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[j §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 $ 76,078,031 967,304 4,973,779 .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 Total assets .62 51.40 3,808,381 9,879,953 1,722,984 1,777,388 5,086,708 19,076,586 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 5.17 52.02 3,589,367 299,847,407 Federal funds sold and securities purchased under agreements to resell Total loans (excluding unearned income) Reserve for possible loan losses Loans, net of reserve 23.30 30,140,010 303,436,774 Total securities 22.28 9.02 2.91 9.84 .51 .17 .85 135,931,577 Federal Reserve stock and corporate stock Trading account securities 13.04 129,990,494 52,612,836 17,005,880 57,384,363 2,987,415 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 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 469,408,735 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 ; 80.47 188,175,050 281,233,685 Demand deposits Time and savings deposits 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 With branches Unit 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 $ 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 Less accumulated depreciation and amortization Total assets 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 6,099,531 $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 Fixed assets and leasehold improvements, at cost (Note 1): Furniture and fixtures Office machinery and equipment Leasehold improvements 13,426,442 $37,568,429 Long-term obligations of U.S. government, at amortized cost (approximates market value) (Note 1). 8,224,024 6,531,255 Total current assets 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 1975 $51,753,849 3,860,808 2,997,207 223,945 62,117 82,809,524 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 $76,128,296 3,828,929 2,546,640 219,977 85,682 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 Excess (deficiency) of revenue over expenses Comptroller's equity at beginning of year Comptroller's equity at end of year 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 1976 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 1975 $2,450,844 $(9,684,152) Total Financial resources were used for: Purchase of leasehold improvements Purchase of fixed assets Payment of accrued leave 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 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) 391,114 498,720 (688,510) Increase (decrease) in working capital 1,257,949 1,017,895 244,871 1,254,279 Total 481,088 458,011 315,180 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 482,029 (2,968,698) (228,521) 89,494 43,972 26,826 (2,554,898) See notes on next page. 34 (138,448) (33,094) (482,785) (1,625,590) Increase (decrease) in working capital (1,002,793) 17,863 (640,660) (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 To be operated 336 337 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, . 40 Blanchard,R. Coleman . Richard J. 41 Park, Radcliffe 42 Faulstich, Albert J 43 Motter, David C 44 45 Gwin, John D W. A. 46 Howland, Jr., Mullin, Robert 47 Ream, Joseph A 48 Bloom, Robert M 49 Chotard, Richard D. .. 50 Hall, Charles 51 Jones, David B H 52 Murphy, C. Westbrook 53 Selby, H. 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 Insolvencies Consolidated Liquidated Merged 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 Outstanding capital stock Total: 9 banks Surplus, undivided profits and reserves Total assets $11,574,000 Title and location of bank $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 Dec. Sept. Apr. 15 30 15 June 15514 Heights Bank, National Association, Alamo Heights 6176 South Main & Richardson National Bank, Henderson 4295 New Braunfels Commerce Bank National Association, New Braunfels 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. $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 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) 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) Indiana Iowa Kansas Kentucky Louisiana 6 . 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 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 District of Columbia non-national* 1 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 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 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) 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 543,127 5,639 65,874 0 921,129 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 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 5,193,168 11,187,643 18,892,521 11,695,845 3,167,178 10,236,991 6,157 45,344 84,358 131,686 9,460 29,119 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, 17,137,934 0 20,140 22,642 31,856 Total demand deposits Total time and savings deposits 9,248,335 1,550 , 4,482,546 341,182 579,947 963,601 Total deposits 282,170 30,632 1,483 556 2,129 154,758 243,422 322,979 12,747 75,530 notes and debentures and equity capital .... 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) Vermont Virginia Subordinated notes and debentures Equity Capital Preferred stock Common stock Surplus Undivided profits Reserve for contingencies and other capital reserves Total equity capital capital..... 108 $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 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 9,983,163 493,038 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 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 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 21,321 33,020 181,940 16,526 3,249 46,196 0 39,326 74,973 100,446 3,765 218,510 Total liabilities 14 7,600 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 13 2,489,735 Total demand deposits Total time and savings deposits 596 2,320,136 Total deposits 74 1,176,270 884,873 15,837 188,505 0 34,595 20,056 Total assets 32 16,005 1,409,761 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 Utah $391,853 187,470 98,404 366,123 818 3,515 11,129 127,290 1,425,766 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 liabilities, subordinated notes and debentures and equity Texas 19 Reserve for possible loan losses Loans, net of reserve Ol Tennessee 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) Wisconsin Wyoming Other areas Puerto Rico Virgin Islands District of Columbia non-national* Washington Number of banks 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 2.7 142 100.0 4,312 100.0 4,241 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 73 100.0 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 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 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 2,099 953 488 321 180 108 65 48 118 4,380 7977 7970 7969 Classified assets as a percent of total loans 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 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 .' 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 District of Columbia Delaware Florida Georgia Hawaii 132 Number of banks Total operating income Connecticut 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 197 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 215 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 216 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 217 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 218 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 219 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 s Is 9: a s < S o £ -D s ? | 1 s s| _ * 2 8ilg j I 1 * . Si «.1 f 8 ^ § Ss is s S §°S3?S i c| 1 -IS f § .|s i g ! 1 H I 1 1 M i l 11 s § ! t l i I s ! f e l l ! l o g o i l § Deposits (Thousands of dollars) 32,000 30,000 7,000 7,000 4,000 53,000 6,000 22,000 98,000 95,000 11,000 934,000 11,000 31,000 51,000 12,000 55,000 7 0 0 ,0 105,000 17,000 24,000 11,000 15,000 14,000 11,000 31,000 19,000 29,000 8,000 28,000 19,000 345,000 1,420,000 30,000 859,000 32,000 10,000 40 30 80 , 32,000 40 , 0 0 237,000 11,000 21.000 7,000 25,000 40,000 34,000 144,000 16,000 124,000 " 28,000 395,000 78,000 37,000 21,000 14.000 34,000 971,000 48,000 77,000 17,000 Totals E 3 i - | | I SS 2 | ? §E 1 I I I ° « 6 3 1 1 5 < ScS S Jl 5 < 3 § S 1 X 2 3 4 X 5 X 6 7 X X 8 X 9 1 0 11 1 2 X 13 X X X 1 4 X X 1 5 1 6 X X 1 7 X 1 8 1 9 2 0 2 1 X 2 2 X 2 3X X X 2 4 2 5X 2 6X 2 7X X 2 8X X X 2 9 3 0X X 3 1 X X 3 2X X 3 3 3 4 3 5 3 6X 3 7X X X 3 8 3 9 X 4 0 X 41 X X 4 2 X 43 X 44 X 4 5 X X 4 6 X X 47 X 4 8 X X 4 9 X 5 0 X 51 X 52 53 X X 54 X 55 X X 56 X X 57 58 X 59 60 X X 61 X 3 6 16 13 X X X X X X X X f 6 X X X X X X X 1 f S |=.2 g §§ S t § g f 1 8 " 3 >£ i§ .S 5 3 5 g £ 3 3 3 3 1 S i 2<5 2 2 l l 2 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 8 17 4 X 34 3 X X X X X X X X X X X X X X X X X X X X X X X X X X X 12 10 24 21 27 5 21 3 9 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 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 228 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. 229 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 230 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 231 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 232 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 5 1 X ? 1 X X 5 3 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 Other 12 USC 371 X X x x X X x x x x x X X X X X X X x x X X 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 Correspondent Balances Executive and Director Compensation Indemnification X Classified Assets Overdrafts Corrections of Law Violations Management Qualification x X Dividends X X X fifi X Loans Within Trade Area 12 USC 84 62 63 64 X 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.] 6 5 X X 0 0 2 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 3 1 3 2 — — 1 1 1 1 1 1 — — 1 4 — — — 4 7 5 1 4 2 — 1 — rv> 1 — — 1 — — 7 1 — 3 37 119 6 — 1 — 6 2 — — — — _ _ _ 4 2 — 1 — 3 10 38 1 ro — 1 — — 1 1 1 — — — — 1 1 — 3 31 1 — — Other — 9 3 3 2 rv> 1 2 1 1 1 _ 2 — 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 2 1 Vacation / Xmas Club Escrow Savings Other Tola 1 — — 2 1 — Time — — — — — 1 1 2 1 ~6" 1 3 1 _ _ — — — _ — — — Demand 1 5 2 2 2 1 3 — — — — — — _ 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 — — 8 13 — — — 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 1 2 1 4 1 — — — — — — — — — 5 1 — — — — 1 — 1 — 20 1 3 1 7 3 1 — 11 — 2 5 — — 2 3 — — — Total 3 2 8 1 Other 1 Savings — 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 1 3 5 — 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 significa