficult for small
banks to supply the needed credits and to offer the
725-698-^64-
$3,097, 599
2
11,141,240
1
14, 238, 840
3
improved services their customers have come to expect. Such is the case with The Pompeii State Bank
which also has an additional problem of maintaining
management depth—it offers no retirement plan or
other fringe benefits to attract young and competent
management successors. In view of these difficulties
besetting the local bank, it appears that the interest
of the residents of the Pompeii area in having a resourceful bank could best be insured by making The
Pompeii State Bank a branch of Commercial National.
In weighing the factors of this case in light of the
statutory criteria it is found to be in the public interest
and the application is hereby approved, effective on
or after February 11, 1963.
FEBRUARY 7,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The consolidating institutions are located 8 miles
apart in a predominantly agricultural county. Although the service areas of the two banks overlap, the
elimination of direct competition between them would
not appear to be extremely significant. There are six
banks competing within the service area of the resulting bank, two of which will have greater loan
volume, and three greater deposit volume. The rela-
97
tive strength of the area banks will not be significantly
altered as a result of the consolidation. Although the
merger will eliminate the independent competitive
activity represented by Pompeii, in view of available
alternative banking facilities, such elimination would
not appear unduly significant. We therefore believe
that the proposed consolidation would not have a
substantial adverse effect on competition.
THE HOME NATIONAL BANK OF BROCKTON, BROCKTON, MASS., AND T H E PLYMOUTH NATIONAL BANK,
PLYMOUTH, MASS.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
The Home National Bank of Brockton, Brockton, Mass. (2152), with
and The Plymouth National Bank, Plymouth, Mass. (779), which had
merged Apr. 18, 1963, under charter of the latter bank (779), and under title
"Plymouth-Home National Bank." The merged bank at the date of merger
had
COMPTROLLER S DECISION
On December 31, 1962, the $11.2 million Plymouth
National Bank, Plymouth, Massachusetts, and the $36
million Home National Bank of Brockton, Brockton,
Massachusetts, applied to the Comptroller of the Currency for permission to merge under the charter of the
former and with the title of "Plymouth-Home National
Bank." Permission is also requested to relocate the
main office of the resulting institution to Brockton,
Massachusetts.
Both of these cities are located in Plymouth County
on the eastern seaboard of Massachusetts. Brockton,
10 miles south of the southern extremity of the Boston
metropolitan area, is a highly industrialized city of
73,000. In the past the city has relied primarily upon
the shoe industry but it now has a broad industrial
diversification and increasing residential development
due to its proximity to Boston.
Plymouth, on the Atlantic Ocean, 20 miles southeast
of Brockton, is a city of 14,000 and claims 24,000 in its
service area. Largely agricultural, Plymouth County
accounts for 80% of the nation's annual cranberry
crop. The city also relies heavily upon tourist trade
for economic vitality. Its proximity to Boston has
recently made the city, along with the county in
general, a growing area.
The commercial banks serving Brockton are the
applicant Home National, with six branches in the
area, and the $34 million National Bank of Plymouth
County with eight branches in the area. Five savings banks with three branches, plus nonbank financial
sources, offer strong competition. Also serving the
area is the Rockland Trust Company, 8 miles north-
98
$36,841,911
11,808,408
48, 650, 318
8
5
12
east of Brockton, and a branch of the $13 million
Plymouth Federal Savings and Loan.
Plymouth National is the only commercial bank
in Plymouth. However, the Plymouth Five-Cent
Savings Bank and the Plymouth Savings Bank generate
effective competition for deposits and mortgage loans.
The proximity <f Boston and the expanding demands
o
of the county make it clear that these institutions will
be in a better position to serve the public as one bank.
The strengthening of management depth, combined
with the new automation program of Home National
and the broader base of operation will benefit both the
banks involved and the public served.
The two savings banks in Plymouth own 16% of
the stock of Plymouth National, and these two savings
banks, along with six other savings banks, own a
combined 21.5% of the Plymouth Bank. In addition,
two local and 11 outside savings banks own 27.7%
of the stock of Home National. It should also be
pointed out that, as this application is approved, 12
of the 25 directors will also be trustees of savings banks
in the area. The two applicant banks are not as
competitive as they could be in this expanding area.
The effect of this common ownership and direction
can be seen in the fact that 17% of Plymouth National's deposits are time deposits, and only 9% of
its portfolio is in real estate loans. Home National,
while it has 19% of its deposits in time money, has
only 9% of its loans in real estate.
Although common ownership of commercial and
savings banks is sanctioned by State law and common
directorships in the two types of institutions is exempt
from the prohibitions of Federal law, this office is
not prepared to say that such overlapping of interest
serves the general public welfare. Notwithstanding
the absence of any legal proscription of interrelated
ownership or directorates between commercial and
savings banks, this office believes that, as a matter of
sound banking policy, the members of the board of
directors of a commercial bank, because of the fiduciary aspects of their office, should be free from the
exercise, or possibility of exercise, of any influence on
their policy determinations by any countervailing demands impressed upon them by conflicting or divergent interests. Proper regard for full competition
among the various financial institutions serving a
community demand that each be free from undue
influence from the others.
It is clear from all the facts made available to this
office in connection with this application that Plymouth County, presently and in the foreseeable future, can well use this larger and stronger commercial
banking institution, to serve the public more efficiently. This transaction, having been measured
against the statutory criteria, has been found to be in
the public interest. The application to merge is
therefore approved, effective on or after February 19,
1963. The proposals to relocate the main office of
the resulting institution from Plymouth, Massachusetts, to Brockton, Massachusetts, and to adopt the
title "Plymouth Home National Bank," are also
approved.
FEBRUARY 14,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The primary service areas of these two banks do
not significantly overlap and competition between
them does not appear to be substantial.
The Home National Bank is now about the same
size as National Bank of Plymouth, the only other bank
in Brockton. The resultant bank will be enlarged in
size by about 30 percent and its lending limit will be
substantially increased thus providing it with a competitive advantage over National Bank of Plymouth
and also over the four smaller banks outside its primary service area with whom it competes.
It is our view that the effect of this proposed merger
on competition will be slightly adverse.
* # *
COMMUNITY TRUST COMPANY, YORK, MAINE, AND FIRST NATIONAL BANK OF PORTLAND, PORTLAND, MAINE
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Community Trust Company, York, Maine, with
and the First National Bank of Portland, Portland, Maine (4128), which had.
merged Apr. 26,1963, under charter and title of the latter bank (4128). The
merged bank at the date of merger had
COMPTROLLER S DECISION
On February 12, 1963, the $101.2 million First
National Bank of Portland, Portland, Maine, and the
$10 million Community Trust Company, York, Maine,
applied to the Comptroller of the Currency for permission to merge under the charter and title of the former.
Portland, with a population of 72,566, is the largest
city in Maine. The general area, which is the leading
retail and wholesale distribution center north of Boston, is estimated to contain 143,000 people, and has
more than 275 manufacturers which contribute to the
area's balanced and diversified economy.
The York-Kittery area, about 45 miles southwest of
Portland, contains several small communities which
are primarily dependent upon the U.S. Naval Shipyard in Kittery as the largest employer in the area.
Recently, however, this region has been experiencing
$9, 725, 504
90,929, 373
100, 654, 877
3
12
15
considerable industrial expansion. Because of its
proximity to several seashore resorts, the area has a
large population increase during the summer months.
First National, chartered in 1889, operates nine
branches, one drive-in facility, one military facility and
has one branch approved but unopened. Its more
than seven decades of existence have been characterized by steady growth and effective management. Approval of this merger will not change its status as the
second largest bank in the State. First National's
chief competition is furnished by the Casco Bank and
Trust Company, with 22 offices, and Canal National
Bank, with 15 offices. Several mutual savings banks
and nonbank financial institutions complete the competitive picture of the Portland area.
Community Trust, with four branches, has been
operating under state charter for 29 years. The ill
99
fiealth of its only two executive officers has created a
management succession problem which the bank is
attempting to alleviate through this merger. Community Trust is the only bank located in the three
communities in which it operates offices—York, Kittery and Ogunquit. However, Casco Bank and Trust
Company, Portland, Maine, is awaiting approval from
the Federal Deposit Insurance Corporation for a
branch in Kittery. Principal banking competition in
this area is provided by the Wells branch of the Ocean
National Bank of Kennebunk, 6 miles north of Ogunquit, and the North Berwick and South Berwick offices
of the First National Bank, Biddeford, 9 miles and 16
miles, respectively, northwest of York. Several New
Hampshire banks and nonbank financial institutions
also compete for area business.
There is no overlap in the trade areas of Portland
and York and a minimal amount of competition will
be eliminated by this merger. The merged bank will
be able to offer broader services to the York-Kittery
region, important among which will be the addition of
a trust department, not now offered by Community
Trust. Although First National is expected to offer
stronger competition in the York-Kittery area than is
presently offered by Community Trust, the overall
effect on banking competition in the area will not be
adverse.
In balancing the factors of this case in light of the
statutory criteria, the application is found to be in the
public interest and is hereby approved, effective on or
after April 25,1963.
APRIL 18, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Community, organized under the laws of the State
of Maine in 1934, has four offices, all located in York
County, Maine. It is presently the third largest of 11
banks in its service area.
First National was organized in 1889 and is the
second largest of nine banks in its service area. The
closest office of Community is located approximately
43 miles southwest of the main office of Community
and the applicants allege that the service areas of the
two banks are distinct.
As a result of the merger, the size of First National's
holdings of IPC deposits and total loans and discounts
will be increased by approximately 10% and 7/2%,
respectively, of their present size.
The principal competitive significance of the merger
is that it represents the continuation of a trend toward
growth through acquisition on the part of First
National. Community, under the proposal, would become the sixth bank to be merged with First National
since 1960. Additionally, following the merger, First
National will be competing in an area where many
banks are only a fraction of its size.
The effect of the proposed merger on competition
probably will be adverse.
WALKERSVILLE BANK, WALKERSVILLE, MD., AND FARMERS & MECHANICS-CITIZENS NATIONAL BANK OF
FREDERICK, FREDERICK, MD.
Name of bank and type of transaction
Total assets
In operation To be operated
Walkersville Bank, Walkersville, Md., with
and Farmers & Mechanics-Citizens National Bank of Frederick, Frederick,
Md. (1267), which had
merged Apr. 26, 1963, under charter of the latter bank (1267), and under title
of "Farmers and Mechanics National Bank." The merged bank at the date
of merger had
COMPTROLLERS DECISION
On February 27,1963, The Farmers and MechanicsCitizens National Bank of Frederick, Frederick, Maryland, and the Walkersville Bank, Walkersville, Maryland, applied to the Comptroller of the Currency for
100
$1,875,698
57,753,289
59,540, 859
permission to merge under the charter and title of the
former.
Situated in the central portion of western Maryland,
Frederick is both the county seat and the trading center of Frederick County. The 45,000 residents of the
area expect continued acceleration of light industrial
and commercial development to provide economic
growth as a supplement to the area's traditional agricultural activities. The expanding suburban areas of
Washington, D.G., and Baltimore, Maryland, both 45
miles from Frederick, are increasingly important influences on the local economy.
Farmers and Mechanics, with 10 offices and total
resources of some $58 million, is the largest of four
banks directly serving the city. Local nonbanking institutions affording specialized financial services and
the larger Baltimore and Washington banks exert competitive force in the area.
Walkersville, with a population of less than 1,500, is
located 7 miles northeast of Frederick. Historically,
the town has served as a retirement haven for farmers
who have drawn their substance from the rich dairyland surrounding the community. Walkersville has
recently been integrated into the metropolitan area of
Frederick and this integration has been attended by
construction of suburban residential projects. While
the economy of Walkersville is based essentially on
dairy farming, a sizable portion of local income is realized by resident wage-earners employed elsewhere.
Prospects for economic growth are modest as industrial
and commercial activity in the immediate locale remains minimal.
While the single office of the $1.7 million merging
bank is the only banking office in Walkersville, other
banking facilities are readily accessible to its residents
in Frederick and smaller communities in outlying areas
of Frederick County.
The geographic proximity of the applicant banks
has generated minor competition between the institutions which will be extinguished by the merger. However, optimum competition between these banks is
unlikely in view of their common ownership, a
common director, and their long history of close
cooperation.
Consummation of the merger will strengthen the
charter bank's position in the area banking structure,
but the effect on banking competition will not be substantial. The small out-county banks in communities
surrounding Walkersville are already faced with competition from branches of the charter bank at Emmitsburg, Libertytown and Union Bridge. The addition
of a branch office at Walkersville will not work a significant change in this competitive structure. Moreover, the proposal will resolve an otherwise insoluble
management succession problem at the Walkersville
Bank, while concurrently extending complete banking
services directly to Walkersville residents.
In weighing the factors of this case in light of the
statutory criteria, it is found to be in the public interest and is therefore approved, effective on or after
April 25,1963.
APRIL 18,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The applicant Bank, located in the principal trading
center of the City of Frederick, proposes to absorb its
sixth independent bank in the last 10 years. More
than 47% of its total deposits of $52,046,000, about
one-third of its total loans of $33,829,000, and seven
of its nine branches are directly attributable to past
acquisitions. The merging Bank, located 7 miles
northeast in the City of Walkersville had, as of January
11, 1963, total assets of $1,773,000, total deposits of
$1,581,000, and net loans and discounts of $610,000.
The applicant Bank, with 53.5% of the total IPC
deposits and 59.8% of the total loans, is larger than all
of its competitors combined in the service area embracing the City of Frederick. In the greater county area,
it is, with 20.8% of the total IPC deposits and 22.7%
of the total loans, by far the largest commercial bank.
The participating banks, in view of their close proximity, appear to be competitive although there is substantial common ownership and a common director.
In the greater county area, the competitive effects of
the merger are not readily discernible because this is
another instance of a large bank absorbing a small
bank. The cumulative effects, however, of five mergers by the applicant Bank during the past 10 years
are serious, and this systematic expansion by acquisition and merger, if unchecked, will eventually endanger
the very existence of independent banking in Frederick
County.
It is the view of the Department of Justice, therefore, that the proposed merger, if approved, would
adversely affect the competitive situation in Frederick
County.
101
PEOPLES NATIONAL BANK OF CENTRAL VIRGINIA, CHARLOTTESVILLE, VA., AND NATIONAL BANK OF COMMERCE
OF NORFOLK, NORFOLK, VA.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Peoples National Bank of Central Virginia, Charlottesville, Va. (2594), with.,
and the National Bank of Commerce of Norfolk, Norfolk, Va. (9885), which
had
consolidated Apr. 26, 1963, under charter of the latter bank (9885), and
under the title "Virginia National Bank." The consolidated bank at the
date of consolidation had
COMPTROLLER S DECISION
On January 24, 1963, the National Bank of Commerce of Norfolk, Norfolk, Virginia, and the Peoples
National Bank of Central Virginia, Charlottesville,
Virginia, applied to the Comptroller of the Currency
for permission to consolidate under the charter of the
former and with the title, "Virginia National Bank."
The cities of Norfolk-Portsmouth and Newport
News-Hampton provide the economic base for the area
served by the National Bank of Commerce. Norfolk,
with a population in excess of 300,000, is the largest
city in Virginia, and an estimated 800,000 people reside in the area. This area is highly industrialized and
inextricably united to the sea through its excellent port
facilities which are first in the country in export tonnage and second only to New York in export values.
The population has increased 29% in the 10 years and
the rapidly increasing metropolitan areas of Newport
News-Hampton and Norfolk-Portsmouth are expected
to comprise over 2 million people by 1975. There is
every reason to believe that Norfolk and its environs
will continue the growth which it has demonstrated in
recent years.
Norfolk itself is served primarily by the $233 million
charter bank with 17 offices, and 2 as yet unopened;
by the $81 million Seaboard Citizens National Bank
with 9 offices; by the $33 million Southern Bank of
Norfolk, a subsidiary of First Virginia Corporation,
with 9 offices; and, by 5 branches of the Bank of Virginia, a subsidiary of Virginia Commonwealth Corporation, and headquartered in Richmond. Ten
smaller banks in the area, plus, in Newport News, the
six offices of First and Merchants National Blank, and
one subsidiary each of United Virginia Bankshares
and the Virginia Commonwealth Corporation, are
effective forces in the local banking structure. Numerous savings and loan associations and high cost
nonbank financial institutions are, of course, present.
102
$122,199,837
16
206,938,484
14
328,847,859
30
Peoples National is located in Charlottesville in Central Virginia, 165 miles west of Norfolk. The city has
a population of 29,000 and the bank serves an estimated 260,000 in a 10-county area. The economy of
this area is essentially opposite to that of Norfolk. Although primarily agricultural, the Charlottesville area
is receiving new support from an increasing influx of
light industry. The University of Virginia, with its
attendant facilities, is an important economic factor.
The City is served by the applicant Peoples National
with resources of $118 million, having 5 branches in
the city and 10 branches in outlying towns; by the $37
million National Bank and Trust Company with 9
offices; and by the $12 million Citizens Bank and Trust
Company with 3 offices. A few smaller banks, and
nonbank financial sources serve the general area.
Richmond-based banks and holding company subsidiaries compete with Peoples National not only for
the larger credits generated in the area but also directly with branches of Peoples National located in
outlying county areas.
Effective meeting of present and future economic
demands in Virginia, as well as other states, and the
nurturing of a thriving economy, will hinge primarily
upon whether the commercial banking facilities are
adequate to the task. It is clear in the instant case
that the Norfolk area will benefit from the increased
capacity for banking competition and service which
would attend approval of the application. The presence of another source of greater service capacity
would be an added benefit to the present and reasonably foreseeable economic convenience and needs of the
public. The position of the smaller banks, although
faced with a larger institution, would not be materially
different than it is now, and the primary effect of this
proposal will be in services and lending ability now
beyond the reach of the smaller banking institutions.
While the present needs in the Charlottesville area
are not as demanding as in Norfolk, there is no ques-
tion that the public will benefit by the substitution for
Peoples National of a commercial bank with a larger
capacity for service and a broader operating base on
which to rely. Moreover the heightened competition
with other larger Virginia banks and holding companies, both locally and on a statewide level, will also
serve the public interest through more aggressive banking, without material detriment to the other banks in
the area.
The Federal Reserve Board has recently approved
the creation of extensive holding companies in Virginia; United Virginia Bankshares, Virginia Commonwealth Corporation, and First Virginia Corporation.
Approval of the proposal before us would obviously be
consistent with the action of the Board in those cases.
As stated in our recent decision, and in our favorable
report to the Board of Governors in connection with
these recent holding company formations in the Commonwealth, Virginia has been the victim of a fragmented banking structure and after a lapse of some
years only since June 1962 has the law been such as
to enable the banks to obtain a necessary concentration
of resources sufficient to retain local business and to
inject new life into an awakening economy.
Approval of this transaction will result in an institution with excellent management and depth, and a
broad, fully complementary operating base allowing
maximum emphasis in all areas of banking service.
In weighing this transaction in light of the statutory
criteria, it is found to be in the public interest and is
hereby approved effective on or after April 12, 1963.
APRIL 5,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
National Bank of Commerce is the third largest bank
in Virginia and is the dominant bank in its service
area, which includes the City of Norfolk, the largest
industrial area in the State.
Peoples National Bank is the largest bank in the
Charlottesville service area to a pronounced degree.
The competitive position of the resulting bank over
the many small independent banks in the service areas
will be enhanced by virtue of the added services it will
be able to offer the banking public; in the increased
incentives it can give its employees; and in the sharp
increase in its lending limit.
Further concentration of banking in Virginia will
be fostered and accelerated and the remaining independent banks in the enlarged service area of the
resulting bank will be under increased pressure to overcome their competitive handicaps through mergers or
becoming units of bank holding companies.
It is the view of this Department that the effect of
this proposed merger on competition will be substantially adverse.
FIRST NATIONAL BANK OF FARMINGDALE, FARMINGDALE, N.Y., AND T H E FIRST NATIONAL BANK OF FARMINGDALE, FARMINGDALE, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
First National Bank of Farmingdale (organizing), Farmingdale, N.Y
applied for purchase of assets and assumption of liabilities of The First National
Bank of Farmingdale, Farmingdale, N.Y. (8882), with
•Purchase and assumption was approved Apr. 30, 1963. Application withdrawn by banks.
COMPTROLLER'S DECISION
On February 1, 1963, the organizers of the First
National Bank of Farmingdale, Farmingdale, New
York, applied to the Comptroller of the Currency for
permission to purchase the assets and assume the
liabilities of The First National Bank of Farmingdale,
Farmingdale, New York.
The First National Bank 'of Farmingdale, with assets
of $31.7 million, is a single office bank located in the
$31,707,000
1
incorporated Village of Farmingdale, Nassau County,
Long Island, New York. This bank serves an area
comprised of Farmingdale and the unincorporated surrounding communities of Bethpage, Old Bethpage,
Plainedge, North Massapequa, and South Farmingdale, in Nassau County, and East Farmingdale and
the Southern section of Melville, in Suffolk County.
While the population of Farmingdale has increased
some 36% during the last decade, the population of
103
its Nassau County service area has gone up 406% in
the same period. This rapid increase in population
has caused a boom in residential development which
has been augmented by substantial industrial development, principally aircraft factories.
Whereas the First National was the largest of 3 commercial banks serving this village and its environs
in 1950, it is now the smallest of the 7 commercial
banks serving the area through 15 offices. This decline in standing of the First National has resulted
from its ultraconservative and nonaggressive policies.
Today, it faces a problem of retiring management with
no competent or trained successors available to take
over the reins.
The First National Bank of Farmingdale, the buying
bank, is now in the process of organization. Though
it has not yet received its charter nor begun operations,
its organizers have received preliminary approval from
the Office of the Comptroller of the Currency. All of
the proposed capital and the fact that all of its stock,
save the directors' qualifying shares, would be owned
by the B.T. New York Corporation, all of whose stock
was acquired in 1951 by Bankers Trust Company, a
state member bank, incident to foreclosure of an oil
loan. The organizing bank, with powers identical to
those of the existing bank, will not commence banking
operations until this proposal is approved, upon which
event it will take over the existing banking house of
the selling bank and continue, without interruption,
the banking service now being offered. The only
significant change to be wrought by this sale and purchase will be the elimination of the home office
protecton which now prevents de novo branching in
Farmingdale.
While there is clearly no existing competition between the buying and selling banks, the advisory re-
direct stock relationship between the buying bank
and Bankers Trust Company through the B.T. New
York Corporation, commented on the presently existing modest competition between the selling bank and
Bankers Trust which would be eliminated. It seems
clear that this loss of competition will be clearly offset
by the benefits to the Farmingdale public which will
flow from this transaction.
Having weighed this application against the criteria
contained in the Bank Merger Act of 1960, we find
that it will be in the public interest. The application
is, therefore, approved effective on or after May 7,
1963.
APRIL 30,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed transaction represents the replacement of a relatively small independent bank serving
the Farmingdale area of Long Island with a branch
controlled by a very large New York City bank.
Because of the proximity of Farmingdale to New York
City, a degree of competition exists between the banks
involved, which would, of course, be eliminated by the
transaction. While First National after the merger
would be better able to compete with its larger rivals
in its immediate service area, other relatively small
banks would face increasing difficulty in effectively
competing with a branch of Bankers Trust Company.
Thus this transaction represents the elimination of still
another independent bank in Long Island and may
lead to still further elimination of small independent
banks, alternately resulting in the banking resources of
the area resting in a few very large institutions. For
these reasons, we believe that the effect of this merger
on competition would be adverse.
FIRST NATIONAL BANK OF HEUVELTON, HEUVELTON, N.Y., AND T H E ST. LAWRENCE COUNTY NATIONAL
BANK, CANTON, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The First National Bank of Heuvelton, Heuvelton, N.Y. (10446), with
and The St. Lawrence County National Bank, Canton, N.Y. (8531), which
had
merged May 3, 1963, under charter and title of the latter bank (8531). The
merged bank at the date of merger had
104
$\, 979, 628
1
12,277,972
3
14,257,600
4
COMPTROLLER S DECISION
On March 11, 1963, the St. Lawrence County
National Bank, Canton, New York, and the First National Bank of Heuvelton, Heuvelton, New York,
applied to the Comptroller of the Currency for permission to merge under the charter and with the title
of the former.
The participating banks are in St. Lawrence County
in the northern section of New York State. This
wedge-shaped county is bordered on the north by the
St. Lawrence River and on the south by the Adirondack Forest Preserve. The economic base of the
county is predominantly predicated on dairy farming
and the major portion of the milk production supplies
a large part of the needs of the metropolitan areas of
New York City, Albany, Utica and Syracuse. The
county consistently ranks among the top six producing
counties in the United States. Prospects for industrial
activity have been enhanced by the opening of the St.
Lawrence Seaway.
The $11.4 million St. Lawrence County National
Bank has its main office in Canton, the county seat.
The 5,200 residents of Canton derive substantial economic support from St. Lawrence University and the
State University of New York Agricultural and Technical Institute, both of which are in the midst of
extensive expansion programs. The $6.8 million First
National Bank of Canton and the Canton Savings and
Loan Association are the only other financial institutions in the city.
Heuvelton, population 810, is situated about 12
miles northwest of Canton in the heart of the dairy
country. It is one of the major centers for the processing of dairy products. The various milk plants employ about 70 people and a cheese company employs
about 85 people. As is generally the case throughout
the country, there has been a shift in the structure of
dairy farming toward bigger farms with greater capital
investment. Thus, the average investment per farm
has increased substantially and the resources of the
$1.7 million First National Bank are not sufficient to
meet the demands which these changes have generated.
These demands are therefore met by the $18.6 million
Ogdensburg Trust Company, Ogdensburg, which is
located some 9 miles north of Heuvelton.
This merger will provide Heuvelton with an in-town
bank having resources adequate to serve the changing
needs of the community. Moreover, it will solve a
management problem at First National.
In balancing the circumstances of this case in light
of the statutory criteria, we find this merger to be in
the public interest, and the application is therefore
approved, effective on or after April 25,1963.
APRIL 18, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger will eliminate a degree of
competition between the participating banks and will
enhance the position of St. Lawrence County National
Bank as the second largest bank in St. Lawrence
County. However, in view of the number of independent banks still in competition with the resulting
bank, the competitive effect of the merger would not
appear to be substantially adverse.
T H E CANTON NATIONAL BANK, BALTIMORE, MD., AND AMERICAN NATIONAL BANK OF SILVER SPRING, SILVER
SPRING, MD.
Total assets
Name of bank and type of transaction
In operation To be operated
The Canton National Bank, Baltimore, Md. (4799), with
and the American National Bank of Silver Spring, Silver Spring, Md. (14937),
which had
merged May 17, 1963, under charter of the latter bank (14937) and under
under title of "American National Bank of Maryland." The merged bank
at the date of merger had
COMPTROLLER S DECISION
On March 5, 1963, the American National Bank
of Silver Spring, Silver Spring, Maryland, and The
Canton National Bank, Baltimore, Maryland, applied
' $6,904,230
50,064, 512
56, 968,743
to the Comptroller of the Currency for permission to
merge under the charter of the former and with the
title "American National Bank of Maryland."
American National, with five operating branches
and seven approved but unopened, now serves Mont-
105
gomery and Prince Georges Counties in Maryland and
certain neighboring portions of Washington, D.G.
This well-managed bank has shown excellent growth
in the face of the formidable competition offered by
many larger banks, including local branches of Baltimore banks, the Suburban Trust Co., and those banks
headquartered in the District of Columbia. Not only
is the area of suburban Washington, D.C., expanding
rapidly but also the high income level and property
values are such as to create a demand on area banks
for a high degree of ability and adequate resources
to serve the community properly.
The $7 million Canton National Bank serves an
industrial section of the City of Baltimore. The majority of local residents maintaining accounts with
this bank enjoy modest incomes. This bank, whose
lending capacity is only $40,000, has, on a recent
average, loaned only 31 percent of its deposits and it
pays but 2 percent on savings accounts. These figures
indicate that this bank, with its ultraconservative approach, is not rendering the service to which the public is entitled.
Moreover, it is common knowledge that the Canton
National has been on the sale block for some time by
its present stockholders. Failing satisfactory sale arrangements, it is also understood that the Canton National intended to liquidate.
While American National has recently received approval for a new branch in Baltimore, approval of this
merger will provide American National with an established and solid base for its entry into the Baltimore
area and will enable it, from the outset, to offer effective competition to the larger well-established banks.
By substantially enlarging the geographic markets
served by American National, this transaction will increase the direct banking competition between this and
the Baltimore banks in a community where it is not
now present. This merger, therefore, will bring a
segment of the Maryland public the many benefits to
be derived from intensified competition and it will
serve the convenience and needs of the people in the
service area of the Canton bank by making available
to them larger banking resources, higher returns on
their savings and, in general, more modern and lower
cost banking services.
It is the opinion of this Office that the proposed
transaction is in the public interest and the application
therefore is approved on or after May 7, 1963.
APRIL 30,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Applicant is the third largest bank in the Maryland
Counties of Montgomery and Prince Georges, a part of
Metropolitan Washington, D.C., and represents approximately 10% of total loans and discounts in that
service area. This area has developed rapidly during
the past 10 years and Applicant has grown with these
counties, deposits having increased 58.2% since 1961
and an average of 14.8% since 1953. The acquired
bank serves a 3-square-mile area in south Baltimore,
Maryland and with $7 million in assets is the smallest
bank within that area, competing with branch offices
of four Baltimore banks having deposits from $580 million to $321 million. Since Applicant plans to open an
office in the acquired bank's service area, competition
between the Participating Banks will be eliminated by
the merger. Applicant is controlled by Financial General Corporation, a holding company with an interest
in 15 banks. This acquisition represents the latest of
a long series of acquisitions of independent banks by
large banking institutions in Maryland.
We are of the view that the effect of the proposed
acquisition on competition will be adverse.
THE WEBER BANK, KELLOGG, IDAHO, AND T H E FIRST SECURITY BANK OF IDAHO, N.A., BOISE, IDAHO
Banking offices
Name of bank and type of transaction
Total assets
(as of 12-28-62)
In operation To be operated
The Weber Bank, Kellogg, Idaho, with
was purchased May 31, 1963, by The First Security Bank of Idaho, N.A.,
Boise, Idaho (14444), which had
After the purchase was effected, the receiving bank had
106
$3, 703
244, 627
247, 920
37
COMPTROLLER'S DECISION
On March 25, 1963, First Security Bank of Idaho,
N.A., Boise, Idaho, applied to the Comptroller of the
Currency for permission to purchase the assets and
assume the liabilities of the Weber Bank, Kellogg,
Idaho.
First Security Bank of Idaho, N.A., is a subsidiary
of First Security Corporation of Salt Lake City, Utah,
a registered bank holding company. It is the second
largest of the State's 31 commercial banks. It competes on a statewide level with the Idaho First National Bank, Boise, and with the Bank of Idaho, a
subsidiary of Western Bancorporation, Los Angeles,
California, a registered bank holding company.
The $3.7 million Weber Bank operates its one office
in Kellogg, which is situated in northern Idaho, approximately 450 miles north of Boise and 70 miles
southeast of Spokane, Washington. The city functions primarily as the processing and smelting center of
Shoshone County, the State's prime producer of silver,
lead and zinc. The area's dependence on mining
makes it subject to economic fluctuations caused by
labor difficulties and changes in the price of nonferrous
metals. The county is served by two branches of
Idaho First National Bank, the main office and one
branch of First National Bank of Wallace, and the
Weber Bank. A branch of First Federal Savings and
Loan Association of Coeur d'Alene, a small credit
union and several finance companies complete the
county financial structure. Thus, the principal competitors affected by this proposal are two offices of the
State's largest bank, each with deposits more than two
times greater than those of Weber Bank; two offices of
First National Bank of Wallace, which is more than
twice the size of Weber Bank; and one office of a
savings and loan association.
It is apparent that the approval of this proposal will
enhance competition in the Kellogg area without significant alteration of the State banking structure. Locally, it will replace an ultraconservative bank, which
has not developed the talents and willingness needed
to provide adequate communityfinancialservices, with
a bank which is more alert to the needs and convenience of the communities it serves.
Applying the applicable statutory criteria to the
facts of this case, we conclude that the proposal is in
the public interest and the application is therefore
approved effective on or after May 24, 1963.
May 17, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The First Security Bank of Idaho is the second
largest bank in Idaho and operates 33 banking offices
in the State. As of June 30, 1962, assets were
$235,943,000, deposits, $288,412,000 and loans and
discounts, $127,343,000. During the past 10 years
five banks were acquired with total deposits of
$19,938,000.
Weber Bank has only one banking office. As of
June 30, 1962, assets were $3,459,000, deposits,
$3,190,000 and loans and discounts, $1,209,000.
The offices of the two banks are sufficiently separated by distance so that they serve different areas.
However, the proposed acquisition will increase First
Security's Bank share of commercial banking in Idaho
where it already has over 31 percent of total banking
assets of the State and will add to the oligopoly in
commercial banking in Idaho, where the four largest
banks presently control over 82 percent of the total
assets of all Idaho banks. Thus this proposed acquisition may have an adverse competitive effect and be
inimical to the stated congressional policy of protecting and fostering the growth of independent bank
units.
WINDBER BANK & TRUST CO., WINDBER, PA., AND UNITED STATES NATIONAL BANK IN JOHNSTOWN,
JOHNSTOWN, PA.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Windber Bank & Trust Co., Windber, Pa., with
was purchased June 1, 1963, by the United States National Bank in Johnstown, Johnstown, Pa. (13781), which had
After the purchase was effected, the receiving bank had
$13,309,200
3
63,122,900
74,675,900
5
8
107
COMPTROLLER'S DECISION
On March 22, 1963, the $63.1 million United States
National Bank in Johnstown, Johnstown, Pennsylvania,
applied to the Comptroller of the Currency for permission to purchase the assets and assume the liabilities
of the $13.3 million Windber Bank and Trust Company, Windber, Pennsylvania.
The United States National Bank, chartered in 1933,
operates four branches; two in Johnstown, one in
Somerset, and one in Nanty Glo. Johnstown, with a
population of 55,000 is a minor industrial center 60
miles east of Pittsburgh. It is located in the southwest
region of Pennsylvania which, as a result of the decline
in coal production and the modernization of the steel
industry, suffers from chronic unemployment and has
been classified as a depressed area. Between 1950 and
1960 Johnstown's population decreased by 14.5 percent.
The Windber Bank, located 10 miles southeast of
Johnstown, is the third largest bank in the area and
operates two branches. This area also is depressed,
suffering from a high rate of unemployment. The
bank is 50 percent owned by the principal local coal
mining and related interests, which have apparently
proposed this sale as part of their plan to liquidate
all of its local investments.
United States National is the largest commercial
bank in the area. Second in size is the Johnstown
Bank and Trust Company. In determining the competitive impact of this proposal consideration must
also be given to competition furnished by the Johnstown Savings Bank and four savings and loan associations operating in the Johnstown-Windber area.
While the competitive impact on the Johnstown
Bank and Trust Company will be intensified, it is a
well-established institution of sufficient size and
strength to compete effectively.
In Windber, the impact of the proposal will fall
mostly on the Citizens National Bank of Windber,
which, however, should be able to withstand the increased competition.
This purchase and assumption will bring to Windber
the resources of a strong bank that should be able to
withstand any further deterioration of local economic
conditions.
In weighing the factors of this case in light of the
statutory criteria, it is found to be in the public interest
and it is therefore approved, effective on or after May
29, 1963.
MAY 23, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The applicant bank, with total assets of $63.1 million, total deposits of $56.8 million and loans and discounts of $27.6 million proposes to absorb its third commercial bank in less than 3 years. The applicant Bank
is presently the largest bank in its head office service
area with over 41% of the IPC deposits and loans and
the largest in its broad county service area with about
30% in each category. The mergering Bank has participated in two mergers within the past 5 years and
with total assets of $13.3 million, total deposits of $11.7
million and loans and discounts of $5.9 million ranks
third in IPC deposits in each of the above service areas.
The merger, therefore, would add to the existing
dominance of the applicant, further distort the already
existing competitive imbalance in these service areas,
and eliminate the considerable competition presently
existing between the participating banks.
The effect of the proposed transaction on competition would be significantly adverse.
FARMERS-DEPOSIT BANK OF SADIEVILLE, SADIEVILLE, KY., AND T H E FIRST NATIONAL BANK OF GEORGETOWN,
GEORGETOWN, KY.
Name of bank and type of transaction
Total assets
In operation To be operated
Farmers-Deposit Bank of Sadieville, Sadieville, Ky., with
and The First National Bank of Georgetown, Georgetown, Ky. (2927), which
had
merged June 15,1963, under charter of the latter bank (2927), and under title
of "First National Bank and Trust Company." The merged bank at the
date of merger had
108
$1,289,880
5,744,173
6,980,763
COMPTROLLER'S DECISION
On January 31, 1963, The First National Bank of
Georgetown, Georgetown, Kentucky, and FarmersDeposit Bank of Sadieville, Sadieville, Kentucky, applied to the Comptroller of the Currency for permission to merge under the charter of the former and with
the title "First National Bank and Trust Company."
Georgetown, the county seat of Scott County, Kentucky, is located in the north central part of the State
12 miles north of Lexington in the midst of a very rich
and fertile belt of bluegrass country that grows top
grade burley tobacco and raises fine livestock. The
city supports a population of 7,600 and serves a trade
area population estimated at 20,000. Though tobacco
is the prime money crop, industrial activity is growing
and economic conditions in the community are very
healthy. There are approximately 1,500 people employed by manufacturing concerns and 1,700 in nonmanufacturing enterprises. Moreover, many of the
local inhabitants are employed in nearby Lexington.
Financial services are provided by the $5.8 million
First National Bank of Georgetown, the $5.2 million
Georgetown National Bank, and the $5.1 million
Farmers Bank and Trust Company. In addition,
there are two small savings and loan associations and
one small loan company located in the Georgetown
trade area.
The $1.4 million Farmers-Deposit Bank of Sadieville is the only bank headquartered in Sadieville, a
semi-isolated village of 300 people situated 16 miles
northeast of Georgetown. The economy is dependent
entirely on agriculture with sales of tobacco, livestock
and dairy products providing the principal sources of
income. The only other bank in the immediate area
is the $0.6 million Corinth Deposit Bank located 9
miles to the north at Corinth.
Since January 1962, Farmers-Deposit Bank has been
without a full time executive officer. The president
of the applicant First National has been supervising
the affairs of both banks, devoting evenings and week
ends to Farmers-Deposit. By approving this merger
the difficult management problem will be solved without adverse effect on other area banks and with substantial benefit to the communities involved.
In balancing the circumstances of this case in light
of the statutory criteria, we find this merger to be in
the public interest, and the application is therefore
approved effective on or after May 7, 1963.
APRIL 30,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
There appears to be no significant competition between the merging Bank and the acquiring Bank.
The increase in the size of the acquiring Bank as a
result of this merger would not seriously upset the
relative competitive equality now prevailing among
the banks in Georgetown. Therefore, this merger is
not likely to have a substantial adverse effect on banking competition in Scott County.
T H E WYOMING NATIONAL BANK OF TUNKHANNOCK,, TUNKHANNOCK,, PAV AND THE WYOMING NATIONAL
BANK OF WILKES-BARRE, WILKES-BARRE,, PA.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
The Wyoming National Bank of Tunkhannock, Tunkhannock, Pa. (835), with....
and The Wyoming National Bank of Wilkes-Barre, Wilkes-Barre, Pa. (732),
which had
merged June 24, 1963, under charter and title of the latter bank (732). The
merged bank at the date of merger had
COMPTROLLER'S DECISION
The Wyoming National Bank of Tunkhannock,
Tunkhannock, Pennsylvania, and The Wyoming National Bank of Wilkes-Barre, Wilkes-Barre, Pennsylvania, have applied to the Comptroller of the
$5, 376, 380
1
36, 981, 608
5
42, 357, 989
6
Currency for permission to merge under the charter of
the latter and with the title "The Wyoming National
Bank of Wilkes-Barre."
The charter bank maintains its main office in WilkesBarre, the seat of Luzerne County. Its four branch
offices in surrounding communities afford additional
109
banking service to the area's 250,000 population. In
the past, the major economic impetus has been generated by anthracite coal mining. That industry,
however, has seen a marked decline in recent years
and now employs but 10 percent of the available labor
force, and textile manufacturing, light industry and
diversified commercial firms have, in large part, supplanted mining in the local economy. Constant civic
efforts to attract new industry to the metropolitan area
have reduced cyclical unemployment and the overall
prospects for development are considered favorable.
Some 15 commercial banks, of which the charter bank
is third largest, are active competitors in the area.
The First National Bank and the Miners National
Bank are each more than twice as large as the charter
bank.
Tunkhannock is situated in the mountainous terrain
of Wyoming County, approximately 25 miles north of
Wilkes-Barre. The city's population represents nearly
one-eighth of the county's 17,000 inhabitants and has
shown modest growth in the past decade. Dairy farming is the leading component of the local economic
structure and forecasts for growth of this industry are
encouraging. General agriculture and a modicum of
industrial activity are other economic elements common to Wyoming County and to Tunkhannock. In
addition, completion of the Penn-Can Highway gives
every assurance that a large scale local recreation
industry will develop.
Banking facilities in Tunkhannock are provided by
the merging bank's single office and by the Citizens
National Bank. Both banks are approximately the
same size. Four other comparable banks, located in
nearby Wyoming County communities, are generally
considered to be in the Tunkhannock service area but
banking activities are characteristically restricted to the
immediate locale. Competitive energies of savings
and loan associations have secured sizable share
balances in this area.
Consummation of the merger will patently have
little effect in Wilkes-Barre. The relative positions of
competing banks will remain unchanged and the
charter bank's acquisition of less than $5 million in
additional resources is not significant.
The major impact of the merger will be felt in
Tunkhannock and in the peripheral communities.
The injection of a branch of the charter bank into the
local banking structure will provide a needed catalyst
to meet the expanding credit needs of agriculture and
industry. While the presence of the resulting bank in
Tunkhannock can be expected to create some pressures
on existing local banks, this minimal competitive consequence of the merger pales in face of the need of the
locale for broader, more adequate banking services.
In weighing the factors of this case in light of the
statutory criteria it is found to be in the public interest
and is therefore approved, effective on or after
May 31,1963.
MAY 24,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger of the Wyoming National
Bank of Wilkes-Barre, Wilkes-Barre, Pennsylvania and
the Wyoming National Bank of Tunkhannock, Tunkhannock, Pennsylvania, would appear to have an adverse effect upon competition. The merger would establish such a large bank in the Tunkhannock area that
some or all of the remaining banks may have to unite
to compete effectively. The result would be increased
concentration in commercial banking. The merger
would destroy the favorable competitive balance existing in the Tunkhannock area. The agricultural
industry in the Tunkhannock area may be deprived of
a local bank that has sought to service the needs of the
industry. Finally, Wilkes-Barre's growth by eliminating independent local banks would be continued and
encouraged.
FIRST BANK OF ST. MARIES, ST. MARIES, IDAHO, AND T H E FIRST SECURITY BANK OF IDAHO, NATIONAL
ASSOCIATION, BOISE, IDAHO
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
First Bank of St. Maries, St. Maries, Idaho, with
and the First Security Bank of Idaho, National Association, Boise, Idaho
(14444), which had
merged June 28, 1963, under charter and title of the latter bank (14444).
The merged bank at the date of merger had
110
$4,724, 661
1
243, 539, 537
37
248,264,199
38
COMPTROLLER S DECISION
On April 24,1963, the First Security Bank of Idaho,
National Association, Boise, Idaho,filedan application
with the Comptroller of the Currency to merge with
the First Bank of St. Maries, St. Maries, Idaho, under
the charter and title of the former.
The $5 million First Bank of St. Maries is located in
St. Maries, the county seat of Benewah County. This
town of 2,400, serving a trading area of 6,000 residents,
lies in St. Joe Valley near the foothills of the Bitterroot
Mountains, 60 miles southeast of Spokane, Washington. While the growing tourist trade, of hunters in
quest of deer, moose, mountain goats and birds; and
fishermen after trout and bass, is adding to the economic life of this area, lumbering and allied activities
are the principal basis for the none too prosperous economic life of the area. There is also some cattle raising
and grain farming in the Valley.
Not only does the single office First Bank have a
protected position in St. Maries as the only bank in
town, but also receives little, if any, competition from
banks in neighboring towns. The closest Idaho banking facilities are located 45 miles northeast in Kellogg.
The next nearest banking town is Coeur d'Alene, 50
miles north, where Idaho First, First Security and the
Bank of Idaho have branches. First Security also has
an office in Moscow, 60 miles south of St. Maries and
there is a branch of Idaho First 49 miles southwest in
Potlatch. Banks in Fairfield and Rockford, Washington, are 36 miles from St. Maries.
Ownership and control of First Bank is closely held.
Its president and its now inactive vice president own
95 percent of the outstanding stock. The president,
who wishes to retire from the banking business, has
been unable to obtain a competent manager for this
bank. His only alternative to leaving an operating
bank in his estate is to join it with another bank by
merger.
This merger should prove beneficial to the people in
the St. Maries area. Without eliminating any desir-
able banking competition, it will bring a larger bank
of more liberal bent into this town which needs an
economic stimulant. Though this proposal will give
First Security another branch in its chain, it does not
appear meaningful, when viewed against this heavily
timbered and sparsely populated mountainous area, to
criticize it as tending toward concentration of banking
resources. It will resolve a management problem
which could, if not answered in time, cause serious
harm and inconvenience to the people in St. Maries.
Having weighed this application against the statutory standards and having found that it will promote
the public interest, the application is therefore approved effective on or after June 21,1963.
June 17, 1963.
SUMMARY OF REPORT BY THE ATTORNEY GENERAL
The First Security Bank of Idaho is the second
largest bank in Idaho and operates 33 banking offices
in the State. As of December 28, 1962, assets were
$241,677,000, deposits $218,222,000 and loans and discounts $137,503,000. During the past 10 years five
banks were acquired with total deposits of $19,938,000.
St. Maries Bank has only one banking office. As
of December 28, 1962, assets were $4,971,000, deposits
$4,454,000 and loans and discounts $1,804,000.
The offices of the two banks are sufficiently separated by distance so that they serve different areas.
However, the proposed acquisition will increase First
Security Bank's share of commercial banking in Idaho
where it already has over 31 percent of total banking
assets of the State and will add to the concentration in
commercial banking in Idaho, where the four largest
banks presently control over 82 percent of the total
assets of all Idaho banks. Thus this proposed acquisition may have an adverse competitive effect and be
inimical to the stated congressional policy of protecting
and fostering the growth of independent bank units.
OLD NATIONAL BANK OF WASHINGTON, SPOKANE, WASH., AND SECURITY STATE BANK, COLTON, WASH.
Banking offices
Name of bank and type of transaction
Total assets
(as of 3/26163)
In operation To be operated
Security State Bank, Colton, Wash., with
was purchased June 28,1963, by Old National Bank of Washington, Spokane,
Wash. (4668), which had
After the purchase was effected, the receiving bank had
$2, 300, 000
1
174, 365, 000
176, 460, 000
28
29
111
COMPTROLLER S DECISION
On April 15,1963, the Old National Bank of Washington, Spokane, Washington, applied to the Comptroller of the Currency for permission to purchase the
assets and assume the liabilities of the Security State
Bank, Colton, Washington.
Old National Bank, with total resources of $174
million, is one of the seven largest banks in the State of
Washington. Headquartered in Spokane, a city of
181,608, the bank operates 26 branch offices in this
agriculturally oriented eastern section of the State.
Nine of its branch offices are in Spokane and 17 are
located in other communities. Old National is a subsidiary of Old National Corporation, a registered bank
holding company, which also controls the First National Bank in Spokane. The latter bank operates
three offices in the city.
Security State Bank, which was organized in 1906,
has total assets of $2.3 million. This single-office bank
is headquartered in Colton, a village of 253 residents,
located 90 miles south of Spokane in the southeast
corner of the State some five miles from the Idaho
boundary. As the only bank in town, Security State
serves the financial needs of this agriculturally rich
area which specializes in raising grains, sugar beets,
and peas.
Security State Bank, an affiliate of the First National
Bank of Pullman, suffered a severe blow with the recent death of its competent senior officer. Since his
death, the leading executive officers of the Pullman
bank have guided the Security State Bank. These
men, faced with the problem of insufficient depth of
management in their own bank, cannot give to Security State the time and attention its affairs demand.
They have been unable to recruit a new manager.
There is no overlapping of the trade areas of these
two banks. The closest branch offices of Old National
to Security State are located in Colfax and Palouse,
both 30 miles north of Colton. This proposal, therefore, will not eliminate any competition between the
participants.
While no other bank operates within the service area
of the State Security, several banking offices within
easy driving distance of Colton are available to its
residents. The Farmers State Bank of Uniontown,
112
with $1 million in assets, is located 3 miles south of
Colton. This small bank appears to serve only the
people of Uniontown. In Clarkston, 10 miles south
of Colton, there is a branch of the National Bank of
Commerce of Seattle, the second largest bank in the
state. In Pullman, 14 miles north of Colton, there is
the main office of the $13 million First National Bank
of Pullman and a branch of the Seattle-First National
Bank. Additionally, Idaho's two largest banks each
maintain an office within 20 miles of Colton at Coeur
d'Alene.
While this proposal will be of little consequence in
the Spokane area, it will mean much to the people in
and around Colton, who will continue to have a convenient banking facility capable of meeting their
banking needs. The assurance of competent management will allay any community uncertainty that followed the death of the former president of Security
State. In all probability, it will stimulate competition
with the larger banks in Pullman, Clarkston and
nearby Idaho without working harm on the one small
bank in Uniontown.
Measuring this proposal against the statutory criteria, this office finds that it will be in the public
interest. The application, therefore, is approved effective on or after June 13,1963.
JUNE 6,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The purchasing Bank is many times the size of the
selling Bank. This acquisition will not significantly
enhance the general competitive position of the purchasing Bank. The purchasing Bank's offices nearest
the selling Bank are about 25 miles away, and competition between the two banks does not appear to be very
extensive. Furthermore, branches of two of the State's
largest banks are about 25 miles from the selling
Bank; these offices are in a position to compete with
the purchasing Bank in the region around Colton,
where the selling Bank is located, and would not be
adversely affected by this acquisition to a significant
degree. Lastly, the purchasing Bank has participated
in only one acquisition since 1940.
For these reasons, it does not appear that this acquisition will have a significant adverse effect on
competition.
STATE BANK OF MADISON, INC., MADISON, VA., AND T H E NATIONAL BANK & TRUST CO. AT CHARLOTTESVILLE,
CHARLOTTESVILLE, VA.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
State Bank of Madison, Inc., Madison, Va., with
and the National Bank & Trust Co. at Charlottesville, Charlottesville, Va.
(10618), which had
merged June 29, 1963, under charter and title of the latter bank (10618).
The merged bank at the date of merger had
COMPTROLLER'S DECISION
On April 12, 1963, the National Bank and Trust
Company at Charlottesville, Charlottesville, Virginia,
and the State Bank of Madison, Inc., Madison, Virginia, applied to the Comptroller of the Currency for
permission to merge under the charter and with the
title of the former.
Charlottesville is situated in Central Virginia approximately 70 miles northwest of Richmond and 165
miles west of Norfolk. With an increasing population
presently estimated at 31,000, it is the largest city in,
and the trading center for, a 12-county agricultural
area serving 100,000 people. Although the economy
of the city is based primarily on agriculture, there has
been a noticeable increase in light industrial activity.
Moreover, the University of Virginia, with its attendant facilities, is an important economic asset.
Banking services for Charlottesville are provided by
the applicant National Bank which operates its main
office and four branches in the city and one office in
each of the communities of Fork Union, Louisa, Mineral, Palmyra and Scottsville, all within a 37-mile
radius; by three offices of the $12 million Citizens
Bank and Trust Company; and, by five offices of the
$352 million Virginia National Bank.
Madison, the county seat of Madison County, is
situated in north-central Virginia about 27 miles north
of Charlottesville. The 8,000 residents of the area are
supported by an economy almost identical with that
of Charlottesville. Although State Bank of Madison
is the only bank in the county, it must compete with
much larger banks located in adjoining counties.
Among these are Virginia National Bank which operates branches in Orange and Greene Counties, the
$10.5 million National Bank of Orange, and two banks
in Culpeper County with total resources of $23.5
million.
$4,967,790
1
44,432, 917
9
49,191, 461
10
Approval of this merger will be substantially beneficial to both banks and to both communities. The
additional resources to be acquired by National Bank
will enable it to compete more effectively within Charlottesville and the State Bank of Madison will have
solved an impending management succession problem.
Moreover, the community of Madison will be serviced
by a bank capable of providing full banking service in
an efficient, responsive and responsible manner.
Applying the applicable statutory criteria to the facts
of this case, we conclude that the proposal is in the
public interest and the application is therefore
approved effective on or after June 8, 1963.
JUNE 3, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The National Bank and Trust Company at Charlottesville had, as of March 1, 1963, assets of $43,583,000, deposits of $37,268,000, loans and discounts of
$19,423,000 and capital accounts of $4,234,000. It
operates three offices in Charlottesville and five offices
outside of Charlottesville located from 20 to 37 miles
east and south of Charlottesville. Authorization has
ben granted for two more branches in Charlottesville.
The State Bank of Madison, Inc., had, as of March
1, 1963, assets of $5,018,000, deposits of $4,602,000,
loans and discounts of $2,302,000 and capital accounts
of $394,000. It operates one office in Madison, a
town 27 miles north of Charlottesville.
The service areas of the banks do not overlap to
any degree. Common depositors and borrowers appear negligible as are deposits and loans which originate in the service area of the other. Direct
competition between the banks thus does not appear
to be significant.
The proposed merger eliminates one more independent bank in Virginia. When consideration is
113
given to the increasing number of other independent
banks in Virginia that have been eliminated by mergers in recent months, the cumulative competitive
effect of supplanting small independent banks by large
consolidations is adverse and is contrary to the stated
congressional policy.
FARMERS AND MERCHANTS BANK, WILLIAMSBURG, OHIO, AND T H E FIRST NATIONAL BANK OF BATAVIA,
BATAVIA, OHIO, AND T H E CLERMONT NATIONAL BANK, MILFORD, OHIO
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
Farmers & Merchants Bank, Williamsburg, Ohio, with
and The First National Bank of Batavia, Batavia, Ohio (715), with
were purchased June 29, 1963, by the Glermont National Bank, Milford,
Ohio (3234), which had
After the purchase was effected, the receiving bank had
COMPTROLLER S DECISION
On March 15, 1963, the Clermont National Bank,
Milford, Ohio, applied to the Comptroller of the Currency for permission to purchase the assets and assume
the liabilities of the Farmers and Merchants Bank,
Williamsburg, Ohio, and The First National Bank,
Batavia, Ohio.
The three banks here involved are all located in
Clermont County, just east of Cincinnati. During the
decade from 1950 to 1960, the population of the county increased by 90 percent, due primarily to the growth
in the Milford area in the northwest corner of the
county. This area serves as a residential suburb for
Cincinnati.
The charter bank, Clermont National, is located in
Milford, a city of 4,700 serving a trade area of 30,000.
Much of the working force resident in Milford commute daily to Cincinnati, 16 miles away. Clermont
National Bank operates one branch in Loveland, 6
miles north of Milford and another in the Milford
Plaza Shopping Center, I/2 miles from its main office.
The Clermont National Bank has excellent management. Since 1958, it has shown substantial growth.
Although it is the only bank in Milford, it competes
with four branches of large Cincinnati banks and with
one smaller bank, all located outside Clermont County
but within 5 to 7 miles of Milford. Two of these are
branches of larger banks having total deposits of over
$350 million.
The First National Bank of Batavia is headquartered in Batavia, the county seat, 12 miles southeast
of Milford and 20 miles east of Cincinnati. Batavia
has a population of 1,700 and serves a trade area of
approximately 5,000 people, many of whom commute
114
$2, 223, 650
5, 008,276
1
2
11,201,619
17,459, 877
3
6
daily to Cincinnati. There is some agriculture in the
area. The First National Bank of Batavia was organized in 1865 and has one branch, located in Mount
Carmel, a village 6 miles south of Milford and 8 miles
west of Batavia.
The sole office of the Farmers and Merchants National Bank is located in Williamsburg, a village of
1,500 in the eastern part of the county, about 20 miles
southeast of Milford and 8 miles southeast of Batavia.
Like Batavia, Williamsburg has shown little growth in
recent years and its main source of employment, aside
from some tobacco and dairy farming, is the industry
in the Cincinnati area, 30 miles to the west.
In addition to the banks involved in this application,
Clermont County hasfiveother small banks located in
Amelia, Bethel, Felicity, New Richmond, and Owensville; each has less than $3 million in deposits. The
Brown County National Bank in Mount Orab and
numerous building and loan associations in Clermont
County also offer competition within the service area
of the selling banks. In reality the most effective
sources of competition for the banks in Clermont
County are the larger banks in Cincinnati. Since so
much of the labor force resident in the county commutes daily to Cincinnati, convenience dictates that
large portions of their wages are deposited in banks
near their employment. While the resulting bank will
hold a substantial portion of deposits in the county,
this factor is of no substantial moment because of the
effectively competing Cincinnati banks.
There is no significant competition between the three
banks here involved. Common ownership of the selling banks, the secondary nature of the roads in the
area, and local habits, have to a large extent dissuaded
people from seeking banking accommodation beyond
their own community, except in Cincinnati itself.
The selling banks have good management and are in
sound financial condition. They are hampered, however, by restrictions inherent in their present size.
Approval of the merger will permit the advent of at
least partial automation and an increase in the interest
rate paid on time and savings accounts deposits from
the present 1 percent, thus permitting the resulting
bank to become more effective in its mortgage and installment loan departments to the public benefit. The
resulting bank promises better service to the communities of Williamsburg and Batavia, renovated
offices and longer hours of operation. The staffs will
have greater opportunity for advancement while the
resulting bank will benefit from increased depth of
management. Clermont National Bank, by this acquisition plus a proposed recapitalization program, will
almost double its lending capabilities making it better
able to compete with the larger Cincinnati banks.
Considered in light of the applicable statutory criteria we conclude that the proposals are in the public
interest and the applications are therefore approved
effective on or after May 29,1963.
MAY 22,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The Clermont National Bank of Milford, Ohio, with
total assets of $11,201,619 proposes to purchase the assets and assume the liabilities of the Farmers and Merchants Bank of Williamsburg, Ohio, with total assets of
$2,223,650. These banks are located about 15 miles
apart in an area predominantly residential which has
experienced a large increase in population during the
past 10 years. Since the degree of competition between them does not appear to be extensive, the overall
probable effect of the merger would not be substantially
adverse.
THE MARION NATIONAL BANK, MARION, VA., AND T H E FIRST NATIONAL EXCHANGE BANK OF VIRGINIA,
ROANOKE, VA.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
The Marion National Bank, Marion, Va. (6839), with
and The First National Exchange Bank of Virginia, Roanoke, Va. (2737),
which had
merged July 8, 1963, under charter and title of the latter bank (2737). The
merged bank at the date of merger had
COMPTROLLER S DECISION
On May 6, 1963, The First National Exchange
Bank of Virginia, Roanoke, Virginia, applied to the
Comptroller of the Currency for permission to merge
The Marion National Bank, Marion, Virginia, under
the charter and title of the former.
Roanoke, serving an area population of 158,000,
is the trading and financial center of southwest Virginia. Its economy has shown good growth and stability and gives every sign of continuing strength.
First National Exchange serves the city through 8 of
its 15 branches, with another approved but unopened.
Banking competition is offered by the smaller Colonial
American National Bank, with four offices, by a
branch of the Bank of Virginia, a subsidiary of the
Virginia Commonwealth Corporation, and by the
Mountain Trust, with five branches. Moreover, pre-
$11,157,991
2
180, 225, 992
15
190,971,481
17
liminary approval has been granted for a new National Bank in the city. Two banks in Salem, adjoining Roanoke, one of which is also a subsidiary of
Virginia Commonwealth Corporation, plus active and
prosperous savings and loan associations, complete
the picture.
Marion, 112 miles southwest of Roanoke, is a city
of 8,000 serving an estimated 31,000 in the general
area of Smyth County. It has a well-balanced economy and shows good signs of participation in the
overall growth of southwest Virginia. Marion is
directly served by the merging $11 million Marion
National and by the smaller Bank of Marion. Some
banking service is also offered by relatively small banks
in the nearby communities—Rural Retreat, Chilhowie, and Saltville.
The public in the Marion area can well use the
increased resources and availability of services offered
115
by First National Exchange. Service of present needs
should be met. The merger should also stimulate the
future beneficial growth of the area.
Marion National is afflicted with a problem of management depth and succession. It has recently lost
two competent men, one of whom is now president
of another bank. The exodus of competent officers
from the smaller banks, when coupled with the banks'
need to provide additional services in response to community demands, may present a situation beyond the
ability of the banks to resolve internally. In such circumstances, merger is the financially feasible method
of providing effective management.
Moreover, approval of this merger will further extend the effective service area of First National Exchange. This bank has recently established branches
in Blacksburg, Bristol, and Wytheville and is, through
publicly beneficial expansion, providing the people in
southwest Virginia with an institution of growing
breadth and diversification, thus better serving the
expanding banking needs of the area.
In weighing this transaction in light of the statutory
criteria, it is found to be in the public interest and is
hereby approved, effective on or after July 8, 1963.
JULY 1,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
First National is by far the largest bank whose home
office is located in southwest Virginia. The present
merger is the sixth in a series of acquisitions of independent banks in this area begun in 1960 by First
National. Should this trend be permitted to continue,
the eventual result will be not only a serious reduction
in the number of independent banks but, more importantly, a substantial diminution in the ability of the
remaining ones to survive as competitive factors.
T H E FIRST NATIONAL BANK OF HUDSON FALLS, HUDSON FALLS, N.Y., AND T H E FIRST NATIONAL BANK OF
GLENS FALLS, GLENS FALLS, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The First National Bank of Hudson Falls, Hudson Falls, N.Y. (3244), with
and The First National Bank of Glens Falls, Glens Falls, N.Y. (980), which
had
consolidated July 12, 1963, under charter and title of the latter bank (980).
The consolidated bank at the date of consolidation had
COMPTROLLER S DECISION
On April 8, 1963, the First National Bank of Glens
Falls, Glens Falls, New York, and the First National
Bank of Hudson Falls, Hudson Falls, New York, applied to the Comptroller of the Currency for permission to consolidate under the charter and with the title
of the former.
Glens Falls is located on the Hudson River in northeastern New York approximately 40 miles north of
Albany. It is a residential and industrial community
with a population of about 18,580. Glens Falls and
the surrounding area are noted for a wide diversity of
industries, with some 60 firms producing 30 different
kinds of products, including paper, electrical capacitors, apparel, machinery, surgical instruments, pigments, wood products, cement, prefabricated buildings,
silver nitrates and other items. Moreover, as a corollary to its manufacturing activities, the area functions
as the principal trading and distribution center between
Albany and Montreal, Canada.
116
$12,251, 510
1
58,330,855
5
70, 582, 365
6
In addition to its main office at Glens Falls, First
National Bank of Glens Falls operates three out-oftown branches, one of which is in South Glens Falls,
across the Hudson River in Saratoga County, about 1
mile southeast of its main office. Another is at Bolton
Landing in the Lake George resort area about 18 miles
north of Glens Falls. The third branch is in Granville some 22 miles northeast of Glens Falls, and a
branch is under construction at Queensbury 2 miles
north of Glens Falls.
Hudson Falls is located about 3 miles east of Glens
Falls and has a comparable economic base. Industrial
activity has increased as has the population. It is
estimated that the population is now in excess of 8,000.
Because of this proximity, the financial structure
of both communities is practically identical. The
main competitor of the applicant banks is the Glens
Falls National Bank and Trust Company whose main
office is located directly across the street from the First
National Bank of Glens Falls, and 3 miles west of the
First National Bank of Hudson Falls. It also operates
a branch in Queensbury, 1 mile north of Glens Falls
and one at Fort Edward, 2 miles south of Hudson
Falls. Approval has also been granted for it to establish a new branch between Fort Edward and Hudson
Falls. Additional banking competition is provided by
the First National Bank of Lake George, Emerson National Bank, Warrensburg, the Argyle and Corinth
branches of Manufacturers National Bank of Troy, the
Whitehall branch of the National Commercial Bank
and Trust Company, Albany, the Glens Falls Savings
& Loan and the Hudson Falls-Fort Edward Savings &
Loan, and the large savings banks in Albany, Schenectady, and Troy reportedly do a substantial business in
the area. Moreover, the area has many credit unions,
personal loan companies and Federal credit agencies.
In view of this diversified financial infrastructure it
does not appear that approval of the proposed merger
will change the competitive picture.
Approval of this consolidation will provide Hudson
Falls with a bank able and willing to meet the
credit needs of its expanding population. Moreover,
the growing economy of Glens Falls will benefit from
the increased resources which First National will acquire. These benefits will accrue to the communities
without substantial change in the competitive structure. As a matter of fact, the possibility of increased
competition becomes evident when it is realized that
approval of the consolidation will remove head office
protection from Hudson Falls, thereby paving the way
for other banks to open branches within the community.
Applying the statutory criteria to the facts of this
case, we conclude that the proposal is in the public
interest and the application is therefore approved
effective on or after July 8,1963.
JULY 1, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The head offices of the two consolidating banks are
located approximately 3 miles apart. In addition to
the applicants, there is only one other commercial bank
in the service area, The Glens Falls National Bank and
Trust Company. This bank has been offering increasing competition in the Hudson Falls area and apparently was a motivating factor in the decision of Hudson
Falls to seek a merger.
As a result of the proposed consolidation the 51,477
residents of the resulting bank's service area will be
left with only two competitive alternative sources of
commercial banking services. Thus the proposal will
add to the dominance of First National and eliminate
as an independent commercial bank the competitive
force represented by Hudson Falls. The competitive
effect would therefore be adverse.
MARLBORO TRUST COMPANY, BENNETTSVILLE, S.C., AND THE FIRST NATIONAL BANK OF SOUTH CAROLINA OF
COLUMBIA., COLUMBIA, S.C.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Marlboro Trust Co., Bennettsville, S.C, with
and The First National Bank of South Carolina of Columbia, Columbia, S.C.
(13720), which had
merged July 20, 1963, under the charter and title of the latter bank (13720).
The merged bank at the date of merger had
COMPTROLLER S DECISION
On April 29, 1963, the $93.5 million First National
Bank of South Carolina of Columbia, Columbia, South
Carolina, and the $6.9 million Marlboro Trust Company, Bennettsville, South Carolina, applied to the
Comptroller of the Currency to merge under the
charter and title of the former.
Columbia, capital and largest city of South Carolina, has a population of 97,500 and serves Richland
$5, 935, 878
2
96,209, 833
19
102,131,037
21
County, whose population is 200,100. The city is a
retail and wholesale center and its economy draws
support from textile manufacturing firms and Federal
and State governmental activity.
First National is the largest commercial bank in
Columbia, and the third largest in the State. The two
largest banks in South Carolina, with which the
charter bank competes on a statewide basis, are South
Carolina National Bank, with 25% of the aggregate
117
State deposits, and Citizens and Southern National
Bank of South Carolina, with 15%. The charter
bank, which holds 8% of State deposits, has participated in 5 mergers by which it gained $30.1 million in
deposits, $10.3 million in loans and discounts, and 8
of its 21 branch offices. Prior to this application First
National's service area was limited to Columbia,
Charleston and the south central portion of the State.
This proposed move into Bennettsville, 100 miles
northeast of Columbia, represents a departure from
charter bank's prior pattern of service area expansion.
Bennettsville, the county seat of Marlboro County,
is the center of the second largest cotton producing
region in South Carolina. Although Marlboro
County's population of 28,500, reflects a slight decrease over the last decade, Bennettsville has shown a
40% increase in population, which now totals 7,000.
The community in former years relied primarily on
agriculture to bolster its economy. Mechanization of
farming, however, resulted in a labor surplus which in
turn attracted much small industry to the area. It is
expected that this industrial growth will continue.
Marlboro Trust Company, with one branch office in
Bennettsville, holds $5 million, or 30% of deposits in
the Bennettsville area. The only other bank in Bennettsville, Citizens State Bank, holds 16.3% of area
deposits. The County has two other small banks and
a depository, which, combined have 12.9% of deposits,
and the Cheraw Branch of South Carolina National
Bank, with 31.8% of total deposits.
The principal competitive impact on this proposal
will be felt by the $3 million Citizens State Bank. Although Citizens will be subjected to increased competition by the resulting banking office, it is not deemed
significant inasmuch as its present inability to serve
adequately the ever increasing financial needs of the
area has already prompted its board of directors to
approve a proposed merger with the South Carolina
National Bank.
By approving this merger, Bennettsville will gain the
services of a progressive bank with a lending limit
much larger than that of the merging bank to the ultimate benefit of a growing industrial community. The
merger will also give local industry and the large
farms an alternative, not now available locally, to the
Cheraw Branch of South Carolina National.
In light of the statutory criteria we find this merger
to be in the public interest and the application is therefore approved effective on or after July 19, 1963.
JULY 18,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The First National Bank of South Carolina of Columbia seeks to annex its sixth independent commercial bank within the last 8 years. Approximately 37%
($30.1 million) of the applicant Bank's present total
deposits of $81 million, more than 23% ($10.3 million) of its net loans and discounts of $44.8 million and
8 of its 21 banking offices are directly attributable to
past acquisitions. The merging Bank has two banking
offices in the City of Bennettsville and had, as of
March 18, 1963, total assets of $6,672,000, total deposits of $5,883,000 and net loans and discounts of
$1,916,000.
The applicant Bank and its widespread branches
compete in the cities of Columbia, Charleston, Anderson, Summerville, Clemson and Clover. The applicant is the largest bank in Columbia and third
largest, with 8% of total deposits, in the State. The
four largest South Carolina banks control approximately 54% of all the State deposits.
The merger would not only eliminate another successful independent bank and thereby increase the
growing dominance of large statewide banks, but
would upset the present competitive balance existing
between commercial banks located in the service area
of the Merging Bank. Thus, it is our view that the
proposed merger would have adverse competitive
consequences.
THE NORTHERN SAVINGS BANK, COLUMBUS, OHIO, AND T H E HUNTINGTON NATIONAL BANK OF COLUMBUS,
COLUMBUS, OHIO
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Northern Savings Bank, Columbus, Ohio, with
and The Huntington National Bank of Columbus, Columbus, Ohio (7745),
which had
merged July 24,1963, under charter and title of the latter bank (7745). The
merged bank at the date of merger had
118
$17, 803,896
1
285,422,456
10
302,057,792
11
COMPTROLLER'S DECISION
On May 20, 1963, The Huntington National Bank
of Columbus, Columbus, Ohio, and The Northern
Savings Bank, Columbus, Ohio, applied to the Comptroller of the Currency requesting permission to merge
under the charter and with the title of the former.
Columbus, the capital of and the third largest city
in Ohio, is situated in the center of the State. It has
a population in excess of 471,000 and serves a trade
area with a population of approximately 800,000.
Industrial activity is widely diversified with over 800
manufacturing plants producing items such as industrial equipment, mining and construction machinery,
electrical appliances, fire engines, airplanes, automotive parts, shoes and many others. It is also the home
of Ohio State University, which has an enrollment of
about 30,000, and of six other colleges and universities.
There is a United States Army depot within the city
and the Lockbourne Air Force Base is located 16 miles
south of the city. This strong and viable economic
base has been largely responsible for the 25% increase
in population since 1950.
The financial structure of the area is as diverse as
the economy it serves. There are 12 commercial
banks operating 55 offices and holding deposits of
some $657 million. There are 19 savings and loan
associations operating 47 offices with withdrawable
share accounts aggregating in excess of $477 million.
The growth of these associations has been twice that
of the commercial banks during the past 12 years.
Moreover, there are 33 insurance company offices, 115
credit unions, 9 sales finance companies, and 53 small
loan companies operating 119 offices. Together these
nonbank financial institutions provide formidable competition for the savings dollars in the hands of local
residents, and for the credit needs of all the area's
borrowers.
The commercial banking structure of the area embraces the 24 offices of the aggressive and efficient
$520 million Ohio National Bank of Columbus which
is an affiliate of BancOhio Corporation, a registered
Bank Holding Company, with which the Ohio State
Bank and the Worthington Savings Bank are also
affiliated. The applicant $281 million Huntington
National Bank with 10 offices is the second largest
bank and the $190 million City National Bank & Trust
Company of Columbus with 9 offices is the third
largest. The six remaining banks, including the $17
million applicant Northern Savings Bank, are relatively small.
Approval of the proposed merger will solve an acute
management problem at Northern Savings Bank without noticeable effect on the present banking structure. The competitive picture will be substantially
unchanged.
Applying the applicable statutory criteria to the proposal, we conclude that it is in the public interest and
the application is approved effective on or after July
24, 1963.
JULY 17,
1964.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Commercial banking in the City of Columbus and
in Franklin County is highly concentrated. Three
banking organizations, Huntington National Bank of
Columbus, City National Bank & Trust Co., and
BancOhio Corporation, a bank holding company with
three affiliates in Franklin County, control roughly
95% of the banking business in this County.
This unusually high degree of concentration has to
a large extent resulted from mergers and acquisitions
by the area's three leading banks. The instant merger, if approved, would add to this concentration by
eliminating the competition between the acquiring
and acquired banks and by reducing the number of
independent banks in Franklin County to six.
The continued existence of these six banks in the
face of such concentration would appear to be precarious. It would not be at all unlikely that they will be
prompted, or indeed compelled, by circumstances to
merge or affiliate with the large Columbus banks.
Independent banking in this area would thus be further threatened by approval of this merger. The
effect on competition of the proposed merger would
therefore be seriously adverse.
119
THE NIGODEMUS NATIONAL BANK OF HAGERSTOWN, HAGERSTOWN, MD., AND T H E FIRST NATIONAL BANK OF
MARYLAND, BALTIMORE, MD.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Nicodemus National Bank of Hagerstown, Hagerstown, Md. (12590), with
and The First National Bank of Maryland, Baltimore, Md. (1413), which had..
merged Aug. 2, 1963, under charter and title of the latter bank (1413). The
merged bank at the date of merger had
COMPTROLLER'S DECISION
On April 11,1963, the First National Bank of Maryland, Baltimore, Maryland, applied to the Comptroller
of the Currency for permission to merge with the Nicodemus National Bank of Hagerstown, Hagerstown,
Maryland, under the charter and with the title of the
former.
A much needed and necessary realignment of the
Maryland banking structure began in 1956. The
more alert commercial banks were struck with the
realization that nonbank financial institutions were expanding their facilities and services to meet the requirements made necessary by the growth and diversification
of population and per capita income. Many of the
commercial banks met this competition by expanding
their own facilities and services on a statewide basis in
accordance with the enlightened branch banking laws
of the State. Thus, Maryland now has several commercial banks which are approaching statewide status
and several more which are regional in scope. During
the same period there was a strong upsurge of interest
by competent groups with new sources of capital and
enterprise which they desired to utilize in the field
of banking. Ten of these groups have succeeded in
establishing banks, seven under national charters and
three under State charters. Four other groups have
received approval under national charters and another
group has recently filed for a national charter. It is
quite clear that the expansion of established banks and
the chartering of new banks has served to rid the
State's banking system of inertia. Effective competition has been instituted and the public interest is being
served.
The First National Bank of Maryland presently
operates its main office and 14 branches in the City of
Baltimore, 9 in Baltimore County, 5 in Montgomery
County, 2 in Wicomico County, and 1 in Anne Arundel
County. Although it is well on its way to becoming a
statewide bank, as are a number of other Maryland
120
$35, 612,646
475, 664,791
508, 850,514
4
33
37
banks, most of its business is generated in the Baltimore
area.
Baltimore is the sixth largest city in the nation with
a population estimated to be in excess of 1,785,000. It
is a commercial and industrial center, a major seaport
and one of the largest insurance and financial centers in
the east.
Hagerstown, the seat of Washington County, is situated in northwest Maryland approximately 70 miles
northwest of Washington, D.C., and an equal distance
west of Baltimore. According to the 1960 census, the
population of the city was 36,600 while that of Washington County was 91,219; about 200,000 persons
reside in the trade area which covers a radius of some
25 miles, extending into Pennsylvania and West Virginia. Hagerstown is principally an industrial city
with the surrounding area devoted largely to dairy
farming, cattle raising and fruit growing. Among the
industries located in the city are manufacturers of airplanes, trucks, pipe organs, commercial refrigeration
equipment, fertilizer, cement, furniture and shoes.
Despite this well-diversified economic base, the Hagerstown area is classified as economically depressed.
This classification is largely due to the drastic cutback
in the production of defense materials by one of the
area's largest industries a few years ago. Admirable
efforts on the part of local community organizations to
improve economic conditions have produced some
results. Since the late 1950's the local Economic
Development Commission has been responsible for
creating some 4,000 new jobs in 24 new and expanding
industries. Recently, however, it has become clear
that a new force is needed to accelerate business
development.
Presently, the Hagerstown area is served exclusively
by relatively small and conservatively oriented banks.
The largest of these is the $33 million Nicodemus National Bank which serves Hagerstown along with the
$19 million Second National Bank, the $16 million
Hagerstown Trust Company, and the $14 million
Farmers and Merchants Bank. Each of these banks
operates three offices. Six other unit banks operate
within Washington County and nine others are located
within a 30-mile radius of Hagerstown, including those
in nearby Pennsylvania. These commercial banks receive considerable competition from three local savings
and loan associations which have assets aggregating
nearly $45 million, and from insurance companies, sales
finance and personal loan companies.
The essential question raised here and by the proposal of the Maryland National Bank to merge the
Second National Bank of Hagerstown is whether or not
a substantial reorganization of banking facilities in the
Hagerstown area is justified as being in the public
interest. It is the opinion of the participating banks,
and of many local businessmen, that it is. The opinion
is not without merit. In addition to diversified established industry and an available labor force, Hagerstown has ample airline and railway facilities, 2 U.S.
highways, 2 interstate expressways, now under construction, and 38 trucking companies. The potential
for substantial new industrial growth is clearly present.
In this connection, it is difficult to refute the claim of
the charter applicant that the lack of necessary growth
thus far is in part attributable to a lack of financial
capacity and strength of larger banking institutions
whose modern financial facilities could be utilized to
aid the further development of existing industry, and
to attract new industry to the area. Moreover, it
appears that a considerable portion of Hagerstown's
present industry receives banking services from larger
institutions outside the area which could be more conveniently and efficiently served locally. Industrial
credit is complex and its proper administration requires
the services of well trained credit specialists and the
support of many specialized departments available only
to larger banks.
It is concluded that the Hagerstown area is not
adequately served by the existing small banks since
they are not equipped to aid materially in solving
THE
present economic problems, or to provide the necessary financial environment for future growth. Approval and consummation of the proposed merger
will provide initiative for the release of talents and
resources which appear to have been stifled because
of lack of adequate financing and know-how. This
will be accomplished by means of increased banking
competition on a level consistent with the needs of
the community.
Applying the statutory criteria to the proposed
merger, we conclude that it is in the public interest
and the application is therefore approved effective on
or after August 1, 1963.
JULY 25,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The applicant Bank, second largest commercial
bank in Maryland, proposes to absorb its eighth independent bank in less than 7 years. As of March 18,
1963, 20 of its 34 banking offices, about 35% of its
total deposits of $399,013,000 and over 37% of its
net loans and discounts of $177,782,000 were directly
attributable to past acquisitions. The merging Bank
is the largest commercial bank in Washington County
and its four banking offices had, as of March 18,1963,
total assets of $33,495,000, total deposits of $30,768,000 and net loans and discounts of $14,707,000.
Commercial banking in Maryland is highly concentrated with the three largest banks operating about
35% of the commercial banking offices and holding
close to 50% of the commercial banking deposits in
the State. These three banks achieved their present
dominance principally by an extensive and systematic
program of expansion through mergers or acquisitions.
The proposed demise of the merging Bank and the
entry, in its place, of the applicant Bank would accentuate the undue concentration in banking power
and would substantially affect adversely existing and
potential competition in Washington County and in
the State of Maryland.
SECOND NATIONAL BANK OF HAGERSTOWN, HAGERSTOWN, MD., AND MARYLAND NATIONAL BANK,
BALTIMORE, MD.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Second National Bank of Hagerstown, Hagerstown, Md. (4049), with
and Maryland National Bank, Baltimore, Md. (13745), which had
merged Aug. 2,1963, under charter and title of the latter bank (13745). The
merged bank at the date of merger had
725-698-^64-
9
$16,188,008
620,403,737
635, 579, 581
3
70
73
121
COMPTROLLER'S DECISION
On May 24, 1963, Maryland National Bank, Baltimore, Maryland and the Second National Bank of
Hagerstown, Hagerstown, Maryland, applied to the
Comptroller of the Currency requesting permission to
merge under the charter and with the title of the
former.
Maryland National Bank serves the Baltimore
metropolitan area, Southern Maryland, the Eastern
Shore and Montgomery County through 70 offices in
39 communities. More than 75% of Maryland National's total deposits are held by the 34 offices it
operates in metropolitan Baltimore.
Since the deposits to be gained as a result of the
proposed merger represent a fractional amount of
aggregate banking deposits in the State, the increase
would have little effect upon the existing competitive
picture in the areas in which Maryland National presently operates. The only noticeable effect will be in
the Hagerstown area.
An exposition of the economic and financial structure of the Hagerstown area is contained in the decision of the merger application of The First National
Bank of Maryland and the Nicodemus National Bank
of Hagerstown which was approved today. The reasons for that approval are equally applicable to this
proposal.
As we pointed out in that decision, the existing
banks in Hagerstown are not able to marshal the resources and leadership which the community needs.
The opportunity for internal growth is limited and
a merger of two local banks could not develop a bank
with sufficient capital, assets or personnel to assist materially the future expansion of the community.
On several occasions we have indicated that entry
into an area by way of de novo branching is generally
preferable to entry by way of takeover, and, while we
continue to adhere strongly to that position we are
convinced that this case constitutes an exception since
there is a pressing need for this area to acquire adequate banking facilities now. While de novo branching could ultimately be depended upon to furnish
Hagerstown with the banking resources its economy
requires, this route, because it generally involves longer
periods of time than does branch expansion through
merger, is not adapted to meet Hagerstown's immediate needs. In view of the present posture of Mary-
122
land's banking structure and its sound branch banking
laws, it would seem advisable for the large multi-office
banks to place greater emphasis on de novo branching
than on merger to achieve future growth.
The people of Hagerstown have been working hard
to diversify and solidify the economic base of the community. Maryland National and The First National
will be of considerable help in that endeavor. The
simultaneous introduction of these two banks into
Hagerstown will raise the level of effective competition
to the degree demanded by the community and numerous alternate banking sources will continue to be
available.
Applying the statutory criteria to the proposed
merger, we conclude that it is in the public interest
and the application is therefore approved effective on
or after August 2,1963.
JULY 26,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL •
Maryland National Bank, the largest commercial
bank in Maryland with 70 banking offices located
throughout the State, proposes to acquire its ninth
independent bank in less than 10 years. As of May 1,
1963, 56 of MNB's 70 banking offices, approximately
65% or $362,915,000 of its total deposits of $561,542,000 and about 56% or $167,724,000 of its net loans and
discounts of $301,486,000 were the direct result of past
acquisitions. The Merging Bank is the second largest
commercial bank in Washington County and its three
banking offices had, as of May 1, 1963, total assets of
$15,971,000, total deposits of $14,121,000, and net
loans and discounts of $8,684,000.
The three largest commercial banks in Maryland,
due to a rash of mergers in recent years, operate over
35% of the commercial banking offices and hold about
one-half of the commercial banking deposits in the
State. The expansion policies of these large statewide
banks has accentuated the undue concentration of
banking power and has seriously impaired the efficiency of the independent banking system in Maryland. The acquisition of the Merging Bank by Maryland National Bank would add to this concentration
and would substantially affect adversely existing and
potential competition in the city of Hagerstown, Washington County and in the State of Maryland.
T H E VALLEY NATIONAL BANK OF CHAMBERSBURG,, CHAMBERSBURG, PA., AND T H E NATIONAL BANK OF
CHAMBERSBURG, CHAMBERSBURG, PA.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Valley National Bank of Charabersburg, Chambersburg, Pa. (4272), with. . .
and The National Bank of Chambersburg, Chambersburg, Pa. (593), which
had
merged Aug. 3,1963, under charter of the latter bank (593) and under title of
"National Valley Bank and Trust Company." The merged bank at the
date of mercer had
.
COMPTROLLER S DECISION
On May 10, 1963, the National Bank of Chambersburg, Chambersburg, Pennsylvania, and the Valley
National Bank of Chambersburg, Chambersburg,
Pennsylvania, applied to the Comptroller of the Currency requesting permission to merge under the charter of the former and with the title "National Valley
Bank and Trust Company."
The Borough of Chambersburg is situated in southcentral Pennsylvania, some 50 miles southwest of Harrisburg, 52 miles west of York and 22 miles north of
Hagerstown, Maryland. It is centrally located within, and serves as the county seat and principal trading
center for, Franklin County. Although the county's
economy is primarily structured along agricultural
lines, nonagricultural activity is generated by the
United States Army Letterkenny Depot and by 131
industrial plants which are engaged in the manufacture of a variety of products including shirts, mobile
homes, paper products and the processing of fruit products. Historically, the area's economy has been relatively stable. In recent years this stability has been
modified upward by enterprises which demand increased capital investment. These events have produced favorable employment opportunities, thereby
contributing to a county population increase of approximately 16% between 1950 and 1960. The present
population of the county is slightly in excess of 88,000.
There are 13 commercial banks in Franklin County.
The four largest are headquartered in Chambersburg.
They are the $23 million National Bank of Chambersburg, which operates five offices in Chambersburg and
one in Fort Loudon, 16 miles west of Chambersburg;
the $19 million Valley National Bank of Chambersburg, which operates two offices in Chambersburg,
one facility at Letterkenny Ordnance Depot, one office
in Dry Run, 18 miles northwest of Chambersburg, and
one office in Lemasters, 12 miles west-southwest of
Chambersburg; the $20.5 million Farmers and Mer-
$18,704, 784
4
23,890, 800
6
42,595, 584
10
chants Trust Company, which operates two in-town
offices along with one office at Marion, 6 miles south
of Chambersburg; and, the $12 million Chambersburg Trust Company which operates two in-town
branches. The remaining banks are situated throughout the county and they are all unit banks with resources of less than $10 million, except for the $16
million First National Bank and Trust Company of
Waynesboro. Competition from nonbank financial
institutions emanates from credit unions, sales finance
and personal loan companies and savings and loan
associations.
The contention of the applicant banks that they are
subject to competition from banks in Harrisburg, York
and Hagerstown has considerable merit. It is an economic axiom that capital will flow where it is needed
when there is a reasonable expectation that the investment will be profitable. Ghambersburg is such an
area. It has an economic base which is growing and
diversifying and it has a commercial banking structure
which is not equipped to marshal and dispose of capital
resources with the degree of magnitude and efficiency
required by the community. In such situations, the
failure of the local banks to fulfill community needs
amounts to an invitation for the needs to be fulfilled by
someone else. More important, only a bank with adequate resources can exert a positive influence in exploring, fostering, supporting and directing the economic development of a community.
Approval and consummation of the proposed merger will prove to be substantially beneficial to the economic life of Chambersburg and Franklin County.
There will be a bank capable and willing to serve the
developing needs of the community and there will be
numerous alternate banking sources available. Effective competition will be increased since there will be a
bank with the tools necessary to produce such.
Applying the applicable statutory criteria to the
proposed merger, we conclude that it is in the public
123
interest and the application is therefore approved effective on or after July 23, 1963.
JULY 16,1963.
SUMMARY OF REPORT BY THE ATTORNEY GENERAL
The participating banks are located in downtown
Chambersburg and have identical service areas. The
acquiring bank is the largest of 4 in Chambersburg and
is the largest of 16 in Franklin County. The acquired
bank is the third largest in Chambersburg and fourth
largest in Franklin County. At present the acquiring
bank has 14.6% of all IPC deposits in Franklin County.
Its nearest competitor, the Farmers and Merchants
Trust Company, has 13.2% of all IPC deposits. If
the proposed merger is accomplished, the resulting
bank will have 26.1% of all IPC deposits, nearly doubling the position of the acquiring bank vis-a-vis its
nearest competitor. Both banks have a prior merger
history. Thus, the proposed merger would represent
a sizable concentration of banking assets to the detriment of the 2 remaining banks in Chambersburg and
the 14 remaining banks in Franklin County.
The effect of the proposed merger on competition
appears to be substantially adverse.
THE NATIONAL BANK OF COHOES, COHOES, N.Y., AND T H E MANUFACTURERS NATIONAL BANK OF TROY,
TROY, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The National Bank of Cohoes, Cohoes, N.Y. (1347), with
and The Manufacturers National Bank of Troy, Troy, N.Y. (721), which had..
merged Aug. 9, 1963, under charter and title of the latter bank (721). The
merged bank at the date of merger had
COMPTROLLER'S DECISION
On May 31, 1963, the $8 million National Bank of
Cohoes, Cohoes, New York, and the $83 million Manufacturers National Bank of Troy, Troy, New York, applied to the Comptroller of the Currency for permission
to merge under the charter and title of the latter.
Troy, located on the east bank of the Hudson River
seven miles northeast of the state capital of Albany, is
the seat of Rennselaer County. It is a residential,
commercial and industrial area, with a well-balanced,
diversified economy. Its 1960 population of 67,492
shows a decline of 6.7% from 1950, representing a
movement of residents to the suburban areas surrounding the city.
Manufacturers National Bank was chartered in 1852
as a State bank and converted into a national association in 1865, 2 years after the enactment of the National Currency Act. This bank, now one of the 11
subsidiary banks of the Marine Midland Corporation,
the second largest registered bank holding company in
the nation with 170 banking offices in New York State,
operates 10 branches in 7 of the 15 counties in New
York's Fourth Banking District. While 6 of the 10
branches of Manufacturers National are situated 31
124
$7, 530,321
87, 927,120
95,457,442
1
11
12
to 160 miles from Cohoes, its offices in Troy, Green
Island and Latham compete with Cohoes National.
Cohoes, situated on the west bank of the Hudson
River 4 miles northwest of Troy, is in Albany County.
Its 1960 population of 20,129 represents a decline of
5% since 1950. Formerly an important textile manufacturing center, Cohoes suffered a severe economic
loss when several large firms moved their plants to the
south. A local industrial commission, however, has,
in the past 5 years, brought 22 new industries to the
City.
The National Bank of Cohoes was organized as a
State bank in 1859, 7 years after the charter bank was
formed. It joined the national system in 1865. This
bank, whose deposits total $7 million while its loans
aggregate $3 million, offers limited services to its community and, consequently, has shown a poor rate of
growth. Its principal competition for banking business within the City of Cohoes comes from a local
branch of the $490 million State Bank of Albany. A
branch of the $410 million National Commercial
Bank and Trust Company of Albany located at Waterford, 2 miles north, and the five offices of Manufacturers National in Troy, Latham and Green Island are
also important competitive elements.
On viewing the relevant market area of these participating banks as including only Rensselaer and
Albany Counties, it appears that this proposal will not
have an impact on the competitive banking structure
inimical to the public interest. In addition to the
offices of these 2 banks, 8 other commercial banks with
41 offices vie for the banking trade. Of these 8 banks,
the State Bank of Albany with 9 offices, The National
Commercial Bank and Trust Company with 15 offices,
and the First Trust Company of Albany with 6 offices,
are larger. This proposal, when completed, will not
change Manufacturers National's relative standing.
Though savings banks are said to be engaged in a
different line of commerce than are commercial banks,
it is significant to note that the merging banks must
compete with a $95 million savings bank in Troy and
the $25 million Cohoes Savings Bank for savings dollars
and for mortgage loans. Also competing for a share
of the local savings pool are a number of savings and
loan associations and credit unions, both presumably
said to be engaged in a different line of commerce than
commercial banks.
This merger will not have an adverse effect upon
banking competition either in Troy or in Cohoes. Its
significance lies in the benefits it will bring to the
Cohoes community; it will substitute an office of an
aggressive forward-looking institution in lieu of the
conservative, limited service bank now there, and it
will open the area to de novo branching by removing
the home office protection now sheltering the National
Bank of Cohoes. The loss of existing competition
between these banks is more than outweighed by other
benefits.
In the light of all the statutory factors, we find that
this proposed merger will promote the public interest.
The application is therefore approved effective on or
after July 23,1963.
JULY 16,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The Manufacturers National Bank of Troy, New
York, proposes to acquire by merger the National Bank
of Cohoes, New York. Manufacturers National, one
of the Marine Midland banks, operates 11 offices in its
service area, 10 of which are well outside the service
area of the National Bank of Cohoes. One branch,
situated in Lansingburgh 2 miles from Cohoes, is separated from the merging bank by the Hudson River.
While a degree of competition may be eliminated by
the merger its main effect is to replace a relatively small
bank in the town of Cohoes by a branch of the much
larger Manufacturers National, in direct competition
with a branch of State Bank of Albany, also a large
bank.
Although the merger would add another bank to the
growing Marine Midland chain, it does not appear
that the transaction would have a substantial adverse
effect on competition.
MERCANTILE NATIONAL BANK OF HAMMOND, HAMMOND, IND., AND T H E CALUMET NATIONAL BANK, HAMMOND, HAMMOND, IND.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Mercantile National Bank of Hammond, Hammond, Ind. (14529), with
and The Calumet National Bank of Hammond, Hammond, Ind. (14379),
which had
were given approval to consolidate under charter and title of the latter bank
(14379) on Aug. 9, 1963. *Approval was rescinded Oct. 22, 1963.
COMPTROLLER S DECISION*
On May 6,1963, the $48.3 million Calumet National
Bank of Hammond, Hammond, Indiana, and the $42.9
million Mercantile National Bank of Hammond, Hammond, Indiana, applied to the Comptroller of the
*Decision rescinded by the Comptroller of the Currency.
$42, 938,000
3
48, 355, 000
4
Currency for permission to consolidate under the
charter and title of the former.
The Calumet National Bank received a national
charter on May 1, 1937, upon its conversion from the
Calumet State Bank which was opened on March 4,
1933. The last report of examination concluded that
the bank was in good condition. There have been no
125
mergers, consolidations, reorganizations, acquisitions of
assets or assumptions of deposit liabilities of any other
bank. In addition to its main office in Hammond,
Calumet National Bank operates a branch in each of
Hammond, Holland and Munster, Indiana, and plans
to open a second branch in Hammond.
Mercantile National Bank of Hammond received a
national charter on November 1, 1945, succeeding the
Mercantile Bank of Hammond which began business
on December 12, 1932, under a charter issued by the
State of Indiana. Mercantile National Bank has two
operating branches in Hammond, and there is the possibility of its head office, in Hammond, becoming a
branch of the resulting bank. In the last report of
examination, the condition of the bank was considered
good. This bank has participated in no mergers, consolidations, reorganizations, acquisitions of assets or
assumptions of deposit liabilities of any other bank.
Mercantile National Bank shareholders have an 89
percent interest in the First National Bank of Lansing,
Illinois, in Cook County. In addition to the applicant
banks, there are headquartered in Hammond the $20.9
million Hoosier State Bank of Hammond with five
offices, including one approved but not yet established,
and savings and loan associations having withdrawable
balances of $66.9 million.
Although the applicant banks are of similar size
and attract business from the same trade area, their
loan and deposit accounts are dissimilar. The charter
bank has a preponderance of time money and mortgage loans while the consolidating bank has more
demand deposits and installment, commercial and
industrial loans. The account structures of the applying institutions complement more than compete
with each other.
Hammond, Indiana, has a population of 111,678
and serves as a trading center for an additional
400,000 people. Situated on the Illinois-Indiana State
Line, it is surrounded by the densely populated Calumet region, which lies within Lake County, Indiana,
and Cook County, Illinois. This well-developed and
highly industrialized metropolitan area has an estimated population of more than 1 million. The boundaries of Hammond are contiguous with 10 cities and
towns, and a total of 22 municipalities lie within a
radius of 10 miles. Among the cities adjacent to
Hammond are Chicago and Calumet City, Illinois,
on the west; and East Chicago and Gary, Indiana, on
the east. For strangers coming into the Calumet region, and even for some long-time residents, it is difficult to determine when they have passed from one
126
city or town into another. The Calumet region ranks
first in steel production in the United States, but its
industries are well diversified. Many nationally
known companies and industries of large size are
located there. Because of the recently completed St.
Lawrence Seaway, the new Chicago-Illinois Port and
the proposed new lake port for Northern Indiana,
there should be continued industrial and population
growth.
Greater Chicago, of which the Calumet region is
an integral part, is one of the largest metropolitan
areas in the world. According to the 1960 census, the
Chicago-Northwestern Indiana urbanized area contained nearly 6 million residents. In the central cities,
of which Hammond is one, the total population was
nearly 4 million with 2 million more residing in the
outlying areas. Almost every element of the economic
life of our country is represented and active in this
great industrial, commercial and financial center.
Sprawling over parts of two States, it is not a conglomeration of many small municipalities, each with
its own sovereign economy, but is one gigantic commercial and financial market. The term "Chicagoland" as used by bankers, businessmen and residents
to describe the Chicago-Northwestern Indiana urbanized area bears witness to the unified nature of its
economy.
As Hammond is one of many adjacent municipalities, competition is on an area basis rather than on a intown basis. The 1960 census reported that the population of Lake County, Indiana, was 94 percent
urban. Within the county the consolidated bank
would control less than 20 percent of the commercial
banking business. The primary service area from
which the resulting bank would derive approximately
85 percent of its deposits represents an area extending
less than 5 miles from the Hammond city limits on the
west and north (and thereby into Illinois), and approximately ll/% miles on the south and east. The
population of this area is estimated at approximately
400,000 people. Hammond, together with Gary,
population 178,000 and East Chicago, population
58,000, forms the nucleus of a limited metropolitan
area at the heart of the Calumet region. There are
43 bank offices representing 13 banks located there.
If the proposal is consummated, the resulting bank
will have eight offices, 18 percent of total deposits and
22 percent of total loans. It will be the second largest
bank, substantially smaller than the largest, and only
nominally larger than the third and fourth ranking
banks. The $155 million Gary National Bank of
Gary, Indiana, holding over 30 percent of area deposits
and loans, with its new Munster branch, located 200
yards from the city limits of Hammond, actively competes for Hammond business. Intense and aggressive
competition for savings dollars and productive loans is
also offered by savings and loan associations, credit
unions, finance companies and insurance companies.
The primary competitive area, as distinguished from
the primary service area discussed above, includes
nearly all of Lake County, Indiana, and the territory
within a 10-mile radius from the home office on the
west and north, generally representing the Calumet
region. Withdrawable balances of savings and loan
institutions there total $418 million. Also included
within this larger arena is the Pullman Bank and Trust
Company of Chicago in Cook County, Illinois, which
would also be larger than the resulting bank, five other
banks in Lake County, Indiana, and seven other banks
in Cook County, Illinois. In this primary competitive
area, the resulting bank would possess 12 percent of
total deposits and 14 percent of total loans. Moreover, the large downtown Chicago banks aggressively
compete for the more important business accounts not
only in the Calumet region but also in each of the constituent communities throughout the commercial and
financial market comprising the Chicago-Northwest
Indiana urbanized area.
There is a need for a larger local bank capable of
fulfilling the banking requirements of a greater number of the more important industrial firms located in
and around Hammond, Indiana. The Gary Bank is
the only commercial bank within the primary service
area, as described above, which can be considered a
bank of substantial size. The development of stronger
banks in the outlying sections of Greater Chicago is
necessary to provide a more balanced metropolitan
banking structure.
Mercantile National and Calumet National, headquartered within one block of each other, are active
competitors. In spite of the dissimilarity between
their loan and deposit accounts, this consolidation will
eliminate some direct competition between them and
will reduce the number of banking alternatives available to the people of Hammond. Counterbalancing
this loss of limited competition are the benefits which
will flow from the proposal and redound to the best
interests of the residents of Hammond and the related
sendee areas. The increased capital structure of the
resulting bank will permit the making of larger loans
without the necessity of correspondent bank participation. The present lending limit for Calumet National
is $275,000, for Mercantile National $250,000, and the
resulting bank will have a lending limit of $630,000.
Customer service will be better and more complete
because of increased size. Improved loan and deposit
service, expanded trust department facilities and
greater specialization will further assist the customers
of the two existing banks and aid in acquiring customers for the resulting bank.
Because of the inadequate quarters in which Mercantile National's head office is located, a $600,000 to
$900,000 building program will be necessary to provide
larger and better quarters if the proposal is not
effected. The charter bank has modern and ample
quarters to absorb and house the consolidating bank.
The other bank in Hammond which does not object
to the proposal is well established and should continue
to provide effective competition.
This situation presented in this application bears a
marked resemblance to the merger of the First National Bank of Michigan City with the Merchants
National Bank of Michigan City. While it was stated
in the decision of the Comptroller of the Currency,
dated October 2, 1962, that the merger of the second
and third largest banks in the city presented certain
difficulties, it was recognized that the proximity of
Michigan City to Chicago, with the consequent competition for banking business in Michigan City by the
Chicago banks was a very significant factor to be
recognized. In this instance, though the participating
banks are first and second in rank, Hammond is 25
miles closer to Chicago than is Michigan City and,
hence, is more materially affected by banking competition deriving from the many Chicago banks. It is the
proximity of Chicago to Hammond and to Michigan
City that makes these mergers unique and forestalls
their use as precedents.
When the Supreme Court in its recent decision in
United States v. Philadelphia National Bank, et al.t
374 U.S. 321, determined that Section 7 of the Clayton Act applied to bank mergers, it relied upon the
principles enunciated in Brown Shoe Company v.
United States, 371 U.S. 294. But in that case the
Court pointed out on page 319 that "Congress recognized the stimulation to competition that might flow
from particular mergers," and again on page 330
that "Congress foresaw that the merger of two large
companies or a large and a small company might violate the Clayton Act while the merger of two small
127
companies might not, although the share of the
market foreclosed be identical, if the purpose of the
small companies is to enable them in combination to
compete with larger corporations dominating the market." The instant merger is just such a case. Its
purpose is to enable the two small applicant banks in
combination to compete more effectively with the
much larger banking units, both in Gary and elsewhere in Chicagoland, which aggressively solicit business in Hammond.
In making the value choice that is implicit when
the circumstances of this case are weighed against the
statutory criteria, we find that the public interest in
Hammond, in the Calumet region and in all of greater
Chicago will be promoted in varying degrees by this
consolidation. The banking competition eliminated
in Hammond and the primary service area will be
more than offset by the presence of a larger, more
capable bank with increased resources and broader
services. Competition in the Calumet region, and particularly in Gary, will be stimulated by a larger, more
aggressive bank. While the impact on competition
with the Loop banks will be less significant and less
immediate, the presence of this resulting bank and of
the many other growing institutions in and around
Chicagoland augurs well for the future development
of vital banking competition. The application is
therefore approved effective on or after August 16,
1963.
AUGUST 9,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The consolidating banks have their head offices
within 150 feet of one another in the center of Hammond, which is located on the Illinois-Indiana State
line in an area described as the Calumet Region. Although banking competition in this densely-populated
metropolitan area is not restricted by municipal boundaries, the consolidating banks have six of their eight
offices within the city of Hammond making that the
primary area in which to measure the competitive effects of the consolidation.
The consolidating banks have been direct and active
competitors. There is a high degree of similarity in
the type and size of business handled by each bank.
Each office of one is located near an office of the other.
The proposed consolidation will reduce from three to
two the number of banks having head offices in Ham-
128
mond and the resulting bank will be approximately
four times the size of the remaining Hammond bank.
The resulting bank, with 17.3% of the IPC deposits
and 21.9% of the loans of the twelve banks in its
widest service area, will be significantly larger than all
but one of these and will obtain an especially dominant
position in its primary competitive area. We therefore conclude that the proposed consolidation will have
substantial adverse effects upon competition.
Telegram from The Calumet National Bank of Hammond, Hammond, Indiana
HAMMOND, INDIANA,
October22,1963.
JAMES J. SAXON,
Comptroller of the Currency,
Treasury Dept., Washington, B.C.
At special meetings of the Boards of Directors of the
Calumet National Bank of Hammond and Mercantile National Bank of Hammond, held at Hammond,
Indiana, this date, it was determined that subject to
confirmatory action being taken by the shareholders of
both banks at special meetings to be held on November
7, 1963, the agreement of consolidation entered into
by both said banks on April 20, 1963, as amended on
May 22, 1963, and on August 22, 1963, be rescinded,
and request is hereby made of you that your approval
of such consolidation granted on August 9, 1963, likewise be rescinded. This request is motivated by the
fact that the practicalities of such consolidation have
been made utterly impossible of accomplishment in the
light of injunction proceedings instituted on October
10, 1963, in the United States District Court for the
Northern District of Indiana, by the United States acting through the Department of Justice, seeking to
enjoin the consolidation as being in violation of Section
1 of the Sherman Act and Section 7 of the Clayton Act.
The cost of resisting such action by the Justice Department, as well as the long delay involved before the
action could be finally resolved through the courts,
are some of the reasons for this request.
Also, the present agreement of consolidation will
expire by its terms on December 31, 1963. It is impractical to undertake to extend said agreement until
the litigation is terminated, because of the fact that
the delay caused by the litigation could result in substantial changes in the financial statements of one or
both banks.
Furthermore, the present agreement of consolidation
provides for the sale of 10,000 shares of additional
capital stock by Mercantile National Bank of Hammond in order to afford the consolidation $800,000 of
new capital. It is now considered that the sale of
such stock will be most difficult in view of the pending
litigation.
The foregoing are difficulties peculiar to this consolidation and make inadvisable resistance to the
action instituted by the Justice Department.
Please advise.
WAS SON J. WILSON,
Attorney,
The Calumet National Bank of Hammond.
TIMOTHY P. GALVIN,
Telegram from the Comptroller of the Currency
WASHINGTON, D.C.,
October 22, 1963.
Mr. WASSON J. WILSON,
Mr. TIMOTHY P. GALVIN,
Attorneys, Calumet Building, Suite 603,
Hammond, Indiana
Pursuant to the request contained in your telegram
of this date, I hereby unconditionally rescind the approval of consolidation of The Calumet National Bank
of Hammond, Hammond, Indiana, and Mercantile
National Bank of Hammond, Hammond, Indiana,
granted by me August 9,1963. This action is effective
immediately. The respective banks are therefore without authority to consolidate.
Attorney,
Mercantile National Bank of Hammond.
JAMES J. SAXON,
Comptroller of the Currency.
THE EDISTO BANK, DENMARK, S.G., AND THE FIRST NATIONAL BANK OF SOUTH CAROLINA OF COLUMBIA,
COLUMBIA, S.C.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
The^Edisto Bank, Denmark, S.C, with
and The First National Bank of South Carolina of Columbia, Columbia, S.C.
(13720), which had
merged Aug. 17, 1963, under charter and title of the latter bank (13720).
The merged bank at the date of merger had
COMPTROLLER S DECISION
On May 3, 1963, the $93.5 million First National
Bank of South Carolina of Columbia, Columbia, South
Carolina, and the $3.1 million Edisto Bank, Denmark,
South Carolina, applied to the Comptroller of the
Currency to merge under the charter and title of the
former.
Columbia, with a population of 97,500, is the capital
and largest city of South Carolina. It serves Richland County, whose population is 200,100, and is a
retail and wholesale center. Columbia's economy
draws support from textile manufacturing firms and
Federal and State governmental activity.
Denmark, located 50 miles south of Columbia, has
shown continued population growth with a 14.5 per
cent increase during the past 10 years. It is located
in Bamberg County, whose population of 16,724 reflects a steady decline in growth for the past several
decades. While this agricultural community has been
725-698-
$3,089,902
1
99,524,948
21
102,601,781
22
dependent upon cotton, this crop is being gradually
replaced in importance by cattle raising and truck
fanning. Some industrialization is being experienced
in Denmark with the introduction of several small
plants producing furniture, plywood, fertilizer, food
and beverages.
The Edisto Bank is the only one located in Denmark
and is one of three locally owned banks operating in
Bamberg County. Competing banks in the County
are the $3.6 million Bamberg County Bank, Bamberg,
7 miles southeast of Denmark, and the $2.2 million
Enterprise Bank, Ehrdardt, 18 miles southeast of Denmark. Some competition also exists with several outof-county banks, namely the $4.3 million Bank of
Barnwell, 14 miles southwest; the $1.4 million Blackville State Bank, 8 miles northwest; and the Norway
branch of the $10.1 million Bank of Orangeburg, 9
miles north. Because there is no overlap in trade areas
between the merging banks, no competition between
them will be eliminated if this merger is approved.
129
Approval of this proposal will introduce into the
Denmark area a bank with a larger lending limit and
additional services. The Board of Directors of the
Bamberg County Bank, having decided that it cannot
meet the increasing banking needs of the area, has
approved a merger with the South Carolina National
Bank.
The merging bank, with elderly ownership, conservative management and a small capital structure,
is faced with aggressive competition it is ill equipped
to meet. The resulting bank will provide Denmark's
residents with modern, expanding banking facilities
of sufficient scope to serve the financial needs of the
community.
In light of the statutory criteria we find this merger
to be in the public interest and the application is
therefore approved effective on or after August 13,
1963.
AUGUST 8,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The acquiring Bank is the third largest commercial
bank in South Carolina. It attained this position
largely as a result of mergers and consolidations since
1955. The banking resources of South Carolina are
concentrated in the hands of a few large banks; the
two largest banks in the State hold 40% of the bank
deposits. This merger would result in the disappearance of another independent bank and tend to further
the already heavy concentration of South Carolina's
banking resources. Finally, the acquiring Bank is
very much larger than all the banks which compete
with the merging Bank combined. This merger would
therefore upset the relative competitive equality now
prevailing in the service area of the merging Bank.
For these reasons, this merger is likely to have significant adverse effects on banking competition in
South Carolina.
NATIONAL BANK OF SUFFOLK, SUFFOLK, VA., AND VIRGINIA NATIONAL BANK, NORFOLK, VA.
Total assets
Name of bank and type of transaction
Banking offices
In operation To be operated
National Bank of Suffolk, Suffolk, Va. (9733), with
and the Virginia National Bank, Norfolk, Va. (9885), which had
merged Aug. 23,1963, under charter and title of the latter bank (9885). The
merged bank at the date of merger had
COMPTROLLER S DECISION
On May 28,1963, Virginia National Bank, Norfolk,
Virginia, and the National Bank of Suffolk, Suffolk,
Virginia, applied to the Comptroller of the Currency
for permission to merge under the charter and title
of the former.
Norfolk, with a population exceeding 300,000, is
the center of the Tidewater service area, a most important economic area in Virginia. Norfolk ranks
first among all United States ports in export tonnage,
and Hampton Roads, a part of the Norfolk harbor
complex, ranks fifth among all Atlantic ports. Military installations, including the U.S. Naval Base, the
largest naval base in the world, and the Langley Air
Force Base provide a considerable stimulus to business
activity. Light and heavy industry also play a major
role in the area. The dynamism of modern industrialization in this flourishing region is bringing in its
sweep increased population, higher wages, large construction demands and other changes.
130
$11,638,248
332, 901, 972
344,280, 602
2
31
33
The charter bank presently serves 2 primary areas,
Norfolk and Charlottesville, which are served by 38
banks with 118 branch offices. The $328.8 million
charter bank which operates 31 branches has its head
office in Norfolk and is the largest bank in the service
area. The $90 million Seaboard Citizens National
Bank of Norfolk and the $31.4 million Southern Bank
of Norfolk, as well as the Norfolk branches of the
Richmond-based $176 million Bank of Virginia, are
also significant banking institutions in the Norfolk
area. The $49 million National Bank and Trust Company of Charlottesville is the largest local bank in
Charlottesville. The remainder of the banks in the
Norfolk and Charlottesville regions are smaller, ranging from the $27 million American National Bank of
Portsmouth to the $1 million Bank of New Hope,
New Hope, Virginia.
The Suffolk trade area consists of Suffolk, Nansemond County, and parts of Isle of Wight County, and
adjoins the Norfolk area. It is largely agricultural.
Suffolk has been known as the "Peanut Capital of
the World" because the growing of peanuts, peanut
processing plants and related facilities provide the
prime economic base of the community. Other industries have been locating in Suffolk and the economy
is becoming diversified. A population growth over the
past decade of 24.3 percent for Nansemond County,
15.1 percent for Isle of Wight County and 2.2 percent for the City of Suffolk indicates a burgeoning
business climate.
The merging bank, with one branch, is the second
largest in Suffolk with resources of $13 million. The
$14.7 million Farmers Bank of Nansemond and the
$12.4 million American Bank and Trust Company also
serve Suffolk. Banking needs are further met by three
smaller banks in the area and by large, neighboring
North Carolina banks.
The addition of the Suffolk bank to the Virginia
National Bank system will, through an increase in
capital and outlets, improve the services which the
charter bank can offer. There will be no adverse
effects on the competitive climate in Norfolk and
Charlottesville.
The main effect of the merger will be felt in Suffolk.
In this growing community, banking facilities have
been restricted in their effort to keep pace with the
economic growth and population increase. Industrial
credit needs of the Suffolk area have been sought from
the larger banks in Virginia, North Carolina, and elsewhere because of the limited resources of local banks.
Large compensatory balances consequently have been
going outside the area. As more industry comes into
the area, this difficulty will be compounded. Much of
the industry, particularly the important peanut industry, needs lines of seasonal credit far beyond the capacities of the Suffolk banks. The resulting bank will
bring to Suffolk a bank which can meet its capital
needs. Such new services as a municipal bond department, a trust department, and a data processing system
will enable the Suffolk public to enjoy modern banking facilities which are presently unavailable to them.
A realignment in the banking field in Virginia over
the past few years has led to a greater utilization of the
State's financial resources. The charter bank has participated in this movement with two major consolidations over the past 10 years. Extending the advantages of increased service and capital capacity to the
Suffolk public could only be harmful if competition in
the area would reasonably be impaired; such is not the
case. There is no competition of consequence between the merging bank and the charter bank, as they
are 25 miles apart and serve in separate relevant markets. There will be as many banking choices in the
Suffolk area after the merger as before and the active
competition with the five other banks in the Suffolk
area will continue. Farmers Bank of Nansemond,
already larger than the National Bank of Suffolk, will
offer stronger competition, if its pending application
for merger with the Seaboard Citizens National Bank,
Norfolk, is approved. The public need clearly calls
for improved banking facilities in Suffolk.
Applying the statutory criteria to the proposed
merger, we conclude that it is in the public interest,
and the application is therefore approved effective on
or after August 22,1963.
AUGUST 15,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Virginia National Bank is the second largest bank
of Virginia and is the dominant bank in its service
area, which includes Norfolk, the largest industrial
area in the State. As of April 26, 1963, assets were
$328,848,000, deposits $290,898,000, loans and discounts $176,793,000 and capital accounts, $27,922,000.
Suffolk National Bank is located in Suffolk, Virginia,
a town 25 miles from Norfolk but outside the primary
service area of Virginia National Bank. As of April
26, 1963, assets were $13,204,000, deposits $11,256,000, loans and discounts $4,818,000 and capital accounts $1,074,000.
Suffolk National presently competes with five other
banks in its service area. Two are located in the town
of Suffolk and are approximately the same size as Suffolk National while the other three, located 12 to 13
miles distant from Suffolk, are considerably smaller.
Should this merger be approved each of these five
banks will thereafter operate at a competitive disadvantage considering all the benefits in the way of
increased lending limit, additional services offered
customers, modern trust department, data processing
equipment, etc. that will accrue to Suffolk National as
a result of the merger. Further concentration of
banking in Virginia will be fostered and accelerated.
It is the view of this Department that the effect of
this proposed merger on competition will be substantially adverse.
131
THE FIRST NATIONAL BANK OF BERRYVILLE, BERRYVILLE, VA., AND FARMERS & MERCHANTS NATIONAL BANK,
WINCHESTER, VA.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The First National Bank of Berryville, Berryville, Va. (7338), with
and Farmers & Merchants National Bank, Winchester, Va. (6084), which had.
merged Aug. 29,1963, binder charter and title of the latter bank (6084). The
merged bank at the date of merger had
COMPTROLLER S DECISION
On June 5,1963, The First National Bank of Berryville, Berryville, Virginia, and the Farmers and Merchants National Bank, Winchester, Virginia, applied to
the Comptroller of the Currency for permission to
merge under the charter and title of the latter.
The Farmers and Merchants National Bank, with
assets of $25.6 million, has its headquarters and its
three branches in Winchester, Frederick County, Virginia. Winchester, population 15,550, is the trading
and cultural center of both Frederick and Clarke
Counties, Virginia. This city is situated at the northern entrance to the beautiful and productive Shenandoah Valley. Agriculture, principally orchards and
related processing industries, is the core of the economy
of this region. The charter bank is the largest bank
in the common trading area. As a result of the merger
the charter bank will gain 6 percent of the loans and 5
percent of the deposits of the trading area.
The main benefits of the merger will be realized in
Berryville, where the merging bank is located. Berryville, population 1,650, is located in Clarke County,
Virginia, 11 miles east of Winchester. The economy
of Berryville, the county seat of Clarke County, is dependent primarily on agriculture. Orchard crops,
beef and dairy cattle and general farming are the
principal sources of income to the locality. The trade
area of Berryville is confined to a radius of approximately 10 miles.
The merger will provide a stimulus to the economy
of Berryville and will make additional resources and
services available to those engaged in and doing busi-
132
$3, 283, 366
25, 999, 872
1
4
29, 283, 238
5
ness in the Berryville trading area, which in turn will
facilitate the economic growth and development of
this region. Resulting from its failure to provide realistically for the future financial security and opportunities for its employees, the merging bank has in the past
had difficulty in attracting and retaining aggressive
young management. The merger of these banks
should immediately minimize this problem.
After balancing the facts applicable to this merger
in light of the statutory criteria, we find that it is in
the public interest to approve this merger, and do so
approve it to be effective on or after August 16, 1963.
AUGUST 9,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Farmers and Merchants National Bank has assets
of $26,692,000, total deposits of $24,608,000, loans and
discounts of $14,079,000 and capital accounts of
$1,720,000.
First National Bank has assets of $3,308,000, total
deposits of $2,916,000, loans and discounts of $1,917,000 and capital accounts of $344,000.
While there is a distance of 11 miles between the two
banks, the service area of First National Bank is nevertheless entirely enclosed by the service area of Farmers
and Merchants National Bank. However, competition between the two banks is only nominal due to the
small lending limit of $25,000 of First National Bank
and its largely localized operation.
The effect of the proposed merger on competition
will not be significantly adverse.
THE PEOPLES NATIONAL BANK OF MARGARETVILLE, MARGARETVILLE,, N.Y., AND T H E NATIONAL BANK & TRUST
Go. OF NORWICH, NORWICH, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Peoples National Bank of Margaretville, Margaretville, N.Y. (5924), with. ..
and The National Bank & Trust Co. of Norwich, Norwich, N.Y. (1354),
which had
merged Aug. 30,1963, under charter and title of the latter bank (1354). The
merged bank at the date of merger had
COMPTROLLER S DECISION
On June 4, 1963, The National Bank and Trust
Company of Norwich, Norwich, New York, and The
Peoples National Bank of Margaretville, Margaretville, New York, applied to the Comptroller of the
Currency for permission to merge under the charter
and title of the former.
The $47 million charter bank is headquartered in
Norwich, a city of 9200, which is the county seat of
Chenango County in south-central New York. It
operates six branches in Chenango County and one
in Delaware County.
The primary service area of this bank includes a
population of approximately 50,000 in a 30-mile radius
economically characterized by dairy farming and pharmaceutical manufacture. Although considerably
larger than its only rival in Norwich, the charter bank
competes with 17 other commercial banks having 22
offices, 5 of which are more than twice the size of the
charter bank and the largest of which is more than
8 times its size. Thus, it appears that the proposed
merger would have no discernible adverse effect on the
existing commercial banks in Chenango County.
The single-office, $3.3 million Peoples National is
the sole banking facility in Margaretville, a village of
850 located in Delaware County approximately 80
miles southeast of Norwich. Delaware County, whose
economy is largely dependent on farming, lumbering,
and light industry, is served by 10 banking offices,
including those of the applicants. The nearest competitors of the merging bank are at Fleischmanns, 8
miles to the east, and at Roxbury, 9 miles to the north.
The Grand Gorge Branch of the charter bank is 19
miles to the northeast of Margaretville, but has not
been an active competitor of the merging bank because
$3,411,116
1
46, 812, 410
8
50, 223, 526
9
of the topography of the area and an intervening bank
midway between them.
Because of the limited resources and restricted capacity of the merging bank and the distance separating the applicants, there is little existing competition
between them. The merged bank would afford the
Margaretville area a complete trust service, installment
loans and consumer credit, in addition to an expanded
lending limit. Additionally, the merger will remedy
the severe problem occasioned by the elderly management of the merging bank.
In weighing this transaction in light of the statutory
criteria, it is found to be in the public interest and is
hereby approved effective on or after August 30,1963.
AUGUST 23,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The applicant Bank has five branches in Chenango
County, one in Delaware County and, as of March 29,
1963, had total assets of $47,153,000, total deposits
of $1,610,000 and net loans and discounts of $28,418,000. It has acquired two commercial banks during
the past 6 years. The merging Bank is the sole banking facility in the city of Margaretville and had, as of
March 29, 1963, total assets of $3,316,000, total deposits of $2,938,000 and net loans and discounts of
$589,000.
The merging Bank is a small rural bank. According to the application, it has an insufficient lending
limit of $10,000, management succession problems and
lacks the capacity to provide comprehensive banking
services. Although consummation of the merger
would eliminate the relatively small degree of competition existing between the banks, it is our view that
it would not, on balance, have any significant adverse
effects on competition in either the applicant or merging Bank's service area.
133
THE HILLIARD BANK, HILLIARD, OHIO, AND T H E CITY NATIONAL BANK & TRUST GO. OF COLUMBUS,
COLUMBUS, OHIO
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Hilliard Bank, Hilliard, Ohio, with
and The City National Bank & Trust Co. of Columbus, Columbus, Ohio
(7621), which had
merged August 31, 1963, under charter and title of the latter bank (7621).
The merged bank at the date of merger had
COMPTROLLER'S DECISION
On July 10, 1963, the $3.8 million Hilliard Bank,
Hilliard, Ohio, and the $208 million City National
Bank and Trust Company of Columbus, Columbus,
Ohio, applied to the Comptroller of the Currency for
permission to merge under the charter and title of the
latter.
Columbus, home of the charter bank, is the capital
of Ohio and, with a population of 471,000, is the third
largest city in the state. A center of industry, Columbus has 800 plants employing about 70,000 people.
State agencies, insurance companies, and seven colleges, including Ohio State University with 30,000 students, located here make substantial contributions to
the area's economy. Franklin County, the relevant
service area, has 750,000 people, an increase of 250,000
since 1950. Despite increased industrialization and
suburban expansion almost 200,000 acres in the county
are still devoted to farming.
The largest bank in Columbus is the $496 million,
22-branch Ohio National Bank of Columbus, controlled by the BancOhio Corporation, a registered
bank-holding company which owns 22 banks in the
State. Second largest is the $278 million Huntington National Bank with nine branches. The charter
bank is third in size in Columbus. Five of the charter
bank's branches are located in Columbus, while the
other three are located outside of the city but within
Franklin County. City National also has approval for
an additional branch in Columbus which it has not
yet opened. Approval of this merger would not
change the relative position of the charter bank; it
would remain less than one-half the size of the largest
bank and 25% smaller than the second largest.
Twelve commercial banks in Franklin County, operating 61 offices, hold total deposits of $982 million.
Nineteen savings and loan associations with a total of
47 offices hold withdrawable balances of $477 million.
These withdrawable balances are double the commer-
134
$3, 868, 740
1
208, 512,987
9
212,035, 099
10
cial banks' savings deposits, and the lending activity
of the savings and loan associations is $51 million
greater than that of the commercial banks. Insurance companies and personal finance companies also
present substantial competition.
The sole office of the Hilliard Bank is located in Hilliard, 11 miles from the business center of Columbus
in northwestern Franklin County. Hilliard's present
population of 6,000 represents a tenfold increase since
1950 and marks its change from a rural village to a
thriving residential suburb. Its rapid growth has
created water supply and sewage service problems
which are severely restricting further development and
preventing the town from fully realizing its potential.
The solution of these problems should encourage further growth. Most of its residents work in Columbus
or in the new plants recently established 5 miles to the
west by Westinghouse and General Motors.
The subject banks do not compete with each other,
their nearest offices being more than 6 miles apart.
The Hilliard bank's present competition derives primarily from the $26 million Ohio State Bank, a
BancOhio affiliate which opened a branch in Hilliard
after the holding company's application to acquire
the stock of the Hilliard Bank was denied by the Federal Reserve Board in 1961, and from a local branch
of the Dollar Federal Savings and Loan Association.
The merger will not be felt in Columbus proper,
since the relative positions of the three major banks
will not be changed. In Hilliard, however, substitution of a branch of a larger institution will permit more
effective competition with the branch of the Ohio
State Bank.
Considered in light of the relevant statutory criteria,
we find the application to be in the public interest,
and it, therefore, is approved, effective on or after August 28,1963.
AUGUST 21,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The Hilliard Bank, Hilliard, Ohio, proposes to
merge into The City National Bank & Trust Company
of Columbus, Columbus, Ohio, under the charter and
title of "The City National Bank & Trust Company
of Columbus."
It does not appear that there is presently any significant competition between the two banks which
might be eliminated by the proposed merger. To the
contrary, The City National Bank already manages
and controls the Hilliard Bank. The only competing
bank in the service area of the Hilliard Bank is a
subsidiary of the BancOhio Corporation, the largest
bank in central Ohio.
It does not appear that the effect of the proposed
merger on competition will be adverse.
T H E BIGLERVILLE NATIONAL BANK, BIGLERVILLE, PA., AND T H E GETTYSBURG NATIONAL BANK, GETTYSBURG, PA.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Biglerville National Bank, Biglerville, Pa. (7917), with
and The Gettysburg National Bank, Gettysburg, Pa. (611), which had
merged Aug. 31, 1963, under charter and title of the latter bank (611). The
merged bank at the date of merger had
COMPTROLLER'S DECISION
On June 25, 1963, the $24.3 million Gettysburg
National Bank, Gettysburg, Pennsylvania, and the
$5.1 million Biglerville National Bank, Biglerville,
Pennsylvania, applied to the Comptroller of the Currency for permission to merge under the charter and
title of the former.
Gettysburg, population 8,000, and Biglerville, population 1,000, are located in Adams County which is
in south-central Pennsylvania. Adams County, with
a population of 52,000, is served by 12 banks. After
the merger the Gettysburg National Bank will replace
the $24.9 million Adams County National Bank, Littlestown, Pennsylvania, as the largest bank in the
county. The resources of the other 10 banks in the
county range in amounts from $1.2 million to $7.8
million.
The income of a substantial number of businesses
in the Gettysburg area, such as motels, hotels, restaurants, museums, souvenir shops and auto service
stations, is generated by the immense number of tourists who visit Gettysburg each year. In addition, the
economy of the area is supported by farming and by
the operation of small plants engaged in manufacturing shoes and clothing.
Biglerville is located approximately 8 miles north
of Gettysburg in the heart of a fruit growing area,
the economy of which is augmented by fruit processing and canning plants.
$5,285,631
26,008, 385
1
2
31,294,017
3
The merger of these banks will not have adverse
competitive effects since numerous alternate banking
sources will be available. As a result of the merger
a small struggling bank, which has had low earnings
during the past 5 years, will be replaced by a branch
of a stronger and more aggressive bank. The Gettysburg National Bank will offer to those doing business
in the Biglerville area the services of a specialized
consumers' credit department and a trust department
and it will provide the depth of management which
cannot be supplied by the smaller bank.
Applying the applicable statutory criteria to the
facts of this case, we conclude that the proposal is in
the public interest and the application is therefore
approved effective on or after August 26, 1963.
AUGUST 19,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This merger would appear to eliminate a substantial degree of competition presently existing between
the two banks, as well as foreclosing the possibility of
even greater competition in the future. It would result in the acquiring bank's becoming the largest bank
in the area, with over 35 percent of the banking resources, and would increase the share of the two
largest banks to over two-thirds of the banking resources in the area. The competitive effect of the
proposed merger would therefore be adverse.
135
NATIONAL COUNTY BANK OF CLOSTER, CLOSTER, N.J., AND CITIZENS NATIONAL BANK OF ENGLEWOOD,
ENGLEWOOD, NJ.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
National County Bank of Closter, Closter, NJ., (8394), with
and the Citizens National Bank of Englewood, Englewood, N J . (4365), which
had
consolidated Aug. 31,1963, under charter and title of the latter bank (4365).
The consolidated bank at the date of consolidation had
COMPTROLLER S DECISION
On June 5, 1963, Citizens National Bank of
Englewood, Englewood, New Jersey, and National
County Bank of Closter, Closter, New Jersey, applied
to the Comptroller of the Currency for permission to
consolidate under the charter and title of the former.
Bergen County, which includes the contiguous sections within which all offices of both banks are located,
is a residential and industrial area of 233 square miles
on the west bank of the Hudson River opposite northern New York City. During the past decade the
county has been one of the fastest growing sections in
New Jersey. Its population of 790,255 in 1960 reflects
an increase of 45 percent since 1950 and it is estimated
that by 1970 it will have a population of 1,000,000.
The County is served by 82 offices of 32 commercial
banks and by three offices of two New York State banks
located immediately across the State boundary to the
north. Although there are no savings banks in Bergen
County, such banks in Newark and New York City
attract business from residents of the county many of
whom commute to jobs in those cities. Commercial
banks also offer strong competition for the larger loan,
deposit and trust accounts. Additional competition is
provided by sales and personal finance companies with
several offices throughout the area.
The $85.8 million Citizens National Bank has its
main office in Englewood, a city of 26,000, and two
branches in Bergenfield and one in Tenafly. A branch
in Englewood has been authorized but not yet established. The trade area served by Citizens is chiefly
residential, industrial, and retail, with a population of
312,000. There are 6 commercial banks operating 12
branches and 9 savings and loan associations operating
16 branches within this service area. Among its competitors, Citizens ranks second in size and: will continue
to hold that position after the consolidation.
The $19.7 million National County Bank of Closter
is headquartered in Closter, and maintains one branch
136
$20,789,919
3
89,112,894
5
108,402,813
8
in Northvale and another in Rivervale. A drive-in
branch authorized for Closter has not yet opened.
Under this proposal, all existing and approved offices
of National County would be operated as branches of
Citizens. Located 5 miles north of the Englewood
bank, National County serves a population of 16,275
in an area primarily residential in character with only
a few small industries. There is still considerable
room for expansion and prospects for future growth
are favorable. National County presently ranks fifth
in size of the seven banks in its service area.
The applicant banks have contiguous rather than
overlapping service areas with the result that there is
little competition between them. The number of common borrowers and depositors is negligible. Thus, the
proposed consolidation would neither result in any
diminution of competition nor reduce the number of
alternative sources for bank services and credit readily
accessible to residents of the area. The resultant bank
would hold 19% of the deposits and 16% of the loans
of the combined service areas as compared with 39%
of deposits and 41% of loans in the combined areas
now held by the larger Peoples Trust Company of
Hackensack, New Jersey. More effective banking
competion should result in Bergen County from the
broader lending and trust services and operating efficiencies of the resulting bank, with its added financial
resources, improved depth of management, and
strengthened capital.
In weighing this transaction in light of the statutory
criteria, it is found to be in the public interest and is
hereby approved effective on or after August 16, 1963.
AUGUST 19, 1963.
SUMMARY OF REPORT BY THE ATTORNEY GENERAL
Direct competition between these two banks does not
appear to be more than nominal. The resulting bank
would not occupy a dominant position in its service
area. Therefore, the effect of the proposed merger
on competition would not be adverse.
KALEVA STATE BANK, KALEVA, MICH., AND SECURITY NATIONAL BANK OF MANISTEE, MANISTEE, MICH.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Kaleva State Bank, Kaleva, Mich., with
and Security National Bank of Manistee, Manistee, Mich. (14843), which
had
consolidated Sept. 3,1963, under charter and title of the latter bank (14843).
The consolidated bank at the date of consolidation had
COMPTROLLER S DECISION
On May 20, 1963, the $6.8 million Security National Bank of Manistee, Manistee, Michigan, and
the $3.5 million Kaleva State Bank, Kaleva, Michigan, applied to the Comptroller of the Currency for
permission to consolidate under the charter and title
of the former.
Both of the applicant banks are located in Manistee
County on the eastern shore of Lake Michigan.
Manistee, where the charter bank is headquartered,
has a population of 8,324. It is a Lake Michigan
port located in the northwestern section of the lower
peninsula of Michigan. Serving as the major trade
center for the 20,000 residents of Manistee County,
its economy is supported by agricultural pursuits and
some manufacturing, mining and shipping. Tourist
trade has expanded considerably in recent years. Unlike other areas of the State, population growth in this
area has been practically nonexistent.
Kaleva, the headquarters of the consolidating bank,
is a small agricultural community of some 350 persons
located 18 miles northeast of Manistee. The surrounding area is marginal farmland and has been
subject to seasonal unemployment and low incomes.
Security National Bank of Manistee was chartered
in 1958 and has grown to its present size in 4 years.
The Kaleva State Bank, chartered in 1911, operates
one branch at Bear Lake, Michigan, a resort village
located 8 miles northwest of Kaleva.
Within the primary service area, the resultant bank
will be second in size to the largest bank, the Manistee
County Savings Bank which controls 65 percent of
$3,401, 678
2
7,272,457
1
10,974,154
3
area deposits and 59 percent of area loans. Furthermore, the applicant banks are, for all practical purposes, affiliates with control centered in one family.
In addition, three directors of the National Bank are
also directors of the State bank and two officers of
the National Bank are also officers of the State bank.
In view of these facts, it does not appear that the
applicant banks now offer meaningful competition to
each other.
Upon approval of this merger there will be no reduction in the number of offices in the service area.
Moreover, the resulting bank will be able to compete
more effectively by reason of its larger lending limit
and stronger management.
In weighing this transaction in light of the statutory
criteria, it is found to be in the public interest and is
therefore approved effective on or after August 21,
1963.
AUGUST 14,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed consolidation of Security National
Bank of Manistee, Manistee, Michigan, and Kaleva
State Bank, Kaleva, Michigan, would not appear to
have an adverse effect upon competition. The two
banks are comparatively small in size with total deposits of $6,164,000 and $2,930,000, respectively, and
are already subject to common ownership and control. They do not appear to be a source of much
competition to each other and the resulting Bank
would not appear to acquire any undue competitive
advantages over its competitors.
137
BAMBERG COUNTY BANK, BAMBERG, S.C., AND T H E SOUTH CAROLINA NATIONAL BANK OF CHARLESTON,
CHARLESTON, S.C.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Bamberg County Bank, Bamberg, S.C, with
and The South Carolina National Bank of Charleston, Charleston, S.C. (2044),
which had
merged Sept. 7, 1963, under the charter and title of the latter bank (2044).
The merged bank at the date of merger had
COMPTROLLER S DECISION
On July 22, 1963, the $295 million South Carolina
National Bank of Charleston, Charleston, South Carolina, and the $3.6 million Bamberg County Bank, Bamberg, South Carolina, applied to the Comptroller of
the Currency for permission to merge under the charter
and title of the former.
Charleston, the third largest city in South Carolina
with a population of 65,925, is in Charleston County
which has a population of 216,382. Charleston, site
of the main office of South Carolina National, is located near the center of the South Carolina seacoast.
It is an important Atlantic seaport, and an industrial
and resort area. A large naval base, naval shipyard,
and United States ordnance depot are located in
Charleston. The city has an excellent harbor which
attracts considerable international trade. It is a repair
station for both commercial and naval vessels and a
market for the state's agricultural products and hardwood as well as seafood caught off the coast.
Bamberg, with a population of 3,081, is located 79
miles south of Charleston, and is the county seat of
Bamberg County. Since colonial days, the area has
been predominantly agricultural, but due to the growing mechanization of farms, the economy is becoming
increasingly industrial.
In addition to its main office, South Carolina National operates 50 branches in 25 localities in 17 of the
State's 46 counties. It has also received permission
to establish seven additional branches. Bamberg
County Bank operates its main and only office in
Bamberg.
The South Carolina National Bank facilities include
trust departments in four cities in South Carolina, with
trust men from these cities soliciting, processing and
handling trust business in each town in which South
Carolina National operates a branch.
The merging bank with elderly management, a
small capital structure, outmoded operations and
138
$3, 697,018
1
294,442,489
48
298,139,506
49
limited facilities has little to offer that banking public.
The proposed merger would provide the residents of
Bamberg and surrounding area with modern credit
and banking services and afford the community a
greater opportunity to progress.
The merger of the Citizens State Bank with South
Carolina National will not have an adverse competitive effect, as the number of banking outlets in Bamberg will not be reduced. The merger will have little,
if any, effect on the other areas in which South Carolina National is doing business.
Many large concerns carry their primary balances
in the financial centers of the Carolinas where their
credit needs may be satisfied. This practice will be
decreased with the presence of South Carolina National in Bamberg County.
As a result of this merger, South Carolina National
will be in a position to lend the weight of its statewide
organization to the development of additional industries and businesses in the Bamberg area and assist in
improving the general economy of this region. In
addition, South Carolina National will provide the
residents of Bamberg and the surrounding area a local
banking unit with a much larger lending limit, the
services of a trust department, a greater depth of
management, and the multiple advantages of a statewide banking institution.
In light of the statutory criteria, we find this merger
to be in the public interest and the application is therefore approved effective on or after September 3, 1963.
AUGUST 26, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
South Carolina National Bank, South Carolina's
largest bank purposes to acquire one of two small banks
competing in the Bamberg-Denmark area. This proposal is made while South Carolina National has pending an application to establish a branch in Denmark.
Since South Carolina National does not now operate
a branch in the service area of Bamberg County Bank
little or no competition between them will occur but future competition will of course be eliminated. Moreover, the remaining small bank in Denmark proposes to
merge with First National Bank of South Carolina,
another large South Carolina bank which also has
pending an application for a branch in Bamberg.
Thus, if both applications to merge are approved, two
large banks will replace two small local banks and
probably withdraw their respective applicants for
branches in the area.
The effect of this proposal on competition, standing
alone, would not be significantly adverse. However, it
represents a trend toward replacing small independent
banks with branches of a few large statewide
institutions.
T H E FIRST NATIONAL BANK OF VINGENTOWN, VINCENTOWN, N.J., AND T H E UNION NATIONAL & TRUST CO.
AT MOUNT HOLLY, MOUNT HOLLY, N. J.
Name of bank and type of transaction
Total assets
In operation To be operated
The First National Bank of Vincentown, Vincentown, N.J. (370), with
and The Union National Bank & Trust Co. at Mount Holly, Mount Holly,
N.J. (2343), which had
merged Sept. 13,1963, under charter of the latter bank (2343) and under title
of "Union National Bank and Trust Company." The merged bank at date
of merger had
COMPTROLLER S DECISION
On May 22,1963, the $18.6 million Union National
Bank and Trust Company at Mount Holly, Mount
Holly, New Jersey, and the $3.1 million First National
Bank of Vincentown, Vincentown, New Jersey, applied to the Comptroller of the Currency for permission to merge under the charter of the former and
under the title, "Union National Bank and Trust
Company."
Vincentown, population 750, and Mount Holly,
population 13,500, are both in Burlington County,
which is situated on the southeast side of the Delaware River approximately 20 miles north of Philadelphia, Pennsylvania. Burlington County, population 224,499, is a part of the industrial complex of the
Delaware River Valley, a rapidly expanding industrial
area. Factories engaged in manufacturing textiles,
electronic equipment and construction materials are
of prime economic importance for those living and
doing business in the area. Agriculture, principally
dairy, vegetable, berry, and fruit farming, is of significant importance to the financial stability of this
region. Personnel at nearby Ft. Dix and McGuire
Airforce Base add appreciably to the economy of this
area. Mount Holly, county seat of Burlington County,
is approximately 5 miles from Vincentown.
The charter bank, organized in 1871, operates one
branch in Mount Holly. It is the third largest bank
$3,305, 583
19,730,128
23,070,438
in the County with 19% of the aggregate deposits
in its service area. The Burlington County Trust
Company, the largest bank in the County, accounts
for 39% of the deposits; Mechanic's National Bank,
second largest in the County, 38%; and First National, the merging bank, is the smallest bank in the
County with 4% of the deposits.
The First National Bank of Vincentown has found
it increasingly difficult to compete in this flourishing
industrial and agricultural County. The addition of
its small resources to the Union National Bank and
Trust Company will stimulate competition with Burlington County Trust Company and Mechanics National Bank, both of which are well established and
are more than twice its size. Due to the size of the
banks in Burlington County, corporate accounts have
turned to Philadelphia-based institutions for their financial needs. The increased size of the resulting
banks is warranted and is necessary in order to adequately serve the residents of the County.
Although the Union National Bank and Trust Company and the First National Bank of Vincentown do
have some common depositors and borrowers in overlapping trade areas, the merger will enable the surviving bank to provide banking services not previously
available to those persons doing business in Vincentown. This factor will more than compensate for
the decreased number of banks in the area. The
139
resulting bank will be in a position to alleviate the
management problems which have in the past beset
the First National Bank of Vincentown.
In light of the statutory criteria we find this merger
to be in the public interest and the application is
therefore approved effective on or after August 16,
1963.
AUGUST 9,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger of the First National Bank of
Vincentown, Vincentown, New Jersey, and the Union
National Bank and Trust Company, Mount Holly,
New Jersey, would have a significant adverse effect
upon competition.
The merger would result in the elimination of First
National as an alternative source of banking services
and the reduction of the number of independent banks
in the area to four. The substantial competition between the two banks would be destroyed. The accompanying increase in the present high concentration
ratio raises serious doubts as to Burlington County
National's ability to effectively compete as an independent banking facility.
FARMERS EXCHANGE BANK, ABINGDON, VA., AND VIRGINIA NATIONAL BANK, NORFOLK, VA.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
Farmers Exchange Bank, Abingdon, Va., with
and Virginia National Bank, Norfolk, Va. (9885), which had
merged Sept. 13, 1963, under the charter and title of the latter bank (9885).
The merged bank at the date of merger had
COMPTROLLER S DECISION
On July 8, 1963, Virginia National Bank, Norfolk,
Virginia, and the Farmers Exchange Bank, Abingdon,
Virginia, applied to the Comptroller of the Currency
for permission to merge under the charter and with the
title of the former.
Norfolk, the largest city in Virginia with a population in excess of 300,000, is the focal point of the Tidewater area, the most highly developed economic region
in the State. Its outstanding port facilities, military
installations and manufacturing industries are factors
which have created a rapid advance in the area's business development. Thefinancialdemands of the Norfolk service area are consequently growing apace.
The $328 million Virginia National Bank, which operates 31 branches in the Norfolk and Charlottesville
territories, is the largest bank in the area. It has recently expanded its operations through a merger with
the $13 million National Bank of Suffolk, Suffolk, Virginia. It experiences keen competition from 42 other
banks in the service area, most notably the $90 million
Seaboard Citizens National Bank of Norfolk, the $49
million National Bank and Trust Company of Charlottesville, and the Norfolk branches of the $176 million
Bank of Virginia, Richmond.
140
$11,021,554
354,684,075
365, 320,242
2
32
34
Abingdon has a population of 4,800 and is situated
about 360 miles west of Norfolk. Along with Bristol,
it serves as the trading center for Washington and Russell Counties which are primarily agricultural and have
a combined annual farm production approaching $14
million. The economy of Abingdon is dependent
upon tobacco warehousing, a large evaporated milk
plant and an increasing number of small manufacturing industries. Additional retail volume is derived
from a growing tourist trade and from Emory and
Henry College. The nearby city of Bristol has a population of 35,000 and a diversified economic structure
which provides a broad base for continued economic
expansion. The increasing industrialization of the
area coupled with its progressive agricultural activities, augurs of promising economic development.
The $10.5 million merging bank has its head office
in Abingdon and a branch in Bristol. It competes not
only with its sole Abingdon rival, the $9.1 million
Washington County National Bank, but with four
smaller banks in nearby farming communities and six
larger banks in the interstate Bristol area. Branches
of the $181 million First National Exchange Bank of
Virginia, Roanoke, and affiliates of the $196 million
Virginia Commonwealth Corporation, Richmond,
provide especially strong competition in the area.
Competition within the Norfolk-Charlottesville area
is so intense and the demand for more bank services
so pressing that it seems quite clear that the merger
will have no adverse competitive effects in the charter
bank's service area.
While the principal impact of the merger will be
felt in the Abingdon area, no competition will be eliminated, as there will be as many banking choices after
the merger as before. Competition will, in fact, be
stimulated. The resulting banks will be more able
to compete with the larger Bristol banks, thereby retaining banking business within the city of Abingdon
to the benefit of the local economy. Moreover, the
resulting bank will be able to offer improved and
increased banking services including a municipal bond
department and a data processing system. The people
of Abingdon will enjoy greatly improved banking
service as a result of the merger.
Applying the statutory criteria to the proposed
merger, we conclude that it is in the public interest,
and the application is, therefore, approved effective
on or after August 30,1963.
AUGUST 23,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Virginia National is the second largest bank in
Virginia with assets of $328,848,000, deposits of $290,898,000, loans and discounts of $176,793,000 and capital accounts of $27,922,000. This bank operates 30
offices in Virginia.
Farmers Exchange is located in Abingdon, Virginia,
360 miles west of Norfolk and over 250 miles distant
from the nearest branch office of Virginia National.
The greatly increased size of the resulting bank in
the service area of Farmers Exchange, and the pending application of Virginia Commonwealth Corp., a
bank holding company, to acquire one of the remaining independent banks in the service area of Farmers
Exchange, will cause the seven remaining banks in
this service area to thereafter operate at a decided
competitive disadvantage.
While this proposed merger would not have serious
anti-competitive effects the continued approval of
this type of merger tends to eliminate the smaller and
medium sized banks as independent competitive entities, and concentrate banking resources in the Commonwealth in the hands of a few large banks.
CITIZENS STATE BANK, BENNETTSVILLE, S.C., AND T H E SOUTH CAROLINA NATIONAL BANK OF CHARLESTON,
CHARLESTON, S.C.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Citizens State Bank, Bennettsville, S.C, with
and The South Carolina National Bank of Charleston, Charleston, S.C.
(2044), which had
merged Sept. 14,1963, under charter and title of the latter bank (2044). The
merged bank at the date of merger had
COMPTROLLER S DECISION
On June 26,1963, the $293 million South Carolina
National Bank of Charleston, Charleston, South Carolina, and the $2.5 million Citizens State Bank, Bennettsville, South Carolina, applied to the Comptroller
of the Currency to merge under the charter and with
the title of the former.
Charleston, the third largest city in South Carolina
with a population of 65,925, is in Charleston County
which has a population of 216,382. Located near the
center of the South Carolina seacoast, Charleston is
an important Atlantic seaport, and an industrial and
resort area. A large naval base, naval shipyard, and
$2,782,208
2
308, 584, 500
49
311,366,708
51
United States ordnance depot are also located there.
The city's excellent harbor attracts significant world
trade and serves as a repair station for both commercial and naval vessels and as a market for the State's
agricultural products and hardwood and for seafood
caught off the coast.
Bennettsville, with a population of 7,000, is located
148 miles north of Charleston and is the county seat
of Marlboro County. Marlboro County, with a population of 29,000, is a part of the Great Pee Dee area
where some of the most productive farm land in the
nation is located. The income of the residents of
Marlboro County is derived almost equally from agri-
141
culture and manufacturing plants. During the past
decade there has been an increased wage level and
general upgrading in the economy of this area.
In addition to its main office, South Carolina National operates 50 branches in 25 localities in 17 of
the State's 46 counties. It has also received permission to establish five additional branches. Citizens
State Bank operates its main office and one branch in
Bennettsville.
The South Carolina National Bank facilities include trust departments in four cities in South Carolina, with representatives from these cities soliciting,
processing and handling trust business in each town
in which South Carolina National operates a branch.
The Citizens State Bank does not have trust powers.
The Citizens State Bank and the $100 million First
National of South Carolina of Columbia, Columbia,
South Carolina, are the only banks engaged in business in Bennettsville. The merger of the Citizens
State Bank with South Carolina National will not have
an adverse competitive effect, as the number of banking outlets in Bennettsville will not be reduced, but
will have a favorable effect by creating direct competition between two large statewide banking systems. The merger will have little, if any, effect on
the other areas in which South Carolina National is
doing business.
Because of the limited resources of the Citizens
State Bank and Marlboro County's only other bank,
the $1 million McCall State Bank, McCall, South
Carolina, they have been unable to satisfy the financial needs of Marlboro County. Many large concerns
carry their primary balances in the financial centers
of the Carolinas where their credit needs may be satisfied. This practice will be decreased with the presence
of two statewide banking systems operating in Marlboro County.
As a result of this merger, South Carolina National
will be in a position to lend the weight of its statewide
organization to the development of additional industries and businesses in the Bennettsville area and assist in improving the general economy of this region.
In addition, South Carolina National will provide the
residents of Bennettsville and the surrounding area
a local banking unit with a much larger lending limit,
the services of a trust department, a greater depth of
management, and the multiple advantages of a statewide banking institution.
In light of the statutory criteria, we find this merger to be in the public interest and the application is
therefore approved effective on or after August 30,
1963.
AUGUST 23, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The South Carolina National, the largest bank in
the State, and operating 57 statewide offices proposes
to merge with one of two small banks in Bennettsville,
South Carolina.
There is no significant competition between the two
institutions. The effect of the merger, standing
alone, on competition would not be significantly adverse. However, it is noted that one of the reasons
for the proposed merger is the application to merge
Marlboro Trust Company, Citizens State's principal
competitor, with the much larger First National
Bank of South Carolina. Thus, a move by one of two
small banks to merge with a large statewide bank
moves the other to do likewise in order to effectively
compete. If both mergers are approved then local
banks disappear and the trend toward concentration
of banking in the hands of a few large banks
continues.
T H E MATTEAWAN NATIONAL BANK, BEACON, N.Y., AND T H E FARMERS & MANUFACTURERS NATIONAL BANK
OF POUGHKEEPSIE, POUGHKEEPSIE, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In operation To'be operated
Matteawan National Bank, Beacon, N.Y. (4914), with
and The Farmers & Manufacturers National Bank of Poughkeepsie, Poughkeepsie, N.Y. (1312), which had
consolidated Sept. 20, 1963, under charter of the latter bank (1312), and
under title "Farmers-Matteawan National Bank." The consolidated bank
at the date of consolidation had
142
$11,614,827
4
12,819,282
3
24,434,109
7
COMPTROLLER S DECISION
On June 3, 1963, the $12.4 million Farmers &
Manufacturers National Bank of Poughkeepsie,
Poughkeepsie, New York, and the $10.3 million Matteawan National Bank, Beacon, New York, applied
to the Comptroller of the Currency for permission
to consolidate under the charter and title "FarmersMatteawan National Bank."
The Farmers & Manufacturers National Bank first
began business in 1835 and 1865 converted to a National charter. It recently paid its 250th consecutive
semiannual cash dividend. It has besides its head
office, a nearby drive-in office and a branch 6 miles
distant from Poughkeepsie in Hyde Park. In addition, the bank's application to open a branch in Bradlees Shopping Center, the largest shopping area in the
vicinity, has been approved.
The Matteawan National Bank opened in 1893.
It now operates three offices including its head office,
and has approval for an additional branch which has
not been opened.
Poughkeepsie, home of Farmers & Manufacturers,
is the county seat of and the largest city in Duchess
County, with a population of 40,000. Over 10,000
persons are employed in manufacturing and product
engineering plants, the most prominent of which is
the International Business Machines Company.
This company is establishing a new plant which is
expected to employ an additional 3,500 people within 2 years.
Beacon, headquarters of the Matteawan National
Bank, is, with 14,000 people, the second largest population center in Duchess County and the home of
many small industries and stores. Its largest employers are the Matteawan State Hospital and the
Texaco Research Center, each with over a thousand
employees. Considering the service area which surrounds the city of Poughkeepsie and encompasses
Beacon, it is readily apparent that this area, situated
on the Hudson River about 80 miles north of New
York City on the road to Albany, has shown excellent
growth in the past and may anticipate further growth.
Federal censusfiguresshow an increase in the population from 120,000 in 1940 to 176,000 in 1960. Both
metropolitan Poughkeepsie and Beacon are rapidly
becoming part of a single industrial, residential, and
commercial complex. New bypass roads and bridges
will soon link the area with Interstate 84, an east-west
freeway and with the Connecticut Turnpike with
promise of even greater growth for southern Duchess
County.
The subject banks cannot be considered to be presently competitive since their nearest operating offices
are 12 miles apart. Among the seven commercial
banks in the area, which hold $153.5 million in deposits, the consolidating banks are presently ranked
fifth and sixth. There are five mutual savings banks
and two savings and loan associations in the area now
holding aggregate deposits and withdrawable balances
of $183 million. Though the consolidated bank will
be third in size among commercial banks and will hold
about 13% of total commercial banking deposits in
the area (though only 7% of deposits of all financial
institutions), the Marine Midland National Bank will
still hold over 52% of commercial bank deposits and
the Duchess Bank & Trust Company, Poughkeepsie,
about 14%.
The consolidation will produce an increase in banking competition in the area by providing a more effective competitor for both the larger banks and the
savings institutions. It will also strengthen the operations of the resulting bank and provide for greater
operating economies. More of the benefits of automation will be provided to the people of the area.
The gain in management depth provided by the consolidation will permit increased activity and greater
specialization in certain services, such as mortgage
lending, consumer loans, dealer financing, and trust
services. The consolidated bank, with eight offices,
will offer improved service to a greater number of residential communities and will better serve the needs of
the area's growing industry by reason of its increased
lending capabilities.
On balancing the circumstances of this case in light
of the relevant statutory criteria, we find this consolidation to be in the public interest and the application
to consolidate is therefore approved, effective on or
after August 16, 1963.
AUGUST 9,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The Farmers and Manufacturers National Bank is
the smallest of four commercial banks in the city of
Poughkeepsie and ranks sixth among eight banks in
Dutchess County. It has four banking offices and
had, as of March 29, 1963, total assets of $12,406,000,
total deposits of $11,284,000 and net loans and discounts of $4,985,000.
The Matteawan National Bank has four banking
offices and with total assets of $10,265,000, total deposits of $9,552,000 and net loans and discounts of
$5,109,000 is the smaller of two banks in the city of
143
Beacon and is seventh in size in Dutchess County.
The resulting Bank would rank third in size in the
county, more than three times smaller than the county's largest Bank and slightly smaller than the bank in
second position. Five other banks, ranging in assets
THE SCOTTISH BANK, LUMBERTON, N.C.,
from $5 million to $17 million, would also remain
competitive in the county area. It is our view that
the resulting Bank would not have any appreciable
competitive advantages over the remaining commercial institutions.
AND FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
CHARLOTTE, N.C.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
The Scottish Bank, Lumberton, N.C, with
and the First Union National Bank of North Carolina, Charlotte, N.C. (9164),
which had
merged Sept. 21,1963, under charter and title of the latter bank (9164). The
merged bank at the date of merger had
COMPTROLLER'S DECISION
On July 18, 1963, First Union National Bank of
North Carolina, Charlotte, North Carolina, and the
Scottish Bank, Lumberton, North Carolina, applied to
the Comptroller of the Currency for permission to
merge under the charter and with the title of the
former.
The $340 million First Union National Bank of
North Carolina operates 60 offices in 25 communities,
most of which are located in the western and industrial
Piedmont sections of the State. The area is composed
of large retail and wholesale trading centers located
around Charlotte, heavily industrialized complexes in
the Greensboro, Winston-Salem sectors, and major
tourist attractions in Asheville and throughout Western North Carolina. These areas have experienced a
rapid 50 percent increase in population during the
past 10 years. The economic structure is based diversely on textiles, tobacco, furniture, electrical machinery, manufacturing, agriculture, lumbering and
tourism.
The home office of First Union National is in Charlotte, the largest city in the state with a population in
excess of 201,000 and the seat of Mecklenburg County.
Charlotte is located in the geographical center of one
of the most rapidly developing industrial and commercial sections of the south. The city is the largest retail
and wholesale center in the Carolinas and is the site of
more than 500 manufacturing plants. While the textile industry has long been the most important factor
in the local economy, there has been a strong move in
recent years toward wide industrial diversification.
144
$59, 512, 312
23
361,118,832
65
419,450, 882
88
The financial infrastructure of Charlotte is as varied
and solid as the economy it serves.
The resources to be gained by First Union National
as a result of this proposal will not change its relative
position in the State nor in the communities in which
it presently operates. The primary effects will be most
noticeable in those communities in which the Scottish
Bank is located.
The $55 million Scottish Bank's service areas include
five counties in the eastern Piedmont section of the
State and four counties in the southeastern section of
the State. It operates 22 offices in 18 different communities within these counties. Its head office is
located in Lumberton, Robeson County, which is located 130 miles east of Charlotte. Robeson County
has a population of 89,000 and is one of the most
important agricultural counties in the State. Most of
the bank's other offices are located in primarily agricultural sections of the State where the population has
remained relatively stable during the past several years.
From the industrialized and relatively prosperous communities of High Point, Salisbury, Fayetteville and
Raleigh the bank derives some 32 percent of its
aggregate deposits.
It is clear that consummation of the proposed
merger will have no adverse competitive effects in the
communities in which Scottish Bank operates. Although 11 of the 18 communities have no banks other
than the Scottish Bank, the fact that the population
of these communities range from a low of 642 to a high
of 2,767 and deposits average less than $1.8 million
make it improbable that they could support an additional bank. In the remaining seven communities
competition is provided by other banks, ranging from
one to five in each place. Five of these communities
have one or more offices of one or more of the State's
six largest banks and the other two communities contain chain banking institutions.
It cannot be seriously contended that the consummation of this proposal will have adverse competitive
effects. It will, in fact, stimulate competition on the
State level by increasing the resources of First Union
National, thus enabling the resulting bank to compete
more effectively with the large Wachovia Bank and
Trust Company and with North Carolina National
Bank. The merger will also increase competition in
Clinton, Fayetteville, High Point, Raleigh and Salisbury, the communities in which one or more of the
State's six largest banks are located. The field of
competition of the resulting bank will include 14 local
banks ranging in size from approximately $1 million
to $20 million, 12 regional banks with a size variance
between $5 million and $150 million, and from 3 statewide banks with resources of $325 million, $650 million and $950 million, respectively.
An increase in competition is not the only benefit
to be derived from this proposal. It will eliminate
non-par banking in nine localities, thus making it possible for many people to receive reduced costs and
other advantages of par banking for the first time.
The merger will serve to prevent the dominance and
control of State financial resources by one large bank,
and it will be a step forward in North Carolina's
announced policy of accelerated development in the
eastern part of the State.
Applying the applicable statutory criteria to the proposed merger, we conclude that it is in the public
interest and the application is approved effective on or
after September 20,1963.
SEPTEMBER 13, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed acquisition of the Scottish Bank of
Lumberton, North Carolina, by the First Union National Bank of North Carolina continues the pattern
adopted by the larger banks toward complete domination of commercial banking which threatens the existence of small independent banks within the State.
First Union has participated in this trend through a
series of bank mergers during the past few years.
The merger would eliminate competition to be
afforded by newly approved branches of the merging
bank that would be abandoned after the merger. It
would also place a number of smaller competing banks
at a competitive disadvantage. For these reasons the
effect of the merger on competition would be adverse.
STATE BANK OF NEWFANE, NEWFANE, N.Y., AND THE LIBERTY NATIONAL BANK & TRUST CO., BUFFALO, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
State Bank of Newfane, Newfane, N.Y., with
and the Liberty National Bank & Trust Co., Buffalo, N.Y. (15080), which had.
merged Sept. 25, 1963, under charter and title of the latter bank (15080).
The merged bank at the date of merger had
COMPTROLLER S DECISION
On July 16, 1963, the $274 million Liberty National
Bank and Trust Company, Buffalo, New York, and the
$4.1 million State Bank of Newfane, Newfane, New
York, applied to the Comptroller of the Currency for
permission to merge under the charter and title of the
former.
Buffalo, with a population of 530,000, is the second
largest city in New York and is located on the eastern
shore of Lake Erie. The trade area of Buffalo embraces a population of approximately 1 million and
extensive industrial areas.
$4,700,516
276,843,755
281,544,272
1
30
31
The Liberty National Bank and Trust Company
operates 26 offices in Erie County, including the City
of Buffalo, 2 in Chautauqua County and 2 in Genesee
County. It ranks third in total number of branches
among the commercial banks operating within the
Buffalo service area. This aggressive bank seeks to
furnish vigorous competition to the two much larger
commercial banks in Buffalo, the $1 billion Marine
Trust Company of Western New York and the $621
million Manufacturers and Traders Trust Company,
which now dominate commercial banking in the area.
Following this merger, Liberty National Bank will con-
145
tinue to rank far below its larger competitors both in
total resources and number of branches.
Newfane, New York, with a population of 1,493, is
in Niagara County 31 miles northeast of Buffalo. The
State Bank of Newfane is at once the only bank in
Newfane and the only single-office bank in Niagara
County. This bank, presently far overshadowed by
branches of Marine Trust and Manufacturers and
Traders, is not able to serve effectively the convenience
and needs of the people of Newfane.
While this merger will have little direct and immediate impact upon banking operations in the City of
Buffalo, it is essential to Liberty National as a step
toward improvement of its competitive position in
Western New York, and toward the development of
some balance in the competitive banking structure.
Liberty National, long denied an opportunity to
branch when prime sites were available, must, if it is to
develop into a vigorous banking competitor, resort to
the merger route for expansion.
Applying the applicable statutory criteria to the
facts of this case, we conclude that the proposal is in
the public interest and the application is therefore
approved effective on or after September 13, 1963.
SEPTEMBER 6, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Banking in the area which would be served by the
resulting bank, which consists of portions of Erie,
Niagara, Genesee and Chautauqua Counties, is dominated by Marine Trust Company of Western New
York, Manufacturers and Traders Trust Company,
and Liberty National. In Erie and Niagara Counties,
an area rated as the eighth largest manufacturing district in the United States and having a population of
of over 1,300,000, these 3 banks own 121 of the 137
existing banking offices. In Niagara County, the applicant State Bank operates the only banking office
not owned by Marine Trust or Manufacturers and
Traders Trust. The three banks control 94% of the
total deposits held by all banks in the service area,
with Marine Trust and Manufacturers and Traders
Trust controlling almost 80% of this total.
While there is some merit in the applicants' position
that Liberty National is the only bank of sufficient size
to offer full competition to the two larger institutions
on their own terms, it is our opinion that this does not
lead inescapably to the conclusion that Liberty National should therefore be permitted to enter competition in Niagara County by merging the only remaining
independent bank. It is our opinion that competition
and the public interest would be better served were
Liberty National to establish a new office in the County,
which would allow it to offer competition to the two
larger banks while at the same time preserving the independence and competitive impact of State Bank.
The size of Midland Trust, Manufacturers and Traders
Trust and Liberty National is already such as to act as
a substantial deterrent to prospective new entrants in
the field. Unless willing to acknowledge the area as
one totally dependent on only three banks, it is therefore imperative that the few remaining independent
banks be preserved from mergers, except in cases of
real necessity.
For the reasons stated herein, it is our opinion that
the proposed merger would have substantial adverse
effects on competition.
THE FIRST NATIONAL BANK OF BALTIMORE, BALTIMORE, OHIO, AND T H E PLEASANTVILLE BANK, PLEASANTVILLE,
OHIO
Banking offices
Total assets
(as of 3-18-63)
Name of bank and type of transaction
In operation To be operated
The Pleasantville Bank, Pleasantville, Ohio, with
was purchased September 25,1963, by The First National Bank of Baltimore,
Baltimore, Ohio (7639), which had
After the purchase was effected, the receiving bank had
,
COMPTROLLER S DECISION
On April 19,1963, the $3 million First National Bank
of Baltimore, Baltimore, Ohio, applied to the Comptroller of the Currency for authority to purchase the
146
$2,215,000
1
2, 969,000
4,851,000
1
2
assets and assume the liabilities of the $2.2 million
Pleasantville Bank, Pleasantville, Ohio.
Baltimore, population 2,116, and Pleasantville, population 741, are located in Fairfield County which has
a population of 63,912. General agricultural pursuits,
embracing the raising of corn and wheat, livestock
production and dairying provides the principal source
of income for both communities.
Consummation of the agreement to purchase the assets and assume the liabilities of the Pleasantville Bank
by the First National Bank of Baltimore will not eliminate any substantial competition. It will, on the other
hand, provide a bank with greater competitive potential to vie with the other eight commercial banks now
serving the residents of Fairfield County.
Applying the applicable statutory criteria to the facts
of this case, we conclude that the proposal is in the
public interest and the application is therefore approved effective on or after September 13, 1963.
SEPTEMBER 6, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The First National Bank of Baltimore, Baltimore,
Ohio, proposes to purchase the assets and assume the
liabilities of The Pleasantville Bank, Pleasantville,
Ohio.
There is presently no substantial competition between the two banks which are located approximately
7 miles apart in Fairfield County, Ohio, north of Lancaster. The proposed purchase of assets will have no
adverse effect on the service area of The Pleasantville
Bank which controls substantially all banking business
in its own area. In the service area of First National,
however, The Bank of Basil Company may be weakened in its ability to successfully compete with First
National.
On balance, we are of the view that the effect of
the proposed merger on competition would not be
significantly adverse.
T H E BANK OF CHAPEL HILL, CHAPEL HILL, N.C., AND NORTH CAROLINA NATIONAL BANK, CHARLOTTE,, N.C.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
The Bank of Chapel Hill, Chapel Hill, N.C, with
and the North Carolina National Bank, Charlotte, N.C. (13761), which had..
merged Sept. 27, 1963, under charter and title of the latter bank (13761).
The merged bank at the date of merger had
COMPTROLLER S DECISION
On June 17, 1963, North Carolina National Bank,
Charlotte, North Carolina, and the Bank of Chapel
Hill, Chapel Hill, North Carolina, applied to the
Comptroller of the Currency for permission to merge
under the charter and with the title of the former.
The $618 million North Carolina National Bank
operates 60 offices located in 11 major service areas
throughout the State. Although it is the second
largest bank in the State, it ranks well below the $881
million Wachovia Bank & Trust Company and it faces
keen competition from other large statewide banks, including the $355 million First Union National Bank,
the $317 million First-Citizens Bank & Trust Company
and the $163 million Northwestern Bank.
Charlotte, the home office of the charter bank, is a
dynamic city with excellent future prospects. The
economic resurgence which has occurred in Charlotte,
as well as throughout the State, in the past decade
may be attributed to the banking laws of North Carolina which permit statewide banking and foster the
$16,704,038
621,325,157
634,703,752
4
65
69
growth of banks with resources and capacity sufficient
to attract and satisfy the varied demands of large
industries.
Chapel Hill, population 12,573, is located 128 miles
northeast of Charlotte. It is primarily noted as a medical and research center and is the home of the University of North Carolina which has an enrollment of
9,500 and an annual payroll of $22 million. Its banking needs are served by the merging bank and by a
branch of the $58 million Central Carolina Bank &
Trust Company, with headquarters at Durham, 8 miles
northeast of Chapel Hill. Durham is served also by
three branches of the charter bank, five branches of
Wachovia Bank & Trust Company, one branch of First
Union and six branches of Central Carolina Bank &
Trust Company. The banking structure of Chapel
Hill is undoubtedly influenced by its proximity to Durham and by the intense competition which emanates
from the statewide banks located there.
The addition of the $14 million resources of the
Bank of Chapel Hill to North Carolina National will
147
not alter the banking structure on a statewide level nor
will it increase appreciably the charter bank's percentage of total loans and deposits in the State. Insofar
as Chapel Hill is concerned, the entry of North Carolina National will not upset the status quo and will
serve to strengthen the charter bank's inferior position
in the Durham area. The presence of the charter
bank in Chapel Hill will provide that community with
expert fiduciary services, experienced management and
resources sufficient to satisfy the needs of the people.
Applying the statutory criteria to the proposed
merger, we conclude that it is in the public interest
and the application is approved effective on or after
September 27, 1963.
SEPTEMBER 20, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This merger will eliminate a degree of competition
presently existing between The Bank of Chapel Hill
and North Carolina National. The competitive effect
of the proposal would be adverse. It will also continue
a trend whereby the largest banks in the State enhance
their competitive position through mergers and consolidations. Other serious competitive effects would
be the elimination of existing and potential competition between the merging banks, give the resulting
Bank an undue competitive advantage over its sole
competitor in the Chapel Hill service area, and contribute significantly to an already marked degree of
concentration in banking in the State of North
Carolina.
T H E MASSENA BANKING & TRUST CO., MASSENA, N.Y., AND T H E WATERTOWN NATIONAL BANK, WATERTOWN, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Massena Banking & Trust Co., Massena, N.Y., with
and The Watertown National Bank, Watertown, N.Y. (2657), which had
merged Sept. 30,1963, under charter of the latter bank (2657), and under title
of "The National Bank of Northern New York." The merged bank at the
date of merger had
COMPTROLLER'S DECISION
On May 24, 1963, the $11 million Massena Banking
and Trust Company, Massena, New York, and the $38
million Watertown National Bank, Watertown, New
York, applied to the Comptroller of the Currency for
permission to merge under the charter of the latter
and under the title, "The National Bank of Northern
New York."
Watertown is located in the north-central part of the
State about 80 miles northwest of Utica and 10 miles
east of Lake Ontario. The city, with an estimated
population of 35,000, has had considerable industrial
development and is a regional commercial and financial center. It is in the center of a large agricultural
and dairy farming region and of a prosperous resort
area. Banking services for Watertown are provided
by the applicant National Bank through five offices
and by the $95 million Northern New York Trust Company, a Marine Midland bank which is by far the
largest bank in the service area. The Northern New
York Trust Company has eight banking offices and
148
$11,214,199
42,979, 517
54,273,785
1
5
6
holds 64 percent of the deposits and 70 percent of the
loans held by commercial banks in the Watertown
area. Keen competition in Watertown is also provided
by the Jefferson County Savings Bank and the Watertown Savings Bank.
Massena, with a population of approximately
14,000, is located 93 miles northeast of Watertown.
For several years, the town had a booming economy
due to the construction of the St. Lawrence Seaway
and Power Project. Upon its completion, the economy gradually declined. Recently, however, conditions have begun to improve and a gradual, healthy
growth is now forecast. The local economy includes
significant industrial activity, dairy farming and vacation facilities. The principal competition in Massena
for the single-office merging bank is a branch of the
Northern New York Trust Company which possesses
86 percent of the deposits and 89 percent of the loans
in the Massena service area.
The Massena Banking and Trust Company, chartered in 1926, though in a generally satisfactory condi-
tion, is affected by a serious management problem.
Its former president has resigned and has been succeeded by one of the directors who is not an experienced banker. The lack of experienced and trained
officers, capable of operating an aggressive and competitively effective bank, is one of the main reasons for
the merger.
The resulting bank will possess 31 percent of the
total deposits and 26 percent of the total loans held
by commercial banks in the combined market areas.
The Northern New York Trust Company will still
possess 58 percent of such deposits and 65 percent of
such loans. The resulting bank will rank third in size
in Watertown, behind the Northern New York Trust
Company and the Jefferson County Savings Bank, and
will become slightly larger than the Watertown Savings Bank. It will still rank well behind the Northern
New York Trust Company in Massena.
Approval of this merger will be substantially beneficial to both banks and to both communities. Since
no competition between the applicants exists, none will
be eliminated by the merger. The additional resources to be acquired by the charter bank will enable
it to compete more effectively in both service areas
with the dominant Northern New York Trust
Company. Banking competition in Massena will be
especially improved with the addition of another institution capable of providing full banking service.
Effectuation of the proposal would also provide a
solution for the merging bank's lack of experienced
and trained management.
Applying the applicable statutory criteria to the
facts of this case, we conclude that the proposal is in
the public interest and the application is therefore
approved effective on or after August 16, 1963.
AUGUST 8, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Due to the fact that the only office of the Massena
Banking and Trust Company is located 93 miles from
the nearest office of Watertown National, there is
presently no competition between the merging banks.
The principal competitor of each of the banks is the
larger Northern New York Trust Company, which has
its main office in Watertown and a branch office in
Massena. In the Watertown service area there are
also three other banks and in the Massena service area
two other banks, all of which are much smaller than
either of the merging institutions.
The merger would place on the smaller banks in
Massena the burden of meeting the competition of the
resulting bank and ultimately may force them to consider merger. As a result of the increase in the resources of the Watertown National Bank, similar
pressures may be placed on the three smaller banks in
the Watertown area. That there is already a merger
trend in that area is indicated by the mergers of the
Black River National Bank and the Croghan National
Bank into Watertown National in 1959.
To the extent that the proposed merger may place
smaller banks within the two service areas at a further
competitive disadvantage, thereby increasing the probability of further merger activity and possibly ultimately resulting in the restriction of competition in
northern New York to two banks, the effect on
competition may be adverse.
ESSEX TRUST CO V ESSEX JUNCTION., VT., AND T H E HOWARD NATIONAL BANK & TRUST CO. OF BURLINGTON,
BURLINGTON, VT.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Essex Trust Co., Essex Junction, Vt., with
and The Howard National Bank & Trust Go. of Burlington, Burlington, Vt.
(1698), which had
merged Sept. 30, 1963, under charter of the latter bank (1698) and
with title "The Howard National Bank and Trust Company." The merged
bank at the date of merger had
COMPTROLLER S DECISION
On May 31,1963, the $47 million Howard National
Bank & Trust Company of Burlington, Burlington,
Vermont, applied to the Comptroller of the Currency
$4,087,607
1
49,496,540
7
53, 567,530
8
for permission to merge the $3.9 million Essex Trust
Company, Essex Junction, Vermont, under the charter
of the former and with the title of "The Howard
National Bank & Trust Company."
149
Burlington has a population of about 38,000, and is
the focal point of a trading area of over 75,000.
The trade area derives economic support from many
manufacturing and processing industries and from a
thriving tourist industry. The University of Vermont
and other educational institutions as well as small
dairy and cattle-raising farms also add to and round
out the local economy. The growth trend over the
past 10 years has been moderate, but industrial expansion and aggressive promotional efforts of local organizations should stimulate it in the future.
Three commercial banks now serve Burlington.
The charter bank, with six branches in the Burlington
trade area, is the second largest. The $55 million
Chittenden Trust Company with eight branches, the
largest bank in the area, and the $11 million Merchants National Bank complete the local commercial
banking picture. Located in the trade area are a
large savings bank, whose resources exceed those of
the largest commercial bank, a strong savings and loan
association, and a number of other nonbank financial
institutions.
Essex Trust Company is at present the sole bank in
Essex Junction, which is located 7 miles from Burlington. Although primarily a residential suburb and
agricultural community, Essex Junction has some
manufacturing industry. Employment is steady and
wages are high. Population has grown from 2,731 in
1950 to an estimated 7,500 at the present time with
further growth predicted. An application is pending
for a branch of The Merchants National Bank of Burlington in Essex Junction, but it has not yet been
approved.
An increase in commercial banking facilities com-
mensurate with the growth prospects of the area is
necessary if the Burlington economy is to realize its
potential. Business interests of the area have called
on the charter bank for larger loans than it can make
with its present resources. An increase in resources
will enable the bank to meet these local requirements
without the need of participations. The proposed
merger will have no adverse effects on competition as
the Burlington area will continue to have effective alternate banking sources available. It will significantly
augment the services available to the residents of Essex
Junction by providing a personal loan department,
foreign remittances, and an active trust department.
Although present management of the Essex Bank is
competent and respected, a serious succession problem
exists. The three principal officers of the bank are
near or over the normal age for retirement and there
is no younger group to replace them. The management depth of the charter bank will assure aggressive
and able administration for the future.
Applying the applicable statutory criteria to the facts
of this case, it is determined that this merger is in the
public interest and the application is therefore approved effective on or after August 22, 1963.
AUGUST 15, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The merger would result in the elimination of still
another small bank in the service area involved offering
a degree of competition to the acquiring bank. However, in view of the relatively small size of the merging
bank and the lack of substantial competition between
them, the effect of the merger on competition would
not be significantly adverse.
CAMPBELL COUNTY BANK, RUSTBURG, VA., AND T H E LYNGHBURG NATIONAL BANK & TRUST CO., LYNCHBURG, VA.
Name of bank and type of transaction
Total assets
In operation To be operated
Campbell County Bank, Rustburg, Va., with
and The Lynchburg National Bank & Trust Co., Lynchburg, Va. (1522),
which had
merged Sept. 30, 1963, under charter of the latter bank (1522) and under
title of "The Fidelity National Bank." The merged bank at the date of
merger had
COMPTROLLER'S DECISION
On June 26, 1963, the $53.9 million Lynchburg National Bank and Trust Company, Lynchburg, Virginia,
and the $15.3 million Campbell County Bank, Rust-
150
$15,524,026
58,806,850
74,145,956
13
burg, Virginia, applied to the Comptroller of the Currency for permission to merge under the charter of
the former and under the title of "The Fidelity National Bank."
Lynchburg, Virginia, situated in Campbell County
near the geographic center of the State, in 1960 reported a city population of 55,000 and a metropolitan
area population of 111,000. It is the trading center
for a four-county area in west central Virginia and
it is an important financial, mercantile, industrial and
transportation city. Manufacturing activity in recent
years has shown a substantial increase and agricultural
pursuits are also significant. Industrial expansion and
relocation is indicative of both past growth and future
potential.
Rustburg, Virginia, located in Campbell County 12
miles south of Lynchburg, has a population of about
400. Like other small towns in the county, its economy is entwined with that of Lynchburg. While
Rustburg derives some economic support from small
retail and service establishments, its primary reliance
is on agricultural activity in the surrounding countryside.
The Lynchburg National Bank and Trust Company
presently operates six branches in the City of Lynchburg, one in Amherst, 16 miles north of Lynchburg,
and one at Madison Heights, an unincorporated
suburb of Lynchburg.
Important changes have recently occurred in the
banking structure of the City of Lynchburg. In 1962,
the First Merchants National Bank of Richmond, Virginia's largest bank with total resources of nearly $400
million, acquired the People's National Bank and Trust
of Lynchburg, and the United Virginia Bank Shares,
Inc., the largest registered bank holding company of
Virginia whose affiliated banks hold total resources in
excess of $450 million, acquired control of the First
National Trust and Savings Bank, Lynchburg. The
former operates five branches within the city and
branches at Bedford and Big Island, 27 miles west and
12 miles northwest, respectively, while the latter operates six branches within the city and a branch at
Madison Heights. Another important force is the
First National Exchange Bank of Virginia, Roanoke,
the fourth largest bank in the State which operates two
offices in Bedford in competition with Lynchburg National in the intervening area.
The Campbell County Bank presently operates three
branches in three communities of Campbell County.
Although the condition of the bank is considered good,
the chief executive officer is desirous of retirement and
the prospects of obtaining a competent replacement
are in grave doubt. The 4-county area surrounding
Lynchburg is presently served by 8 banks with 30 banking offices.
While approval of the proposal will eliminate the
limited amount of competition now existing between
the applicant institutions, overall competition in the
Lynchburg area will be strengthened with no significant increase in bank concentration. Lynchburg
National, because of greater resources and a larger loan
limit, will be able to compete more effectively with the
First and Merchants National Bank and the First
National Trust and Savings Bank. This merger is a
step in the direction of broadening the base of competition among the banks in the Lynchburg area and of
providing a larger home-owned local bank to serve
better the recognized present and foreseeable economic
needs of Lynchburg customers. Moreover, consummation of the merger, will solve the management problem facing the Campbell County Bank and residents
of Campbell County who presently must go to Lynchburg for larger loans and more extensive services will
be able to find these readily available through the
resulting bank at four convenient locations.
In weighing this application in light of the statutory
criteria, it is found to be in the public interest and is
therefore approved, effective on or after August 30,
1963.
AUGUST 23,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger of Campbell County Bank,
Rustburg, Virginia, into the Lynchburg National Bank
& Trust Company, Lynchburg, Virginia, would substantially increase concentration of commercial banking facilities and could substantially reduce competition among commercial banks competing within, and
located principally within, the service areas of the two
banks.
There are at present six commercial banks competing within, and located principally within, the
service area of the two banks. The charter Bank is
the largest and the merging Bank the third largest of
these banks. Excluding First & Merchants, which
operates primarily outside the service area, the proposed merger would concentrate in the hands of the
resulting Bank approximately 53% of the total deposits
and 55% of the total loans held by these banks. The
two largest of these banks would then account for
more than 85% of such deposits and 88% of such
loans; the remaining 12%—15% would be divided
among three small banks.
The proposed merger would therefore materially
increase concentration of commercial banking facilities
in the area, and eliminate the substantial competition
151
existing between the two banks. The imbalance of
the banking structure in the area would appear to
place the remaining smaller banks at a competitive
disadvantage. It appears, therefore, that the proposed merger would have serious adverse competitive
effects.
THE HAZELWOOD BANK, PITTSBURGH, PA., AND WESTERN PENNSYLVANIA NATIONAL BANK, MGKEESPORT, PA.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Hazelwood Bank, Pittsburgh, Pa., with
and the Western Pennsylvania National Bank, McKeesport, McKeesport, Pa.
(2222), which had
consolidated Oct. 4, 1963, under the charter of the latter bank (2222) and
under title "Western Pennsylvania National Bank." The consolidated bank
at the date of consolidation had
COMPTROLLER'S DECISION
On August 8, 1963, the $235.5 million Western
Pennsylvania National Bank, McKeesport, Pennsylvania, and the $10.9 million Hazelwood Bank, Pittsburgh, Pennsylvania, applied to the Comptroller of the
Currency for permission to consolidate under the
charter and title of the former.
McKeesport, population 46,000, is located 11 miles
southeast of Pittsburgh at the confluence of the
Monongahela and Youghiogheny Rivers and is considered a part of the Pittsburgh metropolitan area.
McKeesport and the surrounding area are highly
industrialized, with the principal industries being iron,
steel and related lines.
Hazelwood, with a population of 30,000, is located
about 4 miles southeast of the main business section of
Pittsburgh. The area served by Hazelwood is principally industrial, although it includes many small commercial establishments. The economy of Hazelwood
is supported in large part by Jones and Laughlin Steel
Corporation which employs about 5,500 persons.
Although Western Pennsylvania National Bank is
headquartered in McKeesport, it is properly considered to be a Pittsburgh bank. Its service area and
that of the single-office Hazelwood Bank includes all
of Allegheny County, whose population is 1,665,000.
The main offices of the two banks are 8 miles apart and
on the highway routes between them are five offices of
other banks. Western Pennsylvania National Bank
ranks third in size in the Pittsburgh area and is considerably smaller than the two largest Pittsburgh banks.
Although the merger will increase Western Pennsylvania's deposits from 7.9 percent to 8.2 percent of the
county total, the bank will continue to rank in third
place with respect to both deposits and number of
152
$11,266,613
1
565,197,517
41
576,464,130
42
offices. Twenty-three commercial banks presently
operate in Allegheny County. Of these, 16 banks,
including Hazelwood, account for less than 5 percent
of the deposits and loans, and operate only 19 of the
163 banking offices, in the county.
The resulting bank in Hazelwood will have a greatly
augmented lending capacity, thus increasing its utility
to the business community. The Western Pennsylvania National Bank will provide specialized lending
techniques in thefieldsof consumer credit, home mortgage financing and commercial credit. In addition,
trust services, which are presently not available in the
Hazelwood community will be offered by the experienced trust department of the charter bank in the
Hazelwood branch.
The approval of the consolidation will have an insignificant effect, if any, on the competitive situation in
the Allegheny County trade area. Competition will
not be substantially lessened. It appears that the public interest will be better served as the resulting bank
will furnish the Hazelwood banking public with better
and more diversified services and the benefits of an
aggressively competitive bank.
Considered in light of the statutory criteria, we find
the application to be in the public interest and the
application to consolidate is therefore approved effective on or after September 13,1963.
SEPTEMBER 6, 1963.
SUMMARY OF REPORT BY THE ATTORNEY GENERAL
The Western Pennsylvania National Bank is the
third largest bank in the Pittsburgh area; the Hazelwood Bank is one of the smallest. It does not appear
that their consolidation, if approved, would eliminate
any substantial competition between them. Nor
would it add significantly to concentration in commercial banking in this area.
On the other hand, 95% of the banking business in
this County is concentrated in the hands of seven
banks, and, indeed, the three leading banks alone ac-
count for 83%. This unusual degree of concentration
has to a large extent resulted from a great number
of past acquisitions by the five leading banks. In
such a situation even a slight increase in concentration
would be inimical to the preservation of competition.
WOODBURY BANK & TRUST CO., SIOUX CITY, IOWA, AND FIRST NATIONAL BANK IN SIOUX CITY, SIOUX CITY,
IOWA
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Woodbury Bank & Trust Co., Sioux City, Iowa, with
and First National Bank in Sioux City, Sioux City, Iowa (13538), which had..
merged Oct. 11, 1963, under the charter and title of the latter bank (13538).
The merged bank at the date of merger had
COMPTROLLER S DECISION
On July 23, 1963, the $38.9 million First National
Bank in Sioux City, Sioux City, Iowa, and the $15.8
million Woodbury Bank and Trust Company, Sioux
City, Iowa, applied to the Comptroller of the Currency
for permission to merge under the charter and title of
the former.
Sioux City, population 89,159, is the county seat of
Woodbury County. It is contiguous to Iowa's western
boundary and is at the confluence of the Missouri and
Big Sioux Rivers which at this point form the boundaries of South Dakota, Nebraska, and Iowa. Sioux
City is the situs of over 150 manufacturing plants which
produce a wide variety of products. Its stockyard is
the third largest in the world, and it is the Nation's
largest stocker-feeder cattle market. Farming is an
important economic activity in the area surrounding
Sioux City.
First National is the second largest and Woodbury
is the fifth largest of the 10 commercial banks which
are represented in the Sioux City metropolitan area.
After this merger is effectuated the resulting bank will
rank first in deposit size. The area's small commercial
banks are not located in the downtown business section
of Sioux City, as are the applicant's offices. Since the
small banks of the area do not presently compete with
the larger banks in downtown Sioux City they would
not be affected significantly by this merger.
The credit needs necessary tofinancethe large cattle
shipments to Sioux City stockyards has resulted in intense competition between local banks in Sioux City
for correspondent relationships with outside banks.
725-698—64—11
$15,493,685
42,316,567
1
1
57,421,110
2
These credit needs for this market are such that the
local Sioux City banks have in the past often placed
overloans with larger outside banks, or, in many instances, participated in loans originated elsewhere.
This merger will in part alleviate the necessity of this
practice.
Competition within the Sioux City area is so intense
and the demand for additional bank services so pressing that it is clear that the merger will have no adverse
competitive effect. The resulting bank, with a larger
lending limit, will be able to compete with banks located in other cities, thereby retaining banking business within Sioux City to the benefit of the local
economy.
Applying the statutory criteria to the proposed
merger, we conclude that it is in the public interest, and
the application is, therefore, approved effective on or
after October 9, 1963.
OCTOBER 2, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The First National Bank and the Woodbury Bank
are located in Sioux City, Iowa, one of the largest
stocker and feeder cattle markets in the world. Ten
commercial banks are located in this metropolitan
area. As of June 29, 1963, First National ranked
second in size and had total assets of $37,410,000, total
deposits of $34,560,000 and net loans and discounts
of $18,880,000 while the Woodbury bank ranked fifth
in size and had total assets of $15,256,000, total deposits of $14,362,000 and net loans and discounts of
$8,698,000. If the proposed merger is approved, the
resulting Bank, with 29.87% of total deposits and
153
27.87% of total loans, would be the largest commercial bank in the metropolitan Sioux City service area.
Sioux City commercial banks appear to be highly
competitive for local, and for correspondent, business
and the instant merger would upset the present competitive balance. In addition, the merger would elimi-
THE
nate the considerable competition presently existing
between the participating banks. Thus, it is the view
of the Department of Justice that consummation of
the proposed merger would have very serious adverse
effects on existing and potential competition in the
metropolitan Sioux City area.
FARMERS BANK OF NANSEMOND, SUFFOLK, V A . , AND T H E SEABOARD CITIZENS NATIONAL BANK OF
NORFOLK, NORFOLK, V A .
Name of bank and type of transaction
Total assets
In operation To be operated
The Farmers Bank of Nansemond, Suffolk, Va., with
and The Seaboard Citizens National Bank of Norfolk, Norfolk, Va. (10194),
which had
merged Oct. 18,1963, under charter of the latter bank (10194) and with title
of "Seaboard Citizens National Bank." The merged bank at the date of
merger had
COMPTROLLER'S DECISION
On July 18, 1963, The Seaboard Citizens National
Bank of Norfolk, Norfolk, Virginia, and The Farmers
Bank of Nansemond, Suffolk, Virginia, applied to the
Comptroller of the Currency for permission to merge
under the charter and with the title of the former.
The growth of the Norfolk economy has been noted
in recent statements approving mergers to which Norfolk banks were parties. Norfolk's large military
installations and port facilities, as well as increasing
manufacturing industries, place the area, with a total
population of 578,000, in a favorable economic position and create constantly new demands on its financial
facilities.
The $90 million Seaboard Citizens National Bank
is the second largest bank in Norfolk. It presently has
eight branches, none of which are in the Suffolk service area. The $338 million Virginia National Bank,
with 32 branches in the Norfolk and Charlottesville
areas, is the largest bank competing directly with the
charter bank. The Norfolk branches of the $ 176 million Bank of Virginia, Richmond, are also important
factors in Norfolk banking. In addition, the Norfolk
service area contains six smaller banks, ranging in size
from the $27 million American National Bank of
Portsmouth to the $9.5 million Bank of Craddock and
Norfolk County, Chesapeake.
The Suffolk trade area encompasses three counties
with a population in excess of 26,000, and adjoins the
Norfolk area. Although diverse industries are locating in this region, peanut growing and processing pro-
154
$14,490,299
91,518,644
106,008,943
vide the major portion of the area's income. Suffolk
has been denominated "The Peanut Capital of the
World" and the increasing popularity in American
diets of peanuts and related foodstuffs indicates continuing prosperity for the region.
The $13.3 million Farmers Bank of Nansemond was
the largest bank in Suffolk until the recent merger of
the Virginia National Bank, Norfolk, and the National
Bank of Suffolk. Now the Suffolk branches of the
resulting $352.3 million Virginia National Bank provide the main competition for Fanners Bank. The
$12.4 million American Bank and Trust Company and
two smaller banks in surrounding towns also serve
Suffolk.
The addition of the resources of the merging bank
to the Seaboard Citizens system will have no significant
effect on the competitive climate in the Norfolk area.
The needs of this highly industrialized region call for
increased banking facilities. While the merging bank
is small in comparison with the charter bank, the increased lending limit and extra outlet resulting from
the merger will improve the range of services which
the Norfolk bank can offer.
In Suffolk, the merger will strengthen the resources
and services of the Farmers Bank, and thus stimulate
competition. The problem of obtaining qualified
management personnel is acute for Farmers Bank; the
depth of the charter bank's management will effectively solve this problem. The resulting bank will be
able to offer many facilities now available only through
the Virginia National Bank. The competition arising
from a choice of modern banks in Suffolk will be a
healthy development for the community.
Applying the statutory criteria to the proposed
merger we conclude that it is in the public interest,
and the application is therefore approved effective on
or after October 2,1963.
SEPTEMBER 25, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The Seaboard Citizens National Bank is the second
largest bank in Norfolk with total assets of $89,557,000
as of May 31,1963.
The Farmers Bank of Nansemond is located in Suffolk, a town 18 miles southwest of Norfolk and as of
May 31, 1963, had assets of $13,673,000.
Virginia National Bank, Norfolk, Virginia, the second largest bank in Virginia, presently has pending an
Application to merge the National Bank of Suffolk, a
bank of approximately the same size as Farmers Bank
of Nansemond. Should both these proposed mergers
be approved, there will remain in Suffolk one remaining independent bank about the same size as each of
the two merging banks, and two smaller competing
banks about 12 miles distant from Suffolk. These
three remaining banks will thereafter operate at a substantial competitive disadvantage considering the increased lending limits of the resulting banks and the
other stated benefits that will accrue to them. Not
only will a further increase in the concentration of
banking in Virginia result, but a precedent will be
established for the remaining banks in this area to seek
to protect themselves by like action.
It is our view that the proposed merger will have
adverse competitive effects.
LONG BRANCH TRUST CO., LONG BRANCH, N.J., AND THE MONMOUTH COUNTY NATIONAL BANK, RED BANK,
RED BANK, N.J.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Long Branch Trust Co., Long Branch, N.J., with
and The Monmouth County National Bank, Red Bank, Red Bank, N.J.
(2257), which had
consolidated Oct. 22, 1963, under charter and title of the latter bank (2257).
The consolidated bank at the date of consolidation had
COMPTROLLER'S DECISION
On August 1, 1963, the $108.3 million Monmouth
County National Bank, Red Bank, Red Bank, New
Jersey, and the $19.8 million Long Branch Trust Company, Long Branch, New Jersey, applied to the Comptroller of the Currency for permission to consolidate
under the charter and title of the former.
Monmouth County, in which all offices of both banks
are located, is situated in the eastern part of central
New Jersey within 50 miles of New York City. The
economic character of the County is a mixture of agriculture, industry and summer resorts. A rapid growth
in industry has occurred as many nationally known corporations have entered the County during the past 10
years. This, along with its proximity to the New York
area, has produced a concomitant expansion of residential development. The County population has increased by 50 percent from 1950 to 1960 at which time
the total reached 334,000. Further rapid growth is
anticipated. In addition, the Ft. Monmouth Signal
Corps Depot is located in Monmouth County and pro
120,398,809
2
113,739,517
10
134,116,128
12
vides an annual payroll of $65 million.
Monmouth County is served by 13 commercial banks
operating 58 offices, including 4 approved but not
opened branches, with aggregate deposits of $387 million. In addition, 16 savings and loan associations operate 25 offices and hold $133 million withdrawable
shares. There is also strong competition from finance
and personal loan companies throughout the area.
Monmouth County National Bank, with its 12 offices,
is the largest of the 3 banks that compete on a countywide basis. The $83.7 million Central Jersey Bank
and Trust Company, Freehold, New Jersey, is second
with 20 percent of County deposits, and the $80.7 million First Merchants National Bank, Asbury Park, New
Jersey, is third with 18.6 percent of County deposits.
Recently, the Federal Deposit Insurance Corporation
approved a merger between the $39.5 million Asbury
Park and Ocean Grove Bank, Asbury Park, New Jersey, and the $18.2 million New Jersey Trust Company
of Long Branch, Long Branch, New Jersey. The bank
resulting from that merger will possess 13 percent of
155
County deposits. There is also a merger pending before the Corporation involving the Central Jersey Bank
and Trust Company and the $6.4 million Matawan
Bank, Matawan, New Jersey, which, if approved,
would increase Central Jersey's portion of County deposits to 21.5 percent.
Long Branch is a city of 26,228 citizens, situated on
the Atlantic Ocean about ll/% miles southeast of Red
Bank, New Jersey. It is primarily a seashore resort
but its position has been declining along with a gradual
deterioration of its business center. There is a modest
amount of small industry. From a residential standpoint, this city is fully developed and its growth prospects are therefore limited. Included within the
Long Branch service area are the towns of Monmouth
Beach, West Long Beach, Deal, Ocean Port and the
Rockhurst sector of Ocean Township. The total service area population is approximately 44,000. The
City of Long Branch and the surrounding service area
is served by two offices of the Long Branch Trust Company, an office of Central Jersey Bank and Trust Company, and the main office and two branches of the
New Jersey Trust Company of Long Branch.
The main office of Monmouth County National
Bank is located 7J4 miles northwest of the main office
of Long Branch Trust Company. The nearest office
of Monmouth County National Bank to that of Long
Branch Trust is located in Little Silver, New Jersey,
5/2 miles northwest. Monmouth County National
operates no branches within Long Branch Trust's
primary area and only affects this area through its
competitive effect on the entire County. The amount
of competition between the two consolidating banks
is small. Long Branch Trust Company holds approximately 35 percent of its area's deposits and
Monmouth County National, approximately 5 percent.
The two banks have a few common borrowers and
common depositors.
The proposed consolidation will not result in a significant diminution of competition. Though an independent bank will be eliminated, the resulting bank
will be better able to compete with existing institutions
in its area. Long Branch Trust Company presently
competes with two considerably larger institutions: the
Central Jersey Trust and the new bank resulting from
the merger of Asbury Park and Ocean Grove and New
Jersey Trust of Long Branch. Thus, the competitive
structure in Long Branch will be strengthened by the
proposed consolidation and the area will benefit from
the increased services offered to it by the resulting
bank. The resulting bank will be better able to serve
Monmouth County on a countywide basis with its
additional offices and increased lending limit. A bank
the size of the resulting bank, approximately $128
million in total resources, will be a great asset for
Monmouth County and is necessary to its continued
industrial and residential growth.
Having considered this application in light of the
statutory criteria and having determined that this
proposal will promote the public interest, the application is approved.
OCTOBER 18, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The acquiring bank is the largest in Monmouth
County which it serves through 10 offices. The acquired bank, 1 of 10 smaller banks in the county, operates 2 offices in the City of Long Branch, an area
which the acquiring bank also serves. The merger
would eliminate a degree of competition between the
participating banks. It would also increase the dominance which the acquiring bank already enjoys in the
county and would accelerate the concentration of
banking assets in the largest three banks. These three
banks, which already have 61.41 percent of total IPC
deposits, would increase their share to 65.76 percent,
leaving only 34.24 percent to the remaining nine banks.
An additional factor is the merger record of the acquiring bank. In the past 7 years it has merged four
competitors, with aggregate deposits of $41,852,000.
The result of the proposed acquisition on competition would appear to be substantially adverse.
CLINTON TRUST CO., CLINTON, MASS., AND WORCESTER COUNTY NATIONAL BANK, WORCESTER, MASS.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Clinton Trust Co., Clinton, Mass., with
and the Worcester County National Bank, Worcester, Mass. (14850), which
had
consolidated Oct. 25,1963, under charter and title of the latter bank (14850).
The consolidated bank at date of consolidation had
156
$12,987,777
3
188,961,803
21
200,732,347
24
COMPTROLLER S DECISION
On August 14, 1963, the $188 million Worcester
County National Bank, Worcester, Massachusetts, and
the $13.1 million Clinton Trust Company, Clinton,
Massachusetts, applied to the Comptroller of the Currency for permission to consolidate under the charter
and title of "Worcester County National Bank."
Worcester, the second largest city in Massachusetts,
has a population of 187,000. The county of Worcester is the State's largest and extends from the border
of New Hampshire to that of Rhode Island. Its
population of 583,000 is distributed among 4 cities,
56 towns and the rural areas. The city of Worcester
serves as a manufacturing and trading center for all
of central Massachusetts. Although the dominant
textile industry has experienced a decline in recent
years, diversified manufacturing has increased with
some industry moving to Worcester from the Boston
area. An estimated 36,000 persons are presently employed in Worcester, manufacturing a variety of products including machinery, metal items, abrasives, textiles, and instruments. The general service area is
mixed, with farming and forestry making an important contribution to the local economy. A slight decline in the city population in recent years has been
due entirely to the increasing movement to suburban
areas.
Worcester County National Bank is the county's
largest commercial bank. Its main office and 5 of its
branches, plus an approved but unopened branch, are
in Worcester itself, while 15 other branches are located in 12 towns in the county. In order to keep
pace with the population movement, it has opened
13 branches in the suburbs in the last 12 years. Both
the city and the county are extremely well served
financially. In addition to the subject banks, there
are 19 commercial banks with 37 offices, 24 mutual
savings banks with 39 offices, 12 cooperative banks,
90 credit unions, and numerous small loan and sales
finance companies competing in the county.
Thrift institutions especially are intensely competitive in Massachusetts. They not only have higher
legal lending limits and lower tax rates, but are permitted to perform many functions elsewhere restricted
to commercial banks. Their ability to issue drafts in
the nature of checks and to make installments and collateral loans places them in direct competition with
commercial banks. They hold 2% times the deposits
of commercial banks in this area—$900 million as
compared to $327 million. In addition, the larger
banks in Providence, Rhode Island, Hartford, Connecticut, and Boston, all within 40 to 60 miles of
Worcester, actively solicit deposits and loans in this
area.
Clinton, home of the consolidating bank, is located
13 miles northeast of Worcester and has a population
of 13,000. Like Worcester, Clinton is a growing industrial city having 48 manufacturing firms which
employ 4,000 people. While the surrounding area is
primarily residential, some farms contribute to the
economy. The service area of Clinton encompasses
5 towns and 23,000 people. Clinton itself is served
only by the main office of the consolidating bank, one
mutual savings bank and a small cooperative bank.
Recently the Guaranty Bank and Trust Company,
Worcester's second largest bank, applied for a branch
in Clinton. The Clinton Trust Company operates a
branch in Sterling, 5 miles northwest of Clinton. Its
application for a branch in the community of Lancaster, 5 miles to the north, has been approved although
that office has not yet been opened.
Competition between the subject banks is minimal
since their service areas are separated geographically
and their closest offices are 7 miles apart. The charter
bank has for some time participated with the Clinton
Trust Company in loans which were beyond the legal
lending capability of the latter. The present proposal
arose as a result of the inability of the Clinton Bank,
because of insufficiency of resources to serve adequately the area and its inability to hire and retain
competent personnel.
The effects of this consolidation in Clinton should
be favorable. The management of that bank will be
strengthened and increased services, including automation and international accommodations, will be offered.
The competitive position of the charter bank in Worcester will be improved but slightly since the city will
still have 12 other commercial banks with a total of
27 offices plus 18 mutual savings banks with 31 offices.
More important, the position of the charter bank vis-avis the Boston and out of State banks will be strengthened, its market area widened1, and its ability to service
local companies improved. This should result in the
retention in Worcester of some business which is presently serviced by financial institutions in New York
and Boston.
Considered in light of the relevant statutory criteria,
we find the application to be in the public interest,
and it is therefore approved.
OCTOBER 24,
1963.
SUMMARY OF REPORT BY THE ATTORNEY GENERAL
This consolidation will eliminate the consolidating
Bank, a profitable independent institution, and will in-
157
crease the resources of the charter Bank, the dominant
bank in a region where commercial banking resources
already are highly concentrated in the hands of a few
large institutions. It would also eliminate such competition as now prevails between the consolidating
banks. Further, nearly one-quarter of the charter
Bank's offices originated in a 1961 consolidation.
For these reasons, it is our opinion that this consolidation will have an adverse effect on banking competition in central Massachusetts.
T H E FIDELITY NATIONAL BANK OF TWIN FALLS, TWIN FALLS, IDAHO, AND HAZELTON STATE BANK, HAZELTON,
IDAHO
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Hazelton State Bank, Hazelton, Idaho, with
was purchased Oct. 25, 1963, by The Fidelity National Bank of Twin Falls,
Twin Falls, Idaho (11100), which had
After the purchase was effected, the receiving bank had
COMPTROLLER S DECISION
On August 12, 1963, the $15.8 million Fidelity National Bank, Twin Falls, Idaho, applied to the Comptroller of the Currency for permission to purchase the
assets and assume the liabilities of the $2.2 million
Hazelton State Bank, Hazelton, Idaho.
The Fidelity National Bank of Twin Falls is located
in Twin Falls, the county seat with a population of
20,000. It is the largest city in south-central Idaho
and serves as a shopping center for the rest of the
county and adjacent areas in both Idaho and northern
Nevada. Farming and cattle feeding provide the majority of area income while local processing of agricultural products has grown in importance.
The charter bank operates a drive-in branch in
Twin Falls, and a branch 6 miles to the west in the
town of Filer. While the bank is especially active in
agricultural and consumer lending, it also participates
in some real estate lending in competition with two
savings and loan associations in the Twin Falls area
which have combined withdrawable balances of $41
million. Two other banks serve the Twin Falls area;
the $21.9 million Twin Falls Bank and Trust Company with two offices, and the $2.8 million First Security Bank of Twin Falls with one office.
The Hazelton State Bank is the only bank located in
Hazelton, a community of 400 situated in Jerome
County about 20 miles east of Twin Falls across the
Snake River. The service area of the Hazelton Bank
encompasses about 2,300 people and is similar to that
of the purchasing bank, in that agriculture, the processing and distributing of agricultural production, and
158
$2,245,000
1
15,973,000
17,718,000
3
4
livestock feeding, are the only industries. The selling
bank competes with five other banks located from 14
to 25 miles away. It has been relatively successful but
has been hampered by its low lending limit. This has
required it to participate loans on a number of occasions and has caused some of the larger borrowers to
go out of the area in search of adequate funds. The
demand for agricultural loans in Hazelton has been
greater than the bank can satisfy, and it has been unable to service the community in the real estate and
consumer credit areas. The wish of the bank's executive officer to retire, and the bank's failure to provide
for management succession actuated this proposal.
The purchase will have little if any effect in Twin
Falls, where the charter bank will remain second in
size. In Hazelton, however, the public will benefit by
the increased availability of banking services. The
resulting bank will be capable of making more and
larger loans to farmers, a demand which the existing
bank has been unable to satisfy, and will introduce
consumer credit and real estate lending. Its depth
of management succession will prevent the recurrence
of the situation engendering this transaction. The
effect on competition will be minimal for the service
area of the resulting bank will contain a total of 14
offices, including branches of 2 banks which together
control two-thirds of Idaho's deposits.
On balancing the circumstances of this case in light
of the statutory criteria, we find the transaction to be
in the public interest and the application is therefore
approved on or after October 25,1963.
OCTOBER 18, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This is an acquisition by the second largest bank in
Twin Falls County, Idaho, of the only bank in Jerome
County, Idaho.
The acquisition will result in the elimination of
actual and potential competition between the participating banks. It will enhance the competitive position of Fidelity National vis-a-vis its next largest
competitor Farmers National Bank of Buhl. Further,
it will increase the concentration of banking resources
held by the two largest banks in Twin Falls County.
Finally, it will leave Jerome County without an independent bank.
However, since Hazelton State is only a minor banking factor, its acquisition by Fidelity National should
not have a significantly adverse effect on competition
in Twin Falls County. And, elimination of Hazelton
State as an independent bank should not result in a
substantial change in the servicing of Jerome County's
banking needs.
T H E FIRST NATIONAL BANK OF OELWEIN, OELWEIN, IOWA, AND STATE SAVINGS BANK, WESTGATE, IOWA
Banking offices
Name of bank and type of transaction
Total assets
(as of 6-29-63)
In operation To be operated
State Savings Bank, Westgate, Iowa, with
was purchased Oct. 31,1963, by The First National Bank of Oelwein, Oelwein,
Iowa (5778), which had
After the purchase was effected, the receiving bank had
COMPTROLLER S DECISION
On August 5, 1963, The First National Bank of
Oelwein, Oelwein, Iowa, applied to the Comptroller
of the Currency for permission to purchase the assets
and assume the liabilities of the State Savings Bank,
Westgate, Iowa.
Both Oelwein and Westgate are agricultural communities in the northeastern Iowa county of Fayette.
Oelwein, with a population of 8,282, depends primarily on farming, although several small manufacturing
plants and shops of the Chicago Great Western Railway provide a degree of diversity. A large number
of Oelwein citizens commute to jobs in nearby Waterloo. Westgate has a population of 214 and a small
business district. Although the surrounding area is
excellent farmland, the town has no present prospects
for future growth.
The $9.6 million First National Bank of Oelwein is
the larger of two banks in Oelwein. The $5 million
Oelwein State Bank is the alternate banking institution. In addition to the selling bank, seven small
banks in surrounding towns also operate in the
Oelwein service area.
Although the $695,000 State Savings Bank is the
sole bank in Westgate, the nine banks which are operative in the Oelwein area also serve the Westgate
public.
$624,122. 68
1
9,471,294. 69
9,977,375.13
1
2
There are compelling reasons for changing the
banking structure in Westgate. The management of
the selling bank has experienced considerable difficulty
in providing adequate services to the community.
Deposits have declined over the past 10 years and the
small lines of credit which the bank can give do not
adequately meet the substantial credit needs of local
feeder cattle farmers. The First National Bank of
Oelwein can offer such services as a trust department
and savings accounts which are not presently available
in Westgate. Its larger lending limits will enable the
Westgate farmers to meet their credit needs at home.
The effect of the purchase and assumption on competition in Oelwein will be inconsequential. Eight
banks with 10 offices will still compete with the First
National Bank of Oelwein in its service area. The
State Savings Bank, because of its size and the policies
of its management, has never been an effective competitor. Westgate will now have a bank which will
truly compete with other banks in the area.
Applying the statutory criteria to the proposed
purchase of assets and assumption of liabilities, we conclude that it is in the public interest and the application is therefore approved effective on or after October
10, 1963.
OCTOBER 3, 1963.
159
SUMMARY OF REPORT BY ATTORNEY GENERAL
The First National Bank of Oelwein will compete
with eight independent banks in the resulting Bank
service area. Although the proposed acquisition will
result in an addition to First National's position, the
increase in banking concentration is relatively minor.
In light of this relatively minor increase in concentration, the effect of the interlocking directorates, and the
continued existence of eight independent banking
institutions, we believe the proposed merger will not
have a substantial adverse effect upon competition.
PIEDMONT NATIONAL BANK OF SPARTANBURG, SPARTANBURG, S.C., AND THE SOUTH CAROLINA NATIONAL BANK
OF CHARLESTON, CHARLESTON, S.C.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Piedmont National Bank of Spartanburg, Spartanburg, S.C (14594), with
and The South Carolina National Bank of Charleston, Charleston, S.C. (2044),
which had
merged Oct. 31,1963, under charter and title of the latter bank (2044). The
merged bank at the date of merger had
COMPTROLLER S DECISION
On August 15, 1963, The South Carolina National
Bank of Charleston, Charleston, South Carolina, and
The Piedmont National Bank of Spartanburg, Spartanburg, South Carolina, applied to the Comptroller of
the Currency for permission to merge under the charter and title of the former.
The $305 million South Carolina National Bank
is a statewide institution and is closely involved in all
phases of economic activity throughout South Carolina.
The bank's head office is in Charleston and its administrative office is in Columbia. Charleston, with
a population of 66,000, is an important South Atlantic
port and military center. The pace of industrial activity is reflected in the doubling of the value of manufactured products during the past 10 years. Columbia,
the State's capitol and largest city, has a population
of 200,000. It is a retail and wholesale center. State
and Federal Government activity is an important
source of employment.
The South Carolina National Bank, with 57 offices
and branches, is the largest bank in South Carolina.
The other principal banks in Charleston and Columbia
are the $176.7 million Citizens and Southern National
Bank of South Carolina, Charleston, and the $100.9
million First National Bank of South Carolina of Columbia, Columbia, South Carolina.
Spartanburg is the county seat of Spartanburg
County, which has a population of 156,830, and is the
center of a trade territory of some 520,000 persons.
The city is located 205 miles northwest of Charleston
and 95 miles northwest of Columbia. Although strong-
160
$16,841,035
5
319,252,708
51
336,093,744
56
ly oriented toward the textile industry, the local
economy has diversified in recent years. Projections
of commercial and industrial growth, based on the last
decennial record, portend a promising future for the
Spartanburg area. Spartanburg is also the central
city of arichagricultural region noted for peaches, cotton and other farm staples.
The $17 million Piedmont National Bank, with five
branches, is one of five banks operating in Spartanburg County. The Citizens and Southern National
Bank of South Carolina, the second largest bank in
the State, also has five branches in Spartanburg. The
$33 million Commercial National Bank of Spartanburg, with six branches, is the largest bank headquartered in Spartanburg. Four other banks in surrounding towns range in size from the $10.8 million Bank
of Greer, Greer, South Carolina, to the $1.4 million
Chesnee State Bank, Chesnee, South Carolina.
The effect of the merger in the areas now served
by the South Carolina National Bank will be slight.
Any impact will be felt principally in Spartanburg,
where burgeoning industry needs adequate sources of
credit. The present lending limit of the merging bank
is $120,000, well below that of its two chief competitors. The resulting bank will have a lending limit of
$2 million, which will enable it to respond more fully
to the credit needs of local industry.
Since the resulting bank will retain the present offices of The Piedmont National Bank in Spartanburg
as branches, there will be as many banking choices
available to the public after the merger as exist at
the present time. The broader management base and
technical facilities of the charter bank will not only
provide better service to the Spartanburg area, but
also will stimulate competition with the thriving banks
in Spartanburg. The fact that there are no duplicating deposits and loan accounts of substance between
the merging banks indicates that no appreciable competition will be eliminated by this proposal.
Applying the statutory criteria to the proposed
merger, we conclude that it is in the public interest
and the application is therefore approved.
OCTOBER 24,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The South Carolina National Bank, Charleston,
South Carolina, the largest bank in the state, operat-
ing 57 statewide offices and branches, proposes to
merge with the Piedmont National Bank, Spartanburg, South Carolina.
There does not appear to be significant competition
between the two institutions and therefore the direct
competition eliminated by the proposal would not be
great. Approval of the merger, however, would eliminate another independent bank from a significant
competitive area, place the smaller banks in Spartanburg at a competitive disadvantage, further enhance
the dominance of the largest bank in the state and further encourage the concentration of banking in South
Carolina. The effect on competition would thus be
adverse.
CITIZENS NATIONAL BANK, LOS ANGELES, CALIF., AND CROCKER-ANGLO NATIONAL BANK, SAN FRANCISCO,
CALIF.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
Citizens National Bank, Los Angeles, Calif. (5927), with
and Crocker-Anglo National Bank, San Francisco, Calif. (1741), which had..
merged Nov. 1,1963, under the charter of the latter bank (1741), and under
the title, "Crocker-Citizens National Bank." The merged bank at the date
of merger had
COMPTROLLER'S DECISION
I. Introduction
On May 13, 1963, Crocker-Anglo National Bank,
San Francisco, California, and Citizens National Bank,
Los Angeles, California, applied to the Comptroller of
the Currency for permission to merge under the charter
of the former and with the title "Crocker Citizens
National Bank." A public hearing on this application
was held in Washington, D.C., on July 30 and 31,
1963.* The record developed at the hearing is comprised of 1,605 pages of testimony and exhibits.
Crocker-Anglo National Bank, with total resources
of $2.3 billion, operates under a charter issued in 1870.
It acquired its present title in 1956 when Crocker First
National Bank of San Francisco consolidated with
Anglo California National Bank, San Francisco.
Since the consolidation, Crocker-Anglo has participated in 9 mergers with smaller banks whereby it
acquired $164.4 million in deposits and 19 branch
^Editor's note: A copy of the record developed at the
public hearing is available for inspection in the Office of the
Comptroller of the Currency, Washington, D.C.
725-^698—64
12
$805, 590, 533
2,413,421,681
3,217,445,769
83
131
214
offices. At the time of the application, this bank
operated 125 banking offices located in 29 counties in
northern and central California.
Citizens National Bank, with total resources of $775
million, was originally incorporated in 1890 as a state
bank with the title "Citizens Bank of Los Angeles."
When it converted to the Federal System in 1901, it
became The Citizens National Bank of Los Angeles.
It adopted its present title in 1959. This bank, which
has acquired $20 million in deposits and 6 branch
offices through 3 mergers in the last 10 years, operated
78 offices in 5 of the 7 southern California counties at
the time of the application.
In ruling on bank mergers under the provisions of
the National Banking Act (12U.S.C. 215(a)) and the
Bank Merger Act of 1960 (12 U.S.C. 1828(c)), the
Comptroller of the Currency must consider the financial history and condition of each of the banks involved, the adequacy of its capital structure, its future
earnings prospects, the general character of its management, whether or not its corporate powers are
consistent with the purposes of the Act, the convenience and needs of the community to be served and the
161
effect of the merger on competition, including any
tendency toward monopoly which it may have. The
Comptroller is enjoined from approving a merger unless he shall find it to be in the public interest. He
must also consider § 7 of the Clayton Act as applied
by the Supreme Court in United States v. Philadelphia
National Bank, et al, 374 US 323. While the public
interest is the ultimate standard against which a bank
merger must be assessed, its relation to the seven
criteria was defined in the Report of the Senate Committee on Banking and Currency (Sen. Rep. No. 196,
86th Cong., 1st Sess., p. 21) as follows:
S. 1062 provides for full consideration of the public interest in the soundness and good management of the banking
system, through recognition of the several banking factors
of section 6 of the Federal Deposit Insurance Act, and equally
full consideration of the public interest in promoting competition and preventing monopoly. S. 1062 gives no one
of these factors controlling weight, but requires that all be
considered, that all be duly weighed, and that a balanced
judgment be reached by the banking agency on the basis
of all these factors . . .
The public interest, encompassing the general welfare
of the people of a community, a state or a nation, must
take cognizance of those economic forces which influence the standard of living, the employment opportunities and the social, cultural and recreational facilities of a people. Since bank operations are so
thoroughly intertwined with and essential to the
smooth functioning of the economic forces which bear
upon the public interest, it is impossible to assess the
impact of a proposed bank merger apart from the
economic milieu in which the applying banks operate.
In view of the broad geographic distribution of the
operations of these two banks and their branches, it is
imperative to examine the economy of the entire State
of California. Such a review provides the basis from
which this proposal must be examined.
II. Background Material
Geography
California is comprised of 158,693 square miles of
land lying along the Pacific coast between the 32nd
and 42nd parallels of north latitude. This land mass
extends from Oregon, on the north, to the Mexican
border on the south; it reaches from the Pacific on
the west to Nevada and Arizona on the east. Although
California has some 800 miles of coastline along its
western limits, it averages only 200 miles in width.
It is approximately 1,000 miles from the Yuma Indian
Reservation in Imperial County in the southeastern
162
corner of the state to Smith River in Del Norte County
in the northwest corner.
The geographic expanse of this vast State, with all
the attendant problems created by distance, can best
be appreciated if the California area is transposed to
the east coast and overlaid on the eastern seaboard.
When the north-south California axis is placed on the
north-south axis of the east coast, the California overlay extends from Boston, Massachusetts, on the north
to Charleston, South Carolina, on the south. Encompassed within this area we find all of the land area of
Connecticut, Rhode Island, New Jersey and Delaware
and the eastern half of Massachusetts, Maryland, Virginia, North Carolina and South Carolina. It would
embrace such cities as Boston, New York, New Haven,
Wilmington, Philadelphia, Baltimore, Washington,
D.C., Richmond, Norfolk, Charlotte, Winston-Salem
and Charleston. If the north-south axis of California's
coast were rotated 90 degrees and superimposed on a
line running east and west from New York to Chicago,
the California land mass would take in parts of the
states of New York, New Jersey, Pennsylvania, Delaware, Maryland, Virginia, West Virginia, Ohio, Indiana, Michigan, and Illinois. It would include the
following cities: New York, Philadelphia, Wilmington, Baltimore, Washington, D.C., Buffalo, Pittsburgh,
Cleveland, Detroit, Indianapolis and Chicago.
The topography of this State is so complex and varied
that it can best be described by reference to its 11
physiographic provinces. In the extreme northeast
corner of the State is the Modoc Plateau; a sparsely
populated area of volcanic tablelands dotted1 with sagebrush and cattle ranches. This plateau lies within the
borders of Modoc and Lassen Counties. Immediately
to the west of the Modoc Plateau is the Cascade Range,
whose southern reaches are known for their famous
volcanic cones. This range lies within the eastern half
of Siskiyou County. To the west of the Cascade Range
are the Klamath Mountains, in western Siskiyou
County and in northern parts of Humboldt and Trinity
Counties. Del Norte County, on the coast to the west
of the Klamath Mountains, is the locale of the northern limit of California's Coastal Ranges. The entire
northwestern corner of the State, just described, is best
known for its lumbering, its year-round recreational
facilities and the orchards and vineyards in its southern
valleys.
Four separate physiographic provinces are located
along the coastline of California. The Coastal Ranges
extend from the Oregon border southward, beyond
San Francisco Bay, to San Luis Obispo. This region,
with its narrow coastal plains and attenuated intermontane lowlands, includes much excellent grazing
and crop land, as well as metropolitan San Francisco.
Some 18 counties are organized in this general area.
The Transverse Ranges, consisting of the Sierra Madre
and the Tehachapi Mountains, are located immediately south of the Coastal Ranges in Santa Barbara
and Ventura Counties, and in the northern section of
Los Angeles County. The Los Angeles Basin, the
next southern province, roughly conforms to the
densely populated Los Angeles Standard metropolitan
area, a census standard. In the southeastern corner
of the State along the Mexican border are the Peninsular Ranges, comprised in part of the Laguna Mountains, the Santa Rosa Mountains, the San Jacinto
Mountains and the Santa Ana Mountains. These
ranges are found in western Riverside County and in
San Diego County.
One large physiographic province covers all of southeast California; it is the Mojave-Colorado Desert
province. This thinly populated arid area covers Imperial County, the eastern two-thirds of Riverside
County, nearly all of San Bernardino County and the
eastern half of Kern County. Although water is a
problem for this desert area, its increasing use for recreational establishments add promise to the province's
economic future.
To the north of this desert region and along the
Nevada State line lies the California segment of the
Great Basin. This physiographic province, situated
in Inyo and Mono Counties, is marked by the presence
of Death Valley, famed for its high temperatures and
its low elevation. Although the Great Basin was once
noted for its silver camps, it now depends principally
upon lead and talc mining for economic support.
The Sierra Nevada province lies immediately west of
the Great Basin Province and extends from the Mojave
Desert in the south to the Modoc Plateau and the Cascade Mountains in the north. These glaciated mountains with their many lofty peaks present a formidable
terrain extending over 15 counties. They are becoming increasingly popular as a vacation land.
Their contribution to California's economy consists
not only in their wealth of usable timber but also in
their abundant water supply, which is utilized for
irrigation and hydroelectric purposes.
Nestled within the above-described complex of
of physiographic provinces which fringe the borders
of California is the most significant of all, the Great
Central Valley. The northern end of this province
consists of the Valley of the Sacramento River and the
southern end of the Valley of the San Joaquin River.
This area can best be described as one of the most
fertile spots on earth.
Water Resources
,
Although water is abundant along the rugged slopes
of the Cascades and Klamath Mountains and the
northern reaches of the Sierras, providing an adequate
water supply for many parts of California presents a
major problem. In Central California, with a mean
annual precipitation of 20 to 40 inches, water is often
in short supply. Southern California chronically
suffers from an acute shortage. As early as 1905, Los
Angeles, having outgrown its local water resources,
constructed an aqueduct to carry water from the eastern slopes of the Sierras to the city and to the parched
valleys in the south. By 1930, California was forced to
tap the Colorado River in Arizona in order to provide
potable water for its southern residents. This Colorado River water travels 242 miles by aqueduct over
1,600-foot mountains before it reaches Los Angeles
and is distributed to five southern counties. The
Supreme Court decision of June 3, 1963, in the case
of Arizona v. California et ah, 373 U.S. 546, limits any
plans Californians may have had for obtaining an additional volume of water from the Colorado River.
Portions of the Colorado desert area were afforded
some relief by construction of the Ail-American Canal.
Despite these efforts to supplement nature's deficiencies, however, water continues to be a serious problem in Southern California.
Two other major water projects are under way in
California. The Central Valley project includes the
Shasta Dam on the Sacramento River, the Friant Dam
on the San Joaquin River, the Folson Dam on the
American River and the Trinity River construction.
It is anticipated that this project will furnish water for
irrigation, municipal, domestic and other uses while
providing flood control, adequate stream flow and hydroelectric power. The second project, the California
Water Plan, estimated to cost $1.75 billion, envisions
the movement of water from northern California
sources to the San Diego markets. It provides for
construction of the Oroville Dam and a reservoir on
the Feather River in Butte County. Water flowing
from this dam (scheduled to be the highest in the
world) and from the reservoir will generate electric
power and willflowdown the Sacramento River, south
into the Sacramento-San Joaquin Delta region,
through pipelines, tunnels, aqueducts and pumps, until
it arrives in the far reaches of southern California.
163
These projects should enable the State to maintain its
high growth rate, both demographic and economic,
for many years to come.
Population and Civilian Employment
According to the 1960 U.S. Census, California had
a population of 15,717,204. As of July 1, 1962, this
total had increased by 1,377,000 for a new total of
17,094,000. This remarkable growth rate does not
surprise the native Californian who knows that his
State has doubled its size every 20 years since 1860.
With the population increasing at an average of
513,000 a year, demographers expect that California
will become the most populous State in the nation
sometime in 1963, and certainly no later than 1964.
This large number of people is concentrated in a number of major urban centers. With 377 incorporated
cities as of June 30,1962, California is the most urbanized of all 50 States. It is worth noting that of its total
population in 1960, some 13,591,000 lived within the
limits of California's 10 standard metropolitan areas
and 5,459,000 lived within the borders of the central
cities. Approximately 60 percent of the State's residents live in the 10 southern counties. Los Angeles
County, the nation's most populous, had 6,395,200
residents in 1962; San Diego County, next in rank in
California, had 1,167,700; Orange County, in the Los
Angeles Basin, had 882,500. In the Bay area, San
Francisco County had 745,000, Santa Clara County,
760,100 and Alameda County, 946,700. Demographic experts variously predict that the population
of California in 1970 will be between 20,500,000 and
22,000,000. This prospective growth of 5,000,000
during the decade 1960-1970 is well in excess of the
projected national rate.
It has been reliably estimated that the civilian labor
force in California in 1961 numbered 6,500,000 persons. A comparison of this figure with those available
for 1950 reveals that the State's civilian labor force increased 44 percent while the national increase for the
same period was only 13 percent. Total civilian employment during 1961 averaged 6,112,000, representing 9 percent of total civilian employment in the
nation. It is significant that an ever increasing proportion of California's nonagricultural workers engaged in manufacturing increased from 23 percent in
1940 to 26 percent in 1961 during a time when the
national ratio of manufacturing employment fell from
34 percent of nonagricultural workers to 30 percent.
These figures clearly reflect the continuing attractiveness of California as a site for manufacturing activities.
164
Most of the nonagricultural workers of the State
find employment in and near the State's large metropolitan centers. The Los Angeles-Long Beach area
alone accounted for 2,385,000 workers in 1961 or 48
percent of the State total. San Francisco and Oakland, a single metropolitan area, offer employment to
1,006,000 workers or 20 percent of the total in the
State. Another 1,053,000 jobs, or 21 percent of the
total, were in the metropolitan reaches of Bakersfield,
Fresno, Sacramento, San Bernardino-Riverside-Ontario, San Diego, San Jose and Stockton. As manufacturing is concentrated in these areas, it is not
surprising to find that 93 percent of the factory workers
were employed there with 80 percent of them in the
Los Angeles-Long Beach, San Francisco-Oakland and
San Diego centers.
In 1961 it was reported that the gross personal
income of all Californians reached $45.6 billion which
was 10.9 percent of the national total. This represented a per capita income level of 23 percent above
the national average; the 1961 per capita figures for
California were $2,780 and for the United States
$2,263. While the composition of personal income in
the State is substantially the same as the national average it is worth noting that, whereas salaries and wages
made up 60 percent of total income during the immediate postwar years, they made up 66 percent in 1961.
Manufacturing
Manufacturing has long been a substantial factor
in the California economy. Located 3,000 miles from
the industrial northeast, California began the development of its own fabricating plants in the late 19th
century. During the first war with Germany, the
State's shipbuilding industry gained an impetus it has
never lost. In the early 20's, following the expansion
of agricultural activities in the Central Valley, drying
and canning fruits and vegetables developed into significant proportions. During this period, the Detroit
automobile manufacturers established branch plants in
California to assemble their products, and rubber factories were established to produce the needed tires.
Concurrently, the making of motion pictures was gaining national prominence and an international market.
Factories producing clothing, furniture and jewelry
were established in response to the growing demands
of the ever expanding andflourishingpopulation. In
the late 30's and during World War II aircraft assembly became the major industry in Southern California.
During the last decade there has been a marked increase in electronic production, research establish-
ments and rocket development with all its satellite
activities.
As California industry grew, the number of wage
and salary workers in the State increased from 4 percent of the national total in 1940 to 8 percent in 1961.
Durable goods production, which represents twothirds of California industry, accounted for the greatest number of employed. While transportation equipment, with aircraft and aircraft parts the dominant
element, was the lead item in the durable goods class,
automobile assembly, metal production and fabrication, and nonelectrical machinery are also very important contributors. Missiles, rockets, atomic energy
and electronic equipment are now claiming an ever
larger share of California's total production figures.
Nondurable goods production, about one-third of the
State's industrial output, is centered largely on food
and kindred products. Canned, preserved and frozen
foods, whether from the soil or from the sea, are the
lead items among the nondurable class. Chemical
and petroleum products, clothing, and printed matter
make up the bulk of the balance of nondurables. During 1959, manufacturing in the State added $13.6
billion to the value of goods processed and attracted
$711 million in new capital for plant expansion and
improvement. In the same period this industry employed 1,284,223 persons with the payrolls totalling
$7.6 billion.
Mining today constitutes a billion dollar industry
in this State. Whereas the gold which produced the
first mass migration to the State in 1848 has ceased to
be a significant factor in the mining industry, other
metals have more than replaced it in dollar value. Petroleum fuel production along the Central Coast, in
the Los Angeles Basin and in the southern parts of the
Central Valley along the San Joaquin River makes up
80 percent of all its mineral production. Although
the common metals, such as iron, copper, and coal are
found in only relatively small quantities, such industrial
items as cement, sand and gravel are not only abundant but are conveniently located near the metropolitan centers. Among the other significant mining resources of the State are the potash deposits at Searles
Lake, the borax from Boron, salt and mercury from
the Central Coast, and lead and talc from the Great
Basin,
Agriculture
Fishing
California, with as varied a soil grouping as can be
found in the country, points to agriculture as its largest
resource-based industry. Its annual crop production,
which exceeds that of any other State, is concentrated
on specialty fruits and vegetables. Of all the 200
different crops that are commercially raised in California, its cotton crop ranks as fourth largest in the
nation. In the irrigated sections of the Colorado Desert, farmers working on a year-round planting schedule expect bumper crops of alfalfa, cotton, flax, sugar
beets, dates, winter lettuce, grapes, melons and spring
vegetables. These same men import livestock from
all over the west, Canada and Mexico for fattening.
In the other sections of Southern California, the principal crops are citrus and other fruits, nuts, vegetables,
market flowers, avocados and nursery stock. Along
the southern reaches of the Coastal Ranges, where
heavy fogs are common, lima beans, brussel sprouts,
artichokes and dairy products are the agricultural
mainstay. Along the Central Coastal Ranges, in the
San Francisco Bay area Counties, assorted vegetables,
California leads the nation in commercialfishingand
fish canning. Though the reported numbers of fishermen have declined from 14,600 to 7,951 in the last
decade, with a similar reduction in the size of the fishing fleet from 6,103 vessels to 3,649 during the same
period, the annual commercial landings and shipments
into the State have been relatively stable at 695 million
pounds valued at $71 million. The larger vessels of
the State's fishing fleet, operating from the San Diego
and Los Angeles areas, range far from shore and extend
their operations even to the coast of Peru to the south.
The San Francisco fleet, for the most part, limits its
operations to the Golden Gate area. Among the many
varieties of fish taken commercially and for sport from
the cool waters of the California Current, tuna, anchovy, mackerel, rockfish, sole, sardines and salmon,
as well as such shellfish as crab, abalone, shrimp, lobsters and oysters are the most significant. In 1960, the
annual catch of salmon totaled 6 million pounds; shellfish totaled 32 million; rockfish and sole 29 million;
smaller pelagic fish, 176 million and tuna, 283 million
nuts, fruit, poultry and dairy cattle are the principal
products. The prodigal fertility of the Central Valley
produces virtually all of the 200 different crops, their
source in the northern or southern ends of the valley
depending only upon their adaptability to varying climatic conditions. Cash farm receipts during 1961 totalled $3.2 billion—an increase of $1 billion over the
1950 totals.
Mining
165
pounds. The California fish canneries in 1960 processed and shipped 695 million pounds including 17
million cases of canned fish, 26,000 tons of fish meal
and 21,000 gallons offishoil.
Lumbering
In respect to the lumbering industry, California is
outproduced only by Oregon. Of the 42.5 million
acres of forest land, the largest in any State, 17 million
acres are covered with commercially usable timber.
With the constant expansion of local markets, the development of new mechanized equipment and the construction of more access roads, ever larger areas of
forest land are being utilized in the Sierras, the southern Cascades and in the Klamath Mountains and
Coastal Ranges in the northwest. According to 1953
estimates, the latest available ones, California had 360
billion board feet of usable live saw timber with another 66 billion board feet in growing stock. In 1961,
California's 1,598 timber operators produced 5 billion
board feet of pulp wood and 27 billion board feet of
miscellaneous forest products. Lumber production
for the same year exceeded 6 billion board feet, cut
from the State's forests of douglas fir, ponderosa pine,
white fir, California red fir, sugar pine, redwood and
other species. In light of thesefigures,it is self evident
that lumbering is a multimillion dollar industry in
California.
Educational Resources
The growing educational resources of California, reflecting the upward1 trend of its population, are a significant economic factor in the appraisal of the State.
In the fall of 1961, there were 194 institutions of higher
education: 67 public junior colleges, 16 State colleges,
7 branches of the University of California, and 104 independent colleges and universities. These institutions, with a total enrollment of 611,352, granted 35,530
degrees in 1961. Of the enrolled students, approximately 90 percent were California residents and 10 percent were from out of the State. The 1960 cost of
these institutions of higher education, including operating costs, auxiliary costs and new additions to capital
investments, was $901 million. It is currently estimated that this costfigurehas risen 25 percent between
1960 and 1962.
Tourist Attractions
The tremendously diversified physiography of California has not only made it one of the nation's great
vacation lands but has also contributed substantially
to its economy through the substantial tourist trade
166
it has attracted. California's natural recreational facilities can satisfy all and every sports enthusiast. The
many excellent beaches along the southern coast attract bathers, scuba divers and those addicted to water
sports. In 1961, there were 1,492,019 licensed anglers
on the State's water resources. Those fishing from
licensed party boats that year caught some 3.5 million fish, including albacore, barracuda, halibut, rockfish, salmon, sea bass and yellowtail, among others.
The mountain ranges have their own fascination for
tourists and pleasure seekers. While the swiftly flowing streams and chilly lakes of the Cascades Mountains,
the Klamath Mountains and the Sierras lure many
avid anglers in quest of trout and other game fish,
their wooded slopes provide an abundant supply of
game for hunters. In 1961, the State issued 631,734
hunting licenses, 419,811 deer tags and 172,841 pheasant tags. The towering peaks of the Sierras also challenge many hardy alpinists. Winter sports enthusiasts
find easily accessible slopes for their efforts on Mount
Shasta, in the Donner-Tahoe center, at Badger Pass
and China Peak and around the Mammoth Lakes in
the Sierras. Campers, well equipped with tent and
trailer, roam throughout the State. Despite the extensive State and national park systems, camp sites are
now in short supply and many visitors to Yosemite Park
and Meur's Woods are turned away for want of space.
The State now has under development a 5-year plan, to
be completed in 1966, to double its camping facilities
in the State parks. The tourist industry is estimated
to have contributed $1 billion to the California economy last year.
Foreign Trade
The foreign trade of California is a very significant
economic factor. Both San Francisco and Los Angeles are classed among the 11 major seaports of the
United States. While the number of oceangoing vessels arriving at and departing from these 11 ports in
1961 totaled 111,796, San Francisco's share was 9,344
and Los Angeles, 11,203. In combination these two
California ports accounted for 18.3 percent of the
nation's total. On a dollar and volume basis, the
exports and imports that passed through these two
ports is impressive. In 1961, the Los Angeles port
handled 12,723.3 million pounds of exports valued at
$478.9 million, and San Francisco handled 9,831.8
million pounds valued at $660.7 million. The total
national exports for the period were 258,574.6 million
pounds and were worth $14 billion. The import volume for these California ports is higher; Los Angeles
handled 21,061.4 million pounds valued at $661.5 mil-
lion, and San Francisco handled 11,886.1 million
pounds worth $515.1 million. The national total imports were 399,802 million pounds valued at $11,065.3
million. San Diego, another California coastal port,
handled $47.6 million in exports and $20.1 million
in imports during the same period, 1961. Completion of the Sacramento Deep Water Ship Channel as
well as of the turning basin and channel work in the
Stockton Deep Water Channel will, as part of the
overall San Francisco harbor complex, add new impetus to the foreign commerce of the State and
strengthen its economy by millions of dollars a month.
Military Installations
The large military installations scattered throughout
California contribute meaningfully to its economy. In
addition to the large Navy installations at Vallejo,
Treasure Island and San Diego, the Marine bases at
Camp Pendleton and San Diego, and the strategically
placed airfields, there are substantial ordnance and
missile ranges with large complements of military
and civilian personnel engaged in research and development work for the Government.
Retail and Wholesale Trade
Retail and wholesale trade in the State reflects its
ever growing economy. The total number of retail
establishments licensed by the State in 1961 was
150,540. While this number was some 9,400 lower
than in 1951, total retail sales increased from $13,489
million in 1951 to $23,987 million in 1961. The construction industry received building permits from the
State in 1961 for units valued at $3,672.3 million . Of
this total, $2,334.9 million was for new housing units,
which represented 20.5 percent of the U.S. total for
the year. Intrastate transportation in 1961 produced
$835.6 million. The railroads accounted for $99.5
million of this intrastate revenue; water carriers, $7.5
million, and 14,233 highway carriers utilizing 130,950
vehicles produced $728.6 million.
III. San Francisco—Background
San Francisco, the charter city of Crocker-Anglo
National Bank, covers 45 square miles on the upper
end of the rugged San Francisco Peninsula. This
city of hills, bounded on three sides by the waters of the
Pacific and San Francisco Bay, houses 745,000 residents. The famed Golden Gate Bridge, erected at a
cost of $35 million, joins San Francisco with the
Marine Peninsula to the north, and the San FranciscoOakland Bay Bridge joins it with Oakland, a city of
367,548, and the east bay area. It is the focal point
of the standard metropolitan area which includes, in
addition to its central cities, the counties of Alameda,
Contra Costa, Marin, San Mateo and Solano, as well
as the cities located therein. The total population of
this metropolitan area was 2,783,359 in 1960, up 24.2
percent over 1950.
This naturally air-conditioned city of warm winters
and cool summers is a most attractive place to live.
Despite its reputation for heavy fogs, which are prevalent in July and August, it experiences more sunshine
than most cities in our land. San Francisco now
claims over 276,000 dwelling units of which more than
100,000 are owner occupied and the balance are
rentals. Construction of new units continues at a
rapid pace. Education facilities and cultural centers
add to the charm of the city: not only does it have 124
public elementary schools with an unreported number
of private, parochial, nonsectarian and technical
schools, but it also has 16 universities, public and
private, within easy access of its people. Its wealth of
churches (438), parks (127), theaters (100) and
libraries (24) in addition to its museum, planetarium,
opera house and symphony hall add to its grace.
There are 15 radio stations, AM and FM, and 5 television stations licensed in the city for the convenience
of its residents. The high concentration of trade,
commerce, finance and manufacturing provides San
Franciscans with many opportunities for employment
at high wages and salaries. Retailing alone ranks
third among the local activities in number of persons
employed and fourth in total payroll. In 1958, the
22,066 retail outlets sold personal property valued at
$1.9 billion. The 3,000 wholesalers doing business in
the city handle over $5 billion worth of goods each
year. Manufacturing in the city has an annual payroll in excess of $38 million. The value added by
manufacture to raw materials by the city's plants is
estimated to be over $600 million annually. Its many
banks and other financial institutions, discussed below
in detail, have prompted its residents, in a burst of local
pride, to refer to their city as "The Wall Street of the
West." While it is doubtful that San Francisco banks
have the impact on the national money markets that
this title implies, it is nonetheless true that this city does
possess the greatest number of financial institutions
with the greatest aggregate resources of any city in the
west.
San Francisco's location on the greatest natural
landlocked harbor in the world predestined it to be a
major port and trading center, both domestic and foreign. The excellent anchorage provided by the 555square-mile San Francisco Bay together with the 20
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miles of modern docking facilities along the Embarcadero make the city a principal port of call for deep
draft vessels of more than 85 shipping lines. These
lines, which link the city to at least 300 other ports of
the world, are not only essential to the continued
growth of the American economy but also make their
own substantial contribution to the economic activity
of San Francisco and California. Since the magnitude of the commerce of this port and the diversity of
the products which pass through it make detailed
description impossible here, it will serve as an educator
to note that in the specialized market of foreign fruits
over 60,000 stems of bananas are unloaded there
weekly.
When the railroads, motor carriers and airlines
which converge on San Francisco are considered in
conjunction with its ship service, it is evident that this
city is one of the major transportation centers of the
nation. Four class 1 railroads operating more than
27,000 miles of line serve San Francisco and connect
it with its northern, southern and eastern sisters. Over
100 common carriers and buslines radiating to all
points in the country add to its unexcelled transportation facilities. Its airport, one of the largest in the
world, accommodates over 3,400,000 passengers a
year, arriving from or departing to all parts of the
earth on some 129,800 scheduled planes.
IV. Los Angeles—Background
Los Angeles, the home of Citizens National Bank,
and the center of densely populated Southern California, lies 430 line miles south of San Francisco. An
old community founded as a Spanish pueblo in 1783,
Los Angeles is now the youngest and fastest growing
metropolitan area in the United States. Although it
only attracted a population of 15,000 during the first
century of its existence, it has in the last 80 years
drawn a total population of 6,742,696 into its standard
metropolitan confines. In 1960, the city of Los
Angeles had a population of 2,479,015. Long Beach
and the other cities in Los Angeles and Orange
Counties which comprise the standard metropolitan
area had 4,263,681 residents. For a proper appraisal
of Los Angeles in the context of California economy,
it should be noted that it is surrounded by three other
standard metropolitan areas. The San Diego area
with a total population of 1,033,011 lies 123 miles to
the south; the San Bernardino-Riverside-Ontario metropolitan area with 809,782 residents lies 55 miles to
the east, and the Bakersfield metropolitan area with
291,984 people is 113 miles to the north. If the population develops as projected, in the not too far distant
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future Los Angeles will be part of a megalopolis extending from Santa Barbara through the low-lying
lands southward to San Diego.
Los Angeles is located on the southern end of the
Los Angeles River where it cuts through the Santa
Monica Mountains. So situated on the inner edge
of the Coastal Plain, the city has no port facilities of
its own but relies upon those of San Pedro, Wilmington
and Long Beach. As the population of Los Angeles
has exploded through immigration, its city limits have
mushroomed out from the coastal plain across the low
hills and now extend into four intermontane basins,
which are surrounded by mountains whose elevations
exceed 10,000 feet. Although these surrounding
heights are in part to blame for the smog which blights
the city, they do shield its residents from much summer
heat and protect it from wintry winds blowing off the
interior deserts. The dry, subtropical climate of this
metropolitan area, together with its abundant sunshine, not only makes it a refuge for many senior
citizens seeking a refuge from colder climes, but also
provides a long growing season which enables the
county to lead the nation in the value of its agricultural
products. As the population grew and urban sprawl
began, the farmlands of the county were abandoned
for residential development at the rate of 100,000 acres
a year. While this metropolitan area has been jocularly described as "forty suburbs in quest of a city,"
it is significant that within the Los Angeles Basin there
are more than 100 incorporated satellite communities
encircling Los Angeles. Over 70 of these independent
"cities" are situated in Los Angeles County.
The City's major problem is maintaining an adequate supply of water. When, in the 1900's, the Los
Angeles, San Gabriel and Santa Ana Rivers were no
longer able to furnish sufficient water for irrigation
and consumption, water from the Owens River in
the eastern Sierras was diverted to the city. A generation later, when the Owens River proved inadequate
for the growing population, the Metropolitan Water
District was formed, and it tapped the Colorado River
at Parker Dam, 300 miles to the east. The present
plan of providing enough water for the area contemplates its southward transport from the Groville Dam
at Chico on the Feather River in the northern Sierras.
Sufficient power to satisfy all the needs of Los Angeles residents is another chronic problem for the city.
The electrical power brought to the city from the
Owens Gorge, the southern Sierra Nevada and the
Hoover Dam on the Colorado River is no longer adequate. Los Angeles is increasingly being forced to
resort to steam power plants. The completion of the
735-foot-high Groville Dam will do much to rectify
the hydroelectric shortage in the Los Angeles area.
Oil and natural gas production in the Los Angeles
basin is now declining and cannot be relied upon as
a source of power, but these local deficiencies in oil
and gas are being compensated for by imports from
Texas, and plans are now underway to seek additional
help from the Canadian fields.
Despite its water and power supply problems, Los
Angeles continues the burgeoning growth which commenced during the years of the Second World War.
The estimated 1,000 persons arriving in the City daily
find many employment opportunities. More than
800,000 persons are employed in manufacturing
plants; this is twice the pre-Korean War figure and
more than 400 percent up from 1940. While motion
pictures still constitute Los Angeles' best known product, the industry employs relatively few of the total
labor force, never more than 25,000 in the 1950's.
The cinema industry, however, early bred such satellite industries as clothing, jewelry and cosmetic plants
and recently has given rise to a rapid expansion in
radio and television. Aircraft manufacture in the
area, which formerly employed 25 percent of the labor
force, has declined until it now employs only 15 percent. Recent developments in rocketry and missile
work, in research and space exploration projects, with
concomitant expansion in the field of electronics, has
given new vigor to the aircraft corporations, which
have converted their plants to new uses.
Many of the older line industries have expanded
tremendously in recent years. Automobile assembly
and rubber manufacture have steadily expanded, and
thousands of new factories have been constructed to
satisfy local consumer demand. Area manufacturing
includes steel mills, construction materials, machinery
and food processing plants localized around Vernon,
a satellite of Los Angeles. Oil processing, lumbering
fabricating and shipbuilding activities are centered
around the harbor district.
Not only is metropolitan Los Angeles twice the size
of San Francisco in population, total employment,
manufacturing and wholesale and retail trade, but its
seaborne trade now exceeds that of San Francisco.
Since Los Angeles is a landlocked city on the eastern
edge of the coastal plains, its passion to be called a
seaport was gratified by the development of San Pedro.
Although San Pedro waters were originally only an
open roadstead bordered by mudflats, men of vision
from Los Angeles converted San Pedro Bay into the
largest artificial harbor in the world and erected what
are probably the world's finest port facilities to serve
the area. Construction of a sandstone and granite
breakwater from Point Fermen to the harbor lighthouse, deepening the channel, improving the inner
harbor and construction of a turning basin made this
a completely usable and attractive port. In addition
to its function as an operating base for components of
the U.S. Navy, this harbor serves over 185 steamship
lines, which bring in such various products as bananas,
copra, rubber, coffee, sodium nitrate, jute, iron and
steel scrap, vegetable oils and fibers, and carry away
oil, cotton, borax, citrus fruits, canned fish, machinery,
industrial chemicals and a host of other Americanmade goods.
The transportation facilities of the Los Angeles area
are both a source of pride and a cause for concern.
With more than adequate airfields to accommodate
the sky leviathans of today, the area's airborne trade
far exceeds that passing through San Francisco's airports. In addition to its numerous motor carriers, it
enjoys the services of three transcontinental railroads,
the Union Pacific, the Southern Pacific and the Santa
Fe. Automobile transportation creates a problem of
overabundance. Despite the area's fine complex of
six-lane boulevards built during the 1920's and 1930's
and the rapidly developing network of freeways begun
since 1945, nearly 3.5 million automobiles registered
in the names of area residents create insufferable
traffic congestions and add to the blighting smog. A
proposed rapid transit system now bruited in official
circles may resolve this problem for the city.
So rapid has been the growth of Los Angeles and
its environs that little effort has been given to the
development of the social and cultural aspects of the
community. Although institutions of higher education have been proliferating in recent years to provide
opportunities for its younger citizens, adequate provision for parks, resorts and recreational areas have not
been provided in the newer developments. In addition to the vast belt of expensive homes that extends
along the Santa Monica Mountains and into the San
Fernando Valley, the older city of Los Angeles can
claim some 20 square miles of substandard housing
which all too many pensioners and minority groups
call homes. As urban redevelopment programs are
expanded, much of this blighted area will yield to civic
improvement and to the development of other cultural
projects similar to the new Civic Center.
V. The Banking Structure of California
The banking structure of California, which has contributed in such large measure to the development of
the State's economy, must be considered if this merger
169
proposal is to be evaluated in its proper perspective.
California's banking structure, which includes 17 of
the top 300 banks of the United States and 14 of the
500 largest banks in the free world, is dominated by
the Bank of America, National Trust & Savings Association, the largest privately owned bank in the world.
As of December 31,1962, California's 123 banks maintained 2,035 offices with $30 billion in deposits and
$33.2 billion of total resources. (See Appendices 1
through 10.) [Appendices 1 through 9 are omitted in
this printing.]
The Largest Banks
The giant $13.4 billion Bank of America, National
Trust & Savings Association, San Francisco,firstin the
State, nation and world, operates 818 branches in 58
counties, and is the only bank which is represented in
every county in the State. Two other banks operate
statewide systems, with the remainder having offices
only in the southern or northern sections of the State.
The $2.6 billion United California Bank, Los Angeles,
maintains a statewide system of 150 branches in 33
counties. In addition to being 4th largest bank in the
State, it is 12th largest in the United States and 30th
largest in the world. The only other statewide system
is operated by the $632.4 million First Western Bank
and Trust Company, which has 67 branches in 20
counties. First Western ranks 9th in size in California,
52d in the United States, and 147th in the world.
Bank Holding Companies
There are four registered bank holding companies
operating in California. Western Bancorporation, the
largest bank holding company in the United States,
controls 25 banks, with 479 offices in 11 Western
States, and has total assets of $6.8 billion. The three
other companies doing business in California are foreign banks with subsidiaries in San Francisco and New
York. They are the Bank of Montreal with total
resources of $4 billion, the Canadian Imperial Bank
of Commerce with resources of $4.7 billion and The
Bank of Tokyo whose assets of 863.7 billion yen roughly
convert to $2.2 billion. Through their San Francisco
offices, these holding companies are able to bring their
full resources to bear in the California markets and to
compete effectively for international business.
Savings and Loan Associations and Others
In the area of nonbank financial institutions, California not only has the three largest savings and loan
associations in the country but also has the largest
savings and loan holding company. The largest, the
170
$1 billion Home Savings and Loan Association, is followed in second and third places, respectively, by the
$730.6 million California Federal Savings and Loan
Association, and the $509.5 million Coast Federal Savings and Loan Association of Los Angeles. In all, 31
California savings and loan associations each had more
than $100 million in assets at the close of 1962.
Eighty-four of the State's 264 savings and loan associations are listed among the top 500 in the United States.
These institutions, which compete with commercial
banks for savings deposits and real estate loans, are
especially strong in California, where the interest rate
paid on deposits has been traditionally higher than that
permitted to banks. Further complicating the financial picture are an estimated 1,750 credit unions
with assets of $917.1 million, and the $103.5 million
Morris Plan Company of California. In 1961 finance
companies had 1,183 offices with $695.1 million in
loans. (See Appendix 11.) [Appendix 11 is omitted
in this printing.]
The growth of these nonbank financial institutions
in terms of percentages is a good barometer of the intensity of competition they offer commercial banks for
the savings dollars of California residents. In the 11year period beginning with 1951 and ending with 1961,
time deposits in California banks grew 91.6% as compared to a national growth of 493% by Savings and
Loan Associations. Between 1950 and 1960 California
credit unions increased their share accounts by 701%,
and the Morris Plan Company's Thrift Investment
Certificates increased 398.8%. Insurance companies
also play a tremendously powerful role in the State's
financial structure.
Crocker-Anglo National Bank—Statistics
In light of the State's complex financial structure,
it is important to determine the role Crocker-Anglo
National Bank and Citizens National Bank play in their
relations to each other, to the entire banking system,
and to the many nonbanking institutions with which
they compete. As of December 31, 1962, CrockerAnglo, which is ranked at 5th largest in the State, 16th
largest in the United States, and 37th largest in the
world, had 122 branches in 29 of California's 58 counties. Its branch system extends from San Francisco
southward to Santa Barbara County and the Transverse Ranges and northward to Siskiyou County on the
Oregon border. A majority of Crocker-Anglo's offices
are located in the San Francisco Bay Area, which
roughly comprises the San Francisco standard metropolitan area and Santa Clara County. Although
Crocker-Anglo had only 13 offices in San Francisco at
the close of 1962, it maintained 58 offices in the 8county Bay area, as opposed to the 202 offices then
operated by the Bank of America, the 18 of First Western and the 22 of United California. The State's 3d
largest bank, the $3.2 billion Wells Fargo Bank, San
Francisco, had 106 of its 148 offices in this 8-county
area, while the $858.6 million Bank of California had
19 offices there. In all, the San Francisco Bay area
was served by 486 banking offices, and 141 offices of
savings and loan associations at the end of 1962.
Crocker-Anglo's second most important service area
lies to the east of San Francisco in the middle section
of the Great Central Valley, which includes Sacramento and San Joaquin Counties, where Crocker had 16
offices. In these same 2 counties, Bank of America
maintained 42 branches; First Western, 1; United
California, 4; Wells Fargo, 11 and Bank of California,
2. Other banks had 17 offices in this area and 19
offices were operated by savings and loan associations.
Few banking offices are operated in the seven northern counties of the State, which include the Modoc
Plateau, the Cascade Range, the Klamath Mountains,
and the northern stretches of the Coastal Ranges. To
serve the lumber industry in this northern area,
Crocker-Anglo had but one branch each in Siskiyou
and Shasta Counties, and three in Humboldt County.
The Bank of America operated 20 offices in the 7-county area, while United California had 6 and Wells
Fargo, 2. Total banking offices numbered 39, with
savings and loan offices set at 5.
Extending southward from Shasta to Sacramento is
the northern portion of the Great Central Valley,
which is comprised of seven counties: Tehama, Glenn,
Butte, Colusa, Sutter, Yuba and Yola. Of the 47
banking offices and 7 savings and loan offices in this
area, Crocker-Anglo had 6; Bank of America, 23; First
Western, 2; United California, 3; and Wells Fargo, 7.
To the west of this region and immediately north of
metropolitan San Francisco is a 4-county Coastal
Range Area, extending through Mendocino, Lake,
Sonoma and Napa Counties, where, on December 31,
1962, Crocker-Anglo had but 3 offices, as compared
to 23 of Bank of America, 1 of United California, 5 of
Wells Fargo, and 1 of Bank of California. In all,
49 banking offices, as well as 8 offices of savings and
loan associations were located here.
At the close of 1962, the southern portion of the
Great Central Valley, embracing Stanislaus, Merced,
Fresno, Kings, Kern and San Benito Counties, was
served by 142 banking offices and 22 savings and loan
offices. Of this total, Crocker-Anglo had 15; Bank
of America, 55; First Western and United California,
9 each; Wells Fargo, 5; and Bank of California, 3.
Although primarily serving southern California, the
$4.3 billion Security National Bank, Los Angeles, second largest in the State, had 15 offices in 3 of these
6 counties.
The Sierra Nevada Range, which extends southward from Lassen County and into portions of Kern
County, lies in 12 counties. In this area, CrockerAnglo maintained but 5 offices, while Bank of America had 36; First Western, 2; United California, 3;
and Security First, 7. Sixty-six banking offices serve
the area, as opposed to 11 savings and loan offices. To
the west of the Sierra Nevada is the bicounty Great
Basin area, which is sparsely populated and served
by only three banking offices, all of which are operated
by the Bank of America.
Returning to the Coastal Range, Monterey and San
Luis Obispo Counties, located south of the Bay area
and north of Santa Barbara, have 45 banking and
9 savings and loan offices. Of the banking offices,
Crocker-Anglo has 7; Bank of America, 19; United
California, 2; Security First, 2; and Wells Fargo, 10.
The Transverse Ranges, which include Santa Barbara and Ventura Counties, were served by 127 banking offices on December 31, 1962. At that time, Citizens had no offices in either, and Crocker-Anglo had
15 branches in Santa Barbara. Since then, however,
both Crocker-Anglo and Citizens have opened a
branch in Ventura County, thus making it the only
county in the State in which both banks are located.
However, Citizens' branch is situated in Thousand
Oaks near the Los Angeles County line and is separated from Crocker's branch in the city of Ventura by
25 miles. At the end of 1962, other banks had the
following number of branches in the area: Bank of
America, 46; First Western, 2; United California, 6;
Security First, 9; Wells Fargo, 19; and Bank of California, 3. In addition, 13 savings and loan offices
were located in the area. Crocker-Anglo has no
branches in the remaining portions of the state.
Citizens National Bank—Statistics
Citizens National Bank, with 75 offices as of December 31, 1962, is the 6th largest in California, and
the 37th and 122d in the nation and world, respectively. All of its offices were located within Los Angeles, Orange, Riverside and San Bernardino Counties.
The Los Angeles Metropolitan Area, comprising
Los Angeles and Orange Counties, is the most densely
populated area in California and consequently has the
largest concentration of banks in the State. At the
close of 1962, a total of 769 banking offices were lo-
171
cated in this area, 73 of which belonged to Citizens
National Bank. Bank of America had 295 branches
in the bicounty area, while First Western had 32;
Security First, 169; and United California, 87. Savings and loan associations operated 240 offices in Los
Angeles and Orange Counties.
San Diego, in the Peninsular Ranges in the extreme southwest corner of the State, has 40 Bank of
America branches, 1 of United California and 30
of Security First. No branches of Citizens or Crocker
are located here but savings and loan associations
have 38 offices.
The last remaining area in the State is the threecounty Colorado-Mojave Desert region in the State's
southeastern corner. Most of the banking offices located here are close to the Los Angeles-Orange-San
Diego borders. With particular reference to Citizens'
two branches in San Bernardino and Riverside, these
are located so close to Los Angeles as to be considered
part of the Los Angeles Metropolitan Area. Also serving the area are 41 branches of Bank of America, 8
of United California, and 39 of Security First. Total
banking offices in the 3 counties number 112, while
savings and loan offices number 29.
On February 28, 1963, Crocker-Anglo had a capital
of $65,993,950 divided into 6,599,395 shares of common stock, each of $10 par value, a surplus of $65,993,950 and undivided profits of $16,581,864. At the
same time Citizens National had a capital of $14,777,500 divided into 1,477,750 shares of common stock
each of $10 par value, a surplus of $22,522,500 and
undivided profits of $9,195,955. The capital of the
resulting bank will be $94,071,200 divided into 9,407,120 shares of common stock, each of $10 par value,
a surplus of $80,929,000 and undivided profits of
$20,066,000. This significant addition of $13,300,000
to the capital account, while reducing the combined
surplus accounts by $7,588,000 and the combined undivided profits accounts by $5,712,000, will strengthen
the resulting bank's ability to serve the large national
and international customers who now do business
only with other larger banks. It is clear that the increased capital position of the contemplated CrockerCitizens National Bank will in no way impair its ability
to serve the credit requirements of the small borrowers.
General Character of Management
The general character of the management proposed
for the resulting bank is excellent. Each of the senior
VI. Consideration of the Seven Criteria of the Bank officers and operating executives has demonstrated his
competence in the field of banking and has earned
Merger Act
the respect of his associates for his ability in his parWith this resume of the economy and banking structicular area of specialization.
ture of California as a background, the proposed
The Board of Directors of the resulting bank, to be
merger of Crocker-Anglo and Citizens may be viewed
chosen from men now serving on the boards of the
in proper perspective and assessed more meaningfully
applying banks, promises to be of the highest caliber.
against the criteria contained in the Bank Merger Act.
The most disquieting factor which intrudes itself into
While each of the statutory criteria will be separately
the management picture is the ability of Transamerica
considered, they will be discussed in an order of conCorporation to elect three directors to the board.
venience and not in the sequence in which they apTransamerica, which now holds slightly more than 40
pear in the Act. This approach is necessitated by the
percent of Citizens stock, will, upon consummation of
great volume of data presented in the bulky 1,605 pages
this merger, control 12 percent of "Crocker-Citizens"
of the Comptroller's hearing on this application.
stock. With this holding and cumulative voting,
Corporate Powers
Transamerica could elect one-eighth of the total of
25 directors. Transamerica, a nonbank holding comThere can be no doubt that the corporate powers
pany, has expressed to the Comptroller of the Curof the bank resulting from the merger of Crockerrency its intention to dispose of this bank stock and
Anglo and Citizens will be consistent with the purposes
to abstain from any degree of participation in the
of the National Banking Act and related statutes. This
management of the resulting bank. While the Compbank, as a National Association chartered under the
troller is confident that Transamerica will fulfill its
National Bank Act and subject to the supervision of the
intentions, he must, if he is to protect the public inComptroller of the Currency, can only have those corterest adequately, obtain more than verbal assurances.
porate powers which are consistent with the law and
its purposes.
Future Earnings Prospects
Capital Adequacy
While the future earnings of the resulting bank will
be contingent upon a multitude of unpredictable facThe proposed capital for the resulting "Crockertors, its future earning prospects, to the extent that
Citizens National Bank" will be completely adequate.
172
they can be reasonably assessed at this time, appear
very favorable. Not only will the resulting bank be
operating in the favorable climate of California's burgeoning economy, but it will be under the guidance
of competent managers who have already demonstrated their ability to return a profit while serving
the needs of their community. Operating with a
larger amount of loanable funds and with an increased
lending limit, the resulting bank will be better able
to bid successfully against the larger banks of the
State and nation for the prime accounts of corporations doing a national or an international business.
The economies which the resulting bank may reasonably expect to derive from the unification of the management and operations of the participating banks is
not an insignificant element in forecasting future earnings. (See Appendix 12.)
of their management; the scope, quality and cost of
the services they render the public; the number, quality and location of competing banks, savings and loan
associations, credit unions, finance companies, insurance companies, and small loan companies; the size,
character and location of depositors and borrowers;
and other determining factors—and not by reference
to state branch banking laws.
If, however, the relevant market is to be defined in
terms of customer convenience, it is evident that there
must be a clear understanding as to what customers of
a bank are being considered. All banks have at least
two separate classes of customers—depositors and borrowers—and no bank could operate without their
patronage.3 Since the relation of each class of customers to the bank differs from the other, each must
be considered separately in order to determine the
significance of the convenience factor in establishing
The Effect of the Merger Upon Competition
the relevant market.
The effect of this proposal upon competition must
To most depositors the factor of convenience is often
also be assessed in the light of Section 7 of the Clayton
decisive in the selection of a bank. The wage earner
Act and the Philadelphia National Bank Case, wherein
and person of limited means, who view a bank simply
the Supreme Court recently ruled that Section 7 is
as a place where their money may be stored safely
1
applicable to bank mergers. In assessing the comwhile earning interest and as a checking account facilpetitive effect of a bank merger it is, therefore,
ity generally utilize the banking facility closest to home
essential to define the relevant markets in which the
and ordinarily do not discommode themselves to
participating banks are operating and in which the
inquire about the merits or services of other banks.
resulting bank will operate. Since the extent of the
To many depositors, whose accounts are less than
relevant markets is a function of the size and opera$10,000, one bank is the same as the next since the
tions of each of the merging banks, and of the size and
United States, through an agency, will insure the
operations of the resulting bank, all the markets within
account. In order to reach depositors, a bank must
which the banks can be deemed to operate must be
develop a branch system with strategically placed conconsidered.
venient offices.
The branch banking laws of California cannot be
There are other types of depositors for whom the
taken as determinative of the relevant market in this
factor of physical location has little importance. The
case. Whereas the Supreme Court in the Philadelwage earner and salaried employee who banks by mail
phia case referred to the restrictive banking laws of
is not concerned with the location of his bank since it
Pennsylvania and noted that they were helpful guides
is always as close as the nearest mail box. The deposin providing the State's interpretation of a meaningful
itor who makes his selection of banks as a borrower
banking market, it did not advert to them as an ultilooks to availability of funds, and not physical location,
mate standard to be used in determining what was the
as the test. Banks maintain deposit accounts with
appropriate relevant market.2 The relevant market
remote correspondent banks in order to facilitate the
to be considered in conjunction with any merger must
check clearing procedures and to avail themselves of
be deduced from the particular circumstances that
the specialized services of the larger correspondent.
surround the participating banks and influence their
The number of such depositors and the size of their
operations—such as their size; the location and numaccounts are of such significance as to deprive the
ber of their offices; the competence and aggressiveness
physical location factor of much meaning in determin1
Certain aspects of the Philadelphia Case are discussed
ing a relevant market for depositors.
here; others are discussed at pages 45 through 51, infra.
2
Since the branch banking laws of many States serve to
impede the development of healthy competition in banking,
the Court could not logically have made such arbitrary and
anticompetitive standards a test in a Clayton Act case.
3
Other customers who utilize a bank's fiduciary, custodial,
investment, underwriting, and advisory services are not considered here.
173
Borrowers, unlike depositors, are guided more by
the availability of money at reasonable rates and terms
than by the physical location of the lender. While
it is undoubtedly true that small borrowers seeking
funds to purchase automobiles and household appliances will ordinarily patronize the most convenient
local bank, the larger borrowers, in need of loans beyond the capacity of the local bank, must go to the
larger and more distant banks. As the borrower's
needs grow larger, fewer are the banks that can assist
him. And too, it must be noted that banks actively
solicit countrywide the opportunity to furnish the
credit required by the larger corporations of the country. Thus, it appears that a bank's relevant market
in terms of borrowers is in large measure a function
both of its size and the size of its borrowers as well as
the other factors herein discussed.
Taking the local community served by the head
office and by each branch office of the two applying
banks as a relevant market area, it is clear that there
is presently no significant competition between them.
An examination of the records of these banks will
establish that as of February 28, 1963, Crocker-Anglo
had 737,033 deposits accounts totaling $1,694.6 million, and Citizens had 323,854 accounts totaling
$614.2 million. These deposit accounts were distributed among all the offices of the applying banks.
Since the application to merge requires the participating banks to report the number of depositors who
maintain accounts with both as evidence of interbank
competition, these banks, neither of which maintains
central alphabetized records of all deposit accounts,
were faced with a herculean task of examining and
comparing many thousands of such accounts. The
banks, therefore, adopted a procedure of selective
examination which consisted of an examination of all
accounts above a minimum dollar size maintained at
the offices most likely to have common customers. It
seems reasonable that the smaller the account, the
less the likelihood that the customer would patronize
both banks.
The application states that these banks, on applying
their selective examination procedure to demand deposit accounts, discovered there were 140 customers
who did business with both. At Citizens, all demand
accounts with balances of $20,000 or more as of February 28,1963, being 1,809 in number, were reviewed.
These business demand accounts had an aggregate
balance of $166.6 million. These accounts constituted one percent in number of all demand accounts
held by Citizens, but covered 53.5 percent of the total
174
balances of all demand accounts. At Crocker-Anglo,
4,438 accounts with an aggregate balance of $313.3
million were reviewed. These reviewed accounts constituted 1.2 percent in number of all demand accounts
in the bank but covered 41.2 percent of total aggregate balances. From among all the accounts reviewed,
only 140 were found to be maintained by customers
doing business with both banks.
The supplemental data submitted by the banks during the Public Hearing on the application established
that all of the 140 demand depositors who utilized the
services of both Crocker-Anglo and Citizens were corporations with nationwide operations in need of banking services in each community in which they operate.
These accounts are carried with both applying banks
as a matter of customers' convenience, and they are not
subject to competitive bidding between these banks.
Any competition which may exist for these accounts is
in the local area in which the customers operate.
The real significance of the results of the selective
examination procedure adopted by the banks to determine the extent of their competition for deposits in the
local market lies not in the 140 common depositors but
in the obversefiguresshowing the number of depositors
who patronize only one of the applying banks. The
average balance of all deposit accounts at CrockerAnglo was approximately $1,900 and the average at
Citizens was near $1,500. It is clear, therefore, that
any competition which may be proved to exist between
these banks by reason of the 140 demand accounts they
hold from the same depositor is minuscule. The number and size of accounts of customers who patronize
but one of the applying banks indicates that each bank
competes only with other banks now serving the same
local market.
The figures pertaining to the number and value of
savings accounts held by the applying banks for common depositors also establishes the fact that these banks
do not compete with each other in the local markets.
Using the same selective approach, Citizens reviewed
1,315 savings accounts with average annual balances
in excess of $17,140, and Crocker-Anglo reviewed 5,108
such accounts. The savings accounts so reviewed
comprised 0.9 percent of all savings accounts held by
Citizens and 1.4 percent of the number held by Crocker. From among the accounts reviewed there appeared only one depositor who maintained an account
at both banks. This single customer had average balances of $18,500 at Citizens and $218,750 at CrockerAnglo. The fact that these banks shared one savings
depositor from among the accounts reviewed effectively
negates the presence of any significant competition between them in the local market.
Seven customers with balances of $20,000 or more
were discovered to hold certificates of deposits or time
deposits open account with each. These eight depositors, who held, as of February 28, 1963, $19.3 million
with Crocker-Anglo and $7.3 million with Citizens,
were, like the common demand depositors, large firms
doing a national or regional business. There was also
one other common depositor of both banks, a public
instrumentality, which had a $1 million savings certificate at Crocker-Anglo and a $200,000 savings investment account at Citizens. The fact that these customers divided their business between the applying
banks does not demonstrate that any meaningful competition exists between them in the local market.
Although the geographical area of origin of a deposit
account may be indicative of existing competition
between two banks, it is not necessarily so. In this
case the application indicates that Crocker-Anglo recorded 30 savings accounts, whose 1962 annual average
balances were $17,140 or more, originating in the
southern counties served by Citizens, while Citizens
showed 8 such accounts originating in the CrockerAnglo service area. The explanation for the origination of these accounts submitted by the branch offices
where they were carried showed that the depositor
either maintained a residence in the service area of
each bank, had lived in the Crocker-Anglo area and
had moved to Citizens' area without changing his account, or depended on Crocker-Anglo to make collections within its service area for the credit of the
account. A survey of Citizens branches revealed that
the same general reasons explained its savings accounts
which originated in Crocker-Anglo territory. Again
it appears that these depositors are impervious to competitive blandishments and that they cannot, therefore,
properly be relied upon to demonstrate the existence
of active competition between these banks.
A different explanation accounts for the demand
deposit accounts maintained in each bank by customers
who are recorded as residing in the other's service area.
Of the 79 Crocker-Anglo customers who maintained
270 demand deposit accounts and who had recorded
addresses lying within the 5 southern counties served
by Citizens, all carried on local operations in the counties served by Crocker-Anglo, and, consequently, all
had a business need to maintain banking ties in the
area. Crocker-Anglo and Citizens do not represent
alternative banking choices for these depositors. No
competition for their patronage would be eliminated
by this merger; rather, the resulting bank with statewide operations would better serve their interests. The
same is generally true of the 42 customers who reside
in the Crocker-Anglo service area and maintain demand deposits with Citizens. Of these, 38 are either
national concerns or have local operations in both north
and south California. The other four are individual
accounts amounting to but 0.14 percent of the total
demand deposits of Citizens.
The next area of inquiry must be the extent of competition of the applying banks for loan business in
the local markets. This area is fraught with pitfalls
and false trails which, if not carefully examined, can
only lead to erroneous conclusions. An examination
of common borrowers at each bank means little if the
size of the borrower and the size of the loan and its
purpose are not also considered. Whereas the application indicates that but 19 commercial loan borrowers
had accounts with both banks, the parties, during the
Public Hearing, corrected this number to 17. These
common borrowers, with total outstanding commercial
loans of $21.3 million at Crocker-Anglo and $15.9
million at Citizens as of February 28,1963, were, with
the possible exception of two, borrowers who utilize a
national market. It is noted in passing that the loan
balances of these two, if they really are exceptions,
constitute but % 0 of 1% of the Crocker-Anglo commercial loan portfolio. Any competition which these
banks may have between them for the business of these
15 common commercial loan borrowers is, by virtue of
the size of the borrower, in the national and not in
the local market.
Consideration of the geographic origin of loans
placed by these banks is more significant than is the
number and size of common borrowers. (See Appendices 13 through 17.) While the application did
not particularize in this regard, the applying banks,
responding to a request made subsequent to the Public
Hearing submitted pertinent statistics as to the number and dollar value of loans which originated in the
service area of the other. These statistics pertain to
loans made by 13 Santa Barbara, San Luis Obispo and
Kern County offices of Crocker-Anglo and by the 12 offices of Citizens located closest to those Crocker-Anglo
offices. This survey encompasses well over 45,000
loans. The following tables graphically establish that
only token competition for loans exists between the
two banks in the limited area where their branches
are in closest proximity.
175
Crocker-Anglo National Bank—Loans in 13 selected branches as of June 30,1963
[Dollar amounts in thousands]
Total loans
Reported from Citizens
area
Reported loans as percent
of total
Type of loan
Amount
Number
Number
Amount
Number
Amount
2,734
3,030
22,452
7,561
$33,199
40,442
11,628
12, 355
42
52
288
161
$424
697
208
251
1.54
1.72
1.28
2.13
1.28
1.72
1.79
2.03
35,777
Commercial
Real estate
Consumer... .
Auto finance
97, 624
543
1,580
1.52
1.62
Citizens National Bank—Loans in 12 selected branches as of July 17,1963
[In thousands of dollars]
Total loans
Reported from Crocker's
area
Reported loans as percent
of total
Type of loan
Number
Amount
.
. . .
1,703
1,670
6,914
$12,265
23,829
8,716
10,287
Commercial.
R e a l estate
Installment
44,810
In weighing the above loan origination figures, it
should be noted that they are cataloged according to
the address of the debtor and do not necessarily reflect
the true origin of the loan. Of the 61 installment
loans made by Citizens, 32 were originated by local
mobile trailer homes dealers who sold the paper to
the bank. The same is true of the 161 automotive
loans of Crocker-Anglo, the paper for which was purchased from local dealers. The other loans were made
to persons for real estate situated within the bank's
area, to persons whose place of business in the bank's
service area differs from their recorded address, to persons who have since moved from the area, or to
persons having a personal relation of long standing
with the lending bank. The overall picture of loan
originations in these branches shows that not more
than six of the loans originate in the service area of the
other bank. This figure becomes infinitesimal when
such loans are considered as a percentage of all similar
loans made by all other banks operating in the service
area of each. It appears, therefore, that the effective
loan competition which each bank offers is confined
within its own local market and that the applying
banks cannot realistically be said to compete with each
other in the local markets.
176
Number
Amount
Number
Amount
61
$253
28
128
0.47
.18
.88
2.06
.12
1.47
•72
409
.70
.91
8
3
Inasmuch as the Department of Justice, in its advisory report on the competitive factors, treats the entire State of California as a relevant market, its analysis
of the verities of that market is in order. The Department asserts that reference to the entire State as
a relevant market is "substantiated by the number of
customers, dollar amounts and percents of business
shown by the earlier discussions of common borrowers
and depositors and the geographic origin of deposits."
The doubtful ground upon which this substantiation
rests has already been demonstrated in the previous
analysis of the local market competition where it is
shown that the 140 depositors who patronized both
banks did so not in response to competitive factors,
but because it served their convenience and needs to
have accounts in local banks. The above discussions
of common borrowers and the geographic origin of
loans revealed the fallacies of Justice's approach as a
measure of existing competition. In view of the inadequacy of such data to support the existence of competition between the applying banks in the local
markets, it strains credulity to believe the same figures
substantiate competition between them in a statewide
market.
Whether there is in fact a statewide relevant market
germane to this application is an interesting question.
Although the applicants stress their need to achieve
coverage of the entire State through a system of branch
offices, it is doubtful that statewide branching alone
is enough to constitute the State a relevant market. To
view the State as a relevant market because of geographic distribution of branches is tantamount to saying that the statewide market is merely the aggregate
of all the local markets served by the branches; it does
not distinguish the two markets substantively, but only
quantitatively. For the State to be a meaningful relevant market, there must be some banking business
that can be described properly as statewide. The applicants vigorously contend that there is no such statewide business and assert their inability, after diligent
search, to find any statistics or data which would support the existence of such business as a factual basis for
a legally meaningful statewide relevant market. It is
their position that all their business is either in the
many local markets or in the national and international markets.
If it is assumed, however, that the entire State of
California is a relevant banking market, the market
will be comprised of those companies having operations
in both the northern and southern parts of the State,
and which prefer to do all their banking business with
one bank, together with banks capable of providing
such services. The preference of these customers for
the services of one bank only derives from several
causes. Some customers prefer, and those with electronic bookkeeping systems require, one statewide bank
to handle all their commercial and payroll accounts.
The need to obtain statewide credit information impels
other customers to utilize only one bank. There are
also companies, whose stock is actively traded on the
markets, that desire one bank to act as their registrar
or transfer agent. It is quite clear that, in a statewide
relevant market so understood, neither Crocker-Anglo
nor Citizens can now compete. With the regional dispersion of their offices so definitely limited to the northern and the southern sections of California, neither can
compete with the statewide branch systems of the Bank
of America, the United California Bank and the First
Western Bank in offering the statewide service these
customers require. Only by this merger will the applicants be able to meet the requirements of these
customers for a statewide banking operation and be
able to offer new competition to the three existing
statewide branch banks.
A statewide market could also take the form of customers who shop throughout the State for the most
favorable loan terms, but who do not have access to
broader national or international markets. It has
not been demonstrated, however, that a statewide market of this nature exists in California, and this question was a central issue in the Public Hearing.
The claim of the applicant banks that their future
progress requires them to expand to cover the entire State is particularly true of Crocker-Anglo. This
bank has long served substantial customers in and
around San Francisco. The phenomenal growth of
Southern California is prompting an increasing number of Crocker-Anglo customers to open branches in
the Los Angeles area. If Crocker-Anglo is to retain
these customers in a competitive banking milieu, it
must be able to satisfy their requirements for a bank
that serves all sections of the State. Were CrockerAnglo to lose these customers due to their failure to
provide statewide service, it is clear that Citizens,
with its regionally limited operations, could not capture them. As the need for unified banking services
in California increases, the ability of Crocker and Citizens, as regional banks, to retain their present business decreases.
In the application the banks advert to the 13 Western States. Though these States have strong economic
ties with California, there does not appear to be any
valid reason for viewing them as a separate and distinct relevant market served by the applicants. They
are, at best, only part of the national market, and we
so dispose of this claim of applicants without further
comment.
Apart from the relevant local market, the only other
meaningful markets to be considered in assessing the
competitive impact of this merger are the national and
the international markets. Considering, first, the national market, this proposal must be viewed in the
context of the entire American banking structure. So
viewed, its impact on competition will redound to the
benefit of the public interest.
Many large corporations with far-flung operations,
in addition to maintaining deposit accounts in areas
where they have local needs, also make large deposits
of reserve funds without reference to the geographic
location of the depository bank. The competition
among the larger banks for these deposits, which will
constitute the required compensating balances for future loans to be predicated upon them, is not limited
in geographic scope. Such competition is not only
national in reach but also involves financial institutions other than banks. Typical of this market are
the large finance companies, the leasing companies,
the mortgage servicing companies, and other large
corporate entities whose operations, by their very nature, generate no local deposit needs. All aggressive
177
banks in the country capable of supplying the credit
needs of these customers must compete with each other
or go to the wall. (See Appendix 18.)
The fact that the resulting bank will advance in
national ranking by size is of no cognizable competitive significance. Whereas Crocker-Anglo ranked
16th in size among all the commercial banks in the
nation on December 31, 1962, the merged institution
will, according to present estimates, rank as the 11th
largest. While a gain of five places among the nation's larger banks may be superficially impressive, it
must be remembered that the resulting bank will have
only 1.12 percent of the national total deposits, 0.895
percent of the total banking resources and 0.30 percent of the business loans and credits outstanding of all
financial institutions in the country. These figures,
so small in amplitude, speak for themselves in negating any adverse effect of this merger in the national
market.
That the resulting "Crocker-Citizens" will rank 11th
among the nation's commercial banks should not be
overemphasized. It will still be only fourth among
the California banks. Its relation to the national
market must therefore be judged in the light of the
contribution made by the larger California banks.
While the people of California speak proudly of San
Francisco as the "Wall Street of the West," this is
plainly more local pride than fact. California has no
major national financial centers. They know full
well that their State banks are not yet able to contribute to the economic development of the nation to
the same degree as do New York City banks. The
rapid expansion of the California economy has made
it one of the nations major capital import areas. Since
California banks have not been able to keep pace
with the credit demands generated in the State, outof-State institutions have actively competed there and
supplied the capital deficiency. Since there are no
present indications of a slackening in California's
economic development, this condition is certain to
continue.
The union of these two banks through merger will
nevertheless improve the capabilities of the resulting
"Crocker-Citizens" in national competition. Because
bidding for the large national accounts entails the
maintenance of compensating balances as a condition
to the credit, it does not comport with banking realities to discuss the national market separately in terms
of deposits and credits. Competition in this market for
credits necessarily entails competition for deposits.
The success of the resulting bank in competition for
these large accounts will not be at the expense of the
178
smaller California banks, but at the expense of the
other three statewide branch banks and out-of-State
banks now getting California generated business. In
this respect, competition will certainly be enhanced.
The effect of this proposal on the correspondent
banking relationships established by the participating
banks must be considered as another facet of the relevant national market. Crocker-Anglo, as of July 31,
1963, carried deposit accounts of 170 American correspondent banks located in 30 different States. This is
trivial for any nationally oriented institution. Major
National Banks in true financial centers have many,
many times more correspondent accounts. Of these
170 accounts, 61 of the correspondents were located
in California and included most of the other large
banks of the State. It also had 385 accounts of foreign banks located in 55 different countries. As of
the same date, Crocker-Anglo had deposits in 55 American correspondent banks situated in 22 States and in
101 foreign banks in 31 countries. Its "due to" accounts totaled $71.6 million as of December 28, 1962.
Citizens National has a much smaller correspondent
network than does Crocker-Anglo. As of July 31,
1963, it carried deposit accounts of 99 American banks
located in 21 States. At the same time, it had 90
"due to" accounts of foreign banks located in 30 countries. Its "due from" accounts were placed with 44
American banks in 21 States and with 32 foreign banks
in 18 countries. As of December 28, 1962, "due to
banks" accounts in Citizens totaled $ 19.6 million. The
correspondent importance of Citizens is patently insignificant.
Despite the apparent size of its correspondent banking business, Crocker-Anglo, the 16th largest bank in
the nation, ranked 51st in size of interbank deposits
among the bankers' banks of the country, as of a year
ago. Its "due to banks" accounts of $57 million represented only 2.9 percent of its total deposits. By way
of contrast, it is noted that, of the 28 American banks
which held other banks' deposits in excess of $100 million, 8 were located in New York, 5 in Chicago and only
1 in California. As of December 28,1962, the sum of
all deposits of banks, both domestic and foreign, in the
insured commercial banks of California was $636.4
million. While the Bank of America accounted for
29.78 percent of this correspondent business, CrockerAnglo had 11.26 percent and Citizens but 3.08 percent.
These figures, in addition to revealing that this proposal will have a low order of impact on interbank
transactions, also indicate that California, although
enjoying a flourishing economy, has not yet achieved
the stature to which it aspires among the nation's fi-
nancial centers. The impact of this proposal on corresponding banking relationships will therefor be
minuscule.
Although it is not possible to assess with any fine
degree of precision the impact of this merger on competition in the international banking markets, the incomplete data available amply demonstrates that it is
beneath official notice. The only public statistics reflecting the scope of international business by American banks pertain to foreign branch offices. At the
end of 1962, 10 American banks had 165 branches in
active operation in 39 countries and American overseas territories. Of these, the Bank of America was
the only California based bank which operated foreign offices. The other California banks are of no consequence in the International sphere.
In an effort to find a basis for comparison of the
volume of foreign business done by American banks
headquartered in California, the Bank of America
was selected as the standard. Assuming that its $1.5
billion in total foreign resources constitutes the base
of 100, the other California banks compare as follows:
Wells Fargo, 6.3; Crocker-Anglo, 5.4; United California, 3.9; Bank of California, 1.3; Security First, 1.2;
and Citizens National and First Western combined,
less than 1. Even with this merger, "Crocker-Citizens"
would rank slightly less than 6, as compared to the
Bank of America at 100.
Taking outstanding acceptance liabilities as a rough
measure of international banking business, the same
conclusion is reached. Whereas the total of such liabilities for all insured California banks, as of December
28, 1962, was approximately $236 million, CrockerAnglo accounted for only $24 million and Citizens,
$0.2 million, or 10.11 percent and 0.08 percent of the
total, respectively. Of the $1.7 billion total of such
outstanding liabilities for all insured American banks
on the same date, Crocker-Anglo had but 1.44 percent
and Citizens, 0.01 percent. Other California banks
accounted for 14.26 percent. It is, therefore, manifest
that this merger will hardly be noticed by American
banks competing for a share of the international
market.
Considering only foreign loans, Crocker reported
outstanding acceptances and letters of credit, $98 million as of February 28, 1963, while Citizens reported
10.2 million on the same date. Of the Crocker-Anglo
total, about $1 million can be allocated to business
originating in Europe, $42.9 million to Asian business
and $7.3 million to Central and South American business. Citizens, on the other hand, has virtually no
European or Central and South American business.
It can allocate but one-fourth of its foreign accounts to
Asia. Citizens banking business originating in Mexico, however, approximates $2 million, while Crocker's
is only $85,000. Although they both have substantially the same amount of foreign accounts in Canada
and other countries, their combined volume (about $1
million) is so small and so thoroughly divided as to
constitute an insignificant competitive factor.
In assessing the competition among California banks
for international business, another factor which must
be considered is the local offices of foreign banks.
Consideration of these large, wellfinancedand capably
operated banks in the context of international banking
further tends to minimize the role of the applying
banks. A mere listing of these foreign bank offices
amply demonstrates the substantial contribution which
they make to international banking competition. The
California subsidiaries of foreign banks are the Bank
of Montreal of California, the Bank of Tokyo of California, The Canadian Bank of Commerce of California, The Sumitomo Bank of California and The
Hongkong and Shanghai Banking Corporation of
California. There are also six California agencies
and four representative offices maintained by foreign
banks.
Financial History and Condition and the Tendency
Toward Monopoly
The financial history and condition of the participating banks is the sixth criterion to be considered in
relation to this proposal. Since this criterion compels
a review of each bank's history of mergers and consolidations, it is also appropriate to consider whether their
history reflects any tendency toward monopoly. During the past 10 years, both Citizens and Crocker-Anglo
have participated in various forms of amalgamation
with other banks. Because Crocker-Anglo, as such,
has been in existence for only 7 years, the reorganizations of its predecessors will also be discussed.
Citizens National Bank, which was granted a Federal charter in 1901, has engaged in three mergers in
the last decade. In 1959, Citizens merged with the
Bank of Whittier, which at the time had $11.5 million
in deposits, $6.2 million in loans and two branches.
In the same year, a merger was effected with the single
office First National Bank of Vernon, which had $4.9
million in deposits and $1.2 million in loans. Citizens'
last merger was with the Glendora Commercial and
Savings Bank, having one branch, $3.5 million in deposits and $1.4 million in loans. Thus, in a 10-year
period, Citizens National Bank, through three mergers,
179
acquired $19.9 million in deposits, $8.8 million in loans
and six banking offices.
Crocker-Anglo National Bank was organized in
February 1956, as a result of a consolidation between
Crocker-First National Bank of San Francisco and
Anglo California National Bank. At that time,
Crocker-First had $430.4 million in deposits, $214.2
million in loans and two branches.
Anglo-California had $844.8 million and $440.4
million in deposits and loans, respectively, and operated 46 branches. Prior to the consolidation, but
within the past 10 years, the Anglo-California Bank
had participated in six mergers with banks having an
aggregate of $64.3 million in deposits, $18.1 million in
loans and a total of eight offices. During the same
period, Crocker-First had only one merger, which was
with The National Bank of San Mateo, a single office
institution with deposits of $13.5 million and loans of
$4.9 million.
Since starting business as Crocker-Anglo National
Bank in 1956, the applicant has merged with nine
smaller banks with a total of 22 offices, $164.3 million
in deposits and $79.7 million in loans. These merged
banks ranged in size from the single office First National Bank of Scotia, with deposits of $8.5 million and
loans of $2.9 million, to the First National Bank in
San Rafael, which at the time of the merger had nine
offices, $39.7 million in deposits and $23.1 million in
loans. This latter merger, which was effective in June
1961, is the most recent acquisition by Crocker-Anglo.
No mergers, consolidations or other acquisitions have
occurred within the past 2 years.
The Department of Justice, in analyzing these
mergers, points out that, whereas Crocker-Anglo now
has 7.2% of the State's comercial bank deposits and
loans, the merged bank will have 9.7% of deposits and
9.3% loans. In a State which has total deposits of
$24.7 billion and total loans of $17.0 billion, this increase in concentration of deposits of 2.5% and of
loans of 2.1% hardly seems grounds for raising an
alarm of a tendency toward monopoly. At the time
of the application, the five largest banks in the State
held 78.6% of deposits and 79.7% of loans. Approval
of the application will result in a 2.5% and 2.1% increase, so that these five banks will have a total of
81.1% of deposits and 81.8% of loans. Four of the
five will still hold their present share of the market,
with Bank of America having 39.5% of deposits and
42.4% of loans; Security First, 13.9% of deposits and
11.2% of loans; Wells Fargo, 10.1% of deposits and
10.3% of loans; and United California, 7.9% of deposits and 8.8% of loans. The only change in the top
180
five California banks is in terms of rank; as CrockerCitizens becomes fourth largest, United California
assumes fifth place. It must further be noted that the
figures used are based on the totals held by the applicants before the merger, and do not reflect a prognosis
on the attrition of deposits, which normally follows
every amalgamation.
The question as to whether Crocker-Anglo's past
history of mergers reflects a trend toward monopoly
can also be disposed of by studying the Department
of Justice tabulation of percentages of deposits and
loans held by the larger California banks. As has been
mentioned previously, since Crocker-Anglo was organized in 1956, it has participated in nine mergers with
banks having total deposits of $164.3 million and loans
of $79.7 million. If these amounts were deducted
from Crocker-Anglo's present resources, it would still
rank as fourth largest in the State. In terms of percentages, $164 million represents less than three-fourths
of 1 percent of total deposits in California. Although
it is true that this percentage would have been slightly
higher at the time these previous mergers were consummated, it would not have been so much higher as to
amount to any significant concentration of resources.
It is therefore clear that neither the present proposal
nor the applicant's previous mergers reflect any tendency toward monopoly of banking resources in the State
of California.
The foregoing analysis refutes the conclusion that
this proposal may tend toward a banking monopoly
in California. However, the statutory factor of the
monopolistic tendency is truly meaningful only in the
context of relevant markets of the merging banks.
Having previously described the relevant markets in
which the applying banks operate, the tendency of this
proposed merger toward monopoly will be considered
in relation to those markets. Since neither bank involved operates in the same local markets now served
by the other, it follows that this proposal cannot affect
the deposit, loan and branch distribution which now
prevails in the local markets. A fortiori, it cannot tend
toward monopoly in such markets.
Convenience and Needs of the Community To Be
Served
The "convenience and needs of the community to
be served" is the final criterion to be considered in determining whether or not this proposal will, on balance,
promote the public interest. In order to assess the impact of this merger upon the communities to be served
by the resulting bank, certain value judgments must
be made on the basis of experience in the banking field.
The Supreme Court in United States v. Philadelphia
National Bank, et al, supra, disclaimed any competence
to make the requisite social judgments when it stated:
the Comptroller of the Currency and dated June 14,
1963, commented on the convenience and need of this
proposed merger. He wrote as follows:
We are clear, however, that a merger the effect of which
"may be substantially to lessen competition" is not saved because, on some ultimate reckoning of social or economic debits
and credits, it may be deemed beneficial. A value choice of
such magnitude is beyond the ordinary limits of judicial competence, and in any event has been made for us already, by
Congress when it enacted the amended § 7.
Congress determined to preserve our traditionally competitive economy. If therefore prescribed anticompetitive mergers, the benign and the malignant alike, fully aware, we must
assume, that some price might have to be paid.
In my opinion, the merger of these two non-competing
banks into one state-wide banking institution, will place the
resulting bank in a better position to furnish more effective
competition on a state-wide basis, thus serving the best interests of the citizens of California. The combined institutions, without lessening competition, would serve the convenience, needs and welfare of the communities of the entire
state.
The proposed merger, in my opinion would be in accordance with principles of adequate and sound banking and in
the public interest. Accordingly, it is my recommendation
that you approve the application.
This thought, that a showing of social or economic advantage to society cannot justify a merger where there
is a substantial lessening of competition, reflects a confusion of means with ends. Public efforts to maintain
competition are designed to assure to society the benefits of rivalry among entrepreneurs, and not to sustain
that competition for its own sake without regard to
the consequences. The aim is to gain the advantages
of competition in the form of improved products, better services and lower prices—and it is in these terms
that the degree and form of competition must be appraised. Although the court stated that such value
judgments are beyond its judicial competence, the
Court in fact made such a judgment in this case in
denying the merger. While the Court may disclaim
its competence to make these value choices, the fact
remains that Congress, in enacting the Bank Merger
Act, delegated its authority in this regard to the bank
supervisory agencies and imposed upon them the responsibility of protecting the public interest within the
guidelines of the statutory criteria.
It is believed that this merger will promote the public interest of the people of California and of the nation. By creating another statewide branch bank
system it will bring to the local markets served by the
participating banks a greater range of service and the
benefits of augmented competition. A new competitive force will be added to the national market for the
accounts of customers with statewide operations and
of those desiring a single institution to perform their
banking services throughout the State. The resulting
bank, with offices in the two major seaports of the
Pacific Coast, will possess a greater capability to finance foreign trade and to compete in the international banking markets. Such increased competition
must, if the philosophy of Congress in promoting competition is correct, redound to the benefit of all.
The Superintendent of Banks of the State of California, Mr. John A. O'Kane, in a letter addressed to
VII. Further Consideration in the Light of the
Philadelphia-Girard Decision4
Thus far the proposed merger has been considered
primarily in the light of the economic and banking
structure of the State of California and the national
and international financial interests of the United
States. It has been carefully weighed against the
factors prescribed in the Bank Merger Act. It has
been fully assessed in the light of the competitive
standards of Section 7 of the Clayton Act. While the
rule of the Philadelphia National Bank Case has necessarily permeated the previous discussion of the present
proposal, certain additional observations concerning
that decision are in order.
The merger proposal reviewed by the Supreme
Court involved the $1 billion Philadelphia National
Bank and the $750 million Girard Trust Corn Exchange Bank, which were, respectively, the second and
third largest of the 42 commercial banks headquartered
in the Philadelphia Standard Metropolitan Area.
Both banks maintained their home offices in the City
of Philadelphia and operated their extensive branch
systems, as the provisions of Pennsylvania law permitted, throughout Philadelphia County and the three
contiguous counties. The resulting bank, as the
largest in the four-county area, would control approximately 36 percent of the area banks' total assets,
36 percent of net loans. Between them, this bank
and the First Pennsylvania Bank and Trust Company
would have 59 percent of the total assets, 58 percent
of deposits and 58 percent of the net loans in the same
area. The four largest banks would have 79 percent
of all area banks' total assets, 77 percent of deposits
and 78 percent of loans.
*See page 173 supra, and various other places throughout
the decision wherein this case is considered.
181
The Court pointed out that the percent size of both
the Philadelphia National Bank and the Girard Trust
Corn Exchange Bank was due in part to previous
mergers. The nine mergers of Philadelphia National
since 1950 accounted for 59 percent of its asset growth,
63 percent of its deposit growth and 12 percent of its
loan growth. The six mergers of Girard in the same
period accounted for 85 percent of its asset growth,
91 percent of its deposit growth and 37 percent of its
loans. During the period, the seven largest area banks
increased their share of the total commercial bank
resources from 61 percent to about 90 percent. Since
1947, the number of banks in the Philadelphia area declined from 108 to the present 42.
It is immediately evident that the proposal of the
California banks can be distinguished from the Philadelphia case on the basis of the facts alone. Whereas
Philadelphia National and Girard Trust were located
in relatively close proximity in the heart of Philadelphia and operated their branch offices in the same
four-county area, Crocker-Anglo and Citizens maintain their principal offices in different cities separated
by 380 miles and operate their branch systems in different regions of the State.
While Philadelphia National and Girard Trust
were, respectively, second and third in size in the
Philadelphia area, Crocker-Anglo and Citizens are,
respectively, the fifth and eighth in size in California.
Whereas the resulting bank in the Philadelphia merger
would have been the largest in the area, the resulting
"Crocker-Citizens" will only be fourth. In terms of
absolute size, however, "Crocker-Citizens" will be a
larger bank than the resulting Philadelphia bank
would have been. All the above factual differences
are sufficient to exclude the California proposal from
the rule laid down by the Court in the Philadelphia
case.
As a first step in determining whether the Philadelphia Merger proposal was lawful under Section 7 of
the Clayton Act; that is, whether its effect "may be
substantially to lessen competition" "in any line of
commerce in any section of the country," the Court
adverted to its detailed analysis of this statutory test
as set forth in Brown Shoe Co. v. United States, 370
U.S. 294. The gist of its analysis in that case is that
the substantiality of any lessening of competition must
be determined in terms of the market affected. This
affected or relevant market or "the 'area of effective
competition* must be determined by reference to a
product market (the 'line of commerce') and a geographic market (the 'section of the county')." The
182
court then declared that the Philadelphia case "presents only a straightforward problem of application to
particular facts."
The Court found no difficulty in appraising "the
line of commerce," i.e., the relevant product or source
market, as commercial banking. In this it agreed with
the District Court that the cluster of products (various
kinds of credit) and services (such as checking accounts and trust administration) denoted by the term
"commercial banking" is meaningful in terms of trade
realities. Although the Court did not specifically
allude to "submarkets," it briefly discussed such particular banking products as checking accounts, personal loans and savings accounts. To the extent that
commercial banking, as an agglomeration of products
and services, is accepted as the line of commerce without variation in meaning, it precludes a comparison
of commercial banking with non-bank financial institutions which are nonetheless competing for a share
of the limited amount of the same raw material
essential to their survival—the depositors' dollar.
Although the Court disagreed with the trial court as
to what constituted the geographic market or "section
of the country," it had no difficulty in appraising the
relevant market as the four-county area centered
around Philadelphia. In arriving at this conclusion,
the Court looked not to the area where the merging
banks do business, but to the area of competitive overlap within which the effect of the merger on competition would be immediate and direct. To ascertain
this limited area of "competitive overlap," it looked to
"the geographic structure of supplier—customer relations" and underscored the element of physical convenience, saying "inconvenience localizes banking
competition as effectively as high transportation costs
in other industries." United States v. Philadelphia
National Bank, et ah, supra, p. 358. It concluded,
therefore, that the four-county area in which the participating banks' offices are located is the relevant
market.
In rejecting as without significance the effective
competition that banks on the perimeter of the fourcounty area offered to banks within the area, the
Court, in footnote 37, indicated its concern for the
smaller customer. Recognizing "that competition
from outside the area would only be important to the
larger borrowers and depositors," it stressed that:
. . . the four-county area remains a valid geographical
market in which to assess the anticompetitive effect of the
proposed merger upon the banking facilities available to the
smaller customer—a perfectly good "line of commerce," in
light of Congress' evident concern, in enacting the 1950
amendments to § 7, with preserving small business. . . . 6
By thus recognizing the smaller customer as a separate
line of commerce, and, a fortiori, the larger customer as
another, the Court beclouds the significance of "commercial banking" as the line of commerce upon which
it purports to base its decision. It illustrates, however,
the meaningful fact, as the Court notes, "that in banking the relevant geographical market is a function of
each separate customer's economic scale." Instead of
delimiting separate geographic markets for customers
of various size, the Court accepted the four-county area
as a workable compromise. The State branch banking laws, which permitted branching by Philadelphia
banks in this same four-county area, were invoked
in support of the compromise.
The concept of the geographic market as applied
in the Philadelphia case is not apposite to this California merger proposal. In view of the demonstrated
realities surrounding the operations of Crocker-Anglo
and Citizens National, it is clear that there is no area
of competitive overlap between them wherein the convenience factor of depositors can come into play.
Each bank is presently so located that small customers
in quest of convenience have no choice between the two
merging banks; each bank is convenient to totally different groups of small depositors. Hence, it follows
that this merger proposal cannot be viewed in the same
light as was the Philadelphia case. The merger will not
foreclose any banking alternatives to that line of commerce denoted as "the small customer," as previously
discussed at length herein.
If the larger customer is accepted as a separate
line of commerce, then the relevant geographic market, which is a function of the customer's size, must
far transcend the local community market where location convenience plays the deciding role. It is equally
clear that this merger will not substantially lessen competition in the national market. It is also clear that
it is not possible in this case, as it was in the Philadelphia case, to work out a reasonable compromise to
ascertain a geographic market. Since the market is a
function of the customer's scale, the only logical approach to the competitive problems of this proposal
is to recognize that there must be a local market for
small customers, to whom location convenience is important, and larger markets for larger customers not
concerned with location convenience is the same analysis which was discussed earlier in this decision.
6
See the extensive discussion of the small depositor, the
factor of physical convenience and geographical market as
discussed above at pages 173 et seq.
The Court, having determined that the geographic
market for the Philadelphia banks was the four-county
area, reached the ultimate question and found that
the effect of the proposed merger would be substantially to lessen competition in that market. In reaching this conclusion, the Court, admitting to the difficulties involved, was finally guided by Congressional
fears of "a rising tide of economic concentration in the
American economy," and so formulated the rule of the
case in these words:
Specifically, we think that a merger which produces a
firm controlling an undue percentage share of the relevant
market, and results in a significant increase in the concentration offirmsin that market, so inherently likely to lessen competition substantially that it must be enjoined in the absence
of evidence clearly showing that the merger is not likely to
have such anticompetitive effects.
Two justifications for this test were adduced by the
Court. Thefirstjustification was that:
Such a test lightens the burden of proving illegality only
with respect to mergers whose size makes them inherently
suspect in light of Congress' design in Section 7 to prevent
undue concentration.
The second was that it
. . . is fully consonant with economic theory. That "competition is likely to be greatest when there are many sellers,
none of which has any significant market share," is common
ground among most economists, and was undoubtedly a premise of congressional reasoning about the antimerger statute.
With this concern for size in the forefront, the Court
turned to the facts of the Philadelphia case to assess
each bank's percentage share of the four-county market and the increase in the size of the share the merger
would produce. It was known that the resulting bank
would have 36 percent of the area deposits and 34 percent of the loans. The Court, refusing to define the
smallest market share that would constitute a threat
of undue competition, stated that 30 percent clearly
presents such a threat. It also ruled that an increase
of 33 percent in the holdings of the two largest banks
in the area, from 44 percent to 59 percent as a result
of the merger, was significant. In a pertinent footnote,
the Court cites with approval authors who set the
maximum legal share of the market at 20 to 25 percent
and the maximum legal increase of the market at 7 or
8 percent.
Application of the rule and the standards of the
Philadelphia case to the Crocker-Anglo and Citizens
Merger proposal would not warrant its disapproval
under the Clayton Act. The facts set forth in the
previous discussion make it clear that the resulting
"Crocker-Citizens" will not have an undue percentage
share of the market, nor will it gain an undue increase
183
in the percentage share. Crocker-Anglo now holds
7.4 percent of the aggregate deposits in all commercial
banks in California, and Citizens has only 2.4 percent.
Upon consummation of the merger, the resulting
"Crocker-Citizens" will hold 9.8 percent of the market. This is a far cry from the Philadelphia case
where the resulting bank would have controlled 36
percent of the deposits.
The percentage of increase in the market share of
the resulting bank is meaningful only to the extent the
charter bank's share of the market is significant. The
allegation that Crocker's share of the market would
increase by 30 percent through this merger is misleading and specious. A percentage increase can have
meaning only if it is related to the total market. The
share increase that Crocker-Citizens would enjoy over
Crocker-Anglo is only 2.4 percent, the share now held
by Citizens. The 30 percent figure is a rate of growth,
in relation to itself—a meaningless figure.
Demonstrations of the specious reasoning are as follows: Were the Bank of America, which now holds
39.9 percent of the California commercial bank deposits, to merge with First Western Bank and Trust,
which holds 2 percent of the deposits, the increase
would be but 5 percent. However, were the Union
Bank, Los Angeles, which holds 3.1 percent of the
deposits, to merge with First Western, the increase
would be 64.5 percent. While there can be little doubt
as to the illegality of a merger of the Bank of America
with First Western, the percentage of increase of deposits it would hold would be insignificant. So, in
this case, care must be taken lest percentage increase
figures ignore the basis upon which they are computed.
While the Court in the Philadelphia case did not
discuss concentration of banking offices, it alluded to
Standard Fashion Co. v. Magane Houston Co., 258
U.S. 356, wherein the control of 40 percent of the
industry's retail outlets by a single manufacturer
through exclusive contracts was held to violate Section
3 of the Clayton Act. Crocker-Anglo, with 122 offices,
controls only 5.8 percent of the 2,098 offices in the
State, and Citizens, with 75, has 3.6 percent. Combined in the resulting bank will be only 9.4 percent of
the State's commercial banking offices. These figures
fall far below the prescribed 30 percent of the Philadelphia case.
The statement of the Court that its "test lightens the
burden of proving illegality only with respect to
mergers whose size makes them inherently suspect"
must be examined inasmuch as one of the banks here
involved is substantially larger than either of the banks
in Philadelphia. This reference to size is not a sepa184
rate test but only explains the rule laid down by the
Court. Size, in this context, is meaningful only if it is
related to the Court's statement about undue percentages. Size, per se, has never been condemned by the
Court or by the Congress. The resulting bank in this
merger will remain the fourth largest in California,
ranking after the Bank of America, the Security First
National Bank and the Wells Fargo Bank. Its deposits will be only one-fourth of those held by the
Bank of America and their branch office ratio will be
about the same—four to one.
The "dissatisfied customer" argument adduced by
the Philadelphia banks and rejected by the Court is
inapposite in this case, because it is meaningful only
when the merger eliminates a banking alternative in
the local market. Such will not be the case here.
VIII. De Novo Branching and Other Alternatives
The Court then considered the affirmative justifications offered by the Philadelphia banks. The
argument that the merger was necessary to enable the
banks to follow their customers to the suburbs was rejected as not particularly applicable to the case since
the de novo branching route was available. Although
Crocker-Anglo does not need this merger, to follow
customers, it is necessary if it is to grow apace with the
California economy and retain the customers it has.
De novo branching is not a satisfactory alternative
route to achieve the statewide branch system which is
desirable as a matter of sound public policy.
Evidence adduced by the witnesses at the hearing
demonstrated that three practical considerations—the
unavailability of competent personnel, the shortage of
acceptable locations and heavy cost—made the suggestion inapposite in this case. In order to establish
a branch system by the de novo route in the five southern California counties comparable to Citizens',
Crocker-Anglo officials estimated that it would require
at least 262 branch officers to staff a substantial amount
of branch offices. Because competent men are not
available, they must be trained within the organization. It takes 1 year to prepare an assistant branch
manager and at least two for a branch manager. Although Crocker-Anglo can train some 40 assistants
each year, it would require at least 7 years, disregarding normal attrition, to acquire an adequate staff of
competent branch officers.
In the light of the existing branch coverage in these
five southern counties today, it would seriously overbank this area if the Bank Supervisory Authorities
were to permit the establishment of any such number
of additional de novo branches. Prime branch loca-
tions, or even locations that may be deemed satisfactory, are not now available in anywhere near such
figures. In fact, this Office has been finding it necessary to review applications for denovo branches in this
area most critically in order to avoid the evils of destructive competition too many branch offices would
produce. New locations must often await the development of new business and residential communities.
The usualfiercecompetition among banks for the limited number of available sites makes the problem even
more difficult.
A single branch office in Los Angeles obviously
could not be a comparable competitive substitute for
a substantial number of branches in the southern
counties. Such a branch, while necessitating a very
heavy capital outlay, would not be able to serve the
Los Angeles area in a degree comparable with Citizens'
ability to serve it. The few benefits such a single
branch would produce for Crocker-Anglo would not
offset the costs involved.
The third practical objection to de novo branching
in lieu of this merger is the cost factor. On the present market it is estimated that nearly $30 million
would be required. Of this sum, $23 million would
be invested in physical properties, $5 million in training
personnel, and the balance would represent expected
operating losses during the first year each branch was
in operation.
Quite apart from the practical difficulties of the
suggested de novo branching route is the impact such
an alternative could have on the banking structure of
Southern California. Were Crocker-Anglo to locate
a sufficient number of branch sites acceptable to it in
the areas now served by Citizens, the competitive impact of the new branches particularly on the smaller
competing banks, could be exceedingly harmful. It
therefore appears that in this situation expansion
through de novo branching is not socially more desirable than expansion by merger.
Another suggestion that Crocker-Anglo resort to a
series of mergers with small strategically located banks
must also be rejected. This approach could reduce
the number of independent banks significantly, and
could seriously impair the small bank foundation upon
which our state and national banking structures rest.
Beyond these social reasons for rejecting this suggestion lies the element of cost.
The possibility that other large California banks,
now serving only a portion of the State with their
branch systems, may be prompted to consider mergers
that would convert them into statewide branching
operations should not preclude approval of this
725-698-^64—13
merger, if it is otherwise determined to be in the public
interest. Since tht decision to apply for a merger is
within the exclusive control of the management, and
cannot be compelled by the supervisory authorities,
each application must be weighed on its own merits in
the light of prevailing economic and banking conditions. In the light of the many variables involved, it
would be an unrewarding and futile exercise to attempt to analyze the probable effect of this merger in
inciting future large scale California bank merger
proposals. Any future proposal would have to be
viewed against the decision on this application, and
would be subject to approval by this Office or by a
combination of State and other Federal authorities.
IX. Advisory Reports
This application highlights an administrative difficulty that arises in the application of the Bank Merger
Act of 1960. After enumerating the seven criteria to
be weighed in making a determination that will promote the public interest, the Act requires that each of
the bank supervisory agencies and the Department of
Justice submit a report on the competitive aspects of
the merger to the agency possessing the decisional authority. The declared purpose of the competitive reports is to achieve uniformity in the application of the
Bank Merger Act. Apart from the fact that this reporting requirement tends to overemphasize the "competitive factor" it does not appear, as demonstrated in
this case, to have achieved the desired uniformity.
The Federal Deposit Insurance Corporation was unable to submit a report on the competitive factors
involved in this merger. When the Comptroller of the
Currency, an ex officio member of the Board of Directors of the Corporation, understandably abstained from
casting a vote on a matter over which he must exercise
final authority, only the Chairman and another Director remained to vote. These two directors, unable to
agree, were deadlocked.
The Board of Governors of the Federal Reserve
System submitted a lengthly report to the Comptroller
on the competitive aspects of this proposal. Following its analysis of the banking structure of California,
it noted that this proposed merger would unite the fifth
and eighth largest banks in the State of California, and
the resulting bank "would have total deposits of approximately the same volume as that of the third largest
bank in the State." The conclusion of the Board of
Governors was:
. . . The continuing bank would probably be a stronger
competitor for the other large California banks than is Crocker
or Citizens, individually, while it is not believed the proposal
185
would have serious adverse competitive effects on any banks
operating in the State.
The clear-cut conclusion that this proposal would foster large bank competition without bringing competitive harm to small banks was obscured by the next
paragraph which stated:
There is a heavy concentration of banking resources in California in a small number of very large banks. The proposed
merger would further this concentration significantly.
The reference to the concentration of banking resources that will result from this merger is beguiling.
Since the Bank Merger Act refers only to "the effect of
the transaction on competition (including any tendency toward monopoly)" as one criterion, the reference
to concentration of resources is extra legal. Because
it is the nature of banks to concentrate resources in
order to better serve the credit needs of large borrowers, it follows that the bigger the bank is, the
larger will be the resources it has available to meet the
economic needs of its customers. The concentration
of resources, therefore, is not inherently evil. Only if
the concentration is "undue," or "unreasonable" or
demonstrates a "monopolistic" character may it be
properly condemned. But the Board of Governors in
its report does not relate the heavy concentration of
resources to any tendency toward monopoly. Therefore, it appears that the Board's report must, in legal
intendment, be read as favorable on the competitive
factors.
The Department of Justice in its report clearly expressed the opinion that:
. . . the proposed merger would have a most serious adverse effect upon competition and raise questions under the
antitrust laws as well.
This conclusion was based upon eight considerations
the Department deemed significant. Its report stated
that this merger, if approved, would not only eliminate
one of the alternative sources of banking service in
California, but would also destroy the substantial competition that now prevails between the participating
banks. The Department went on to say that the
proposal would also constitute another step on the applicant's practice of expansion through merger and
would augment the high degree of concentration in
commercial banking in the state. The Department,
doubting that meaningful competition will be forthcoming from the smaller banks if this proposal is approved, fears that the merger will prompt the smaller
banks to merge. It also doubts that newly chartered
banks will be able to offer strong banking competition
to the resulting bank. The contention of the appli-
186
cants that this merger is necessary for them if they
are to compete effectively with the larger statewide
California banks is rejected by Justice on the grounds
that the applicants already compete in statewide markets. Finally, the Department objects to the merger
on the ground that since Transamerica Corporation
would be a substantial stockholder in the resulting
bank, it "would go a long way toward reestablishing
the evils sought to be removed by the Federal Reserve
Board's proceeding against Transamerica and the subsequent passage of the Bank Holding Company Act of
1956." Each of these considerations has been
thoroughly discussed and answered. It suffices to
point out the striking contrast between the report of
the Department of Justice and that of the Board of
Governors of the Federal Reserve System. The aim
of the Bank Merger Act to achieve uniformity through
advisory reports on the competitive aspects of bank
mergers has obviously failed.
The need for uniformity of approach among the
agencies concerned with bank mergers is demonstrated
by many manifest inconsistencies in recent years. The
Board of Governors of the Federal Reserve System,
which objected to the merger of the Philadelphia National Bank with Girard Trust in 1961, had no apparent difficulty in approving the merger of the $831
million Pennsylvania Company for Banking and
Trusts with the $228 million First National Bank of
Philadelphia in 1955 to form the largest bank in Philadelphia. Its present concern over concentration in
banking was not in evidence when, in 1954, it approved the merger of the $3.4 billion Chemical Corn
Exchange Bank with the $859 million New York
Trust Company. When the Board approved the union
of the $3 billion Guaranty Trust Company with the
$969 million J. P. Morgan and Company in 1959
and the merger of the $3.7 billion Manufacturers
Trust Company with the $1.95 billion Hanover Bank
in 1961, it indicated no fear of concentration of banking resources or of substantial lessening of competition. The same was true when it created the United
California Bank.
Although many other examples could be cited
where the Board of Governors has approved the
merger of two large banks located in the same city, it
suffices to mention the $1 billion Harris Trust and
Savings Bank in Chicago, the $606 million State Street
Bank and Trust Company in Boston and the Wells
Fargo Bank in San Francisco. It also approved the
merger of the $10 billion Chase Manhattan Bank.
There is now pending before it the application of Fidelity-Philadelphia to merge with the Liberty Real
Estate Bank and Trust Company. How the Board
can favorably entertain this proposal in the light of its
own recommendation and the Court's decision in the
Philadelphia-Girard merger is difficult to understand.
With the administrative approach to bank mergers in
such a state of conflict, it is virtually impossible for a
reasonably prudent banker to plan intelligently for
future expansion. It is equally difficult for the Comptroller of the Currency to assess these advisory reports
of the other agencies in view of their history of past
inconsistencies. The question remains as to why the
Board of Governors should fear concentration of banking resources in this case, when it was not perturbed
by them in the New York mergers in 1954, 1959 and
1961.
X. Size as a Criterion
In the banking industry, it is demonstrable that size
alone does not place the smaller banks at a competitive disadvantage in the markets they serve. The phenomenal growth of banks recently chartered in San
Francisco bear witness to this truth. The San Francisco National Bank, chartered in 1962, commenced
operations on California Street one block east of the
$700 million Bank of California, two blocks from the
Bank of America, the United California Bank and the
Wells Fargo Bank, and four blocks from CrockerAnglo. In 1 year, this new bank has acquired deposits
of $41 million. The Golden Gate National Bank,
chartered in 1961, also began operations in downtown
San Francisco in the midst of the large California
banks, and it has already developed deposits of $30
million. The experience of these two banks is typical
of many newly chartered banks. They are not impeded in their development by the presence of much
larger banks in the same community. The facts indicate that the new banks grow at the expense of the
larger banks, because many customers prefer to do
business with smaller institutions. (See Appendix 19.)
To contend that this merger proposal must be condemned because of the size of the participating banks
is to ignore the law and the realities of the banking
industry. While size may be an indicium of tendency
toward monopoly, it is not, in and of itself, illegal.
The Supreme Court succinctly stated the rule in
United States v. United States Steel Corporation, 251
U.S. 417, when it said, "the corporation is undoubtedly of impressive size, and it takes an effort of resolution not to be affected by it or to exaggerate its
influence. But we must adhere to the law, and the
law does not make mere size an offense. . . ." This
rule was followed in Transamerica Corporation v.
Board of Governors, 206 F. 2d 163 (3d Cir., 1953),
cert, denied 346 U.S. 901 (1953) wherein the court
said:
. . . Evidence of mere size and participation in a substantial
share of the line of business involved . . . is not enough.
XL The Public Interest
It now devolves upon us to determine, in the light
of all the previously discussed considerations, where
lies the public interest. A determination of the public interest in any bank merger case entails a decision
concerning the banking structure best calculated to
serve the convenience and needs of the affected community or communities.
The nature of this decision cannot be understood
without a comprehension of the fact that, in all its
essential aspects, the banking structure is critically determined by the choices which are made by the regulatory authorities. The formation of new banks, their
internal expansion through capital additions, the
establishment of new branches, and the merger of existing banks all ultimately rest with the public authorities. The evolving banking structure is thus
shaped through public action according to criteria of
the public interest.
Bank regulation does not, as does regulation in the
public utility industries, encompass the power to require the provision of services. The banking authorities thus must rely upon the initiative displayed by
private banks, and the regulatory choices in shaping
the structure of the banking system are limited to those
which banks are willing to undertake. In these circumstances, where there is a public objective to be
achieved, and a feasible course offers prospect of reaching that objective without counterbalancing harm, it
is ordinarily proper to rely upon this initiative rather
than to await the appearance of alternative proposals
in the hope that more ideal results might be achieved,
unless there is substantial evidence that superior alternative proposals will be forthcoming.
The consideration which makes this case unique is
the existence in the State of California of the Nation's
largest bank (Bank of America), which has expanded
its offices throughout the State. Only two other banks
may now be considered to be in any degree competitive
with that bank in what may be defined as a statewide
market. In that market, only banks which have
statewide facilities are competitive. Neither CrockerAnglo nor Citizens, because of their limited geographical representation, are presently competitive in
that market. They would become so with this merger.
Accordingly, the merger would immediately introduce
187
into the statewide market a significant additional
competitive force.
There remain to be determined the consequences of
the merger in other markets, and the potential results
of alternative courses of action. In the regional
markets in which Crocker-Anglo and Citizens now
operate, their merger would create no adverse effects
on competition. Although some small overlap of depositors and borrowers does exist between these two
banks, this overlap consists almost entirely of demands
for purely local banking services, or relates to large
borrowers who have access to national credit markets.
The alternatives open to these depositors and borrowers would thus not be diminished by this merger.
In the national and international markets, the
effects of the merger are likely to be positively beneficial. The larger lending limit which the merged
bank would enjoy would enable it to become a more
effective competitor in both of these markets. Its
larger size would allow it to undertake a greater
diversification of risks in the more hazardous fields of
international finance, and the varied experience of
the two banks in different foreign markets would be
shared in a merged bank.
Despite the public benefits which would be derived
from this merger, it is of interest to determine whether
de novo branching, or selective mergers with smaller
banks, are feasible and desirable courses of action in
this case. Additional de novo branching by CrockerAnglo and Citizens into each other's major market
areas would enhance competition in statewide, national, and international markets. However, de novo
branching on a sufficient scale to produce effective
competition in these broader markets would pose a
significant threat to the smaller institutions in the
local markets, and thus adversely affect the banking
structure in those areas. Selective mergers with
smaller banks would have similar harmful effects on
the banking structure in those markets through the
absorption of smaller institutions.
The real issue here, however, is one of feasibility.
The distance which separates Crocker-Anglo and
Citizens in their major markets is such that limited
entry into each other's markets is not economical.
And it is highly doubtful that appropriate locations
are readily available in sufficient quantity, and at a
188
low enough cost, to support market penetration on a
scale that would be economically worthwhile.
Mergers with smaller banks do not present any better
prospect. There would be the matter of finding banks
responsive to offers of merger at tolerable costs. Moreover, the particular competence and experience of such
banks would be unlikely to match those of the merger
applicants.
There is, finally, to be considered the question of
incipiency. The Clayton Act seeks to inhibit mergers
which may tend to create a monopoly, and the courts
have scrutinized mergers with great care to detect incipient effects of this nature. There is, however, no
present indication of such incipient effects as a result
of this merger. More fundamentally, in the regulated industry of banking, incipient tendencies toward
monopoly are of less moment because no merger may
be consummated without the express prior approval
of the public authorities, and such approval is granted
only after a determination of the public interest.
We find that no significant adverse effects will flow
from the proposed merger, and that positive public
benefits will be achieved through this modification of
the banking structure of California. The obstacles
which would be confronted in the formation of a new
statewide banking institution through de novo branching, or through mergers with smaller banks, are such
that these courses of action cannot be relied upon to
produce the positive public gains which could be
achieved through a new banking institution with this
scope of operations.
Conclusion
Having found that the proposed merger will promote the public interest, the application is approved
effective on or after November 1, 1963, if, prior to
that date, there is filed in the Office of the Comptroller of the Currency, a Resolution of the Board of
Directors of the Transamerica Corporation (1) agreeing that not more than one director or officer or other
representative of Transamerica Corporation will serve
as a director of the resulting bank, and (2) agreeing
to dispose of substantially all of its stock holdings in
the resulting bank by December 31,1966.
SEPTEMBER 30,1963.
APPENDICES
The exhibit number indicated on the bottom center
of each appendix refers to the Public Record developed during the hearing on this merger application.
[Appendices 1 through 9 and 11 have been omitted
in this printing.]
APPENDIX 10.—Number of banks and banking offices located in communities served by Crocker-Anglo National
Bank and Citizens National Bank
County and community
CrockerAnglo
National
Bank,
number of
Alameda:
Berkeley
Fremont
Hayward
Livermore
Oakland
San Leandro
Butte: Ghico
Colusa:
Golusa
Maxwell
Contra Costa:
Concord
Pittsburg
Walnut Creek
El Dorado: Tahoe Valley
Fresno:
Fresno
Reedley
Selma
Humboldt:
Arcata
Eureka
Scotia
Kern:
Bakersfield
Oildale
Taft
Kings:
Hanford
Lemoore
Madera: Madera.
Marin:
Corte Madera
Fairfax
Kentfield
Mill Valley
Novato
San Anselmo
San Rafael
Terra Linda
Tiburon
Merced: Merced
Monterey:
Carmel
Monterey
Pacific Grove
Pebble Beach
Salinas
See footnotes at end of table.
2
1
3
1
3
1
2
1
1
1
1
1
1
4
1
1
1
1
1
3
1
1
1
1
1
1
1
1
1
1
1
Other banks
County and community
Number of
banks2
Number of
banking
Monterey—Continued
Seaside
Napa: Napa
Sacramento:
Carmichael
Fairoaks
,
North Highlands
Rancho Cordova
Sacramento
San Francisco City and
County
San Joaquin:
Stockton
Tracy
San Luis Obispo:
Paso Robles
San Luis Obispo
San Mateo:
Daly City
Redwood City
San Mateo
South San Francisco.
Santa Barbara:
Lompoc
Montecito
Santa Barbara
Santa Maria
Santa Clara:
Mountain View
Palo Alto
San Jose
Santa Clara
Sunnyvale
Shasta: Redding
Siskiyou: Yreka
Solano: Vallejo
Sonoma:
Healdsburg
Petaluma
Stanislaus: Modesto
Tehama: Red Bluff
Tulare:
Porterville
Tulare
Visalia
Yolo: West Sacramento
Total.
EXHIBIT 13
190
CrockerAnglo
National
Bank
number of
offices t
Other banks
Numbei of
banks*
Number of
1
3
2
1
1
1
36
116
14
2
1
4
10
5
9
4
6
9
33
5
8
4
1
5
1
3
11
2
2
2
4
1
12'
506
APPENDIX 10.—Number of banks and banking offices located in communities served by Crocker-Anglo National
Bank and Citizens National Bank—Continued
Citizens
National
Other Banks
Number of
Number of Number of
banking
banks*
offices2
County and community
offices1
Los Angeles:
Arcadia
Baldwin Park
Bellflower
Beverly Hills
Burbank
City of Commerce
Covina
Diamond Bar
Glendora
Hawthorne
Inglewood
Lakewood
La Mirada
La Puente
Los Angeles
Maywood
Norwalk
Pomona
Redondo Beach
San Fernando
South Gate
Torrance
Vernon
Whittier
Orange:
Anaheim
Costa Mesa
Fullerton
Garden Grove
Huntington Beach
La Habra
Los Alamitos
Santa Ana
Riverside: Riverside
San Bernardino: Ontario.
Ventura: Thousand
Oaks
1
1
1
1
1
1
1
1
2
1
1
1
1
2
39
1
1
1
1
1
1
1
2
2
4
1
3
9
5
3
3
5
1
3
16
9
4
3
1
2
4
2
2
2
28
1
3
5
2
3
3
6
3
3
2
3
8
3
2
2
285
1
4
11
3
4
4
10
4
8
2
1
1
1
1
1
1
1
1
1
5
4
4
5
3
2
1
6
4
3
12
5
8
10
4
3
1
17
9
6
1
3
3
78
473
124
78
506
473
202
Total
979
Recapitulation
Crocker-Anglo National
Bank
Citizens National Bank...
Total
1 As of April 5, 1963.
2 As of March 29, 1963.
Source: Crocker-Anglo National Bank.
EXHIBIT 13
191
APPENDIX 12.—Future earnings prospects
Statements of Current Operating Income and Expense
[In thousands of dollars]
Crocker-Anglo
National Bank,
Year 1962
Current operating income:
Interest and dividends on securities
Interest and discount on loans
Commissions, fees, and collection, exchange, and service charges
Other current operating income
Citizens
National Bank,
Year 1962
Estimate First
Twelve Months'
Operations of
Crocker-Citizens
National Bank
$21, 087
73, 261
10, 636
4,476
$8,414
21,116
6,090
2,011
$32,451
103,815
18, 399
7,136
109,460
37,631
161,801
27, 558
2,920
34,724
496
4,436
1,501
9,198
10,972
1,649
10, 369
94
2,287
977
3,265
42,383
5,026
49,602
649
7,395
2,726
13,709
Total current operating expenses
80, 833
29,613
121,490
Net current operating income
28,627
8,018
40,311
Gross current operating income
Current operating expense:
Salaries, wages, and fees
Officer and employee benefits
Interest on time and savings deposits
Interest and discount on borrowings
Net occupancy expense of bank premises
Furniture and equipment—depreciation, rents, servicing, e t c . . .
Other current operating expenses
Net current operating income, previous 5 calendar years
Year
Crocker-Anglo
National Bank
$22,507
27,447
31,949
30,781
28,627
1958
1959
1960
1961
1962
Average
$5,178
7,074
8,212
8,525
8,018
28,262
7,401
EXHIBIT 10
192
Citizens
National Bank
APPENDIX 13.—Crocker-Anglo National Bank commercial loans
7 Sansome office
7 Montgomery office
Percentage
Per books
Per books
Total
Percentage
Per books
(as of
Percentage
(as of 7I11J63)
7112/63)
$15, 819, 679
10, 334, 931
1,483,012
49, 374,206
Total
20.54
13.42
1.93
64.11
$27,102,705
5,318,024
13, 934, 870
81,918,461
21.13
4.15
10.86
63.86
$42, 922, 384
15,652,956
15,417,882
131, 292, 666
20.91
7.62
7.51
63.96
77,011,828
Group 1
Group 2
Group 3
All other
100. 00
128, 274, 060
100. 00
205,285, 888
100.00
Entire system (as of 7/12/63)
Per books
Percentage
$77,011,828
128,274,060
242,133,174
Total
17.21
28.67
54.12
447,419,062
1 Sansome office
1 Montgomery office
All other offices
100.00
Group 1—Borrowers with record addresses outside of the State of California.
Group 2—Borrowers with record addresses within the southern California counties of Ventura, Los Angeles, San Bernardino,
Orange, Riverside, San Diego, and Imperial.
Group 3—Borrowers with record addresses within central and northern California other than the Bay Area, i.e., all other
counties of California except the 9 Bay Area counties of San Francisco, San Mateo, Santa Clara, Alameda, Contra
Costa, Solano, Napa, Sonoma, and Marin.
EXHIBIT
;725-698—64
14
18
193
APPENDIX 14.—Study of Southern California borrowers from 1 Montgomery Street and 1 Sansome
Street of Crocker-Anglo National Bank
Total amount
$15,652,955.34
National accounts or those accounts originating from national customers
13,447, 286. 84
Percentage of national accounts or those customers originating from national customers
85.908
EXHIBIT 21
APPENDIX 15.—Summary of real estate loans of 1
Montgomery Street and 1 Sansome Street offices of
Crocker-Anglo National Bank secured by property
in southern California
Total real estate loans in 1 Montgomery and
1 Sansome Street offices, 6/30/63
$109,682, 778
Real estate loans of these 2 offices secured by
property in southern California (see attached lists)
$659,100
Percentage of such loans secured by property
in southern California
0. 60
Total number of real estate loans at the 2
offices
4,290
Total number of such loans secured by southern California property
.
.7
Percentage secured by southern California
property
0.16
EXHIBIT 22
APPENDIX 16.—Citizens National Bank commercial loan statistics, as of July 15,1963
Wilshire-Flower
5th and Spring
Total
Percentage
office
office
$1, 667,355.74 $24, 934,853. 81 $26,602,209. 55
5,410,621.45
4, 523,034. 24
887, 587. 21
54,419,445.28
10,179, 424. 52 44,240,020.76
Group 1
Group 2
Mother
Total
30.78
6.26
62.96
86,432,276.28
100.00
12,734,367.47
73, 697, 908. 81
Entire system (as of 7\15\63)
Total
5th and Spring office
Wilshire-Flower office
All other offices
Total
Percentage
$73, 697,908. 81
12,734,367.47
85,121,813.18
42.96
7.42
49.62
171,554,089.46
100.00
Group 1—Borrowers with record addresses outside of the
State of California.
Group 2—Borrowers with record addresses within the State
of California other than in the counties of Los Angeles, Orange,
Riverside, San Bernardino, Ventura, San Diego, Imperial,
Inyo, and Mono.
EXHIBIT 23
194
APPENDIX 17.—Analysis of real estate loans at 5thSpring and Wilshire-Flower offices of Citizens National Bank
Total loans secured by property outside Citizens service areas (list is attached hereto)6
Total loans secured by property in Crocker
service area
2
Value of loans secured by property in Crocker
service area
$60, 413. 91
Total real estate loans of 5th-Spring and Wilshire-Flower offices
$15, 292,000
Percentage of total real estate loans in these 2
offices which are secured by property in the
Crocker service area
0.4
Total real estate loans of Citizens
$140, 511,830
APPENDIX 18.—National accounts of Crocker-Anglo
National Bank (February 1963)
Total number of national depositors
Average balance of total national depositors.
Percentage of national depositor accounts to
total demand deposits of Crocker
Number of national depositor accounts which
have local addresses and operations
Number of national depositor accounts which
do not have local addresses (an analysis of
those 13 accounts is attached)
Average balance for the 13 accounts which
do not have local addresses
Percentage of average deposits of national
depositors without local addresses to average deposits of all national deposits
EXHIBIT 24
647
$93,613, 000
9. 69
634
13
$1, 392,000
1.49
EXHIBIT 34
APPENDIX 19.—Selected unit and branch banks in California
[Total deposits ($000)]
Year opened
1874
Bank
First National of San Juan
County Bank, Santa Cruz
Exchange Bank, Santa Rosa
Pacific National, San Francisco...
Oakland Bank of Commerce
Central Valley National, Oakland.
Mechanics Bank, Richmond.
Community National of Kern County.,
Farmers & Merchants, Lodi
Community Bank, Huntington Park. ..
Farmers & Merchants, Long Beach
First National, Ontario
American National, San Bernardino...
Bank of A. Levy, Oxnard
San Diego T. & S., San Diego
U.S. National, San Diego
1st National of San Diego
Hibernia Bank, San Francisco
Dec. 31, 1953
Dec. 31, 1962
Increase
1890
1924
1937
1892
1905
1952
1916
1945
1907
1887
1916
1905
1889
1913
1883
1859
$55,090
21, 247
22,491
60,123
39, 840
28, 978
36, 984
1,935
22, 344
13, 326
92, 390
12,663
29, 305
12, 875
33,114
39, 526
135,900
161,393
$122, 525
50,964
38, 636
191,226
87,819
144, 228
74, 668
13,149
46,426
42,204
140,483
31,759
52,102
33,254
51,012
203, 899
263,512
219,237
$67,435
29,717
16,145
131,103
47,979
115,250
37,684
11,214
24,082
28, 878
48,093
19,096
22, 797
20, 379
17,898
164, 373
127,612
57,844
819,524
1870
1,807,103
987,579
Average 9-year gain per bank, $54,866.
Average annual gain per bank, $6,096.
Source: Rand McNally International Bankers Directory.
195
APPENDIX 19.—New banks established in California, 1953-62
[Total deposits ($000) at yearend]
(Source: Rand McNally International Bankers Directory)
Number
Year
opened
Bank
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1953.. Mother Lode, Placerville...
1953.. Sumitomo, San Francisco...
1953.. Bank of Tokyo, San Francisco
1953.. Greenfield State, Bakersfield
1953.. San Fernando Valley,
Pacoima
1953.. Bank of Belmont Shore
(Coast Bank)
1954.. City National, Beverley
Hills
1955.. First National, Cupertino..,
1955.. Pacific State, Hawthorne
1955.. Garfield C&S, Montebello
1955.. Hong Kong and Shanghai,
San Francisco
1955.. Gilmore C&S, Los Angeles.
1955.. Vaca Valley, Vacaville
1956.. State Center, Fresno .
1956.. South Bay, Manhattan
Beach
1957.. Ahmanson, Beverly Hills...
1957.. Glendale National (Valley
National)
. .
1959.. Metropolitan, Hollywood...
I960.. Santa Barbara, National....
I960.. First National, Southgate ..
I960.. Valley National, Sunnymead
I960.. Lincoln, Van Nuys
I960.. Ripon State
1961.. Bank of Fallbrook
1961.. Rancher's Quartz Hill
1961.. Golden Gate National, San
Francisco
1961.. Mid State, Arroyo Grande.
1961.. Century, West Los Angeles.
1961.. Continental, Hollywood
1961.. Bank of Santa Ana
1961.. Peoples, Los Angeles
1961.. Bank of Trade, San
Francisco
1961.. San J u a n Capistrano
(Orange County Bank)
1962.. Bank of Marin, San Rafael
1962.. Cathay Los Angeles
1962.. Channel Islands, Ventura.
1962.. Feather River National,
Oroville
1962.. First National Bank, Fresno.
1962.. First State, San Leandro
1962.. Guaranty, Torrance
1962.. M a n u f a c t u r e r ' s , Los
Angeles.
1962.. Rocklin-Sunset National
1962.. San Francisco National....
1962.. Wilshire National, West Los
Angeles...
. . .
1,824 2,842 4,194 6,250 7,204 8,804 12, 295 14,662 17,492 22, 259
4,232 7,834 11,920 20,875 24,187 30,271 34,810 41,625 53,676 74,355
Total ..
5,254 9,231 15,319 23,011 25,112 30,734 38,164 48,840 67, 565 77,140
196
4
4
5
1,337 2,225 2,458
3,578
3,768
5,811
7,042
8,638 10,319 13,771
4
547 1,715 2,376
4,260
5,130
5,504
7,109
7,896
8,904 12,665
3
311 3,124 5,001
6,196
6,931
5,773
6,323
6,481
8,861
9,874
1
6,859 18,233 26,029 39,003 60,872 86,133 106, 884 142,691 192,000
2,387 3,736 4,232 5,747 8,019 9,638 13,935 19,074
2,419 4,622 6,582 8,307 12,917 17,050 24, 260 31,619
1,851 2,964 3,324 3,799 4,803 5,880 7,292 8,577
9
3
5
1
4,160
4,860
1,166
5,576
6,976 14,478 15,493 17,961 18, 532 18,059
6,412 8,609 9,798 11,615 13, 880 15, 829
1,948 2,259 3,394 3,227 3,843 4,402
8,423 15,093 17,856 19,225 22, 609 26, 960
1
0
1
5
996
2,196 3,571 4,551 4,454 6,632 7,557
5,840 11,043 16,810 14,865 25,751 25, 554
0
0
1,439
1,889
5,897
3,308
2,141
696
1
1
0
0
0
0
0
1
0
0
14,799 28, 650
955 2,539
5,993 13,331
10, 601 22,711
855 4,453
2,302 8,158
0
0
0
0
0
0
1,070
4,687
0
586
1,791
3,022
1,480
1,251
0
0
0
631
3,298
5,616
5,496
0
0
0
0
15, 744
296
17, 333
0
0
0
9,267
0
13, 505 33,830 73,586 118,279 158,707 226,091 292,756 361,691 530,246 777,053
50
5,233
2,115
80
5,416
7,239
8,857 13,129 16,505
4,828 8,906 13,252
3,191 11,205 16,813
2,609 4,525 7,103
882
1,667
716
EXHIBIT 47
of
branches,
1962
1,316
3,788
2,150
1,338
486
Summary of experience of new banks and selected unit and small branch
banks in California, 1953-62
New banks studied
44
Total deposits of new banks as of Dec. 31,1962. $777,053,000
Average deposit gain per bank for each year of
operation (approx.)
$4, 500,000
Selected unit and small branch banks studied..
18
Increase in deposits of selected unit and small
branch banks over 9-year period, 1953-62.. $987,579,000
Average annual deposit gain per selected bank
(approx.)
$6,000,000
Total deposits
Dec. 31, 1953
Total deposits,
Dec. 31, 1962
$17,149,276,000 $30,007, 390,000
All California banks
Percentage of market
held by newly opened
and selected unit and
8.61
4.86
small banks
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger of Citizens National Bank,
Los Angeles, California (Citizens), and CrockerAnglo National Bank, San Francisco, California
(Crocker-Anglo), would have most serious adverse
effects upon competition in the California commercial
banking industry.
The merger would eliminate Citizens as an alternative source of banking services. The substantial competition between Citizens and Crocker-Anglo would
be destroyed by the merger. Citizens' and CrockerAnglo's policies and practices of expansion through
acquiring competitors would be continued and greatly
enhanced by their merger. Crocker-Anglo is itself
the resulting bank of a 1956 consolidation. The present high degree of concentration in commercial banking in California would be augmented by the merger.
If the merger is approved, it is doubtful that the
smaller California banks will be able to give meaningful competition to the larger banks without combining, thereby further increasing the concentration
ratio. The merger would greatly diminish the probability of new entrants into the California commercial
banking industry. The resulting bank's benefits in
statewide competition would be small compared with
the harmful anticompetitive effects of the merger in
California. Finally, Transamerica Corporation's substantial stockholdings in the resulting bank and other
banks and financial institutions would compromise any
competition between them.
UNITED STATES OF AMERICA, PLAINTIFF
v.
CROCKER-ANGLO NATIONAL BANK, CITIZENS NATIONAL BANK,
AND TRANSAMERICA CORPORATION, DEFENDANTS
Civ. A. No. 41808
United States District Court
N.D. California, S.D.
Nov. 1,1963
PER CURIAM.
On April 3, 1963, the defendant banks (Crocker-Anglo and
Citizens) entered into an agreement for merger of the two
banks under the charter of Crocker-Anglo, the resulting bank
to be known as Crocker-Citizens National Bank. The merger
was to become effective on the day specified by the Comptroller of the Currency in his certificate. Provision was made
for termination of the agreement by either party if the merger
did not become effective by December 31, 1963. On May 3,
1963, application was made to the Comptroller for his approval of the merger pursuant to Title 12 U.S.C. (1963 Ed.)
§§ 1828(c) and 215a. Extensive hearings were held on this
application on July 30, and 31, 1963, and on September 30,
1963, the Comptroller approved the merger subject to certain
prescribed conditions, and fixed November 1, 1963, as its
effective date.
Thereupon, on October 8, 1963, this action was brought
by the United States seeking (1) an injunction prohibiting
the proposed merger, (2) a preliminary injunction against the
same, and (3), an adjudication that certain earlier mergers
completed by Crocker-Anglo were in violation of § 1 of the
Sherman Act and § 7 of the Clayton Act, and (4) a judgment
requiring defendants to take such action as is necessary and
appropriate "to dissipate the effects" of the alleged unlawful
activities and "to permit and restore competition in interstate
and foreign commerce in commercial banking." A certificate
was filed by the Attorney General under the Expediting Act,
32 Stat. 823, as amended (15 U.S.C. § 28), and the case was
assigned to this court of three judges. The cause comes before us now on plaintiff's motion for a preliminary injunction.
The parties filed a stipulation, approved by the court, fixing the time for filing all briefs, affidavits, exhibits and other
papers, and fixing the time for argument on the motion on
October 21, 1963. Affidavits of both parties were filed, as
stipulated, and at the hearing it was stipulated by the parties
that the motion was then submitted to us, after argument,
upon the affidavits filed and certain additional exhibits which
were offered by the plaintiff and received in evidence. Such
is the record before this court at this time and upon which we
have reached the conclusions which we now proceed to state.
[1] We start with the premise that the governmental policy
stated in the antitrust laws is an overriding one; that the need
to preserve that policy obviates any further showing of irreparable damage; and that if there is a reasonable probability
that the Government will prevail on the merits we ought to
preserve the status quo by an injunction. As we view the
197
matter, the primary question we must decide is whether we
can find, upon the record now before us, that there is reasonable probability of ultimate success by the Government.
The locations of the operations of these two banks, as of
April 5, 1963, are shown on the following map or chart.
We consider first the question as to whether the record
before us shows a possible or probable violation of § 7 of the
Clayton Act. The operative words of that section prohibit, in
respect to corporations engaged in commerce, the acquisition
of the stock or assets of another corporation "where in any
line of commerce in any section of the country, the effect of
such acquisition may be substantially to lessen competition,
or to tend to create a monopoly."
The case of United States v. Philadelphia Nat. Bank, 374
U.S. 321,83 S. Ct. 1715, 10 L. Ed. 2d 915, settled the proposition that bank mergers are not excluded from § 7. Proceeding from that premise we pass rapidly over the question as
to what is the relevant market here. The view we take of
this case makes it unnecessary, so far as decision of this motion
is concerned, to decide which "line of commerce" or which
"section of the country" must be chosen as a basis for our
inquiry as to the probable effects of this merger on competition. The parties are in disagreement as to the relevant
market. The Government says that commercial banking is
the appropriate line of commerce. United States v. Philadelphia Nat. Bank, supra, 374 U.S. at 356, 83 S. Ct. at p.
1737, 10 L. Ed. 2d 915. It says that the entire state of California, the Los Angeles metropolitan area (Los Angeles and
Orange Counties), and the San Francisco Bay Area (San
Francisco, Alameda, Contra Costa, San Mateo and Marin
Counties), are all sections of the country under § 7. Without discussing some countervailing arguments on these points
which are made by the defendants, we assume, at this time,
the correctness of the Government's contentions in these
respects.
The primary question here is where do we find the competition which the merger acquisition may have the effect of
lessening? Here we should have a look at the entire commercial banking picture in California. Both parties are agreed
that since the middle 1930's concentration in commercial
banking in California has been high. This, it would appear,
has resulted in large part from the State's lack of restrictions
on branch banking. Branch banking has flourished there.
The following table, adapted from the Government's exhibits,
shows the percentage of total deposits and of total loans and
discounts of all the banks of the state held by the five largest
banks.
Percentages of total IPC [individual; partnership; corporations] deposits and of total loans and discounts, the
number of banking offices, and the counties in which such offices are located, 5 largest California banks,
Dec. 28,1962
Banking offices
Rank
Name of bank
IPC deposits
(percent)
Loans and
deposits
(percent)
Number
1st
2d
3d
4th
5th
Bank of America, NT& SA, San Francisco
Security First National, Los Angeles
Wells Fargo Bank, San Francisco
United California Bank, Los Angeles
Crocker-Anglo, San Francisco
Total
If this tabulation were carried forward it would disclose
Citizens to be No. 8 in rank, its percentage of deposits to be
2.5, its percentage of loans and discounts to be 2.1, and its
number of banking offices to be 78, located in 5 counties.
If the proposed merger had been completed on the date
of that tabulation, Crocker-Citizens would be No. 4 in size,
its percentage of deposits 9.7, its percentage of loans and
discounts 9.3, and its banking offices 202, located in 34 counties. No material changes in these percentages or ranks are
shown to have taken place through changes since the date
of this tabulation.
It should be noted that the fact situation presented by the
present record is quite different from that which was present in United States v. Philadelphia Nat. Bank, supra. In
that case the merging banks were not only located in the
same city and direct competitors of each other, but the result
of the merger there was a significant concentration with the
merged bank controlling at least 30% of the commercial
banking business in the relevant area. The merger there
would result in an increase of more than 33% in concentra-
198
39.5
13.9
10.1
7.9
7.2
42.2
11.2
10.3
8.8
7.2
818
278
148
150
122
78.6
79.7
Number of
counties in which
represented
1,516
58
13
23
33
29
tion. (374 U.S. pp. 364-365, 83 S. Ct. pp. 1742, 1743, 10
L. Ed. 2d 915) Here, in contrast, the proposed merged
bank, Crocker-Citizens, would have but 9.7% of the deposits
in the relevant area and 9.3% of loans and discounts. As
the above figures indicate, the increase in Crocker-Anglo's
percentage of deposits, now 7.2%, would be only 2.5%
through the addition of the deposits of Citizens. In view of
these statistics and in view of the size and extent of the other
banks listed in the foregoing tabulation there can be no inherent likelihood that competition will be substantially lessened, for it is readily obvious that the merger will not produce a bank controlling an undue percentage share of the
relevant market, and will not result in a significant increase
in the concentration of banks in that market.
[2] In making inquiry as to what competition is involved
here, we start with the fact, not here questioned, that
Crocker-Anglo and Citizens are located in rather widely separated areas. Apart from the situation existing in Ventura
County, to which we will advert later, there is no solid evidence that Crocker-Anglo and Citizens compete against each
other. In fact, necessary inference is all to the contrary; for
we must recognize the fact, noticed by the Supreme Court
in United States v. Philadelphia Nat. Bank, supra (374
U.S. p. 358, 83 S. Gt. p. 1738, 10 L. Ed. 2d 915), that
"[i]n banking, as in most service industries, convenience of
location is essential to effective competition. Individuals
and corporations typically confer the bulk of their patronage
on banks in their local community; they find it impractical
to conduct their banking business at a distance. * * * The
factor of inconvenience localizes banking competition as
effectively as high transportation costs in other industries."
At the hearing before the Comptroller it was developed
that the two banks had 140 depositors who had accounts in
both banks. That is no proof of competition.1 If a man
living in Beverly Hills owned property in San Francisco, his
having a deposit in both places would signify nothing as to
these banks being in competition.
Ventura County furnishes a special and exceptional situation. As indicated on the chart first above set out, as of
April 5, 1963, Citizens had a branch in that county, in a
place called Thousand Oaks, population 2934. As of the
last day of December, 1962, there were 30 banking offices in
Ventura County of which Bank of America had 11, Security
First National 9, United California 1, and First Western 1.
This county has shown recent rapid growth.2
Shortly prior to 1963, Crocker-Anglo applied for permission to open two branches in Ventura County. This was
granted and shortly prior to the hearing before the Comptroller, one of these branches was opened at Ventura (population 29,114). As of September 30, 1963, the Ventura
branch of Crocker-Anglo had no deposits in the usual banking sense. (It carried Dealers Reserves as deposits.) Its
loans were $325,000, a minuscule percentage of Crocker's
total loans. At that time the Thousand Oaks branch of
Citizens had deposits of $490,000, and loans of $359,000.
These too are a minuscule percentage of Citizen's totals.
Ventura and Thousand Oaks are 25 miles distant from each
other. On January 2, 1963, Crocker-Anglo applied for permission to establish another branch in Ventura County, at
Camarillo. The letter of application stated that branches at
Ventura and Oxnard could not serve the entire county, but
through the Camarillo branch "it is our desire to service the
entire county." On February 12, 1963, this application was
disapproved by the Comptroller.
Later on, in connection with our discussion of potential
competition, we shall have occasion to discuss this move of
Crocker-Anglo into Ventura County. But so far as a lessening of existing competition is concerned, in view of the size
and extent of the market here relevant, and considering particularly the "section of the country" here involved, we cannot hold that any lessening of competition in Ventura County
through the merger would be so substantial as to call for any
injunction here. Such lessening would be de minimis. We
do not understand Government counsel to claim otherwise.
1
In his decision the Comptroller said: "These accounts are
carried with both applying banks as a matter of customers'
convenience, and they are not subject to competitive bidding
between these banks."
2
Total bank deposits had shown a 90.6% increase from
1956 to 1962. Population in 1962 is estimated to have increased 20% since the 1960 census.
The actual competition with which Crocker-Anglo and
Citizens are each involved is competition with other banks
in their respective areas. Nearest the place where this court
sits are two of the banking offices described in the record:
an office of the Hibernia Bank at Jones and McAllister Streets
and the Jones and Market Street branch of Crocker-Anglo
across the street. That both compete for the custom of the
business houses in their vicinity is self-evident. The question
then is what will happen to such competition, which must
be typical,3 after the proposed merger? We perceive no
evidence that it will be altered or lessened at all.
In similar manner Citizens' 66 banking offices in Los
Angeles County and 9 offices in Orange County, are a part
of the 659 banking offices in Los Angeles County and 110
in Orange County. The presumably active competition that
these figures suggest will, we are satisfied, not be altered in
any substantial respect after the proposed merger. That
such is true is apparent from another phenomenon present
in the California banking situation. This is the very rapid
increase in recent years in the entry of new banks into the
California banking field,* and the rapid growth and success
of such banks.5
We are forced to the conclusion that so far as presently
existing competition in this field is concerned, there is no
showing here that the proposed merger will have any competitive effect. It is not shown that its effect may be substantially, or at all, to lessen any existing competition.
The Government asserts, however, that the merger will
tend to lessen potential competition between Crocker-Anglo
and Citizens. The Government's showing seems to indicate
that this point represents its entire case. Thus the statement
concerning the economic effects of the merger made by the
Government's principal economist expert is as follows: "Based
on these documents" [the record before the Comptroller] "it
is my opinion that this proposed merger will have a sub3
As of December 31, 1962, there were 129 banking offices
in San Francisco, of which Bank of America had 55, Wells
Fargo Bank 27, United California 6, Crocker-Anglo 13, First
Western 4, Bank of California 3, and the Hibernia Bank 8.
The remaining 10 include Pacific National Bank, Canadian
Bank of Commerce, Golden Gate National Bank, Bank of
Trade, San Francisco National Bank and Hong Kong and
Shanghai Bank. The last five, as we notice hereafter, are
recently established.
* 17 national banks and 32 state banks, a total of 49, were
chartered in the years 1960 to 1963, inclusive. And as of
October 10, 1963, 21 additional new California bank applications (national and state) had been approved.
5
"California Banks: Smaller Institutions Find Their Size
an Asset, Not a Liability" Barron's, June 12, 1961, pp. 13, 20.
Cited to us are the cases of San Francisco National Bank,
opened May 31, 1962, with assets of less than 7 million on
June 30, 1962, and by June 28, 1963 it had over 45 million
total resources, and Golden Gate National Bank, opened
June 1, 1961, with 2 branches and resources of 34.7 million
on June 28, 1963. Both banks are located in the heart of
the financial district in San Francisco. Other smaller banks
referred to are Pacific National and Hibernia Bank, both of
San Francisco, the former showing 200% increase in deposits
from 1953 to 1962, and the latter 30% increase in the same
period. These are typical of a state-wide trend.
199
stantial adverse effect upon commercial banking competition
in the State of California, because of its foreclosure of
potential competition." (Emphasis added) This statement
is based upon the theory that if not permitted to merge
Crocker-Anglo would enter the Los Angeles metropolitan
area, and, in general, all of the area served by Citizens, by
establishing de novo branches. So, it is said this merger
would avoid the necessity of establishing such branches.
Thus, it is contended, the merger will operate substantially
to lessen that potential competition.
Whether there is such potential competition is a question of
fact. To answer it is not easy, for it involves a forecast
of probabilities. And upon this motion we are of course
limited to the evidence and showing now before us.
The assertion that apart from the questioned merger
Crocker-Anglo would have entered Citizens' territory through
de novo creation of branch banks in that area is not something to be taken for granted. There must be proof to support an inference to that effect.
In some states it might be possible to infer that if a bank
had been in the process of establishing branches over a wide
section of the state that it would in due course extend its
business throughout the state. But those who are familiar
with California know that such cannot be said here for in
many respects it is like two different states not closely related
to each other.
The Tehachapi mountains, south of Bakersfield, form a
natural barrier between north and south California. Between these two sections there are marked differences in types
of business, methods of doing business, kinds of industries and
occupations, and there are wide differences in the mores of
the people and even in the manner in which they dress. It
is natural that large businesses in northern California should
stay there, and that those in southern California should do
likewise. Certain chain stores and supermarkets found in
one part of the state are absent from the other.
That this is markedly true in the banking business is evidenced by the past situation of Crocker-Anglo and Citizens.
The same situation is true with respect to two of the five
largest banks in the state, Wells Fargo and Security First
National Bank. The former has a substantial number of
banking offices in 22 counties in northern California (148 as
of December 31, 1962), and the latter, as of the same date,
had 278 banking offices in southern California. (Security
First National offices cover a somewhat larger area than
Citizens as it includes San Diego and Imperial counties on the
south, and Fresno, Kings and Tulare counties near the center
of the state.) With respect to Wells Fargo and Security
First National it is apparent that each has chosen to stay
in its own section.
The question then arises what evidence is there now before
us that apart from the proposed merger Crocker-Anglo would
within any foreseeable period of time become a competitor
of Citizens in the latter's area of southern California?
[3] We think it is plain that before a merger may be condemned merely because its effect may be to lessen potential
competition it must be ascertained that the potential competition is a reality, that is to say, that there is a reasonable
probability of such potential competition.
The legislative history of the 1950 amendment of § 7 of
the Clayton Act makes it plain that with respect to the question of whether the effect of a merger "may be substantially
200
to lessen competition" the proof must be that there was a
reasonable probability that the merger would have the prescribed effect. As stated in the Committee Reports,6 "[t]he
use of these words means that the bill, if enacted, would not
apply to the mere possibility but only to the reasonable probability of the prescribed effect, as determined by the Commission in accord with the Administrative Procedure Act."
Of course, if the effect is to be judged only by "reasonable probability" then a fortiori the existence of a potential
competition must be judged according to the reasonable
probability of the same. To say that it would be possible for
Crocker-Anglo to move by de novo branching into the area
of Citizens is not enough. The question is, has there been
disclosed a reasonable probability that such would be the
case? In short, our function is not to speculate upon the
basis of mere possibility.7
a
S. Rep. 1775. See U.S. Code Cong., Serv. 81st Cong.,
2nd Sess. 1950, Vol. 2, p. 4298.
7
United States v. Columbia Steel Co., 334 U.S. 495, 68
S. Ct. 1107, 92 L. Ed. 1533, dealt with a complaint charging
violation of §§ 1 and 2 of the Sherman Act. As it was decided prior to the 1950 amendment of § 7 of the Clayton Act,
which was perhaps designed to alter some of the results of
Columbia Steel, see United States v. Philadelphia Nat.
Bank, supra, 374 U.S. at p. 340, 83 S. Ct. at p. 1729, 10
L. Ed. 2d 915, we would not undertake to cite it generally
as an authority for our decision here. It did, however, discuss the question of what proof would be required to establish a claim of substantial potential competition. At that
time, at any rate, the Supreme Court was apparently of the
view that a claim of potential competition would have to be
proven by showing something more than a mere possibility
of future competition and under the circumstances of that
case, the Court declined to speculate on the basis of possibility. Such may well be still good law as to the quality
of evidence required to prove the probability of potential
competition. The Court there said: "The United States
makes the point that the acquisition of Consolidated would
preclude and restrain substantial potential competition in the
production and sale of other steel products than fabricated
structural steel and pipe. Force is added to this contention
by the fact, adverted to above at pages 500 and 512 [of 334
U.S., at pages 1110 and 1116 of 68 S. Ct., 92 L. Ed. 1533],
that United States Steel does no plate fabrication while Consolidated does. By plate fabrication Consolidated produces many articles not now produced by United States Steel.
We mention, as examples, boilers, gas tanks, smoke stacks,
storage tanks and barges. Attention is also called to the
war activities of Consolidated in steel shipbuilding as indicative of its potentialities as a competitor. We have noted,
[334 U.S. 498] pp. 500-501, [68 S. Ct. 1109, pp. 1110, 1111,
92 L. Ed. 1533], supra, that this construction was under government direction and financing. We agree that any acquisition of fabricating equipment eliminates some potential competition from anyone who might own or acquire such
facilities. We agree, too, with the government's position that
potential competition from producers of presently noncompetitive articles as well as the possibility that acquired facilities may be used in the future for the production of new
articles in competition with others may be taken into consideration in weighing the effect of any acquisition of assets on
restraint of trade.
The Government asserts that the past history of CrockerAnglo points to the probability of the suggested potential competition. Crocker-Anglo is the result of a 1956 consolidation
of Crocker First National Bank of San Francisco and AngloCalifornia National Bank. At that time Crocker First National had two branch offices in Oakland and San Mateo and
Anglo-California National Bank had 46 banking offices in
San Francisco and the surrounding area. Prior to that time
Crocker First National had specialized in wholesale banking.
From that time on Crocker-Anglo has followed a policy of
expansion. Its 49 offices as of the date of that merger have
now grown to 129. Some of these later acquired branch
banks were acquired by merger and a much larger number
by de novo branching. It is to be noted that the expansion
program thus manifested has been, with the exception of the
move into Ventura County, previously referred to, and
branches in Santa Barbara County, hereafter mentioned, confined generally to the counties and areas north of the
Tehachapis.
"The government's argument, however, takes us into highly
speculative situations. * * * Looking at the situation here
presented, we are unwilling to hold that possibilities of interference with future competition are serious enough to justify
us in declaring that this contract will bring about unlawful
restraint." (334 U.S. pp. 528-529,68 S. Ct. pp. 1124,1125,
92 L.Ed. 1533)
The Government claims that the record of this branching
discloses a southward trend and that the history of this
process discloses a steady movement which will lead into the
Los Angeles area. This is not so.
The attempted showing made by the Government in support of its contention (Schedule III attached to Durlam affidavit) fails completely. It discloses a misunderstanding of
the areas traditionally constituting northern and southern
California. For instance, this is a list headed "Offices of
Crocker-Anglo opened since January 1, 1958 South of San
Francisco. This includes branches in Daly City, Redwood
City, San Jose, Santa Clara, and Sunnyvale, all a part of the
San Francisco metropolitan area. The remaining branches
listed in this schedule, (with the exception of Ventura and
Santa Barbara Counties, to which we shortly allude) are all
north of the Tehachapis.
The Government places particular emphasis upon the establishment of branches in Santa Barbara County. It says
that Santa Barbara is well toward the south of the state
and that this evidences an inevitable movement into Los
Angeles. We think that the establishment of branches in
Santa Barbara County is to be explained by its special economic condition and through the peculiar opportunities there
for banks with trust departments. There is a special reason,
peculiar to Santa Barbara County, for branching there.
Crocker-Anglo of course was aware of its "reputation for
living elegantly and its money from the multimillionaires
who made the area—especially adjacent Montecito—their
playground." This "socially impeccable retirement enclave"
with many "elderly widows who travel a great deal", is an
unusually rich source of business for trust departments of
8
The quoted language is from an article on Santa Barbara
in the New York Times Western Edition for October 25,
1963.
banks.8 Branching into Santa Barbara County presents
something entirely different from a movement into Los Angeles County.
We have previously indicated the special circumstances
relating to Ventura County. We cannot find that CrockerAnglo's entry into those counties is evidence that absent the
merger here involved Crocker-Anglo would probably move
into such areas as Los Angeles and Orange County where
Citizens principally operates.
Counsel for the Government has offered in evidence certain testimony given by the President of the Crocker-Anglo at
the hearing before the Comptroller of the Currency on July
30, 1963. The offer is on the theory that this testimony
would constitute an admission with respect to the question
of probability of potential competition. The portions of
the testimony to which attention is called are as follows:
"The Comptroller: Are you prepared to state why, in your
opinion, or so far as you are aware, with your knowledge of
the policies of the Crocker Bank, why it has not undertaken
in the past to establish itself in Southern California, particularly in the Los Angeles area?
"Mr. Solomon: We have long entertained the idea. The
circumstances never seemed to be completely appropriate
until the origination of our negotiations with the Citizens
Bank. There is nothing novel or new in our desire and
intention to move south. There have been previous attempts
to move in that direction.
"The Comptroller: Apart from the question of merger,
as here proposed, can you tell us why, in your opinion, the
bank did not seek to employ the de novo branching route
into the southern part of California?
"Mr. Solomon: I cover that later in my statement in some
detail."9
9
In the statement here referred to the witness stated:
"Crocker-Anglo, however, could not enter the Los Angeles
area de novo on a sufficient scale to broaden its financial base
or to enable it to compete with the statewide banks. The
practical problems of obtaining qualified personnel and acceptable locations, not to mention cost, are insurmountable."
He discussed at considerable length the reasons why in his
view to move into that area on a de novo basis and to furnish
effective banking service and competition would be an insuperable task. A single or only a few branch offices could
not handle the needs of customers in that extended area
where business establishments are spread over a wide geographical area; —a branch in downtown Los Angeles would
be available to only a small portion of businesses; it would
require over seven years to train the necessary branch management personnel for a system comparable to that of Citizens,
and require longer for the next top level administrative
personnel which would have to be supplied because San
Francisco and Los Angeles are approximately 400 miles apart,
and top management could not operate from San Francisco.
He estimated the cost of physical properties, of training administrative personnel, together with the loss expected during
the first 14J/2 months would aggregate $29,721,000. The
I4/2 months is the expected period of loss in establishing a
new branch in a contiguous area. He estimated the loss in
this distant metropolitan area would extend for five years.
201
Wholly apart from this witness's testimony as to the impossibility of moving into Citizens' area the present record
leaves us without any evidence that that move would be
made absent the merger.
It is true that Mr. Solomon testified that they had long
entertained the idea of establishing Crocker-Anglo in southern California and obviously Crocker-Anglo seized the opportunity to make the merger considering it a desirable move.
Under the arrangement with Citizens it has agreed in effect
to transfer to Citizens' stockholders as a part of the arrangement a bonus the equivalent of $12,000,000; but if, as stated,
Crocker-Anglo has long entertained the idea of moving into
that area and during that time has made no move to establish de novo branches there, this in itself tends to negative
the claim of a probable potential competition, in the manner
asserted by the Government.10 It confirms the existence of
serious obstacles to establishment of such branches, and the
unlikelihood that Crocker-Anglo would, in the foreseeable
future, attempt to establish such branches.
Challenging the statement of Crocker-Anglo's president
that in order to be competitive in the Los Angeles area
€rocker-Anglo, if it adopted the de novo branch route, would
have to establish substantially the same number of branches
as those operated by Citizens, counsel for the Government
asserts that becoming a competitor of Citizens in Los Angeles
"could have been accomplished as the Bank of California
accomplished it this year by going in and opening an office,
a branch office, in downtown Los Angeles." [Emphasis
added] Any one acquainted with Los Angeles and the
manner in which its business areas are sprawled across the
map, would have to agree that Crocker-Anglo cannot supply
any substantial competition for Citizens by establishing a
branch office in downtown Los Angeles. As was pointed out
at the hearing, the Bank of California is a very special institution having the unique privilege of maintaining branches
in several states, at Seattle, Portland, San Francisco and Los
Angeles. One branch in Los Angeles for that bank may
well be worthwhile to permit it to advertise its interstate
services and representation in all large metropolitan centers
up and down the Pacific coast. But for the purpose of
furnishing a substantial competition in such a metropolitan
area by de novo branching it is obvious that multiple branches
would be required to take care of the very considerable business communities in Los Angeles County such as Beverly
Hills, Hollywood, Westwood, Burbank, Inglewood, Whittier,
10
It is interesting that the Government's economist affiant
previously mentioned asserts in his affidavit in support of his
statement as to potential competition: "Crocker-Anglo is
evidently on the point of moving into the Los Angeles area";
but in the same affidavit he also states that "It is clear that
Citizens and Crocker-Anglo neither faced squarely, nor made
a serious effort to appraise the costs and benefits in becoming more, rather than less competitive with each other and
with other Los Angeles and San Francisco banks." This
would seem to amount to a statement that Crocker-Anglo has
given no thought to de novo branching in the Los Angeles
area.
202
Glendora, Torrence, and the like, not to mention numerous
centers in Orange and Riverside Counties.
We are not convinced that one such branch bank in downtown Los Angeles could represent the sort of substantial potential competition which is urged upon us here.11
In this case there is another special circumstance which
makes proof of probable prospective competition by CrockerAnglo through establishment of de novo branches in the Los
Angeles area well-nigh impossible. Unlike a grocery chain
or a hardware merchant or a steel manufacturer who can
establish new outlets or plants where he wishes, CrockerAnglo cannot establish a branch bank anywhere without
approval of bank supervisory authorities. Whether the
Comptroller would permit the establishment of sufficient
branching in this area is so uncertain as further to throw this
whole question into the field of speculation. At the time
of his decision upon the application for merger the Comptroller obviously considered the five southern counties occupied by Citizens as already overcrowded with banks.12
We are compelled to conclude on this record that the evidence with respect to the alleged potential competition is
wholly insufficient to permit us to make a finding of any
lessening of competition in consequence of the merger here in
question.
[4] We hold that there is now nothing before us which
would permit us to find that there was even a prima facie
case that could be made or even any suggestion of doubt as
to there having been a violation of § 7 of the Clayton Act.
In that situation we must conclude that there is no showing
here to support the issuance of a temporary injunction to
preserve the status quo based upon a claim of violation of § 7.
Since the merger does not violate the Clayton Act, the
possibility that it might be held to violate the more stringent
standards of the Sherman Act seems most unlikely. See
Times-Picayune v. United States, 345 U.S. 594, 609, 73 S.
Ct. 872, 97 L. Ed. 1277; Tampa Electric Co. v. Nashville
n
The decision of the Comptroller which of course is in no
way binding upon us, contains the following statement: "A
single branch office in Los Angeles obviously could not be a
comparable competitive substitute for a substantial number
of branches in the southern counties. Such a branch, while
necessitating a very heavy capital outlay, would not be able
to serve the Los Angeles area in a degree comparable with
Citizens' ability to serve it. The few benefits such a single
branch would produce for Crocker-Anglo would not offset
the costs involved."
13
Said the Comptroller in his decision: "In the light of the
existing branch coverage in these five southern counties today, it would seriously over-bank this area if the Bank Supervisory Authorities were to permit the establishment of any
such number of additional de novo branches. Prime branch
locations, or even locations that may be deemed satisfactory,
are not now available in anywhere near such figures. In
fact, this Office has been finding it necessary to review applications for de novo branches in this area most critically in
order to avoid the evils of destructive competition too many
branch offices would produce."
Co., 365 U.S. 320, 335, 81 S. Ct. 623, 5 L. Ed. 2d 580.
We have indicated at great length the reasons for our finding
that there is no existing or prospective competition that could
possibly be lessened through this merger. For a like reason
we hold that we do not have here any basis for a prima facie
case showing a contract, combination or conspiracy in restraint of trade. And in light of the statistics previously
given, it cannot be claimed that this merger would in any way
tend to create a monopoly.
The Government has made an argument which we have
some difficulty in understanding to the effect that we ought
to hold this merger to be a violation of the Sherman Act
because the results of the merger will be as harmful and
as restrictive of competition as would be the results of a certain hypothetical agreement between Citizens and CrockerAnglo. Let us suppose, proceeds this argument, that CrockerAnglo and Citizens had entered into an agreement to the
effect that neither would enter into the territory of the other
for the purpose of establishing branch banks. Since such
an agreement to divide up the territory would constitute a per
se violation of the Sherman Act, it is argued that a similar
conclusion ought to be drawn with respect to this merger.
We think this is a complete non sequitur. What is about
to happen here is not a division of territory but rather the
creation of a consolidation whereby a single successor bank
will operate in both areas.13 We cannot find any violation
of the Sherman Act per se or otherwise in the record before us.
It is plain that behind the desire of defendant banks to
accomplish the proposed merger is the anticipated opportunity to procure new business. As of now there are three
banks in California which furnish to some degree banking
services in both northern and southern California. These
are Bank of America with branches in every county in the
state, United California Bank with branches in all southern
California counties, and in most important northern California counties, and First Western Bank and Trust Company
with branches in a more limited number of counties both
north and south. There are customers of California banks
which have operations in both northern and southern parts
of the state. Some of these desire to do their banking with
one banking instituion. The record shows with some detail
why such customers desire to obtain that kind of banking
service. Heretofore Crocker-Anglo and Citizens have been
unable to supply that service; their hope to participate in it
in the future is the primary reason for the proposed merger.
If the merger is completed the net result will be that the
state-wide banks, so called,—Bank of America, United California Bank and First Western Bank—will have competition
in that field from Crocker-Citizens. The present oligopoly
resulting from the operations of the three state-wide banks
mentioned would thus be somewhat thinned by the entry
"Counsel could just as well argue that if Citizens and
Crocker-Anglo continued in the future as they have in the
past to operate each in its own respective territory without
any agreement whatever to remain there, then since this
would result in carrying on of banking in the same manner as
would have been carried on under an agreement to divide
the territory, this non-action by the two banks could and
ought to be treated as a violation of the Sherman Act, a manifest absurdity.
of Crocker-Citizens into this field."
The view which we take of this action is epitomized in the
following statement in Transamerica Corp v. Board of Governors, 3 cir., 206 F.2d 163, 169: "We agree that this quantitative analysis discloses a tremendous concentration of banking capital, and thereby of economic power, in the hands of
the Transamerica group which may be unwise and against
sound public policy. It may well be in the public interest to
curb the growth of this banking colossus by appropriate legislative or administrative action. This, however, is not for us
to decide. Our only question is whether the theory upon
which the Board based its decision meets the legal tests which
are required under Section 7 of the Clayton Act * * *."
Since we are of the opinion that on this hearing no prima
facie case has been made, we must deny the motion for a
preliminary injunction.
The Government has suggested that we might tentatively
issue an injunction here and continue to consider the matter
until December 31 which is the final upset date for the
merger. It is also suggested that since the Government has
served interrogatories in this case, which have not yet been
answered, we ought to delay our decision for some further
period. It is the view of this court that we should not delay
a decision. The matter has been submitted upon the stipulation made by all the parties; and at the hearing it was
agreed that the court had a complete record composed of affidavits filed and other exhibits offered at the hearing. The
court would not be warranted in issuing an injunction holding up this matter merely to permit the Government to await
answers to interrogatories in the hope that something further
may turn up.
Of course, on final hearing on the merits, other proof may
be forthcoming, through these or other discovery proceedings,
or otherwise.
So far as the presently proposed merger is concerned, should
the Government make a case on final hearing, we would be
confronted with a problem of divestiture. We appreciate the
difficulties presented in such a case. But those alone do not
warrant a preliminary injunction. And, in any event, on
final hearing we will be confronted with a problem of divestiture, since the Government asks us to undo other mergers,
including that between Crocker National and Anglo-California in 1956.
Transamerica Corporation has been made a defendant here,
evidently because it is alleged that it has working control of
Citizens. Since we have denied the motion for preliminary
injunction against the merger of the banks we find no occasion at this time to discuss the rights or liabilities of
Transamerica.
Findings in accord with this opinion will be filed and thereupon an order denying the motion for the preliminary
injunction will be entered.
14
If it were possible to point to a lessening of competition
as a result of this merger, the fact of an increase of competition with existing larger institutions would not be a defense. See United States v. Philadelphia Nat. Bank, supra,
374 U.S. at p. 370, 83 S. Ct. at p. 1745, 10 L. Ed. 2d 915.
As we have indicated, such is not the situation here. An
affidavit by an attorney for the Department of Justice, filed
here, concedes that it is the position of the Department that
"California needs more state-wide commercial banks."
203
LARGILLIERE COMPANY BANKERS, SODA SPRINGS, IDAHO, AND T H E IDAHO FIRST NATIONAL BANK, BOISE, IDAHO
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Largilliere Company Bankers, Soda Springs, Idaho, with
was purchased Nov. 1, 1963, by The Idaho First National Bank, Boise, Idaho
(1668), which had
After the purchase was effected, the receiving bank had
COMPTROLLERS DECISION
On August 1, 1963, the $271 million First National
Bank, Boise, Idaho, applied to the Comptroller of the
Currency for permission to purchase the assets and
assume the liabilities of the $5 million Largilliere Company Bankers, Soda Springs, Idaho.
The Idaho First National Bank is the largest of three
statewide banking systems competing in Idaho. The
locally owned applicant operates 39 branches representing 35.9 percent of all deposits in the state. First
Security Bank of Idaho, N.A., a subsidiary of First
Security Corporation of Salt Lake City, Utah, is second
in size with 38 branches and 31 percent of deposits.
In third place is the Bank of Idaho, a subsidiary of
Western Bancorporation, Los Angeles, California,
holding 9.8 percent of deposits. The selling bank
holds only 0.7 percent of bank deposits in the State.
Idaho is primarily an agricultural State, with livestock raising, wheat, and potatoes being the principal
sources of farm income. Logging and lumbering figure importantly in the economy of the northern part of
the State. Soda Springs, seat of Caribou County, is
in southeastern Idaho 311 miles from Boise and 67
miles from Pocatello, the nearest large trading center.
Soda Springs has a population of nearly 2,500 and
serves an area of approximately 6,000. In addition to
cattle and agriculture, mining operations loom large
in the Soda Springs economy. The world's largest
phosphate deposits are located in the area.
The Largilliere Company is the only bank in Soda
Springs. The nearest banks are The First National
Bank of Grace, Idaho, 12 miles southwest of the selling
bank, and a branch of The First Security Bank at
Montpelier, Idaho, 30 miles south of Soda Springs.
Because of the distance involved and because they primarily serve the communities in which they are located, these banks are not likely to be affected by the
substitution of the selling bank for a branch of The
Idaho First National Bank. The selling bank's lending limit is $40,000, which has been inadequate.
Larger borrowers in the area have had to seek financ-
204
$4, 979,000
1
271,041,000
275, 545, 000
40
41
ing elsewhere. The acquiring bank will provide consumer and home loans as well as trust services to the
inhabitants of Soda Springs.
It is apparent that the approval of this proposal will
not adversely affect competition either throughout the
state or in the Soda Springs service area. It will replace an ultra-conservative bank, which has not adequately served the financial needs of the community,
with a vigorous bank which is able to meet the public
demands.
Applying the applicable statutory criteria to the facts
of this case, we conclude that the proposal is in the
public interest and the application is therefore
approved.
OCTOBER 18, 1963.
SUMMARY OF THE REPORT OF ATTORNEY GENERAL
Idaho First National Bank is the largest bank in
Idaho and operates 41 banking offices in the State.
As of May 21,1963, assets were $271,041,000, deposits
$242,677,000 and loans and discounts $139,360,000.
During the past 10 years nine banks with total deposits
in excess of $32,000,000 have been acquired.
Largilliere Company Bankers, as of the same date,
had assets of $4,928,000, deposits of $4,455,000 and
loans and discounts of $2,014,000.
The offices of the two banks are sufficiently separated by distance so that they serve different areas.
However, the proposed acquisition will increase The
Idaho First National's shares of commercial banking
in Idaho, where it presently has approximately 35.8
percent of total deposits of all Idaho banks, and will
add to the concentration of banking in Idaho where
the two largest banks presently have two-thirds of all
deposits and 60 percent of all banking offices in the
State. This second largest bank, First Security Bank
of Idaho, N.A., has acquired nine banks within the
past 10 years.
It is the view of this Department that in such situations, the cumulative effect of such acquisitions must be
considered, and in this light, the proposed acquisition
will have an adverse competitive effect.
THE JOHNSONBURG NATIONAL BANK, JOHNSONBURG, PAV AND THE WARREN NATIONAL BANK, WARREN, PA.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
The Johnsonburg National Bank, Johnsonburg, Pa. (4544), with
and The Warren National Bank. Warren, Pa. (4879), which had
merged Nov. 29, 1963, under the charter and title of the latter bank (4879).
The merged bank at the date of merger had
COMPTROLLER S DECISION
On September 5, 1963, the $53.2 million Warren
National Bank, Warren, Pennsylvania, and the $5.1
million Johnsonburg National Bank, Johnsonburg,
Pennsylvania, applied to the Comptroller of the Currency for permission to merge under the charter and
title of the former.
Warren, population 14,500, is the county seat of
Warren County, population 45,600. It is the industrial, commercial and residential center of its trade
area. The economic base is supported by diversified
manufacturing concerns, lumbering, oil production
and agriculture. The area is fast emerging as a recreational center. Nearby Forest and McKean Counties
are sparsely populated; and, with the exception of
Warren and, to a lesser extent, Kane in McKean
County, there are no important population centers in
these north-central Pennsylvania counties. Prospects
for a stable and modestly expanding economy are good,
and population growth should parallel economic
growth.
Johnsonburg, population 5,000, is located in Elk
County, population 37,300. Warren and Elk Counties are contiguous but touch only at a point. Industrial employment in Johnsonburg is stable, but the
town depends heavily upon the paper manufacturing
plant of the New York and Pennsylvania Company.
In the nearby towns of Ridgeway and St. Marys industrial employment has been stable. Lumbering
and a limited amount of marginal farming are of some
importance in the surrounding countryside. The future economic outlook for the Johnsonburg trade region appears to be generally favorable.
The charter bank, historically the dominant bank
in the Warren area, presently operates seven offices in
a three-county market. Its principal competitor in
Warren County is the Pennsylvania Bank and Trust
Company, which operates three branches in the
County. The only other commercial bank remaining
in Warren County is the Youngsville National Bank,
Youngsville, Pennsylvania, which will be absorbed by
$5,144, 658
57,471,429
62,511,087
1
7
8
the Pennsylvania Bank and Trust Company if permission is granted by supervisory authorities. Competition in the service area also comes from the Gold
Standard National Bank, Marienville, Pennsylvania,
and the Hamlin Bank and Trust Company, Smethport,
Pennsylvania, through offices in McKean County. If
the instant application and the pending application
concerning the Pennsylvania Bank and Trust Company
are both approved, Warren National Bank will control
47% of its service area's deposit and Pennsylvania
Bank 39%.
The merging bank competes in a separate banking
market from that of the charter bank. Johnsonburg
National Bank is entirely oriented to Elk County where
it competes with five other banks, two in Ridgeway and
three in St. Marys. Two of the three banks in St.
Marys—the St. Marys National Bank and St. Marys
Trust Company—have common stock ownership and
common directors. It is reported that St. Marys
Trust Company controls a substantial stock interest in
the Elk County National Bank in Ridgeway. The
combination composed of these three banks controls
64% of the service area's deposits. The merging
bank, as the second smallest in the County, possesses
11.6% of the area deposits. There are five savings
and loan associations in Elk County which have withdrawable funds of $15.5 million, as compared with
$34 million in commercial bank deposits in the County.
The merging bank was organized in 1891 and has
remained a unit bank. Its deposits have decreased in
the last 10 years while loans have increased by $700,000.
The officers of the Johnsonburg National Bank are
capable and experienced, but successor management
has not been developed. The problem of increasing
loans and declining deposits, as well as the lack of
trust service are factors which make merger desirable.
Approval of the proposal will in no way affect the
competitive situation either in the Warren or in the
Johnsonburg service areas. Warren National Bank
and Johnsonburg National Bank have no common
loan or deposit accounts. The distance between the
205
head office is 46 miles, and the closest Warren National Bank office to Johnsonburg is its 17 miles-distant
branch in Kane. There will be an increase in the
lending limit of the resulting bank to $460,000, enabling the Warren National Bank to improve its services to the communities in which it is located. The
resulting bank will bring to the Johnsonburg service
area a greatly increased lending limit, a large supply
of available money to meet the needs of the local banking public, specialized lending techniques, trained personnel and trust services.
Applying the relative statutory criteria to the proposed merger, we conclude that it is in the public
interest and the application is hereby approved.
NOVEMBER 15, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The Warren National Bank is one of the two largest banks operating in Warren County. The Johnsonburg National Bank, on the other hand, is the second
smallest bank in Elk County, which is just southeast of
Warren. These two banks presently operate in different service areas. In addition, it is alleged that
three of the six banks in Elk County are controlled by
the same stockholders. It would thus appear that the
instant merger, if approved, would not eliminate any
significant competition between the merging banks,
would not directly or materially enhance Warren's position in its present service area.
On the other hand, Warren accounts for approximately 45% of the banking business in Warren County.
Together with the Pennsylvania Bank and Trust
Company, it accounts for over 80%. This high degree of concentration has resulted to a considerable
extent from recent mergers and acquisitions by Pennsylvania Bank and Trust and the Hamlin Bank and
Trust Company, the area's third largest bank. The
Warren National Bank has, until now, not participated
in this movement. The proposed merger, however,
may well accelerate further acquisitions, particularly
in view of Pennsylvania Bank and Trust's reported interest in acquiring the Youngsville National Bank.
Furthermore, except for the alleged common control
of the three banks in Elk County, this merger would
introduce therein a bank many times larger than any
of the present banks. The resulting imbalance would
ordinarily not be favorable to the ability of the smaller
banks to continue to compete effectively.
It would thus appear that although the instant
merger may adversely affect competition in the
Warren-Elk Counties area, in view of the extenuating
circumstances noted this effect will probably not be
significantly adverse.
THE DELTA NATIONAL BANK, DELTA, PA., AND FIRST NATIONAL BANK & TRUST CO. OF RED LION,
RED LION, PA.
Banking offices
Name of bank and type of transaction
Total assets
In
operation
The Delta National Bank, Delta, Pa. (14201), with
and the First National Bank& Trust Co. of Red Lion, Red Lion, Pa. (5148),
which had
merged Nov. 30,1963, under the charter of the latter bank (5184) and under
title of "First National Bank & Trust Company." The merged bank at the
date of merger had
COMPTROLLER S DECISION
On September 20, 1963, First National Bank and
Trust Company of Red Lion, Red Lion, Pennsylvania,
and the Delta National Bank, Delta, Pennsylvania, applied to the Comptroller of the Currency for permission to merge under the charter of the former and
with the title "First National Bank & Trust Company."
The applicant banks are located in York County
which is in southcentral Pennsylvania. The State of
Maryland forms its southern border and the Susque-
206
To be
operated
H 822,737
26, 479, 026
31, 301, 764
hanna River is contiguous with its eastern boundary.
The county ranks fourth among the 67 counties in
Pennsylvania in the number of industrial concerns and
second in the number of farms and crop land acreage.
Industry is well diversified with over 600firmsengaged
in the manufacture of varied products.
The $22 million First National Bank and Trust
Company of Red Lion operates its main office in Red
Lion, a branch in York, 9 miles northwest, and a
branch in Stewartstown, 12 miles south. Red Lion
has a population of 6,000 and is located 9 miles southeast of the City of York, the principal shopping center
of the area. Well established industries in Red Lion
provide steady employment in such industries as furniture, cigars, tools and dies, metal specialties and
apparel. The surrounding area is a prosperous grain,
vegetable and cattle raising section. There are six
branches of four competing commercial banks in the
area with total assets ranging between $20 million and
$146 million. They are the National Bank and Trust
Company of Central Pennsylvania, the York Bank and
Trust Company, the Drovers and Mechanics Bank,
and the First National Bank of York.
The only office of the Delta National Bank is in
Delta which is situated in the extreme southeast corner
of York County bordering on the Pennsylvania-Maryland line approximately 20 miles southeast of Red
Lion. The 840 residents derive a living primarily
from agricultural pursuits. An atomic power plant
being constructed nearby and a new bridge across the
Susquehanna River are expected to provide future economic stimulation.
Approval of the proposed merger will be of substantial benefit to the two banks and to the community
of Delta. The resulting bank will be in a position to
offer effective competition to the much larger York
banks and the citizens of Delta will have trust facilities, a greater borrowing potential, and other more
specialized services. More important, the merger will
solve a serious management succession problem for the
Delta National Bank. Both banks have done commendable jobs in their respective communities and the
resulting bank will, of course, maintain its traditions of
sound and adequate banking services.
Applying the statutory criteria to the proposed
merger, we conclude that it is in the public interest and
it is therefore approved.
NOVEMBER 22,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Although the proposed merger would not appear to
eliminate any significant competition between the participating banks or to substantially increase concentration in banking in York County, Pennsylvania, it
may adversely affect competition among banks with
head offices outside the city of York. It might also
lead to further merger applications in an area where
concentration has already increased markedly in recent
years. The proposal cannot, therefore, be said to be
free of probable adverse competitive effects.
PEOPLES BANK OF RURAL RETREAT, RURAL RETREAT, V A . , AND W Y T H E COUNTY NATIONAL BANK OF WYTHE-
VILLE, WYTHEVILLE, V A .
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Peoples Bank of Rural Retreat, Rural Retreat, Va., with
and Wythe County National Bank of Wytheville, Wytheville, Va. (12599),
which had
consolidated Nov. 30,1963, under charter of the latter bank (12599) and under
title "Wythe County National Bank." The consolidated bank at the date of
consolidation had
COMPTROLLER S DECISION
On October 1, 1963, the $2.5 million Peoples Bank
of Rural Retreat, Rural Retreat, Virginia, and the
$9.7 million Wythe County National Bank of Wytheville, Wytheville, Virginia, applied to the Comptroller
of the Currency for permission to consolidate under the
charter of the latter and with the title "Wythe County
National Bank."
The charter bank has its main office and a drive-in
branch in Wytheville, the county seat, which has a
population of 5,600 and serves a primarily rural trade
area of 30,000. Wythe County is in southwestern Vir
$2, 539, 000
1
10,790,264
3
13, 329, 686
4
ginia, 75 miles southwest of Roanoke, in a predominantly agricultural area. Livestock production is of
primary importance, although mining and lumbering
also contribute to the economy, as do three manufacturing plants which employ a total of 800 in Wytheville. The intersection of Interstate Routes 81 and 77
is immediately outside the city and this should help
attract industry and promote area growth. The charter bank's only other branch is in Crockett, an agricultural community of 250 persons located 10 miles
southwest of Wytheville.
The consolidating bank has its sole office in Rural
207
Retreat, a community of 500 persons situated 12 miles
west of Wytheville in the same county. It serves a
trade area of approximately 5,000. The economy of
this community is very similar to Wytheville; though
it has one plant employing 200 people, it is primarily
dependent on livestock and grain production. Little
future growth is foreseeable.
The major source of competition in this area derives from Virginia's fourth largest bank, the First
National Exchange Bank of Virginia, Roanoke, which
has branches both in Wytheville and in Marion, 16
miles west of Rural Retreat. The $6.3 million Bank
of Marion has some competitive effect, while two small
banks on the periphery of the trade area, the Bank of
Speedwell, Inc. and the Bank of Bland County have
hardly any.
The consolidating bank is scarcely a competitive
factor. It has followed ultra-conservative policies for
many years, makes no consumer loans and has experienced shrinking profits of late. Its officers are
aging and have no successors. The bank is incapable
of attracting competent management personnel because of the size of the community and salary limitations.
Approval of this application will substitute a more
aggressive bank capable of offering better service to
the community than is presently available. It will
solve the problem of management succession and will
assure the residents of Rural Retreat of continued
convenient banking facilities. No significant competition will be be eliminated.
Considered in light of the relevant statutory criteria
we find this consolidation to be in the public interest
and it is therefore approved.
NOVEMBER 15, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Wythe County National Bank had assets of
$9,760,000 and The Peoples Bank of Rural Retreat
had assets of $2,478,000 as of August 15, 1963. Direct competition between these two banks is only nominal. The limited growth, the unsatisfactory ratio of
loans to deposits of 37.3 percent, the small lending
limit and shrinking profits of the Consolidating Bank
all tend to reduce the competitive significance of this
bank. The probable effect of the proposed consolidation on competition will be negligible.
T H E FIRST NATIONAL BANK OF NEW CARLISLE, NEW CARLISLE, IND., AND T H E NATIONAL BANK & TRUST
Co. OF SOUTH BEND, SOUTH BEND, IND.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The First National Bank of New Carlisle, New Carlisle, Ind. (5639), with
was purchased Nov. 30, 1963, by The National Bank & Trust Co. of South
Bend, South Bend, Ind. (13987), which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
On August 30, 1963, The National Bank and Trust
Company of South Bend, South Bend, Indiana, applied
to the Comptroller of the Currency for permission to
purchase the assets and assume the liabilities of The
First National Bank of New Carlisle, New Carlisle,
Indiana.
South Bend, with a population of 135,000, is the
sixth largest city in Indiana and the center of a trade
area of 245,000. The city is on major transportation
routes, with a superhighway providing fast access to
Chicago and the eastern seaboard markets. South
Bend is an industrial hub where 89,900 workers are
208
$3,911,000
1
60, 425, 000
63, 872, 000
7
8
engaged in such diverse enterprises as fabricated
metals, transportation equipment, food and apparel.
The $60.6 million National Bank and Trust Company of South Bend is the second largest bank in South
Bend. Six other banks in South Bend and adjacent
Mishawaka range in size from the $105.8 million First
Bank and Trust Company, South Bend, to the $1.4
million Western State Bank, South Bend. The $9.3
million Farmers State Bank, Wyatt, Indiana, is the
largest of six banks, including the selling bank, located
in the small towns surrounding South Bend.
New Carlisle, with a population of 1,376, is the
center of a prosperous agricultural area. The town
serves the farmers of St. Joseph and LaPorte Counties,
which have 3,468 farms of an average size of 147
acres. New Carlisle, which also benefits from adjacent
Hudson Lake, a year-round resort, presently shows no
signs of industrial development. Because the town is
situated on the main line of the New York Central
Railroad, as well as on a regional commuter line, it is
growing popular as a residential community for persons employed in South Bend and Chicago which are
15 miles and 85 miles distant, respectively. The New
Carlisle public, however, will benefit from a more
modern and aggressive bank. The lending limit will
be increased from $20,000 to $200,000, trust facilities
will be provided for the substantial community of retired persons living in New Carlisle, and a serious
management succession problem will be resolved with
the availability of the buying bank's management.
The competitive climate in the South Bend area
will not be appreciably altered by the acquisition.
The resources of The National Bank and Trust Company will increase only slightly, from 19.4% to
20.6% total resources of the South Bend service area.
Seven savings and loan associations in the trade region
have withdrawable balances of $98.5 million. Credit
Unions and other financial institutions also offer vigorous competition. As the selling bank has not been an
aggressive competitor, entry of The National Bank
and Trust Company of South Bend into New Carlisle,
will actually heighten competition in the area.
Applying the relevant statutory criteria to the proposal, we conclude that it is in the public interest and
the application is therefore approved.
NOVEMBER 7,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The National Bank and Trust Company of South
Bend will compete with ten independent banks in the
resulting bank service area. Although the proposed
acquisition will result in an addition to National
Bank and Trust's position, the increase in banking
concentration is relatively minor. In light of this
relatively minor increase in concentration, and the
continued existence of 10 banking institutions, we believe the proposed merger will not have a substantial
adverse effect upon competition.
BANK FOR SAVINGS & TRUSTS, BIRMINGHAM, ALA., AND BIRMINGHAM TRUST NATIONAL BANK,
BIRMINGHAM, ALA.
Banking offices
Total assets
Name of bank and type of transaction
In operation To be operated
Bank for Savings & Trusts, Birmingham, Ala., with
and the Birmingham Trust National Bank, Birmingham, Ala. (14569), which
had
consolidated Dec. 6, 1963, under charter and title of the latter bank (14569).
The consolidated bank at the date of consolidation had
COMPTROLLER S DECISION
On August 6, 1963, Birmingham Trust National
Bank, Birmingham, Alabama, and the Bank for Savings and Trusts, Birmingham, Alabama, applied to the
Comptroller of the Currency for permission to consolidate under the charter and with the title of the
former.
Birmingham, the seat of Jefferson County, is located
at the foothills of the Appalachian Mountains in
north-central Alabama approximately 94 miles north
of Montgomery, the State capital, and 160 miles west
of Atlanta, Georgia. The city, less than one hundred
years old, achieved its early growth through the dis-
$52,316,761
1
193,182, 694
13
245,499,455
14
covery of large deposits of coal, iron and manganese
ore. In the process of extracting these minerals,
many separate communities were formed in and around
Birmingham. Today, there are 30 other incorporated
towns and numerous unincorporated residential areas
in Jefferson County. Many of these towns have a
common boundary with the city and include, among
others, four of Alabama's largest communities wherein
reside approximately 80,000 of the county's 635,000
residents. The county now contains 20 percent of the
total population of the entire State.
The economy of Birmingham is in the process of
shifting from one primarily dependent upon the ex-
209
tractive industries to one of balanced diversity with
extraction, manufacturing and distribution each contributing to the area wealth. Distribution is currently
the dominant pursuit since Birmingham is the center
of retail and wholesale trade for the entire State.
Manufacturing is increasing and approximately 27 percent of the working force is employed in such endeavors. The economic future of Jefferson County is
favorable. The population continues to increase, retail and wholesale volume is high, and the trend away
from the extractive industries and unskilled labor to
manufacturing and skilled labor portends increased
income for area residents. This increase has become
evident in the continued substantial growth of bank
deposits and the increased velocity of demand deposits.
The largest factor in the commercial banking structure of Birmingham and Jefferson County is the $430
million First National Bank of Birmingham, an aggressive, service-oriented bank. Since 1935, when it acquired the assets and assumed the liabilities of six failing banks, First National has occupied the leading role
in Jefferson County. It was not until 1958 when the
Birmingham Trust National Bank abandoned its ultraconservative policies and obtained new and aggressive
managers, that it was able to offer more than token
competition to the First National.
At the present time there are 7 commercial banks
operating 46 banking offices in Jefferson County.
Among these are the 22 offices of First National, the
12 offices of the $192 million Birmingham Trust National, the 8 offices of the $65 million Exchange-Security Bank, and the home offices of the $52 million Bank
for Savings and Trust, the $3.5 million Steiner Brothers
Bank, the $2 million Citizens Bank and the $1.9 million
Warrior Savings Bank.
Local entrepreneurs, local bankers, local civil authorities and administrative agencies have long realized
that the banking community of Birmingham functions
within a relatively unique set of circumstances. This
realization has generated both an application for the
establishment of a new national bank, which was approved on October 17, 1963, and this application to
consolidate. Two new state banks have also been
210
organized to do business in metropolitan Birmingham.
The combined force of these locally initiated actions
should serve as needed stimuli to the Birmingham
community. The combining of the two applicants,
neither of which has any past merger history, will result
in a bank more able to offer services comparable to
those of the largest bank. The local banking structure
will change substantially as the resulting bank strives
toward maximum utilization of its increased potential
and as the new banks necessarily establish policies and
services designed to fulfill the banking needs of all local
citizens. The beneficiaries of these incipiently dynamic forces will be the people of Jefferson County.
Since there are many extremely unique factors involved in this particular case, its value as a precedent is
limited, indeed.
Applying the statutory criteria to the proposed consolidation, we conclude that it is in the public interest
and the application is therefore approved.
DECEMBER 5,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed consolidation would unite the second
and fourth largest banks in the City of Birmingham
and in Jefferson County, Alabama, the service area
adopted by the applicants. The resulting Bank would
control over 32 per cent of "IPC" deposits and loans
and discounts. An important banking source to individual and small business customers would be eliminated by the consolidation. The present over-concentration in commercial banking in the Birmingham area
would be further accentuated. Competition between
the two applicant banks would be eliminated. Only
three of the seven existing banks in the service area
now have branches. Elimination of the consolidating
Bank would remove from the scene a bank with a
branching potential. Of the five remaining banks in
the service area, only two would be in a position to
compete effectively with the resulting Bank. The
proposed consolidation would have a highly significant
adverse effect upon competition in Birmingham and
the Jefferson County, Alabama area.
THE TOOTLE-ENRIGHT NATIONAL BANK, ST. JOSEPH, MO., AND T H E AMERICAN NATIONAL BANK OF ST.
JOSEPH, ST. JOSEPH, MO.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Tootle-Enright National Bank, St. Joseph, Mo. (6272), with
and The American National Bank of St. Joseph, St. Joseph, Mo. (9042),
which had
consolidated Dec. 6, 1963, under the charter of The Tootle-Enright National
Bank (6272), and under title of "The American National Bank of St. Joseph."
The consolidated bank at the date of consolidation had
COMPTROLLER S DECISION
On August 28, 1963, the Tootle-Enright National
Bank, St. Joseph, Missouri, and The American National Bank of St. Joseph, St. Joseph, Missouri, applied to the Comptroller of the Currency for permission to consolidate under the charter of the former
and with the title of the latter.
St. Joseph is located in northwest Missouri on the
Missouri River which, at this point, serves as the border
between Kansas and Missouri. It is one of many business centers within a large agricultural and cattle producing area. Among the other centers are Kansas
City, which is 30 miles south of St. Joseph; Topeka,
Kansas, 70 miles southwest; Wichita, Kansas, about
200 miles southwest; Omaha, Nebraska, approximately
100 miles north; and Lincoln, Nebraska, 80 miles
northwest. Vehicular speed limits of 70 and 80 miles
an hour coupled with excellent water transportation
and common economic pursuits combine to make this
area more comprehensively homogeneous than the
mileage distance would seem to indicate.
St. Joseph is the seat of Buchanan County and has
a population of approximately 80,000, just 10,000
under the total population of the County. Major
highways and railroads, 49 motor carriers, 37 daily
buses, a modern jet airport and service by Missouri
River barge lines point up St. Joseph's rating as a
center of wholesale, retail, financial and industrial activities in an area which includes a large portion of
Missouri, most of Kansas, southwestern Iowa and
southern Nebraska. The City's stockyards are the
sixth largest in the nation, requiring the location there
of four major packing houses, including Swift and
Armour, whose employees approximate 3,000 in number. Other major industries include Quaker Oats
Company, with an annual payroll of $275 million, the
Western Tablet and Stationery, Inc., employing nearly
1,000, the Whitaker Cable Company, Pearl Brewing
and Anchor Service Company, each employing about
400.
$47, 370, 600
1
36, 372,247
1
83,742, 847
2
Cattle is the most common pursuit among St. Joseph
and the other area business centers. Each of these
centers contain huge stockyards where cattle are
shipped from everywhere west of the Missouri River
to be fed, slaughtered and processed. Competition
among these centers for adequate quantities of cattle
is so intense that teams of farmers, bankers and commission men travel throughout the range country soliciting ranchers to ship cattle to the particular community from which the teams originate. Success in
attracting the ranchers to a precise city is particularly
dependent upon the extent to which financial credit is
available in that city. Ranchers, farmers and feeders
all need extensive credit to finance the period during
which the cattle are being fattened for slaughter. Of
course, as the price of cattle increases, the amount of
available credit must increase.
For the past few years, the stockyards of St. Joseph
have not been so busy as they once were. While this
has adversely affected the local economy, stability of
economic conditions has been somewhat preserved by
industrial diversity. This marginal economic condition has prompted local civic leaders, among whom are
the bankers, to form a nonprofit industrial development organization. To insure the success of this enterprise, a considerable amount offinancialcredit must
be available. Although there are numerous sources of
financial credit in St. Joseph, their limitations are not
compatible with the changing needs of the community.
There are now 10 commercial banks in the immediate area of St. Joseph. They are the $42 million First
National Bank, the $46 million Tootle-Enright National Bank, the $12 million First Stock Yards Bank,
the $9 million Park Bank, the $5 million Drovers and
Merchants Bank, the $4 million Farmers State Bank,
the $3 million Belt State Bank, and the First Trust
Company, which recently received permission to engage in a general commercial banking business.
The First National Bank is majority stock trustee
of the First Trust Company, which in turn is majority
211
stock trustee of First Stock Yards Bank, whose assets
approximate $ 12 million. Since its inception, the First
Trust Company has been housed in the quarters of
First National, handling the latter's successful trust
business. Recently, full trust powers were granted
First National, paving the way for the move of First
Trust Company into commercial banking. The First
Trust Company contemplates turning over a majority
of its trust accounts to its parent bank. When this is
accomplished, the total volume of business in all services rendered by First National Bank and its two affiliates will aggregate in excess of $80 million.
Numerically, the applicant banks are among the
more than seventy financial institutions in and around
St. Joseph, all of which are competing for either the
trust dollar, deposits, real estate loans, commercial and
agriculture loans, small and large personal loans or
institutional business. The competition is keen, with
five of the nine savings and loan associations in St.
Joseph increasing their share accounts almost six times
as fast as the commercial banks in the period 1950—
1962. Incomplete figures for the other associations
indicate a similar trend. In addition to the 10 commercial banks in the St. Joseph area and the 9 savings and loan associations, there are more than 25
credit unions and a like number of sales finance and
personal loan companies, 5 of which have opened in
the last 3 years.
The service area of the resulting bank must be considered regional in nature, not only because of its far
flung network of loans and correspondents, but also
because the City of St. Joseph does not provide 75%
of the bank's deposits. By virtue of their location in a
principal city of a regional market, and because of the
historical development of the midwest, both banks enjoy a well developed correspondent system, with
Tootle-Enright concentrating in the regional market
and American National obtaining the majority of its
accounts in the areas nearer to St. Joseph. On the
periphery, but included in the service area of TootleEnright, which extends to the Colorado border, are
the cities of Lincoln, Grand Island and North Platte,
Nebraska, and Dodge City, Wichita, Topeka and Kansas City, Kansas. Within this area is the prime winter
wheat belt of the nation, extensive cattle ranges and
grain fields. In each of these cities, and throughout
the area, one or both of the applicants maintain active
correspondent relationships, placing or servicing loans
and otherwise offering the myriad of services which
spring from the nature of the relationship. From the
regional area outside the metropolitan district and environs of St. Joseph, the Tootle-Enright Bank alone
212
holds 167 country correspondent accounts, totaling
nearly one-third of its latest year-end deposits. American National's 91 country correspondent accounts
generated from outside the St. Joseph area and Buchanan County give it good representation in its part
of Missouri, in Iowa to Council Bluffs, and in scattered cities of northeastern Kansas. These accounts
amounted to 20% of American's year-end deposits.
Moreover, 67% of Tootle-Enright's total loans and
discounts originate from areas beyond 25 miles of St.
Joseph. The corresponding figure for American National is 46%. The loans for both banks, outside the
immediate St. Joseph area, total over 1,200, only a few
of which are from outside the regional market. As
for deposits, American National receives over 36%
from without its primary service area; similarly, Tootle
receives 21%. Adding to these the previously mentioned country correspondent balances, it appears that
over 50% of Tootle's and 55% of American's deposit
balances come from outside the St. Joseph area.
A review of thesefigurescompels the conclusion that
while the applicant banks are located in St. Joseph,
the larger share of the loan and deposit business is regional in nature. Thus placed in the regional market,
the consolidation of these banks must be viewed in
that perspective. The total deposits and loans of eight
large cities in that section—Dodge City, Wichita, Topeka, Hutchison and Kansas City, Kansas, Lincoln,
Grand Island and North Platte, Nebraska—aggregate
$1,180 million and $538 million. Of these amounts,
the consolidated bank will hold a mere 0.057% and
0.061%, respectively. These fractions represent a de
minimis increase in concentration of 3%.
There is no lack of competition in the St. Joseph
area or the regional market which the resulting bank
will serve. Competition is strong, with no indication
of lessening. Consummation of the proposal will have
a revitalizing influence on St. Joseph banking competition for both commercial and trust business and thus
preserve a downtown core of commercial and financial
strength to offset the loss of business to suburban
banks.
It can well be said that this consolidation will not
reflect or result in a trend toward concentration and
will not create a significant increase in the resulting
bank's share of the relevant market. The existence of
the large number of competitors in this market, their
size and the resulting bank's fractional share of the
available business belie such contentions. The resulting bank's $73 million in deposits will compare with
the $81.5 million deposit structure of the largest bank
in Kansas City, Kansas, the $95.8 million in deposits of
the largest bank in Topeka and the $125.5 million of
deposit accounts of the largest bank in Lincoln, Nebraska. All of these banks are in the merged bank's
regional service area and presently compete with it.
The consolidation will also solve a serious management loss which confronts the charter bank and a
building expansion problem which thwarts the independent growth of American National. The larger
lending limit of the resulting bank will not only be a
great aid in retaining within St. Joseph the cattle and
grain business upon which its viability depends but
also will attract business so necessary for community
expansion and improvement.
Having considered this application to consolidate
in the light of the statutory criteria, we conclude that
it is in the public interest. The consolidation is
approved.
DECEMBER 6, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The Tootle-Enright National Bank is the largest of
the three major commercial banks in the St. Joseph,
Missouri, area and possesses 26.8% of the IPG de-
posits and 25.0% of the loans of the nine existing commercial banks in the area. The American National
Bank, which it seeks to acquire, is the third largest
bank and possesses 20.6% of the IPG deposits and
18.8% of the loans in the area.
A combination of the two banks would thus bring
together into one commercial banking institution approximately 47% of the IPC deposits and 44% of the
loans in the St. Joseph trade area. In addition the
percentage of area IPC deposits held by the two largest banks would increase from approximately 52%
to 72% and the concentration in the loans held by
these two banks would increase from 51% to 70%.
The remainder would be dispersed among the remaining six smaller banks in the area whose competitive
significance is relatively fragmented. Moreover, there
are communities of interest between two of these
smaller banks and two of the largest banks in the area.
In view of this precipitous increase in banking concentration in the St. Joseph area, and the substantial
competition to be eliminated by the merger, it is our
opinion that the effect on competition of the merger
here proposed would be seriously and substantially
adverse.
T H E LANCASTER COUNTY NATIONAL BANK, LANCASTER, PA., AND FARMERS BANK & TRUST CO. OF LANCASTER,
LANCASTER, PA.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Lancaster County National Bank, Lancaster, Pa. (683), with
and the Farmers Bank & Trust Go. of Lancaster, Lancaster, Pa., which had..
consolidated Dec. 11, 1963, under the charter of The Lancaster County National Bank (683), and under title of "Lancaster County Farmers National
Bank." The consolidated bank at the date of consolidation had
COMPTROLLER'S DECISION
On September 19, 1963, the Lancaster County National Bank, Lancaster, Pennsylvania, and Farmers
Bank and Trust Company of Lancaster, Lancaster,
Pennsylvania, applied to the Comptroller of the Currency for permission to consolidate under the charter
of the former and with the title "Lancaster County
Farmers National Bank."
The main office of the $58.5 million The Lancaster
County National Bank and 2 of its 7 branch offices
and the main office of the $32.2 million Farmers Bank
and Trust Company and both of its branches are
located in Lancaster, the seat of Lancaster County, one
$59,152,656
31, 965, 575
91,118,232
8
3
11
of the country's most prosperous and fastest growing
areas. The county ranks among the highest in the
United States in agricultural production and the intensively cultivated family owned and operated farms
are models of agricultural technology and farm management. The county has shown considerable industrial growth during the last two decades. There has
been a constant influx of new industries and existing
industries have rapidly expanded their plant facilities.
Not only has it the lowest percentage of unemployment of any major labor market area in Pennsylvania
but it has experienced the most substantial gain in employment in the State during the past 6 years. The
213
area, as the center of Pennsylvania German culture,
has become the 19th major tourist attraction in the
United States.
The financial structure t»f the county is as vibrant
and viable as the economy. There are 22 national
banks operating 46 offices, 2 State member banks with
4 offices, 2 nonmember banks and 1 branch of the
Berks County Trust Company, Reading. Nineteen
of these 27 commercial banks have less than $10
million in deposits and the remaining banks range
between $10 million and $57 million. The noncommercial bank segment of the financial structure consists of 8 savings and loan associations having
repurchasable share accounts of $132 million and loans
of $128 million, 2 mortgage service companies, numerous credit unions, 7 sales finance companies, 15 personal loan companies and several Federal agencies
including the Federal Land Bank, the Production
Credit Association, and the Farm and Home Administration. Moreover, the larger banks from Harrisburg, Philadelphia, Reading and York actively solicit
business in the county.
The City of Lancaster is an industrially diversified
city located about 35 miles southeast of Harrisburg
and 65 miles west of Philadelphia. While the population of the city has decreased 4 percent to 61,000
during the last census period, the county population
has increased 18 percent to 279,000. As a means of
halting and reversing this attrition, the city is engaged
in developing new industrial tracts, constructing additional parking facilities and renewing urban areas.
The 4 city banks have been active participants in these
endeavors. They are the 2 applicants, the $59 million
Fulton National Bank and the $35 million The Conestoga National Bank of Lancaster.
Since the City of Lancaster is the financial and trading center for the entire county, the competitive impact of this proposal must be viewed on a regional level
in conformity with realistic economic patterns. On
this basis, the resulting bank will control approximately
23 percent of the county's commercial bank deposits.
The remainder will be distributed among the other
25 banks. The real importance of this proposal lies
in the fact that the resulting bank will have the re-
214
sources necessary to contribute more fully to the economic changes taking place within the county. The
farmer will have access to increased resources which
will enable him to finance his need for additional
capital investment in the local market. The City of
Lancaster will have a bank more capable of responding to the redevelopment program and the people of
the community will have a competitive banking structure on a level more commensurate with community
needs.
Applying the statutory criteria to the proposed
merger, we conclude that it is in the public interest
and it is therefore approved.
DECEMBER 6,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Lancaster County National Bank, with $58 million
in assets, now operates eight offices, five of which are
located in or near the City of Lancaster. The remaining three offices were acquired as a result of two
mergers in 1961 and 1962. Fanners Bank and Trust
Company, with $32 million in assets, operates three
offices, all of which are located in the City of Lancaster. The main offices of the consolidating banks are
one-tenth of a mile apart and branches of Farmers
Bank are located near branches of Lancaster County
National Bank. The consolidating banks are apparently substantial competitors and each is an important
alternative source of banking service. There is a significant number of depositors and borrowers common
to both banks.
The consolidation will increase the share of IPC
deposits and loans of the banks in the broadest service
area held by Lancaster County National from 15.0%
and 16.3% to 23.2% and 23.6% respectively. It will
thus move the banks well in front of the 25 other banks
in the County. Moreover, it appears that the six City
offices of the resulting bank will have more than 40%
of the IPC deposits and loans held by the nine banking
offices in the City, where an important banking competitor will be eliminated. We therefore conclude
that the proposed consolidation will have substantial
adverse effects upon competition.
SECURITY STATE BANK OF TURLOCK, TURLOCK, CALIF., AND T H E BANK OF CALIFORNIA, NATIONAL ASSOCIATION, SAN FRANCISCO, CALIF.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Security State Bank of Turlock, Turlock, Calif., with
and The Bank of California, National Association, San Francisco, Calif. (9655),
which had
merged Dec. 13,1963, under charter and title of the latter bank (9655). The
merged bank at date of merger had
COMPTROLLER S DECISION
On September 23, 1963, The Bank of California,
National Association, San Francisco, California, and
Security State Bank of Turlock, Turlock, California,
applied to the Comptroller of the Currency for permission to merge under the charter and with the title
of the former.
The $839 million The Bank of California, National
Association, maintains its headquarters in San Francisco and operates 36 branches which serve 22 northern
California communities, Los Angeles in southern California, the cities of Seattle and Tacoma in the State
of Washington and the city of Portland, Oregon. Although it is the seventh largest bank in the State of
California, it maintains but 2.6 percent of the total
bank deposits and 2.3 percent of loans held by the 169
banks in the State. Most of its deposits and loans
originate in the San Francisco Bay Area and approximately 10 percent of deposits and loans are held in
branches in Central California and the San Joaquin
Valley, an area in which the Security State Bank of
Turlock transacts a small portion of its business.
The $9.7 million State Bank maintains its head office
in Turlock, which is located in Stanislaus County in the
San Joaquin Valley, 100 miles east-southeast of San
Francisco. This predominantly agricultural county
has a population of about 157,000 and ranks tenth in
farm production among all counties in the United
States. Most of the 9,500 residents of Turlock make
their living by processing agricultural products and by
supplying services to the agricultural community.
Security State Bank operates a branch in Ceres,
which is nine miles northwest of Turlock between Turlock and Modesto, the county seat. Modesto, the location of the nearest Bank of California branch, is the
principal trading center for Stanislaus County.
$9,767,171
3
838, 590,233
38
848,452,415
41
At the present time there are 9 banks operating 22
offices in the Modesto-Turlock area. The competition
generated by these commercial banks is considerably
enhanced by the savings and loan associations which
account for 45 percent of recorded real estate mortgages in the county. Insurance companies, personal
loan companies and sales finance companies contribute
effective competition also.
Approval of the proposed merger will provide Turlock with a resulting bank more capable of competing
and more able to provide modern banking services.
Applying the statutory criteria to the proposed
merger, we conclude that it is in the public interest
and it is therefore approved.
NOVEMBER 29,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This merger between a $775 million San Francisco
bank, with a recent history of acquisition and merger
with other banks, and the largest remaining independent bank in Stanislaus County would leave but one
small independent bank in that county. Of the 28
banking offices in the county, 27 would be branch offices of 10 banks, all of which maintain head offices
outside of the county. Thus, for all practical purposes,
Stanislaus County would be left without an independent bank and all control would be centered outside the
area.
Further, consummation of the merger would eliminate a substantial amount of competition presently
existing between Bank of California and Security State.
And, because certain branch offices of Bank of California overlap in service area with Security State, consummation of the merger would eliminate potential
competition between them.
For these reasons, the probably competitive effect
of the proposed merger would be adverse.
215
FARMERS & MERCHANTS BANK OF STAUNTON, STAUNTON, VA., AND T H E VIRGINIA NATIONAL BANK,
NORFOLK, VA.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Farmers & Merchants Bank of Staunton, Staunton, Va., with
and The Virginia National Bank, Norfolk, Va. (9885), which had
merged Dec. 13, 1963, under the charter and title of the latter bank (9885).
The merged bank at the date of merger had
COMPTROLLER'S DECISION
On September 19, 1963, the $366 million Virginia
National Bank, Norfolk, Virginia, and the $5 million
Farmers and Merchants Bank of Staunton, Staunton,
Virginia, applied to the Comptroller of the Currency
for permission to merge under the charter and with
the title of the former.
The charter bank is presently the second largest
bank in Virginia and operates a statewide system consisting of 38 offices located in 4 primary service areas.
A detailed description of these areas is contained in
the decision on the application of the charter bank to
merge Tidewater Bank and Trust Company, Franklin,
Virginia, approved today. The only noticeable effect
of the instant merger will be in the area of the merging bank.
The Farmers and Merchants Bank is located in
Staunton, Virginia, 200 miles northwest of Norfolk.
It serves an area within a 10-mile radius of Staunton
containing a population of approximately 60,000.
This area is predominantly agricultural, with dairying,
orchards, livestock and poultry raising accounting for
the greater part of farm income. Plants located in
or near the city produce such diverse products as razors
and razor blades, furniture, wearing apparel, air conditioners, and food products. Nearby scenic and historic attractions bring many tourists to the area and
several colleges and preparatory schools in the vicinity contribute toward the favorable economic outlook of this region.
The merging bank ranks fifth in size among five
banks serving Staunton. With the merger of the Augusta National Bank into First and Merchants National Bank, Richmond, approval of the instant proposal will bring the two largest banks in Virginia into
direct competition with each other for the first time.
The two offices of Farmers and Merchants together
with Virginia National's two offices in Waynesboro,
11 miles east of Staunton, account for 22.6 percent
of deposits in the local area. This is only 1 percent
216
$5,724,000
383, 306, 745
2
39
389,030,745
41
higher than the share of the local unit National Valley
Bank, Staunton. Furthermore, Farmers and Merchants competes to a limited degree with two subsidiaries of Financial General Corporation, New York,
which controls seven Virginia banks holding 4.7 percent of the State's total bank deposits. Far from
eliminating competition, this merger will serve to
strengthen competition in the Staunton area. The
other Staunton banks are well established and should
not suffer any adverse effects.
The Staunton community and its industrial enterprises need services and credit accommodations which
the merging bank cannot furnish because of its limited
resources and lending powers. The resulting bank
will afford a lending limit of $2,725,000 as compared
with the merging bank's limit of $60,000, and will
offer such additional services as corporate payroll accounting, inventory control, management information,
etc. The bond department of the merged bank can
render invaluable assistance to the area's political subdivisions in meeting financial requirements.
Applying the statutory criteria to the proposed
merger, we conclude that it is in the public interest
and the application is therefore approved.
DECEMBER 4, 1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Virginia National is the second largest bank in Virginia and is the dominant bank in its service area,
which includes Norfolk, the largest industrial area in
the State. As of June 29, 1963, assets were $366,293,000, deposits $324,561,000, loans and discounts
$196,031,000, and capital accounts $29,948,000.
Farmers and Merchants Bank is located in the Town
of Staunton, Virginia, 13 miles distant from Waynesboro, where two branches of Virginia National Bank
are located. As of June 29, 1963, assets were $5,720,000, deposits $5,018,000, loans and discounts $3,390,000, and capital accounts $662,500.
Standing alone, the effect of this proposed merger
on competition will not be significant. However, co-
incidental with the filing of the Application of Virginia National Bank to merge with Tidewater Bank
& Trust Company was thefilingof another application
for Virginia National Bank to merge Tidewater Bank
& Trust Company, Franklin, Virginia.
It is the cumulative effect of the series of mergers
already consummated by Virginia National in 1963
plus the two pending proposed mergers that is of concern to this Department.
As of December 31, 1962, Virginia National had
total assets of $233,809,000. Three banks have been
merged in 1963 with total resources of about $141,000,000, and the two pending applications for mergers, of
which this is one, will add resources of about
$22,000,000 to Virginia National. Each merger consummated has eliminated an independent bank, one
of sizable proportions, and has increased the concentration of banking in Virginia. Should the pending
mergers be approved, Virginia National, in less than
a year, will have increased its assets through mergers
approximately 65 percent and very substantially extended its area of operations.
It is our view that the overall effect of this series
of mergers on competition is adverse since it contributes to the serious trend toward concentration in
the State of Virginia.
TIDEWATER BANK & TRUST CO., FRANKLIN, AND T H E VIRGINIA NATIONAL BANK, NORFOLK, VA.
Banking offices
Name of bank and type of transaction
Total assets
In operation 7*o be operated
Tidewater Bank& Trust Co., Franklin, Va., with
and The Virginia National Bank, Norfolk, Va. (9885), which had
merged Dec. 13,1963, under charter and title of the latter bank (9885). The
merged bank at the date of merger had
COMPTROLLER'S DECISION
On September 19, 1963, the $366 million Virginia
National Bank, Norfolk, Virginia, and the $17 million
Tidewater Bank and Trust Company, Franklin, Virginia, applied to the Comptroller of the Currency for
permission to merge under the charter and with the
title of the former.
The charter bank is presently the second largest
bank in Virginia and operates a statewide system consisting of 38 offices located in four primary service
areas.
Headquartered at Norfolk, a city of 300,000, Virginia National has 19 offices in the Tidewater region
serving a population of approximately 800,000. In
the 10 years from 1950 to 1960 the metropolitan area
of Norfolk-Portsmouth experienced a population increase of 29.7 percent compared with the State average
for the same period of 19.5 percent. The port of Norfolk ranks first among United States ports in tonnage
exported and second only to New York in export values. As a result of improved harbor facilities now
under construction and prospective consummation of
proposed railroad mergers, it may be expected that
freight traffic to and from the area will increase substantially during the next decade. Completion of the
Chesapeake Bay Bridge-Tunnel this year will further
725-698-
$17,141,802
366,292,846
383,306,745
3
36
39
enhance the area as a distribution center. The United
States Naval Base, together with other naval and military installations, swells the employment rolls of Norfolk-Portsmouth. In addition, this area is well
populated with manufacturing establishments, making it one of the State's leading centers for both light
and heavy industry.
The applicant has 15 offices in the central region of
Virginia which includes all of the counties of Albemarle, Buckingham, Fluvanna, Greene, Louisa, Madison, and Orange, and parts of Augusta, Nelson, Page,
and Rockingham Counties, containing a population
of 300,000. Primarily agricultural, this region has
become increasingly industrialized in recent years.
Charlottesville, a city of 30,000 at the center of a trade
area estimated at 150,000, is the home of the University of Virginia. Additions to its physical plant and
increasing enrollments have made the University a
significant factor in the economy of the region.
The Washington County area in southwestern Virginia, adjoining the Tennessee border, is served by two
offices of the charter bank. Bristol is a city of 35,000
astride the Tennessee-Virginia line. Because of this
location it is the shopping center for an estimated
113,000 people in the surrounding sections of both
States. Additionally, it is the terminal for two rail-
217
roads which serve numerous manufacturing plants
producing a wide variety of products. Abingdon,
population 4,800, lies 15 miles northwest of Bristol.
Tobacco warehousing holds first place among its commercial activities. The presence of diversified light
industries which continue to locate there gives Abingdon a well balanced economy. The Barter Theatre,
among other tourist attractions, and Emory and
Henry College, with an enrollment of 800 students
contribute substantially to the economy of this community. Sixty-nine percent of Washington County is
devoted to farmland the annual production of which
is valued at $9 million. The raising of burley tobacco,
beef and other livestock, and dairying are the principal
activities.
The Nansemond County area lying immediately
west of Norfolk is served by two offices of Virginia
National. The area embraces the city of Suffolk,
population 12,600, and surrounding Nansemond
County as well as adjoining sections of Isle of Wight
County. Suffolk, approximately 25 miles west of
Norfolk, is known as the Peanut Capital of the World
because of its bountiful peanut crop and the numerous
processing plants. Theraising of hogs is also a mainstay of the economy. Despite the heavy reliance on
peanuts, Suffolk continues to attract light industry.
Franklin, site of the merging bank's head office, lies 20
miles west of Suffolk, in Southampton County.
With 8 percent of the State's total banking resources,
Virginia National is the second largest bank in Virginia. First and Merchants National Bank, Richmond,
is in first place with 9.9 percent and State-Planters
Bank of Commerce and Trusts, Richmond, is third
largest with 6.3 percent of the State's total banking
resources. However, aggressive competition is furnished throughout applicant's service areas by 99 banking facilities with aggregate deposits of approximately
$836 million and aggregate loans of $594 million.
Further, Virginia National competes with four bank
holding companies which have aggregate deposits of
$1,200 million and loans of $800 million. This merger
will only slightly augment the applicant's present resources and Virginia National will still occupy second
place among Virginia banks.
Franklin, population 7,300, lies 25 miles west of
Norfolk, in Southampton County. With one branch
each at Capron and at Boykins, 17 and 22 miles west
of Franklin, respectively, Tidewater serves a population of 30,000 in an area composed of Southampton
County and a small portion of adjacent Isle of Wight
County. While 70 percent of the area is devoted to
farmland, in the independent city of Franklin are lo-
218
cated branches of Union Bag-Camp Paper Co., St.
Regis Paper Co., and Hercules Powder Co., in addition
to a number of small plants participating in the peanut
industry.
Tidewater Bank presently enjoys 60 percent of total
deposits and 67 percent of total loans in the area. The
Farmers Bank of Holland, Inc., 8 miles east of Franklin, has 10.4 percent of deposits and 8.8 percent of
loans and is engaged in a proposed merger with Seaboard National Bank of Norfolk. The Southampton
County Bank at Courtland, 8 miles west of Franklin,
has 10.2 percent of deposits and 8.5 percent of loans.
Its area of operations is local and limited and should be
only slightly affected by this merger. With 19 percent
of deposits and 15.7 percent of loans, the Merchants
and Farmers Bank of Franklin constitutes Tidewater's
chief competitor. However, any adverse competitive
impact of the merger is softened by the fact that Merchants and Farmers is a subsidiary of United Virginia
Bankshares, Inc., which controls six Virginia banks
holding in the aggregate 10.4 percent of the State's
total bank deposits.
While Tidewater Bank has been able to serve adequately the agricultural segment of the community, the
industrial credit needs of the area have for the most
part been cared for by the larger banks in Virginia and
neighboring North Carolina. The increased lending
limit of the resulting bank will mean the retention of
prime credits in the community where they will have a
salutary effect on the continued industrial development
of the Franklin area.
Applying the statutory criteria to the proposed merger, we conclude that it is in the public interest and
the application is therefore approved.
DECEMBER 4,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Virginia National is the second largest bank in Virginia and is the dominant bank in its service area which
includes Norfolk, the largest industrial area in the
State. As of June 29,1963, assets were $366,293,000,
deposits $324,561,000, loans and discounts $196,031,000 and capital accounts $29,948,000.
Tidewater Bank & Trust Company is located in the
town of Franklin, which is 47 miles southwest of Norfolk. As of June 29, 1963, assets were $17,142,000,
deposits $15,153,000, loans and discounts $8,898,000
and capital accounts $1,521,000.
Standing along the effect of this proposed merger on
competition will not be significant. However, coincidental with the filing of the Application of Virginia
National Bank to merge with Tidewater Bank & Trust
Company, was the filing of another application for Virginia National Bank to merge Farmers and Merchants
Bank of Staunton, Staunton, Virginia.
It is the cumulative effect of the series of mergers
already consummated by Virginia National in 1963,
plus the two pending proposed mergers, that is of concern to this Department.
As of December 31, 1962, Virginia National had
total assets of $233,809,000. Three banks have been
merged in 1963 with total resources of about $141,000,000 and the two pending Applications for mergers,
of which this is one, will add resources of about $22,-
000,000 to Virginia National. Each merger consummated has eliminated an independent bank, one of
sizable proportions, and has increased the concentration of banking in Virginia. Should the pending
mergers be approved, Virginia National, in less than a
year will have increased its assets through mergers approximately 65 percent and very substantially extended
its area of operations.
It is our view that the overall effect of this series of
mergers on competition is adverse since it contributes
to the serious trend toward concentration in the State
of Virginia.
MOGADORE SAVINGS BANK, MOGADORE, OHIO, AND FIRST NATIONAL BANK OF AKRON, AKRON, OHIO
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Mogadore Savings Bank, Mogadore, Ohio, with
and the First National Bank of Akron, Akron, Ohio (14579), which had
merged Dec. 20,1963, under charter and title of the latter bank (14579). The
merged bank at the date of merger had.
COMPTROLLER'S DECISION
On August 26, 1963, The Mogadore Savings Bank,
Mogadore, Ohio, and the First National Bank of
Akron, Akron, Ohio, applied to the Comptroller of
the Currency for permission to merge under the charter
and with the title of the latter.
First National has its main office at Akron, the county
seat of Summit County, and operates 17 branches
throughout the county. The Mogadore Savings Bank
is headquartered in Mogadore, a village bisected by the
boundary of Summit and Portage Counties, with its
main office located in Portage County and two
branches in Summit County. Because the charter
bank may branch only in Summit County, a branch application was also filed for a new branch diagonally
across the intersection from the location of the merging
bank's main office which is to be closed so as to eliminate the nonconforming branch location.
Akron is a highly industrialized city of 292,000 in
northeastern Ohio, only 35 miles south of Cleveland.
The metropolitan area of Akron is coextensive with
Summit County which has a population of 531,817.
Rubber and related industries, accounting for $500
million worth of products annually and using 40 percent of the world's rubber, have made Akron one of
the largest trucking centers in the country. Despite
the primacy of rubber, Akron's industries produce such
$24, 341, 954
340, 469,242
364,811,196
3
18
.:,.
21
diversified items as fishing tackle, matches, clay products, batteries, wood products, plastics, chemicals,
fabrics, toys, road-building machinery, and missile
components.
Of the 4 banks in Akron operating 28 offices, the
charter bank is presently more than twice the size of
the second largest Akron Dime Bank, an aggressive
competitor with 8 branches. The Firestone Bank is
largely owned by the Firestone family and has no
branches. The Goodyear State Bank is a wholly
owned subsidiary of the Goodyear Tire and Rubber
Company and is devoted almost exclusively to servicing
the banking requirements of that company and its employees. Competition is further intensified by ten savings and loan associations, holding share accounts of
nearly $330 million and loans of more than $312 million. Moreover, banks in nearby Cleveland and in
large financial centers such as Chicago and New York
also compete actively for the patronage of Akron's major industries. The resulting bank's capacity to compete will exceed that of the charter bank by a mere
three percent—an increase easily attainable in a brief
period of ordinary operations.
The Mogadore bank is located 8 miles southeast
of downtown Akron and is the only bank in a village
of 2,900. It serves an area embracing the eastern
section of Portage County, which is primarily agricul-
219
tural, and the western portion of Summit County.
The area between Mogadore and Akron has become
increasingly industrialized in recent years and is populated with the usual retail establishments and residential developments which follow in the wake of
industrialization. Tallmadge, 5 miles northwest of
Mogadore and site of one of the merging bank's
branches, is fast becoming a desirable residential community. As this change from agricultural to industrial,
commercial and residential is accelerated, the already
strong demand for larger credits will become more
pronounced.
In addition to extended credit lines, customers of
the Mogadore bank will be further benefited by the
availability of trust services which only First National,
among the Akron banks, can offer. The instant proposal will solve the merging bank's need for increased
capital and cure an acute management succession
problem occasioned by the advanced age of most of
the directors of the Mogadore Bank.
Applying the statutory criteria to the proposed merger, we conclude that it is in the public interest and
it is therefore approved.
DECEMBER 17,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The Magadore Savings Bank, Mogadore, Ohio, proposes to merge into the First National Bank of Akron,
Akron, Ohio, under the charter and title of "First National Bank of Akron." First National Bank of Akron
is the largest commercial bank in the Akron area, with
approximately 50% of all loans and discounts, deposits and assets. Merger with the Mogadore Savings Bank would eliminate competition between the
merging banks, further increase the financial imbalance between First and its competitiors and contribute
to the tendency to monopoly in commercial banking
in the Akron area. Its effect on competition would
therefore be seriously adverse.
PINGONNING STATE BANK, PINCONNING, MICH., AND PEOPLES NATIONAL BANK & TRUST CO. OF BAY CITY,
BAY CITY, MICH.
Banking offices
Total
Name of bank and type of transaction
assets
In operation
Pinconning State Bank, Pinconning, Mich., with
and Peoples National Bank & Trust Go. of Bay City, Bay City, Mich. (14641),
which had
merged Dec. 31, 1963, under charter and title of the latter (14641). The
merged bank at the date of merger had
COMPTROLLER S DECISION
On October 16, 1963, the $88 million Peoples National Bank & Trust Company of Bay City, Bay City,
Michigan, and the $7 million Pinconning State Bank,
Pinconning, Michigan, applied to the Comptroller of
the Currency to merge under the charter and with the
title of the former.
The applicant banks are located in Bay County in
the northeastern industrial area of Michigan approximately 100 miles north of Detroit.
Bay City, with a population estimated at 55,000, is
referred to as the hub of the Saginaw-Bay City-Midland trade area which is composed of a group of growing, highly industrialized, geographically related
communities located near the southwestern extremity
of Saginaw Bay. The Bay City area, with a population of approximately 100,000, is predominantly an
220
$7,192,000
1
88, 376,000
To be operated
6
95, 568,000
7
industrial-commercial economy although some truck
garden agriculture will be found. The manufacture
of motor vehicle component parts is singled out as the
most important industry in the Bay City area. The
Port of Bay City is one of the principal ports on the
Great Lakes. All indicators point to a favorable economic outlook for the area.
Pinconning is a community of about 1,300 persons
located 21 miles north of Bay City. Agriculture is the
predominant economic factor. Pickles, wheat and
sugar beets are major crops, while dairy farming is
also of considerable importance. Trends in population, retail sales and in manufacturing indicate slow
but steady growth and the general economic outlook
for Pinconning appears fairly good.
The charter bank operates four branches in Bay City
and one branch in the nearby community of Essexville. The charter bank dominates immediate compe-
tition in Bay City with 79% of deposits to 21% for its
single smaller competitor, the Bay City Bank. Insofar as the larger commercial and industrial customers
are concerned, banking competition in the Bay City
area includes the several institutions located in Midland, population 28,000, and Saginaw, population,
100,000. In this larger area, the charter bank holds
only an estimated 21% of total bank deposits of about
$325 million. The addition of the $6.4 million deposits of the merging bank would have virtually no
competitive effect in the service area of the charter
bank. The Bay City area is also served by the two
Midland banks with total deposits of about $44 million
and by three Saginaw banks with total deposits of
about $190 million, one of the latter a branch of the
Michigan National Bank, a statewide organization.
Nonbank competition in the Bay City area is furnished by 5 savings and loan associations, 26 loan
companies, 32 credit unions and various auto finance
companies located in Bay City, Midland and Saginaw.
Competitive factors among the area banks and nonbanking institutions have shown an increasing trend.
The charter bank provides a full range of banking
services including the exercise of trust powers.
The merging bank was organized in 1908 and has
remained a unit bank. It is the only bank in Pinconning. The nearest banks are the State Bank of
Linwood, located 10 miles to the south and the State
Bank of Standish, located 10 miles to the north. There
is some competition between these two banks and
the merging bank on the fringes of their service areas,
but for the most part these banks serve the population
in their own immediate trade areas. There is virtually
no competition between the charter bank and the
merging bank. The management of the merging
bank, while capable and experienced, is aging and
no successor management has been developed. Approval of the merger will not materially affect the
competitive situation in Bay City, and will enable the
charter bank to compete more effectively with the
larger Midland and Saginaw banks for the more important commercial accounts in the Bay City area.
More importantly, it appears that the Pinconning area
has a potential for future growth and development
which would be furthered by the far larger charter
bank with its larger lending limit, its greater amount
of available funds, its highly trained personnel and
its trust services. The needs of the local banking
public Would be better served by this merger, with the
merging bank becoming a branch of the charter bank.
Applying the statutory criteria to the proposal, we
conclude that it is in the public interest and the application is therefore approved.
DECEMBER 17,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The acquiring Bank, the larger of two banks in Bay
City, a community of 55,000, proposes to acquire the
merging bank, the only bank in a village of 1300
people 20 miles from Bay City. No significant competition between the participating banks will be eliminated. The acquiring Bank, already nearly 2}4
times as large as the second largest in its area of effective competition, will somewhat further enhance its
economic power of size over one other bank in Bay
City and two banks in Midland, Michigan. The
competitive effects of the merger would appear to be
slightly adverse.
THE TROY CITIZENS BANK, TROY, OHIO, AND T H E TIPP-CITIZENS NATIONAL BANK OF TIPP CITY, TIPP CITY,
OHIO, AND T H E CITIZENS NATIONAL BANK & TRUST CO. OF PIQUA, PIQUA, OHIO
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
The Troy Citizens Bank, Troy, Ohio, with
and The Tipp-Citizens National Bank of Tipp City, Tipp City, Ohio (3004),
with
and The Citizens National Bank& Trust Co. of Piqua, Piqua, Ohio (1061),
which had
merged Dec. 31, 1963, under charter of The Citizens National Bank & Trust
Co. of Piqua and under the title "The Miami Citizens National Bank &
Trust Company". The merged bank at the date of merger had
$5,653,000
2
3,951,000
1
13,168,000
2
22,548,000
5
221
COMPTROLLER S DECISION
On October 21, 1963, The Citizens National Bank
and Trust Company of Piqua, Piqua, Ohio; The Troy
Citizens Bank, Troy, Ohio; and The Tipp-Citizens
National Bank of Tipp City, Tipp City, Ohio, applied
to the Comptroller of the Currency for permission to
merge under the charter of The Citizens National
Bank and Trust Company and with the title of "The
Miami Citizens National Bank and Trust Company."
All of the applicant banks are located in Miami
County, Ohio, which has a population of 73,000. The
County is one of the most productive farm areas in
Ohio. Piqua, population 19,000, is the largest city
in Miami County. Such medium-sized industries as
paper products, steel tubing, aircraft propellors and
meat products provide a diversified economic base,
and the long-range outlook for the city is promising.
Troy, population 13,685, has several small industrial
concerns and serves as a trade center for the agricultural environs. Tipp City, population 4,300, also
depends on trade from the surrounding rural areas,
as well as on one industry, the A. O. Smith Company,
which employs about 1,000 persons.
The $13.1 million Citizens National Bank and Trust
Company of Piqua is the smallest of two banks in
Piqua. It is surpassed in size by the $16.7 million
Piqua National Bank and Trust Company. The $6
million Citizens National Bank in nearby Covington
also competes with the charter bank.
The two merging banks—the $5.6 million Troy
Citizens Bank and the $3.9 million Tipp-Citizens National Bank of Tipp City—are 8 miles apart and compete with the dominant bank in the area, the $27.4
million First Troy National Bank and Trust Company. The $3.6 million Citizens National Bank in
West Milton also competes with the merging banks.
The need for more banking services in Troy and
Tipp City, as well as for an increased lending limit in
222
Piqua, argues convincingly for the merger of the three
Miami County banks. It is a recognized fact that effective management is increasingly difficult to obtain
for small banks; the merging banks have certainly not
been left untouched by this problem. The pooling of
their resources and strengthening of their corporate
organization will help solve this management problem
for the applicant banks. Such services as a Trust Department, hitherto unavailable in the merging banks,
will be extended to Troy and Tipp City.
The competitive effect of the merger will be beneficial. There is almost no competition at present among
the applying banks. After the merger, the resulting
bank will have 28.3 percent of the deposits and 32.5
percent of the loans in its service area as against 35.4
percent and 33.6 percent, respectively, held by The
First Troy National Bank and Trust Company. While
the resulting bank will not have a dominant position,
it will give the banking public in Miami County a
greater choice of complete bank services.
Having considered this application in light of the
statutory criteria and having determined that this proposal will promote the public interest, the application
is approved.
DECEMBER 19,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger of the three comparatively
small independent banks in Miami County, Ohio will
eliminate some competition presently existing between
the banks which are located approximately 8 miles
north and 8 miles south of Troy, Ohio, respectively.
This competition, however, does not appear to be substantial nor is it believed that the banks presently competing with the applicant banks will be at a substantial
competitive disadvantage in the combined service area
as a result of the proposed merger.
Thus, the effect of the proposed merger upon competition would not appear to be substantially adverse.
//. Disapprovals
THE RIGGS NATIONAL BANK OF WASHINGTON, D.G., WASHINGTON, D.C, AND BANK OF COMMERCE, INC.,
WASHINGTON, D.C.
Banking offices
Name of bank and type of transaction
Total assets
In operation To be operated
Bank of Commerce, Inc., Washington, D.C, with
and The Riggs National Bank of Washington, D.C, Washington, D.C (5046),
which had
were denied application to consolidate May 23,1963, under charter and title of
the latter bank (5046).
COMPTROLLER S DECISION
On February 26, 1963, The Riggs National Bank
of Washington, D.C, Washington, D.C, and the
Bank of Commerce, Incorporated, Washington, D.C,
applied to the Comptroller of the Currency requesting
permission to consolidate under the charter and title
of the former.
Although Washington, the capital city of our nation, has grown through the years, its 1960 population
of 763,956 reflects a decrease of 4.8 percent since 1950.
This residential city, housing no industry, derives its
economic support from large governmental installations, both civil and military, and from service and
commercial business supplying both its residents and
government offices.
The Washington Standard Metropolitan Statistical
Area consists of the District of Columbia, Montgomery
and Prince Georges Counties in Maryland, the cities
of Alexandria and Falls Church in Virginia and the
counties of Arlington and Fairfax in Virginia. The
1960 Census showed the population of this metropolitan area had increased 36.7 percent over 1950 to its
present number of 2,001,897. These figures, plus the
steady growth of our federal government during the
same period, clearly establish the dramatic growth of
Washington's suburbs which shows no signs of abating.
While these suburbs are principally residential, they
have in recent years attracted some light industry and
research establishments. Several large military facilities give an added lift to the economy.
In December 1962, some 821,000 residents were employed in the metropolitan area. Approximately
$49, 682, 000
4
598, 025, 000
14
259,000 or one-third of this local labor force were on
the payrolls of the Federal Government. It should be
noted that while the City accounts for only 38 percent
of the metropolitan area population, it affords 61 percent of the employment opportunities.
The applicants contend that this proposal must be
viewed in the light of the banking structure of Washington and its suburbs considered jointly. There are
12 banks headquartered in Washington. These banks,
operating 75 branches or facilities, had total deposits
of $1.8 billion in mid-March 1963. Of these banks,
the applicant, Riggs National, was the largest with
$544 million in deposits and 13 operating branches.
American Security & Trust Company, with 19 branches
and $435 million in deposits, is second in size and the
National Bank of Washington, with 18 branch facilities
and $346 million in deposits, is third. Together these
three banks accout for 74 percent of District of Columbia bank deposits. The fourth and fifth banks in size
are, in order, the Union Trust Company with four
branches and $131 million in deposits and The National Savings & Trust Company, with three offices
and $116 million in deposits. The remaining seven
banks in descending order of size are the First National Bank with five branch facilities, the Bank of
Commerce with three branches, Security Bank with
two branches, McLachlen Banking Corporation with
two branch facilities, National Capital Bank and the
Industrial Bank, each with one branch, and the District of Columbia National Bank, recently chartered.
These seven banks account for 12.2 percent of the
District's commercial bank deposits and control 22.6
percent of the commercial banking facilities.
223
Of these 12 District of Columbia banks, all but one,
the National Capital Bank, are headquartered within
1 mile of the White House; 8, in fact, are within a halfmile radius. In addition to the main offices, there
are 27 branch offices within the same 1-mile radius
and 11 within a half-mile radius. Riggs is located
within a block of the White House on the corner of
Fifteenth Street NW., and Pennsylvania Avenue, directly opposite the main building of the Treasury Department. The Bank of Commerce, whose deposits
total $45 million, operates its main office at the intersection of Seventeenth and K Streets NW., four blocks
from the White House and five blocks from Riggs'
main office. Commerce's main office site is presently
regarded by many as the prime banking location in
the City.
In the two Maryland counties there are main offices
of eight banks. The Suburban Trust Company, with
33 branches and $209 million in deposits, is the largest.
The Citizens Bank of Maryland, with eight offices,
and the American National Bank of Silver Spring,
with four offices, are both in the $50 million deposit
bracket. The other 5 banks, with 13 offices among
them, account for an aggregate of $67 million in
deposits. Additionally, 3 large Baltimore banks,
whose deposits aggregate $1.2 billion, operate 11
branch offices in these two counties.
The Virginia suburbs of Washington are equally
well-banked through 72 offices operated by 17 banks.
While none of these Virginia banks separately has resources equal to the large District of Columbia or
suburban Maryland banks, eight of them, as affiliated
banks, can make available to the community the large
resources of their parent corporations. Three of these
eight banks are subsidiaries of the First Virginia Corporation and two are subsidiaries of the United
Virginia Bankshares, Inc., both of which are registered
bank holding companies. The other three affiliated
banks are subsidiaries of the Financial General Corporation. In addition to these banks, First and
Merchants National Bank, Richmond, Virginia, with
total deposits of $387 million, operates a facility in the
Pentagon through which it makes its resources available to borrowers in the Washington area.
To complete the commercial banking picture of
metropolitan Washington, mention must be made of
the large role played by the Financial General Corporation. Not only does this investment company,
exempt from the Bank Holding Company Act of 1956,
control $103 million in aggregate deposits of the Alexandria National Bank, the Arlington Trust Company,
224
Inc., and the Clarendon Trust Company in Virginia,
but also $184 million in deposits in its District of
Columbia affiliates, the Union Trust Company and
the First National Bank of Washington. The same
corporation controls the American National Bank of
Silver Spring, with deposits of $49 million, which bank
recently received permission to merge with the $7
million Canton National Bank in Baltimore, Maryland. These Washington area affiliates of Financial
General account for $336 million of the area's commercial bank deposits.
Competing with the commercial banks in the Washington Metropolitan area are a plethora of nonbank
financial institutions. Within the District of Columbia there are 24 savings and loan associations having
$1.6 billion in withdrawable shares—slightly less than
the total deposit accounts in the commercial banks.
In addition to these 24 savings and loan associations,
which maintain 28 offices in the District and in nearby
Maryland, there are 7 savings and loan associations in
Maryland and 12 in suburban Virginia, all accounting
for another $305 million in withdrawable shares.
Competition from insurance companies and credit
unions situated in the area is also a significant factor
to be considered in appraising the Washington area
banking scene.
Riggs National Bank, which was originally established in 1836 as a private bank, was chartered as a
national bank in 1896. In 1954 it consolidated with
the Washington Loan and Trust Company whose main
office was located at Ninth and F Streets NW., and
whose one branch was situated on the corner of Seventeenth and G Streets NW. By this union Riggs acquired $50 million in deposits. In 1958 Riggs National consolidated with the three-office Lincoln
National Bank whose deposits aggregated $42 million.
By this transaction Riggs gained another branch on
Seventeenth Street at the corner of H Street, a little
more than one block north of the branch previously
acquired from Washington Loan and Trust Co. The
other two branches acquired from Lincoln National
are situated at Seventh and D Streets NW., and at
1348 Fourth Street NE. The Bank of Commerce,
which was incorporated under Virginia law in 1907 as
the Dime Savings Bank, has never participated in a
merger or consolidation with another bank.
By this application, Riggs National Bank, the largest
bank in Washington, D.C., with total deposits of $544
million, seeks to consolidate with the $45 million Bank
of Commerce, the seventh largest in the District. As
set forth in the application, the basic reasons adduced
to support this consolidation are to solve the top management problem besetting the Bank of Commerce, to
provide a better system of retail operations through
strategically located branches, to aid and intensify
banking competition in the metropolitan area, and to
improve the services available to the customers of the
Bank of Commerce. Whether these claimed justifications will, in fact, promote the public interest is
the crucial question.
The management factor adduced in support of this
merger is somewhat unique. Evidence in the record
clearly supports the applicants' claim that the persistent ill health of the senior officer of Commerce makes
it imperative for Commerce to resolve this top management problem. Though Commerce has been
offered for sale for some years, it was not until it made
overtures to Riggs that a mutually acceptable basis
for union could be reached. This proposed resolution
of the top management problem, however, is confused
by other factors. The ailing president of Commerce
had not only been awarded a substantial long-term
employment contract but he is scheduled, according
to the application, to continue, with executive powers,
as vice chairman of the board of the resulting bank.
To avoid the very apparent inconsistency between the
claimed inability of Commerce's president to continue
effective operation of his bank and the proposal to
utilize his active services in the resulting bank, he has
agreed, as the record reveals, to forego the benefits of
this contract.
Though the demonstrated illness of the top officer of
a bank, with all the attendant management succession
problems, would be most significant in weighing the
acquisition of a bank of more limited resources, it is
not equally significant in this case. A $45 million
bank, located in the nation's capital, does not need to
endure a persistent management problem until the
type of consolidation now proposed is found to offer a
solution. Other obvious solutions are clearly available to it, and the board of directors and the shareholders should consider alternate courses.
The second reason adduced in support of this proposal is the claim that this consolidation will provide
the people of the area with a better system of retail
banking operations through strategically located
branches. At this time Riggs operates 13 branch offices; 12 in the northwest quadrant of the city and 1 in
the northeast. Five of the 13 branches are located in
the downtown business section of Washington and 8
are on arterial streets in the residential area. Of Riggs
deposits which may be allocated to its branch offices,
725-698—64
16
it is significant that a very substantial percentage of
them derive from its four branches on Seventeenth
Street and on Connecticut Avenue. When Riggs National opens the branch office, for which it has already
obtained approval, in the new Hilton complex now
under construction, it will have another office on Connecticut Avenue just above Dupont Circle along this
economically healthy artery.
The Bank of Commerce operates three branch offices in the north and northeast sections of the District
of Columbia. Though the time deposits of the North
Capital Street and Brightwood branches have shown
minimal growth during the last 5 years, the Rhode
Island branch has reported a substantial increase.
During the same 5 year period total deposits at the
main office of Commerce have increased very substantially.
The geographical relation of the Commerce branch
offices to those of Riggs is significant. While the
North Capital Street and Rhode Island Avenue
branches of the Bank of Commerce are both located
within a mile of the Northeast branch of Riggs, they
are separated by the Union Station railroad yards.
Whether the railroad yards serve effectively to separate the service areas of these competing branches may
be doubtful in view of the several thoroughfares that
traverse the yards by underpasses or bridges. Moreover, Riggs and Commerce have offices in close proximity in the Brightwood area. Whether the fact that
the Riggs' office is a military facility on the grounds of
Walter Reed Army Hospital, while that of Commerce
is located on Georgia Avenue, negates competition between them is not clear as many of the base personnel
live in the surrounding neighborhoods.
The main office of Commerce, located on the southwest corner of Seventeenth and K Streets NW., is engaged in vigorous competition with Riggs5 Lincoln
branch, two blocks south, its Seventeenth and G Street
branch, three blocks south, the Dupont Circle branch,
Riggs' head office, and, potentially, its branch to be
located in the Hilton complex.
While this consolidation is claimed to extend Riggs'
geographical branch coverage of the District of Columbia by giving it the three branches of the Bank of
Commerce, its primary result would permit Riggs to
saturate with six strategic locations, including the
participating banks' main offices, the roughly mile and
one-quarter stretch of Connecticut Avenue and Seventeenth Street lying between the Hilton complex and
the Executive Office Building. This area is now the
heart of the burgeoning commercial and financial sec-
225
tion of the city. The main banking office of the Bank
of Commerce, so strategically located, is the core of
this consolidation proposal.
Moreover, the proposed consolidation could well
have substantially adverse competitive effects on the
recently chartered District of Columbia National Bank
at 1812 K Street NW., as well as on the First National
Bank of Washington at Seventeenth Street and Pennsylvania Avenue, the branch office of the National
Savings and Trust Company in the Mercury Building
at Twentieth and K Streets, and the branch office of
the National Bank of Washington at Pennsylvania
Avenue at Twentieth Street, all doing business within
an area of eight square blocks lying immediately west
of Lafayette Park. The proposal would also affect the
soon to be opened Lafayette Square office of the National Bank of Washington, located at 800 Connecticut
Avenue. Because of this existing competitive situation, it would not be defensible to grant Riggs an additional facility in this narrow, but highly profitable,
banking area; and, in the present circumstances, we
cannot reasonably do by consolidation what we would
decline to authorize directly.
A third, and independent, justification claimed for
this consolidation is that it will improve the banking
services in the metropolitan area by intensifying competition. The competitive impact of this consolidation
must be assessed in reference to the service area of the
participating banks. While some disagreement has
developed as to whether Riggs' service area is limited
to the District of Columbia or properly includes all of
the Standard Metropolitan area, it seems clearly demonstrable in this case, in view of the banking picture
detailed above, that the metropolitan area, at least, is
the real service area of these banks. Within this area
there are many offices of large banks aggressively competing for banking business. Enhancement of Riggs
deposits by $45 million through this proposal would
certainly not elevate Riggs to a position of overwhelming importance nor give it an overriding competitive
advantage throughout the metropolitan area. On the
contrary, so slight would be its net effect on Riggs'
relative standing in the banking community that any
enhancement of Riggs' present ability to compete
would be negligible. The only significant competitive
impact of this consolidation would be in an area
broadly centered around Farragut Park, as pointed out
above, and there it would be definitely and clearly
adverse.
Finally, the proponents of this application contend
that this consolidation is needed to serve the conven-
226
ience and needs of the community by making available to customers of Commerce the improved and
superior services offered by Riggs. It is undoubtedly
true that Riggs does offer a greater range of services
than does the Bank of Commerce. The growth of the
Bank of Commerce in recent years, however, does not
indicate that its many customers have been hurt by the
unavailability of certain services. Thus, in view of the
great number of alternative commercial banking offices
situated in downtown Washington, it would be rash to
say that the banking public would be aggrieved by
failure of this consolidation. The additional argument that this consolidation is required to augment
Riggs' lending capacity is not sustained as the application fails to establish that such a minor increase in
its resources would be sufficient to enable it to retain
the larger accounts it now asserts it is losing to other
banks in the large east coast cities.
In this consolidation proposal, therefore, the adverse
effects which would result from the preemption of
prime banking locations and the potential saturation
with six offices of Riggs of this small but significant
area described above is not outweighed either by the
slightly beneficial effect, if any, the proposal might have
upon the total picture of financial competition in the
Greater Washington area or by the management problem confronting the Bank of Commerce because of the
illness of its chief officer.
The foregoing review of the banking situation involved in this proposed consolidation marks it as
unique and serves to distinguish it from other cases
which have come before this office for consideration.
In the Roanoke, Virginia, merger, involving The First
National Exchange Bank of Roanoke and The Colonial-American National Bank of Roanoke, which proposal was denied by this Office, we were concerned
with the question of whether the public interest in the
immediate Roanoke area demanded two substantial
local, competitive institutions, and the further question
of the demands of the region of southwest Virginia for
an institution of sufficient capacity and resources to
serve effectively that growing region. The disapproved merger of First National City Bank, New York,
New York, and the National Bank of Westchester, resolved the question of necessary entry into this area
by First National City not on the basis of massive entry
but on the principle of gradual de novo entry. In the
recently approved Cumberland, Maryland, case of the
First-Second National Bank, the problems of management and substantial nonbanking competition were
the controlling concerns. The Philadelphia National
Bank and Girard Trust Corn Exchange Bank merger,
now awaiting decision by the Supreme Court of the
United States, favorably presented the overriding issue
of necessary additional competitive capacity in the light
of heightened regional competition in one of the most
competitivefinancialareas in the country. This Riggs
case, however, concerns potential branch saturation of
a small, but highly significant and profitable, section of
the general service area of the participating banks.
When the stockholders of a bank wish to withdraw
from the business, for whatever reason, they cannot be
prevented from doing so, nor should they be. However, the particular means they select to withdraw has
significance for the public interest. In this case, involving a bank which has been "on the block" for some
years, the merger route offers extremely limited possibilities. Of the local banks, other than Riggs, two,
because of their competitive position in the Washington
banking structure as analyzed above, would be subject
to very critical scrutiny, if either proposed to acquire
the Bank of Commerce. A proposed merger with a
local affiliate or sale to a subsidiary or other instrumentality of Financial General could not be deemed in
the public interest as it would create a metropolitan
area banking chain of seven interrelated banks. Such
a route could effectively generate a proposal to amend
the Bank Holding Company Act of 1956 to encompass
and regulate the activities of Financial General. Alternatively, this soundly managed, healthy and growing bank could well attract new owners, other than a
banking organization, and continue as an effective
competitive banking force in the Washington area.
It must seem clear, even to a casual observer of the
local banking scene, that present opportunities for de
novo branching are becoming limited and future
branching opportunities may have to await further
development of the city. The answer to the problem
of proper and publicly beneficial expansion of Riggs
and other similarly situated institutions lies in the geographical expansion into the suburban areas.
Coincident with this applicant is the fact that this
Office has had pending before it two conflicting applications for a highly desirable branch location. The
application by the Bank of Commerce for a branch to
be located in the vicinity of Connecticut Avenue and
Albemarle Street NW., has been rejected today. The
conflicting application of the District of Columbia National Bank for a branch at 4400 Connecticut Avenue
NW. (Connecticut Avenue and Yuma Street), has
been granted today. While the application of the
Bank of Commerce had an earlier filing date, that
bank and the owner of the property were unable to
reach agreement on the terms and conditions of a
lease. The District of Columbia National Bank,
which filed later, has entered into a binding agreement
with the owner of the property for the sought-after location. In view of the fact that only one branch may
reasonably be established in this vicinity, the application of the District of Columbia National Bank has, as
noted, been granted since it has acquired a definite
location.
In weighing this application in light of the statutory
criteria, the consolidation of the Bank of Commerce
and Riggs National Bank is found not to be in the
public interest and it is therefore denied.
MAY 23,1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Riggs, with resources of $598 million, is the largest
bank in Washington, D.C., and has approximately
31% of the local commercial banking market. Commerce, the city's eighth largest bank, has total resources of $49.7 million and approximately 2.5% of
the market. Neither bank has shown any business
need to merge with the other. Commerce has been
a successful bank which has experienced rapid growth
over the past several years. Riggs' growth in the same
period reflects in substantial part the acquisitions of
two other area banks. This acquisition will eliminate
a substantial competitor from the market, will appreciably increase Riggs' dominance of the market,
will further disadvantage smaller competitors and will
generate more merger pressures upon the remaining
area banks. The effect of the proposed merger on
competition will be seriously adverse. The merger is
not justified and the Application should be denied.
227
7
I
Banking Locations
in Down-town
Washington. D.C.
c
LA
7.
O
-S
g/
c
o
K St.
D
C3) L(I9
H St.
Penna. Ave.
White
House
L@J
lst
st.;
228
Banking Locations in Downtown Washington, D.C.
See Map on Facing Page
1. Riggs National Bank
2. Riggs National Bank
3. Riggs National Bank
4. Riggs National Bank
5. Riggs National Bank
6.
7.
8.
9.
10.
11.
12.
Bank of Commerce
First National Bank of Washington
First National Bank of Washington
D.C. National Bank
American Security & Trust Co
American Security & Trust Go
American Security & Trust Co
Main office
17th and G Street
branch
Lincoln branch
Dupont Circle
branch
Approved, not
opened
Main office
Main office
G Street branch
Main office
Main office
City branch
Metropolitan
branch
13. American Security & Trust Co
14. National Savings & Trust Co
15. National Savings & Trust Co
16. National Bank of Washington
17. National Bank of Washington
18. National Bank of Washington
19. National Bank of Washington
20. Union Trust Co
21. Union Trust Co
22. Union Trust Co
23. Security Bank
_. Northwest branch
„ Main office
.. 20th and K Street
branch
._ Main office
._ Liberty branch
_ Pennsylvania Ave.
branch
._ Approved but
unopened
._ Main office
._ 14th and G Street
branch
Munsey branch
._ K Street branch
MARYLAND NATIONAL BANK, BALTIMORE, MD., AND T H E CHESTERTOWN BANK OF MARYLAND,
GHESTERTOWN, MD.
Total assets
Name of bank and type of transaction
Banking offices
In operation To be operated
The Chestertown Bank of Maryland, Chestertown, Md., with
and Maryland National Bank, Baltimore, Md. (13745), which had
were denied application to merge Dec. 23, 1963, under charter and title of the
latter bank (13745).
COMPTROLLER'S DECISION
On October 21, 1963, Maryland National Bank,
Baltimore, Maryland, and the Chestertown Bank of
Maryland, Ghestertown, Maryland, applied to the
Comptroller of the Currency for permission to merge
under the charter and with the title of the former.
A much needed and necessary realignment of the
Maryland banking structure began in 1956. The more
alert commercial banks realized that nonbank financial
institutions were expanding their facilities and services
to meet the requirements made necessary by the growth
and diversification of population and per capita income. Many of the commercial banks met this competition by expanding their own facilities and services
on a statewide basis in accordance with the enlightened branch banking laws of the State. Thus, Maryland now has several commercial banks which are approaching statewide status and several more which
are regional in scope. During the same period 10
competent groups, with enterprise and new sources of
capital at their disposal, succeeded in establishing new
banks, 7 under national charters and 3 under State
$9,078,000
672, 438, 000
3
74
charters. Four other groups recently have received
approval under national charters and a fifth group has
now filed for a national charter. It is quite clear that
the expansion of established banks and the chartering
of new banks has served to rid the State's banking
system of inertia. Effective competition has been
instituted and the public interest is being served.
This expansion and realignment of banking facilities
was instituted as a means of keeping pace with the
expanding needs of an industrialized and urbanized
State of Maryland. During the period between 1950
and 1960 the population of the State increased 32 percent, personal income doubled and the Maryland
Gross State Product increased 90 percent.
In the State of Maryland there are at present 122
banks with 472 offices, and with total assets ranging
between $1 million and $650 million. The expansion
of many banks, both large and small, throughout the
State in recent years has greatly improved banking
service and banking competition. Small banks with
competent management have prospered alongside the
large banks. The success of new banks recently established, and the branching of many local banks into
229
other communities to compete against branches of
larger metropolitan banks, all testify to the improvement in banking competition and to the fact that small
local banks compete effectively with the larger urban
banks. More important, the public has been the beneficiary of longer and more convenient banking hours,
increased borrowing facilities and new financial
services.
Throughout this period of realistic realignment this
Office has endeavored to insure that the public interest
be served in accordance with the contemporary economic structure of the State. All of our decisions have
been based on this premise and the present proposal is
no exception.
Since Maryland National Bank began its expansion
program in 1954 it has acquired 9 banks which contributed 59 of its 72 offices and slightly more than onehalf of its deposits and loans. There were sound economic justifications for each of these acquisitions. The
State needed adequate commercial banking facilities
and the merger route jwas the only feasible way of
fulfilling the need.
At the present time, Maryland National operates in
14 of Maryland's 23 counties and in the City of Baltimore. Its service area covers five principal sections of
the State: the Baltimore Metropolitan Area, the
Maryland Suburban Area of Washington, Southern
Maryland, the Eastern Shore and Washington County
in Western Maryland. Three of its offices are in the
Chestertown area where the effects of the proposed
merger will be most noticeable.
The Chestertown Bank of Maryland operates its
main office in Chestertown, a branch at Galenta, 15
miles northeast, and a branch at Church Hill, 8 miles
southeast. The trade area population is approximately 35,000 and it comprises all of Kent County and
the northern part of Queen Anncs County, the two
northernmost counties on Maryland's Eastern Shore
except for a portion of Cecil County which surround
the head of Chesapeake Bay. Although commercial
and industrial development within this area has been
limited, the proposed construction of additional
bridges and highways will definitely commence a trend
toward increased industrialization. At the present
time, farming, fishing, and canning are the main
staples of the economy. Dairying and beef cattle are
becoming increasingly important and the resort business due to the more than 650 miles of shoreline in the
two counties is substantial. In addition to Maryland
National and the Chestertown Bank, the area banking
structure consists of the $10 million Peoples Bank of
Chestertown, the $8 million Ceritreville National Bank
230
of Maryland, Centreville, the $4 million Millington
Bank of Maryland, Millington, and the $5 million
Sudlersville Bank of Maryland, Sudlersville.
In the City of Chestertown there are five banking
offices, of which Maryland National operates three,
Chestertown bank one, and the Peoples Bank of Chestertown one. Within the Chestertown service area
there are 1 1 banking offices, 3 of which are operated
by Maryland National, 3 by Chestertown Bank and 2
by the Peoples Bank. The other three banks, located
14 to 16 miles from Chestertown, each operate one
office. Among the six banks, the applicants together
hold 45 percent of area deposits and 54 percent of area
loans. In the city of Chestertown they hold 70 percent
of deposits and 81 percent of the loans.
These figures indicate that the present area banking
structure is compatible with the needs and convenience of the community, a situation that should not be
disturbed in the absence of an overriding public
interest. There is strong existing competition between
the various banks, sufficient alternate banking facilities are available, banking resources are adequate for
the community needs and there is no management
succession problem in the applying banks. In short,
the applicant banks have failed to establish that their
merger is required to serve the public interest.
In arriving at a decision, we have considered the
effects of this proposal on the other banks in the area,
particularly the Peoples Bank of Chestertown. We are
very much impressed with the ability that bank has
manifested in meeting the present substantial competition provided by the two applicants and we would
have had no doubts as to its future potential had this
merger been approved. This conclusion is based
partly on our observations of other mergers that were
approved in almost identical circumstances. They include the mergers of Equitable Trust Company with
the State Bank of Laurel in 1962 and with the First
National Bank of Aberdeen in 1963, wherein only one
small locally owned bank was left to compete with the
resulting bank, and the merger of Union Trust with
the Liberty Bank in Easton in 1962 which left one
small bank to compete with two considerably larger
banks. In each instance the small banks have been
able to compete effectively because the management
was alert enough to exploit the advantages of the small
bank.
In weighing this proposal against the statutory
factors, the merger is found not to be in the public
interest and is therefore denied.
DECEMBER 23,
1963.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Maryland National Bank, the largest commercial
bank in Maryland with 72 banking offices located
throughout the State, proposes to acquire its tenth
independent bank in less than 10 years. As of September 30, 1963, 59 of MNB's 72 banking offices,
$377,069,000 of its $607,670,000 in deposits and
$176,582,000 of its $325,680,000 in net loans and discounts were the result of past acquisitions. Chestertown Bank of Maryland is the second largest of three
banks operating in Chestertown, a rural community
on the eastern shore of Maryland. MNB's Chestertown branch is the largest banking office in that town.
After the proposed merger, the resulting bank would
have more than 70% of the I PC deposits and over
81 % of the total loans and discounts in Chestertown.
The remainder would be held by a small independent
bank. Prior to 1951, three State banks and a national bank operated in this community and thus,
banking alternatives will have been halved through
a series of acquisitions, if this merger is approved.
In the brief period since January 1, 1962, Maryland's 3 largest banks have absorbed 12 other banks
with a total of 30 offices and $186,739,000 in deposits.
As noted in prior reports by the Department of Justice,
there is a definite trend in Maryland towards the
elimination of independent banks through merger.
This merger trend is all the more significant in view
of Maryland's laws permitting statewide de novo
branching.
In view of the merger history of MNB—and the
trend in Maryland generally—we feel that the effect of
the proposed merger on competition may be seriously
adverse.
231
APPENDIX B
Statistical Tables
INDEX
Statistical Tables
Table No.
B-l
B-2
B-3
B 4
—
B-5
B-6
B-7
B 8
—
B-9
B-10
B-l 1
B-l 2
B-l 3
Title
Comptrollers of the Currency, by dates of appointment and resignation, and states from which
appointed
Administrative Assistants to the Comptroller of
the Currency and Deputy Comptrollers of the
Currency, by dates of appointment and resignation, and native states
Changes in the structure of the National Banking
System, by states since 1863: number of banks
organized, consolidated, and merged; number
of insolvencies, liquidations, and conversions;
and national banks in existence, December 31,
1963
Applications for new national bank charters, approved and rejected, with name of bank and
date of approval or rejection, calendar 1963, by
states
National banks chartered during calendar 1963:
by charter number, title and location, states,
and authorized capital stock
State chartered banks converted to national banks
during calendar 1963, by title and location of
bank, state, effective date, outstanding capital
stock, surplus, undivided profits and reserves,
and total assets
National banks reported in voluntary liquidation
during calendar 1963 with the names of succeeding banks, the dates of liquidation, and
total capital accounts
National banks merged or consolidated with and
into state banks during calendar 1963, with
effective dates, and total capital accounts
National banks converted into state banks, calendar 1963, with effective date, and total capital
accounts
Purchases of state banks by national banks, calendar 1963, with title and location, effective dates
of purchase, and total capital accounts of state
banks
Consolidations of national banks, or national and
state banks, calendar 1963, with title and location, outstanding capital stock, surplus, undivided profits and reserves, and total assets....
Mergers of national banks, or national and state
banks, calendar 1963, with title and location,
outstanding capital stock, surplus, undivided
profits and reserves, and total assets
Number of domestic branches of national banks
opened for business, calendar 1963, by states,
banks, and type of branch
234
Page
235
236
237
238
243
248
249
249
250
250
251
253
260
Table No.
Title
B-l4 Number of domestic branches of national banks
closed, calendar 1963, by states, banks, and
type of branch
B-l5 Principal assets and liabilities of national banks,
by deposit size, December 1962 and 1963
B-l6 Number and percent of national banks with surplus fund equal to or greater than, and less
than, common stock, June and December,
1942-63
B-l 7 Dates of reports of condition of national banks,
1914 to 1963
B-l8 Number, total and principal assets, liabilities,
and capital accounts, of national banks, by
states, June 29, 1963
B-19 Number, total and principal assets, liabilities,
and capital accounts, of national banks, by
states, December 20, 1963
B-20 Selected loans and discounts of national banks,
by states, December 20, 1963
B-21 Selected U.S. Government obligations held by
national banks, by states, December 20, 1963..
B-22 Selected bank trust statistics, by states, 1963
B-23 Current operating revenue, expenses, and dividends of national banks, by major categories
and states, year ended December 31, 1963
B—24 Current operating revenue, expenses, and dividends of national banks in the United States
and possessions operating throughout calendar
1963, by size of deposits, December 1963
B-25 Current operating revenue, expenses, and dividends of national banks, years ended December
31, 1962 and 1963
B—26 Number of national banks, capital stock and
accounts, net profits, dividends, and ratios to
capital accounts, years ended December 31,
1930-63
B-27 Total loans of national banks, losses and recoveries on loans, and ratio of net losses or recoveries to loans, by calendar years, 1944-63. .
B-28 Total securities of national banks, losses and
recoveries on securities and ratio of net losses
or recoveries to securities, by calendar years,
1944-63
B-29 Foreign branches of national banks, December
31, 1963
B-30 Assets and liabilities of foreign branches of
national banks, December 20, 1963: consolidated statements
B-31 Assets and liabilities of all national banks, date
of last report of condition, December 1936-63..
Page
268
270
271
272
274
280
286
288
290
292
300
304
306
307
307
308
309
310
TABLE B-l.—Comptrollers of the Currency, by dates of appointment and resignation, and states from which
appointed
Date of
appointment
No.
McCuIloch, Hugh
Clarke, Freeman
Hulburd, Hiland R
Knox, John Jay
Cannon, Henry W
Trenholm, William L . . .
Lacey, Edward S
Hepburn, A. Barton....
Eckels, James H
Dawes, Charles G
Ridgely, William Barret,
Murray, Lawrence O . . .
Williams, John Skel
Crissinger, D. R
Dawes, Henry M
Mclntosh, Joseph W. . .
Pole, John W
O'Connor, J. F. T
Delano, Preston
Gidney, Ray M
Saxon, James J
1
May
Mar.
Feb.
Apr.
May
Apr.
May
Aug.
Apr.
Jan.
Oct.
Apr.
Feb.
Mar.
May
Dec.
Nov.
May
Oct.
Apr.
Nov.
9, 1863
21,1865
1,1867
25, 1872
12, 1884
20,1886
1,1889
2, 1892
26, 1893
1,1898
1, 1901
27, 1908
2, 1914
17,1921
1,1923
20,1924
21, 1928
11,1933
24, 1938
16, 1953
16, 1961
Date of
resignation
Mar. 8,1865
July 24, 1866
Apr. 3,1872
30, 1884
Mar. 1, 1886
Apr. 30,1889
June 30, 1892
Apr. 25, 1893
Dec. 31,1897
Sept. 30,1901
Mar. 28, 1908
Apr. 27,1913
Mar. 2, 1921
Apr. 30, 1923
Dec. 17, 1924
Nov. 20,1928
Sept. 20,1932
Apr. 16, 1938
Feb. 15,1953
Nov. 15, 1961
Indiana
New York
Ohio
Minnesota
Minnesota
South Carolina
Michigan
New York
Illinois
Illinois
Illinois
New York
Virginia
Ohio
Illinois
Illinois
Ohio
California
Massachusetts
Ohio
Illinois
Term expired.
235
TABLE B-2.—Administrative Assistants to the Comptroller of the Currency and Deputy Comptrollers of the
Currency, by dates of appointment and resignation, and native states
Date of
appointment
Date of
resignation
State
ADMINISTRATIVE ASSISTANTS TO THE COMPTROLLER
Larsen, Arnold E. .
Faulstich, Albert J .
Dec. 24,1961 July 1, 19621 Nebraska
July 2,1962
Louisiana
DEPUTY COMPTROLLERS OF THE CURRENCY
Howard, Samuel T
Hulburd, HilandR.. . .
Knox, John Jay
Langworthy, John S
Snyder.V.P.
Abrahams, J. D
Nixon, R. M
Tucker, Oliver P
Coffin, George M
Murray, Lawrence O...
Kane, Thomas P
Fowler, Willis J
Mclntosh, Joseph W
Collins, Charles W
Stearns, E. W
Await, F. G
Gough, E. H
Proctor, John L
Lyons, Gibbs
Prentiss, William, Jr
Diggs, Marshall R
Mulroney, A. j
McCandless, R. B
Sedlacek, L. H
Robertson, J. L
Hudspeth, J. W
Jennings, L. A
Taylor, W. M
Garwood, G. W
Fleming, Chapman C...
Haggard, Hollis S
Camp, William B
Redman, Clarence B. . .
Watson, Justin T
Miller, Dean E
DeShazo, Thomas G. . .
R. Coleman Egertson..
Richard J. Blanchard..
Radcliffe Park
May 9,1863
Aug. 1,1865
Mar. 12,1867
Aug. 8,1872
Jan. 5,1886
Jan. 27,1887
Aug. 11,1890
Apr. 7,1893
Mar. 12,1896
Sept. 1,1898
June 29,1899
July 1,1908
May 21,1923
July 1,1923
Jan. 6,1925
July 1,1927
July 6,1927
Dec. 1,1928
Jan. 24,1933
Feb. 24,1936
Jan. 16,1938
Jan. 16,1938
Oct. 1,1938
May 1,1939
July 7,1941
Sept. 1,1941
Oct. 1,1944
1.1949
New York
Ohio
Minnesota
New York
New York
Virginia
Indiana
Kentucky
South Carolina
New York
Dist of Col.
Indiana
Illinois
Illinois
Virginia
Maryland
Indiana
Washington
Georgia
California
Texas
California
Iowa
Iowa
Iowa
Nebraska
Nebraska
Texas
1.1950
New York
Mar. 1,1951
Virginia
Feb. 18,1952
Colorado
Sept. 15,1959
Ohio
M a y 16,1960
Missouri
Apr. 2,1962
Texas
Aug. 4,1962 Oct. 26,1963 Connecticut
Ohio
Sept. 3,1962
Dec. 23,1962
Iowa
Jan. 1,1963
Virginia
July 13,1964
Iowa
Sept. 1,1964
Massachusetts
Sept. 1,1964
Wisconsin
Aug. 1,1865
Jan. 31,1867
Apr. 24,1872
Jan. 3,1886
Jan. 3,1887
M a y 25,1890
Mar. 16,1893
Mar. 11,1896
Aug. 31,1898
June 27,1899
Mar. 2,19232
Feb. 14,1927
Dec. 19,1924
June 30,1927
Nov. 30,1928
Feb. 15,1936
Oct. 16,1941
Jan. 23,1933
Jan. 15,1938
Jan. 15,1938
Sept. 30,1938
Sept. 30,1938
Dec. 31,1948
Aug. 31,1941
Mar. 1,1951
Sept. 30,1944
Feb. 17,1952
Aug. 31,1950
M a y 16,1960
Apr. 1,1962
Dec. 31,1962
Aug. 31,1962
Aug. 3,1962
1
Appointed Regional Comptroller of the Currency with headquarters in San Francisco, Calif.
2 Died Mar. 2, 1923.
236
TABLE R-3.—Changes in the structure of the National Banking System, by states, since 1863: number of banks
organized, consolidated, and merged; number of insolvencies, liquidations, and conversions; and national
banks in existence, December 31,1963
Consolidated and merged
Organized under 12 U.S.C. 215
1863
Insolthrough
vent
Consolida1963
Mergers
tions
State
In
existence
Converted Merged or Decemto state
consolidated ber 31,
1963
banks
with state
banks
51
212
4,625
62
2
21
55
383
84
69
18
13
41
87
4
65
295
205
243
198
110
53
79
69
207
156
192
34
148
76
199
8
22
150
36
438
58
118
333
453
102
483
58
49
81
94
572
19
29
74
135
68
115
26
0
1
0
0
1
0
0
13
0
13
8
73
5
3
60
54
104
23
5
7
161
55
2
10
405
124
101
167
83
44
22
46
39
8
0
7
0
2
32
0
5
0
0
0
0
1
17
3
0
0
0
0
0
o too
0
0
0
1
0
5
10
6
3
0
0
1
0
0
0
3
0
0
2
0
5
4
7
0
0
0
0
0
1
1
0
0
1
0
4
0
0
1
1
0
2
0
0
1
2
10
1
1
0
0
0
0
0
0
0
i-NOOOO
6,690
45
0
6
39
65
55
7
1
7
42
42
0
35
227
98
205
76
37
16
13
17
28
77
116
16
58
76
83
4
5
59
25
130
44
100
112
85
31
211
2
43
93
36
141
6
17
28
51
38
54
12
0
0
oootoooo
2,814
1
0
0
0
16
0
4
0
1
0
0
1
0
1
6
8
3
0
0
1
0
0
1
0
13
0
61
8
0
4
0
2
51
0
0
0
2
2
6
2
0
0
0
0
0
0
csoooe
. ,
170
4
0
1
1
19
5
11
0
8
2
8
1
0
19
14
4
6
11
4
7
3
37
11
8
5
12
3
2
1
3
48
1
121
8
3
32
12
2
96
3
8
13
8
44
4
3
20
18
11
9
0
0
0
o ooooo
. . .
674
185
8
31
155
552
248
127
32
35
246
195
7
112
950
442
558
451
250
117
127
151
379
338
506
84
306
202
406
17
82
424
92
1 004
157
260
706
764
150
1,284
67
131
221
216
1,288
42
85
264
233
193
282
72
1
1
OOOOOf
15,236
United States*
Alabama
Alaska .
Arizona
Arkansas
California
Colorado
Connecticut
Delaware . . .
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana...
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi. .
Missouri
Montana.....
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico...
New York . .
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina.
South Dakota
Xennessee .
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin .
Wyoming
Virgin Islands
Puerto Rico
12 U.S.C. 214
In
liquidation
29
84
47
121
3
52
145
30
211
31
39
217
213
11
409
4
26
33
74
520
10
28
123
26
76
104
34
1
0
•Includes Virgin Islands and Puerto Rico.
237
TABLE B-4.—Applications for new national bank charters, approved and rejected, with name of bank and date
of approval or rejection, calendar 1963, by states
Alabama
First National Bank of Athens, Athens,
Alabama (Conversion)
The American National Bank of Huntsville, Huntsville, Ala
Peoples National Bank of Huntsville,
Huntsville, Ala
American National Bank of Birmingham,
Birmingham, Ala
First National Bank of Butler, Butler,
Choctaw County, Ala
Auburn National Bank of Auburn, Auburn, Lee County, Ala. (Conversion)..
Approved Rejected
1963
1963
California—Continued
Jan. 18
July 16
July 30
Oct. 17
Dec. 6
Dec. 11
Arizona
Liberty National Bank of Phoenix,
Phoenix, Ariz
Nov. 29
Continental National Bank, Phoenix,
Ariz
Nov. 29
Arkansas
First National Bank & Trust Co. of
Mountain Home, Mountain Home,
Jan. 5
Baxter County, Ark
Commercial National Bank of Texarkana
July 19
Texarkana, Ark
First National Bank in West Memphis,
Aug. 14
West Memphis, Ark. (Conversion)
California
Mission National Bank of Los Angeles,
Los Angeles, Calif
Security National Bank of Contra Costa,
Walnut Creek, Calif
National Southwest Bank, Pasadena,
Calif
Community National Bank of Fresno
County, Mendota, Calif
First National Bank of Oakland, Oakland,
Calif
Vicinity Sunset Boulevard and Barrington
. Avenue, Los Angeles County, Calif....
Tiburon National Bank, Tiburon, Calif..
Culver City, Calif
Citrus National Bank, West Covina,
Calif
Tahoe National Bank, Stateline, Calif...
Newport National Bank, Newport Beach,
Calif
Oceanside National Bank, Oceanside,
Calif
Newhall, Calif
Newport Beach, Calif
Gateway National Bank, El Segundo,
Calif
Sierra National Bank, Petaluma, Calif...
First National Bank of Anaheim, Anaheim,
Calif
Berkeley, Calif
San Luis Obispo, National Bank, San Luis
Obispo, Calif
Altadena, Calif
Pioneer National Bank, Los Angeles, Calif.
San Francisco, Calif.
Saddleback National Bank, Tustin, Calif..
Hollywood, Calif
Los Padres National Bank, Santa Maria,
Calif
Palm Springs National Bank, Palm
Springs, Calif
Riverside, Calif
238
Jan. 18
Jan.
5
Jan. 26
Mar. 2
Mar. 15
Mar. 2
Mar. 27
May 7
May 8
Apr. 27
July
1
3
1
July 15
June 8
Aug. 5
June 22
Sept.' 13
Approved Rejected
1963
1963
Oct. 28
Oct.
4
Oct. 17
Oct. 4
Oct. 4
Oct. 28
Sept. 17
Sept. 6
Sept. 20
Sept. 27
Oct. 9
Oct. 22
Aug. 20
Oct. 1
Oct. 29
Oct. 22
Oct. 9
Sept. 11
Oct. 28
Oct. 28
Nov. 26
Nov. 29
Dec. 17
Oct. 29
Nov. 26
Dec. 4
Nov. 8
Nov. 26
Nov. 26
Nov. 29
Oct. 28
Nov. 26
Nov. 29
Dec. 12
Dec. 13
Nov. 29
Dec. 12
Dec. 17
Colorado
July 16 July
July
July 19
Sweetwater-Spring Valley, Calif
Between Fullerton and Placentia, Orange
County, Calif
Hayward, Calif
San Clemente, Calif
San Francisco, Calif
County National Bank, Orange, Calif
San Jose, Calif
Arcadia, Calif
Palo Alto, Calif
San Mateo, Calif
Oakwood National Bank, Woodland Hills,
Calif
Alhambra, Calif
Rosemead, Calif
Sequoia National Bank of San Mateo
County, Redwood City, Calif
Marina del Rey, Calif
Redwood City, Calif
Peninsula National Bank of Burlingame,
Burlingame, Calif
Encino, Calif
Pasadena, Calif
Pasadena, Calif
Northern California National Bank of San
Mateo, San Mateo, Calif
Humboldt National Bank, Eureka, Calif..
Los Feliz National Bank, Los Feliz area of
Los Angeles, Calif
El Monte-South El Monte, Calif
Alameda First National Bank, Alameda,
Calif
Dinuba, Calif
Santa Ana, Calif
Arcadia, Calif
National Bank of Berkeley, Berkeley,
Calif
Whittier, Calif
Livermore, Calif
Hayward National Bank, Hayward, Calif.
Encino National Bank, Encino, Calif
Los Angeles, Calif
Commonwealth National Bank of San
Francisco, San Francisco, Calif
Livermore National Bank, Livermore,
Calif
The National Bank of Monterey County,
Salinas, Calif
Marina del Rey National Bank, Marina
del Rey, Calif
July 25
Aug. 12
July
1
Aug. 8
Sept. 20
Sept. 20
Oct. 24
17th Street National Bank of Denver,
Denver, Colo
Boulevard National Bank, Denver, Colo..
The Brighton National Bank, Brighton,
Colo.
Northeast Colorado National Bank of
Denver, Denver, Colo
Valley National Bank, Littleton, Arapahoe
County, Colo
Aurora National Bank, Aurora, Colo. . . .
Burlington, Colo
Northern National Bank, Colorado
Springs, Colo
West Greeley National Bank, Greeley,
Colo
Hampden National Bank of Englewood,
Englewood, Colo
Western National Bank of Denver, Denver,
Colo
Feb. 9
Jan. 26
Mar. 18
Mar. 29
Apr. 18
May 11
May 24
June 21
July 17
July 26
June 21
TABLE B-4.—Applications for new national bank charters, approved and rejected, with name of bank and date
of approval or rejection, calendar 1963, by states—Continued
Colorado—Continued
Boulder National Bank, Boulder, Colo
South Platte National Bank, La Salle,
Colo
Greeley, Colo
Leadville, Colo
Denver, Colo
Denver, Colo
The First National Bank of North Glenn,
North Glenn, Colo
First National Bank at Burlington, Burlington, Colo
South Colorado National Bank, Denver,
Colo
Mesa National Bank of Grand Junction,
Grand Junction, Colo
Grand Junction, Colo
Approved Rejected
1963 1963
Aug. 7
Aug. 13
June 21
Aug. 23
Aug. 8
Oct. 1
Sept. 20
Aug. 13
Dec. 13
Dec. 21
Dec. 21
Connecticut
Orange National Bank, Orange, Conn...
Norwalk National Bank, Norwalk, Conn.
Westport National Bank, Westport, Conn.
The North Haven National Bank, North
Haven, Conn
Dover, Del
Aug. 13
July 23
Oct. 29
Nov. 7
Delaware
Aug. 15
District of Columbia
Public National Bank, Washington, D.C.. Feb. 9
Madison National Bank, Washington,
D.C
May 24
Washington, D.C
June 11
Washington, D.C
June 21
Florida
Parkway National Bank of Tallahassee,
Tallahassee, Fla.
Halifax National Bank of Port Orange,
Port Orange, Fla
Northeast National Bank of St. Petersburg, St. Petersburg, Fla
DeBary, Fla.
Rockledge, Fla
Fort Lauderdale, Fla
Ocean National Bank of Fort Lauderdale,
Fort Lauderdale, Fla
Peoples Liberty National Bank of North
Miami, North Miami, Fla
Boynton Beach, Fla
Five Point National Bank of Miami,
Miami, Fla
Belle Glade, Fla
Pompano Beach, Fla
South Miami area of Dade County, Fla
Sterling National Bank of Davie, Davie,
Broward County, Fla
Lakeland, Fla
Miami, Fla
Guaranty National Bank of Fort Lauderdale, Fort Lauderdale, Fla
South Miami, Fla
Hollywood, Fla
Sarasota, Fla
Key Biscayne, Fla
Liberty National Bank of St. Petersburg,
St. Petersburg, Fla
First National Bank of the Upper Keys,
Tavernier, Fla
St. Petersburg, Pinellas County, Fla
Jan. 19
Jan. 26
Jan. 12
Mar. 15
Mar. 29
Mar. 27
Mar. 27
Mar. 27
Apr. 12
May 30
May 17
Apr. 4
Mar. 29
Apr. 12
Feb. 11
Mar. 27
June 7
une
uly
'
Apr.
8
2
30
4
May 30
J u ty
2
July 1
Florida—Continued
Fort Pierce, St. Lucie County, Fla
Jefferson National Bank of Miami Beach,
Miami Beach, Fla
Fidelity National Bank of South Miami,
Dade County, Fla
Hollywood, Fla
Inverness, Citrus County, Fla. ,....•
Citizens National Bank of Hollywood,
Hollywood, Broward County, Fla
First National Bank of Margate, Margate,
Broward County, Fla
Lake Worth, Fla
Dania, Fla.
Dixie National Bank of Dade County,
vicinity Chapman Field Drive and U.S.
#1, Dade County, Fla
Miami, Fla
Westside National Bank of Manatee
County, Bradenton, Fla.
Clearwater, Fla
Mount Dora, Fla
Palm Beach County, Fla
Deerfield Beach, Fla
Second National Bank of Tampa, Tampa,
Fla
Second City National Bank at Clearwater,
Clearwater, Fla
Third City National Bank at Clearwater,
Clearwater, Fla
Liberty National Bank of Fort Lauderdale,
Fort Lauderdale, Fla
Boca Raton, Fla
First National Bank of Fort Pierce, Fort
Pierce, Fla. (Conversion)
Palm Beach, Fla
Citizens National Bank of West Hollywood, West Hollywood, Fla. (Conversion)
Key West National Bank, Key West, Fla.
(Conversion)
Miami, Fla
West of Lake Worth, Fla
Port Charlotte, Fla
Miami, Fla
Vicinity of intersection Riverland Road
and Davie Boulevard, Broward County,
Fla
Fort Lauderdale, Fla
City National Bank of Miami Beach,
Miami Beach, Fla. (Conversion)
Ocala, Fla
Treasure Island, Fla. . .
Bradenton, Fla
Okaloosa National Bank at Niceville,
Niceville, Fla
Oneco-Samoset, Fla
Okeechobee, Fla
City National Bank of Cocoa, Cocoa, Fla.
Bay Harbor Islands, Fla....
Miramar, Fla
Miami, Fla
Daytona Beach, Fla
First National Bank of DeBary, DeBary,
Fla
The American National Bank in Cypress
Gardens, Cypress Gardens, Fla
Miami, Fla
First National Bank of Boynton Beach,
Boynton Beach, Fla
First National Bank of Coconut Grove,
Coconut Grove, Fla
Approved Rejected
1963
1963
July 1
May 30
Sept. 4
July 19
May 30
June 8
Mar. 27
Aug. 2
July
9
July
July 1
Aug. 2
July 19
2
July
July
July
July
26
9
19
25
July 26
July 26
June 21
June 26
July
Oct. 17
Sept. 9
1
June 21
Oct.
Oct.
Oct.
Oct.
17
2
9
17
Oct. 17
Oct. 17
July 25
Oct. 17
Aug. 12
• Oct. 4
Nov. 8
Dec. 20
Sept. 6
Oct. 17
Aug. 22
Oct. 17
Nov. 29
Oct. 17
Aug. 5
Oct. 28
Nov. 29
Dec. 16
Dec. 16
239
TABLE B-4.—Applications for new national bank charters, cpproved and rejected, with name of bank and date
of approval or rejection, calendar 1963, by states—Continued
Georgia
Approved Rejected
1963
1963
Robins Air Force Base, Ga
Apr. 4
Southgate National Bank of Richmond
County, Augusta, Ga
Oct. 17
Idaho
Tri State National Bank of Montpelier,
Montpelier, Idaho
Mar. 15
Boise, Idaho
Oct. 28
Indiana
The American National Bank of Evansville, Evansville, Ind
Sept. 24
Iowa
Jan. 8
Jan. 8
June 26
June 26
Mar. 27
May 7
Aug. 7
Oct. 2
Sept. 11
Dec. 6
Kansas
Moran, Kans
Apr. 17
National Bank of Wichita, Wichita, Kans. June 21
Hays National Bank, Hays, Kans
July 15
Garden City, Kans
Nov. 26
Kentucky
First Security National Bank of Owensboro, Owensboro, Ky
Oct. 28
Louisiana
Farmerville, La
Mar. 2
Raceland, La
Aug. 14
First National Bank of St. Bernard Parish,
Arabi, La
Nov. 26
First National Bank in Laplace, Laplace,
St. John the Baptist Parish, La
Nov. 26
Maryland
Belair National Bank, Bowie, Md
Citizens National Bank of Southern Maryland, Lexington Park, Md. (Conversion)
Aberdeen National Bank, Aberdeen, Md.
Chesapeake National Bank, Towson, Md.
Chillum, Md
240
Approved Rejecte
1963
1963
Feb. 9
Apr. 27
Nov. 29
Nov. 27
Minnesota
Illinois
First National Bank of Jacksonville,
Jacksonville, 111
July 1
Columbia National Bank of Chicago,
Chicago, 111
Oct. 3
Springfield, 111
Oct. 2
The Pershing National Bank of Decatur,
Decatur, 111
Oct. 28
First National Bank of Davenport, Davenport, Iowa
East Des Moines National Bank, Des
Moines, Iowa
Spencer, Iowa
Camanche, Iowa
Spencer National Bank, Spencer, Iowa...
First National Bank of West Burlington,
West Burlington, Iowa
Spencer, Iowa
Community National Bank of Clear Lake,
Clear Lake, Iowa
First National Bank of Ottumwa,
Ottumwa, Iowa (Conversion)
Denison, Iowa
Michigan
The Madison National Bank, Madison
Heights, Mich.
National Bank of Southfield, Southfield,
Mich
National Bank of Rochester, Rochester,
Mich
First National Bank of Lake City, Lake
City, Mich. (Conversion)
June 22
Apr. 16
July 5
May 27
Sept. 27
Brainerd National Bank, Brainerd, Minn.
National City Bank of Minneapolis, Minneapolis, Minn
Park National Bank of St. Louis Park,
St. Louis Park, Minn
Edina, Minn
Minneapolis, Minn
Security National Bank of Minneapolis,
Minneapolis, Minn
Valley National Bank of North Mankato,
North Mankato, Minn
Rochester, Minn
Navarre, Minn
Citizens National Bank of Willmar,
Willmar, Minn
First National Bank of Navarre, Navarre,
Minn
City National Bank of Cloquet, Cloquet,
Minn
Peoples National Bank of Mora, Mora,
Minn
Richfield, Minn
Valley National Bank of Eagan Township,
Eagan Township, Minn
St. Martin National Bank, St. Martin,
Minn
Virginia, Minn
Crystal, Minn
Jan. 5
Mar. 27
Mar. 29
May 30
June 21
Apr. 8
Apr. 17
June 21
Aug. 20
Aug. 19
Aug. 20
July 31
June 11
Aug. 20
Aug. 6
June 21
Sept. 6
Oct. 2
Mississippi
First National Bank of Leland, Leland,
Miss
Apr. 18
Tylertown, Miss
Aug. 12
Jackson, Miss
Nov. 4
Missouri
First National Bank of Gladstone, Gladstone, Mo
Dexter National Bank, Dexter, Mo
American National Bank in Springfield;
Springfield, Mo
Sugar Creek, Mo
Wentzville, Mo
Metropolitan National Bank, Kansas City,
Mo
Sugar Creek National Bank, Levasy, Mo.
(Conversion)
Sikeston, Mo
The First National Bank of Pulaski
County, St. Robert, Mo
Security National Bank of Joplin, Joplin,
Mo
Mountain Grove National Bank, Mountain Grove, Mo
Belt National Bank of St. Joseph, St.
Joseph, Mo. (Conversion)
Joplin, Mo
Florissant, Mo
First National Bank of Poplar Bluff,
Poplar Bluff, Mo
Ava, Mo
Feb. 1
Mar. 29
Mar. 29
May 23
May 27
May 30
May 23
July 15
June 8
Aug. 13
July 19
June 21
Oct. 4
Aug. 13
Aug. 30
Oct. 28
TABLE B^4.—Applications for new national bank charters, approved and rejected, with name of bank and date
of approval or rejection, calendar 1963, by states—Continued
Montana
Montana National Bank of Absarokee,
Absarokee, Mont
Absarokee, Mont
Western National Bank of Wolf Point,
Wolf Point, Mont. (Conversion)
First National Bank in Libby, Libby,
Mont. (Conversion)
Clarks Fork National Bank of Fromberg,
Fromberg, Mont. (Conversion)
Approved Rejected
1963
1963
Mar. 15
Mar. 15
May 22
May 30
Nov. 7
Nebraska
Minatare, Nebr
June 21
Lincoln, Nebr
Aug. 14
Plainview National Bank, Plainview, Nebr.
(Conversion)
Nov. 16
New Jersey
National Bank of Secaucus, Secaucus, N.J. May 24
Peoples National Bank of Sparta, Township of Sparta, N J
Nov. 26
First Bank & Trust Co., National Association, Fords, N.J. (Conversion)
Dec. 13
New Mexico
Los Alamos National Bank, Los Alamos,
N. Mex
Mar. 15
Truth or Consequences, N. Mex
July 15
Taos, N. Mex
,
Aug. 9
First National Bank in Clayton, Clayton,
N. Mex
Oct. 23
Farmington National Bank, Farmington,
N. Mex
Dec. 6
New York
First National Bank of Farmingdale,
Farmingdale, N.Y
Liberty National Bank & Trust Co.,
Buffalo, N.Y. (Conversion)
Hamilton National Bank of New York,
New York, N.Y
Chelsea National Bank, New York, N.Y..
Metropolitan National Bank of Syracuse,
Syracuse, N.Y
Freedom National Bank of New York,
New York, N.Y
Jan. 19
Mar. 25
June 21
Oct. 24
Oklahoma—Continued
Exchange National Bank of Moore, Moore,
Okla
First National Bank of Temple. Temple,
Okla
Sand Springs, Okla
American National Bank of Midwest
City, Midwest City, Okla
Bryan County National Bank, Caddo,
Okla. (Conversion)
Founders National Bank of Oklahoma
City, Oklahoma City, Okla
Guaranty National Bank, Tulsa, Okla...
Langley, Okla
The Guaranty National Bank of Oklahoma
City, Oklahoma City, Okla
Southwestern National Bank of Oklahoma
City, Oklahoma City, Okla
First National Bank of Weatherford,
Weatherford, Okla
Oklahoma City, Okla
Oklahoma National Bank of Norman,
Norman, Okla
Tulsa Okla
Cache Road National Bank of Lawton,
Lawton, Okla
University National Bank of Stillwater,
Stillwater, Okla
Lawton, Okla
Friendly National Bank in Southwest
Oklahoma City, Oklahoma City, Okla..
Watonga, Okla
Tulsa, Okla
Hugo, Okla
Muskogee, Okla
Sallisaw, Okla
Langley, Okla
Republic National Bank of Tulsa, Tulsa,
Okla
Walters, Okla
First National Bank, Broken Bow, Broken
Bow, Okla. (Conversion)
Southern Hills, National Bank of Tulsa,
Tulsa, Okla
Approved Rejected
1963
1963
May 23
Apr. 5
July 24
May 14
May 7
Aug. 5
June 24
Aug. 21
July 10
Aug. 22
Aug. 15
Sept. 6
Aug. 22
Sept. 13
Oct. 9
Sept. 6
Oct. 1
Oct. 9
Oct.
Oct.
Nov.
Dec.
Dec.
Oct.
28
28
12
18
17
28
Oct. 22
Dec. 12
Oct. 22
Nov. 26
Oct. 4
Sept. 11
Union National Bank of Portland, Portland, Oreg
Mar. 27
First National Bank of Smithfield, Smithfield, N.C. (Conversion)
July 30
Lincoln National Bank, Philadelphia, Pa. Sept. 30
North Carolina
North Dakota
First National Bank of Southwest Fargo,
Southwest Fargo, N. Dak
May 27
Ohio
First National Bank of Archbold, Archbold, Ohio (Conversion)
Aug. 27
Oklahoma
First National Bank of Turley, Turley,
Okla
Mar. 9
First National Bank in Atoka, Atoka,
Okla
Mar. 27
Plaza National Bank of Bartlesville,
Bartlesville, Okla
Mar. 27
Jenks, Okla
Apr. 17
Pennsylvania
South Carolina
Horry County National Bank, Loris,
May 30
South Carolina
Whitmire, S.C
July 15
First State National Bank, Jackson, S.C
(Conversion)
Dec. 14
Texas
San Angelo, Tex
Everman National Bank of Fort Worth,
Fort Worth, Tex
Northshore National Bank, Houston, Tex.
First National Bank of Bellaire, Bellaire,
Tex
First National Bank of Denton, Denton,
Tex
Highland Lakes National Bank, Kingsland, Tex
Jan. 29
Jan. 19
Mar. 15
Feb. 1
Feb. 9
Jan.
5
241
TABLE B-4.—Applications for new national bank charters, approved and rejected, with name of bank and date
of approval or rejection, calendar 1963, by states—Continued
Texas—Continued
Sherman, Tex
Mercantile National Bank of Kingsville,
Kingsville, Tex
Houston, Tex
Lewisville National Bank, Lewisville, Tex.
The First National Bank of Sundown,
Sundown, Tex
First National Bank of Hurst, Hurst, Tex.
(Conversion)
Clear Lake, Tex
Citizens National Bank of Breckenridge,
Breckenridge, Tex
Midway National Bank of Grand Prairie,
Grand Prairie, Tex
Nassau Bay National Bank of Clear Lake,
Clear Lake, Tex
Union National Bank in Houston, Houston, Tex
Piano National Bank, Piano, Tex
Randolph Field National Bank, Universal
City, Tex
First National Bank of Carrollton, Carrollton, Tex
Dickinson, Tex
Lancaster, Tex
White Rock National Bank of Dallas,
Dallas, Tex
Houston, Tex
Memorial National Bank of Houston,
Houston, Tex.
Community National Bank of Oak Cliff,
Dallas, Tex
Citizens National Bank of Lufkin, Lufkin,
Tex
Dallas, Tex
Arlington National Bank, Arlington, Tex.
Kress National Bank, Kress, Tex
Houston, Tex
Houston, Tex
Clear Lake, Tex
...
Trinidad, Tex.
Bryan, Tex
Houston, Tex
Commercial National Bank of Dallas,
Dallas, Tex
Winters, Tex
Security National Bank of Lubbock,
Lubbock, Tex.
Pasadena, Tex
Dallas, Tex
Citizens National Bank of Dallas, Dallas,
Tex
,..
First National Bank of Richardson,
Richardson, Tex
Texoma National Bank of Sherman,
Sherman, Tex
Morton, Tex.
First National Bank of Plainview, Plainview, Tex
Silsbee,Tex
Silsbee, Tex
Houston, Tex
White Settlement National Bank, White
Settlement, Tex
Inwood National Bank of Dallas, Dallas,
Tex
Northpark National Bank of Dallas,
Dallas, Tex
Dallas, Tex
Houston, Tex
242
Approved Rejected
1963
Feb. 15
Feb. 20
1963
Mar. 15
Mar. 9
Mar. 15
Jan.
9
Apr. 17
Apr. 11
Apr. 5
Apr. 17
Apr. 12
Apr. 17
Apr. 12
Apr. 5
Mar. 27
May 14
May 9
May 27
Apr. 2
May 8
May 14
May 17
Apr. 8
July
3
July 30
June 8
May
May
July
May
May
May
24
30
1
11
27
27
June 21
July 17
July 23
July 23
July
9
May 17
Aug. 12
Aug. 12
June 26
Aug. 23
July
Utah
American National Bank of Salt Lake
City, Salt Lake City, Utah.
South Davis First National Bank, Bountiful, Utah
Granite National Bank, Salt Lake City,
Utah
...
Draper National Bank, Draper, Utah
Approved Rejected
Rejecte
1963
1963
July 17
.
Sept. 6
Sept. 6
Oct.
3
Aug. 22
July 31
Oct. 2
July 3
Oct. 28
Sept. 13
Oct. 9
Sept. 20
Oct. 4
Aug. 13
Oct. 17
Nov. 7
Oct. 9
Oct. 2
Oct. 2
Oct. 28
Sept. 11
Dec. 16
Oct. 22
Oct. 17
Oct. 28
Nov. 12
Nov. 29
. . . . . . . Dec. 21
Dec. 23
Nov. 26
Dec. 23
Mar. 9
May 22
Aug. 8
Dec. 18
Virginia
July 23
May 31
Texas—Continued
Kleberg, Tex
Austin, Tex
La Porte, Tex
Abilene National Bank, Abilene, Tex
Lackland National Bank of San Antonio,
San Antonio, Tex
University National Bank of College Station, College Station, Tex. (Conversion)
Tascosa National Bank of Amarillo,
Amarillo, Tex
Westmont National Bank, Houston, Tex.
Peoples National Bank of Sulphur Springs,
Sulphur Springs, Tex
La Marque, Tex
Citizens National Bank of Beaumont,
Beaumont, Tex
Uvalde National Bank, Uvalde, Tex
Commonwealth National Bank of Dallas,
Dallas, Tex
Houston, Tex
Airline National Bank of Houston,
Houston, Tex. (Conversion).
Texas City, Tex
Greenville, Tex
Gulfway National Bank of Corpus Christi,
Corpus Christi, Tex
Bay City, Tex
Hurst, Tex
Tomball, Tex
Lisbon National Bank of Dallas, Dallas,
Tex
Laredo, Tex..,-.Southwest National Bank of Wichita Falls,
Wichita Falls, Tex
Llano, Tex
Irving, Tex
San Antonio, Tex
Galena, Tex
Pasadena, Tex
Three Rivers, Tex.
Dickinson, Tex
5
July 23
July 23
Sept. 4
Commonwealth National Bank of Arlington, Arlington, Va
Security National Bank of Roanoke,
Roanoke, Va
The Colonial National Bank of Alexandria,
Alexandria, Va
The National Bank of Rosslyn, Rosslyn
section of Arlington County, Va
Rosslyn, Arlington County, Va
Falls Church, Va
National Bank of Commerce of Fairfax
County, Fairfax County, Va
Grundy National Bank, Grundy, Va
Fredericksburg, Va
First Valley National Bank, Rich Creek,
Va. (Conversion)
Feb. 11
Jan.
5
Mar. 27
May 7
May 22
May 22
Aug. 13
Sept 25
. Aug 21
July
2
TABLE B-4.—Applications for new national bank charters, approved and rejected, with name of bank and date
of approval or rejection, calendar 1963, by states—Continued
Virginia—Continued
American National Bank, Fredericksburg,
Va
Fidelity National Bank, Arlington County,
Va
Charlottesville, Va
Monticello National Bank, Albemarle
County, Va
Guardian National Bank of Fairfax
County, Springfield, Va
Fairfield National Bank of Highland
Springs, Highland Springs, Va
Woodlawn National Bank, Fairfax County,
Va
Approved Rejected
1963
1963
Aug. 21
Wisconsin
Aug. 12
Oct. 18
Oct. 18
Dec. 23
Nov. 26
First National Bank of Glendale, Glendale, Wis
May 30
New London National Bank, New London,
Wis
July 15
Brookfield National Bank, Brookfield,
Wis
Aug. 12
Hudson, Wis
Aug. 15
Dec. 18
Wyoming
Washington
Valley National Bank of Auburn, Auburn,
Wash
American National Bank of Edmonds,
Edmonds, Wash
Security Bank, National Association, Lynwood, Wash. (Conversion)
Clarkston, Wash
First Union National Bank, Puyallup,
Wash....
Timbermans National Bank of Hoquiam,
Hoquiam, Wash
Approved Rejected
1963
1963
West Virginia
First National Bank of Weirton, Weirton,
W. Va
Sept. 30
Apr. 18
July 25
June
8
Sept. 6
Oct. 23
Dec. 12
First National Bank of Gillette, Gillette,
Wyo
First National Bank of Pinedale, Pinedale,
Wyo. . .
National Bank of Newcastle, Newcastle,
Wyo
First National Bank of Glenrock, Glenrock, Wyo
East Cheyenne National Bank, Cheyenne,
Wyo
Dubois National Bank, Dubois, W y o . . . .
American National Bank of Powell, Powell,
Wyo
Mar. 27
Jan. 24
June 21
May 30
July 16
Aug. 5
Sept. 6
TABLE B-5.—National banks chartered during calendar 1963: by charter number, title and location, states, and
authorized capital stock
Charter
No.
15073
15053
15090
Title and location of bank, by states
First National Bank of Athens1
Phenix National Bank, Phenix City..
Citizens National Bank of Shawmut.
Authorized
capital stock
$200, 000
250, 000
150,000
Total: 3 banks.
15222
15194
First National Bank & Trust Co. of Mountain Home.
First National Bank in West Memphis i
350, 000
Total: 2 banks.
CALIFORNIA
15089
15087
15182
15180
15220
15174
15074
15047
15217
15149
15092
15216
First National Bank of Daly City
Mission National Bank of Los Angeles
Community National Bank of Fresno County, Mendota. .
First National Bank of Oakland
Oceanside National Bank, Oceanside
Sierra National Bank, Petaluma
The Mount Diablo First National Bank, Pleasant Hill
Redwood National Bank, San Rafael
Tahoe National Bank, Stateline
Tiburon National Bank
Security National Bank of Contra Costa, Walnut Creek. .
Citrus National Bank, West Covina
Total: 12 banks.
150,000
200, 000
600,000
2, 250, 000
150,000
1, 600, 000
450, 000
550, 000
300, 000
800, 000
500,000
375, 000
500, 000
500, 000
8, 575, 000
See footnote at end of table
243
TABLE B-5.—National banks chartered during calendar 1963: by charter number, title and location, states, and
authorized capital stock—Continued
Charter
No.
Title and location of bank, by states
Authorized
capital stock
COLORADO
15126 Aurora National Bank, Aurora
15086 The Brighton National Bank, Brighton
15181 First National Bank at Burlington
15170 Northern National Bank, Colorado Springs
15058 The Pikes Peak National Bank of Colorado Springs i
15184 Security National Bank, Denver
15111 Boulevard National Bank, Denver
15114 Northeast Colorado National Bank of Denver
15079 17th Street National Bank of Denver
15199 Western National Bank of Denver
15118 South Denver National Bank of Glendale
15119 West Greeley National Bank, Greeley
15063 First Westland National Bank, Lakewood
15121 Valley National Bank, Littleton
15203 The First National Bank of North Glenn
15048 Park National Bank of Pueblo
Total: 16 banks.
$250, 000
250, 000
100, 000
250, 000
200, 000
750, 000
300, 000
281, 250
700,000
300,000
300,000
125,000
400, 000
300, 000
212,500
250, 000
4, 968, 750
DELAWARE
15060
15127
15208
The First National Bank of Wilmington.
300,000
DISTRICT OF COLUMBIA
Public National Bank, Washington.
Madison National Bank, Washington.
Total: 2 banks.
15201
15055
15224
15204
15186
15162
15213
15143
15191
15050
15193
15067
15147
15066
15113
15103
15156
15173
15064
15190
15062
15095
15157
15107
15084
15206
15046
15071
15166
15135
4, 000,000
FLORIDA
First National Bank of Bonita Springs
University National Bank of Coral Gables
Dixie National Bank of Dade County (P.O. Miami)
Sterling National Bank of Davie
The Harbor City National Bank of Eau Gallie
Commercial National Bank of Broward County (P.O. Fort Lauderdale)
Ocean National Bank of Fort Lauderdale
Guaranty National Bank of Fort Lauderdale
Liberty National Bank of Fort Lauderdale
Edison National Bank in Fort Myers
First National Bank of Fort Pierce *
First National Bank of Hialeah
Citizens National Bank of Hollywood
First National Bank of Lakeland
First National Bank of Margate
First National Bank of Merritt Island
Inter National Bank of Miami
City National Bank of Miami Beach »
First National Bank of New Smyrna Beach
Peoples Liberty National Bank of North Miami
The Plaza National Bank at Orlando
The First National Bank of St. Andrews Panama City,
First National Bank of Riviera Beach
Gulf Gate National Bank, Gulf Gate Drive and U.S. Highway 41 (P.O. Sarasota).
First National Bank of South Brevard Beaches, Satellite Beach
Parkway National Bank of Tallahassee
First National Bank of Titusville *
First National Bank of Venice
Citizens National Bank of West Hollywood *
Aloma National Bank of Winter Park
Total: 30 banks.
15148
15219
1,500,000
2, 500,000
First National Bank of Newton County, Covington
Southgate National Bank of Richmond County, Fort Gordon Highway, Richmond County (P.O.
Augusta)
Total: 2 banks.
See footnote at end of table.
244
150,000
600,000
300, 000
300, 000
400, 000
600, 000
250, 000
500, 000
250,000
400,000
400, 000
500,000
440, 000
400,000
400, 000
540, 000
750,000
1, 250, 000
500,000
400,000
400,000
250,000
600, 000
250, 000
400, 000
300,000
150,000
300,000
948, 660
700, 000
13, 628, 660
150, 000
150,000
300, 000
TABLE B-5.—National banks chartered during calendar 1963: by charter number, title and location, states, and
authorized capital stock—Continued
Title and location of bank, by states
Charter
No.
Authorized
capital stock
IDAHO
15153
$125,000
Tri State National Bank of Montpelier
ILLINOIS
15097
15225
First National Bank of Deerfield
First National Bank of Winnebago
250, 000
60,000
Total: 2 banks
310,000
IOWA
15069
15133
15085
107
15218
Peoples National Bank of Columbus Junction
First National Bank of Davenport
East Des Moines National Bank, Des Moines
First National Bank of Ottumwa *
Spencer National Bank, Spencer
125,000
250,000
300, 000
600, 000
200,000
Total: 5 banks
1,475,000
MARYLAND
15102
15051
15098
15154
National City Bank of Baltimore
First National Bank of Hillandale
Citizens National Bank of Southern Maryland,1 Lexington Park
Peoples National Bank of Prince Georges County, Suitland
Total: 4 banks
1, 500,000
250,000
300,000
500,000
2, 550, 000
MASSACHUSETTS
15052
200, 000
Suburban National Bank of Arlington
MICHIGAN
15164
15049
15234
15105
15167
Huron Valley National Bank, Ann Arbor
Metropolitan National Bank of Farmington
First National Bank of Lake City *
The Madison National Bank, Madison Heights
National Bank of Southfield
600, 000
250, 000
240, 000
300,000
200, 000
Total: 5 banks
1, 590,000
MINNESOTA
15214
15230
15223
15059
15161
15131
15110
15198
Brainerd National Bank, Brainerd
City National Bank of Cloquet
Valley National Bank of Eagan Township (P.O. St. Paul)
First National Bank of Montgomery
Peoples National Bank of Mora
Valley National Bank of North Mankato
Park National Bank of St. Louis Park
St. Martin National Bank, St. Martin
Total: 8 banks
100, 000
100, 000
125,000
100,000
150,000
100,000
200, 000
50, 000
925, 000
MISSISSIPPI
15124
15215
First National Bank of Bolivar County, Cleveland
First National Bank of Leland
200, 000
Total: 2 banks
15115
15083
15155
15169
15197
15176
15183
100, 000
100, 000
MISSOURI
First National Bank of Gladstone
Civic Plaza National Bank of Kansas City
Kennett National Bank, Kennett l
Sugar Creek National Bank, Levasy
Mountain Grove National Bank, Mountain Grove
Belt National Bank of St. Joseph i
American National Bank in Springfield
Total: 7 banks
250, 000
,000, 000
200, 000
50, 000
150, 000
200, 000
200,000
2, 050, 000
See footnote at end of table.
245
TABLE B-5.—National banks chartered during calendar 1963: by charter number, title and location, states, and
authorized capital stock—Continued
Title and location of bank, by states
Charter
No.
Authorized
capital stock
MONTANA
15091
15226
15150
15122
Montana National Bank of Absarokee
Clarks Fork National Bank, Fromberg *
First National Bank in Libby i
Western National Bank of Wolf Point i
$90, 000
75, 000
150,000
180, 000
Total: 4 banks
495, 000
NEBRASKA
15096
150,000
First National Bank of Bellevue
NEW HAMPSHIRE
15100
White Mountain National Bank of North Conway
NEW JERSEY
15228
100, 000
250,000
National Bank of Secaucus
NEW MEXICO
15108
175, 000
Los Alamos National Bank, Los Alamos
NEW YORK
15080
15070
Liberty National Bank & Trust Co., Buffalo i
4,947,160
500, 000
Flushing National Bank, Flushing, N.Y
5,447,160
Total: 2 banks
15116
15165
NORTH CAROLINA
150,000
125, 000
First National Bank of Boone
275, 000
First National Bank of Smithfield »
Total: 2 banks
15088
15227
15109
NORTH DAKOTA
Community National Bank of Grand Forks
100, 000
125,000
500, 000
OHIO
625, 000
First National Bank of Archbold »
First National Bank of Parma
15093
15177
15232
15106
15211
15152
15207
15151
15138
15210
15140
15163
Total: 2 banks
OKLAHOMA
First National Bank in Atoka
Plaza National Bank of Bartlesville
First National Bank, Broken Bow i
Bryan County National Bank, Caddo *
American National Bank of Midwest City
Exchange National Bank of Moore
The Guaranty National Bank of Oklahoma City
First National Bank of Temple
Southern Hills National Bank, Tulsa
Southern Hills National Bank of Tulsa
First National Bank of Turley
Total: 11 banks
100, 000
200, 000
100,000
50, 000
300, 000
250, 000
300, 000
100, 000
715,000
500,000
100, 000
2,715,000
100, 000
OREGON
15229
15134
Emerald National Bank, Bethel-Danebo (P.O. Eugene)
SOUTH CAROLINA
First State National Bank, Jackson i
Horry County National Bank, Loris
246
Total: 2 banks
>te at end of table.
150,000
150,000
300, 000
TABLE B-5.—National banks chartered during calendar 1963: by charter number, title and location, states, and
authorized capital stock—Continued
Title and location of bank, by states
Charter
No.
Authorized
capital stock
TENNESSEE
15056
$100, 000
The First National Bank of Rutherford i
TEXAS
15137
15144
15077
15123
15099
15188
15185
15101
15068
15125
15141
15178
15082
15112
15128
15120
15078
15142
15145
15159
15231
15072
15065
15175
15168
15171
15104
15209
15187
15132
15129
15136
15179
15094
15061
15130
15075
Arlington National Bank, Arlington
First National Bank of Bellaire
Bowie National Bank, Bowie
Citizens National Bank of Breckenridge
First National Bank of Garrollton
Nassau Bay National Bank of Clear Lake (P.O. Houston)
University National Bank of College Station 1
Hillside National Bank of Dallas
Trinity National Bank of Dallas
White Rock National Bank of Dallas
Community National Bank of Oak Cliff, Dallas
Commercial National Bank of Dallas
First National Bank of Denton
Southwest National Bank of Fort Worth
Everman National Bank of Fort Worth (P.O. Everman)
Midway National Bank of Grand Prairie
Republic National Bank of Houston
Northshore National Bank, Houston
Riverside National Bank of Houston
Airline National Bank of Houston l
Memorial National Bank of Houston
First National Bank of Hurst».
Highland Lakes National Bank, K i n g s l a n d . . . . . . . . . . . .
Mercantile National Bank of Kingsville
Kress National Bank, Kress
First National Bank of Lake Jackson
Lewisville National Bank, Lewisville
Security National Bank of Lubbock
Citizens National Bank of Lufkin
First National Bank of Plainview
Piano National Bank, Piano
Security National Bank of San Antonio
Texoma National Bank of Sherman
The First National Bank of Sundown
Texas National Bank of Temple
Commercial National Bank of Victoria
Lake Air National Bank of Waco
:
.
..
Total: 37 banks
200, 000
300, 000
200, 000
150,000
150,000
200,000
200, 000
300, 000
300,000
200, 000
200, 000
200,000
200, 000
280,000
200, 000
200, 000
250, 000
200, 000
200, 000
300,000
200,000
250,000
100,000
150,000
100, 000
200,000
125,000
250, 000
160,000
300, 000
125,000
250, 000
150,000
75, 000
300,000
200, 000
200,000
7, 565,000
UTAH
15202
15054
15196
South Davis First National Bank, Bountiful
Utah National Bank of Provo
Granite National Bank, Salt Lake City
150, 000
250, 000
560, 000
Total: 3 banks
960, 000
VIRGINIA
15172
15146
15200
15221
15139
15117
The Colonial National Bank of Alexandria
Commonwealth National Bank of Arlington
The National Bank of Rosslyn
National Bank of Commerce of Fairfax County, Falls Church
First Valley National Bank, Rich Creek *
Security National Bank of Roanoke
Total: 6 banks
600, 000
1, 000, 000
600, 000
1, 200, 000
500, 000
1, 000, 000
4, 900, 000
WASHINGTON
15233
Valley National Bank of Auburn
300,000
See footnote at end of table.
247
TABLE B-5.—National banks chartered during calendar 1963: by charter number, title and location, states, and
authorized capital stock—Continued
Title and location of bank by states
Charter
No.
15160 First National Bank of Gudahy
15057 American National Bank of Green Bay
15081 Marine National Bank of Waukesha
Authorized
stock
WISCONSIN
$200,000
200,000
200,000
Total: 3 banks
15189 East Cheyenne National Bank, Cheyenne
15205 Dubois National Bank, Dubois
15158 First National Bank of Gillette
15195 First National Bank of Glenrock
15192 National Bank of Newcastle
15076 First National Bank of Pinedale
15212 American National Bank of Powell
600,000
WYOMING
100,000
50,000
50, 000
100,000
50,000
50,000
50,000
Total: 7 banks
1
450,000
Conversion of state chartered bank.
TABLE B-6.—State chartered banks converted to national banks during calendar 1963, by title and location of
bank, state, effective date, outstanding capital stock, surplus, undivided profits and reserves, and total assets
Charter
No.
Title and location of bank
State
Effective
date of
charter
1963
248
Surplus, undivided profits, and reserves
Total asseti
$11,468,950
$21,086, 505
$436, 873,508
Fla.
Tenn.
Colo..
Jan. 2
Feb. 2
Feb. 14
150, 000
100, 000
200, 000
310,000
250,000
380,000
6,254,158
2, 914, 722
4, 259, 784
Texas
Ala
N. Y
Md
Mar. 29
Mar. 30
Apr. 19
M a y 27
250, 000
200,000
4, 775, 290
300, 000
290,165
641, 721
12, 604, 436
321, 505
6,806,135
9,170,941
268, 999, 524
3,268, 873
Okla..
Mont.
Va.
Mont.
Texas.
N.C..
Fla...
Mo...
Fla...
Mo...
Tex...
June 11
July 9
Aug. 5
Aug. 26
Sept. 10
Sept. 13
Sept. 13
Sept. 18
Sept. 25
Sept. 30
Oct. 10
50, 000
180, 000
150, 000
150, 000
300,000
125,000
948, 660
50, 000
1, 250, 000
200, 000
200, 000
68, 312
235, 088
296, 670
296, 453
392, 972
104,915
574, 587
42, 517
1, 770, 542
50, 828
211, 367
1,715,873
7, 717,161
3, 797,074
7, 046, 602
9, 274, 448
2,127, 337
19, 251, 807
496, 076
32, 292, 885
3, 047, 901
5,401,966
Fla...
Ark..
Mont.
Ohio..
S.C...
Iowa..
Okla..
Mich.
Oct.
Oct.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
400, 000
200, 000
75, 000
125, 000
150, 000
600, 000
100, 000
240, 000
232, 536
374, 954
150,611
267,885
117,085
439, 404
240, 779
421,173
5, 724, 696
6, 895, 069
1, 998, 853
4, 606, 351
2, 050, 399
10,611,407
3, 667, 780
7, 475, 686
Total: 26 banks.
15046 First National Bank of Titusville
15056 The First National Bank of Rutherford
15058 The Pikes Peak National Bank of Colorado
Springs.
15072 First National Bank of Hurst
15073 First National Bank of Athens
15080 Liberty National Bank & Trust Co., Buffalo.
15098 Citizens National Bank of Southern Maryland, Lexington Park.
15106 Bryan County National Bank, Caddo
15122 Western National Bank of Wolf Point
15139 First Valley National Bank, Rich Creek. ..
15150 First National Bank in Libby
15159 Airline National Bank of Houston
15165 First National Bank of Smithfield
15166 Citizens National Bank of West Hollywood.
15169 Sugar Creek National Bank, Levasy
15173 City National Bank of Miami Beach
15176 Belt National Bank of St. Joseph
15185 University National Bank of College
Station.
15193 First National Bank of Fort Pierce
15194 First National Bank in West Memphis
15226 Clarks Fork National Bank, Fromberg
15227 First National Bank of Archbold
15229 First State National Bank, Jackson
107 First National Bank of Ottumwa
15232 First National Bank, Broken Bow
15234 First National Bank of Lake City
Outstanding
capital stock
23
24
19
23
24
27
31
31
TABLE B-7.—National banks reported in voluntary liquidation during calendar 1963 with the names of succeeding banks, the dates of liquidation, and total capital accounts
Title and location of bank
Date of
liquidation, 1963
Total capital
accounts
$5, 773, 390
Total: 5 banks.
The First National Bank of Batavia, Batavia, Ohio (715), absorbed by Clermont National Bank, Milford,
Ohio
June 29
First National Bank of Sharon, Sharon, Pa. (13803), absorbed by First Seneca Bank& Trust Co., Oil
City, Pa
Aug. 24
The First National Bank of Farmingdale, Farmingdale, N.Y. (8882), absorbed by Bankers Trust Co.,
New York, N.Y
Sept. 9
The First National Bank of New Carlisle, New Carlisle, Ind. (5639), absorbed by The National Bank&
Trust Co. of South Bend, Ind
Nov. 30
The First National Bank of Scribner, Scribner, Nebr. (14256) (no absorption)
Jan. 2
576, 387
2,250, 000
2, 419,178
314, 469
213, 356
TABLE B-8.—National banks merged or consolidated with and into state banks during calendar 1963, with
effective dates, and total capital accounts
Title and location of bank
Effective
date,
1963
$10, 331, 877
Total: 13 banks.
The First National Bank of Batavia, Batavia, N.Y. (340), merged with and into Liberty Bank & Trust
Co., Buffalo, N.Y
Codorus National Bank in Jefferson, Codorus, Pa. (14071), merged with and into Peoples Bank of Glen
Rock, Pa.
The First National Bank of Montpelier, Montpelier, Vt. (748), merged with and into Chittenden Trust
Co. of Burlington, Vt., and under the title "Chittenden Trust Company"
The First National Bank of Wyckoff, Wyckoff, N.J. (12272), merged with and into Peoples Trust Co. of
Bergen County, Hackensack, N.J
The Farmers National Bank of Allentown, Allentown, N.J. (3501), merged with and into The Central
Jersey Bank & Trust Co., Freehold, N.J
The National Bank& Trust Co. of Port Jervis, Port Jervis, N.Y. (1363), merged with and into The
Sullivan County Trust Co., Monticello, N.Y
The Farmers National Bank of Sussex, Sussex, N J . (1221), merged with and into Sussex County Trust
Co., Franklin, N.J., and under the title "The Bank of Sussex County"
The National Bank of Crewe, Crewe, Va. (14052), merged with and into Bank of Crewe, Crewe, Va. . .
The First National Bank of Aberdeen, Aberdeen, Md.1 (4634), merged with and into The Equitable Trust
Co., Baltimore, Md
The National Bank of Oxford, Oxford, Pa. (728), merged with and into Industrial Valley Bank & Trust
Co., Jenkintown, Pa
The Citizens National Bank of New Philadelphia, New Philadelphia, Ohio* (1999), merged with and into
The Reeves Banking & Trust Co., Dover, Ohio
First National Bank in Clarion, Clarion, Pa. (14043), merged with and into Northwest Pennsylvania
Bank and Trust Co., Oil City, Pa
The First National Bank of Mercer, Mercer, Pa.a (392), merged with and into Northwest Pennsylvania
Bank & Trust Co., Oil City, Pa
Total
capital
accounts
Jan. 11
1,078, 252
Feb. 15
161,762
Feb. 21
523, 071
Feb. 25
778, 544
Mar. 1
525, 606
Apr. 26
478,214
June 28
July 31
1,159, 226
183,265
Aug. 9
1, 082,633
Sept. 30
766, 467
Oct. 11
1, 348,138
Nov. 30
785, 539
Nov. 30
1, 461,160
1
With 1 local branch and 1 each at Darlington and Joppatowne;
» With 1 local branch.
« With 2 local branches.
249
TABLE B-9.—National banks converted into state banks, calendar 1963, with effective date, and total capital
accounts
Title and location of bank
Effective
date,
1963
Total
capital
accounts
$7, 876, 932
Total: 11 banks.
The First National Bank of Adairville, Adairville, Ky. (8814), converted into "Adairville Banking GomThe Mercha National Bank & Trust Co. of Meadville, Meadville, Pa. (871), converted into "Merhants
chants Bank and Trust Company"
The Farmers & Merchants National Bank of De Leon, De Leon, Tex. (7553), converted into "The
Farmers & Merchants Bank"
The Durant National Bank & Trust Co., Durant, Okla. (13018), converted into "Durant Bank & Trust
Company"
The West National Bank, West, Tex. (13935), converted into "West Bank & Trust"
The First National Bank of Grand View, Grand View, Tex. (4389), converted into "First State Bank"...
Industrial National Bank of Dallas, Dallas, Tex. (14705), converted into "Industrial Bank & Trust
Company"
The Citizens National Bank of Glasgow, Glasgow, Ky. (8439), converted into "Citizens Bank and Trust
Company"
The First National Bank of Thayer, Thayer, Kans. (9465), converted into "First State Bank"
The First National Bank of Gowrie, Gowrie, Iowa (5707), converted into "First State Bank of Gowrie"...
Fayette National Bank & Trust Co. of Uniontown, Uniontown, Pa. (14584), converted into "Fayette Bank
and Trust Company"
Jan. 31
111,041
Mar. 1
1, 755,178
May 18
370, 831
Aug. 10
Aug. 13
Sept. 16
1, 039, 514
327,611
124, 280
Sept. 16
950,465
Sept. 23
Sept. 30
Oct. 26
677,090
240,481
188, 928
Dec. 20
2,091,513
TABLE B-10.—Purchases of state banks by national banks, calendar 1963, with title and location, effective dates
of purchase, and total capital accounts of state banks
Title and location of bank
Effective
date,
1963
$4, 965, 242
Total: 9 banks.
The American National Bank & Trust Co. of Kalamazoo, Kalamazoo, Mich. (13820), purchased The
Home Savings Bank of Kalamazoo, Kalamazoo, Mich
The First Security Bank of Idaho, N.A., Boise, Idaho (14444), purchased the Weber Bank, Kellogg, Idaho,
United States National Bank of Johnstown, Pa. (13781), purchased the Windber Bank & Trust Co.,
Windber, Pa
Old National Bank of Washington, Spokane, Wash. (4668), purchased the Security State Bank, Colton,
Wash,
Cleremont National Bank, Milford, Ohio (3234), purchased the Farmers & Merchants Bank, Williamsburg, Ohio
The First National Bank of Baltimore, Baltimore, Ohio (7639), purchased The Pleasantville Bank,
Pleasantville, Ohio
The Fidelity National Bank of Twin Falls, Twin Falls, Idaho (11100), purchased the Hazelton State
Bank, Hazelton, Idaho
The First National Bank of Oelwein, Oelwein, Iowa (5778), purchased the State Savings Bank, Westgate,
Iowa
The Idaho First National Bank, Boise, Idaho (1668), purchased the Largelliere Company Bankers, Soda
Springs, Idaho
250
Total
capital
accounts
Mar. 30
May 31
1, 233, 391
453, 750
June 1
1, 468, 636
June 28
177,020
June 29
430, 050
Sept. 25
311,646
Oct. 25
276, 334
Oct. 31
104, 775
Nov. 1
509, 640
TABLE B-ll.—Consolidations of national banks, or national and state banks, calendar 1963, with title and
location, outstanding capital stock, surplus, undivided profits and reserves, and total assets
Title and location of bank
Total: 16 consolidations (after consummation)
The South Fallsburg National Bank, South Fallsburg, N.Y.*
(11809), with
and The National Bank of Liberty, Liberty, N.Y. (10037),
which had
,
consolidated Feb. 21,1963, under charter of the latter bank
(10037), and under title of "Community National Bank."
The consolidated bank at date of consolidation had
The First National Bank of Southampton, Southampton, N.Y.
(10185), with
and Security National Bank of Long Island, Huntington,
N.Y. (6587), which had
consolidated Mar. 15, 1963, under charter and title of the
latter bank (6587). The consolidated bank at the date
of consolidation had
The National Mahaiwe Bank of Great Barrington, Great
Barrington, Mass.2 (1203), with
and First Agricultural National Bank of Berkshire County,
Pittsfield, Mass. (1082), which had
consolidated Apr. 12, 1963, under the charter and title of
the latter bank (1082). The consolidated bank at the
date of consolidation had
The Pompeii State Bank, Pompeii, Mich.,3 with
and The Commercial National Bank of Ithaca, Ithaca,
Mich. (9654), which had
consolidated Apr. 17, 1963, under charter of the latter
bank (9654), and under title of "Commercial National
Bank." The consolidated bank at date of consolidation
had
Peoples National Bank of Central Virginia, Charlottesville,
Va.* (2594), with
and National Bank of Commerce of Norfolk, Norfolk, Va.
(9885), which had
consolidated Apr. 26,1963, under charter of the latter bank
(9885), and under the title "Virginia National Bank."
The consolidated bank at the date of consolidation had..
The First National Bank of Hudson Falls, Hudson Falls, N.Y.
(3244), with
and The First National Bank of Glens Falls, Glens Falls,
N.Y. (980), which had
consolidated July 12, 1963, under charter and title of the
latter bank (980). The consolidated bank at the date of
consolidation had
National County Bank of Closter, Closter, N.J.,5 with
and Citizens National Bank of Englewood, Englewood,
N.J. (4365), which had
consolidated Aug. 31, 1963, under charter and title of the
latter bank (4365). The consolidated bank at the date of
consolidation had
Kaleva State Bank, Kaleva, Mich.,« with
and Security National Bank of Manistee, Manistee, Mich.
(14843), which had
consolidated Sept. 3, 1963, under charter and title of the
latter bank (14843). The consolidated bank at the date
of consolidation had
Matteawan National Bank, Beacon, N.Y.* (4914), with
and The Farmers & Manufacturers National Bank of
Poughkeepsie, Poughkeepsie, N.Y. (1312), which had
consolidated Sept. 20, 1963, under charter of the latter
bank (1312), and under title "Farmers-Matteawan National Bank." The consolidated bank at the date of
consolidation had
See footnotes at end of table.
Outstanding
capital stock
Surplus
$48, 482, 820
$81, 223, 602
Undivided
profits and
reserves
Total assets
$25,188,701 $2, 242, 851, 962
100, 000
325, 000
47, 625
6, 591, 378
250, 000
750, 000
249, 643
15, 510, 467
340, 000
1, 085, 000
297, 368
22, 060, 002
300, 000
600, 000
382, 030
15, 571, 668
5, 768, 385
8, 401, 975
1, 239, 212
256, 088, 600
6, 368, 385
8,651,975
1,671, 242
271, 660, 267
200,000
500, 000
146, 577
8, 682, 722
1,175, 000
2, 325, 000
891,736
38,118,726
1, 398, 650
100, 000
2, 725, 000
100, 000
961, 964
103, 576
46, 648, 748
3, 097, 599
332, 000
350, 000
212, 247
11,141,240
432, 000
450,000
312, 298
14, 238, 840
2, 862,105
6, 637, 895
1, 505, 974
122,199,837
4, 000, 000
10, 000, 000
2,916,191
206, 938, 484
6, 862,105
18,137,895
2,922,165
328, 847, 859
300, 000
500, 000
206, 879
12,251,510
1, 330, 000
1, 330, 000
1, 796, 000
58, 330, 855
2, 005, 000
500, 000
2, 005, 000
500, 000
1, 434, 480
240,133
70, 582, 365
20, 789, 919
2, 000, 000
3, 000, 000
1, 959, 265
89,112,894
2, 600, 000
125, 000
3, 400, 000
115,000
1, 399, 399
30,167
108, 402, 813
3, 401, 678
200,000
82, 500
122, 295
7, 272, 457
675, 000
300,000
213,750
270,000
86,213
155,000
10, 974,134
11,614,827
300, 000
270, 000
437, 424
12,819,282
600,000
670, 000
592, 423
24, 434,109
251
TABLE B—11.—Consolidations of national banks, or national and state banks, calendar 1963, with title and
location, outstanding capital stock, surplus, undivided profits and reserves, and total assets—Continued
Title and location of bank
The Hazelwood Bank, Pittsburgh, Pa., with
and Western Pennsylvania National Bank, McKeesport,
McKeesport. Pa. (2222), which had
consolidated Oct. 4, 1963, under the charter of the latter
bank (2222) and under title "Western Pennsylvania
National Bank." The consolidated bank at the date
of consolidation had
Long Branch Trust Co., Long Branch, N.J.,8 with
and The Monmouth County National Bank, Red Bank,
Red Bank, N.J. (2257), which had
consolidated Oct. 22, 1963, under charter and title of the
latter bank (2257). The consolidated bank at the date
of consolidation had
Clinton Trust Company, Clinton, Mass.,9 with
and Worcester County National Bank, Worcester, Mass.
(14850), which had
consolidated Oct. 25, 1963, under charter and title of the
latter bank (14850). The consolidated bank at date of
consolidation had
The Peoples Bank of Rural Retreat, Rural Retreat, Va., with.
and Wythe County National Bank of Wytheville, Wytheville, Va. (12599), which had
consolidated Nov. 30, 1963, under charter of the latter
bank (12599) and under title "Wythe County National
Bank." The consolidated bank at the date of consolidation had
Bank for Savings & Trusts, Birmingham, Ala., with
and Birmingham Trust National Bank, Birmingham, Ala.
(14569), which had
consolidated Dec. 6, 1963, under charter and title of the
latter bank (14569). The consolidated bank at the date
of consolidation had
The Tootle-Enright National Bank, St. Joseph, Mo. (6272),
with
and The American National Bank of St. Joseph, St. Joseph,
Mo. (9042), which had
consolidated Dec. 6, 1963, under the charter of The
Tootle-Enright National Bank (6272), and under title
of "The American National Bank of St. Joseph." The
consolidated bank at the date of consolidation had
The Lancaster County National Bank, Lancaster, Pa. (683),
with
and Farmers Bank & Trust Company of Lancaster, Lancaster, Pa.,H> which had
consolidated Dec. 11, 1963, under the charter of The Lancaster County National Bank (683), and under title of
"Lancaster County Farmers National Bank." The consolidated bank at the date of consolidation had
1
Branches, 1 outside.
» Branches, 1 outside.
* Branches, 1 outside.
4
Branches, 5 local and 10 outside.
« Branches, 2 outside.
252
Outstanding
capital stock
Surplus
Undivided
profits and
reserves
Total assets
$200, 000
$700, 000
$270, 401
$11,266,613
7, 353, 690
13, 646, 310
4,132,653
565,197, 517
7, 753, 690
200, 000
15, 246, 310
700, 000
3, 303,055
665, 977
576, 464,130
20, 398, 809
2, 300, 000
3, 200, 000
1, 446, 952
113,739,517
2, 810, 000
500,000
4, 000, 000
505,000
1, 703, 418
118,981
134,116,128
12, 987, 777
3, 935, 000
7, 940, 000
3, 264, 019
188, 961, 803
4,185, 000
35, 000
8, 695, 000
65, 000
3, 427, 022
83, 524
200, 732, 347
2, 539, 000
300, 000
400, 000
232,154
10, 790, 264
356, 000
1, 464,100
494, 000
1, 285, 900
265, 678
1, 038,197
13, 329, 686
52, 316, 761
6,000,000
6, 000, 000
3,440,251
193,182, 694
7, 626, 670
7, 285, 900
4,315,878
245, 499, 455
750, 000
1, 250, 000
577, 838
47, 370, 600
1, 000, 000
1, 750, 000
827, 535
36, 372, 247
2, 000, 000
3, 000, 000
1,155, 373
83, 742, 847
1, 336, 280
3, 663, 750
1,281,911
31, 965, 575
800, 000
1, 500, 000
392, 867
59,152, 656
2, 470,320
5,163, 772
1, 340, 716
91,118,232
9
Branches, 1 outside.
? Branches, 3 outside.
Branches, 1 local.
» Branches, 2 outside.
i° Branches, 2 local.
8
TABLE B-12.—Mergers of national banks, or national and state banks, calendar 1963, with title and location,
outstanding capital stock, surplus, undivided profits and reserves, and total assets
Title and location of bank
Total: 63 mergers (after consummation).
Commercial Bank of Lexington, Lexington, N.C.1, with
and the First Union National Bank of North Carolina,
Charlotte, N.C. (9164), which had
merged Jan. 2, 1963, under charter and title of the latter
bank (9164). The merged bank at the date of merger
had
The Peoples National Bank in Brunswick, Brunswick, Md.
(14044), with
and the Farmers & Mechanics-Citizens National Bank of
Frederick, Frederick, Md. (1267), which had
merged Jan. 11, 1963, under charter and title of the latter
bank (1267). The merged bank at the date of merger
had
First National City Trust Co., New York, N.Y. (14853), with..
and the First National City Bank, New York, N.Y. (1461),
which had
merged Jan. 15, 1963, under charter and title of the latter
bank (1461). The merged bank at the date of merger
had
The First National Bank of LeRaysville, LeRaysville, Pa.
(6350), with
and The County National Bank of Montrose, Montrose,
Pa. (2223), which had
merged Jan. 16, 1963, under charter of the latter bank
bank (2223), and under title of "County National Bank
of Montrose." The merged bank at the date of merger
had
The Gotham Bank, New York, N.Y. ,2 with
and the Royal National Bank of New York, New York,
N.Y. (15029), which had
merged Jan. 31, 1963, under charter and title of the latter
bank (15029), The merged bank at the date of merger
had
The Peoples National Bank & Trust Co. of Lynchburg, Lynchburg, Va.s (2760), with
and the First & Merchants National Bank of Richmond,
Richmond, Va. (1111), which had
merged Jan. 31, 1963, under charter and title of the latter
bank (1111). The merged bank at the date of merger
The Firat National Bank of La Verne^ La Verne, Calif.'(9599)','
with
and The United States National Bank of San Diego, San
Diego, Calif. (10391), which had
merged Feb. 8, 1963, under charter and title of the latter
bank (10391). The merged bank at the date of merger
had
The First National Bank of Dolgeville, Dolgeville, N.Y.
(6447), with
and The Oneida National Bank & Trust Co. of Central
New York, Utica, N.Y. (1392), which had
merged Feb. 21, 1963, under charter and title of the latter
bank (1392). The merged bank at the date of merger
had
The Dominion National Bank of Bristol, Bristol \ Va. (4477),
with.
and The First National Exchange Bank of Virginia,
Roanoke, Va. (2737), which had
merged Feb. 28, 1963, under charter and title of the latter
bank (2737). The merged bank at the date of merger
had
See footnotes at end of table.
Undivided
pro/its and
reserves
Outstanding
capital stock
Surplus
$609, 721, 060
$991,807,363
176, 665
1, 073, 335
185,069
22,137,252
9, 025, 000
9, 025, 000
3, 461, 264
306, 457, 267
9, 731, 660
10,268, 340
3,001, 333
327,013,623
50,000
100, 000
90,194
3, 641, 788
1, 435, 000
2, 265,000
1,990,213
54, 408, 750
1, 485,000
10, 000, 000
2, 365,000
10, 000, 000
2, 080, 407
4, 835, 686
58, 033, 507
95, 914,163
255, 689, 920
400, 304, 000
150, 067, 798 8, 599, 754, 558
255, 689, 920
420, 304, 000
154, 903, 484 8, 663, 926,141
50, 000
100, 000
82, 099
1, 314,196
500, 000
1, 000, 000
579, 630
17, 376, 076
562, 500
742, 000
1,100, 000
1, 450, 000
649, 230
325, 237
18, 690, 272
33, 009,174
2,711,270
3, 795, 908
340, 964
117,202,989
3, 638, 770
5, 245, 908
480, 702
150, 357, 056
1,221, 000
1, 500, 000
833, 681
37, 762, 325
10,880, 250
14,119, 750
6, 531, 764
368, 894, 295
12,162, 300
17, 837, 700
5,086, 446
405, 939, 470
150, 000
250, 000
207, 508
8, 060, 607
4, 850, 000
6,150, 000
1,978,156
203, 078, 860
5, 350, 000
7, 650, 000
1,768,165
211,139,467
200, 000
400, 000
271, 052
6, 553, 245
2,128, 820
6, 500, 000
3, 368, 851
143, 226, 704
2,268, 820
7,000, 000
3, 599, 904
149, 779, 949
500, 000
800,000
387,456
24, 892, 600
3, 889, 400
7, 462, 000
963, 722
148,534,162
4, 439,400
8, 262, 000
1, 233,179
172, 061, 507
Total assets
$318,123, 182 $23,081,586,360
253
TABLE B-12.—Mergers of national banks, or national and state banks, calendar 1963, with title and location,
outstanding capital stock, surplus, undivided profits and reserves, and total assets—Continued
Title and location of bank
The Second National Bank of Cumberland, Cumberland, Md.8
(1519), with
and The First National Bank & Trust Co. of Cumberland,
Cumberland, Md. (381), which had
merged Mar. 8, 1963, under charter of the latter bank
(381) and under title of "The First-Second National
Bank & Trust Company." The merged bank at the date
of merger had
The First National Bank of Big Stone Gap, Big Stone Gap,
Va. (11765), with
and The First National Bank of Appalachia, Appalachia,
Va. (9379), which had
merged Mar. 9, 1963, under charter and title of the latter
bank (9379). The merged bank at the date of merger
had
The American Bank & Trust Co., New Haven, Conn.,8 with...
and The Second National Bank of New Haven, New
Haven, Conn. (227), which had
merged Mar. 15, 1963, under charter and title of the latter
bank (227). The merged bank at the date of merger had..
The Columbus Savings Bank, Columbus, Ohio, with
and The Huntington National Bank of Columbus,
Columbus, Ohio (7745), which had
merged Mar. 16, 1963, under charter and title of the latter
bank (7745). The merged bank at the date of merger
had
The Reynoldsburg Bank, Reynoldsburg, Ohio, with
and The City National Bank & Trust Company of Columbus, Columbus, Ohio (7621), which had
merged Mar. 30,1963, under charter and title of the latter
bank (7621). The merged bank at the date of merger
had
The First National Bank of Middleburg, Pa., Middleburg, Pa.?
(4156), with.
and The First National Bank of Selinsgrove, Selinsgrove,
Pa. (357), which had
merged Apr. 1, 1963, under charter of the latter bank
(357), and under the title of "Tri-County National
Bank." The merged bank at the date of merger had. . . .
The First National Farmers Bank of Wytheville, Wytheville,
Va.s (9012), with
and The First National Exchange Bank of Virginia,
Roanoke, Va. (2737), which had
merged Apr. 1, 1963, under charter and title of the latter
bank (2737). The merged bank at the date of merger
had
Bank of Greensboro, Greensboro, N.C.,9 with
and the First Union National Bank of North Carolina,
Charlotte, N.C. (9164), which had
merged Apr. 9, 1963, under charter and title of the latter
bank (9164). The merged bank at the date of merger
had
The Keystone National Bank of Manheim, Manheim, Pa.
(3635), with
and The Fulton National Bank of Lancaster, Lancaster,
Pa. (2634), which had
merged Apr. 15, 1963, under the charter and title of the
latter bank (2634). The merged bank at the date of
merger had
The Shelby County Bank, Botkins, Ohio, with
and The Citizens Baughman National Bank of Sidney,
Sidney, Ohio (7862), which had
merged Apr. 17, 1963, under charter of the latter bank
(7862) and under title of "The Citizens Baughman
National Bank." The merged bank at the date of
merger had
See footnotes at end of table.
254
Outstanding
capital stock
Undivided
profits and
Total assets
$600, 000
$600, 000
$476, 973
$19, 843, 949
450, 000
600, 000
269, 835
18, 479,764
1,110,000
1, 390, 000
411,253
38, 386, 461
100, 000
225, 000
44, 608
3, 743, 969
300, 000
300, 000
217, 004
8, 867, 207
444, 000
400, 000
556, 000
800, 000
186,613
329, 532
12,611,176
14, 841, 322
2, 319,125
3, 680, 875
918,156
86,134, 983
2, 901, 625
400, 000
4, 598, 375
400, 000
947, 688
307, 953
100, 976, 305
15,306,740
8, 332,000
11,668,000
3, 412, 660
264, 474, 779
8, 772, 000
175, 000
12, 228, 000
175, 000
3, 520, 613
186, 025
278, 867, 755
6, 485, 751
6, 000, 000
6, 000, 000
2, 663, 996
184, 249, 212
6, 210, 000
6, 290, 000
2, 656, 566
190, 576, 230
220, 000
680, 000
162, 063
125, 000
225, 000
44, 661
5, 769, 935
307, 500
942, 500
206, 725
17, 354, 822
175, 000
500, 000
283, 989
9, 730, 602
4, 439, 400
8, 262, 000
1, 425,164
172, 566, 272
4, 701, 900
1,000, 000
8, 762, 000
1,100, 000
1, 621, 654
4,789
181,631,616
26, 025, 049
9,731, 660
10, 268, 340
3, 453, 026
306, 474, 892
10, 856, 660
11,643,340
3, 034, 564
331, 360, 202
125, 000
650, 000
472, 392
9, 495, 628
1,155,000
2, 295, 000
1,418,912
59,174, 708
1, 592, 500
60, 000
2, 945, 000
60, 000
1, 557, 542
21, 743
68, 670, 336
1, 753, 647
460, 000
640, 000
375, 582
13, 597, 041
520, 000
700, 000
395, 206
15, 348, 569
11,584,887
TABLE B-12.—Mergers of national banks, or national and state banks, calendar 1963, with title and location,
outstanding capital stock, surplus, undivided profits and reserves, and total assets—Continued
Title and location of bank
The Home National Bank of Brockton, Brockton, Mass.,™
(2152), with
and The Plymouth National Bank, Plymouth, Mass. (779),
which had
merged Apr. 18, 1963, under charter of the latter bank
(779), and under title "Plymouth-Home National Bank."
The merged bank at the date of merger had
Community Trust Co., York, Maine,11 with
and the First National Bank of Portland, Portland, Maine
(4128), which had
merged Apr. 26, 1963, under charter and title of the latter
bank (4128). The merged bank at the date of merger
had
Walkersville Bank, Walkersville, Md., with
and Farmers & Mechanics-Citizens National Bank of
Frederick, Frederick, Md. (1267), which had
merged Apr. 26, 1963, under charter of the latter bank
(1267), and under title of "Farmers and Mechanics National Bank." The merged bank at the date of merger
had
The First National Bank of Heuvelton, Heuvelton, N.Y.
(10446), with
and The St. Lawrence County National Bank, Canton,
N.Y. (8531), which had
merged May 3, 1963, under charter and title of the latter
bank (8531). The merged bank at the date of merger
had
The Canton National Bank, Baltimore, Md. (4799), with
and the American National Bank of Silver Spring, Silver
Spring, Md. (14937), which had
merged May 17, 1963, under charter of the latter bank
(14937), and under title of "American National Bank
of Maryland." The merged bank at the date of merger
had
Farmers-Deposit Bank of Sadieville, Sadieville, Ky., with
and The First National Bank of Georgetown, Georgetown,
Ky. (2927), which had
merged June 15, 1963, under charter of the latter bank
(2927), and under title of "First National Bank and
Trust Company." The merged bank at the date of
merger had
The Wyoming National Bank of Tunkhannock, Pa. (835),
with
and The Wyoming National Bank of Wilkes Barre,
Wilkes-Barre, Pa. (732), which had
merged June 24, 1963, under charter and title of the
latter bank (732). The merged bank at the date of
merger had
First Bank of St. Maries, St. Maries, Idaho, with
and the First Security Bank of Idaho, National Association, Boise, Idaho (14444), which had
merged June 28, 1963, under charter and title of the
latter bank (14444). The merged bank at the date of
merger had
State Bank of Madison, Inc., Madison, Va., with
and the National Bank & Trust Co. at Charlottesville,
Charlottesville, Va. (10618), which had._
merged June 29, 1963, under charter and title of the latter
bank (10618). The merged bank at the date of merger
had
The Marion National Bank, Marion, Va.1* (6839), with
and The First National Exchange Bank of Virginia,
Roanoke, Va. (2737), which had
merged July 8, 1963, under charter and title of the latter
bank (2737). The merged bank at the date of merger
had
See footnotes at end of table.
Undivided
profits and
Outstanding
capital stock
Total assets
$660, 000
$1, 240, 000
$440, 627
$36,841,911
260, 000
440, 000
444, 281
11,808,408
1, 000, 000
100, 000
1, 680, 000
400, 000
804, 509
227, 059
48, 650, 318
9, 725, 504
3, 602, 500
4, 225, 000
1, 627, 458
90, 929, 373
3, 898, 500
25, 000
4, 601, 500
125, 000
100, 654, 877
1, 875, 698
1, 485, 000
2, 365, 000
1, 682, 018
51, 884
2, 419, 279
1, 528, 750
2, 471, 250
2,471,164
59, 540, 859
50, 000
50, 000
115,800
1, 979, 628
57, 753, 289
250, 000
750, 000
207, 380
12, 277, 972
300, 000
200, 000
800,000
200,000
323,180
331,176
14, 257, 600
6, 904,230
1, 912, 500
2,187, 500
479, 929
50, 064, 512
2,172, 500
40, 000
2, 327, 500
80,000
811,106
84, 388
56, 968, 743
1, 289, 880
200, 000
200, 000
112, 569
5, 744,173
6, 980, 763
300, 000
300, 000
117,471
100, 000
200, 000
260, 714
5, 376, 380
1, 070, 600
1, 750, 000
380, 866
36, 981, 608
1, 200, 600
100, 000
1, 950, 000
200, 000
611,580
164, 647
42, 357, 989
4, 724, 661
6, 500, 000
7, 500, 000
4, 509, 551
243, 539, 537
6, 657, 000
81, 600
7, 700, 000
200, 000
4,617,198
113,594
248,264,199
4, 967, 790
825, 000
1,175, 000
1, 035, 291
44, 432, 917
924,155
200,000
2, 375,000
600,000
1,106, 391
275, 004
49,191,461
11,157,991
4, 701, 900
8,762, 000
1, 925, 467
180,225,992
5,061, 900
9, 362, 000
2, 040, 471
190, 971, 481
255
TABLE B-12.—Mergers of national banks, or national and state banks, calendar 1963, with title and location,
outstanding capital stock, surplus, undivided profits and reserves, and total assets—Continued
Title and location of bank
Marlboro Trust Company, Bennettsville, S.C.,13 with
and The First National Bank of South Carolina of Columbia, Columbia, S.C. (13720), which had
merged July 20, 1963, under the charter and title of the
latter bank (13720). The merged bank at the date of
merger had
The Northern Savings Bank, Columbus, Ohio, with
and The Huntington National Bank of Columbus, Columbus, Ohio (7745), which had
merged July 24, 1963, under charter and title of the latter
bank (7745). The merged bank at the date of merger
had
The Nicodemus National Bank of Hagerstown, Hagerstown,
Md." (12590), with
and The First National Bank of Maryland, Baltimore, Md.
(1413), which had
merged Aug. 2, 1963, under charter and title of the latter
bank (1413). The merged bank at the date of merger
had
The Second National Bank of Hagerstown, Hagerstown, Md.1*
(4049), with
and Maryland National Bank, Baltimore, Md. (13745),
which had
merged Aug. 2, 1963, under charter and title of the latter
bank (13745). The merged bank at the date of merger
had
The Valley National Bank of Chambersburg, Chambersburg,
Pa." (4272), with
and The National Bank of Chambersburg, Chambersburg,
Pa. (593), which had
merged Aug. 3,1963, under charter of the latter bank (593)
and under title of "National Valley Bank and Trust
Company." The merged bank at the date of merger had •
The National Bank of Cohoes, Cohoes, N.Y. (1347), with
and The Manufacturers National Bank of Troy, Troy, N.Y.
(721), which had
merged Aug. 9, 1963, under charter and title of the latter
bank (721). The merged bank at the date of merger had,
The Edisto Bank, Denmark, S.C, with
and The First National Bank of South Carolina of Columbia, Columbia, S.C. (13720), which had
merged Aug. 17, 1963, under charter and title of the latter
bank (13720). The merged bank at the date of merger
had
National Bank of Suffolk, Suffolk, Va." (9733), with
and the Virginia National Bank, Norfolk, Va. (9885), which
had
merged Aug. 23,1963, under charter and title of the latter
bank (9885). The merged bank at the date of merger
had
The First National Bank of Berryville, Berryville, Va. (7338),
with
and Farmers & Merchants National Bank, Winchester,
Va. (6084), which had
merged Aug. 29,1963, under charter and title of the latter
bank (6084). The merged bank at the date of merger
had
The Peoples National Bank of Margaretville, Margaretville,
N.Y. (5924), with
and The National Bank & Trust Co. of Norwich, Norwich, N.Y. (1354), which had
merged Aug. 30, 1963, under charter and title of the latter
bank (1354). The merged bank at the date of merger
had
See footnotes at end of table.
256
Outstanding
capital stock
Surplus
Undivided
profits and
reserves
Total assets
$300,000
$300,000
$194, 657
$5, 935, 878
1, 969, 370
3, 530, 630
1, 641, 780
96, 209, 833
2,119, 370
200,000
3, 880, 630
700,000
1, 782,173
421, 874
102,131, 037
17, 803, 896
8, 772, 000
12, 228,000
3, 667, 008
285, 422, 456
9, 322, 000
12, 678, 000
3, 831, 964
302,057, 792
600, 000
1, 000, 000
749, 475
35, 612, 646
9, 822,400
20,177, 600
5, 673, 695
475, 664, 791
10, 542, 400
21,177, 600
6,173, 612
508, 850, 514
300, 000
1, 000, 000
321, 640
16,188,008
10, 020, 960
30, 979,040
7, 685, 683
620, 403, 737
10, 380, 960
32,119,040
7, 807, 324
635, 579, 581
442, 500
935, 500
171,726
18, 704,784
500, 000
1,200, 000
229, 806
23, 890, 800
1,080, 000
250, 000
2, 000, 000
650, 000
399, 533
155, 669
42, 595, 584
7, 530, 321
1, 656,250
2, 343, 750
2,188i 856
87, 927,120
1, 918, 750
100, 000
2, 993, 750
220, 000
2, 332, 025
46, 251
95} 457} 442
3, 089, 902
2,119,370
3, 880, 630
1,787, 974
99, 524, 948
2,192, 370
250,000
3, 907, 630
600, 000
2, 035, 354
240,000
102, 601, 781
11,638,248
6, 862,105
18,137, 895
3, 336,042
332, 901, 972
7,124, 605
18, 725, 395
3, 576, 635
344, 280, 602
100, 000
150, 000
126,708
3, 283, 366
420, 000
1,080, 000
613, 712
25, 999, 872
500, 000
1, 250, 000
740, 420
29, 283,238
50, 000
50, 000
301, 427
3,411,116
1, 870, 280
1, 870, 280
719, 373
46, 812,410
2,010,280
2,010, 280
840, 801
50,223, 526
TABLE B-12.—Mergers of national banks, or national and state banks, calendar 1963, with title and location,
outstanding capital stock, surplus, undivided profits and reserves, and total assets—Continued
Title and location of bank
The Hilliard Bank, Hilliard, Ohio, with
and The City National Bank & Trust Co. of Columbus,
Columbus, Ohio (7621), which had
merged Aug. 31, 1963, under charter and title of the
latter bank (7621). The merged bank at the date of
merger had
The Biglerville National Bank, Biglerville, Pa. (7917), with....
and The Gettysburg National Bank, Gettysburg, Pa.
(611), which had
merged Aug. 31, 1963, under charter and title of the latter
bank (611). The merged bank at the date of merger had.
Bamberg County Bank, Bamberg, S.C., with
and The South Carolina National Bank of Charleston,
Charleston, S.C. (2044), which had
merged Sept. 7, 1963, under the charter and title of the
latter bank (2044). The merged bank at the date of
merger had
The First National Bank of Vincentown, Vincentown, N J .
(370), with
and The Union National Bank & Trust Co. at Mount
Holly, Mount Holly, NJ. (2343), which had
merged Sept. 13, 1963, under charter of the latter bank
(2343) and under title of "Union National Bank and
Trust Company." The merged bank at date of merger
had
Farmers Exchange Bank, Abingdon, Va.,18 with
and Virginia National Bank, Norfolk, Va. (9885), which
had
merged Sept. 13, 1963, under the charter and title of the
latter bank (9885). The merged bank at the date of
merger had
Citizens State Bank, Bennettsville, S.C.,"> with
and The South Carolina National Bank of Charleston,
Charleston, S.C. (2044), which had
merged Sept. 14,1963, under charter and title of the latttr
bank (2044). The merged bank at the date of merger
had
The Scottish Bank, Lumberton, N.C.,20 with
and the First Union National Bank of North Carolina,
Charlotte, N.C. (9164), which had
merged Sept. 21,1963, under charter and title of the latter
bank (9164). The merged bank at the date of merger
had
State Bank of Newfane, Newfane, N.Y., with
and the Liberty National Bank & Trust Co., Buffalo, N.Y.
(15080), which had
merged Sept. 25, 1963, under charter and title of the latter
bank (15080). The merged bank at the date of merger
had
The Bank of Chapel Hill, Chapel Hill, N.C, 21 with
and the North Carolina National Bank, Charlotte, N.C.
(13761), which had
merged Sept. 27,1963, under charter and title of the latter
bank (13761). The merged bank at the date of merger
had
The Massena Banking & Trust Co., Massena, N.Y., with
and The Watertown National Bank, Watertown, N.Y.
(2657), which had
merged Sept. 30, 1963, under charter of the latter bank
(2657), and under title of "The National Bank of Northern New York." The merged bank at the date of merger
had
See footnotes at end of table.
72,5-698—64
18
Outstanding
capital stock
Undivided
profits and
Total assets
$100, 000
$100, 000
$226, 722
$3, 868, 740
6, 210, 000
6, 290, 000
3,290,136
208, 512, 987
6, 300, 000
125, 000
6,700,000
275,000
3, 216, 858
160, 979
212,035,099
5,285, 631
750, 000
1, 375, 000
299, 734
26, 008, 385
937, 500
108, 000
1, 650, 000
200, 000
398, 214
75, 342
31, 294, 017
3, 697, 018
4, 885, 420
13,114, 580
4, 790, 564
294, 442, 489
4, 950, 220
13,549,780
4, 673, 906
298,139,506
100, 000
100, 000
160,699
3, 305, 583
500, 000
1, 000,000
297, 682
19, 730,128
612,000
350, 000
1,100, 000
650, 000
444,120
51, 604
23, 070, 438
11,021,554
7,124, 605
18, 725, 395
3, 399, 071
354, 684, 075
7,439, 605
115,000
19, 410, 395
105, 000
365, 320, 242
2, 782,208
4, 951,220
13, 549, 780
3, 450, 675
43, 881
4, 594, 316
308, 584, 500
4, 991, 295
2,000, 000
14,008, 705
4, 000,000
4, 344, 698
1, 367, 231
311,366,708
59, 512, 312
10, 856, 660
11,643,340
3,758, 886
361,118, 832
13,481,660
150, 000
16, 518, 340
150, 000
3,480, 478
144, 091
419, 450, 882
4, 700, 516
4,775, 290
10, 250, 000
2, 983, 912
276, 843, 755
4, 899, 040
200, 000
10, 426, 250
650, 000
3,128, 003
232,023
281, 544, 272
16, 704, 038
11,075,250
31, 924, 750
6, 464,492
621, 325,157
11,385,250
375,000
32, 614, 750
325,000
6, 546, 515
141, 435
634, 703,752
11,214,199
1,196,000
1,196, 000
889, 573
42, 979, 517
1, 533, 500
1, 533, 500
1,056,008
54, 273,785
257
TABLE B-12.—Mergers of national banks, or national and state banks, calendar 1963, with title and location,
outstanding capital stock, surplus, undivided profits and reserves, and total assets—Continued
Title and location of bank
Essex Trust Co., Essex Junction, Vt., with
and The Howard National Bank & Trust Co. of Burlington, Burlington, Vt. (1698), which had
merged Sept. 30, 1963, under charter of the latter bank
(1698), and with title "The Howard National Bank and
Trust Company." The merged bank at the date of the
merger had
Campbell County Bank, Rustburg, Va.,22 with
and The Lynchburg National Bank & Trust Co., Lynchburg, Va. (1522), which had
merged Sept. 30, 1963, under charter of the latter bank
(1522), and under title of "The Fidelity National Bank."
The merged bank at the date of merger had
Woodbury Bank& Trust Co., Sioux City, Iowa, with
and First National Bank in Sioux City, Sioux City, Iowa
(13538), which had
merged Oct. 11, 1963, under the charter and title of the
latter bank (13538). The merged bank at the date of
merger had
The Farmers Bank of Nansemond, Suffolk, Va., with
and The Seaboard Citizens National Bank of Norfolk,
Norfolk, Va. (10194), which had
merged Oct. 18, 1963, under charter of the latter bank
(10194) and with title of "Seaboard Citizens National
Bank." The merged bank at the date of merger had....
Piedmont National Bank of Spartanburg, Spartanburg, S.C.23
(14594), with
and The South Carolina National Bank of Charleston,
Charleston, S.C. (2044), which had
merged Oct. 31, 1963, under charter and title of the latter
bank (2044). The merged bank at the date of merger
had
Citizens National Bank, Los Angeles, Calif.24 (5927), with....
and Crocker-Anglo National Bank, San Francisco, Calif.
(1741), which had
merged Nov. 1, 1963, under the charter of the latter bank
(1741), and under the title "Crocker-Citizens National
Bank." The merged bank at the date of merger had....
The Johnsonburg National Bank, Johnsonburg, Pa. (4544),
with
and The Warren National Bank, Warren, Pa. (4879),
which had
merged Nov. 29, 1963, under the charter and title of the
latter bank (4879). The merged bank at the date of
merger had
The Delta National Bank, Delta, Pa. (14201), with
and the First National Bank & Trust Co. of Red Lion, Red
Lion, Pa. (5184), which had
merged Nov. 30, 1963, under the charter of the latter bank
(5184), and under title of "First National Bank & Trust
Company." The merged bank at the date of merger had..
Security State Bank of Turlock, Turlock, Calif, ,2s with
and The Bank of California, National Association, San
Francisco, Calif. (9655), which had
merged Dec. 13, 1963, under charter and title of the latter
bank (9655). The merged bank at date of merger had. .
Farmers & Merchants Bank of Staunton, Staunton, Va.,26 with.
and the Virginia National Bank, Norfolk, Va. (9885),
which had
merged Dec. 13, 1963, under the charter and title of the
latter bank (9885). The merged bank at the date of
merger had
See footnotes at end of table.
258
Outstanding
capital stock
Surplus
Undivided
profits and
reserves
Total assets
$100,000
$200,000
$133, 267
$4, 087, 607
1, 582, 500
1, 582, 500
953,179
49, 496, 540
1,732, 500
260, 000
1, 680, 000
450, 000
1,131,270
82, 514
53, 567, 530
15,524,026
1, 600, 000
2, 400, 000
387, 678
58, 806, 850
1, 925, 000
300, 000
2, 850, 000
450, 000
405,193
454, 272
74,145, 956
15, 493, 685
400, 000
1, 600, 000
413,719
42, 316, 567
1,100, 000
500, 000
1, 650, 000
1, 000, 000
512,270
408, 776
57, 421,110
14, 490, 299
1, 500, 000
4, 500, 000
2, 334, 358
91, 518, 644
2, 375, 000
7, 625, 000
243,135
106, 008, 943
525, 000
675, 000
296, 551
16, 841, 035
4, 991, 295
14, 008, 705
4, 926, 351
319, 252,708
5, 306, 295
14,777, 500
15, 693, 705
22, 522, 500
4, 422, 903
10, 587, 546
336, 093, 744
805, 590, 533
65, 993, 950
65, 993, 950
22, 567, 085 2,413,421,681
94, 071, 200
80, 928, 800
27, 442, 532
300, 000
300, 000
283, 751
5,144, 658
1, 650, 000
2, 350, 000
1, 219, 568
57, 471, 429
1, 890, 000
50, 000
2, 710, 000
250, 000
1, 398, 320
88, 632
62,511,087
4, 822, 737
400, 000
1, 600, 000
346,117
26, 479,026
500, 000
300, 000
1, 800, 000
350, 000
434, 750
180, 776
31,301,764
9, 767,171
15, 415, 800
34, 584, 200
4, 550, 264
838, 590,233
15, 790, 800
100, 000
34, 209, 200
300, 000
5, 395, 314
252, 533
848, 452, 415
5, 724,000
7, 864, 825
20, 332, 775
3, 896, 761
383, 306,745
8,014, 825
20, 582,775
4,149, 294
389,030, 745
3, 217, 445, 769
TABLE B-12.—Mergers of national banks, or national and state banks, calendar 1963, with title and location,
outstanding capital stock, surplus, undivided profits and reserves, and total assets—Continued
Title and location of bank
Tidewater Bank & Trust Co., Franklin, Va.,2? with
and the Virginia National Bank, Norfolk, Va. (9885),
which had
merged Dec. 13, 1963, under charter and title of the latter
bank (9885). The merged bank at the date of merger
had
The Mogadore Savings Bank, Mogadore, Ohio,23 with
and the First National Bank of Akron, Akron, Ohio
(14579), which had
merged Dec. 20,1963, under charter and title of the latter
bank (14579). The merged bank at the date of merger
had
Pinconning State Bank, Pinconning, Mich., with
and Peoples National Bank & Trust Co. of Bay City, Bay
City, Mich. (14641), which had
merged Dec. 31, 1963, under charter and title of the latter
(14641). The merged bank at the date of merger had..
The Troy Citizens Bank, Troy, Ohio, 2 with
9
and The Tipp-Citizens National Bank of Tipp City, Tipp
City, Ohio (3004), with
and The Citizens National Bank & Trust Co. of Piqua,
Piqua, Ohio (1061), which had
merged Dec. 31, 1963, under charter of The Citizens National Bank & Trust Co. of Piqua and under the title
"The Miami Citizens National Bank & Trust Company."
The merged bank at the date of merger had
1 With 2 local branches.
1 local branch.
With 4 local, 2 outside branches.
* With 2 local branches.
5
With 1 outside branch.
e With 1 local branch.
7
With 3 outside branches,
s With 1 local branch.
» With 5 local branches.
io With 3 local, 4 outside branches.
" With 2 outside branches.
1 With 1 local branch.
2
1 With 1 local branch.
3
14
With 2 local, 1 outside branches,
is With 1 local, 1 outside branches.
2
With
3
Outstanding
capital stock
Surplus
Undivided
profits and
reserves
Total assets
$447, 600
$900, 000
$275, 745
$17,141, 802
7, 439, 605
19, 410, 395
3,621,015
366, 292, 846
7, 864, 825
350, 000
20, 332, 775
850, 000
3, 896, 761
282,197
383, 306, 745
22, 392, 000
5, 314, 350
14, 685, 650
4, 249, 343
326, 970, 000
5, 664, 350
200, 000
15, 535, 650
300, 000
4, 531, 541
318, 000
349, 362, 000
7,192, 000
2, 640, 000
3, 000, 000
1, 507, 849
88, 376,000
2, 977, 500
200, 000
3, 300, 000
250, 000
1, 613, 930
89, 055
95, 568, 000
5, 653, 000
100, 000
150,000
155,379
3, 951,000
300, 000
1, 000, 000
115,172
13,168, 000
1, 000, 000
1,000, 000
360, 291
22, 548, 000
s With 1 local, 2 outside branches.
With 1 local branch.
s With 1 outside branch.
With 1 local branch.
0 With 22 outside branches.
1 With 2 local, 1 outside branches.
2 With 3 outside branches.
3
With 2 local, 2 outside branches.
4
With 41 local, 41 outside branches.
5
With 2 local, 1 outside branches.
« With 1 local branch.
With 2 outside branches.
8 With 2 outside branches.
9
With 1 local branch.
259
TABLE B-13.—Number of domestic branches of national banks opened for business, calendar 1963, by states,
banks, and type of branch
Branches opened for business
Title and location of bank
Local
283
Total.,
The First National Bank of Anniston
First National Bank of Athens
First National Bank of Bay Minette
Birmingham Trust National Bank, Birmingham.
The First National Bank of Birmingham
State National Bank of Alabama, Decatur
First National Bank of Fairhope
The First National Bank of Huntsville
The First National Bank of Jacksonville
The First National Bank of Mobile
The First National Bank of Montgomery
The First National Bank of Anchorage.
National Bank of Alaska, Anchorage...
First National Bank of Fairbanks
Alaska National Bank of Fairbanks....
The First National Bank of Ketchikan.
The First Navejo National Bank, Holbrook
First National Bank of Arizona, Phoenix
The Valley National Bank of Arizona, Phoenix..
The First National Bank of DeQueen
The First National Bank of Jonesboro
The First National Bank in Little Rock
American National Bank of North Little Rock..
The Commercial National Bank of Little Rock.
First National Bank of Magnolia
First National Bank at Marianna
The First National Bank of Nashville
CALIFORNIA
Beverly Hills National Bank, Beverly Hills
City National Bank of Beverly Hills
Community National Bank of Kern County, Buttonwillow
Citizens National Bank, Los Angeles
Security First National Bank, Los Angeles
Central Valley National Bank, Oakland
First National Bank & Trust Co., Ontario
The First National Bank of Pleasanton
Rocklin-Sunset National Bank, Rocklin
The American National Bank of San Bernardino
First National Bank of San Diego
The United States National Bank of San Diego
Bank of America National Trust & Savings Association, San Francisco.
The Bank of California, N.A., San Francisco
Crocker-Citizens National Bank, San Francisco
Golden Gate National Bank, San Francisco
San Francisco National Bank, San Francisco
The First National Bank of San Jose
Valley National Bank, Sunnymead
260
Other
than
local
557
TABLE B-13.—Number of domestic branches of national banks opened for business, calendar 1963, by states,
banks, and type of branch—Continued
Branches opened for business
Title and location of bank
Local
Other
than
local
Total
CONNECTICUT
The Connecticut National Bank, Bridgeport
The State National Bank of Connecticut, Bridgeport.
The National Iron Bank of Falls Village
Hartford National Bank & Trust Co., Hartford
The First National Bank of Litchfield
The First New Haven National Bank, New Haven...
The Second National Bank of New Haven
Lincoln National Bank of Stamford
DELAWARE
Colonial National Bank, Wilmington
DISTRICT OF COLUMBIA *
The First National Bank of Washington.
The National Bank of Washington
GEORGIA
The First National Bank of Atlanta
West Georgia National Bank of Carrollton
The Chamblee National Bank, Chamblee
Glenwood National Bank, Decatur
The First National Bank & Trust Co. in Macon....
The Citizens & Southern National Bank, Savannah.
First National Bank of Hawaii, Honolulu.
First Security Bank of Idaho, N.A., Boise.
The Idaho First National Bank, Boise
,
The Cassia National Bank of Burley
Pocatello National Bank, Pocatello
Fidelity National Bank of Twin Falls
The First National Bank of Elkhart
The First National Bank of Elwood
Old National Bank in Evansville
The First National Bank of Fremont
American Fletcher National Bank & Trust Co., Indianapolis.
The Indiana National Bank of Indianapolis
Merchants National Bank & Trust Co. of Indianapolis
The Peoples National Bank of Lawrenceburg
The First National Bank of Madison
First National Bank of Martinsville
The First National Bank of Mishawaka
The Merchants National Bank of Muncie
The First National Bank of Richmond
The Second National Bank of Richmond
The National Bank & Trust Co. of South Bend
The Merchants National Bank of Terre Haute
1
3 branches also authorized for 2 Nonnational Banks in the District of Columbia.
261
TABLE B-13.—Number of domestic branches of national banks opened for business, calendar 1963, by states,
banks, and type of branch—Continued
Branches opened for business
Title and location of bank
Local
First National Bank, Cedar Falls
The Merchants National Bank of Cedar Rapids
The Citizens National Bank of Charles City
The City National Bank of Council Bluffs
Northwest Des Moines National Bank, Des Moines.,
First National Bank, Iowa City
The First National Bank of Oelwein
The First National Bank of Sibley
First National Bank in Sioux City
The Security National Bank of Sioux City
The Home National Bank of Arkansas City..
The Central National Bank of Junction City.
The First National Bank of Olathe
The First National Bank of Carlisle
First National Bank & Trust Co., Georgetown
The Second National Bank & Trust Co. of Lexington.
First National Lincoln Bank of Louisville
The Traders National Bank of Mount Sterling
The First National Bank of Pikeville
The Citizens National Bank of Russellville
The Clark County National Bank of Winchester
LOUISIANA
Security National Bank, Alexandria
The Citizens National Bank in Hammond
Citizens National Bank & Trust Co. of Houma
The First National Bank of Jeanerette
The National Bank of Commerce in Jefferson Parish.
The First National Bank of Lake Charles
The Quachita National Bank in Monroe
The New Iberia National Bank, New Iberia
The State National Bank of New Iberia
National American Bank of New Orleans
The National Bank of Commerce in New Orleans. . .
First National Bank of Portland.
Canal National Bank, Portland.
MARYLAND
The First National Bank of Aberdeen
Maryland National Bank, Baltimore
The First National Bank of Maryland, Baltimore
First National Bank of Harford County
The First-Second National Bank & Trust Co., Cumberland
Farmers & Mechanics-Citizens National Bank of Frederick
Citizens National Bank of Southern Maryland, Lexington Park.
The First National Bank of Oakland
The Garrett National Bank in Oakland
The First National Bank of Sandy Spring
American National Bank of Maryland
National Bank of Maryland, Silver Spring
262
Other
than
local
TABLE B-13.—Number of domestic branches of national banks opened for business, calendar 1963, by states,
banks, and type of branch—Continued
Branches opened for business
Title and location of bank
Local
Other
than
local
MASSACHUSETTS
Amesbury National Bank, Amesbury
The First National Bank of Attleboro
The Beverly National Bank, Beverly
The First National Bank of Boston
New England Merchants National Bank of Boston
National Bank of Plymouth County, Brockton
Plymouth-Home National Bank, Brockton
Middlesex County National Bank, Everett
The Merchants National Bank of Leominster
Union National Bank of Lowell
The Merchants National Bank of New Bedford
Manufacturers National Bank of Bristol Co., North Attleboro.,
First National Bank of Cape Cod, Orleans
First Agricultural National Bank of Berkshire Co., Pittsfield...
South Shore National Bank of Quincy
The Union Market National Bank of Watertown
The Williamstown National Bank, Williamstown
Worcester County National Bank, Worcester
The First National Bank of Yarmouth, Yarmouth Port
Peoples National Bank & Trust Co. of Bay City
City National Bank of Detroit
Manufacturers National Bank of Detroit
Michigan Bank, N. A., Detroit
National Bank of Detroit
Hillsdale County National Bank, Hillsdale
The Ionia County National Bank of Ionia
Commercial National Bank, Ithaca
The First National Bank & Trust Co. of Kalamazoo
The American National Bank & Trust Co. of Kalamazoo.
First National Bank of Lake City
The First National Bank of Lapeer
Security National Bank of Manistee
Hackley Union National Bank & Trust Co. of Muskegon. ,
The National Lumberman's Bank of Muskegon
Community National Bank of Pontiac
National Bank & Trust Co. of Traverse City
MISSISSIPPI
First National Bank of Biloxi
Gulf National Bank of Gulfport
The Attala National Bank of Koscuisko
First National Bank of Picayune
The Exchange National Bank of Jefferson City.
Leawood National Bank of Kansas City
The American National Bank of St. Joseph
NEBRASKA
First National Bank of Fremont
The First National Bank of North Platte
Stock Yards National Bank of South Omaha, Omaha.
The First National Bank of York
First National Bank of Nevada, Reno
Security National Bank of Nevada, Reno.
263
TABLE B-13.—Number of domestic branches of national banks opened for business} calendar 1963, by states,
banks, and type of branch—Continued
Branches opened for business
Title and location of bank
Local
NEW HAMPSHIRE
The Indian Head National Bank of Nashua
NEW JERSEY
Somerset Hills National Bank, Basking Ridge
Peoples National Bank & Trust Go. of Belleville
The Cumberland National Bank of Bridgeton
First Camden National Bank & Trust Co., Camden
The Third National Bank & Trust Co. of Camden
Cherry Hill National Bank, Cherry Hill Township
The United National Bank of CUffside Park
First Clinton National Bank, Clinton
The National Union Bank of Dover
The National State Bank, Elizabeth
Citizens National Bank of Englewood
The Flemington National Bank & Trust Co., Flemington
The Hunterdon County National Bank of Flemington
First National Bank in Fort Lee
The Hardyston National Bank of Hamburg
Livingston National Bank, Livingston
The Farmers & Merchants National Bank of Matawan
Merchantville National Bank & Trust Co., Merchantville
The Short Hills National Bank, Millburn Township
The Millville National Bank, Millville
Montclair National Bank & Trust Co., Montclair
,
The First National Iron Bank of Morristown
,
Union National Bank & Trust Co., Mount Holly
,
National Newark & Essex Bank, Newark
The National State Bank of Newark
,
The Second National Bank of Orange
The First National Bank of Park Ridge
The Phillipsburg National Bank & Trust Co., Phillipsburg. .
The Monmouth County National Bank, Red Bank
The First National Bank of Middlesex County, South River.
The Vineland National Bank & Trust Co., Vineland
The First National Bank of Westwood
First County National Bank & Trust Co., Woodbury
NEW MEXICO
First National Bank in Alamogordo
Albuquerque National Bank, Albuquerque
The Carlsbad National Bank, Carlsbad
First National Bank of Dona Ana County, Las Cruces.
The First National Bank of Roswell
Hot Springs National Bank, Truth or Consequences
National Commercial Bank & Trust Co., Albany..
First National Bank of Bay Shore
The Matteawan National Bank, Beacon
Liberty National Bank & Trust Co., Buffalo
Lincoln National Bank, Buffalo
Central National Bank, Canajoharie
The St. Lawrence County National Bank, Canton.
Peninsula National Bank, Cedarhurst
Northern Westchester National Bank, Chappaqua.
The Chester National Bank, Chester
First National Bank of Cortland
The Tinker National Bank of East Setauket
The Endicott National Bank, Endicott
The First National Bank of Glens Falls
264
Other
than
local
TABLE B-13.—Number of domestic branches of national banks opened for business, calendar 1963, by states,
banks, and type of branch—Continued
Branches opened for business
Charter
No.
Title and location of bank
Other
than
local
Local
Total
NEW YORK—continued
7699
1399
11087
3186
6587
548
8453
10037
4925
5293
12997
13314
13955
1461
7703
15029
1354
14734
1887
12788
1312
11708
5390
5846
13393
721
1392
11881
2657
10525
13882
Glens Falls National Bank & Trust Co., Glens Falls
The National Bank of Orange & Ulster Counties, Goshen
Long Island National Bank, Hicksville
The Homer National Bank, Homer
Security National Bank of Long Island, Huntington
The First National Bank of Jamestown
Chautauqua National Bank of Jamestown
Community National Bank, Liberty
The Sullivan County National Bank of Liberty
The First National Bank of Mexico
Franklin National Bank, Mineola
Nanuet National Bank, Nanuet
First Westchester National Bank, New Rochelle
First National City Bank, New York
The Meadow Brook National Bank, New York.
Royal National Bank of New York
The National Bank & Trust Co. of Norwich
Tappan Zee National Bank of Nyack. . .
The First National Bank of Olean
The Peoples National Bank of Patchogue
Farmers-Matteawan National Bank, Poughkeepsie
Scarsdale National Bank & Trust Co., Scarsdale
The First National Bank of Spring Valley
Rockland National Bank, Suffern
Lincoln National Bank & Trust Co. of Central New York, Syracuse
The Manufacturers National Bank of Troy
The Oneida National Bank & Trust Co. of Central New York, Utica
Valley National Bank of Long Island, Valley Stream
The National Bank of Northern New York, Watertown
National Bank of Westchester, White Plains
First National Bank in Yonkers
1
1
1
1
1
6
1
6
1
1
1
1
1
4
1
1
13
2
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
6
1
2
1
1
1
4
1
2
19
2
2
1
1
1
2
1
1
1
1
1
1
1
1
1
1
NORTH CAROLINA
11091
8953
9164
13761
13779
4597
14676
10610
4896
10608
14527
The First National Bank of Albemarle
The First National Bank of Asheboro...
First Union National Bank of North Carolina, Charlotte
North Carolina National Bank, Charlotte
The Citizens National Bank in Gastonia
First National Bank of Catawba County, Hickory
First National Bank in Eastern North Carolina, Jacksonville
Southern National Bank of Lumberton..
The First National Bank of Mount Airy
The Planters National Bank & Trust Co., Rocky Mount
First National Bank of Whiteville
2434
13455
The First National Bank of Bismarck
The Union National Bank in Minot
14579
7639
13899
24
4318
786
14761
7621
7745
5065
2604
14914
First National Bank of Akron
The First National Bank of Baltimore
The First National Bank in Bryan
The First National Bank of Cincinnati
Central National Bank of Cleveland
The National City Bank of Cleveland
Society National Bank of Cleveland
The City National Bank & Trust Co. of Columbus
The Huntington National Bank of Columbus
The Ohio National Bank of Columbus
The Winters National Bank & Trust Co. of Dayton
National Bank of Fulton County, Delta
1
1
3
2
1
1
1
1
35
11
1
2
2
1
1
1
38
13
1
1
1
3
1
2
1
NORTH DAKOTA
1
1
1
1
OHIO
1
3
1
1
2
1
2
1
1
2
3
1
2
1
1
1
4
1
1
1
4
3
1
3
3
1
1
1
265
TABLE B-13.—Number of domestic branches of national banks opened for business, calendar 1963, by states,
banks, and type of branch—Continued
Branches opened for business
Title and location of bank
Local
OHIO—continued
The First National Bank of East Liverpool
The First National Bank of Findlay
Tri-Gounty National Bank, Fostoria
The Second National Bank of Greenville
First National Bank of Mansfield
Glermont National Bank, Milford
The Park National Bank of Newark
The New Carlisle National Bank, New Carlisle
The Lake County National Bank of Painesville
The Miami Citizens National Bank& Trust Co., Piqua.
The Citizens Baughman National Bank, Sidney
The First National Bank of Springfield
The First Troy National Bank & Trust Co., Troy
The Champaign National Bank of Urbana
The Citizens National Bank of Urbana
The Peoples National Bank of Wapakoneta
The First National Bank of Washington Court House. . .
The First National Bank of Wilmington
The First National Bank of Zanesville
First National Bank in Cordell.
National Security Bank, New
The First National Bank of C
The United States National I
PENNSYLVANIA
The First National Bank of Allentown
The Merchants National Bank of Allentown
The First National Bank & Trust Co. of Bethlehem
The Bradford National Bank, Bradford
The First National Bank of Carmichaels
National Valley Bank & Trust Co., Ghambersburg
The National Bank of Corry
The Denver National Bank, Denver
The Downington National Bank, Downington
The Citizens National Bank of Evans City
The Gettysburg National Bank, Gettysburg
First National Bank of Mercer County, Greenville
The Harleysville National Bank& Trust Co., Harleysville
First National Bank in Indiana
United States National Bank in Johnstown
National Bank & Trust Co. of Kennett Square
The Grange National Bank of Wyoming County at Laceyville..
The Fulton National Bank of Lancaster
Lancaster County Farmers National Bank, Lancaster
Commercial National Bank of Westmoreland County, Latrobe..
The National Bank of McKeesport
Western Pennsylvania National Bank, McKeesport
The First National Bank of Mercer
Tri-County National Bank, Middleburg
County National Bank of Montrose
The Cement National Bank, Northampton
The Philadelphia National Bank, Philadelphia
Mellon National Bank & Trust Co., Pittsburgh
Pittsburgh National Bank, Pittsburgh
The Union National Bank of Pittsburgh
Portage National Bank, Portage
First National Bank & Trust Co., Red Lion
The McDowell National Bank of Shawn
Union National Bank & Trust Co. of Souderton
The National Bank of Topton
266
Other
than
local
TABLE B-13.—Number of domestic branches of national banks opened for business, calendar 1963, by states,
banks, and type of branch—Continued
Branches opened for business
Title and location of bank
Local
Other
than
local
PENNSYLVANIA—continued
The Warren National Bank, Warren
Citizens National Bank & Trust Co. of Waynesboro
National Bank of Chester County & Trust Co., West Chester.
The First National Bank of Wilkes-Barre
The Wyoming National Bank of Wilkes-Barre
Williamsport National Bank, Williamsport
The First National Bank of York
The Industrial National Bank of West York, York
RHODE ISLAND
The Columbus National Bank of P r o v i d e n c e . . . .
SOUTH CAROLINA
The Citizens & Southern National Bank of South Carolina, Charleston.
The South Carolina National Bank of Charleston
The First National Bank of South Carolina of Columbia
The Peoples National Bank of Greenville
First State National Bank, Jackson
The Commercial National Bank of Spartanburg
Piedmont National Bank of Spartanburg
The National Bank of South Carolina of Sumter
TENNESSEE
American National Bank & Trust Co. of Chattanooga.
The Hamilton National Bank of Chattanooga
The First National Bank of Greeneville
The First National Bank of Jefferson City
The Hamilton National Bank of Knoxville
Union Planters National Bank of Memphis
First American National Bank of Nashville
Third National Bank in Nashville
First National Bank of Pulaski
The First National Bank of Rutherford
The Peoples National Bank of Shelbyville
The First National Bank of Sparta
UTAH
The First National Bank of Logan
First Security Bank of Utah, N.A., Ogden..
Zions First National Bank, Salt Lake City. .
The Howard National Bank & Trust Co., Burlington.
The Merchants National Bank of Burlington
,
The First National Bank of Springfield
First & Citizens National Bank of Alexandria
Mount Vernon National Bank& Trust Co. of Fairfax Co., Anandale.
The First National Bank of Appalachia
Security National Bank, Bailey's Cross Roads
The First National Bank of Bassett
National Bank & Trust Co. at Charlottesville
The National Bank of Fairfax
The First National Bank of Farmville
The National Bank of Fredericksburg
First National Bank of Gate City
Peoples National Bank of Gloucester
The Citizens National Bank of Hampton
The Merchants National Bank of Hampton
267
TABLE B-13.—Number of domestic branches of national banks opened for business, calendar 1963, by states,
banks, and type of branch—Continued
Branches opened for business
Charter
No.
Title and location of bank
Other
than
local
Local
Total
VIRGINIA—continued
12267
11694
5290
2917
1522
5032
11444
10194
9885
6018
12477
10080
1111
15027
2737
14824
6084
1635
12599
The Old Point National Bank of Phoebus, Hampton
The National Bank of Harrisonburg
The Lancaster National Bank of Irvington
The Peoples National Bank of Leesburg
The Fidelity National Bank, Lynchburg
The National Bank of Manassas
The First National Bank of Narrows
Seaboard Citizens National Bank, Norfolk
Virginia National Bank, Norfolk
The Purcellville National Bank, Purcellville
The First National Bank of Quantico
The Central National Bank of Richmond
First & Merchants National Bank of Richmond
Richmond National Bank & Trust Co., Richmond
The First National Exchange Bank of Virginia, Roanoke.
Fairfax County National Bank, Seven Corners
Farmers & Merchants National Bank, Winchester
The Shenandoah Valley National Bank of Winchester
Wythe County National Bank, Wytheville
12114
4699
4375
13230
14394
11280
13331
4668
14866
3417
12292
The First National Bank of Enumclaw
The First National Bank of Pullman
The National Bank of Commerce of Seattle
The Pacific National Bank of Seattle
Peoples National Bank of Washington in Seattle
Seattle-First National Bank, Seattle
First National Bank in Spokane
Old National Bank of Washington, Spokane
Spokane National Bank, Spokane
National Bank of Washington, Tacoma, Washington.
The Puget Sound National Bank of Tacoma
1
1
1
1
4
2
1
1
12
1
1
2
2
2
5
1
1
1
1
WASHINGTON
TABLE B-14.—Number of domestic branches of national banks closed, calendar 1963, by states, banks, and
type of branch
Branches closed
Charter
No.
Title and location of Bank
Local
Total: 30 banks
Other than
local
25
Total
19
44
1
1
2
2
1
1
2
2
CALIFORNIA
2491
6919
10391
13044
Security First National Bank, Los Angeles
Central Valley National Bank, Oakland
The United States National Bank of San Diego
Bank of America National Trust & Savings Association, San Francisco
CONNECTICUT
4
The State National Bank of Connecticut, Bridgeport
1
1
1
1
DISTRICT OF COLUMBIA
5046
The Riggs National Bank of Washington, D.C
268
TABLE B-14.—Number of domestic branches of national banks closed, calendar 1963, by states, banks, and
type of branch—Continued
Branches closed
Charter
No.
Title and location of bank
Other
than
local
Local
Total
IOWA
10139
1
1
1
1
1
The Toy National Bank of Sioux City
1
KENTUCKY
3832
The First & Farmers National Bank of Somerset
LOUISIANA
13648
Commercial National Bank in Shreveport
MARYLAND
4634
13745
2
3
1
1
1
1
The First National Bank of Aberdeen
Fidelity-Baltimore National Bank, Baltimore
1
MASSACHUSETTS
736
First National Bank of Cape Cod Provincetown
MICHIGAN
13820
The American National Bank & Trust Co. of Kalamazoo
1
1
1
1
1
1
1
1
1
1
1
3
1
3
MISSOURI
9042
6272
4111
The American National Bank of St. Joseph
The Tootle-Enright National Bank, St. Joseph, Mo
The Citizens National Bank of Chillicothe
9908
Stock Yards National Bank of South Omaha
.
NEBRASKA
NEW YORK
15080
14853
Liberty National Bank & Trust Co., Buffalo
First National City Trust Co., New York
13761
North Carolina National Bank, Charlotte
NORTH CAROLINA
1
4
5
NORTH DAKOTA
13455
1
1
The Union National Bank in Minot
OHIO
975
1999
14724
Farmers National Bank & Trust Co. of Ashtabula . .
The Citizens National Bank of New Philadelphia
The Southern Ohio National Bank of Cincinnati
1
1
1
1
1
1
OKLAHOMA
6159
The First National Bank of Yukon
1
1
PENNSYLVANIA
1233
871
392
252
13803
Easton Nation Bank & Trust Co., Easton
The Merchants National Bank & Trust Co. of Meadville
The First National Bank of Mercer
Pittsburgh National Bank, Pittsburgh
First National Bank in Sharon
1
1
2
3
1
1
1
3
2
2
1
269
TABLE B—15.—Principal assets and liabilities of national banks, by deposit size, December 1962 and 1963
[Dollar amounts in millions]
Cash,
balances
with other
Loans and U.S. Govbanks,
Real
discounts, ernment
Other
including
estate
bonds reserve with assets
obligarediscounts tions,
and
Federal Reand over- direct and securities serve banks
drafts
guaranteed
Loans and securities
Number
of banks
Total
Total
1962
Banks with deposits of—
Less than $1.0
$1.0 to $1.9
$2.0 to $4.9
$5.0 to $9.9
$10.0 to $24.9
$25.0 to $49.9
$50.0 to $99.9
$100.0 to $499.9
Over $500.0
$35, 663 $16, 042
$29, 684
Deposits
Total
assets
$2, 287 $160, 657
Capital
stock
Surplus,
undivided
profits,
and
Time and
savings
Total
$8, 992 $142, 825
$88, 964
$53, 861
11
63
378
581
908
660
636
2,092
3,664
72
609
4,494
8,052
13, 936
11,069
10, 794
34, 881
58, 919
54
396
2,745
4,648
7,924
6,473
6,649
23, 747
36, 329
18
213
1,749
3,405
6,011
4, 596
4, 145
11,134
22, 589
4,029
9,519
150, 823
89, 389
61, 434
15
37
139
205
363
303
315
965
1,688
17
66
394
610
946
693
704
2,212
3,877
91
593
4,526
8,166
14,450
11,456
11,895
36, 552
63, 095
68
385
2,704
4,604
7,977
6,470
7,019
23, 720
36, 441
23
207
1,822
3,562
6,472
4,985
4,876
12, 832
26, 654
4,505 $127, 254
$75, 548
$3, 758
101
395
306
135
908
315
150
158
37
67
559
4,096
7,333
12, 785
10, 139
9,800
30, 278
52, 197
37
284
2,073
3,757
6,678
5, 496
5,484
18, 663
33, 075
26
226
1,524
2,563
4, 354
3,365
3,037
8,215
12, 352
4
49
499
1,012
1,752
1,278
1,280
3,399
6,769
22
131
861
1,440
2, 359
1,866
1,931
7,988
13,085
2
9
66
131
252
208
178
578
863
91
700
5,031
8,919
15,431
12, 257
11,978
39, 095
67, 154
8
25
126
198
348
290
294
909
1, 561
4,615
135, 990
83, 388
33, 384
19,218
28, 635
2,595
170,233
132
388
1,316
1,145
935
329
167
164
39
88
565
4,205
7,585
13, 379
10, 579
10, 854
31, 966
56, 769
47
305
2,209
3,984
7,233
5,831
6,176
20, 328
37, 275
36
214
1,489
2,516
4, 144
3,226
3,171
7,550
11,037
5
45
507
1,084
2,003
1,521
1,507
4,088
8,457
32
122
801
1,331
2,260
1,773
1,917
7,673
12, 726
3
12
80
140
274
224
208
678
976
123
702
5, 100
9,082
16,037
12, 739
13,257
41,052
72, 143
1963
Total
Banks with deposits of—
Less than $1.0
$1.0 to $1.9
$2.0 to $4.9
$5.0 to $9.9
$10.0 to $24.9
$25.0 to $49.9
$50.0 to $99.9
$100.0 to $499.9
Over $500.0
NOTE : Data may not add to totals because of rounding.
TABLE B-16.—Number and percent of national banks
with surplus fund equal to or greater than, and less
than, common stock, June and December, 1942-63
Banks with—
Dates
Number Surplus equal to Surplus less than
common stock
of banks or greater than
common stock
Number Percent
June 30, 1942
Dec. 31, 1942
June 30, 1943
Dec. 31, 1943
June 30, 1944
Dec. 30, 1944
June 30, 1945
Dec. 31,1945
June 29, 1946
Dec. 31, 1946
June 30, 1947
Dec. 31, 1947
June 30, 1948
Dec. 31, 1948
June 30, 1949
Dec. 31, 1949
June 30, 1950
Dec. 30, 1950
June 30, 1951
Dec. 31, 1951
June 30, 1952
Dec. 31, 1952
June 30, 1953
Dec. 31, 1953
June 30, 1954
Dec. 31, 1954
June 30, 1955
Dec. 31, 1955
June 30, 1956
Dec. 31, 1956
June 6, 1957
Dec. 31, 1957
June 23, 1958
Dec. 31, 1958
June 10, 1959
Dec. 31, 1959
June 15, 1960
Dec. 31, 1960
June 30, 1961
Dec. 30, 1961
June 30, 1962
Dec. 28, 1962
June 29, 1963
Dec. 20, 1963
5,107 2,115 41.41
5,087 2,205 43.35
5,066 2,275 44.91
5,046 2,434 48.24
5,042 2,576 51.09
5,031 2,749 54.64
5,021 2,946 58.67
5,023 3,180 63.31
5,018 3,318 66.12
5,013 3,531 70.44
5,018 3,637 72.48
5,011 3,773 75.29
5,004 3,820 76.34
4,997 3,963 79.31
4,993 4,003 80.17
4,981 4,132 82.96
4,977 4,148 83.34
4,965 4,236 85.32
4,953 4,242 85.65
4,946 4,324 87.42
4,932 4,327 87.73
4,916 4,398 89.46
4,881 4,368 89.49
4,864 4,406 90.58
4,842 4,400 90.87
4,796 4,417 92.10
4,751 4,378 92.15
4,700 4,363 92.83
4,675 4,330 92.62
4,659 4,337 93.09
4,654 4,316 92.74
4,627 4,316 93.28
4,606 4,299 93.33
4,585 4,308 93.96
4,559 4,276 93.79
4,542 4,263 93.86
4,542 4,236 93.26
4,530 4,243 93.66
4,524 4,246 93.85
4,513 4,251 94.19
4,500 4,241 94.24
4,505 4,231 93.92
4,537 4,225 93.12
4,615 4,225 91.55
Number Percent
2,992
2,882
2,791
2,612
2,466
2,282
2,075
1,843
1,700
1,482
1,381
1,238
1,184
1,034
990
849
829
729
711
622
605
518
513
458
442
379
373
337
345
322
338
311
307
277
283
279
306
287
278
262
259
274
312
390
58.59
56.65
55.09
51.76
48.91
45.36
41.33
36.69
33.88
29.56
27.52
24.71
23.66
20.69
19.83
17.04
16.66
14.68
14.35
12.58
12.27
10.54
10.51
9.42
9.13
7.90
7.85
7.17
7.38
6.91
7.26
6.72
6.67
6.04
6.21
6.14
6.74
6.34
6.15
5.81
5.76
6.08
6.88
8.45
271
TABLE B-17.—Dates of reports of condition of national banks, 1914 to 1963
[For dates of previous calls, see AR report for 1920, vol. 2, table No. 42, p. 150]
Year
1914
1915
1916
1917
1918
1919
1920
1921
1922
. .
1923
1924
1925
1926
1927.
1928
1929
1930
1931
1932
1933
1934.. .
1935
1936
1937.
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950.
1951
1952..
1953
1954
1955
1956... .
1957... .
1958.
1959
1960
1961..
1962
1963
Jan.
Feb.
Apr.
4
4
7
5
4
4
13
272
Mar.
28
21
May
1
1
1
10
12
4
28
5
10
3
31
23
6
12
28
27
27
25
5
4
4
31
7
29
26
4
4
13
20
12
11
24
9
31
20
15
11
10
14
4
12
15
12
26
18
June
30
23
30
20
29
30
30
30
30
30
30
30
30
30
30
29
30
30
30
30
30
29
30
30
30
30
29
30
30
30
30
30
29
30
30
30
30
30
30
30
30
30
30
6
23
10
15
30
30
29
July
Sept.
Oct.
12
2
12
11
Aug.
31
Nov.
10
17
20
1
17
15
31
12
8
6
15
14
10
28
10
3
4
24
29
30
25
17
1
28
2
24
18
30
6
1
5
30
4
10
7
5
26
11
24
27
28
30
6
3
Dec.
31
31
27
31
31
31
29
31
29
31
31
31
31
31
31
31
31
31
31
30
31
31
31
31
31
30
31
31
31
31
30
31
31
31
31
31
30
31
31
31
31
31
31
31
31
31
31
30
28
20
NOTES
Act of Feb. 25, 1863, provided for reports of condition on
the 1st of each quarter before commencement of business.
Act of June 3, 1864-—1st Monday of January, April, July,
and October, before commencement of business, on form prescribed by Comptroller (in addition to reports on 1st Tuesday
of each month showing condition at commencement of business in respect to certain items; i.e., loans, specie, deposits,
and circulation).
Act of Mar. 3,1869, not less than 5 reports per year, on form
prescribed by Comptroller, at close of business on any past
date by him specified.
Act of Dec. 28, 1922, minimum number of calls reduced
from 5 to 3 per year.
Act of Feb. 25, 1927, authorized a vice president or an
assistant cashier designated by the board of directors to verify
reports of condition in absence of president and cashier.
Act of June 16, 1933, requires each national bank to furnish
and publish not less than 3 reports each year of affiliates other
than member banks, as of dates identical with those for which
the Comptroller shall during such year require reports of
condition of the bank. The report of each affiliate shall contain such information as in the judgment of the Comptroller
shall be necessary to disclose fully the relations between the
affiliate and the bank and to enable the Comptroller to inform
himself as to the effect of such relations upon the affairs of the
bank.
Sec. 21 (a) of the Banking Act of 1933 provided, in part,
that after June 16, 1934, it would be unlawful for any private
bank not under state supervision to continue the transaction
of business unless it submitted to periodic examination by the
Comptroller of the Currency or the Federal Reserve bank of the
district, and made and published periodic reports of conditions
the same as required of national banks under sec. 5211,
U.S.R.S. Sec. 21 (a) of the Banking Act of 1933, however,
was amended by sec. 303 of the Banking Act of 1935, approved
Aug. 23, 1935, under the provisions of which private banks
are no longer required to submit to examination by the Comptroller or Federal Reserve bank, nor are they required to make
to the Comptroller and publish periodic reports of condition.
(5 calls for reports of condition of private banks were made
by the Comptroller, the first one for June 30, 1934, and the
last one for June 29, 1935.)
Sec. 7(a) (3) of the Federal Deposit Insurance Act (Title
12, U.S.C., sec. 1817(a)) of July 14, 1960, provides, in part,
that, effective Jan. 1, 1961, each insured national bank shall
make to the Comptroller of the Currency 4 reports of condition annually upon dates to be selected by the Comptroller, the
Chairman of the Board of Governors of the Federal Reserve
System, and the Chairman of the Board of Directors of the
Federal Deposit Insurance Corporation, or a majority thereof.
2 dates shall be selected within the semiannual period of January to June, inclusive, and 2 within the semiannual period of
July to December, inclusive. Sec. 161 of Title 12 also provides that the Comptroller of the Currency may call for additional reports of condition, in such form and containing such
information as he may prescribe, on dates to be fixed by him,
and may call for special reports from any particular association whenever in his judgment the same are necessary for use
in the performance of his supervisory duties.
273
TABLE B-18.—Number, total and principal assets, liabilities
[Dollar amounts
ASSETS
State
United Statesf
Alabama
Alaska
Arkansas
C*]pt 1 ifVirn i s*
Colorado
Connecticut
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Kansas
Kentucky
Louisiana
Maine
^^aryland
Michigan
A^innesota
Mississippi
^lissouri
A*fontana
Nebraska
Nevada
New Hampshire
New Tcrsev
New Mexico
New York
North Carolina
North Dakota
Ohio
C*kl ahoma
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
Washington
West Virginia
Wisconsin
^Vvo miner
Virgin Islands
District of Columbia—all*
Number of
banks
4,537
Total assets » Cash assets 2
$162, 748
Obligations of
states and
political
subdivisions,
net3
$34,011
$15,174
73
5
3
58
48
94
23
5
5
143
53
2
9
404
125
99
168
84
44
22
48
93
85
183
27
79
44
121
3
52
146
30
216
29
39
219
205
10
417
4
25
33
74
498
8
28
121
25
76
103
28
1
1,918
208
1 348
881
23 095
1,900
1 538
20
1 099
4 049
2,054
355
566
15 685
3,601
1 238
1,654
1 255
2 318
407
1 627
4 609
6,252
3 609
504
2 669
507
1,402
420
389
5 290
620
16, 861
1 323
458
7 554
2 811
2 163
11,442
626
798
517
3,001
11 980
582
244
2,510
3 053
886
2,473
353
23
374
27
185
181
3,634
364
269
3
201
834
447
61
67
2 621
696
273
307
245
488
56
307
930
960
690
94
579
77
280
52
66
681
110
2,921
276
58
1,235
618
314
1,659
73
162
65
634
2 759
99
28
385
521
153
464
54
3
407
55
173
172
3 993
411
217
6
322
1,103
326
73
126
3,679
951
275
423
327
597
77
360
774
1,518
747
111
555
121
268
86
76
1,176
165
2,988
194
124
1,767
679
422
2,517
72
175
135
599
2,427
73
55
504
600
296
619
90
5
202
10
77
103
1,973
106
205
1
54
317
140
20
49
1,606
226
103
184
105
183
30
122
286
691
250
57
200
37
95
49
24
712
29
1,869
91
40
684
211
192
1,764
103
53
30
217
901
52
17
210
247
53
173
21
2
12
2,011
347
562
83
•Includes national and nonnational banks in the District of
Columbia, all of which are supervised by the Comptroller of the
Currency.
flncludes Virgin Islands.
JLess than $500,000.
274
$28, 641
U.S. Governtnent
obligations,
direct and
guaranteed,
net*
Other bonds
notes and,
debentures,
net*
$2,164
20
8
2
14
305
6
14
(t)
4
74
17
1
3
383
63
15
25
16
14
4
22
35
31
70
3
18
12
16
3
2
95
2
190
26
11
87
36
19
153
3
7
9
39
149
5
2
51
26
10
41
3
0
11
1
Same as total liabilities and capital accounts.
2 Cash, balances with other banks, and cash items in process
of collection.
1
Net of valuation reserves.
NOTE : Data may not add to totals because of rounding.
and capital accounts, of national banks, by states, June 29,1963
in millions]
ASSETS—Continued
Corporate stc
cks,
including Fee
Ural
Reserve Banks,
net*
Loans and
discounts
including
overdrafts, net3
Bank premises
owned, including
furniture and
fixtures
Real estate
other than
bank premises
Investments and
other assets indi"
rectly representing
bank premises or
other real estate
Customers'
liability on
acceptances
outstanding
Other assets
$413
tt)
U)
(t)
$78, 383
$2, 137
$67
$216
$518
4
875
102
859
393
12, 378
960
793
9
494
1,588
1,071
184
308
7,071
1,596
549
689
539
988
230
779
2,449
2,927
1,761
228
1,272
247
719
212
213
2,520
300
8,174
703
212
3,637
1,209
1,153
5,103
361
380
264
1,458
5,397
343
137
1,307
1,573
358
1,123
175
13
25
5
24
12
350
28
29
1
4
1
6
1
0
4
0
153
3
2
84
4
4
2
8
4
1
1
49
7
2
3
3
5
1
3
14
13
7
1
5
1
3
1
1
11
1
46
3
1
17
6
3
32
1
2
1
6
26
1
6
7
2
4
1
(t)
3
971
(t)
18
86
36
12
9
89
44
14
16
13
26
8
24
49
60
40
8
24
9
11
13
7
66
8
205
19
8
91
34
42
135
9
14
8
34
238
2
3
37
50
11
29
6
(t)
(t)
(t)
(I)
(t)
(t)
(I)
(t)
(t)
(t)
(t)
(t)
(i)
(t)
(%)
(t)
(!)
(i)
it)
w
4
2
0
7
2
1
1
(t)
(t)
26
1
1
4
1
1
2
1
(8
(t)
1
1
2
1
2
1
(t)
(t)
(t)
2
1
4
1
(t)
(t)
1
10
1
2
1
2
1
0
(t)
68
10
0
0
13
3
0
0
17
1
1
2
1
2
9
17
1
3
(t)
U)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
3
1
2
8
4
1
3
8
5
0
1
0
5
6
1
2
1
1
3
(t)
(t)
(t)
(t)
(t)
(t)
(t)
0
0
0
U)
(t)
$1 023
7
tt)
U)
0
72
0
2
0
1
47
5
5
0
1
0
0
0
0
191
1
2
1
1
14
1
6
0
0
(t)
8
0
0
0
13
3
154
10
6
3
23
7
4
2
91
15
4
4
4
13
2
7
23
37
19
2
12
3
7
3
1
24
4
267
6
3
30
9
16
54
3
4
4
11
62
1
8
18
2
14
2
U)
8
275
TABLE B-18.—Number, total and principal assets, liabilities and
[Dollar amounts
LIABILITIES
State
United States f.
Alabama
Alaska
Arizona
Arkansas
California
,
Colorado
,
Connecticut
Delaware
,
District of Columbia.
Florida
Georgia
,
Hawaii
,
Idaho
Illinois
Indiana
,
Iowa
Kansas
Kentucky
,
Louisiana
,
Maine
Maryland
Massachusetts
Michigan
,
Minnesota
,
Mississippi
,
Missouri
Montana
Nebraska
Nevada
New Hamphsire
New Jersey
,
New Mexico
,
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Virgin Islands
District of Columbia—all*.
Total
liabilities
Total
deposits
Demand
deposits,
total
$149, 740
§145,513
Demand
deposits,
IPC
Time and
savings deposits, IPC
Deposits of
U.S. Government
$86, 893
$58, 620
$63,256
$54,055
$6,212
1,755
197
1,261
810
21, 592
1,747
1,415
18
1,016
3,718
1,883
325
524
14,403
3,303
1,137
1,506
1,142
2,124
367
1,494
4,160
5,833
3,319
464
2,443
471
1,278
390
350
4,900
576
15,483
1,216
425
6,935
2,555
1,998
10, 355
576
733
480
2,771
10, 986
535
223
2,294
2,819
801
2,286
324
22
1,721
193
1,226
803
20, 913
1,715
1,336
18
1,003
3,629
1,806
315
517
14, 078
3,220
1,117
1,494
1,128
2,087
354
1,463
3,960
5,715
3,240
459
2,408
461
1,244
382
334
4,768
569
14,515
1,174
418
6,746
2,529
1,962
10,141
558
703
471
2,720
10, 814
522
218
2,229
2,760
783
2,237
318
21
1,139
98
689
557
9,779
1,041
928
9
704
2,387
1,342
178
303
8,440
2,154
779
1,084
809
1,499
206
969
3,100
2,920
1,991
312
1,742
269
935
225
246
2,453
373
8,648
839
233
3,888
1,843
1,015
5,263
258
576
273
1,733
7,405
272
83
1,252
1,692
483
1,293
177
7
582
95
537
246
11,134
674
408
9
299
1,243
463
136
215
5,638
1,066
339
409
319
587
148
494
859
2,795
1,249
147
666
191
309
157
89
2,315
196
5,866
335
186
2,858
686
947
4,879
300
127
198
987
3,409
250
135
977
1,068
300
944
141
13
829
74
535
401
7,857
808
751
8
620
1,732
935
123
219
5,863
1,492
500
683
631
998
167
705
2,256
2,126
1,249
201
1,168
203
657
162
188
1,952
260
6,141
613
185
2,817
1,253
806
4,104
196
448
202
1,053
5,179
200
68
960
1,252
347
949
124
6
558
55
511
238
9,857
601
371
9
288
1,110
420
108
214
5,349
1,029
336
378
303
542
146
472
821
2,525
1,195
138
634
182
299
143
85
2,242
164
5,424
279
178
2,726
659
858
4,558
292
112
180
900
2,890
230
133
922
1,056
298
905
122
9
68
14
34
31
648
70
90
1
46
133
92
27
17
658
148
49
58
54
80
14
86
249
354
158
18
130
14
62
19
21
179
35
571
79
13
327
110
55
425
20
42
13
129
354
20
7
98
126
40
112
11
1
1,866
1,832
1,251
581
1,112
564
76
""Includes national and nonnational banks in the District of
Columbia, all of which are supervised by the Comptroller of the
Currency.
t Includes Virgin Islands.
276
Time and
savings deposits, total
JLess than $500,000.
1
IPC deposits are those of individuals, partnerships, and
corporations.
NOTE : Data may not add to totals because of rounding.
capital accounts, of national banks, by states, June
29,1963—Continued
in millions]
LIABILITIES—Continued
Deposits of States
and political
subdivisions
Deposits of
banks
Certified and
officers' checks
$11,429
$8, 627
$1, 934
165
46
119
60
1,747
132
78
93
2
10
68
377
88
31
0
40
288
178
8
2
1,130
140
141
105
63
190
10
63
390
208
342
37
373
11
138
3
13
47
12
896
92
11
260
232
33
436
5
16
9
355
1,319
18
1
85
75
29
144
10
9
3
16
4
427
17
15
U)
U)
331
173
45
60
938
380
80
258
68
261
14
126
202
458
264
63
86
47
80
51
25
301
91
920
105
29
557
253
167
564
39
81
64
267
973
48
7
153
229
65
112
45
4
1
(J)
(t)
10
35
8
4
5
140
32
11
11
8
15
3
11
42
44
31
1
17
4
7
5
3
47
7
561
7
2
58
22
43
54
6
4
4
16
98
4
2
12
23
4
14
5
Acceptances executed by or for
account of this
bank and outstanding
$600
$531
$3, 093
3
2
2
0
36
11
14
0
0
27
31
1
0
4
0
157
31
2
29
8
486
21
65
$3
(V
(X)
(X)
(t)
(t)
(t)
(i)
(t)
(t)
(I)
(t)
(t)
(t)
(t)
(t)
0
0
0
0
0
0
0
0
0
0
(X)
(X)
0
(t)
(X)
(X)
(t)
(t)
(t)
(J)
(t)
(t)
(X)
(X)
(i)
(t)
(X)
0
0
(t)
(t)
(t)
(t)
(X)
(X)
0
0
0
(t)
0
(X)
(X)
0
63
5
13
1
21
(X)
(X)
11
(X)
11
(X)
168
9
0
33
(X)
0
8
0
0
0
4
62
5
0
14
8
2
0
0
0
(t)
(X)
(t)
(X)
(X)
(!)
22
0
10
0
22
0
0
(X)
59
Rediscounts and
other liabilities for
borrowed money
Mortgages o
other liens or
bank premises
(X)
(t)
(t)
(X)
(X)
(X)
(X)
0
2
0
72
1
0
2
0
1
47
5
5
0
1
0
0
0
0
196
1
2
1
1
14
1
6
0
0
8
0
0
Other
liabilities
(t)
13
59
46
10
7
189
78
7
12
13
35
13
30
142
113
52
6
25
10
12
8
16
120
L7
605
32
6
154
26
34
191
18
29
9
46
103
8
5
50
50
17
41
4
1
33
277
TABLE B-18.—Number, total and principal assets, liabilities, and capital accounts, of national banks, by states,
June 29, 1963—Continued
[Dollar amounts in millions]
CAPITAL ACCOUNTS
Common
stock
Preferred
stock
State
Total
capital
accounts
Capital
stock, total
United States^
$13, 008
$3, 871
$3, 846
$25
$6, 526
$2, 331
$281
163
12
87
71
1,503
153
122
2
83
331
172
30
41
1,282
298
101
148
113
194
39
132
449
419
290
39
226
36
49
5
24
23
421
51
37
1
22
125
44
9
14
426
77
26
45
29
46
15
35
112
121
85
10
70
13
49
5
24
23
421
51
37
1
22
125
44
9
14
426
77
26
45
29
46
15
35
112
118
85
10
70
13
0
0
0
0
0
0
72
4
46
31
789
68
64
1
41
156
82
14
19
621
151
46
67
60
107
15
73
255
215
140
27
97
14
31
3
15
16
283
32
20
12
1
3
2
10
1
1
16
39
27
5
7
180
62
28
34
23
41
9
19
64
75
61
2
52
8
4
10
18
2
2
55
8
2
2
2
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois.
Indiana
Iowa
Kansas
..
Kentucky
Louisiana
. . . .
Maryland
.
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
See footnotes at end of table.
278
OOO
.
OO
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Surplus
0
0
0
0
(t)
0
0
0
0
o
3
0
0
0
0
Undivided
profits
U)
Reserves
(i)
5
19
8
5
(t)
7
U)
TABLE B-18.—Number, total and principal assets, liabilities, and capital accounts, of national banks, by states,
June 29,1963—Continued
[Dollar amounts in millions]
CAPITAL ACCOUNTS
Total
capital
accounts
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Virgin Islands
District of Columbia—all*
124
30
38
390
44
1,379
107
33
619
256
166
1,087
50
65
37
230
994
47
21
216
234
85
187
29
2
145
Capital
stock, total
Common
stock
37
15
8
120
16
437
31
11
183
70
51
264
14
16
13
67
358
13
7
62
71
21
47
5
37
15
8
120
16
417
31
11
183
70
51
264
14
16
13
67
358
13
7
62
71
21
47
5
(t)
(t)
37
Preferred
stock
37
(t)
U)
Undivided
Surplus
51
12
20
198
16
680
60
14
330
104
62
655
26
36
16
120
451
23
8
118
101
42
91
16
1
75
profits
Reserves
33
3
9
64
4
253
15
7
103
78
53
158
10
12
8
39
157
7
4
35
61
17
42
(I)
(t)
9
1
U)
4
(t)
U)
5
28
2
1
2
1
4
7
1
0
27
•Includes national and nonnational banks in the District of Columbia, all of which are supervised by the Comptroller of the
Currency.
•{•Includes Virgin Islands.
JLess than $500,000.
NOTE : Data may not add to totals because of rounding.
279
TABLE B—19.—Number, total and principal assets, liabilities, and
[Dollar amounts
ASSETS
State
Number
of banks
Total
assets l
Cash assets 2
U.S.
Government
obligations,
direct and
guaranteed^
net*
Obligations
of States
and political
subdivisions,
net3
Other bonds,
notes, and
debentures,
net*
United Statesf
4,615
$170, 232
$28,634
$33, 384
$16, 380
$2, 408
Alabama. .
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia,
Florida
Georgia
Hawaii . . .
Idaho
Illinois ..
. .
Indiana
Iowa
Kansas ..
..
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota..
Mississippi
Missouri
Montana. .
Nebraska .
73
5
3
60
54
104
23
5
7
161
55
2
10
405
124
100
167
83
44
22
46
93
369
27
186
189
3,864
376
234
2
221
863
491
45
83
2,448
618
271
296
272
494
54
291
862
1,007
436
51
183
190
3,852
408
205
7
318
1,102
311
65
128
3,474
929
316
423
317
580
80
350
857
1,458
214
10
82
112
2,191
118
226
1
53
337
132
26
51
1,745
239
105
189
109
198
28
144
243
22
7
12
21
247
12
11
29
84
2,052
210
1,400
957
24, 448
1,999
1,539
21
1,184
4,321
2,166
344
607
16,127
3,629
1,332
1,703
1,349
2,403
408
1,679
4,747
6,547
3,719
530
2,825
680
760
754
269
46
562
83
133
44
New Hampshire
...
87
188
. . .
.
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
30
211
31
39
217
211
11
Pennsylvania
Rhode Island
South Carolina
Tennessee
Texas
Utah
.
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
121
3
52
144
.
409
4
25
33
74
519
10
28
123
1,517
439
409
5,489
670
4
26
16
101
52
20
749
25
6
1
132
33
3
161
42
2,821
1,998
205
113
1,572
64
2,416
71
1,902
138
153
4
864
551
169
78
665
203
146
594
56
34
249
3,212
12, 683
631
252
2,134
•Includes national and nonnational banks in the District of
Columbia, all of which are supervised by the Comptroller of
the Currency.
280
173
40
82
312
34
1
25
76
112
282
74
82
1,120
59
226
2,796
2,758
3,119
894
2,604
392
25
104
325
55
63
650
115
563
76
17
1
5
486
71
18
27
20
20
4
21
26
17, 467
1,502
483
7,853
2,875
2,324
11,752
662
14
.
99
612
U)
58
1,178
133
1,782
624
373
636
410
49
717
223
195
15
107
41
39
2,780
2,376
1,021
112
25
413
504
134
68
58
539
588
296
55
15
231
16
10
40
171
3
3
53
459
593
189
41
551
82
11
75
2
383
102
5
t Includes Virgin Islands.
jLess than $500,000.
252
59
24
1
30
10
3
0
capital accounts, of national banks, by states, December 20,1963
in millions]
ASSETS—Continued
Corporate
stocks,
including
Federal
Reserve
Banks, net a
Zoanj am/
discounts,
including
overdrafts,
net*
Federal
funds sold
Direct lease
financing
Bank
premises
owned,
including
furniture
and
fixtures
$83, 388
$1, 457
124
947
104
883
425
13,240
1,022
816
10
543
1,758
1,149
182
322
7,523
1,660
591
716
587
1,037
228
815
2,523
3,121
1,792
240
1,308
267
756
231
221
2,671
288
8,838
778
214
3,825
1,281
1,231
5,412
370
395
270
1,572
5,848
381
143
1,423
1,642
371
1,229
174
16
22
2
4
2
177
6
7
0
15
42
12
8
4
145
38
8
26
21
26
2
20
93
36
45
0
0
0
0
19
26
6
25
13
356
33
30
1
20
96
39
12
10
98
48
15
17
15
27
8
26
53
64
43
9
30
10
15
15
8
71
10
206
24
9
98
38
47
142
9
15
8
41
286
2
3
42
53
12
34
9
$46
$2, 324
4
U)
(t)
U)
3
2
85
4
4
2
9
4
1
1
50
8
2
3
3
5
1
3
15
15
7
1
6
1
3
1
1
11
1
52
3
1
17
6
3
33
1
2
1
7
26
1
6
7
2
5
1
(t)
3
U)
1,042
1
41
3
1
1
12
58
49
149
13
1
94
7
5
50
1
2
0
30
75
1
3
39
17
6
38
3
0
22
(t)
0
0
0
0
0
0
0
\\\
(J)
U)
(t)
1
0
0
(t)
(f)
($)
U)
(1)
(t)
(• )
(: )
(:
:)
(;
(t)
(t)
0
0
0
1
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
Same as total liabilities and capital accounts.
2
Cash, balances with other banks, and cash items in process
of collection.
3
Net of valuation reserves.
725-69S—<64——19
27
Customers'
liability to
this bank on
acceptances
outstanding
$225
$575
1
5
1
6
1
0
5
(t)
U)
(f)
(i)
(t)
(1)
(t)
(t)
ill
(i)
3
1
0
(t)
(t)
3
1
0
4
1
(i)
U)
1
1
2
1
(t)
(t)
(i)
(t)
(t)
(i)
(i)
U)
(i)
(f)
(t)
(t)
1
1
3
(i)
U)
U)
(t)
1
1
1
1
4
1
5
(i)
(t)
OfA«r owrff
1
2
1
1
0
(t)
(t)
67
11
0
0
14
4
3
(t) 200
(t)
(t) 0
0
8
18
1
3
0
3
1
ai
tt)
(!)
(t)
1
4
7
1
2
1
1
5
0
0
0
tt)
0
53
1
52
6
6
0
Ct)
2
10
4
1
3
9
0
6
0
6
(J)
(t)
18
1
2
1
2
0
5957
CMO
$431
Real estate Investments in
owned other corporations
owning bank
than bank
premises 4
premise.
r
(t)
1
0
1
0
1
0
169
(t)
1
2
1
6
12
(t)
(t)
(i)
tt)
(t)
(t)
3
40
0
0
(t)
10
0
0
0
10
3
146
9
6
8
21
7
2
2
83
15
4
4
4
11
2
7
23
36
16
2
11
2
7
2
22
2
265
7
2
29
9
13
50
2
5
3
10
50
1
8
15
2
10
1
tt)
11
4
Advances and investments in corporations or other entities
owning bank premises or other real estate.
NOTE : Data may not add to totals because of rounding.
281
TABLE B-19.—Number, total and principal assets, liabilities, and capital
I Dollar amounts
LIABILITIES
Time and
savings
deposits,
State
Time and
savings
deposits,
IPC
Total
Total
deposits
United Statesf
$156, 684
$150,823
$89, 389
$61,434
$67, 740
$56, 606
$3, 874
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Virgin Islands
1,878
197
1,312
880
22, 925
1,836
1,413
19
1,091
3,967
1,989
313
563
14, 799
3,319
1,224
1,547
1,231
2,203
368
1,543
4,288
6,113
3,419
487
2,588
522
1,386
409
368
5,082
623
16,044
1,381
449
7,208
2,602
2,155
10,616
612
795
512
2,963
11,642
582
229
2,518
2,879
805
2,410
359
23
1,838
194
1,258
868
21,826
1,798
1,341
19
1,070
3,864
1,917
303
553
14, 354
3,205
1,187
1,523
1,215
2,168
353
1,486
4,055
5,919
3,337
469
2,539
507
1,347
399
351
4,929
612
14, 881
1,339
439
6,965
2,556
2,107
10, 282
581
758
501
2,889
11,193
552
223
2,450
2,791
790
2,344
353
22
1,206
105
696
612
10, 399
1,093
910
10
746
2,561
1,420
164
327
8,370
2,134
822
1,083
885
1,562
204
968
3,131
2,986
2,016
318
1,846
301
1,024
243
257
2,564
412
8,566
962
246
4,036
1,817
1,094
5,170
251
628
293
1,827
7,601
290
85
1,395
1,682
481
1,372
208
9
632
89
562
256
11,427
705
431
9
324
1,303
497
139
226
5,984
1,071
365
440
330
606
149
518
924
2,933
1,321
151
693
206
323
156
94
2,365
200
6,315
377
193
2,929
739
1,013
5,112
330
130
208
1,062
3,592
262
138
1,055
1,109
309
972
145
13
933
83
539
455
8,598
876
777
9
660
1,842
1,028
119
254
6,190
1,610
574
730
701
1,089
172
750
2,367
2,222
1,344
221
1,256
232
716
176
196
2,083
286
6,361
747
209
3,073
1,325
860
4,126
207
496
232
1,181
5,525
204
12
1,112
1,336
369
1,054
155
8
606
56
535
250
10, 203
642
385
9
311
1,182
450
114
225
5,630
1,037
360
402
312
551
148
494
870
2,642
1,266
144
664
196
315
147
89
2,288
173
5,719
304
186
2,800
714
888
4,787
316
116
186
979
3,048
246
135
993
1,097
307
952
129
10
39
10
21
16
393
44
54
1,978
1,932
1,311
621
District of Columbia—all*
•Includes national and nonnational banks in the District of
Columbia, all of which are supervised by the Comptroller
of the Currency.
NOTE : Data may not add to totals because of rounding.
282
Demand
deposits,
IPC*
1,180
601
Deposits
of U.S.
Government
(I)
30
81
61
21
10
415
78
25
35
29
49
10
56
151
259
91
12
68
8
41
13
13
104
21
453
42
7
198
51
30
279
13
27
8
60
211
11
4
61
66
17
67
6
1
47
flncludes Virgin Islands.
JLess than $500,000.
IPC deposits are those of individuals, partnerships, and
corporations.
1
accounts, of national banks, by states, December 20,1963—Continued
in millions]
LIABILITIES—Continued
Deposits of
States and
political
subdivisions
Deposits
of banks
Certified
and officers'
checks
$11,523
$9, 009
$2, 072
150
41
135
63
1,783
114
85
98
1
11
78
400
104
28
12
2
16
5
448
16
13
Mortgages or
other liens
on bank
premises
it)
(t) 404
160
40
55
833
295
71
239
71
244
13
124
258
515
225
46
128
50
88
54
39
361
106
927
132
22
560
219
248
623
37
91
60
224
959
64
10
166
187
66
86
43
3
1
U)
58
324
209
7
3
1,149
153
146
108
96
219
8
52
361
235
387
45
410
16
175
2
11
45
18
111
105
12
274
222
33
413
4
21
12
426
1,346
20
1
101
79
27
170
15
U)
(t)
(t)
83
11
31
8
3
5
137
31
11
9
6
15
2
10
48
48
24
1
14
5
13
7
3
47
7
651
8
3
60
25
48
53
4
6
4
18
105
8
2
17
26
4
15
5
22
$4
(i)
0
0
tt)
(t)
ill
18
(8
(i)
$395
18
0
0
(*)
0
0
0
(t)
a;))
( ;)
(:)
(;)
(;)
(
•
(t)
(t)
(t)
$11,765
38
2
36
9
590
24
61
129
34
58
99
576
151
74
(t)
0
1
3
U)
(t)
1
0
0
1
0
0
(f)
(t)
(t)
(t)
$3, 569
1
0
0
0
0
0
(t)
(t)
0
U)
0
2
0
4
67
0
1
8
7
0
6
0
0
0
Time
Certificates
of deposit
outstanding
$584
70
8
0
1
0
1
6
0
0
0
Other
liabilities
0
0
12
2
229
12
11
0
0
24
1
0
0
113
19
20
4
0
3
l
78
1
0
0
1
8
21
0
0
35
10
4
7
1
0
3
9
32
4
Acceptances
executed by or
for account of
this bank and
outstanding
$1, 309
22
41
22
8
10
20
2
24
0
1
12
1
269
1
0
52
11
0
97
14
7
0
15
198
11
0
3
16
1
2
1
0
(t)
(8
Federal
funds
purchased
(t)
0
0
(1)
(t)
(t)
Rediscounts
and other
liabilities for
borrowed
money
5
(t) 202
(t)
(t) 0
0
(t)
(t)
(f)
(t)
(t)
U)
(I)
(t)
(t)
(t)
(t)
tt)
U)
0
53
1
2
0
1
53
6
6
0
1
0
1
0
1
0
174
1
2
1
6
12
3
40
0
0
10
0
0
0
(*)
20
70
51
10
10
241
85
13
13
16
30
14
31
129
134
63
8
29
12
14
10
17
136
10
652
42
8
180
28
41
219
16
30
11
55
140
10
6
65
61
13
58
5
1
41
(t)
80
297
232
41
28
1,302
130
143
140
81
124
5
52
226
526
717
69
238
97
160
11
12
171
47
1,180
125
135
429
216
71
1,230
44
28
126
328
1,230
39
6
118
64
27
298
21
0
108
283
TABLE R-19.—Number, total and principal assets, liabilities, and capital accounts, of national banks, by states,
December
20,1963—Continued
[Dollar amounts in millions]
CAPITAL ACCOUNTS
State
Preferred
stock
o
0
0
0
0
1
0
0
0
0
0
3
0
0
0
0
0
0
0
156
118
200
41
136
459
434
300
42
236
40
131
30
41
ooooooo
o
0
1,524
163
126
2
93
354
176
31
43
1,328
310
108
0
0
0
0
0
0
Surplus
$3, 959
$25
$6, 699
52
5
24
74
4
46
23
32
Undivided
profits
Reserves
$290
$2, 529
36
4
16
13
1
3
20
2
440
54
37
1
26
135
44
9
14
453
78
27
786
71
66
1
50
163
83
14
20
629
160
47
45
69
9
1
288
37
22
40
29
46
15
35
113
119
86
11
71
14
38
15
60
110
15
74
267
217
141
27
107
14
54
13
8
21
1
4
10
19
2
46
30
6
7
194
63
32
28
43
10
21
62
86
67
4
50
11
35
2
10
CM CO 00
284
0
0
0
oo
...
Kansas
Kentucky
Louisiana
Maine
Maryland
....
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
See footnotes at end of table.
0
0
0
ooo
,.
$45
174
13
88
77
. . .
oooooo
.
oooo
Common
stock
$13,548
United StatesfAlabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Debentures
oooo
Total
capital
accounts
2
2
(i)
6
18
9
5
"•
*
g
(t)
l
* 4
(J)
TABLE B-19.—Number, total and principal assets, liabilities, and capital accounts, of national banks, by states,
December
20,1963—Continued
[Dollar amounts in millions]
CAPITAL ACCOUNTS—Continued
State
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Virgin Islands
Total
capital
accounts
,
District of Columbia—all
407
47
,423
121
34
645
272
169
,136
50
69
39
250
,041
50
23
239
241
89
194
32
2
Debentures
Common
m
stock
(t)
(X)
(t)
201
16
700
68
15
336
106
62
661
26
40
16
128
460
26
9
128
101
44
105
17
1
41
(V
156
Surplus
122
16
419
34
1
1
188
73
51
266
14
16
13
69
365
14
7
69
71
2
1
48
6
(t)
•Includes national and nonnational banks in the District of
Columbia, all of which are supervised by the Comptroller of the
Currency.
Preferred
stock
84
(t)
Undivided
profits
75
7
246
17
8
117
90
56
181
11
12
10
46
186
8
5
40
67
20
35
9
Reserves
9
7
8
1
1
4
4
Ct)
(t)
(t)
13
6
30
2
2
2
2
4
7
1
0
25
flncludes Virgin Islands.
JLess than $500,000.
NOTE: Data may not add to totals because of rounding.
285
TABLE Br-20.—Selected loans and discounts of national banks, by states, December 20, 1963
[Dollar amounts in millions]
Real estate
loans l
State
Missouri
Loans for
purchasing or
carrying
securities 2
Loans to
farmers 3
Commercial
and industrial
loans *
Personal
loans to
individuals
5
Other
loans 8
Loans and
discounts,
gross 7
Reserve
8
$21, 481
$5, 823
$3, 043
$3, 698
$29, 371
$19, 359
$2, 291
$85, 067
$1, 679
157
United Statesf
Alabama
Alaska
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii...
.
.
Idaho
Illinois
Indiana .
Iowa
Kansas
Kentucky
Louisiana
[Maine
NdEaryland
Massachusetts
^Michigan
Minnesota
Loans to
financial
institutions
51
18
44
338
315
49
971
24
45
235
84
4,888
218
234
5
175
367
188
84
123
1,243
506
.. •
147
99
143
153
68
237
343
1, 172
445
43
298
(t)
925
78
23
0
100
118
113
3
9
792
120
0
25
11
227
31
28
0
5
57
18
8
5
506
54
27
36
35
85
7
56
263
221
10
7
12
47
3
35
56
55
153
191
39
20
8
14
6
33
149
9
75
10
112
11
120
43
642
79
78
423
20
146
59
569
157
3
it)
26
5
50
237
48
34
234
137
4,119
292
240
2
143
613
409
47
68
3,385
431
29
199
116
2,532
248
262
3
113
573
385
32
70
1,272
489
136
230
177
481
74
249
111
158
178
236
66
214
608
853
17
5
11
27
6
19
92
100
343
82
47
11
338
23
1,215
739
(t)
5
5
210
14
42
29
24
5
2
296
39
108
891
431
13,470
1,038
832
10
552
1, 789
1,163
183
327
7,732
1,686
602
725
596
1,049
232
824
2, 583
3, 173
1,813
245
1,324
4
7
5
230
16
17
(t)
8
31
14
1
5
210
27
11
9
9
12
3
9
60
52
21
5
16
Loans and
discounts
net9
$83, 388
947
104
883
425
13,240
1, 022
815
10
544
1, 758
1, 149
182
322
7,522
1, 660
591
716
587
1,037
228
815
2, 523
3, 121
1,792
240
1,308
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Virgin Islands
District of Columbia—all*
75
81
81
50
115
59
926
94
72
212
202
339
757
170
56
68
200
584
142
66
410
429
135
390
55
12
307
62
129
9
91
4
0
1
15
2
2
153
5
588
16
1
165
18
17
94
18
15
2
63
365
24
1
25
27
4
76
2
0
168
17
5
31
9
11
93
11
697
31
2
211
94
90
235
16
21
8
143
386
26
(t)
* Includes national and nonnational banks in the District of Columbia, all of
which are supervised by the Comptroller of the Currency.
•{•Includes Virgin Islands.
JLess than $500,000.
1
Includes all loans secured by real estate, whatever the purpose.
2
Secured or unsecured.
3
Includes secured and unsecured loans to farmers, except loans secured by real
estate.
4
Includes all loans for commercial and industrial purposes, secured or unsecured,
except those secured by real estate.
U)
11
90
82
371
22
8
40
101
5
28
34
0
65
207
69
77
601
109
3,845
326
44
960
531
468
1,907
98
141
52
622
2,750
101
25
379
597
81
328
48
3
71
147
63
77
713
73
1,716
289
44
1,142
292
240
1,226
53
144
53
466
1,321
60
42
498
352
140
274
33
1
250
53
272
8
4
12
34
73
14
52
61
117
73
92
283
($)
2
17
3
46
4
298
20
2
145
44
13
208
19
14
4
28
178
9
2
26
37
5
72
(t)
26
272
769
232
224
2,732
296
9, 143
791
219
3,896
1,297
1,241
5,517
375
402
279
1,604
5,955
385
144
1,440
1, 672
379
1,260
177
16
1,052
5
13
1
3
62
8
305
14
6
71
16
10
105
5
7
9
32
107
4
2
17
31
7
30
3
(t)
10
267
756
231
221
2,671
288
8,838
778
214
3, 825
1, 281
1, 231
5,412
370
395
270
1, 572
5,848
381
143
1,423
1, 642
371
1,229
174
16
1,042
5
Loans to individuals for household, family, and other personal expenditures.
Business loans, loans to farmers, and loans secured by real estate are excluded.
6
Includes overdrafts. Also includes loans to churches, hospitals, charitable or
educational institutions, etc., not secured by real estate.
? Total of first 7 categories.
8
Reserve for bad debts, on unallocated chargeoffs and other valuation reserves.
9
Loans and discounts, gross, less reserve for bad debts equals loans and discounts, net.
NOTE : Data may not add to totals because of rounding.
TABLE B—21.—Selected U.S. Government obligations held by national banks, by states, December 20, 1963
[Dollar amounts in millions]
Treasury
bills
State
Certificates of
indebtedness
Treasury
notes
US. nonmarketable
bonds
Other
U.S. bonds
maturing
within
1 year
Other
Other
U.S. bonds
US. bonds
maturing
maturing
1—4.9 years 5.0-9.9 years
US. bonds
maturing
after
10 years
United Statesf
$4, 999
$864
$11,992
$151
$561
$7, 083
$6, 881
$781
Alabama
Alaska . .
Arizona
Arkansas
California .
Colorado
Connecticut
Delaware
.. .
District of Columbia
Florida
Georgia
Hawaii
Idaho . .
..
Illinois
Indiana
.
Iowa
Kansas
Kentucky
Louisiana
MEaine
Maryl and
Massachusetts
85
7
63
40
455
101
26
3
45
146
30
5
25
591
132
11
0
3
1
113
21
5
0
4
37
14
0
1
47
23
164
16
44
55
1, 155
130
122
1
109
370
164
29
74
1, 198
345
2
2
16
99
8
42
33
975
79
25
2
87
204
64
23
17
699
230
58
18
27
53
938
66
23
1
63
298
36
8
9
787
161
3
1
74
93
71
51
78
47
Securities
guaranteed
by U.S.
Government
...
62
22
28
320
9
14
10
9
1
11
22
107
142
136
232
35
192
239
13
(J)
1
0
15
5
2
3
1
1
1
1
1
107
4
2
^too
<*>
1
1
6
to to
..
67
78
42
(t)
2
(t)
36
22
5
10
7
4
1
6
157
9
66
112
99
11
44
149
$73
0
3
4
86
5
1
2
27
1
0
3
0
1
(J) 99
3
11
1
6
2
15
1
6
6
a>
a
• )
0
1
District of Columbia—all*
125
91
13
167
21
43
2
18
117
30
420
33
16
286
120
7
334
6
41
22
71
334
6
13
102
54
48
65
26
0
85
tt)
27
15
1
30
2
7
1
3
16
5
98
1
2
50
10
553
245
39
162
34
104
19
29
352
53
1,248
28
0
1
6
42
85
2
1
17
35
7
12
1
1
75
34
738
209
50
972
32
66
51
218
793
52
13
190
243
76
252
29
2
12
194
* Includes national and nonnational banks in the District of Columbia, all of
which are supervised by the Comptroller of the Currency.
•("Includes Virgin Islands.
4
3
1
2
(i)
2
(t)
(t)10
1
7
1
1
6
3
1
13
(t)
3
1
2
12
1
1
4
2
2
2
1
(t)
7
U)
31
6
3
7
5
7
3
1
9
4
7
2
1
83
15
18
33
0
2
3
10
35
1
6
14
4
6
4
0
304
168
33
98
36
70
35
14
250
44
428
58
33
273
141
150
475
16
51
33
146
514
5
12
122
153
77
154
21
1
332
208
23
88
34
45
14
16
307
32
521
34
42
300
128
179
489
17
39
27
97
508
2
14
93
79
73
95
18
1
149
96
JLess than $500,000.
NOTE: Data may not add to totals because of rounding.
(t)
77
23
2
8
2
3
0
1
58
4
83
1
4
39
9
4
69
2
7
72
1
4
5
8
9
7
2
0
4
(t)
U)
(t)
U)
(t)
(t)
(t)
(t)
(t)
U)
(?)
(t)
0
0
0
0
3
0
9
1
8
1
1
1
23
1
•++++
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Virgin Islands
0
(t)
TABLE B-22.—Selected bank trust statistics, by states, 1963
Accounts where national banks exercise investment
responsibility*
Employee
benefit
accounts
($ millions)
Other trust
accounts
(S millions)
Total trust
accounts
(S millions)
National
banks
($ thousands)
All insured
commercial
banks
($ thousands)
1,517
$16,208
$47, 932
$64, 140
$264, 093
$573, 224
United States.
102
592
1
694
2
2,574
58
1,779
552
37, 701
4,763
6,279
0
5,222
7,363
3,814
0
207
32, 926
5,251
1,436
1,134
1,482
1,179
1,020
2, 136
11,196
2,713
58
2, 157
720
51, 740
5,010
14, 379
7,016
5,222
9, 104
6,742
(A)
230
94.9
100.0
82.5
76.7
72.9
95.1
43.7
0
100.0
80.9
56.6
0
90.0
63.3
73.7
59. 3
92.0
28.7
83.5
68.5
64.3
52.1
(§)
1,172
77
169
0
148
127
106
0
5
3,208
191
26
18
19
48
14
33
561
171
4,092
861
1,726
0
991
1,549
685
0
20
4,565
1,290
219
254
212
148
183
405
1,986
(§)
178
5,264
938
1,895
0
1, 139
1,676
791
0
25
7,773
1,481
245
272
231
196
197
438
2,547
52, 037
7, 128
2,420
1,233
5,167
1,412
1,490
3,323
21, 487
National
banks as a
percent of
total
Collective investment funds of
of all commercial banks f
46.1
30
3
2
23
16
22
13
0
6
55
22
0
3
125
93
35
34
51
18
18
10
57
Number of
banks having
accounts
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia %.
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Trust department income in 7963
Number
of funds
Assets of
funds
($ millions)
$5, 420
8
0
8
3
34
28
19
7
8
23
14
7
1
31
19
3
2
11
1
15
18
41
19
0
31
6
305
125
124
73
54
37
81
17
(**)
352
53
3
3
42
2
43
121
396
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
27
18
15
26
8
12
2
21
83
9
84
17
6
47
28
2
156
2
11
8
27
116
2
13
59
11
26
34
11
1,749
398
2
110
2
49
1,389
1,221
39
894
28
305
<§)
4
68
4
2,980
88
4
709
98
(§)
2,761
(§)
40
6
65
573
( § )
3
86
96
8
121
1
921
106
4,613
447
30
2,552
326
(§)
8,012
(§)
32
964
2,248
§)
3,
992
759
206
378
31
*Trust assets for national banks are derived from annual reports for 1963 submitted to the Comptroller of the Currency without adjustment for variations in
asset valuation dates.
fCollective investment fund data cover only those funds which submit annual
reports to the Comptroller of the Currency by April 1964.
3,138
1,619
41
1,004
30
354
(§)
121
989
110
7,593
535
34
3,261
424
(§)
10, 773
256
38
1,029
2,821
(§)
34
1,078
855
214
499
32
8,860
7,756
174
4,311
122
1,998
836
435
7,693
598
27, 065
2,225
285
11,264
2,033
3, 115
24, 548
1,417
1,067
334
3,034
13, 110
571
165
4,495
4,781
920
2,633
176
16, 209
7,817
695
9,437
376
2,030
1,019
511
13, 847
616
185, 042
6,257
285
24,419
2,038
3,298
53, 514
4,393
1,152
358
3,594
14, 143
1,402
470
6, 319
5,283
1,710
6,016
186
54.7
99.2
25.0
45.7
32.4
98.4
82.0
85.1
55.6
97. 1
14.6
35.6
100.0
46. 1
99.8
94. 5
45. 9
32. 3
92.6
93.3
84.4
92.7
40.7
35.1
71. 1
90.5
53.8
43.8
94. 6
37
21
4
24
6
11
4
7
29
3
78
10
4
64
10
8
97
14
6
6
17
33
9
5
29
5
6
22
0
123
96
8
231
6
32
6
8
80
10
944
98
2
319
19
66
,075
40
14
2
34
97
14
6
73
31
9
91
0
{National bank figures on trust assets and income include national and nonnational banks in the District of Columbia.
§To avoid individual bank disclosure, figures are omitted for states where fewer
than 3 national banks have trust accounts with investment responsibility.
AFigure not available for Hawaii.
**Less than $500,000.
TABLE B—23.—Current operating revenue, expenses, and dividends of national banks, by major categories and states, year ended December 31, 1963
[Dollar amounts in millions]
Current operating revenue
State
Number of
banks*
Interest and dividends
on securities
U.S. Goveminent
obligations
Other
securities
Interest and
discount on
loans
Service
charges and
other fees on
bank loans
Service
charges on
deposit
GCCOtlTltS
Other service
charges,
COTTlTTltSStOtZSy
fees and
collection
and exchange
charges
Trust
department
Other
current
operating
revenue
Alaska .
Arizona
Arkansas. .
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana..
Iowa
Kansas
Kentucky
Maine....
^Maryland
Massachusetts
Michigan
4,615
$1, 171
$505
$4, 622
$83
$409
$113
$261
$139
73
United Statesf
14
2
5
6
137
14
7
7
56
1
1
2
6
2
3
1
2
1
2
1
16
38
5
3
60
54
104
23
5
7
161
55
2
10
405
124
100
167
83
44
22
46
93
87
37
12
3
4
126
32
10
15
11
20
3
13
28
53
"'
3
8
54
24
65
765
4
5
12
4
1
58
49
1
27
99
69
12
2
19
56
8
381
96
3
6
4
6
1
4
8
22
32
41
32
56
14
44
140
171
($)
1
6
2
87
3
ill
24
1
1
13
8
1
2
1
3
(J)
3
(t)
8
2
1
33
5
3
5
3
5
2
3
2
1
20
8
1
3
1
1
1
1
1
4
13
12
2
(t)
1
9
4
(t)
$7, 302
88
13
74
38
1,161
91
76
1
46
177
102
17
30
8
2
637
156
1
1
2
1
1
2
11
9
30
1
1
5
6
0
2
7
4
0
3
4
1
(t)
(t)
7
5
(t)
Total
current
operating
revenue
53
92
1
7
3
21
70
218
277
1
(t)
52
69
,
,
,
188
29
84
47
121
3
52
144
30
211
31
39
217
211
11
408
4
25
33
74
519
10
28
123
25
76
104
34
1
District of Columbia—all*
10
2
7
2
3
2
1
24
1
61
4
2
23
7
6
54
3
2
1
8
31
2
14
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Virgin Islands
27
4
20
5
10
3
2
40
5
101
8
5
62
23
13
84
3
7
5
21
84
3
2
18
21
10
21
3
(t)
(t)
(t)
8
8
2
6
1
^Includes national and nonnational banks in the District of Columbia, all of
which are supervised by the Comptroller of the Currency,
flncludes Virgin Islands.
JLess than $500,000,
101
15
67
16
42
14
13
146
19
468
43
13
205
76
71
295
20
24
17
85
320
21
9
81
97
23
62
11
1
54
(t)
U)
ct)
U)
(t)
U)
u>
U)
2
9
2
3
2
3
1
15
2
32
5
2
17
8
10
17
2
3
2
5
20
2
1
7
14
1
4
1
(t)
U)
(t)
(J)
(t)
(t)
3
1
10
2
1
4
1
1
4
1
1
1
2
6
1
4
3
1
1
2
1
8
1
27
2
(t)
11
2
3
25
1
1
U)
3
13
1
U)
U)
(t)
2
5
1
3
162
23
104
26
63
21
20
241
30
738
66
22
329
120
107
491
30
39
27
127
486
30
12
124
152
38
100
17
1
89
* Number of banks as of end of year, but figures of income, expenses, etc., include
banks which were in operation a part of the year but were inactive at the close of
the year.
NQTE : Data may not add to totals because of rounding.
TABLE B-23.—Current operating revenue, expenses, and dividends of national
[Dollar amounts
Current operating expenses
Salaries and wages
Officer and
employee
benefits
State
United States f.
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia. .
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Missouri.
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Virgin Islands
District of Columbia—all*.
hospitalization,
social security,
insurance, etc.)
$243
$31
Employees other than officers
Officers
Amount
Fees paid to
directors and
members of
executive,
discount,
and other
committees
Number*
Number 2
Amount
$608
58, 238
I, 131
287,498
8
1
7
4
86
9
8
805
104
633
472
8,744
888
663
21
322
1,723
904
126
283
3,659
1,389
673
990
653
680
227
610
1,597
1,273
1,453
249
871
303
809
226
265
1,776
312
3,689
752
252
2,185
1,495
1,205
3,806
179
470
349
1,038
4,647
214
149
1,294
1,368
407
820
206
10
14
3
13
5
194
14
15
4,118
530
3,206
1,564
43, 590
3,754
3,772
62
1,884
8,846
5,075
650
1,329
20, 649
6,731
2,164
2,537
2,245
3,965
1,103
3,455
10, 508
11,391
6,337
962
4,512
1,003
2,535
964
925
10, 851
1,355
26,121
3,616
862
12, 354
4,476
4,225
17, 339
1,208
2,342
1,000
5,097
16, 425
1,055
518
5,303
6,652
1,387
4,219
662
65
U)
4
17
10
2
3
44
15
7
9
6
8
2
6
18
16
15
2
9
3
8
2
2
19
3
46
7
2
25
14
11
37
2
4
3
10
47
2
1
11
14
4
9
2
tt)
570
U)
31
19
2
4
87
25
8
9
8
15
4
12
42
45
25
3
17
4
9
4
3
41
5
114
12
3
49
15
17
68
4
8
3
18
61
4
2
18
28
5
15
2
U)
15
(t)
U)
(t)
(t)
3
1
36
3
4
1
5
4
1
1
23
5
2
2
2
3
2
9
9
6
1
3
1
2
1
1
8
1
31
2
1
9
4
3
15
1
2
1
4
13
1
4
5
1
3
U)
U)
i
i
()
t
IB
tt)
(8
()
t
U)
as
()
i
U)
()
t
()
t
()
t
()
t
U)
()
t
()
t
as
(«
at)
()
t
()
t
()
t
i
3
1
1
1
1
1
1
1
1
2
2
2
1
3
3
1
1
3,507
•Includes national and nonnational banks in the District of Columbia, all of which are supervised by the Comptroller of the
Currency.
tlncludes Virgin Islands.
fLess than $500,000.
294
banks, by major categories and states, year ended December 31,1963—Continued
in millions]
Current operating expenses—Continued
Interest on time
and savings deposits
(t)
9
40
15
4
7
192
28
11
13
10
18
4
15
25
95
40
5
22
6
9
4
3
69
6
209
10
6
85
24
32
147
10
3
7
34
111
9
4
32
36
9
27
5
(t)
18
0/A*r current
operating
expenses
Total current
operating
expenses
Net current
operating
earnings 8
Net occupancy
expense of bank
premises
$20
$314
$174
$792
$5,229
$2, 074
3
1
4
2
50
5
4
2
11
2
8
5
92
10
9
60
10
56
27
871
68
55
1
31
132
73
13
20
444
107
38
46
36
65
15
50
136
214
116
16
71
19
42
14
14
186
22
527
45
16
230
79
81
357
22
25
19
89
332
20
10
88
110
25
72
13
1
28
3
17
11
290
23
21
$1,917
20
3
20
8
379
24
12
Furniture
and equipment
(depreciation, rents,
servicing,
uncapitalized
costs, etc.)
Interest and
discount on
borrowed money
(t)
(t)
U)
(t)
(t)
(i)
0
4
0
U)
I
I
(t)
U)
l
(t)
(t)
(t)
(i)
(t)
(i)
($)
I
($)
(t)
tt)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
0
3
1
1
U)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
3
U)
(i)
(t)
(t)
U)
U)
(1)
U)
2
8
6
1
1
22
7
2
3
3
5
1
4
11
13
7
1
5
1
2
1
1
12
1
37
3
1
11
4
5
20
1
2
1
5
18
1
1
4
7
1
4
1
(t)
U)
U)
3
1
29
3
3
1
6
3
1
1
11
4
1
2
1
2
1
2
6
6
4
1
2
1
2
1
1
6
1
14
2
7
3
3
11
1
1
1
3
11
1
(X)
5
1
2
1
(i)
U)
4
U)
5
23
15
2
3
62
21
7
8
7
14
3
9
24
29
18
3
12
4
8
2
3
27
4
71
8
2
42
14
10
54
3
5
3
15
65
3
1
14
15
4
11
2
U)
2
10
59
tt)
15
45
28
4
10
193
48
14
23
17
27
5
20
82
63
46
7
33
7
21
7
6
55
8
211
20
6
99
41
26
134
8
14
9
38
154
10
3
35
42
13
28
5
(t)
30
1
Number at end of period. Excludes building officers.
2 Number of employees at end of period. Excludes building employees.
Total current operating revenue less total current operating expenses.
NOTE: Data may not add to totals because of rounding.
3
295
TABLE B-23.—Current operating revenue, expenses, and dividends of national
[Dollar amounts
Recoveries, transfers from valuation reserves, and profits l
Onloc
On securities
State
All other
Profits on
securities sold Recoveries
or redeemed
United Statesf.
Alabama
Alaska
Arizona
Arkansas
California
Colorado...
Connecticut
Delaware
District of Columbia..
Florida
Georgia
Hawaii
,
Idaho
Illinois
,
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
,
Maryland
Massachusetts
,
Michigan
,
Minnesota
Mississippi
,
Missouri
Montana
Nebraska
Nevada
,
New Hampshire
New Jersey
New Mexico
,
New York
North Carolina
,
North Dakota
,
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Virgin Islands
District of Columbia—all*.
$88
tt)
tt)
Transfers
from valua-
$45
$2
Recoveries
$8
Transfers
from valua-
$105
Ct)
$304
Ct)
()
t
IB
IB
(8
()
t
$56
Total recoveries, transfers
from valuation
reserves, and
profits
tt)
U)
()
t
IB
IB
(t)
(t)
25
5
1
1
1
3
1
1
9
6
2
1
4
2
2
tt)
iB
Ct)
Ct)
U)
(t)
iB
tt)
(t)
Ct)
U)
(i)
84
tt)
Ct)
IB
IB
C)
t
Ct)
(i)
(t)
ct)
U)
1
5
1
125
1
U)
iB
ill
IB
c)
t
()
t
9
3
2
17
1
1
1
6
14
(t)
(t)
U)
•Includes national and nonnational banks in the District of Columbia, all of which are supervised by the Comptroller of the
Currency.
•[•Includes Virgin Islands.
JLess than $500,000.
296
banks, by major categories and states, year ended December
31,1963—Continued
in millions]
Losses, cha
, and transfers to valuation reserves *
On securities
Losses on
securities sold
Chargeqffs on
securities not sold
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
II
(1)
it)
it)
it)
it)
0
0
it)
i8
it)
0
0
1
0
it)
4
2
1
5
(8
it)
2
1
3
3
0
1
1
0
1
it)
\\
I
(:
C)
(8)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
0
1
it
(:
(:
))
))
)
(1)
it)
it)
it)
it)
0
2
it)
it)
it)
it)
it)
1
0
1
0
1
0
0
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
Transfers to
valuation reserves
$13
it)
$330
$68
$484
1
0
0
4
1
3
1
39
6
1
4
2
57
4
5
it)
it)
(t)
0
0
0
9
2
III
it)
it)
it)
it)
it)
it)
(t)
1
$39
it)
2
2
(i)
it)
it)
it)
it)
it)
it)
it)
;)
(: )
1
0
it)
1
1
(: )
1
1
1
7
0
3
1
1
1
2
0
0
0
U)
Totally
chargeqffs, and
transfers to
valuation reserves
Allotht r
I
Losses ana
chargeqffs
(; ;)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
1
1
1
2
0
it)
( )
C
C)
C)
it)
it)
it)
it)
it)
CO CM
III
18
it)
it)
1
Transfers to
valuation reserves
$6
$28
it)
it)
it)
it)
it)
it)
On Ioans
0
0
3
8
4
1
33
6
2
2
2
4
1
3
12
10
4
1
2
1
2
1
1
9
2
75
2
1
10
5
3
20
1
1
2
5
24
1
5
5
2
2
it)
it)
3
(i)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
it)
13
1
2
U)
1
2
it)
4
3
1
1
1
1
1
5
3
1
1
1
1
4
1
2
1
3
1
3
4
1
1
it)
it)
it)
it)
3
11
6
1
51
13
3
4
3
6
1
4
20
20
6
2
5
2
4
1
2
13
3
88
3
1
17
8
8
29
2
2
2
9
33
1
1
7
6
2
3
1
it)
1
4
1
Not including recoveries credited to valuation reserves.
5 Not including losses charged to valuation reserves.
NOTE: Data may not add to totals because of rounding.
297
TABLE B-23.—Current operating revenue, expenses, and dividends of national
[Dollar amounts
Taxes on net income
State
Net income
before related
taxes
United Statesf
SI, 894
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin.
Wyoming
Virgin Islands
24
2
15
9
255
27
17
District of Columbia—all*
(t)
12
37
25
4
Federal
$637
1
6
3
tt)
27
5
14
10
2
3
58
9
167
40
12
21
15
24
5
17
72
49
43
6
33
6
19
7
6
46
6
247
18
6
90
36
20
122
7
12
7
34
135
9
2
31
39
12
29
4
$51
88
8
5
(I)
14
•t
11
16
4
11
2
U)
15
1
8
6
145
18
11
1
1
() 0
i
(t)
0
0
tt)
1
0
0
0
0
0
0
0
0
5
0
3
0
1
0
0
0
0
0
0
8
()
t
() 0
t
1
2
0
1
U)
U)
56
4
$1, 206
0
22
17
4
7
6
9
2
7
28
12
16
2
13
2
8
3
2
13
2
48
8
2
35
13
6
31
2
5
3
Net income
before
dividends
State
U)
(t)
Cash dividends declared
0
0
()
t
(?)
0
0
0
1
0
0
(t)
7
23
15
3
5
109
24
8
13
10
15
3
10
38
37
24
4
19
4
11
4
3
33
3
191
10
4
55
22
12
90
4
7
4
20
79
5
1
20
23
7
17
3
On common Onpreferred
stock
stock
$547
Total cash
dividends
declared
$1
(I)
$548
(t)
(t)
U)
U)
(t)
(t)
U)
(i)
14
•{•Includes Virgin Islands.
T Less than $500,000.
•Includes national and nonnational banks in the District of Columbia, all of which are supervised by the Comptroller of
the Currency.
298
bank.', by major categories and states, year ended December
31,1963—Continued
in millions]
Memoranda items
Ratios (percent)
Net income
v.fter
dividends
Capital
accounts *
Net income
Total current
before dividends operating expenses
to capital
to total current
accounts
operating revenue
Recoveries credited to valuation Losses charged to valuation reserves
(not included in losses, p. 297)
reserves (not included in recoveries, p. 296)
On securities
On loans
On securities
On loans
$658
$13,102
9.20
71.61
$5, 306
$60, 402
$11,867
$177, 661
9
1
4
4
55
12
5
165
13
86
73
1,501
153
122
2
86
333
172
30
42
1,290
301
103
150
114
194
39
131
451
421
292
40
227
37
126
30
39
395
45
1,383
110
33
624
260
167
1,098
49
66
37
235
1,004
48
22
222
235
86
188
30
2
9.09
7.69
9.30
8.22
9.66
11.76
9.02
0
8.14
6.91
8.72
10.00
11.90
8.45
7.97
7.77
8.67
8.77
7.73
7.69
7.63
8.43
8.79
8.22
10.00
8.37
10.81
8.73
13.33
7.69
8.35
6.67
13.81
9.09
12.12
8.81
8.46
7.19
8.20
8.16
10.61
10.81
8.51
7.87
10.42
4.54
9.01
9.79
8.14
9.04
10.00
0
68.18
76.92
75.68
71.05
75.02
74.73
72.37
100. 00
67.39
74.58
71.57
76.47
66.67
69.70
68.59
73.08
66.67
67.92
70.65
71.43
71.43
62.39
77.26
71.60
69.57
68.27
73.08
66.67
66.67
70.00
77.18
73.33
71.41
68.18
72.73
69. 91
65.83
75.70
72.71
73.33
64.10
70.37
70.08
68.31
66.67
83.33
70.97
72.37
65.79
72.00
76.47
100. 00
0
5
0
0
540
5
0
0
0
15
26
0
0
1,425
0
0
3
46
0
1
0
3
3
0
0
0
28
0
0
2
260
3
724
36
0
49
0
0
1,972
0
23
2
0
85
0
0
50
0
0
0
0
0
919
264
648
299
7,205
826
555
1
182
1,781
698
165
61
6,642
1,380
282
748
482
451
309
757
1,324
3,102
989
274
351
216
576
154
188
1,530
547
8,098
278
72
2,056
751
516
3,712
122
152
162
556
6,374
30
92
793
622
220
1,232
200
8
23
0
0
11
142
0
1
0
0
4
29
0
0
1,716
93
0
139
191
201
1
168
691
4,793
0
0
140
0
4
0
0
187
21
192
10
0
1,190
1
0
1,694
0
4
0
0
75
0
0
128
0
0
0
18
0
2,727
603
2,614
831
24, 951
2,018
1,611
22
881
5,801
2,931
338
231
18,194
4,047
611
1,168
963
3,306
1,001
851
7,245
4,888
3,463
871
1,509
447
1,121
310
532
4,501
1,351
29,195
797
181
5,962
4,663
1,701
8,669
361
567
372
2,449
13,911
156
238
2,266
1,830
594
1,389
398
24
147
9.52
66.29
0
305
0
1,238
(J)
3
13
8
1
3
66
14
5
8
6
9
2
4
15
20
12
3
12
2
7
2
2
18
2
129
5
2
31
13
5
46
1
4
3
12
38
3
1
10
12
5
9
2
(t)
7
i Represents aggregate book value of capital stock, surplus, undivided profits, reserves, and retirement fund for preferred
stock. Figures are averages of amounts reported for the June and December call dates in the current year and the December call
date in the previous year.
NOTE : Data may not add to totals because of rounding.
299
TABLE B—24.—Current operating revenue, expenses, and dividends of national banks in the United States and possessions operating throughout calendar 1963, by size of deposits, December 1963
[Dollar amounts in millions]
Banks operating throughout entire year with deposits in December 1963, ofItem
Less than
$2.0
Current operating revenue:
Interest and dividends on—
U.S. Government obligations
Other securities
Interest and discount on loans
Service charges and other fees on banks' loans
Service charges on deposit accounts
Other service charges, commissions, fees, and collection and exchange charges
Trust department
Other current operating revenue
Total current operating revenue
Current operating expenses:
Salaries and wages: 1
Officers
Employees other than officers
Number of officers *
Number of employees other than officers 2
Officer and employee benefits—pensions, hospitalization, social security, insurance, etc
Fees paid to directors and members of executive,
discount, and other committees
$5.1 to
$70.0
$25.1 to
$50.0
$50.1 to
$700.0
167
39
4,445
$11, 393
301
991
$10.1 to
$25.0
$11,895
315
1,018
$63, 095
1,688
5,565
$150, 168
3,968
13,421
$100.1 to
$500.0
Over
$500.1
Total
1,282
1,131
$569
23
81
$4, 428
125
506
$8, 076
194
794
7
1
17
48
14
134
1
13
83
29
244
2
26
141
52
437
6
52
110
39
335
5
37
109
40
350
5
36
398
218
1, 966
42
146
1, 159
500
4,578
82
403
7
1
3
11
8
8
8
15
8
9
18
8
46
139
83
112
259
138
1,708
3,037
7,232
Number of banks
Total deposits
Capital stock (par value)
Capital accounts
$2.1 to
$5.0
U)
1
1
U)
28
217
396
715
557
6
3
1, 130
1,081
35
25
4,845
8,129
51
50
6,057
15,215
76
102
7,945
29, 918
54
86
5,097
24, 655
51
88
4,487
24, 187
136
287
11, 351
73, 630
192
476
16, 751
108, 520
602
1,117
57, 663
285, 335
10
21
17
20
58
109
240
1
Interest on time and savings deposits
Interest and discount on borrowed money
,
Net occupancy expense of bank premises
Furniture and equipment—depreciation, rents, servicing, uncapitalized costs, etc
Other current operating expenses
5
Net income before related taxes
See footnotes at end of table.
150
1
26
148
1
26
392
5
74
856
11
123
1,897
19
309
5
27
10
48
18
87
13
67
15
69
45
202
65
278
172
782
162
295
537
419
419
1,203
7
55
101
178
139
155
4
10
1
2
7
2
<*>
2
1
1
1
1
3
1
1
2
Ct)
9
18
14
1
1
2
2
2
2
1
1
3
6
2
3
12
4
3
28
6
1
21
5
2
12
22
43
31
6
48
89
153
121
it)
"> o
2
it)
it)
2
Total recoveries, transfers from valuation reserves,
and profits
Total losses, chargeoffs, and transfers to valuation
reserves
191
1
33
21
Total current operating expenses
Losses, chargeofFs, and transfers to valuation reserves:
On securities:
Losses on securities sold
Chargeoffs on securities not sold
Transfers to valuation reserves
On loans:
Losses and chargeoffs
Transfers to valuation reserves
All other
103
1
4
Net current operating earnings
Recoveries, transfers from valuation reserves, and profits:
On securities:
Profits on securities sold or redeemed
Recoveries
Transfers from valuation reserves
On loans:
Recoveries
Transfers from valuation reserves
All other
51
it)
1
5
1
1
U)
it)
505
2, 112
5, 168
924
2,064
35
6
30
88
2
45
3
6
17
1
92
29
8
105
55
17
51
187
303
2
4
1
9
14
1
24
27
6
39
17
166
29
12
328
67
37
99
234
480
134
457
878
1,887
6
it)
3
U)
23
it)
it)
it)
TABLE B—24.—Current operating revenue, expenses, and dividends of national banks in the United States and possessions operating throughout calendar 1963, by size of deposits, December 1963—Continued
[Dollar amounts in millions]
Banks operating throughout entire year with deposits in December 7963, of—
Item
Taxes on net income:
Federal
State
Less than
$2.0
2
$50.1 to
$100.0
42
2
50
2
$100.1 to
$500.0
173
8
48
2
Over
$500.1
Total
26
1
13
28
52
44
50
181
315
684
34
61
102
78
84
276
563
1,203
2
0
Total cash dividends declared
13
40
33
127
268
1
543
1
23
36
(t)
(t)
(t)
(t)
281
34
634
50
2
13
23
40
33
36
127
269
544
3
Net income after dividends
$25.1 to
$50.0
5
On common stock
On preferred stock
1 Excludes building employees.
2 Number at end of year.
% Less than $500,000.
$10.1 to
$25.0
2
Total taxes on net income
Per $100 of deposits:
Net current operating earnings
Net income before dividends
Per $100 of capital accounts:
Net current operating earnings
Net income before dividends
Cash dividends
$5.1 to
$10.0
13
1
U)
Net income before dividends
Average per bank:
Gross current operating revenue
Current operating expenses
Net current operating earnings
Net income before dividends
$2.1 to
$5.0
21
38
61
45
48
149
294
659
2
1
3
3
1
1
10
7
3
2
78
54
24
14
(t)
(i)
IB
1.23
.88
8.64
6. 17
2.47
(i)
(t)
1.24
.77
10.87
6.72
2.57
(t)
I
1
(t)
U)
2
1
IB
1.25
.76
1.23
.71
1.22
.68
1.30
.71
1.39
.76
1.46
.89
1.37
.80
12.72
7. 68
2.90
13.62
7. 80
3.06
14.03
7. 87
3.33
15.23
8.25
3.54
15.99
8.74
4.02
16.60
10. 12
4.83
15.38
8. 96
4.05
NOTE: The deposits, capital stock, and capital accounts shown in this table are
as of Dec. 20, 1963. Capital accounts represents the aggregate book value of
capital stock, surplus, undivided profits, reserves, and retirement fund for preferred
stock.
TABLE B-25.—Current operating revenue, expenses, and dividends of national banks, years ended Dec. 31,
1962 and 1963
[Dollar amounts in thousands]
1962
4,503
4,615
$3, 672, 455
$12, 289, 305
$3, 886, 042
$13,102,085
Number of banks *
Capital stock, par value 2
Capital accounts 2
Amount
Current operating revenue:
Interest and dividends on:
U.S. Government obligations
Other securities
Interest and discount on loans
Service charges and other fees on banks' loans
Service charges on deposit accounts
Other service charges, commissions, fees, and collection and exchange charges
Trust department
Other current operating revenue
Total current operating revenue
Current operating expenses:
Salaries and wages:
Officers
Employees other than officers
Number of officers 1
Number of employees other than officers !
Officer and employee benefits—pensions, hospitalization, social
security, insurance, etc
Fees paid to directors and members of executive, discount, and
other committees
Interest on time and savings deposits
Interest and discount on borrowed money
Net occupancy expense of bank premises
Furniture and equipment—depreciation, rents, servicing, uncapitalized costs, etc
Other current operating expenses
Total current operating expenses
Net current operating earnings
1963
Percent distribution
Amount
Percent distribution
$1,136, 543
414, 878
4,134, 522
74, 305
380, 402
17.23
6.29
62.68
1.13
5.77
$1,171,285
504, 854
4, 621, 556
83, 090
408,787
16.04
6.91
63.29
1.14
5.60
108, 978
242, 204
104, 571
1.65
3.67
1.58
113,394
260, 970
138,535
1.55
3.57
1.90
6, 596, 403
559, 485
1, 057, 500
7, 302, 471
12.12
22.91
607, 954
1,131,033
11.63
21.63
58, 238
287, 498
55, 421
275,139
4.79
242, 598
4.64
064
710
680
962
.63
34.42
.71
6.19
31,014
1,917,349
19, 576
313, 563
.59
36.67
.37
6.00
148, 521
693, 071
3.22
15.01
173, 699
791,979
3.32
15.15
4,616,225
5, 228, 765
100. 00
1, 980,178
1, 073, 706
221, 232
29,
1, 588,
32,
285,
See footnotes at end of table.
303
TABLE B-25.—Current operating revenue, expenses, and dividends of national bank, years ended Dec. 31, 1962
and 1963—Continued
[Dollar amounts in thousands]
1963
7962
Amount
Recoveries, transfers from valuation reserves, and profits:
On securities:
Profits on securities sold or redeemed
Recoveries
Transfers from valuation reserves
On loans:
Recoveries
Transfers from valuation reserves
All other
Total recoveries, transfers from valuation reserves, and profits.. . .
Losses, chargeoffs, and transfers to valuation reserves:
On securites:
Losses on securities sold
Chargeoffs on securites not sold
Transfers to valuation reserves
On loans:
Losses and chargeoffs
Transfers to valuation reserves
All other
Total losses, chargeoffs, and transfers to valuation reserves
Net income before related taxes
Taxes on net income:
Federal
State .
Percent distribution
Amount
$128, 077
3,408
41, 696
51.44
1.37
16.74
$88, 053
2,340
44,764
28.98
.77
14.74
8,106
27, 343
40, 373
3.26
10.98
16.21
8,062
105,038
55, 537
2.65
34.58
18.28
249, 003
100. 00
303, 794
100, 00
32, 961
7,409
59,125
6.98
1.57
12.52
27, 750
6,306
39, 259
5.74
1.30
8.12
13,465
292, 201
67,151
2.85
61.86
14.22
12, 527
329, 596
68,119
2.59
68.16
14.09
472, 312
100. 00
483, 557
100. 00
1,756,869
1, 893, 943
637, 670
50, 356
637,099
50, 927
Cash dividends declared:
On common stock
On preferred stock
Total cash dividends declared
See footnotes at end of table.
304
688,026
688, 026
1,068,843
1, 205, 917
517, 546
202
547, 060
1,126
517, 748
548,186
551,095
Total taxes on net income
Net income before dividends
Percent distribution
657,731
TABLE B-25.—Current operating revenue, expenses, and dividends of national banks, years ended Dec. 31, 1962
and 1963—Continued
[Dollar amounts in thousands]
1963
1962
Amount
Occupancy expense of bank premises:
Salaries and wages:
Officers
Employees other than officers
Number of officers1
Number of employees other than officers i
$1,018
48, 562
1
Number at end of period. Remaining figures include
earnings, expenses, etc., of banks which were in operation a
part of the year but were inactive at the close of the year.
2
Figures are averages of amounts reported for the June and
December call dates in the year indicated and the December
call date in the previous year.
3 Exclusive of building employees.
0.29
12.22
152
16,814
5,611
1.48
5,998
1.47
69, 513
18.39
75,058
18.33
46, 568
62, 504
85,134
59, 066
12.32
16. 54
22.52
15.63
51,333
68, 435
94, 717
62, 682
12.54
16.71
23.13
15.31
100. 00
409, 457
100. 00
23.57
.77
92, 204
3,690
22.52
.90
92, 014
Memoranda items:
Recoveries credited to valuation reserves (not included in recoveries
above):
On securities
On loans
Losses charged to valuation reserves (not included in losses above):
On securities
On loans
. .
Stock dividends (increases in capital stock)
Ratio of cash dividends to capital stock (par value)
Ratio of cash dividends to capital accounts
$1,186
50. 048
24.34
95, 894
23.42
285, 962
Total
Total current expenses
Percent
to total
89, 097
2,917
Net occupancy expense
Net current earnings
Amount
377, 976
Gross occupancy expense
Less:
Rental income from bank premises
Other credits
Ratios to current operating revenue:
Salaries, wages, and fees 8
Interest on time and savings deposits
All other current expenses
0.27
12.85
116
16, 867
.
Building officer and employee benefits
Recurring depreciation on bank premises and leasehold improvements
Maintenance, repairs, and uncapitalized alteration costs of bank
premises and leasehold improvements
Insurance, utilities (heat, light, and water), etc..
Rents paid on bank premises .
Taxes on bank premises and leasehold improvements
Percent
to total
75.66
313, 563
76.58
2,942
51,317
5,306
60, 402
7,579
143, 575
94,144
11,867
177, 661
126, 085
Percent
Percent
24.95
24.09
20.94
24.24
26.25
21.11
69.98
71.60
30.02
28.40
14.10
4.21
14.11
4.18
NOTE.—Earnings and dividends figures for 1869 to 1937 were
published for the years ended August 31 or June 30 and appear
in the table beginning on page 96 of the Comptroller's Annual
Report for 1937. Similar figures for 1938 through 1941 appear in table 26 on page 136 of the 1941 report. Calendar
year figures are available, beginning with the year 1917, and
are published in the Comptroller's reports as follows: 1938, p.
100; 1940, p. 17; 1942, p. 34; 1943, p. 30; 1946, p. 98; 1949,
p. 100; 1951, p. 118; 1954, p. 142; 1957, p. 152; and 1960, p.
305
TABLE B—26.—Number of national banks, capital stock and accounts, net profits, dividends, and ratios to capital accounts, years ended Dec.
31, 1930-63
[Dollar amounts in 1thousands. For earlier data, see Annual Report of the Comptroller of the Currency, 1938, p. 115]
Capital stock (par value) 1
Tear
Preferred
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1
2
Total
Tatal
capital
accounts *
Net profits
before
dividends
$1, 724, 028
1, 680, 780
1, 597, 037
L, 600, 303
L, 709, 043
:L, 791, 324
L, 706, 528
I, 591, 788
L, 577, 738
L, 561, 521
L, 532, 315
L, 523, 454
,511, 123
1, 508, 170
1,551, 116
1, 616, 884
1, 699, 833
1, 697, 205
1, 804, 490
1, 884, 352
1, 965, 977
2, 058, 050
2, 177, 888
2, 263, 746
2, 386, 226
2, 460, 621
2, 562, 055
2, 716, 931
2,875,117
3, 066, 632
3, 259, 258
3, 466, 166
3, 672, 455
3, 870, 842
$3, 919, 950
3, 753, 412
3, 323, 536
2, 981, 678
2, 982, 008
3, 084, 092
3, 143, 029
3, 206, 194
3,281,819
3, 380, 749
3, 463, 862
3, 596, 865
3, 684, 882
3, 860, 443
4, 114,972
4, 467, 718
4, 893, 038
5, 293, 267
5, 545, 993
5,811,044
6,152,799
6, 506, 378
6,875,134
7, 235, 820
7, 739, 553
7, 924, 719
8, 220, 620
8, 769, 839
9, 412, 557
10, 003, 852
10, 695, 539
11,470,899
12, 289, 305
13,102, 085
$158,411
2
54, 550
2
164,737
3
286, 116
2
153,451
158,491
313, 826
228, 021
198, 649
251,576
241,465
269, 295
243, 343
350, 457
411,844
490, 133
494, 898
452, 983
423, 757
474, 881
537, 610
506, 695
561, 481
573, 287
741, 065
643, 149
647, 141
729, 857
889, 120
800,311
1,046,419
1, 042, 201
1, 068, 843
1, 205, 917
Number
of banks
7,038
6, 373
6,016
3 5, 159
s 5, 467
5,392
5, 331
, 5, 266
5,230
5,193
5,150
5, 123
5,087
5,046
5,031
5,023
5,013
5,011
4, 997
4,981
4, 965
4, 946
4,916
4,864
4,796
4,700
4, 659
4,627
4,585
4, 542
4,530
4,513
4,503
4,615
n.a.
n.a.
n.a.
$92, 469
349, 470
510,511
447, 501
305, 842
267, 495
241, 075
204, 244
182, 056
156, 739
135,713
110, 597
80, 672
53, 202
32, 529
25, 128
20, 979
16, 079
12, 032
6,862
5, 512
4,797
4, 167
3, 944
3,786
3,332
3,225
2,050
2,040
9,852
24, 304
KsOTTlTTlOTl
$1,724,028
1, 680, 780
I, 597, 037
t, 507, 834
1, 359, 573
I, 280, 813
L, 259, 027
1,285, 946
1, 310, 243
1, 320, 446
1, 328, 071
1, 341, 398
1, 354, 384
1, 372, 457
1,440, 519
1, 536, 212
1, 646, 631
1, 736, 676
1, 779, 362
1, 863, 373
1, 949, 898
2, 046, 018
2, 171, 026
2, 258, 234
2, 381, 429
2, 456, 454
2, 558, 111
2,713,145
2, 871, 785
3, 063, 407
3, 257, 208
3, 464, 126
3, 662, 603
3, 846, 538
Averages of amounts from reports of condition made in each year.
Deficit.
Ratios
Cash dividends
3
On
On
preferred
stock
common
stock
n.a.
n.a.
n.a.
$558
10, 103
18, 862
18, 166
11, 532
9,378
8,911
8,175
7,816
6,683
6,158
5,296
4,131
2,427
1,372
1,304
1,100
$211,272
193, 196
135, 381
71, 106
80, 915
94, 377
101,850
110,231
113, 347
122, 267
125, 174
124, 805
121, 177
125, 357
139,012
151,525
167, 702
182, 147
192, 603
203, 644
228, 792
247, 230
258, 663
274, 884
299, 841
309, 532
329, 777
363, 699
392, 822
422, 703
450, 830
485, 960
517, 546
547, 060
712
615
400
332
264
203
177
171
169
165
99
119
202
1,126
Cash dividends on
preferred
stock to
preferred
capital
Cash dividends on
common
stock to
common
capital
Percent
n.a.
n.a.
n.a.
0. 60
2.89
3.69
4.06
3.77
3.51
3.70
4.00
4.29
4.26
4.54
4.79
5.12
4.56
4.22
5. 19
5.24
4.43
5.11
5.83
6.02
5.50
4.87
4.49
4.52
5.07
5. 12
4.83
5.83
2.05
4.63
Percent
12. 25
11.49
8.48
4.72
5.95
7.37
8.09
8.57
8.65
9.26
9.43
9.30
8. 95
9. 13
9.65
9.86
10. 18
10.49
10.82
10.93
11. 73
12.08
11.91
12. 17
12.59
12. 60
12.89
13.41
13. 68
13.80
13.84
14.03
14. 13
14.22
Net profits before
dividends
Total cash
dividends
to capital
accounts To capital To capital
accounts
stock
Percent
5.39
5.15
4.07
2.40
3.05
3.67
3.82
3.80
3.74
3.88
3.85
3.69
3.47
3.41
3.51
3.48
3.48
3.47
3.50
3.52
3. 73
3.81
3.77
3.80
3.88
3.91
4.01
4.15
4.18
4.23
4.22
4.24
4.21
4. 18
Licensed banks, i.e., those operating on an unrestricted basis.
NOTK.—n.a. = not applicable.
Percent
9. 19
2
3.25
2
10. 32
2
17. 88
2
8.98
8.85
18.39
14.32
12.59
16. 11
15.76
17.68
16. 10
23.24
26.55
30.31
29.11
25.60
23.48
25.20
27. 35
24. 62
25.78
25. 32
31.06
26.14
25.26
26.86
30.92
26. 10
32.11
30.07
29.10
31.15
Percent
4.04
2
1. 45
2
4. 96
2
9. 60
2
5.15
5.14
9. 98
7. 11
6.05
7.44
6.97
7.49
6. 60
9.08
10.01
10.97
10.11
8. 56
7.64
8. 17
8.74
7.79
8.17
7.92
9. 58
8.12
7.87
8. 32
9.45
8.00
9.78
9.09
8.70
9.20
TABLE B-27.—Total loans of national banks, losses and recoveries on loans, and ratio of net losses or recoveries
to loans, by calendar years, 1944-63
[Dollar amounts in thousands]
Total loans end
of year
Year
Losses and
chargeqfs
Recoveries
Ratio of losses
Net losses or (or recoveries
recoveries ( + ) + ) to loans
Percent
$11,497,802
13,948,042
17, 309, 767
21, 480, 457
23,818,513
23, 928, 293
29, 277, 480
32, 423, 777
36,119,673
37, 944,146
39, 827, 678
43, 559, 726
48, 248, 332
50, 502, 277
52, 796, 224
59, 961, 989
63, 693, 668
67, 308, 734
75,548,316
83; 388, 446
Average for 1944-63. .
$41, 039
29, 652
44, 520
73, 542
i 50, 482
i 59, 482
i 45, 970
i 53, 940
i 52, 322
i 68, 533
i 67, 198
i 68, 951
i 78,355
i 74, 437
i 88, 378
i 80, 507
i 181,683
i 164, 765
1157,040
i 190,188
$50, 348
37, 392
41,313
43, 629
2 31,133
2 26, 283
2 31, 525
2 31,832
2 32, 996
2 36, 332
2 41, 524
2 39, 473
2 37, 349
2 39, 009
2 50, 205
2 54, 740
2 51,506
2 52, 353
2 59, 423
2 68, 464
$ + 9 , 309
+ 7 , 740
3,207
29, 913
19, 349
33,199
14, 445
22,108
19, 326
32, 201
25, 674
29,478
41,006
35, 428
38,173
25, 767
130,177
112,412
97, 617
121, 724
+0.08
+.06
.02
41, 629,167
1944
1945
1946
1947
1948..
1949
1950
1951
1952
1953
1954
1955.. .
1956
1957
1958 .
1959
1960
1961 .
1962
1963
83, 549
42, 841
40, 708
.10
.14
.08
.14
.05
.07
.05
.08
.06
.07
.08
.07
.07
.04
.20
.17
.13
.15
1
Excludes transfers to valuation reserves.
Excludes transfers from valuation reserves.
NOTE.—For earlier data, see Annual Report of the Comptroller of the Currency 1947, p . 100.
2
TABLE B-28.—Total securities of national banks, losses and recoveries on securities and ratio of net losses or
recoveries to securities, by calendar years, 1944-63
[Dollar amounts in thousands]
1944 .
1945
1946.
1947
1948
1949
1950
1951
1952 .
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
. . .
. .
Average for 1944-63
.
Ratio of losses
Net losses or (or recoveries
recoveries ( + )+ ) to securities
Total securities
end of year
Year
. .
Losses dfid
chargeqffs
$47, 022, 329
55,611,609
46, 642, 816
44, 009, 966
40, 228, 353
44, 207, 750
43, 022, 623
43, 043, 617
44, 292, 285
44, 210, 233
48, 932, 258
42, 857, 330
40, 503, 392
40, 981, 709
46, 788, 224
42, 652, 855
43,852,194
49, 093, 539
51, 705, 503
52, 601, 949
$67, 574
74, 627
74, 620
69, 785
i 55, 369
i 23, 595
i 26, 825
i 57, 546
i 76, 524
i 119,124
i 49, 469
1152,858
i 238, 997
1151,152
i 67, 455
i 483, 526
U54,372
151,236
i 47, 949
i 45, 923
$50, 302
54,153
33, 816
25, 571
2 25, 264
2 7,516
2 11,509
2 6, 712
2 9, 259
2 8, 325
2 9, 286
2 15,758
2 13,027
2 5, 806
212, 402
218, 344
2 21,198
2 10, 604
2 6, 350
2 7, 646
$17, 272
20, 474
40, 804
44, 214
30,105
16, 079
15,316
50, 834
67, 265
110,799
40,183
137,100
225, 970
145, 346
55, 053
465,182
133,174
40, 632
41, 599
38, 277
Percent
0.04
.04
.09
.10
.07
.04
.04
.12
.15
.25
.08
.32
.56
.35
.12
1.09
.30
.08
.08
.07
45,613,027
104, 426
17, 642
86, 784
.19
Recoveries
1
Excludes transfers to valuation reserves.
Excludes transfers from valuation reserves.
NOTE.—For earlier data, see Annual Report of the Comptroller of the Currency, 1947, p. 100.
2
307
TABLE B-29.—Foreign branches of national banks, Dec. 31,
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION,
SAN FRANCISCO, CALIF.:
Argentina: Buenos Aires
England:
London
London (West End)
France: Paris
Germany: Dusseldorf
Guam: Agana
Guatemala: Guatemala City
Hong Kong: Hong Kong
Japan:
Kobe
Osaka
Tokyo
Yokohama
Lebanon: Beirut
Malaysia:
Kuala Lumpur
Singapore
Netherlands: Amsterdam
Nigeria: Lagos
Okinawa: Naha
Pakistan: Karachi
Philippines: Manila
Thailand: Bangkok
Truk Islands: Moen
CONTINENTAL ILLINOIS NATIONAL BANK & TRUST CO. OF
CHICAGO, I I I . : England: London
FIRST NATIONAL BANK OF BOSTON, MASS.:
Argentina:
Avellaneda
Buenos Aires
Buenos Aires (Alsina)
Buenos Aires (Constitucion)
Buenos Aires (Once)
Rosario
Brazil:
Campinas
Rio de Janeiro
Santos
Sao Paulo
FIRST NATIONAL CITY BANK OF NEW YORK, N.Y.:
Argentina:
Buenos Aires
Buenos Aires (Belgrano)
Buenos Aires (Flores)
Buenos Aires (Plaza Once)
Buenos Aires (Liniers)
Cordoba
Lomas de Zamora
Mendoza
Rosario
Bahamas: Nassau
Belguim: Brussels
Brazil:
Belo Horizonte
Brasilia
Campinas
Curitiba
Porto Alegre
Recife
Rio de Janeiro
Salvador
Santos
Sao Paulo (Avenida Ipiranga)
Sao Paulo (Praca Antonio Prado
1
Excludes banking facilities at military establishments.
NOTE.—For consolidated statement of the assets and liabilities of the above-named branches for Dec. 20, 1963, see table
B-30.
308
19631
FIRST NATIONAL CITY BANK OF NEW YORK, N.Y.—Con.
Canal Zone: Balboa
Chile:
Santiago
Valparaiso
Colombia:
Barranquilla
Bogota
Bogota (Hotel Tequendama)
Cali
Medellin
Dominican Republic: Santo Domingo
Ecuador:
Guayaquil
Quito
England:
London
London (Berkeley Square Branch)
France: Paris
Germany: Frankfurt am Main
Hong Kong:
Hong Kong
Hong Kong (Kowloon Section)
India:
Bombay
Calcutta
Delhi
Madras
Italy: Milan
Jamaica: Kingston
Japan:
Nagoya
Osaka
Tokyo
Yokohama
Lebanon: Beirut
Malaysia:
Kuala Lumpur
Singapore (Raffles Quay)
Singapore (Orchard Road)
Mexico:
Mexico City (Isabel la Catolica)
Mexico City (San Martin)
Mexico City (Paseo de la Reforma)
Mexico City (Republica)
Pakistan: Karachi
Panama:
Colon
Panama City
Panama City (Hotel El Panama Hilton)
Panama City (LaExposicion)
Paraguay:
Asuncion
Asuncion (Guarani Hotel)
Asuncion (Pettirossi)
Peru: Lima
Philippines:
Cebu City
Clark Air Base
Manila
Manila (Port Area Branch)
Puerto Rico:
Arecibo
Bayamon
Caguas
Mayaguez
Mayaguez (Plaza de Colon)
Ponce
San Juan
San Juan (Hato Rey)
New Port Area)
Rio Piedras)
Santurce)
TABLE B-29.—Foreign branches of national banks, Dec. 31, 1963 a—Continued
FIRST NATIONAL CITY BANK OF NEW YORK, N.Y.—Con.
Saudi Arabia: Jeddah
Switzerland: Geneva
Uruguay:
Montevideo
Montevideo (Pocitos)
Venezuela:
Caracas
FIRST NATIONAL CITY BANK OF NEW YORK, N.Y.—Con.
Venezuela—Continued
Caracas (Miranda)
Maracaibo
Valencia
VIRGIN ISLANDS NATIONAL BANK, CHARLOTTE AMALIE, ST.
THOMAS, VIRGIN ISLANDS: British Virgin Islands: Road
Town (Tortola Island)
TABLE B-30.—Assets and liabilities of foreign branches of national banks, Dec. 20, 1963: consolidated
statement1
[Dollar amounts in thousands]
Number of branches.
123
Loans and discounts, including overdrafts
$1, 437, 439
Securities
114, 249
Currency and coin
34, 729
Balances with other banks and cash items in
process of collection
578, 575
Due from head office and branches
221, 035
Real estate, furniture, and fixtures
25, 715
Customers' liability on account of acceptances. . .
236, 895
Other assets
30, 080
Total assets.
1
2, 678, 717
Excludes figures for banking facilities at military establishments.
NOTE.—For location of foreign branches, see table B-29.
Demand deposits of individuals, partnerships, and
corporations
Time and savings deposits of individuals, partnerships, and corporations
Deposits of U.S. Government
State and municipal deposits
Deposits of banks
Other deposits (certified and officers' checks, etc.).
$662, 709
923, 442
180,148
14,127
573,182
22, 384
Total deposits
2, 375, 992
Due to head office and branches
4, 863
Rediscounts and other liabilities for borrowed
money
18,283
Acceptances executed by or for account of reporting branches and outstanding
237,188
Other liabilities
42, 391
Total liabilities
2, 678, 717
309
TABLE B—31.—Assets and liabilities of all national banks,, date of last report of condition, December 1936—63
[Dollar amounts in thousands]
Number
of banks
1936...
1937...
1938...
1939...
1940...
1941...
1942...
1943...
1944...
1945...
1946...
1947...
1948...
1949...
1950...
1951...
1952...
1953...
1954...
1955...
1956...
1957...
1958...
1959...
1960...
1961...
1962...
1963...
Loans and
discounts
including
overdrafts
5, 331 $8, 271, 120
5,266 8, 813, 547
5,230 8, 489, 120
5, 193 9, 043, 632
5, 150 10, 027, 773
5,123 11, 751, 792
5,087 10, 200, 798
5,046 10, 133, 532
5,031 11, 497, 802
5,023 13, 948, 042
5,013 17, 309, 767
5,011 21, 480, 457
4, 997 23, 818, 513
4,981 23, 928, 293
4, 965 29, 277, 480
4, 946 32, 423, 777
4, 916 36, 119, 673
4,864 37, 944, 146
4,796 39, 827, 678
4,700 43, 559, 726
4,659 48, 248, 332
4, 627 50, 502, 277
4, 585 52, 796, 224
4,542 59, 961, 989
4, 530 63, 693, 668
4,513 67, 308, 734
4,505 75, 548,316
4,615 *83, 388, 446
U.S. Goveminent
obligations,
direct and
guaranteed
$8, 685, 554
8, 072, 882
8, 705, 959
9, 073, 935
9, 752, 605
12, 073, 052
23, 825, 351
34, 178, 555
43, 478, 789
51,467,706
41, 843, 532
38, 825, 435
34, 980, 263
38, 270, 523
35, 691, 560
35, 156, 343
35, 936, 442
35, 588, 763
39, 506, 999
33, 690, 806
31, 680, 085
31, 338, 076
35, 824, 760
31, 760, 970
32,711,723
36, 087, 678
35, 663, 248
33, 383, 886
Other
bonds,
stocks,
and
securities
Cash
$4, 094, 490 $518, 503
3, 690, 122 422, 490
3, 753, 234 555, 304
3, 737, 641
615, 698
3,915,435
718, 799
3, 814, 456
786, 501
3, 657, 437
733, 499
3, 325, 698
807, 969
3, 543, 540
904, 500
4, 143, 903 1, 008, 644
4, 799, 284 1, 094, 721
5, 184, 531 1, 168, 042
5, 248, 090 1, 040, 763
5, 937, 227 1, 059, 663
7,331,063 1, 147, 069
7, 887, 274 1, 418, 564
8, 355, 843 1, 446, 134
8, 621,470 1, 292, 254
9, 425, 259 1, 279, 171
9, 166, 524 1, 388, 250
8, 823, 307 1, 706, 507
9, 643, 633 1, 734, 533
10, 963, 464 1, 675, 827
10, 891, 885 1, 521, 334
11, 140,471 1, 721, 492
13,005, 861 1, 923, 655
16, 042, 255 2, 277, 621
19, 218, 063 2, 178, 563
Balances
with other
banks 1
Total assets
Capital
Surplus
and
u ndt vided
profits 2
Total
deposits
Bills payable and
rediscounts,
etc.
Other
liabilities
462, 578 $1 032, 327 $31, 064, 662 $1
,598, 815 $1, 572, 195 $27: 608,397
$3, 495 $281, 760
,
128, 003
977, 186 30, 104,230 1, 577,831
10, 839 308, 499
666, 367 26, 540, 694
151,105
28, 749
Oil, 455 31, 666, 177 1, 570,622
5,608
757, 522 28, 050, 676
887,915
960, 436 35,319,257 1, 532,903
2,882 298, 265
872,215 31,612, 992
401, 268
918, 082 39, 733, 962 1, 527,237
3, 127 342, 013
009, 161 35, 852, 424
794
215,429
897, 004 43, 538, 234 1, 515,
3,778 330, 585
133, 305 39, 554, 772
682
516,771
847, 122 54, 780, 978 1, 503,
234, 673 50, 648, 616
3, 516 390, 291
272, 695
813, 468 64, 531, 917 1,531, 515
427, 927 60, 156, 181
8, 155 408, 139
732, 749
792, 479 76, 949, 859 1, 566,905
707, 960 72, 128, 937
54, 180 491, 877
170, 145
797, 316 90, 535, 756 1, 658,839
996, 898 85, 242, 947
77, 969 559, 103
621
972, 446
830, 513 84, 850, 263 1, 756,
393, 178 79, 049, 839
20, 047 630, 578
766
907, 548
880, 987 88, 447, 000 1, 779,
641, 558 82, 275, 356
45, 135 705, 185
983, 506
063, 917 88, 135,052 1, 828,759
842, 129 81, 648,016
41, 330 774, 818
985, 295
058, 178 90, 239, 179 1,916, 340
018, 001 83, 344,318
7,562 952, 958
666, 366
,
126, 555 97, 240, 093 2, 001,650
327, 339 89, 529,632
76, 644 1 304, 828
593, 594
' \ 738,
259, 008 102, 738, 560 2, 105,345
564, 773 94,431, 561
15,484 1, 621,397
953, 269
321, 382 108i '' 743 2, 224,852
834, 369 99, 257,776
, 132,
75,921 , 739, 825
253, 264
233
416, 802 H O !
107, 759 100, 9 4 7 ,
759 " ~>,
1,116,699 2, 301,757
14, 851 , 745, 099
,889,416
668, 736 116. 150, 5692, 485,
618, 398 106, 145,813
\,
442, 726
11,098 1
,
989
569, 791 113,750,287 2, 472,
463, 305 104,, 2 1 7 ,
""" " "
375, 190
107, 796 1 488, 573
•
,
823
867, 761 117, 701, 982 2, 638,108
834, 024 107, 494,
375, 990
18, 654 1 716, 373
'
,
311
173, 520 120, 522, 640 2, 806,213
287,
130, 601
38, 324 ' 954, 788
i 436,
,
120!
,
347, 698 128, 796, 966 2, 951,279
717,
188, 993
, 086,128
43, 035 1 999, 002
:
,
677
557, 024 132,636, 113 3, 169,
132, 375 119! 637,
742
942, 911
'
,
13Z
340, 362 2. 355, 957
040, 499 139, 260, 867 3, 342,850
755, 488 124. 9 1 0 ,851
953,014
•
,
110, 590 3.141, 088
,
617 224, 615 3. 198, 514
328, 334 150, 809,052 3, 577,244
298, 062 135! 510,
154,790
.
,
891 , 635, 593 , 446, 772
719, 607 160,657,006 3, 757,646
992, 104 142: 824,
405, 959
:
,
3.
,
412
608,
518,
"""',233,363 4, 029,243
455, 937
i 823,
,
395, 201 i 466, 572
1
Includes reserve balances and cash items in process of collection.
2 Includes reserve accounts.
NOTE.—Reciprocal interbank demand balances with banks in the United States
are reported net beginning with the year 1942.
Other
assets
NOTE.—For earlier data, revised for certain years and made comparable to those
in this table, references should be made as follows: Years 1863 to 1913, inclusive,
Comptroller's Annual Report for 1931; figures 1914 to 1919, inclusive, report for
1936, and figures 1920 to 1939, inclusive, report for 1939.
* This does not include Federal funds sold.
APPENDIX C
Addresses of
JAMES J. SAXON
Comptroller of the Currency
INDEX
Addresses of James J. Saxon, Comptroller of the Currency
Page
Remarks before the Bond Club of Toledo, Toledo, Ohio,
February 9, 1962
"Confidence": remarks at the testimonial dinner in
honor of State Treasurer Joseph T. Ferguson, Neil
House, Columbus, Ohio, June 16, 1962
"Branching Powers and the Dual Banking System":
remarks before The National Association of Supervisors of State Banks, Bretton Woods, N.H., September
18, 1962
"A New Image for the National Banking System":
remarks at the National Bank Division Meeting,
American Bankers Association held in Atlantic City,
N.J., September 24, 1962
"Competition in Banking": remarks at the 68th Annual
Convention of the Kentucky Bankers Association held
at Louisville, Ky., October 22, 1962
"The American Banking Industry Today": remarks at
the 76th Annual Convention of the Iowa Bankers
Association held at Des Moines, Iowa, October 23,
1962
"Bank Expansion and Economic Growth: A New Perspective": remarks before the National Credit Conference of the American Bankers Association, SheratonChicago Hotel, Chicago, 111., January 22, 1963
"Regulation 9: Fiduciary Powers of National Banks
and Collective Investment Funds": remarks at the
Midwinter Trust Conference of the American Bankers
Association, Waldorf-Astoria Hotel, New York, N.Y.,
February 4, 1963
312
313
315
316
318
322
324
326
329
Page
"The Role of Deposit Insurance in Bank Regulation":
remarks before the Seventh District Texas Bankers
Association, Hotel Texas, Fort Worth, Tex., February
22,1963
"Banks and Community Progress": remarks before the
Florida Bankers Association, Hotel Fontainebleau,
Miami Beach, Fla., March 22, 1963
"The Promise of Free Enterprise": remarks before the
Symposium on The Survival of Free Enterprise, War
Memorial Building, Trenton, N.J., May 1, 1963
"What Kind of Banking Structure Do We Want?: The
Role of Branch Banking": remarks before the Annual
Spring Dinner of the New York Financial Writers
Association, Americana Hotel, New York City, May
27, 1963
"Public Control and Private Initiative in Banking":
remarks before the National Bank Division, American
Bankers Association, Constitution Hall, Washington,
D.C., October 7, 1963
Excerpts from remarks before the Business Council, The
Homestead, Hot Springs, Va., October 19, 1963
Remarks before a Luncheon to Salute the Tenth Annual
"Invest-in-America Week" in the Metropolitan Washington Area, Senate Conference Room, April 24,1964.
"Freedom or Conformity: The Present Issue in Banking" : remarks before the Commercial Bankers Forum,
DePaul University, Chicago, 111., May 6, 1964
"The New Spirit In Banking": remarks before the New
Jersey Bankers Association, Haddon Hall, Atlantic
City, N.J., May 21, 1964
333
336
339
341
344
346
347
348
350
REMARKS OF JAMES J. SAXON, COMPTROLLER OF THE CURRENCY, BEFORE THE BOND CLUB OF TOLEDO,
TOLEDO, OHIO, FEBRUARY 9,
Over the nearly a century of its existence the Office
of the Comptroller of the Currency, which is the oldest regulatory agency in the Federal Government, has
been concerned principally with the basic function of
maintaining the solvency and liquidity of our great
National Banks throughout the country. Time has
brought pervasive changes, however, in the tasks
which our National Banks must perform, and these
changes have altered significantly the responsibilities
of the Comptroller's Office. If our National Banks
are to play the role they must in the growth and
development of our economy, their operations must
be attuned more sensitively to the requirements of
today and of the future. The need for a reappraisal
of the functioning of our banking system is urgent,
and we have made it the first order of business of this
Office to reexamine the laws, procedures, policies, and
practices which affect these operations.
A week ago we began the first full-scale investigation of our National Banking System which the Office
has ever undertaken. Every significant aspect of the
operations of our National Banks will come under
close scrutiny in the course of this study. We are
drawing on the experience of the heads of all the
National Banks, and on their thoughts and reflections
concerning the problems they have faced, and we
anticipate that we shall assemble from these sources
the most comprehensive factual evidence that has
ever been available concerning the actual functioning
of our National Banking System. I have appointed
a distinguished group of bankers and lawyers as an
Advisory Committee to assist me in appraising this
evidence, and in devising measures to meet the problems which are disclosed.
This, however, is only the first step in the adaptation
of our National Banking System to the modern economy. This initial study shall be concerned principally
with the powers and functioning of commercial banks.
Significant as these surely are, there lie beyond these
matters at least two further and vital aspects of our
commercial banking system which require the most
intensive reexamination.
The first, on which I shall shortly announce an inquiry, concerns the proper role of competition in the
field of banking. The banking industry presents
1962
unique problems of public policy because, while it
is competitive, it is not—nor may it properly be—
fully competitive. Banking stands midway between
industries such as the public utilities, and those industries in which we rely principally upon the maintenance of essentially unregulated private competition
to serve the public interest. It contains elements of
both these basically divergent philosophies.
Like the public utilities, entry into banking is controlled by public authority. And there is intimate
public supervision of bank lending and investment
policies. Unlike the public utilities, however, only
certain maximum rates are publicly set for banking
services, and the provision of these services is not
mandatory. There is thus, within these limits, scope
for the exercise of private initiative in the field of
banking. This mixture of public regulation and private competition in banking is today a source of uncertainty and dispute.
The issue, put simply, is this: What role should the
competitive factors play in the regulated industry of
banking? The criteria of the Anti-Trust Statutes do
not seem appropriate for the publicly regulated industries. The Anti-Trust Statutes are designed to
maintain private rivalry free of explicit public control,
where the public depends upon such private competition to serve its needs. Where reliance is placed upon
private initiative to make the basic choices concerning
investment, output, and prices—as is true in the nonregulated industries—the public authorities stand
outside the decision-making process and act merely to
sustain rivalry. To achieve this purpose, it is indispensable that full freedom of entry for new competition
should be preserved.
In sharp contrast are the objectives and policies
which characterize the public control of banking. The
effective functioning of any economy which has advanced beyond the stage where individuals produce
solely for their own consumption, requires a reliable
monetary medium, and a confidently accepted means
of storing and investing savings. To achieve these
aims, above any other consideration bank solvency and
liquidity must imperatively be assured, and the supply
of money and credit must be made responsive to the
monetary andfiscalpolicies of the government. These
313
have always been, and inevitably must be, public
functions—and they inescapably entail public control
over the entry of new competition in the field of banking. How can the performance of these tasks, which
require that the basic decisions be made by the public
authorities, be reconciled with the fundamental reliance upon private decisions which is embodied in the
philosophy of our anti-trust statutes?
In the current merger cases this basic issue may not
specifically be before the courts. These suits rest
solely on anti-trust grounds, and the courts thus have
no occasion to review the other considerations which
the banking agencies must take into account in merger
cases. Unfortunately, therefore, the broader publicinterest criteria which necessarily guide banking policy
are not being faced explicitly by the courts. Judicial
review which meets all of the issues cannot be achieved
unless means are found to place these broader criteria
specifically before the courts.
There are many subordinate problems which grow
out of this fundamental issue, and which must be examined. As examples, I would cite these questions:
how is the size of banks related to their efficiency; at
what point are the cost advantages of size counterbalanced by the limitations over rivalry which result
from a reduction in the number of bank competitors;
how important a role does the preemption of desirable
locations play in the opportunities for new competition
to develop in the field of banking; do our present
federal and state banking laws inhibit the achievement of the most efficient pattern of banking facilities;
what are the proper areas of competition to be considered, and do these vary with the types of banking
services offered; what account should be taken of the
competition of financial institutions outside the field
of commercial banking; should bank holding companies be treated according to the same principles as
bank mergers?
Of special concern are the limitations of choice
which now hamper the bank supervisory agencies in
carrying out their responsibilities to insure that the
convenience and needs of the public for banking
services are met. Many State laws now limit or prohibit the privileges of branching and of bank holding
companies. These state standards seriously impair the
discretionary power of the Federal banking authorities.
As a result, undue reliance has often had to be placed
upon new bank charters, mergers, or holding companies, depending upon the facts in the individual
case. Strong pressures are now being mounted to
accede to the unnatural use of these devices, without
regard to their suitability to the needs of the individual
314
community or area. This course would serve only to
fortify these discriminatory inhibitions of the present
state and federal statutory structure, and thus obscure
its evident and serious weaknesses contrary to the
public interest.
The broader the range of choices which are open to
the bank supervisory agencies, the more likely it is that
the public's needs will be served to best advantage.
These needs will vary with the circumstances in individual cases, and the public authorities should have at
hand the full complement of tools which may be required. This point cannot be stressed too emphatically. The need was never more urgent to assure the
free flow of capital to its best uses throughout the
country. Such mobility is indispensable if our economy is to grow and prosper to its full capacity.
The second additional area which I propose to examine intensively is the international role of our commercial banking system. Today, only five of our
commercial banks perform a major function in our
international trade and commerce, and these are confined to three large metropolitan areas. In most sections of the country, too little attention has been paid
to this essential and growing function. All of the
evidence points clearly to the fact that in the years
ahead we shall have to devote increasing efforts to
this field of banking operations.
It is interesting to note that the two most significant
developments which have taken place with respect to
the international operations of our commercial banks
over the past half-century have been the result of postwar developments. After the first world war, we
sought to fill the gap in our export trade which had
been financed to a significant extent by our governmental aid programs, through the passage of the Edge
Act which was designed to broaden the scope of private
financing of this trade. Neither the Edge Act, nor the
related Agreement Corporations, ever flourished.
The outlets for financing facilities within our own
domestic economy was so great during the intervening years that, by comparison, foreign opportunities
rarely seemed sufficiently attractive.
The reduction in our governmental economic aid
programs within recent years has once again brought
resort to new measures to stimulate our export trade.
Early this week a new plan to deal with this problem
was placed in operation. The approach this time is
to encourage commercial banks throughout the
country to participate more actively in financing our
export trade, under the protection of a system of export credit insurance which spreads the risks of such
transactions and sets specific costs for meeting these
risks. The condition of our international balance of
payments has brought this development in our public
policy, and our commercial banks must be prepared
to adapt their operations to this new task.
The challenge to our imagination and ingenuity,
and to our dispassionate concern for the public interest,
as we undertake the task of re-appraising our National
Banking System, is undeniably great. The hope that,
with the help of all who know its problems, it may yet
achieve its full potential for the national well-being,
is worthy of that challenge.
CONFIDENCE
REMARKS OF JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, AT THE TESTIMONIAL DINNER IN HONOR OF STATE TREASURER JOSEPH T. FERGUSON,
NEIL HOUSE, COLUMBUS, OHIO, JUNE 16, 1962
I am indeed privileged to have the opportunity to
share in this well-deserved tribute to an illustrious citizen of Ohio. Mr. Ferguson's long and distinguished
record of public service is well known within and beyond the borders of the State of Ohio. His service in
the high station of life which he presently occupies,
and his previous roles of great distinction, reflect the
integrity and high purpose which have marked his
work. It is indeed an honor for all of us to be here
with you, tonight, Mr. Ferguson.
We hear a lot today about confidence, and the part
which our hopes and fears for the future are now
playing in our economy. If I were to judge from the
matters which cross my own desk daily, I would say
that in the field of banking the "confidence factor" is
at a supremely high level.
The vigor and energy, the enterprise and initiative,
which banks throughout our country are displaying,
is clearly evident in the constant flow of proposals for
new charters, new branches, additional capital flotations—as well as in plans for mergers, consolidations,
and for the formation of bank holding companies. A
new spirit is evident in the world of commercial banking to respond more viogorously to the opportunities
which abound. Fresh capital is being committed
daily to new banking ventures at home, and opportunities abroad are being explored at an accelerating rate.
This is coldblooded confidence.
This thrust of force, and its implications for the
growth of our economy, is not always fully understood.
It is not surprising—when new energies are being released and new initiative is being expressed—that
some will view the prospects with fear and suspicion.
In the field of banking we are not entirely free from
this timidity. The efforts of enterprising bankers to
make the best use of their skills and resources have
brought fear and concern in some quarters that our
cherished dual banking system, which we are determined to preserve, is in jeopardy. Others fear that
smaller banks are threatened by the reaching out for
new opportunities by some larger, and indeed by aggressive smaller banking institutions.
This problem, if it is a problem, should be seen
in proper perspective. We must realize the vital role
which banking plays in the growth of industry and
commerce throughout the country. We have a large
and rising population that continually is in search of
means to improve its lot. The ingenuity of our scientists is bringing an enlarging stream of new technologies to improve and expand our productive capacity.
More and more of our people are developing highly
specialized skills for which they seek outlets. If these
prospects for future advancement are to be fully
realized our banking attitudes and practices must
change with the times. There can be no comfort for
any of us in resisting these urgent needs. Nor should
there be any lack of confidence whatsoever in our capacity to meet them.
Shortly after I came to the office of comptroller of
the currency, we undertook to survey for the first time
the practical problems which confront our national
banking system in adapting to the ever-changing requirements of our dynamic economy. This study is
now well advanced, and it is evident to those of us who
have been examining the reports of the National Banks
that there is thoughtful concern throughout the country over the impediments, the weaknesses and limitations, which now bar or impair the capacity of our
commercial banks to perform in the fullest degree the
essential tasks that are theirs.
I do not find in these responses any lack of confidence, or initiative or vision. I have been deeply
impressed, rather, by the profound understanding,
which is evidenced, of the need for basic reforms, and
of the ingenuity which has been displayed in analyzing
the issues and advancing proposals for change. Bankers throughout the country are clearly aware of the
factors which hamper their performance. They seek,
not to be sheltered from the forces which affect them,
but to be armed with tools that will enable them to
fulfill the role they must play. They ask not for safeguards, but for opportunity, and their confidence is
high.
The great task for the future is to foster and encourage these aggressive attitudes in banking. This is
a particularly difficult task in a regulated industry
315
subjected to intimate public controls. The risk is great
that initiative will be dampened, and unwise reliance
placed on established advantage. Public controls are
imposed in banking for public purposes, but public
controls must be confined to public purposes and not
extended beyond the needs. Indeed, it is clear that
some of the public controls over banking can and
should be safely relaxed, and management flexibility
encouraged. This is necessary to allow enterprise and
initiative in the banking industry to find forceful expression in the public interest.
As with banking practices, the practices of the public
authorities also require continual reassessment and
revision to meet emergent needs and changing circumstances. We are now engaged in such a review of our
own policies, and the laws under which we work.
Much as we have found, is in need of change. Time
has outrun many of our practices. Some have been
proved detrimental to effective performance of banking functions. Still others, we find, need strengthening and extension.
Most vital, it has seemed to us, is the need to alter
the image of banking as a closed industry. The need
has never been so great to attract to thefieldof banking
larger proportions of the supply of fresh capital seeking productive uses, and young talent and skill in
search of fruitful careers.
We must adapt both our private practices and our
public controls to the environment in which we live
and work. Working together, I am confident we will
succeed. I know you share my confidence.
BRANCHING POWERS AND THE DUAL
BANKING SYSTEM
REMARKS OF JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, BEFORE THE NATIONAL ASSOCIATION OF
SUPERVISORS OF STATE BANKS, BRETTON WOODS,
NEW HAMPSHIRE, SEPTEMBER 18, 1962.
I know that our policies with respect to branch
banking are of great concern to some of you. From
the correspondence I have received, and the views I
see stated in the public press, I would judge that there
is one issue in the field of banking on which all do not
see alike. To deal with this issue properly, it must be
placed in full public view.
The most illuminating aspect of the concern over
branch banking is the fact that those who fear that
branching powers may not be liberalized, appear to
be as numerous as those who fear that these powers
may indeed be broadened.
316
Some bankers, who have been hampered by severe
branching restrictions in their States, and who have
witnessed the absorption of profitable markets by
other financial institutions not subject to such limitations, have rebelled at these bars to their initiative.
Other bankers, who are secure or satisfied under the
shelter of branching limitations which favor them,
view as a threat the prospect that any of these limitations may be eased.
Each group cites basic considerations of public policy in support of its position. Those who favor the
present restrictions over branching regard them as
necessary to safeguard the position of small independent banks and to preserve our variously defined "dual
banking system." Those who favor a relaxation of
these restrictions argue that bank efficiency and service are now hampered, and that nonbank financial
institutions are taking over banking functions in many
areas. Some consider the issue as a contest between
Federal and State authority.
Let us first clear the air of misconceptions, and try
to define the issues more sharply. We can all agree, I
believe, that the effectiveness with which our commercial banks perform their functions will exercise a
critical role in the future growth of our economy.
Few would disagree with the judgment that the present performance of our commercial banks fails to
match either their potentials or our national needs. I
doubt also that there would be any dissent from the
view that nonbank financial institutions have generally grown more rapidly and responded more sensitively to developing needs for financing many
segments of our economy.
Beyond this point differences of view become apparent. I believe these differences can be resolved—
or at least greatly narrowed. This can be done by
taking a look at the fundamental role which banks
perform in our economy, and the strong forces which
are now at work seeking to adapt banking policies and
practices to the emerging needs of our growing
economy.
In a private enterprise economy reliance is placed
principally on private initiative to marshal the Nation's financial resources, and to see that they are directed to their best uses in terms of market demands.
As our economy has grown and new technologies have
developed, changes have taken place constantly both
in the supply and in the demand for financing. If
the growth of our economy is not to be hampered, our
commercial banks must always be on the alert to adapt
to these changing needs.
Of more immediate significance to banking operations, advanced technology has produced opportunities for the use of automated procedures, and the
growth of our capital supplies has yielded opportunities to employ specialized personnel in various phases
of banking activities. Both of these factors are conducive to the formation of larger-scale banking units
to gain greater efficiency. In addition, the rapid
growth of suburban areas in many sections of our country, often accompanied by the stagnation or decline of
metropolitan areas, has brought a continuing flow of
new demands for banking facilities requiring expanded
operations.
It is in this context that a powerful thrust has developed for an easing of branching restrictions. In
order to take advantage of the opportunities to utilize
specialized personnel and automated technology, and
to meet the new demands for banking services, many
enterprising banks have sought to expand their operations through the formation of branches. Perhaps
even more fundamental in terms of the role which
banks perform in our economy, the shifts of population
and the emergence of new industries require continued adaptation of the location of banking facilities
so that financial resources may move with ready mobility from point of excess to points of deficit.
If we look at the problem of branching powers in
the light of these considerations, it should be obvious
that this is not a contest between large and small banks,
or between Federal and State authority. The real
issue is how to adapt our commercial banking system to
its modern-day tasks—to determine the kind of a banking structure which will best serve our needs at all
levels, National, State and local.
Branching, of course, represents only one of a number of techniques through which banks have sought
to remedy their present deficiencies. Where the path
to improve banking services through branching has
been closed, banks have sometimes found other means
to serve community and national needs. Often these
other means have not been as efficient or as effective.
Applications for new bank charters are increasing at
a rapid rate in many parts of the country, and are now
at an unprecedented level. Efforts to form bank holding companies, and affiliate and satellite banking, are
also growing markedly. Where these efforts have
failed to fulfill the requirements for banking services,
nonbank financial institutions have readily grasped
the missed opportunities.
The standards which should govern banking policies
and practices must be dynamic, not static—they must
be positive, not negative. We cannot allow the pace
of our economic growth to falter because of lack of
banking facilities. We must safeguard the solvency
and liquidity of our banking system, but we must not
permit initiative to be stifled where needs remain
unserved.
The necessity for banks to adapt to modern methods
and present demands does not require that we abandon our traditional vigilance of safeguarding competitive forces. Indeed, it is the opportunity for the expression of these competitive forces that we seek, within
the limitations required to sustain a sound banking
structure. The maintenance of competition cannot
be equated with the preservation of the status quo.
Preservation of the status quo has never been and
should never be the purpose of our private enterprise
system.
Enterprise and initiative are not monopolized by the
larger banks. It is the capacity and aggressiveness of
management, and not the size of a bank, which determines success in adapting to market demands for
banking services. Nor are those demands always such
that the larger bank will be favored. There is a role
for each to perform in serving our growing national
and local needs.
Nor do I see the problem as a contest between Federal and State authority in which our "dual banking
system" is in jeopardy. There is perhaps no term in
the lexicon of bankers which has been subject to so
great a variety of interpretations as "the dual banking
system." All that seems to emerge from the welter of
past and present confusion is the thought that duality
is preserved by subordinating either the Federal system
or the State system to the other. It is not surprising
that this has been the result, since any move to improve
one segment of the dual system is usually treated as a
threat to the entire system.
The only sense in which the duality of a banking
system can be made truly meaningful is to regard the
authority of each segment as separate and distinct, and
not subordinate one to the other. Far from posing a
threat to the duality of our banking system, this separation of power is the only means by which the dual
banking system may be sustained. Under any other
approach one authority would become predominant,
and duality in any practical terms would disappear.
There are sound reasons for preserving the duality
of our banking structure, in the same way that we
have divided power between the Federal and State
governments in other fields. The development of our
National Banking System had its origin in the search
for means to satisfy the national interest in a properly
regulated system of commercial banks. The assertion
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of Federal power in this area left undiminished the authority of the individual States to charter banks, and
to regulate them, according to their own standards.
There are national objectives in maintaining a commercial banking system fully capable of meeting national needs. But there may be other needs, purely
local in character, and these should be determined and
met at the discretion of the State authorities. It is no
threat to a dual banking system, but merely the natural
expression of such a system, to allow the Federal and
the individual State authority to be separately and
independently exercised in full.
I realize that there may be little comfort in this
approach for those who argue that the actions of the
Federal authorities will force comparable action by
the State authorities and thus impair or destroy their
independence. Independence in this sense, however,
can never be generally applied. We are all limited
by the environment in which we live. Anyone of us
could achieve our aims if we were able to control those
who affected their attainment, but to do so would be
to destroy the independence of others.
The branching powers of National Banks should,
in my judgment, not be limited according to those
policies which the individual States find appropriate
to meet their local needs through State-chartered
banks. By the same token, I believe that the State
supervisory agencies should be granted the final authority to approve branching by State-chartered
banks, whether or not they are members of the Federal Reserve System. I believe, further, that the State
supervisory agencies should be encouraged to build
adequately compensated staffs to the point that they
may be relied upon to assume full responsibility for
the examination and supervision of State-chartered
banks.
Both segments of our dual banking system require
reinvigoration to meet the challenges of the future,
and this aim can be attained only if each segment is
allowed to develop in accordance with the needs it
must fulfill.
There are certain to remain areas of mutual interest to the National and State banking systems alike.
On these matters I welcome most heartily a frank
exchange of views. For my own part, I should like
to develop closer and continuing relationships with
the State bank supervisory agencies. It is my hope
that these relationships may be founded—not on fear
of conflict—but on a mutual desire to instill a spirit
of achievement which will enable our commercial
banks, both National and State, to reach the high level
of performance of which I am certain they are capa318
ble, and which is so vital to our future economic
progress.
Only in this way can we realize our true potential.
A NEW IMAGE FOR THE NATIONAL
BANKING SYSTEMREMARKS OF JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, AT THE NATIONAL BANK DIVISION
MEETING, AMERICAN BANKERS ASSOCIATION, HELD
IN ATLANTIC CITY, NEW JERSEY, SEPTEMBER 24,
1962.
We have in our National Banking System a powerful instrument to stimulate our economic growth and
to strengthen our international position. So far we
have not made the best use of our commercial banks
in performing these vital tasks.
We all share the responsibility for past deficiencies.
Today our task is to look forward, not backwards, nor
sideways. But we must understand present shortcomings in order to meet future challenges.
Last week the Advisory Committee on Banking to
my Office presented to the President its Report on
"National Banks and the Future." That Committee
has been exploring since last April the problems confronting our National Banks in their efforts to meet
the needs of our growing economy. Many National
Banks assisted the Committee through reports of their
experience. The Advisory Committee Report furnishes us for the first time a kaleidoscopic view of our
National Banking System and its problems.
When I took office some 10 months ago I was convinced that our national banking regulations were outdated, and were severely handicapping the adaptation
of National Banks to the ever changing needs of our
dynamic society. I further believed that long years
of working under these hampering restrictions had
subdued the spirit of our National Banking System,
and left it unprepared for its present-day tasks. The
intervening months have confirmed my initial views.
We have endeavored to meet this challenge, but the
task has only begun.
I. Procedural Matters
The first step was to improve the channels of communication with the National Banks, and to place the
operations of the Office in full public view so that all
might observe and appraise the policies being followed.
In our Weekly Bulletin we now furnish current information on all of our activities of immediate interest
to the banking community. Public hearings are now
held on applications for mergers, consolidations, new
bank charters, branches, and other matters. Notices
of opinions in cases of mergers and consolidations,
and rulings on investment securities, are now published in the Federal Register and made available
promptly to the National Banks. A program has been
instituted for the distribution to National Banks of
copies of communications relating to the policies of
the Comptroller's Office, such as letters, memoranda,
and instructions. We have found that by opening the
issues to public discussion in these ways, the views of
the private interests have been more thoughtfully developed, and we have gained a more knowledgeable
basis for the determination of the public interest.
Many problems affecting the developing structure of
our banking system have come to light through these
means.
We have endeavored also to streamline the organization of the Office, and to speed up the decisionmaking process so that plans of action by our National
Banks would not lie idle for want of decision by this
office. Fourteen Regional Offices have replaced the
previous 12 District Offices. Through this reorganization we have unified previously divided State administration, facilitated better utilization of our
examination staff, and given long-overdue recognition to the economic growth which has taken place
in the Northwestern States, the Rocky Mountain
States, and the Southern States.
To assure the effective use of these improved facilities, authority in many matters has been delegated
to the Regional Chief National Bank Examiners.
Issues which formerly had to be resolved in Washington are now dealt with at the local level, and closer
relationships are being developed with the individual
National Banks.
Within the Washington Office, we have established
accelerated and firm schedules for handling applications for charters, mergers, and branches. Under this
new procedure these applications are now being processed and decided months ahead of the typical period
required for such action in the past.
In recognition of the greater use of automated procedures by our National Banks we have embarked
on a program designed to equip our bank examining
staff with better knowledge of automatic data processing. Pilot efforts have been completed, and a manual prepared which should prove most helpful to bank
examining personnel throughout the country. Regularly scheduled classes in automation will be given
to our examiners, so that they may have special training to cope with the problems resulting from
automation.
Throughout the Bureau we have sought to elevate
the quality of personnel and the level of performance.
In making personnel assignments to key positions, in
addition to technical knowledge and ability, consideration has been given to factors of vigor, vitality,
drive, and interest in supporting a program aimed at
improving the National Banking System. Personnel
qualification requirements have been modified, new
types of positions have been established, and the pay
structure has been revised, to assure the recruitment
and retention of a well-qualified staff. We have given
special attention to the building of our staff of attorneys in the area of trusts.
II. Substantive Matters
Although we found the operating procedures of the
Comptroller's Office to be greatly in need of improvement, the more basic problems were those relating to
the laws, regulations and policies affecting the operations of National Banks. During the nearly 100 years
of the National Banking System, layer upon layer of
laws and rulings have been built to control the activities of National Banks. They all must be reexamined
and reappraised in terms of their consistency and
their appropriateness for present-day conditions. Several areas are of particular significance.
1. Competition in banking. No phase of our banking operations is more fundamental to the effectiveness
with which banks perform their essential functions in
the economy than the pattern of competition which
is allowed to develop. Banking is a regulated industry
in this country, and entry is permitted only through
a public charter. Public approval is also required for
the expansion of banking units through merger, consolidation, or holding companies—and through the
formation of de novo branches as well.
The policies which are followed in approving new
charters, and in sanctioning the expansion of existing
units by any means, will shape the emerging structure
of our banking system. Decisions in individual cases
must conform to the ultimate pattern which is sought.
In general terms, the aim should be to achieve a banking structure best suited to serve the national and international interests of the United States, and the convenience and needs of the banking public, both present
and future.
Over the long history of the development of our
banking system the exercise of public authority has
produced an attitude that can only be described as
that of "a closed industry." The emphasis of the
past, inherited from the early years of public regulation in thisfield,has been attuned largely to the aim of
319
safeguarding the liquidity and solvency of banks. In
these circumstances, both the spirit and the image of
banking have largely been static if not regressive—protective rather than venturesome.
The necessity for preserving public confidence in the
banking system has not diminished over the years—the
need to safeguard liquidity and solvency is as great today as in the past. Alongside this need, however, is
one of equal significance to the progress both of our
commercial banking system and of our economy generally. This is the need to adapt the provision of
banking facilities to the requirements of economic
growth. That objective cannot be accomplished in
an environment dedicated solely to the protection of
existing units in banking—or indeed in any business or
industry.
Over the past two decades we have witnessed cataclysmic changes in our economy which have far outpaced the developments which have taken place in our
commercial banking system. Other types of financial
institutions have developed and grown phenomenally
while our commercial banks have lagged behind. To
retrieve the position of the commercial banks, and their
central role in the economy, a whole new spirit must be
engendered.
We must look forward to the needs of the future, and
adapt our policies with respect to bank expansion to
those requirements. Initiative and enterprise should
be encouraged. The way should be opened for fresh
capital to flow into banking, and the field of banking
should be made attractive to the new generation of
highly-trained men and women selecting careers for a
bright and appealing future.
All of our policies with respect to the chartering of
new banks, and the expansion of existing banking units,
should take sensitive account of these needs.
It is not alone sufficient, however, to allow new banks
to be chartered, and existing ones to expand. Our
needs cannot be fulfilled unless these banks have the
power to operate effectively.
Our Advisory Committee has recommended a number of revisions in the powers of National Banks. Let
me review some of these briefly.
2. Lending powers. Perhaps of most basic importance to effective banking operations is the authority to lend. Lending is the raison d'etre of the commercial banking industry.
The powers relating to real estate loans are particularly in need of reform. Real estate lending authority is now encrusted with a variety of archaic restrictions which have greatly impaired the capacity of
320
National Banks to carry on their activities in the public interest.
Modifications are also required in the regulations
affecting working capital loans and consumer instalment loans. Means should be found to apply to loans
on unlisted securities, standards comparable to those
now applied to loans on listed securities. The present
rules affecting loans to corporate families are inconsistent in principle, and should be conformed to some
uniform set of policies while guarding against undue
concentration of lending. Finally, the basic lending
limits applied to National Banks should be reasonably
broadened.
3. Investment powers. National Banks are now
subject to more rigorous investment limitations than
those applied to other financial institutions, and a substantial liberalization is required. The present general
limitations should be eased, and certain added specific
forms of investment should be made eligible.
Closely related is the need to authorize National
Banks to underwrite revenue bonds, a form of obligation which has grown more common over the past two
decades. This broader authority would serve to extend the participation of National Banks in public
improvement projects, and would lower borrowing
costs to the issuers.
4. Trust powers. The rapid growth which we have
experienced in personal savings necessitates a new attitude toward the exercise of trust powers by National
Banks. The present restrictions do not reflect the need
for such services, and this area requires a thorough
reexamination. Last week the Congress passed a bill
transferring to my Office from the Federal Reserve
authority in this area. We intend as soon as possible
to reexamine and rewrite Regulation F in order to
enable National Bank trust departments to meet fully
the needs of the public for these services.
5. Borrowing powers. Fundamental changes have
occurred since the present eligibility requirements for
Federal Reserve discounts and advances were inaugurated. There is broad support in the banking community for modernized concepts of eligibility, in order
to enable commercial banks to operate more effectively.
Comparable broadening of powers is also favored with
respect to borrowing from other sources.
III. Changes Soon To Be Announced
There are a number of matters relating to the capital position of National Banks, and to their corporate
procedures, which urgently require change. On some
of these matters we shall announce new policies within
a very short time. These new regulations will be pub-
lished in the Federal Register in proposed form, and
all National Banks as well as others who may be interested will be invited to submit comments before
promulgation. I can describe these new regulations
briefly as follows:
1. Financial information. In order to insure that
shareholders and potential purchasers of securities of
National Banks may be provided with all the pertinent
information they require, all National Banks regardless of size will be required to conform to certain uniform reporting regulations. Every National Bank
will be required, within 30 days after the close of each
fiscal year, to supply its shareholders with an Annual
Report containing financial information according to
standards set by the Office of the Comptroller. Where
proxies are solicited, there will be a requirement that
shareholders must be given the information necessary
for intelligent voting. The minimum information
which must be provided will be specified in detail by
the Office of the Comptroller.
We have taken these steps in order to safeguard
shareholders' interests, according to the same principles followed in safeguarding shareholders of listed
securities. There is widespread dissatisfaction with
the information now supplied to holders of unlisted
securities, including bank securities, and it seems appropriate with respect to the securities of National
Banks that the Comptroller's Office should assume the
responsibility for instituting the required reforms.
2. Ownership Reports. The proposed new regulations will require that a report be made to the Comptroller whenever there is a significant change in the
beneficial ownership of the stock of a National Bank.
3. Employee stock option plans. In order to enable
National Banks to attract and retain competent executive personnel, the new regulations will permit the
adoption of employee stock option plans which qualify
for tax treatment under Section 421 of the Internal
Revenue Code. These plans will be subject to approval by the shareholders of the bank and by the
Comptroller, and a method is provided in the regulations for the approval by shareholders of authorized
but unissued stock to be made available for fulfilling
stock option plans.
4. Preferred stock. Although existing statutes permit the issuance of preferred stock by National Banks,
it has been the common view that the Comptroller
would approve the issuance of such stock only in distress situations. The new regulations will make it
clear that preferred stock may be issued by National
Banks according to normal business considerations.
725-698—64
22
Minimum standards will be set for the protection of
the investing public and of the banks.
5. Capital debentures. There has been a general
feeling also that the Comptroller would not approve
the use of capital debentures by National Banks, even
though there is no statutory provision against the issuance of bonds by National Banks. The new regulations will specifically permit National Banks to incur indebtedness in the form of capital debentures,
provided that the total amount of such indebtedness
does not exceed the statutory limitation on overall
borrowing.
6. Stock dividends. There has been much criticism
of the present procedures for the issuance of stock
dividends by National Banks, particularly the requirement for preliminary approval by the Comptroller
before the submission of proposals to the shareholders.
The new regulations will eliminate most of the paper
work and delay in the stock dividend procedure. Applications for stock dividends will be considered approved unless there is notice to the contrary within 15
days. An alternate procedure to be provided will
permit shareholders to approve in advance a quantity
of authorized but unissued stock out of which stock
dividends may be distributed. Finally, no distinction
will generally be drawn between recurring and nonrecurring stock dividends, and it will no longer be
required that recurring stock dividends must be related to earnings for the current year or to the market
value of the bank's stock.
7. Authorized but unissued stock. The Comptroller
in the past has ruled that National Banks may not
follow the usual corporate practice of holding authorized but unissued stock. Under the new regulations shareholders of National Banks will be allowed
to approve the issuance and holding of shares to be
issued at the discretion of the Board of Directors and
with the approval of the Comptroller. Under this
new procedure stock may be issued without further
shareholder action for such purposes as stock options,
the acquisition of assets, the distribution of stock dividends, and the like. Transactions such as mergers,
which require specific shareholder approval, will continue to be subject to that requirement.
8. Capital adequacy ratios. There is one other
matter, although not regulatory in nature, which will
soon be presented for public comment prior to the
final formulation of new policies. This is the matter
of the capital position of National Banks.
At present a formula, commonly known as the "riskasset formula," is employed by the Comptroller's Office as a screening device in appraising the capital
321
position of National Banks. There is real doubt that
any arbitrary formula can provide a sufficient basis
for determining capital adequacy. Although the risks
represented in the assets of a bank should be taken
into account in determining the adequacy of its capital position, a number of other factors should also be
considered.
At the present stage of our thinking, it is our view
that the appraisal of capital adequacy should take account of the following factors:
(a) the quality of management;
(b) the liquidity of the bank's assets;
(c) the bank's earnings history;
(d) the quality and character of ownership;
(e) the capacity of the bank to carry its occupancy expenses;
(f) the potential volatility of the bank's deposit
structure;
(g) the quality of the bank's operating procedures; and
(h) the bank's capacity to meet the present and
future financial needs of its trade area,
considering the competition it faces.
At times in the past, adherence to arbitrary formulas
has resulted in the failure of National Banks to serve
the full credit needs of their communities. A revision
of our present tests of capital adequacy is clearly required. The present risk-asset formula will be
abandoned.
IV. Matters Affecting Other Regulatory Agencies
There are a number of matters affecting the operations of National Banks in which other agencies of
Government are involved. The Report of our Advisory Committee takes particular note of the problems
arising out of the requirement for mandatory membership of National Banks in the Federal Reserve
System; the regulation of interest rates; the level and
scope of reserve requirements, both against demand
deposits and against time and savings accounts; the
present division of responsibilities for bank regulation
and supervision; and the limitations now imposed on
the branching powers of National Banks. These are
all issues of great concern throughout the banking
community, and are now undergoing thorough reexamination and re-appraisal within the Federal
Government.
V. A Look Ahead
For too long we have merely accepted the limitations under which our National Banks operate. A
vital new spirit is required in our National Banking
322
System. In every city and town throughout the country, the attitudes and efforts of the banks in the community influence critically the skill and energy with
which industrial and commercial opportunities are
explored and developed. There exists among the
bankers of our country the nucleus about which may
be formed a new aggressive movement to realize to
the full our potential for economic growth.
This task, so essential to our future, requires a forward new outlook in the banking community. All of
us should strive to the utmost to achieve this aim.
Progress to attain our ultimate capacity should be
our goal in the years ahead.
COMPETITION IN BANKING
REMARKS OF JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, AT THE 68TH ANNUAL CONVENTION OF
THE KENTUCKY BANKERS ASSOCIATION HELD AT
LOUISVILLE, KENTUCKY, OCTOBER 22, 1962.
10:30
A.M.
There is increasing discussion throughout the banking community—and indeed throughout the country—
of the present state of this industry. We have witnessed during the past two decades a great upsurge in
the growth of our economy, and many are concerned
that our commercial banking system has not advanced
at the same rate. Some observers point to the rise in
prominence of a variety of new types of nonbank financial institutions which are exercising banking functions—and ask the question whether our commercial
banks are doing all they should—and, if not, what is
responsible for our difficulties and what ought to be
done about them.
Much of this discussion is focused on the role of
competition in the field of banking. The vitality and
energy of the industry and commerce of our country
are viewed with envy throughout the world, and stand
as symbols of the virtues of our private enterprise system. The scope we have allowed for the exercise of
personal initiative in our economy, and the reliance we
have placed on business rivalry and the freedom to
innovate, have been the driving forces in these
achievements.
Banking, it is often said, is different, and we should
not expect banks to operate in the same way as other
industries. There is a certain measure of truth in
this appraisal of banking, but it is easy to be misled by
sharp distinctions in drawing this contrast.
There is a sound basis for distinguishing banking
from other industries, but there are similarities as well
as differences. There do exist public interest consid-
erations which have traditionally been accepted as the
basis for regulating banking more closely than most of
our other industries. The commercial banks of our
country provide us with one of the principal monetary
instruments to facilitate the conduct of our industry
and commerce—through the creation of demand deposits against which checks may be drawn which are
accepted as a means of payment. Unless there is complete confidence in the banking system, the banks
cannot effectively perform this essential function. So
that this confidence may be maintained, entry into
banking has been regulated, and banking operations
have been subjected to intimate public supervision.
Banks also serve as one of the chief instrumentalities through which those who save may find a safe
storehouse for their funds, and those who want to put
those savings to productive use may find a ready source
for borrowing. These vital functions, through which
the Nation's supply of capital is mobilized and directed,
also necessitate careful but not excessive public control
of banking operations.
The banks of our country are not, however, controlled in the same degree as the "public utilities."
This difference is of vital significance in determining
the proper role of competition in the field of banking.
In the public utility industries, the cost conditions
which prevail require in many instances the granting
of monopoly powers as a means of assuring service and
avoiding destructive competition. Accordingly, in
that industry, in addition to the regulation of entry,
the serving of public convenience and need is made
mandatory, and the terms under which those services
are offered are publicly controlled. Neither of these
latter two forms of public control is applied to the
field of banking.
In banking, even though entry is regulated, there is
broad scope for the exercise of private initiative. Unfortunately, the significance of this distinction is not
always fully understood. The emphasis which has
been placed on the regulatory aspects of banking has
often been misinterpreted as reflecting the objective of
safeguarding existing banking institutions against competition—in much the same way that monopoly powers
are granted to the public utilities.
This is a thought which must be dispelled if our
banks are to perform as they must in furthering the
growth and development of our economy. There remains today, as in the past, a public concern to maintain confidence in the banking system. But we must
not regard this objective as justifying protection
against competition. For if the public controls in the
field of banking were designed to provide a shelter
against rivalry, it would also become necessary to require the mandatory provision of banking services at
rates fixed by the public authorities. There would be
no other way, under those circumstances, to protect
the public interest.
This, fortunately, is not the case. Although we
apply the concept of "public convenience and need"
in the field of banking as well as in the public utility
industries, the application is not the same in both
cases. In the public utilities, since monopoly powers
are granted, the protection of the public interest relates to the required provision of service and the setting of the rates charged for those services. In the
field of banking, where entry is permitted though regulated, the issue of public convenience and need relates solely to the rate and character of entry. It is
through this means that proper service to the public
on reasonable terms is assured.
This process by which the public interest is protected in the field of banking through the regulation
of entry is described by some in negative terms—as
designed to prevent "over-banking." In a sense, this
is a true description—so long as we are clear as to how
this term should properly be applied. Some appear to
regard the community as in danger of being overbanked wherever any proposal is made that a new
banking institution or facility should be allowed to
enter. Most agree that there ought to be some consideration of the performance of existing institutions
in serving the banking needs of the community. But
it is rare to find an understanding of another test
which is properly applicable—whether the community
is being supplied with a continued infusion of new
energies and initiative sufficient to realize its full
potentials, both present and future.
The state of the American banking industry today
is the result of the narrow concept which has long
generally prevailed in the banking community, of the
role which our commercial banks should perform in
our economy. The emphasis has been on the safeguards against competition, rather than on the need
to equip banks with the capacity to compete effectively. As a consequence, the requirements for banking services have increasingly outrun the supply.
Other types of financial institutions, with greater initiative and a more positive outlook, have moved in to
perform functions which unprogressive commercial
banks have failed to provide.
We stand today at a critical juncture in the development of our commercial banking system. The growth
and development of our economy will not be allowed
to lag. Our choice is whether to participate more
323
fully in these achievements, or to direct our efforts to
ever-more repressive measures to carve out a protected domain which is certain to shrink. These are
the choices we face.
For my own part, I have no doubt of the eventual
outcome. I find throughout the country a growing
awareness of the issues, and a determined resolve to
adapt banking policies and practices to the new needs
which are emerging. To that effort I shall devote my
full support—and I urge all of you to join in this task
which is so vital to our industry and to our Nation.
THE AMERICAN BANKING INDUSTRY
TODAY
REMARKS OF JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, AT THE 76TH ANNUAL CONVENTION OF
THE IOWA BANKERS ASSOCIATION HELD AT DES
MOINES, IOWA, OCTOBER 23, 1962.
10:30
A.M.
Next year we shall mark the 100th Anniversary of
our National Banking System. This is a time for reflection on the past, and a look ahead at the future.
The original conception of the functions of our National Banking System has been modified over the
years, and today new needs are emerging which call
insistently for further change.
In the beginning, the prime objective in forming
our National Banking System was to provide acceptable monetary instruments for our industry and commerce, and a means of mobilizing and directing the
Nation's supply of capital. The National Banks
initially had note-issuing power as well as the authority to create demand deposits. Bank supervision
and examination has been centered chiefly on the
maintenance of solvency and liquidity, so that depositors might be safeguarded and confidence maintained in the banking system.
More recently, with the enlarged role of government in the maintenance of full employment, new
tasks have been imposed upon the National Banking
System. It serves today as one of the principal instruments through which our national monetary and credit
policies are carried out.
It has become increasingly apparent, however, that
there is a third coordinate, and equally vital, consideration which should guide public policy in the field
of banking. We must make certain that the policies
and practices of the regulatory authorities which affect
the operations of banks do not inhibit, but promote,
the growth and development of our economy. This
is an objective which has not always been clearly seen
324
and certainly has never been systematically sought.
We have tended to lose sight of the fact that in the
final analysis it is the banks themselves which actually
carry out the function of providing the essential
financial facilities for our economy.
The great variety of statutory provisions, and supporting regulations, which today govern the operations
of National Banks, have been developed piecemeal
over nearly a century. Many of these statutes and
regulations were designed to deal with conditions
which no longer prevail. New conditions have developed for which no adequate provision has been
made. No grand design, or basic philosophy, has been
consistently applied in developing the present structure of limitations and controls.
These deficiencies have a special significance in
regulated industries such as banking. In other segments of our economy, where public controls are carefully limited, and where broad scope is allowed for the
exercise of private initiative, any lag in the adaptation
of public controls is unlikely to prove greatly harmful.
In the regulated industries, however, the level of performance is critically affected by the prevailing public
controls. It is vitally urgent in those industries that
public regulation should be continuously and sensitively adapted to the emerging requirements of the
affected industry and of the national interests.
The insensitivity and inflexibility of our public controls in the field of banking are evident both in the
practical operations and in the spirit of our banking
system. Long accustomed to a complex set of rules,
infrequently modified, banks have grown up in an environment which is essentially static and constrictive.
An attitude of dependence is prevalent, accompanied
by a fear of change. Practices and policies have failed
to keep pace with the development of industry and
commerce. Other financial institutions performing a
variety of banking functions have been developed, and
have grown rapidly, to fulfill insistent needs. The vast
structure of our banking system lies under-employed
in terms of its potential, and in terms of the role it
should play in our economy. Our commercial banking system, nevertheless, stands at the heart of our
industry and commerce. The effectiveness with which
it operates exercises a decisive influence on our economic progress.
The time is long overdue for a searching re-examination of the entire structure of public policy in the
field of banking. In this reappraisal our aim should
be to modernize our banking system in terms of
present-day needs, and to equip banks with the tools
which will enable them to meet the requirements of
the future and to play an active and positive role in
fostering the growth and development of our economy.
As a first step in that direction, we undertook early
this year to conduct a study of our National Banking
System. National Banks throughout the country assisted us in this study by examining their own experiences and offering their proposals for change. These
suggestions were carefully appraised by an Advisory
Committee, and their Report embodying a comprehensive and fundamental series of recommendations
was presented to the President about a month ago.
Many of you, I am certain, have read that Report, and
know how thorough and practical a job has been
done.
We are moving quickly in our Office to appraise
the recommendations of the Advisory Committee, and
to take such action as is appropriate and feasible. On
Thursday of last week there were published in the
Federal Register proposed new regulations relating to
the corporate practices and procedures of National
Banks. We have invited the comments of all National
Banks and of others who may be interested in these
proposed regulations, and we shall consider these reactions carefully before final promulgation of some of
these regulations.
We have had a double purpose in preparing these
proposed regulations. The corporate operations and
procedures of National Banks are governed by a statute
which is nearly a century old. In the intervening
years, a body of corporate law adapted to emerging
needs has been provided for other segments of our
economy. It is essential that comparable adaptations
should be provided for the operations of National
Banks, and it is appropriate that the authority in whom
Congress has vested the supervisory functions should
undertake this task. The proposed regulations present
an effort to discharge this responsibility within the
authority we now have. We have sought to provide
to the National Banks the needed flexibility in their
corporate operations, consistent with their responsibilities to their communities, the Nation, and their stockholders.
In three additional fields, we have taken steps to
effect a thoroughgoing modernization of our present
regulations. In each instance, a group of highly
skilled technicians has been appointed to advise this
Office.
The authority over the trust powers of National
Banks and common trust funds was recently transferred by statute from the Federal Reserve Board to
the Comptroller of the Currency. We have reissued
Regulation F of the Federal Reserve Board as Regulation 9 of the Comptroller of the Currency. A group
of leaders in the field of trusts has been formed to advise us on measures to adapt the exercise of trust
powers and the operations of common trust funds to
modern-day requirements. We have asked all National Banks exercising fiduciary powers and State
Banks operating common trust funds to submit comments and recommendations. We are receiving a flow
of helpful suggestions, and these are now being appraised. Our aim will be to revise our new Regulation 9 to enable the trust institutions of our country
to provide the widest range of services which are
publicly beneficial and which are within their special
competence.
The Investment Securities Regulations of our Office
are also now under review. Some of the most experienced men in the banking community in this specialized field are providing technical advice to us in
this area. Interpretative modifications of existing policies are being made. We shall continue to follow
the policy of making public our determinations under
these Regulations, and a standardized procedure is
being established for the prompt resolution of eligibility
questions. We have also initiated and supported legislation to clarify the powers of National Banks and State
members banks to underwrite and deal in revenue issues within reasonable and safe limitations.
Finally, all of the precedents and the Digest of
Opinions of this Office are being reviewed. Our supervision of the day-to-day operations of National
Banks is performed in large part through the issuance
of formal and informal rulings interpreting the banking laws and applying them to ever-changing needs.
These rulings have mounted in volume over the years,
and many of them are not relevant or suited to modern
banking requirements. A group of lawyers with extensive experience in the field of banking law is now
assisting us technically in this task of reappraisal.
The long-needed effort to reshape the structure of
laws and regulations affecting the operations of our
National Banks is now well under way. We can clearly
see the goal ahead. A new spirit is already being infused in the National Banking System, and in all parts
of the country we see evidence that this spirit is taking
hold and is being expressed in very practical terms
throughout the banking community. This is a task
which must be pursued with unrelenting vigor, so that
our National Banks—and indeed all banks—may function as they should in the dynamic economy in which
we live.
325
BANK EXPANSION AND ECONOMIC
GROWTH: A NEW PERSPECTIVE
REMARKS OF JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, BEFORE THE NATIONAL CREDIT CONFERENCE OF THE AMERICAN BANKERS ASSOCIATION,
SHERATON-CHICAGO HOTEL, CHICAGO, ILLINOIS,
JANUARY 22,1963
Next month will mark the 100th Anniversary of the
formation of the National Banking System. At the
time the Congress provided for the chartering of National Banks, one prime need was for an effective payments medium to supplant the unsatisfactory system
of notes issued by State-chartered banks. In the
intervening years, the National Banks lost their noteissuing power, and primary attention in bank regulation shifted to the protection of depositors with all
that this implies in the way of continuous supervision.
Throughout the course of evolution of the National
Banking System, changes of policy have taken place
chiefly in response to banking crises which generated
demands for more rigorous limitations over banking
operations. This crisis orientation has survived to the
present day.
The basic need for bank regulation and supervision
is as essential today as it was at the time the National
Banking System was founded. We now have a
clearer conception, however, of the essential role of
banks in the economy. What is lacking is the full
application of these concepts to the structure of public
control in the field of banking.
As our economy has grown, it has become increasingly evident that the commercial banking system
occupies a central role in its progress. It is upon the
commercial banking system that we significantly rely
for the marshaling and disposition of our capital resources, and the provision of our payments mechanism.
A deficiency in that financial mechanism will critically
affect the rate of our economic growth.
It is often pointed out that the growth of our commercial banking system has lagged behind the pace of
our economic advance. Nonbank financial institutions have come into being and prospered, to fill in
some degree the gaps left by these deficiencies. Commercial banks, however, offer a wider variety of services than any one of these other financial institutions,
and have a greater potential for adaptation to the
growing range of new requirements. It is essential
in the national interest that this key financial instrumentality should not be needlessly constricted.
There are two broad areas in which basic reforms
are required if our commercial banking system is to
326
perform with fullest efficiency its essential role in the
growth of our economy. One relates to the powers
which banks are allowed to exercise in the conduct of
their operations. The other relates to the authority of
banks to extend the area of their operations in a spatial
sense.
Banking powers
The present limitations over banking powers were
intensively examined in the recent Report of our Advisory Committee. That Report is the subject of a
Panel Discussion here this afternoon, and I shall describe it only briefly, and indicate the steps
which we have taken to carry out the Committee's
recommendations.
Every significant phase of the operating policies,
practices and procedures of the Comptroller's Office
and of National Banks was critically reappraised in
the Advisory Committee Report. A wide range of
recommendations was proposed with respect to the
lending and investment powers of National Banks,
their trust powers, their borrowing powers, the alternatives open to them to provide needed capital, and the
various details of their corporate procedures. The
Report also appraised the relationship of National
Banks to the Federal Reserve System, and the heavy
penalties and burdens of mandatory membership; and
surveyed the constrictions imposed on the foreign operations of National Banks.
Since that Report was completed, these recommendations have been subjected to intensive examination within our Office, and a number of steps have
been taken to promulgate new policies and procedures
to bring them into effect.
New regulations have been issued allowing the use
of preferred stock and capital debentures as normal
means of raising capital; and permitting the use of
authorized but unissued stock, provision for employee stock option plans, and the appointment of a
limited number of directors between annual meetings.
Commencing February 1, National Banks will be
required to submit annual financial reports and proxy
statements to their shareholders. Moreover, we are
now at thefinalstages of developing revised regulations
and procedures relating to the trust and investment
powers of National Banks; and the revision of the entire body of interpretations and policies set forth in
our Digest of Opinions is substantially completed.
We are also well along in the revision of the trust and
commercial examination forms, and the respective
related instructions to examiners. When these new
instructions are completed, they will be made available to the National Banks.
A broad consensus prevails in the banking community concerning the need for modification of the
powers, regulations and procedures affecting banking
operations, and we have encountered little controversy
in working out measures to meet these needs. There is
little disagreement with the view that commercial
banks require greater latitude in operations if they are
to meet current and future needs for banking services.
Bank expansion
The same understanding does not prevail with
respect to the principles which should govern the
expansion of banking facilities. While most bankers
agree that added powers and broader discretion in the
exercise of these powers are needed, they do not view
policy toward bank expansion with the same degree of
unanimity.
The cause of this difference is not difficult to understand. While some bankers with a vision of the future,
and the initiative to explore new opportunities, favor
liberalization of the limitations which now constrict
their expansion—many others regard such a policy as
a threat to their survival, or at least to their comfort.
Evidence that these limitations have hampered the
needed growth of banking facilities, and provided
favorable opportunities for nonbank financial institutions, have not always been persuasive in the face of
the hope that this need or threat would not touch them.
In resolving these issues, we must search for considerations which transcend the private interests of
individual banks. These are to be found, fundamentally, in the public purposes which underlie the
regulation of bank entry and the control of bank
expansion.
While these limitations and controls are essentially
negative in their operation, they are founded on positive objectives of public policy. Were it not for the
fact that it is considered necessary to preserve the
solvency and liquidity of banks, freedom of entry could
be allowed in the field of banking. Reliance could
then be placed solely on the antitrust laws to maintain
competition and regulate competitive practices in
serving the public's needs for banking services and
facilities. The fact that entry restrictions are needed
in order to maintain bank solvency and liquidity will
not, however, justify such restrictions beyond the requirements for this purpose. Indeed, if the banking
system is to foster economic growth in the fullest degree, the concept of bank solvency and liquidity must
be broadened to include safeguards against inertia.
While almost every form of bank expansion has
come under criticism by those who fear adverse competitive effects, much of the opposition is centered
upon certain of the particular techniques employed.
Viewed in proper perspective, however, it is clear that
the principal concern should be to insure the adequacy
of banking facilities. The need to employ particular
techniques should be judged solely according to their
suitability for this purpose.
New charters
In most circumstances, some degree of permissible
entry by newly formed institutions is essential in order
to provide constant access by succeeding generations
of fresh talent, and so as to broaden the sources of
capital and initiative through which the demands for
banking services may be developed and served. Because of the vital role that banks play in the growth of
our economy, it is of critical necessity to insure that
new opportunities do not fail of development because
of inertia in the banking system. Progress in the industrial and commercial sectors of the economy could
be impaired or hampered if the financial mechanism
were deficient.
Some argue that entry restrictions should be entirely removed in the field of banking, on the ground
that depositor protection could be achieved without
them while the public would gain the advantages of
greater competition. If this were done, however, it
would also be necessary to abandon direct control of
bank expansion through branching and merger, and
to rely upon anti-trust enforcement to prevent harmful
concentration of power and to regulate competitive
practices. There could be no justifiable basis for
allowing newly formed institutions free access to the
industry of banking, while the expansion of existing
institutions is directly restricted. Complete reliance
upon competitive forces to determine bank entry and
bank expansion, however, would greatly complicate
the task of bank supervision, and weaken the safeguards provided through this form of public control.
It is an indispensable part of such supervision to regulate the rate and form of bank entry as well as bank
expansion.
There is, however, under present circumstances, a
special reason for the chartering of new banking institutions. In many areas of the country, it has
become increasingly evident that the expansion of
banking facilities through the growth of existing institutions has been insufficient to meet public needs.
The branching laws of many States have hampered
internal growth through the formation of new
327
branches. Nonbank financial institutions not subject to such limitations have in some degree filled this
gap. But these needs have also given rise to initiative
to charter new banks.
During the past year we experienced a strong upsurge of interest by new sources of capital and enterprise desirous of entering the field of banking. Wellcapitalized, competent groups have been formed in
many parts of the country to seek new bank charters.
Chiefly, the new applications have come from the
States which impose severe restrictions over bank
expansion.
Of the 149 applications for new National Bank
charters received last year, 98 were from 13 of the
States which prohibit branch banking. 35 of the
applications were from Florida, 26 from Texas, 9 from
Colorado, 5 from Illinois, and 4 from Wisconsin—all
no-branch States. The present breadth of interest
in the field of banking is indicated by the fact that 37
States were represented in last year's list of new National Bank charter applications. These applications
in 1962 were nearly triple the average annual applications for the preceding decade, and approximately
double the highest year during that period. For the
preceding decade, applications for new National Bank
charters were as low as 39 in 1952, and ranged between
71 and 75 in the years 1955, 1959, 1960, and 1961.
In many instances, the initial authorized capital of
the newly-chartered banks has been substantially
over-subscribed, indicating that in the judgments of
those who possess free capital, banking is an industry
that offers opportunities for the profitable commitment
of new funds. According to this fundamental economic test, it can thus be said that the rational use
of capital in our economy calls for a greater commitment of resources to the field of banking. While this
test is not sufficient to determine the proper degree
of entry in a regulated industry, it does represent a
significant factor in determining the need for provision of additional banking facilities.
De novo branches
While present branching limitations have caused
the pressures for new banking facilities to find outlets
in applications for new charters, it is obvious that
reliance should not be placed primarily on new charters to meet these growing needs in an industry in
which competent management is not abundant. Unreasonable limitations over branching imprison established banks, and deprive the public of the skills,
experience, and resources of proven institutions.
Many of the critics of more liberal branching powers
equate this form of bank expansion with diminished
328
competition. Broadened branching powers will not,
however, have this effect if they are properly administered. It is not the number of banks which determines the degree of competition, but the number of
points at which effective rivalry actually takes place.
A series of unit banks enjoying monopoly positions in
their individual communities, for example, could actually produce less effective competition than would
prevail if bank expansion took place through branching by a number of institutions, each bringing to the
individual community the full force of its competitive efficiency.
In determining the proper role of branching as a
means of providing the banking facilities essential for
our economic growth, it is also important to take
account of the economies of larger-scale operations.
Modern technology has invaded the field of banking,
as it has other sectors of the economy, and provided
•opportunities for more efficient operation. These
technologies can be efficiently employed, however, only
through larger-scale ventures. Comparable opportunities also exist for the utilization of specialized personnel in the ever-increasing range of services which
banks are able to perform. The task of public control
is to allow opportunities for these forces of efficiency
to be expressed, within the limits which must be imposed in order to preserve a balanced banking
structure.
The required balance in the structure of our banking system must include provision for a variety of
financial services to meet the public need. To permit
the forces of efficiency to be expressed does not mean
that concentration of control should be unrestricted,
nor that only the large should be allowed to survive.
There is a wide spectrum of public requirements for
banking services, and a diversified size-structure of
banks is needed to meet these requirements on an
assured basis.
Mergers and holding companies
Bank expansion may take place not only through
internal growth, but also through the merger of existing institutions, and the formation of holding companies. Perhaps the most common criticism of our
banking structure by foreign observers relates to the
emphasis we place on the maintenance of unit banks.
Those critics argue that bank expansion through new
charters and new branches is often more costly than
expansion through mergers or holding companies, and
results in a waste of resources. These criticisms
usually come from countries in which there is no tradition to maintain competition. Nevertheless, even
within our own competitive traditions, there are many
circumstances in which bank expansion through
mergers or holding companies will be socially preferable to new charters or the establishment of de novo
branches.
The basic task
The task we face in shaping the structure of our
banking system is to provide the necessary latitude for
enterprise and initiative in this industry. While banking differs from other industries with respect to the
degree of reliance we place on private initiative, it is
alike in the need to preserve a spirit of dynamism and
enterprise. Only in this way will banks be able to
perform with the highest effectiveness the urgent responsibilities which lie ahead to serve and promote
the growth of our economy.
The particular techniques of bank expansion most
appropriate for this purpose will vary with circumstances. Unreasonable limitations over the use of
individual techniques needlessly narrow the range of
choices open to the regulatory authorities and to the
banking community, and thus distort and weaken the
banking structure. Our attention should be centered,
not on these techniques, but on the public's needs for
banking services. The pressures to fill these needs will
not be alleviated by limitations relating to means—
they will merely be diverted into channels where less
effective means are available. It is pointless to devote
our energies to a struggle over techniques, when our
primary task is to find the best means of meeting the
needs of the future.
Federal authority and the dual banking system
It is necessary, in discussing the issue of bank expansion and economic growth, to consider the impact on
the traditional dual structure of our banking system.
Over the past months, there have been heightened
fears that enlarged branching powers for National
Banks would pose a threat to that system. It should
be clearly understood, however, that such enlarged
authority could be utilized only to allow greater scope
for the exercise of private initiative. This does not
constitute an intrusion of Federal power, but only a
relaxation of the limitations which now prevail over
the operation of privately owned banks. Steps which
allow banks to adapt more sensitively to the Nation's
requirements will not weaken, but will strengthen, our
banking system.
Extended branching powers for National Banks,
some fear, would bring defections from the State to
the National Banking System. This could occur, however, only if banks were able to operate more efficiently
and to compete more effectively under National charters. It is within the power of the State authorities to
provide scope for the most efficient and effective operation of the banks which they charter. Only if all
commercial banks are fully empowered to meet their
responsibilities, can we realize completely the opportunities for the growth of our industry and commerce.
REGULATION 9: FIDUCIARY POWERS OF
NATIONAL BANKS AND COLLECTIVE INVESTMENT FUNDS
PROPOSED REVISION OF REGULATION 9
REMARKS OF JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, AT THE MIDWINTER TRUST CONFERENCE OF THE AMERICAN BANKERS ASSOCIATION,
WALDORF-ASTORIA HOTEL, NEW YORK, N.Y., FEBRUARY^ 1963
Since my assuming the Office of Comptroller of
the Currency, we have been proceeding rapidly to
introduce modifications and outright innovations in
the regulatory establishment for our banking structure. You are, I am sure, aware of the multivariety
of areas in which we have either made changes or advanced specific proposals. I shall not attempt to
elaborate upon them here except in regard to the one
area closest to your operations, the Trust Regulation.
It is a matter of common agreement that the present
trust regulations are in need of re-evaluation. That is
not to say the trust area is unique in this respect.
Rather, we regard it as typical of much of the existing
orientation of banking structure. We now live in an
environment completely dissimilar from that which
prevailed thirty or more years ago, when our crisisoriented banking structure was evolved. Outmoded
and backward-looking patterns of thought and operations in the regulatory agencies and in the industry
have come to be regarded as immutable and inflexible
principles, meretriciously equated to the moral order.
So it is that the industry in many crucial respects
has failed to adapt sensitively to the emerging and increasing requirements of the economy and of the
public at all income levels. The fiduciary franchise
ought to be so exercised as to meet the needs of all
segments of our society. In the public interest neither
the regulatory authorities nor the banks can justify
the inertia which has characterized in some measure
both. An aggressive, vibrant and enterprising commercial banking system is essential in all major segments of bank operations—lending, bond investment
and limited underwriting, and fiduciary.
329
Transfer of authority
In the fiduciary area the first action in this direction was the proposal transmitted to Congress by
Secretary Dillon, which became Public Law 87-722
and transferred to the Comptroller of the Currency
authority over trust powers of national banks. The
consequences have been far reaching. It has permitted us to conduct a thorough re-examination of
the trust regulatory system. This re-examination has
borne several results, some of which have already been
put in effect.
As a necessary concomitant of our increased fiduciary responsibilities we immediately strengthened
our Trust Division. To head the Division we have
created a new position, Deputy Comptroller of the
Currency for Trusts, and appointed Dean Miller to
fill that position. This places our trust regulatory
functions on a parity with our regulation of bank
commercial departments. To the same purpose, the
position of Chief Representative in Trusts, corresponding to the Chief National Bank Examiner, has been
created. Preston P. Kellogg has been appointed to
fill this position.
Personnel policies
The Trust Division has been further strengthened
by the addition of personnel and facilities in the Washington Office. New machinery has been established
to handle the new activities of the Division. Applications for permission to exercise trust powers are being
handled expeditiously. It is expected that actions on
such applications will be dealt with on a 30-day timetable. In addition, some renovations of the examination system which have been particularly needed for
years have been made. At present there are not
enough trained, experienced Representatives in Trusts
to conduct the type of examination we believe to be
necessary. A vigorous recruitment program to attract law school graduates to become Trust Examiners has been under way for several months. The
pay scales have been revised to make them competitive
with the industry. A regular system of promotions has
been established. In connection with our concept of
the function of trust examination, Trust Examiners
now have the title of Representative in Trusts and
how a bank Trust Department operates,
the subordinate positions of Assistant in Trusts and
Associate in Trusts have been established.
Further to this end, we will soon institute a Trust
Examination School to be conducted for young Assistants and Associates in Trusts which will permit them
to acquire, through an extensive series of lectures
coupled with practical exercises, sound training in
330
Instructions to examiners
Other particularly needed modernizations which
are being undertaken include the preparation and distribution of a new manual of instructions for Representatives in Trusts and a revision of the portion of our
Digest of Opinions pertaining to trusts. Both of these
will be distributed to all banks, as well as to examiners,
in order that all may know the rules of the game.
Both will reflect the new substantive policies which
we are soon to put into effect, and which I will outline to you in a moment.
Advisory group
Shortly after the passage of Public Law 87-722, we
requested all National Banks and all State banks operating common trust funds to give us the benefit of
any recommendations that they might have as to how
Regulation 9 might be improved. The response was
voluminous. In nearly every case some amount of
change was recommended. As a result, we appointed
a Committee composed of prominent bank trust men
from both State and National Banks to assist in a
comprehensive revision of the Regulation. This Committee has worked long hours toward this end and its
members are to be highly commended for their labors.
Up until today, it was felt advisable that their names
not be disclosed, in order that they would be able to
devote their efforts as individuals, free from outside
pressures, and not as representatives of any particular
groups. However, this necessity has now passed, and
I would like to name them in order that I might thus
give some recognition for the magnificent job that
they have done. Chairman of the group is Mr. Reese
H. Harris of Manufacturers Hanover Trust Company.
Serving as a member of the Committee, and as continuing Consultant to the Comptroller of the Currency
is Professor Austin W. Scott of the Harvard Law
School. Also offering the continuous benefit of his
legal advice as a Committee member was Mr. Henry
Harfield of Shearman and Sterling, New York. The
other members, whose work merits them equal recognition, are: Paul I. Wren, Old Colony Trust Company, Boston, Massachusetts; James F. English, Jr., of
the Connecticut Bank and Trust Company, Hartford,
Connecticut; Robert Coltman, of The Philadelphia
National Bank, Philadelphia, Pennsylvania; Richard
P. Brown, of The First National Bank of Denver, Denver, Colorado; and Harvey Hill, of The Citizens and
Southern National Bank, Atlanta, Georgia.
I have left out from this list the name of the one
member of this committee, Joe Wolfe, who died quite
suddenly two weeks ago. All of us know the contribu-
tions Joe has made to the industry, and of the various
posts in which he served with such distinction. To
that list must be added the work which he performed
on the new Regulation 9. No member of the committee worked more diligently than Joe, and he was
working with our staff right up until the day of his
death. If the revisions we are proposing prove creditworthy over the years, much of that credit must go to
Joe Wolfe.
Substantive provisions
I should now like to outline in some detail the provisions of our revision, which we are publishing in proposed rule-making form in tomorrow's Federal Register. At the beginning there has been introduced a
new section of definitions. Among the terms defined
are "fiduciary," "fiduciary powers" and "account,"
for use in large part instead of "trustee," "trust powers" or "trust." References to the law of the state
or other jurisdiction governing the fiduciary relationship are now clarified by the inclusion of a definition
of local law. "Guardian" is defined, as well as "state
bank," in order to cover the special situations in which
those terms are used in the Regulation. Another structural change embodied in the proposed revision is the
elimination of all footnotes. There has been eliminated
all references to nongovernmental organizations, not
from any expression of disapproval or disagreement
with such groups, but simply based upon the belief that
such references have no place in a government regulation.
I come now to the specific changes we have made in
existing regulations. For the purposes of summary,
I shall divide the revisions into three categories: (1)
collective investment; (2) conflicts of interest; and (3)
management supervision.
Collective investments
1. In the field of collective investments, we have
made what we deem significant and far-reaching improvements. We have recognized the proper place of
banks in this area and the fact that banks with established trust departments are uniquely fitted to serve
the public and compete with other institutions in this
field. Specifically, three types of collective investment
funds are permitted by the regulation. The first is
the now familiar type of common trust fund in which
it is permitted to place individual trusts held by the
bank in the capacity of trustee, executor, administrator,
or guardian. The second will consist solely of assets
from retirement, pension, profit sharing, stock bonus
or other trusts which are themselves exempt under the
Internal Revenue Code. In this category it is intended to permit the inclusion of trusts set up under
the recently enacted Smathers-Keogh Bill. The third
type of collective trust fund may contain funds held
by the bank as fiduciary, other than as trustee, executor, administrator or guardian. Accounts commonly
known as managing agency accounts are intended to
be covered by this last category.
You will note that the concept of "bonafidefiduciary purpose" has been eliminated from our definitions.
No one has ever been able satisfactorily to explain that
term to me. It is obvious that whenever a bank is entrusted with the custody of property other than deposits, it holds a fiduciary duty of greater or lesser degree to its customer. It has never made sense to me
why a trust set up for the purpose of supporting one's
children or aged parents had a more "bonafidefiduciary" aspect than a trust set up to support one's self in
one's old age. The net effect of this vague term has
been to introduce a great amount of legal and practical uncertainty. This idea of dividing otherwise
legally established trusts into two groups depending
on the purpose for which the trust is created, is not
followed in any other area of trust law to our knowledge and we have consequently abandoned it.
2. There is imposed a requirement that a copy of
the Plan of each collective trust fund be filed with our
Office and that such Plan be available to any member of the public whether or not then a participant
in the fund. In addition, an annual financial report
of each collective fund will be required to be filed
with our Office. This report may, at the option of the
bank, be made available to the public and the availability of that report may be mentioned in advertising.
A summary of the annual financial report will be required to be published in a newspaper of general circulation, once a year.
3. The specific provision for a special type of common fund composed principally of mortgages has been
eliminated. This does not have the effect of forbidding the investment in mortgages in whole or in part,
but instead permits such funds to be administered under the same principles as the other types of fund.
4. In determining the lawfulness of the placement
of a particular participation in a fund, the entity theory
has been adopted. That is, the entire fund may be
viewed as a whole, rather than each particular asset,
in determining the propriety of a particular participation.
5. The 7-day requirement for completing the quarterly evaluation has been omitted. The requirement
for the quarterly evaluation itself has been retained.
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6. The segregation of defaulted mortgages has been
made optional. Alternatives have been made available, such as the setting up of a reserve to which defaulted interest may be charged, or, the outright
purchase by the bank in cases where the cost of segregation would be greater than the loss to the trust
incurred by the disposition of the asset.
7. The $100,000 limit on a single participation has
been eliminated but the limit of not more than 10%
of the fund per single participation has been retained,
as well as the 10% of the fund limitation on the investment in the securities of one issuer. Neither of
these limits applies to qualified profit sharing and
pension trust funds.
8. Provision has been made for the charge by the
bank of a reasonable fee for the management of a
collective investment fund, provided that the proportionate share of the fee payable by each participating
trust shall not exceed that which would have been
charged to the trust if it had not been placed in the
common fund.
Conflicts of interest
In the area of possible conflicts of interest, the thrust
has been to rely on local law. We see no reason for
a more restrictive rule in this regard for a national
bank than that which the case and statute law of a
state imposes. To this end the following changes have
been made:
1. The notorious footnote 12 which required that a
trust instrument "expressly require" in detail the making of a particular transaction has been eliminated.
This form of words, as you all know, had the effect of
extending the exception with one hand and taking it
away with the other, since no well-drawn trust instrument would ever "expressly require" a particular
investment by the trustee.
2. The regulation on the self-deposit of trust funds
has been amended to allow consideration of FDIG
insurance in determining the amount of pledged securities necessary to be set aside for trust deposits.
Management supervision
In the area of management supervision our primary
emphasis has been on the responsibility of the board
of directors for the proper supervision of trust funds.
To this end, specific reference to trust committees,
trust officers, supervising committees, etc., have been
omitted, and each individual board of directors has
been left to carry out its responsibilities in such manner as it may deem most practical. This does not in
any sense mean that our examiners will be more lax
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than has been the case formerly, in inquiring as to the
methods of supervising trust funds. Instructions to
examiners will be that any existing system or other
organization of the trust department is acceptable,
as long as it is clear that the board of directors is fully
aware of its responsibilities and is carrying them out.
The inquiry will be to substance and not to form.
Grant of powers
The practice of granting some trust powers to a
particular bank and withholding others, has been
discontinued. We do not believe that it was the
intention of Congress in enumerating the nine usual
trust powers exercised by banks, that the nine powers
were to be considered separable. There does not appear to be any sound basis for distinction between the
competence of an applying bank to execute one trust
power and its competence to execute another.
SEC laws
There has been recent discussion of the attitude of
the Securities and Exchange Commission towards certain activities of banks in the collective investment
field. As many of you may be aware, an official of the
SEC recently stated publicly that the view of the
Commission was that the Securitites Act of 1933 would
be applicable to a collective investment fund set up
by a bank for the purpose of taking in self-employed
pension trusts under the Smathers-Keogh Bill.
While we cannot, of course, presume to speak for the
Commission, our discussions so far with them lend
some credence to the earlier reports of their position.
However, we do not know what specific action, if any,
the Commission might take in the matter. It is our
firm belief that the reasoning adopted by Congress
in excepting securities issued by banks from the federal
securities laws continues to be sound and justified.
That reasoning was based on the concept that the continuous internal examination and supervision of banking by the bank regulatory authorities makes application of the less rigorous disclosure pattern of SEC
regulation superfluous and unnecessary. In any event,
our own regulation, as I have previously stated, will
require full public disclosure of the terms and conditions of operation of each collective trust as well as
periodic financial reports of its financial condition.
The substantial legal, accounting, printing and administrative expenses entailed in SEC registration
and reporting could very well have the effect of nullifying the purposes which Congress sought to effect by
the Smathers-Keogh Bill.
In view of the often-expressed Congressional intent
that the regulatory power over national banks rests in
our Office, and particularly in view of the most recent
expression of that intent as to fiduciary functions, it
is our position that the SEC laws do not apply to the
collective investment funds set up by national banks
pursuant to law and our regulations.
Conclusion
These then are the major changes which have been
incorporated in the proposed revision. We have asked
that all comments on this revision be submitted by
March 5. It is contemplated that the regulation will
be put into effect on or about April 5, with such revisions as may be deemed appropriate in view of the
comments submitted. We urge you to give these
proposals your immediate and careful consideration,
and we will be most interested in the responses to this
proposal. It is our belief that these proposals constitute a practical, realistic, long-needed modernization, of the fiduciary powers which can well be permitted within our regulatory responsibilities. We await
your comments.
Thank you.
THE ROLE OF DEPOSIT INSURANCE IN
BANK REGULATION
REMARKS OF JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, BEFORE THE SEVENTH DISTRICT TEXAS
BANKERS ASSOCIATION, HOTEL TEXAS, FORT
WORTH, TEXAS, FEBRUARY 22,1963
A variety of proposals are now being advanced for
strengthening the role of deposit insurance in bank
regulation. Virtually every significant aspect of banking control and banking operations would be affected
by these proposed changes. It is essential that their
implications should be fully understood.
Proposals for change
The proposals for change are in several different
forms. It has been suggested that at the time of chartering new banks, when branches are authorized, and
when mergers take place, eligibility for Federal deposit insurance should be determined by the insuring
agency—in the case of National Banks and other members of the Federal Reserve System as well as nonmembers. For all insured banks, it is proposed that
the insuring authority should itself conduct periodic
examinations to determine continued eligibility, and
not rely entirely on the examinations of the supervisory
agencies. It has further been proposed that the coverage of deposit insurance should be substantially increased, and that the insuring authority should have
enlarged powers to assist failed or failing banks in
order to maintain financial stability in the economy.
Implications of these proposals
If these proposed changes were adopted, the insuring agency would gain critical new powers over banking activities. The authority to grant or to withhold
deposit insurance would place in the hands of the
insuring agency an effective veto power over chartering, branching, and mergers—together with added
power to set the capital requirements and to control
the operating policies and practices of banks. Moreover, broader coverage of deposit insurance would
alter fundamentally the incentives to prudent bank
management, and enlarged emergency powers would
assign to the insuring agency added responsibilities
for maintaining financial stability in the economy.
A contrast with present policies
Public regulation of banking was undertaken, fundamentally, in order to provide effective instruments for
attracting and channeling funds into productive uses,
and to provide a satisfactory payments mechanism.
For all these purposes, it was essential to maintain confidence in the banking system, and the measures of
control were accordingly directed to sustaining the
solvency and liquidity of banks, and assuring the provision of adequate banking facilities. Bank entry and
bank expansion were subjected to public regulation,
and the operating policies and practices of banks were
brought under continuing intimate public supervision.
Despite these explicit forms of public control, and the
actions or inactions of the monetary authorities, recurrent crises persisted and bank failures continued
to occur. Eventually, provision was made for deposit
insurance to meet occasional contingencies on a carefully defined, limited basis.
The critical aspect of the present role of deposit
insurance in bank regulation is its subordinate place
in the pattern of public control at the Federal level.
The basic responsibility for maintaining the solvency
and liquidity of banks and the adequacy of banking facilities is entrusted to the bank regulatory and supervisory agencies, and in some respects to the monetary
authorities. The broad public purposes of bank regulation and supervision are expressed in the statutes
governing the operation of those agencies. Deposit
insurance is designed to provide an additional safeguard of limited application in those occasional
circumstances in which the basic regulatory and supervisory mechanism fails to provide the needed protection for depositors, or where sufficient liquidity is not
provided through monetary action. Although the
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availability of deposit insurance is regarded by some
as exercising a pervasive influence on public confidence
in the banking system, reliance is not placed upon the
insurance function as such for assuring the fundamental soundness of the banking system.
This interpretation of the role of deposit insurance
is borne out by certain basic conditions which were
imposed for the issuance of such insurance, and for
the operation of the insurance plan. Deposit insurance was introduced without altering significantly the
responsibilities of the Comptroller of the Currency and
of the Federal Reserve Board for bank regulation and
supervision, and without modifying the basic public
objectives of such control. This was accomplished by
requiring that National Banks and other members of
the Federal Reserve System, which were under Federal
supervision, should automatically be eligible for deposit
insurance without further limitations. So that the insurance safeguard would not be narrowly administered according to commercial standards, which were
likely to be in conflict with the broader public purposes
of bank regulation and supervision, provision was made
for access to public funds to underwrite the solvency
of the insurance plan. The degree of protection afforded through deposit insurance was explicitly restricted, thus preserving the basic reliance upon direct
public supervision and prudent bank management.
This restricted coverage of deposit insurance conformed
with the special concern displayed for the smaller, lessknowledgeable depositor who had difficulties in reaching independent judgments on the safety of particular
banks.
A fundamental transformation
The proposed changes in the role of deposit insurance would be likely to produce a fundamental transformation in this present structure of public control
of banking. The probable effects are revealed in the
basic supporting argument for these changes which
asserts that insurance agencies do not ordinarily accept or continue risks without independent appraisal
of the hazards. If this philosophy were followed,
deposit insurance would tend to be administered
according to commercial standards of insurability,
rather than the broader public purposes which now
prevail.
Although it is generally agreed that the risks of deposit insurance are not actuarially determinable, and
are thus not clearly susceptible to commercial application, it could be expected that commercial concepts of
insurability would be introduced if eligibility for deposit insurance were generally to be determined by
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the insuring authority. Such independent discretion
to grant insurance protection would naturally place upon the insuring authority a greater feeling of responsibility to safeguard the solvency of the insurance fund.
If this occurred, the tendency would be to appraise
applications for bank charters and bank expansion, and
proposals to enlarge the latitude of banking operations,
principally in terms of their effects upon the insurance
risks. Since these risks could be minimized through
more rigorous controls over new competition as well
as existing competition, the almost inevitable consequence would be the imposition of more severe restrictions upon innovation and new initiative.
Quite apart from the precise standards which an
insuring agency would be likely to follow if it were
endowed with greater powers over bank expansion and
banking operations, the proposed changes would almost
certainly give rise to conflicts of policy. The standards
now applied by the regulatory and supervisory agencies
are conceived in broad public interest terms which
would be most unlikely to coincide with commercial
standards of insurability. Banks seeking to qualify for
deposit insurance would be under a strong constraint
to conform to the standards set by the insuring agency.
As a consequence, the present roles of bank supervision
and deposit insurance in the structure of public control
might be entirely reversed, with criteria of insurability
becoming predominant over the broader public purposes of bank regulation and supervision.
Emergency situations
The proposals for enlarging the powers of the insuring authority to deal with failed and failing banks
would entail added discretion to apply insurance coverage unequally among depositors. Moreover, it seems
to be implied under these proposals that the insuring
authority would be assigned broader responsibility for
the maintenance of financial stability in the economy.
Whatever the need may be for such additional emergency powers, they scarcely seem appropriate for an
insuring agency. A wiser course would be to confine
deposit insurance to precise limits, and to deal with
emergency situations affecting the liquidity of the economy as a whole by other means. In this way, these
two disparate functions could clearly be separated, and
administered according to the individual standards that
are appropriate for each.
The incidence of extended deposit insurance
There are three basic considerations which must be
taken into account in appraising the desirability of
extending the coverage of deposit insurance, apart
from the broader issues of public policy which we have
noted. These relate to: (1) the costs of broader coverage; (2) the manner in which these costs would be
distributed; and (3) the effects on the competitive
position of various classes of banks.
1. It has been asserted that the coverage of deposit
insurance could be substantially broadened without
a significant increase in cost. These calculations are
generally based on the assumption that past experience
is a sufficient guide to the future. It should be evident, however, that a broadening of deposit insurance
coverage might materially alter the performance of
bank management. This would be particularly true
where the deposits of a bank were fully covered by such
insurance. Should this occur, the record of past experience would not necessarily provide an accurate
basis for calculating potential future risks.
2. The effects of broadened insurance coverage upon
the competitive position of banks would be dependent
upon the role that such insurance plays in attracting
deposits. Those banks in which depositors are more
heavily reliant upon insurance would be favored over
those which have a more secure position in the minds
of depositors independent of the insurance coverage.
The cost of providing this competitive benefit, which
in a sense impairs the advantages of good management, would be borne in significant degree by other
banks because of the fact that the insurance assessments are based on total deposits.
3. The broadening of deposit insurance would be
likely to have a pervasive effect upon the prudency
of bank management. It seems apparent that as the
coverage of risks is extended, the incentive to prudent
management would likely be diminished. This outcome would be probable because maturing risks under
deposit insurance are not borne solely by the affected
banks. The effect would be most marked where
broadened deposit insurance coverage reached all of
the deposits of a bank.
The decision whether to extend deposit insurance
coverage would ultimately have to rest on the public
purposes sought to be achieved. Support for a substantial increase in such coverage is generally founded
on the asserted need to avert disruptions in the economy resulting from the unavailability of balances to
commercial and industrial firms. There are sound
reasons for protecting the smaller, less-knowledgeable
depositors. Those who hold larger balances, however,
particularly commercial and industrialfirms,are better
able to select the banks in which their holdings will
be secure. Considering the broader implications of
extended insurance coverage which we have discussed,
it is doubtful that this limited consideration will justify
a substantial increase in such coverage.
The choices we face
We stand now at a critical juncture in the development of public policy in the field of banking. The
pace of our economic growth has persistently outrun
the capacity of our banking system to serve emerging
needs. We may meet this challenge through enlarged
operating powers for banks, and measures designed
to overcome harmful impediments to bank expansion.
Or we may seek refuge, however uncertain, in new
barricades to protect banks against rivalry.
The proposals for enlarging the role of deposit insurance are, I fear, measures of retrenchment. While
taken separately, these individual proposals may appear
to have some merit, in their entirety they reflect a
search for safeguards against competition and the consequences of competition.
Our primary effort should be directed to the maintenance of an active and vibrant banking system, closely
attuned to our national purpose of fostering the fullest
development of our talents and resources. These critical requirements cannot be met, and indeed would
be defeated or greatly impaired, by heightened concern
for the risks of enterprise expressed in the pattern of
public control of banking. The spirit we should endeavor to engender in our banking system should be
one of vitality, and not one of fearful preoccupation
with risks.
It may appear that added insurance coverage for
depositors would induce greater vitality in the banking
system by freeing management from the constraints
imposed by the risks of enterprise. Enterprise which
is founded upon freedom from risks, however, is not
the form of banking activity which we should seek to
encourage. Nor should we move to the other extreme
of regulating bank expansion and banking operations
according to standards which would safeguard an insurance fund. Our aim should be to provide greater
latitude for banking operations, while preserving the
incentive to prudent management; and to rely upon
bank supervision directed to the fulfillment of public
needs, rather than to impose standards which are
oriented to the minimization of insurance risks.
Viewed in this perspective, deposit insurance should
remain as a limited ultimate safeguard against occasional failures, administered according to standards
which do not conflict with the broader public purposes
which bank regulation and supervision are designed
to serve. From the public point of view, deposit in335
surance works best when it operates, not as a crutch,
or as a barrier to initiative, but as a measure which
affords restricted and clearly defined protection in
terms which preserve the incentive and the opportunity
for the proper conduct of banking operations.
BANKS AND COMMUNITY PROGRESS
REMARKS OF JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, BEFORE THE FLORIDA BANKERS ASSOCIATION, HOTEL FONTAINEBLEAU, MIAMI BEACH,
FLORIDA, MARCH 22, 1963
As we observe this Centennial year of our National
Banking System, it is appropriate that we should reexamine the past and assess our needs for the future.
This task of re-appraisal, on a broad national scale, has
been one of the chief matters of concern in our Office
during the past year. But it is also of vital importance
to highlight the significance of the particular problems
which confront individual areas and communities within the country.
Florida's future
The State of Florida occupies a strategic position in
three of the most significant mainstreams of the future
economic development of our country. Its climate
provides a high attraction as a resort area, and for
those who are entering the stage of retirement from
active affairs. As the per capita income level of our
citizens has risen, expenditures for leisure activities
have grown, and provisions for retirement have become
settled factors in the plans of a larger and larger proportion of our population. These are trends which are
certain to accelerate in the future, and the State of
Florida is in a position to benefit greatly from these
prospects as the phenomenal rise in its population has
already shown.
The future of Florida is bright also in the realm of
our economic and cultural relationships with Latin
America. The economic development of our neighbors to the South, and the forging of closer ties with
those countries, has a high priority among the matters
which are of greatest concern in our foreign relations.
The State of Florida, because of its location, has an
essential role to play in these efforts.
Most dramatic in the achievements already attained,
and most exciting for the future, are the activities in
the field of interplanetary space. Florida has already
reached a prime position in these activities, and it must
be prepared to participate fully in the new developments which the future holds.
336
Bankings role in the future
These observations on Florida's future are not news
to those who live and work in this State. But there
should also be an awareness of the important role which
banks have to play in that future.
First, let me say a few words about the central function which banking has historically performed in economic development.
It is sometimes said that we have nothing to worry
about in the field of banking. We all have heard the
argument that the forces which lead to economic
growth are certain to have their effects—and that banks
will respond to the needs as they appear, without any
special public concern for the manner in which banks
perform.
This, we believe, is a mistaken view. Where banking facilities are inadequate, the forces of economic
growth will not be fully realized. But, more important, banks can exert a positive influence in exploring,
fostering, supporting, and directing the economic development of a community or a nation. Where there
is a failure to exert this positive influence, opportunities
for economic development may long remain quiescent.
A lack of inspiration at the heart of our financial system, will have a pervasive depressing influence throughout the economy.
It is no accident that the economies of the free societies which have displayed the most persistent
growth, have been those which possessed the most active
and effective banking systems. This has been true also
of individual areas and communities, even within the
most progressive economies. In the modern-day
world, the conduct and the expansion of commercial
and industrial ventures rest critically upon the availability of adequate banking facilities. Where banking
institutions are not alive to the prospects of the future,
or fail to participate actively in exploiting the opportunities which abound, the forces of initiative can be
stifled, and talents and resources lie idle for want of
financing.
One of the most basic tasks of any economy is to
make the best use of its skills and resources. The effectiveness with which this task is performed, rests in important degree upon the mobility of capital to the
points at which it may be utilized to best advantage in
support of economic advance. Any obstacle which impairs this mobility destroys in that degree the opportunity for achievement.
In a free enterprise economy, banks are one of the
chief instrumentalities for carrying out this indispensable function. Without banking institutions, much of
the savings of our citizens would never find their way
into productive uses—and certainly not to the most
productive uses. Unless adequate banking facilities
are available at all the points at which resources are
needed to finance enterprise, economic development
will be hampered or distorted. The greatest needs for
banking facilities are precisely at the points at which
prospective future growth is most promising.
In the highly developed banking system of our own
country, it is possible in some degree to overcome local
inadequacies of banking facilities by resort to the use
of institutions at more distant points. But such limitations can never be fully overcome by these means.
All of us suffer from deficiencies of outlook which are
affected by the limitations of our personal knowledge
and experience. In appraising new prospects for productive enterprise, it is essential to have the intimate
awareness which can come only from close contact with
local conditions. It is in the national, as well as in
the local, interest to assure the adequacy of banking
facilities throughout the country.
Improving the tools of banking operations
We are now embarked on an effort to provide the
banks of our country with the most modern tools to
meet the needs of today and of the future. A searching examination of our past experience has clearly disclosed the presence of many antiquated limitations
which now operate to obstruct the effectiveness of
banks in discharging their vital public functions. On
a number of fronts, we are proceeding to modernize the
rules and regulations under which our banks operate,
so that these impediments may be removed.
Steps have already been taken to provide greater
flexibility for banks in their lending and investment
activities, in their trust operations, and in the conduct
of their corporate affairs. But none of these changes
can be fully effective unless adequate banking facilities
are available in all the communities in which they are
needed.
Expansion of banking facilities
Curiously enough, while there is almost universal
support for expanding the powers of banks to meet the
emerging needs of their communities—proposals to
make additional banking facilities available and
equipped with these added powers, have aroused the
most heated controversy. I can but feel that much of
this dissent arises from a misunderstanding of the
objectives sought, and of the manner in which these
policies would be administered.
Great concern has been expressed that any move to
enlarge banking facilities—whether through new charters, new branches, mergers, or holding companies—
would quickly deteriorate into a plethora of banks,
which could lead only to destructive competition fatal
to the solvency and liquidity of many institutions.
Some feel that the inevitable outcome would be the
virtual disappearance of small banks, thus bringing
about an excessive concentration of banking control.
None of these doubts are, in my judgment, wellsupported.
Factors leading to branch banking
Let me be more specific with respect to the one issue
which is paramount today among the banks of this
State—that of branch banking. We shouldfirstunderstand the strong forces which have lain behind the insistent demands for additional branching which have
appeared in virtually all parts of the country.
During the past several decades we experienced a
pronounced growth of many metropolitan and suburban communities, which gave rise to requirements for
additional banking facilities in a number of our major
cities and outlying suburban areas. At the same time,
there occurred an increase in the level of per capita
income, which led to a growth in the volume of expendable funds, and consequently of savings. These
factors have operated to produce both increased demands for banking facilities, and shifts in the location
of those demands.
Under the influence of these changes, some banks
found increasing demands for their services close at
hand, while others found their customers moving to
adjacent areas. Deficits and surpluses began to appear
in the supply and need for financial resources and
banking facilities. Particularly in those parts of the
country which experienced rapid suburban growth,
local supplies offinancialresources often exceeded local
demands, and opportunities arose to tap the supply
of deposits emerging in those areas for more productive
uses elsewhere.
It was a natural expression of competitive forces,
that banks sought to provide new facilities as these new
demands and new opportunities appeared. By so
doing, they were effectively discharging their essential
role of providing banking services at the points at which
they were required, and channeling excess supplies of
financial resources to the points at which they could be
employed most usefully. These efforts toward bank
expansion in response to emerging needs were in clear
337
conformance with the standards which an enterprising
banking system could be expected to follow.
Also at work to produce incentives for the expansion
of banking facilities were a number of technical factors
which have characterized the growth and development
of many segments of our economy. As businesses grew
in size, they required larger and more varied banking
services. Moreover, as our economy has grown, new
technologies have been developed, and a variety of new
industries have emerged—often at locations not previously highly industrialized. Within the banks themselves, new opportunities have increasingly appeared
for the mechanization of operations—and these new
techniques often have been susceptible of most effective
use only by larger institutions. Finally, as individual
incomes have grown, increased demands have appeared
for specialized banking services which require the use
of expert personnel who can be employed most efficiently only in larger-scale operations.
Policy on branch banking
These, then, have been the forces which have been
at work to produce a powerful thrust toward the expansion of banking facilities. The task we face is to
direct these forces so that they will serve public needs
most effectively and most efficiently. In carrying out
this task, we must allow sufficient scope for bank expansion to meet those needs, and we must erect and
preserve the sort of banking structure which will sustain the continued adaptation of our banking facilities
to the new requirements as they appear.
We should not allow a fear of change to deny to ourselves the best banking structure that we can devise.
The needs are clear. Our duty is to see that they are
met with the least harm and the greatest gain.
It is proper that we should be concerned to avoid a
degree of bank expansion which would threaten the
solvency and liquidity of our banks. And it is also
proper that we should be concerned to avoid excessive
concentration of banking control. But it is equally as
important that we should assure the adequacy of our
banking facilities, in the most positive, forward-looking
sense.
The formation of new branches is but one of a
variety of devices through which these objectives may
be achieved. No harm can come from the availability
of this technique to the regulatory authorities, and to
the banks—but only a gain through a broadening of
the tools which are at hand. If the kit of tools is
arbitrarily limited, less effective means will have to be
employed, and the tasks to be performed will not be
done as well.
338
Broadened authority to permit branching will not
be used by this Office indiscriminately, without regard
to the needs for banking facilities, or without relation
to the effects upon the viability of existing institutions.
Nor will this authority be utilized in a manner which
will result in excessive concentration of banking control.
Our concern is to produce a banking structure which
is equal to the responsibilities it faces, and alert to the
opportunities which are emerging. In such a banking
structure, there is a role for banks of all sizes, and there
is no room for power beyond that required to meet
essential needs efficiently. It is not the size of a bank
which determines its capacity to survive and prosper—
but only the competence of its management, and the
adequacy of its resources to the specific functions it
seeks to perform. There are a variety of these functions, and for many of them the smaller bank has a
special place in the banking structure. This role we
intend to preserve.
But it is equally essential that banks should be allowed to grow, and to expand their facilities to the
points of need—so that the tasks which require largerscale operations may also be performed with the greatest efficiency. The purposes of arming both our
smaller banks, and our larger banks, with the capabilities they require in order to perform their special functions effectively, do not entail conflicting objectives.
These objectives are of coordinate importance, and we
must accommodate our banking structure to all of them
if our economic development is not to falter or to be
misdirected.
Nonbank competition
Those who resist change in our banking structure
must be made aware of the fact that the position of
the commercial banking system cannot be protected if
it fails to meet urgent community needs. As is evident
from the experience in your own State—a negative attitude toward bank expansion favors the development
and growth of nonbank financial institutions.
These other financial institutions are not equipped
to perform as efficiently, the full range of services of
which commercial banks are capable. But the rate of
their growth is striking evidence of their efforts to fill
the vacuum created by unsatisfied demands for financial services. The expansion of these nonbank financial institutions has been particularly notable in those
States, such as Florida, which prohibit branching by
commercial banks. Wherever the potential strength
of the commmercial banks has been chained, the effect
has been to elevate artificially the position of other
financial institutions with lesser basic competitive
capacity.
There is no sensible reason why the powerful instrumentality represented by our commercial banks should
be held in check, while the tasks which they are able
to perform with the greatest efficiency are in such large
degree left to others. This policy serves neither the
interests of the banks, nor of the community, nor of
the Nation. It is a formula for stagnation—not
progress.
Response to existing impediments
The force of the commercial banking system has not,
however, lain entirely dormant. Throughout the
country, particularly in many of the States which severely restrict the branching powers of commercial
banks, there has been a strong upsurge of demand for
the creation of new banking establishments. With
existing banks denied the privilege of branching, and
with clear opportunities prevailing for the profitable
use of new capital in this industry—many well-capitalized, highly competent, groups have been formed
to seek new bank charters.
During the past year, Florida stood at the head of
the list of the States from which applications were received for the formation of new National Banks.
Florida is also one of the States which has experienced
a marked growth of affiliate, satellite and group banking—which are among the most common devices used
to overcome impediments to bank expansion. These
are facts which all of you should ponder well. They
clearly reflect the existence of growing needs for banking facilities, and the efforts to serve those needs by
the only means at hand.
Some degree of permissible entry by newly formed
banks is always needed in order to refresh constantly
the initiative which is required in this industry if it is
to play its proper role in the growth of our economy.
Eut in an industry in which competent management is
scarce, it is highly unwise to deprive the public of the
full expression of the capacities of experienced, established institutions, through the means most suitable to
the effective use of those capacities.
A narrow view of the role of banking in its future
development, is not in keeping with the glowing prospects of this State. Strong new forces are at work,
revealing bright new hopes. In the fulfillment of those
hopes, there is an indispensable role for the commercial
banks of your State, which would enable them to attain
their full high potential for community service.
THE PROMISE OF FREE ENTERPRISE
REMARKS OF JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, BEFORE THE SYMPOSIUM ON THE SURVIVAL OF FREE ENTERPRISE, WAR MEMORIAL BUILDING, TRENTON, NEW JERSEY, WEDNESDAY, MAY 1,
1963
The Symposium which is scheduled for this afternoon bears the title: "The Survival of Free Enterprise." The theme of this Symposium is to explore
what needs to be done to make certain that a system
of private enterprise is sustained in our country.
It is surprising to me that the survival of free enterprise should be questioned in a gathering of leaders in
thefieldsof business, labor, education and communications—or that these men and women should require
any .guidance on the measures which are needed to
preserve the vitality of our private enterprise system.
It is not the survival, but the promise, of free enterprise
which should have our attention here today.
The meaning of free enterprise
It is the genius of our private enterprise system that
the source of inspiration and initiative lies with the
individual. Throughout our history, there have been
men of doubt, of little vision or imagination, without
courage or hope—whose attention has been centered
solely on safeguarding what they have. But it is not
these fearful men upon whom we have relied for our
progress.
Our Nation has risen to its present high estate, not
on the counsel of those who lack confidence in the future, but through the initiative of those with the
courage to experiment and explore, to test new ideas, to
attempt new ventures. For these men and women, on
whom our future rests, I have no advice. They need
none.
In the future, as in the past, the survival of our private enterprise system and its progress will rest with
each new generation of skillful, talented, farsighted
and resourceful men and women who provide the thrust
of force which keeps our economy in motion. In selecting our future course, we cannot rely upon the
collective judgments of this gathering, or indeed upon
any other selected group. That course must be chosen
by individuals throughout the country, acting in their
personal capacities—choosing their own careers, selecting the ventures they wish to follow, taking the risks
they consider to be worthwhile, striving to fulfill their
own aspirations. Our faith has always rested in the
capacity of the individual to make these choices. This
is the meaning of a private enterprise system.
339
The role of government in a private enterprise system must be carefully fashioned, and constantly attuned, to the basic purpose of creating and sustaining
the conditions most conducive to the effective function-*
ing of individual initiative wherever reliance may
properly be placed on free enterprise. This is a task
which requires continuous re-appraisal in order to avoid
needless restrictions and to insure the most suitable
forms of public action.
Banking and free enterprise
I should like to say a few words about the role of
free enterprise in the field of banking—not only because it is a matter of personal concern to me in my
present work, but because our experience in this industry sharply illustrates the importance of individual initiative in economic progress.
Although we have relied primarily upon free enterprise to provide a source of livelihood for our citizens,
and to produce the goods and services we consume, in
some industries public controls have played a more
dominant role. Fortunately, a high degree of public
control has been the exception rather than the rule.
We have generally observed the principle that there is
a presumption in favor of free enterprise in any industry, unless there are clear and compelling public purposes to be served through direct regulation. And it
is also a sound principle to confine public controls to
those which are demonstrably needed to attain unquestioned public objectives.
Banking is one clear example of an industry in which
the forces of private enterprise have been subjected to
a high degree of explicit public regulation. The experience we have had with public controls in this field
teaches us a significant lesson concerning the hazards
of regulating private enterprise.
Bank regulation was undertaken because of a special
public concern to establish and sustain a confident
reliance on the solvency and liquidity of our banks.
Public confidence in our banking institutions is essential
if funds are to be drawn out of hoards and put to productive use through the banking system, and if bank
checks are to function as a generally acceptable payments medium for our industry and commerce. Without such confidence, the mobility of capital to its best
uses would be impeded, and we would be without an
effective mechanism for the conduct of industrial and
commercial transactions.
The controls which were imposed in the field of
banking were designed to carry out these public purposes. Entry into banking and the expansion of banks
have been regulated, and banking policies and practices
340
have been subjected to intimate public supervision.
Over the years in which these controls have been in
effect, however, many have come to regard them as a
means of preserving the status quo. Confined in their
daily operations to conformance with many explicit
regulations, and functioning in an environment in
which new competition has been severely restricted—
an attitude of reliance upon directed rules of operation
and dependence upon public protection has emerged
among some bankers. Some have even claimed a
private right to such protection. In this atmosphere,
the outlook has become regressive and the forces of
initiative have withered.
These are dangers which may arise wherever public
authority is used to curb free enterprise. The longer
such curbs persist and the more restrictive their application, the weaker may become the spirit of initiative
and the more inflexible the opposition to change.
These are considerations which call for the most careful limitation of public controls over free enterprise.
The ferment we find today in the field of banking
is the outcome of a re-birth of enterprise in an industry
long accustomed to protection against this vital force
in our economy. Some portray these developments as
a growth of governmental power—but, in truth, they
reflect a relaxation of governmental power over the
exercise of initiative by privately owned enterprises.
Our commercial banks lie at the heart of our financial system, and the capability of our financial system
critically affects the progress of our entire economy. A
banking system alive to its positive responsibilities, and
equipped to carry out those responsibilities, is thus indispensable to the success of our private enterprise system. This objective can be achieved only by allowing
the forces of individual initiative to be expressed more
fully and more actively in this industry. A significant,
although perhaps not as articulate, part of the banking
community, I believe, shares this view of our present
needs.
It is evident to me every day that powerful new
forces of initiative are waiting at the threshold, both
within and outside the industry of banking. Decades
of excessive controls have created the image of banking
as a closed industry—an industry in which reliance
upon governmental protection, and constricted scope
for initiative, have become ingrained. This image can
be changed only by allowing the burgeoning forces of
private enterprise to enter this industry with greater
freedom, in order to eliminate the pockets of monopoly
and to provide the new life which is so essential to our
progress.
The future of free enterprise
The present advanced level of our economic development was not achieved by preserving the status quo.
Those of you who have lived and worked in the world
of industry and commerce are intimately aware of the
vitality that private initiative imparts to our economy.
Our achievements of the past, under the influence of
this initiative, are known to us all. Ahead lie vistas
which none of us today can fully realize. The strength
of our productive power, the skills of our new generation of young men and women, the rate of our technological progress—all are at levels unmatched in our
past experience. We stand poised for new achievements beyond our imagination. It will not take another 75 years to attain the advances we have achieved
in the past three-quarters of a century.
This is the promise of free enterprise.
WHAT KIND OF BANKING STRUCTURE DO
WE WANT? THE ROLE OF BRANCH BANKING
REMARKS OF JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, BEFORE THE ANNUAL SPRING DINNER
OF THE NEW YORK FINANCIAL WRITERS ASSOCIATION, AMERICANA HOTEL, NEW YORK CITY, MAY
27, 1963.
I know that it is the practice of financial writers
to shun controversial topics. But I am confident I
will be forgiven if I raise such an issue, so long as it is
newsworthy.
I have been told that the subject of branch banking
ought not to be discussed because it provokes such
emotional responses as to make objective consideration
impossible. The vital importance of this question,
however, leads me to venture an effort to define the
issues and suggest the considerations by which they
should be resolved.
The changing scene
More than three and a half decades ago, the Congress established a National policy which subjected the
branching of National Banks to certain laws of the
individual States. This decision critically influenced
the banking structure which has emerged in our country in the intervening years.
Since the time when that National policy was set,
pervasive changes have taken place throughout our
economy which have affected the needs for banking
services and facilities. It is time for a fresh look at the
consequences of our past policy, and an appraisal of
its adequacy for the future.
It is not enough to say that the Congress, 36 years
ago, decided this issue. Nor need we be concerned
whether the decision taken at that time was wise in the
circumstances which then prevailed. Our concern today is to determine whether, for the years ahead, we
may safely rely upon present law to assure the kind
of banking structure we need and want.
National standards for National Banks
The fundamental issue we face concerns the standL
ards according to which branching by National Banks
should be controlled. At present there is no single
National standard. The standards we now follow are
those set separately by the 50 individual States. The
question is whether our National aims require a uniform standard for branching by National Banks, set
by the Congress of the United States—and, if so, what
that standard should be.
There is an obvious National interest in providing
for our country a banking system which is fully capable
of serving our National goals for economic growth and
development. The rate at which our economy progresses under our private enterprise system is vitally
dependent upon the free movement of capital, labor
and enterprise throughout the country—to seek out
every opportunity for industrial and commercial ventures which employ the talents and resources of our
people. This freedom for initiative and innovation,
which offers the broadest scope for the individual to
realize his capacities to the full, is the real source of
power in our Nation. We must not constrict these
forces of initiative in any greater degree than is necessary to achieve clear public aims. We rely upon the
banks of our country to provide the lifeblood of financing for much of the new ventures which are undertaken. Where any community in our country is
without adequate banking facilities, its full potentials
will not be achieved, and our National progress will
be retarded.
There are undoubtedly aims of local significance
which may vary among the States. But it is inconceivable that the conditions within the individual
States vary so much, or vary in the precise way, as to
justify fashioning the National banking structure according to the fifty different sets of State branching
statutes which now exist.
The regulatory choices
Unlike enterprises in the vast unregulated sectors
of our economy, banks are not allowed to be formed
or to expand without the explicit consent of the public
authorities. The policies set by the public authorities
thus govern the kind of banking structure which is
allowed to develop. We must be certain that the
effects of our public policies on bank expansion are
341
those we actually seek in order to serve our National
interests.
The bank regulatory agencies are charged with the
responsibility for assuring the adequacy of our banking
facilities. Restriction of their authority to permit the
use of the branching technique requires them to allow
otjier means of bank expansion to be used where
additional banking facilities are needed. The only
alternative open to the regulatory authorities where
branching is forbidden and banking facilities are inadequate, is to respond favorably to applications for
new charters by competent and well-capitalized
groups. New charters are not, however, always the
most economic or the most efficient means of providing additional banking facilities—nor are they
always the most sensitive source of response to emerging requirements. Branching restrictions, moreover,
often lead to undue reliance upon less-efficient tools
such as affiliate and satellite banking. Perhaps most
significantly, the gap left by the restrictions over bank
expansion has in some degree been filled by nonbank
financial institutions which are under less stringent
public regulation.
Origin of demand for bank expansion
The upsurge of demand we have experienced for
bank expansion has its origin in the great changes
which have taken place in our economy since the law
which now governs the branching powers of National
Banks was enacted. Advances in technology, the
growth of our per capita income and of the supply of
capital available for productive use, improvements in
communication and transportation—all have worked
to produce deep-seated modifications in the form and
in the location of the demands for banking services
and facilities. The banking needs of today are vastly
different from those which prevailed when our present
branching law was enacted by the Congress.
We have become more than ever a country with
nationwide markets, and nationwide demands for
financial services. New products and new industries
are constantly emerging. Many business firms have
extended their operations throughout the country and
even abroad, and have grown greatly in size. These
factors have produced new requirements for financing
at an ever-increasing rate, and on a larger scale.
Suburban areas surrounding metropolitan communities have flowered throughout the country. Homebuilding and durable consumer goods have absorbed
a larger and larger proportion of the personal expenditures of our citizens—and have given rise to new needs
for financing. More of our citizens have found it
342
possible to accumulate savings for which they seek
outlets, and to participate in plans for the care of
future needs such as education, sickness, retirement
and old age—all of which have resulted in new requirements and opportunities for banking services and
facilities. New technologies have also touched the
internal operations of banks, and made possible the
effective use of automated facilities in larger-scale
operations. Similar opportunities have appeared for
the use of specialized banking personnel, as the range
of banking services has been expanded in response to
advances in individual incomes and the growth of
personal savings.
One special form of change which has taken place
bears a particular relationship to the demands for
branch banking. A fundamental function performed
by banking institutions is to serve as a conduit through
which is channeled the Nation's supply of capital
resources from its origins to its best uses. The mobility of capital thus provided is vital to our economic
growth. In the past several decades we have experienced marked shifts of population and in the location
of industry. These changes have brought about areas
both of deficit and surplus in capital supplies. In
some communities deposits have grown beyond local
needs, while in others they have failed to match expanding demands. In still other areas banks have
lost customers in their established locations without
equal replacements.
These factors have led many banking institutions
to seek the establishment of branches at new locations—
in order to "move with their customers", and to tap
excess supplies of deposits for better use elsewhere. It
is vital to the progress of our economy to allow sensitive adjustments to changing demands for banking
facilities. Only in this way can we assure the required
mobility of capital.
In cities and towns, both large and small, throughout
the country, those who manage our banking institutions
are continually appraising their prospective markets
and reaching decisions on the opportunities they confront. Outside the banking industry, there are others,
with skills and talents to apply, and capital to invest,
in search of outlets for the best use of their resources.
Some of them seek entry into thefieldof banking.
The public issues
The responsibility of the bank regulatory agencies is
to determine how far, and in what forms, these forces
of private initiative shall be allowed expression in the
banking industry. In carrying out this task, the regulatory authorities must inevitably determine the struc-
ture of the banking system, and the degree of competition which is allowed to prevail in serving the demands
for banking services and facilities. To the extent that
the choices for bank expansion open to the regulatory
authorities are limited, the strength of the competition
they may allow will be restricted and the shape of the
banking structure will be correspondingly affected.
The critical issue of public policy is the kind of competitive banking structure we in this country need and
want. The use of any particular technique for bank
formation and bank expansion must be governed according to those needs and wants. Viewed in these
terms, it is clear that any limitations which are imposed on branching should be in accord with the requirements for this particular form of bank expansion
in our emerging banking structure.
These requirements will vary from market to market,
depending upon the banking structure which exists,
and the future needs for additional banking facilities.
Moreover, these requirements will vary over time. Accordingly, there can be no arbitrary basis upon which
the limitations over branching may properly be established for all areas and for all future time. Public
policy should properly be addressed to the sought-for
dimensions of the banking structure, and the regulatory
authorities should have the discretion to select the
means most suitable to the attainment of those objectives in the great variety of banking markets which
exist, and are constantly undergoing change, in our
country.
Fears of branching
Three basic fears are expressed by those who would
forbid, or severely constrict, the power of banks to
branch: (1) that there is a particular danger of undue
bank concentration where the branching technique
is employed; (2) that branching threatens the position
of unit banks, which should have a special place in
the banking structure; and (3) that branching will
lead to over-banking. Let me deal with each of these
fears separately.
(1) Arbitrary branching restrictions are not a
proper means of controlling bank concentration. Indeed, improperly conceived branching limitations may
actually increase, rather than diminish, the probable
degree of such concentration. This is a problem which
has to be examined market-by-market, and not in general terms—for the relevant test of concentration is
its effect upon competition. Indeed, de novo branching into new market areas is likely to advance rather
than retard the pace of rivalry.
The more constricted the area in which a bank may
function, the more limited will be the scope for its
enterprise, and the greater its probable hold in its
particular market area. Looked at from another viewpoint—the fewer the sources of competition which
may enter any market, the greater is likely to be the
degree of concentration. This issue is often confused
by reference to the degree of concentration found in
the 200 or the 100 largest banks. This test does not,
however, truly reveal the concentration which prevails.
Although I do not at all suggest that this should be our
aim—it should be realized that if there were only 200
banks in our country, and each competed in every
market area in the Nation, we would have more competition than we now have.
(2) The proper role of unit banks in the banking
structure cannot be defined in unvarying, absolute
terms. The assertion of the principle that all banks
should be unit banks would require acceptance of the
view that there are no public benefits to be derived
through larger-scale banking operations. This is evidently untrue. There are cost advantages to be obtained through larger-scale operations in any industry
in which there are substantial fixed investments or
specialized personnel capable of more extensive use—
or unrealized opportunities to employ to advantage
these techniques of operation.
Once it is understood that the public may in some
degree be served better, and more cheaply, through
larger-scale operations—the problem then becomes one
of determining where this is true and should be allowed. In an unregulated industry there is no power
in a public authority to make these determinations—
they are made solely by private entrepreneurs within
the limits imposed by our antitrust statutes. In banking, however, this is a task for the regulatory agencies.
The objective of public policy should be—not to
safeguard banks of any particular size, but to assure
that the public's needs are met to the best advantage by
whatever institutions can do the job most effectively.
There is a point beyond which the cost advantages of
larger-scale operations will be exhausted, or will not
be passed on to consumers because of diminished competition. But until that point is reached, no arbitrary,
absolute limit should be placed upon the expansion
of banking facilities. The proper standard to apply
is the one of public benefit.
The application of this standard does not mean that
there will be no proper place in the banking structure
for unit banks, and banks with few branches. The
capacity of banks to survive competition is not solely
dependent upon the scale of their operations. For
343
many banking services, size confers no advantage.
Moreover, our experience shows that well-managed,
adequately capitalized, aggressive smaller institutions
can prosper and progress alongside the largest banking institutions we have in our country. For such
banks, which rely upon their own efforts, and not upon
public protection against competition, there will always be a place in the banking structure.
(3) The fear of over-banking is in large degree a
survival of our unhappy experience of the thirties, and
of earlier periods of crisis, which produced much of
the excessive banking regulation under which we now
struggle. It is a valid purpose of bank regulation to
safeguard the solvency and liquidity of banks—but
not without regard to the adequacy of our banking
facilities and tools. Under-banking is as much a
public concern as over-banking. The proper test for
bank expansion is to allow the forces of private initiative to be expressed in this industry in the degree and
in the forms that are required to assure the public
the services and facilities they must have to meet their
needs. The safeguards should be public safeguards—
and not safeguards for individual banks.
The case for statewide branching authority
The considerations which I have outlined indicate
that there is no matter of principle which would require an absolute prohibition on nationwide branching by National Banks. Indeed, both National and
State-chartered banks, quite properly, may now branch
across National lines, even though they may not branch
across State lines. It seems anomalous that a New
York City bank may establish a branch in New Delhi,
but not in Albany.
Were it not for the fact that State-chartered institutions could not readily be accorded equal privileges,
a strong case could indeed be made for removing the
limitations over the expansion of National Banks which
now confine their domestic operations within their
charter State. Although considerations of equity could
thus justify confining National Banks within State
boundaries, this test provides no basis for the imposition of narrower limitations on the discretion of the
National regulatory authorities. The States have the
power to provide comparable discretion to their own
regulatory authorities.
The vital need to enable the banking system to respond actively and sensitively to the requirements of
economic growth thus clearly justifies the authority
to permit statewide branching for National Banks,
wherever that course represents the most effective
means of attaining that objective.
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The forces of enterprise in the banking industry are
at the mercy of the regulatory authorities. The banks
may propose, but the regulatory authorities dispose.
Where the laws restrict the choices open to the regulatory agencies, or those agencies fail to make the
proper use of their authority, private initiative will be
needlessly restricted and the development of our banking structure, as well as the progress of our economy,
will be hampered.
The standards for branching
The only real issues with respect to branching powers relate to the standards which should be imposed
for their use in individual cases. It is not the technique itself, but the proper occasions for its use which
should be our concern. The basic objective should
be to produce a banking structure fully capable of serving our National goals for economic growth and development. Our banking structure is composed of
a variety of institutions of differing size, specializing
in varying degrees, and operating under different market conditions. The task is to fit the techniques available for bank expansion to the particular emerging
needs in individual market areas—a task which varies
in substance with each new proposal for bank expansion. If this task is to be well performed, there must
be discretion to apply in individual cases the technique
most suitable to the required expansion in the particular market area. To withhold entirely any means for
reaching our National goals is to court the peril of
failure—a failure we cannot afford in today's World.
PUBLIC CONTROL AND PRIVATE INITIATIVE IN BANKING
REMARKS OF JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, BEFORE THE NATIONAL BANK DIVISION,
AMERICAN BANKERS ASSOCIATION, CONSTITUTION
HALL, OCTOBER 7,1963
This, the 100th year of the National Banking System, has been a year of searching self-examination and
reappraisal. The publication of "National Banks and
the Future," a year ago, inaugurated this process.
That study defined the issues confronting the System
and laid the basis for decisions.
Through public discussions the opposing views have
now been clarified. On one side, there are aligned
those who believe that the powers of commercial banks
should reasonably be broadened so as to enable them
to perform more effectively their functions in the economy; and on the other side, there are aligned those who
oppose further powers for commercial banks in the fear
that the commercial banker cannot be trusted to exercise expanded powers without serious abuse.
A clear perspective of the issues requires an understanding of the true nature and purpose of public regulation in the field of banking, and of the role which
should be preserved for private initiative in this industry. We live under a private enterprise system
which has as its cardinal principle a presumption in
favor of individual initiative and responsibility. The
role of government under that system should be confined to circumstances in which there are clear and
evident public purposes to be served.
Our commercial banking system has been singled out
for a unique form of public control. So that bank
solvency and liquidity may be maintained and public
confidence in the banking system sustained, entry into
banking has been regulated, and the operating policies
and practices of banks have in many respects been
placed under public supervision. Public regulation of
banking has not, however, gone so far as the controls
imposed in the public utility industries. There is no
public authority to require that banking facilities and
services must be provided, and rate regulation has been
applied only partially to the industry of banking. A
measure of discretion is thus left to the directors and
managers of banks.
The critical issue today is how broad the area of
discretion for private initiative should be in the banking
industry. Banks occupy a central role in economic
progress. They represent the chief means through
which the Nation's savings are gathered and apportioned among the variety of their productive uses, and
they provide the principal payments instrument for
much of our industry and commerce. Any deficiency
in the commercial banking system is felt throughout
the economy.
The task we face is to fashion a commercial banking
system which is sensitively adapted to changing needs
and new opportunities. One course would be, as new
situations arise, to proliferate further the already detailed and complex rules and regulations which are
applied to banking. The other course would be to
rest greater discretionary authority with the banks,
while proscribing only those activities which are clearly
hazardous to the solvency and liquidity of the banking
system. The former course would lead to increasing
reliance upon decisions by the public authorities; the
latter course would entrust greater responsibility to the
initiative and enterprise of private bankers.
There is an evident thrust today to loosen somewhat the tight reins of public regulation in banking.
No one is wise enough to draft rules and regulations
which are suitable for all time, and the cumbersome
procedures of public control are not always readily
adaptable to change. We have learned from our experience in other sectors of the economy how productive
and fruitful private initiative can be, if it is allowed to
function. In banking, as elsewhere, there are untapped resources of vision and enterprise which can
contribute greatly to our future progress.
In an industry which long has been accustomed to
enforced rules of conduct in virtually every aspect of
its operation, it is understandable that greater freedom to compete has been greeted by some with expressions of concern. There is no way, however, of
escaping the necessity to exercise judgment and discretion in lending and investing. Nor can the element
of risk be obliterated from banking without great damage to our economic progress. It is not a counsel of
irresponsibility to suggest that banks should be entrusted with greater discretion in the performance of
their lending and investment functions. Rather, it is
an expression of confidence in the capacity of banks
to respond to these new tasks with an even greater
sense of obligation to carry out the prudent conduct
of affairs which has become traditional in this industry.
To be prudent is not to be unmindful of new opportunities. Today's risks are often tomorrow's secure
investments, and today's secure investments are often
tomorrow's risks. Vision, as well as care, is needed,
if the responsibilities bf banks are to be properly
exercised.
The opposition which has developed to the proposals now before the Congress to enlarge the powers of National Banks affords a clear illustration of
the principles which are at stake. The opponents of
these measures call up visions of "past excesses," question whether this is the time to "relax credit standards," argue the effects on competing financial institutions, raise doubts about the "need" for these added
powers, challenge the prudence and probity of the
banking fraternity, and seek to inspire the fears of
depression.
The most revealing arguments are those which have
been advanced in opposition to enlarged underwriting
powers for commercial banks. We are presented with
the curious contention that entry into this field by
commercial banks would actually lessen competition
and bring about undue concentration of power in
commercial banks. The implication seems to be that
the best way to maintain competition is to prevent it,
and that we will get the most effective competition by
forming privileged cartels which are sheltered from
rivalry. This is an ancient view which has long held
345
sway in those countries which have never known the
benefits of a vibrant competitive economy. It has
no place in our society. If it is the danger of monopoly with which we are concerned, the safeguards
should be addressed to the maintenance of competition and not to the preservation of private enclaves.
This argument appears in another form under the
guise of a determination of "need." We are told that
there is no need for added services from commercial
banks, since the services which they are not now
allowed to provide are available from other financial
intermediaries. The test of public convenience and
necessity is properly applied, however, only to bank
formation and bank expansion through branching and
merger. No public purpose can be served by restricting the range of financial services offered by
banks, unless the performance of the service threatens
bank solvency and liquidity. Within that limitation,
the consumer in a free market should make these
choices—they should not be determined by governmental edict.
Perhaps the most mischievous basis of opposition
to a broadening of the powers of commercial banks
is the argument that the present, when our economy is
doing so well, is not the time to relax credit standards.
This view reflects two varieties of confusion. Broader
investment and lending powers merely enlarge the
choices open to banks. Unless it is assumed that
bankers are imprudent and the regulatory authorities
are lax, this wider horizon of opportunity should permit greater diversification of risk and a better allocation of resources. Activities clearly hazardous to bank
solvency and liquidity should, of course, not be
sanctioned.
The matter of timing, moreover, is not an issue here.
Enlarged powers for banks are not sought as a means
of influencing the course of the business cycle, to be
applied at a particular time when the stimulation of
business activity is required. This is a function of
monetary policy, and not of private banks. If greater
or lesser monetary ease is needed, this should be accomplished by influencing the aggregate lending and
investment resources of banks, and not by attempting
through selective controls to direct the precise forms
in which banks lend or invest.
The reference to "past excesses" as an argument
against broader powers for banks raises a spurious
issue. It has been stated that the bills now before the
Congress to enlarge the powers of National Banks
would relax limitations that were designed to safeguard banks and the public from dangers such as we
have known in the past. But we surely have learned
346
more from our experience than the mere fact that
power can be abused. We have also learned how to
employ and to regulate power with discretion. Three
decades of experience since the last basic revision of
our banking laws have revealed the heavy hand of
public regulation. Limitations enacted in the despair
of failure have proven incapable of adaptation to
change. To immobilize our banks because of past
abuses is no proper way to deal with this problem.
We cannot sustain a vital commercial banking system, sensitive to our national needs and alert to the
new opportunities which emerge, if our attention is
centered on harsher and harsher rules of enforced
conduct. The initiative and enterprise which are so
essential to economic progress cannot be cultivated and
cannot flourish in such an environment. Public controls in banking should be confined to those which are
clearly needed to preserve bank solvency and liquidity.
Our mature banking system should be allowed to act
maturely, heedful of its past experience, but not invalided because of the ills it has known.
As our population grows, as our technologies advance, and as we take our place in a widening range of
world affairs—we shall require, more than ever, a
commerical banking system fully capable of performing the many new tasks we shall confront. If the positive role of commercial banks in economic growth and
development is to be fulfilled, greater scope for private
initiative will have to be allowed in banking. This is
a responsibility to be sought with confident assurance.
It is not one to be feared.
EXCERPTS FROM REMARKS OF JAMES J. SAXON,
COMPTROLLER OF THE CURRENCY, BEFORE THE
BUSINESS COUNCIL, THE HOMESTEAD, HOT SPRINGS,
VIRGINIA, OCTOBER 19,1963
Today's disquiet in banking may be traced in large
part to the restrictions which were imposed upon banking operations as a result of the wave of bank failures
which occurred in the early thirties. That unhappy
experience had its effect not only upon the formal laws
and regulations which were enacted at the time, but
also upon the spirit of initiative displayed in the banking community. The public authorities, armed with
more rigorous laws, pursued firmer regulatory policies—and the banks became more and more dependent upon regulatory approval of their daily operating
policies and practices. In this environment, banking
initiative and enterprise faltered, and the laws applied
to banking became progressively out of tune with the
rapid changes in the economy. Other financial inter-
mediaries arose to fill the gaps left by the restrictions
imposed upon the commercial banks.
In recognition of these conditions, we undertook
some two years ago to reexamine and reappraise the
functioning of National Banks. On the basis of these
studies we have sought to provide, or to propose, measures which we believed would improve bank performance. These actions and proposals have been designed
to allow banks greater freedom to employ their initiative and enterprise in adjusting to the emerging needs
of the economy. We have not been unmindful of the
vital public necessity to maintain the solvency and
liquidity of the banking system, but it has been our
thought that public regulation of banking should be
confined to the limitations clearly required for that
purpose.
The reactions to these efforts have taken two sharply
contrasting forms. Some bankers have welcomed the
prospect of greater scope for the expression of their
competitive capacities. Others have been fearful of
the consequences of enlivened competition. Outside
the commercial banking community, the opposition to
enlarged powers for commercial banks has been
founded on the apparent desire to hold the banks in
check as a means of preserving their own markets free
of new competition.
It is necessary to be aware of these purely private
considerations which underlie the present laments and
misgivings about enlarging the powers of commercial
banks. But the issues cannot be resolved in these
terms. Public regulation of banking is designed to
serve public purposes, and there can be no public justification for restricting the competitive capacity of
banks merely in order to protect other banks or other
financial intermediaries from rivalry. There is, indeed,
a positive public responsibility to make certain that
banks are not needlessly restrained from competing
to serve the public's needs forfinancialservices.
The standards applied in bank regulation are of vital
importance to industry and commerce. In the degree
that banks are barred from participating in the performance of financial functions, depositors and borrowers are deprived of competition from that source.
The range of their choices is thus narrowed, and the
progress of the economy is in that manner constricted.
These limiting effects of outmoded banking laws and
regulations upon those who utilize the services of banks
are often lost from sight in the controversies over the
proper powers for commercial banks. Yet, it is precisely these public needs for banking services by which
the sufficiency of our banking laws and the performance of banks should be judged. Only if the issues
are elevated beyond a mere intramural struggle among
banks and other financial intermediaries, can the true
public interest be discerned. Only if banks are empowered to participate in the performance of financial
functions to the maximum degree consistent with bank
solvency and liquidity, can they make their full contribution to economic growth and development.
REMARKS BY JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, BEFORE A LUNCHEON TO SALUTE THE
TENTH ANNUAL "INVEST-IN-AMERICA WEEK," IN
THE METROPOLITAN WASHINGTON AREA, SENATE
CONFERENCE ROOM, APRIL 24, 1964
It is important to bear clearly in mind the central
theme of Invest-in-America Week. The significant
fact is that this appeal is directed to the individual.
He is asked to seek the best use of his own capabilities
and resources.
There is more than mere rhetoric in this emphasis
on personal choice. There is, indeed, a deep and
abiding significance in the preeminence which our
society accords to the judgment and initiative of the
individual. It is this precept which we apply when
we ask of our citizens that they invest in America their
full capacities for achievement.
In any society, the actions of the individual are
carried out through the institutions of that society.
Among the most important of the institutions which
affect the processes of investment in our society are
the commercial banks. A large part of the Nation's
savings, and the capacity to create credit, are entrusted
to bankers who channel these resources into productive
uses. The choices which bankers make, and are free
to make, thus critically affect the creation of job
opportunities for our growing population, the pace of
our economic growth, and the advances which are
made in our standard of living.
For at least a century the lending and investment
policies of banks have been closely supervised by
public authorities. The guiding principles which we
now follow in such supervision were fashioned largely
at times of crisis. They reflect the fears and doubts
which prevailed in those periods.
There is strong evidence that many present-day
regulations needlessly constrict the capacity of banks
to participate fully and effectively in the processes of
investment which are so fundamental to our economic
progress. The tools of banking have been kept
unnecessarily dull because of the fear that they might
be used harmfully. These outdated tools must be
supplanted by sharper, more modern instruments
equal to the needs and opportunities of today and to347
morrow. Only in this way may the resources entrusted to banks flow to their most productive uses,
and contribute most effectively to our economic
growth.
Invest-in-America Week has meaning for all of us.
It is a call to revitalize our efforts in pursuit of the
best prospects for the investment of our talents and
resources. This is a task which requires the development of our individual capacities to the full, the use
of our productive strength for the greatest good, and
the exercise of initiative and skill in conceiving and
exploring new ideas and new ventures. None of us
can afford to shirk these responsibilities if our national
goals are to be reached.
FREEDOM OR CONFORMITY: THE PRESENT
ISSUE IN BANKING
REMARKS OF JAMES J. SAXON, COMPTROLLER OF THE
CURRENCY, BEFORE THE COMMERCIAL BANKERS
FORUM, DEPAUL UNIVERSITY, CHICAGO, ILLINOIS,
MAY 6, 1964
It is a curious habit of critics to attack individuals
or institutions merely because they disapprove of their
policies. And it is also a common human failing to
be attracted by formal arrangements of neat simplicity.
We are plentifully supplied with such observers of the
current banking scene.
One of the most notorious of these critics, who affirms it to be his public obligation to speak out openly
about the defects of government, apparently feels that
open discussion is a privilege closely confined to those
who share his own views. This myopia is prevalent
to call for a single obvious answer. But one should
always be deeply distrustful of the easy answer—it is
among the zealous if not among the wise.
It is never difficult to state issues so that they seem
likely to produce the uneasy solution. In banking today we have an arch example of such superficial
thought which finds valor in conformity and virtue in
singleness of expression.
We are asked to believe that the banking industry
and the public generally would be better off if no banking agency ever introduced any change of policy unless
all the others agreed, and if all Federal powers over
banking were consolidated into a single agency so that
no differences could ever arise in the future. The
present system of dispersed powers is described as a
"troika," presumably so that it might have the most
unfavorable connotation, but there is no indication how
disunity or disagreement within a single Board or Commission is to be treated.
348
We could characterize the proposed consolidation
of powers as creating a "monolithic" regulatory system. But such appeals to the plausible and the emotions only add to the confusion and uncertainty. They
leave the vague impression that something is drastically
wrong, and that there is only one solution.
As with many simple solutions, the proposal to consolidate the bank regulatory agencies is founded on a
half-truth. It is true that serious questions may be
raised concerning the wisdom of assigning any bank
regulatory powers to the central bank. The objectives
of bank regulation and monetary policy sometimes
conflict. Monetary policy is carried out through the
banking system, and where the monetary authorities
have bank regulatory powers there is always the risk
that they will use those powers to effectuate monetary
policy in a manner detrimental to the effective functioning of the banking system. This risk is most apparent in such matters as interest rate regulation and
the standards for bank lending and investing. If banks
are needlessly hampered in their capacity to compete,
they will fail to perform with full effectiveness the task
of allocating to their best uses the resources which are
entrusted to them.
On the other hand, there are vital reasons for
separating Federal powers over National Banks from
Federal powers over State banks. This division of
authority is deeply rooted in the traditions of our dual
banking system. To combine these Federal powers
within a single agency would be to strike at the foundations of truly independent banking systems at the
National and State levels.
It is an accepted view among political theorists
that the dispersion of power is an essential safeguard
to the preservation of individual liberty. Greater
uniformity of policy may be achieved if all powers are
centralized. But this can only be done by sacrificing
individual freedom of expression.
If the dual banking system is preserved, differences
of policy may indeed occur. These differences may
reflect genuinely divergent views, or they may represent
merely a lag of adaptation to changing conditions.
The benefits of greater scope for innovation and initiative, however, and the advantages of decentralizing
power, far outweigh any harm which may come from
differences of policy.
There is something deeply disturbing about the
call for conformity which has been the response of
some to the recent changes in banking policy. In the
concern over policy differences, the substance of the
issues has been lost from sight.
Some have been content to ask for coordination,
but this is a term which has different meanings to
different people. To some it suggests that proposals
on which there might be disagreement should be
avoided. To others it suggests the retention of the
status quo wherever differences cannot be reconciled.
If coordination followed this course, it is clear that the
most reluctant, the most fearful, and the least imaginative would always control the pace of change.
Each bank regulatory agency has been assigned
certain discretionary powers under the law. It is the
duty and responsibility of each of those agencies individually to exercise these discretionary powers according to its best judgment as to where the public interest
lies. It should not be surprising that in a changing
world there may be differences of opinion as to what
constitutes the public interest. The tragedy to be
feared is not that these differences will arise, but that
they may be submerged in the interest of surface
harmony and at the expense of the public good.
It is said that the differences among the regulatory
agencies have led to the confusion of bankers. But it
must be understood that such differences have related
almost entirely to the permissive use by individual
banks of the new powers granted to them. To be
sure, some of the recent rulings have been challenged.
And it is also true that some banks have hesitated to
exercise the discretionary powers which have been
disputed. It is not true, however, that doubts should
be avoided at all costs. Laws are subject to interpretation, and old laws must be applied to new situations.
Change is not always tidy. What we should look at
is the substance of the differences—and there we shall
find some revealing facts.
Take for example the controversy over the authority
of banks to underwrite revenue bonds. The real
opposition there is not evident in the dispute over
statutory powers. It is to be found, in part, in the
deep distrust which some regulatory officials have of
banker judgment. In part, it also reflects the fears of
investment bankers concerning the new competition
they face from commercial banks. Where does the
public interest lie in this dispute? How can we justify
depriving the hard-pressed states and municipalities
of the lower borrowing costs which come from enlarged
competition for the revenue bonds they offer?
The same general story holds true with respect to
the recently expanded powers of banks to engage in
leasing and factoring transactions, to operate collective
investment funds, to accept corporate savings accounts,
and to offer certain ancillary services relating to their
banking operations such as insurance, data processing,
and expanded mortgage financing and servicing.
The bank regulatory authorities have long held
narrow views of the range of activities appropriate
for banking institutions. In the gloom which prevailed during the Great Depression of the early Thirties, and with the experience of bank failures not far
behind, banking came under more severe regulation.
The limitation of banking activities, however, did not
limit the demand for the services which banks can
perform, and a number of specialized institutions
emerged to fill this gap. It is understandable that
some of these specialized institutions have objected to
added competition from commercial banks against
which they have been protected for so many years.
But what considerations should prevail in judging
these disputes—the public interest or the private
interest?
Are there any general standards by which we may
appraise the conflicting contentions which are now
being made concerning the present course of change
in bank regulation? Is there any fundamental test by
which the divergent views may be judged? In my
opinion, there does exist an underlying principle of
such basic significance in our society that it may serve
as a unifying criterion.
In a democratic society public regulation is not
undertaken for its own sake. We accept the exercise of
public authority only where it is clear that this is the
best means of achieving the public good. The presumption always favors individual freedom. Conformity to governmentally determined standards is
asked only where there is an unmistakable showing
that reliance may not properly be placed on the discretion of the individual.
How can we apply these basic concepts to the problems of bank regulation and the issues of today?
First, we must ask ourselves the question: Why do we
regulate banks when most other industries are free
of such controls? We do so because banks cannot
function properly unless they enjoy public confidence.
Banks perform a vital function in the economy by
providing a payments medium and by channeling
savings and credit into productive uses. Unless there
is public confidence in banks, savings would not be
entrusted to them, nor could the check mechanism
operate effectively. Bank regulation is thus designed
to assure bank solvency and liquidity so that public
confidence may be sustained.
When we view these purposes of bank regulation in
the context of a social system which places fundamental and primary reliance upon individual initiative
349
and private enterprise, it is apparent that public control of banking should be limited to the forms clearly
essential to the preservation of bank solvency and
liquidity. Unless it can be shown that public control is
required for that purpose, the presumption must be
that discretion should lie with the individual bank.
There is a unique reason why the scope for individual initiative is of particular importance in the case
of banking. Commercial banks, through the savings
placed with them and the powers they have to create
credit, influence the allocation of a major portion of
the Nation's productive resources. Our economic
progress, the success of our efforts to relieve poverty
and unemployment—the very strength of our economy—all are heavily dependent upon the attitudes,
capabilities and enterprise of bankers. Upon their
power, their willingness to venture, their initiative
in exploring the promise of the future, will rest in
great degree our economic growth in the years ahead.
We should not hamper their performance in discharging these vital tasks.
There is a temptation to be diverted from these
most fundamental issues by the petty disputes among
the regulatory agencies and narrowly centered private
groups which have traditional positions to defend.
We should never cease asking the question whether
the restrictions now imposed upon banking initiative
are necessary in order to achieve some overriding public
purpose. If they are not, then under our free enterprise philosophy they should be abandoned.
THE NEW SPIRIT IN BANKING
REMARKS OF JAMES J. SAXON, COMPTROLLER OF
THE CURRENCY, BEFORE THE NEW JERSEY BANKERS
ASSOCIATION, HADDON HALL, ATLANTIC CITY, NEWJERSEY, MAY 21, 1964
A vital, aggressive new spirit has arisen in banking.
The long overdue reexamination of old thinking, the
striking away of excessive regulation, and the provision of a massive arsenal of new tools and powers have
produced a restless upsurge of new activity in banking.
Bankers are not fretting about the great many necessary changes which have been introduced during the
past two and a half years. They are getting ahead
with the job of using their new-found tools and powers.
To convey some notion of the range of banking
policies and practices which have been re-thought and
modernized, I can cite the following as illustrative of
the hundreds of new actions which have been taken:
Liberalization of the use of preferred stock;
Authorization to use capital debentures;
350
Permission to use stock option and employee
stock purchase plans;
Clarification of the authority to underwrite public securities;
Simplification of the rules relating to investment securities;
Complete revamping of the trust regulations to
provide administrative and investment flexibility;
Authorization for the collective investment of
managing agency accounts;
Broadening of the authority to make improvement and development loans, business and commercial loans, and construction, residential and
condominium loans;
Recognition of the authority to engage in lease
financing, factoring and export transactions;
Broadening of the applicability of the exceptions to the lending limit;
Recognition of the authority to engage in mortgage servicing and other services ancillary to
banking;
Broadening of the authority to participate in
community development projects by contributions
or loans;
Recognition of the authority to extend computer, accounting, payroll, and other similar services to bank customers;
Recognition of the authority to accept corporate savings accounts.
I could recitefigureswhich would demonstrate that,
under the stimulus of these new powers, banking performance has reached a new high level—for the growth
of deposits, loans, investments, and earnings has been
bright indeed. But these cold facts do not truly reveal
the depth and breadth of the broad-scale reformation
which has taken place in the operating powers and
practices of banks. The most notable fact is the release of the energy and initiative of bankers around
the country—as new opportunities have at long last
been opened for the use of their resources, their skills,
and their talents.
There is everywhere a new interest in banking. The
evident health and strength of the banking system—
its vitality and its potentials—have attracted a flow
of new capital and managerial skills to this industry.
In the schools and colleges, banking has aroused greatly
increased interest among students and teachers. We
can look to them for valuable contributions in the
years to come.
The bank regulatory authorities have also participated in the learning process. They now have a
better understanding of the purposes of bank regulation. For many years, the thinking of regulatory officials was shackled by the repressive and damaging
attitude that the primary purpose of bank regulation
was to take the risk out of banking by substituting the
judgments of regulatory officials for the judgments of
operating bankers. The regulators have had to learn
anew the lesson that bank regulation has a positive as
well as a negative aspect.
The Nation has a compelling need for the effective
operation of the banking system. This need, which is
so critically important to our economic progress, cannot be met if bank regulation is dominated by the
negative concept of minimizing, or even eliminating,
risk. The preservation of bank solvency and liquidity
is indispensable to effective bank performance. But
this objective need not, and never should, be allowed
to smother the vital competitive force of the banking
industry, as it has for the past thirty years.
The emphasis must be the other way around.
Bankers must be free, and should be encouraged, to
compete across the board—unless there is a clear and
unmistakable case for limiting their competition in
the interest of bank safety. Many bankers have responded practically and imaginatively to the new confidence which has been placed in their capacities and
in their judgment, and this affirmative response is increasingly daily.
One of the most encouraging aspects of this change
of spirit in banking has been the inspiration afforded
to the younger generation of bankers. They now see
broader horizons for the development of their skills
and talents—greater opportunity for the use of their
energy and initiative. This reflects, in part, the infusion into banking of new vitality from dynamic outside sources freshly admitted to this important industry.
Fortunately, this new challenge has been vigorously
met by those long associated with banking. Dormant
or unsuspected sources of strength within banking
have come alive—as new opportunities and new responsibilities have appeared, and new competition
has emerged, through the use of the new tools and
powers which have been granted. All of banking, and
those who are served by banks, have profited from this
new and exhilarating, forward-looking atmosphere.
The banking industry has a great task to perform
in directing the flow of the Nation's capital resources
to their best and most productive uses throughout the
country. Our economic growth, our success in dealing with poverty and unemployment, the aspect we
present to the outside world—all of these vital national
objectives rest importantly in the hands of bankers.
Bankers are rising admirably to the new trust which has
been placed in their discretion. The persistent, penetrating self-examination, which has been taking place,
has developed among bankers a new appreciation of
their potentials for achievement.
I find, not fear, but excitement; not doubt, but
confidence; not anxious concern, but eagerness to explore the many new oportunities which lie ahead. In
an environment now full of promise, there is a deep
yearning to fulfill that promise. The banking industry is now looking confidently ahead—not backwards,
nor sideways. The future in banking has never been
so bright.
351
APPENDIX D
Selected Congressional Testimony
of
JAMES J. SAXON
Comptroller of the Currency
725-698—64
24
INDEX
Selected Congressional Testimony of James J. Saxon, Comptroller of the Currency
Date
July 19, 1962, before the House Banking and Currency
Committee on real estate and construction loans, data
processing services, and foreign branches
August 14, 1962, before Subcommittee No. 1 of the
House Banking and Currency Committee on transfer
of trust powers and conversion of state banks
August 30, 1962, before the Senate Banking and Currency Committee on real estate and construction
loans, data processing services, transfer of trust powers, and conversion of state banks
February 18, 1963, before the House Banking and Currency Committee on lending limits and real estate
loans
May 3, 1963, before the House Banking and Currency
Committee on Comptroller's basic goals
May 15,1963, before the Subcommittee on Bank Supervision and Insurance of the House Banking and
Currency Committee on reorganization of regulatory
structure
May 20, 1963, before the Legal and Monetary Affairs
Subcommittee of the House Committee on Government Operations on trust powers
354
Page
355
356
356
358
359
363
367
Date
June 24,1963, before the Subcommittee on Securities of
the Senate Committee on Banking and Currency on
S. 1642 (disclosure)
September 23, 1963, before the House Banking and
Currency Committee on quality of bank credit, underwriting revenue bonds, mortgage loan limits, lending limits and forest tract loans
February 19,1964, before the House Committee on Interstate and Foreign Commerce on S. 1642 (disclosure)..
March 10, 1964, before the Subcommittee on Financial
Institutions of the Senate Banking and Currency
Committee on Regluation Q
March 26, 1964, prepared for the Senate Banking and
Currency Committee on private mortgage insurance.
June 9, 1964, before the Subcommittee on Commerce
and Finance of the House Interstate and Foreign
Commerce Committee on collective investment funds.
August 12, 1964, before the House Banking and Currency Committee on disclosure of changes in ownership control
Page
374
379
394
394
396
397
397
BEFORE THE HOUSE BANKING AND CURRENCY COMMITTEE ON H.R. 7796, H.R. 8874, AND S. 1771,
THURSDAY, JULY 19, 1962
Mr. Chairman and members of the Committee: I
am here to submit my comments on three bills affecting
the banking industry, H.R. 7796, H.R. 8874, and
S. 1771.
H.R. 7796 would amend certain lending limitations
on real estate loans which are imposed by the provisions of Section 24 of the Federal Reserve Act. Under present law, a national bank may make real estate
loans in an aggregate amount not in excess of the
amount of capital stock of the association paid in and
unimpaired, plus the amount of its unimpaired surplus fund, or not in excess of 60% of the amount of
its time and savings deposits, whichever is greater.
Section 1 of the bill would increase this second alternative to 70%.
This bill would make only a minor change in the
law. It would be of assistance to those banks which
have made loans up to the maximum without completely serving the needs of their communities. Because most States permit their banks to make such
loans in greater aggregate amounts than national banks
can, many of the latter are at a competitive disadvantage. Indeed, some 24 States wisely permit such loans
with no limitation. This section will alleviate that
situation to some extent.
Section 2 of the bill amends the provisions concerning loans to finance construction of residential or farm
buildings. Presently, such loans having maturities of
9 months or less are not subject to the requirements
of Section 24. H.R. 7796 would increase the maximum maturity on such loans to 18 months. This section embodies a desirable change in the law, in the
light of experience in construction of farm and residential buildings. Quite often it is impossible to complete such construction in 9 months, due to no fault
of the builder. An 18 months' limitation is somewhat
more realistic, and indeed, in itself, may be too short,
if any limitation at all is required.
H.R. 8874 would give authority to member banks
and district banks to invest in corporations organized
to perform clerical services for them. This reflects a
growing need of our banks in this day and age. The
introduction of high cost electronic equipment for
bookkeeping, sorting, and data processing has imposed
a hardship upon the small bank, which can neither
afford to continue older, less efficient techniques, nor
to buy new equipment.
Because of the ever increasing complexity of banking operations, the needs for modernization will multiply. Enactment of this legislation will enable two
or more small banks jointly to own and acquire necessary equipment, which perhaps neither could afford
alone. It will thus permit them to compete with the
larger banks who have obtained such equipment. It
is of note that the legislatures of Connecticut, Iowa,
Maine, Massachusetts, Michigan, Ohio, Pennsylvania,
Virginia, and South Carolina have enacted laws which
permit state nonmember banks to own stock in service
corporations. We have received a considerable number of responses from national banks in connection with
the banking survey being undertaken by the advisory
committee which I appointed, recommending making
this power available to national banks.
While this is the primary reason for this legislation,
there may be other services which could conveniently
and profitably be performed for banks. Accordingly,
I recommend that the bill be amended to comprehend
related banking services other than strictly clerical
which such corporations might usefully perform.
Further, I recommend that the bill be amended to
permit such a corporation to perform services for a
single bank. While it is true that most banks could
not afford to purchase this equipment, it would appear
pointless to require those that can, and desire to do so
through a service corporation, to so invest only in
conjunction with other banks. Therefore, I submit
that an amendment of this nature is necessary to
impart sufficient flexibility to the bill to assure maximum utilization of its provisions.
S. 1771 would amend Section 25 of the Federal
Reserve Act to empower the Board of Governors of
the Federal Reserve System to authorize foreign
branches of national banks to exercise the usual banking powers of banks of the foreign country in which
the branch is located. Among the areas in which such
branches have been at a competitive disadvantage with
foreign banks because of restrictions based upon our
domestic banking laws, are: loans secured by real
estate, acceptances, guarantees, and purchase of public
securities. The bill would not permit such a foreign
355
branch to conduct a general business of producing,
distributing, buying or selling goods, wares, or merchandise, or to engage in the business of underwriting,
selling or distributing securities. H.R. 1771 would
enable our banks, through their foreign branches, to
contribute more significantly to our foreign commerce
by increasing their competitive capabilities. Moreover, there can be no sound reason for handicapping
foreign branches of national banks in their competition
with foreign banking institutions because of domestic
considerations. Under proper supervision of the regulatory agency, the exercise of these powers by foreign
branches of our banks will not contravene the considerations which gave rise to the requirements applicable
in this country, and will not impair the soundness of
our banking system.
For these reasons, I have no objection to these bills.
BEFORE SUBCOMMITTEE NO. 1 OF THE HOUSE BANKING AND CURRENCY COMMITTEE ON H.R. 12577 AND
H.R. 12825, TUESDAY, AUGUST 14, 1962
It is a pleasure to appear before this Committee in
support of two bills: H.R. 12577, a bill to place
authority over the trust powers of national banks in
the Comptroller of the Currency; and H.R. 12825,
relating to bank branches which may be retained upon
conversion, consolidation or merger. I shall discuss
both of these briefly.
H.R. 12577 would transfer to the Comptroller of
the Currency from the Board of Governors of the Federal Reserve System authority over the trust activities
of national banks. Under existing law national banks
must obtain the permission of the Board to exercise
trust powers, and are subject to the Board's regulations
even though not directly supervised or examined by
it. The present authority of the Board over trust
activities applies only to national banks—the granting
and regulation of the exercise of trust powers by State
banks rests with the respective State authorities.
Since the Comptroller of the Currency is the supervisory authority over national banks, it is appropriate
that he be the official who authorizes and regulates
their activities as fiduciaries. As some of you will
recall, a similar recommendation was contained in the
proposed Financial Institutions Act of 1956. Then
as now, the Board of Governors of the Federal Reserve
System stated that it had no objection to the proposal.
At that time, however, it urged that jurisdiction over
common trust funds also be assumed by the Comptroller of the Currency. H.R. 12577 adopts this
recommendation of the Federal Reserve System by
356
making two minor technical changes in the Internal
Revenue Code.
H.R. 12825 relates to bank branches which may be
retained upon conversion or consolidation or merger.
Very simply, this bill is designed to eliminate an existing technical impediment to the conversion of State
banks into national banks in certain situations. These
are situations in which a State bank desiring to convert
into a national bank may not after conversion retain
as a national bank, branches which it had in lawful
operation as a State bank. This could occur where
because of a change in State law or in the factual
situation since the time of establishment of the
branches in question, such branches could not be
established at the time of conversion.
This bill would provide that such branches may be
retained with the approval of the Comptroller, and it
would apply to consolidations and mergers as well as
conversions. It is important to emphasize that all the
bill does is to permit the retention of branches already
in lawful operation by the charter bank.
While this bill is important in the cases in which
applicable, it should be pointed out that it is of limited
applicability. It would not apply in States having
statewide branch banking, nor would it apply in States
which have always prohibited branch banking. Of
the States having limited branch banking, it would
apply only in those which at one time had more liberal
branch laws than at present, or in which because of
intervening factual changes existing branches could
not be reestablished. For example, a bank may be
able to establish a branch in a town having no bank,
but not be able to establish one in that town after an
independent bank is established there.
We did not ask for nor do we endorse the provision
in this bill theoretically limiting the authority of the
Comptroller to grant approval in certain cases.
There is no need for such a provision and it can only
cause confusion.
I urge that the Committee favorably consider both
bills.
BEFORE THE SENATE BANKING AND CURRENCY COM-
MITTEE ON H.R. 7796, H.R. 8874, H.R. 12577, AND
H.R. 1289, THURSDAY, AUGUST 30, 1962
I appreciate the opportunity to appear before this
Committee today to submit my views on four banking bills, H.R. 7796, H.R. 8874, H.R. 12577, and H.R.
12899. I will comment on them in that older.
H.R. 7796 makes a minor change in section 24 of
the Federal Reserve Act pertaining to real estate and
construction loans of national banks. Presently, a
national bank may make real estate loans in an aggregate amount not in excess of its capital and surplus,
or 60% of its time and savings deposits, whichever
is greater. The bill increases the second alternative
limitation to 70% of time and savings deposits. The
bill also amends the provisions of section 24 concerning loans to finance construction of residential and
farm buildings. Currently, such loans having maturities of 9 months or less are not subject to many of
the requirements pertaining to real estate loans. H.R.
7796 increases the maximum maturity to 18 months.
We endorse these proposed changes. It is our belief
that banks should be permitted moreflexibilityin meeting loan requirements, particularly in the real estate
loan area. Similarly, in the case of construction loans
on residential or farm building, the 9 months limitation is too restrictive. Often it is impossible to complete construction in 9 months, due to no fault of the
builder. Because the bill adds some measure of flexibility in these areas, we believe it is desirable, and
favor passage.
H.R. 8874 would authorize national banks, district
banks and State member and nonmember insured
banks to invest an amount not in excess of 10% of
capital and surplus in the stock of corporations organized to perform bank services for them. Modernday banking requires the performance of a huge
volume of data processing activities. High-speed
equipment designed to handle this work is being acquired by many banks. However, such equipment is
very expensive, and small banks are often not able to
acquire it. This places them at a severe disadvantage
with their larger competitors. Thus, there is a need
to change those provisions in our laws affecting national banks and state member banks which prevent
such banks from jointly investing in the stock of corporations organized to acquire such equipment. If
small banks are permitted to obtain the use of this
equipment, their competitive capabilities will be
strengthened, to the benefit of the banking industry
and the nation's economy.
Insofar as H.R. 8874 achieves this aim, we welcome
and support it. However, it had been our hope that
this could have been accomplished in the simplest manner possible, without an overlay of burdensome qualifications, such as appear in the bill. H.R. 8874 goes
beyond mere removal of the impediments to these
stock investments by national and State member banks.
As we have specifically pointed out in our report on
the bill, we feel that many of the regulatory provisions
in the bill are not needed from a supervisory standpoint. Some of them result from the fact that the bill
extends Federal regulation of investment in service
corporations to State nonmember insured banks, the
investments of which have hitherto been relatively free
of detailed Federal supervision. This extension, we
believe, is not warranted.
There is also much to be said for permitting the organization of a service corporation by a single bank.
It may be more desirable to a bank to own a subsidiary corporation to acquire data processing equipment than for the bank to purchase such equipment
outright. It appears unrealistic to require that there
be two or more banks in order to establish such a corporation, but then permit it to continue if subsequently
one bank becomes the sole owner, as the bill now
provides.
While we would not wish to see this bill die, and
our banking system get no legislation in this area, we
feel that we should point out these things to the Committee. However, we would like to make it clear that
should the question become one of either having this
bill or no legislation in this respect at this session, we
would favor passage of the bill.
H.R. 12577 would transfer from the Board of Governors of the Federal Reserve System to the Comptroller of the Currency authority to grant trust powers
to national banks, and to regulate the exercise of such
powers. Under existing law national banks must obtain the permission of the Board to exercise trust
powers, and are subject to the Board's regulations
even though not directly supervised or examined by
it. The present authority of the Board over trust
activities applies only to national banks—the granting
and regulation of the exercise of trust powers by State
banks rests with the respective State authorities.
Since the Comptroller of the Currency is the supervisory authority over national banks, it is appropriate
that he be the official who authorizes and regulates
their activities as fiduciaries. As some of you will
recall, a similar recommendation was contained in
the Financial Institutions Act. Then as now, the
Board of Governors of the Federal Reserve stated that
it had no objection to the proposal. At that time,
however, it urged that jurisdiction over common trust
funds also be assumed by the Comptroller of the Currency. H.R. 12577 adopts this recommendation of
the Federal Reserve System by making two minor
technical changes in the Internal Revenue Code. In
so doing, the bill merely shifts the applicable standard
for the qualification for tax exempt status of the common trust funds of banks from one Federal agency to
another. It does not give the Comptroller any supervisory authority over State banks, or permit any dis357
crimination in favor of the national system. We urge
that the Committee give favorable consideration to
this bill.
H.R. 12825 relates to bank branches which may be
retained upon conversion or consolidation or merger.
Very simply, this bill is designed to eliminate an existing technical impediment to the conversion of State
banks into national banks in certain situations. These
are situations in which a State bank desiring to convert
into a national bank may not after conversion retain
as a national bank, branches which it had in lawful
operation as a State bank. This could occur where
because of a change in State law or in the factual situation since the time of establishment of the branches in
question, such branches could not be established at the
time of conversion.
This bill would provide that such branches may be
retained with the approval of the Comptroller, and it
would apply to consolidations and mergers as well as
conversions. It is important to emphasize that all the
bill does is to permit the retention of branches already
in lawful operation by the charter bank.
While this bill is important in the cases in which
applicable, it should be pointed out that it is of limited
applicability. It would not apply in States having
statewide branch banking, nor would it apply in States
which have always prohibited branch banking. Of
the States having limited branch banking, it would
apply only in those which at one time had more liberal
branch laws than at present, or in which because of
intervening factual changes existing branches could
not be reestablished. For example, a bank may be
able to establish a branch in a town having no bank,
but not be able to establish one in that town after an
independent bank is established there.
We did not ask for nor do we endorse the provision
in this bill theoretically limiting the authority of the
Comptroller to grant approval in certain cases. There
is no need for such a provision and it can only cause
confusion. With this reservation, we urge that the
Committee favorably consider this bill.
BEFORE THE HOUSE BANKING AND CURRENCY COMMITTEE, MONDAY, FEBRUARY 18, 1963
Mr. Chairman, members of the Committee: It is a
great pleasure for me to meet with the Members of
the House Banking and Currency Committee, to introduce some of the members of my staff, and to outline for the Committee {he work of our Office and our
goals for the future.
358
The past year has been a year of reexamination and
reappraisal. Three decades have passed since any
fundamental modifications were made in the basic
structure of public policy in the field of banking. In
the intervening years, pervasive changes have taken
place in our economy and in the financial structure of
our Nation.
These changes have attracted the attention of all
who are concerned to assure the effective functioning
of our banking system in meeting its critical responsibilities to the growth of our industry and commerce.
In the banking world, in our universities, and in the
Government as well—the new developments have been
subjected to searching thought which has given rise to
a variety of proposals for reform.
The Commission on Money and Credit, in 1961,
completed and published a comprehensive study of
monetary and credit problems including those confronted by our private financial institutions. Last
year, an Advisory Committee on Banking to our Office
inquired thoroughly, and in broad scope, into the
problems confronting our National Banking System.
Basing their study on a great volume of reports submitted by National Banks throughout the country,
the Advisory Committee formulated an appraisal of
the entire range of problems which face our National
Banks, and offered recommendations for action.
Within the Executive Branch of the Government, a
study of public policy with respect to private financial
institutions is now nearing completion.
With this wealth of material before it, this Committee will have the task of considering the needs for
legislative action. Many of the problems we face can
be dealt with through the existing powers of the bank
supervisory agencies. For our own part, we have during the past months, placed into effect a number of
such changes of which the Committee is aware. We
are now engaged in a systematic effort to appraise
the other recommendations of our Advisory Committee. As our work progresses, we may place additional
modifications of policy into effect, and develop recommendations for legislative action where that seems
to be required. Two of these are now under consideration, and I shall outline them in a moment.
Throughout the banking community a notable
ground swell of self-examination is taking place. We
find daily expressions of this new spirit in our correspondence and in personal contacts with practicing
bankers. Among the various organized groups of
bankers, new studies are being undertaken, and statements expressing their particular interests are receiving
wide publicity. A number of the State governments
are also in process of reexamining their laws relating to
banking.
The widespread public discussion of banking problems which has been brought about by all these efforts
is a wise prelude to action in a democratic society. We
are all being made aware of the issues we face, and the
manner in which proposed courses of action would
affect the various segments of the industry of banking, and of the economy generally.
I know that this Committee faces a difficult task
of appraising the variety of points of view which have
been advanced, and proposals which have been made.
We hope that we may be of some assistance to the Committee in carrying out this vital responsibility.
There are two items of specific legislation which we
have drafted and which we intend to submit to the
Congress this session through the usual channels of
the Treasury Department and the Budget Bureau.
General Lending Limit (12 U.S.C. 84)
The first of these proposals would raise the limit on
loans to a single borrower from the present amount
equal to 10% of the capital and surplus of a bank to
20% of capital and surplus. The reason for this
change is that many smaller and medium-sized banks
today are turning away sound agricultural and business
loans because their lending limits are too low to handle
the amount requested. I might mention that the existence of low lending limits in one or both of the merging
banks is one of the arguments most often submitted to
me in support of merger applications. An incidental
result therefore, of raising the lending limit could be
a possible braking effect on mergers.
Another consideration of equal or greater importance is the fact that the lending limits imposed by
various States upon State-chartered banks are in the
main higher than that available to competing National
Banks. In this connection, I have had copies made of
a chart which shows the various lending limits imposed
by the 50 States. On the very first page, the members
of the Committee will note that Alaska has a limit of
35% of capital and surplus, Arizona 15% of capital
and surplus, Arkansas 20% of capital and surplus, and
Colorado 15% of capital and surplus. Going through
the chart page by page one sees a pattern of limits
almost uniformly higher than 10%. The proposed
change, therefore, would merely equalize the competitive position of the National Banks in the matter of
lending limits. Based upon my own experience, it is
my considered judgment that a limit of 20% would not
result in any undue risks to the solvency and liquidity
of banks.
Real Estate Loans (12 U.S.C. 371)
The second specific item which we will propose concerns the limitations on the terms of loans secured by
real estate. Our proposal would raise the maximum
amount of loan and term for a conventional amortized
real estate loan from the present maximum of 75%
of appraised value for a term of up to 20 years, to a
maximum of 80% of appraised value for terms up
to 30 years.
Under most State banking laws, State-chartered
banks are permitted to extend such terms and, consequently, to advertise them. This has placed the National Banks at a distinct disadvantage in regard to
real estate mortgages. Since in this, as in allfields,we
believe that the public interest is best served by competition free of unnecessary restriction, it is our belief
that the welfare of the public will be served by an
increase in the permissible term and amount of real
estate loans. The good judgment of the banker can
be relied upon not to grant the maximum permissible
terms except where the circumstances justify them,
and the proposed change will provide the required
flexibility in the matter which, in our judgment, is
presently lacking.
BEFORE THE HOUSE BANKING AND CURRENCY COMMITTEE, FRIDAY, MAY 3, 1963
As background for these Hearings, I believe it
would be helpful to the Committee to have an expression of the basic philosophy which has guided the
activities of this Office, and a review of our branching
and chartering policies and procedures.
Our basic philosophy
Our aims, during my tenure in the Office of the
Comptroller of the Currency, have been to assess the
needs of our country for banking tools and banking
facilities—to measure those needs against the tools
and facilities which are at hand to discharge the vital
functions which banks perform in our economy—and
to improve those tools and facilities as best we can.
On some matters, the initiative has had to come
principally from this Office. We found, on the basis
of careful studies, that banks were needlessly hampered
in their operations by many antiquated restrictions.
These we have endeavored to modernize to meet the
requirements of today, insofar as we have had the
statutory power to act. Where we have felt that
legislative action was required, we have prepared proposals for submission to the Congress.
There is one broad area, however, in which the
initiative has had to rest primarily with the banks
359
themselves. This area concerns the competitive conditions which will prevail in the banking industry.
We have the authority to pass upon applications for
new National Bank charters, for the establishment of
new branches by National Banks, and for the merger
of existing institutions. But we do not have, nor do
we seek, the authority to initiate such applications.
The flow of such applications which we have been
receiving, and are continuing to receive, reflects decisions on the part of private bankers, or prospective
organizers of new banks, taken at their own initiative.
Based upon their own appraisals, these private citizens
of our country have thought it worthwhile to risk their
capital in new ventures which they anticipated would
be profitable. These are expressions of an underlying
force of enterprise in our banking community, and
represent a positive affirmation of the vitality of that
industry.
Our task in this Office has been to develop and
apply standards of the public interest by which we
could judge and act upon these private efforts to establish new banking facilities to serve our economy. I
believe that it is fair to say, within the spirit of our
private enterprise system, that a great deal of weight
must be attached to decisions by our citizens to risk
their capital in new enterprises.
Banking is a regulated industry, and there are sound
considerations of the public interest which underlie our
policy of restricting entry into this industry, and regulating the operating practices of banks. But we should
not interpret the regulation of entry as a bar to entry.
Controls over the formation of new banking institutions, and over the expansion of existing institutions,
were not designed for the purpose of erecting an impenetrable barrier to new initiative in this industry.
They were designed, instead, to provide a basis for
judicious limitations conceived in terms of the public
interest.
What are the standards by which the public interest
in the expansion of banking facilities may properly be
judged? There are two basic criteria which should
be applied. Recognition must be accorded to the fact
that our economy is a living and growing instrument,
and that for its progress it requires the adequate provision of banking facilities. Our needs are ever
changing, and our banking facilities must be attuned
to these changing needs.
There is also a second consideration of coordinate
importance, by which we must appraise private efforts to expand banking facilities. In the vast unregulated sector of our economy, we rely entirely upon
private initiative to determine the desirability of un360
dertaking new ventures. Indeed, through our antitrust statutes, we endeavor to maintain conditions in
which full freedom of entry will be sustained. There
are some who believe that we could safely apply this
policy to the industry of banking.
Under a private enterprise system, there is indeed
a strong presumption that full freedom of entry into
any industry or trade must be vigilantly preserved.
The reliance we place on private initiative to direct the
flow of production in our economy rests in the most
fundamental sense on the preservation of free access
to opportunity. Any restrictions which are imposed
over free entry must clearly be justified in the public
interest, and such restrictions must be closely limited
to the forms necessary to achieve public aims. No entrepreneur in a private enterprise economy has the
right to protection against competition. Any protection he is granted must demonstrably be supportable
as required in the public interest.
I am entirely in accord with the view that the regulation of entry into the industry of banking, and bank
expansion, are soundly justified. Without such restrictions, it would not be feasible to supervise banks
in the degree necessary to maintain confidence in our
banking system. The maintenance of this confidence
is essential if our banking system is to operate with full
effectiveness in the performance of its basic functions
of channeling productive resources to their best uses,
and providing a payments mechanism for our
economy.
One requirement for the maintenance of confidence
in our banking system is to sustain the solvency and
liquidity of banks. But it is equally necessary to assure the adequacy of banking facilities to the growth
of our economy. The aim of safeguarding solvency
and liquidity must not, thus, be interpreted as an
obligation to protect individual banks against competition. Scope must be preserved for the expression of
initiative in this industry if it is to fulfill its public
tasks with maximum effectiveness.
If we placed a narrow interpretation on the objective of maintaining bank solvency and liquidity, we
would have to shelter every existing bank against
competition from any source. Even those banks
which had monopoly positions in their communities
would have to be safeguarded in their power. Communities with more than a single bank or two, where
the banks displayed a notable lack of enterprise, would
also have to be condemned to inadequate banking
facilities. This approach would represent a policy of
protection for individual banks, and not the banking
system, nor indeed the public.
I am fearful that this narrow view of the purpose of
entry and expansion restrictions is all too prevalent in
some segments of the banking community. Public
controls designed to serve public purposes are being
interpreted as private rights. The assertion of public
needs for added banking facilities is being viewed as
an invasion of such private rights. This complete
reversal of the true purpose of public regulation of
bank entry and expansion accounts for much of the
dispute which now prevails in this industry.
I cannot endorse such a backward-looking, restrictive concept of the policy by which entry into banking,
and the expansion of banks, should be regulated.
There is a vital public interest in assuring adequate
banking facilities, and this interest cannot be determined solely according to the views of those banks
which wish to safeguard their markets, or are content
to ignore the needs of their communities. I say "those
banks," because these are not the views held by all
banks. Fortunately for the progress of our economy,
we do possess a great number of enterprising and
imaginative banking institutions which are not fearful
of competition, and do have a positive concept of their
responsibilities—and we find that the industry of banking is attracting many men of initiative and vision
who wish to enter this field.
If banks are to be able to meet their responsibilities
to the public which they serve, we must guide our
public policies according to those needs. Enclaves of
monopoly, and stagnant, unprogressive banks should
not, and indeed cannot, in the long run be safeguarded
against the insistent pressures for the expansion of
banking facilities which are present in our growing
economy.
It must clearly be borne in mind that the actions of
the bank supervisory authorities, including the Comptroller of the Currency, are solely permissive in nature.
When we act to allow new banks to be formed, new
branches to be established, or mergers to take place—
we merely permit the forces of private initiative to be
expressed. National Banks are not public corporations—they are private enterprises. And in a private
enterprise economy the forces of initiative should not
be constricted except where there are clear public
purposes to be served.
National Banks and the dual banking system
Much of the discussion of our banking problems
today is not cast in the terms which I have described.
A concerted effort has been made by some organized
groups to pose the issues in terms of a conflict between
the National Banks and the State-chartered banks, in
which the survival of our dual banking system is pictured as in dire jeopardy. It is no service to our
understanding of these problems to present them in
those terms.
Let me quote a series of the most incisive observations on this issue which I have seen:
. . . it seems to me . . . rather an untenable argument
to insist that the Congress may authorize the establishment
of a national banking system in all the states, but that it
would be an invasion of the sovereign rights of the States to
authorize such banks to establish branches and to conduct
their business in various parts of the States rather than in
one place. . . . I am a states-rights Democrat. I believe in
the Jeffersonian theory of State rights . . . but no State
rights is involved in this question, because the State is not
precluded from putting its State Banks on a level of competition with national banks should they avail themselves
of a privilege proposed to be granted. . . . The Federal Government may go into 48 States of the Union and establish
a banking system without their leave. It may even deny
to them the right of taxation, except by permission of Congress. It may go into the States and deny to everyone of
the 14,000 State banks the right of issue, the right of executing
their own notes and passing them as currency. And yet we
are told that the question of State rights is involved in
permitting these Federal agencies to extend their credit facilities through branching. It is preposterous to so assert.
There is no question of "State rights" involved.
There is interposed here the suggestion that a bank
having a branch in a distant community of its State cannot
altogether sympathize with the requirements of that community and would not so readily respond to the commercial
and industrial demands upon it. Why would it be there,
what would it have a branch there for, except to do business, and to do all the business that its resources would permit it to do? I grant you that it might be that the sound
and sensible man or men in charge of a branch would not
be so eager to grant favors and privileges arising out of
personal contact and friendly associations; but that would
be to the credit of the management rather than to the detriment of the community. How many banks have failed utterly
because of unbusinesslike loans made for the accommodation
of bank officials themselves, or their personal friends?
These are the words of Carter Glass of Virginia
spoken on the floor of the Senate of the United States
more than three decades ago.
I know of no better way to state these issues. It
is clear that the National Banking System was established, and has been preserved, so that National
aims could be achieved. The effectiveness with which
our National Banking System functions will critically
affect the progress of our economy. In the measure
that any community in our country is without the
banking facilities to assure the full development of its
skills and resources, in that same degree will our National progress be impaired. The spirit which motivates the banks in any community will intimately influ361
«ence the enterprise of that community. We can illafford to tolerate, and we certainly cannot justify the
enforcement through public authority, of limitations
designed to safeguard entrenched monopoly or to protect institutions of little courage or vision.
In our quest for a National Banking System which
will fully serve our National aims, there need be no
clash with the aims of our State banking systems. Our
purposes should be alike—to serve the public to best
advantage.
Nor is there any reason why the policies pursued by
the National authorities will counter or obstruct those
of the State authorities. It is entirely within the power
of the State authorities to provide the banks which they
charter with whatever latitude they may require to
serve their communities and States.
I must say, frankly, that some conflict does indeed
exist between the National authorities and the authorities in some States. And, in truth, this conflict reflects a genuine difference in aims. It has been made
abundantly clear to us by representatives of some State
authorities that they view the control of bank entry and
bank expansion as a matter which should be handled
through what amounts to the allocation of financial
markets. They would approach this problem by parceling out these markets among National and Statechartered banks, so that each group, and individual
banks within the group, would have assured territories
reserved to them. This is their concept of how a dual
banking system should operate. Viewed in these terms,
any action by the National authorities which fails to
preserve these sheltered markets is regarded as a threat
to the dual banking system.
This, I submit, is wholly out of accord with the
purposes which lay behind the establishment of our
National Banking System. There was no such thought
at the time our National Banking legislation was enacted, nor is there to be found anywhere in the present
law a statement of public purpose which would give
any support to this view. Indeed, early in the history
of the National Banking System, provision was made to
tax out of existence the variety of State Bank Notes,
so that a single National currency could be provided
through the National Banks. The State banking systems, nevertheless, have survived and prospered—and
they have made their contribution to our Nation's
progress. They have made their greatest contribution,
not where they have been protected against competition, but where they have been able to compete most
effectively.
It is a bleak picture we would have to paint for the
future of our banking system, if our efforts were to be
362
centered on safeguarding the markets for any segment
of that system. The progress of our entire economy
would be severely hampered if we regarded this to
be the purpose of public control in thefieldof banking.
I have indicated that there are National aims which
must guide our policies with respect to our National
Banking System. There is more than a local concern
with assuring the fullest development of every community in our Nation. In the years since our National
Banking System was founded, the ever-growing
strength of our National economy has been critically
dependent upon the free exchange of goods and services, the free movement of labor, and the free flow of
capital and enterprise throughout the country. In the
years ahead, we face an even more urgent task of exploiting to the fullest our productive capacity. No
opportunity for achievement should be allowed to go
unexplored, nor any needed one to remain unexploited.
A failure of any community to develop its full potentialities deprives the entire economy of the progress
from that source, and thus diminishes the gains for
us all.
This is the National interest in an effectively functioning banking system throughout the country, and
the only proper basis upon which we may establish the
policies for our National Banks.
Issues of policy
In the development of wise public policy by the
Committee and the Congress, there are certain basic
questions which should be raised concerning the standards which should properly govern bank entry and
bank expansion:
1. What action is required in the public interest, where an
application is received for a new National Bank charter or
a new National Bank branch for a community:
(a) which possesses but a single banking institution;
(&) where studies of both current and future prospects
indicate clear opportunities for the profitable operation of the new facility;
(c) where businessmen and other private citizens in that
community urge that additional banking facilities
are needed; and
(d) where there is broad interest in investing in the new
institution?
2. What action is required in the public interest, where an
application is received for a new National Bank charter or
a new National Bank branch for a community:
(a) in which there is clear evidence that the existing
banking institutions are not performing their proper
role in meeting community needs and fostering
community development;
(6) where an energetic group of private citizens is desirous of organizing a new bank, or an existing
institution is desirous of establishing a branch, to
exploit the potentials of the community more actively; and
(c) where the prospects of profitable operation of a new
bank or a new branch are evident?
3. What action is required in the public interest, where
an application is received for a new National Bank charter or
a new National Bank branch, and the State authorities ask
that the application should not be honored because:
(a) the State authority has an application which it has
held in reserve, and revives only where an application appears for a National Bank;
(b) a State bank has filed an application evidently for
defensive purposes, in order to thwart entry by
rival banks; or
(c) a State-chartered group has failed for a long period
to establish a facility which it was authorized to do?
4. What action is required in the public interest, where
Federal authorities are requested by the State authorities to:
(a) parcel out protected territories, respectively, for
National Banks and State-chartered banks, and even
individual banks within those groups;
(b) on the basis of mutual vetoes; and
(c) without regard to the duties and obligations of the
Federal authorities to insure the adequacy of banking facilities through the National Banking System?
These are not idle theoretical questions. They are
the heart and substance of the issues we confront every
day. From the very beginning of our efforts to deal
with the applications for new National Bank charters,
and new National Bank branches, according to demonstrated community needs for additional banking facilities—we have faced determined opposition from those
who have sought to safeguard the positions of existing
institutions without regard to community needs. The
most active opposition we have encountered has been
precisely in one or two bank communities, or communities in which dormant banks feared the effects of
prospective enterprising rivals.
Some of the State banking authorities have expressed this same view. Their principal concern has
seemed to be the desire to restrict bank expansion in a
way which would safeguard markets for particular
banks, and we have found them highly unresponsive to
the thought that bank expansion should be guided
according to the fundamental test of community needs.
In appraising these observations, it should be borne
in mind that even though banking is a regulated
industry, we still rely heavily upon private initiative
to assure the sensitive adaption of banking facilities
to community needs. The choices faced by the regulatory authorities to meet these needs are necessarily
confined to the applications received from those who
display the required enterprise. If our community
needs are to be met, we must take advantage of the
willingness of those who wish to serve them. If we
bar those with initiative, in order to rely on the less
enterprising banks—or to protect private domains—we will fail to provide the urgently required opportunities for private enterprise to function in this
industry. This is a burden which we must not impose
on our banking industry, and on our entire economy.
The whole range of these issues is often presented
in terms of the effects upon our dual banking system.
Those who oppose the present policies of this Office
often attack them on the ground that they pose a
threat to that duality. We would suggest a concluding question: what meaning should be attached to
the dual banking system, and how should it function?
We see no way that a dual banking system can
function if either segment is held in check for the
purpose of safeguarding the other. Such an approach
would subordinate one system to the other, and there
could be no true duality.
As we see it, there are National aims which our
National Banking System was designed to serve. In
serving these aims, no restraints are imposed upon the
State banking systems. The State authorities are left
free to pursue whatever standards they may consider
appropriate to meet local and State needs as they
conceive them.
In judging the needs for additional expansion of
the National Banking System, we perforce take account of the existing facilities, both National and
State, at the time new applications are received for
National Bank charters and National Bank branches.
If we find unfilled community needs, or prospective
needs, which could profitably support the expansion of
banking facilities, we feel obliged to allow this gap to
befilledin the public interest. This is the only standard we believe we may properly apply. The State
authorities may properly apply other and different
standards according to their own concepts of the role
of State-chartered banks. Unless each is left free to
carry out its own objectives, however, one system will
become subordinate to the other and there will be no
genuine duality in our banking system.
BEFORE THE SUBCOMMITTEE ON BANK SUPERVISION
AND INSURANCE OF THE HOUSE BANKING AND CURRENCY COMMITTEE, WEDNESDAY, MAY 15,1963
Mr. Chairman, members of the Committee: At the
outset, I should say to the Subcommittee that the views
I shall express are those of the Office of the Comptroller of the Currency.
The bill which is before this Subcommittee to establish a Federal Banking Commission deals with means,
not ends. It is concerned with the mechanics of carry363
ing out public policy, rather than the substance of
that policy.
Based on our own continuing studies, we are persuaded that there are certain fundamental questions
of basic public policy which need to be resolved before
the reorganization proposals dealt with in this Bill, or
indeed other similar proposals, may properly be
considered.
These fundamental questions are:
1. What is the proper role of the Central Bank
in our country, and what should be its functions?
2. What is the proper role of a dual banking
system in our country, and how should it function?
3. What is the proper role of deposit and share
insurance in our national financial structure, and
should the insuring agency have any regulatory
or supervisory functions?
Central banking functions
In the half-century since the Federal Reserve System
was established, the Central Bank has through historical accident or otherwise acquired a number of
functions unrelated to its basic task of monetary control. As a consequence, the Federal Reserve Board
is now deeply and broadly involved in bank regulation,
examination, and supervision for both National and
State-chartered banks. We raise the basic question:
Should the Central Bank exercise any such nonmonetary functions, or should it be confined to purely
monetary functions as is traditional to Central Banks
in the Western World?
Specifically, for example, is there any proper justification for the Federal Reserve Board to regulate:
(1) the acceptance by member banks of drafts or bills
of exchange (Regulation G); (2) corporations doing
foreign banking or other foreign financing (Regulation K ) ; (3) interlocking bank directorates (Regulation L ) ; (4) foreign branches of National Banks
(Regulation M); (5) Loans to Executive Officers of
member commercial banks (Regulation O) ; (6) holding company affiliates (Regulation P); (7) payment
of interest on deposits (Regulation Q ) ; (8) relationships with dealers in securities (Regulation R ) ; (9)
credit by brokers, dealers and members of national
securities exchanges (Regulation T ) ; (10) loans by
banks for the purpose of purchasing or carrying registered stocks (Regulation U ) ; and (11) holding company creation and expansion (Regulation Y) ?
These are solely or primarily bank regulatory and
supervisory functions, and it appears to us that before
any reorganization of the bank regulatory agencies is
undertaken, the Congress would want to reexamine
364
the wisdom of intermingling these functions with the
essential Central Bank function of monetary control.
There is one further basic issue which is related to
the proper role of the Central Bank. For Statechartered banks which are members of the Federal
Reserve System, the Federal Reserve Board now exercises basic authority over mergers and the establishment of new branches. Moreover, the Federal
Reserve Board administers all Federal authority over
the formation and expansion of holding companies,
whether the banks involved are National or Statechartered. As a result, the Central Bank exercises a
pervasive and intimate role in the expansion of banks
in the banking systems of all the 50 States. It appears
to us that this far-reaching intercession of authority
by the Central Bank in the functioning of the State
banking systems should be reexamined before any plan
for the reorganization of the Federal banking agencies
is considered.
Examination is the core of bank regulation. So
long as this power over State banks is exercised by any
Federal authority, the ultimate control of such banks
will continue to lie in Federal hands. There are today
pervasive, direct Federal controls over the organization, operation, expansion, and even dissolution and
liquidation of State banks. If a truly meaningful
dual banking system is to be established in our country,
the States should fully assume the examinatory responsibility over their own banks—and the entire regulatory structure may then be built upon the discharge
of that function.
The dual banking system
As we indicated in earlier testimony to the full
House Banking and Currency Committee, it is our
view that a dual banking system can function properly
only if the National and State banking systems each
has the maximum degree of autonomy. At present,
beyond the enormous powers now lodged with the
Federal Reserve Board over the operations of both
National and State-chartered banks, other powers over
State-chartered banks are exercised by the Federal
Deposit Insurance Corporation. For the some 7,000
State-chartered banks which are not members of the
Federal Reserve System, the Federal Deposit Insurance Corporation determines their insurability at the
time they are formed, passes upon branch applications
by those banks, passes upon merger applications where
the emerging bank is to be a State-chartered bank,
examines all such banks, and exercises myriad other
authority over them. In fact, the FDIC is indeed the
regulator of nonmember State banks in the United
States.
It appears to us that the Congress should reexamine
the basic issues whether State-chartered banks should
be subject to any Federal jurisdiction with respect to
branching, with respect to mergers where the emerging bank is to be a State-chartered bank, with respect
to regular examination, and, of course, with respect to
other public controls. These questions, it appears to
us, should be resolved before any specific plan for
the reorganization of the Federal bank supervisory
agencies is considered.
A more difficult issue is the automatic insurability
of State-chartered banks, as is now provided for National Banks. A distinction could be drawn here on
the ground that National Banks are subject to Federal
supervision and standards. However, the Congress
may wish to consider similar treatment for all Statechartered banks with respect to deposit insurance, if
it regards such treatment as essential to the preservation of a dual banking system.
The insurance junction
There are other and equally fundamental considerations relating to the proper role of deposit insurance
which need to be resolved before the reorganization of
the bank supervisory agencies should be considered.
The House Banking and Currency Committee now
has before it a proposal to extend the coverage of deposit insurance. There is at issue, however, the more
basic question of the proper role of deposit insurance
in the entire structure of bank regulation and supervision. This is a question which should be resolved
before we may properly consider any need for reorganization of the regulatory structure.
Deposit insurance entails risks as well as benefits to
the effective functioning of our banking system, and a
choice should be made which will achieve a proper
balance between these conflicting considerations. The
insurance of deposits operates as a safeguard to smaller,
less-knowledgeable depositors who are unable to appraise the soundness of banks, or to diversify their deposits sufficiently to overcome such risks. In some
degree, we perhaps also rely upon deposit insurance
to maintain an element of confidence in the banking
system, although deposit insurance exercises only a
secondary role for this purpose.
There are also risks, however, to the effective functioning of banks where deposits are insured. The
insurance of deposits tends to make some depositors
indifferent to the quality of bank management. It
thus may operate to subsidize inefficiency and withhold the rewards of efficiency. As a result, deposit
insurance may distort and impair the effectiveness of
the competitive forces in banking. Great care must
therefore be exercised in setting the limits of insurance
coverage, so that competitive effectiveness will not be
weakened in any greater degree than is necessary in
order to provide the required safeguards to depositors.
The greatest danger in expanding the role of deposit
insurance is the risk that it will result in the application of purely commercial standards of insurability.
If this occurred, the tendency would be to minimize
bank expansion and bank competition in order to
minimize insurance risks. This could defeat the fundamental aims which we have set for our banking
system.
It has been said that increased deposit insurance
coverage, by diminishing the hazards of banking
operations, would encourage more risk-taking on the
part of bankers, and thus improve the effectiveness of
our banking system in meeting the needs of economic
growth. It is, however, directly contrary to the philosophy of our private enterprise system to have the
government take the risks out of enterprise. The
reliance we place upon private initiative is founded
fundamentally on individual responsibility for decisionmaking. It cannot be consonant with such individual
responsibility for the Government to take the risks.
Indeed, it is only a step from risk-taking by public
authorities, to direct control of the industry for which
those risks are assumed. There may, of course, be
circumstances in which the subsidization of risks is
a proper means through which public incentives are
provided to private entrepreneurs. But this device
may properly be used only where there is a clear public
objective to be achieved, and this is the best means
of doing so. The general subsidization of the risks of
enterprise by Government does not meet this test.
Specific proposals
To appraise fairly the need for and the adequacy of
any reorganization plan, it appears to us that we
should look at each of the bank regulatory and supervisory functions to see whether the proposed consolidation would be likely to improve matters—or to worsen
them.
There are three basic tasks performed by the bank
regulatory authorities: (1) the control of mergers;
(2) the control of chartering and branching; and (3)
bank examination and supervision. I will discuss
each of these separately.
365
Control of mergers
The chief criticism directed against the administration of merger policy has been the approval of
some mergers in the face of adverse advisory opinions
on the competitive factor. This fact has been interpreted as evidence of policy differences and lack of
coordination.
The Bank Merger Act provision for advisory opinions on the competitive factor, however, was designed
to furnish the responsible agency with independent
appraisals of this factor only. The purpose, moreover, was not to suppress differences of view, but
to allow such differences to be expressed. Indeed,
so that authority for ultimate decision would be clear,
the advisory opinions were not made binding on the
responsible agency, and it was required that decisions
should be reached on the basis of all the criteria set
forth in the Act, with no single criterion to be
controlling.
It should not be surprising that the decisions
reached on this broader basis should sometimes have
failed to coincide with the advisory opinions based on
a single criterion. Even differences of view on the
competitive factor should not be cause for concern—
uniformity may be achieved only at the expense of
restraining independent expression, if indeed uniformity could—or should—be achieved at all.
The only proper cause for concern would be differences in the decisions on comparable cases. It is
too early to say whether such differences will emerge.
Scarcely two years have elapsed since the Bank Merger Act was passed. We are persuaded that a convergence of treatment of comparable cases will most
likely evolve if the responsible agencies will clearly
set forth and make known the bases of their decisions. Should evident differences appear, perhaps
more precise standards could be provided through
amendment of the Bank Merger Act or through the
courts. Consolidation of the regulatory agencies
would not contribute to, much less assure, consistency
of decisions.
Control of chartering and branching
The need for consolidating the bank supervisory
agencies is even less apparent in the regulation of chartering and branching. Only a single Federal
agency—the Comptroller of the Currency—may formally charter a bank or authorize the establishment
of a branch, even though the FDIC has effective
power in this respect over State-chartered banks, as
I indicated earlier.
366
The only significant problem of policy coordination which may arise in branching cases is the treatment of conflicting applications between National and
State-chartered banks. The resolution of these cases,
however, involves relationships between National and
State supervisory authorities, and not among Federal
regulatory agencies. Consolidation of the Federal
regulatory agencies would not, therefore, alleviate
any problems which we see. More often, indeed, the
conflicting applications for branches are between
National Banks.
Bank examination and supervision
Since the laws and standards which govern the
operation of State-chartered banks vary among the 50
States, and differ from those which uniformly apply
to National Banks, the standards for examination and
supervision are not the same for both classes of banks.
For this reason, there is no benefit to be derived
through consolidating the examining and supervisory
functions at the Federal level. Moreover, such consolidation of Federal powers over National and Statechartered banks would in time obliterate the distinction between National and State Banks—and the dual
banking system itself.
Recommendations
Since this Subcommittee has before it a plan for
consolidation, we believe it would be worthwhile for
the Subcommittee to consider the merits of alternative
approaches.
The present bill has, in our judgment, at least three
basic weaknesses: (1) it would imperil the dual banking system by consolidating Federal authority over National Banks and State-chartered banks in a single
agency; (2) it would create an independent commission to add to the proliferation and expansion of government outside the Executive Branch; and (3) it
would disperse authority among a number of commissioners, and thus obscure and divide responsibility for
action and hamper expeditious administration.
If any plan of consolidation of bank regulatory functions is to be considered, we believe it would be wise
to separate entirely the Federal powers over National
Banks from those over State-chartered banks. We are
in full sympathy with those who argue that the preservation of a dual banking system requires such a clear
separation of powers over each of these classes of banks.
It would be possible to avert the weaknesses of the
Bill before this Subcommittee by providing for consolidation in the manner proposed in the Report of the
Advisory Committee to the Comptroller of the Currency. That Committee recommended that all Fed-
eral power over National Banks should be centered in
the Office of the Comptroller of the Currency; and
that comparable provision should be made to centralize
all Federal power over State-chartered banks—to the
extent that such power should be permitted to exist—
in a single agency under a single administrator. This
latter objective, it was recommended, could be achieved
by reorganizing the FDIC under a single administrator, placing all examinatory, regulatory and supervisory
Federal power over State-chartered banks in that
agency, and transferring it to the Department of the
Treasury.
It would be most appropriate to place the responsibility for coordination of Federal banking powers in
the Secretary of the Treasury, who is the Chief Financial Officer of the Government. If the FDIC were
reorganized as suggested, were assigned all Federal
power over State-chartered banks, and transferred to
the Treasury—it would then not seem logical to combine the FDIC with the FSLIC.
As a matter of principle, there are persuasive reasons for confining the Central Bank to the performance
of purely monetary functions. Coordinately, there is
much to be gained through centralizing in separate
single agencies, Federal powers over National Banks
and State-chartered banks. The plan which the Advisory Committee recommended would achieve both
of these basic objectives.
Some of the non-monetary functions now exercised
by the Federal Reserve Board do not appropriately fall
within the special competence of any bank regulatory
agency. The Secretary of the Treasury seems to be the
proper official with whom to lodge these powers.
The supervisory authority which the Federal Reserve
Board exercises over bank holding companies raises
special problems because holding companies are ordinarily conglomerates of National and State-chartered
banks. In order to preserve the necessary distinction
between National and State-chartered banks, it would
be most appropriate to transfer that function to the
Secretary of the Treasury.
It is an anomaly that the regulation of the foreign
operations of National Banks now rests with the Federal Reserve Board, while such banks are generally
under the supervision of the Comptroller of the Currency. This power should be transferred to the Comptroller of the Currency. Moreover, in furtherance of
the plan described earlier, control over the foreign
operations of State-chartered banks could be transferred to the FDIC to the extent that any such Federal power over State-chartered banks is retained.
This broad approach to the consolidation of the bank
regulatory agencies is, in my judgment, preferable to
that followed in the Bill before this Subcommittee.
BEFORE THE LEGAL AND MONETARY AFFAIRS SUBCOMMITTEE OF THE HOUSE COMMITTEE ON GOVERNM N OPERATIONS ON MONDAY, MAY 20, 1963
E T
Mr. Chairman and members of the Committee: We
were most pleased to receive your invitation to appear
here today to testify in regard to our recent revisions to
Regulation 9, affecting the fiduciary powers of National Banks.
This Regulation was promulgated by us on April 5,
1963. It is the culmination of many years of study
and discussion within the banking industry. The period during which the revisions were under consideration, therefore, cannot be measured by the 60 days
which elapsed between the publication of the proposed
rule-making and April 5; by the 6-month period between the enactment of P.L. 87-722 and April 5; or
even by the period of our incumbency in this Office.
Many of the changes had received long and intensive
study by the Board of Governors of the Federal Reserve System and some have since received the informal
approval of some of the Members of the Board's staff.
Many had been under consideration by members of
our own examining force, who have devoted a lifetime
to the supervision of the Trust Departments of National Banks. Finally, these changes reflect the
product of years of thought and discussion by members of the banking industry and their associations.
In drafting the revisions, this Office drew upon all
of the foregoing. In addition, shortly after assuming
Office, we appointed an Advisory Committee composed of bankers and lawyers to conduct an intensive
inquiry into the need for revision in our banking laws
and practices. At the same time, the views of all
National Banks were solicited for recommendations as
to needed changes. One of the areas receiving much
comment and given careful study by the Committee
was the trust powers of National Banks. In its report
entitled National Banks and the Future published on
September 17,1962, the Committee recommended that
the authority over trust powers of National Banks be
transferred to this Office; that there was needed a
constant reexamination of the trust regulations in
order that National Banks might keep pace with the
changing needs of the public for such services; and
that there existed a present need for such reexamination.
Shortly thereafter we appointed an industry committee to render technical assistance in carrying out
367
this recommended reexamination. At the same time
a letter was sent to all National Banks and all State
banks operating common trust funds requesting specific commentary on the trust regulations. This
Office also appointed Professor Austin W. Scott of
Harvard University as Consultant to the Comptroller,
and has since drawn upon the wealth of his knowledge
in this area. The revision was drafted with the assistance of all of these sources. In making our study
of the proposed revisions, all questions were carefully
analyzed, including the tax and securities laws.
Thus, it will be seen that the final Regulation reflects a meticulous and thorough effort over a period
of many months by this Office and many persons who
offered their technical advice and criticism during its
evolution.
MEMORANDUM
APPLICATION OF SECURITIES ACT OF 1933 AND INVESTMENT COMPANY ACT OF 1940 TO COMMON TRUST
FUNDS OPERATED BY NATIONAL BANKS
This memorandum will treat of the applicability of
The Securities Act of 1933 and the Investment Company Act of 1940 to the collective investment of funds
held by a National Bank in certainfiduciarycapacities.
The question is raised by the assertion of the Securities
and Exchange Commission that the recently published
Regulation 9 of the Comptroller of the Currency will
allow to National Banks broadened fields of activity
which the SEC feels will require its regulation in addition to that presently provided by the Comptroller.
Regulation 9 (12 C.F.R. 9) allows to National
Banks, where not in contravention of local law, the
right to commingle funds held as fiduciary in three
distinct collective investment funds. The first is a
common trust fund maintained exclusively for the
investment of monies held as executor administrator,
guardian, or trustee under a will or deed. The second
is a fund consisting solely of assets of pension, profitsharing, stock bonus, or other tax-exempt trusts. The
third is a common trust fund maintained exclusively
for the investment of monies held by the bank as
managing agent. In each instance the bank holds the
funds in capacities traditionally committed to it. The
Regulation adds nothing in this regard. The nuance
is found in allowing collective investment of monies
under the third form of fund and under the second
as it relates to trusts qualifying for tax exempt status
under the Smathers-Keogh bill.
Thus, the tax-exempt pension plans for the selfemployed (Keogh trusts) and managing agency ac368
counts are subject to collective investment at the discretion of the bank. It bears repetition that the capacity
in which the bank holds monies and the collective investment fund are, as individual mechanisms, time
honored and legally unquestionable, representing no
extension of banking powers nor the creation of any
new relationships with the public. It is only the marriage of the collective investment form to managing
agency accounts and Keogh trusts as a means of effecting economy of operation that leads to the SEC assertion of jurisdiction. The Commission makes no argument that the reformation is undesirable but rather
that such fiduciary activities warrant a duplicity of
regulation under the securities laws.
Any effort to analyze the detail of the securities laws
in question must be accompanied by continuing recognition of the broad policy determination made by
Congress at the enactment of these laws, i.e., the activities of banks, and especially of National Banks, as
constituents of a closely regulated industry, do not
require the visitorial attention of the SEC. This consideration is of paramount importance as it permeates
both the 1933 Act and the 1940 Act, and is the sine
qua non for intelligent evaluation of the specifics of
these Acts. Debate on the 1933 Act came squarely
to the question of exempting banks and resulted in the
affirmation that the bill was intended to do so. Unqualified exemption was founded on the premise that
banking institutions are adequately regulated by Federal and state officials.
Mr. GANNON of Wisconsin. Why should it not cover the
securities issued by the bank?
Mr. RAYBURN. Because the United States Government
through its examiners and State officials, is supervising these
banks, and it has been complained that we are going into
fields where we had no business. We also exempted the
stocks and bonds of railroads, and they do not come under
this bill, because they are already supervised by the Interstate
Commerce Commission (77 Cong. Rec. 2942 (1933)).
The expressed desiratum of the 1933 Act was the
protection of the public from overreaching by dealers
in securities, a heterogenous mass of unregulated individuals and concerns. Congress was simultaneously
committing to appropriate Federal agencies increased
regulatory power over the commercial and fiduciary
activities of National Banks. The commission of banking regulation and, of importance here, the regulation
of fiduciary activities of banks, to the bank regulatory
authorities is unequivocal. The intendment is preserved not only in Congressional Record but is boldly
stated in precise language of both the Banking and
Securities Act of 1933. In short, the Congressional
resolution that banking activities are to be left to bank
regulatory agencies, under whose aegis they are subject
to the highest standards of concern for the public interest, is a resolution that must color every interpretation of the securities laws in question.
The SEC has called for registration by and regulation of common trust funds in which are invested
monies of managing agency and Keogh trust accounts
under its reading of the Securities Act of 1933 and the
Investment Company Act of 1940.
INVESTMENT COMPANY ACT OF 1940
The Banking Exemptions
The question common to the exemption provisions of the
Securities Act and the Investment Company Act and to Sec.
2(b) of the McCarran-Ferguson Act is whether respondents
are issuing contracts of insurance.
The complete inapplicability of the case as a controlling
precedent here is pointed up by the fact that much of
the court's discussion was directed to the effect of a
statute which has no application to banks at all, the
McCarran-Ferguson Act, 15 U.S.C. 1011, Sec. 2(b).
That Act provides:
No Act of Congress shall be construed to invalidate, impair
or supersede any law enacted by any State for the purpose of
regulating the business of insurance . . .
The disparity between the Valic case and our present
considerations is further marked by the fact that in
Valic the respondent company was not "primarily" an
insurance company but dealt almost exclusively in
variable annuity contracts. In addition, the sale of
variable annuity contracts, while perhaps not illegal,
is not a traditional segment of the insurance business,
(3) Any bank or insurance company; any savings and
as the Court recognized.
loan association, building and loan association, cooperative
The Commission finds a precedent, however, in two
bank, homestead association, or similar institution, or any
of its own administrative decisions, i.e., the Valic and
receiver, conservator, liquidator, liquidating agent, or simithe Prudential decisions. In those cases, the Commislar official or person thereof or therefor; any common trust
fund or similar fund maintained by a bank exclusively for the
sion evolved a novel legal concept, that of an "ectocollective investment and reinvestment of money contributed
plasmic investment company," to support its decision.
thereto by the bank in its capacity as trustee, executor,
The "ectoplasmic" theory or principle works to attribadministrator, or guardian; or any common trust fund or
ute legal existence, as an entity, to one specific activity
similar fund, established before the effective date of the
of a business otherwise exempt by describing as an "inRevenue Act of 1936 by a corporation which is supervised
or examined by State or Federal authority having supervision
vestment company" any amorphous group which is
over banks, if a majority of the units of beneficial interest in
deemed to be functioning as an "investment company."
such fund, other than units owned by charitable or educaApplication of this theory to the instant question would
tional institutions, are held under instruments providing for
result in the bank's common trust fund and participants
payment of income to one or more persons and of principal
therein being classed as "investment company" subject
to another or others. [Emphasis supplied.]
to registration and regulation under the Act in spite of
and at Section 3 (a) (7) :
the clear import of the exclusions of Sections 3(a) (3)
(7) Any company primarily engaged, directly or through
and 3(a)(7).
majority-owned subsidiaries, in one or more of the businesses
The "ectoplasmic" theory is subject to serious exdescribed in paragraphs (3), (5), and (6), or in one or more
ception as being logically unpalatable, as a distortion
of such businesses (from which not less than 25 per centum of
such company's gross income during its last fiscal year was
of the Congressional purpose in enacting the 1940
derived) together with an additional business or businesses
measure, as rendering Section 3 (a) (3) and 3(a) (7) of
other than investing, reinvesting, owning, holding, or trading
the Act nugatory exclusions, and as being totally unin securities. [Emphasis supplied.]
workable in application. Brief exposition will illusIn full view of this language the SEC nonetheless
trate the latter point. Thus, it would be impossible to
argues that the fiduciary activities of a bank are not
accord to the participating agency accounts in such a
exempt. The Commission finds encouragement in its
fund the right to elect directors annually (Section 16)
reading of SEC v. Variable Annuity Life Insurance
for the simple reason that the common fund has no
Co., 359 U.S. 65, the Valic case. In Valic the quesdirectors. There are numerous other provisions of
tion before the court was whether variable annuity
the 1940 Act which clearly indicate its inapplicability
to common trust funds. For example, Section 19
insurance contracts constituted securities or contracts
which contains detailed provisions as to the identity
of insurance under the 1933 Act. Mr. Justice Douglas
and conduct of the directors, officers and employees of
framed the issue in the case as follows:
Consistent with the Congressional purpose of 1933
to entrust the regulation of commercial banking and
bank fiduciary activities to bank regulatory bodies, the
Investment Company Act contains express exemptions
for banks. Thus, the definition of an Investment
Company excludes at Section 3(a) (3) :
369
the investment company. The common fund would
have no officers, employees or directors. Section 14
(a)(l) provides that no investment company may
make a public offering of securities unless it has a net
worth of $100,000. How is this to be applied to a
common trust fund which always has a net worth of
zero? Section 18 contains detailed provisions as to
the capital structure of investment companies; the
common trust fund has no capital structure. Section
20 entitled "Proxies; voting trusts; circular ownership :" is completely incapable of application to common trust funds. Section by section, it will be found
that the greater part of the Act could not be applied
to a common trust fund without effectively preventing its functioning. Clearly, Congress did not intend
this result.
Moreover, the "ectoplasmic" theory has received no
clear judicial sanction and remains simply an assertion of the Commission. The Valic case is cited by
the Commission as placing a judicial imprimatur on
its theory however indirectly. But as seen earlier,
Valic involved a company which, while ostensibly an
insurance company, was actually functioning as an
investment company through the merchandising of
its variable annuity contracts. Salesmen were deployed in manner remarkably similar to the manner
in which mutual fund salesmen operate. Further the
operation resulted in a massive public offering. The
Valic case cannot be read as authorizing the implementation of the "ectoplasmic" theory against the
simple aggregation or commingling of funds held by
a banking institution as fiduciary, which constitutes
only one of the many services made available by the
bank and which involves no public offering. The
theory is currently under court review in regard to
an entity whose primary business is the sale of life
insurance. In no case has this theory been applied
to banks.
The Common Trust Fund Exemption
In addition to the exclusion for banks, Sec. 3(c)
(3) specifically exempts common trust funds from all
provisions of the Act:
Any bank or insurance company; . . . any common
trust fund or similar fund maintained by a bank exclusively
for the collective investment and reinvestment of moneys
contributed thereto by the bank in its capacity as a trustee,
executor, administrator, or guardian; . . .
SEC's position in the face of this clear language
would seem inexplicable. Their argument apparently depends on a very strict interpretation of the
word "trustee." As near as we can understand it,
their contention is that the only common trust funds
370
within the exception are those wholly made up of
the funds of formal inter vivos and testamentary trusts
in which the bank formally is designated and acts as
trustee, executor, administrator or guardian.
It is but hornbook law that there are many relationships resulting in substantially the same fiduciary
duties as is the case with a formally designated trustee.
Black's Law Dictionary lists 36 different kinds of relationships which result in a trustee-cestui relationship. In very few of these would there be an instrument actually designating a trustee by name.
The Restatement of the Law of Trusts defines a
trust as "a fiduciary relationship with respect to property, subjecting the person by whom the property is
held to equitable duties to deal with the property for
the benefit of another person." The Restatement
defines a trustee as a person who holds property in
trust. Professor Austin Scott of Harvard University
made this apposite comment:
The term "trust" is used by courts and lawyers in a variety of senses. It is sometimes used to include various
fiduciary relationships, not only trust in the narrower sense,
but also bailment, executorship, guardianship and agency.
(Scott on Trusts (2d Edition), Section 2)
Among the cases cited by Scott as approving this
definition are Gilmer v. U.S., 91 Fed. Supp. 887
(1950) and Continental Casualty Co. v. Powell, 83
F.2d 652 (1936).
Further support is found in the Restatement of
Agency 2ds Sec. 14B et seq., where the concept of
agent-trustee is recognized.
a. Agents and trustees are both fiduciaries, and there is
no antithesis between the relations. An agent may or may
not hold a title for the principal but he is always subject to
the principal's directions. A trustee always holds a legal
or equitable title for the beneficiary, but he may or may
not be subject to the beneficiary's control. When the required elements in each relation exist, that is, the holding
of a title by one subject to the directions of the beneficiary,
there is both an agency and a trust relation.
b. An agent may be authorized to deal with property for
his principal. If he has only possession, he is merely an
agent. If he has title, either legal or equitable, to property
which he holds subject to equitable duties to deal with it
for the benefit of another, he is a trustee. If he has such
title and also holds the property subject to the control of
another, he is an agent-trustee . . .
Further,
. . . If a person receives property from another who
manifests an intention that the transferee is to hold the
property for the benefit of and subject to the control of the
transferor, an agency is created, whether or not title is transferred. If the title is transferred, the transferee is an agenttrustee . . .
We would also quote from an opinion of Austin W.
Scott:
If the customer pays money to a bank to be invested in a
common trust fund, it would seem that a trust and not a
mere agency is created, since the customer has no control
over the conduct of the bank in investing the money. The
mere fact that the customer may withdraw and receive his
pro rata share of the assets of the fund does not make it a
mere agency. This merely means that the trust is revocable
and a revocable trust is a trust and not an agency.
The trust is an informal trust and its sole purpose may be
to use the common trust fund as an instrument of investment. But it is not uncommon to create a revocable inter
vivos trust in which the settlor is to receive the income and the
principal is payable to his estate on his death if the trust
has not been revoked.
The position of the Commission is closely related to
that taken by the Federal Reserve in former Regulation F to the effect that somehow trusts could be
divided into those with a "bonafidefiduciarypurpose"
and those without such a purpose. A study of the commentary made to the Board prior to adoption of the
common trust fund provisions of the Regulation suggests that "bonafidefiduciarypurpose" stemmed from
a desire to prevent the use of collective investment
funds for speculative purposes. This intent, we believe, is preserved in the revised Regulation. Moreover, the Investment Company Act makes no reference
to "bona fide fiduciary purposes." It merely states
that common trust funds made up of assets acquired
by the bank as "trustee," in any of the myriad ways
that relationship may occur, are not subject to the Act.
The purpose of the trust is irrelevant; it is the nature
of the relationship that governs.
The Commission's argument that in light of the
general banking exemption the specific exemption for
common trust funds must be strictly construed appears
to ignore the conditions extant at the time of passage
of the Act. As an historical matter, the separate
reference to common trust funds most probably stems
from the fact that the study conducted by the Securities
and Exchange Commission included a separate report
as to commingled or common trust funds administered
by banks and trust companies. (House Document
476, 76th Cong., 2dSess.)
The exemption expressed this resolve: that this
aspect of bank fiduciary activity, in the form and to
the full extent to which it had been permitted by bank
regulatory authorities, was not to be covered by the
Act and that common trust funds are to be the concern of bank regulatory agencies and not the SEC.
Viewed in this historical perspective, a restrictive
reading of the exemption for common trust funds is
unwarranted and inconsistent with principles of statu-
tory interpretation. Certainly no history can be found
suggesting that the insertion of this additional clause
reflected an adoption of the "ectoplasmic" theory, a
necessary ingredient to the efficacy sought to be given
this clause by the Commission. Neither does the
history show it to be a recognition that units of participation in a common trust fund are securities.
Keogh Trusts
This leads to the least tenable of all of the contentions of the Commission relating to the 1940 Act that
there are "strong perhaps persuasive" arguments that
the Investment Company Act of 1940 applies to
collectively invested qualified profit sharing and pension trusts for the self-employed—the so-called "Keogh
bill" trusts. In the first place, the collective investment vehicle for such trusts should qualify as a
common trust fund, within the separate exemption
for such funds in the 1940 Act. The Commission has
apparently lost sight of the fact that Regulation F
permitted two types of collective investments. The
first was called a common trust fund and had rather
severe restrictions. It was held by the Board to set
the standard for qualification for tax exempt status
under section 584 of the Internal Revenue Code.
The second form was simply called collective investment, and was limited to funds of trusts forming part
of qualified pension, profit sharing or stock bonus
plans. This form, being composed as trusts in themselves each tax exempt, was subject to no restrictions.
Trusts forming part of pension, profit sharing or stock
bonus plans could be invested collectively in either
form of collective investment, and this remains true
of the new Keogh bill trusts. Yet in either case, the
funds of such trusts are invested in common trust
funds, within the exemption from the definition of
"investment company". This is particularly apparent
when one considers that the wording of that exemption is ". . . any common trust fund or similar fund
maintained by a bank exclusively for the collective
investment and reinvestment of moneys contributed
thereto by the bank in its capacity as a trustee, executor, administrator or guardian . . ." [Emphasis supplied.] Further, there is an exemption from the definition of "investment company" for "any employees'
stock bonus, pension, or profit sharing trust which
meets the conditions of section 165 of the Internal
Revenue Code." Section 165 was the equivalent in
the 1939 Code of the present section 401. The Keogh
bill was an amendment of section 401 to permit the
qualification under that section as employee pension
and profit sharing plans similar plans for the self371
employed. Unless the Commission is to adopt the
unrealistic argument that this exemption was intended
to cover only those plans which were qualified under
section 165 in 1940, it has no basis for contending
that collectively invested Keogh trusts fall outside this
exemption. The foregoing makes clear that what the
SEC has characterized as a "generous" interpretation
as to Keogh trusts is the only possible one, and that
there are neither persuasive nor strong arguments for
the opposite conclusion.
In view of the foregoing, it is an inescapable conclusion that the collective investment of funds held
by a bank as fiduciary is not subject to registration and
regulation under the Investment Company Act of
1940.
SECURITIES ACT OF 1933
Banking Exemption
Section 2(1) of the Securities Act of 1933 defines a
"security" as follows:
the term "security" means any note, stock, treasury stock,
bond, debenture, evidence of indebtedness, certificate of
interest or participation in any profit-sharing agreement,
collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, votingtrust certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas, or other mineral rights, or, in
general, any interest or instrument commonly known as a
"security," or any certificate of interest or participation in,
temporary or interim certificate for, receipt for, guarantee of,
or warrant or right to subscribe to or purchase, any of the
foregoing.
The Commission in seeking a touchstone for jurisdiction argues, as it must, that two aspects of the
operation of the funds can be construed as "securities"
within the statutory definition. The first is the agreement between the bank and the customer upon establishment of the Keogh trust or managing agent account
in question. The SEC states that the bank is offering
an "investment contract" within the statutory language, which, in the case of a Keogh trust, becomes
somewhat attenuated. The Commission must next
contend with the exemption of Sec. 3(a) (2) for
"securities issued or guaranteed by a bank." The parties to the "investment contract" are the bank as trustee
or managing agent and the customer. The collective
investment fund is not involved in any manner in the
establishment of the legal relationships here. Thus,
the Commission cannot advert to its "ectoplasmic"
theory to circumscribe the "issuer" as some entity other
than the bank. None of those attributes of a collective
investment fund which cause the SEC to submit a separate legal existence for such a fund are present where
372
the bank is functioning solely as a fiduciary under a
Keogh trust or managing agent account. If the agreement between bank and customer is a "security" as
an "investment contract" then it is certainly an exempt
security issued by a bank under 3 (a) (2).
Instructive here as illuminative of Congress' constant
attention to the banking exemption is the Investment
Advisors Act of 1940 which excluded banks from the
definition of an "investment advisor" and defines a
bank, inter alia, as any banking institution a substantial
portion of the business of which involves "exercising
fiduciary powers similar to those permitted to National
Banks under section 11 (k) of the Federal Reserve Act."
The second aspect of the bank's fiduciary activities
which the Commission would describe as a "security"
is the bookkeeping entry made as a memorandum for
the bank's own purposes to locate the ownership of
the commingled assets of the collective investment
fund. To fail to note the ownership of the fund's
assets would be to ignore a clear fiduciary obligation.
Yet the SEC reads the definition of security to include
this discharge of a fiduciary obligation. Nothing is
issued which purports to be assignable or negotiable,
and nothing is available to the customer representing
an interest in the fund. The interest in the aggregate
assets of the collective fund may be terminated not
only by the effect of the customer's cancellation of the
managing agent account or the Keogh trust but may
also be terminated by the exercise of the bank's discretion in investing monies held as fiduciary.
Assuming, however, that the bookkeeping entry falls
within the statutory definition of a "security," the exemption for "any security issued or guaranteed by a
national bank" would apply. SEC attempts to avoid
this blanket exemption by asserting that the bank will
not be the issuer but rather that some nebulous entity
involving the collective investment fund itself will be
the issuer. The Commission is forced to resort to this
legal artifice by the all-inclusive definition of "security."
Self-contradiction would be obvious were the SEC to
argue that the word "security" as used in 3(a) (2) refers only to the common stock or debentures or any
class of security less broad than the definition of security in 2 (1).
Section 2(4) of the Securities Act of 1933 defines
"issuer" as follows:
The term "issuer" means every person who issues or proposes to issue any security; except that with respect to . . .
shares in an unincorporated investment trust not having a
board of directors (or persons performing similar functions)
. . . the term "issuer" means the person or persons performing the acts and assuming the duties of depositor or manager
pursuant to the provisions of the trust or other agreement or
investment under which such securities are issued; . . .
The plain meaning of the definition compels the
conclusion that the bank as the "manager pursuant to
the provisions of the trust" is the issuer. Oddly
enough the SEC staff, in their own memorandum,
dated January 16, 1963, to Chairman Cary, concedes
that the bank as trustee will be the "issuer" of any
certificates of participation issued by the common trust
fund, and in the same paragraph is also forced to
concede that owing to the specific language of Section
2(4) that the bank as a trustee could not be held liable
to civil suits under Sec. 11 for false or misleading statements in the registration.
Normally where a registration statement is filed
with respect to such a security, Section 11 of the Act imposes
additional civil liability for false or misleading statements
contained therein, on a broader class of persons. The suit
may be brought to recover the difference between the amount
paid for the security and the value thereof as of the time of
suit or the price at which the security was sold. Section 2 (4)
of the Act defines "issuer" to include, in the case of certificates
of interest or shares in an unincorporated investment trust
not having a board of directors, "the person or persons performing the acts and assuming the duties of depositor or
manager pursuant to the provisions of the trust or other
agreement or instrument under which such securities are
issued . . ." It should be pointed out, however, that Section
2(4) further provides that in the case of a trust the trustee
thereof shall not be individually liable as issuers of any
security by the trust. Thus, while the bank or trust company
would sign the registration statement on behalf of the trust,
it would appear that it would not be liable as an issuer of any
security issued by the trust. [Emphasis supplied.]
This utterly anomalous result comes from the effort
to force this activity within the framework of a statute
which was clearly not designed to accommodate it.
The Commission depends for support of its square
disregard of the statutory exemption on the decision
of the Supreme Court in SEC v. Variable Annuity Life
Insurance Co. of America, 359 U.S. 65 (the Valic
case), on the Commission's own decision in that case
constructing the "ectoplasmic" theory, and on the
presence of an explicit exemption for common trust
funds in the Investment Company Act of 1940. As
indicated earlier, a study of the majority opinion in
Valic reveals that the issue decided by the court has
nothing to do with the question we are now facing.
The legal question there was whether the respondent
company's variable annuity contracts constituted "securities" within the meaning of the Act. The factual
framework of the case was equally dissimilar to the
present circumstances involving as it did an insurance
company under state regulation engaged largely in the
mass public sale of variable annuity contracts.
The doubtful validity of the "ectoplasmic" theory
has been discussed above under the 1940 Act and the
logical and legislative considerations there are equally
persuasive under the 1933 Act.
Finally, the failure to provide a specific exemption
for common trust funds in the 1933 Act as was done
in the 1940 Act is scarcely indicative of a Congressional intention to leave these funds without the bank
exemption. This is true primarily because the common trust fund was in its infancy as a bank fiduciary
activity in 1933 and could not have merited separate
attention. No separate study of the common trust
fund as an investment medium had been made in
anticipation of legislation. Clearly the historical context within which the 1933 Act was drawn did not
require special consideration of the common trust
fund. Accordingly, the absence of a specific exemption is of no significance.
Exempt Transactions
The SEC must also contend with Section 4(1)
of the 1933 Act which states as to Exempted
Transactions:
(1) Transactions by any person other than an issuer,
underwriter, or dealer; transactions by an issuer not involving
any public offering; . . .
A reasonable conclusion from a thorough study of the
operation of a collective investment plan under Regulation 9 is that it embraces "transactions by an issuer
not involving any public offering." The Commission
is undeniably caught in the net of its own argument.
The only possible juncture at which the SEC could
declare "public offering" is at the inception of the
managing agent or Keogh trust agreement. But here
the bank is the "issuer" of the "security" (investment
contract) and the bank exemption precludes jurisdiction. The Commission's contention that, upon a bank
entering a managing agency contract, it is selling an
interest in the pooled fund is patently invalid; for the
investment of monies in a collective fund is but one
option available to the bank in executing its investment responsibility. Indeed, a requirement in a managing agency agreement that investment must be made
in a collective fund would clearly be improper under
Regulation 9, as would be advertising other than that
which would be incidental to the promotion of the
range of fiduciary services offered by the bank. The
use of agents, a practice common to mutual funds and
insurance companies, is forbidden.
If, as an alternative, the SEC argues that the
"issuer" of a "security" for purposes of the Act is the
common trust fund, the only "security" involved is
373
the bookkeeping entry made by the bank as an intramural accounting device. This transaction bears no
resemblance to a "public offering'* involving as it does
only the bank in its several fiduciary capacities.
In this regard, the Supreme Court states in SEC v.
Ralston Purina Co., 346 U.S. 981:
The applicability of Sec. 4(1) should turn on whether
the particular class of persons affected need the protection
of the Act. An offering to those who are shown to be able
to fend for themselves is a transaction "not involving any
public offering."
The record undisputably reveals that the protection
afforded bank fiduciary customers through the constant, thorough scrutiny of bank examiners, the shield
afforded by our rigid fiduciary laws, and the requirements of our revised Regulation 9, far exceed that
which would result from the application of the securities laws.
For the above reasons, we believe that, at best, there
exists strong doubts as to the merits of the Commission's contentions.
BEFORE THE SUBCOMMITTEE ON SECURITIES OF THE
COMMITTEE ON BANKING AND CURRENCY, UNITED
STATES SENATE, ON S. 1642, MONDAY, JUNE 24,
1963
Mr. Chairman and members of the Committee, I am
pleased to have the opportunity to present our views
on one provision of S. 1642. That provision would
apply to every commercial bank with 500 or more
shareholders certain major provisions of the Securities
and Exchange Act of 1934.
We strongly favor full and complete disclosure to
shareholders and potential shareholders of all corporations of a certain size, including banks, and not merely
those having 500 or more stockholders, of all the financial and other information necessary for their protection. In the entire history of the banking business, we
have been the pioneers in putting into effect appropriate disclosure requirements for banks. We did this
on our own initiative solely on the grounds of sound
banking policy and without prompting or pressure
from anyone. It was pursuant to this policy that
immediately after assuming office, we started work on
regulations requiring the banks under our jurisdiction
to furnish their shareholders with minimum standards
of information. Indeed such information should be
available to all parties interested in any corporation's
affairs, and in the case of banks, to depositors and all
other interested parties.
We sought to fashion a first set of disclosure requirements to be followed by additional requirements as
374
experience was gained. We put into effect what we
considered the most important requirements first and
announced our intention to add to these requirements
as the banks and our Office became accustomed to this
new type of regulation and the accompanying administrative machinery. After months of preparation, we
have the second installment ready. Moreover, further
additions and refinements will be made from time to
time, as appropriate and necessary.
Although we encountered considerable resistance to
the regulations when first proposed, now, less than a
year after their effectiveness, we are pleased to be able
to say the spirit and purpose of these disclosure requirements have been widely accepted by the banks.
Of course, there was compliance with the requirements. Indeed, in many instances, there has been,
disclosure substantially in excess of our requirements,
as we expected.
It is true that State banks are not subject to our
regulations. There is no reason, however, why the
other Federal Banking Agencies having jurisdiction
over State banks or State Banking Agencies should not
take similar action. It would appear likely in any
case that the mounting public interest and acceptance
of the steps taken with respect to National Banks would
in due course of time influence these authorities to act.
In order that the Committee might know specifically
what National Banks are now required to disclose, I
will briefly run down our regulatory requirements.
Effective as of last February 1, every National Bank
with deposits of $25 million or more has been required
to furnish each of its shareholders with an annual
report containing as a minimum the following information:
a. Comparative balance sheets as of the close of the last
calendar or fiscal year and as of the close of the preceding
calendar or fiscal year.
b. Comparative statements disclosing net operating income
after applicable federal income taxes, and net operating
income per share for the last calendar or fiscal year and the
preceding calendar or fiscal year.
c. A comparative reconciliation of capital accounts which
summarizes the changes in capital accounts for the last
calendar or fiscal year and the preceding calendar or fiscal
year. This reconciliation includes items of nonoperating
income or expense.
Every such National Bank is required to furnish
every shareholder a proxy statement in connection
with any annual or special meeting of shareholders,
for which proxies are solicited. The proxy statement
must include all of the information necessary for
intelligent voting by a shareholder including the
following:
1. The identity, age, principal occupation and the office
held by each nominee for a directorship.
2. The remuneration paid to principal officers of the bank.
3. The amounts set aside or approved during the last
calendar year for pension or retirement benefits payable to
principal officers.
4. If action is to be taken with respect to any bonus, profitsharing or other remuneration plan, the material features of
the plan and the identity of the persons who would benefit
thereby. The amounts which would have been distributed
under the plan during the last calendar year. If the plan
may be amended, otherwise than by a vote of stockholders,
to materially increase the cost to the bank, the nature of the
amendment which may be so made.
5. If action is to be taken with respect to any pension or
retirement plan, the material features of the plan and the
estimated costs thereof.
6. If action is to be taken with respect to the granting or
extension of any options, warrants or rights to purchase the
stock of the bank, the following information must be disclosed:
(a) the title and amount of stock called for or to be
called for by such options, warrants, or rights;
(b) the prices, expiration dates, and other material
conditions upon which the options, warrants, or rights
may be exercised; and
(c) the market price of the stock called for or to be
called for by the options, warrants, or rights as of the
latest practicable date.
(d) The amount of stock called for or to be called for
by options, warrants, or rights received or to be received
by the following persons, naming each such person: (1)
each director of the bank or each nominee for election
as a director of the bank, and (2) each other person who
will be entitled to acquire 5% or more of the stock called
for or to be called for by such options, warrants, or
rights.
7. If action is to be taken with respect to the authorization
or issuance of any security, the following information must
be supplied:
(a) The title and amount of securities to be authorized or issued.
(b) If the securities are other than additional shares
of common stock of a class outstanding, the applicable
information with respect to (1) dividend rights, (2)
voting rights, (3) liquidation rights, (4) preemptive
rights, (5) conversion rights, (6) redemption provisions,
(7) sinking fund provisions, (8) interest rate and (9)
maturity.
(c) If the securities to be authorized or issued are
other than additional shares of common stock of a class
outstanding, the Comptroller may require financial statements comparable to those contained in the Annual
Report.
8. If action is to be taken with respect to any amendment
of the Articles of Association, a statement of the reasons
therefor and the general effect of such amendment and the
vote needed for its approval.
Our existing regulation requires that a report be
filed whenever a change in stock ownership of the
bank occurs of a magnitude sufficient to effect a change
in control of the management of the bank. The
amendment to be issued this week will expand thisrequirement to include a report to be filed whenever
any officer, director or beneficial owner of 10 percent
or more of the bank's stock, purchases or sells any
share of such stock.
Our amended regulations will require that special
information be included in proxy statements before
meetings at which shareholders will vote on merger
transactions. These requirements will include:
a. Dissenters Rights of Appraisal. The rights of appraisal
or similar rights of dissenters with respect to any matter to
be acted upon; any statutory procedure required to be followed by dissenting security holders in order to perfect such
rights;
b. Amount of Stock Outstanding Entitled to Vote. The
total number of shares outstanding entitled to vote and the
date on which the record of stockholders entitled to vote
at the meeting will be determined. If the right to vote is,
not limited to stockholders of record on that date, the conditions under which other stockholders may be entitled to vote.
c. Plans or Agreements of Mergers, Consolidations, Acquisitions of Assets.
1. The material features of the plan or agreement,
the reasons therefor, the factors considered in arriving
at the terms, the general effect thereof upon the rights
of existing stockholders and the vote needed for approval.
2. The names of the directors and principal officer*
of the merging banks together with the number of shares
of stock each own beneficially in each of the banks as
well as the number of shares each will receive in the
merger or consolidation. If any director or officer has
entered into or has agreed to enter into an employment
contract with the resulting bank, the name of such officer or director together with a brief description of the
contract.
3. The material terms and status, including estimated
increased cost, of any pension or retirement plan or proposed plan and the principal provisions of any bonus
or profit sharing plan.
4. A table showing the adjusted book value and
market value per share of each bank for the last three
years together with the pro forma book value per share of
the resulting bank.
5. If available, the range in bid and asked prices
for the last fiscal year, together with the current quoted
market price, with respect to the stock of each bank.
6. The following financial statements must be
furnished:
(a) The most recent balance sheet of each bank.
(b) Comparable profit and loss statements for the
last two fiscal years for each bank. As a continuation
of each profit and loss statement, the earnings per
share after all taxes and the dividends paid per share.
(c) A pro forma combined balance sheet and profit
and loss statement giving effect to the necessary adjustments with respect to the resulting bank.
7. In cases where the resulting bank will be a subsidiary of a bank holding company and shares of the
holding company are to be issued to stockholders in lieu
of shares in the resulting bank, the financial informa375
tfon required above must be furnished for the holding
company.
8. Where stockholders are to receive shares of a holding company, such shares must be fully described and
any material differences in the rights accorded holders
of the holding company shares, as opposed to the bank
shares to be exchanged, shall be set forth.
Our amended regulation will spell out additional
information to be furnished shareholders in the case
of a proxy fight over the election of directors. These
requirements will include the following information
concerning every important participant on both sides,
the management and dissenting group. The term
"participant" will include principal officers and directors of the bank or banks involved in the contest,
nominees for whose election proxies are solicited, and
any other person, acting alone or in conjunction with
one or more other persons, in organizing, directing
or financing the solicitation.
The following information must be furnished with
respect to each person who is a participant in any proxy
contest in respect to any special or annual meeting of
stockholders at which directors are to be elected:
1. His name, age, and business address.
2. His principal occupation or employment, the name,
type of business and address of the corporation or other organization in which such employment is carried on.
3. If he has been a participant in any other proxy contest
within the past 10 years, the principals involved, the subject
matter of the contest, the outcome thereof, and his relationship to the principals.
4. If within the past 10 years he has been convicted in a
criminal proceeding (excluding traffic violations), the dates,
nature of conviction, name and location of court, and the
penalty imposed or other disposition of the case.
5. The amount of stock of the bank or any of its affiliates
owned beneficially, directly or indirectly, by him or his family.
6. The amount of such stock owned of record but not
beneficially by him or his family.
7. If any of the stock specified in Items 5 and 6 was
acquired in the last 2 years, the dates of acquisition and
amounts acquired on each date.
8. If he has entered into any arrangement or understanding with any person regarding future employment or with
respect to any future transaction to which the bank or any
of its affiliates will, or may be a party, a description of such
arrangement or understanding.
9. Whether or not he will bear any part of the expense
incurred in the solicitation, and, if so, the amount thereof.
In addition, every covered National Bank will be
required to deliver to each prospective purchaser of
any new issue of stock of the bank, an offering circular
containing essential and material information concerning the issuer to enable the professional securities analyst, present and potential investors, depositors and the
376
public at large, to make a judgment as to the investment quality of the issue in question.
Although our offering circular requirement will be
another substantial innovation, as far as legal requirements are concerned, nonetheless, every major new
issue of bank stock in recent months, has been made
by means of an offering circular which contained information as complete as any nonbank offering circular I have seen. For example, I would like to distribute to each Member of the Committee a copy of
the circulars used by the Franklin National Bank of
Long Island last September in connection with the
marketing of $20 million of preferred stock. I would
also ask the Committee to take note of this circular
issued just this week by the Security National Bank of
Huntington, Long Island, in connection with a recent
issue of common stock. By law, the securities of National Banks are issued only with the approval of the
Comptroller of the Currency, and, hence, the purchaser of these shares will be buying a security based
on values, the existence of which is the responsibility
of a government official. This is a crucial protection
which only the investor in a National Bank can enjoy.
While it is obvious that we consider disclosure of
great importance, we regard direct supervision of
banks of greater value. The combination of these two
forms of public control gives the bank investor much
greater protection than any other investor. No one
should denigrate the direct supervision of banks as
an effective means of public control. The continuous
internal supervision, regulation and examination of
banks by Federal and State bank supervisory agencies
provides a protection to investors in banks which is
far greater than that afforded by disclosure alone. For
example, the National Bank Act requires that a complete examination at least three times in every 2-year
period, of the books and records of each National
Bank, must be made by a bank examiner employed by
the Comptroller of the Currency. Each of these examinations involves a detailed analysis and valuation
of the assets and liabilities of the institution. This
supervision provides protection for depositors and
shareholders alike which is not available to investors
in any other type of corporation.
We pass on the full details of such capital changes,
including the relationship of the offering price to
book value and to market value. No change in capital structure which would water the holdings of existing shareholders, or which conversely would cause an
undue accretion to the book value of existing shares
at the expense of new investors, would be approved.
Mr. Gary, in his statement to the Committee, criticized our annual reporting and proxy rules as falling
short of those issued by his agency. We are puzzled by
this criticism because in another part of his testimony
he emphasizes that the banking agencies will be free
under the bill, to apply their disclosure requirements
in a manner which in their judgment would be most
appropriate and which would best synchronize with
their traditional supervisory and administrative practices. This criticism is a clear indication of one of
the most undesirable features of the bill which is that
it requires the banking agencies to administer an act
which for almost 30 years has been the exclusive responsibility of another agency. The "delegation" of
authority to the banking agencies would soon prove
illusory if every deviation from SEC regulations, interpretations and policies would be subject to challenge
and criticism by that agency.
The specific criticisms made by Mr. Cary of our
regulations would appear to stem from lack of familiarity with the laws and administrative procedures
under which our Office operates. Specifically, we refer to the following statements made to the Committee by Mr. Cary:
He stated that our regulations did not provide for
prior review by our Office of proxy materials prior to
their distribution. He is understandably unaware
of the fact that our bank examiners, who visit each
bank three times in every 2-year period, are under
instructions to check carefully the last proxy statement
used by the bank and to note in their report any deviation from our regulations or any misleading or inaccurate material in the statement. Also, even before
our regulation was published, it had been the custom
of most banks to submit their notices of meeting to
our Office for prior review and this custom has continued and been reinforced by our expanded proxy
requirements.
Although it was contained in our first drafts, it was
decided that a specific provision concerning false or
misleading material would not be necessary in view
of the heavy sanctions which would befall any bank
management, which was guilty of fraud of any kind.
For this same reason it was decided not to rely upon
private actions brought by shareholders for enforcement of our regulation. This is a concept which is
foreign to bank regulation. We believe that it is
clearly more effective and preferable for law enforcement to be accomplished directly by the responsible
regulatory agency, rather than through private law
suits with their uncertain effectiveness and their atT25-698—64
25
tendant risk of abuses, such as strike and nuisance
actions.
Mr. Cary cites that there is no express provision in
the banking laws specifically providing for an injunction action by the Comptroller of the Currency.
Firstly, we would reply that neither is there any provision or any court decision indicating lack of such
authority in the Comptroller. The reason for the lack
of judicial precedent on this question is simply that
the enormous weight of the authority of the Comptroller over the National Banks is traditionally such
that with rare exception, the banks comply with his
requirements and instructions without resistance or
resort to the courts. It has, thus, been over the
years virtually unnecessary for Comptrollers to resort
to the courts for enforcement of their requirements.
Nonetheless, at any time it seemed necessary for us to
do so, we would not hesitate to seek recourse to injunction procedure, and, in my opinion, the Courts would
respond.
Mr. Cary cites as a "serious shortcoming" in our
regulation a failure to require that annual reports be
submitted to shareholders before the date of the annual meeting. Mr. Cary is evidently unaware of the
provisions of Section 71 of Title 12 which require that
the annual meeting of a National Bank must be held
during the month of January. This old statutory requirement makes it physically impossible for a bank
with a large number of shareholders living all over
the world to prepare, print, and mail an annual report
with December 31 figures at the same time as its
proxy statement and notice of annual meeting. However, we know of no instance where the figures for
the close of the calendar year are not available and
read to shareholders present at the meeting. We
completely agree with Mr. Cary that it would be
highly desirable to have a copy of the annual report
in the hands of each shareholder at the same time his
proxy is requested. To that end, we have prepared
an amendment to Section 71 which would eliminate
the obsolete requirement that the annual meeting be
held during the month of January, and instead, permit
the meeting to be held at any time and place specified in the bank's bylaws. We have this amendment
ready and will submit it through the usual channels
at an early date, and we urge its approval. If this
change is adopted, we would immediately amend our
regulations to require that the annual report be mailed
at the same time as the notice of annual meeting.
Mr. Cary stated that our proxy statement did not
specify that information be given about the interests
of officers and directors in material transactions or
377
matters to be acted upon by shareholders. As I indicated earlier in my testimony, our amended regulation
will require that such information be given in connection with any merger transaction being voted upon.
In addition. National Bank shareholders are protected
by specific statutory provisions such as 12 U.S.G.
Section 375 and 375a which prohibit conflict of interest transactions. They also have the benefit of the
criminal laws against misappropriation of bank funds.
If experience suggested to us that additional requirements in this area were needed, we would not hesitate
to impose them.
Finally, Mr. Gary says that our regulation is "only
applicable to some National Banks." In answer to this,
we would point out that our regulations, which apply
to every National Bank having deposits of $25 million
or more, cover more banks than does this Bill with its
cutoff point of 500 or more stockholders. If a figure
of 1,000 shareholders is taken, as has been recommended to this Committee by previous witnesses, our
regulation covers many more.
We earnestly believe that our existing and impending disclosure requirements are a giant forward stride
in protecting investors, present and future, depositors
and the public at large.
As the Members of the Committee well know, it was
not considered necessary or desirable to include banks
within the provisions of similar legislation whenever it
has been proposed before. The Securities Act of 1933
contains a specific exemption for securities issued by
banks. The Securities and Exchange Act of 1934,
although not containing an express exemption, does
not apply to banks by virtue of the fact that bank
stock is not listed on national securities exchanges.
The Investment Company Act of 1940 contains specific
exemption for banks from the provisions of that Act.
The Frear bill introduced in 1950 contained an exemption for bank stock as did the Fulbright bills of 1955
and 1957. On all of these occasions, the Congress was
of the opinion that it was not necessary to subject banks
to additional disclosure requirements.
What conditions exist today as to National Banks
which did not exist then? The most pertinent change
in circumstances would appear to exert its influence in
precisely the opposite direction than is proposed by the
pending bill. Today, the National Banking System is
being required by regulation to disclose essential and
material information to shareholders, which was not
the case in any of the previous periods I have just
mentioned. There would thus appear to be substantially less reason today for subjecting National Banks
378
to provisions of a law which recent Congresses have
considered undesirable and inappropriate for banks.
The genesis of the proposed legislation is based upon
the purported conclusions of the Special Study of
Securities Markets. However, an examination of the
Special Study "findings" which deal with the present
disclosure practices of corporations including banks,
now sought to be regulated, do not contain any specifics
which would tend to support in any way the extensive
reporting requirements which the bill would impose
upon banks. A careful examination of the Special
Study reveals no finding of any specific abuse or fraudulent practice of any kind on the part of banking corporations. If the Special Study group has any information of this nature, not yet published, we feel that
it is incumbent upon them, and we hereby request, that
such information be turned over to our Office immediately for appropriate action.
This Office has fully adequate power to impose on
National Banks any disclosure requirements which it
believes to be consistent with the public interest, the
interests of shareholders and of depositors. It is unnecessary to state to the Members of the Banking
Committees of the Congress that the powers vested
in this Office over National Banks substantially, and
quite rightly, exceed the powers which the SEC has in
its area. These statutory powers include criminal penalties and civil sanctions which range from monetary
penalties to forfeiture of charter.
The National Banking System is the creature of the
Congress and an instrumentality of the United States.
The Congress alone has the authority to determine
under what laws National Banks shall operate, as in
its judgment it deems best in terms of the national
aims and interests. In the instant matter of the application and enforcement of disclosure requirements,
I believe that this Office has clearly and unequivocally
demonstrated its capacity and willingness to create
conditions most conducive to the growth and effectiveness of the National Banking System, and to the protection of the public investor interest therein.
Mr. Cary raised the question as to whether future
Comptrollers would be bound to continue our regulations in effect, in the absence of an express statutory
direction to do so. We do not believe there is merit to
this contention. However, if the Committee should
decide that the National Bank Act should be amended
to prescribe general standards of disclosure, I would be
glad to cooperate with the Committee in such an
undertaking. While we do not believe any legislation
is necessary with respect to National Banks, if the
Congress should none the less deem otherwise, we
strongly urge that its action be limited strictly to the
aforesaid general amendment to the National Bank
Act, and we would be strongly opposed to any other
legislative approach.
BEFORE THE HOUSE BANKING AND CURRENCY
COMMITTEE, MONDAY, SEPTEMBER 23, 1963
Mr. Chairman, members of the Committee: Before
commenting on the bills which are before this Committee, I should like to make a brief statement on the
quality of bank credit. Fears have been expressed
that the quality of bank credit is deteriorating, and
the concern generated by these observations may lead
some to oppose further liberalization of the lending
powers of banks.
Unless banks are to pursue a policy of seeking only
riskless loans, it may be expected that the quality of
their loan portfolios will be diverse and will vary with
business conditions and monetary policies. This is
as it should be, since indeed banking is a risk-taking
business as are all other forms of private enterprise.
The task of bank supervision is to hold these risks
within manageable proportions in terms of bank solvency and liquidity.
To describe changes in the composition of bank
portfolios as "deterioration" can be very misleading.
It implies that the banks have failed to exercise prudent judgment, and that the regulatory mechanism
has broken down. It also implies that any change in
the degree of risk in bank portfolios is harmful whether
or not sound credit standards have been followed by
the banks and enforced by the regulatory authorities.
Where a policy of monetary ease is being followed
in an effort to stimulate production and employment,
it will be necessary for banks to finance new and added
ventures if these efforts are to succeed. It is to be expected that at such times greater risks may have to be
assumed in bank lending. But it is also true that the
resultant increase of aggregate demand will tend to
improve the quality of bank loans generally. If all
changes in bank portfolios were to be viewed as evidence of "deterioration," and restricted according to
such a standard, our production and employment
goals could be jeopardized and our economy condemned to a stagnant performance.
We should also be clear as to the proper roles of
monetary policy and bank supervision as means of
regulating the quality of bank credit. Monetary policies have as their proper objectives the attainment of
higher employment, economic growth, price level stability, and international balance. For these purposes,
it is aggregate demand, and not the specific forms of
bank lending, which should be influenced. Monetary
policy, moreover, is not well suited to the regulation
of the quality of bank credit. Indeed, it may operate perversely in this respect.
The tightening of credit tends to diminish aggregate demand, and reduces the capacity of borrowers
to meet their commitments. It causes banks to seek
higher returns from available funds, and diverts
funds from commercial banks to other financial intermediaries which are not subject to rate ceilings
on time and savings deposits. Nor are credit-quality
limitations suitable devices to effectuate monetary
policies. Whether it is greater or lesser monetary ease
which is sought, the most effective means of achieving these objectives are through variations in aggregate demand.
The regulation of bank credit quality had best be
left to bank supervision. Moreover, the most effective results will be achieved if broad discretion is allowed to banks and to the regulatory authorities to
adapt their policies and practices sensitively to the
emerging and potential needs of our economy. It
may safely be presumed that bankers will seek the
best opportunities to make loans, and will not substitute poorer for better loans if their lending powers
are broadened. Explicit limitations on the lending
powers of banks should properly be confined to loans
which are clearly hazardous to bank solvency and
liquidity. Within these limitations, we can rely upon
the prudent judgment of bankers, bolstered by the
supervision of the regulatory authorities, to confine
bank lending within safe boundaries.
On the specific question whether there has been a
recent deterioration in the quality of bank credit, we
have analyzed the reports of examination for a selected
sample of National Banks. For the purpose of this
study, we chose a random sample of 151 National
Banks with appropriate stratification by size of bank.
Each bank's criticized-loan ratio was computed for an
examination in 1960, and compared with this ratio
for the latest examination we have conducted of that
bank. Of the 151 banks studied, 76, or 50.4%, had
lower criticism ratios in the latest examination than
in the 1960 examination. 75 banks, or 49.6%, had
higher criticism ratios in the latest examination than
in the 1960 examination. The ratio of dollar volume
of criticized loans to the aggregate dollar volume of
loans, for all of the banks in the selected sample, rose
from 0.852% in 1960 to 1.076% in the latest examination period. This appears to be well within the normal range of random fluctuations in such ratios. We
would conclude from this study that actual expe379
resources to the repayment of the construction costs of
necessary public facilities.
Because of the importance of revenue bond financing
to State and local governments, any measure which
will lower the cost of such financing is of great benefit
H.R. 5845
to them. I believe that H.R. 5845 will provide considerable savings to State and local governments and
Borrowing by State and local governments has proto their taxpayers. Ending the present restriction on
ceeded at a rapid pace in the post-World War II
revenue bond financing will increase competition in
period. Much of this borrowing has been to finance a
the bidding for and distribution of revenue bonds, and
great backlog of projects for which funds were not
competition is a powerful force making for lower costs
available in the 1930's, and for which materials were
to consumers.
not available during the war. The rapid population
The contribution of commercial bank entry into the
growth since 1940, and the significant movement of
revenue bond underwriting field can be seen by exampopulation (and industry) to the suburbs during the
ination of the activities of banks in the underwriting
1950's, created further needs for new public facilities.
general obligations of State and local governments.
As needs for schools, highways, sewers, etc., increased,
In 1962, syndicates managed by commercial banks were
annual spending by State and local governments rose
high bidders on over 60% of the new general obligation
from under $8 billion in 1941 to over $60 billion now.
municipal bonds issued. This means that on over $3
Obviously not all of this could be met out of current
billion of new bond issues sold in 1962, State and local
taxation, and since many of the projects have had a
governments are paying less interest than they would
long useful life, State and local governments have been
be if commercial banks were not participating in the
borrowing sizable amounts of money. New issues of
market. Moreover, even on the issues on which a
securities sold by State and local governments
syndicate headed by an investment banking firm was
amounted to nearly $9 billion in 1962, and will probthe high bidder, can anyone doubt that their bid was
ably exceed $10 billion in 1963.
higher than it would have been if they did not have
In recent years, an increasing reliance has been
to consider bank competition for the issue?
placed on revenue bonds as a means to finance selfSome opponents of the bill have contended that the
liquidating projects. While in the late 1940's revenue
only saving to the borrowing units would be a slight
bonds accounted for under l/$ of State and local bond
reduction in "spreads"—the difference between the
issues, they are now running about l/z of the total.
price the underwriters pay for an issue of bonds and
The major reason for the increased use of revenue
the price at which they sell it to the ultimate investor.
bonds by State and local governments is the greater
However, since we are dealing in billions of dollars,
need that has existed for public facilities. Where these
even a "slight" reduction in spread is a considerable
facilities were expected to produce revenue which
saving to the governmental units involved. Moreover,
could be pledged for the repayment of the costs of
there are other advantages to be derived from comconstruction, the facility could be built sooner than
mercial bank participation in this market.
would be possible if repayment had to come from genThe proposed legislation would broaden and
eral property taxation. Indeed, such self-liquidating
strengthen the market for revenue bonds. If banks
projects could thus be financed on a sound basis outwere allowed to underwrite and deal in sound revenue
side the debt limitations which were related to the
bonds generally, this enlarged market would enhance
property tax resources of the local governments.
their attractiveness as investments. Even the smaller
As soon as the soundness of this method of financing banks, familiar with the needs of their communities,
became apparent, it was applied to public facilities
could provide essential assistance in the preparation
which had to find their ultimate support from tax
and marketing of revenue bond issues of their comrevenues. Gasoline taxes differ only slightly from tolls
munities. Throughout the country, investors, who
charged for the use of highways. Dedicated gasoline
rely on their bank for information concerning taxtaxes could thus be considered as revenues which could
exempt securities, would become more willing to invest
be properly pledged for the payment of highway bonds.
in sound revenue bonds. Finally, the ability of banks
Later, other special taxes were pledged for the repayto trade in and make markets in these securities would
ment of school bonds. All of this represents the sound
improve their marketability. Revenue bonds would
allocation by State and local governments of their tax
become more liquid investments than they now are.
rience does not support the assertion that there has
been a deterioration in the quality of bank credit.
I turn now to the specific bills which are before
this Committee.
380
Commercial banks have the facilities and capabilities
needed to make markets in many of the smaller revenue bonds issues.
On October 16 of last year, this Office and the Fed,
too, ruled that bonds issued by various Georgia State
Authorities were in effect general obligation bonds,
and hence could be underwritten by National Banks.
Standard and Poor's Bond Outlook commented that
"There was an immediate mark-up in the secondary
market price of all Georgia Authority bonds. . . .
Yields now are more in line with our appraisal of the
high grade quality of these bonds." An issue of
Georgia Highway Authority bonds which was selling
at a yield of 3.30% on the Friday before the ruling,
rose in price so that its yield on the following Friday
was down to 3.15%. This sort of interest reduction
would be important to any governmental unit raising
money through the sale of revenue bonds. On a $10
million issue of 30-year bonds, a reduction in interest
rate of this extent would amount to nearly half-amillion dollars in interest saved over the life of the
bonds.
We might note incidentally that this was not an
artificial or temporary speculative increase in the price
of these Georgia bonds. Standard and Poor pointed
out that the yields are now in line with the quality of
the bonds. The reason yields were previously out of
line was due simply to the fact that it was believed that
commercial banks could not deal in these bonds. As
Governor Vandiver put it: "The ruling by the Comptroller of the Currency will in the long run mean millions of dollars in savings to our taxpayers due to the
low interest rate which will result from this ruling."
Another recent example that may be cited is the experience in financing the Chicago Civic Center. During the last week of June of this year, $87 million of
bonds were sold by competitive bidding to pay for
construction of that Center. The Civic Center is to
be leased from the Public Building Commission by the
City of Chicago, with rent payable from tax revenues.
In line with the ruling in the case of the Georgia
Authorities, this Office determined that these bonds
are, in effect, general obligations and may be underwritten by commercial banks.
The winning bid was submitted by a syndicate managed by the Continental Illinois National Bank, and
included many large commercial banks. The winning
bid represented a 3.33% interest cost to the City of
Chicago, while the next best bid was 3.40%. It is, of
course, impossible to determine accurately what the
winning bid would have been without bank participation, but if the second bid had been the lowest, the
additional cost to the city would have been approximately $60,000 over the life of the bonds.
This bill would make no substantial increase in the
risks which may be incurred by commercial banks. It
relates only to bonds which are "eligible for purchase
by a national bank for its own account." The bill
would not allow any bank to buy any security which it
cannot now buy. Moreover, the bill would limit the
total amount of securities of any one issuer which may
be held. Risks are of course involved in these transactions, but the major risks lie in long-term holdings
rather than in short-term underwriting.
A slightly higher percentage of revenue bonds rated
by Moody's are in the four highest ratings (Aaa, Aa, A,
Baa) than is the case for rated general obligation
bonds. Furthermore, there are over 25 cities which
have revenue bonds outstanding with higher ratings
than their general obligation bonds. This list includes
Austin, Dallas, Toledo, Akron, Allentown, Jacksonville, St. Petersburg, San Diego, Louisville, Memphis,
Knoxville and others.
It has been suggested that there is a danger of conflicts of interest between the underwriting operations
of commercial banks and their deposit, investment,
and trust functions. It is contended, for example,
that banks which underwrite securities would have an
interest in selling these securities to depositors and
correspondents, so that customers could no longer rely
on those banks for disinterested advice.
Actually, of course, the firsthand knowledge of the
borrower and the market which underwriting requires
and provides, improves the ability of a bank to give
accurate and helpful investment advice. The business of providing correspondent services, of which
investment portfolio advice is but a part, is highly
competitive. A bank that consistently recommends
inferior securities to its customers will inevitably find
itself losing correspondents and their deposit accounts
to banks which can provide better advice. These
overriding competitive considerations apply with equal
force to investment advice to depositors.
It is also sometimes alleged that banks might be
inclined to sell such securities to their trust accounts.
Any such possibility has been obviated by the provisions of Regulation 9 and by applicable examination
procedures of this Office. Regulation 9 was issued in
execution of our general supervision of trust departments of National Banks and expressly prohibits the
use of fiduciary funds to purchase property or obligations from the bank unless lawfully authorized by the
governing instrument, by court order, or by local law.
The provision is enforced irrespective of the intrinsic
381
qualities of the property or obligations involved. This
injunction against misuse of fiduciary funds involves a
precept of fiduciary law which is widely recognized
in the courts of this country. However, Regulation 9
is not the sole test in our examination procedures.
Where the requirements of local law are more restrictive than the Regulation, that local law is treated as
determinative.
It is especially important to note that our trust
examination procedures give particular attention to the
situation here under discussion. In every examination our Representative must make explicit answer to
the following question: "Have bonds been purchased
for fiduciary accounts from any member of a syndicate
in which the bank participates?" The examining
personnel are directed to determine in every instance
whether the bank has an interest in or receives a benefit from such a purchase except as fiduciary of the
account for which it is made and to list any purchase
which may constitute a breach of trust with comment
and complete information.
The speculation that trust accounts may become
victims of underwriting mistakes ignores our supervisory activities in yet another respect. Well-established trust examination procedures compel a thorough investigation of trust department policy and
practices as to acquisition of substandard or unsuitable
assets. In the event that substandard securities are purchased for trust accounts, the matter is brought to the
attention of the bank's Board of Directors for its special consideration. Where there is clear evidence of
abuse of discretion, appropriate action is taken by
this Office.
The basic answer to the question of conflicts of interest, however, is the fact that banks have been acting
as underwriters of state and local government securities for many years without any evidence of such
problems.
Some have expressed the fear that any departure
from the present limitations on underwriting would
lead eventually to a wholesale entry of banks into the
underwriting of every class of marketable security, with
the consequence that the conditions which prevailed
in the early thirties would be recreated. Where, we
have been asked, would we draw the line—once we
departed from past policy.
The present bill is properly concerned only with
public securities, and I believe that it is only in broadening the base of dealings in such public securities that
commercial banks can make their most significant contribution. We have taken modest steps in this direction under existing law through changes in the Invest382
ment Securities Regulations of this Office. Basically,
the changes clarify the definitions of the term "political
subdivision" and "general obligation," so as to take
account of changes which have occurred in governmental financing in the past 30 years.
We believe that the Investment Securities Regulation will in some degree permit banks to perform their
proper functions in this area of public finance. However, in order to achieve the full benefits of bank participation in this market, I strongly endorse the passage
of H.R. 5845.
H.R. 7878
The law pertaining to the mortage loan activity of
National Banks now specifies that such institutions may
not make conventional loans in excess of 75 percent
of the appraised value of improved real estate, and
may not offer a conventional mortgage for longer
than twenty years. H.R. 7878 would modify these
constraints by permitting National Banks to make conventional real estate loans for not more than 80 percent
of the appraised value of the property, and for a term
of not more than 30 years.
In appraising the merits of this bill, I should like
to explore briefly what statutory standards may be appropriate for such loans.
There is a natural constraint on mortgage terms
even in the absence of restrictive controls, because
of the conservatism, prudence and caution of the
typical bank loan officer. With minor exceptions, it
is highly unlikely that banks would extend themselves
beyond reasonable limits in setting mortgage terms.
These exceptions, moreover, would not likely escape
the criticism of our examining staffs.
In determining the appropriate limitations for real
estate loans, the principal question is: should the
ceiling on mortgage maturity and the loan-to-value
ratio be set with the view of minimizing bank losses,
or to encourage a maximum level of home ownership
consistent with some bearable level of bank losses.
If Congress desired the former goal, the loan-tovalue ratio would be set very low, and the maximum
maturity of the mortgage would be fixed at a shortterm level. I do not believe that this is good public
policy in terms of our general goal of achieving a
high rate of real income growth, which includes adding
to our stock of housing and non-residential productive
capital in commercial and industrial buildings.
If commercial banks are to fulfill their functions,
they must be allowed to take risks. Neither legislation nor administrative regulation should hamper
them from doing so, within the bounds of ultimate
safety of the deposit funds they have accepted. To
assure the effective operation of banks broad lending
discretion is required.
Prospective mortgagors differ widely in their creditworthiness. They differ in terms of present income,
prospective income, employment stability, ownership
of liquid assets, insurability, and character. They live,
furthermore, in widely varying economic environments, a fact which will color their credit capacity
quite apart from the above-named characteristics. All
of these factors enter into the calculation of the terms
upon which mortgage loans can be made with reasonable prudence.
Because of these facts, there are some borrowers
whose creditworthiness clearly indicates loan terms
more restrictive than those set in the present law as
maxima; and there are other borrowers who could
make mortgage commitments on terms considerably
more liberal than these proposed maxima, without
subjecting the lending bank to unreasonable risk. The
effect of present ceilings is thus to penalize in substantial degree both the prospective borrower and the
prospective lender. The prospective borrower may
find liberal terms in his long-range interest, particularly where his normal income curve will rise in the
future, and he expects later prepayments to offset
the higher cost in the short run.
In recent years, the delinquency rates on conventional mortgages have tended to be lower than on FHA
and VA insured loans. (See accompanying table 1.)
This can be interpreted in three ways: (1) the legal
limitations on the terms of conventional mortgages
have made them less subject to delinquency; (2) the
data reflect inherently more creditworthy applicant
borrowers in the conventional category; or (3) lenders
screen uninsured risks more rigorously than those that
are insured.
There is no reason to suppose that the stricter legal
requirements for conventional mortgages are the bases
for these differences. Since such borrowers are subject to generally higher amortization payments for any
given loan size, a higher delinquency rate would be
expected. Nor does there appear to be any reason
why the more creditworthy borrowers would seek conventional loans in preference to insured loans. It
would thus seem that lenders have in the past exercised
greater care in screening conventional mortgage applicants than those for insured loans. On this basis,
I would anticipate even more careful screening of applicants for liberalized terms, and a consequent reduction in their delinquency and default rates.
At this point I should like to call your attention
again to table 1. As you can see, delinquency rates
have fallen from 1961 to the latest quarter, June 1963.
Conventional mortgage delinquencies show no trend
since 1960. While FHA and VA delinquencies are
higher now than in 1960, they have improved considerably in the more recent period.
A mortgage default is never due to the loan having
too long a maturity. It is unlikely, therefore, that
the passage of this amendment would alter the pattern of mortgage defaults, which tends to follow the
course of the business cycle. We are therefore concerned solely with the impact that the extended maximum term would have on the safety and viability of
our banking system, and individual banks within that
system.
The impact on a single bank of longer rather than
shorter term mortgages, is a reduction in the rate of
cash payback from a given volume of outstanding
loans. To the extent that those who hold mortgages
from the banks are also its depositors, this slower payback from very long-term mortgages simply means
that both deposit liabilities and loan assets are extinguished at a lesser rate than would otherwise be the
case. And if the borrowers are not depositors, but
customers of other banks, then the lending bank under
such circumstances will find its excess reserves augmented at a rate which is smaller than that which
would obtain in the case of shorter term loans. In
both cases, the practical effect of longer-term loans is
to reduce the cash inflow of the lending bank and thus
to reduce its freedom to alter its asset structure in the
very short run. I do not consider this a significant
handicap, however, because the individual bank must
provide for short-run liquidity needs largely through
holdings of cash and secondary reserves, rather than
through its prospective return flow of funds from
amortized loans. In other words, the safety and viability of an individual bank does not turn primarily on
the maturity of its amortized mortgage loans, but on
the wisdom of its management of primary and secondary reserve assets as well.
Account must also be taken of equity considerations.
The mortgage loan limitations on National Banks are,
in general, more restrictive than many State laws affecting State-chartered banks—and also more restrictive than Federal and State laws affecting savings and
loan associations and other financial intermediaries.
The accompanying tables provide appropriate comparisons between legislation affecting National Banks
and that governing banks in the several States.
383
TABLE 1.—National Association of Mutual Savings Banks mortgage delinquency rates, by selected
States
[Percentages of number of loans delinquent to number outstanding]
All reporting States
End of period
VA
Conv.
Total
FHA
VA
Conv.
Total
FHA
0.15
.33
.20
.17
. 15
.21
.21
.41
.69
0.45
.86
.32
.26
.32
.43
.32
.53
.66
0.36
.44
.24
.23
.26
.32
.29
.53
.57
0.20
. 33
.24
.24
.31
.38
.34
.69
.75
0.13
.21
.30
.29
.24
.32
.44
.58
.83
0.40
.72
.34
.28
.44
.54
.40
.88
.96
0.16
.24
.19
.21
.23
.29
.29
.61
.65
0.49
.62
.32
. 34
. 34
.63
.44
.50
.52
.61
.59
.59
'. 60
.72
.72
.72
'.73
.63
.58
.60
.60
.53
.52
.50
.53
.62
.63
.59
.67
.56
.70
.65
.71
.73
.74
.73
.77
. 59
.56
.53
.62
.60
. 55
.69
. 61
.61
. 56
.55
. 51
.66
.64
.66
. 58
.77
.70
.62
. 63
Total
1948
1949
1952
1954
1957
1958
1959
1960
1961
1962:
Mar
Tune
Sent
Dec
1963:
Mar
Tune
FHA
0. 36
.50
.25
.22
.25
.34
.28
. 50
.63
See footnotes at end of table.
New Hampshire
Maine
Connecticut
Massachusetts
Conv.
VA
Conv.
Total
FHA
VA
Conv.
Total
FHA
VA
0. 16
.34
.24
. 32
.28
.45
. 38
.39
.56
0.57
1.09
.40
.36
.50
.90
.52
.50
.59
0.51
.55
.30
.28
.27
.55
.42
.53
.48
1.71
2.58
1.13
.91
.79
.87
.94
1.46
1.89
2.24
1.69
.72
.97
.79
1. 36
1.15
1.60
2.76
3.71
1.08
1.26
.90
1.33
1.21
1.96
2.39
1.05
2.20
1.06
.74
.67
.61
.53
1.36
1.79
n.r.
1.39
1.10
.41
.81
.75
.31
1.35
1.29
n.r.
.39
.75
.26
.63
.44
.16
1.90
1.52
n.r.
2.48
2.09
1.09
1.20
1.17
.47
1.53
1.78
n.r.
1.20
.76
. 13
. 62
.59
.27
1. 23
1.13
.54
. 56
.49
.44
.56
.53
.51
. 50
.66
.68
.63
.55
.49
.53
.45
.38
1.77
1.92
1.88
2.02
1.70
1.86
2.43
2.13
2.07
2.59
2.47
2.56
1. 66
1.67
1.40
1.74
1.21
1. 24
1. 16
1.28
1.46
1.13
1.35
1.27
1. 37
1.04
1. 12
1.45
1. 14
1.32
1. 15
1.23
.42
.44
.39
.45
.46
. 51
.42
. 41
2.01
2 29
2. 17
2. 31
2. AS
3 03
1.73
1. 95
1.28
1. 12
1.09
. 92
1.57
1. 13
1.22
1. 14
TABLE 1.—National Association of Mutual Savings Banks mortgage delinquency rates, by selected
States—Continued
[Percentages of number of loans delinquent to number outstanding]
Rhode Island
New York City
Vermont
New York Upstate
End of period
1948
1949
1952
1954
1957
1958
1959
1960
1961
1962:
Mar
June
Sent
Dec
1963:
Mar
Tune
Conv.
Total
FHA
0. 50
1.64
.84
1. 54
0. 35
. 37
.23
. 17
.27
. 35
0. 12
. 19
.24
. 14
1.77
3. 85
5. 06
2.07
1. 50
1.47
. 61
. 67
1.20
.83
1.68
.67
1. 79
1. 12
1.59
1.17
1. 15
1.32
.92
1. 39
1.24
1. 45
Conv.
Total
FHA
0. 16
. 65
. 55
. 92
1.08
1. 10
0.26
.62
1.26
1.34
1. 16
1.07
0.30
. 36
.27
.34
1.24
.84
1.50
.48
.98
1.07
1. 14
1.57
.88
1.27
1.85
1.25
1.48
1.17
. 81
1. 15
1. 12
1. 37
.88
.83
.97
.87
1. 12
1.06
1.35
1.22
1.35
1.31
1. 30
1.41
.78
.73
. 88
.75
1.51
1.21
1.35
1. 15
.71
. 60
1.09
1.02
1.11
. 81
.61
.52
1.34
1.26
FHA
0.24
. 51
.50
. 59
.58
. 59
.40
.78
.41
.95
See footnotes at end of table.
VA
VA
Total
.64
.39
.42
.34
.69
.22
1. 38
.89
.77
.97
.23
VA
Conv.
Total
FHA
0.25
.51
.20
.25
. 37
. 51
0.49
.41
.08
.07
0. 33
.39
.30
.27
.36
. 52
. 64
.67
.14
New Jersey *
VA
Conv.
Total
0.27
.27
.14
. 20
. 13
0.37
. 36
.20
.32
. 35
0.39
.45
. 18
.26
26
.28
.61
. 60
0.22
0.46
. 18 '6.' 08' .06
.31
.35
. 18
. 13
. 08
. 12
.20
.31
. 34
. 44
.51
.60
. 30
. 40
.50
. 31
. 51
.63
. 36
. 35
.51
. 20
. 38
.41
.49
FHA
VA
Conv.
0.20
.23
.46
. 12
. 35
. 33
.39
.40
.42
. 15
. 19
. 21
.26
.63
. 74
.76
1.44
I. 34
I. 35
1
L.07
.36
.33
. 33
.36
.50
.54
. 49
. 51
.40
.33
.37
.37
.24
.21
. 20
.25
.69
••.60
. 65
.65
.70
. 50
. 51
.63
.68
.63
. 67
.68
.70
r. 62
. 69
.65
.63
.49
. 46
.49
.86
.62
. 59
.62
. 69
.30
. 34
.52
.40
. 54
. 47
.39
L.49
L 15
.39
. 33
.56
.45
.38
. 33
.30
.26
.70
.64
.61
. 50
.71
.65
.72
. 68
.52
. 46
.64
. 64
.57
. 50
. 38
. 31
. 83
1.49
1. 13
1
1.57
.27
. 27
. 31
.52
.30
.39
.43
. 51
.46
36
32
49
22
TABLE 1.—National Association of Mutual Savings Banks mortgage delinquency rates, by selected States—Continued
[Percentages of number of loans delinquent to number outstanding]
Pennsylvania
End of period
Total
1948
1949
1952
1954
1957
1958
1959
1960
1961
1962:
Mar
June
Sept
Dec
1963:
Mar
Tune
FHA
VA
Conv.
Total FHA
VA
0 73
1.25
.40
.12
. 11
. 18
. 16
.49
.46
0 22
.82
.25
.04
.04
. 13
.18
.63
.65
1 46
2. 90
. 58
.13
.17
.25
. 19
.57
.55
0 48
.47
.30
.17
.02
.07
.03
.24
. 16
0.05
.02 " ' . 0 6 '
.05
.07
.08
.04
.08
.04
.05 " . 0 6 "
.22
.23
0. 15
.03
.12
. 13
.03
.12
.09
.38
.46
.43
.42
••.48
.61
.61
.61
' . 80
.53
.46
.44
••.41
.23
.21
.20
'.22
. 16
. 19
.11
.15
.09
. 19
.16
.20
.33
.23
.09
.22
.49
.39
.78
.63
.46
.40
.20
. 12
.12
.12
.13
.12
.19
.23
See footnotes at end of table.
Other Atlantic States *
Florida
Maryland
Conv.
Total
FHA
VA
Conv.
Total
FHA
VA
Great Lakes States »
Conv. Total
Conv.
FHA
VA
.12
.02
.31
.13
.33
0.20
.36
. 17
.20
.13
.34
.39
.58
.56
0. 12
.40
.09
.20
.05
.17
.27
.30
.45
0.29
.44
.32
.29
.29
.67
.57
.90
.57
0.22
.30
.18
. 17
.11
.22
.27
.57
.59
n.r.
n.r.
n r
n.r.
0.11
.09
6.02 .09
. 17
.04
.20
. 0 3 ' .67
.10 2.27
n r
n.r.
0.08
.09
. 11
.16
.19
.68
2.67
n r.
n r.
n.r.
n.r.
0. 13 0.37
.13
.07
.22
.25 " . ' 0 3 '
. 14
.77
.29
1.93
n.r.
n.r.
0.13
.14
.24
.15
.16
.22
.36
n.r.
n.r.
0. 14
.18
.41
.09
.15
.27
.39
n.r.
n.r.
0. 16
.06
.10
.29
.21
.20
.34
.03
. 16
.10
.06
2. 10
2.00
1.86
1.96
2.64
2.44
2.27
2.37
1.67
1. 69
1.62
1.69
.15
.23
.07
.31
.41
.33
.40
.38
.48
.39
.52
.41
.44
.34
.34
.38
.21
.20
.25
.32
.61
.79
.98
.86
.41
.89
1.20
.98
.52
.75
1.06
.80
.70
.72
.65
.80
.04
.02
1.82
1.45
2.24
1.75
1.53
1.28
. 15
.08
.33
.38
.33
.42
. 34
.43
. 31
.20
.96
.86
.94
.87
1.07
.88
.85
.84
'6.22'
TABLE 1.—National Association of Mutual Savings Banks mortgage delinquency rates, by selected States—Continued
[Percentages of number of loans delinquent to number outstanding]
Arkansas
End of period
Total
1948
1949
1952
1954
1957
1958
1959
I960
1961
1962:
Mar
FHA
0.15
0. 11
. 18
June
Sept
Dec
1963:
Mar
June
.22
.02
.10
. 10
. 09
. 27
.29
. 55
.02
.09
.07
. 12
. 34
. 34
.37
.22
.68
.45
.27
.22
.13
.27
.14
VA
Texas *
Conv. Total
0. 28
0. 11
.39
(•)
.09
.07
. 18
. 10
(a)
0.07
VA
Conv.
Total FHA
0. 17
0.03
n.r.
0.05
. 14
. 13
.12
.07
. 17
. 13
.14
35
81
.04
.07
.15
.10
36
84
. 60
. 71
.98
.88
.65
53
.65
.66
.51
.56
.50
.57
.38
. 12
. 17
.80
.73
. 56
.10
FHA
Other Southwest States «
. 54
.42
.22
.20
35
74
Conv.
Total FHA
0.42
0.46
.47
.37
. 11
. 25
0.33
. 36
. 28
n.r.
n.r.
n.r.
n.r.
n.r.
0 25
Conv.
Total
FHA
n.r.
0.05
n.r.
0.40
.42
. 20
.18
.08
17
28
.05
.10
.05
15
42
38
.52
.27
.32
45
.42
.37
.25
44
.40
.45
.24
48
.46
.31
.27
.28
.34
.30
.44
.32
.27
.30
. 18
VA
VA
.06
16
35
.08
.17
31
90
NOTE: Data reflect delinquencies on loans against 1- to 4-family properties
located in the respective States or areas; mutual savings banks report on their own
in-State loans, and selected mortgage servicing contractors report on loans which
they service for savings banks and other institutional holders. Percentage ratios
are computed by dividing the number of loans delinquent by the total number of
loans held or serviced. Delinquent loans include those which are 3 or more payments overdue on a monthly program and one or more payments overdue on a
quarterly program and, beginning in March 1956, all loans in the process of foreclosure on the date of the report. Data for years prior to 1960 are not strictly
comparable with later data because of changes made in the survey, including a
substantial increase in the number of savings bank reporters, the addition of several
States to the survey, and the change in the classification of loans reported from total
mortgages to 1- to 4-family mortgages.
n.r.
0.05
. 19
Northwest States •
California
13
.22
.20
22
24
13
38
.17
.29
.28
24
20
. 14
18
20
.37
.36
0 12
.25
.25
26
34
30
.25
.33
.28
56
.42
.48
.36
33
.30
.33
.44
15
.23
.26
.20
.36
.40
.26
.36
.44
.55
.40
.35
.20
.23
. 30
. 12
19
n.i
n.i
VA
Conv.
n.i
n.i
n.r.
n.r.
n.r.
n.r.
n.r.
ni
n.i
n.i
n.i
n.i
n.i
n.i
0 26
0 34
0 18
14
. 15
.28
.21
16
.23
.31
.22
. 19
.36
.14
.20
21
. 31
.23
16
. 31
n.r
18
.12
.20
.19
n . r . = N o report.
a
No loans of his type reported.
» Revised.
•
1
Beginning with Dec. 1962 rates for New Jersey reflect a change in reporting
procedure by one bank.
2
Includes Georgia, North Carolina and District of Columbia from May 1951 and
Delaware from March 1960.
3
Includes Minnesota, Ohio, Indiana from December 1948, Michigan from May
1951, and Wisconsin from March 1960.
* Dec. 1961 rates for Texas reflect a basic change in collection policy by one major
mortgage serviccr.
s
Includes Oklahoma from December 1954 and Arizona from March 1960.
8
Includes Oregon, Washington and Alaska from March 1962.
TABLE 2.—Tabulation of States with laws governing
term of conventional mortgage loans relative to regulation governing National Banks
States with laws regarding term of Conventional real estate
loans that are:
More restrictive
Oklahoma
South Carolina
Wyoming
(3)
Less restrictive 1
Alabama
Alaska
Arizona
Arkansas
Connecticut
Delaware
Florida
Hawaii
Illinois
Kansas
Kentucky
Louisiana
Maine
Maryland
Minnesota
Mississippi
Missouri
Nebraska
Nevada
New Hampshire
New York
North Carolina
Pennsylvania
Rhode Island
South Dakota
Tennessee
Utah
Washington
West Virginia
Wisconsin
(30)
Same
California
Colorado
Georgia
Idaho
Indiana
Iowa
Massachusetts
Michigan
Montana
New Jersey
New Mexico
North Dakota
Ohio
Oregon
Pennsylvania
Texas
Vermont
(17)
i Includes States with no restrictions on term of conventional
mortgage loan.
I wish to make clear that I would support this bill
even if all comparable Federal and State laws were
either equally or more stringent than the existing federal limitations.
I believe this bill can thus stand on its own positive
merits. Congress, in passing this bill, will not only
benefit the public, but remove the present discrimination against federally chartered commercial banks.
I strongly recommend the passage of H.R. 7878.
H.R. 8247
Section 5200 of the Revised Statutes, as amended
(12 U.S.G. 84), limits the obligations of any person,
copartnership, association, or corporation to any National Bank, to 10 percent of the bank's capital stock
and surplus. There are certain loan categories which
are exempted from the 10 percent loan limit, or are
subject to a greater limit. Largely, these exceptions
are banker's acceptances, obligations that arise from
388
TABLE 3.—Appraised value conventional mortgage
loan limits of States compared with the limit applying to National Banks
States having appraised value conventional mortgage loan
limits that are:
More restrictive
Minnesota
Montana i
New Mexico
North Dakota
Oklahoma
South Carolina
Texas
(7)
Less restrictive 1
Alabama
Alaska
Arizona
Arkansas
Connecticut
Delaware
Florida
Illinois
Kansas
Kentucky
Louisiana
Maine
Maryland
Mississippi
Missouri
Nebraska
Nevada
New Jersey
New York
North Carolina
Rhode Island
Tennessee
Utah
Washington
West Virginia
Wisconsin
(26)
Same
California
Colorado
Georgia
Hawaii
Idaho
Indiana
Iowa 1
Massachusetts
Michigan
New Hampshire'
Ohio
Oregon
Pennsylvania
South Dakota
Vermont »
Virginia
Wyoming
(17)
1
Only 40 percent of the loan must be amortized in the
20-year period.
* New Hampshire law provides for maxima of 50-80% of
appraised value, depending on the location of the property.
8
66%-80%, depending on type of property.
the international and domestic shipments of goods,
obligations collateralized by U.S. Treasury securities,
and certain obligations of National Banks and local
public agencies.
The proposed legislative revision would raise the
basic lending limit of National Banks to 20 percent
of capital and surplus. It would also raise the statutory exceptions, since the purpose of the proposed legislation is to elevate the whole structure of limitations
on lending by National Banks to a single borrower.
The proposed legislation would enable National
Banks to compete more effectively with State banks,
which for the most part are subject to less restrictive
lending limits. It would enable banks generally to
compete more effectively with other financial institutions, and with various money and capital market instruments. It would enable smaller banks to compete
more effectively for commercial customers. The proposed legislation would also tend to enhance competi-
tion in loan markets, and thereby increase the availability of financial resources to business firms of all
sizes. In general, the proposed legislative change
would be a step in the direction of encouraging competition and resource mobility, and consequently, I believe, it would lead to a fuller realization of the potential of the American economy.
The basic limitation on loans of National Banks to
a single borrower has not been changed since 1906.
The rationale for the restriction has been a desire to
encourage or to force banks to diversify, and thereby
limit the risk associated with a single or several "bad"
loans.
The principle of diversification is a reasonable and
proper one which we do not seek to discourage. The
proposed legislative revision, however, would still limit
the maximum loan that a National Bank could extend
to a single borrower to a very small portion of its
resources. In an average case, 20 percent of capital
and surplus would be about 15-16 percent of a bank's
entire capital account, and less than 1.5 percent of its
total assets. Of course, spreading loans among many
borrowers does not insure substantial diversification.
Where a bank's activity is restricted to an area dependent upon a narrow economic base, loan diversification
may be very difficult to achieve under any limitations.
Moreover, lending limits may in some instances actually restrict the diversification possibilities of commercial banks. This would occur, for example, where a
small or medium-sized bank was effectively excluded
by its lending limit from servicing a medium or larger
commercial customer, and consequently had to restrict
its lending activity to instalment or real estate lending,
or to smaller commercial lending which might be
heavily concentrated in one or a few industries.
Increasing the maximum loan to a single borrower
to 20 percent of a bank's capital and surplus would not
result in any significant increase in the risk attached to
bank lending. The maximum loan would still be small
enough to forestall any excessive or interlocking relationship between a bank and a single customer. Bankers would still be in a position to decide for themselves
whether certain loans or lending policies were consistent with desired diversification—but they would be
given a somewhat wider latitude to exercise that discretion. This greater latitude would enable many
banks to improve the quality and diversification of their
loan portfolios. Apart from added flexibility, the
quality of loan portfolios would be improved by enabling smaller and medium-sized banks to service
somewhat larger borrowers, which often entail lesser
risks.
The present limitation on loans to single borrowers
has a direct restrictive impact on small and mediumsized banks, and upon many potential bank borrowers.
Small and medium-sized banks frequently cannot meet
the loan demands of local customers without sharing
loans with correspondent banks in largerfinancialcommunities. This may result in eventual loss of the customer, or in excessive dependence upon a larger correspondent bank. In some instances a rapidly expanding
firm outgrows the lending limit of its local bank or
banks. This sort of phenomenon is not restricted to
the smallest banks. For example, a National Bank
with resources of $10 million and with an average ratio
of capital and surplus to deposits and assets, could not
lend more than about $65,000 to a single borrower.
The inability to service the loan needs of many
potential customers acts as a barrier to the growth of
smaller and newly formed banks. Not only may the
banks themselves suffer, but frequently the quality of
banking services available in the community may also
suffer; for, when larger commercial customers concentrate their banking in financial centers, there is less
pressure and there are fewer resources for the development of quality banking in smaller communities. Providing for the banking needs of larger customers would
not drain away banking resources available to smaller
customers. Rather, it would tend to improve the quality and variety of services available to smaller customers.
The 10% loan limit also tends to handicap many
larger commercial banks. Not only does the present
limit force large commercial firms to borrow from the
large banks in New York, Chicago, and San Francisco,
but it persuades many businessfirmsto obtain much of
their financing outside of the commercial banking
system. Insurance companies, with greater permitted
flexibility in their lending practices, have a competitive
advantage over banks in handling larger intermediateterm credits. In the shorter maturities, many large
firms find that the necessity of arranging a number of
bank lines in order to obtain a given amount of financing increases the relative attractiveness of commercial
paper as a source of funds.
Apart from the effects of the bill upon competition
between smaller and larger banks, and between bank
and nonbank lenders, there is also the question of
competition between National Banks and State banks.
At present, most State banks are subject to less restrictive lending limits than those imposed on National
Banks. In only about 10 States is the basic lending
limit as low as the 10 percent of capital and surplus
that applies to National Banks. In no State is the
389
basic lending limit below that applicable to National
Banks. In a few States, the limit is 10 percent of
capital, surplus and undivided profits, or 10 percent
of capital and surplus with a provision for larger
loans if approved by the bank's directors. In all other
States the basic lending limit ranges from 15 to 35
percent of capital and surplus. In addition, in a number of States the exceptions to the basic lending limit
are more generous than those applicable to National
Banks.
The proposed increase in the basic lending limit of
National Banks would substantially meet some of the
deficiencies which now exist in the availability of financing in the U.S. economy. It would bring about
improved competition among commercial banks and
among lenders generally, thus leading to the fuller
utilization of existing resources and furthering the
progress of our economy. I see no material danger
that the proposed legislation would result in undesirable banking practices. Indeed, it would provide
commercial bankers more latitude to implement a
flexible and less risky lending policy.
I urge the passage of this bill.
H.R. 8230
National Banks currently may make loans on forest
tracts only up to 40 percent of the appraised value
of the economically marketable timber offered as
security. The maximum term of such loans is now 2
years for unamortized loans, and 10 years for fully
amortized loans. The proposed legislation would
increase the maximum permissible loan to 60 percent
of the appraised fair market value of the growing
timber, plus the value of the lands and improvements
thereon offered as security. The maximum term
would be increased to 3 years for unamortized loans,
and to 15 years for amortized loans.
The forests of the United States represent a vital
natural resource. Even in the "age of steel," wood
remains a critically important material. The gamut
of uses ranges from houses and shipping containers
to furniture and railroad crossties. Wood pulp is the
prime raw material in the production of paper and
paperboard. Further, growing forests perform invaluable functions such as erosion prevention and
maintenance of water tables, and provide recreation
sites and wildlife refuges.
The forest-related industries represent a significant
share of U.S. economic activity. Of the $163.6 billion value added by manufacture in 1960, the Census
industry groups of "lumber and wood products," "fur390
niture and fixtures" and "paper and allied products"
accounted for $12.7 billion, or 7.8 percent. In the
South and West (Census divisions of South Atlantic,
East South Central, West South Central, Mountain,
and Pacific), these same industry groups represented
in 1960,11.4 percent of the total value added by manufacture.1 Over 1.5 million people were employed in
these industry groups in 1960, including about 600,000
in "lumber and wood products." By any standard,
both the output and the economic activity of the forestrelated industries are important for the economy as a
whole and especially important for the economies of
the South and the West.
Most of the easily accessible virgin forests have been
cut, the distances over which lumber must be shipped
have steadily increased, and much cutover land which
is primarily suited for forestry has not been returned
to tree production. Lumber prices have increased
much more than have all commodity prices in recent
decades. For example, the wholesale price index of all
commodities increased by 133 percent between 1940
and 1961, while the wholesale price index of lumber
increased by 238 percent.2 One major factor responsible for this price history has been the persistent decline in the stock of good quality, reasonably accessible
timber.
Adequate timber renewal can be achieved only under "sustained yield management." A tree must be
40 to 80 years old to be suitable for lumbering. To
gain sustained yield, assuming tree maturity at 50
years, one-fiftieth of the stand should be cut each
year (each tree cut being mature) and one-fiftieth
should be replanted. Sustained yield management
puts forestry on a crop basis as opposed to a mineral
basis.
In terms of maintaining adequate supplies of timber resources, the sustained yield principle is fully
consistent with the public interest. Federally owned
forests are operated under it. That the principle is
now also consistent with the interests of private holders of timber resources, when coupled with other
techniques of good forest management, is indicated by
the fact that a number of large lumber and paper
companies currently operate their holdings on this
basis. To do so requires adequate long-term financing. Such financing has not been readily available
to large numbers of enterprises engaged in lumbering
1
Figures were computed from Bureau of the Census, Annual
Survey of Manufacturers, 1959 and 1960.
9
Bureau of the Census, Statistical Abstract of the United
States, 1962, pp. 343, 693.
and other forest-related operation. The proposed bill
will be a step toward closing this credit gap.
The availability and the cost of long-term credit
are critical factors in determining how privately-owned
forests will be managed. The Forest Service of the
Department of Agriculture, in its 1947 study, Forests
and National Prosperity (p. 97), maintained that
"forest owners and operators generally lack sources
of satisfactory credit—long-term or intermediate—
adapted to their special needs." The situation subsequently improved only to the extent that the prohibition on forest tract loans by National Banks was
replaced by the current provisions for such loans in
1933. The proposed legislation is a necessary step
in direction of making more credit available on a
longer-term basis to owners of forest lands, so that
these lands may be put on a sustained yield basis.
The proposed amendment, if enacted, should have
the effect of bringing more forest lands under sound
management practices. Both the existing legislation
and the proposed amendment allow National Banks
to make loans only on those forest tracts "which are
properly managed in all respects." Proper management includes acceptable cutting and replanting practices, removal of trees damaged by insects or disease,
and protection against fire losses. Liberalization of
the provisions for forest loans will result in more owners of forest tracts accepting the responsibility of
"proper management" in order to secure bank credit.
National Banks are presently operating at a competitive disadvantage in comparison with State banks in
the field of forest tract loans. Very few States have
specific provisions concerning lending on forest tracts,
but the general State restrictions on real estate loans
typically are more liberal than those placed upon forest tract lending by National Banks. In at least twothird of the States, State banks may now operate
under more liberal restrictions than do National Banks
in this area, with respect to one or more of the critical
factors of loan-to-value ratio, inclusion of the value
of the land in the base, or the maturity of loans.
The lengthening of the term of forest-tract loans
would be a significant step toward meeting the longterm credit needs of the forest-related industries. At
the same time, the new terms—15 years for a fully
amortized loan and 3 years for an unamortized loan—
are in full accord with sound banking principles.
The increase to 60 percent of security offered as the
maximum loan, and the inclusion of land in the base,
are also well within the range which would be consistent with sound banking. Forest tract management
is now a highly professionalized endeavor. Ever bet-
ter safeguards against losses from fire, insects, and
disease have resulted in increasingly favorable loss
experience.
Lack of adequate long-term credit has handicapped
the efforts of forest owners to place their holdings on
a sustained yield basis under scientific forest management techniques. Such a basis is essential if adequate
supplies of forest resources are to be available for the
economy. The entire economy would benefit from
the greater availability of forest resources, and from
the stronger participation of the forest-related industries in overall economic activity. The amendment
would also allow National Banks to compete more effectively with State banks in the forest-tract field.
I urge the Committee to approve this proposed
legislation.
BEFORE THE COMMITTEE ON INTERSTATE AND FOREIGN
COMMERCE, HOUSE OF REPRESENTATIVES, ON H.R.
6789 AND S. 1642, WEDNESDAY, FEBRUARY 19, 1964
As we stated to the Senate Committee, this Office
is strongly opposed to the provisions which would subject banks to Sections 12, 13, 14 and 16 of the Securities and Exchange Act of 1934. As the Federal official charged with the enforcement of the present laws
governing federally chartered banks, I regard this proposal as both unnecessary and unwise, so far as National Banks are concerned.
This legislation would not increase the amount of
disclosure to the public of the financial affairs of National Banks but, in fact, decrease it. Our Office in
1962 imposed disclosure requirements on all National
Banks with total deposits of $25 million or more. The
attached tabulation shows that this regulation covers
654 National Banks holding 81.2% of the total assets
of National Banks. If passed, S. 1642 for the first 2
years would cover only 200 National Banks having
750 or more shareholders. Thereafter, if the administering agency elected to lower the cutoff to 500 or
more shareholders, 114 additional National Banks
would be covered.
In addition, S. 1642 does not cover any new issue
of securities by a new bank or by an existing bank unless that bank already has 750 or more shareholders.
As we stated to the Senate Committee, it was our intention to issue expanded disclosure regulations which,
among other things, would require offering circulars
to be used on all new issues of securities over a minimum dollar amount. In view of the uncertainty concerning the whole field of disclosure which has been
engendered by the rapid passage of S. 1642 through
the Senate, we have not thought it feasible to issue
391
this regulation as well as additional projected disclosure requirements concerning merger and proxy
contests.
In order that the Committee might know specifically
what National Banks are now required to disclose, I
will briefly run down our regulatory requirements. Effective as of last February 1, every National Bank with
deposits of $25 million or more has been required to
furnish each of its shareholders with an annual report
containing as a minimum the following information:
a. Comparative balance sheets as of the close of the last
calendar or fiscal year and as of the close of the preceding
calendar or fiscal year.
b. Comparative statements disclosing net operating income
after applicable Federal income taxes, and net operating
income per share for the last calendar or fiscal year and the
preceding calendar or fiscal year.
c. A comparative reconciliation of capital accounts which
summarizes the changes in capital accounts for the last calendar or fiscal year and the preceding calendar or fiscal year.
This reconciliation includes items of nonoperating income or
expense.
Every such National Bank is required to furnish
every shareholder a proxy statement in connection with
any annual or special meeting of shareholders, for
which proxies are solicited. The proxy statement must
include all of the information necessary for intelligent
voting by a shareholder including the following:
1. The identity, age, principal occupation and the office
held by each nominee for a directorship.
2. The remuneration paid to principal officers of the bank.
3. The amounts set aside or approved during the last calendar year for pension or retirement benefits payable to
principal officers.
4. If action is to be taken with respect to any bonus, profitsharing or other remuneration plan, the material features
of the plan and the identity of the persons who would benefit
thereby. The amounts which would have been distributed
under the plan during the last calendar year. If the plan
may be amended, otherwise than by a vote of stockholders,
to materially increase the cost to the bank, the nature of the
amendment which may be so made.
5. If action is to be taken with respect to any pension or
retirement plan, the material features of the plan and the
estimated costs thereof.
6. If action is to be taken with respect to the granting
or extension of any options, warrants or rights to purchase
the stock of the bank, the following information must be
disclosed:
(a) the title and amount of stock called for or to be
called for by such options, warrants, or rights;
(b) the prices, expiration dates, and other material
conditions upon which the options, warrants, or rights
may be exercised; and
(c) the market price of the stock called for or to be
called for by the options, warrants, or rights as of the
latest practicable date.
392
(d) The amount of stock called for or to be called
for by options, warrants, or rights received or to be
received by the following persons, naming each such
person: (1) each director of the bank or each nominee
for election as a director of the bank, and (2) each other
person who will be entitled to acquire 5% or more of
the stock called for or to be called for by such options,
warrants, or rights.
7. If action is to be taken with respect to the authorization
or issuance of any security, the following information must be
supplied:
(a) The title and amount of securities to be authorized or issued.
(b) If the securities are other than additional shares
of common stock of a class outstanding, the applicable
information with respect to (1) dividend rights, (2)
voting rights, (3) liquidation rights, (4) pre-emptive
rights, (5) conversion rights, (6) redemption provisions,
(7) sinking fund provision, (8) interest rate and (9)
maturity.
(c) If the securities to be authorized or issued are
other than additional shares of common stock of a class
outstanding, the Comptroller may require financial
statements comparable to those contained in the Annual
Report.
8. If action is to be taken with respect to any amendment
of the Articles of Association, a statement of the reasons
therefor and the general effect of such amendment and the
vote needed for its approval.
In addition to the above regulations, our Office in
October of 1963 published a 53-page booklet entitled,
"Shareholders' Meeting Instructions'* which explained
in detail our disclosure requirements. We are pleased
to attach a copy together with a pamphlet published
by a large National Bank at its own expense to explain
our regulations to its correspondent banks.
In January of 1964, we had the first extended test
of the efficiency of our regulations as every National
Bank held its annual meeting and distributed its yearend statements. The result was most gratifying. The
covered banks and many smaller banks as well, supplied their shareholders with proxy statements and
annual financial reports as good as any listed
company's.
Under S. 1642 and H.R. 6789, instead of the approach just described, our Office and the other banking agencies would be compelled to issue regulations
designed to enforce sections 12, 13, 14 and 16 of the
Securities Exchange Act. Under H.R. 6789 the banking agency could elect to leave enforcement up to the
SEC. Under S. 1642 the banking agency would be
required to enforce the Exchange Act.
In our judgment, neither alternative offers a viable
solution to the disclosure needs of banking. As many
commentators have noted, banking, and especially national banking, today suffers from an overdose of over-
lapping statutes and jurisdictions. The laws of affecting the day to day operation of National Banks are
now spread over the National Bank Act, the Federal
Reserve Act, the Federal Deposit Insurance Act, The
Clayton Act and 50 varying State laws on branching.
Since assuming office, I have made every effort to
reverse the trend toward further fragmentation of authority over National Banks.
Accordingly, we regard this proposal as definitely
a step in the wrong direction. In addition to the three
existing Federal agencies and the Department of
Justice, a fifth agency, the SEC is introduced into the
picture. Under this proposal, jour of these agencies
would be issuing regulations, not necessarily the same,
all in enforcement of the same four sections of statute.
Even for the field of banking, which is trying to learn
to live with overlapping agencies, this would seem to
set a record for muddled administration.
The remedy is not to add the SEC to the list of
agencies now regulating banks, but rather to leave
the enforcement of disclosure to the banking agencies
to do in their own way and pursuant to their own
statutes. We have demonstrated that the National
Bank Act gives us sufficient authority to act over National Banks. If the FDIG and the Fed are unwilling
to exercise their responsibilities in this area under their
general supervisory power, we suggest that their
respective acts be amended to require them to do so.
We consider disclosure of great importance as indicated by our efforts described above, but we consider
our direct supervisory power over National Banks of
even greater value to the investor. No one can denigrate the direct supervision of banks as an effective
means of public control. The continuous internal
supervision, regulation and examination of National
Banks by our Office provides a protection to investors
in banks which is far greater than that afforded by disclosure alone. For example, the National Bank Act
requires that a complete examination at least three
times in every 2-year period, of the books and records
of each National Bank, must be made by a bank examiner employed by the Comptroller of the Currency.
Each of these examinations involves a detailed analysis
and valuation of the assets and liabilities of the institution. This supervision provides protection for depositors and shareholders alike which is not available to
investors in any other type of corporation.
We pass on the full details of such capital changes,
including the relationship of the offering price to book
value and to market value. No change in capital structure which would water the holdings of existing shareholders, or which conversely would cause an undue
accretion to the book value of existing shares at the
expense of new investors, would be approved.
As the Members of the Committee well know, it was
not considered necessary or desirable to include banks
within the provisions of similar legislation whenever it
has been proposed before. The Securities Act of 1933
contains a specific exemption for securities issued by
banks. The Securities and Exchange Act of 1934,
although not containing an express exemption, does not
apply to banks by virtue of the fact that bank stock is
not listed on national securities exchanges. The investment Company Act of 1940 contains specific exemption
for banks from the provisions of that Act. The Frear
bill introduced in 1950 contained an exemption for
bank stock as did the Fulbright bills of 1955 and 1957.
On all of these occasions, the Congress was of the
opinion that it was not necessary to subject banks to
additional disclosure requirements.
Even in the present proposal, share accounts in
savings and loan associations are exempted. Why, if it
is thought necessary at this time to remove the exemption for securities issued by commercial banks, are not
share accounts in savings and loan associations, similarly treated?
We urge that this legislation be amended to except
securities issued by National Banks. This could be
done by adding the words "Except National Banks"
after the word "issuer" in section 3(c).
If the above amendment is not acceptable, we recommend that at least the following clarifying language
be added to section 3(e), "In view of the authority
vested hereunder in the foregoing banking agencies, no
rule, regulation, standard, interpretation, policy or
procedure of the Securities and Exchange Commission
issued heretofore or hereafter in connection with the
enforcement and administration of the aforesaid sections shall be applicable with respect to any security
issued by a national bank."
JAMES J. SAXON,
Comptroller of the Currency.
(Attachments.)
ATTACHMENT
(As of 12-28-62)
Total assets all National Banks
$160,657, 006, 000
Total assets of National Banks with deposits of $25,000,000 or more (represents 81.2% of total assets)
130,484, 632,000
Total assets of National Banks with deposits of less than $25,000,000 (represents only 18.8% of total assets)
30,172, 374.000
Total assets of all commercial and stock
savings banks (National Banks hold
53.8% of assets of all commercial and
stock savings banks)
298,196,408,000
393
BEFORE THE SUBCOMMITTEE ON FINANCIAL INSTITUTIONS OF THE SENATE BANKING AND CURRENCY
COMMITTEE, TUESDAY, MARCH 10, 1964
At a Hearing before the Subcommittee on Financial Institutions of the Senate Banking and Currency
Committee, on March 4, 1964, Senator Javits requested that I supplement my remarks on the effects
of interest rate controls under Regulation Q. This is
submitted in response to that request.
A cardinal principle of our free enterprise system is
that government should impose economic regulation
only in those areas where free market forces lead to
results that are clearly not in the public interest.
When the Federal Government intervenes to fix prices
administrative decisions are substituted for those of
the marketplace: the decisions of one man or a very
few men replace the judgments of thousands. Clearly
there may be instances in which this is a desirable
course. However, unless there is a clear-cut case for
such intervention on social welfare grounds, it would
be judicious to avoid the substitution of government
decisions for private decisions.
In my view, neither ceiling rates on deposits nor the
standby authority to impose them are likely to bring
improvements in the social welfare. On the contrary,
they are likely to produce much damage.
Both the Commission on Money and Credit and the
President's Committee on Financial Institutions recommended that interest rate ceilings be placed on a
standby basis, thus recognizing the fact that they are
not normally desirable. Remarkably little discussion
and debate was generated on this point when the
Banking Act of 1933 was under consideration. What
discussion there was rested on the assumption that the
banking troubles of the 19305s were the result of imprudent banking practices. Such practices were forced
upon the commercial banks, so the argument ran, by
the severe competition for correspondent and other
deposit balances. This competition, it was said, led
to high interest rates on deposits, and impelled the
banks to acquire very risky, high yielding assets. In
other words, in order to justify the payment of high
rates on deposits, the banks were forced to take risks
that exposed them to the dangerous illiquidity that
led to the banking crisis of 1933.
This argument appears to me as a gross oversimplification of the causes of the banking problems of 19191933. I find it extremely difficult to believe that the
troubles we experienced then could have been avoided
by the prior existence of ceiling rates on time and savings deposits. The forces at work were varied, complex, and powerful. They suggest that the lack of
394
interest rate regulation could have been only tenuously
connected with the general collapse of the banking
system.
(1) For the most part, the crisis in the early 1930's
was a liquidity crisis. It consisted of two forces that
were mutually reenforcing. First, the stock market
crash in 1929 destroyed public confidence in the workings of credit and capital markets. Coming at a time
when the economy had already moved into the recession phase of the business cycle, the result was one of
retrenchment, liquidation of debt and a rapid decline
in the supply of money. Currency drains on some
banks put the latter in difficulty, and each failure
generated new fears concerning the safety of bank deposits, which led in turn to fresh runs on other banks.
Because of existing central bank practices and authority, a second force intruded on the situation: the
Federal Reserve's power to act as a lender of last resort
was severely restrained, and partly because of this the
member banks were kept under essentially tight money
conditions throughout the period. With the exception
of one episode in 1932, the System's powers were never
fully utilized to meet the crisis.
(2) It should be recalled that, until 1932, the eligibility requirements for rediscounting at the Federal
Reserve banks were extremely high. Only limited
kinds of commercial paper could be rediscounted to
enable a bank to meet its (fixed) reserve requirements
in the face of deposit drains. Those banks that were
under severe strain found the discount window virtually closed. This led them to meet further drains
by sale of assets in a declining market and at substantial losses. While an individual bank might meet deposit drains in this way, it is impossible for a major
segment of the banking system to meet the problem
in this manner. The result was a widespread liquidity
crisis.
(3) Even more disastrous, however, was the tight
money policy pursued in 1931 by the Federal Reserve
Banks. This was motivated by a temporary loss of
gold and rigid adherence to the rules of the gold
standard game. This was surely a mistake, and the
result of a misunderstanding of the central bank's
responsibilities in that worldwide crisis. Temporarily
revived confidence and a modest improvement in bank
liquidity was struck down by the increase in the Federal Reserve discount rate and concurrent sale of
Federal Reserve assets.
In summary, the banking crisis of the early 1930's
was the product of a general loss of confidence in the
banking system, declining business activity, the lack of
a sound deposit insurance system, and the failure of the
Federal Reserve as a lender of last resort.
With this as a background, I should like to review
briefly the costs and benefits of interest rate ceilings
on deposits.
A. The Costs
1. The imposition of ceiling rates on deposits distorts the market allocation of savings between various financial intermediaries. By establishing prices
and pegging the market in a discriminatory fashion—
different rate ceilings being imposed on different
classes of intermediaries—the regulatory authorities
encourage the flow of savings into some kinds of institutions and discourage the flow to others. Savers,
while apparently insensitive to general rate levels in
determining how much to save out of a given level
of income, are becoming increasingly sensitive to differential rates offered by various financial intermediaries.
In other words, while total saving is not substantially
influenced by the level of interest rates, individual
savers allocate their funds to get the highest return
for any given level of risk.
Since consumers and savers consider the risks of
bank savings and shares in savings and loan associations equal, or essentially so, the price control placed
on the former discriminates against commercial banks.
2. The imposition of price control on a discriminatory basis distorts the flow of investment funds to particular uses. If some intermediaries are allowed to pay
higher rates on deposits than others, then it follows
that investment funds will tend to be directed toward
the specialized loan business of the favored institutions.
In practical terms, this may mean that investment in
some lines with a high rate of social return will go
begging for funds, while other kinds of investment
with lower rates of social return are assured ample
supplies of the community's savings.
It can be shown that the maximum total return from
a given level of investment expenditures is realized
•when the marginal returns of various kinds of investment are equal. I am suggesting that, where the
monetary authorities distort the flow of savings by
differential ceiling rates on deposits, the possibility
exists that investment returns cannot be equalized;
hence, the community suffers
(A hypothetical example to illustrate this possibility may illuminate this further. Suppose we have
two intermediaries, X and Y. X specializes in making
loans to the oil industry, while Y makes only mortgage
loans. Suppose further that the rate of return on a
marginal investment in oil-drilling machinery is
15% and the marginal return on housing investment
is 10%. X is a commercial bank subject to a ceiling
savings deposit interest rate of 4%, while Y, a Savings
and Loan Association, has no ceiling imposed and is
offering 4%%. Savers, being sensitive to deposit rate
differentials, divert their funds from the commercial
bank to the S and L. Consequently, the savings of the
community are used to build more houses at a 10%
rate of return, and at the expense of investment in oil
machinery at 15%.)
3. A final cost of ceiling rates is that they tend to
subsidize inefficient banks, while penalizing those that
are well-managed, vigorous and efficient. Some
banks, because of their high efficiency, are able to pay
more than the existing ceiling rate without engaging
in imprudent banking practices. Others, less well
organized, less cost-conscious, and perhaps in a sheltered competitive position, find the ceiling a convenient means of avoiding the rigors of competition for
deposits with their more resourceful counterparts in
the banking community.
It is essentially unwise for regulatory agencies to
impose price controls that reward the slothful and
discourage enterprise. Even if there were no other
costs of this control—and there most certainly are—I
would regard this cost a necessary and sufficient justification for its abolition.
B. Benefits
1. It is sometimes alleged that ceiling rates on commercial bank deposits will prevent ruinous rate competition which leads to the acquisition by banks of risky
and unsound loans. The restraints now imposed on
such behavior through strict bank examination standards, and the generally higher quality of risk assets
today (in comparison with the period 1920-33), reduce the potency of this argument. Furthermore, the
danger of any such development today is infinitely
smaller than it was in the period that led to the
Bank Act of 1933, because of our system of Federal
deposit insurance.
2. It is also argued that deposit rate ceilings improve domestic stabilization weapons in the hands of
the Federal Reserve Board. I find this assertion difficult to understand, except in the context of deep and
prolonged depression. Under such conditions it
might be desirable to discourage saving in order to
raise consumption, assuming that net private investment demand is very low. But this would require
generally low ceilings on all liquid assets—otherwise,
savings would simply be diverted from low paying
assets to higher. In any case, much more powerful
395
tools exist to fight depression, including expenditure
policy, and a vigorous policy of monetary ease.
The types of market distortions that result from
the imposition of ceiling rates on deposits are well
illustrated by the present situation with respect to
certificates of deposit. A very large volume of such
deposits are presently concentrated in money market
centers. As yields on other market instruments have
increased in recent months, large banks have moved to
offer 6-month CD's at the maximum rate permitted by
Federal Reserve regulation, 4 per cent. If yields on
competitive instruments continue to increase in the
next 6 months, CD's will become increasingly unattractive, unless Regulation Q is revised upward. If the
present ceiling is maintained, we may look forward
to a substantial churning in the location of deposits.
This disruptive effect will result not from competitive
market forces but rather from the price fixing policy
of the Federal Reserve.
PREPARED FOR THE SENATE BANKING AND CURRENCY
COMMITTEE ON THURSDAY, MARCH 26,1964
At a Hearing before the subcommittee on Financial
Institutions of the Senate Banking and Currency Committee, on March 10, 1964, Senator Bennett requested
that I supplement my remarks on the ruling of the
Office of the Comptroller relating to the use by National Banks of private mortgage insurance. This is
submitted in response to that request.
The ruling represents a special application of a general principle evolved from a careful examination of
Congressional action and administrative interpretation with respect to real estate loans. Federal law (12
U.S.C. 371) requires that loans made by National
Banks on the security of real estate meet certain requirements with respect to the nature and value of
the security, the term of the loan and the manner of
its repayment. The law recognizes, however, that in
certain circumstances loans secured by real estate are
not made primarily on the security of real estate and
are to be treated as ordinary commercial loans. From
these provisions, there may be developed a general
definition that a real estate loan within the meaning of
the Federal law is any loan secured by real estate where
the bank relies upon such real estate as the primary
security for the loan. Where the bank in its judgment
relies principally upon other factors, such as the general credit standing of the borrower, guaranties or
security other than real estate, the loan does not
constitute a real estate loan within the meaning of the
Federal law, although as a matter of prudent banking
practice it may also be secured by real estate. This
396
definition was tested through application to a variety
of transactions during the early part of 1963 and now
appears as paragraph 2000(b) of the Comptroller's
Manual for National Banks. This Manual was distributed to all National Banks in June 1963.
It should be especially noted that the principle set
forth in this definition is by law applied to loans insured
under the National Housing Act and other Federal
legislation and to loans fully insured or guaranteed
where the insurance or guaranty is supported by the
credit of a state. (12 U.S.C. 371). It is also by law
applied to any loan at least 20 percent of which is
guaranteed by the Veterans Administration (38 U.S.C.
1802(f)).
These provisions of law afford the immediate basis
for paragraph 2150 of the Comptroller's Manual
which provides that where a bank in its judgment relies
principally on the insurance or guaranty of a governmental agency in making a loan, the loan does not
constitute a real estate loan within the meaning of 12
U.S.C. 371 although, as a matter of prudent banking
practice or because such security is required by the
insurer or guarantor, the loan may also be secured by
real estate. A cross-reference at the end of paragraph
2150 refers to paragraph 2000.
Counsel for a National Bank, making the invited
comparison, inquired whether private mortgage guaranty insurance could be used in the same manner as
FHA and VA insurance and with the same result:
that the loan would not constitute a real estate loan
within the meaning of the Federal law. This Office
replied that where a National Bank makes a loan in
primary reliance upon private mortgage insurance or
guaranty the loan does not constitute a real estate loan
within the meaning of 12 U.S.C. 371. The admonition was added, however, that where the bank relies
upon private insurance or guaranty as primary security
for a loan, its files should contain evidence to demonstrate that the bank is justified in placing such primary
reliance on the insurance contract. Accordingly, the
terms and conditions in the insurance contract issued
by a financially responsible company must afford adequate protection to the lending bank. The ruling does
not represent an endorsement of any insurance company, policy or form of coverage. It places in the
lending bank the initial responsibility for evaluating
the insurance company and policy on which it will primarily rely in making the loan. Our examiners will
review, regularly and in detail, the manner in which
each bank fulfills its responsibility in making these
evaluations.
There has been some misunderstanding about the
scope of the insurance required. It is not necessary
that such insurance eliminate all risk of loans. The
amortization, maturity and other restrictions imposed
by Federal law (12 U.S.C. 371) on real estate loans
made by National Banks are designed to reduce the
risk of loss in making such loans. They do not purport and are not intended to eliminate all risk of loss.
Other financial institutions not subject to these restrictions have developed other methods of minimizing
losses. One method, recognizing the usual salvage
value of real estate security, is to insure not the whole
risk but the most important part: the top 20 percent.
Where a loan is made in primary reliance on insurance
which adequately protects the bank against the major
risk in the loan, i.e., that part of the loan in excess of
what is recognized as the usual salvage value of the
real estate security, the loan satisfies the requirements
of both prudent banking practice and the principle
contained in paragraphs 2000(b) and 2150 of the
Comptroller's Manual for National Banks.
BEFORE THE SUBCOMMITTEE ON COMMERCE AND FINANCE OF THE HOUSE INTERSTATE AND FOREIGN
COMMERCE COMMITTEE, TUESDAY, JUNE 9, 1964
Mr. Chairman, members of the Committee: We are
pleased to appear this morning in support of H.R. 8499
and H.R. 9410. These bills would provide express
exemptions from the securities laws for bank collective
investment funds. They were introduced to resolve
the assertions of the Securities and Exchange Commission that units of interest in a bank common trust
fund are securities and that such a fund itself may be
an investment company. These bills reflect the recommendations of the Government Operations Committee
of the House of Representatives following hearings on
this matter which were conducted last year.
We see no need to apply the securities laws in this
area. The legislative history of those statutes reveals
that it was never the intent of Congress that they apply
to bank collective investment fund operations. There
is no record of any abuses in this area to support the
introduction of the SEC now, and we cannot envisage
circumstances under which such a need would arise.
Application of the securities laws to bank collective
investment funds would not increase protection of the
public in any substantial amount and might even serve
to hamper, if not preclude, such activity. The terms
"disclosure" and "protection" are not synonymous.
Experience and studies have shown that the substantive requirements of the Investment Company Act
often do not provide significant protection to investors. The regular, thorough examination by a government agency, to which banks are subject, is far more
effective. This protection cannot be passed off on
the ground that bank examination is oriented solely
toward the maintenance of solvency and liquidity, for
the very purpose of the bank trust department examination is to ensure that no surcharge will arise because
of a breach of fiduciary duty. The bank examiner
corrects potential abuses of the interests of beneficiaries
of fiduciary accounts, matters which are often left to
self help or remedy after the fact under the securities
laws. We believe that bank examination can continue
to supply this real protection, and that bank supervisors
can grow with the increasing complexity of bank activity and need not therefore abdicate in favor of other
agencies.
It has been suggested that bank common trust funds
be subjected to identical requirements as mutual funds
for competitive reasons, even though they are not akin
in structure or method of operation. Yet, this logic
would require that mutual funds be subject to regulation comparable to banks and thus be examined at
least annually and that their investment advisors be
examined at least three times every two years, by an
agency of a Federal Government. Also, the restrictions of present regulations which prevent banks from
actively merchandising interests in these funds would
have to be removed. Only then would the interests of
investment protection really be served and competitive
equality achieved. Until such time as this situation
should prevail, we submit, that this argument is also
without merit.
We favor passage of the bills in their present form.
BEFORE THE HOUSE BANKING AND CURRENCY COMMITTEE., WEDNESDAY, AUGUST 12, 1964
Mr. Chairman, members of the Committee: My
name is William B. Camp. I am First Deputy Comptroller of the Currency, and in Mr. Saxon's absence I
am the Acting Comptroller of the Currency. It is in
this capacity that I am presenting Mr. Saxon's statement on H.R. 12267 which is now under consideration by this Committee.
We fully support the principle of required1 disclosure of changes in the ownership control of banks.
Indeed, we have been following this practice since
December 1962. No additional powers are required
to enable this Office to meet the purposes of the Bill so
far as National Banks are concerned.
The Bill, in our view, has one serious administrative weakness, and raises a fundamental question con397
cerning the proper function of the insuring agency in
the pattern of bank regulation.
The administrative weakness of the Bill is the requirement for duplicate reporting by National Banks.
This duplication is explicitly set forth in the Bill in
a sentence which appears at the end of paragraph 3:
The reports requirements in this subsection shall be in addition to any reports that may be required pursuant to other
provisions of law.
Since this Office dbes require substantially similar
reports, the effect of that section would clearly be to
provide for duplicate reporting.
The fundamental question of public policy concerns the provision of the Bill which requires the
Comptroller of the Currency and the Federal Reserve
Board to furnish to the FDIC copies of the reports
called for under the Bill. We do not see that any
valid purpose could be served through such centralization of these reports. They are useful only for
regulatory purposes, and the FDIC is not a regulatory
agency. The appropriate place for such reports is
the Comptroller of the Currency in the case of national banks, and the State authorities in the case
of State-chartered banks. Any regulatory action
which would be required in response to these reports
would properly be taken by those agencies under our
dual banking system.
The question we raise here is not merely a jurisdictional one. It reaches to the basic issue of the
proper role of deposit insurance in the pattern of
bank regulation. The essential point to be borne in
mind is that deposit insurance plays a subordinate role
in that pattern, and properly so.
Banks are regulated in order to sustain public confidence in the banking system. But since banking
serves the industry and commerce of the Nation, there
must be scope for private initiative in meeting the
changing needs of the public. Because of this fact,
banking cannot be a riskless enterprise, and it is not
the purpose of bank regulation to eliminate risk. The
function of deposit insurance is to provide an ancillary safeguard in those occasional circumstances in
which bank supervision does not provide the necessary protection to depositors. That deposit insurance
is subordinated to the broader public purposes of
bank regulation is evident from the fact that bank
supervisory powers rest with the chartering agencies,
and that the insurance fund may be supplemented,
where necessary, through access to public funds.
This policy is in clear contrast with what would
be likely to occur if bank regulatory powers were as398
signed to the insuring agency. If that were done,
there would be a natural tendency to fashion banking controls so as to protect the deposit insurance
fund. Every new entry of competition, and every
banking transaction involving risk, would tend to be
viewed with suspicion because of the possible hazard
it posed for the insurance fund. The effect would
be to place the protection of the insurance fund above
the performance of the banking system—thus reversing the proper roles of bank regulation and deposit
insurance. These thoughts on the relation of deposit insurance to bank regulation were developed
more fully in an address by Mr. Saxon before the
Texas Bankers Association on February 22, 1963, and
I should like to enter that address in the Record.
There is no urgent need which would require immediate action by the Congress on this Bill. The
five receiverships which have occurred in recent
months following changes in ownership have involved
only very small institutions. In view of this lack of
urgency, and the possible implications of the Bill for
the powers and functions of the FDIC, it would appear desirable for the Committee to examine more
fully certain of the past practices of the FDIC. There
are several which appear to be of special importance.
We have conducted some preliminary studies of the
costs of administration being charged against the
assets of insolvent banks. From the information we
now have, some of these administrative costs appear
to be excessively high. We should like to enter into
the Record the preliminary data which we have
collected.
There are also problems arising out of the practice
of the FDIC to share in the distribution of assets, as
a subrogee, with depositors having accounts over the
insured limit. As a result of this practice, the Corporation is usually the largest claimant against the
insolvent estate. It may be questioned whether depositors are receiving the protection originally envisaged by the Congress, where this practice is followed.
It would also seem open to serious question whether
the FDIC as a major claimant should also act as a
receiver. The practice of invariably appointing the
FDIC as the receiver for insolvent national banks
would seem to run contrary to the practice followed
in other insolvency proceedings. It is also inconsistent with the practices followed in State bank insolvencies. In only two States is there a requirement
that the FDIC be appointed a receiver of an insolvent
State bank. In most of the remaining States, the
FDIC may be so appointed at the discretion of the
court or an administrator having authority.
Finally, we are greatly concerned about the public
attention which has been drawn to FDIG operations
in recent bank failure cases. Deposit insurance works
best when it is applied quietly in times of need—not
when it heightens public concern and distrust. It is
the smaller banks of the country which are most
likely to suffer from the adverse effects of such fears.
These banks should be encouraged to serve their communities more fully—not subjected to pressures to
withdraw further from competition,
In the light of all the considerations which we have
described, we would recommend that action on the
present Bill be deferred to allow time for further study.
399
APPENDIX E
Selected Congressional Correspondence
of
JAMES J. SAXON
Comptroller of the Currency
INDEX
Selected Congressional Correspondence of James J. Saxon, Comptroller of the Currency
Subject
Bank Holding Companies
Banking Services
Branch Banking
Coin Shortage
Collective Investment Funds
Comptroller's Office Procedures
Conservatorship
Corporate Practices and Procedures
Corporate Savings Accounts
Credit Quality
Debt Cancellation Contracts
Deposit and Share Insurance
Direct Leasing
Disclosure Requirements
402
Page
Subject
Page
403
403
408
409
409
412
413
414
415
417
417
418
419
424
Federal Reserve Membership and Federal Reserve
Powers
Fraudulent Practices
Insolvent Banks
International Operations
Mutual Savings Banks
Real Estate Loans
Reports of Condition
Savings and Loan Associations
S. 1642
Service Charges
Trust Regulations
Underwriting Revenue Bonds
426
434
435
435
437
439
440
441
441
445
447
447
BANK HOLDING COMPANIES
APRIL 28,
1964.
DEAR MR. CHAIRMAN :
The views of this Office have been requested on
S. 2561 and its companion bill H.R. 10668. These
bills would amend the Bank Holding Company Act
of 1956 and the Federal Deposit Insurance Act to
include under the definition of "bank holding company" any testamentary trust controlling bank assets
of $100 million or more.
The proponents of this legislation are frank to admit that it is aimed at only one existing situation, the
Alfred I. Dupont Estate, a testamentary trust which
owns control of 31 banks in the State of Florida and
numerous other corporations including a large paper
manufacturing operation and the Florida East Coast
Railway. The railway has been the subject of a bitter
strike for the past several months.
It is the expressed intent of the proponents to subject the Dupont Estate to the provisions of the Bank
Holding Company Act. This would require the Estate
to dispose of either its nonbanking corporations or of
the thirty-one banks.
The technical provisions of the bill are three, as
follows:
1. The definition of "company" in the Bank Holding Company Act of 1956 (12 U.S.G. 1841 (b)) would be amended
to include "any corporation, business trust, testamentary trust,
which at the end of the most recent calendar year controls
bank assets of $100 million or more."
2. The present exemption in the Holding Company Act
for charitable corporations would be amended to exclude
any charitable foundation which controlled bank assets of
$100 million or more.
3. The Bank Merger Act (12 U.S.C. 1828(c)) would be
amended to include in the subjects which the approving
agency had to consider on any merger "possible inconsistency
with the purposes and objectives of the Bank Holding Company Act of 1956, should the transaction result in the removal
of any company from the purview of that Act."
The intent of the third amendment in relation to the
Dupont Estate seems remote. The explanation given
by Senator Morse in his remarks introducing the bill
was along the following lines. The Florida legislature
at some time in the future may remove restrictions on
state-wide branching. If this happens, the Dupont
Estate would be in a position to merge its 31 banks into
one large bank. The agency, having to approve such
a merger, would be required under amendment number three to reject such a merger as inconsistent with
the "purposes and objectives of the Bank Holding
Company Act of 1956." The reasoning behind this
seems a bit attenuated since it is problematical whether
it can be said that one of the purposes and objectives
of the Bank Holding Company Act is the preservation
of an existing bank holding company over some other
form of combination.
Amendment number three, unlike the other two
proposals, could, we believe, have unintended effect in
the case of proposed mergers of banks controlled by an
existing bank holding company having no relation to
the Dupont Estate situation. For this reason alone,
and also because of its vagueness and obscurity, we
would object to proposal number three.
With regard to the intent of the bill as a whole, we
do not believe it appropriate or desirable for Congress
to amend a piece of legislation as important as the
Bank Holding Company Act in order to take care of
a single situation. The Federal Reserve Board and
others have suggested amendments to the Act of general application, having much greater importance in
our opinion than the Dupont Estate situation. Any
unsolved problems of government regulation inherent
in the Dupont Estate situation should, we believe, be
handled only in the context of legislation which would
have general application.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable A. WILLIS ROBERTSON
Chairman, Committee on Banking and Currency
United States Senate
Washington 25, D.C.
BANKING SERVICES
DECEMBER 3, 1962.
DEAR SENATOR HOLLAND:
This is in reply to your letter of November 20, 1962,
in which you have enclosed a letter received by you
from Mr. Malcolm D. Witt of Miami, Florida.
You have asked my opinion as to the legality of the
furnishing of computer services by banks to their
403
patrons. It has been our position that a bank which
acquires automatic data processing equipment may
utilize that equipment for the performance of services
incidental to banking for its customers. We have also
permitted national banks to lease their unused equipment time for the performance of services for others as
long as the equipment was acquired primarily for the
purpose of performing necessary services for the bank.
Because such equipment is very expensive, it must
usually be operated on a 24-hour basis in order that
banks may afford its acquisition. Accordingly, we regard this activity as incidental to the business of
banking.
You have also requested my interpretation of Section
4 of Public Law 87-856. We interpret that section as
prohibiting a bank service corporation, as defined in
that Act, from offering its services to parties other than
banks.
As you are aware, this Office is charged with the
responsibility for the supervision of the activities of
national banks. Because the Citizens Bank and Trust
Company referred to in Mr. Witt's enclosure is a state
bank, we are unable to provide you with specific information concerning the services that bank is offering its
customers.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
performing services for the bank. Because the overlay of the restrictive provisions in Public law 87-856
has made the bank service corporation device highly
unattractive to banks we believe that this method of
obtaining the use of data processing equipment is
necessary.
From the number of inquiries we have received it
appears that several banks are obtaining equipment
outright in this manner and offering the services, as
permitted by this office. However, we do not believe
that the practice will become common, or thai significant problems will be caused thereby. For one
thing, the acquisition and usage of this equipment is,
and will be, subject to our regulation and control.
Also, the making available of the services is not viewed
as a permanent thing on the part of any given bank,
but rather as a temporary means to help finance a
heavy expenditure. As such equipment becomes less
expensive, or is amortized, or as the bank's utilization
increases this activity will diminish, we believe.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable MATTHEW HALE
Chief of Staff
Committee on Banking and Currency
United States Senate
Washington 25, D.C.
The Honorable SPESSARD L. HOLLAND
United States Senate
Washington 25, D.C.
FEBRUARY 28, 1963.
DEAR SENATOR PROXMIRE:
JANUARY 10, 1963.
DEAR MATT:
This is in reply to your letter of January 3, 1963,
concerning a complaint received by the Committee
from a data processing firm.
As you have noted, although Public Law 87-856
prohibits bank service corporations from performing
data processing services for users other than banks,
there is no specific prohibition of a bank's undertaking this business directly.
We have permitted national banks which obtained
such equipment outright to lease the unused time
thereon to others. Because of the high cost of the
equipment full usage has been necessary in order to
make it pay. Accordingly, it has been our position
that national banks may perform this incidental activity. We have always required that a substantial
portion of the time of this machinery be utilized in
404
Reference is made to our previous correspondence
concerning the complaint of Mr. Carl Taylor of the
Waukesha, Wisconsin State Bank about the First National Bank of Waukesha's "No Check Pay Roll Plan."
Specifically in your letter of February 18, 1963, you
have asked us to justify by citing "rules, regulations,
court decisions or legal opinions" that the services involved herein are within "such incidental powers as
shall be necessary to carry on the business of banking,"
as that language is used in 12 U.S.C. 24. You have also
asked for a description of the procedure by which a
national bank instituting such services obtains the approval of the Comptroller.
In reply to the second question, a national bank
does not need the specific approval of this Office to
carry on an activity which is incidental to the business
of banking. Where there is a close question involved,
the bank or our examiner will normally submit the
facts to the Comptroller's legal staff for an opinion.
This is done informally by letter.
In this case, the only inquiry made to us concerning the "No Check Pay Roll Plan" was the one made
by Mr. Taylor. Upon receipt of it, we wrote First
National Bank of Waukesha for details of the service
and in return received the letter and brochure dated
December 11, 1961, copies of which are enclosed.
We examined the details of the plan and after some
delay caused by a misplaced file, wrote to the bank
on November 26, 1962, copy enclosed, that in our
opinion it involved no violation of law or regulation.
This opinion is not based on any court decision or specific regulation, since the question, to our knowledge,
has not been raised before. Our opinion is based in
the main on the fact that with the increased use of
automation, banks, as well as other businesses, must
adjust the services they offer to take full advantage of
technological improvements. This fact was recognized by Congress last year when it passed the Bank
Service Corporation legislation. We believe that the
type of service being offered by the First National
Bank of Waukesha is being offered and will be offered
by many banks throughout the country in years to
come and will represent a significant addition to the
area of service the commercial banks now perform for
the public.
With reference to the question of obtaining the
consent of employees involved, specific inquiry was
made to the bank. Their reply dated January 28,
1963 (copy attached), indicates that the number
of nonconsenting employees is insignificant in relation to the total advantages gained by all concerned
in the operation. We have not received a complaint
from any employee covered by this plan or any similar
plan.
Sincerely yours,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable WILLIAM PROXMIRE
United States Senate
Washington 25, D.C.
SEPTEMBER 13, 1963.
DEAR SENATOR JAVTTS :
This has reference to a communication dated
July 29, 1963, addressed to you by the National Society of Public Accountants and forwarded under
cover date of September 4, 1963, protesting the use by
banks of automatic data processing equipment to perform accounting and bookkeeping services for their
customers and potential customers. You have referred this letter to our Office for comment.
It has long been the policy of this Office to permit
National Banks to acquire property and equipment
which would permit them to offer the public the best
possible service at the lowest possible cost. We do
not believe it appropriate to impede the acquisition
of property or equipment by National Banks which
will accomplish this objective nor do we believe it
sound policy to prohibit the full economic utilization
of such property or equipment after acquisition.
When this property or equipment is utilized for such
functions as payroll accounting or billing of accounts
receivable for customers or potential customers, we
believe the bank is rendering a financial service which
historically is well within its powers.
We also believe that the performance of these services by automatic equipment is superior and less costly
than other methods so that the services of such equipment will be sought by users whether it is furnished
by banks or not.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable JACOB K. JAVITS
United States Senate
Washington 25, D.C.
FEBRUARY 15, 1964.
DEAR MR. PRICE :
With your transmittal of January 2, 1964, you enclosed a letter from Mrs. Ruth T. Harnist, Belleville,
Illinois, and you requested information for use in replying to Mrs. Harnist.
In her letter, Mrs. Harnist voiced her objection to a
recent ruling of this Office by which National Banks
are authorized to sell insurance and retain the profits.
She also stated that she cannot understand how one
official can authorize such activity in view of the fact
that Congress recently turned down a proposed amendment to the national banking laws which would have
accomplished the same purpose.
By the Act of September 7, 1916 (30 Stat. 753; 12
U.S.C. 92), Congress provided that National Banks
may act as agents for any fire, life, or other insurance
company in any place the population of which does
not exceed five thousand inhabitants. This enactment authorized the solicitation and selling of insurance and the collecting of premiums on policies issued
by the insurer. In effect, the statute granted National
Banks having an office in such communities the right
to act as general insurance agents. It is applicable to
any office of a National Bank when the office is lo405
cated in a community having a population of less than
5,000 even though the principal office of such bank
is located in a community whose population exceeds
5,000.
The recent ruling of this Office is not based on the
above statute. The ruling provides that by the powers
vested in them under 12 U.S.G. 24, National Banks
have authority to act as agent in the issuance of insurance which is incidential to banking transactions. The
ruling is based on the recognition by this Office that
National Banks are essentially service organizations
engaged in rendering a full range of financial and related services to the public, including the acting as
agent in the issuance of insurance which is incidental
to banking transactions. Such insurance activities
provide normal protection for the risks taken by National Banks in the extension of credit in many forms.
The ruling does not authorize a National Bank to act
as a general insurance agent in any community of less
than 5,000 in which it does not have a banking office.
This Office is aware of only one recent attempt to
amend the banking laws to grant all National Banks
the right to act as general insurance agents. Such a
provision was part of the Financial Institutions Act of
1957 (S. 1451 and H.R. 7026) which passed the Senate
but not the House. It is important to realize that the
proposed amendment differed substantially from the
ruling of this Office in that the amendment would have
authorized all National Banks to act as general insurance agents. The ruling, which is considerably more
restrictive, interprets the statutory power of National
Banks (12 U.S.G. 24) to exercise all such incidental
powers as are necessary to carry on the business of
banking.
We trust that this explanation will provide Mrs.
Harnist with a more clear understanding of the ruling
concerning National Banks acting as agents in connection with insurance incidental to banking transactions.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
The Honorable MELVIN PRICE
House of Representatives
Washington 25, B.C.
APRIL 1, 1964.
DEAR MR. CHAIRMAN :
You have requested our views on H.R. 9548 which
is designated "A bill to prohibit banks from performing certain nonbanking services, and for other
purposes."
406
We strongly oppose the passage of this legislation.
Our opposition is based on both procedural and substantive grounds. Procedurally, the language of the
bill would be very difficult to interpret and administer. The operative language of the bill is as follows:
That no bank of any type described in section 2 of this
Act may perform any clerical, administrative, bookkeeping,
statistical, accounting, or other similar services for its depositors, borrowers, or other customers, except to the extent that
such services are a necessary incident to the proper dischargeof lawful functions of such bank as a depository, lender,
trustee, or agent.
Difficult problems of interpretation are immediately
apparent. For instance:
What is the meaning of the word "necessary"?
What are "other similar services" ?
Whose determination of necessity is to control? If
a banker is of the opinion that a particular service is
necessary to the proper discharge of his duties towards
a customer, is this sufficient to make the service permissible under the bill? Or is the supervisory agency
to determine what services are "a necessary incident
to the proper discharge of lawful functions of such
bank as depository, lender, trustee, or agent"?
Even if it were possible to resolve these questions
of legal interpretation by redrafting, we would strongly
oppose the legislation because we do not agree with
its fundamental purpose, which is to constrict by governmental fiat the business operations of commercial
banks. Why should not a bank be permitted to perform whatever clerical, administrative, bookkeeping,
statistical, etc., services for its customers which its management believes can be performed profitably? We
can understand the opposition of groups who imagine
they would be hurt competitively by such activities
but we see no legal or policy basis for eliminating such
competition.
We do not think the argument of some accountants
that banks are transgressing on their domain is tenable.
The practice of accounting is regulated by State laws
throughout the country. Any acts by a corporation
within a State's borders which were violative of such
licensing statutes, would be subject to prosecution.
This has not happened to date because the type of
services which we are concerned about here are not
in fact professional services, but are repetitive clericaltype functions which are susceptible to automation.
This whole problem is a creature of the automatic data
processing machine. The claim of unauthorized accounting is also being raised as a smokescreen by some
data processing machine interests who are no more
qualified as accountants than are bankers.
The spirit of this bill is directly at odds with the
previously expressed intent of Congress as long ago as
1864 and as recently as 1962. In 1864, in the National Bank Act, Congress stated that National Banks
shall have "all incidental powers as shall be necessary
to carry on the business of banking" (12 U.S.C. 24,
paragraph Seventh). Congress, in 1864 wisely did not
attempt to define the business of banking as it then
existed. They foresaw that the business of banking
would change and develop with the passing years.
The sweeping nature of the technological changes in
the banking business is strikingly illustrated by the necessity for the passage almost a hundred years later,
of H.R. 8874, the Bank Service Corporation Bill (Public Law 87-856, 87th Congress, October 23, 1962),
which deals with the virtual necessity of the use today
by banks of expensive automatic equipment.
H.R. 9548 does just what Congress in its wisdom
in 1864 would not do—attempts to define the business
of banking. This definition which is limited to acting
as "depository, lender, trustee, or agent" is entirely
inadequate as a description of modern commercial
banking. In any event, we do not think it is any
more desirable to attempt to legislate such a definition
in 1964 than it was in 1864.
In 1962, Congress passed H.R. 8874, the Bank Service Corporation Bill which empowered banks to invest in corporations created for the purpose of rendering clerical services to banks. The proponents of H.R.
8874 thought that the bill was necessary because of
existing prohibitions against National Banks' owning
the stock of corporations. There was no question concerning the banks right to perform these services directly for their customers on their own equipment.
We regard it as highly unfortunate that a provision
was added to H.R. 8874 at the last minute, prohibiting
bank service corporations from performing any services
for anyone other than banks.
The Senate Banking and Currency Committee, in its
reports on H.R. 8874, had this to say on the subject of
the increasing use of automation equipment by banks:
The demand for bank services is increasing at an extremely
rapid rate. Many banks have found it difficult to acquire
adequate personnel to handle this mounting workload. Testimony indicated that the volume of checks in circulation has
increased tremendously during the past two decades. It
was estimated that the check volume in 1939 was 3.5 billion.
The volume is increasing at the rate of about one-half billion
items per year. By 1970 the number of checks is expected
to be at an annual rate of 22 billion. In addition to check
handling there is a need for automation of other bank
services. Some banks are now processing their savings accounts, computing payrolls, calculating other credits and
charges, and preparing and mailing statements through the
use of automatic equipment.
The high cost of equipment makes it impossible for the
majority of banks to buy this equipment. In some cases
they are able to lease it, or to have their material processed
by firms owning this equipment. But in many cases these
solutions are not practicable or desirable.
Larger banks are generally able to afford this automatic
equipment, but smaller institutions find the cost prohibitive.
According to a study made by the Federal Reserve System,
nearly all large banks in the group they surveyed are now
using some form of automated equipment or plan to do so
within the next 3 years. However, the ratio of automating
banks to the total number of banks falls rapidly as one
moves down the scale in bank size. Only about one-fifth of
the banks with deposits of $25 to $50 million have automation
plans and among smaller banks the proportion is negligible.
Thus, it is becoming more and more difficult for smaller
banks to compete with larger banks in offering complete and
efficient banking services to their customers. Testimony was
received which indicated that, unless a satisfactory means is
devised whereby smaller banks may acquire benefits of automated equipment, many of them may be absorbed by larger
banks or compelled to merge with other banks in the area.
Under this bill two or more banks would be able to pool
their resources through the corporate device in order to gain
the benefits of this expensive equipment for themselves and for
the people in their communities.
We believe it would be quixotic for the Congress to
attempt now to stem the performance of automation
services for their customers by banks. Banking, like
any industry, is entitled to the benefits of technological
change and, in our opinion, it would be wrong and perhaps futile for Congress to attempt to shackle this
industry as does this bill.
We strongly urge against enactment of H.R. 9548.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable ABRAHAM J. MULTER
Chairman, Subcommittee on Domestic Finance
Banking and Currency Committee
House of Representatives
Washington, D.C.
APRIL 21,1964.
DEAR SENATOR KEATING :
This refers to your inquiry of April 13, 1964, concerning National Banks acting as travel agents.
The corporate powers of a National Bank are enumerated in 12 U.S.C. 24. Paragraph Seventh of that
section authorizes a National Bank.
To exercise . . . all such incidental powers as shall be
necessary to carry on the business of banking; by discounting
and negotiating promissory notes, drafts, bills of exchange,
407
and other evidences of debt; by receiving deposits; by buying
and selling exchange, coin, and bullion; by loaning money on
personal security; and by obtaining, issuing, and circulating
notes according to the provisions of this title.
That the business of banking covers a wide range
of activities has been consistently recognized by the
Congress. In the National Bank Act of 1864 Congress wisely refused to define the business of banking
as it then existed, foreseeing that the banking business would change and develop with the passing years.
Traditionally, National Banks have been excluded
from direct participation in the production of raw
materials, manufacturing, or commerce, so as to immunize the banking system from the risks inherent
in the employment of venture capital. Subject to
this restriction, however, it is clear that the business
of banking is the furthering by financial and related
services of commerce and industry and the convenience
of the public. Powers necessary to achieve the fundamental purposes of banking must be regarded as powers incidental to those expressly granted.
Admittedly, a bank could not exist primarily for the
purpose of operating a travel agency. Where, however, the travel services provided by a National Bank
are related, yet clearly and measurably subordinate, to
its overall financial and banking services there is no
conflict with the corporate purposes nor any question
but that the corporate powers are ample to permit
the rendition of travel services with entire legality.
In conclusion, banking is an industry presently and
historically affected with the public interest and regulated in the public interest. The business of travel
agencies is not historically affected with the public
interest nor subject to any manner of governmental
regulation. If the avowed purposes of an enterprise
(as stated in its charter or as demonstrated by its
practice) are such as primarily to be those of a travel
agency, then it should be barred from engaging simultaneously in the banking business. On the other hand,
if a National Bank, which is primarily engaged in the
business of banking, chooses to provide travel services
for its customers as an incident of the banking business,
it has adequate corporate power to do so. The rendering of such services is not in conflict whatsoever with its
corporate purposes but rather is in furtherance of the
corporate purposes.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable KENNETH B. KEATING
United States Senate
Washington 25\D.C.
408
MAY 15, 1964.
DEAR SENATOR LONG:
This refers to your letter of May 6, 1964, seeking
the comments of this Office as to the advisability of
legislation to regulate the sale of money orders.
Many National Banks engage in the issuance and
sale of traveler's checks and money orders, which are
equivalent to cashier's checks. These activities are an
essential part of the business of banking within the
meaning of Paragraph Seventh of 12 U.S.C. 24. National Banks also serve as the drawee for commercial
money order companies. As you know, all National
Banks are chartered by and subject to the supervision
of this Office, and their activities in connection with
money orders, whether as primary obligor or as drawee
only, are carefully and regularly examined to insure
that no unsound or imprudent banking practices occur. You will notice from the attached ruling governing the sale of money orders by National Banks at
non-banking outlets that the selling agents are covered by the bank's blanket bond. The examinations
and related procedures presently available to this
Office are adequate to enable it to discover and discourage undesirable practices by National Banks in
connection with money order operations.
Thus, it is the opinion of this Office that the public
interest in a sound banking system would not be further served by Federal legislation aimed at strengthening the vistorial and supervisory authority of this Office. That nearly half of the States have statutes
relating to the issuance and sale of money orders indicates that they are aware of the problem and are seeking to cure it.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
The Honorable RUSSELL B. LONG
United States Senate
Washington, 25, D.C.
BRANCH BANKING
APRIL 16, 1963.
DEAR SENATOR COOPER:
This is in reply to your letter of March 15, 1963,
which enclosed a letter to you dated March 7, 1963,
from Mrs. Robert Yarbrough of Symsonia, Kentucky.
Mrs. Yarbrough requests information as to "new legislation . . . concerning the business of interstate
branch banking."
As you know, under 12 U.S.G. 36 (c), National
Banks, in order to establish branches outside their home
city, are tied to the location restrictions of State law
which are imposed upon State banks in the State in
which the National Bank is located. This Office has
for some time had under intensive study the question
of a reasonable relaxation of these strictures placed by
Congress upon National Banks. However, we know
of no proposed legislation which would allow branch
banking on an interstate level.
The arguments for a general relaxation are: (a)
that it would enable the banks to offer services to
towns not now having banks; (b) that a greater flexibility of supervision would be possible; and (c) that
banks could reasonably expand in a publicly beneficial
way, bringing broader service and lower rates to its
customers. Opposing contentions include the questions of undue concentration, absentee ownership and
management, and the loss of personal contact with a
community.
As you well know, it is difficult to fully treat questions in this area within the limitations of a letter, but
this brief statement provides the general basis of the
arguments both for and against a relaxation of branching restrictions.
If we can be of any further assistance to you please
do not hesitate to contact this Office. We regret the
delay in answering your letter. Enclosed is a copy of
this letter and we are returning Mrs. Yarbrough's
letter as requested.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable JOHN SHERMAN COOPER
United States Senate
Washington, 25, D.C.
COIN SHORTAGE
MAY
12, 1964.
DEAR SENATOR CANNON :
Reference is made to your letter of April 22, 1964,
relating to the operation of numismatic departments
by commercial banks under the supervision of this Office. It is your view that there exists a perilous coin
shortage and that this shortage is being abetted by
these banks.
Although this Office is aware that some National
Banks engage in certain practices relating to numismatic activities, it is not aware that these practices
or activities contribute materially to whatever coin
shortage may exist at the present time. In this connection, it is the understanding of this Office that the
Congress has taken the appropriate and necessary steps
to facilitate the production of additional coins.
Although employees of the Mint and the Treasury
Department may be prohibited from engaging in practices relating to numismatic activities, there appears
to this Office no need or justification to impose any
such governmental restriction on privately owned commercial banks or their employees. However, this Office does wish to be immediately apprized of any
evidence such as would support the contention that
numismatic activities or any practices relating thereto
by National Banks have an adverse effect on the supply
of coins available for the Nation's economy.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable HOWARD W. CANNON
United States Senate
Washington 25, D.C.
COLLECTIVE INVESTMENT FUNDS
JANUARY 20, 1964.
DEAR MR. CHAIRMAN :
This is in reference to a letter dated November 27,
1963, written by Mr. William L. Cary, Chairman of
the Securities and Exchange Commission, pertaining
to the asserted applicability of the Federal securities
laws to collective investment funds operated by banks.
This letter was introduced by you into the Congressional Record of December 19, 1963, to supplement
the several discussions which have occurred on this
matter. Inasmuch as the letter reflects what appears
to us to be a serious misunderstanding of the Regulations governing the fiduciary operations of National
Banks issued by this Office on April 5, 1963, and of the
prior Regulations of the Board of Governors of the
Federal Reserve System, I feel it appropriate to submit this letter in order that the record may be
complete.
As you know, the authority over thefiduciaryactivities of National Banks was transferred to this Office from the Board of Governors of the Federal Reserve System by the Act of September 28, 1962, 76
Stat. 668. Prior to that time and since the enactment
of the Federal Reserve Act, Regulation F of the Board1
had governed such activities. Following passage of
the Revenue Act of 1936, which accorded tax exempt
status to common trust funds operated in conformity
with regulations of the Board, that body revised Regu409
lation F to provide detailed regulations concerning
common trust funds. Regulation F, as so revised, contained a prohibition against the admission to common
trust funds of trust not established for "bona fide
fiduciary purposes." This vague phrase was interpreted by the Board to prohibit the establishment by
a bank of an investment trust, meaning a mutual fund
operation. Regulation F was administered by the
Board so as to proscribe severely bank common trust
fund activity, with the result that an extremely wide
gulf separated such activities from those of mutual
funds. So wide was this gulf that many legitimate
bank fiduciary activities, in no way approaching the
operation of a mutual fund, were prohibited. Yet at
all times this was no more than Board policy based
upon no statutory requirements.
When in the late 1930's the Investment Company
Act of 1940 was drafted, it contained an exemption
from the definition of investment company for common trust funds. The original language of this exemption would have incorporated the Board's policy
regarding "bona fide fiduciary purposes" by making
that exemption depend upon conformity with the
Board's regulations. However, it was amended to its
present form: ". . . any common trust fund or similar
fund maintained by a bank exclusively for the collective
investment and reinvestment of moneys contributed
thereto by the bank in its capacity as a trustee, executor,
administrator, or guardian; . . ." This language
finally adopted was significantly broader than the
language of the Revenue Act of 1936, upon which the
common trust fund provisions of Regulation F were
based. In fact, at no place in the legislative history of
the Investment Company Act of 1940 does it appear
that it was the intent to enact into law the regulatory
policy of the Board.
The foregoing shows decisively, we believe, that
there is no identity between the application of the
Investment Company Act of 1940 and the regulatory
policy followed by the Board of Governors of the Federal Reserve System. That the Commission may have,
at isolated instances in the past, asserted that violation
of Regulation F made the common trust fund involved
an investment company subject to the provisions of the
1940 Act is of no relevance to the question of whether
such interpretation was, in fact, legally correct, for it
has never been tested. The decision of the Supreme
Court in S.E.C. v. Variable Annuity Life Insurance Co.
of America, 359 U.S. 65 (1959), oft-cited by the Commission, resolved a completely different issue than is
here involved. The Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Com410
pany Act of 1940, as well as the Banking Acts of 1933
and 1935 were enacted at times when banks operated
commingled fiduciary funds. In fact, the existence of
such funds significantly preceded the legislation of the
1930's. Yet nowhere in the history of these Acts appears any statement that it was considered that the
operation of these funds involved the issuance of
securities.
Over the years the investment company industry has
actively sought to maintain and even broaden further,
the wide separation between the operation of common
trust funds and mutual funds. At the same time, the
banking industry has long sought to have removed or
modified, various restrictions of Regulation F. In the
1950's the Board of Governors of the Federal Reserve
System proposed an amendment of the Regulation
which would limit common trust fund entry to irrevocable trusts. However, this change was not effected.
But the cumulative result of the policy of the Board,
the position of the Commission, and the adamant assertions of the investment company industry has been the
emergence of a myth that the slightest deviation from
the stringent regulations governing common trust
funds would make them indistinguishable from mutual
funds, and outside the exemption from the Investment
Company Act of 1940. As is shown above, this has no
basis in law.
Early in 1963, after careful consideration of all factors, with the technical assistance of a committee
drawn from the banking industry, this Office determined that the limitations on common trust fund
activity could be moderately relaxed, by permitting the
collective investment of moneys of certain managing
agency accounts. Where the managing agency agreement confers investment discretion upon the bank,
there is abundant and eminent authority that a trust
relationship results, with the attendant potential liabilities. In recognition of this, our Office in past years
began to recognize the substance rather than the label
of the relationship in such cases in our regulatory
policy. Similarly, when Regulation 9 was revised, it
was decided that it was sound and logical that these
accounts should be permitted to be operated like trusts,
i.e. invested in common trust funds. It cannot be overemphasized that this amendment of the Regulation
applied only to investment-discretion accounts, and not
to those where the bank's role is merely advisory. This
is the full thrust of the "liberalization" effected in this
area.
The provisions of Regulation 9 have been misunderstood by the Commission and by the investment company industry. That the Regulation permits this slight
relaxation of common trust fund regulations does not
mean that it would permit anything which might be
characterized as widespread merchandising. It is obvious that statements by bankers as to what might be
necessary to operate Smathers-Keogh trusts profitably,
and statements by members of our technical advisory
committee made in speeches or debates prior to their
service on that committee, have no relevance to what is
permitted by the regulations issued by this Office.
That this Office does not agree that a slight modification of unnecessarily strict rules puts banks in the
securities business, does not mean that we will fail to
administer our duties responsibly. Indeed, investigation will reveal that the prohibitions of Regulation 9
on advertising are more strict than those of Regulation
F. Therefore, once one divorces the inaccurate characterizations of what Regulation 9 contemplates from
what has actually been done, it becomes apparent that
the operation by a bank of an investment company,
with the attendant considerations which this might
entail, is not in question.
With the foregoing in mind, therefore, I submit that
the conclusions of the letter are not soundly premised.
To the extent accurate, the allusion that a bank trust
department customer, under Regulation 9, may ". . .
buy a pro rata share of a pool of largely equity securities, and the value of his investment will fluctuate in
accordance with the market performance of the pooled
portfolio . . ." speaks only to a truth which has had
equal validity to all common trust funds over the years.
And the conclusion from the foregoing that this is
"indistinguishable from the purchase of a share in a
mutual fund" is irrelevant from the standpoint of
existing law, for whether it is to the Commission
indistinguishable or not, it has been specifically excluded from the Investment Company Act. That
exclusion rests upon a Congressional policy determination which is of controlling "substance and significance" to the question of the responsibility of the
Commission for investor protection. If anything of
substance or significance may be gleaned from the
legislative history of the securities laws, it is that bank
activities were not to be within their purview.
The suggested shortcomings in Regulation 9 reflect
a lack of comprehension of banking supervision and of
the operations of banks in the fiduciary area. Banks
do not operate from private residences with housekeepers maintaining their books. They may not sell
units of interest in collective investment funds. Even
the purported dangers which the Commission and the
investment company industry profess to see in this
modest amendment, such as that pressures will be
generated to make inappropriate loans to companies
whose securities are held in the investment fund portfolio, or to make improper fund investments in companies with which the bank has outstanding commercial loans, reflect this lack of understanding. It is
readily seen by one familiar with bank operations that
these same purported dangers must exist in equal
degree as to all bank trust activity. That they have
been effectively regulated under Regulation F over the
years is apparently conceded by the Commission in its
indication of satisfaction with the enforcement of that
Regulation. Regulation 9 retains the same proscription as Regulation F in this regard, and will be enforced by the same bank supervisors. In addition,
Regulation 9 and our interpretations thereof, specifically incorporate many requirements which were assumed as included under the "bonafidefiduciarypurposes" test. Also overlooked are the plethora of
regulations affecting all phases of banking activity, including the extensive disclosure and reporting requirements imposed by this Office, which are tailored to
banking activity and reinforced by the constant and
meticulous examination by bank examiners. The
cumulative effect of these factors is that the beneficiary
of a bank fiduciary relationship is provided with far
better protection than is enjoyed by the investor in a
mutual fund. For these reasons, we submit that a
recital of specific disclosure requirements enforced by
the Commission under the Investment Company Act
of 1940, which are not duplicated in Regulation 9, is
meaningless. In addition, it is questionable whether
a bank could comply with certain of the enumerated
requirements of the Investment Company Act—such
as the establishment of a fund management which is
elected at regular intervals, or the approval by the
interest holders of changes in investment policy.
Thus, it will be seen that to compel a rigid compliance
with the identical requirements as are applicable to
investment companies would be unwarranted, inappropriate, productive of no public benefit and would
likely exclude banks from the execution of a legitimate
fiduciary function.
In conclusion, the Commission's letter is premised
upon afictitiousequation between the scope of former
Regulation F and the exemption from the Investment
Company Act of 1940 for common trust funds. The
modifications effected in this area by Regulation 9
permit nothing more than a realistic administration
of fiduciary powers, and have no identity with the
operation of a mutual fund. The Regulation prescribes safeguards which are oriented to banking ac411
tivity, and enforced through regular examinations by
bank examiners. Finally, the suggestion that the application of the Investment Company Act will in some
manner be publicly beneficial demonstrates a pervasive misunderstanding of the range and depth of
bank fiduciary activities in general, and bank examination and supervision in particular.
We are enclosing herewith a copy of the memorandum concerning the legal issues involved, which was
furnished to the Subcommittee for Legal and Monetary Affairs of the Committee on Government Operations of the House of Representatives at hearings conducted into this matter on May 20,1963.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable A. WILLIS ROBERTSON
Chairman, Banking and Currency Committee
United States Senate
Washington 25, B.C.
COMPTROLLER'S OFFICE PROCEDURES
DEAR MR. LANGEN :
FEBRUARY 26,1963.
Thank you for your letter of February 11, 1963, on
the subject of the holding of hearings in the local area
on applications for new National Bank charters.
Before the undersigned assumed the Office of the
Comptroller of the Currency in November of 1961,
as far as I have been able to determine, there had never
been a public hearing held in the 100-year history
of the existence of this Office. Very soon after assuming Office, I published in the Federal Register my intention of holding public hearings on those applications, in which the complexity of the issues, or the
public importance of the case, warranted the expenditure of time and money involved in such proceedings.
We have since held a number of such hearings. However, the volume of applications makes the conducting of such a hearing in each case impractical.
With reference to your mention of cooperation with
state authorities, it is our practice to notify each state
authority, by means of our weekly bulletin of every
application received by us our disposition of such
application and numerous other items of business.
I might say that comparatively few of the states reciprocate with such information.
We are, of course, ready and willing to cooperate
with any state official. At the same time, it is our
view that if the concept of a dual banking system
is to have real meaning, that the separate chartering
412
authority of the states and this Office must be exercised on an independent basis.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable ODIN LANGEN
House of Representatives
Washington, D.C.
OCTOBER 15, 1963.
DEAR SENATOR DOMINICK:
This has reference to your letter of September 26,
1963, requesting additional information as to our
office policy on issuing written opinions, particularly in
cases where an initial preliminary decision is reversed.
You make specific reference to the approved application to organize a National Bank at Burlington,
Colorado.
Before I took office in November of 1961, our records
do not indicate that a written opinion was ever issued
by previous Comptrollers on any applications. Immediately upon assuming office, I initiated the practice of
writing and making public, written opinions on all
merger, consolidation and purchase of asset applications. This was done without the addition of additional personnel for this purpose and the major burden
of our opinion writing is handled by our Law Department in addition to their other regular duties.
It has not been possible, to date, to institute the
practice of writing written opinions on new bank charters and branch applications within our existing restrictions of budget and personnel. There are also reasons of policy why it may not be desirable to issue a
written opinion in new bank cases, especially where
rejection is involved. Such files contain much information of a highly confidential and personal nature
regarding the organizers. An application may be
denied on the basis of such information and no public
purpose would be served by publicizing the reasons for
our action in such a case.
The particular type of case to which you refer where
a preliminary decision is reversed is a rare occurrence.
It must be borne in mind, that it is the practice of the
Office to first issue a preliminary approval letter on
new bank and branch applications, after which a period of time must elapse while the applicant bank
completes the physical requirements for opening the
institution. At the end of this period, when the bank
is actually ready to open its doors, the final approval
certificate is issued. Up until that time, the applicant
has no legal right to commence banking at the location
in question and we are free to continuously reappraise
the application up until the time offinalissuance of the
certificate of authority.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable PETER H. DOMINIC K
United States Senate
Washington, D.C.
CONSERVATORSHIP
MAY
1, 1962.
DEAR SENATOR JAVITS:
In response to your inquiry, I wish to state below
our position on the Exeter, Pennsylvania, conservatorship.
The First National Bank of Exeter as an institution
of just under $3,000,000 deposits, located in the anthracite coal region of Pennsylvania. Early this year there
came to light a large defalcation the full amount of
which was not readily determinable. As a result there
came to my attention information which raised serious
questions concerning some stockholders and directors
and officers of the bank. It became patently clear that
the continued operation of even a sound bank by these
persons would be inimical to the bank as well as prejudicial to the interests of the depositors.
As an audit of the bank progressed the amount of
the defalcation continued to rise to the point where
it was obvious that the bank could not be permitted to
continue operating although there was doubt as to
whether it could be held to be technically insolvent.
In light of these facts, plus the failure of the persons
involved to work out a satisfactory sale or reorganization of the bank, a serious question as to the liability
by the insurer on the bank's umbrella bond, the fact
that a receiver may be appointed by the Comptroller
only if he is satisfied that the bank is insolvent, etc.,
there was no alternative but to seek some satisfactory
means of conserving the assets of the bank until the
full amount of defalcation could be ascertained, the
liability or lack of liability of the bonding company
could be better established, and there could be determined whether a prompt sale or reorganization of
the bank could be accomplished.
There was reason to believe that the bank could be
sold. In spite of its difficulties the bank at no time
lost the confidence of the banking public in Exeter,
and there was no run nor heavy withdrawals of the
deposits. A number of sound and well managed banks
in the area had expressed an interest in acquiring the
bank. Such an acquisition would, of course, insure the
continuation of sound, adequate banking service in
the community with all deposits immediately available
and a minimum of harmful publicity. This would
clearly be preferable to receivership even if I had had
legal authority to place the bank in receivership. The
appropriate and perhaps only way the depositors could
be protected until the bank could be sold was through
a conservatorship.
Accordingly, acting under clear statutory authority,
I placed the bank in conservatorship, appointing as
conservator Mr. Russell E. Gardner, Vice President of
the Miners National Bank of Wilkes-Barre, and a
former national bank examiner. Mr. Gardner assumed control of the bank on the morning of February 20, 1962. During the 7 days of the conservatorship, the bank continued to have the confidence of the
public, and although withdrawal of funds was limited
to 10% there was no rush on the part of the depositors
to withdraw the amount permitted, but the bank continued to operate in the usual way subject to the
limitation.
During this period there was agreed upon by the
directors of the bank a sale of the assets to The
Wyoming National Bank of Wilkes-Barre which assumed all deposit and other liabilities. I terminated
the conservatorship on February 26, 1962. The
Wyoming National Bank, a solid and well managed
bank opened its branch in Exeter to the accompaniment of public celebration. All deposits immediately
became available.
There can be no doubt that the use of the conservatorship in this case was in the best interests of all
concerned. In thefirstplace, at no time were deposits
totally unavailable, but 10% was available to each
depositor. Secondly, the limitation upon withdrawals lasted only 7 days, compared with the somewhat
longer period required to commence payment of
deposits under a receivership. We emphasize the
word "commence" because the technical and ponderous machinery of a receivership frequently results in
extended delays before full payout is warranted.
Thirdly, the sale which was accomplished during
the conservatorship resulted in continuity of banking
services in Exeter with all deposits immediately available as deposits in a sound bank. In a receivership
uninsured deposits may never have been paid.
Fourthly, there were avoided the heavy costs of
forced liquidation of assets which all will realize
results in receivership cases. Moreover, receiverships
frequently extend over an extended period of time.
413
Fifthly, the shareholders of the bank were benefitted
by the premium paid as well as the avoidance of receivership costs so that they realized more on their
investments than would otherwise have been possible.
Lastly, whatever drain there may otherwise have
been upon the funds of the Federal Deposit Insurance
Corporation was avoided.
There can be no doubt whatsoever that the people
in Exeter, as indeed people everywhere, will recognize
and realize the difference between a receivership and
a conservatorship. The word "receivership" imparts
one, and only one, thought, forced liquidation and
substantial loss. The word "conservatorship" also
imparts a thought, and only one thought, a conserving,
a saving, and in the case at hand, a complete saving
resulting to the benefit of all.
It was, indeed, a unique set of facts and circumstances which caused and warranted the action I took
in invoking the conservatorship provision. On two
previous occasions since I have held this Office, I have
placed institutions in receivership, as the facts in those
cases clearly warranted such action. In the Exeter
case, I could not reasonably have done so at the time
the bank was placed in conservatorship. The conservator provisions of the National Bank Act are an important and an essential element of the proper and
publicly beneficial administration of the National
Banking System. The Congress wisely enacted these
provisions many years ago, and with equal wisdom
declined, in 1957, in connection with the Financial
Institutions Act, to repeal or even to amend these well
established practices and well justified provisions of
law.
Regulatory authority in banking requires maximum
flexibility of tools so that the tool employed may be
adapted to the facts and circumstances of a given
case. The proper use of the tool proper to the case
at hand avoids the harsh result of employment of a
tool not properly natural, or realistically adapted to
the requirements of a given set of facts and circumstances. It is only by the employment of a tool proper
to the case at hand that the public interest can best be
served.
How frequently the particular set of facts and circumstances which arose in Exeter may arise again in
the future, no man can say. It must be said that such
a concatenation of facts and circumstances will, in all
likelihood, not often be made. But, however infrequent or rare the occurrence of such a situation may in
the future be, the tool should be available to meet it.
In Exeter, the proper tool was unquestionably the conservatorship and proper protection of the public inter414
est would also unquestionably require the preservation
of that tool without change.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable JACOB K. JAVITS
United States Senate
Washington 25, D.C.
CORPORATE PRACTICES AND PROCEDURES
DECEMBER 11,
1962.
DEAR ABE :
We wish to acknowledge your letter of November 5,
1962, expressing your disagreement with our proposed regulations on corporate practices.
This office has been working on these regulations
for many months. All of the topics covered were
considered by the Advisory Committee to the Comptroller of the Currency which commenced its work
in March of 1962 and published its report on September 17, 1962. You will recall that on September 24, in my speech to the American Bankers Association in Atlantic City, I described in detail the
proposals contained in these regulations. The regulations still have not been promulgated in final form
having been published in the Federal Register for 30
days of comments on October 18, 1962.
Parts 10, 11 and 12 of the Regulations which impose compulsory requirements on the banks as to proxy
statements, annual reports and reports of stock ownership will not be put into effect until February 1, 1963,
unless the bank wishes to submit to its stockholders at
the forthcoming shareholders' meeting next January
one or more of the newly permitted programs such as
a stock option plan, preferred stock, etc. In such
case we are requiring that the new rules on proxy information be followed as a condition to our approval
of such program.
Parts 7, 13, and 14 of the new Regulations are permissive in nature and do not require any action on
the part of the bank. There was no reason, therefore,
for delaying the effective date of those parts.
We can assure you that the adjournment of Congress has nothing whatever to do with the effective
dates of these regulations and the fact that part of
them will be effective before Congress convenes and
part afterwards is due to the facts discussed above and
is entirely coincidental.
Concerning the merits of our proposed regulations
and our authority to promulgate the same, we, of
course, respect your opinion but must disagree with
it. We have thoroughly investigated the legal aspects
of the matter and are firmly convinced that the reforms contained in our regulations are well within our
authority to effect.
Specifically, the permissive provisions to which you
object will give to the banking industry aflexibilityin
raising additional capital and retaining competent
management which is already available to virtually
every other type of corporation, including banks chartered by many of our States. In your own State of
New York, banks chartered by the State are permitted
to have authorized but unissued stock, preferred stock
and capital debentures, to mention three of the items
to which you have expressed objection.
You have mentioned the fact that some of the
changes effected by our regulations have previously
been included in legislative proposals. It is our view
that these legislative proposals were necesssitated by
the fact that previous Comptrollers had not seen fit
to effect the changes by regulation even though they
had the authority to do so.
Our tentative publication stated a probable effective
date of November 30, 1962, for the permissive parts
of the regulations. Various matters in the proposed
regulations are being relied on by National banks
throughout the country, and they have planned to
take appropriate corporate action at their forthcoming
annual meetings, which are required by law to be
held in January of each year. Any delay, therefore,
in the final promulgation of these rules past the deadline date for the mailing of notices of these meetings
would, in effect, postpone action pursuant to the regulations for an entire year, to the substantial detriment
of these banks.
We are presently considering many technical and
clarifying changes in these proposed regulations which
have been suggested by many banks throughout the
country in response to our publication of tentative
rule-making.
We would, of course, be greatly pleased to receive
any comments and suggestions you may wish to make
with respect to any or all of the proposed changes and
to discuss each or all of them with you.
Accordingly, we would be grateful to you if you
could arrange to meet with us as soon as possible after
your return from your present trip. Since the Federal
Register requires copy to be presented at least 3 days
in advance of publication, it is necessary, if we are to
have time to incorporate your suggestions into the final
rules, which are to be put in effect before the end of
the year, to hold our meeting not later than December
19. I would greatly appreciate it, therefore, if you or
your office would call me so that we may sit down and
discuss these matters.
In our long relationship, it has been rare that we
have had any substantial disagreements, and I feel sure
that nothing here involved will affect our long standing
amicable personal and official relationship. You know
that I have always been anxious to support you in your
distinguished efforts as a legislator and as a national
leader, and I feel sure that I shall continue to have
your support in the larger objectives which both of us
seek in the national interest.
Cordially,
JAMES J. SAXON,
Comptroller of the Currency.
The Honorable ABRAHAM J. MULTER
House of Representatives
Washington 25, D.C.
NOVEMBER 6, 1963.
DEAR MR. CHAIRMAN :
I am pleased to enclose a copy of the instructions and
model forms we have furnished all banks under our
jurisdiction in connection with our recent corporate
practice and disclosure regulations.
The requirements described in the enclosed instructions must be followed by all National Banks with total
deposits of $25,000,000 or more, for the forthcoming
annual meeting of shareholders to be held in January
of 1964 and also for all special meetings of shareholders
held hereafter. It is expected that a substantial number of banks with deposits under $25,000,000 will also
use the model documents.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable WRIGHT PATMAN,
Chairman, Committee on Banking and Currency
House of Representatives
Washington 25, D.C.
CORPORATE SAVINGS ACCOUNTS
JANUARY 14,1964.
DEAR MR. CHAIRMAN :
Thank you for sending me a copy of your January 8, 1964, reply to another Senator concerning my
interpretation that National Banks may lawfully accept savings accounts from profit making corporations
415
or any other class of depositors. It is noted that this
Senator's inquiry to you was prompted by a letter
from one of his constituents, the president of a small
National Bank located in Wyoming. Although it appears that this banker was inquiring whether a profit
making corporation like General Motors could open a
savings account in a commercial bank, it is submitted
that with respect to this National Bank, it is the small
business corporation in that bank's community, which
is ill-equipped to operate in short-term money markets,
and which is therefore unfairly and seriously handicapped by the Board's discriminatory and unlawful
definition of deposits by the character and general purposes of the depositor, which will seek to maintain a
savings account.
A study of several years duration by this Office as
to the authority of the Federal Reserve Board to define
a savings deposit by the character and general purposes of the depositor resulted in our recent interpretation that National Banks may lawfully accept
savings accounts maintained by profit making corporations and any other class of depositors. The Comptroller would, therefore, regard acceptance of such a
savings account by a National Bank as neither requiring nor permitting any enforcement action to be taken
by him or a representative of his Office.
This matter continues to receive careful study by
this Office, and in the very near future a memorandum
will be sent to you and to all National Banks by this
Office which will consider not only the Board's authority to define savings deposits under 12 U.S.G. 461,
but also the Board's vague threats of massive retaliation for a National Bank's failure to accept a definition
made by the Board in excess of its statutory authority.
Specifically, this memorandum will discuss the lack of
authority in the Board to take any retaliatory action
against a National Bank by an action for charter forfeiture. It will also discuss the Board's lack of authority to enforce acceptance of its unlawful definition
of savings deposits by an action against the bank's
directors or by an assessment of penalties for reserve
deficiencies.
The responsibility for the supervision of National
Banks and the enforcement of banking laws and regulations applicable to National Banks is entrusted to
the Comptroller of the Currency. This responsibility
with respect to the banking regulations must, of course,
be executed in accordance with the Comptroller's interpretation and understanding of the banking laws
under which the regulations are issued. The Comptroller would regard as improper and unlawful any
contrary action by any representative of his Office.
416
The reports of the National Bank Examiners are the
principal source of the information upon which enforcement action is based. National Bank examination reports will not take exception to, note, or criticize actions which are in accordance with the Comptroller's interpretation of the National Banking Laws.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
The Honorable A. WILLIS ROBERTSON
Chairman, Committee on Banking and Currency
United States Senate
Washington 25, D.C.
JANUARY 24,1964.
DEAR SENATOR ROBERTSON :
As promised in our letter of January 14, 1964,
concerning the acceptance of corporate savings accounts by National Banks, there is enclosed for your
consideration a memorandum prepared by this Office
which demonstrates that the statutory authority of the
Federal Reserve Board to define "demand deposits,"
"time deposits," and "savings deposits" is directed
to the terms of the deposit contract and provides no
authority for the Board to prescribe who may or may
not become a party to a savings deposit contract. Our
memorandum also demonstrates 1) that the Board has
no authority to impose, or cause to be imposed, any
penalty for failure to comply with the unauthorized
provisions of Regulation Q, and 2) that the drastic
penalties of charter forfeiture and directors liabilities
are not applicable to the enforcement of Regulation Q
or the related Regulation D and 3) that such penalties can only be imposed as a result of a suit brought
by the Comptroller of the Currency.
The philosophy that business corporations do not
accumulate funds for general thrift purposes appears to
motivate the Board to refuse the "privilege of maintaining savings deposits" to a small one-man business
corporation and to extend such "privilege" to individuals of unlimited means and to nonprofit corporations,
associations, and other organizations possessing vast
fortunes. Yet, it is the small business corporation
which is usually ill-equipped to operate in short-term
money markets. The larger business firms generally
have more knowledgeable and sophisticated corporate
treasurers and may not be significantly handicapped
by the elimination of corporate savings accounts in
commercial banks as an alternate place for the investment of their funds. This discrimination based on
the character and general purposes of the depositor not
only arises from an exercise of nonexistent authority,
but it also effectively prevents commercial banks from
meeting the needs of the small businesses within their
communities. It is the purpose of the enclosed memorandum to demonstrate that National Banks, under
the law as enacted by Congress in 1935, may lawfully meet the investment needs of the small businesses
within their communities.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable A. WILLIS ROBERTSON
United States Senate
Washington 25>D.C.
CREDIT QUALITY
MARCH 7, 1962.
DEAR MR. GONZALES :
I have received your letter of March 1, 1962, enclosing an inquiry from your constitutent, Mr. Sylvan
Lang. I understand that Mr. Lang is a member of
the law firm of Lang, Byrd, Cross, Ladon and Opperheimer, San Antonio, Texas, whose clientele includes
a company engaged in the business of leasing equipment.
Mr. Lang's letter states that this client's banking
connection, the National Bank of Commerce, San
Antonio, Texas, has taken the position that its loans
to the leasing company would be criticized by the bank
examiners if the total of such loans was more than four
times the amount of the borrower's capital funds even
though the loans would be secured by assigned leases
having a value of at least 120% of the loans. Mr.
Lang asks that you obtain a statement from me as to
whether national banks will be criticized by my examiners if they do make secured loans to leasing companies where the borrowing ratio is 10 to 1 which, in
the opinion of a few banks active in this field of lending, should be the maximum ratio.
I do not believe that the case presented by Mr. Lang
is one that would be resolved by my field examiners
through the application of a borrowing ratio alone
since the question of whether a particular loan of this
type would be criticized would depend upon the credit
judgment of the examiner after a thorough analysis of
all the factors relating to the loan. These would include the credit worthiness of the lessors, the type of
product under lease, the technical suitability of the
loan and lease instruments, the lending bank's method
725-698—64
28
and effectiveness in supervising the loan, as well as the
financial strength and performance of the borrower.
Where the collateral pledged to such a loan consists
of lease obligations of concerns of unquestioned financial strength, and this fact may be readily determined
from the lending bank's credit files, the examiner's
analysis of the loan would be largely based on the collateral. On the other hand, if the credit worthiness
of the lessees is not strong or cannot be determined
from the lending bank's files, the examiner would
necessarily need to give more weight to the factors
disclosed by the financial statement and operating history of the leasing company.
I hope that I have been helpful to you on this matter and, as you requested, I am returning Mr. Lang's
letter.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
The Honorable HENRY B. GONZALES
House of Representatives
Washington 25, D.C.
DEBT CANCELLATION CONTRACTS
JUNE 3, 1964.
DEAR SENATOR GRUENING:
Reference is made to your letter of May 20,1964, in
which you forward a copy of a letter from a constituent, Wallace Cathcart, Jr., Fairbanks Insurance
Agency, Inc., at Fairbanks, Alaska. Mr. Cathcart objects to a recent ruling of this Office relating to National Banks and their use of debt cancellation
contracts.
As stated in paragraph 7495 of the Comptroller's
Manual, a National Bank may provide for losses arising from cancellation of outstanding loans upon the
death of borrowers. The imposition of an additional
charge and the establishment of necessary reserves in
order to enable the bank to enter into such debt cancellation contracts are a lawful exercise of the powers
of a National Bank and necessary to the business of
banking.
National Banks may engage in debt cancellation contracts pursuant to paragraph Seventh of 12 U.S.C. 24
which authorizes a National Bank to exercise "all such
incidental powers as shall be necessary to carry on
the business of banking; * * *." The execution of
debt cancellation contracts pursuant to section 24 is an
exercise of a National Bank's corporate powers the
same as in the case of its other banking activities.
417
The debt cancellation contract ruling issued by this
Office is not intended as a means for National Banks
to invade the field of insurance. Rather, it is a recognition by this Office of a National Bank's right to protect itself by the establishment and maintenance of
appropriate reserves against anticipated losses in connection with its lending activities under 12 U.S.C. 24.
The necessity to maintain such reserves and to adjust
its charges in relation to both reserves and the risk involved in a particular transaction has long been recognized as an essential part of the business of banking.
Similarly, it has always been recognized as an essential
part of the business of banking for banks to enter into
lending transactions on such terms and conditions as
are consonant with prudent banking judgment. Although a particular lending transaction by a National
Bank, or some aspect thereof, may appear to fall within
the definition of insurance as that word is defined by a
state statute, that fact alone does not make the transaction a part of the business of insurance such as is
subject to regulation by state insurance authorities.
All banking activities of a National Bank, including
its activity in executing debt cancellation contracts, are
performed under its corporate powers and are governed
by Federal legislation and regulations pertaining to
banking activities of National Banks. Any state law
which purports to license or regulate a banking activity
of National Banks would not be applicable to or binding upon them.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
The Honorable ERNEST GRUENING
United States Senate
Washington 25, D.C.
DEPOSIT AND SHARE INSURANCE
APRIL 27,
1962.
DEAR MR. FULTON:
Reference is made to your communication of April
13, 1962, with regard to a letter from Mr. Stanley J.
Warren, 2442 Starkamp Avenue, Pittsburgh 26, Pennsylvania, dated March 19, concerning federal insurance
of deposits in banks and savings and loan associations.
The insurance of deposits in insured banks is governed
by the Federal Deposit Insurance Corporation under
the provisions of Title 12 of the United States Code,
sections 1811 through 1831. The insurance of deposits
in federal savings and loan associations is governed by
the Federal Savings and Loan Insurance Corporation
under the provisions of the National Housing Act.
418
Ordinarily, the customers of savings and loan associations are not depositors, but share owners and their
savings accounts in such insured associations are insured share accounts. In other words, the owner of a
savings account in a savings and loan association is a
stockholder in the association. The owner of a savings account in an insured commercial bank is a depositor. The investment of the stockholders in the
capital stock of a commercial bank is separate and
apart from the deposits of the depositors and that investment along with earnings accumulated from year
to year is maintained as a form of cushion for the
protection of the bank and its depositors against losses.
The accumulated earnings of a savings and loan association which are undistributed are called reserves and
undivided profits. Such funds are owned by the share
account owners but are held by the association to protect share account owners against loss. It may, therefore, be seen that a bank and a savings and loan association are quite different insofar as their capital funds
are concerned.
An insured commercial bank must meet requests
for withdrawal of deposits immediately on demand unless the deposit has been made under a contract
whereby the depositor agrees to give a specified period
of notice which may be waived by the bank under certain conditions. The failure of an insured commercial
bank to pay its deposits in accordance with the deposit
contract would cause the bank to close and immediately bring about a full cash payment of the insured
deposits by the Federal Deposit Insurance Corporation.
Failure of an insured savings and loan association to
meet a withdrawal request would not necessarily cause
the savings and loan association to close its doors and
bring about a full cash payment of the insured share
account. It would be necessary, however, for the savings and loan association to apply a certain part of
its available funds toward meeting a portion of the
withdrawal request which, if not paid in full, would
be numbered and paid in installments or in full as
funds permit as it is reached in the order of receipt
with other withdrawal requests. In order that the
owner of a share account may realize upon the insurance coverage, the savings and loan association must
be declared in default by legal authority or a court
of competent jurisdiction.
However, in order to prevent default in an insured
institution, or in order to restore an insured institution
in default to normal operations as an insured institution, the Corporation is authorized, in its discretion, to
make loans to, purchase assets of, or make a contribution to, an insured institution or to an insured institu-
tion in default; but no contribution shall be made to
any such institution in an amount in excess of that
which the Corporation finds to be reasonably necessary
to save the expense of liquidating such institution.
As we have stated, a commercial bank and a savings
and loan association are different types of financial
institutions and the interests of customers of each are
insured to the extent of $10,000 each by separate governmental agenices. The distinction between the two
agencies is apparent in the different ways in which
their respective types of insurance become operative.
Each insuring corporation is an instrumentality of the
Government of the United States.
We are not in a position to comment as to the likelihood of any change in the dividend rates paid by
federally insured savings and loan associations.
Sincerely yours,
JAMES J. SAXON,
Comptroller of the Currency.
The Honorable JAMES G. FULTON
House of Representatives
Washington 25, B.C.
DIRECT LEASING
JUNE 4, 1963.
DEAR MR. VICE PRESIDENT :
You have requested our comments on a letter of
May 20, 1963, addressed to you by Mr. Morris Glesby
of Leasing Associates, Inc., in which he objects to the
position taken by this Office in a letter of March 18,
1963, addressed to the Presidents of all National Banks
on the subject of direct leasing of personal property.
The letter of March 18, 1963, was the result of a
long period of study stimulated in part by the recommendations of the Advisory Committee on Banking to
the Comptroller of the Currency. (A copy of the Committee's recommendations on this subject is attached.)
The letter simply expresses the conclusion that
The leasing by the bank of personal property acquired upon
the specific request of and for the use of its customer, and
the incurring of such additional obligations as may be incident to becoming an owner of personal property and the lessor
thereof, is a lawful exercise of the powers of a National Bank
and necessary to the business of banking.
Banks have, from the beginning of commercial banking, financed the acquisition and the use of personal
property. They have lent money on the security of
some form of ownership or control of the property
financed. They have also lent money to lessors on
the security of the lessee's agreement to pay rent. No
one questions the propriety of these transactions.
For a number of years, however, it was thought that
banks could not participate in lease financing by the
direct acquisition and leasing of property without engaging in a merchandising operation. The development of leasefinancingcompanies has proved the contrary. They have established that there is a significant need for a form of leasing in which property management is largely in the hands of the lessee. The
letter of March 18, 1963, recognizes that this form
of leasing is a financial business well within the power
of a bank to perform.
This recognition of the authority of National Banks
to engage in direct lease financing has provoked some
criticism from a limited number of automobile dealers
and lease financing companies engaged in the leasing of automobiles. It is asserted that it is not a proper
function of banks to engage in the purchase and lease
of merchandise of any sort. It is also alleged that the
intrusion of banks into the business of leasing constitutes "unfair" competition for those now engaged
in the business and deprives those in that business of
access to necessary financing. The letter you have received from Mr. Glesby is a representative sample of
this criticism.
The power which National Banks possess to engage
in direct lease financing transactions does not carry
with it the power to purchase merchandise for the
purpose of stocking in anticipation of future leasing.
This is the essence of a merchandising operation. The
precise function of the merchant in the distributive
process is to provide the consumer with a stock of
merchandise at convenient locations and in quantities
which make supplies readily available—so-called
"place utility." This is the function for which he is
compensated as a merchant.
The financing of his operations is a separate function. Most merchants rely on outside financing in
some degree to finance both their purchases and their
sales—and banks have been a chief source of such
financing.
The power of National Banks to engage in lease
financing transactions is entirely a financing power.
While the National Banks may become the owner of
commodities, they may not carry out the functions of
the merchant. They may not purchase commodities
for stock, and hold them for eventual anticipated lease
or sale. They may purchase only at the request of a
customer who wishes to have the full and immediate
use of the commodity on a lease basis. National Banks
become the owner of commodities in permitted lease
financing transactions principally for the purpose of
providing a well defined financial, and not a merchan419
dising, service. They do not offer or solicit the sale
of commodities—but only of financing.
Thus, when National Banks enter into direct lease
financing arrangements they compete not with leasing companies, but with other sources of financing.
The distributive and property management functions,
as contrasted with financing, are really performed by
the lessee, himself where the transaction is handled
directly by a bank.
The fear has been expressed that the entry of National Banks into direct lease financing transactions
would constitute "unfair" competition with leasing
organizations, and even lead banks to deny financing
to their "competitor" leasing organizations.
No bank is in a position to assure effective denial of
financing to any prospective borrower unless the bank
is in a monopoly position or acts in concert with other
banks. Such power, where it may exist, cannot be
derived from the fact that banks are authorized to enter
into leasing transactions—and should be attached irrespective of the manner in which it is employed. So
long as there is competition among banks, it can never
be to the advantage of any bank to withhold profitable
loans—but only to seek the most profitable outlets for
their lendable resources.
The question whether the National Banks would
become "unfairly" competitive under this authority
raises a different set of issues. Throughout our private
enterprise economy, under the influence of competitive
forces, there is a constant search for improved means
both of production and distribution. It is not "unfair"
for any entrepreneur to devise less costly or more effective means of serving consumers—that is indeed the
basic aim we seek under our private enterprise system.
If National Banks are able, under this authority, to
provide a less costly means of financing the distribution
of commodities and services, that can only be to the
advantage of the consuming public. It is the consumer, and not any particular class of producers or
distributors, who ought to be safeguarded.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency,
Honorable LYNDON B. JOHNSON
Vice President of the United States
Washington 25, D.C.
OCTOBER 22,
1963.
DEAR SENATOR ROBERTSON :
You have asked for our comments on a number of
problems involved in the direct leasing of personal
420
property by National Banks. Your concern is principally with:
(1) the statutory authority of National Banks to engage in
these transactions;
(2) the extent to which the statutory lending limits are
applicable;
(3) whether there is a need for limits comparable to the
lending limits on the acquisition of property for leasing.
The letter of March 18,1963, on this subject was the
result of a reexamination of the statutory corporate
powers of National Banks. In response to a number of
inquiries we have prepared a simple statement explaining the reasons for the examination and the relationship of direct leasing to other banking business. A copy
of this statement is enclosed.
Paragraph Seventh of 12 U.S.G. 24 authorizes a
National Bank to exercise "all such incidental powers
as shall be necessary to carry on the business of banking; by discounting and negotiating * * * evidences
of debt; * * *."
Prior to March 18, 1963, a lease financing transaction had been considered within the authority of a
National Bank only to the extent that the transaction
could be regarded as the discount or the negotiation of
an evidence of debt. It followed, of course, that such
transactions were subject to the lending limits contained in 12 U.S.G. 84. The letters of February 1 and
March 1, 1963, recognized that certain lease paper
could be discounted or negotiated and would qualify
under exception 13 of 12 U.S.G. 84. As you have
noted, under some circumstances, the obligation of the
discounter or negotiator of such paper (ordinarily the
lessor) is not subject to the lending limit.
Our study of lease financing indicated that transactions in which the economic function of the lessor had
been reduced to a minimum were already an important
part of the business of banking. In those transactions
a bank lent money to a lessor solely upon the credit
of a lessee for the purchase of property specifically
requested by the lessee for its immediate possession
and use. The lessor acted solely as a holder of title
and as a nominal debtor. He was a relatively expensive retailer of bank credit necessary only because
a lease transaction required an owner and lessor of
property, and because the bank supervisors required
an evidence of debt.
The recognition that in some cases a lessee could
be regarded as a debtor under 12 U.S.G. 84 approached but did not reach the solution of the problem. A debtor-creditor relationship did not meet the
needs of the lessee.
Solution of the problem, however, required only the
recognition that the economic development of our
country had brought this form of lease financing into
the business of banking. The business of banking, like
the law merchant, continues to grow to meet the
needs of commerce. Paragraph Seventh of 12 U.S.C.
24 clearly authorizes National Banks to carry on the
business of banking. The use of a semicolon at the
end of the first clause of the paragraph indicates that
the "business of banking" is not limited to the transactions described in the succeeding clauses. It is not
necessary to fit lease financing into the narrow confines of the negotiation of an evidence of debt. It is,
in fact, necessary to the business of banking to recognize
as was stated in the letter of March 18, 1963 that "the
leasing by the bank of personal property acquired upon
the specific request of and for the use of its customer,
and the incurring of such additional obligations as may
be incident to becoming an owner of personal property and the lessor thereof, is a lawful exercise of the
powers of a National Bank and necessary to the business of banking."
The limitation contained in 12 U.S.C. 84 applies
specifically to the discounting, negotiation and guaranty of evidences of debt. If, as indicated in the preceding paragraphs, lease financing is not the negotiation of an evidence of debt for the purposes of 12
U.S.C. 24, there is no reason to regard it as such for
the purpose of bringing it within the limitation of 12
U.S.C. 84. Certainly, the acquisition of personal property is not within the limitation and the payment of
rent is ordinarily regarded as compensation for the
use of property and not as the payment of a debt.
There remains only the question of the need for
limits on the acquisition of property for lease. During the period which has elapsed since the publication
of the letter of March 18, 1963, banks have proceeded
prudently. As has been noted these transactions are
not new to them. Banks have lent money to lessors
and have been aware of the risks incurred by lessors.
There has been no indication of any need to establish
either statutory or administrative limits comparable to
the lending limits for these transactions. This, of
course, is not an unusual situation. A number of lending transactions are by statute completely excepted
from the lending limits, and certain investments are
by statute completely excepted from investment limitations. All such transactions, however, are subject
to prudent banking standards. These standards will
provide for the immediate future a sufficient guide for
the development of direct lease financing by National
Banks.
There are, of course, problems involved in the widespread transaction of lease financing business. As you
have noted, they include problems relating to the
transaction of business in other states, problems of taxation and of the liabilities resulting from the ownership
of property. There are similar problems in widespread
financing of any kind. Thus far, however, banks proposing to engage in these activities have demonstrated
that they are aware of these problems and that they
are preparing to meet them in a variety of ways. It
seems to us desirable to allow the initiative of bankers
and their counsel to develop the techniques for handling these problems before setting up statutory or
administrative standards.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable A. WILLIS ROBERTSON
Chairman, Committee on Banking and Currency
United States Senate
Washington 25, D.C.
DECEMBER 23,1963.
DEAR MR. GUBSER :
With your letter of November 27, 1963, you enclosed
a letter from your constituent, Mr. David I. Pursley,
which contained several questions concerning an
equipment leasing project for a group of National
Banks.
As outlined in Mr. Pursley's letter, the proposal constitutes a method by which institutional investors, such
as pension funds and life insurance companies, may
participate with banks in the financing of equipment
lease transactions. Under the plan, the bank would
buy from the institutional investor the equipment, and
would simultaneously or subsequently lease the equipment to a third party. The bank would approve the
credit of each lessee subject to the approval of the
institutional investor. Approximately 33 percent of
the equipment cost would be paid for from the bank's
resources as a downpayment on a special type of purchase money mortgage. Under the terms of the contract, the bank would be obligated to pay the remaining payments only out of rents and the proceeds from
the sale of the used equipment at the termination of
the lease. As a means of securing the contract, the
bank would assign the rents to the institutional investor. According to Mr. Pursley's calculations, the
bank will recover its investment in its first one-third
of the lease, and the bank's maximum exposure will be
5 years.
421
Prior to implementing the proposed program, Mr.
Pursley has asked for clarification as to whether or not
a National Bank may enter into the type of conditional
sales contract which was enclosed with his letter,
whether a National Bank may assign the rents receivable from the related lease on the equipment purchased to secure the contract, and whether a National Bank may use declining depreciation on its
leased equipment and tax accounting and straight
line depreciation for report accounting to the Comptroller of the Currency and to the bank's stockholders.
In the exercise of its regulatory responsibilities over
National Banks, this Office has adopted a prudent
policy of not issuing opinions on generalized proposals
from institutions not under its supervision. In order
for National Banks to avoid being pressured into participating in a particular program, it is preferable
that requests such as this be received from a specific
National Bank. This procedure also affords the bank
and its counsel an opportunity to study the proposal
with all of its ramifications and subtleties. This policy
has proved effective in avoiding misinterpretations
and misunderstandings.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
The Honorable
CHARLES S. GUBSER
House of Representatives
Washington,B.C.
JANUARY 29,1964.
DEAR MR. HALPERN :
Further reference is made to your letter of November 12, 1963, in which you express serious concern
as to the legality of the conclusions contained in the
Comptroller's letters of March 18, and October 22,
1963, authorizing National Banks to engage in the
ownership and leasing of personal property.
You suggest that there exists a most serious problem
with "regard to the inequity of competition between
the National Bank-lessors and existing business organizations." You state that "the National Banks would
have access to the depositors' funds to carry on their
leasing business, a source of money obviously denied to
their competitors." You also suggest that "National
Banks would face serious problems with respect to
Federal and State taxation on any personal property
owned by them [and] used in leasing transactions,
as well as complex difficulties with the corporate
qualification requirements, licensing, taxation, and
422
service of process in the various states where a National Bank might be held to be doing business as
a result of its leasing activities." Finally, you take issue with the conclusion of this Office that National
Banks, under paragraph Seventh, 12 U.S.C. 24, have
the authority to engage in the direct leasing of personal
property and you state that it is this legal question
which causes you the most concern.
The question whether the National Banks would
become "unfairly" competitive under this authority
has been carefully considered by this Office. Throughout our private enterprise economy, under the influence of competitive forces, there is a constant search
for improved means both of production and distribution. It is not "unfair" for any entrepreneur to
devise less costly or more effective means of serving
consumers—that is indeed the basic aim we seek
under our private enterprise system. Our study of
lease financing indicated that transactions in which
the economic function of the lessor had been reduced
to a minimum were already an important part of the
business of banking. In these transactions a bank lent
money to a lessor solely upon the credit of a lessee for
the purchase of property specifically requested by the
lessee for its immediate possession and use. The lessor
acted solely as a holder of title and as a nominal debtor.
He was a relatively expensive retailer of bank credit
necessary only because a lease transaction required an
owner and lessor of property, and because the bank
supervisors required an evidence of debt. If National
Banks are able, under this authority, to provide a less
costly means of financing the distribution of commodities and services, that can only be to the advantage
of the consuming public. It is the consumer, and not
any particular class of producers or distributors, who
ought to be safeguarded.
All of the problems which you have mentioned with
respect to taxation on personal property owned by
National Banks and used in leasing transactions, as
well as complex difficulties with the corporate qualification requirements, licensing, taxation, and service
of process in the various States where a National
Bank might be held to be doing business as a result
of its leasing activities were carefully considered prior
to the letter of March 18, 1963, and have been carefully reviewed on a number of occasions and especially
while the letter of October 22, 1963, was being prepared. As stated in the letter of October 22, 1963,
these problems are similar to those which exist in
connection with widespread financing of any kind.
Thus far, however, banks proposing to engage in these
activities have demonstrated that they are aware of
these problems and are prepared to meet them in a
variety of ways.
This Office has given careful study over an extended
period of time to the question of a National Bank's
authority to engage in the direct leasing of personal
property. This study resulted in our letter of March
18, 1963. Paragraph Seventh of 12 U.S.G. 24 clearly
authorizes a National Bank to exercise "all such incidental powers as shall be necessary to carry on the
business of banking; by discounting and negotiating * * * evidence of debt; * * *." The use of a
semicolon at the end of the first clause of the paragraph indicates that the "business of banking" is not
limited to the transactions described in the succeeding
clauses. It is not necessary to fit lease financing into
the narrow confines of the negotiation of an evidence
of debt. It is, in fact, necessary to the business of
banking to recognize as was stated in the letter of
March 18, 1963, that "the leasing by the bank of personal property acquired upon the specific request of
and for the use of its customer, and the incurring of
such additional obligations as may be incident to becoming an owner of personal property and the lessor
thereof, is a lawful exercise of the powers of a National Bank and necessary to the business of banking."
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable SEYMOUR HALPERN
United States House of Representatives
Washington 25,D.C.
APRIL 8, 1964.
DEAR MR. CHAIRMAN:
You have requested the views of this Office on H.R.
9822 which is designated "A Bill to prohibit banks
from engaging in the business of personal property
leasing." This Office strongly opposes the passage of
the legislation. The operative language of the bill is
as follows:
That no bank of any type described in section 2 of this Act
may be the lessor of any personal property under any circumstances or by any means as a result of which such bank
(1) performs or is compensated for any services other
than the lending of money or advancement of credit
with respect to such property, or
(2) acquires or may acquire any interest in such
property other than as security for the repayment to
such bank of money or credit advanced by it together
with interest and other charges for exclusively financial
services, or may realize from such property in the event
of default more than such repayment and charges.
This Office fundamentally disagrees with the purpose of this legislation which is to unduly restrict, for
the private benefit of a competing group, the business
operations of banks. We see no reason why a bank
should not be permitted to engage in all forms of financing and perform all phases of the business of banking for its customers which its management believes
can be performed profitably.
The objective of this bill appears contrary to the
intent of Congress expressed in the National Bank
Act, that National Banks shall have "all such incidental powers as shall be necessary to carry on the
business of banking" (12 U.S.C. 24, paragraph Seventh). Congress, in 1864 wisely did not attempt to
define the business of banking as it then existed. They
foresaw that the business of banking would change and
develop with the passing years. The sweeping character of these changes is evidenced by the variety of
nonbank financial institutions, including leasing companies, which exist today in response to public financial
needs which banks, in part, failed to satisfy. H.R.
9822 would constrict for the benefit of these leasing
companies the powers of banks which, as financialservice institutions, are best situated to respond to the
public demand for what is essentially a financing
transaction.
Banks have, from the beginning of commercial banking, financed the acquisition and the use of personal
property. They have lent money on the security of
some form of ownership or control of the property
financed. They have also lent money to lessors on the
security of the lessee's agreement to pay rent. The
power of banks to engage in lease financing transactions is entirely a financing power. While the banks
may become the owner of commodities, they may not
carry out the functions of the merchant. They may
not purchase commodities for stock, and hold them
for eventual anticipated lease or sale. They may purchase only at the request of a customer who wishes to
have the full and immediate use of the commodity on
a lease basis. Banks become the owner of commodities in permitted lease financing transactions principally for the purpose of providing a well-defined financial, and not a merchandising, service. They do
not offer or solicit the sale of commodities—but only
of financing. When banks enter into direct lease
financing arrangements, they compete not with leasing
companies, but with other sources of financing. The
distributive and property management functions, as
contrasted with financing, are really performed by the
lessee himself where the transaction is handled directly
by a bank.
423
This Office understands the opposition of those engaged in direct leasing who contend that they may be
hurt competitively where such activities are conducted by banks, but this Office sees no legal or policy
basis for eliminating or preventing such competition.
The argument of some leasing companies that banks
are violating their exclusive domain of direct leasing
of personal property is entirely without merit. Such
lessors, in most instances, are thinly capitalized corporations which discount their leases with a bank, act
solely as holders of title and are nominal debtors. As
such, they are relatively expensive retailers of bank
credit. Throughout the private enterprise economy of
this nation, under the influence of competitive forces,
there continues a constant search for improved means
both of production and distribution. It is not "unfair"
for any entreprenuer to devise less costly and more
effective methods of serving consumers, which is indeed, the basic aim that we seek to achieve under our
free enterprise system. If banks are able to provide a
less costly means of financing the distribution of commodities and services, such result inures only to the
advantage of the consuming public. It is the consumer, and not any class of producers or distributors
who ought to be safeguarded.
tion. The enclosures marked "Exhibit A" attached
hereto, are an exchange of correspondence between
this Office and the New York Stock Exchange. The
letters of the Stock Exchange indicate that in the event
H.R. 6793 becomes law and the administration of the
Securities Acts thereby passes from the SEC to the
banking agencies, the Stock Exchange has requested
the banking agencies to grant a temporary exemption
from registration to any bank which desires to list its
stock on the exchange. If such an exemption were
granted, a bank which listed would not be required to
file a registration statement until April 29, 1965, which
is the deadline date for the filing of registration statements by unlisted companies.
In view of the position taken by the representatives
of the New York Stock Exchange in all of their testimony on the bill, that their support of the legislation
was all directed at attaining the maximum amount of
disclosure to stockholders by unlisted companies at the
earliest possible time, we thought that this application
of the New York Stock Exchange for a temporary
exemption from the requirements of the bill for listed
companies should be brought to your attention.
The second piece of correspondence enclosed
marked "Exhibit B" is a letter from Erskine & Tulley,
It is the position of this Office that it would be an attorneys of San Francisco, calling to our attention an
anomaly for Congress to reserve to the benefit of a unintended possible result of H.R. 6793 as it now
select group a particular segment of financial business,
stands. The letter points out that certain banks have
while it prohibits that some business to the banks,
issued their stock to voting trustees who in turn have
which were clearly created by the Federal and State
issued trust certificates to the general public. In such
governments for the purpose of meeting and satisfya case a banking agency would administer the act with
ing public financial needs. Banking, like any indusrespect to the portion of the stock held by the general
try, is entitled to the benefits of new business forms and
public, while the Securities and Exchange Commission
developments in financial transactions and, in the would administer the act with respect to the trust ceropinion of this Office, it would be myopic and contificates. This would apparently require duplication
trary to the public interest to attempt to constrict the
of registration and proxy control, and in general would
banking industry as would this bill.
be unduly burdensome and unpractical.
Sincerely,
Sincerely,
JAMES J. SAXON,
JAMES J
Comptroller of the Currency.
Comptroller of the Currency.
Honorable ABRAHAM J. MULTER
Chairman, Subcommittee on Domestic Finance
Banking and Currency Committee
House of Representatives
Washington, D.C.
DISCLOSURE REQUIREMENTS
MAY 18, 1964.
Re: H.R. 6793, "Securities Acts, Amendments of 1964"
DEAR MR. CHAIRMAN:
In connection with the above bill, we think the enclosed correspondence should be brought to your atten424
Honorable OREN HARRIS
Chairman, Interstate and Foreign Commerce
Committee
House of Representatives
Washington, D.C.
JUNE 23, 1964.
Re: H.R. 6793, "Security Acts Amendments of 1963"
DEAR MR. CHAIRMAN:
The subject Bill in Section 3(e) provides that the
powers, functions and duties of the Securities and
Exchange Commission with respect to the enforcement
of Sections 12, 13, 14(a), 14(c) and 16 of the Securities and Exchange Act of 1934, shall be vested in the
Federal banking agencies with respect to any security
issued by a bank.
The proponents of the Bill have declared that it is
the intention of this section to completely vest all
powers of the SEC with respect to securities issued by
banks in the Federal banking agencies, whether or not
such securities are listed on a stock exchange.
However, the language of the Bill refers only to
Sections 12, 13, 14(a), 14(c) and 16 of the Securities
and Exchange Act of 1934. The pertinent part of the
report of the Senate Committee on Banking and Currency (Report No. 379, page 36) reads as follows:
S. 1642 as reported vests all powers under and enforcement
of, sections 12, 13, 14(a), 14(c), and 16 of the Securities
Exchange Act in respect of such securities directly in the respective Federal bank regulatory agencies. Thus, these agencies would have powers under those sections over listed as well
as over-the-counter bank securities. [Italics supplied.]
The four sections of the 1934 Act referred to above
deal with the subjects of securities registration, periodic
reports, proxy statements, and insider trading reports,
respectively.
H.R. 6793 would extend those four requirements to
over-the-counter companies in the same manner as is
now required of companies whose stock is listed on a
National Securities Exchange. It seems clear that as
a result of H.R. 6793, an unlisted bank would be subject to the four requirements as enforced and interpreted by the banking agency. A very important question which is left unanswered, however, is what would
happen if a bank elected to list its securities on a
National Securities Exchange. In such an event, it
would appear that all of the other sections of the 1934
Act would become applicable to such bank. It is not
at all clear from the Bill whether such bank would not
be subject to dual regulation—by the banking agency
with respect to Sections 12, 13, 14(a), 14(c) and 16
and by the SEC with respect to the remaining thirty
sections of the Exchange Act.
The statement from the Senate Report quoted
above states that the banking agency "would have
powers under those sections over listed, etc." banks.
The report did not deal with the question of the rest
of the 1934 Act.
The Report of the House Committee on Interstate
and Foreign Commerce similarly appears to limit the
authority of the banking agency to "the administration and enforcement of the disclosure, proxy, and
insider trading provisions of the Securities Exchange
Act." House Report No. 1418, pages 8 and 9.
The position at the SEC on the point is apparently
set forth at pages 216 and 217 of the House Hearings
in the "Technical Statement of the SEC on H.R. 6789,
H.R. 6793 and S. 1642." In their Technical Statement the SEC takes the position that "For the purpose of exercising the functions vested in them by this
section [Sec. 3(e), H.R. 6793], these designated Federal banking agencies would have the authority vested
in the Commission under any provision of the Exchange Act. . . . The jurisdiction of the Federal
banking regulatory agencies over any bank will be the
same, therefore, whether the securities of that bank
are listed on a national securities exchange or registered under the new section 12 (g) (1). . . ."
Of course the Technical Statement just quoted is not
part of the statute. In view of the importance of the
question, we think, that inquiry should be made of
the sponsors on the point at the time a Rule is sought.
We should be glad to have a representative of this Office testify as to our interpretation on the point if the
Committee so desires.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable HOWARD W. SMITH
Chairman, Rules Committee
House of Representatives
Washington, D.C.
JUNE 23, 1964.
DEAR ABE:
Thank you for your letter of June 17, commenting
upon our proposed amended regulations on disclosure
to shareholders.
The use of 750 shareholders as a dividing line, was in
response to the declaration of Congressional intent contained in S. 1642 and H.R. 6793. Our disclosure rules,
as first published, and which are now in effect, used a
dividing line of $25,000,000 in total deposits. The use
of the deposit test does cover approximately double
the number of National Banks as the 750 shareholder
rule. In the event that H.R. 6793 does not pass the
House, we would have to consider leaving the present
deposit test in effect.
However, in the event of the passage of H.R. 6793,
only those state banks having 750 or more shareholders
would be under disclosure rules. It would, inter alia,
be inequitable to impose the considerable expense and
the administrative burden involved on National Banks
when competitors of equal size would not be so
burdened.
425
It should be noted, however, that under our proposed amendments important areas of stockholder
protection which are not provided in H.R. 6793 are
covered. Under H.R. 6793 a new bank just organizing would not be required to give prospective offerees
of its stock any information. We will require by regulation that such new National Banks file a complete
registration statement and provide the same information to all prospective shareholders in the form of an
offering circular. The use of the $1,000,000 size of
issue cutoff was designed to minimize expenses to those
new and existing banks in small towns where personal
and financial information about bank management is
traditionally disseminated in the community by more
informal means.
All other major areas of disclosure to shareholders
are also covered by our existing and proposed regulations in detail—reports of changes in control, insider
trading, proxy contests, annual financial reports, etc.
We will undoubtedly receive comments from bankers and other interested persons about the cutoff points
we have used in the proposed regulation and we shall
certainly give serious consideration to all suggestions
received, as to where the most appropriate cutoff
should be.
Best personal regards,
JAMES J. SAXON,
cies would have full and exclusive jurisdiction over
bank securities whether or not they are listed on a
National Security Exchange. This assumption, however, is not based upon any firm language in the bill
since the only provision in the bill dealing with the
subject, Section 3(e), only mentions Sections 12, 13,
14 and 16 of the 1934 Act.
It was the general consensus of opinion of the attorneys attending the meetings referred to above that the
bill leaves many important questions unanswered with
respect to administrative jurisdiction over those banks,
which in view of the additional reporting requirements
imposed by the legislation, elect to list their securities
on a National Exchange.
In view of the importance of this matter, we request
that you give serious consideration to deferring submission of the bill to the whole House until language
clarifying these points can be added.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable OREN HARRIS
Chairman, Interstate and Foreign Commerce
Committee
House of Representatives
Washington, D.C.
Comptroller of the Currency.
Honorable ABRAHAM J. MULTER
Chairman, Subcommittee on Domestic Finance
Banking and Currency Committee
House of Representatives
Washington, D.C.
JUNE 30, 1964.
Re: H.R. 6793, "Securities Acts Amendments of
1963"
DEAR MR. CHAIRMAN :
This Office has been engaged in preliminary discussions with officials and attorneys for the New York
Stock Exchange and some of the larger publicly owned
National Banks on the subject of possible listing of the
securities of such banks on the Exchange in event that
H.R. 6793 becomes law.
As you know, the legislation does not deal directly
with this subject, the emphasis being on requiring comparable disclosure by nonlisted banks and other corporations with that presently required of listed
corporations.
The Senate Committee in its report and the SEC in
its technical statements assume that the banking agen426
FEDERAL RESERVE MEMBERSHIP AND
FEDERAL RESERVE POWERS
JUNE 26, 1963.
DEAR MR. CHAIRMAN: Reference is made to your
letter asking for the views of this Office on H.R. 5879,
"to provide that membership by National Banks in the
Federal Reserve System shall be voluntary and for
other purposes."
Under present law, National Banks are required to
become and remain members of the Federal Reserve
System. The bill would grant to National Banks the
privilege of choice as to their maintenance of membership in the Federal Reserve System. At present, only
State chartered banks and trust companies enjoy the
option of maintaining or refraining from membership
in the Federal Reserve System.
The fourth and fifth Sections of the proposed bill
would provide that National Banks may join the Federal Reserve System, changing from the imperative to
the permissive. Section six would eliminate the
penalty provisions invoked upon the failure of a National Bank to join the System. National Banks as
well as state banks and trust companies would be per-
mitted to withdraw from the Federal Reserve System,
if they so desire, by the eighth Section of the bill.
The ninth Section of the proposed bill would provide for reserve requirements for nonmember National
Banks. These requirements would be determined
through regulation by the Comptroller of the Currency. The tenth and eleventh Sections of the proposed bill concern interest rates on demand and time
and savings accounts. As are member banks under
present law, nonmember National Banks would be prohibited from paying interest on demand deposits. Provision is made by amendment of both the Federal
Reserve Act and the Federal Deposit Insurance Act
for regulation by the Comptroller of the Currency
of interest rates on time and savings accounts for nonmember National Banks.
When the Federal Reserve Act was passed in 1913,
it required all National Banks to become members of
the Federal Reserve System. The purpose of this
provision was to insure a sound starting point for the
new financial experiment. It was necessary to provide from the beginning that there would be sufficient
bank membership to make the system workable. It
was perhaps then thought impossible to provide for
mandatory membership of all commercial banks.
There would have been at that date difficult constitutional considerations in any requirement that State
banks must become members of a federal instrumentality. If membership had been made optional for all,
it might have been years before the System became
established, as banks joined one by one. Consequently, all National Banks were made mandatory
members of the new Federal Reserve System and State
banks were given the option of joining or remaining
without the System. Today, the Federal Reserve System is vigorous and sound, so the purpose of the provision for mandatory membership of National Banks
in the Federal Reserve System has become invalid.
This has been the case for many years. Discrimination against National Banks which might have been
justified in 1913, is no longer required and cannot be
supported.
Both economic equity and competitive fairness
appear to dictate a policy of optional membership for
National Banks in the Federal Reserve System. All
banks do not benefit equally from membership in the
System. Considering the costs involved and the alternatives open, there are few advantages to be derived
from membership by smaller banks. These banks generally find that most of the services performed for them
by the Federal Reserve System are made available
more efficiently and more conveniently from their correspondent banks. This would especially apply to the
check clearing and borrowing facilities of the System.
Many of the smaller member banks utilize their correspondent banks for the performance of such functions
as check clearance; servicing of loan requirements of
customers in excess of their own lending limits; aid in
improving operations forms and procedures; the analysis of investment portfolios; the provision of credit
information; the provision of payroll services for employees and customers; the provision of travel arrangements; the provision of bookkeeping services; aid in
meeting emergency and vacation needs for additional
employee services; and contacts with business firms
which represent potential depositors and borrowers.
In order to arrange for the performance of these services by the correspondent banks, they must maintain
balances in those banks. As a consequence, if such
smaller banks are members of the Federal Reserve System they must maintain two sets of idle balances, with
the Federal Reserve and with their correspondent
banks. This is a needless duplication of idle funds.
The loss of earnings from these balances represents a
critical factor, affecting the smaller banks capacity to
survive in competition with nonmember banks which
do not incur comparable costs and with the rapidly
growing number of nonbank financial institutions.
The advantages of optional membership are evident
from the fact that the great majority of smaller State
banks have elected to remain without the System.
National Banks, which do not possess this choice, are
placed at a competitive disadvantage in terms of their
operating costs and hence their capacity to meet the
terms of their rival State chartered banks.
There are also basic policy considerations relating to
mandatory membership of National Banks in the Federal Reserve System as a means of assuring effective
monetary controls. Reserve requirements play a role
as a tool of monetary management. However, it is
doubtful that optional membership in the Federal
Reserve System would impair monetary control powers
significantly. Most of the larger National Banks in the
country would undoubtedly choose to retain their
membership in the System both for reasons of tradition
and prestige and because they are able to utilize the
facilities of the System more readily. Only a very
small number of the larger State chartered banks have
failed to seek membership in the System.
There is a possible alternative course for dealing with
the problem both of equitable treatment of National
Banks and of efficient control of monetary policy. This
427
would require membership in the Federal Reserve
System for all commercial banks or for at least all
insured banks. Such a mandate for all insured commercial banks would be immune from the constitutional objections that a similar provision for all State
banks might be subject to. This course would not,
however, solve the problem of equity and fair treatment. The smaller banks, both National and State,
would still find it necessary to maintain their correspondent relationships at the expense of additional idle
balances. Moreover, since the Reserve requirements
imposed under State law are generally less onerous
than those which apply to member banks, mandatory
membership would represent a severe added burden to
banks which are now not members of the System.
Therefore, any proposal to make membership of the
Federal Reserve System mandatory for all banks would
necessitate a review of reserve requirement policies and
would not solve the problems created by present
provisions.
The time has come to redress the inequity that
National Banks have suffered since 1913. The discrimination against them may have been necessary at
the time of the founding of the Federal Reserve System
but its purpose is no longer valid. The System is prospering and National Banks which are subject to all
laws effecting their State competitors should be accorded equal treatment in this important matter. It is
the view of the Office that the objectives of H.R. 5879
are in the best interests of the banking industry and the
nation. The Office of the Comptroller of the Currency
urges passage of this legislation.
Sincerely yours,
JAMES J. SAXON,
Comptroller of the Currency.
Chairman, Committee on Banking and Currency
House of Representatives
Washington 25, D.C.
JULY 10, 1964.
Honorable WRIGHT PATMAN
Chairman, House Banking and Currency
Committee
House of Representatives
Washington, D.C.
DEAR MR. CHAIRMAN:
You will recall that on May 15, 1964, we met with
you and several members of the Committee to discuss
Title I. Makes membership in the Federal Reserve voluntary for all banks, State or National.
Title II. Requires all banks with deposits exceeding $25,000,000 to hold reserve requirements with the Federal Reserve on the same basis as a member bank in the same location.
All banks with deposits under $25,000,000 are required
to hold reserves in the manner and in the amounts prescribed
by State authorities for State-chartered banks in the same
place.
Title III. Gives the Comptroller of the Currency the
authority to control interest rates on deposits for nonmember
national banks to the same extent as now exists in the Fed
and the FDIC.
Title IV. Provides for automatic deposit insurance for
a nonmember national bank on the certificate of the Comptroller, in the same manner as is now the practice for national
banks.
Existing provisions requiring any bank which withdraws
from the Federal Reserve System to reapply for deposit insurance to the FDIC, are made not applicable in the case of a
withdrawing national bank.
Title V. Contains various conforming amendments to
miscellaneous statutes.
We are also enclosing copies of the two papers which
were discussed at our earlier meeting.
Sincerely,
JAMES J. SAXON,
Honorable WRIGHT PATMAN
428
certain aspects of the relationships between National
Banks and the Federal Reserve System. At that time
we presented for discussion two papers, one dealing
with Federal Reserve Membership and the other with
Federal Reserve Discounting.
We have been doing some further work on these
subjects, and we are pleased to enclose for your consideration a draft of a bill which would make Federal
Reserve membership voluntary for all banks while
maintaining a requirement for the holding of reserves
by all banks.
This bill is divided into five titles which may be
summarized as follows:
Comptroller of the Currency.
Federal Reserve Membership
Present laws governing membership in the Federal
Reserve System discriminate against national banks.
Federally chartered commercial banks are required
to be members of the System, while those that are
chartered under state laws may elect to remain outside the System. It is generally conceded that Federal
Reserve membership imposes a burden on banks in
the form of higher and more costly reserve requirements than those applicable to State nonmember banks.
At the present time member banks must hold reserves equal to 12% or 16/2% of demand deposits (depending upon reserve city classification) and 4% of
time deposits. Not only are these requirements
higher than those of most states but even more onerous
is the requirement that these reserves be held mainly
in the form of idle nonearning deposits at a Federal
Reserve Bank. In addition to these cash reserves the
bank must also maintain its normal working balances
with correspondent banks.
Of course, there are some advantages to Federal
Reserve membership. Many State banks voluntarily
belong to the Federal Reserve, though it appears that
most of these advantages are important only to the
larger banks. The smaller banks find that Federal
Reserve check collection regulations make clearing
through the System slower and more costly than working through a correspondent bank. Likewise the
small banks generally find borrowing from a correspondent more convenient than borrowing from the
Federal Reserve. State chartered banks are free to
make their own assessment of the advantages and
disadvantages of membership and act accordingly.
National banks are required to joint the System.
This burden is greatest on the smaller member
banks, particularly those that must compete with
neighboring nonmember banks. While this competitive disadvantage has been and is important, it is
becoming more important as local banking markets
become more competitive. Where member banks
face little or no competition, the costs of Federal Reserve membership can simply be passed on to bank
customers in the form of higher interest rates on loans.
In an increasing number of communities, existing
banks are being faced with competition from newly
chartered banks. Many small communities are now
served by both a national and a State chartered bank.
The national bank is at a substantial disadvantage in
such a situation.
This inequity has long been recognized and several
solutions have been proposed. The Commission on
Money and Credit recommended that all insured
banks be required to join the Federal Reserve System.
The President's Committee on Financial Institutions
recommended that all banks (member and nonmember alike) be subject to the same reserve requirements,
thus making the issue of membership irrelevant.1
The Commission's proposal was once part of the
law. A provision of the Banking Act of 1933 required
membership in the Federal Reserve in order for a bank
to obtain Federal deposit insurance. This provision
1
Both the Douglas (1950) and Patman (1952) Subcommittees of the Joint Economic Committee made similar
recommendations.
was scheduled to go into effect in 1936. The Banking Act of 1935 postponed this to 1941 but Congress
repealed this provision altogether in 1939.
Despite the merits of such an approach, it seems to
be politically impossible at the present time. Since we
cannot eliminate this inequity by treating State banks
like national banks (making Federal Reserve membership mandatory for State banks), the best approach
seems to be to treat national banks like State banks,
by making membership optional for national banks.
Obviously any measure which allows national banks
to remain outside the Federal Reserve System must be
appraised from the point of view of its effect on monetary policy. If optional membership for national
banks in the Federal Reserve would significantly
weaken the effectiveness of Federal Reserve control
of the money supply, it is an undesirable reform. All
the evidence indicates, however, that the number of
member banks is not relevant to the impact of monetary policy.
It is generally accepted today that variations in
reserve requirements are not an important tool of
monetary policy. In fact, the Federal Reserve, despite many statements in the past 13 years about the
dangers of inflation, has not raised reserve requirements since 1951.2 The Federal Reserve has thus
recognized that open market operations are the major
tool of monetary policy.
Not only are changes in reserve requirements unnecessary as a weapon of monetary control, but legally
required reserves themselves are unnecessary for the
effective functioning of the Federal Reserve. The
original view of reserve requirements was that they
were to insure bank liquidity. The view of recent
years is that the function of required reserves is to
provide a fulcrum for open market policy. It is
now clear that open market operations can control
the money supply even if there were no legally required reserves.
Even without legal requirements, as a matter of
prudent policy banks would maintain some level of
cash reserves.3 Using open market operations the
Federal Reserve could expand or contract cash rea
The only exception to this was an increase in requirements
from 11% to 12% for country banks in 1960. But this was
accompanied by a move allowing banks to include vault
cash as part of their legal reserves, and thus the net effect
was a reduction in reserve requirements.
8
Nonmember banks in Illinois maintain cash assets equal
to about 11% of their total deposits, even though Illinois
has no reserve requirements.
429
serves in virtually the same manner that it does today.
The Bank of England has close control over British
credit conditions, although there are no legal reserve
requirements in England, nor provisions for commercial bank "membership" in the Bank of England. In
a very real sense all commercial banks are influenced
by Federal Reserve actions. This influence on the
reserves of commercial banks and on the value of
their assets is important and cannot be escaped.
We are, of course, not suggesting that reserve requirements in the U.S. be completely eliminated.
The point is simply that if reserve requirements are
unnecessary for monetary control, no one can argue
that Federal Reserve policy would be adversely affected if a number of small national banks were to
drop out of the Federal Reserve.
Even at the present time Federal Reserve membership does not cover all banking assets of the country.
Now Federal Reserve member banks hold about 84%
of the assets of all commercial banks. The proportion
of all commercial bank assets held by member banks
has ranged about 70% in the early 1920's to 87% in
1942. During all of this period (with the exception
of the years of World War II and immediately thereafter) , the Federal Reserve has apparently been quite
effective in establishing the condition of ease or stringency deemed necessary by the System.
In view of these considerations, we have no fear
that easing the burden of mandatory Federal Reserve
membership on national banks will weaken the Federal Reserve System or its powers to control the money
supply.
Let us examine carefully the effects on Federal
Reserve membership and control of some specific
proposals for reform. The burdens of Federal Reserve membership falls heaviest on the smaller banks.
The large banks apparently feel that the benefits of
membership outweigh the costs. Only one State bank
with deposits of over $500 million is not a member
of the Federal Reserve. About 70% of those State
banks with deposits of $100 million to $500 million
are members, as are 59% of those with deposits between $50 million and $100 million. On the other
hand, only 4% of State banks with deposits under $1
million are members and only 15% of those with
deposits from $2 million to $5 million have elected to
join the System. These data are shown in table 1.
Total assets of member banks as of the end of 1963
amounted to $261.4 billion, of which $170.2 billion
were accounted for by national banks. If national
banks retained membership in the Federal Reserve
only to the same extent as State banks presently do on
430
TABLE 1.—Number of insured State banks by size and
membership status, 1963
Number of State banks
Deposit size
(millions of dollars)
State member
banks as percent
of insured State
banks
Insured
Less than 1.0
1.0 to 1.9.
2 0 to 4.9
5.0 to 9.9
10.0 to 24.9
25.0 to 49.9
50.0 to 99.9
100.0 to 499.9
500 and over
Total
Member
654
1,796
3,028
1,610
965
248
116
94
28
24
131
465
328
277
104
68
64
27
7.3
15.4
20.4
28.7
41.9
58.6
68.1
96.4
8,539
1,488
17.4
3.7
a voluntary basis,4 national bank assets totaling approximately $48.8 billion would leave the System.
This decline of 19% would reduce the percentage of
commercial bank assets under direct Federal Reserve
control to about 68%.
This reduction in assets of member banks can be
moderated considerably if membership is made optional only for national banks below a given size.5 If
membership were optional for national banks with
deposits of less than $25 million but mandatory for all
larger national banks, the asset drop in Federal Reserve membership would be roughly $23.6 billion. If
the cutoff point were $10 million of deposits, the asset
drop would be only $12.3 billion (see Table 5).
Even this modest drop in assets of member banks
can be offset by coupling voluntary membership for
small banks with compulsory membership for large
banks—both National and State. A plan that would
make Federal Reserve membership optional for all
banks with deposits under $25 million and compulsory
for all insured banks larger than that would result in
more assets in the Federal Reserve System than at the
present time. With a $10 million cutoff, this would
be true even if all the small banks dropped out of the
System.
* This assumption may be slightly optimistic—some State
banks are members because their national bank competitors
are members and there is probably some public relations advantage to membership. Some of these State banks might
drop their membership if their national bank competitors do.
On the other hand, the fear that dropping membership may
have an adverse public relations effect may induce many
national banks to retain membership even if it appears unprofitable to them on a dollars-and-cents basis.
6
This type of proposal has the obvious disadvantage of
introducing an arbitrary cutoff point which will appear unfair to those banks that are slightly larger than the cutoff
TABLE 2.—Number and assets of insured commercial banks, by size, December 1963
[Dollar amounts in millions]
National
Insured nonmember
State-member
Deposit size (millions of dollars)
Number banks
Number banks
Assets
Number banks
Assets
132
388
1,316
1 145
935
329
167
164
39
...
$123
702
5,100
9,082
16 037
12, 739
13, 257
41 052
72,143
24
131
465
328
277
104
68
64
27
$22
224
1,758
2,530
4,647
4,068
5,459
15,170
57, 337
630
1,665
2,563
1,282
688
144
48
30
1
$535
2,766
9,228
9,760
11,314
5,434
3,573
6,102
677
4,615
Less than 1.0
1.0 to 1 . 9 . . . .
2.0 to 4 9
5.0 to 9.9
10.0 to 24.9. . .
25.0 to 49.9
50.0 to 99.9
100.0 to 499.9. .
500 and over
Total.
Assets
$170, 233
1,488
$91,215
7,051
$49, 390
TABLE 3.—Number of insured commercial banks, cumulative by size, 1963
Insured nonmember
Member
Insured
Deposit size (millions of dollars)
Cumulative
total
Number
Less than 1
1.0 to 1.9
2 0 to 4 . 9 . . . .
5.0 to 9.9
10 0 to 24.9
25.0 to 49.9
50.0 to 99.9
100.0 to 499.9.
500.0 and over
Number
786
2,970
7,314
10, 069
11,969
12, 546
12, 829
13,087
13,154
786
2,184
4,344
2,755
1,900
577
283
258
67
Cumulative
total
156
675
2,456
3,929
5,141
5,574
5,809
6,037
6,103
156
519
1,781
1,473
1,212
433
235
228
66
Number
630
1,665
2,563
1,282
688
144
48
30
1
Cumulative
total
630
2,295
4,858
6,140
6,828
6,972
7,020
7,050
7,051
TABLE 4.—Assets of insured commercial banks, cumulative by size, December 1963
[In millions of dollars]
Insured
Insured nonmember
Member
Deposit size (millions of dollars)
Assets
Less than 1
1.0 to 1.9
2.0 to 4 9
5.0 to 9.9
10.0 to 24.9
25 0 to 49 9
50.0 to 99.9
100 0 to 499.9
500.0 and over
680
3,692
16,086
21, 372
31,998
22, 241
22, 289
62, 324
130,157
Cumulative
total
680
4,372
20, 458
41, 830
73, 828
96, 069
118,358
180, 682
310,839
Assets
145
926
6,858
11,612
20, 684
16, 807
18,716
56, 222
129, 480
Cumulative
total
145
1,071
7,929
19, 541
40, 225
57, 032
75, 748
131,970
261, 450
Assets
535
2,766
9,228
9,760
11,314
5,434
3,573
6,102
677
Cumulative
total
535
3,301
12, 529
22, 289
33, 603
39, 037
42, 610
48, 712
49, 389
431
TABLE 5.—Estimate of assets of nonmember national banks if membership were optional
[Dollar amounts in millions]
Assets of
national
banks
Assets of national
banks that would
be nonmembers
(column 3 times
column 4)
Cumulative
nonmember
assets
(4)
(5)
(6)
Assets
Deposit size (millions of dollars)
Insured State
banks
Assets of insured
nonmember banks
Insured
as percent of innonmember sured State banks
banks
0)
Less than 1
1.0 to 1.9..
2.0 to 4.9
5.0 to 9.9
10.0 to 24.9
25.0 to 49.9
50.0 to 99.9
100 0 to 499 9
500 and over
(2)
$557
2,990
10, 986
12, 290
15, 961
9,502
9,032
21, 272
58,014
$535
2,766
9,228
9,760
11,314
5,433
3,573
6,102
677
(3)
96.1
92.5
84.0
79.4
70.9
57.2
39.6
28.7
1.2
$123
702
5,100
9,082
16,037
12, 739
13, 257
41,052
72,143
$118
649
4,284
7,212
11,368
7,285
5,244
11,776
842
$118
767
5,051
12, 263
23, 531
30, 816
36,060
47, 836
48, 678
TABLE 6.—Estimate of number of nonmember national banks if membership were optional
Number of banks
Deposit size
{millions of dollars)
Insured
State
banks
Insured
nonmember
banks
(2)
Less than 1
1.0 to 1.9
2 0 to 4 9
5.0 to 9.9
10.0 to 24.9
25.0 to 49.9
50.0 to 99.9
100.0 to 499.9
500 and over
645
1,796
3,028
1,610
965
248
116
94
28
630
1,665
2,563
1,282
688
144
48
30
1
Once the concept of nonmember national banks is
accepted, the practical problem of reserve requirements for these banks must be solved. There are
several possible approaches. One suggestion is to subject nonmember national banks to the reserve requirements of their respective States. The obvious drawback of this proposal is that national banks in different
States would be subject to differing reserve requirements. We should rather move in the direction of
treating all national banks alike regardless of where
they happen to be located.
Another approach is to have reserve requirements
for nonmember national banks set by the Comptroller
of the Currency. H.R. 5879 utilizes this approach,
and thereby gives the Comptroller monetary policy
432
Insured non~
member banks
as percent of
insured State
banks
National
banks
(3)
(4)
96.3
92.7
84.6
79.6
71.3
58.1
41.4
31.9
3.6
132
388
1,316
1,145
935
329
167
164
39
Cumulative
National banks
nonmember
that would be
nonmembers (col- national
umn 3 times
banks
column 4)
(6)
(5)
127
360
1,113
911
667
191
69
52
1
127
487
1,600
2,511
3,178
3,369
3,438
3,490
3,491
responsibility. In effect, it permits the Comptroller
to vary legal reserve requirements for nonmember national banks. This power, to be exercised responsibly would require a very large expansion of functions
of this Office and, in effect, the establishment of a
second monetary authority.
The approach that seems most appropriate would
be similar to that which is now in effect for nonnational banks in the District of Columbia. Reserve
requirements for nonmember national banks would be
at the same level as those required for member banks.6
a
Since these nonmember banks would all be small banks,
the reserve requirements would be those applicable to country
banks.
dition the administering agency will have clear guidelines as well as flexibility.
To that end a substitute bill has been prepared, a
copy of which is attached hereto. The substitute bill
makes no change in the reserve banks' discretion as
to the timing or amount of advances. Under the
substitute bill as well as under S. 2076 and H.R. 8505,
Proposed Changes in Legislation Concerning Federal the present restrictions in the law as to the maturity of
Reserve Discounting
advances to member banks is eliminated. The present
15-day restriction on advances secured by government
Two bills have been introduced in the 88th Congress
obligations and 90-day restriction on advances secured
which would liberalize the regulations governing comby commercial paper, serve no useful purpose.
mercial bank assets eligible for discounting at the
In the substitute bill, the present power of the FedFederal Reserve Banks. H.R. 8505 and S. 2076 are
eral Reserve to make advances to individuals, partnermost pertinent in this respect in the addition of Sec.
ships and corporations other than banks is eliminated.
13A(a):
This Office sees no reason why the Federal Reserve
Any Federal Reserve bank may make advances to any of its
should be permitted to compete with private lenders.
member banks on the time or demand notes of such banks
The substitute bill adds to the types of paper eligible
secured to the satisfaction of such Federal Reserve bank, subas security for advances the following:
ject to such limitations, restrictions, and regulations as the
Board of Governors of the Federal Reserve System may
(1) Obligations, secured by first liens on real
prescribe.
estate, and which comply with the requirements
Under present legislation the Federal Reserve Banks
of section 24.
are effectively limited to discounting commercial, in(2) Obligations issued or drawn to finance industrial and agricultural paper with less than 91 days
stallment sales provided that such obligations
to maturity; exceptions are made (1) in the discount
come up to certain standards set forth in the bill.
of acceptances based upon warehouse receipts for
(3) Obligations representing term loans for
marketable staple agricultural products, where the
fixed capital purposes, provided that principalmaximum maturity is 6 months and (2) the execution
reduction payments are required not less freof advances to member banks for not more than 4
quently than annually.
months, secured by eligible paper and at a "penalty"
(4) Investment securities eligible for purchase
rate of not less than */% of 1 percent above the prevailby member banks under section 5136 of the Reing discount rate.
vised Statutes.
These bills also repeal several sections of the Federal
(5) Obligations representing loans on stocks
Reserve Act which specify the kinds of collateral that
in conformity with Regulation "U."
will be eligible for discounts and advances and the
(6) Obligations insured by an agency of the
"penalty" rate provisions mentioned above.7
Federal Government.
The purpose of the proposed legislation as stated by
In addition the Federal Reserve is given authority
its proponent, the Federal Reserve Board, is to broaden
to accept any other type of security which it finds
the kinds of security on which the reserve banks may
satisfactory from a credit standpoint.
extend credit. This Office is in favor of so broadening
It is the view of this Office that the liberalization of
the eligibility requirements and believes this change is
present eligibility requirements for discountable paper
overdue.
is in the best interest of the banking industry, the econIn order that the mandate of Congress to the Board
omy and the nation. The Office of the Comptroller of
may be clearer, it is suggested that instead of repealing
the Currency urges passage of the substitute bill atall existing eligibility requirements, specific types of
tached hereto as the best and most practical means
paper should be added to the present eligible list and
of accomplishing such liberalization.
that in addition the Federal Reserve be given the disThe substitute bill differs from the bills sponsored
cretion to accept such other security as may be satisfacby the Federal Reserve in philosophy as well as in
tory to it. In this way there will be no doubt as to the
content. It is based upon the notion that the Federal
accomplishment of the legislative purpose and in adReserve should base its discounting decisions on mone7
tary policy considerations alone and never upon the
12 U.S.G. 343, 344, 345, 346, 347, 347c and 361.
These reserves could be held in the form of correspondent balances and other cash items. This would
eliminate the burden of forcing banks to hold idle
reserves with the Federal Reserve, but would neither
subject national banks to State requirements nor require the Comptroller to set reserve requirements.
433
(6) Investment securities eligible for purchase by
member banks under section 5136 of the Revised
Statutes;
(7) Obligations representing loans on stocks in conformity with Regulation "U" issued by the Board of
Governors of the Federal Reserve System;
(8) Obligations insured by an agency of the United
States under the National Housing Act;
(9) Revenue bonds and warrants representing general
obligations of any state or political subdivision;
(10) Obligations constituting a first lien on improved
real estate, which comply with the amendment and
maturity requirements of section 24 of the Federal Reserve Act, provided that the borrowing member bank
maintains in its files an appraisal of the real estate, and
such other information as the Board of Governors by
regulation may require;
(11) Obligations issued or drawn to finance installment sales, provided that such obligations are secured
by a first lien in the nature of a chattel mortgage, conditional sales contract or a similar instrument, and that
the goods are of such a nature that in the event of resale
the sum realized would be greater than the amount necessary to liquidate the obligation;
(12) Obligations representing term loans for fixed
capital purposes, provided that principal-reduction payments are required not less frequently than annually
under the provisions of the loan;
A BILL
(13) Such other security as may be satisfactory to the
To amend the Federal Reserve Act in order to enable the
lending Federal reserve bank.
Federal reserve banks to extend credit to member banks and
SEC. 2. The third paragraph of section 13 of the Federal
others in accordance with current economic conditions, and
Reserve Act (12 U.S.C. 343) is stricken out.
for other purposes.
SEC. 3. The second colon in thefirstsentence of the fourth
Be it enacted by the Senate and House of Representatives of paragraph of section 13 of the Federal Reserve Act (12 U.S.C.
the United States of America in Congress assembled, That the 344) is changed to a period and the following words are
eighth paragraph of section 13 of the Federal Reserve Act (12
stricken out: "Provided further, That no such bill shall in any
U.S.C. 347) is amended by striking out the first sentence and
event be held by or for the account of a Federal reserve bank
substituting therefor the following:
for a period in excess of 90 days."
Any Federal reserve bank may make advances to any of
SEC. 4. The following words in the sixth paragraph of secits member banks on the time or demand notes of such
tion 13 of the Federal Reserve Act (12 U.S.C. 346) are
banks, secured by the deposit or pledge of one or more
stricken out: "which have a maturity at the time of discount
of the types of collateral hereinafter listed. Advances
of not more than 90 days' sight."
may be made at such times and in such amounts as the
SEC. 5. The thirteenth paragraph of section 13 of the Fedlending Federal reserve bank may deem advisable. The
eral Reserve Act (12 U.S.C. 347c) is stricken out.
following types of obligation shall be eligible as collateral
SEC. 6. Section 10 (b) of the Federal Reserve Act (12
for such advances:
U.S.C. 347b) is hereby repealed.
(1) Bonds, notes, certificates of indebtedness, or Treasury bills of the United States;
(2) Debentures or other such obligations of Federal
FRAUDULENT PRACTICES
intermediate credit banks which are eligible for purchase
MARCH 2,1964.
by Federal reserve banks under section 13 (a) of this Act;
DEAR MR. FASGELL:
(3) Federal Farm Mortgage Corporation bonds issued
under the Federal Farm Mortgage Corporation Act;
This is in reply to the questions contained in your
(4) Bonds issued under the provisions of subsection (c)
letter of February 3, 1964, concerning bank losses arisof section 4 of the Home Owners' Loan Act of 1933, as
ing out of possible fraudulent warehouse receipts and
amended;
(5) Such notes, drafts, bills of exchange, or bankers'
counterfeit securities given as collateral for bank loans.
acceptances as are eligible for rediscount or for purchase
(a) If, and to what extent, the supervisory agencies
by Federal reserve banks under the provisions of this Act;
function to minimize losses by banks in connection with
8
forged or counterfeit securities orfictitiousor inaccurate
Milton Friedman and Anna Jacobson Schwartz, A Monewarehouse receipts hypothecated as collateral for bank
tary History of the United States 1867-1960 (Princeton:
loans;
Princeton University Press, 1963). Ch. 7.
type of collateral offered, other than to insure the
soundness of particular pieces of the latter.
We have some evidence that banks have been refused
discounts because their paper was not eligible under
existing regulations. While the present bill is motivated by the desire of the Board to liberalize its discounting, there is nothing in H.R. 8505 and S. 2076
to prevent a differently motivated Board from interpreting eligibility as restrictively as it so desires.
This possibility is particularly grave in its consequences in the event of severe recession. In its unrestricted discretion to establish eligibility, a "bad"
Board might well use its own eligibility regulations to
supplement and rationalize an unwisely restrictive discount policy. If we are inclined to believe that this
cannot happen now or in the future, the merit of the
substitute bill in this respect is somewhat reduced. But
we need not go as far back in history as 1929-33—the
period that Professor Friedman cites as a great monetary policy mistake s—to find examples of "mistakes"
on the part of the Board. This would seem to argue
for the approach advocated in the substitute bill.
434
Examination procedure by this Office ordinarily includes a physical verification of the warehouse receipts
themselves and a review of the bank's policy with respect to its own physical verification of the pledged
collateral.
(b) What specific steps examiners perform in the
course of their examination which are designed to, or
capable of, disclosing the validity or invalidity of collateral;
National Bank Examiners review the policy of the
bank with respect to collateral inspections when the
collateral is not physically present on the bank's premises. Where it appears that inspection and verification
procedures of the bank are deficient, the bank's procedures are criticized, especially where the extension
of credit was made in primary or substantial reliance
on the security of the collateral.
(c) If there be no such specific steps, on what basis,
at what point, and in what manner do the supervisory
agencies act in respect of a loan which goes into default
because the collateral proves valueless or of less value
than the loan;
Where the loan is in default and the collateral
proves to be either valueless or of less value than the
loan, the bank is required to make immediate recognition of the loss. In such circumstances that portion
of the loan which exceeds the value of the collateral
is charged off the books of the bank by a debit to
Undivided Profits or a reserve for loan losses, at the
direction of a National Bank Examiner.
(d) Whether you have any suggestions as to any additional steps which might be taken by your agency or
any other supervisory agency to prevent, or to minimize,
losses of the kinds here discussed.
Study is underway as to the feasibility of requiring
more extensive physical verification of the collateral
where credit is extended in primary or substantial
reliance on the collateral or where the borrower's
ability to repay may be dependent upon the existence
of collateral. Whether more extensive physical verification is feasible would depend in large measure on
the circumstances of the particular transaction, including such factors as the credit of the borrower, the
reputation and independence of the warehouseman,
the size of the bank, the amount being loaned, and the
facility by which such physical verification could be
accomplished.
Sincerely,
_
T _
J
JAMES J. SAXON,
Comptroller of the Currency.
Honorable DANTE B. FASGELL
House of Representatives
Washington, D.C.
INSOLVENT BANKS
FEBRUARY 7, 1964.
DEAR SENATOR MONRONEY :
Transmitted for comment with your Secretary's
memorandum of January 23, 1964, were letters of
November 21 and December 5, 1963, from Mr. E.
Hughes of the Farmers and Merchants State Bank,
Tulsa, Oklahoma, to Honorable Wright Patman, regarding Southern Hills National Bank, Tulsa,
Oklahoma.
In his letter of December 5, 1963, Mr. Hughes
suggests that an "insolvent" bank is one whose capital
has been impaired. As a matter of law, a bank is not
insolvent merely because there is an impairment of
capital. Of course, where a bank is not insolvent
it cannot be turned over to the Federal Deposit Insurance Corporation for liquidation. In that situation
the only proper and genuinely effective course is prescribed by Congress in the Bank Conservation Act to
conserve the assets of the bank for the benefit of all
depositors, insured as well as uninsured, and other
creditors.
Furthermore, "prompt" action by the Federal
Deposit Insurance Corporation is subject to such time
consuming delays and expense as may be necessary for
examination, audit, and effecting legal arrangements
for transfer of assets and deposit liabilities. In the
special situation which we encountered at Tulsa, this
Office was able to apply the remedies of the Bank
Conservation Act in considerably less time and at less
expense and inconvenience to all concerned than would
have been feasible under any other alternative.
Sincerely,
, „
T
"
JAMES J. SAXON,
Comptroller of the Currency.
Honorable MIKE MONRONEY
United States Senate
Washington 25, D.C.
INTERNATIONAL OPERATIONS
JUNE 26, 1963.
DEAR MR. CHAIRMAN:
Reference is made to your letter of May 22, 1963, in
which you request the views of this Office with respect
to H.R. 5800, a bill "to place in the Comptroller of the
Currency authority over foreign branches of National
Banks."
The proposed bill would transfer from the Board of
Governors of the Federal Reserve System to the Comptroller of the Currency the power to charter and regulate foreign branches of National Banks. At present
435
the chartering, regulation and examination of National
Banks, including their domestic branches, rests with
the Comptroller of the Currency. The Office also
conducts the bulk of the examinations which are made
of foreign branches. A thorough and systematic examination of foreign branches is not possible however
because of the existing division of the chartering and
examination functions.
Subsection (1) of the first Section of the bill provides that any national banking association possessing a capital and a surplus of a million dollars or more
may file application with the Comptroller of the Currency, under such regulations as he may prescribe to
establish branches in foreign countries or dependencies
or insular possessions of the United States. Subsection (2) of the first Section carries over to the Office
of the Comptroller of the Currency the power granted
to the Board of Governors by Public Law 87-588.
Under this measure the Board, by regulation, may
authorize foreign branches of National Banks to exercise, in addition to their present powers, such further
transactions as may be usual in connection with the
business of banking in the places where such foreign
branches transact business. The third subsection of
the first Section of the bill provides that the Board of
Governors of the Federal Reserve System shall continue to exercise regulatory power over the so-called
agreement-corporations engaged in international or
foreign banking. The second Section of the bill concerns the handling of applications for permission to
exercise foreign banking powers and the third Section
concerns examinations.
Enacted in 1913, Section 25 of the Federal Reserve
Act provided that National Banks having a capital of
$1 million or more could establish branches in foreign
countries under the regulation of the Board. This
was a very minor provision in the Act, relatively, and
references to it in the legislative history are few. The
main thrust of the regulation of foreign banking activities from that date to the present has been upon National Banks or other federally chartered banking
institutions, which in other respects are under the authority of the Comptroller of the Currency. No satisfactory explanation appears as to why the supervisory
powers were given to the Board rather than to the
existing agencies either in committee reports or in the
debates on the measure. The purpose of Section 25
is only briefly explained in the House Report, "There
has long been a demand for an extension of the powers
of National Banks which would permit them to facilitate foreign trade and business abroad."
436
The authorization to National Banks to establish
and maintain foreign branches found in Section 25 of
the Federal Reserve Act was the earliest manifestation
of the affirmative Congressional policy to stimulate
the United States commercial banking system into participation in international trade and investment. During those earlier years, however, international banking, and particularly international banking through
the medium of foreign establishments, was an area in
which the United States banks had substantially no
experience. Even the large banks in financial centers were virtual strangers to the fraternity of international trade and investment bankers. The situation is
far different today as United States economic and
financial interests circle the globe.
When the present division of responsibility over
National Banking activities in the foreign field was
established by the Federal Reserve Act, it was envisaged that a unified policy would be achieved by
the presence on the Board of Governors of the Federal Reserve System, of the Secretary of the Treasury
and the Comptroller of the Currency. Formerly, the
ex officio membership on the Board given to the Secretary of the Treasury (as Chairman) and the Comptroller of the Currency did aid in formulating a common approach to the regulation of all National Bank
activity. There was participation by the Comptroller
in decisions concerning branches of National Banks
abroad. Many other supervisory functions over National Banks were placed in the Board in addition to
its activities in the sphere of monetary policy.
But there has been a departure from the original
concept of the Board's functions and personnel to
that which exists today. In recent years there has
been a growing feeling that the Federal Reserve Board
should be freed of its responsibilities in the supervisory
field so as to be better able to concentrate on monetary
policy. The transfer of the regulation of trust powers
of National Banks last year from the Federal Reserve
Board to the Comptroller of the Currency is an example of this. In the recent hearings on proposed bills,
H.R. 5874 and H.R. 729, there was discussion of proposals to limit the activities of the Federal Reserve
Board to the field of monetary policy. Today, of
course, the Secretary of the Treasury and the Comptroller of the Currency are no longer members of the
Board of Governors of the Federal Reserve System.
The case for placing regulation of foreign branches
of National Banks in the Comptroller is as strong as
that made for the transfer of trust powers last year.
There is no logical reason why these powers should re-
main in the Board inasmuch as they concern exclusively
regulation of branches of National Banks. As the
Comptroller of the Currency has the entire supervisory
authority over domestic branches of National Banks,
the Office should have the same authority over foreign
branches of National Banks.
Moreover, it is the Secretary of the Treasury who has
the primary authority for the control of international
financial policy—not the Federal Reserve Board. The
Secretary of the Treasury is the first financial officer of
the Government. The international activities of private financial institutions have a significant influence
upon international financial policy and it would not
seem inappropriate for the regulation of these activities
to rest within the Department of the Treasury.
Since the Secretary of the Treasury and the Comptroller of the Currency are no longer members of the
Board they have no working contact with the chartering and regulation of foreign branches of National
Banks. The present division of responsibility dilutes
the power of the Comptroller effectively to supervise
the national banking system. Regulation of National
Banks which is the responsibility of the Comptroller of
the Currency and the control of international financial
policy which is the responsibility of the Secretary of the
Treasury are made less effective than they might be.
There would be significant administrative advantages
in placing all Federal authority over the operations of
National Bank branches within the Office of the Comptroller of the Currency. The presence of two Federal
instrumentalities in the same field of regulation leads
to administrative inconsistencies and increased costs to
the Government. Also it is cumbersome to require
National Banks to petition one department of the Government to establish a domestic branch and another to
establish a foreign branch. There should be a unified
approach to the question of establishing branches of
National Banks.
It is the view of this Office that the objectives of
H.R. 5800 are in the best interest of the national banking system, the economy and the nation. The Office of
the Comptroller of the Currency urges passage of this
legislation.
Sincerely yours,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable WRIGHT PATMAN
Chairman, Committee on Banking and Currency,
House of Representatives
Washington 25, D.C.
MUTUAL SAVINGS BANKS
JANUARY 24,
1964.
DEAR MR. CHAIRMAN:
Reference is made to an amended version proposed
by the Home Loan Bank Board of H.R. 258, a bill,
"To authorize the establishment of Federal mutual
savings banks." This Office supported the original
version of H.R. 258 early in 1963. We continue to
believe that the general purposes of the bill should be
supported. Federal charters are available for commercial banks and savings and loan associations, and
equity would call for similar treatment for mutual
savings banks. Mutual savings banks and savings and
loan associations have similar economic functions, and
it would be proper for the former industry to have
access to Federal chartering. Today, three-fourths of
the existing mutual savings banks are located in three
Northeast States. Federal chartering should enable
the industry to spread to other parts of the country.
This development would enhance savings mobility to
meet investment needs around the country. Several
of the amendments proposed to H.R. 258 by the Federal Home Loan Bank Board are of significance. This
Office would continue its support of the legislation, as
amended, with some reservations.
1. The bill, as amended, would grant to mutual
savings banks power to branch within the State in
which its principal office is located equal to that of
any financial institution accepting funds from savers
on deposit or share accounts. This section would give
the proposed Federal mutual savings banks authority
to establish and operate branches without any restriction on a statewide basis within the State where its principal office is located. This would extend to savings
banks substantially the same branching privileges now
enjoyed by savings and loan associations and further
increase the inequitable position of the commercial
banks. We are fully in agreement with the policy expressed in the bill provided that it is expanded to
include federally chartered commercial banks. The
present system of 50 different, complicated, artificial,
parochial restrictions on the branch powers of nationally chartered institutions is a millstone on the economy
which we can no longer afford. This Office, therefore,
would strongly support the branch policy expressed
in this bill, but only if it is expanded to include all
nationally chartered banking institutions including
the National Banks. If it is not so expanded, we would
have to oppose it on the grounds of competitive
inequity.
437
The Board, in its transmittal letter to the Bureau
of the Budget, states that a statutory limitation of
branches to the State in which the principal office of
the Federal mutual savings banks is located is undesirable; and it is suggested that the revision would
eliminate this restriction. We agree with the Board
that limitations of this type are also outmoded and
obsolete. They cause a lessening of competition and
prevent effective service by financial institutions within
natural economic areas. There is no reason why a
financial institution should not be allowed to branch
within its metropolitan trading area regardless of
whether it is intersected by State borders or not. This
Office would support such a proposal for mutual savings banks if the same sort of privilege could be provided nationally chartered commercial banks.
2. Under the bill, as introduced, two alternative
methods of organization for Federal mutual savings
banks are provided. The first would provide for election of the directors by a self-perpetuating body of
members or corporators. The second would provide
a self-perpetuating board of directors which itself
would constitute the sole statutory body. The Home
Loan Bank Board in its letter states that it has reached
the conclusion that neither of these methods of organization are desirable and that it would be preferable to
provide a means by which the directors would be
elected by members of the bank consisting of the
depositors of the bank rather than by a corporation
completely uncontrolled by them. This method would
be carried out in Section 103 of the revised bill by
retaining the present phraseology of election by
"members" but defining the term so that it would
mean a depositor. The Board would have power
to make exclusions determined by it to be necessary
or appropriate in the public interest. In connection
with the conversion of State chartered banks into Federal mutual savings banks, the amended bill would
insert in new Section 109 a "grandfather" clause which
would authorize the Board to provide such organization of the converted savings banks as the Board may
deem to be appropriate. This was added so that existing institutions would not be forced to change their
existing organization upon conversion to Federal
charter. The changes created in the bill by these
amendments are, in the main, desirable. The method
by which the directors would be elected by the members/depositors would be more in line with the
traditional organization of the savings banks. However, the included "grandfather" clause could cause
difficulty inasmuch as it might result in the creating of
many different kinds of Federal mutual savings banks.
438
It would seem more appropriate to require a State
mutual savings bank if it desired to convert to a Federal charter to conform to national law. If it preferred
its existing pattern of organization, it Would be better
for it to remain a State chartered institution.
3. The third principal change in the amended bill
would reserve power to the Board to prescribe prohibitions, restrictions and limitations on the exercise by
savings banks of the power to accept deposits and pay
interest. This new provision would enable the Board,
if necessary, to prescribe rates of interest which could
be paid by Federal mutual savings banks. This Office
has consistently opposed the regulation of interest rates
of financial institutions except in the case of national
emergency. The power should be a stand-by one to
come into effect upon Presidential proclamation.
4. The amended as well as the original bill would
clearly permit the federally chartered savings banks
to accept savings accounts from corporations. This
does not constitute any great departure from existing
practice in that many savings banks and savings and
loan associations are permitted to do so at present.
Hence, both the bill and the existing practice of the
savings banks illustrate that there is nothing
wrong or inconsistent in the concept of a savings account for a corporation. This Office has recently
sought to clarify the notion to the contrary which for
many years has been fostered by the Federal Reserve
Board. Since corporations may deposit in savings
banks, which are thrift institutions exclusively, a
fortiori there is no reason to deny them a like privilege
in their own commercial bank. It is our belief that
the savings banks and savings and loan associations are
to be commended and emulated in their handling of
this question.
5. The original bill permitted Federal chartered
savings banks to invest in corporate securities of any
United States or State chartered corporation in
amounts up to 5 percent of the bank's assets or 100
percent of the bank's reserves and undivided profits,
whichever is the greater. The amended bill lays down
an additional limitation that not more than 10 percent
of the outstanding stock of any one issuer may be purchased. We would not object to the extension of bank
investment powers to include some equity securities,
but only within strictly defined limitations and only
if National Banks are given like authority.
6. Under the bill, as introduced, Federal mutual
savings banks would be insured by the Federal Savings
and Loan Corporation whose name would be changed
to the Federal Savings Insurance Corporation. On
the other hand, it would give State chartered mutual
savings banks the option of obtaining insurance from
the Federal Savings Insurance Corporation or from
the Federal Deposit Insurance Corporation. The
proposed amendment would remove, for the future,
the authority of the Federal Deposit Insurance
Corporation to insure such banks and would terminate
any existing insurance held by the FDIC within 2
years. This is a desirable amendment as it would
eliminate the confusion that would follow if certain
savings banks were to be insured by the FDIC and
other savings banks by the Federal Savings Insurance
Corporation.
7. The bill does not deal with the pressing question
of the unfair tax advantages savings banks and savings
and loans associations now enjoy over commercial
banks.
8. There are many other amendments contained in
the proposed revision of H.R. 258. Most of them are
technical in nature and this Office would interpose no
objection to any of them. With the above comments
and reservations, this Office would support the revised
bill, H.R. 258.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable A. WILLIS ROBERTSON
Chairman, Banking and Currency Committee
United States Senate
Washington, D.C.
REAL ESTATE LOANS
APRIL 4, 1963.
DEAR ABE :
I appreciate your comments of March 21, 1963, on
our recent ruling that real estate may be improved
within the meaning of 12 U.S.C. 371, by off-site improvements in its immediate vicinity.
We have been giving careful consideration to the
meaning of the term "improved real estate" as used in
12 U.S.C. 371 in the light of economic conditions
which prevail today as well as those which have prevailed at various times in the past. The statute suggests that improved real estate may be divided into two
or three categories: improved farm land and improved
business and residential properties. For many years
cultivation and the fencing of pasture land have been
considered sufficient tests for improved farm land.
Reexamination of these tests and of the reasonable
needs of farming community has led to the conclusion
that farm land may be said to be improved when it is
useful for agricultural purposes without further substantial improvements.
It is apparent, however, that a different test is necessary for improved business and residential property.
The essence of improvement for banking purposes is
that something must have been done to increase the
value of the property. In the context of a long-term
loan the something must be substantial and permanent.
The conclusion follows that generally real estate is improved within the meaning of 12 U.S.C. 371 when
substantial and permanent construction or development has contributed substantially to its value.
With reference to the specific ruling you mention
concerning a vacant lot in a large city, such property
often has a substantial well-reco,gnized market value
which is the direct result of the substantial and permanent construction and development which surround it. It is often excellent security for a bank
loan. Its ready availability for further development
may make it more valuable than property on which a
building has been created. Consideration of these
factors has led us to the conclusion that business and
residential property may be improved by off-site improvements in its immediate vicinity. While it must
be conceded that most vacant lots in developed
urban areas will qualify under this test, there will
remain to be determined in other areas, as a question
of fact in each case, whether off-site improvements
have contributed substantially to the value of the
property.
The ruling of February 11 and others we have issued
on the subject of improved real estate was based on a
recognition of the proper economic value of this type
of security and we believe these rulings to be fully
within the intent and letter of the statute in question.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable ABRAHAM J. MULTER
House of Representatives
Washington 25, D.C.
JUNE 15,1964.
DEAR MR. CHAIRMAN :
Enclosed with your letter of May 21, 1964, is a
copy of H.R. 11218 introduced by Representative
Harvey of Michigan. You request our comments and
recommendations on H.R. 11218 which revises a previous bill, H.R. 10007 pertaining to the same subject
matter.
Generally speaking, H.R. 11218 amends the first
paragraph of § 24 of the Federal Reserve Act by
adding a clause (5). The new clause (5) permits a
439
National Bank to make a loan to a person, owning real
property in an urban area, for the purpose of redeveloping such property. Such loans are limited in an
amount not to exceed the cost of the redevelopment
involved or 90 per centum of the appraised value of
the property (as redeveloped), whichever is less, for
a term not longer than 30 years, on the condition that
the local governing body certifies to the bank that
such redevelopment is in accordance with an official
plan.
In the opinion of this Office the proposed bill would
not only be beneficial to National Banks by giving
them greater latitude in making local real estate loans
but would be of great benefit to the local communities throughout the nation which would be encouraged
to promote and develop various projects in making
those communities a better place in which to live.
In fostering the development of local communities,
National Banks, under this bill, would be able to lend
greater assistance with respect to finance and knowhow because it's frenquently the case that National
Banks are thoroughly familiar with the economic conditions of the local communities in which they are
located.
anteed by the Farmers Home Administration may not
be included under Item 2 "United States Government
obligations, direct and guaranteed." Schedule B on
the back of the form contains a list of the Government obligations which must be included under Item
2. You will note that all of these obligations, such
as Treasury bills, United States bonds, Treasury certificates of indebtedness, securities guaranteed by
United States Government, etc., are the types of paper
commonly called "securities." Loans which are insured or guaranteed by the Government, such as
Farmers Home Administration loans, Federal Housing Administration loans, Veterans Administration
loans, Commodity Credit loans, etc., are all included
under Item 6 of the Report of Condition "Loans and
Discounts."
On the back of the form, a breakdown of Item 6,
Loans and Discounts, is contained in Schedule A. At
the foot of Schedule A, you will note that there is a
separate item (number 11) for the total amount of
loans or portions thereof which are fully backed or
insured by agencies of the United States Government.
It is thus seen that Farmers Home Administration
guaranteed loans are treated in the same way as are all
other Government-insured and guaranteed loans to in^'
JAMES J. SAXON,
dividuals. The division between Item 2 and Item 6
Comptroller of the Currency.
is one of Government securities in the one item and
Honorable WRIGHT PATMAN
Government-insured loans in the latter item.
Chairman, Committee on Banking and Currency
The form of report of condition is presently under
House of Representatives
study by this office for possible revision. The problem
Washington, D.C.
you raise is caused by the fact that only the front of
the Report of Condition form is published and not
REPORTS OF CONDITION
the schedule on the back. It may be that this probNOVEMBER 15,1962.
lem could be solved by breaking down present Item
DEAR SENATOR STENNIS:
6 into two items, one consisting of Government-insured
Reference is made to your letter dated November 1,
loans and discounts and the other consisting of all
1962, referring to the manner in which loans guaranother loans and discounts. We shall give careful
teed by the Farmers Home Administration are reconsideration to such a change in our present study
quired to be reported in the Reports of Condition pubof the form and would appreciate receiving any comlished by banks. In your letter you refer only to the
ment you may have on this suggestion. As a matter
requirements for state banks, but I assume your inquiry
of fact many banks in the balance sheets which they
was directed to this Office because of the fact that the
same form of Report of Condition is required by the supply to their shareholders and to their customers,
do further break down the item known as loans and
Federal Deposit Insurance Corporation and the Fedediscounts, to show what proportion of such loans is
ral Reserve Board in connection with insured nonmade up of Government-insured loans. This pracmember State banks and member banks as is required
tice has the complete approval of this agency.
for national banks. As you know, this Office is charged
Sincerely,
C.B.REDMAN,
with the regulation of national banks and District of
Columbia banks exclusively.
Acting Comptroller of the Currency.
The Honorable JOHN STENNIS
For your convenience, we are enclosing a copy of the
United States Senate
blank form of Report of Condition involved. You
Washington 25, D.C.
have asked why rural housing loans which are guar440
SAVINGS AND LOAN ASSOCIATIONS
NOVEMBER 22,1963.
DEAR MR. DADDARIO:
This is in reply to your letter of November 8, 1963,
wherein you request information on which to base
a reply to Mr. George H. Stebbins, President of the
Simsbury Bank and Trust Company, Simsbury, Connecticut. From the copy of Mr. Stebbins' letter of
November 6, 1963, which accompanied yours, it
appears that Mr. Stebbins is concerned about enlargement of powers for Federal Savings and Loan Associations such as would enable them to become more
competitive with banks without being subject to the
strict laws or regulations pertaining to commercial
banking. Mr. Stebbins also expresses concern with
respect to a recently promulgated rule of the Federal
Home Loan Bank Board authorizing Federal Savings
and Loan Associations to establish drive-in and pedestrian facilities within 500 feet from the public entrance
of their main offices and branches without the prior
approval of the Federal Home Loan Bank Board.
With respect to a possible enlargement of powers
of Federal Savings and Loan Associations, a bill (H.R.
8245) has been introduced in the present session of
the Congress which would authorize Federal Savings
and Loan Associations to establish special deposit accounts for pension or retirement trust funds, and
authorize these associations and other members of the
Federal Home Loan Bank System to act as trustees
for stock bonus, pension, and profit-sharing plans;
broaden the investment authority of Federal Savings
and Loan Associations to include obligations of Federal agencies and of the States and local governmental
entities, including special obligations as defined by the
Federal Home Loan Bank Board; authorize Federal
Savings and Loan Associations to make loans for furnishing, equipping, or promoting the livability of a
home, as well as for paying the expenses of a college
education or acquiring a mobile dwelling; qualify
institutions insured by the Federal Savings and Loan
Insurance Corporation as depositories for funds of the
Federal Government; grant to Savings and Loan Associations authority similar to that granted to commercial banks to establish service corporations; and
authorize small business investment companies to place
idle funds in institutions insured by the Federal Savings and Loan Insurance Corporation.
With respect to the matter of Federal Savings and
Loan Associations being authorized to establish additional facilities, it should be noted that another bill
(H.R. 3734) introduced in the present session of the
Congress would limit Federal Savings and Loan Associations in the establishment and operation of new
branches to those locations where State Savings and
Loan Associations or State banks and trust companies
are permitted by state law or practice to establish
and operate new branches.
Sincerely,
WILLIAM B. CAMP,
Acting Comptroller of the Currency.
The Honorable EMILIO Q. DADDARIO
House of Representatives
Washington, D.C. 20515
S. 1642
JUNE 24,1963.
DEAR SENATOR WILLIAMS:
During my testimony this morning on S. 1642,
I presented some figures as to the number of banks
covered by the disclosure regulations issued by our
Office as opposed to the number of banks covered
by S. 1642. In order that the record may be complete,
we would like to submit the precisefiguresand request
that this letter be printed in the hearing record.
As of March 18, 1963, the last call date, there were
654 National Banks with deposits of $25,000,000 or
more. This is the group which is covered by our
regulations.
Under S. 1642 only banks with 750 or more shareholders are covered for at least 2 years and as long
thereafter as the SEC wishes. After 2 years the SEC
may lower the cutoff point to 500 shareholders. The
following table indicates the number of National
Banks which would be covered at various cutoff
points:
No. of Shareholders:
1,000
750
500
No. of National
Banks
137
200
314
Under the $25,000,000 deposit test used in our
regulation, we have covered $130,484,632,000 or
81.2% of the total assets of all National Banks which
are $160,657,006,000. The National Banks covered
hold 53.8% of the $298,196,408,000 assets of all commercial and stock savings banks.
It should also be noted that the 654 National Banks
covered by our regulation represent a figure which is
in excess of one-half of the number of all corporations
441
listed on the New York Stock Exchange which, according to the latest figures available, is 1286.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable HARRISON A. WILLIAMS, Jr.
United States Senate
Washington 25, D.C.
JULY 15,1963.
Re: S.1642
DEAR MR. CHAIRMAN :
We have been informed that the above bill will
be considered by the full committee in executive
session on Tuesday, July 16, 1963.
As you know, we testified in opposition to the bill
as originally submitted to the Subcommittee on Securities. We understand that the bill as reported out
by the Subcommittee is the same as originally printed
with the exception of the Williams' Amendment which
would "vest" in the banking agencies the "powers,
functions and duties" of the SEC with regard to the
administration and enforcement of sections 12, 13,
14(a), 14(c) and 16 of the Securities and Exchange
Act of 1934. This language is substantially similar to
the original draft bill which was originally submitted
for our consideration by the Budget Bureau, but which
was evidently dropped by the SEC for reasons which
have not been communicated to us.
It is likely that Senator Williams' intention in
framing his amendment was to answer the objection
we voiced and which was shared in by certain
other witnesses, to giving the SEC jurisdiction over
banks in connection with this legislation. However,
we feel that inasmuch as the Williams' Amendment
would result in the administration by the banking
agencies of specific sections of the Securities Act by
the same means and with the same powers as are
vested in the SEC, that a very serious threat to the
continued viable administration of the banking agencies, would be presented by the present form of the
bill.
This is for the reason, inter alia, that the enforcement powers which the banking agencies would be
compelled to use and which are set forth in sections
19, 21 and 22 of the Securities and Exchange Act of
1934, would involve those agencies in a method of
administration which is entirely foreign to their usual
operation.
The method of enforcement spelled out in sections
19, 21 and 22 of the 1934 Act is tied into the Adminis442
trative Procedure Act and calls for formal hearings
upon notice, record proceedings and full court review. This method of administration is common to
the independent agencies set up to enforce laws based
upon the commerce clause.
As you know, the powers and functions of this Office
are not based upon the commerce clause but are based
upon the fact that National Banks are instrumentalities of the Federal government which owe their existence to the Federal government and are therefore
directly subject to regulation. This office has for a
hundred years successfully regulated the banks under
its jurisdiction without resort to the technical quasijudicial proceedings which S. 1642 would require it to
use in matters pertaining to the investor protection
rules. Over the years, a highly satisfactory relationship has been built up between the National Banks and
the Comptroller's Office. In this relationship, the
banks and bank officers with rare exception respond
to the rules and direction of the Comptroller without
resort to the courts. We think that this rather delicately balanced relationship would be in serious danger
of being destroyed if in this one area of regulation, the
full panoply of judicial enforcement procedures are
required to be followed. This is especially so in view
of the fact that the area of regulation which would
require the Administrative Procedure Act formalities
would not be one of the more important areas of
regulation of the Office. It would be impossible to
justify on logical grounds the informal conference
type regulation traditionally used to decide merger,
branch, and new bank applications and to discipline
bank management in serious matters affecting the bank
when at the same time, full record proceedings on
notice and upon hearing with judicial review would be
necessary for disclosure violations.
There are, in addition, many other objectionable
features to S. 1642 which time does not permit us to
detail in this letter. Some of these other objections
are contained in my testimony before the Subcommittee. In particular, the number of National Banks
covered by S. 1642 is substantially less than are covered
by our presently existing disclosure regulations. Also,
S. 1642 contains no provision for disclosure to prospective investors in stock to be issued by a newly organized
bank, a subject of regulation which we intended to
cover in the near future by amendments to our existing regulations, but which we have had to hold in abeyance because of the proposed legislation. I am sure
that you will understand that it will be impossible as a
practical matter for us to continue in effect our existing disclosure regulations covering groups of banks
which have been specifically excluded by a recent
expression of Congressional intent. This observation
applies equally to our prepared amendatory regulations dealing with proxy fights, merger meetings and
insider trading.
In view of the above, we strongly urge to the full
Committee that instead of the approach taken in
S. 1642 to require more disclosure by banks, that this
end be achieved by means of a direct amendment to
the National Bank Act, and if the Committee wishes
to impose similar requirements on State banks, by similar amendments to the Federal Reserve and FDIC
Acts. A suggested amendment is enclosed which
would authorize and direct the banking agencies to
issue and enforce regulations calling for appropriate
disclosure to stockholders, without reference to any
specific provisions of the Acts administered by the
Securities and Exchange Commission.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable A. WILLIS ROBERTSON
Chairman, Senate Banking and Currency Committee
United States Senate
Washington 25, D.C.
JULY 22,
1963.
Mr. MATTHEW HALE
Chief of Staff
Senate Banking and Currency Committee
5300 New Senate Office Building
Washington 25, D.C.
DEAR MATT:
Thank you for providing us with a copy of the
galley proofs of the Committee Report on S. 1642. We
have examined the material contained in pages 33
through 36 dealing with the question of the intended
meaning and effect of the Williams Amendment "vesting" in the banking agencies the "power, functions and
duties" of the SEC with respect to the administration
of sections 12, 13, 14 and 16 of the 1934 Act in respect
of securities issued by banks.
The material in the Report has not removed our
basic doubts as to the meaning and legal effect of the
Williams Amendment. Blasic questions as to the
meaning and thrust of the "vesting" language appear
unanswered.
Since our views on the matter were contained in our
testimony before the Subcommitee and our letter of
July 15, 1963, we will not repeat them here.
We appreciate the courtesy extended in offering us
the opportunity to comment on the Report before final
publication.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
FEBRUARY 19,1964.
DEAR MR. CHAIRMAN :
We are pleased to enclose herewith a statement
for the record on H.R. 6789 and S. 1642. Sufficient
copies have been made for distribution to each member of the Committee, if appropriate. This statement strongly opposes the provisions which would
subject National Banks to certain sections of the Securities and Exchange Act of 1934. Our objection
is based on both substantive and procedural grounds.
In view of the ample authority which now exists in
this Office to require appropriate disclosure of the
financial affairs of National Banks, which authority
has been implemented and will be further implemented by this Office, we feel that there is absolutely
no need to apply the complicated panoply of disclosure
law contained in the Exchange Act to the national
banking system.
Procedurally, the proposed Bills are another long
step in the fragmentation of statutory sources to which
National Bankers must look prior to virtually every
move they make. The statutes governing National
Banks are now scattered throughout the National
Bank Act, the Federal Reserve Act, the Federal Deposit Insurance Corporation Act, the Clayton Act,
and 50 various State laws on branching. To bring
these banks wholesale into the complicated arena of
the SEC laws by the application of its four major
provisions, as does this Bill, is to open a Pandora's
Box of complications. As any attorney handling corporation matters knows, it is almost impossible to refer
to a single section of the SEC laws for the answer to
a particular question. In the 30 years since their
enactment, an intricate web of cross references and
interdependencies between the regulatory and enforcement provisions of the 1933 and 1934 Act, has grown
up. There is also a gloss of many court decisions
interpreting these sections which may or may not be
productive of good results when applied to the banking industry.
Without a thorough study of all of this case law
which has not been possible in the time at hand, all
of the technical problems inherent in this legislation
443
cannot be assessed. There are some questions which
are readily apparent. For instance:
1. What is the interpretation of the sponsors of this legislation of the meaning of the so-called Williams' Banking
Amendment (§ 3(e) of 1642) which reads as follows?
In respect of any securities issued by banks the deposits of which are insured in accordance with the
Federal Deposit Insurance Corporation Act, the powers,
functions, and duties vested in the Commission under
this title to administer and enforce sections 12, 13,
14(a), 14(c), and 16 thereof (1) with respect to national banks and banks operating under the Code of
Law for the District of Columbia are vested in the
Comptroller of the Currency, (2) with respect to all
other member banks of the Federal Reserve System are
vested in the Board of Governors of the Federal Reserve
System, and (3) with respect to all other insured banks
are vested in the Federal Deposit Insurance Corporation.
2. What powers or authority, if any, would the SEC retain over banks under the bill including the Williams' Banking Amendment?
3. Would the sponsors expect the banking agencies to follow the same general standards of disclosure as does the SEC ?
4. For instance, would the banking agency have the discretion to designate any reports it might require under the
Bill as nonpublic files?
5. Specifically, would the banking agency have the discretion under the Bill to deny to an inquiring journalist any
such report filed by a bank, which might be in temporary
financial difficulty?
6. Under the Williams' Banking Amendment, "The powers, functions, and duties vested in the commission . . . to
administer and enforce the Sections 12, 13, 14(a), 14(c)
and 16" with respect to securities issued by National Banks,
"are vested in the Comptroller of the Currency." Does this
mean that the Comptroller will have the powers enumerated
in Sections 19, 20, 21, 22 and 23 of the 1934 Act?
7. If the answer to No. 5 is affirmative
(a) would the Comptroller have the power under
Section 19 "to expel from a national securities exchange any member or officer" whom the Comptroller
finds has violated Sections 12, 13, 14(a), 14(c) or 16
with respect to a security issued by a National Bank?
(b) would a National Bank, under investigation by
the Comptroller for suspected violations, have the right
to the court proceedings required by Sections 21, 25 and
27?
8. New Section 15 (c) (5) gives the SEC power to suspend
trading in any over-the-counter security subject to the Bill,
if it finds after notice and open hearing that any person has
failed to comply with the provisions of Sections 12, 13 or
subsection (d) of Section 15, or any rule or regulation thereunder. Section 15 is not one of the sections which the
Comptroller enforces under the Williams' Banking Amendment. Therefore, has the SEC retained authority to suspend
trading in a security issued by a National Bank?
9. Would a newly formed bank, selling its first stock to
the public be required to file a registration statement under
the bill?
10. If the answer to No. 9 is negative, why does the bill
require that banks register long outstanding issues?
444
The above questions are merely illustrative of the
many legal uncertainties and problems inherent in the
application of this bill to National Banks.
We trust that after consideration of our statement
and the questions raised herein that the Committee
will vote to except securities issued by National Banks
from this bill.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable OREN HARRIS
Chairman, Committee on Interstate and Foreign
Commerce
House of Representatives
Washington, D.C.
MARCH 16,1964.
DEAR MR. CHAIRMAN :
Further reference is made to our letter of February 19, 1964, and the statement attached thereto on
the subject of H.R. 6789 and S. 1642.
Since submitting our statement, we have been giving
hard and diligent thought to possible solutions of the
problem raised by the blanket inclusion of national
banks and other commercial banks in the bill. As
you know, we do not think that the so-called Williams
Banking Amendment effectively deals with the
problem.
At the end of our statement previously submitted,
we requested that the national banks be excepted entirely. If this was not done, we suggested that a sentence be added to the amendment. This sentence,
while making clear that interpretative rulings of the
SEC would not be applicable to banks, clearly did
not take care of the basic problem, which is to give
the banking agency the discretion to modify or waive
the statutory requirements of Sections 12, 13, 14(a),
14(c) and Section 16 where in their judgment the
public interest warrants.
Since submitting our statement, we have drafted
language which we think would give the banking agencies such necessary flexibility and discretion. We request that the following language be substituted for
the present language of the Williams Banking Amendment which is section 3(e) of S. 1642 which adds a
new subparagraph (i) to section 12 of the 1934 Act.
(i) In respect of any securities issued by banks, the deposits of which are insured in accordance with the Federal
Deposit Insurance Act, the banking agencies hereinafter
named shall be vested with the powers of the Commission
to administer sections 12, 13, 14(a), 14(c) and 16 of this
title. In addition to such powers, such banking agencies
are hereby granted authority and discretion to determine
the extent to which, if any, Sections 12, 13, 14(a), 14(c)
and Section 16 shall be applied to the banks under their
jurisdiction. The agencies referred to in the preceding
sentence shall be: (1) the Comptroller of the Currency
with respect to national banks and banks operating under
the Code of Law for the District of Columbia; (2) the
Board of Governors of the Federal Reserve System with
respect to all other member banks of the Federal Reserve
System; and (3) the Federal Deposit Insurance Corporation
with respect to all other insured banks.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable OREN HARRIS
Chairman, Committee on Interstate and
Foreign Commerce
House of Representatives
Washington, D.C.
SERVICE CHARGES
DECEMBER 23, 1963.
DEAR WILLIS :
Many thanks for your note of the 12 th regarding
service charges. I regret that I did not advise you
earlier of the details on the Southern Hills matter.
The attached copy of a statement of this Office of
December 9, 1963 (Enclosure 1) will, I believe, explain the details of the Southern Hills reorganization.
There are also enclosed for your information, copies
of the press releases relating to this conservatorship
(Enclosure 2).
With respect to the question of policy of this Office
on the offer of free service charge accounts generally,
the quick answer lies in the attached copy of a letter
of November 15, 1963 (Enclosure 3), sent to the organizers of all new National Banks, which in effect states
that this Office will not permit the use of free service
charge accounts at the time of the opening of a new
National Bank without the prior specific approval of
this Office.
A number of State, as well as National Banks, have
employed the offer of free service charge accounts,
some with, and some without limitations. Our view
is that such business techniques can properly be employed only if practical safeguards are imposed, such
as a limited period on the offer, individual accounts
only, opening of such accounts only by the depositor in
person, automatic revocability on overdraft, merger,
reorganization, etc., minimum average balance requirements as appropriate to each case, and express
contractual condition that any such agreements are
revocable at any time at the discretion of the Comp-
troller of the Currency. Attached is a copy of a letter
addressed to a proposed new National Bank which
applies the limitations deemed appropriate by this
Office in that particular case (Enclosure 4).
As you know, the matter of determining service
charges is within the discretion of the Board of Directors of the Bank. Such charges should, of course,
be determined independently by each bank's Board of
Directors competitively. While we believe there
should ordinarily be a reasonable relationship between
these charges and the actual cost of servicing the accounts, it would be inappropriate for this Office to
interfere with the service charge policies of well established National Banks, unless excesses should develop
which raised questions as to safe and sound banking
practices.
In the light of the policy expressed in the immediately foregoing paragraph we should not and do not
intend to regulate service charges on all banks, and I
am sure you would not suggest such a policy for this
Office. We must assure that no practices are adopted
by any bank, new or well established, which would lead
to unsafe and unsound banking.
Many old and established banks in the smaller communities in the United States have not for many years
and do not now impose service charges on account activity. These are generally smaller banks where account activity is light and it results in no excessive burden on the banks at least cost-wise. This practice is
sometimes used by National and State member banks
to compete against the non-par banks in their communities. We would not, of course, undertake to
interdict these long standing policies of these banks,
and we would have no sound reason to do so, in my
opinion.
I do not think the offer of free service charge accounts under appropriate limitations and circumstances raises any question as to the need for a new
bank. These offers are business inducement techniques, not substantially dissimilar in cost or in purpose to other inducements employed by new or established banks, such as give-aways, free accounting
service for small businesses, corporate payroll account
reconciliations, and many other types of business devices. In fact, as employed by some banks, free service
charge accounts have been less costly than advertising,
give-aways, and other promotional techniques employed by other new banks. The question in my opinion comes down to one of practicability and reasonableness.
In some areas the use of the free service charge account under reasonable limitations has been singularly
445
effective because of excessive service charges imposed
by existing banks. This is certainly true in Tulsa, as
well as in certain other places in the country, where
average service charges have clearly been excessive,
have irritated people, and have amounted to the most
sensitive aspect of bank operations. That this was a
factor in the Southern Hills case is indisputable. The
appropriate answer to excessive service charges is ordinarily a competitive schedule of service charges, but,
as you know, in a number of communities such competition has not existed. There is no reason apparent
to me why banks should not be competitive in the area
of service charges and in every other area of the banking business, provided only that a competitive schedule of service charges does not amount to an unsafe
and unsound banking practice.
The waiver of a service charge does not constitute
a violation of Regulation Q. It is common practice
throughout the United States for banks of all sizes to
waive service charges in any account where the average balance maintained produces net income on analysis sufficient to cover the cost of the service charges
rendered. This is true in the case of many large corporate accounts as well as in individual partnership
and other accounts. No one to my knowledge has
asserted that a bank which under such circumstances
waived the application of service charges would be
violating any law. Indeed today particularly among
the larger banks in communities where competition
may be tough, various services are rendered to corporate and other accounts at no cost to the depositor. In
general then, we would be on thin ground indeed in
attempting to require rates or charges on any specific
type of banking activity whether it involved imposing
a specific level of rates or charges on loans, investment
services, custodial arrangements, trust services, account activity or any other area.
The attached copy of our letter of November 15,
1963 (Enclosure 5), reflects the new policies adopted
by this Office and now being enforced throughout the
United States as a result of our experience in the
Southern Hills case. That letter should be read in
conjunction with our instruction of November 15,1963
(Enclosure 6), to all Regional Chief National Bank
Examiners, copy of which is also attached.
These letters announce the following basic policies:
(1) That schedules of service charges for National Banks should be determined independently
for each bank by its Board of Directors and should
generally bear a reasonable and appropriate rela446
tionship to the actual cost of the services provided.
(2) No new National Bank should commit itself generally to provide services without reasonable charges therefor, without the prior specific
approval of this Office.
(3) No National Bank should hereafter undertake or engage in any program to promote any
type of bank business which on analysis would
involve the risk of excessive or unreasonable costs
in relation to the profitability of the business
sought to be obtained.
The Tulsa case is a unique and unprecedented one.
We have dealt with it in the most effective way we
knew how. Tulsa has also had beneficially constructive results throughout the country, both from the
standpoint of the public and the banks themselves.
Of all other areas in banking the service charge is most
sensitive to the public, many of whom resent the imposition of such charges. The principal basis for this
resentment goes to lack of understanding that bank
services cost money, just as do the services rendered
by any other type of business enterprise. Banks themselves, as well as the regulatory authorities—both State
and National—have failed over the years to communicate to the banking public the basis of reasonable
charges for the services banks render. In no other
area in the banking business has the default in communication with the customer been so clear and pronounced. Because of the broad national publicity on
the Tulsa case, that case has done more, in my opinion,
than any other development to inform the public that
bank services cost money and warrant reasonable
charges therefor. It is to be hoped now that the banking associations, the banks themselves and the regulatory authorities, would undertake efforts designed to
inform the depositors and customers of the need and
basis for reasonable and competitive charges for the
services they render. Public complaints about bank
service charges have been the largest single source of
letters received by this Office since I have been here.
Several of the attachments to this letter have not
been made public or circulated outside of our staff
here and in the field.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable A. WILLIS ROBERTSON
Chairman, Committee on Banking and Currency
United States Senate
Washington, D.C.
TRUST REGULATIONS
MARCH 1,
1963.
DEAR MR. CHAIRMAN:
This is in reply to your letter of February 21, 1963,
enclosing a copy of a letter received by you from Mr.
Carl Shipley of Washington, D.C.
Mr. Shipley's letter has reference to the proposed
rule making recently published by this Office. This
proposal would amend the trust regulations affecting
National Banks, and was announced by me at the Midwinter Trust Conference of the American Bankers Association in New York on February 4. You may recall that a copy of my remarks at the Conference, and
of the proposal, was sent to you at that time.
As was promised at the hearings before the House
Banking and Currency Committee last year, shortly
after the passage of the bill transferring to this Office
the authority over the trust powers of National Banks,
which you managed in the debates in the House, a
Committee was appointed to advise us upon technical
and procedural aspects of possible changes in our trust
regulations. This Committee was composed of experienced men from the trust departments of both
State and National Banks.
Mr. Shipley's comments are directed to section 9.18
of the proposed revision, pertaining to the collective
investment of funds held in a fiduciary capacity by a
bank. The proposed revision has eliminated the present requirement that the funds of trusts that are created for other than "bonafidefiduciarypurposes" cannot be invested in a common trust fund. This was
done because we are convinced that the term had no
valid meaning. This does not, however, make a mutual fund out of a common trust fund.
As you know, one fiduciary service performed by
bank trust departments has been the acceptance of
managing agency accounts. The operation of such
accounts, and all other trust functions, has always been
subject to the supervision of the appropriate State or
Federal bank regulatory agency. Heretofore, the regulations affecting National Banks have prohibited the
collective investment of such funds, requiring that the
funds of each account be invested singly. This has
had the effect of permitting banks to accept only accounts of substantial size because of the costs involved.
The proposed revision would permit National Banks,
where the State law permits, collectively to invest these
accounts in a common trust fund, thus facilitating the
extension of these bank fiduciary services to accounts
of small size.
The operation by a National Bank of common trust
funds under the proposed revision would be subject to
rigid safeguards. The plans under which such funds
operate must be filed with this Office and made available to prospective bank customers. The same is true
as to financial reports of fund operations. These disclosure requirements are coupled with the constant
supervision and examination of National Bank trust
departments by our examiners.
From the foregoing I am certain that you will agree
that we do not propose to permit the creation of pools
which are indistinguishable from mutual funds, and
that we do propose to impose protections for bank
customers far superior to that afforded by the Securities and Exchange Commission laws over mutual
funds. Accordingly, we are confident that Mr. Shipley's unnamed clients need have no worries in this
regard.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
The Honorable WRIGHT PATMAN
Chairman, Committee of Banking and Currency
House of Representatives
Washington 25, D.C.
UNDERWRITING REVENUE BONDS
JUNE 26,
1963.
DEAR MR. CHAIRMAN :
Reference is made to your letter asking for the
views of this Office on H.R. 5845, "To assist cities
and States by amending section 5136 of the Revised
Statutes, as amended, with respect to the authority
of national banks to underwrite and deal in securities
issued by State and local governments, and for other
purposes."
Section 1 of the proposed legislation would amend
R.S. 5136 (12 U.S.C. 24) to provide that the limitations and restrictions therein contained as to dealing
in, underwriting and purchasing for its own account,
investment securities, shall not apply to obligations
of any local public housing agency which are secured
by an agreement between the agency and the State
in which it is situated, in which agreement the public
housing agency agrees to borrow from the State, and
the State agrees to lend to the public housing agency,
prior to the maturity of such obligations having a maturity of not more than 18 months, monies in an
amount which together with other monies committed
to the payment of interest on such obligations will
suffice to pay the principal of such obligations with
interest to maturity thereon. This is intended to
place obligations of local public housing agencies with
447
respect to which States are obligated to lend amounts
sufficient to pay their principal and interest on the
same basis as obligations of local public housing agencies with respect to which the Public Housing Administration is obligated to lend amounts sufficient to pay
their principal and interest. The language used in
this section, like the language in the statute which it is
intended to parellel, describes the transactions to which
it applies with a particularity which narrowly and
unnecessarily limits the usefulness of the authority
proposed to be granted.
Section 2 of the proposed legislation would amend
R.S. 5136 (12 U.S.G. 24) to permit national banks,
and consequently, State member banks, to deal in and
underwrite up to their 10 per centum limitations, obligations issued by a State or political subdivision or
agency of a state or political subdivision, except obligations payable solely from the proceeds of special
benefit assessments.
The Glass-Steagall Act of 1933 prohibited all underwriting and trading in securities by commercial
banks. An exception was made in the case of general obligations of States and municipalities and obligations of the United States. The purpose of this
Act was to take commercial banks out of promotional,
speculative development projects and more specifically out of the corporate and foreign bond business. There was concern at the time about the risk
involved in a special assessment bond payable from
the proceeds of an assessment upon a single piece of
property or the property in a very limited area. Such
a bond represents the sale of a tax lien and often is
not the obligation of any government or individual.
At the time the volume of bonds payable solely from
the resources of a specific project was relatively small
and tended to be concentrated in the development
projects, such as toll bridges. It was, thus, appropriate in 1933 to regard the general obligations of
States and municipalities as suitable for underwriting
by commercial banks and all other State and municipal bonds as unsuitable.
For many reasons, there has been a shift in municipal financing. More and more, revenue bonds,
rather than general obligations, are being used by local
governments to build schools, office buildings, highways, bridges, water and electric plants. In some
cases, indeed, the allocation of various government
receipts to specific revenue obligations may leave inadequate resources for the general obligations of the
municipality.
The important role revenue bonds now play make
it desirable for the Congress to consider their suit448
ability for underwriting by commercial banks. The
projects financed by revenue bonds embrace government services supported ultimately by general taxation
such as schools and other public buildings as well as
such self-supporting services as public utilities. Conceivably they might include projects where there is
some risk that revenues may not be sufficient to support the project. Bonds for such projects would, of
course, not meet the Comptroller's standards for bank
investment.
The proposed legislation will permit commercial
banks to underwrite, trade and deal in municipal
bonds only to the extent national banks can invest
in such bonds under the National Banking Act. Any
bank can only own or be obligated to buy an amount
of bonds limited to 10% of the bank's capital and
surplus. The risk level is therefore not raised by
this legislation.
Revenue bond financing, from which commercial
banks are now automatically excluded runs about
one-third of the total market. State and local governments need the broadest possible market for their
growing volume of securities. The broader the
market the greater the competition and the lower the
interest rate. If commercial banks were permitted
to participate in revenue bond financing, the interest rate that the municipalities and States must pay
would be lower. Therefore, more public improvements which are financed in this way would be
possible.
It is the view of this Office that the objectives of
S. 828 are desirable ones. The Office of the Comptroller of the Currency urges passage of this legislation.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable WRIGHT PATMAN
Chairman, Committee on Banking and Currency
House of Representatives
Washington 25, D.C.
JANUARY 9,1964.
DEAR MR. CHAIRMAN :
The following are the answers to the series of questions you placed in the record during my testimony
on December 11, 1963, on the bills to liberalize the
underwriting and lending powers of National Banks.
For convenience the questions are repeated with pertinent answers following thereafter.
Question: Once an obligation has been defined as a general obligation, is there any author-
ity in law for you to limit a bank's investment in
this obligation?
Question: Once an obligation has been defined
as a general obligation, is there any authority
in law for you to specify any quality requirements that must be met in order for a National
Bank to invest in that obligation?
Answer: Answers to these questions require at
the outset an examination of the statutory language under which a general obligation is entitled to special treatment. This language, contained in the sixth sentence of paragraph Seventh
of 12 U.S.G. 24, reads in pertinent part as follows: "The limitations and restrictions herein
contained as to dealing in, underwriting, and
purchasing for its own account, investment securities shall not apply to obligations of the United
States, or general obligations of any State or of
any political subdivision thereof, * * *."
Under this language a general obligation is
not subject to limitations and restrictions contained in paragraph Seventh which relate to
the specified transactions in investment securities.
Paragraph Seventh of 12 U.S.G. 24 limits the
dealing in securities and stock to transactions
which are for the account of customers and prohibits the underwriting of securities or stock with
the proviso that investment securities may be
purchased for the account of the bank under
such limitations and restriction as the Comptroller
of the Currency may by regulation prescribe.
The paragraph then imposes a 10% maximum
limitation on the holding of the investment securities of any one obligor. The paragraph also
contains a partial definition of the term "investment securities" and authority for the Comptroller of the Currency to further define the term.
It follows from the foregoing that a general
obligation, in order to qualify under the statute
for special treatment, must first be an investment security under the statutory definition of
the term and under such further definition of the
term as the Comptroller of the Currency may by
regulation prescribe. The statutory definition and
use of the term "investment securities" clearly
implies a quality standard. The authority of the
Comptroller of the Currency to further define the
term, therefore, includes the authority to prescribe quality standards which must be met in
order for a National Bank to invest in a general
obligation.
725-6!9 8-^64
30
A general obligation which qualifies as an investment security would not, however, be subject to the statutory 10% limitation nor to an
administrative limitation based solely upon authority contained in paragraph Seventh of 12
U.S.C. 24. The Investment Securities Regulation of the Comptroller of the Currency is, however, more broadly based. The Comptroller of
the Currency is charged by the national banking
laws with the execution of all laws of the United
States relating to the organization, operation,
regulation and supervision of National Banks.
In carrying out this responsibility, the Comptroller has full authority in law to prescribe reasonable limitations and restrictions upon the investments of National Banks.
Question: If a State issued bonds specifying
that they will be payable solely out of tolls received from a bridge, would this be a general
obligation under your interpretation of the
statute?
Question: If a State creates an authority to
build a bridge, and the authority issued bonds
payable solely out of bridge tolls but the authority has no other source of income and pledges
its full faith and credit, is that bond a general
obligation?
Answer: Section 1.3 (e) of the Investment
Securities Regulations, a copy of which annexed'
hereto, defines a "general obligation of any
political subdivision thereof" as an obligation
supported by the full faith and credit of an
obligor possessing resources sufficient to justify
faith and credit and as including an obligation
payable from a special fund when the full faith
and credit of a State or any political subdivision
thereof is obligated for payments into the fund
of amounts which will be sufficient to provide
for all required payments in connection with
the obligation. Accordingly, if the resources
available for the repayment of the obligation
are insufficient to justify faith and credit, the
obligation does not meet the requirements of
the definition even though all of the resources
of the obligor are pledged for such repayment.
On the other hand, if the resources available
for the repayment of the obligation are sufficient
to justify faith and credit, the obligation may
meet the requirements of the definition although
some of the resources of the obligor are not
available for such repayment. It is important
to note that this definition results from the con449
elusion that when Congress used the term "general
obligation" it was concerned., as it is today, that
some governmental obligations might not be supported by resources adequate to justify faith
and credit. "Resources sufficient to justify faith
and credit" is a workable and useful standard of
quality derived directly from the Congressional
use of the term "general obligation."
Applying this standard to the bridge toll
questions, the issue depends in both questions
upon the resources available for the repayment
of the bonds. Both questions limit these resources to expected bridge tolls and suggest no
evidence to support a determination that such
resources would be sufficient. The same answer
applies to both questions: the bonds would not
be general obligations under the interpretation
of the Comptroller of the Currency.
Question: With reference to your quality
requirements, does the Comptroller's Office make
a quality rating of obligations? Do you use any
of the private rating services as a means for
specifying which obligations a national bank may
invest in?
Answer: The Comptroller's Office sets standards of quality in §§ 1.3,1.4 and 1.5 of the Investment Securities Regulation, and from time to
time, when the question is raised by a bank or
by a bank examiner, applies these standards of
quality to specific securities. A bank is required
by § 1.8 of the Investment Securities Regulation
to maintain in its files credit information adequate
to demonstrate that it has exercised prudence in
determining that specific securities meet the required standards of quality. Various private
rating services have established their own scales
of quality ratings and evalute securities in terms
of these ratings. While such ratings provide a
convenient rule of thumb for the classification
of securities, the Comptroller's Office does not
depend solely upon such ratings and expects banks
to be able to support their quality determinations
upon a broader base of credit information. The
Comptroller's Office, therefore, does not use any
of the private rating services as a means for
specifying which obligations a National Bank may
invest in. On the contrary, it insists that responsibility for the proper investment of bank funds
rests primarily with each bank's directors and
that this responsibility cannot be delegated to the
rating services or others or be performed merely
450
by ascertaining that a security falls within a particular rating classification.
Question: Under your present regulation, what
would be the lowest quality obligation in terms
of the Moody's rating service that a National Bank
can invest in?
Answer: Under § 1.3 (b) of the present Investment Securities Regulation the term "investment
security" does not include investments which are
predominantly speculative in nature. Moody's
rating Baa is applied to bonds which "lack outstanding investment characteristics and in fact
have speculative characteristics as well." The
next lower rating, Ba, is applied to bonds which
"are judged to have speculative elements." It
would appear to be the opinion of Moody's that
securities which they have rated Baa would be
the lowest quality obligation that a National Bank
can invest in. There would be considerable
doubt, however, that a bond which lacks outstanding investment characteristics and which has
speculative characteristics as well would be considered an investment security within the meaning of § 1.3 (b) of the Investment Securities
Regulation.
Question: In your present regulations as they
pertain to public securities, is there any quality
standard other than that the bank shall exercise
prudent banking judgment?
Answer: The quality standard for public
securities is not limited to the exercise of prudent
banking judgment. Additional standards are
set forth in the definitions of "investment securities" and "general obligation of any State or of
any political subdivision thereof contained in
paragraphs (b) and (e), respectively, of § 1.3 of
the Investment Securities Regulation. Section
1.4 of the Regulation sets forth an additional
guide by providing that prudence will require
a consideration of the resources and obligations
of the obligors and a determination that the
obligor possess resources sufficient to provide for
all required payments in connection with the
obligation.
Question: As your regulations pertain to investment securities other than public securities,
is there any standard other than that the bank
will "in its prudent banking judgment" determine
that "there is adequate evidence that the obligor
will be able to perform," and that the "security
may be sold with reasonable promptness at a
price which corresponds reasonably with its fair
market value?"
Answer: For investment securities other than
public securities the quality standard includes the
definition of "investment security" contained in
§ 1.3 (b), as well as the guide set forth in
§ 1.5(a) that the bank will "in its prudent
banking judgment" determine "that there is
adequate evidence that the obligor will be able
to perform all that it undertakes to perform in
connection with the security, including all debt
service requirements, and that the security may
be sold with reasonable promptness at a price
which corresponds reasonably to its fair value."
Question: Is there any Federal law which prohibits national banks from buying for their trust
accounts obligations which the bank owns as
an underwriter?
Answer: There is no Federal law which
specifically affects such a prohibition. However,
Regulation 9 of the Comptroller of the Currency
which, through the provisions of 12 U.S.C. 92a
has the force of law, would forbid these transactions unless lawfully authorized by local law.
Question: Section 9.12 of your regulation No.
9 forbids a national bank from buying for its
trust accounts obligations they own as underwriters unless lawfully authorized by local law.
How many States have laws which authorize
such practices?
Answer: There are no State statutes specifically
dealing with this situation to our knowledge.
The authorization of local law, therefore, would
have to stem from the common law principles
pertaining to trust of each State. Accordingly,
the following principles would apply. Under
the common law it is a recognized principle that
a trustee violates his duty to the beneficiary if
he sells to himself as trustee his individual property or property in which he has a personal interest of such a substantial nature that it might affect
his judgment. It is immaterial that the trustee
acts in good faith in purchasing the property for
the trust and that he pays a fair consideration.
Restatement of Trusts, Sec. 170, Comment h;
Scott, The Law of Trusts, Sec. 170.12 and cases
cited therein. This principle is equally applicable
to a corporate trustee. Restatement, Sec. 170,
Comment i, Scott, Sec. 170.13. Further a purchase of securities by a corporate trustee from a
syndicate of which it is a member and in whose
profits it shares is improper. In re Estate of Binder, 137 Ohio St. 26, 27 N.E. (2d) 939 (1940). By
the terms of the trust the trustee may be permitted to purchase property owned by it individually, and such a provision has been held effective
where the trustee acts in good faith in making the
purchase. Scott, Sec. 170.13. The trustee violates his duty to the beneficiary, however, if he
acts in bad faith no matter how broad may be
the provisions of the terms of the trust in conferring power upon him to deal with the trust
property for his own account. Restatement, Sec.
170, Comment t. A provision of a government
instrument which purported to permit the trustee
to sell to the trust securities held by a syndicate
of which the trustee was a member which had
deteriorated in value, for the benefit of the trustee
individually and to the deteriment of the trust
would be so inconsistent with the nature of a
trust as to destroy the trust relationship and make
the provision or the instrument itself of no effect.
Moreover, it is difficult to conceive of a settlor
who would establish such a trust.
National Banks presently are permitted to underwrite obligations of the Federal Government and general obligations of States and political subdivisions
thereof. It is recognized that many of such obligations, particularly in the latter group, are not proper
for trust investment. Yet, there has not developed
any "unloading" of such issues upon trust departments
by National Banks which have underwritten them.
Accordingly, it is difficult to see that it will be different
with revenue bonds, in view of the facts that: (1)
many revenue bonds are of better quality than general
obligations; (2) under the bill banks may only underwrite revenue bonds which are eligible for investment,
i.e., revenue bonds meeting the standards of this Office;
and (3) the examination procedures which we have
established have not been shown to be deficient in
preventing the alleged possible abuses, and there is
no reason to believe that they will be so in the future.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Honorable WRIGHT PATMAN
Chairman, House Banking and Currency Committee
House of Representatives
Washington 25, D.C.
451
APPENDIX F
Selected Letters to the Presidents
of
National Banks
by
JAMES J. SAXON
Comptroller of the Currency
INDEX
Selected Letters to the Presidents of National Banks by James J. Saxon, Comptroller of the
Currency
Subject
Page
Advisory Committees to the Comptroller
Banking Services
Capital Improvements Loans
Centennial of the National Banking System
Certificates of Deposit
Collective Investment Funds
Comptroller's Office Procedures and Organization....
Corporate Practices and Procedures
Corporate Savings Accounts
Debt Cancellation Contracts
Direct Leasing
Federal Reserve Membership and Federal Reserve
Powers
455
457
458
459
460
461
464
468
471
475
476
454
477
Subject
International Operations
Lending Limits
Letters of Credit
Loans to Bank Officers
Political Contributions
Real Estate Loans
Relationships With Insurance Companies
Reporting Requirements
Repurchase Agreements
S. 1642
Service Charges
State Examination of National Banks
Underwriting Revenue Bonds
Page
477
479
481
481
482
482
490
490
492
493
502
503
503
ADVISORY COMMITTEES TO THE COMPTROLLER
FEBRUARY 1, 1962.
As I am certain you are aware, it is one of the vital
goals of our national economic policy to seek the best
and fullest use of our productive resources, and a
rate of balanced economic growth which realizes our
highest potential for advancing the national wellbeing. We cannot fully attain these aims unless our
commercial banking system responds promptly and
sensitively to the growing and changing needs of our
industry and commerce, and of our government.
This Office has responsibility for insuring the effective performance of our National Banks, and we have
decided to undertake a comprehensive study of the
functioning of our National Banking System. In
making this study, we should like to draw upon your
broad experience and thought. We are asking you,
as we are the head of each National Bank, to aid us
in identifying and appraising the shortcomings of
our National Banking System, and in developing measures to overcome them. Our inquiry will be centered
on those laws, policies, practices and procedures
which no longer serve, and indeed may obstruct, attainment of the requirements of today and of the
future.
It would be most helpful to us if you would submit to my Office any recommendations for change
which your knowledge and experience persuade you
are needed. We intend to cover in our inquiry all
existing applicable law, regulation, interpretative
opinion, policy, and procedure (including forms), and
we urge you to consider all of these matters in developing your recommendations. Solely as an illustrative
check list of problem areas, we suggest:
1. Articles and bylaws
2. Edge Act and Agreement Corporations
3. Regulations Q, including reserve required against
savings deposits
4. Lending powers
5. Investment powers
6. Borrowing powers
7. Capital-adequacy ratios
8. Authorized but unissued capital stock
9. Sec. 5219, relative to State taxation of national
banks
10. Revenue bond underwriting
11. Stock option plans
12. Proxy regulations
13. Preferred stock
14. Trust powers
15. Branch powers
16. Basic lending limits
17. Stock dividend policy and procedure
18. Notice, voting, and all other corporate procedural requirements relating to shareholders and directors
and the like under all applicable statutes
19. Mandatory membership of national banks in the
Federal Reserve System
20. Digest of opinions
In submitting your recommendations relating to
these suggested topics, will you please provide a separate statement for each title covered, indicating the
title and number and bearing your name. Other
topics should occur to you based on your experience,
and in these instances you should supply your own
titles with a separate submission for each additional
topic covered. Wherever feasible your recommendations should be accompanied by supporting factual
evidence or hypothetical illustrations, together with
an indication of the manner in which you believe your
proposals for change would meet the problems you
have encountered. Your recommendations should
be presented in writing, should be as specific as possible, and should be mailed to this Office not later than
March 15.
I am today establishing an Advisory Committee
consisting chiefly of National Bankers, under the
Chairmanship of Mr. Frank E. McKinney, to assist me
in examining and appraising the proposals which are
submitted. I have also included officers of two State
banks on the Committee so that we may explore more
fully the problems of our dual banking system, and
three attorneys whose specialized experience in banking law will be helpful to us. The Comptroller of
the Currency, the Chief Counsel of the Office, and
the Economist to the Comptroller each will serve as
an ex officio member of the Committee. The Chief of
Staff of the Senate Banking and Currency Committee,
and the Clerk and Chief Counsel of the House Banking and Currency Committee have been authorized to
participate as observers at sessions of the Advisory
Committee, and will be kept apprised of the progress
of the Committee's work.
The Committee shall serve as an independent advisory body to the Comptroller of the Currency, and
each nongovernmental member shall be asked to act
455
in his personal capacity without regard to his affiliation with any association or organization. Each
member of the Committee shall bear his own expenses.
The Committee shall meet in this Office or otherwise at
the call of the Chairman or of the Comptroller of
the Currency. It shall continue in existence until the
inquiry now begun is completed, when and as determined by the Comptroller of the Currency.
It is our hope, on the basis of the proposals submitted, and the work of the Advisory Committee, that
we shall be able to determine the modifications of
policy, procedure and practice which properly should
be made within administrative discretion, and those
which require the submission of recommendations for
legislative action by the Congress. This job done,
we shall seek the cooperation of the Congress in a
recodification of the National Bank Act.
We sincerely hope that the head of each National
Bank will give to the Advisory Committee and to this
Office the benefit of his intimate understanding of
the operation of our National Banking System, and
his views concerning the changes which are essential
to its most effective performance in the national
interest.
A list of the nongovernmental members of the Advisory Committee is attached.
Sincerely,
JAMES
Manuel Gale
President, The Peoples National
Bank of Keyport, Keyport,
Donald M. Graham
Vice Chairman, Board of Directors, Continental Illinois Natl.
Bank & Tr. Co., Chicago, 111.
Chairman, First National Bank
of Arizona, Phoenix, Ariz.
Senior Vice President, CrockerAnglo National Bank, San
Francisco, Calif.
President, First National Bank
& Trust Co. of Covington,
Ky.
Executive Vice President (Retired), Seattle First National
Bank, Seattle, Wash.
Law Firm of Dickinson, Wright,
McKean, & Cudlip, Detroit,
Mich.
Vice President, American National Bank of Austin, Austin,
Tex.
President, First National City
Bank, New York, N.Y.
Law Firm of Thompson, Mitchell, Douglas, & Neill, St.
Louis, Mo.
President, The First National
Exchange Bank of Roanoke,
Roanoke, Va.
Chairman and President, Kenosha National Bank, Kenosha,
Wis.
Vice President, Central National
Bank of Cleveland, Cleveland,
Ohio
President, Miami Beach First
National Bank, Miami Beach,
Fla.
Law Firm of Barnes, Dechert,
Price, Myers, & Rhoads Philadelphia, Pa.
NJ.
Sherman Hazeltine
Joseph F. Hogan
H. J. Humpert
Jay G. Larson
Robert E. McKean
Tom Miller, Jr
George S. Moore
Robert Neill
E. H. Ould
Edwin J. Reutz
Comptroller of the Currency.
John A. Seliskar
Nongovernmental Members of the Advisory Committee
Frank E. McKinney,
Chairman
Reed H. Albig
S. Clarke Beise
W. C. Blewster
H. W. Bourgeois
Frank M. Browning
Goodwin Chase
John D. Chisholm
Frank R. Denton
Chairman of the Board, American Fletcher Natl. Bank &
Trust Co., Indianapolis, Ind.
President, The National Bank
of McKeesport, McKeesport,
Pa.
President, Bank of America National Trust & Savings Association, San Francisco, Calif.
President, First National Bank
of Magnolia, Magnolia, Ark.
President, Union National Bank
of Lowell, Lowell, Mass.
President, Bank of Utah, Ogden, Utah, and Chairman,
Bank of Ben Lomond, Ogden,
Utah
Chairman and President, National Bank of Washington,
Tacoma, Wash.
President, Olmstead County
Bank & Trust Co., Rochester,
Minn.
Vice Chairman, Mellon National
Bank & Trust Company, Pittsburgh, Pa.
456
Frank Smathers, Jr
Carroll R. Wetzel
SEPTEMBER 6, 1962.
You will recall that on February 1, 1962,1 requested
your assistance in the initiation of a comprehensive
study of our National Banking System. We are
grateful for your response to that request. The report
of the study will soon be available. One of the
matters considered was a revision of the Digest of
Opinions of the Office of the Comptroller of the
Currency relating to the operations and powers of
National Banks.
We are ready now to begin a revision of the Digest.
We again ask you to aid us in compiling a new Digest
which, in both form and substance, will better serve
the National Banking System.
While earlier comments received on this topic were
very helpful many of them are not sufficiently specific
for our present purposes. We are interested at this
time, in identifying Digest paragraphs which you
believe unnecessarily hamper sound banking practices
and solicit your recommendations as to the manner in
which these and similar problems should be handled
in a Digest of Opinions to foster the growth of a
banking system which will meet the requirements of
today and the future. We should appreciate it if
you would submit a separate statement for each subject on which you make a recommendation. Each
separate statement should bear a subject title, the
Digest paragraph number to which it relates, if any,
and your name.
Since we hope to complete the revision of the Digest
before the end if the year, we would like to have your
recommendations mailed to this Office not later than
September 30, 1962.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
OCTOBER 30, 1962.
This Office has undertaken a comprehensive study
of the Investment Securities Regulation of the Comptroller of the Currency, found in Title 12, of the Code
of Federal Regulations, Chapter I, Part I. A committee of state and national bank officers from various
regions of the country, who are known for their skill
and long experience in this area, is assisting this
Office in that study. In order that we may give
proper consideration to all aspects of the subject,
we are herewith soliciting your views in the matter.
We would appreciate the early receipt of such comments, which should be labeled "Investment Securities
Regulation" and forwarded to this Office, in order
that we may give them our prompt and thorough
consideration.
JAMES J. SAXON,
Comptroller of the Currency.
BANKING SERVICES
JANUARY 10, 1963.
This is in reply to your letter of December 4, 1962,
concerning our recent letter to all National Banks
relating to Public Law 87-856.
You state that your bank is installing a computer
and is contemplating performing bank services for
other banks. You ask whether we would object to
your so doing. As long as the computer was acquired
by your bank for the primary purpose of performing
services for it, we do not object to your making available the unused equipment time by offering such
services to other banks at a fee. However, if the
banks for which you intend to perform these services
are state member banks or state nonmember insured
banks, it will be necessary that you furnish a letter
to either the Federal Reserve Board or the Federal
Deposit Insurance Corporation respectively in each
case, giving assurances that the performance of these
services shall be subject to their regulation and examination, as required by Public Law 87-856.
As you know, the Act provides:
No bank subject to examination by a Federal supervisory
agency may cause to be performed, by contract or otherwise,
any bank services for itself, whether on or off its premises,
unless assurances satisfactory to the agency prescribed in
subsection (b) of this section are furnished to such agency
by both the bank and the party performing such services that
the performance thereof will be subject to regulation and
examination by such agency to the same extent as if such
services were being performed by the bank itself on its own
premises.
Because of provisions such as this, we opposed this
bill when it was before Congress. It was our position
that such assurances were not needed. However, the
other supervisory agencies insisted that these assurances were necessary to enable them to examine the
performance of bank services for state member and
nonmember insured banks, and the Act was passed
with this provision.
As a result of your letter, we have made informal
inquiry of the Board of Governors of the Federal
Reserve System and the Federal Deposit Insurance
Corporation as to whether they believe that the assurances called for in the. statute—indeed, the examination and regulation itself—would be insisted upon in
the instances where a National Bank is performing
bank services for State member and nonmember
insured banks. In both cases the response was that
they believed that such assurances should be furnished
them, and that examination and regulation of such
National Banks by them might likewise be necessary.
This, we believe, is giving the statute a strictly
literal reading that is totally without regard to the
general intent of the legislation, or the purposes for
which the inclusion of this section was recommended.
Although the same reasoning could support our examination and regulation of State member and nonmember insured banks which perform services for
National Banks, we of course would not so contend.
457
In conclusion, we believe that this situation highlights the need for revision of Public Law 87-856 at
the next Congress.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
of income. We consider the sale of accident insurance for trips, in connection with the sale of travelers
checks, to be a service which may properly be offered
by National Banks. Resulting premiums or commissions may be retained by the bank.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
FEBRUARY 27,
1963.
Reference is made to your letter of January 30,
1963, wherein you inquire as to whether there has been
any recent directive from this Office with respect to
advertising a bank's travel department. Your inquiry is prompted by an observance of increased efforts and expenditures by banks throughout the
country as regards such advertising.
The most recent advice by this Office to National
Banks generally on this subject is contained in Paragraph 9700 of the Digest of Opinions which is a copy
of a letter from the immediate past Comptroller of
the Currency to the Counsel for the American Society
of Travel Agents. As stated in that letter, National
Banks may, as an incidental power, provide travel
services for their customers and they may have the
reasonable rights and benefits that flow therefrom.
It is the opinion of this office that a National Bank
operating a travel department may advertise, develop
and extend the services which it performs not only
in the interest of furnishing its existing customers with
a full range of appropriate services but also for the
purpose of attracting new customers to the travel
department and to the other departments of the bank.
Sincerely,
MARCH 12,
1964.
During a recent visit to this Office you asked two
questions concerning the operation of a bank service
corporation. The first question was whether a bank
service corporation can be owned by both banks and
individuals. Your second question was whether the
corporation can, on behalf of a bank, service the payroll accounts of a bank customer.
There is nothing in the Bank Service Corporation
Act nor in the legislative history of that Act which
would preclude banks from sharing in the ownership
of the corporation with individuals or with corporations other than banks.
A bank service corporation is restricted to the performance of bank services for banks (12 U.S.C. 1864).
Bank services, however, include any service which a
bank would ordinarily perform for a customer.
Accordingly if a bank undertakes to handle the payroll accounts of a customer, a bank service corporation may perform for the bank the service necessary
to enable the bank to fulfill its undertaking.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
JAMES J. SAXON,
Comptroller of the Currency.
APRIL 30,
1963.
Your letter of April 9, 1963, to Regional Chief
National Bank Examiner W. A. Robson has been
referred to this Office for reply.
You advise that your bank is considering offering
its customers accident insurance for trips at the time
such customers purchase travelers checks at your
bank. You request our opinion as to whether National Banks can provide this service and retain the
premiums charged therefor.
By letter of February 18, 1963, this Office advised
the Presidents of all National Banks that the retention
of commissions or premiums received by the bank in
connection with the issuance of insurance to customers as an incidental service was a legitimate source
458
CAPITAL IMPROVEMENTS LOANS
APRIL 29,
1963.
Your letter of March 8, 1963, has reference to the
fifth paragraph of 12 U.S.C. 371 and inquires as to
whether the proceeds of loans made thereunder must
be used only for working capital purposes or whether
such loans may be used for capital improvements or
other uses in connection with the operation of a manufacturing or industrial business.
Loans made to manufacturing and industrial businesses in accordance with the fifth paragraph of Section 371 may be used for any general business purpose, including capital improvements.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
CENTENNIAL OF THE NATIONAL
BANKING SYSTEM
FEBRUARY 25, 1963.
The date of this weekly Bulletin coincides with a
most important day in the history of American Banking, the 100th Anniversary of the establishment of the
National Banking System. On February 25, 1863,
President Abraham Lincoln approved the National
Currency Act which established our system of tederally-chartered National Banks. That same Act
established the Office of the Comptroller of the
Currency.
Attached is a copy of the Centennial Proclamation
which President Kennedy issued today, in which he
cited the national banking system for its contribution
to the economic, social, and cultural lives of the people
of this Nation. Earlier today, in his appearance at
the Symposium on Economic Growth, the President
opened his remarks with this significant statement:
"One hundred years ago today—in the darkest days of
domestic crisis this Nation has ever known—the National Banking System was born. It was a far-sighted
act, laying the basis for a sound and prosperous system
of private credit which has served this Nation well."
We salute all National Banks, and extend our special
congratulations to the 51 National Banks which will
be observing their 100th Anniversary during 1963.
Attached is a list of these banks which were chartered
in 1863. There are other National Banks which had
their beginning 100 years ago in the National Banking System but, because of mergers and consolidations,
they are not operating under the original charters
which they received in 1863. We also extend our
congratulations to them.
Secretary of the Treasury Dillon and I thank the
shareholders, directors, and all officers and staff members of National Banks for their contributions to the
progress of the National Banking System. The Centennial affords an excellent opportunity to view with
pride the strength of the National Banking System.
We are certain that National Banks will continue to
contribute substantially to the future growth and development of the economy of our country consistent
with the changing needs of the public, industry, agriculture, and commerce.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
CENTENNIAL OF THE COMMERCIAL BANKING
SYSTEM
By the President of the United States of America
A Proclamation
WHEREAS the year 1963 marks the centennial of the
approval by President Abraham Lincoln of the Act of
February 25, 1863, which provided for the establishment
of a system of national banks chartered and supervised by
the Comptroller of the Currency, under the general direction of the Secretary of the Treasury; and
WHEREAS the national banks and the State-chartered
banks comprise a dual banking system which has beneficially
served the public interest, provided credit and other
financial assistance necessary for the economic growth of
the United States, and played a leading role in keeping
our economy competitive and vital; and
WHEREAS commercial banking, both Federal and State,
has made great contributions to the Nation in times of
crisis and continues to serve the Nation daily; and
WHEREAS the national banks and the State-chartered
banks anticipate continued opportunities to contribute to
the future growth and development of the economy of our
country consistent with the changing needs of the public,
industry, agriculture, and commerce:
Now, THEREFORE, I, JOHN F. KENNEDY, President of the
United States of America, do hereby designate the year 1963
as the Centennial of the Commercial Banking System; and
I request the people of the United States to join with
Federal and State authorities and representatives of the
banking industry in activities and ceremonies designed to
pay tribute to the contribution which commercial banking
has made to the economic, social, and cultural lives of the
people of this Nation.
IN WITNESS WHEREOF, I have hereunto set my hand and
caused the Seal of the United States of America to be
affixed.
DONE at the City of Washington this twenty-fifth day of
February in the year of our Lord nineteen hundred
[SEAL] and sixty-three, and of the Independence of the
United States of America the one hundred and
eighty-seventh.
JOHN F. KENNEDY
By the President:
DEAN RUSK,
Secretary of State.
FEBRUARY 25,
1963
NATIONAL BANKS CHARTERED IN 1863 AND OPERATING IN 1963 UNDER THEIR ORIGINAL
CHARTERS
Name of Bank
Charter No.
The First New Haven National Bank, New Haven,
Conn
2
The State National Bank of Connecticut, Stamford,
Conn
4
The First National Bank of Chicago, Chicago, 111
8
The Third National Bank and Trust Company of Dayton, Ohio, Dayton, Ohio
10
The First National Bank of Erie, Erie, Pa
12
459
Name of Bank
Charter
The First National Bank of Richmond, Richmond,
Ind
The First National Bank of Portsmouth, Portsmouth,
N.H
The First National Bank of Cincinnati, Cincinnati,
Ohio
The First National Bank of Marietta, Marietta, Pa__
The First National Bank of Wilkes-Barre, Wilkes-Barre,
Pa
First-Grange National Bank of Huntingdon, Huntingdon, Pa
The Fishkill National Bank, Beacon, N.Y
The First National Bank of Findlay, Findlay, Ohio__
The First National Bank of Towanda, Towanda, Pa
The First National Bank of Strasburg, Strasburg, Pa__
The First National Bank of Salem, Salem, Ohio
The First National Bank and Trust Company of Ellenville, Ellenville, N.Y
The First National Bank of McConnelsville, McConnelsville, Ohio
Terre Haute First National Bank, Terre Haute, Ind__
The First National Bank and Trust Company of Hamilton, Hamilton, Ohio
The First National Bank of Newville, Newville, Pa
First Wisconsin National Bank of Milwaukee, Milwaukee, Wis
First National Bank of Canton, Canton, Ohio
Northeastern Pennsylvania National Bank & Trust
Company, Scranton, Pa
The First National Bank of Janesville, Janesville, Wis_
The First National Bank of Germantown, Germantown, Ohio
The First Citizens National Bank of Upper Sandusky,
Upper Sandusky, OhioThe First National Bank of Hudson, Hudson, Wis
The First National Bank of Ironton, Ironton, Ohio__
The First National Bank of Moravia, Moravia, N.Y
The First National Bank of Cadiz, Cadiz, Ohio
First National Lincoln Bank of Louisville, Louisville,
Ky
The First National Bank of Madison, Madison, Ind—
The First National Bank of Danville, Danville, 111
The First National Bank of Marion, Marion, Iowa
The First National Bank of Circleville, Circleville,
Ohio
First National Bank of Springfield, Springfield, Vt
The First National Bank of Chillicothe, Chillicothe,
Ohio
The First National Bank of Gallipolis, Gallipolis, Ohio
The First National Bank and Trust Company of Bethlehem, Bethlehem, Pa
The First National Bank of Madison, Madison, Wis—
The First National Bank of West Chester, West
Chester, Pa
The First National Bank of Danville, Danville, Ind—
The First National Bank of Fort Atkinson, Fort Atkinson, Wis
The First National Bank of Zanesville, Zanesville,
Ohio
First National Bank in St. Louis, St. Louis, Mo
460
No.
17
19
24
25
Name of Bank
Charter
The Second National Bank of Circleville, Circleville,
Ohio
The First National Bank of Williamsport, Williamsport, Pa
The First National Bank of Peoria, Peoria, 111
The First National Bank of Wilmington, Wilmington,
111
First National Bank of Columbus, Columbus, Wis
No.
172
175
176
177
178
30
31
35
36
39
42
43
45
46
47
56
60
64
76
77
83
86
95
98
99
100
109
111
113
117
118
122
128
136
138
144
148
152
157
164
170
CERTIFICATES OF DEPOSIT
MAY 23, 1962.
A number of legal and policy questions have arisen
recently as a result of the increased use of negotiable
certificates of deposit. The following are the positions
the office has taken to date on these questions:
Question: May a national bank purchase a
certificate of deposit issued by another bank?
Answer: Yes. There is no law or regulation
forbidding the deposit of a bank's funds in another
bank. The provisions of Section 463 of Title 12,
U.S. Code, must be observed; i.e., a member bank
may not deposit a sum in excess of 10% of its
capital and surplus with a non-member bank.
Question: May a national bank purchase a negotiable certificate of deposit from a holder other
than the issuing bank?
Answer: Yes. If the issuing bank is a nonmember bank, the restriction of Section 463, Title
12, U.S. Code, applies.
Question: How are funds invested in certificates of deposit to be shown on call reports?
Answer: In Schedule D, Item 3, "other balances with banks in the United States."
Question: Are there any limitations on the
amount which a national bank may place on
deposit in the form of a certificate of deposit in
another bank?
Answer: There are no legal restrictions on the
amount that a national bank may place on deposit in the form of a certificate of deposit in a
member bank. As a matter of sound banking
policy, however, careful consideration should be
given to the purchasing bank's liquidity at all
times and to the negotiability and ready marketability of the certificates held.
JAMES J. SAXON,
Comptroller of the Currency.
COLLECTIVE INVESTMENT FUNDS
APRIL 8,
1963.
Your letter of March 8, 1963, in regard to collective
investment under Regulation 9 has been received.
The insurance policy as proposed offers as one alternative, an agreement to invest dividends in a collective investment fund. Such an agreement would be
prohibited by the provisions of section 9.18 (b) (13)
of Regulation 9. The most which could be done in
this direction would be to offer as the alternative to
leaving dividends with the company, the opening of
a managing agency account with your bank. However, there can be no agreement, either express or
implied, that the funds of that account will be invested in a collective investment fund, without violation of Regulation 9.
The proposed advertising practices would also violate Regulation 9. The bank may not advertise its
collective investment funds, except that incidental
mention of them may be made as a part of advertisements of the fiduciary services generally being offered
by your bank. A copy of the Plan for each collective investment fund, and its financial report, must
be supplied to all who ask for them, and the fact of
the availability of these may be published as a part
of the permissible trust department advertisement outlined above. However, no predictions of any kind
and no comparisons of any nature may be made in
any event, either in trust department advertisements,
in the Plan of a collective investment fund, or in the
financial report of such a fund.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Attached is a copy of the memorandum referred to
in the article which appeared in the Wall Street
Journal of March 13, 1963. It is not intended to represent a memorandum of law on the subject, but
rather constitutes the statement of our policy and beliefs in this area. It is felt necessary that these
matters be made known in view of the fact that the
controversy in this area had been made public.
* * *
This Office has received a copy of a letter from
Mr. William L. Cary, Chairman of the Securities and
Exchange Commission, to Mr. Reese Harris of Manufacturers Hanover Trust Company suggesting that
there be arranged a meeting of the members of the
Technical Advisory Committee to the Comptroller
of the Currency on Regulation 9 and representatives
of the Commission, in view of the asserted applicability of the Securities Act of 1933 and the Investment Company Act of 1940 to collective investment
funds authorized by the proposed revision of the Regulation. This letter has been released to the press by the
Commission.
Mr. Cary's letter sets forth as established legal
principles several points which, to say the least, are
very unsettled, and as to which our own analysis would
indicate an opposite conclusion. It appears to us that
neither the Securities Act of 1933 nor the Investment
Company Act of 1940 is, or should be, applicable to
the proposed collective investment funds. The fact
that these matters are unsettled is recognized by the
Commission, inasmuch as it has recognized that litigation would be likely to result from an assertion by them
of jurisdiction in the common trust fund area.
With the aid of the technical assistance of our Committee as regards matters of procedure and organization, we have, after careful study and analysis,
proposed a revision of the trust regulations affecting
National Banks which would permit a broadening of
bank activities in the field of collective investment of
fiduciary accounts, couched with disclosure requirements embodying all of the protection offered by the
SEC laws, in addition to the intensive and constant
regulation to which banks are subject, which is not
afforded by SEC laws.
The proposed revision would permit three types of
collective investments of fiduciary accounts by National Banks. Thefirsttype is for the collective investment of funds contributed by the bank in its capacity
of trustee, executor, administrator or guardian. This
is the basic common trust fund which has existed
for years. The second type is for the collective investment of funds of qualified profit sharing and pension plan trusts, a bank activity permitted for years,
and now including funds of trusts established under
the recently enacted Smathers-Keogh bill. The third
type is for the collective investment of managing
agency accounts. The acceptance and investment
of such accounts singly has been a bank fiduciary
activity ever since banks were accorded trust powers. All that is now proposed as to these accounts
is their collective investment. Contrary to the case
in the mutual fund industry, the bank customer in
either his capacity of beneficiary or principal does
not receive a certificate indicating an interest in a
pooled fund. In the case of the first and second types
of collective investments funds, the individual whom
461
the SEC would like to call the "investor" is merely a
beneficiary of a trust, the funds of which may or may
not be invested in the common trust fund operated
at the bank. The decision whether or not to invest
the funds of the trust of which the "investor" is a
beneficiary in the common trust fund rests with the
bank as trustee. Similarly, in the case of the third
type of investment fund, where the "investor" stands
in the relationship of principal and the bank, of agent,
the decision to invest the funds which the principal
has left with the bank in units of a common trust fund
rests with the bank, and no certificate of participation
in such fund is ever issued to the principal. As a
practical matter, most managing agency accounts of
small amounts would be invested in a collective investment fund by the bank because that would be the only
way such amounts could profitably be invested. There
would be no agreement to do so, however.
The purpose of the meeting suggested by Mr. Cary
with members of the Committee is to confer as to the
provisions of a so-called "short form" of registration
for commingled funds of the second proposed type
which contain investments of trusts qualifying under
the Smathers-Keogh bill, and to discuss the problems
which banks would encounter in having collective investment funds comply with the 1933 and 1940 Acts.
This letter therefore is but the latest of a series of attempts on the part of the Commission to persuade the
banking industry to subject itself to SEC laws.
Late last year, public statements were made by an
official of the SEC indicating that it was of the opinion
that commingled funds of the Smathers-Keogh trusts
were within the purview of the Securities Act of 1933.
Inasmuch as this was contrary to our own analysis of
that Act and if true could easily thwart the Congressional purpose in enacting the Smathers-Keogh
bill, this Office made prompt inquiry of the Commission. We were assured by Mr. Cary that this person's statement did not necessarily represent their
views. It was suggested that a meeting with him and
members of his staff be arranged further to discuss
this subject. At this meeting it developed that the
statements indeed represented the Commission's viewpoint and that the only points they were willing to discuss were the means by which this Office could join
them in imposing their interpretations upon the
banking industry.
We did not feel this to be a proper course for a bank
regulatory authority under the circumstances. The
purported applicability of the Securities laws to the
various types of collective investment funds had been
examined by us with the conclusion that, to say the
462
very least, there was serious doubt as to the issue. It
appeared to us that the variable annuity positions taken
by the SEC could well be exceeding the logic of the
decision of the Supreme Court in the Valic case.
Further, there clearly is no determinative analogy
which may be made between the question of whether
a variable annuity constituted the business of insurance
and the question of what constitutes the business of
banking, which was clearly not meant to come within
the SEC laws. In view of the highly burdensome impact which the application of these laws, so clearly
designed for entirely dissimilar entities than common
trust funds, would entail, we felt that we could neither
accede to Mr. Cary's request, nor so direct the course
of our revison of the Trust Regulation so as to preclude, prejudice or delay the action of the members of
the industry who might question the legality of SEC
jurisdiction and not be disposed to a voluntary submission to the Commission. Indeed, it was made clear
to us that no matter what restrictions we might impose
by our own regulations, the SEC was determined to
assert its jurisdiction in this area. Accordingly, it appeared highly desirable to us, as it does today, that a
prompt judicial determination of this question be
made.
Upon our publication of the proposed revision of
Regulation 9, we solicited the comments of the Commission. No response was received; instead, Mr. Cary
approached our superiors, once again asserting as fact
the Commission's interpretations of the laws in this
area, stating that the actions of banks under our proposed revision could lead to litigation which the Commission would prefer to avoid, and soliciting their
intervention. In every instance Mr. Cary was unsuccessful. It is with matters in this posture that Mr.
Cary now approaches the Technical Advisory Committee to the Comptroller of the Currency, and asks
them under threat to lead their industry into voluntary
submission.
While Commission representatives now speak in
terms of "short form" registrations, they have conceded
to us that such funds would continually require "updating." They could give no firm assurance that the
exercise of visitorial powers in pursuance of their
claimed authority should be eschewed; indeed, they
have stated that they have no authority under their
statutes to agree to waive any of the whole range of
regulatory requirements which they impose. Parenthetically, this Office would have grave doubts whether
we would permit entry or any other form of exercise of
visitorial powers by the SEC in regard to National
Banks. It is no secret that the aspirations of the Com-
mission reach far beyond the immediate area of dispute and that broader issues are involved here than the
purported facile accommodations of their statutes to
the common trust fund area. It has been made known
that the Commission is desirous of subjecting the banking industry to their authority in a variety of areas, for
example, the trading in bank stock, proxy rules for
banks—in short the entire corporate banking structure.
Every time Congress has had the occasion, it has expressed the conclusion that the activities of banks were
to be free of the applicability of the SEC laws. Exempted from the Securities Act of 1933 were the securities of banks. Exempted from the definition of
"investment company" in the Act of 1940 were both
banks and common trust funds or similar funds maintained by banks exclusively for the collective investment and reinvestment of monies contributed thereto
by banks in their capacity as trustee, executor, administrator or guardian. This exempted from the application of these laws the full extent of existing bank
activity in this area. Indeed one needs to do no more
than read the language of the Investment Company
Act to see how fallacious would be any assertion of the
applicability of the provisions of that Act to collective
investment funds of the first two types. When one
further considers that there is no real distinction between the capacity of bank as managing agent and
those of trustee, executor, administrator or guardian,
it becomes clear that this is a "similar fund" also exempted from the Investment Company Act of 1940.
Similarly, it is apparent from the foregoing that any
certificate of participation in a common trust fund
would be issued by the bank as trustee to itself as
trustee or agent. Hence, that certificate in no way may
be considered a security issued by a party other than
the bank. The reason for these exemptions of bank
activity is clear. Blanking is significantly different in
its structure, organization and operations from investment companies and is extensively regulated by a proliferation of agencies. To superimpose the structure
of SEC laws would merely add duplication and the imposition of the requirements clearly inappropriate to
bank fiduciary activity, with the result that the participation of banks in this area would be severely
circumscribed, if not stifled.
It is for these reasons that we regard the actions of
the Commission as extremely unfortunate, as we would
also regard the voluntary submission by the banks to
the SEC laws. We would hope that these matters
would be resolved speedily through appropriate judicial proceedings, in which we would expect to inter-
vene, in view of the vital importance of the question to
the banking industry.
JAMES J. SAXON,
Comptroller of the Currency.
FEBRUARY 5,
1964.
Comptroller of the Currency James J. Saxon today
announced the issuance by the Internal Revenue Service of a tax ruling permitting the collective investment of certain managing agency accounts by banks.
Mr. Saxon emphasized that the ruling applies only
to certain accounts which qualify as managing agency
under Regulation 9, and stated that the Regulation
was being amended so as to reflect this fact. In order
to qualify for collective investment, the managing
agency contract must at some point in the text provide that the monies held by the bank are received
by it "in trust." However, all other sections of Regulation 9 apply to all managing agency accounts
whether or not they have this provision. For example, the pledge to secure trust funds and deposits in
the commercial department of a National Bank must
be made for funds deposited of all accounts which
qualify as managing agencies under Regulation 9.
The change made in the Regulation to correspond
with the tax ruling appears in subparagraph (3) of
paragraph (a) of section 9.18. In order for a managing agency contract to comply with this provision,
its language must recite that the monies of the account are received by the bank "in trust." When
these words appear in a managing agency contract,
it may be collectively invested in a fund for such accounts, and the fund will receive tax treatment under
section 584 of the Internal Revenue Code.
In addition, Mr. Saxon announced a clarifying
amendment in Regulation 9 of the definition of managing agent. Mr. Saxon emphasized this redefinition makes no substantive change but merely more
clearly expresses what was covered in the prior definition. Subparagraph (3) of paragraph (c) of
section 9.18 was also amended.
For your information, the amendments to Regulation 9 are attached. A revised Regulation 9 will be
forwarded to you in the near future reflecting these
changes.
A. J. FAULSTICH,
Administrative Assistant to the
Comptroller of the Currency.
Part 9, Chapter I, Title 12, of the Code of Federal Regulations of the United States of America is amended by
revising paragraph (g) of section 9.1, subparagraph (3) of
463
paragraph (a), and subparagraph (3) of paragraph (c) of
section 9.18 to read as follows:
§ 9.1 Definitions
*
*
•
*
•
(g) "Managing agent" means the fiduciary relationship
assumed by a bank upon the creation of an account so
entitled which confers investment discretion on the bank
and imposes upon it the fiduciary responsibilities imposed
upon trustees under will or deed;
*
*
*
*
*
§ 9.18 Collective investment
(a) * * *
(3) In a common trust fund, maintained by the bank
exclusively for the collective investment and reinvestment
of monies contributed thereto by the bank in its capacity
as managing agent under a managing agency agreement expressly providing that such monies are received by the bank
in trust;
*
*
*
*
*
(c) * * *
(3) In a common trust fund maintained by the bank for
the collective investment of cash balances received or held
by a bank in its capacity as trustee, executor, administrator
or guardian, which the bank considers to be individually
too small to be invested separately to advantage, and the
total investment in which on the part of any one account
does not exceed $10,000: Provided, That in applying this
limitation if two or more accounts are created by the same
person or persons and as much as one-half of the income or
principal of each account is payable or applicable to the use
of the same person or persons, such account shall be considered as one; And provided, That no fund shall be established
or operated under this subparagraph for the purpose of
avoiding the provisions of paragraph (b) of this section.
The expenses incurred in the administration and
operation of a collective investment fund have been
the subject of inquiry. In order properly to conform
to the requirements of Section 9.18 of Regulation 9,
and the rules and regulations of this Office, the following will establish the proper handling of all such expenses in the future.
Expenses may be charged to (1) the principal or
income account for the reasonable cost of audit performed by independent public accountants, but shall
not include the cost of audit by auditors of the bank;
(2) the income account if a charge is made for the
reasonable expense incurred in servicing mortgages
held in a collective investment fund; (3) the principal
or income account whichever is applicable, for all costs,
commissions, taxes, transfer taxes, legal fees and other
expenses associated with the purchase or sale of assets
of a collective investment fund; and (4) the principal
and income account whichever is applicable, for a
management fee: provided that when such fees are
taken from the fund the proportionate amount of the
fee charged to the fund and the fee charged to the
participating trusts, if any, should not exceed the com464
pensation permitted in such participating accounts if
they were not invested in the collective investment
fund.
Expenses that may not be charged against the fund
but shall be absorbed by the bank are (1) the cost of
establishing or reorganizing a collective investment
fund; (2) the cost of printing, publishing and distributing the full financial report and the publication
of the summarized financial report; and (3) except
as provided in the foregoing paragraph, all other costs
incurred in the operation and administration of a
collective investment fund.
JAMES J. SAXON,
Comptroller of the Currency.
COMPTROLLER'S OFFICE PROCEDURES
AND ORGANIZATION
JANUARY 18,
1962.
Commencing immediately, all applications with
respect to all of the following proposals should initially
be submitted to the office of the appropriate District
Chief National Bank Examiner, and not directly to the
Washington Office:
1. Establishment of new branches or of drive-in facilities.
2. Relocation of branches or of main office.
3. All capital revision programs by payment of capital stock
dividends, sale of new shares, and/or combination of both,
and reductions of capital stock.
4. Direct or indirect investments in banking premises when
the contemplated investment exceeds the amount of the
capital stock of the bank, requiring specific approval in accordance with the provisions of Title 12, U.S.C., Section
371d.
In addition to the foregoing, we are also amending
office procedures to require that all applications to
establish new national banks will be submitted to the
office of the appropriate District Chief National Bank
Examiner.
These procedural changes are designed to provide
more expeditious action by this Office on all such
applications.
JAMES J. SAXON,
Comptroller of the Currency.
MARCH 7, 1962.
To all National Banks:
Commencing immediately, all applications for permission to change the corporate title of national banks
should be submitted to the office of the appropriate
District Chief National Bank Examiner and not to the
Washington Office. All District Chief National Bank
Examiners have been furnished a supply of forms to be
used in applying for change in title, which will be made
available to you upon request. This procedural
change is designed to provide more expeditious action
by this Office on all such applications.
JAMES J. SAXON,
Comptroller of the Currency.
MARCH 7,
1962.
Commencing immediately, all requests for rulings
relative to the eligibility for purchase by national banks
of investment securities should initially be submitted
directly to the office of the appropriate District Chief
National Bank Examiner and not to the Washington
Office.
This procedural change is designed to provide more
expeditious action by this Office on all such requests.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
JULY 23,
1962.
Comptroller of the Currency James J. Saxon announced on May 3, 1962, a reorganization of national
bank examination offices, effective August 1, 1962.
Instead of having 12 district offices on and after August 1, the Comptroller's Office will have 14 regional
offices. As shown on the map which accompanied
the Comptroller's announcement, the regional offices
will follow State boundaries, eliminating situations
where parts of the same State are now in different
districts.
A. J. FAULSTIGH,
Administrative Assistant to the
Comptroller of the Currency.
JUNE 6,
1963.
We announce herewith the publication of the
Comptroller's Manual, containing an up-to-date compilation of Laws, Regulations and Rulings applicable
to National Banks.
It has taken months to prepare this Manual, and in
the performance of this task we have had a great number of most helpful suggestions from National Banks
throughout the country and other representatives of
the industry.
This Manual, which constitutes a long-overdue revision of the former Digest of Opinions, is the initial
step in the creation of a living document which we
shall endeavor to keep alive and responsive to cur-
rent developments in the banking environment. In
our continuing effort to adapt the Manual to emerging
new practices and problems, we solicit the thoughts
and suggestions of those who may be affected.
We intend to supplement all sections of the Manual,
particularly the Rulings section, as circumstances require. A key-word index is now being prepared and
will be distributed within a few weeks.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
JULY 12,
1963.
This Office has now completed the preparation of
its Manual of Instructions for Representatives in
Trusts, containing a compilation of applicable laws,
regulations, instructions to examiners and opinions
pertaining to the operation of National Bank Trust
Departments, including a section pertaining to collective investment funds.
This constitutes a long overdue revision of the Manual, which was last published in 1938. It also complements the revision of the trust regulations affecting
National Banks which began with the publication of
the revised Regulation 9. Pursuant to our supervisory responsibilities in regard to National Banks, we
have prepared this Manual in an effort to provide to
banks and examiners alike an up-to-date handbook
covering the direction and scope of Trust Department
examinations. As such, it represents an authoritative
interpretation of Regulation 9.
This Manual, like the recent revision of Regulation 9, is the result of long hours of intensive preparation by this Office with the asssistance of both State
and National Banks. We intend to provide up-todate supplements for all sections of the Manual and
particularly the rulings section.
JAMES J. SAXON,
Comptroller of the Currency.
MARCH 27,
1964.
Effective hereafter, certificates of final approval of
increases in capital by way of stock dividend or sales
of additional common stock for cash will be issued
from the office of the Regional Comptroller of the
Currency instead of from the Washington office.
Under present procedure the Regional Comptrollers
have the authority to issue preliminary approval of
such capital increases, so this further change appears
desirable and should result in further efficiency and
speed in handling of such applications.
465
For your information, there is enclosed a copy of
the instructions which have been issued to the Regional
offices containing a review of the steps which must be
taken before approval of such applications.
Other than the change in the handling of the final
certificates of approval, all other previous regulations
and instructions in regard to stock dividends and cash
sales of common stock remain in effect. Applications
for approval of preferred stock, capital debentures,
authorized but unissued stock and stock option plans
should still be addressed to the Washington office.
JAMES J. SAXON,
Comptroller of the Currency.
MARCH 27,
1964.
1. Effective immediately Regional Comptrollers
will handle capital increases by way of stock dividend
and sale of common stock for cash from inception to
conclusion. Preliminary approval letters to banks
from Regional Comptrollers should indicate this fact
and instruct banks to return completed Secretary's
Certificates and Form 6-C or 7-SD to the Regional
Comptroller.
2. The only substantial change involved in existing
procedure is that the Comptroller's Certificate of final
approval will be issued from the Regional Office instead of the Washington Office. All other previous
instructions, including the instruction that applications which the Regional Comptroller is inclined to
disapprove must be referred to Washington, are still
in effect.
3. Regional Comptrollers are requested to transmit
to the Washington Office, attention Organization Division, the following papers at the time each final certificate of approval is issued:
A. One copy of executed Secretary's Certificate together
with two copies of executed Form 7-SD and/or 6-G.
B. One copy of Comptroller's Certificate of final approval.
4. For your information the following is a review
of the steps which must be taken in connection with
each stock dividend and stock sale for cash:
A. Bank submits a written application on Form 1904
accompanied by a certified copy of resolution of the Board
of Directors.
B. Regional Comptroller advises bank of preliminary approval and requests bank to forward to Regional Comptroller
Secretary's Certificate in duplicate (certifying to requisite
shareholder approval) and Form 7-SD or 6-C in duplicate.
Bank is requested in this letter to advise Regional Comptroller as to date it wishes capital increase to be effective. Final
certificate should show this date and will be sent to bank in
most cases upon receipt by Regional Comptroller of the
466
Secretary's Certificate and Form 7-SD or 6-C. (See paragraph B above) The Regional Comptroller in his discretion, however, may release final certificate to the bank prior
to receipt of the Secretary's Certificate and Form 6-C of
7-SD in cases where the bank requests such release and the
Regional Comptroller is satisfied that he will receive the
Secretary's Certificate and Form 6-G or 7-SD in due course.
C. Items listed in paragraph three above are forwarded to
the Washington Office.
D. Unusual questions or legal problems should be taken
up with the Washington Office. Applications and inquiries
concerning preferred stock, capital debentures, authorized
but unissued stock or stock option plans should be referred
to Washington. Applications for approval of the issuance
for cash of shares out of authorized but unissued stock which
has previously been approved by shareholders and Washington, should be processed by the Regional Comptroller in the
same manner as any cash sale.
JAMES J. SAXON,
Comptroller of the Currency.
APRIL 29, 1964.
Effective immediately, Regional Comptrollers of the
Currency will process and decide applications for prior
approval by this Office of proposed investments in bank
premises in excess of the amount of total capital stock
pursuant to 12 U.S.C. 371d. This change is designed
to bring about increased procedural efficiency and
better administrative process.
Unless there are unusual or special circumstances
connected with an application, the bank should receive
a definitive answer to its request for approval within
10 days after receipt by the Regional Comptroller.
Applications which the Regional Comptroller is inclined to disapprove or concerning which he has serious
doubt should be forwarded to Washington for final
decision.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
MAY 12, 1964.
The attached, a copy of a letter from Mr. Webster
P. Maxson of the Department of Justice to the Editor
of the American Banker, is for your information.
Following the publication of the article to which Mr.
Maxson refers, this Office received inquiries from
many banks. And, since the American Banker has
declined to publish the Justice Department's protest,
we take this means of bringing it to your attention.
W. ROBERT GRUBB,
Special Assistant to the
Comptroller of the Currency.
APRIL 24,
1964.
Mr. MILLARD G. RAPPLEYE
Editor "The American Banker" Newspaper,
Albee Building, Washington, D.C.
DEAR MR. RAPPLEYE:
This letter is to protest vigorously your April 22,
page one article in which it is reported that on Tuesday I "disclosed" a U.S. Justice Department "investigation" of Comptroller of the Currency James J.
Saxon.
The article's lead states that the Justice Department
believes a serious violation of Federal law is involved.
There is attributed to me the statement that "it looks
now like the Comptroller has seriously violated the
Administrative Procedure Act. But we'll know for
sure as soon as our investigation is completed." The
clear inference of the article is that the Justice Department is informed in this matter, that it has formulated
a belief that a serious violation of Federal law is involved, that it is conducting a probe of at least two or
three weeks' duration to determine whether Mr. Saxon
has broken the law, and that, if so, the Department will
take strong action under its responsibility for seeing
that Federal agencies adhere to the Act, perhaps even
taking the matter to the President if no corrective steps
are forthcoming from the Comptroller.
The quotation ascribed to me bears no resemblance
to any statement I have made at any time. Beyond
that, it is inconceivable that this story could be devised
from my response to Mr. Michael Benson's telephone
inquiry of last Monday. Mr. Benson asked whether
the Comptroller is required to publish his procedures
in the Federal Register, and if so, whether he has made
such publication. From the outset, I emphasized to
Mr. Benson that the information he presented concerning the revocation of Part 4, Title 12 of the Code
of Federal Regulations was entirely new to me, and
that I knew absolutely nothing of the matter. Mr.
Benson requested my help in ascertaining whether the
Comptroller might have republished Part 4 since its
revocation. I checked the Federal Register and reported by return call that he had not. Mr. Benson inquired as to the requirements of the Act, and I mailed
him a copy. When, in our subsequent conversation, he
pressed for my views concerning the propriety of the
Comptroller's action, I again advised that I knew
nothing of the matter except what he had told me and
therefore could have no opinion on the question without inquiring to learn the circumstances. When asked
what action we could take if, in fact, the Comptroller
is violating the Act, I explained fully that my office
has no authority over any agency. I made clear to Mr.
Benson that its function is only to engage in cooperative efforts among the agencies and the bar toward
improvements in agency procedures and to assist agencies in the formulation of such improvements, and that
any action with respect to the procedures of the Office
of the Comptroller would be entirely the decision of
the Comptroller. Although the article, at page 14,
admits that the Act gives the Justice Department "no
power to levy any penalty" upon the Comptroller,
such token reflection of my remarks scarcely overcomes
the effect of the early paragraphs on page one.
At the conclusion of our telephone conversations I
did tell Mr. Benson that I would inquire into the
matter to determine whether my office could be of any
service. However, I indicated that because of the press
of other business such inquiry would not be immediate.
I suggest to you that no newspaper interested in truthful reporting could interpret this statement as a "disclosure" of a Department "investigation."
Please be advised that this office has not formulated
a belief that the Comptroller is violating the Administrative Procedure Act. We have no reason to believe
that such is the case. We are not conducting and do
not contemplate undertaking any investigation of the
Office of the Comptroller of the Currency.
Sincerely yours,
WEBSTER P. MAXSON,
Director, Office of Administrative Procedure.
MAY 26, 1964.
Effective immediately, Regional Comptrollers of the
Currency will process and decide requests for extensions of time in connection with the opening of approved branches.
The bank must receive a definitive answer to its request within ten days after receipt by the Regional
Comptroller.
Requests which the Regional Comptroller is inclined
to disapprove or concerning which he has serious doubt
should promptly be forwarded to Washington for final
decision.
JAMES J. SAXON,
Comptroller of the Currency.
MAY 26, 1964.
Effective immediately, Regional Comptrollers of the
Currency will process and decide requests for prior
approval of contemplated cash dividends in all instances which require approval under the provisions
of Title 12, U.S.C., Section 60 (b).
467
The bank must receive a definitive answer to its
request within 10 days after receipt by the Regional
Comptroller.
Requests which the Regional Comptroller is inclined
to disapprove or concerning which he has serious doubt
should promptly be forwarded to Washington for final
decision.
JAMES J. SAXON,
JAMES J. SAXON,
Comptroller of the Currency.
CORPORATE PRACTICES AND
PROCEDURES
DECEMBER 4,
1962.
JAMES J. SAXON,
Comptroller of the Currency.
1963.
Subject: Reductions in Par Value (Stock Splits)
Effective as of the date of this letter, stock splits
which are effected by a reduction in the par value of
existing shares will not require the advance approval
of this Office, since such action does not change the
total capital of the bank.
The form of amendment to the Articles of Association necessary to change par value may be obtained
from your Regional Chief National Bank Examiner.
After such amendment has been approved by shareholders, a Secretary's Certificate (form obtainable
from Regional Chief National Bank Examiner) should
be forwarded to this Office for filing with the bank's
Articles.
468
Comptroller of the Currency.
APRIL 29,
Subject: Treatment of Fractional Shares
In the future it will be the policy of this Office to
permit, as an alternative method of handling fractional shares arising out of the declaration of a stock
dividend, the sale by the bank of the full shares representing all of the fractions by sealed bid. Such
sale may be held shortly before the distribution of
the stock dividend and the proceeds of the sale shall
be distributed pro rata to the stockholders entitled to
the fractions. The procedure for the handling of
fractional shares should be submitted to the stockholders for approval at the meeting at which approval is
requested of the stock dividend.
Paragraph 6110 of the Digest of Opinions, which
requires that scrip or warrants must be issued to existing stockholders for fractional shares, is hereby rescinded. However, any bank which wishes to follow
the scrip or warrant procedure may, of course, do so.
APRIL 17,
When stock splits are proposed in combination with
stock dividends, stock sales, or both, the processing of
such applications will be handled by Regional Chief
National Bank Examiners and will be administered
under the provisions of §§ 14.3 and 14.6 of Corporate
Practices and Procedures of National Banking
Associations.
1963.
Your letter of April 15, 1963, on behalf of your
client, The Meadow Brook National Bank, has reference to the requirement of 12 U.S.C. 52 that National
Bank stock certificates must be "signed by the president and the cashier of the association, or by such
other officers as the bylaws of the association shall
provide . . ." You advise that because of the large
number of stockholders of the bank at the present
time, the task of having each certificate manually
signed by two officers has become extremely onerous.
Facsimile signatures of officers of a National Bank,
without further authentication, will comply with the
requirements of 12 U.S.C. 52. This interpretation
will be reflected in the new Comptrollers Manual
which, when published, will replace the present Digest.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
DECEMBER 27,
1963.
On December 23, 1963, President Johnson signed
into law S. 2228, a bill which requires the date on
which the annual meeting of shareholders of a National
Bank is to be held, to be specified in the bylaws of the
bank instead of the Articles of Association as heretofore required. The bill permits any day of the year to
be specified in the bylaws, as opposed to the former
restriction to the month of January.
This bill was introduced by this Office, at the request
of many banks, for the purpose of giving bank managements the option of scheduling shareholders' meetings
at more convenient times than the former statutory
restriction to the month of January. It will also enable banks to mail annual financial reports to shareholders at the same time as their proxy is solicited for
the election of directors at the annual meeting. A
copy of the Bill is attached.
The Committee report which accompanied the Bill
makes it clear that the forthcoming annual meetings
scheduled for January of 1964 may be held pursuant
to existing provisions of the Articles of Association.
In order to bring your Articles of Association into
conformity with the new law, the following amendment to Article Fourth should be presented to and approved by the shareholders of each bank at the forthcoming January meeting. In cases where the notice
of meeting and proxies have already been mailed to
shareholders, the passage of the amendment may be
moved from the floor of the meeting without violation
of any rule or regulation of this Office. Management
proxies may be voted for the resolution under the
"such other business" discretionary clause therein.
Resolved, That, Article Fourth of the Articles of Association of Anytown National Bank is hereby amended to read
as follows:
"Fourth. The regular annual meeting of the shareholders
of this Association shall be held at its main banking house,
or other convenient place duly authorized by the board of
directors on such day of each year as is specified therefor in
the bylaws."
At the first meeting of the board of directors following the January 1964 shareholders' meeting, an appropriate bylaw should be passed fixing the date and
place the annual meeting of shareholders for the years
1965 and following.
JAMES J. SAXON,
Comptroller of the Currency.
88TH CONGRESS
1ST SESSION
S. 2228
IN THE SENATE OF THE UNITED STATES
OCTOBER 10, 1963
Mr. ROBERTSON introduced the following bill; which
was read twice and referred to the Committee on
Banking and Currency
A BILL
To change the requirements for the annual meeting date for
national banks.
Be it enacted by the Senate and House of Representatives
of the United States of America in Congress assembled,
That the first sentence of section 5145 of the Revised Statutes
(12 U.S.C. 71) is amended by striking out all after the semicolon and inserting in lieu thereof "and afterward at meetings
to be held on such day of each year as is specified therefor
in the bylaws."
SEC. 2. The first sentence of section 5149 of the Revised
Statutes (12 U.S.C 75) is amended by striking out "articles
of association" and inserting in lieu thereof "bylaws".
AUGUST 21, 1964.
We are pleased to send you herewith our amended
disclosure regulations as they will appear in final form
in the Federal Register. These regulations were published for comment in proposed form on June 16, 1964.
All comments received were given careful consideration and a number of the suggestions made have been
incorporated. We wish to thank and express our
appreciation to those banks and their counsel who gave
us the benefit of their thinking.
As stated in our letter of June 10, 1964, the enclosed regulations are intended to provide disclosure
of essential information upon which an investor may
base an informed investment decision. In certain
respects the required disclosure exceeds the minimum
requirements of the Securities Acts Amendments of
1964, which were signed into law on August 20, 1964,
and are now known as P.L. 88-467. Consequently,
compliance with these regulations by a National Bank
will constitute compliance with the relevant provisions
of the Securities Exchange Act of 1934, as amended.
Previous correspondence from this Office indicated
our vigorous opposition to the banking provisions of
P.L. 88-467 while it was being considered by the Congress. Our opposition was not to giving shareholders
additional information, but rather to the legislative
technique of subjecting National Banks to an Act from
which they have traditionally been exempt. We did
not think, and we still do not think, that commercial
banks should be subject to the mechanism of the same
securities law that applies to unregulated manufacturing and industrial corporations. The responsibility
for seeing that bank shareholders are provided with
the financial and other information to which they are
entitled, in our view, rests with the bank supervisory
agencies.
In furtherance of our conviction, we took the lead
in December 1962 by publishing the first disclosure
regulations ever made applicable to banks. Whether
or not the Securities Acts Amendments of 1964 became
law, it was our intention to strengthen and expand
those regulations and to publish amendments comparable to the enclosure.
In accordance with our view that the responsibility
for the protection of investors in National Banks resides in this Office, we have expanded on the requirements of P.L. 88-467 in those areas where it is inadequate. The highlights of these provisions are called
to your attention. We urge you to carefully read the
full text of all the regulations.
469
Common Stock Issues by New Banks
P.L. 88-467 requires the filing of a registration statement only by those companies having 750 or more
shareholders. This coverage does not reach the situation of an organizing bank that is soliciting subscriptions from the public to invest in its capital stock.
Our regulation requires any new bank group seeking
an initial capitalization of $1 million or more to furnish an offering circular to an investor prior to his
being legally bound to pay for his subscription.
of a proxy contest, we have set up in a separate section,
§ 11.5, the provisions applicable to election contests.
Section 11.5(c) (2) requires the management, within
5 business days after a solicitation is made by a nonmanagement group, or such longer period as the
Comptroller may authorize, to file with the Comptroller, on behalf of each management nominee for
director, a statement containing the same personal
information as is required from each nominee of the
nonmanagement side.
Use of Offering Circulars by Established Banks
P.L. 88^67 does not require, even of banks having
750 shareholders, that offering circulars be used in
connection with a new stock issue. Recognizing the
fact that most shareholders would not have ready
access to registration statements filed in New York or
Washington, our regulations require that public offerings in excess of $1 million made by a bank already
having at least 750 shareholders, can only be effected
in accordance with rules designed to place an offering
circular in the hands of a prospective investor before
any sale is consummated.
Proxy Statement Requirements in Connection with
Merger Meetings
There has been no substantial change in the rules
as adopted from the proposed form in connection with
this subject.
Change in Control Reports
Some minor additions in the information which is
to be submitted to the Comptroller whenever a change
of control occurs in a National Bank (Section 12.1)
have been made. It should be noted that this section,
which is not new, applies to every National Bank
regardless of size of deposits or assets or number of
shareholders.
Other Ownership Reports
Commencing October 1, 1964, reports will be
required to be filed with the Comptroller's Office in
Washington, the Regional Comptroller's Office and at
the principal office of the bank which disclose the
holdings of every 10 percent stockholder, director or
principal officer of a National Bank in securities issued
by the bank. Thereafter, a report will have to be
filed whenever a "substantial" change occurs in such
person's beneficial ownership of his securities. The
term "substantial change" is still defined in the manner prescribed in the draft regulation, i.e., any change
which aggregates 5 percent of the outstanding securities of the bank or 500 shares, whichever is the lesser
figure, in the case of a particular bank. Certain
exceptions have been made and others are being
studied.
With the publication of these regulations in final
form, the program of investor protection initiated by
this Office in 1962 is substantially completed. This is
not to say that any improvements which prove desirable will not be made in the future. We have imposed no regulation merely for the sake of regulating
but consistent with our philosophy of banking supervision, we have filled the legitimate needs of investors
for relevant information.
Registration of Already Outstanding Issues
P.L. 88-467 requires of every bank that has total
assets exceeding $1 million and a class of equity securities held of record by 750 or more shareholders, that
it file a registration statement with the Comptroller of
the Currency within 120 days after the close of its
fiscal year. In the interests of administrative convenience, we have provided in Section 10.1 (b) that by
filing with this Office two copies of the annual report
prescribed by Section 10.3, such class of securities will
be deemed registered under Section 12 (b) of the Securities Exchange Act of 1934. Because almost every
National Bank has a fiscal year ending December 31,
this registration procedure under the Exchange Act
becomes effective May 1, 1965. This method of registration will apply only to issues that are already
outstanding.
Public offerings, however, and any listing on a
national securities exchange by a National Bank to
which our regulations apply must comply with the full
registration statement procedure required by new
Part 16.
New Proxy Statement Requirements in Connection
with Election Contests
There have been no changes of substance made in
this part from the proposed regulations. In order to
clarify the question of what additional material the
management side will be required to file in the event
470
JAMES J. SAXON,
Comptroller of the Currency.
CORPORATE SAVINGS ACCOUNTS
MARCH 4, 1963.
Reference is made to your letter of February 21,1963
concerning the interpretation of the Board of Governors of the Federal Reserve System which concluded
that Associated Hospital Service, a nonprofit corporation organized under a statute which describes it to be
a charitable and benevolent institution, is ineligible to
maintain savings accounts in member banks.
It is our understanding that this interpretation has
not been changed by the Bbard.
It is the opinion of this office, however, that under
the provisions of 12 U.S.C. 461 and the regulations
issued by the Board thereunder, particularly 12 C.F.R.
217.1 (e), Associated Hospital Service is eligible to
maintain a savings deposit in a National Bank.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
APRIL 18, 1963.
The following are excerpts from two letters mailed
today to officers of National Banks in response to inquiries concerning the acceptance of savings accounts:
* * * you advise that a corporation which operates a
funeral home wishes to maintain a savings account which
would represent prepayment of funeral expenses by persons
not yet deceased. Your inquiry is whether such a savings
account is permissible under the law.
It is the opinion of this Office that the bank may lawfully
accept savings accounts maintained by this funeral home
customer so long as the withdrawal requirements and interest rate limitations imposed on savings accounts by the applicable regulations are satisfied.
* * * you inquire whether your bank may lawfully pay
interest on savings accounts opened and maintained by a
labor union.
You state that this labor union, which is not operated for
profit, wishes to open a savings account for the accumulation
of sinking fund payments until certain loan payments become
due. This union also wishes to open a savings account as an
accumulation fund for its next national convention.
It is the opinion of this Office that the bank may lawfully
accept savings accounts maintained by this labor union so
long as the withdrawal requirements and interest rate limitations imposed on savings accounts by the applicable regulations are satisfied.
JAMES J. SAXON,
Comptroller of the Currency.
JANUARY 21, 1964.
In accordance with the Comptroller's ruling of December 23, 1963, a copy of which is attached, National
Banks may accept savings accounts from any deposi-
tor including corporations and other organizations
operated for profit. The Board of Governors of the
Federal Reserve System through its Regulation Q
attempts to limit savings deposits to individuals and
corporations and other organizations not operated for
profit and has suggested that failure to comply with
Regulation Q might result in the imposition of drastic
penalties.
The attached memorandum prepared in the Law
Department of this Office demonstrates that the statutory authority of the Board to define "demand deposits," "time deposits" and "savings deposits" is directed
to the terms of the deposit contract and provides no
authority for the Board to prescribe who may and who
may not become a party to a savings deposit contract.
Since larger reserves are required for demand deposits than for time deposits it was necessary to define
these two classes of deposit contracts and also to define
savings deposits which Congress, however, specifically
included within the term "time deposits" for reserve
purposes. The Board has completely ignored this specific Congressional determination in its ruling that
a corporation operated for profit may maintain a
time deposit but not a savings deposit.
Our memorandum also demonstrates (1) that the
Board has no authority to impose, or cause to be
imposed, any penalty for failure to comply with the
unauthorized provisions of Regulation Q, and (2) that
the drastic penalties of charter forfeiture and directors liabilities are not applicable to the enforcement
of Regulation Q or the related Regulation D and
(3) that such penalties can only be imposed as a result
of a suit brought by the Comptroller of the Currency.
Under these circumstances the Comptroller could not
properly bring such a suit; on the contrary, he would
have an affirmative duty not to do so.
JAMES J. SAXON,
Comptroller of the Currency.
TITLE 12—BANKS AND BANKING
Chapter I—Bureau of the Comptroller of the Currency
Department of the Treasury
Part 7—INTERPRETATIONS
Corporate Savings Accounts; Loans to Executive Officers
Part 7, Chapter I, Title 12, of the Code of Federal Regulations of the United States of America is hereby amended by
adding new §§ 7.8 and 7.9 as follows:
§ 7.8. Corporate savings accounts
The Comptroller of the Currency has frequently been requested for his opinion as to the legal basis by which profit
making corporations or any other class of depositor may be
precluded from maintaining a "savings account." The
471
Comptroller is of the opinion that the authority contained in
12 U.S.G. 461 to define the terms "time deposits" and
"savings deposits" extends only to the terms of the deposit
contract such as a description of withdrawal requirements
and interest rate limitations. There is nothing contained
in 12 U.S.G. 461 which would preclude, or would authorize
a regulation which would preclude, the maintenance of such
accounts by any class of depositor. Accordingly, a national
bank may, subject to withdrawal requirements and interest
rate limitations imposed by applicable regulations, accept
savings accounts without regard to whether the funds deposited are to the credit of one or more individuals, or of a
corporation, association, or other organization, whether operated for profit or otherwise.
*
*
*
*
*
JAMES J. SAXON,
Comptroller of the Currency.
Dated: December 19,1963.
Memorandum Prepared by the Law Department of the Office
of the Comptroller of the Currency
Subject: Authority of the Board of Governors of the Federal
Reserve System to prohibit business corporation or any
other particular class of depositors from maintaining
savings accounts.
I. Board's Authority to Define
A. Source of Board's Authority
The authority of the Board of Governors of the Federal
Reserve System to define the term "savings deposits" is found
in 12 U.S.C. 461 which was enacted in 1935. That section,
which is the statutory authority for Regulation Q, provides
that:
The Board of Governors of the Federal Reserve System is authorized, for the purposes of this section and
sections 371a, 371b, 374, 374a, 462, 462a-l to 466 of
this title, to define the terms "demand deposits," "gross
demand deposits," "deposits payable on demand," "time
deposits," "savings deposits," and "trust funds," to determine what shall be deemed to be a payment of
Interest, and to prescribe such rules and regulations as
it may deem necessary to effectuate the purposes of this
section and sections 371a, 371b, 374, 462-1 to 466 of
this title and prevent evasions thereof: Provided, That,
within the meaning of the provisions of this section
and sections 371a, 371b, 374, 374a, 462, 462-1 to 466
of this title regarding the reserves required of member
banks, the term "time deposits" shall include "savings
deposits."
B. Development of Definition Prohibiting Corporate Savings
Accounts
Prior to the enactment of 12 U.S.C. 461 (as section 324 of
the Banking Act of 1935), Section 19 of the Federal Reserve Act enacted in 1913 defined demand and time deposits:
"Demand deposits within the meaning of this Act shall comprise all deposits payable within thirty days and time deposits shall comprise all deposits payable after thirty days, and
all savings accounts and certificates of deposit which are
subject to not less than 30 days' notice before payment."
Also prior to the enactment of 12 U.S.G. 461 in 1935, the
Board itself on several occasions defined both "savings depos-
472
its" and "savings accounts." These first definitions extended only to the terms of the deposit relationship
established by contract. In a 1915 opinion, the Board defined "savings accounts" as referring "to accounts which
are evidenced by (a) pass book, certificate of deposit, or
similar form of receipt, which must be presented to the bank
whenever a deposit or withdrawal is made; and (b) which
accounts are subject to printed regulations which were
accepted by the depositor at the time the account was opened
under which the depositor may be required by the bank to
give notice of intended withdrawal not less than 30 days
before the withdrawal is made." a
An opinion2 of the Board's counsel in 1916 noted that:
The Federal Reserve Board, in defining the terms
"savings account" in Regulation D, series of 1916, has
provided that—
The term "savings accounts" shall be held to include
those accounts of the bank in respect to which, by its
printed regulations, accepted by the depositor at the
time the account is opened—•
(a) The pass book, certificate, or other similar form
of receipt must be presented to the bank whenever a
deposit or withdrawal is made, and
(b) The depositor may at any time be required by
the bank to give notice of an intended withdrawal not
less than 30 days before a withdrawal is made.
Another opinions of the Board's counsel in 1916 reaffirmed
the foregoing definition, and stated that a bank's practice
must conform to the Board's Regulation D that withdrawals
of such accounts not be permitted before the expiration of
30 days' notice. This opinion further stated that for a bank
to permit an earlier withdrawal would not be "complying
with the spirit and intent of the Board's regulation and it
should be required to maintain the same reserve against those
deposits that it maintains against other demand deposits." 4
Regulation D, including the Series of 1923, superseding
Regulation D of 1920, consistently defined "savings accounts"
merely by their passbook and withdrawal notice requisites.5
The first comment by the Board as to the further character
of "savings accounts" appears in the Board's opinion6 concerning special reserve savings accounts. That opinion stated,
in part, that "savings accounts are commonly understood to
consist of the savings or accumulations of small depositors.
Deposits made by one bank in another are obviously not deposits of this kind. Savings deposits and bank deposits are
of essentially different character." The Board concluded that
such bank deposits were not savings deposits within the meaning of Section 19 of the Federal Reserve Act or the Board's
Regulation D.
1
June 1915 Federal Reserve Bulletin, opinion dated February 4,1915, at page 73.
3
November 1916 Federal Reserve Bulletin, opinion dated
October 5, 1916, at page 611.
3
December 1916 Federal Reserve Bulletin, opinion dated
November 13, 1916, at page 686.
4
See also an opinion of the Board's counsel dated January 31, 1918, in the March 1918 Federal Reserve Bulletin
at pages 199,200.
"June 1923 Federal Reserve Bulletin, pages 677, 678,
August 1923 Federal Reserve Bulletin, page 896.
6
August 1927 Federal Reserve Bulletin, page 609.
The first time that the Board, by regulation, extended the
definition of "savings account" or "savings deposit" was in its
Regulation Q, Series 1933,7 which consisted of six sections,
the first of which was a reprint of Section 19 of the Federal
Reserve Act, as amended by the Banking Act of 1933 (12
U.S.C. 371a, 371b). Section V of this Regulation Q, entitled "Interest on Savings Deposits," provided, in part, that:
"(a) Definition.—The term 'savings deposit' means a deposit
which consists of funds accumulated for bona fide thrift purposes * * *." In a footnote to this section the Board stated
that "If by reason of the amount of the deposit, the business
of the depositor or otherwise, a question arises whether a deposit is properly classified by a bank as a savings deposit, the
bank must be prepared to show clearly that it is a deposit consisting of funds accumulated for bona fide thrift purposes and
that it otherwise complies with the above definition."
Section 19 of the Federal Reserve Act, as amended by the
Banking Act of 1933, eliminated the payment of interest on
demand deposits. Thereafter, the Board commented8 on
the term "savings deposit" as follows:
In response to an inquiry regarding the nature of
"savings deposits" within the meaning of the Federal
Reserve Board's Regulation Q, the Board stated that it
does not feel that it should undertake at this time to
define in detail the words "bona fide thrift purposes" or
further to define the term "savings deposit" as used in
the regulation. The Board suggests that each member
bank exercise its best judgment in determining whether
deposits are of such a nature that they may properly be
classified as savings deposits within the meaning of the
Board's definition and, if a case arises in which the bank
is in doubt as to the correctness of its conclusion, that
it submit the matter to the Federal Reserve bank of its
district for advice on the question. If the Federal Reserve bank feels the question is one which should properly be considered by the Federal Reserve Board, it will
submit the matter to the Board for a ruling.
Further equation of "savings deposits" and "funds accumulated for bona fide thrift purposes" appeared in a 1934
opinion9 of the Board when it stated:
Generally speaking and without intending to exclude
other classes of deposits, the Federal Reserve Board feels
that deposits which consist of funds in relatively small
amounts which are being or have been accumulated by
persons of limited financial means may be considered
presumptively by the banks to be funds accumulated for
bona fide thrift purposes. Likewise it is believed that
the same presumption should usually obtain with respect
to funds which are being or have been accumulated in
order to provide for old age or for contingencies which
may not be foreseen, such as sickness or accident, and
also with respect to funds which are being or have been
accumulated in order to provide for anticipated expenditures such as, for example, the purchase of homes,
furnishings, etc., and Christmas or vacation expenses,
as well as for anticipated obligations falling due within
a reasonable time, such as tax liabilities or insurance
premiums.
7
8
8
September 1933 Federal Reserve Bulletin, pages 571-574.
October 1933 Federal Reserve Bulletin, page 643.
June 1934 Federal Reserve Bulletin, pages 389, 390.
725-698—64,
31
It would seem that deposits of corporations in most
cases probably would not consist of funds accumulated
for bona fide thrift purposes; but here again no general
rule can be laid down. Funds of a business enterprise
which are temporarily idle such as surplus funds or funds
commonly known as reserve funds would not ordinarily
seem to constitute funds accumulated for bona fide thrift
purposes. With respect to firms and individuals engaged
in business, the nature of the business may be important
in determining this question. Funds deposited by one
bank in another would not, in the opinion of the Board,
constitute funds accumulated for bona fide thrift purposes. In some instances the amount of the funds on
deposit may be a factor for consideration in determining
the propriety of their classification as savings deposits.
None of the considerations mentioned above is to be
considered as conclusive of the question whether funds
may be regarded as accumulated for bona fide thrift
purposes or as savings deposits and, as indicated, each
case must be determined in the light of its particular
circumstances. The Federal Reserve Board feels that
questions as to whether deposits may be regarded as
funds accumulated for bona fide thrift purposes should
be considered by the member banks in the exercise of
their best judgment and in the light of the provisions
of the law and the regulation. It would not be practicable for the Federal Reserve Board to undertake to
determine such questions as they may arise in individual
cases with member banks when deposits are offered to
them. It is hoped, however, that the general statements
above set forth may be indicative of the classes of deposits which in proper circumstances may constitute
savings deposits and that they may be of assistance to
the member banks in this connection.
As indicated in the regulation, if the circumstances
with respect to the deposit are such as to raise a question as to whether it is properly classified as a savings
deposit, the bank must be prepared to shown clearly that
it is a deposit consisting of funds accumulated for bona
fide thrift purposes and that it otherwise complies with
the definition of savings deposits set forth in the regulation.
C. Definition Exceeds Board's Authority
Neither the provisions nor legislative history of 12 U.S.C.
461, enacted in 1935, provide any basis for concluding that
this statute was intended to give the Board the authority to
define "savings deposits" by the character or general purposes
of the depositor. Notwithstanding, the Board continued its
equation of "savings deposits" and "funds accumulated for
bona fide thrift purposes" when it stated,10 in part, that:
It is believed that "savings deposits," in the true meaning of the term, are deposits which consist of the accumulations of savings of individuals, usually of limited
financial means, in order to provide for sickness, accident, old age or other exigencies, to meet anticipated
expenses, or for other similar purposes. Although there
are certain nonprofit organizations which may properly
be included in the class of those who are entitled to the
privilege of maintaining savings deposits, it is not believed
10
March 1936 Federal Reserve Bulletin, pages 191, 192.
473
that corporations operated for profit fall within this
category. Accordingly, in section l(c) of Regulation
Q, the Board has provided that a savings deposit must
consist of the funds of one or more individuals or of an
organization operated primarily for religious, philanthropic, charitable, educational, fraternal or other
similar purposes and not operated for profit.
in 1915, it is clear that the distinction between such accounts
must rest on the terms of the deposit relationship established
by the contract between the bank and depositor. The subsequent refinements of these definitions advanced by the
Board, which are based on inferences drawn from inferences,
have been incorporated into the present questionable and
shaky Regulation Q that requires shoring by new legislation.
The Board stated in this opinion that 12 U.S.G. 461 conferred upon it the "authority to define the term 'savings deposits' and to prescribe such rules and regulations as it may
deem necessary to effectuate the purposes of the law and prevent evasions thereof." The Board also noted that this authority was granted in order to enable it to correct certain
well known abuses which had grown up in connection with
savings deposits, "chief of which were the classification of
ordinary demand deposits as savings deposits in order to pay
interest on such funds and to carry the lower reserves against
them, and the classification of idle funds of business corporations as savings deposits even though such funds were not
accumulated for genuine thrift purposes."
It is the position and philosophy of the Board that business corporations, by virtue of their character and purposes,
do not accumulate funds for general thrift purposes although
individuals and other entities, regardless of size or worth, are
motivated to open savings accounts in order to accumulate
funds for such purposes. This position, therefore, enables
the Board to extend the "privilege of maintaining savings deposits" to individuals of unlimited means and to nonprofit
corporations, associations, or other organizations possessing
vast fortunes while it refuses such "privilege" to a small one
man business corporation. Yet, it is the small business corporation which is usually ill-equipped to operate in short-term
money markets. The larger business firms generally have
more knowledgeable and sophisticated corporate treasurers
and may not be significantly handicapped by the elimination
of corporate savings accounts in commercial banks as an
alternate place for the investment of their funds. This discrimination based on the character and general purposes of
the depositor not only arises from an exercise of non-existent authority, but it also effectively prevents commercial
banks from meeting the needs of the small businesses within
their communities.
In two bills (S. 1799, H.R. 7404) introduced in the first
session of the 88th Congress to increase maximum insurance
coverage of depositor and share accounts from $10,000
to $15,000 per account, it is proposed at the request of the
Board of Governors of the Federal Reserve System, that the
Board be given standby authority to limit by regulation the
rates of interest which may be paid by member banks on time
and savings deposits. Both bills specifically provide that such
"limitations on interest rates so prescribed [by the Board]
may be different for different classes of deposits or of member
banks, according to the type or maturity of deposits, the
conditions of withdrawal or repayment thereof, or the nature
or location of the depositor or member bank." [Emphasis
supplied.] If the contention of the Board that it has present
authority under section 461 to define demand and savings
accounts by reference to the nature and character of the depositor and to the purpose of the account is correct, why does it
urge passage of this legislation which would specifically grant
such authority? As incorporated in the original definitions
of demand and savings accounts promulgated by the Board
II. Enforcement of Board's Regulations Q and D
A. Forfeiture of Bank's Charter
The question arises as to what penalties may be imposed on
a National Bank for an alleged failure to comply with the provisions of the Board's Regulations Q and D. As stated in an
opinion of the Board in 1936," no specific penalties are provided for violations of Regulation Q. However, the Board
then, and more recently in reply to the Comptroller's interpretation on corporate savings accounts,13 threatened that
failure of a National Bank to comply with its Regulations Q
and D constitutes grounds for instituting legal proceedings
for forfeiture of the bank's charter. That threat is based on
12 U.S.C. 501a which provides that:
474
Should any national banking association in the United
States now organized fail within one year after December
23, 1913, to become a member bank or fail to comply
with any of the provisions of this Act applicable thereto,
all of the rights, privileges, and franchises of such association granted to it under the national-bank Act, or
under the provisions of this Act, shall be thereby forfeited. Any noncompliance with or violation of this Act
shall, however, be determined and adjudged by any
court of the United States of competent jurisdiction in a
suit brought for that purpose in the district or territory
in which such bank is located, under direction of the
Board of Governors of the Federal Reserve System, by the
Comptroller of the Currency in his own name before the
association shall be declared dissolved. In cases of such
noncompliance or violation, other than the failure to
become a member bank under the provisions of this Act,
every director who participated in or assented to the
same shall be held liable in his personal or individual
capacity for damages which said bank, its shareholders,
or any other person shall have sustained in consequence
of such violation. [Emphasis supplied.]
It is clear that any suit brought under this section for forfeiture of a National Bank's charter must be brought "by the
Comptroller of the Currency in his own name," and that
the forfeiture provision in this section is clearly applicable
only to National Banks in existence when the Federal Reserve Act was enacted on December 23, 1913. The monolithic severity of the penalty provision makes it self-evident
that this section was clearly designed solely as a method of
insuring that National Banks in existence on December 23,
1913, would become members of the Federal Reserve System.
The limited purpose of this section is even more obvious upon
consideration of the amendment of 12 U.S.C. 222, 223, enacted by Congress in 1958. That amendment, for the first
time, made the forfeiture penalty for failure to join the Federal Reserve System, provided by 12 U.S.C. 501a, applicable
to National Banks organized after December 23, 1913. This
11
13
February 1936 Federal Reserve Bulletin at page 119.
12 C.F.R. 7.8.
penalty was made applicable to such other National Banks
only for their failure to "become a member bank of the Federal Reserve System * * *" and to become "an insured bank
under the Federal Deposit Insurance Act * * *." It is
therefore clear that this section alone cannot be expected to
provide a basis for any enforcement action for any other
purpose by the Comptroller of the Currency or any other
Federal officer.
B. Director's Liability
The provisions in section 501a relating to the liability of
directors are significant. Such provisions are clearly applicable only to directors of National Banks in existence on December 23, 1913, who have participated in or assented to a
noncompliance or violation determined and adjudged by a
federal court in a suit brought by the Comptroller of the
Currency for the dissolution of the bank.13 It is also significant that the 1958 amendment to 12 U.S.G. 222, 223, which
made the forfeiture penalty of 12 U.S.C 501a applicable to
National Banks organized or commencing business in the
United States since December 23, 1913, did not make applicable to the directors of such National Banks any provisions
contained in 12 U.S.C. 501a applicable to the directors of
National Banks in existence on December 23, 1913.
The question arises as to what action may be taken by a
Federal officer with respect to a particular director or officer
of a National Bank in connection with its failure to comply
with the provisions of the Federal Reserve Act. The only
provisions are those contained in 12 U.S.C. 77, which provides, in part, that "Whenever, in the opinion of the Comptroller of the Currency, any director or officer of a National
Bank, or of a bank or trust company doing business in the
District of Columbia, * * * shall have continued to violate
any law relating to such bank or trust company or shall have
continued unsafe or unsound practices in conducting the
business of such bank or trust company, after having been
warned by the Comptroller of the Currency * * * to discontinue such violations of law or such unsafe or unsound
practices, the Comptroller of the Currency * * * may certify
the facts to the Board of Governors to the Federal Reserve
System * * *." Section 77 thereafter provides for removal
of the director or officer following a hearing and prescribes
penalties if such director or officer participates in the bank's
management following his removal.
C. Reserve Deficiency Penalties
A review of the provisions of the Federal Reserve Act and,
in particular, of those provisions of the Act appearing in the
statutory appendix following the Board's Regulation D, discloses the existence of no present authority of the Board to
assess penalties for the alleged reserve deficiencies of a National Bank based on such bank's failure to accept the Board's
prohibition of corporate savings accounts. Although the
Board has statutory authority to assess penalties in certain
circumstances, and although Regulation D contains a provision relating to such penalties, there exists no present au13
Although there appears to be conflicting dicta pertaining
to this matter in Michelsen v. Penney, 135 F. 2d 409 (2d
Cir. 1943) and Holman v. Cross, 75 F. 2d 909 (6th Cir.
1935), any such conflict is clearly resolved in support of the
foregoing position by the 1958 amendment to 12 U.S.C. 222,
223, as discussed above.
thority to assess penalties in the circumstances hereinbefore
described.
D. Conclusion Regarding Board's Authority
The Federal Reserve Board thus has no authority to impose
or cause to be imposed any penalty upon a National Bank for
accepting a savings account from a corporation or other organization operated for profit or for classifying such an
account as a time deposit for reserve purposes. The threatened penalties of charter forfeiture and directors liability are
not applicable to the enforcement of any part of Regulation
Q, or Regulation D. The Board's ability to require compliance with its unauthorized and unrealistic definition of
savings deposits is limited to the making of vague unenforceable threats, to the assessment of unauthorized and therefore
uncollectible penalties on reserve deficiencies and to arbitrary
and capricious refusal to exercise affirmatively its discretionary authority in behalf of particular banks in such matters as
advances, discounting, and foreign branches.
E. Comptroller's Position
The Comptroller of the Currency has ruled that National
Banks may lawfully accept savings accounts maintained by
profit making corporations and any other class of depositors.
The Comptroller accordingly would regard such acceptance
by a National Bank as neither requiring nor permitting sanctions of any kind to be taken by him or any representative of
his Office. Charter forfeiture and directors liability can result only from a suit brought by the Comptroller. In these
circumstances there would be no legal basis for the Comptroller to bring such a suit. Indeed he would have an affirmative
duty not to do so.
DEBT CANCELLATION CONTRACTS
MARCH 10, 1964.
Reference is made to your letter of January 21,
1964, concerning debt cancellation contracts. Your
inquiry is prompted by a discussion of this subject on
page 264 of the December 1963 issue of The National
Banking Review.
You are correct in your assumption that this ruling
means that a National Bank may make additional
charges to borrowers for the purpose of creating a
fund out of which the balance due on a loan would
be paid in the event the borrower died. The following is in reply to your specific questions:
1. Can the additional charge be made only on
selected customers?
The bank may, in its discretion, determine whether
to adopt standards, such as age and health of the borrower, in making debt cancellation contracts available
to its customers.
2. Does the debt cancellation contract referred
to mean that the debt will automatically be cancelled in the event of the borrowers death?
475
Yes. The debt cancellation contract is understood
to mean the bank's agreement to waive its claim or
right to the unpaid balance of the loan at the death of
the borrower.
3. Can a provision be inserted in the contract to
the effect that the borrower must be in sound
health when the contract is made?
The bank in its discretion may require the borrower
to certify that to his best knowledge he is free from
certain specified health hazards.
4. Do all charges go into reserve or is the reserve determined on an actuarial basis?
Charges should be placed in reserves to the extent
necessary to protect the bank against loss incurred in
connection with debt cancellation contracts. Such
reserves may be determined by the use of accepted and
reliable methods, including the use of an actuarial
basis.
5. Can the charges collected and credited to the
reserves be excluded from income until such time
as taken out of the reserve?
The bank may exclude from income those charges
collected and credited to reserves but which have not
been taken out of reserves. However, upon the adoption of such practice, accounting recognition must be
given to the requirements of the Internal Revenue
Code of 1954 and regulations promulgated thereunder relating to the extent to which loss reserves are
not subject to income tax.
6. Is there a limit to the amount of the reserve?
The reserve should be limited only after it affords
adequate protection to the bank from actual and
anticipated losses from debt cancellation contracts.
7. Will this type of contract be considered as
engaging in the life insurance business?
The use of debt cancellation contracts, the imposition of an additional charge, and the establishment
of reserves as protection against losses arising out of
such contracts is a lawful exercise of the powers of a
National Bank. The exercise of such powers is necessary to and is a part of the business of banking. Such
activities may not therefore, properly be considered as
engaging in the life insurance business.
Sincerely,
T
T _
JAMES J. SAXON,
Comptroller of the Currency.
DIRECT LEASING
MARCH 18,
1963.
We have been asked whether it is permissible under
existing law and regulations for a National Bank to
enter into lease financing arrangements whereby the
476
National Bank would acquire title to personal property
and would lease such property directly to its customer.
Our letters of February 1, 1963, and March 1, 1963,
copies of which were circulated to all National Banks,
ruled that leases covered thereby are valid evidences
of debt for National Banks, and may be considered as
installment consumer paper to which Exception 13 of
12 U.S.C. 84 is applicable.
The leasing by the bank of personal property acquired upon the specific request of and for the use of
its customer, and the incurring of such additional obligations as may be incident to becoming an owner of
personal property and the lessor thereof, is a lawful
exercise of the powers of a National Bank and necessary to the business of banking. Such direct leasing
is, with respect to its banking aspects, substantially the
same as the present practice of financing personal
property acquisition through a separate lessor.
It is our conclusion therefore that direct lease transactions, as above described, constitute legal and proper
banking activities for National Banks.
JAMES J. SAXON,
Comptroller of the Currency.
APRIL 30,
1963.
Your letter of March 26, 1963, has reference to our
earlier letter of March 18, authorizing the purchase
of personal property by National Banks incidental to
a lease thereof.
You advise that your bank has been requested to
purchase equipment at a price of $150,000, for which
the lessee would immediately pay to the bank $50,000
and enter into a 36 month lease agreement. This
would result in a net expenditure by the bank of
$100,000, which is $70,000 more than the bank's lending limit. You request our advice on whether the
lending limit is applicable to the situation presented.
The purchase by the bank of personal property incidental to a lease thereof does not constitute a loan to
the lessee, even if it is contemplated that title to the
property will be transferred to the lessee upon termination of the lease.
Likewise, the fact that the sum of the lease rentals
might exceed the bank's loan limit is without bearing,
since such remittances are not repayments on a loan
but payments for the use of property owned by the
bank.
The amount of any one investment in personal property to be leased is a matter of judgment for the bank,
acting upon the relevant circumstances of each case.
An undue concentration in such investments is, of
course, to be avoided.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
FEDERAL RESERVE MEMBERSHIP AND
FEDERAL RESERVE POWERS
FEBRUARY 28,1964.
I have had a great many inquiries from National
Banks throughout the country asking for my views
on the bill now before the House Banking and Currency Committee to provide that membership by National Banks in the Federal Reserve System shall be
voluntary (H.R. 5879), and I am taking this means of
responding generally to those inquiries.
The dissatisfaction expressed to me concerning the
mandatory membership requirement has come chiefly
from the smaller National Banks. As they see it, membership in the Federal Reserve System provides few
benefits, and it burdens them with reserve requirements
which place them at a competitive disadvantage as
contrasted with nonmember State-chartered banks.
Many of the smaller National Banks prefer to use the
lending and clearing facilities of their correspondents
rather than those of the Federal Reserve System. In
order to do this they must keep balances with their
correspondents as well as with the Federal Reserve.
The issue, as I see it, turns basically on the need for
reserves to be held with and varied at the discretion of
the central bank. I believe it is broadly agreed, even
within the Federal Reserve System, that the variation
of reserve requirements is a blunt tool of monetary
policy—and, in fact, this tool has rarely been used.
The question then boils down to the need for any
sort of mandatory reserve requirement.
We have long since given up the notion that reserve requirements serve any function in maintaining
bank liquidity. Their only purpose is to provide a base
on which the open market and discounting actions of
the Federal Reserve may influence bank lending and
investing. For this purpose the only essential requirement is that the banks hold some reserves. It is not
necessary that the reserves be held with the central
bank or befixedby them. Since it is a settled tradition
of prudent banking for banks to hold reserves, monetary
policy can be made effective without mandatory reserve requirements. In any event, most of the larger
banks would likely remain within the System even if
membership were voluntary.
It is principally the larger banks which actually make
use of the facilities of the System, and which exercise
influence on the policies of the System, although many
large State-chartered banks have remained outside
the System. The smaller National Banks are captives
of the Federal Reserve System, and the smaller Statechartered banks have generally exercised their voluntary right to remain outside the System. As a matter of equity, therefore, and without impairing the
effective conduct of monetary policy, membership in
the System, it appears to me, should be made voluntary
for all banks.
Although I am glad to have the views of bankers
on these issues, these are matters which can be dealt
with only through legislative action and expressions of
opinion should more appropriately be addressed to the
proper Congressional Committees.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
INTERNATIONAL OPERATIONS
DECEMBER 20,1963.
Subject: International Operations of National Banks
One of the recent developments in banking which
this Office has viewed with great interest is the accelerated entry of National Banks in the area of international banking and financing through the use of
foreign branches and so-called Edge Act and "agreement" subsidiaries. At the present time National
Banks are operating more than 120 foreign branches
and some 14 subsidiaries engaged in foreign banking or
financing, with the number steadily increasing.
This development has carried with it a concomitant
necessity that we re-examine our supervisory procedures to ensure the proper execution of our responsibilities. It is undeniable that the ultimate soundness of a National Bank may be intimately related to
its foreign operations. A substantial loss occurring
in such operations would reflect adversely not only
upon the bank involved but also upon this Office,
where lies the prime responsibility for the proper operation of National Banks. In keeping with that responsibility, therefore, this Office must now take a
more affirmative role in the supervision of international
transactions of National Banks to ensure that the financial condition of those banks is in no way jeopardized. Not to do so would be to abdicate our supervisory responsibilities.
In order to provide this Office with necessary information and to facilitate our supervision of the in477
ternational operations of National Banks, we have today published in the Federal Register a set of proposed
regulations which will set certain requirements for
National Banks desiring to enter the international field
for the first time or to expand their present activities
in that area. Briefly stated, the proposed regulations
will require that the prior approval of the Comptroller
be obtained before any National Bank may engage
in any of the following or similar transactions:
(a) Open or move a foreign branch.
(b) Invest in an Edge Act or "agreement" corporation.
(c) Cause a subsidiary corporation engaged in
foreign banking to open a domestic agency or a
foreign branch or agency.
(d) Acquire controlling interests in a bank or
other corporation organized under foreign law.
Under the proposal, applications for approval must
be made directly to the Comptroller on forms to be
provided by this Office. It is not intended that approval must be obtained as to past transactions or as to
existing corporate relationships. Approvals may be
granted subject to terms and conditions, such as, adherence to specific requirements.
It will be our policy to facilitate every useful activity
in this area, consistent with the continued sound financial condition and proper operation of the institution involved.
A copy of the proposed Regulation is attached to
this letter. Your written comments and suggestions
are invited.
JAMES J. SAXON,
Comptroller of the Currency.
DEPARTMENT OF THE TREASURY
COMPTROLLER OF THE CURRENCY
(12 GFR Part 15)
INTERNATIONAL OPERATIONS OF NATIONAL BANKS
Notice of Proposed Rule Making
Notice is hereby given that the Comptroller of the Currency, pursuant to the authority contained in the National
Bank Act, as amended, 12 U.S.C. 1 et seq., is considering
the adoption of a new Part 15 relating to the international
operations of national banks.
Prior to the adoption thereof, consideration will be given
to any written comments pertaining thereto which are submitted in duplicate to the Comptroller of the Currency, Washington, D.C., by February 1, 1964. All national banks and
other interested parties are invited to submit such comments.
It is contemplated that the new Part 15 will enter into effect
on or about February 15, 1964, with such revisions thereof
which may be deemed appropriate in light of comments
submitted.
478
The proposed new Part 15 would read as follows:
PART 15—INTERNATIONAL OPERATIONS OF NATIONAL BANKS
Sec.
15.1
15.2
15.3
15.4
15.5
15.6
Scope and application
Definitions
Applications
Consideration of Applications
Saving Provision
Forms
15.1 Scope and Application. This part applies to any
transaction defined herein as an international operation.
15.2 Definitions. For the purposes of this Part:
(a) "foreign banking corporation" means any bank or
corporation chartered or incorporated under the laws of the
United States or of any state thereof, including any corporation organized under 12 U.S.C, Sec. 611 to 632, which
is principally engaged in international or foreign banking or
financing or banking or financing in a dependency or insular
possession of the United States, either directly or through
the agency, ownership or control of local institutions in foreign countries, or in such dependencies or insular possessions.
(b) "international operation" means:
(1) The establishment or relocation of a branch of
a national bank in a foreign country, dependency or
insular possession of the United States.
(2) The establishment or relocation by a foreign
banking corporation controlled by a national bank of
any branch or agency in the United States or abroad.
(3) The acquisition by a national bank of stock in a
foreign banking corporation.
(4) The acquisition by a national bank, directly or
indirectly, of controlling interest in:
(i) a bank or other corporation or association organized under foreign law, or;
(ii) a corporation organized under the laws of any
State, dependency or insular possession of the United
States and principally engaged in business abroad.
(5) Any similar or related transaction as the Comptroller of the Currency may rule to be an "international
operation."
15.3 Applications.
(a) On and after the effective date hereof, a national bank
desiring to engage in any international operation shall make
application to the Comptroller of the Currency for approval.
No such transaction shall be entered into prior to receiving
the approval of the Comptroller of the Currency. Approval
of such applications shall be subject to such terms and conditions as the Comptroller of the Currency may prescribe.
(b) Applications shall be made on forms as provided by
the Comptroller of the Currency.
15.4 Consideration of applications. In passing upon an
application for approval of an international operation the
following factors will be considered:
(a) The general financial condition of the bank, including
the adequacy of its capital and surplus in relation to the character and condition of its assets and its deposit liabilities and
other corporate responsibilities.
(b) The general character and ability of the management
of the bank.
(c) The history of the bank's activities, if any, in international banking or financing.
(d) Whether the bank has sufficient capital and surplus
to meet legal requirements.
(e) Whether the proposed international operation is consistent with the interests of the United States.
15.5 Saving Provision. This part shall not apply to any
international operation which has been completed prior to the
effective date hereof.
15.6 Forms. All forms referred to in this Regulation
and all such forms as amended from time to time shall be a
part of this Regulation.
of local institutions in foreign countries, or in such dependencies or insular possessions; or any corporation
or other association, organized under the laws of a foreign country or a dependency or insular possession of
the United States, which is principally engaged in a
commercial banking business.
It is not intended that this request should apply to
past transactions or to existing corporate relationships.
JAMES J. SAXON,
Comptroller of the Currency.
JAMES J. SAXON,
Comptroller of the Currency.
Dated: December 16,1963.
MAY 1,1964.
Effective this date, it is requested that every National Bank, upon engaging in any of the international
operations set forth below, forward to this Office information reports as to each such international operation within 30 days of the occurrence thereof. A series
of appropriate forms are available on request to be
used by National Banks in reporting these international
operations. The international operations to be reported, and the forms appropriate to each, are as
follows:
(1) The establishment or relocation of a
branch of a national bank in a foreign country,
dependency or insular possession of the United
States. (Form 1500)
(2) The acquisition by a national bank of stock
in a foreign banking corporation. (Form 1510)
(3) The establishment or relocation, by a foreign banking corporation controlled by a national
bank, of any branch or agency in the United States
or abroad. (Establishment or Relocation—Form
1511)
(4) The acquisition by a national bank,
through a foreign banking corporation controlled
by that bank, of controlling stock interest in a foreign corporation or association (including a foreign bank). (Form 1512)
For the purposes of reporting international operations, a foreign banking corporation is: Any bank or
corporation chartered or incorporated under the laws
of the United States or of any state thereof, including
any corporation organized under 12 U.S.C., Sec. 611 to
632, which is principally engaged in international or
foreign banking or financing, or banking in a dependency or insular possession of the United States, either
directly or through the agency, ownership or control
JULY 2,1964.
Subject: Acquisition of Stock of Foreign Banks
The opinion of this Office has been requested as to
whether a National Bank may acquire and hold directly stock interests in foreign banks.
The prevailing practice with respect to the purchase
of foreign bank stock is to acquire such through a subsidiary Edge Act or "agreement" corporation. Direct
acquisition of foreign bank stock would involve a
proper exercise of the corporate powers of a National
Bank and would appear to offer a useful supplement
or alternative to the corporate devices now being employed in the conduct of overseas banking and financing operations.
Accordingly, this Office is of the opinion that a National Bank may acquire and hold directly stock interests in foreign banks as a means of conducting its overseas operations.
Any National Bank acquiring stock interests in foreign banks in accordance with this ruling shall report
any such transaction to this Office within 30 days of
the acquisition. Forms, appropriate to reporting such
acquisitions, are available on request.
JAMES J. SAXON,
Comptroller of the Currency.
LENDING LIMITS
JANUARY 21,1963.
It is our understanding that certain customers of
the bank wish to sell to the bank certain promissory
notes insured under an export credit insurance policy
(medium term—shipment form) issued by the Foreign Credit Insurance Association and the Export-Import Bank of Washington. It is our understanding that
the sale of these notes will be made without recourse
but that said customers will enter into an agreement
providing for repurchase of the notes by them from
the bank (a) to the extent that the bank does not re479
cover insurance proceeds to cover losses and (b) in
the event of breach of warranties as to genuineness and
validity. Your inquiry is whether the repurchase obligations are subject to R.S. 5200 (12 U.S.C. 84) and if
so whether these obligations come within any of the
exceptions of R.S. 5200.
Obligations to repurchase these notes in the event
of breach of warranties as to genuineness and validity
are not obligations which must be taken into consideration in determining the amount of the customer's obligations subject to the limitations of R.S. 5200.
Obligations to repurchase notes to the extent that
the bank does not recover insurance proceeds to cover
losses are obligations subject to R.S. 5200. However,
Exception 2 of R.S. 5200 (12 U.S.C. 84(2)) is now
interpreted as being applicable to negotiable paper
given in payment of the purchase price of commodities
in export transactions. In the case of export transactions, it may bear the full recourse endorsement of an
actual owner or may be endorsed by such owner without recourse or with limited recourse, or may be
accompanied by a separate agreement for limited
recourse, but if endorsed without full recourse,
must be supported by an assignment of appropriate insurance covering the foreign political and
credit risks applicable to the paper. The insurance
provided by the Export-Import Bank and the Foreign
Credit Insurance Association is considered appropriate
insurance for this purpose and the paper for which
it may be used is considered to be commercial or business paper to which Exception 2 is applicable.
Very truly yours,
JAMES J. SAXON,
Comptroller of the Currency.
FEBRUARY 1, 1963.
This is in reply to your letter of January 4, 1963,
concerning the following statement contained in the
Comptroller's letter of December 14, 1962, addressed
to counsel for a National Bank:
Exception 2 is applicable to negotiable paper given in payment of the purchase price of commodities for resale or to be
used in connection with the fabrication of a product, or to be
used for any other business purpose which may reasonably be
expected to provide funds for payment of the paper.
You ask whether this statement may be extended to
the sale of farm machinery to farmers who expect to use
the machinery in the production of crops to provide
funds for the payment of the agricultural sales paper,
and whether the notes and conditional sales agreements
480
given by farmers in payment for such agricultural
machinery should come under Exception 2 rather than
Exception 13.
Exception 2 is applicable to negotiable paper, bearing the full recourse endorsement of an actual owner,
given by a farmer in payment of the purchase price of
farm machinery, the use of which may reasonably be
expected to provide funds for the payment of the
paper upon its maturity. This means that it must appear reasonable, not only to the farmer but to the
banker or to a disinterested third person, that the machinery will improve production to the extent that the
machinery may be said to pay for itself within the term
of the paper.
Paper arising out of the sale of agricultural machinery to farmers which fails to meet the requirements
set forth in the preceding paragraph may qualify under
the requirements of Exception 13 or may be handled
under a dealers' reserve arrangement described in subparagraph (c) of Paragraph 1110 of the Digest of
Opinions.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
FEBRUARY 1, 1963.
Reference is made to your letter of January 3, 1963
requesting our advice on the applicability of Exception
13 (12 U.S.C. 84(13)) in light of the Comptroller's
letter of December 17, 1962. Particularly, you inquire
whether lease paper covering automobiles and trucks
leased to business firms is properly includable under
Exception 13. The query arises from your conclusion
that the Comptroller's letter "stressed" the term "installment consumer paper."
Exception 13 is applicable to "negotiable or nonnegotiable installment consumer paper." This language was used in the statute in contrast to the
negotiable "commercial or business paper" which is
the subject of Exception 2. The letter of December
17, 1962 ruled that paper given in connection with the
lease, as well as the purchase, of consumer articles may
qualify under Exception 13. Where similar paper is
used in connection with the lease of automobiles and
trucks to business firms, it will also qualify under
Exception 13.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
FEBRUARY 15,
1963.
This is in reply to your letter of February 4, 1963,
concerning the rights of National Banks to enter into
financing agreements whereunder they purchase
equipment leases, either with or without recourse,
without any note or other evidence of debt being executed by the lessor in favor of the bank.
It is the position of this office that equipment leases
constitute satisfactory evidence of debt for purchase
by a National Bank within the meaning of Paragraph
Seventh of 12 U.S.C. 24, if under a given lease agreement and assignment, (1) the obligations of the lessor
have been fully performed, (2) the lessee is unqualifiedly obligated to pay rentals thereunder, and (3)
lessor and lessee agree to save free the bank from any
claims arising thereunder.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
MARCH 1, 1963.
Your letter of January 22, 1963, encloses for our
review two lease contracts which the bank proposes to
purchase with recourse under Exception 13 to 12
U.S.C. 84. You ask our opinion as to the eligibility
of these two forms of transactions under this
Exception.
Under one of the lease arrangements, the lessor assigns only the rentals due under the lease, accompanied
by the lessor's guaranty. In addition, the lessor executes a note to the bank for the full amount paid him
by the bank for the assignment, and this note is secured
by a chattel mortgage on the leased equipment.
The second lease arrangement contemplates an assignment of the lease itself, accompanied by the lessor's
guaranty.
We understand from your letter that in each of the
foregoing lease arrangements the lessee is determined
by bank management to be financially responsible and
able to perform his obligations under the terms of the
lease; that the bank is relying principally on the lessee
for payment and that the guaranty, note and chattel
mortgage of the lessor are taken as a matter of prudent
banking practice.
In our opinion, each of the lease arrangements
herein described result in installment consumer paper
to which Exception 13 is applicable.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency,
LETTERS OF CREDIT
MAY 1, 1964.
Your letter memorandum of February 24, 1964, requests the position of this Office in regard to the increasing use of letters of credit.
While letters of credit were formerly used only to
facilitate the movement of goods, both nationally and
internationally, other usages have gained prominence.
One of these involves stand-by letters of credit which
relate to a promise to loan on the occurrence of a specified event, such as a default, failure of shipment, or
failure of contractual performance. Where the event
specified does not occur and the underlying transaction
transpires as anticipated, the bank's customer may not
draw on such letter of credit. Thus, the bank promises
to loan money in the future if it is required to do so.
Such promises are normally made only on behalf of,
and with recourse against, the bank's customer to
whom such an advance would be made in the normal
course of business. In exchange for such pledge of
its credit, the bank earns a commitment fee irrespective
of whether it advances any funds.
Stand-by letters of credit, and other such agreements
to make loans upon the occurrence of a specified
event, are a lawful exercise of the powers of a National
Bank and necessary to the business of banking. The
making and management of such commitments require the exercise of prudent banking judgment to prevent the creation of loans in excess of the lending limits
of 12 U.S.C. 84 although such limitations are not applicable until funds are actually advanced pursuant
to such commitment.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
LOANS TO BANK OFFICERS
JULY 1,
1963.
Your letter of May 28, 1963, addressed to Regional
Chief National Bank Examiner A. E. Larsen, requests
our opinion concerning the purchase by your bank of
residences of bank personnel when they are transferred
to a new assignment and are unable to immediately
sell their homes for a fair value. On a few occasions
when the bank has undertaken to purchase an employee's home, it has sustained a loss on behalf of the
employee.
This Office will regard the purchase of an employee's
residence by your bank for the purpose of preventing
a loss to such employee by reason of the reassignment
481
to be a legitimate part of a program for the development and efficient utilization of bank employees.
However, the bank should arrange for early divestment of its title to such property and in no case should
the bank continue to hold the property in order to
realize a gain thereon.
The suggested alternative of having the bank's affiliate take title to the property will also be permissible.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
POLITICAL CONTRIBUTIONS
APRIL 12,
1963.
Your letter of March 11, 1963, in continuance of
our previous correspondence, advises that you are of
the opinion that the proposed mortgage loan by The
First National Bank of East Islip, East Islip, New
York, to the Islip Town Democratic Club is not illegal
or prohibited. You have considered the loan in the
light of 18 U.S.C. 591 and 18 U.S.C 610, which are
concerned with political contributions by National
Banks.
The loan is to finance the purchase of property by
the borrower and normal interest is to be charged
thereon. The building on the property will be used
as a clubhouse for meetings, dances and other recreational pursuits, as well as any business which a political club might be expected to transact.
In the circumstances, we agree with your conclusion that the proposed loan would not be unlawful
under the provisions of 18 U.S.C. 591 and 18 U.S.C.
610.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
REAL ESTATE LOANS
OCTOBER 23,
1962.
This is in reply to your letter of October 19, 1962,
concerning a loan proposed to be made by a group
of 10 banks including 4 national banks to a public
utility company in the Philippines in an aggregate
principal amount not to exceed U.S. $9,400,000. The
basic structure of the proposed financing will involve
a 7-year term loan to the borrower secured by the
guaranties of two large U.S. oil companies, each for
one-half of the aggregate of the loans, and by a pledge
of the borrower's own first mortgage bonds, payable
in Philippine pesos, to be issued under an existing
482
indenture and secured by a lien on the borrower's plant
and real properties.
The financing outlined above requires the approval
of the Philippines Public Utilities Commission which
will take several months to obtain. The borrower,
however, needs U.S. $4,700,000 within the next 2
weeks to meet a dividend payment required to be
made to the holding company owning its capital stock.
The banks, therefore, contemplate making an interim
1-year loan of that amount. It is your understanding
that the interim loan will not require such approval.
When the approval is received the initial term loan
will be made in an amount sufficient to discharge the
interim loan. The borrower may then and until November 30, 1963, borrow additional amounts up to
the aggregate of $9,400,000. The additional term
loans will be used primarily for current plant expansion
and for other general corporate purposes.
The borrower has an existing contractual obligation
to limit the aggregate amount of its unsecured indebtedness. For this reason, the borrower is required to
pledge as security for the interim loan other first mortgage bonds having a corresponding maturity. The
interim loan will not be secured by guaranties of the
oil companies.
You state that it is your understanding that the
banks are satisfied that the borrower's projected earnings over the next 8 years will be clearly sufficient to
repay the proposed term loans and that, if necessary,
current earnings could also be applied to the payment
of the interim loan. It is also your understanding
that the banks are relying primarily on the ability of
the borrower as a going concern to pay the loans out
of the operations of its business, and on the general
credit standing of the guarantors, for payment of the
term loans in United States dollars rather than on the
value of the bonds to be pledged as collateral. You
have been informed that the bonds have been taken
as security primarily to prevent other creditors from
obtaining a position superior to that of either the banks
or the guarantors with respect to the borrower's properties, and also because of the restriction on the amount
of the borrower's unsecured indebtedness.
We agree with your conclusion that the proposed
loans fall within the exception set forth in the fifth
paragraph of Section 24 of the Federal Reserve Act
(12 U.S.C. 371) relating to loans to "manufacturing
and industrial businesses where the association looks
for repayment out of the operations of the borrower's
business, relying primarily on the borrower's general
credit standing and forecast of operations . . .," and
should not be considered as real estate loans.
Paragraph 2152, of the Digest of Opinions, which
limits this exception to working capital loans is in the
process of revision. In its revised form it will incorporate the ruling made in this letter.
Sincerely,
G. B. REDMAN,
Acting Comptroller of the Currency.
NOVEMBER 23,1962.
This is in reply to your letter of November 15, 1962,
concerning a proposed commercial construction loan
to be used in the erection of a multi-story office building.
You state that you hold a firm 2-year commitment
of a responsible insurance company to purchase the
loan upon completion of the building. Because of the
size of the project nearly 18 months will be required for
its completion. Additional time will be needed in
order to obtain occupancy before amortization commences. For these reasons, the borrowers request that
the note mature on the expiration date of the commitment of the permanent lender. The borrowers will
agree, however, that the building will be fully completed within 18 months from the date of the note.
The exception from the requirements applicable to
loans secured by real estate, which is contained in the
third paragraph of Section 24 of the Federal Reserve
Act (12 U.S.G. 371), relates to industrial or commercial construction loans "having maturities of not to
exceed eighteen months where there is a valid and
binding agreement entered into by afinanciallyresponsible lender to advance the full amount of the bank's
loan upon completion of the buildings."
Paragraph 2155 A (10/1/62) of the Digest of Opinions states that the purpose of the statute is that there
be adequate provision for the repayment of the full
amount of the bank's loan within the time prescribed.
In the case of the proposed loan, the respective agreements of the borrowers to complete the building within
18 months, and the permanent investor to purchase
the note upon completion of the building, taken together, provide for the repayment of the full amount of
the bank's loan within the time prescribed. In other
words, the maturity of the loan with respect to the bank
does not exceed 18 months. In such circumstances, the
maturity of the note given by the borrower is not controlling.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
JANUARY 9,1963.
Your letter of December 28, 1962, has been forwarded to this office by Mr. J. R. Thomas, Regional
Chief National Bank Examiner, for reply.
You inquire as to whether lots in a partially developed housing subdivision may be considered improved property for the purposes of Section 24 of the
Federal Reserve Act (12 U.S.C. 371). There are
presently some 25 homes now built in the subdivision,
and 7 more are scheduled for construction early this
year. There have been furnished for the seven lots in
question water, gas, electricity and paved streets. At
present, septic tanks are being used for the existing
homes, but the sewer system will be connected soon
to a district sewer system which is presently within 1
mile of the property.
It is our position that the lots for which these substantial improvements have been provided do constitute improved real estate within the meaning of
Section 24, and that loans thereon may be made within
the limitations of said Section.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
JANUARY 9,1963.
This is in reply to your letter of December 14, 1962,
concerning a loan proposed to be made by your client,
a national bank, to a Venezuelan oil producing company. The loan is to be in the amount of $6.5 million
repayable in quarterly installments over a 4-year term.
It is to be guaranteed by the borrower's parent English
holding company and secured, inter alia, by the borrower's assignment to the bank of a mortgage on certain land and fixed assets of the borrower's Delaware
affiliate, a company engaged primarily in the refining
and marketing of oil products in California.
You state that it is your understanding that the
bank is satisfied that the borrower's projected operating
earnings, plus dividends from Venezuelan oil royalty
companies in which it has a majority interest, will be
sufficient to repay the loan over the next 4 years. It
is also your understanding that the bank is relying primarily on the ability of the borrower as an oil producing company and a majority owner of the royalty companies to pay the loan out of its operations and dividends, and to a limited extent on the general credit
standing of the English parent as guarantor. You have
been informed that the mortgage on the California
property and certain other collateral have been taken
483
as security primarily as a hedge against nationalization
of the borrower and exchange blockages.
This will confirm the advice given you by telephone
on December 14, 1962, that we agree with your conclusion that the proposed loan falls within the exception set forth in the fifth paragraph of 12 U.S.C. 371
as a loan to an industrial business where the bank is
looking "for repayment out of the operations of the
borower's business, relying primarily on the borrower's
general credit standing and forecast of operations, with
or without other security, but wishes to take a mortgage
on the borrower's real estate as a precaution against
contingencies * * *," and should not be considered
as a real estate loan.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
JANUARY 15,
1963.
This is in reply to your letter of December 14, 1962,
concerning loans in an aggregate amount not to exceed
$1,500,000 proposed to be made to a railroad company, the credit to be available for 2 years and each
loan to mature 2 years after the date of the respective
borrowing.
You state that your bank is willing to enter into the
proposed credit if, and only if, the Interstate Commerce Commission will guarantee the loans advanced
under the authority granted to it by the Transportation Act of 1958 (49 U.S.C. 1231-40).
You have been advised that the Interstate Commerce Commission will require as a condition to the
giving of the guaranty that the bank take a general
mortgage on all the physical properties of the railroad.
The general mortgage will be at best a second lien on
the borrower's real estate and a third lien on most of
the rolling stock. The bank, however, will not be required to resort to the collateral before realizing on the
guaranty.
You summarize the proposed transaction by stating
that the borrower's financial condition and prospects
are such that the bank would not entertain the loan
without the Government's guaranty and that the general mortgage will be taken only at the insistence of
the guarantor, and that as far as the bank is concerned
the required mortgage adds nothing to the collectibility of the loans.
This will confirm the advice given you by telephone
that where the bank in its judgment relies principally
upon security other than real estate, in this case the
484
guaranty of an agency of the United States, the loan
does not constitute a real estate loan within the meaning of 12 U.S.C. 371 although the loan may also be
secured by real estate either as a matter of prudent
banking practices or, as in this case, because such
security is required by the guarantor.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
JANUARY 21,
1963.
Reference is made to your letter of January 4, 1963,
concerning the amortization of a real estate loan in
the amount of $375,000, secured by a mortgage on
property appraised at $750,000. The loan, participated in by your bank and a local manufacturing concern, will be extended to a group of prominent local
citizens to aid in their acquisition of the manufacturer's office building.
It is your understanding that the borrowers are purchasing the building for the purpose of bringing a new
payroll to the city. It is their hope to sell the building within 2 years, at which time it will be refinanced.
Even if this hopes does not materialize, the borrowers
have adequate capacity to amortize this loan in full
within the next 10 years.
In order to assist the borrowers, the lenders have
agreed to waive principal payments for thefirst2 years.
Thereafter, the principal is to be repaid in forty equal
quarter-annual payments which will retire the loan
within 12 years.
This will confirm the advice given you by telephone
on January 4, 1963, that the amortization schedule
proposed will comply with the requirements of 12
U.S.C. 371 (2), although no payments of principal will
be made during the first 2 years.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
JANUARY 28,
1963.
Your letter of December 18, 1962, addressed to
Mr. J. D. Gwin, Regional Chief National Bank Examiner, has been referred to this Office for reply. You
question the eligibility of condominium apartments for
mortgaging under 12 U.S.C. 371.
In condominium ownership the owner-mortgagor
owns, separately, one or more single dwelling units in
a multiple-unit apartment building and has an undivided interest with the owners of the other apart-
merits in common areas and facilities serving the
building.
It is important to note that in many States, legislation will be necessary (a) to insure recognition of ownership on a condominium basis; (b) to allow for
recording of the appropriate instrument creating the
condominium; and (c) to provide for taxes to be levied
against the individual unit together with its undivided interest in the common elements in the condominium, rather than against the structure as a whole.
It is the position of this Office that where state
law permits or recognizes condominium ownership,
the purchaser of a condominium apartment takes title
to improved real estate such as is eligible for real
estate loans within the meaning and limitations of
12U.S.G.371.
Sincerely,
FEBRUARY 11, 1963.
Your letter of January 22, 1963, inquires as to the
legality of your bank's taking a real estate mortgage on
a vacant lot in order to secure a loan.
The lot in question, you advise, is prime industrial
property, bounded in front by a paved street and on
one side by a railroad siding. Electric and gas utility
connections are available from the abutting street.
Water, sewer and telephone facilities are also available.
This will confirm the advice given you by telephone
on January 21 that the lot you describe does constitute
improved real estate within the meaning of 12 U.S.G.
371 and that a loan may be made thereon within the
limitations of that statute.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
JAMES J. SAXON,
Comptroller of the Currency.
FEBRUARY 15,
JANUARY 28,
1963.
Your bank proposes to make real estate mortgage
loans to two officers of a tractor company in order to
enable them to take advantage of an opportunity to
purchase stock in their company. The loans will be
guaranteed by the company. Because the borrowers
will not begin to realize substantial returns on their
investment for 3 years, you ask our opinion as to the
legality of mortgage payment schedules calling for installments on other than the usual monthly amortization basis.
The two amortization schedules under consideration
contemplate that regular payments of principal and
interest will not be made until the fourth year of the
20 year loans. During the first 3 years of the loans,
interest payments will be made monthly, and payments
toward principal will be made yearly.
Section 371 requires that where loans are made for
a period of 20 years in an amount equal to 663/3 or
75% of the appraised value of the real estate, the payments thereon must be in an amount sufficient to
amortize the principal thereof within the loan's term.
Either of the amortization schedules described meet
the requirements of the statute. In fact, under the
circumstances which you describe, an amortization
schedule which required no principal payment within
the first 3 years would be consistent with 12 U.S.G.
371.
Sincerely,
T
T „
'
JAMES J. SAXON,
Comptroller of the Currency.
1963.
Your letter of January 21, 1963, has reference to a
letter of this Office dated January 9, 1963, in which the
conclusion was reached that lots in a housing subdivision for which substantial improvements—i.e.,
water, gas, electricity, paved streets and, eventually,
sewer system—have been provided do constitute improved real estate within the meaning of 12 U.S.G.
371. You inquire whether this ruling supplants that
set forth in Paragraph 2210 of the Comptroller's Digest
of Opinions.
The referenced Paragraph states that, in housing
subdivisions, only those lots on which houses have
actually been constructed constitute improved real
estate. Our letter of January 9, 1963, qualifies this
previous position to the extent that not only completed
houses, but also such substantial improvements as cited,
suffice to convert what was unimproved property into
improved property within the meaning of 12 U.S.C.
371. The revised Digest of Opinions, incorporating
this change, will be furnished all National Banks when
published.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
MARCH 4, 1963.
Your letter of February 25, 1963, requests our opinion as to whether the following described property
qualifies as improved real estate and, thus, eligible for
a mortgage loan under 12 U.S.C. 71.
485
The lot is in a commercially zoned area, cattycornered to The First National Bank premises. It is
bordered by the Seaboard Airline Railroad and is in
the immediate area of other established commercial
enterprises. The lot, you advise, is a favorable piece
of property in an excellent location.
We conclude that this property qualifies as improved
real estate within the meaning of 12 U.S.C. 371.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
MARCH 6, 1963.
Reference is made to your letter of February 20,
1963, to Mr. G. M. Van Horn, Regional Chief National Bank Examiner, concerning your proposal to
create what you refer to as a split loan to a lessor where
the assignment of rentals from the lessee would be insufficient to liquidate the obligation within the term of
the lease.
Under the proposal a 15-year fully amortized mortgage loan in an amount equal to two-thirds of the estimated value of the property will be made to the lessor.
In addition, a 10-year fully amortized lease loan will
be made in an amount equal to the remaining onethird of the estimated value of the property. Both
loans will be secured by an assignment of rental payments to be received under a 10-year lease. The lease
loan will also be secured by an additional mortgage on
the property. The rental payments, which will be
made by a national concern considered to be a prime
credit risk, will be sufficient to meet the amortization
schedule of both loans during the term of lease.
Since the bank will be relying for the repayment of
both loans during the term of the lease principally
upon the rentals to be paid by a prime credit risk, the
combined loans do not during this period constitute
real estate loans within the meaning of 12 U.S.G. 371,
although, as a matter of prudent banking practice,
they are also secured by real estate. After the term
of the lease the bank will be relying upon real estate
as the primary security, but the loan then outstanding
will conform to the requirements of 12 U.S.C. 371.
It is our conclusion, therefore, that the proposed transaction conforms to the requirements of the banking
laws and prudent banking practice.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
486
MARCH 7,1963.
Your letter of February 1,1963, has reference to our
letter of January 9, 1963, regarding the financing of
lots in housing subdivisions, and poses the following
questions, the answers to which are noted after each:
(1) Can a National Bank make a mortgage
loan on a vacant lot in a built-up area? This lot
would have all of the utilities available and would
be a single lot, setting in a developed area.
Answer: Under the circumstance which you
described where the value of a vacant lot is enhanced substantially by its improved surroundings
and immediately accessible utilities, a national
bank may consider it to be improved property
within the meaning of 12 U.S.C. 371.
(2) Is it necessary to have utilities stubbed into
the lot, or is it enough that the utilities are available to the lot?
Answer: The test, in the first instance, is
whether or not the lot is improved by virtue of its
surroundings and attendant facilities. While it
would not be necessary in every case that utilities
be stubbed in on the lot which is to be mortgaged,
it would as a minimum be necessary that provisions for such connections have been made on or
immediately adjacent to the lot so that at such
time as construction of a building was commenced
thereon, connection to the immediately available
utilities could be made with facility.
(3) Is there any time limit on loans as to when
construction must start after originating mortgage, secured by lots in a subdivision?
Answer: Where a lot has been determined to be
improved real estate, it qualifies for a mortgage
loan whether or not further improvements are to
be made thereon.
(4) Is it necessary that streets be paved with
concrete or just improved (i.e. oiled, graveled,
asphalt) ?
Answer: The existence and condition of streets
in a housing subdivision are among the factors
to be considered when determining whether the
lots therein are improved real estate. Under certain circumstances, subdivision lots may be determined to be substantially improved even though
the streets therein have not been permanently
paved.
The position enumerated in our letter of January 9,
1963, does qualify to an extent the ruling set forth in
Paragraph 2210 of the Comptroller's Digest of Opin-
ions. This change will be reflected in the revised Digest
when published, and a copy thereof will be furnished
your bank.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
APRIL 18,
1963.
Reference is made to your letter of April 6, 1963,
wherein you inquire whether a National Bank may
make loans secured by real estate mortgages for a
period of 25 years, if prior to the date of the mortgage,
the bank has a firm take-out commitment from the
insurance company.
Where a National Bank, in its judgment, relies primarily upon factors other than the security of real
estate, such as a firm take-out commitment from a
financially responsible party, a loan secured by a real
estate mortgage may be made by it for a period of 25
years. Such an arrangement does not violate the provisions of 12 U.S.G. 371 and is, therefore, permissible
to a National Bank because it does not constitute a
real estate loan within the meaning of that section
even though the loan may be secured by a first mortgage on real estate either as a matter of prudent banking practice or because such security may be required
by the financially responsible party giving the firm
take-out commitment.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
APRIL 18,
1963.
You seek an opinion of this Office as to whether that
bank may loan money to a promoter, developer and/or
builder for the acquisition and development of a tract
of land for a proposed subdivision without being in
violation of the provisions of 12 U.S.G. 371.
You state that in your area there is a responsible
trust company of substantial net worth and an extremely good experience record which was created by
its parent, a major title insurance company, for the
purpose of financing, both directly and indirectly, real
estate transactions. The trust company brings its prospect, the developer, to the bank for the two-fold purpose of helping the prospect obtain a source of interim
and permanent financing and to offer the proposed
development loan to the bank. If the bank is interested in financing the proposed development, the trust
company through its wholly owned subsidiary known
as the land holding company makes a loan to the developer. The land holding company then negotiates
a loan under the same terms and conditions with the
bank, offering primarily a "take-out agreement" of the
trust company and as collateral security the note and
mortgage of the developer in favor of the land holding
company. The take-out agreement in effect backs up
both the obligation directly to the bank of the land
holding company and the obligation in favor of the
land holding company of the developer since the agreement is to purchase both notes and take an assignment
of the mortgage. Performance of this take-out agreement by the trust company would be contingent only
on the maturity of these two notes. In making the
loan the bank would rely principally upon this firm
take-out agreement of the trust company rather than
the real estate mortgage. You further state that such
an arrangement would enable the National Bank to
provide complete financing for a developer from
acquisition of the undeveloped land tofinancinghouse
purchases.
Where the bank in its judgment relies principally
upon factors other than the security of real estate, in
this case the firm unconditional take-out agreement
of the trust company, the loan does not constitute a
real estate loan within the meaning of 12 U.S.C. 371
although the loan may also be secured by real estate
either as a matter of prudent banking practice or because such security may be required by the financially
responsible party furnishing the firm unconditional
take-out agreement.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
APRIL 29,
1963.
Your letter of April 11, 1963, addressed to Regional
Chief National Bank Examiner G. L. DeRemer, takes
issue with our Examiner's criticism, in his Report of
Examination concluded February 15, 1963, of a loan
secured by a second lien on real estate as additional
collateral to restaurant equipment. The original
amount of the 3-year loan was $16,520 with monthly
payments of $459. The loan payments are current.
Where a National Bank, in its discretion, extends a
loan in primary reliance on such credit factors as the
financial responsibility of the borrower, guaranties or
other considerations, such loan will not be considered
a real estate loan even though, as a matter of prudent
487
banking practice, the bank takes from the borrower
a mortgage on the real estate. Accordingly, such mortgages may take the form of conforming or nonconforming liens against the property.
Your bank may retain in its collateral portfolio the
second mortage in question as additional security for
this loan.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
JULY 15, 1963.
This is in reply to your letter of July 5, 1963, concerning the merger of real estate liens and the application of paragraph 2040(f)(l) of the Comptroller's
Manual of Rulings, and in confirmation of the advice
given you by telephone on July 12, 1963.
You state that your client, a National Bank, has
made a loan secured by a first mortgage of real estate
with the added security of a purchase agreement by
the lessee of the real estate. The purchase agreement
provides that if the lessee is called upon to purchase
the mortgage note, he is also entitled to receive the
mortgage. The bank has now been asked by the mortgagor to make a further mortgage loan on other contiguous property which other property, by itself, will
not support the new loan. The appraised value of
both properties together would support both loans.
The bank has asked whether the new loan would be
permissible if it were secured by a first mortgage on
the additional property and either a second mortgage
on the property presently mortgaged or an agreement
on the part of the mortgagor that the present mortgage
would also stand as security for the new loan.
Paragraph 2040 (f) (1) of the Comptroller's Manual
of Rulings indicates that the proposed transaction is
permissible if there is no intervening lien between the
first and second mortgages. Such a lien would arise
were the bank to call upon the lessee to purchase the
mortgage note. Until that time, there is no intervening lien and the purchase agreement represents only
an alternative remedy which it is prudent for the bank
to retain. The purchase agreement, under these circumstances, does not represent an intervening lien
within the meaning of paragraph 2040 (f) (1) and the
combined mortgages may be regarded as merged into
one qualifying first lien.
Sincerely,
AUGUST 6, 1963.
Your letter of July 25, 1963, inquires whether the
effect of recent rulings of this Office is to permit National Banks to accept nonconforming real estate liens
as additional security for home improvement loans.
As defined in paragraph 2000 of the Comptroller's
Manual of Rulings, a real estate loan is one principally
secured by real estate. Implicit in this definition is
the recognition that banks may make loans in primary
reliance upon credit factors other than real estate, but
additionally secure such loans, as a matter of prudent
banking practice, by nonconforming real estate
security.
As a general rule, loans for home improvement purposes are made in primary reliance upon the credit
standing of the borrower, insurance, guaranties or combinations of these factors. Additional security in the
form of junior mortgages, taken as a matter of prudent
banking practice, need not meet the requirements of
12U.S.C. 371.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
OCTOBER 29,
1963.
In your letter of October 22, 1963, you ask whether
an 83-acre tract of undeveloped residential land may
be considered to be improved real estate within the
meaning of 12 U.S.C. 371 because of substantial and
permanent construction and development in its
vicinity.
The tract which was sold in 1961 for about $10,000
per acre is almost completely surrounded by developed
and developing residential property and is adjacent
to a major university campus which is in the process of
development. It is reported to be the best remaining
undeveloped parcel in a rapidly growing urban district. There are no immediate plans for its development except that the owners plan to sell it in whole or
in parcels to subdividers and builders as soon as
possible.
This will confirm the advice given you by telephone
on October 28, 1963, that this tract may be considered
to be improved real estate within the meaning of 12
U.S.C. 371.
Sincerely,
JAMES J. SAXON,
JAMES J. SAXON,
Comptroller of the Currency.
Comptroller of the Currency.
488
DECEMBER 24,
1963.
There is attached for your use and information the
revised regulation governing loans made by National
Banks secured by liens upon leaseholds. The new regulation contains a revised section 5.3 which substitutes a simplified standard for appraising leasehold
values in place of the obsolete and impractical appraisal formula previously contained in that section.
The regulation also contains a revised section 5.5
which excepts from the regulation all loans made in
principal reliance on the insurance or guaranty of a
governmental agency. The revised sections of this regulation became effective immediately upon their publication in the Federal Register on December 24, 1963.
This regulation, authorized by 12 U.S.G. 371, is applicable to loans made by National Banks in primary
reliance upon the security of afirstlien on a leasehold.
National Banks may make such loans under the requirements of the regulation and the other requirements of the statute. The statutory requirements are
set forth in Paragraph 2200(b) of the Comptroller's
Manual for National Banks.
JAMES J. SAXON,
Comptroller of the Currency.
PART 5—LOANS MADE BY NATIONAL BANKS SECURED BY
LIENS UPON LEASEHOLDS
[12 CFR 5]
Sec.
5.1
5.2
5.3
5.4
5.5
Scope and application.
General authorization.
Appraisals.
Covenants and restrictions.
Loans insured or guaranteed.
Authority: §§ 5.1 to 5.5 issued under sec. 24, 38 Stat. 273,
as amended; 12 U.S.C. 371.
§ 5.1 Scope and application
This part is issued by the Comptroller of the Currency
under authority § 24 of the Federal Reserve Act, as amended
(12 U.S.C. 371). It applies to real estate loans made by
national banks secured by liens on leaseholds.
§ 5.2 General authorization
Any national bank may make or acquire a loan, in accordance with this regulation, secured by a first lien on a leasehold
under a lease which does not expire for at least 10 years beyond the maturity date of the loan.
§ 5.3 Appraisals
The "appraised value" of a leasehold, for the purposes of
12 U.S.C. 371, shall be determined by the use of accepted
and reliable methods of appraising leasehold values including,
in areas where such information is available, a consideration
of the sales prices of comparable leaseholds.
§ 5.4 Covenants and restrictions
In order to qualify as an acceptable leasehold for security
for a real estate loan made by a national bank, the covenants
and restrictions contained in the lease which provide for forfeiture or reversion in the event of a breach must not be more
onerous or burdensome than those contained in leases in general use in the area in which such bank is located, and the
lease should permit acquisition of the leasehold by the lending bank by voluntary conveyance or assignment by the lessee,
and acquisition and sale under judicial process, without being
subject to such restrictions as would jeopardize recovery of
the security value of such leasehold.
§ 5.5 Loans insured or guaranteed
The provisions of §§ 5.3 and 5.4 do not apply to loans
where the bank in its judgment relies principally on the insurance or guaranty of a governmental agency in making the
loan.
JANUARY 20,1964.
In your letter of November 21, 1963, you requested
a ruling for your client, The Citizens and Southern
National Bank, Atlanta, Georgia, as to whether, under existing statutes and regulations governing National Banks, as interpreted by the Comptroller, private mortgage guaranty insurance coverage may be
used to support a mortgage loan in excess of 75 percent of the appraised value of real estate and/or
for an amortization term longer than 20 years. In
other words, may private mortgage guaranty insurance, which is modeled after the FHA-VA type of
coverage, be used to remove a mortgage loan from
the classification of "real estate loan" within the
meaning of 12 U.S.C. 371?
Paragraph 2000 (b) of the Comptroller's Manual
provides that a real estate loan within the meaning
of 12 U.S.C. 371 is any loan secured by real estate
where the bank relies upon such real estate as the
primary security for the loan. However, where the
bank in its judgment relies principally upon other
factors, such as the general credit standing of the
borrowers, guaranties, or security other than real
estate, the loan does not constitute a real estate loan
within the meaning of 12 U.S.C. 371, although as a
matter of prudent banking practice it may also be
secured by real estate.
It is your conclusion that where such mortgage
insurance is the primary security relied upon, a National Bank would be able to make those loans which
would otherwise not qualify as conforming real estate
loans, but which would in all other respects be real
estate loans within the meaning of the applicable
statutes. Your conclusion is based on the premise that
mortgage insurance falls within the same classifica-
489
tion as other types of guaranties, accommodation endorsements and take-out commitments, all of which
have been held to remove loans from the definition
of a real estate loan within the meaning of 12 U.S.G.
371.
We agree with your conclusion that private company mortgage insurance or guaranty may be used as
a substitute for the insurance or guaranty of a government agency and that where a National Bank makes
a loan in primary reliance upon such insurance or
guaranty, the loan does not constitute a real estate
loan within the meaning of 12 U.S.G. 371.
Where the bank relies on private insurance or
guaranty as primary security for a loan, its files
should contain evidence to demonstrate that the bank
is justified in placing such primary reliance on the
insurance contract.
Sincerely,
T
T o
1
JAMES J. SAXON,
Comptroller of the Currency.
JUNE 5,1964.
This is in reply to your letter of April 28, 1964, in
which you inquired whether shares of your bank
stock might be held as a "back-up" for a loan which
you intend to make. The loan would be a real estate
loan secured by a mortgage in complete conformity
with 12 U.S.C. 371. However, due to the variability
in the customer's earning pattern, your bank wishes to
hold these shares as a back-up for the loan.
Title 12 U.S.G. 83 states that a National Bank may
not make any loan on the security of its own shares,
nor be the purchaser or holder of any such shares,
unless such security shall be necessary to prevent loss
upon a debt previously contracted in good faith.
However, a National Bank may require that the borrower execute an agreement not to pledge such shares,
execute an agreement to pledge such shares at the
request of the bank at such time that loss on the loan
appears likely, or leave such shares in the bank's
custody.
Sincerely,
_
_ _
JAMES J. SAXON,
Comptroller of the Currency.
RELATIONSHIPS WITH INSURANCE
COMPANIES
JUNE 9,1964.
In response to many inquiries received by this
Office, we are undertaking a study of the relationships between National Banks and insurance com490
panies. It would be most helpful to us if we could
have from your bank such comments or suggestions
as you would care to make concerning these relationships.
The board of directors of each National Bank, in
the exercise of its fiduciary duties to its shareholders,
should review regularly the bank's relationships with
insurance companies. Such a review could serve as
a basis for suggestions to be made to this Office in
connection with our study.
It is suggested that there are at least several factors
which should be considered in examining the relationships of the bank with insurance companies:
(1) Is the insurer a financially responsible
company, and do the terms and conditions of the
insurance contract afford adequate protection
to the bank?
(2) What has been the actual experience in
dealing with the insurance company?
(3) Does the insurance company offer reasonable and competitive rates?
(4) Does the insurance company impose upon
the bank any burdensome restrictions which
would impair in any way the freedom of bank
management to choose its own operating practices?
Wherever a review of these and other considerations indicate that the bank's present relationships
with insurance companies may not be serving the
best interests of the public, the bank and its shareholders, the board of directors should give appropriate
consideration to alternatives which may be open for
the provision of these services.
JAMES J. SAXON.
REPORTING REQUIREMENTS
APRIL 16, 1962.
In the interest of reducing the number of reports
national banks are required to submit to the supervisory agencies, I have decided to eliminate the midyear Report of Income and Dividends, beginning with
the current year. No such report on Form 2129 will
be required for the 6 months period ending June 30,
1962, and from now on Reports of Income and Dividends will be requested by this office only for December 31, each year, covering the operations for the entire
calendar year.
I believe this action to be in the best interests of the
banks, and a step toward partially alleviating the
heavy burden of reports required to be furnished the
supervisory agencies.
Very truly yours,
the year-end. No significant modification can therefore be expected at this time.
JAMES J. SAXON,
Comptroller of the Currency.
JAMES J. SAXON,
Comptroller of the Currency.
MARCH 8,
1, 1962.
Hereafter, the detailing of individual issues of all
securities on page 12 of the examination reports, except for speculative securities, defaulated issues and
stocks, will be discontinued. Information relative to
all speculative securities, defaulted issues and stocks is
to be submitted on page 12 as has been done previously.
All National Bank Examiners have been instructed
to comment particularly on any concentrated holdings
in the issues of any one obligor, undue holdings of marginal securities, and of any other facts or conditions
relating to the bond account which they deem advisable
to report.
MAY
JAMES J. SAXON,
Comptroller of the Currency.
JUNE 5,
1962.
We have received numerous inquiries from National
Banks throughout the country concerning the survey
of chain banking which the Federal Reserve Board is
now undertaking. We wish to make it clear that participation by National Banks is at their discretion.
We also wish to inform all National Banks that the
Federal Reserve Board will solicit branch deposit data
of all member banks on an annual basis, the first of
these surveys to be undertaken shortly. The asserted
purpose of this annual survey is to aid the Federal Reserve Board in discharging its responsibilities with respect to applications "to merge or consolidate banks,
to form or add to bank holding companies, and to
establish branches." We indicated to the Federal Reserve Board our judgment that a broad-scale continuing survey of this nature is not necessary to the
effective discharge of the responsibilities to which it is
addressed. Here again, participation by National
Banks in the proposed survey is at their discretion.
So that our views on these proposed surveys may
be understood in their proper context, we are concerned about the mounting burdens which are being
imposed upon National Banks in the form of greatly
expanded reporting requirements. In recognition of
these burdens, this Office has recently sought without
success to abbreviate three of the four mandatory reports of condition, requiring a detailed report only at
1963.
In order to reduce the administrative and expense
burden incident to the publication of Reports of Condition, National Banks shall have the following option,
effective immediately:
Publication of the first call of each semiannual
period may at the bank's option be deferred, and made
at the same time, and in conjunction with, and as part
of, the publication of the second call of the same semiannual period by showing the call figures for each of
the two calls in comparative columnar form for each
date.
Any National Bank exercising this option should
strike from the attestation for the first call only of the
same semiannual period the phrase "within fifteen
days from the date of receipt of the call for report of
condition by the Comptroller of the Currency."
JAMES J. SAXON,
Comptroller of the Currency.
JULY 3,1963.
As shown in the enclosed request, June 29, 1963,
was selected by the majority of the Federal supervisory agencies as the date for the second call report
for 1963. This Office would have preferred a date
other than June 29.
It is the opinion of this Office that the legislative
history of the call report laws clearly indicates a design
to employ these reports as a supervisory device and
on a surprise basis. In practice, however, this design
has not been followed. During the past 25 years, calls
were made on the last business day of June 21 times,
and on the last business day of December 24 times.
As a consequence, the supervisory purpose of call reports has fallen into disregard.
This default from sound bank supervision has
brought about the widespread practice of "window
dressing." Although the banking industry generally
regards this practice as undesirable, no justifiable
criticism can be lodged against the banks for "window
dressing" in view of the failure of the bank supervisory
agencies to take the steps necessary to prevent this
practice.
The practice of end-of-month calls has been defended by some as a means of providing statistical in491
formation on a comparable basis for analytical purposes. We recognize the usefulness of such data for
these purposes, but it is our view that the practice
of "window dressing" has impaired the validity of
these figures. Although surprise calls do not provide
strict comparability of data, this would be less serious
from a statistical viewpoint than the consequences of
"window dressing." Thus, the procedure of surprise
calls would serve our supervisory responsibilities more
effectively without impairing, and perhaps improving, the statistical worth of the data.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
MAY 28,1964.
Last year this Office substituted Form 103, the
Trust Department Annual Report, for Form 2130-D,
which had formerly been utilized for this purpose.
The new report called for market values of assets
of accounts where the bank had investment responsibility; this data to be taken from the records of
account asset reviews. Through this revision, this
Office obtained for the first time meaningful and
comparable trust department figures.
Form 103 will be used henceforth for reporting
trust department assets. Inasmuch as it will call for
market values of assets of all accounts wherein the
bank has investment responsibility, either as of the
date of the last review of that account or as of December 31 of the subject year, banks are advised to
establish operating procedures so as to provide ready
accessibility to these figures. It is not anticipated that
there will be a delayed submission date in subsequent
years, as was the case this year.
JAMES J. SAXON,
Comptroller of the Currency.
JULY 8,1964.
On March 10, 1964, the President addressed to the
heads of all executive departments and agencies a
request for a special review of all reporting requirements, with instructions to eliminate all unnecessary
reporting. Following that Presidential request, we
redoubled our efforts in this Office to simplify the
reports required of National Banks and to diminish
the burdens of such reporting. We are pleased to
report that these efforts bore fruit in the form we
employed for the first call of this year in which there
were 70% fewer required items than in the comparable call for 1963. This is a task which requires con492
tinued vigilance because of the many and increasing
requests for data from National Banks, and we have
not always been entirely successful in our efforts to
persuade other agencies to keep their demands within
proper bounds.
I am enclosing a copy of the President's memorandum so that you may be aware of his thoughts on
the matter of burdensome reporting, and our efforts
to carry out the President's wishes in this respect.
JAMES J. SAXON,
Comptroller of the Currency.
MARCH 10, 1964.
MEMORANDUM FOR THE HEADS OF EXECUTIVE
DEPARTMENTS AND AGENCIES
Subject: Simplification or elimination of reports to the
Government
The number and complexity of reports to the Government have increased in recent years.
Most of these reports are essential—and many of them
result from our expanding economy.
But we must be on guard to prevent duplication—eliminate obsolete items—and avoid unnecessary details.
Too much reporting puts a heavy burden on citizens,
industry in general, and particularly on small business.
Fortunately the machinery set up by the Federal Reports
Act of 1942, has been helpful in controlling reports required
by Federal agencies.
Nonetheless, I consider it timely and constructive to
launch a special review of all current reporting requirements
at this time.
In no case should necessary reporting be eliminated—
but all unnecessary reporting should.
Our objective is simply this:
1. To simplify reports.
2. To discontinue reports where possible.
3. To save the time of the individual businessman
as well as industry in general.
4. To make better use of the time and efforts of
government employees.
This should result in a long-term saving of time and
money by the Government, business and the general public.
I have asked the Budget Director to report to me on the
results of this effort.
LYNDON B. JOHNSON.
REPURCHASE AGREEMENTS
MARCH 11,1964.
Since numerous inquiries have been received concerning the treatment of repurchase agreements referred to in "Current Legal and Regulatory Developments" section of The National Banking Review
(December 1963, p. 261), the ruling on this subject
which will appear as Paragraph 1131 in the March
1964 supplement to the Comptroller's Manual for
National Banks is quoted below:
1131. Purchase or sale of securities: Resale or repurchase
agreement
The purchase or sale of securities by a bank, under an
agreement to resell or repurchase at the end of a stated
period, is not a borrowing subject to 12 U.S.G. 82 nor an
obligation subject to the lending limit of 12 U.S.C. 84.
JAMES J. SAXON,
proposals we have made would provide more certain
and more effective safeguards for banking, while preserving the needed protection for investors. In their
own best judgment, the National Banks may form and
express their own views.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
Comptroller of the Currency.
S. 1642
MARCH 6,
MARCH 3,1964.
The head of the American Bankers Association, we
have been informed, has endeavored to quiet the
opposition of the National Banks to the banking provisions of S. 1642 and H.R. 6789. He states that his
purpose is to allay any fears which may have been
aroused by my letter of February 20; that he has the
matter well in hand, and that the banks need not be
concerned about the issues which we have raised.
It is no service to the banking community to be told
that it need not be concerned about issues which vitally
affect its future. What the banking industry needs is
more information, more discussion, better understanding—not tranquilizers.
The views which Mr. Kelly expresses do not appear
to be in accord with those presented to us by the National Banks. Almost without exception, the communications which we have received concerning
S. 1642 and H.R. 6789 indicate grave concern about
the banking provisions of those bills. These differences between the views of the National Banks and
those of Mr. Kelly, a State banker, are understandable.
National Banks are now subject to comprehensive and
detailed disclosure requirements, and the proposed
legislation would needlessly duplicate these requirements and confuse their administration.
More National Banks than State banks would be
affected by the provisions of S. 1642 and H.R. 6789.
This has placed a particular responsibility on this
Office to assess carefully the legal consequences of the
proposed legislation. The position we have taken before the Congress was based upon an intensive examination of the issues. We do not share Mr. Kelly's
confidence in S. 1642 as modified by the Williams
Amendment. Neither the views of Mr. Gary quoted
by Mr. Kelly, nor the opinions expressed in the Senate
Committee Report, can alter the language of that
bill. That language, as we have indicated, plainly
leaves many vital questions unanswered.
We have endeavored to inform the National Banks
fully of the issues as we see them. In our view, the
1964.
DEAR MR. PRESIDENT:
This Office has received numerous requests from
banks for detailed information as to what exactly will
be required of banks in the event S. 1642 should
become law. This bill, which has already been
passed by the Senate, is now under consideration by
the House Committee on Interstate and Foreign
Commerce.
In answer to these requests, the following is a brief
summary of the major provisions of the bill:
What Banks Affected. Every bank having assets
of $1,000,000 or more and 750 or more shareholders
as of the effective date of the statute will, within 120
days after the last day of the bank's fiscal year following
the effective date of the statute, be subject to the provisions of the bill. Every such bank will be required
thereafter to comply with all of the terms and conditions of Section 12, 13, 14(a), 14(c), and 16 of the
Securities and Exchange Act of 1934, pursuant to
regulations required to be issued by the Comptroller
of the Currency implementing the aforesaid sections
of the Exchange Act. Two years after the effective
date, the Comptroller will have authority to lower the
shareholder test to 500.
Registration Statements. Pursuant to Section 12
(b), the Comptroller will be required to issue regulations requiring that a registration statement containing the information listed hereafter be filed by
each covered bank. Such registration statement and
all other reports described in this letter will be required
to be available to any member of the public unless
the registering bank makes written objection to public
disclosure of specific information contained therein
stating the grounds for such objection. The Comptroller, in cases where good cause has been shown,
may withhold a particular item of information. The
registration statement will be required of each covered bank with respect to all issues of securities outstanding regardless of the time the issue took place.
The registration statement must contain information
493
as to each of the following matters. The form of the
disclosure will be prescribed by the Comptroller.
(A) the organization, financial structure and
nature of the business;
(B) the terms, position, rights, and privileges
of the different classes of securities outstanding;
(G) the terms on which their securities are to
be, and during the preceding three years have
been, offered to the public or otherwise;
(D) the directors, officers, and underwriters,
and each security holder of record holding more
than 10 per centum of any class of any equity
security of the issuer (other than an exempted
security), their remuneration and their interests
in the securities of, and their material contracts
with, the issuer and any person directly or indirectly controlling or controlled by, or under direct
or indirect common control with, the issuer;
(E) remuneration to others than directors and
officers exceeding $20,000 per annum;
(F) bonus and profit-sharing arrangements;
(G) management and service contracts;
(H) options existing or to be created in respect
of their securities;
(I) material contracts, not made in the ordinary course of business, which are to be executed
in whole or in part at or after the filing of the
application or which were made not more than
two years before such filing, and every material
patent or contract for a material patent right
shall be deemed a material contract;
(J) balance sheets for not more than the three
preceding fiscal years, certified if required by the
rules and regulations of the Comptroller, by independent public accountants;
(K) profit and loss statements for not more
than the three preceding fiscal years, certified if
required by the rules and regulations of the
Comptroller, by independent public accountants;
and
(L) such other financial statements which the
Comptroller may deem necessary.
Such copies of articles of incorporation, bylaws, trust
indentures, or corresponding documents by whatever
name known, underwriting arrangements, and other
similar documents of, and voting trust agreements
with respect to, the issuer and any person directly or
indirectly controlling or controlled by, or under direct
or indirect common control with, the issuer, as the
Comptroller may require as necessary or appropriate
for the proper protection of investors and to insure fair
dealing in the security.
494
Periodic Reports. Pursuant to Section 13, each covered bank will be required to file a report with the
Comptroller in such detail and at such intervals as he
may require by regulation, necessary to keep current
the information and documents filed pursuant to Section 12. This will require the filing of current reports
showing any change made in the facts reported under
Items A through L listed above. For example, any
substantial change in the bonus and profit-sharing
arrangements reported under Item (F), information
and service contracts under Item (G) or options existing to be created in respect of securities issued by the
bank, Item (H).
Annual Financial Reports. Under Section 12 (a)
(2), an annual report, certified if required by the
regulations of the Comptroller, by independent public
accountants, and such quarterly reports as the Comptroller may prescribe.
Proxy Statements. Pursuant to Section 14(a), it
will be unlawful for any person, by the use of the
mails or by any means or instrumentality of interstate
commerce to solicit or to permit the use of his name
to solicit any proxy or consent or authorization in
respect of any security issued by a covered bank in
contravention of any rule or regulation issued by the
Comptroller. Under the new Section 14(c), covered banks which do not solicit proxies will be required
to transmit to all record holders information substantially equivalent to the information which would be
required by the Comptroller's regulations if a solicitation where made.
Insider Trading Reports. Under Section 16(a),
every person who is directly or indirectly the beneficial
owner of more than 10 per centum of any class of any
equity security issued by a covered bank or who is a
director or an officer of such bank shall file, at the
time of the registration of such security or within 10
days after he becomes such beneficial owner, director,
or officer, a statement with the Comptroller of the
amount of all equity securities of the bank of which he
is the beneficial owner, and within 10 days after the
close of each calendar month thereafter, if there has
been any change in such ownership during such month,
shall file with the Comptroller a statement indicating
his ownership at the close of the calendar month and
such changes in his ownership as have occurred during
such calendar month.
Pursuant to Section 16 (b) any profit realized by any
such officer, director or 10% beneficial owner, from
any purchase and sale or any sale and purchase of
any equity security of the bank, within any period of
less than 6 months shall inure to the benefit of the
bank and be recoverable by the bank irrespective of
any intention on the part of such beneficial owner,
director, or officer in entering such transaction, of
holding the security purchased or of not repurchasing
the security sold for a period exceeding 6 months.
Suit to recover such profit may be instituted at law
or in equity in any court of competent jurisdiction by
the bank, or by the owner of any security of the bank
in the name and in behalf of the bank, if the bank shall
fail or refuse to bring such suit within 60 days after
request or shall fail diligently to prosecute the same
thereafter. The foregoing will not apply to a security acquired by the officer, director, or beneficial
owner in good faith in connection with a debt previously contracted. Pursuant to Section 16 (c), it shall
be unlawful for any such beneficial owner, director,
or officer, directly or indirectly, to sell any equity
security of such issuer, if the person selling the security or his principal (1) does not own the security
sold, or (2) if owning the security, does not deliver
it against such sale within 20 days thereafter, or does
not within 5 days after such sale deposit it in the mails
or other usual channels of transportation; but no
person shall be deemed to have violated the subsection
if he proves that notwithstanding the exercise of good
faith he was unable to make such delivery or deposit
within such time, or that to do so would cause undue
inconvenience or expense.
Enforcement Power. New Section 12 (i) is especially important in connection with banks and is therefore quoted in its entirety. Section 12 (i) reads as
follows:
(i) In respect of any securities issued by banks the deposits of which are insured in accordance with the Federal
Deposit Insurance Corporation Act, the powers, functions,
and duties vested in the Commission under this title to
administer and enforce sections 12, 13, 14(a), 14(c), and
16 thereof (1) with respect to national banks and banks
operating under the Code of Law for the District of Columbia are vested in the Comptroller of the Currency, (2) with
respect to all other member banks of the Federal Reserve
System are vested in the Board of Governors of the Federal
Reserve System, and (3) with respect to all other insured
banks are vested in the Federal Deposit Insurance Corporation.
Since pursuant to the new paragraph 12 (i) the
Comptroller will have all of the powers, functions and
duties of the Commission with respect to securities
issued by National Banks, it is presumed that enforcement, liability and penalty provisions of the Exchange
Act such as Sections 20, 21, 22, 23, 25, 26, 27, 29, and
32 will be applicable. These enforcement and penalty
provisions include:
1. Authority in the Comptroller to commence
investigations, require statements under oath,
subpoena witnesses, compel their attendance and
require the protection of any books, papers,
correspondence, memoranda, or other records
which the Comptroller deems relevant or material to the inquiry. (Section 21 (b))
2. Authority to apply to the United States
District Court for an injunction against any act
or practice which may be in violation of the provisions of the Exchange Act or any rule or regulation issued thereunder. (Section 21 (c))
3. Authority to apply to the United States
District Court for a writ of mandamus commanding any person to comply with provisions of the
Exchange Act or any order of the Comptroller
made in pursuance thereof. (Section 21 (f))
4. Authority to conduct hearings where necessary (Section 22)
Private Lawsuits. Private individuals, including
shareholders who allege damage as a result of misstatements in material required to be filed under the Exchange Act, may maintain private lawsuits against the
offending issuer under Sections 27 and 32, in addition
to the particular reporting section alleged to have been
violated. Under Section 27, the United States District
Courts are given jurisdiction over any suit or action to
enforce any liability or duty created by the Exchange
Act or rules or regulations thereunder and to enjoin
any such violation. Such actions may be brought in
any district wherein the defendant may be found.
Penalties. Any person who willfully violates any
of the provisions applicable to banks or any rule or
regulation thereunder or any person who willfully and
knowingly makes or causes to be made any statement
in any application, report or document required to be
filed or any rule or regulation thereunder, which statement was false or misleading with respect to any
material fact, shall be subject upon conviction to a fine
of not more than $10,000 or imprisonment for not more
than 2 years, or both.
The above constitutes an outline of the new requirements to be imposed on covered banks by S.
1642. No attempt has been made to present every
requirement which may be contained therein. In
order that interested banks may have samples of the
type of reports which will be required, we are attaching for your information copies of the blank form
of registration statement, periodic report and insider
trading report which the SEC presently requires.
The registration and reporting forms which would be
used by the Comptroller in the event of passage of
495
the bill, would not necessarily be identical to the
SEC forms but would be similar as to type of information required.
It is my view that National Banks, which are now
subject to comprehensive and detailed disclosure
requirements, should be extempted from this legislation.
The above information is being submitted to each
National Bank President, so that he may determine
the effect of S. 1642 on his present and future operations and may take whatever action he deems appropriate in connection with this proposed legislation.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
JUNE 10,1964.
On December 20, 1962, this Office issued the first
set of regulations ever adopted by a bank supervisory
authority on the subject of minimum disclosure of
financial information to investors in securities issued
by banks under its jurisdiction. These regulations
required National Banks, with total deposits exceeding $25,000,000, to supply their shareholders and this
Office with proxy statements, prescribed annual financial reports and reports of major changes in
ownership.
Since this area was new to the banks involved, it
was not attempted in the first regulation to cover
every possible area of investor protection. The experience gained during approximately 18 months of
operation under the regulation has been most illuminating. The response of the banks over the prescribed
size limit and of many hundreds of smaller banks,
who voluntarily complied with the regulation, has
conclusively demonstrated that the matter of investor
protection could be well handled under existing
authority by this Office. The pending legislation,
which would subject banks to the provisions of the Securities and Exchange Act (S. 1642 and H.R. 6793)
partially duplicates the protection which has already
been given such investors by our present regulations
as supplemented by the additional items described
below. The bill, however, is deficient in certain important areas such as the number of banks covered
and new bank stock issues, as compared with our
regulation.
Prior to the issuance of our December 20, 1962,
regulations, a draft set had been published in the
Federal Register for comments. That draft covered
certain areas which, in the interest of simplifying the
initial regulation, were omitted in the final draft.
496
In order that there may be no question raised as to
the completeness and adequacy of National Bank
disclosure, the attached proposed amendments cover
the following important additional areas: (1) minimum information to be furnished shareholders with
respect to pending merger transactions; (2) special
information to be furnished this Office and shareholders in proxy contests over the election of directors;
(3) more detailed information concerning transactions of officers, directors and principal stockholders
in their bank stock; and (4) a requirement that
an offering circular containing specified information
be used in the sale of new issues of securities over a
certain size by both newly organized and existing
National Banks.
The major provisions of the attached draft amendments are as follows:
1. Changes in applicability tests. The present deposit test for covered banks is changed
to a test based on number of shareholders. Instead of the present test of deposits of $25,000,000
or more, all existing and amended disclosure
regulations, with the exception of the report on
changes in control, are made applicable only to
banks with 750 or more shareholders. In the
case of new banks, registration statements and
offering circulars (which may be the same
document) will be required of such institutions
if they propose to raise capital exceeding
$1,000,000. The present requirement for a report to the Comptroller of all changes of actual
working control is retained on all banks regardless of size. More detailed reports of changes
of ownership are required of banks having 750
or more shareholders.
2. Proxy statements for merger meetings.
Specific items of information are required in
proxy statements used for shareholder meetings
called for the purpose of obtaining approval to
merger transactions. The items of information
required include the material provisions of the
plan of merger, financial information on the
participating and resulting banks, per share
valuations and earnings, provisions of existing
pension and profit-sharing plans and other
items.
3. Proxy contests. A new Schedule C is added
to the proxy statement which is to be used only
in the event that a proxy contest occurs over the
election of directors. This schedule will require
personal information concerning each partici-
pant in such a contest to be furnished to this
Office and to shareholders by the dissenting as
well as the management side.
4. Ownership reports. Present ownership reporting requirements are expanded to include a
report to the Comptroller whenever a "substantial change" occurs in the holdings of any principal officer, director, or beneficial owner of 10%
of outstanding stock. "Substantial change" is
defined as a change which, when added to previously unreported changes, amounts to 500
shares or 5% of the bank's outstanding stock.
5. Registration statement and offering circulars. A new requirement for the use of offering
circulars in the public sale of new securities by
new and existing National Banks is laid down.
Such registration statements and offering circulars are required of new banks proposing to
raise more than $1,000,000 capital by public
sale of securities and existing banks with 750
or more shareholders proposing to issue securities at an offering price exceeding $1,000,000.
We believe that with the foregoing amendments
the investors in National Bank stock are fully protected. In the event that S. 1642 and H.R. 6793
become law, it is our present intention to use the
existing regulations with the above amendments as
implementing regulations under the statute.
JAMES J. SAXON,
Comptroller of the Currency.
DEPARTMENT OF THE TREASURY
COMPTROLLER OF THE CURRENCY
[12CFR Parts 10,11,12 and 15]
CORPORATE PRACTICES AND PROCEDURES OF NATIONAL
BANKING ASSOCIATIONS
Notice of Proposed Rule Making
Notice is hereby given that the Comptroller of the
Currency, pursuant to the authority contained in the
National Banking Laws (R.S. 324 et seq., as amended;
12 U.S.C. 1 et seq.) is considering the adoption of
amendments to Parts 10, 11, 12, and the adoption of
a new Part 15. All of said amendments and the new
Part deal with the subject of disclosure to shareholders.
On December 20, 1962, this Office issued the first
set of regulations ever adopted by a bank supervisory
authority on the subject of minimum disclosure of
financial information to investors in securities issued
by banks under its jurisdiction. These regulations required National Banks, with total deposits exceeding
$25,000,000, to supply their shareholders and this
Office with proxy statements, prescribed annual financial reports and reports of major changes in ownership.
Since this area was new to the banks involved, it
was not attempted in the first regulation to cover every
possible area of investor protection. The experience
gained during approximately 18 months of operation
under the regulation has been most illuminating. The
response of the banks over the prescribed size limit and
of many hundreds of smaller banks, who voluntarily
complied with the regulation, has conclusively demonstrated that the matter of investor protection could be
well handled under existing authority by this Office.
The pending legislation, which would subject banks to
the provisions of the Securities and Exchange Act
(S. 1642 and H.R. 6793), partially duplicates the protection which has already been given such investors by
our present regulations as supplemented by the additional items described below. The bill, however, is
deficient in certain important areas such as the number
of banks covered and new bank stock issues, as compared with our regulation.
Prior to the issuance of our December 20, 1962,
regulations, a draft set had been published in the
Federal Register for comments. That draft covered
certain areas which, in the interest of simplifying the
initial regulation, were omitted in the final draft. In
order that there may be no question raised as to the
completeness and adequacy of National Bank disclosure, the attached proposed amendments cover the
following important additional areas; (1) minimum
information to be furnished shareholders with respect
to pending merger transactions; (2) special information to be furnished this Office and shareholders in
proxy contests over the election of directors; (3) more
detailed information concerning transactions of officers, directors and principal stockholders in their
bank stock; and (4) a requirement that an offering
circular containing specified information be used in the
sale of new issues of securities over a certain size by
both newly organized and existing National Banks.
The major provisions of the attached draft amendments are as follows:
1. Changes in applicability tests. The present
deposit test for covered banks is changed to a
test based on number of shareholders. Instead
of the present test of deposits of $25,000,000 or
more, all existing and amended disclosure regulations, with the exception of the report on
497
changes in control, are made applicable only to
banks with 750 or more shareholders. In the
case of new banks, registration statements and
offering circulars (which may be the same document) will be required of such institutions if
they propose to raise capital exceeding $1,000,000.
The present requirement for a report to the Comptroller of all changes of actual working control
is retained on all banks regardless of size. More
detailed reports of changes of ownership are required of banks having 750 or more shareholders.
2. Proxy statements for merger meetings.
Specific items of information are required in
proxy statements used for shareholder meetings
called for the purpose of obtaining approval to
merger transactions. The items of information
required include the material provisions of the
plan of merger, financial information on the participating and resulting banks, per share valuations and earnings, provisions of existing pension
and profit-sharing plans and other items.
3. Proxy contests. A new Schedule G is added
to the proxy statement which is to be used only
in the event that a proxy contest occurs over the
election of directors. This schedule will require
personal information concerning each participant
in such a contest to be furnished to this Office and
to shareholders by the dissenting as well as the
management side.
4. Ownership reports. Present ownership reporting requirements are expanded to include a
report to the Comptroller whenever a "substantial change" occurs in the holdings of any principal officer, director, or beneficial owner of 10%
of outstanding stock. "Substantial change" is
defined as a change which, when added to previously unreported changes, amounts to 500 shares
or 5% of the bank's outstanding stock.
5. Registration statement and offering circulars. A new requirement for the use of offering
circulars in the public sale of new securities by
new and existing National Banks is laid down.
Such registration statements and offering circulars are required of new banks proposing to raise
more than $1,000,000 capital by public sale of
securities and existing banks with 750 or more
shareholders proposing to issue securities at an
offering price exceeding $1,000,000.
We believe that with the foregoing amendments the
investors in National Bank stock are fully protected.
In the event that S. 1642 and H.R. 6793 become law,
it is our present intention to use the existing regulations
498
with the above amendments as implementing regulations under the statute.
Prior to the adoption of the amendments, consideration will be given to any written comments pertaining thereto which are submitted within 30 days
of the publication hereof to the Comptroller of the
Currency, Washington, D.C. All national banking
associations and other interested parties are invited to
submit such comments.
The proposed amendments are as follows:
Part 10, § 10.1 is amended to read as follows:
§ 10.1 Scope and application. Every national banking
association having a class of equity security held of record
by seven hundred and fifty or more persons shall furnish to
each of its stockholders not later than 60 days after the close
of each calendar year a written report containing, as a minimum, the financial and other information called for by this
regulation.
Part 11, § 11.1 is amended to read as follows:
§11.1 Scope and application. The rules contained in
this regulation apply to every solicitation of a proxy with
respect to stock of a national banking association having a
class of equity security held of record by seven hundred and
fifty or more persons.
Part 11, § 11.2(a) is amended to read as follows:
§ 11.2 Definitions, (a) The term "principal officer" as
used in Part 11 means chairman of board, president, principal vice president, cashier, chairman of the executive committee, and any other person who performs functions
corresponding to those performed by the foregoing officers.
Part 11, § 11.3, subparagraph (a) is amended to
read as follows:
§ 11.3 Information to be furnished stockholders, (a)
No solicitation subject to this regulation shall be made unless each person solicited is concurrently furnished or has
previously been furnished with a written proxy statement
containing the applicable information specified in Schedules
A and B. In the case of a solicitation made by any person
in opposition to any other solicitation (proxy contest), subject to this regulation, with respect to any special or annual
meeting of stockholders at which directors are to be elected,
the information required by Schedule G shall be included in
the proxy statement in addition to the information required
by the applicable items of A and B. The information required by Schedule C with respect to each participant in a
proxy contest shall be filed with the Office of the Comptroller of the Currency, Washington, D.C. not later than 10 days
before the date of the shareholders' meeting.
A new Schedule C is hereby added to Section 11.6.
The proposed Schedule C will read as follows:
Schedule C
The following information shall be furnished with respect
to each person who is a participant in any solicitation of
proxies in opposition to any other solicitation in respect to any
special or annual meeting of stockholders at which directors
are to be elected:
Instruction. For the purpose of this Schedule, the term
"participant" includes nominees for whose election proxies
are solicited, and any other person, acting alone or in conjunction with one or more other persons, in organizing, directing orfinancingthe solicitation.
Item 1. Name, age, and business address of each participant.
Item 2. His principal occupation or employment, the name,
type of business and address of the corporation or other organization in which such employment is carried on.
Item 3. If he has been a participant in any other proxy
contest within the past ten years, indicate the principals involved, the subject matter of the contest, the outcome thereof,
and his relationship to the principals.
Item 4. State the amount of stock of the bank or any of
its affiliates owned beneficially, directly or indirectly, by him
or his family.
Item 5. State the amount of such stock owned of record
but not beneficially by him or his family.
Item 6. If any of the stock specified in Items 4 and 5 was
acquired in the last two years, state the dates of acquisition
and amounts acquired on each date.
Item 7. If he has entered into any arrangement or understanding with any person regarding future employment or
with respect to any future transaction to which the bank or
any of its affiliates will or may be a party, describe such
arrangement or understanding.
Item 8. State whether or not he will bear any part of the
expense incurred in the solicitation. If so, indicate the
amount thereof.
together with the pro forma book value per share of the
resulting bank.
(4) If available, the range in bid and asked prices
for the last fiscal year, together with the current quoted
market price, should be furnished with respect to the
stock of each bank.
(5) State the percentage of outstanding shares which
must approve the transaction before it is consummated.
(6) The following financial statements should be furnished for each bank involved in the transaction:
(a) Comparative balance sheets for the last two fiscal
years.
(b) Comparative statements of operating income and
expenses for the last two fiscal years. As a continuation of each statement, state the earnings per share after
all taxes and the dividends paid per share.
(c) A pro forma combined balance sheet and income
and expense statement for the lastfiscalyear giving effect
to the necessary adjustments shall be furnished with
respect to the resulting bank.
(7) In cases where the resulting bank will be a subsidiary of a bank holding company and shares of the
holding company are to be issued to stockholders in
lieu of shares in the resulting bank, the applicable financial information required by Item 6 above shall be furnished for the holding company.
(8) Where stockholders are to receive shares of a
holding company, such shares shall be fully described
and any material differences in the rights accorded holders of the holding company shares as opposed to the bank
shares to be exchanged shall be set forth.
Schedule B, Item 9, in § 11.6 is hereby amended to
read as follows:
Part 12—Ownership Reports of Capital Stock, is
hereby amended by the addition of the following new
sections:
Item 9. Mergers, consolidations and acquisitions of assets.
If action is to be taken with respect to a merger, consolidation or the acquisition of the assets of another institution,
furnish the following information:
(a) Dissenters' Rights of Appraisal. Outline briefly the
rights of appraisal or similar rights of dissenters with respect
to any matter to be acted upon, and indicate any statutory
procedure required to be followed by dissenting security
holders or order to perfect such rights.
(b) Plans or Agreements of Mergers, Consolidations,
Acquisitions of Assets.
(1) Outline briefly the material features of the plan
or agreement, the reasons therefor, the factors considered
in arriving at the terms, the general effect thereof upon
the rights of existing stockholders and the vote needed
for approval.
(2) State the names of the directors and principal
officers of the merging banks together with the number
of shares of stock each own beneficially in each of the
banks as well as the number of shares each will receive
in the merger or consolidation. If any director or officer has entered into or has agreed to enter into an
employment contract with the resulting bank, state the
name of such officer or director together with a brief
description of the contract.
(3) Furnish a table showing the adjusted book value
per share of stock of each bank for the last three years
§ 12.2 Scope and application. Every principal stockholder, director or principal officer of a national banking
association having a class of equity security held of record
by seven hundred and fifty or more persons, within ten days
after becoming such principal stockholder, director, or principal officer, shall file with the Comptroller of the Currency
a statement of the amount of capital stock of the bank of
which he is directly or indirectly the beneficial owner.
Within ten days after the close of each calendar month
thereafter, if there has been substantial change in such
ownership during such month, he shall file with the Comptroller a statement indicating his ownership at the close of
the calendar month and such changes in his ownership as have
occurred during such calendar month.
§ 12.3 Definitions, (a) The term "principal officer"
means chairman of the board, president, chairman of the
executive committee, principal vice president, cashier, and
any other person who performs functions corresponding to
those performed by the foregoing officers.
(b) The term "principal stockholder" means any person
who is the beneficial owner of more than 10 percent of any
class of capital stock issued by the bank.
(c) The term "substantial change" means the acquisition
or disposition of 500 shares or shares totaling more than
5% of the outstanding capital stock of the bank. Transactions of less than such amounts which, when added to pre-
499
viously unreported transactions, total more than such amounts,
shall be reported.
(d) The term "person" is not limited to natural persons,
but also includes corporations, partnerships, pension funds,
profit-sharing funds, and any other organization of whatever
nature.
§ 12.4 Filing of statements. Initial statements of beneficial ownership of capital securities required by § 12.1 shall
be filed on Form OR-1. Statements of changes in such
beneficial ownership required by that section shall be filed
on Form OR-2. All such statements shall be prepared and
filed in accordance with the requirements of the applicable
form. One executed copy shall be filed with the appropriate Regional Comptroller of the Currency, and one executed
copy with the Washington office of the Comptroller. Statements filed shall be available for public inspection at reasonable times in each such office.
§ 12.5 Persons temporarily exempt fromfilingstatements.
The following persons shall be exempt, for a period of twelve
months following their appointment and qualification, from
filing the ownership statements required by § 12.2:
(a) Executors or administrators of the estate of a
decedent;
(b) Guardians or committees for an incompetent; and
(c) Receivers, trustees in bankruptcy, conservators, liquidating agents, assigns for the benefit of creditors, and other
similar persons duly authorized by law to administer the
estates or assets of other persons.
After the expiration of such twelve-month period, the foregoing persons shall file reports with respect to securities held
by the estates they administer.
A new Part 15, dealing with public offerings of securities by National Banks, is proposed for adoption as
follows:
Part 15—New Issues of Securities—Registration and
Offering Circulars
§ 15.1 Registration statement—new banks. No new
National Bank which is to be capitalized at $1,000,000 or
more shall make any public offering of its securities, unless
such security shall have been registered by filing with the
Comptroller of the Currency a registration statement containing the following information:
1. Issuer. On the outside front cover page state the
proposed name and address of the issuing National Bank
and that the offer and sale of these securities are subject to the approval of and the regulations of the Comptroller of the Currency of the United States.
2. Distribution. The amount of securities to be offered, the aggregate offering price and the aggregate
proceeds to the issuer. The proposed means of distribution of the securities and what expenses in connection
with the offering, if any, will be borne by the issuing
bank.
3. Use of Proceeds. Describe briefly the present or
proposed business activities of the issuer, including a
description of its properties and the general competitive
conditions wherein it proposes to conduct its business.
4. Management. State the full names and complete
500
residence addresses of all organizers, proposed directors
and principal officers and their principal occupations
during the past 10 years. State the aggregate amount
of salaries to be paid all directors and officers who will
earn in excess of $25,000 per year. Briefly describe any
bonus, retirement, pension, stock option or other remuneration plan or provisions for the management. In
addition, describe any material proposed financial interest or transaction between any organizer, director or
officer and the issuing bank other than transactions in
the ordinary course of banking business.
5. Principal Security Holders. State the percentage
of outstanding securities which will be held by directors, principal officers and organizers and the percentage of such securities which will be held by the public
if all the securities offered are sold. State the name
and address of any person who owns or will own 10%
or more of the outstanding capital stock of the issuing
bank.
6. Description of Capital Stock Being Issued. State
the title of the class of security and furnish the following
information wherever applicable: (a) Outline briefly;
(1) dividend rights; (2) voting rights; (3) liquidation
rights; (4) pre-emptive rights; (5) conversion rights;
(6) redemptive provisions; (7) sinking fund provisions;
and (8) liability to further calls or to assessment by the
issuer.
(b) If the rights of holders of such stock may be
modified otherwise than by a vote of a majority or
more of the shares outstanding, voting as a class, so
state and briefly explain.
(c) Briefly describe any restriction on the repurchase
of redemption of shares by the registrant while there
is any arrearage in the payment of dividends or sinking fund installments. If there is no such restriction,
so state.
7. Legal Proceedings. Briefly describe any material
pending legal proceedings to which the issuer is a party
or of which any of its property is the subject.
§ 15.2 Registration statement—existing banks. No National Bank having a class of equity security held of record
by seven hundred and fifty or more persons shall make any
public offering of its securities at a total offering price of
more than $1,000,000, unless such security shall have been
registered by filing with the Comptroller of the Currency
a registration statement containing the following information:
1. Issuer. On the outside front cover page state the
exact name, address and date of charter of the issuing
National Bank and that the offer and sale of these
securities are subject to the approval of and the regulations of the Comptroller of the Currency of the United
States.
2. Distribution. The amount of securities to be
offered, the aggregate offering price and the aggregate
proceeds to the issuer. The proposed means of distribution of the securities, including whether or not
by or through underwriters and what other expenses in
connection with the offering, if any, will be borne by
the issuing bank.
3. Financial Statements. Financial statements containing as a minimum the information required by
§ 10.3.
4. Use of Proceeds. State briefly the principal purposes for which the net proceeds to the bank from
the securities to be offered are intended to be used.
5. Management. State the full names and complete
residence addresses of all directors and principal officers and their principal occupations during the past 10
years. State the aggregate amount of salaries to be
paid all directors and principal officers earning in excess of $25,000 during the most recent fiscal year.
Briefly describe any bonus, retirement, pension, stock
option or other remuneration plan or provisions for the
management. In addition, describe any material
financial interest or transaction between any director
or officer and the issuing bank within the past three
years other than transactions in the ordinary course
of banking business.
6. Principal Security Holders. State the percentage
of outstanding securities which will be held by directors, principal officers and organizers and the percentage of such securities which will be held by the
public if all the secuirties offered are sold. State
the name and address of any person who owns or will
own 10% or more of the outstanding capital stock
of the issuing bank.
7. Description of Capital Stock Being Issued. State
the title of the class and furnish the following information wherever applicable: (a) Outline briefly:
(1) dividend rights; (2) voting rights; (3) liquidation
rights; (4) preemptive rights; (5) conversion rights;
(6) redemption provisions; (7) sinking fund provisions; and (8) liability to further calls or to assessment
by the issuer.
(b) If the rights of holders of such stock may be
modified otherwise than by a vote of a majority or
more of the shares outstanding, voting as a class, so
state and briefly explain.
(c) Briefly describe any restriction on the repurchase or redemption of shares by the registrant while
there is any arrearage in the payment of dividends or
sinking fund installments. If there is no such restriction, so state.
8. Description of Capital Debt Being Issued. Briefly
disclose the following information where applicable:
(a) Provisions with respect to interest, conversion,
maturity, redemption, amortization, sinking fund or
retirement.
(b) Provisions with respect to the kind and priority of any lien securing the issue.
(c) Provisions restricting the declaration of dividends or requiring the maintenance of any ratio of
assets, the creation or maintenance of reserves or the
maintenance of properties.
(d) Provisions permitting or restricting the issuance
of additional securities, the withdrawal of cash deposited against such issuance, the incurring of additional debt, the release or substitution of assets securing
the issue, the modification of the terms of the security,
and similar provisions.
9. Legal Proceedings. Briefly describe any material
pending legal proceedings to which the issuer is a party
or of which any of its property is the subject.
§ 15.3 Offering circular. No such National Bank or any
other person shall make any offer to sell or offer to buy such
securities for a period of 90 days following the filing of the
registration statement, unless the offeree is furnished with an
offering circular containing at least the information required
to be in the registration statement.
§ 15.3 Use of offering circulars; other communications.
No securities subject to this Part shall be sold or delivered
after sale by or on behalf of any issuing bank subject to this
Part unless accompanied or preceded by an offering circular
complying with the requirements of this Part.
Any written advertisement or other written communication,
or any radio or television broadcast, which states from whom
an offering circular containing the information specified herein may be obtained and in addition contains no more than
the following information may be published, distributed or
broadcast at or after the commencement of the public offering to any person, prior to sending or giving such person a
copy of such circular:
(1) the name and address of the issuer of such
security;
(2) the title of the security, the amount being offered,
and the per-unit offering price to the public.
The offering circular may be printed, mimeographed,
lithographed or typewritten, or prepared by similar process
which will result in clearly legible copies.
If this offering is not completed within 12 months from
the date of the offering circular, a revised offering circular
shall be prepared, filed and used in accordance with these
rules as for an original offering circular. In no event shall
an offering circular be used which is false or misleading in
light of the circumstances then existing. In cases of dispute,
the final determination of whether or not a particular statement is false or misleading shall be made only by the Comptroller of the Currency after such investigation and proceedings as he shall deem necessary in the circumstances.
If the offering circular is revised or amended subsequent
to its filing with the Comptroller of the Currency, four copies
of such revised or amended circular shall be filed with the
Comptroller of the Currency at least 10 days prior to its
use, or such shorter period as the Comptroller of the Currency
may, in his discretion, authorize upon written request for
such authorization.
§15.5 Penalties. Failure to comply with the requirements of this Part may result in refusal of the Comptroller
of the Currency to issue approval of the offering of its securities by a National Bank. The enforcement of this Part shall
be a function solely of the Office of the Comptroller of the
Currency and no provision of this Part is intended to confer
any private right of action on any stockholder or other person
against a National Bank. This Part contains all the disclosure rules applicable to the issuance and sale of securities
by National Banks. No rule, regulation, policy or procedure
of any other governmental agency is applicable thereto.
JAMES J. SAXON,
Comptroller of the Currency.
Date: June 10,1964.
501
FEBRUARY 20,1964.
In June 1963, we sent each National Bank President a copy of our testimony to the Senate Committee
on Banking and Currency, opposing that provision
of S. 1642 which would subject every bank having
assets of $1 million or more and 500 or more shareholders to the major provisions of the Securities and
Exchange Act of 1934. We pointed out in that statement that this provision was unnecessary as far as the
National Banks were concerned, because of the ample
authority in this Office to compel appropriate disclosure to investors. As you know, we issued regulations requiring such disclosure in 1962, and we are
pleased to be able to report that the response of the
affected banks has been most gratifying.
Despite our efforts, however, S. 1642 passed the
Senate without exemption for National Banks and is
now under active consideration in the House Committee on Interstate and Foreign Commerce under
the distinguished Chairmanship of the Honorable
Oren Harris. The purpose of this letter is to make
available to you a copy of a statement which we have
prepared for the House Committee and a companion
letter which lists some of the many problems of interpretation which would be raised by the passage of this
legislation.
As a result of the fact that banks heretofore have
not been subject to the securities laws, bankers and
their associations may not realize what this legislation
entails and the many serious problems which may
arise under it as contained in our letter to the House
Committee. Because of this very lack of experience
with SEC law, there may have been up to now a failure of communication between bankers and the Congress on this matter.
We felt it to be our obligation to advise each National Bank head of this important matter, in order
that you may determine how this legislation would
affect your bank. The views of interested parties are
now being received by the House Committee on Interstate and Foreign Commerce and further action on
this legislation is imminent.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
502
SERVICE CHARGES
FEBRUARY 28,1962.
So that there may be no misunderstanding with
respect to the policy of this Office concerning the service charges of banks, I am issuing these formal instructions to all national banks.
Agreements, arrangements, undertakings, understandings, etc., among banks, through clearing houses
or otherwise, concerning service charges are not permissible in any form. It is the responsibility of the
Board of Directors of each national bank to terminate
promptly any of these practices which it may now be
following.
Wherever a national bank has been involved in any
of the practices cited, it should now review its scale
of service charges independently of any other bank,
and take appropriate corporate action to reestablish a
scale of service charges independent of any relationships with any other bank. In taking this action, it
is appropriate to make such changes in the scale of
service charges as are deemed necessary or desirable
in the light of the individual bank's costs and competitive position. This review and reestablishment of the
scale of service charges should be undertaken, even
though there may have been no overt or implicit agreement, wherever there have been discussions of such
charges among banks or their officers, either independently or in group meetings, or where the scale of service
charges was adopted with knowledge of prospective
adoption of similar charges by competitor banks.
It is recognized that identical charges for identical
services may occur where there are no agreements or
understandings among banks. Nevertheless, wherever
this occurs, each national bank must be prepared to
demonstrate conclusively that its scale of service
charges was decided unilaterally, and not on the basis
of any agreement or understanding, or even of discussion, among banks or their officers.
Our examiners have been instructed to explore,
regularly and in detail, the methods by which the existing scale of service charges was determined by each
national bank. At the time of the next examination
of your bank, inquiry shall be made to determine
whether appropriate action has been taken, where
necessary, to conform to these instructions.
JAMES J. SAXON,
Comptroller of the Currency.
STATE EXAMINATION OF NATIONAL BANKS
Thank you for your letter of February 20, 1964,
concerning the right of State agencies to examine a
National Bank for the purposes of determining compliance with the State Wage and Hour Laws.
As you already know, the exercise of vistorial powers over National Banks is vested solely in the Comptroller of the Currency. This exclusive right, given
to the Comptroller of the Currency by Congress in
12 U.S.C. 481 and 484, precludes representatives of
a State or local government from conducting examinations or from inspecting or requiring production of
books or records of National Banks.
If the State department or bureau of labor needs
payroll information, they must use the following procedure prescribed by 26 U.S.C.A. 3305 (c) :
(c) National Banks.—Nothing contained in § 5240 of the
Revised Statutes, as amended (12 U.S.C. 484), shall prevent any State from requiring any national banking association to render returns and reports relative to the association's
employees, their remuneration and services, to the same
extent that other persons are required to render like returns
and reports under a State law requiring contributions to
an unemployment fund. The Comptroller of the Currency
shall, upon receipt of a copy of any such return or report
of a national banking association from, and upon request of,
any duly authorized official, body, or commission of a State,
cause an examination of the correctness of such return or
report to be made at the time of the next succeeding examination of such association, and shall thereupon transmit
to such official, body, or commission a complete statement
of his findings respecting the accuracy of such returns or
reports.
A National Bank is therefore neither required nor
permitted to submit to an examination by representatives of the State government.
Sincerely,
JAMES J. SAXON,
Comptroller of the Currency.
UNDERWRITING REVENUE BONDS
JUNE 25,
1962.
For your information I am sending you herewith
a copy of a letter which I have today sent in response
to a letter I received on the question of underwriting
and dealing in nongeneral obligations of States and
political subdivisions thereof.
* * *
Many thanks for your note of the 14th. I hope
there will be few matters in the financial world on
which you and I will ever disagree, but I can clearly
see that one of them is the reasonable relaxation of
the present prohibition on underwriting and dealing
in revenue obligations by member banks. The investment bankers clearly enjoy a plain and unvarnished
monopoly in this field to the detriment of the states,
municipalities, and localities of this country. It results in inadequate competition in the distribution and
pricing of these securities. I can very well understand that the investment banking fraternity will use
all power at its command to protect and preserve the
artificial statutory protection which it possesses, but in
doing so it will not act in the public interest. Such
self-serving purpose, understandable as it may be as
a human quality, does not comport with the public
interest in this area.
I should greatly deplore what you suggest, namely,
the elimination of member banks from participation
in general obligation financing. Nothing has come to
my attention during the time which I have occupied
this Office which so clearly perverts the public interest as this strangulation provision which you propose,
and which has so clearly evidenced the desire of the
investment banking fraternity to expand the dimensions of the monopoly it possesses.
In my opinion, the issues here are those which will
be most effectively met before the Congress, and I
hope to meet you before that body in a friendly but
vigorous presentation of the gist of our diametrically
opposing views. I appreciate your frankness in setting forth to me your views, and I know you will welcome equal frankness on my part in responding.
Nothing reflected in my views, nor in yours I am sure,
should or will reflect on the mutual high regard and
friendship which exists between us.
Cordially,
JAMES J. SAXON,
Comptroller of the Currency.
503
INDEX
Page
Addresses of the Comptroller of the Currency {Appendix C)
311
Administration
56
Advisory committees to the Comptroller of the Currency
455
Amortization regulations
9
Annual Report, 1963
33
Assets, deposits and capital accounts
36
Assets of consolidations of national banks or national
and state banks, calendar 1963
251
Assets of mergers of national banks or national and
state banks, calendar 1963
253
Assets of national banks converted from state chartered
banks, calendar 1963
248
Assets and liabilities of the Office of the Comptroller
of the Currency, calendar years 1958 through 1963..
60
Assets and liabilities of national banks:
Date of last report of condition, December 31, 1936—
63
310
By states:
June 29, 1963
274
December 20, 1963
280
Comparison of:
December 28, 1962, and December 20, 1963, and
percent change, December 1962 to December
1963
37
Percent distribution of, December 1962 and December 1963
38
Principal items of, by size of banks (deposits),
December 1962 and 1963
270
Foreign branches, December 20, 1963
309
Banks (see also Commercial banks, Federal Reserve
member banks, Insured nonmember banks, Mutual
savings banks, National banks and Noninsured
commercial banks):
All banks:
Trust statistics, by states, calendar 1963
290
Bank holding companies
403
Bank premises, ownership of, by national banks
11
By states:
June 29, 1963
275
December 20, 1963
281
Comparison of:
December 28, 1962, and December 20, 1963..
37
Percent distribution of, December 1962 and December 1963
38
Bank promissory notes
22
Bank service charges and banking hours
29
Banking services
403,457
Page
Benefits to national bank employees and officers:
By states, calendar 1963
294
By size of banks (deposits), calendar 1963
300
Total, years ended December 31, 1962 and 1963.... 303
Comparison of, dollar and percent changes, December 1962-63
46
Borrowings. (See assets and liabilities of national
banks.)
Branch banking
408
Branches, new charters and mergers
29
Branch litigation
50
Branches of national banks:
Domestic:
Number of:
In operation, by states, December 31, 1963
40,43
Closed, by states and type of branch, calendar
1963
268
Open for business, calendar 1963:
By states, and type of branch
43, 260
By community population and size of bank...
44
De novo applications received, approved, rejected,
abandoned, and pending, as of December 31,
1963, by states
45
Foreign:
Assets and liabilities of, summary of, December
20, 1963
309
Location of, December 31, 1963
308
Number of, in operation, December 20, 1963
309
Calls for reports of condition of national banks, 1914—
63
272
Capital accounts, assets and deposits
36
Capital accounts:
Of national banks:
By states:
June 29, 1963
278
December 20, 1963
284
Calendar 1963
299
Comparison of:
December 28, 1962, and December 20, 1963....
37
Dollar and percent changes, December 1962
and 1963
46
Total, years ended December 31, 1962 and
1963
303
Converted into state banks, calendar 1963
250
Merged and consolidated with or into state banks,
calendar 1963
249
Reported in voluntary liquidation, calendar
1963
249
By size of banks (deposits), calendar 1963
300
505
Capital accounts—Continued
**•*•
Of state banks:
Purchased by national banks, calendar 1963
250
Capital improvement loans
458
Capital stock of national banks:
Years, 1930-63
306
December 31, 1936-63
310
By states, June 29, 1963
278
(Authorized, chartered, by states, calendar 1963... 243
Changes in, by categories, calendar 1963
42
Comparison of:
Dollar and percent changes, December 1962 and
1963
46
Percent distribution of, December 1962 and 1963..
38
By size of banks (deposits), December 1962 and
1963
270
Total, years ended December 31, 1962 and 1963.. 303
By size of banks (deposits), calendar 1963
300
Capital stock of consolidations of national banks or
national and state banks, calendar 1963
251
Capital stock of mergers of national banks or national
and state banks, calendar 1963
253
Cash in banks. {See assets and liabilities of national
banks.)
Centennial of the national banking system
459
Certificates of deposit
460
Charters of national banks. {See organizations of national banks.)
Closed banks. {See consolidations, mergers, liquidations and suspensions of national banks.)
Coin shortage
409
Collective investment funds
14, 397,409, 461
Collective investment funds of all commercial banks,
by states, calendar 1963
290
Combining loans to separate borrowers
5
Commercial banks:
Collective investment funds of, by states, calendar
1963
290
Number of, and banking offices, December 1962 and
1963
35
Total assets of, end of December 1961, 1962, and
1963, and percent change 1962-63
35
Total deposits of, dollar amount and percent distribution, December 1962 and 1963
38
Trust department statistics, by states, calendar
1963
290
Common stock of national banks:
By states:
June 29, 1963
278
December 20, 1963
284
December 31, 1930-63
306
December 28, 1962, and December 20, 1963
37
Comptroller of the Currency, Office of:
Administration
56
Basic goals
1, 359
Comptrollers, names of, since organization of the
Office, periods of service, and states from which
appointed
235
Deputy Comptrollers and Administrative Assistants,
names of, since organization of the Office, periods
of service and states from which appointed
236
Income and expenses of, in year 1963
46
506
Pa
Comptroller of the Currency—Continued
s«
Issue and redemption of currency
61
Office procedures and organization
412, 464
Community development
30
Conflicts of interest
13
Congressional Correspondence {Appendix E)
401
Congressional Testimony {Appendix D)
355
Conservatorship
413
Conservatorship Litigation
53
Consolidations of national banks, or national and state
banks, calendar 1963
251
Consolidations and mergers of national banks:
Description of each consolidation, merger, and purchase and sale transaction, approved by the Comptroller of the Currency, calendar 1963
63
Number of, under 12 U.S.C. 214 and 215, by states,
since 1863
237
With and into state banks, calendar 1963
249
Construction loans
9
Construction and real estate loans
355, 356
Conversions of national banks to state banks, by states,
since 1863
237
Conversions of state banks
356, 358
Corporate practices and procedures
19,414, 468
Corporate savings accounts
27, 415
Credit Quality
417
Credit Unions:
Total assets of, end of December 1961, 1962, and
1963, and percent increase, 1962-63
35
Data processing services
30, 355, 357
Debt cancellation and insurance
25
Debt cancellation clauses
25
Debt cancellation contracts
417, 475
Demand deposits. {See deposits.)
Deposits. {See also assets and liabilities of banks.)
Deposits, assets, and capital accounts
36
Deposit and share insurance
418
Deposits of national banks:
Demand and time:
By states:
June 29, 1963
276
December 20, 1963
282
By size of banks (deposits), December 1962 and
1963
270
Percent distribution of, December 1962 and 1963..
38
Total, by size of bank (deposits), calendar 1963.. 300
Total, years ended December 31, 1962 and 1963.... 303
Times and savings, interest on, by states, year 1963.. 295
Deposits of all banks:
Demand and time, by type of banks and percent
distribution of, December 1962 and 1963
39
Direct acquisition of foreign bank stock
28
Direct leasing
419,476
Direct lease financing by national banks, by states,
December 20, 1963
281
Disclosure of changes in ownership control
397
Disclosure requirements
424
Disclosure to shareholders
20, 391, 441, 493
Discounts. {See Loans and Discounts.)
Dividends. {See also Income, expenses and dividends
of national banks.)
Page
Dividends and ratios to capital accounts of national
banks, years 1930-63
306
Examinations and supervision of international operations
28
Exceptions to the lending limits
6
Executive officers, loans to
31
Expenses and income of national banks
46
Expenses. {See also Comptroller of the Currency,
Office of; Income, expenses, and dividends of national banks.)
Employee stock option plans and stock purchase plans.
20
Federal Reserve membership and Federal Reserve
powers
428, 477
Federal Reserve member banks, total deposits of, dollar
amounts and percent distribution of, December 1962
and 1963
39
Fees paid to director and members of executive, discount, and other committees of national banks:
By states, calendar 1963
294
By size of banks (deposits), calendar 1963
300
Total, years ended December 31, 1962 and 1963
303
Fiduciary activities of national banks
54
Field office administration
56
Financial management
60
Foreign bank stock, direct acquisition of
27
Foreign branches. {See also Branches of national
banks.)
355
Forest tract loans
11, 390
Fraudulent practices
434
Furniture and equipment expenses of national banks:
By states, calendar 1963
295
By size of bank (deposits), calendar 1963
300
Total, years ended December 31, 1962 and 1963....
303
General insurance agency, location of
24
Improved real estate
8
Income and expenses of national banks
46
Income, expenses and dividends of national banks:
By states, calendar 1963
292
By size of banks (deposits), calendar 1963
300
Years ended December 31, 1962 and 1963
303
Income and expenses of Office of the Comptroller of
the Currency, by calendar years 1958 through 1963..
59
Income before dividends of national banks:
By states, calendar 1963
298
By size of banks (deposits), calendar 1963
301
Years ended December 31, 1962 and 1963
304
December 1962 and 1963, and dollar and percent
changes, 1962-63
47
Income after dividends of national banks:
By states, calendar 1963
299
By size of banks (deposits), calendar 1963
302
Years ended December 31, 1962 and 1963
304
Income before taxes of national banks:
By states, calendar 1963
298
By size of banks (deposits), calendar 1963
301
Years ended December 31, 1962 and 1963
304
December 1962 and 1963, and dollar and percent
changes, 1962-63
47
Insolvent banks
435
Insolvencies of national banks, by states, since 1863..
237
Insurance and debt cancellation
25
Insurance incident to banking
25
Page
Insured nonmember banks:
Number of, and banking offices, and total assets,
December 1962 and 1963, and percent changes,
1962-63
35
Total deposits of, dollar amount and percent distribution, December 1962 and 1963
39
Interest and discounts on national banks:
Loans:
By states, calendar 1963
292
By size of banks (deposits), calendar 1963
300
Years ended December 31, 1962 and 1963
303
Borrowed money:
By states, calendar 1963
295
By size of banks (deposits), calendar 1963
301
Interest and dividends of U.S. Government obligations
and other securities of national banks:
By states, calendar 1963
292
By size of banks (deposits), calendar 1963
300
Years ended December 31, 1962 and 1963
303
Interest on time and savings deposits of national banks:
By size of banks (deposits), calendar 1963
301
December 1962 and 1963, and dollar and percent
changes, 1962-63
46
International operations
28, 435, 477
Intervening liens
9
Investment and underwriting powers
17
Issue and redemption of currency
61
Leasehold security
10
Leasing of personal property
23
Legislation to increase national bank lending limits
7
Lending Limits:
4, 359, 388, 479
Exceptions to the
6
Legislation to increase national banks
7
Letters of credit
481
Letters to the presidents of national banks {Appendix
F)
454
Liabilities. {See Assets and liabilities of national
banks.)
Life insurance on officers
25
Liquidations of national banks:
Since 1863, by states
237
By categories, calendar 1963
42
(Voluntary) reported in calendar 1963, capital accounts of, date and title of banks with names of
succeeding banks in case of succession
249
Litigation
48
Loans to bank officers
481
Loans to executive officers
31
Loans of national banks:
Losses and recoveries on, calendar years 1944-63....
307
Ratio of net losses or recoveries to, calendar years
1944-63
307
Loans and discounts of national banks:
By states:
June 29, 1963
275
December 20, 1963
281,286
By size of banks (deposits), December 1962 and
1963
270
December 28, 1962 and December 20, 1963
37
December, 1936-63
310
Percent distribution of, December 1962 and 1963..
38
507
Page
Loans and securities of national banks, by size of banks
(deposits), December 1962 and 1963
270
Location of general insurance agency
25
Losses charged to valuation reserves of national banks:
By states, December 31, 1963
299
December 1962 and 1963, and dollar and percent
changes, 1962-63
47
Losses, chargeoffs and transfers to valuation reserves
on securities and loans of national banks:
By states, calendar 1963
297
By size of banks (deposits), calendar 1963
301
Years ended December 31, 1962 and 1963
304
December 1962 and 1963, and dollar and percent
changes, 1962-63
47
Management supervision of trust departments
13
Manual of Instructions for Representatives in Trusts,
revision of
15
Merger Decisions, 1963 (Appendix A)
63
Merger litigation
48
Mergers, new charters and branches
39
Mergers of national banks, under 12 U.S.G. 214 and
215, by states, since 1863
237
Mergers of national banks or national and state banks,
calendar 1963
253
Merger or consolidation of national banks with or into
state banks, calendar 1963, with effective date and
total capital accounts
249
Miscellaneous powers
30
Miscellaneous rulings relating to real estate loans....
10
Mobile service
31
Money orders, sale of
31
Mortgage loan limits
11, 382
Mortgages or other liens of national banks' premises and
other real estate:
By states:
June 29, 1963
277
December 20, 1963
283
December 28, 1963 and December 20, 1963
37
Mutual savings banks
437
Mutual savings banks, total assets of, end of December
1961, 1962 and 1963, and percent change 196263
35
National banks:
Assets and liabilities. (See Assets and liabilities of
national banks.)
Branches. (See Branches of national banks.)
Calls for reports of conditions of, years 19141963
272
Mergers. (See Mergers of national banks.)
Number of:
By states:
Organized, consolidated, and merged since
1863
237
Insolvencies, liquidations, and conversions since
1863
237
December 31, 1863 through 1963
237
June 29, 1963
274
December 20, 1963
280
Banking offices, December 31, 1963
440
Chartered during calendar 1963
243
In existence, December 31, 1963
40, 237
508
National banks—Continued
Number of—Continued
Banking offices and total assets, December 1962
and 1963, and percent change, 1962-63
December 31, 1930-63
Converted into state banks, calendar 1963
National office administration
New bank litigation
New charters, branches and mergers
Noninsured commercial banks:
Total deposits of, dollar amount and percent distribution of, December 1962-63
Number of, and banking offices and total assets,
December 1962 and 1963, and percent change,
1962-63
Obligations within the ten percent limitation
Office relocation litigation
Operating earnings of national banks:
By states, calendar 1963
By size of banks (deposits), calendar 1963
Total, years ended December 31, 1962 and 1963..
December 1962 and 1963, and dollar and percent
changes, 1962-63
Operating expenses of national banks:
By states, calendar 1963
By size of banks (deposits), calendar 1963
Total, years ended December 31, 1962 and 1963....
December 1962 and 1963, and dollar amount and
percent changes, 1962-63
Operating revenue, expenses, and dividends of national
banks:
By states, calendar 1963
By size of banks (deposits), calendar 1963
Total, years ended December 31, 1962 and 1963....
December 1962 and 1963 and dollar and percent
changes, 1962-63
Organizations of national banks:
Number of, by states, from 1863 to December 1963..
Charters:
Applications approved and rejected, by states,
calendar 1963
Applications received, approved, rejected, abandoned, and pending, by states, December 31,
1963
Granted, by states, calendar 1963
Issued, by states, calendar 1963
Converted from state chartered banks, by charter
number, calendar 1963
By category, calendar 1963
Organization chart of the Office of the Comptroller of
the Currency
Ownership of bank premises
Personal property, leasing of
Political contributions
Private mortgage insurance
Profits, recoveries and transfers from valuation reserves
on securities of national banks:
By states, calendar 1963
By size of banks (deposits), calendar 1963
Quality of bank credit
Pase
35
306
250
56
49
39
39
35
4
53
295
301
303
46
294
300
303
46
292
300
303
46
237
238
41
243
42
248
42
58
11
22
482
396
296
301
379
Page
Real estate assets of national banks:
By states:
June 29, 1963
275
December 20, 1963
281
By size of banks (deposits), December 1962 and
1963
270
December 28, 1962, and December 20, 1963
37
Percent distribution of, December 1962 and 1963. .
38
Real estate loans
8, 359, 439, 482
Real estate and construction loans
355, 356
Recoveries, transfers from valuation reserves, and
profits of national banks:
By states, calendar 1963
296
By size of banks (deposits), calendar 1963
301
Total, years ended December 31, 1962 and 1963
304
December 1962 and 1963, and dollar and percent
changes, 1962-63
46
Recoveries credited to valuation reserves of national
banks:
By states, calendar 1963
299
Total, years ended December 31, 1962 and 1963
305
December 1962 and 1963, and dollar amount and
percent changes, 1962-63
47
Redemption and issue of currency
61
Reforms in corporate practices
20
Regulation Q
394
Relationships with insurance companies
490
Reorganization of the trust division
15
Reorganization of regulatory structure
363
Reporting requirements
440
Reports of condition
440
Repurchase agreements
492
Revision of Manual of Instructions for Representatives
in Trust
15
Salaries and wages of officers and employees of national banks:
By states, calendar 1963
294
By size of banks (deposits), calendar 1963
300
Total, years ended December 31, 1962 and 1963
303
December 1962 and 1963, and dollar and percent
changes, 1962-63
46
Savings and loan associations:
Total assets of, end of December 1961, 1962 and
1963, and percent changes, 1962-1963
335
Securities of national banks:
Calendar years 1944 through 1963
307
Recoveries on, calendar 1944 through 1963
307
Percent distribution of, December 1962 and 1963..
38
S. 1692 (Disclosure requirements)
374, 391, 441, 493
Senior securities
19
Service charges
445, 502
State banks purchased by national banks, list of, by
effective dates, calendar 1963
250
State chartered banks converted to national banks,
by charter number, title and location of banks, calendar 1963
248
State examination of national banks
503
State of the national banking system
35
Page
State member banks:
Number of, offices and total assets of, December
1962 and 1963, and percent change, 1962-63
35
Total deposits of, in dollar amounts and percent distribution of, December 1962 and 1963
37
Statistical tables (Appendix B)
233
Stock dividend policy
19
Surplus funds and unimpaired capital stock
6
Surplus, undivided profits and reserves of national
banks:
By states:
June 29, 1963
278
December 20, 1963
284
December 1936-63
310
By size of banks (deposits), December 1962 through
1963
270
Percent distribution of, December 1962 and 1963
38
Converted from state chartered banks, calendar
1963
248
Surplus, undivided profits and reserves of consolidations of national banks or national and state banks,
calendar 1963
251
Surplus, undivided profits and reserves of mergers of
national banks or national and state banks, calendar
1963
253
Taxes (Federal and State) on net income of national
banks:
By states, calendar 1963
298
By size of banks (deposits), calendar 1963
302
Years ended December 31, 1962 and 1963
304
December 1962 and 1963, and dollar and percent
changes, 1962-63
47
Trust department revenue of national banks:
By states, calendar 1963
292
By size of banks (deposits), calendar 1963
300
Years ended, December 31, 1962 and 1963
303
Trust division, reorganization of
15
Trust powers
13, 367
Transfer of authority to the Comptroller of the Currency
13, 356, 357
Trust regulations
447
Trust statistics, selected bank, by states, calendar
1963
290
Underwriting and investment powers
17
Underwriting revenue bonds
17,380, 447, 503
Unimpaired capital stock and surplus funds
6
United States Government obligations of national
banks:
By states:
June 29, 1963
274
December 20, 1963
280, 288
By size of banks (deposits), December 1962 and
1963
270
December 1936-63
310
December 28, 1962, and December 20, 1963
37
Percent distribution of, December 1962 and 1963...
38
Years of Reform: A Prelude to Progress
1
509
@FedFRASER