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§7
Comptroller of the Currency
Administrator of National Banks
I*
1
»l%
* .»•
Annual Report 1976
Comptroller of the Currency
The Administrator of National Banks
John G. Heimann
Comptroller of the Currency
Letter of Transmittal
Treasury Department,
Office of the Comptroller of the Currency,
Washington, D.C., October 17, 1977
Sirs: Pursuant to the provisions of Section 333 of the United States Revised Statutes, I am pleased to submit the 1975 Annual Report of the Comptroller of the Currency.
Respectfully,
John G. Heimann,
Comptroller of the Currency.
The President of the Senate
The Speaker of the House of Representatives
Contents
Title of Section
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
Condition of the National Banking System
Income and Expenses of National Banks
Structural Changes in the National Banking System
Bank Examinations and Related Activities
Law Department
Fiduciary Activities of National Banks
International Banking and Finance
Administration
Consumer Affairs
Other Activities
Financial Operations of the Office of the Comptroller of the Currency
Page
1
3
5
13
15
19
21
23
25
29
31
Appendices
A.
B.
C.
D.
Merger Decisions, 1976
Statistical Tables
Addresses and Selected Congressional Testimony
Selected Rulings
Index
37
121
187
263
291
Statistical Tables
Table No.
Title
1 Assets, liabilities and capital accounts, domestic offices of national banks, December 31, 1976 . . .
2 Income and expenses of national banks, December 31, 1976
3 National banks and banking offices, by states, December 31, 1976
4 Applications for national bank charters and charters issued, by states, calendar 1976
5 Applications for national bank charters pursuant to corporate reorganizations and charters issued, by
states, calendar 1976
6 Applications for conversion to national bank charter and charters issued, by states, calendar 1976
7 Branches of national banks, by states, calendar 1976
8 De novo branch applications of national banks, by states, calendar 1976
9 De novo branches of national banks opened for business, by community size and by size of bank,
calendar 1976
10 Mergers, calendar 1976
11 Examinations of overseas branches, subsidiaries and EDP centers of national banks, 1972 - 1976 .
12 Office of the Comptroller of the Currency: balance sheet
13 Office of the Comptroller of the Currency: statements of revenue, expenses and Comptroller's equity
14 Office of the Comptroller of the Currency: statement of changes in financial position
VI
Page
2
4
6
7
8
9
10
11
12
12
22
32
33
34
I. Condition of the National Banking System
The operations of national banks reflected the steady
recovery the U.S. economy experienced during 1976.
Loans were well over $300 billion. This figure is not directly comparable to 1975's because of changes in the
balance sheet reporting. Deposit growth reflected the
recovery; total deposits grew by 4.8 percent, 1 percent
more than the 1975 rate of 3.8 percent. IPC demand deposits grew 2.5 percent while IPC time and savings deposits increased 9.1 percent, reflecting the somewhat
improved state of the economy. Total time and savings
deposits relative to total deposits continued to increase,
to reach 59.9 percent in 1976. The 1972 figure was 52.0
percent.
Total book assets grew more than 5.4 percent in 1976.
The actual growth was closer to 7.3 percent if provision is
made for the new exclusion of loan reserves and unearned income in 1976. That is significant because it
shows a reversal of the previous trend of declining asset
growth. The four previous increases were 3.6 (1975), 9.2
(1974), 12.6 (1973) and 15.5 (1972) percent.
National banks' securities holdings (including those
held in trading accounts) increased by $10,527 million.
Holdings of U.S. Treasury securities for investment purposes increased more than 17 percent over year-end
1975. State and local government holdings also
increased slightly. The total increase in securities holdings was 8.4 percent, about half the 17.2 percent
increase from 1974 to 1975.
Reserves for possible loan losses reached over
$3,589 million. That figure is equivalent to 1.2 percent of
total loans. Total loans represented 52 percent of total
assets.
Total equity capital of national banks was $41,325 million. Capital notes and debentures increased $436 million, showing the continued weak position of bank stock
in the open market. Total equity capital to assets was 7.1
percent, while equity capital to risk assets, that is total
assets less cash, U.S. Treasuries, and securities of other
U.S. government agencies, was 9.4 percent. Those
ratios are not exactly comparable to those for earlier
years because of the reporting changes.
Table 1
Assets, liabilities and capital accounts, domestic offices of national banks, December 31, 1976
(Dollar amounts in thousands)
Amount
Percent
distribution
4,737 national banks
Assets
Cash and due from banks
Total, investment securities
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Total securities
Federal funds sold and securities purchased under agreements to resell
Total loans (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liability to this bank on acceptances outstanding
Other assets
Total assets
$ 76,078,031
13.04
129,990,494
52,612,836
17,005,880
57,384,363
2,987,415
967,304
4,973,779
22.28
9.02
2.91
9.84
.51
.17
.85
135,931,577
23.30
30,140,010
303,436,774
5.17
52.02
3,589,367
299,847,407
.62
51.40
3,808,381
9,879,953
1,722,984
1,777,388
5,086,708
19,076,586
.65
1.69
.30
.31
.87
3.27
583,349,025
100.00
147,018,169
242,873,535
2,126,653
38,088,306
5,917,740
27,332,987
6,051,345
25.20
41.63
.37
6.53
1.01
4.69
1.04
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Demand deposits
Time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
;
469,408,735
80.47
188,175,050
281,233,685
32.26
48.21
51,678,941
2,741,434
406,112
5,140,675
9,921,683
8.86
.47
.07
.88
1.70
539,297,580
92.45
2,726,628
.47
18,754
9,106,275
15,853,738
15,271,833
1,074,217
1.56
2.72
2.62
.18
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Total liabilities, subordinated notes and debentures and equity capital
41,324,817
7.08
583,349,025
100.00
NOTE: Data may not add to totals because of rounding. Dashes indicate amounts less than 0.005 percent.
II. Income and Expenses of National Banks
Total income and expenses of the National Banking
System reflected the steady recovery in the U.S. economy during 1976. Total income rose 23.4 percent, a reversal of the previous year's decline. Total expenses also
increased, by 25.2 percent. National banks' net income
increased $332.1 million, or 7.8 percent. That rate was
2.5 percent more than the 5.3 percent increase achieved
1974 to 1975. Applicable income taxes on operating
income rose to $1,436.8 million, 34.5 percent more than
the previous year. The rate of return on assets was 0.79,
slightly more than 1975's 0.77.
Interest and fees on loans increased $5,555.4 million
to $31,031.0 million, showing an increase of 21.8 percent. Income from federal funds sold or securities
purchased under agreements to resell decreased to
$1,383.6 million. Loan-related income fell to 64.6 percent
of total operating income, continuing the pattern of previous years. Total revenue from securities holdings
(including stock) as a proportion of total revenue declined slightly to 16.2 percent from 1975's 17.0 percent
figure.
Holdings of U.S. Treasury securities for investment
purposes increased $7,802 million. That produced an
increase in interest earned on such securities of $786.5
million, or 32.7 percent. The interest earned on U.S.
Treasuries was $1,964.1 million more than the earnings
on Federal funds sold and securities purchased to resell.
That reinforces the reversal of the previous trend. Prior to
1975, interest earned on U.S. Treasuries had been less
that the earnings from Federal funds sold and securities
purchased under agreements to resell. Revenues from
obligations of states and political subdivisions totalled
$2,801.1 million, a small increase over the 1975 figure.
The expense items involving interest payments
increased by 37.5 percent. Interest on deposits, the
largest expense item, increased to $20,885.8 million, an
increase for the year of 37 percent. Salaries and employee benefits increased 18.6 percent, more than double the previous year's increase. Provisions for loan
losses increased by $26.1 million, or 1.2 percent. That
small increase in the provision for loan losses was important in making 1976 a profit year.
Cash dividends paid totaled $1,821.1 million, almost
the same amount paid in 1976. In 1975, the dividend
pay-out ratio declined to 39.7 percent. The previous two
years' dividend pay-out ratios were 42.8 (1975) and 41.3
(1974) percent.
Table 2
Income and expenses of National banks, December 31, 1976
(Dollar amounts in thousands)
Amount
Percent
distribution
4,737 national banks
Operating income:
Interest and fees on loans
Interest on balances with banks
Income on Federal funds sold and securities purchased under agreements to resell in domestic
offices
Income on securities:
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Dividends on stock
Income from direct lease financing
Income from fiduciary activities
Service charges on deposit accounts in domestic offices .,
Other service charges, commissions, and fees
Other income
Total operating income
Operating expenses:
Salaries and employee benefits
Interest on time certificates of deposit of $100,000 or more issued by domestic offices
Interest on deposits in foreign offices
Interest on other deposits
Expense of Federal funds purchased and securities sold under agreements to repurchase in
domestic offices
Interest on borrowed money
Interest on subordinated notes and debentures
Occupancy expense of bank premises, net
Furniture and equipment expense
Provision for possible loan losses (or actual net loan losses)
Other expenses
Total operating expenses
$31,031,046
2,946,656
64.61
6.14
1,229,182
2.56
7,696,571
16.03
3,193,274
1,210,149
2,801,076
492,072
6.65
2.52
5.83
1.03
62,149
408,438
1,029,203
911,467
1,441,484
1,265,214
.13
.85
2.14
1.90
3.00
2.64
48,021,410
100.00
8,575,522
4,327,891
5,962,140
10,595,809
20.37
10.28
14.16
25.17
2,268,120
454,745
179,190
1,548,312
1,015,489
2,250,427
4,925,748
5.39
1.08
.42
3.68
2.41
5.34
11.70
42,103,393
100.00
Income before income taxes and securities gains or losses
Applicable income taxes (domestic and foreign)
Income before securities gains or losses
Securities gains (losses), gross
Applicable income taxes (domestic and foreign)
Securities gains (losses), net
Income before extraordinary items
Extraordinary items, net of tax effect
5,918,017
1,436,755
4,481,262
168,493
-72,596
95,897
4,577,159
13,891
Net income
4,591,050
Cash dividends declared:
On common stock . . . .
On preferred stock....
1,820,000
1,088
Total cash dividends declared
1,821,088
Ratio to income before income taxes and securities gains or losses:
Applicable income taxes
Net securities gains
Extraordinary charges or credits
24.28
1.62
.24
Ratio to total operating income:
Salaries and wages
Interest on deposits*
All other operating expenses
Total operating expenses
Net income
17.86
43.49
26.33
87.68
9.56
* Includes expenses on all deposits.
NOTE: Data may not add to totals because of rounding. Includes all banks operating as national banks at year-end and full year data for
those state banks converting during the year.
Structural Changes in the National Banking
System
The National Banking System consisted of 4,737
banks as of year-end 1976. Of that number, 2,643 were
unit banks and 2,094 operated 16,640 domestic
branches. The total number of banking offices of national
banks in the U.S. was 21,377, an increase of 364 for the
year. During the year the number of branches increased
2.3 percent and the number of banking offices increased
1.7 percent. Both of those rates are less than the previous year's growth rates. The three large unit banking
states, Texas, Illinois and Florida, continued to lead in
total number of banks; at year-end 1976, there were 596,
425 and 306 banks in those states, respectively. California remained the state with the largest number of banking offices, with 2,766, up from 2,704 at year-end 1975.
New York and Pennsylvania continue to rank second and
third with 1,643 and 1,606 offices, respectively. New
York experienced a decrease of 138 offices, 117 of
which were branch offices. That shows the effect of the
change in that state's branching law which became effective in 1976.
During 1976, 536 cte novo branches entered the National Banking System. Mergers and conversions added
235 branches, while subtracting 394. The vast majority of
the new branches (ate novo) were in cities with populations of less than 100,000 persons. The percentage of
new branches in cities of that size was 69 percent in
1975, and increased to 75 percent in 1976. Banks with
total resources of less than $100 million established 238,
or 44 percent of the ate novo branches. The large banks,
those with over $1 billion in total resources, opened 142
branches, or about 26 percent of all new branches.
California led all states with 77 new branches, followed
by Michigan and Pennsylvania with 42 and 38, respectively.
Again, in 1976, the number of charters issued was
below the previous year's. There were 65 national banks
chartered in 1976 compared to 76 in 1975 and 92 in
1974. Only 34 applications were approved in 1976,
compared to 72 the previous year. Texas led the states in
charters issued with 19, followed by Florida with 8. Additionally, 14 banks were chartered for the purpose of effecting corporate reorganizations and 9 state-chartered
banks converted to national bank status.
Table 3
National banks and banking offices, by states, December 31, 1976
National banks
Total
All national banks
50 states
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia . . . .
Florida
Unit
With
branches
Number
of
branches
Number
of
offices
4,737
4,735
97
6
3
73
58
132
23
5
15
306
2,643
2,641
35
1
1
16
13
107
3
2
3
239
2,094
2,094
62
5
2
57
45
25
20
3
12
67
16,640
16,640
300
73
307
172
2,708
25
262
4
128
66
21,377
21,375
397
79
310
245
2,766
157
285
9
143
372
Kansas ..
Kentucky .
Louisiana.
Maine
64
2
6
425
120
100
169
82
54
17
17
0
1
315
33
52
121
25
11
1
47
2
5
110
87
48
48
57
43
16
318
11
167
110
483
85
70
228
254
117
382
13
173
535
603
185
239
310
308
134
Maryland
Massachusetts ..
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire .
41
75
122
203
38
115
56
120
4
43
9
19
181
5
61
49
84
1
10
33
66
103
22
33
54
7
36
3
33
365
506
792
28
220
69
7
52
78
89
406
581
914
231
258
184
63
172
82
132
New Jersey
New Mexico
New York
North Carolina ..
North Dakota . . .
Ohio
Oklahoma
Oregon
Pennsylvania . . .
Rhode Island . . .
104
38
129
28
43
219
195
7
237
5
9
8
34
7
21
50
141
1
83
0
95
30
95
21
22
169
54
6
154
5
1,012
115
1,514
788
23
1,018
54
310
1,369
115
1,116
153
1,643
816
66
1,237
249
317
1,606
120
South Carolina
South Dakota .
Tennessee . . .
Texas
Utah
Vermont
Virginia
Washington . . .
West Virginia .
Wisconsin . . . .
Wyoming
19
32
74
596
13
14
108
21
103
130
46
6
18
10
591
8
4
14
3
77
87
46
13
14
64
5
5
10
94
18
26
43
0
299
80
353
5
99
47
679
556
26
84
0
318
112
427
601
112
61
787
577
129
214
46
1
1
1
1
0
0
0
0
1
1
Georgia ..
Hawaii . . .
Idaho
Illinois
Indiana ..
Iowa
Puerto Rico
FDIC National Bank
District of Columbia - all*
16
129
13
* Includes national and non-national banks in the District of Columbia, all of which are supervised by the Comptroller of the Currency.
145
Table 4
Applications for national bank charters* and charters issued, by states, calendar 1976
Received^
Approved
Disapproved
Withdrawn
Pending
December 31,
Chartered
1976
Total
69
65
0
0
0
0
0
0
0
0
0
2
1
0
0
2
3
3
1
1
1
11
3
0
0
0
2
0
0
0
0
0
0
0
2
1
1
1
0
0
0
0
1
0
0
0
0
6
1
0
0
2
1
0
0
0
0
0
0
0
0
0
0
0
0
0
3
0
2
1
0
0
0
0
0
0
2
3
0
4
1
0
0
0
1
0
3
2
0
0
1
1
0
0
0
0
2
1
1
0
3
1
0
0
0
2
0
0
19
0
0
0
0
2
2
1
0
0
1
0
0
0
3
1
1
0
0
0
0
0
0
0
0
0
0
1
19
1
0
1
0
0
2
0
0
0
0
0
0
1
0
0
145
34
36
3
0
0
3
6
5
1
1
1
28
0
0
0
1
0
2
0
0
0
3
2
0
0
0
3
0
0
0
0
12
Georgia .
Hawaii . . .
Idaho
Illinois . . .
Indiana ..
Iowa . . . .
Kansas . .
Kentucky
Louisiana
Maine . . .
2
1
0
9
5
0
0
1
3
0
0
0
0
3
3
0
0
0
0
0
0
0
0
4
1
0
0
1
1
0
Maryland
Massachusetts .
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
0
0
4
1
2
0
0
0
0
0
0
0
1
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
New Jersey
New Mexico....
New York
North Carolina ..
North Dakota . . .
Ohio
Oklahoma
Oregon
Pennsylvania . . .
Rhode Island . . .
2
3
6
0
1
3
4
0
1
0
1
0
2
0
1
2
2
0
0
0
0
0
2
0
0
0
3
0
1
26
2
0
0
1
7
5
2
0
0
1
5
1
0
0
1
2
2
0
0
0
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
South Carolina
South Dakota..
Tennessee
Texas
Utah
Vermont
Virginia
Washington . . .
West Virginia ..
Wisconsin
Wyoming
Virgin Islands
0
1
Puerto Rico ..
* Excludes conversions and corporate reorganizations.
t Includes 73 applications pending as of December 31, 1975.
1
0
1
0
0
0
0
2
0
0
0
0
1
0
0
0
0
0
0
0
0
0
1
1
0
Table 5
Applications for national bank charters pursuant to corporate reorganizations and charters issued, by states, calendar
1976
Pending
December 31,
Disapproved
Withdrawn
Received*
Approved
Chartered
1976
1
14
24
22
Total
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
1
0
Georgia .
Hawaii...
Idaho....
Illinois . . .
Indiana ..
Iowa . . . .
Kansas ..
Kentucky
Louisiana
Maine . . .
3
0
0
3
1
0
0
0
0
0
3
0
0
3
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2
0
0
0
0
0
0
Maryland
Massachusetts .
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
1
3
5
0
0
0
0
0
0
0
1
3
5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
2
0
0
0
0
0
0
0
New Jersey . . . .
New Mexico
New York
North Carolina ..
North Dakota . . .
Ohio
Oklahoma
Oregon
Pennsylvania . . .
Rhode Island . . .
0
0
1
0
0
1
0
0
0
0
0
0
1
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
2
0
0
0
0
South Carolina
South Dakota..
Tennessee
Texas
Utah
Vermont
Virginia
Washington . . .
West Virginia ..
Wisconsin
Wyoming
0
0
1
4
0
0
1
0
0
0
0
0
0
0
4
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
3
0
0
1
0
0
0
0
Virgin Islands
Puerto Rico ..
0
0
0
0
0
0
0
0
0
0
0
0
* Includes 2 applications pending as of December 31, 1975.
Table 6
Applications for conversion to national bank charter and charters issued, by states, calendar 1976
Received*
Approved
Rejected
Withdrawn
Pending
December 31,
Chartered
1976
Total
15
11
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
0
0
0
0
0
0
0
0
0
5
0
0
0
0
0
0
0
0
0
4
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
4
Georgia .
Hawaii . . .
Idaho
Illinois . . .
Indiana ..
Iowa . . . .
Kansas ..
Kentucky
Louisiana
Maine . . .
1
0
1
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
Maryland
Massachusetts .
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
0
0
1
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
New Jersey . . . .
New Mexico....
New York
North Carolina ..
North Dakota . . .
Ohio
Oklahoma
Oregon
Pennsylvania . . .
Rhode Island . . .
0
1
0
1
0
0
0
0
0
0
0
1
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
1
0
0
0
0
South Carolina
South Dakota. .
Tennessee
0
0
0
Texas
1
0
0
1
0
0
0
1
0
0
1
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2
0
0
0
0
0
0
0
0
1
0
0
0
0
Alabama
Alaska
Utah
Vermont
Virginia
Washington . . .
West Virginia ..
Wisconsin
Wyoming
* Includes those pending from prior years.
0
3
0
0
Table 7
Branches* of national banks, by states, calendar 1976
Branches
in
operation
December 31,
1975
All national banks
50 states
De novo
branches
opened for
business
Jan. 1 to
Dec. 31,1976
Branches
acquired
through
merger or
conversion
Jan. 1 to
Dec. 31, 1976
Existing
branches
discontinued
or
consolidated
Jan. 1 to
Dec. 31, 1976
Branches
in
operation
December 31,
1976
16,269
16,262
290
66
300
160
2,647
25
258
4
98
53
536
536
12
7
12
11
77
1
1
0
3
12
235
235
1
0
0
1
1
0
4
0
30
1
394
393
3
0
5
0
17
1
1
0
3
0
16,640
16,640
Georgia ..
Hawaii . . .
Idaho
Illinois
Indiana ..
Iowa
Kansas ..
Kentucky .
Louisiana.
Maine
318
11
161
103
469
83
63
204
242
128
5
0
6
9
16
2
9
23
12
1
5
0
0
0
1
0
0
1
0
1
10
0
0
2
3
0
2
0
0
13
318
11
167
110
483
85
70
228
254
117
Maryland
Massachusetts ..
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire .
357
504
749
25
210
65
5
50
77
85
10
15
42
4
11
4
2
3
1
6
2
2
16
0
1
0
0
0
0
0
4
15
15
1
2
0
0
1
0
2
365
506
792
28
220
69
7
52
78
89
New Jersey
New Mexico
New York
North Carolina .,
North Dakota . . .
Ohio
Oklahoma
Oregon
Pennsylvania . . .
Rhode Island . . .
963
111
1,631
767
21
972
51
299
1,354
114
27
4
27
11
2
32
3
11
38
2
34
0
18
14
0
17
0
0
10
0
12
0
162
4
0
3
0
0
33
1
1,012
115
1,514
788
23
1,018
54
310
1,369
115
298
75
368
1
98
48
661
519
18
83
0
5
2
10
4
1
0
15
14
8
3
0
0
3
24
0
0
1
14
33
0
0
0
4
0
49
0
0
2
11
10
0
2
0
299
80
353
5
99
47
679
556
26
84
0
7%
0
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
South Carolina
South Dakota .
Tennesse . . . .
Texas
Utah
Vermont
Virginia
Washington . . .
West Virginia .
Wisconsin . . . .
Wyoming
Virgin Islands
District of Columbia - allt
128
0
300
73
307
172
2,708
25
262
4
128
66
129
* Does not include foreign branches. For those branches, see table B-35.
t Includes national and non-national banks in the District of Columbia, all of which are supervised by the Comptroller of the Currency.
X Includes 6 branches of Virgin Islands National Bank, merged into First Pennsylvania Bank, N.A., December 31, 1975. Those branches are now
operated as "foreign branches" of the resulting bank.
10
Table 8
De novo branch applications of national banks, by states, calendar 1976
Received*
Approved
600
Rejected
Abandoned
Pending
December 31, 1976
77
32
256
11
6
7
5
63
4
4
0
2
119
1
0
0
0
6
0
0
0
2
21
0
0
0
0
0
0
0
0
0
10
9
3
11
4
18
2
1
0
2
20
9
0
10
50
33
3
7
30
20
3
9
0
9
23
17
2
5
26
12
3
0
0
0
0
4
0
1
0
1
0
0
0
0
2
2
1
0
0
2
0
0
0
1
25
10
0
1
4
5
0
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
15
21
111
7
15
12
3
3
4
5
12
16
35
4
9
4
3
1
2
4
2
1
18
1
0
0
0
0
0
0
0
4
4
1
1
1
0
0
0
0
1
0
54
1
5
7
0
2
2
1
New Jersey
New Mexico
New York
North Carolina ..
North Dakota . . .
Ohio
Oklahoma
Oregon
Pennsylvania . . .
Rhode Island . . .
40
5
26
16
2
53
6
18
33
0
29
4
18
12
2
30
4
14
21
0
1
0
5
0
0
6
1
1
2
0
1
0
1
0
0
0
0
0
0
0
9
1
2
4
0
17
1
3
10
0
2
2
0
0
16
7
3
3
7
3
1
1
17
13
17
20
2
3
Wisconsin
1
5
Wyoming
0
0
* Includes 171 applications pending as of December 31, 1975.
0
0
1
0
0
0
0
1
0
1
0
0
0
0
0
0
0
1
0
1
0
0
0
0
8
0
4
0
3
2
0
3
0
Total ..
965
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
21
9
18
9
87
6
5
0
6
170
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
South Carolina ..
South Dakota . ..
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia . . .
11
Table 9
De novo branches of National banks opened for business, by community size and.by size of bank,
calendar 1976
Population of cities
Less than 5,000
5,000 to 24,999
25,000 to 49,999
50,000 to 99,999
100,000 to 249,999 ..
250,000 to 499,999 ..
500,000 to 1,000,000
Over 1,000,000
Total
Branches
.100
.170
..76
..57
..52
..31
..30
..20
Less than 10.0
10.0 to 24.9
25.0 to 49.9
Total resources of banks
(millions of dollars)
:
Branches
25
70
83
50.0 to 99.9
100.0 to 999.9
60
156
1,000.0 and over
.142
Total
536
.536
Table 10
Mergers*, calendar 1976
Transactions
involving
two or more
operating banks
Others pursuant
to
corporate
reorganization
Applications received, 1976:
Mergers
Consolidations
Purchases and Assumptions
46
2
29
13
3
0
59
5
29
Total received
77
16
93
Approvals issued, 1976:
Mergers
Consolidations
Purchases and Assumptions
39
1
27
12
2
0
51
3
27
Total approvals
67
14
81
5
1
0
7
0
0
12
1
0
6
7
13
36
1
25
13
2
0
49
3
25
62
15
77
Abandoned, 1976:
Mergers
Consolidations
Purchases and Assumptions
Total abandoned
Consummated, 1976:
Mergers
Consolidations
Purchases and Assumptions
Total consummated
* Includes mergers, consolidations and purchases and assumptions where the resulting bank is a national bank.
12
Total
IV. Bank Examinations and Related Activities
By statute, all National banks are required to be
examined twice in each calendar year. However, the
Comptroller of the Currency, in the exercise of his discretion, may waive one such examination in each 2-year
period, or may cause such examinations to be made
more frequently, if considered necessary. The Code of
the District of Columbia authorizes the Comptroller to
examine each non-national bank and trust company located in the District.
For the year ended December 31, 1976, the Office
examined 5,426 banks, 11,357 branches and facilities,
1,453 trust departments and 261 affiliates and subsidiaries and conducted 314 special examinations and
visitations. The Office received 54 applications to establish new banks and processed 794 applications for de
novo branches and 9 applications to convert state banks
to national banking associations.
National bank examinations are designed to determine the condition and performance of banks, the quality
of their operations and the capacity of management and
to enforce compliance with federal laws. The Office is
presently implementing new examination policies and
procedures incorporating the recommendations of the
Haskins & Sells study, the informal acceptable practices
of many examiners and current industry innovations. The
examination process has been modified to place greater
emphasis on analysis and interpretation of financial data
and less on detailed verification. Also, more reliance is
being placed on systems for internal control and the
work performed by internal and external auditors. It is anticipated that all examiners will be using the new procedures by mid-1977.
As of December 31, 1976, the Office employed 2,336
examiners, 2,195 commercial and 141 trust examiners.
The Office continues to use a select group of EDP
examiners in each of the 14 regions to examine bank
EDP operations. Those examiners have been specially
trained in EDP and receive continuous update training,
as needed. A major achievement in EDP during the year
was the promulgation of Minimum Standards of Information for Automated Systems. That document will contribute to the improvement of information used for evaluations performed by this Office and by bank management.
Ninety-nine national banks with 635 foreign branches
are examined by examiners specially trained in
international procedures and policies. Those examiners
attend periodic seminars conducted by staff personnel
and outside international experts to update their knowledge on international financial affairs.
13
V. Law Department
The Law Department advises the Comptroller of the
Currency and his staff on legal matters pertaining to the
administration and interpretation of laws and regulations
governing the National Banking System. Attorneys in the
Law Department deal directly with the management of
national banks, with bank attorneys and accountants
and with the staffs of other government agencies and
Congressional committees. The Department also responds to litigation in which the Office may become
interested and exercises certain direct responsibility in
enforcement and securities disclosure. Some of the Department's major activities are described below.
Legislation
During 1976, the Law Department was responsible for
the preparation of testimony and related materials for the
Comptroller of the Currency and other agency officials in
connection with Congressional hearings. Topics
included practices and procedures of the Office, the
House Banking, Currency and Housing Committee's
study of Financial Institutions and the Nation's Economy
(FINE), proposed legislation to consolidate the federal
bank regulatory agencies into a single agency, and fair
lending practices. Representatives of the Office also
spoke on the need to strengthen the enforcement powers provided in the federal banking laws, the regulatory
processes of the Office particularly in connection with
the failure of Franklin National Bank, and federal enforcement of the Truth-in-Lending Act. (See Appendix C,
Addresses and Selected Congressional Testimony, pp.
187-262, in this report.) Agency comments also were offered on a wide array of proposed legislation affecting
bank regulation, ranging from freedom of information
and privacy to federal regulation of foreign banks, competition in banking, and anti-trust laws.
Litigation
On January 1, 1976, there were 39 cases pending in
which the Comptroller was a defendant. During the year,
17 of those cases were concluded, 11 in the Comptroller's favor, five unfavorably and one by stipulation resulting in a compromise acceptable to all parties.
The most significant cases were those involving the
Comptroller's Interpretive Ruling 7.7491 on customerbank communication terminals. Despite varying rulings
by the district courts, four courts of appeals considered
the cases and all ruled against the Comptroller's position
that CBCT's are not branches. In October, the Supreme
Court denied certiorari in two of the cases and the Comptroller's ruling subsequently was rescinded.
Other issues litigated during the year included the validity of the Comptroller's assessment proceedings,
whether an office engaged in providing trust services
constitutes a "branch" of a national bank, and the government's liability for alleged negligence in supervising
United States National Bank of San Diego and Franklin
National Bank. The Law Department also participated in
litigation brought by the Department of Justice alleging
that a transaction approved by the Comptroller leading
to the acquisition of four banks by Michigan National
Corporation violated Section 7 of the Clayton Act. That
litigation was eventually settled out of court.
Securities Disclosure
Major revisions in the consolidated reports of condition
and income ("call reports") required by the federal banking regulatory agencies were made during 1976. In addition, Securities and Exchange Commission Guides 61
and 3.were adopted as a result of the joint efforts of the
SEC - Federal Banking Agencies Task Force on statistical disclosure by bank holding companies. Those actions precipitated substantial modifications of the Comptroller's various regulations relating to the form and content of financial disclosure by national banks.
The Law Department assisted in revising 12 CFR 18,
"Form and Content of Annual Reports to Shareholders,"
to make the regulation substantially consistent with the
instructions for the new consolidated reports of condition
and income. As revised, the regulation provides specific
exemptions, as well as a short form for complying with it.
The Department also made a comprehensive revision
of 12 CFR 16, Securities Offering Disclosure Rules. That
regulation concerns the use of an offering circular by a
national bank when it offers and sells its equity securities.
The revision was adopted to require that prospective
investors be provided with all material facts and information relating to the business operations and financial
condition of national banks seeking to obtain funds
through the public offering and sale of their securities.
The disclosure guideline standards in the revised regulation were designed to facilitate compliance by smaller
banks and by organizing banks. For the first time, a
15
number of transactions were specifically exempted from
the offering circular requirements.
The Law Department also implemented amendments
to 12 CFR11, Securities Exchange Act Disclosure Rules,
designed to make the regulation substantially similar to
SEC rules, as mandated by law. Other changes were
made in the regulation in order to effect consistency with
the other reporting guidelines.
In connection with the Office's expanded responsibilities with respect to the regulation of bank municipal
securities dealers under the Securities Acts Amendments of 1975, the Department coordinated with the
SEC, the Municipal Securities Rulemaking Board and
other interested parties in carrying out the requirements
of the Securities Exchange Act of 1934. Accountants assigned to the Law Department also issued numerous
interpretations to bankers, public accountants and regional and Washington Office personnel regarding various accounting matters, including sale-and-lease back
transactions, accounting for dividends, accounting relating to the establishment of charitable trusts and accounting for accretion of discount on investment securities.
Interpretations and Regulations
During 1976, the Law Department responded to nearly
4,000 requests for information, advice and
interpretations of statutes and regulations from members
of the Comptroller's staff, banks, attorneys, bank customers and others. In addition, many formal rulings
involving new policies and procedures or modifications
of existing policies and procedures were either proposed or issued. Some are described below.
Banking Circular No. 79. The Commodity Futures Trading Commission has authorized the establishment of two
financial instrument futures markets: the Chicago Board
of Trade's GNMA Mortgage Futures contract which
commenced trading in October 1975, and the Chicago
Mercantile Exchange's Treasury bill (T-bill) futures contract which commenced trading in January 1976. Many
national banks sought to purchase and sell GNMA or
T-bil! futures contracts through those exchanges in order
to minimize their risk of loss resulting from interest rate
fluctuations in corresponding cash markets, e.g., conventional mortgages, U.S. Treasury bills and certificates
of deposit. Because the Comptroller believes such activity is incidental to the business of banking and permissible under 12 USC 24(7), he issued Banking Circular No.
79 on November 2,1976, advising all national banks that
their participation in those markets will be approved if,
among other things, they develop adequate internal
audit and control procedures and only engage in those
activities to substantially reduce the risk of loss resulting
from interest rate fluctuations in appropriate cash markets.
Trust Banking Circular No. 4 (Revised). In the initial issue
of Trust Banking Circular No. 4, December 23,1975, the
Office advised that investment of national bank trust assets in shares of mutual funds constituted an improper
delegation of the trust investment authority "under the
common law" and that the Office would, therefore, permit such investment only if there existed specific authority in state statutes or decisions or in the governing
16
instrument, or if there existed binding mutual consent
from all beneficiaries. That instruction was generally
interpreted by national bank trust officers to preclude
investment in mutual fund shares unless specific state
legislation expressly permitted investment by fiduciaries
in mutual funds. General "prudent man" language in
many state statutes was thought insufficient to provide
the necessary statutory authorization. Because the
Comptroller concluded that the Office should not attempt to state the common law of trusts on this question
in every state, he revised Trust Banking Circular No. 4 on
September 29, 1976, to permit national bank trust officers, on advice of local counsel, to invest trust assets in
shares of mutual funds if that investment is expressly or
implicitly authorized by state law.
Charitable Trusts. Legal arrangements and institutional
mechanisms were developed to permit national banks
seeking to fulfill their charitable commitments and
maximize their tax benefits to establish 10-year charitable trusts under 12 USC 24(8) and 12 CFR 7.7445. Typically, a national bank would transfer U.S. government
securities to the trust as corpus for a 10-year and onemonth period. The bank's trust department would serve
as trustee and distribute all income generated by the
corpus to philanthropic organizations approved by
Internal Revenue Service. Following the expiration of the
trust term, the trust would terminate and the assets would
automatically revert to the settlor bank. Because the trust
assets would revert to the settlor bank after a fixed term,
the Comptroller considered such a temporary transfer of
assets to be a contribution for the use of a foundation, not
a contribution to a foundation under 12 CFR 7.7445(c);
otherwise, the contribution limitations of paragraph (c)
would effectively preclude the establishment of a trust
that could generate enough income to satisfy the needs
of the respective charitable organizations.
12 CFR Parts 4 and 5. Parts 4 and 5 were amended on
November 1, 1976, to clarify and consolidate the application procedures relating to the various activities subject to supervision of the Comptroller and to expand the
scope of the regulations to include additional activities
within the hearing procedures. Specifically, the amendments establish revised Office procedures for charters,
branches, conversions, mergers, fiduciary powers,
operating subsidiaries, title changes, relocations and
changes in capital structure.
Interpretive Ruling 7.6125. Section 56 of Title 12 of the
United States Code requires that bad debts, i.e., "statutory bad debts," must be deducted from "net profits then
on hand" in order to compute funds available for the
payment of dividends. Confusion regarding the precise
meaning of "bad debt" became evident when certain
overdue real estate loans were so classified although
long-term workout schedules had been arranged that
minimized the risk of loss to the respective banks. That
action created the possibility that some financially sound
institutions would be precluded from declaring and paying regular dividends. Accordingly, on December 14,
1976, the Comptroller proposed that Interpretive Ruling
7.6125 be amended to allow for greater flexibility in the
treatment of such problem credits. In that regard, the
proposed revision clarifies the meaning of "bad debts"
without changing the substantive provisions of the present interpretive ruling.
Interpretive Ruling 7.7479. On December 14, 1976, the
Comptroller proposed to amend this interpretive ruling in
order to permit a national bank to make charitable contributions based upon its income before taxes during the
preceding calendar half-year. The present ruling limits
the amount contributed by a national bank to that "which
is allowed by the Internal Revenue Service as a deduction from income." That proviso effectively limits charitable contributions to 5 percent of a national bank's taxable
income computed without regard to such items as
carrybacks for net operating losses or capital losses and
certain deductions. The limitation was originally designed to prevent management of closely held banks
from contributing excessive sums to charities in which
the bank's controlling stockholders have a personal
interest.
The Comptroller continues to believe that a limitation of
some kind is necessary, but he does not think that the
"taxable income" standard is the best method. For
example, the present limitation unreasonably restricts
banks that have low taxable income due to heavy
investment in tax exempt securities from making contributions. That problem can be resolved by tying the 5
percent limitation to income before taxes, rather than
taxable income.
Another problem created by the present ruling relates
to the difficulty of forecasting the permissible amount
that can be given to charity. Although contributions are
made throughout the calendar year, the net taxable
income may not be known until long after the year has
ended. Therefore, the Comptroller has proposed authorizing national banks to contribute up to 5 percent of
"income before income taxes and securities gains or
losses" registered during the immediately preceding
calendar half-year.
Mortgage Backed Securities. In June 1976, the Comptroller's Office approved a proposal by a commercial bank
to sell conventional, single-family real estate loans to a
trust which finances the purchase by selling mortgage-backed bonds in denominations of $100,000 or
more to institutional investors. With the Comptroller's approval, the plan was subsequently modified to eliminate
the trust and convert the security from a bond to a
passthrough instrument backed by a pool of mortgages.
The securities will be sold through an underwriting syndicate, and the proceeds will be used to make more
mortgage loans.
Credit Life Insurance. During 1976, the Law Department
participated in several efforts to curb the payment of
credit life insurance income to officers, directors and
controlling stockholders of national banks. The most significant effort was the publication of a proposed regulation declaring the practice an unsafe and unsound banking practice. Earlier in the year, the Law Department filed
an amicus brief in litigation brought by a minority
shareholder against a bank's directors who had diverted
all the income from credit life insurance sales to a corporation owned exclusively by them.
Enforcement
In 1976, the Comptroller's enforcement activities were
more intense than in any past year. Two administrative
hearings were convened, testing the validity of Notices
of Charges and seeking final Orders to Cease and Desist
pursuant to the Financial Institutions Supervisory Act, 12
USC 1818(b) etseq. These hearings were the first involving the Comptroller since passage of the Act in 1966.
Both hearings resulted in judgments by an administrative law judge sustaining the charges.
The first hearing involved a Notice of Charges alleging
substantial self-dealing and other "insider" abuses. A
final Order was issued which largely circumscribed the
ability of insider personnel to favor their own interests.
The second hearing involved excessive salaries and
bonuses to officers and directors alleged to constitute an
unsafe and unsound banking practice. In a judgment
sustaining the charges the administrative law judge recommended a final Order limiting salaries and bonuses
to amounts representing more normal industry levels
within the bank's peer group.
The Law Department initiated 33 formal actions
against national banks in 1976. Although those actions
covered all areas of bank operations from capital adequacy to violations of consumer laws, certain subjects
were dealt with more frequently than others. Of the 33
formal actions, 17 related to abusive self-dealing and
self-serving transactions by senior officers, directors
and principal shareholders. Provisions for increased
capital were made in 16 actions and the hiring of a new
executive officer was required in 13. The implementation
of new lending policies in writing was ordered in 12 actions.
Directives were also issued to national banks requiring, among other things, that they comply with consumer
protection regulations and properly book credit life
insurance proceeds. Several national banks were required to make reimbursement to borrowers who had received inaccurate or incomplete disclosures required by
theTruth-in-LendingAct, 15 USC 1601 etseq., and Federal Reserve Regulation Z.
Civil money penalties were twice assessed against national banks for failure to submit timely reports of condition pursuant to 12 USC 161. Directors were required to
reimburse the bank in the amount of the assessment.
17
VI. Fiduciary Activities of National Banks
During/1976,46 national banks applied for permission
to exercise fiduciary powers. Of them, 33 were approved. At year-end, 2,008 national banks had the authority to exercise trust powers.
Much of the activity of the Trust Operations Division
during the year had to do with the implementation of the
recommendations of the Haskin & Sells study. By yearend nearly all of those revisions had been completed.
New trust examination procedures were devised by a
task force of examiners early in the year. The procedures
were tested in a number of banks across the country during March and April by examiners who had not participated in the drafting process and who were from regions
other than those from which the members of the task
force had been drawn. In June, 70 trust examiners and
assistant trust examiners attended a workshop held in
Washington at which the use of the new procedures was
explained. Examiners that attended the workshop returned to their regions to train other trust personnel in the
revised procedures.
In October the new examination system was put into
effect. In each region the first examination was of a large
bank in which all task force members could participate to
finalize their training. A revised Handbook for National
Trust Examiners was issued at that time. The handbook
contains all instructions necessary for trust examiners
properly to carry out their responsibilities. It also includes
copies of all of the Office's rulings relating to trust ac-
tivities and copies of the revised questionnaires and
checklists utilized under the new procedures. Thus far,
experience with the new examination procedures has
been favorable.
During the year the registration of national bank transfer agents with this Office was completed, currently 947
national banks are registered. Discussions were held
with the other banking agencies and the SEC with reference to the formulation of proposed regulations relating
to turn-around time and safe handling of securities. In a
related activity the Office, together with the other banking agencies and the SEC, proposed regulations pertaining to the supervision of clearing agents. That proposal
was still pending at year-end.
Another regulatory proposal published for comment
during the year related to the question of the separation
of trust department investment decision makers from
other sources of non-public information regarding
publicly-traded securities which may exist in the bank.
Many comments were received about that proposal. It is
hoped that final regulations on this subject can be made
early next year.
This Office also proposed an amendment to Regulation 9 which would limit the amount which a corporation
can borrow from a national bank trust department by
means of a variable amount note to the bank's lending
limit. Many comments were received with reference to
this proposal, most of which were significantly adverse.
19
VII. International Banking and Finance
The effects of economic resurgency in the United
States, beginning in late 1975, extending into mid-1976,
pausing slightly, and then ascending through year-end,
stimulated similar direct and indirect positive economic
progress throughout the greater part of the industrialized
world. The developed nations continued to experience
varying degrees of inflation, unemployment and underutilization of industrial capacity. However, the degree of
their revival from the seemingly insurmountable problems of the preceding 3 years, especially those which
were oil-related, justifies characterizing 1976 as a year of
recovery. The stronger industrialized nations were able
to compensate satisfactorily for both the increasing consumption and price of oil; however, their weaker counterparts were forced to continue borrowing to finance
oil-originated payments deficits. The non-oil producing
developing nations again fared poorly, tormented by uninterrupted domestic recession, depressed commodity
prices and persistent oil-generated trade deficits. Those
deficits, collectively amounting to an estimated $32 billion during 1976, although reduced from $40 billion in
1975, still presented tremendous financing problems to
world money markets. The stronger, semi-developed nations generally were able to finance their needs through
private bank sources, sometimes with the assistance of
public authorities. However, the lesser developed countries were forced to rely more heavily on direct credit
from international institutions, grants-in-aid and private
credit guaranteed by official agencies. Nevertheless, reschedulings and technical defaults did occur in a few
isolated instances. Total non-oil producing, lesser
developed nations' outstanding external debt grew to an
estimated $180 billion by the end of the year. The year
ended on a note of uncertainty, as internal division within
OPEC surfaced in the form of a split among the members
over oil price increases. While the relatively small
increase by the two major producers was expected to
have little impact on the industrial nations, the fact that
there was another increase could have substantial effect
on the developing nations.
The world financial community, prompted by the payments imbalances caused by the continued OPEC
surpluses/non-oil developing countries deficits and
concerned by the prospects of such imbalances disturbing the financial markets, continued to voice the need for
establishing coordinated international payments mech-
anisms to cooperate in handling the recycling of OPEC
reserves. However, the world commercial banking system was again able to cope effectively with the problem.
The foreign exchange markets endured periods of both
rational and irrational rate fluctuations, with several major
currencies suffering either deep depreciation or substantial devaluation. Within the semi-floating exchange
rate system, stronger currency nations came to the aid of
several weaker currency nations, helping to support their
currencies during these crises.
During 1976, United States banks increased their
foreign lending by approximately $20 billion, with total
overseas exposure now estimated at $80 billion. However, the 1976 increase took the form of shorter-term
credits, a change from the medium and longer term
loans of past years. Bankers reassessed their own rapid
growth in lending overseas and, conversely, the rapid
growth of borrowing by many countries. Several major
private bank credits were linked to adoption of economic
stabilization programs by the borrowing countries, in
cooperation with official lenders. The international assets
of national banks were estimated to total over $150 billion
at the end of 1976. Those assets were divided primarily
among the national banks that operate foreign branches.
Those banks are located in all 14 national bank regions.
Foreign branches are now operated by about 100 national banks. During 1976, the number of foreign
branches of national banks showed an overall net decrease of 40, primarily because of the consolidation of
several branch systems into subsidiary banks that resulted from changes in host country laws. At year-end,
total assets of the 635 foreign branches of national banks
aggregated $135 billion, a 20 percent increase over the
$112 billion at the end of 1975. National banks also continued to hold investments in foreign financial
institutions, either directly or through their Edge Act subsidiaries.
Supervisory responsibility for the international activities of all national banks is delegated to the
International Operations Division of the Office of the
Comptroller of the Currency. Through a 6-man team of
examiners based in London and experienced examiners
selected from the 14 regions, the International Operations Division conducts examinations of the international
divisions, foreign branches and foreign affiliates of national banks. The examinations are especially tailored to
21
the organizational, geographical and reporting structure
of the bank under examination and include evaluation of
the quality of international loan and investment portfolios,
analysis of foreign exchange activities and reporting
procedures, accounting and bookkeeping systems and
adequacy of internal controls and audit programs. The
examinations are coordinated by the International Options Division and are conducted by examiners selected
from each region. At present there are approximately
150 national bank examiners who regularly conduct
examinations of international banking divisions within
their home regions. During 1976, continuing the established OCC policy of performing direct on-site examinations of major foreign offices of national banks, 215 national bank examiners travelled to 37 countries to conduct examinations of 145 foreign branches with assets
totalling $66 billion. The assets of the remaining
branches, including $22 billion in shell branches in the
Caribbean, were examined using records maintained at
the bank's head offices. Thirteen foreign electronic data
processing centers were also examined.
In conjunction with the OCC's program for development of comprehensive procedures for all phases of
bank examination, the International Operations Division
produced a series of policies and procedures specifically designed for examination of the international banking activities of national banks. Field testing of those new
procedures began in December. Training of
international examiners continued to receive major em-
phasis, as a total of 93 examiners participated in quarterly seminars on all phases of international banking
which were conducted by the International Operations
Division. Five national bank examiners attended the
School for International Banking which is sponsored by
the American Bankers Association. In addition, a bimonthly newsletter comprised of relevant media articles
was mailed to approximately 300 examiners, as well as
to the staffs of the Board of Governors, the Department of
the Treasury and members of Congress.
The uncertain and sensitive area of direct and indirect
lending by national banks to foreign governments, especially those in the developing world, continued to present a supervisory issue for the OCC. The accurate and
uniform assessment of the quality of such credits held in
the loan portfolios of national banks remained the task of
the OCC Foreign Public Sector Credit Review Committee, working in conjunction with the International Operations Division.
During 1976, the International Operations Division
continued to work closely with the staffs of Congress, the
FDIC, the Board of Governors, the Bankers Association
for Foreign Trade and foreign officials and bankers in
order to improve the quality and supervision of the National Banking System throughout the world by
strengthening both supervisory techniques and communications between the regulatory agencies, bankers
and foreign governments.
Table 11
Examinations of overseas branches, subsidiaries, and EDP centers of national banks, 1972-1976
Year
1972
1973
1974
1975
1976
22
Examinations
Branches and
subsidiaries
184
92
137
80
145
EDP centers
4
3
4
15
13
Banks
Countries
Examiners
16
22
23
23
25
24
28
26
25
37
58
59
96
153
215
VIII. Administration
The Administration Department facilitates the work of
the Comptroller's Office by providing supporting administrative services. Established in 1975 as Washington
Operations, it was reorganized in 1976 with the transfer
of the Research and Analysis and Systems and Data
Processing Divisions to the Deputy Comptroller for Economics. It is directed by the Deputy Comptroller for Administration and is comprised of three operating divisions — Bank Organization and Structure, Finance and
Administration and Personnel Management. Although a
Financial Accounting and Reporting unit is organizationally a division of Administration, it is not yet operational.
Its responsibilities are presently performed by other
units.
Bank Organization and Structure Division
The responsibility of processing applications for charters, branches, conversions, operating subsidiaries, title
changes and relocations was transferred to the regional
offices in 1976. Concomitant with that transfer is an expansion of the role of the regional offices in the decisional
process, particularly for branch applications. In 1975,
each regional office appointed a regional director for
corporate activities to assist the regional administrator in
meeting that expanded responsibility.
During 1976, policy statements intended to provide
the public and the banking industry with a better understanding of the basis for corporate decisions were issued (See pp. 274-282 in this report). Additionally, all
forms, instructions and internal processing procedures
were revised and will be continually scrutinized with a
view toward further improvement.
Although much responsibility for processing applications has been transferred to the regional offices, the Bank
Organization and Structure Division in Washington will
continue to have primary responsibility for processing
merger proposals and preparing substantive recommendations on mergers, new bank charters and debt
capital proposals.
Finance and Administration Division
This division includes two branches, Fiscal Management
and Administrative Operations, and is responsible for
ensuring the bureau's sound financial position, for performing its fiscal operations and for providing administrative services, including procurement and property
management.
During 1976, a budget program based on responsibility accounting principles was developed and im-
plemented. Each unit prepared an expense budget for
calendar year 1977, then submitted it to a Budget Review Committee assembled to make recommendations
to the Comptroller. On approving the committee's proposed budget, the Comptroller reaffirmed the premise of
responsibility accounting, that managers be responsible
for expenditures under their jurisdiction.
A computer-produced monthly budget evaluation report designed in 1976 will be operational in 1977. It will
compare actual versus budgeted expenditures by function. The system will identify areas where cost savings
may be effected and should increase managers' awareness of the need to control expenses.
Development of the computer-based fiscal information system in 1976 was a major step toward providing
more knowledge of bureau spending and promoting optimum utilization of financial and physical resources in
the future. A subsystem for property accounting will
maintain inventory on all capital expenditures, identifying them by acquisition date, cost, location and depreciated value.
The Fiscal Management Branch carried out a variety of
other activities in addition to assisting in development of
the budget program and the fiscal information system.
They are covered in "Financial Operations of the Office
of the Comptroller of the Currency" elsewhere in this report.
As a result of the recommendations in the Haskins &
Sells study, the Administrative Operations Branch has
been very involved with facilities management and
space reorganization both at the Washington headquarters and at the 14 regional offices. Regional offices in Atlanta, Chicago, Minneapolis and San Francisco were relocated in 1976. The Boston and Portland offices also enlarged their headquarters. Two additional subregional
offices were established.
During 1976, a Bicentennial exhibit produced by Administrative Operations on the history of banking and the
role of the OCC in bank regulation was displayed in
banks throughout the country. That branch also continued to provide procurement and to supply reference
assistance, printing and reproduction services to the
bureau.
Personnel Management Division
During 1976, the main objective of the Personnel Management Division was to simultaneously operate ongoing programs and entirely new Human Resources programs recommended by Haskins & Sells. The responsi-
23
bility for collecting information for new programs, studying their potential impact on operating branches and
personnel and preparing specific program details was
given to several task forces made up of national bank
examiners. The Employee Relations Branch participated
in the development of new programs and in the upgrading of existing ones. Manuals were prepared and distributed to managers describing each of the proposed
programs. By year-end, a formal request for approval of
the new Human Resources Division was forwarded to the
Secretary of the Treasury.
Employee performance was highlighted in 1976 with
the presentation of achievement awards and seven cash
awards for employee suggestions which were adopted.
Twelve OCC employees were honored at this year's
Treasury ceremony. Guidelines were formulated for
special achievement awards to be presented in 1977 to
examiners who served as regional discussion leaders in
the implementation of new bank examination procedures.
In Manpower Planning, efforts were concentrated on
identifying information essential in operating a longrange planning and budgeting system. Once identified,
that information will be used to design a computer-based
data system for manpower planning to coordinate the
planning and human resources functions. The program
relies upon maintenance of a comprehensive human resources information system (HRIS) and has as its goal
the assurance that the OCC will have the proper number
of people and skills available at all times.
A national recruitment program has been designed to
help the OCC compete effectively with the financial
community for talented people. The program calls for a
national director in Washington, D.C. and coordinators in
the regional offices. It includes professional recruitment
training for all OCC recruiters, and requires an aggressive college-university relations program to maintain
contacts with campus officials. An inter-regional referral
system will provide qualified candidates with an oppor-
24
tunity to express geographical preferences, while ensuring that OCC geographic needs are satisfied. Finally, in
conjunction with the manpower planning function, all recruitment activity will be monitored to determine the best
sources of potential employees and full compliance with
EEO guidelines.
In order to carry out its mission effectively and to ensure that all professional and technical employees
develop to their maximum potential, the OCC has
created a modern, comprehensive personnel development program which recognizes that development occurs through an accumulation of work experience. The
program emphasizes, however, that such development
can be enhanced and accelerated through formal programs of continuing education and career development.
The program encompasses a systematic, planned approach to provide well balanced education throughout
each employee's career. Seven education levels will be
coordinated with individual experience levels to be responsive to the mutual needs of the individual and the Office. A personnel development task force of national
bank examiners completed its extensive study of continuing education needs and designed a program which
encompasses many different courses to meet the long
range needs of our employees.
Technical education for examiners focuses on various
aspects of bank examination, and is tailored to the new
bank supervisory procedures the OCC is implementing.
Technical concepts will be presented early and more
complex practices and policies will be approached in
later career stages. Elective courses will provide specialization in such areas as international banking or
examination of computer systems. Management education will provide personnel with a thorough knowledge of
the skills needed to meet the increasing demands facing
professional managers. The total technical and management curriculum will provide our primary staff, approximately 2,500 bank examiners, with 17.4 weeks of
formal education during their first 10 years with the OCC.
IX. Consumer Affairs
The Consumer Affairs Division of the Comptroller of the
Currency was created in March 1974, before it was legislatively mandated, and became operational in September 1974. From that time, the division has been responsible for the enforcement of all consumer protection
laws applicable to national banks. The division has equal
status with other, long established divisions of the Comptroller's Office and participates similarly in overall policy planning. The Consumer Affairs Division conducts
specialized examinations of each national bank, on a
continuing basis, to enforce compliance with consumer
laws and regulations.
The Consumer Affairs Division performs several basic
functions:
• Counselling the Comptroller of the Currency on
all matters which affect consumers.
• Receiving consumer complaints and resolving
them.
• Coordinating, supervising and reviewing consumer examinations.
• Following up on and supervising corrective action in cases of noncompliance discovered during the consumer examination.
• Monitoring, updating, and improving consumer
examination procedures.
• Compiling of new and revised laws and regulations and disseminating them to banks and the
public.
• Monitoring the development of electronic funds
transfer systems.
In performing those functions, the division ensures compliance with consumer laws. The division's first concern
is the consumer, and that commitment is best served by
guaranteeing that national banks comply with consumer
laws and by informing consumers of their rights and remedies.
During 1976, the National Commission on Electronic
Fund Transfers (NCEFT) became active. Mr. Thomas W.
Taylor, Associate Deputy Comptroller and director of
this division, represents this Office on the Commission.
The Office has played a major role in supporting its activities. Many of the critical areas of concern in EFT have
been reviewed and several recommendations have
been made to Congress.
On April 16, 1976, the Office of the Comptroller of the
Currency issued guidelines containing policy statements on the development of electronic fund transfers
(EFT). Those guidelines on non-legal issues address
consumer concerns as well as security considerations
and are based on an extensive study of existing EFT
networks. The guidelines will be incorporated into
examination procedures and have been well received,
as evidenced by distribution of more than 16,000 copies
to banks, state supervisors, data processors, consumer
groups and other interested parties. Guidelines were
deemed more appropriate than regulations because
they do not restrict innovative developments in EFT;
however, they are meant to convey our regulatory concern about EFT.
Compliance
The Consumer Affairs Division's statutory obligation is
administered through the bank examination process and
by the review and resolution of consumer complaints.
The Comptroller has assigned a specially trained corps
of national bank examiners to conduct consumer compliance investigations. Over 6 percent of the field staff
has been allocated to the consumer area. Those
examiners are supported by regional consumer specialists in each national bank region. During 1976, the division conducted three 2-week schools that trained more
than 140 examiners in the new consumer examination
procedures. A second series of three schools is scheduled for March and April 1977, and a third series will take
place in the fall.
The schools stress examination techniques and rely
heavily on case studies to give experience in examining
for compliance. The procedures are tailored to spot
those problems that are most likely to harm consumers.
Particular emphasis is placed on evaluating policies and
practices to detect unlawful discrimination. Bank lending
policies are examined as are policies implementing consumer protection laws. Consumer examinations also
involve extensive interviews with bank lending officers to
assure that the bank adheres to its policy standards.
In 1976, the Consumer Affairs Division developed the
Comptroller's Handbook for Consumer Examinations.
The handbook is divided into thirteen sections each of
which relates to a specific law, regulation or banking activity. Each section, where applicable, is divided into four
areas of interest.
• Introduction—which details the major provisions
of the law, regulation, or activity being discussed.
This section is meant to apply the language of the
regulation to various banking operations.
25
• Examination Objectives — which contains a description of the goals that should be of primary
interest to the examiner.
• Examination Procedures — which represents the
"what to do" of the examination process. These
procedures explain the order in which the work
programs should be executed.
• Verification Procedures — which represent the
"how to do it" of the examination process.
The handbook has been shared with numerous other
regulatory agencies and copies have been distributed to
all examiners and all national banks.
The consumer report of examination has been developed and the division prepares comprehensive
checklists and work papers to examine for bank compliance with consumer protection laws. The results of the
examinations indicate that the specialized examination
is both justified and effective.
The consumer report of examination consists of five
sections:
• Compliance — details the area o f ' n o n compliance giving the appropriate citation;
• Internal control — summarizes deficiencies in the
bank's program and recommends that certain
programs be implemented;
• Corrective action—outlines the action taken or to
be taken by the bank to correct past noncompliance and assure future compliance;
• Discriminatory policies/practices — details
questionable activities which may be discriminatory; and
• Impact of noncompliance — estimates monetary
harm suffered by consumers because of noncompliance.
The consumer examination now covers the Equal
Credit Opportunity Act, Regulation B, the Home
Mortgage Disclosure Act, Regulation C; the Real Estate
Settlement Procedures Act, Regulation X; the Truth-inLending Act, Fair Credit Billing Act and Consumer Leasing Act, Regulation Z; the Fair Credit Reporting Act; the
Fair Housing Act; Regulation Q; and applicable state
laws.
When noncompliance is found during an examination,
corrective action begins during the examination and the
problem may be resolved immediately. If the issue cannot be resolved during the examination, it is referred to
the regional office. In a few instances, final resolution is
accomplished by the Washington Office.
There are two primary ways of correcting noncompliance. When noncompliance has not resulted in
monetary harm to the consumer, the bank is directed to
immediately correct its procedures and forms. When
customers have suffered monetary harm, such as
through a miscalculation of annual percentage rate, the
bank may be directed to reimburse affected customers
for the excess amounts charged. Banks are encouraged
to voluntarily reimburse the affected customers. When a
bank fails to adequately do so, the Office of the Comptroller of the Currency is empowered to commence formal
enforcement proceedings against the bank. The Office
has used cease and desist authority and has made refer
26
rals to the United States Department of Justice. During
1976, in connection with noncompliance with consumer
laws and regulations, six such administrative actions
were taken and several referrals were made to the United
States Department of Justice.
During 1976, the division began to develop a system
to tabulate perceived violations of law. The purpose in
developing that computer-based system is to give the
Office the ability to analyze trends in order to pinpoint
problem areas that need attention and to facilitate corrective action.
Noncompliance may also be noted through the consumer complaint process. Complaints against national
banks cover the full spectrum of consumer banking activities. Upon receipt of complaint, the OCC contact the
bank concerned by letter or, if necessary, by an
examiner's visit. Depending on what is discovered,
either the bank is asked to remedy its error or the complainant is informed that no basis has been found for the
complaint.
A Consumer Complaint Information System (CCIS)
became operational at the 14 regional offices in January
1976. The CCIS enables the division to catalog complaints on a nationwide basis and to determine which
banks have a disproportionate number of complaints
filed against them. The information available from this
system allows the Office to identify common consumer
problems. The information is also valuable in conducting
consumer examinations.
Legislation
During 1976, Congress enacted the Consumer Leasing
Act (15 USC 1667) and amended the Equal Credit Opportunity Act (15 USC 1691) and the Real Estate Settlement Procedures Act (12 USC 2601). The Federal Reserve Board was entrusted with the responsibility for
promulgating regulations to implement the Consumer
Leasing Act (Regulation Z) and the Equal Credit Opportunity Act (Regulation B). The Department of Housing
and Urban Development (HUD) was entrusted with the
responsibility of promulgating regulations to implement
the Real Estate Settlement Procedures Act (Regulation
X). This division participated in the regulation making
process by offering comments to the Board and to HUD.
We also incorporated those acts and regulations into our
handbook of consumer examination and verification
procedures.
Also, the Home Mortgage Disclosure Act (12 USC
2801), enacted in 1975, became effective June 28,1976,
and is implemented by the Board's Regulation C. We
have also included that regulation in our handbook of
consumer examination and verification procedures.
In addition, the division has the continuing responsibility for enforcing compliance with previously enacted
state and federal consumer protection laws as they
apply to national banks.
The Consumer Affairs Division maintains a legislative
log for each session of Congress. That log keeps the division and other departments of the Comptroller's Office
updated on all pending consumer legislation and, also,
on all proposed and promulgated rules of the various
regulatory agencies.
Liaison
The division maintains continuing liaison with federal
regulatory agencies, state banking departments, consumer interest groups and industry associations to ensure mutual assistance and an intercharge of ideas
about consumer protection in banking. The Federal Reserve has the responsibility for promulgating several
consumer protection regulations and this Office has
benefited from their invitations to comment on proposed
regulations and from their formal and informal
interpretations issued after the regulations have become
effective.
Members of the Division of Consumer Affairs of the
Board of Governors of the Federal Reserve System, the
Office of Bank Customer Affairs of the Federal Deposit
Insurance Corporation, and the Comptroller's Consumer
Affairs Division meet frequently to discuss mutual problems and concerns. Information is exchanged concerning consumer complaints and examination procedures.
The assistance of the Division of Consumer Affairs of the
Board of Governors of the Federal Reserve System was
valuable in the compilation of the Comptroller's Handbook for Consumer Examination and this division has
provided them with similar assistance in developing their
new examination program.
Consultations are held with the Federal Trade Commission, the Federal Home Loan Bank Board, the Department of Housing and Urban Development and the
Civil Rights Division of the Department of Justice. In December 1976, this Office signed an agreement with the
Civil Rights Division of the Department of Justice which
will permit members of the Civil Rights Division, as observers, to accompany national bank examiners to several national banks during an examination for compliance with the Fair Housing Act. The purpose of that
cooperation is so that examiners may be instructed in
techniques of detecting discriminatory practices.
27
X. Other Activities
Operations Review
Prior to 1976 OCC had no formal operation's review program and no individual or group had overall responsibility for the review, evaluation and monitoring of the quality
of the OCC's performance of its bank supervision and
regulation functions. In 1976, the importance of such a
program was realized and a Deputy Comptroller for Operations Review was named. It is his responsibility to
develop and maintain the program; he reports directly to
the Comptroller of the Currency.
The first review of operating procedures was conducted in 1976 and covered the commercial examination process. A review team of 56 members, four from
each of the 14 regions, was selected and members were
assigned to regions other than their own. A questionnaire
was utilized and each team filed a report following the review of selected examination working papers, reports
and correspondence files. The Washington staff prepared a consolidated report to the Comptroller.
Operations Planning
Operations planning is a continuous management process involving all executives, managers and supervisors
of all units of the Comptroller's Office, In 18-month overlapping cycles starting each July 1, they plan, coordinate, manage and control policy and operating decisions to meet current and future demands on national
bank supervision and regulation. As each cycle begins,
the senior management group sets policy objectives and
functional operating goals. The objectives and goals, together with assumptions pertaining to the ever-changing
economic, political, social and technological environments in which the Office and the banking industry operate, form the bases for result-oriented performance
targets and action programs set out in operational plans
adopted by each functional, staff and operating unit.
Those unit plans cover the upcoming year and 5 years
beyond. They are consolidated, under the direction of
the Deputy Comptroller for Operations Planning, into an
operating plan covering the same time span. The Deputy
Comptroller is responsible for the development and effective functioning of the planning process.
Throughout 1976, the Operations Planning Department conducted orientation programs for key executives
and managers in Washington and in the regions. Early in
the year, it conducted workshops for unit heads and
planning associates, during which the first broad out-
lines of the planning process evolved. By May, the department had developed an operations planning guide,
which was used by all units in an abridged planning cycle, primarily to learn the process. From experience
gained from that abridged cycle, the process and guide
were refined and modified. A full length cycle was begun
in July 1976. Policy objectives and operating goals were
set and furnished to each unit and, by year-end, the
planning process was fully operational, with unit plans
expected early in 1977.
Economic Research and Operational Analysis
In October 1976, the Research and Analysis Division,
Statistical Division and Systems and Data Processing
Division were reorganized as the Department of Economic Research and Operational Analysis, under the
administrative direction of the Deputy Comptroller for
Economics and the Associate Deputy Comptroller for
Economic Research and Operational Analysis. Although
that change necessitated a few revisions in division
titles, the staffs and operations of the divisions remained
largely unchanged.
Economic Research and Analysis. By year-end, the authorized staff of the Division was eight senior economists
including the director and deputy director, five financial
analysts/research assistants, an editor, and three secretaries. In addition, the Division included regional
economists in each of the 14 national bank regions. During the first full year that it was fully staffed, the division
produced substantial work for the agency and for the
advancement of knowledge in the field of economics.
Major research projects by the Washington staff
included the Fair Housing Lending Pilot Project, which is
being used to implement fair housing regulations and
also to determine the effects, if any, of "redlining." Other
projects related to market location and chartering practices, loan rates and risk, liquidity, minority banks, statutory lending limits and loan size, examiner manpower
planning and a detailed examination of the effect of financial institution reform in the state of Maire. Regional
economists also contributed to Office research as well
as performing their regional duties. Research by regional economists included studies of classified assets,
potential competition, international bank examination,
common trust funds and bank executive compensation.
In accordance with recommendations of Haskins &
Sells, the regional duties of the regional economists were
29
expanded to include economic planning and related
items.
Financial Reports and Statistics. This division has primary responsibility for collecting, editing and inputting
accurate and timely bank financial data for use by the Office of the Comptroller of the Currency and other banking
regulatory agencies in support of their regulatory function. The data bases thus established have important
strategic uses in administering early-warning and economic forecasting systems. Additionally, the division
functions as the official custodian for financial and statistical reports required from national banks including
those required under certain provisions of Title 12 of the
United States Code and the Code of Federal Regulations.
During 1976, the division reviewed and edited approximately 88,000 financial reports received in response to
the Comptroller's quarterly calls on over 4,700 national
banks. The division also responded to numerous calls
from banks seeking assistance in the preparation of the
various call report forms and special supplements. Over
1,800 Trust Department Annual Reports were received
and edited and over 800 Common Trust Fund Surveys
from banks and trust companies administering common
trust funds were processed.
The division is responsible for preparing various statistical tables and schedules for use in the Comptroller's
Annual Report and other interagency publications and
reports.
The disclosure unit of the Division of Financial Reports
and Statistics is the focal point for the release of quarterly
financial statements, reports on trust department security transactions and holdings, and various annual report
and proxy materials from national banks subject to the
disclosure rules of the Securities Act of 1934. That unit
responded to approximately 1,300 requests for copies of
bank reports from interested parties in both the public
and private sectors in 1976. Those requests resulted in
the production of over 196,000 pages of material.
Systems and Data Processing. During 1976, the major
activities of the Systems and Data Processing Division
were conducted toward fulfilling the requirements of the
bureau's three major information systems:
• The Regulatory Information System;
• The Fiscal Information System; and
• The Administrative Information System
30
The National Bank Surveillance System (NBSS), a
major component of the Regulatory Information System,
became fully operational during the year. Effort in that
area has resulted in the development of an error free national bank data base for each quarterly call within 45
calendar days of the report due date. On-going activities
involve expanding and refining the data base and providing system output to bureau users and national
banks.
Also in the regulatory area, an automated public disclosure system was developed and became operational. Basically, the system produces those reports on
national banks that are available to the public, on request. The Financial Reports and Statistics Division's
public disclosure unit receives a large number of requests from the public for copies of call report documents. The new automated system greatly reduces the
manual burden of responding to such requests by
computer-generating needed data in report format. Systems and Data Processing also designed a new, automated trust annual report processing system during
1976.
The Fiscal Information System, a computerized accounting system software package, was thoroughly
tested and selected to prepare for an early 1977 conversion from the current system to a new and advanced
processing system. The system will identify the operating cost of each organizational unit and compare
budgeted figures with actual expenditures through
periodic, computer-generated financial reports. Also in
that area, the bureau's semiannual assessment return
was redesigned as a computer-generated self mailer.
The automated Human Resources Information System
(HRIS) is being developed to meet the Office's need for
accurate and up-to-date information concerning the
employee work force. That system is a major component
of the Administrative Information System. The elements
of this data base focus on formal education, job experience, skills inventory and continuing education. Such
statistics will provide a valuable management tool for
manpower planning purposes, budgeting considerations and for monitoring progress in employee career
development. The HRIS task force, with members from
the human resources user area and from the division
staff, has developed the general system design and has
identified preliminary system requirements and management reporting needs.
XI. Financial Operations of the Office of the
Comptroller of the Currency
Total revenue of the Office of the Comptroller of the
Currency for 1976 was $82.8 million, an increase of 40.6
percent over 1975, compared to a 3.7 percent increase
in the previous year. Assessment receipts, which account for 92 percent of total revenue, amounted to $76.1
million, an increase of $24.4 million due principally to an
increase in rates. Revenue from trust examinations totaled $2,527,000, a decrease of $186,000. Revenue
from applications for new branches and mergers and
consolidations increased by $152,000 and $83,000, respectively. New bank charter fees declined $9,000.
Interest on investments decreased $450,000, a decline
of 15 percent, to a total of $2,547,000. The other revenue
categories remained at substantially the same levels as
in 1975.
Total expenses amounted to $80.4 million, compared
to $68.6 million for 1975, an increase of $11.8 million.
That represents a 17.1 percent increase in 1976, compared to the 23.6 percent increase for 1974 to 1975.
Salaries, personnel benefits and travel expenses
amounted to $66.3 million, or 82.5 percent of total expenses for the year. Those three expenses amounted to
$59.2 million in 1975. Salary increases were caused by a
full year under the government-wide general pay
increase of 5 percent, effective October 1975, and
another general pay increase of 4.8 percent effective
October 1976, and an increase in our examining staff
and support personnel. Travel expenses totaled $12.1
million, a rise of $1.6 million over 1975. That increase was
caused by higher per diem and mileage allowances, as
well as by the increase in the examining staff. The higher
per diem and mileage allowances were in line with
increases authorized for employees of all federal agencies.
The remaining expenses totaled $14.0 million, an
increase of $4.2 million over the previous year. The most
significant increases occurred in data processing, consultants and education. The greater data processing
and consulting costs result from implementation of the
procedures study recommendations and the continuation of programs implemented in 1975. The increase in
education results from the greater emphasis on that area
and from training examiners in the new examination
techniques adopted as a result of the procedures study.
Although the costs related to the procedures study have
been substantial, for the most part they represent nonrecurring costs and the results achieved have been well
worth the cost in terms of more effective bank supervision by the Comptroller of the Currency.
The equity account is in reality a reserve for contingencies. The financial operations of 1976 have
increased that reserve by the $2.5 million excess of revenue over expenses to $26.5 million at year-end. That
represents a 3.7-month reserve for operating expenses,
based on the level of expenses over the last three
months of 1976. The equity account has been administratively restricted in the amount of $2,330,000, as explained in Note 3 to the financial statements.
31
Table 12
COMPTROLLER OF THE CURRENCY
BALANCE SHEETS
December 31
1976
1975
ASSETS
Current assets:
Cash
Obligations of U.S. government, at amortized cost (approximates market value) (Note 1)
Accrued interest on investments
Accounts receivable
Travel advances
Prepaid expenses and other assets
Total current assets
Long-term obligations of U.S. government, at amortized cost (approximates market value) (Note 1).
Fixed assets and leasehold improvements, at cost (Note 1):
Furniture and fixtures
Office machinery and equipment
Leasehold improvements
Less accumulated depreciation and amortization
Total assets
$
167,876
15,619,372
410,908
506,308
589,041
317,227
$
603,266
6,001,948
470,838
341,737
580,857
225,378
17,610,732
8,224,024
13,426,442
19,091,952
2,719,323
934,731
4,394,285
2,446,058
803,942
3,913,197
8,048,339
1,517,084
7,163,197
1,063,666
6,531,255
6,099,531
$37,568,429
$33,415,507
$ 2,065,099
193,881
2,759,575
$ 1,062,306
211,744
2,118,915
5,018,555
3,392,965
3,377,354
2,705,297
3,301,420
2,704,743
11,101,206
9,399,128
2,330,000
24,137,223
2,160,000
21,856,379
26,467,223
24,016,379
$37,568,429
$33,415,507
LIABILITIES AND COMPTROLLER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses
Taxes and other payroll deductions
Accrued travel and salaries
Total current liabilities
Long-term liabilities:
Accgmulated annual leave
Closed Receivership Funds (Note 2) .
Total liabilities
Comptroller's equity:
Administratively restricted (Note 2)
Unrestricted
Total liabilities and Comptroller's equity
See notes at end of tables.
32
Table 13
COMPTROLLER OF THE CURRENCY
STATEMENTS OF REVENUE, EXPENSES AND COMPTROLLER'S EQUITY
Year ended December 31
1976
Revenue (Note 1):
Semiannual assessments
Examinations and investigations
Investment income
Examination reports sold
Other
Expenses:
Salaries
Retirement and other employee benefits (Note 3)
Per diem
Travel
Rent and maintenance (Note 3)
Communications
Moving and shipping
Employee education and training
Data processing
Printing, reproduction and subscriptions
Office machine repairs and rentals
Depreciation and amortization
Supplies
Consulting services
Conferences
Remodeling
Other
Excess (deficiency) of revenue over expenses
Comptroller's equity at beginning of year
Comptroller's equity at end of year
1975
$76,128,296
3,828,929
2,546,640
219,977
85,682
$51,753,849
3,860,808
2,997,207
223,945
62,117
82,809,524
58,897,926
49,305,710
4,898,077
7,972,002
4,152,614
2,977,690
1,219,463
1,095,522
1,700,485
1,690,655
993,668
425,457
498J20
431,249
2,525,685
162,144
49,407
260,132
44,073,615
4,204,230
7,220,781
3,289,408
2,613,596
'859,509
640,901
1,152,363
'378,940
707,601
321 ^684
386J28
310,715
1,926,987
190,586
117,389
187,645
80,358,680
68,582,078
2,450,844
24,016,379
(9,684,152)
33,700,531
$26,467,223
$24,016,379
See notes at end of tables.
33
Table 14
COMPTROLLER OF THE CURRENCY
STATEMENTS OF CHANGES IN FINANCIAL POSITION
Year Ended December 31
Financial resources were provided by:
Excess (deficiency) of revenue over expenses
Charges and (credits) not affecting working capital in the period:
Additions to accumulated annual leave
Depreciation and amortization
Amortization of premium and accretion of discount on long-term U.S. government obligations, net
Net loss on sale of fixed assets
Working capital provided by (used for) operations for the period
Long-term U.S. government obligations transferred to current assets
Proceeds from sale of fixed assets
Net closed receivership fund receipts (disbursements)
Total
Financial resources were used for:
Purchase of leasehold improvements
Purchase of fixed assets
Payment of accrued leave
Total
Increase (decrease) in working capital
1976
1975
$2,450,844
$(9,684,152)
391,114
498,720
629,131
386,128
(16,872)
207
(21,010)
2,338
3,324,013
5,682,382
8,448
554
(8,687,565)
7,998,719
2,525
(2,189)
9,015,397
(688,510)
481,088
458,011
315,180
1,257,949
1,017,895
244,871
1,254,279
2,520,715
$7,761,118
$(3,209,225)
$ (435,390)
9,617,424
(59,930)
164,571
8,184
91,849
$
Analysis of Changes in Working Capital
Increase (decrease) in current assets:
Cash
Obligations of U.S. government
Accrued interest
Accounts receivable
Travel advances
Prepaid expenses and other assets
9,386,708
(Increase) decrease in current liabilities:
Accounts payable and other accruals
Taxes and other payroll deductions
Accrued travel and salaries
Increase (decrease) in working capital
See notes on next page.
34
482,029
(2,968,698)
(228,521)
89,494
43,972
26,826
(2,554,898)
(1,002,793)
17,863
(640,660)
(138,448)
(33,094)
(482,785)
(1,625,590)
(654,327)
$7,761,118
$(3,209,225)
Notes to Financial Statements
December 3 1 , 1976 and 1975
Note 1—Organization and Accounting Policies
The Comptroller of the Currency (Comptroller's Office) was created
by an Act of Congress for the purpose of establishing and regulating a
National Banking System. The National Currency Act of 1863, rewritten
and re-enacted as The National Banking Act of 1864, created the
Comptroller's Office, provided for its supervisory functions and the
chartering of banks. The revenue of the Comptroller's Office is derived
principally from assessments and fees paid by the national banks and
interest on investments in U.S. government obligations. Assessments
paid by national banks are not construed to be government funds. No
funds derived from taxes or federal appropriations are allocated to or
used by the Comptroller's Office in any of its operations. The Comptroller's Office is exempt from federal income taxes.
The accounts of the Comptroller's Office are maintained on the accrual basis. Furniture, fixtures, office machinery and equipment are
depreciated on the straight-line basis principally over estimated useful
lives of 10 years. Leasehold improvements are amortized over the
terms of the related leases (including renewal options) or the estimated
useful lives, whichever is shorter. Premiums and discounts on
investments in U.S. government obligations are amortized or accreted
ratably over the terms of the obligations. U.S. government obligations
having a maturity date more than 12 months from the date of the financial statements are classified as long-term investments.
Note 2—Closed Receivership Funds
Prior to the assumption of closed national bank receivership functions by the Federal Deposit Insurance Corporation in 1936, the Comptroller of the Currency appointed individual receivers for all closed national banks. After settling the affairs of the closed banks and issuing
final distributions to the creditors of the banks (principally depositors),
the receivers transferred to the custody of the Comptroller's Office all
remaining funds which represented distributions which were undeliverable or had not been presented for payment. Closed Receivership
Funds in the accompanying balance sheets represent the potential
claims for such funds by the original creditors of the receiverships.
Since inception of the receivership function, unclaimed funds have
been invested in U.S. government securities. The income from
investments has been applied as an offset to expenses incurred by the
Comptroller's Office in performing this function and accordingly has
been recorded as revenue in the statements of revenue, expenses and
Comptroller's equity. Through December 31, 1976, income has exceeded direct expenses by approximately $2,330,000 (including
$170,000 and $160,000 in 1976 and 1975, respectively), which excess
amount is included in the Comptroller's equity. An analysis of allocable
indirect expenses has not been made.
In its reexamination of the legal status of Closed Receivership
Funds and related excess income earned thereon, the Comptroller's
legal staff has been unable to locate any definitive statutory or case law
which specifies the ultimate disposition of such funds. In the absence
of legal precedent, the legal staff is unable to currently give a definitive
opinion as to the appropriate disposition of either the unclaimed receivership funds or the excess income from investment of such funds.
The Comptroller is in the process of seeking legislative resolution of
these matters.
Pending a resolution of the legal uncertainties and legislative action
surrounding these funds, the Comptroller's Office has included a liability for Closed Receivership Funds in its balance sheets and recognized
income from investment of such funds as revenue in its statements of
revenue, expenses and Comptroller's equity. In recognition of these
uncertainties, the Comptroller has administratively restricted a portion
of the Comptroller's equity in an amount that approximates the excess
income earned from investment of Closed Receivership Funds since
custody of the funds commenced.
Note 3—Commitment and Contingencies
Regional and sub-regional offices lease office space under
agreements which expire at varying dates through 1990. Minimum
rental commitments under 100 leases in effect at December 31, 1976
aggregate approximately $1,365,000 for 1977 and varying lesser
amounts each year thereafter, to approximately $938,000 for 1981,
$3,005,000 for the period 1982-1986, and $499,000 for the period
1987-1990. In addition, the Comptroller's Office occupies office space
in Washington, D.C., under a lease agreement which provided for an
initial 5-year term with five consecutive 5-year renewal options. The
Comptroller's Office has exercised two of its options through 1989.
Rent is at an annual rate of $1,660,000. Certain of the leases provide
that annual rentals may be adjusted to provide for increases in taxes
and other related expenses.
The Comptroller's Office contributes to the Civil Service retirement
plan for the benefit of all its eligible employees. Contributions aggregated $3,381,600 and $3,000,900 in 1976 and 1975, respectively. The
plan is participatory, with 7 percent of salary being contributed by each
party.
The accompanying balance sheets include a liability for annual
leave, accumulated within specified limits, which if not taken by employees prior to retirement is paid at that date.
Various banks in the District of Columbia have deposited securities
with the Comptroller's Office as collateral for those banks entering into
and administering trust activities. These securities, having a par or
stated value of $12,593,000 are not assets of the Comptroller's Office
and accordingly are not included in the accompanying financial statements.
The Comptroller's Office is a defendant, together with other bank
supervisory agencies and other persons, in litigation generally related
to the closing of certain national banks. In the opinion of the Comptroller's legal staff, the Comptroller's Office will'be able to defend successfully against these complaints and no liability is expected to result
therefrom.
OPINION OF INDEPENDENT ACCOUNTANT
To the Comptroller of the Currency
In our opinion, the accompanying balance sheets, the related statements of revenue, expenses and Comptroller's
equity and of changes in financial position present fairly the financial position of the Comptroller of the Currency at
December 31,1976 and 1975, and the results of its operations and the changes in its financial position for the years then
ended, in conformity with generally accepted accounting principles consistently applied. Our examinations of these
statements were made in accordance with generally accepted auditing standards and accordingly included such tests
of the accounting records and such other auditing procedures as we considered necessary in the circumstances,
including confirmation of securities owned at December 31,1976 and 1975, by correspondence with the custodians.
Price Waterhouse & Co.
Washington, D.C.
April 29, 1977.
35
APPENDIX A
Merger Decisions, 1976
Merger* Decisions, 1976
/. Mergers consummated, involving two or more operating banks
Jan. 2, 1976:
Page
Citibank (Western), National Association, Buffalo, N.Y.
Citibank (Eastern), National Association, Castleton-onHudson, N.Y.
Citibank (Central), National Association, Oriskany Falls,
N.Y.
Citibank (Mid-Western), National Association, Honeoye
Falls, N.Y.
Merger
43
Jan. 2, 1976:
First National City Bank, New York City, N.Y.
Citibank (Suffolk), National Association, Islip, N.Y.
Citibank (Mid-Hudson), National Association, Woodbury,
N.Y.
Merger
43
Jan. 2, 1976:
National City Bank, Cleveland, Ohio
The Bank of Cleveland, Cleveland, Ohio
Merger
44
Jan. 10, 1976:
First National State Bank of New Jersey, Newark, N.J.
The Bank of Bloomfield, Bloomfield, N.J.
Purchase
45
Jan. 15, 1976:
Southeast First National Bank of Sarasota, Sarasota, Fla.
Palmer First National Bank and Trust Company of Sarasota,
Sarasota, Fla.
Purchase
46
Jan. 31, 1976:
Bank of Virginia N.A., Vinton, Va.
Bank of Virginia—Danville, Danville, Va.
Merger
.. 48
Jan. 31, 1976:
Bank of Virginia N.A., Vinton, Va.
Bank of Virginia—Lynchburg, Lynchburg, Va.
Merger
48
Feb. 3, 1976:
Old Colony Bank of Hampden County, N.A., Holyoke,
Mass.
Heritage Bank and Trust Company, Westfield, Mass.
Merger
49
Feb. 6, 1976:
First National State Bank/Mechanics, Burlington Township,
N.J.
Somerset Hills & County National Bank, Basking Ridge,
N.J.
Merger
50
Feb. 16, 1976:
First Tennessee National Bank, Chattanooga, Tenn.
The Hamilton National Bank of Chattanooga, Chattanooga,
Tenn.
Purchase
50
Feb. 17, 1976:
United National Bank, Rapid City, S. Dak.
Union Bank & Trust, Sioux Falls, S. Dak.
Consolidation
51
Mar. 1, 1976:
South Loop National Bank, Houston, Tex.
South Texas Bank, Houston, Tex.
Purchase
52
Mar. 5, 1976:
Old National Bank of Washington, Spokane, Wash.
Bank of the West, Bellevue, Wash.
Purchase
53
Mar. 5, 1976:
Page
The Farmers National Bank of Annapolis, Annapolis, Md.
The Millington Bank of Maryland, Millington, Md.
Merger
54
Mar. 9, 1976:
The First National Bank of Huntsville, Huntsville, Ark.
The Valley Bank, Hindsville, Ark.
Purchase
55
Mar. 15, 1976:
United National Bank, Castlewood, S. Dak.
First State Bank, Lake Norden, S. Dak.
Merger
56
Mar. 15, 1976:
Virginia National Bank, Norfolk, Va.
North American Bank and Trust, Leesburg, Va.
Merger
57
Mar. 17, 1976:
Peoples Bank of Mississippi, National Association, Union,
Miss.
Clinton National Bank, Clinton, Miss.
Merger
..
58
Mar. 20, 1976:
Puget Sound National Bank, Tacoma, Wash.
Continental Bank, Burien, Wash.
Purchase
59
Mar. 26, 1976:
The Edison Bank, National Association, South Plainfield,
N.J.
First National State Bank of the Jersey Coast, Spring Lake,
N.J.
Merger
60
Mar. 31, 1976:
Euclid National Bank, Euclid, Ohio
The Continental Bank, Cleveland, Ohio
Purchase
61
Mar. 31, 1976:
The First National Bank of Allentown, Allentown, Pa.
The Kutztown National Bank, Kutztown, Pa.
Merger
62
Apr. 1, 1976:
The New Farmers National Bank of Glasgow, Glasgow, Ky.
Hiseville Deposit Bank, Hiseville, Ky.
Merger
63
Apr. 10, 1976:
Greenville National Bank, Greenville, Ohio
The Citizens Bank Company, Ansonia, Ohio
Purchase
64
Apr. 19, 1976:
Landmark Bank of Pompano Beach, N.A., Pompano
Beach, Fla.
The Security State Bank of Pompano Beach, Pompano
Beach, Fla.
Purchase
65
Apr. 30, 1976:
The First National Bank of Greenville, Greenville, Ala.
The Citizens Bank of Georgiana, Georgiana, Ala.
Merger
66
May 1, 1976:
The Huntington National Bank of Columbus, Columbus,
Ohio
The Pickerington Bank, Pickerington, Ohio
Merger
67
May 3, 1976:
The First National Bank of Stone Harbor, Stone Harbor, N.J.
Independent National Bank, Willingboro, N.J.
Merger
68
39
May 21, 1976:
Page
The Chase Manhattan Bank (National Association), New
York, N.Y.
Chase Manhattan Bank of Long Island (National Association), Melville, N.Y.
Chase Manhattan Bank of the Mid-Hudson (National Association), Saugerties, N.Y.
Chase Manhattan Bank of Central New York (National Association), Syracuse, N.Y.
Chase Manhattan Bank of Eastern New York (National Association), Albany, N.Y.
Chase Manhattan Bank of the Southern Tier (National Association), Binghamton, N.Y.
Chase Manhattan Bank of Greater Rochester (National Association), Caledonia, N.Y.
Chase Manhattan Bank of Western New York (National Association), Buffalo, N.Y.
Chase Manhattan Bank of Northern New York (National Association), Canton, N.Y.
Merger
70
June 1, 1976:
The Citizens National Bank in Gastonia, Gastonia, N.C.
Union Trust Company of Shelby, Shelby, N.C.
Merger
71
June 8, 1976:
First City Bank—Northeast, N.A., Houston, Tex.
Northeast Bank of Houston, Houston, Tex.
Purchase
72
June 11, 1976:
Valley National Bank, Passaic, N.J.
Bank of Wayne, National Association, Wayne, N.J.
Merger
73
June 15, 1976:
New Jersey Bank (National Association), Clifton, N.J.
First State Bank of Hudson County, Jersey City, N.J.
Purchase
74
June 18, 1976:
First Bank National Association, Cleveland, Ohio
Community National Bank of Warrensville Heights, Warrensville Heights, Ohio
Purchase
75
June 28, 1976:
Wells Fargo Bank, National Association, San Francisco,
Calif.
The Topanga Plaza Branch of City National Bank, Beverly
Hills, Calif.
Purchase
76
June 30, 1976:
First National Bank of Springfield, Springfield, Vt.
The Merchants National Bank of St. Johnsbury, St.
Johnsbury, Vt.
Merger
77
June 30, 1976:
Beach Haven National Bank and Trust Company, Beach
Haven, N.J.
The Bank of New Jersey, N.A., Moorestown, N.J.
Merger
78
July 1, 1976:
The National Bank of Georgia, Atlanta, Ga.
Mercantile National Bank, Atlanta, Ga.
Purchase
79
July 12, 1976:
The Planters National Bank and Trust Company, Rocky
Mount, N.C.
Hanover Bank, Wilmington, N.C.
Merger
80
July 20, 1976:
The Oneida National and Trust Company of Central New
York, Utica, N.Y.
The Red Creek National Bank, Red Creek, N.Y.
81
Purchase
40
Aug. 24, 1976:
Page
Seattle—First National Bank, Seattle, Wash.
First National Bank in Port Angeles, Port Angeles, Wash.
The First American National Bank of Port Townsend, Port
Townsend, Wash.
Bank of Sequim, Sequim, Wash.
Forks State Bank, Forks, Wash.
Purchase
82
Aug. 31, 1976:
The First New Haven National Bank, New Haven, Conn.
The North Haven National Bank, North Haven, Conn.
Merger
86
Sept. 15, 1976:
United States National Bank in Johnstown, Johnstown, Pa.
The First National Bank of Coalport, Coalport, Pa.
Merger
88
Sept. 20, 1976:
First National Bank, Carbondale, Pennsylvania, Carbondale, Pa.
The First National Bank of Dickson City, Dickson City, Pa.
Merger
89
Sept. 30, 1976:
Fl National Bank, Ironton, Ohio
The First National Bank of Ironton, Ironton, Ohio
Purchase
90
Sept. 30, 1976:
FT National Bank, Troy, Ohio
The First National Bank & Trust Company, Troy, Ohio
Purchase
91
Oct. 1, 1976:
Canal National Bank, Portland, Me.
Central National Bank, Waterville, Me.
Merger
91
Oct. 1, 1976:
The Citizens National Bank of Evansville, Evansville, Ind.
The Lamasco Bank, Evansville, Ind.
Merger
92
Oct. 8, 1976:
The National Bank of Georgia, Atlanta, Ga.
The Hamilton Bank and Trust, Atlanta, Ga.
Purchase
94
Oct. 18, 1976:
New Jersey Bank (National Association), Clifton, N.J.
Plaza National Bank, Secaucus, N.J.
Merger
95
Nov. 1, 1976:
The Cumberland National Bank of Bridgeton, Bridgeton,
N.J.
United Jersey Bank/City National, Vineland, N.J.
Merger
95
Nov. 12, 1976:
Virginia National Bank, Norfolk, Va.
Fairfax County National Bank, Seven Corners, Va.
Merger
96
Nov. 19, 1976:
The Oneida National Bank and Trust Company of Central
New York, Utica, N.Y.
Ogdensburg Trust Company, Ogdensburg, N.Y.
Merger
98
Nov. 29, 1976:
First National Bank of Rio Grande City, Rio Grande City,
Tex.
First State Bank & Trust Company, Rio Grande City, Tex.
Purchase
99
Dec. 1, 1976:
American National Bank, Hamden, Conn.
Laurel Bank and Trust Company, Meriden, Conn.
Merger
100
Dec. 1, 1976:
The First National Bank and Trust Company of Western
Maryland, Cumberland, Md.
The First National Bank of Mount Savage, Mount Savage,
Md.
Merger
101
Dec. 17, 1976:
Page
New Jersey National Bank, Trenton, NJ.
First State Bank, Toms River, N.J.
Purchase
102
Dec. 28, 1976:
Citizens First National Bank of New Jersey, Ridgewood,
N.J.
The State Bank of North Jersey, Pine Brook, N.J.
Purchase
103
Dec. 31, 1976:
First National Bank of Jackson, Jackson, Miss.
Columbia Bank, Columbia, Miss.
Merger
104
Dec. 31, 1976:
Page
First Peoples National Bank of New Jersey, Haddon Township (P.O. Westmont), N.J.
The Provident Bank of New Jersey, Willingboro, N.J.
Purchase
105
Dec. 31, 1976:
Midlantic National Bank, Newark, N.J.
Midlantic National Bank/West, Morristown, N.J.
Merger
107
Dec. 31, 1976:
Union Chelsea National Bank, New York, N.Y.
Chelsea National Bank, New York, N.Y.
Purchase
108
//. Mergers consummated, involving a single operating bank
Jan. 5, 1976:
Page
Gateway National Bank of Fort Worth, Fort Worth, Tex.
Circle National Bank of Fort Worth, Fort Worth, Tex.
Merger
109
Mar. 11, 1976:
Commercial National Bank, Cassopolis, Mich.
C National Bank, Cassopolis, Mich.
Merger
110
Mar. 31, 1976:
American Security and Trust Company, National Association, Washington, D.C.
American Security and Trust Company, Washington, D.C.
Merger
111
Apr. 16, 1976:
The First National Bank of New Braunfels, New Braunfels,
Tex.
New Braunfels Commerce Bank National Association, New
Braunfels, Tex.
Merger
111
Apr. 29, 1976:
The Geuga County National Bank of Chardon, Chardon,
Ohio
The G.C. National Bank, Chardon, Ohio
Merger
112
June 16, 1976:
The First National Bank of San Jose, San Jose, Calif.
F.N. National Bank, San Jose, Calif.
Merger
113
July 1, 1976:
The First National Bank of Troutville, Troutville, Va.
Troutville Bank, N.A., Troutville, Va.
Merger
113
Aug. 16, 1976:
Page
The First National Bank of Elyria, Elyria, Ohio
FNB National Bank, Elyria, Ohio
Consolidation
114
Oct. 1, 1976:
The First National Bank of Henderson, Henderson, Tex.
South Main & Richardson National Bank, Henderson, Tex.
Merger
115
Dec. 3, 1976:
The National Bank of Ludington, Ludington, Mich.
NBL National Bank, Ludington, Mich.
Consolidation
115
Dec. 31, 1976:
Alamo Heights National Bank, Alamo Heights, Tex.
Heights Bank, National Association, Alamo Heights, Tex.
Merger
H6
Dec. 31, 1976:
First National Bank of Freeport, Freeport, III.
First Freeport Bank, National Association, Freeport, III.
Merger
117
Dec. 31, 1976:
The Chester National Bank, Chester, N.Y.
Chester Bank, N.A., Chester, N.Y.
. Merger
117
Dec. 31, 1976:
The Illinois National Bank of Springfield, Springfield, III.
INB National Bank, Springfield, III.
Merger
118
Dec. 31, 1976:
Williamstown National Bank, Williamstown, Mass.
Williamstown Bank (National Association), Williamstown,
Mass.
Merger
118
///. Mergers approved but abandoned, no litigation
Jan. 14, 1976:
Southeast First National Bank of Sarasota, Sarasota, Fla.
Palmer First National Bank and Trust Company of Sarasota,
Sarasota, Fla.
Merger ..
Page
119
July 20, 1976:
Page
The First National Bank of Maryland, Baltimore, Md.
The Citizens National Bank of Havre de Grace, Havre de
Grace, Md.
Merger
119
41
/. Mergers consummated, involving two or more operating banks.
CITIBANK (WESTERN), NATIONAL ASSOCIATION,
Buffalo, N.Y., and Citibank (Eastern), National Association, Castleton-on-Hudson, N.Y., and Citibank (Central), National Association, Oriskany Falls, N.Y., and Citibank (Mid-Western), National Association, Honeoye Falls, N.Y.
Banking offices
Total assets
Name of bank and type of transaction
In
To be
operation operated
Citibank (Eastern), National Association, Castleton-on-Hudson, N.Y. (5816), with
and Citibank (Central), National Association, Oriskany Falls, N.Y. (16089), with
and Citibank (Mid-Western), National Association, Honeoye Falls, N.Y. (15976), with
and Citibank (Western), National Association, Buffalo, N.Y. (10258), which had
merged Jan. 2, 1976, under charter of the latter bank (10258), and title "Citibank (New
York State), National Association." The merged bank at date of merger had
COMPTROLLER'S DECISION
On October 21, 1975, Citibank (Eastern), National Association, Castleton-on-Hudson, N.Y.; Citibank (Central), National Association, Oriskany Falls, N.Y.;
Citibank (Mid-Western), National Association, Honeoye
Falls, N.Y.; and Citibank (Western), National Association, Buffalo, N.Y., applied to the Comptroller of the
Currency for permission to merge under the charter of
the latter and with the title "Citibank (New York State),
National Association."
The proposed merger represents a corporate reorganization which would merely combine four existing
$ 36,362,000
34,903,000
41,321,000
46,650,000
9
5
10
12
36
159,236,000
subsidiary banks of Citicorp into a single institution that
will continue under the ownership of Citicorp. The resulting bank will continue to operate all existing offices
of the charter and merging banks.
Applying the statutory criteria, it is concluded that
the proposed merger is mereiy part of an internal corporate reorganization which will not adversely affect
competition in New York State. This application is,
therefore, approved.
December 1, 1975.
Note: No Attorney General's report was received.
FIRST NATIONAL CITY BANK,
New York City, N.Y., and Citibank (Suffolk), National Association, Islip, N.Y., and Citibank (Mid-Hudson), National
Association, Woodbury, N.Y.
Name of bank and type of transaction
Total assets
Banking offices
In
To be
operation operated
Citibank (Suffolk), National Association, Islip, N.Y. (15917), with
and Citibank (Mid-Hudson), National Association, Woodbury, N.Y. (P. O. Central Valley) (9990), with
and First National City Bank, New York, N.Y. (1461), which had
merged Jan. 2, 1976, under charter and title of the latter bank (1461). The merged bank
at date of merger had
COMPTROLLER'S DECISION
On October 21, 1975, Citibank (Suffolk), National Association, Islip, N.Y.; Citibank (Mid-Hudson), National
Association, Woodbury, N.Y.; and First National City
Bank, New York, N.Y., applied to the Comptroller of the
Currency for permission to merge under the charter
and title of the latter.
The proposed merger represents a corporate reorganization which would merely combine three existing
subsidiary banks of Citicorp into a single institution that
$
47,012,000
5
33,101,000
26,732,196,000
10
251
28,812,309,000
266
will continue under the ownership of Citicorp. The resulting bank will continue to operate all existing offices
of the charter and merging banks.
Applying the statutory criteria, it is concluded that
the proposed transaction is merely part of a corporate
reorganization which will not adversely affect competition. This application is, therefore, approved.
December 1, 1975.
Note: No Attorney General's report was received.
43
NATIONAL CITY BANK,
Cleveland, Ohio, and The Bank of Cleveland, Cleveland, Ohio
Banking offices
Total assets
Name of bank and type of transaction
In
To be
operation operated
The Bank of Cleveland, Cleveland, Ohio, with
and National City Bank, Cleveland, Ohio (786), which had
merged Jan. 2, 1976, under charter and title of the latter bank (786). The merged bank at
date of merger had
COMPTROLLER'S DECISION
On September 2, 1975, The Bank of Cleveland, Cleveland, Ohio, and National City Bank, Cleveland, Ohio,
applied to the Comptroller of the Currency for permission to merge under the charter and with the title of National City Bank.
National City Bank, the charter bank, was established in 1845 and currently has assets of $2.7 billion
and IPC deposits of $1.3 billion. National City Bank is
the lead bank for the state's third largest multi-bank
holding company, National City Corporation. Although
the charter bank is headquartered in Cleveland, its
service area includes all of Cuyahoga County where it
operates 45 branches. Cuyahoga County, with an estimated population of 1.7 million persons, is highly
industrialized and is an important commercial, transportation and service center.
National City Bank is the second largest bank in its
service alrea where direct competition is provided by
numerous banks located in Cleveland, including The
Cleveland Trust Company, with deposits of $2.9 billion,
a member of CleveTrust Corporation; The Capital National Bank, with deposits of $117.4 million, a member
of BancOhio Corporation; Central National Bank of
Cleveland, with deposits of $1.4 billion, a member of
Centran Corporation; Society National Bank of Cleveland, with deposits of $1 billion, a member of Society
Corporation; and Union Commerce Bank, with deposits of $1.2 billion, a member of Union Commerce
Corporation.
The Bank of Cleveland, the merging bank, was established in 1913 and now has assets of $28.8 million
and IPC deposits of $24.5 million. The merging bank
has one branch office in addition to its main office and
is the 12th largest of the 13 banks in Cuyahoga
County. The service area of the merging bank consists
of several ethnic neighborhoods located in central
Cuyahoga County. The Bank of Cleveland is a retailoriented bank whose operations are entirely local in
nature. The merging bank, which has few business
customers, relies primarily upon small personal check-
$
30,546,000
2,569,103,000
2,592,844,000
2
47
49
ing and savings accounts for its deposits, and thus
competes with nearby savings and loan associations
and credit unions. There is minimal competition between the charter bank and The Bank of Cleveland
because of the different nature of their banking operations. The charter bank has one small branch office
within the service area of the merging bank. However,
there are numerous banking alternatives in the merging bank's service area because each of the large
banks which compete with the charter bank has a
branch office within the area.
Consummation of the proposed transaction will not
significantly increase National City Bank's position relative to other banks in its service area. The resulting
bank will remain the second largest in the county. The
proposed transaction should benefit the customers of
the merging bank because the resulting bank will offer
over 40 banking services not presently available at the
merging bank. The charter bank plans to reduce fees
for many of the services now offered by merging bank.
The charter bank will benefit from the proposed transaction by gaining an office in Garfield Heights, a suburb with considerable commercial market potential.
Applying the statutory criteria, it is concluded that
the proposed merger will only slightly lessen competition in the relevant market and this application is,
therefore, approved.
November 26, 1975.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Bank's main office in Cleveland is located about six
blocks from Applicant's nearest branch. All 46 of Applicant's offices and both of Bank's offices are located
in Cuyahoga County. Applicant is the second largest
of 13 banks with offices in Cuyahoga County, while
Bank ranks 11th.
We conclude that the proposed transaction would
eliminate some existing competition between the parties and slightly increase concentration in commercial
banking in Cuyahoga County.
FIRST NATIONAL STATE BANK OF NEW JERSEY,
Newark, N.J., and The Bank of Bloomfield, Bloomfield, N.J.
Banking offices
Total assets*
Name of bank and type of transaction
In
To be
operation operated
The Bank of Bloomfield, Bloomfield, N.J., with
was purchased Jan. 10, 1976, by First National State Bank of New Jersey, Newark, N.J.
(1452), which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
On January 10, 1976, application was made to the
Comptroller of the Currency for prior written approval
for First National State Bank of New Jersey, Newark,
N.J. ("Assuming Bank") to purchase certain of the assets and assume certain of the liabilities of The Bank of
Bloomfield, Bloomfield, N.J. ("Bloomfield").
As of the close of business on January 10, 1976,
Bloomfield was a state bank with three offices and one
approved but unopened office, all located in Bloomfield, N.J. As of January 7, 1976, Bloomfield had deposits of $26 million. On January 10, 1976, the Federal
Deposit Insurance Corporation ("FDIC") was appointed as receiver of Bloomfield. The present application is based upon an agreement, which is
incorporated herein by reference, by which the FDIC
as receiver has agreed to sell certain Bloomfield assets and liabilities to the Assuming Bank. For the
reasons stated hereafter, the Assuming Bank's application is approved, and the purchase and assumption
transaction may be consummated immediately.
Bloomfield was organized in 1963 and, as of January
7, 1976, had total assets of approximately $31.5 million.
Under the Bank Merger Act, 12 USC 1828(c), the
Comptroller cannot approve a purchase and assumption transaction which would have certain proscribed
anticompetitive effects unless he finds those anticompetitive effects to be clearly outweighed in the public
interest by the probable effect of the transaction in
meeting the convenience and needs of the community
to be served. Additionally, the Comptroller is directed
to consider the financial and managerial resources
and future prospects of the existing and proposed
institution and the convenience and needs of the
community to be served. When necessary, however, to
prevent the disruptions attendant upon the failure of a
* Asset figures are as of call dates immediately before and after
transaction.
$32,501,959
3
1,358,706,000
1,173,201,000
32
35
bank, the Comptroller can dispense with the uniform
standards applicable to usual acquisition transactions
and need not consider reports on the competitive consequences of the transaction ordinarily solicited from
the Department of Justice and the other banking
agencies. He is authorized in such circumstances to
act immediately in his sole discretion, to approve an
acquisition and to authorize the immediate consummation of the transaction.
This proposed acquisition will prevent a disruption to
the community and potential losses to depositors. The
Assuming Bank has financial and managerial resources sufficient to purchase Bloomfield. Thus, the
approval of this transaction will help to avert a loss of
public confidence in the banking system, and may actually improve the services offered to the banking public.
The Comptroller thus finds that the proposed transaction will not result in a monopoly, be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any
part of the United States and that the anticompetitive
effects of the proposed transaction, if any, are clearly
outweighed in the public interest by the probable effect of the proposed transaction in meeting the convenience and needs of the community to be served.
For these reasons, the Assuming Bank's application to
assume certain liabilities and purchase certain assets
of Bloomfield as set forth in the agreement executed
with the FDIC as receiver, is approved. The Comptroller further finds that the failure of Bloomfield requires
immediate action, as contemplated by the Bank
Merger Act, to prevent disruption of banking services
to the community; the Comptroller thus waives publication of notice, dispenses with the solicitation of competitive reports from other agencies and authorizes the
transaction to be consummated immediately.
January 10, 1976.
Due to the emergency nature of the situation, no Attorney General's report was requested.
45
SOUTHEAST FIRST NATIONAL BANK OF SARASOTA,
Sarasota, Fla., and Palmer First National Bank and Trust Company of Sarasota, Sarasota, Fla.
Banking offices
Total assets*
Name of bank and type of transaction
In
operation
Palmer First National Bank and Trust Company of Sarasota, Sarasota, Fla. (13352), with
was purchased Jan. 15, 1976, by Southeast First National Bank of Sarasota, Sarasota, Fla.,
(16531), which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
On January 13, 1976, application was made to the
Comptroller of the Currency to grant prior written approval for Southeast First National Bank of Sarasota,
Sarasota, Fla. ("Assuming Bank"), to purchase assets,
and to assume certain of the liabilities, of Palmer First
National Bank and Trust Company of Sarasota,
Sarasota, Fla. ("PFNB"). The instant application rests
upon an agreement, incorporated herein by reference
the same as if fully set forth, and, for the reasons set
forth below, the application is hereby approved, and
the Assuming Bank is hereby authorized immediately
to consummate the purchase and assumption transaction.
PFNB was initially organized as a national bank in
1929, when it was granted charter number 13352. As
of October 6, 1975, PFNB ranked as the second
largest bank in Sarasota County, Fla., with total assets
of $144 million and total deposits of $122 million. In
addition, PFNB managed trust assets as of October
1975, of approximately $356 million. The commercial
banking service area of PFNB consisted of the northern third of Sarasota County which contains the major
portions of the city of Sarasota, its business district
and the surrounding residential, commercial and
shopping areas.
On November 30, 1971, PFNB became a subsidiary
of Palmer Bank Corporation, a newly organized bank
holding company which simultaneously acquired two
additional Florida banks. Since 1971 the holding company has acquired several additional banks, four of
which were opened during the first quarter of 1974, as
well as non-bank subsidiaries. As of June 1975, the
holding company owned eight commercial banks and
three non-bank subsidiaries. On June 30, 1975, Palmer
Bank Corporation ranked 22nd in size of the 31 bank
holding companies in Florida. The holding company
had consolidated assets of $262 million, 55 percent of
which was represented by the assets of PFNB.
As of June 1969, PFNB had 49.1 percent of total assets invested in securities and 37.6 percent invested in
loans. Real estate loans and personal loans represented 30.4 percent and 31.2 percent, respectively, of
the loan portfolio. Classified assets as of January 30,
1973, represented only 19 percent of the bank's gross
capital funds and, of that figure, a mere 0.5 percent
represented a classification of doubtful or loss. Depreciation in the bond account was nominal.
Beginning in 1974, the asset quality of PFNB began
* Asset figures are as of call dates immediately before and after
transactions.
46
To be
operated
$135,870,600
5,000,000
117,320,100
to deteriorate and the bank experienced an increase in
classified assets, overdue loans and nonaccruing
loans, many of which involved real estate construction
projects that had been originated by Coastal Mortgage
Company, a wholly-owned subsidiary of Palmer Bank
Corporation. Many of the real estate borrowers experienced financial setbacks due to inflation, cost overruns, increased interest rates, the effects of the energy
crisis and the general decline in the economy. Because of those and other factors, losses were incurred
as the real estate borrowers were unable to meet their
obligations to the bank. Thus, in 1973, net loan
charge-offs were only $139,000. At year-end 1974, the
charge-offs had increased to $1,550,000. Subsequent
examinations during the early months of 1975 revealed
that management had been unable to reverse that
trend and the bank continued to sustain heavy loan
losses. As of October 6, 1975, classified assets were
345 percent of capital; loss and doubtful assets alone
aggregated $6,668,000, representing 74 percent of
capital; overdue loans represented 33.2 percent of
total loans; and nonaccruing loans aggregated 22
percent of total loans and 209 percent of capital.
With respect to the liability structure of PFNB, time
and savings deposits of individuals, partnerships, corporations and other private sector sources decreased
from 54 percent of total deposits in 1970 to 44 percent
in 1974. Demand deposits from the same sources decreased from 40 percent of total deposits, in 1970, to
32 percent, in 1974. However, public funds deposits
increased from 6 percent of total deposits, in 1970, to
24 percent in 1974. That shift in the deposit base to
funds which could be easily removed from the bank in
large amounts placed added pressure on the bank's
liquidity and increased the difficulty of accurately projecting the bank's money flow. From February 18,
1975, to the examination date of October 6, 1975, the
bank experienced a deposit run-off of approximately
$22 million. That was coupled with a diminishing ability
to attract funds in the money market. A reliance by
PFNB on the purchase of Federal funds and other
money market borrowings to maintain liquidity and a
corresponding loss of credibility with the sellers of
those funds, caused in large part by the publication of
the bank's annual report for 1974 and other adverse
publicity, forced PFNB to borrow funds from the Federal Reserve Bank of Atlanta, the lender of last resort.
Prior to the end of 1973, borrowings by the bank
from all sources were an insignificant portion of its
liabilities, aggregating only 4.4 percent of total
liabilities. On December 3 1 , 1974, Federal funds
purchased and securities sold subject to repurchase
agreements comprised 7.8 percent of total liabilities.
By the last week of December 1975, however, borrowings at the Federal Reserve Bank of Atlanta had
increased to a high of $11.5 million in order to maintain
liquidity in the face of heavy deposit withdrawals. The
continued inability of the bank to attract deposits or
raise funds in the money market further strained its liquidity position and reflected diminished public confidence in its viability as a financial institution.
The severity and multiplicity of problems facing
PFNB by early 1975, required the earliest feasible addition of equity capital and management expertise. The
unsuccessful attempts of Palmer Banking Corporation
and PFNB independently to raise additional equity
capital resulted in an effort to seek out a merger partner. An agreement by Southeast Banking Corporation,
the largest bank holding company in Florida, to acquire Palmer Bank Corporation and its subsidiaries
with the assistance of a $10 million loan from the FDIC
was subsequently reached. As part of that transaction
the Comptroller was first asked to approve the merger
of PFNB into a newly organized subsidiary bank of
Southeast Acquisition Corporation. However, as a result of litigation commenced or threatened against certain directors of PFNB and Palmer Bank Corporation
within the past few weeks, the parties postponed the
consummation of the transaction originally scheduled
for December 31, 1975, modified certain details of the
transaction with the permission of the Federal Reserve
Board, FDIC and the Comptroller and have now asked
the Comptroller to approve, in lieu of the proposed
merger of PFNB into a new bank, the purchase and
assumption agreement negotiated between PFNB and
Southeast First National Bank of Sarasota by which the
latter would purchase assets and assume certain
liabilities, including all deposit liabilities, of the former.
Under the Bank Merger Act, 12 USC 1828(c), the
Comptroller cannot approve a purchase and assumption transaction which would have certain proscribed
anticompetitive effects unless he finds those anticompetitive effects to be clearly outweighed in the public
interest by the probable effect of the transaction in
meeting the convenience and needs of the community
to be served. Additionally, the Comptroller is directed
to consider the financial and managerial resources
and future prospects of the existing and proposed
institution and the convenience and needs of the
community to be served. When necessary, however, to
prevent the evils attendant upon the failure of a bank,
the Comptroller can dispense with the uniform standards applicable to usual acquisition transactions and
need not consider reports on the competitive consequences of the transaction ordinarily solicited from the
Department of Justice and other banking agencies. He
is authorized in such circumstances to act immediately, in his sole discretion, to approve an acquisition and to authorize the immediate consummation of
the transaction.
The proposed acquisition will be in accord with all
pertinent provisions of the National Bank Act and will
prevent an enormous disruption to the community and
potential losses to a number of uninsured depositors.
The Assuming Bank will have strong financial and
managerial resources and this acquisition will enable
it—as a direct Southeast subsidiary—to enhance the
banking services offered in the Sarasota community.
Thus, the approval of this transaction will help to avert
a loss of public confidence in the banking system and
will improve the services offered to the banking public.
The Comptroller finds that the anticompetitive effects
of the proposed transaction, if any, are clearly outweighed in the public interest by the probable effect of
the proposed transaction in meeting the convenience
and needs of the community to be served. For these
reasons, the Assuming Bank's application to assume
certain liabilities and purchase assets of PFNB as set
forth in the agreement is approved. The Comptroller
further finds that the possible failure of PFNB requires
him to act immediately, as contemplated by the Bank
Merger Act, to prevent disruption of banking services
to the community; and the Comptroller thus waives
publication of notice, dispenses with the solicitation of
competitive reports from other agencies and authorizes the transaction to be consummated immediately.
January 14, 1976.
Due to the emergency nature of the situation, no Attorney General's report was requested.
47
BANK OF VIRGINIA N.A.,
Vinton, Va., and Bank of Virginia - Danville, Danville, Va.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
Bank of Virginia - Danville, Danville, Va., with
and Bank of Virginia N.A., Vinton, Va. (16485), which had
merged Jan. 31, 1976, under charter and title of the latter bank (16485). The merged bank
at date of merger had
COMPTROLLER'S DECISION
On December 3, 1975, Bank of Virginia - Danville,
Danville, Va., and Bank of Virginia N.A., Vinton, Va.,
applied to the Comptroller of the Currency for permission to merge under the charter and title of the latter.
The proposed merger represents a corporate reorganization which would merely combine two existing
subsidiary banks of Bank of Virginia Company into a
single institution that would continue under the ownership of the holding company. The resulting bank will
continue to operate all existing offices of the charter
and merging banks.
Applying the statutory criteria, it is concluded that
* Reflects the result of this merger and that with Bank of Virginia Lynchburg, which occurred on the same date.
$ 43,413,094
90,436,221
4
10
145,631,146*
14
the proposed merger is merely part of an internal corporate reorganization which will have no effect on
competition.
Approval of this application is conditioned upon this
Office's receipt of notice of publication by Bank of Virginia - Danville, a state bank, of a shareholders' meeting to ratify the subject merger and, receipt of notice of
the ratification by the shareholders.
December 30, 1975.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The merging
sidiaries of the
their proposed
ganization and
banks are both wholly-owned subsame bank holding company. As such,
merger is essentially a corporate reorwould have no effect on competition.
BANK OF VIRGINIA N.A.,
Vinton, Va., and Bank of Virginia - Lynchburg, Lynchburg, Va.
Banking offices
Total assets
Name of bank and type of transaction
In
To be
operation operated
Bank of Virginia - Lynchburg, Lynchburg, Va., with
and Bank of Virginia N.A., Vinton, Va. (16485), which had
merged Jan. 31, 1976, under the charter and title of the latter bank (16485). The merged
bank at date of merger had
COMPTROLLER'S DECISION
On December 3, 1975, Bank of Virginia - Lynchburg,
Lynchburg, Va., and Bank of Virginia N.A., Vinton, Va.,
applied to the Comptroller of the Currency for permission to merge under the charter and title of the latter.
The proposed merger represents a corporate reorganization which would merely combine two existing
subsidiary banks of Bank of Virginia Company into a
single institution that would continue under the ownership of the holding company. The resulting bank will
continue to operate all existing offices of the charter
and merging banks.
Applying the statutory criteria, it is concluded that
* Reflects the result of this merger and that with Bank of Virginia Danville, which occurred on the same date.
48
$ 11,781,831
90,436,221
145,631,146*
4
14
18
the proposed merger is merely part of an internal corporate reorganization which will have no effect on
competition.
Approval of this application is conditioned upon this
Office's receipt of notice of publication by Bank of Virginia - Lynchburg, a state bank, of a shareholders
meeting to ratify the subject merger and receipt of
notice of the ratification by the shareholders.
December 30, 1975.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The merging
sidiaries of the
their proposed
ganization and
banks are both wholly-owned subsame bank holding company. As such,
merger is essentially a corporate reorwould have no effect on competition.
OLD COLONY BANK OF HAMPDEN COUNTY, N.A.,
Holyoke, Mass., and Heritage Bank and Trust Company, Westfield, Mass.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
Heritage Bank and Trust Company Westfield Mass with
and Old Colony Bank of Hampden County, N.A., Holyoke, Mass. (1939), which had
merged Feb. 3, 1976, under charter and title of the latter bank (1939). The merged bank
at date of merger had
COMPTROLLER'S DECISION
On January 21, 1976, Old Colony Bank of Hampden
County, N.A., Holyoke, Mass., applied to the Comptroller of the Currency for permission to merge with Heritage Bank and Trust Company, Westfield, Mass.,
under the charter and with the title of Old Colony Bank
of Hampden County, N.A. This application has been
processed pursuant to the emergency provisions of
the Bank Merger Act of 1966, contained in 12 USC
1828(c).
Old Colony Bank of Hampden County, N.A., the
charter bank, was founded in 1872 and currently has
assets of $35 million and IPC deposits of $25.3 million.
The charter bank is currently the fourth largest bank in
Hampden County and operates seven branch offices
in that county, with three branches in Holyoke, three
branches in Chicopee and one branch in Springfield.
The primary service area of the bank consists of the
Springfield-Chicopee-Holyoke Standard Metropolitan
Statistical Area (SMSA). In November 1973, the charter
bank was acquired as a wholly-owned subsidiary of
First National Boston Corporation, a multi-bank holding
company headquartered in Boston.
Heritage Bank and Trust Company, the merging
bank, was organized in 1967 and now has assets of
$12.3 million and IPC deposits of $9.6 million. The
merging bank operates its main office and one branch
in the city of Westfield which is the fourth largest city in
Hampden County, and geographically, lies in the center of that county, on the western edge of the
Springfield-Chicopee-Holyoke SMSA. The primary service area of the bank consists of the city of Westfield.
In May 1974, Heritage Bank and Trust Company was
acquired, as a wholly-owned subsidiary, by Heritage
Bancorp, Inc.
Both the charter and merging banks compete with
the three largest banks headquartered in Springfield,
which aggregately control 85 percent of the commercial bank deposits and operate 62 of the 82 commercial banking offices in Hampden County. Those three
banks are Third National Bank of Hampden County,
Springfield, with deposits of $256 million; Valley Bank
and Trust Company, Springfield, with deposits of $242
million, a subsidiary of Baystate Corporation; and
Shawmut First Bank and Trust Company, Springfield,
with deposits of $122 million, a member of Shawmut
Corporation.
There is little, if any, competition between the charter
and merging banks because each operates in a primary service area which is separate and distinct from
that from which the other derives a majority of its business. A survey of the deposits and loans taken in the
$11,810,178
36,273,385
47,161535
2
8
10
fall of 1975 by Old Colony Bank of Hampden County
reveals that more than 80 percent of the number and
dollar amounts of the personal demand deposits,
commercial demand deposits and savings deposits
originated from the three cities in which the charter
bank maintains branch offices — Chicopee, Holyoke
and Springfield. The same survey shows that the
majority of installment, commercial and real estate
loans of the charter bank came from those same cities.
Similarly, the business generated by Heritage Bank
and Trust Company in the primary service area of the
charter bank is minimal.
An important aspect of this transaction, prompting
the Comptroller to invoke the emergency provisions of
the Bank Merger Act, is the present financial position
of the merging bank. The deposits of Heritage Bank
and Trust Company have significantly declined in the
past 6 months. From a level of $12.5 million on June
30, 1975, its deposits fell to $10.6 million (unaudited)
on November 30, 1975. The bank's loan portfolio has
shown serious deterioration over the past 3 years.
Charge-offs for 1975 have virtually eliminated the previously established reserve for loan losses. Loans
classified substandard and doubtful during 1975 far
exceed the amount available at the bank to cover exposure for possible losses. The merging bank is also
carrying a substantial loss in its bond portfolio.
The instant merger will have beneficial effects on
both the banking community and the public served by
the two banks. The competitive environment of
Hampden County will be strengthened because a relatively small, healthy bank will enter the Westfield market and will present a competitive challenge to three
dominant banks which are already entrenched in that
area. The resulting bank will offer new services and will
expand existing services in the area now served by the
merging bank. Management of Old Colony Bank of
Hampden County has the capacity to assume this
added responsibility and become a vigorous competitor in this part of Hampden County. Of vital importance, consummation of this merger will insure the continued, uninterrupted performance of banking services
to the present customers of Heritage Bank and Trust
Company, thereby maintaining the confidence of the
public in the American banking system.
Applying the statutory criteria contained in 12 USC
1828(c), the Comptroller of the Currency finds that an
emergency exists because of the present condition of
Heritage Bank and Trust Company which requires expeditious action in order to prevent the failure of that
bank at some future date. Consistent with this finding,
it is concluded that the subject merger will not ad-
49
ward increased concentration in the county, although
the linking of Bank to FNBC may enhance its ability to
compete with greater vigor with the three largest
banks.
Although branching is permitted in Massachusetts, it
appears that prospective branching or de novo entry
by Applicant in Westfield is highly problematic given
the fact that its population of 31,000 is already served
by seven institutions.
In sum, it appears that the proposed merger will
eliminate some existing competition and will slightly
increase the concentration in commercial banking and
have a slight impact on potential competition. Overall,
the proposed merger would have slightly adverse
competitive consequences.
versely affect competition in Hampden County. This
application is, therefore, approved.
January 29, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Applicant and Bank currently operate in each other's
market. Although it appears that the proposed merger
would eliminate some existing competition, the effect
should be slight.
Commercial banking in Hampden County is highly
concentrated with the three largest commercial banks
collectively accounting for an 85.6 percent share of
total deposits in the county. It appears that the proposed
acquisition will contribute slightly to the trend to-
FIRST NATIONAL STATE BANWMECHANICS,
Burlington Township, N.J., and Somerset Hills &
County National Bank, Basking Ridge, N.J.
Banking offices
Total assets
Name of bank and type of transaction
In
To be
operation operated
Somerset Hills & County National Bank, Basking Ridge, N.J. (6960), with
and First National State Bank/Mechanics, Burlington Township, N.J. (1222), which had
merged Feb. 6, 1976, under charter of the latter bank (1222) and title "First National
State Bank of West Jersey." The merged bank at date of merger had
COMPTROLLER'S DECISION
$ 83,022,242
124,172,444
8
15
23
207,194,686
The resulting bank will continue to operate the existing
offices of the charter and merging banks.
Applying the statutory criteria, it is concluded that
the proposed merger is merely part of an internal corporate reorganization which will not adversely affect
competition. This application is, therefore, approved.
December 31, 1975.
On November 6, 1975, Somerset Hills & County National Bank, Basking Ridge, N.J., and First National
State Bank/Mechanics, Burlington Township, N.J.,
applied to the Comptroller of the Currency for permission to merge under the charter of the latter and with
the title "First National State Bank of West Jersey."
The proposed merger represents a corporate reorganization which would merely combine two existing
subsidiary banks of First National State Bancorporation, Newark, N.J., into a single institution that will continue under the ownership of the holding company.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The merging
sidiaries of the
their proposed
ganization and
banks are both wholly-owned subsame bank holding company. As such,
merger is essentially a corporate reorwould have no effect on competition.
FIRST TENNESSEE NATIONAL BANK,
Chattanooga, Tenn., and The Hamilton National Bank of Chattanooga, Chattanooga, Tenn.
Banking offices
Name of bank and type of transaction
Total assets*
In
To be
operation operated
The Hamilton National Bank of Chattanooga, Chattanooga, Tenn. (7848), with
was purchased Feb. 16, 1976, by First Tennessee National Bank, Chattanooga, Tenn. (16552),
which had
After the purchase was effected, the receiving bank had
$476,673,000
25
16,000,000
353,904,000
0
25
Due to the emergency nature of the situation, no "Comptroller's Decision" or Attorney General's report was prepared.
* Asset figures are as of call dates immediately before and after transaction.
50
*
*
*
UNITED NATIONAL BANK,
Rapid City, S. Dak., and Union Bank & Trust, Sioux Falls, S. Dak.
Name of bank and type of transaction
Total assets*
Banking offices
In
To be
operation operated
Union Bank & Trust, Sioux Falls, S. Dak., with
and United National Bank, Rapid City, S. Dak. (15639), which had
consolidated Feb. 17, 1976, under charter and title of the latter bank (15639). The
consolidated bank at date of consolidation had
COMPTROLLER'S DECISION
On May 15, 1975, Union Bank & Trust, Sioux Falls, S.
Dak., and United National Bank, Rapid City, S. Dak.,
applied to the Comptroller of the Currency for permission to consolidate under the charter and with the title
of the latter and with its headquarters in Sioux Falls, S.
Dak.
United National Bank, the charter bank, was organized in 1914 and currently operates 15 branch offices with assets of $80.3 million and IPC deposits of
$56.2 million. An additional branch has been approved
but is not yet in operation. The charter bank is owned
by United National Corporation, a one-bank holding
company. The service area of the charter bank can be
broadly defined as that part of South Dakota which lies
either adjacent to or south of Interstate Highway 90
which connects Rapid City and Sioux Falls, the two
largest cities in the state. The economy of that region is
dependent on agricultural pursuits, tourism and related
service businesses.
The charter bank operates the majority of its
branches without competition in sparsely populated,
agricultural communities. In Vermillion it competes directly with a branch of National Bank of South Dakota,
Sioux Falls, the largest bank in the state, which has
deposits of $318.1 million and is a member of First
Bank System, Inc. Direct competition in Rapid City is
provided by additional branches of National Bank of
South Dakota and by First National Bank of the Black
Hills, Rapid City, which has deposits of $174.2 million
and is a member of Northwest Bancorporation. In
Sioux Falls, where the charter bank has operated a
branch for. less than 1 year, it again competes with National Bank of South Dakota which is headquartered in
that city, as well as with Northwestern National Bank of
Sioux Falls, which has deposits of $226.4 million and is
a member of Northwest Bancorporation; The First National Bank in Sioux Falls, which has deposits of $81.9
million; and two other, moderately-sized, independently
owned banks.
$33,313,000
98,733,000
123,544,000
2
16
18
Union Bank & Trust, the consolidating bank, was organized in 1929 and operates its main office and one
branch in Sioux Falls. It has assets of $31.1 million and
IPC deposits of $24.7 million. The area served by the
bank includes downtown Sioux Falls and the southwest
quadrant of the city. The economy of that region is
dominated by the city of Sioux Falls which is the agricultural and industrial center of South Dakota. Direct
competition for the consolidating bank is provided by
the large commercial banks headquartered in the city.
Although the charter bank operates a branch in
Sioux Falls, there is only minimal competition between
that branch and the consolidating bank. The Sioux
River divides the city roughly in half and the main office and branch of the consolidating bank are located
east of the river while the branch of the charter bank
branch is west of the river. Practically and historically
those .sections have been recognized as separate and
distinct service areas. The fact that the same individual
owns a controlling interest in both the consolidating
bank and the holding company that owns the charter
bank further minimizes competition between the two
banks.
Consummation of the proposed transaction will
stimulate competition in Sioux Falls because the resulting bank will be in a better position to compete with the
large holding company affiliated banks that are already established in the city. The consolidation will
have little effect outside the Sioux Falls area and the
principal benefit to the other communities served by
the charter bank will be the availability of the resulting
bank's larger lending limit. The charter bank already
maintains its executive offices in the Union Bank &
Trust building in Sioux Falls and the consolidation will
enable the resulting bank to establish more firmly its
identity in the banking center of South Dakota.
Applying the statutory criteria, it is concluded that
the proposed transaction is in the public interest and
this application is, therefore, approved.
August 15, 1975.
SUMMARY OF REPORT BY ATTORNEY GENERAL
* Asset figures are as of call dates immediately before and after transaction.
We have reviewed this proposed transaction and conclude that it would not have a substantial competitive
impact.
51
SOUTH LOOP NATIONAL BANK,
Houston, Tex., and South Texas Bank, Houston, Tex.
Name of bank and type of transaction
Total assets *
Banking offices
In
To be
operation operated
South Texas Bank, Houston, Tex., with
was purchased Mar. 1, 1976, by South Loop National Bank, Houston, Tex. (16558), which
had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
On March 1, 1976, application was made to the Comptroller of the Currency by the South Loop National
Bank, Houston, Tex., for permission to purchase some
of the assets and assume the liabilities of the South
Texas Bank, Houston, Tex. Instant application rests
upon an agreement incorporated herein by referencing
the same as if fully set forth, and, for the reasons set
forth below, the application is hereby approved and
the assuming bank is hereby authorized immediately
to consummate purchase and assumption transaction.
Under the Bank Merger Act, 12 USC 1828(c), the
Comptroller cannot approve a purchase and assumption transaction which would have certain proscribed
anticompetitive effects unless he finds these anticompetitive effects to be clearly outweighed in the public
interest by the probable effect of the transaction in
meeting the convenience and needs of the community
to be served. Additionally, the Comptroller is directed
to consider the financial and managerial resources
and future prospects of the existing and proposed
institution and the convenience and needs of the
community to be served. When necessary, however, to
prevent the evils attendant upon the failure of a bank,
the Comptroller can dispense with the uniform standards applicable to usual acquisition transactions and
need not consider reports on the competitive consequences of the transaction ordinarily solicited from the
Department of Justice and other banking agencies. He
is authorized in such circumstances to act im* Asset figures are as of call dates immediately before and after
transaction.
52
$8,173,336
1
1,120,000
5,426,000
0
1
mediately, in his sole discretion, to approve an acquisition, and to authorize the immediate consummation of
the transaction.
The proposed acquisition will be in accord with all
pertinent provisions of the National Bank Act and will
prevent disruption to the community and potential
losses to a number of uninsured depositors. The
assuming bank will have strong financial and managerial resources, and this acquisition will enable it to enhance the banking services offered in the Houston
community. Thus, the approval of this transaction will
help to avert a loss of public confidence in the banking
system, and will improve the services offered to the
banking public.
The Comptroller finds that the anticompetitive effects
of the proposed transaction, if any, are clearly outweighed in the public interest by the probable effect of
the proposed transaction in meeting the convenience
and needs of the community to be served. For those
reasons, the assuming bank's application to assume
certain liabilities and purchase assets of South Texas
Bank as set forth in the agreement is approved. The
Comptroller further finds that the failure of South Texas
Bank requires him to act immediately, as contemplated
by the Bank Merger Act, to prevent disruption of banking services to the community; and the Comptroller
thus waives publication of notice, dispenses with the
solicitation of competitive reports from other agencies,
and authorizes the transaction to be consummated
immediately.
March 1, 1976.
Due to the emergency nature of the situation, no Attorney General's report was requested.
OLD NATIONAL BANK OF WASHINGTON,
Spokane, Wash., and Bank of the West, Bellevue, Wash.
Banking offices
Total assets*
Name of bank and type of transaction
In
To be
operation operated
Bank of the West, Bellevue, Wash., with
was purchased Mar. 5, 1976, by Old National Bank of Washington, Spokane, Wash. (4668),
which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
60
76
SUMMARY OF REPORT BY ATTORNEY GENERAL
Ten of Applicant's offices, five in King County and five
in Snohomish County, are within 11 miles of four of
Bank's King County offices; the closest offices are
about 4.4 road miles apart. Thus, the merger would
eliminate some existing competition between the
banks. Neither bank, however, controls a significant
portion of the total deposits in this area, which is dominated by two Seattle-based banks. Thus, the effect of
the merger on competition would not be significantly
adverse.
* Asset figures are as of call dates immediately before and after
transaction.
*
16
633,358,000
745,866,000
County. The city of Seattle dominates King County but
the selling bank has no offices in the city itself. Old National Bank has five offices in King County, two of
which are located in Seattle. Four of the purchasing
bank's offices are separated from the offices of the
selling bank by Lake Washington. The purchasing
bank's fifth branch in King County is more than 4 miles
from any branch of the selling bank. Additionally, because of the state branching laws, Bank of the West
cannot branch into Seattle proper and Old National
Bank is restricted from freely branching in King
County. Both banks are severely limited in their ability
to expand in this area of the state. Neither bank controls a significant portion of the total deposits in King
County which is dominated by the large Seattle-based
banks. As a result, only a minimal amount of competition between the two banks will be eliminated by the
proposed transaction and the effect on competition in
the King County area will not be significant.
Competition for both banks is provided by SeattleFirst National Bank, with deposits of $3.4 billion;
Rainier National Bank, with deposits of $2 billion;
Pacific National Bank of Washington, with deposits of
$800 million; and Peoples National Bank of
Washington, with deposits of $615 million.
Consummation of the proposed transaction will result in some loss of competition but the great number
of alternative banking offices throughout King County
reduces the impact of that slight loss. The transaction
will not change Old National Bank's position relative to
other banks in the state and the resultant bank will be
able to compete more effectively with the large
Seattle-based banks. The resulting bank will have a
larger lending limit and will be able to provide
increased services to present customers of the selling
bank, such as expanded trust services.
Applying the statutory criteria, it is concluded that
the proposed transaction will not significantly affect
competition and, therefore, it is approved.
February 2, 1976.
On September 30, 1975, Old National Bank of
Washington, Spokane, Wash., applied to the Comptroller of the Currency for permission to purchase the assets and assume the liabilities of Bank of the West,
Bellevue, Wash.
Old National Bank of Washington, the purchasing
bank, was organized in 1891 and, with assets of approximately $564 million and IPC deposits of approximately $445 million, ranks as the state's fifth largest
bank in deposit size. The purchasing bank currently
operates 60 offices. Forty-nine of the bank's offices are
located on the eastern side of the Cascade Mountains
which bisect the state. The economy of the area is
predominantly agricultural and Spokane is the principal urban center.
Old National Bank is a member of Washington
Bancshares, Inc., a bank holding company whose only
other affiliate bank is First National Bank in Spokane,
with deposits of $45.5 million. First National Bank in
Spokane operates no branches outside Spokane
County in eastern Washington.
In the past several years Old National Bank has expanded to the western and more densely populated
area of the state in and around Seattle. Old National
Bank's expansion has been primarily by acquisition
because of the state's restrictive branching laws which
only permit de novo branching within the county in
which the bank is headquartered or in any city or town
which has no bank or branch.
Bank of the West, the selling bank, is a statechartered bank organized in 1965 which presently operates 16 offices in western Washington. Bank of the
West has total assets of $117 million and IPC deposits
of $85 million and ranks as the state's 11th largest
bank in deposit size. The selling bank is headquartered in Bellevue, King County, Wash. Bellevue, a city
which is separated from Seattle by Lake Washington,
is a major port and manufacturing center.
Bank of the West has seven offices, acquired by
merger, in Cowlitz County which is in the southwestern
portion of the state approximately 100 miles from
Seattle. The purchasing bank has no offices in Cowlitz
County and, because of the state's restrictive branching laws, the purchasing bank is unable to branch de
novo into Cowlitz County. As a result the present
transaction will have little competitive impact in Cowlitz
County.
Bank of the West has nine offices located in King
$126,226,969
*
*
53
THE FARMERS NATIONAL BANK OF ANNAPOLIS,
Annapolis, Md., and The Millington Bank of Maryland, Millington, Md.
Banking offices
Total assets
Name of bank and type of transaction
In
To be
operation operated
The Millington Bank of Maryland, Millington, Md., with
and The Farmers National Bank of Annapolis, Annapolis, Md. (1244) which had
merged Mar. 5, 1976, under charter of the latter bank (1244) and title "Farmers National Bank of Maryland." The merged bank at date of merger had
COMPTROLLER'S DECISION
On January 16, 1976, the Farmers National Bank of
Annapolis, Annapolis, Md., applied to the Comptroller
of the Currency for permission to merge the Millington
Bank of Maryland under the charter of the Farmers National Bank of Annapolis and with the title of "Farmers
National Bank of Maryland." This application has been
processed pursuant to the emergency provisions of
the Bank Merger Act of 1966, contained in 12 USC
1828(c).
The Farmers National Bank of Annapolis, the charter
bank, was established in 1805 and currently has assets of $76 million and IPC deposits of $60 million. The
charter bank operates four offices in Annapolis and
five offices in surrounding Anne Arundel County.
The charter bank's service area encompasses almost all of Anne Arundel County which is located on
the Chesapeake Bay in eastern Maryland. The population of the service area, which is currently about
175,000, has grown rapidly because people who work
in Baltimore and Washington, D.C., are establishing
homes in the area.
The charter bank is the ninth largest of 16 banks, represented in Anne Arundel County. The five largest
banks in the state have offices in the county. However,
in spite of the highly competitive nature of banking in
the service area, the charter bank has realized excellent growth over the last 10 years and ranks second in
its share of total deposits in the county. Major competitors in the service area include Equitable Trust
Bank, Baltimore, with deposits of $992 million, a
member of the Equitable Bancorporation; Maryland
National Bank, Baltimore, with deposits of $1.9 billion;
and First National Bank of Maryland, Baltimore, with
deposits of $902 million.
The Millington Bank of Maryland, the merging bank,
was established in 1908 and operates as a unit bank
with assets of $5.6 million and IPC deposits of $5 million. Millington is an agricultural community with a
population of about 450 located in Kent County on the
eastern side of the Chesapeake Bay. The service area
of the merging bank includes much of Kent County
and part of Queen Anne County to the south, and extends east into Delaware. The economy of the service
area is dominated by agriculture. The merging bank is
the smallest of five banks serving Kent County. Two of
the largest banking organizations in the state have offices in the service area, including Maryland National
Bank and an affiliate of Mercantile Bankshares Corporation, the $25 million deposit Chestertown Bank of
Maryland, Chestertown.
54
$ 5,398,792
76,251,752
81,650,543
1
9
10
There is little, if any, competition between the charter
and merging banks because of the distance which
separates the closest offices of each bank, approximately 50 miles, and they are separated by the
Chesapeake Bay. The charter bank is interested in expanding into the Eastern Shore counties in order to
take advantage of the banking opportunities presented
by the increasingly successful agriculture industry.
An important aspect of this transaction prompting
the Comptroller to expedite this merger under
emergency provisions of the Bank Merger Act is the
present financial position of the merging bank. The
merging bank has not progressed significantly since
its organization in 1908 and, because of its size and
location, the merging bank has not been able to attract
and hold qualified management. More importantly, the
bank's condition decreased substantially during the
past few weeks when it experienced a $170,000 overdraft loss charged against the capital accounts of
$250,000. Also the merging bank has experienced an
additional $23,000 loan loss. Those substantial losses
in conjunction with the inability of stockholders to raise
additional capital have left the bank in a precarious
position militating against its future survivability as a
viable institution.
The instant merger will benefit the Millington community, now served by the merging bank, by providing
a more aggressive and viable competitor. Additionally,
the merger will only slightly increase the charter bank's
relative position in Anne Arundel County. The resulting
bank will offer new services and expand existing services in the area now served by the merging bank.
Farmers National Bank has both the capital and management capacity to absorb the merger without any
detriment to its own financial position, and to become
a vigorous competitor in Kent County. Of vital importance, consummation of this merger will insure the continued, uninterrupted, provision of banking services to
the present customers of The Millington Bank of Maryland, thereby maintaining the confidence of the public
in the banking system.
Applying the statutory criteria contained in 12 USC
1828(c), the Comptroller of the Currency finds that an
emergency exists because of the present condition of
the Millington Bank of Maryland which requires expeditious action in order to prevent the failure of that
bank at some future date. Consistent with that finding,
it is concluded that the subject merger will not adversely affect competition in Maryland. Accordingly,
this application is in the public interest and should be,
and is, approved.
February 23, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Applicant operates solely in Anne Arundel County
(population 298,000) and Bank operates solely in Kent
County (population 16,000). The office of Applicant
closest to the sole office of Bank is 51 miles away, and
there are both competitive banking alternatives and
the Chesapeake Bay located in the area which separates Applicant and Bank. Thus, there currently exists
at best a negligible amount of competition between
Applicant and Bank.
There are currently 16 commercial banks serving
Anne Arundel County and they collectively operate 63
offices. Applicant operates nine of the offices and currently ranks second with 16 percent share of the deposits in the county. The five largest banks in the state
all have offices in Anne Arundel County. Bank is the
smallest of the five banks which currently operate a
total of nine offices in Kent County. Bank holds 7.5
percent of total county deposits. Two of the largest
banks in the state operate in Kent County. In any
event, since Applicant does not operate in Kent
County and Bank does not operate in Anne Arundel
County, the proposed acquisition will not increase the
level of concentration in either market.
Statewide branching is permitted in Maryland, so
both Applicant and the Bank are free to open
branches in the counties served by each other. The financial condition of Bank makes it obvious that it cannot entertain serious notions about expansion any time
soon, and the small population of Kent County and the
presence of many other banks in the county render
Kent County a less than likely target for expansion by
Applicant.
In sum, the proposed acquisition will not eliminate
any significant amount of existing competition, nor will
it appreciably increase concentration. It will remove
the theoretical possibility of de novo entry by each
bank into the area served by the other, a possibility
which appears to be rather remote.
THE FIRST NATIONAL BANK OF HUNTSVILLE,
Huntsville, Ark., and The Valley Bank, Hindsville, Ark.
Banking offices
Total assets*
Name of bank and type of transaction
In
To be
operation operated
The Valley Bank, Hindsville, Ark., with
was purchased Mar. 9, 1976, by The First National Bank of Huntsville, Huntsville, Ark. (8952),
which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
On March 8, 1976, application was made to the Comptroller of the Currency by the First National Bank of
Huntsville, Huntsville, Ark. ("Assuming Bank") for permission to purchase the assets and assume the
liabilities of The Valley Bank, Hindsville, Ark. The application rests upon an agreement incorporated herein
by referencing the same as if fully set forth, and, for the
reasons set forth below the application is hereby approved and the Assuming Bank is hereby authorized
immediately to consummate the purchase and assumption transaction, and to operate the office of The
Valley Bank as a branch office of the Assuming Bank.
During the course of an examination of The Valley
Bank, commencing February 10, 1976, a shortage
presently estimated at approximately $645,000 was
discovered. That shortage resulted from loans either
forged or in the names of non-existent persons. Capital
and reserves of The Valley Bank as of February 9,
1976, totalled approximately $152,600. In addition, the
bank carries a $75,000 Fidelity Coverage Bankers Blanket Bond, however, the bank carries no excess Employee Dishonesty Bond. Applicant is one of only two
banks eligible to establish a branch in Hindsville. The
other eligible bank, Bank of Kingston, Kingston, Ark., is
* Asset figures are as of call dates immediately before and after
transaction.
$1,936,637
18,457.000
20,077,000
a small institution located in a remote area of Madison
County, approximately 30 miles from Hindsville. The
Bank of Kingston has total deposits of approximately
$1.1 million and does not have the financial capacity to
absorb the Hindsville bank.
Under the Bank Merger Act, 12 USC, 1828(c), the
Comptroller cannot approve a purchase and assumption transaction which would have certain proscribed
anticompetitive effects unless he finds these anticompetitive efects to be clearly outweighed in the public
interest by the probable effect of the transaction in
meeting the convenience and needs of the community
to be served. Additionally, the Comptroller is directed
to consider the financial and managerial resources
and future prospects of the existing and proposed
institution and the convenience and needs of the
community to be served. When necessary, however, to
prevent the disruptions attendant upon the failure of a
bank, the Comptroller can dispense with the uniform
standards applicable to usual acquisition transactions
and need not consider reports on the competitive consequences of the transaction ordinarily solicited from
the Department of Justice and the other banking
agencies. He is authorized in such circumstances to
act immediately in his sole discretion, to approve an
acquisition and to authorize the immediate consummation of the transaction.
The proposed acquisition will be in accord with all
55
pertinent provisions of the National Bank Act and will
prevent disruption to the Hindsville community and potential losses to several uninsured depositors. The Assuming Bank has sufficient financial and managerial
resources to absorb The Valley Bank. Thus, the approval of this transaction will help to avert a loss of
public confidence in the banking system and prevent
disruption of banking services to the community.
The Comptroller finds that the anticompetitive effects
of the proposed transaction, if any, are clearly outweighed in the public interest by the probable effect of
the proposed transaction in meeting the convenience
and needs of the community to be served. For those
reasons, the Assuming Bank's application to assume
the liabilities and purchase the assets of The Valley
Bank, as set forth in the purchase agreement, is
hereby approved. The Comptroller further finds that
the failure of The Valley Bank requires him to act immediately, as contemplated by the Bank Merger Act, to
prevent disruption of banking services to the community;
and the Comptroller thus waives publication of notice,
dispenses with the solicitation of competitive reports
from other agencies and authorizes the transaction to be
consummated immediately.
March 9, 1976.
Due to the emergency nature of the situation, no Attorney General's report was requested.
UNITED NATIONAL BANK,
Castlewood, S. Dak., and First State Bank, Lake Norden, S. Dak.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
First State Bank, Lake Norden, S. Dak., with
and United National Bank, Castlewood, S. Dak. (16470), which had
merged Mar. 15, 1976, under charter and title of the latter bank (16470). The merged bank
at date of merger had
COMPTROLLER'S DECISION
On October 22, 1975, First State Bank, Lake Norden,
S. Dak., and United National Bank, Castlewood, S.
Dak., applied to the Comptroller of the Currency for
permission to merge under the charter and with the
title of the United National Bank.
United National Bank, the charter bank, was organized as a state bank in 1902, converted to a national bank in 1975, and now has assets of $5.2 million
and IPC deposits of $3.3 million. The bank operates no
branch offices. The service area of the charter bank
includes the town of Castlewood, S. Dak., population
523, and its immediate environs which include the surrounding area within an 8- to 10-mile radius.
The charter bank is the only bank domiciled in
Castlewood and competes primarily with two banks located in Watertown, about 15 miles north of
Castlewood. The larger of the two competitors in
Watertown, the largest city in the immediate area, is
the First National Bank of Watertown with deposits of
$39.5 million, a subsidiary of Northwest Bancorporation, Minneapolis. The other competitor, Farmers and
Merchants Bank & Trust, is an independent bank with
total deposits of $45.0 million. Those two banks, because of their size, are able to offer services, such as
greater lending limits, which the United National Bank
at Castlewood, because of its present small capital
base, is unable to extend. Competition between the
charter bank and these competitors is, therefore, substantial.
First State Bank, the merging bank, was organized
as a national bank in 1928, has operated as a state
banking institution since 1965 and now has assets of
$4.5 million and IPC deposits of $3.6 million. The bank
56
$4,664,736
5,190,046
9,854,782
1
1
operates no branch offices. The town of Lake Norden,
in which the bank is located, has a population of approximately 400 inhabitants. The bank's service area
includes Lake Norden and extends approximately 10
miles in all directions from Lake Norden. The economy
of the service area, like that of Castlewood, is almost
exclusively agricultural and there is no major industrial
operation in the Lake Norden area. Competition for the
merging bank is provided by the two banks in Watertown which compete with the charter bank.
There is no significant competition between the charter and merging banks because of the distance
separating the two banks and the existence of natural
barriers. The 19-mile distance between the two banks
and the presence of several intervening lakes establish
two different service areas. Moreover, the banks
involved in the proposed transaction are controlled by
the same individual. The transaction is therefore effectively a corporate reorganization of that individual's
holdings into a single entity which will not result in any
changes of policy or management. Finally, there is no
potential competition between the charter and merging
banks due to South Dakota's restrictive branch banking statutes which provide for home office protection.
Additionally, neither bank is of the size to undertake de
novo branching.
Consummation of the proposed merger may result in
some operational cost efficiencies, and the resulting
bank will have a larger lending limit thereby enabling it
to better serve the banking needs of the populace. The
resulting bank, with assets of $9.7 million and IPC deposits of $6.9 million, will remain considerably smaller
in size than the banks with which it will compete.
Applying the statutory criteria, it is concluded that
the proposed merger would have no adverse competitive effects and is not adverse to the public interest.
Accordingly, this application should be, and therefore
is, approved.
February 13, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The main (and only) office of Applicant in Castlewood
(population 523) is 19 miles from the main (and only)
office of the Bank in Lake Norden (population 393) and
there are competitive banking alternatives located in
the intervening area between the two towns. As of
June 30, 1974, five banks operated six offices in Hamlin County, with the Applicant holding about 11 percent
and the Bank holding about 10 percent of total Hamlin
County deposits. If the merger is approved, the result-
ing bank will be the largest in Hamlin County, holding
about 21 percent of county deposits.
The majority control of both the Applicant and the
Bank is held by the same individual, with the result that
the two banks have had numerous loan participations
during the past year. This factor somewhat mitigates
the anticompetitive effects of the merger.
It appears that the merger would eliminate some
existing competition as well as the potential for
increased competition in the future, and would also
substantially increase concentration among commercial banks in Hamlin County. It thus appears that the
proposed merger would have an adverse effect on
competition, although we note that the two banks are
quite small and Hamlin County is a sparsely populated
area which probably will not experience significant
economic growth anytime soon.
VIRGINIA NATIONAL BANK,
Norfolk, Va., and North American Bank and Trust, Leesburg, Va.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
North American Bank and Trust, Leesburg, Va., with
and Virginia National Bank, Norfolk, Va. (9885), which had
merged Mar. 15, 1976, under charter and title of the latter bank (9885). The merged bank
at date of merger had
COMPTROLLER'S DECISION
On December 23, 1975, North American Bank and
Trust, Leesburg, Va., and Virginia National Bank, Norfolk, Va., applied to the Comptroller of the Currency for
permission to merge under the charter and title of "Virginia National Bank."
Virginia National Bank, Norfolk, Va., the charter
bank, is the lead bank for Virginia National
Bankshares, Inc., a multi-bank holding company that is
the second largest banking organization in the state.
The charter bank, with assets of $1.7 billion and IPC
deposits of $1.2 billion, operates 116 offices throughout the state of Virginia.
North American Bank and Trust, Leesburg, Va., the
merging bank, was established in 1972 under a state
charter and now has assets of $9.6 million and IPC
deposits of $5.4 million. The merging bank primarily
serves the town of Leesburg and the surrounding area
in Loudoun County. Loudoun County is located on the
fringe of the Washington, D. C. Standard Metropolitan
Statistical Area (SMSA) and is predominantly rural in
nature. Approximately one-third of the work force in
Loudoun County commutes to Washington, D. C , for
employment.
North American Bank and Trust is the smallest of
nine banks serving Loudoun County. The two dominant
competitors in its service area are First Virginia Bank/
First National, Purcellville, with deposits of $18 million,
$
8,783,472
1,745,416,361
1,753,137,292
1
118
119
which is a member of First Virginia Bankshares Corporation, and The Peoples National Bank of Leesburg,
with deposits of $28 million, which is a member of Financial General Bankshares, Inc.
The charter bank has no offices in Loudoun County
or within 25 miles of the merging bank. As a result, the
proposed transaction will not lessen any competition
within Loudoun County. In addition, consummation of
the merger will not significantly increase Virginia National Bank's relative position statewide.
Since its establishment in 1972, the merging bank
has been unable to achieve a profitable level of earnings. The bank has been experiencing increasing loan
losses, low liquidity and a deteriorating capital position. The future prospects for the merging bank are not
encouraging. The subject transaction presents a desirable alternative to possible liquidation of the bank or
financial support from regulatory agencies. The charter
bank has sufficient capital, financial resources and
management depth to absorb North American Bank
and Trust without damage to the charter bank's present
financial condition.
Consummation of the proposed transaction will
strengthen competition in Loudoun County. The resulting bank will offer additional banking services to the
community not presently offered by the merging bank,
such as more sophisticated real estate financing and
trust services. Virginia National Bank will not enter this
57
service area in a dominant position and a financially
weak competitor will have been replaced by a more
viable institution.
Applying the statutory criteria, it is concluded that
the proposed merger is in the public interest and this
application is therefore approved.
February 12, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
In sum, the proposed merger would not eliminate any
significant amount of existing competition. It would
abort the theoretical possibility that Applicant would
enter the market through the chartering of a new bank.
On balance, thev proposed merger would have only a
slightly adverse effect on competition.
PEOPLES BANK OF MISSISSIPPI, NATIONAL ASSOCIATION,
Union, Miss., and Clinton National Bank, Clinton, Miss.
Name of bank and type of transaction
Total assets
Banking offices
In
To be
operation operated
Clinton National Bank, Clinton, Miss. (16253), with
and Peoples Bank of Mississippi, National Association, Union, Miss. (16194), which had . . .
merged Mar. 17, 1976, under charter and title of the latter bank (16194). The merged bank
at date of merger had
COMPTROLLER'S DECISION
On October 11, 1975, Clinton National Bank, Clinton,
Miss., and Peoples Bank of Mississippi, National Association, Union, Miss., applied to the Comptroller of
the Currency for permission to merge under the charter and with the title of Peoples Bank of Mississippi,
National Association.
Peoples Bank of Mississippi, National Association,
the charter bank, was organized in 1919 and, with IPC
deposits of $52.3 million and assets of $65.9 million,
operates 11 branches in seven counties east and
northeast of Jackson, Miss. The bank also had pending an application for another branch office in Winston
County. The charter bank's service area is considered
to be the seven counties in which it presently conducts
business: Attala, Grenada, Lauderdale, Neshoba,
Newton, Oktibbeha and Scott.
Competition is provided the charter bank by offices
of 16 different banking institutions, including Grenada
Bank, Grenada, with deposits of $175.8 million; Citizens National Bank of Meridian, with deposits of $58.4
million; Merchants and Farmers Bank, Koscuisko, with
deposits of $43.8 million; and Citizens Bank of
Philadelphia, with deposits of $24.6 million, among
other competitors.
Clinton National Bank, the merging bank, opened for
business on January 2, 1974, and, with IPC deposits of
$3.6 million and assets of $6.4 million, does not operate any branches. The service area of Clinton National
Bank consists of Clinton and its immediate environs
with a population estimated to be in excess of 13,500
persons. The merging bank is the fourth smallest of 11
commercial banks headquartered in Hinds County and
competes with offices of Mississippi's two largest
banks, First National Bank of Jackson, with deposits of
$586.5 million, and Deposit Guaranty National Bank,
Jackson, with deposits of $673.5 million. The merging
bank also competes with Mississippi Bank, Jackson,
with deposits of $76.3 million; First Mississippi National
Bank, Hattiesburg, with deposits of $181.8 million; and
58
$ 5,545,665
68,219,855
73,765,520
1
14
15
Fidelity Bank, Utica, with deposits of $17.6 million,
among other competitors.
There is minimal competition between Peoples Bank
of Mississippi, N.A., and Clinton National Bank because their closest two offices are separated by a distance of approximately 41 miles. Moreover, the merging bank's small size and its lack of experienced bank
management prevents the bank from being a significant competitor of Peoples Ba'nk of Mississippi. The
possible entry by the charter bank into Hinds County is
not so easily discounted. The charter bank has sufficient resources to enter the Hinds County service area
ate novo if the proposed merger is denied; nevertheless, consummation of the merger would not have an
adverse competitive effect. The merging bank would,
at best, provide weak competition for a de novo Hinds
County office of the charter bank if the latter chose that
alternative to enter Hinds County; the merging bank is
without experienced management and, given that
bank's portfolio problems and size, it will be quite
some time (should the merger not be consummated)
before Clinton National is a substantial competitive factor in the Hinds County service area. Further, entry into
Hinds county by Peoples Bank of Mississippi, with resources only a tenth as great as the major banks in the
Jackson area, will not have a dramatic impact on the
various markets for banking services. The state's
largest banks, Frist National Bank of Jackson and Deposit Guaranty Bank, dominate banking in Hinds
County and each operates a branch in Clinton where
the merging bank is located.
Consummation of the proposed merger should
stimulate competition in the service area of the merging bank. The transaction will resolve Clinton National's
management problems. Further, the resulting bank is
likely to retain the charter bank's aggressive competitive traits. In addition to replacing a relatively new,
inexperienced commercial bank with a more established and expansion-minded financial institution, consummation of this transaction will provide Clinton area
residents and businesses with the availability of a substantially increased lending limit, lower service
charges, extended banking loans and "personal banking service."
Applying the statutory criteria it is concluded that the
proposed merger is in the public interest and this application is therefore, approved.
February 11, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The closest offices of Applicant and Bank are approximately 61 miles apart and there are numerous other
banks plus the Metropolitan Jackson Area in the
intervening area. It appears, therefore, that the proposed
acquisition will not eliminate existing competition
to any appreciable extent. As of June 30, 1975, Applicant held approximately 1.03 percent of total state de-
posits and Bank held .10 percent. Thus, the merger of
the two banks will not appreciably increase concentration in commercial banking in the state or in any local
markets therein.
Both of the largest banks in the state have branches
in Clinton, a fast-growing town to approximately 10,000
people. A third bank was established in 1973. The
proposed acquisition can be characterized as a toehold acquisition by Applicant. It appears that Applicant
could have established (assuming state approval) a de
novo branch in Clinton, and the growth rate in the Clinton area suggests that a de novo branch might well be
possible, at least in the near term if not immediately.
Thus, the proposed merger may eliminate some potential competition.
In sum, the proposed merger may have slightly adverse anticompetitive consequences.
PUGET SOUND NATIONAL BANK,
Tacoma, Wash., and Continental Bank, Burien, Wash.
Total assets *
Name of bank and type of transaction
Banking offices
In
To be
operation operated
Continental Bank, Burien, Wash., with
was purchased Mar. 20, 1976, by Puget Sound National Bank, Tacoma, Wash. (12292), which
had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
On March 10, 1976, application was made to the
Comptroller of the Currency by Puget Sound National
Bank, Tacoma, Washington ("Assuming Bank") to
purchase the assets and assume the liabilities of Continental Bank, Burien, Wash. ("Selling Bank").
Assuming Bank, with approximately $346 million in
deposits, is the sixth largest bank in the state of
Washington. The Assuming Bank operates through a
34-branch network; all except five of the branches are
located in Pierce County. Two of the branches are located in King County, home of the Selling Bank, and
one of those branches is located approximately 5
miles from a branch office of the Selling Bank. However, because of the restrictions in the branching laws
of the state of Washington, Assuming Bank's further
expansion into King County and the trade area of Selling Bank, as a practical matter, can come only through
acquisition of an existing bank.
Selling Bank was chartered in 1969, and presently
has approximately $18 million in deposits. The trade
area of Selling Bank is presently serviced by 37 offices
of other commercial banks with total deposits of approximately $343 million.
An examination of Continental Bank on January 30,
1976, disclosed that the Selling Bank had been the vic* Asset figures are as of call dates immediately before and after
transaction.
$20,514,344
4
395,792,000
481,871,000
35
39
tim of certain forged notes creating a substantial and
debilitating effect upon its capital accounts. Current
known losses aggregate approximately $1.47 million,
reducing the capital accounts of the Selling Bank to
approximately $70,000.
Pursuant to the provision of the Bank Merger Act, 12
USC 1828(c), the Comptroller of the Currency cannot
approve a purchase and assumption transaction which
would have certain proscribed anticompetitive effects
unless the Office concludes that those anticompetitive
effects are clearly outweighed in the public interest by
the probable effect of the proposed transaction in
adequately meeting the convenience and needs of the
community to be served. Furthermore, the Office of the
Comptroller is directed to also fully consider the financial and managerial resources and future prospects of
the existing and proposed institution. When necessary,
however, to prevent the disruption attendant upon the
probable failure of a bank, the Comptroller can dispense with the uniform standards applicable to usual
acquisition transactions and need not consider reports
relating to the competitive consequences of the transaction ordinarily solicited from the United States Department of Justice and other banking agencies. The
Comptroller is specifically authorized in such exigent
circumstances to act immediately, in his sole discretion, to approve an acquisition and to authorize the
immediate consummation of the proposed transaction.
The subject proposed transaction is deemed to be
in accord with all pertinent provisions of the National
59
Bank Act and will serve to prevent disruption of banking services to the Burien banking community and potential losses to uninsured depositors. The Assuming
Bank has sufficient financial and marginal resources to
absorb Continental Bank and be a strong competitive
force in Selling Bank's trade area. Approval of the
instant transaction will avert a potential loss of public
confidence in the banking system, and prevent disruption of any banking services to the relevant community.
Although this requisition will eliminate some direct
competition, the Comptroller finds that any anticompetitive effects of the proposal are clearly outweighed
by the probable effect of the resultant bank's ability to
meet the convenience and needs of the community to
be served. For the reasons herein stated, the Assum-
ing Bank's application to purchase the assets and assume the liabilities of Continental Bank is deemed to
be in the public interest and is approved. The Comptroller also finds that the probable failure of Continental Bank requires this Office to act immediately, as contemplated by The Bank Merger Act, to prevent disruption of banking services to the community, and the
Comptroller hereby waives publication of notice, dispenses with the solicitation of competitive factor reports from other agencies, and authorizes the immediate consummation of the proposed transaction.
March 20, 1976.
Due to the emergency nature of the situation, no Attorney General's report was requested.
THE EDISON BANK, NATIONAL ASSOCIATION,
South Plainfield, N.J., and First National State Bank of the Jersey Coast, Spring Lake, N.J.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
First National State Bank of the Jersey Coast, Spring Lake, N.J. (13898), with
and The Edison Bank, National Association, South Plainfield, N.J. (15845), which had
merged Mar. 26, 1976, under charter of the latter bank (15845) and titled "Edison/First
National State Bank." The merged bank at date of merger had
COMPTROLLER'S DECISION
On December 12, 1975, First National State Bank of
the Jersey Coast, Spring Lake, N.J., and The Edison
Bank, National Association, South Plainfield, N.J.,
applied to the Comptroller of the Currency for permission to merge under the charter of the latter and with
the title of "Edison/First National State Bank."
The Edison Bank, National Association, the charter
bank, was originated in 1956 as a state bank and now
operates 10 branches with assets of $98.8 million and
IPC deposits of $74.1 million. The service area of the
bank consists of Middlesex County, which has a population of approximately 607,000.
First National State Bank of the Jersey Coast, the
merging bank, is the survivor of a 1974 merger with
First National State Bank of Ocean County. The merging bank, with 11 offices, has assets of $94.2 million
and IPC deposits of $80.8 million. The bank's service
area includes Monmouth County, where it has four offices, and Ocean County where the bank maintains
seven offices. The combined population of the two
60
$ 93,182,054
93,500,271
186,682,325
11
10
21
counties that comprise its service is estimated at
738,000.
Edison Bank, National Association and First National
State Bank of the Jersey Coast are both wholly-owned
subsidiaries of the same multi bank holding company, First National State Bancorporation, Newark,
N.J., which controls six other banks and has aggregate deposits of $1.9 billion. As such, their proposed
merger is a corporate reorganization and would have
no effect on competition.
Applying the statutory criteria, it is concluded that
the proposed merger is not adverse to the public
interest and this application is, therefore, approved.
February 24, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The merging
sidiaries of the
their proposed
ganization and
banks are both wholly-owned subsame bank holding company. As such,
merger is essentially a corporate reorwould have no effect on competition.
EUCLID NATIONAL BANK,
Euclid, Ohio, and The Continental Bank, Cleveland, Ohio
Banking offices
Name of bank and type of transaction
Total assets*
In
To be
operation operated
The Continental Bank, Cleveland, Ohio, with
was purchased Mar. 31, 1976, by Euclid National Bank, Euclid, Ohio (15573), which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
On January 19, 1976, Euclid National Bank, Euclid,
Ohio, applied to the Comptroller of the Currency to
purchase certain assets and assume certain liabilities
of The Continental Bank, Cleveland, Ohio.
Euclid National Bank, the purchasing bank, was organized in 1952 as a state savings and loan association, has operated as a national bank since February
1966, and now has total deposits of approximately
$111 million. The bank operates seven branch offices
throughout Cuyahoga County and one branch office in
neighboring Lake County in addition to its head office
in Euclid, a suburban community which lies in both
Cuyahoga and Lake counties.
The Continental Bank, the selling bank, commenced
commercial banking operations in 1927 as a state
banking institution and now operates 10 offices in
Cuyahoga County. As of September 30, 1975, The
Continental Bank controlled total deposits of $77.1 million and ranked immediately behind the purchasing
bank as eighth largest of the 12 banks in the county.
Although both banks involved in the proposed
merger presently compete in the same relevant banking market, approximated by the Cleveland SMSA, in
only one instance do the subject banks' branches directly compete in the same service area. That competitive situation is, however, greatly mitigated by the restricted capabilities of the selling bank, which severely
limit its competitive posture, and further by the additional benefits accruing to the public through conditions of convenience and needs.
On a pro forma basis, approval of the instant application would have the effect of combining into one
institution the seventh and eighth largest banks in
Cuyahoga County which control approximately 1.4
percent and 1.0 percent of the total deposits in the
county, respectively. The resultant bank would become the sixth largest bank, surpassing The Capital
National Bank, a subsidiary of BancOhio Corporation,
by 0.1 percent. Additionally, it is noted that Euclid National Bank is a subsidiary of Winters National Corporation, Dayton, and the merger of the two subject banks
would not alter the present bank holding company's
* Asset figures are as of call dates immediately before and after
transaction.
$100,204,382
134,748,000
225,689,000
10
8
18
rank as 11th largest multi-bank holding company in
Ohio, controlling approximately 2.4 percent of total
state commercial banking deposits.
Winters National Corporation has committed itself to
add an additional $5 million in capital to the resulting
bank upon consummation of this merger. Also, the
parent bank holding company assures that assistance
will be provided management if the need arises. Consummation of the proposal should therefore resolve the
severe capital and managerial problems of the selling
bank. The combination of the two banks will improve
the ability of the surviving bank to better service the
needs and enhance the convenience of the banking
public by increasing the legal lending limit of the bank,
providing greater access to capital markets, increasing capabilities in international banking and providing
leasing and trust expertise; thereby resulting in a more
viable banking alternative better able to compete with
its five substantially larger competitors in the area, all
five of which are also affiliated with large, multi-bank
holding companies.
In conclusion, while consummation of the instant
proposal would result in the foreclosure of some slight
degree of present competition and preclude probable
future competition between the two banks, the slightly
adverse competitive effects are clearly outweighed by
overriding considerations with respect to convenience
and needs of the community to be served.
Applying the statutory criteria, it is concluded that
the proposed acquisition would have no significant
competitive effects and is not adverse to the public
interest. Accordingly, this application should be, and
therefore is, approved.
March 1, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Applicant and Bank both principally operate in
Cuyahoga County, Ohio, and it is apparent from an
examination of the map contained in the application
that the two banks compete directly with each other. It
is thus clear that the proposed acquisition will eliminate direct competition between the parties.
The Cuyahoga County market is dominated by five
large banking institutions — Cleveland Trust Company, National City Bank, Central National Bank, Union
Commercial Bank and Society National Bank — which
collectively control 94.9 percent of deposits and 95.1
percent of loans and operate 85.7 percent of the bank-
61
ing offices in Cuyahoga County. Applicant ranks sixth
and Bank ranks seventh in size in Cuyahoga County.
However, Applicant and Bank combined would have
only a 2.9 percent share of deposits and 2.5 percent
share of loans in the market. Thus, the proposed ac-
quisition will not contribute significantly to the already
existing unhealthy degree of concentration in commercial banking in the area.
In short, the proposed acquisition will have some
adverse competitive effects.
THE FIRST NATIONAL BANK OF ALLENTOWN,
Allentown, Pa., and The Kutztown National Bank, Kutztown, Pa.
Total assets
Name of bank and type of transaction
Banking offices
In
To be
operation operated
The Kutztown National Bank, Kutztown, Pa. (5102), with
and The First National Bank of Allentown, Allentown, Pa. (373), which had
merged Mar. 31, 1976, under charter and title of the latter bank (373). The merged bank
at date of merger had
COMPTROLLER'S DECISION
On September 15, 1975, The Kutztown National Bank,
Kutztown, Pa., and The First National Bank of Allentown, Allentown, Pa., applied to the Comptroller of the
Currency for permission to merge under the charter
and title of The First National Bank of Allentown.
The First National Bank of Allentown, the charter
bank, was established in 1855 and is the largest of two
banks headquartered in Allentown with IPC deposits of
$420 million and assets of $479 million. The bank operates 16 offices with four additional approved but unopened new branch sites. Allentown is located approximately 55 miles northwest of Philadelphia in the
Lehigh Valley which encompasses the three contiguous cities of Allentown, Bethlehem and Easton which
have a combined population of about 494,000 persons. The area is economically progressive with an
abundance of both light and heavy industry. The charter bank primarily serves that three-city area and the
surrounding area in Lehigh and Northampton counties.
Although the only two banks headquartered in Allentown are the charter bank and The Merchant's National
Bank of Allentown, with deposits of $308 million, competition is provided by branches of banks headquartered in other areas, such as Girard Bank, Philadelphia, with deposits of $2.8 billion; Industrial Valley
Bank and Trust Company, Jenkintown, with deposits of
$783 million; Union Bank and Trust Company of Eastern Pennsylvania, Bethlehem, with deposits of $142
million, and First Valley Bank, Bethlehem, with deposits
of $448 million. Other banks which have recently expanded into Allentown include First Pennsylvania
Bank, N. A., Philadelphia, with deposits of $4.2 billion;
American Bank and Trust Co. of Pennsylvania, Reading, with deposits of $951 million; and Bank of
Pennsylvania, Reading, with deposits of $283 million.
The Kutztown National Bank, the merging bank, was
established in 1897 and operates as a unit bank with
IPC deposits of $23.6 million and assets of $27 million.
Kutztown, in Berks County, is located approximately 16
62
$ 28,317,000
512,774,000
541,091,000
1
18
19
miles southwest of Allentown and is largely residential
and agricultural with an estimated population of 4,100
persons. The service area of the merging bank
includes Kutztown and the immediately surrounding
area. Competition for the merging bank is provided by
Farmers Bank of Kutztown with deposits of $20.5 million and a recently opened branch of American Bank
and Trust Company, Reading.
Because some Kutztown residents work in Allentown
and Lehigh County, the charter and merging banks do
have some mutual customers. However, because of
the intervening distance and because of the merging
bank's local orientation, there is minimal competition
between them. First National Bank of Allentown draws
few substantial depositors and loan customers from
the Kutztown vicinity.
The resulting bank will be able to offer a much wider
range of services to the Kutztown residents than is now
provided by Kutztown National Bank, such as
liberalized and more complete personal and commercial loan programs, compound interest from day of
deposit to day of withdrawal, higher interest rates on
savings, increased lending capacity for commercial
and industrial loans and expanded trust and estate
planning services.
Applying the statutory criteria, it is concluded that
although there will be a slight lessening of competition
the proposed merger is in the public interest and this
application is, therefore, approved.
February 2, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Although the main offices of the parties are about 17
miles apart, three of Applicant's branches in southwestern Lehigh County are within 10 to 12 miles of
Bank. However, there are several competitive alternatives in the intervening areas. Thus, on balance it appears that the proposed merger would eliminate some
existing competition between the parties.
Applicant is permitted by state law to enter de novo
the market served by Bank and it has the resources to
do so. Commercial banking in Berks County is highly
concentrated, with four banks controlling 88 percent of
deposits as of 1974. Bank ranked seventh of the 16
banks which serve Berks County, holding 2 percent of
total deposits held in the county. However, in view of
the existence of other significant potential entrants and
the modest market position of Bank, it appears that the
proposed merger would not eliminate substantial potential competition.
THE NEW FARMERS NATIONAL BANK OF GLASGOW,
Glasgow, Ky., and Hiseville Deposit Bank, Hiseville, Ky.
Total assets
Name of bank and type of transaction
Banking offices
In
To be
operation operated
Hiseville Deposit Bank, Hiseville, Ky., with
and The New Farmers National Bank of Glasgow, Glasgow, Ky. (13651), which had
merged Apr. 1, 1976, under charter and title of the latter bank (13651). The merged bank
at date of merger had
COMPTROLLER'S DECISION
On December 22, 1975, Hiseville Deposit Bank,
Hiseville, Ky., and The New Farmers National Bank of
Glasgow, Glasgow, Ky., applied to the Comptroller of
the Currency for permission to merge under the charter and title of "The New Farmers National Bank of
Glasgow."
The New Farmers National Bank of Glasgow, the
charter bank, was established in 1932 and, with assets
of $36 million and IPC deposits of $27.7 million, now
operates three offices in Glasgow. Glasgow is located
in Barren County approximately 100 miles south of
Louisville, Ky., and has an estimated population of
11,000. The economy of Barren County is supported
primarily by farming, however industrial employment
opportunities are increasing in the county, particularly
in Glasgow. The charter bank's service area includes
all of Barren County; it is the second largest of five
banks headquartered in the county.
Hiseville Deposit Bank, the merging bank, was established in 1903 and now operates as a unit bank with
assets of $4.3 million and IPC deposits of $3.6 million.
Hiseville is a small farming community with a population of about 200, located 9 miles northeast of Glasgow. The merging bank's service area is limited to
Hiseville and the immediately surrounding agricultural
area.
Competition for both banks is provided by the other
three banks located in Barren County including Citizens Bank & Trust Company, Glasgow, with deposits
of $37.5 million; The Peoples Bank, Cave City, with
deposits of $5.9 million; and Park City State Bank, Park
City, with deposits of $2.4 million. Competition is also
provided by the banks located just outside Barren
County such as Horse Cave State Bank, Horse Cave,
with deposits of $14.9 million; Edmonton State Bank,
Edmonton, with deposits of $9.9 million; Bank of Summer Shade, Summer Shade, with deposits of $5.2 million; the Smith Grove branch of The American National
Bank and Trust Company of Bowling Green, with total
deposits of $69.6 million; and the Fountain Runn
$ 4,939,160
40,689,444
47,103,621
1
3
4
agency branch of Gamaliel Bank, Gamaliel, with total
deposits of $9.5 million.
The service areas of the charter and merging banks
do overlap, and consummation of the proposed transaction will result in a slight lessening of competition.
However, the extent of any loss of competition in Barren County is minimized by the fact that Hiseville Deposit Bank has had little competitive impact outside of
its own service area. In addition, the merger will not
place the resulting bank in a dominant position and
there are sufficient banking alternatives in the county.
Consummation of the proposed transaction will result in new and expanded banking services for the
Hiseville community. The resulting bank will offer agricultural and installment lending programs, bank
credit card services and trust services, none of which
are presently provided by the merging bank.
Recently, the chief executive officer of Hiseville Deposit Bank died suddenly, leaving a void in the bank's
leadership. Because of the size and location of the
merging bank, it will have difficulty attracting qualified
successor management. The subject proposal will
solve that problem.
Applying the statutory criteria, it is concluded that
although the proposed merger will result in a slight
lessening of competition, the Hiseville community will
receive increased and more convenient banking services; therefore, this application is approved.
February 24, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
In sum, this proposed merger will eliminate some existing competition and will slightly increase concentration
in commercial banking, and will eliminate one of the
five banks currently serving the area. Be that as it may,
in view of the small size of Bank and the community it
serves, the low population density of the market and
the managerial difficulties suffered by Bank, we conclude that the overall competitive effect of the proprosed
merged would be slightly adverse.
63
GREENVILLE NATIONAL BANK,
Greenville, Ohio, and The Citizens Bank Company, Ansonia, Ohio
Banking offices
Total assets*
Name of bank and type of transaction
In
To be
operation operated
The Citizens Bank Company, Ansonia, Ohio, with
was purchased Apr. 10, 1976, by Greenville National Bank, Greenville, Ohio (13944), which
had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
On October 29, 1975, Greenville National Bank,
Greenville, Ohio, applied to the Comptroller of the Currency for permission to purchase the assets and assume the liabilities of the Citizens Bank Company, Ansonia, Ohio.
Greenville National Bank, the purchasing bank, was
chartered in 1934 and is presently the second largest
of nine banks located in Darke County, Ohio. The bank
operates three banking offices—two in Greenville, and
one in Gettysburg, 7 miles to the east. The purchasing
bank has received approval to open an additional office in Darke County. The bank has assets of approximately $34.9 million and total IPC deposits of approximately $26.9 million.
The Citizens Bank Company, the selling bank, was
organized in 1904 and operates one banking office.
With assets of $8.2 million and total IPC deposits of
$6.4 million, it is the smallest commercial bank in
Darke County.
Both banks are located in Darke County, in southwestern Ohio, population about 50,000. The service
area of the purchasing bank is the Greenville - Gettysburg area which has a population of approximately
40,000 persons and, despite the presence of some
manufacturers, is primarily an agricultural area. The
selling bank is located in Ansonia, 8 miles north of
Greenville and has a population of 1,100. With the exception of a few small stores, the service area of the
selling bank is entirely reliant upon agriculture for its
economic base.
Both the selling and purchasing bank compete with
seven banks located in Darke County. They are: Second National Bank of Greenville, Greenville, Ohio, with
total deposits of $33.1 million; The Farmers State Bank,
Union City, Ohio, with total deposits of $17.8 million;
Peoples National Bank, Versailles, Ohio, with total deposits of $16.1 million; Arcanum National Bank, Arcanum, Ohio, with total deposits of $14.8 million; The
Farmers State Bank and Trust Company, New Madison, Ohio, with total deposits of $10.2 million; The Citizens State Bank, Greenville, Ohio, with total deposits
of $9.3 million; and The Osgood State Bank, Osgood,
Ohio, with total deposits of $7.1 million. Competition is
also provided by three savings and loan institutions:
Greenville Federal Savings and Loan Association,
$8,473,000
1
35,096,000
43,797,000
4
Greenville, Ohio, with total deposits of $41.6 million;
Arcanum Federal Savings and Loan Association, Arcanum, Ohio, with total deposits of $17.7 million; and
Versailles Savings and Loan Company, Versailles,
Ohio, with total deposits of $5.9 million.
Because the purchasing and selling banks' head offices are located approximately 8 miles apart there is
some competitive overlap in trade areas and there is
some direct competition between them. Should the
proposed transaction take place, the resulting bank
would become the largest bank in Darke County giving
the applicant approximately 26 percent of the county's
total deposits. The next largest bank in Darke County,
Second National Bank of Greenville, has approximately
24 percent of the total deposits in the county. A total of
six banks will remain in Darke County to provide alternative banking services in addition to the resulting
bank. Furthermore, inasmuch as the selling bank is the
smallest bank in Darke County, its elimination will not
greatly alter the competitive structure of the banking
market within the county.
Any slightly adverse competitive effects experienced
as a result of this transaction will be outweighed by the
benefits to the community which will accrue in terms of
its convenience and needs. The lending limit of the resulting bank will be much larger than the current limit
of the selling bank, which is considered inadequate to
meet the requirements of the larger agricultural farms
located in the trade area. Other benefits that will result
from the consummation of the proposed transaction
will be an increased capacity for consumer lending,
introduction of a bank credit card plan and automated
bookkeeping.
It is noted that the selling bank's chief executive officer is 23 years old with only 1 year of banking experience, four of its six directors are at least 75 years old,
and there is no provision for successor management.
Management of the purchasing bank is considered
good and, if the proposed acquisition occurs, the resulting bank will provide the Ansonia area with those
qualities now found lacking in the selling bank's management.
The statutory criteria having been met, it is concluded that the proposed transaction is in the public
interest. The application is, therefore, approved.
March 2, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
* Asset figures are as of call dates immediately before and after
transaction.
64
There are presently nine banks in Darke County, of
which Second National Bank of Greenville is the
largest (total deposits - $30 million; IPC demand deposits $11.2 million, as of June 30, 1975) with about 22
percent of total county deposits. Applicant is the second largest with about 21 percent of total county deposits. Bank ranks eighth, with about 5 percent of total
county deposits. The remaining six banks in the county
are relatively small, single-office banks. The proposed
acquisition, accordingly, would give Applicant about
26 percent of total county deposits, woutd make Appli-
cant the largest bank in the county and would give the
two largest banks in the county control over almost 50
percent of total county deposits.
Accordingly, although Bank is rather small, it appears that the proposed acquisition will have an adverse effect on competition inasmuch as it will eliminate some direct competition and will also contribute
to increased concentration of commercial banking in
Darke County.
LANDMARK BANK OF POMPANO BEACH, N.A.,
Pompano Beach, Fla., and The Security State Bank of Pompano Beach, Pompano Beach, Fla.
Banking offices
Name of bank and type of transaction
Total assets*
In
To be
operation operated
The Security State Bank of Pompano Beach, Pompano Beach, Fla., with
was purchased Apr. 19, 1976, by Landmark Bank of Pompano Beach, N. A., Pompano Beach, Fla.
(16574), which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
Landmark Bank of Pompano Beach, N.A. (a proposed
de novo bank), Pompano Beach, Fla. ("Assuming
Bank") has applied to the Comptroller of the Currency
for permission to purchase substantially all of the assets and assume substantially all of the liabilities of
The Security State Bank of Pompano Beach, Pompano
Beach, Fla., ("Selling Bank") under the charter and
with the title of the former. This application has been
processed pursuant to the emergency provisions of
the Bank Merger Act of 1966, contained within 12 USC
1828(c).
Inasmuch as the Assuming Bank is a proposed new
bank, it has no operating history. Selling Bank was organized in 1973 and currently has total deposits of
$4.4 million. On a pro forma basis, the surviving banking institution will become a wholly-owned subsidiary
of Landmark Banking Corporation, Fort Lauderdale,
Fla. ("Landmark"). Landmark is presently the eighth
largest bank holding company in the state of Florida,
with 16 banking subsidiaries controlling total deposits
of $744.3 million, representing approximately 3 percent of total commercial bank deposits in Florida.
In the relatively short operating history of the Selling
Bank, it has experienced an unusually rapid turnover
of management personnel, and has suffered substantial loan losses that have had a seriously adverse effect upon the bank's capital structure. Additionally,
Selling Bank has not been able to augment its eroded
capital position due to a trend of net operating losses.
In view of these and other relevant factors of record, it
is the conclusion of this Office that, absent the subject
proposal, the failure of Selling Bank is probable.
* Asset figures are as of call dates immediately before and after
transaction.
$5,007,000
1
945,000
5,242,000
0
1
Pursuant to the provisions of the Bank Merger Act of
1966, 12 USC 1828(c), the Comptroller of the Currency
cannot approve a purchase and assumption transaction which would have certain proscribed anticompetitive effects unless the Office concludes that the anticompetitive effects are clearly outweighed in the public interest by the probable effect of the proposed
transaction in adequately meeting the convenience
and needs of the community to be served. Furthermore, the Office of the Comptroller is also directed to
fully consider the financial and managerial resources
and future prospects of the existing and proposed
institution. Whenever necessary, however, to successfully prevent the disruption attendant upon the probable
failure of a bank, the Comptroller can dispense
with the uniform standards applicable to usual acquisition transactions and need not consider the reports relating to the competitive consequences of the transaction ordinarily solicited from the United States Department of Justice and other banking agencies. The
Comptroller is specifically authorized in such exigent
circumstances to act immediately, in his sole discretion, to approve an acquisition and to authorize the
immediate consummation of the proposed transaction.
The subject proposal is deemed to be in accord with
all pertinent provisions of the National Bank Act and
will Serve to prevent disruption of banking services to
the Pompano Beach banking community and any potential losses to uninsured depositors.
Because of the proposed affiliation with Landmark,
the surviving institution's financial and managerial resources and future prospects are enhanced and appear favorable. Of vital importance, consummation of
this proposal will insure the continued, uninterrupted
provision of banking services to the present customers
of The Security State Bank of Pompano Beach, thereby
maintaining the confidence of the public in the banking
system.
65
Applying the statutory criteria contained within 12
USC 1828(c), the Comptroller of the Currency concludes that an emergency situation exists that requires
expeditious action in order to prevent the probable
failure of the Selling Bank. For the reasons herein
stated, the Assuming Bank's application to purchase
the assets and assume the liabilities of The Security
State Bank of Pompano Beach is judged to be in the
public interest and should be, and hereby is, approved.
April 15, 1976.
Due to the emergency nature of the situation, no Attorney General's report was requested.
THE FIRST NATIONAL BANK OF GREENVILLE,
Greenville, Ala., and The Citizens Bank of Georgiana, Georgiana, Ala.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
The Citizens Bank of Georgiana, Georgiana, Ala., with
and The First National Bank of Greenville, Greenville, Ala. (5572), which had
merged Apr. 30, 1976, under charter and title of the latter bank (5572). The merged bank
at date of merger had
COMPTROLLER'S DECISION
On November 18, 1975, The Citizens Bank of Georgiana, Georgiana, Ala., and The First National Bank of
Greenville, Greenville, Ala., applied to the Comptroller
of the Currency for permission to merge under the
charter and with the title of the latter.
The First National Bank of Greenville, the charter
bank, was established September 10, 1900, and now
has total commercial deposits of approximately $31
million, which represent approximately 57 percent of
total deposits in Butler County. The bank is domiciled
in the city of Greenville and currently operates as a unit
bank.
In 1930, the city of Georgiana, Ala., had two banking
institutions; however, both failed and the town was left
without local banking service. Consequently, the management and shareholders of the charter bank sought
permission to establish an office in Georgiana, but
Alabama's restrictive state branching statutes in effect
at the time forbade the establishment of a branch office. Utilizing a portion of the capital funds of the charter bank, principals of the charter bank became organizers of The Citizens Bank of Georgiana, the merging bank, which opened as a state-chartered banking
institution in 1931. The two banks are affiliates as defined by 12 USC 221a. From that beginning, the two
banks have continued to operate as affiliates with considerable directorate and shareholder interlocks. To
cite but one case-in-point, the same person serves as
president of both the charter and merging banks.
On March 10, 1975, the Alabama State Legislature
made provision for:
Any bank, either incorporated or unincorporated,
whose principal place of business is located in
Butler County shall have the power to establish, to
maintain, and to operate within the limits or bound-
66
$ 7,858,133
35,702,450
43,217,737
aries of such county one or more branches or
branch banks. . . .
The purpose of the instant proposal is to provide the
means whereby The Citizens Bank of Georgiana may
become a more integral part of the charter bank, as
opposed to the merging bank continuing its present
status as an affiliate. Consummation of the subject
proposal will provide for certain economies of scale,
permit consolidation of some banking services and,
generally, improve and expand banking services
available to the populace of Butler County.
It is recognized that approval of this proposal would
have the effect of eliminating one of three banking alternatives domiciled in Butler County, Ala. However,
the charter bank competes with 13 banking offices,
excluding the merging bank, in its service area which
includes portions of seven neighboring counties.
Moreover, due to the aforementioned long-standing affiliation between the charter and merging banks, and
the approximately 20 miles which separate the two
banks, neither bank actively solicits business from the
primary service area of the other.
Applying the statutory criteria, it is concluded that
the proposed merger would have no significantly adverse competitive effects and is not adverse to the
public interest. Accordingly, this application should be,
and therefore is, approved.
March 8, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Both parties to this proposed merger operate under
the same majority stockholder and director control,
one branch having been initially created and
capitalized by the other. In short, the merger proposal
is essentially a corporate reorganization. Accordingly,
it appears that the proposal will have no effect upon
competition.
THE HUNTINGTON NATIONAL BANK OF COLUMBUS,
Columbus, Ohio, and The Pickerington Bank, Pickerington, Ohio
Banking offices
Total assets
Name of bank and type of transaction
In
To be
operation operated
The Pickerington Bank, Pickerington, Ohio, with
and The Huntington National Bank of Columbus, Columbus, Ohio (7745), which had
merged May 1, 1976, under charter and title of the latter bank (7745). The merged bank
at date of merger had
COMPTROLLER'S DECISION
On January 5, 1976, The Pickerington Bank, Pickerington, Ohio, and The Huntington National Bank of
Columbus, Columbus, Ohio, applied to the Comptroller
of the Currency for permission to merge under the
charter and title of "The Huntington National Bank of
Columbus."
The Huntington National Bank of Columbus, the
charter bank, was organized in 1866 and presently
operates 33 offices with assets of $822 million and IPC
deposits of $531 million. The charter bank is the lead
bank for Huntington Bancshares, Inc., Columbus,
which has 11 other affiliated banks, and is the state's
eighth largest bank holding company.
The primary service area for the charter bank is
Franklin County, Ohio. Columbus, the principal city in
Franklin County, is the state capital and second largest
city in Ohio with a population of approximately
540,000. The economy of Franklin County is highly diversified and is supported by a mix of manufacturing,
service and transportation industries.
The charter bank is the second largest of eight
banks in Franklin County and competes primarily with
other commercial banks located in the Columbus Metropolitan Area, including Ohio National Bank, Columbus, with deposits of $974 million, a member of BaneOhio Corporation; The City National Bank and Trust
Company of Columbus, with deposits of $544 million, a
member of First Bank Group of Ohio, Inc.; and The
Ohio State Bank, Columbus, with deposits of $103 million, a member of BancOhio Corporation.
The Pickerington Bank, the merging bank, was established in 1910 and currently has assets of $9.5 million and IPC deposits of approximately $7.5 million.
The merging bank operates only one branch in Pickerington in addition to its main office. Pickerington is a
small rural community with a population of about 700
persons, located approximately 18 miles southeast of
downtown Columbus. The service area of the merging
bank is confined to Pickerington and the immediately
surrounding area in northwest Fairfield County. Historically, the service area has been almost entirely residential and agricultural, with very little industry.
Fairfield County is adjacent to Franklin County but,
because of Ohio's branching laws, the charter bank
had been unable to expand into the merging bank's
service area through branching. However, portions of
the northwest area of Fairfield County were recently
annexed into the Columbus Standard Metropolitan
Statistical Area (SMSA). As a result, the proposed
$
8,999,000
872,964,000
881,175,000
2
32
34
merger is now permissible under Ohio's branching
laws.
The merging bank is the only bank headquartered in
Pickerington, and is the fifth largest of eight banks in
Fairfield County. Within the last 2 years, several
Columbus-based financial institutions have opened offices in the merging bank's service area, including
Ohio National Bank, noted above, and three savings
and loan associations. Other competition for the merging bank is provided by The Millersport Bank Company, Millersport, with deposits of $6 million; The Hocking Valley National Bank, Lancaster, with deposits of
$36 million, a member of BancOhio Corporation; The
Farmers & Citizens Bank of Lancaster, with deposits of
$45 million; and The Fairfield National Bank, Lancaster,
with deposits of $36 million.
Consummation of the proposed transaction will result in eliminating one independent bank serving Fairfield County. However, the impact of any loss of competition is greatly minimized by the fact that the merging bank, because of its limited resources, has not
been a strong competitor in the county. Additionally, it
is unlikely that the merging bank will be able to offer
the level of services needed to compete effectively
with the substantially larger Columbus-based
institutions which have recently branched into its service area. Also, the number of financial institutions now
in the area militates against the charter bank's successful de novo branching into the immediate Pickerington area; but, by consummation of the subject
transaction, a new vigorous competitor will enter the
community.
Furthermore, the resulting bank will offer the following services not presently available to the customers of
the Pickerington Bank, a full line of checking accounts,
such as overdraft checking; computerized savings accounts with higher effective interest rates; 24-hour automatic teller machines; lower minimum amounts on
certificates of deposit; a bank credit card program;
and real estate mortgages with lower down payments
and longer terms.
The subject merger will not change the charter
bank's deposit ranking in Franklin County and the parent holding company, Huntington Bancshares, Inc.,
will retain the same relative competitive position.
Applying the statutory criteria, it is concluded that
the proposed merger will result in some slight degree
of loss of competition, but the community of Pickerington will benefit by increased banking services. It
is the opinion of this Office that any slightly anticompetitive effects of the subject proposal are clearly out-
67
weighed by considerations of convenience and needs
and considerations relating to financial and managerial
resources. Accordingly, the proposal is deemed to be
in the public interest and should be, and hereby is,
approved.
March 29, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Fairfield County (population 80,000) is in central Ohio
and borders Franklin County in which Columbus is
situated. The Columbus SMSA embraces Franklin,
Fairfield and three other counties. Fairfield County is
now part of the Columbus SMSA. Pickerington, the
situs of Bank, is in the northeastern portion of Fairfield
County and is located approximately midway (about
18 miles from each) between Lancaster, the county
seat, and downtown Columbus. The Pickerington area
has been growing more rapidly than the remainder of
Fairfield County; its population increased by over 50
percent between 1960 and 1970, to about 4,800, and
is expected to almost double to about 8,800 by 1980.
Much of that growth is due to the area becoming a
residential suburb of Columbus.
Applicant has two offices located 6 and 7 miles, respectively, from the head office of Bank; one of these
offices appears to be only 2.5 miles from Bank's
branch office. It appears that Applicant derives 0.5
percent of its total deposits and loans from the principal service area of Bank and, conversely, that Bank
derives 17 percent of the total deposits and 15 percent
of its total loans from the principal service area of Applicant. Thus, although the dollar amounts involved are
relatively small, it is nonetheless obvious that the proposed acquisition will eliminate existing competition
between the merger parties.
The Columbus banking market is highly concentrated with three of the 13 banking organizations
(which operate 15 banks) serving the area accounting
for 95 percent of the total deposits. It appears that Applicant ranks second with 25.6 percent of total deposits, with the largest bank holding 45.7 percent of
total deposits, and that Bank ranks 14th among the 15
banks, with a market share of 0.4 percent. Thus, the
proposed acquisition will increase Applicant's market
share to 26 percent and thus will worsen an already
badly concentrated situation. It should be noted that
the 10 banks which collectively share with Bank the 5
percent of total deposits left over from the three dominant banks are each large enough to be potential candidates for merger with Bank, and that a merger between any of the 10 banks and Bank would be far
preferable to the proposed merger between Applicant and Bank.
Applicant currently has no branches in Fairfield
County. However, the extension of the corporate limits
of Columbus in 1974 means that Applicant is now free
to branch into Pickerington, Bank's headquarters.
Indeed, Ohio National, the largest bank in the Columbus banking market, recently received approval to
open a branch in Pickerington and is in the process of
constructing it. The rapid growth in Pickerington, and
its projected continuation, suggest that Applicant
might well decide to enter the area de novo absent this
proposed acquisition.
In sum, the proposed acquisition, although it
involves the acquisition of a relatively small bank, will
nonetheless have an adverse effect upon both existing
and potential competition and will contribute to the unhealthy degree of concentration which characterizes
the Columbus banking market.
THE FIRST NATIONAL BANK OF STONE HARBOR,
Stone Harbor, N.J., and Independent National Bank, Willingboro, N.J.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
Independent National Bank, Willingboro, N.J. (16092), with
and The First National Bank of Stone Harbor, Stone Harbor, N.J. (12978), which had
merged May 3, 1976, under charter of the latter bank (12978) and title "Independent National Bank." The merged bank at date of merger had
COMPTROLLER'S DECISION
On July 15, 1975, Independent National Bank, Willingboro, N.J., and The First National Bank of Stone
Harbor, Stone Harbor, N.J., applied to the Comptroller
of the Currency for permission to merge under the
charter of First National Bank of Stone Harbor and with
the title "Independent National Bank."
The First National Bank of Stone Harbor, the charter
bank, was established in 1926 and now operates three
offices in Cape May County with IPC deposits of approximately $16.3 million and total assets of approximately $3.1 million. The primary service area of the
68
$15,752,751
37,263,361
53,016,112
bank is located in the mideastem portion of Cape May
County which is a summer resort and retirement area
with an estimated population of 8,784 persons. The entire county of Cape May has an estimated population
of 59,000 persons.
Competition for the charter bank is provided by an
office of First National Bank of South Jersey,
Pleasantville, with deposits of $387 million, which recently acquired The Cape May County National Bank,
Ocean City. Coastal State Bank, Ocean City, with deposits of $28.9 million, has an application pending for
a branch in the primary service area of the charter
bank. Additional competition in Cape May County is
provided by First National Bank of Cape May Court
House, with deposits of $46.8 million; Marine National
Bank, Wildwood, with deposits of $54.5 million; Union
Trust Company of Wildwood, with deposits of $32.3
million; and Citizens United Bank, N. A., Vineland, with
deposits of $106 million, which is a member of Citizens
Bankcorp.
Independent National Bank, the merging bank, was
organized in 1973 and has IPC deposits of $6.5 million
and assets of $10.2 million. The merging bank's service area is located in the northwestern portion of Burlington County which is an economically diversified
area with considerable growth potential and has an estimated population of 323,123 persons.
Competition for the merging bank is provided by offices of New Jersey National Bank, Trenton, with deposits of $625 million, which is a member of New Jersey National Corporation; First National State Bank/
Mechanics, Burlington Township, with deposits of $121
million, which is a member of First National State Bancorporation; Fidelity Bank and Trust Company of New
Jersey, Pennsauken, with deposits of $62.8 million;
Bank of West Jersey, Delran, with deposits of $34.5
million, which is a member of Fidelity Union Bancorporation; Friendly National Bank of New Jersey, Cinnaminson, with deposits of $22.2 million; and First Na-
tional Bank and Trust Company of Beverly, Edgewater
Park, with deposits of $21.4 million. Competition in the
service area is also provided by offices of the Howard
Savings Bank, Newark, with deposits of $1.3 billion.
There is negligible competition between the merging
banks because of the large distance between them.
The closest offices of these two banks are 63 miles
apart.
Consummation of the proposed merger will stimulate
competition in the service area of the merging bank
because the resulting branch in Willingboro will have a
larger lending limit and be an overall stronger competitor to the other banks in that market. The proposed
merger will also help to alleviate a management succession problem at Independent National Bank.
Applying the statutory criteria, it is concluded that
the proposed merger is in the public interest and the
application is, therefore, approved.
February 10, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
We have reviewed this proposed transaction and conclude that it would not have a substantial competitive
impact.
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION),
New York, N.Y., and Chase Manhattan Bank of Long Island (National Association), Melville, N.Y., and Chase Manhattan Bank of the Mid-Hudson (National Association), Saugerties, N.Y., and Chase Manhattan Bank of Central New
York (National Association), Syracuse, N.Y., and Chase Manhattan Bank of Eastern New York (National Association), Albany, N.Y., and Chase Manhattan Bank of the Southern Tier (National Association), Binghamton, N.Y., and
Chase Manhattan Bank of Greater Rochester (National Association), Calendonia, N.Y., and Chase Manhattan Bank
of Western New York (National Association), Buffalo, N.Y., and Chase Manhattan Bank of Northern New York (National Association), Canton, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
Chase Manhattan Bank of Long Island (National Association), Melville, N.Y. (15922), which
merged Mar. 22, 1976, with
and Chase Manhattan Bank of the Mid-Hudson (National Association), Saugerties, N.Y. (1040),
which merged Apr. 2, 1976, with
and Chase Manhattan Bank of Central New York (National Association), Syracuse, N.Y.
(16047), which merged Apr. 9, 1976, with
and Chase Manhattan Bank of Eastern New York (National Association), Albany, N.Y.
(16203), which merged Apr. 16, 1976, with
and Chase Manhattan Bank of the Southern Tier (National Association), Binghamton, N.Y.
(16379), which merged Apr. 23, 1976, with
and Chase Manhattan Bank of Greater Rochester (National Association), Caledonia, N.Y.
(16050), which merged May 3, 1976, with
and Chase Manhattan Bank of Western New York (National Association), Buffalo, N.Y. (13952),
which merged May 7, 1976, with
and Chase Manhattan Bank of Northern New York (National Association), Canton, N.Y. (3696),
which merged May 21, 1976, with
and The Chase Manhattan Bank (National Association), New York, N.Y. (2370), which had
merged under charter and title of the latter bank (2370). The merged bank at date of merger
had
COMPTROLLER'S DECISION
On January 9, 1976, the following banks applied to the
Comptroller of the Currency for permission to merge
with The Chase Manhattan Bank (National Association), New York, N.Y., under its charter and title: Chase
Manhattan Bank of Long Island (National Association),
Melville, N.Y.; Chase Manhattan Bank of the MidHudson (National Association), Saugerties, N.Y.;
Chase Manhattan Bank of Eastern New York (National
Association), Albany, N.Y.; Chase Manhattan Bank of
Central New York (National Association), Syracuse,
N.Y.; Chase Manhattan Bank of the Southern Tier (National Association), Binghamton, N.Y.; Chase Manhattan Bank of Greater Rochester (National Association),
Caledonia, N.Y.; Chase Manhattan Bank of Western
New York (National Association), Buffalo, N.Y.; and
Chase Manhattan Bank of Northern New York (National
Association), Canton, N.Y.
The proposed merger represents a corporate reor-
70
$
27,867,484
6
28,546,044
9
18,019,231
6
12,063,811
4
6,843,472
2
25,631,563
7
30,910,986
9
20,445,027
25,409,953,855
1
227
25,489,462,000
270
ganization which would merely combine nine existing
subsidiary banks of Chase Manhattan Corporation into
a single institution that would continue under the ownership of the holding company. The resulting bank will
continue to operate all existing offices of the charter
and merging banks.
Applying the statutory criteria, it is concluded that
the proposed merger is merely part of an internal corporate reorganization which will have no affect upon
competition in New York State. This application is,
therefore, approved.
February 20, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The merging banks are all wholly-owned subsidiaries
of the same bank holding company. As such, their
proposed merger is essentially a corporate reorganization and would have no effect on competition.
THE CITIZENS NATIONAL BANK IN GASTONIA,
Gastonia, N.C., and Union Trust Company of Shelby, Shelby, N.C.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
Union Trust Company of Shelby, Shelby, N.C, with
and The Citizens National Bank in Gastonia, Gastonia, N.C. (13779), which had
merged June 1, 1976, under charter of the latter bank (13779) and title "Independence
National Bank." The merged bank at date of merger had
COMPTROLLER'S DECISION
On November 26, 1975, The Citizens National Bank in
Gastonia, Gastonia, N.C, applied to the Comptroller of
the Currency for permission to merge with.Union Trust
Company of Shelby, Shelby, N.C, under the charter of
the Citizens National Bank in Gastonia and with the title
"Independence National Bank."
The Citizens National Bank in Gastonia, the charter
bank, was chartered in 1933, and at present operates
12 offices: six branches in Gastonia and five branches
in Gaston County. Citizens National Bank has assets of
$115 million and IPC deposits of approximately $95
million which make it the 16th largest bank in North
Carolina.
The charter bank serves Gaston County, a relatively
well developed area, which is coextensive with the
Gastonia SMSA. The principal manufacturing activity,
textile and textile related production, generated 59
percent of the county's 1973 payroll. The Gaston
County textile industry has recently rebounded from a
recessionary period during which there was high unemployment.
Citizens National Bank competes directly with nine
commercial banks, three of which are among the four
largest banks in North Carolina. Competitors include
Wachovia Bank and Trust Co., N.A., with deposits of
$2.64 billion; First Union National Bank, with deposits
of $1.45 billion; and First-Citizens Bank and Trust Co.,
with deposits of $1.05 billion. Forty-two percent of the
banking offices in Gaston County are maintained by
those three banks. Competition is also provided by
seven savings and loan associations and 18 loan and
finance companies.
Union Trust Co. of Shelby, the merging bank, was
chartered in 1922 and consolidated with Cleveland
Bank and Trust Co. around 1930. It presently operates
11 branches in the Cleveland - Rutherford County area
and has received approval to open a 12th branch. The
economy in Cleveland and Rutherford counties is predominately agricultural and is less dependent on the
textile industry than is Gaston County's.
At present, Union Trust Co. has total assets of $71.4
million and total IPC deposits of $50.6 million, making it
the second smallest bank in the Cleveland - Rutherford
County area. Union Trust Co. competes directly with
First Union National Bank, with deposits of $1.45 billion; First Citizens Bank and Trust Co., with deposits of
$1.05 billion; and Northwest Bank, with deposits of
$936 million. Those are three of the state's five largest
$ 69,482,000
125,452,000
195,456,000
13
13
26
banks and they operate 56 percent of the offices in the
two-county area.
The two banks submitting this application operate in
different geographic areas. Their nearest offices are 20
miles apart and there is little, if any, direct competition
between them.
Consummation of the proposed merger will leave the
relative position of competitor banks in the Gaston Rutherford - Cleveland County market areas virtually
unchanged. Since four of the five largest North
Carolina banks operate in the market area of the resulting bank, consummation of the proposed transaction
will not adversely affect competition. On the contrary,
competition in the three-county area should be further
stimulated by the addition of a new, larger competitor,
able to offer a wider range of services that either bank
is capable of offering as an independent competitor.
Applying the statutory criteria, it is concluded that
the proposed merger is in the public interest and will
not adversely affect competition. This application is,
therefore, approved.
March 12, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger would not produce a significant
increase in concentration in commercial banking.
Commercial banking in North Carolina is dominated by
five major banks who collectively hold in excess of
two-thirds of total statewide deposits. Consummation
of the proposed merger will not exacerbate the current
structure of commercial banking in the state and,
indeed, it may produce a new bank of sufficiently enhanced competitive vigor so as to offset the power of
the dominant banks. In terms of the tri-county area in
which the parties operate, the proposed merger will
produce a modest degree of increased concentration.
Applicant is the fifth largest of nine commercial banks
operating in Gaston County and Bank is the smallest
bank operating in Cleveland County, although it is the
fourth largest of five commercial banks operating in the
combined Cleveland and Rutherford counties.
North Carolina law permits statewide branch banking. Hence, in theory, the participants are free to
branch into the areas currently served by each other.
However, there appears to be little likelihood that either
Applicant or Bank would be apt to make further entry
into each other's service area. The towns in the tricounty area served by Applicant and Bank are all
71
presently served by more banks on the average than
are towns of similar population size nationwide. In addition, there are 40 banking offices in the area
involved, and the population per banking office is 12 to
18 percent below the United States average.
In conclusion, it is our view that the proposed acquisition will have an insignificant effect upon competition.
FIRST CITY BANK - NORTHEAST, N.A.,
Houston, Tex., and Northeast Bank of Houston, Houston, Tex.
Banking offices
Total assets*
Name of bank and type of transaction
In
To be
operation operated
Northeast Bank of Houston, Houston, Tex., with
was purchased June 8, 1976, by First City Bank - Northeast, N. A., Houston, Tex. (16585),
which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
On June 6, 1976, application was made to the Comptroller of the Currency by the First City Bank - Northeast, N.A., Houston, Tex., for permission to purchase
certain of the assets and assume certain of the
liabilities of the Northeast Bank of Houston, Houston^
Tex. Instant application rests upon an agreement
incorporated herein by referencing the same as if fully
set forth, and, for the reasons set forth below the application is hereby approved and the assuming bank is
hereby authorized immediately to consummate purchase and assumption transaction.
Under the Bank Merger Act, 12 USC 1828(c), the
Comptroller cannot approve a purchase and assumption transaction which would have certain proscribed
anticompetitive effects unless he finds these anticompetitive effects to be clearly outweighed in the public
interest by the probable effect of the transaction in
meeting the convenience and needs of the community
to be served. Additionally, the Comptroller is directed
to consider the financial and managerial resources
and future prospects of the existing and proposed
institution, and the convenience and needs of the
community to be served. When necessary, however, to
prevent the evils attendant upon the failure of a bank,
the Comptroller can dispense with the uniform standards applicable to usual acquisition transactions and
need not consider reports on the competitive consequences of the transaction ordinarily solicited from the
Department of Justice and other banking agencies. He
* Asset figures are as of call dates immediately before and after transaction.
72
$19,872,000
1,250,000
16,724,000
is authorized in such circumstances to act immediately, in his sole discretion, to approve an acquisition, and to authorize the immediate consummation of
the transaction.
The proposed acquisition will be in accord with all pertinent provisions of the National Bank Act and will prevent disruption to the community and potential losses to
a number of uninsured depositors. The assuming bank
will have strong financial and managerial resources, and
this acquisition will enable it to enhance the banking services offered in the Houston community. Thus, the approval of this transaction will help to avert a loss of public
confidence in the banking system, and will improve the
services offered to the banking public.
The Comptroller finds that the anticompetitive effects
of the proposed transaction, if any, are clearly outweighed in the public interest by the probable effect of
the proposed transaction in meeting the convenience
and needs of the community to be served. For those
reasons, the assuming bank's application to assume
certain liabilities and purchase certain assets of Northeast Bank of Houston as set forth in the agreement is
approved. The Comptroller further finds that the failure
of Northeast Bank of Houston requires him to act immediately, as contemplated by the Bank Merger Act,
to prevent disruption of banking services to the community; and the Comptroller waives publication of
notice, dispenses with the solicitation of competitive
reports from other agencies and authorizes the transaction to be consummated immediately.
June 8, 1976.
Due to the emergency nature of the situation, no Attorney General's report was requested.
VALLEY NATIONAL BANK,
Passaic, N.J., and Bank of Wayne, National Association, Wayne, N.J.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
Bank of Wayne, National Association, Wayne, N.J. (15934), with
and Valley National Bank, Passaic, N.J. (15790), which had
merged June 11, 1976, under charter and title of the latter bank (15790). The merged bank
at date of merger had
COMPTROLLER'S DECISION
On January 16, 1976, Bank of Wayne, National Association, Wayne, N.J., and Bank of Passaic and Clifton,
National Association, Passaic, N.J., applied to the
Comptroller of the Currency for permission to merge
under the charter of the latter and with title "Valley National Bank."
Bank of Passaic and Clifton, National Association
("BOPAC"), the charter bank, was organized in 1927,
and converted to a national banking charter in 1970.
As of December 31, 1975, BOPAC was the 27th
largest bank domiciled in New Jersey, and controlled
total commercial deposits of $217.1 million. BOPAC
presently operates seven branches within the counties
of Passaic and Morris in the municipalities of Passaic,
Clifton, Little Falls, and Pequannock.
Bank of Wayne, National Association ("BOW"), the
merging bank, is headquartered in the township of
Wayne, N.J., and opened for business in 1972. As of
December 31, 1975, BOW was the 161st largest commercial bank in the state and had total deposits of $9.3
million. The merging bank presently has no operating
branches, but does have one approved, but unopened, branch approximately 4 miles southeast of its
main office.
The charter and merging banks have always been
affiliated by virtue of their common stock ownership.
BOW was opened in 1972 in order to enable BOPAC
to better serve the banking needs of customers in the
immediate Wayne area. The merging bank was forced
$ 10,079,000
242,671,000
252,535,000
1
9
10
to enter as a ate novo institution inasmuch as New Jersey restrictive branching statutes in effect at that time,
did not permit BOPAC to branch into Wayne.
As aforenoted, both banks are owned by common
stockholders. Additionally, seven of 10 directors of
BOW are directors of BOPAC, and seven of 12 directors of BOPAC are also directors of BOW. Because
of that close affiliation, there has never been, and is
not presently, any active competition between the two
banks. Consummation of the instant proposal would,
therefore, not adversely effect either present or future
competition in the area. The proposed merger should
bring into being greater economies of operation for the
two banks and the resulting institution should be better
able to more adequately and more actively compete
with numerous other financial institutions in the area by
utilizing its resources to the fullest.
Applying the statutory criteria, it is concluded that
the proposed merger will result in a more viable competitor in the relevant market and increase the banking
services offered to the community. It is the opinion of
this Office that the proposal is in the public interest,
and should be, and hereby is, approved.
April 9, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
We have reviewed this proposed transaction and conclude that it would not have a substantial competitive
impact.
73
NEW JERSEY BANK (NATIONAL ASSOCIATION),
Clifton, N.J., and First State Bank of Hudson County, Jersey City, N.J.
Banking offices
Name of bank and type of transaction
Total assets *
In
To be
operation operated
First State Bank of Hudson County, Jersey City, N.J., with
was purchased June 15, 1976, by New Jersey Bank (National Association), Clifton, NJ.
(15709), which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
On June 15, 1976, application was made to the Comptroller of the Currency by the New Jersey Bank, National Association, Clifton, N.J. ("Assuming Bank"), for
permission to purchase certain of the assets and assume certain of the liabilities of the First State Bank of
Hudson County, Jersey City, N.J. This application rests
upon an agreement incorporated herein by referencing
the same as if fully set forth and, for the reasons set
forth below the application is hereby approved and the
Assuming Bank is hereby authorized immediately to
consummate the transaction.
Under the Bank Merger Act, 12 USC 1828(c), the
Comptroller cannot approve a purchase and assumption transaction which would have certain proscribed
anticompetitive effects unless he finds these anticompetitive effects to be clearly outweighed in the public
interest by the probable effect of the transaction in
meeting the convenience and needs of the community
to be served. Additionally, the Comptroller is directed
to consider the financial and managerial resources
and future prospects of the existing and proposed
institution, and the convenience and needs of the
community to be served. When necessary, however, to
prevent the evils attendant upon the failure of a bank,
the Comptroller can dispense with the uniform standards applicable to usual acquisition transactions and
need not consider reports on the competitive consequences of the transaction ordinarily solicited from the
Department of Justice and other banking agencies. He
* Asset figures are as of call dates immediately before and after
transaction.
74
$13,646,000
3
749,973,000
775,979,000
37
40
is authorized in such circumstances to act immediately, in his sole discretion, to approve an acquisition and to authorize the immediate consummation of
the transaction.
The proposed acquisition will be in accord with all
pertinent provisions of the National Bank Act and will
prevent disruption to the community. The Assuming
Bank has adequate financial and managerial resources, and this acquisition will enable it to enhance
the banking services offered in the Clifton community.
Thus, the approval of this transaction will help to avert
a loss of public confidence in the banking system and
will improve the services offered to the banking public.
The Comptroller finds that the anticompetitive effects
of the proposed transaction, if any, are clearly outweighed in the public interest by the probable effect of
the proposed transaction in meeting the convenience
and needs of the community to be served. For those
reasons, the Assuming Bank's application to assume
certain liabilities and purchase assets of First State
Bank of Hudson County as set forth in the aforemoted
agreement is approved. The Comptroller further finds
that the failure of First State Bank of Hudson County
requires him to act immediately, as contemplated by
the Bank Merger Act, to prevent disruption of banking
services to the community; and the Comptroller thus
waives publication of notice, dispenses with the solicitation of competitive reports from other agencies and
authorizes the transaction to be consummated immediately.
June 15, 1976.
Due to the emergency nature of the situation, no Attorney General's report was requested.
FIRST BANK NATIONAL ASSOCIATION,
Cleveland, Ohio, and Community National Bank of Warrensville Heights, Warrensville Heights, Ohio
Banking offices
Name of bank and type of transaction
Total assets *
Community National Bank of Warrensville Heights, Warrensville Heights, Ohio (15561), with
was purchased June 18, 1976, by First Bank National Association, Cleveland, Ohio (16545),
which had
After the purchase was effected the receiving bank had
COMPTROLLER'S DECISION
On June 17, 1976, application was made to the Comptroller of the Currency for prior approval for First Bank
National Association, Cleveland, Ohio, ("Assuming
Bank"), to purchase the assets and to assume the
liabilities of Community National Bank of Warrensville
Heights, Warrensville Heights, Ohio ("CNB"). The
instant application rests upon an agreement,
incorporated herein by reference the same as if fully
set forth, and, for the reasons set forth below, the application is hereby approved, and the Assuming Bank
is hereby authorized to immediately consummate the
purchase and assumption transaction.
CNB was organized as a national bank on
November 30, 1965, when it was granted charter
number 15561. As of March 31, 1976, CNB was the
only bank headquartered in Warrensville Heights,
Ohio, and had total assets of approximately $16 million. It has operated one branch office. During an
examination of CNB commenced on July 15, 1974, a
large number of poor quality loans purchased from, or
originated through, Northern Ohio Bank, Cleveland,
Ohio, were discovered. The Comptroller of the Currency entered into an agreement with the board of directors of the CNB on November 22, 1974, calling for
the removal of approximately $6,553,000 in loans acquired from, or originated by, the Northern Ohio Bank.
All such loans were to be disposed of by January 31,
1975. Many of the loans were resold to the originating
bank during the 3-month period from November 1974
through January 1975. However, upon the closing of
Northern Ohio Bank in February 1975, approximately
$1,978,0(30 in loans purchased or otherwise acquired
through that bank remained on the books of CNB.
Subsequent loan losses and operating losses resulting
from high interest cost, heavy occupancy expenses,
declining loan revenues and a large employee staff
eliminated all equity capital in the bank and encroached upon the $540,000 in outstanding subordinated debentures. Equity capital was a deficit of
$142,000 as of the March 31, 1976 report of condition.
The severity and multiplicity of problems facing CNB
by early 1976 required the earliest feasible addition of
* Asset figures are as of call dates immediately before and after
transaction.
In
To be
operation operated
$15,927,000
2
12,760,000
29,734,000
1
3
equity capital and management expertise. An agreement has been negotiated between CNB and the Assuming Bank whereby the latter would purchase the
assets and assume the liabilities, including all deposit
liabilities, of the former. It is this agreement that the
Comptroller is now asked to approve.
Pursuant to the Bank Merger Act of 1966, 12 USC
1828(c), the Comptroller of the Currency cannot approve a purchase and assumption transaction which
would have certain proscribed anticompetitive effects
unless he finds those anticompetitive effects to be
clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served. Additionally, the Comptroller is directed to consider the financial and managerial resources and future prospects of the existing and proposed institution and the
convenience and needs of the community to be
served. When necessary, however, to prevent the evils
attendant upon the failure of a bank, the Comptroller
can dispense with the uniform standards applicable to
usual acquisition transactions and need not consider
reports on the competitive consequences of the transaction ordinarily solicited from the Department of Justice and other banking agencies. He is authorized in
such circumstances to act immediately, in his sole discretion, to approve an acquisition, and to authorize the
immediate consummation of the transaction.
The proposed acquisition will be in accord with all
pertinent provisions of the National Banking Act and
will prevent a disruption of banking services to the
community and potential losses to a number of uninsured depositors. The Assuming Bank will have
strong financial and managerial resources and this
acquisition will enable it to enhance the banking services offered in the Warrensville Heights community.
Thus, the approval of this transaction will help to avert
a loss of public confidence in the banking system and
will improve the services offered to the banking public.
The Comptroller finds that the anticompetitive effects
of the proposed transaction, if any, are clearly outweighed in the public interest by the probable effect of
the proposed transaction in meeting the convenience
and needs of the community to be served. For those
reasons, the Assuming Bank's application to purchase
the assets and to assume the liabilities of CNB as set
forth in their agreement is approved. The Comptroller
75
further finds that the possible failure of CNB requires
him to act immediately, as contemplated by the Bank
Merger Act, to prevent disruption of banking services
to the community; the Comptroller thus waives publication of notice, dispenses with the solicitation of com-
petitive reports from other agencies and authorizes the
transaction to be consummated immediately.
June 18, 1976.
Due to the emergency nature of the situation, no Attorney General's report was requested.
WELLS FARGO BANK, NATIONAL ASSOCIATION,
San Francisco, Calif., and the Topanga Plaza Branch of City National Bank, Beverly Hills, Calif.
Banking offices
Name of bank and type of transaction
Total assets *
Topanga Plaza Branch of City National Bank, Beverly Hills, Calif. (14695), with
was purchased June 28, 1976, by Wells Fargo Bank, National Association, San Francisco,
Calif. (15660), which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
Wells Fargo Bank, National Association, San Francisco
("Wells"), has made application to the Comptroller of
the Currency to purchase the assets and assume the
liabilities of the Topanga Plaza Branch of City National
Bank, Beverly Hills ("Topanga Plaza Branch").
Wells is the successor to Mercantile Trust Company
which was incorporated under the laws of the state of
California in 1920. Wells became a national banking
association on January 30, 1962, and is the whollyowned subsidiary of Wells Fargo Company, San Francisco. The third largest commercial bank domiciled in
California, Wells controls total domestic deposits of
$9.8 billion.
City National Bank, the wholly-owned subsidiary of
City National Corporation, Beverly Hills, was established in 1953, and currently holds total commercial
bank deposits of $560 million. The Topanga Plaza
Branch of City National Bank was opened for business
in March 1960, and has total deposits of approximately
$2.4 million.
The service area of Topanga Plaza Branch encompasses the communities of Woodland Hills, Warner
Ranch and Canoga Park in the southwestern portion of
the San Fernando Valley in the city of Los Angeles. The
closest banking office of Wells is the Warner Ranch Office, less than 1 mile south of Topanga Plaza Branch.
Wells and City National Bank are, therefore, considered to be in direct competition. However, the Los
Angeles-Orange County banking market, the relevant
banking market, is served by over 70 banks, including
the 10 largest commercial banks in California. In a
market as large as that of Los Angeles-Orange County,
* Asset figures are as of call dates immediately before and after
transaction.
Digitized for 76
FRASER
In
operation
$2,393,000
1
10,766,126,000
11,153,293,000
336
To be
operated
337
the transfer of less than $3 million in deposits between
two banks whose market share of deposits is relatively
small, will have no significant impact upon banking
competition within the relevant area.
In conclusion, it is the opinion of this Office that this
proposal will not adversely affect competition among
banks in the relevant banking market, and inasmuch
as the Topanga Plaza Branch of City National Bank
has not been able to generate a satisfactory profit or
volume of business sufficient to justify its continued
existence, (as of October 1975, Topanga Plaza Branch
controlled total deposits approximately $725 thousand
less than it did in December 1971) its pro forma operation as an adjunct to the Warner Ranch Office of Wells
would insure the uninterrupted provision of banking
services to the banking public. Accordingly, this application should be, and hereby is, approved.
May 25, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Applicant operates a branch office approximately 0.75
mile away from the Topanga Plaza Branch office in the
Los Angeles area. Accordingly, there exists some degree of direct competition between Applicant and the
Topanga Plaza Branch of Bank, minimized somewhat
by the fact that the branches are on opposite sides of
a heavily travelled boulevard which acts as a barrier.
Applicant's branch holds about 3.4 percent of commercial banking deposits in the area and the Topanga
Plaza Branch of Bank holds 1.1 percent of deposits.
Hence, the proposed acquisition will have only a minimal effect upon concentration. Finally, although
California permits statewide branch banking, it appears very improbable that the area could support ate
novo entry by Applicant.
In sum, the proposed acquisition will have only a
minimal adverse effect upon competition.
FIRST NATIONAL BANK OF SPRINGFIELD,
Springfield, Vt., and The Merchants National Bank of St. Johnsbury, St. Johnsbury, Vt.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
The Merchants National Bank of St. Johnsbury, St. Johnsbury, Vt. (2295), with
and First National Bank of Springfield, Springfield, Vt. (122), which had
merged June 30, 1976, under charter and title of the latter bank (122). The merged bank
at date of merger had
COMPTROLLER'S DECISION
The Merchants National Bank of St. Johnsbury, St.
Johnsbury ("Merchants"), and First National Bank of
Springfield, Springfield ("FNB"), have applied to the
Comptroller of the Currency for permission to merge
under the charter and with the title of the latter.
Merchants, the merging bank, was organized in
1875 and operates its head office in St. Johnsbury and
branches in Lyndonville and Newport. As of December
31, 1975, Merchants controlled total commercial bank
deposits of $8.1 million.
FNB, the charter bank, was chartered as a national
banking association in 1863 and, with total deposits of
approximately $36 million, is now the ninth largest of
30 commercial banks domiciled in Vermont. FNB currently operates a total of six banking offices in the
state.
The closest operating branch offices of FNB and
Merchants are more than 50 miles from each other,
and the head offices of the two subject banks are
separated by approximately 100 miles. Each of the two
banks serves a separate and distinct market, and
neither bank actively competes with the other. Consummation of the instant merger, therefore, would not
eliminate any meaningful degree of existing competition.
Pursuant to applicable Vermont state statutes,
statewide branching is permitted. Thus, either FNB or
Merchants could legally establish a ofe novo branch office within the service area of the other subject bank.
However, due to the relatively small size of both banks
herein involved and the economic infeasibility of such
a venture, it does not appear likely that these two
banks would choose this mode of expansion. It is con-
$ 9,374,000
40,856,000
48,691,000
cluded, therefore, that this merger would not adversely
affect potential competition between these two
institutions.
The resulting institution should be recognized as a
more viable competitor and a more meaningful banking alternative that is better able to meet the banking
needs of the communities to be served.
Accordingly, it is the opinion of this Office that the
proposed transaction is in the public interest, and
should be, and hereby is, approved.
May 26, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The head offices of the merging banks are located 100
miles apart and their closest branch offices are 50
miles apart. Thus, it would appear that no significant
amount of direct competition would be eliminated by
the proposed merger.
Under Vermont law, statewide branching is permitted. Applicant could, therefore, branch de novo into
Bank's service area. Opportunities for further branching into the sparsely settled St. Johnsbury area are limited, however, due to the present concentration of four
banking organizations in St. Johnsbury. Also, Applicant's resources are apparently not sufficient to justify
branching into a distant area dominated by banks
substantially larger than Bank, which is the smallest
banking organization operating in St. Johnsbury.
The proposed transaction would not eliminate any
significant amount of direct competition, although it
would eliminate the potential for increased competition
which would result if Applicant established a branch
office in St. Johnsbury. Overall, the proposed merger
has no significant competitive effect.
77
BEACH HAVEN NATIONAL BANK AND TRUST COMPANY,
Beach Haven, N.J., and The Bank of New Jersey, N.A., Moorestown, N.J.
Banking offices
Name of bank and type of transaction
Total assets
In
operation
Beach Haven National Bank and Trust Company, Beach Haven, N.J. (11658), with
and The Bank of New Jersey, N.A., Moorestown, N.J. (16397), which had
merged June 30, 1976, under charter and title of the latter bank (16397). The merged bank
at date of merger had
COMPTROLLER'S DECISION
Beach Haven National Bank and Trust Company,
Beach Haven ("Beach Haven Bank"), and The Bank of
New Jersey, N.A., Moorestown ("BNJ"), have applied
to the Comptroller of the Currency for permission to
merge under the charter and with the title of the latter.
The head office of the resulting bank will be at Moorestown.
Beach Haven Bank was chartered as a national
banking association in 1920, and, as of December 31,
1975, controlled total commercial bank deposits of
approximately $58 million. With" the one exception of a
branch office located in Medford Lakes in Burlington
County, the remaining seven branches and Beach
Haven Bank's main office, are all located in the southeastern portion of Ocean County.
BNJ commenced business November 8, 1974, as a
de novo banking subsidiary of the ninth largest banking organization in the state, Bancshares of New Jersey, Moorestown ("Bancshares"), a registered multibank holding company. At year-end 1975,
Bancshares' three subsidiary banks held commercial
bank deposits aggregating approximately $644 million,
$2.6 million of which was controlled by BNJ. BNJ currently operates only from its head office. The bank has
however, filed an application for permission to establish a branch office in Moorestown. To date, this Office
has not acted upon the separate branch application of
BNJ.
The closest office of Beach Haven Bank is approximately 12 miles distant from BNJ, although another
subsidiary of Bancshares, The Bank of New Jersey,
Camden, maintains a branch approximately 11 miles
from the Medford Lakes branch of Beach Haven Bank.
All other branches of Beach Haven Bank are at least
45 miles from BNJ's location in Moorestown. Due to the
geographical distance involved and the presence of
numerous intervening banks, consummation of the
instant proposal would not eliminate any meaningful
degree of present competition between the two subject banks.
Applicable New Jersey state banking statutues do
make provision for statewide branch banking except
for towns with a population of less than 20,000 persons
(10,000 after January 1, 1977) where home office protection is in effect. Therefore, this merger would have
the effect of foreclosing the potential for increased
competition between subsidiaries of Bancshares and
Beach Haven Bank.
78
$68,562,000
6,728,000
75,290,000
To be
operated
-j
Q
10
By statute, 12 USC 1828(c)(5)(b), the Comptroller of
the Currency must also consider the public interest by
being mindful of the probable effect of the transaction
in meeting the convenience and needs of the community to be served, and the Comptroller cannot approve
a merger transaction which would have certain proscribed anticompetitive effects unless the Office concludes that these anticompetitive effects are clearly
outweighed in the public interest by the probable effect of the proposed transaction in more adequately
meeting the convenience and needs of the community
to be served.
Consummation of this merger would enhance competition within Ocean County, and Beach Haven, N.J.,
would become open to de novo branching, and the
services of the resulting institution would be extended
beyond the resort-oriented trade area presently served
by Beach Haven Bank. Additionally, affiliation with
Bancshares will enhance the future prospects of the
surviving bank by increasing the legal lending limit of
the bank, providing greater access to capital markets,
and providing for management depth and management succession. Thus, the new bank should be a
more viable banking alternative that will be better able
to compete with larger competitors and, thereby, better serve the needs of its banking community.
Accordingly, applying the statutory criteria, it is the
opinion of this Office that the foreclosure of any slight
degree of probable future competition which might
arise between Beach Haven Bank and BNJ is clearly
outweighed by considerations relating to convenience
and needs and future prospects of the bank. Therefore, it is the opinion of this Office that this transaction
is in the public interest, and should be, and hereby is,
approved. This approval is conditioned upon amendments to the merger agreement and articles of association which will reflect the head office of BNJ as
Moorestown. The amendments must be approved by
shareholders of both banks and evidence of such approval must be received by the Comptroller's Office
prior to consummation of the transaction.
May 28, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Bank's Medford Lakes Branch office is located about
12 miles northeast of Applicant's office and about 10
miles northeast of the two Gibbsboro offices of
Bancshares. Bank's remaining branch offices are at
least 45 miles southeast of Applicant's office. Thus, it
appears that the proposed acquisition will eliminate direct competition to an insignificant degree.
New Jersey law permits statewide branch banking
except for home office protection in towns of under
10,000. Accordingly, the only offices of Bank which are
protected are in Beach Haven (population 1,640), and
Applicant and Bancshares could branch de novo
elsewhere in Ocean County where Bank maintains its
other offices. Hence, the proposed acquisition would
eliminate potential competition to some extent.
The proposed acquisition will not contribute significantly to increased concentration. Applicant and its
parent collectively control about 7 percent of total deposits. Bank operates one branch in Burlington County
and the proposed acquisition would therefor increase
the combined market share of Applicant and
Bancshares to 7.5 percent.
In sum, the proposed acquisition would have only a
slightly adverse effect upon competition.
THE NATIONAL BANK OF GEORGIA,
Atlanta, Ga., and Mercantile National Bank, Atlanta, Ga.
Banking offices
Total assets *
Name of bank and type of transaction
In
To be
operation operated
Mercantile National Bank, Atlanta, Ga. (15789), with
was purchased July 1, 1976, by The National Bank of Georgia, Atlanta, Ga. (15541), which
had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
The National Bank of Georgia, Atlanta, Ga. ("NBG"),
has applied to the Comptroller of the Currency for
permission to purchase substantially all of the assets
and to assume the liabilities of Mercantile National
Bank, Atlanta, Ga. ("Mercantile"). This application has
been processed under the emergency provisions of
the Bank Merger Act of 1966, as set forth in 12 USC
1828(c).
NBG, the assuming bank, was founded in 1911 as
the second Morris Plan Bank in the United States. NBG
became a national banking organization in 1965, and
currently has total commercial bank deposits of approximately $290 million. NBG presently ranks as the
fifth largest bank in the Atlanta banking market (approximated by the whole of Fulton and DeKalb counties), controlling 4.2 percent of total deposits within the
relevant market.
Mercantile, the selling bank, was chartered as a national banking organization in 1970 after operating for
10 years as a state banking instutition. Mercantile as of
March 31, 1976, held total commercial bank deposits
of $9.6 million, representing 0.2 percent of total market
deposits.
As may be seen by its deposit size, Mercantile is
among the smallest commercial banks operating within
the Atlanta market. During the years 1971 through
1975, inclusive, Mercantile's total assets decreased
approximately 18 percent, demand deposits decreased more than 30 percent and time deposits decreased about 10 percent. Decline in size and market
share has made the bank a relatively ineffective com* Asset figures are as of call dates immediately before and after
transaction.
$
9,001,000
3
346,997,000
380,969,000
26
29
petitor within the relevant market. Furthermore, during
the same 5-year period, Mercantile only had a net
operating profit in 1972 and 1973, with an average net
operating loss per year of approximately $63,000 for
the 5-year period. For the first quarter of 1976, Mercantile has reflected an average monthly net operating
loss of approximately $37,000. Operating losses in
addition to substantial loan losses have seriously
eroded the bank's capital structure. To further strain a
difficult situation, in its relatively short operating history,
Mercantile has experienced a rapid turnover of management personnel. The selling bank has not been
able to successfully augment its diminished capital
base through a retention of earnings due to the aforenoted net operating losses and, at the request of the
directors of Mercantile, the Comptroller of the Currency, on May 13, 1976, pursuant to Sections 12(i) and
12(k) of the Securities Exchange Act of 1934, temporarily suspended over-the-counter trading of Mercantile's securities.
In view of the record in this matter, it is the conclusion of this Office that an emergency situation exists
which requires an expeditious solution by the Comptroller's Office. Consistent with the applicable provisions of 12 USC 181, the Comptroller of the Currency
hereby specifically waives the requirement for
shareholder approval by owners of Mercantile's stock.
Also, the decision of the Comptroller is rendered pursuant to an agreement between the proponent banks
upon which the instant application rests, and is
incorporated herein by reference the same as if fully
set forth.
Pursuant to the provisions of the Bank Merger Act of
1966, 12 USC 1828(c), the Comptroller of the Currency
cannot approve a purchase and assumption transaction which would have certain proscribed anticompeti-
79
five effects unless the Office concludes that those anticompetitive effects are clearly outweighed in the public interest by the probable effect of the proposed
transaction in adequately meeting the convenience
and needs of the community to be served. Furthermore, the Office of the Comptroller is also directed to
fully consider the financial and managerial resources
and future prospects of the existing and proposed
institution. However, when an emergency situation
exists, the Comptroller may dispense with the normal
time requirements applicable to usual acquisition
transactions. In such situations the 30-day comment
period in which the Department of Justice and other
banking agencies submit reports relating to the competitive consequences of the transaction is reduced to
a 10-day comment period. Consummation of the
transaction must await an additional 5-day period.
Applying the statutory criteria contained with 12 USC
1828(c), the Comptroller of the Currency concludes
that an emergency situation exists, due to the general
condition of Mercantile, that requires expeditious action. For the reasons herein stated, NBG's application
to purchase the assets and assume the liabilities of
Mercantile National Bank is judged to be in the public
interest and is, hereby, approved.
June 24, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The application has conflicting testimony about the distances between offices of Applicant and Bank, but apparently they are within a mile or two of each other in
certain areas. Accordingly, the proposed acquisition
will doubtless eliminate some existing competition.
The application lists 26 banks in the market area
served by the Applicant and Bank. Applicant ranks
fifth among these with 4.2 percent of combined deposits of $6.1 billion and Bank is one of five banks with
0.1 percent (there are five with 0.1 percent each). The
three largest banks have deposits, respectively, of
$1.9 billion (equal to 31 percent), $1.5 billion (equal to
24 percent), and $1.2 billion (equal to 20 percent) and
the fourth in size has $561 million (equal to 9 percent).
These four large banks operate 51 offices, 53 offices,
38 offices and 30 offices, respectively. The proposed
acquisition will increase concentration only to a slight
extent.
In sum, the proposed acquisition will eliminate direct
competition and will contribute slightly to increased
concentration. However, in view of the deterioration of
Bank's position in the market and the increasingly
large operating losses it has had to absorb in recent
years, the overall effect of the acquisition would not be
substantially adverse.
THE PLANTERS NATIONAL BANK AND TRUST COMPANY,
and Hanover Bank, Wilmington, N.C.
Banking offices
Name of bank and type of transaction
Total assets
In
operation
Hanover Bank, Wilmington, N.C, with
and The Planters National Bank and Trust Company, Rocky Mount, N.C. (10608), which had
merged July 12, 1976, under charter and title of the latter bank (10608). The merged bank
at date of merger had
COMPTROLLER'S DECISION
Pursuant to the provisions of the Bank Merger Act of
1966 [12 USC 1828(c)L Hanover Bank, Wilmington,
N.C. ("Hanover"), and The Planters National Bank and
Trust Company, Rocky Mount, N.C. ("Planters"), have
applied to the Comptroller of the Currency for prior
permission to merge under the charter and with the
title of the latter.
Hanover, the merging bank, was organized
November 29, 1973, and commenced commercial
bank operations November 1, 1974. Hanover, the
smallest of 7 commercial banks serving the Wilmington, N.C. area, operates only from its main office,
but has sought and received permission for the establishment of a branch office in Wilmington. As of December 31, 1975, Hanover held total deposits of approximately $9 million.
Planters, the charter bank, was originally chartered
as a state banking institution in 1899, and converted to
a national banking association charter in 1914. Presently the 10th largest commercial bank domiciled in
80
$ 11,512,000
240,995,000
252,507,000
To be
operated
1
33
34
North Carolina, Planters maintains 31 banking offices
in 14 countries throughout the State. As of year-end
1975, Planters total deposits aggregated $226.4 million, representing 1.8 percent of total deposits held by
all commercial banking offices within the state.
The closest operating offices of the proponents are in
excess of 100 miles apart and there is no competition between these two banks. Inasmuch as applicable state
statutes do make provision for statewide branching, and
bank holding companies are permitted to establish de
novo subsidiaries, there exists the potential for the subject banks to become competitors at some date in the future. The likelihood of this event coming to fruition, however, is considered remote and highly unlikely given the
merging bank's deposit size and the economic factors in
the Wilmington area. Consummation of this proposal,
therefore, is considered to have no seriously adverse effect upon competition within the relevant area.
Accordingly, applying the statutory criteria, it is the
conclusion of this Office that the transaction would
have the effect of improving the competitive position of
the merging bank through operating economies and
efficiencies, and provide an additional source of fullservice banking for the banking community. The resulting institution should be a well managed bank that is a
more meaningful banking alternative better able to
serve the needs of the public. This application is thus
deemed to be in the public interest and should be, and
hereby is, approved.
June 10, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The office of Applicant closest to an office of Bank is
about 100 miles away, which indicates that the proposed acquisition will not eliminate any existing competition.
Bank is currently the smallest of the seven banks
that serve the Wilmington area. The three largest
banks collectively hold almost 76 percent of the deposits in the area. The two largest banking organiza-.
tions in the state share 61 percent of total deposits in
the area. Bank currently has only a 3.5 percent share
of total deposits. Hence, the proposed acquisition
should enhance competition in the area through the
strengthening of the smallest bank. North Carolina
does permit statewide branching and holding companies are permitted to establish de novo subsidiaries.
Accordingly, there is no impediment to the entry by
Applicant into the Wilmington area through means
other than acquisition. In this respect the proposed
acquisition does have some anticompetitive effect.
In sum, the proposed acquisition will have some anticompetitive effect because of its elimination of potential competition.
THE ONEIDA NATIONAL BANK AND TRUST COMPANY OF CENTRAL NEW YORK,
Utica, N.Y., and The Red Creek National Bank, Red Creek, N.Y.
Banking offices
Name of bank and type of transaction
Total assets*
In
To be
operation operated
The Red Creek National Bank, Red Creek, N.Y. (10781), with
was purchased July 20, 1976, by The Oneida National Bank and Trust Company of Central New
York, Utica, N.Y. (1392), which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
On July 12, 1976, application was made to the Comptroller of the Currency by The Oneida National Bank
and Trust Company of Central New York, Utica, N.Y.
("Assuming Bank") for permission to purchase the assets and assume certain of the liabilities of The Red
Creek National Bank, Red Creek, N.Y. The application
rests upon an agreement dated July 9, 1976 and a letter amending said agreement dated July 14, 1976.
Said agreement and letter are incorporated herein by
referencing the same as if fully set forth, and, for the
reasons set forth below, the application is hereby approved and the Assuming Bank is hereby authorized
immediately to consummate the purchase and assumption transaction and to operate the head office
and branch office of The Red Creek National Bank as
branch offices of the Assuming Bank.
An examination of The Red Creek National Bank,
which commenced on June 28, 1976, indicates that
the bank is in critical condition. Estimated losses as of
this examination total approximately $835,000 leaving
a deficit capital position of approximately $181,000.
Classified assets total 437 percent of gross capital
funds. Past-due loans are 19.5 percent of total loans.
Loans lacking current and satisfactory credit information represent 23.1 percent of the loan portfolio. Pres* Asset figures are as of call dates immediately before and after
transaction.
$ 12,073,000
2
480,748,000
512,527,000
29
31
ent management is not considered capable of handling the affairs of the bank. During the course of the
examination, the president resigned. Supervision by
the board of directors has been lacking, and the directors have failed to institute sufficient measures to
correct the deteriorating condition of the bank.
In view of the record in this matter, it is the conclusion of this Office that an emergency situation exists
which requires an expeditious solution by the Comptroller's Office. Consistent with applicable provisions
of 12 USC 181, the Comptroller of the Currency hereby
specifically waives the requirement for shareholder
approval by owners of The Red Creek National Bank's
stock.
Under the Bank Merger Act, 12 USC 1828(c), the
Comptroller cannot approve a purchase and assumption transaction which would have certain proscribed
anticompetitive effects unless he finds those anticompetitive effects to be clearly outweighed in the public
interest by the probable effect of the transaction in
meeting the convenience and needs of the community
to be served. Additionally, the Comptroller is directed
to consider the financial and managerial resources
and future prospects of the existing and proposed
institution, and the convenience and needs of the
community to be served. When necessary, however, to
prevent the disruption attendant upon the failure of a
bank, the Comptroller can dispense with the uniform
standards applicable to usual acquisition transactions,
81
and need not consider reports on the competitive consequences of the transactions ordinarily solicited
from the Department of Justice and the other banking
agencies. He is authorized in such circumstances to
act immediately, in his sole discretion, to approve an
acquisition and to authorize the immediate consummation of the transaction. The proposed acquisition will
be in accord with all pertinent provisions of law and will
prevent disruption of banking services to the Red
Creek and the North Rose communities and avert a
loss of public confidence in the banking system. The
Assuming Bank has sufficient financial and managerial
resources to absorb The Red Creek National Bank.
The Comptroller finds that any possible anticompetitive effects of the proposed transaction, are clearly
outweighed in the public interest by the probable effect of the proposed transaction in meeting the con-
venience and needs of the communities to be served.
For those reasons, the Assuming Bank's application to
assume the liabilities and purchase the assets of The
Red Creek National Bank as set forth in the purchase
agreement and subsequent letter, dated July 14, 1976,
is hereby approved. The Comptroller further finds that
the probable failure of The Red Creek National Bank
requires him to act immediately, as contemplated by
the Bank Merger Act, to prevent disruption of banking
services and the Comptroller thus waives publication
of notice, dispenses with the solicitation of competitive
reports from other agencies and authorizes the transaction to be consummated immediately.
July 20, 1976.
Due to the emergency nature of the situation, no Attorney General's report was requested.
SEATTLE - FIRST NATIONAL BANK,
Seattle, Wash., and First National Bank in Port Angeles, Port Angeles, Wash., and The First American National Bank of
Port Townsend, Port Towsend, Wash., and Bank of Sequim, Sequim, Wash., and Forks State Bank, Forks, Wash.
Banking offices
Name of bank and type of transaction
Total assets*
In
To be
operation operated
First National Bank In Port Angeles, Port Angeles, Wash. (6074), with
The First American National Bank of Port Townsend, Port Townsend, Wash. (13351), with
Bank of Sequim, Sequim, Wash., with
and Forks State Bank, Forks, Wash., with
were purchased Aug. 24, 1976, by Seattle - First National Bank, Seattle, Wash. (11280),
which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
Seattle - First National Bank, Seattle, ("Seattle - First"),
has applied to the Comptroller of the Currency for
permission to purchase the assets and assume the
liabilities of First National Bank in Port Angeles, Port
Angeles ("Port Angeles Bank"), The First American National Bank of Port Townsend, Port Townsend ("First
American"), Bank of Sequim, Sequim ("Sequim
Bank"), Forks State Bank, Forks ("Forks Bank"), collectively, "Union Bond Banks" or "Merging Banks". The
decision of the Office of the Comptroller of the Currency is rendered pursuant to an agreement executed
between the proponent banks upon which the instant
application rests, and is incorporated herein by reference, the same as if fully set forth.
Seattle - First, the charter bank, is the largest commercial bank domiciled in the state of Washington, and
is the wholly-owned subsidiary of SeaFirst Corporation,
Seattle, a registered one-bank holding company organized in 1974. Seattle - First has total deposits of
$3.3 billion,1 representing approximately 35 percent of
the total commercial bank deposits in the state of
* Asset figures are as of call dates immediately before and after transaction.
1
All deposit data are as of December 31, 1975, unless otherwise
noted.
82
$
56,687,000
26,675,000
23,870,000
14 211 000
6
3
3
1
4,576,802,000
4,899,325,000
146
159
Washington. Seattle - First operates 150 branch offices
and is represented in 30 of the 39 counties in the state;
with 11 of those offices located in and around the city
of Seattle in King County.
The merging banks are controlled, and have been
operated as a group banking system since their establishment, by Union Bond and Mortgage Company, a
family-controlled multi-bank holding company, and the
Phillips family. Port Angeles Bank was organized as a
unit bank in 1901 and merged in 1919 with The Port
Angeles Trust and Savings Bank, the latter having
been established in 1914 by the late Ben Phillips,
father of James E. Phillips, president and chairman of
the Board of Port Angeles Bank. Port Angeles Bank
currently has total deposits of approximately $46 million and operates its main office and four branches in
Port Angeles and one branch in Clallam Bay, an unincorporated community approximately 50 miles to the
west of Port Angeles near the northwestern tip of the
Olympic Peninsula.
First American was organized in 1929 by Ben Phillips, currently has total deposits of $22.6 million and
operates its head office and one of its two branches in
Port Townsend, the county seat and only incorporated
city in Jefferson County. First American's second
branch is located in Hadlock, 9 miles south of Port
Townsend.
Sequim Bank was established in 1936 and operates
its main office and a drive-in branch in Sequim.
Sequim Bank has an application recently approved by
the state of Washington for the establishment of a new
branch. As of year-end 1975, Sequim Bank had total
deposits of $20.2 million.
Forks Bank was opened for business in 1944, and
operates no branches. The bank has total deposits of
$12.4 million. In the aggregate, Union Bond Banks
control total deposits of $101.2 million, representing
approximately 1 percent of total commercial bank deposits in the state of Washington.
The relevant banking markets are approximated by
the various municipalities, and their respective immediate environs, wherein the Union Bond Banks'
principal offices are domiciled. All of those local markets are located within Clallam and Jefferson counties
which form the northwestern tip of the Olympic Peninsula. The relevant area is remote and is surrounded on
three sides by bodies of water: the Pacific Ocean to
the west, the Strait of Juan de Fuca to the north, and
Puget Sound and the Hood Canal to the east. The rugged Olympic Mountain chain provides a natural barrier
along the southern border of the two-county area. The
Olympic National Park and Olympic National Forest
occupy more than half of the land mass of the two
counties and most of the population is located along
the northern coastal region of the peninsula.
There is virtually no existing competition among the
Union Bond Banks, a fact which is attributable to their
common ownership and control. In Port Angeles, population 17,286, the major city and banking market on the
northern Olympic Peninsula, Port Angeles Bank experiences competition from two branch offices of Peoples
National Bank of Washington, Seattle, the fourth largest
commercial bank in the State, and from a relatively
new unit bank, Northwestern National Bank, Port
Angeles, chartered in 1972, which operates a single
banking office. First American Bank's primary local
competitor in Port Townsend, population 5,075, is a
newly opened bank (chartered in 1975), Jefferson National Bank, with a single banking office. Jefferson National Bank has recently received approval for the establishment of a branch office in Quilcene.
The community of Sequim, population 2,035, receives local banking services from the two offices of
Sequim Bank and the Sequim branch of Peoples National Bank of Washington. Forks, Wash., population
1,956, is served by only the single office of Forks Bank.
The closest office of Seattle - First to any office of the
merging banks is the Bremerton Office of Seattle First, more than 50 miles from the Hadlock branch of
First American. Seattle - First does not operate any offices in either Clallam or Jefferson County and, due to
the presence of intervening banks and the geographic
distance between the closest office of Seattle - First
and any office of the merging banks, consummation of
the instant transaction would not have the effect of
2
The question of whether a national bank may establish a branch pursuant to the authorization provided by the case of Washington Mutual
Savings Bank v. FDIC (482 F. 2d 459 (9th Cir. 1973)), is now pending
before the U.S. Appeals for the Ninth Circuit.
eliminating any meaningful degree of direct competition between Seattle - First and the merging banks.
Inasmuch as Union Bond and Mortgage Company is
one of only two multi-bank holding companies with
headquarters in Washington state (The second multibank holding company is Washington Bancshares,
Inc., Spokane), and the only multi-bank holding company represented on the northern Olympic Peninsula,
the Union Bond Banks have, through the passage of
time and use of the applicable provisions of state
branch banking law, evolved into a position of dominance in their respective market areas. Under state
statutes as presently constituted, no other banking organization in Washington can realistically hope to
achieve a parity of competitive status with the Union
Bond Banks within either Clallam or Jefferson County.
The Bank Merger Act mandates that the convenience and needs of the communities to be served must
be considered in every proposed acquisition of a
commercial bank by another commercial bank. By
permitting acquisition of all offices of the Union Bond
Banks by the state's largest financial institution, this
agency would be foreclosing a significant and meaningful avenue for entry into the most attractive markets
on Puget Sound by other Washington commercial
banks. The opportunity, through this application, to
open the Port Angeles - Sequim markets to additional
entry and competition is of such consequence in considering the convenience and needs of the public in
these markets as to preclude Seattle - First from acquiring all of the offices in these markets. Such an unbalanced banking structure where one institution controls, in the aggregate, approximately 80 percent of the
total commercial bank deposits within Clallam and Jefferson counties, is of major concern in reaching a determination in this matter; and this control situation is
not considered by this Office to be conducive to effective competition, regardless of who controls such a
large share of commercial bank deposits. Unconditional approval of this application would thus perpetuate the concentration existent within both Clallam
and Jefferson counties by adding the sanction of the
Office of the Comptroller of the Currency. Therefore,
such a course of action is totally unacceptable to this
Office when an alternative is available that would
increase the number of alternative suppliers of banking
services.
Pursuant to the provisions of Washington state statutes concerning the establishment of de novo
branches by commercial banks, such branches are
essentially limited to the county in which the head office is located and unbanked cities and towns
throughout the state. Section 30.40.020 of the
Washington Revised Code (Supp. 1973) provides in
relevant part2:
No bank or trust company shall establish or operate any branch, . . . in any city or town outside the
city or town in which its principal place of business
is located in which any bank, trust company or national banking association regularly transacts a
banking or trust business, except by taking over or
acquiring an existing bank, trust company or national banking association, or the branch of any
83
bank, trust company or national banking association operating in such city or town.3
Furthermore, as additional evidence of Washington
state's stringent restrictions placed upon branch banking, applicable state statute forbids any bank holding
company from owning or controlling 25 percent or
more of the outstanding voting shares of more than
one bank, a restriction which effectively prevents and
precludes the development of any multi-bank holding
company within the state4.
Since there are no viable, unbanked communities in
either Clallam or Jefferson County, Seattle - First is effectively precluded from the establishment of any new
branch operations in these areas. The Union Bond
Banks could, however, within the provisions of applicable state statutes, expand by de novo branching
outside their traditional operating territory, but have
shown no interest or desire in so doing. It is therefore
concluded that there is little probability that Seattle First and the merging banks would become direct
competitors through de novo branching and consummation of this proposal would not, from an antitrust
reference, have an adverse effect upon potential competition within the relevant markets.
All of the Union Bond Banks are considered as viable competitors within their respective markets, and all
represent attractive potential acquisitions for banking
organizations not represented in the extreme northern
Puget Sound area. It seems highly unlikely, however,
that Seattle - First could be perceived as a potential
entrant into those banking markets through any means
except via the acquisition of an existing bank. (See
United States v. Marine Bancorporation, Inc., 418 U.S.
602 (1974).) As previously noted, applicable
Washington state law does make provision for bank
merger acquisitions; but the same state statute effectively restricts the branching activities of a bank
whenever acquired by an out-of-county bank.
Inasmuch as Seattle - First's home county is King
County, consummation of this merger would, under
current applicable state statute, eliminate the possibility of Seattle - First establishing any new branch office
at any location within either Clallam or Jefferson
County.
The conclusion that a transaction does not violate
judicially accepted antitrust standards, does not relieve the Comptroller of the Currency from considering
3
As this Office indicated a decade and a half earlier upon the merger
application to merge National Bank of Westchester, Westchester, N.Y.,
and The First National City Bank of New York, N.Y. (1961):
As our society changes so must every business desiring to maintain its position and achieve its growth potential change also. One
of the serious problems in banking today arises from legal restrictions, many of which were designed for an earlier age, which have
hampered the proper accommodation by banks to the changing
nature of our society, and have inhibited not only their growth, but
their ability to serve efficiently our growing economy.
4
The Union Bond and Mortgage Company, a registered multi-bank
holding company, is "grandfathered" under Washington state's law
prohibiting multi-bank holding companies.
5
H.R. Rep. No. 1221, 89th Cong., 2d Sess., 4(1966).
84
other factors not associated with Section 7 of the
Clayton Act, which may have implications relating to
banking structure and competition. The Comptroller
clearly has always had discretion through his general
supervisory responsibility to help create a viable banking system through decisions upon individual applications, such as this one, based upon the consideration of
all factors which are deemed relevant.5 It is the Comptroller's view that although antitrust law may provide the
basic framework for safeguarding competition, the expertise of the banking agencies, including this Office,
permits a more intensive evaluation of particular mergers.
By statute, 12 USC 1828 (c)(5)(B), the Office of the
Comptroller cannot approve:
any . . . proposed merger transaction whose effect
in any section of the country may be substantially
to lessen competition, or to tend to create a
monopoly, or which in any other manner would be
in restraint of trade, unless it finds that the an• ticompetitive effects of the proposed transaction
are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the
convenience and needs of the community to be
served.
The Bank Merger Act of 1966, makes it clear that bank
mergers violative of the Clayton Act cannot be approved unless the anticompetitive effect of the proposed transaction is clearly outweighed by the probable convenience and needs benefits which would result
from the merger. In addition, the Comptroller believes
that Congress intended for the National Banking System
to be structured by the statutes pertaining specifically to
national banks and the Comptroller's responsibility for,
and authority over, all national banks. Indeed, the Office
of the Comptroller of the Currency has not only a right,
but a resibility and an obligation, to promote and insure a
sound National Banking System which best serves the
needs of the banking public.
With respect to the instant transaction, SeaFirst Corporation and its subsidiary Seattle - First, propose to
augment existing services provided by Union Bond
Banks and further to introduce new banking services in
the relevant market areas. Seattle - First has a legal
lending limit in excess of $22 million, while the combined legal lending limit of the four Union Bond Banks
is approximately $800,000. With its substantially larger
size and more diversified economic base, Seattle First will be able to respond more adequately to the
increasing credit needs of the market area.
Through both Seattle - First and FirstBank Mortgage
Corporation, a wholly-owned subsidiary of the bank,
Seattle - First will be able to serve the local residential
and real estate mortgage markets and also service the
commercial real estate mortgage markets of the relevant areas.
At the present time, Port Angeles Bank is the only
one of the Union Bond Banks with trust powers, and
the bank has only one trust officer who serves the customers of all four affiliated banks. Subsequent to the
merger, Seattle - First will offer a more comprehensive
package of trust services to the residents and business organizations in the areas.
Customers of Union Bond Banks will enjoy the benefit of being able to transact business throughout the
state through the use of Seattle - First's extensive
branch network.
None of the merging banks presently offers
international banking services to its customers. Seattle
- First will introduce these services which should benefit, among others, the larger lumber products firms in
the area which have established an extensive trade
with such foreign nations as Japan and Canada.
Present customers of Union Bond Banks will also
benefit from the additional proposed services of customer investment service and counseling; business
advisory services; automated banking services; electronic data processing services such as remittance
banking, account reconciliation and payroll processing; and specialized checking services, including no
service fee checking with the maintenance of a
minimum balance.
In addition to the competitive and antitrust factors
and the convenience and needs of the community to
be served, the Office of the Comptroller is charged
with the responsibility of considering the financial and
managerial resources and future prospects of the
banks involved in the proposed merger. A review of
the financial factors of the banks reveals that all are in
generally satisfactory overall condition with sound
management.
We believe the facts and circumstances of the
instant application are distinguishable from those
involved in Washington Mutual Savings Bank v. FDIC,
482 F. 2d 459 (9th Cir. 1973). Furthermore, nothing in
the language of the Bank Merger Act of 19666 compels, nor even suggests, that mergers which do not violate any of the antitrust standards of the Act, must be
approved; nor does the law limit agency inquiry exclusively to the competitive impact of a proposed bank
merger.
Unquestionably some of what is stated herein under
the convenience and needs factor could also be applicable to the competitive factor. However, the primary consideration is with the balance of the banking
system on Puget Sound and, in particular, the Port
Angeles - Sequim markets, the future structure of those
markets, how the banking needs of the communities
will best be served, what sizes and types of banks
there should be in these markets and the number of
banks present in the markets. In the Comptroller's view
those matters are clearly relevant to the banking factors and for determination by the Comptroller in the
exercise of his supervisory authority over the National
Banking System, rather than exclusively to the competitive factors under the Bank Merger Act where the
primary concern is directed toward lessening of competition and monopoly. It is the Comptroller's responsibility, acting within the statutory policies prescribed
by Congress, to preserve and foster the National Banking System to insure that it has the capacity to, and
does, perform efficiently and in the public interest and,
specifically, whether proposed acquisitions are in the
public interest.
6
12 USC 1828(c).
Having considered all relevant statutory criteria, it is
concluded that should the Union Bond Banks be acquired individually, or in combination by more than one
banking organization, the effect would be the deconcentration of already highly concentrated markets and
the relevant markets would be provided with additional
banking alternatives and competition, thereby better
serving the banking community and fostering a more
responsive banking atmosphere. It is further the opinion of this Office that the relevant banking factors
herein require that Seattle - First not be allowed the acquisition of all of the offices of the Union Bond Banks;
such an across-the-board approval does not appear
either desirable or warranted.
Therefore, the Comptroller of the Currency hereby
grants approval of the application for Seattle - First to
purchase the assets and assume the liabilities of the
Union Bond Banks subject to the following stipulations
and conditions:
1. Within 12 months from the date of consummation of
the instant transaction, Seattle - First will divest itself
of any and all interests in the following branch offices of Port Angeles Bank and Sequim Bank:
Port Angeles Bank
(a) "Eighth Street Branch"
134 West Eighth Street
Port Angeles, Wash.
(b) "Penn Street Branch"
1633 East First Street
Port Angeles, Wash.
(c) "Clailam Bay Branch"
Corner of Bogachiel and Pioneer Streets
Clailam Bay, Wash.
Sequim Bank
(a) "Valley Branch"
Highway 101 and Loft Mountain Road
Carlsborg, Wash.
2. Such divestiture of the branch offices herein stated
is further conditioned that Seattle - First must not
sell the subject branch offices, in whole or in part,
to any banking organization(s) now represented in
either Clailam or Jefferson counties, nor may these
branch offices be sold to any individual(s), group(s)
or organization(s), whose offices and/or directors
are affiliated with any banking organization(s) now
represented in either Clailam or Jefferson counties.
3. The branch offices must not be sold to any
individual(s), group(s}-or organization(s), who are
officers and/or directors, of Seafirst or Seattle First, or any of their respective subsidiaries or affiliates.
4. The Comptroller must give his express prior approval of the proposed branch purchaser(s) to
Seattle - First, for the purpose of assuring compliance with this decision, prior to consummation of
the sale of the branch offices.
85
Subject to the foregoing conditions this transaction is
approved.
July 23, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The service area of the four Union Bond banks is the
whole of Clallam and Jefferson counties which embraces roughly the northern half of the Olympic Peninsula, a remote area which has a population of 48,100.
Applicant has no offices in Clallam and Jefferson counties. The closest offices of the Applicant and the Union
Bond banks are approximately 56 miles apart, including a toll bridge which costs $3 for a round trip. Applicant has total deposits from the Union Bond service
area of $706,536, which amounts to 0.74 percent of
the total deposits held by the Union Bond banks and
0.53 percent of all deposits held in the two counties.
Thus, it is apparent that the proposed acquisition will
have only a negligible effect upon existing competition
between the merger parties.
As of December 31, 1974, Applicant ranked first
among the commercial banks in Washington with 34
percent of total statewide deposits. The second largest
bank had a 19.2 percent share of the market. The
third, fourth and fifth largest had market shares of 8.8,
6.6 and 5.5 percent, respectively. It can thus be fairly
said that commercial banking in Washington, with the
two largest banks controlling more than 53 percent of
total deposits, already suffers from an unhealthy degree of concentration. The Union Bond banks collectively rank 10th among commercial banks in
Washington with 1 percent of total deposits. The proposed acquisition would increase Applicant's market
share to 35 percent and thus contribute importantly to
the trend toward increased concentration in banking in
Washington.
As of December 31, 1974, there were seven commercial banks (counting the Union Bond banks as
four) and one mutual savings bank in Clallam and Jef-
ferson counties. In terms of total deposits, the Union
Bond banks are the largest banks operating in the
area with a 74.4 percent market share. Of the remaining three commercial banks, only People's National
Bank of Washington, which ranks fourth statewide with
6.6 percent of total deposits, holds substantial deposits in the amount of $26,711,000 (20 percent of the
market). The Union Bond banks and People's National
Bank of Washington control 94.4 percent of the total
deposits in Clallam and Jefferson counties. Thus, the
proposed acquisition raises the spectre of the largest
banking system in the state moving into a new market
by purchasing a banking system which has a 74.4
percent share of the local market.
Washington banking law prevents Applicant from entering the Jefferson - Clallam market de novo through
establishment of a branch. The state law permits de
novo branching by a commercial bank outside of its
home county only in incorporated but unbanked communities, i.e., an out-of-county bank cannot open a
branch in an unincorporated area or in an incorporated
community which already has a bank. Since Applicant's home county is King County and since the area
it is desirous of servicing is outside of its home county,
is incorporated, but is already banked, Applicant appears to be precluded from opening branches in the
Jefferson - Clallam County communities on a de novo
basis. Furthermore, it appears that Applicant cannot
enter the market through the normal bank holding
company device due to statutory prohibition of multibank holding companies.
Consummation of the proposed acquisition will
instantaneously render Applicant the dominant commercial bank in the two-county area. In sum, the proposed acquisition will contribute importantly to the
seemingly inexorable movement toward a decidedly
unhealthy degree of concentration in commercial banking in Washington, and for that reason must be viewed
unsympathetically as having an adverse effect upon
competition.
THE FIRST NEW HAVEN NATIONAL BANK,
New Haven, Conn., and The North Haven National Bank, North Haven, Conn.
Banking offices
Name of bank and type of transaction
Total assets
To be
In
operation operated
The North Haven National Bank, North Haven, Conn. (15439), with
and The First New Haven National Bank, New Haven, Conn. (2), which had
merged Aug. 31, 1976, under charter and title of the latter bank (2). The merged bank at
date of merger had
COMPTROLLER'S DECISION
The North Haven National Bank, North Haven, Conn.
("North Haven Bank"), and The First New Haven National Bank, New Haven, Conn. ("New Haven National"), have applied to the Comptroller of the Currency for prior permission to merge under the charter
and with the title of The First New Haven National
Bank. The decision of the Comptroller is rendered pur86
$ 14,434,000
344,161,000
356,693,000
3
24
27
suant to an agreement executed between the proponent banks upon which the instant application rests,
and is incorporated herein by reference the same as if
fully set forth.
New Haven National, the charter bank, was chartered pursuant to applicable laws of the state of Connecticut in 1792, and became a national banking association in 1863. New Haven National's charter,
number 2, is the oldest national bank charter in continuous use in the United States. As of December 31,
1975, New Haven National held commercial bank deposits aggregating $285.4 million, and is the eighth
largest banking organization domiciled within the state
of Connecticut. The subject bank operates a total of 23
branch offices in the greater New Haven area and 1
branch in the Cayman Islands.
North Haven Bank, the merging bank, was chartered
in 1964, and is the only commercial bank headquartered within the community of North Haven. North
Haven Bank operates 2 branches in addition to its
main office, all of which are located in North Haven. At
year-end 1975, the bank controlled total deposits of
$13.3 million.
The head offices of the proponent banks are approximately 9 miles apart, and the two closest branches of
New Haven National and North Haven Bank are about
3 miles distant from each other.
New Haven National is the largest of 17 banking organizations operating in the New Haven banking market (an area encompassing portions of New Haven
and Middlesex counties) and North Haven Bank is the
eighth largest commercial bank in the area, and confines its services primarily to its home office town of
North Haven, and the contiguous towns of New Haven,
East Haven, Hamden, North Branford and Wallingford.
North Haven Bank's service area is completely encompassed by that of New Haven National. Inasmuch
as the subject banks are direct competitors, approval
of the instant proposal would have the effect of
eliminating existing competition between the two banking institutions.
Pursuant to the provisions of the Bank Merger Act of
1966, 12 USC 1828(c), the Comptroller of the Currency
cannot approve a merger transaction which would
have certain proscribed anticompetitive effects unless
the Office concludes that those anticompetitive effects
are clearly outweighed in the public interest by the
probable effect of the proposed transaction in
adequately meeting the convenience and needs of the
community to be served. Furthermore, the Comptroller
is also directed to fully consider the financial and managerial resources and future prospects of the existing
and proposed institution.
Connecticut law does make provision for de novo
branch banking, subject to home office protection.
Approval of this proposal would remove home office
protection from North Haven and open the community
to other banking organizations that have been precluded from entering the town since 1964. Further,
since December 31, 1975, mutual savings banks and
state-chartered savings and loan associations in Connecticut have been authorized to accept demand deposits and to offer personal checking accounts to their
customers. The effects of the proposed merger should
be positive within the relevant area inasmuch as the
resulting bank would have an increased lending limit,
and be able to provide a more sophisticated array of
credit services, including international banking and
trust services. Also, New Haven National possesses
the capital resources needed to make improvements in
North Haven Bank's physical facilities, an undertaking
which North Haven Bank has not been able to make
due to poor earnings and difficulties experienced in
making capital augmentations.
North Haven Bank has, since 1972, conducted a
search for a new president for the bank. To date, that
search has not proven successful and,,at the present
time, North Haven Bank's chairman and president are
inactive directors and the bank is without a cashier
and installment loan manager. Since its organization,
North Haven Bank has had five cashiers, and the bank
does not presently have in its employ any person who
is fully qualified to discharge the duties of this position
in the management staff. To further complicate the
situation, North Haven Bank does not have a formalized training program. New Haven National is currently providing, on an interim basis, an operating officer who is acting as a full-time chief operating officer
for North Haven Bank. New Haven National does have
a well developed management training program and
New Haven National is considered to presently possess the managerial talent and expertise necessary to
rectify the problems currently confronting North Haven
Bank. Accordingly, it is the conclusion of this Office
that the future prospects of the combined institution
are greatly enhanced via means of consummation of
this application, and the banking public will be better
served by the replacement of a restricted competitor
with a vibrant competitor that is a more meaningful
banking alternative.
It is therefore, the opinion of this Office that any anticompetitive effects of this proposal are clearly outweighed by the probable effects of the transaction in
adequately meeting the convenience and needs of the
community to be served, and by enhancing the future
prospects of the resulting institution through the provision of needed financial and managerial resources.
The application is thus deemed to be in the public
interest, and should be, and hereby is, approved.
July 27, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
It appears that the primary market served by Applicant
is an area encompassing portions of New Haven and
Middlesex counties and in which there are 22 towns.
Applicant has offices in 11 of the towns. Bank operates
all three of its offices in North Haven, one of the 22
towns in the Applicant's primary market, and Bank
confines itself primarily to serving the local North
Haven market. The nearest offices of Applicant and
Bank are about 3 miles apart, and the next nearest pair
of offices are 4 miles apart although there are offices of
other banks in the intervening area. As might be expected, Applicant draws a significant amount.of business from the primary market of Bank and is directly
competitive with Bank. For example, 1,349 demand
deposit accounts in Applicant, totalling $87 million,
originate in the area served by Bank. Bank obtained
669 demand deposit accounts, worth $297,400, from
persons located in New Haven. In addition, Applicant
appears to get many of the large loans in the area
served by Bank. Applicant had made 625 installment
loans to persons living in the area served by Bank (as
87
of September 30, 1975). It thus seems clear that the
proposed acquisition will eliminate existing competition
to a significant extent.
Applicant currently ranks as the eighth largest commercial bank in the state with 4.3 percent of total IPC
deposits. The proposed acquisition will enhance Applicant's statewide position very slightly — an increase
of 0.2 percent of total IPC deposits and no change in
ranking. However, Applicant is the largest banking
institution in its primary market area with a 26.5 percent share of total deposits, and the proposed acquisition would increase Applicant's share of the market to
27.7 percent and would also give Applicant a dominant position in the submarket served by Bank. Hence,
the proposed acquisition will increase concentration in
the relevant banking markets.
Connecticut law, which permits de novo branching
subject to home office protection, precludes Applicant
from branching into North Haven, but Applicant does
operate 12 branch offices in the adjacent towns which
fall within Bank's primary market. Bank has not
branched outside North Haven and appears unlikely to
do so owing to lack of resources.
In sum, the proposed acquisition will eliminate a
substantial volume of direct competition and will materially increase concentration in the relevant markets,
with the consequence that it would have an adverse effect upon competition.
UNITED STATES NATIONAL BANK IN JOHNSTOWN,
Johnstown, Pa., and The First National Bank of Coalport, Coalport, Pa.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
The First National Bank of Coalport, Coalport, Pa. (6887), with
and United States National Bank in Johnstown, Johnstown, Pa. (13781), which had
merged Sept. 15, 1976, under charter and title of the latter bank (13781). The merged bank
at date of merger had
COMPTROLLER'S DECISION
The First National Bank of Coalport, Coalport, Pa.
("Coalport Bank"), and United States National Bank in
Johnstown, Johnstown, Pa. ("USNB"), have applied to
the Comptroller of the Currency for prior permission to
merge under the charter and with the title of The
United States National Bank in Johnstown. The decision of the Office of the Comptroller is issued pursuant to an agreement executed between the proponent
banks upon which the instant application rests, and is
incorporated herein by reference the same as if fully set
forth.
USNB, the charter bank, was chartered as a national
banking association on September 22, 1933 and, as of
March 31, 1976, held commercial bank deposits aggregating $240 million. USNB operates its head office
in Johnstown and an additional 13 branch offices in
Cambria County. In addition, USNB also operates 3 offices in neighboring Somerset County, and has approval for the establishment of offices in University
Heights and Seward.
Coalport Bank, organized in 1903, operates its sole
office in the community of Coalport, and has total
commercial bank deposits of approximately $5.9 million. Due in large measure to the mountainous topography of the area, the mobility of the populace is limited, and Coalport Bank derives most of its business from the area within a 15-mile radius of Coalport.
The Carrolltown office of USNB is the closest office
of the charter bank to Coalport Bank's location, approximately 16 miles distant, and there is an office of
another bank located in the intervening area. Neither of
the proponent banks derives a significant amount of its
deposits or loan accounts from the primary service
88
$
7,476,000
274,767,000
282,244,000
1
15
16
area of the other and no appreciable degree of existing competition between two banking institutions
would be eliminated via means of the proposed transaction. Applicable Pennsylvania state branching statutes do make provision for the establishment of
branch offices within the home office county of a
commercial banking institution and in counties contiguous thereto. Therefore, USNB could legally establish a de novo office in Coalport Bank's home office
county of Clearfield. However, given the small population of Coalport (approximately 800 persons) and the
general decrease in population within the county, it
does not appear that USNB would consider such a
venture to be economically feasible; especially since a
state bank has recently received permission to establish a branch in Coalport.
Accordingly, applying the statutory criteria, it is the
conclusion of this Office that consummation of the
instant proposal will provide the Coalport area with a
more meaningful banking alternative that is a more
vigorous competitor with a sound financial base and
capable management. Therefore, this application is
deemed to be in the public interest and should be, and
hereby is, approved.
July 28, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Applicant operates principally in Cambria County, Pa.,
and also operates to a lesser extent in Somerset
County and Westmoreland County. Bank operates only
in Clearfield County, which abuts Cambria County. The
banking office of Applicant closest to Bank is about 16
miles distant and the remainder of the offices are considerably further apart. Thus, it appears that the pro-
posed acquisition would eliminate only a small amount of
existing competition.
Since neither bank operates in markets served by
the other, the proposed acquisition will not produce
any increase in concentration in either market.
Pennsylvania permits the establishment of branch offices only in the same county in which a bank maintains its principal office and in contiguous counties.
Thus, since Cambria County is contiguous to Clearfield
County, Applicant is free to branch into Clearfield
County in lieu of entering the market through acquisition. Indeed, entry via branching seems preferable to
entry via acquisition as a general proposition. However, given the population of Coalport (800) and the
recent decrease in population of Clearfield County, it
perhaps would not be economically feasible for Applicant to establish a branch in the county.
In sum, the proposed acquisition would cause some
anticompetitive effects, particularly in regard to the
elimination of potential competition.
FIRST NATIONAL BANK, CARBONDALE, PENNSYLVANIA,
Carbondale, Pa., and The First National Bank of Dickson City, Dickson City, Pa.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
The First National Bank of Dickson City, Dickson City, Pa. (13937), with
and First National Bank, Carbondale, Pennsylvania, Carbondale, Pa. (664), which had
merged Sept. 20> 1976, under charter and title of the latter bank (664). The merged bank
at date of merger had
COMPTROLLER'S DECISION
The First National Bank of Dickson City, Dickson City,
Pa. ("Merging Bank"), and First National Bank, Carbondale, Pennsylvania, Carbondale, Pa. ("Charter
Bank"), have applied to the Comptroller of the Currency for permission to merge under the charter and
with the title of the latter.
Merging Bank, a unit national banking organization,
was chartered in 1934, and currently has total commercial deposits of $18.6 million.
Charter Bank became a national banking organization in 1864. Located approximately 15 miles northeast
of Scranton, Pa., Charter Bank operates its main office
and six of its seven branches in Lackawanna County
(the seventh branch office is domiciled in Wayne
County). Charter Bank currently has total deposits of
$47.5 million.
Both Merging Bank and Charter Bank conduct
commercial banking operations within the Scranton,
Pa. banking market. The Scranton, Pa. banking market
is approximated by the whole of Lackawanna County,
the northeastern half of Wyoming County, the southern
half of Susquehanna County, and small contiguous
portions of Luzerne, Pike and Wayne counties. The
closest office of Charter Bank, the Archbald branch, is
located approximately 5 miles from Merging Bank, and
all offices of Charter Bank are located within a 13 miles
radius of Dickson City. Within the relevant banking
market, 24 banks operate 55 offices. Charter Bank is
currently the seventh largest commercial bank operating within the market, controlling 4.1 percent of market
deposits. Merging Bank is the second smallest bank
within the market, and controls approximately 1.5 percent of market deposits. Consummation of the proposed transaction would result in the surviving institution becoming the fourth largest commercial bank within
the market. The instant proposal would have the effect of
eliminating a small degree of direct competition between
$21,614,000
59,518,000
81,244,000
1
7
8
the two merging institutions; however, there are several
conveniently located banking alternatives, three of
which are located between the closest offices of Charter
Bank and Merging Bank, as to mitigate any adverse effect upon competition.
The statute, 12 USC 1828(c)(5)(b), the Comptroller
of the Currency must also consider the public interest
by being mindful of the probable effect of the transaction in meeting the convenience and needs of the
community to be served. Consummation of the subject
proposal would eliminate the current problem of management succession at Merging Bank. The lending
capacity of the resulting institution would be increased
and the resulting bank should be better able to serve
the needs of the banking community and result in a
more meaningful banking alternative which is better
able to compete with the larger financial institutions in
the market. Additionally, the resulting bank will provide
such new services as BankAmericard and additional
operating hours. On balance, it is the conclusion of this
Office that any slightly adverse competitive effects
inherent within this transaction are clearly outweighed
by the aspects of convenience and needs of the banking community to be served.
Accordingly, it is the opinion of this Office that the
proposed transaction is in the public interest and
should be, and hereby is, approved.
August 12, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The closest office of Applicant to that of Bank is located at Archbald which is 4.7 miles distant from
Dickson City. There are 3 intervening banks between
these offices. Applicant has another office at Mayfield
which is 8.6 miles distant from Bank and another at
Elmhurst which is 10.5 miles distant therefrom. All of
Applicant's banks are within a 12.5 mile radius of
Dickson City. A survey of accounts discloses that Ap89
plicant's banks have 67 customers in the Dickson City
banking market which represents a total of $41,000 in
deposits and $235,000 in loans. Bank has no accounts
in the Carbondale banking market. Thus, the proposed
merger would eliminate some existing competition between the participants.
In Lackawanna County, 16 county-based banks operated 39 banking offices on June 30, 1975. Bank is
the next to smallest bank based in this county, with 1.5
percent of total county deposits. Applicant is the
seventh ranked bank with 4.1 percent of county deposits. If the proposal is approved, Applicant will have
5.5 percent of such deposits and will rank fifth among
county-headquartered banks. The largest county bank
has 41.2 percent of these deposits, the second ranked
bank has 11.2 percent and the third ranked 8.1 percent. Therefore, the proposed merger would increase
concentration among commercial banking resources
in Lackawanna County to a small extent.
We conclude that the instant proposal would eliminate some direct competition between the merging
banks and would somewhat increase concentration
among the commercial banks based in Lackawanna
County. Its overall effect, however, would only be
slightly adverse.
Fl NATIONAL BANK,
Ironton, Ohio, and The First National Bank of Ironton, Ironton, Ohio
Banking offices
Name of bank and type of transaction
Total assets *
The First National Bank of Ironton, Ironton, Ohio (98), with
was purchased Sept. 30, 1976, by Fl National Bank, Ironton, Ohio (16607), which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
Fl National Bank (organizing), Ironton, Ohio, has
applied to the Comptroller of the Currency for prior
permission to acquire all of the assets and assume all
of the liabilities of The First National Bank of Ironton,
Ironton, Ohio.
The First National Bank of Ironton, Ironton, Ohio, the
merging bank, was chartered as a national banking
association on June 6, 1890. As of March 31, 1976, the
merging bank held total deposits of $59.2 million.
The proposed purchase and assumption transaction
is the facility whereby the acquisition of The First National Bank of Ironton by First National Cincinnati Corporation, Cincinnati, Ohio, a registered multi-bank
holding company, will be accomplished. The instant
transaction would merely combine an existing commercial bank with a non-operating institution; and as
* Asset figures are as of call dates immediately before and after
transaction.
90
$64,442,000
1,200,000
66,670,000
In
To be
operation operated
1
0
1
such, without regard to the proposed acquisition of the
surviving bank by First National Cincinnati Corporation,
would have no effect upon competition within the
relevant banking market (approximated by the whole of
Lawrence County, Ohio).
Consequently, applying the statutory criteria, it is the
conclusion of this Office that the subject proposal is
not adverse to the public interest. Accordingly, this
application should be, and hereby is, approved.
August 30, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed transactions are parts of plans through
which First National Bank of Ironton and First National
Bank & Trust Company would become subsidiaries of
First National Cincinnati Corporation, a bank holding
company. The instant transactions, however, would
merely combine existing banks with non-operating
institutions; as such, and without regard to the acquisition of the surviving banks by First National Cincinnati
Corporation, it would have no effect on competition.
FT NATIONAL BANK,
Troy, Ohio, and The First National Bank & Trust Company, Troy, Ohio
Banking offices
Total assets *
Name of bank and type of transaction
In
-operation
The First National Bank & Trust Company, Troy, Ohio (3825), with
was purchased Sept. 30, 1976, by FT National Bank, Troy, Ohio (16608), which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
$76,998,000
2,400,000
81,467,000
with a non-operating institution; and as such, without regard to the proposed acquisition of the surviving bank by
First National Cincinnati Corporation, would have no effect upon competition within the relevant banking market
(approximated by the Dayton, Ohio banking market).
Accordingly, applying the statutory criteria, it is the
conclusion of this Office that the subject proposal is
not adverse to the public interest and should be, and
hereby is, approved.
August 30, 1976.
FT National Bank (organizing), Troy, Ohio, has applied
to the Comptroller of the Currency for prior permission
to acquire all of the assets and assume all of the
liabilities of The First National Bank & Trust Company,
Troy, Ohio.
The First National Bank & Trust Company, Troy,
Ohio, the merging bank, was chartered as a national
banking association on December 16, 1887 and, as of
March 31, 1976, held commercial bank deposits aggregating $65.5 million.
The proposed transaction is the facility whereby First
National Cincinnati Corporation, Cincinnati, Ohio, a
registered multi-bank holding company, will acquire the
successor by purchase and assumption to The First National Bank & Trust Company. This transaction would
have the effect of merely combining an existing entity
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed transactions are part of plans through
which First National Bank of Ironton and First National
Bank & Trust Company would become subsidiaries of
First National Cincinnati Corporation, a bank holding
company. The instant transactions, however, would
merely combine existing banks with non-operating
institutions; as such, and without regard to the acquisition of the surviving banks by First National Cincinnati
Corporation, it would have no effect on competition.
* Asset figures are as of call date immediately before and after
transaction.
*
To be
operated
*
*
CANAL NATIONAL BANK,
Portland, Me., and Central National Bank, Waterville, Me.
Banking offices
Name of bank and type of transaction
Total assets
In
operation
Central National Bank, Waterville, Me. (15954), with
and Canal National Bank, Portland, Me. (941), which had
merged Oct. 1, 1976, under charter and title of the latter bank (941). The merged bank
at date of merger had
COMPTROLLER'S DECISION
Central National Bank, Waterville, Me. ("Central N/B"),
the merging bank, and Canal National Bank, Portland,
Me. ("CNB"), the charter bank, have applied to the
Comptroller of the Currency for prior permission to effectuate a merger under the charter and with the title of
Canal National Bank. The instant application rests
upon an agreement executed between the proponent
banks, and is incorporated herein the same as if fully
set forth.
Central N/B was chartered as a national banking association on March 30, 1972 and, as of May 28, 1976,
held total commercial bank deposits of $9.5 million.
Central N/B maintains its head office in the town of
Waterville and operates one branch office in Augusta,
the state capital.
CNB became a national banking association on May
$ 10,100,000
180,348,000
193,263,000
To be
operated
2
28
30
29, 1969, is the fifth largest bank in the state, and controls deposits aggregating approximately $147.5 million. CNB operates a system of 28 branches, concentrated in southern and south-central Maine.
Both Central N/B and CNB are wholly-owned banking subsidiaries of the sixth largest commercial banking organization domiciled within the state of Maine,
Canal Corporation, Portland, Me. Canal Corporation
controls 4 banks with total deposits of $183.4 million,
9.3 percent of total commercial bank deposits in
Maine.
The closest offices of the charter bank and merging
bank are approximately 25 miles distant, and given the
geographic distance that separates those two banks in
conjunction with their common ownership and control,
there is no meaningful degree of competition between
the two institutions.
91
Essentially the subject application represents a corporate reorganization whereby Canal Corporation is
consolidating its banking interests. Accordingly, the
application is not adverse to the public interest, and
should be, and hereby is, approved.
August 30, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The merging
sidiaries of the
their proposed
ganization and
banks are both wholly-owned subsame bank holding company. As such,
merger is essentially a corporate reorwould have no effect on competition.
THE CITIZENS NATIONAL BANK OF EVANSVILLE,
Evansville, Ind., and The Lamasco Bank, Evansville, Ind.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
The Lamasco Bank, Evansville, Ind., with
and The Citizens National Bank of Evansville, Evansville, Ind. (2188), which had
merged Oct. 1, 1976, under charter and title of the latter bank (2188). The merged bank
at date of merger had
COMPTROLLER'S DECISION
The Citizens National Bank of Evansville, Evansville,
Ind., the charter bank ("Citizens N/B"), and the
Lamasco Bank, Evansville, Ind., the merging bank
("Lamasco Bank"), have applied to the Comptroller of
the Currency for prior permission to merge into The
Citizens National Bank of Evansville. The subject application rests upon an agreement executed between
the proponent banks and is incorporated herein by
reference, the same as if fully set forth.
Citizens N/B was chartered in 1875 and, as of December 31, 1975, held total deposits of $191.6 million.
It currently operates six branch offices in Vanderburgh
County and has approval for the establishment of three
additional offices. Currently the second largest commercial bank in the county, Citizens N/B controls approximately 30 percent of the county deposits.
Lamasco Bank, organized in 1914, is the smallest of
five commercial banks domiciled in Vanderburgh
County, and has commercial bank deposits aggregating $17.6 million, which represent 3 percent of deposits within the county.
Lamasco Bank's sole office is located approximately
1 mile from the main office of Citizens N/B. There are,
however, six banking offices, including the main office
of each of the remaining three commercial banks
domiciled in Evansville, within two blocks of the head
office of the charter bank. Citizens N/B also operates a
branch office about 1 mile west of Lamasco Bank's
site, but there is an intervening office of another bank
between those two offices of the proponent banks.
Lamasco Bank's entire service area is enveloped by
that of Citizens N/B, and approval of the subject transaction would have the effect of eliminating some degree of existing competition between the charter and
merging banks and foreclose the possibility of any future competition developing between these two banks.
Although applicable Indiana state statutes do make
provision for county-wide de novo branching, Lamasco
Bank, in its half century of existence, has not established any branches and, given its small size and other
$ 21,295,000
231,241,000
252,081,000
pertinent factors outlined within this decision, the likelihood of Lamasco Bank utilizing this mode of expansion, appears remote.
Pursuant to the provisions of the Bank Merger Act of
1966, 12 USC 1828(c), the Comptroller of the Currency
cannot approve a merger transaction which would
have certain proscribed anticompetitive effects unless
the Office concludes that those anticompetitive effects
are clearly outweighed in the public interest by the
probable effects of the proposed transaction in
adequately meeting the convenience and needs of the
community to be served. Furthermore, the Office of the
Comptroller is also directed to fully consider the financial and managerial resources and future prospects of
the existing and proposed institutions.
Lamasco Bank is located On the west side of the city
of Evansville, approximately 1 mile from the city's
downtown business district, in an area formerly referred to as Lamasco City. Formerly a residential
neighborhood composed of citizens of German extraction, the area has experienced a period of major transition, and is presently developed into an industrial and
commercial complex with the few remaining residential
dwellings in a general state of decline. The majority of
Lamasco Bank's customers are former neighborhood
residents who have moved away from the immediate
area, (only approximately 30 percent of the bank's customers live within a 1-mile radius of Lamasco Bank's
site) but have maintained their accounts with Lamasco
Bank due to ethnic bonds and personal loyalty to
senior management of the bank. With the major transition within Lamasco Bank's primary service area, the
merging bank's conservative operational policies and
resultant lack of growth, have placed the bank in a position which in effect precludes it from successfully
competing for the banking business of the commercial
and industrial concerns that have recently entered the
area around Lamasco Bank. Consequently, those
businesses have sought the services of the larger, more
aggressive, commercial banks located in Evansville.
In passing upon this application, it is noted that in
addition to the significantly larger commercial banks
located within Vanderburgh County, Lamasco Bank
must also compete with seven savings and loan associations, six of which have larger share accounts (deposits) than does Lamasco Bank; two industrial banks;
and 10 credit unions. A review of Lamasco Bank's loan
portfolio reveals that approximately 50 percent of the
loan portfolio is in real estate loans, 18 percent is in direct auto financing extensions and only 25 percent is
in the area of commercial and industrial loans. It is evident from that review that Lamasco Bank has operated
in a fashion more like a mortgage banking institution or
savings and loan institution, than a commercial bank.
As aforenoted, many of Lamasco Bank's customers
have maintained a business affiliation with the bank
because of personal loyalties to the merging bank's
senior management. The majority of the children of the
long-time customers do not, however, share that feeling of personal loyalties and ethnic identity with the
bank. Consequently, they conduct their banking business elsewhere. The former president of the Lamasco
Bank, Mr. E. J. Schroeder, passed away in July 1975,
and the current bank president, Mr. Lawrence Goebel,
who is 67 years of age, has said he is most anxious to
retire; there is no member of the bank's present management who appears to be fully capable of assuming
the duties of that position. Additionally, members of the
board of directors of Lamasco Bank have made it
known that they wish to become less involved in the affairs of the bank and, further, that they have no desire
to, or intention of, serving on the board of the resulting
bank.
Inasmuch as the majority of Lamasco Bank's stock is
held by the bank's directors, all of whom have expressed a desire to get out of the banking business,
and given the extremely conservative manner in which
this bank has historically operated, this Office must
consider the questions: How effectively is Lamasco
Bank competing with other institutions in the area?
How well is this bank serving the banking needs of the
public? Would denial of this application serve to preserve an independent banking alternative in the
Evansville area? The Office concludes that Lamasco
Bank is far from being considered an aggressive competitor and, although a superficial analysis of the facts
of record shows that the merging bank controls approximately 3 percent of commercial bank deposits in
Vanderburgh County, and that approval of this application would result in the charter bank holding approximately one-third of the total deposits within the county,
further analysis indicates that Lamasco Bank's deposits size is only half that of the fourth largest commercial bank in the county, and the ranking of Citizens
N/B as the second largest bank in the county would be
unchanged on a pro forma basis. Due to its small size,
and its extremely conservative trend of operations
(approximately 22 percent of Lamasco Bank's investment portfolio is in U. S. Treasury securities and over
40 percent of its total deposits are invested in U. S.
government obligations), the merging bank is simply
unable, and essentially lacks the desire, to provide a
full range of banking services to all segments of the
Evansville banking public. Lamasco Bank has only a
nominal 2 percent of total commercial and industrial
loans originating from within Vanderburgh County.
The record reflects that the charter bank is not the
only bank in the Evansville area that has expressed the
desire to become a merger partner with Lamasco
Bank. Given the sum of these factors, this Office must
conclude that it is simply a matter of time until
Lamasco Bank ceases to be an independent entity
and that the public is not well served by this present
situation. Approval of this application would have the
effect of replacing a lethargic institution with a competitor which provides more banking alternatives, and
one which is better able to serve the full banking
needs of the public.
A review of both banks indicates that both are in
satisfactory financial condition and, with the exception
noted concerning Lamasco Bank's lack of management depth, both banks are capably managed
institutions.
Accordingly, applying the statutory criteria, it is the
conclusion of this Office that any anticompetitive effects attendant to the proposed merger are clearly
outweighed by considerations relating to the convenience and needs of the area to be served, and that the
public will be served by a more aggressive and meaningful banking alternative. Also, Citizens N/B is considered to possess both the financial and managerial
resources necessary to enhance the future prospects
of the surviving institution. Therefore, this application is
deemed to be in the public interest, and should be,
and hereby is, approved.
August 12, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The only office of Bank is located about 1 mile from the
headquarters office of Applicant. However, there are
six banking offices, including the main offices of the
remaining three commercial banks in Evansville, within
two blocks of Applicant's headquarters. Applicant also
operates a branch office about a mile west of Bank,
but another bank operates a branch in the intervening
area. Thus, it appears that there is direct competition
between Applicant and Bank.
Indiana is a limited branching state, where commercial banks can only branch in the county in which a
bank is headquartered. Thus, Applicant and Bank are
limited in their branching to Vanderburgh County. In
that county, there are five commercial banks with 29
offices, all but two of which are located in Evansville.
As of June 30, 1975, Applicant held the second largest
share, approximately 30 percent, of total deposits in
the county. Bank held the fifth largest share, about 3
percent. As a consequence of the proposed acquisition, Applicant's share of the market would increase to
33 percent and the top three banks would control over
90 percent of total deposits.
In sum, the proposed acquisition would both eliminate some direct competition and produce an increase
in concentration. Accordingly, it would have an adverse competitive effect.
93
THE NATIONAL BANK OF GEORGIA,
Atlanta, Ga., and The Hamilton Bank and Trust Company, Atlanta, Ga.
Name of bank and type of transaction
Total assets *
Banking offices
In
To be
operation operated
The Hamilton Bank and Trust Company, Atlanta, Ga., with
was purchased Oct. 8, 1976, by The National Bank of Georgia, Atlanta, Ga. (15541), which
had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
On October 8, 1976, application was made to the
Comptroller of the Currency for prior written approval
for The National Bank of Georgia, Atlanta, Ga., ("Assuming Bank") to purchase certain of the assets and
assume certain of the liabilities of the Hamilton Bank
and Trust Company, Atlanta, Ga., ("Hamilton").
On October 8, 1976, Hamilton was a state-chartered
bank operating through its main office and one branch
office with deposits of approximately $30 million. In the
afternoon of October 8, 1976, Hamilton was declared
insolvent and the Federal Deposit Insurance Corporation ("FDIC") was appointed as receiver. The present
application is based upon an agreement, which is
incorporated herein by reference, by which the FDIC
as receiver has agreed to sell certain Hamilton assets
and liabilities to the Assuming Bank. For the reasons
stated hereafter, the Assuming Bank's application is
approved and the purchase and assumption transaction may be consummated immediately.
Under the Bank Merger Act, 12 USC 1828(c), the
Comptroller cannot approve a purchase and assumption transaction which would have certain proscribed
anticompetitive effects unless he finds those anticompetitive effects to be clearly outweighed in the public
interest by the probable effect of the transaction in
meeting the convenience and needs of the community
to be served. Additionally, the Comptroller is directed
to consider the financial and managerial resources
and future prospects of the existing and proposed
institution and the convenience and needs of the
community to be served. When necessary, however, to
prevent the evils attendant upon the failure of a bank,
the Comptroller can dispense with the uniform standards applicable to usual acquisition transactions and
need not consider reports on the competitive consequences of the transaction ordinarily solicited from the
* Asset figures are as of call dates immediately before and after
transaction.
94
$39,622,000
2
380,969,000
404,122,000
27
29
Department of Justice and other banking agencies. He
is authorized in such circumstances to act immediately, in his sole discretion, to approve an acquisition and to authorize the immediate consummation of
the transaction.
The proposed acquisition will prevent disruption of
banking services to the community and potential losses to a number of uninsured depositors. The Assuming Bank has sufficient financial and managerial resources to absorb Hamilton and enhance the banking
services it offers in the Atlanta market.
The Comptroller thus finds that the proposed transaction will not result in a monopoly, be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any
part of the United States, and that the anticompetitive
effects of the proposed transaction, if any, are clearly
outweighed in the public interest by the probable effect of the proposed transaction in meeting the convenience and needs of the community to be served.
For those reasons, the Assuming Bank's application to
acquire certain liabilities and purchase certain assets
of Hamilton as set forth in the agreement executed with
the IC as receiver, is approved. This approval also
includes specifically approval to operate all offices of
Hamilton as branches of the Assuming Bank and approval of the transfer to the Assuming Bank of Hamilton's trust business as provided in the agreement. The
Comptroller further finds that the failure of Hamilton requires him to act immediately, as contemplated by the
Bank Merger Act, to prevent disruption of banking services to the community. The Comptroller thus waives
publication of notice, dispenses with the solicitation of
competitive reports from other agencies and authorizes the transaction to be consummated immediately.
October 8, 1976.
Due to the emergency nature of the situation, no Attorney General's report was requested.
NEW JERSEY BANK (NATIONAL ASSOCIATION),
Clifton, N.J., and Plaza National Bank, Secaucus, NJ.
Banking offices
Total assets
Name of bank and type of transaction
In
operation
Plaza National Bank, Secaucus, N J . (15228), with
and New Jersey Bank (National Association), Clifton, N J . (15709), which had
merged Oct. 18, 1976, under charter and title of the latter bank (15709). The merged bank
at date of merger had
COMPTROLLER'S DECISION
Plaza National Bank, Secaucus, N.J. ("Plaza N/B"), the
merging bank, and New Jersey Bank (National Association), Clifton, N.J. ("NJB"), the charter bank, have
applied to the Comptroller of the Currency for prior
permission to merge under the charter and with the
title of New Jersey Bank (National Association).
Plaza N/B was chartered as a national banking association on December 23, 1963, and as of March 31,
1976, held total commercial bank deposits of $25.2
million. Plaza N/B maintains its head office and one
branch in Secaucus and one branch in West New
York, all in Hudson County, N.J.
NJB, with deposits of approximately $675 million,
operates a total of 40 banking offices in seven counties
of northern and northeastern New Jersey.
Both Plaza N/B and NJB are wholly-owned banking
subsidiaries of Greater Jersey Bancorp., West Paterson, N.J., the sixth largest commercial banking organization domiciled within the state of New Jersey.
Greater Jersey Bancorp, has one other banking subsidiary, Provident Bank of New Jersey, Willingboro.
$ 28,432,000
825,071,000
To be
operated
3
39
42
853,503,000
Given the common ownership and control of both
the merging bank and the charter bank, there is no
significant degree of competition existing between
these two institutions, nor is there a potential for such
competition to develop in the future. The subject transaction essentially effects a corporate reorganization
and, of itself, will have no adverse impact upon competition.
Additionally, the merger of these two banks will result in certain economies of operation, streamline the
bank holding company operation, increase efficiency
and simplify the management structure.
In conclusion, it is the opinion of this Office that the
subject proposal is not adverse to the public interest
and should be, and hereby is, approved.
September 7, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The merging banks are both wholly-owned subsidiaries of the same bank holding company. As such,
their proposed merger is essentially a corporate reorganization and would have no effect on competition.
THE CUMBERLAND NATIONAL BANK OF BRIDGETON,
Bridgeton, NJ., and United Jersey Bank/City National, Vineland, N.J.
Banking offices
Name of bank and type of transaction
Total assets
In
operation
United Jersey Bank/City National, Vineland, N.J. (14673), with
and The Cumberland National Bank of Bridgeton, Bridgeton, N.J. (1346), which had..
merged Nov. 1, 1976, under charter of the latter bank (1346) and title "United Jersey
Bank/Cumberland National." The merged bank at date of merger had
COMPTROLLER'S DECISION
United Jersey Bank/City National, Vineland, N.J. ("City
National"), the merging bank, and Cumberland National Bank of Bridgeton, Bridgeton, N.J. ("CNB"), the
charter bank, have applied to the Comptroller of the
Currency for prior permission to effectuate a merger
under the charter of Cumberland National Bank of
Bridgeton, and with the title of United Jersey Bank/
Cumberland National. The instant application rests
upon an agreement executed between the proponent
banks, and is herein incorporated by reference the
same as if fully set forth.
City National became a national banking association
on April 26, 1972. As of March 31, 1976, City National
$29,098,000
54,820,000
To be
operated
4
4
83,918,000
held total commercial bank deposits of approximately
$27 million at its main office and three branches, all
domiciled in Millville. The merging bank also has an
approved, but unopened, branch office in the city of
Vineland.
CNB was chartered as a national banking association on September 28, 1970, and has deposits aggregating $43.9 million. CNB operates its main office
and two branches in the community of Bridgeton and
one branch in Hopewell Township.
The proponent banks are both wholly-owned subsidiaries of United Jersey Banks, Princeton, N.J., a
registered bank holding company. United Jersey Banks
is the second largest banking organization in the state of
95
New Jersey, with 14 subsidiary banks controlling 7.1
percent of all commercial bank deposits in the state.
All offices of the charter bank and the merging bank
are located within Cumberland County, and the closest
offices of the two banks are approximately 11 miles
apart. However, given the common ownership and
control of City National and CNB by United Jersey
Banks, approval of this application would not have the
effect of eliminating any meaningful degree of existing
competition between the two banks, nor would the
proposed merger affect the potential for increased
competition, nor alter the share of deposits held in any
relevant area by the parent bank holding company.
Inasmuch as the instant application essentially represents a corporate reorganization whereby United
Jersey Banks is realigning and consolidating its banking interests, there is no basic change in the competi-
tive environment within which the proponent banks
must operate and the convenience and needs of the
banking community will be unaltered. The greatest degree of change will relate to the financial and managerial resources and future prospects of the combined
institution.
Accordingly, applying the statutory criteria, it is the
conclusion of this Office that the instant application is
not adverse to the public interest, and is hereby approved.
October 1, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The merging banks are both wholly-owned subsidiaries of the same bank holding company. As such,
their proposed merger is essentially a corporate reorganization and would have no effect on competition.
VIRGINIA NATIONAL BANK,
Norfolk, Va., and Fairfax County National Bank, Seven Corners, Va.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
Fairfax County National Bank, Seven Corners, Va. (14824), with
and Virginia National Bank, Norfolk, Va. (9885), which had
merged Nov. 12, 1976, under charter and title of the latter bank (9885). The merged bank
at date of merger had
COMPTROLLER'S DECISION
Virginia National Bank, Norfolk, Va. ("VNB"), the charter bank, and Fairfax County National Bank, Seven v.
Corners, Va. ("FCNB"), the merging bank, have
applied to the Comptroller of the Currency for prior
permission to effectuate a merger under the charter
and with the title of Virginia National Bank. The instant
application rests upon an agreement executed between the proponent banks, and is incorporated herein
by reference the same as if fully set forth.
VNB was chartered as a national banking association on November 5, 1910, and as of June 20, 1976,
had commercial bank deposits aggregating approximately $1.5 billion. A wholly-owned banking subsidiary
of Virginia National Bankshares, Inc., Norfolk, Va., a
registered bank holding company with five subsidiary
banks, VNB serves as the lead bank of Virginia National Bankshares, Inc., and operates 123 offices in 24
counties and 18 independent cities throughout the
Commonwealth of Virginia.
FCNB became a national banking association on
December 30, 1957, and has total deposits of $55.9
million at its main office and 10 branches in Fairfax
County and one branch in tbe independent city of Falls
Church.
FCNB has, since 1963, been a subsidiary of American Security Corporation, Washington, D. C, which
controls 96.5 percent of the outstanding voting shares
of FCNB. The Board of Governors of the Federal Reserve System has determined that the relationship
existent between American Security Corporation and
Digitized for 96
FRASER
$
62,491,000
1,804,327,000
1,862,225,000
11
119
130
FCNB is in violation of the Bank Holding Company Act
of 1956, as amended and, on November 12, 1974, the
Board ordered American Security Corporation to reduce its ownership of FCNB to less than 25 percent by
November 12, 1976. The instant application is evidence of American Security Corporation's attempt to
comply with the Board's order.
As aforenoted, all of the offices of FCNB are
domiciled within the Washington, D. C. Metropolitan
Area. The relevant banking market to be considered in
this application is approximated by the Washington, D.
C. SMSA which includes the District of Columbia; the
Maryland counties of Charles, Montgomery and Prince
Georges; and the Virginia counties of Arlington, Fairfax, Loudoun and Prince William; in addition to the
independent cities of Alexandria, Fairfax and Falls
Church, Va. VNB has two offices in Falls Church where
FCNB has one office. Another subsidiary of Virginia
National Bankshares, Inc., Virginia National Bank/
Fairfax, has two offices in Fairfax County where the
remaining 11 FCNB offices are located. The closest offices of VNB and FCNB appear to be in the city of Falls
Church, approximately 0.75 mile east of and 0.5 mile
south of FCNB's Falls Church branch. Additionally,
Virginia National Bank/Fairfax recently opened a
branch in Springfield, 0.5 mile north of FCNB. Therefore, approval of this proposal would have the effect of
eliminating a degree of existing competition between
charter bank and merging bank. However, given the
large number of banking alternatives available within
the relevant market and the relatively small share of
market deposits to be controlled (the combined bank
would rank as sixth largest of 17 commercial banks in
Fairfax County, with 2.4 percent of the total deposits in
the market), this proposal would have only a de
minimus effect upon competition.
Pursuant to applicable Virginia state branching statutes, a commercial bank may branch within the city or
county limits of its principal office and in contiguous
cities and towns. Thus, the proposed acquisition would
foreclose the potential for future competition between
VNB and FCNB. That is mitigated, however, by the fact
that Virginia National Bankshares, Inc., is the second
smallest of the seven bank holding companies operating in the Northern Virginia area and, further, by the
fact that there does not appear to be any independent
bank in the relevant area that is able to absorb an
institution the size of FCNB.
The Comptroller of the Currency, pursuant to the
provisions of the Bank Merger Act of 1966, 12 USC
1828(c), cannot approve any transaction which would
have certain proscribed anticompetitive effects unless
the Office concludes that those anticompetitive effects
are clearly outweighed in the public interest by the
probable effects of the proposed transaction in
adequately meeting the convenience and needs of the
community to be served. Furthermore, the Office of the
Comptroller is also directed to fully consider the financial and managerial resources and future prospects of
the existing and proposed institution.
The Federal Reserve Board, in ordering the severing
of the affiliation between American Security Corporation and FCNB, was of the opinion that the public
would be better served if that affiliation were broken.
Approval of this proposal would better serve the public
because the resulting bank would have an increased
lending limit, provide sophisticated trust services, offer
international services, have greater access to capital
markets and operational efficiencies and provide for
management depth and management succession, to
better serve the public and insure the successful future
prospects of the combined institution through the establishment of a financially sound, well-managed bank.
Accordingly, applying the statutory criteria, it is the
opinion of this Office that the elimination of any slight
degree of competition between the proponent banks is
clearly outweighed by considerations relating to convenience and needs and future prospects of the combined bank. Therefore, it is the conclusion of the Office
of the Comptroller of the Currency that this transaction
is in the public interest and should be, and hereby is,
approved. This approval is conditioned upon the ratification of at least two-thirds of the outstanding voting
shares of both VNB and FCNB, as required by 12 USC
215(a).
October 12, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Applicant operates one office in Fairfax County from
which it derived $5.4 of its total deposits, and it ranks
17th out of 20 commercial banks in the county. Bank,
with 11 county offices from which it derived $41.9 million in total deposits, ranks sixth in the country. The
closest offices of Applicant and Bank are 1 mile apart.
Thus, Applicant's deposits emanating from the county
constitute 11.0 percent of Bank's total deposits, a
small but not significant amount of competition. The
proposed acquisition will, therefore, eliminate some
existing .competition.
Fairfax County has 20 banks with 102 offices. As of
June 30, 1975, the four largest banks in the market
held 60.4 percent of total deposits, and 57.2 percent
demand IPC deposits. Applicant's share of the market
of total deposits is 0.7 percent (0.8 percent demand
IPC), whereas Bank's share of the market of total deposits is 5.6 percent (6.2 percent demand IPC). Combining both shares results in 6.2 percent share of total
deposits (7.1 percent demand IPC). The proposed acquisition represents the joinder of the sixth and the
17th largest commercial banks in the county (in terms
of total deposits), and the resulting bank will continue
to rank sixth. Within the Washington, D. C. SMSA, Applicant has a market share of total deposits of 1.8 percent. Bank's share of that market is 0.6 percent, or a
combined share of 2.4 percent. Regardless of whether
one views the proposed acquisition in the context of
Fairfax County or the Washington, D.C. SMSA, it appears that consummation of the transaction will not
contribute importantly to an increase in concentration.
Under Virginia law a bank may branch within the
town, city, or county limits of its principal office and in
contiguous cities and counties, unless offices are acquired by merger. Since Applicant has one branch already in the market, de novo branching would be a
practical means of expansion within Fairfax County.
Hence, the proposed acquisition would eliminate potential competition. This fact is mitigated somewhat
because of the divestiture order. The Bank must be
sold, and Applicant ranks sixth out of seven among the
bank holding companies in the Northern Virginia area
that possess the requisite financial wherewithal to
make an acquisition of this size. It does not appear
that any independent bank in the area is able to absorb an institution the size of Bank. Thus, given the
necessity to sell Bank, a sale to Applicant is much less
undesirable than would be a sale to other potential
purchasers.
In sum, the proposed acquisition will eliminate some
direct competition, will slightly increase concentration
and will eliminate potential competition, the cumulative
effect of which is that it will have some adverse effect
upon competition.
97
THE ONEIDA NATIONAL BANK AND TRUST COMPANY OF CENTRAL NEW YORK,
Utica, N.Y., and Ogdensburg Trust Company, Ogdensburg, N.Y.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
Ogdensburg Trust Company, Ogdensburg, N.Y., with
and The Oneida National Bank and Trust Company of Central New York, Utica, N.Y. (1392),
which had
merged Nov. 19,1976, under charter and title of the latter bank (1392). The merged bank
at date of merger had
COMPTROLLER'S DECISION
Ogdensburg Trust Company, Ogdensburg, N.Y.
("Merging Bank"), and The Oneida National Bank and
Trust Company of Central New York ("Charter Bank"),
Utica, N.Y., have applied to the Comptroller of the Currency for prior permission to effectuate a merger under
the charter and with the title of The Oneida National
Bank and Trust Company of Central New York. The
instant application rests upon an agreement executed
between the proponent banks, and is incorporated
herein by reference the same as if fully set forth.
Merging Bank was chartered as a state banking organization in 1829 and, as of December 31, 1975, controlled commercial bank deposits aggregating $27.6
million. In addition to its main office and one branch
domiciled within the community of Ogdensburg, Merging Bank operates one branch office in St. Regis Falls.
Charter Bank was organized in 1836, and became a
national banking association on July 5, 1865. With its
present network of 29 branch offices which cover
segments of nine counties within the northcentral section of the state, Charter Bank, as of year-end 1975,
held total deposits of approximately $412 million.
The main offices of Merging Bank and Charter Bank
are approximately 130 miles apart, and the closest offices of the two proponent banks are separated by
nearly 100 road miles. Due to the geographic distance
involved, the presence of intervening banks and other
banking alternatives available to the banking public,
approval of this application would not have the effect
of eliminating any meaningful degree of existing competition between Merging Bank and Charter Bank. Although applicable state banking statutes would legally
permit Merging Bank and Charter Bank to expand de
novo into each other's primary service area, Merging
98
$ 35,471,000
3
524,974,000
30
552,015,000
33
Bank does not appear to possess either the willingness or resources necessary to do so. Likewise, due to
the declining population and economic status of the
Ogdensburg area, it appears highly unlikely that Charter Bank would choose this means to enter the service
area of Merging Bank. It is/therefore, the conclusion of
this Office that the foreclosure of any potential competition between these two banks is not significant.
Approval of this application would provide for management succession at Merging Bank and the future
prospects of the combined institution appear favorable. Also, the banking public in the Ogdensburg area
would be provided with a financially sound institution
that is a more meaningful banking alternative that will
serve as a source of full-service banking for the community.
The Office of the Comptroller of the Currency, therefore, concludes that consummation of this proposal is
in the public interest and should be, and hereby is,
approved.
October 14, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Applicant, the largest independent bank in Upstate
New York, proposes to acquire a three office bank, the
closest office of which is 100 miles away. No direct
competition is involved.
Several major competitors operate in Applicant's
area but they, too, are considerable distances from
Bank. It thus appears that, if the area in which Bank
operates should be suitable for de novo entry, Applicant would be among the smaller potential entrants.
Accordingly, we conclude that the probable effect of
the proposed merger on competition is not adverse.
FIRST NATIONAL BANK OF RIO GRANDE CITY,
Rio Grande City, Tex., and First State Bank & Trust Company, Rio Grande City, Tex.
Banking offices
Total assets
Name of bank and type of transaction
In
To be
operationi operated
First State Bank & Trust Company, Rio Grande City, Tex., with
was purchased Nov. 29, 1976, by First National Bank of Rio Grande City, Rio Grande City,
Tex. (16618), which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
On November 26, 1976, application was made to the
Comptroller of the Currency by the First National Bank
of Rio Grande City, Rio Grande City, Tex. ("Assuming
Bank"), for permission to purchase certain of the assets and assume the liabilities of the First State Bank &
Trust Company, Rio Grande City, Tex. First State Bank
& Trust Company was placed in receivership and
taken over by the Federal Deposit Insurance Corporation on November 24, 1976.
Assuming Bank's application rests upon an agreement incorporated herein by reference, the same as if
fully set forth, between the Assuming Bank and the
Federal Deposit Insurance Corporation, as receiver.
For the reasons set forth below, this application is
hereby approved and the Assuming Bank is hereby
authorized immediately to consummate the purchase
and assumption transaction.
Under the Bank Merger Act, 12 USC 1828(c), the
Comptroller cannot approve a purchase and assumption transaction which would have certain proscribed
anticompetitive effects unless he finds those anticompetitive effects to be clearly outweighed in the public
interest by the probable effect of the transaction in
meeting the convenience and needs of the community
to be served. Additionally, the Comptroller is directed
to consider the financial and managerial resources
and future prospects of the existing and proposed
institution and the convenience and needs of the
community to be served. When necessary, however, to
prevent the evils attendant upon the failure of a bank,
the Comptroller can dispense with the uniform standards applicable to usual acquisition transactions and
need not consider reports on the competitive consequences of the transaction ordinarily solicited from the
Department of Justice and other banking agencies. He
$15,480,000
1
1,500,000
14,874,000
0
1
is authorized in such circumstances to act immediately, in his sole discretion, to approve an acquisition and to authorize the immediate consummation of
the transaction.
The proposed acquisition will be in accord with all
pertinent provisions of the National Bank Act and will
prevent disruption to the community. The Assuming
Bank will have sufficient financial and managerial resources to enable it to continue banking services in
Rio Grande City and environs. Thus, the approval of
this transaction will help to avert a loss of public confidence in the banking system, and a loss of banking
services to the community. The Comptroller finds that
there are no anticompetitive effects of the proposed
transaction. First State Bank & Trust Company was the
only operating bank within Starr County, Tex., and the
only bank within approximately 40 miles of Rio Grande
City. For the reasons indicated, the Assuming Bank's
application to purchase certain of the assets and assume the liabilities of First State Bank & Trust Company, as set forth in the agreement between the Federal Deposit Insurance Corporation, as receiver, and
the organizers of First National Bank of Rio Grande
City, is approved.
The Comptroller further finds that the failure of First
State Bank & Trust Company requires immediate action as contemplated by the Bank Merger Act, to prevent continued disruption of banking services to the
community. The Comptroller thus waives publication of
notice, dispenses with the solicitation of competitive
reports from other agencies and authorizes the transaction to be consummated immediately.
November 29, 1976.
Due to the emergency nature of the situation, no Attorney General's report was requested.
99
AMERICAN NATIONAL BANK,
Hamden, Conn., and Laurel Bank and Trust Company, Meriden, Conn.
Banking offices
Total assets
Name of bank and type of transaction
In
To be
operation operated
Laurel Bank and Trust Company, Meriden, Conn., with
and American National Bank, Hamden, Conn. (15496), which had
merged Dec. 1, 1976, under charter and title of the latter bank (15496). The merged bank
at date of merger had
COMPTROLLER'S DECISION
Laurel Bank and Trust Company, Meriden, Conn.
("Merging Bank"), and American National Bank, Hamden, Conn. ("Charter Bank"), have applied to the
Comptroller of the Currency for prior permission to effectuate a merger under the charter and with the title of
American National Bank. The instant application rests
upon an agreement executed between the proponent
banks, and is incorporated herein by reference the
same as if fully set forth.
Merging Bank was organized in 1968, and operates
its main office in Meriden, New Haven County, and two
branch offices in adjoining Middlesex County, approximately 7 and 10 miles, respectively, from the head office. As of March 31, 1976, Merging Bank had total
deposits of $22.7 million, was the fourth largest of six
commercial banks serving Meriden and ranked fifth
among 12 commercial banks serving Middlesex
County.
Charter Bank became a national banking association on March 30, 1965, now has deposits of $38.8 million and operates four offices, three in Hamden and
one in West Haven.
The closest offices of the proponent banks are Merging Bank's head office in Meriden and Charter Bank's
offices in Hamden, approximately 14 miles apart.
There are however, several offices of other banks
within the intervening area; existing competition between Charter Bank and Merging Bank is minimal and
there does not appear to be the possibility of a substantial increase in competition between these two
banks in the foreseeable future. Merging Bank has experienced little growth over the past 3 operating years,
and the bank's generated earnings have shown a significant decline during the same period. Additionally,
Merging Bank has sustained substantial loan losses
which have begun to erode the subject bank's capital
accounts. Consequently, the internal operating difficulties experienced recently by Merging Bank have affected the bank's ability to act as viable competitor.
The combination of the financial and managerial resources of Merging Bank and Charter Bank should
100
$24,869,000
54,779,000
3
4
79,907,000
better enhance the favorable future prospects of the
surviving bank, and the banking public will be better
served by a stronger, more meaningful banking alternative.
Accordingly, applying the statutory criteria, it is the
conclusion of the Office of the Comptroller of the Currency that this proposal is in the public interest and
should be, and hereby is, approved.
November 1, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Bank concentrates its business activity in upper New
Haven County and the adjoining area of Middlesex
County. Its two branches in Middlesex County are 7
and 10 miles, respectively, from its head office in
Meriden. Applicant's offices in Hamden are about 14
miles from Bank's closest office and its West Haven office is 29 miles from Bank's nearest office. Thus, the
two banks are oriented toward different geographic
areas and it appears that the proposed acquisition
would not eliminate existing competition to any appreciable extent. Moreover, because of Connecticut banking laws, neither bank can branch into the two where the
other's head office is located.
Both banks are rather small. In Hamden, although
Applicant ranks first in local deposits among the six
commercial banks serving the town, the other banks
are five of the nine largest commercial banks in the
state. Bank ranks fourth among the six commercial
banks serving Meriden, among which are four of the
largest commercial banks in the state. In Middlesex
County, Bank ranks fifth among the 12 commercial
banks serving the county, which includes five of the
state's largest. It thus appears that the proposed acquisition may produce a commercial bank which is
better able to compete against the large banks currently serving the affected towns. Furthermore, given
the highly concentrated structure of Connecticut banking, where the top 10 among the state's 70 banks hold
82 percent of deposits, the proposed merger of two of
the smaller banks in the state may prove to be procompetitive.
THE FIRST NATIONAL BANK AND TRUST COMPANY OF WESTERN MARYLAND,
Cumberland, Md., and The First National Bank of Mount Savage, Mount Savage, Md.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
The First National Bank of Mount Savage, Mount Savage, Md. (6144), with
and The First National Bank and Trust Company of Western Maryland, Cumberland, Md. (381),
which had
merged Dec. 1, 1976, under charter and title of the latter bank (381). The merged bank
at date of merger had
COMPTROLLER'S DECISION
The First National Bank of Mount Savage, Mount Savage ("Mount Savage Bank"), and The First National
Bank and Trust Company of Western Maryland, Cumberland ("FNBTC"), have applied to the Comptroller of
the Currency for prior consent to merge under the
charter and with the title of the latter.
Mount Savage Bank, the merging bank, was organized as a national banking association in 1902 and,
with total commercial bank deposits of $2 million, now
is the smallest of eight commercial banks operating in
Allegany County.
FNBTC, the charter bank, opened for business in
1812, and converted to a national bank charter in
1864. Currently the largest bank domiciled in Allegany
County, FNBTC, as of March 31, 1976, held total deposits of $68.3 million. FNBTC operates its head office
and three branches in Cumberland and one branch
each in Creseptown and La Vale.
The head offices of the merging banks are approximately 10 miles apart, and the closest office of FNBTC
to Mount Savage Bank is the La Vale office, approximately 7 miles away. The proposed merger would
therefore have the effect of eliminating a de minimis
degree of present competition existent between the
two subject banks and eliminate one independent
banking alternative.
By statute, 12 USC 1828 (c), the Comptroller of the
Currency,must also consider the public interest by
being mindful of the probable effect of the transaction
in adequately meeting the convenience and needs of
the community to be served. As is indicated by its age
and small deposit size, Mount Savage Bank has not
been a viable competitor in its market. To the contrary,
it is considered to be the least aggressive and least
competitive bank in the area. Its small size forces loan
and savings customers requiring more sophisticated
services to look beyond the Mount Savage area in
order to meet their needs.
Additionally, the future prospects of the combined
institution appear far more favorable. The increased
lending limit and higher interest rate on savings would
allow customers in the Mount Savage area to enjoy the
benefit of a full-service bank. The proposed merger
would also provide the assurance of management
$ 2,528,000
1
90,032,000
6
92,539,000
depth and provide for management succession at the
Mount Savage Bank. That takes on additional significance because Mount Savage Bank's present senior
management is well beyond the normal retirement age
and has expressed a desire to become less involved
in the daily operations of the bank.
Accordingly, applying the statutory criteria, it is the
conclusion of this Office that any slightly anticompetitive effects of this proposal are clearly outweighed by
factors relating to convenience and needs, managerial
and financial resources and future prospects of the resulting bank. This application is thus deemed to be in
the public interest, and should be, and hereby is, approved.
September 30, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The head offices of the merging banks are 9 miles
apart and their closest offices (Applicant's branch at
La Vale) are 7 miles apart. Thus, the proposed merger
would eliminate some existing competition between
the participants.
There are 24 commercial banks in the area served
by Applicant and Bank. The primary service area for
Applicant and Bank is principally located in Allegany
County, Md., with Cumberland the county seat, while
parts of West Virginia and Pennsylvania can properly
be included within the surrounding area from which
both banks draw many of their customers. In this illdefined area, which clearly overstates the market, Applicant, the largest bank of the 24 commercial banks
serving the area, has 12.59 percent of the total deposits and Bank has 0.36 percent. The second-ranked
bank has 11.34 percent of such deposits and the
third-ranked has 10.93 percent. Consummation of the
proposed transaction would increase Applicant's lead
share of the total deposits in this market to 12.95 percent.
The instant proposal would eliminate some existing
competition between Applicant and Bank and would
increase Applicant's share of the deposits in the tristate service area in which both operate by less than
0.5 percent of such deposits. Thus, the proposed acquisition would have some anticompetitive effect.
101
NEW JERSEY NATIONAL BANK,
Trenton, N.J., and First State Bank, Toms River, N.J.
Banking offices
Total assets *
Name of bank and type of transaction
In
To be
operation operated
First State Bank, Toms River, N.J., with
was purchased Dec. 17, 1976, by New Jersey National Bank, Trenton, N.J. (1327), which
had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
New Jersey National Bank, Trenton, N.J. ("Purchasing
Bank"), has made application to the Comptroller of the
Currency for prior permission to purchase substantially
all of the assets and assume all of the liabilities of First
State Bank, Toms River, N.J. ("Selling Bank"). The subject application rests upon an agreement executed between the proponent banks, and is incorporated herein
by reference the same as if fully set forth.
Purchasing Bank, the second oldest banking institution within the state of New Jersey, was organized as a
state-chartered bank in 1804, and was chartered as a
national banking association on June 22, 1865. As of
June 30, 1976, Purchasing Bank had total commercial
bank deposits of $730.4 million, and operated 31 banking offices that primarily serve central New Jersey. The
wholly-owned banking subsidiary of New Jersey National Corporation, Trenton, N.J., a registered onebank holding company, Purchasing Bank ranks as the
seventh largest banking organization in the state.
Selling Bank, with total deposits of $142 million, was
organized in 1964 as a state-chartered institution and,
in 1972, became the wholly-owned subsidiary of
American Bancorp, Toms River, N.J., also a registered
one-bank holding company. Selling Bank presently
operates 12 banking offices, all of which are domiciled
within Ocean County.
The proponent banks' closest offices, Selling Bank's
Jackson branch, in Ocean County, and Purchasing
Bank's Howell Township branch, in adjacent Monmouth County, are approximately 4 miles apart; but all
other offices are at least 15 miles apart, and there are
numerous intervening offices of competing banks. Approval of this application would therefore have the effect of eliminating only a minimal degree of existing
competition between Purchasing Bank and Selling
Bank.
Applicable New Jersey state branching statutes
provide for de novo branching by commercial banks in
any municipality within the state except where another
banking institution maintains its principal office, and in
municipalities whose population is less than 20,000. As
of January 1, 1977, the population requirement becomes 10,000. Thus, Purchasing Bank could be perceived as a possible entrant into Ocean County via de
novo expansion. Militating against Purchasing Bank's
de novo entry is the concentration of banks presently
located within Ocean County, the declining growth rate
* Asset figures are as of call dates immediately before and after
transaction
102
$161,224,000
12
823,889,000
1,038,241,000
35
47
of central New Jersey and the low banking office to
population ratio of Ocean County. Therefore, absent
the proposed acquisition, it appears highly unlikely
that Purchasing Bank would choose to enter Ocean
County to any significant degree in the near future, and
the proposed acquisition will have no significantly adverse effect upon potential competition.
During the recent past, Selling Bank has experienced certain operational difficulties that have adversely affected the bank. The preponderence of Selling Bank's loan portfolio is real estate-related, much of
which has been subject to criticism by bank regulatory
authority, which has had a severe impact upon this
bank's earnings performance. Also, neither Selling
Bank nor its bank holding company parent appear to
have the necessary financial and managerial resources to solve the myriad problems currently confronting Selling Bank. Purchasing Bank appears to
possess the financial resources and qualified management with sufficient experience and expertise to
greatly aid Selling Bank in coping with its problems.
Furthermore, Purchasing Bank has committed to augment its total capital accounts by $20 million. With the
additional capital, the favorable future prospects of the
combined institution are greatly enhanced.
Accordingly, applying the statutory criteria, it is the
conclusion of the Office of the Comptroller of the Currency that any slightly adverse competitive aspects of
this proposal are clearly outweighed by factors relating
to the convenience and needs of the banking public
and further by the favorable future prospects of the
combined bank which are primarily dependent upon
the financial and managerial resources of Purchasing
Bank. This application is therefore deemed to be in the
public interest and should be, and hereby is, approved. Approval of this proposal by the Comptroller of
the Currency is conditioned upon Purchasing Bank's
commitment to augment the capital accounts of New
Jersey National Bank by $20 million, and this augmentation must be accomplished within 1 year from the
date of this statement.
November 15, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Applicant operates no banking offices in Ocean
County and only 0.9 percent of Applicant's deposits
and 4.6 percent of its loans are derived from Ocean
County residents. Although the parties have two
branches that are only 4 miles apart on opposite sides
of the Ocean County - Monmouth County boundary,
the next closest offices are 16 road miles apart, with
some 22 offices of competing banks intervening. In
addition, approximately 0.6 percent of Bank's deposits
and 8 percent of its loans are derived from customers
with addresses in service areas of Applicant. Therefore, it appears that the proposed acquisition will not
eliminate any significant amount of existing competition between the parties.
New Jersey law permits de novo branching by
commercial banks in any municipality in the state except for municipalities in which another banking institution maintains its principal office and whose population
is less than 20,000. As of January 1, 1977 the population requirement becomes 10,000. Applicant, the fifth
largest bank by total deposits in New Jersey, is the
fourth largest bank in Monmouth County, which adjoins
Ocean County, and the largest bank in the Mercer
County market. Thus, with the liberalization in New Jersey branching laws, Applicant should be deemed a
possible entrant into Ocean County market. However,
militating against Applicant's de novo entry is the concentration of banks in Ocean County and the declining
growth trend in the central New Jersey area. The banking office to population ratio in Ocean County is 1 to
2,313 (112 offices per 259,120 persons), compared to
a statewide average of 3,179 persons per office. Thus,
absent the proposed acquisition, it appears unlikely
that Applicant would enter the market to any significant
extent in the near future and, therefore, the proposed
acquisition will have only a slightly adverse effect on
potential competition.
Sixteen commercial banks with 75 offices presently
serve Ocean County. Bank, which holds approximately
17 percent of the total deposits of commercial banking
offices within the county, ranks second among all
institutions competing in Ocean County. Thus, the
proposed acquisition involves the fifth largest commercial bank in the state entering Ocean County
through the acquisition of the second largest commercial bank in the county. It obviously would have been
preferable had Applicant chosen a smaller bank as its
vehicle for entry into the Ocean County market, assuming, without knowing, that a smaller institution was
available for acquisition.
In sum, the proposed acquisition would not eliminate
either actual or potential competition to any significant
degree. Overall, the proposed acquisition will have a
slightly adverse competitive effect.
CITIZENS FIRST NATIONAL BANK OF NEW JERSEY,
Ridgewood, N.J., and The State Bank of North Jersey, Pine Brook, N.J.
Banking offices
Name of bank and type of transaction
Total assets *
In
To be
operation operated
The State Bank of North Jersey, Pine Brook, N.J., with
was purchased Dec. 28, 1976, by Citizens First National Bank of New Jersey, Ridgewood,
NJ. (11759), which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
Citizens First National Bank of New Jersey,
Ridgewood, N.J. ("Purchasing Bank"), has applied to
the Comptroller of the Currency for prior permission to
purchase all of the assets and assume all of the
liabilities of The State Bank of North Jersey, Pine
Brook, N.J. ("Selling Bank"). The instant application
rests upon an agreement executed between the proponent banks, and is incorporated herein by reference,
the same as if fully set forth.
Purchasing Bank, with total commercial bank deposits of $246.9 million as of December 31, 1975, operates 18 branches in addition to its main office, and
has received approval for the establishment of three
new offices. Chartered as a national banking association on June 18, 1920, Purchasing Bank's branch network serves the northern, western and central portions
of Bergen County, and has one branch domiciled
within an adjacent area of Passaic County.
Selling Bank, with year-end 1975 total deposits of
approximately $44 million, operates its head office and
* Asset figures are as of call dates immediately before and after
transaction.
$52,454,000
7
342,790,000
402,114,000
21
28
six branches in eastern Morris County. Morris County
is located southwest of Bergen and Passaic counties
in north-central New Jersey and is a rapidly growing
area with a diversified economy.
The head offices of the proponent banks are 18 miles
apart, and the closest offices of these two banks are
Purchasing Bank's office in Hawthorne and Selling
Bank's Pine Brook office, approximately 15 miles apart.
There are intervening offices of other commercial
banks situated between the closest offices of Purchasing Bank and Selling Bank, and it does not appear that
the proposed acquisition would eliminate any meaningful degree of existing competition.
Pursuant to applicable state banking statutes, Purchasing Bank could legally establish a de novo branch
in the area served by Selling Bank; however, there are
other banking organizations of comparable size to
Purchasing Bank that could also enter the area via de
novo expansion. Furthermore, because Selling Bank
controls a relatively small percentage of total commercial bank deposits within Morris County (4.8 percent), it
is highly unlikely that consummation of the proposal
would have a significantly adverse effect upon potential competition.
103
Accordingly, applying the statutory criteria, it is the
conclusion of the Office of the Comptroller of the Currency that approval of the subject proposal will provide
new and expanded banking services in the Selling
Bank's service area, thereby better serving the needs
of the banking public through a financially sound,
well-managed institution. The application is hereby,
approved.
November 11, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Morris County is located southwest of Bergen and
Passaic counties in north-central New Jersey. It is a
rapidly growing county with a diversified economy. Between 1960 and 1970 its population increased from
262,000 to 383,000, and it is predicted that its population will increase to 452,000 by 1985; increases which
exceed the average population increases for the state
as a whole. Business and industry have also expanded
substantially in Morris County; county employment
climbed from 70,000 to 120,000 between 1960 and
1970 and it is predicted that by 1985 it will climb to
190,000.
As of December 31, 1975, 20 banking organizations
operated in Morris County, and held a total of $895.4
million in county deposits. Banking is concentrated in
Morris County, with the top four banks controlling 65.5
percent of total county deposits. Bank holds 4.8 percent of total county deposits and is the seventh largest
banking organization in Morris County in terms of total
county deposits.
The head offices of Applicant and Bank are 18 miles
apart. Their closest offices (Applicant's Hawthorne office and Bank's Pine Brook office) are approximately
14 miles apart and there are approximately six banks
in the intervening area. It appears that the proposed
acquisition would not eliminate any substantial existing
competition.
Under New Jersey law, Applicant could be permitted to branch de novo into the area served by Bank.
There are, however, other banking organizations as
large as Applicant which also could be permitted to
enter that area de novo. Moreover, Bank controls a rel-.
atively small percentage of Morris County deposits.
Therefore, it is unlikely that the proposed acquisition
would have a significantly adverse effect on potential
competition.
FIRST NATIONAL BANK OF JACKSON,
Jackson, Miss., and Columbia Bank, Columbia, Miss.
Banking offices
Total assets
Name of bank and type of transaction
In
To be
operation operated
Columbia Bank, Columbia, Miss., with
and First National Bank of Jackson, Jackson, Miss. (10523), which had
merged Dec. 31, 1976, under charter and title of the latter bank (10523). The merged bank
at date of merger had
COMPTROLLER'S DECISION
Columbia Bank, Columbia, Miss. ("Columbia Bank"),
the merging bank, and First National Bank of Jackson,
Jackson, Miss. ("FNB"), the charter bank, have
applied to the Comptroller of the Currency for prior
permission to effectuate a merger under the charter
and with the title of First National Bank of Jackson. The
subject merger rests upon an agreement executed between the proponent banks and is incorporated herein
by reference, the same as if fully set forth.
Columbia Bank was established in 1899 and, with deposits of approximately $21 million as of March 31,
1976, is the second largest of three commercial banks
domiciled within Marion County, Miss., the approximate relevant banking market. Columbia Bank operates both its main office and one branch in the city of
Columbia.
FNB was chartered as a national banking association on April 27, 1914, and holds commercial bank deposits of $597.7 million. FNB operates a total of 30
banking offices in seven counties of the state; the
closest to Columbia Bank" is FNB's Tylertown Bank
Branch in adjacent Walthall County, approximately 22
104
$ 27,839,000
810,858,000
838,697,000
2
31
33
miles distant. Inasmuch as the main offices of two
proponent banks are approximately 80 air miles apart
and the competition now existing between the two
banks is minimal, approval of this application would
not have the effect of eliminating a meaningful degree
of present competition.
Applicable Mississippi state statutes would permit
the establishment of a de novo branch in Marion
County by FNB. However, given the fact that three
commercial banks now serve the area, which has a
population of slightly less than 8,000, it does not appear likely that FNB would consider that means of expansion into the area.
Approval of the instant proposal would provide Columbia Bank with a means for management succession. That factor has additional significance because
Columbia Bank's president is at normal retirement age
and has expressed the desire to become less involved
in the daily affairs of the bank. Also, the introduction of
FNB into the Columbia area would provide the banking
public with expanded and additional banking services.
In conclusion, it is the opinion of this Office that approval of this application would provide the banking
public with convenient full-service banking in the Columbia area by a financially strong and well-managed
institution. Accordingly, this application should be, and
hereby is, approved.
November 19, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Three banks with five offices currently operate within
Marion County, which is the appropriate geographic
market in which to evaluate the competitive effects of
the proposed merger. Of these, Citizens Bank, with
one office in Columbia, is the largest. It had total deposits of $24,488,000 as of March 31, 1976, or a 45.78
percent share of the commercial banking market in
Marion County. Bank is second largest with
$21,100,000 in total deposits on the same date, or
39.45 percent of the market. The Foxworth Bank, with
its main office in a settlement about 3 miles east of Columbia and one branch in Columbia, is third largest
with total deposits of $7,903,000, or 14.77 percent of
the market. Although Bank's total deposits have
gradually increased during the past 5 years, its share
of the Marion County market has declined. In 1971,
Bank was the largest bank in the county, with a 47
percent market share. Since that time, Citizens Bank's
share has increased from 40 percent to 46 percent;
Foxworth Bank's share has increased from 8 percent
to 15 percent; and Bank's share has declined to 39
percent.
Applicant is not a significant competitor in the Marion County banking market. Its main office in Jackson
is 79 air miles from Columbia, and its closest branch
bank, in Tylertown, Walthall County, is 22 miles therefrom. Only 0.4 percent of Bank's demand deposits
originate in the service area of Applicant's Tylertown
branch. Only 3.6 percent of the Tylertown branch
bank's deposits originate in Marion County, although
this figure is somewhat overstated in that many Walthall County residents have a Marion County rural delivery mailing address. Thus, the proposed merger
should eliminate a minimal amount of existing competition beween Bank and Applicant's closest subsidiary.
While Mississippi law permits Applicant to open a cfe
novo branch in Marion County, such a development is
unlikely to occur. The banking needs of Marion County
residents appear to be adequately served by the existing banks. The city of Columbia would be the most logical location for a new bank, yet three banks with four
offices now serve its population of 8,000. Furthermore,
given the county's generally declining population, the
prospects for an expanding banking market in the future are not bright. Therefore, it is unlikely that the
proposed merger would eliminate any potential competition between Applicant and Bank.
The proposed merger would not have any significant
effect on concentration in commercial banking in Marion County, although it may strengthen Bank's competitive position to the detriment of Foxworth Bank, the
county's smallest bank. Viewed on a statewide basis,
the proposed acquisition would increase Applicant's
share of total deposits from 11.0 percent to 11.4 percent, but Applicant would remain the second largest
bank behind the Deposit Guaranty National Bank,
which currently has a 12.9 percent share of all Mississippi bank deposits. The third and fourth largest banks
in the state have market shares, respectively, of 4.1
percent and 3.6 percent, so the proposed merger
would increase the four-firm concentration index for
the state as a whole from 31.6 percent to 32.0 percent.
For the reasons stated above, we conclude that the
proposed merger would have a slightly adverse effect
on competition in Marion County and Mississippi as a
whole.
FIRST PEOPLES NATIONAL BANK OF NEW JERSEY,
Haddon Township (P. O. Westmont), N.J., and The Provident Bank of New Jersey, Willingboro, N.J.
Banking offices
Name of bank and type of transaction
Total assets'
In
To be
operation operated
The Provident Bank of New Jersey, Willingboro, N.J., with
was purchased Dec. 31, 1976, by First Peoples National Bank of New Jersey, Haddon Township, (P.O. Westmont), N.J. (399), which had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
First Peoples National Bank of New Jersey, Haddon
Township, N.J. ("Purchasing Bank"), has made application to the Comptroller of the Currency for prior permission to purchase the assets and assume the
liabilities of The Provident Bank of New Jersey, Willingboro, N.J. ("Selling Bank"). The subject application
rests upon an agreement executed between the pro* Asset figures are as of call dates immediately before and after
transaction.
$35,642,000
4
555,861,000
606,575,000
36
40
ponent banks and is incorporated herein by reference
the same as if fully set forth.
Purchasing Bank, the 15th largest commercial banking organization with headquarters domiciled within
the state of New Jersey, was chartered as a national
banking association on April 25, 1864. As of June 30,
1976, Purchasing Bank held total deposits of $477.4
million and operated 34 banking offices throughout
seven southern New Jersey counties.
Selling Bank, which had total deposits of $32.3 million as of mid-year 1976, was established in 1959 as
105
an independent state-chartered, non-member commercial banking institution. In 1973, Selling Bank became a wholly-owned subsidiary of a registered
multi-bank holding company, Greater Jersey Bancorp,
West Paterson, N.J., the sixth largest commercial banking organization in the state. Selling Bank currently operates four banking offices in Willingboro and has an
application pending for the establishment of a branch
office in Berlin, N.J.
The main office of Purchasing Bank is located approximately 15 miles southwest of the head office of
Selling Bank. The closest offices of the proponent
banks are Purchasing Bank's three offices in Cherry
Hill, and Selling Bank's main office in Willingboro, approximately 14 road miles apart. There are however,
offices of other banks in the intervening area; and the
area is largely undeveloped, with road traffic limited by
certain geographic barriers. It, therefore, appears that
only a negligible degree of existing competition exists
between the proponent banks, and approval of this
proposal would not have the effect of eliminating any
meaningful competition between the two banks.
Applicable state branching statutes permit de novo
branching by commercial banks into all municipalities
except those in which another banking institution maintains its head office and those municipalities with
populations less than 20,000 persons. As of January 1,
1977, the population requirement becomes 10,000
inhabitants. Inasmuch as this Office denied an application in early 1975 sponsored by Purchasing Bank to establish a de novo branch in Willingboro, it appears
highly unlikely that Purchasing Bank could be perceived as a potential entrant into the Willingboro area
via de novo expansion in the near future.
As aforenoted herein, Selling Bank has been affiliated with Greater Jersey Bancorp since 1973.
Greater Jersey Bancorp's primary banking operations
have been concentrated, with the exception of Selling
Bank, in northern New Jersey. Selling Bank was acquired apparently to afford the holding company a
foothold representation in southern New Jersey from
which to expand throughout the southern portion of the
state. To date, that expansion has not materialized,
and it appears that Selling Bank has been largely neglected by its parent bank holding company. In an effort to improve its earnings and loss of customers deposits, Selling Bank has curtailed certain banking services to its customers, thereby resulting in an
increasingly severe competitive disadvantage and
further in a disservice to the banking public.
First Peoples National Bank of New Jersey has managers who are considered by this Office to be competent and capable bankers; the bank also has the financial capacity to aid Selling Bank's representation to be
that of a more aggressive and effectual competitor in
the Willingboro area. Purchasing Bank is regarded as
a retail-oriented institution and the banking public will
be well served by the introduction of new and expanded banking services.
Therefore, applying the statutory criteria, it is the
conclusion of the Office of the Comptroller of the Currency that any slightly adverse competitive consequences of this proposal are clearly outweighed by the
106
convenience and needs of the banking public and the
more favorable future prospects of the combined
institution because of the financial and managerial resources of Purchasing Bank. This application is thus
deemed to be in the public interest and should be, and
hereby is, approved.
December 1, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Applicant's sole Burlington County office is located
approximately 55 miles from the Willingboro trade
area. However, Applicant's main office in Haddon
Township is approximately 15 miles southwest of Willingboro, and it operates three offices in Cherry Hill,
N.J., the nearest of which is 8.9 air miles (13.6 road
miles) from Willingboro. Although the area between the
service areas of Bank and Applicant is largely undeveloped and road traffic is limited by certain geographic obstructions, it appears likely that some competition presently exists between the parties. In particular, it should be noted that, according to a New Jersey
Department of Labor Survey in 1973, approximately 56
percent of Willingboro's workers commuted to places
outside of Burlington County for their employment — of
these, approximately 49 percent traveled to Philadelphia
County and 18 percent to Camden County for their employment. Given these commutation patterns and the
proximity of the trade areas, it appears likely that a moderate degree of competition currently exists between
Applicant and Bank. As a result, the proposed acquisition will eliminate existing direct competition to some extent.
Applicant, the 12th largest commercial banking
institution in New Jersey, ranks third in total deposits
among banks competing in Camden County. Given
Applicant's size, its considerable growth in recent
years and the similarity between the Camden County
and Willingboro markets, Applicant would appear to
be a likely potential entrant into the growing western
Burlington County market. New Jersey law permits de
novo branching by commercial banks in any municipality in the state except for municipalities in which
another banking institution maintains its principal office
and whose population is less than 20,000. As of January 1, 1977, the population requirement becomes
10,000. Applicant, in fact, recently filed an application
to establish a de novo branch in Willingboro. However,
this application was denied in early 1975 on the
grounds, inter alia, that Applicant lacked sufficient
existing customers in the trade area to justify granting
a branch application in Willingboro. Applicant acknowledges that should this acquisition be denied it
would "no doubt refile at some remote future point" to
establish a branch in the Willingboro area. It thus appears that the Applicant is a likely entrant into the market at some future time. However, given Applicant's
recent unsuccessful attempt to establish a de novo
branch in Willingboro, it appears that entry by Applicant is unlikely in the near term.
Bank, although it has less than 5 percent of the total
deposits among commercial banks in Burlington
County, is nevertheless the largest competitor in the
Willingboro market. Thus, the proposed merger would
combine a potential entrant into the Willingboro market
with the dominant competitor there. Moreover, even if
de novo entry by Applicant were not possible, the
proposed acquisition would foreclose the possibility of
entry by Applicant by means of a merger with one of
the small banks in the area. Accordingly, the proposed
acquisition would have an adverse effect on potential
competition.
In sum, the proposed acquisition, overall, would
have an adverse competitive effect.
MIDLANTIC NATIONAL BANK,
Newark, N.J., and Midlantic National Bank/West, Morristown, N.J.
Banking offices
Name of bank and type of transaction
Total assets
In
To be
operation operated
Midlantic National Bank/West, Morristown, N.J. (15360), with
and Midlantic National Bank, Newark, N.J. (1316), which had
merged Dec. 31, 1976, under charter and title of the latter bank (1316). The merged bank
at date of merger had
COMPTROLLER'S DECISION
Midlantic National Bank/West, Morristown, N.J. ("Merging Bank"), and Midlantic National Bank, Newark, N.J.
("Charter Bank"), have applied to the Comptroller of
the Currency for prior permission to effectuate a
merger under the charter, and with the title of, Midlantic National Bank. The subject application rests upon
an agreement executed between the proponent banks
and is incorporated herein by reference, the same as if
fully set forth.
Both Merging Bank and Charter Bank are whollyowned, except for directors' qualifying shares, by the
third largest multi-bank holding company headquartered in New Jersey, Midlantic Banks, Inc., Newark,
N.J. Merging Bank was chartered as a national banking association on July 24, 1964, and, as of June 30,
1976, had commercial bank deposits aggregating approximately $34 million. Charter Bank is headquartered
in Newark, 34 of its 38 banking offices are located in
Essex County, and serves as a head bank for its parent bank holding company. As of mid-year 1976, Charter Bank had total deposits of $829.5 million. Because
of the common ownership and control existing between Merging Bank and Charter Bank, there is no
$
40,219,000
1,000,472,000
1,040,691,000
8
39
47
present competition between these two banks nor is
there any potential for increased competition in the future.
This application is considered essentially as a corporate reorganization of Midlantic Banks, Inc. The surviving institution should realize certain operating efficiencies and increased profitability. Furthermore, the
banking public will continue to be served by a source
of full-service commercial banking.
Accordingly, applying the statutory criteria, it is the
conclusion of the Office of the Comptroller of the Currency that this proposal is not adverse to the public
interest and should be, and hereby is, approved. This
proposal may not be consummated prior to the statutory waiting period, nor prior to receipt by this Office of
evidence of publication requirements pursuant to Sections 215(a) and 1828(c) of the United States Code.
November 29, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The merging
sidiaries of the
their proposed
ganization and
banks are both wholly-owned subsame bank holding company. As such,
merger is essentially a corporate reorwould have no effect on competition.
107
UNION CHELSEA NATIONAL BANK,
New York, N.Y., and Chelsea National Bank, New York, N.Y.
Banking offices
Name of bank and type of transaction
Total assets *
Chelsea National Bank, New York, N.Y. (15428), with
was purchased Dec. 31, 1976, by Union Chelsea National Bank, New York, N.Y. (16629), which
had
After the purchase was effected, the receiving bank had
COMPTROLLER'S DECISION
Union Chelsea National Bank, New York, N.Y.
("UCNB"), has made application to the Comptroller of
the Currency for prior permission to purchase the assets and assume the liabilities of Chelsea National
Bank, New York, N.Y. ("Chelsea"). This application has
been processed pursuant to the emergency provisions
of the National Bank Act, as set forth in 12 USC 181
and the Bank Merger Act of 1966, as set forth in 12
USC 1828(c). Also, the decision of the Comptroller is
rendered pursuant to an agreement executed between
the proponent banks upon which the instant application rests and is incorporated herein by reference, the
same as if fully set forth.
UCNB, the assuming bank, was, on December 20,
1976, granted preliminary approval to organize by the
Office of the Comptroller of the Currency and, to date,
has no operating history.
Chelsea was chartered as a national banking association on November 13, 1964 and, as of September
30, 1976, held total commercial bank deposits aggregating $28.7 million. In addition to its main office
located in the Chelsea district of Manhattan, Chelsea
operates one branch office in the financial district (111
John Street), and one branch in the theatrical district
(7th Avenue and 53rd Street).
Chelsea was visited by representatives of the Office
of the Comptroller of the Currency on October 26,
1976, for the purpose of examining the bank's operations and determining its overall condition. Examiners
indicated that there had been further deterioration in
Chelsea's loan portfolio since the previous examination; loan losses classified by examiners at the October 1976 examination aggregated approximately
$763,000. Subsequent to those loan charge-offs,
Chelsea's gross capital funds were $528,000, an
amount woefully inadequate to support the bank's
scope of operation. Additionally, operating losses for
Chelsea had continued to mount and, as of examination date, were averaging $60,000 per month.
On December 8, 1976, examiners for the Comptroller again visited Chelsea; at that time, it was determined that additional loan losses amounting to
$429,000 existed. The bank's equity capital was only
$400,000 at the time. Efforts by the bank's directors
* Asset figures are as of call dates immediately before and after
transaction.
108
In
To be
operation operated
$31,724,000
1,006,005
31,174,000
and shareholders to raise new capital funds have been
without success.
In view of the record in this matter, it is the conclusion of this Office that an emergency situation exists
which requires expeditious action by the Comptroller's
Office. Consistent with the applicable provisions of 12
USC 181, the Comptroller of the Currency hereby specifically waives the requirement for shareholder approval by owners of Chelsea's stock.
Pursuant to the Bank Merger Act of 1966, 12 USC
1828(c), the Comptroller of the Currency cannot approve a purchase and assumption transaction which
would have certain proscribed anticompetitive effects
unless he finds those anticompetitive effects to be
clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served. Additionally, the Comptroller is directed to consider the financial and managerial resources and future prospects of the existing and proposed institution and the
convenience and needs of the community to be
served. When necessary, however, to prevent the evils
attendant upon the failure of a bank, the Comptroller
can dispense with the uniform standards applicable to
usual acquisition transactions and need not consider
reports on the competitive consequences of the transaction ordinarily solicited from the Department of Justice and other banking agencies. He is authorized in
such circumstances to act immediately, in his sole discretion, to approve an acquisition and to authorize the
immediate consummation of the transaction.
The proposed acquisition will be in accord with all
pertinent provisions of the National Banking Act and
will prevent a disruption of banking services to the
community and potential losses to a number of uninsured depositors. The assuming bank will have
strong financial and managerial resources and the acquisition will enable it to enhance the banking services
offered in the New York City area. Thus, the approval
of this transaction will help to avert a loss of public
confidence in the banking system and should improve
the services offered to the banking public.
The Comptroller finds that there are no anticompetitive effects of the proposed transaction. For those
reasons, the assuming bank's application to purchase
the assets and to assume the liabilities of Chelsea as
set forth in their agreement is approved. The Comptroller further finds that the possible failure of Chelsea requires him to act immediately, as contemplated by the
Bank Merger Act, to prevent disruption of banking services to the community; the Comptroller thus waives
publication of notice, dispenses with the solicitation of
competitive reports from other agencies, authorizes
UCNB to operate all former offices of Chelsea as
branches of UCNB and, further, authorizes the transaction to be consummated immediately.
December 31, 1976.
Due to the emergency nature of the situation, no Attorney General's report was requested.
//. Mergers consummated, involving a single operating bank.
GATEWAY NATIONAL BANK OF FORT WORTH,
Fort Worth, Tex., and Circle National Bank of Fort Worth, Fort Worth, Tex.
Banking offices
Name of bank and type of transaction
Total assets*
In
To be
operation operated
Gateway National Bank of Fort Worth, Fort Worth, Tex. (14962), with
and Circle National Bank of Fort Worth, Fort Worth, Tex. (14962), which had
merged Jan. 5, 1976, under the charter of the latter bank (14962) and title "Gateway
National Bank of Fort Worth." The merged bank at date of merger had
COMPTROLLER'S DECISION
On March 8, 1974, Gateway National Bank of Fort
Worth, Fort Worth, Tex., and Circle National Bank of
Fort Worth (organizing), Fort Worth, Tex., applied to the
Comptroller of the Currency for permission to merge
under the charter of the latter and the title of the
former.
Gateway National Bank of Fort Worth, the merging
bank, was chartered in 1962 and has assets of $18.9
million and IPC deposits of $15.7 million. The merging
bank is the 25th largest of the 46 banks in the Fort
Worth area.
Circle National Bank of Fort Worth (organizing), the
charter bank, is being organized to provide a vehicle
by which to transfer ownership of the merging bank to
First United Bancorporation, Inc., Fort Worth, a multibank holding company with aggregate deposits of
$760.3 million. The charter bank will not be operating
as a commercial bank prior to the merger.
Consummation of the proposed transaction will result in no adverse competitive effects. The merging
bank has had a long-standing relationship with the
holding company, including legal affiliation with the
* Asset figures are as of call dates immediately before and after
transaction.
$24,695,000
120,000
25,456,000
1
0
1
holding company's largest subsidiary, The First National Bank of Fort Worth, since 1972. The closest subsidiary of the holding company, Security State Bank, is
located 5 miles from the merging bank, with several alternative banking facilities situated in the intervening
area.
Applying the statutory criteria, it is concluded that
the proposed transaction is in the public interest and
this application is, therefore, approved.
December 5, 1975.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This is in reply to your letter of March 13, 1974, requesting a report pursuant to Section 18(c) of the Federal Deposit Insurance Act on the competitive factors
involved in the proposed merger of Gateway National
Bank of Fort Worth, Fort Worth, Tex., and Circle National Bank of Fort Worth (org.), Fort Worth, Tex.
The proposed merger is part of a plan through which
Gateway National Bank of Fort Worth would become a
subsidiary of First United Bancorporation, Inc., a bank
holding company. The instant merger, however, would
merely combine an existing bank with a non-operating
institution; as such, and without regard to the acquisition of the surviving bank by First United Bancorporation, Inc., it would have no effect on competition.
109
COMMERCIAL NATIONAL BANK,
Cassopolis, Mich., and C National Bank, Cassopolis, Mich.
Total assets*
Name of bank and type of transaction
Banking offices
Commercial National Bank, Cassopolis, Mich. (16371), with
and C National Bank, Cassopolis, Mich. (16371), which had
merged Mar. 11, 1976, under charter of the latter bank (16371) and title "Commercial
National Bank." The merged bank at date of merger had
COMPTROLLER'S DECISION
On November 19, 1974, C National Bank, (organizing),
Cassopolis, Mich., and Commercial National Bank,
Cassopolis, Mich., applied to the Comptroller of the
Currency for permission to merge under the charter of
the former and with the title of the latter.
Commercial National Bank, the existing bank, was
organized in 1864 and presently operates six
branches. It has total assets of $54.5 million and IPC
deposits of $38.9 million. The primary service area of
this bank encompasses central and southern Cass
County, southwestern St. Joseph County and the city
of Niles, all of which are located in Michigan; and
northern Elkart County, Ind.
Direct competition for Commercial National Bank is
provided by First National Bank of Southwestern
Michigan, Niles, with deposits of $109 million; First National Bank and Trust Company, Sturgis, with deposits
of $29.1 million; Community State Bank of Dowagiac,
with deposits of $13.5 million; and First National Bank
of Cassopolis, with deposits of $13.2 million.
C National Bank is being organized to provide a vehicle by which to transfer ownership of Commercial National Bank to Michigan National Corporation. Bloomfield
Hills, Mich. The new bank will not be operating as a
commercial bank prior to this merger.
Michigan National Corporation, the bank holding
company which will acquire the resulting bank was organized in 1972 and presently is the third largest bank
holding company in Michigan. It controls nine banks
with aggregate deposits of $2.5 billion. The two largest
subsidiaries are Michigan National Bank, Lansing, with
deposits of $1.3 billion, and Michigan National Bank of
Detroit, with deposits of $881 million. Michigan Na* Asset figures are as of call dates immediately before and after transaction.
Digitized for 110
FRASER
$60,585,000
120,000
67,622,000
OCX)
In
To be
operation operated
8
tional Corporation also controls two bank-related subsidiaries which specialize in leasing and auditing.
There is no competition between Michigan National
Corporation or its subsidiaries and Commercial National Bank because their nearest offices are separated by a distance of 35 miles and an adequate
number of alternative banking facilities operate
in the intervening area.
Consummation of the proposed merger will stimulate
competition in the service area of the resulting subsidiary because it will be able to offer new and improved services, such as commercial and mortgage
lending, investment banking, trust services and
international banking. The acquisition of the existing
bank by Michigan National Corporation will result in an
economy of operation which will be reflected in
increased profits for that bank.
Applying the statutory criteria, it is concluded that
the proposed merger is in the public interest and this
application is, therefore, approved.
February 9, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This is in reply to your letter of November 20, 1974, requesting a report pursuant to'Section 18(c) of the Federal Deposit Insurance Act on the competitive factors
involved in the proposed merger of Commercial National Bank, Cassopolis, Mich., and C National Bank
(org.), Cassopolis, Mich.
The proposed merger is part of a plan through which
Commercial National Bank would become a subsidiary
of Michigan National Corporation, a bank holding
company. The instant merger, however, would merely
combine an existing bank with a non-operating institution; as such, and without regard to the acquisition of
the surviving bank by Michigan National Corporation, it
would have no effect on competition.
AMERICAN SECURITY AND TRUST COMPANY, NATIONAL ASSOCIATION,
Washington, D.C., and American Security and Trust Company, Washington, D.C.
Banking offices
Name of bank and type of transaction
Total assets*
American Security and Trust Company, Washington, D.C, with
and American Security and Trust Company, National Association, Washington, D.C. (16565),
which had
merged Mar. 31, 1976, under charter and title of the latter bank (16565). The merged bank
at date of merger had
COMPTROLLER'S DECISION
On July 31, 1975, the American Security and Trust
Company, Washington, D.C., and the American Security and Trust Company, National Association (organizing), Washington, D.C., applied to the Comptroller of
the Currency for permission to merge under the charter and with the title of American Security and Trust
Company, National Association.
American Security and Trust Company, the merging
bank, is headquartered in Washington, D.C., and has
30 banking offices in the District of Columbia and one
foreign branch in Nassau, Bahamas. The bank, with
total assets of 1.2 billion and IPC deposits of $725.7
million was originally chartered in 1889.
American Security and Trust Company, National Association, the charter bank, is being organized to provide a vehicle by which to transfer ownership of the
merging bank to the American Security Corporation
which will become a one-bank holding company upon
its acquisition of the resulting bank. The charter bank
will not be operating as a commercial bank prior to the
merger.
Because the merging bank is the only operating
bank involved in the proposed transaction, there can
* Asset figures are as of call dates immediately before and after transaction.
In
To be
operation operated
$1,122,122,000
31
240,000
0
1,052,219,000
31
be no adverse effect on competition resulting from
consummation of the proposed merger. The resulting
bank will conduct the same banking business at the
same locations and with almost the same name as presently used by the merging bank.
Applying the statutory criteria, it is concluded that
the proposed merger is in the public interest and this
application is, therefore, approved.
February 25, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This is in reply to your letter of July 31, 1975, requesting a report pursuant to Section 18(c) of the Federal
Deposit Insurance Act on the competitive factors
involved in the proposed merger of American Security
and Trust Company, Washington, D.C. and American
Security and Trust Company, N.A. (org.), Washington,
D.C.
The proposed merger is part of a plan through which
American Security and Trust Company would become
a subsidiary of American Security Corporation, a bank
holding company. The instant merger, however, would
merely combine an existing bank with a non-operating
institution; as such, and without regard to the acquisition of the surviving bank by American Security Corporation, it would have no effect on competition.
THE FIRST NATIONAL BANK OF NEW BRAUNFELS,
New Braunfels, Tex., and New Braunfels Commerce Bank National Association, New Braunfels, Tex.
Banking offices
Total assets*
Name of bank and type of transaction
In
To be
operation operated
The First National Bank of New Braunfels, New Braunfels, Tex. (4295), with
and New Braunfels Commerce Bank National Association, New Braunfels, Tex. (4295), which
had
merged Apr. 16, 1976, under charter of the latter bank (4295) and title "First National
Bank of New Braunfels." The merged bank at date of merger had
COMPTROLLER'S DECISION
On August 6, 1975, New Braunfels Commerce Bank,
National Association (organizing), New Braunfels, Tex.,
and First National Bank of New Braunfels, New Braunfels, Tex., applied to the Comptroller of the Currency
for permission to merge under the charter of New
* Asset figures are as of call dates immediately before and after transaction.
$31,452,000
1
120,000
0
33,272,000
Braunfels Commerce Bank, National Association, and
with the title "First National Bank of New Braunfels."
The proposed merger is part of a plan through which
First National Bank of New Braunfels will become a
wholly-owned subsidiary of Texas Commerce
Bancshares, Inc., Houston, Tex., a registered bank
holding company.
Applying the statutory criteria, it is concluded that
the merger will merely combine an existing bank with a
non-operating institution; as such, and without regard
111
to the acquisition of the surviving bank by Texas
Commerce Bancshares, Inc., there will be no effect on
competition.
This application, therefore, should be, and hereby is,
approved.
March 17, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This is in reply to your letter of August 6, 1975, requesting a report pursuant to Section 18(c) of the Federal
Deposit Insurance Act on the competitive factors
involved in the proposed merger of The First National
Bank of New Braunfels, New Braunfels, Tex., and New
Braunfels Commerce Bank National Association (org.),
New Braunfels, Tex.
The proposed merger is part of a plan through which
The First National Bank of New Braunfels would become a wholly-owned subsidiary of Texas Commerce
Bancshares, Inc., a bank holding company. The
instant merger, however, would merely combine an
existing bank with a non-operating institution; as such,
and without regard to the acquisition of the surviving
bank by Texas Commerce Bancshares, Inc., it would
have no effect on competition.
THE GEAUGA COUNTY NATIONAL BANK OF CHARDON,
Chardon, Ohio, and The G. C. National Bank, Chardon, Ohio
Banking offices
Name of bank and type of transaction
Total assets*
In
To be
operation operated
COMPTROLLER'S DECISION
On January 14, 1976, The Geauga County National
Bank of Chardon, Chardon, Ohio, and The G. C. National Bank (organizing), Chardon, Ohio, applied to the
Comptroller of the Currency for permission to merge
under the charter of G. C. National Bank and with the
title, The Geauga County National Bank of Chardon.
The proposed merger is part of a plan through which
The Geauga County National Bank of Chardon will become a wholly-owned subsidiary of BancOhio Corporation, Columbus, Ohio, a bank holding company.
Applying the statutory criteria, it is concluded that
the instant merger will merely combine an existing
bank with a non-operating institution; as such, and
without regard to the acquisition of the surviving bank
* Asset figures are as of call dates immediately before and after transaction.
112
$16,918,000
125,000
21,200,000
COO
The Geauga County National Bank of Chardon, Chardon, Ohio (14879), with
and The G. C. National Bank, Chardon, Ohio (14879), which had
merged Apr. 29, 1976, under charter of the latter bank (14879) and title "The Geauga County
National Bank of Chardon." The merged bank at date of merger had
3
by BancOhio Corporation, it will have no effect on
competition. This application is, therefore, approved.
March 11, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This is in reply to your letter of January 14, 1976, requesting a report pursuant to Section 18(c) of the Federal Deposit Insurance Act on the competitive factors
involved in the proposed merger of Geauga County
National Bank of Chardon, Chardon, Ohio, and G. C.
National Bank (org.), Chardon, Ohio.
The proposed merger is part of a plan through which
Geauga County National Bank of Chardon would become a subsidiary of BancOhio Corporation, a bank
holding company. The instant merger, however, would
merely combine an existing bank with a non-operating
institution; as such, and without regard to the acquisition of the surviving bank by BancOhio Corporation it
would have no effect on competition.
THE FIRST NATIONAL BANK OF SAN JOSE,
San Jose, Calif., and F. N. National Bank, San Jose, Calif.
Banking offices
Total assets*
Name of bank and type of transaction
In
To be
operation operated
The First National Bank of San Jose, San Jose, Calif. (2158), with
and F. N. National Bank, San Jose, Calif. (2158), which had
merged June 16, 1976, under charter of the latter bank (2158) and title "The First National
Bank of San Jose." The merged bank at date of merger had
COMPTROLLER'S DECISION
The First National Bank of San Jose, San Jose, Calif.,
and F. N. National Bank (organizing), San Jose, Calif.,
have applied to the Comptroller of the Currency for
permission to merge under the charter of the latter and
with the title of the former.
The First National Bank of San Jose, the merging
bank, is the 17th largest commercial bank in the state
of California, and is the fifth largest banking organization in the market area (approximated by Santa Clara,
Alameda and San Mateo counties). The bank has total
deposits of approximately $299 million.
The proposed merger is the facility whereby the acquisition of The First National Bank of San Jose by First
National Bancshares Inc., San Jose, a proposed bank
holding company, will be accomplished. The instant
merger would have the effect of merely combining an
existing commercial bank with a non-operating institution, and as such, without regard to the proposed acquisition of the surviving bank by First National
* Asset figures are as of call dates immediately before and after
transaction.
$360,007,000
256,250
34
0
34
381,161,000
Bancshares Inc., would have no adverse effect upon
competition in the relevant banking market.
Consequently, applying the statutory criteria, it is
concluded that the proposed merger is not adverse to
the public interest. Accordingly, this application should
be, and hereby is, approved.
April 30, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This is in reply to your letter of January 8, 1976, requesting a report pursuant to Section 18(c) of the Federal Deposit Insurance Act on the competitive factors
involved in the proposed merger of First National Bank
of San Jose, San Jose, Calif, and F. N. National Bank
(org.), San Jose, Calif.
The proposed merger is part of a plan through which
First National Bank of San Jose would become a subsidiary of First National Bancshares Inc., a bank holding company. The instant merger, however, would
merely combine an existing bank with a non-operating
institution; as such, and without regard to the acquisition of the surviving bank by First National Bancshares
Inc., it would have no effect on competition.
THE FIRST NATIONAL BANK OF TROUTVILLE,
Troutvllle, Va., and Troutville Bank, N. A., Troutville, Va.
Banking offices
Total assets*
Name of bank and type of transaction
In
To be
operation operated
The First National Bank of Troutville, Troutville, Va. (9764), with
and Troutville Bank, N. A., Troutville, Va. (9764), which had
merged July 1, 1976, under charter of the latter bank (9764) and title "The First National
Bank of Troutville." The merged bank at date of merger had
COMPTROLLER'S DECISION
The First National Bank of Troutville, Troutville, Va., and
Troutville Bank, N. A. (organizing), Troutville, Va., have
applied to the Comptroller of the Currency for permission to merge under the charter of the latter and with
the title of the former.
The First National Bank of Troutville, the merging
bank, was chartered in 1910, and currently has deposits of approximately $11 million. In addition to its
main office in Troutville, The First National Bank of
* Asset figures are as of call dates immediately before and after
transaction.
$12,486,000
60,000
2
0
13,249,000
Troutville operates one branch office in Daleville, Va.,
approximately 5 miles east of Troutville.
The proposed merger is the facility whereby the acquisition of The First National Bank of Troutville by Valley of Virginia Bankshares, Inc., Harrisonburg, a
multi-bank holding company, will be accomplished.
The instant merger would have the effect of merely
combining an existing commercial bank with a nonoperating institution, and as such, without regard to the
proposed acquisition of the surviving bank by Valley of
Virginia Bankshares, Inc., would have no adverse effect upon competition in the relevant banking market.
Consequently, applying the statutory criteria, it is
concluded that the proposed merger is not adverse to
113
the public interest. Accordingly, this application should
be, and hereby is, approved.
May 19, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This is in reply to your letter of February 27, 1976, requesting a report pursuant to Section 18(c) of the Federal Deposit Insurance Act on the competitive factors
involved in the proposed merger of Troutville Bank,
N.A. (org.), Troutville, Va., and First National Bank of
Troutville, Troutville, Va.
The proposed merger is part of a plan through which
First National Bank of Troutville would become a subsidiary of Valley of Virginia Bankshares, Inc., a bank
holding company. The instant merger, however, would
merely combine an existing bank with a non-operating
institution; as such, and without regard to the acquisition of the surviving bank by Valley of Virginia
Bankshares, Inc., it would have no effect on competition.
THE FIRST NATIONAL BANK OF ELYRIA,
Elyria, Ohio, and FNB National Bank, Elyria, Ohio
Banking offices
Total assets*
Name of bank and type of transaction
In
To be
operation operated
First National Bank of Elyria, Elyria, Ohio (14968), with
and FNB National Bank, Elyria, Ohio (14968), which had
consolidated Aug. 16, 1976, under charter and title of "The First National Bank of Elyria"
(14968). The consolidated bank at date of consolidation had
COMPTROLLER'S DECISION
The First National Bank of Elyria, Elyria, Ohio, the Charter Bank ("Elyria Bank"), and FNB National Bank (organizing), Elyria, Ohio ("FNB"), have applied to the
Comptroller of the Currency for prior permission to effectuate a consolidation of the proponent banks under
the charter and with the title of The First National Bank
of Elyria. The decision of the Office of the Comptroller
of the Currency is rendered pursuant to an agreement
executed between Elyria Bank and FNB, upon which
the instant application rests, and such agreement is
herein incorporated by reference, the same as if fully
set forth.
Elyria Bank was chartered as a national banking association on April 13, 1962 and, as of March 31, 1976,
controlled total commercial bank deposits of $30.8 million, representing approximately 0.1 percent of commercial bank deposits in the state of Ohio.
The proposed consolidation is the facility whereby
the acquisition of The First National Bank of Elyria by
National City Corporation, Cleveland, Ohio, will be accomplished. The instant consolidation would merely
combine an existing commercial bank with a non* Asset figures are as of call dates immediately before and after
transaction.
114
$34,988,000
240,000
36,192,000
operating institution, and as such, without regard to the
proposed acquisition of the surviving bank by National
City Corporation, would have no adverse effect upon
competition within the relevant banking market.
Consequently, applying the statutory criteria, it is the
conclusion of this Office that the instant proposed
transaction is not adverse to the public interest. Accordingly, this application should be, and hereby is,
approved.
July 16, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This is in reply to your letter of June 16, 1976, requesting a report pursuant to Section 18(c) of the Federal
Deposit Insurance Act on the competitive factors
involved in the proposed consolidation of FNB National
Bank, Elyria, Ohio (org.) and First National Bank of
Elyria, Elyria, Ohio.
The proposed consolidation is part of a plan through
which First National Bank of Elyria would become a
subsidiary of National City Corporation, a bank holding
company. The instant transaction, however, would
merely combine an existing bank with a non-operating
institution; as such, and without regard to the acquisition of the surviving bank by National City Corporation,
it would have no effect on competition.
THE FIRST NATIONAL BANK OF HENDERSON,
Henderson, Tex., and South Main & Richardson National Bank, Henderson, Tex.
Banking offices
Name of bank and type of transaction
Total assets*
In
To be
operation operated
The First National Bank of Henderson, Henderson, Tex. (6176), with
and South Main & Richardson National Bank, Henderson, Tex. (6176), which had
merged Oct. 1, 1976, under charter of the latter bank (6176) and title "The First National
Bank of Henderson." The merged bank at date of merger had
COMPTROLLER'S DECISION
The First National Bank of Henderson, Henderson,
Tex., and South Main & Richardson National Bank (organizing), Henderson, Tex., have applied to the Comptroller of the Currency for prior permission to merge
under the charter of South Main & Richardson National
Bank, and with the title of The First National Bank of
Henderson.
The First National Bank of Henderson, Henderson,
Tex., the merging bank, was chartered as a national
banking association on March 27, 1902, and as of December 31, 1975, held total commercial bank deposits
of $26.6 million, representing approximately 5.6 percent of the Longview banking market, approximated
by the whole of Gregg, Harrison and Rusk counties.
The proposed merger is the facility whereby the acquisition of the merging bank by Republic of Texas
Corporation, Dallas, Tex., the fourth largest banking
organization domiciled in Texas, will be accomplished.
The subject merger would merely combine an existing
commercial bank with a non-operating entity, and as
* Asset figures are as of call dates immediately before and after
transaction.
$31,062,000
130,000
33,574,000
such, without regard to the proposed acquisition of the
surviving institution by Republic of Texas Corporation,
would have no adverse effect upon competition within
the relevant market.
Accordingly, applying the statutory criteria, it is the
conclusion of this Office that the proposed merger is
not adverse to the public interest, and should be, and
hereby is, approved.
August 26, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
This is in reply to your letter of June 25, 1976, requesting a report pursuant to Section 18(c) of the Federal
Deposit Insurance Act on the competitive factors
involved in the proposed merger of First National Bank
of Henderson, Henderson, Tex., and South Main &
Richardson National Bank (org.), Henderson, Tex.
The proposed merger is part of a plan through which
First National Bank of Henderson would become a
subsidiary of Republic of Texas Corporation, a bank
holding company. The instant merger, however, would
merely combine an existing bank with a non-operating
institution; as such, and without regard to the acquisition of the surviving bank by Republic of Texas Corporation, it would have no effect on competition.
THE NATIONAL BANK OF LUDINGTON,
Ludington, Mich., and NBL National Bank, Ludington, Mich.
Banking offices
Name of bank and type of transaction
Total assets*
The National Bank of Ludington, Ludington, Mich. (14016), with
and NBL National Bank, Ludington, Mich. (14016), which had
consolidated Dec. 3, 1976, under the charter of the former (14016) and with the title
"National Bank of Ludington." The consolidated bank, at date of consolidation had
COMPTROLLER'S DECISION
The National Bank of Ludington, Ludington, Mich., the
charter bank, and NBL National Bank (organizing),
Ludington, Mich., the merging bank, have applied to
the Comptroller of the Currency for prior permission to
effectuate a consolidation under the charter, and with
the title of The National Bank of Ludington. The instant
application rests upon an agreement executed be* Asset figures are as of call dates immediately before and after
transaction.
In
To be
operation operated
$30,919,000
120,000
31,690,000
tween the proponent banks, and is incorporated herein
by reference, the same as if fully set forth.
The charter bank became a national banking association on February 19, 1934 and, as of March 31,
1976, had total commercial bank deposits of $29.4 million.
The proposed consolidation is the facility whereby
the acquisition of The National Bank of Ludington by
First National Financial Corporation, Kalamazoo, Mich.,
a registered multi-bank holding company, will be accomplished. The instant transaction would merely
combine an existing commercial bank with a non115
operating institution, and as such, without regard to the
proposed acquisition of the surviving bank by First National Financial Corporation, would have no effect upon
competition within the Ludington banking market.
Accordingly, applying the statutory criteria, it is the
conclusion of the Office of the Comptroller of the Currency that the subject proposal is not adverse to the
public interest and should be, and hereby is, approved.
October 22, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed consolidation is part of a plan through
which National Bank of Ludington would become a
subsidiary of First National Financial Corporation, a
bank holding company. The instant transaction, however, would merely combine an existing bank with a
non-operating institution; as such, and without regard
to the acquisition of the surviving bank by First National Financial Corporation, it would have no effect on
competition.
ALAMO HEIGHTS NATIONAL BANK,
Alamo Heights, Tex., and Heights Bank, National Association, Alamo Heights, Tex.
Banking offices
Total assets*
Name of bank and type of transaction
In
operation
Alamo Heights National Bank, Alamo Heights, Tex. (15514), with
and Heights Bank, National Association, Alamo Heights, Tex. (15514), which had
merged Dec. 31, 1976, under charter of the latter bank (15514) and title "Alamo Heights
National Bank." The merged bank at date of merger had
COMPTROLLER'S DECISION
Alamo Heights National Bank, Alamo Heights, Tex.
("Merging Bank"), and Heights Banks, National Association (organizing), Alamo Heights, Tex. ("Charter
Bank"), have applied to the Comptroller of the Currency for prior permission to effectuate a merger under
the charter of Heights Bank, National Association, and
with the title of Alamo Heights National Bank. The subject application rests upon an agreement executed between the proponent banks, and is incorporated herein
by reference, the same as if fully set forth.
Merging Bank was chartered as a national banking
association on May 10, 1965, and as of June 30, 1976,
held total deposits of $30.8 million. Charter Bank is a
newly created institution, and has no operating history.
The proposed merger is the facility whereby Merging Bank will become a wholly-owned, less directors'
qualifying shares, subsidiary of the largest banking organization headquartered in the state of Texas, First
International Bancshares, Inc., Dallas, Tex. As of December 31, 1975, First International Bancshares, Inc.
* Asset figures are as of call dates immediately before and after
transaction.
116
$33,635,000
125,000
35,756,000
To be
operated
•j
0
-j
controlled 23 commercial banking subsidiaries with
aggregate deposits of approximately $3.6 billion, 7.6
percent of the state deposits. This merger would have
the effect of merely combining an existing commercial
bank with a non-operating entity, and as such, disregarding the proposed acquisition of the surviving
institution by First International Bancshares, Inc., would
have no adverse competitive effect within the San Antonio SMSA, the approximate relevant banking market.
Accordingly, applying the statutory criteria, it is the
conclusion of the Office of the Comptroller of the Currency that the proposed transaction is in the public
interest,-and should be, and hereby is, approved.
December 1, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger is part of a plan through which
Alamo Heights National Bank would become a subsidiary of First International Bancshares, Inc., a bank
holding company. The instant merger, however, would
merely combine an existing bank with a non-operating
institution; as such, and without regard to the acquisition of the surviving bank by First International
Bancshares, Inc., it would have no effect on competition.
FIRST NATIONAL BANK OF FREEPORT,
Freeport, III., and First Freeport Bank, National Association, Freeport,
Banking offices
Total assets*
Name of bank and type of transaction
In
To be
operation operated
First National Bank of Freeport, Freeport, III. (13695), with
and First Freeport Bank, National Association, Freeport, III. (13695), which had
merged Dec. 31, 1976, under charter of the latter bank (13695) and title "First National
Bank of Freeport." The merged bank at date of merger had
COMPTROLLER'S DECISION
First National Bank of Freeport, Freeport, III. ("Merging
Bank"), and First Freeport Bank, National Association
(organizing), Freeport, III. ("Charter Bank"), have
applied to the Comptroller of the Currency for prior
permission to effectuate a merger under the charter of
First Freeport Bank, National Association, and with the
title of First National Bank of Freeport. The instant application rests upon an agreement executed between
the proponent banks, and is incorporated herein by reference, the same as if fully set forth.
Merging Bank was chartered as a national banking
association on May 29, 1933 and, as of June 30, 1976,
held total commercial bank deposits of $69.6 million.
The proposed merger is the facility whereby the acquisition of Merging Bank by First Freeport Corporation, Freeport, III., a proposed one-bank holding company, will be accomplished. The instant merger would
merely have the effect of combining an existing com* Asset figures are as of call dates immediately before and after
transaction.
$79,640,000
130,000
2
0
83,601,000
mercial bank with a non-operating institution; and as
such, without regard to the proposed acquisition of the
surviving bank by First Freeport Corporation, would
have no adverse effect upon competition within the relevant banking market, approximated by the whole of
Stephenson County.
Accordingly, applying the statutory criteria, it is the
conclusion of the Office of the Comptroller of the Currency that the proposed merger is not adverse to the
public interest and should be, and hereby is, approved.
November 5, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger is part of a plan through which
First National Bank of Freeport would become a subsidiary of First Freeport Corporation, a bank holding
company. The instant merger, however, would merely
combine an existing bank with a non-operating institution; as such, and without regard to the acquisition of
the surviving bank by First Freeport Corporation, it
would have no effect on competition.
THE CHESTER NATIONAL BANK,
Chester, N.Y., and Chester Bank, N.A., Chester, N.Y.
Banking offices
Name of bank and type of transaction
Total assets*
in
To be
operation operated
The Chester National Bank, Chester, N.Y. (1349), with
and Chester Bank, N.A., Chester, N.Y. (1349), which had
merged Dec. 31, 1976, under charter of the latter bank (1349) and title "The Chester National
Bank." The merged bank at date of merger had
COMPTROLLER'S DECISION
The Chester National Bank, Chester, N.Y. ("Merging
Bank"), and Chester Bank, N.A., (organizing), Chester,
N.Y. ("Charter Bank"), have applied to the Comptroller
of the Currency for prior permission to effectuate a
merger under the charter of Chester Bank, N.A. and
with the title of The Chester National Bank. The instant
application rests upon an agreement executed between the proponent banks, and is incorporated herein
by reference, the same as if fully set forth.
The proposed merger is the facility whereby First
Commercial Banks Inc., Albany, N.Y., a registered
* Asset figures are as of call dates immediately before and after
transaction.
$53,286,000
60,000
51,606,000
10
0
10
multi-bank holding company with five commercial
banking subsidiaries that have total deposits of $1.4
billion, will be accomplished. The instant merger would
merely combine an existing commercial bank with a
non-operating institution, and as such, without regard
to the proposed acquisition of the surviving bank by
First Commercial Banks Inc., would have no adverse
effect upon competition within the relevant banking
market, approximated by Orange and Sullivan counties.
Accordingly, applying the statutory criteria, it is the
conclusion of the Office of the Comptroller of the Currency that the proposed transaction is not adverse to
the public interest and should be, and hereby is approved.
November 26, 1976.
117
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger is part of a plan through which
Chester National Bank would become a subsidiary of
First Commercial Banks Inc., a bank holding company.
The instant merger, however, would merely combine
an existing bank with a non-operating institution; as
such, and without regard to the acquisition of the surviving bank by First Commercial Banks Inc., it would
have no effect on competition.
THE ILLINOIS NATIONAL BANK OF SPRINGFIELD,
Springfield, III., and INB National Bank, Springfield, III.
Banking offices
Name of bank and type of transaction
Total assets*
In
To be
operation operated
The Illinois National Bank of Springfield, Springfield, III. (3548), with
and INB National Bank, Springfield, III. (3548), which had
merged Dec. 31, 1976, under charter of the latter bank (3548) and title "The Illinois
National Bank of Springfield." The merged bank at date of merger had
COMPTROLLER'S DECISION
On January 20, 1976, The Illinois National Bank of
Springfield, Springfield, III., and INB National Bank (organizing), Springfield, III., applied to the Comptroller of
the Currency for permission to merge under the charter of the latter and with the title of the former.
The proposed merger is part of a corporate reorganization through which The Illinois National Bank of
Springfield will become a wholly-owned subsidiary of
Illinois National Bancorp, Inc., Springfield, III., a bank
holding company.
Applying the statutory criteria, it is concluded that
the instant merger will merely combine an existing
* Asset figures are as of call dates immediately before and after
transaction.
$187,084,000
250,000
o
0
o
205,959,000
bank with a non-operating institution, as such, and
without regard to the acquisition of the surviving bank
by Illinois National Bancorp, Inc., it will have no effect
on competition. This application is, therefore, approved.
May 5, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger is part of a plan through which Illinois National Bank of Springfield would become a
subsidiary of Illinois National Bancorp, Inc., a bank
holding company. The instant merger, however, would
merely combine an existing bank with a non-operating
institution; as such, and without regard to the acquisition of the surviving bank by Illinois National Bancorp,
Inc., it would have no effect on competition.
WILLIAMSTOWN NATIONAL BANK,
Williamstown, Mass., and Williamstown Bank (National Association), Williamstown, Mass.
Banking offices
Total assets*
Name of bank and type of transaction
In
To be
operation operated
Williamstown National Bank, Williamstown, Mass. (3092), with
and Williamstown Bank (National Association), Williamstown, Mass. (3092), which had
merged Dec. 31, 1976, under charter of the latter bank (3092) and title "Williamstown
National Bank." The merged bank at date of merger had
COMPTROLLER'S DECISION
Williamstown National Bank, Williamstown, Mass.
("Merging Bank") and Williamstown Bank (National
Association) (organizing), Williamstown, Mass. ("Charter Bank") have made application to the Comptroller of
the Currency for prior permission to effectuate a
merger under the charter of Williamstown Bank (National Association) and with the title of Williamstown
National Bank. The instant application rests upon an
* Asset figures are as of call dates immediately before and after transaction.
Digitized for 118
FRASER
$10,877,000
120,000
2
0
11,111,000
agreement executed between the proponent banks
and is incorporated herein by reference, the same as if
fully set forth.
Merging Bank was chartered as a national banking
association on December 17, 1883 and, as of June 30,
1976, held total commercial bank deposits of $9.1 million.
The proposed merger is the facility whereby the acquisition of Merging Bank by T.N.B. Financial Corp.,
Springfield, Mass., a registered one-bank holding
company, will be accomplished. The subject merger
would merely have the effect of combining an existing
commercial bank with a non-operating institution, and
as such, without regard to the proposed acquisition of
the surviving bank by T.N.B. Financial Corp., would
have no effect upon competition.
Accordingly, applying the statutory criteria, it is the
conclusion of the Office of the Comptroller of the Currency that the proposed merger is not adverse to the
public interest and should be, and hereby is, approved.
November 29, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger is part of a plan through which
Williamstown National Bank would become a subsidiary of T.N.B. Financial Corporation, a bank holding
company. The instant merger, however, would merely
combine an existing bank with a non-operating institution; as such, and without regard to the acquisition of
the surviving bank by T.N.B. Financial Corporation, it
would have no effect on competition.
///. Mergers approved but abandoned, no litigation.
SOUTHEAST FIRST NATIONAL BANK OF SARASOTA,
Sarasota, Fla., and Palmer First National Bank and Trust Company of Sarasota, Sarasota, Fla.
Name of bank and type of transaction
Palmer First National Bank and Trust Company of Sarasota, Sarasota, Fla. (13352) and Southeast First National Bank of Sarasota, Sarasota, Fla.
(16531) applied for permission to merge Dec. 3, 1975, under charter and title of the latter bank (16531). The application was approved Dec. 23,
1975, but was abandoned by the banks Jan. 14, 1976.
COMPTROLLER'S DECISION
On December 3, 1975, Southeast First National Bank
of Sarasota (organizing), Sarasota, Fla., and Palmer
First National Bank and Trust Company of Sarasota,
Sarasota, Fla., applied to the Comptroller of the Currency for permission to merge under the charter and
with the title of Southeast First National Bank of
Sarasota.
The proposed merger is between two banks
wholly-owned, except for directors qualifying shares,
by Southeast Acquisition Corporation, a registered
bank holding company.
Applying the statutory criteria, it is concluded that
the instant merger will merely combine an existing
bank with a non-operating institution; as such, it will
have no effect on competition. This application is,
therefore, approved.
December 23, 1975.
SUMMARY OF REPORT BY ATTORNEY GENERAL
The proposed merger is part of a plan through which
Palmer First National Bank and Trust Company of
Sarasota would become a subsidiary of Southeast
Banking Corporation, a bank holding company. The
instant merger, however, would merely combine an
existing bank with a non-operating institution; as such,
and without regard to the acquisition of the surviving
bank by Southeast Banking Corporation, it would have
no effect on competition.
THE FIRST NATIONAL BANK OF MARYLAND,
Baltimore, M<±, and The Citizens National Bank of Havre de Grace, Havre de Grace, Md.
Name of bank and type of transaction
The Citizens National Bank of Havre de Grace, Havre de Grace, Md. (5445) and The First National Bank of Maryland, Baltimore, Md. (1413)
applied for permission to merge Mar. 8, 1976, under the charter and title of the latter bank (1413). The application was approved May 28, 1976,
but was abandoned by the banks July 20, 1976.
COMPTROLLER'S DECISION
The Citizens National Bank of Havre de Grace, Havre
de Grace ("Citizens") and The First National Bank of
Maryland, Baltimore ("FNB") have applied to the Comptroller of the Currency for permission to merge under
the charter and with the title of the latter.
FNB, is the wholly-owned banking subsidiary of First
Maryland Bancorp, Baltimore, Md. Currently the third
largest commercial banking organization domiciled
within the state of Maryland, FNB, as of March 31,
1976, held total domestic deposits of approximately
$933 million, representing approximately 11 percent of
total commercial bank deposits in Maryland. Operating
119
a total of 70 banking offices throughout the state,
FNB's principal market area is the city of Baltimore and
adjacent Baltimore County.
Citizens was chartered in 1900 and currently holds
deposits aggregating approximately $9 million at its
main office and one drive-in facility in Havre de Grace.
Located in the extreme northeastern section of Harford
County, Citizens primarily serves the immediate Havre
de Grace area, and the municipalities of Perryville and
Port Deposit in adjacent Cecil County.
Citizens' two banking offices experience the greatest
degree of competition from two offices of Maryland National Bank, the state's largest bank. Additionally, there
are 39 offices of 10 commercial banks operating within
Citizens' relevant market area, including five offices of
Maryland National Bank, 10 offices of The Equitable
Trust Company and eight offices of FNB; the three
largest commercial banks in Maryland. The closest office of FNB to a Citizens location is FNB's Aberdeen office, slightly less than 5 miles south of Havre de Grace.
All other offices of FNB are more than 15 miles from
Havre de Grace. Accordingly, consummation of the
proposed merger would have the effect of eliminating
a degree of existing competition between FNB's
branch office in Aberdeen and Citizens. Furthermore,
the Office of the Comptroller of the Currency, on December 29, 1975, gave approval to FNB's application
to establish a de novo banking office within the city of
Havre de Grace. To date, that new FNB office has not
opened for business, but it will be opened as an additional banking site of FNB in Havre de Grace if this application is approved. Therefore, if the subject merger
is approved, the potential for increased competition
between FNB and Citizens is eliminated.
Pursuant to the provisions of the Bank Merger Act of
1966, 12 USC 1828(c), the Comptroller of the Currency
cannot approve any transaction which would have certain proscribed anticompetitive effects unless the Office concludes that those anticompetitive effects are
clearly outweighed in the public interest by the probable effects of the proposed transaction in adequately
meeting the convenience and needs of the community
to be served. Furthermore, the Office of the Comptroller is also directed to fully consider the financial and
managerial resources and future prospects of the
existing and proposed institution.
As noted, Citizens primary competition is from two
branches of the largest bank in Maryland. In light of
Citizens' small deposit size relative to Maryland National Bank, it must be concluded that Citizens has not
been an effective competitor in its relevant market.
Also, Citizens' small size precludes it from adequately
meeting any large commercial customer loan requests.
This merger would have the effect of providing a viable, full-service banking competitor to Maryland National Bank in Havre de Grace, and a second meaningful baking alternative would be available to fully serve
the needs of the Havre de Grace banking community.
120
Furthermore, the senior management of Citizens is beyond normal retirement age. Affiliation with FNB would
ensure both management depth and provide for management succession at Citizens.
In conclusion, it is the opinion of this Office that any
anticompetitive effects of the subject merger are
clearly outweighed by the aspects of convenience and
needs of the banking community to be served and,
further, by considerations with respect to the financial
and managerial resources and future prospects of the
surviving banking institution.
It is therefore, the opinion of this Office that the
proposed merger is in the public interest and should
be, and hereby is, approved.
May 28, 1976.
SUMMARY OF REPORT BY ATTORNEY GENERAL
Applicant operates a branch office in Aberdeen which
is 4.6 miles south of Havre de Grace. It also operates
additional nearby offices at Bel Air and Edgewood. A
survey of accounts disclosed that 2.4 percent of Applicant's deposits in Harford County, wherein Havre de
Grace is located, originate in Havre de Grace and that
6.6 percent of Bank's deposits originate within the Bel
Air, Aberdeen and Edgewood areas. Thus, it would
appear that the proposed merger would eliminate
some existing competition between the participants.
A total of 10 banks, including the parties to this
transaction, operate 26 offices within the southeastern
part of Harford County which includes Bel Air, Aberdeen and Edgewood and the southwestern part of
Cecil County which includes Perryville and Port Deposit, where the major impact of this merger will be felt
and which appears to be the appropriate geographic
market within which to gauge the effects of the proposed acquisition. As of June 30, 1975, Applicant held
the largest share of total deposits in this area, approximately 35 percent, while Bank held the fifth largest
share, some 4 percent. The Equitable Trust Company
held the second largest share (about 23 percent), the
Commercial and Savings Bank of Bel Air held the third
largest share (16 percent) and Maryland National
Bank, the largest bank in the state, held the fourth
largest share (approximately 11 percent). Thus, consummation of the proposed merger would result in
Applicant holding about 39 percent of total area deposits.
We conclude that the proposed merger would eliminate some existing competition between the merging
parties and would increase concentration among
commercial banking institutions in the southeastern
part of Harford County which includes Bel Air, Aberdeen and Edgewood and the southwestern part of
Cecil County, which includes Perryville and Port Deposit. Its overall effect on competition would be adverse.
APPENDIX B
Statistical Tables
Statistical Tables
Table
No.
Title
Page
B-1
Comptrollers of the Currency, 1863tothe
present
125
B-2
Deputy Comptrollers of the Currency .. 126
B-3
Regional administrators of national banks 126
B-4
Changes in the structure of the National
Banking System, by states, 1863-1976 . 127
B-5
Charters, liquidations and changes in issued capital stock of national banks,
calendar 1976
128
B-6
Applications for national bank charters,
approved and rejected, by states, calendar 1976
129
B-7
Applications for national bank charters
pursuant to corporate reorganizations, by
states, calendar 1976
130
B-8
Newly organized national banks, by
states, calendar 1976
130
B-9
National bank charters issued and mergers consummated pursuant to corporate reorganizations, by states, calendar
1976
132
B-10 State-chartered banks converted to national banks, by states, calendar 1976 . 133
B —11 National bank charters issued pursuant
to corporate reorganizations, by states,
calendar 1976
133
B-12 National banks reported in voluntary liquidation, by states, calendar 1976
134
B-13 National banks merged or consolidated
with state banks, by states, calendar
1976
135
B-14 National banks converted into state
banks, by states, calendar 1976
136
B-15 Purchases of state banks by national
banks, by states, calendar 1976
137
B-16 Consolidations of national banks, or national and state banks, by states, calendar 1976
137
B-17 Mergers of national banks, or national
and state banks, by states, calendar
1976
138
B-18 Mergers resulting in national banks, by
assets of acquiring and acquired banks,
1960-1976
140
B-19 Total assets, liabilities and equity capital
of domestic offices and subsidiaries of
national banks, United States and other
areas, June 30, 1976
141
Table
Title
Page
No.
B-20 Total assets, liabilities and equity capital
of domestic offices and subsidiaries of
national banks, United States and other
areas, December 31,1976
149
B-21 Loans of national banks, by states, December 31, 1976
157
B-22 Outstanding balances, credit cards and
related plans of national banks, by states,
December 31, 1976
158
B-23 National banks involved in direct lease
financing, December 31, 1976
159
B-24 Principal assets, liabilities and capital
accounts of national banks, by asset size,
year-end, 1976
160
B-25 Ratios of classified assets to total loans
for national banks, deposit size category,
under $100 million
161
B-26 Ratios of classified assets to total loans
for national banks, deposit size category,
$100 million and over
161
B-27 Income and expenses of foreign and
domestic offices and subsidiaries of national banks, United States and other
areas, year ended December 31, 1976
162
B-28 Income and expenses of national banks,
by asset size, December 31, 1976
178
B-29 Average assets and equity capital, net
income and dividends of national banks
1961-1976
B-30
B-31
B-32
B-33
B-34
B-35
Loan losses and recoveries of national
banks, 1961 -1976, domestic offices only
Assets and liabilities of national banks,
date of last report of condition, 1961 1976, domestic offices only
Consolidated assets and liabilities of national banks with foreign operations, December 31, 1976
Foreign branches of national banks, by
region and country, December 31, 1976
Total foreign branch assets of national
banks, year-end 1953-1976
Foreign branches of national banks,
1960-1976
B-36
B-37
Foreign branch assets and liabilities of
national banks, December 31, 1976 . . .
Trust assets and income of national
banks, by states, calendar 1976
179
180
181
182
183
184
184
184
185
Significant Changes in the Financial Reports of National Banks
Beginning with the first call report of 1976, for March 31,
a number of significant changes, were incorporated in
the quarterly financial reports submitted by national
banks. Those changes affected the domestic report of
condition, the foreign and domestic report of condition
and the report of income and are reflected in the statistical tables presented throughout this Annual Report. Direct comparison of certain 1976 data with those of earlier
years is often impossible because of the changes. To
facilitate the use of this report, major changes affecting
individual tables have been footnoted where appropriate. The following general explanation of the reporting
changes instituted in 1976 should prove helpful in
analyzing current and prior years' data.
Reports of income for 1976 were prepared on a fully
consolidated foreign and domestic basis, instead of a
domestic-only basis. Banks which have foreign offices,
i.e., foreign branches, foreign subsidiaries or Edge Act
or Agreement subsidiaries, began reporting income and
expenses from those offices, along with that of domestic
offices, on the appropriate lines of the income and expense statement. For example, a bank with foreign offices reports the combined income earned on loans
booked in the bank's domestic and in its foreign offices
as "Interest and fees on loans." For 1975 and prior years,
banks with foreign offices reported net earnings from
foreign branches and net earnings from foreign subsidiaries as single entries under "Other operating
income." Beginning in 1976, gross income and expenses of a bank's foreign offices are consolidated with
those of the domestic offices on a line-by-line basis.
Readers should be mindful of that change when-comparing income and expense items with corresponding
asset items. For 1976, an income item such as "Interest
and fees on loans," relates to the consolidated foreign
and domestic loans of a bank with foreign operations.
Similarly, total income and expenses for all national
banks corresponds to the total assets and liabilities of
domestic offices and subsidiaries and the additional assets and liabilities held in foreign offices. For 1975 and
prior years, however, "Interest and fees on loans" relates
only to the domestic loans of a bank or of the National
Banking System. To facilitate proper analysis of the
aggregate income data presented in the report, the consolidated foreign and domestic balance sheet of national
banks with foreign assets is presented for the first time
(Table B-32). The difference between the domestic and
the consolidated foreign and domestic items for those
banks may be added to the domestic-only balance sheet
for all national banks to arrive at a fully consolidated balance sheet for the National Banking System.
The fully consolidated foreign and domestic balance
sheet differs, in two important ways, from that produced
by adding the domestic-only balance sheet to the total
foreign branch assets found in earlier Annual Reports.
First, the aggregate foreign branch data, which are the
summations of reports by individual foreign branches,
contain significant intra-bank items which should be netted out before calculating total foreign and domestic assets. Intra-bank items are normally excluded from the
consolidated foreign and domestic report of condition.
Second, the assets and liabilities of foreign subsidiaries,
including, by definition, Edge Act and Agreement subsidiaries located in the U.S., do not appear on the foreign
branch reports, but were reported only as net
investments in unconsolidated subsidiaries on the
domestic balance sheet. Those items are included on a
line-by-line basis in the fully consolidated foreign and
domestic report of condition.
Major changes in 1976 reports of condition, both
domestic and foreign and domestic, included the recasting of reserves on loans and securities and the reporting
of assets and loans net of unearned discount and valuation reserves on loans. Those changes required new definitions of both "Total assets" and "Total equity capital"
that preclude direct comparison with the same items for
1975 and earlier years.
Beginning in 1976, loans and, therefore, "Total assets"
are reported net of unearned discount. Before 1976, unearned income, which relates primarily to installment
loans, was reported under "Other liabilities" by all national banks on an accrual accounting basis. That
included all banks with more than $25 million in assets,
those that had been recently chartered and those small
banks that had chosen to use accrual accounting. At the
end of 1975, banks on the accrual basis reported approximately $6 billion in unearned income on loans. Prior
to 1976, national banks on a cash basis of accounting,
only certain smaller banks, were permitted to include
their interest collected but not earned on installment
loans in undivided profits. That amounted to only something over $100 million. Beginning in 1976, all banks had
to deduct unearned income from total loans. That resulted in a downward adjustment of "Total assets" by
more than $6 billion and a slight reduction in total equity
capital.
In addition, the valuation portion of the reserve for bad
debt losses, consisting of amounts added to the reserve
by charges to operating expense and reduced by net
charge-offs, is now deducted from total loans net of unearned discount. The valuation portion constituted the
majority of the reserve for bad debt losses on loans as
reported in the years 1969 through 1975; as of December 31, 1975, it equalled approximately $3.5 billion.
Therefore, at the beginning of 1976, "Total assets" had to
be adjusted downward an additional $3.5 billion, for a
total downward adjustment of that item of more than $9.5
billion.
The remainder of the old item "Reserves on Loans and
Securities" consisted of contingency and deferred tax
portions. The contingency portion consisted of amounts
transferred to the loss reserve from "Undivided profits"
and, thus, represents the cumulative difference between
the expense item "Provision for loan losses" reported in
the report of income, and the total provision for loan
losses allowed for income tax purposes. The deferred
tax portion of the reserve consists of the total tax effect of
amounts transferred to the reserve from undivided profits, when amounts provided for in the income statement
are less than the amounts deducted for income tax purposes. Beginning in 1976, the contingency portion is reported as part of total equity capital and is generally
123
carried in the item "Reserve for contingencies and other
capital reserves." That reporting change, breaking up the
old "Reserves on Loans and Securities," caused an upward adjustment in total equity capital in 1976 of approximately $1 billion. The deferred tax portion, which
amounted to more than $600 million at the end of 1975, is
now reported under "Other liabilities."
Other changes involved separating Federal Reserve
stock out of "Other bonds, notes and debentures" on the
report of condition. Minority interest in consolidated sub-
124
sidiaries is now reported as part of "Other liabilities"
rather than as a separate entry below total liabilities.
In addition to being fully consolidated, the report of
income now provides detail on interest earned on balances with banks, interest expense of large time certificates of deposit, interest expense of deposits in foreign
offices and income from direct lease financing.
Because of the major reporting changes outlined
above, care should be taken when calculating asset
growth rates, changes in capital and earnings ratios and
when making historical comparisons in general.
Table B - 1
Comptrollers of the Currency, 1863 to the present
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Name
McCulloch, 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 Skelton
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
Camp, William B
Smith, James E
Heimann, John G
Date of
appointment
May
Mar.
Feb.
Apr.
May
Apr.
May
Aug.
Apr.
Jan.
Oct.
Apr.
Feb.
Mar.
May
Dec.
Nov.
May
Oct.
Apr.
Nov.
Nov.
July
July
9,
21,
1,
25,
12,
20,
1,
2,
26,
1,
1,
27,
2,
17,
1,
20,
21,
11,
24,
16,
16,
16,
5,
21,
1863
1865
1867
1872
1884
1886
1889
1892
1893
1898
1901
1908
1914
1921
1923
1924
1928
1933
1938
1953
1961
1966
1973
1977
Date of
resignation
Mar.
July
Apr.
Apr.
Mar.
Apr.
June
Apr.
Dec.
Sept.
Mar.
Apr.
Mar.
Apr.
Dec.
Nov.
Sept.
Apr.
Feb.
Nov.
Nov.
Mar.
July
8, 1865
24, 1866
3, 1872
30, 1884
1, 1886
30, 1889
30, 1892
25, 1893
31, 1897
30, 1901
28, 1908
27, 1913
2, 1921
30, 1923
17, 1924
20, 1928
20, 1932
16, 1938
15, 1953
15, 1961
15, 1966
23, 1973
31, 1976
State
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.
Texas.
South Dakota.
New York.
125
Table B-2
Deputy Comptrollers of the Currency
No.
1 Howard, Samuel T. ...
2 Hulburd, Hiland R
3 Knox, John Jay
4 Langworthy, John S. ..
5 Snyder, V. P
6 Abrahams, J. D
7 Nixon, R. M
8 Tucker, Oliver P
9 Coffin, George M
10 Murray, Lawrence O. .
11 Kane, Thomas P
12 Fowler, Willis J
13 Mclntosh, Joseph W. .
14 Collins, Charles W. . . .
15 Stearns, E. W
16 Await, F. G
17 Gough, E. H
18 Proctor, John L
19 Lyons, Gibbs
20 Prentiss, Jr., William ..
21 Diggs, Marshall R
22 Oppegard, G. J
23 Upham, C. B
24 Mulroney, A. J
25 McCandless, R. B
26 Sedlacek, L H
27 Robertson, J. L
28 Hudspeth, J.W
29 Jennings, L. A
30 Taylor, W. M
31 Garwood, G. W
32 Fleming, Chapman C. .
33 Haggard, Hollis S
34 Camp, William B
35 Redman, Clarence B. .
36 Watson, Justin T
37 Miller, Dean E
38 DeShazo, Thomas G. .
39 Egertson, R. Coleman .
40 Blanchard,
Richard J. .
41 Park, Radcliffe
42 Faulstich, Albert J
43 Motter, David C
44
John D
45 Gwin,
Jr., W. A.
46 Howland,
Mullin, Robert A
47 Ream,
M
48 Bloom, Joseph
Robert
49 Chotard,
Richard D. ..
50 Hall, Charles
B
51 Jones,
H
52 Murphy,David
Westbrook
53 Selby, H.C.Joe
Name
Dates of tenure
May
9, 1963 Aug.
1, 1865 Jan.
Aug.
Mar. 12, 1867 Apr.
8, 1872 Jan.
Aug.
Jan.
5, 1886 Jan.
Jan. 27, 1887 May
Aug. 11, 1890 Mar.
7, 1893 Mar.
Apr.
Mar. 12, 1896 Aug.
Sept. 1, 1898 June
June 29, 1899 Mar.
1, 1908 Feb.
July
May 21, 1923 Dec.
1, 1923 June
July
6, 1925 Nov.
Jan.
1, 1927 Feb.
July
6, 1927 Oct.
July
Dec. 1, 1928 Jan.
Jan. 24, 1933 Jan.
Feb. 24, 1936 Jan.
Jan. 16, 1938 Sept.
Jan. 16, 1938 Sept.
1, 1938 Dec.
Oct.
1, 1939 Aug.
May
7, 1941 Mar.
July
Sept. 1, 1941 Sept.
1, 1944 Feb.
Oct.
1, 1949 Aug.
Jan.
Sept. 1, 1950 May
1, 1951 Apr.
Mar.
Feb. 18, 1952 Dec.
Sept. 15, 1959 Aug.
May 16, 1960 Aug.
2, 1962 Nov.
Apr.
4, 1962 Oct.
Aug.
Sept. 3, 1962 July
Dec. 23, 1962
1, 1963
Jan.
July 13, 1964 June
Sept. 1, 1964 Sept.
Sept. 1, 1964 June
July 19, 1965 Oct.
1, 1966
July
Feb. 21, 1967 Dec.
5, 1973
July
July
5, 1973
2, 1975
Feb.
Aua
31, 1975
,
y
Aug. 31, 1975
Aua 31, 1975
Aug. 31, 1975 Sept.
Aua 31 1975
Aug". 31, 1975
1,1865
31,1867
24, 1872
3, 1886
3, 1887
25, 1890
16, 1893
11, 1896
31, 1898
27, 1899
2, 1923
14, 1927
19, 1924
30, 1927
30, 1928
15, 1936
16, 1941
23, 1933
15, 1938
15, 1938
30, 1938
30, 1938
31, 1948
31, 1941
1, 1951
30, 1944
17, 1952
31, 1950
16, 1960
1, 1962
31, 1962
31, 1962
3, 1962
15, 1966
26, 1963
18, 1975
30,
26,
1,
26,
1966
1975
1967
1974
31, 1974
20, 1976
State
New York.
Ohio.
Minnesota.
New York.
New York.
Virginia.
Indiana.
Kentucky.
South Carolina.
New York.
District of Columbia
Indiana.
Illinois.
Illinois.
Virginia.
Maryland.
Indiana.
Washington.
Georgia.
California.
Texas.
California.
Iowa.
Iowa.
Iowa.
Nebraska.
Nebraska.
Texas.
New York.
Virginia.
Colorado.
Ohio.
Missouri.
Texas.
Connecticut.
Ohio.
Iowa.
Virginia.
Iowa.
Massachusetts.
Wisconsin.
Louisiana.
Ohio.
Mississippi.
Georgia.
Kansas.
Pennsylvania.
New York.
Missouri.
Pennsylvania.
Texas.
Maryland.
Texas.
Table B-3
Regional Administrators of National banks
Region
Name
1 Charles H. Paterson
2
3
4
5
6
7
8
9
10
11
12
13
14
Charles M. Van Horn
R. Coleman Egertson
Larry T. Gerzema
Clifton A. Poole
Donald L. Tarleton
Billy C. Wood
John W. Schaffer, Jr
Kenneth W, Leaf
John R. Burt
Michael Doman
Kent D. Glover
M. B. Adams
John G. Hensel
Digitized for126
FRASER
Headquarters
Boston, Mass
New York, N.Y
Philadelphia, Pa
Cleveland, Ohio
Richmond, Va
Atlanta, Ga
Chicago, III
Memphis, Tenn
Minneapolis, Minn
Kansas City, Mo
Dallas, Tex
Denver, Colo
Portland, Oreg
San Francisco, Calif
States
Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island,
Vermont.
New Jersey, New York, Puerto Rico, Virgin Islands.
Pennsylvania, Delaware.
Indiana, Kentucky, Ohio.
District of Columbia, Maryland, North Carolina, Virginia, West Virginia.
Florida, Georgia, South Carolina.
Illinois, Michigan.
Alabama, Arkansas, Louisiana, Mississippi, Tennessee.
Minnesota, North Dakota, South Dakota, Wisconsin.
Iowa, Kansas, Missouri, Nebraska.
Oklahoma, Texas.
Arizona, Colorado, New Mexico, Utah, Wyoming.
Alaska, Idaho, Montana, Oregon, Washington.
California, Guam, Hawaii, Nevada.
Table B-4
Changes in the structure of the National Banking System, by States, 1863-1976
Organized
and opened
for business 18631976
Consolidated and merged
under 12 USC215
Consolidated
Merged
Insolvencies
Liquidated
12 USC 214
Merged or
Converted to consolidated
with state
state banks
banks
In
operation
Dec. 31,
1976
All national banks .
16,634
729
895
2,835
6,779
278
381
4,737
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia . . .
Florida
237
9
33
173
625
289
141
32
44
396
4
0
1
1
21
5
11
0
26
0
0
3
56
4
10
0
1
2
45
0
6
39
68
59
7
1
7
43
64
2
21
55
397
86
69
18
13
43
1
0
1
2
5
3
5
0
0
0
0
1
1
0
20
0
16
8
0
0
97
6
3
73
58
132
23
5
15
306
4
0
2
18
8
2
4
3
3
11
43
0
35
227
98
206
77
37
16
13
89
4
65
299
205
243
198
110
53
79
9
1
2
21
7
12
11
8
0
1
0
0
3
2
4
2
0
2
0
2
64
2
6
425
120
100
169
82
54
17
69
208
157
193
36
149
76
199
8
23
1
1
3
6
4
5
0
9
0
3
11
16
5
0
1
1
0
0
1
0
41
75
122
203
38
115
56
120
4
43
1
0
14
0
0
2
36
0
17
0
29
0
89
9
0
6
0
7
109
0
104
38
129
28
43
219
195
7
237
5
4
0
2
5
2
9
13
1
0
0
0
19
32
74
596
13
14
108
21
103
130
46
0
0
1
1
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
217
8
113
1,012
456
569
465
253
130
131
1
0
20
14
4
6
11
4
161
401
408
526
107
354
213
416
18
91
3
45
11
8
6
13
4
2
1
4
19
28
33
0
6
12
1
3
0
13
17
28
77
116
16
59
76
83
4
5
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
503
102
1,064
170
264
756
793
154
1,304
70
57
1
127
8
3
33
12
2
112
3
95
1
130
23
0
44
11
4
122
2
61
25
132
44
100
113
85
31
211
2
156
37
443
58
118
South Carolina
South Dakota
Tennessee
140
225
239
1,496
53
85
313
251
222
313
85
14
9
45
4
3
23
19
11
9
0
14
3
14
72
2
9
63
10
2
1
1
44
93
36
142
6
18
28
52
38
54
12
49
81
95
574
23
29
74
148
68
117
26
2
2
9
62
3
3
4
0
0
2
0
2
2
0
0
0
0
0
0
1
1
0
0
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Virgin Islands
Puerto Rico
339
454
103
496
58
Does not include one non-national bank in the District of Columbia supervised by the Comptroller of the Currency.
127
Table B-5
Charters, liquidations and changes in issued capital stock of national banks, calendar 1976
Capital stock
Number of
banks
Increases:
Banks newly chartered:
Primary organization
Conversion of state banks
Capital stock:
Preferred: 3 cases by new issue
Common:
439 cases by statutory sale
503 cases by statutory stock dividends
1 case by statutory consolidation
21 cases by statutory merger
19 cases by conversion of preferred stock
50 cases by conversion of capital notes
Subordinated notes and debentures: 160 cases by new issue
Total increases
Decreases:
Banks ceasing operations:
Voluntary liquidations:
Succeeded by national banks
Succeeded by state banks
Statutory mergers
Converted into state banks
Merged or consolidated into state banks
Insolvent
Capital stock:
Preferred" 19 Retired
Common:
12 cases by statutory reduction
12 cases by statutory merger .
Subordinated notes and debentures:
80 retirements
50 converted to common stock
Total decreases
Net change
Charters in force Dec. 31, 1975, and issued capital
Charters in force Dec. 31, 1976, and issued capital
* Includes 13 reorganized banks with capital stock of $1,655,000.
t Includes 13 reorganized banks.
t Represents charters issued, not banks in operation.
NOTE: Premium on sale of common stock
Premium on sale of convertible notes
Total
128
Common
79*
9
$50,090,670
8,974,000
Preferred
$100,000
Subordinated
notes and
debentures
$2,000,000
8,659,236
125,198,150
184,473,526
800,000
8,408,000
608,777
494,588
88
10
4
43t
23
13
1
379,047,711
1,628,000
8,759,236
470,209,900
473,837,900
15,331,000
400,000
1,040,000
26,121,030
22,827,000
200,000
7,550,000
752,000
2,953,114
12,411,577
17,454,000
94
-6
4,747$
4,741$
94,744,607
2,953,114
284,303,104
8,785,389,103
9,069,692,207
5,806,122
14,333,810
20,139,932
44,378,593
1,125,760
54,846,353
418,991,547
2,584,836,844
3,003,828,391
.$169,045,095 (457 cases)
631,173 ( 50 cases)
$169,676,268 (507 cases)
Table B-6
Applications for national bank charters*, approved and rejected, by states, calendar 1976
ALABAMA
Approved
Alexander City
Dothan
Rejected
Feb. 19
Dec. 16
ARKANSAS
First N a t i o n a l B a n k o f S h e r i d a n , S h e r i d a n . . . .
__
Rejected
July 8
July 8
July 8
Greenburgh
Golden Pacific National Bank, Borough of
Manhattan
Union Chelsea National Bank, New York
Niskayuna
Jan. 6
Apr. 27
Dec. 17
Mar. 19
NORTH DAKOTA
COLORADO
Jan. 27
June 7
Citizens National Bank, Colorado Springs
Western National Bank South, Longmont
First National Bank of Crosby, Crosby
FLORIDA
ILLINOIS
Market Place National Bank, Champaign
June 7
Midland National Bank, Chicago
July 8
Chicago
July 8
Chicago
Julv 8
The Guarantee National Bank of Rockford,
Rockford
Oct. 26
St. Charles
Jan. 27
Spring Valley
Mar. 19
INDIANA
Industrial National Bank of East Chicago,
East Chicago
Feb. 19
East Chicago
South Lake National Bank, Lowell
June 7
Apr. 16
Liberty National Bank, Selma
LOUISIANA
Sept
New Orleans
MICHIGAN
of Southfield,
N.A.,
Apr ?6
June 22
June ??
OKLAHOMA
Miami National Bank, Miami
Lakeshore Bank, N.A., Oklahoma City
Tulsa
Mar. 19
Mar. 24
Auq. 9
PENNSYLVANIA
Erie
July ?R
TENNESSEE
First Tennessee National Bank, Chattanooga . . .
Feb 16
TEXAS
First City Bank - Northeast, N.A., Houston
June 7
Mar 1
South Loop National Bank, Houston
Feb. 9
Houston
July 8
Houston
South Texas National Bank of Laredo, LaSept. 30
redo
Nov ?1
Western National Bank, Odessa
First National Bank of Rio Grande City, Rio
Nov. ?7
Grande City
UTAH
First Security Bank of Orem, National Association, Orem
Richfield
Feb. 18
Mar. 19
WASHINGTON
June 30
WEST VIRGINIA
Feb. 19
Dec 14
Hopkinsville
Fl National Bank, Ironton
FT National Bank, Troy
Pioneer National Bank, Yakima
KENTUCKY
Bank
Jan 6
OHIO
Clearwater
Jan. 9
Clermont
Jan. 8
Royal Trust Bank of South Dade, N.A., unincorporated area of Dade County
Dec. 14
__
Jan. 8
Unincorporated area of Dade County
Jan. 6
Delray Beach
__ May 20
Delray Beach
__ Jan. 27
Unincorporated area of Orange County
May 6
Unincorporated area of Orange County
Florida Coast Bank of South Palm Beach
County, N.A., unincorporated area of Palm
Dec. 29
Beach County
Unincorporated area of Palm Beach County . . . .
Jan. 6
Unincorporated area of Pasco County
May ?4
Landmark Bank of Pompano Beach, N.A.,
Mar. 12
Pompano Beach
Unincorporated area of St. Lucie County
Jan. 27
Tallahassee
Aug. 20
Temple Terrace
•
Oct.
Manufacturers
Southfield
Approved
NEW YORK
July 2
CALIFORNIA
Fallbrook
Los Angeles
Los Angeles
NEW JERSEY
City Trust Services, National Association,
June 14
Elizabeth
Unincorporated area of Glen Daniel
Central National Bank, Morgantown
Mountaineer National Bank, Morgantown
Salem
Wheeling
Apr. 16
Aug. 20
Aug. 20
Jan. 6
Dec. 9
WISCONSIN
The First National Bank of Boscobel, Boscobel . Feb. 18
First National Bank of Minocqua and Woodruff,
Dec. 16
Minocqua
Jan. 6
Minocqua
-
MINNESOTA
WYOMING
Granite City National Bank of St. Cloud,
St. Cloud
June 7
Miles
Jan. 6
• Does not include applications for conversion or pursuant to corporate reorganizations.
129
Table B-7
Applications for national bank charters pursuant to corporate reorganizations,
by states, calendar 1976
GEORGIA
Approved
First National Interim Bank of Albany, Albany
Georgia National Bank, Atlanta
First National Interim Bank of Brunswick,
Georgia, Brunswick
Rejected
Dec. 29
Dec. 9
The First Iron River National Bank, Iron River . . . .
Kentwood Bank, N.A., Kentwood
Lapeer Bank, N.A., Lapeer
Cassopolis National Bank, Niles
P. Bank National Association, Trenton
Dec. 29
ILLINOIS
O'Hare National Bank, Chicago
First Freeport Bank, National Association,
Freeport
Maywood National Bank, village of Maywood . . .
Jan. 19
NEW YORK
Mar. 31
Oct. 22
June 5
OHIO
FNB National Bank, Elyria
Withdrawn Feb. 19
MARYLAND
New University National Bank, Rockville
Rejected
Oct. 12
Oct. 19
Nov. 5
Feb. 10
Feb. 2
Chester Bank, N.A., Chester
INDIANA
East Chicago
Approved
MICHIGAN
June 7
MASSACHUSETTS
First Bank of Athol (National Association),
Athol
Sept. 13
Williamstown Bank (National Association)^
Williamstown
Sept. 13
The Yarmouth Bank, National Association,
Yarmouth
Nov. 18
May 21
TEXAS
Heights Bank, National Association, Alamo Heights
New Citizens National Bank of Baytown,
Texas, Baytown
3300 Commerce National Bank, Dallas
Bexar County Commerce Bank National Association, San Antonio
July 15
Dec. 2
Nov. 16
May 21
VIRGINIA
Troutville Bank, N.A., Troutville
June 25
Table B-8
Newly organized national banks, by states, calendar 1976
Charter
No.
Title and location of bank
Total, United States: 65 banks
Total capital
accounts
$101,066,005
ALABAMA
16579 First National Bank of Hamilton, Hamilton
16553 Commonwealth National Bank, Mobile . . .
16547 First Shelby National Bank, Pelham
Total: 3 banks
1,000,000
750,000
1,500,000
3,250,000
CALIFORNIA
16595 Anaheim National Bank, Anaheim
16605 Vista National Bank, Vista
Total: 2 banks
2,000,000
1,250,000
3,250,000
FLORIDA
16589
16616
16583
16561
16590
16574
16549
16531
Barnett Bank of Gainesville, National Association, Gainesville .. .
Century National Bank, Jacksonville
First Commercial National Bank, Lakeland
Second National Bank of Lakeland, Lakeland
Barnett Bank of Orange Park, National Association, Orange Park
Landmark Bank of Pompano Beach, N.A., Pompano Beach
Singer Island National Bank, Riviera Beach
Southeast First National Bank of Sarasota, Sarasota
Total: 8 banks
."
16569
16593
16594
16601
16588
16584
Airport National Bank, Bethalto
Columbia National Bank, Columbia
First National Bank of Lake Zurich, Lake Zurich .
First National Bank of Marengo, Marengo
Madison National Bank of Niles, Niles
Butterfield National Bank, Wheaton
Total: 6 banks
1,000,000
845,000
1,200,000
1,000,000
1,250,000
945,000
1,200,000
5,000,000
12,440,000
ILLINOIS
1,000,000
1,000,000
1,500,000
750,000
1,000,000
1,500,000
6,750,000
INDIANA
16582 First National Bank of Paoli, Paoli
1,000,000
KENTUCKY
16581
16611
Continental National Bank of Kentucky, Louisville
First National Bank of Lewis County, Vanceburg .
Total: 2 banks
1,000,000
1,000,000
2,000,000
LOUISIANA
16551
First National Bank of Eunice, Eunice
130
1,000,000
Table B-8—Continued
Newly organized national banks, by states, calendar 1976
Charter
No.
Title and location of bank
Total capital
accounts
MICHIGAN
16612
16554
National Bank of Port Huron, Port Huron
National Bank of Troy, Troy
Total: 2 banks
$2,000,000
3,000,000
5,000,000
MINNESOTA
16599 American National Bank of Brainerd, Brainerd
16559 Suburban National Bank, Eden Prairie
16548
National City Bank of Ridgedale, Village of Minnetonka .
Total: 3 banks
1,000,000
2,000,000
2,000,000
5,000,000
MISSOURI
16592
16570
16546
16603
Commerce Bank of Grandview, National Association, Grandview .
Mark Twain National Bank, Ladue
Christian County National Bank, Ozark
Mehlville National Bank, unincorporated Area of St. Louis County
Total: 4 banks
1,000,000
1,000,000
1,000,000
1,200,000
4,200,000
MONTANA
16580 G l a c i e r N a t i o n a l B a n k , C o l u m b i a F a l l s . . . .
700,000
NEW MEXICO
16566 San Juan National Bank, Farmington
16596 Bank of Las Cruces, National Association, Las Cruces
Total: 2 banks
1,000,000
1,000,000
2,000,000
NEW YORK
16629 U n i o n C h e l s e a N a t i o n a l B a n k , N e w Y o r k . . . .
$1,006,005
NORTH CAROLINA
16560 U n i t e d N a t i o n a l B a n k , F a y e t t e v i l l e . . . .
750,000
OHIO
16607 Fl National Bank, Ironton
16563
16608 National City Bank of Lake County, Mentor
FT National Bank, Troy
Total: 3 banks
16606
OKLAHOMA
1,200,000
2,500,000
2,400,000
6,100,000
1,200,000
Miami National Bank, Miami
16552
TENNESSEE
16,000,000
First Tennessee National Bank, Chattanooga
16557
16625
16544
16575
16598
16572
16624
16602
16585
16564
16558
16600
16555
16618
16578
16614
16626
16550
16617
TEXAS
Prestonwood National Bank, Addison
Anahuac National Bank, Anahuac
National Bank of Commerce, Austin
Western National Bank, Austin
Chemical National Bank, Clute
National Bank of Commerce, Edinburg
Chamizal National Bank, El Paso
Braes Bayou National Bank, Houston
First City Bank - Northeast, N.A., Houston
Parkway National Bank, Houston
South Loop National Bank, Houston
First National Bank of Pearland, Pearland
Canyon Creek National Bank, Richardson
First National Bank of Rio Grande City, Rio Grande City
Plaza National Bank, San Antonio
Hays County National Bank, San Marcos
Central National Bank of Woodway-Hewitt, Waco
First National Bank of West University Place, West University Place
American National Bank, Wichita Falls
Total: 19 banks
2,000,000
1,000,000
2,000,000
1,000,000
600,000
1,000,000
1,000,000
1,000,000
1,250,000
2,500,000
1,120,000
1,000,000
1,000,000
1,500,000
1,250,000
1,000,000
1,200,000
1,000,000
1,000,000
23,420,000
UTAH
16615
First Security Bank of Orem, National Association, Orem
1,000,000
VIRGINIA
16613
Patrick Henry National Bank, Bassett
2,000,000
WISCONSIN
16620 Regency National Exchange Bank, Brookfield
16604 Community National Bank, Oregon
Total: 2 banks
2,000,000
1,000,000
3,000,000
131
Table B-9
National bank charters issued* and mergers consummated pursuant to corporate reorganizations,
by states, calendar 1976
Operating bank
New bank
Resulting bank
Effective
date of
merger
Total
capital
accounts^
Total
assets
$22,445
$391,867
95,918
1,069,068
5,905
83,601
941
11,111
3,866
61,587
2,036
32,612
3,174
51,607
1,307
17,898
3,442
39,200
2,294
35,756
2,426
31,371
3,527
34,591
1,073
12,486
CALIFORNIA
The First National Bank of San Jose, San Jose
F.N. National Bank, San Jose
Charter issued June 14, 1976
June 16 The First National Bank of San Jose, San Jose
DISTRICT OF COLUMBIA
Mar. 31
American
American
Charter
American
Security and Trust Company, Washington
Security and Trust Company, National Association, Washington
issued March 26, 1976
Security and Trust Company, National Association, Washington
ILLINOIS
Dec. 31
First National Bank of Freeport, Freeport
First Freeport Bank, National Association, Freeport
Charter issued December 27, 1976
First National Bank of Freeport, Freeport
MASSACHUSETTS
Williamstown National Bank,
Williamstown Bank (National
Charter issued December
Dec. 31 Williamstown National Bank,
Williamstown
Association), Williamstown
28, 1976
Williamstown
MICHIGAN
Commercial National Bank, Cassopolis
C. National Bank, Cassopolis
Charter issued March 9, 1976
Mar. 11 Commercial National Bank, Cassopolis
The National Bank of Ludington, Ludington
NBL National Bank, Ludington
Charter issued December 1, 1976
Dec. 3 The National Bank of Ludington, Ludington
NEW YORK
Dec 31
The Chester National Bank, Chester
Chester Bank, N.A., Chester
Charter issued December 22, 1976
Chester National Bank Chester
OHIO
The Geauga County National Bank of Chardon, Chardon
G. C. National Bank, Chardon
Charter issued April 28, 1976
Apr. 29 The Geauga County National Bank of Chardon, Chardon
First National Bank of Elyria, Elyria
FNB National Bank, Elyria
Charter issued August 9, 1976
Aug. 16 First National Bank of Elyria, Elyria
TEXAS
Alamo Heights National Bank, Alamo Heights
Heights Bank, National Association, Alamo Heights
Charter issued December 15, 1976
Dec. 31 Alamo Heights National Bank, Alamo Heights
The First National Bank of Henderson, Henderson
South Main & Richardson National Bank, Henderson
Charter issued September 30, 1976
Oct. 1 Thp Fir^t National Bank of Hpndprson Henderson
The First National Bank of New Braunfels, New Braunfels
New Braunfels Commerce Bank National Association, New Braunfels
Charter issued April 15, 1976
Apr. 16 Fir<=;t National Bank of NPW Braunfpls New Braunfels
VIRGINIA
The First National Bank of Troutville, Troutville
Troutville Bank, N.A., Troutville
Charter issued June 25, 1976
July 1 The First National Bank of Troutville Troutville
* Includes only charter issuances related to mergers consummated during 1975. For a full listing of charters issued pursuant to corporate
reorganizations during the year see Table B - 1 1 .
t Includes subordinated notes and debentures, if any.
132
Table B-10
State-chartered banks converted to national banks*, by states, calendar 1976
Charter
no.
Effective
date of
charter
Title and location of bank
Total: 9 banks
Outstanding
capital stock
Surplus, undivided profits
and reserves
Total assets
$11,574,000
$15,682,922
$285,586,959
FLORIDA
16556
City National Bank of Lauderhill, Lauderhill
Conversion of City Bank of Lauderhill . . .
16576 The National Bank of Collier County, Marco Island
Conversion of First Bank of Marco Island
16586 Century National Bank of Palm Beach County, West Palm
Beach
Conversion of Northwood Bank of West Palm Beach . . .
16630 The Exchange National Bank of Lake County, Clermont
Conversion of The Exchange Bank of Clermont
Feb.
23
990,000
1,451,471
34,844,352
Apr.
28
490,000
737,524
17,073,681
June
14
1,260,000
398,000
9,854,779
Dec.
30
400,000
1,288,495
23,644,560
Mar.
26
100,000
517,937
7,449,615
Apr.
1
2,422,000
3,115,426
147,580,834
Mar.
29
2,611,000
1,239,673
11,455,000
Jan.
21
2,101,000
1,452,477
13,163,138
Oct.
20
1,200,000
5,481,919
20,521,000
GEORGIA
16567 The First National Bank of Haralson County, Buchanan
Conversion Haralson County Bank
MICHIGAN
16571
Peoples Bank and Trust, N.A., Trenton
Conversion of Peoples Bank
....
NORTH CAROLINA
16568
Burlington National Bank, Burlington
Conversion of Burlington Bank and Trust Company .. .
OHIO
16545
First Bank National Association, Cleveland
Conversion of First Bank and Trust of Cleveland
VIRGINIA
16610 Virginia National Bank/Richmond, Richmond
Conversion of Virginia Trust Company
* Does not include one bank that converted to national status through a merger pursuant to corporate reorganization. That bank was American
Security and Trust Company, Washington, D.C., which merged with American Security and Trust Company, National Association, Washington,
D.C., charter number 16565, formed for the purpose of effecting a corporate reorganization. For complete information see Table B-9.
Table B-11
National bank charters issued pursuant to corporate reorganizations, by states, calendar 1976
Charter
no.
Title and location of bank
Date of
issuance
Total: 14 banks
CALIFORNIA
2158 F. N. National Bank, San Jose
June
14
Mar.
26
Dec.
Dec.
27
27
Dec.
28
DISTRICT OF COLUMBIA
16565 American Security and Trust Company, National Association, Washington
ILLINOIS
13695 First Freeport Bank, National Association, Freeport
3548 I N B National Bank, Springfield
Total: 2 banks
MASSACHUSETTS
3092 Williamstown Bank (National Association), Williamstown
MICHIGAN
16371 C. National Bank, Cassopolis
14016 N B L National Bank, Ludington
Mar.
Dec.
Total: 2 banks
1349
NEW YORK
Chester Bank, N.A., Chester
OHIO
14879 The G. C. National Bank, Chardon
14968 F N B National Bank, Elyria
Total: 2 banks
Dec.
22
Apr.
Aug.
28
9
133
Table B—11— Continued
National bank charters issued pursuant to corporate reorganizations, by states, calendar 1976
Charter
no.
Date of
issuance
Title and location of bank
TEXAS
15514 Heights Bank, National Association, Alamo Heights
6176 South Main & Richardson National Bank, Henderson
4295 New Braunfels Commerce Bank National Association, New Braunfels
Dec.
Sept.
Apr.
15
30
15
June
25
Total: 3 banks
VIRGINIA
9764 Troutville Bank, N.A., Troutville
Table B-12
National banks reported in voluntary liquidation, by states, calendar 1976
(Dollar amount in thousands)
Title and location of bank
Dates of
liquidations
Total: 14 National banks
Total capital
accounts of
liquidated
banks*
$53,068
FLORIDA
Palmer First National Bank and Trust Company of Sarasota (13352), Sarasota, absorbed by Southeast First National
Bank of Sarasota (16531), Sarasota
Jan.
15
1,000
GEORGIA
Mercantile National Bank (15789), Atlanta, absorbed by The National Bank of Georgia (15541), Atlanta
851
July
MISSOURI
Deposit Insurance National Bank of Kansas City (99001), Kansas City, absorbed by Laurel Bank of Kansas City,
Kansas City
Dec.
18
0
Dec.
July
31
272
20
938
June
Sept.
Sept.
30
30
30
400
4,389
7,386
June
18
3,084
Feb.
16
26,273
Jan.
30
551
Sept.
Aug.
17
24
1,448
4,341
Aug.
24
2,135
NEW YORK
Chelsea National Bank (15428), New York, absorbed by Union Chelsea National Bank (16629), New York
The Red Creek National Bank (10781), Red Creek, absorbed by The Oneida National Bank and Trust Company of
Central New York (1392), Utica
OHIO
The First National Bank of Amesville (7235), Amesville, absorbed by The Glouster Community Bank, Glouster..
The First National Bank of Ironton (98), Ironton, absorbed by F I National Bank (16607), Ironton
The First National Bank & Trust Company (3825), Troy, absorbed by F T National Bank (16608), Troy
Community National Bank of Warrensville Heights (15561), Warrensville Heights, absorbed by First Bank National
Association (16545), Cleveland
TENNESSEE
The Hamilton National Bank of Chattanooga, (7848), Chattanooga, absorbed by First" Tennessee National Bank
(16522), Chattanooga
VERMONT
The Enosburg Falls National Bank (13986), Enosburg Falls, absorbed by Sterling Trust Company, Johnson
WASHINGTON
The First National Bank of Redmond (12121), Redmond, absorbed by Seattle Trust and Savings Bank, Seattle .
First National Bank in Port Angeles (6074), Port Angeles, absorbed by Seattle - First National Bank (11280), Seattle
The First American National Bank of Port Townsend (13351), Port Townsend, absorbed by Seattle - First National
Bank, (11280), Seattle
' Includes subordinated notes and debentures, if any.
134
Table B-13
National banks merged or consolidated with state banks, by states, calendar 1976
(Dollar amount in thousands)
Title and location of bank
Total capital
accounts of
national
banks*
Effective
date
Total: 13 banks
$101,453
MAINE
Casco Northern National Bank (16382), Augusta, merged into Casco Bank & Trust Company, Portland, under title
"Casco Bank & Trust Company"
June
25
1,088
16
1,794
6
4,990
29
978
July
30
10,081
Jan.
1
12,952
Jan.
1
14,106
Oct.
29
9,928
Jan.
1
21,139
Jan.
1
16,278
30
3,503
23
1,161
MASSACHUSETTS
The Park National Bank of Holyoke (4703), Holyoke, merged into Western Bank and Trust Company, West
July
Springfield, under title "Park West Bank and Trust Company"
The Union Market National Bank of Watertown (2108), Watertown, merged into BayBank Newton-Waltham Trust
Company, Waltham, under title "BayBank Newton-Waltham Trust Company"
July
NEW JERSEY
Suburban National/A United Jersey Bank (16129), South Plainfield, merged into United Jersey Bank/Central,
Oct.
Elizabeth, under the title "United Jersey Bank/Central"
NEW YORK
Manufacturers Hanover Trust Company/Suffolk, National Association (10029), Bay Shore, merged into Manufacturers Hanover Trust Company, New York, under title "Manufacturers Hanover Trust Company"
Marine Midland Bank-Chautauqua, National Association (8453), Jamestown, merged into Marine Midland Bank,
Buffalo, under title "Marine Midland Bank"
Marine Midland Tinker National Bank (11511), Melville, merged into Marine Midland Bank, Buffalo, under title
"Marine Midland Bank"
Bankers Trust of Suffolk, National Association (12788), Patchogue, merged into Bankers Trust Company, New York,
under title "Bankers Trust Company"
Marine Midland Bank of Southeastern New York, N.A. (465), Poughkeepsie, merged into Marine Midland Bank, Buffalo, under title "Marine Midland Bank"
Marine Midland Bank-Eastern, National Association (721), Troy, merged into Marine Midland Bank, Buffalo, under
title "Marine Midland Bank"
PENNSYLVANIA
The First National Bank of Lewistown (1579), Lewistown, merged into Central Counties Bank, State College, under
title "Central Counties Bank"
Sept.
The First National Bankof Shoemakersville (11841), Shoemakersville, merged into American Bank and Trust Co. of
Pa., Reading, under title "American Bank and Trust Co. of Pa."
Apr.
VIRGINIA
Richmond National Bank (15027), Richmond, merged into First Virginia Bank of Colonial Heights, Colonial Heights,
under title "First Virginia - Colonial"
Nov.
3,455
* Includes subordinated notes and debentures, if any.
135
Table B-14
National banks converted into state banks, by states, calendar 1976
(Dollar amounts In thousands)
Charter
no.
Title and location of bank
Total: 24 banks
Total capital
accounts of
national
banks*
Effective
date
".
$109,018
ALABAMA
11635 Opelika National Bank, Opelika, converted into The Bank of East Alabama
Sept.
2,765
ARKANSAS
14973 First National Bank of Dermott, Dermott, converted into First State Bank of Dermott
14606 First National Bank of Jonesboro, Jonesboro, converted into First Bank & Trust of Jonesboro
Oct.
Dec.
15
22
805
1,883
CALIFORNIA
15958 Gavilian National Bank, Gilroy, converted into Gavilan Bank
Apr.
3,327
ILLINOIS
10582 The First National Bank of Marine, Marine, converted into First Bank of Marine
14595 Wheaton National Bank, Wheaton, converted into Bank of Wheaton
Nov.
June
30
30
396
4,496
Apr.
14
2,093
July
Sept.
31
2
1,101
2,033
16
8,967
30
2,527
29
5,402
Oct.
29
874
Sept.
16
3,673
Aug.
30
863
Sept.
7
13,086
Dec.
Mar.
22
5
14,982
2,273
Oct.
29
30,359
June
Nov.
Feb.
Sept.
Jan.
9
12
2
29
20
1,302
929
3,147
1,323
412
INDIANA
111 The First National Bank of Madison, Madison, converted into First Bank of Madison
KANSAS
3066 The First National Bank of Concordia, Concordia, converted into First Bank and Trust
14978 East Side Bank and Trust, National Association, Wichita, converted into East Side Bank and Trust
MAINE
2260 Northeast Bank, N. A. of Lewiston and Auburn, Lewiston, converted Northeast Bank of Lewiston and Auburn Mar.
MICHIGAN
8496 Northern Michigan Bank, N.A., Escanaba, converted into Northern Michigan Bank
July
14582 First National Bank & Trust Company of Midland, Midland, converted into First Midland Bank & Trust Company
Apr.
MINNESOTA
10740 First National Bank of Lakeville, Lakeville, converted into First Lakeville State Bank
MISSOURI
8011 Plaza First National Bank of West Port, St. Louis County, converted into Plaza Bank of West Port
NEW HAMPSHIRE
1242 Monadnock National Bank, Jaffrey, converted into Monadnock Bank
NEW YORK
10087 Long Island National Bank, Hicksville, converted into Long Island Bank
PENNSYLVANIA
870 Marine National Bank, Meadville, converted into Marine Bank
4984
The First National Bank of Troy, Troy, converted into First Bank of Troy
TENNESSEE
13539 United American Bank, N.A., Knoxville, converted into United American Bank in Knoxville
TEXAS
15082
16213
14811
15827
12691
Western National Bank of Denton, Denton, converted into Western State Bank
Heritage National Bank, Houston, converted into Heritage Bank
Sabine National Bank of Port Arthur, Port Arthur, converted into Sabine Bank
First National Bank of Tomball, Tomball, converted into First Bank & Trust
Fannin National Bank in Windom, Windom, converted into The Fannin Bank
* Includes subordinated notes and debentures, if any.
136
Table B-15
Purchases of state banks by national banks, by states, calendar 1976
(Dollar amounts in thousands)
Total capital
accounts of
state banks*
$44,422
Effective
date
Title and location of bank
Total: 17 banks
ARKANSAS
Mar.
9
143
Landmark Bank of Pompano Beach, N.A. (16574), Pompano Beach, purchased The Security State Bank of Pompano Beach, Pompano Beach
Apr.
19
388
8
4,471
The First National Bank of Huntsville (8952), Huntsville, purchased The Valley Bank, Hindsville
FLORIDA
GEORGIA
T h e N a t i o n a l B a n k o f G e o r g i a ( 1 5 5 4 1 ) , A t l a n t a , p u r c h a s e d T h e H a m i l t o n B a n k a n d T r u s t C o m p a n y , A t l a n t a . . . . Oct.
NEW JERSEY
New Jersey Bank, National Association (15709), Clifton, purchased First State Bank of Hudson County, Jersey City
First Peoples National Bank of New Jersey (399), Haddon Township, purchased The Provident Bank of New Jersey,
Willingboro
First National State Bank of New Jersey (1452), Newark, purchased The Bank of Bloomfield, Bloomfield
Citizens First National Bank of New Jersey (11759), Ridgewood, purchased The State Bank of North Jersey, Pine
Brook (Montville Township)
New Jersey National Bank (1327), Trenton, purchased First State Bank, Toms River (Dover Township)
June
15
Dec.
Jan.
31
10
1,849
2,490
Dec.
Dec.
28
17
4,142
9,799
Mar.
Apr.
31
10
5,126
651
First City Bank - Northeast, N.A. (16585), Houston, purchased Northeast Bank of Houston, Houston
June
South Loop National Bank (16558), Houston, purchased South Texas Bank, Houston
Mar.
First National Bank of Rio Grande City (16618), Rio Grande City, purchased First State Bank & Trust Company, Rio
Grande City
Nov.
1
558
666
29
1,103
20
24
24
4
1,455
1,314
1,749
8,518
OHIO
Euclid National Bank (15573), Euclid, purchased The Continental Bank, Cleveland
Greenville National Bank (13944), Greenville, purchased The Citizens Bank Company, Ansonia
TEXAS
WASHINGTON
Puget Sound National Bank (12292), Tacoma, purchased Continental Bank, Burien
Seattle - First National Bank (11280), Seattle, purchased Bank of Sequim, Sequim
and Forks State Bank, Forks
Old National Bank of Washington (4668), Spokane, purchased Bank of the West, Bellevue ..
Mar.
Aug.
Aug.
Mar.
Table B-16
Consolidations* of national banks, or national and state banks, by states, calendar 1976
(Dollar amounts in thousands)
Effective
date
Consolidating banks
Resulting bank
Totaf: 1 consolidation
Outstanding
capital
stock
Surplus
Undivided
profits and
reserves
Total assets
SOUTH DAKOTA
Feb.
17
United National Bank (15639), Rapid City
United Bank & Trust, Sioux Falls
United National Bank (15639), Rapid City
$1,500
500
2,300
$1,500
1,000
2,500
$2,490
628
2,819
$95,559
32,888
128,446
137
Table B-17
Mergers* of national banks, or national and state banks, by states, calendar 1976
(Dollar amounts in thousands)
Effective
date
Merging banks
Resulting banks
Total: 36 merger actions
Outstanding
capital
stock
Surplus
Undivided
profits and
reserves
Total assets
ALABAMA
Apr.
30
The Citizens Bank of Georgiana, Georgiana
The First National Bank of Greenville, Greenville (5572) . . . .
The First National Bank of Greenville, Greenville (5572)
$75
250
300
$150
500
675
$349
1,723
2,072
$7,858
35,702
43,218
256
5,083
5,083
1,209
1,644
2,076
256
15,000
15,000
983
1,801
3,561
295
9,129
9,129
0
566
0
14,434
344,161
356,693
24,869
54,779
79,907
400
4,800
5,900
600
7,200
7,800
1,433
6,286
7,019
21,295
231,241
252,081
60
600
720
250
1,400
1,650
119
881
951
4,939
40,689
47,104
400
5,400
5,750
300
4,500
4,850
18
1,619
1,549
10,100
180,348
193,263
50
1,500
1,560
0
2,500
2,500
74
1,781
1,845
5,399
76,252
81,651
25
325
140
2,528
1,477
3,023
2,714
90,032
1,530
3,320
2,854
92,539
330
700
700
330
2,740
2,740
262
465
465
11,810
36,273
47,162
400
625
0
5,546
1,012
2,800
580
68,220
1,213
375
8,594
8,594
3,625
1,725
43,511
45,806
562
664
1,384
1,384
73,766
27,839
810,858
838,697
1,718
2,300
1,950
83,022
3,650
3,650
1,479
124,172
5,368
5,950
3,429
207,195
2,500
2,050
1,201
93,182
2,165
5,000
800
622
1,022
600
4,250
4,625
2,500
5,000
800
2,063
3,263
600
4,250
4,625
3,947
4,362
483
1,014
1,497
391
13,878
14,720
93,500
186,682
15,753
37,263
53,016
10,079
242,671
252,535
CONNECTICUT
Aug.
Dec.
The North Haven National Bank, North Haven (15439)
The First New Haven National Bank, New Haven (2)
31 The First New Haven National Bank, New Haven (2)
Laurel Bank and Trust Company, Meriden
American National Bank, Hamden (15496)
1 American National Bank, Hamden (15496)
INDIANA
Oct.
The Lamasco Bank, Evansville
The Citizens National Bank of Evensville, Evansville (2188) .
1 The Citizens National Bank of Evansville, Evansville (2188) .
Apr.
Hiseville Deposit Bank, Hiseville
The New Farmers National Bank of Glasgow, Glasgow (13651)
1 The New Farmers National Bank of Glasgow, Glasgow (13651)
Oct.
Central National Bank, Waterville (15954)
Canal National Bank, Portland (941)
1 Canal National Bank, Portland (941)
KENTUCKY
MAINE
MARYLAND
Mar.
Dec.
The Millington Bank of Maryland, Millington
The Farmers National Bank of Annapolis, Annapolis (1244).
5 Farmers National Bank of Maryland, Annapolis (1244)
The First National Bank of Mount Savage, Mount Savage
(6144)
The First National Bank and Trust Company of Western Maryland, Cumberland (381)
The First National Bank and Trust Company of Western Mary1
land, Cumberland (381)
MASSACHUSETTS
Feb.
3
Heritage Bank and Trust Company, Westfield
Old Colony Bank of Hampden County, N.A., Holyoke (1939)
Old Colony Bank of Hampden County, N.A., Holyoke (1939)
MISSISSIPPI
Clinton National Bank, Clinton (16257)
Peoples Bank of Mississippi, National Association, Union
(16194)
Mar.
Dec.
17
Peoples Bank of Mississippi, National Association, Union
31
Columbia Bank, Columbia
First National Bank of Jackson, Jackson (10523)
First National Bank of Jackson, Jackson (10523)
(16194)
NEW JERSEY
Somerset Hills & County National Bank, Basking Ridge (6960)
First National State Bank/Mechanics, Burlington Township
(1222)
Feb.
6
First National State Bank of West Jersey, Burlington Township
(1222)
First National State Bank of the Jersey Coast, Spring Lake
(13898)
The Edison Bank, National Association, South Plainfield
(15845)
Mar.
May
June
26
Edison/First National State Bank, South Plainfield (15845) ..
Independent National Bank, Willingboro (16092)
The First National Bank of Stone Harbor, Stone Harbor (12978)
3 Independent National Bank, Stone Harbor (12978)
Bank of Wayne, National Association, Wayne (15934)
Valley National Bankt, Passaic (15790)
11 Valley National Bank, Passaic (15790)
See footnotes at end of table.
138
Table B-17—Continued
Mergers* of national banks, or national and state banks, by states, calendar 1976
(Dollar amounts in thousands)
Effective
date
Merging banks
Resulting bank's
Outstanding
capital
stock
Surplus
Undivided
profits and
reserves
Total assets
JEW JERSEY—Continued
June
Oct.
Nov.
Dec.
Beach Haven National Bank and Trust Company, Beach
Haven (11658)
'
The Bank of New Jersey, N.A., Moorestown (16397)
30 The Bank of New Jersey, N.A., Moorestown (16397)
Plaza National Bank, Secaucus (15228)
New Jersey Bank (National Association), Clifton (15709) . . .
18 New Jersey Bank (National Association), Clifton (15709) . . .
United Jersey Bank/City National, Vineland (14673)
The Cumberland National Bank of Bridgeton, Bridgeton
(1346)
United Jersey/Cumberland National, Bridgeton (1346)
Midlantic National Bank/West, Morristown (15360)
Midlantic National Bank, Newark (1316)
31 Midlantic National Bank, Newark (1316)
$1,594
400
1,994
532
9,693
9,693
700
$1,606
400
2,006
1,278
19,444
21,254
820
$1,881
154
2,035
233
11,960
12,193
0
$ 68,562
6,728
75,290
28,432
825,071
853,503
29,098
500
1,200
1,200
16,726
16,726
2,500
3,320
1,065
39,277
41,542
1,421
1,319
0
32,501
32,333
54,820
83,918
40,219
1,000,472
1,040,691
1,400
1,100
283
36,362
1,400
3,600
1,160
34,903
1,400
1,400
3,600
1,100
658
85
•41,321
46,650
1,400
1,400
1,100
1,100
85
854
159,236
47,012
1,400
750,691
750,691
800
1,100
880,754
880,754
800
296
1,085,643
1,085,139
0
33,101
26,732,196
26,812,309
27,867
857
526
0
28,546
800
800
800
800
0
0
17,993
12,647
800
800
161
7,317
950
210
2
25,641
1,400
611
0
29,458
250
1,010
873
17,974
536,270
536,976
6,000
708,995
709,626
1,500
582,701
582,701
1,828
25,409,954
25,489,462
35,471
6,342
10,500
19,387
524,974
6,342
10,500
19,490
552,015
896
1,305
2,089
1,100
2,354
3,299
5,765
1,107
3,247
5,942
9,198
109
69,482
125,452
195,456
11,512
4,227
5,053
5,225
240,995
4,887
6,600
5,334
252,507
575
29,245
29,245
250
12,837
12,837
1,325
95,235
95,235
250
23,163
23,163
1,012
63,647
63,126
288
23,137
23,137
30,546
2,569,103
2,592,844
8,999
872,964
881,175
NEW YORK
Citibank (Eastern), National Association, Castleton-onHudson (5816)
Citibank (Central), National Association, Oriskany Falls
(16089)
Citibank (Mid-Western), National Association, Honeoye Falls
(15976)
Jan.
Citibank (Western), National Association, Buffalo (10258) ..
Citibank (New York State), National Association, Buffalo
(10258)
Citibank (Suffolk), National Association, Islip (15917)
Citibank (Mid-Hudson), National Association, Woodbury
(9990)
Jan.
First National City Bank, New York (1461)
First National City Bank, New York (1461)
Chase Manhattan Bank of Long Island, N.A., Melville (15922)
Chase Manhattan Bank of the Mid-Hudson, N.A., Saugerties
(1040)
,
Chase Manhattan Bank of Central New York, Syracuse
(16047)
Chase Manhattan Bank of Eastern New York, Albany (16203)
Chase Manhattan Bank of the Southern Tier, Binghamton
(16379)
Chase Manhattan Bank of Greater Rochester, N.A., Rochester
(16050)
Chase Manhattan Bank of Western New York, N.A., Buffalo
(13952)
May
Nov.
Chase Manhattan Bank of Northern New York, N.A., Canton
(3696)
Chase Manhattan Bank, National Association, New York
(2370)
21 Chase Manhattan Bank, N.A., New York (2370)
Ogdensburg Trust Company, Ogdensburg
Oneida National Bank and Trust Company of Central New
York, Utica (1392)
19 Oneida National Bank and Trust Company of Central New
York, Utica (1392)
NORTH CAROLINA
June
July
Union Trust Company of Shelby, Shelby
The Citizens National Bank in Gastonia, Gastonia (13779)..
1 Independence National Bank, Gastonia (13779)
Hanover Bank, Wilmington
The Planters National Bank and Trust Company, Rocky Mount
(10608)
12 The Planters National Bank and Trust Company, Rocky Mount
(10608)
OHIO
Jan.
May
The Bank of Cleveland, Cleveland
National City Bank, Cleveland (786)
National City Bank, Clevelrnd (786)
The Pickerington Bank, Pickerington
The Huntington National Bank of Columbus, Columbus (7745)
The Huntington National Bank of Columbus, Columbus (7745)
See footnotes at end of table.
139
Table B-17—Continued
Mergers* of national banks, or national and state banks, by states, calendar 1976
(Dollar amounts in thousands)
Outstanding
capital
stock
Merging banks
Resulting banks
Effective
date
Surplus
Undivided
profits and
reserves
Total assets
PENNSYLVANIA
Mar.
Sept.
Sept.
The Kutztown National Bank, Kutztown (5102)
The First National Bank of Allentown, Allentown (373)
31 The First National Bank of Allentown. Allentown (373)
The First National Bank of Coalport, Coalport (6887)
United States National Bank in Johnstown, Johnstown M 3781)
15 United States National Bank in Johnstown, Johnstown (13781)
The First National Bank of Dickson City, Dickson City (13937)
First National Bank, Carbondale (664)
20 First National Bank, Carbondale (664)
$420
3,871
4,396
75
2,188
2,282
100
1,380
1,840
$830
20,000
20,830
325
16,000
16,500
1,000
1,700
3,770
$895
11,345
12,135
420
5,394
5,621
683
2,862
1,321
$28,317
512,774
541,091
7,476
274,767
282,244
21,614
59,518
81,244
100
150
400
125
200
125
76
118
144
4,665
5,190
9,855
150
800
800
150
800
800
350
1,340
1,340
9,374
40,856
48,691
SOUTH DAKOTA
Mar.
First State Bank, Lake Norden
United National Bank, Castlewood (16470)
United National Bank, Castlewood (16470)
15
VERMONT
The Merchants National Bank of St. Johnsbury, St. Johnsbury
(2295)
June
First National Bank of Springfield, Springfield (122)
30 First National Bank of Springfield, Springfield (122)
VIRGINIA
Jan.
31
Jan.
31
Mar.
15
Nov.
12
294
2,700
6,000*
1,600
2,700
6,000*
779
20,552
20,552
1,485
20,552
20,552
Bank of Virginia - Lynchburg, Lynchburg
Bank of Virginia, N.A., Vinton (16485)
Bank of Virginia, N.A., Vinton (16485)
Bank of Virginia - Danville, Danville
Bank of Virginia, N.A., Vinton (16485)
Bank of Virginia, N.A., Vinton (16485)
North American Bank and Trust, Leesburg
Virginia National Bank, Norfolk (9885)
Virginia National Bank, Norfolk (9885)
Fairfax County National Bank, Seven Corners (14824)
Virginia National Bank, Norfolk (9885)
Virginia National Bank, Norfolk (9885)
457
1,770
2,000*
500
1,770
2,000*
451
31,803
31,803
1,400
31,803
31,803
11,782
90,436
145,631*
43,413
90,436
145,631*
8,783
1,745,416
1,753,137
62,491
1,804,327
1,862,225
19
1,750
2,170*
1,081
1,750
2,170*
0
46,616
46,616
1,258
49,251
53,346
* Excludes mergers involving only one operating bank, effected pursuant to corporate reorganizations,
t Formerly Bank of Passaic and Clifton, National Association.
* Information for the resulting bank is after the two actions involving Bank of Virginia, N.A., that day.
Table B-18
Mergers resulting in National banks, by assets of acquiring and acquired banks, 1960-1976"
Assets of acquired bank
Assets of acquiring banks1~
Under $10 million
$10 to 24.9 million . . .
$25 to 49.9 million . ..
$50 to 99.9 million . . .
$100 million and over
Total
Acquired
banks
1960-1976
Under $10
million
$10 to 24.9
million
99
153
176
199
633
99
135
114
117
242
0
18
47
49
221
1,260*
707
335
$25 to 49.9
million
$50 to 99.9
million
$100 million
and over
29
93
0
0
0
4
34
0
0
0
0
43
137
38
43
0
0
15
* Includes all forms of acquisitions involving two or more banks from May 13, 1960 through December 31, 1975.
t In each transaction, the bank with the larger total assets was considered to be the acquiring bank.
*Comprises 1,202 transactions, 27 involving three banks, nine involving four banks, two involving five banks and one involving nine DanKs.
140
Table B-19
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, June 30, 1976
(Dollar amounts in thousands)
Total,
Total, U.S. and
other areas United States
Number of banks
Assets
Cash and due from banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell.
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Total liabilities, subordinated notes and debentures and equity capital
Alabama
Arkansas
Arizona
Alaska
4,749
4,747
98
$75,491,155
47,410,419
$75,488,250
47,409,324
16,504,630
56,888,987
2,779,940
923,512
3,824,936
21,700,362
287,136,830
$787,485
510,480
361,120
1,052,790
22,531
9,323
27,146
213,330
3,657,623
$166,615
47,627
51,083
197,241
961
2,755
0
63,250
578,557
75
44,847
3,612,776
23,294
6,477
572,080
3,480,114
3,561,395
283,575,435
3,480,114
9,577,520
1,354,891
1,609,514
6,215,868
17,367,303
9,577,338
1,353,993
1,609,514
6,215,868
17,366,738
141,572
4,480
221
20,421
87,234
4,124
39,391
2,078
0
100
15,908
548,725,843
548,698,941
6,874,203
1,163,213
136,751,059
231,704,992
3,308,326
36,011,521
5,610,618
25,176,432
5,714,568
136,747,862
231,688,090
3,308,305
36,007,454
5,610,618
25,175,688
5,712,987
1,889,723
3,113,678
28,531
622,693
0
203,170
40,525
444,277,516
444,251,004
175,576,220
268,701,296
42,719,423
2,464,780
446,214
6,257,308
10,446,027
$574,690
502,096
137,984
462,516
9,410
6,590
6,820
California
56
$543,701
280,940
169,333
510,934
15,015
4,577
21,456
225,972
2,005,487
$11,161,032
23,973
3,112,611
3,031
18,913
1,986,574
471,584
41,851,853
4,382
1,403,185
146,325
5,838
0
8,497
68,908
1,392,527
5,255,326
87,648
4,474
20
1,536
55,422
3,911,984
78,327,858
491,382
331,242
20,926
152,139
0
3,503
22,688
1,463,800
2,850,197
23,472
166,577
79
31,052
64,714
1,133,287
1,662,893
14,426
311,359
0
202,021
20,298
18,271,281
36,760,213
441,042
4,289,934
1,499,059
2,128,012
837,332
5,898,320
1,021,880
4,599,891
3,344,284
64,226,873
175,570,607
268,680,397
42,719,423
2,464,780
446,214
6,257,308
10,445,509
2,337,128
3,561,192
299,178
7,484
2,375
20,421
95,705
594,842
427,038
50,002
1,145
213
100
9,814
1,647,089
2,952,802
258,468
599
506,611,268
506,584,238
6,323,483
1,083,154
8,497
41,619
4,909,795
1,464,063
1,880,221
210,194
3,544
87
1,535
47,310
3,606,954
21,426,566
42,800,307
5,970,291
297,904
88,703
1,276,735
1,713,535
73,574,041
2,610,607
2,610,607
23,996
740
77,668
24,105
405,178
19,437
8,960,644
15,222,322
14,231,837
1,069,728
39,503,968
19,437
8,959,764
15,221,522
14,233,645
1,069,728
39,504,096
0
114,069
211,732
192,509
8,414
0
23,259
34,373
19,520
0
40,910
99,776
119,517
7,660
0
66,430
84,885
116,133
13,477
0
844,955
1,840,585
1,613,043
50,056
526,724
79,319
267,863
280,925
4,348,639
548,725,843
548,698,941
6,874,203
1,163,213
5,255,326
3,911,984
78,327,858
16,506,342
56,893,632
2,779,940
923,562
3,824,936
21,701,787
287,151,419
3,562,559
283,588,860
2,167
210,010
3,136,584
721
6,392,580
2,343,890
4,209,926
274,486
94,980
344,115
3,530,808
42,323,437
71,180
484,281
1,275,593
3,497,422
Table B-19—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, June 30, 1976
(Dollar amounts in thousands)
Colorado
Number of banks
Assets
Cash and due from banks
U S Treasurv seruritip^
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds notes and debentures
Federal Reserve stock and coroorate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises ..
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase . . . .
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
Equity Capital
Preferred stock
Common stock.
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Total liabilities, subordinated notes and debentures and equity capital . . . .
Connecticut
District of
Columbia
Delaware
Florida
Hawaii
Georgia
65
2
132
24
5
15
$1,015,970
444,465
151,753
670,998
7,382
9,318
17,306
244,736
3,509,173
$721,183
209,221
99,942
385,032
92,284
8,666
13,781
46,230
2,045,190
$6,433
8,340
2,966
3,193
384
92
0
2,200
38,580
$603,118
541,281
95,652
474,203
18,724
8,722
0
211,590
2,184,061
$2,351,537
2,276,844
834,033
2,105,756
92,797
29,713
40,064
561,070
7,352,172
$1,331,744
399,626
131,947
616,786
16,851
52,393
12,560
242,228
4,146,204
$19,862
20,654
8,781
2,757
0
214
0
2,700
94,767
34,586
3,474,587
20,054
2,025,136
175
38,405
28,887
2,155,174
93,415
7,258,757
56,495
4,089,709
480
94,287
27 149
26 771
0
25,432
33,165
36,574
0
132,126
22 285
2,904
15 025
90,965
6,326,969
95,281
3,319
9
9,917
171,233
3,908,005
1,083
69
0
0
432
63,597
57,528
1,239
0
5,255
76,274
370,759
95,781
3,642
12,222
271,542
238,098
118,195
77,522
55,700
142,340
2,094
5
0
162
1,647
4,274,192
16 337 682
7 562 273
153,163
1,866,471
2,437,052
41,986
529,206
0
373,905
60,085
1,238,053
1,563,983
31,635
254,996
228
272,582
31,992
17,111
38,078
939
1,395
0
0
342
1,679,792
1,528,144
80,345
2,382
169,553
66,789
72,080
4,697,842
7,303,278
56,486
1,293,716
4,534
574,085
174,344
2,275,851
2,290,397
45,545
569,568
15,026
556,505
41,693
42,420
64,098
548
28,138
0
2,555
2,298
5,308,705
3,393,469 ^_
57,865
3,599,085
14,104,285
5,794,585
140,057
2,411,027
2,897,678
1,636,505
1,756,964
18,544
39,321
2,036,271
1,562,814
5,780,430
8,323,855
3,002,684
2,791,901
48,316
91,741
403,210
52,029
15,054
15,025
67,087
194,079
4,575
546
9,917
32,337
0
200
0
0
351
210,390
29,965
335
5,255
40,318
663,811
12,559
6,281
12,227
149,660
655,546
197,484
23,602
56,074
198,320
0
1,200
0
162
2,257
5,861,110
3,634,923
58,416
3,885,348
14,948,823
6,925,611
143,676
30,479
11,388
200
13,532
37,347
58,838
1,500
0
95,984
155,008
174 850
9,538
435,380
0
62,681
130,689
64,448
3,876
261,694
0
1,550
1,486
1 917
28
4,981
430
62,851
134,690
171,773
5,568
375,312
1,001
355,324
539,485
423,670
32,032
1,351,512
0
143,058
209,408
157,600
67,758
577,824
0
3,797
2,806
1,184
200
7,987
6,326,969
3,908,005
63,597
4,274,192
16,337,682
7,562,273
153,163
303
Table B-19—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, June 30, 1976
(Dollar amounts in thousands)
Idaho
Number of banks
Assets
Cash and due from banks
U S Treasury securities
•
•
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds notes and debentures
Federal Reserve stock and corporate stock
.
Trading account securities
Federal funds sold and securities purchased under agreements to resell
Loans, total (excluding unearned income)
.
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
Liabilities
Demand deposits of individuals, partnerships and corporations
Time ancf savings deposits of individuals, partnerships and corporations
Deposits of U S government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase . . . .
Liabilities for borrowed money
. .
.
.
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
Equity Capital
Preferred stock .
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Total liabilities, subordinated notes and debentures and equity capital . . . .
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
6
424
120
100
$256,310
178,093
61,806
283,997
2,305
3,795
0
50,747
1,473,058
$5,394,575
4,608,368
1,811,815
5,114,004
452,664
79,120
391,708
1,352,456
26,959,698
$1,272,062
1,512,700
586,006
1,472,559
110,069
16,255
57,316
742,879
6,020,963
$625,678
366,525
210,481
561,678
21,625
4,513
6,042
144,284
2,314,767
$632,318
482,494
254,708
647,842
10,278
7,764
30,930
352,210
2,356,541
$486,282
476,673
137,157
580,471
6,285
6,132
6,148
287,035
2,422,006
$915,620
1,107,855
205,369
917,031
10,777
12,877
3,111
501,850
3,354,334
12,831
1,460,227
390,898
26,568,800
74,936
5,946,027
20,955
2,293,812
12,146
69,913
136,688
1,405
25,192
2,331,349
3,650
24,740
2,397,266
54,979
41,412
3,312,922
26,939
40,112
1,777
109
0
32,254
591,388
141,665
156,163
453,529
1,446,863
206,604
27,100
7,547
43,384
421,732
65,768
4,101
1,543
293
68,551
116,301
2,943
1,353
0
48,720
87,405
7,626
69
4,097
102,642
148,397
11,138
1,943
4,476
122,091
2 383,678
48,633,031
12,558,928
4,376,299
4 922 860
4 640 267
7 302 396
639,905
1,219,892
15,140
215,214
0
4,308
19,576
10,187,711
20,294,029
227,509
2,201,629
1,278,890
2,574,326
396,045
2,715,183
5,610,498
58,009
1,371,539
1,446
313,729
96,098
1,026,906
2,163,852
19,543
242,135
0
306,050
27.608
1,266,239
2,002,492
20,024
664,960
0
216,798
26,650
1,336,071
2,126,395
39,658
297,175
0
199,746
28,528
2,068,351
2,677,761
27,182
897,989
7,816
332,004
59,442
2,114,035
37,160,139
10,166,502
3,786,094
4,197,163
4,027,573
6,070,545
732,035
1,382,000
12,793,044
24,367,095
76,356
4,295
190
0
27,824
6,610,035
55,476
18,158
461,235
898,551
3,712,232
6,454,270
1,145,304
94,162
9,703
43,384
209,235
1,404,382
2,381,712
221,925
4,404
742
293
51,348
1,724,791
2,472,372
249,281
14,509
356
0
38,181
1,680,315
2,347,258
183,496
17,450
2,294
4,097
51,228
2,624,700
3,445,845
530,010
13,240
22,382
4,476
77,110
2,222,700
45,203,594
11,668,290
4,064,806
4,499,490
4,286,138
6,717,763
9,340
84,037
5,679
20,949
19,640
5,965
18,139
0
35,943
88,869
22,735
4,091
1,665
754,731
1,472,397
1,039,185
77,422
0
186,442
348,137
334,040
16,340
0
59,904
81,845
133,429
15,366
0
92,599
150,757
152,906
7,468
0
72,284
120,683
142,255
12,942
1,800
101,598
220,851
219,739
22,506
151,638
3,345,400
884,959
290,544
403,730
348,164
566,494
2,383,678
48,633,031
12,558,928
4,376,299
4,922,860
4,640,267
7,302,396
171
81
54
Table B-19—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, June 30, 1976
(Dollar amounts in thousands)
Maryland
Maine
Number of banks
Assets
Cash and due from banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase . . . .
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Total liabilities, subordinated notes and debentures and equity capital . . . .
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
18
42
77
122
203
38
115
$129,542
69,726
28,857
129,439
1,281
1,260
0
30,506
578,292
$585,586
299,503
103,516
595,451
7,121
7,720
53,232
261,372
2,916,663
$1,744,618
1,087,142
188,668
897,143
42,692
30,547
110,236
314,595
5,987,149
$3,046,898
1,727,253
483,325
2,275,757
127,229
32,561
11,126
831,268
10,465,001
$1,399,960
943,221
397,191
1,295,910
17,197
17,589
301,740
361,011
6,205,650
$473,747
267,003
78,303
425,172
8,853
6,257
25,163
168,523
1,603,722
$1,454,236
694,095
319,608
1,131,791
18,122
14,825
48,498
912,647
4,562,634
5,555
572,737
32,917
2,883,746
69,478
5,917,671
112,397
10,352,604
65,584
6,140,066
18,280
1,585,442
53,563
4,509,071
0
33,089
60,988
43,865
60,093
190
47,420
22,010
2,397
3
0
10,950
85,343
16,031
536
11,089
279,428
241,701
21,304
66,327
138,240
928,747
312,428
29,389
48,585
86,957
382,397
144,257
57,638
3,596
58,742
192,890
69,303
4,991
79
905
41,332
107,449
18,435
10,095
35,933
153,810
998,708
5,222,763
11,790,619
19,791,642
11,391,101
3,155,263
9,476,035
287,586
510,384
6,473
66,940
0
3,589
7,578
1,445,019
2,540,433
47,235
202,288
364
91,394
44,715
3,356,399
4,094,201
123,802
829,205
182,867
487,339
105,464
4,344,224
9,784,314
156,139
1,659,258
4,547
379,244
478,519
845,467
1,195,572
10,377
513,570
6,309
160,373
9,441
882,550
4,371,448
9,179,277
16,806,245
2,441,644
4,902,176
53,989
734,105
548
574,693
76,126
8,783,281
2,741,109
2,521,874
3,176,331
74,671
509,014
26
803,722
56,915
7,142,553
329,599
552,951
32,845
886
331
0
8,181
1,684,509
2,686,939
401,621
14,925
315
11,089
65,916
4,476,987
4,702,290
5,636,104
11,170,141
3,263,416
5,519,865
1,183,533
1,557,576
3,445,394
3,697,159
1,206,878
74,288
2,444
141,276
201,703
1,100,056
13,978
7,293
86,957
259,666
1,219,979
143,747
17,175
59,466
238,797
148,768
655
845
905
28,003
1,404,227
24,358
5,767
35,940
117,200
924,793
4,865,314
10,805,866
18,274,195
10,462,445
2,920,285
8,730,045
1,550
6,157
45,198
83,543
118,576
9,540
29,122
0
20,066
21,797
29,544
958
. 0
64,652
119,485
152,779
14,376
0
172,383
414,212
322,694
30,266
100
294,204
603,057
503,396
33,147
0
256,715
262,110
263,184
28,071
0
44,436
165,063
13,504
2,435
4,809
152,879
230,432
313,451
15,297
72,365
351,292
939,555
1,433,904
810,080
225,438
716,868
998,708
5,222,763
11,790,619
19,791,642
11,391,101
3,155,263
9,476,035
Table B-19—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, June 30, 1976
(Dollar amounts in thousands)
Montana
Number of banks
Assets
Cash and due from banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
..........
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase . . .
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
:
Total liabilities
Subordinated notes and debentures
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Total liabilities, subordinated notes and debentures and equity capital . . .
en
Nebraska
New
Hampshire
Nevada
New Jersey
New Mexico
New York
56
120
4
44
108
37
133
$199,060
147,400
57,908
281,875
2,821
3,381
0
45,611
1,115,707
$623,371
300,465
184,925
521,768
10,859
5,199
28,236
144,341
2,416,671
$148,394
148,339
85,259
159,862
21,228
1,657
0
72,200
722,128
$149,645
131,016
18,979
146,875
1,471
1,953
0
14,245
673,249
$1,896,963
1,585,087
756,391
2,432,328
385,959
22,979
8,493
344,977
8,608,002
$264,024
158,700
123,037
295,641
1,658
3,563
0
124,895
1,124,172
$11,613,350
3,641,777
744,050
4,340,431
312,480
144,540
1,343,460
1,069,112
34,288,900
11,070
1,104,637
2,686
26,356
2,390,315
39,627
7,466
714,662
11,114
7,003
666,246
28
110,818
8,497,184
71,889
14,094
1,110,078
1,373
602,105
33,686,795
470,922
31,905
2,141
0
1,943
26,195
1,907,563
72,007
6,327
29
1,822
57,768
4,387,059
34,949
4,782
0
0
12,930
1,415,376
27,738
625
0
489
9,076
1,168,386
329,749
27,949
261
22,474
301,519
16,684,202
53,124
7,708
455
122
28,094
2,172,472
704,371
162,774
586,776
2,675,957
4,405,747
65,902,542
439,849
1,049,389
6,358
151,001
0
33,587
15,098
1,161,814
1,986,152
18,537
257,356
0
296,148
23,300
444,608
627,699
7,951
165,469
0
2,402
24,593
328,525
538,308
10,861
105,335
0
2,350
10,371
4,266,701
8,826,511
121,917
1,199,696
0
158,719
167,687
603,962
863,291
29,359
366,362
0
40,624
20,437
1,695,282
538,628
1,156,654
41,452
32
402
1,943
26,130
1,765,241
3,743,307
1,569,979
2,173,328
255,258
1,549
793
1,822
42,396
4,045,125
1,272,722
525,900
746,822
6,895
14,182
765
0
10,859
1,305,423
995,750
408,093
587,657
51,802
1,485
1,500
489
13,508
1,064,534
14,741,231
1,924,035
15,238,153
20,966,791
359,936
1,597,437
2,123,037
7,518,140
1,382,548
49,186,042
5,256,163
9,485,068
443,502
46,417
9,711
22,970
170,705
15,434,536
730,724
1,193,311
62,338
3,543
420
122
22,946
2,013,404
24,105,968
25,080,074
4,196,806
700,006
19,484
2,703,574
2,749,557
59,555,469
12,725
21,920
0
1,125
61,620
12,960
372,138
0
51,635
51,730
23,048
3,184
129,597
101
70,018
88,842
150,563
10,490
320,014
0
27,518
27,717
52,203
2,515
109,953
0
15,554
46,697
38,448
2,028
102,727
25
296,335
458,364
406,114
27,208
1,188,046
0
44,387
55,429
43,154
3,138
146,108
1,506
1,544,583
2,036,796
2,268,985
123,065
1,907,563
4,387,059
1,415,376
1,168,386
16,684,202
2,172,472
65,902,542
5,974,935
Table B-19—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, June 30, 1976
(Dollar amounts in thousands)
North Carolina North Dakota
Number of banks
Ohio
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
.
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase . ..
Liabilities for borrowed money
Mortaaae indebtedness
..
Acceptances executed by or for account of this bank and outstanding
"
Other liabilities
Total liabilities
Subordinated notes and debentures
Pennsylvania Rhode Island
43
220
194
7
241
5
$1,246,849
513,264
355,141
1,177,124
8,079
12,734
96,871
258,347
4,975,839
$145,049
128,196
57,761
208,810
2,636
1,863
200
13,395
883,852
$2,470,685
2,794,244
433,171
3,432,131
115,063
39,420
119,491
952,290
10,397,454
$1,121,249
921,867
96,538
1,330,068
23,775
12,695
48,494
544,686
3,924,477
$1,309,951
365,138
188,210
732,592
5,967
9,204
4,204
236,010
3,191,078
$4,002,022
3,426,717
1,191,187
3,521,130
253,505
62,480
402,239
1,475,121
20,310,958
$260,200
176,397
58,563
246,184
23,522
4,703
56,943
67,000
1,650,162
63,099
4,912,740
9,257
874,595
38,837
3,885,640
27,865
28,291
3,162,787
22,521
236,486
20,074,472
208,704
15,866
1,634,296
41,7077,598
820
53,740
58,453
48,023
0
133,833
10,263,621
90,447
170,134
30 288
7,217
113,529
324,541
28,672
122
155
814
18,818
378,287
12,226
12,011
59,108
754,769
154,242
11,724
800
901
97,403
150,622
12,457
7,012
88,231
69,123
497,494
83,916
77,460
581,493
982,021
9,274,881
1,481,086
21,926,964
8,277,947
6,364,929
36,839,961
2,715,623
2,723,687
3,645,719
60 803
633,826
15,204
302 140
50,870
378,871
833,527
4,876
78,603
0
13,850
11,667
5,352,364
10,601,126
127,065
1,406,567
1,007
326,906
173,784
2,290,446
3,337,176
63,750
961,678
0
427,469
61,293
1,610,142
2,554,210
26,252
378,897
0
94,856
57,011
8,071,597
16,809,165
191,864
1,786,005
202,346
1,250,756
226,025
502,229
1,481,794
12,368
186,788
0
12,299
20,436
7,432,249
1,321,394
17,988,819
7,141,812
4,721,368
28,537,758
2,215,914
3,290,637
4,141,612
434,834
886,560
777,340
17 275
4 060
113,529
149,309
25,782
1,376
477
814
17,058
6,421,890
11,566,929
1,576,907
14,937
1,854
59,108
447,497
2,915,499
4,226,313
376,383
2,749
1,943
901
73,920
1,930,261
2,791.107
999,712
9,831
370
88,231
85,409
9,749,424
18,788,334
3,639,522
356,425
15,703
581,607
842,719
630,092
1,585,822
150,094
1,769
0
53,740
96,299
8,493,762
1,366,901
20,089,122
7,597,708
5,904,921
33,973,734
2,517,816
135,695
9,954
42,135
57,158
100,750
234,290
5,000
0
164,655
246,233
226,168
8,368
0
29,163
33,450
36,372
5,246
0
371,710
809,359
577,874
36,764
500
134,511
176,561
300,327
11,182
0
92,530
124,633
141,032
163
1,335
495,684
1,156,632
886,509
91,777
0
30,390
83,348
73,326
5,743
645,424
104,231
1,795,707
623,081
358,358
2,631,937
192,807
21,926,964
8,277,947
6,364,029
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U S government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Oregon
28
Assets
Cash and due from banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell
Loans, total (excluding unearned income)
Oklahoma
25,49^
Equity Capital
Preferred stock
Common stork
Surolus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Total liabilities, subordinated notes and debentures and equity capital . ..
9,274,881
1,481,086
n
36,839,96?!
2,715,623
Table B-19—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, June 30, 1976
(Dollar amounts in thousands)
South Carolina South Dakota
Number of banks
19
32
Tennessee
75
Texas
591
Vermont
Utah
12
14
Virginia
108
Assets
Cash and due from banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell.
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
$357,693
180,261
94,752
353,177
118
3,496
26,339
132,975
1,351,817
$190,556
146,311
67,011
292,457
7,737
2,537
24
31,033
1,184,075
$1,263,702
812,581
341,125
814,680
32,101
15,347
13,820
479,450
4,346,248
$6,158,868
3,420,484
1,274,692
5,536,591
103,109
53,496
70,430
2,165,497
18,503,308
$252,591
156,046
50,955
164,332
253
2,612
8,558
80,698
1,091,252
$31,385
35,132
8,962
45,310
4,913
484
0
8,480
268,584
$1,105,246
739,471
302,363
1,223,300
10,716
17,145
6,514
285,927
5,313,256
14,599
1,337,218
13,714
1,170,361
53,746
4,292,502
215,994
18,287,314
9,526
1,081,726
2,558
266,026
55,938
5,257,318
4,216
1,402
26,493
91,263
15,885
225
12,078
71,894
7,065
0
1,215
30,845
191,745
75,594
34
6,219
265,508
799,205
89,389
27,952
142,193
728,553
34,725
2,354
0
82
29,794
7,954
685
0
0
3,489
260,415
35,527
16
2,182
112,142
2,601,264
36,765
720
0
798
27,632
1,975,344
8,630,901
38,949,036
1,880,611
413,045
9,370,360
1,133,877
841,844
20,935
156,777
0
31,638
20,994
442,547
1,118,617
8,543
179,002
0
25,412
10,258
2,129,799
3,731,406
57,683
801,583
1,040
569,053
50,676
11,296,874
13,085,470
265,814
4,375,130
22,278
2,505,002
294,721
493,468
817,855
14,192
225,501
0
27,565
33,734
88,059
266,448
1,433
12,510
0
1,118
3,824
2,520,395
4,783,649
74,729
612,218
112
112,479
59,755
2,206,065
1,784,379
7,341,240
31,845,289
1,612,315
373,392
8,163,337
604,969
1,007,346
100,125
273,267
2,926,243
5,237,094
1,472
4,615
0
0
2,371
287,745
23,604
45,781
2,182
117,316
381,850
8,639,965
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase . ..
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
1,301,079
904,986
519,149
1,265,230
2,851,909
4,489,331
14,762,923
17,082,366
144,059
7,304
71
1,215
25,212
15,760
29
2,041
798
23,267
558,004
9,968
5,844
6,219
98,358
3,333,312
85,174
97,560
142,412
483,186
2,383,926
1,826,274
8,019,633
35,986,933
109,185
2,814
119
82
19,538
1,744,053
7,600
16,821
36,660
137,235
19,456
1,757
37,437
0
39,205
74,741
91,390
4,402
0
37,998
42,190
48,455
3,606
0
145,613
211,788
202,787
14,420
140
698,187
855,143
1,107,155
164,243
0
30,734
49,558
35,519
1,291
0
6,768
9,010
12,436
1,224
0
165,376
263,355
249,324
14,903
209,738
132,249
574,608
2,824,868
117,102
29,438
692,958
2,601,264
1,975,344
8,630,901
38,949,036
1,880,611
413,045
9,370,360
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Total liabilities, subordinated notes and debentures and equity capital
Table B-19—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, June 30, 1976
(Dollar amounts in thousands)
Washington
Number of banks
Assets
Cash and due from banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Total liabilities, subordinated notes and debentures and equity capital
24
West Virginia Wisconsin
103
Wyoming
Other areas
Puerto Rico Virgin Islands
128
46
1
District of
Columbia
non-national*
1
$1,518,978
486,683
133,896
970,974
5,656
11,191
36,920
718,002
5,848,264
$440,397
469,813
306,964
661,918
14,968
5,727
4,880
233,010
1,781,445
$879,187
950,463
255,493
772,998
42,120
14,748
20,322
307,748
4,143,067
$138,033
118,667
62,003
206,054
1,903
1,800
0
29,805
730,552
$2,488
0
0
4,645
0
50
0
700
14,581
65,854
5,782,410
21,778
1,759,667
46,716
4,096,351
7,767
722,785
1,164
13,417
318
11,855
134,702
6,728
25,155
2,799
0
0
245,872
13,033
21,636
197,996
164,797
95,702
1,967
0
189
34,315
193,341
80,560
275
22,298
92,664
21,821
984
58
0
18,808
182
898
0
0
513
0
0
0
0
52
424
47
0
0
408
10,442,746
4,036,245
7,753,723
1,325,520
22,893
4,009
40,953
2,743,424
4,265,082
53,540
772,996
30,381
249,582
93,153
933,619
2,091,668
18,564
209,120
99
60,210
30,788
1,669,960
3,720,995
48,211
601,325
43,822
228,557
57,130
333,300
602,615
37,132
159,148
0
23,332
11,738
2,281
14,277
12
4,067
0
729
1,354
916
2,625
9
0
0
15
227
14,462
22,517
413
2
0
0
535
8,208,158
3,344,068
6,370,000
1,167,265
22,720
3,792
37,929
3,279,370
4,928,788
1,128,854
2,215,214
2,075,997
4,294,003
417,391
749,874
4,446
18,274
1,167
2,625
15,412
22,517
1,189,194
34,953
2,459
197,997
128,544
308,857
7,200
7,452
189
28,932
690,337
19,618
1,442
22,298
88,637
31,755
12,864
51
0
10,580
0
0
0
0
194
0
0
0
0
324
9,761,305
3,696,698
7,192,332
1,222,515
22,914
4,116
77,625
7,186
52,669
6,285
0
6,025
143,923
204,023
224,819
25,026
0
60,773
127,218
133,212
11,158
0
129,909
210,304
154,807
13,702
0
8,901
33,783
50,613
3,423
0
880
800
1,701
0
0
0
0
107
0
0
278
1,000
923
625
603,816
332,361
508,722
96,720
21
107
2,826
10,442,746
4,036,245
7,753,723
1,325,520
22,893
4,009
40,953
* Non-national banks in the District of Columbia are supervised by the Comptroller of the Currency.
$417
1,095
1,712
0
0
0
0
725
8
$3,059
7,356
4,088
8,573
3,342
1
0
1,800
12,173
37,937
190
Table B-20
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, December 31, 1976
(Dollar amounts in thousands)
Total, U.S.
and
other areas
4,737
Total,
United States
4,735
97
6
3
73
58
$76,078,031
52,612,836
17,005,880
57,384,363
2,987,415
967,304
4,973,779
30,140,010
303.436.774
$76,074,001
52,610,736
17,004,197
57,379,718
2,987,415
967,159
4,973,779
30,135,213
303.422.203
$852,828
523,198
284,199
1,149,817
29,843
9,828
35,106
381,465
4.007.413
$166,937
82,680
-50,314
175,303
3,158
2,416
0
35,000
625.034
$562,349
586,599
118,927
419,178
8,659
6,996
8,178
214,600
3,236,168
$587,185
271,330
159,559
531,077
10,445
4,737
22,257
347,379
2,140,981
$10,587,196
7,736,680
2,078,611
5,120,513
198,749
109,887
313,924
4,197,897
44,163.743
3,589,367
299,847,407
3,588,723
299,833,480
46,889
3,960,524
6,443
618,591
23,914
3,212,254
19,343
2,121,638
493,900
43,669,843
3,808,381
- 3,808,381
23,271
6,761
3,445
5,167
1,483,465
9,879,953
1,722,984
1,777,388
5,086,708
19,076,586
9,879,738
1,721,536
1,777,388
5,086,708
19,076,206
144,322
5,219
180
16,288
91,169
42,086
1,280
585
0
18,194
147,594
8,296
0
7,335
91,029
89,469
3,921
117
901
57,123
1,463,898
74,746
480,343
1,763,843
3.973,410
583,349,025
583,315,655
7,507.257
1,203,305
5,395,439
4,212,305
83,253,005
147,018,169
242,873,535
2,126,653
38,088,306
5,917,740
27,332,987
6,051,345
147,014,675
242,853,964
2,126,647
38,085,623
5,917,740
27,328,648
6,050,839
2,059,997
3,326,242
40,147
647,704
0
263,822
38,174
468,691
389,666
12,774
135,738
0
2,196
20,448
1,548,398
3,018,899
17,236
156,338
5,240
29,381
67,448
1,188,968
1,765,090
13,842
315,865
0
255,495
24,957
19,470,724
37,635,748
214,726
5,305,814
1,705,432
2,022,614
1,079,533
469,408,735
469,378,136
6,376,086
1,029,513
4,842,940
3,564,217
67,434,591
188,175,050
281,233,685
188,170,057
281,208,079
2,561,502
3,814,584
546,677
482,836
1,714,832
3,128,108
1,556,889
2,007,328
23,065,670
44,368,921
51,678,941
2,741,434
406,112
5,140,675
9,921,683
51,678,941
2,741,434
406,112
5,140,675
9,920,706
386,897
39,634
2,311
16,288
116,350
56,270
12,684
61
0
12,749
145,083
280
485
7,335
44,636
280,579
2,280
92
901
45,697
6,736,818
561,465
61,023
1,769,745
1,506,292
539,297,580
539,266,004
6,937,566
1,111,277
5,040,759
3,893,766
78,069,934
2,726,628
2,726,628
23,996
990
77,666
25,863
404,747
18,754
9,106,275
15,853,738
15,271,833
1,074,217
18,754
9,103,635
15,851,530
15,274,887
1,074,217
0
113,855
211,967
212,607
7,266
0
23,624
38,718
26,651
2,045
41,324,817
41,323,023
545,695
91,038
0
40,910
99,847
128,843
7,414
277,014
0
67,268
87,429
124,220
13,759
292,676
0
915,465
2,070,988
1,748,723
43,148
4.778,324
Total liabilities, subordinated notes and debentures and equity capital . . .. 583,349,025
583,315,655
7,507,257
1,203,305
5,395,439
4,212,305
83,253,005
Number of banks
Assets
Cash and due from banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves >
Total equity capital
CO
Alabama
Alaska
Arizona
Arkansas
California
Table B-20—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, December 31, 1976
(Dollar amounts in thousands)
Colorado
Number of banks
Assets
Cash and due trom banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase . . . .
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Total liabilities, subordinated notes and debentures and equity capital . . . .
Connecticut
District of
Columbia
Delaware
Florida
Georgia
Hawaii
132
23
5
15
$1,035,822
468,939
153,504
675,014
6,115
9,336
4,999
413,385
3,773,086
36,389
3,736,697
28,949
$676,022
296,611
129,804
372,088
94,926
8,720
27,719
127,505
2,091,424
23,431
2,067,993
25,544
$4,905
8,688
2,696
3,325
$572,783
480,449
109,583
578,637
16,784
8,810
13,769
345,420
2,281,027
29,330
2,251,697
27,677
$2,540,605
2,472,746
1,002,499
1,979,596
122,626
28,528
25,938
1,270,482
7,655,460
88,003
7,567,457
38,440
$1,214,147
449,883
148,357
561,899
13,146
53,063
26,708
439,377
4,225,161
55,694
4,169,467
33,733
$21,360
24,151
9,059
1,327
137,226
27,552
2,421
17,857
95,184
6,813,000
94,676
6,473
49,637
1,633
52,906
4,510,366
238,937
145,446
80,382
74,513
124,462
7,773,520
2,370
6,376
161,626
4,096,091
373,032
108,043
3,198
14,620
291,831
17,839,641
2,019,564
2,734,692
35,981
522,842
1,333,227
1,611,012
23,360
313,757
405,063
59,005
5,777,147
248,665
28,149
3,558,170
1,760,743
1,746,749
28,332
7,200
184,668
57,219
62,519
3,847,430
5,169,360
7,715,255
69,951
1,472,267
2,994
733,926
167,473
15,331,226
2,365,343
2,397,711
35,363
532,910
21,725
551,329
66,437
5,970,818
2,587,507
3,189,640
391,995
46,152
11,489
17,857
79,464
1,707,937
1,850,233
212,081
6,661
6,376
36,796
0
98
0
0
354
2,043,407
1,804,023
196,689
9,275
6,324,104
3,820,611
60,409
4,107,931
6,497,402
8.833.824
908,652
6,315
7,579
14,621
160,048
16,428,441
3,117,761
2.853.057
839,697
49,808
25,609
77,039
150,944
7,113,915
1,306
146,779
29,952
12,473
200
13,128
36,486
66,340
1,500
0
8
0
527
383
97
0
4,100
40,436
153
40,283
0
1,031
70
0
0
406
65,984
17,449
39,900
686
1,325
0
0
597
59,957
18,857
41,100
0
581
0
580
53,957
306
64
2
0
200
0
5,270
91,610
981
90,629
0
5
0
115
1,459
155,945
47,736
66,773
607
23,094
0
2,909
1,933
143,052
53,616
89,436
0
2,306
0
115
0
0
0
400
0
62,866
136,564
59,594
3,983
263,007
1,580
1,676
2,050
144,960
216,573
164,035
67,697
593,265
3,797
2,506
1,363
5,375
63,185
134,756
186,801
4,165
389,307
1,001
357,979
546,952
441,974
26,808
1,374,714
0
98,686
160,213
193,527
6,518
458,944
6,813,000
4,096,091
65,984
4,510,366
17,839,641
7,773,520
155,945
69
0
7,666
Table B-20—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, December 31, 1976
(Dollar amounts in thousands)
Idaho
Number of banks
Assets
Cash and due from banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell.
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Ol
Total liabilities, subordinated notes and debentures and equity capital
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
425
120
100
169
82
54
$298,784
192,854
56,646
330,732
1,283
3,819
1,997
47,467
1,553,686
$4,760,876
4,910,987
1,939,864
5,194,676
433,630
84,561
543,068
1,616,440
28,331,740
$1,392,670
1,535,,529
675,793
1,485,802
177,091
16,384
45,924
782,445
6,328,163
$671,828
380,866
197,627
562,395
14,808
4,553
12,773
225,781
2,494,894
$720,794
489,521
233,865
634,931
9,943
7,662
14,342
433,630
2,521,162
$562,411
500,445
127,776
584,857
2,797
6,306
8,969
406,400
2,632,696
$1,099,206
1,102,507
164,198
908,516
9,637
12,305
399
837,227
3,552,320
13,610
1,540,076
9,559
364,854
27,966,886
71,152
80,319
6,247,844
25,130
2,496,032
25,669
2,607,027
41,128
3,511,192
131,876
20,661
2,474,233
1,921
4,076
64,024
25,989
42,063
1,058
0
6
34,139
2,560,483
606,458
199,707
202,897
137,430
1,447,365
50,115,997
217,589
36,072
7,712
46,800
546,624
13,346,155
66,907
4,290
1,212
730
79,606
4,699,530
119,065
2,894
1,484
105
53,115
5,221,459
91,675
6,596
74
545
76,293
5,046,195
149,709
16,890
1,877
10,711
128,478
7,978,841
693,078
1,328,076
11,910
219,718
0
8,234
18,685
10,599,134
20,054,426
161,588
2,031,059
1,380,222
2,693,400
399,507
3,019,656
5,968,533
45,542
1,324,445
1,470
340,831
100,629
1,145,880
2,322,194
20,397
260,862
0
335,438
27,026
1,365,928
2,184,611
17,924
566,423
0
294,111
30,908
1,493,200
2,245,443
16,043
313,252
0
217,241
30,551
2,309,500
2,881,421
24,699
890,668
7,429
420,534
62,095
2,279,701
37,319,336
10,801,106
4,111,797
4,459,905
4,315,730
6,596,346
804,337
1,475,364
79,728
2,533
228
6
30,217
13,287,637
24,031,699
8,135,127
36,829
17,479
138,170
829,339
3,977,236
6,823,870
1,336,477
32,676
9,829
46,814
187,651
1,548,703
2,563,094
185,617
3,436
617
730
64,227
1,903,079
2,556,826
266,282
13,746
282
105
42,972
1,817,817
2,497,913
286,763
4,919
2,197
545
55,087
2,952,983
3,643,363
635,441
13,578
18,762
10,712
92,524
2,392,413
46,476,280
12,414,553
4,366,424
4,783,292
4,665,241
7,367,363
7,964
87,431
12,538
26,884
21,065
11,596
18,121
0
35,943
96,969
22,927
4,267
160,106
2,365
760,952
1,548,983
1,142,087
97,899
3,552,286
0
189,103
354,744
359,660
15,557
919,064
0
60,750
83,510
148,226
13,736
306,222
0
92,459
151,554
165,542
7,547
417,102
0
72,978
123,789
162,316
10,275
369,358
1,800
101,647
223,007
241,603
25,300
2,560,483
50,115,997
13,346,155
4,699,530
5,221,459
5,046,195
7,978,841
593,357
Table B-20—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, December 31, 1976
(Dollar amounts in thousands)
Maine
Number of banks
Maryland
Massachusetts
Michigan
17
41
75
122
$101,960
66,575
$1,707,901
1,525,350
166,445
829,490
58,093
37,120
184,464
298,732
5,949,125
$2,494,345
2,007,525
396,754
68,655
603,395
$627,268
267,477
110,296
556,213
8,522
7,852
6,295
370,228
3,197,141
5,763
597,632
27,802
3,169,339
0
Minnesota
203
Mississippi
38
Missouri
115
Assets
Cash and due from banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell
Loans, total (excluding unearned income)
944,967
11,203,366
$1,605,744
1,083,208
395,904
1,314,147
66,073
18,996
486,408
653,137
6,558,395
174,015
1,728,317
364,479
1,163,727
24,126
15,312
119,904
1,534,763
4,823,901
76,996
5,872,129
112,678
11,090,688
61,708
6,496,687
17,930
1,710,387
57,531
4,766,370
34,552
54,538
45,536
68,500
207
49,919
21,755
2,116
3
0
10,957
1,040,681
86,680
10,411
838
5,994
302,147
5,564,112
238,738
24,234
70,045
97,344
1,021,460
318,988
38,285
48,347
50,240
449,025
148,705
54,854
4,522
64,111
205,850
71,163
4,595
79
556
45,740
118,583
19,229
11,180
25,361
168,844
12,186,083
20,449,742
12,666,846
3,412,163
11,002,145
289,804
9,841
6,844
1,495,397
2,581,430
23,814
263,239
293
86,397
31,976
3,582,622
3,960,011
42,077
758,417
135,195
643,377
126,636
4,353,082
10,132,242
74,703
1,778,592
4,861
359,790
434,664
2,821,327
5,383,103
40,003
791,887
331
716,240
93,066
891,750
1,394,094
13,414
441,303
6,413
180,116
16,456
2,918,185
3,546,707
34,603
547,577
0
1,069,489
60,629
29,233
139,721
787
1,287
0
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
2,367,093
137,024
32,879
28,046
$501,106
300,888
77,806
442,990
7,412
6,483
68,736
$1,951,675
668,673
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
543,127
5,639
65,874
0
,
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase . . . .
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
7"ofa/ liabilities
Subordinated notes and debentures
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
subordinated
notes and debentures
4,482,546
9,248,335
17,137,934
9,845,957
2,943,546
8,177,190
1,718,405
2,764,141
4,764,139
4,484,196
5,534,746
11,603,188
3,801,663
6,044,294
1,224,977
1,718,569
4,201,447
3,975,743
33,465
375
328
0
8,304
622,175
11,442
361
5,994
70,650
1,554,529
63,155
2,787
100,013
218,824
1,391,179
6,321
6,562
50,240
300,285
1,336,051
208,953
8,343
64,281
232,260
191,288
356
29,949
1,888,635
18,540
5,510
25,361
121,755
963,601
5,193,168
11,187,643
18,892,521
11,695,845
3,167,178
10,236,991
1,550
6,157
45,344
84,358
131,686
9,460
29,119
0
20,140
22,642
31,856
0
66,068
121,021
163,055
14,643
0
170,962
411,992
343,527
26,615
100
297,691
605,024
536,330
33,718
0
257,879
268,634
0
45,162
183,358
3,406
3,599
892
Total equity capital
Total liabilities,
921,129
341,182
579,947
and equity capital
....
282,170
30,632
1,483
556
2,129
154,758
243,422
322,979
12,747
75,530
364,787
953,096
1,472,863
839,315
235,525
736,035
1,040,681
5,564,112
12,186,083
20,449,742
12.666,846
3,412,163
11,002,145
Table B-20—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, December 31, 1976
(Dollar amounts in thousands)
Montana
Number of banks
Nebraska
New
Hampshire
Nevada
56
120
$215,972
146,130
62,696
273,600
3,276
3,278
0
87,178
1,185,065
$689,163
283,169
170,621
534,955
10,857
5,272
35,154
215,209
2,576,997
$162,060
253,177
101,412
150,250
1,807
0
21,800
755,154
1,935
0
45,205
726,724
11,016
1,174,049
26,374
2,550,623
8,291
746,863
2,624
41,296
34,992
2,332
0
264
25,814
New Jersey
New Mexico
New York
43
104
38
129
$149,632
130,665
14,745
134,886
$1,896,943
1,738,311
982,925
2,504,592
$11,025,945
3,974,445
636,187
8,989,324
$274,519
181,011
122,219
301,489
1,809
3,669
0
134,400
1,198,543
6,961
719,763
107,913
8,881,411
13,401
1,185,142
589,443
37,389,403
17,740
74
74,587
1,518
475,319
74,007
5,623
576
551
61,209
34,789
288
0
0
16,237
29,789
946
0
1,053
9,347
348,819
64,530
988
28,771
341,666
53,996
5,588
759,263
334,886
698,550
2,032,205
4,678,285
1,530,570
1,239,623
17,963,751
492,728
1,099,922
8,152
157,339
0
36,579
14,922
1,237,708
2,093,275
12,156
493,703
649,181
5,341
210,256
0
356,312
597,654
4,544,002
9,348,950
90,053
1,809,642
591,888
1,217,754
Assets
Cash and due from banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
24,147
1,583
433,983
23,376
6,662
496
394
30,634
2,296,884
661,085
3,715,840
297,925
149,539
1,324,250
912,809
37,978,846
1,362,938
4,559,342
67,641,539
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
•
259,334
0
9,356
199,539
192,259
25,969
399,326
0
50,371
21,931
15,437,980
22,207,206
172,593
1,565,885
2,014,658
7,510,193
1,195,514
633,823
920,458
2,895
22,822
114,736
0
1,461
11,810
3,997,910
1,384,198
1,091,329
15,786,812
2,051,878
50,104,029
570,149
814,049
11,885
1,522
1,123
0
14,001
445,290
646,039
5,552,445
10,234,367
762,188
1,289,690
24,221,904
25,882,125
46,033
19
412
264
25,996
1,703,067
2,294,843
267,038
4,520
1,192
551
50,647
26,821
45
1,417
1,053
12,918
625,695
47,400
9,326
28,893
186,689
55,209
0
6,486,825
734,303
18,626
1,882,366
4,321,858
1,412,729
1,133,583
16,684,815
2,130,926
61,040,518
Subordinated notes and debentures
15,303
23,910
0
1,125
62,781
12,925
370,014
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
0
56,169
56,275
18,633
3,459
101
155,041
10,641
0
27,518
28,718
0
15,328
46,553
25
296,557
464,338
40,659
2,375
427,094
28,141
1,500
45,938
57,239
45,339
1,421
1,542,867
2,136,836
2,448,803
3,017
101,080
134,536
332,517
117,841
104,915
1,216,155
153,033
6,231,007
2,032,205
4,678,285
1,530,570
1,239,623
17,963,751
2,296,884
67,641,539
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase . . . .
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Total equity capital
Total liabilities,
subordinated
notes and debentures
and equity capital
....
370,324
25,113
72,894
93,840
59,295
2,310
1,409,905
2,104
402
394
23,043
1,404,611
2,292,124
Table B-20—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, December 31, 1976
(Dollar amounts in thousands)
North Carolina North Dakota
Number of banks
Oklahoma
Ohio
Oregon
28
43
219
195
$1,338,632
611,222
433,614
1,107,691
51,470
12,855
212,238
557,269
5,230,004
$169,343
120,802
58,784
219,946
1,979
1,969
0
38,091
940,039
$2,915,287
2,800,474
588,244
3,519,569
118,579
41,743
152,322
1,361,465
11,028,029
$1,420,867
1,003,100
113,918
1,303,258
26,563
$865,933
387,729
13,105
9,376
61,392
5,168,612
8,988
931,051
50,593
170,287
28,243
Pennsylvania Rhode Island
237
Assets
Cash and due from banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
\
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
156,671
747,773
5,528
$3,973,896
4,184,832
1,412,977
3,709,905
276,586
64,014
$281,677
330,270
43,554
202,445
25,219
5,005
51,280
118,090
1,673,063
15,099
1,657,964
90,628
703,600
262,051
4,293,221
3,331,323
1,879,990
20,585,750
137,551
10,890,478
41,807
4,251,414
28,562
3,302,761
246,981
20,338,769
364
102,176
29,578
24,627
300.523
114,267
450,381
29,801
1,555
5
268
18,871
10,312,339
1,592,829
392,601
15,710
14,786
53,754
890,024
23,857,212
168,829
8,654
826
1,173
104,487
9,240,000
149,893
11,559
8,121
107,859
429,572
72,928
45,873
6,476,248
502,704
89,547
75,507
559,600
983,071
38,921,604
15,653
843
57,816
72,469
2,981,086
3,035,322
3,937,029
39,579
423,270
883,646
6,435
85,779
0
20,389
14,014
6,133,438
11,110,048
83,692
1,458,445
1,007
558,441
192,876
2,495,683
3,653,904
47,729
963,075
0
634,236
80,849
1,750,771
2,734,779
14,551
452,076
0
94,855
91,405
8,555,415
17,356,767
86,642
2,120,214
351,062
1,183,543
268,081
536,857
1,533,669
7,210
242,474
0
12,857
20,843
8,159,520
1,433,533
19,537,947
7,875,476
5,138,437
29,921,724
2,353,910
3,633,480
4,526,040
492,928
940,605
7,490,782
12,047,165
3,317,982
4,557,494
2,062,674
3,075,763
10,207,591
19,714,133
661,333
1,692,577
1,019,986
22,762
4,217
114,267
177,037
13,821
1,346
440
268
20,297
1,923,789
14,297
3,669
53,754
404,659
519,532
45,365
2,087
1,173
85.629
659,778
10,599
347
107,859
85,555
4,282,452
435,529
16,188
559,681
763,964
225,695
48,807
0
57,816
87,662
9,497,789
1,469,705
21,938,115
8,529,262
6,002,575
35,979,538
2,773,890
136,920
13,041
47,078
58,797
100,750
232,281
5,000
0
166,399
249,235
251,922
10,074
0
30,263
35,973
38,310
5,537
0
375,237
842,735
622,188
31,859
500
135,999
179,440
325,109
10,893
677,630
110,083
1,872,019
651,941
0
92,531
124,632
145,041
10,719
372,923
1,254
492,816
1,174,943
949,925
90,847
2,709,785
0
30,390
88,663
76,065
7,078
202,196
10,312,339
1,592,829
23,857,212
9,240,000
6,476,248
38,921,604
2,981,086
4,965
6,795
569,683
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
733,610
10,212
344,099
59,669
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Total liabilities, subordinated notes and debentures and equity capital
Table B-20—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, December 31, 1976
(Dollar amounts in thousands)
South Carolina South Dakota
Number of banks
Assets
Cash and due from banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase . . . .
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Ol
Total equity capital
Total liabilities, subordinated notes and debentures and equity
capital.....
Tennessee
Texas
Utah
Vermont
Virginia
19
32
74
596
13
14
108
$391,853
187,470
98,404
366,123
818
3,515
11,129
127,290
1,425,766
$219,596
148,109
80,409
284,145
11,994
2,586
31
53,915
1,251,569
$1,220,824
789,696
285,434
746,626
26,500
14,978
15,860
635,682
4,320,781
$6,958,824
3,961,884
1,273,052
5,327,750
119,984
56,225
323,242
3,994,614
19,794,806
$301,005
156,751
49,000
149,120
1,194
2,724
23,327
74,297
1,240,397
16,005
1,409,761
12,948
1,238,621
52,072
4,268,709
4,705
73,063
7,238
0
3,309
31,167
2,715,845
1,922
39,443
1,059
0
204
29,044
37,385
182,058
74,465
36
9,347
276,492
229,214
19,565,592
100,556
10,075
1,230,322
16,880
$34,927
35,580
8,029
53,030
3,115
496
0
16,050
285,620
2,529
283,091
170
2,111,078
8,584,092
43,534,570
36,888
1,505
0
90
24,674
2,067,777
8,318
481
33
0
3,517
446,837
$1,160,748
844,260
299,439
1,304,017
11,887
17,506
13,835
395,626
5,546,200
57,518
5,488,682
11,380
264,667
30,905
42
9,662
130,591
9,983,163
1,176,270
884,873
15,837
188,505
0
34,595
20,056
493,038
1,197,683
9,928
159,709
0
30,987
14,088 I
2,207,966
3,705,126
31,730
665,263
1,087
584,980
53,964
12,845,600
14,303,187
225,818
4,475,752
19,775
2,889,645
404,508
556,325
938,724
2,204
261,981
0
44,245
19,612
88,772
282,545
1,572
28,580
0
1,563
4,646
2,731,039
5,017,371
68,253
673,874
128
128,635
73,213
2,320,136
1,905,433
7,250,116
35,164,285
1,823,091
407,678
8,692,513
1,371,466
948,670
131,525
5,117
268
3,309
29,380
567,414
1,338,019
14,763
500
2,033
204
28,284
2,916,986
4,333,130
591,481
1,324
5,715
9,347
128,791
16,689,985
18,474,300
4,237,744
112,835
98,329
199,577
570,802
667,783
1,155,308
79,218
1,762
113
90
22,690
106,211
301,467
1,200
1,657
0
0
2,748
2,489,735
1,951,217
7,986,774
40,383,572
1,926,964
413,283
3,155,403
5,537,110
327,225
20,735
45,528
9,662
124,670
9,220,333
7,600
21,321
33,020
181,940
16,526
3,249
46,196
0
39,326
74,973
100,446
3,765
218,510
0
38,499
42,863
53,041
4,137
0
142,017
211,027
193,364
17,890
133
727,607
886,613
1,173,637
181,068
0
35,103
51,517
35,950
1,717
0
7,269
9,213
12,696
1,127
138,540
564,298
2,969,058
124,287
30,305
0
166,144
265,984
271,140
13,366
716,634
2,715,845
2,111,078
8,584,092
43,534,570
2,067,777
446,837
9,983,163
821,273
91,658
31,313
199,566
709,037
F
Table B-20—Continued
Total assets, liabilities and equity capital of domestic offices and subsidiaries of national
banks, United States and other areas, December 31, 1976
(Dollar amounts in thousands)
Number of banks
Wisconsin
Wyoming
Other areas
Puerto Rico Virgin Islands
District of
Columbia
non-national*
Washington
West Virginia
21
103
130
46
1
1
1
$1,544,863
567,675
163,446
984.340
5,674
11,921
102,067
758,756
6,167,453
$397,058
469,907
303,618
689,709
14,041
5,872
1,397
392,385
1,886,890
$963,108
748,245
268,487
759,571
54,137
14,455
33,956
510,002
4,387,494
$182,619
121,463
67,616
206,024
2,507
1,801
0
27,485
813,301
$3,691
997
0
4,645
0
145
0
4,600
14,567
$339
1,103
1,683
0
0
0
0
197
4
$2,230
5,795
6,468
7,096
2,665
1
1,900
14,105
166
68,511
6,098,942
21,146
1,865,744
50,580
4,336,914
8,097
805,204
644
13,923
13,939
0
165,198
9,717
25,202
3,018
0
437
257,737
11,825
22,535
217,481
188,435
99,513
1,838
0
189
38,134
23,200
801
50
0
19,977
207
1,448
0
0
318
8
0
0
0
62
0
0
0
579
41,110
11,100,895
4,289,122
195,579
110,732
296
15,790
103,572
8,140,046
1,461,765
29,974
3,396
14,130
3,086,562
4,659,941
32,875
771,643
19,995
261,177
96,955
982,225
2,215,818
18,908
235,257
0
75,354
25,520
1,922,659
3,898,369
35,869
574,752
41,439
275,017
60,924
368,464
650,684
48,834
189,683
0
35,010
8,900
2,501
17,397
0
2,683
0
4,339
325
993
2,174
6
0
0
0
181
23,277
119
3
0
0
0
327
8,929,148
3,553,082
6,809,029
1,301,575
27,245
3,354
37,856
3,599,398
5,329,750
1,170,872
2,382,210
2,398,090
4,410,939
462,340
839,235
3,813
23,432
1,180
2,174
14,559
23,297
1,044,850
41,638
2,650
217,482
151,120
329,703
9,280
7,149
189
36,144
631,920
16,152
653
15,847
90,331
27,235
10,103
284
0
12,888
0
0
0
0
662
0
0
0
0
315
10,386,888
3,935,547
7,563,932
1,352,085
27,907
3,669
37,857
84,332
7,156
52,524
6.225
0
0
170
6,025
142,626
202,616
254,676
23,732
0
61,933
130,233
143,027
11,226
0
132,428
215,960
161,354
13,848
0
9,110
34,273
56,060
4,012
0
2,640
2,208
2,781
0
0
0
0
273
0
0
278
1,000
1,180
625
629,675
346,419
523,590
103,455
2,067
273
3,083
11,100,895
4,289,122
8,140,046
1,461,765
29,974
3,396
41,110
Assets
Cash and due from banks
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell.
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises; furniture and fixtures and other assets representing bank
premises
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
Liabilities
Demand deposits of individuals, partnerships and corporations
Time and savings deposits of individuals, partnerships and corporations
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits ..
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to repurchase
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Total liabilities, subordinated notes and debentures and equity capital
Table B-21
Loans of national banks, by states, December 31, 1976
(Dollar amounts in millions)
Total
loans
Loans
secured
by real
estate
Loans to
financial
institutions
Loans to
purchase
or carry
securities
Loans to
farmers
Commercial Personal
and indusloans to
trial loans
individuals
Other
loans
Total loans
less unearned
income^
All national banks
$310,559
$82,922
$22,694
$8,637
$11,324
$109,489
$66,747
3,747
$303,437
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia ..
Florida
4,163
646
3,382
2,203
45,248
3,854
2,137
42
2,309
7,884
972
247
1,003
648
14,101
881
726
23
784
2,665
174
2
169
31
3,934
149
59
0
348
300
53
97
20
63
843
62
11
0
17
81
249
114
1,688
440
7
1
1
65
1,320
220
971
646
14,572
1,195
689
6
519
2,166
1,420
171
929
653
8,628
1,039
588
12
487
2,456
127
6
40
48
1,481
88
55
154
152
4,007
625
3,236
2,141
44,164
3,773
2,091
40
2,281
7,655
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
4,406
93
1,606
28,670
6,554
2,524
2,574
2,721
3,654
616
1,149
59
484
5,012
2,609
706
424
889
932
233
207
1
19
4,007
171
38
52
83
177
1
44
0
2
1,467
57
59
96
25
55
39
1
266
792
180
536
620
125
54
10
1,431
22
388
12,506
1,581
600
690
672
1,436
182
1,402
10
435
3,975
1,818
541
659
878
915
176
133
1
12
911
137
43
33
48
84
14
4,225
92
1,554
28,332
6,328
2,495
2,521
2,633
3,552
603
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
3,301
6,040
11,479
6,702
1,788
4,883
1,237
2,628
782
754
1,199
1,124
4,500
1,944
478
1,051
333
347
364
253
162
606
695
380
69
340
3
34
5
2
49
76
151
269
23
206
2
97
1
1
25
5
112
409
61
267
224
921
14
2
817
2,976
3,013
2,282
517
1,839
305
580
174
239
943
1,159
2,447
1,227
580
1,071
354
609
212
250
104
94
561
190
61
110
15
40
12
7
3,197
5,949
11,203
6,558
1,728
4,824
1,185
2,577
755
727
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
9,247
1,246
38,468
5,456
967
11,446
4,378
3,394
21,081
1,705
4,034
279
6,376
971
261
3,744
912
930
6,236
685
372
23
4,567
341
1
359
182
404
2,097
95
43
7
2,948
58
3
87
248
39
377
3
111
205
94
203
176
506
175
169
2,354
411
19,334
2,082
281
3,085
1,471
1,121
7,136
569
2,242
398
3,921
1,784
211
3,773
968
670
4,393
304
194
17
1,117
126
8
222
91
55
674
48
8,989
1,199
37,979
5,230
940
11,028
4,293
3,331
20,586
1,673
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
1,480
1,287
4,485
20,168
1,266
293
5,758
6,229
2,005
4,463
841
287
327
1,166
3,342
477
155
2,286
1,559
802
1,732
218
21
4
226
1,056
22
8
4
51
737
13
130
340
12
224
2
29
64
5
77
3
24
374
76
1,105
43
6
89
361
11
117
146
484
300
1,468
8,733
423
62
1,325
2,349
368
1,310
256
610
268
1,413
4,365
270
65
1,764
1,424
777
882
199
46
11
86
829
18
5
134
132
31
122
18
1,426
1,252
4,321
19,795
1,240
286
5,546
6,167
1,887
4,387
813
4
15
0
2
0
0
0
0
0
0
12
0
1
2,324
793
349
17
521
489
Virgin Islands
Puerto Rico
District of Columbia-all*
0
15
154
* Includes national and non-national banks in the District of Columbia, all of which are supervised by the Comptroller of the Currency.
t Equals total loans from the balance sheet before the removal of the reserve for possible loan losses.
NOTE: Data may not add to totals because of rounding. Dashes indicate amounts of less than $500,000.
2,295
Table B-22
Outstanding balances, credit cards and related plans of national banks, December 31, 1976
Other related credit plans
Credit cards
Number of
banks
All national banks
Outstanding
volume
(dollars in
thousands)
Outstanding
volume
(dollars in
thousands)
Number of
banks
958
3,215,846
1,216
$1,645,947
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
16
2
2
5
26
61
5
0
1
83
99,832
20,512
123,921
26,142
1,716,337
185,073
104,265
0
78,441
266,506
9
1
3
5
36
70
11
0
10
58
2,775
164
26,189
821
292,787
23,469
26,248
0
40,651
31,567
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
24
1
3
41
59
8
5
33
6
12
219,384
363
32,552
609,934
142,080
48,715
59,919
76,509
63,053
15,474
10
1
2
117
21
22
15
9
5
9
25,778
617
10,426
55,946
16,159
2,532
2,500
4,525
13,418
6,041
4
37
34
32
3
16
9
5
3
19
157,266
148,865
366,128
24,527
36,563
228,323
3,867
141,228
23,279
17,239
17
49
44
115
1
35
19
25
1
15
30,240
104,757
52,516
64,970
801
18,735
2,582
4,052
4,969
3,975
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
15
4
25
9
6
111
7
3
17
4
105,569
24,844
648,682
151,773
1,084
420,178
106,110
119,878
341,618
36,640
56
4
43
24
13
63
24
0
45
2
93,266
1,114
277,558
63,905
2,708
45,358
4,097
0
174,537
14,941
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
4
0
12
56
5
4
32
6
11
64
51,666
0
144,076
370,745
44,285
3,426
225,766
223,088
19,734
137,408
2,979
5
10
67
0
2
22
4
11
63
15
5,909
1,098
10,974
31,153
0
8
10,243
15,589
6,485
14,531
2,263
0
0
0
0
0
0
:
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
Virgin Islands
Puerto Rico
158
Table B-23
National banks engaged in direct lease financing, December 31, 1976
Total number
of banks
Number of banks
engaged in direct
lease financing
4,737
769
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
97
6
3
73
58
132
23
5
15
306
2
1
10
21
30
4
0
4
48
Maryland
Massachusetts . .
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire ,
41
75
122
203
38
115
56
120
4
43
New Jersey
New Mexico
New York
North Carolina ..
North Dakota . . .
Ohio
Oklahoma
Oregon
Pennsylvania . . .
Rhode Island . . .
104
38
129
28
43
219
South Carolina ..
South Dakota . ..
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia .. .
Wisconsin
Wyoming
All national banks
Virgin Islands . . .
Puerto Rico
District of Columbia — all*
64
2
6
425
120
100
169
82
54
17
8
0
2
64
30
16
24
15
9
0
4
9
22
16
6
27
13
21
2
3
Amount of direct
lease financing
(dollars in thousands)
$3,808,381
23,271
6,761
3,445
5,167
1,483,465
28,949
25,544
0
27,677
38,440
33,733
0
9,559
71,152
131,876
1,921
4,076
64,024
25,989
0
34,552
54,538
45,536
68,500
207
49,919
2,624
41,296
17,740
74
74,587
1,518
475,319
195
7
237
5
9
9
14
8
1
54
82
2
15
2
19
32
74
596
13
14
108
21
103
130
46
2
3
11
58
4
2
6
11
17
23
16
4,705
1,922
37,385
1
1
0
0
16
50,593
364
102,176
29,578
24,627
300,523
72,928
100,556
16,880
170
11,380
165,198
9,717
25,202
3,018
0
0
27,677
* Includes national banks and non-national banks in the District of Columbia, all of which are supervised by the Comptroller of the Currency.
159
Table B-24
Principal assets, liabilities and capital accounts of national banks, by asset size, year-end 1976
(Dollars in thousands)
Banks with assets of—
Number of banks
Assets
Cash and due from banks
U S Treasury securities
Obligations of other U.S. government agencies and corporations . . .
Obligations of states and political subdivisions
Other bonds notes and debentures . .
.
Federal Reserve stock and corporate stock
Trading account securities
Federal funds sold and securities purchased under agreements to resell
Loans, total (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures and other assets representing bank premises
.
. . .
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
.
Customers' liabilities to this bank on acceptances outstanding
Other assets
Total assets
Equity Capital
Preferred stock
Common stock
Surplus
Undivided profits
Reserve for contingencies and other capital reserves
Total equity capital
Total liabilities and equity capital
Standby Letters of Credit (outstanding as of report date
A. Time certificates of deposit in denominations
of $100,000 or more
B. Other time deposits in amounts of
$100 to $300 $300to$1,00C
million
million
$1,000 million
and more
$5 to $10
million
$10 to $25
million
4,737
223
563
1,558
1,750
396
162
85
$76,078,031
52,612,836
17,005,880
57,384,363
2,987,415
967,304
4,973,779
30,140,010
$103,075
134,700
56,617
36,937
5,067
2,736
0
73,819
$491,638
624,717
316,301
345,226
17,745
7,462
0
276,625
$2,831,754
3,230,577
1,651,834
3,201,894
154,377
36,609
41
1,332,846
$8,804,087
8,986,849
4,338,578
11,619,868
556,750
114,979
7,504
3,442,304
$7,701,621
6,678,604
3,118,921
8,651,075
527,758
88,921
49,264
3,014,426
$11,919,059
7,575,081
2,475,102
9,779,727
600,424
120,096
387,519
5,945,879
$44,226,797
25,382,308
5,048,527
23,749,636
1,125,294
596,501
4,529,451
16,054,111
303,436,774
3,589,367
299 847 407
3,808,381
355,018
2,618
352 400
232
2,104,929
16,855
2.088.074
1,722
13,237,595
120,895
13.116.700
19,914
42,822,954
424,067
42.398.887
94,673
31,992,539
358,668
31.633.871
144,610
43,404,249
502,003
42.902.246
482,244
169,519,490
2,164,261
167.355,229
3,064,986
9,879,953
1,722,984
25,890
477
88,042
2,801
465,026
22,146
1,598,651
112,209
1,216,330
121,074
1,657,713
233,289
4,828,301
1,230,988
1,777,388
5,086,708
19,076,586
583.349,025
0
43
6.119
798,112
7
407
29,032
4,289,799
1 096
1,227
205,119
26,271,160
7,959
16,124
979.248
83,078,670
9,452
17,590
806,094
63,779,611
19,543
110,854
1,247,512
85,456,288
1,739,331
4,940,463
15,803,462
319,675,385
147,018,169
252,912
1,290,839
7,319,960
22,084,943
16,569,441
23,769,286
75,730,788
242,873,535
2,126,653
38,088,306
5,917,740
27,332,987
6,051.345
469,408,735
188,175,050
281,233,685
317,757
4,047
76,214
0
7,826
9.400
668,156
295,636
372,520
2,105,613
26,406
353,634
543
11,662
36.597
3,825,294
1,493,105
2,332,189
13,772,201
145,618
2,188,424
811
82,196
237.966
23,747,176
8,551,793
15,195,383
43,904,360
446,040
6,865,447
82
571,752
711.763
74,584,387
25,694,665
48,889,722
31,130,407
300,960
5,509,045
6,666
1,912,689
531.313
55,960,521
20,584,209
35,376,312
35,149,960
362,262
7,110,794
34,308
4,520,686
756.619
71,703,915
30,651,765
41,052,150
116,493,237
841,320
15,984,748
5,875,330
20,226,176
3.767.687
238,919,286
100,903,877
138,015,409
51,678,941
2,741,434
406,112
1,605
640
286
19,594
3,265
812
167,961
18,529
3,857
1,064,042
73,772
39,563
2,217,867
55,896
26,631
6,316,953
197,893
84,686
41,890,919
2,391,439
250,277
5,140,675
9.921.683
539 297 580
2,726,628
43
4.075
674 805
235
407
20,352
3.869J24
2,875
1,227
171,512
24.110.262
42,426
16,147
802,453
76.580.364
247,448
17,601
660,562
58.939.078
264,211
110,890
990,830
79.405,167
429,074
4,994,360
7,271,899
295,718.180
1,740,359
18,754
9 106,275
15,853,738
15,271,833
1,074,217
41,324,817
0
45 894
43,105
32,298
1,775
123,072
0
117 823
124,823
160,832
13,722
417,200
1,101
451,098
652,932
918,036
95,305
2,118,472
6,450
1,376,487
2,172,495
2,447,187
248,239
6,250,858
1,979
1,063,638
1,722,220
1,659,594
128,891
4,576,322
8,824
1,332,372
2,214,243
1,951,726
114,882
5,622,047
400
4,718,963
8,923,920
8,102,160
471,403
22,216,846
583,349,025
7,416,516
798,112
356
4,289,799
1,965
26,271.160
22,117
83,078,670
136,542
63.779,611
194,577
85,456,288
495,292
319,675,385
6,565,667
68,226,974
38,941
173,345
1,315,516
5,707,670
5,842,115
9,851,985
45,297,402
Liabilities
Demand deposits of individuals, partnerships and corporations . . . .
Time and savings deposits of individuals, partnerships and corportions
Deposits of U.S. government
Deposits of states and political subdivisions
Deposits of foreign governments and official institutions
Deposits of commercial banks
Certified and officers' checks
Total deposits
Total demand deposits
Total time and savings deposits
Federal funds purchased and securities sold under agreements to
repurchase
Liabilities for borrowed money
Mortgage indebtedness
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
$25 to $100
million
Less than
$5 million
All national
banks
Table B-25
Ratios of classified assets to total loans for National banks, deposit size category, under $100 million
Latest examination in—
0-.9
1-1.9. ..
2-2.9....
3-3.9
4-4.9
5-5.9
6-6.9
7-7.9
8 and over
Total
Number of Perbanks cent
Number of
banks
Percent
Number of
banks
47.9 1,779
21.8
971
11.1
561
7.3
354
4.1
219
2.5
135
1.5
89
1.1
62
2.7
142
41.3 1,717
945
22.5
599
13.0
363
8.2
235
5.1
118
3.1
77
2.1
50
1.4
137
3.3
100.0 4,312
100.0 4,241
2,099
953
488
321
180
108
65
48
118
4,380
7977
7970
7969
Classified
assets as a
percent of
total loans
1972
Percent
Number of
banks
7974
7973
Percent
Number of
banks
Percent
Number of
banks
43.5 2,004
958
23.8
579
14.4
7.4
288
4.3
161
2.3
80
1.4
48
1.1
28
1.9
73
47.5 1,741
960
22.7
606
13.7
6.8
372
3.8
196
1.9
127
1.1
70
0.7
48
1.7
125
100.0 4,230 100.0 4,219
100.0 4,245
40.5 1,840
22.3 1,005
608
14.1
313
8.6
183
5.5
97
2.8
59
1.8
45
1.2
80
3.2
7976
7975
Percent
Number of
banks
Percent
Number of
banks
Percent
32.0 1,214
878
21.4
666
15.3
415
9.0
7.2
318
4.6
203
2.8
139
1.9
64
5.6
242
29.3
21.2
16.1
10.0
7.7
4.9
3.4
1.6
5.9
100.0 4,235 100.0 4,139
100.0
41.0 1,357
907
22.6
649
14.3
382
8.8
306
4.6
196
3.0
120
1.7
80
1.1
238
2.9
NOTE: Previous years have been revised.
Table B-26
Ratios of classified assets to total loans for National banks, deposit size category, $100 million and over
Latest examination in—
7970
7969
Classified
assets as a
percent of
total loans
Number of
banks
Percent
0-.9
1-19
. .
2-2 9 .. .
3-39 .
4-4.9
5-5.9
6-6 9
7-79 .
8 and over
159
76
49
9
7
5
2
1
3
51.1
24.4
15.8
2.9
2.3
1.6
0.6
0.3
1.0
Total
311
100.0
Number of
banks
99
84
64
26
16
14
8
1
8
1972
1971
Percent
30.9
26.3
20.0
8.1
5.0
4.4
2.5
0.3
2.5
320 100.0
Number of
banks
119
92
67
37
21
10
6
4
10
Percent
32.5
25.1
18.3
10.1
5.7
2.7
1.6
1.1
2.7
366 100.0
Number of
banks
152
89
80
29
12
13
5
3
6
7974
1973
Percent
39.1
22.9
20.6
7.5
3.1
3.3
1.3
0.8
1.5
389 100.0
Number of
banks
164
129
77
30
16
8
4
2
6
Percent
Number of
banks
7975
Percent
37.6
29.6
17.7
6.9
3.7
1.8
0.9
0.5
1.4
116
108
88
53
33
26
8
8
24
25.0
23.3
19.0
11.4
7.1
5.6
1.7
1.7
5.2
436 100.0
464
100.0
Number of
banks
67
88
88
56
37
35
22
21
83
7976
Percent
13.5
17.7
17.7
11.3
7.4
7.0
4.4
4.2
16.7
497 100.0
Number of
banks
66
98
85
54
53
32
20
13
99
Percent
12.7
18.9
16.4
10.4
10.2
6.2
3.6
2.5
19.0
520 100.0.
NOTE: Previous years have been revised.
161
Table B-27
Total income and expenses of foreign and domestic offices and subsidiaries of national
banks*, United States and other areas, year ended December 31, 1976
(Dollar amounts in thousands)
Number of banks
Operating income:
Interest and fees on loans
Interest on balances with banks
.
Income on Federal funds sold and securities purchased under agreements to
resell in domestic offices
U S Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds notes and debentures
Dividends on stock
Income from direct lease financing
Income from fiduciary activities
Service charges on deposit accounts in domestic offices
Other service charges commissions and fees
....
Other income
Total operating income
Operating expenses:
Salaries and employee benefits
. .
.
Interest on time certificates of deposit of $100,000 or more, issued by domestic
offices
Interest on deposits in foreign offices
Interest on other deposits
Expense of Federal funds purchased and securities sold under agreements to
repurchase in domestic offices
Interest on borrowed money
Interest on subordinated notes and debentures
Occupancy expense of bank premises net
Furniture and equipment expense
Provision for possible loan losses (or actual net loan losses)
Other expenses
Total operating expenses
Income before income taxes and securities gains or losses
Applicable income taxes (domestic and foreign)
Income before securities gains or losses
Securities gains (losses) gross
Applicable income taxes (domestic and foreign)
Securities gains (losses) net
Income before extraordinary items
Extraordinary items, net of tax effect
Net income
Total,
Total,
U.S. and
United States
other areas
4,737
4,735
Alabama
Alaska
Arkansas
Arizona
California
97
6
3
73
58
$31,031,046
2,946,656
$31,030,070
2,946,577
$345,862
4,428
$64,635
1,189
$276,529
1,895
$179,267
1,611
$5,255,006
921,743
1,229,182
3,193,274
1,210,149
2,801,076
492,072
62,149
408,438
1,029,203
911,467
1,441,484
1,265,214
1,228,953
3,192,927
1,210,032
2,800,801
492,072
62,147
408,438
1,029,203
911,403
1(441t406
1,265,211
11,914
34,546
23,564
53,931
1,674
582
1,117
11,776
17,815
18,689
8,662
2,030
3,505
3,916
9,552
242
156
484
1,037
5,016
4,960
1,386
11,672
33,979
10,257
21,593
657
297
286
9,716
17,337
5,817
7,850
11,925
19,494
11,860
26,823
961
290
731
3,209
9,240
7,032
8,850
161,019
399,103
164,915
188,879
82,285
12,529
151,911
114,575
163,538
284,257
162,171
48,021,410
48,019,240
534,560
98,108
397,885
281,293
8,061,931
8,575,522
8,574,895
110,035
30,889
102,728
57,365
1,412,190
4,327,891
5,962,140
10,595,809
4,326,857
5,962,140
10,595,325
50,830
20
148,429
7,618
0
15,282
27 511
994
136,427
25,017
0
83,568
623,900
1,734.528
1,713,474
2,268,120
454,745
179,190
1,548,312
1,015,489
2,250,427
4,925,748
2,268,120
454,745
179,190
1,548,139
1,015,444
2,249,457
4,925,197
16,286
4,337
2,022
16,265
15,044
19,996
72,048
2,040
30
48
4,849
4,108
1,102
11,912
8,808
7
4,982
20,494
10,461
9,396
43,320
9,664
251
1,723
12,069
10,375
5,811
36,470
249,429
38,927
27,586
246,215
128,266
314,248
613,420
42,103,393
42,099,509
455,312
77,878
365,128
242,313
7,102,183
5,918,017
1,436,755
4,481,262
5,919,731
1,436,755
4,482,976
79,248
11,548
67,700
20,230
5,175
15,055
32,757
3,422
29,335
38,980
4,866
34,114
959,748
399,004
560,744
168,493
72,596
168,470
72,596
1,256
455
258
112
144
74
1,664
596
5,338
2,492
95,897
4,577,159
13,891
95,874
4,578,850
13,891
801
68,501
650
146
15,201
0
70
29,405
0
1,068
35,182
6
2,846
563,590
1,270
4,591,050
4,592,741
69,151
15,201
29,405
35,188
564,860
Equity capital, beginning of period
Net income (loss)
Sale, conversion, acquisition or retirement of capital
Changes incident to mergers and absorptions
Cash dividends declared on common stock
Cash dividends declared on preferred stock
Stock dividends issued
Other increases (decreases)
36,493,171
4,591,050
352,001
206,930
-1,820,000
-1,088
-73
1,502,734
36,491,765
4,592,741
348,833
206,930
-1,820,000
-1,088
-73
1,503,824
487,535
69,151
4,804
648
-23,786
0
1
7,341
70,799
15,201
4,607
0
-1,306
0
0
1,737
249,769
29,405
78
0
-12,359
0
0
10,121
256,824
35,188
1,038
0
-7,647
0
0
7,271
3,798,945
564,860
65,410
305
-230,143
0
0
578,944
Equity capital, end of period
41,324,725
41,322,932
545,694
91,038
277,014
292,674
4,778,321
3,541,243
439,352
20,557
2,250,427
-2.544,934
3,540,243
439,262
20,557
2,249,457
-2,543,518
42,201
6,070
97
19,996
-21,484
6,222
1,012
0
1,102
-1,893
23,333
2,570
0
9,396
-11.385
18,265
2,852
0
5.811
-7,584
482,011
51,471
1,215
314,248
-315,237
3,706,645
3,706,001
46,880
6,443
23,914
19,344
533,708
11.50
11.64
13.24
18.87
11.05
12.59
13.16
87.68
87.67
85.18
79.38
91.77
86.14
88.10
Reserve for possible loan losses, beginning of period
Recoveries credited to reserve
Changes incident to mergers and absorptions
Provision for possible loan losses
Losses charged to reserve
Reserve for possible loan losses, end of period
Ratios:
Net income before dividends to average equity capitalf (percent)
Total operating expense to total operating income (percent)
See footnotes at end of table.
Table B-27—Continued
Total income and expenses of foreign and domestic offices and subsidiaries of national
banks*, United States and other areas, year ended December 31, 1976
(Dollar amounts in thousands)
Colorado
Number of banks
Operating income:
Interest and fees on loans
Interest on balances with banks
Income on Federal funds sold and securities purchased under agreements to
resell in domestic offices
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Dividends on stock
Income from direct lease financing
Income from fiduciary activities
Service charges on deposit accounts in domestic offices
Other service charges, commissions and fees
Other income
Total operating income
.'
Operating expenses:
Salaries and employee benefits
Interest on time certificates of deposit of $100,000 or more, issued by domestic
offices
Interest on deposits in foreign offices
Interest on other deposits
Expense of Federal funds purchased and securities sold under agreements to
repurchase in domestic offices
Interest on borrowed money
Interest on subordinated notes and debentures
Occupancy expense of bank premises, net
Furniture and equipment expense
Provision for possible loan losses (or actual net loan losses)
Other expenses
Total operating expenses
Income before income taxes and securities gains or losses
Applicable income taxes (domestic and foreign)
Income before securities gains or losses
Securities gains (losses), gross
Applicable income taxes (domestic and foreign)
Securities gains (losses), net
Income before extraordinary items
Extraordinary items, net of tax effect
Net income
Connecticut
District of
Columbia
Delaware
Florida
Georgia
Hawaii
132
23
5
15
306
64
2
$340,233
860
$198,525
10,890
$3,515
0
$189,938
20,396
$673,119
16,023
$425,326
14,716
$8,586
9
14,263
29,914
10,855
35,078
584
507
3,171
18,751
17,415
17,633
11,968
4,341
14,653
7,602
18,675
6,105
448
2,657
17,151
5,558
8,944
8,917
196
545
191
159
28
4
0
0
105
77
52
14,173
34,339
6,691
21,421
1,275
354
2,092
14,048
9,217
5,827
4,199
48,835
152,942
60,707
105,974
7,630
1,668
5,005
38,831
35,485
32,930
24,486
16,645
27,070
8,746
30,658
2,330
2,165
3,605
19,310
26,958
18,611
35,058
179
1,213
703
144
0
13
0
0
1
1,286
22
501,232
304,466
4,872
323,970
1,203,635
631,198
12,156
110,796
79,395
1,003
75,404
232,292
149,639
3,354
44,810
288
118,379
22,065
3,813
70,886
85
0
1,983
19,786
23,372
62,647
99,448
1,003
362,381
56,903
11,920
100,604
2,097
0
2,952
17,332
1,886
2,312
19,880
14,700
19,272
84,494
16,149
891
638
16,748
11,612
26,033
40,777
0
9
14
185
128
59
731
11,393
667
724
13,542
8,988
12,339
38,408
40,157
989
2,438
40,531
32,816
71,642
239,413
47,223
13,058
4,495
24,016
20,088
54,302
95,939
60
0
75
824
345
948
2,151
434,149
289,007
4,197
267,270
1,123,110
578,187
12,806
67,083
14,019
53,064
15,459
-549
16,008
675
213
462
56,700
17,466
39,234
80,525
-2,467
82,992
53,011
5,776
47,235
-650
14
-664
1,727
808
1,199
580
13
3
2,660
1,322
12,706
5,008
2,049
630
261
0
919
53,983
122
619
16,627
31
10
472
0
1,338
40,572
171
7,698
90,690
105
1,419
48,654
-47
261
-403
0
54,105
16,658
472
40,743
90,795
48,607
-403
Equity capital, beginning of period
Net income (loss)
Sale, conversion, acquisition or retirement of capital
Changes incident to mergers and absorptions
Cash dividends declared on common stock
Cash dividends declared on preferred stock
Stock dividends issued
Other increases (decreases)
410,985
54,105
3,887
0
-20,245
0
0
10,213
253,816
16,658
636
114
-12,070
0
0
3,852
4,773
472
195
0
-153
0
0
88
359,760
40,743
1,456
0
-17,054
-169
0
4,569
1,294,404
90,795
1,482
16,250
-50,121
-60
0
21,957
561,096
48,607
7,366
0
-28,978
0
0
5,172
7,869
-403
0
0
0
0
0
200
Equity capital, end of period
458,945
263,006
5,375
389,305
1,374,707
593,263
7,666
Reserve for possible loan losses, beginning of period
Recoveries credited to reserve
Changes incident to mergers and absorptions
Provision for possible loan losses
Losses charged to reserve
33,479
4,469
222
19,272
-21,054
22,951
3,339
736
26,033
-29,628
140
3
0
59
-48
29,040
2,158
0
12,339
-14,208
90,582
15,937
6,878
71,642
-97,033
59,717
9,587
0
54,302
-67,550
652
73
0
948
-692
36,388
23,431
154
29,329
88,006
56,056
981
12.43
6.41
9.33
11.39
6.75
8.46
-5.08
86.62
94.92
86.15
82.50
93.31
91.60
105.35
Reserve for possible loan losses, end of period
Ratios:
Net income before dividends to average equity capitalt (percent)
Total operating expense to total operating income (percent)
See footnotes at end of table.
en
Table B-27—Continued
Total income and expences of foreign and domestic offices and subsidiaries of national
banks*, United States and other areas, year ended December 31, 1976
(Dollar amounts in thousands)
Idaho
Number of banks
Operating income:
Interest and fees on loans
Interest on balances with banks
Income on Federal funds sold and securities purchased under agreements to
resell in domestic offices
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Dividends on stock
Income from direct lease financing
Income from fiduciary activities
Service charges on deposit accounts in domestic offices
Other service charges, commissions and fees
Other income
Total operating income
Operating expenses:
Salaries and employee benefits
Interest on time certificates of deposit of $100,000 or more, issued by domestic
offices
Interest on deposits in foreign offices
Interest on other deposits
Expense of Federal funds purchased and securities sold under agreements to
repurchase in domestic offices
Interest on borrowed money
Interest on subordinated notes and debentures
Occupancy expense of bank premises, net
,
Furniture and equipment expense
Provision for possible loan losses (or actual net loan losses)
Other expenses
Total operating expenses
Income before income taxes and securities gains or losses
Applicable income taxes (domestic and foreign)
Income before securities gains or losses
Securities gains (losses), gross
Applicable income taxes (domestic and foreign)
Securities gains (losses), net
Income before extraordinary items
Extraordinary items, net of tax effect
Net income
Illinois
425
Indiana
120
Iowa
Kansas
100
169
Kentucky
Louisiana
82
54
$143,887
618
$2,697,593
342,558
$552,363
17,839
$203,613
1,541
$212,295
298
$228,173
4,077
$307,316
7,039
2,030
13,319
4,531
13,355
184
238
964
1,414
6,547
4,150
1,448
79,211
330,106
138,143
254,829
48,670
7,086
11,177
99,628
42,762
95,216
132,295
33,718
100,717
41,578
74,656
9,354
949
10,557
20,653
20,715
23,610
12,143
13,094
24,756
15,312
26,879
1,577
263
211
6,763
5,575
10,298
3,408
15,731
33,611
18,442
31,747
745
412
1,165
5,878
7,854
10,613
4,446
15,413
33,753
10,167
31,263
228
350
4,920
3,843
6,285
11,242
4,212
22,992
72,743
14,186
44,509
785
746
2,954
5,771
14,933
17,684
4,827
192,685
4,279,274
918,852
313,290
343,237
353,926
516,485
39,390
576,183
164,766
54,696
64,347
67,179
93,924
15,602
0
64,664
526,972
657,724
817,424
84,723
8,711
284,127
14,459
0
122,826
30,052
0
109,253
28,097
2,871
106,558
82,313
2,452
110,973
3,001
7
628
5,345
4,940
3,984
22,432
375,724
29,210
6,050
102,654
74,359
252,476
328,959
61,217
1,914
595
31,835
25,581
39,835
101,700
11,789
207
1,616
9,479
7,148
3,510
39,170
10,494
1,242
1,519
10,486
10,384
8,211
39,712
12,175
526
479
11,912
10,746
9,497
43,227
25,460
646
1,395
18,328
19,627
19,620
63,560
159,993
3,747,735
805,004
264,900
285,700
293,267
438,298
32,692
9,?330
23,362
531,539
133,163
398,376
113,848
16,329
97,519
48,390
9,793
38,597
57,537
12,514
45,023
60,659
11,935
48,724
78,187
16,236
61,951
-185
-94
34,170
15,255
7,536
3,442
1,218
553
1,916
633.
684
83
5,993
1,150
-91
23,271
3
18,915
417,291
2,878
4,094
101,613
-26
665
39,262
275
1,283
46,306
163'
601
49,325
53
4,843
66,794
2,139
23,274
420,169
101,587
39,537
46,469i
49,378
68,933
Equity capital, beginning of period
Net income (loss)
Sale, conversion, acquisition or retirement of capital
Changes incident to mergers and absorptions
Cash dividends declared on common stock
Cash dividends declared on preferred stock
Stock dividends issued
Other increases (decreases)
140,080
23,274
0
0
-7,401
0
0
4,153
3,074,759
420,169
19,061
1,083
-141,663
-95
0
178,960
838,249
101,587
3,636
2,672
-38,982
0
0
11,903
266,175
39,537
1,662
0
-11,315
0
0
10,162
376,816
46,469
1,245
24
-13,483
0
0
6,028
314,912
49,378
2,330
445
-11,162
0
0
13,453
520,914
68,933
3,863
0
-17,384
-89
0
17,117
Equity capital, end of period
160,106
3,552,274
919,065
306,221
417,099
369,356
593,354
Reserve for possible loan losses, beginning of period ..
Recoveries credited to reserve
Changes incident to mergers and absorptions
Provision for possible loan losses
Losses charged to reserve
11,572
2,191
0
3,984
-4,137
393,384
28,071
1,335
252,476
-289,773
69,285
9,770
1,051
39,835
-39,621
20,974
1,874
11
3,510
-5,709
23,254
4,113
70
8,211
-10,511
24,336
3,045
40
9,497
-11,248
42,899
6,680
0
19,620
-28,072
13,610
385,493
80,320
20,660
25,137
25,670
41,127
15.36
12.60
11.50
13.71
11.57
14.27
12.25
83.03
87.58
87.61
84.55
83.24
82.86
84.86
Reserve for possible loan losses, end of period ..
Ratios:
Net income before dividends to average equity capitalt (percent)
Total operating expense to total operating income (percent)
See footnotes at end of table.
i
CO
Table B-27—Continued
Total income and expences of foreign and domestic offices and subsidiaries of national
banks*, United States and other areas, year ended December 31, 1976
(Dollar amounts in thousands)
Maine
Number of banks
Operating income:
Interest and fees on loans
Interest on balances with banks
Income on Federal funds sold and securities purchased under agreements to
resell in domestic offices
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Dividends on stock
Income from direct lease financing
Income from fiduciary activities
Service charges on deposit accounts in domestic offices
Other service charges, commissions and fees
Other income
Total operating income
Maryland
Massachusetts
Michigan
17
41
75
122
$55,431
120
$275,900
1,709
$681,748
138,470
$985,639
61,599
3,668
4,886
2,037
5,970
84
75
0
2,320
2,014
2,321
1,000
13,938
21,064
7,816
26,219
561
329
3,782
5,429
11,688
7,831
14,061
19,223
80,210
13,415
44,388
35,064
1,407
22,888
52,299
16,150
55,447
28,986
79,926
390,327
19,102
Minnesota
203
Mississippi
Missouri
38
115
$522,835
13,340
$151,876
2,544
$394,637
15,854
43,717
119,641
33,228
113,091
11,095
1,729
3,230
35,703
30,398
25,373
19,145
21,483
56,414
29,802
63,639
2,059
918
5,859
23,973
13,219
28,900
47,629
7,034
18,441
5,967
20,822
516
353
81
2,404
8,787
8,559
7,746
52,671
45,641
23,411
54,894
1,112
783
5,575
23,913
8,203
23,654
23,664
1,189,695
1,483,588
830,070
235,130
674,012
87,023
244,767
283,791
138,815
45,711
123,137
4,066
0
25,629
32,946
6,754
109,697
115,687
204,688
139,890
101,492
77,600
512,811
69,648
11,192
245,180
30,722
0
58,141
68,761
6,622
140,814
Operating expenses:
Salaries and employee benefits
Interest on time certificates .of deposit of $100,000 or more, issued by domestic
offices
Interest on deposits in foreign offices
Interest on other deposits
Expense of Federal funds purchased and securities sold under agreements to
repurchase in domestic offices
Interest on borrowed money
Interest on subordinated notes and debentures
Occupancy expense of bank premises, net
Furniture and equipment expense
Provision for possible loan losses (or actual net loan losses)
Other expenses
Total operating expenses
1,444
3
134
3,694
2,533
2,635
10,604
19,011
579
472
16,528
11,287
15,644
46,777
70,982
32,683
3,292
50,093
26,485
77,601
126,113
47,646
608
8,635
51,049
34,987
41,763
140,067
60,429
10,501
8,302
20,195
15,018
26,275
99,968
9,247
39
545
8,470
8,081
10,195
29,841
80,315
1,419
1,436
18,864
18,347
23,929
84,017
69,844
346,718
1,092,281
1,300,449
705,523
200,992
567,661
Income before income taxes and securities gains or losses
Applicable income taxes (domestic and foreign)
Income before securities gains or losses
10,082
1,858
8,224
43,609
6,200
37,409
97,414
30,002
67,412
183,139
28,633
154,506
124,547
31,502
93,045
34,138
5,603
28,535
106,351
23,861
82,490
477
238
845
209
8,074
4,129
-714
-503
1,132
323
748
124
2,495
1,092
239
8,463
-53
636
38,045
-15
3,945
71,357
-40
-211
154,295
237
624
29,159
609
1,403
83,893
33
8,410
38,030
71,317
154,532
809
93,854
161
94,015
29,768
83,926
Securities gains (losses), gross
Applicable income taxes (domestic and foreign)
Securities gains (losses), net
Income before extraordinary items
Extraordinary items, net of tax effect
Net income
68,834
8,410
832
718
-4,561
0
0
1,297
330,039
38,030
578
566
-11,588
0
0
7,158
887,809
71,317
245
0
-37,712
0
0
31,435
1,325,990
154,532
9,605
420
-67,137
-6
0
49,459
744,917
94,015
16,113
0
-34,682
0
0
18,953
207,593
29,768
158
3,125
-9,670
0
0
4,551
676,709
83,926
5,026
0
-44,180
-248
0
14,792
Equity capital, end of period
75,530
364,783
953,094
1,472,863
839,316
235,525
736,025
Reserve for possible loan losses, beginning of period
Recoveries credited to reserve
Changes incident to mergers and absorptions . . . .
Provision for possible loan losses
Losses charged to reserve
6,640
1,205
105
2,635
-4,822
27,108
3,610
55
15,644
-18,617
76,004
16,272
-272
77,601
-89,949
110,627
11,045
112
41,763
-49,526
58,627
3,559
85
26,275
-26,832
17,450
3,596
206
10,195
-13,521
51,640
6,540
506
23,929
-25,084
Reserve for possible loan losses, end of period
5,763
27,800
79,656
114,021
61,714
17,926
57,531
Ratios:
Net income before dividends to average equity capitalf (percent) ..
11.24
10.85
7.65
10.92
9.53
13.28
11.77
87.39
88.83
91.81
87.66
85.00
85.48
84.22
Equity capital, beginning of period
Net income (loss)
Sale, conversion, acquisition or retirement of capital
Changes incident to mergers and absorptions
Cash dividends declared on common stock
Cash dividends declared on preferred stock
Stock dividends issued
Other increases (decreases)
Total operating expense to total operating income (percent)
See footnotes at end of table.
CO
Table B-27—Continued
Total income and expenses of foreign and domestic offices and subsidiaries of national
banks*, United States and other areas, year ended December 31, 1975
(Dollar amounts in thousands)
Montana
Number of banks
Operating income:
Interest and fees on loans
Interest on balances with banks
Income on Federal funds sold and securities purchased under agreements to
resell in domestic offices
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Dividends on stock
Income from direct lease financing
Income from fiduciary activities
Service charges on deposit accounts in domestic offices
Other service charges, commissions and fees
Other income
Total operating income
Operating expenses:
Salaries and employee benefits
Interest on time certificates of deposit of $100,000 or more, issued by domestic
offices
Interest on deposits in foreign offices
Interest on other deposits
Expense of Federal funds purchased and securities sold under agreements to
repurchase in domestic offices
Interest on borrowed money
Interest on subordinated notes and debentures
Occupancy expense of bank premises, net
Furniture and equipment expense
Provision for possible loan losses (or actual net loan losses)
Other expenses
Total operating expenses
Income before income taxes and securities gains or losses
Applicable income taxes (domestic and foreign)
Income before securities gains or losses
Securities gains (losses), gross
Applicable income taxes (domestic and foreign)
Securities gains (losses), net
Income before extraordinary items
Extraordinary items, net of tax effect
Net income
Nebraska
Nevada
New
Hampshire
New Jersey
43
104
38
129
$728,902
20,981
$108,456
1,861
$5,974,143
815,701
6,190
10,835
8,453
14,141
2,313
5,537
6,151
1,403
45,552
237,642
58,245
228,326
187,367
7,687
75,280
136,858
60,419
327,782
338,719
New Mexico
New York
56
120
4
$105,562
$220,157
$68,895
$65,607
420
649
233
953
3,218
10,087
4,271
13,563
9,381
21,906
13,568
27,607
2,539
11,732
6,265
7,639
1,354
1,556
8,485
1,317
7,093
3,438
4,895
1,133
4,095
8,679
5,872
15,120
5,714
1,437
1,949
5,811
1,774
1,536
2,247
2,745
1,886
843
25,029
110,690
58,568
122,056
30,666
1,466
6,568
19,900
28,143
24,741
16,429
148,147
333,800
111,263
92,959
1,194,139
165,868
8,493,721
24,695
63,175
25,984
21,865
260,464
33,708
1,328,444
8,492
18,921
13,252
8,246
0
0
0
59,085
107,783
24,804
24,372
65,035
7,139
432,908
25,131
0
689,649
2,610,087
692,199
2,022
283
70
0
1,666
3,627
3,162
5,042
19,219
10,349
3,312
1,617
12,085
10,789
11,551
40,862
5,064
2,204
2,106
14,055
126,398
280,444
21,749
3,642
18,107
257
8
235
181
380
764
103
951
744
308
99
102
110
15
0
44,964
4,863
2,740
3,811
16,220
23,885
3,068
3,951
57,224
35,307
38,490
144,504
1,114
6,741
5,547
8,516
20,781
270,746
255,431
19,150
264,051
103,540
590,930
690,809
87,822
83,888
1,071,975
149,449
7,515,036
53,356
9,387
43,969
23,441
7,363
16,078
9,071
122,164
-467
122,631
16,419
2,078
14,341
978,685
333,405
645,280
619
211
-70
-33
4,130
1,498
1,180
25,886
16,017
23
82
742
8,329
1,208
465
249
408
-37
18,356
44,377
16,041
9,072
219 *
18,373
44,553
16,041
9,291
17
164
197
167
176
0
743
2,632
125,263
2,885
62
415
765
346
15,106
-393
125,609
14,713
9,869
655,149
527
655,676
Equity capital, beginning of period
Net income (loss)
Sale, conversion, acquisition or retirement of capital
Changes incident to mergers and absorptions
Cash dividends declared on common stock
Cash dividends declared on preferred stock
Stock dividends issued
Other increases (decreases)
117,423
18,373
913
0
-6,199
0
0
4,031
295,673
44,553
564
0
-16,169
-6
-75
7,976
103,125
16,041
0
0
-4,567
0
0
3,242
98,122
9,291
19
0
-3,913
0
0
1,395
1,107,050
125,609
369
23,342
-63,316
-2
0
23,103
136,820
14,713
5,698
0
-6,216
-23
0
2,040
5,552,322
655,676
44,343
124,913
-270,137
-5
0
123,896
Equity capital, end of period
134,541
332,516
117,841
104,914
1,216,155
153,032
6,231,008
Reserve for possible loan losses, beginning of period
Recoveries credited to reserve
Changes incident to mergers and absorptions
Provision for possible loan losses
Losses charged to reserve
10,524
1,796
0
5,042
-6,344
29,716
3,111
0
11,551
-17,998
7,350
1,021
0
2,106
-2,186
6,785
692
8
3,811
-4,337
105,075
11,126
2,160
38,490
-48,944
12,927
2,435
0
8,516
-10,477
594,833
87,543
1,967
590,930
-643,131
11,018
26,380
8,291
6,959
107,907
13,401
632,142
14.33
14.02
14.54
9.08
10-61
10.08
11.01
85.32
84.02
78.93
90.24
89.77
90.10
88.48
Reserve for possible loan losses, end of period
Ratios:
Net income before dividends to average equity capitalt (percent)
Total operating expense to total operating income (percent)
See footnotes at end of table.
Table B-27—Continued
Total income and expenses of foreign and domestic offices and subsidiaries of national
banks*, United States and other areas, year ended December 31, 1976
(Dollar amounts in thousands)
North Carolina North Dakota
Number of banks
Operating income:
Interest and fees on loans
Interest on balances with banks
Income on Federal funds sold and securities purchased under agreements to
resell in domestic offices
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Dividends on stock
Income from direct lease financing
Income from fiduciary activities
Service charges on deposit accounts in domestic offices
Other service charges, commissions and fees
Other income
Total operating income
Operating expenses:
Salaries and employee benefits
Interest on time certificates of deposit of $100,000 or more, issued by domestic
offices
Interest on deposits in foreign offices
Interest on other deposits
Expense of Federal funds purchased and securities sold under agreements to
repurchase in domestic offices
Interest on borrowed money
Interest on subordinated notes and debentures
Occupancy expense of bank premises, net
Furniture and equipment expense
Provision for possible loan losses (or actual net loan losses)
Other expenses
Total operating expenses
Income before income taxes and securities gains or losses
Applicable income taxes (domestic and foreign)
Income before securities gains or losses
Securities gains (losses), gross
Applicable income taxes (domestic and foreign)
Securities gains (losses), net
Income before extraordinary items
Extraordinary items, net of tax effect
Net income
Oklahoma
Ohio
Oregon
Pennsylvania
Rhode Island
237
28
43
219
$475,696
37,920
$79,624
137
$976,826
44,096
$362,875
2,651
$295,020
19,116
$1,833,243
139,894
$148,771
1,949
25,862
36,603
27,480
57,234
2,045
724
6,929
23,233
21,809
20,143
30,997
1,767
8,874
4,346
10,610
97
107
0
1,893
2,226
3,418
1,220
52,345
193,747
34,232
167,644
8,541
2,363
10,157
43,182
44,794
41,988
30,604
27,236
61,508
7,392
65,198
1,942
810
2,170
10,181
14,508
12,513
16,111
12,779
23,828
13,515
36,675
474
393
2,828
10,853
19,683
19,960
6,051
96,535
229,719
93,453
175,976
21,343
5,597
17,148
80,099
25,234
49,908
100,589
3,148
14,278
3,485
10,333
1,555
287
2,793
10,094
3,402
4,248
10,149
766,675
114,319
1,650,519
585,095
461,175
2,868,738
214,492
165,315
19,055
314,208
103,531
103,808
495,614
40,279
60,087
41,038
175,408
3,375
0
50,051
101,652
11,859
520,351
94,636
359
145,109
28,809
10,579
123,022
293,557
206,993
738,905
22,375
8,558
61,579
47,869
725
10,186
32,608
19,297
24,584
90,298
590
213
698
2,831
2,178
1,014
12,153
85,969
964
2,451
54,706
41,803
54,297
196,248
21,985
1,041
4,083
13,594
15,356
35,813
73,822
30,118
489
7,482
16,297
11,085
7,895
50,807
213,586
28,993
16,719
94,382
61,220
134,244
262,079
7,249
329
314
7,439
3,334
10,062
26,022
667,415
92,158
1,384,508
509,329
390,391
2,546,292
187,540
99,260
18,771
80,489
22,161
5,517
16,644
266,011
43,206
222,805
75,766
1,938
73,828
70,784
18,195
52,589
322,446
33,814
288,632
26,952
7,947
19,005
138
-33
70
28
3,012
1,148
4,313
1,317
-1,289
-658
10,335
4,477
432
164
171
80,660
601
42
16,686
46
1,864
224,669
186
2,996
76,824
939
-631
51,958
0
5,858
294,490
221
268
19,273
0
81,261
16,732
224,855
77,763
51,958
294,711
19,273
195
Equity capital, beginning of period
Net income (loss)
Sale, conversion, acquisition or retirement of capital
Changes incident to mergers and absorptions
Cash dividends declared on common stock
Cash dividends declared on preferred stock
Stock dividends issued
Other increases (decreases)
598,423
81,261
709
8,362
-26,609
0
0
15,484
94,800
16,732
200
0
-5,357
0
0
3,704
1,676,246
224,855
17,682
16,812
-98,906
0
0
35,322
588,123
77,763
3,253
0
-24,951
-45
0
7,802
332,192
51,958
10
0
-21,823
0
0
10,587
2,483,277
294,711
12,157
4,019
-136,048
-69
0
51,734
182,000
19,273
0
0
-10,947
0
0
11,867
Equity capital, end of period
677,630
110,079
1,872,011
651,945
372,924
2,709,781
202,193
58,124
6,209
963
24,584
-27,122
9,194
338
0
1,014
-1.559
123,834
18,725
1,021
54,297
-60,237
37,464
9,830
15
35,813
-41,312
27,070
2,318
0
7,895
-8,721
255,379
16,044
444
134,244
-156.122
15,648
1,690
0
10,062
-12,301
62,758
8,987
137,640
41,810
28,562
249,989
15,099
12.68
16.18
12.56
12.47
14.58
11.22
10.01
87.05
80.61
83.88
87.05
84.65
3.76
87.43
Reserve for possible loan losses, beginning of period ..
Recoveries credited to reserve
Changes incident to mergers and absorptions
Provision for possible loan losses
Losses charged to reserve
Reserve for possible loan losses, end of period
Ratios:
Net income before dividends to average equity capitalt (percent)
Total operating expense to total operating income (percent)
See footnotes at end of table.
Table B-27—Continued
Total income and expenses of foreign and domestic offices and subsidiaries of national
banks*, United States and other areas, year ended December 31, 1976
(Dollar amounts in thousands)
South Carolina South Dakota
Number of banks
Operating income:
Interest and fees on loans
Interest on balances with banks
Income on Federal funds sold and securities purchased under agreements to t
resell in domestic offices
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Dividends on stock
Income from direct lease financing
Income from fiduciary activities
Service charges on deposit accounts in domestic offices
Other service charges, commissions and fees
Other income
Total operating income
Operating expenses:
Salaries and employee benefits
Interest on time certificates of deposit of $100,000 or more, issued by domestic
offices
Interest on deposits in foreign offices
Interest on other deposits
Expense of Federal funds purchased and securities sold under agreements to
repurchase in domestic offices
Interest on borrowed money
Interest on subordinated notes and debentures
Occupancy expense of bank premises, net
Furniture and equipment expense
Provision for possible loan losses (or actual net loan losses)
Other expenses
Total operating expenses
Income before income taxes and securities gains or losses
Applicable income taxes (domestic and foreign)
Income before securities gains or losses
Securities gains (losses), gross
Applicable income taxes (domestic and foreign)
Securities gains (losses), net
Income before extraordinary items
Extraordinary items, net of tax effect
Net income
Tennessee
Texas
Utah
Vermont
Virginia
19
32
74
596
13
14
108
$129,004
698
$110,047
669
$386,943
11,924
$1,764,099
186,115
$109,404
1,042
$24,282
62
$511,969
8,640
5,742
12,653
7,139
16,786
66
201
170
4,948
11,780
6,660
4,580
2,210
10,080
5,542
14,863
520
168
453
1,709
3,438
4,703
1,242
24,062
50,940
22,609
39,424
2,288
761
2,190
12,522
18,208
26,643
14,025
144,654
238,584
91,977
264,033
10,055
3,022
7,436
65,376
63,510
58,566
43,427
3,726
11,110
3,688
8,850
37
173
1,702
2,705
5,106
5,223
2,717
756
2,370
752
2,349
311
28
19
260
950
338
545
18,004
50,586
21,780
62,942
913
934
648
16,773
14,110
19,845
12,980
200,427
155,644
612,539
2,940,854
155,483
33,022
740,124
60,395
24,832
121,937
452,922
27,805
7,167
144,610
3,472
0
45,882
8,386
0
67,813
71,980
5,037
167,489
418,265
239,246
604,661
22,076
0
38,501
528
0
14,304
49,613
1,490
244,297
6,509
231
607
8,362
8,724
8,689
29,589
737
61
1,266
4,138
2,959
1,476
15,597
27,210
750
1,764
22,861
20,164
56,646
78,994
185,977
10,720
9,900
70,327
62,706
98,253
329,002
4,900
688
1,411
4,588
5,916
3,834
18,799
111
6
145
1,297
929
752
3,825
17,178
336
3,379
26,710
20,465
25,582
129,884
172,460
127,265
574,832
2,481,979
128,518
29,064
663,544
27,967
4,110
23,857
28,379
6,602
21,777
37,707
-103
37,810
458,875
90,605
368,270
26,965
8,594
18,371
3,958
581
3,377
76,580
3,054
73,526
186
9
287
144
8,972
4,419
5,608
346
-262
-135
-36
1,975
682
177
24,034
0
143
21,920
103
4,553
42,363
-75
5,262
373,532
1,572
-127
18,244
35
44
3,421
99
1,293
74,819
121
24,034
22,023
42,288
375,104
18,279
3,520
74,940
Equity capital, beginning of period
Net income (loss)
Sale, conversion, acquisition or retirement of capital
Changes incident to mergers and absorptions
Cash dividends declared on common stock
Cash dividends declared on preferred stock
Stock dividends issued
Other increases (decreases)
Equity capital, end of period
Reserve for possible loan losses, beginning of period
Recoveries credited to reserve
Changes incident to mergers and absorptions . . . .
Provision for possible loan losses
Losses charged to reserve
Reserve for possible loan losses, end of period
Ratios:
Net income before dividends to average equity capitalf (percent)
Total operating expense to total operating income (percent)
See footnotes at end of table.
198,834
24,034
5
0
-8,678
0
0
4,314
118,432
22,023
300
2,553
-7,041
0
0
2,271
516,587
42,288
17,591
0
-16,933
0
0
4,767
2,557,076
375,104
78,630
475
-139,596
0
0
97,348
108,463
18,279
1,000
0
-6,717
0
0
3,260
27,405
3,520
15
0
-1,441
0
0
804
652,620
74,940
2,293
3,905
-32,396
0
0
15,273
218,509
138,538
564,300
2,969,037
124,285
30,303
716,635
13,941
2,005
0
8,689
-8,629
13,485
1,507
330
-3,850
54,814
15,248
0
56,646
-74,634
218,066
33,044
331
98,253
-118,604
9,022
945
0
3,834
-3,726
2,460
187
0
752
-870
53,698
8,726
855
25,582
-31,341
16,006
12,948
52,074
231,090
10,075
2,529
57,520
11.47
16.85
7.39
13.37
15.56
11.89
10.85
86.05
81.77
93.84
84.40
82.66
88.01
89.65
1,47(5
l
Table B-27—Continued
Total income and expenses of foreign and domestic offices and subsidiaries of national
banks*, United States and other areas, year ended December 31, 1976
(Dollar amounts in thousands)
Washington
Number of banks
Operating income:
Interest and fees on loans
Interest on balances with banks
Income on Federal funds sold and securities purchased under agreements to
resell in domestic offices
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes and debentures
Dividends on stock
Income from direct lease financing
Income from fiduciary activities
Service charges on deposit accounts in domestic offices
Other service charges, commissions and fees
Other income
Total operating income
Operating expenses:
Salaries and employee benefits
Interest on time certificates of deposit of $100,000 or more, issued by domestic
offices
Interest on deposits in foreign offices
Interest on other deposits
Expense of Federal funds purchased and securities sold under agreements to
repurchase in domestic offices
Interest on borrowed money
Interest on subordinated notes and debentures
Occupancy expense of bank premises, net
Furniture and equipment expense
Provision for possible loan losses (or actual net loan losses)
Other expenses
Total operating expenses
Income before income taxes and securities gains or losses
Applicable income taxes (domestic and foreign)
Income before securities gains or losses
Securities gains (losses), gross
Applicable income taxes (domestic and foreign)
Securities gains (losses), net
Income before extraordinary items
Extraordinary items, net of tax effect
Net income
West Virginia
Wisconsin
Wyoming
103
130
46
$578,976
18,825
$158,059
2,210
$366,085
28,196
$73,578
269
38,821
34,360
9,287
46,891
921
687
16,315
18,107
33,483
27,629
21,084
16,249
30,933
22,514
32,210
1,109
331
1,255
3,980
2,997
4,982
2,853
18,623
56,378
17,580
39,259
3,193
760
3,554
11,307
8,346
19,455
20,331
845,386
279,682
201,276
§3,712
38,240
205,496
Other areas
Puerto Rico Virgin Islands
District of
Columbia
n on-national +
1
1
$976
79
0
0
$1,060
0
1,854
8,394
4,532
9,951
225
102
307
876
3,039
1,874
1,298
152
301
0
275
0
2
0
0
64
55
3
$77
46
117
0
0
0
0
0
0
23
0
111
325
448
527
250
0
0
0
173
40
593,067
106,299
1,907
263
2,942
44,839
102,438
18,608
409
218
856
15,278
0
108,851
46,592
26,963
195,666
8,128
0
36,826
1,034
0
363
0
0
121
239
0
777
46,597
4,143
4,813
31,185
23,337
22,749
96,729
14,496
525
581
6,688
7,460
4,779
31,678
36,168
1,046
3,863
19,167
16,257
25,642
65,975
1,560
780
508
2,754
2,511
2,377
12,016
0
0
0
82
15
970
502
0
0
0
91
30
0
49
1
0
13
97
36
0
453
738,277
235,175
539,777
86,068
3,375
509
2,472
107,109
24,870
82,239
44,507
4,492
40,015
53,290
8,425
44,865
20,231
4,541
15,690
-1,468
0
-1,468
-246
0
-246
470
30
440
242
42
1,366
502
5,687
2,696
516
189
23
0
200
82,439
21
864
40,879
220
2,991
47,856
279
327
16,017
-94
23
-1,445
0
0
-246
0
0
426
0
82,460
41,099
48,135
15,923
-1,445
-246
426
21
-14
0
Equity capital beginning of period
Net income (loss)
. .
Sale, conversion, acquisition or retirement of capital
Changes incident to mergers and absorptions
Cash dividends declared on common stock.
Cash dividends declared on preferred stock . . .
Stock dividends issued
Other increases (decreases)
540,893
82,460
456
-3,821
-21,014
271
0
30,972
307,747
41,099
1,344
0
-10,131
0
1
6,356
479,780
48,135
4,819
0
-22,078
0
0
12,932
87,961
15,923
1,150
0
-4,035
0
0
2,458
1,518
-1,445
3,168
0
0
0
0
-1,175
-112
-246
0
0
0
0
0
85
2,623
426
0
0
-70
0
0
104
Equity capital, end of period
629,675
346,416
523,588
103,457
2,066
-273
3,083
Reserve for possible loan losses, beginning of period
Recoveries credited to reserve
Changes incident to mergers and absorptions
Provision for possible loan losses
Losses charged to reserve
63,837
8,614
-10
22,749
-23,259
21,697
1,588
0
4,779
-6,919
45,597
2,577
20
25,642
-23,255
7,310
831
1
2,377
-2,422
1,000
90
0
970
-1,416
0
0
0
0
13,403
686
0
3,812
-4,832
71,931
21,145
50,581
8,097
644
0
13,069
13.82
12.42
9.51
16.54
-110.31
-13.62
15.10
87.33
84.09
91.01
80.97
176.98
193.54
84.02
Reserve for possible loan losses, end of period . .
Ratios:
Net income before dividends to average equity capitalt (percent) . . .
Total operating expense to total operating income (percent)
* Includes all banks operating as national banks at year-end, with full-year data for state chartered banks that converted to national banks during the year.
tThis is an average of five periods beginning with December 31,1975. The 1975 figure is not identical in definition with the four figures from 1976 because of
major reporting changes instituted in 1976.
tNon-national banks in the District of Columbia are supervised by the Comptroller of the Currency.
Table B-28
Income and expenses of national banks, by asset size, December 31, 1976
(Dollars in thousands)
Banks with assets of—
Report of income accounts
Number of banks
All
national
banks
Less than
$5 million
$5 to $10
million
$10 to $25
million
$25 to $100
million
$100 to $300
million
$300 to $1,000 $1,000 million
and more
million
4,737
223
563
1,558
1,750
396
162
85
Interest and fees on loans
$31,031,046
Interest on balances with banks
2,946,656
Income on federal funds sold and securities purchased under
agreements to resell in domestic offices
1,229,182
Interest on U.S. Treasury securities
3,193,274
Interest on obligations of other U.S. government agencies and corporations
1,210,149
Interest on obligations of states and political subdivisions of the U.S.
2,801,076
Interest on other bonds notes, and debentures
492,072
Dividends on stock
62,149
Income from direct lease financing
408,438
Income from fiduciary activities
1,029,203
Service charges on deposit accounts in domestic offices
911,467
Other service charges, commissions and fees
1,441,484
Other income
1,265,214
$27,303
617
$174,905
1,754
$1,140,798
13,123
$3,725,346
48,379
$2,752,510
43,988
$3,744,946
54,098
$19,465,238
2,784,697
3,423
8,368
13,502
42,291
65,403
212,906
164,241
598,033
127,694
421,438
211,002
483,718
643,917
1,426,520
3,798
1,942
23,442
17,827
1,243
341
164
5,904
305,426
572,568
41,585
6,606
2,943
120,954
162,385
11,242
1,989
2,624
8,363
61,257
35,249
18,319
56,373
214,333
419,165
37,091
5,240
16,491
98,047
105,602
103,290
69,786
175,314
476,928
42,854
6,835
48,125
183,887
149,739
189,209
111,863
5,854,521
4,414,675
5,878,518
366,882
1,150,261
357,763
41,051
328,616
683,535
413,631
995,510
1,005,368
29,662,989
Total operating income
Salaries and employee benefits
Interest on time certificates of deposit of $100,000 or more issued by
domestic offices
Interest on deposits in foreign offices
Interest on other deposits
Expense of federal funds purchased and securities sold under agreements to repurchase in domestic offices
Interest on borrowed money
Interest on subordinated notes and debentures
Occupancy expense of bank premises, gross
Less: rental income
Occupancy expense of bank premises, net
Furniture and equipment expense
Provision for possible loan losses (or actual net loan losses)
Other expenses
Total operating expenses
294
87
13
2,349
1,921
4,261
562
48,021,410
54,938
301,157
1,854,612
8,575,522
18,486
71,290
371,576
1,099,862
869,238
1,256,160
4,888,910
4,327,891
5,962,140
10,595,809
1,449
0
15,478
139
147
20
3,439
95_
3,344
2,446
1,714
11,164
54,387
8,917
0
109,270
653
265
206
12,384
466
11,918
8,868
9,626
45,196
266,209
75,477
0
724,040
7,206
1,291
3,088
63,127
3,322
59,805
46,843
53,904
242,065
1,585,295
348,052
0
2,256,882
50,881
5,847
16,949
219,631
21,308
365,608
1,302
1,497,633
107,922
4,651
17,602
199,176
35,509
158,323
163166?
145,821
174,754
727,387
5,024,758
118,853
146,784
570,117
3,863,377
600,998
19,650
1,527,885
292,815
17,300
29.462
308,171
66.657
241,514
187,917
262,857
792,248
5,228,806
2,927,390
5,941,188
4,464,621
1,808,504
425,244
111,863
1,07J,725
203.984
869,741
504,741
1,600,788
2,537,571
26,080,561
34,948
6,174
28,774
3,031
674
2,357
31,131
-58
269,317
45,092
224,225
15,607
3,940
11,667
235,892
2,597
829,763
126,818
702,945
35,154
11,104
24,050
726,995
4,661
551,298
62,729
488,569
30,185
13,111
17,074
505,643
2,643
649,712
76,576
573,136
21,602
10,086
11,516
584,652
3,131
3,582,428
1,118,839
2,463,589
62,335
33,586
28,749
2,492,338
1,003
31,073
238,489
731,656
508,286
587,783
2,493,341
2,268,120
454,745
179,190
1,879,653
331.341
1,548,312
1,015,489
2,250,427
4,925,748
42,103,393
5,918,017
1,436,755
Income before income taxes and securities gains or losses .
Applicable income taxes (domestic and foreign)
Income before securities gains or losses
Securities gains (losses), gross
Applicable income taxes
Securities gains (losses), net
Income before extraordinary items
Extraordinary items, net of tax effect
4,481,262
168,493
72,596
95,897
4,577,159
13,891
551
527
24
579
95
484
508
-86
Net income
4,591,050
422
10,817
6,024
12,405
47,118
168,500
107,941
Table B-29
Average assets and equity capital, net income, and dividends of National banks, 1961-1976
(Dollar amounts in millions)
Ratios (percent)
Average capital stock (par value)*
Year
1961
1962
1963
1964
1965
1966
1967 . .
1968 ..
1969
1970
1971
1972
1973
1974
1975
1976
.
Number
of
banks
4,513
4,503
4,615
4,773
4,815
4,799
4,758
4,716
4,669
4,621
4,600
4,614
4,661
4,708
4,744
4,737
Average
total
assets *
$142,456
153,675
164,546
178,483
200,938
226,847
247,136
275,155
303,127
318,718
352,924
397,169
453,761
508,688
536,370
554,666
Preferred
Common
$2
10
24
27
29
29
38
58
60
63
57
43
39
27
13
18
$3,464
3,663
3,862
4,136
4,600
5,036
5,224
5,504
5,983
6,327
6,641
7,132
7,676
8,178
8,550
9,060
Total
$3,466
3,673
3,886
4,163
4,629
5,065
5,262
5,562
6,043
6,390
6,698
7,175
7,715
8,205
8,563
9,078
Average
total
equity
capital*
$11,471
12,289
13,087
14,023
15,304
16,817
17,887
19,291
21,298
22,942
24,679
26,888
29,647
32,391
35,163
39,915
Net income
before
dividends
$1,042
1,069
1,206
1,213
1,387
1,583
1,757
1,932
2,534
2,829
3,041
3,308
3,768
4,044
4,259
4,591
Cash
dividends
on
capital
stock
$486
518
548
593
683
738
796
897
1,068
1,278
1,390
1,310
1,449
1,671
1,821
1,821
Net income
Net income
before
before
dividends to dividends to
average total average total
assets
equity capital
0.73
.70
.73
.68
.69
.70
.71
.70
.84
.89
.86
.83
.83
.79
.79
.83
9.08
8.70
9.22
8.65
9.06
9.41
9.82
10.02
11.90
12.33
12.32
12.30
12.71
12.48
12.11
11.50
Cash
dividends to
net income
before
dividends
46.64
48.46
45.44
48.89
49.24
46.62
45.30
46.43
42.15
45.17
45.71
39.60
38.46
41.32
42.76
39.66
Cash
dividends
to total
equity
capital
4.24
4.22
4.19
4.23
4.46
4.39
4.45
4.65
5.01
5.57
5.63
4.87
4.89
5.16
5.18
4.56
* Prior to 1976 these are averages of data from the reports of condition for the previous December and June and December of the respective years. Beginning with 1976, these are averages of data
from the reports of condition for the previous December and the four calls in the year. Data are not exactly comparable because assets through 1975 are net of reserves on loans and securities and
since then are net of valuation reserves and unearned discount on loans. Also, equity capital for 1976 was reported including certain components of the reserve on loans and securities which were
not reported separately for the years 1969-1975.
NOTE: For earlier data, see Annual Reports of the Comptroller of the Currency, 1938, p. 115, 1963, p. 306 and 1975, p. 160. In the table above, "Average total equity capital" does not include subordinated capital notes or debentures.
CD
Table B-30
Loan losses and recoveries of national banks, domestic offices only, 1961-1976
Year
1961
1962
1963
1964
1965 . . .
1966
1967
1968
1969
1970
1971
1972
1973 . . . .
1974
1975
1976
Total loans,
end of year, net*
Net losses or
recoveries^
$ 67 308,734
75,548,316
83,388,446
95,577,392
116,833,479
126,881,261
136,752,887
154,862,018
168,004,686
173,456,091
190,308,412
226,354,896
266,937,532
292,732,965
287,362,220
299,833,480
$ 112,412
97,617
121,724
125,684
189,826
240,880
279,257
257,280
303,357
601,734
666,190
545,473
731,633
1,193,730
2,047,643r
1,819,748
Ratio of net losses
or net recoveries^
to loans
Percent
0.17
0.13
0.15
0.13
0.16
0.19
0.20
0.17
0.18
0.35
0.35
0.24
0.27
0.41
0.71 r
0.61
* Loans used in all years are net of reserves; and 1976 loans are also net of unearned discount.
f Ratios are based on end-of-year-loans.
r
Restated.
NOTE: For earlier data, see Annual Reports of the Comptroller of the Currency, 1947, p. 100; 1968, p. 233 and 1975, p. 161.
180
Table B-31
Assets and liabilities of domestic operations of national banks, date of last report of
condition, 1961-1976
(Dollar amounts in millions)
Liabilities
Assets
Year
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
Number
of
banks
Total
assets *
Cash
and due
from banks
Total
securities
Loans,
net*
Other
assets
Total
deposits
4,513
4,503
4,615
4,773
4,815
4,799
4,758
4,716
4,669
4,621
4,600
4,614
4,661
4,708
4,744
4,737
$150,809
160,657
170,233
190,113
219,103
235,996
263,375
296,594
310,263
337,070
372,538
430,768
484,887
529,232
548,170
583,349
$31,078
29,684
28,635
34,066
36,880
41,690
46,634
50,953
54,728
56,040
59,201
67,401
70,724
76,557
78,050
76,078
$49,094
51,706
52,602
54,367
57,310
57,667
69,656
76,872
70,030
84,157
95,949
103,659
104,607
106,931
125,332
135,932
$67,309
75,548
83,388
95,577
116,833
127,454
136,753
154,862
168,005
173,456
190,308
226,355
266,938
292,733
287,362
299,847
$3,328
3,270
5,608
6,103
8,079
9,185
10,332
13,907
17,500
23,416
27,080
33,354
42,619
53,012
57,426
71,492
$135,511
142,825
150,823
169,617
193,860
206,456
231,374
257,884
256,427
283,784
314,212
359,427
395,881
431,225
447,712
469,409
* For years 1961-1975, data are net of securities and loan reserves. 1976 data are net of valuation reserves and unearned discount on loans.
t Includes subordinated capital notes and debentures.
00
Other
liabilities^
$3,424
5,083
5,907
5,922
8,943
12,243
13,506
18,442
31,703
29,571
32,702
43,117
58,072
64,435
63,769
72,615
Total
equity
capital
$11,875
12,750
13,503
14,573
16,300
17,298
18,495
20,268
22,134
23,714
25,623
28,223
30,935
33,572
36,688
41,325
Table B-32
Consolidated assets and liabilities of national banks with foreign operations, December 31, 1976
(Dollar amounts in thousands)
Foreign and
domestic assets
and liabilities
Domestic
assets and
liabilities
Foreign assets
and liabilities
(Column 1
minus column 2)
Assets
Cash and due from banks
Investment securities
$95,419,459
58,482,635
$45,060,605
55,393,861
$50,358,854
3,088,774
25,206,811
5,149,924
23,984,794
4,141,106
25,197,762
5,149,742
23,866,357
1,180,000
9,049
182
118,437
2,961,106
706,452
4,958,619
598,458
4,614,635
107,994
343,984
64,147,706
60,606,954
3,540,752
16,558,193
244,299,335
16,556,595
171,571,382
1,598
72,727,953
2,314,971
241,984,364
2,197,688
169,373,693
117,283
72,610,671
3,703,415
3,109,212
594,203
5,370,781
1,325,549
805,796
6,615,834
8,614,285
4,879,762
1,273,265
1,735,035
4,980,317
15,989,759
491,019
52,284
-929,239
1,635,517
-7,375,474
444,545,381
323,565,198
120,980,183
Liabilities
Deposits:
Total demand deposits, domestic
Total time and savings deposits, domestic
Total deposits in foreign offices
103,280,791
138,885,643
112,836,769
103,280,791
138,885,643
N.A.
N.A.
N.A.
112,836,769
Total deposits in domestic and foreign offices
355,003,203
242,166,434
112,836,769
42,210,653
5,568,103
280,095
6,739,123
10,512,485
42,106,374
2,440,982
272,143
5,034,215
7,316,312
104,279
3,127,121
7,952
1,704,908
3,196,173
420,313,660
299,336,460
120,977,200
1,797,342
1,794,362
2,980
22,434,377
22,434,377
0
444,545,381
323,565,198
120,980,183
U.S. Treasury securities
Obligations of other U.S. government agencies and corporations
Obligations of states and political subdivisions
Other bonds, notes, and debentures
Federal Reserve stock and corporate stock
Trading account securities
Total securities
Federal funds sold and securities purchased under agreements to resell . . . .
Total loans (excluding unearned income)
Reserve for possible loan losses
Loans, net of reserve
Direct lease financing
Bank premises, furniture and fixtures, and other assets representing bank
premises
•.
Real estate owned other than bank premises
Investments in unconsolidated subsidiaries and associated companies
Customers' liability to this bank on acceptances outstanding
Other assets
Total assets
Federal funds purchased and securities sold under agreements to repurchase . . . .
Liabilities for borrowed money
Mortgage indebtedness
'
Acceptances executed by or for account of this bank and outstanding
Other liabilities
Total liabilities
Subordinated notes and debentures
Total equity capital
Total liabilities subordinated notes and debentures and equity capital
N.A. — Not applicable.
NOTE: Data may not add to totals because of rounding.
Digitized for 182
FRASER
Table B-33
Foreign branches of national banks, by region and country, December 31, 1976
Region and country
Central America
El Salvador
Guatemala
Honduras
Mexico
Nicaragua
Panama
Number
49
2
3
3
5
5
31
South America
93
Argentina
Bolivia
Brazil
Chile
Columbia
Ecuador
Guyana
Paraguay
Peru
Uruguay
Venezuela
32
4
18
1
7
13
1
5
3
5
4
West Indies — Caribbean
Antigua
Bahamas
Barbados
British Virgin Islands
Cayman Islands
Dominican Republic
French West Indies
Haiti
Jamaica
Montserrat
Netherlands Antilles
St. Lucia
Trinidad and Tobago
West Indies Federation of States
Europe
Austria
Belgium
Denmark
England
France
Germany
Greece
Ireland
Italy
Luxembourg
Monaco
Netherlands
160
1
62
6
2
41
19
2
4
8
1
4
1
130
1
6
3
34
14
20
18
4
9
5
1
6
Region and country
Number
Europe—Continued
Northern Ireland
Scotland
Switzerland
Africa
10
Egypt
Gabon
Ivory Coast
Kenya
Liberia
Mauritius
Senegal
Middle East
Bahrain
Jordan
Lebanon
Oman
Qatar
Saudi Arabia
United Arab Emirates
Yeman Arab Republic
Asia and Pacific
Brunei
Fiji Islands
Hong Kong
India
Indonesia
Japan
Korea
Malaysia
Pakistan
Philippines
Republic of China
Singapore
Thailand
U.S. overseas areas and trust territories
American Samoa
Canal Zone (Panama)
Caroline Islands
Guam
Marianas Islands
Marshall Islands
Puerto Rico
Virgin Islands
Total
2
1
1
2
2
1
1
25
3
3
3
2
1
2
10
1
112
2
4
27
11
6
24
4
5
4
4
4
15
2
56
1
2
1
4
1
1
23
23
635
183
Table B-34
Total foreign branch* assets of national banks, year-end
1953-1976
(Dollar amounts in thousands)
$1,682,919
1,556,326
1,116,003
1,301,883
1,342,616
1,405,020
1,543,985
1,628,510
1,780,926
2,008,478
2,678,717
3,319,879
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
$7,241,068
9,364,278
11,856,316
16,021,617
28,217,139
38,877,627
50,550,727
54,720,405
83,304,441
99,810,999
111,514,147
134,790,497
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975r
1976
* Includes military facilities operated abroad by National banks from 1966 through 1971
r
Revised.
Table B-35
Foreign branches of national banks,
End of year
1960
1961
1962
1963
1964
1965
1966
1967
r
National bank
branches as a
Number of branches
operated by
percentage of total
national banks
foreign branches
of U.S. banks
93
102
111
124
138
196
230
278
75.0
75.6
76.6
77 5
76 7
93.5
94.3
95.5
1960-1976
National bank
branches as a
Number of branches
operated by
percentage of total
national banks
foreign branches
End of year
1968
1969
1970
1971
1972
1973
1974
1975r
1976
. .
. .
. .
355
428
497
528
566
621
649
675
635
95.0
93.0
92.7
91.5
90.2
89.5
89.4
88.6
87.2
Revised.
Table B-36
Foreign branch assets and liabilities of national banks, December 31, 1976
(Dollar amounts in thousands)
ASSETS
Cash and cash items in process of collection
Demand balances with other banks
Time blances with other banks
Securities
Loans, discounts and overdrafts, etc
Customers' liability on acceptances outstanding . . . .
Customers' liability on deferred payment letters of
credit
Premises, furniture and fixtures
Accruals — interest earned, foreign exchange profits,
etc
Due from other foreign branches of this bank
Due from head office and its domestic branches . . . .
Other assets
Total assets
184
$
480,698
4,216,388
44,561,722
2,054,193
61,150,749
2,503,491
84,597
262,763
1,807,025
14,443,383
2,506,916
718,572
$134,790,497
LIABILITIES
Demand deposits
Time deposits
Liabilities for borrowed money
Acceptances executed
Deferred payment letters of credit outstanding
Reserve for interest, taxes and other accrued expenses
Other liabilities
Due to other foreign branches of this bank
Due to head office and its domestic branches
$ 7,736,672
92,984,563
2,349,811
2,464,017
84,622
1,857,729
682,670
14,646,134
11,984,279
$134,790,497
Total liabilities
:
MEMORANDA
$ 2,546,549
Letters of credit outstanding
Future contracts to buy foreign exchange and bul$52,658,624
lion
Future contracts to sell foreign exchange and bul$50,782,092
lion
Table B-37
Trust assets* and income of national banks, by states, calendar 1976
(Dollar amounts in millions)
Number
of banks
Employee
benefit
accounts't
Other
trust
accountst
Total
trust
accounts
agency
accounts^
Total
trust and
agency
accounts
Trust
department
income
(Dollar
amounts in
thousands)
All national banks ..
1,982
$96,658
$111,687
$208,345
$64,498
$272,843
$1,025,942
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbian.
42
4
2
43
12
42
11
2
5
806
37
437
117
13,760
1,112
840
0
778
1,503
59
1,157
2,309
97
1,594
412
24,516
2,723
2,665
340
1,783
468
27,508
3,085
4,477
0
4,230
11,776
295
357
243
189
56
2,991
363
1,280
0
1,811
102
32
0
4
506
1,183
0
148
10,531
1,128
235
239
131
447
64
911
3,123
0
32
5,997
1,905
592
445
178
233
155
6,570
5,810
0
364
24,428
6,043
1,690
1,496
825
1,147
492
1,095
218
9,077
2,059
2,780
869
28
2,284
1,313
11,137
17,585
5,336
472
7,506
115
1,962
527
523
Florida.. .
Georgia .
Hawaii...
Idaho....
Illinois . . .
Indiana ..
Iowa
Kansas ..
Kentucky
Louisiana
Maine . . .
202
99
65
60
57
24
15
1,098
1,051
646
914
337
60
20
68
16
15
68
47
2
113
4
600
58
18,854
2,253
338
10,782
2,315
203
9
251
57
11
39
179
3
7
55
11
44
48
20
0
0
2,717
95
3,540
885
493
8,284
465
579
4,905
183
2
536
663
96
503
14
0
0
5,659
2,687
0
332
18,431
331
3,559
86
894
426
313
New Jersey
New Mexico
New York
North Carolina ..
North Dakota . . .
Ohio
Oklahoma
Oregon
Pennsylvania . . .
Rhode Island . ..
2,418
7,901
113
1,663
14
476
44
30
258
4,574
11,115
3,197
0
3,010
863
812
515
467
273
2,092
15
63
48
29
23
54
16
36
4
32
Puerto Rico ..
Virgin Islands
5,153
1,504
0
184
837
4,504
3,689
2,375
Maryland
Massachusetts .
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
South Carolina
South Dakota..
Tennessee
Texas
Utah
Vermont
Virginia
Washington . ..
West Virginia ..
Wisconsin
Wyoming
10,756
1,610
2,357
0
1,641
6,316
1,354
894
11,368
1,403
4,138
14,805
4,467
444
5,222
100
1,371
471
344
2,853
396
29,636
5,032
298
9,855
2,240
1,388
19,651
1,868
15
592
57
179
1,245
61
12,779
1,051
77
2,511
993
239
9,007
437
4,098
457
42,415
6,083
375
12,366
3,232
1,627
28,658
2,305
1,037
9,716
3,208
114,575
18,751
17,151
0
14,048
38,827
19,310
0
1,414
99,576
20,653
6,763
5,878
3,843
5,768
2,320
5,429
52,299
35,703
23,973
2,404
23,913
764
8,679
1,949
2,247
19,833
2,313
134,511
23,233
1,887
43,151
10,181
10,853
80,099
10,094
4,914
982
337
3,040
15,097
140
865
2,894
154
170
91
586
3,075
64
6
949
630
182
373
32
3,307
3,432
1,047
3,267
186
1,709
12,522
65,373
2,704
260
16,061
18,107
3,980
11,307
876
0
0
0
0
0
0
0
0
0
0
561
189
1,875
7,117
344
38
1,822
2,139
769
2,391
812
246
2,455
12,022
527
40
2,358
2,802
591
46
* As of December 31, 1976.
f Employee benefit accounts include all accounts for which the bank acts as trustee, regardless of whether investments are partially, or wholly,
directed by others. Insured plans or portions of plans funded by insurance are omitted, as are employee benefit accounts held as agent.
$ Includes all accounts, except employee benefit accounts and corporate accounts, for which the bank acts in the following, or similar capacities
trustee (regardless of whether investments are directed by others), executor, administrator, guardian; omits all agency accounts and accounts for
which the bank acts as registrar of stock and bonds, assignee, receiver, safekeeping agent, custodian, escrow agent or similar capacities.
§ Includes both managing agency and advisory agency accounts.
II Includes national and non-national 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.
185
APPENDIX C
Addresses and Selected
Congressional Testimony
Addresses and Selected Congressional Testimony
Date and Topic
Jan. 20, 1976, Statement of Robert Bloom, First Deputy Comptroller of the Currency for Policy, before the
Subcommittee on Commerce, Consumer and Monetary Affairs of the House Government Operations
Committee, Washington, D.C
Page
Jan. 29, 1976, Statement of James E. Smith, Comptroller of the Currency, before the Subcommittee on Financial Institutions, Supervision, Regulation and Insurance of the House Banking, Currency and
Housing Committee, Washington, D.C
Feb. 5, 1976, Statement of James E. Smith, Comptroller of the Currency, before the Senate Committee on
Banking, Housing and Urban Affairs, Washington, D.C
Mar. 1, 1976, Statement of James E. Smith, Comptroller of the Currency, before the Senate Committee on
Banking, Housing and Urban Affairs, Washington, D.C
215
Mar. 11, 1976, Statement of John E. Shockey, Deputy Chief Counsel to the Comptroller of the Currency,
before the Senate Committee on Banking, Housing and Urban Affairs, Washington, D.C
217
Mar. 16, 1976, Remarks of H. Joe Selby, First Deputy Comptroller of the Currency for Operations, before
the Texas Six Flags Chapter of the Bank Administration Institute, Victoria, Tex
218
Mar. 26, 1976, Statement of C. Westbrook Murphy, Deputy Comptroller for Law and Chief Counsel to the
Comptroller of the Currency, before the Senate Committee on Banking, Housing and Urban Affairs,
Washington, D.C
May 5, 1976, Statement of James E. Smith, Comptroller of the Currency, before the Committee to Investigate a Balanced Federal Budget of the Democratic Research Organization, Washington, D.C
June 1, 1976, Statement of James E. Smith, Comptroller of the Currency, before the Subcommittee on
Commerce, Consumer and Monetary Affairs of the House Government Operations Committee,
Washington, D.C
July 29, 1976, Statement of Thomas W. Taylor, Associate Deputy Comptroller of the Currency for Consumer Affairs, before the Senate Committee on Banking, Housing and Urban Affairs, Washington, D.C.
Sept. 16, 1976, Statement of Thomas W. Taylor, Associate Deputy Comptroller of the Currency for Consumer Affairs, before the Subcommittee on Commerce, Consumer and Monetary Affairs of the House
Government Operations Committee, Washington, D.C
Dec. 14, 1976, Remarks of H. Joe Selby, First Deputy Comptroller of the Currency for Operations, before
the American Institute of Certified Public Accountants, Washington, D.C
188
222
225
226
241
2
55
259
Statement of Robert Bloom, First Deputy Comptroller of the Currency for Policy,
before the Subcommittee on Commerce, Consumer and Monetary Affairs of the
House Government Operations Committee, Washington, D.C., January 20, 1976
I have been asked by the Subcommittee to discuss
the examination practices and procedures of the Office of the Comptroller of the Currency. In view of recent newspaper articles on the subject of so-called
"problem banks," it is important to shed light on this
topic as the publicity has tended to confuse rather
than enlighten the public.
The term "problem bank" is a vague term which has
become banking agency jargon without precise definition. If what is meant is a bank, the liquidity and solvency of which is in serious question, let me hasten to
assure you that very few national banks, and none of
the money center national banks, are considered by
our Office to be "problem banks."
On the other hand, many national banks receive
extra analysis and attention for a variety of reasons.
The degree of supervision is determined through objective and subjective judgments made by field
examiners, regional administrators and Washington
staff. The Comptroller's Office maintains no list of such
banks that could be characterized as a "problem bank
list." Each bank is handled on a case-by-case basis.
There is no magic formula or ratio which is capable
of identifying banks for special supervision with any
degree of accuracy. As a practical matter, however,
we have used in the past a quantitative formula based
on examination report data which identify those banks
to be given further analysis at all staff levels. All banks
with criticized assets (100 percent of substandard, 50
percent of "other loans especially mentioned," 50 percent of doubtful) aggregating 65 percent or more of
adjusted capital funds (equity accounts, reserves for
loan losses and capital notes, less losses and 50 percent of doubtful) are given special analysis and attention by this Office.
It was apparently a list of banks with classified assets equal to more than 65 percent of capital which
was referred to in the Washington Post story as the
Comptroller's "problem bank" list. As the Comptroller
stated in his press release following the Post story, the
labeling of every bank with a ratio of criticized assets
to capital of 65 percent or more as a "problem bank" is
a misstatement and over-simplication. The volume of
criticized loans in a particular bank, taken alone, without further information as to the strength of management, earnings, liquidity, ability to raise additional capital, access to the money markets and other factors, is
not significant. In addition, a great deal depends on
the state of the economy during the period in question.
The significance of classified asset ratios as a supervisory tool is greater during prosperous times than it is
during periods of recession, such as 1974 and 1975. A
ratio of 65 percent or more of classified assets in a
prosperous economy could be reflective of poor management. A ratio of 65 percent or more during 1975
and at present does not necessarily reflect adversely
on management. It is common knowledge in financial
circles that many banks, both large and small, well
managed and poorly managed, today have ratios in
excess of 65 percent. Indeed, any bank whose volume
of criticized loans did not increase during 1975 probably was not performing the normal risk-taking functions
through which a commercial bank serves its community.
There are two principal aspects in singling out banks
for special supervisory attention. First, there are the
procedures and criteria to be used in identifying such
banks, and second, there are the procedures and
methods for correcting whatever deficiencies exist in
such banks. This Office is now engaged in a major revision and improvement of its operations in both of
these areas, based largely on the recommendations of
Haskins & Sells, an outside consulting firm retained by
the Office in May 1974. The Haskins & Sells recommendations have been made public, and copies of the
report have been sent to each member of Congress.
Existing Grading Systems
Under the traditional system for pinpointing banks for
special attention, a great deal of emphasis was placed
on the ratio of classified assets to gross capital. Classified assets are those assets which are singled out by
the examiner as having credit weaknesses of varying
degrees of intensity. The classifications, in ascending
order of severity, are "other loans especially mentioned" (OLEM), substandard, doubtful and loss.
Banks are graded in four groupings according to the
ratio of assets classified as loss, doubtful or substandard to gross capital funds. The four groupings are:
A — less than 20 percent
B — 20 to 40 percent
C — 40 to 80 percent
D — 80 percent or more.
In addition, examiners rate capital adequacy on a one
through four scale, taking into account the quality of
management, the liquidity of assets, the history of earnings, the quality and character of ownership, the burden
of meeting occupancy expenses, the potential volatility
of the deposit structure, the efficiency of operations and
certain competitive factors. Bank management is rated
in three categories, strong, fair or poor. After the capital
position, the quality of assets and management are
scored, the examiners assign a composite or group rat-
189
ing to the bank. Group 1 banks are those considered to
have good capital, competent management, good operations, good liquidity and classified assets to gross
capital of less than 20 percent. At the other end of the
spectrum, Group 4 banks are those which could be approaching insolvency, thus requiring an immediate injection of capital, new management or both.
in the past, this Office has maintained lists of banks
falling within composite groups 3 and 4 as described
above. A schedule included with this statement reflects the number of banks on these lists from July 5,
1972 to July 1, 1974. Such lists, because of the primary
emphasis placed on the volume of classified loans,
under present economic conditions, are not considered
particularly meaningful. This Office still reviews each
examination report on a case-by-case basis and, after
discussions with our regional administrators and the national bank examiners, determines whether or not additional supervision is necessary. In those cases where it is
decided that such supervision is required, personnel
from Washington work closely, in some cases on a daily
basis, with personnel in the region and with personnel
from the bank.
The New System
As I have noted, our Office is presently actively engaged
in modernizing its system for identifying and dealing with
banks requiring special attention. A computerized "early
warning system" called the National Bank Surveillance
System (NBSS) will consist of four basic elements:
1. A data collection system.
2. A computer-based monitoring system that would
detect unusual or significantly changed circumstances within a bank and within the National
Banking System.
3. An evaluation by experienced personnel of the
impact of such changes on bank soundness.
4. A review procedure that would provide administrative controls over all proposed Office of the
Comptroller of the Currency remedial actions, including those of Washington personnel.
A Deputy Comptroller of the Currency and a project
manager from Haskins & Sells initiated the NBSS in September 1975. Their efforts have been directed toward
steps 1 and 2, a data collection system and a
computer-based monitoring system. They also have
begun work on step 3 by selecting experienced
examiners who will analyze the importance of the computerized data.
The data which have been reported to the three federal regulatory agencies by their respective banks have
traditionally been used for historical statistical purposes.
Major portions of those data have, by joint agreement of
the three agencies, been stored in the FDIC's computer.
When this Office decided to use those data for supervisory purposes, one of the first steps in creating the NBSS
required the transfer of portions of the data in the FDIC's
computer to a data base in a separate computer which
could be used by our Office for supervisory purposes.
190
The data base has been transferred and essentially covers the condition and income reports of national banks
during the past 5 years.
Three additional steps are being taken to improve and
expand the data base. First, we are conducting frequent,
almost daily, discussions with representatives of the
Federal Reserve and the FDIC to amend the condition
and income reports so that the facts in these reports will
be more meaningful for supervisory purposes. When information desired by this Office is not deemed necessary by the other two regulators, we will acquire that data
through special reports submitted by the bank separately from the customary call and earnings reports.
Second, certain portions of the non-public reports of
examination will be included in our data base. Third, if all
of the data is to be analyzed on a timely basis, it must be
processed rapidly. To accomplish this objective, the
Management Services Division of the Comptroller's Office has made two trial runs on the direct processing of
NBSS data from reports of condition and has concluded
that those data can be processed within 45 days of the
date of the call, in lieu ot the 5-month period normally required for the combined production by the three federal
bank regulators.
The NBSS will work with banks that are segregated
into peer groups in our data base. The statistical trends
of each peer group and of each bank within the peer
group will alert this Office to exceptional banks or groups
of banks on no less than a quarterly basis. In view of today's rapidly changing economy, that system will be
more timely than the traditional system cf supervision
through the receipt of reports of examination which are
required only three times in each 2-year cycle.
The fourth element of the system is an administrative
review procedure, or monitoring system, which would
stem from the quarterly analysis of data. The review and
monitoring system will enable a staff of experienced
examiners to make recommendations, on a bank-bybank basis, to each of 14 regional administrators, about
the type and scope of examination which may be required promptly for individual banks. The monitoring system will also be computer-assisted to the extent that the
recommendations and the reactions, both positive and
negative, by both examiners and bankers will prompt
successive steps of recommended corrective action as
needed.
What we are developing is an NBSS which will serve
the regulator and the banker in maintaining a sound financial system, to serve the public needs. The NBSS will
help in the detection and the correction of impending
problems before they become serious cases. This system will neither eliminate the human element from bank
regulation nor will it eliminate the human element from
the management of individual banks. It should, however,
substantially aid in the prevention of future bank failures.
Enforcement Follow-up
Once significant problems of a national bank have been
identified through the examination process, the
examiner commences the supervisory action process by
commenting in the report of examination on important
matters requiring attention of the Comptroller, the bank's
board of directors and active executive management.
The examiner's comments are supplemented by a letter
from the regional administrator which highlights the
bank's problems and requests the board of directors
and executive management to institute appropriate corrective measures. Depending on the circumstances and
severity of problems, the bank's executive management
may be requested to submit monthly reports regarding
progress it has made toward improving unsatisfactory
areas of the bank. In addition, frequent visitations and
examinations may be conducted.
When an examination or special visitation of a national
bank discloses a condition so unsatisfactory as to warrant that the board of directors should be promptly and
personally informed, a special meeting with the board is
called by the examiner or his regional administrator.
Special representatives of the Comptroller's Office may
attend the meeting depending on the circumstances
and severity of the problem. The objectives of meeting
with a board of directors are to discuss the conditions
and affairs of the bank that were observed during the
most recent examination, to reach an agreement on any
significant problems in the bank, to obtain a definitive
commitment from the board, to institute the proper corrective actions, and to obtain information concerning future plans and proposed changes in bank policy that
may have a significant impact on the future condition of
the bank.
Bank supervision provided at the regional level is
coordinated with the Washington staff which provides
additional legal assistance, coordination with other regulatory agencies, attendance at board meetings, analytical support, and follow-up review. Where the facts indicate a serious problem, a possible violation of law, or unsafe and unsound practices, we may call upon the Enforcement and Compliance Division of our Law Department. This assistance may consist of the attendance of
an attorney from the Enforcement and Compliance Division at a board of directors meeting to discuss with the
bank the problems and the suggested corrective action.
In other cases it may require the investigation by the Enforcement and Compliance Division to determine
whether sufficient facts justify the commencement of a
cease and desist proceeding or the certification to the
Federal Reserve Board for removal of an official or the
making of a criminal referral to the Department of Justice.
In the latter two situations, the investigation must disclose that the particular activities of an individual constitute evidence of personal dishonesty.
In addition, the bank must come to the Comptroller for
approvals of various corporate changes, such as the
opening of a new branch, dividend restrictions, investments in premises and other approvals. The Comptroller
may withhold his approval on such applications until he
is satisfied concerning the responsiveness of a bank to
his recommendations.
In determining the appropriate remedy for a particular
bank, the Comptroller, together with the Deputy Comptrollers, regional administrators, examiners and the Law
Department, must determine which type of action will be
the best rehabilitative type of remedy to assist the bank.
Where the facts indicate that there are serious problems
or that there are repeated violations of law or unsafe and
unsound practices, this Office has a wide range of administrative remedies to deal with the situation. These
remedies, however, are not punitive but are of a rehabiliative nature. One of the principal remedies available to the Comptroller is the power given under the Financial Institutions Supervisory Act of 1966 to commence
cease and desist proceedings. Cease and desist proceedings are rehabilitative, intermediate tools which
allow the Comptroller to force a bank to work out its problems without resorting to the more drastic measures of
receivership, conservatorship, termination of insurance,
forfeiture of charter, or forced merger. Our experience
has indicated that the threat of a cease and desist proceeding enables this Office to handle the majority of
bank problems through the less formal techniques of
persuasion, frequent examinations and meetings with directors.
Of course, the success of all these efforts will depend
on the quality of information we receive. While our
examiners independently search for information in
examining banks, much information is derived from a
candid exchange of views with bank directors and officers and other members of the public, conducted on a
strictly confidential basis. If the rules are changed to require public disclosure of what is in the examination report, there is no doubt that we will be hampered considerably in obtaining a complete picture of national banks.
Likewise, the disclosure of which banks are subject to
special supervision will make correction of problems incomparably more difficult, if not impossible, in some
cases.
The confidentiality of government examinations, however, does not impair the public's right to obtain necessary financial information about banks. Banks are subject to the disclosure provisions of the Securities
Exchange Act of 1934 to the same extent as are other
publicly held companies. In addition to what non-bank
corporations must disclose, banks must publish, quarterly, a report of condition, which includes both balance
sheet and income and expense information. The three
federal banking agencies have recently increased substantially these disclosure requirements. Beginning with
the March 31,1976 report of condition, banks will be disclosing publicly more financial information than any
other major category of publicly owned companies.
We thus respectfully must decline to comment specifically on the affairs of any particular bank, including
Chase Manhattan Bank and First National City Bank. To
violate confidences which we have elicited in order to investigate more thoroughly these and other banks would
run counter to the venerable Congressional policy of protecting the confidentiality of bank records and examination reports. (See 5 USC 552 (b) (8), 12 USC
1817 (a) (2), 12 USC 1442, 12 USC 481, 12 USC 484,18
USC 1905, 18 USC 1906.)
Thank you for this opportunity to discuss the examination and supervisory activities of the Comptroller's Office.
Schedule of Banks with Composite Ratings of 3 or 4
Date of list
July
Jan.
July
Jan.
July
5, 72
'
10, 73
3, '73
11, 74
1, '74
Total
number of
national
banks
4607
4614
4629
4661
4695
Number of
banks on
list
Banks
listed
(Percent of
national
banks)
Date of
call
report
Total
assets (In
millions of
dollars)
Total
deposits (In
millions of
dollars)
122
110
94
109
133
2.6
2.4
2.0
2.3
2.8
June 30, 72
Dec. 31, 72
June 30, 73
Dec. 31, 73
June 30, 74
18,661
21,796
21,095
22,924
42,086
15,222
18,282
16,723
18,146
31,282
Total
Total
deposits
assets
of banks
of banks
on list
on list
(Percent of
(Percent of
national
national
bank assets) bank deposits)
'
4.8
5.0
4.7
4.7
8.1
4.7
5.1
4.6
4.6
7.7
Statement of James E. Smith, Comptroller of the Currency, before the
Subcommittee on Financial Institutions, Supervision, Regulation and Insurance of
the House Banking, Currency and Housing Committee, Washington, D.C.,
January 29, 1976
I am pleased to respond to your invitation to testify before the Committee in connection with its study of Financial Institutions and the Nation's Economy (FINE). My
staff and I are familiar with the FINE study "Discussion
Principles." In connection with your study, we already
have submitted our complete responses to your comprehensive questionnaire. We will be glad to continue to
provide any information or assistance requested by the
Committee.
Because the "Discussion Principles" are so extensive
and time is limited, I will confine my comments today to
several areas in which we can be particularly helpful to
your study.
Regulatory Agencies
There seems to be considerable discussion of proposals
to reorganize the federal bank regulatory structure. The
FINE "Discussion Principles", for example, recommend
the consolidation of all federal regulatory authority over
depository institutions into a single, new agency.
Unfortuately, those who advocate complete regulatory structural change appear to have lost sight of
many of the advantages of the present system of bank
regulation. I suggest that that oversight is attributable
in large measure to the common misbelief that the federal bank regulatory structure is an accident of history
or a reflection of Congressional refusal over the past
century to deal with long-run regulatory problems.
If there has been a single, identifiable public objective
with respect to government's involvement with banking
in this nation over almost two centuries, it has been hostility toward the concentration of financial power, whether
in public or private hands. The record is so clear as to
require only a few illustrations. We can note, for example,
President Jackson's destruction of the Bank of the United States in 1832, bringing to an end the federal government's first attempt to centralize banking power. We
can point to the fact that when the federal government
192
again entered the banking arena, it did so in 1863 by
adopting the free banking principles of the states and
providing for the establishment of locally owned national
banks. So strong was the fear of centralization of financial power that all during the 19th century and until well
into the 20th, the United States, alone among industrialized nations, had no central bank. When the Federal
Reserve finally was organized in 1913, Congress rejected the idea of a single institution and opted instead
for 12 regional Federal Reserve banks. Moreover, the
record is clear that the Congress explicity considered
and rejected, in 1913 and again in 1933, the inclusion
of a federal deposit insurance system, and, in 1919
and again in 1921, the inclusion of the functions of the
Comptroller's Office within the Federal Reserve System.
The federal bank regulatory system which now exists
is a testament to American abhorrence of concentration
of financial control, whether accomplished through the
political process or the economic process. Certainly, it is
appropriate continually to examine the suitability of this
system to the evolving world of banking and to seek to
make improvements where needed. But the question of
suitability should be debated on its own merits, without
resort to a distortion of the historical record.
In this connection, I think it is instructive to note just
what studies other than FINE have recommended in recent times. In 1937, the Brookings Institution called for
consolidation of all bank regulatory authority in the FDIC.
Twelve years later the Hoover Commission recommended transferring the FDIC to the Treasury Department. The second Hoover Commission, in 1955, made
no recommendation for change at all. The 1961 Commission on Money and Credit concluded that the Federal
Reserve should have sole responsibility for bank regulation. In contrast, the Hunt Commission, in 1971, recommended that the Federal Reserve and FDIC be stripped
of bank regulatory powers, leaving them to a new federal
administrator of state banks. Not one of these studies
recommended consolidating all federal bank regulatory authority in a new agency, let alone federal authority over all depository institutions, as the FINE "Discussion Principles" urge.
There is no question that we have a complex federal
bank regulatory structure. This complexity stems basically from the fact that all national banks must be members of the Federal Reserve System and that all members of the Federal Reserve System must be members of
the deposit insurance system. State-chartered banks
have elected overwhelmingly to avail themselves of deposit insurance but, for the most part, to remain outside
of the Federal Reserve System. Finally, the Federal Reserve Board regulates and supervises all bank holding
companies.
The resulting structure, three federal bank regulatory
agencies with responsibilities which in some respects
are quite similar and in other respects are quite different,
is neither simple nor tidy. To be sure, it is an affront to the
sensitivities of those who would prefer to see abstract
orderliness in governmental structures or who are wedded to the beguiling symmetry of organization charts. It
is said to be an inefficient structure, though the record is
free of hard evidence that substantial efficiencies can be
achieved by any change.
I believe, as have most of my predecessors, that an effective and adaptive banking system must embrace
both soundness of operation and freedom of competition. I am compelled, as well, to recognize that nothing
could be more difficult than to devise a system which can
accommodate two such opposite objectives. A
thoroughly safe banking system also cannot be vigorously competitive; an intensively competitive system
never can be completely safe. Yet, I suggest that our
federal bank regulatory structure has come as close to
achieving these twin objectives as is possible.
What, in fact, is the record of the modern American
bank regulatory system? The existing structure was put
into place in 1933, following the collapse of the economy
and the banking system. In the years since World War II,
we have had 121 bank closings requiring FDIC disbursements, an average of approximately 4 per year.
That is hardly a frightening number when measured
against a banking system which is comprised of more
than 14,000 corporate entities. It becomes an impressive
record when we recall that some 9,000 banks closed
their doors during the Great Depression.
Depositor losses have been miniscule. Since 1933, of
the $4.5 billion of deposits in all of the insured banks requiring disbursements, depositors actually lost only
$21.8 million, or 0.5 percent. I would remind you that
even in the cases of large bank closings, which have attracted so much attention in recent years, depositors did
not lose a dime.
In this last regard, some observers, apparently unfamiliar with the facts, have suggested that the present
regulatory structure must bear substantial responsibility
for the financial difficulties experienced by these large
institutions. The problems of each of those banks have
been detailed before this Committee and in the financial
press, and require no elaboration here. It is clear that
they were in no way related to the organization of federal
supervisory authority.
Quite properly, in each of those cases, questions
might be raised now as to whether the federal agency involved should have acted more or less expeditiously or
should have taken some course of action other than that
it did. However, there is no reason to believe that a consolidated agency would have dealt differently with any of
those situations, not to mention the possibility that it
might not have acted as well, or as promptly. Under the
present arrangement, no banking problem encountered
by one of the federal agencies can fail to touch the regulatory responsibilities of at least one and often both of
the other agencies. That trichotomy of checks and balances offers a significant advantage unavailable to a
consolidated regulatory body.
Having demonstrated the overall safety of the banking
system, I now turn to the question of its ability to meet the
challenges of a competitive financial world. Federal
bank regulators have contributed notably to industry innovation and responsiveness to public needs. Since the
early 1960's, the Comptroller's Office has been a leader
in overcoming tradition-bound restrictions on free competition and improved services. Other bank regulatory
agencies have acted in the same spirit, but frequently in
different particulars, with regard to the institutions which
they supervise.
There are those who have characterized the attempt to
identify and discard archaic and outmoded laws which
unnecessarily shackle the banking industry as a "competition in laxity." I give little credence to this phrase.
Blind adherence to the past is not prudence. Repeal of
the obsolete is not laxity.
Statistics on bank conversions do not support the image, painted by critics, of a continual ferment of banks
switching from one federal regulator to another in an effort to find friendly or lenient supervisors. The record
suggests quite the opposite. In 1974, a typical year in
that respect, and the latest for which we have complete
data, a total of 72 banks, or about 0.5 percent of all
banks, changed federal supervisors and their reasons
for doing so seem fairly routine.
Of those 72,48 left the Federal Reserve System but retained deposit insurance. Twenty of those had had national charters and 28 had had state charters. Understandably, their changes were occasioned by the attractiveness of lower state reserve requirements.
Of the remaining 24 banks, 15 converted from state to
national charters, and nine joined the Federal Reserve
System while retaining their state charters. Again, the
motivation for change is easily understood. Federal Reserve membership, under either national or state charter,
becomes more attractive as a bank grows larger. Often,
an increasing volume of correspondent business
prompts the move. In many instances, the advantages of
having a single regulator convince a bank to seek a national charter. Also, as a bank grows and diversifies, it
may find the National Bank Act to be a more sophisticated code under which to operate. That last reason,
traditionally, has been important and has led to the modernization of many state codes. For the Committee's information, a chart is attached showing net changes in
regulatory status system-wide over the past three years.
My remarks thus far have not been intended to lay the
foundation for a defense of thestatus quo; I discern a real
193
need for improvement in bank supervision and regulation. I do mean to suggest, however, that improvement
can be achieved without consolidating the federal agencies and thereby abandoning a framework of proven effectiveness.
As a basic first step, the banking agencies must recognize their responsibility to modernize their procedures. This has been a primary goal at the Office of the
Comptroller of the Currency during recent years, and it fs
evident that similar programs are under way at the Federal Deposit Insurance Corporation and at the Federal
Reserve Board. While I cannot comment on the specific
programs in those'agencies, I can say that my Office now
is engaged in implementing the recommendations made
by the consulting firm of Haskins & Sells following a
comprehensive year-long review of our operations.
Haskins & Sells (H&S) reported that our Office had
kept up with some changes in the banking industry, but
not with others. They strongly recommended that the
Comptroller establish a systematic way of identifying
which of the many rapid changes in the banking industry
might require a regulatory response, and fashioning that
response in time to shape developments, not merely to
react to them. We now are implementing that recommendation. We also are implementing, as a result of the
H&S report, a new statistical monitoring system which
will permit the Office, much more rapidly than before, to
discern trends in the national banking industry as a
whole and in individual banks. The information required
by the new call report requirements adopted by all three
federal banking agencies to be effective with the March
31, 1976, report of condition are an integral part of this
statistical system.
Consistent with another H&S recommendation, substantial improvements in national bank examination procedures now are being adopted. The new procedures
will gear examination efforts more precisely to the needs
of the Comptroller's Office and the particular bank being
examined and will stress review of bank internal controls,
such as audits and prudent credit and investment rules.
Thus, examiners will devote more time to evaluation of a
bank's policies, its decision-making process, and its
management information systems.
We also are revamping completely our personnel
policies, our training programs, our examination manual,
and the organization of most of our executive and administrative functions.
In addition to internal operational adjustments, I recommend a limited redistribution of federal bank regulatory authority designed to streamline the system and
improve the quality of bank supervision. As the central
part of this plan, I propose an end to the present division
of supervisory responsibilities over banks and bank holding companies. Specifically, I recommend that a bank
holding company be supervised by the same federal
agency which supervises the institution or institutions
which hold a preponderance of the bank assets in that
company. I would leave with the Federal Reserve, however, its present rulemaking authority over the nature and
scope of bank holding company activities, so that the
dispersed responsibility for examination and supervision
proceeds from a uniform body of law and regulation.
That arrangement, which would not require any change
194
in the existing division of bank regulatory and supervisory authority among the Federal Reserve, FDIC and
Comptroller of the Currency, has worked successfully,
particularly for recent consumer legislation.
At the present time there are 1,616 bank holding companies registered with the Federal Reserve. Of those,
1,340 are one-bank companies which, under my proposal, would be distributed for supervisory purposes
among the banking agencies as follows:
• Comptroller of the Currency —427 companies
with $204 billion in assets.
• Federal Reserve — 85 companies with $42 billion in assets.
• FDIC — 828 companies with $36 billion in assets.
Of the 276 multi-bank companies, the Comptroller's
Office would supervise 156 companies for which the
preponderance of assets is in national banks; those
companies have total assets of $214 billion. The supervision of the other murtti-bank companies would be divided
between the Federal Reserve, 44 companies with $122
billion in assets, and the FDIC, 76 companies with $22
billion in assets.
Not only does the artificial separation of supervisory
authority between banks and bank holding companies
create unnecessary bureaucratic delay, but, even more
important, it deprives the bank supervisor of the power
essential to deal with activities which may imperil the
safety or soundness of a bank. For example, it has been
our experience that often the board of directors of a bank
which is wholly-owned by a holding company will consist
of mere nominees of the holding company board. Action
which a supervisor may take against a bank director in
that case may prove ineffective in curbing the misdeeds
of the actual decision-maker at the holding company
level.
Those kinds of problems were foreseen in 1970 before
the Bank Holding Company Act Amendments were
adopted. A high Treasury official at the time strongly
urged both this Committee and its counterpart in the
Senate not to disrupt the basic supervisory pattern by
centralizing bank holding company supervision in a
single agency. As he told the Senate Banking Committee: "We are . . . concerned by the layers of federal
bank supervision . . . we think that it is the examining
authority that knows more about the bank which would
be the central unit in the particular holding company."
Most recently, my colleague at the FDIC, Chairman
Frank Wille, suggested that the Comptroller of the Currency be given authority to approve or deny non-bank
acquisitions by one-bank holding companies where the
only bank subsidiary of the holding company is a national bank, and that full examination and supervisory authority over each such one-bank holding company also
be placed in this Office. I, of course, endorse that view
and simply urge that it be extended to multi-bank companies where the preponderance of bank assets is in national banks. A similar redistribution of authority would
take place among the other federal agencies where the
single subsidiary is a state bank, or where the preponderance of assets is in state-chartered banks.
Second, I suggest that all supervisory functions relating to overseas operations of national banks be vested in
the Comptroller of the Currency. As now structured, authority to supervise and regulate Edge Act Corporations
and their banking subsidiaries and foreign banking subsidiaries of national banks rests with the Federal Reserve
Board. Also, while my Office supervises and regulates
foreign branches of national banks, the Federal Reserve
is responsible for approving their establishment. That
confused pattern only serves to hamper the efficiency
and effectiveness of regulatory action.
As a third recommendation to redistribute authority, I
suggest that Congress require the Federal Reserve
Board to designate one Governor to exercise exclusive
responsibility for bank supervision. That Governor also
would be appointed to sit as the third member of the
board of directors of the FDIC. Placing a representative
of each bank supervisor on one board is a simple and
ready means of facilitating coordination and communication among the agencies without disrupting the existing regulatory structure.
Fourth, I wish to endorse a recommendation, recently
made to this Committee, for the establishment of a Federal Bank Examination Council. Governor Holland of the
Federal Reserve Board already has outlined this proposal, which apparently has strong support within the
Board of Governors, and I need not dwell on it at length.
The Council would be authorized to establish standards
and procedures for bank surveillance, examination, and
follow-up, applicable to all the federal banking agencies,
and to review significant problem cases when and as
they develop. All three federal agencies would be represented, with a member of the Board of Governors
serving both as Federal Reserve representative and as
chairman of the Council.
The proposal seems to me to have considerable merit,
although one might question assigning the chairmanship to a particular agency rather than to the individual
most experienced in bank examination procedures.
Apart from that, however, I suggest, as one additional
improvement, that one representative from the state
banking authorities should sit on the Council.
Examinations conducted by the FDIC and the Federal
Reserve Banks are concerned to a considerable degree
with the application of state law, and those agencies
regularly combine forces with state regulators. Accordingly, it would seem appropriate to receive input from the
state supervisory system in the deliberations of the
proposed Council. Selection of the state representative
is a matter easily resolved; my objective is, simply, to assure that we do not ignore that half of the dual banking
system.
Finally, efforts must continue to assure that, wherever
possible, savings are accomplished and potential conflicts eliminated under the present system. I would point
out, however, that it is recognized generally, so far as the
great bulk of bank supervisory activity is concerned, that
the work has been parcelled out among the three federal
agencies in such manner as to leave little to be saved by
any consolidation. Some would suggest that savings can
be realized by cutting the costs of research or personnel
training conducted separately in each of the three agencies. Frankly, I have not noticed that we are suffering
from an over-abundance of research or training, but certainly, if there is wasteful duplication, it can be eliminated
without the drastic surgery of consolidation.
Sweeping, fundamental reform of the federal bank
regulatory system is not a matter to be undertaken lightly.
A passion for tidiness and symmetry must not be allowed
to obscure the true goal of increased bank safety, flexibility, and innovation. Consolidation is not the answer. We,
instead, should preserve with care and improve the
unique American banking system which has served us
so well for so long.
Structure of Depository Institutions
On numerous occasions, I have stated that improvement
should take the form of increased asset and liability
powers for thrift institutions, and a removal of the strictures of governmental^ imposed interest rate ceilings
for all financial institutions. I am pleased that the "Discussion Principles" endorse these concepts.
Electronic Funds Transfer Systems
I would like now to turn to the electronic funds transfer
debate, the resolution of which I consider vital to the success of the quest for improved operational effectiveness
of the nation's banking system. As the Committee knows,
the electronic delivery of financial services, commonly
referred to as EFTS, is a fairly recent development within
the financial service industry and offers the American
consumer convenience of location and time.
At present, federally chartered savings and loan associations and federal credit unions enjoy a great deal of
latitude in the deployment of computer terminals through
which customer transactions can be accommodated.
Commercial banks are presently constrained by the
possibility that these devices may be classified as
"branches." Notwithstanding the determinations of the
Comptroller of the Currency, and a number of state
statutes, that EFTS terminals are not "branches," litigation and other legal uncertainties are serving to retard
both innovative development and service delivery system deployment by commercial banks. At the same
time, savings and loan associations, credit unions, and
mutual savings banks are expanding their EFTS
capabilities and are moving into the marketplace with
increasing frequency and determination.
Most damaging to the National Banking System in this
regard is the recent decision, now on appeal, of the U.S.
District Court for the District of Columbia ordering suspension of our interpretive ruling on customer-bank
communication terminals. A Missouri federal court also
has ruled that CBCT's constitute branches. In contrast,
federal courts in Colorado and Illinois have permitted installation of terminal devices, while limiting the functions
which may be performed; and in Oklahoma deployment
has been upheld without restriction. Cases are pending
in Michigan, Ohio, and West Virginia.
The diversity of judicial and legislative treatment is a
compelling argument for the imposition of a national
standard in that field. I continue to believe that during the
initial experimental phase in the development of EFTS, it
is desirable to provide competing institutions with the
195
greatest degree of flexibility in both service offerings and
delivery systems. Enhanced competition in the marketplace can only result in a broader range of financial
options for the consumer, offered at lower prices and at
higher quality than would be the case in a monopolistic
or oligopolistic market or one in which the principal competitors were constrained by statutes or regulators from
participating.
By creating the National Commission on Electronic
Fund Transfers, Congress, too, has recognized the importance of studying the issues and formulating a national EFTS policy. Like you, I am hopeful for expeditious
action by the Commission so that we all can receive
clarification and guidance, either through research by
the Commission or through actual industry experience,
before the debate is rendered academic by disjointed
developments in the marketplace and the courts.
Branching
Essentially related to the electronic fund transfers
question is the broader issue of branch banking. I believe this issue must be addressed, even though any
attempt to alter the present, state-oriented branching
structure will meet vigorous resistance.
Branching has been a topic of intense debate
throughout the modern history of the Comptroller's Office. As the law now stands, appropriate changes can
be accomplished by amendments to state laws, but
uniformity of state action appears to be unlikely. Thus,
amendment of federal law is likely to be necessary to
provide banks uniform authority to establish branches
to serve the needs of the modern community.
To that end, I endorse the recommendation in the
FINE "Discussion Principles" to permit all federally insured depository institutions to branch interstate where
state law does not conflict. Power for federallychartered institutions to establish branches within their
own SMSA's regardless of state law also would be a
welcome improvement.
We all can recognize that many cities are situated
near state bprders so that their metropolitan areas
extend into two or more states. For many commercial
purposes a metropolitan area is a single entity, not a
collection of units. To permit branching within a metropolitan area would enable banks to locate branches
wherever they would be most useful for customers.
My Office recently completed a study of the nation's
50 largest SMSA's. Of the 11 million people in the
commuting work force of those cities, approximately
half are denied access at work to the same financial
institutions at which they bank at home. The
Washington, D.C., metropolitan area is a prime
example. There, 360,000 people, or close to one-third
of the total area work force, commute across a district
or state line and, therefore, cannot bank at the same
institution at work and at home.
Returning to the "Discussion Principles", I do not
favor an absolute prohibition against entry into metropolitan areas by merger. I believe that existing antitrust standards are sufficient to guard against anticompetitive mergers.
196
Securities Underwriting
I note with approval the recommendation that banks
be permitted to underwrite state and municipal securities, including revenue bonds. The Comptroller's Office repeatedly has recommended that the present authority of national banks to underwrite general obligations of state and municipal governments be extended
to permit also the underwriting of revenue issues —
most recently, on December 9, 1975, in my testimony
before the Subcommittee on Securities of the Senate
Committee on Banking, Housing, and Urban Affairs.*
Banks have underwritten general obligation bonds
for years, subject to the supervision of federal bank
regulators. This supervision has been strengthened
recently by the enactment of the provisions of the Securities Acts Amendments of 1975 relating to municipal bond dealers. For those reasons, I am confident
that the performance of that underwriting function will
be afforded all necessary protection. I would recommend only one additional safeguard, that is, that a
bank be required to obtain approval from the appropriate bank regulatory agency before engaging in the
business of underwriting.
Municipalities, particularly small ones, will reap
numerous benefits from this new bank underwriting authority. They will be able to tap a significantly broader
market which, according to studies in this field, should
facilitate the sale of their securities and decrease their
interest costs, as well.
On the general subject of securities underwriting, I
offer one additional recommendation that the appropriate provisions of the Banking Act of 1933 be
amended to permit national banks to operate commingled investment accounts. For years bank trust departments have offered investment services as part of
their role as trustee of personal and employee benefit
trusts, as executor, administrator or guardian of
estates, and as agent for various purposes. In the process they have acquired extensive research and investment capabilities. Through the pooling which
commingled investment accounts involve, these
capabilities can and should be made available to the
general public.
I realize that in offering this type of service a bank
may face situations in which a conflict of interest arises
between the needs of one customer and those of
another customer or the bank's commercial department. This is not new to banks. Similar conflicts of
interest arise with respect to investment management
services regularly provided through bank trust departments. Neither will authority to offer commingled
investment accounts significantly increase the amount
of assets affected by such conflicts. Supervision of
bank trust departments is designed to detect those
situations and to monitor the effectiveness of controls
which banks themselves impose. I do not mean to say
that additional safeguards would be inappropriate
were that service to be permitted. I see merit in requir* For full testimony, see pages 209-212 of the Annual Report of the
Comptroller of the Currency, 1975.
ing banks to obtain permission from the appropriate
bank regulatory agency before establishing commingled agency accounts, and I would not oppose a decision to subject these accounts to the protections of the
Investment Company Act of 1940.
Foreign Banks in the United States
I wish briefly to comment upon the constraints which the
"Discussion Principles" would have Congress impose
upon the U.S. operations of foreign banks. I have just returned from meeting with European leaders and I am
more convinced than ever that legislation in that area
should be drafted very carefully and after much deliberation.
While there is, of course, no objection to even-handed
treatment of our own banks and foreign banks, I would
caution that it is a very delicate and complex matter involving reciprocal treatment of American banks abroad
and our whole foreign trade policy. Thus, any legislation
must be written painstakingly to assure that without
doubt there is even-handed treatment.
In addition, it is possible that the deliberations of the
EFT Commission, which Congress has instituted, will
produce recommendations for change in the geographical location restrictions for U.S. banks. It would
seem more appropriate to await those recommendations
before applying domestic geographic limitations to
foreign banks operating in the United States.
In regard to the "Discussion Principles" recommendation that certain types of underwriting activities and corporate equity powers be forbidden to foreign banks, I
think that legislation should await the studies of secu-
rities activities restrictions on national banks imposed by
the Glass-Steagall Act. The Congress currently is engaged in a study on the subject, and we are cooperating
with them.
Finally, my impression is that foreign banks, like our
own, are taking a hard look at balance sheet considerations. I do not think that much expansion by foreign
banks in the U.S. is likely in the year ahead. There is no
need for haste in drafting legislation in this extremely
sensitive area.
Enforcement Powers of the Comptroller's
Office
The "Discussion Principles" do not include anything relating to the enforcement powers of the banking agencies. Because that subject has been much in the news in
recent weeks, however, I would like to conclude by
commenting upon it.
In September 1975 Chairman Burns of the Federal Reserve Board, on behalf of the Board, the Comptroller,
and the FDIC, sent this Committee recommended legislation for strengthening the enforcement powers of all
three agencies. We heartily endorse the substance of
this proposed legislation — although the Comptroller's
Office has some ideas on how a few of the details might
be improved. If the Committee would like to consider
such legislation, we would be happy to work with the
Committee and its staff in that endeavor.
Again, I would like to thank you for this opportunity to
participate in your deliberations on the FINE study, and
to assure you of the desire of my Office to render any help
that you require of us as the study progresses.
Statement of James E. Smith, Comptroller of the Currency, before the Senate
Committee on Banking, Housing and Urban Affairs, Washington, D.C., February 5,
1976
I appreciate this opportunity to discuss examination
practices and procedures of the Office of the Comptroller of the Currency and to review with the Committee
some of the questions raised by the recent series of
newspaper articles on the subject of so-called "problem
banks." I hope my statement today will help correct
some of the misunderstanding caused by the articles.
My testimony will touch upon three areas. First is an
overview of the condition of the national banking system.
Second is a discussion of the subject of so-called
"problem banks." Third is a review of the modernizing
procedures by which the Comptroller's Office
examines banks and follows up on any corrective action which may be required. I am attaching to my
statement a detailed response to the specific questions raised in the Chairman's letters to me of January
14 and 20, 1976.
The Condition of the National Banking System
The United States is now emerging from the severest
economic recession since the Great Depression of the
1930's. Not surprisingly, the serious economic condition
weakened many of the businesses upon which our
economy depends. In view of that, it would be unrealistic
to expect that those major economic problems would not
affect the nation's banks, especially those larger institutions which are the principal credit sources for regional
and national businesses.
Despite the economic problems, the National Banking
System, which is supervised by the"Office of the Comptroller of the Currency, is sound and prosperous. Indicative of that strength is the remarkably resilient performance of the 10 largest national banks in 1975.
The Committee might wish briefly to review that record. Those 10 national banks hold about 40 percent of
the assets and deposits of all national banks. Each of
them is the principal subsidiary of a bank holding company whose year-end 1975 data are available for
analysis.
Outstanding loans for those 10 banking companies totaled $152 billion at year-end 1975. Their total net loan
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losses for all of 1975 equalled $1.1 billion, or 0.7 percent
of outstanding loans. Although those losses were above
the historic annual figures since World War II, let us ask:
• Did they severely impair the banks' capital?
No. In fact, capital accounts of these 10 banking
companies grew $1.4 billion in 1975.
• Did they exhaust loan loss reserves?
No. Their loan loss reserves were strengthened in
1975 by some $206 million.
• How were the loan losses absorbed?
Entirely out of current earnings.
Recognizing the severity of the recession and the impact it was having on their loan portfolios, those 10
money market banking companies during 1975 set
aside $1.3 billion from current revenues to cover possible loan losses. Actual net loan losses totaled $1.1 billion, however. Thus, the $200 million difference between
the provision for possible losses and actual losses was
added to their reserve for loan losses, which brought
those loan loss reserves to 0.95 percent of outstanding
loans at year-end 1975. A year earlier, the reserve for
loan losses amounted to 0.81 percent of outstanding
loans. To place that ratio in perspective, net loan losses
of those 10 banking companies averaged only 0.34 percent of their total loans over the past 5 years.
In other words, those 10 money market banking companies individually, as well as in the aggregate, covered
their entire 1975 loan losses from current earnings. Even
after charging off some $1.1 billion in bad loans, the
companies earned before-tax income of $2.2 billion.
Adding their before-tax earnings of $2.2 billion to the
$1.3 billion they provided to cover losses, one can see
that those banking companies could have charged off
1975 losses two or three times over, without reducing
their reserves for loan losses or impairing capital.
The Committee should study the origin of the classified
loans found today in banks. To the extent that these loans
reflect banking mistakes, they are not the result of bad
decisions made in the past months or even during the
past year. On the contrary, 1975 was a year of marked
retrenchment for the banking industry. The dollar amount
of total loans of the 10 banking companies at year-end
1975 showed an absolute decline from that outstanding
at the beginning of 1975.
The loan losses which were absorbed last year came
from loans made in the prosperous environment of 1971,
1972 and 1973. Thus, we are not dealing with an expanding problem, but with one whose limits seem to be
known. In simple terms, most of today's classified loans
are loans that were pfaced on the books during an earlier
period.
As will be evident later in my testimony, earnings, and
their relationship to loan losses or capital, are not the only
factors which can or should be used in analyzing a
bank's performance and soundness. Those 10 banking
companies' capital and liquidity positions, which improved measurably in 1975, are also important considerations in judging their soundness. In the case of those
money center companies, however, the earnings-based
analysis employed does give an accurate picture of their
condition.
198
In summary, I believe that public confidence in the
banking system of the United States is fully justified, both
on the basis of present condition and recent performance. Indeed for that system to have had the fundamental strength and resiliency to carry through this enormously difficult economic period with only limited resort to
foreclosure and other liquidating practices has doubtless contributed materially to the avoidance of an even
deeper and more severe recessionary experience for
this nation and its people.
I do not suggest that the system is faultless. Certainly
some of the problems in the loan pouch are the result of
poor decisions made by individual banks. But, in the
main, the asset problems are economy related, and the
capacity of our banking system to shoulder those
problem loans is a matter deserving of commendation
rather than condemnation. The banking industry and
the other financial facilities of the private and public
sectors are now being looked to for active involvement
in financing our national economic recovery. Strident
criticism could well drive the directorates and management of banks in the direction of credit policies so
inordinately conservative as to thwart or severely retard economic recovery. I earnestly hope that our critical examination of present and past banking practices
will be ever mindful of the potential for that unwanted
psychological fallout.
Problem Banks
There recently has been discussion in the press about
so-called "problem banks", which has led to much confusion. I would like to attempt to put that matter in
perspective.
The Comptroller's Office for many years has been
identifying certain banks for special attention. Until 1974,
the term "problem bank" as used by the Comptroller's
Office meant no more than a bank whose classified assets, that is loans judged by the examiner to be substandard, of doubtful collectability or a loss, aggregated
40 percent or more of the bank's gross capital funds
(equity accounts, subordinated capital notes and debentures and reserves for loan losses). Thus the term
"problem bank" never had been used in the sense of
identifying the very few banks which, at any time, the
Comptroller's Office believed to be in serious danger of
failing, although those very few banks normally would be
included within the group netted by the 40 percent classified asset to capital ratio.
This formula for identifying banks which should be
more closely analyzed or tracked by the Comptroller's
Office may have been appropriate when it first was conceived in the economic conditions of the 1950's. We
concluded that it would not be, in the economic and
banking climate of the 1970's, a useful way to designate
banks which require our special attention. We thus have
been determined to develop more discerning methods
of singling out the banks which require our special attention; and the Office has made considerable improvement in that regard. For example, we no longer use the
40 percent ratio to define a bank which should be reviewed for possible special attention.
Our present method of identifying banks that require
extra attention cannot be understood without also reviewing the changes in our procedures for monitoring
those banks once they are identified. In January 1974, I
began a weekly meeting with my senior examining and
legal staffs to discuss bank-by-bank the problems which
the staff had identified as requiring extra attention. In the
case of large banks with problems of unusual severity,
the regional administrator and the examiner were flown
to Washington to participate in those meetings. If the corrective actions already underway were deemed insufficient, other possible corrective actions were decided
upon and responsibilities were delegated to make sure
that those actions were accomplished. That series of
meetings permitted me to assess, firsthand, the methods
then existing for dealing with problem banks. They also
had the positive effect of bringing our Washington staff
more deeply into enforcement activity.
These meetings, however, revealed some of the
weaknesses in our methods of identifying and tracking
so-called "problem banks." Particularly disturbing was
the observation that time and resources were being devoted to banks which did not really have severe problems. As a result, the Office established, experimentally,
the "Victor" program.
On November 15, 1974, a memo was sent to all national bank examiners outlining the Victor program, and
describing it as:
a better means of coordinating the various skills and
resources that we have in the problem identification
and correction area and of applying them more expeditiously and precisely than previous procedures
have allowed.
The program was under the supervision of a Deputy
Comptroller of the Currency with over 25 years of examining experience. He reported directly to me.
The Victor program was largely one of communication.
It established procedures through which examiners at
the time of examination, regional administrators, and
program personnel in Washington were required to
communicate swiftly and regularly to make sure that
problems identified either by the examiner or by those
analyzing the report were called to the attention of the
bank in an appropriate fashion and corrective measures
sought and monitored.
In order to understand the methodology of the program, I should explain that every bank examination contains a rating by the regional administrator on several
factors, and a composite rating for the bank of 1 through
4, with 1 being best. That composite rating system, like
the 40 percent classified asset to capital ratio, is overly
simplistic, although it is still found on our examination
report. As of November 1974, it was the best tool we
had — so we used it.
The Victor program originally included all banks with a
composite rating of 3 or 4 and any other bank which the
examiner, the regional administrator or Washington personnel believed merited the special kind of attention the
program was designed to provide. A total of 186 banks
with total assets of $228 billion and total deposits of $183
billion were originally included in the program.
The Victor program from its inception was intended to
be evolutionary. It soon became apparent that the composite rating system included banks which did not need
the intensive supervision that the Victor program involved. We thus looked for a new way to identify such
banks.
On December 31, 1974, a memorandum was sent to
all regional administrators and all examining personnel
requiring the examiner to write a special memorandum
summarizing a bank's condition when, in the examiner's
judgment, any condition existed which could lead to the
bank's insolvency; or when criticized assets, that is, 100
percent of loans classified substandard plus 50 percent
of doubtful loans and other loans especially mentioned,
equalled 65 percent or more of adjusted capital funds
(equity accounts, capital notes, debentures and reserves for loan losses less losses and 50 percent of assets classified as doubtful). Thus, in lieu of using a ratio
relating gross classified assets to gross capital at the
start of an examination, we began to use a ratio of the remaining criticized assets to the remaining capital at the
end of an examination. Those memos were sent for
further evaluation and followup action to the appropriate
regional office and thence to Washington. The
examiners were told:
While some statistics and ratios are necessary,
please understand that I am depending primarily
upon your professional ability and judgment, not
ratios, to disclose those serious banking matters requiring our attention.
We are developing a program with quantitative ratios
which will be more discriminating. Meanwhile, however,
we must work with the tools we have.
In short, we are still using the 65 percent ratio, but only
as a fine mesh screening device. Every bank with
criticized assets equal to 65 percent or more of its adjusted capital funds is reviewed in the Washington Office
to determine whether or not the bank warrants special
and unusual surveillance. The 65 percent ratio thus automatically identifies only those banks which will be reviewed. That ratio does not identify those banks which
are defined as "problems".
On September 2,1975, the Comptroller's Washington
Office underwent a major reorganization. As a small part
of this reorganization, the name Victor was dropped, and
the personnel supervising the program changed. There
are now two organizational units within the Washington
Office, each staffed by experienced examiners, whose
sole responsibility is to identify such banks, analyze their
problems, see that corrective measures are agreed
upon, and follow up on the implementation of such corrective measures.
As of today, there are 28 banks which the Comptroller's Office would describe as "problem banks", for want
of a better term. Of those 28, seven banks, with total assets of $1,669 million and deposits of $1,359 million,
exhibit a combination of weaknesses and adverse financial trends which pose an immediate threat to liquidity or
solvency of the institution. The remaining 21 banks, with
total assets of $9,856 million and deposits of $6,242 million, are considered by the Office to be in "serious" con199
dition. The weaknesses in those 21 banks could lead to
insolvency if not corrected, but they are in no immediate
danger.
Additionally we are giving some extra attention to 57
national banks. Those banks include those selected
from our routine review of all banks meeting the 65 percent ratio and those we believe deserve special attention, even though their classified asset to capital ratio is
under 65 percent. While we believe these banks exhibit
certain performance characteristics warranting special
surveillance, we do not regard these as "problem
banks".
I think our Office has made important strides over the
past 2 years in both the identification and supervision of
"problem banks1'. This has been an evolutionary process, and it continues. I hope the next 2 years will witness
as much progress in improving these procedures as has
occurred in the last 2 years.
I should add one caveat: I don't think that the Comptroller's Office or any other bank regulatory agency can
prevent bank failures in our present competitively
oriented banking system. We can identify potential problems and we can attempt to assure the best efforts both
of the regulatory agency and of the bank to correct these
problems. It would be wrong to believe, however, that
every bank problem, whatever its size or complexity, can
be remedied solely because the problem has been identified and all reasonable solutions have been attempted.
Modernizing Changes in Examination and
Supervision
As is evident from this discussion of the "problem bank"
situation, I became firmly persuaded, soon after becoming Comptroller, that major improvements were needed
in the examination and follow-up procedures used by the
Comptroller's Office in its supervision of national banks.
In the past, the Comptroller's Office used the review of
the loan portfolio as a focal point of examinations. It was
obvious, however, that the tremendous growth of bank
assets during the 1960's and early 1970's had outstripped the ability of the Comptroller's Office to check all
loans. Indeed, our Office would need several times the
number of employees we presently have to evaluate all
loans on an individual basis.
In the spring of 1974, the Office commissioned the nationally recognized accounting and management firm of
Haskins & Sells (H&S) to conduct a major study of the
Comptroller's Office and, where indicated, to recommend improvements. The H&S report was released in
August 1975. It is available to the public and a copy was
sent by my Office to each member of Congress. We are.
now busily engaged in implementing the major changes
recommended in that study.
Endorsement of those new procedures is not meant to
criticize either the personnel in the Comptroller's Office
or those who preceded me as Comptroller. Indeed, most
of the recommendations are synthesized from criticism
that came from within the Comptroller's Office. The banking industry in the last 15 years has changed dramatically in terms of size, functions and the velocity of activity, and our procedures simply had not kept up with the
200
accelerated pace of change in the industry we supervise.
H&S recommended that the Comptroller establish a
systematic way of identifying which of the many rapid
changes in the banking industry might require a regulatory response, and fashioning that response in time to
shape developments, not merely react to them. Central
to that response is the recognition that a sound banking
system must be soundly managed by bankers themselves — and we must be able promptly and accurately
to evaluate bank management. We now are implementing those recommendations.
We also are implementing, as a result of the H&S report, a new statistical monitoring system which will permit the Office, much more rapidly than before, to discern
trends in the national banking industry as a whole and in
individual banks. The information required by the new
call report requirements adopted by all three federal
banking agencies, to be effective with the March 31,
1976 report of condition, is an integral part of that statistical system.
Consistent with another H&S recommendation, substantial improvements in national bank examination procedures now are being adopted. The new procedures
will gear examination efforts more precisely to the needs
of the Comptroller's Office and the particular bank being
examined and will stress review of bank internal controls,
such as prudent credit and investment rules and internal
audit procedures. By devoting more time to evaluation of
a bank's own policies and procedures, its decisionmaking process, and its management information system and less time to independent duplication of what the
bank already has done, we expect greatly to increase
the efficiency of our examiners.
Although there will be more emphasis on systems
checks and less on individual loan verifications, our
examination process will employ more efficient procedures in the areas of national credits and country credits.
If a debtor has an aggregate line of credit in excess of
$20 million shared by two or more national banks in this
country, three experienced examiners will review the
credit. A majority vote will determine a uniform classification to be used by all examiners in every national bank in
the United States. As regards country credits, since July
1974, three senior international examiners, from New
York, Chicago and San Francisco, and two international
officials from our Washington Office have analyzed,
semiannually, facts on loans from banks into foreign
countries and, by a majority vote, have determined
uniform classifications for each such loan. That procedure should establish consistency, focus the attention of our most talented examiners on the classification, and be an immense saving of time.
We also are reviewing and improving our personnel
policies, our training programs, our examination manual,
and the organization of most of our executive and administrative fuctions. I am aware that any bank regulatory organization, no matter how structured, is only as
effective as the quality of its personnel.
All these steps are being taken to improve the bank
supervisory and regulatory functions under existing
laws. In the follow-up procedures to bank examination,
however, we need new legal authority to strengthen our
ability to deal with particularly difficult problems. The
Committee already has before it S. 2304, which contains
some amendments recommended jointly by the Comptroller, the Federal Reserve Board, and the FDIC to enable us better to deal with problem banks. I urge prompt
Committee consideration and passage of that legislation.
The legislation has several provisions. The first empowers the banking agencies to assess civil penalties for
violations of various banking statutes and cease and desist orders. I endorse wholeheartedly the idea of giving
the agencies that authority. My staff and I believe that
some improvement can be made in the procedures now
found in S. 2304 through which those penalties would be
assessed and collected. We would be happy to consult
with the Committee staff on this matter.
Another provision of the bill which I heartily support
would give the banking agencies power to remove an officer, director, or other person participating in the affairs
of the bank from his position upon being able to show
gross negligence in the operation or management of the
bank or a willful disregard for the bank's safety and
soundness. Under the present statute, bank officials can
be removed only if the agency can establish "personal
dishonesty". The judicial review provisions already con-
tained in the statues are ample to protect against arbitrary or capricious use of that power.
The procedures by which an officer or a director of a
national bank can be removed also need amendment.
Under existing law, the Comptroller lacks power to remove a bank official unless that official has been indicted. If he has not been indicted, the Comptroller can
do no more than certify facts to the Federal Reserve
Board. The Federal Reserve is given the responsibility
for issuing a notice of proposed removal, prosecuting
the case, hearing the evidence and making the final decision. The Comptroller cannot even institute the proceeding.
That procedure is so cumbersome to use that neither
the Federal Reserve Board nor my Office believes that it
has been very effective. We thus have recommended a
provision in S. 2304 which would empower the Comptroller to institute and prosecute proceedings. The Comptroller also would have the power to suspend a bank official pending completion of the proceedings. The Federal
Reserve Board, however, would retain its present authority to hear the case and make final decisions. I am in
complete agreement with that recommendation.
In conclusion, I refer the Committee to the responses
from my Office to specific questions contained in Chairman Proxmire's letter of invitation to me.
Appendix to February 5 Statement by James E. Smith
Responses to the Committee's Questions
The Committee has asked in Chairman Proxmire's letter
of invitation for responses to specific questions. Some of
the questions have been answered by information presented in the earlier portions of this statement. The remaining responses are below.
Question 1: The Standards for Assets,
Capital, Liquidity and Management
Classification of Loans
The evaluation of loans and discounts is one of the most
important phases of a national bank examination. The
examiner bases many of his conclusions regarding the
condition of a bank, the strength of its management, and
its service to the community on his appraisal of the loan
account.
In each bank under examination, the examiner determines the volume of loans to be appraised. Generally,
examination coverage of the loan portfolio exceeds 70
percent of total dollar amount outstanding and always
includes overdue loans, non-accrual loans, previously
classified loans and other paper which the examiner has
definite reasons for investigating and appraising.
Once it is determined which loans will be reviewed, the
examiner systematically appraises each loan by analyzing available financial information, including financial
statements and other statistical support, as well as
evaluating pledged collateral if the loan was granted on
a secured basis. Financial data and other essential information such as the purpose of the borrowing and the
intended sources of repayment, progress reports, inspections, and memoranda of outside information and
loan conferences, are normally maintained in the bank's
credit files.
Open and candid discussion with bank officers and directors, who are familiar with borrowing customers, is an
equally important step in the process of appraising the
varying degrees of risk in a given loan. Factors relating to
the character of the borrower in the case of an individual,
or the competency of management if the loan is to a corporation, usually may be determined from discussion
with the appropriate bank officers. Analysis of financial
data alone may not reveal credit factors of this nature,
which could have a significant bearing on the ultimate
collectability of a loan. Frank communication between
the examiner and the banker is a crucial element in the
loan review process.
When the examiner has identified individual credits
that require criticism, the loans are assigned a "classification" based on the degree of risk. Each such loan is
supported in the report of examination by informative
and factual comments which justify the classification. A
loan to a given borrower may be categorized as "other
loans especially mentioned" (OLEM), substandard,
doubtful or loss. Portions of the loan may, depending on
the circumstances, be assigned different classifications.
For example, the following hypothetical $100,000 to a
201
self-employed individual, based on varying elements of
risk, might be classified as follows:
Not
OLEM Substandard Doubtful
Loss
Criticized
(1) $10,000 (2) $5,000 (3) $40,000 (4) $30,000 (5) $15,000
(1) The collateral for this portion of the debt is a pledge
of U.S. Government securities with a current market
value of $10,000. Aside from a potential decline in the
market value of the securities, this part of the loan is virtually without risk.
(2) This is the unsecured portion of the loan on which
the bank holds the guaranty of a financially responsible
individual. Bank management feels confident that the
guarantor has the capacity and willingness to honor this
obligation; however, financial information supporting the
guaranty is outdated and the bank has not yet attempted
to collect from the guarantor. Until the guarantor performs, this portion of the loan warrants more than the
normal degree of supervision.
(3) The collateral for this portion of the debt is a real
estate mortgage on borrower's personal residence, appraised at $40,000. Three monthly payments are past
due. This portion of the debt fits the substandard definition; the bank appears protected from loss because of
the underlying value of the real estate. However, the loan
is a non-earning asset, as evidenced by the past due
status, and the bank may be forced to foreclose on the
property in order to effect collection. Foreclosure action
would not necessarily assure disposal of the property for
the appraised value.
(4) The collateral for this portion of the debt is a lien on
equipment formerly used in borrower's now defunct
machine shop business. Bank has taken possession of
the equipment and is attempting to arrange a sale; however, the age and specialized nature of the equipment
mitigates against sale at a price sufficient to liquidate the
doubtful portion. The probability of loss is high, although
a favorable sale could still materialize.
(5) This portion of the loan is unsecured and past due
for an extended period. The borrower has no apparent
source of repayment at this time and continuance as an
active asset is not warranted. Some recovery at a future
date might be effected if the borrower is able to find gainful employment.
To clarify exactly what we mean by the different
categories, we provide the following definitions:
• Other Loans/Assets Especially Mentioned
(OLEM) — Currently protected but potentially
weak credits or other assets.
• Substandard — Assets with a positive and welldefined weakness or weaknesses which jeopardize the liquidation of the debt. Defined in a general way, a substandard asset is a bank asset inadequately protected by the current sound worth
and paying capacity of the obligor, or pledged
collateral, if any.
• Doubtful — Assets with all the weaknesses inherent in assets classified substandard with the
added proviso that the weaknesses are pro202
•
•
•
•
•
•
nounced to a point where collection or liquidation
in full, on the basis of currently existing facts,
conditions and values, is highly questionable and
improbable. The probability of total or substantial
loss is high but extraneous factors might make
possible the strengthening or liquidating of the
asset.
Loss — Assets considered uncollectable and of
such little value that their continuance as active
assets of the bank is not warranted. Assignment
of this classification does not mean that an asset
has absolutely no recovery or salvage value, but
simply that it is not practical or desirable to defer
writing off a basically worthless asset even
though partial recovery may be effected in the future.
Classified Assets — The sum of substandard,
doubtful and loss classifications.
Criticized Assets — Classified assets plus OLEM.
Gross Capital Funds —The sum of capital stock,
surplus, undivided profits, reserves against loan
and security losses and long-term subordinated
notes and debentures.
Adjusted Capital Funds — Gross capital funds
less estimated losses and 50 percent of doubtful
classifications.
Equity Capital — The sum of capital stock,
surplus and undivided profits.
Evaluation of Bank Capital & Ratio Analysis
Bank capital has myriad uses and purposes. It allows a
bank to gain competitive entry by acquiring the necessary infra-structure to operate. It provides a cushion to
withstand abnormal losses not covered by current earnings, enabling the bank to regain equilibrium and reestablish a normal earnings pattern. It serves the important psychological role of maintaining the confidence
of public lenders and investors in the bank's ability to
meet maturing demands in most market conditions, to
sustain present and contemplated growth patterns and
to conform to industry standards. In liquidation it provides protection to both depositors and other creditors.
Although the purposes and uses of capital are easily
defined, capital adequacy is not. Attempts to construct
objective criteria to measure what is substantially a subjective concept have been mired in controversy for years
and have resulted in no firm answers to this complex subject.
As we see it, there are five major issues relating to the
capital adequacy of banks. They are:
1. The relevance of total economic collapse.
2. The weight to be given the quality of management.
3. The role of capital notes and debentures.
4. The role of bank capital in bank holding companies.
5. The usefulness of capital ratios as measures of
capital adequacy.
Each of these topics will be discussed in turn.
The first problem that must be faced in any discussion
of capital adequacy is composing a list of contingencies
threatening bank capital. At the forefront of that problem
is the question of whether the list should include total
economic collapse.
Perhaps the principal element that may distinguish the
answer to that question today from the answer that may
have been appropriate 40 years ago is the changing role
of national economic policies. Most economic authorities
are in agreement that our knowledge of appropriate
counter-cyclical fiscal and monetary policies is vastly
superior to that available to our policymakers in the early
1930's. From that, one reasonably may assume that an
economic debacle of the magnitude of the Great Depression of the early 1930's is avoidable.
What does that mean for the banker and the bank regulator in connection with capital adequacy? We think it is
defensible for both bank regulators and bankers to assume that fiscal and monetary policies will allow the prevention of large-scale economic crises. We are well
aware, however, that cyclical movements have not been
abolished, and that periodic recessions of more limited
amplitude are to be expected. Those swings can bring
significant pressures to bear upon banks, as has been
evident in the last 2 years.
The second issue to be considered is whether the
quality of management should influence determinations
of capital adequacy. Some views from outside and inside banking suggest that management quality has not
been given its due.
For example, a major study completed a few years ago
by Professors Robinson and Pettway suggested that
bank examiners". . . should take their eyes off bank capital and focus on the quality of bank management." The
authors continue:
An analogy will help at this point: examiners do not
try to specify the elements of a liquidity policy to a
bank but they rightly criticize a bank if it does not
have a clearly articulated liquidity policy. By the
same token, why should examiners try to establish
capital standards (which by their nature can't be
specified)? Shouldn't their efforts and energy be directed to the problem of making sure that bank
managements have clearly articulated capital
policies and that they are implemented by managers of as high skill and training as possible?
Mr. George Vojta, in a recent monograph, after
examining the body of research dealing with the relationship between bank capital and bank failures, concludes that". . . the important causal factors relating to
solvency are competence and integrity of management."
The Comptroller's Manual contained a section dealing
with capital adequacy until the 1971 revision, when the
section was deleted. It opened with the statement that
the Comptroller of the Currency will not hereafter
rely on the ratios of capital to risk assets and to total
deposits in assessing the adequacy of capital of national banking associations.
The section also included the well-known set of eight
factors to ". . . be considered by the Comptroller in assessing the adequacy of capital." The very first factor
listed was "the quality of management." The other seven
were:
• The liquidity of assets.
• The history of earnings and of the retention
thereof.
• The quality and character of ownership.
• The burden of meeting occupancy expenses.
• The potential volatility of deposit structure.
• The quality of operating procedures.
• The bank's capacity to meet present and future
financial needs of its trade area, considering the
competition it faces.
Although that list is not contained in the current edition
of the Manual, the factors have not been disowned by
this Office. Indeed, to some degree that set of factors has
come to epitomize the non-ratio approach with which the
Comptroller has been identified during the past decade.
Subjective factors and good judgment with respect
thereto, thus, play a far more important role in our assessment of capital adequacy than the use of objective
capital ratios, which have never proven reliable. This Office has placed a great deal of emphasis on two key factors, the quality of management and the quality of earnings, in assessing the capital adequacy of individual
banks. Banks cannot survive without either for very long
and the two factors are usually inseparable.
While a premium has been placed on management
capability and earnings capacity in assessing capital
adequacy, asset quality and liquidity/liability management are given near equal emphasis, depending on individual bank circumstances. The point is that capital
adequacy can only be determined by a subjective
analysis of all factors affecting a bank's condition. Emphasis must be given to those factors affecting the
bank's performance and those will vary from bank to
bank and will also vary with prevailing market and
economic conditions, either locally, nationally or internationally.
The role of capital notes and debentures is a third controversial subject. The Office of the Comptroller of the
Currency in the early 1960's issued a ruling that encouraged national banks to resort, on appropriate occasions,
to the sale of debentures to supplement their capital
position. Until that ruling, senior capital, in the view of
many banks, was associated only with nearemergency situations at financially weak institutions.
Our Office has applied a rule of thumb that limits the
proportion of a national bank's total capital that can be
in debentures to one-third.
Some of the capital formulae applied by bank regulators discriminate against the use of debentures. For
example, one such ratio involves total equity capital plus
reserves on loans and securities, divided by the sum of
total liabilities plus total debentures less cash and cash
items. It is obvious that a bank with outstanding debentures is penalized in the application of that ratio as compared with a bank that has issued none.
203
In our Office, we believe there is a place for debt instruments in the capital structure of national banks. The
basic regulatory function of bank capital is to serve as
protection for depositors and those who assume their
risks. Subordinated notes and debentures extend substantial additional protection to bank depositors. Further,
some market situations would penalize bank stockholders greatly, were the regulatory authorities to insist
upon the sale of equity securities. Having the option of
selling subordinated notes yields valuable flexibility.
A subsidiary question, in connection with bank debt
capital, relates to the sale by one bank, usually a smaller
one, of its debentures to a larger bank. There are, we believe, reasons for holding such transactions to a
minimum. From the standpoint of the entire banking system, such transactions do not provide any net inflow of
capital. Were such transactions to proceed on a roundrobin basis throughout the system, it is evident that a
substantial watering down of capital requirements for the
system would have occurred. If the regulatory authorities
desire to reduce capital requirements for the system, it
may be preferable to take such action directly. We do
not, however, advocate abolition of this type of transaction. On occasion, in a particular situation, this course of
action can be beneficial to both banks involved.
There is also the fourth question of bank capital for
holding company banks. There appears to be fairly general agreement that a bank and its capital position must
be protected, whether or not it is a holding company
subsidiary. Certainly, from the standpoint of a primary
bank regulator, the relationship of a regulated bank with
a parent bank holding company and its associated
non-bank affiliates, should be a source of positive
strength for the bank. Our Office will oppose any affiliation for a national bank when that affiliation would tend to
threaten the soundness of the bank.
The fifth and final issue mentioned above relates to the
usefulness of capital ratios as measurements of capital
adequacy. In fact, somewhat more broadly, the question
really is: How may the adequacy of capital be measured?
A variety of capital ratios are used by all bank
examiners as initial screening devices in their attempt to
determine whether an institution under examination is
adequately capitalized. The loans-to-capital ratio, the
capital-to-total assets ratio, the capital-to-total deposits
ratio, those and others are among the more popular
measures.
As to the norms or "acceptable" levels for those
ratios, it is undoubtedly true that the current average
figures tend to become a sort of standard. There has
been a decline in capital ratios over the past 60 years,
and that drop illustrates that we tend to look at the
concept of capital adequacy in relative rather than absolute terms.
In using ratios, one is often tempted to adopt
"minimum" values for regulatory purposes. When that
is done, there is a natural tendency on the part of bankers, hard pressed as they are to maintain a favorable
rate of return on capital, to allow their institutions to
slide gradually to the minimum acceptable levels. The
choice of any minimum which lies below the ratios of a
significant number of banks would tend, in and of it204
self, to exert downward pressure on the aggregate
capital ratios of the system.
We believe that no strict formulation can substitute
for the factor of human judgment in determining capital
adequacy. Obviously, were that not so, the world
would be an easier place for bank regulators. Were
mechanistic judgments to be finally determinative, one
perhaps could appoint the latest generation computer
as regulator.
Evaluation of Bank Asset Liquidity
The liquidity of a bank refers to the volume of cash and
other assets, readily convertible into cash, which provide its capacity promptly to meet demands for payment of its obligations. Banks tend to hold their cash
and balances with other banks at a minimum since
those are nonearning assets. Accordingly, most banks
rely upon a special liquidity account consisting of
short-term, readily marketable high grade assets which
can be quickly converted into cash at any time to meet
loan and deposit fluctuations. Banks are not restricted
to the asset side of the balance sheet in meeting their
liquidity needs, for they can also borrow money, purchase federal funds, and attract time certificates of
deposit in order to gain needed liquidity.
This Office computes liquidity for each bank on a
separate form attached as part of each examination
report. Simply stated, on that form liquidity is measured by determining the percentage of a bank's
liabilities held in the form of cash or assets readily
convertible into cash. In general we prefer to see
liquidity ratios in the range of 15 to 20 percent or more.
A secondary liquidity position also is computed by giving consideration to the liquidity inherent in other assets listed as memoranda accounts. Those
memoranda accounts include loans to U.S. government securities dealers, eligible bankers' acceptances, other loans eligible for discount at the Federal
Reserve, commercial paper, and other securities with
maturities of over 2 years.
After those computations, the examiner evaluates
the adequacy of the bank's liquidity position in relation
to the bank's demand for liquid assets to meet loan
commitments and other contractual obligations, and
the composition and volatility of its deposit structure.
Consideration is also given to the quality of the bank's
loan portfolio and the cash throw-off it provides as
loans are reduced and paid.
For larger banks which are heavily engaged in
money market operations, a more sophisticated approach is used in determining the adequacy of
liquidity/liability management. One has to approach
such banks with an overview of their market positions
and the diversification, quality and stability of their
funds sources. In addition an analysis must be made
of the bank's liability management. Money market purchased funds (negotiable CD's, Eurodollars, federal
funds, etc.) are extremely interest sensitive and must
be properly matched as to maturity and rate with interest sensitive assets to provide the bank with a profitable interest spread and a means to meet current demands placed upon it.
Those funds are also extremely "confidence" sensi-
tive and are subject to the vagaries and whims of the
financial money markets. Individual banks with a marginal access to money market funds or an uncertain
status in the markets due to adverse financial trends
can be extremely vulnerable to a liquidity crisis when
the confidence of large individual or institutional depositors or lenders diminishes with respect to the
bank.
The psychology of the market place is especially
important to banks during adverse economic times.
For example, the combinations of steadily rising interest rates, tight money conditions, a prolonged
economic recession and a few bank failures, both here
and abroad, in 1974 created problems for some regional and money market banks which were highly
dependent on purchased funds. Some tiering developed in the money market and the very largest banks
with excellent national and international reputations
and several well-managed regional banks were the direct beneficiaries. Other regional and smaller money
center banks were often denied some funds or were
forced to pay a high premium for their funds.
Thus, a bank's position in the money market, its staying power, its liability management techniques and its
reputation are key factors which must be objectively
and subjectively analyzed to determine the adequacy
of liquidity in money center banks.
Question 2: Ratio Analysis
As stated in the second part of this testimony, banks to
be selected for special attention are of two types:
Banks which, in the examiner's judgment show any
condition which could lead to insolvency and banks
selected from those whose criticized assets equal 65
percent or more of adjusted capital funds. Further
analysis of those banks, based upon the factors listed
in response to Question 1, is made to determine which
banks truly are deserving of special attention.
Question 3: Categories of Banks
The evolution of bank examinations and supervision as
practiced by my Office has been extensively described in the first part of this statement. That should
be considered my answer to this question.
Question 4: Procedures for Abating Unsound
Conditions
Once significant problems of a national bank have been
identified through the examination process, the
examiner begins the supervisory action process by
commenting in the report of examination on important
matters requiring attention of the Comptroller, the board
of directors and the active executive management. The
examiner's comments are supplemented by a letter from
the regional administrator which highlights the bank's
problems and requests the board of directors and
executive management to institute appropriate corrective measures. Depending on the circumstances and
severity of problems, the bank's executive management
may be requested to submit monthly reports regarding
progress it has made toward improving unsatisfactory
areas of the bank. In addition, frequent visitations and
examinations may be conducted.
When an examination or special visitation of a national
bank discloses a condition so unsatisfactory as to warrant that the board of directors should be promptly and
personally informed, a special meeting with the board is
called by the examiner or his regional administrator.
Special representatives of the Comptroller's Office may
attend the meeting depending on the circumstances
and severity of the problem. The objectives of meeting
with a board of directors are to discuss the conditions
and affairs of the bank that were observed during the
most recent examination, to reach an agreement on any
significant problems in the bank, to obtain a definitive
commitment from the board, to institute the proper corrective actions, and to obtain information concerning future plans and proposed changes in bank policy that
may have a significant impact on the future condition of
the bank.
Bank supervision provided at the regional level is
coordinated with the Washington staff which provides
additional legal assistance, coordination with other regulatory agencies, attendance at board meetings, analytical support, and follow-up review. Where the facts indicate a serious problem, a possible violation of law, or
unsafe and unsound practices, we may call upon the
Enforcement and Compliance Division of our Law Department. That assistance may consist of the attendance
of an attorney from the Enforcement and Compliance Division at a board of directors' meeting to discuss with the
bank the problems and the suggested corrective action.
In other cases it may require the investigation by the Enforcement and Compliance Division of a cease and desist proceeding or the certification to the Federal Reserve Board for removal of an official or the making of a
criminal referral to the Department of Justice. In the latter
two situations, the investigation must disclose that the
particular activities of an individual constitute evidence
of personal dishonesty.
In addition, the bank must obtain the approval of this
Office for various corporate changes, such as the opening of a new branch, dividend restrictions, investments in
premises and other approvals. That approval may be
withheld until this Office is satisfied that the bank will
adopt the recommendations.
In the abnormal case where it is determined by this Office that stronger enforcement action should be taken to
ensure that a bank is functioning in a safe and sound
manner and within the law, the Comptroller has a range
of administrative remedies to deal with the situation. In
determining the appropriate remedy for a particular
bank, the Comptroller, together with the Deputy Comptrollers, regional administrators, examiners and the
Law Department, must determine which type of action
will be the best rehabilitative remedy to assist the bank.
Where the facts indicate that there are serious problems or that there are repeated violations of law or unsafe
and unsound practices, this Office may use the power
given under the Financial Institutions Supervisory Act of
1966 to begin cease and desist proceedings. Cease and
desisi proceedings are rehabilitative, intermediate
tools which allow this Office to force a bank to work out
its problems without resorting to the more drastic
205
As noted in the earlier portions of this statement, we
endorse a proposal, S. 2304, which would correct
some of the problems with the FISA and grant the regulatory agencies the powers they originally requested
when the FISA was conceived in 1966. Among the
amendments we seek is a change from a standard for
removal of an officer or director of "personal dishonesty" to a standard of gross negligence or willful misconduct. That change alone would be helpful in preventing the development of many new problem bank
situations for it will allow for the removal of bad management at an earlier stage. Other provisions included
in S. 2304 will simplify the administrative procedures in
a removal case and end the unnecessary administrative delays now present in the system.
measures of receivership, conservatorship, termination
of insurance, forfeiture of charter, or forced merger.
Our experience has indicated that the threat of a
cease and desist proceeding enables this Office to
handle the majority of bank problems through the less
formal techniques of persuasion, frequent examinations and meetings with directors.
Question 5: Updating of Previously Furnished
Information
The Chairman's letters of January 14 and January 20,
1976, included a request for information on banks in
composite categories 3 and 4, including a statement of
their assets and deposits from call reports for the years
1971 through 1975. That information is included in
Table A.
Question 7: Exchange of Examination Reports
and Other Data
Question 6: Cease and Desist Proceedings
Over the past several years this Office has resorted to
the use of formal cease and desist proceedings under
the Financial Institutions Supervisory Act of 1966, 12
USC 1818 as set forth below:
Year
1971
1972
1973
1974
1975
This Office routinely provides a copy to the FDIC of all reports of examination of national banks which carry an
OCC composite rating of 3 or 4. In addition, the
Washington Office of the FDIC has checkout privileges
with our Central Records Section and may request a
copy of the examination report or other data on any national bank. The Board of Governors of the Federal Reserve System, in Washington, is granted the same access to examination reports and other data relating to national banks.
Each of our 14 regional offices has an arrangement with the Federal Reserve District Bank of jurisdiction to provide to that bank, a copy of every report of
examination of national banks. Moreover, the regional offices of the OCC freely exchange information on banks
and bank holding companies with the Federal Reserve
District Banks where there is a mutual interest to be
served in the regulation and supervision of the nation's
banking system.
Number of Cease and Desist
Proceedings
3
6 (one involving several ban
10
19
23
Because none of the cases matured into litigation, no
summary of court action is available. Summaries of the
individual orders appear [at the end of] this statement.
While the Financial Institutions Supervisory Act has
become increasingly useful as a regulatory tool, we hasten to point out that it has several serious deficiencies.
Table Ai
National Banks Rated 3 and 4*
(Dollars in millions)
Date of
list
12/70
6/71
12/71
6/72
12/72
6/73
12/73
6/74
12/74
6/75
12/75
Total
number of
national
banks
Total
assets of
national
banks
Total
deposits of
national
banks
4,348 $323,359 $269,690
4,366 354,327 299,254
4,385
373,870 315,212
4,417 398,278 333,843
4,449 425,550 354,442
4,495 466,265 388,516
4,546 497,583 410,471
4,612
545,290 444,084
4,659 579,715 469,181
4,703
599,803 489,624
4,709 600,860 490,594
104
112
101
105
61
56
71
110
169
251
251
Assets
Percent of all national banks
Deposits Number
Assets
Deposits
$2,685
$3,058
5,002
4,311
13,084
10,990
13,558
11,399
9,107
10,693
9,472
11,601
13,742
10,735
97,397
119,603
225,164 180,916
249,725 201,919
249,747 201,917
2.4
2.6
2.3
2.4
1.4
1.2
1.6
2.4
3.6
5.3
5.3
NOTE: Dashes indicate amounts less than .05 percent.
*A reconstruction based on examination reports of banks still in existence.
206
Group 4
Group 3
Number
of banks
.9
1.4
3.5
34
2.5
2.5
2.8
21.9
38.8
41.6
41.6
1.0
1.4
3.5
3.4
2.6
2.4
2.6
21.9
38.6
41.2
41.2
Number
of banks
8
8
8
5
6
8
8
11
17
25
24
Assets
Percent of all nat ional bank
Deposits Number Assets Deposits
$211
328
121
93
81
131
144
225
2,37.6
3,527 .
3,487
$193
294
109
83
73
116
131
202
1,779
2,901
2,866
.2
.2
.2
.1
.1
.2
.2
.2
.4
.5
.5
.1
.1
—
—
—
—
—
—
.4
.6
.6
.1
.1
—
—
—
—
—
—
.4
.6
.6
This Office and the Federal Reserve System have an
established communications procedure, both between
the respective Washington offices and the regional offices of each agency, whereby we provide prompt notification to the Federal Reserve System whenever our
examination of a subsidiary bank of a bank holding company reveals that the condition of that bank is deteriorating significantly or that it is in a generally unsatisfactory
condition. Similarly we give the Federal Reserve System
periodic progress reports, either verbal or written, during
an examination, and subsequent to it, for such banks.
The Federal Reserve System, in turn, provides this Office with reports of examination of bank holding companies which have national banks as subsidiaries. The
Federal Reserve also promptly informs the OCC
whenever it has information that a holding company's
condition or actions could have an adverse effect upon a
subsidiary national bank.
Similar formal and informal communications procedures exist between the OCC and the regional and
Washington offices of the FDIC. That communication
network is further augmented by my direct participation
as one of the three directors of the FDIC and through the
liaison staff of this Office at the FDIC.
All three federal banking agencies work in close concert, especially when it becomes apparent that the nature and volume of weaknesses and the trends of a particular bank are such that correction is urgently needed.
For example, at the early stages of a problem involving a
bank holding company, the agencies have often con-
ducted a simultaneous examination of the holding company and its affiliates. The follow-up procedure has been
to monitor the entire system under the control of the affected holding company and to impose and enforce a
coordinated corrective program on the particular
problem affiliates within the holding company system.
In addition to the above-descibed arrangements and
practices existing between the bank regulatory agencies, all three agencies participate in regular meeings of
the Interagency Coordinating Committee; in meetings
designed to coordinate and standardize examination
procedures; and in frequent meetings to develop common reporting requirements, including call report and
income and expense items to be disclosed by all commercial banks.
Queston 8: Aggregate Data and Ratios for
Three Classes of Banks
The Committee has requested certain statistical information for banks over $5 billion in assets, banks having $1
billion to $5 billion in assets and banks with less than $1
billion in assets. The data appear in the tabular material
that follows.
Table I compares aggregate classified loans to gross
capital funds and total assets for 1972 -1975 for national
banks with assets exceeding $5 billion dollars; Table II
compares the same information for national banks with
assets of $1 to $5 billion. For the largest national banks
(Table I) classified assets have risen as a percentage of
Table I
Aggregate Classified Assets, National Banks with Assets over $5 Billion, 1972 - 1975
(Dollars in millions)
Year
Number
of banks
Total
assets
Gross
capital funds
(GCF)
1972
1973
1974
1975
11
11
12
12
$151,597
186,510
233,394
248,173
$10,170
11,026
12,351
13,245
Substandard
assets
Substandard
as a percent
of total
classified
assets
Doubtful
assets
Doubtful
as a percent
of total
classified
assets
$2,459
2,611
5,479
9,840
76
74
77
73
$ 602
753
1,317
3,224
19
21
19
24
Loss
assets
$159
193
314
439
Loss as a
percent
of total
classified
assets
5
5
4
3
Total
classified
assets
$ 3,220
3,557
7,110
13,503
Total
classified
assets /GCF
(Percent)
Total
classified
assets 1
Total assets
(Percent)
31.7
32.3
57.6
101.9
2.1
1.9
3.0
5.5
Source: U.S. Comptroller of the Currency examination reports for years indicated.
Table II
Aggregate Classified Assets, National Banks with Assets of $1 to 5 Billion, 1972 - 1975
(Dollars in millions)
Year
Number
of banks
Total
assets
1972
1973
1974
1975
48
49
60
58
$81,887
94,312
117,649
115,398
Gross
capital funds Substandard
assets
(GCF)
$6,227
6,800
8,313
8,675
$1,009
1,010
2,321
3,577
Substandard
as a percent
of total
classified
assets
Doubtful
assets
75
$257
79
82
82
186
344
624
Doubtful
as a percent
of total
classified
assets
19
15
12
14
LOSS as a
Loss
assets
$
74
78
163
167
percent
of total
classified
assets
6
6
6
4
Total
classified
assets
Total
classified
assets IGCF
(Percent)
$1,340
1,274
2,828
4,368
21.5
18.7
34.0
50.4
lotai
classified
assets 1
Total assets
(Percent)
1.6
1.4
2.4
3.8
Source: U.S. Comptroller of the Currency examination reports for the years indicated.
207
gross capita! funds in each of the last 4 years. Most of
that increase occurred in 1974 and 1975 and reflects, to
a great degree, the adverse economic conditions existing in those years.
Table IV
Equity Capital to Total Assets, National Banks,
1970- 1975, by Size of Bank
(Percent)
T a b l e III
Banks with Assets of—
Aggregate and Average Classified Assets,
National Banks with Assets Under $1 Billion,
1970- 1975
(Dollars in millions)
Aggregate
Year
assets
Average
classified
assets
1970
1971
1972
1973
1974
1975*
$1,495
1,625
1,673
1,918
2,695
4,112
$ .333
.351
.361
.414
.581
.887
classified
Classified
assets /Gross
capital funds
(percent)
12.17
12.09
11.16
11.29
15.78
20.87
Source: U.S. Comptroller of the Currency examination reports for years
indicated.
NOTE: The EDP data base does not carry individual totals for substandard, doubtful and loss. Therefore, such information could not be furnished. Based on 4,635 national banks.
* Through September.
To put classified assets into perspective, it is important
to look at their composition.
For the 12 largest national banks, in 1975, substandard classifications accounted for 73 percent of total
classified assets, doubtful classifications for 24 percent
and loss for only 3 percent. Substandard assets are considered by examiners to have only a minimal or, in most
cases, no potential for loss. Historically, for analytical
purposes, we have assumed that approximately 50 percent of the doubtful classifications will translate into loss.
Today, one cannot generalize on this translation;
analysis on a case-by-case basis is necessary. A significant volume of loans classified doubtful in the banking industry today have underlying collateral of considerable value. With even nominal improvement in
economic conditions, that value will be realized, resulting in little if any loss to the banks. For example, of the
$3,224 million in assets classified doubtful in 1975 for the
12 largest national banks, $1,526 million or 47 percent
was centered in loans to real estate investment trusts
(REIT's). Another $2,030 million, 21 percent of all substandard, in REIT loans was classified substandard.
The examiners for the most part classified those REIT
loans in their full amount, despite the underlying value
of the properties held by the REIT's. No one, especially
a bank examiner anticipates that those 12 banks will
incur losses on their REIT loans at anywhere near the
booked amount. In fact, a recent study by Drexel Burnham & Company indicated that the potential loss on
loans to the most troubled REIT's is likely to be about
208
Year
$5 billion
and over
$1 to 5
billion
Under $1
billion
1970
1971
1972
1973
1974
1975
5.44
5.23
4.84
4.24
3.87
4.29
6.53
6.18
5.67
5.26
5.37
N.A.
7.15
6.91
6.67
6.68
6.90
N.A.
12
63
4,636
Number of banks
Source: U.S. Comptroller of the Currency year-end call reports of national banks.
N.A. - Information not available.
25 percent over time. Some industry experts expect an
even smaller percentage to translate to loss.
Even more perspective^ gained on classified assets
if the aggregates are compared to total assets. For the 12
largest national banks in 1975, substandard classifications accounted for 4 percent of their total assets, doubtful classifications for only 1.3 percent of total assets, and
estimated losses for a mere 0.2 percent of total assets.
To understand fully the trends in banking during the
last few years, particularly with respect to the rise in classified assets, one has to reflect on the state of the
economy and the condition of the capital markets during
the same period. Banks, after all, mirror the economic
conditions affecting the industries to which they lend and
the banking system in any country is only as good as the
economy in which it functions.
Table V
Equity Capital to Deposits, National Banks,
1970- 1975, by Size of Bank
(Percent)
Banks with Assets of—
Year
$5 billion
and over
$1 to 5
billion
Under $1
billion
1970
1971
1972
1973
1974
1975
6.44
6.21
5.85
5.18
4.69
5.21
7.92
7.59
7.01
6.78
6.94
N.A.
8.17
7.92
7.63
111
8.08
N.A.
12
63
Number of banks
4,636
Source: U.S. Comptroller of the Currency year-end call reports of national banks.
N.A. - Information not available.
Table VI
Debt Capital to Total Capital, National Banks,
1970- 1975, by Size of Bank
(Percent)
Year
$5 billion
and over
Banks with Assets of—
$1 to 5
billion
Under $1
billion
1970
1971
1972
1973
1974
1975
5.04
5.33
6.73
5.25
5.50
5.15
8.01
8.69
11.24
11.15
10.62
N.A.
2.58
3.35
4.67
5.18
5.02
N.A.
12
63
4,636
Number of banks
Source: U.S. Comptroller of the Currency year-end call reports of national banks.
N.A. - Information not available.
Despite the adverse economic conditions of the past
few months, the commercial banking system has continued to meet its responsibilities in assisting the functioning of our economy. Banks have carried individuals,
businesses and local and state governments through
what has been described as the worst recession since
the 1930's. This was done at no small cost to the banking
system and a hangover of substandard assets still remains. Yet, the banking system has come through the
unstable economic conditions of the last few years and
has emerged strong and well-positioned for the recovery
ahead. (Tables III through VI appear in somewhat different format than that in which they were presented to
Congress. That was done to facilitate printing.)
Question 9: Examination and Regulation of
Holding Companies
Although this Office is authorized to examine bank holding companies and their nonbanking subsidiaries which
are affiliated with national banks, this Office does not
regulate them. Since the regulatory and enforcement actions against holding companies under present law are
within the jurisdiction of the Federal Reserve Board, a
more detailed response to this question more properly is
left to that agency.
The separate corporate existence of nonbank affiliates
provides, within limits, a separation between the bank
and these affiliates. However, cases in recent years,
such as that of Beverly Hills National Bank, appear to
demonstrate that difficulties of nonbank subsidiaries
within a holding company can redound to the detriment
of a bank.
Recognizing this principle of nonseverability, this Office has undertaken full examination of bank holding
companies and their nonbanking subsidiaries in conjunction with the examination of subsidiary national
banks when there has been a.need for information on
the bank holding companies and their inter-company
transactions. Such examinations are usually con
ducted to determine whether such relationships are
detrimental to the safety and soundness of the bank.
In recent years this Office has promoted the idea that
bank regulators should look beyond the bank to include
the entire corporate family as an entity. Such an
expanded view is consistent with the plans of this Office
to broaden surveillance of all affiliates of national banks.
As of December 2, 1974, I have requested that every
national bank which is a subsidiary of a bank holding
company which files annual reports or Form 10-K with
the Securities and Exchange Commission maintain one
copy of the most recent such annual report at the main
office of the bank for review by national bank examiners.
In most cases, the reporting requirements just described, together with information derived from affiliate
examination reports of this Office and those of the Federal Reserve System, provide a sufficient data base to
keep the Office fully apprised of the possible problems
of bank holding company affiliates which would have a
detrimental effect on the holding company and its banks.
While improved reporting requirements and the authority under 12 USC 481 to examine entities affiliated
with any national bank have kept this Office reasonably
abreast of the activities and financial conditions of most
affiliates of national banks, some gaps remain in our ability to properly supervise and regulate holding company
national banks. We believe our Office should have the
authority to examine any affiliate of a national bank.
An additional change which we recommend is to unify
supervisory and examination authority over holding
companies and their affiliates according to the preponderance of banking assets within the holding company.
Under our proposal, national one-bank holding companies and multi-bank holding companies with a preponderance of their assets held in national banks would
be examined and supervised by the Comptroller of the
Currency. State one-bank holding companies and
multi-bank holding companies with a preponderance of
state bank assets would be examined and supervised by
the Federal Reserve. Regulations, as opposed to supervision, would still be the prerogative of the Federal Reserve. In this way, the pattern of enforcement and supervision according to the type of charter under uniform
regulations prescribed by the Federal Reserve will be
preserved and strengthened.
Question 10: Foreign Branch Examinations
During every examination of a national bank, the activities of all of its foreign branches are also examined.
Multi-national banks place loans or portions of loans in
their various foreign and domestic offices for funding,
customer convenience, and other reasons. When the
principal domestic office of a national bank is examined,
the loans of that bank's foreign offices are normally
examined as of the same date. When an examiner determines, for example, that he can review 70 to 80 percent of a bank's loans by reviewing the credit files of all
loans of $50 million or more, he applies the same criteria
to loans carried in foreign branches.
It is obviously impossible to place bank examiners in a
large number of foreign or domestic offices on the same
date. Therefore, the policies and practices of this Office have required national banks to maintain duplicate
209
credit files and other information necessary to conduct
an examination of the activities of foreign branches in the
bank's principal domestic office or in readily accessible
foreign offices. To assure the continuance of that policy
during the period when the number of national banks
with foreign branches was increasing, this Office issued
an examining circular on March 18, 1970. That circular
stated:
Each national bank will be expected to maintain or to
readily obtain from its foreign branches and affiliates such information as shall be necessary to
disclose their condition to National Bank Examiners
and to the bank's directors.
The information which will normally be expected will
pertain to a substantial majority of the branches' or
affiliates' assets. Generally, the names, amounts,
and credit data pertaining to all investments and to
70 percent or 80 percent of all extensions of credit
will be required. It will be incumbent on the bank to
obtain such customers' waivers as it may deem
necessary to comply with these requirements.
On June 28, 1971, that examining circular was
supplemented to permit national banks to maintain the
necessary data in foreign regional offices providing:
the foreign regional office is located in a country
where all conditions readily permit examinations by
national bank examiners.
On June 7, 1973, the Board of Governors of the Federal
Reserve System published an interpretation on Part 213
of Title 12 which requires all member banks to follow essentially the same procedures as stated above.
During the years of the Voluntary Foreign Credit Restraint Program, London, England, developed as the
world's leading international financing center. It also became a center for foreign branches and affiliates of national banks engaged in lending, money market and
foreign exchange activities. Located at the top of the
time zones covering all of Europe, the Middle East, and
Africa, it was a favored location for the administrative offices of national banks covering their branches and affiliates in that geographic area. Those activities required
the placement of examiners in London on a permanent
basis to supervise the foreign exchange and money
market activities of the London branches of national
banks and to examine the regional office records of other
branches and affiliates located throughout Europe, the
Middle East and Africa. Permission to establish a national bank examiners's office in the American Embassy
in London was requested in 1971 and permission was
granted and the office was established in 1972. The six
national bank examiners headquartered in London
primarily review the foreign exchange and operational
activities of the London branches of 23 national banks.
The examiner hour requirements necessary for the review and evaluation of loans and other assets carried on
the books of London branches is still carried by
examiners located in the United States. However, the review of such assets at the London regional offices of a
few national banks is covered by the London examiners
with the assistance of examiners from the United States
for temporary intervals.
210
While an asset evaluation of a worldwide network of
branches of a single national bank can most efficiently
be conducted from a few regional centers as of a single
common date, the operational aspects can best
be examined on site. These on-site operational
examinations are conducted not on a bank-by-bank
basis, but on a country-by-country basis. During these
personal visits to foreign branches by national bank
examiners, all of the branches of all national banks in
selected foreign cities are examined during a single visit
to the particular country. In cases where national bank
examiners, as U.S. government employees, are prevented from entering a foreign country for reasons of
legal safety or cost, the examiners will review the adequacy of operational audits made by independent auditors or by the bank's own internal auditors.
The following chart shows the number of overseas
foreign branch examinations conducted during each of
the past 5 years. The numbers do not include on-site
overseas examinations of affiliates and regional centers.
Year
1975
1974
1973
1972
1971
Total
branches
660
649
621
566
528
Branches
examined
on site
80
137
92
72
59
Percentage
examined
on site
12.1
21.1
14.8
12.7
11.2
The decline in number of on-site examinations from
1974 to 1975 is primarily attributable to an increased
emphasis on examination through regional credit centers of Bank of America and Chase Manhattan. The regional credit centers of those two banks were responsible for 111 branches in 1975.
Question 11: Foreign Loans
The [following] chart shows the information on the
foreign loan activities of the 20 largest national banks
for the past 5 years. The chart includes information for
each year on the volume of international loans, the volume of classified international loans and the volume of
classified loans to foreign governments.
This Office does not currently maintain records
which show the name of each foreign government receiving a loan from a national bank or the purpose of
each loan to a foreign government. A foreign government loan is identified to this Office by name and purpose only when an examiner determines that it should
be classified.
Five-Year Foreign Loan Experience
of the 20 Largest National Banks
(Dollar amounts in millions)
Classified
Total
International
Loans to
International Classified
Foreign
Year
Loans
Loans
Governments
1975
1974
1973
1972
1971
$52,438
45,665
31,263
22,198
19,529
$2,322
1,360
608
401
458
$206
54
32
121
23
Information on classified loans is not available for all
banks in this group for 1971-1973. Information on classified loans to foreign governments includes information from 15 banks in 1971, 15 banks in 1972 and 13
banks in 1973. Information on all international classified loans reflects information from 19 banks for
1971, 16 banks for 1972 and 19 banks for 1973. In addition, for the year 1971, 19 banks' figures are reported
in computing total international loans, as one bank now
in the top 20 was not a national bank in that year. The
figures for 1974 and 1975 represent totals for all international loans by these banks. For 1971-1973, figures
are for only those international loans booked at foreign
branches.
The basis for all years is the 20 largest national
banks as of December 31, 1974.
Proceedings Brought by the Comptroller Pursuant to the
Cease and Desist Provisions of the Financial Institutions
Supervisory Act of 1966, 12 USC 1818 (b),
1971-1975
1971
1. An Agreement to eliminate self-dealing and selfserving transactions by directors, officers or
shareholders of more than 2 percent of the outstanding shares of the bank. Limitations on the
trade area and management contracts to be made
by the bank.
2. An Agreement to eliminate unreasonable employment contracts of insiders and eliminate insider
dealings. The bank also was to improve the credit
quality of its loan portfolio and take steps to eliminate general criticized problems, unsafe and unsound practices and violations of law.
3. An Agreement to eliminate extensions of credit to
unqualified borrowers, self-dealing by insiders and
self-serving management contracts. Also provisions to improve the credit quality of the loan
portfolio and to take steps to eliminate general
criticized problems, unsafe and unsound practices and violations of law.
collection efforts of the bank. Termination of
employment of the bank's president because of
self-dealing and illegal practices.
8. A Notice of Charges and Permanent Order to
Cease and Desist to strengthen management
through eliminating the problems of an unsafe and
unsound nature such as excessive classified assets, overdrafts, collateral imperfections, and the
elimination of concentrations of credit. Provisions
to directthe strengthening of the bank's liquidity and
capital. Provisions to cause an outside audit and an
effective loan policy. Provisions to eliminate a
number of unsafe and unsound practices, as well as
violations of law, including 12 USC 84.
9. An Agreement to prohibit the extensions of credit
to insiders and to eliminate self-dealing by major
shareholders. Provisions eliminating the extensions of credit to these insiders and a reduction in excessive compensation of the insiders.
1972
4. A Notice of Charges and Permanent Order to
Cease and Desist to eliminate extensions of credit
to insiders and self-dealing transactions. Provisions to eliminate overdrafts and increase the
documentation for loans. Elimination of further
extensions of credit on classified loans and the
elimination of an unsafe and unsound correspondent account relationship. Also elimination of violations of 12 USC 84, 375a and various unsafe and
unsound practices.
5. An Agreement to eliminate loans in violation of 12
USC 84 and the indemnification of the bank for
losses.
6. An Agreement with several banks rectifying problems in employee benefit trusts and eliminating
self-serving employment and management contracts which were entered into on behalf of the
bank for a controlling owner of the banks. Elimination of a number of unsafe practices.
7. An Agreement to eliminate loans made in excess
of the lending limit and to update the loan portfolio
with credit information and strengthening in the
10. An Agreement to eliminate insider and self-dealing
and the illegal practice of nominee loans. The
elimination of excessive extensions of credit to affiliates and affiliated persons. Provisions to eliminate unsafe practices including the handling of
criticized loans and the modification of a selfdealing management contract.
11. A Notice of Charges and an Agreement to eliminate excessive directors' compensation and selfdealing by principal owners and directors of a
bank.
12. A Notice of Charges and an Order to Cease and
Desist to eliminate extensions of credit to affiliates
and substantial self-dealing transactions by a
principal officer and shareholder of the bank. The
appointment of a committee to eliminate the various violations of law and unsafe and unsound
banking practices including the collection of classified assets and elimination of contingent
liabilities, as well as provisions to help restore the
liquidity and establishing a loan and investment
policy. The removal of the principal officer and
1973
211
13.
14.
15.
16.
17.
18.
19.
controlling person from positions of authority in the
bank. Indemnification for losses on the selfdealing transactions.
An Agreement to eliminate various violations of
law, including 12 USC 84, and to prohibit general
unsafe and unsound banking practices. Procedures to effect collection of substantial criticized
assets and the obtaining of current and satisfactory credit information. Provisions to help restore
the capital position of the bank.
A Notice of Charges and a Permanent Order to
eliminate loans of a self-dealing nature to companies closely related to the controlling owner of
the bank and the elimination of any nominee loans.
The establishment of a committee and provisions
to correct unsafe and unsound banking practices
as well as violations of 12 USC 84, 371, 371c,
375a, 473 and the Truth-in-Lending statute (Regulation Z). Provisions requiring the indemnification
for loss on certain violations of law. Provisions to
help restore the capital and limitations on dividends.
An Agreement to eliminate insider and self-dealing
and illegal nominee loans. The elimination of
excessive extensions of credits for the benefit of
affiliates and affiliated persons. Provisions to
eliminate unsafe practices including the handling
of criticized loans, executive salaries and modifications of a self-dealing management contract.
A Notice of Charges and a Permanent Order to enforce an agreement previously entered for various
violations of law including 12 USC 84 and to prohibit general unsafe and unsound practices. Procedures to effect collection of substantial criticized
assets. Provisions to improve the capital and
liquidity positions of the bank.
An Agreement to eliminate self-dealing and selfserving loans made for the benefit of the controlling owner of the bank and to eliminate selfdealing loans to affiliates. Indemnification for
losses on the self-dealing loans.
An Agreement to eliminate abuses by the president and controlling shareholders. Provisions to effect collection of criticized assets and for the
elimination of violations of law, including 12 USC
375a.
A Notice of Charges and a Temporary Order to
Cease and Desist from unsafe and unsound practices. Provisions to eliminate loans or extensions of
credit to related companies or individuals and to
preclude the issuance of letters of credit, guarantees or endorsements to related companies or individuals. The elimination of breaches of fiduciary
relationships.
1974
20. An Agreement to establish internal controls and
eliminate management problems as well as to rectify violations of law, including 12 USC 1829b, 31
CFR 103, 12 CRF 217 and Regulations J and Q.
212
21. An Agreement to eliminate self-dealings by an official of the bank and to obtain his resignation. A limitation on loans to certain individuals. Provisions to
improve the credit quality of the loan portfolio and to
take steps to eliminate general criticized problems,
unsafe and unsound practices and violations of law,
including 12 USC 84.
22. An Agreement to establish internal controls and
eliminate management problems. Provisions to
improve the credit quality of the investment and
loan portfolio and to take steps to eliminate a
number of criticized problems, unsafe and unsound practices and violations of law, including 12
USC 84. Provisions for indemnification for losses.
23. An Agreement to eliminate management and
internal control problems. Provisions to upgrade
the credit quality and procedures for handling
loans. Provisions to eliminate unsafe and unsound
practices, criticized problems and violations of
law, including 12 USC 84 and 375a.
24. An Agreement to eliminate extensions of credit to
affiliates and to eliminate several problems in the
loan portfolio. Provisions to eliminate unsafe and
unsound practices and criticized problems.
25. An Agreement to improve the credit quality of the
loan portfolio and to take steps to eliminate various
criticized problems, unsafe and unsound banking
practices and violations of law, including 12 USC
84.
26. An Agreement eliminating various self-dealing
transactions and excessive concentrations of
credit. Provisions to eliminate specific management problems, unsafe and unsound banking
practices and violations of law, including 12 USC
84.
27. An Agreement to correct a number of unsafe and
unsound banking practices including violations of
12 USC 84, 375a and 24(7). Provisions to eliminate abuses by the controlling owner and a requirement to obtain a new active and capable
chief executive officer.
28. An Agreement to eliminate insider and self-dealing
extensions of credit to affiliates and controlling
persons. Provisions to eliminate unsafe practices
including the handling of criticized loans.
29. An Agreement to improve the credit quality of the
loan portfolio and to take steps to eliminate a
number of criticized problems, unsafe and unsound practices, and violations of law.
30. An Agreement to establish internal controls and
eliminate management problems. Provisions to
improve the credit quality of the investment and
loan portfolio and to take steps to eliminate a
number of criticized problems, unsafe and unsound practices and violations of law, including 12
USC 84, 82, 371c and 375a. Provisions for indemnification for losses.
31. A Notice of Charges and a Cease and Desist
Order requiring the bank to comply with a previously issued formal written agreement and particu-
32.
33.
34.
35.
36.
37.
38.
larly requiring the bank to eliminate violations of 12
USC 84, 375a and 24(7). The Order also required
the obtaining of a new and active chief executive
officer.
An Agreement to eliminate various violations of
law, including 12 USC 84 and to prohibit unsafe
and unsound banking practices. Procedures to effect collection of substantial criticized assets and
the obtaining of current and satisfactory credit information. Provisions to help restore the capital
position of the bank.
A Letter Agreement dealing with restrictions on the
loan portfolio and a concomitant reduction of the
dependency on volatile money. Limitations on
expansion and implementation of management
changes.
A Notice of Charges and an Order to Cease and
Desist from advertising and paying excessive
interest rates in violation of 12 CFR 217.
An Agreement to establish a management committee to direct corrective actions to improve the
credit quality of the loan and investment portfolio
and to take steps to eliminate criticized problems
including violations of law and unsafe and unsound practices.
An Agreement to eliminate violations of various
statutes including 12 USC 84 and establishment of
procedures of a safe and sound nature to eliminate excessive criticized assets and unjustified
loan participations from affiliate banks.
An Agreement to eliminate violations of various
statutes including 12 USC 84 and 375a, as well as
an indemnification agreement for certain loans
made in violation of law. The establishment of
policies for eliminating problem credits and
establishing guidelines for the bank's operations.
Provisions to insure that no nominee loans are
made for the benefit of companies or individuals
not primarily obligated on the loans. Provisions for
obtaining and employing the services of a new president and chief executive officer as well as a review
of executive salaries, dividends, and loans to directors.
An Agreement to eliminate transactions between
affiliated corporations and individuals.
1975
39. An Agreement to eliminate various unsafe and unsound banking practices including excessive
amounts of criticized assets and the establishment
of policies to eliminate unsafe practices. Elimination of violations of various statutes including 12
USC 84. Establishment of procedures to closely
evaluate transactions between the directors,
employees and their related interests.
40. An Agreement to take corrective action relating to
criticized assets. Establishment of procedures to
strengthen capital. Removal of bank personnel responsible for the problems in the bank.
41. An Agreement to eliminate various unsafe and un
42.
43.
44.
45.
46.
sound banking practices including concentrations
of credit as well as the elimination of violations of
law. The adoption of a new loan policy as well as
the hiring of additional lending officers.
An Agreement to eliminate self-dealing, insider
extensions of credit to affiliates and closely related
individuals. Various provisions to eliminate unsafe
and unsound practices and violations of law.
An Agreement to eliminate participation of loans
with affiliates and violations of various laws, rules
and regulations including 12 USC 84, 161 and
371c, and to eliminate unsafe and unsound banking practices.
A Notice of Charges and a Permanent Cease and
Desist Order for a failure to conform to an agreement which required compliance with various laws
including 12 USC 84, and inadequate and unsafe
practices requiring an independent audit, additional capital and a new chief executive officer.
An Agreement to eliminate various violations of law
including 12 USC 84 and to eliminate statutory
proscribed tying agreements in violation of 12
USC 1972. The agreement likewise required compliance with the Truth-in-Lending Act of 1968 (15
USC 1601; 12 CFR 226) and required disclosure
by the bank. Various violations of law also required
corrective action including 12 USC 371, 222 and
371c, as well as other unsafe and unsound banking practices.
An Agreement to eliminate self-dealing and insider
transactions and for the termination of certain officials of the bank responsible for extraordinary
extensions of credit to closely related individuals
and companies. Corrections of various violations
of law including 12 USC 84. Restrictions placed on
active officers of the bank.
47. An Agreement eliminating various violations of the
law including 12 USC 84 and procedures to eliminate various unsafe and unsound banking practices concerning the elimination of criticized assets and overdue loans. A policy to hire additional
lending officers and to insure that internal operations and control were instituted.
48. An Agreement between several banks and this Office eliminating loans and participations with affiliates and the elimination of unsafe and unsound
banking practices.
49. An Agreement to eliminate unsafe and unsound
banking practices and provisions to improve the
credit quality of the loan portfolio and to take steps
to eliminate criticized problems, unsafe and unsound banking practices and violations of law including 12 USC 84 and the Truth-in-Lending statute (Regulation Z).
50. A Notice of Charges, a Temporary Cease and Desist Order and a Permanent Order eliminating the
extensions of loans of a self-dealing nature and a
prohibition to preclude the purchase of loans for
the benefit of controlling persons or officials of the
bank. A provision to eliminate a potential misuse of
213
51.
52.
53.
54.
55.
56.
a correspondent account by the officials of the
bank for their own personal benefit.
An Agreement to eliminate internal controls and
management problems and a provision requiring
the hiring of a new executive officer. Provisions to
improve the credit quality of the loan portfolio and
to take steps to eliminate criticized problems, unsafe and unsound banking practices and violations of law including 12 USC 375a and 463.
An Agreement amending a previous agreement
dealing with loans to affiliates and subsidiaries in
violation of 12 USC 371c.
An Agreement to eliminate internal controls and
management problems. Provisions to improve the
credit quality of the investment and loan portfolio
and to take steps to eliminate criticized problems,
unsafe and unsound banking practices and violations of law including 12 USC 84, 371c and 1829b.
Provisions to improve the capital position of the
bank and the loan policies of the bank.
Provisions to preclude the assumptions of obligations incurred by affiliated companies or individuals and the elimination of concentrations of credit
to individuals or to industries.
A Notice of Charges and a Permanent Order to
establish internal controls and eliminate management problems with provisions to improve the
credit quality of the investment and loan portfolio
and to take steps to eliminate criticized problems,
unsafe and unsound banking practices and violations of law including 12 USC 371c, 72 and 375a
and 12 CFR 23. Procedures to eliminate selfdealing by officials of the bank.
Resolution Agreement to eliminate unsafe and unsound and self-dealing practices and relationships
with controlling owner. Limitations of loans to
specified insiders. Removal of officers and directors for unsafe and self-dealing practices.
Resolution Agreement to eliminate unsafe and unsound and self-dealing practices and relationships
with controlling owner. Limitations of loans to
specified insiders.
214
57. Resolution Agreements to eliminate unsafe and
unsound and self-dealing practices and relationships with controlling owner. Limitations of loans to
specified insiders.
58. An Agreement to establish internal controls and
eliminate management problems with provisions to
improve the credit quality of the investment and
loan portfolio and to take steps to eliminate
criticized problems, unsafe and unsound banking
practices and violations of law including 12 USC
84. Provisions to eliminate concentrations of credit
to single or closely-related borrowers.
59. An Agreement to establish internal controls and
eliminate management problems together with
provisions to improve the credit quality of the investment and loan portfolio and to take steps to
eliminate criticized problems, unsafe and unsound
banking practices and provisions to strengthen
the capital position of the bank. Provisions to
eliminate self-dealing transactions by officials of
the bank and to obtain new capable lending officers.
60. A Notice of Charges, Temporary Cease and Desist
Order and Permanent Order to eliminate management and internal control problems including
provisions to upgrade the credit quality and procedures for handling loans. Provisions to eliminate
unsafe and unsound banking practices, criticized
problems and violations of various statutes including 12 USC 84, 24(7) and 371a, 12 CFR 217 and
226 and 15 USC 1601. Limitations placed on the
trust department and a procedure to assist the
bank in obtaining additional capital. Also a provision for the bank to obtain a new capable executive officer. Provisions to eliminate self-dealing by
officials of the bank.
61. A Notice of Charges and a Permanent Order for a
breach of an Agreement entered into to eliminate
violations of 12 USC 84, Regulation Z (12 CFR
226) and the Truth-in-Lending Act (15 United
States Code 1601) as well as violations of provisions of the agreement and substantial management and internal control problems.
Statement of James E. Smith, Comptroller of the Currency, before the Senate
Committee on Banking, Housing and Urban Affairs, Washington, D.C., March 1,
1976
I appreciate this opportunity to give my views on S.
2298. This bill would restructure the federal bank regulatory system. Under the bill the bank regulatory functions of the Comptroller of the Currency, the Federal Reserve Board, and the Federal Deposit Insurance Corporation would be consolidated into a new Federal Bank
Commission.
Restructuring of the banking agencies should not be
undertaken now for at least three important reasons:
1. Substantive, not organizational, restructuring is
the first priority for improving bank supervision.
The disruption resulting from restructuring
would impede the necessary substantive improvements. Within our Office, we are particularly distressed at the inevitable disruption
which would occur in the implementation of the
extensive recommendations of the Haskins &
Sells report of 1975. At best, these implementation efforts would certainly be delayed. At
worst, the progress already made and that
planned for the next few months would be lost.
2. This Committee and the Senate have overwhelmingly passed the Financial Institutions Act. That
Act calls for far-reaching changes in the powers
and the operations of depository institutions.
Such major changes should, in my view, be digested and absorbed within the framework of a
reasonably stable regulatory system. The Hunt
Commission called for changes in both depository institutions' powers and regulatory structure.
The Administration, in drafting the FIA, weighed
the merits of the Hunt Commission recommendation, and came to a carefully considered decision that any proposals for regulatory structural
change should not be implemented until experience had been gained under the new ground
rules for operations of depository institutions. We
believe that that decision is still appropriate.
3. Temporary deferral would not harm the public
interest because, by any fair and impartial standard, the present system has worked reasonably
well. No objective observer could state that the
present system has functioned in a manner so
inconsistent with the public interest that it must
be eradicated and replaced immediately. This
Committee thus has time to undertake an indepth management study of the performance of
the three agencies.
Restructuring would disrupt needed reforms in
examination procedures
The urgent need for change in bank supervision is in the
substance of the examination process, not in the structure of the agencies. To this end we commend the Committee's action in scheduling early consideration of the
legislation requested by the three agencies to augment
their present enforcement powers. The magnitude, functional diversity, and transactional velocity of modern
banking cannot be effectively supervised by any
agency, existing or newly created, with antiquated
techniques and procedures.
The Comptroller's Office is on the verge of the first real
breakthrough in applying modern technology, information systems, and management techniques to the process of bank examination. Our efforts center around the
recommendations of Haskins & Sells, the nationally
known firm of auditing and management experts.
The other agencies also are actively engaged in improving their procedures and technology. The examination procedures used by the other agencies for the last
four decades have been basically the same as those
used by the Comptroller's Office. There is now a vital
competition among the agencies: a competition in
creativity to devise the best and most effective mode of
examination and follow-up procedures. To consolidate
the agencies now into one commission would destroy
that healthy competition.
Let me describe specifically just a few of the improvements now under way in the Comptroller's Office.
One of the key elements of the new examination process is the National Bank Surveillance System. NBSS is a
program of computer-based data and ratio analysis
which now is being tested in the field. When a national
bank is to be examined, the examiner-in-charge will be
provided with the most recent statistical analysis of that
bank. That analysis will already have been reviewed by a
specialist in the Comptroller's Office. He will provide the
examiner with a list of specific matters which should be
inquired into during the examination. The NBSS system
also will warn of potentially dangerous positions in particular banks or in the National Banking System as a
whole. Through NBSS we are supplementing evaluation
of bank assets with modern financial analysis.
The Comptroller's Office now is able to process call
report data and make it ready for analysis three times
faster than in 1975. This prompt processing is necessary
for the NBSS system. Additionally, much more complete
data will be available because of an expanded call report form effective March 31, 1976.
Testing has just begun on another key operating system: an entirely new manual of examination work programs. That manual details each examination procedure
and contains extensive instructions, statistical sampling
techniques, checklists, and detailed work programs.
The conceptual thrust of those modern examination procedures is to devote more of our inspection time to testing and evaluating the adequacy of a bank's own controls, operating procedures and policies, and less time to
the independent valuation of the bank's loan assets.
The efficiencies of the new methods will permit us to
examine a bank both more comprehensively and more
quickly. The shorter time for completing an examination
is critical so that the examiner's analysis is current when
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forwarded to bank management and the Comptroller.
Furthermore, we believe that the new procedures will
give us, for the first time, objective standards for judging
the quality of a bank's management and management
systems. Management is the key factor on which the
soundness of any bank ultimately turns.
Individual examination programs are now being field
tested. The first complete bank examination incorporating all the new procedures will be conducted next month.
When the new manual is issued, copies will be furnished
to the Committee.
The report of examination form is being completely
revised. The evaluation of bank management and future prospects now reported only to the Comptroller
will routinely be given to the bank's board of directors.
In addition, examiners now are required to meet with
each national bank's board of directors at least once a
year. Such meetings formerly occurred only if the regional administrator wished to discuss a particular
problem with the board.
A Division of Strategic Studies has been established
to monitor financial and technological developments in
banks, and identify those which ought to be of regulatory concern. A formal planning system will augment
our capacity to keep abreast of the change and
dynamism of the banking system.
Another important development is a new performance audit group to apprise systematically the Comptroller of deficiencies in current performance of the
Office and of the need to modify existing practices and
procedures.
The principal asset of our Office is the professional
examiner. We are well on the way to establishing a
Human Resources Division to improve vastly on the
way we recruit, train, and reward this valuable professional.
I have taken the Committee's time to describe the
new developments in the Comptroller's Office because
that modernization of the examination and regulatory
process seems to us to be far more important than restructuring the regulatory agencies. At the very least, it
would seem that this Committee should not approve
restructuring without carefully studying the ongoing
changes within each agency to determine whether or
not the agencies themselves have perceived the problems which exist in the regulatory process and are taking appropriate steps to remedy those problems.
Changes in the industry
Vast changes are occurring in the banking industry
because of economic forces and new legislation. Now
is an inauspicious time to create a new and, therefore,
uncertain regulatory structure. Only after determining
the probable future nature of the financial industry can
the question of restructuring the regulatory agencies
be rationally addressed.
The Senate's action in passing the Financial Institutions Act, S. 1267, if supported by the House, promises important changes in the services available to the
public through a variety of financial institutions. There
is a possibility that, as a result of the work of a subcommittee of this Committee, the Glass-Steagall Act
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will be amended to change the restrictions applying to
banks' securities activities. The amendment of the
McFadden Act is also a possibility. The National
Commission on Electronic Funds Transfers is to report
to Congress what legislation is needed in this vital
area.
All of those changes will affect enormously the structure and operations of financial institutions. The regulatory structure should not be destabilized while such
vast changes are occurring in the regulated industries.
Immediate restructuring is not necessary
The issue raised by S. 2298 is whether the existing system of decentralized bank regulation should be consolidated immediately into one monolithic agency.
Congress has, during the entire history of this country,
adhered to the conscious policy of dispersing financial
power — both privately and governmentally. We only
need to be reminded of the destruction of the Bank of the
United States by Andrew Jackson in 1832; the adoption
of the dual banking system in 1863; the rejection of a central bank until 1913; and the creation in 1933 of a deposit
insurance organization as a separate entity.
The present federal system of bank supervision was
established in 1933. Since then, actual depositor loss
stemming from the closing of insured banks has totalled
less than $22 million. For purposes of comparison, total
estimated deposits of all banks as of December 31,
1975, were $780 billion. There have been absolutely no
depositor losses in the few large bank closings which
have occurred in recent years.
This country has a decentralized banking system that
is unique among industrialized nations. Over 14,000
separate banking associations exist. In the past 30
years, there have been only 121 bank closings requiring
FDIC disbursements, or an average of about four per
year. When those figures are contrasted with the
experience of the United States during the late 1920's
and 1930's, when thousands of banks were forced to
close their doors, the regulatory record hardly seems to
require a defense, much less a call for an immediate and
drastic change.
In addition to the historical record, the performance of
the United States commercial banking system during the
past 3 years shows that a deferral of plans to restructure
the regulatory system would not endanger the public
interest. In the 1973-75 period, the United States suffered its most severe economic recession since the
1930's. Largely as a result of this recession, and not at all
unexpectedly, bank loan losses rose sharply. Further,
banks have prudently increased loan loss reserves in
anticipation of possible additional recession-related
losses.
The banking industry has shown remarkable resiliency
in withstanding the effects of the severe recession. As I
pointed out to this Committee on February 5, the record
of the 10 largest national banks in 1975 shows that, despite net loan losses in 1975 of $1.1 billion, or 0.7 percent
of outstanding loans, those banks actually provided
$200 million more for their loan loss reserves than the actual loss figure and still earned before-tax income of $2.2
billion. Thus we can see that those institutions could have
charged off their 1975 losses two or three times over,
without reducing their reserves for loan losses or impairing their capital.
To support further the idea that there is no urgent
necessity for immediate regulatory restructuring, the recession bottomed out in the spring of 1975. The liquidity
position and the risk exposure of the commercial banking industry are improving. Total investment securities
held by commercial banks increased an estimated $34
billion in 1975, while total commercial bank loans outstanding actually decreased by approximately $5 billion
due to diminished loan demand.
The United States commercial banking system is significantly stronger in 1976 than it was 2 years ago. Thus
there is no immediate need for change in the regulatory
structure and ample time for the Committee to consider
more pragmatically the question of restructuring.
In summary, the disruption that is certain to occur from
agency consolidation or major restructuring surely will
delay the final implementation of important new examination procedures. It is even possible that they may be entirely lost in the unsettling course of consolidation.
Also, the agencies should not be radically changed at
the very time when they are expected to supervise
rapidly evolving new developments in the regulated industries. Instead, agency changes should not be made
until the structural impact of those new developments can
be more clearly defined. There is time for the Committee
fully to inform itself as to all of the factors contained in my
testimony.
Agency restructuring now, in our opinion, would be entirely contrary to the public interest, and would not fulfill
the public need for a modern and efficient bank supervisory system.
Statement of John E. Shockey, Deputy Chief Counsel to the Comptroller of the
Currency, before the Senate Committee on Banking, Housing and Urban Affairs,
Washington, D.C., March 11, 1976
Thank you for this opportunity to present the views and
describe the efforts of the Comptroller's Office in the area
of fair lending practices. I would like to concentrate my
remarks today on our responsibilities under the fair lending provisions of Title 8 of the Civil Rights Act of 1968.
Title 8 prohibits national banks, as well as all other
lending institutions, from denying a mortgage or home
improvement loan to anyone for reasons of race, color,
religion, sex or national origin. Enforcement of this directive is a statutory duty of the Comptroller's Office. To that
end, the present Comptroller, from the time he assumed
office, has been committed to devising and implementing an effective enforcement mechanism.
Recognizing the peculiar complexities of detecting
and correcting violation of the fair lending laws, the
Comptroller has sponsored research in this area in recent years. At present, a Special Assistant to the Comptroller, two attorneys and one examiner in our
Washington headquarters have been assigned primary
responsibility for studying various means of enforcing
the anti-discrimination statutes. Those personnel are
supported by agency economists, lawyers and consumer specialists in preparing analyses and drafting
new procedures.
The Committee is aware of our research effort in the
Fair Housing Lending Practices Pilot Project, conducted
jointly by the federal banking agencies during the latter
half of 1974. Unfortunately, the mechanics of data collection did not yield results that could be considered reliable for valid statistical inference. Rather than pursue a
program which could not accomplish the goals fixed by
Congress, we have preferred to study new and potentially more beneficial approaches to the problem of fair
lending enforcement.
This is not to say, however, that we did not learn some
valuable lessons from the pilot project. Most important is
a better awareness of the constraints imposed by sample size and prevailing economic conditions upon any
statistical analysis we might wish to conduct. The results
also have helped us refine the types and formats of the
questions which must be asked in order to adduce useful
information, and we are investigating methods other than
that used in the pilot project for pinpointing the exact location of each mortgaged property.
Our principal concern is the quantification of normally
subjective criteria which signal discriminatory lending
practices at individual institutions. Except for the pilot
project, this Office never has attempted to construct a
data base for loan denials or for personal characteristics of loan applicants at national banks. The necessary information is not available from the traditional
bank-by-bank, loan-by-loan examination process. This
process must be supplemented in this area with new
techniques which reveal patterns of lending behavior
having possible discriminatory effect. Designing an
appropriate system for data collection analysis is
complicated by present estimates that national banks
handle 200,000 to 300,000 mortgage applications annually.
We have, however, made progress toward instituting
an appropriate system for data collection and analysis
which is designed to avoid the problems encountered in
the pilot project. We contemplate requesting loan
applicants at national banks to complete a new data collection form designed to provide relevant personal and
economic information. Completed forms will be kept on
file at the banks. Each form will include a detachable section, to be mailed by the applicant and addressed to the
Comptroller of the Currency with postage prepaid, which
has space for the applicant's name and social security
number, as well as a bank identification code number.
That section will serve as a double-check against the
possibility of a bank concealing specific applications. By
requiring a bank to keep all forms on file for a specified
period of time, examiners can conduct a review and
verification of the bank's practices during regularly
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scheduled examinations. Because of the large number
of loan applications that some banks receive, it would be
impractical to review every form. However, we think that
a sampling technique will be effective. In such instances
the examiner will be instructed to make copies of the appropriate number of forms and forward them to our
Washington Office for computer processing. That
method will enable us to construct models of the lending
patterns of various banks and compare banks with
others of comparable size in their communities and
throughout the country. In that regard we are developing
a computer base for determining demographic characteristics of every community in the country in which national banks operate. Portions of the new procedures are
expected to be ready for selective field testing this
spring.
If we find that our efforts would be aided materially, we
will incorporate into this program additional special
recordkeeping requirements. In attempting to contain
the proliferation of unnecessary forms and reports in
keeping with the Federal Paperwork Commission Act,
the President's recent directive and similar Congressional concern in the Home Mortgage Disclosure Act of
1975, we also are taking into consideration, throughout
our planning, the burdens of increased paperwork which
would be imposed upon consumers and banks.
In a separate but related endeavor, our Office now is
engaged in drafting extensive instructions for examiners dealing with the various consumer laws which affect national banks. That material, which includes all
fair lending laws, will comprise a totally new supplement to the Comptroller's Handbook of Examination
Procedure which will give deserved emphasis to an
area of Congressional priority. That will be used as a
foundation for a new, specialized examination. We
presently anticipate that those procedures may involve
appointment of a consumer affairs officer in each region to coordinate implementation of the new examination and other procedures calculated to obtain
maximum compliance.
With respect to the problem of lending discrimination
on the basis of property location, otherwise referred to as
"redlining," the Comptroller has urged publicly that national bankers take an active role in combating urban
decay in their respective communities and in assuring
equal access to lendable funds for all creditworthy
applicants. Indeed, the Comptroller's Office long has
given consideration, in acting upon branch and similar
applications, to an institution's willingness to serve
unmet credit needs of a community which it proposes to
enter. We expect that the proposed procedures for
monitoring compliance with Title 8 may provide
examiners with a more effective means of discovering
and investigating lending practices having an unlawfully
discriminatory effect.
However, where loan denials are found not to be
premised upon racial or other unlawful criteria, we would
oppose any plan which would prevent a mortgage officer
from exercising his own judgment regarding the physical
condition of collateral security or the creditworthiness of
the prospective borrower. Such constraints could force
bankers to take inordinate risks with depositors' money
and thereby jeopardize bank soundness.
As part of our fair lending research and regulatory efforts in recent months, we have approached the Civil
Rights Division of the Justice Department to avail ourselves of the expertise of their staff in developing special examining and recordkeeping techniques. In addition, we have arranged to facilitate the flow of information between the two agencies on a case-by-case
basis regarding fair lending matters at individual national banks. Justice now may gain access to relevant
bank records for the purpose of investigating alleged
violations of Title 8 and patterns of discrimination.
In closing, we would be pleased to provide the Committee with any information or assistance it deems useful.
In turn, we are certain that we will benefit from the Committee's findings in our continuing development of a
meaningful and effective fair lending regulatory program.
Remarks of H. Joe Selby, First Deputy Comptroller of the Currency for Operations,
before the Texas Six Flags Chapter of the Bank Administration Institute, Victoria,
Tex., March 16, 1976
"What a Bank Director Should Know about Bank
Examinations"
I would like to impart to each of you a broad view of what
a director should know about examiners and
examinations and conversely what the examiner will
need to know about each of you.
Of extreme concern to the Office of the Comptroller of
the Currency has been the reliance by the directors on
examination reports of the regulatory authorities. We appear to have become the proverbial "crutch."
In reviewing director action, we find many directors
correcting deficiencies in examination reports, where
possible, then relaxing and waiting for the next examination to see if any new deficiencies have arisen. With the
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rapid changes occurring in the banking industry and
increased competitive pressures, serious deficiencies
or problems can arise in a very short period of time, indeed between examinations, which can cause severe
harm to a bank. Directors must initiate necessary
mechanisms to identify and deal with those changes and
competitive pressures without jeopardizing the bank's
soundness.
I personally believe that our changes in examination
procedures and philosophies will go a long way in placing the responsibility for bank direction squarely on the
shoulders of each bank's directors.
Over the past 20 years, the national bank examiner
has devoted less and less time to detailed audit or verifi-
cation procedures. Also, there has been an increase in
both the volume of activity and the variety of services offered by banks. During that period, there has been a
general increase in the quality of internal control, including the problem of internal audit of many banks. Also, an
ever increasing number of banks are employing the services of outside accounting firms to provide either limited
or complete financial audits. Proper internal control,
however, is a day-to-day proposition and cannot be
satisfactorily accomplished by an outside examination
or audit. The assumption of responsibility for internal
controls by the board should promote in the directors a
better understanding and knowledge of the institution
and will give them a greater involvement in the protection
of a bank's depositors and shareholders. That approach
is grounded in the assumption that it is in a bank's own
best interest for its directors and management to assume
their roles of responsibility as dictated by both law and
tradition.
Over the past several years, bank examiners have fulfilled a role which has been weighted toward verification
and audit procedures. The new philosophy of the Office
of the Comptroller of the Currency will move the examiner
away from his traditional role. The new philosophy will
encompass managerial appraisal as well as director appraisal; in other words, the examiner will be interested in
how good you and your management are doing your
jobs. We feel that in determining the scope of an
examination, the examiner should evaluate the system of
internal control including the program of internal audit,
and the scope and adequacy of the external audit.
We are in the process of designating, for each area of
examination interest, those procedures considered
supervisory in nature; that is, the minimum procedures
that must be performed by the examiner in each area.
We also are developing verification procedures which, if
not performed by others, must be performed on a test
basis by examiners.
Our initial concentration will be in obtaining a description of and evaluating the program of internal audit as it
relates to those verification procedures. In the absence
of internal auditing which accomplishes those procedures, the examiner will be instructed to review the
scope of any audit performed by independent accountants to determine if that audit scope will satisfy the respective verification procedures.
This concept of reliance on the verification of data by
others has considerable merit and will actually result in a
more thorough examination. By concentrating our efforts
in areas where we have the expertise and/or statutory
responsibility, we will be able to provide better service to
the banking community.
It is interesting to note that the FDIC is following our
lead in this respect. A recent press release stated that
the agency "has begun giving greater weight to outside
audits by accounting firms in assessing the balance
sheets and income statements of state banks." It also
stated that the audit mechanism would permit examiners
to dispense with extensive proof and verification requests which can burden banks being examined.
Regardless of the amount of auditing performed by
others, our examiners will perform minimum tests to de-
termine a bank's compliance with its system of internal
controls. If, after reviewing and testing the internal controls in effect and reviewing the scope of external audit
activities, the examiner concludes that there are
shortcomings in the bank's program, he must expand
the scope of his examination to include the performance
of verification or audit procedures for the area considered appropriate in light of the deficiencies. Under those
circumstances, the shortcomings must be of the magnitude to indicate to the examiner that he cannot rely on
the system of internal control and the external audit to
provide reliable financial records.
Under ideal circumstances, however, it is the
examiner's job to perform only examining procedures.
These are the procedures that are considered supervisory in nature and logically should be performed by a national bank examiner. They allow the examiner to accomplish target objectives for each area of examination
interest which, in turn, will accomplish the essential objectives previously set forth. Although it is the examiner's
goal to assume his supervisory role and leave the performance of verification procedures to others, it should
be noted that there is a difference between the
examiner's ideal role and his responsibility. Where the
examiner judges that a bank's internal control procedures are inadequate, it is his responsibility to broaden
the scope of his examination to gain assurance of the
existence of assets and the reliability of the financial records he is using to correct shortcomings in the bank's
programs of internal control and audit. The examiner can
assume a normal supervisory posture in future
examinations after needed corrections have been made
by the bank.
The national bank examiner must also consider the
soundness of the banking policies and practices of the
bank being examined before he begins to apply other
examination procedures appropriate to each area of
examination interest. For example, the examiner must
determine the extent to which the bank's practices regarding information compiled on borrowers and the
maintenance of credit files on borrowers conform with
acceptable bank practices. If the examiner finds that the
bank's policy requires that prospective borrowers submit financial statements at least annually, that all loans be
approved by two officers before being made, and that
loan files be reviewed on a regular basis by a senior officer of the bank, he might then be justified in reducing
the extent to which he reviews credit files in detail. Conversely, if the examiner determines that effective procedures do not exist, because of weaknesses in the procedures, lack of adequate personnel or other reasons, he
should extend his review of credit files accordingly.
Presently, loan classifications are largely developed
by examiners, independent of any evaluations that may
have been made by management. We believe there is
considerable merit in utilizing management's evaluation
of loans, particularly in banks where procedures provide
for credit reviews by officers independent of those responsible for making loans. In banks which have internal
loan review systems requiring regular evaluations of collateral and ratings of loans by quality and performance,
the system will be checked, on a sampling basis, but not
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duplicated, by an evaluation of 80 percent of the bank's
loan portfolio, as is currently done.
The use of management's evaluation may provide the
examiner with information on other loans that should be
selected for detailed review. We will allocate sufficient
time to evaluating the loan review process and determining the scope of the review, credit lines selected, qualifications of the reviewers, etc. We will investigate problem
credits surfaced during the examination which should
have been uncovered during the loan review process.
Material amounts of such credits will, of course, immediately prompt the examiner to increase the scope of
the examination. Subsequently, we will report to the directorate any deficiencies in the loan review area and
hopefully effect corrective action.
We are currently developing a new report of examination. The report will be divided into three major sections.
The first section of the report will be directed to the board
of directors, its examining committee and senior management. That section will summarize the examiner's
critical comments and the recommended remedial action. Comments will be supported by schedules and
analyses, where appropriate, to fortify the examiner's
conclusions. We would hope the information would be
presented in such a manner that it will aid the directorate
and senior management in pursuing avenues for corrective action. Examples of comments that may appear in
this section of the report include major deficiencies in
policies and procedures directly relating to management, internal controls, the quality of the assets and capital deficiency.
The second section of the report will include deficiencies of a less serious nature than those included in the
first section. I would best describe these as isolated
exceptions to policy, minor deficiencies in internal control, collateral exception, etc.
The important difference between the sections is that
those comments in the first section will require the bank,
through the chairman of the board of directors, to respond within a predetermined period of time, indicating
whether they agree or disagree with the examiner's
comments. If the bank generally agrees with the comments made, We would request a report on the corrective
action which will be taken. We would hope that the directors and/or senior management would follow-up on the
deficiencies in the second section. However, they would
not be required to notify the Office of such actions. We, of
course, would follow-up during our next regular
examination.
The third or confidential section, which we have in the
existing report of examination, will be modified. A major
change is that much of the information which now appears in the confidential section will appear in one of the
two previously mentioned sections. For example, our
evaluation of management, earnings analysis, and future
prospects will be addressed in the open sections, where
appropriate. The confidential section will be limited to:
• Suspected violations of law found during the
examination and reported to the appropriate regulatory and enforcement agencies.
220
• Critical comments relating to senior bank officers
that require remedial action by the Office, such as
the threat of cease and desist orders or officer removal.
• Other critical comments regarding major problems that require remedial actions but about
which the bank has failed or refused to initiate any
corrective measures.
The great abyss between the examiner, his report and
the board of directors will hopefully narrow as a result of
our new procedures on directors' meetings. The Comptroller of the Currency has inaugurated a program
which should initiate a continuing dialogue between
boards of directors and examiners. The Office has
instituted a program requiring that an examiner visit
each board of directors at least annually. Those meetings will normally be convened in conjunction with a
regular examination of the bank. In some cases, meetings might be held with the examining, executive, or
discount committee, provided outside directors are represented on those committees.
The objectives of meeting with members of the board
of directors are to discuss the conditions and affairs of
the bank that were observed during the most recent
examination, to reach agreement on any significant
problems, to obtain a definitive commitment from the
board of directors to institute the proper corrective action
and to obtain information concerning future plans and
proposed changes in bank policy that may have significant impact on the future condition of the bank. Those
meetings will initially provide the forum where future
examination criteria can be discussed. The meetings will
serve to keep the directors informed while providing
them the opportunity to discuss, with an examiner, situations germane to the bank or general banking community. The interaction between the board and the
examiners can be a meaningful exchange of ideas and
opinions if properly utilized.
In reviewing what a bank director should know about
bank examinations, the question also arises as to what a
bank's directors should know about their own responsibilities. Directors are placed in positions of trust by the
shareholders of the bank. Both statutory and common
law have placed responsibility for the management of a
bank, whether it involves the lending or investing function, protection against internal fraud, or any other banking activity, firmly and squarely on its board of directors.
The directors of a national bank may delegate the dayto-day routine of conducting the bank's business, but
they cannot delegate to their officers and employees the
responsibility for the consequences resulting from unsound or imprudent policies and practices. The directorate is responsible to its depositors and shareholders for
safeguarding their interests through the lawful, informed,
efficient, and able administration of the institution. Quite
frankly, in this business, the buck stops on the board
room table.
Unless bank directors realize the importance of their
position and act accordingly, they are failing to dis-
charge their obligations to the shareholders and depositors and are failing to take advantage of their opportunity to exercise a sound and benefical influence
on the economy of their community. The following are
the major, specific responsibilities of bank directors:
• To select competent executive officers.
• To effectively supervise the bank's affairs.
• To adopt and follow sound policies and objectives.
• To avoid self-serving practices.
• To be informed of the bank's condition and
management policies.
• To maintain reasonable capitalization.
• To observe banking laws, rulings, and regulations.
• To ensure that the bank has a beneficial influence on the economy of its community.
I can assure you that directors' participation in banking or the lack thereof is significantly involved in many
of the problems that I deal with on a day-to-day basis.
But to give major emphasis to the director's part in
day-to-day operations is to seriously limit and distort
the director's total role. An approach from the opposite
point of view, that is, emphasizing the director's participation in and impact upon long-range trends and
developments provides a far more accurate initial
characterization. Directors are not day-to-day practitioners of banking. They are the philosophers of the
profession. They have a primary responsibility to see
the business of banking at its broadest, most vital,
most essential terms. Banking's primary task is to meet
an almost universal need for temporary financial help
to initiate, maintain, and/or expand economically
sound projects. Consumers, business firms, and
agencies of government are all subject to that need.
The power to meet such needs, to supply funds that
create jobs and produce goods, is really an awesome
power when you see it as directors ought to see it. To
misuse such power for personal gain, or to permit such
a misuse when means are at hand to prevent it, is a
serious breach of moral standards which, sooner or
later, is bound to have very serious consequences.
There seems to be a great deal of cynicism in people
these days. It's an infectious kind of cynicism that goes
deeper than the definitional concept of assuming hidden motives behind every good deed. Today's cynicism
can become an exercise in self-justification, and the
cynic not only disbelieves the apparent kindness and
generosity of other people's motives, but also draws
encouragement from his disbelief for his own selfserving plans and activities. Modern cynicism fre-
quently remains hidden until some unexpected turn of
events reveals its corrosive presence. Think of how
many news stories lately reveal the extent of that cynicism and the carelessness, confusion and dishonesty
that its presence encourages, and even justifies, in
some mixed-up minds. Sometimes, even in a reasonable mind, desirable ends may seem to justify unethical
means.
Leaders, such as bank directors, cannot ignore unethical, questionable or dishonest events; they must
respond to them, verbally and actively. Many people
are deeply influenced by events which they themselves are not realiy capable of evaluating. They require leadership. The original cynics, you recall, were
philosophers of ancient Greece whose basic belief
was that truth and happiness are achieved in the pursuit of goodness and virtue rather than in the pursuit of
pleasure. The cynics in their day represented a reaction against the hedonistic practices and philosophies
of the times. Their criticisms of society at large, however, became more and more bitter and less and less
rational until they established a reputation for being
unable to see or believe anything good about anyone.
They lost both their objectivity and their effectiveness.
Modern society produces many ambivalent people
who are capable of moving in many directions depending on what pressures they feel and what motives capture their attention and enlist their loyalties. Such a
situation calls for strong leadership based on sound
principles effectively stated and clearly demonstrated
in practice and policy. Directors' responsibilities reach
from the top down through the organization, and outward to the stockholders and the public. Directors
must not only select competent and effective administrators, but they themselves must keep informed about
current problems, both internal and external. They
must participate actively in finding workable solutions.
Directors must resist any tendency to recognize any
one influence on their thinking as dominant. They have
been elected by the shareholders for the purpose of
overseeing the operations of a bank, which automatically requires sensitivity to the public interest. In behalf
of the stockholders and for the purpose of serving the
public profitably, directors select top administrative officers to whom decision-making powers are delegated.
Directors must be certain that their relations with management remain fluid and well-balanced so that each
respects the authority and seeks the counsel of the
other. Directors are expected to provide banks with
their special areas of expertise. But their fundamental
ability to establish a general atmosphere of trust, confidence, enthusiasm, and understanding — an atmosphere in which the bank's work can be and must be effectively carried forward — is their most important responsibility.
221
Statement of C. Westbrook Murphy, Deputy Comptroller for Law and Chief Counsel
to the Comptroller of the Currency, before the Senate Committee on Banking,
Housing and Urban Affairs, Washington, D.C., March 26, 1976
I appreciate the opportunity to appear in support of S.
2304. This bill is based upon a joint request of the three
federal bank regulatory agencies for legislation to improve the enforcement powers provided in the federal
banking laws.
I am accompanied today by the director of our Enforcement and Compliance Division. He joined the staff
of the Comptroller of the Currency in November of
1971 and, since then, has participated personally in
more than half of all the cease and desist activities initiated by the three banking agencies. Those activities
are summarized, in accordance with the Chairman's
request of March 15, 1976, in [the appendix] to this
testimony.
S. 2304 in its present form would bring significant
improvement to the regulatory agencies' supervisory
functions. In order to expedite Congressional consideration, our Office joined with the Federal Reserve and
the FDIC in the transmittal of the bill. However, we advised the primary drafter, the Federal Reserve, that we
would suggest some changes to the Committees. Accordingly, our testimony will suggest some minor
changes which, in our opinion, would strengthen the
bill.
Officer and Director Removal
Section 6 of the bill would simplify both the substance
and the procedure of the officer removal provisions of
the Financial Institutions Supervisory Act.
Under existing law a bank official who has not been
indicted may be removed from his position only if the
agency can establish, inter alia, "personal dishonesty."
That standard is vague and difficult to establish. It also
provides no remedy against a bank official whose actions, although honest, are so incompetent as to
jeopardize the soundness of the bank. S. 2304 adds
another ground to justify removal of a bank official:
"gross negligence in the operation or management of
the bank or a willful disregard for the safety or soundness of the bank."
The new procedures for officer removal affect
primarily the Comptroller's Office. Under existing law
the Comptroller may not initiate officer removal proceedings. The Comptroller only may certify facts to
the Federal Reserve Board, which then is given full responsibility for all proceedings, from the issuance of
the notice of charges which begins the proceedings
through final decision.
Both the Comptroller's Office and the Federal Reserve Board have found this procedure to be ineffective. We thus endorse the provisions of S. 2304 which
would empower the Comptroller to:
• Issue a notice of intention to remove.
• Establish the hearing date and arrange for the
appointment of an Administrative Law Judge.
222
• Decide procedural questions arising in the
course of the proceedings.
• Prosecute the case before the Administrative
Law Judge.
• Issue, in an appropriate case, a temporary removal order pending completion of the proceedings.
The Administrative Law Judge, under the bill, would
certify his findings and conclusions to the Federal Reserve Board for final determination of whether an official should be removed. The bill thus provides effective and efficient administrative procedures, while still
leaving the final decision with a seven-man board instead of just one individual.
We expect that the combination of the new grounds
for officer removal and the streamlining of procedures
will, for the first time, make the officer removal statute an
effective tool for the Comptroller's Office.
A brief word is in order concerning the philosphy of
the officer removal provisions of the Financial Institutions Supervisory Act. The removal provision which has
been most used by the banking agencies permits
summary removal of a bank officer who has been indicted for a felony involving personal dishonesty or
breach of trust. Two courts of appeals have expressed
some doubt about the constitutionality of those provisions. See Manges v. Camp, 474 F.2d 97 (5th Cir.
1973); and Fineberg v. FDIC, 522 F.2d 1335 (D. C. Cir.
1975). Those courts seemed troubled by the abrupt
manner in which a bank officer may be removed.
I suggest to the Committee that those courts have
given insufficient weight to the legitimate Congressional concern with maintaining a safe and sound
banking system. All banks covered by the removal statute have federal deposit insurance. Many of them belong to the Congressionally established Federal Reserve System. Many of them are chartered by the federal government and governed in their most important
activities by federal law. Additionally, the banking system is the principal means of effecting payment for
goods and services and of funding commerce in the
United States. Congress, thus, has a far greater concern for the health and safety of the banks than it does
for other privately owned corporations. The removal
provisions, in my opinion, are an appropriate expression of this Congressional concern.
Naming Persons in Cease and Desist
Proceedings
Under existing law, only a bank may be named as a party
to a cease and desist proceeding and only a bank may
be served with a temporary cease and desist order. A
final order, however, may be directed not only to the
bank, but also to its directors, officers, employees, and
agents.
Section 6 of S. 2304 would permit the agency to name
as full parties to a cease and desist proceeding any director, officer, employee, agent, or other person participating in the conduct of the affairs of the bank. We
have occasionally encountered situations in which the
culpable party was not the bank, but an individual or
corporation directing the bank's affairs. That new provision of the bill should permit us to deal more effectively
with that situation.
Civil Money Penalties
The provision for civil money penalties for violation of the
banking laws is one of the most important provisions in S.
2304. Civil money penalties are now applicable to national banks only for failure to file reports or to make information available to a national bank examiner. See 12
USC 161 and 481. Under sections 1,2,5,6 and 7 of the
bill, civil money penalties could be imposed to cover violations of various provisions of the Federal Reserve Act,
the Federal Deposit Insurance Act, and the Bank Holding Company Act; and of orders issued under the Financial Institutions Supervisory Act of 1966. That authority to
assess civil penalties will give the bank regulators an important tool in seeking compliance with these various
legal mandates.
The civil money penalty provisions of section 6 would
allow the "appropriate Federal banking agency" to assess civil money penalties for violation of a final order issued under the provisions of 12 USC 1818(b) and (c), as
amended by the bill. Under present law the only enforcement procedure available to the banking agency
for violation of a cease and desist order is an injunctive
action in the Federal district court. Civil money penalties
may in some instances be a more effective enforcement
tool, particularly since such penalties may be assessed
under the bill against individuals as well as against the
bank involved. We, therefore, strongly endorse the concept of permitting the appropriate federal banking
agency to assess civil money penalties for violation of a
cease and desist order.
In contrast, the civil penalty provision of section 1 of
the bill, dealing with violations of sections 22 and 23A of
the Federal Reserve Act (insider lending restrictions)
would vest the power to assess a civil penalty exclusively
in the Federal Reserve. Because the detection and correction of insider lending abuses is the responsibility of
the primary supervisor of a bank, we think it logical to
give the civil penalty authority to such supervisor. Thus
the Comptroller should be given civil penalty authority to
deal with insider lending violations in national banks. We
have no objection, however, to the Federal Reserve
Board also having authority to assess penalties against
national banks, if they so desire.
Giving the Federal Reserve Board exclusive authority
to assess penalties against national banks would be
similar to the unsuccessful officer removal provisions of
the existing law. The agencies' experience under that
procedure has been less than satisfactory to all concerned and, as already noted, S. 2304 includes provi-
sions to correct the situation. It would be anomalous in
the same bill to correct a discredited procedure for removing officers in one section and in a different section install
a similar procedure for assessing civil penalties. I hope
the Committee will amend the bill to give the Comptroller
authority to assess penalties against national banks or
officials of national banks who engage in insider lending
practices which violate sections 22 and 23A.
Additionally, the bill does not spell out sufficiently the
procedure for collecting a civil penalty and disposition of
the amounts received. Civil penalties imposed under S.
2304 would be collected "by suit or otherwise." The word
"otherwise" may include administrative processes, but
that is not apparent from the bill. The bill should clearly
state that civil penalties can be collected through administrative processes. That change would clarify the intent of the bill and assure that the civil penalty is perceived by bankers and regulators as an easily available
enforcement tool.
One possible means of administrative enforcement of
civil penalties is suggested by section 5213 of the Revised Statutes, 12 USC 164. That section allows the
Comptroller to assess a penalty against a national bank
for failure to make a proper report by requesting the
Treasurer of the United States to retain the interest on
U.S. bonds held by the Treasurer for the bank. That section has been obsolete since national banks stopped issuing currency, but it does provide a precedent for administrative collection of civil penalties which would be
imposed under S. 2304. The Comptroller thus recommends the addition to S. 2304 of a provision to allow the
assessment of civil penalties from funds of the offending
bank held at its Federal Reserve Bank. The payments
would be made out of those funds on order of the Federal
Reserve Board or of the Comptroller, as appropriate,
after 10 days notice to the bank.
Combining of Insider Loans
Sections 3 and 7 of the bill would add new restrictions on
loans by a bank to its officers and directors or to individuals controlling more than 5 percent of any class of
voting securities of the bank. The bill would require loans
to each of those individuals to be aggregated with any
loans made by the bank to any company controlled by
him or in which he owns 25 percent or more of any class
of voting securities. That provision thus would apply
more stringent rules of aggregation to officers and directors than are applied to borrowers generally.
The Comptroller's Office is fully mindful of the potential
for abuse in insider lending. In the spring of 1975 we published a regulation enabling both our examiners and a
national bank's own board of directors better to identify
and scrutinize loans by a bank to outside business enterprises of its own officers or directors. The FDIC has recently issued an extensive regulation on the same subject. We are now reviewing the FDIC regulation to see
what improvements might be suggested for our own
regulations or procedures.
The Comptroller's Office fears that the effect of the
proposed new statutory aggregation rule might be to
223
Appendix to March 26 Statement of C. Westbrook Murphy
Cease and Desist Proceedings Brought by The Comptroller of the Currency,
Pursuant to 12 USC 1818(b), 1971-1975
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124,000
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395,000
78,000
37,000
21,000
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34,000
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5 42 3 0 5 3 6 25 2 12 25 15 42
N O T E : A d e t a i l e d d e s c r i p t i o n o f e a c h o f t h e s e w a s a l s o i n c l u d e d w i t h t h i s t e s t i m o n y . It m a y b e f o u n d i n t h e A p p e n d i x t o t h e F e b r u a r y 5 S t a t e m e n t b y
James E. Smith, pp. 211-214, in this report.
force bank directors and officers to leave a bank in order
to preserve lines of credit for firms with which they are
associated. Thus, in many communities, the most active,
intelligent and able business people couldn't serve on
the boards of directors, and banks would be deprived of
their guidance. The Committee might wish to consider
both this possible adverse effect and the experience of
the Comptroller and the FDIC under their new regulations before changing the statutes regulating insider
lending.
Conclusion
Change in the supervisory laws is necessary. As noted
above, the Comptroller's Office supports S. 2304 and we
are pleased that the Committee is holding hearings on
the legislation. Our few recommendations for change in
the bill are intended to suggest to the Committee ways to
strengthen the bill and to eliminate some foreseeable
problems. We hope the Committee will report favorably
on S. 2304.
Statement of James E. Smith, Comptroller of the Currency, before the Committee to
Investigate a Balanced Federal Budget of The Democratic Research Organization,
Washington, D.C., May 5, 1976
I welcome the opportunity to appear before the Committee to Investigate a Balanced Federal Budget of the
Democratic Research Organization. You have asked me
to address the following question: What impact have inflation and high interest rates had on the lending capability of financial intermediaries since 1965?
Your question correctly ties together inflation and high
interest rates. To be induced to forego current consumption, savers will not settle for a "normal" rate.of return in
periods of inflation; because inflation reduces the purchasing power of principal, savers demand an inflation
premium. That premium has represented a major portion
of market interest rates in recent years when we have
seen double-digit inflation and are only now returning to
an inflation rate of 5 to 6 percent.
I would like to divide my discussion concerning the impact of inflation on financial intermediaries into three
parts:
1. Inflation as a generator of higher interest rates,
and, in turn, disintermediation;
2. Inflation as a major contributing factor to recession; and
3. The effect of inflation on capital markets.
As already noted, inflationary pressures have been a
major contributor to the relatively high rates of interest
this economy has experienced in recent years. In and of
themselves, those higher rates would not necessarily
impair the lending capacity of financial institutions. That
is, if lending institutions were able to maintain an appropriate margin between rates received on loans and rates
that must be paid for funds, they could continue their intermediary function. However, as we all recognize, that is
such an oversimplication that it has little practical relevance. Financial intermediaries, in varying degrees, are
locked into portfolios bearing fixed rates of return over
stated maturities. That is especially true of specialized financial institutions such as savings and loan associations and mutual savings banks. As a result, sharp upward movements in interest rates can place such
specialized institutions in a difficult position, especially
during a period of transition.
Thus, even in the absence of interest rate ceilings for
deposit institutions, it is likely that some disintermediation would occur in periods of sharply rising interest rates
because of the locked-in position of financial institutions.
The presence of interest rate ceilings has the effect of virtually forcing disintermediation when market rates on
competing financial instruments move above the legal
ceilings on the rates financial institutions can pay on their
deposits. A major factor in the credit crunches of 1966
and 1969, was Regulation Q, for member banks, and
comparable regulations for other financial institutions.
A severe liquidity squeeze occurred in the banking industry in 1970, associated with the collapse of Penn Central. For a time, that squeeze made it impossible for
commercial banks to meet the credit demands of worthy
customers of long standing. The severity of the pressures was reduced for larger banks by the action of the
Federal Reserve Board in removing ceiling rates on
short-term certificates of deposit (CD's). That action allowed large commercial banks to tap the short-term
money market funds on a competitive basis. In 1973, all
ceiling rates on deposits of $100,000 and over were removed. As a result, large banks in money market centers
and the larger of the regional banks have been able to
secure short-term money market funds at going rates.
However, ceiling rates continue for smaller denomination time deposits of financial intermediaries. Thus, institutions that rely on such deposits are still subject to the
vicissitudes created by sharp movements in short-term
rates on instruments that are not subject to controls.
To summarize my first point, interest rate controls have
worsened the impact of inflation on the lending
capabilities of financial intermediaries. However, even in
the absence of such controls, the phenomen of disintermediation, with some resultant reduction in lending
capabilities, would probably occur, because of the nature of the asset portfolios of the institutions.
My second major point relates to the causal relationship between sharp inflation and the occurrence of recession. We are all painfully aware of the fact that we
have just come through the worst recession in the U.S.
economy since the 1930's. Many knowledgeable observers have pointed out that inflation was itself a key factor
in creating the conditions that led to that recession.
With double-digit inflation, the confidence of consum225
ers and, to a very considerable extent, the confidence
of businesses, was shaken. With inflation outpacing
the growth in personal disposable income, the real
disposable income of many individuals actually fell.
That decline in real income was coupled with the negative expectation that continuing inflation might lead to
even a sharper decline. As a result, the effective demand for goods and services fell off. In this uncertain
atmosphere, businesses were hesitant to carry out
their plans for expansion of plant and equipment.
The 1973-75 recession had, not surprisingly, a quite
adverse effect on the banking industry. Predictably,
loan losses moved upward sharply, cutting into net
earnings. Fortunately, even in that recessionary period,
earnings before loan losses were sufficient to allow the
banking industry to emerge in a relatively strong position. Because the recession bottomed out in the spring
of 1975, and because loan demand had been soft due
to the recession, the quality of loan portfolios has
strengthened during the past year. We will still see relatively high loan losses in 1976, but they will come
primarily from known weaknesses in certain loans
made some time ago. The worst of the impact of the
recession is over for the banking industry. However, to
the extent inflation was a major contributing factor to
the recession, it is simply another way inflation impaired the lending capabilities of financial institutions.
My third major point, and perhaps the most important one in terms of where our economy goes from
here, relates to the effect of inflation on the functioning
of our capital markets. We are all aware that our capital
markets have performed less than adequately in recent years. In my view, a major reason has been the
sharp inflation that we have experienced. In fact, I
think it is unlikely that our capital markets will be able
to carry out their crucial role in an acceptable way until
the rate of inflation is substantially reduced.
The relative deterioration of the capital markets has
had a two-pronged effect upon the banking industry.
First, it has made it nearly impossible during much of
the recent past for banks or banking organizations to
issue equity capital. The market for debt has also been
relatively unfavorable for banking organizations during
that period. Consequently, banks have not been able
to add to their capital base at a rate comparable to
their rate of asset growth, although that has become a
goal for many banks in recent years. Retained earn-
ings have been the principal source of additions to
bank capital, but have been insufficient to stabilize the
ratio of capital to total assets.
Thus banks and banking organizations have become considerably more leveraged in recent years. As
a result, bank lending capability has been reduced' relative to what it would have been, if capital markets
could have been tapped.
The second prong of the relationship between inflation and the functioning of capital markets has also
presented problems for the banking industry. Bank's
prime corporate customers have experienced the
same sort of difficulties in capital markets as have
banks. Consequently, there has been some increase in
pressure on banks to become suppliers of quasicapital for corporate customers through the medium of
term lending. Within reasonable limits, such action by
the banking industry has been in the public interest. In
other words, for limited periods, banks can serve as a
"bridge," pending an improvement in the performance
of capital markets. It is obvious, however, that there
must be limits on such lending activity by the industry,
if it is to remain sound and capable of meeting other
public demands for funds. Fortunately, we see some
evidence that, with the current reduction in the rate of
inflation, access to capital both for banks and for other
corporations has improved somewhat.
In overall summary, I am pleased to report that the
banking industry has withstood the perils of a difficult
period and is strong and healthy today. However, we
have noted three different paths through which inflation
has had a deleterious effect on the capacity of financial intermediaries to serve the financial needs of the
public. It is evident that we must strive to develop
policies that will hold the rate of inflation to acceptable
levels.
Government has a major role to play in that attempt.
In the final analysis, we must have a climate which induces savers to supply sufficient funds to support a
level of investment that is consistent with economic
health and appropriate economic growth. Somehow,
we must find a way to tilt the consumption-savings mix
in favor of additional saving. Others of your expert witnesses have provided some prescriptions which are
aimed at achieving that purpose; it is beyond the province
of my testimony to discuss specific remedies.
Statement of James E. Smith, Comptroller of the Currency, before the
Subcommittee on Commerce, Consumer and Monetary Affairs of the House
Government Operations Committee, Washington, D.C., June 1, 1976
I appreciate this opportunity to appear before the
Committee in connection with its inquiry into the Comptroller's regulatory processes. In this hearing the Committee is attempting to evaluate those processes through
a study of the Franklin National Bank, which was placed
in receivership on October 8, 1974.
I believe that we can learn from our past experiences,
both good and bad. Thus, as the Committee staff tes226
tified last week, even before the failure of Franklin National Bank, I initiated a special study of the events leading to the bank's difficulties.
This Committee's record on Franklin National Bank
would be incomplete, however, without including information on the behavior of the financial market place during the critical years 1970-1974 and the changes that
have occurred in the Comptroller's Office.
The Financial Market Place and Its Effect on
Franklin
National banks are privately owned corporations. The
most important decisions made in each bank are those
of the bank's own board of directors and management,
responding to competitive pressures and opportunities.
Thus no inquiry into the failure of Franklin National Bank
can be complete without an examination of the decisions
made by the Franklin management in the context of the
then existing market place environment.
Inflation during the 1970-1974 period was rampant;
because of the effects of the Vietnam war, an
expansionary monetary policy and other such factors,
consumer prices increased by 31.9 percent from 1970 to
1974. At the same time, the steepest recession since the
Great Depression of the 1930's had set in.
From the banker's point of view, the greatest problem
was the enormous increase in interest rates; the Federal,
funds rates during the summer of 1974 rose to an unprecedented 12.9 percent and the prime rate was at a staggering 12.1 percent. The basic cost of money to banks
aggressively using liability management during the
1970-1974 period had increased an incredible 105.3
percent. Franklin was particularly ill-suited to survive
those economic pressures.
Franklin was a marginal operation throughout the
1960's, yet the bank managed to operate and grow to a
$3 billion institution by the end of 1969 without arousing
any significant concerns by this Office or the financial industry. Despite its apparent progress, however, particularly in 1968 and 1969, the bank had neither the management depth and acumen nor the operational systems
and controls to cope with its ambitious expansion program and the financial perils of the 1970's. Had the bank
curtailed its activities after 1969 and solidified its position
in the marketplace, the results might have been different.
By December 3 1 , 1973, Franklin's resources
exceeded $5 billion. The bank's management proved
incapable of developing and handling the sophisticated
asset and liability management techniques necessary
for a bank that size.
During the 1960's and early 1970's, the money market
banks, faced with declining rates of growth in deposits,
sought new ways to meet the heavy credit demands of
their customers. In consequence, Franklin and other
banks placed less and less reliance on the generation of
liquidity through asset composition and cash flow. Instead, increasing emphasis was given to acquisition of
deposits and the purchase of a wide array of borrowed
money, including Federal funds, Eurodollars, negotiable
certificates of deposit and long-term debt.
Franklin thus was able to buy its liquidity in the marketplace to support its rapid asset growth. In retrospect,
Franklin's liability structure and asset structure made the
bank exceptionally vulnerable to the confidence of the
money markets.
Confidence in financial institutions declined significantly in 1973 and 1974 as a result of bank failures both
here and abroad, significant foreign exchange losses in
several major banks and evidence of deterioration in
bank loans to struggling real estate firms, airlines, public
utilities and the like. That decline in confidence, coupled
with steadily rising interest rates, tight money conditions,
high inflation and the beginnings of a recession led to a
rush to safe havens for funds. The very largest banks with
unquestioned national and international reputations
were the direct beneficiaries, because money market
participants seemed to think that biggest also meant
safest. Marginally operated and smaller money center
banks like Franklin were often denied funds altogether or
were forced to pay high premiums for a limited amount of
funds. The tiered markets which developed forced many
banks to scramble to avoid negative margins and to assure liquidity adequate to meet the claims against them.
Franklin had long-term, low yield assets in both its loan
and its investment portfolios, and thus was locked into a
negative margin between the cost of the funds it borrowed and the uses it made of those funds.
Under these turbulent market conditions, Franklin
struggled. The money market's continuing concern
about Franklin was greatly aggravated in the spring of
1974 when significant problems were disclosed and
market rumors about substantial losses became generally known. A loss of confidence occurred and a massive
outflow of funds resulted, from which Franklin never recovered. The specific actions taken by the Comptroller's
Office during the November 1973 through October 8,
1974 Franklin difficulties are detailed in the appendix to
this statement.
That all banks could not always be assured of equal
access to the money markets was a rude awakening for
many banks practicing liability management and an important lesson for us. We believe we now have the
sophisticated analytical techniques and a far better understanding of money market banks to enable us to take
remedial action early and effectively.
However, because our powers, by design, fall far short
of actually running a bank, there will always be a limit on
our capacity to insure a fail-safe National Banking System.
Changes in the Comptroller's Office
The Committee staff's testimony last week mentioned
several times the year-long study and report on the
Comptroller's Office by the nationally known management consulting firm of Haskins & Sells. There was apparently no direction to the Committee staff, however, to
evaluate the many changes which have resulted from
implementation of the recommendations in that report.
As the Committee knows, the General Accounting Office is now undertaking a full scale review of the operations of the Comptroller's Office. The GAO's report is
expected to deal with the changes in our regulatory and
supervisory procedures.
Meanwhile, however, I should review for the Committee some of those changes in order to dispel the erroneous impression that might be left in the record from the
limited scope of the testimony already presented to this
Committee.
Domestic Examination Procedures
Substantial improvements in national bank examination
procedures now are being adopted.
The new procedures will gear examination efforts
227
more precisely to the needs of the Comptroller's Office
and the particular bank being examined and will stress
review of bank internal controls, such as credit and investment rules, and internal audit procedures.
Examiners will devote more time to the review and evaluation of the bank's own policies and procedures, its
decision-making process, and its management information system. Had the new examination procedures and
processes been in place earlier, they might have enabled the examiners of the Franklin National Bank to perceive much earlier the inherent weaknesses in the bank's
philosophy, policies and procedures which eventually
created the problems leading to its demise.
In addition to the new examination processes, major
revisions are being made in the examination report itself.
The primary purpose of the revised report of examination
is to communicate meaningful information effectively to
both the Office of the Comptroller of the Currency and to
bank directors and management. The report must
clearly identify the problems of special concern to the
examiner, the factors that have caused the problems
and the remedial action suggested.
To promote effective communication of these matters
to the intended recipients, the new report of examination
is divided into three sections designed to explain the relative importance of the examiner's findings of problems
and causes and to indicate recommended corrective action to the applicable recipient.
The first section of the report is designed specifically
for the immediate benefit of the board of directors and its
examining committee, as well as senior management. It
is to be in letter form and will set forth the scope of the
examination plus a summary of all critical comments, in
narrative form, backed by appendices and schedules
that will support the conclusions in sufficient detail to enable the board, or its representatives, to take specific
corrective action. The examiner's comments are to include probable causes of problems and recommended
actions to assist the directorate with this aspect of remedial responsibility.
The second section of the report consists of various
schedules, technical irregularities and deficiencies and
comments by the examiner relative to the conclusions
and evaluation of specific areas. That section will be a
checklist against which a bank's auditor, cashier or other
designated officer can effect correction and against
which the bank's board of directors and/or senior
management can measure the progress of the corrective action.
The third section of the report is designed specifically
for the Comptroller's Office, although we will receive
copies of all three report sections. The third section will
include confidential information and a certain amount of
additional informative data necessary to the operation of
our Office. The confidential section will set forth matters
requiring the prompt attention of our senior staff, such as:
• Suspected violations of law uncovered during the
course of the examination reported, or to be reported, to the appropriate Comptroller officials or
other regulatory and enforcement agencies.
• Critical comments relating to senior bank officers
which may require official remedial action by the
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Comptroller's Office such as the threat of cease
and desist orders or officer removal.
• Subjective comments regarding management or
other matters which have not been factually proven by the examiner but which, nevertheless,
constitute areas of concern.
As is evident, the report of examination and related
procedures have undergone substantial change.
Perhaps the most important change is that most of the
information previously "hidden" in the confidential section of the report of examination is now presented in
the open section. Directors and management of the
bank will have no excuse for doubt concerning our Office's evaluation of the condition of the bank.
National Bank Surveillance System
We are also implementing a bank evaluation and
monitoring system called the National Bank Surveillance
System (NBSS). Had that system been in operation at the
time when Franklin's earnings problems were developing, the system, in coordination with the new examination
procedures, would have assisted in detecting the detailed causes of those problems and, more importantly,
could have helped management correct those problems
in a timely manner.
The NBSS consists of four elements: a data collection
system; a computerized analysis system which detects
unusual or changing conditions in any national bank; an
analysis of those changes by trained NBSS specialists;
and, of primary importance, an Action Control System.
Rapidly processed reports of condition and income
from each national bank are entered into the system at
quarterly intervals. The computer calculates 15 pages of
meaningful ratios and percentages for each bank. A
second computer program summarizes those performance reports and ranks each bank in an "Anomaly Severity Ranking Report." That report simply designates those
banks in the National Banking System which deserve a
priority review. At that point the human element re-enters
the process. The trained NBSS specialists review each
of the 15-page reports and all other relevant data on
each bank which the Anomaly Severity Ranking Report
has designated for priority review.
The Anomaly Severity Ranking System covers three
basic aspects of a bank's condition in relation to that of
other banks in its peer group. It considers the bank's current position in each ratio, its short-term trend in the most
recent quarter and its long-term trend over the past 5
years. Had the NBSS been in use earlier, it would have
designated Franklin for priority review. The NBSS
specialists would have noted a number of conditions in
the Franklin report, including its low and declining earnings; its sources of those earnings; its inadequate provisions for its reserve for possible loan losses; and its inability to utilize fully its municipal tax exempt income. In
view of all of those factors, the hazards involved in its
large, volatile liabilities would have been flagged.
When the Anomaly Severity Ranking System designated Franklin for priority review, an NBSS specialist
would have reviewed the performance report, noted
conditions of concern, and then turned to the Action Control System.
All banks designated for priority review are placed in
the Action Control System quarterly. The bank cannot be
removed from the Action Control System until the conditions of concern have been corrected. While the bank
remains in the Action Control System, reports must be
made every 2 weeks showing the progress or the lack of
progress in correcting conditions of concern.
The conditions of concern must be acknowledged by
the regional administrator, who has the responsibility for
the initiation of corrective action. He must respond to the
conditions cited in the Action Control System. He can
achieve correction at his discretion, but correction
and/or his response must be made within 30 days.
The Action Control reports will also be utilized by various functional units of the Washington Office. If those reports show a bank or a region as delinquent or unsuccessful in its corrective efforts, they can be assisted by
other appropriate units such as our Special Projects staff
or the staff of our Enforcement and Compliance Division.
The NBSS does exist now to this extent. Fast and accurate data is flowing into the system. The 15-page performance reports are being produced and they are
being utilized in most of our geographic regions. Seven
trained NBSS specialists are now in regional offices and
all 14 regional offices will have trained specialists before
the end of June 1976. The Anomaly Severity Ranking reports have been utilized repeatedly and they have proven reliable. We have used the results of the reports and
the specialists' work in banks to cause the correction of
serious problems which would otherwise not have been
detected at an early date.
The Action Control System is a crucial part of the system. Its programming is nearly complete. Its action, condition and response codes have been tested and, with
the input of the next quarter's data, the Action Control
System is to be implemented.
We will then be using a new system of bank supervision. We know that system must remain flexible to cope
with the rapid changes in the banking system. It must
also maintain the proper balance between its machineoperated segments and those involving good human
judgment.
Foreign Exchange Procedures
We are in the process of finalizing a new examination
procedures manual which covers every aspect of
foreign exchange trading and requires written policy
goals and guidelines, segregation of specific duties by
trading and bookkeeping personnel, specific confirmation requirements, internal controls and audit programs.
Recognizing that with relatively minor changes in our
old techniques we might well have found reason to suspect some less than prudent action on the part of
Franklin's personnel, we now require that the examiner
review, not just the most recent, but all monthly revaluation worksheets since the last examination to insure that
proper market rates were used. The new procedures,
under appropriate circumstances, require the examiner
to intercept all mail to insure that all incoming confirmations can be identified with contracts on the bank's
books. These new examination procedures are the most
comprehensive guidelines written to date.
We have made other modifications in personnel, train
ing and examining procedures and policies. These are
designed to help prevent the occurrence of similar situations in other banks.
We insist that the board, through senior management,
set up strict segregation of duties and responsibilities for
every function of this and every other area. Traders
should trade and nothing else. Accounting personnel
should be responsible for all accounting, confirmation,
revaluation and other recordkeeping functions and
completely independent of all trading functions. Their
duties would include sending and receiving trade confirmations, checking discrepancies directly with the
counterparties and reporting those activities to the audit
department and obtaining forward rates for revaluations
independently and performing revaluations without interference from the traders. Auditors must be truly independent from the influence of senior management or the
personnel they are auditing. They must feel free to report
their findings to proper board-level committees. The position clerk should only keep records for the trader and not
prepare reports-for management. Such reports should
be prepared by the accounting department.
Examiners are to evaluate the organization and effectiveness of that separation of duties and to comment
upon deficiencies or overlapping of responsibilities. Critical comments are made directly to senior management
and the board. Examiners include in their examination
procedures an inspection of internal bank reports from
periods between examinations to insure their accuracy
and the correctness of their content.
In addition, as part of the "ongoing examination" concept, while examiners are in the bank they review reports, daily activities, and similar matters, at least on a
test basis, to ascertain if required procedures are followed as a regular practice and also to determine any
major changes in positions and policies.
The International Banking Group continues its efforts
to upgrade the quality, knowledge and experience of
personnel engaged in examining international activities.
Examiners-in-charge of international divisions are now
recommended by the regional administrators and final
selections are made by the International Banking Group,
based on experience, ability and availability. Additional
personnel are participating in quarterly training sessions
on international banking. This training, both in general international banking and in foreign exchange, is conducted by Washington staff personnel, as well as by
other authorities from government agencies such as the
Ex-lm Bank and the Federal Reserve, and by
experienced bankers. An advanced seminar on foreign
exchange trading is also given at least twice annually to
help disseminate knowledge of this subject to as many of
our examiners as possible. In addition, international
examiners travel to other areas of the country in order to
help where experienced support personnel are needed,
and to gain experience from the increased exposure.
Branch and Other Approvals
Procedures for actions on corporate activities, such as
new branches, mergers and other applications in the
corporate area, are being developed to examine more
closely the expansion policies of a national bank in light
of its historical and current condition.
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The Comptroller's Office will soon announce policy
statements which will be published for comment by the
public prior to adoption. Those policies will set forth
guidelines under which the Comptroller's Office will
either grant or deny branches, mergers and other applications of a corporate nature. Those guidelines will
specify that, if a regional administrator wants to approve
a branch or merger which falls outside the guidelines,
the application will get close scrutiny in Washington. If a
particular bank is subject to special surveillance, its application will undergo special analysis by the Bank Organization and Structure Division in consultation with the
special surveillance units in Washington.
In short, our new policies in regard to corporate
expansion will permit closer monitoring, in conjunction
with our new examination and analysis techniques, both
at the regional and Washington levels.
Operations Review
Prior to 1976 the Comptroller's Office had no formal process for reviewing in a systematic way the manner in
which national bank examiners perform their
examinations to assure that performance is consistent
with established instructions and procedures. Such a
formal operations review process is now in place. It is
headed by a Deputy Comptroller with 27 years examining experience who reports directly to me. He is our own
internal inspector general.
Under his supervision, examiners in each of our 14 regions have been specially trained to review the procedures by which banks in other regions are examined and
supervised. Any exceptions to established procedures
and instructions are noted and reported to the
Washington Office.
Additionally, our Deputy Comptroller for Operations
Review is the person to whom a banker who is fundamentally aggrieved by any of our regulatory activities can
bring his complaint.
Operations review procedures should lessen the possibility of examinations being conducted improperly or
not in accordance with the new procedures being
established by our Office.
Recommended Enforcement Legislation
Although the already mentioned changes should make
our Office more effective, there are still more tools we
need that only the Congress can provide. The Congress
is currently considering enforcement legislation recommended jointly by the Comptroller, the Federal Reserve
Board and the FDIC to enable us better to deal with problem banks. I urge prompt consideration and passage of
that legislation.
The legislation has several provisions. The first empowers the banking agencies to assess civil penalties for
violations of various banking statutes and cease and desist orders. I endorse the idea of giving the agencies that
authority.
Another provision of the bill which I heartily support
would give the banking agencies power to remove an officer, director or other person participating in the affairs
of the bank from his position for gross negligence in the
operation or management of the bank or a willful disregard for,the bank's safety and soundness. Under the
present statute, bank officials can be removed only if the
agency can establish "personal dishonesty." The judicial review provisions already contained in the statutes
are ample to protect against arbitrary or capricious use
of such power.
The procedures by which an officer or a director of a
national bank can be removed also need amendment.
Under existing law, the Comptroller lacks power to remove a bank official unless that official has been indicted. If he has not been indicted, the Comptroller can
do no more than certify facts to the Federal Reserve
Board. The Federal Reserve is given the responsibility
for issuing a notice of proposed removal, prosecuting
the case, hearing the evidence and making the final decision. The Comptroller cannot even institute the proceeding.
That procedure is so cumbersome to use that neither
the Federal Reserve Board nor my Office believes that it
has been very effective. We thus have recommended a
provision which would empower the Comptroller to institute and prosecute proceedings. The Comptroller also
would have the power to suspend a bank official pending
completion of the proceedings. The Federal Reserve
Board, however, would retain its authority to hear the
case and make final decisions. I am in complete agreement with that recommendation.
In addition to this general statement on Franklin and
the operations of our Office, responses to specific questions in your letter of invitation of May 4, 1976 are addressed in the Appendix to the statement.
Appendix to June 1 Statement by James E. Smith
Franklin National Bank — November 1973 October 8, 1974
On November 14, 1973, our Office began a regular
examination of Franklin. That examination, which was not
to conclude until March 8, 1974, disclosed that Franklin
had serious financial problems. Those problems included a low-yielding loan portfolio, depreciation in the
municipal and investment portfolios, heavy reliance by
the bank on short-term borrowed funds (so-called hot
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money) and the bank's poor management. Uncollectable loans totalled $10 million. The operating income of
the bank was poor, and, because that was public information, public confidence in the bank was affected.
Total resources of the bank had grown to
$4,852,999,972, which was 29 percent higher than the
previous December 8, 197-2 examination. The capital,
however, had increased by less than 0.5 percent; demand and savings deposits actually had declined 5.5
percent. The bank's recent growth had been financed
almost entirely by using short-term borrowed funds, including time deposits of other banks and money market
certificates of deposit. Those types of funds totaled $2.3
billion, or 50 percent of the bank's liabilities. They had increased dramatically by $984 million, or 76 percent,
since the last examination. Such borrowed funds are
volatile and likely to disappear quickly if creditors have
reason to question a bank's stability or soundness.
I instructed Regional Administrator Van Horn by letter
on February 22, 1974, to meet with the senior management of Franklin in order to formulate a plan with the bank
for remedial action such as reducing all forms of
borrowings, setting standards for new loan extensions
and adjusting the imbalance between the bank's capital
and the size of its operations. Mr. Van Horn met with the
senior officers of Franklin on February 28,1974, and with
the board of directors on March 28, 1974. The bank
agreed to reduce its borrowings by $500 million by
liquidating $260 million carried in its bond trading account, selling another bank $100 million in loans, reducing new loan commitments and increasing borrowers'
compensating deposits maintained at the bank.
On April 18, 1974, Franklin New York Corporation
(FNYC) announced net operating income for the first
quarter of 2 cents per share, or $79,000, down from the
previous year's 68 cents per share, or $3.123 million. The
holding company release stated that income was "adversely affected by the sharp rise in the cost of short-term
borrowings needed to carry assets during the 1974 quarter."
On May 1, 1974, the Federal Reserve Board announced its denial of the holding company's application
to acquire Talcott National Corporation, a business
financing and factoring firm. FNYC had applied for that
acquisition on August 13, 1973. The Board decided that
"this proposal may constitute an undue drain on Applicant's managerial and financial resources."
On May 10, 1974, the Comptroller's office and the
Federal Reserve Board learned from Franklin that heavy
losses in an undetermined amount had occurred in the
bank's foreign exchange department. Bank management decided to announce those losses. It was clear that
an announcement of this kind would dry up the bank's
sources of borrowed funds, thereby creating a severe
liquidity crisis. In anticipation, the bank sought a huge
loan from the Federal Reserve Bank of New York to cover
the expected run-off.
On May 10, 1974, management announced that, in
light of the small profit for the first quarter of 1974 and
management's estimate for the second quarter, it would
recommend that Franklin's board of directors not declare the regular dividend on Franklin's common stock
and convertible preferred stock.
We advised the FDIC of those events.
Taken together, the bank's April 18 release, the May 1
Talcott turndown and the May 10 release caused large
scale institutional withdrawals and forced the bank to the
Federal Reserve discount window to obtain the liquidity
funds it needed.
At that time, management of the bank and representatives of this Office began exploring merger possibilities.
The only possible, immediate merger partner showing
serious interest was Manufacturers-Hanover Trust Com
pany of New York. Manufacturers-Hanover, in April
1974, had loaned FNYC $30 million on a long-term basis.
After intensive discussions with the officers of Franklin,
the management of Manufacturers-Hanover determined
on May 12 that an immediate merger was not feasible.
On Friday and Saturday, May 10 and May 11,1974, an
internal review of the foreign exchange department was
taking place and by Saturday evening, May 11, 1974, a
relatively large loss was estimated. On Sunday, May 12,
1974, Franklin issued a press release, which stated in
part:
The bank also reported that its foreign currency
exchange department has realized losses since
March 31,1974, of approximately $2 million. In addition, it has recently been discovered that because of
a trader in that department operating beyond his authority and without the bank's knowledge, it will have
sustained losses, as of May 13,1974, of $12 million,
and has potential losses of $25 million at May 10,
1974 rates.
The bank also noted that earlier in the day on May 12,
1974, Vice-Chairman Mitchell of the Federal Reserve
Board, after having been assured by our Office that
Franklin was solvent, advised in a press release that "as
with all member banks, the Federal Reserve System
stands prepared to advance funds to this bank as
needed." FNYC asked the Securities and Exchange
Commission to suspend trading in its securities. The
SEC did suspend trading and conducted an investigation into the accuracy of FNYC financial statements. Ultimately a lawsuit was instituted by the SEC.
On May 13, 1974, at a special meeting of the bank's
board of directors, the president of the bank and the
head of its foreign exchange department were fired.
Those events further eroded confidence in the bank so
that, by close of business on Wednesday, May 15,1974,
the bank's loan at the Federal Reserve discount window
reached $780 million.
Much of the public attention at that time was focused
on Michele Sindona, an Italian lawyer and resident of
Switzerland, who, in July 1972, had purchased
1,000,000 shares of FNYC through his holding company,
Fasco. That stock constituted 21.6 percent of the outstanding shares of the common stock of FNYC. Mr. Sindona became a director of FNYC in August 1972.
In view of the public concern over Mr. Sindona's association with the holding company, Mr. Sindona agreed
that, for one year, he would relinquish his rights to vote
the FNYC stock held by Fasco and would give the sole
voting rights to former Treasury Secretary David Kennedy. That was completely agreeable to me and an announcement to that effect was made by Franklin in a
press release dated May 12, 1974. Franklin also announced plans to raise additional capital of $50 million
and several major management changes which were to
be put into effect at the bank's board meeting the next
day. On Monday, May 13, the bank accepted the resignations of Paul Luftig, the president and chief executive
officer of the bank and Peter Shaddick, vice chairman in
charge of Franklin's international department.
On Tuesday, May 14, 1974, a new examination of the
bank was commenced in order to update the value of its
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loans, its securities and foreign exchange position. The
May 14 examinations showed large foreign exchange
losses, accelerated depreciation in securities and a
general lack of improvement in the bank's condition
since November 1973.
On May 13, 1974, I requested the member banks of
the New York Clearing House Association to explore
Franklin's affairs. The purpose of this review was
threefold:
1. To advise me and my staff as to how other bankers would view the condition of Franklin National
Bank;
2. To establish a foundation upon which the Clearing House Association members might act to
help with Franklin's liquidity problems; and
3. To provide information to members of the Clearing House who might be interested in acquiring
Franklin National Bank. In this regard, it was
agreed that any information received through
this processing by members of the Clearing
House also would be made available to any
non-Clearing House member interested in acquiring Franklin National Bank.
On June 11,1974, with the encouragement of the Federal Reserve System, an arrangement was reached
whereby members of the Clearing House individually
would loan Federal funds to Franklin in an amount which
aggregated $225 million.
Meanwhile, efforts had been made to attract stronger
management. With my assistance, Mr. Edwin Reichers
was brought into Franklin on May 17,1974, as an executive vice president in charge of Franklin's foreign
exchange operations. He had for 40 years been with First
National City Bank of New York, and headed that bank's
foreign exchange operations.
A long search for a new head of Franklin culminated on
June 21, when Joseph W. Barr was brought into Franklin
as its chief executive officer.
Mr. Barr, who is well known to many members of this
Committee as a former colleague in the House, had a distinguished background in the fields of government and
finance, having served as Chairman of the FDIC, Under
Secretary and Secretary of the Treasury Department,
and as the Chairman and Chief Executive Officer of
American Security and Trust Company of Washington,
D.C. He was well and favorably known by foreign financial institutions, and was a man with whom I was confident we could work effectively under most demanding
conditions. My confidence in him was fully justified by his
performance. Without him and the qualities of integrity,
courage, and decisiveness which he brought to bear on
the myriad problems, I frankly doubt that the successful result on behalf of Franklin's depositors could have
been achieved.
On July 2, I wrote the FDIC requesting that it contact
other banking organizations which were potential purchasers of some or all of the business assets of Franklin
National Bank. The FDIC developed a plan to assist a
prospective purchaser to assume liabilities and purchase assets of Franklin and began negotiations with
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interested bankers to draft a set of acquisition papers
upon which banks could bid competitively in the event
the FDIC became the receiver.
In an effort to alleviate further liquidity problems, I requested a meeting of representatives of 17 large U.S.
banks to discuss selling Franklin's portfolio of Eurocurrency loans. The meeting took place in Chicago on
July 22. Some $300 million of loans were offered for sale.
That proved unsuccessful, however, because of the
interest rates on the credits in comparison with the then
prevailing high interest rates, and because of the liquidity problems of all large banks at that time.
In September, Mr. Barr presented the regulatory
agencies a plan by which, with substantial assistance
from the FDIC, Franklin would retrench, give up most
of its national and international business, and become a
Long Island bank. I requested the investment banking
firm of Blyth Eastman Dillon & Co. to advise us concerning Mr. Barr's proposal. On October 3, the firm
advised that the prospects of Franklin's achieving financial viability as an independent banking institution
were bleak.
Mr. Barr also suggested that in the event a takeover
of Franklin became necessary, it would be beneficial to
the interests of the shareholders and to the competitive
situation to widen, as much as possible, the list of potential purchasers. The greatest obstacle to that was
the legal situation which limited the list of potential U.S.
buyers to New York State-chartered institutions and national banks located in New York. Mr. Barr requested
that, not only for this case, but also for the future, Congress should act quickly on legislation which would
permit the purchase and operation of banks across
state lines where necessary to prevent the probable
failure of a large institution. Time did not permit the
adoption of such legislation before the end came for
Franklin, but I hope that the Congress will soon provide
for such a situation.
As a result of continuing negative publicity, continuing deposit decline and management's continued inability to reduce the loan portfolio, on September 30,
Franklin's total borrowings from the Federal Reserve
Bank of New York exceeded $1.7 billion. By the end of
September, total deposits were rapidly declining to the
$1 billion mark and total other liabilities, principally borrowings, were rising to nearly $2 billion. The bank was
unable to retain large maturing certificates of deposits
or other maturing money market liabilities.
Based on all facts available, including Mr. Barr's
proposal which conceded that the bank could not survive without massive government assistance, the Blyth
Eastman Dillon report, and the negative reports by the
New York Clearing House banks, I concluded that
Franklin did not appear to be a viable institution.
On October 4, I wrote to the Federal Reserve bank,
briefly reviewing the situation, and asking for the Federal Reserve Bank's views with respect to its continued
willingness to lend funds to Franklin. On October 7, the
Federal Reserve Bank replied, stating that its
emergency credit assistance to Franklin was based on
public policy considerations arising from the responsibility of the Federal Reserve System as a lender of last
resort and was designed to give Franklin and the concerned Federal bank regulatory agencies a sufficient
period to work out a permanent solution to the bank's
difficulties. The Federal Reserve Bank also had concluded that the Franklin proposal of September 16, to
the FDIC did not offer a feasible means of achieving
the continuation of Franklin as an independent, viable
bank. The Federal Reserve Bank advised that it would
not be in the public interest for that bank to continue its
program of credit assistance to Franklin.
It was no longer in the best interest either of
Franklin's depositors and other creditors or of its
shareholders to wait for further deterioration in the
bank's condition, especially when the alternative of the
FDIC-assisted purchase of the bank at a price including a substantial premium for a going concern, became available. By October 8, Franklin was no longer
the 20th largest bank in the country but had become
about the 46th largest bank. Of the 65 banks in its size
category, those with $1 to 5 billion in deposits, Franklin
had ranked 65th in earning power. That lack of ability
to generate earnings, combined with heavy reliance on
purchased money, finally created a set of circumstances which the bank could not bear. On October 8, having become satisfied that Franklin National
Bank was insolvent, and acting pursuant to 12 USC
191, I declared the bank insolvent and appointed the
FDIC as receiver.
In order to protect all of the depositors of Franklin,
the FDIC moved immediately to accept bids from several major New York banks upon a pre-negotiated contract which provided full projection for all Franklin depositors and other normal banking creditors. All bids
were opened simultaneously in the presence of the entire FDIC Board of Directors. The high bidder was the
European-American Bank and Trust Company, a federally insured, New York State-chartered institution
owned by six large European banks. The following day
every banking office of Franklin was opened at the
regular banking hour by the European-American Bank.
All depositors in Franklin, including holders of certificates of deposit, savings accounts, time accounts,
and checking accounts, automatically became depositors of the European-American Bank. The
European-American Bank also assumed all existing
liabilities to trade creditors of Franklin. The approval of
the purchase and assumption transaction avoided any
disruption in service for depositors and increased the
chances of subordinate creditors for full repayment of
their claims.
In summary, our number one goal was to protect the
depositors and the banking system of this country, and
that goal was achieved.
Responses to the Subcommittee's Questions
The Subcommittee has asked, in Chairman Rosenthal's
letter of May 4,1976, for responses to a series of specific
questions. Most of the questions have been answered in
the earlier portions of the statement or by making available documents to the Committee staff. The remaining
questions are answered below.
Question: For the years 1971 to date, provide the number
of parties to, terms of, and degree of compliance with
each (i) agreement between the Office of the Comptroller
of the Currency and a national bank, and (ii) statement of
intent or assurance by the board of directors and/or officers of a national bank, which was given as a condition
for obtaining approval for a merger, acquisition, new
domestic or foreign branch, expansion of office facilities,
an issuance of equity shares or debentures, or other act
requiring the consent of the Comptroller of the Currency.
Answer: Exhibit A is a summary of the administrative actions brought pursuant to the Financial Institutions
Supervisory Act of 1966 from 1971 to present. [With it is]
a copy of a chart prepared reflecting the number of times
specific violations were addressed in the proceedings.
We have found that the administrative actions taken
have proven successful in the majority of instances. In
that regard, we note that in 29 instances since 1971, this
Office has requested banks to obtain additional capital
or to initiate plans to increase capital. In all but four
instances, the banks have complied with those requirements. In two of the four instances where there was
inadequate compliance with formal written agreements
between the bank and this Office, we resorted to the issuance of a Notice of Charges and a commencement of
a formal Cease and Desist proceeding. In both of those
instances the bank added additional capital as a direct
result of the proceedings.
Four of the proceedings brought have been formally
concluded as there has been complete compliance with
the provisions. Nine proceedings have been terminated
due to the sale, merger or failure of the banks while under
administrative actions. We believe that in at least 37 instances, proceedings, although still in effect, may be
concluded as the banks have fully complied or are taking
adequate steps to gain compliance.
The remainder of the banks have not yet fully complied
and may require additional administrative action.
233
Exhibit A
Proceedings Brought by the Comptroller Pursuant to the
Cease and Desist Provisions of the Financial Institutions
Supervisory Act of 1966, 12 USC 1818(b),
1971 - Present
[For 1971 through 1975, see pp. 211-214 of this report. For printing, those years were not repeated here.]
1976
62. An Agreement to eliminate excessive extensions of
credit, in violation of 12 USC 84, and to eliminate various unsafe and unsound banking practices concerning criticized assets. Provisions to upgrade the
credit quality and procedures for handling loans
and to improve the capital position of the bank.
63. A Notice of Charges, a Temporary Cease and Desist
Order and a Permanent Order to eliminate unsafe
and unsound banking practices, criticized assets
and violations of law, including 12 USC 84, 31 CFR
103.33, and 12 CFR 221 and 226. Provisions to improve the capital position of the bank and the loan
policies of the bank and the elimination of excessive
concentrations of credit. Provisions to cause the collection of all debts previously charged off and to hire
an executive officer and operations officer.
64. An Agreement to improve the capital position, the
liquidity position and the loan policies of the bank.
Provisions for the elimination of unsafe and unsound
banking practices, criticized assets and violations
of law, including 12 USC 84 and the Truth-in-Lending
statute (Regulation Z). A provision to hire a new
executive officer.
65. An Agreement to eliminate various unsafe and unsound banking practices and to take steps to eliminate criticized problems, including excessive hold-
ings in real estate. Provisions requiring the improvement of the capital position of the bank and the
hiring of an executive officer.
66. An Agreement to eliminate excessive extensions of
credit, in violation of 12 USC 84, and to eliminate various unsafe and unsound banking practices concerning criticized assets. Provisions to improve the
capital and earnings position of the bank and to upgrade the credit quality and procedures for handling
loans. Provisions to hire an executive officer and a
full-time auditor.
67. A Notice of Charges and a Temporary Cease and
Desist Order to eliminate extensions of credit of a
self-dealing and self-serving nature for the benefit of
the controlling shareholder of the bank and related
companies or individuals. A provision to eliminate
overdrafts.
68. An Agreement to improve the liquidity position of the
Bank and to upgrade the credit quality and procedures for handling loans. Provisions for the elimination of unsafe and unsound banking practices,
criticized problems, excessive concentrations of
credit, and violations of law, including 12 USC 371 c,
12 CFR 23,11 and 18. Provisions for the hiring of an
operations officer to ensure adequate internal controls.
Chart
Cease and Desist Proceedings Brought by the Comptroller of the Currency, Pursuant to 12 USC 1818(b),
1971 to Present
234
67
c)8
X
X
X
X
X
x
X
X
X
X
X
X
1
X
?
1
X
X
x
x
X
x
x x x
x
X
X
5
3
X
X
5
X
X
2
1
X
X
6
0
0
1
5
2
1
0
2
6
1
X
X
X
X
X
X
X
x
x
X
X
x
X
X
X
X
X
Other
12 USC 371
12 USC 375a
Individual Exclusion
and Prohibition
Bonuses
Limit New Loans or
Extensions of Credit
Limit Credit Extension
on Existing Loans
Management Fees
Loan Collections and
Loan Policy
Audit (Internal
Controls)
Truth-in-Lending
Satisfactory Credit
Information
New Management and
Director
12 USC 375
Collateral Exceptions
Increase Capital
X
X
X
X
X
Liquidity
X
Correspondent Balances
Executive and Director
Compensation
Indemnification
X
Classified Assets
x
X
Overdrafts
Corrections of Law
Violations
Management Qualification
fifi
Dividends
X
X
X
Loans Within Trade Area
12 USC 84
62
63
64
X
C\J|
Deposits
(Thousands of dollars)
1,003,100
9,653
11.550
B3.8P7
65.123
46.044
10.200
Total for
1976 to date
Number
[For 1971 through 1975, see page 224 of this report. For printing, those years were not repeated here.]
X
X
6
5
0
0
2
X
X
X
1
7
This Office has on several occasions attached conditions to the approval of branches, mergers, acquisitions
and other actions by banks. The typical situation involves
a request for a branch, the approval of which is conditioned on the bank's increasing its capital by a specific
amount. Neither the files on mergers and branches nor
the files on capital increase are established to reflect
after the event that the raising of new capital was a condition for approval of a new branch. The information can be
developed only by a separate review of documents associated with each branch, merger, acquisition, capital
issue or expansion.
Question: All approvals and consents given and made
by personnel of the Comptroller of the Currency permitting mergers, the opening of new domestic or foreign
branches, and /or expansion of office facilities regarding
FNB for each year from 1965 through 1974.
Answer:
Foreign Branches
The only merger during the period was with Federation
Bank and Trust, referred to above. The New York regional office issued two approvals during 1972 permitting expansion of office space pursuant to 12 USC 371 d.
This Office has no authority to approve or disapprove
foreign branches. Documents in OCC files pertaining to
Franklin foreign branches have been provided to the
Committee staff.
Branches, Mergers and Expansion
of Facilities of Franklin
Domestic Branches
Year
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
Final
Approvals
Permitting
Openings
4
4
15*
1
3
3
7
5
1
0
Rejected
1
4
3
0
2
4
1
0
0
0
Withdrawn
2
0
0
0
2
2
0
0
0
0
*The approvals of 1967 include the main office (retained as a branch)
and 13 operating branches of the Federation Bank and Trust Co. acquired by merger June 30, 1967.
Question: Set forth the number of national banks which
were given composite or group ratings of 3 or 4 continuously from 1971 through 1975, and for each bank the annual number of (i) new domestic branches, (ii) new
foreign branches and (iii) expansions of office space the
Comptroller of the Currency has approved for each year
since 1972.
Answer: There were five national banks which were
given composite or group ratings of 3 or 4 continuously
from 12/31/71 through 12/31/75. For those five banks,
the following new domestic branch applications were
approved or denied during the 1971 through 1975
period:
1972
Approved
Bank#1
Bank #2
Bank #3
Bank #4
Bank #5
Denied
1973
Approved
1974
Denied
Approved
1975
Denied
Approved
Denied
2
2
Total forthe period: Applications - 5; Approved - 1 ; and
Denied - 4.
For the same five national banks, the Office received
no applications for new foreign branches.
Pursuant to 12 USC 371 d, a national bank may invest
in bank premises up to 100 percent of its capital stock
without the approval of the Comptroller of the Currency.
Bank #2 applied to the Office for permission to exceed
its limitation in 1974. Permission was granted for the
bank to invest in banking premises in an amount not to
exceed its capital accounts plus $150,000. None of the
other four banks requested permission to exceed the
limitation during the 1972-1975 period.
Question: The management, operations and conditions
of, and supervisory recommendations made and actions
taken by personnel of the Comptroller of the Currency
with respect to First National Bank of East Islip (FNBEI)
for the years 1971 through 1975, to the extent the same
previously has been made a matter of public record
through court records, proxy statements, press releases
and other means.
Answer: Copies of the public documents of which we are
aware that relate to the management, operations and
conditions of the FNBEI and the Comptroller's supervisory actions related to that bank are annexed hereto: [For
the purposes of this publication, we are including only a
list of those documents. They are, however, available as
public information.]
•
•
•
•
•
•
Documents Available as Public Information on First
National Bank of East Islip
Notice of annual meeting and proxy statement for the
annual meeting of shareholders of January 19,
1971.
Notice of annual meeting and proxy statement for the
annual meeting of shareholders of March 7, 1972.
Notice of special meeting and proxy statement for
special shareholders' meeting of August 29, 1972.
Notice of annual meeting and proxy statement for the
annual meeting of shareholders of March 6, 1973.
Shareholders' Derivative Suit of Charles H. Wolpert
and Martha Wolpert as stockholders of the First National Bank of East Islip against the First National Bank
of East Islip, ef a/., commenced on or about February
3, 1974.
Shareholders' Derivative Suit of Charles Housler, et al.
versus the First National Bank of East Islip, ef al.,
commenced on or about January 21, 1974.
235
Complaint of Joel E. Kastein, John W. McGraine and
Crest Affiliates Inc. against the First National Bank of
East Islip, et ai, commenced on or about October 22,
1973.
The notice of annual meeting and proxy statement for
the annual meeting of shareholders held March 5,
1974.
The notice of special meeting of shareholders to be
held November 12, 1974.
Notice of annual meeting of shareholders and proxy
statement of the annual shareholders' meeting held
March 4, 1975.
The notice of annual meeting of shareholders and
proxy statement of annual shareholders' meeting held
March 2, 1976.
Article, Newsday, dated March 2, 1974.
Article, Long Island Press, dated March 2, 1974.
Additional Material on Special Projects/Bank
Review Program
Memo to all regional administrators and
national bank examiners, January 27, 1976
The reorganization of the OCC contemplates primary authority and responsibility for the supervision of banks at
the regional level through our examiners and regional
administrators. This Office must, however, retain some
overview responsibility of banks, especially in the capacity of lending technical and specialized assistance to the
regions. A revised procedure has been devised which allows the Comptroller to be informed and to track movements within the National Banking System at all levels.
The details of the new program are attached. The program is essentially designed to provide improved communication and coordination between the national bank
236
examiners, the regional offices and the Washington Office and, by so doing, to enhance the ability of the OCC
as a whole to effectively discharge its supervisory responsibilities.
The program provides for timely notification when a
bank is being assigned to the program or when significant subsequent events change the status of a bank
previously assigned. The program also provides the
Washington staff with the opportunity to directly assist
the regions in bank supervision, when required.
The procedures involved in the program are designed to give this Office a standardization to insure an
informed posture, but are not intended to be inflexible.
It is recognized that circumstances will on occasion
dictate that exceptions be made to the policies and
procedures set forth in the attached material. However,
when such circumstances warrant a departure from
established procedure, we should be promptly advised.
A revised examiner's memo, which is to be prepared
at each examination, is also [attached]. The analysis
sheet, which is an integral part of the memo, should be
completed in full at each future examination of a bank
assigned to the program. It is recognized, however,
that certain statistical data called for by the analysis
sheet will not be readily available from prior examination reports. Therefore, examiners may omit the historical information on certain items if it is not easily obtainable.
The task of properly controlling the problems faced
by the National Banking System is obviously one of the
most important we have. We are hopeful that this program can be successfully integrated into and compliment other planned changes under our reorganization
effort. Success in this regard will of course continue to
depend on your full cooperation, support and advice.
H. Joe Selby
First Deputy Comptroller for Operations
Attachments
Special Projects/Bank Review Program
Participants
Regional participations will include the examiners who
conducted the last examination of banks subject to the
program as well as the regional administor, his deputies,
or other designees.
In Washington, responsibility for banks in the program
will be divided into two groups, each with a director and a
professional staff of national bank examiners.
One group will be known as Special Projects and will
have responsibility for all banks in the program with total
resources in excess of $100 million. Overall supervisory
responsibility for the Special Projects group will be vested in H. Joe Selby, First Deputy Comptroller for Operations, with primary administration delegated to Paul M.
Homan, Associate Deputy Comptroller.
Bank Review, the other group, will handle those banks
assigned to the program which have total resources of
less than $100 million. Charles B. Hall, Deputy Comptroller for Banking Operations, will have overall supervisory
responsibility for this group, with primary administration
delegated to Royal B. Dunham, Jr., Director.
Other Washington Office staff participating in the program on a full- or part-time basis include:
•
•
•
•
The Enforcement and Compliance Division.
All groups of Bank Operations.
National Bank Surveillance System.
Securities Disclosure Division.
Criteria
A. Banks designated by the regional administrator in the
exercise of his best judgement as to quality of assets,
adequacy of earnings, ability and depth of management, capital adequacy, and other factors which militate for inclusion on the program. All banks having
criticized assets, that is, 100 percent substandard
plus 50 percent of OLEM and doubtful, aggregating
65 percent of adjusted capital funds will be reviewed
by the regional administrator for possible inclusion,
as well as those with separate and distinct deficiencies relating to other than asset quality.
B. All banks with assets of more than $100 million that
have criticized assets, as defined above, aggregating 65 percent of adjusted capital funds which were
not designated by the regions under A, will be reviewed by Special Projects for possible inclusion in
the program.
C. Using the same criteria or additional criteria that may
be developed, Banking Operations, Special Projects, and/or the NBSS group, at their discretion, may
designate banks for the program.
D. All banks operating under a formal written agreement
or a Cease and Desist order.
Removal of a Bank from the Program
When a bank no longer meets the criteria described
above, and /or in the opinion of the regional administrator
no longer requires close supervision under the program,
the regional administrator should submit a memorandum
to the appropriate group recommending removal of the
bank from the program. The decision on such recommendations will be made by the appropriate group subject to a review by the First Deputy Comptroller for Operations and /or the Deputy Comptroller for Banking Operations.
Communications
Written
All reports of examination of banks in this program will be
marked with the word "priority" (rubber stamps should
be ordered by the regional offices). In addition, letters,
memoranda or other data pertaining to problems or the
correction of problems will also be so marked. Such reports and correspondence should receive speedy processing and be forwarded to the attention of Paul M.
Homan, Associate Deputy Comptroller, Special Projects, or Royal B. Dunham, Jr., Director, Bank Review, as
appropriate.
Other correspondence about banks in the program
should be directed to the appropriate individual, division
or group in the Washington Office through use of the attention line.
Telephone
Each regional office should be equipped with speaker
telephone equipment. Similar equipment will be available to the Washington groups. Conferences will be arranged on a case-by-case basis at the initiation of either
regional administrators, their designees or Washington
Office staff participating in the program.
Procedures
National Bank Examiners
The examiner-in-charge of each examination will communicate with the regional or Washington Office under
the following circumstances and in the following manner:
• By telephone to the regional office, during an
examination as soon as it becomes apparent that
there are significant adverse changes in a bank in
the program or there is evidence that a bank
should be placed in the program.
• In writing, to be forwarded to his regional administrator as in Exhibit A, no later than at the time of
concluding the examination. The written communication will include basic statistical information;
a concise narrative of the bank's significant problems, to include causes and a summary of pertinent subsequent events; and specific recommendations for appropriate corrective action.
The regional administrator will mark the
examiner's memorandum with the "Priority"
stamp and add his opinions to those of the
examiner. The examiner's memo should be forwarded within 2 business days of receipt in the
regional office. Completion of the report of
examination will not delay the forwarding of the
examiner's memorandum.
237
• When required by the regional administrator, the
examiner will participate in group telephone conferences between the regional offices and the
Washington Office concerning banks in the program.
Regional Administrators
1. New banks added to the program are to be reported to the Washington Office by the regional
administrator as soon as possible.
2. The regional office will continue to review reports of examination and rate the banks. If, by
the review and rating, they determine that a
bank should have been placed in the program
by the examiner but was not, they will provide
the necessary telephone and written communication as in Exhibit A.
3. The regional administrator, or his designee,
and the examiner-in-charge must meet with the
board of directors, or a committee thereof, in
conjunction with each examination of a bank in
the program.
4. For banks in the program with assets exceeding $50 million, a copy of the report of examination will be sent to the bank and the appropriate
Washington group at least 10 days prior to the
board meeting.
5. A letter written by the regional administrator
should be forwarded to the bank's board of directors, together with the transmittal of the report. At a minimum, that letter should include:
a. A request that each board member review
the report;
b. A summary of the major deficiencies disclosed in the report in an objective method;
c. A request that the board prepare a specific
plan of corrective action designed to deal
with and correct the deficiencies of the
bank as reflected in the examination report.
The board should be prepared to discuss
this plan at the meeting;
d. A paragraph that indicates:
This letter is supplemental to and part of
the examination report. Its purpose is to
highlight matters in the examination report
requiring the attention of the board of directors. The letter and its contents should be
treated with the same degree of confidentiality as the examination report.
As an alternative, the regional administrator may
wish to fully incorporate into the examination report his communication to the board by commenting on page 2 under the heading, "Regional Administrator's Comments." If that
alternative is used, the transmittal letter should
instruct the board to refer to page 2 of the report
of examination for the regional administrator's
comments.
6. Prior to meetings with the board of directors, the
238
7.
8.
9.
10.
11.
regional administrator will inform the appropriate Washington group of the date and objectives of the board meetings. When appropriate,
a staff member of the group and a representative of the Enforcement and Compliance Division will attend such meetings. Participation in
the actual board meeting by the Washington
staff is desirable to an extent that is mutually
agreeable to the regional administrator and the
Washington Office.
The board, or a committee thereof so authorized, should present their plans for corrective action at the meeting. If those plans are not
considered adequate by the regional administrator, his views should be so stated to the
board or committee members and satisfactory
amendments adopted by resolution. If satisfactory plans are not adopted, the regional administrator should advise the group that further
administrative action by the Comptroller's Office may be required.
The regional administrator should convey in
writing the results of the board meetings.
The regional administrator should require frequent reports by the board as to the progress
concerning any agreed corrective action. Each
bank required to send a progress report should
be asked to forward the original to the regional
administrator with a copy to the Comptroller of
the Currency, Attention: Royal B. Dunham, Jr. or
Paul M. Homan, as appropriate.
Regional offices should forward copies of internal analyses of progress reports to the appropriate Washington group.
Regional administrators will continue to
schedule frequent examinations and visitations
of banks assigned to the program as they deem
necessary. However, an examination projection of such banks will be completed by each
region on a monthly basis. The form (Exhibit B)
will be reproduced in the region as needed and
forwarded to the attention of the appropriate
Washington group in sufficient time to arrive no
later than 5 working days prior to the beginning
of the month projected. Any amendments to the
projection after it has been submitted, will be
conveyed to the group via telephone communication.
For your information, the names of the Washington
staff members assigned to the program are:
Bank Review — banks with assets of less than $100
million, Director, Royal B. Dunham, Jr.
Professional Staff, [3 national bank examiners]
Special Projects — banks with assets of $100 million or
more, Director, Paul M. Homan
Professional Staff, [5 national bank examiners]
Exhibit A
Examiner's Memo
Summary of Problems
Summarize your views of the bank's problems, taking
into account all significant factors. Specific problems
should be identified. Your recommendation as to possible solutions to the significant problems should be included in the narrative.
Subsequent Events
Summarize any pertinent changes since the date of your
examination. This would include the resignation of key officers or directors, declines in deposits, increases in
loans or commitments to lend, proposed mergers, etc.
Recommended Corrective Actions
Your positive, open views are needed in this section. You
can be the most knowledgeable as to the causes of the
bank's problems. Please state your views without reservation.
Signature of national bank examiner
Regional Administrator's Opinion
Statements concurring or differing with those of the
examiner should be made in this section.
Signature of regional administrator
Exhibit B
(month)
Priority Banks Examination Projection
(Include all such banks under examination)
Name of Bank & Location
Projected Starting Date
(if under examination
indicate starting date.)
Projected
Completion Examiner-inDate
Charge
Type Examination
Regular Examination
Visitation
Bobtail Examination
Regional Administrator
239
Exhibit C
SPECIAL PROJECTS/BANK REVIEW PROGRAM
ANALYSIS SHEET
NAME OF BANK.
-REGION.
-CHARTER #_
^STATE-
CITY
HOLDING COMPANY AFFILIATION-
(Showi prior three and current examinatc)ns)
(Omit 000's)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Rating
Date of Examination
Examiner-in-Charge
Total Resources
Total Deposits
Percent of Time Deposits to Total Deposits
Gross Capital Funds (GCF)
Adjusted Capital Funds (ACF)
Deposits x GCF
Total Assets x GCF
Loans x GCF
Percent of Loans to Deposits
Substandard
Doubtful
15. Loss
16. Total Classified Assets
17. Percent of Classified Assets to GCF
18. OLEM
19. Percent of OLEM to GCF
20. *SP Ratio
21. Valuation Portion (Reserve for Loan Losses)—Amount
Percent of Total Loans
22. Loans not supported for current Credit Information—Amount
Percent of Total Loans
23. Overdue Loans—Amount
Percent of Total Loans
24. Non-Accrual Loans—Amount
Percent of Total Loans
25. Bond Depreciation—Amount
Percent of ACF
26. Percent of Direct or Indirect Investment in F/A to ACF
27. Percent of Net Liquid Assets to Net Deposits
28. Loans and Overdrafts
29. Direct Lease Financing
30. Acceptances
31. Stand-by Letters of Credit
32. Irrevocable commitments to lend
33. Advances to Affiliates
34. TOTAL (Lines 28 through 33)
35. Line 34 x GCF
36. Large ($100M or more) Time CDs
37. Due to Banks—Time
38. Borrowings—Short Term* *
39. TOTAL (Lines 36 through 38)
40. Cash and Due from Banks
(Demand and Time)
41. Money Market Assets* * *
42. Market Value Unpledged Bonds
43. TOTAL (Lines 40 through 42)
44. Net Volatile Liabilities (Line 39
minus Line 43)
Percent of Total Resources
197
197
197
197
45. Operating Income
46. Operating Expense
47. Income before Income Taxes &
Securities Gains/Losses
48. Net Income
49. Add Provision for Loan Losses
50. Add Recoveries credited to
Reserves
51. Less: Losses charged to Reserves
52. Adjusted Net Income
53. Less: Dividends
54. Retained Profits
*
**
**
**
SP Ratio: The adjusted sum of substandard, 50% of Doubtful and 50% of OLEM as a percentage of Adjusted Capital Funds.
Borrowings—Short Term: Include all forms of money market obligations, except for mortgage debt and capital notes and debentures,
Money Market Assets: Include Federal Funds sold and securities purchased under Resale Agreements.
Show last three full calendar years plus interim f "}ures through the month-end prior to the examination date.
Digitized for240
FRASER
Statement of Thomas W. Taylor, Associate Deputy Comptroller of the Currency for
Consumer Affairs, before the Senate Committee on Banking, Housing and Urban
Affairs, Washington, D.C., July 29, 1976
I appreciate this opportunity to represent the Office of
the Comptroller of the Currency in my capacity as Director of the Consumer Affairs Division. Our Office has a
deep commitment to consumer protection as it relates to
national banks. In addition to being good public policy,
attention to good relations with consumers should result
in sound banking.
The Comptroller perceived early on the need to establish a special division in our Office devoted to consumer
affairs which would coordinate the various activities the
Office was undertaking to assist the consumer and enforce consumer protection laws. That was before the
Magnuson-Moss Warranty — Federal Trade Commission Improvement Act of 1974 mandated that each bank
regulatory agency have such a division. Our Consumer
Affairs Division was operating fully by September 1974.
Our experience since that time, has shown that our
examination efforts in enforcing consumer protection
laws need to be strengthened or given a new direction.
During 1975 and 1976, one of our regional offices conducted specialized examinations as a test project. The
results of that project convinced us that there was substantially greater non-compliance with consumer credit
protection laws than we had previously thought, and,
accordingly, we have decided to implement a crash
program aimed at examining, for consumer protection
purposes, each national bank in the 12-month period between 1976 and 1977.
Beginning this fall, a select group of 250 examiners will
undergo 2 weeks of intensive training in newly designed
procedures for examination of national bank compliance
with consumer protection laws. The special consumer
examination will cover Truth-in-Lending, Equal Credit
Opportunity, Fair Credit Reporting, Fair Credit Billing,
Fair Housing, Home Mortgage Disclosure, Real Estate
Settlement Procedures, advertising, usury and applicable state laws. We have isolated a number of the provisions of the laws affecting those areas which we think
merit more emphasis than others. Therefore, the new
examination procedures will focus on those problems
which will result in a significantly adverse impact on consumers.
Examiners will be prepared to review note forms used
by the banks and to take a statistical sample of their
loans to review for conformity with various statutory and
regulatory requirements. A bank's lending policies also
will be examined as will its policies for implementing
consumer protection laws. Extensive interviews of lending officers will be conducted to assist in determining a
bank's adherence to its policy standards.
Where violations are detected during the examination,
we will use the full authority of our Office to see that they
are corrected. Where bank customers have been aggrieved, we will use our authority to the fullest to correct
the situation.
Our Office is devoting extensive resources to the consumer protection area in the processing of consumer
complaints and conducting of examinations. We have
found that both consumers and banks have benefitted
from the changes brought about by the new consumer
protection laws. Despite the necessary complexity of
many of the regulations, increased disclosure and more
rigorous, non-discriminatory credit guidelines have
served to educate the public and to improve relations between banks and their customers. The answers to the
questions that you submitted, are included in the appendix to my statement.
Appendix to July 29 Statement by Thomas W. Taylor
Responses to the Committee's Questions
Question: Please describe the organization, staffing and
resources allocated to your consumer affairs division. To
what extent does it operate through regional offices?
How are its existence and its complaint-handling function publicized?
Answer: The Consumer Affairs Division of the Office of
the Comptroller of the Currency was created in March
1974, and was organized in September 1974. It is staffed
by an Associate Deputy Comptroller who serves as director, two consumer affairs specialists and two secretaries. The division receives substantial support from
other departments within the Office, particularly the Law
Department. Because the division cuts across several
policy and operating areas, the director reports directly
to the Comptroller. That close alliance also makes it clear
that consumer protection efforts are of fundamental importance to the Comptroller.
All consumer complaints are monitored by the
Washington Office. Depending upon where they are received, complaints are handled by one of our 14 regional
offices, as well as by the Consumer Affairs Division. The
functions of the division have been publicized in newspaper columns throughout the United States, in
banking-oriented newsletters and periodicals, by appearances before both public and banking groups and
by mention in public television programs prepared by
other government agencies. At least one regional office
has been listed in the Yellow Pages under a consumer
protection heading. As a result of a requirement of Regulation B of the Board of Governors of the Federal Reserve
System (Board), loan applicants are given notice that
this agency has the responsibility for enforcing the
statutory provisions of the Equal Credit Opportunity Act.
As a direct result, we are receiving an increasing amount
241
of consumer correspondence. Also, Regulation C of the
Board, which implements the Home Mortgage Disclosure Act, requires that national banks subject to the Act
designate this Office as the agency responsible for enforcing the regulation.
A new factor in allocating staff and resources to the
Consumer Affairs Division will materialize in September
1976. At that time, approximately 10 percent of our field
examination force will begin to devote their efforts exclusively to special consumer examinations, with the support of a specialist in each regional office.
Question: Please indicate the numbers and — to the extent possible — the types of consumer complaints received. How many were found meritorious? What disposition was made of these complaints?
Answer: [At the end of this Appendix] is a summary of
complaints received by the Washington Office from 1973
through 1975 and by the Washington and regional offices in the first half of 1976. Those data were derived
from our Consumer Complaint Information System
(CCIS). That computer system was established at our
Washington Office in August 1975, and became operational for our regional offices on January 1, 1976. Previously, the master file on citizen complaints, started in
1970, consisted of nine filing trays containing approximately 14,000 three-by-five cards. The 14 regional offices did not start sending those cards into the
Washington Office until 1973. The data base for the CCIS
was initially derived from the Washington Office routing
slips. The CCIS is designed to identify volume, type and
concentration of complaints by region and by bank. It
serves as a useful tool in handling the increasing volume
of complaint letters we are receiving and in monitoring
the problem areas that might be indicated by consumer
complaints.
During the years 1973 through 1975, we received
2,609 complaints at the Washington Office. During the
first half of 1976, we received 2,850 complaints, including those processed by our regional offices. The [appended] charts indicate the types and nature of the
complaints and how they were resolved.
We record all complaints which we receive and we
process all of them except those which are referred to
other enforcement agencies. We respond to all complaints we process, except the few which are received
from persons who are obviously unstable or not capable
of understanding that a problem does not exist.
Question: What procedures are used to handle consumer complaints? Are all complaints processed? How
promptly are they handled? Are there maximum time limits for dealing with them?
Answer: When a complaint is received, a letter of acknowledgement is sent to the complainant. At the same
time, a letter is sent to the bank involved, describing the
complaint and asking for the bank's explanation. If the
complaint is very complex or contains an extremely serious allegation against the bank, an examiner may be
sent to the bank to investigate the facts. After receiving
information from the bank or the examiner, the situation is
analyzed by our Washington or regional staff and the
242
complainant is informed of our findings and determination. If the bank has erred or violated a law, it is directed
to seek the proper remedy with the customer.
Generally, we have found banks to be responsive to
our inquiries concerning consumer complaints. If they
have made an error, they usually will issue an apology to
the complainant and an explanation of the corrective action they have taken. If the bank's defense is that its action was legally proper or that the consumer should be
seeking redress from a third party, and if we agree, we
apprise the complainant and suggest he seek legal
counsel. In instances where there is a factual dispute between the parties, we advise the complainant that we do
not have authority to adjudicate such matters and that he
should seek legal advice concerning possible redress in
the courts.
All complaints received by this Office are processed,
and all are answered with the few exceptions noted
above. Generally, we attempt to give a final response to
the complainant within 4 weeks of receiving the complaint. Of necessity that schedule varies according to the
amount of time required to receive a response from the
bank or examiner. In more complex matters, there are
occasions when a complaint may not be resolved for
several months.
Question: Do the staff members assigned to consumer
complaints also have other enforcement duties?
Answer: Two members of the Law Department, who operate outside the Consumer Affairs Division, devote full
time to processing consumer complaints. Other members of the Consumer Affairs Division, the Law Department, and regional office staffs who have responsibility
for consumer complaints have other enforcement responsibilities. We have not found that those other duties
interfere with complaint processing. The staff of the Consumer Affairs Division devotes full time to consumer enforcement responsibilities, except that the director is
also the Comptroller's delegate to the National Commission on Electronic Fund Transfers. That responsibility is
considered consumer-related.
Question: Through what devices does your agency
exercise its responsibility to enforce the consumer protection law? Through regular examination? Special
examinations? Education? Other methods?
Answer: At the present time, the principal means of enforcing consumer protection laws is through the regular
bank examination. Although all examiners are advised of
the principal components of those laws, we have concluded that the only effective means to enforce consumer laws is by specialized examinations conducted
by specially trained examiners. We now are preparing
texts, procedures and questionnaires to implement that
new examination process. Various task forces have
been created to assist in that task, and we are preparing
a curriculum of training procedures to equip approximately 250 examiners in the next year to conduct those
examinations. We will begin September 13,1976, to train
135 examiners in three schools of 2 weeks each, and we
plan to have examiners in the field by late September
and early October. Twelve months later all national
banks will have been subjected to a consumer examination. The examination will cover Truth-in-Lending, Equal
Credit Opportunity, Fair Credit Reporting, Fair Credit Billing, Fair Housing, Home Mortgage Disclosure, Real Estate Settlement Procedures, advertising, interest on deposits, usury, and applicable state laws. As the result of a
test project, we have isolated certain areas in these laws
which we think merit more emphasis than others and
therefore we will focus our attention on those targets. The
purpose the examination procedures will be to focus on
those problems which result in a significantly adverse
impact on consumers.
One other method we use for enforcing compliance
with consumer protection laws is through the review of
consumer complaints, as previously noted.
Question: How are your bank examiners trained, with respect to examining for violations of state and federal
consumer protection laws? Would you supply the Committee copies of the training materials used, handbooks
or other instructional materials for examiners on the job,
and examination report forms used for assessing compliance in this area?
Answer: New examiners have been educated in consumer protection law when they are assigned to training
crews for 6 months. During that period they are
indoctrinated into the entire regular examination process, including consumer protection compliance. Until
recently, newly commissioned national bank examiners
have attended a 2-week training session which included
^a nominal amount of consumer law instruction. At the
present time, that course is being addressed to seasoned assistant examiners. Although those sessions will
continue to include instruction on consumer laws, the
training emphasis will be on a separate school devoted
exclusively to consumer protection enforcement, as
noted in our earlier response.
We are including a copy of page 6-1 of our present
examination report [may be found at the end of this appendix after the summary of complaints], which we use
for examining for compliance with the Truth-in-Lending
Act. Because the Office is adopting new examination
procedures, that page will not be used in the future.
Rather, as noted above, Truth-in-Lending will be
included in the special consumer protection examination. The report itself will be in memorandum form culled
from certain working materials. We expect to have those
materials completed in the next few weeks.
Question: How are examiners supervised, with respect
to examining for violations of state and federal consumer
protection laws? To what extent do supervision and training include reviewing state laws applicable to the banks?
Answer: National bank examiners are directly supervised by their regional administrator and enforcement
action concerning violations of state and federal consumer protection laws is taken by the regional office.
When matters concerning violations cannot be satisfactorily resolved in the region, they are referred to the
Washington Office for formal enforcement proceedings.
At the present time, supervision and training concerning state laws vary considerably from state to state. That
is due to a number of factors, i.e., disparities in effect of
the different state statutes, the variety of enforcement
approaches and the degree of involvement of state
banking officials. In some states most consumer protection is contained within the procedural rules of local
courts, in which there is little room for federal participation. In a few states our examiners have been using consumer protection examination manuals prepared by the
state for the use of its examiners. That has been the case
where a fairly broad body of state consumer protection
law exists. In some states, we have conferred with state
regulatory authorities concerning the enforcement of
state laws, and in others there has not been much
interaction between the regional office and the state authorities. As part of our specialized consumer examination, we are contacting each state banking department
and asking them to provide us with an analysis of state
usury laws. At the outset, we believe that that is the most
important area of state law affecting consumers. However, we intend to broaden our scope to include other
pertinent state laws as our programs develop.
Question: How are bank examinations conducted, with
respect to consumer protection laws? Are they comprehensive reviews of the bank's consumer transactions, or spot checks or random reviews? What systematic records of violations are maintained? How are the
examiners' reports analyzed, and how are judgments
made about appropriate corrective measures?
Answer: In examining with respect to consumer protection laws, our examiners review a bank's loan application
and note forms to determine that they comply procedurally with the law. Selected loans are also reviewed. Other
than the listing of any violations in the report of examination, no record of violations is maintained in the
Washington Office. The regional offices maintain lists of
violations in each bank's file. Examination reports are
analyzed in the regional office by a review examiner and
a letter is written to the bank's board of directors asking
for appropriate corrective action in accordance with Office policy.
The special consumer examination process will
include a review of a bank's stated and actual lending
policies and its forms and a statistical sampling of loans.
Internal controls used by the bank will be monitored, because a complete audit of consumer loans is not feasible. Violations of laws will be reported to the regional office and a consumer affairs specialist will review the reports and prepare appropriate follow up data with each
bank. The Consumer Affairs Division will provide additional technical support to the regional offices. Policy
guidelines will be established to determine appropriate
corrective measures for various violations.
Question: Where violations are detected through bank
examinations, what corrective measures are sought?
E.g., formal sanctions against the bank or its officers?
Compensation for the aggrieved consumers? Changes
in bank practices for the future? Publicity of the violations?
Answer: When violations of law are discovered during
bank examinations, we seek to impose a remedy which
243
is appropriate to the violation. If, for instance, there is a
technical violation in the bank's forms, we bring it to the
attention of the board of directors and require that the
forms be changed. We follow a similar procedure if there
are violations in advertising or promotions. If the customer has suffered a monetary loss because of a bank's
violation of law, we ask for an equitable remedy, such as
restitution. That may occur through a lump sum payment
or, if the monetary burden would be unduly damaging to
the bank, we suggest that the bank might prorate the
overcharge over the life of the loan, as in the case of a
long-term mortgage loan. If the bank resists complying
with our request for restitution, we are prepared to use
our cease and desist powers, although we have not yet
been forced to do so.
In the relatively few instances where there have been
repeated and continuing violations of consumer protection laws, particularly of Truth-in-Lending, we have entered into formal agreements with the banks to gain
compliance. When a bank has violated the terms of such
an agreement, we have filed formal cease and desist orders.
To date, we have not followed a policy of making public announcements of violations found in individual
banks. From time to time we have carefully considered
doing so, and have concluded that it was the intention
and expectation of Congress that the banking agencies
would use the same private approach to consumer law
enforcement as they do for other banking laws. That
conclusion is reinforced by the cross-references to the
Financial Institutions Supervisory Act (cease and desist
power) found in the CCPA and other recently enacted
consumer protection laws. The Financial Institutions
Supervisory Act provides that the normal rule is that enforcement proceedings under it are to be private, although the agency may go public if it determines that it is
"necessary to protect the public interest."
To date we have been able to achieve correction of
abuses without public proceedings. In view of the peculiar sensitivity of depository institutions to loss of public
confidence, we feel that it is important to continue that
policy. However, we certainly do not foreclose the possibility of public enforcement proceedings in appropriate
circumstances.
Question: To what extent, and how, are enforcement
policies and criteria coordinated among the various federal supervisory agencies? What coordination is done
with state agencies having parallel responsibilities?
Answer: The federal financial institution supervisory
agencies share enforcement responsibility for many
consumer protection laws, and there is obvious interest
in interagency communication. The Federal Reserve
System has been given the responsibility for promulgating several consumer protection regulations. Our Office
has benefited from invitations to comment on proposed
regulations and from formal and informal interpretations
issued after the regulations have become effective.
Members of the Office of Saver and Consumer Affairs of
the Board of Governors of the Federal Reserve System,
the Office of Bank Customer Affairs of the Federal Deposit Insurance Corporation, and the Comptroller's Con244
sumer Affairs Division meet frequently to discuss mutual
problems and concerns. Information is exchanged concerning consumer complaints and examination procedures. Meetings also are held with the Federal Home
Loan Bank Board, the Department of Housing and Urban
Development, and the Civil Rights Division of the Department of Justice, particularly on the topic of fair housing. All of those agencies are contributing substantially
to the development of our consumer protection examination. In addition, we consult with the Federal Trade
Commission on matters concerning unfair and deceptive acts and practices by banks.
Most contact with state agencies originates from referrals of consumer complaints to and from our Office. We
contemplate that there will be more coordination with
state agencies as we incorporate state consumer protection laws into our new examination process. Meetings
also have been held with state agencies on problems of
mutual concern.
Question: What degree of importance or priority does the
enforcement of consumer protection laws have in your
agency's overall operation? What degree of importance
does it have in individual bank examinations?
Answer: The enforcement of consumer protection laws is
considered to be of fundamental importance by the
Comptroller's Office. Extensive development, technical
and training resources have been made available for
handling consumer complaints and for establishing effective examination procedures. As noted above, a substantial amount of examiner resources also will be made
available this coming September. Our objective is for
every national bank to have undergone a special consumer examination by October 1977.
Question: What degree of importance or priority does the
enforcement of state consumer protection laws have in
your agency's overall consumer protection effort? Are
state enforcement personnel involved in your efforts?
Are they notified? Do they have access to information
developed by your examiners?
Answer: Because this agency is responsible for examining national banks, we have accorded a higher priority to
federal consumer protection laws than to state laws. Not
all state consumer protection laws are applicable to national banks, particularly in light of recent federal legislation which has preempted state laws in many areas. At
the present time our regional offices have been
instructed to compile a more comprehensive record of
usury laws from the respective state agencies. That
information will be incorporated into the consumer
examination. Thereafter, additional state laws which are
applicable to national banks will be compiled in a similar
manner. Normally, state agencies do not have access to
information developed by our examiners because of our
exclusive visitorial powers over national banks under
federal law.
Question: Where a state has been exempted from federal law, e.g., Truth-in-Lending, on condition that there is
adequate state enforcement of substantially similar state
Question: Is there any discernible incompatibility or conflict of interest in your agency's dual responsibilities to
see to the bank's soundness and to consumer protection?
Answer: We do not perceive any incompatibility or conflict of interest in our agency's dual responsibilities to
insure the sound operation of national banks and to protect the consumer in accordance with law. We believe
that a bank's safety and soundness depends in part on
its compliance with consumer protection laws. There is a
possibility that a bank subject to a large restitution remedy or to a class action for damages might be impaired. However, in the first instance, we would attempt
to arrange for restitution to be made over a period of time
to ease the burden and yet make the customer whole; in
the second instance, we do not believe that a court of law
would impose an inequitable damage burden on a bank.
Even if a separate agency were responsible for enforcing consumer protection laws, that agency would face
the same dilemma as to whether the public interest
would be served by jeopardizing a bank's ability to continue to function in the community as a financial
intermediary.
Banks are competitive institutions, and it is in their
self-interest to lend in a fair and non-discriminatory manner. Banks that treat customers fairly will acquire more
customers than banks that do not.
the method of rebating unearned finance charges on
prepayment of loans involving precomputed finance
charges is of dubious value to the consumer in shopping
for credit because of the difficulty of comparing dollar
charges to percentages. The concept and computation
is difficult and not readily understood, even by competent bankers. That is not the type of information a consumer is likely to consider in applying for a loan.
In general, the federal government is attempting to
achieve truth, equality and fairness in the granting of
credit. Those are ideals based on moral principles and
any attempt to achieve such ideals through legislation
requires that they be defined; that necessitates complex,
lengthy and technical procedures.
Drafting a regulation to govern essentially subjective
processes is an extremely difficult task. For example,
discrimination in the granting of credit on the basis of
marital status is prohibited. It would seem logical to forbid the creditor from inquiring aboutthe applicant's marital status on the assumption that if the creditor does not
have that information, he cannot discriminate on the
basis of it. However, because of state property laws, if
the loan is to be secured, it is necessary to know the applicant's marital status in order to establish a valid lien.
Therefore, to draft a law or regulation to achieve that
goal, it is necessary to reach a compromise between the
bank's need to know certain information and the applicant's right to withhold such information. The conclusion
which must be drawn is that some degree of complexity
is inherent in attempting to prohibit unlawful discrimination and deceptive practices.
That is not to advocate the abolition of laws dealing
with discrimination and broader disclosure. Despite the
complexity of most such laws, generally they are accomplishing their intended purpose. Those parts of the
law which are not really beneficial to consumers should
be repealed selectively. Frustrations and costs will continue to pose problems in efforts to comply, but ultimately
consumers and creditors both benefit from the changes
brought about by these laws.
Question: Regulations promulgated under the Consumer Credit Protection Act are lengthy, complex and
technical. Why? Is this complexity necessary? Does this
complexity serve the consumer's interests?
Answer: The main reason for the complexity of any regulation, and especially Regulation Z, is the multitude of
fact patterns which must be covered by the regulatory
language. There is always a trade-off in regulation writing between simplicity and coverage. If an agency writes
a general brief rule such as "All elements of cost to the
borrower must be included in the finance charge," then
it merely has postponed answering hundreds of requests for individual rulings of what is meant by "cost to
the borrower." The resulting collection of individual rulings makes for even greater complexity and confusion
than a more precisely drafted regulation.
Another reason that the regulations promulgated
under the Consumer Credit Protection Act are lengthy,
complex and technical is because Congress has not
given sufficient consideration to costs, social and economic, relative to the benefits to be derived from some
provisions of such legislation. For example, disclosure of
Question: What adverse effects do you perceive from the
complexity of Regulations Z and B? What beneficial effects?
Answer: The consumer has derived benefit from the provisions of Truth-in-Lending that require disclosure of finance charges and the annual percentage rate because
the cost of credit is disclosed accurately which enables
him to shop for credit on a cost comparative basis. Similarly, the Equal Credit Opportunity Act has had a favorable impact on the granting of credit to women. On the
basis of the consumer complaints we have received, it is
apparent that many creditors are changing their attitudes and policies in regard to granting credit to
women.
Unfortunately, Truth-in-Lending, Fair Credit Billing and
Equal Credit Opportunity have caused creditors to incur
substantial costs in reviewing and printing forms,
educating personnel and revising loan policies to conform with the regulations implementing those statutes.
Those costs have been passed along to consumers in
the form of higher interest rates. Also, marginal loan ap-
laws, who exercises enforcement responsibility with respect to banks under your jurisdiction?
Answer: The Comptroller's "Office exercises sole enforcement authority for all banking laws applicable to national banks because of the exclusivity of our visitorial
rights. Some states have received an exemption from the
Truth-in-Lending Act where the state law is substantially
similar, but the Federal Reserve System, which has authority to grant such exemptions, has explicitly provided
that such exemptions do not apply to national banks in
those states.
245
plicants who previously might have qualified for credit no
longer qualify because of attempts by lenders to hold
collection costs down.
It also has been costly for this Office and other enforcement agencies to monitor compliance as more resources of our Washington Law Department, regional
counsels, and bank examiners have been devoted to
that task. A substantial amount of the Consumer Affairs
Division's efforts is involved in enforcing consumer protection regulations. A significant amount of the time of the
senior staff, as well, has been expended in that effort.
There are also indications that some consumers have
abused the laws. Some loan applicants believe that the
law confers on them the automatic right to have credit. In
certain areas of the country, attorneys for debtors who
are filing for bankruptcy almost automatically file a legal
suit for a Truth-in-Lending violation in the hope that a
creditor will settle on the loan whether the case has merit
or not.
Question: How can this regulatory complexity be
avoided?
Answer: As noted above in our answers to the last two
questions, it is unlikely that regulatory complexity can be
avoided completely. The amount of complexity might be
decreased by a judicious review of consumer protection
| a w s t 0 determine which provisions do not bestow a truly
necessary or significant consumer benefit.
Supplementary Material
Consumer Complaint Resolutions
Jan. 1, 1975 through Dec. 3 1 , 1975
Received At Washington Office
Number
494
73
10
68
229
22
38
55
114
124
16
13
1,256
Jan. 1, 1976 through July 19, 1976
Received by Washington and Regional Offices
Disposition
Closed; no resolution code
Open complaints
No reply necessary — To Files
Bank errors
Bank legally correct
Consumer reimbursed — Bank legally correct
Consumer reimbursed — Bank error
Factual dispute — contestable
Referral to other agency
Information
Consumer reimbursed — Communication
problem
Settled by mutual agreement
Total
Number
9
801
43
100
825
106
158
323
196
598
80
39
3,278
Disposition
Closed; no resolution code
Open complaints
No reply necessary — To Files
Bank error
Bank legally correct
Consumer reimbursed — Bank legally correct
Consumer reimbursed — Bank error
Factual dispute — contestable
Referral to another agency
Information
Consumer reimbursed — Communication
problem
Settled by mutual agreement
Total
Consumer Complaints - Deposit Function - Washington and Regional Offices
Jan. 1, 1976 to June 30, 1976
Time
Advertising
Attachment and Claims Freezing
Deposit Not Credited
Deposit Not Credited on Day Made
Disclosure of Account Service Charges
& Terms
Discrepancy in Account
Forged Signature or Endorsement
Offset or Set-Off
Payment of Interest
Processing Without Benefit of Endorsement .
Refusal to Cash or Pay Customer's Check ..
Refusal to Cash Non-Customer's Check
Release of Funds
Renewal Automatic
Service Charges
Stop Payment Check Being Paid
Untimely Dishonor of Instrument
Possible Escheat or Inactive Account
Account Regulations - Procedures
Other
Total
5
1
1
—
6
15
87
10
—
—
—
—
—
—
—
—
4
5
13
4
1
—
3
1
16
21
104
15
5
4
4
4
28
—
2
—
3
—
2
3
—
—
18
_8_
88
5
131
58
26
3
20
35
9
22
—
64
45
27
4
76
__49
692
—
—
—
—
1
1
—
—
3
—
—
—
—
—
—
=_
5
1
5
—
—
2
—
1
—
2
—
—
1
1
—
4
JO.
27
5
58
13
5
36
—
2
—
27
1
17
—
—
33
21
20
264
1
7
3
1
5
—
—
5
7
—
2
2
1
4
4
10
57
17
205
78
36
75
21
40
14
64
1
85
51
29
41
123
97
1,133
246
Demand
Vacation I
Xmas Club
Nature of Complaint
Escrow
Savings
Other
Total
Consumer Complaints - Loan Function - Washington and Regional Offices
Jan. 1, 1976 to June 30, 1976
3
—
_
—
3
—
3
—
58
10
6
—
7
3
1
—
5
16
—
—
26
24
28
2
_
_
_
1
1
9
—
_
42
5
—
—
—
8
13
1
14
1
5
15
58
462
—
1
1
8
~6cf
3
2
7
_56_
377
IV)
5
IV)
1
IV)
113
3
1
_z
41
1
—
_
—
1
1
11
1
z
z
z
— 9
11
—
— 3
—
_
2
6
23
5
—
1
1
59
113
79
42
4
—
1
—
—
—
—
—
—
3
1
—
1
4
—
3
5
10
70
9
3
126
23
1
1
—
7
46
140
—
1
—
1
12
—
—
—
33
107
14
5
9
31
209
1.207
CM
4
61
CvJ
3
3
1
2
1
CM
26
1
15
34
23
75
27
18
3
14
IV)
IV)
z
3
1
—
—
—
3
3
5
5
2
1
IV)
4
IV)
7
1
1
45
7
132
IV)
29
9
36
17
12
Total
IV)
_
—
5
2
6
1
1
1
—
—
1
23
13
Other
1
10
IV)
1
28
Single
Payment
Demand
1
1
IV)
rv)
_
1
7
Real
Estate
Mortgage
—
CvJ
68
1
4
CM
Acceleration Clauses
Amount of Interest Charges - Usury
Amount of Rebate Upon
Prepayments 78's
Collateral
Collection Tactics
Collection Service and Attorneys ..
Credit and Disability Insurance - TIL
Discrimination by Age
Discrimination by Sex, Marital Status
Discrimination by Race, National
Origin
Discrimination by Religion
Equal Lending Poster
Escalator Clauses
Fair Credit Reporting Act
Flood Disaster Act
Individual Credit Decision
Institutional Loan Policy
Late Payment Penalty Charges . . . .
Leasing
Real Estate Settlement Procedures
(RESPA) Act
Redlining
Refusal to Renew
Repossession or Foreclosure
Restrictions on Security Interests ..
Regulation Z - Advertising
Regulation Z - Fair Credit Billing Act
Regulation Z - Disclosure
Regulation Z - Oral Disclosure . . . .
Regulation Z - Right of Rescission .
Regulation Z - Unauthorized Mailing
of Issuance
Regulation Z - General
Forgery
Credit Account
Other
Total
Check
Credit / Commercial 1 Instalment
Overdraft Agricultural
CvJ
Nature of Complaint
Credit/
Bank
Card
247
Consumer Complaints — Other Functions — Washington and Regional Offices
Jan. 1, 1976 to June 30, 1976
Function
Number
Electronic Funds Transfer System:
2
Automatic Bill Payment
1
Automatic Payroll Deposit
1
CBCT Equipment
1
CBCT Location
—
Confidentiality
—
Customer Identity Technique or Methods . . . . 1
Error Correction Procedures
4
Liability
1
Monthly Statement
1
Transaction Errors
•
1
Transaction Receipt or Record of ReconciliationWrongful or Fraudulent Use of Card
2
Total for function
15
Trust Services:
Excessive Charges
Improper Disbursement
Investments
Prudent Handling of Estates/Trusts
Too Long to Close and Disburse Estates
Refusal to Respond for Information
Total for function
Foreign Operations:
31
6
14
13
30
12
24
130
1
Letters of Credit/Travelers' Checks
Foreign Currency Transactions
Foreign Draft Presentment
Total for function
8
19
9
37
Function
Number
Safety Deposit Box/Safekeeping:
11
Disappearance of Items
11
Illegal Entry
4
Service Charges
5
Securities Redemption Transfer/Collection
Items
34
Total for function
65
General Complaints:
Advertising
Cashing U.S. Government Checks
Information Available to Stockholders
Lost or Stop Payment of Offical
Checks/Money Orders
Promotions
Service Charges
Stock Manipulation by Bank Officials
U.S. Savings Bond Redemption
Wire Transfer
Incompetent or Rude Personnel
Bank Supervision
Secrecy
Travel Business
Employee Hiring, Benefit, Firing
Data Processing Services
Conflict of Interest
Total for function
89
12
9
4
48
4
9
4
9
9
43
8
5
—
7
3
—
.263
Total complaints during period
2,850
Consumer Complaints - Deposit Function - Washington Office
Jan. 1, 1975 to Dec. 31, 1975
Nature of Complaint
Time
Demand
Advertising
Attachment and Claims Freezing
Deposit Not Credited
Deposit Not Credited on Day Made
Disclosure of Account Service Charges
& Terms
Discrepancy in Account
Forged Signature or Endorsement
Offset or Set-Off
Payment of Interest
Processing Without Benefit of Endorsement .
Refusal to Cash or Pay Customer's Check ..
Refusal to Cash Non-Customer's Check
Release of Funds
Renewal Automatic
Service Charges
Stop Payment Check Being Paid
Untimely Dishonor of Instrument
Possible Escheat or Inactive Account
Account Regulations - Procedures
Other
Total
4
2
1
—
1
4
17
2
1
6
2
22
14
7
—
2
6
4
8
248
2
9
6
1
6
—
1
1
16
56
Vacation /
Xmas Club
—
—
2
—
_
—
—
—
3
Savings
Other
Toti
6
1
1
1
6
3
4
2
17
10
25
5
1
6
—
1
13
2
_
6
4
40
14
10
30
7
8
6
22
1
28
14
2
19
20
121
403
2
2
18
13
3
11
46
180
Escrow
1
6
5
6
29
76
5
3
2
2
6
2
1
2
10
1
25
80
Consumer Complaints - Loan Function - Washington Office
Jan. 1, 1975 to Dec. 31, 1975
Total
7
1
5
1
1
1
1
1
—
—
1
4
—
—
—
7
5
1
4
2
—
1
—
rv>
1
—
1
—
—
6
—
1
—
6
2
—
—
—
—
—
1
_
_
_
—
3
10
4
2
1
ro
—
1
—
—
1
1
1
—
—
—
—
1
1
—
4
38
_
2
—
1
—
7
1
—
3
37
119
3
Other
—
9
3
3
2
rv>
2
—
—
3
31
1
—
—
1
1
2
1
1
1
3
3
IV)
1
—
—
—
—
—
rv>
—
—
2
1
6
4
3
Single
Payment
Demand
1
1
2
21
67
—
—
—
1
—
—
_
2
—
3
17
47
1
2
Total
1
33
12
12
7
4
4
1
16
2
6
4
6
13
13
6
IV)
1
1
ro
Collection Tactics
Collection Service and Attorneys ..
Credit and Disability Insurancy - TIL
Discrimination by Age
Discrimination by Sex, Marital Status
Discrimination by Race, National
Origin
Discrimination by Religion
Equal Lending Poster
Escalator Clauses
Fair Credit Reporting Act
Flood Disaster Act
Individual Credit Decision
Institutional Loan Policy
Late Payment Penalty Charges
Leasing
Real Estate Settlement Procedures
(RESPA) Act
Redlining
Refusal to Renew
Repossession or Foreclosure
Restrictions on Security Interests . .
Regulation Z - Advertising
Regulation Z - Fair Credit Billing Act
Regulation Z - Disclosure
Regulation Z - Oral Disclosure . . . .
Regulation Z - Right of Rescission .
Regulation Z - Unauthorized Mailing
of Issuance
Regulation Z - General
Forgery
Credit Account
Other
—
1
4
Real
Estate
Mortgage
4
5
ro
Collateral
4
rv)
12
IV)
Acceleration Clauses
Amount of Interest Charges - Usury
Amount of Rebate Upon
Prepayments 78's
Check
Credit/ Commercial 1 Instalment
Overdraft Agricultural
rv>
Nature of Complaint
Credit 1
Bank
Card
1
2
2
—
1
2
—
30
—
_
1
15
3
20
17
6
1
5
4
15
5
3
39
6
30
1
—
21
1
7
25
2
3
11
20
142
11
103
434
249
Consumer Complaints — Other Functions — Washington Office
Jan. 1, 1975 to Dec. 31, 1975
Number
Function
Electronic Funds Transfer System:
2
Automatic Bill Payment
—
Automatic Payroll Deposit
3
CBCT Equipment
2
CBCT Location
1
Confidentiality
—
Customer Identity Technique or Methods
1
Error Correction Procedures
2
Liability
—
Monthly Statement
2
Transaction Errors
1
Transaction Receipt or Record of Reconcilation —
Wrongful or Fraudulent Use of card
_1_
Total for function
15
Trust Services:
Excessive Charges
Improper Disbursement
%
Investments
*
Prudent Handling of Estates/Trusts
Too Long to Close and Disburse Estates
Refusal to Respond for Information
Total for function
Foreign Operations:
Letters of Credit/Travelers' Checks
Foreign Currency Transactions
Foreign Draft Presentment
Total for function
28
2
7
1
22
4
_3_
67
1
12
4
6
23
Function
Number
Safety Deposit Box/Safekeeping:
Disappearance of Items
Illegal Entry
Service Charges
Securities Redemption Transfer/Collection
Items
Total for function
General Complaints:
Advertising
Cashing U.S. Government Checks
Information Available to Stockholders
Lost or Stop Payment of Official
Checks/Money Orders
Promotions
Service Charges
Stock Manipulation by Bank Officials
U.S. Savings Bond Redemption
Wire Transfer
Incompetent or Rude Personnel
Bank Supervision
Secrecy
Travel Business
Employee Hiring, Benefit, Firing
Data Processing Services
Conflict of Interest
Total for function
8
1
1
1
20
31
144
12
8
8
11
8
1
1
7
7
8
22
8
6
3
3
2
259
Total complaints received by
Washington Office, 1975
1,232
Consumer Complaints - Deposit Function - Washington Office
Jan. 1, 1974 to Dec. 31, 1974
Nature of Complaint
Advertising
Attachment and Claims Freezing
Deposit Not Credited
Deposit Not Credited on Day Made
Disclosure of Account Service Charges
& Terms
Discrepancy in Account
Forged Signature or Endorsement
Offset or Set-Off
Payment of Interest
Processing Without Benefit of Endorsement .
Refusal to Cash or Pay Customer's Check ..
Refusal to Cash Non-Customer's Check
Release of Funds
Renewal Automatic
Service Charges
Stop Payment Check Being Paid
Untimely Dishonor of Instrument
Possible Escheat or Inactive Account
Account Regulations - Procedures
Other
Total
250
Time
2
1
Vacation /
Xmas Club
Escrow
Savings
Other
Tola
1
—
—
2
1
—
—
—
—
—
—
1
1
2
1
~6"
1
3
1
_
_
—
—
—
_
—
—
—
Demand
1
5
2
2
2
1
3
8
13
—
—
—
—
—
—
_
3
—
1
6
1
—
—
1
z
3
1
5
1
9
7
3
9
1
5
2
9
4
3
1
2
52
119
5
2
1
3
2
—
—
—
—
—
1
1
1
1
1
17
38
—
—
1
1
12
27
14
40
Consumer Complaints - Loan Function - Washington Office
Jan. 1, 1974 to Dec. 31, 1974
Acceleration Clauses
Amount of Interest Charges - Usury
Amount of Rebate Upon
Prepayments 78's
Collateral
Collection Tactics
Collection Service and Attorneys ..
Credit and Disability Insurancy- TIL
Discrimination by Age
Discrimination by Sex, Marital Status
Discrimination by Race, National
Origin
Discrimination by Religion
Equal Lending Poster
Escalator Clauses
Fair Credit Reporting Act
Flood Disaster Act
Individual Credit Decision
Institutional Loan Policy
Late Payment Penalty Charges . . . .
Leasing
Real Estate Settlement Procedures
(RESPA) Act
Redlining
Refusal to Renew
Repossession or Foreclosure
Restrictions on Security Interests ..
Regulation Z - Advertising
Regulation Z - Fair Credit Billing Act
Regulation Z - Disclosure
Regulation Z - Oral Disclosure . . . .
Regulation Z - Rights of Rescission
Regulation Z - Unauthorized Mailing
of Issuance
Regulation Z - General
Forgery
Credit Account
Other
Total
—
—
Check
Credit 1 Commercial 1 InstalOverdraft Agricultural ment
Real
Single
Estate
Payment
Mortgage Demand
"Other
Total
—
—
2
—
—
12
14
_
—
—
_
—
—
—
_
2
1
—
_
_
—
—
—
—
—
—
4
—
—
—
—
5
2
1
1
4
3
—
5
4
2
1
4
3
4
4
1
3
4
1
4
3
1
4
6
—
1
3
1
10
11
3
1
1
2
—
—
33
2
3
3
7
2
36
26
1
—
8
128
5
31
3
2
79
252
—
—
—
—
z z z
z
— — — —
_
_
—
—
1
—
—
3
2
—
—
—
1
1
2
1
—
—
—
—
—
—
—
1
5
—
—
—
1
3
—
4
2
2
1
42
61
1
—
—
1
—
3
2
—
—
17
36
1
—
—
9
20
1
2
—
1
1
1
-j
1
1
1
—
—
—
—
—
1
—
—
—
—
3
IV)
Nature of Complaint
Credit/
Bank
Card
—
251
Consumer Complaints — Other Functions — Washington Office
Jan. 1, 1974 to Dec. 31, 1974
Function
Electronic Funds Transfer System:
[None]
Trust Services:
Excessive Charges
Improper Disbursement
Investments
Prudent Handling of Estates/Trusts
Too Long to Close and Disburse Estates
Refusal to Respond for Information
Total for function
Foreign Operations:
Letters of Credit/Travelers' Checks
Foreign Currency Transactions
Foreign Draft Presentment
Total for function
Safety Deposit Box/Safekeeping:
Disappearance of Items
Illegal Entry
Service Charges
Securities Redemption Transfer/Collection
Items
Total for function
Number
34
—
—
1
6
—
—
41
2
—
—
_2_
4
5
1
2
1
Function
Number
274
21
7
4
General Complaints:
Advertising
Cashing U.S. Government Checks
Information Available to Stockholders
Lost or Stop Payment of Official
Checks/Money Order
Promotions
Service Charges
Stock Manipulation by Bank Officials
U.S. Savings Bond Redemption
Wire Transfer
Incompetent or Rude Personnel
Bank Supervision
Secrecy
Travel Business
Employee Hiring, Benefit, Firing
Data Processing Services
Conflict of Interest
Total for function
5
3
7
1
4
3
—
24
2
1
—
—
—
356
Total complaints received by
Washington Office, 1974
.790
18
Consumer Complaints - Deposit Function - Washington Office
Jan. 1, 1973 to Dec. 31, 1973
Nature of Complaint
Advertising
Attachment and Claims Freezing
Deposit Not Credited
Deposit Not Credited on Day Made
Disclosure of Account Service Charges
& Terms
Discrepancy in Account
Forged Signature or Endorsement
Offset or Set-Off
Payment of Interest
Processing Without Benefit of Endorsement
Refusal to Cash or Pay Customer's Check .
Refusal to Cash Non-Customer's Check
Release of Funds
Renewal Automatic
Service Charges
Stop Payment Check Being Paid
Untimely Dishonor of Instrument
Possible Escheat or Inactive Account
Account Regulations - Procedures
Other .,
Total
252
Time
Demand
Vacation /
Xmas Club
Escrow
8
1
—
5
Savings
1
2
—
—
—
—
1
4
1
—
—
—
—
—
—
—
—
—
—
5
1
2
3
—
—
—
—
1
2
—
1
1
—
—
—
Other
Total
11
1
20
1
3
3
2
1
7
3
5
15
1
1
2
3
6
1
4
2
3
5
1
—
4
11
JO
_i
_L
JO.
^7
26
1
2
28
39
37
107
Consumer Complants - Loan Function - Washington Office
Jan. 1, 1973 to Dec. 31, 1973
Nature of Complaint
Acceleration Clauses
Amount of Interest Charges - Usury
Amount of Rebate Upon
Prepayments 78's
Collateral
Collection Tactics
Collection Service and Attorneys ..
Credit and Disability Insurancy - TIL
Discrimination by Age
Discrimination by Sex,
Marital Status
Discrimination by Race, National
Origin
Discrimination by Religion
Equal Lending Poster
Escalator Clauses
Fair Credit Reporting Act
Flood Disaster Act
Individual Credit Decision
Institutional Loan Policy
Late Payment Penalty Charges
Leasing
Real Estate Settlement Procedures
(RESPA)Act
Redlining
Refusal to Renew
Repossession or Foreclosure
Restrictions on Security Interests ..
Regulation Z - Advertising
Regulation Z - Fair Credit Billing Act
Regulation Z - Disclosure
Regulation Z - Oral Disclosure
Regulation Z - Right of Rescission .
Regulation Z - Unauthorized Mailing
of Issuance
Regulation Z - General
Forgery
Credit Account
Other
Total
Credit/
Bank
Card
1
Check
Credit/ Commercial / Instalment
Overdraft Agricultural
—
—
—
—
—
1
1
Real
Estate
Mortgage
Single
Payment
Demand
—
—
Other
6
—
1
—
1
1
1
1
1
—
—
—
—
—
—
—
—
—
—
7
3
2
1
1
1
—
2
—
Total
—
—
—
—
1
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2
—
—
—
2
—
3
3
—
2
2
—
—
—
3
—
4
3
1
2
—
—
1
—
—
—
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
1
—
—
—
—
—
—
1
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5
—
—
3
—
—
1
1
2
1
5
3
—
3
—
—
9
26
1
2
53
138
7
2
—
—
_36_
52
5
—
1
3
1
5
—
—
1
1
24
1
—
4
9
11
1
60
253
Consumer Complaints — Other Functions — Washington Office
Jan. 1, 1973 to Dec. 31, 1973
Function
Electronic Funds Transfer System:
Number
1
Trust Services:
Excessive Charges
Improper Disbursement
Investments
Prudent Handling of Estates/Trusts
Too long to Close and Disburse Estates
Refusal to Respond for Information
Total for function
—
1
—
2
—
—
16
Foreign Operations:
Letters of Credit/Travelers' Checks
Foreign Currency Transactions
Foreign Draft Presentment
Total for function
—
4
2
_2_
8
Safety Deposit Box/Safekeeping:
Disappearance of Items
Illegal Entry
Service Charges
Securities Redemption Transfer/Collection
Items
Total for function
3
—
—
2
13
Function
General Complaints:
Advertising
Cashing U.S. Government Checks
Information Available to Stockholders
Lost or Stop Payment of Official
Checks/Money Orders
Promotions
Service Charges
Stock Manipulation by Bank Officials
U.S. Savings Bond Redemption
Wire Transfer
Incompetent or Rude Personnel
Bank Supervision
Secrecy
Travel Business
Employee Hiring, Benefit, Firing
Data Processing Services
Conflict of Interest
Total for function
Total complaints received by
Washington Office, 1973
Number
250
30
1
2
8
2
—
1
4
1
3
5
3
—
—
—
.—
310
587
2_
7
Sample Examination Report Page
Form CC-1425-OX Page 6-1
June 1971
UNITED STATES TREASURY
COMPTROLLER OF THE CURRENCY
Charter No..
REGULATION Z - TRUTH IN LENDING
Were test checks made of the bank's forms and procedures for disclosure? If any irregularities were disclosed,
discuss in detail and indicate management's plan for correction.
Has bank established effective procedures to detect defects in disclosures on dealer paper which it proposes to
acquire? If not, or if there are defects, discuss in detail and indicate management's plan to correct existing procedures or establish new ones.
Were test checks made to determine accuracy of interest computations and rebates? If any irregularities were disclosed, discuss in detail and indicate corrective measures proposed to prevent future occurrences.
Were test checks made of the bank's advertising? If any irregularities were disclosed, discuss in detail and indicate
proposed plans to prevent future occurrences.
If it appears that rescission rights are not being properly observed on both direct and indirect paper, discuss in
detail.
254
[This represents the page, it is not a reproduction of it]
Statement of Thomas W. Taylor, Associate Deputy Comptroller of the Currency for
Consumer Affairs, before the Subcommittee on Commerce, Consumer and
Monetary Affairs of the House Government Operations Committee, Washington,
D.C., September 16, 1976
I appreciate this opportunity to participate on behalf of
the Office of the Comptroller of the Currency in the Committee oversight hearings on Federal enforcement of the
Truth-in-Lending Act. Our Office has a strong commitment to consumer protection as it relates to national
banks. As our efforts in that field seem to be misunderstood by some commentators, I welcome the opportunity to set the record straight. Thus, I would like to give
the Committee a brief background of our performance in
enforcing consumer protection laws before answering
directly the specific questions posed in your letter of
invitation.
The former Comptroller, James E. Smith, established a
special division in our Office devoted to consumer affairs
before the Magnuson-Moss Warranty — Federal Trade
Commission Improvement Act of 1974 mandated that
each bank regulatory agency have such a division. Our
Consumer Affairs Division, which was designed to coordinate the various activities the Office was undertaking
toward assisting the consumer and enforcing consumer
protection laws, was operating fully by September 1974.
Our experience since that time has shown that our
examination efforts in enforcing consumer protection
laws need to be given a new direction and strengthened.
Our regional office in Boston began special consumer
examinations as a test project in November 1974. The
results of that project convinced us that there was substantially greater non-compliance with consumer credit
protection laws than we had previously thought and, accordingly, we implemented a crash program with the
target of examining, for consumer protection purposes,
each national bank in the 12-month period between 1976
and 1977.
As part of that program, a select group of 250 examiners are taking 2 weeks of intensive training and newly
designed procedures for examination of national bank
compliance with consumer protection laws. The special
consumer examination covers Truth-in-Lending, Equal
Credit Opportunity, Fair Credit Reporting, Fair Credit Billing, Fair Housing, Home Mortgage Disclosure, Real Estate Settlement Procedures, advertising, usury and applicable state laws. We have isolated a number of the
provisions of the laws affecting those areas which we
think merit more emphasis than others. Therefore, the
new examination procedures will focus on those problems which result in a significantly adverse impact on
consumers.
Examiners will be prepared to review note forms used
by the banks and to take a statistical sample of their
loans to review for conformity with various statutory and
regulatory requirements. A bank's lending policies also
will be examined as will its policies for implementing
consumer protection laws. Extensive interviews of lending officers will be conducted to assist in determining a
bank's adherence to its policy standards.
Where violations are detected during the examination,
we will use the full authority of our Office to see that they
are corrected. Where bank customers have been aggrieved, we will use our authority to the fullest to correct
the situation. We recently sent a banking circular, a copy
of which is attached, to all national banks informing them
of our expanded consumer examinations, follow-up procedures and formal enforcement actions.
Our Office is devoting extensive resources to the consumer protection area in the processing of consumer
complaints and conducting of examinations. We have
found that both consumers and banks have benefited
from the changes brought about by the new consumer
protection laws. Despite the complexity of many of the
regulations, increased disclosure and more rigorous,
non-discriminatory credit guidelines have served to
educate the public and to improve relations between
banks and their customers.
I would now like to turn to your specific inquiries. You
requested information on the special consumer protection examinations we conducted in New England. Since
November 1974, we have examined 27 national banks in
that region specifically to determine the level of their
compliance with state and federal consumer protection
laws. Among the laws given particular attention were
Truth-in-Lending, Fair Credit Billing, Fair Credit Reporting, Equal Credit Opportunity, usury and various applicable state laws.
Those special consumer examinations are designed
to investigate compliance with specific consumer protection laws. Each section of the examination report contains textual material which includes a summary description of the respective topics, a statement of the examination objectives, an explanation of the examination procedures, the verification procedures to be used, and an
internal control questionnaire. Through the use of target
areas and statistical sampling techniques, examiners
will be able to confirm the degree of compliance with
consumer protection laws. Our objective is for all 4,700
national banks to have received a special consumer
examination by November 1977.
You have requested the number and nature of Truthin-Lending violations found in the banks which were
examined in our New England pilot project. We have attached a chart as an appendix to this statement which
explains the types of violations of sections of Regulation
Z in each examined bank. We have previously submitted
to the Committee copies of the examination reports.
Those violations have been corrected in two ways.
Where the violation is purely technical and has not resulted in monetary harm to the customer, the bank has
been directed to correct immediately its procedures and
forms. If the customer has suffered a significant loss,
such as with a miscalculated annual percentage rate,
the bank has been directed to reimburse the customer
for the excess amount charged.
You have also asked our position on the merits of
non-compliance disclosure. Disclosure of possible violations discovered during examinations would be both im255
practical and unfair. Examiners are trained to be severe
with national banks and, not being lawyers, they occasionally err in interpretation of law. It would thus be misleading to the public and harassing to the banks to impose a disclosure requirement on what is an
investigatory finding of a violation of law. Such
investigatory findings are not publicized by other federal
agencies prior to institution of court action.
In the matter of disclosure, we are also concerned that
our traditional and effective methods of examination not
be weakened. Our Office is now able to examine national
banks with the cooperation of bankers who know that
information in the examination reports will remain confidential. We do not believe that Congress intends that our
ability to examine national banks for the purpose of financial soundness and compliance with law be compromised by publicizing information obtained through
such cooperation. The fomenting of widespread private
litigation by such public disclosure would shut our
examiners off from open communication with bankers by
making bank examination an adversary proceeding, a
development which would render the examination process much more burdensome to the private sector,
much less effective to the regulatory agencies and injurious to the public welfare.
To date, this Office has been able to achieve correction of abuses in virtually all instances without public
proceedings. In view of the peculiar sensitivity of depository institutions to loss of public confidence, we feel
that it is important to continue that policy. However, as we
have previously stated, we do not foreclose the possibility
of public enforcement proceedings in appropriate circumstances.
Finally, your letter requested our position on preemption of federal consumer protection laws by state laws
and access by state examiners to files of national banks.
Congress has given the Federal Reserve Board broad
authority to prescribe regulations in order to carry out the
purposes of the Truth-in-Lending Act. Pursuant to that
authority, the Board has said that all transactions in
which a federally chartered institution is a creditor constitute a separate class of transactions not subject to
exemption from the federal Truth-in-Lending Act unless
the Board is satisfied that appropriate arrangements
have been made with relevant federal authorities to assure effective enforcement of the requirements of state
laws. We think the Board has exercised discretion and
prudence in declining to include national banks in the
exemptions from federal consumer protection laws before our Office, which has the primary supervisory and
regulatory responsibility for national banks, is assured
that enforcement capabilities of the states are suitable.
As for compliance with state laws, our examiners do
insist on such compliance when state laws are applicable to national banks. In light of the improved
methodology and examiner training in our Office in the
consumer protection area, we do not think there is a
need for state officials to examine national banks for violations of state laws or to take enforcement action against
national banks. In fact, such actions would be a virtually
unprecedented breach of the principles underlying the
dual banking system and would subject national banks
to more kinds of governmental intrusion.
Thank you for permitting me to explain our activities
and views in this important area. I shall be happy to answer any questions you might have.
Appendix to September 16 Statement by Thomas W. Taylor
July 9, 1976
Banking Circular No. 73
To: Presidents of All National Banks
Subject: Compliance with Consumer Laws — Expanded Examination Procedures
Within the past few weeks the Comptroller's Office has begun to implement new examination procedures designed
to better determine compliance by national banks with a number of statutes enacted to protect consumer interests. Key
elements of the new examination effort include:
• Completely revised and greatly expanded examination questionnaires which will enable the examiner to probe the
policies, procedures and practices of national banks for the purpose of assuring full compliance with the requirements of consumer protection statutes and regulations.
• Expanded training programs which will require a mastery by assistant examiners of the new consumer-oriented
examination procedures as a prerequisite to obtaining a commission.
• Coordinated follow-up procedures which will require our regional offices to secure early bank correction of deficient
practices.
• Involvement by the Comptroller's Enforcement and Compliance Division in assisting the regional offices in obtaining
correction of deficiencies by recalcitrant institutions — through formal procedures under the Financial Institutions
Supervisory Act when necessary.
256
The new examination procedures initially will concentrate upon those problem areas in which noncompliance
may have a significantly adverse impact upon consumers. When it is discovered that customers have been
harmed by noncompliance, we are confident that national banks will act in a manner consistent with the public's faith and trust in them. It is expected that such actions will include taking whatever steps are deemed appropriate to remedy conditions resulting from violations
of law, including restitution.
The experience of our examination force suggests that
many deficient practices could be avoided simply by
banks scrutinizing their own compliance more carefully.
Indeed, inadvertent violations are frequently caused by
a failure of bank officers and counsel to match an understanding of the law with an awareness of the details of the
bank's procedures and practices. Because even highly
technical violations of a number of these statutes can re-
sult in substantial punitive damages and protracted litigation, bank counsel, in particular, must be alert to deviations from statutory and regulatory requirements. A
list of the statutes which should be reviewed by bank
counsel is attached to this circular.
In sum, the Comptroller's Office intends to assure
whatever degree of examiner scrutiny may be necessary
to obtain conscientious bank compliance with the requirements of these statutes. I encourage each of you to
anticipate this heightened examiner inquiry by conducting your own thorough in-house reviews of practices and
procedures
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