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N
ANNUAL REPORT OF THE
FEDERAL DEPOSIT INSURANCE CORPORATION
1976

Ill

L E T T E R OF T R A N S M I T T A L

F E D E R A L DEPOSIT INSURANCE CORPORATION
Washington, D.C., May 31, 1977

SIRS: In accordance with the provisions of section 17(a) of the Federal
Deposit Insurance Act, the Federal Deposit Insurance Corporation is pleased to
submit its annual report fo r the calendar year 1976. This report is a reprint of
the report issued on March 1 expanded to include bank merger decisions,
statistical tables, and other updated information pertinent to the operations of
the Corporation.

Very truly yours,

ET.
ROBERT E. BARNETT
Chairman

THE PRESIDENT OF THE SENATE
THE SPEAKER OF THE HOUSE OF REPRESENTATIVES

FEDERAL DEPOSIT INSURANCE CORPORATION

V
FEDERAL DEPOSIT INSURANCE CORPORATI ON

BOARD OF DIRECTORS
C hairm an...................................................................... .........Robert E. Barnett
D ire c to r........................................................................ , . .George A. LeMaistre
Comptroller o f the Currency (Acting) ...................... ............. Robert Bloom

OFFICIALS
Assistant to the Chairman (P o lic y )............................ ........... Paul M. Horvitz
Assistant to the Chairman
(Administration and Management) ........................

Alfred H. Teichler, Jr.

Assistant to the Director ...........................................

John C. H. Miller, Jr.

Assistant to the Director
(Comptroller o f the Currency) .............................. ........... Joseph M. Ream
Executive S e cretary.................................................... ............... Alan R. Miller
Director, Division o f Bank Supervision...................... ............... John J. Early
General Counsel........................................................... ............... Miles A. Cobb
C o ntroller...................................................................... . . Edward F. Phelps, Jr.
Chief, Division o f Liquidation ................................... ............. George W. Hill
Director, Division o f Management Systems
and Economic A n a ly s is ........................................... .........Robert P. Rogers
Director, Office o f Corporate Planning......................

Stanley C. Silverberg

Director, Office o f Corporate A u d its ........................

Robert D. Hoffman

Director, Office o f Bank Customer A ffa irs ............... .........Thomas C. O'Neil
Director, Office o f Employee R elations.................... ............... Joe S. Arnold
Special Assistant to the Chairman .................................Robert F. Miailovich
Special Assistant to the Director ...................................C. F. Muckenfuss, 111
Executive Assistant to the B o a rd .............................. Tim othy J. Reardon, Jr.

D ecem ber 3 1 , 1 9 7 6

FEDERAL

DEPOSIT INSURANCE CORPORATION

REGIONS

REGIONAL DIRECTORS
Minneapolis
Anthony S. Scalzi
730 Second Avenue South, Suite 266
Minneapolis, Minnesota 55402
New York
Claude C. Phillippe
345 Park Avenue, 21st Floor
New York, New York 10022
Omaha
Burton L. Blasingame
1700 Farnam Street, Suite 1200
Omaha, Nebraska 68102
Philadelphia
Frank T. Locki
5 Penn Center Plaza, Suite 2901
Philadelphia, Pennsylvania 19103
Richmond
John Stathos
908 E. Main Street, Suite 435
Richmond, Virginia 23219
St. Louis
Robert V. Shumway
720 Olive Street, Suite 2909
St. Louis, Missouri 63101
San Francisco
Charles E. Doster
44 Montgomery Street, Suite 3600
San Francisco, California 94104

Atlanta
Lewis C. Beasley
2 Peachtree St., N.W., Suite 3030
Atlanta, Georgia 30303
Boston
Edwin B. Burr
2 Center Plaza, Room 810
Boston, Massachusetts 02108
Chicago
James A. Davis
233 S. Wacker Drive, Suite 6116
Chicago, Illinois 60606
Columbus
John R. Curtis
37 West Broad Street, Suite 600
Columbus, Ohio 43215
Dallas
Quinton Thompson
300 North Ervay Street, Suite 3300
Dallas, Texas 75201
Madison
Bernard J. McKeon
1 South Pinckney Street, Room 813
Madison, Wisconsin 53703
Memphis
Roy E. Jackson
165 Madison Avenue, Suite 1010
Memphis, Tennessee 38103

December 31, 1976

FEDERAL

DEPOSIT

Main

550

Office:

17th

INSURANCE

Street,

CORPORATION

N. W., W a s h i n g t o n ,

D. C., 2 0 4 2 9

VI I

CONTENTS
Chairman's statem ent...................................................................................

PART ONE
OPERATIONS OF THE CORPORATION
Promoting sound banking............................................................................

Protecting depositors...................................................................................

Enforcing consumer and investor legislation..............................................

Administration of the Corporation.............................................................

Finances of the C orporation........................................................................

PART TWO
ENFORCEMENT PROCEEDINGS
Actions to terminate insured status ...........................................................

Cease-and-desist a c tio n s ..............................................................................

PART THREE
MERGER DECISIONS OF THE CORPORATION
Bank absorptions approved by the C orporation.......................................

Bank absorption denied by the Corporation..............................................

107

PART FOUR
REGULATIONS AND LEGISLATION
Rules and regulations...................................................................................

113

Federal Legislation.......................................................................................

114

PART FIVE
STATEMENTS BY CORPORATION DIRECTORS
Selected addresses and Congressional testim ony.......................................

119

PART SIX
STATISTICS OF BANKS AND DEPOSIT INSURANCE
Number of banks and branches .................................................................

212

Assets and liabilities of banks...................................................................... 233
Income of insured banks ............................................................................

255

Banks closed because of financial difficulties;
FDIC income, disbursements, and losses................................................ 271

V III

TABLES
NUMBER OF BANKS AND BRANCHES:
Explanatory note .............................................................................................................
101. Changes in number and classification of banks and branches in the United
States (States and other areas) during 1976 ..................................................

212
214

102. Changes in number of commercial banks and branches in the United States
(States and other areas) during 1976, by S ta te ..............................................

216

103. Number of banking offices in the United States (States and other areas),
December 31, 1976
Banks grouped by insurance status and class o f bank, and by State or
area and type o f o f f ic e .................................................................................

218

104. Number and assets of all commercial and mutual savings banks (States and
other areas), December 31, 1976
Banks grouped by class and asset size.........................................................

227

105. Number, assets, and deposits of all commercial banks in the United States
(States and other areas), December 31, 1976
Banks grouped by asset size and S ta te .......................................................

228

ASSETS AND LIA B ILITIE S OF BANKS:
Explanatory note .............................................................................................................
106. Assets and liabilities of all commercial banks in the United States (States and

233

o th e r areas), Ju n e 3 0 , 1 9 7 6

Banks grouped by insurance status and class o f b a n k ..............................

235

107. Assets and liabilities of all commercial banks in the United States (States and
other areas), December 31, 1976
Banks grouped by insurance status and class o f b a n k ...............................

239

108. Assets and liabilities of all mutual savings banks in the United States (States
and other areas), June 30, 1976, and December 31, 1976
Banks grouped by insurance status.............................................................

243

109. Assets and liabilities of insured commercial banks in the United States (States
and other areas), December call dates, 1971-1976 .......................................

245

110. Assets and liabilities of insured mutual savings banks in the United States
(States and other areas), December call dates, 1971-1976 ............................

248

111. Percentages of assets, liabilities, and equity capital of insured commercial
banks operating throughout 1976 in the United States (States and other
areas), December 31, 1976
Banks grouped by amount o f assets...........................................................

250

112. Percentages of assets and liabilities of insured mutual savings banks operating
throughout 1976 in the United States (States and other areas), December
31, 1976
Banks grouped by amoun t o f assets...........................................................

251

113. Distribution of insured commercial banks in the United States (States and
other areas), December 31, 1976
Banks grouped according to amount o f assets and by ratios o f selected
items to assets or deposits ..........................................................................

252

INCOME OF INSURED BANKS:
Explanatory note .............................................................................................................
114. Income of insured commercial banks in the United States (States and other
areas), 1971-1976 ..............................................................................................

255
258

115. Ratios of income of insured commercial banks in the United States (States
and other areas), 1971-1976 ............................................................................

260

116. Income of insured commercial banks in the United States (States and other
areas), 1976
Banks grouped by class o f b a n k .................................................................

261

117. Income of insured commercial banks operating throughout 1976 in the
United States (States and other areas)
Banks grouped by amount o f assets...........................................................

263

118. Ratios of income of insured commercial banks operating throughout 1976 in
the United States (States and other areas)
Banks grouped by amount o f assets...........................................................

265

119. Income of insured mutual savings banks in the United States (States and other
areas), 1971-1976 ..............................................................................................

267

120. Ratios of income of insured mutual savings banks in the United States (States
and other areas), 1971-1976 ............................................................................

269

BANKS CLOSED BECAUSE OF FINANCIAL DIFFICULTIES;
FDIC INCOME, DISBURSEMENTS, AND LOSSES:
Explanatory note .............................................................................................................
121. Number and deposits of banks closed because of financial difficulties,
1934-1976...........................................................................................................

272
273

122. Insured banks requiring disbursements by the Federal Deposit Insurance
Corporation during 1976 .................................................................................

274

123. Depositors, deposits, and disbursements in failed banks requiring disburse
ments by the Federal Deposit Insurance Corporation, 1934-1976
Banks grouped by class o f bank, year o f deposit payo ff or deposit
assumption, amount o f deposits, and State ..............................................

276

124. Recoveries and losses by the Federal Deposit Insurance Corporation on
principal disbursements for protection of depositors, 1934-1976 ...............

279

125. Analysis of disbursements, recoveries, and losses in deposit insurance
transactions, January 1, 1934-December 31, 1976 .......................................

280

126. Income and expenses, Federal Deposit Insurance Corporation by year, from
beginning of operations, September 11, 1933, to December 31, 1976 . . . .

281

127. Protection of depositors of failed banks requiring disbursements by the
Federal Deposit Insurance Corporation, 1934-1976 .....................................

282

128. Insured deposits and the deposit insurance fund, 1934-1976 ............................

283

CHAIRMAN'S STATEMENT
The last few years have been traumatic
ones for the United States banking indus
try. The worst recession since the Great
Depression of the 1930s, combined with
d o u b le -d ig it inflation, imposed great
strains on the banking system. More bank
failures occurred in 1976 than in any year
since 1942. The eight largest bank failures
in the FDIC's history took place in the
39-month period from October 1973 to
December 1976—banks whose assets ag
gregated over 3 1/2 times as many assets as
all the other insured banks that have been
closed during the entire history of the
FDIC. Yet, despite these strains, and the
generation of a great deal of unfavorable
publicity, the public's basic confidence in
the banking system and the deposit insur
ance system appears to be unshaken. A t
all times during 1976, for example, at
least 97-98 percent of all the insured
banks in the country were n ot on the
FDIC problem list; only around 2-3 per
cent of them were.
The strains on the banking system in
the last few years were not at all insignifi
cant. Not only did they lead to 16 in
sured bank failures in 1976, but they also
raised the number of banks on our prob
lem list to the highest level in 28 years.
A t the end of the year, there were 379
FDIC-insured banks on our list of banks
we feel supervisors should be paying par
ticular attention to, the list we call our
"problem " list, or about 214 percent of all
insured banks. While this is a very low
percentage, far fewer than that, consider
ably less than 1 percent of all banks in
the country, are in our serious problem
categories.
One new aspect of the problem list
now, as distinct from a few years ago, is
that the list includes some large banks
(banks with over $500 m illion in de
posits) and a few very large banks (over
$1 billion in deposits). Of course, there
are many more banks in those size cate
gories now than there were in the past, so

the appearance of some of these banks on
a problem list is more likely now than
previously. But it must be recognized that
in recent years larger banks assumed
greater risks on both sides of their bal
ance sheets. That fact, combined with the
unsatisfactory performance of the econ
omy, has led to problem status for a few
of these larger banks.
The FDIC was not established, of
course, to eliminate bank failures or to
prevent banks from assuming risks. Dur
ing periods such as the one we have been
passing through, the FDIC has as its
major function that of assuring that an
individual bank failure does not lead to
drastic repercussions. Our major function
in these circumstances is one of maintain
ing confidence in the banking system so
that the occasional failure, which is an
essential part of a free enterprise system,
can be handled w ith a minimum of dis
ruption to the economy and the com
munity.
The FDIC has successfully met the test
which recent events have thrust upon it.
If, 5 years ago, we could have forecast the
most severe recession since the Depres
sion of the '30s, simultaneous high un
employment and rapid inflation, the
collapse of the m ulti-billion dollar REIT
industry, bankruptcies of major industrial
corporations, as well as failures of some
larger banks, we might have had great
concern about the ability of the banking
system to avoid a major crisis of confi
dence.
Such a crisis has not developed. To be
sure, this required massive action on an
unprecedented scale by the FDIC. The
concept of a "clean bank" purchase and
assumption transaction, one in which a
take-over bank purchases only good assets
from the estate of the failed bank, with
the FDIC substituting cash for the assets
not taken by the take-over bank, has been
applied in the past 3 years by the Cor
poration to larger banks. By doing so, the
Corporation has removed from the bank
ing system between October of 1973 and

XII

F E D E R A L DEPOSIT INSURANCE CO RPORATION

December 31, 1976, over $3.7 billion of
questionable assets, including all the
worst assets of all the failed insured
banks. This represents a substantial re
moval of poor quality assets from the
banking system.
Just as important as the "clean bank"
purchase and assumption approach has
been the Corporation's determination to
attempt to arrange a purchase and as
sumption in each failed bank situation,
rather than pay depositors their insured
amounts. This approach, and our ability
to implement it not only in all larger
bank failures but in nearly all failures re
gardless of bank size, has contributed
significantly to customer confidence in
the banking system. Only three banks
whose total deposits aggregated only about
$18 million, were paid out in 1976.
The size and complexity of the Cor
poration have grown dramatically during
the past few years. The Corporation now
supervises 9,009 commercial and mutual
savings banks, an increase of 86 during
1976 and an increase of 798 during the
past 5 years. These banks at year-end
1976 had assets totaling $355.6 billion,
an increase of $34.1 billion in assets of
banks supervised by the Corporation
from the end of 1975, and an increase of
$151.4 billion during the preceding 5
years. We now supervise three times as
many banks with deposits over $100 m il
lion as the Federal Reserve System, and
are approaching the number of banks of
this size supervised by the Comptroller of
the Currency. More banks with deposits
of over $1 billion are supervised by the
FDIC than by the Federal Reserve Sys
tem.
We are currently liquidating over $2.6
billion of assets in our Division of Liqui
dation. These assets are considerably larg
er and more d iffic u lt to liquidate than
those in earlier liquidations and our re
covery record w ill not be as high when
the books are finally closed on these
liquidations as it has been in the past.
The number of Corporation employees

now totals 3,535, an increase of 261 dur
ing 1976, and an increase of 928 during
the past 5 years. Our expenditures, of
which at least 83 percent are for em
ployee compensation and examiners' trav
el, totaled $75 m illion for 1976, an in
crease of $8 m illion from the previous
year and an increase of $33 m illion from
5 years ago. The increase in expenditures
during the past 5 years is directly trace
able to governmental pay and reimburse
ment increases, increases in number of
employees, and inflation.
The largest part of the increase in
number of employees is directly related
to the increase in the number and size of
banks supervised and to the number and
size of liquidations we are administering.
In addition, a number of employees have
been added to deal with relatively new
responsibilities that the Corporation has
been given during the past few years. For
example, while it is d iffic u lt to estimate
precisely, it appears that the Corporation
is spending the equivalent of 230 thou
sand man-hours each year in enforcing
consumer laws.
There has not been a fundamental
change in the deposit insurance system
since its inception. The performance of
the banking industry and the FDIC dur
ing this recent d iffic u lt economic period
has been good and suggests that drastic
change may be unnecessary. Nevertheless,
in an attempt to confirm or refute this
and to review systematically our entire
operations, we launched during 1976 a
major analysis of the premises and pro
cedures of our system of Federal deposit
insurance. This review covers the extent
of deposit insurance, the financing of the
deposit insurance system, and our meth
ods of handling bank failures. In addition,
we are giving special attention to the in
ternational aspects of deposit insurance
to determine whether that change in the
nature of that important segment of the
banking business requires some change in
the deposit insurance system. Any rec
ommendations arising from our study w ill

C H A IR M A N 'S STATEM EN T

be reported during 1977.
We have also been reviewing the proc
ess of bank examination, which is our
major tool for preventing bank failures.
Some changes, which had been initiated
by the FDIC on an experimental basis in
1975, were implemented more fu lly in
1976 and w ill be accelerated in 1977. A
dramatically revised procedure for exam
ining and supervising banks was adopted
in November when amended General
Memorandum No. 1 was approved. The
new approaches to the examination func
tion are designed to deploy more effec
tively the resources needed to meet an
increasing work load, to marshal efforts
in the appropriate areas, and to maintain
technical competence in the face of in
creasing sophistication in operating and
management systems of banks. Specific
changes include the use of a modified
examination for smaller banks that do
not present supervisory problems, both
computerized and manual monitoring
techniques to anticipate problem bank
situations and to keep banks under sur
veillance between examinations, more in
tensive use of statistical sampling tech
niques, and automated bank examination
packages.
The FDIC has been experimenting
since 1974 w ith the elimination of some
FDIC bank examinations in three States
deemed to have appropriate and effective
State bank examination procedures,
Georgia, Iowa, and Washington. A t the
conclusion of that experiment in 1976,
and as a result of what was learned, an
agreement has been reached with the
State of Georgia whereby examinations
of a large portion of the total nonprob
lem State-chartered banks in Georgia will
be conducted by the State and the FDIC
on an alternate year basis. While it ap
pears at this time that Iowa does not wish
to continue the experimental program
and instead wants the FDIC to return to
the examination status that was in effect
before the first year of the withdrawal
experiment, the Corporation is in the proc

X III

ess of discussing programs similar to the
one to be begun in Georgia with Washing
ton and other States. Agreements w ith
other States should save substantial exam
ination time by eliminating some duplica
tion of State and FDIC examinations, it
will permit State banking departments to
improve both the quality and size of their
examination staffs at a rate that can be
absorbed by State budgets, and it will
permit the FDIC to deploy its resources
more vigorously in examining problem or
more d iffic u lt banks.
This improved cooperation and coordi
nation w ith the States, as well as the
other changes in our examination pro
cedures, are designed to permit the rede
ployment of more of our resources to
banks that have problems, or that because
of their size and scope of operations are
of particular concern to the FDIC. Banks
that warrant it will be examined more fre
quently and more intensively than in the
past, while banks in good condition will
be examined less frequently by the FDIC
but w ill still be monitored through care
ful review of information supplied by the
bank itself.
When our examination process detects
weakness in a bank, we have several
means of dealing with the situation, both
formal and informal. Over the last few
years, there has been a trend in the direc
tion of more frequent initiation of formal
actions, generally cease-and-desist orders
issued pursuant to section 8(b) of the
Federal Deposit Insurance Act. While in
formal approaches are often successful,
the trend toward greater use of formal
actions was accelerated in 1976. There
were 41 cease-and-desist proceedings in iti
ated in 1976, compared with 8 in 1975
and only 7 as recently as 1971.
Section 8(a) orders., withdrawal of in
surance, have remained rather constant in
numbers during similar periods with 8
being initiated during 1976 and 5 each in
the years 1975 and 1972. Federal deposit
insurance was terminated in one bank
during 1976, First State Bank & Trust

XIV

FE D E R A L DEPOSIT INSURANCE CO RPO RATIO N

Co., Rio Grande City, Texas, and the
bank failed shortly thereafter.
Major steps were taken by the FDIC
during 1976 to increase efforts at enforc
ing bank customer oriented laws and reg
ulations. Not only was a director fo r the
Office of Bank Customer Affairs selected
and the efforts of that office begun to be
felt during 1976, but section 8(b) ceaseand-desist orders for violations of the
Truth in Lending Law were issued for the
first time since 1973. Also instituted was
a sample survey aimed at improving en
forcement of Fair Housing Lending (Title
V III of the Civil Rights Act of 1968), and
based on what is learned from analysis of
the sample survey, we plan to extend that
program during 1977. Increased training
for examiners was part of our program
during 1976, as were changes and im
provements in our consumer complaint
investigation procedure.
Our analysis of bank problems in the
past has led us to conclude that an in
creasing responsibility for bank safety
and success must lie with the board of
directors of the bank. During 1976 mem
bers of the Board of Directors of the Cor
poration and members of the FDIC staff
p a rticip a te d in educational programs
aimed at directors of banks and we have
announced a policy of conducting meet
ings between the bank examiner and the
board of directors of banks on a more
frequent basis than previously. Since we
have found that a number of bank fail
ures and bank problems have resulted
from improper dealings between the bank
and its insiders, we issued a new regula
tion in 1976 requiring approval of signifi
cant insider transactions by the board of
directors of each nonmember bank.
Under the present bank regulatory
structure, the FDIC does not directly
supervise all the banks it insures. Even
though the Federal Deposit Insurance Act
perm its the Corporation to examine
member banks "fo r insurance purposes,"
the Senate Banking Committee in its re
port accompanying the 1950 amend

ments to the FDI A ct made it clear that
this was not to mean that the Corpora
tion would conduct any systematic exam
ination program of member banks. Thus,
the FDIC has a need for coordination be
tween itself and the other supervisory
agencies. There are several mechanisms
for assuring this needed cooperation, one
obvious one being the membership of the
Comptroller of the Currency on the
Board of Directors of the FDIC. This
gives the Comptroller a good understand
ing of the status of major matters at the
FDIC and provides the opportunity on a
regular basis for other FDIC Board mem
bers to ask questions of the Comptroller
concerning his operations. During 1976
meetings were held on an approximate
monthly basis of the Interagency Coordi
n a tin g Committee, consisting of the
Chairman of the Federal Deposit Insur
ance Corporation, the Comptroller of the
Currency, the Chairman of the Federal
Home Loan Bank Board, the Vice Chair
man of the Board of Governors of the
Federal Reserve System, and a representa
tive of the Secretary of the Treasury. The
Coordinating Committee considers all
matters that involve more than a single
agency's activities, and during 1976 con
sidered such issues as interest rate ceil
ings, supervisory treatment of certain
bank assets, regulations on pooling of
deposits, transfers from savings to check
ing accounts, new deposit instruments,
and many others.
The FDIC might know more about all
the banks it insures if it had a representa
tive in the offices or on the boards of the
other bank regulatory agencies. But even
absent such representation, we believe the
opportunity for extensive cooperation
and coordination not only exists but is
taken frequently and extensively. Because
of this, we feel that we have, in general,
an accurate and current knowledge of
banks not supervised by us that present a
significant risk to the deposit insurance
fund.
In the interest of consistency and uni

C H A IR M A N 'S ST A T E M E N T

form ity, the Comptroller of the Currency
launched a program in 1975 aimed at pro
viding a uniform classification of certain
large credits participated in by several
banks in which a national bank was the
lead bank. This assures that a loan to a
given company w ill be treated in a con
sistent fashion by all national bank exam
iners. The FDIC had observers at the loan
discussions in this program in 1976 and
has concluded that the reviews were gen
erally consistent with reviews Corpora
tion examiners would have made were
they faced with the same loans. We antic
ipate participating in such reviews in
1977 and are now applying the results to
the same credits when they appear in
State nonmember banks.
The FDIC has long had an extensive
and sophisticated training program for
examiners, including the most modern,
spacious, and useful classrooms, as well as
the most extensive curriculum, of all the
banking agencies. Our long-run planning
indicates a need for increased facilities to
handle our growing needs fo r examiner
training. In the interest of coordination
and efficiency, we have proposed to the
Comptroller of the Currency and the
Federal Reserve that they consider partic
ipating with us in an expanded joint train
ing facility. Along the same lines, we have
proposed to the Comptroller of the Cur
rency consideration of a jo in t computer
facility. We have received responses from
both agencies which encourage us to be
lieve that some useful joint facility can be
developed.
The process of bank supervision is
facilitated by contact w ith executives of
the supervised institutions and representa
tives of bank customer groups. In 1975

the FDIC began a series of meetings be
tween officials of the FDIC and chief
executive officers of insured nonmember
banks. During 1976 two such meetings
were held on a regional basis with com
mercial bankers and two with mutual sav
ings bank officers. While these meetings
covered a variety of topics, we gained a
clear impression of the controversial
m a tte rs th a t most concern bankers
around the country. Payment of interest
on demand deposits and NOW accounts,
as well as interest rate ceilings on time
deposits and competition between com
mercial and th rift institutions, appeared
to be the most important concern of the
banking community. A close second was
concern about the growth of regulations
pertaining to consumer protection and
the burden of government paperwork re
quirements generally. Preservation of the
dual banking system also was a matter of
great importance to the bankers who at
tended these meetings.
As yet, a program to get systematic
input from bank customers has not been
developed. We do hear frequently from
customers (over 4,000 inquiries or com
ments were received during 1976 from
bank customers), and FDIC representa
tives have both attended and hosted
meetings of consumer groups. We hope
that a more regular means of communica
tion w ith bank customers can be devel
oped in 1977.

^ X i

Robert E. Barnett
Chairman

OPERATIONS OF THE CORPORATION
PART ONE

PROMOTING SOUND BANKING
The Corporation has some supervisory
authority with respect to all insured
banks, and has general supervisory re
sponsibilities for insured banks that are
not members of the Federal Reserve
System. It also has authority, imple
mented in Part 329 of its Regulations,
with respect to noninsured mutual savings
banks to establish maximum rates of
interest payable on time deposits. There
has been rapid growth in the number,
size, and complexity of the banks falling
w ith in the Corporation's supervisory
mandate over the past decade. Between
year-end 1966 and year-end 1976, the
number of insured nonmember commer
cial and mutual savings banks increased
from 7,724 to 9,009. Assets of insured
nonmember commercial banks totaled
$234.8 billion as of December 31, 1976,
representing 23.2 percent of all insured
commercial bank assets (domestic) com
pared with just 16.6 percent in 1966. In
December 1976, there were 329 mutual
savings banks insured by the FDIC, with
total assets of $115.3 billion.
Examinations. In 1976, the Corpora
tion changed its policy of examining
every insured nonmember bank every
year and put into effect a system that
recognizes the basic differences among
banks associated with size and allocates
more time to the examination of banks
th a t require more attention. General
Memorandum No. 1 set forth the new ex
amination policy on examination priori
ties, frequency, and scope and clarified
areas which allow the FDIC Regional
Directors some discretion while still main
taining some uniform ity of approach.
Top priority is accorded the examina
tion of banks w ith known supervisory or
financial problems. They w ill receive a
full-scale examination at least once every
12 months. For banks with assets of less
than $100 m illion that do not present
supervisory or financial problems, and
that meet criteria indicating satisfactory

management, adequate capital, acceptable
fidelity coverage, good earnings, and ade
quate internal routine and controls, a
modified examination is permitted for
alternate examinations. The time between
examinations will be stretched out so
there w ill be one examination in each
18-month period, w ith no more than 24
months between examinations. Emphasis
in such modified examinations w ill be
placed on management policies and per
formance; the evaluation of asset quality,
distribution, and liquidity; capital ade
quacy; and compliance with laws and reg
ulations. Banks with assets of $100 m il
lion or more that do not present super
visory or financial problems w ill continue
to receive a full-scale examination during
each 18-month period, again with no
more than 24 months between examina
tions. But the examination is designed to
make full use of the bank's own reporting
capabilities and generally is tailored more
to the size and the complexity of the
bank than was the case heretofore.
The program of bank examination out
lined in General Memorandum No. 1
appears to be a better solution to effec
tive allocation of examiner resources than
the FDIC selective examination w ith
drawal program. This program, which was
initiated in Georgia, Iowa, and Washing
ton in 1974, was continued on a modified
basis in 1976. Under this program, the
Corporation had withdrawn in these three
States from its usual examination of in
sured State nonmember banks and, for a
specified number of such banks in each of
the three States, agreed to rely heavily
upon 1974 and 1975 examinations by the
respective State banking departments for
determination of their financial condi
tion. In 1976, the Corporation examined
the approximately 60 percent of insured
nonmember banks in Georgia it had not
examined in the previous 2 years, and
also the 50 percent in Iowa and the 80
percent in Washington it had not exam
ined in 1974 or 1975. During these exam
inations in 1976, the FDIC analyzed

F E D E R A L DEPOSIT INSUR ANCE CO RPO RATIO N

NUMBERS AND ASSETS OF COMMERCIAL BANKS
IN THE UNITED STATES 1966-1976
NUMBER OF BANKS

15.000

10.000 I

PROMOTING SOUND B A N K IN G

these banks' current condition and tried
to gain some measure of what their condi
tion was at the time of the 1974 and
1975 examinations. The FDIC did not
examine in these three States the banks it
had examined in 1974 and 1975, leaving
their examinations solely to the respec
tive State banking departments.
The evaluation of the 3-year experi
ment suggests the feasibility of agree
ments with various States whereby exami
nations of a large portion of the non
problem State-chartered banks would be
conducted by the State and the FDIC on
an alternate year basis. The resultant sub
stantial saving of time w ill permit the
Corporation's examiner force to concen
trate on the examination and follow-up
supervision of banks with known or more
complex problems. Recent experience
suggests that the new policy delineated in
General Memorandum No. 1 w ill be more
likely to insure the Corporation's fu lfill
ment of its statutory responsibilities than
withdrawal from examining banks in any

specific group of States.
In addition to the on-site examinations
of nonmember insured banks to deter
mine their current condition, to evaluate
their management, and to discover and
obtain correction of any unsafe and un
sound practices or violations of laws and
regulations, the Corporation conducts
special investigations in connection with
applications for Federal deposit insur
ance, mergers, establishment of branches,
and other actions requiring the prior
approval of the Corporation.
Compliance is an area of increasing
importance. The Corporation examines
banks for compliance with certain Fed
eral laws, including the Truth-in-Lending
Act, the Fair Credit Reporting Act, the
Bank Protection Act, the Bank Secrecy
Act, and certain disclosure and equal
opportunity laws, using a Compliance Ex
amination Report. This report was devel
oped specifically for the purpose and was
tested during 1974 on banks in the selec
tive withdrawal program.

BANK EXAMINATION ACTIVITIES OF
THE FEDERAL DEPOSIT INSURANCE CORPORATION
IN 1975 AND 1976
Number

A ctivity
1976

1975

Field examinations and investigations—total..............................................
Examinations of main offices-total...................................................

29,713
8,037

28,254
7,597

Regular examinations of insured banks not members of
Federal Reserve S y s te m ........................................................................
Reexaminations or other than regular exam inations..............................
Entrance examinations of operating noninsured banks...........................
Special exam inations....................................................................................

7,829
187
19
2

7,354
207
26
10

Examinations of departments and branches.........................................

9,691

8,884

Examinations of trust departments............................................................
Examinations of branches...........................................................................

1,491
8,200

1,469
7,415

Investigations..................................................................................

3,812

3,998

New bank investigations..............................................................................
State banks members of Federal Reserve S ystem ..............................
Banks not members of Federal Reserve System.................................
New branch investigations...........................................................................
Mergers and co n s o lid a tio n s ........................................................................
Miscellaneous investigations........................................................................

162
16
146
952
118
2,580

176
10
166
709
124
2,989

Compliance examinations.................................................................

8,173

7,775

FE D E R A L DEPOSIT INSURANCE CO RPO RATIO N

Enforcement proceedings. After an ex
am ination of an insured State non
member bank, if the Corporation finds
that the bank has been conducting its
business in an unsafe or unsound manner,
or has violated a law, rule, or regulation,
or any agreement with a condition im
posed in writing by the Corporation, it
may initiate a cease-and-desist proceeding
pursuant to section 8(b) of the Federal
Deposit Insurance Act. The Corporation
first attempts to correct the deficiencies
through a consent cease-and-desist order.
Bank management is given a proposed
Notice of Charges detailing the objection
able practices, proposed Findings of Fact
and Conclusions of Law, and a proposed
Order to Cease and Desist which contains
a program designed to put the bank in
compliance. The bank is given a reason
able period of time to study the docu
ments and consult with counsel. A meet
ing is then held with the bank and the
appropriate State supervisory authority
to negotiate a consent to the issuance of
the notice, findings, and order. If these
efforts fail, the Corporation w ill initiate
formal proceedings by issuing the notice
of charges and setting a date for a hearing
before an administrative law judge. After
the presentation of evidence by both the
bank and the Corporation, the adminis
trative law judge submits a written deci
sion and recommended order to the
Board of Directors of the Corporation.
The subsequent order issued by the Cor
poration, which is based upon an inde
pendent review of the entire case, can be
appealed to a Federal Circuit Court of
Appeals. In 1976 the Corporation had no
formal hearings under section 8(b).
Fifteen cease-and-desist orders against
insured State nonmember banks were
outstanding at the beginning of 1976. Be
cause of substantial compliance, five of
these orders were terminated during the
year. During 1976, there were 49 staff
recommendations to initiate cease-anddesist proceedings. Of these, 5 were w ith
drawn prior to Board action because of

substantial compliance or action by State
authorities and 3 were in preparation at
year-end and had not as yet been pre
sented to the Board, leaving 41 ceaseand-desist proceedings actually initiated
in 1976.
Of these 41, 5 were summary ceaseand-desist orders issued pursuant to sec
tion 8(c) of the Federal Deposit Insur
ance Act after a determination that
continuation of certain practices would
either cause substantial financial damage
to the bank or prejudice the interest of its
depositors. These summary orders took
effect upon service on the bank and re
mained in effect until completion of
cease-and-desist proceedings. Three of the
summary orders were terminated during
the year.
As to the remaining 36 cease-anddesist proceedings initiated under section
8(b), 15 were still being negotiated with
the banks affected at the end of 1976.
Final orders were issued during the year
with respect to the other 21 section 8(b)
proceedings, in addition to 3 final orders
issued during 1976 covering cease-anddesist proceedings initiated in 1975. This
resulted in a total of 34 final section 8(b)
orders outstanding at the end of 1976 (in
cluding the 10 carried over from 1975).
Listed below are some of the unsafe or
unsound banking practices that were un
covered by the Corporation and cited in
most of its findings and orders:
(1) inadequate capital in relation to
the kind and quality of assets;
(2) inadequate provisions for liquid
ity;
(3) failure to diversify its portfolio re
sulting in a risk to capital;
(4) extension of credit to insiders and
affiliates of the bank who were
not creditworthy, sometimes at a
preferred rate;
(5) weak
ment;

and self-serving manage

(6) hazardous lending practices in
volving extension of credit with

PROMOTING SOUND B A N K IN G

(T h o u s a n d s )

BANK EXAMINATIONS AND INVESTIGATIONS
FEDERAL DEPOSIT INSURANCE CORPORATION 1 9 6 6 -1 9 7 6

inadequate documentation or for
the purpose o f speculation in real
estate;
(7) an excessive portfolio of poor
quality loans in relation to capital;
and
(8) violation of the Fair Credit Re
porting A ct and Regulation Z of
the Federal Reserve.
Termination-of-insurance proceedings
under section 8(a) of the Federal Deposit
Insurance A ct can be initiated when the
Corporation determines that a bank has
been conducting its affairs in an unsafe or
unsound manner and is in an unsafe and

unsound financial condition. The bank
and the proper regulatory authority are
advised of the Corporation's findings and
the bank is given a period o f up to 120
days to correct the deficiencies. If timely,
satisfactory correction is not achieved,
the Corporation may terminate the in
sured status of the bank after an adminis
trative hearing and due deliberation. The
depositors of the bank are then notified
of the termination, but each deposit (less
subsequent withdrawals) continues to be
insured fo r 2 years.
A t the beginning of 1976, five termination-of-insurance proceedings were in
progress. A ll five banks were closed by

F E D E R A L DEPOSIT INSURANCE CORPO RATIO N

State authorities during the year. During
1976, 15 recommendations were received
to initiate proceedings to terminate de
posit insurance. The Corporation issued
eight Findings of Unsafe or Unsound
Practices and Condition and Orders of
Correction initiating section 8(a) termina
tion proceedings. After issuance of these
orders, two banks were closed by their
chartering authorities. In five instances
the recommendations were withdrawn be
cause of merger or substantial improve
ment in the financial condition of the
bank. Two banks were closed by the char
tering authority prior to Board action. As
a result, six deposit insurance termination
proceedings were pending at year-end
1976.
The Corporation also has statutory
authority under section 8(e) of the Fed
eral Deposit Insurance Act to remove an
officer, director, or other person partici
pating in the management of an insured
State nonmember bank if it determines
that the person has violated a law, rule,
regulation, or final cease-and-desist order,
has engaged in unsafe or unsound banking
practices, or has breached his fiduciary
duty. The act must involve personal dis
honesty and entail substantial financial
damage to the bank, or seriously prej
udice the interests of the bank's depos
itors. The Corporation may also sum
marily suspend such a person pending the
outcome of the removal proceeding in
order to protect the bank and its depos
itors.
One removal proceeding, issued after
an administrative hearing, which resulted
in a summary suspension was challenged
in a United States District Court in 1975,
and this challenge to the summary sus
pension was withdrawn in 1976. During
1976 no removal proceedings were in iti
ated.
Section 8(g) of the Federal Deposit
Insurance Act authorizes the Corporation
to suspend or remove officers, directors,
and other persons participating in the af
fairs of insured State nonmember banks

who are indicted for a felony involving
dishonesty or a breach of trust. During
1976, the statutory authority for sus
pending individuals was ruled unconstitu
tional by a three-judge Federal district
court. (Feinberg v. FDIC, Civil Action
No. 74-1150 (D.D.C. Aug. 13, 1976).)
The decision will not be appealed to the
Supreme Court. The Corporation's staff is
working on legislation to propose to Con
gress to cure the constitutional defects
found by the court.
Problem banks. By year-end 1976, the
FDIC's problem bank list, which includes
national banks and State member banks
as well as nonmember banks, contained
379 banks, after reaching a peak of 385
during November 1976. Comparisons of
time series on bank loan losses and num
ber of banks on the problem list with
broad economic indicators show a def
inite connection between those bank
problems and the state of the economy.
Management and policy deficiencies make
banks vulnerable to recessions and their
problems are reflected on the FDIC prob
lem list—only w ith a lag, however. This
lag is attributable in part to the time it
takes to examine a bank and complete
the review and analysis processes, as well
as the period between examinations. In
previous economic cycles, the lag has
averaged about 12 months, but in the
1974-75 downturn the lag has been some
what longer—about 18 months. The con
dition of the loan portfolio at the time of
the most recent examination is an impor
tant factor in assigning and retaining
banks on the problem bank list, and be
cause of the nature and severity of prob
lems associated with REIT credits and
other loans that were most affected by
the 1974-75 recession, banks have needed
a substantial amount of time to work out
those problems. Taking all this into con
sideration, the condition of the banking
system at year-end 1976 was considerably
stronger than it was at the end of the
previous year.
While the peak figure represented only

PROMOTING SOUND B A N K IN G

about 21/2 percent of all insured commer
cial banks, it was nevertheless at its high
est level in 28 years. It is important to
note that at year-end 1976, 14,363
banks, or about 97.4 percent of the total
number of insured banks in the U.S.,
were n ot considered problem banks by
the FDIC. Moreover, the overall experi
ence in recent years has been that about
75 percent of the banks listed on a given
date will still be operating and w ill no
longer be considered in the problem
status 2 years later.
Because the information on problem
banks has frequently been misinterpreted
by observers outside the bank supervisory
area, a description of the FDIC problem
bank designations and a rundown of addi
tions to the list during 1976 are in order.
The Division of Bank Supervision main
tains a list of problem banks for internal
supervisory purposes which is divided
into three separate categories:

Serious Problem-Potential Payoff:
An advanced serious problem situation
with an estimated 50 percent chance
or more of requiring financial assist
ance from the FDIC.
Serious Problem: A situation that
threatens ultimately to involve the
FDIC in a financial outlay unless dras
tic changes occur.
Other Problem: A situation wherein
a bank contains significant weakness
but where the FDIC is less vulnerable.
Such banks require more than ordi
nary concern and aggressive super
vision.
Analysis of problem bank lists since
year-end 1973 indicates that about 34
percent of the banks that were at one
time or another in the serious problempotential payoff category ultimately did
fa il. An additional 11 percent were
merged with other banks w ithout finan
cial assistance by the Corporation, 1 per

STATUS OF PROBLEM BANKS
FEDERAL DEPOSIT INSURANCE CORPORATION
DECEMBER 31, 1976
(Dollar amounts in thousands)
Number of
banks

Total
deposits

Estimated
insured deposits

Total
assets

NONMEMBER
Serious P ro b le m -P P O .....................
Serious Problem.................................
Other Problem....................................
S u b to ta l...........................

19
72
210
301

454,680
4,389,359
8,347,986
$13,192,025

350,345
3,715,936
6,842,976
$10,909,257

519,980
4,878,592
9,187,538
$14,586,110

1
3
15
19

4,432
73,996
21,448,253
$21,526,681

3,767
55,398
4,095,470
$ 4,154,635

4,898
85,596
27,435,905
$27,526,399

4
16
39
59

59,337
2,148,675
22,226,377
$24,434,389

40,243
1,188,858
7,842,844
$ 9,071,945

STATE MEMBER
Serious P ro b le m -P P O .....................
Serious Problem.................................
Other Problem....................................
S u b to ta l...........................
N A TIO N A L
Serious P ro b le m -P P O .....................
Serious Problem.................................
Other Problem....................................
S u b to ta l...........................

67,328
2,563,489
29,441,531
$32,072,348

A L L PROBLEM BANKS
Serious P ro b le m -P P O .....................
Serious Problem.................................
Other Problem....................................
T o ta l.................................

24
91
264
379

518,449
6,612,030
52,022,616
$59,153,095

394,355
4,960,192
18,781,290
$24,135,837

592,206
7,527,677
66,064,974
$74,184,857

F E D E R A L DEPOSIT INSURANCE CO RPORATION

cent received financial assistance from the
FDIC, and the remaining 54 percent re
ceived a less severe rating or were re
moved from problem status.
Problem status generally is accorded
after analysis of the most recent examina
tion report of a bank or consideration of
other pertinent information. The FDIC's
problem list is not limited to the non
member banks it supervises but also in
cludes national and State member banks.
This list overlaps but does not duplicate
the watch lists maintained by the Office
of the Comptroller of the Currency and
the Federal Reserve of the banks they
supervise. Their watch lists include some
banks with supervisory problems that
apparently pose little risk to the insur
ance fund. The FDIC maintains similar
watch lists of banks at the regional level;
such banks may require special super
vision because of certain conditions that
require corrections, but are not likely to
involve any financial outlays by the
FDIC.
During 1976, 188 banks were added to
the list and 158 were removed (16 by
actual failure). The net increase of 30 was
represented by increases of 31 in the
other problem and 3 in the serious prob
lem groups, and a decrease of 4 in the
serious problem-potential payoff group.
These changes represent substantially
lower rates of increase than the dramatic
changes in 1975. Most banks were in
cluded because of loan portfolio weak
nesses which were aggravated by the
1974-75 recession and, due to the type of
credit involved, could not be resolved
quickly.
Of the 379 banks on the problem list
at year-end, 60 had multi-bank holding
co m p a n y affiliations while 52 were
owned by one-bank holding companies.
From a deposit-size standpoint, 31 prob
lem banks had deposits between $50 and
$100 m illion, 30 between $100 and $500
million, 7 between $500 m illion and $1
billion, and 8 w ith $1 billion or more.
Banks on the list had total deposits of

$59.2 billion, representing about IVi per
cent of the total deposits of all banks.
One hundred fifteen of the listed
banks, compared w ith 116 at the end of
1975, were in the two most serious cate
gories; however, 92 of these had deposits
of less than $50 million. The remaining
23 banks in these two categories included
9 banks between $50 m illion and $100
million, 10 between $100 and $500 m il
lion, 3 between $500 m illion and $1 bil
lion, and 1 with deposits of $1 billion or
more. There were no banks of over $200
m illio n considered serious problempotential payoff; 19 banks in this cate
gory had deposits of less than $25 m il
lion, while 4 had deposits of $25 to $50
million.
Applications fo r deposit insurance and
branches. Before approving an application
for deposit insurance, the FDIC is re
quired under section 6 of the Federal
Deposit Insurance Act, to consider the
financial history and condition of the
bank, the adequacy of its capital struc
ture, its future earnings prospects, the
general character of its management, the
convenience and needs of the commun
ity, and the consistency of the bank's cor
porate powers w ith the purposes of the
act. National banks receive deposit insur
ance upon their chartering and State
member banks upon joining the Federal
Reserve System—in both cases after certi
fication by the responsible Federal agen
cy that the criteria mentioned were given
consideration. State nonmember banks
apply directly to the Corporation fo r de
posit insurance.
The Corporation's Board of Directors
considered 122 applications for Federal
deposit insurance in 1976, approving 112
and denying 10 (4 of which were subse
quently approved following amendment
to the applications). Two banks were
denied again a fte r reconsideration.
Forty-four of the approved applications
came from the 13 unit-banking States.
A pplications from 22 State member
banks for continuation of their insured

PROM OTING SOUND B A N K IN G

status following voluntary withdrawal of
their membership from the Federal Re
serve System were approved under dele
gated authority by the Corporation's 14
Regional Directors, and 1 was approved
by the Board of Directors.
The Federal Deposit Insurance A ct re
quires the Corporation's approval before
an insured nonmember bank may estab
lish or change the location of a branch
office. A "branch" is defined in section
3(o) o f the act as
. . any branch place
of business . . . at which deposits are re
ceived, or checks paid, or money lent."
This definition includes tellers' windows
and other limited service facilities that

may not be "branches" under the laws of
the respective States.
O f 613 applications considered in
1976 for the Corporation's prior consent
to the establishment of new branches,
135 were approved by the Corporation's
Board of Directors and 476 were ap
proved under delegated authority by the
Director of the FDIC's Division of Bank
Supervision or by the Corporation's 14
Regional Directors. Two applications
were denied because of asset and man
agerial problems.
O f 255 applications considered in
1976 for the Corporation's prior consent
to the operation of limited branch facil

APPLICATIONS FOR DEPOSIT INSURANCE AND BRANCHES APPROVED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION 1 9 6 6 -1 9 7 6

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

ities (125 of which were unmanned oper
ations), 137 were approved by the Cor
poration's Board of Directors, 117 were
approved under delegated authority, and
1 was denied. In addition, the Corpora
tion accepted 116 notifications of un
manned remote service facilities which
were to be established w ithout the Cor
poration's approval but subject to publi
cation and a 30-day waiting period. The
Corporation also accepted notifications
by 107 banks that they intended to share
200 remote service facilities owned and
operated by other banks, also w ithout
approval as branches. Such facilities not
approved as branches may not be oper
ated if and when there is a definitive fu
ture determination by statute, administra
tive action, or final court decision that
these facilities constitute branches as de
fined in section 3(o). It is estimated that
11,300 man-hours were saved in 1976 by
the use of delegated authority for the
approvaf of the 476 branches, and 2,300
man-hours were saved in 1976 by the use
of delegated authority for the 117 facil
ities.
Mergers. The Bank Merger A ct of
1960, amending section 18(c) of the
Federal Deposit Insurance Act, requires
the approval of a Federal bank super
visory agency before any insured bank
may engage in a merger transaction, as
defined in the act. If the surviving institu
tion is to be an insured nonmember bank,
or in any merger of an insured bank with
a noninsured institution, the Corporation
is the deciding agency.
The act, as amended in 1966, provides
further that, before approving any pro
posed merger of an insured bank, the
deciding Federal agency must consider
the effect of the transaction on competi
tion, the financial and managerial re
sources of the banks, the future prospects
of the existing and proposed institutions,
and the convenience and needs of the
community to be served. A merger that
would further an attempt to monopolize
or that would result in a monopoly under

the Sherman Antitrust Act may not be
approved. A merger that would substan
tially lessen competition in any section of
the country, or tend to create a monop
oly, may be approved, but only if the re
sponsible agency finds these anticompeti
tive effects to be clearly outweighed in
the public interest by the probable effects
on the needs and convenience of the com
munity to be served. Following approval
of a bank merger by the Federal super
visory agency, the Justice Department
may, w ithin a 30-day period (or in emer
gency cases, w ithin 5 days), bring an ac
tion under the antitrust laws to prevent
the merger.
In past litigation over whether a pro
posed merger substantially lessens compe
tition and thereby violates section 7 of
the Clayton Act, the determination of the
"line of commerce," or product market,
that w ill be affected by the merger has
been a major issue. In general, a product
market consists of those products that are
reasonably interchangeable in use or have
significant cross-elasticity of demand with
the products offered by the merging com
panies. For purposes of bank mergers, the
Supreme Court has held that commercial
banking and th rift institutions represent
separate and distinct lines of commerce.
In the view of the Court, commercial
banking offers a unique cluster of pro
ducts and services (such as demand de
posits and commercial loans) as compared
to th rift institutions. However, the Court
has recognized that as the laws pertaining
to th rift institutions evolve, the distinc
tions between the two forms of banking
could eventually become nonexistent.
In the State of Maine, through recent
legislation, the traditional competitive
barriers separating th rift institutions from
commercial banks have been diminished
significantly. In the light of this, during
1976, the Corporation's Board of Direc
tors stated that "commercial realities re
quire a viewing of a combined commer
cial bank-thrift institution market, as well
as the traditional separate market" when

PROMOTING SOUND B A N K IN G

determining the competitive impact of
any proposed merger in that State (Basis
for Corporation Approval of the Pro
posed Merger of Bangor Savings Bank,
Bangor, Maine, and Piscataquis Savings
Bank, Dover-Foxcroft, Maine, July 6,
1976, pp. 77-79). Statutes similar to the
one in Maine have been enacted in several
States and there are proposals in many
other States and at the Federal level to
legislate greater parity between commer
cial banks and th rift institutions. As a
result, future merger decisions may also
require a determination of whether suffi
cient distinctions exist, for purposes of
competitive analyses, to justify treating
commercial banks and th rift institutions
as separate lines of commerce.
The Corporation acted on 43 mergertype proposals under section 18(c) during
1976, approving 41 (including 9 emer
gency cases) and denying two. The Cor
poration also approved 21 applications
in v o lv in g c o rp o ra te reorganizations,
which, as such had no competitive effect,
including 17 in connection w ith the ac
quisitions of banks by holding companies.
The act requires that descriptive material
on each merger case that is approved, the
basis for approval, and the Attorney Gen
eral's advisory report be published in the
deciding agency's annual report. This in
formation for 1976 is published on pages
57-109 of this report.
Included in the 41 approvals were 3
applications involving the acquisition of
mutual savings banks by their affiliated
commercial banks. These were approved
after the June 30, 1976 expiration of the
statutory moratorium on approvals that
would have the practical effect of per
m itting a conversion from the mutual to
the stock form of organization. Although
technically these transactions were not
outright conversions from the mutual to
the stock form of organization, they did
have such a “ practical e ffe ct/'
The Bank Merger Act additionally re
quires that before deciding on any appli
cation, unless the agency finds that it

must act immediately to prevent the
probable failure of one of the banks in
volved, the deciding agency shall request,
from the other two Federal bank super
visory agencies and from the Attorney
General of the United States, a report on
the competitive factors involved in the
case. In 1976, 70 advisory reports were
filed on the competitive factors involved
in merger transactions in which the result
ing institution would be a national or
State member bank. In four of these re
ports, the Comptroller of the Currency
was informed that the Corporation con
sidered the competitive factors presented
to be adverse in one or more respects; the
Com ptroller nevertheless approved all
four transactions.
There has been virtually no case in re
cent years where any significant competi
tive question raised in the reports to the
Corporation was not brought to light by
its own processing and fu lly considered in
rendering a decision. The likelihood is
that the other two Federal banking agen
cies' experience has been similar. In an
effort to expedite processing, the Board
of Directors during 1976 delegated to the
Executive Secretary the authority on be
half of the Board of Directors to furnish
reports to the other bank supervisory
agencies if the proposed merger would
have no significant competitive effects.
Nonetheless, the advisory opinions re
quired by the Bank Merger A ct appear to
be an expensive and time consuming ex
ercise whose usefulness has diminished to
near zero. It is apparent that this require
ment could be eliminated with no effect
on the careful consideration given to each
case by the responsible agency.
In 1976, the mergers approved by the
Federal bank supervisory agencies re
sulted in the absorption of 81 operating
banks, compared to 67 in 1975. This
number does not include corporate re
organizations of individual banking insti
tutions, such as banks in process of form
ing one-bank holding companies, and
other merger transactions which did not

F E D E R A L DEPOSIT INSURANCE CORPORATION

have the effect of lessening the number of
existing operating banks.
While mergers and the bank holding
company movement have the potential
for increasing the concentration of re
sources in the banking industry, current
evidence suggests that this has not oc
curred to any important degree. For
example, compared to 1960, when the
Bank Merger Act was enacted, concentra
tion ratios based on total deposits of the
largest 100, the largest 10, and the largest
1/2 of 1 percent of commercial banks and
bank groups, all showed declines through
June 30, 1976.
Change in bank control and loans se
cured by bank stock. A change in the out
standing voting shares, unless 10 percent
or less of the outstanding stock is in
volved, which results in control or change
in control of a bank must be reported by
the chief executive officer of the bank.
After a reportable change in outstanding
voting shares has occurred, bank manage
ment must report all changes of its chief
executive officer or directorate that take
place in the next 12 months. With certain
exceptions, lending banks are also re
quired to report loans secured or ex
pected to be secured by 25 percent or
more of the outstanding voting stock of
an insured bank. Reports required by
section 7(j) of the Federal Deposit Insur
ance Act enable the appropriate Federal
banking agency to investigate promptly
changes in control and determine their
effect on the bank and the need for any
corrective action.
The Corporation received 468 notices
of change in control involving insured
nonmember banks during 1976, of which
54 came from the State of Texas. Citing
the high turnover in the control of Texas
banks in recent years, the Subcommittee
on Financial Institutions Supervision,
Regulation and Insurance of the House
Committee on Banking, Finance and
Urban Affairs held hearings in Texas in
December 1976 to probe possible causes
of the failure of four banks in the State

during the year.
Bank security. To combat an increas
ing and alarming number of crimes
against financial institutions, Congress
adopted the Bank Protection A ct in
1968. The act enabled the regulatory
agencies to establish standards to guide
banks in devising procedures to discour
age external bank crimes and assist in the
apprehension and identification of the
person(s) committing such crimes. Under
the Corporation's regulations, a report on
security devices and procedures must be
submitted w ithin 30 days after a bank
becomes insured; a form must also be
submitted for each newly opened branch
office. The Corporation's regulations also
require that insured State nonmember
banks report all robberies, burglaries, and
nonbank employee larcenies. Both the
Federal Reserve and the Comptroller of
the Currency have similar regulations.
During 1976, the Corporation received
934 crime reports filed pursuant to its
regulations.
Presently, the three regulatory agen
cies are revising these forms to simplify
reporting by banks and to update infor
mation on banks' security devices. Also, a
procedural change was made in 1976
w h e re b y the certification statement,
which previously had to be filed annually
with the Corporation, can now be main
tained at the bank.
On December 21, 1976, the Justice
Department petitioned the Federal bank
regulatory agencies to tighten the rules on
physical security. In the petitions, the
agencies were advised that the regulations
adopted in the wake of the Bank Protec
tion A ct of 1968 are not as complete as
Congress expected and, moreover, are not
being fu lly met by the affected banks.
The Justice Department did not rec
ommend any specific types of hardware
or procedures, leaving these recommenda
tions to the discretion of the regulatory
agencies.
Supervisory and other training activites. The C o rp o ra tio n has a well-

PROMOTING SOUND B A N K IN G

established training program directed
toward maintaining a highly qualified
bank examination staff. Seven different
schools of banking are conducted in the
Division of Bank Supervision Training
Center, a modern and complete training
facility established in 1970 in Rosslyn,
Virginia, a short commute from the Cor
poration's headquarters in Washington,
D.C. Each school has a 2- or 3-week
course of study, administered by a per
manent staff of 17 persons, but with an
instruction staff augmented by FDIC
field examination personnel brought in
from the various FDIC regions. Certain
Washington Office staff members also
serve as instructors, bringing the number
of instructors to more than 100 persons
in a typical year. In addition, the Training
Center occasionally brings in bankerlecturers as well as experts from the other
Federal regulatory agencies for special
ized topics.
The seven schools include, for new
trainees, a course in the fundamentals of
banking and bank examinations; for as
sistant examiners, a second course empha
sizing accrual accounting, audit tech
niques, and bank operations, with a
portion devoted to examination of com
puterized banks; and for senior assistant
examiners, a program centering on credit
analysis, asset appraisal, bank manage
ment simulations, and Corporation poli
cies and objectives. For examiners be
yond the senior assistant examiner level,
there are an advanced course in the exam
ination of computerized banks, basic and
advanced courses in examining trust de
partments, and finally a course for com
missioned examiners. In addition to the
regular schools, some new projects were
undertaken including a 1-week trust
workshop and a 1-week fair housing
workshop. Both are expected to be pre
sented again in 1977. Also a week of in
struction in the area of consumer protec
tion was instituted in the school for
senior assistant examiners. This instruc
tion w ill be given nine times in 1977 and,

because of the nature of the material, will
require constant attention and modifica
tion to keep abreast of changing events in
consumer protection.
Over the years there has been an ex
pansion in the number of schools and
sessions as well as the student population.
In 1976, 46 school sessions were held in
volving nearly 1,200 students, compared
with 189 sessions and 5,100 students in
the 6-year period 1970-1975. While train
ing is directed prim arily toward FDIC
personnel, 157 State bank examiners, 22
students nominated by foreign govern
ment banking authorities, and 13 Federal
Reserve examiners attended FDIC schools
in 1976.
The Training Center also handles en
rollment and processing of senior exam
iners in 10 different graduate schools of
banking. Annual new enrollments pres
ently amount to about 45 with approxi
mately 95 students in attendance each
year. New annual enrollments are ex
pected to expand somewhat in the near
future. The FDIC Office of Education,
through the Corporation's Tuition Re
imbursement Policy, provides the oppor
tunity for examiners to enroll in Amer
ican Institute of Banking and other
correspondence courses, career-related
college training, seminars and workshops
in specialized areas, and other job-related
training.
E ffort is made to update courses to
match current banking developments.
Course administrators and Washington
Office personnel review current bank
legislation, periodicals, and literature,
keeping up to date with present banking
trends and watching for the need to
change existing material or expand into
new areas. The approximately 100 field
instructors who teach in the schools given
at the Training Center assist in this effort.
Conferences. During 1976, as part of a
continuing effort to establish more mean
ingful dialogue between bankers and bank
regulators, the Corporation jo in tly spon
sored w ith the American Bankers Associa

F E D E R A L DEPOSIT INSURANCE CO RPORATION

tion two seminars for the chief executive
officers of insured State nonmember
banks headquartered in Florida, Georgia,
Illinois, North Carolina, Puerto Rico,
South Carolina, Virginia, and Wisconsin,
at which issues concerning the economy,
bank structure, and bank examination
and supervision were discussed. Similarly,
the Corporation jointly sponsored with
the National Association of Mutual Sav
ings Banks two seminars for the chief
executive officers of savings banks, at
which issues concerning supervision and
examination, proposed legislation, de
posit interest rate ceilings, and banking
structure were discussed. The seminars
were open to members of the press, and
press reports of the activities of the sem
inars further facilitated communications
between the Corporation and bankers.
Members of the Board of Directors
and staff of the Corporation also met
with representatives of 31 State bankers
associations throughout the year to dis
cuss Corporation policies, plans, and
programs and other matters of concern to
bankers.
These seminars and meetings provided
a forum for informing bankers of the
basis for such Corporation policies and
actions as its increasing reliance upon the
issuance of cease-and-desist orders as a
means of bringing about correction of un
safe or unsound practices or conditions
and its expanded efforts at enforcing the
ever-growing number of consumer protec
tion laws and regulations. They also pro
vided a forum for advising bankers of
trends developing in the industry, ob
served by the Corporation in the course
of its examination and supervisory activi
ties, that were a matter of concern to the
Corporation, for example, the much
higher losses and significant increase in
the number, size, and geographical disper
sion of "problem " banks. Moreover, the
observations and comments of bankers
present at the seminars and meetings
helped the Corporation to gauge the prac
tical effect of certain of its policies and

actions—such as its adoption of "insider"
transaction regulations and its proposals
for variable-rate time deposits, for re
stricting the payment of negotiated rates
of interest on pooled time deposits of
$100,000 or more, and for sanctioning
preauthorized withdrawals from savings
deposits to cover insufficient funds items.
Additionally, the Corporation spon
sored two conferences, attended by 26
State bank supervisors, on trends and
developments in the banking industry,
the regulatory agencies, and the Congress.
Similar conferences were conducted for
senior staff of the Corporation's Regional
Offices.
Reports and surveys. Bank reports and
surveys are important to the bank super
visory function and provide a valuable
source of data useful in studying eco
nomic conditions and trends. Since its
beginning, the Corporation has received
Reports of Condition from insured banks
on the mid-year and year-end dates, and a
Report of Income once each year. Condi
tion reports have been received from non
insured banks since the mid-1930s, per
mitting tabulation of condition data for
all banks. Beginning in 1961, as a result
of statutory changes in the method of
computing deposit insurance assessments,
each insured bank has filed four Reports
of Condition each year.
Some significant changes in bank re
porting occurred during 1976. After sev
eral years of discussions, the three Federal
bank agencies put into effect revised Re
ports of Condition and I ncome for insured
commercial banks which contain more
meaningful information for supervisory
purposes as well as for investors in bank
securities. In addition, the treatment of
certain concepts in these reports was made
more consistent with the latest views in the
accounting profession; for example, the
revised reports provide a better picture of
bank reserves for loan losses and their
relationship to bank capital and Federal
tax liability. Besides the revised forms,
the frequency of reporting of the Report

PROTECTING DEPOSITORS

of Income was increased from once a year
to twice a year for all insured banks, and
to four times for "large" commercial
banks having total assets of $300 m illion
or more. The latter group of banks are
newly required also to provide certain in
formation supplemental to the basic con
dition and income reports.
The FDIC in particular implemented
certain actions to provide more accurate
and tim ely reporting. For the first time in
its history, the Corporation began a
policy of fining insured State nonmember
banks submitting late reports. In Septem
ber 1976, the Corporation's Board of
Directors notified 89 State nonmember
banks that they were subject to fines for
not submitting reports w ithin the re
quired period. Also, a toll-free telephone
number was made available fo r banks
seeking assistance in the completion of
their Call Reports.
Subjects of on-going surveys continued
in 1976 included accounts and deposits in
all banks, trust assets of insured commer
cial banks, mortgage rates and mortgage
lending by banks, interest rates paid on
savings and time deposits, and income
and deposit flows of mutual savings
banks. During the year the Corporation
also conducted surveys of insured non
member banks relating to Individual Re
tirement Accounts and Keogh Accounts,
and to provisions of the Fair Housing A ct
of 1976.

PROTECTING DEPOSITORS
Incorporated banks and trust com
panies that receive deposits are eligible
for Federal deposit insurance. For na
tional banks and State bank members of
the Federal Reserve, participation in Fed
eral deposit insurance is required by the
Federal Deposit Insurance Act. As of
December 31, 1976, about 98 percent of
all commercial banks in the United
States, and 69 percent of all mutual sav
ings banks, were covered by Federal

deposit insurance. All mutual savings
banks not having Federal deposit insur
ance were located in Massachusetts and
were covered under the deposit insurance
program of that State.
Under section 11 (as amended) of the
Federal Deposit Insurance Act, each de
positor is protected by insurance up to
$40,000 in each insured bank. Time and
savings deposits held by government units
(except deposits held in out-of-State
banks) are insured up to $100,000 for
each depositor.
The Corporation uses two principal
methods to protect depositors: assisting
the absorption of failed or failing institu
tions into other insured banks and paying
insured deposits in failed banks that are
closed and liquidated.
In recent years, the Corporation has
attempted to arrange purchase and as
sumption transactions as often as possible
in bank failures. The Corporation is
authorized under section 13(e) of the
Federal Deposit Insurance Act to assist
financially in the absorption of an insured
bank in financial d iffic u lty by another in
sured bank, whenever the Board of Direc
tors finds that the Corporation's risk or
loss w ill be reduced. This assistance may
be accomplished in various ways. The
Corporation may purchase the assets or
grant a loan secured by the assets of a
distressed or closed bank. It may also
indemnify the absorbing insured bank
against loss due to its assuming the liabil
ities and acquiring the assets of a dis
tressed bank. The deposit assumption
method has the significant advantage of
providing full protection to all depositors
with minimal disruption of banking serv
ices to the community.
In those instances when the deposit
payoff method is used, immediately after
the bank is closed by its chartering
authority the Corporation's claim agents
are sent to the bank to prepare for the
payment of insured deposits. The claims
presented by depositors and the records
of the bank are used to determine the

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

INSURED BANK FAILURES, 1 9 3 4 -1 9 7 6
NO. OF BANKS

i
I?

;

1 i.„iiii.ii.i__ii_i-.IiliilKi_iiII

0_________________________________________________________________ :_■1934

'36

'40

'42

'44

'46

'48

'50

'52

total amount of deposits held by each
depositor. From this total, matured debts
owed by the depositor to the bank may
be deducted. The net amount eligible for
deposit insurance is then paid by the Cor
poration. In recent years, this process has
usually begun w ithin 5 to 7 days of the
bank closing.
Since 1934, a total of 535 failure cases
involving insured banks have required the
Corporation's disbursements, including
303 direct payoff cases and 232 deposit
assumption cases. Although the number
of failures of insured banks in the past
few years has averaged only slightly above
the average number each year since the

'54

'56

'58

'60

'62

'64

'66

'68

l l ll i

early 1940s, these recent failures have
included several quite large institutions,
requiring substantial increases in the Cor
poration's disbursements in failure cases.
Bank failures in 1976. The Corpora
tion advanced $469.1 m illion in cash to
protect depositors and take questionable
assets out of the banking industry in
connection w ith 16 insured banks that
failed during 1976. The failing banks,
which ranged in deposit size from $555
thousand to $336 m illion, were located in
11 States and had combined deposits of
$865 m illion. While the number of clos
ings increased in 1976, the total asset size
of the failed banks declined from the

PROTECTING DEPOSITORS

record-setting years of 1973 and 1974.
Most of the cash advanced by the Cor
poration w ill be recovered as the remain
ing assets of the banks are liquidated. In
the 16 failures, the Corporation used the
statutory payoff method in 3 cases and
assisted sound banks to assume deposits
in 13 cases.
In the three failures which resulted in
s ta tu to r y payoffs, the Corporation's
Board of Directors decided to proceed
only after extensive efforts to arrange a

d e p o s it assum ption transaction had
proved unsuccessful. In one of the three
cases the Corporation was unable to ef
fect a purchase and assumption trans
action because of a substantial lapse of
time between the banking commissioner's
finding of insolvency and the court's deci
sion supporting that finding and also
because the general disarray in the bank's
records made it impossible to determine
accurately the amount of the bank's
assets and liabilities. In the other two

INSURED BANKS CLOSED DURING 1976 REQUIRING DISBURSEMENTS
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION

Name and location

Date of closing
or deposit
assumption

Number o f
depositors
or accounts

A m ount of
deposits (In
thousands)

Deposit payoff
Coronado National Bank
Denver, Colorado

June 25, 1976

3,770

2,606

Mt. Zion Deposit Bank
Mt. Zion, Kentucky

June 25,1976

388

555

Citizens State Bank
Carrizo Springs, Texas

June 28,1976

4,088

15,698

Deposit assumption
The Bank of Bloomfield
Bloom field, New Jersey

January 10, 1976

15,700

25,969

Bank of Woodmoor
Woodmoor, Colorado

January 12,1976

3,590

3,549

The Hamilton National Bank of Chattanooga
Chattanooga, Tennessee

February 16, 1976

120,000

336,292

South Texas Bank
Houston, Texas

February 25, 1976

6,498

7,074

First State Bank o f Northern California
San Leandro, California

May 21,1976

34,760

53,405

Northeast Bank o f Houston
Houston, Texas

June 3, 1976

9,652

17,452

First State Bank o f Hudson County
Jersey C ity, New Jersey

June 14,1976

15,759

13,790

The New Boston Bank and Trust Company
Boston, Massachusetts

September 14,1976

2,660

5,335

American Bank & Trust Company
New Y ork, New York

September 15, 1976

26,000

165,079

The Hamilton Bank and Trust Company
Atlanta, Georgia

October 8, 1976

8,128

32,022

Centennial Bank
Philadelphia, Pennsylvania

October 19,1976

13,756

12,312

First State Bank & Trust Co.
Rio Grande City, Texas

November 19, 1976

8,982

12,082

International City Bank and Trust Company
New Orleans, Louisiana

December 3, 1976

67,000

161,639

FE D E R A L DEPOSIT INSURANCE CO RPORATION

cases, the banks were declared insolvent
as of the close of business on a Friday
and the payoffs began the following Mon
day morning. The ultimate loss to the
depositors in the three cases is expected
to be minimal; the uninsured deposits in
two of the banks were less than $600.
In the failures resulting in deposit
assumptions, the 13 assuming banks paid
purchase premiums totaling $37.5 m illion
for the right to acquire the failed banks'
deposit liabilities. When a significant price
for a transaction is paid by the acquiring
bank, this is added to the capital cushion
available to the FDIC to absorb losses and
may mean the difference between some
recovery and none for shareholders and
noteholders of the failed bank. In connec
tion with the three largest failures, The
Hamilton National Bank of Chattanooga,
Chattanooga, Tennessee; American Bank
& Trust Company, New York, New York;
and International City Bank and Trust
Company, New Orleans, Louisiana; the
Corporation purchased capital notes of
$24 m illion, $10 m illion, and $7.5 m il
lion, respectively, from the banks acquir
ing the deposits to alleviate the capital
needs resulting from the sudden expan
sion in their deposit liabilities. Also in
1976, the Corporation received payment
in full of the $8-miilion capital note it
purchased from Southern Bancorporation, Inc., Greenville, South Carolina,
whose subsidiary bank assumed the liabil
ities and purchased certain assets of
American Bank & Trust, Orangeburg,
South Carolina, which failed in 1974. The
obligation to the FDIC was to mature on
September 24, 1977, but the holding
company was able to arrange a 10-year
refinancing for the full amount through
First Union National Bank of North
Carolina, Charlotte, North Carolina. As a
result of the refinancing, the Corporation
on December 9, 1976, received payment
in full of the $8 m illion owed to it by
Southern. In exchange for the repayment,
the Corporation agreed to guaranty 75
percent of the principal of the First

Union National Bank loan, the amount of
the guaranty to be reduced pro rata as
regular principal reductions are made.
Following the closing of International
City Bank and Trust Company, the FDIC
followed its normal practice of asking
several groups to submit bids for an
FDIC-assisted transaction. When no bids
were submitted, the FDIC began negotia
tions w ith two parties that had expressed
some interest, and a mutually acceptable
contract between the FDIC and The Bank
of New Orleans and Trust Company was
finally arranged. The greatest obstacle in
negotiations, and the primary reason that
no bids were received in the first instance,
was approximately $44 m illion in "w ild
card" certificates of deposit issued by
ICB in 1973. These deposits carried inter
est rates substantially higher than those
currently obtainable. Therefore, any bank
assuming these deposits could be ex
pected to incur substantial losses and
suffer a negative impact upon its earnings.
To avoid placing this large financial risk
on Bank of New Orleans, the FDIC
agreed to reimburse Bank of New Orleans
for certain of its anticipated losses, in
demnifying the bank in an amount equal
ing the difference between interest accru
ing on the wild card deposits and the
amount of income Bank of New Orleans
could earn during the same period on
money prudently invested in U.S. Treasury
bills. In addition to assuming approxi
mately $160 million in deposits and other
liabilities, The Bank of New Orleans and
Trust Company agreed to pay a purchase
premium of $800,000. To facilitate the
transaction, the FDIC advanced cash
amounting to $116.9 m illion and retained
book assets of the failed bank of $129.9
million.
Direct assistance to operating insured
banks. Direct assistance by the FDIC to
an o p e ra tin g insured bank, initially
authorized in 1950 under section 13(c) of
the Federal Deposit Insurance Act, may
be employed if a bank is both in danger
of closing and essential to maintain ade

PROTECTING DEPOSITORS

quate banking services in the community.
The Corporation first used this authority
in 1971 and has used it on three occa
sions since then. The most recent use was
in 1976 to assist Farmers Bank of the
State of Delaware. The Corporation and
the State of Delaware (which owns 49.4
percent of the bank's common stock)
developed a program of financial assist
ance after it became evident that the
bank was in danger of closing primarily
due to a deterioration in the quality of its
real estate loan portfolio.
Farmers Bank, w ith $370 m illion in
deposits at the time of the announcement
of this transaction, was the second largest
commercial bank in Delaware and is the
sole depository for State funds under
Delaware law. The Corporation, the State
of Delaware, and the bank entered into
an assistance agreement on June 10,
1976, whereby the State purchased a
$20-million new issue of preferred voting
stock of the bank, and the Corporation
purchased, for $32 m illion, poor quality
loans and other assets of the bank having
a book value of approximately $40 m il
lion. In addition, the State of Delaware
agreed to keep certain minimum balances
with the bank and certain managerial
changes were made to facilitate the
bank's return to profitability.
Also in 1976, the FDIC and Bank of
the Commonwealth, Detroit, Michigan,
agreed to a financing plan for the bank.
The plan involves the sale of an additional
$10 m illion of common stock under
written by First Arabian Corporation and
the extension of the maturity o f the ex
isting $35.5-million capital note from the
FDIC to the bank. The note, which is
scheduled to mature in April 1977, will
be extended for a minimum of 5 years.
Interest payments on the note, fixed at
5.5 percent, were increased to 6.6 per
cent per annum, the rate earned on the
FDIC insurance fund, payable for the
first 5 years only to the extent of onehalf of the bank's net income for any
year. The remaining income w ill be added

to the bank's equity capital. Am ortiza
tion of the note w ill begin in 1979. The
new financing program is designed to
make Bank of the Commonwealth a com
petitive force in the Detroit banking
market. Financial assistance was orig
inally given to the bank by the FDIC in
1972 under section 13(c). While the orig
inal assistance averted the danger of Bank
of the Commonwealth failing, recovery of
the bank's position has been retarded by
the bank's large holdings of low-yielding
assets acquired by prior management as
well as by the unfavorable economic cli
mate of recent years. Detroit, the primary
market served by the bank, has been par
ticularly hard hit by the recent recession
and unemployment has been substantially
higher than the national average.
The Corporation also agreed to extend
until June 30, 1982, the $1.5-million
capital note of Unity Bank and Trust
Company, Boston, Massachusetts, which
was scheduled to mature on December
31, 1976. Amortization of the note will
begin on June 30, 1980. The loan was
part of an assistance program initiated in
July 1971 which prevented the failure of
Unity Bank and Trust Company and
assured continued banking service for the
black community in Roxbury and Dor
chester. The bank's full recovery has been
inhibited to a large extent by adverse
economic conditions.
Protection of depositors, 1934-1976.
The Corporation makes disbursements
when it pays depositors up to the insur
ance lim it in payoff cases and acquires
their claims against the failed banks,
when it assists deposit assumptions
through loans or purchases of assets, and
when it provides assistance to enable an
operating bank to remain open. From
January 1, 1934 through December 31,
1976, the Corporation disbursed approxi
mately $2.3 billion for 539 insured banks
requiring assistance. These banks had
aggregate deposits of about $6.2 billion.
In the 535 closed banks, at the end of
1976 over 99.8 percent of the depositors

FE D E R A L DEPOSIT INSURANCE CO RPO RATIO N

had received or were assured of payments
of their deposits in fu ll, and 99.6 percent
of the total deposits had been paid or
made available to them. Banks whose
deposits were assumed by other insured
banks with the Corporation's assistance
accounted for almost 72 percent of the
deposits in the closed banks. By far the
largest proportion of the amount re
covered by depositors in payoff cases has
been provided by FDIC payments of in
sured deposits, with additional payments
received from the proceeds of liquidated
assets, offsets against indebtedness, and
pledged assets.
Including the amounts disbursed in
failure cases and assistance to operating
banks, and all losses and provision for
losses on assets being liquidated, the Cor
poration's losses of $285.0 m illion have
amounted to 12.4 percent of its disburse
ments in all insurance operations.
L iq u id a tio n activities. A t year-end
1976, the FDIC's Division of Liquidation
was administering over 72,000 assets with
an aggregate book value of approximately
$2.6 billion. The largest portion of those
assets, over $900 m illion, was real estate
related. To liquidate those assets the
Corporation employs approximately 600
persons in the Division of Liquidation.
During 1976, the Division of Liquidation
collected approximately $740 m illion
from the assets of the closed banks held
by the Corporation either directly or as
receiver. The complexity of those assets
has increased significantly during the past
few years as a result of the larger bank
closings.
In the Franklin National Bank (FNB)
liquidation, the FDIC's largest, as of
December 31, 1976, the Corporation had
collected $1,124.7 m illion on assets held,
and had paid $1,073.5 m illion of this
amount to the Federal Reserve Bank of
New York, thereby reducing the principal
amount due on the "w ind o w " loan ex
tended to FNB from $1,723.5 m illion at
the time of the bank's closing on October
8, 1974, to $650 m illion at year-end

1976. Interest at the rate of 7.52 percent
per annum will not be due until the note
matures on October 8, 1977. The prin
cipal book value of assets remaining to be
liquidated as of December 31, 1976, is
approximately $1,208.6 m illion com
pared with the principal and accrued
interest on the FDIC's outstanding debt
to the Federal Reserve Bank of New York
of $848.8 million.
On October 8, 1977, it is estimated
that the Corporation w ill be required to
advance approximately $465 m illion to
$665 m illion to pay the Federal Reserve
Bank the remaining balance due on the
o rig in a l $ 1,7 2 3 .5 -m ill ion obligation
which was owed by Franklin as of its
closing. Based on a number of assump
tions as to the duration of the receiver
ship, the pace of collections, and the re
sults of matters in litigation, it is unlikely
that the Corporation will suffer a loss in
this very large failure.
Charters for two deposit insurance
national banks established in 1975 were
scheduled to terminate in 1977 according
to the statute authorizing their establish
ment; and before the expiration of each
charter, the FDIC must make arrange
ments to dispose of the bank's business.
Deposit insurance national banks (DINB)
were organized in accordance with sec
tion 11 of the Federal Deposit Insurance
Act to deal with the failures in 1975 of
Swope Parkway National Bank, Kansas
City, Missouri, and The Peoples Bank of
the Virgin Islands, St. Thomas, Virgin
Islands. In such cases, the receiver of the
closed bank immediately transfers to the
new bank all insured and fu lly secured
deposits in the closed bank, and those
funds are available to their owners to the
same extent that they were available be
fore the bank's closing. By establishing a
deposit insurance national bank the FDIC
hopes to encourage local communities to
consider the establishment and capitaliza
tion of a new bank.
The FDIC is authorized to dispose of a
deposit insurance national bank's business

PROTECTING DEPOSITORS

DEPOSITS AND LOSSES IN ALL INSURED BANKS
REQUIRING DISBURSEMENTS BY FDIC 1 9 3 4 -1 9 7 6

TO TA L DEPO SITS
$6.23 billion

Recovered by depositors
$6 21 billion

Lost or not yet av aila b le
to d epositors $19.7 million

D IS B U R S E M E N T S B Y FDIC
$2.30 billion

Recovered by FD IC
$2.01 b illion

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

either by offering capital stock in the
bank for sale or by transferring its busi
ness to any insured bank w ithin the same
community. Stockholders of the former
bank have the first opportunity to pur
chase such stock. The FDIC made a stock
offering in 1976 in connection with the
deposit insurance national bank created
in the Swope Parkway failure and con
ducted meetings with the stockholders of
the former The Peoples Bank of the
Virgin Islands. Former stockholders of
Swope Parkway National Bank did not
reorganize a new bank; therefore, the
Corporation on December 18, 1976, en
tered into a transaction transferring the
remaining business of the DINB to Laurel
Bank of Kansas City, Kansas City, Mis
souri. The decision to transfer the remain
ing business to Laurel Bank was made
because of that bank's willingness to
enter into such a transaction, because
Laurel Bank already had a significant vol
ume of business from the trade area of
the DINB, and because the location of
Laurel, among those available, was the
most geographically convenient to the
transferred depositors. In addition, Laurel
agreed to pay the FDIC a $3,000 pre
mium for the transaction.
The FDIC has received expressions of
interest from various groups in connec
tion with the DINB in the Virgin Islands.
The interest of these groups w ill be pur
sued and hopefully the result will be pro
posals for a new bank that w ill include
the participation and support of the local
community.

ENFORCING CONSUMER AND INVES
TOR LEGISLATION
The FDIC is responsible fo r enforcing
a number of consumer protection laws
and regulations, including the Truth in
Lending Act, the Fair Credit Reporting
Act, the Real Estate Settlement Proce
dures Act, the Equal Credit Opportunity
Act, the Civil Rights Act, and the Home

Mortgage Disclosure Act, with respect to
the insured nonmember banks w ithin its
supervisory and regulatory jurisdiction. In
most cases, this responsibility is explicit,
that is, the result of an explicit direction
in a governing statute. In some cases how
ever, the responsibility is im plicit, that is,
it arises by virtue of the FDIC's super
visory responsibility to see to it that the
banks it supervises operate w ithin the
confines of applicable Federal law.
P u b lic ly held insured State non
member banks fall under the Corpora
tion's explicit regulatory authority for
public reporting, proxy solicitations, and
trading by insiders of their own bank
stock. The Corporation also supervises
disclosure with respect to take-over
attempts and other purchases of publicly
held securities of banks subject to its pri
mary jurisdiction. Newer statutory re
sponsibilities have engaged the Corpora
tion in the regulation of insured non
member banks that act as transfer agents
and deal in municipal securities.
These increasing statutory responsibil
ities in the securities disclosure area have
coincided with the Corporation's in
creased interest and concern in securities
disclosure problems even where it has no
explicit statutory mandate. The Corpora
tion, for example, has actively encour
aged the use of offering circulars in
connection w ith bank stock and deben
ture offerings and has become more con
cerned with general questions of bank
accounting and disclosure by bank hold
ing companies regulated by the Securities
and Exchange Commission. It has also
monitored banks' securities marketing
devices and banks' involvement in the
market for their own stock.
Compliance examinations and related
activities. The FDIC carries out its re
sponsibility to enforce various consumer
laws primarily through the examination
and supervisory process. FDIC examiners
checked for compliance with the require
ments of such laws during regular bank
examinations in 1976 in every State ex

ENFORCING CONSUMER AN D INVESTOR LE G IS LA TIO N

cept Georgia, Iowa, and Washington,
where as noted, the FDIC was engaged in
the selective withdrawal program for a
certain number of insured nonmember
banks. Separate compliance examinations
of the banks involved in the experiment
were conducted in these three States. All
banks within the FDIC's supervisory juris
diction are generally examined for com
pliance at least once every 18 months.
Such examinations are normally done by
reviewing a sample of pertinent trans
actions and documents and through dis
cussions with bank management. Viola
tions and other exceptions discovered in
the process are reported and followed up
by the staffs of the various Regional Of
fices to assure that appropriate corrective
measures are taken by the bank involved.
As a matter of practice, each Regional
Office staff makes every e ffo rt to resolve
exceptions and obtain compliance with
applicable requirements on a voluntary
basis. If this cannot be accomplished,
resort is made to a formal administrative
proceeding under section 8(b) of the Fed
eral Deposit Insurance Act looking to
ward the issuance, by the FDIC's Board
of Directors, of a cease-and-desist order
against the objectionable practices. Dur
ing 1976, the Board initiated four such
orders relating in whole or in part to vio
lations of Truth in Lending and Equal
Credit Opportunity requirements.
C ertain consumer protection laws,
notably the Truth in Lending Act, pro
vide for criminal sanctions against those
who w illfu lly and knowingly violate its
requirements. During 1976, the FDIC re
ferred one case of apparently w illfu l and
knowing violation of the Truth in Lend
ing act to the appropriate U.S. Attorney
for possible criminal prosecution.
With regard to Truth in Lending, the
FDIC, during the latter part of 1976,
withdrew from examining for compliance
with State Truth in Lending requirements
in the exempt States of Connecticut,
Maine, Massachusetts, Oklahoma, and
Wyoming. This was an e ffort to both con

serve man-hours and avoid unnecessary
duplication of activities already being per
formed by State examiners in these five
States. FDIC examiners are, nevertheless,
continuing to examine for compliance
with those Federal Truth in Lending re
quirements from which the five States
have not received an exemption and
which therefore continue to be applicable
in these States.
In the area of fair housing, the FDIC,
in conjunction with the Office of the
Comptroller of the Currency, began test
ing a program to identify possible dis
criminatory lending practices. During this
test phase, approximately 300 banks were
asked to use a specially designed two-part
form. One part requires the banks to re
tain certain basic economic data on each
loan applicant. The other part, to be com
pleted by applicants for mortgage loans
and forwarded directly to the agencies,
calls for data on race, sex, religion, and
certain other personal characteristics. The
separate parts of the form have identi
fying numbers so that the data can be
readily analyzed together. It is antici
pated that the data retained by a bank
will be reviewed during regular bank ex
aminations and when a profile of that
data fails to meet certain tests in specially
designed computer programs, it will signal
the examiner to conduct a closer review
of the bank's housing lending practices
for evidence of discrimination.
Also in furtherance of its commitment
to fair housing lending on the part of the
banks it supervises, the FDIC has begun
to collect copies of the Mortgage Loan
Disclosure Statements which certain of
the banks it supervises are required to
compile and make available to the public
pursuant to the Home Mortgage Disclo
sure Act. These data w ill later be ana
lyzed for evidence of "redlining" and
possible discriminatory lending practices.
Office of Bank Customer Affairs. The
Office of Bank Customer Affairs, which
was created in 1975, is responsible for
coordinating FDIC efforts to protect the

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

interests of bank customers. The first
priority in 1976 was staffing. Four staff
members were added, including a perma
nent director. The process of establishing
consumer affairs specialists in the Re
gional Offices was begun during the year
with the designation of five individuals to
these positions. It is expected that the
remaining consumer affairs specialists will
be selected in early 1977.
The office processes bank customer
complaints and inquiries received directly
and reviews and coordinates the activities
of the Regional Offices in responding to
consumer complaints. In addition to
alleged violations of consumer protection
laws, consumers' letters dealt with a vari
ety of other banking matters. Although
many inquiries did not deal with alleged
violations of either Federal or State laws,
the office made a conscientious effort to
provide informative and timely responses
to all consumers. Use of a standardized
complaint form which may aid the com
plaint process is currently under study.
The Office of Bank Customer Affairs
also reviews proposed legislation and
regulations to assess their impact on bank
customers. It reviews compliance reports
on a selected basis. During the year, the
office recommended four cease-and-desist
actions involving consumer laws.
To improve examiners' effectiveness in
investigating discrimination complaints
and conducting fair lending examinations,
the office jo in tly sponsored a 1-week fair
housing workshop during the year, and
plans are being formulated to conduct a
similar workshop in 1977. In addition,
comprehensive instructions for investi
gating fair housing complaints were devel
oped for examiners. A brochure describ
ing the F D IC 's complaint handling
function and giving information on con
sumer laws is being prepared and publica
tion of a series of pamphlets on consumer
laws and various banking practices is be
ing considered.
Securities Exchange Act — Registra
tion and reporting. Under the Securities

Exchange Act of 1934, the Corporation
exercises all "the powers, functions, and
duties" otherwise vested in the Securities
and Exchange Commission "to administer
and enforce" the registration, companyreporting, and related provisions of that
act with respect to insured nonmember
banks. These provisions are applicable to
banks with more than $1 m illion in assets
that have 500 or more holders of any
class of equity security. Under these pro
visions and the Corporation's regulations
thereunder, the banks are required to file
an initial registration statement and peri
odic reports (annually, semi-annually, and
quarterly) as well as a special report
covering any material event which oc
curred in the preceding month. Any
matter presented for a vote of security
holders must be effectuated through a
proxy statement, or an information state
ment if proxies are not solicited, com
plying with the Corporation's regulations;
and where directors are to be elected, the
proxy or information statement must be
accompanied or preceded by an annual
report disclosing the financial condition
of the bank. Officers and directors of a
bank whose securities are registered and
any person or related group of persons
holding more than 5 percent of such
securities must report their holdings and
any changes in their holdings to the Cor
poration.
A ll required statements and reports
filed with the Corporation under the
Securities Exchange Act are public docu
ments. All such statements and reports
are available for inspection at the Cor
poration's headquarters and copies of
registration statements and company re
ports, proxy statements, and annual re
ports to shareholders are also available at
the New York, Chicago, and San Fran
cisco Federal Reserve Banks as well as at
the Reserve Bank of the district in which
the bank filing the report is located.
During 1976, 22 banks filed registra
tion statements, 1 bank withdrew from
the Federal Reserve System, and 1 bank

A D M IN IS T R A T IO N OF THE CORPORATION

converted from a national to a State char
ter. Nine banks terminated registration
due to mergers and bank holding com
pany acquisitions. The year-end total of
registered banks was 336 compared to
321 the year earlier.
Banks acting as municipal securities
dealers and transfer agents. The Securities
Acts Amendments of 1975 imposed, for
the first time, registration requirements
and a scheme of Federal regulation upon
municipal securities dealers and transfer
agents, including banks that act in those
capacities. Both the Securities and Ex
change Commission and the Corporation
have responsibilities for enforcing com
pliance by insured State nonmember
banks with the enacted provisions. As of
December 31, 1976, 55 State nonmember
banks had registered as municipal secur
ities dealers with the Securities and Ex
change Commission and 444 State non
member banks had registered with the
Corporation as transfer agents.
During 1976, the Corporation worked
closely with the Securities and Exchange
C om m issio n, the Municipal Securities
Rulemaking Board, the Federal Reserve,
and the Comptroller of the Currency in
developing rules, forms, regulation guide
lines, and examination procedures. A
special compliance report and new regula
tions are presently being drawn up to
properly supervise the activities of banks
acting as municipal securities dealers.

ADM INISTRATION
RATION

OF THE CORPO

Organizational structure. Mr. Robert
E. Barnett was appointed a member of
the Board of Directors on March 18,
1976. On the same date, he was elected
unanimously by the Board of Directors to
be Chairman, succeeding Chairman Frank
Wille whose 6-year term expired on
March 16, 1976.
Director George A. LeMaistre, also
serving a 6-year term which began on

August 1, 1973, continued his service as a
director. Comptroller of the Currency
James E. Smith, an ex officio member of
the Board, who began a 5-year term of
office on July 5, 1973, resigned on July
30, 1976, and was succeeded by Acting
Com ptroller of the Currency Robert
Bloom, pending appointment and con
firmation of a successor to Mr. Smith.
Corporation officials, Regional Direc
tors, and Regional Offices are listed on
pages v and vi.
Organizational changes. Effective June
20, 1976, the Division of Research and
the Office of Management Systems were
consolidated into the resulting Division of
M anagem ent Systems and Economic
Analysis. The consolidation brought the
administration of statistical reports and
the economic research and analysis func
tions into closer coordination w ith the
computer and data processing support
operation. DMSEA is stressing particu
larly a broader utilization of financial,
statistical, and economic data for several
Corporation purposes, including the con
tinuing development of systems to detect
unfavorable trends in bank operations as
a tool in the Corporation's bank super
visory activities.
The Office of Employee Relations was
created on May 17, 1976, for the purpose
o f centralizing some personnel-related
activities that had been scattered through
out the Corporation. Offices currently
operating in the FDIC that were made a
part of OER include the Personnel Office,
Office of Education, Equal Employment
O p p o rtu n ity , and Upward M obility.
Other reasons for establishing the new
office were: to provide an improved mech
anism through which the Board of Direc
tors can focus on matters relating to the
environment in which Corporation em
ployees work, and which w ill provide a
focal point through which employees
may express their preferences, com
plaints, and attitudes; and to provide
manpower to study and make recommen

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

effective no later than mid-year 1977.

dations to the Board of Directors in areas
related to employee relations matters not
currently being handled by any office in
the Corporation, or which may be rela
tively new to the Corporation. OER is
primarily responsible for creating and im
plementing recommendations relating to
career development at the Corporation,
job counseling, employee benefits, griev
ance administration, equal employment
opportunity, upward m obility opportun
ity, education and training, recruitment,
merit promotion, and related technical
personnel office operations. Three new
professional positions, including staffing
in career counseling and employee and
labor relations, will be added in 1977.

Number of employees. Total employ
ment increased by 261 in 1976 with ap
proximately 9 out of every 10 new em
ployees added to the Division of Bank
Supervision and the Division of Liquida
tion. The year-end 1976 total includes
624 nonpermanent employees serving on
a short-term appointment or on a whenactually-employed basis. Of the year-end
total, an estimated 58 percent and 9 per
cent respectively were assigned to re
gional or other field offices of the Divi
sion of Bank Supervision and of the
Division of Liquidation.
For the 6-year period 1971-1976, the
Corporation's total workforce increased
from 2,508 to 3,535, or 41 percent, with
55 percent of the increase in the Division
of Bank Supervision and 32 percent in
the Division of Liquidation.
The percentage of women and minor
ities in the professional job series group,
including student cooperatives, increased
from 9.3 percent and 5.9 percent respec
tively as of December 31, 1974, to 12.2

Change in location o f Regional Office.
On December 16, 1976, based on a sup
porting study by the Division of Bank
Supervision, the Board of Directors ap
proved the transfer of regional head
quarters for the existing St. Louis Region
(States of Missouri and Kansas) from St.
Louis, Missouri, to Kansas City, Missouri.
It is expected that the transfer w ill be

NUMBER OF OFFICERS AND EMPLOYEES
OF THE FEDERAL DEPOSIT INSURANCE CORPORATION
DECEMBER 31, 1975 AND 1976
Washington
office

Total

Regional and
other field offices

U nit
1976

1975

1976

T o ta l...............................................................

3,5351

3,2741

1,110

Directors...................................................
Executive Offices3 .................................
Legal D ivisio n ..........................................
Division of Bank S u p ervision ...............
Division of Liquidation...........................
Division o f Management Systems
and Economic Analysis.....................
Office of the C o n tro lle r........................
Office of Corporate A u d it s ..................
Office of Employee Relations...............

32
57
92
2,450
501

3
51
83
2,282
423

192
175
24
41

1944
219
19
0

1975

1976

1975

971

2,425

2,303

32
57
79
389
165

3
51
72
300
128

0
0
13
2,061
336

0
0
11
1,982
295

192
160
24
41

1944
204
19
0

0
15
0
0

in c lu d e s 624 nonpermanent employees on short term appointment or when actually employed in 1976, and 508 in
1975.
2As o f December 31, 1976, Mr. Robert Bloom was serving as Acting C om ptroller of the Currency (see text).
3 Includes Office of Bank Customer Affairs and Office of Corporate Planning.
4 Aggregate figures fo r Division of Research and Office of Management Systems. These two organizational entities were
consolidated as a result of a reorganization in 1976.

A D M IN IS T R A T IO N OF THE CORPORATION

percent and 9.3 percent as of mid-year
1976. Continuing progress in increasing
the numbers of women and minorities to
more representative levels in the Corpora
tion's professional workforce is largely
attributable to recruitment efforts cited
as action items in past and current Equal
Employment Opportunity Plans. In par
ticular, the hiring of bank examinersstudent cooperatives contributes to both
short-and long-term gains through reten
tion of many such student cooperatives as
permanent bank examiners. The Student
Cooperative Education Program, through
which college students are appointed as
bank examiners-student assistants and
after completion of a work-study pro
gram may qualify as assistant bank exami
ners, was continued in 1976 with 264
such employees as of December 4, 1976.
While technically assigned to the Washing
ton Office, such employees have actual
duty stations in various regions where
they gain experience through tours of
duty with bank examiners on actual bank
examinations. As of December 4, 1976,
the combined bank examiner workforce,
including student assistants, included 9.3
p ercent minorities and 11.0 percent
women. Approximately 80 percent of
professional group positions in the Cor
poration are bank examiners.
Employee and personnel programs.
The Corporation's Equal Employment
O pportunity and Upward M obility Pro
grams are each administrated by a fu ll
time professional. The equal opportunity
specialist is assisted by approximately 60
employees assigned part-time duties and
responsibilities, and the upward m obility
coordinator is assisted by a task force of
division and office representatives. During
1976 under the Upward- M obility Pro
gram, opportunities were announced and
bridge positions filled for bank examiner
aide, auditor-technician, computer aide,
writer-editor aide, and computer pro
grammer trainee. The bank examiner aide
bridge position, of which seven were

filled during 1976, is structured to pro
vide the qualifying work experience and
academic courses for a target position of
assistant bank examiner. In December
1976, recruitment was initiated for the
Federal Women's Program coordinator
who w ill serve on the staff of the Director
of the Office of Employee Relations (also
designated as Director of Equal Employ
m en t Opportunity) devoting approxi
mately 60 percent of available time to
coordinating Federal Women's Program
activities in liaison w ith existing Federal
Women's Program committees, and the
remainder of time to operational em
ployee relations duties and responsibilties.
Elections of members of Employee Ad
visory Councils were conducted in Feb
ruary 1976. Members of the Councils are
elected by the employees they represent.
The Councils, whose establishment was
announced in late 1975, are intended to
provide employees w ith a regular oppor
tunity to make recommendations on mat
ters of administrative policy and practice
affecting FDIC employees.
Negotiations with a union local in the
Corporation's New York Region during
1976 led to the signing of a contract
agreement on November 19, 1976. The
union local serves as the exclusive repre
sentative of the unit of bank examiners in
the New York Region under the provi
sions of Executive Order 11491, as
amended.
The Corporation's Tuition Reimburse
ment Policy provides for reimbursement
of costs for job- and career-related train
ing for employees. The Periodical Sub
scription Program, provided for field
employees who do not have ready access
to the Corporation's head office library,
permits examiners, liquidators, and audi
tors to subscribe to selected job-related
periodicals at Corporation expense.
A t the Corporation's Awards Cere
mony on December 14, 1976, 74 em
ployees received recognition for 15, 25,

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

35 or more, and 40 years of service. A t
the same ceremony, three employees re
ceived special awards:
Chairman's Award

Exceptional Walter W.
service by a
Tibbs
nonexaminer
employee

Edward J. Roddy
Award

Exceptional Robert T.
service by an
Dial
examiner

Nancy K. Rector
Award

Exceptional Patricia Ann
service of a
R iley
humanitarian
nature

Implementation and administration of
the Freedom of Information Act. During
1976, the Corporation responded to 124
requests under the Freedom of Informa
tion A ct for access to or copies of records
in its possession. Twelve of the requests
were either misdirected to the Corpora
tion or the records requested were not in
the Corporation's possession, and the re
questers were notified accordingly.
Of the remaining 112 requests, the
Corporation granted in full 52 requests.
Thirty-six requests were wholly denied;
23 requests were granted in part and de
nied in part. One request was outstanding
as of December 31, 1976. The Board of
Directors received only 10 appeals from
initial denials. After considering those
appeals, the Board reversed one initial
denial, thereby directing that the records
requested be made available to the re
quester; sustained seven other initial
denials; and granted in part and denied in
part the appeal from one initial denial;
one appeal had not been acted upon as of
December 31, 1976.
In wholly or partially denying certain
requests, the Corporation invoked those
provisions of the Freedom of Information
Act which authorize an agency to exempt
from disclosure matters that are (1) con
tained in or related to examination, oper
ating, or condition reports prepared by,
on behalf of, or for the use of an agency
responsible for the regulation or super
vision of financial institutions; (2) trade

secrets and commercial or financial infor
mation obtained from a person and priv
ileged or confidential; (3) inter-agency or
intra-agency memorandums or letters
which would not be available by law to a
party other than an agency in litigation
with the agency; and (4) personnel and
medical files and similar files the disclo
sure of which would constitute a clearly
unwarranted invasion of personal privacy.
To expedite the processing of requests
for records pursuant to the Freedom of
Information Act, the Board of Directors
delegated authority to initially deny such
requests to the Executive Secretary or his
designee on September 22, 1976. That
authority had previously been vested in
the Chairman of the Corporation.
Audit. The Corporation's Office of
Corporate Audits has the responsibility of
performing independent audits of all fi
nancial and operational activities w ithin
the Corporation, and for reporting audit
results and recommendations to executive
management. During the year the office
conducted numerous audits relating to
the administration of the insurance fund,
the proper conduct of Corporation busi
ness, and the multi-billion-dollar liquida
tion activities in which the FDIC is in
volved. Qualified CPA firms were used to
supplement the resources of the Office of
Corporate Audits when unusual and non
recurring requirements arose. In addition
to our continuing internal audit activity,
the financial transactions of the Corpora
tion are audited annually by the General
Accounting Office and audit results are
reported to the Congress. This external
audit review provides additional assurance
as to the fairness of our financial state
ment presentation and the appropriate
ness of our accounting practices.

FINANCES OF THE CORPORATION
During 1976 the Corporation's consis
tent financial growth continued. Its
total assets, its cash flow for the year, its

FINANCES OF THE CORPORATION

deposit insurance fund, and the yield on
its portfolio of government securities all
reached new highs.
Notwithstanding substantial outlays in
connection with a larger-than-normal
number of bank failures, the Corpora
tion's financial position on December 31,
1976, testified to the basic strengths of
its statutory funding and investment
operations.
A t the close of business in 1976 the
Corporation's assets totaled $8.6 billion.
Cash and United States Government secu
rities valued at amortized cost plus ac
crued interest were $6.8 billion. Equity in
assets acquired from failed banks in pur
chase and assumption and depositor pay
off transactions, in notes purchased to
facilitate deposit assumptions and merg
ers, and in direct assistance to operating
banks totaled $2.0 billion before deduct
ing reserves for losses. Of this total,
approximately $849 m illion represented
equity in assets acquired as a result of the
closing of Franklin National Bank on Oc
tober 8, 1974.
On the same date, the Corporation's
liabilities totaled $1.3 billion; nearly
$849 m illion of these liabilities consisted
of the unpaid balance of a note, including
accrued interest, held by the Federal
Reserve Bank of New York, which had
provided financial assistance to Franklin
National Bank before the assumption of
certain of Franklin National's liabilities in
1974 by European-American Bank &
Trust Company. The remaining liabilities
consisted largely of assessment credits
due insured banks, most of which will
become available on July 1, 1977.
The Corporation's total gross revenues
in 1976 amounted to $1.1 billion, an in
crease of $92 m illion over 1975. Of this
total, $676 m illion was derived from the
gross assessments payable by insured
banks during the year; $445 m illion was
received as interest on the Corporation's
portfolio of United States Government
securities, in which the Federal Deposit
Insurance A ct requires that its surplus

funds must be invested; and $24 m illion
from other sources.
During 1976, the Corporation con
tinued to take action to improve yields
on its investments and to compress the
m aturity structure of its investment port
folio. In this process, w ith the assistance
of the Department of the Treasury, the
Corporation sold approximately $748
million face value of low-yield marketable
bonds which the Corporation purchased
many years ago. These particular bonds,
characterized by long maturities and low
interest rates, had served in recent years
as an obvious drag on the Corporation's
efforts to improve the average yield on its
total portfolio. Although this sale re
sulted in an expected immediate book
loss to the Corporation of approximately
$106 m illion, the proceeds of the sale,
totaling $641 m illion, were immediately
reinvested in shorter-term securities with
an average annual yield on cost 7.74 per
cent.
This sale, which the Corporation had
been pursuing for a considerable period,
enabled the Corporation to increase its
revenues derived from interest by approx
imately $22 m illion annually, and in
creased its average annual portfolio yield
on cost from 6.47 percent as of Decem
ber 31, 1975, to 7.11 percent as of
December 31, 1976. The Corporation
estimates that it w ill recover the book
losses from this transaction over a period
of 7 years or less, through reinvestment
of the proceeds in markedly higheryielding securities.
The Corporation's administrative and
operating expenses during 1976, includ
ing a net increase of approximately $28
m illion in the reserve for insurance losses
and other expenses incurred to protect
depositors, totaled $107 million.
As to the annual assessments required
by the Federal Deposit Insurance A ct to
be paid by insured banks, the basic assess
ment rate since 1935 has been 1/12 of 1
percent of total assessable deposits. In
1950, legislation was enacted which had

F E D E R A L DEPOSIT INSURANCE CO RPORATION

DEPOSITS IN INSURED BANKS,
AND THE DEPOSIT INSURANCE FUND, 1 9 5 0 -1 9 7 6

B illio n s of d o lla rs

9 0 0 -----------------------------------800-

TOTAL DEPOSITS

7006005004 0 0 ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------300-

20 0 -

INSURED DEPOSITS (estimated)
10 0 i

1 95 0'51

i—

’52 '5 3 '5 4 '5 5 '56 '57 '5 8 '59

I—

i—

'60 '61 '6 2 '63 ’6 4 '6 5 '6 6

i—

'67 '6 8 '6 9 '70 '71 '72

i—

'73 '74 ’75 ’76

DEPOSIT INSURANCE FUND
8 --------------------------------------------------------------------------------------------------------------

the effect of reducing the statutory rate
of assessment by providing a credit to be
applied against the gross assessments lev
ied each year. Following another legisla
tive change, this credit to insured banks
has been 66-2/3 percent since December
31, 1961. This percentage is applied to
the gross assessments due from banks in
the calendar year after subtracting the
Corporation's administrative and oper
ating expenses, insurance losses, and addi
tions to reserve for losses in that calendar
year. Gross assessments payable by in
sured banks in 1976 amounted to $35
million more than in 1975. The statutory

credit to banks amounted to approxi
mately $380 m illion, an increase of $17
million over the previous year. This made
the net assessment paid by insured banks
equal to approximately 1/27 of one per
cent of assessable deposits in 1976, com
pared to 1/28 of one percent in 1975.
The deposit insurance fund, in effect
the excess of the Corporation's assets
over its liabilities, represents its accumu
lated net income since the beginning of
deposit insurance in 1933. This fund,
which is the Corporation's basic resource
for the protection of depositors, amount
ed to $7.3 billion at the end of 1976, an

FINANCES OF THE CORPORATION

increase of $553 m illion from year-end
1975. Although it is not possible to state
actuarially what the deposit insurance
fund should be, it is clearly symbolic of
the Corporation's financial integrity and
independence, and it has been more than
adequate to meet the Corporation's re
quirements during its 43-year history.
Additionally, the Corporation is author
ized to borrow up to $3 billion from the
Department of the Treasury, although it
has never exercised this authority.

By any standards, the Corporation's
finances remained strong in 1976, in spite
of the necessity of increasing the number
of its employees, the impact of rising
costs, and financial involvement in more
than the usual number of failed bank situ
ations. Healthy and continuing financial
growth is forecast for the future and it is
expected that most key financial figures
at the end of 1977 w ill exceed those re
corded at the close of 1976.

FE D E R A L DEPOSIT INSURANCE CO RPO RATIO N

COMPARATIVE STATEMENT
OF FINANCIAL CONDITION

(in thousands)

ASSETS:

Calendar year ended December 31,

1976

Cash

U.S. Government obligations

1975

22,860

6,760,229

17,359
6,472,294

Assets acquired in failures o f insured banks:
Depositors claims paid

62,598

65,686

Depositors claims unpaid

1,280

900

Equity in assets acquired

1,664,321

1,790,443

35,160

4,477

$1,763,359

$1,861,506

Assets purchased outright

Less reserve fo r losses

240,601

1,522,758

213,150

1,648,356

Notes purchased:
Principal

Accrued interest

200,500
4,127

204,627

1 6 3 ,0 0 0

3,518

166,518

Assistance to operating insured banks:
Principal
Accrued interest

37,000
7

$
37,007

37,000
1

37,001

Miscellaneous assets

1,869

1,645

Land and office building less
depreciation on building

6,553

6,688

$8,555,903

$8,349,861

Total Assets

Notes to financial statements on pages 38-39 are an integral part o f this statement.

FINANCES OF THE CORPORATION

FEDERAL DEPOSIT INSURANCE CORPORATION

L IA B IL IT IE S A N D TH E

Calendar year encJed December 31,

D E P O S IT IN S U R A N C E FU N D :

1975

1976

Accounts payable and accrued liabilities

3,927

4,053

Earnest money, escrow funds, and
collections held for others

3,963

2,137

Accrued annual leave

3,791

3,359

Due insured banks:

Net assessment income credits
Available July 1, 1976
Available July 1, 1977
Other

$ 362,428

379,595
27,185

406,780

1,098

363,526

Liabilities incurred in failures of insured banks:

F.R.B. indebtedness
Principal
Accrued interest

$ 650,000
198,846

$1,125,000
848,846

134,847

1,259,847

Other notes payable
Principal
Depositors claims unpaid

18,691

1,280

900

7,268,625

6,716,039

$8,555,903

$8,349,861

Deposit insurance fund,

net income accumulated since
the beginning of the Corporation

Total Liabilities and Deposit Insurance Fund

F E D E R A L DEPOSIT INSURANCE CORPO RATIO N

C O M PAR ATIVE STATEMENT OF IN C O M E
A N D THE DEPOSIT INSURANCE FUND

(In thousands)

Calender Year En<dec! December 31,

1976

1975

$ 676,065

$ 641,233

444,699

390,558

4,995

3,752

Revenues:
Assessments earned
Interest on U.S. Government securities
Am ortization and discounts earned, net

17,697

15,720

1,001

304

$1,144,457

$1,051,612

$ 379,565

$ 362,304

28,001

27,619

74,849

67,688

3,861

2,152

105,595

Total expenses

$ 591,871

$ 459,763

Net Income - A d d itio n to the deposit insurance fund

$ 552,586

Deposit insurance fund - January 1

$6,716,039

$6,124,190

Deposit insurance fund - December 31

$7,268,625

$6,716,039

Net p ro fit on sales of U.S. Government securities
Interest earned on notes receivable
Other income

Total revenues

Expenses, losses, and assessment credits:
Assessment credits returned to banks
P ro v is io n f o r in s u ra n c e

losses

Administrative and operating expenses
Nonrecoverable insurance expenses
Net loss on sales of U.S. Government securities

591,849

Notes to financial statements on pages 38-39 are an integral part o f this statement.

FINANCES OF THE CORPO RATIO N

C O M P A R A T IV E STATEMENT OF CHANGES
IN F IN A N C IA L POSITION

(In thousands)
FEDERAL DEPOSIT INSURANCE CORPORATION

Calendar year entded December 31,

1976

1975

Resources provided from :
Net assessment income
Interest on U.S. Government obligations
Interest on notes receivable
Other income

Less: administrative and insurance expenses

Total resources provided by operations

M aturity and sale of U.S. Government obligations
Collections on assets acquired in failures of insured banks
Increase (decrease) in assessment credits and other
liabilities

Total resources provided

296,500

278,929

444,699

390,558

17,697

15,720

1,001

304

78,575

69,704

$ 681,322

$ 615,807

2,606,985

1,723,976

362,579

135,383

45,386

73,708

$3,696,272

$2,548,874

$2,971,611

$2,211,895

695,027

323,124

29,634

13,855

$3,696,272

$2,548,874

Resources applied to:
Purchase of U.S. Government obligations
Acquisition o f assets in failures of insured banks
Increase (decrease) in other assets

Total resources applied

F E D E R A L DEPOSIT INSURANCE CO RPORATION

NOTES TO FIN AN C IAL STATEMENTS
These statements:
a) Do not include accountability for
the assets and liabilities of the
closed insured banks for which the
Corporation acts as receiver or liq
uidating agent. Periodic and final
accountability reports of its activi
ties as receiver or liquidating agent
are furnished by the Corporation to
the courts, supervisory authorities,
and others as required.
b) Include transactions in unaudited
collection and disbursement reports
from liquidators of Franklin Na
tional Bank, Northeast Bank of
Houston, The Hamilton Bank and
Trust Company, and Centennial
B a nk, o f Philadelphia, for the
month of December 1976.
ACCOUNTING POLICIES
Securities. U.S. Government securities
are shown at amortized cost which is the
purchase price of the securities less the
amortized premium or plus the amortized
discount. As of December 31, 1976,
amortized premiums amounted to $8.4
million and amortized discounts $8.5 m il
lion. Premiums and discounts are amor
tized on a daily straight-line basis from
the date of acquisition to the date of
maturity.
Deposit insurance assessments. The
Corporation assesses insured banks at the
rate of 1/12 of 1 percent per year on the
bank's average deposit liability less cer
tain exclusions and deductions. Assess
ments are due in advance for a 6-month
period and credited to income when
earned each month. Each July 1, 66-2/3
percent of the Corporation's net assess
ment income for the prior calendar year
is made available to insured banks as a
pro-rated credit against the current assess
ment due.
Depreciation. The office building is de
preciated on a straight-line basis at the
rate of 2 percent per year over a 50-year

estimated life. Furniture, fixtures, and
equipment are fu lly depreciated at the
time of acquisition.
ASSETS ACQUIRED IN RECEIVER
SHIPS AND DEPOSIT ASSUMPTIONS
Equity in assets acquired under agree
ments with insured banks totaled $1,664
million. Of this total approximately $849
m illion represents equity in assets ac
quired as a result of the closing of Frank
lin National Bank on October 8, 1974.
Notes purchased to facilitate deposit
assumptions. As of December 31, 1976,
the Corporation's outstanding notes re
ceivable, purchased to facilitate deposit
assumptions and mergers under section
13(e) of the Federal Deposit Insurance
Act are:
Crocker National Corporation $ 50,000,000
European-American B a n k &
100,000,000
Trust Company
Clearing Bank
1,500,000
Marine National Exchange
2,500,000
Bank of Milwaukee
First Tennessee National
16,000,000
C orporation
First Tennessee National Bank
8,000,000
Bank Leumi T ru st Company o f
10,000,000
New Y o rk
Southeast Banking Corporation
5,000,000
New Orleans Bancshares, Inc.
7,500,000

ASSISTANCE TO OPERATING
INSURED BANKS
As of December 31, 1976, the Corpo
ration had two outstanding notes receiv
able purchased under authority of section
13(c) of the Federal Deposit Insurance
Act: one for Bank of the Commonwealth
with a principal balance on the note of
$35.5 m illion and the other for Unity
Bank and Trust Company with a principal
balance of $1.5 million.
Bank of the Commonwealth. Maturity
dates of the Bank of the Commonwealth
notes were extended in 1976 from 1977
to 1982-87. In addition to changing the
basis of computing interest from a fixed
rate to a formula related to net income,
the new terms provide for a prepayment

FINANCES OF THE CORPORATION

incentive discount. As a condition of the
extension and modification agreement,
the bank agreed to a recapitalization plan
which was in progress but not fu lly com
pleted at year-end.
Unity Bank and Trust Company. On
December 27, 1976, the Federal Deposit
Insurance Corporation announced that
the Board of Directors had agreed to ex
tend until June 30, 1982, the $1.5 m il
lion capital note of U nity Bank and Trust
Company, Boston, Massachusetts, which
matured on December 31, 1976. Payment
of principal and interest on the note will
be in accordance with the terms of the
amended note.
LIA B ILITIE S INCURRED IN RECEIV
ERSHIP AND DEPOSIT ASSUMPTION
TRANSACTIONS
Federal Reserve Bank of New York
indebtedness. As of December 31, 1976,
the principal outstanding balance due the
Federal Reserve Bank of New York was
$650 m illion. Accrued interest payable of
$199 m illion represents interest for 817
days at the rate of 7.52 percent simple
interest per annum on the unpaid prin
cipal balances, since inception, due to the
Federal Reserve Bank of New York and
after deducting $5 m illion for certain
out-of-pocket expenses incurred by the
Corporation as provided for in the agree
ment of sale.
Other notes payable. This amount rep
resents the unpaid principal on the Cor
poration's unsecured notes designated
"5.775% Series A Notes due January 1,

1988" and "5.775% Series B Notes due
January 1, 1990" as set forth in the con
sents, exchange agreement, and agree
ments of release and satisfaction related
to the sale of Franklin Buildings, Inc. to
European-American Bank & Trust Com
pany.
CONTINGENT LIA B ILITIE S
Savings c e rtific a te s , 8-% percent
growth and savings certificates, 8-% per
cent income. In accordance w ith the in
dem nification agreement between the
Corporation and The Bank of New Or
leans and Trust Company, the Corpora
tion agreed to indemnify the bank, by
paying to the bank on a monthly basis, an
amount equal to the difference between
the interest accrued on the outstanding
principal and interest balances on certain
specified savings certificates (referred to
collectively as the "w ild card indebted
ness") and the interest that would accrue
during the month at the Treasury bill
rate.
Southern Bancorporation — Note re
ceivable. On December 9, 1976, Southern
Bancorporation repaid in full the $8 m il
lion note that the Corporation had pur
chased on September 24, 1974. Southern
Bancorporation financed this transaction
by obtaining a loan from First Union
National Bank of North Carolina. To
induce FUNB to enter the loan agree
ment, the FDIC agreed to guarantee the
payment of 75 percent of the principal
amount of the loan on the terms and con
ditions set forth in the guarantee agree
ment.

-------------

ENFORCEMENT PROCEEDINGS
PART TWO

43
ACTIONS TO TERMINATE INSURED STATUS
Actions to Terminate Insured Status
Federal Deposit Insurance Act - Section 8 (a)
The Corporation has issued 27 termination of
insurance actions since January 1971. In each case,
the bank was found to be in unsafe and unsound
condition.
Also, a number of other termination of insur
ance actions have been recommended but were
withdrawn prior to action by our Board because of
favorable interim affirmative actions on the part of
either the banks or management-shareholders. As
in the case of cease-and-desist actions, the threat
of termination of insurance has caused many af
firmative action programs on the part of banks
which negated the need for finalizing the actions.

Su m m a ry o f cases

Deposits—$11.1 million
Notice of intention to terminate in
sured status issued on January 22,
1971. Bank was ordered to provide an
active and capable management, elimi
nate by charge-off or otherwise certain
classified assets, correct all violations
of law listed in the report of examina
tion, and adopt and strictly follow
written loan policies if continued in
sured status was desired.
The action was terminated on June
30, 1971, when subject was merged
with another bank.
Deposits—$13.4 million
Notice of intention to terminate in
sured status issued on March 12, 1971.
Bank was ordered to provide an active
and capable management, eliminate
c e rta in assets from its books by
charge-off or otherwise, correct all vio
lations of law listed in the examination
report, adopt and strictly follow w rit
ten loan policies, pay no cash divi
dends without the prior consent of the
Banking Commissioner and the FDIC,
reduce the loan-to-deposit ratio, not
accept or acquire directly or indirectly
brokered deposits, eliminate from its
capital accounts all income collected
but not earned, and provide adequate
capital and reserves if continued in
sured status was desired.
The action was terminated on De
cember 17, 1971, based upon substan
tial compliance with the corrective
orders.

Deposits—$3.8 million
Notice of intention to terminate in
sured status issued on June 30, 1971.
Bank was ordered to provide an active
and capable management, eliminate
ce rta in assets from its books by
charge-off or otherwise, reduce the re
maining classified assets, correct all
violations of law listed in the report of
examination, adopt and strictly follow
satisfactory written loan policies, pay
no cash dividends w ithout the prior
consent of the Commissioner of Bank
ing and the FDIC, and put the assets
of the bank in such form and condi
tion as to be acceptable to the Com
missioner of Banking and the FDIC if
continued insured status was desired.
The action was terminated on April
6, 1973, based upon substantial com
pliance with the corrective orders.
Deposits—$5.9 million
Notice of intention to terminate in
sured status issued on November 19,
1971. Bank was ordered to provide an
active and capable management, elimi
nate from its books certain assets by
charge-off or otherwise, refrain from
extending credit directly or indirectly
for the benefit of a director, reduce
the remaining classified assets, adopt
and strictly follow satisfactory written
loan policies, pay no cash dividends
without the prior consent of the Com
missioner of Banking and the FDIC,
and put the assets of the bank in such
form and condition as to be acceptable
to the Commissioner of Banking and
the FDIC if continued insured status
was desired.
The action was terminated July 7,
1972, based upon substantial com
pliance with the corrective orders.
Deposits—$12.6 million
Notice of intention to terminate in
sured status issued on December 17,
1971. Bank was ordered to eliminate
from its book assets, by charge-off or
otherwise, certain classified assets, to
put other assets of the bank in a satis
factory form and condition, and to
provide acceptable capital funds if
continued insured status was desired.
The action was terminated on July
14, 1972, based upon substantial com
pliance with the corrective orders.

FEDERAL DEPOSIT INSURANCE CORPORATION

Bank No.

Deposits—$8.2 million
Notice of intention to terminate in
sured status issued on January 27,
1972. Bank was ordered to provide
acceptable management, eliminate or
reduce adversely classified assets,
adopt acceptable loan policies, correct
violations of law, and provide accept
able capital funds if continued insured
status was desired.
The action was terminated on May
14, 1973, based upon substantial com
pliance with the corrective orders.
Deposits-$4.1 m illion
Notice of intention to terminate in
sured status issued on March 17, 1972.
Bank was ordered to provide accept
able management, eliminate or reduce
adversely classified assets, adopt ac
ceptable loan policies, correct viola
tions of law, and provide acceptable
capital funds if continued insured sta
tus was desired.
The action was terminated on De
cember 4, 1972, based upon substan
tial compliance with the corrective
orders.
Deposits—$1.9 million
Notice of intention to terminate in
sured status issued on May 1, 1972.
Bank was ordered to provide accept
able management, eliminate or reduce
adversely classified assets, adopt ac
ceptable loan policies, and provide ac
ceptable capital funds if continued in
sured status was desired.
The action was terminated on June
11, 1973, based upon substantial com
pliance with the corrective orders.

Deposits—$12.6 million
Notice of intention to terminate in
sured status issued on October 30,
1972. Bank was ordered to eliminate
or reduce adversely classified assets,
obtain supporting documents prior to
extending credits, adopt acceptable
loan policies, and provide acceptable
capital funds if continued insured sta
tus was desired.
The action was terminated on
March 1, 1974, based upon substantial
compliance w ith the corrective orders.

Deposits—$5.5 million
Notice of intention to terminate in
sured status issued on November 21,
1972. Bank was ordered to provide ac
ceptable management, eliminate or
reduce adversely classified assets, ob
tain supporting documents prior to

extending credits, strictly adhere to its
written loan policies, correct violations
of laws, and provide acceptable capital
funds if continued insured status was
desired.
The action was terminated on May
29, 1974, based upon substantial com
pliance with the corrective orders.
11

Deposits—$3.9 million
Notice of intention to terminate in
sured status issued on May 14, 1973.
Bank was ordered to eliminate or re
duce adversely classified assets, adopt
acceptable loan policies, correct viola
tions of law, and provide acceptable
capital funds if continued insured sta
tus was desired.
The action was terminated on
August 11, 1975, based upon substan
tial compliance with the corrective
orders and a change in control owner
ship.

Deposits—$18.6 million
Notice of intention to terminate in
sured status issued on June 28, 1974.
Bank was ordered to provide accept
able management, eliminate or reduce
adversely classified assets, adopt ac
ceptable loan policies, and correct vio
lations of law if continued insured sta
tus was desired.
The action to terminate insured sta
tus was in the hearing stage when the
bank was closed on June 14, 1976.
Deposits—$13.8 million
Notice of intention to terminate in
sured status issued on August 12,
1974. Bank was ordered to provide ac
ceptable management, eliminate or re
duce adversely classified assets, adopt
acceptable loan policies, pay no cash
dividends without prior written con
sent, provide acceptable capital, and
correct violations of law if continued
insured status was desired.
T he action was terminated on
August 11, 1975, because of tempo
rary compliance; however, due to fu r
ther deterioration and the length of
time since the issuance of the initial
order, a new order was simultaneously
issued.

Deposits—$6.6 m illion
Notice of intention to terminate in
sured status issued on August 12,
1974. Bank was ordered to provide ac
ceptable management, eliminate or re
duce adversely classified assets, adopt
acceptable loan policies, lim it invest

ACTIONS TO TERMINATE INSURED STATUS

ment in securities to U.S. Government
or Agency obligations maturing within
5 years, cease paying preferential rates
of interest on certificates of deposit or
other obligations to ownership inter
ests, and correct violations of law if
continued insured status was desired.
The action to terminate insured sta
tus was in the hearing stage when the
bank was closed on May 30, 1975.
15

Deposits—$4.2 million
Notice of intention to terminate in
sured status issued on June 19, 1975.
Bank was ordered to provide accept
able management, eliminate or reduce
adversely classified assets, reduce its
loan volume, adopt and comply with a
loan policy, discontinue cash divi
dends, and obtain a certain level of
capital if continued insured status was
desired.
The bank was closed on January
12, 1976.
Deposits—$0.8 million
Notice of intention to terminate in
sured status issued on July 25, 1975.
Bank was ordered to provide accept
able management, eliminate or reduce
adversely classified assets, define an ac
ceptable trade area, curtail direct and
indirect loans to insiders, restrict its
loan volume, comply with certain in
vestment restrictions, comply with all

tion of Insurance which could be
dated by the bank or the Corporation
after 90 days. After this period, an ex
amination indicated both further de
terioration and continued noncom
pliance, and the Corporation dated the
document on August 16, 1976. The
bank was closed on November 22,
1976.
18

Deposits—$16.1 million
Notice of intention to terminate in
sured status issued on September 16,
1975. Bank was ordered to provide ac
ceptable management, eliminate or re
duce adversely classified assets, adopt
and comply with a loan policy, pro
vide for an orderly liquidation of cer
ta in stock holdings, comply with
applicable laws, rules, and regulations,
appoint a committee to approve and
co n tro l expenses, discontinue cash
dividends, and obtain a certain level of
capital if continued insured status was
desired.
The action to terminate insured sta
tus was in the hearing stage when the
bank was closed on October 20, 1976.

Deposits—$15.9 million
Notice of intention to terminate in
sured status issued on October 9,
1975. Bank was ordered to provide ac
ceptable management, eliminate or re
duce adversely classified assets, reduce
and maintain loan volume at a certain
level, reduce its overdue loans not to
exceed a certain percentage of out
standing loans, maintain a primary and
secondary reserve position equal to a
certain percentage of total resources,
adopt and comply with loan and in
vestment policies, and obtain a certain
level of capital if continued insured
status was desired.
The bank was closed on October
24, 1975.

Deposits—$18.9 million
Notice of intention to terminate in
sured status issued on April 8, 1976.
Bank was ordered to provide accept
able management, eliminate or reduce
adversely classified assets, reduce over
due loans to a specified level, reduce
the book value of other real estate in
accordance with statutory provisions,
comply with applicable laws, rules,
and regulations, discontinue cash divi
dends, and obtain a certain level of
capital if continued insured status was
desired.

a p p lica b le laws, rules, and re g u la tio n s,

discontinue cash dividends, and obtain
a certain level of capital if continued
insured status was desired.
The action to terminate insured sta
tus was in the hearing stage when the
bank was closed on June 25, 1976.
17

Deposits—$13.8 million
Notice of intention to terminate in
sured status issued on August 11,
1975. Bank was ordered to provide ac
ceptable management, eliminate or re
duce adversely classified assets, reduce
and maintain loan volume at a certain
level, eliminate all adversely classified
insider loans and reduce and maintain
all such loans at a certain level, adopt
and comply with a loan policy, discon
tinue cash dividends, obtain a certain
level of capital, comply with all applic
able laws, rules, and regulations, and
refrain from participating in any trans
actions with a certain affiliate if con
tinued insured status was desired.
During the hearing stage, the bank
signed an undated Voluntary Termina

FEDERAL DEPOSIT INSURANCE CORPORATION

Bank No.

The bank was closed on June 3,
1976.
21

Deposits—$33.1 million
Notice of intention to terminate in
sured status issued on June 16, 1976.
Bank was ordered to provide accept
able management, eliminate or reduce
adversely classified assets, eliminate
adversely classified loans to insiders
and certain shareholders of the bank
and holding company, eliminate con
centrations of credit, discontinue cash
dividends and management fees, com
ply with applicable laws, rules, and
regulations, adopt and follow accept
able loan policies, and obtain a certain
level of capital if continued insured
status was desired.
An examination to determine the
extent of correction was made and the
bank was found not to be in compli
ance with the order. The action is in
the hearing stage.
Deposits—$2.9 m illion
Notice of intention to terminate in
sured status issued on July 6, 1976.
Bank was ordered to provide accept
able management, eliminate or reduce
adversely classified assets, reduce loan
volume to a specific level, lim it invest
ments in securities to U.S. Treasury or
Agency obligations, eliminate adverse
ly classified loans to insiders, provide
adequate liquidity, comply w ith ap
plicable laws, rules, and regulations,
adopt and follow acceptable loan poli
cies, discontinue cash dividends, and
obtain a certain level of capital if con
tinued insured status was desired.
Deposits—$68.0 million
Notice of intention to terminate in
sured status issued on July 22, 1976.
Bank was ordered to provide accept
able management, comply with applic
able laws, rules, and regulations, elimi
nate or reduce adversely classified
assets, reduce overdue loans to a spe
cific level, adopt and follow acceptable
loan policies, discontinue cash divi
dends, refrain from the purchase or
sale of loan participations or extending
credit to insiders of closely related
banks, refrain from extending credit to
or secured by stock of the holding
company, and obtain a certain level of
capital if continued insured status was
desired.
Deposits—$ 11.4 million
Notice of intention to terminate in

sured status issued on September 7,
1976. Bank was ordered to provide ac
ceptable management, eliminate or re
duce adversely classified assets, reduce
overdue loans to a specific level, com
ply with applicable laws, rules, and
regulations, adopt and follow accept
able loan policies, discontinue cash
dividends, adopt and follow acceptable
internal control and audit procedures,
refrain from preferential treatment of
insiders, and obtain a certain level of
capital if continued insured status was
desired.
Deposits—$4.2 m illion
Notice of intention to terminate in
sured status issued on September 7,
1976. Bank was ordered to provide ac
ceptable management, eliminate or re
duce adversely classified assets, reduce
overdue loans to a specific level, elimi
nate adversely classified loans to in
siders, reduce the volume of exten
sions of credit to insiders to a specific
level, comply with applicable laws,
rules, and regulations, reduce the book
value of other real estate in accordance
with statutory requirements, and ob
tain a certain level of capital if con
tinued insured status was desired.
Deposits—$7.9 m illion
Notice of intention to terminate in
sured status issued on October 19,
1976. Bank was ordered to provide ac
ceptable management, eliminate or re
duce adversely classified assets, reduce
overdue loans to a specific level, com
ply with applicable laws, rules, and
regulations, discontinue cash divi
dends, adopt and follow acceptable
loan policies, actively seek fidelity in
surance coverage, and obtain a certain
capital level if continued insured status
was desired.
Deposits—$163.5 million
Notice of intention to terminate in
sured status issued on November 19,
1976. Bank was ordered to provide ac
ceptable management, eliminate or re
duce adversely classified assets, adopt
a plan to control expenses, eliminate
concentrations of credit, comply with
applicable laws, rules, and regulations,
reduce overdue loans to a specific
level, adopt and follow acceptable loan
policies, discontinue cash dividends,
and obtain a certain level of capital if
continued insured status was desired.
The bank was closed on December
3, 1976.

CEASE-AND-DESIST ACTIONS
Cease-and-Desist Actions
Federal Deposit Insurance Act - Section 8 (b)
The Corporation has issued 61 cease-and-desist
actions since January 1971. In addition, five tem
porary cease-and-desist orders were issued in 1976.
In each case, the bank was ordered to cease and
desist from unsafe and unsound practices and to
take affirmative action to correct certain condi
tions. Several such actions are now in various
stages of processing.
In addition to these cases, a number of other
cease-and-desist actions have been authorized by
the Corporation's Board of Directors which were
never consented to by banks or adopted in final
form by our Board because of favorable interim
affirmative actions by either the banks or management-shareholders. In effect, the threat of a ceaseand-desist action has caused many banks to under
take favorable affirmative action programs, which
negated the need for finalizing the authorized
cease-and-desist actions.
In three other cases, formal written agreements
between banks and the Corporation were ratified
by our Board of Directors. Noncompliance with
these formal w ritten agreements can be enforced
by a subsequent cease-and-desist action.
Section 8 (m) of the Federal Deposit Insurance
Act provides the State supervisory authorities with
the opportunity to initiate independent corrective
action after the Corporation has served notice of
intent to take formal action. While in most cases
the State supervisory authorities choose to join the
Corporation in any such action, some State bank
ing laws do provide for independent cease-anddesist actions which have been utilized in a
number of instances—either prior or subsequent to
notice of intent by the Corporation. A compila
tion of these State supervisory authority ceaseand-desist actions is not maintained by the FDIC,
but the corrective orders are analyzed and checked
for compliance on a case-by-case basis at each
examination of the involved banks.
Su m m a ry o f cases

Bank No.

Deposits—$64.6 m illion
Cease-and-desist order entered on
June 17, 1971. Bank ordered to re
duce the volume of municipal bonds,
realign other assets to improve liquid
ity, curtail direct and indirect loans to
insiders, provide acceptable manage
ment, and inject new capital funds.
Order terminated on December 10,
1971, following the sale of controlling
interest by the unsatisfactory manage
ment, sale of new capital funds, sub
stantial compliance with the ceaseand-desist order, and designation of
new management.

Bank No.

Deposits—$46.1 million
Cease-and-desist order entered on
July 12, 1971. Bank ordered to elim i
nate transactions with self-serving
ownership.
Order terminated on January 12,
1973, following change of stock con
trol and a revamping of the board of
directors.
Deposits—$7.3 m illion
Cease-and-desist order entered on
July 12, 1971. Bank ordered to elim
in a te transactions with self-serving
ownership.
Order terminated on May 1, 1972,
following the sale of controlling inter
est by the unsatisfactory management
and restoration of the capital accounts
to an acceptable level.
Deposits—$1.0 million
Cease-and-desist order entered on
July 12, 1971. Bank ordered to elim
in a te transactions with self-serving
ownership.
O rder terminated on April 17,
1972, following the sale of controlling
interest by the unsatisfactory manage
ment and restoration of the capital
accounts to an acceptable level.

Deposits—$20.2 million
Cease-and-desist order entered on
July 12, 1971. Bank ordered to elim
in a te transactions with self-serving
ownership.
Order terminated on December 10,
1971, following the sale of controlling
interest by the unsatisfactory manage
ment and restoration of the capital to
an acceptable level.
Deposits—$5.1 million
Cease-and-desist order entered on
July 12, 1971. Bank ordered to cor
rect violations of laws and regulations,
correct operating deficits, and restore
capital accounts to an acceptable level.
Order terminated on July 8, 1974,
following substantial compliance with
corrective orders, favorable trends,
improved prospects, and augmented
capital.
Deposits—$4.6 million
Cease-and-desist order entered on
November 19, 1971. Bank ordered to
eliminate transactions with a selfserving ownership and management.
Order terminated on May 2, 1974,
following change of control and man
agement and asset improvement.

FEDERAL DEPOSIT INSURANCE CORPORATION

Bank No.

Deposits—$6.5 million
Cease-and-desist order entered on
January 6, 1972. Bank ordered to pro
vide its shareholders with adequate in
formation pertaining to the conditions
and activities of the bank in full com
pliance with various requirements of
sections 12, 13, and 14 of the Secur
ities Exchange Act of 1934 and sec
tion 335 of the Federal Deposit Insur
ance Corporation's Rules and Regula
tions.
Deposits—$5.1 m illion
Cease-and-desist order entered on
February 15, 1972. Bank ordered to
correct misuse of credit facilities by
controlling stockholders.
Order terminated on May 29, 1974,
when compliance with the condition
was accomplished.

Deposits—$18.9 million
Cease-and-desist order entered on
March 31, 1972. Bank ordered to cor
rect hazardous lending policies and in
adequate capital caused by incompe
tent active management and a com
placent directorate.
Order terminated on August 28,
1973, when substantial compliance
with almost all conditions had been ac
complished.

Deposits—$1.8 million
Cease-and-desist order entered on
May 5, 1972. Bank ordered to correct
its sharply declining asset condition
and capital inadequacy resulting from
tw o successive inept managementownership groups.
O rde r terminated on June 25,
1973, following change of management-ownership, improved asset condi
tion, and substantial compliance with
other parts of the order.

Deposits—$3.6 million
Cease-and-desist order entered on
May 5, 1972. Bank ordered to take
affirmative action with respect to an
excessive volume of high-risk loans,
sizable loan losses, and inadequate cap
ital which resulted from policies of a
liberal, self-serving, and domineering
controlling owner and a weak, ineffec
tive management.
Order terminated on April 8, 1976,
when substantial compliance with all
conditions had been accomplished.
Deposits—$60.0 million
Cease-and-desist order entered on
August 18, 1972. Bank ordered to cor

rect repeated and flagrant violations of
applicable laws and regulations.
Order terminated on May 14, 1973,
upon compliance with requirements
contained therein.
14

Deposits—$3.7 m illion
Cease-and-desist order entered on
November 21, 1972. Bank ordered to
correct excessive risk in the loan ac
count, inadequate capital, w illfu l and
continued violations of applicable stat
utes, and generally unsatisfactory
operations resulting from liberal lend
ing policies of self-serving controlling
interests.
O rde r terminated on June 19,
1974, fo llo w in g substantial com
pliance with the corrective require
ments.
Deposits—$4.7 million
Cease-and-desist order entered on
November 21, 1972. Bank ordered to
reduce excessive exposure in the loan
account and increasing loan losses and
to correct an inadequate and diminish
ing level of capital and unsatisfactory
operations under the self-serving domi
nation of the controlling interests.
Order terminated on February 8,
1974, after substantial improvements
in the bank's asset-capital condition
and operations within the constraints
of the cease-and-desist order.

Deposits—$2.0 m illion
Cease-and-desist order entered on
December 4, 1972. Bank ordered to
correct excessive risk in the loan ac
count, increasing losses, and a shrink
ing level of capital which resulted from
liberal lending policies fostered by the
bank's management-ownership.
Order terminated on February 8,
1974, following examinations which
disclosed improvements, and full or
substantial compliance w ith all correc
tive provisions.

Deposits—$1.3 m illion
Cease-and-desist order entered on
December 18, 1972. Bank ordered to
reduce an excessive volume of classi
fied loans and improve inadequate cap
ital and poor liquidity resulting from
expansionary and liberal policies of
inexperienced management-ownership.

Deposits—$2.5 million
Cease-and-desist order entered on
February 12, 1973. Bank ordered to
correct excessive adversely classified
loans and an inadequate capital struc

CEASE-AND-DESIST ACTIONS

ture which developed as a result of
liberal lending policies and the weak
management ability of ownership and
its subservient staff.
Order terminated on February 11,
1975, following substantial improve
ment in the bank's asset-capital condi
tion.
19

Deposits—$28.0 million
Cease-and-desist order entered on
April 23, 1973. Bank ordered to elim
inate heavy and severe adverse classifi
cations of loans extended to a group
of related construction firms which
resulted in violations of law, heavy
losses, deterioration of other segments
of the loan portfolio, and capital in
adequacy.
Order terminated on December 23,
1974, following the elimination of the
adversely classified concentrations of
credit and the injection of new capital
funds.
Deposits—$3.8 million
Cease-and-desist order entered on
May 21, 1973. Bank ordered to cor
rect excessive risk in the loan account,
a declining level of capital protection,
deficit earnings resulting from heavy
loan losses, and other problems stem
ming from a management dispute re
sulting in the resignation of three
directors including the former execu
tive officer. The order to cease and
desist included requirements for man
agement improvements, rehabilitation
of asset condition, a capital improve
ment program, and adoption of w rit
ten lending and internal operating
policies.
Order terminated on September 7,
1976, following substantial compli
ance with the corrective provisions.
Deposits—$3.1 million
Cease-and-desist order entered on
June 25, 1973. Bank ordered to take
affirm ative action with respect to
excessive adversely classified credits in
volving several out-of-area or selfserving loans, potential losses from
irregularities, and inadequate capital
protection.
Order terminated on August 11,
1975, as conditions were fulfilled in
cluding the injection of new equity
capital.
Deposits—$2.9 million
Cease-and-desist order entered on
July 31, 1973. Bank ordered to end

unsound securities transactions and re
duce excessive municipal bond hold
ings which threatened the solvency of
the bank through the resulting market
depreciation, illiquid position, and
trading losses incurred.
Deposits—$5.5 million
Cease-and-desist order entered on
July 31, 1973. Bank ordered to com
ply with Federal Reserve Regulation
Z.
Order terminated on November 26,
1975, after bank was found to be in
compliance with the corrective provi
sions.
Deposits—$51.6 million
Cease-and-desist order entered on
September 24, 1973. Bank ordered to
provide acceptable management; im
plement and maintain lending, invest
ment, and operating policies in accord
with sound banking practices; conform
to all applicable laws, rules, and regula
tions; and reduce the excessive volume
of weak credits.
Order terminated on November 26,
1975, when the bank was found to be
in compliance with the corrective pro
visions.
Deposits—$4.1 million
Cease-and-desist order entered on
October 15, 1973. Bank ordered to
reduce the high volume of adversely
classified loans and an excessive delin
quency ratio, to end continued viola
tions of laws and regulations, and to
improve a deteriorated capital position
which resulted from the increasingly
liberal lending policies of the control
ling stockholder and executive officer,
coupled with a complacent directorate
and incompetent staff.
Order terminated on September 2,
1975, following improvements in asset
quality, substantial compliance with
requirements included in the order to
cease and desist, and the revitalization
of sincere concern to effect improve
ments by the staff and directorate.
Deposits—$13.9 million
Cease-and-desist order entered on
January 29, 1974. Bank ordered to
take affirmative action with respect to
excessive loan classifications, inept and
self-serving management, violations of
law, concentrations of credit, and un
controlled expenses.
Order terminated on July 24, 1974,
following the sale of control of the

FEDERAL DEPOSIT INSURANCE CORPORATION

Bank No.

lending limits and the acceptance of
securities collateral w ithout observing
prudent banking practices, and to pre
pare for the lawful and orderly disposi
tion of such securities in the event
such disposition became necessary.

bank to a new group and injection of
capital funds.
27

Deposits—$3.9 million
Cease-and-desist order entered on
April 11, 1974. Bank ordered to take
affirm ative action with respect to
serious asset problems which developed as total loan volume was rapidly
expanded, capital inadequacy which
developed as the loan portfolio dete
riorated in credit quality, hazardous
lending and collection policies, and
violations of laws and regulations.
Order terminated on July 6, 1976,
following compliance with the correc
tive provisions.
Deposits—$2.9 million
Cease-and-desist order entered on
June 7, 1974. Bank ordered to reduce
the heavy volume of adverse classifica
tions, end speculative land contracts to
out-of-territory borrowers, implement
sound lending, investment, and oper
ating policies, and correct an inade
quate capital structure.
The bank was closed on December
19, 1975.
Deposits—$49.5 m illion
Action begun on July 22, 1974,
and cease-and-desist order entered on
June 11, 1975, following a hearing.
Bank ordered to reduce the large vol
ume of adversely classified loans which
far exceeded capital and reserves and
centered in two massive concentra
tions of credit. Other weaknesses con
sisted of an overloaned and illiquid
position, inadequate capital protec
tion, and numerous, frequent, and
flagrant violations.
Deposits $15.1 million
Cease-and-desist order entered on
October 15, 1974. Bank ordered to
take affirmative action with respect to
the massive volume of weak loans and
loan losses taken in recent years, an
inadequate margin of capital protec
tion, an overloaned and illiquid posi
tion, poor earnings, and a pattern of
numerous and repeated violations.
Order terminated on April 8, 1976,
following substantial compliance with
the corrective provisions.
Deposits—$18.4 million
Cease-and-desist order entered on
March 26, 1975. Bank ordered to dis
continue unauthorized and unlawful
acts by its officers, directors, or em
ployees, including the exceeding of

Deposits—$9.9 million
Cease-and-desist order entered on
May 9, 1975. Bank ordered to provide
acceptable management; reduce ad
versely classified assets and loan vol
ume; adhere to loan policy; comply
with laws, rules, and regulations; im
prove loan documentation, internal
routine, and controls; inject new cap
ital funds; and discontinue cash divi
dends.

Deposits—$7.2 million
Cease-and-desist order entered on
May 9, 1975. Bank ordered to provide
acceptable management, reduce ad
versely classified assets, curtail loans to
insiders, inject new capital, reduce bor
rowings and loan volume, comply with
laws, rules, and regulations, adopt and
comply with a loan policy, and dis
continue cash dividends.
Order terminated on July 22, 1976,
following substantial compliance with
the corrective provisions.
Deposits—$6.5 million
Cease-and-desist order entered on
June 19, 1975. Bank ordered to pro
vide acceptable management, reduce
adversely classified assets, inject new
capital, comply with laws, rules, and
regulations, adopt and comply with a
loan policy, provide adequate liquid
ity, reduce borrowings, and discon
tinue cash dividends.

Deposits—$1.8 million
Cease-and-desist order entered on
August 11,1975. Bank ordered to pro
vide acceptable management and man
agement policies, reduce adversely
classified assets, provide adequate cap
ital and liquidity, comply with laws,
rules, and regulations, and adopt and
comply with a loan policy.

Deposits—$6.0 million
Cease-and-dssist order entered on
August 28, 1975. Bank ordered to pro
vide acceptable management, reduce
adversely classified assets, inject new
capital, comply with laws, rules, and
regulations, and adopt and comply
with a loan policy.

Deposits—$5.3 million
Cease-and-desist order entered on

CEASE-AND-DESIST ACTIONS

October 17, 1975. Bank ordered to
reduce adversely classified assets, com
ply with laws, rules, and regulations,
and adopt and comply with a loan
policy.
Deposits—$7.7 million
Cease-and-desist order entered on
January 29, 1976. Bank ordered to
provide acceptable management, re
duce adversely classified assets, inject
new capital, lim it advances of credit to
borrowers, comply with laws, rules,
and regulations, retain credit life and
accident insurance commissions, dis
continue cash dividends, and eliminate
a concentration of credit.
Deposits—$9.1 million
Cease-and-desist order entered on
February 18, 1976. Bank ordered to
reduce adversely classified assets; re
frain from participating in any new
loans and in any extension, renewal,
refinancing, or additional extension of
loans acquired from closely related
banks; comply with laws, rules, and
regulations including Financial Rec
ordkeeping Regulations and the Fair
Credit Reporting Act; inject new cap
ital; and discontinue dividends.
Deposits—$5.9 million
Cease-and-desist order entered on
March 30, 1976. Bank ordered to re
duce adversely classified assets, inject
new capital, comply with laws, rules,
and regulations, adopt and comply
with a loan policy, and discontinue
cash dividends.
Deposits—$3.1 m illion
Cease-and-desist order entered on
June 3, 1976. Bank ordered to provide
acceptable management, reduce ad
versely classified assets, inject new
capital, comply with laws, rules, and
regulations, adopt and comply with a
loan policy, and discontinue cash divi
dends.
Deposits—$6.4 million
Cease-and-desist order entered on
July 22, 1976. Bank ordered to provide
acceptable management, reduce ad
versely classified assets, inject new
capital, comply with laws, rules, and
regulations, adopt and comply with
loan and investment policies, and dis
continue cash dividends.
Deposits—$4.2 m illion
Cease-and-desist order entered on
September 7, 1976. Bank ordered to
provide acceptable management, re

duce adversely classified assets, inject
new capital, comply with laws, rules,
and regulations, adopt and comply
with a loan policy, and discontinue
cash dividends.
44

Deposits—$44.6 million
Cease-and-desist order entered on
September 7, 1976. Bank ordered to
provide acceptable management, re
duce adversely classified assets, inject
new capital, eliminate transactions
w ith affiliates, comply with laws,
rules, and regulations, adopt and com
ply with loan and investment policies,
and discontinue cash dividends.
Deposits—$35.7 m illion
Cease-and-desist order entered on
September 7, 1976. Bank ordered to
provide acceptable management, re
duce adversely classified assets and
overdue loans, discontinue cash divi
dends, inject new capital, comply with
laws, rules, and regulations, adopt and
comply with a loan policy, and elim
inate loan transactions with affiliates.
Deposits—$4.8 million
Cease-and-desist order entered on
September 22, 1976. Bank ordered to
eliminate loans to an insider, reduce
adversely classified assets, provide
acceptable management, comply with
laws, rules, and regulations, adopt and
comply w ith a loan policy, implement
an audit program, and obtain fidelity
coverage.
Deposits—$13.0 million
Cease-and-desist order entered on
September 22, 1976. Bank ordered to
provide acceptable management, re
duce adversely classified assets and
overdue loans, discontinue cash divi
dends, inject new capital, comply with
laws, rules, and regulations, adopt and
comply with a loan policy, and elimi
nate loan transactions w ith affiliates.

Deposits—$87.9 million
Cease-and-desist order entered on
October 6, 1976. Bank ordered to
eliminate, collect, or establish repay
ment programs for overdrafts and
loans to insiders, and comply with
laws, rules, and regulations.

Deposits—$24.7 m illion
Cease-and-desist order entered on
October 6, 1976. Bank ordered to
eliminate, collect, or establish repay
ment programs for overdrafts and
loans to insiders, and comply with
laws, rules, and regulations.

FEDERAL DEPOSIT INSURANCE CORPORATION

Bank No.

Deposits—$21.6 m illion
Cease-and-desist order entered on
October 6, 1976. Bank ordered to pro
vide acceptable management, reduce
adversely classified assets, inject new
capital, obtain collateral for loans to
certain insiders and related interests,
lim it total credit extended to an indi
vidual or concern and reduce such
credits to the limitations set, comply
with laws, rules, and regulations, adopt
and comply with loan and investment
policies, and discontinue cash div
idends.
Deposits—$17.3 million
Permanent cease-and-desist order
entered on October 6 , 1976, following
issuance of a temporary cease-anddesist order. Bank ordered to prohibit
payment of checks against uncollected
funds for deposit accounts of an in
sider and a foreign bank.
Deposits—$138.9 million
Cease-and-desist order entered on
October 19, 1976. Bank ordered to
provide acceptable management, re
duce adversely classified assets and
overdue loans, lim it payment of cash
dividends, inject new capital, comply
with laws, rules, and regulations, and
adopt and comply with a loan policy.
Deposits—$28.1 million
Cease-and-desist order entered on
October 19, 1976. Bank ordered to
provide acceptable management, re
duce adversely classified assets and
overdue loans, discontinue cash divi
dends, inject new capital, comply with
laws, rules, and regulations, adopt and
comply with a loan policy, and discon
tinue overdrafts and preferential rates
of interest to insiders.
Deposits—$30.8 m illion
Cease-and-desist order entered on
November 16, 1976. Bank ordered to
provide acceptable management, re
duce adversely classified assets, inject
new capital, discontinue cash divi
dends, comply with laws, rules, and
regulations, adopt and comply with a
loan policy, and implement internal
controls and an audit program for elec
tronic data processing operations.
Deposits—$88.3 million
Cease-and-desist order entered on
December 16, 1976. Bank ordered to
inject new capital in compliance with
conditions included in an order issued
in 1974 in connection with Corpora

tion consent to establish a branch.
50

Deposits—$13.4 million
Cease-and-desist order entered on
December 16, 1976. Bank ordered to
provide acceptable management, re
duce adversely classified assets, inject
new capital, lim it new extensions of
credit to insiders and related interests
and concentrations of credit, reduce
loan volume, comply with laws, rules,
and regulations, adopt and comply
with loan and investment policies, and
discontinue cash dividends.

Deposits—$20.2 million
Cease-and-desist order entered on
December 16, 1976. Bank ordered to
collect or eliminate adversely classified
loans to certain insiders and their re
lated interests, reduce adversely clas
sified assets, provide acceptable man
agement, inject new capital, comply
with laws, rules, and regulations, and
adopt and comply with a loan policy.
Deposits—$2.2 million
Cease-and-desist order entered on
December 16, 1976. Bank ordered to
provide acceptable management, re
duce adversely classified assets, lim it
extensions of credit to any one bor
rower and related entities, discontinue
participating in loans with certain re
lated banks, eliminate loans to persons
located outside the bank's normal
trade area, reduce remuneration of cer
tain officers and directors, comply
with laws, rules, and regulations, adopt
and comply with a loan policy, and
discontinue cash dividends.

Deposits—$7.3 million
Cease-and-desist order entered on
December 16, 1976. Bank ordered to
provide acceptable management, re
duce adversely classified assets, discon
tinue participating in loans with cer
tain related banks, eliminate adversely
classified loans to insiders, reduce con
centrations of credit, eliminate loans
to persons located outside the bank's
normal trade area, comply with laws,
rules, and regulations, adopt and com
ply with a loan policy, and discontinue
cash dividends.

Deposits—$3.6 m illion
Cease-and-desist order entered on
December 16, 1976. Bank ordered to
provide acceptable management, re
duce adversely classified assets, discon
tinue participating in loans with cer
tain related banks, eliminate adversely

CEASE-AND-DESIST ACTIONS

Bank No.

sound practices that the controlling
shareholder, for a period of 3 years
from date, would purchase within 60
days after the completion of any FDIC
examination of the bank, any loan
which was classified loss or doubtful in
subject bank that originated in any
other of the controlling shareholder's
chain of banks or any loan originating
outside subject bank's regular trade
area. Subject bank was also to divest
itself of any loan originated in any of
the controlling shareholder's other
banks which were classified substand
ard. Divestiture was to be accom
plished by sale to the originating bank
or controlling stockholder.

classified loans to insiders and loans to
persons located outside the bank's nor
mal trade area, reduce remuneration to
certain officers and directors, comply
with laws, rules, and regulations, adopt
and comply with a loan policy, and
discontinue cash dividends.
61

Deposits—$3.2 million
Cease-and-desist order entered on
December 16, 1976. Bank ordered to
provide acceptable management; re
duce adversely classified assets, over
due loans, and concentrations of cred
it; eliminate adversely classified loans
to insiders; discontinue participating in
loans with certain related banks; com
ply with laws, rules, and regulations;
adopt and comply with a loan policy;
and discontinue cash dividends.

Temporary Cease-and-Desist Actions
Federal Deposit Insurance Act - Section 8 (c)
Formal Written Agreements
S u m m a r y o f cases
S u m m a r y o f cases

Bank No.

Deposits—$12.3 million
Written agreement entered into on
October 27, 1971. Bank agreed for
purposes of effecting correction of un
safe and unsound practices to provide
acceptable management, eliminate and
reduce adversely classified assets, cor
re c t in te rn a l control deficiencies,
adopt and comply with an internal
audit program, correct violations of
and in the future comply with all ap
plicable laws, rules, and regulations,
and adopt and comply with a written
loan policy.
Deposits—$14.0 million
Written agreement entered into on
March 2, 1972. Bank agreed for pur
poses of effecting correction of unsafe
and unsound practices to provide ac
ceptable management, eliminate and
reduce adversely classified assets,
adopt and comply with a written loan
policy, inject new capital, establish an
unearned income account, adopt and
comply with an internal audit pro
gram, correct internal control deficien
cies, and correct violations of and in
the future comply with all applicable
laws, rules, and regulations.
Deposits—$2.0 million
Written agreement entered into on
February 14, 1973. Bank and control
ling shareholder agreed for purposes of
effecting correction of unsafe and un-

Deposits—$17.3 million
Temporary cease-and-desist order
issued on July 22, 1976. Bank ordered
to prohibit payment of checks against
uncollected funds for deposit accounts
of an insider and a foreign bank.
A permanent cease-and-desist order
was issued on October 6, 1976.
Deposits—$16.7 million
Temporary cease-and-desist order
issued on July 22, 1976. Bank ordered
to discontinue paying cash dividends
pending resolution of charges against
the bank concerning nonpayment of
fair value of stock held by sharehold
ers dissenting to conversion from na
tional to State charter.
Temporary order terminated on
December 3, 1976, following resolu
tion of the matter.
Deposits—$15.7 m illion
Temporary cease-and-desist order
issued on October 6, 1976. Bank or
dered to prohibit insider transactions
involving extensions of credit to or for
the benefit of directors, officers, or
the principal shareholder or involving
purchase or sale of assets to or for the
benefit of the principal shareholder, to
prohibit additional credit to borrowers
whose loans are classified doubtful or
loss, and to discontinue payment of
cash dividends.
The bank was closed on November
19, 1976.

FEDERAL DEPOSIT INSURANCE CORPORATION

Bank No.

Deposits—$6.3 million
Temporary cease-and-desist order
issued on October 19, 1976. Bank or
dered to discontinue declaration or
payment of cash dividends.
Deposits—$3.8 million
Temporary cease-and-desist order
issued on December 23, 1976. Bank
ordered to discontinue extending cred
it, directly or indirectly, over a speci
fied amount to any insider or entering
into any business transaction with an
insider.

MERGER DECISIONS OF THE CORPORATION
PART THREE

BANKS IN V O L V E D IN ABSORPTIONS APPROVED BY
THE F E D E R A L DEPOSIT INSURANCE CORPORATIO N IN 1976
State

Tow n o r C ity

Alabama

Gadsden

Tuscaloosa

California

Beverly Hills

La Habra
Los Angeles

San Francisco
San Leandro
Colorado

Connecticut

Woodmoor

Bridgeport

Chester
Hartford

Georgia

Atlanta
Byromville
Marietta
Roswell
Smyrna
Unadilla

Illinois

Iowa

Northfield

Ames

Bank

Etowah County Bank (in organization;
change title to Gadsden Mall Bank)
Gadsden Mall Bank
Peoples Bank of Tuscaloosa
Tuscaloosa County Bank (in organiza
tion; change title to Peoples Bank
of Tuscaloosa)

Page

106
106
106

106

Ahmanson Bank and Trust Company
California Overseas Bank (in organi
zation)
Hacienda Bank
Japan California Bank
Lloyds Bank California
The Mitsubishi Bank of California
Bank of Montreal (California)
First State Bank of Northern
California

Bank of Woodmoor
El Paso County Bank (in organi
zation)

Metropolitan Bank & Trust Company
Union Trust Company of Bridgeport
Union Trust Company of Bridgeport, Inc.
(in organization; change title to
Union Trust Company of Bridgeport)
Chester Bank
Chester Savings Bank
Constitution Bank and Trust Company
The Colonial Bank and Trust Company
of Hartford (in organization)

86
76
95
71
76
95
71

61
106
106

106
104
104
106
106

DeKalb County Bank
Bank of Byromville
Cobb Exchange Bank (change title
to First Bank & Trust Co.)
Roswell Bank
First State Bank of Cobb County
Exchange Bank of Unadilia (change
title to State Bank and Trust
Company)

BN Bank of Northfield (in organiza
tion; change title to Bank of
Northfield)
Bank of Northfield

106
106

Union Company
Union Story Trust & Savings Bank

61
82
73
61
73

93
93

State

Maine

F E D E R A L DEPOSIT INSURANCE CORPORATION

Tow n or C ity

Burlington Bank and Trust Company
Hillsboro Savings Bank
New London State Bank

71
71
71

Augusta
Bangor
Dover-Foxcroft
Farmington

Casco Northern National Bank
Bangor Savings Bank
Piscataquis Savings Bank
Franklin County Savings Bank (change
title to Franklin Savings Bank)
Casco Bank & Trust Company
Somerset Loan and Building Association

70
77
77

Boston

Holyoke
West Springfield

Michigan

Page

Burlington
Hillsboro
New London

Portland
Skowhegan
Massachusetts

Bank

Adrian

Beaverton
Caro

Dowagiac
Howard City
Midland

Capitol Bank and Trust Company
The New Boston Bank and Trust
Company
The First National Bank of Boston
The Park National Bank of Holyoke
Western Bank and Trust Company (change
title to Park West Bank and Trust
Company)
CSB State Bank (in organization;
change title to Commercial Savings
Bank)
Commercial Savings Bank
The Commercial Savings Bank
CFC Bank (in organization)
Gladwin County Bank
P.S.B. State Bank (in organization)
The Peoples State Bank of Caro,
Michigan
Community State Bank of Dowagiac
DSB Bank (in organization)
WSB Bank (in organization)
Western State Bank
First MBT Bank (in organization)
First Midland Bank & Trust Company
First National Bank & Trust Company
of Midland (change title to First
Midland Bank & Trust Company)

86
70
86
85
85
96
74

106
106
106
106
106
106
106
106
106
106
106
106
106

106

Mississippi

Crystal Springs
Jackson

Truckers Exchange Bank
The Mississippi Bank

89
89

New Hampshire

Bristol

The Bristol Savings Bank
The First National Bank of Bristol
(change title to The Bristol Bank)
Monadnock National Bank (change title
to The Monadnock Bank)
Monadnock Savings Bank

Jaffrey

79
103
103

BANK ABSORPTIONS APPROVED BY THE CORPORATIO N

Page

State

Town or C ity

New Jersey

Atlantic City
Cape May
Court House
Chatham
Chatham
Township
Lacey Township
Point Pleasant

Guarantee Bank
The First National Bank of Cape May
Court House
State Bank of Chatham
The Chatham Trust Company

Buffalo
Irondequoit

Olean
Yonkers

Erie County Savings Bank
Genesee Federal Savings and Loan
Association
American Bank & Trust Company
Bank Leumi Trust Company of New York
Dry Dock Savings Bank
New York Federal Savings and Loan
Association
The Manhattan Savings Bank
The New York Bank for Savings
Olean Savings and Loan Association
Yonkers Savings Bank

North Carolina

Matthews
Warrenton
Wilson

The Bank of Matthews
The Citizens Bank of Warrenton
Branch Banking and Trust Company

Ohio

Amesville
Glouster
Lodi
Medina

The First National Bank of Amesville
The Glouster Community Bank
The Medina County Bank
SDB Bank (in organization)
The Ohio State Bank of Medina (change
title to The Medina County Bank)
The Savings Deposit Bank Company

New York

New York City

Bank

96
96
67
67

Citizens State Bank o f New Jersey
A tlantic State Bank

101
101
98
92
85
85
91
91
99
92
98
99

68
93
68, 93
62
62
64
106
64
106

Oregon

Canby
Woodburn

Guaranty Bank
Bank of Oregon

81
81

Pennsylvania

Bala-Cynwyd
Greensburg
Harrisburg

Lincoln Bank
C. W. Benner Company
Dauphin Deposit Bank and Trust
Company
Dauphin Deposit Trust Company (change
title to Dauphin Deposit Bank and
Trust Company)
Second Street Bank and Trust Company
(in organization)
The First National Bank of Lewiston
Centennial Bank
Commercial Bank & Trust Company
American Bank and Trust Co. of Pa.

89
63

Lewiston
Philadelphia
Pittsburgh
Reading

106

106
106
80
89
63
65

F E D E R A L DEPOSIT INSURANCE CORPORATION

State

Tow n or C ity

Shoemakersville
State College
Garland

Texas

Groveton

Houston

Lufkin

Bank

The First National Bank of
Shoemakersville
Central Counties Bank
Garland Commerce Bank (in organiza
tion; change title to Southern Bank
and Trust Company)
Southern Bank and Trust Company
1st & Devine State Bank (in organiza
tion; change title to First Bank in
Groveton)
First Bank in Groveton
Galleria Bank
Galleria New Bank (in organization;
change title to Galleria Bank)
First and Townsend State Bank (in
organization; change title to First
Bank & Trust)
First Bank & Trust

Page

65
80

106
106

106
106
106
106

106
106
88
88

Vermont

Burlington
Hardwick

The Merchants Bank
Hardwick Trust Company

Virginia

Bristol
Galax
N orfolk
Poquoson
Pulaski
Weber City

Bank of Virginia-Southwest
Bank of Virginia-Galax
First Virginia Bank of Tidewater
First Virginia Bank of the Peninsula
Bank of Virginia-Pulaski
Bank of Virginia-Scott

Wisconsin

Green Bay
Thiensville
Wauwatosa
Wrightstown

West Bank and Trust
Colonial State Bank
Security Bank on Capitol
The Farmers and Traders Bank

Washington

Everett
Granite Falls
Lynnwood
Seattle

Bank of Everett
Granite Falls State Bank
City Bank
Evergreen State Bank

61
61
84
84

Boston Leasing, GmbH

66, 69
69
94
94
69
66
102
76
76
102

Other Areas
Federal Republic Frankfurt
of Germany

BANKS INVOLVED IN ABSORPTION DENIED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION IN 1976
Michigan

Au Gres
Stand ish

The Au Gres State Bank
State Bank of Standish

107
107

BANK ABSORPTIONS APPROVED BY THE CORPORATION
Bank ing
Resources
offices in
(in
ope ratio n
thousands
o f dollars) Before A fte r

El Paso C o u n ty B a n k

500

(in organization)
Woodmoor, Colorado
to purchase certa in assets and as
sume the d ep osit lia b ilitie s o f
Bank o f W oodm oor

5,112

Woodmoor
Approved under emergency provisions. No re
port requested from the Attorney General.
Basis for Corporation approval, January 14,1976
El Paso County Bank, Woodmoor (P.O. Monu
ment), Colorado, a newly chartered State non
member bank having capital funds of $500,000,
has applied, pursuant to section 18(c) of the Fed
eral Deposit Insurance Act, for the Corporation's
consent to purchase certain assets of and assume
the liability to pay deposits made in Bank of
Woodmoor, Woodmoor (P. O. Monument), Colo
rado, an insured State nonmember bank with total
assets of $5,112,000 as of June 30, 1975.
As of January 12, 1976, Bank of Woodmoor
had deposits of some $3,567,100 and operated
one office. On January 12, 1976, the Federal De
posit Insurance Corporation was appointed as re
ceiver of Bank of Woodmoor.
The Board of Directors finds that the failure of
Bank of Woodmoor requires it to act immediately
and thus waives publication of notice, dispenses
with solicitation of competitive reports from other
agencies, and authorizes the transaction to be con
summated immediately.

of $57,044,000, has applied, pursuant to section
18(c) and other provisions of the Federal Deposit
Insurance Act, for the Corporation's prior ap
proval to acquire certain assets of and assume the
liability to pay deposits made in Granite Falls
State Bank, Granite Falls, Washington, an insured
State nonmember bank with total resources of
$1,881,000. As an incident to the proposed trans
action, the sole office of Granite Falls State Bank
would become a branch of Bank of Everett.
The proposed transaction presents virtually no
competitive problems. Granite Falls State Bank is
an ineffective competitor. Bank of Everett, whose
main office is 16 miles southwest of Granite Falls
and whose nearest branch is 12 miles away, has
13.6 percent of total commercial bank deposits
held by all such banks within 15 miles of Granite
Falls and would gain only another 0.5 percent by
th is transaction. This area is dominated by
Seattle-First National Bank and Everett Trust &
Savings Bank with 45.3 and 28.9 percent, respec
tively, of the area's commercial bank I PC deposits.
Indeed, because of Granite Falls State Bank's small
size, the competitive significance of this trans
action would be virtually equivalent to the estab
lishment of a de novo branch.
For reasons related to the condition of Granite
Falls State Bank and the fact that the Corporation
has been advised that the Supervisor of Banks of
the State of Washington intends to take possession
of the bank if this proposed transaction is not con
summated, the Board of Directors finds that the
Corporation must act immediately in order to pre
vent the probable failure of Granite Falls State
Bank and thus waives publication of notice, dis
penses with the solicitation of competitive reports
from other agencies, and authorizes the trans
action to be consummated immediately.

Banking
o ffices in
Resources
o p e ratio n
(in
thousa nds
of dollars) Before A fte r

B a n k o f E v e r e tt

57,044

10
R o sw e ll B a n k

Everett, Washington

36,700

15,418

Roswell, Georgia

to acquire certa in assets and as
sume the d ep osit lia b ilitie s o f
G ra n ite Falls S ta te B a n k

Banking
Resources
offices in
ope ratio n
(in
thousands
o f dollars) Before A fte r

to merge w ith

1,881

Granite Falls

D e K a lb C o u n ty B a n k

DeKalb County

Approved under emergency provisions. No re
port requested from the Attorney General.

Basis for Corporation approval, January 22, 1976

Basis for Corporation approval, March 2, 1976

Bank of Everett, Everett, Washington, an in
sured State nonmember bank with total resources

Roswell Bank, Roswell, Georgia, an insured
State nonmember bank with total resources of

FEDERAL DEPOSIT INSURANCE CORPORATION

$36,700,000 and I PC deposits of $29,244,000, has
applied, pursuant to section 18(c) and other pro
visions of the Federal Deposit Insurance Act, for
the Corporation's prior consent to merge with
DeKalb County Bank, DeKalb County (P. O.
Atlanta), Georgia, an insured State nonmember
bank with total resources of $15,418,000 and IPC
deposits of $13,380,000. As an incident to the
proposed transaction, the three offices of DeKalb
County Bank would become branches of the re
sulting bank, thereby increasing the number of its
offices to six.
This merger would not eliminate significant
existing or potential competition between the two
banks, both having been operated under common
control since DeKalb County Bank was established
in 1970. Moreover, even if the banks were to dis
affiliate and DeKalb County Bank were restored to
a satisfactory condition, the prospects for signifi
cant competition to develop between Roswell
Bank and DeKalb County Bank are remote.
For reasons related to the condition of DeKalb
County Bank and the fact that the Corporation
has been advised by the Department of Banking
and Finance of the State of Georgia th a t" . . . it is
apparent that DeKalb County Bank is in an insol
vent condition . . . ", the Board of Directors finds
that the Corporation must act immediately in
order to prevent the probable failure of DeKalb
County Bank and thus waives publication of no
tice, dispenses with the solicitation of competitive
reports from the other agencies, and authorizes the
transaction to be consummated immediately.

R e s o u rc e s
(in

B a n k in g
o f f ic e s in
o p e r a t io n

o f d o lla r s )

B e fo r e A f t e r

th ouS3nds
T h e G lo u s te r
C o m m u n ity B a n k

7,054

2,350

Glouster, Ohio
to acquire the assets and assume
the dep osit lia b ilitie s o f
T h e F irs t N a tio n a l B a n k
o f A m e s v ille

Amesville
Summary report by Attorney General,
October 23, 1975
We have reviewed this proposed transaction and
conclude that it would not have a substantial com
petitive impact.
Basis for Corporation approval, March 2, 1976
The Glouster Community Bank, Glouster, Ohio
("Com m unity Bank"), a State nonmember insured
bank with total resources of $7,054,000 and total
IPC deposits of $5,697,000, has applied, pursuant

to section 18(c) and other provisions of the Federal
Deposit Insurance Act, for the Corporation's prior
consent to acquire the assets of and assume the li
ability to pay deposits made in The First National
Bank of Amesville, Amesville, Ohio ("Amesville
Bank"), with total resources of $2,350,000 and
total IPC deposits of $1,860,000. The transaction
would be effected under the charter and title of
Community Bank, and incident to the transaction,
the sole office of Amesville Bank would be estab
lished as a branch of the resulting bank.
C om petition. Community Bank operates its sole
office in Glouster, in the northern panhandle of
Athens County, Ohio, which lies adjacent to the
West Virginia border in the southeast part of the
State. Amesville Bank has its sole office in Ames
ville, a hamlet of 295 residents, in northeastern
Athens County. Athens County, a part of the
Appalachian Region, is predominantly rural and
agricultural with coal mining and recreational facil
ities of secondary economic importance. Commerce
is centered around Athens, the county seat and
home of Ohio University, located 16 road-miles
south of Glouster and 13 road-miles southwest of
Amesville. Population of the county was 55,747 in
1970, an increase of 18.6 percent since 1960, with
85 percent of the increase occurring in the county
seat. Glouster's population meanwhile decreased
5.9 percent to 2,121. The 1974 median household
buying level in Athens County was $9,207, about
29.5 percent below that of the State as a whole. The
primary trade area of Community Bank extends
north of Glouster some 10 road-miles to include
Corning in Perry County, south 10 miles to include
Chauncey, and west some 12 miles to Nelsonville.
This market has a population of about 10,150, a
decrease of approximately 6.4 percent since 1960.
Community Bank has the third largest share, 17.3
percent, of the IPC deposits aggregating $33 million
held by the five commercial bank offices in the area.
Amesville Bank's primary trade area may be con
sidered to include points w ithin some 10 miles of
Amesville; the bank draws its business from the
sparsely populated area bounded by points south
west of the village along U.S. Highway A LT 50, on
the east by Bartlett in Washington County, and on
the northeast along State Highway 377 by Chesterhill in Morgan County. This market has a population
estimated at 3,200 and three commercial banks,
each with one office. Amesville Bank has the small
est share, 17.4 percent, of the $10.7-million IPC
deposits held by these three offices.
Glouster is separated from Amesville by some 13
miles of a tertiary road which serves no population
center in the intervening area other than nearby
suburbs of Glouster. Community Bank's primary
market is oriented west from Glouster and north
along State Highway 13, which runs from the
Athens area toward Zanesville, some 40 road-miles
north of Glouster. Amesville Bank's primary market
lies along U.S. Route A LT 50, leading generally east

BANK ABSORPTIONS APPROVED BY THE CORPORATION
from the Athens area toward Bartlett, and along
State Highway 377, leading northeast from Ames
ville toward Chesterhill. Although abutting, the
primary markets of the two banks do not overlap to
any significant degree. The proposal thus would not
eliminate any significant existing competition be
tween Community Bank and Amesville Bank.
Although both banks may legally establish de
novo branches in Athens County, there is no signifi
cant potential for increased competition between
them in the future by virtue of such expansion. Both
markets are sparsely populated and already have a
substantial number of commercial bank offices.
Income levels are relatively low and only very slow
growth is predicted outside the county seat. Neither
bank has branched since it opened, and any oppor
tunities for de novo branching that may arise be
cause of future growth are likely to be taken up by
one or more of the three banks in Athens, rather
than either bank here involved. Accordingly, the
Board considers the prospects for increased compe
tition between them through de novo branching to
be extremely remote.
In the combined areas served by the two banks,
the resulting bank would hold the second largest
share, 17.3 percent, of IPC deposits held by eight
area offices of the six commercial banks represented
therein. In its maximum legal branching and merg
ing area (Athens County), the resulting bank would
have the fifth largest share, 7.7 percent, of IPC de
posits held by seven commercial banks. On a state
wide basis, the resulting bank would hold only 0.03
percent of the aggregate IPC deposits held by all
Ohio commercial banks.
On the basis of the foregoing information, the
Board of Directors has concluded that the proposed
transaction would not, in any section of the coun
try, substantially lessen competition, tend to create
a monopoly, or in any other manner be in restraint
of trade.
Financial and Managerial Resources; Future
Prospects. Financial and managerial resources of

Banking
Resources
offices in
(in
ope ratio n
thousands
o f dollars) Before A fte r

C o m m e rc ia l B a n k
& T ru s t C o m p a n y

68,065

1,882

Pittsburgh, Pennsylvania
to m e rg e w ith
C. W . B e n n e r C o m p a n y

Greensburg
Summary report by Attorney General,
November 4, 1975
We have reviewed this proposed transaction and
conclude that it would not have a substantial com
petitive impact.
Basis for Corporation approval, March 8, 1976
Commercial Bank & Trust Company, Pitts
burgh, Pennsylvania ("Commercial"), a State non
member insured bank with total resources of
$68,065,000 on June 30, 1975, has applied, pur
suant to section 18(c) and other provisions of the
Federal Deposit Insurance Act, for the retroactive
consent of the Corporation to merge with C. W.
Benner C o m p a n y, Greensburg, Pennsylvania
("Benner"), a noninsured institution which from
its establishment in 1964 until September 30,
1974, was engaged primarily in the leasing of per
sonal property.
C om petition. In September 1971, Commercial
acquired control of all the outstanding capital
stock of Benner for debts previously contracted.
Thereafter, Benner was operated by Commercial
until September 30, 1974, at which time Commer
cial merged w ith Benner and established a leasing
department w ithin the bank. This merger trans
action effected a reorganization which consoli
dated the operations of a wholly owned subsidiary
into the parent organization. In and of itself, the
transaction has had no significant effect on com
petition.

each institution, and of the resulting bank, are con
sidered satisfactory. Future prospects of the result
ing bank are favorable.

Financial and Managerial Resources; Future
Prospects. The financial and managerial resources

Convenience and Needs o f the C om m unity to be
Served. The principal benefit of the proposed trans

and future prospects of Commercial are satisfac
tory.

action is a modest increase in lending limits which
would accrue to the residents and businesses in both
Glouster and Amesville.
Based on the foregoing information, the Board of
Directors has concluded that approval of the appli
cation is warranted.

Convenience and Needs o f the C om m unity to
be Served. The merger transaction, essentially an

internal reorganization, has had no effect on the
convenience and needs of the community.
On the basis of the foregoing information, the
Director of the Division of Bank Supervision act
ing on behalf of the Board of Directors under
delegated authority has concluded that approval of
the application is warranted.

FEDERAL DEPOSIT INSURANCE CORPORATION

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B a n k in g
o f f ic e s in
o p e r a t io n
B e fo r e A f t e r

T h e O h io S ta te B a nk
o f M e d in a

3,842

22,465

Medina, Ohio
(change title to The
Medina County Bank)
to merge w ith
T h e M e d in a C o u n ty B a n k

Lodi
Summary report by Attorney General,
July 31, 1975
A pplicant's Medina headquarters is located
about 10 miles northeast of Bank's Lodi head
quarters and approximately 10 miles south of
Bank's Valley City and Brunswick branches. A l
though Applicant is the only BancOhio Corporation
subsidiary with offices in Medina County, BancOhio's subsidiaries in nearby Cleveland and Akron
derive some deposits and loans from the Medina
County area. Thus, it appears that the proposed
merger would eliminate existing competition be
tween the parties in the Medina County area. It does
not, however, appear that concentration in commer
cial banking would be substantially increased in any
relevant banking market.
Basis for Corporation approval, March 15, 1976
The Ohio State Bank of Medina, Medina, Ohio
("State Bank"), a State nonmember insured bank
with total resources of $3,842,000 and total I PC
deposits of $2,218,000, has applied, pursuant to
section 18(c) and other provisions of the Federal
Deposit Insurance Act, for the Corporation's prior
consent to merge with The Medina County Bank,
Lodi, Ohio ("County Bank"), also a State non
member insured bank, with total resources of
$ 2 2 ,4 6 5 ,0 0 0 and to ta l IP C d e p o sits of
$18,592,000, under the charter of State Bank and
with the title "The Medina County Bank." As an
incident to the merger, the three offices of County
Bank would become branches of the resulting bank,
increasing the number of its offices to five.
C om petition. State Bank has operated its main
office and a nearby drive-up facility since April
1974 in the city of Medina, which is located in
Medina County in northeastern Ohio, south of
Cleveland and west of Akron. BancOhio Corpora
tion, the State's second largest multibank holding
company, which organized State Bank de novo,
holds 99.3 percent of its outstanding stock. Larger
affiliates of BancOhio Corporation are located in
both Cleveland and Akron, but State Bank's share of
total commercial bank deposits in Cleveland is very
small and in Akron is approximately one-half that of
the market's leading bank. County Bank operates its
main office in the village of Lodi, approximately 11

miles southwest of Medina, and branches at Bruns
wick and Valley City, 7 and 9 miles north and north
west, respectively, of State Bank's offices.
Medina County had a 1970 population of
82,717, a 26.6 percent increase from 1960. The city
of Medina, the county seat (1970 population
10,913), showed a 32.5 percent increase in the same
period while the village of Lodi (1970 population
2,399) has remained more stable. The county's re
cent growth has occurred predominantly in its
northern portions, while the southern sections have
remained agriculturally oriented. An increasing
number of the county residents commute to the
industrialized areas around the nearby cities of
Akron and Cleveland for employment.
Three possible local banking markets have been
suggested by the Corporation's staff. One would
encompass all of Medina County, the legal branch
ing and merging area for both State Bank and Coun
ty Bank and the political jurisdiction in which all of
their banking offices are located and from which
most of their banking business is drawn. The second
would encompass northern Medina County, includ
ing both branches of County Bank, and all of Cuya
hoga County in which the city of Cleveland is lo
cated. The third would encompass southern Medina
County, including State Bank's two offices and
County Bank's main office, plus all of Summit
County in which the city of Akron is located.
Whichever area is selected for analysis, however,
there would appear to be only a modest elimination
of existing competition, no significant loss of poten
tial competition in the future, and no objectionable
increase in banking concentration as a result of the
proposed merger.
Wit hin Medina County as a whole, State Bank has
not achieved any sizable market penetration, and
County Bank, with 9.4 percent, lags far behind The
Old Phoenix National Bank of Medina, which con
trols about 54 percent of the county's commercial
bank I PC deposits. Three other banks, two of which
are affiliated with statewide bank holding com
panies,, would be within $6 m illion of the resulting
bank's total I PC deposit size. Even though the
income levels of Medina County are 15 percent
above the statewide average, the population per
commercial bank facility is already below4,000, so
that only modest de novo branching, if any, can be
anticipated over the next few years.
In the two alternative, but much larger, local
markets, the relatively small share of total commer
cial bank deposits held by County Bank offices
would only nominally affect BancOhio Corpora
tion's present holdings.
In any case, County Bank is not an aggressive
competitor at the present time and does not appear
capable of significant de novo expansion. Each of
the possible markets, moreover, has a relatively large
number of commercial bank competitors, and an
increasing number are affiliated with multibank
holding companies operating across county lines.

BANK ABSORPTIONS APPROVED BY THE CORPORATION

In the State as a whole, banking resources are
relatively unconcentrated and this situation would
continue if the proposed merger is approved. BancOhio Corporation, with 8.3 percent of the State's
total commercial bank IPC deposits, would retain its
second-place position and its share of such deposits
would increase only 0.1 percent.
Under the circumstances, the Board of Directors
is of the opinion that the proposed merger would
not, in any section of the country, substantially
lessen competition, tend to create a monopoly, or in
any other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. The merger would end shareholder dis

sension in County Bank, supply that bank with
management expertise available through affiliation
with a large holding company, and strengthen the
bank's capital position. Earnings of the newly organ
ized State Bank should improve as a result of greater
operating efficiencies, and the proposal would give
State Bank an established base from which it can
compete more effectively in Medina County. It is
therefore concluded that the financial and man
agerial resources, as well as the future prospects of
the resulting bank, weigh in favor of approval.
Convenience and Needs o f the C om m unity to be
Served.The principal benefit of the proposed merger

to persons and businesses located in Medina County
would be the extension to County Bank customers
of the expanded commercial banking services now
available at offices of banks affiliated with BancOhio Corporation.
Based on the foregoing information, the Board of
Directors has concluded that approval of the appli
cation is warranted.

Resources
(in
thousands
o f dollars)

Banking
offices in
o pe ratio n
Before A fte r

A m e ric a n B a n k an d T r u s t
C o . o f Pa.

1,091,620

8,755

Reading, Pennsylvania
to merge w ith
T h e F irs t N a tio n a l B a n k
o f S h o e m a k e rs v ille

Shoemakersville
Summary report by Attorney General,
July 31, 1975
Shoemakersville is located about 14 miles north
of Reading, in Berks County. Two of Applicant's
offices are w ithin 12-14 miles of Bank, with at least
one competitive alternative in the intervening area.
It appears that the proposed merger would eliminate
some existing competition between the parties in
the Reading-Berks County area.
Commercial banking in Berks County is highly

concentrated; the four largest banks with offices in
Berks County control about 88 percent of county
deposits. Applicant, with about44 percent of coun
ty deposits, ranks first among the 16 banks with
offices in the county while Bank, with less than 1
percent of total deposits, ranks tenth.
We conclude that this proposed merger will have
some adverse competitive effects.
Basis for Corporation approval, March 15, 1976
American Bank and Trust Co. of Pa., Reading,
Pennsylvania ("Am erican"), a State nonmember
in s u r e d b a n k w i t h to ta l resources o f
$ 1 ,0 9 1 ,6 2 0 ,0 0 0 and to ta l IPC deposits of
$853,913,000, has applied, pursuant to section
18(c) and other provisions of the Federal Deposit
Insurance Act, for the Corporation's prior consent
to merge with The First National Bank of Shoe
makersville, Shoemakersville, Pennsylvania ("F irst
National"), with total resources of $8,755,000 and
total IPC deposits of $7,158,000, under the charter
and title of American. As an incident to the merger,
the sole office of First National would become a
branch of the resulting bank.
C om petition. American operates 55 offices in
the 7 counties where it may legally branch or merge
under Pennsylvania law, that is, Berks, Chester,
Lancaster, Lebanon, Lehigh, Montgomery, and
Schuylkill Counties. In addition, American has one
approved but unopened branch. American is an
aggressive full service bank with a large trust depart
ment.
First National operates its sole office in Shoe
makersville (1970 population 1,427), approxi
mately 14 miles north of Reading (1970 population
87,643, a decline of 10.7 percent from 1960) in the
northern section of Berks County. The area sur
rounding Shoemakersville retains an agricultural
flavor and some farming is done, though primarily as
a part-time endeavor. The community itself is pre
dominantly of the bedroom type with some com
mutation to Reading and Hamburg. However, the
majority of the wage earners are employed by the
several large industrial plants located just 5 minutes
from town on Route 61. Industries in the commun
ity are related to the garment trade and employ
mostly women. With the exception of the industries
on Route 61, very little commercial business exists.
American's 7-county trade area had a combined
population of 2,033,751 in 1970, up 14.7 percent
since 1960. The trade area of American is well diver
sified and includes all types of industry, agriculture,
and vacation and recreational facilities. With the
exception of Schuylkill County, at $8,900, and
Lebanon County, at $12,005, all counties in
American's branching area had 1974 median house
hold buying levels exceeding the State figure of
$12,141.
Effects of the proposed merger would be most
direct and immediate w ithin the primary trade area
of First National, an area comprising communities

FEDERAL DEPOSIT INSURANCE CORPORATION

within some 10 road-miles of Shoemakersville, in
northern Berks County. In this market, First
National has the seventh largest share (5.2 percent)
of the IPC deposits held by all area offices of the
eight commercial banks represented therein. Ameri
can has the largest share of such deposits (21.7 per
cent), at its branch in Temple, which is located some
10 road-miles south of Shoemakersville in the north
ern suburbs of the city of Reading. Two other banks
have local deposit shares closely approximating that
of American: Hamburg Savings and Trust Company,
with 20.8 percent, and The First National Bank of
Leesport, with 19.0 percent. The 1970 population
of First National's primary trade area is estimated at
28,900,an increase of some 12.9 percent since 1960.
Although the proponents operate in the same
local banking market, available information indi
cates that neither draws a significant amount of its
business from areas served primarily by the other.
First National draws its business from the local
market surrounding Shoemakersville, while the
Temple branch of American serves the northern
suburbs of the city of Reading. It thus appears that
existing competition between American and First
National, which their merger would eliminate, has
no compelling competitive significance in view of
First National's small share of the relevant market
and the number of convenient alternatives that
would remain following the merger, including
branches of the $754-million-IPC-deposit National
Central Bank, Lancaster, and the$287-million-IPCdeposit Bank of Pennsylvania, headquartered in
Reading.
First National has been a unit bank ever since its
1920 establishment and presently has an aging
management and no incentive to undertake office
expansion. American, on the other hand, is an
aggressive, growth-oriented bank and has the finan
cial resources and expertise to facilitate de novo
expansion. First National's relevant market, north
of Reading, has experienced considerable economic
expansion during the past decade and appears to be
an area that American may find attractive for its de
novo entry in the future. Elimination, by the merg
er, of this potential for increased competition be
tween the proponents appears to have little com
petitive significance to weigh against approval of the
application, however, in view of the existing com
mercial bank structure of the relevant market and
the likelihood that other major competitors may be
attracted to the area should its economic expansion
continue.
There are 80 commercial banks operating 546
offices w ithin the 7-county trade area of American.
These offices held approximately $6.2 billion in
total IPC deposits as of June 30, 1975, and Ameri
can ranked first with 13.3 percent. However, this
percentage includes all of American's deposits but
only a portion of the deposits of many banks oper
ating in the area. For example, eight large Phila
delphia banks with aggregate resources exceeding

$18 billion have their home offices in Montgomery
County thereby allowing them to operate in four of
the seven counties in which American has offices. In
addition, 21 other commercial banks, each with
total resources over $100 m illion, may branch de
novo into various portions of American's trade area.
Therefore, it is obvious that there is significant
a ctu al and potential competition confronting
American throughout the service area. The pro
posed merger, which would add only 0.1 percent to
American's share of IPC deposits in the sevencounty market, would not significantly affect the
structure of commercial banking or the concentra
tion of banking resources in the trade area.
Based on the foregoing, the Board of Directors is
of the opinion that the proposed merger would not,
in any section of the country, substantially lessen
competition, tend to create a monopoly, or in any
other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. Both banks have satisfactory financial

and managerial resources for the business they do as
independent institutions, and the same would be
true of the resulting bank.
Convenience and Needs o f the C om m unity to be
Served. Consummation of the proposed merger

would bring to customers of First National the
broad range of services of a large commercial bank,
such as significantly larger lending limits, bank
credit card services, computer services, trust serv
ices, and a more complete line of credit services.
On the basis of the foregoing information, the
Board of Directors has concluded that approval of
the application is warranted.

R e s o u rc e s
th o u s a n d s
o f d o lla r s )

B a n k o f V ir g in ia -S o u th w e s t

B a n k in g
o f f ic e s in
o p e r a t io n
B e fo r e

A fte r

67,630

9,293

Bristol, Virginia
to merge w ith
B a n k o f V ir g in ia -S c o tt

Weber City
Summary report by Attorney General,
April 7, 1976
The merging banks are both wholly owned sub
sidiaries; of the same bank holding company. As
such, their proposed merger is essentially a cor
porate reorganization and would have no effect on
competition.
Basis for Corporation approval, March 30, 1976
Bank of Virginia-Southwest, Bristol, Virginia
(“ Southwest"), an insured State nonmember bank
with total resources of $67,630,000 and IPC de

BANK ABSORPTIONS APPROVED BY THE CORPORATION
posits of $53,638,000, has applied, pursuant to sec
tion 18(c) and other provisions of the Federal
Deposit Insurance Act, for the Corporation's prior
consent to merge with Bank of Virginia-Scott,
Weber City, Virginia ("S co tt"), an insured State
non m e m b er bank w ith to ta l resources of
$9,293,000 and I PC deposits of $7,244,000. The
banks would merge under the charter and title of
Southwest. Following the merger, the 2 offices of
Scott will be operated as branches of Southwest,
increasing the number of its authorized offices to
11.

C om petition. Both Southwest and Scott are
owned by Bank of Virginia Company, Richmond,
Virginia ("Holding Company"), a multibank hold
ing company. This proposed transaction has the sole
purpose of enabling Holding Company to consoli
date its operations in western Virginia. The two
banks are located in separate but contiguous service
areas and are operated under substantially identical
managerial guidelines established by Holding Com
pany. The proposed transaction, therefore, would
not in itself change the structure of competition in
the area.
Under the circumstances presented, the Board of
Directors is of the opinion that the proposed merger
would not, in any section of the country, substan
tially lessen competition, tend to create a mono
poly, or in any other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. The proponent banks each have adequate

financial and managerial resources for the business
they do as independent institutions, and the same
would be true of the resultant bank. Future pros
pects of the resultant bank are considered to be
favorable.
Convenience and Needs o f the C om m unity to be
Served. This proposal represents an internal reorgan

ization, and no effect on the convenience and needs
of the community is expected.
On the basis of the foregoing information, the
Board of Directors has concluded that approval of
the application is warranted.

B a n k in g
o f f ic e s in
o p e r a t io n

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B e fo r e

A fte r

62,989

12,147

T h e C h a th a m T r u s t
Com pany

Chatham Township,
New Jersey
to purchase certa in assets
and assume the
dep o sit lia b ilitie s o f
S ta te B a n k o f C h a th a m

Chatham
Summary report by Attorney Generai,
April 23, 1976

Chatham has a population of 8,600 and Chatham
Township has a population of 8,100. Apparently
they are contiguous communities. According to the
application, both banks' Chatham offices are essen
tially in middle income residential areas, and time
deposits represent more than 70 percent of total
deposits in both banks; the Livingston branch of
Bank is in a shopping center and thus has more
demand deposits.
U n ite d States Savings Bank of Newark, a
$400-million institution, has a branch with deposits
of $37.5 million in Chatham Township. The trans
action would result in the entry of another savings
bank in the area. The proposed transaction includes
the sale of Bank's physical assets and its rights as
lessee of its 2 offices to Howard Savings Bank of
Newark, a $1.5-billion institution with about 20
offices, including a branch in Millburn, about 6
miles from Chatham, which has deposits of $25
million.
Consummation of the transaction would leave
Applicant as the only commercial bank in Chatham
but head office protection will be eliminated.
You have asked that our report be furnished
within 10 days, it having been determined that an
emergency exists requiring expeditious action.
Accordingly, in view of the precarious condition of
Bank and the disposal of the commercial bank o ff
ices to a savings bank, we conclude that the probable
anticompetitive effects are not so grave as to war
rant our writing an adverse report.
Basis for Corporation approval, April 27, 1976
The Chatham Trust Company, Chatham Town
ship, New Jersey ("Chatham Trust"), a State non
member insured bank with total resources of
$ 6 2 ,9 8 9 ,0 0 0 and to ta l IPC d e p o sits o f
$51,623,000, has applied, pursuant to section 18(c)
and other provisions of the Federal Deposit Insur
ance Act, for the Corporation's prior written con
sent to purchase certain assets of and assume the
liability to pay deposits made in State Bank of Chat
ham, Chatham, New Jersey ("State Bank"), a State
nonmember insured bank with total resources of
$1 2 ,1 4 7 ,0 0 0 and to ta l IPC d e p o sits o f
$10,138,000. The proposal does not include the
acquisition of State Bank's fixed assets and no
branches are to be established by Chatham Trust as a
result of the proposed transaction.
The Corporation, upon the request of the Com
missioner of Banking for the State of New Jersey,
has heretofore advised the Attorney General, the
Board of Governors of the Federal Reserve System,
and the Comptroller of the Currency of the exist
ence of an emergency requiring expeditious action
pursuant to paragraph 6 of section 18(c) of the Fed
eral Deposit Insurance Act. The publication re
quired by the Bank Merger Act has been completed.
C om petition. Chatham Trust operates its main
office in Chatham Township and three branches in
Chatham Borough, all in Morris County which is

FEDERAL DEPOSIT INSURANCE CORPORATION

located in northeastern New Jersey approximately
13 road-miles west of Newark and 23 road-miles
west of lower Manhattan. Chatham Trust was the
75th largest commercial bank in New Jersey as of
June 30, 1975, with 0.26 percent of the total com
mercial bank deposits. State Bank has its main office
in Chatham Borough and one branch in Livingston,
in Essex County, 3 miles north of the main office.
Existing competition between the proponents
would be eliminated by the transaction; but, in its
present precarious financial condition, State Bank
cannot be considered a significant competitor.
Following consummation of the proposal, Chatham
Trust would be the only commercial bank rep
resented in Chatham Borough; however, a number
of commercial banking offices exist w ithin a dis
tance of 1 to 2 miles from the Chatham Borough
branches of Chatham Trust. In addition, as a result
of the proposal, State Bank's home office will be
eliminated, thereby removing the community's
current home office protection and opening it to de
novo branching.
The primary trade area of both proponents com
prises those portions of southeastern Morris Coun
ty, southwestern Essex County, and northern Union
County that are situated w ithin a 5-mile radius of
Chatham Borough. Largely urbanized and contain
ing an estimated 100,000 inhabitants, this area is
served by 19 commercial banks presently maintain
ing a total of 48 offices therein. Of the I PC deposits
held by area offices of such banks, as of June 30,
1975, Chatham Trust held 9.2 percent, the 5th larg
est share, and State Bank held 1.6 percent, the 13th
largest share. The resultant bank would hold the
fourth largest share, 10.8 percent, of area commer
cial bank IPC deposits. If consideration is given to
the entire Newark SMSA, the resulting institution
would control only 1.1 percent of the total commer
cial bank deposits. This would represent the 16th
largest share of the 56 commercial banking organiza
tions that would remain in that area. Therefore, it is
apparent that the proposed transaction would have
no significant effect on the structure of commercial
banking in any relevant area.
Under these circumstances, the Board of Direc
tors has concluded that the proposed transaction
would not, in any section of the country, substan
tially lessen competition, tend to create a mono
poly, or in any other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. Financial resources of State Bank are

inadequate and its future viability is in grave doubt.
Chatham Trust has a sound asset structure and satis
factory management. Prospects for the resulting
bank are satisfactory.
Convenience and Needs o f the C om m unity to be
Served. Consummation of the proposal would pre

clude any interruption of banking services for the
clientele of State Bank. These individuals should
also benefit from the resulting larger, sound institu
tion.

Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

Banking
Resources
offices in
(in
ope ratio n
thousands
of dollars) B efore A fte r

B ran ch B a n k in g and
T ru s t C o m p an y

441,029

6,885

Wilson, North Carolina
to merge w ith
T h e B a n k o f M a tth e w s

Matthews
Summary report by Attorney General,
December 8, 1975
The main offices of the merging banks are 196
miles apart. Applicant, however, has four branch
offices at Charlotte, which is about 10 miles from
Matthews. Applicant draws IPC deposits totaling
$290,699 and loans totaling $234,547 from the
service area of Bank, and the latter has I PC deposits
of $5,827 and loans of $1,226 drawn from the serv
ice area of Applicant's Charlotte offices. Thus, it is
likely that the proposed merger would eliminate
some e x is tin g competition in the CharlotteMatthews area.
Both Charlotte and Matthews are in Mecklenburg
County which has a total of 16 banks operating 124
branch offices. As of June 30, 1974, Applicant con
trolled about 2 percent of total county deposits and
Bank controlled some 2.1 percent of the deposits.
The largest bank in the county, North Carolina
National, held about 50 percent of these deposits as
of that date. Thus, if the proposed merger is con
summated, it would slightly increase concentration
among commercial banking institutions in Mecklen
burg C o u n ty , particularly in the CharlotteMatthews area of the county.
North Carolina law permits statewide branching.
Applicant could, therefore, branch denovo into the
Matthews area, but is probably not likely to do so
since it already operates four branches in Charlotte
which is close to Matthews and since Matthews is
such a small town. Accordingly, the proposed acqui
sition would not have important anticompetitive
consequences insofar as potential competition is
concerned.
In sum, we conclude that the proposed acquisi
tion would have some adverse effect upon competi
tion.
Basis for Corporation approval, May 4, 1976
Branch Banking and Trust Company, Wilson,
North Carolina ("Branch Bank"), an insured State
n o n m e m b er bank w ith to ta l resources of

BANK ABSORPTIONS APPROVED BY THE CORPORATION
$ 4 4 1 ,0 2 9 ,0 0 0 and to ta l IPC deposits of
$325,920,000, has filed an application, pursuant to
section 18(c) and other provisions of the Federal
Deposit Insurance Act, seeking the Corporation's
prior written consent to merge under its charter and
title with The Bank of Matthews, Matthews, North
Carolina ("Matthews Bank"), an insured State non
member bank with total resources of $6,885,000
and total IPC deposits of $5,982,000. As an incident
to the merger, the sole office of the Matthews Bank
would be established as a branch of the resulting
bank and 230 shares of the Matthews Bank's $50 par
value preferred stock would be retired.
Competition. Branch Bank is the sixth largest
commercial bank and the seventh largest banking
organization in the State of North Carolina, with 2.9
percent of the total IPC deposits held by com
mercial banks in the State. It operates 74 offices
throughout North Carolina, with the majority lo
cated in the eastern half of the State.
Matthews Bank has its sole office in the town of
Matthews and is located approximately 10 miles
southeast of Charlotte, the largest city and leading
trade and distribution center in North Carolina.
Matthews is a local retail center with a large number
of its residents commuting to Charlotte for employ
ment. Given this commutation pattern, the market
principally affected by this transaction is delineated
as that area encompassed within a 15-mile radius of
Matthews, thereby including the city of Charlotte.
Branch Bank operates four offices in Charlotte.
However, there is no significant direct competition
between the proponents. A total of 15 commercial
banks operate 147 offices within the trade area and
there are numerous alternative banking offices lo
cated in the intervening area between the proponent
banks. Branch Bank holds 0.5 percent of the mar
ket's commercial bank IPC deposits and Matthews
Bank holds 0.4 percent. Upon consummation of the
merger, the resultant bank would hold only 0.9
percent of the IPC deposits held by all commercial
banks, operating in the trade area, thereby maintain
ing Branch Bank's 11 th place ranking in the market.
The major shares of the market, 53.0, 14.1, and 13.8
percent, are held by the second, first, and third larg
est of North Carolina's banking organizations,
respectively. Thus, although some existing compe
titio n would be eliminated, the proposed merger
would have scant competitive significance in view of
the small market shares held by the proponents, the
concentration of deposits held by the State's three
largest banks, and the many convenient alternatives
for banking services located in the relevant area. The
proposed merger would not result in the elimination
of any significant potential competition between
the banks involved. Branch Bank and Matthews
Bank have such small shares within the market area,
and there are so many other alternatives in the mar
ket capable of de novo expansion, that the elimina
tion of any competition that could develop in the
future between the two banks is not considered
significant.

For the reasons stated, the Board of Directors is
of the opinion that the proposed merger would not,
in any section of the country, substantially lessen
competition, tend to create a monopoly, or in any
other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. The financial resources of Branch Bank
and Matthews Bank are adequate. Managerial re
sources of Branch Bank are satisfactory. Future
prospects for the resultant bank are favorable.
Convenience and Needs of the Community to be
Served. The merger would substitute an office of a
major bank for a small unit bank. This would result
in the provision of a full range of banking and trust
services to Matthews Bank's present customers and
the introduction of a more aggressive management.
Operating with a greatly increased credit capability
and offering the specialized loan and trust services
of one of the State's major banks, this management
should improve banking service in the local market.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

Banking
offices in
Resources
(in
ope ration
thousands
o f dollars) Before A fte r

B a n k o f V irg in ia -S o u th w e s t

76,939

30,890

22,114

Bristol, Virginia
to merge w ith
B a n k o f V ir g in ia -G a la x

Galax
and
B a n k o f V irg in ia -P u la s k i

Pulaski
Summary report by Attorney General,
January 15, 1976
The merging banks are wholly owned subsid
iaries of the same bank holding company. As such,
their proposed merger is essentially a corporate
reorganization and would have no effect on com
petition.
Basis for Corporation approval, May 4, 1976
Bank of Virginia-Southwest, Bristol, Virginia
("Southwest"), an insured State nonmember bank
with total resources of $76,939,000 and IPC de
posits of $64,473,000, has filed applications, pur
suant to section 18(c) and other provisions of the
Federal Deposit Insurance Act, seeking the Cor
poration's prior written consent to merge with
Bank of Virginia-Galax, Galax, Virginia ("BOVAGalax"), an insured State nonmember bank with
total resources of $30,890,000 and IPC deposits of
$26,152,000, and with Bank of Virginia-Pulaski,
Pulaski, Virginia ("BOVA-Pulaski"), an insured

FEDERAL DEPOSIT INSURANCE CORPORATION

State nonmember bank, having total resources of
$22,114,000 and IPC deposits of $17,484,000.*
The proposed transactions would be consummated
under the charter and title of Southwest, and the 2
offices of BOVA-Galax and the 3 offices of
BOVA-Pulaski would be established as branches of
Southwest, thereby increasing the total number of
its offices to 16.
C om petition. Each of the subject banks is wholly
owned by Bank of Virginia Company, Richmond,
Virginia ("Holding Company"), a multibank hold
ing company. The sole purpose of the proposed
transactions is to enable Holding Company to con
solidate its operations in western Virginia. The three
banks are located in separate service areas and are
operated under substantially identical managerial
guidelines established by Holding Company. The
two proposed transactions, therefore, would not in
themselves change the structure of commercial
banking competition in the relevant areas.
Under these circumstances, the Board of Direc
tors is of the opinion that the proposed mergers
would not, in any section of the country, substan
tially lessen competition, tend to create a mono
poly, or in any other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. Each of the proponents has adequate

financial and managerial resources for the business it
does, as would the resultant bank. Future prospects
of the resultant bank are considered to be favorable.
Convenience and Needs o f the C om m unity to be
Served. These proposals represent an internal re

organization and no effect on the convenience and
needs of the community is expected to result there
from.
On the basis of the foregoing, the Board of Direc
tors has concluded that approval of the applications
is warranted.

Summary report by Attorney General,
April 23, 1976
The merging banks are both wholly owned sub
sidiaries of the same bank holding company. As
such, their proposed merger is essentially a cor
porate reorganization and would have no effect on
competition.
Basis for Corporation approval, May 18, 1976
Casco Bank & Trust Company, Portland, Maine
("Casco"), an insured State nonmember bank with
total resources of $267,454,000 and total IPC de
posits of $196,246,000, has filed an application,
pursuant to section 18(c) and other provisions of
the Federal Deposit Insurance Act, seeking the
Corporation's prior written consent to merge with
Casco Northern National Bank, Augusta, Maine
("N orthern"), w ith total resources of $5,530,000
and total IPC deposits of $2,620,000. The banks
would merge under the charter and title of Casco.
Following the merger, the 2 offices of Northern
would be operated as branches of Casco, thereby
increasing the number of its offices to 39.
C om petition. Both Casco and Northern are sub
sidiaries of Casco-Northern Corporation, Portland,
Maine ("Holding Company"), a multibank holding
company. The sole purpose of the proposed trans
action is to enable Holding Company to consolidate
its operations in central and southern Maine. The
two banks are located in separate service areas and
are operated under substantially identical manage
rial policies established by Holding Company. The
proposed transaction, therefore, would not in itself
alter the structure of commercial banking competi
tion in the relevant areas.
Under these circumstances, the Board of Direc
tors is of the opinion that the proposed merger
would not, in any section of the country, substan
tially lessen competition, tend to create a mono
poly, or in any other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. Each proponent has adequate financial

B a n k in g
o f f ic e s in
o p e r a t io n

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B e fo r e

A fte r

267,454

5,530

Casco B a n k & T r u s t
Com pany

Portland, Maine
to merge w ith
Casco N o rth e r n N a tio n a l
Bank

Augusta

^Financial data are as of December 31, 1975. Data con
cerning Bank o f Virginia-Southwest were adjusted in
anticipation of that bank's im minent merger with Bank
of Virginia-Scott, Weber City, Virginia, which had re
ceived FDIC approval on March 30, 1976.

and managerial resources for the business it con
ducts as an independent institution, as would the
resultant bank. Future prospects of the resultant
bank are considered to be favorable.
Convenience and Needs o f the C om m unity to be
Served. The proposal represents an internal reorgan

ization, and no effect on the convenience and needs
of the community is expected to result therefrom.
On the basis of the foregoing, the Board of Direc
tors has concluded that approval of the application
is warranted.

BANK ABSORPTIONS APPROVED BY THE CORPORATION

L lo y d s B a n k C a lifo rn ia

B a n k in g
o f f ic e s in
o p e r a t io n

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B e fo r e

A fte r

1,308,087

63,058

Los Angeles, California
to purchase the assets and as
sum e the dep o sit lia b ilitie s o f
F irs t S ta te B a n k o f
N o rth e r n C a lifo rn ia

San Leandro
Approved under emergency provisions. No re
port requested from the Attorney General.
Basis for Corporation approval, May 22, 1976
Lloyds Bank California, Los Angeles, Cali
fornia, an insured State nonmember bank with
total resources of $1,308,087,000, has applied,
pursuant to section 18(c) of the Federal Deposit
Insurance Act, for the Corporation's consent to
purchase the assets of and assume liability to pay
deposits made in First State Bank of Northern
California, San Leandro, California, also an insured
State nonmember bank, with total resources of
$63,058,000. As an incident to the proposed
transaction, the four offices of First State Bank of
Northern California would become branches of
Lloyds Bank California.
As of May 20, 1976, First State Bank of North
ern California had deposits of some $54.3 million
and operated four offices. On May 21, 1976, the
F ederal D e p o sit Insurance Corporation was
appointed receiver of First State Bank of Northern
California.
The Board of Directors finds that the failure of
First State Bank of Northern California requires it
to act immediately and thus waives publication of
notice, dispenses w ith the solicitation of compet
itive reports from other agencies, and authorizes
the transaction to be consummated immediately.

R e s o u rc e s

(in
th o u s a n d s
o f d o lla r s )

B a n k in g
o f f ic e s in
o p e r a t io n
B e fo r e

A fte r

Summary report by Attorney General,
March 25, 1976
Applicant's office is 20 miles distant from New
London Bank's office. Other banks operate in the
intervening area between these offices, and less
than 2 percent of Applicant's deposit and loan
accounts originate in New London Bank's service
area. Thus, it would appear that a minimal amount
of direct competition would be eliminated by the
proposed merger.
The service areas of both banks lie in a fourcounty area known as Region XVI, the Southeast
Iowa Region. If the proposed acquisition is ap
proved, Applicant w ill then be the largest bank in
Region XVI with 18 percent of total regional
deposits. The second ranked bank, the First Na
tional Bank of Burlington, w ill have 16 percent of
such deposits. Applicant currently has pending an
application to acquire Hillsboro Savings Bank of
Hillsboro, Iowa, which is also located in Region
XVI. In our March 18, 1976 letter to you concern
ing the application regarding the Hillsboro acquisi
tion, we pointed out that the proposed acquisition
would give Applicant 16 percent of total deposits
in Region XVI (not including the instant applica
tion) and we concluded that that proposed acquisi
tion would result in the elimination of some direct
and potential competition, and that its overall
effect would be somewhat adverse.
Under Iowa law, banks can establish full service
office facilities outside the municipal corporation
or urban complex in which their principal office is
located, provided these facilities are located in the
same or in a contiguous county. Applicant and
New London Bank are located in contiguous coun
ties and thus Applicant could branch into the area
served by New London Bank. Applicant is not
likely to do so, however, since New London Bank
is located in a town of only 1,877 inhabitants.
In sum, the proposed acquisition would elimi
nate a minimal degree of direct competition be
tween the participants and would result in A ppli
cant becoming the largest bank in its regional area.
It would also eliminate the potential for increased
competition which would result if Applicant estab
lished a banking facility in New London. Our over
all view is that the proposed acquisition w ill have
some adverse effect upon competition.
Summary report by Attorney General,
March 8, 1976

B u rlin g to n B a n k and
T ru s t C o m p an y

48,014

7,060

4,923

Burlington, Iowa
to acquire the assets and assume
the d ep osit lia b ilitie s o f
N e w L o n d o n S ta te B a n k

New London
and
H ills b o ro Savings B a n k

Hillsboro

The main office of Hillsboro Bank is 37 miles
distant from Applicant's office and its branch of
fice is 32 miles distant therefrom. A survey of
accounts discloses that Hillsboro Bank has a small
number of deposits and loans in Applicant's serv
ice area. Thus, there is some direct competition
which would be eliminated by the proposed merger.
The service areas of both banks lie in a fourcounty area known as Region XVI, the Southeast

FEDERAL DEPOSIT INSURANCE CORPORATION

Iowa Region. If the proposed acquisition is ap
proved, Applicant w ill then be the largest bank in
Region XVI with 16 percent of total regional de
posits. The second ranked bank, the First National
Bank of Burlington, w ill have 15 percent of such
deposits.
Under Iowa law, banks can establish full service
office facilities outside the municipal corporation or
urban complex in which their principal office is lo
cated provided these facilities are located in the
same or in a contiguous county. Applicant and
Hillsboro Bank are located in contiguous counties
and thus Applicant could branch into the area
served by Hillsboro Bank. Applicant is not likely
to do so, however, since Hillsboro Bank is located
in a town of only 218 inhabitants.
In sum, the proposed acquisition would elimi
nate a slight amount of direct competition between
the participants and would result in Applicant be
coming the largest bank in its regional area. It would
also eliminate the potential for increased compe
tition which would result if Applicant established a
banking facility in Hillsboro. Overall, the proposed
acquisition would thus have some adverse effect.
Basis for Corporation approval, June 3, 1976
Burlington Bank and Trust Company, Burling
ton, Iowa ("Burlington Bank"), an insured State
n o n m e m b er bank w ith total resources of
$ 4 8 ,0 1 4 ,0 0 0 and to ta l IPC d e p osits of
$38,126,000, has applied, pursuant to section
18(c) and other provisions of the Federal Deposit
Insurance Act, for the Corporation's prior written
consent to acquire New London State Bank, New
London, Iowa ("New London Bank"), an insured
State nonmember bank with total resources of
$7,060,000 and total IPC deposits of $5,519,000,
and Hillsboro Savings Bank, Hillsboro, Iowa
("Hillsboro Bank"), an insured State nonmember
bank having total resources of $4,923,000 and
total IPC deposits of $4,158,000. The transactions
would be effected under the charter and with the
title of Burlington Bank and Trust Company.
Following the mergers, the sole office of New
London Bank and the two offices of Hillsboro Bank
would be established as branches of the resultant
bank, thereby increasing the number of its author
ized offices to six.
C om petition. Burlington Bank, operating three
offices in Burlington, Des Moines County, is a sub
sidiary of Hawkeye Bancorporation ("Hawkeye").
Controlling 15 banks with aggregate IPC deposits of
$361 million as of June 30, 1975, 3.7 percent of the
State's total IPC deposits, Hawkeye is Iowa's third
largest commercial banking organization.
New London Bank has its sole office in New
London, a town in eastern Henry County. Hillsboro
Bank has its main office in Hillsboro and its sole
branch in Salem, both in southwestern Henry
County.*
Des Moines and Henry are adjoining counties
located in southeastern Iowa. The population of Des

Moines County, 46,982 in 1970, increased 5.3 per
cent during the 1960s, while that of Henry County,
18,114, did not change significantly during the
decade. The town of New London had a 1970 popu
lation of 1,900, representing a 12.2 percent increase
since 1960. Hillsboro and Salem had populations of
252 and 458 respectively. Burlington, with a 1970
population of 32,366, is located on the Mississippi
River some 160 road-miles southeast of Des Moines
and 80 road-miles south of Davenport. Burlington
contains significant industry and is the trading
center for much of the surrounding agricultural
area. The 1974 median household buying levels of
Des Moines County ($11,568) and Henry County
($11,117) closely approximate that of the State
($1 1,577).
The market principally affected by these trans
actions is delineated as that area w ithin a 20-mile
radius of Mount Pleasant, the county seat of Henry
County and a focal point of economic activity for
residents of the county. This would include Henry
County and portions of adjacent Washington,
Louisa, Des Moines, Lee, Van Buren, and Jefferson
Counties. Both New London Bank and Hillsboro
Bank are located in this market. Burlington Bank's
primary trade area is principally Des Moines Coun
ty, and although there is some slight overlap with
the Henry County bank market, Burlington Bank
operates in a separate market from New London
Bank and Hillsboro Bank.
A total of 12 banks operate 15 offices within the
relevant market area. New London Bank holds 5.4
percent of the market's IPC deposits and Hillsboro
Bank holds 4.1 percent, representing the eighth and
ninth largest banks in the market. Upon consumma
tion of the proposals, the resultant bank would hold
9.5 percent of such deposits, representing the fifth
largest market share.
Existing competition between Hillsboro Bank
and New London Bank is minimal, with the nearest
offices of these banks being located approximately
20 road-miles apart. No subsidiary of Hawkeye is
located in the relevant market. Burlington Bank is
the nearest Hawkeye subsidiary to either New
London Bank or Hillsboro Bank. Its offices are lo
cated some 20 road-miles from New London and 30
road-miles from Hillsboro Bank's Salem branch.
An Iowa commercial bank may legally branch de
novo in its main office county and into all con
tiguous or cornering counties subject to main office
and branch office protection. Neither New London
Bank nor Hillsboro Bank has the managerial and
financial resources to facilitate such expansion.
*Mr. E. A. Hayes has controlled Hillsboro Bank since
1951, Mr. Donald J. Bell acquiring a substantial interest
therein during 1973. Messrs. Hayes and Bell have con
trolled New London Bank since 1955. They also had
been control owners of Burlington Bank for several years
prior to its acquisition by Hawkeye in 1969, becoming
at that time members of Hawkeye's board of directors.
This relationship among the three proponent banks lends
no persuasive weight to approval of the applications.

BANK ABSORPTIONS APPROVED BY THE CORPORATION
Burlington Bank or Hawkeye ordinarily would be
considered a likely de novo entrant into the relevant
market. However, due to the restrictive branching
laws and the apparent adequately banked condition
of the market, such entry does not appear to be
highly probable.
In its maximum potential market under State
law—Des Moines, Lee, Henry, and Louisa Coun
ties—the resultant bank would hold 12.1 percent of
a relatively unconcentrated market; 9 other banks
held IPC deposit shares ranging, on June 30, 1975,
from 4.1 percent (held by a subsidiary of the
State's largest banking organization) to 11.1 per
cent (held by a subsidiary of Iowa's second largest
banking organization) with the remaining 33.5
percent of such deposits shared by an additional
14 banking organizations.
Hawkeye's third largest share of Iowa's commer
cial bank IPC deposits on June 30, 1975, would be
increased from 3.7 percent to 3.8 percent by Bur
lington Bank's acquisition of both New London
Bank and Hillsboro Bank.
Based on the foregoing, the Board of Directors
has concluded that the proposed transactions would
not, in any section of the country, substantially
lessen competition, tend to create a monopoly, or in
any other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. A ll three proponents have satisfactory

financial and managerial resources. With its capital
structure supplemented to offset a reduction of
capital funds resulting from consummation of the
proposals, the resultant bank appears to have favor
able future prospects.
Convenience and Needs o f the C om m unity to be
Served. Residents in the relevant market should

benefit from the expanded services offered by one
of the major subsidiaries of Hawkeye. Computer
ized recordkeeping and credit card facilities would
become available to the former customers of Hills
boro Bank and New London Bank. Trust services
would be offered to Hillsboro Bank's customers for
the first time.
On the basis of the information indicated, the
Board of Directors is of the opinion that approval of
the applications is warranted.

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

C o b b E x ch a n g e B a n k

B a n k in g
o f f ic e s in
o p e r a t io n
B e fo r e

38,562

41,466

A fte r

Marietta, Georgia
(change title to First
Bank & Trust Co.)
to consolidate w ith
F irs t S ta te B a n k o f C o b b
Cou n ty

Smyrna
Summary report by Attorney General,
November 25, 1975
The proposed merger would combine the third
and fourth largest commercial banks in Cobb Coun
ty into what would become the second largest bank
in the county with approximately 25 percent of
total county deposits. First National Bank of Cobb
County, w ith about 30 percent of the deposits,
would remain the largest bank. The third and fourth
ranking banks in the county would then have 14
percent and 10 percent of total county deposits,
respectively.
Georgia banking law permits branching only in a
county in which a bank is located. Thus, the large
commercial banks in Atlanta are precluded from
establishing branches in Cobb County. Several
Atlanta banks have, however, established banks in
the portion of Fulton County immediately adjacent
to Cobb County. In addition, the Atlanta banks
have made some competitive inroads upon the Cobb
County banks by virtue of the fact that upwards of
one-third of the Cobb County residents work in the
greater Atlanta metropolitan area and, presumably,
at least some of the commuters bank in the area
where they work.
It appears that Cobb County w ill continue to
experience considerable economic growth and may
well need additional banking services. Inasmuch as
State banking law permits only county branching,
Applicant and Bank would be significant potential
competitors in opening new branches to meet
expanding banking needs of the county. Thus, the
proposed acquisition would eliminate such poten
tial competition.
In sum, we conclude that the proposed acquisi
tion would eliminate both actual and potential
competition between Applicant and Bank to a
significant extent, would im portantly increase the
amount of concentration in the Cobb County bank
ing market, and accordingly, would produce sub
stantially adverse competitive consequences.
Basis for Corporation approval, June 16, 1976
Cobb Exchange Bank, Marietta, Georgia ("E x
change Bank"), an insured State nonmember bank
with total resources of $38,562,000 and total IPC
deposits of $27,691,000, has applied, pursuant to

FEDERAL DEPOSIT INSURANCE CORPORATION

section 18(c) and other provisions of the Federal
Deposit Insurance Act, for the Corporation's prior
consent to consolidate with First State Bank of
Cobb County, Smyrna, Georgia ("State Bank"), an
insured State nonmember bank with total re
sources of $41,466,000 and total IPC deposits of
$30,398,000. The transaction would be effected
under a new State charter and with the title "First
Bank & Trust Co.” As an incident to the consolida
tion, the 6 offices of State Bank would become
branches of the resulting bank, increasing the num
ber of its approved offices to 11.
C om petition. Exchange Bank operates its main
office and three branches in central and north
western Cobb County and has the necessary ap
provals to establish an additional office in the
county. State Bank has its main office and five
branches in southeastern Cobb County in areas adja
cent to the city of Atlanta and Fulton County.
Located in northwestern Georgia, Cobb County
had a 1970 population of 196,793, representing a
72.4 percent increase from 1960. The county's
economy is closely tied to that of nearby Atlanta
and Fulton County. Although the northern portion
of the county remains largely rural, an influx of
industrial and commercial activity has occurred as a
result of the proliferation of highways providing
easy access to Atlanta. In addition, such access has
enabled a commutation pattern to develop and
approximately 38.5 percent of the county's work
force commutes to Atlanta and its vicinity.
There is currently little direct competition be
tween the proponents, although there is some over
lap between their service areas. However, because of
the growth pattern in Cobb County, a potential for
increased competition between the proponents does
exist. Georgia banking law permits only county
branching. Within Cobb County, State Bank and
Exchange Bank are the third and fourth largest
banks, controlling 11.9 and 11.7 percent of the total
commercial bank IPC deposits, respectively. Upon
consummation of the consolidation, the resulting
bank would be the second largest of the eight re
maining banks, holding 23.6 percent of the total
commercial bank IPC deposits. This would result in
two banks controlling 52.5 percent of the county's
total commercial bank IPC deposits, and three
banks controlling 66.8 percent of such deposits.
Such a high level of concentration would ordinarily
require an adverse determination regarding the
proposal; however, the influence of the larger A t
lanta banks must be considered in viewing the com
petitive environment in which the proposal is made.
Intense competition exists in Cobb County
emanating from the Atlanta-based commercial
banks, several of which are among the State's larg
est. These banks have branches located along the
Cobb County-Fulton County border and are w ith
in State Bank's service area. Because of this and the
commutation pattern in Cobb County, the relevant
geographic market for purposes of determining the

competitive effects incident to the proposal in
cludes both Cobb County and Fulton County. In
this market, 5 of 23 commercial banking organiza
tions controlled 87.5 percent of the IPC deposits
held by such banks on June 30, 1975. Exchange
Bank and State Bank each held only 0.9 percent of
such deposits and the resulting bank would hold a
mere 1.8 percent market share. Considering the rela
tive sizes of the Atlanta-based competitors, com
muting patterns and ease of access, and the presence
of common communication media, the proposed
consolidation is seen as having little competitive
effect on the commercial banking structure of the
market. Likewise, although a potential exists for
increased competition between the proponents
through future de novo branching, elimination of
such future competition is not regarded as serious
because of the dominance of the Atlanta-based
banking organizations.
Under the circumstances, the Board of Directors
is of the opinion that the proposal would not, in any
section of the country, substantially lessen compe
tition, tend to create a monopoly, or in any other
manner be in restraint of trade.
Financial and Managerial Resources; F u ture
Prospects. Each proponent generally has satis

factory financial and managerial resources, as would
the resulting bank. Future prospects of the com
bined institution appear favorable.
Convenience and Needs o f the C om m unity to be
Served. Benefits accruing to the community will be

a significantly higher lending lim it and the avail
ability of additional banking services to be offered
by the combined institution.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B a n k in g
o f f ic e s in
o p e r a t io n
B e fo r e

A fte r

W estern B a n k and T ru s t
Com pany

30,420

11,986

West Springfield,
Massachusetts
(change title to
Park West Bank
and Trust Company)
to merge w ith
T h e P a rk N a tio n a l B a n k o f
H o ly o k e

Holyoke
Summary report by Attorney General,
April 29, 1976
Almost all of the banking activity of Applicant
and Bank is confined to Hampden County. The

BANK ABSORPTIONS APPROVED BY THE CORPORATION
primary service area for Applicant is composed of
the contiguous communities of West Springfield,
Springfield, and Agawam, while the primary service
area for Bank is Holyoke, South Hadley, and Chico
pee. The primary service areas of the two banks are
contiguous. Applicant's Riverdale Street branch is
within 6 miles of both offices of Bank. Data sup
plied by Applicant suggests that there is some degree
of competitive overlap. Approximately 4.3 percent
of Applicant's deposits and 6.29 percent of its loans
are derived from the primary service area of Bank.
Similarly, Bank receives 3.06 percent of its deposits
and 4.58 percent of its loans from the primary serv
ice area of Applicant. Thus, it appears that the pro
posed acquisition w ill eliminate some direct compe
tition between the banks.
There are 19 commercial and savings institutions
serving Hampden County. Applicant is the fifth larg
est commercial bank in the county, controlling 3.77
percent of the total deposits, and 4 of the 82 com
mercial banking offices. Bank, as the smallest
commercial institution in the county, controls 1.4
percent of the deposits and 2 of the 82 commercial
banking offices in the county. Consummation of the
proposed merger w ill give the resulting institution
total deposits and loans of 5.0 percent and 5.2 per
cent, respectively, and will effectively increase
Applicant's market share by 1.4 percent, making it
the fourth largest institution in the county. Accord
ingly, the proposed acquisition would tend to
increase concentration in banking in Hampden
County slightly.
Massachusetts banking law permits both Appli
cant and Bank to freely enter the primary service
area of each other, either by branching or the estab
lishment of a de novo bank. Thus, the proposed
acquisition w ill remove the likelihood of potential
competition between Applicant and Bank.
In sum, it appears that overall the proposed
acquisition will have slightly adverse competitive
consequences.
Basis for Corporation approval, June 16, 1976
Western Bank and Trust Company, West Spring
field, Massachusetts ("Western"), an insured State
n o n m e m b er bank w ith total resources of
$ 3 0 ,4 2 0 ,0 0 0 and to ta l IPC d e p o sits of
$22,565,000, has applied, pursuant to section
18(c) and other provisions of the Federal Deposit
Insurance Act, for the Corporation's prior consent
to merge with The Park National Bank of Hol
yoke, Holyoke, Massachusetts ("P ark"), with total
resources of $11,986,000 and total IPC deposits of
$8,041,000, under the charter of Western and with
the title "Park West Bank and Trust Company."
As an incident to the merger, the two offices of
Park would be established as branches of the result
ant bank, thereby increasing to six the total number
of its offices.
C om petition. Western operates four offices in
the Hampden County area of southwestern Massa

chusetts, with its main office and two branches lo
cated in West Springfield and one branch located in
the Feeding Hills section of Agawam, approxi
mately 5 road-miles southwest of its main office.
Western's primary trade area consists of West
Springfield and surrounding communities, including
Westfield (7 miles to the west) Chicopee (4 miles to
the northeast) Springfield (2 miles to the east) and
Agawam (6 miles to the south). Western had the
fifth largest share, 4.3 percent, of the IPC deposits
held on June 30, 1975, by offices of the six commer
cial banks operating in the area.
Park has its two offices in Holyoke, in Hampden
County, approximately 8 road-miles north of West
Springfield. Park's primary trade area includes
Holyoke, Chicopee (5 miles to the southeast), Easthampton (5 miles to the northwest), and South
Hadley (4 miles to the northeast). Eight commercial
banks operate w ithin this area. On June 30, 1975,
Park had the sixth largest share, 7.5 percent, of the
area commercial bank IPC deposits; 72.4 percent of
such deposits were held by the three largest com
mercial bank organizations in Massachusetts.
The proponents are located in an area of mixed
economy. The cities of Springfield, Chicopee, and
Holyoke are engaged in diversified manufacturing,
commerce, education, and public administration.
The town of West Springfield and the city of West
field are mainly residential communities, as are the
neighboring towns. The area is experiencing an
economic decline. The unemployment rate in the
Springfield-Chicopee-Holyoke SMSA was 11.1
percent at year-end 1975; in Holyoke it was 13.9
percent. The 1974 median effective household buy
ing level of Hampden County ($11,846) was 5.5
percent below that of the State.
The closest branches of the proponents are lo
cated approximately 5 road-miles apart. There is
some overlapping of trade areas, largely in the
Chicopee area, and the proposed merger would
eliminate some existing competition. However, in
view of the modest size of both banks, this result of
the transaction would have no meaningful signifi
cance. Although Massachusetts law permits both
proponents to expand de novo throughout Hamp
den County, there appears to be minimal potential
for competition to increase between them through
their de novo branching in the future. Western
would not likely find de novo entry into the city of
Holyoke feasible in view of the declining population
trend and high unemployment rate in this area.
Park, in business since 1892, is not an aggressively
operated bank and has experienced a downward
deposit trend since mid-1974. With limited man
agerial and financial resources, it is not likely to
consider de novo expansion in the foreseeable
future.
Following consummation of the merger, the
resultant bank w ill hold the fifth largest share, or 5.1
percent, of the IPC deposits held on June 30, 1975,
by area offices of the nine commercial banks oper

FEDERAL DEPOSIT INSURANCE CORPORATION

ating w ithin the proponents' combined trade area. If
consideration is given to the entire SpringfieldChicopee-Holyoke SMSA, the resulting institution
would control only 4.3 percent of the commercial
bank IPC deposits. This would represent the sixth
largest share of the 11 commercial banks that would
remain in the SMSA.
Under these circumstances, the Board of Direc
tors has concluded that the proposed transaction
would not, in any section of the country, substan
tially lessen competition, tend to create a monop
oly, or in any other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. Both Western and Park have satisfactory
managerial and financial resources for the business
they do at the present time. Such resources of the
resultant bank appear satisfactory and its future
prospects are favorable.
Convenience and Needs of the Community to be
Served. The merger would have minimal effect on
the convenience and needs of the relevant market.
Although an increase in lending lim it would be
provided for the resultant bank and trust services
would be available fo r the first time at the offices
of Park, there are a number of substantially larger
competitors in the Springfield-Chicopee-Holyoke
market whose services lim it the significance of
these improvements in the proponents' competi
tive stature.
F o r th e fo re g o in g reasons, th e B o ard o f D ire c
tors has c o n c lu d e d th a t ap p ro val o f th e a p p lic a tio n

action, the sole office of Security Bank on Capitol
would become a branch of the Colonial State
Bank.
For reasons related to the condition of Security
Bank on Capitol and the fact the Commissioner of
Banking of the State of Wisconsin has seen fit to
invoke the “ emergency branching" section of the
Wisconsin Banking Laws to permit the proposed
transaction, the Board of Directors finds that the
Corporation must act immediately in order to pre
vent the probable failure of Security Bank on
Capitol and thus waives publication of notice, dis
penses with the solicitation of competitive reports
from other agencies, and authorizes the trans
action to be consummated immediately, upon
proper approval of the transaction by the share
holders of Colonial State Bank and Security Bank
on Capitol.

Banking
Resources
offices in
(in
o p e ratio n
thousands
o f dollars) Before A fte r

T h e M its u b is h i B a n k o f
C a lifo rn ia

139,148

56,871

Los Angeles, California
to merge w ith
H a cie n d a B a n k

La Habra

is w a rra n te d .

Summary report by Attorney General,
February 9, 1976
Bank ing
o ffices in
Resources
o p e ratio n
(in
thousands
o f dollars) Before A fte r

C o lo n ia l S ta te B a n k

34,884

6,231

Thiensville, Wisconsin
to acquire certa in assets and as
sume the d ep osit lia b ilitie s o f
S e c u rity B a n k o n C a p ito l

Wauwatosa
Approved under emergency provisions. No re
port requested from the Attorney General.
Basis for Corporation approval, June 21, 1976
Colonial State Bank, Thiensville, Wisconsin, an
insured State nonmember bank with total re
sources of $34,884,000, has applied, pursuant to
section 18(c) and other provisions of the Federal
Deposit Insurance Act, for the Corporation's prior
approval to acquire certain assets of and assume
the liability to pay deposits made in Security Bank
on Capitol, Wauwatosa, Wisconsin, an insured
State nonmember bank with total resources of
$6,231,000. As an incident to the proposed trans

This merger involves two fairly small banks rela
tive to the size of competing banks in the State.
There are no deposit or loan accounts with both
banks of the same individuals, partnerships, or cor
porations. In addition, there are no deposits or loans
of Applicant or Bank which originate in the other's
service area. In view of these factors and the pres
ence of intervening banking alternatives, the pro
posed merger will not eliminate any direct competi
tion. In addition, the proposed acquisition will not
materially increase concentration in banking either
on a statewide or a local basis. California law permits
Applicant and Bank to branch de novo into each
other's service area. Thus, the proposed acquisition
removes this theoretical possibility. However, there
are numerous much larger commercial banks in the
State much better positioned to branch into the
areas served by the merger parties should those areas
prove to be economically attractive.
In short, the proposed acquisition w ill not ad
versely affect existing competition and will not
materially increase concentration, but it will pro
duce a slight lessening of potential competition.
Basis for Corporation approval, June 25, 1976
The Mitsubishi Bank of California, Los Angeles,

BANK ABSORPTIONS APPROVED BY THE CORPORATION
California ("M itsubishi"), a State nonmember in
sured bank with total resources of $139,148,000
and total IPC deposits of $95,096,000 on Decem
ber 31, 1975, has applied, pursuant to section
18(c) and other provisions of the Federal Deposit
Insurance Act, for the Corporation's prior consent
to merge with Hacienda Bank, La Habra, Cali
fornia, a State nonmember insured bank with total
resources of $56,871,000 and total IPC deposits of
$45,650,000 at year-end 1975, under the charter
of and with the title "The Mitsubishi Bank of Cali
fornia." Incident to the merger, the four existing
offices and one approved but unopened office of
Hacienda Bank would become branches of the
resultant bank, thereby increasing the total num
ber of its authorized offices to nine.
C om petition. Mitsubishi operates its main office
and two branches in the metropolitan Los Angeles
area, with the main office located in downtown Los
Angeles, one branch located 1 mile east of the main
office, and a second branch located in Gardena, 13
miles south. A fourth office is operated in San Fran
cisco. Mitsubishi, a wholly owned subsidiary of The
Mitsubishi Bank, Ltd., Tokyo, Japan, a registered
one-bank holding company, is 38th largest of Cali
fornia's commercial banks, with 0.13 percent of the
total deposits held by all such banks within the
State.
Hacienda Bank operates its main office in La
Habra, approximately 18 road-miles east of Los
Angeles. I n addition, it operates three branches, one
each in La Mirada (5 road-miles south of the main
office), Garden Grove (13 road-miles south), and
West Covina (12 road-miles north). Hacienda Bank
also has approval to establish one additional branch
in Placentia, about 1 1 road-miles southeast of the
main office.
Hacienda Bank operates in three separate trade
areas: the La Habra-La Mirada market, the Garden
Grove market, and the West Covina market. The
effects of the proposed merger would be most direct
and immediate within these markets. In each of
these markets, Hacienda Bank is competing with
four of the five largest commercial banks in the
State. Only in the La Habra-La Mirada market does
Hacienda Bank have more than a modest share of
area commercial bank IPC deposits. In this market,
Hacienda has 25.6 percent, or the second largest
share, of the IPC deposits controlled by area offices
of the seven commercial banks operating in the mar
ket.
Mitsubishi does not have an office in any of
Hacienda Bank's primary markets. Its closest office,
in Gardena, is located approximately 17 road-miles
west of Hacienda Bank's La Mirada office, with
many commercial bank offices intervening. There
fore, there is little direct competition between the
proponents. If consideration is given to the Los
Angeles-Long Beach SMSA, in which Mitsubishi
operates three offices and Hacienda Bank operates
two, the resulting institution would control only

0.36 percent, or the 17th largest share, of the total
IPC deposits in the area. Thus, it is apparent that the
proposed transaction would have no significant
effect on the structure of commercial banking in
any relevant area.
Mitsubishi has specialized in commercial and
international banking, establishing its offices in
areas where such business may best be developed.
Hacienda Bank, in contrast, has concentrated on
retail banking and its primary trade areas are resi
dential communities. Therefore, although Cali
fornia law permits statewide branching, neither
bank would be likely in the near future to enter de
novo the primary trade area of the other. Were such
expansion to occur, with the existing domination by
the major statewide banks, it is doubtful that any
significant competition between the banks would
result.
The Board of Directors, therefore, has concluded
that the proposed merger would not, in any section
of the country, substantially lessen competition,
tend to create a monopoly, or in any other manner
be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. Each proponent has satisfactory financial

and managerial resources and favorable future pros
pects, as would the resultant bank.
Convenience and Needs o f the C om m unity to be
Served. No significant enhancement of public con

venience is likely to result from the proposed
merger. The resulting institution would offer no
services that are not currently available from alter
native sources in the relevant areas.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B a n g o r Savings B a n k

B a n k in g
o f f ic e s in
o p e r a tio n
B e fo r e

154,768

21,583

A fte r

Bangor, Maine
to merge w ith
Piscataquis Savings B a n k

Dover-Foxcroft
Summary report by Attorney General,
April 29, 1976
All of Applicant's offices are more than 25 miles
from any of Bank's offices. Nevertheless, because
Bangor is the employment and shopping center of
the region, there is some competitive overlap be
tween Applicant and Bank. Bank has virtually no
loans outstanding in Applicant's area, derives no
demand deposits from it, and holds only about $1.5
m illion in savings deposits for people there. Appli
cant has less than $1 million in loans, holds about

FEDERAL DEPOSIT INSURANCE CORPORATION

$9.5 m illion in demand deposits, and has about $1.5
million in savings deposits that derive from Bank's
service area. Thus, the proposed merger will elimi
nate direct competition to some degree, albeit com
petition which runs almost entirely in the direction
of Applicant.
Although Applicant's home office is the largest
office in Bangor (deposits $110 million), it is not
the largest financial institution doing business in the
city, or even the largest financial institution head
quartered there. Merrill Trust Company (total de
posits of $163 m illion), which has 24 branches
spread around the neighboring counties, has its
home office in Bangor (total deposits of $68 m il
lion). Merrill Trust belongs to the fourth largest
holding company in the State (total statewide de
posits of $240 m illion). The first, second, third, and
fifth largest holding companies in Maine also have
offices in Bangor as does the seventh largest holding
company, a one-bank affair (deposits $45 million,
home office deposits $37 million).
Bank is a much smaller organization (deposits
$20 m illion), headquartered in Dover-Foxcroft
(home office deposits $15 m illion). It has three
offices, one of which is only 6 months old. A l
though Bank is the largest bank in Dover-Foxcroft,
it faces substantial competition. Merrill Trust has
an office in the town (deposits $6 m illion); there
are six more bank offices w ithin a radius of 15
miles that belong to vigorous organizations. Bank's
other well-established branch also enjoys a similar
degree of competition, while its 6-month old
branch faces an entrenched competitor owned by
a large holding company. Accordingly, although
the proposed merger w ill increase concentration to
some extent, the existence of numerous banking
alternatives in the area serves as a mitigating fac
tor.
Basis for Corporation approval, July 6, 1976
Bangor Savings Bank, Bangor, Maine ("Bangor
Savings"), an insured mutual savings bank with total
resources of $154,768,000 and IPC deposits of
$142,250,000, has applied, pursuant to section
18(c) and other provisions of the Federal Deposit
Insurance Act, for the Corporation's prior consent
to merge with Piscataquis Savings Bank, DoverFoxcroft, Maine ("PSB"), an insured mutual sav
ings bank with total resources of $21,583,000 and
IPC deposits of $19,135,000. The banks would
merge under the charter and title of Bangor Sav
ings. As an incident to the merger, the three of
fices of PSB would become branches of the result
ing bank, increasing the number of its approved
offices to eight.
C om petition. Bangor Savings and PSB are sav
ings banks operating in the State of Maine. The
proponents are th rift institutions and, as such, are
considered interchangeable alternatives to savings
and loan associations for th rift deposits and resi
dential mortgage loans. Ordinarily, th rift institu
tion banking, as exemplified by savings banks and

savings and loan associations, would be considered
the decisive line of commerce for determining the
competitive implications of the proposed merger.
However, Maine th rift institutions are now per
mitted to accept personal demand deposits, to
allow the withdrawal by negotiable instruments
from accounts on which interest is paid, to grant
or participate in certain types of commercial loans,
and to issue credit through the use of credit cards.
As a result of these recent changes, the traditional
competitive barriers separating th rift institutions
and commercial banks have diminished; therefore,
the competitive analysis of this case will view the
market areas both in terms of th rift institutions
separately and combined with commercial banks.*
Bangor Savings operates four offices: two in
Bangor in southern Penobscot County and one
each in Belfast, Waldo County, and Ellsworth,
Hancock County. Additionally, it has an approved
but unopened branch in Orono, Penobscot Coun
ty. Bangor Savings is the largest of the six th rift
institutions operating in its primary trade area,
Waldo and Hancock Counties and southern Penob
scot County, controlling 49.3 percent of the area
th rift institution IPC deposits as of June 30, 1975.
When commercial banks are considered, this mar
ket share is reduced to 25.5 percent.
PSB operates its main office in Dover-Foxcroft
and one branch in Greenville, both in Piscataquis
County, and one branch in Millinocket in northcentral Penobscot County. Its primary trade area
comprises southern Piscataquis County, several
adjoining towns in Penobscot County south of
Dover-Foxcroft, and the M illinocket area of
north-central Penobscot County. Within this mar
ket area, PSB controlled 93.6 percent of the IPC
deposits held by the two th rift institutions oper
ating in its market area as of June 30, 1975. How
ever, it controlled only 28.3 percent of the com
b ined commercial bank-thrift institution IPC
deposits.
The proponents operate in adjoining, yet essen
tially separate and distinct markets. Their nearest
offices are separated by approximately 36 roadmiles through a predominantly rural area. There
fore, little existing competition would be elimi
nated by the proposal.
Although both institutions may, under Maine
law, merge or expand de novo throughout the
State, neither would be likely to find economically
feasible de novo entry into the primary trade area
*The Supreme Court stated in United States v. Connecti
cut National Bank, 418 U.S. 656 (1974), that in Connec
ticu t for mergers between commercial banks the line of
commerce is lim ited to commercial banks rather than
both savings banks and commercial banks. However, due
to the increased parity between th rift institutions and
commercial banks in the State of Maine, the Board of
Directors has determined that commercial realities re
quire a viewing of a combined commercial bank-thrift
institution market, as well as the traditional separate
market, when determining the competitive impact of
any proposed merger in Maine.

BANK ABSORPTIONS APPROVED BY THE CORPORATION
of the other. PSB's financial resources are limited
and it is unlikely that it would undertake expan
sion in view of the strong competition it would
encounter. Bangor Savings has adequate financial
resources; however, because of the unfavorable
income levels of Piscataquis County and the rela
tively small and declining population, PSB's mar
ket has limited potential for further expansion of
banking offices.
Consummation of the proposal w ill result in the
combination of the leading institutions in their
respective markets, w ith the resultant bank con
trolling 52.3 percent of the th rift institution IPC
deposits and 25.8 percent of the commercial
bank-thrift institution IPC deposits, based on June
30, 1975 deposit figures, in its combined market
area. However, recent changes in State law permit
statewide branching. Maine Savings Bank, the
State's largest bank, which has operated in south
ern Maine, has applied for permission to establish a
branch in Waterville, bringing it into closer compe
tition with Bangor Savings. Such future encroach
ment may serve to erode the resultant bank's
dominant position in its market.
Under these circumstances, the Board of Direc
tors is of the opinion that the proposed merger
would not, in any section of the country, substan
tially lessen competition, tend to create a monop
oly, or in any other manner be in restraint of
trade.
Financial and Managerial Resources; Future
Prospects. Financial and managerial resources of

each institution are generally satisfactory, and the
proposed merger would eliminate the problem of
orderly succession of management presently con
fronting PSB. Future prospects of the resultant
bank are considered favorable.
Convenience and Needs o f the C om m unity to
be Served. Although both banks provide the basic

services normally associated with mutual savings
banks, PSB customers would benefit from an in
creased lending lim it and a broader range of loan
services at a slightly lower cost.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

Banking
o ffices in
Resources
o p e ratio n
(in
thousands
o f dollars) Before A fte r

T h e F irs t N a tio n a l B a n k
o f B risto l

2,744

Bristol, New Hampshire
(change title to
The Bristol Bank)
to acquire the assets and assume
the d ep osit lia b ilitie s o f
T h e B risto l Savings B a n k

Bristol

10,959

Summary report by Attorney General,
July 31, 1975
Bristol Bank and Bristol Savings have a com
mon office, common chief executive officer,
common teller window, and common advertising.
Bristol Bank accepts demand deposits and makes
non-mortgage loans while Bristol Savings accepts
time and savings deposits and makes mortgage
loans. Thus, the parties are not now in significant
competition with each other. Bristol Savings owns
approximately 11 percent of Bristol Bank's stock.
Although not presently in competition, State
law will require the parties to separate their inter
locking directors and management in July 1975,
resulting, presumably, in two independent institu
tions capable of offering competing banking serv
ices. Thus, if the parties may be expected to exist
as viable independent institutions, the proposed
transaction will eliminate the prospect for future
competition throughout their six-town common
service area.
Basis for Corporation approval, July 6, 1976
The First National Bank of Bristol, Bristol, New
Hampshire ("Commercial Bank” ), with total re
sources of $2,744,000 and total IPC deposits of
$1,370,000, has applied, pursuant to section 18(c)
and other provisions of the Federal Deposit Insur
ance Act, for the Corporation's prior consent to
acquire the assets of and assume the liability to
pay deposits made in The Bristol Savings Bank,
Bristol, New Hampshire ("Savings Bank"), an in
sured mutual savings bank having total resources
o f $ 1 0 ,9 5 9 ,0 0 0 and total IPC deposits of
$10,049,000. Incident to the proposed trans
action, the 108 par $100 shares of common stock
of Commercial Bank presently owned by Savings
Bank would be retired. Commercial Bank, prior to
consummation of the proposed transaction, would
convert to a State nonmember insured bank under
the title "The Bristol Bank." The resulting bank
would operate from the sole location in which the
two banks presently share quarters.*
C om petition. Commercial Bank and Savings
Bank share a single office in Bristol and have done so
since 1898. Bristol had a 1970 population of 1,670
and is located in the southeastern corner of Grafton
County.
The two banks derive the bulk of their business
from Bristol and the surrounding towns of Alexan
dria, Bridgewater, Hebron, and New Hampton. This
area is rural and sparsely populated and is largely a
resort area with virtually no industry. The aggregate
1970 population of the service area was 3,714, rep
resenting an increase of only 566 from 1960. There
are no other banks operating in this area, and the
*FD IC approval of mergers that would involve conversion
from a mutual to a stock form had been prohibited, w ith
certain exceptions, by section 18 (c)(10) o f the Federal
Deposit Insurance Act, 12 U.S.C. section 1828(c)(10).
However, this prohibition expired on June 30, 1976.

FEDERAL DEPOSIT INSURANCE CORPORATION

closest alternatives are in Franklin, approximately
13 miles south of Bristol. The service area of the
proponents is highly localized, and the mountainous
terrain and several lakes in the area have an inhibit
ing effect on travel.
There is no competition between Commercial
Bank and Savings Bank. Each offers services appro
priate to its method of operation and they comple
ment one another. It is possible that the two banks
could become independent of each other in the
future, but it is highly unlikely. Commercial Bank
has neither the resources nor the management to
establish separate facilities in competition with
Savings Bank. Moreover, it does not appear that the
banking business is there to be had. The economy of
the service area is relatively stagnant and its popula
tion is limited. In over 75 years of jo in t operation
the two banks combined have accumulated a total
of only $12.2 million in deposits. Commercial
Bank's deposits have been stable or declining in re
cent years while Savings Bank's deposits have in
creased only modestly. Accordingly, the proposed
transaction would not eliminate any significant
existing or potential competition between the two
banks.
In view of the foregoing, the Board of Directors is
of the opinion that the proposed transaction would
not, in any section of the country, substantially
lessen competition, tend to create a monopoly, or in
any other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. Commercial Bank and Savings Bank have

satisfactory financial and managerial resources
under their present operational arrangement, and
the future prospects of the resulting bank are ade
quate.
Convenience and Needs o f the C om m unity to be
Served. The proposed transaction would have vir

tually no effect on the banking services presently
available in the service area. The resulting bank
would continue to offer all services now provided by
Commercial Bank and Savings Bank.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted, contingent upon Commercial Bank's
conversion to a State nonmember insured bank.

Banking
Resources
offices in
(in
o p e ratio n
thousands
o f dollars) Before A fte r

C e n tra l C o u n tie s B a n k

213,056

State College,
Pennsylvania
to m erge w ith
T h e F irs t N a tio n a l B a n k
o f L e w is to w n

Lewistown

37,255

Summary report by Attorney General,
April 29, 1976
The head offices of the merging banks are 32
miles apart and their closest branch offices are 20
miles apart. Other banks operate in the intervening
area between the two closest offices of the partici
pants. Less than 1 percent of each bank's loans and
deposits originate in the service area of the other
bank. Additionally, the respective service areas of
each bank abut mountains of the Appalachian
Range which are an effective physical barrier to
competition between them. Thus, it would appear
that the proposed merger would eliminate only a
minor degree of existing competition.
Under Pennsylvania law, which permits a bank to
branch into counties contiguous to the county in
which it maintains its principal office, either bank
could branch into the service area of the other since
they are based in adjoining counties. Neither bank is
likely to branch into the other's service area, how
ever, since both areas are more than adequately
served by existing banking offices and since Bank
appears to lack the resources that such expansion
would require.
I
n sum, the proposed transaction would not elim
inate any significant degree of direct competition. It
would, however, eliminate the theoretical potential
for increased competition which would result if
either bank established a de novo branch in the serv
ice area of the other. The overall effect of the pro
posed acquisition would be slightly adverse.
Basis for Corporation approval, July 22, 1976
Central Counties Bank, State College, Penn
sylvania ("Central Counties"), an insured State non
member bank with total resources of $213,056,000
and total IPC deposits of $170,173,000, has ap
plied, pursuant to section 18(c) and other provisions
of the Federal Deposit Insurance Act, for the Cor
poration's prior consent to merge with The First
National Bank of Lewistown, Lewistown, Penn
sylvania ("FNB Lewistown"), with total resources
o f $ 3 7 ,2 5 5 ,0 0 0 and total IPC deposits of
$31,589,000, under the charter and title of Central
Counties. As an incident to the merger, the 4 offices
of FNB Lewistown would become branches of the
resultant bank, increasing the number of its author
ized offices to 24.
C om petition. Central Counties operates 19 of
fices: its main office and 5 branches in Centre Coun
ty, 4 branches in Clinton County, and 9 branches in
Blair County. In addition, it has approval to estab
lish a 10th branch in Blair County.
FNB Lewistown operates its four offices in M iff
lin County, with its main office in Lewistown. Its
branches are located, one each, in Burnham, Milroy,
and McVeytown, which are respectively 3 and 8
road-miles north and 11 road-miles southwest of
Lewistown. M ifflin County is situated immediately
southeast of Centre County. The light manufactur

BANK ABSORPTIONS APPROVED BY THE CORPORATION
ing industry in M ifflin County has declined in recent
years and forestry and agriculture lend only modest
economic support. As of March 1976, the county
had a 12.3 percent unemployment rate, a rate sub
stantially higher than the national average.
There is no significant existing competition be
tween Central Counties and FNB Lewistown. Their
markets, although adjacent, are separated by a por
tion of the Appalachian Range and by State forest
lands, and their closest offices, the two State College
offices of Central Counties and the M ilroy branch of
FNB Lewistown, are approximately 20 road-miles
apart. For residents of either market, there are alter
native sources of banking services more convenient
than the proponent located in the other market.
Few depositors or borrowers are common to both
banks and neither bank draws a significant amount
of business from the primary trade area of the other.
The effects of the proposed merger would be
most pronounced in FNB Lewistown's market,
which consists of M ifflin County. FNB Lewistown is
1 of 6 commercial banks operating a total of 13
offices in this market and holds the second largest
share, 27.6 percent, of the IPC deposits held on June
30, 1975 by area offices of these banks. The Russell
National Bank, also headquartered in Lewistown,
holds the largest share of such deposits, 40.4 per
cent.
Pennsylvania law permits a commercial bank to
branch de novo or merge w ithin its home office
county and all contiguous counties. Central Coun
ties thus may enter de novo M ifflin County while
FNB Lewistown may enter Centre County. How
ever, M ifflin County experienced only a moderate
population growth during the 1960s, its median
household buying level is substantially below the
State median, and six commercial banks are already
well established in the market. Centre County also
has a median household buying level substantially
below that of the State, and although it is an area of
expanding population, the county presently has a
commercial banking office in the county for each
3,102 of its residents. Therefore, it appears unlikely
that any substantial potential for increased compe
titio n between the proponents through their de
novo branching in the future would be eliminated
by the proposed merger. Moreover, even if future
economic developments warrant the establishment
of additional branches, there are several existing
banks, besides Central Counties, capable of de novo
entry into either county.
Within its maximum legal branching area, Central
Counties is the second largest of the 41 commercial
banks represented, w ith 14.4 percent of the area
IPC deposits held by such banks on June 30, 1975.
The proposed merger would increase to 17.0 per
cent Central Counties' IPC deposit share of this
market. Mid-State Bank and Trust Company, A l
toona, would continue to hold the largest share,
18.2 percent. The five largest shares of such deposits
would then aggregate 49.6 percent.

Based on the foregoing, the Board of Directors is
of the opinion that the proposed merger would not,
in any section of the country, substantially lessen
competition, tend to create a monopoly, or in any
other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. Both banks have satisfactory financial

and managerial resources for the business they do,
and the same would be true of the resultant bank.
Convenience and Needs o f the C om m unity to be
Served. The merger would bring to M ifflin County

the specialized services of one of the region's major
banks. Passbook savings deposits, now earning 3 per
cent annually at FNB Lewistown, would be paid 5
percent, and rates paid on several types of ce rtifi
cates of deposit would be increased.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

R e s o u rc e s
( in
th o u sands
o f d o lla r s )

B a n k o f O re g o n

B a n k in g
o f f ic e s in
o p e r a t io n
B e fo r e

A fte r

39,056

7,620

Woodburn, Oregon
to merge with
G u a r a n ty B a n k

Canby
Summary report by Attorney General,
June 22, 1976
A p p lica n t currently operates in Woodburn,
Aurora, Salem, Hubbard, Silverton, Stayton, and
Dundee, all in Marion County. Bank operates solely
in Canby which is in Clackamas County, the county
immediately to the north of Marion County. How
ever, Applicant currently has pending an application
to establish a branch in West Linn, which is located
in Clackamas County approximately 7 miles from
Canby. Furthermore, Applicant's Aurora office is
only about4 miles from Canby. The main offices of
Applicant and Bank are approximately 11 miles
apart. It thus appears that the proposed acquisition
would eliminate some existing competition between
Applicant and Bank.
Applicant and Bank both operate within the
Portland metropolitan commercial banking mar
ket—Canby is 20 miles from Portland and Wood
burn is 36 miles away. Applicant currently ranks 7th
and Bank ranks 16th among the commercial banks
operating in the Portland metropolitan area. Upon
consummation of the merger the Applicant would
hold less than 2 percent of total deposits in the area.
It thus appears that the proposed acquisition will
not enhance concentration to any im portant degree
in the area.

FEDERAL DEPOSIT INSURANCE CORPORATION

Oregon law prohibits the branching into any city
with a population of 50,000 or less that contains the
head office of another bank. Thus, Applicant can
not establish a de novo branch in Canby and can
enter the town only via acquisition.
In sum, the proposed acquisition would elimi
nate some existing competition, would increase
concentration marginally, and would eliminate no
meaningful potential competition. The proposed
acquisition, simply put, would have only a slightly
adverse anticompetitive effect.
Basis for Corporation approval, August 17,1976
Bank of Oregon, Woodburn, Oregon, with total
resources of $39,056,000 and total IPC deposits of
$31,203,000, has applied, pursuant to section
18(c) and other provisions of the Federal Deposit
Insurance Act, for the Corporation's prior consent
to merge w ith Guaranty Bank, Canby, Oregon,
with total resources of $7,620,000 and total IPC
deposits of $6,006,000. The banks would merge
under the charter and title of Bank of Oregon. As
an incident to the merger, the sole office of Guar
anty Bank would be established as a branch of the
resultant bank, thereby increasing the number of
its offices to nine.
C om petition. Bank of Oregon operates its eight
offices in the Willamette Valley of northwestern
Oregon. Its main office, in Woodburn, is located
some 30 road-miles south of Portland and 17 miles
northeast of Salem. Other than a single branch
established in Dundee, in northeastern Yamhill
County, all offices of Bank of Oregon are located
in western Marion County. Guaranty Bank has its
sole office in Canby, in Clackamus County, 11
road-miles northeast of Woodburn.
The Willamette Valley is a rich agricultural re
gion. In addition to agriculture, the area around
Woodburn has some light industry and timber
operations. Canby is a trading center in the valley.
During the 1960s Canby experienced a 76 percent
increase in its population, resulting in a 1970
population of 3,813. While the 1974 Marion Coun
ty median household buying level of $10,116 was
7 percent below the State level of $10,855, Clack
amas County's median level of $13,038 was 20
percent above that of the State.
One other institution, Canby Union Bank, is
headquartered in Canby. Two branches of Bank of
Oregon, representing the closest alternatives for
Canby area residents other than Canby Union
Bank, are located 3 and 7 miles southwest of Can
by. Therefore, there is an overlapping of the serv
ice areas of the proponents. Guaranty Bank holds
7.3 percent, the fifth largest share, of the IPC
deposits held in the offices of the seven commer
cial banks operating in its trade area. Bank of
Oregon holds 3.9 percent of such deposits. Con
summation of the proposal would eliminate some
existing competition. However, Guaranty Bank's
market is dominated by the State's two major

banks, which hold a combined market share of
59.6 percent, and in view of the minor shares of
aggregate area commercial bank IPC deposits held
by each proponent, this elimination of competi
tion would not weigh significantly against approval
of the application.
Guaranty Bank has experienced managerial and
financial problems and its potential fo r office
expansion is negligible. On the other hand, al
though Bank of Oregon is precluded by Oregon's
home office laws from de novo entry into Canby,
it would likely find other areas of Guaranty Bank's
market attractive for such entry. Thus, the merger
would eliminate the potential for increased compe
tition between the proponents. However, this anti
competitive effect is mitigated as a result of
Guaranty Bank's weakened condition and the
existing domination of the market by the State's
major banks. Any available alternative merger part
ner for Guaranty Bank would be one of the larger
banks which would represent a far more anti
competitive proposal.
In view of the foregoing, the Board of Directors
is of the opinion that the proposed merger would
not substantially lessen competition in any section
of the country, nor would it tend to create a
monopoly or in any other manner be in restraint
of trade.
Financial and Managerial Resources; Future
Prospects. Bank of Oregon has satisfactory finan

cial and managerial resources; those of Guaranty
Bank are less than satisfactory. The latter's future
prospects, as an integral part of the resultant bank,
would be satisfactory.
Convenience and Needs o f the C om m unity to
be Served. The proposed merger would improve

significantly the viability of Guaranty Bank as a
part of the resultant bank and strengthen its com
petitive stance in the relevant market.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

E x change B a n k o f U n a d illa

B a n k in g
o f f ic e s in
o p e r a tio n
B e fo r e

A fte r

7,859

3,972

Unadilla, Georgia
(change title to State Bank
and Trust Company)
to merge with
B a n k o f B y ro m v ille

Byromville
Summary report by Attorney General,
May 11, 1976
Dooly County

(1970 population 10,404) is

BANK ABSORPTIONS APPROVED BY THE CORPORATION
served by four banks, each of which has only one
office. Applicant currently holds 30 percent of
total county commercial bank deposits and ranks
second in the county. Bank ranks fourth with 15
percent. Hence, the proposed acquisition would
produce a bank holding 45 percent of total county
deposits and the bank which currently ranks first
with 33 percent of county deposits will drop to
second place. Also, Applicant and Bank are w ithin
11 miles of each other, which produces some de
gree of competitive overlap.
It must be noted, however, that Applicant and
Bank are controlled by the same five persons.
In sum, the proposed acquisition would elim i
nate direct competition and would greatly increase
concentration and would normally be viewed as
having an adverse effect upon competition. The
existing common ownership and control of the
Applicant and Bank suggests that the damage has
already occurred and that the merger is more a
change in form than in substance.
Basis for Corporation approval, September 7, 1976
Exchange Bank of Unadilla, Unadilla, Georgia
("Exchange Bank"), an insured State nonmember
bank having total resources of $7,859,000 and
total IPC deposits of $6,100,000, has applied, pur
suant to section 18(c) and other provisions of the
Federal Deposit Insurance Act, for the Corpora
tion's prior consent to merge with Bank of Byrom
ville, Byromville, Georgia ("Byrom ville Bank"), an
insured State nonmember bank with total re
sources of $3,972,000 and total IPC deposits of
$3,611,000. The merger would be effected under
the charter of Exchange Bank and with the title
"State Bank and Trust Company." Following the
merger, the sole office of Byromville Bank would
be established as a branch of the resultant bank,
which would then operate a total of two offices.
C om petition. Exchange Bank operates its sole
office in Unadilla, a town in central Georgia lo
cated approximately 40 miles south of Macon and
70 miles east of Columbus. Byromville Bank has
its office in Byromville, located some 12 roadmiles west of Unadilla.*
*A close relationship has existed between the proponents
since September 1973 when the m ajority of Byromville
Bank's stock was acquired by five individuals who also
control more than 60 percent of the stock of Exchange
Bank. The Corporation has consistently taken the posi
tion that where control of a bank is acquired by stock
acquisition not subject to regulatory scrutiny, the effect
of a merger may be the circumvention of the competi
tive standards o f the Bank Merger Act. See Basis for
Corporation Denial of the proposed acquisition of The
Citizens and Southern Bank of Tucker by The Citizens
and Southern Emory Bank, 1971 F D IC Annual Report,
pp. 152, 154 and Basis fo r Corporation approval of the
proposed acquisition of The Citizens and Southern
Emory Bank, 1975 F D IC Annual Report, pp. 105-110.
Therefore, the current affiliation of the two banks is
seen as being of no persuasive value in determining what
competitive impact, if any, the proposed merger may
have.

Both banks are located in the northern half of
Dooly County. This county and the immediately
adjacent area are largely rural and characterized by
an agricultural economy. These areas have experi
enced a declining population over the last two
decades.
Byromville Bank's primary trade area extends
over a radius of approximately 12 miles from
Byromville and includes the Macon County cities
of Montezuma and Oglethorpe to the northwest as
well as the Dooly County communities of Unadilla
to the east and Vienna to the southeast. Including
a bank established in July 1976, seven commercial
banks have one office each in this area and serve a
1970 estimated population of 17,300, representing
a 3.9 percent population decrease during the
1960s. Controlling the fifth and sixth largest
shares of the market's commercial bank IPC de
posits, Exchange Bank and Byromville Bank hold
respectively 15.5 percent and 9.2 percent of such
deposits. Although existing competition between
the proponents would be eliminated by their merg
er, this result would have only slight competitive
significance in view of the market's relatively
modest size and the continued presence therein of
four established competitors whose market shares
range from 16.4 percent to 22.9 percent. Including
the newly established bank in Vienna, there would
be a bank to serve each 2,468 inhabitants in the
market.
Within the primary trade area of the resultant
bank (comprising in addition to Byromville Bank's
market an area extending 15 road-miles north of
Unadilla to Perry in Houston County and a similar
distance east to Hawkinsville in Pulaski County),
11 commercial banks would be represented by a
total of 16 offices. The resultant bank, holding
11.6 percent of the IPC deposits of these offices,
would be third largest in the market. Five other
banks would hold shares ranging from 9.9 percent
to 14.3 percent of such deposits. Including the
newly established bank, each commercial bank
office in this market would serve an average of
2,200 people.
Even if the two banks were not under the same
majority control, it is doubtful that a significant
potential for increased competition between the
proponents through their de novo branching
would exist. Although Georgia law permits their
branching w ithin Dooly County, such de novo
expansion by either would be unlikely in view of
the county's 9.3 percent decline of population
during the 1960s and its present over-banked
structure.
Based on the foregoing, the Board of Directors
has concluded that the proposed merger would
not, in any section of the country, substantially
lessen competition, tend to create a monopoly, or
in any other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. Each proponent has satisfactory finan

FEDERAL DEPOSIT INSURANCE CORPORATION

cial and managerial resources, as would the result
ant bank. Its future prospects appear to be favor
able.
Convenience and Needs o f the C om m unity to
be Served. The larger lending lim it and increased

pool of lendable funds of the resultant bank
should be advantageous to a number of borrowers
in the Unadilla area. Credit card financing would
be introduced in the Byromville area.
In view of the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

C it y B a n k

B a n k in g
o f f ic e s in
o p e r a t io n
B e fo r e

A fte r

7,393

7,870

Lynnwood, Washington
to acquire the assets and assume
the deposit liabilities o f
Evergreen S ta te B a nk

Seattle
Summary report by Attorney General,
July 19, 1976
The banks are relatively close to each other al
though Applicant is located in Snohomish County
and Bank is located in bordering King County.
One of Bank's branches is right on the border of
the two counties. Both banks serve the Seattle
SMSA, and thus they compete w ith each other.
However, given the small size of deposits and mar
ket shares of the banks, the existing competition
between them should be viewed as insubstantial.
Applicant presently controls 5.7 percent of com
mercial bank deposits in its service area and Bank
controls 7 percent. The resulting bank would have
12.7 percent of the total bank deposits in the sur
rounding area. However, if the entire Seattle
SMSA were included in the relevant market, the
respective market shares would be de minimus.
Furthermore, Washington State's laws pertain
ing to branching and holding companies preclude
Applicant from entering King County on a de
novo basis and Bank from entering Snohomish
County. Hence, the proposed acquisition w ill not
eliminate potential competition.
We therefore conclude that the proposed acqui
sition w ill have only a slight adverse effect upon
competition.
Basis for Corporation approval, September 7, 1976
City Bank, Lynnwood, Washington, with total
resources of $7,393,000 and total IPC deposits of
$5,323,000, has applied, pursuant to section 18(c)
and other provisions of the Federal Deposit Insur
ance Act, for the Corporation's prior consent to

acquire the assets of and assume the liability to
pay deposits made in Evergreen State Bank,
Seattle, Washington, with total resources of
$7,870,000 and total IPC deposits of $6,576,000.
The transaction would be effected under the char
ter and with the title of City Bank. Incident to the
proposal, the three offices of Evergreen State Bank
would be established as branches of City Bank,
increasing the number of its offices to four.
C om petition. City Bank operates its sole office
in the city of Lynnwood, a residential community
in southwestern Snohomish County approximately
17 road-miles north of downtown Seattle and 12
miles south of Everett, in northwestern Washing
ton.
Evergreen State Bank has its main office
approximately 12 road-miles north of downtown
Seattle. It maintains one branch each in Innis
Arden and in Inglewood, located respectively 3
miles southwest and 6 miles southeast of the main
office. All three offices are located in residential,
unincorporated areas of northwestern King Coun
ty.
The proponents operate within the SeattleEverett SMSA; however, the area in which the
competitive effects of the merger would be most
immediate is Evergreen State Bank's primary trade
area. This area consists of extreme northwestern
King County and adjacent southwestern Sno
homish County and includes the cities of Kenmore, Lynnwood, and Edmonds. The defined
market area has experienced substantial growth
during recent years. The market's estimated 1970
population of 89,800 represents approximately a
72 percent increase from 1960.
A total of 10 commercial banks operating 23
local offices are represented in Evergreen State
Bank's primary market. The market is dominated
by the State's largest commercial banks. The
State's two largest commercial banks control 56.4
percent of the market's commercial bank IPC
deposits; 77.9 percent of such deposits are con
centrated in four banks. City Bank has 2.7 percent
and Evergreen State Bank has 3.8 percent of such
deposits, representing the second and fourth small
est shares respectively. The proposed transaction
would eliminate existing competition; however, in
view of the modest size of each proponent, the
proposal would have no significant effect on
competition. The resultant bank's 6.5 percent
share of the market's commercial bank IPC de
posits, although fifth largest, would be substan
tially lower than those of the four market leaders.
A Washington commercial bank may legally
branch de novo w ithin the city that contains its
main office, in unincorporated areas of its main
office county, and in unbanked, incorporated
communities throughout the State. As a result of
this law, the number of branch sites open to either
of the proponents is very limited and the potential
for a significant increase in competition between

BANK ABSORPTIONS APPROVED BY THE CORPORATION
the proponents is minimal. Further, any potential
increase in competition that may be eliminated by
the proposal is not considered serious when com
pared with the market's present deposit concentra
tion.
Based on the foregoing, the Board of Directors
is of the opinion that the proposed transaction
would not substantially lessen competition in any
section of the country, nor would it tend to create
a monopoly, or in any other manner be in restraint
of trade.
Financial and Managerial Resources; Future
Prospects. Each proponent has satisfactory finan

cial and managerial resources. Those of the result
ant bank would be satisfactory. Its future pros
pects would be favorable.

As of September 14, 1976, The New Boston
Bank and Trust Company had deposits and other
liabilities of $5.3 million and operated one office.
On September 14, 1976, the Federal Deposit
Insurance Corporation was appointed as liqui
dating agent of The New Boston Bank and Trust
Company.
The Board of Directors finds that the failure of
The New Boston Bank and Trust Company re
quires it to act immediately and thus waives pub
lication of notice, dispenses with the solicitation
of competitive reports from other agencies, and
authorizes the transaction to be consummated
immediately.

Convenience and Needs o f the C om m unity to
be Served. The proposed transaction would have

little effect on the convenience and needs of the
local market. The resultant bank would not offer
any services not presently available in the market;
however, its increased legal lending lim it should
enable it to compete more effectively in the rel
evant market.
The Board of Directors, considering the fore
going information, has concluded that approval of
the application is warranted.

Banking
offices in
Resources
(in
o p e ratio n
thousands
o f dollars) Before A fte r

B ank L eu m i T ru s t C o m p a n y
o f N ew Y o rk

491,222

267,680

New York, New York
to purchase the assets and as
sume the deposit lia b ilitie s o f
A m e ric a n B a n k & T ru s t
C om pany

New York

Banking
offices in
ope ratio n

Resources
(in
thousands
o f dollars) Before A fte r

C a p ito l B a n k and
T ru s t C o m p an y

68,910

9,238

Boston, Massachusetts
to purchase the assets and as
sume the dep osit lia b ilitie s o f
T h e N e w B o sto n B a n k and
T ru s t C o m p an y

Boston
Approved under emergency provisions. No re
port requested from the Attorney General.
Basis for Corporation approval, September 14, 1976
Capitol Bank and Trust Company, Boston,
Massachusetts, an insured State nonmember bank
with total resources of $68,910,000, has applied,
pursuant to section 18(c) and other provisions of
the Federal Deposit Insurance Act, for the Cor
poration's consent to purchase the assets of and
assume liability to pay deposits made in The New
Boston Bank and Trust Company, Boston, Massa
chusetts, an insured State nonmember bank with
total resources of $9,238,000. As an incident to
the transaction, the only office of The New Bos
ton Bank and Trust Company would become a
branch of Capitol Bank and Trust Company.

Approved under emergency provisions. No re
port requested from the Attorney General.
Basis for Corporation approval, September 15, 1976
Bank Leumi Trust Company of New York, New
York (Manhattan), New York, an insured State
no n m e m b er bank w ith total resources of
$491,222,000, has applied, pursuant to section
18(c) and other provisions of the Federal Deposit
Insurance Act, for the Corporation's consent to
purchase the assets of and assume the liability to
pay deposits made in American Bank & Trust
Company, New York (Manhattan), New York, a
State bank and member of the Federal Reserve
System, with total resources of $267,680,000. As
an incident to the transaction, the main office and
four branches of American Bank & Trust Com
pany would become branches of Bank Leumi
Trust Company of New York.
As of September 15, 1976, American Bank &
Trust Company had deposits and other liabilities
of approximately $190 m illion and operated five
offices. On September 15, 1976, the Federal De
posit Insurance Corporation was appointed as
receiver of American Bank & Trust Company.
The Board of Directors finds that the failure of
American Bank & Trust Company requires it to
act immediately and thus waives publication of
notice, dispenses w ith the solicitation of compet
itive reports from other agencies, and authorizes
the transaction to be consummated immediately.

FEDERAL DEPOSIT INSURANCE CORPORATION

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B a n k in g
o f f ic e s in
o p e r a t io n
B e fo r e

A fte r

C a lifo rn ia O verseas B a n k

(in organization)
Beverly Hills, California
to purchase a portion o f the
assets and assume a portion
o f the deposit liabilities o f
A h m a n s o n B a n k and T ru s t
C om pany

25,862

Beverly Hills
Summary report by Attorney General,
August 5, 1976
California Overseas Bank ("California Bank") is
a non-operating institution organized for the pur
pose of effectuating the sale of the commercial
banking business (except for the trust business) of
Ahmanson Bank to a separate new banking organi
zation. After consummation of the proposed plan,
the capital stock of California Bank will largely be
owned by a group of investors (including foreign
investors) not connected with either Ahmanson
Bank or its corporate parent.
It does not appear that the proposed trans
action w ill have any adverse competitive effect.
Basis for Corporation approval, October 6, 1976
Pursuant to sections 5 and 18(c) and other pro
visions of the Federal Deposit Insurance Act,
applications have been filed on behalf of California
Overseas Bank, Beverly Hills, California, a pro
posed new bank in organization, for Federal de
posit insurance and for consent to its purchase of a
portion of the assets and assumption of a portion
of the liabilities of Ahmanson Bank and Trust
Company, Beverly Hills, California ("Ahmanson
Bank"), a State nonmember insured bank with
total resources of $25,862,000 and total IPC de
posits of $20,021,000 as of December 31, 1975.
The main office and two existing branches of
Ahmanson Bank would be established as the main
office and branches of California Overseas Bank.
C om petition. Organization of California Over
seas Bank and the proposed purchase and assump
tion transaction are being utilized by H. F.
Ahmanson & Company, Los Angeles, California, a
holding company controlling 100 percent of the
voting shares of Ahmanson Bank, to divest the
commercial banking business presently conducted
by Ahmanson Bank. California Overseas Bank
would not operate as a commercial bank prior to
the proposed transaction. Subsequent to con
summation of that transaction, California Overseas
Bank would be operated as a commercial bank
under a new management at the existing locations
of Ahmanson Bank. The proposal would not affect
the competitive structure of commercial banking
in the trade area of Ahmanson Bank or result in a

change of the commercial banking services which
Ahmanson Bank has heretofore made available to
the public.
In view of the foregoing, the Board of Directors
is of the opinion that the proposed transaction
would not substantially lessen competition in any
section of the country, nor would it tend to create
a monopoly, or in any other manner be in restraint
of trade.
Financial and Managerial Resources; Future
Prospects. California Overseas Bank's new manage

ment would appear to be both capable and diverse.
Several of these individuals have had extensive and
lengthy experience in the banking field. In addi
tion, it is expected that the present staff of
Ahmanson Bank will be retained. Overall, Cali
fornia Overseas Bank's proposed management
appears to be satisfactory.
Ahmanson Bank has satisfactory financial re
sources. The replacement of current ownership by
a more aggressive and growth oriented ownership
should have favorable results in terms of the
Bank's future resources.
Based on the foregoing, the Board concludes
that the proponents' financial and managerial re
sources are satisfactory and the resultant bank's
future prospects would appear to be favorable.
Convenience and Needs o f the C om m unity to
be Served. In the past, Ahmanson Bank has not

chosen to be a strong competitor. As a result, the
bank has not grown like other banks in its service
area. It is expected that the new management w ill
entirely change past policies and objectives and
will aggressively seek new business, and by be
coming an active competitor in its service area, the
resultant bank should make a meaningful contribu
tion to the financial needs of the community.
On the basis of the foregoing information, the
Board of Directors has concluded that approval of
the applications is warranted.

Bank ing
Resources
o ffices in
(in
o pe ratio n
thousands
o f dollars) Before A fte r

F ra n k lin C o u n ty
Savings B a n k

53,892

497

Farmington, Maine
(change title to
Franklin Savings Bank)
to merge wi th
S o m e rs et L o a n and
B u ild in g A s so c ia tio n

Skowhegan
Summary report by Attorney General,
August 20, 1976

BANK ABSORPTIONS APPROVED BY THE CORPORATION
Based on information contained in the appli
cation, there appears to be no direct competition
between the parties. Neither party has offices in
the other's markets and neither draws any savings
deposits or loans from the market area of the
other.
There are 13 financial institutions (2 savings
banks, 5 commercial banks, 1 savings and loan
association, and 5 credit unions) operating in Asso
ciation's market area w ith total deposits of $102
million and loans of $75 million. Consummation
of the proposed merger w ill result in the elimi
nation of the only savings and loan association in
the market. Although the respective market shares
of each institution will remain the same after the
merger, concentration in the number of savings
banks w ill increase somewhat and the share of
deposits held by all such savings institutions will
increase by 0.4 percent.
Maine permits statewide branching except in
limited circumstances which do not exist in the
present application. By de novo entry into the
Skowhegan market instead of merger, Applicant
would increase competition, rather than eliminate
the only mutual loan and building corporation in
the market. De novo entry is the preferable, less
restrictive alternative for Applicant to enter the
Skowhegan market, absent any "failing company"
argument.
In sum, it appears that the proposed merger will
have some adverse competitive consequences.
Basis for Corporation approval, October 6,1976
Franklin County Savings Bank, Farmington,
Maine (“ Franklin Savings"), an insured mutual sav
ings bank with total resources of $53,892,000 and
total deposits of $49,740,000, has applied, pur
suant to section 18(c) and other provisions of the
Federal Deposit Insurance Act, for the Corpora
tion's prior consent to merge with Somerset Loan
and Building Association, Skowhegan, Maine
("Somerset Loan"), a noninsured mutual loan and
b u ild in g corporation with total resources of
$497,000 and total deposits of $376,000. The
institutions would merge under the charter of
Franklin Savings w ith the title "Franklin Savings
Bank." As an incident to the merger, the sole of
fice of Somerset Loan would become a branch of
the resulting bank, increasing the number of its
approved offices to seven.
C om petition. Franklin Savings operates five of
fices: its main office and two branches in Franklin
County and two branches in Oxford County. Also,
it has approval to open a sixth office in Franklin
County. Franklin Savings is the 12th largest th rift
institution in the State. Somerset Loan operates its
sole office in Skowhegan, Somerset County.
The effects of the merger would be most pro
nounced in Somerset Loan's market, which con
sists of Skowhegan and the adjacent town of
Norridgewock. The combined 1970 population of

Skowhegan and Norridgewock was 9,565, rep
resenting a 2.9 percent increase from 1960. The
1970 population of Somerset County was 40,597,
up 2.1 percent from 1960. Economic activity in
the area includes the manufacture of leather,
paper, lumber products, and textiles. The 1974
median buying level for Somerset County was
$9,713, 9.2 percent below the comparable state
wide figure. The local economy is expected to
receive a significant boost in the near future from
the construction of a large plant of a major paper
products company.
There is no existing competition between
Franklin Savings and Somerset Loan. Their closest
offices are about 28 miles apart, and neither has
any significant business originating in areas served
by the other. Indeed, Somerset Loan is not a
viable competitor in its own market, having
accumulated total deposits of less than $400,000
in its over 90 years of operation. This amounts to
only 0.7 percent of the aggregate IPC deposits of
$55 million in the local market. The other 99.3
percent is held by the Skowhegan Savings Bank
(70.5 percent) and four branches of two commer
cial banks (28.8 percent).*
The potential for competition to develop be
tween the two institutions in the future is remote.
The miniscule size and lack of managerial re
sources preclude any expansion by Somerset Loan.
Moreover, Somerset Loan is required by State law
to become federally insured by March 1977, and
the likely alternative to this merger is liquidation
of the institution. This transaction represents a de
m inim is acquisition and it is the practical equiva
lent of the establishment of a de novo branch in
Skowhegan by Franklin Savings.
Under these circumstances, the Board of Direc
tors is of the opinion that the proposed merger
would not, in any section of the country, substan
tially lessen competition, tend to create a monop
oly, or in any other manner be in restraint of
trade.
Financial and Managerial Resources: Future
Prospects. Financial and managerial resources of

Franklin Savings are generally satisfactory. Finan
cial resources of Somerset Loan are satisfactory;
however, managerial resources are limited by an
elderly staff with no successor management. Con
summation of the proposed merger would elimi
nate the succession problem. Future prospects of
the resulting bank are considered favorable.
Convenience and Needs o f the C o m m unity to
be Served. The proposed merger would provide the
^Because of the increased parity between th r ift institu
tions and commercial banks in the State of Maine, the
Board of Directors has taken the position that commer
cial realities require a viewing of a combined commercial
b ank-thrift institution market when determining the
competitive impact of any proposed merger in Maine.
See Basis fo r Corporation Approval of the proposed
merger of Bangor Savings Bank, Bangor, Maine and the
Piscataquis Savings Bank, Dover-Foxcroft, Maine, page 78.

FEDERAL DEPOSIT INSURANCE CORPORATION

Skowhegan area with an alternative source for all
mutual savings bank services, including maximum
allowable interest rates on regular savings and a
full range of time deposits, as well as conventional,
insured conventional, and VA-guaranteed mort
gage loans. Such alternatives are presently limited
to regular savings and conventional mortgages by
Somerset Loan. This broader range of alternative
services would be offered at a time when demand
for such services in the area should be increasing
due to the completion of the new paper plant in
the Skowhegan area. In addition, Somerset Loan's
depositors would gain the protection and security
of Federal deposit insurance.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

T h e M e rc h a n ts B a n k

B a n k in g
o f f ic e s in
o p e r a t io n
B e fo r e

A fte r

83,354

7,216

Burlington, Vermont
to merge with
H a rd w ic k T r u s t C o m p a n y

Hardwick
Summary report by Attorney General,
August 19, 1976
Although neither party has banking facilities in
the other's service area, both institutions derive
some business from the other's market. Applicant
derived 0.36 percent of its deposits and 0.67 per
cent of its loans from Bank's service area. Sim
ilarly, Bank receives 5.7 percent of its deposits and
0.5 percent of its loans from Applicant's service
area. Hence, the proposed acquisition would elimi
nate a small amount of existing competition.
There are seven commercial banking institu
tions serving Caledonia County. Applicant has no
facility in the county, but nevertheless it has an
0.8 percent market share. Bank, the smallest com
mercial banking institution in the county, controls
9 percent of the deposits and 1 of the 10 commer
cial banking offices in the county. Consummation
of the proposed merger w ill give the resulting insti
tution total deposits and loans of 9.8 percent and
$4.3 million, respectively, and will effectively in
crease Applicant's market share by 9 percent, al
though it w ill not change its county rank. Accord
ingly, the proposed acquisition would tend to
increase concentration in banking in Caledonia
County slightly.
Vermont banking law permits both Applicant
and Bank to freely enter the primary service area
of the other, either by branching or the establish
ment of a de novo bank. Indeed, since 1963 A ppli
cant has on five occasions entered new markets

through the establishment of de novo branches.
Nothing in the application suggests that de novo
entry is infeasible in the instant situation. The pro
posed acquisition, therefore, would eliminate
potential competition to an im portant degree.
In sum, it appears that overall the proposed
acquisition will have adverse competitive conse
quences, particularly as regards potential competi
tion.
Basis for Corporation approval, October 6, 1976
The Merchants Bank, Burlington, Vermont
(“ Merchants"), a State nonmember insured bank
with total resources of $83,354,000 and total IPC
deposits of $68,178,000, has applied, pursuant to
section 18(c) and other provisions of the Federal
Deposit Insurance Act, for the Corporation's prior
consent to merge with Hardwick Trust Company,
Hardwick, Vermont ("Hardwick Trust"), with
total resources of $7,216,000 and total IPC de
posits of $5,780,000. The banks would merge
under the charter and title of Merchants. The 1 of
fice of Hardwick Trust, as an incident to the merger,
would become a branch of the resulting bank, in
creasing to 11 the total number of its offices.
C om petition. Merchants operates its 10 offices
in western Vermont: 6 offices in Chittenden Coun
ty, 2 in Washington County, and 1 each in Addi
son and Grand Isle Counties. Merchants is the
State's fifth largest commercial bank, holding 5.4
percent of the statewide commercial bank de
posits.
Hardwick Trust, operating its sole office in
Hardwick, Caledonia County, is ranked 27th
among the 29 commercial banks in the State.
Hardwick is situated in the northeast quadrant of
the State and is approximately 45 miles east of
Burlington.
The most appropriate geographic area in which
to assess the competitive effects of the proposed
transaction would be Hardwick Trust's market,
which consists of the town of Hardwick and five
adjacent communities in Caledonia County. This
market area had a population of 4,651 in 1970,
representing a 1.8 percent increase since 1960. Its
economy is based primarily upon agriculture, with
tourism and light manufacturing of some impor
tance. Caledonia County's 1974 median household
income of $9,004 was 11.4 percent below the
statewide median of $10,160. The only other
banking office in the trade area is a branch of
S te rlin g Trust Company, Johnson, Vermont,
which opened for business on November 24, 1975,
and had total deposits of only $501,000 on June
25, 1976. Merchants does not operate in this mar
ket. The proponents' closest offices, Merchants'
office in Barre and Hardwick Trust's office in
Hardwick, are located 25 road-miles apart. There
fore, no significant existing competition between
the two banks would be eliminated by their pro
posed merger.

BANK ABSORPTIONS APPROVED BY THE CORPORATION
Although Vermont law permits statewide de
novo branching, there is little potential for the
development of competition in the future between
Merchants and Hardwick Trust. Hardwick Trust, in
operation since 1892, has confined its expansion
activity to one merger in 1931 and it lacks the
managerial and financial resources to branch de
novo. For its part, Merchants would not find the
Hardwick trade area attractive for de novo entry at
the present time because income levels are well
below the statewide average and each banking of
fice presently serves an average of 2,325 people,
compared with an average of 2,598 people per
banking office throughout the State. Accordingly,
any elimination of potential competition between
Merchants and Hardwick Trust which might result
from their proposed merger is not significant.
Under the circumstances presented, the Board
of Directors is of the opinion that the proposed
merger would not, in any section of the country,
substantially lessen competition, tend to create a
monopoly, or in any other manner be in restraint
of trade.

section 18(c) and other provisions of the Federal
Deposit Insurance Act, for the Corporation's con
sent to purchase the assets of and assume the li
ability to pay deposits made in Centennial Bank,
Philadelphia, Pennsylvania, an insured State non
member bank with total resources of $15,281,000.
As an incident to the transaction, the main office
and three branches of Centennial Bank would be
come branches of Lincoln Bank.
As of October 20, 1976, Centennial Bank had
deposits and other liabilities of some $12.4 million
and operated four offices. On that date, Pennsyl
vania Secretary of Banking William E. Whitesell
took possession of Centennial Bank.
The Board of Directors finds that the failure of
Centennial Bank requires it to act immediately and
thus waives publication of notice, dispenses with
the solicitation of competitive reports from other
agencies, and authorizes the transaction to be con
summated immediately.

Financial and Managerial Resources; Future
Prospects. Both Merchants and Hardwick Trust

have satisfactory financial and managerial re
sources for their present operations, as would the
resultant bank. Future prospects for the resultant
bank are favorable.
Convenience and Needs o f the C om m unity to
be Served. Customers of Hardwick Trust would be

offered broader banking services by a more aggres
sive management, such as an expanded deposit
program, free checking for senior citizens, more
sophisticated trust services, substantially increased
lending limits, and a credit card plan.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

L in c o ln B a n k

B a n k in g
o f f ic e s in
o p e r a tio n

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B e fo r e

A fte r

110,596

15,281

Bala-Cynwyd,
Pennsylvania
to purchase the assets and as
sume the deposit liabilities o f
C e n te n n ia l B a n k

Philadelphia
Approved under emergency provisions. No re
port requested from the Attorney General.
Basis for Corporation approval, October 21, 1976
Lincoln Bank, Bala-Cynwyd, Pennsylvania, an
insured State nonmember bank with total re
sources of $110,596,000, has applied, pursuant to

T h e M ississippi B a n k

B a n k in g
o f f ic e s in
o p e r a tio n

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B e fo r e

A fte r

152,410

18,784

Jackson, Mississippi
to merge with
T ru c k e rs E xch an g e B a n k

Crystal Springs
Summary report by Attorney General,
September 27, 1976
In terms of county deposits, Applicant is the
third largest of the 10 banking organizations oper
ating in Hinds County. As of June 30, 1975,
Applicant's Hinds County offices held deposits of
$72 million, 6.5 percent of the total deposits held
by commercial banking offices located in that
county. Deposit Guaranty National Bank, the larg
est banking organization in the State, held, as of
June 30, 1975, deposits of $510 million at its
Hinds County offices, 46 percent of total county
deposits. First National Bank of Jackson, the
second largest banking organization in the State,
held, as of June 30, 1975, deposits of $448 m illion
at its Hinds County offices, 40.4 percent of coun
ty deposits.
Bank is the second largest of the four banks
operating in Copiah County, which adjoins Hinds
County to the south. Its deposits of $15.5 million,
as of June 30, 1975, constituted 28 percent of
deposits held by Copiah County banks. Bank of
Hazlehurst is the largest bank in Hinds County; it
held deposits of $19.8 million, as of June 30,
1975, 36 percent of total Copiah County deposits.
Merchant and Planters Bank and Bank of Wesson

FEDERAL DEPOSIT INSURANCE CORPORATION

held, as of June 30, 1975, 22 percent and 14 per
cent, respectively, of total Copiah County de
posits. According to the application, the State has
approved a charter for a new bank which will be
located in Crystal Springs, Copiah County.
The closest offices of Applicant and Bank
(Applicant's branch in Terry, Hinds County, and
Bank's main office in Crystal Springs, Copiah
County) are 9 miles apart, and there is some over
lap between Applicant's and Bank's service areas.
The application does not indicate the amount of
deposits or number of accounts held by A ppli
cant's Terry branch which are drawn from Bank's
service area. However, even assuming that all the
deposits held by Applicant's Terry branch—total
deposits of approximately $2 million (including
IPC dem and d e p osits o f a p p ro x im a te ly
$500,000)—are drawn from Bank's service area,
the proposed acquisition would not eliminate a
significant degree of direct competition. The de
posits held by Applicant's Terry branch constitute
only 1.4 percent of Applicant's total deposits, and
equal only 3.6 percent of the total deposits held
by Copiah County banks and 11.7 percent of
Bank's total deposits.
Under Mississippi law, either bank could be per
mitted to open de novo branches in the area served
by the other. Applicant, however, is substantially
smaller than the two largest banks in the State
which operate in its service area and which may
also enter Bank's service area. Therefore, the pro
posed acquisition would be unlikely to have a sig
nificantly adverse effect on potential competition.
In sum, the proposed acquisition will have,
overall, slightly adverse anticompetitive effects.
Basis for Corporation approval, November 3, 1976
The Mississippi Bank, Jackson, Mississippi
(“ Jackson Bank"), an insured State nonmember
bank with total assets of $152,410,000 and total
IPC deposits of $50,271,000, has applied, pur
suant to section 18(c) and other provisions of the
Federal Deposit Insurance Act, for the Corpora
tion's prior consent to merge under its charter and
t it le w ith Truckers Exchange Bank, Crystal
Springs, Mississippi ("Truckers"), an insured State
n o n m e m b er bank w ith total resources of
$ 1 8 ,7 8 4 ,0 0 0 and to ta l IPC d e p osits of
$15,223,000. Incident to the merger, the 3 offices
of Truckers would be established as branches of
the resulting bank, increasing to 13 the total num
ber of its offices.
C om petition. Jackson Bank maintains its 10
offices w ithin the Jackson SMSA, in the southwest
quadrant of Mississippi. This SMSA comprises
Hinds and Rankin Counties and had a 1970 popu
lation of 258,906, representing a 17.0 percent in
crease since 1960.
Truckers operates its main office and two
branches in the city of Crystal Springs, in Copiah
County, 25 road-miles southwest of Jackson.

Copiah County adjoins the southern border of
Hinds county and many of its workers commute
to Jackson or its suburbs for employment. Crystal
Springs and Copiah County had 1970 populations
of 4,180 and 24,749, respectively. The county's
population represented an 8.5 percent decrease
from 1960 and its median household buying level
of $6,957 was substantially below the statewide
median of $8,706.
Effects of the proposed merger would be most
immediate and direct in Truckers' local market,
which comprises Copiah County and the southern
portion of adjoining Hinds County. This includes
the towns of Terry and Utica, which are respec
tively located 9 miles northeast and 20 miles
northwest of Crystal Springs. There are 12 offices
of 6 commercial banks operating w ithin this mar
ket, serving a 1970 population estimated at
27,250. In addition, a new unit bank has been
chartered and approved for Federal deposit insur
ance and w ill be located in Crystal Springs. Jack
son Bank operates one office in this market area.
As of June 30, 1975, Truckers held 24.3 percent
of the local market's commercial bank IPC de
posits, representing the second largest share of
such deposits. With merely $1,972,000 in IPC de
posits, Jackson Bank's Terry branch held 3.6 per
cent of the IPC deposits, representing the local
market's smallest share. The resultant bank's 27.9
percent share of the market's commercial bank
IPC deposits would remain second to the 31.6 per
cent share held by the market's largest competitor,
Bank of Hazlehurst. The proposed transaction
would eliminate existing competition; however, in
view of Jackson Bank's modest size in the local
market, the proposal is not viewed as having a sig
nificant effect on competition.
Under Mississippi law, each of the proponents
may enter de novo the primary trade area of the
other, but there appears to be little likelihood of
this occurring. Truckers, in business for 44 years,
has never expanded beyond Crystal Springs and
would be unlikely to enter the Jackson SMSA, an
area of intense competition, within the near fu
ture. With the pending entry of a new unit bank
into Crystal Springs and as a result of the market's
limited population, the Crystal Springs local mar
ket would be unattractive for de novo expansion.
Further, even if the area were to become attractive
for expansion in the future, several of the State's
largest banks would be capable of de novo entry
into the market.
In its maximum potential market, which under
State law is that region in Mississippi lying within a
radius of 100 miles of its main office, Jackson
Bank controls 1.5 percent of the IPC deposits held
on June 30, 1975, by all area offices of the 100
commercial banks now represented in this market.
The proposed merger would increase this share to
2.0 percent.
From the foregoing data it appears that the pro
posed merger would not have a significant effect

BANK ABSORPTIONS APPROVED BY THE CORPORATION

on competition in any relevant area; and thus, the
Board of Directors is of the opinion that the propsoed merger would not, in any section of the
country, substantially lessen competition, tend to
create a monopoly, or in any other manner be in
restraint of trade.
Financial and Managerial Resources; Future
Prospects. Both Jackson Bank and Truckers have

adequate financial and managerial resources, as
would the resulting bank.
Convenience and Needs o f the C om m unity to
be Served. With a substantially increased credit

capability, an aggressive management would offer
at Truckers' locations a broader spectrum of lend
ing services and introduce trust services in the area.
In light of the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

D r y D o c k Savings B a n k

B a n k in g
o f f ic e s in
o p e r a tio n
B e fo r e

A fte r

1,626,421

81,729

New York, New York
to merge with
N e w Y o r k F ed eral Savings
and L o a n A s so ciatio n

New York
Summary report by Attorney General,
June 22, 1976
We have reviewed this proposed transaction and
conclude that it would not have a substantial
competitive impact.
Basis for Corporation approval, November 3, 1976
Dry Dock Savings Bank, New York (Man
hattan), New York ("D ry Dock"), an insured mu
tu a l savings bank with total resources of
$ 1 , 6 2 6 , 4 2 1 , 0 0 0 and to ta l d e p osits o f
$1,518,290,000, has applied, pursuant to section
18(c) and other provisions of the Federal Deposit
Insurance Act, for the Corporation's prior consent
to merge with New York Federal Savings and Loan
Association, New York (Manhattan), New York
("Federal"), with total resources of $81,729,000
and total deposits of $73,621,000, upon the latter's conversion to a State charter. The merger
would be effected under the charter and title of
Dry Dock, and incident to the transaction, the 3
offices of Federal would become branches of the
resultant bank, increasing to 17 the number of its
approved offices.
C om petition. Dry Dock presently operates a
total of 12 offices: its main office and 8 branches
in Manhattan, 2 branches in Queens, and 1 in

Nassau County. In addition, it has approval to
establish a branch in Suffolk County and is pro
posing the relocation to Nassau County of a
branch it acquired, but has never operated, by its
April 1975 purchase of Fifth Avenue Savings and
Loan Association. Dry Dock's primary trade area
comprises the boroughs of Manhattan, Bronx,
Brooklyn, and Queens, in New York City, and
adjacent Nassau County. It is not represented in
Westchester County.
Federal has its main office in Manhattan and
two branches in Westchester County and it draws
the bulk of its deposits from these two areas.
Dry Dock and Federal have their main offices
at locations 1.3 miles apart on Lexington Avenue
in Manhattan. Within the Manhattan-Westchester
market, Dry Dock and Federal, respectively, hold
4.72 percent and 0.31 percent of the deposits held
by area offices of 40 mutual savings banks and 33
federally insured savings and loan associations.
Although some direct competition would be elimi
nated as a result of the proposed merger, in light
of the modest size of each of the proponents and
the numerous competing th rift institutions in the
market, the competitive effects would be insignifi
cant.
New York law permits th rift institutions to
establish only one de novo branch per year. In
view of the modest size of each institution in its
market and the intense competition presently
existing therein, there appears to be little potential
for significant competition to develop between
Dry Dock and Federal in the near future.
Dry Dock is the 10th largest of New York's
th rift institutions, holding approximately 2.5 per
cent of their aggregate deposits. The resultant
bank, with approximately 2.6 percent of such
deposits, would remain the 10th largest in the
State.
The Board of Directors is of the opinion that
the proposed merger would not, in any section of
the country, substantially lessen competition, tend
to create a monopoly, or in any other manner be
in restraint of trade.
Financial and Managerial Resources; Future
Prospects. While some weaknesses are noted in the

condition of Dry Dock's assets and the level of its
surplus accounts, its financial resources are con
sidered adequate for the purposes of this proposal
and its management is satisfactory. Federal's finan
cial and managerial resources are less than accept
able. Financial and managerial resources of the
resultant bank, however, would be acceptable and
its future prospects appear to be favorable.
Convenience and Needs o f the C om m unity to
be Served. The proposed transaction would have

little effect on the convenience and needs of the
Manhattan market. The resulting institution would
offer no services that are not presently available
from numerous alternative sources in the relevant
market.

FEDERAL DEPOSIT INSURANCE CORPORATION

The Board of Directors, considering the fore
going information, has concluded that approval of
the application is warranted.

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B a n k in g
o f f ic e s in
o p e r a t io n
B e fo r e

A fte r

3,191,245

26,390

T h e N e w Y o r k B a nk
f o r Savings

New York, New York
to merge with
G enesee F ed eral Savings
and L o a n A s so ciatio n

Irondequoit
Summary report by Attorney General,
June 9, 1976
Applicant's branch office at Jefferson Valley
and the Genesee Savings' branch office at Henrietta
(the closest offices of the parties) are 305 miles
apart. Thus, it appears the proposed acquisition
would eliminate no significant existing competi
tion.
Since January 1, 1976, statewide branching has
been permitted under New York State law with
certain exceptions, one of which requires that the
city or village into which branching is contem
plated have a population in excess of 50,000.
Given the size of Rochester, Applicant could
branch into the area served by Genesee Savings.
Accordingly, the proposed acquisition would
eliminate potential competition to some extent. It
should be noted, however, that Genesee Savings
ranks eighth among the nine th rift institutions
which serve the Rochester area. Furthermore,
there are 10 commercial banks which serve the
market, several of which are upstate appendages of
New York City banks that rank among the largest
financial institutions in the country. Viewing all
19 financial institutions that currently serve the
Rochester area collectively, the total deposits held
by Genesee Savings represent 0.03 percent of the
total deposits of all 19 institutions and its 2 offices
represent less than 1 percent of total offices in the
region. Thus, the amount of potential competition
lost as a result of the proposed acquisition is not
substantial. Indeed, the acquisition w ill create a
financial institution much more capable of com
peting against the large institutions already serving
the market than Genesee Savings standing alone.
In sum, the proposed acquisition would have
only a slightly adverse effect upon competition.
Basis for Corporation approval, November 3, 1976
The New York Bank for Savings, New York
(Manhattan), New York ("A pplicant"), an insured
mutual savings bank with total resources of

$ 3 ,1 9 1 ,2 4 5 ,0 0 0 and to ta l d e p osits of
$2,757,194,000, has applied, pursuant to section
18(c) and other provisions of the Federal Deposit
Insurance Act, for the Corporation's prior consent
to merge with Genesee Federal Savings and Loan
Association, Irondequoit (P. O. Rochester), New
York ("Genesee"), a federally insured savings and
loan a sso cia tio n w ith to ta l resources of
$26,390,000 and total deposits of $24,795,000.
The 2 institutions would merge under the charter
and title of Applicant, and incident to the merger,
the 2 offices of Genesee would become branches
of the resultant bank, increasing to 21 the number
of its offices.
C om petition. Applicant operates its main office
and 16 branches in Manhattan and its remaining 2
branches in Westchester County. Applicant is the
third largest of New York's mutual savings banks,
holding 4.5 percent of their aggregate deposits.
Genesee has its main office in Irondequoit and
its only branch in Henrietta, located respectively
approximately 6 miles north and 7 miles south of
Rochester. The city of Rochester, centrally lo
cated in Monroe County, is the largest center of
population and industry between Syracuse and
Buffalo in northwestern New York State. The
1975 median household buying level of Monroe
County ($16,576) exceeded that of the State by
21.4 percent. The area enjoys the lowest unem
ployment rate in the State and its continued eco
nomic stability is indicated.
The Monroe County th rift institution market is
shared by three mutual savings banks, whose area
offices hold aggregate deposits of $1,562 billion,
and six savings and loan associations, whose coun
ty offices hold deposits of $1,003 billion. Genesee
has the eighth largest share, 1.0 percent, of the
deposits held by county offices of these nine insti
tutions.
No office of Applicant is located within 300
road-miles of either office of Genesee and the pro
ponents' primary trade areas are separate and dis
tinct. No significant existing competition between
them would be eliminated by their merger. The
possibility of significant competition developing
between Applicant and Genesee through their de
novo branching is limited. Modest-sized Genesee
would not find feasible its entry into the distant,
intensely competitive metropolitan New York
market. New York law limits to one the number of
de novo branches any th rift institution may estab
lish per year. As a result, there is little potential
for the development of a significant amount of
competition in the near future even if Applicant
were to branch de novo into the Rochester trade
area.
Based on the foregoing, the Board of Directors
is of the opinion that the proposed merger would
not, in any section of the country, substantially
lessen competition, tend to create a monopoly, or
in any manner be in restraint of trade.

BANK ABSORPTIONS APPROVED BY THE CORPORATION

Financial and Managerial Resources; Future
Prospects. While some weaknesses are noted in the

Financial and Managerial Resources; Future
Prospects. The financial and managerial resources

condition of Applicant's assets and the level of its
surplus accounts, its financial and managerial re
sources are considered adequate for purposes of
this proposal. Genesee's financial and managerial
resources are acceptable. Financial and managerial
resources of the resultant bank would be accept
able and its future prospects appear to be favor
able.

and future prospects of Union Story are satis
factory.

Convenience and Needs o f the C om m unity to
be Served. The proposed transaction would have

Convenience and Needs o f the C om m unity to
be Served. The proposed transaction would be an

internal reorganization and would not affect the
convenience and needs of the community.
Based on the foregoing information, the Board
of Directors has concluded that approval of the
application is warranted.

little effect on the convenience and needs of the
local market. The resulting institution would offer
no services that are not currently available from
alternative sources in the relevant area.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

Banking
Resources
offices in
(in
ope ratio n
thousands
o f dollars) Before A fte r

B ran ch B a n k in g a n d T r u s t
C om pany

426,782

17,549

Wilson, North Carolina
Banking
Resources
offices in
(in
op e ratio n
thousands
o f dollars) Before A fte r

U n io n S to ry T ru s t
& Savings B a n k

31,835

Ames, Iowa
to merge w ith
U n io n C o m p a n y

Ames
Summary report by Attorney General,
October 18, 1976
The merging banks are both wholly owned sub
sidiaries of the same bank holding company. As
such, their proposed merger is essentially a cor
porate reorganization and would have no effect on
competition.
Basis for Corporation approval, November 16, 1976
Union Story Trust & Savings Bank, Ames, Iowa
("Union Story"), an insured State nonmember
bank w ith total resources of $31,835,000, as of
December 31, 1975, has applied, pursuant to sec
tion 18(c) and other provisions of the Federal
Deposit Insurance Act, for the Corporation's prior
consent to merge with Union Company, Ames,
Iowa, a nonbanking entity which holds title to
Union Story's banking premises and which is
wholly owned by Union Story. The merger would
be effected under the charter and title of Union
Story.
C om petition. The proposed merger would be a
minor internal reorganization designed to return
direct ownership of Union Story's banking prem
ises to the bank from its wholly owned subsidiary.
As such, it would not affect competition.

to merge w ith
T h e C itiz e n s B a n k o f
W a rre n to n

Warrenton
Summary report by Attorney General,
September 10, 1976
Bank operates solely in Warrenton (population
1 ,000), Warren County (population 15,800).
Applicant operates its closest branch office in
Littleton which is located in adjoining Halifax
County about 16 miles away. Applicant also oper
ates six other branch offices in Halifax County
whose distances from Warrenton range between 30
and 65 miles. Thus, it seems clear that the pro
posed acquisition w ill not eliminate existing com
petition.
There are three banks operating in Warren
County. As of December 31, 1975, Bank had de
posits of $14.5 m illion, 60 percent of county de
posits; Peoples Bank and Trust Co., the State's
10th largest bank, had deposits of $5.4 million at
its branch in Norlina (4 miles northwest of Warren
ton), representing 25.7 percent of county deposits;
and First Citizens Bank and Trust Co., the State's
5th largest bank, had deposits of $1.1 million at its
Warrenton branch, equal to 5.2 percent of county
deposits. Hence, the proposed acquisition w ill not
increase concentration in Warren County. A ppli
cant is the second largest bank in Halifax County,
with about 30 percent of total deposits. Should it
be deemed appropriate to define the relevant mar
ket to embrace both Warren and Halifax Counties,
there would be an increase in concentration. The
second largest bank would be acquiring the fifth
largest bank in the two-county market, and the
resulting bank would rank first with 36 percent of
total two-county deposits.

FEDERAL DEPOSIT INSURANCE CORPORATION

Under North Carolina law either bank could be
permitted to open de novo branches in the areas
served by the other. Accordingly, the merger
would eliminate the potential for increased compe
titio n between the merging banks in the WarrenHalifax County area. However, the area is open to
entry by the State's four largest banks, with de
posits ranging from $1 billion to $3.1 billion, none
of which presently operates an office there. In
view of the decline in the area's population, and
the ability of the State's largest banks to enter the
area, consummation of the proposed merger would
be unlikely to have a significantly adverse effect
on potential competition.
In sum, the proposed acquisition will have some
adverse competitive effects.
Basis for Corporation approval, November 16, 1976
Branch Banking and Trust Company, Wilson,
North Carolina ("Branch"), an insured State
n o n m e m b er bank w ith total resources of
$ 4 2 6 ,7 8 2 ,0 0 0 and to ta l IPC deposits of
$327,085,000, has filed, pursuant to section 18(c)
and other provisions of the Federal Deposit Insur
ance Act, an application seeking the Corporation's
prior consent to merge under its charter and title
with The Citizens Bank of Warrenton, Warrenton,
North Carolina ("Citizens"), an insured State non
member bank with total resources of $17,549,000
and total IPC deposits of $14,825,000. As an
incident of the merger, the 2 offices of Citizens
would be established as branches of the resultant
bank, increasing to 79 the number of its approved
offices.
C om petition. Branch is the sixth largest com
mercial bank in North Carolina and its parent,
Branch Corporation, a one-bank holding company,
is the State's seventh largest banking organization.
Operating largely in the east-central and midwestern sections of the State, Branch has a total of
77 offices, including 1 approved but unopened
branch.
Citizens operates its two offices in the town of
Warrenton, the county seat and trading center of
Warren County. Located in central-northern North
Carolina and characterized as a rural and pre
dominantly agricultural area, Warren County had a
1970 population of 15,810, representing a 19.6
percent decrease from 1960.
Effects of the proposed merger would be most
immediate and direct in Citizens' local market,
which consists of Warren County. Three commer
cial banks have offices in this market, holding, on
June 30, 1975, IPC deposits aggregating $20.3
million. With 68.8 percent of such deposits, C iti
zens is the dominant bank in this market.
Branch's nearest office is located in the Halifax
County portion of the town of Littleton, which
lies partly in Warren County, 16 road-miles east of
Warrenton. The intervening area is sparsely popu
lated and neither proponent appears to draw a

significant amount of business from the market of
the other.
Although North Carolina law permits statewide
de novo branching, there is very little potential for
the development of competition in the future be
tween the proponents. Citizens is being operated
under the conservative policies of an aged manage
ment and it is not likely to undertake office ex
pansion. With a decreasing population and a 1974
median household buying level 34.6 percent below
that of the State, Warren County would be un
likely to attract Branch's de novo entry. Should
Warren County become attractive for such entry,
the State's largest banks would also be potential
entrants.
The proposed merger would not eliminate signi
ficant existing or potential competition between
Branch and Citizens, nor would it reduce the
number of banking alternatives within the relevant
market. Based on the foregoing, the Board of
Directors is of the opinion that the proposed merg
er would not, in any section of the country, sub
stantially lessen competition, tend to create a
monopoly, or in any other manner be in restraint
of trade.
Financial and Managerial Resources; Future
Prospects. The financial resources of both pro

ponents are adequate. The managerial resources of
Branch Bank are satisfactory. Future prospects of
the resultant bank are favorable.
Convenience and Needs o f the C om m unity to
be Served. The merger would introduce at C iti

zens' two offices the full range of banking and
trust services of one of the State's major banks. An
aggressive management, operating with a greatly
increased credit capability, should improve the
scope and quality of banking service in the Warren
County market.
On the basis of the foregoing information, the
Board of Directors has concluded that approval of
the application is warranted.

B a n k in g
o f f ic e s in
o p e r a t io n

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B e fo r e

A fte r

124,053

18,333

F irs t V ir g in ia B a n k o f
T id e w a te r

Norfolk, Virginia
to merge w ith
F irs t V ir g in ia B a n k o f th e
Peninsula

Poquoson
Summary report by Attorney General,
August 19, 1976
The merging banks are both wholly owned sub
sidiaries of the same bank holding company. As

BANK ABSORPTIONS APPROVED BY THE CORPORATION
such, their proposed merger is essentially a cor
porate reorganization and would have no effect on
competition.
Basis for Corporation approval, November 16, 1976
First Virginia Bank of Tidewater, Norfolk, V ir
ginia ("Tidewater Bank” ), an insured State non
m e m b e r b a n k w ith to ta l resources of
$ 1 2 4 ,0 5 3 ,0 0 0 and to ta l IPC deposits of
$102,393,000, has applied, pursuant to section
18(c) and other provisions of the Federal Deposit
Insurance Act, for the Corporation's prior consent
to merge with First Virginia Bank of the Peninsula,
Poquoson, Virginia ("Peninsula Bank"), an insured
State member bank with total resources of
$ 1 8 ,3 3 3 ,0 0 0 and to ta l IPC d e p o sits of
$12,845,000. The banks would merge under the
charter and title of Tidewater Bank, and incident
to the merger, the five offices of Peninsula Bank
would be established as branches of the resultant
bank.
C om petition. This proposal is designed solely to
provide a means by which First Virginia Bankshares Corporation, Falls Church, Virginia ("F irst
Virginia” ), a registered bank holding company,
may consolidate its operations in the Tidewater
and Peninsula areas of Virginia. Both proponents
have been controlled by First Virginia for the past
5 years and the proposal would not change the
effective structure or concentration of resources of
commercial banking in their relevant markets nor
would there be any significant change in the bank
ing services they presently provide.
The Board of Directors is of the opinion that
the proposed merger would not, in any section of
the country, substantially lessen competition, tend
to create a monopoly, or in any other manner be
in restraint of trade.
Financial and Managerial Resources; Future
Prospects. The proponents' financial and man

agerial resources are considered adequate for pur
poses of this proposal. The financial and man
agerial resources of the resultant bank would be
satisfactory and its future prospects appear to be
favorable.
Convenience and Needs o f the C om m unity to
be Served. This proposal represents an internal re

organization and no effect on the convenience and
needs of the community is expected.
On the basis of the foregoing information, the
Board of Directors has concluded that approval of
the application is war ranted.

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

Japan C a lifo rn ia B a n k

B a n k in g
o f f ic e s in
o p e r a t io n
B e fo r e

A fte r

36,466

_ *

Los Angeles, California
to purchase a portion o f the
assets and assume liability
to pay a portion o f the
deposits o f
B a n k o f M o n tre a l
(C a lifo r n ia )

San Francisco
Summary report by Attorney General,
May 24, 1976
Japan California's closest office to the San Diego
branch is 120 miles away. The proposed branch in
San Jose is even farther away. The applicant bank
presently has no accounts or customers in San
Diego County nor do the two banks share any
loans. Thus, there is no existing competition be
tween the banks that would be eliminated.
Potential competition is also not a problem in
spite of California's lack of legal limitations on
branching. The acquiring bank is very small in rela
tion to California's high degree of concentration,
and the bank it is acquiring has only .05 percent of
the market in San Diego County which is clearly
de minimus.

Basis for Corporation approval, November 30, 1976
Japan California Bank, Los Angeles, California
("Japan California"), a State nonmember insured
bank with total resources of $36,466,000 and
total IPC deposits of $13,306,000 on December
31, 1975, has applied, pursuant to section 18(c)
and other provisions of the Federal Deposit Insur
ance Act, for the Corporation's prior consent to
purchase a portion of the assets of and assume li
ability to pay a portion of the deposits in Bank of
Montreal (California), San Francisco, California, a
State nonmember insured bank. Japan California
also has applied for consent to establish Bank of
M ontreal's Westgate Plaza branch ("Montreal
branch"), with total deposits of $1,637,000 as of
December 31, 1975, as a branch, increasing the
number of its offices to two.
C om petition. Japan California operates its one
office in downtown Los Angeles and it is the 87th
largest of California's commercial banks, holding
0.03 percent of their aggregate deposits.
The Montreal branch operates in a trade area
consisting of the city of San Diego. Within this
area it is competing with 121 offices of 24 banks
and it holds merely 0.1 percent of total deposits.
Nine of the State's 10 largest banks are rep
resented in this area and hold a total of 84.0 per
cent of the area's commercial bank deposits.
*Total resources statistics are not available on a branch
basis.

FEDERAL DEPOSIT INSURANCE CORPORATION

Japan California's only office is located approx
imately 120 road-miles north of the Montreal
branch and has no deposits in the San Diego area.
California law permits statewide de novo branch
ing; however, were such expansion to occur, no
significant competition between the proponents
would result in view of the fact that both are
modest-sized operations in markets dominated by
the State's major banks. For these reasons, it
appears that the approval of this application would
not eliminate significant existing or potential
competition between the two proponents, nor
would it affect the structure of commercial bank
ing in any relevant area.
The Board of Directors, therefore, has con
cluded that the proposed transaction would not, in
any section of the country, substantially lessen
competition, tend to create a monopoly, or in any
other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. Each proponent has satisfactory finan

cial and managerial resources and favorable future
prospects, as would the resultant bank.
Convenience and Needs o f the C om m unity to
be Served. No significant enhancement of public

convenience is likely to result from the proposal.
Nine of the State's 10 largest banks are rep
resented in Montreal branch's trade area. Expan
sion of services to include Japan California's
international banking services at the Montreal
branch location would provide an additional alter
native for such services in the relevant area.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

Basis for Corporation approval, November 30, 1976
The First National Bank of Boston, Boston,
Massachusetts ("F N B B "), a national banking asso
ciation having total resources of $7,540,247,000,
has applied, pursuant to section 18(c) of the Fed
eral Deposit Insurance Act, for the Corporation's
prior consent to acquire the assets and assume the
liabilities of Boston Leasing, GmbH, Frankfurt,
Federal Republic of Germany ("B L G "), a non
insured indirect wholly owned subsidiary of
FNBB.
The proposed transaction is in effect a cor
porate reorganization whose purpose is to change
the legal form under which FNBB conducts its
leasing business in the Frankfurt market. As a
result of the merger, substantially all the assets and
liabilities of BLG would be transferred to the ac
counts of FNBB's Frankfurt branch. The trans
action consummated, FNBB would carry on essen
tially the same leasing business at its Frankfurt
branch, in addition to the other services now of
fered by that branch, as has heretofore been con
ducted by BLG.
C om petition. The proposed transaction would
have no effect on either existing or potential com
petition between FNBB and BLG or on the struc
ture of commercial banking in any relevant area.
Financial and Managerial Resources; Future
Prospects. These factors are acceptable for both

FNBB and BLG, and the potential tax benefits
which would result from the new corporate struc
ture should have a salutary effect.
Convenience and Needs o f the C om m unity to
be Served. The proposal would have no perceptible

effect on the convenience and needs of any of
FNBB's domestic markets or of the Frankfurt
market.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

B a n k in g
o f f ic e s in
o p e r a tio n

R e s o u rc e s
(in
th o u s a n d s
o f d o lla r s )

B e fo r e

A fte r

7,540,247

T h e F irs t N a tio n a l B a n k
o f B osto n

G u a ra n te e B a n k

Boston, Massachusetts

B e fo r e

A fte r

141,783

56,926

Atlantic City, New Jersey

to acquire the assets and
assume the deposit
liabilities o f
B oston Leasing, G m b H

B a n k in g
o f f ic e s in
o p e r a t io n

R e s o u rc e s
( in
th o u s a nds
o f d o lla r s )

to acquire the assets and assume
the deposit liabilities of

18,386

Frankfurt, Germany

T h e F irs t N a tio n a l B a n k o f
C ape M a y C o u r t H o use

Cape May Court House
Summary report by Attorney General,
November 5, 1976
The banks are both wholly owned subsidiaries
of the same bank holding company. As such, the
proposed transaction is essentially a corporate
reorganization and would have no effect on com
petition.

Summary report by Attorney General,
August 20, 1976
Applicant currently operates nine offices in the
Atlantic County market and a single office in adja
cent Cumberland County. First National operates
five offices in Lower and Middle Townships, Cape

BANK ABSORPTIONS APPROVED BY THE CORPORATION
May County. The main offices of the banks are
separated by 29 miles and the closest branches are
20 miles apart. I t appears that the prop o se d merg
er would not eliminate any significant amount of
existing competition.
New Jersey law permits de novo branching by
commercial banks in any municipality in the State,
but provides home office protection in municipal
ities of less than 20,000. (As of January 1, 1977,
the population requirement becomes 10,000.)
Applicant is the second largest institution in Atlan
tic County with 23.6 percent of total IPC deposits.
First National, the dominant bank in its primary
service area of Lower and Middle Townships, ranks
third among all institutions in Cape May County.
Applicant, which has recently opened a branch in
Cumberland County, over 30 miles distant from its
main office, is a likely de novo entrant into Cape
May County absent the proposed acquisition.
Furthermore, the proposed acquisition w ill fore
close the possibility of entry by Applicant by
means of a merger with one of the small banks in
the area.
The proposed acquisition would not eliminate
any significant amount of existing competition.
However, it would combine a likely entrant into
the Cape May County area with the dominant
institution serving the Middle and Lower Town
ship market. Accordingly, the proposed merger
would have an adverse effect on potential compe
tition.
Basis for Corporation approval, November 30, 1976
Guarantee Bank, Atlantic City, New Jersey, an
insured State nonmember bank with total re
sources of $141,783,000 and total IPC deposits of
$112,292,000, has applied, pursuant to section
18(c) and other provisions of the Federal Deposit
Insurance Act, for the Corporation's prior consent
to acquire the assets of and assume the liability to
pay deposits made in The First National Bank of
Cape May Court House, Cape May Court House,
New Jersey ("F N B "), with total resources of
$ 5 6 ,9 2 6 ,0 0 0 and to ta l IPC d e p o sits of
$42,680,000. The transaction would be effected
under the charter and title of Guarantee Bank, and
as an incident thereto, the 5 offices of FNB would
become branches of Guarantee Bank which would
then have a total of 15 offices.
C om petition. Guarantee Bank operates nine
offices in Atlantic County and one office in
Cumberland County. Sixteen commercial banks
with a total of 100 area offices serve these 2 coun
ties. Guarantee Bank controls 14.0 percent, rep
resenting the second largest share, of the total
commercial bank deposits held in these two coun
ties.
FNB operates all five of its offices in Cape May
County. Cape May County is bounded on the
south and east by the Atlantic Ocean, on the west
by the Delaware Bay, on the north by Atlantic

County, and on the northwest by Cumberland
County. The county had a 1970 population of
59,554, representing a 22.7 percent increase from
1960, and a 1975 median household buying level
of $10,551, which was 33.9 percent below the
statewide median.
Effects of this proposed merger would be most
immediate and direct in FNB's local market, which
consists of the lower townships and the southern
portion of the middle townships of Cape May
County, including the boroughs of Woodbine and
Sea Isle City. The population of the market is
approximately 45,000. The area is characterized as
being a predominantly rural, residential area with a
heavy concentration of seasonal dwellings and
resort-oriented facilities. This market is currently
served by 19 offices of 7 commercial banks. Guar
antee Bank is not represented in this market. FNB
holds 25.4 percent, or the second largest share, of
the market's commercial bank IPC deposits. There
fore, the proposed acquisition would neither elimi
nate existing competition nor enhance concentra
tion in the area, as Guarantee Bank would succeed
to the market share held by FNB.
New Jersey law permits statewide branching,
subject to certain restrictions relating to home
office protection. Although FNB does not have
the managerial or financial resources to branch de
novo into the highly competitive Atlantic City
area in the foreseeable future, Guarantee Bank is a
possible de novo entrant into the Cape May Coun
ty area and would be able to establish branches
both in FNB's service area and other areas of the
county. Therefore, there is some potential for
development of competition between the pro
ponents. However, consummation o f the proposed
transaction would remove home office protection
in Middle Township, presently afforded FNB.
Moreover, the elimination by this transaction of
the potential for increased competition between
the two banks is mitigated by the availability of
many of the State's larger banks as potential en
trants.
Commercial banking in New Jersey is relatively
unconcentrated. The two largest commercial banking organizations, each a multibank holding
company with total IPC deposits in excess of $1.4
billion, have an aggregate of only 15.0 percent of
the commercial bank IPC deposits in the State.
Guarantee Bank has 0.6 percent of such deposits
and the proposed acquisition would give the result
ant bank only 0.8 percent. Neither of the partici
pating banks is affiliated with a holding company,
but many of the competitors of Guarantee Bank
are so affiliated. The proposed acquisition would
have no appreciable effect on the structure or
deposit concentration of commercial banking in
New Jersey.
Under those circumstances, the Board of Direc
tors is of the opinion that the proposed trans
action would not, in any section of the country,

FEDERAL DEPOSIT INSURANCE CORPORATION

substantially lessen competition, tend to create a
monopoly, or in any other manner be in restraint
of trade.

It appears that the proposed acquisition is not
likely to have an adverse effect upon competition.

Financial and Managerial Resources; Future
Prospects. Financial and managerial resources at

Basis for Corporation approval, November 30, 1976

FNB are satisfactory and are adequate at Guar
antee Bank. Financial and managerial resources at
the resultant bank would be acceptable and its
future prospects appear to be favorable.
Convenience and Needs o f the C om m unity to
be Served. The proposed transaction would have

little effect on the convenience and needs of the
local market. The resultant institution would offer
no services that are not currently available from
alternative sources in the relevant market.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B a n k in g
o f f ic e s in
o p e r a tio n
B e fo r e

A fte r

1,315,172

8,232

E rie C o u n ty Savings
Bank

Buffalo, New York
to merge w ith
O lean Savings and L oan
A s s o c ia tio n

Olean
Summary report by Attorney General,
August 19, 1976
Applicant operates 11 offices in and around
Buffalo and had deposits on December 31, 1975,
of $1,209 million. Savings has its only office in
Olean, 70 miles southeast of Buffalo, and has also
been authorized to open a branch in Arcade, 45
miles southeast of Buffalo. As of December 31,
1975, it had deposits of $7.2 m illion.
There are no other savings and loans and no
savings banks in Olean but there are eight commer
cial banking offices, including four of Manufac
turers Hanover. Applicant's offices are almost
entirely w ithin Erie County, surrounding Buffalo;
it has one branch in an adjoining county, opened
last year. Savings' business comes from the areas
surrounding Olean. In Applicant's area are 30 sav
ings bank offices, 30 savings and loan offices, and
174 commercial bank offices, including many of
the State's largest. Depositors in common for both
organizations as of December 31, 1975, had total
deposits at Applicant of $73,000 (0.006 percent
of deposits) and at Savings of $46,000 (0.637 per
cent of deposits). Applicant has three loans total
ing $607,000 in Savings' area; Savings has no loans
in Applicant's area. There are no borrowers who
have loans at both institutions.

Erie County Savings Bank, Buffalo, New York
(“ Erie Savings"), an insured mutual savings bank
with total resources of $1,315,172,000 and total
deposits of $1,227,494,000, has applied, pursuant
to section 18(c) and other provisions of the Fed
eral Deposit Insurance Act, for the Corporation's
prior consent to merge with Olean Savings and
Loan Association, Olean, New York ("S & L "), a
federally insured mutual savings and loan associa
tion with total resources of $8,232,000 and total
deposits of $7,260,000. The institutions would
merge under the charter and title of Erie Savings,
and as an incident to the merger, the 2 approved
offices of S&L would become branches of the
resultant bank, increasing the number of its full
service offices to 13.
C om petition. Erie Savings is headquartered in
Buffalo and operates 10 full service branches, with
all but 1 located in Erie County. That branch is
located in Jamestown, Chautauqua County. Erie
Savings is the second largest th rift institution in
Erie County with 32.5 percent of the total de
posits held by area offices of three mutual savings
banks (deposits as of June 30, 1975) and seven
savings and loan association offices (deposits as of
March 31, 1976). It is also the 13th largest th rift
institution in the State of New York with 1.6 per
cent of the State's total deposits. No change in
these market positions would be effected as a re
sult of this proposed merger.
S&L operates its sole office in Olean (popu
lation 19,169), Cattaraugus County, which is lo
cated 70 miles southeast of Buffalo and 55 miles
east of Jamestown, the location of Erie Savings'
nearest office.
The area principally affected by this merger is
the city of Olean and its immediate environs, in
cluding the towns of Allegany and Portville. This
market has an estimated population of 33,000.
Olean is the center of commercial and retail activ
ity in southeastern Cattaraugus County. Catta
raugus County had a 1975 median buying level of
$10,896, which was approximately 20.2 percent
below the State median level of $13,649. A t pres
ent there are 10 offices of 4 commercial banks
located in the relevant market area. These banks
controlled 92.2 percent of the market's aggregate
IPC time and savings deposits as of June 30, 1975.
S&L is the only th rift institution represented in
the market, and it held merely 7.8 percent of the
market's IPC time and savings deposits. In view of
the distance between the proponents' closest of
fices, there is no significant existing competition
between them. Moreover, the proposed merger
would not change the local market structure, but
would merely allow Erie Savings to succeed to the
deposits now held by S&L.

BANK ABSORPTIONS APPROVED BY THE CORPORATION
There is little potential for the development of
significant competition between the proponents in
the future through their de novo branching. S&L
has operated as a unit institution for over 80 years
and it has neither the financial nor the managerial
resources to expand in this manner.* Mutual sav
ings banks in New York are permitted only one de
novo branch per year. Due to this lim itation, Erie
Savings is likely to prefer more economically vi
able areas than Olean in which to branch.
Under the circumstances presented, the Board
of Directors is of the opinion that the proposed
merger would not, in any section of the country,
substantially lessen competition, tend to create a
monopoly, or in any other manner be in restraint
of trade.
Financial and Managerial Resources; Future
Prospects. Erie Savings has, and the resultant bank

w o u ld have, adequate financial and man
agerial resources and favorable future prospects.
S&L has experienced a declining trend in net earn
ings due to an imbalanced deposit structure and
accompanying high cost of time money, a situa
tion which would be remedied by this merger pro
posal.
Convenience and Needs o f the C om m unity to
be Served. Customers of S&L and other area resi

dents would benefit from the full range of savings
bank services offered by the resultant bank, in
cluding savings bank life insurance, free checking,
and more favorable interest rates.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B a n k in g
o f f ic e s in
o p e r a tio n
B e fo r e

A fte r

1,303,046

392,189

T h e M a n h a tta n Savings
B ank

New York, New York
to merge w ith
Y o n k e rs Savings B a n k

Yonkers
Summary report by Attorney General,
October 28, 1976
Applicant, the ninth largest mutual savings
bank in New York County, has its main office and
six branches in New York City and three other
branches in Westchester County. On June 30,
1976, Applicant had total deposits of $1,200.3
m illion (including IPC time and savings deposits of
*S & L has received approval to establish a branch in
Arcade, Wyoming County; however, the branch's estab
lishment is conditioned upon the consummation of this
merger transaction.

$1,187.8 m illion), and held real estate loans total
ing $884.9 million.
Bank operates four offices in the city of
Yonkers in Westchester County and is the largest
mutual savings bank headquartered in the county.
On June 30, 1976, Bank had total deposits of
$356.5 million (including IPC time and savings
deposits of $356.1 m illion), and held real estate
loans totaling $125.1 m illion. A review of Bank's
balance sheets for selected prior years shows that
the investment portfolio has usually been larger
than the real estate mortgage loan portfolio.
Westchester County, located in the northern
sector of the New York metropolitan area, is a
suburban area with a 1970 population of 894,409.
Approximately one-third of employed county resi
dents commute to work outside the county,
primarily to New York City. There is also substan
tial commutation to the county; in 1970, approxi
mately 71,000 nonresidents were employed in
Westchester County.
Applicant operates two offices in Mount Kisco,
in the northern portion of the county, and one in
Eastchester, in the southeast portion of the coun
ty. All four of Bank's offices are located in the
city of Yonkers, in the southwest portion of the
county. The closest offices of both banks are 3.26
miles apart, and all Bank's offices are within
approximately 6 miles of Applicant's Eastchester
office. According to the application, the service
areas of Applicant's Eastchester office and. Bank's
offices overlap to a substantial extent.
Twenty-one savings banks operating in West
chester County (an area which may overstate the
market) held total county savings deposits of $2.6
billion as of June 30, 1975. As of the same date,
18 savings and loan associations operating in the
county held total county savings of $919.2 m il
lion. (As of June 30, 1975, the 15 commercial
banks operating in Westchester County held $1.5
billion of county IPC time and savings deposits.)
On June 30, 1975, Applicant, seventh largest of
the 39 th rift institutions in total county savings
deposits, held $141.7 million of county savings
deposits, 4 percent of total county th rift institu
tion savings deposits. As of June 30, 1975, Bank,
the largest Westchester County-headquartered
th rift institution, held $328 million in total coun
ty deposits which constituted 9.4 percent of total
county th rift institution savings deposits. The four
largest th rift institutions in Westchester County
held 34.7 percent of total county savings deposits
held by all th rift institutions operating in the
county. If the proposed merger were consum
mated, the resulting bank would be the largest
th rift institution in the county, accounting for
13.4 percent of total county savings deposits held
by the th rift institutions operating there. The share
of county savings deposits held by the top four
th rift institutions would increase from 34.7 per
cent to 38.7 percent.

100

FEDERAL DEPOSIT INSURANCE CORPORATION

The proposed merger would eliminate substan
tial existing competition between the merging
parties, and would increase concentration among
Westchester County th rift institutions. However,
Bank's preference for investing a larger share of its
deposits in securities rather than in real estate
mortgages means that it has not competed as
actively as it should. Furthermore, the increase in
concentration may be substantially offset by the
commuting habits of Westchester County residents
referred to above, and by the presence of large and
numerous th rift institutions located in New York
City, some of which also have branches in the
county.
We conclude that, overall, the proposed merger
would have an adverse effect on competition.
Basis for Corporation approval, November 30, 1976
The Manhattan Savings Bank, New York
(Manhattan), New York ("Manhattan Savings"),
an insured mutual savings bank with total re
sources of $1,303,046,000 and total deposits of
$1,200,337,000 as of June 30, 1976, has applied,
pursuant to section 18(c) and other provisions of
the Federal Deposit Insurance Act, for the Cor
poration's prior consent to merge with Yonkers
Savings Bank, Yonkers, New York ("Yonkers Sav
ings"), an insured mutual savings bank having, on
June 30, 1976, total resources of $392,189,000
and total deposits of $356,454,000. The 2 banks
would merge under the charter and title of M an
hattan Savings, and incident to the merger, the 4
offices of Yonkers Savings would be established as
branches of the resultant bank, increasing to 16
the number of its approved offices.
C om petition. Yonkers Savings operates all four
of its offices w ithin the city of Yonkers in West
chester County.
Manhattan Savings presently operates a total of
10 offices: its main office and 5 branches in Man
hattan, 1 branch in Queens, and 3 branches in
Westchester County. Two additional branches, to
be established in Manhattan, have been approved.
Two of Manhattan Savings' three Westchester
County branches are located in Mount Kisco,
approximately 21 road-miles north of the city of
Yonkers. The third branch is located in Eastchester, 3.9 miles southeast of Yonkers Savings'
Northeast branch.
Manhattan Savings draws the bulk of its de
posits from the boroughs of Manhattan and
Queens and Westchester County. Yonkers Savings
draws more than 95.0 percent of its deposits from
Yonkers and other nearby communities in West
chester County.
Westchester County is situated immediately
north of New York City. The county had a 1970
population of 894,104, representing a 10.5 per
cent increase from 1960, and a 1975 median
household buying level of $18,564, which was
approximately 36.0 percent higher than the state
wide
median. Yonkers Savings held 9.3 percent,

representing the largest share, of the deposits held
by offices of the 23 mutual savings banks and 18
federally insured savings and loan associations
operating in the county. Manhattan Savings has
the eighth largest share, 4.0 percent, of these de
posits. Therefore, existing competition between
the proponents would be eliminated as a result of
this merger. However, due to the location of West
chester County, many of its residents commute to
New York City for employment. Manhattan Sav
ings held 2.2 percent, the 14th largest share, of the
deposits held by offices of the 54 mutual savings
banks and 61 federally insured savings and loan
associations operating within this larger area con
sisting of New York City and Westchester County.
Yonkers Savings held merely 0.7 percent of the
deposits. In view of these modest market shares,
the resulting elimination of existing competition
would not be significant.
New York law limts de novo expansion by a
mutual savings bank to one branch each year. This
lim itation effectively restricts the development of
significant competition between Manhattan Sav
ings and Yonkers Savings.
Manhattan Savings is the 18th largest of the
New York th rift institutions, holding approxi
mately 1.4 percent of their aggregate deposits. The
resultant bank, with some 1.9 percent of such de
posits, would become the 11th largest th rift insti
tution in the State.
The Board of Directors is of the opinion that
the proposed merger would not, in any section of
the country, substantially lessen competition, tend
to create a monopoly, or in any other manner be
in restraint of trade.
Financial and Managerial Resources; Future
Prospects. Both proponents have satisfactory

financial and managerial resources, as would the
resultant bank. Future prospects of the resultant
bank appear favorable.
Convenience and Needs o f the C om m unity to
be Served. The proposed transaction would have

little effect on the convenience and needs of the
community. The resulting institution would offer
no services that are not currently available from
alternative sources in the relevant area.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

BANK ABSORPTIONS APPROVED BY THE CORPORATION

R e s o u rc e s
(in
th o u ss n ds
o f d o lla r s )

B a n k in g
o f f ic e s in
o p e r a tio n
B e fo r e

A fte r

20,205

9,584

C itize n s S ta te B a n k o f
N e w Jersey

Lacey Township,
New Jersey
to acquire the assets and assume
the deposit liabilities of
A t la n t ic S ta te B a n k

Point Pleasant
Summary report by Attorney General,
October 18, 1976
Applicant's main office is located 21.4 miles
south of Bank, and its two other offices are lo
cated approximately 27 miles and 36 miles south
of Bank. According to the application, Bank holds
no deposits or loans originating in Applicant's serv
ice area, Applicant holds only a negligible amount
of deposits and loans originating in Bank's service
area, and there are only a small number of cus
tomers who have deposit or loan accounts at both
banks. Therefore, it appears that the proposed
acquisition will not eliminate any significant exist
ing competition.
Both banks are among the smaller institutions
operating in Ocean County. As of June 30, 1975,
Applicant held approximately 2 percent of the
total deposits in the county and Bank held less
than 1 percent. Bank is the smallest of the four
banks operating in its immediate service area; as of
June 30, 1976, it accounted for 4.3 percent of the
total deposits in that area.
Under New Jersey law, Applicant could be per
mitted to branch de novo into Bank's service area.
However, in view of the relative sizes of Applicant
and Bank, and Bank's present condition, the pro
posed acquisition will not have any significant
effect on potential competition.
In sum, the proposed acquisition will not elimi
nate either actual or potential competition to any
significant degree.
Basis for Corporation approval, December 16, 1976
Citizens State Bank of New Jersey, Lacey
Township (P. 0 . Forked River), New Jersey (“ C iti
zens” ), a State nonmember insured bank with
total resources of $20,205,000 and total IPC de
posits of $17,127,000, has applied, pursuant to
section 18(c) and other provisions of the Federal
Deposit Insurance Act, for the Corporation's prior
consent to acquire the assets of and assume the
liability to pay deposits made in Atlantic State
Bank, Point Pleasant, New Jersey ("A tla n tic"), a
State nonmember insured bank with total re
sources of $9,584,000 and total IPC deposits of
$5,635,000. The resultant bank would be operated
under the charter and title of Citizens, and as an

101

incident to the acquisition, the sole office of
Atlantic would become a branch of Citizens,
which would then have a total of four offices.
C om petition. Both of the proponents operate
in Ocean County, which is located in central New
Jersey along the Atlantic Ocean. Ocean County
experienced a construction and population boom
during the 1960s and early 1970s. Between 1960
and 1970, the county's population nearly doubled,
increasing from 108,241 to 208,470. The 1975
median household buying level for the county was
$ 1 2 ,4 7 1 , compared to a statewide level of
$15,971.
Citizens' service area is defined as the south
eastern, coastal portion of Ocean County, extend
ing as far north as Toms River and as far south as
Little Egg Harbor. Eight commercial banks operate
a total of 29 offices in this area. Citizens' holds 6.4
percent, the fourth largest share, of the commer
cial bank IPC deposits held in the market. Atlantic
does not operate in the market. Three banks, hold
ing 86.4 percent of the IPC deposits, dominate the
market, with the largest, The First National Bank
of Toms River, Toms River, New Jersey, control
ling 52.9 percent.
Atlantic's service area consists of the north
eastern tip of Ocean County and the southernmost
portion of adjacent Monmouth County. Atlantic
holds the smallest share, 1.3 percent, of the com
mercial bank IPC deposits held by the nine
commercial banks operating in this area. Citizens
has no offices in this market.
Citizens' and Atlantic's closest offices are
approximately 21 road-miles apart and there are
many alternative commercial banking offices lo
cated in the intervening area. The business gener
ated by Citizens and Atlantic from areas served
primarily by the other is nominal and their service
areas are separate and distinct. The proposed
acquisition, therefore, would not eliminate any
significant existing competition between the pro
ponents.
New Jersey law permits statewide de novo
branching, subject to certain restrictions relating
to home office protection. As of January 1, 1977,
Citizens would be able to branch de novo into
Point Pleasant, as well as into other communities
located in Atlantic's service area*This area is al
ready adequately banked, however, and it is
doubtful that Citizens would branch into it in the
near future. Moreover, acquisition of Atlantic's
mere 1.3 percent market share is insignificant and
it is the practical equivalent of the establishment
of a de novo branch by Citizens. For Atlantic's
^Currently, New Jersey commercial banks may not estab
lish de novo branches in communities that contain both
fewer than 20,000 residents and the main office of
another bank, thereby precluding Citizens' de novo
entry into Point Pleasant. However, beginning January 1,
1977, this restriction w ill be lim ited to communities
having fewer than 10,000 residents, and as a result. C iti
zens would be able to branch into Point Pleasant.

FEDERAL DEPOSIT INSURANCE CORPORATION

102

part, it lacks the financial and managerial resources
to engage in any meaningful de novo branching.
Therefore, the proposed acquisition of Atlantic by
Citizens would not eliminate any significant poten
tial for competition to develop in the future.
Based on the foregoing, the Board of Directors
is of the opinion that the proposed merger would
not, in any section of the country, substantially
lessen competition, tend to create a monopoly, or
in any manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. Both Citizens' and Atlantic's financial

and managerial resources are adequate for pur
poses of this proposal. Financial and managerial
resources of the resultant bank would be accept
able and its future prospects appear to be favor
able.
Convenience and Needs o f the C om m unity to
be Served. The proposed transaction would have

little effect on the convenience and needs of any
market. The resultant institution would offer no
services that are not currently available from alter
native sources in the relevant areas.
The Board of Directors, considering the fore
going information, has concluded that approval of
the application is warranted.

W est B a n k and T ru s t

B a n k in g
o f f ic e s in
o p e r a t io n

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

B e fo r e

A fte r

103,222

6,034

Green Bay, Wisconsin
to acquire the assets and assume
the deposit liabilities of
T h e Farm ers and Trad e rs
B ank

Wrightstown
Summary report by Attorney General,
December 30, 1976
We have reviewed this proposed transaction and
conclude that it would not have a substantial
competitive impact.
Basis for Corporation approval, December 16, 1976
West Bank and Trust, Green Bay, Wisconsin
("West Bank"), a State nonmember insured bank
with total resources of $103,222,000 and total
IPC deposits of $74,986,000, has applied, pur
suant to section 18(c) and other provisions of the
Federal Deposit Insurance Act, for the Corpora
tion's prior consent to acquire the assets of and
assume liability to pay deposits made in The
Farmers and Traders Bank, Wrightstown, Wiscon
sin ("Farmers"), a State nonmember insured bank,
with total resources of $6,034,000 and total IPC
deposits of $4,900,000, and for consent to estab
lish the sole office of Farmers as a branch.

C om petition. West Bank operates its main of
fice in downtown Green Bay and two branches in
the western suburbs of that city. West Bank is
owned by United Bankshares, Inc., Green Bay,
Wisconsin ("Bankshares"), a holding company
whose only other banking subsidiary is East Bank,
Green Bay, Wisconsin.
Farmers operates its sole office in Wrightstown,
which is located approximately 17 miles southwest
of Green Bay.
The city of Green Bay is located in northcentral Brown County, which is in northeastern
Wisconsin about 100 miles north of Milwaukee.
The village of Wrightstown is in southwestern
Brown County. Green Bay is an industrial com
munity whose principal products are paper, paper
products, and machinery. The surrounding area in
the county, however, is agricultural, with dairy
farming predominating. The 1975 median house
hold buying level for Brown County was $13,675,
some 3.3 percent above the State figure of
$13,232.
The proposed transaction would have its most
immediate competitive impact in Farmers' local
market, which consists of that area within 10
road-miles of Wrightstown. There are four banking
offices in this market, each operated by a different
bank. Farmers has the third largest share, 13.2 per
cent, of the market's IPC deposits. Neither West
Bank nor its affiliate, East Bank, operates in this
market.
The proponents' closest offices are located 17
road-miles apart. West Bank's affiliate, East Bank,
has its office approximately 15 miles from
Wrightstown. In both instances, the intervening
area contains a number of offices of competing
banks, including affiliates of some of the State's
largest holding companies. Thus, the proposed
transaction would neither eliminate existing com
petition nor enhance concentration in any relevant
area.
The potential for competition to develop be
tween West Bank and Farmers through de novo
branching appears to be remote. Wisconsin's re
strictive branching law precludes West Bank from
branching into Wrightstown, and Farmers has
neither the financial nor the managerial resources
to expand in this manner.
Bankshares is one of the smaller holding com
panies in Wisconsin, holding only 0.6 percent of
total statewide deposits. Consummation of the
proposed transaction would have no perceptible
effect on this percentage.
Under these circumstances, the Board of Direc
tors is of the opinion that the proposed trans
action would not, in any section of the country,
substantially lessen competition, tend to create a
monopoly, or in any other manner be in restraint
of trade.
Financial and Managerial Resources; Future
Prospects. The financial and managerial resources

BANK ABSORPTIONS APPROVED BY THE CORPORATION
of West Bank are satisfactory and its future pros
pects are favorable. Farmers has experienced asset
and capital problems which the proposed trans
action would resolve. Financial and managerial
resources at the resultant bank would be satis
factory and its future prospects would be favor
able.
Convenience and Needs o f the C om m unity to

103

be Served. As a result of the proposed transaction,

new banking services, such as trust services, data
processing services, and leasing services, as well as a
much larger lending lim it, would be available to
Farmers' customers.
Based on the foregoing information, the Board
of Directors has concluded that approval of the
application is warranted.

APPROVALS OF BANK ABSORPTIONS PREVIOUSLY DENIED BY THE CORPORATION

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

M o n a d n o c k N a tio n a l B a n k

B a n k in g
o f f ic e s in
o p e r a tio n
B e fo r e

4,724

20,978

A fte r

Jaffrey, New Hampshire
(change title to The
Monadnock Bank)
to acquire the assets and assume
the deposit liabilities o f
M o n a d n o c k Savings B a n k

Jaffrey
Statement upon reconsideration,
July 6, 1976
Monadnock National Bank, Jaffrey, New Hamp
shire, w ith total resources of $4,724,000 and total
IPC deposits of $3,195,000, applied, pursuant to
section 18(c) and other provisions of the Federal
Deposit Insurance Act, for the Corporation's prior
consent to acquire the assets of and assume the li
ability to pay deposits made in Monadnock Savings
Bank, Jaffrey, New Hampshire, an insured mutual
savings bank having total resources of $20,978,000
and total IPC deposits of $18,862,000. It was in
tended that, incident to the proposed transaction,
the 4,000 par $5 shares of common stock of Monad
nock National Bank owned by Monadnock Savings
Bank would be retired. It was further intended that
Monadnock National Bank, prior to consummation
of the proposed transaction, would convert to a
State nonmember insured bank under the title "The
Monadnock Bank" and that the resulting bank
would operate from the sole location where the two
banks share quarters. On June 30, 1975, the applica
tio n was denied.* Subsequently, Monadnock
National Bank requested the Corporation to recon
sider its denial and submitted additional material in
support of its request. During processing of this
request, the Corporation's reason for denial of the
original application became m oot.** Accordingly,
after an analysis of the relevant factors contained in
the Bank Merger Act, the Corporation has con
cluded that the application should be approved.
C om petition. Monadnock National Bank and

Monadnock Savings Bank share a single lobby and
various overhead and operating expenses. In addi
tion, the two banks had some interlocking of direc
tors, trustees, and officers prior to July 1, 1975,
when State legislation which prohibited such inter
locks became effective. Realignment of manage
ment personnel has taken place to comply with the
law, but this reorganization proposal was initiated as
the ultimate solution.
The town of Jaffrey had a 1970 population of
3,353 and is located in the southeastern portion of
Cheshire County, which is the extreme southwest
ern corner of New Hampshire and borders on
Vermont and Massachusetts. The two banks appear
to draw their business from an area w ithin 10 to 12
miles of Jaffrey, including Peterborough, New
Hampshire, and Winchendon, Massachusetts. The
population of this area is estimated at 23,000 and is
largely rural but has some industry. The service area
experienced good growth during the 1960s, but the
rate of growth is reported to be slowing.
Five commercial banks, 5 mutual savings banks,
and 1 cooperative bank serve this local banking mar
ket with a total of 13 offices. Monadnock National
Bank holds 19.6 percent of the market's IPC de
mand deposits (or $2.9 million out of a total of
$14.6 million), and Monadnock Savings Bank holds
14.9 percent of the IPC time and savings deposits (or
$18.4 million out of a total of $123.7 million). In
terms of total deposits of $140.4 million in the mar
ket, both banks combined would control 15.5 per
cent, ranking a distant second to the 43.2 percent
held by Peterborough Savings Bank and about on a
par with the 15.1 percent held by Winchendon Sav
ings Bank. The proposed transaction would give
permanence to the combined 15.5 percent share of
total deposits in the local market, but this would not
significantly affect the competitive delivery of
*See Basis fo r Corporation Denial, 1975 F D IC Annual
Report, pp. 121-123.
**Section 18(c)(10) of the Federal Deposit Insurance
Act, 12 U.S.C. section 1828(c)(10), which, w ith certain
exceptions, prohibited FDIC approval o f any merger
that would involve conversion from a mutual to a stock
form expired on June 30, 1976.

104

FEDERAL DEPOSIT INSURANCE CORPORATION

financial services to its residents.
Monadnock National Bank and Monad nock Sav
ings Bank have chosen not to compete for the same
banking business. Consequently, there is currently
no overlapping of their services, and for many years
they have operated as complementary entities.
Although the management interlocks have been
eliminated, this arrangement is continuing in antic
ipation of consummation of the proposed trans
action. However, there is the possibility that compe
tition could arise between the two banks in the
future if either or both would become part of a
different banking organization or if each were to go
its own way. Although the economy of the service
area is reasonably viable, this does not appear to be a
very realistic prospect. It is questionable whether
the market has the near-term potential to support
what would in effect be a new competitor vying for
segments of the existing banking business. Further
more, even if the proposed transaction is approved,
the 23,000 persons in the trade area would still have
5 commercial banks, 4 mutual savings banks, and 1
cooperative bank from which to choose. This would
appear to provide fu lly adequate alternatives for the
variety of commercial and th rift institution services.
Therefore, the proposed transaction would elimi
nate no existing competition between Monadnock
National Bank and Monadnock Savings Bank, but
would eliminate an insignificant amount of poten
tial competition between them.
In view of the foregoing, the Board of Directors is
of the opinion that the proposed transaction would
not, in any section of the country, substantially
lessen competition, tend to create a monopoly, or in
any other manner be in restraint of trade.
Financial and Managerial Resources; Future
Prospects. Monadnock National Bank and Monad

nock Savings Bank have adequate financial re
sources, and the proposed transaction would restore
the full managerial resources to the resulting bank
that each shared prior to the elimination of manage
ment interlocks.
Initially there may be a reduction in the resulting
bank's savings and time accounts since by regulation
it would not be able to pay the maximum rates of
interest allowed mutual savings banks on similar
accounts. However, the deposit attrition may be
slight in view of the interest that present depositors
of Monadnock Savings Bank would have, as share
holders, in the success of the resulting bank. The
future prospects of the resulting bank are con
sidered satisfactory.
Convenience and Needs o f the C om m unity to be
Served. The proposed transaction would have little

effect on the convenience and needs of the Monad
nock market. The resulting bank would not offer
any services not presently available in the market,
but its increased legal lending lim it would enable it
to make larger commercial loans, thereby benefiting
the local economy.
Based on the foregoing, the Board of Directors

has concluded that approval of the application is
warranted, contingent upon Monadnock National
Bank's conversion to the status of a State non
member insured bank.

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

C h ester B a n k

B a n k in g
o f f ic e s in
o p e r a tio n
B e fo r e

4,661

18,625

A fte r

Chester, Connecticut
to acquire the assets and assume
the deposit liabilities o f
C h ester Savings B a n k

Chester
Statement upon reconsideration,
July 16, 1976
Chester Bank, Chester, Connecticut, an insured
State nonmember bank with total resources of
$4,661,000 and total IPC deposits of $3,512,000,
applied, pursuant to section 18(c) and other pro
visions of the Federal Deposit Insurance Act, for the
Corporation's prior consent to acquire the assets of
and assume the liability to pay deposits made in
Chester Savings Bank, Chester, Connecticut, an
insured mutual savings bank having total resources
o f $ 1 8 ,6 2 5 ,0 0 0 and total IPC deposits of
$17,205,000. It was intended that the resulting
bank would operate from the sole location in which
the two banks presently share quarters. On June 30,
1975, the application was denied on the grounds
that approval was precluded by section 18(c)(10) of
the Federal Deposit Insurance Act, 12 U.S.C. sec
tion 1828(c)(10), which, with certain exceptions,
prohibited FDIC approval of any application that
would involve conversion from a mutual to a stock
form of organization.* That prohibition expired
on June 30, 1976. Upon request, the Corporation
has reconsidered the application and, based on an
analysis of the relevant factors contained in the
Bank Merger Act, has concluded that the applica
tion should be approved.
C om petition. Chester Savings Bank has operated
one office ever since its establishment in 1871 in the
town of Chester, Middlesex County, in southern
Connecticut. Chester Bank was organized in 1914
by individuals connected with Chester Savings
Bank. Through the ensuing years, the two banks
have been under essentially the same management,
sharing a common lobby at their sole location. The
operations of the two banks have been comple
mentary, thereby providing a broad range of services
for Chester and its vicinity. A t year-end 1975,
Chester Savings Bank ranked as the 65th largest o f
the 67 Connecticut mutual savings banks with 0.19
*See Basis fo r Corporation Denial, 1975 F D IC Annual
Report , pp. 119-121.

BANK ABSORPTIONS APPROVED BY THE CORPORATION
percent of their aggregate deposits; Chester Bank
was 68th largest of the State's 71 commercial banks,
with 0.05 percent of their total deposits.
The most appropriate geographic area in which
to assess the competitive effects of the proposed
transaction would be the town of Chester and the
surrounding towns within a radius of approximately
10 road-miles, this being a segment of southeastern
Middlesex County and the town of Lyme in adja
cent New London County. Chester is located 31
road-miles south of Hartford, the capital and largest
city in the State, and a similar distance east of New
Haven. The local market is largely residential and
rural. Its population approximated 26,300 in 1970,
having increased about 30 percent during the 1960s,
in contrast to the statewide increase of 19.6 percent.
Middlesex County's 1974 median household buying
level of $14,518 closely approximated that of the
State.
The Chester banking market is served by six
commercial banks and six mutual savings banks.
Chester Bank has 12.8 percent of the$26.6-million
IPC deposits held by the seven area offices of these
commercial banks; Chester Savings Bank has 22.4
percent of the $74.6-million deposits held by the six
area offices of the savings banks. The resulting bank
would control 19.9 percent of the total I PC deposits
in the market, representing the second largest share
within the market.
There is no significant competition between the
proponents. These banks enjoy a unique exception
to the Connecticut statute which prohibits inter
locking directorates of financial institutions. In view
o f th e ir current common management, there
appears to be no potential for competition to in
crease between them.

105

Chester is currently closed to de novo expansion
by outside banks as a result of Connecticut's home
office protection law. Consummation of this pro
posal would result in the abandonment by Chester
Savings Bank of its charter, thereby permitting
branching into Chester by other savings banks.
In view of the foregoing, the Board of Directors is
of the opinion that the proposed transaction would
not, in any section of the country, substantially
lessen competition, tend to create a monopoly, or in
any other manner be in restraint of trade.
Financial and Managerial Resources: Future
Prospects. Chester Bank and Chester Savings Bank

have satisfactory financial and managerial resources
under their present operational arrangement, as
would the resulting bank.
Initially there may be a reduction in the resulting
bank's savings and time accounts since by regulation
it would not be able to pay the maximum rates of
interest allowed mutual savings banks on similar
accounts. However, the deposit attrition may be
slight in view of the interest that present depositors
of Chester Savings Bank would have, as stock
holders, in the success of the resulting bank. The
future prospects of the resulting bank are con
sidered satisfactory.
Convenience and Needs o f the C om m unity to be
Served. The proposed transaction would have little

effect on the convenience and needs of the Chester
market. The resulting bank would offer no services
that are not presently offered by the proponents,
but its increased legal lending lim it would enable it
to make larger commercial loans.
Based on the foregoing, the Board of Directors
has concluded that approval of the application is
warranted.

FEDERAL DEPOSIT INSURANCE CORPORATION

106

Merger transactions were involved in the acqui
sitions of banks by holding companies in the fo l
lowing approvals in 1976. In each instance, the
Attorney General's report stated that the proposed
transaction would have no effect on competition.
The Corporation's basis for approval in each case
stated that the proposed transaction would not,
per se, change the competitive structure of bank
ing, nor affect the banking services that the (oper
ating) bank has provided in the past, and that all
other factors required to be considered pertinent
to the application were favorably resolved.
Tuscaloosa C ounty Bank, Tuscaloosa, Alabama,
in organization; offices: 0; resources: 100($000);
to merge with and change title to Peoples Bank o f
Tuscaloosa, Tuscaloosa; offices: 1; resources:
7,462($000). Approved: January 23.
E tow ah C ounty Bank, Gadsden, Alabama, in

organization; offices: 0 ; resources: 100($000); to
merge with and change title to Gadsden M all Bank,
Gadsden; offices: 2; resources: 6,022($000). Ap
proved : January 28.
F irs t N ational Bank & Trust Company o f M id
land (upon conversion to a State-chartered institu
tion w ith the title F irs t M idland Bank & Trust
Company), Midland, Michigan; offices: 5; re
sources: 61,175($000); to consolidate with F irst
M B T Bank, Midland, in organization; offices: 0;

resources: 120($000). Approved: March 29.
S econd

S treet Bank

and

Trust

Company,

Harrisburg, Pennsylvania, in organization; offices:
0; resources: 512($000); to merge with Dauphin
Deposit Trust Company (change title to Dauphin
D eposit Bank and Trust Company), Harrisburg;
offices: 32; resources: 444,921 ($000). Approved:
April 12.
The Savings D eposit Bank Company, Medina,
Ohio; offices: 2; resources: 20,652($000); to
merge with SDB Bank, Medina, in organization;
offices: 0; resources: 647($000). Approved: April
16.
Galleria New Bank, Houston, Texas, in organ
ization; offices: 0 ; resources: 200($000);to merge
with and change title to Galleria Bank, Houston;
offices: 2; resources: 39,894($000). Approved:
April 21.
1st & Devine State Bank, Groveton, Texas, in
organization; offices: 0; resources: 50($000); to
merge with and change title to F irs t Bank in
G r o v e to n , G ro v e to n ; offices: 1; resources:

12,189($000). Approved: August 30.
F irs t and Townsend State Bank, Lufkin, Texas,
in organization; offices: 0; resources: 75($000); to

merge with and change title to F irst Bank & Trust,
Lufkin; offices: 1; resources: 74,865($000). Ap
proved : August 30.
The Comm ercial Savings Bank, Adrian, Mich
igan; offices: 4; resources: 66,200($000); to con
solidate with CSB State Bank (change title to
Commercial Savings Bank), Adrian, in organiza
tion; offices: 0; resources: 120($000). Approved:
October 28.
C o nstitution Bank and Trust Company, Hart
fo rd , C o n n e c tic u t; o ffic e s : 6 ; resources:
35,356($000); to merge with The C olonial Bank
and Trust Company o f H artford , Hartford, in
organization; offices: 0; resources: 4,697($000).
Approved: November 3.
M e trop olitan Bank & Trust Company, Bridge
p o rt, C o n n e c tic u t; o ffic e s : 1; resources:
13,023($000); to merge with U nion Trust Com
pany o f Bridgeport, Inc. (change title to Union
Trust Company o f B ridge port ), Bridgeport, in
organization; offices: 0; resources: 3,000($000).
Approved: November 29.
Garland Commerce Bank, Garland, Texas, in
organization; offices: 0 ; resources: 200($000); to
merge with and change title to Southern Bank and
Trust Company, Garland; offices 1; resources:
21,138($000). A p p ro v e d : N o ve m b e r 17.
G ladwin C oun ty Bank, Beaverton, Michigan;
offices: 2 ; resources: 15,720($000); to consolidate
with CFC Bank, Beaverton, in organization; of
fices: 0; resources: 120($000). Approved: Novem
ber 23.
BN Bank o f N o rth fie ld , Northfield, Illinois, in
organization; offices: 0 ; resources: 88($000); to
merge with and change title to Bank o f N orth fie ld ,
Northfield; offices: 1; resources: 20,795($000).
Approved: November 29.
Western State Bank, Howard City, Michigan;
offices: 3; resources: 14,092($000); to consolidate
with WSB Bank, Howard City, in organization; of
fices: 0; resources: 120($000). Approved: Novem
ber 29.
C om m unity State Bank o f Dowagiac, Dow agiac, M ic h ig a n ; o ffic e s : 2; resources:
17,098($000); to consolidate with DSB Bank,
Dowagiac, in organization; offices: 0; resources:
120($000). Approved: November 30.
The Peoples State Bank o f Caro, Michigan,

C a r o , M ic h ig a n ; o ffic e s : 2; resources:
24,415($000); to consolidate with P.S.B. State
Bank, Caro, in organization; offices: 0; resources:
120($000). Approved: December 23.

107

BANK ABSORPTION DENIED BY THE CORPORATION

R e s o u rc e s
( in
th o u s a n d s
o f d o lla r s )

S ta te B a n k o f S tan d ish

B a n k in g
o f f ic e s in
o p e r a t io n
B e fo r e A f t e r

36,424

8,158

Standish, Michigan
to acquire the assets and assume
the deposit liabilities o f
T h e A u G res S ta te B a n k

Au Gres
Summary report by Attorney General,
December 8, 1975
Applicant and Bank are the only banks in Arenac
County and are located 15 miles apart. The service
areas of the banks overlap and it appears that Appli
cant is a substantial factor in the service area of
Bank. Consequently, the proposed merger would
eliminate a substantial amount of competition and
would give Applicant a monopoly position.
In conclusion, the proposed merger would
appear to have significant adverse competitive ef
fects, albeit in a very small market.
Basis for Corporation denial,
March 15, 1976
State Bank of Standish, Standish, Michigan
("Standish Bank” ), a State nonmember insured
bank with total resources of $36,424,000 and
total IPC deposits of $28,262,000, has applied,
pursuant to section 18(c) and other provisions of
the Federal Deposit Insurance Act for the Cor
poration's prior consent to acquire the assets of
and assume the liability to pay deposits made in
The Au Gres State Bank, Au Gres, Michigan ("A u
Gres Bank"), also a State nonmember insured
bank, having total resources of $8,158,000 and
total IPC deposits of $6,246,000, the transaction
to be effected under the charter and with the title
of Standish Bank. The sole office of Au Gres Bank
would be established as a branch of the resulting
bank. Consent has also been requested to issue
subordinated capital notes as an addition to result
ing bank's capital structure and to retire these
notes at m aturity, seven years after date of issue.
These notes constitute part of the consideration
being offered to shareholders of Au Gres Bank.
C om petition. Standish Bank has its main office
and a drive-in facility in Standish (population
1,184), the county seat of Arenac County, which
borders Saginaw Bay north of Bay City in eastcentral Michigan. Standish Bank also has a branch
at Skidmore Lake in Mills Township, Ogemaw
County, 20 road-miles north of its main office. At
year-end 1974, Standish Bank was 129th largest of
the commercial banks in the State of Michigan,
with 0.1 percent of their total deposits. Au Gres
Bank, a unit bank located in the city of Au Gres

(population 564), 16 road-miles northeast of
Standish, is the only other bank in Arenac County.
Arenac County had a 1970 population of
11,149, which represented an increase of 13.1 per
cent over its population in 1960. The county,
which has been primarily agricultural, continues to
grow at about the same rate, as light manufac
turing, touring, and recreational activities become
more important. Arenac County's most recent
median household buying level, however, was
about 33 percent below the statewide median.
The area in which the competitive effects of the
proposed transaction would be most immediate
and direct may be approximated by the area w ith
in a 20-25 mile radius of Au Gres. This would
include all of Arenac County, the southern portion
of Iosco County, the southeastern portion of
Ogemaw County, and the northern half of Bay
County. The total population of this local market
which is bounded on the east by Saginaw Bay
approximated 28,000 people in 1970. Except for
Bay County, income levels are well below the
State median, but economic prospects throughout
the market are reasonably good. Both Standish
Bank and Au Gres Bank, for example, have seen
their deposits grow substantially since 1970—more
than doubling for the former and increasing by
over 80 percent for the latter.
Both Standish Bank and Au Gres Bank compete
within the relevant market, and each draws a not
insignificant portion of its total loans and deposits
from the primary service area of the other. A lto
gether, six commercial banks compete in the rel
evant market. Two of these are affiliates of
Peoples Banking Corporation, which presently
controls about 15.9 percent of the market's total
IPC deposits, while Standish Bank has the largest
market share of all six (34.8 percent). Peoples
State Bank of East Tawas controls about 27.0 per
cent of such deposits; Farmers and Merchants
State Bank of Hale, about 14.7 percent; and Au
Gres Bank, 7.6 percent. Standish Bank and Au
Gres Bank are the closest of these six banks.
Although the market involved is relatively
sparse in population, the proposed transaction
would, if consummated, (i) eliminate a modest
amount of existing competition between Standish
Bank and Au Gres Bank, (ii) add substantially to
the market share presently held by Standish Bank,
the leading local bank, (iii) increase substantially
the advantage in local market share which Standish
Bank presently enjoys over all of its local compet
ito rs , n a m e ly Peoples Banking Corporation,
Peoples State Bank of East Tawas, and Farmers
and Merchants State Bank of Hale, and (iv) reduce
from five to four the number of other banking
sources from which residents and businessmen in
the Au Gres area have to choose for banking serv
ices, the nearest of which would then be 19 roadmiles away.

108

FEDERAL DEPOSIT INSURANCE CORPORATION

Even if no significant potential exists for in
creased competition between Standish Bank and
Au Gres Bank in the future through de novo
branching by either or both, and even if some
consolidation appears desirable for Au Gres Bank,
the Board of Directors understands that Standish
Bank is not the only legally available partner for
such an acquisition and believes it extremely desir
able as a competitive matter not to increase Stand
ish Bank's present advantage over its nearest
competitors w ithin the market. The Board also
notes that the trust department of Peoples Na
tional Bank & Trust Company of Bay City, an
affiliate of Peoples Banking Corporation, annually
votes a substantial, although possibly not control
ling, block of stock in Standish Bank, thereby
raising a question in its mind of the vigor of com
petition between the two banking organizations.
Based on the foregoing and on the standards
established by the Supreme Court in cases involv
ing horizontal mergers of banks already competing
in the same local market, the Board of Directors is
of the opinion that the proposed transaction
would "substantially lessen competition” in the
relevant local banking market.
Financial and Managerial Resources; Future
Prospects. Both banks have satisfactory financial

resources, with the earnings performance of Au
Gres Bank being particularly strong. The latter
bank claims a management succession problem,
with one senior officer due to retire shortly and
the other, presently in his late 50s, in somewhat
precarious health. The Board notes in this regard
that the application contemplates that both o ffi
cers w ill continue on the board of directors of the
resulting institution and that the younger of the
two will continue in charge of the proposed Au
Gres branch for 4 or 5 years if his health permits.
The succession problem does not appear either
imminent or insurmountable, and lends only slight
weight in favor of the application. Standish Bank
has managerial resources in depth, and the future
prospects of both banks, as well as the resulting
bank, must be regarded as favorable in this devel
oping area.
Convenience and Needs o f the C om m unity to
be Served. Banking premises at the Au Gres loca

tion would be renovated and refurbished. A t this
office, policies of a more aggressive, sophisticated
management would be reflected and improved
loan services, particularly in the field of agricul
tural credit, would be available. Standish Bank's
$180,000 statutory loan lim it and Au Gres Bank's
$60,000 lim it would, for the resulting bank, be
increased to $270,000 (subject in each case to the
discretionary 100 percent increase legally per
mitted a board of directors). Time deposit open
accounts would become available at the Au Gres
location, as would time certificates of deposit in a
minimum amount reduced from $5,000 to $1,000,
a costless checking plan, and interest on Christmas

Club deposits. However, since Standish Bank al
ready competes w ithin the relevant market, these
additional services are presently available to resi
dents and businessmen in and around Au Gres,
albeit with some inconvenience. Greater conven
ience for a limited portion of the public within the
market area does not, in the opinion of the Board,
outweigh the adverse competitive effects pre
viously recited.
The Board of Directors believes accordingly that
the application should be, and it hereby is, denied.
Statement upon reconsideration, June 25, 1976
State Bank of Standish, Standish, Michigan
("Standish Bank” ), a State nonmember insured
bank with total resources of $36,424,000 and total
IPC deposits of $28,262,000, was denied, on March
15, 1976, the Corporation's prior approval to ac
quire the assets of and assume the liability to pay
deposits made in The Au Gres State Bank, Au Gres,
Michigan ("A u Gres Bank” ), a State nonmember
insured bank having total resources of $8,158,000
and total IPC deposits of $6,246,000 (see page 107
for Basis for Corporation Denial). Standish Bank
and Au Gres Bank thereafter petitioned the Cor
poration to reconsider its original denial. The
Corporation's Board of Directors, having recon
sidered its earlier decision, affirms its original
denial with the following additional statement.
The Board of Directors concluded in its original
decision that the proposed transaction would, if
consummated, (i) eliminate a modest amount of
existing competition between Standish Bank and
Au Gres Bank, (ii) add substantially to the market
shares presently held by Standish Bank, the leading
local bank, (iii) increase substantially the advantage
in the local market share that Standish Bank pres
ently enjoys over all of its local competitors, and (iv)
reduce from five to four the number of other bank
ing sources from which residents and businessmen in
the Au Gres area have to choose for banking serv
ices. Based on those conclusions and on the stand
ards established by the Supreme Court in cases
involving horizontal mergers of banks already com
peting in the same local market, the Board of Direc
tors was of the opinion that the proposed trans
action would "substantially lessen com petition"
within the relevant local banking market, which was
described as the area within a 20-25 mile radius of
Au Gres. This included all of Arenac County, the
southern portion of Iosco County, the southeastern
portion of Ogemaw County, and the northern half
of Bay County.
The applicants' requested reconsideration is
based, principally, on the ground that the market
defined in the Basis for Corporation Denial was too
narrow and should be expanded to include addi
tional parts of all adjoining counties, particularly
the southern half of Bay County with its principal
trade and population center, Bay City. Addi
tionally, the argument was again made that Au Gres

BANK ABSORPTION DENEID BY THE CORPORATION
Bank faced serious management succession prob
lems and that residents of the Au Gres area were not
receiving full banking services. Further, it was stated
that there were no less anticompetitive alternatives
available.
In support of the argument that the market
should be expanded, particularly southward to in
clude Bay City, surveys were presented which pur
portedly indicated substantial commutation be
tween the Bay City area and Standish for banking
and other services. The statistics in these surveys
were contained in the original application and were
carefully considered at the time the application was
denied. It was recognized that some residents of the
Standish area do commute to large shopping com
plexes in the Bay City area for shopping needs, but
no conclusion could be drawn from the statistics
submitted that any meaningful number of persons
traveled there for banking services or that residents
of the Bay City area found Standish Bank a conven
ient banking alternative. On the contrary, the sur
veys showed that 72 percent of Standish Bank's
main office customers were located within 10 miles
of that office and 99 percent were located within 25
miles. The survey further indicated that 91 percent
of Au Gres Bank's customers were contained w ith
in a 10-mile radius of Au Gres and that the one
branch operated by Standish Bank obtained 96
percent of its deposits from customers located
within a 10-mile radius of that office.
While the Bay City trade area does have some
economic impact on competition in the service areas
of the applicants, for purposes of section 7 of the
Clayton Act (15 U.S.C. 18), the relevant geographic
market is where "the effect of the merger will be
direct and immediate" (U nited States v. Phila
delphia N ation al Bank. 374 U.S. 321, 359 (1963)).
In view of the direct effect the proposed merger
would have w ithin the originally defined market
area, the Board of Directors sees nothing in the
record supporting the argument for an expanded
market.*
It is noted, however, that even were the relevant
market redefined to include that area within a
25-mile radius of Standish, which would corres
pond to Standish Bank's legal branching area, the
basis for the original denial would still be true.

* Although the population o f this relevant geographic mar
ket is quite small, the Au Gres banking market would
constitute an economically significant "section of the
c o un try." See United States v. Phillipsburg National
Bank & Trust Co., 339 U.S. 350 (1970); United States v.
County National Bank o f Bennington, 330 F. Supp. 155
(D. V t. 1971), 339 F. Supp. 85 (D. Vt. 1972).

109

Standish Bank and Au Gres Bank hold a combined
30.1 percent share of that market, second only to
the 39.6 percent combined share held by the two
subsidiary banks of Peoples Banking Corporation
represented therein. While the resultant bank would
not hold the leading share of deposits in this market,
the combined share of the two largest banking
organizations in that market would be increased to
69.7 percent, existing competition would be elimi
nated, and banking sources would be reduced from
six to five. The Board of Directors is of the opinion
that consummation of the proposal, even if such a
redefined market were considered relevant, would
present anticompetitive problems too severe to
warrant approval of the application.
The Corporation has again reviewed the con
venience and needs factor and the banking factors,
and it adheres to its original conclusion on these
points and finds nothing in the record to warrant a
conclusion that the proposed transaction would
result in the realization of significant public benefit
under these factors. Again, the management succes
sion problem does not appear to be imminent or
insurmountable and lends only a slight weight in
favor of the application. Alternative purchasers in
clude 3 other banks headquartered within 25 miles
of Au Gres and thus capable of consummating the
transaction under present Michigan law, and with
the exception of Peoples Banking Corporation, any
of the other 41 bank holding companies operating in
Michigan could be considered potential purchasers.
Since Standish Bank already competes in the rele
vant market, any additional services are presently
available to residents and businessmen in and
around Au Gres, albeit with some inconvenience.
Therefore, there is no basis in the record for con
cluding that the public cannot obtain such benefits
from other sources at the present time or that the
same benefits could not be achieved through other,
less anticompetitive means.
Based on all of the foregoing and on the record
before it, the Corporation's Board of Directors again
concludes that approval of the proposed purchase of
assets and assumption of liabilities of Au Gres Bank
by Standish Bank is not warranted and should
accordingly be denied.

REGULATIONS AND LEGISLATION
PART FOUR

113

RULES AND REGULATIONS
Interest rate regulations (Part 329).
The Corporation amended its deposit
interest rate regulations to broaden the
exemption from interest rate ceilings for
capital notes issued by insured nonmem
ber banks. Under the amendments of
June 16, 1976, such notes may have an
average (rather than absolute) maturity as
short as 7 years, although no note in a
serial issue can have an original m aturity
of less than 5 years. The amendments also
established a procedure for permitting
such banks to issue capital notes of less
than $500 to satisfy the preemptive rights
of shareholders.
The Corporation further amended its
interest rate regulations on November 12,
1976, to permit the penalty-free w ith
drawal before m aturity of funds de
posited in insured nonmember banks by
self-employed persons under so-called
Keogh or H.R. 10 retirement plans. Such
withdrawals can be made after the depos
itor reaches age 5914, or earlier if he or
she is disabled. Moreover, the $1,000
minimum amount requirement for longer
term time deposits no longer applies to
such funds. These amendments are similar
to those adopted in December 1975 for
Individual Retirement Accounts and are
designed to prevent conflicts with Federal
tax law upon distribution of retirement
funds.
Finally, the Corporation temporarily
suspended premature withdrawal penal
ties on time deposits for victims of the
Teton Dam disaster in Idaho. The suspen
sion, which was initiated on June 6,
1976, and expired on December 31,
1976, gave victims of that disaster ready
access to their time deposit funds for
reconstruction and similar purposes. Each
insured nonmember bank had the discre
tion to decide whether or not to allow
such penalty-free withdrawals.
Two new proposals about regulations
on deposits were advanced by the Cor
poration during 1976. On March 15,

1976, the Corporation proposed an
amendment to its regulations that would
permit transfers from savings accounts to
checking accounts to cover overdrafts.
This proposal would require that the
transfers be in minimum increments of
$100, w ith at least 30 days' interest on
the amount transferred to be forfeited.
On November 15, 1976, the Corporation
proposed a rule which would generally re
quire notice to depositors of the m aturity
of their time deposits. The notice would
have to be printed on or affixed to the
deposit instrument. The purpose of this
proposal is to reduce the possibility that
depositors will forget when their deposits
mature, resulting in the loss of interest or,
if the deposit has been automatically re
newed, payment of a penalty for early
withdrawal.
Insider transactions. On February 25,
1976, the Corporation adopted a regula
tion aimed at curbing abuses which may
occur in transactions between an insured
State nonmember commercial bank and
"insiders" of the bank. On April 27,
1976, this regulation was extended to
cover insured State nonmember mutual
savings banks as well. The regulation be
came effective on May 1, 1976.
Under this regulation, the board of
directors of each insured State nonmem
ber bank is required to review and ap
prove every insider transaction involving
assets or services having a fair market
value greater than a specified amount,
that amount varying with the size of the
bank. In addition, certain recordkeeping
requirements are imposed in order to
foster effective internal controls over
such transactions by the bank itself and
to facilitate examiner review.
In adopting this regulation, the Cor
poration did not intend to suggest that all
transactions with insiders or their inter
ests are detrimental to the bank or that
such transactions should be automatically
rejected. The regulation neither prohibits
nor significantly restricts a bank's ability
to enter into such transactions. On the

FE D E R A L DEPOSIT INSURANCE CO RPO RATIO N

114

other hand, the regulation makes clear
that formal compliance with its review
and approval requirements does not re
lieve a bank of its duty to conduct its
operations in a safe and sound manner,
nor does it prevent the Corporation from
ta k in g appropriate supervisory action
with respect to any insider transaction.
By year-end 1976, the regulation had
been in effect 8 months. Reaction to it
was generally viewed as favorable, with
many banks finding that implementation
of its requirements did not result in un
due burden or expense. Compliance with
the regulation generally appeared satisfac
tory, but it was still too early to assess
adequately whether the regulation is
achieving its intended purpose of curbing
abusive insider transactions.
Deposit insurance coverage. Under the
Corporation's insurance regulations, the
deposit accounts of a corporation are in
sured up to $40,000 in any one insured
bank. On November 3, 1976, the Corpo
ration proposed amendments to its insur
ance regulations designed to apply this
same rule to deposit accounts of any reg
istered investment company, even if that
company is organized in some noncor
porate form. Specifically, for deposit
insurance purposes, the Corporation
would treat as a corporation any trust or

other business arrangement registered, or
required to be registered, w ith the Secur
ities and Exchange Commission as an in
vestment company under the Investment
Company A ct of 1940. The proposal
would not cover trusts that are not sub
ject to registration under that act, such as
employees' pension and profit-sharing
trusts, charitable trusts, and common
trust funds maintained by bank trust de
partments.
The proposed amendments are in
tended to clarify the extent of insurance
coverage on deposits of certain business
trusts and other entities which may be
viewed as de facto corporations because
of their public ownership and business
objectives. Some confusion has existed as
to whether such deposits are insured
according to each individual investor's
beneficial interest in the trust, or alterna
tively, according to the aggregate deposits
held by the trust in each insured bank.
The Corporation asked for comment on
these proposed amendments by January
14, 1977.
FEDERAL LEGISLATION
The three most significant pieces of
banking legislation enacted in 1976 in
vo lve consumer credit and so-called

FEDERAL DEPOSIT INSURANCE COVERAGE
PER DEPOSITOR 1934-1976
A m ount (each insured bank)
$

Effective date

2,500.........................................................................................................................................................January 1,1934
5,000.........................................................................................................................................................July 1,1934
10.00 0

September 21,1950

15.00 0

October 16, 1966

20.00 0

December 23, 1969

40.00 0

November 27,1974

100,000- Time and savings deposits o f government units (except State and local government
deposits held in out-of-State b a n k s ).................................................................................... November 27, 1974

115

FE D E R A L LE G IS LA TIO N - 1976

Negotiable Orders of Withdrawal (NOW)
accounts, which in effect are interestbearing checking accounts. A provision of
Public Law 94-22, signed on February 27,
1976, added Connecticut, Rhode Island,
Maine, and Vermont to the list of States
in which NOW accounts could be offered.
Previously, they had been permitted only
in Massachusetts and New Hampshire.
This same legislation also amended the
Truth in Lending Act to provide that cash
discounts would not be regarded as inter
est for disclosure purposes and placed a
3-year ban on the imposition of sur
charges on credit card purchases.
Approved on March 23, the Equal
Credit Opportunity A ct Amendments ex
panded the categories of prohibited dis
crimination in consumer credit trans
a c tio n s to include age, race, color,
religion, national origin, and receipt of
public assistance benefits, in addition to
the existing prohibitions against discrimi
nation because of sex or marital status.
This law also gave rejected applicants the
right to obtain specific reasons for the
refusal of credit and raised the ceiling on
class action liability to $500,000 (from
$100,000) or 1 percent of the creditor's
net worth, whichever is less.
The Consumer Leasing A ct of 1976,
which was also approved on March 23,
made the Truth in Lending Act applicable
to leases of consumer durables, such as
automobiles and household goods, and re
quired that the costs of the lease arrange
ment be clearly stated. It also created a
presumption of unreasonableness if the
final ("balloon") payment under the lease
exceeded three times the average monthly
payment. These new requirements of the
Equal Credit Opportunity Act Amend
ments and the Consumer Leasing Act
become effective on March 23, 1977, ex
cept for the increase in class action liabil
ity limits which became effective upon
enactment.
A bill approved on August 3, 1976
(Public Law 94-375), contained provi
sions amending the National Flood Insur

ance Act to grant certain exemptions
from the general statutory ban against
mortgage lending by federally supervised
financial institutions in identified flood
hazard areas of communities not partici
pating in the national flood insurance
program. This legislation made permanent
the existing temporary exemption permit
ting mortgage loans to be made for the
purchase of existing, previously occupied
residential dwellings. It also broadened
this exemption to include loans to fi
nance the purchase of existing small busi
ness properties and to permit owners of
residential dwellings to renew or increase
the financing on their homes. The new
law further expanded this exemption to
permit loans to finance improvements of
existing residential structures, up to an
aggregate of $5,000 per dwelling, and to
finance farm improvements of a nonresidential, agricultural nature.
Legislation enacted late in the 94th
Congress, the "Government in the Sun
shine A c t" (Public Law 94-409), requires
all Federal agencies headed by two or
more Presidential appointees to hold their
meetings and to conduct agency business
in

th e

open

a fte r

g iv in g

le a s t

1 - w e e k 's

notice of the time and place of their
meetings. The agencies are required to
keep transcripts, recordings, or detailed
minutes of all closed agency meetings.
The law contains a list of 10 exemptions
from the open meeting requirements. The
exemptions relating specifically to bank
regulation matters include those covering
trade secrets and confidential financial
information, information contained in ex
a m in a tio n reports, and information
which, if prematurely disclosed, would
significantly endanger the stability o f any
financial institution. Agencies are re
quired to issue implementing regulations
by March 13, 1977.
Two provisions in the mammoth Tax
Reform Act of 1976 (Public Law 94-455)
which became law on*October 4, 1976,
are of particular interest to banks. An im
portant step in the direction of financial

116

FE D E R A L DEPOSIT INSURANCE CO RPO RATIO N

privacy for bank customers was taken in
section 1205 of the act, which requires
the Internal Revenue Service to provide,
in most circumstances, at least 14 days'
prior notice to any bank customer whose
bank records it wishes to examine. Within
this 14-day period, the customer may
direct the bank in writing not to comply
with the IRS administrative summons.
The Service would then be required to
obtain a court order to examine the rec
ords. Also, sections 1061-64 of the act
provide that United States corporations

(including banks) actively participating in
international boycotts not sanctioned by
the United States can, in some circum
stances, lose their foreign tax credits,
foreign tax deferrals, and export sub
sidies.
Public Law 94-414 amended the In
ternal Revenue Code to permit banks in a
holding company system to use a com
mon trust fund maintained by one or
more banks in the same affiliated group,
w ithout loss of the fund's tax-exempt sta
tus.

STATEMENTS BY CORPORATION DIRECTORS
PART FIVE

STATEM ENTS BY CO RPORATION DIRECTORS

Statement by Frank Wille, on the Com
mittee Print o f the "'Financial Reform
Act of 1976"*
Mr. Chairman and Members of the Sub
committee:
I appreciate this opportunity to testify
on the proposed "Financial Reform Act
of 1976," a bill designed to reflect testi
mony and comments received in connec
tion with your subcommittee's FINE
Study "Discussion Principles." The bill
also incorporates a number of provisions
from the Senate-passed "Financial Insti
tutions A c t" (S.1267), from legislative
proposals by the Federal bank regulatory
agencies designed to strengthen their avail
able regulatory procedures to prevent and
correct problem bank situations (S. 2304,
H.R. 9743, and Title I of H.R. 10183),
and from the FDIC's proposed "house
keeping" bill (S. 2233, H.R. 9742, and
Title IV of H. R. 10183).
The bill before the subcommittee is
long and complex. Many of its provisions
are interrelated, and some, for technical
consistency and clarification, may require
amendments to Federal law beyond those
presently contemplated. Because of the
short time which has been available to
analyze all the ramifications of the bill
and its recently proposed amendments, I
respectfully request that the FDIC be
allowed to file for the record such addi
tional comments and suggestions of both
a technical and a substantive nature as
may be appropriate in the light of our
continued study of this important legisla
tion.
On the substantive side, I have pre
viously testified for the Corporation in
general support of the objectives and pro
visions of the Senate-passed Financial
Institutions Act, particularly those pro
visions which would enlarge the asset and
* Presented to the Subcom mittee on Financial
Institutions, Supervision, Regulation and In
surance, Com mittee on Banking, Currency and
Housing, House of Representatives, March 16,
1976.

119

liability powers of th rift institutions, pro
vide a Federal charter option for mutual
savings banks, and schedule a gradual
phasing out of the deposit rate ceilings
presently found in Regulation Q and its
FDIC counterpart. Naturally, the Cor
poration would favor those same pro
visions in the House bill, as well as those
supervisory and housekeeping provisions
which have been previously introduced at
the FDIC's request and are now included
in the same bill.
This morning I intend to confine my
remarks**to five aspects included in or
relevant to the proposed House bill:
•

the proposed restructuring of the
Federal bank regulatory agencies,

•

the requirement that the FDIC and
the proposed Federal Banking Com
mission operate on appropriated
funds,

•

the imposition of Federal Reserve
reserve requirements on all State
banks having third party payment
accounts exceeding $15 million,

•

the need for a fresh look at the
country's housing goals and incen
tives, and

•

the desirability of further legisla
tion to mandate additional financial
and operating disclosure on insured
banks with fewer than 500 share
holders.

I. Agency Restructuring
My December 9 testimony before this
subcommittee contained a specific, inter
mediate proposal for Federal bank agency
restructuring which I think is superior to
the provisions presently in the bill before
you, because it would have consolidated
* * ln fairness to my successor as Chairman of
the FDIC and to the C om ptroller o f the Cur
rency who serves ex o ff ic io on the FDIC
Board o f Directors and w ill be presenting the
views o f his o ffice to m o rro w , these remarks
should be considered personal observations
o f the present incum bent and not necessarily
the present or fu tu re views o f the FDIC.

120

F E D E R A L DEPOSIT INSURANCE CO RPORATION

Federal oversight of State-chartered
banks in one office, preserved significant
play between national and State banking
systems, and provided for an evolutionary
structure (the proposed Federal Banking
Board) which would include among its
five members the Comptroller of the Cur
rency, the Federal Supervisor of State
Banks, and a Governor of the Federal
Reserve System.
Title I of the proposed Financial Re
form Act, by consolidating the present
supervisory powers of the Comptroller of
the Currency over national banks and the
Federal Reserve System over bank hold
ing companies and State member banks,
adopts some aspects of my earlier pro
posal at the expense of others. It provides
for the removal of the Federal Reserve
System from day-to-day supervision of
bank holding companies and State mem
ber banks, a transfer of power I continue
to support wholeheartedly. Such a trans
fer does not require that the Federal
Reserve conduct its monetary policy in a
vacuum, and no r e s p o n s i b l e p e r s o n h a s
suggested that the Federal Reserve Sys
tem be denied information about banking
developments which it needs to conduct
the all-important monetary affairs of the
country. No convincing argument has yet
been advanced, however, to justify the
daily diversion of the staff and members
of the Board of Governors away from
monetary policy issues to such matters as
regul ati o n - w r iti ng under T ruth-inLending, Fair Credit Billing, and Equal
Credit Opportunity or the thousands of
decisions required annually under the
Bank Holding Company Act Amend
ments of 1970. The Financial Reform
Act would also consolidate in one place
the regulation and supervision of most of
the nation's larger banks (no nonmember
commercial bank today exceeds $2 bil
lion in size), but it does so at potentially
great risk to the major State banking
systems of the country if the proposed
commission fails to permit some diversity
between the way in which national and

State banks operate. The bill before you
also divides jurisdiction over State banks
between the FDIC and the proposed com
mission, depending on whether or not the
bank is a member of a holding company
system. Apparently, the FDIC would also
have jurisdiction over State banks that are
"members" of the Federal Reserve System
so long as they are not in a holding com
pany. I urge the subcommittee to review
these matters carefully, clarifying them as
necessary, and again consider the alterna
tive I proposed in December.
II.

Placing the Federal Bank Agencies on
Appropriated Funds
It is no accident, in my judgment,
that the three Federal bank agencies have
remained over the years relatively un
touched by political scandal or intim ida
tion. I fear, however, that this track rec
ord could be substantially altered if the
proposed Federal Banking Commission
and the FDIC were to be placed on an
appropriated funds basis, subject in the
first stage of the process to the tender
mercies of the White House and the Of
fice of Management and Budget and in
the second stage to the varied interests of
individual Congressmen. The practical
effect of the appropriations process would
be to give the political operatives of the
White House and the Congress substantial
control over the personnel, the day-today operations, and the legislative posi
tio n s*** taken by the commission and
the FDIC, and I need not remind you
how sensitive many of these agency deci
sions can be.
The Congress and the public must,
however, hold every agency of govern
ment, and its responsible officials, ac
* * * l n this respect, insofar as OMB is con
cerned, the im position o f the appropria
tions procedure on the FDIC could have the
practical effect o f n u llifyin g recent legisla
tion which expressly exempted the FDIC
from obtaining OMB clearance before sub
m itting its positions on legislative matters
to the Congress.

STATEM ENTS BY CO RPO RATIO N DIRECTORS

countable for their performance of duty.
In p a rt, this is accomplished today
through the requirement of an annual
report to the Congress, through oversight
hearings of the responsible committees
and subcommittees of the two Houses
and through the limited GAO audit which
is presently conducted each year of the
FDIC's "financial transactions/' In addi
tion, the Freedom of Information Act is
opening more and more of the activities
and decisions of the Federal bank agen
cies to public scrutiny. This process of
enforcing accountability on the bank
regulatory agencies could be further
strengthened by (i) requiring periodic
reports to the Congress on specific sub
jects of interest to the responsible com
mittees or subcommittees, and (ii) enlarg
ing the GAO audit requirements to in
clude a limited sampling of the agency's
examination reports and supervisory pro
cesses in specific cases, under strict re
quirements of confidentiality, in an effort
to obtain an independent, outside ap
praisal of the effectiveness of the agency's
supervision. We are currently engaged in
an effort to compromise the FDIC's long
standing dispute w ith the GAO over its
asserted need to have "unrestricted"
access to FDIC examination reports in
order to accomplish its required audit,
and I am hopeful that the pattern that
emerges from these current efforts can be
used on a regular basis. In any event,
legislative oversight and GAO post-audit
hold more promise in my view than the
appropriations process of preserving the
nonpolitical nature of the bank agencies
and the public confidence which has
accompanied their performance in the
past.
III. Uniform Reserve Requirements for
Banks w ith $15 m illion or more in
Third Party Payment Accounts
Under present law the Federal Reserve
is required by Federal law to impose re
serve requirements on national banks and
on State-chartered banks which choose to

121

become members of the Federal Reserve
System. Some State-chartered member
banks apparently find the advantages of
membership overcome the cost thereof,
although a substantial number of banks
have dropped their membership over the
past 10 years. The principal cost of
membership is the maintenance of re
quired reserves in the form of noninter
est-earning deposits at a Federal Reserve
Bank. State reserve requirements for
nonmember banks generally are less oner
ous than Federal Reserve requirements
since nonmember banks may use balances
held with a correspondent bank and, in
some States, may also use earning assets
in calculating their required reserves. The
most frequently cited advantages of mem
bership are cost-free check clearing and
co lle ctio n services, rediscounting and
borrowing privileges at a Federal Reserve
Bank, cost-free wire transfer, and safe
keeping privileges. Some banks also con
sider the "prestige" of membership an
intangible benefit.
By contrast, nonmember banks receive
a variety of services and assistance from
correspondent banks in return for main
taining correspondent balances. As fees
for such services replace the maintenance
of balances (and there clearly is a trend
toward this development), it w ill be more
apparent to nonmember banks what the
various services, including check clearing
and collection, are costing them. Should
the Federal Reserve make its clearing wire
and transfer service available on a fee
basis to all users, nonmember banks
would be able to compare costs in this
area with those fees charged by corres
pondent banks. The net result might well
be that State-chartered banks, member as
well as nonmember, would have better
information than they do today in de
ciding how to have their checks cleared
and whether the benefits of discount w in
dow borrowing and safekeeping services
are worth the residual cost of maintaining
reserves with the Federal Reserve.
Proponents of uniform reserve require

122

FE D E R A L DEPOSIT INSURANCE CO RPO RATIO N

ments for banks of similar size argue that
uniform requirements are necessary for
the Federal Reserve to maintain adequate
control over the money supply. It is im
plied that the absence of uniform reserves
allows a significant part of the banking
system to escape Federal Reserve control
and this makes monetary management
more difficult.
I am not aware of any substantive re
search and analysis that gives credence to
these arguments. FDIC staff analyses, as
well as those of outside economists, do
not support the view that the existence of
a large number of nonmember banks has
hampered monetary management. Sophis
ticated observers note that except for the
large money-market correspondent banks,
Federal Reserve membership may not be
particularly important for the conduct of
monetary policy. They argue that the
reserve positions of smaller banks depend
upon the reserve positions of large corres
pondent banks and thus effective mone
tary control of correspondent bank re
serves gives the Federal Reserve effective
control over all banks, regardless of the
amount or form of these reserves.
Another argument advanced on behalf
of uniform reserve requirements pertains
to equity. Insofar as State reserve require
ments can be met by correspondent bal
ances which compensate for services pro
vided or by placing funds in earning
assets, it is sometimes alleged that such
institutions tend to be at a competitive
advantage compared with member banks;
and, in fact, nonmember banks in States
with lower reserve requirements have
tended to be more profitable than mem
ber banks of comparable size. However,
extending reserve requirements to all
depository institutions is not the only
way to address this issue. Another alter
native would be for the Federal Reserve
to pay interest on member bank reserves,
to allow all or a portion of its required
reserves to be held in the form of Treas
ury securities, or to reduce prevailing
reserve requirement levels. (There may be

considerable logic in tying the latter to
the elimination of restrictions on the pay
ment of interest on demand deposits.)
With respect to other Federal Reserve
services, principally access to the discount
window and check clearing services, these
might be made available to nonmember
banks on a nonsubsidized basis.
To reiterate the position outlined in
my previous testimony, I believe that the
nation's banks should be permitted to
retain a meaningful choice between the
regulatory options now available to in
sured banks. For State-chartered banks,
an important part of that choice is op
tional membership in the Federal Reserve
System with its attendant costs and bene
fits. A t present, being unconvinced of the
merits of the two principal arguments
advanced by proponents of uniform
Federal Reserve reserve requirements, I
would not favor the imposition of such
uniform requirements on State-chartered
banks. If considerations of either mone
tary policy or equity persuade the sub
committee to adopt such a requirement, I
believe that a much higher cutoff figure
than the $15 m illion proposed should be
used to determine those banks to which
such uniform reserves should apply.
IV. A Fresh Look at the Country's Hous
ing Goals and Incentives
Diversification on the asset and liabil
ity side appears to be necessary if the
specialized th rift institution is to have the
earnings and the competitive tools neces
sary to attract and retain deposits in
periods of high market interest rates. To
those in the Congress and elsewhere, how
ever, who seek to keep lendable funds
flowing to the housing sector, broadened
investment powers for thrifts raises the
specter of a reduced commitment to
housing. While it may be true that the
percentage o f assets devoted to mortgage
lending and the housing sector is likely to
go down with broadened powers, most
experts feel that the dollars devoted to
housing w ill not be adversely affected.
Heightened competition for deposits also

STATEM ENTS BY CO RPO RATIO N DIRECTORS

raises the likelihood of higher rates on
home mortgages and related housing cred
it, and this raises understandable concern
over the future attractiveness of such
expenditures to the purchasing public.
Should we then be moving away from
specialized mortgage lending institutions?
I think the answer must be “ yes,”
coupled w ith a more enlightened housing
policy. Tax incentives to keep financial
institutions in the housing sector, or in
centives like the differential under Regu
lation Q, are directed to lending institu
tions, not the ultimate user. If the incen
tives are adequate, so the argument goes,
more money will flow to housing and
home mortgage rates will be kept low.
But will this happen and is it what we
need today? Will such incentives increase
the flow of funds to housing units that
are affordable by lower- and middleincome families—who are, after all, the
vast m ajority of our population? Or will
it again be the developers and the rela
tively affluent who benefit from the
many real estate incentives presently
embedded in our laws?
The basic problems in housing today
run much deeper than the availability of
funds or high interest rates. They are a
combination of high and rising energy
costs, high building costs, and a preoccu
pation with the detached, single-family
home. Surely the time has come for a
fresh look at the housing goals we have
set for ourselves as a nation. A reexami
nation of these goals, and agreement on
what they should be, may lead us to quite
different incentives in the housing sector
than are contemplated by either the
Senate or House bills now before you. I
fear that reliance on the traditional incen
tives aimed at lending institutions and
developers w ill only lead to more dis
appointments in the actual improvement,
both quantitatively and qualitatively, of
our housing stock.
V.

Greater Disclosure in Banks with
fewer than 500 Shareholders

123

Recent events have accelerated what
has been a persistent trend toward greater
disclosure of information related to the
operations and financial soundness of the
nation's insured banks, a trend which I
believe benefits the institutions them
selves, their depositors and customers,
their shareholders, and their regulators.
The Federal bank agencies and the
SEC have played a major role in this pro
cess. The FDIC has for several years, for
example, released to anyone who asks the
complete Reports of Condition and In
come which insured banks file regularly
but which had previously been held con
fidential. Contrary to the fears of some,
there is no evidence that this has resulted
in any adverse effects on the nation's
banking system. Currently, the Federal
bank agencies and the SEC are engaged in
a concerted effort to expand the useful
ness of the information collected in such
reports.
In addition, bank holding companies
with 500 or more shareholders are gener
ally required to disclose data, file periodic
reports, use proxy statements, and dis
tribute annual reports in accordance with
SEC standards. Nonholding company
banks with 500 or more shareholders are
required to meet similar disclosure re
quirements set by the Federal bank agen
cies, in substantial conformance with SEC
standards. A t the present time 321 non
member insured banks meet the statutory
tests and are subject to these extensive
disclosure requirements.
I would recommend two additional
steps which would significantly enlarge
the public dissemination of banking data,
both of which would require legislation
to be effective. First, the 500-shareholder
test should be reduced to 300 share
holders and subsequently to 100 share
holders. The initial reduction would add
approximately 500 nonmember banks to
those already subject to these extensive
reporting requirements, while the reduc
tion to 100 shareholders would add

124

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

another 1,700 nonmember banks. A com
parable percentage increase in coverage
would most likely occur for bank holding
companies registered w ith the SEC, for
national banks registered with the Comp
troller of the Currency, and for State
member banks registered with the Federal
Reserve. Second, all insured banks should
be required to send out to their share

holders the data contained in the yearend condition and income reports sub
mitted as of December 31 to the three
Federal bank agencies. While such data
may be obtained from the agencies upon
request, placing the burden of dissemina
tion on the banks themselves would lead
to more widespread disclosure on an
equal basis to all bank owners.

125

STATEM ENTS BY CO RPO RATIO N DIRECTORS

Statement by Robert E. Barnett, on S.
2304, 94th Congress, a bill "to strengthen
the supervisory authority of the Federal
banking agencies over financial institu
tions and their affiliates"*
I appreciate this opportunity to testify
in support of S. 2304, 94th Congress, a
bill "to strengthen the supervisory au
thority of the Federal banking agencies
over financial institutions and their a ffili
ates." As you know, the bill was pro
posed jo in tly by the FDIC, the Comp
troller of the Currency, and the Federal
Reserve. Its enactment would provide
much needed assistance for preventing
certain types of abuses that in the past
have led some banks to fail and would
better enable the regulatory agencies in
the future to attempt to correct such
problem bank situations before they
reach the terminal stage. The need for
this type of legislation was underscored
by former FDIC Chairman Frank Wille in
his July 21, 1975 statement before the
House Committee on Financial Institu
tions Supervision, Regulation and Insur
ance . . . [a copy was attached as appen
dix A ] .
In his September 5, 1975 letter to
Senator Proxmire forwarding this pro
posed legislation to the Congress, Federal
Reserve Chairman Arthur Burns discussed
in some detail the background circum
stances giving rise to this proposal. I will
briefly summarize these circumstances to
refresh the committee's memory in this
regard.
Civil Penalties
In a number of areas of bank regula
tion there is no totally effective deterrent
to violation of various limitations and
restrictions imposed by Federal statute.
Although such violations can severely
affect a bank's safety and soundness, the
only sanction a bank faces in some cases
is the possible issuance of a cease-and*Presented to the Com mittee on Banking,
Housing and Urban Affairs, United States
Senate, March 26, 1976.

desist order requiring it to reverse a par
ticular transaction or to refrain from
committing similar future violations. One
example is section 23A of the Federal
Reserve Act which (in conjunction with
section 18(j) of the Federal Deposit
Insurance Act) imposes stringent lim ita
tions on loans and other dealings between
insured banks and their affiliates. How
ever, since there are no specific penalties
for violation thereof, a bank holding com
pany or other person experiencing finan
cial pressure may cause a subsidiary bank
to violate such restrictions knowing that,
if such violations are discovered, the only
sanction would be the possible issuance
of a cease-and-desist order designed to
rectify the violation and prevent further
such transgressions.
While the cease-and-desist order is
quite useful for some purposes, it is not
as significant a deterrent to violations of
restrictions on inter-affiliate or insider
lending as a daily money penalty would
be. Accordingly, sections 1 and 7 of the
bill would authorize the Federal Reserve
and the FDIC to impose up to $1,000 per
day civil penalties for violations of sec
tion 23A of the Federal Reserve Act re
la tin g

in te r-a ffilia te

d e a lin g s

o r s e c tio n

22 of the Federal Reserve Act covering
bank loans to their own executive of
ficers. Similarly, section 2 of the bill
would authorize the imposition of up to
$100 per day civil penalties for violations
of Regulation Q type restrictions relating
to the payment of interest on deposits
(section 19 of the Federal Reserve Act).
In addition, section 6(e) of the bill
would authorize the imposition of a civil
penalty against any bank or any officer,
director, employee, agent, or other per
son participating in the bank's affairs for
violation of a cease-and-desist order or a
consent agreement which has become
final under section 8(b) or 8(c) of the
Federal Deposit Insurance Act. Section
6(e) would provide for a civil penalty of
up to $10,000 for each day the offending
bank or individual w illfu lly refuses to

126

F E D E R A L DEPOSIT INSURANCE CO RPORATION

obey the order. The authority to impose
such a fine for violating a final cease-anddesist order would serve to emphasize the
gravity of such an order.
Under section 8(k) of the FDI Act, a
cease-and-desist order does not become
final unless entered into by consent or
until the time has run for filing a petition
for review with the appropriate U.S.
Court of Appeals and no petition has
been filed or perfected, or the petition so
filed is not subject to further review by
the Supreme Court. In either event, the
party must have exhausted the adminis
trative and judicial remedies afforded to
him under the act. If the party then con
tinues to disobey an order, the appro
priate agency can apply to the proper
U.S. District Court to secure its enforce
ment. However, the threat of a court
enforcement and possible contempt pro
ceedings should not be the only deterrent
at this point. The party has been given
every opportunity to have his day in
court. He should not be allowed to fu r
ther impede the effect of the o r d e r
sim ply to secure another delay and
should be subject to a substantial mone
tary penalty for each day that he does so,
as provided in the bill.
In imposing civil money penalties
under the bill's provisions, the appro
priate bank regulatory agency would be
required to take into account the finan
cial resources and the good faith of the
bank or person charged with the viola
tion, as well as the history of previous
violations. Hopefully, the u tility of such
penalties would be primarily in their
deterrent effect, and the actual imposi
tion of fines could be used sparingly.
Insider Loans
Our experience has indicated the need
for more vigorous supervision by bank
boards of directors and bank supervisory
agencies of transactions between an in
sured nonmember bank and insiders of
the bank. Abusive self-dealing has been a
significant contributing factor in more
than half of all bank failures since 1960,

including the failure of 30 nonmember
insured banks. Losses to the deposit in
surance fund as a result of these failures
are likely to exceed $175 million. A re
view of existing and past problem bank
cases also reveals abusive self-dealing as a
significant source of difficulty. Even
where the immediate result is not the
bank's failure or its designation as a bank
requiring close supervision, an insider
transaction that is not effected on an
"arm's length" basis may lead to a dim i
nution of the bank's earnings and an ero
sion of its capital—thereby increasing the
risk of loss to depositors and m inority
shareholders and ultimately to the de
posit insurance fund. Also, insider trans
actions whose terms and conditions can
not be justified constitute a diversion to
insiders of resources that properly belong
to all shareholders on a pro rata basis, as
well as a misallocation of a community's
deposited funds.
For these reasons the FDIC on Febru
ary 25, 1976, adopted a new regulation
dealing with insider transactions. The
regulation seeks to minimize abusive selfdealing through the establishment of pro
cedures which insure that bank boards of
d ire c to rs supervise such transactions
effectively and which better enable FDIC
examiners to identify and analyze such
transactions. The board of directors of
each insured nonmember bank will be re
quired, effective May 1, 1976, to review
and approve each insider transaction in
volving assets or services having a fair
market value greater than $20,000 for a
bank having assets under $100 million,
$50,000 for a bank between $100 m illion
and $500 m illion in assets, or $100,000
for a bank with assets over $500 million.
In addition, certain recordkeeping re
quirements, including a record of dissen
ting votes cast by members of bank
boards of directors, w ill be imposed in
order to foster effective internal controls
over such transactions by the bank itself
and to facilitate examiner review. A more
complete explanation of the FDIC's new

STATEM ENTS BY CO RPO RATIO N DIRECTORS

insider regulation w ill be found in our
February 25, 1976 press release issued in
this connection . . . [a copy was attached
as appendix B ].
In addition to these new regulatory
requirements, it is our opinion that more
explicit statutory lending limitations on
the amount of a bank's loans to its in
siders would be helpful in preventing
banks from incurring undue risks by lend
ing excessive amounts to insiders and their
related business enterprises. Such limits
are necessitated by the fact that a bank
may be less subject to the restraints im
posed by prudence and sound judgment
when making loans to its insiders and
their related interests than it would be in
making loans to unrelated individuals or
business enterprises.
Accordingly, we believe further sub
stantive restrictions should be placed on
transactions between banks and insiders.
Specifically, it would be desirable to
amend section 22 of the Federal Reserve
Act to impose additional restrictions on
loans by a bank to its own officers and
directors and to major stockholders and
corporations affiliated w ith such individ
uals. Accordingly, sections 3 and 7 of the
bill would provide that the existing limits
under applicable Federal or State law on
loans to one borrower would apply with
respect to loans by any member or non
member insured bank to any one of its
officers and directors and to any other
individual holding more than 5 percent of
its voting securities, including loans to
companies controlled by such an officer,
director, or 5-percent shareholder. These
provisions would require that loans or
extensions of credit to any one of its of
ficers, directors, or 5-percent shareholders
and to all companies controlled by such a
person be aggregated and that the aggre
gate of such a credit not exceed applic
able Federal or State one-borrower limits.
Administrative Enforcement
While the provisions of the bill dis
cussed above are designed in large part to
prevent problem bank situations from

127

developing, the bill also contains several
provisions intended to assist in dealing
with problem bank situations once they
arise. Presently, under section 8(e) of the
Federal Deposit Insurance Act the appro
priate Federal bank regulatory agency is
authorized to remove a bank director or
officer who has engaged in a violation of
a law, rule, or regulation, participated in
an unsafe or unsound practice, violated a
final cease-and-desist order, or breached
his fiduciary d u ty —but only if such a vio
lation involves personal dishonesty and
where substantial financial loss to the
bank or other damage to its depositors
can be demonstrated. Because of the
d if f i c u l t y o f proving circumstances
amounting to personal dishonesty, the
present law effectively bars removal of
individuals even if they have repeatedly
demonstrated gross negligence in the
operation or management of the bank or
w illful disregard for its safety and sound
ness.
While we realize that the congressional
objective underlying the "personal dis
honesty" requirement was to protect
bank officers and directors from arbitrary
or capricious administrative action, we
b e l i e v e t h a t i n l i g h t of r e c e n t e x p e r i e n c e
it is necessary to balance the interests of
the individual bank officer or director
against those of the bank's depositors and
shareholders, and ultim ately against the
public interest in maintaining the integ
rity of the Federal deposit insurance
fund. To strike this balance, we strongly
recommend enacting the provisions of
section 6(d) of the bill, which add to the
standard of personal dishonesty an alter
native standard which would recognize
the need to remove those officers and
directors whose gross negligence in the
operation or management of a bank or
whose w illfu l disregard of its safety and
soundness threatens the financial safety
of the institution. We believe that the
present hearing and judicial review re
quirements are sufficient to shield bank
officers and directors from arbitrary or

128

F E D E R A L DEPOSIT INSURANCE CO RPORATION

capricious administrative action.
Recent experience also indicates that a
bank may be harmed not only by the mis
conduct of its own officers and directors
but also by the misconduct of others who
are in a position to influence its affairs.
However, it is often d iffic u lt or impos
sible to reach such persons through re
moval proceedings or through cease-anddesist action brought against the bank
itself. Accordingly, we also recommend
that the amendments contained in section
6(a) and 6(c) of the bill, which would
amend paragraphs (b) and (c) of section 8
of the Federal Deposit Insurance Act, to
provide that the appropriate regulatory
agency may bring cease-and-desist pro
ceedings against directors, officers, em
ployees, agents, and other persons partici
pating in the conduct of the affairs of a
bank, as well as against the bank itself as
permitted under present law. We believe
that the ability to reach such officers,
directors, and other persons participating

in a bank's affairs through cease-anddesist orders would result in a greater
ability to correct situations which might
otherwise result in serious detriment to
the bank.
There are other provisions in the bill
which relate to bank holding companies
or to other matters w ithin the special
cognizance of the Comptroller of the Cur
rency or the Federal Reserve. While we
support the bill in toto, we defer to these
other agencies for detailed discussions of
such provisions. Also in response to the
request contained in your March 15,
1976 letter, there is attached a resume of
administrative enforcement proceedings
conducted by the FDIC during the past 5
years . . . [a copy was attached as appen
dix C ]. Finally, we would recommend
that the committee also act favorably
with respect to a related bill (S. 2233)
which contains various noncontroversial,
"h o u s e k e e p in g " amendments to the
Federal Deposit Insurance Act.

STATEM ENTS BY CO RPO RATIO N DIRECTORS

Letter by Robert E. Barnett, on making
the FDIC subject to the appropriations
process*
Dear Mr. Chairman:
I have learned that the Banking Com
mittee voted yesterday to make the FDIC
subject to the appropriations process.
That action is profoundly troubling to
the Corporation and its Board of Direc
tors, and while I believe you know the
general position of the Corporation on
that proposition, I feel I should present it
more thoroughly so that you and the
other committee members will under
stand our view of the full implications of
that action.
We are unaware of any major dissatis
faction of the committee with the Cor
poration. In many areas, such as disclo
sure, insider transactions, variable rate
deposit instruments, examiner training
and development, problem bank predic
tio n , responsiveness to Congressional
suggestions and inquiries, etc., we have
been the leader among the bank regula
tory agencies. We have not resisted your
efforts to have the GAO audit our per
formance; on the contrary, we have wel
comed it.
With respect to our performance in
assisting banks that are failing or in dan
ger of failing, or our general performance
as guardians of the deposit insurance fund
and administrators of the deposit insur
ance program, most objective observers
will give us very high marks. We under
stand, for example, that a recent Gallup
poll showed that 93 percent of Americans
with bank accounts feel their money is
safe there. Frankly, even though this poll
was apparently funded by the American
Bankers Association for that associa
tion's own purposes, we feel the results
are a tribute to the FDIC and are a direct
result of the Corporation's efforts over
the years. No other efforts in the financial
*T o Honorable W illiam Proxmire, Chairman,
Com m ittee on Banking, Housing and Urban
Affairs, United States Senate, A p ril 30, 1976.

129

or monetary arena have received or could
receive such a vote of confidence and
approval.
If including the FDIC under the appro
priations process was not designed to
correct serious abuses or poor perform
ance in our office, then it must be de
signed to provide better oversight of our
activities. We feel we have always been
open and candid with the Banking Com
mittee, but nevertheless we can appreci
ate your interest in more information.
Because of our interest in providing
you that information, we w illingly have
agreed to a GAO performance audit of
the FDIC. This audit, which tracks most
of the suggestions generated by your staff
and sent to the FDIC by you on January
27, 1976, should provide you the infor
mation which will permit you a more
thorough oversight of our activities. [A
copy of the agreement was attached.]
As you know, the financial statements
of the Corporation have been audited by
the General Accounting Office on an
annual basis for over 30 years. With the
exception caused by the disagreement
between the GAO and the Corporation
over the desirability of predicting bank
failures a n d possible losses to the d e p o s i t
insurance fund, and the concomitant re
luctance of the Corporation to permit a
review of our examination reports for
that purpose, the GAO has always found
the Corporation helpful in assisting it in
its annual audit. There have been no
instances to my knowledge of the GAO
raising any questions of irregularity or
irresponsibility in the financial dealings or
budget expenditures of the FDIC.
Although our budget is not reviewed
by the OMB or Congressional commit'
tees, our budget decisions are made only
after careful analysis w ithin the FDIC.
Our budget process begins with the Divi
sion chiefs7 preparation of budget recom
mendations to our Budget Office. That is
followed by a review by that office and
our Personnel Office of those recom
mendations, hearings conducted by a

130

FE D E R A L DEPOSIT INSURANCE CO RPO RATIO N

Budget Review Committee internal to the
Corporation, detailed recommendations
by that review committee to the Board of
Directors, and finally review and approval
by the Board of Directors itself. We have
a Controller's Office w ithin the Corpora
tion to which are delegated certain lim it
ed responsibilities and authorities with
respect to administering the budget
adopted by our Board of Directors, and
the FDIC auditor and his audit staff audit
both the Corporation's expenditures and
each and every liquidation in which the
Corporation is participating. During the
middle of each fiscal year, a limited bud
get review and update is held.
Several benefits flow from this proce
dure. We have no need to pad our budget
estimates to allow for cutting by the
OMB or the Congressional appropria
tions or Budget Committees. We have no
need to spend unused funds near the end
of the fiscal year in order to avoid budget
cuts the following year. Our decisions on
applications for branches, deposit insur
ance, merger approvals, etc., and our
judgments on hiring, firing, promotions,
contracts, etc., can be made on the basis
of our professional objective judgment
rather than on their possible impact on
our ability to gain approval for future
budgets. We are able to budget and plan
on a long-range basis for programs with
long-range benefits. For example, we have
developed over a period of many years a
training program for bank examiners of
which we are very proud. Such a program
does not necessarily provide a payoff in
the very beginning, but the present need
for more and better trained examiners
underscores the correctness of the judg
ment which initiated this program before
the need was obvious. We are able imme
diately to increase our expenditures over
budget estimates if an emergency involv
ing a large bank failure occurs. We do not
have to wait for a special supplementary
appropriation nor do we have to build an
unpredictable and probably misleading
contingency fund into our budget esti

mates. Finally, if we decide, for example,
that we should hire 100 more liquidators
to administer closed bank receiverships
that we see might be developing (as we
did about 2 years ago), we can do that
w ithout publicity. As Senator Vandenberg said on the floor of the Senate in
leading a bipartisan effort to prevent
requiring the FDIC to submit a budget
annually to the Bureau of the Budget (the
same principle as here):
. . . If the FDIC is d o u b tfu l about the year
to come and has to build up a large budget
in anticipation o f its doubts, I know of no
surer way to precipitate a crisis in the
United States than to have the budget of the
FDIC necessarily increased in anticipation
of bank failures made public to the world
on New Year's each year. (93 Cong. Rec.
10121 (1947)).

Because of the crucial and unique role
of the banking system in providing the
credit base for our entire economic sys
tem, certain related propositions seem
clear to the FDIC. First, it is essential
that Congress and the public are assured
that the financial affairs of the FDIC are
managed in a prudent and efficient man
ner. Second, it is essential that bank
depositors remain confident that the
FDIC has the financial and managerial
ability to meet its responsibilities to deal
effectively and promptly with failing
banks. Third, it is essential that the gen
eral public remain confident that the Fed
eral deposit insurance fund, built up over
40 years, w ill continue to be dedicated to
protecting the safety and soundness of
the banking industry. Finally, it is essen
tial that the public be confident that the
decisions of the FDIC on broad policy
issues or on individual bank cases that
come before it are decided on a profes
sional, impartial, and nonpolitical basis.
I believe that under our existing ad
m inistrative, financial, and budgetary
arrangements and procedures, particularly
as amended by the addition of a GAO
performance audit, these propositions can
be supported affirmatively. First, the
existing GAO audit and the periodic re

STATEM ENTS BY CORPO RATIO N DIRECTORS

131

w hich is even m ore sensitive w ith respect to
the necessities fo r its independence . . . .

Federal deposit insurance has worked.
That the American public has confidence
in its banking system and knows that its
deposits are safe in the nation's banks is
due in large measure to the existence of
Federal deposit insurance. The integrity
of the fund out of which those deposits
will be paid in the event of a bank closing
is unquestioned; each succeeding Board
of Directors of the Corporation since its
beginning has proved to be an excellent
guardian of the fund. Any change in the
financial operations of the Corporation or
the methods by which the Corporation
receives its money to conduct its business
may well erode the public's confidence in
the fund. We might note in this regard the
recent concern being voiced about the
soundness and solvency of the Social
Security fund. Whether justified or not,
similar concern about the integrity of the
deposit insurance fund could prove to be
unsettling. W ithout some overwhelming
need, carefully and completely delin
eated, it seems reckless to expose the
public's confidence in the banking system
to the danger of such erosion of confi
dence. In a statement by former Chair
man Leo T. Crowley (1934-1945) before
the Senate Appropriations Committee
which was at that time considering plac
ing the FDIC under the appropriations
process, this was stated eloquently:

I am not so much afraid o f what the p o liti
cal controls w ould do, because I assume th a t
they w ould have an adequate respect fo r
this in s titu tio n . But I am saying th a t the
fundam ental im portance and value of the
Federal Deposit Insurance Corporation is
psychological; it is the fa ith th a t fo r 15
years America has demonstrated it has in
this in s titu tio n . A t the m om ent when the
FDIC is about com pleting $1,000,000,000
of earnings o f its own, so that it can elim i
nate all G overnm ent capital at this tim e
when there is a b illio n dollars of money
available in the Treasury of the FDIC, if the
American people read that, at long last, in
Washington something is going on which
indicates that the p o litica l powers are rest
less and w ill remain restless u n til they can
get their hands upon this great in stitu tio n ,
the effect w ill be most deplorable. [Emphasis
added.]

In the brief span o f 14 years, the Federal
Deposit Insurance C orporation has banished
the fear o f bank failures fro m the minds of
the public. It has blazed the trail from
hoarded currency hidden in mattresses and
tobacco cans to the present tim e when no
one doubts th a t his bank deposit w ill be
repaid, if not by his bank, then by the
Deposit Insurance C orporation. No longer
do broken people gather before the closed,
cold doors of a failed bank and ponder their
plight w hile reading the fatal notice an
nouncing the appointm ent o f a receiver.
Instead, when a bank closes, the depositors
calm ly await the arrival o f the claim agents
of the Federal Deposit Insurance Corpora
tion who, in a brief period of days, pay o ff
their claims in cash. From the outset, the
Corporation has operated successfully and,
as a banker, a fo rm e r Government o fficia l,
and a businessman, I have always believed

ports and financial statements published
by the FDIC constantly assure the public
that the financial affairs of the FDIC are
in order. Second, our performance has
proved that the Corporation can deal
effectively w ith closed banks. Third, the
confidence of the public in the FDIC was
shown by the total absence of lines out
side the doors of Franklin National Bank,
U.S. National Bank, or Hamilton National
Bank when those banks closed. Before
the FDIC was created, "runs" on banks
were commonplace; now they are practi
cally nonexistent. We believe the Gallup
poll I referred to earlier accurately rep
resents the confidence the public has in
the FDIC. Finally, the public knows that
decisions at the FDIC are not wrongly
influenced by the political process since it
is an independent agency, not supported
by tax funds and not subject to the
appropriations process. Change is un
necessary, unwarranted, and may, in fact,
weaken the confidence the public now
has in the FDIC. Again, referring to com
ments of Senator Vandenberg in the
debate referred to before:
. . . No one has yet had the tem erity to pro
pose that the Federal Reserve System
should be robbed o f its independence and
subordinated to a p o litica l bureau of the
Government. Yet, here is an in s titu tio n

132

F E D E R A L DEPOSIT INSURANCE CO RPORATION
that an organization w hich is operating
successfully should not be disturbed or
upset by forcing it to change its method of
transacting business. To unnecessarily de
prive the Federal Deposit Insurance Cor
p oration o f its independence and fle x ib ility
which its corporate structure was designed
to furnish, as is proposed in the pending
measure, would, in my opinion, be a very
grave mistake.

Former Chairman Wille made much
the same statement testifying before the
Subcommittee on Financial Institutions
Supervision, Regulation and Insurance on
his final day as Chairman of the FDIC:
It is no accident, in m y judgm ent, that the
three Federal bank agencies have remained
over the years relatively untouched by p o li
tical scandal or in tim id atio n . I fear, how
ever, th a t this track record could be substan
tia lly altered if the proposed Federal Bank
ing Commission and the FDIC were to be
placed on an appropriated funds basis, sub
ject in the firs t stage o f the process to the
tender mercies o f the W hite House and the
O ffice of Management and Budget and in
the second stage to the varied interests of
individual Congressmen. The practical effect
of the appropriations process w ould be to
give the po litica l operatives o f the White
House and the Congress substantial co n tro l
over the personnel, the day-to-day opera
tions, and the legislative p o sitio n s** taken by
the commission and the FDIC, and I need
not remind you how sensitive many o f these
agency decisions can be.
* * *
My own suggestion fo r change is, as I say,
legislative oversight and post-audit by the
GAO under specified conditions of co n fi
den tiality. I th in k we must have account
a b ility , b u t I tru ly believe that w ith the
thousands of very sensitive and im portant
decisions made by the bank agencies on
which many financial interests ride, that it
would be a mistake to go through the p o liti
cal process o f appropriations reviewed by
the White House and then by the Congres
* * l n this respect, insofar as the OMB is con
cerned, the im position o f the appropriations
procedure on the FDIC could have the prac
tical effect of n u llify in g recent legislation
which expressly exempted the FDIC from
obtaining OMB clearance before subm itting
its positions on legislative matters to the
Congress.

sional committees. I believe that this w ill
lead to co n tro l over personnel and legisla
tive positions and possibly even regulatory
decisions themselves.
* * *
It was no secret that during the years o f
this past A d m in istra tio n and the affairs of
Watergate significant efforts were made on
the part o f the W hite House to place partic
ular personnel in some o f the agencies of
government, who were loyal above all things
to the incum bent President.
I th in k it is clear that the O ffice o f Man
agement and Budget has used its power to rec
ommend budget levels in an e ffo rt to con
trol the policy direction of agencies. And, in
many cases, I th in k this is appropriate.
When you have a regulatory agency, I have
severe question that that is appropriate.
I also believe th a t the tem ptation may
exist to try to influence the actual decisions
that the agency must make on individual
applications.

To summarize, therefore, our opposi
tion to including the FDIC under the
appropriations process is based on (1) a
deep concern for the integrity of the
deposit insurance program and the inde
pendent dedicated fund which supports
that program, (2) a fear that public confi
dence in deposit insurance might erode if
the finances of the Corporation become
politically controlled, (3) a strong desire
to continue the present ability of the
FDIC to make its decisions, many of
which are extremely sensitive, on an
objective, nonpolitical basis, and (4) a
need to maintain fle x ib ility in our fi
nances to cover expenditures which may
be predictable or unpredictable. The
Corporation feels that the recent agree
ment reached with the General Account
ing Office permitting operational audits
by the GAO provides thorough oversight
ability to Congress w ithout the ancillary
dangers associated with subjecting the
FDIC to the appropriations process.
I am taking the liberty of sending
copies of our views as expressed in this
letter to the other members of the com
mittee. I hope they are helpful to you
and the other members.

STATEM ENTS BY CORPORATION DIRECTORS

Address by Robert E. Barnett, Remarks
on the Economy, Banking, and Bank
Regulation*
We have been going through a period
in which problem banks and failures have
received more public attention than we
have been used to. Even those of us who
are in favor of increased disclosure by
banks have been unhappy with those
news stories which have been exagger
ated, out-of-date, or simply inaccurate. I
may just be overly sensitive on this, how
ever, since there is substance to the impres
sion one gets from them and from the
accurate stories also published during this
period. Our problem bank list is longer
than it has ever been and it does include
some sizable banks. Bank loan losses were
up dramatically last year and were more
than double the figure for just 2 years
ago.
I cannot explain everything that has
happened to banks in the last 2 years. I
have not seen any complete explanations
for the very significant increase in bank
problems that accompanied the recent
recession. Unlike some observers, I do not
find that the performance of the bank
regulators, including the FDIC, is the
cause of the problems, although had all of
us done our jobs better, perhaps we could
have blunted the impact on some individ
ual banks—more about our role later.
What I want to do today is to set out
three factors which I think account, at
least in large part, for the severity of our
recent problems and to discuss briefly the
implications of these events for bank
supervision. While I might make a predic
tion or two, this is not a speech about
what is going to happen as much as about
what has already occurred.
The major strands in the explanation
for the increase in bank losses and in the
number of problem banks include, first of
all, the 1974-75 recession; second, a gen
*Presented before the 92nd Annual Convention
o f the Texas Bankers Association, El Paso,
Texas, May 3, 1976.

133

eral trend toward greater risk-taking on
the part of the banking system that goes
back a fairly long time; and third, some
unusual peculiarities of the recent eco
nomic and international situation.
The 1974-1975 Recession
It is important that we not under
estimate the relationship between the
economy and bank performance. Some
analysts and reporters seem to assume
that banking should be immune to the
general trends and problems of the econ
omy. But that seems an unreasonable
standard for banks. The 1974-75 reces
sion was much more severe than anything
our economy has experienced since World
War II, whether measured by decline in
GNP or industrial production or increase
in unemployment. Since banks play such
a major role in our economy, we must
expect the health of banks to mirror that
of the economy as a whole. In periods of
economic decline, the profits of business
firms fall and the number of firms en
countering financial difficulties and fail
ure always increases. This w ill be re
flected in nonaccruing loans and loan
charge-offs at commercial banks. If this
were not the case—if banks were only
making loans to firms whose financial
condition was so solid that even a severe
recession would not affect their ability to
pay—then the banks would not be doing
their job. I think most of us can agree
that banking involves taking moderate
risks on individual credits, though we
expect that a well-managed, diversified
loan and investment portfolio will keep
overall losses at reasonable levels. Main
taining that portfolio, however, is hard to
do when there is very substantial weak
ness in the general business environment.
We have reviewed the figures on loan
losses of commercial banks over the last
25 years and we find a definite cyclical
pattern. The pattern is not perfect, partly
because we only have loss data on an
annual basis and partly because banks do
exercise some discretion with respect to
the timing of charge-offs. Essentially, we

134

F E D E R A L DEPOSIT INSURANCE CORPORATION

have found that the percentage of loans
charged o ff does increase during periods
of business recession. This has been true
in all of our post-war recessions—1949,
1954, 1958, 1960, 1967, 1971, and
1975. The year of recovery following
those recessions always produced a reduc
tion in the loan loss ratio. Of course, we
don't know yet whether that will turn
out to be the case for 1976, but if the
pattern of these past 25 years continues
then I would expect the loan loss ratio to
decline this year.
While the pattern is rather clear, the
magnitude of these year-to-year changes
in bank loan losses was actually modest
until we get to around 1970. I think that
reflects the fact that the economic de
clines themselves were relatively modest.
In fact, most of our recessions of the last
25 years really were slowdowns in the
rate of growth of GNP rather than an
actual year-to-year decline in the econ
omy. Thus, it is not surprising to me that
during the period of our most severe
post-war recession, we should have a sig
nificant increase in bank loan losses and a
significant increase in the number of
banks on our problem list.
Risk-Taking in Banking during 1960-1976
Once I have said all this about the im
pact of the economic situation on banks,
I am still left with the belief that the data
on loan losses suggests more than a cycli
cal phenomenon. The extent of bank
problems in the last 2 years was certainly
influenced by this recession, but it also
reflects some more basic and longlasting
characteristics. I believe this squares with
our general assessment of what has been
happening in banking. Let me suggest a
few numbers that illustrate this general
trend.
The I oan-to-deposit ratio of large
banks was about 56 percent in 1960 and
68 percent in 1975. The ratio of equity
capital to assets of large banks was over 8
percent in 1960 and under 6 percent in
1975. The ratio of cash and U.S. Govern

ment securities to assets was over 40 per
cent in 1950 and about 25 percent in
1975. These are significant differences in
meaningful ratios.
Since the early 1960s, many banks,
and particularly the large banks, aban
doned their traditional conservatism and
began to strive for more rapid growth in
assets, deposits, and income. "L ia b ility
management" became the essential phrase
in the modern banker's lexicon. The larg
er banks also began pressing at the bound
aries of allowable activities for banks.
They expanded into fields which some
felt involved more than the traditional
degree of risk for commercial banks.
These activities included direct lease fi
nancing, credit cards, underwriting of
revenue bonds, foreign operations, and
others. This list of activities and the bank
financial ratios I cited reflect a general
trend toward increased aggressiveness and
increased willingness to bear risks on the
part of the banking system in general and
large banks in particular. The holding
company movement of the 1970s cer
tainly accelerated these developments,
though most of the activities of bank
holding companies could also be, and
were in fact, engaged in by banks di
rectly. I am assured by our FDIC exam
iners that this increased aggressiveness
showed up in lowered credit standards as
well.
During the 1960s, banks generally
were not noticeably harmed by the diver
sification of activities, the movement
toward greater risk in their own financial
structure, and lowered credit standards.
After all, the early and mid-1960s rep
resented a fairly extended period of rela
tiv e ly stable growth and moderately
stable prices. The first half of the 1970s
proved to be a much tougher economic
environment in which to operate. Even
apart from the recession of 1974-75, we
should not minimize the impact on banks
of operating in periods of very tight cred
it, very high money costs, and extremely

STATEM ENTS BY CO RPO RATIO N DIRECTORS

erratic movements in commodities and
other prices. These factors affected not
only the banks directly, but also the sta
bility and predictability of business oper
ations, and that, in turn, had its impact
on the repayment of bank loans.
I have mentioned some financial ratios
and changes in activities that specifically
apply to large banks. Many would argue
that small banks have changed much less
dramatically than larger institutions, and
the loan loss data support this view. Dur
ing the 1950s and 1960s, smaller banks
generally had higher loss ratios than the
larger institutions. That pattern clearly
has been reversed in the 1970s. The loan
loss ratios have been noticeably higher for
larger banks over the last few years. This
has been due in part to some failures of
major corporations with substantial bank
lines from large banks, in part to the large
banks' greater exposure to construction
lending and mortgage banking, and in
part to their greater willingness over this
period to finance new and sometimes
untested operations or ideas. Moreover,
since the large banks tend to have higher
loan-to-asset ratios, their earnings tend to
be more sensitive to loan losses.
The two factors I have mentioned in
explaining the increase in bank problems,
the general state of the economy and the
increased willingness of banks to bear
risk, are clearly interrelated. The in
creased aggressiveness of the banks would
probably not have shown up to the same
extent in increased problems if it had not
been for the decline in the economy.
Likewise the third factor I wish to ex
plore is related to the general state of the
economy as well.
Unusual Characteristics of this Period
In recent years, in addition to the
general decline in economic activity, we
have had some special problems. Some
are directly related to the economy; some
are unusual, one-shot events. These in
clude such factors as the tremendous in
crease in energy costs, rapid rise in food

135

prices, record high interest rates, and very
severe problems in the real estate market.
Let us look first at the real estate
problem, since many of our bank failures
and major problems for the past 2 years
have had severe real estate loan problems.
While real estate markets have turned or
appear to be bottoming out in many areas
of the country, real estate loan problems
in some areas may be with us for some
time. It is d iffic u lt to tell what amount of
nonaccruing real estate or REIT loans
have been written o ff thus far, and what
the ultimate write-offs w ill be on the vol
ume of these loans presently on bank
books. Some analysts expect that REIT
loans still on the books of the banks will
result in losses of up to 25 percent. While
this figure seems high to me, even the
more optimistic imply ultimate losses still
to be taken by the banks over a period of
a number of years w ill be in the order of
a billion dollars. In some instances, loan
swaps and refinancing have forestalled or
eliminated immediate charge-offs, but
these have been at the price of taking on
long-term, low-yielding assets, which may
penalize long-term earnings. It is possible,
therefore, that bank loans to REITs will
be a drag on the earnings of some large
banks for several years. If successful,
however, these work-out programs may
reduce the number of REIT failures and
lower future losses on REIT loans.
Why all the real estate loan problems?
One answer given is that land booms are
accompanied and fed by forces associated
with price appreciation and "can't-miss"
projection that feed on themselves. Be
yond this, I think banks as lenders and as
managers of REITs through holding com
panies deserve a considerable share of the
blame. High rates on construction loans
and REIT fee arrangements that encour
age volume purchases and sales undoubt
edly contributed im portantly to a loss of
perspective on loan quality. Too many
projects required overly favorable sales or
occupancy to break even, and though I

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F E D E R A L DEPOSIT INSURANCE CORPORATION

recognize that the following is easy to say
as a matter of hindsight, the lender's tra
ditional restraint on the developer's per
petual optimism was not present. In
many cases, bank real estate lending of
ficers were too young and inexperienced
to remember past periods of real estate
lending problems.
There have been some well-conceived
projects that ended up with foreclosures
and bankrupt builders. These have been
due to the general weakness of the econ
omy, greatly increased building costs, and
much higher energy costs, all of which
contributed importantly to the failure of
many real estate ventures that appeared
sound when they were conceived. Very
high interest rates added to the burden of
carrying nonearning assets and acceler
ated bankruptcies. Now the economy is
on the rise and money for permanent
financing seems plentiful. Many of these
projects w ill be bailed out by the rising
tide of the economy and, in the longer
run, perhaps by inflation.
Some of the real estate developments,
however, were poorly conceived to begin
with. In some instances, costs were just
too high for the market and sizable losses
will have to be accepted. Some of the
developments, particularly second-home
or vacation area condominiums, were
based on expectations of ever-increasing
prices and eventual resale at a profit.
Once it became clear that owning a con
dominium was not a sure-fire route to
ever higher and higher values, it became
very d iffic u lt to sell any at all. Many of
those projects seemed to be based on the
"greater fo o l" theory of investment; that
is, even if you foolishly pay too much for
a piece of property, sometime in the fu
ture you will be able to sell it at an even
higher price to an even greater fool.
Many banks have had problems with
loans to REITs and real estate developers.
A smaller number of banks have been
affected by other particular problems,
such as losses on foreign operations and
loans on oil tankers. It appears that some

of these problems have been greatly ex
aggerated. For example, there has been a
widely cited figure of American bank
vulnerability on oil tanker loans of some
thing like $17 billion. It appears now that
responsible analysts are saying that the
correct figure for American banks is ac
tually nearer $3 billion. Or to take
another example, many of the loans to
less developed countries that have been
cited as a potential problem for large
banks appear to be loans to foreign sub
sidiaries of AA A U.S. corporations.
Nevertheless, these special problems,
combined with the decline in the econ
omy and the increased vulnerability of
some banks, have led to increased loan
losses and a larger number of problem
banks.
Significance of these Problems
Loan losses need to be viewed w ithin
the context of a bank's overall ability to
absorb such losses through earnings and
through reserve and capital accounts. I
have mentioned the decline in bank cap
ital ratios and the increase in loan-todeposit ratios, particularly for the large
banks. Some of the decline in capital
ratios has been the result of rapid growth
of foreign operations, increased reliance
on purchased money, holding company
acquisitions, and inflation, all of which
contributed to rapid deposit growth for
all banks. During the past year or so,
however, many banks have made con
siderable progress in reducing their vul
nerability. Bank capital increased faster
than deposits last year and as a result,
capital ratios rose. The deposit mix of
banks, and particularly large banks, has
improved considerably from the stand
point of cost and stability. Banks have
not bid aggressively for CDs, allowing a
sizable runoff. Thus, while bank deposits
have increased by over 7 percent since the
end of 1974, that increase occurred de
spite a sizable reduction in large CDs.
Bank loans are virtually unchanged from
year-end 1974, whereas holdings of U.S.

STATEM ENTS BY CO RPO RATIO N DIRECTORS

Government securities have increased by
about $40 billion. Thus, the banking
system is clearly in a more liquid and less
vulnerable position than it was a year or
so ago.
There is also reason for optimism
when we look at bank earnings. In the
aggregate, bank earnings have held up
fairly well during this very d iffic u lt pe
riod. Bank earnings rose by about 2 per
cent last year, making it one of the few
industries to show an increase in earnings
during the recession. But that average in
crease masks some wide variations. Along
with some sizable gains, there were a lot
of moderate gains and some very sizable
declines. Despite weak commercial loan
demand and declining loan rates, banks
generally maintained their spread be
tween gross earnings and money costs.
Money center banks actually improved
their spreads. Banks experiencing the
worst year-to-year comparisons generally
did so because of loan losses.
Loan losses have come to be a major
factor in determining bank net income.
This is quite different than the situation
only a few years ago when bank loan
losses had a negligible effect on bank
earnings. The increased importance of
loan losses is shown in a recent report of
Keefe, Bruyette & Woods, Inc., a leading
bank stock analyst, which reported an
average ratio of net loan losses to out
standing loans of .65 percent for 82 large
banks in 1975. There was considerable
variation among banks and among re
gions. The percentage for 10 New York
banks was .72 percent and for 10 south
ern banks the figure was 1.1 percent. It
was lower in the rest of the country and
only .41 percent for five large banks in
Texas.
It is d iffic u lt to predict bank earnings
for this year. First quarter reports seem
to indicate that most banks have declines
as compared with last year. That reflects
lower loan volume and lower interest
rates as compared with the first quarter
of last year, and an increased tendency of

137

banks to spread out loan charge-offs
throughout the year rather than concen
trating them heavily in the last quarter.
While it is hard to forecast the balance of
the year, since much will depend on loan
demand and interest rates, I would expect
comparisons w ith last year to get better
throughout the year. I would also expect
to see some improvement stemming from
a reduction in loan losses.
Relationship to FDIC Problem List and
Supervisory Implications
The trends I have described so far have
been reflected in our list of problem
banks. The FDIC's problem list, which
includes national banks and State mem
ber banks as well as nonmember banks,
now totals about 370 banks. That num
ber was increasing steadily all during
1975 but now appears to be leveling off.
While that is only about 2Vi percent of all
insured commercial banks, it is neverthe
less at its highest level in 25 years.
We have compared figures of our prob
lem list with data on the economy as a
whole, in much the same way we did with
loan losses, and found again a meaningful
relationship. However, whereas loan los
ses appear worst just when the state of
the economy is worst, our problem list
tends to lag by an average of about 12
months. This should not be surprising
since there tends to be a lag in the exami
nation and analysis process and since our
own examiners are not apt to be com
pletely insensitive to recent economic and
financial developments. Thus, it is not
surprising that now, about a year from
the low point in the recession, we are at a
high point on our problem list. If the
c u rre n t relationship follows previous
experience, I would expect the number
on our problem list to get smaller later on
this year.
Not only has the banking system got
ten considerable attention over the last
year or so, so has the bank supervisory
system. There are those who say or imply
that inadequate bank regulation was the
cause of so many banks being on problem

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F E D E R A L DEPOSIT INSURANCE CORPORATION

lists. That misses the point, however,
since it is good bank regulation and super
vision that spot the banks that are in
trouble and puts them on lists for closer
s u p e rv is io n . The question probably
should be, could better regulation and
supervision have prevented banks from
reaching a condition which required
closer supervision by bank regulators?
What are the implications of this eco
nomic cycle analysis of bank problems
for bank supervision?
It is my view that bank supervision as
we know it in the United States, as
opposed to its characteristics in other
countries such as Japan, is limited in its
ability to dictate the soundness of the
banking system. It appears that a con
siderable part of the bank problems in the
last couple of years has been due one way
or another to the general state of the
economy. That is clearly a matter beyond
the control of the process of bank super
vision. Some of the problems have been
due to specific unpredictable events like
the rapid increase in oil prices and a re
sulting decline in the demand for oil and
oil tankers. It would have been nice if we
had been able to anticipate and prevent
the debacle of the REITS, for example.
In view of the vast number of financial
experts who failed to foresee these prob
lems, I don't think it is surprising that
bank supervisors failed also.
There is one area, however, in which
we do have an ability to lessen the impact
of the business cycle. We must be very
careful in this area, however. It is the one
covering bank attitudes toward risk and
the willingness of bankers to increase loan
ratios and decrease capital. We are giving
more attention to these matters at the
present time, and we will continue to
demand more capital from banks inade
quately capitalized, as well as demand
that loan, investment, and operating poli
cies and practices be reasonable ones. We
have so informed members of the two
b a n k in g committees which have ex
pressed concern over capital adequacy.

We are analyzing trends rather than static
pictures much more intently than we did
in the past. Computers are whirring con
stantly as we try to find ways to discover
problems sooner. We are looking much
harder at management and are willing to
step in quicker with formal orders requir
ing action on management's part. We've
asked Congress for more powers to deal
not only with dishonest bankers but
grossly negligent ones.
We recognize, however, that banking is
a risk-taking business and we must rely on
market forces, on management, and on
owners, in addition to our supervisory
judgment, to determine the appropriate
degree of risk for individual banks. I do
not believe that even the most outspoken
critics of banking and bank regulators
want the regulators to run the banks rath
er than the bankers. We can all agree that
that is not our function. If we are too
intent upon preventing all bank failures in
our regulatory posture, we may have
some success in shortening our problem
lists, but the conservative banking philos
ophies we would have to adopt would
retard the progress of the economy. So
attempting to prevent all bank failures is
not our function either. In some cases,
government policy, which I endorse, has
encouraged a shift toward a riskier bank
ing posture. We have issued regulations on
"leeway investments" which have broad
ened the types of investments that can be
made. By disapproval of redlining and
promoting the concept of equal credit
opportunity, we have actively pushed
banks into lending that they may feel
(though I do not necessarily agree) is
more risky. The FDIC has been in the
vanguard of those who insist that the
Bank Merger Act be interpreted to permit
more competition between banks: this
approach has as its corollary an unwilling
ness to protect competitors from the
results of com petition—i.e., one wins, one
loses.
Frankly, I believe that the FDIC and
the other regulators have done an excel

STATEM ENTS BY CORPORATION DIRECTORS

lent job of bank supervision during the
past 2 or 3 years after the magnitude of
the problems became apparent to us.
Very large bank failures have been re
solved by the Corporation working close
ly with the Comptroller of the Currency
or the Federal Reserve System w ithout
the loss of a dime to any depositor and
with only minimum disruption in the
communities affected. Compare that with
the result of the bank panics in the '20s
or early '30s!
The Corporation and the other regu
lators should be praised, not berated, for
this performance.
The jury is still out, however, on the
question of prevention. Somehow, the
regulators must do a better job of carry
ing out the full range of responsibilities
given them by Congress, some of which
have only limited direct effect on safety
and soundness; must spot problem situa
tions earlier; must be willing and able to
move in more quickly with effective en
forcement action; and must do all of this
w h ile recognizing that our economy
needs the initiative, ingenuity, and aggres
siveness of free enterprise and competi
tive banking.
In any case, I believe that the move
ment since 1960 has been essentially
healthy, though it may have gone too far
in some respects. Overall, the system is
not in bad shape and I do not think we
have to be apologetic. Some individual
banks made mistakes and have suffered
for those mistakes. I would have pre
ferred it if we could have spotted those
individual situations earlier, and perhaps
corrected them. No one, particularly a
bank regulator, likes to see a bank fail.
But the role of banking supervision in
general, and certainly of the FDIC, is
much more oriented toward soundness in
the banking system and maintenance of

139

confidence in that system rather than
protecting individual banks. While I rec
ognize the interrelationship of the two
concepts, it should be kept in mind that
they are different. As long as banking is
part of the competitive enterprise system,
there will be bank failures.
What the FDIC has done, however, is
cushion the shock of a failure, and we've
done an excellent job there. I am sure
you have all seen the recent Gallup Poll
which showed that 93 percent of Ameri
cans with bank accounts feel their money
is safe there. This comes after intensive
bad publicity about bank problems, and
soon after the largest bank failures in our
history. Frankly, we feel that this over
whelming display of confidence is a direct
result of the FDIC's efforts over the
years. Any suggestions that the oper
ations, funding, or control of the Cor
poration be changed must deal w ith the
possibility that this confidence may be
eroded.
We certainly can improve our policies
and our operations in many areas, and I
intend to explore the possibilities during
my term as Chairman of the FDIC. We
cannot completely sever the links, how
ever, between the performance of the
economy and the performance of the
banking system. If the economy con
tinues to improve, next year w ill prob
ably be a very good year for banks. I
suspect that banks will be somewhat
more cautious in their lending policies
than was the case during the past few
years. We will be more cautious as well
and view unusual situations much more
skeptically than 5 years ago. Whether or
not that caution w ill prove warranted, or
perhaps overdone, will depend in great
part on the performance of the economy
in the years ahead.

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F E D E R A L DEPOSIT INSURANCE CORPORATION

Address by George A. LeMaistre, on bank
regulatory reform*
Large bank failures and economic
strains have focused attention on the
banking industry and our system of bank
supervision and regulation to a degree not
seen since the '30s. Beginning w ith the
speech given by Arthur Burns of the
Federal Reserve at the American Bankers
Association Convention in 1974 in which
he decried what he termed a "com peti
tion in la xity" and described the existing
regulatory framework as a "jurisdictional
tangle that boggles the m ind," the issue
of bank regulatory reform has never been
far from the attention of either the bank
ing committees in Congress or the bank
ing agencies themselves. A myriad of pro
posals has been put forward, untold hours
have been consumed in discussion,
numerous speakers have pontificated,
reams of paper have been produced, and,
finally, what should have been a careful
analytical exploration degenerated into a
personal political vendetta. I do not need
to tell you the outcome: after much
sound and fury, the issue of bank regu
latory reform is dead in the 94th Con
gress.
Nevertheless, I think it is desirable to
reflect on the subject of regulatory re
form in the banking context, since, like it
or not, governmental and regulatory re
form seems to be an idea whose time has
come. When I talk with businessmen,
bankers, and even consumer advocates
around the country, I hear one persistent
complaint: profound dissatisfaction with
the pervasiveness of governmental inter
vention in our day-to-day affairs and with
the reams and reams of paper that are
required to effect even the simplest and
least controversial of transactions. The
extent of this concern has been one of
the dominant themes of the current Presi
dential election campaign.
*Presented before the 86th Annual Conven
tio n o f the Arkansas Bankers Association, Hot
Springs, Arkansas, May 17, 1976.

The issue posed by this dissatisfaction
is not a simple one. Most informed people
share the recognition that our economy is
too large and complex to function prop
erly w ithout some governmental super
vision or regulation. For example, while
some might disagree with the direction of
monetary policy at a particular time, few
would deny the need for a mechanism to
control the quantity of money in the
system. Similarly, although one may dis
agree w ith the specific policies of many
environmentalists, the absence of some
controls over the disposal of commercial
waste and other pollutants would lead to
disastrous consequences in a highly indus
trialized society such as ours. And finally,
by way of illustration, there is, I believe,
general agreement that some surveillance
and supervision of the operation of indi
vidual banks is required to avoid an exces
sive number of failures that would create
economic instability.
Accordingly, the problem is not that
regulation and supervision of economic
and commercial affairs is inappropriate,
but rather that regulation often outlives
the problem it was intended to address;
that we do not always take sufficient care
to choose the least costly means to
achieve the desired end; and that, often,
regulation results in unanticipated conse
quences which can be more severe than
the problem which regulation sought to
remedy.
It is not surprising, however, that these
problems are so rarely dealt with effec
tively. All too often those who are regu
lated, while screaming loudest about the
sanctity of an unfettered free enterprise
system, grow comfortable in their regu
lated environment and resist mightily
when any serious e ffort is made to de
regulate. Similarly, regulatory bodies ac
quire a vested interest in their own ex
istence and the " t u r f" which they regu
late which prevents their objective assess
ment of the regulatory policies which
they pursue. As a result, governmental
agencies are often loathe to engage in c rit

STATEM ENTS BY CO RPO RATIO N DIRECTORS

ical self-examination. And finally, it must
be acknowledged that while it is possible
to deal with these issues with some ease
in the abstract, real-world solutions are
not easy to produce. In part, this is a con
sequence of practical politics and the fact
that any change in the framework of an
industry's regulation may lead to signifi
cant short-run dislocations or adjustment
costs. A t least as important, however, is
the simple fact that answers to many of
these problems are extremely d ifficu lt to
discover.
These factors provide a partial expla
nation of why the results of bank regula
tory reform efforts were so disappointing
in the 94th Congress. Notwithstanding
the difficulties, however, I believe that it
is im portant—and perhaps crucial—that
bankers and bank regulators develop a
systematic and reasoned approach to
regulatory reform. In my judgment, the
failure to develop such a positive ap
proach w ill have several adverse conse
quences. A golden opportunity w ill be
lost to deal in a meaningful way with the
problems of excessive and inefficient
regulation, and to highlight the unin
tended ill effects and hidden costs of
regulation. Similarly, an opportunity will
be lost to remedy certain demonstrable
inadequacies in the present supervisory
framework. And finally, I think that it is
critical that we not opt out of the process
of shaping the changes which are both
inevitable and bound to affect us deeply.
In the time which remains, I would
like to identify some of the elements of
such an approach, and to suggest some of
the changes which might flow from this
analysis. I hasten to emphasize that these
remarks are not intended to be a compre
hensive or definitive plan but are rather a
tentative effort to suggest an orderly way
of thinking about regulatory reform—an
effort which I hope to refine substantially
in the months ahead.
First of all, remedies should be devel
oped which respond directly to inade
quacies and abuses which are demon

141

strated by careful analysis of the facts,
rather than to empty phrases such as
"com petition in la x ity ." In my judgment,
the failure of recent legislative efforts to
focus upon specific, demonstrated short
comings of the system insures that at
least one serious flaw w ill be with us for
at least two more years.
Recent events have illustrated that the
existing framework for the regulation and
supervision of bank holding company
systems is not only unduly costly because
of the overlapping and conflicting juris
dictions involved, but also in some in
stances simply has not functioned prop
erly. In three of our largest bank failures
in the past 18 months—the insolvencies of
the $ 1/2-billion-asset Hamilton National
Bank of Chattanooga and the $175million American City Bank of Milwau
kee, and the distressed merger of the
Palmer National Bank of Sarasota—the
cause of bank failure was not abusive
self-dealing, which from 1960 through
1973 was far and away the predominant
cause of failure, but rather massive unsafe
and unsound lending practices occurring
in the essentially unsupervised environ
ment of a nonbanking holding company
affiliate. The failure of the Hamilton
National Bank of Chattanooga—a vener
able, traditionally conservative, well-run
institution—is the most graphic and tragic
illustration of this phenomenon. But for
$80 m illion in mortgages initiated by an
Atlanta-based mortgage company affiliate
over a period of months and dumped on
the bank, the bank in Chattanooga would
be in existence today.
These cases illustrate two points which
should be recognized by both the banking
agencies and the Congress. First of all, the
notion that one segment of a holding
company operation can be insulated from
the remainder of the system is quite sim
ply a myth. It is the worst form of selfdeception to think that the lead bank i*n a
holding company is in a safe and sound
condition because its last examination
was satisfactory if other facets of the

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FE D E R A L DEPOSIT INSURANCE CO RPO RATIO N

holding company system are not under
going equally rigorous scrutiny. (I should
emphasize parenthetically that I am not
an advocate of more stringent portfolio
supervision. Quite the contrary.) Rather,
my point is that when holding companies
were allowed to proceed in a manner that
would be unacceptable in a commercial
bank, some of them were encouraged, in
effect, to hide enormous risk.
The second point flows from the first.
That is, it simply makes no sense for as
many as four bank regulatory agencies to
have safety and soundness jurisdiction
over various segments of an integrated
business enterprise. Inevitably, this ap
proach w ill be at times conflicting and
uncoordinated.
Accordingly, as an individual involved
with the agency concerned with the ad
ministration of the deposit insurance
fund, I would rate the fragmented and
ineffectual framework of regulating hold
ing company systems and not some vague
notion of "com petition in la x ity " as the
most profound cause for concern in our
present supervisory structure. As has
been suggested by others, including
Comptroller of the Currency Jim Smith,
this problem could be remedied by charg
ing the supervisor of the lead bank with
the primary supervisory responsibility for
the entire system, including the holding
company itself.
Even if it were not possible to illus
trate the adverse consequences of the
present framework in concrete cases such
as the Hamilton failure, such a framework
should be rejected both because of the
governmental waste that results from the
unnecessary duplication of effort and
because of the burden imposed upon the
banker, who must deal with four bank
regulators as well as the SEC, the Justice
Department, the FTC, and miscellaneous
other regulatory bodies.
This brings me to what seems to me to
be a second element of any serious at
tempt to reform a regulatory framework:
that is, a concerted e ffo rt should be made

to eliminate redundancy and overlap
w ithin the framework of regulation that
applies to an industry. Although many of
the regulatory reform proposals which
surfaced recently purported to rationalize
the bank regulatory structure, some of
the most notable instances of duplication
and inefficiency were largely ignored.
In my judgment, the existing system
of review under the Bank Merger Act rep
resents a classic example of a regulatory
process which, although benign, is redun
dant, time-consuming, and unduly costly.
As you know, our present system of re
view of the competitive aspects of a merg
er has three elements. Under the statute,
the primary Federal regulator is charged
with the responsibility for considering
both anti-trust and banking factors in
determ ining whether a given merger
should be approved or denied. Second,
each of the remaining two Federal bank
ing agencies and the Justice Department
are required to file with the primary regu
lator its own analysis of the competitive
implications of the merger in question.
Finally, after approval by the banking
agency, Justice may, within 30 days, sue
to overturn the merger on anti-trust
grounds.
This system was designed by Congress
ostensibly to obtain uniform application
of the act. Moreover, on paper at least,
the system seems a good example of how
checks and balances can be built into
governmental processes. Yet, in fact, the
record as developed and reviewed by the
Senate Banking Committee this session
reveals that uniform ity has not been the
result. And I can personally testify to the
fact that the advisory opinions contribute
little, if anything, in the way of facts or
analysis that is not brought to our atten
tion by FDIC staff.
Thus, the net effect of this process is,
in my judgment, that the energies of
bright competent people are consumed in
a meaningless task and that more paper is
circulated in a city already choked with
it. The redundancy, it seems to me, could

STATEM ENTS BY CO RPO RATIO N DIRECTORS

be remedied w ithout altering the present
application of the law. A t the very least,
the requirement of the extra competitive
factor reports should be eliminated. How
ever, I would go a step further, and rec
ommend simply that the primary bank
supervisor and the Justice Department be
given notice of the intention of two
banks to merge. The bank agency would
have the responsibility of reviewing the
merger from a safety and soundness point
of view and the Justice Department
would review the competitive factors. If,
in the judgment of the banking agency,
the merger was defective in terms of
banking factors, then the agency would
have the authority to prevent it. The Jus
tice Department could, as it does now,
file suit under the anti-trust statutes to
stop the merger w ithin the time period.
Another area of redundancy has been
underscored by the recent highly publi
cized efforts of the SEC with respect to
disclosure of financial information by
large holding companies about to go to
the market with debt issues. Congress
made a determination that banks should
be exempt from the registration require
ments of the Securities Exchange Act of
1933. That decision was undoubtedly
based on the belief that the special ex
pertise of the bank supervisors would
better protect investors, on the idea that
the disclosure of the sort mandated by
the securities laws was incompatible with
the maintenance of confidence in the
banking system and, perhaps, on the
political clout of banks at the time.
Whatever the reasons underlying this
scheme or its merits, the rapid evolution
of the holding company and its dom
inance of banking have served to n ullify
it. So long as holding company systems
finance through the holding company
rather than the bank—and that has been
one of the attractive features of the
mechanism—bank exemption from SEC
jurisdiction is meaningless. Accordingly,
it seems to me that Congress should face
up to this fundamental anomaly in the

143

law and vest jurisdiction for the protec
tion of investors in bank securities in
either the SEC or the banking agency or
agencies. The failure to do so w ill, it
seems to me, lead to further duplication
of time and effort as well as further con
flic t and confusion.
I have focused upon the administra
tion of the securities laws and the Bank
Merger Act not so much because the
redundancy involved in each leads to
"bad" or ineffective regulation, but be
cause they illustrate so clearly the extent
to which we have all come to expect, and
live easily with, needless and wasteful
government when the same resources
could be employed to achieve meaningful
and needed results. A t best, as in the re
view of merger cases, the result of dupli
cation and overlap in governmental func
tion is waste and inefficiency w ithin the
government. A t worst, as in the area of
holding company supervision, the result is
increased costs and burden upon those
regulated and their customers, confusion
of responsibilities, and, most importantly,
regulation which is far less effective than
it might be.
Finally, and most importantly, any
serious e ffort at regulatory reform must
be based upon an analysis of the objec
tives and functions of the entire bank
regulatory framework. Congress has as
signed to the banking agencies and to
other agencies of the government such as
the Justice Department, the FTC, and the
SEC a host of functions, including,
among others, the promotion of eco
nomic stability through the administra
tion of monetary policy, the protection
of the safety and soundness of the bank
ing system and individual banks through
bank examinations and supervision, the
protection of investors and the securities
markets through fair and adequate disclo
sure under the securities laws, the pro
motion of competition, the protection of
consumers, the enforcement of antidiscrimination laws, the regulation of
interest rates paid on deposits, and the

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F E D E R A L DEPOSIT INSURANCE CO RPORATION

amelioration of the effects of bank fail
ures when they do occur.
As even the recitation of this partial
list suggests, bank regulation is m ulti
faceted. All too often these several goals
conflict, necessitating trade-offs among
them in terms of both the allocation of
resources and the resolution of disputes.
In order to understand, much less intel
ligently reform, the structure and content
of bank supervision and regulation, each
of these functions and its relationship to
other functions should be fu lly compre
hended and evaluated. Indeed, I think
that it is quite likely that much of the
re c e n t controversy surrounding bank
supervision is the result of misunderstand
ing, confusion, and submerged disagree
ments as to the relative weights which are
to be accorded the different functions
involved in bank regulation. While this
evaluation of each of these functions is a
tedious and d ifficu lt process—and one for

which the political crucible of Congress is
especially ill-suited—it is in my judgment
essential if regulatory reform is to lead to
anything but disruption of a system
that—by and large—works.
In conclusion, I would simply like to
reiterate what I suggested earlier. The cur
rent Presidential campaign confirms what
we should have already known: that re
form of our governmental and regulatory
processes is an idea whose time has come.
Knee-jerk opposition to change will not
prevent its occurrence, but may serve to
exclude the opponents from participation
in shaping that change. I sincerely hope
that we as bankers and bank regulators
will have the foresight to deal with the
issues involved in an orderly and analyt
ical way. If we do, I am convinced that
the net result w ill be a regulatory frame
work that is less burdensome and more
effective and an industry which better
serves its customers.

STATEM ENTS BY CO RPORATION DIRECTORS

Address by Robert E. Barnett, Enforcing
the Fair Housing Lending Law*
Since becoming Chairman of the FDIC
several weeks ago, I have received many
invitations to speak. I have turned down
most of those invitations because I have
felt that it is important to spend as much
time as possible at my desk during this
early period. However, I was happy to
accept this invitation to speak at the
NAMSB convention. The FDIC is the
only Federal supervisory agency for the
savings bank industry, and savings banks
comprise about one-third of the deposits
of all banks examined by the FDIC.
Happily, from both our points of view,
savings banks give us much less than their
proportionate amount of supervisory
problems.
Today I would like to say a few words
about our view of the condition of the
savings bank industry and also our anal
ysis of the current year's outlook. I then
will turn to my major topic today, fair
housing lending.
Attention has been given in recent
weeks to a decline in the surplus position
of mutual savings banks. In our view, this
decline, which we see as a relatively in
significant one, has been a result more of
the problems associated with inflation
than anything else. Inflation has three
direct undesirable effects on mutual sav
ings bank capital. First, inflation, accom
panied by an increase in the money sup
ply, results in an increase in the dollar
amount of deposits. Second, inflation re
sults in an increase in operating expenses.
Third, inflation is accompanied by high
interest rates, which increase the interest
expense of savings banks more rapidly
than the interest income from long-term
assets. The net result is an inability of
savings banks to retain earnings in a suffi
cient volume to margin the rapid deposit
*Presented before the 56th Annual Conference
of the National Association o f Mutual Savings
Banks, Philadelphia, Pennsylvania, May 19,
1976.

145

growth. We are concerned, of course,
about the continued decline of mutual
savings bank surplus ratios. We recognize,
however, that the decline in recent years
has not resulted from losses or substantial
deterioration of asset quality, or from a
deliberate movement of the industry to
ward a riskier capital position, but instead
is simply a reflection of the economic
forces that the industry has faced.
The last few years have been trouble
some ones for the commercial banking
industry. One of the most serious prob
lems faced by commercial banks has been
in real estate lending. This, of course, is
the area to which mutual savings banks
devote most of their resources. Yet the
mutual savings banks have weathered this
very trying period of real estate financing
virtually unscathed. Commercial bank
real estate loan losses are at record levels.
Mutual savings bank real estate loan los
ses, while up slightly, are still low and no
cause for concern.
Similarly, a great deal of attention has
been paid in recent months to our prob
lem list. The number of commercial
banks on the problem list is at the highest
level since the aftermath of the depres
sion. I hope the worst is past with respect
to the commercial bank problem list. But
the mutual savings bank problem list has
caused us almost no concern at all. There
are very few mutual savings banks on the
problem list, only two or three, and this
represents no real change from the situa
tion several years ago.
Of course, mutual savings banks have
gone through a d iffic u lt few years. We
expect, however, that 1976 is going to be
a near record year for mutual savings
bank earnings. Our analysis of first quar
ter reports finds the industry moving
about on the track we expected. Deposits
have been flowing into mutual savings
banks at a record pace all year and show
no signs of slackening off. Obviously
these inflows are sensitive to market in
terest rates, and at the present time, the
rates offered by mutual savings banks

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F E D E R A L DEPOSIT INSURANCE CO RPORATION

compare very favorably with rates avail
able on the open market. We recognize
that that might change. Many forecasts
anticipate some increase in short-term
interest rates over the last half of 1976.
But while that may well be the case, we
see little likelihood that interest rates will
rise fast enough or high enough to result
in disintermediation. The deposit inflows,
so far this year, have allowed savings
banks to greatly improve their liquidity
position. This includes both the repay
ment of borrowings and an expansion in
holdings of short-term securities. Mutual
savings banks will turn more heavily to
the mortgage market in the remainder of
the year, and we expect mortgage hold
ings to increase by over $3.5 billion in
1976. Obviously, investment in short
term securities tends to penalize earnings
in the short run, but there is no question
that it has left the industry in a very
strong position to meet whatever the
future may bring. Not only is there ade
quate liquidity to handle the threat of
possible outflows, but an increase in in
terest rates this time around will find the
savings banks with substantial resources
which can be moved into attractive highyielding investment opportunities.
The improved earnings that the savings
banks are experiencing this year are ac
counted for by the sizable growth in
deposits. Profit margins, while expected
to be somewhat higher than in the last
couple of years, are still low and are poor
in comparison with the more robust prof
it margins of the early 1970s. We project
net income at .42 percent of assets for
1976 compared with about .35 percent in
1974 and 1975. In 1972 and 1973, the
ratio was above .50 percent. Inflation,
with its impact on noninterest costs, and
the steady rise in the percentage of sav
ings bank deposits accounted for by
high-yielding term accounts may make it
impossible to return to those days of
higher p ro fit margins. But a narrower
margin on ever-increasing deposit volume
may not be an unsatisfactory industry

position.
I'd like to move now to the question
of fair housing lending.
A t my confirmation hearing, Senator
Proxmire and I discussed several matters.
He led o ff with one issue, however, which
he returned to at the conclusion of the
hearing. That matter concerned FDIC
enforcement of fair housing lending laws.
I think it fair to infer from the stress he
put on that topic that it is his view, and
that of the Senate Banking Committee,
that the FDIC should give serious atten
tion to this matter over the coming
months. I was not unhappy with that
emphasis because it has been my personal
view also that the FDIC should devote
substantial effort to assuring that mort
gage lending by commercial and mutual
savings banks is carried out in a nondiscriminatory manner. I would like to re
view the background of this matter with
you briefly, and then discuss what we
might do about it.
In 1968, Congress passed a Civil Rights
Act that included a title on fair housing.
A section of this act made it unlawful for
any financial institution to discriminate
in real estate lending on the basis of race,
color, religion, or national origin. A fu r
ther provision of the act requires "all
executive departments and agencies to
administer their programs and activities
relating to housing and urban develop
ment in a manner affirmatively to further
the purposes of this title ." In 1974, this
act was amended so as to prohibit dis
crimination on account of sex in m ort
gage financing. The Equal Credit Oppor
tunity Act added marital status and age as
illegal bases for discrimination.
The Civil Rights Act provides a clear
proscription against these enumerated
discriminatory practices, but does not
specifically call for regulations to be is
sued by the financial regulatory agencies
or spell out other duties or obligations of
such agencies with respect to enforce
ment. In December 1971, the FDIC is
sued a press release giving notice of inten

STATEM ENTS BY CO RPORATION DIRECTORS

tion to formulate regulations related to
the act, and issued a policy statement on
fair housing directing banks supervised by
the FDIC to give public notice that their
real estate loans are available w ithout
regard to race, color, religion, or national
origin. We also required that a fair hous
ing notice appear in real estate financing
advertisements. This policy statement
became effective on May 1, 1972. Our
routine examination process since then
has included checks on bank compliance
with the requirements for advertising and
the required lobby poster on fair housing.
We have found relatively few violations,
and those have been promptly corrected.
In the fall of 1972, we proposed some
regulations on fair housing that involved
recordkeeping requirements, and in De
cember we held 2 days of hearings on
these proposed regulations. These regula
tions were never issued because we were
not convinced that the recordkeeping
requirements would provide meaningful
data for monitoring fair housing lending
practices. In the spring of 1974, we began
a pilot survey along with the Comptroller
of the Currency, the Federal Reserve, and
the Federal Home Loan Bank Board to
test various types of reporting forms to
determine what a feasible and effective
recordkeeping system would involve. I
will comment in a few minutes on some
of the problems we encountered in that
pilot survey. In any case, after a review of
all the data, we concluded that use of any
of the three different types of reporting
forms would not enable us to detect pat
terns of discrimination.
It is fair to say then, that even now we
have not determined the best route to
take to assure ourselves that discrimina
tion in housing finance has been elimi
nated. A ll during this period, we have
received petitions and proposals submit
ted by civil rights organizations urging us
to do things. Many of them appeared to
be costly and burdensome, and not neces
sarily effective. We have also received
comments from bankers telling us that

147

nothing should be done since banks do
not discriminate in mortgage financing.
The problem is a very d iffic u lt one for
reasons which I will get into shortly.
Regardless of the difficulties of the prob
lem, however, we have become increas
ingly subject to criticism from the Con
gress and others that we have not met the
responsibilities that they would like us
to assume.
Part of our problem in enforcing the
law is that the concept of discrimination
is a very d iffic u lt one and its exercise can
take place in subtle ways. Discrimination
connotes the exclusion of some individual
or group of individuals from some activ
ity on the basis of one or more identifi
able attributes possessed by the individual
concerned. Some forms of discrimination
represent indefensible biases (for ex
ample, exclusions from certain jobs on
the basis of sex or race) and work to the
ultimate disadvantage of both the affect
ed individuals and society as a whole,
while other forms of discrimination may
be appropriate and, in fact, benefit soci
ety (for example, the exclusion of con
firmed kleptomaniacs from jobs as bank
tellers). Our economic system is based on
a type of discrimination. In our market
economy, an increase in the price of any
goods excludes certain members of soci
ety from consuming the goods or restricts
their purchases below what they would
have desired at the previous price. That is,
if a commodity is in short supply, its
price rises so that the supply is allocated
to those to whom it is worth the most
and, hence, discriminates against others.
But while markets are inherently discrimi
natory, they should be discriminatory
with respect to economic phenomena
only. Two individuals with vastly differ
ent incomes would be expected to receive
different amounts of credit with, perhaps,
different credit terms. On the other hand,
two individuals with similar economic
characteristics but with different skin
colors would be expected to receive
essentially the same amount of credit on

148

F E D E R A L DEPOSIT INSURANCE CO RPORATION

essentially the same terms. It is primarily
noneconomic discrimination w ith which
the Civil Rights Act is concerned.
It is very d ifficu lt to detect or to meas
ure th is noneconomic discrimination
because, in order to do so, it is necessary
to control for economic characteristics. If
this is not done, a finding of apparent
systematic discrimination in, say, credit
allocation to one group of individuals
may be due to valid economic considera
tions rather than noneconomic biases. If
blacks, on average, have lower incomes
than whites, we should not be surprised
to find that blacks receive a share of
mortgage loans made that is less than pro
portional to their number in the popula
tion. But for those blacks who have
comparable incomes with whites, loan
rejections should not be at a higher rate.
We must also take account of the size of
the loan requested in relation to the ap
praised value of the property. But are
appraisals influenced by the racial com
position of the neighborhood? These
economic factors, enormously compli
cated by themselves, must be analyzed
thoroughly before we can say anything
about noneconomic discrimination.
A further complication in the enforce
ment of the Civil Rights Act is that its
coverage is much broader than simply
affirmative or negative decisions on loan
applications. The act forbids discrimina
tion w ith respect to downpayments, in
terest rates, maturity, and other terms or
conditions of the mortgage loan. A bor
rower may feel that he is discriminated
against when his loan application is re
jected, and he may have some basis for
that judgment. He may not know he is
being discriminated against with respect
to the terms of the loan that is granted,
since, at least under present institutional
arrangements, he does not necessarily
know the prevailing policy of the institu
tion with respect to maturities, down
payments, or even interest rates.
In our experiences with surveys and
recordkeeping proposals, we have found

it d iffic u lt to specify information which
would provide sufficient evidence of dis
crimination to prove that the law has
been violated.
I recognize all these problems as well
as some others I have not mentioned. I
think they explain why the FDIC and
other banking supervisory agencies have
not been successful in promulgating regu
lations aimed at enforcement of the Civil
Rights Act. It is possible that racial or
religious discrimination may be quantita
tively an insignificant problem in the sav
ings bank industry. But our information
does not enable me to confirm that view.
I am sure all of you feel that racial dis
crimination does not play any role in
your bank's mortgage lending decisions.
But can you know for sure that all your
loan officers are conducting themselves in
accord with bank policy? How do you
know?
It may well be, as many bankers have
argued, that the costs of more vigorous
enforcement of the law w ill substantially
outweigh the benefits. There is a law on
the books prohibiting discrimination, and
we have felt an obligation at the FDIC to
determine the existence and extent of dis
crimination and devise appropriate en
forcement procedures to insure compli
ance with the law. If it turns out to be
very costly to enforce this law, it w ill be
up to Congress to deal with the situation.
We w ill certainly bring information on
enforcement cost to their attention. In
any case, I personally am in agreement
with the Congressional view that the
FDIC should continue to take action to
make sure that illegal discrimination does
not exist.
In the past, some bankers have had the
view that since they feel that there is no
real problem in this area, it was not
worthwhile to devote much energy to
thinking about realistic and effective solu
tions. If I do nothing else w ith my com
ments today, I would like to change that
view. I would like to encourage each of
you to think about this problem, and let

STATEM ENTS BY CO RPO RATIO N DIRECTORS

me know what steps you feel can be
taken that w ill represent acceptable bur
dens for the vast majority of savings
banks that are not discriminating in mort
gage lending, yet w ill be effective in fer
reting out those few situations where
discrimination may be taking place. Write
me. Give me your suggestions. A t least
tell us how you convince yourselves and
your trustees or directors that you're not
violating the law.
It may be helpful to your thinking on
this matter if I describe some of the steps
that have been taken, or have been pro
posed, in the past. Our first step in imple
menting the law against discrimination
was easy and noncontroversial. We told
the banks that there was a law that made
discrimination illegal. Some bankers may
have been discriminating in real estate
lending and felt that it was their preroga
tive to do so. Informing them that the
law now prohibited such discrimination
probably had some effect. After all, bank
ers are basically law-abiding. I believe it is
quite possible, for example, that prior to
1974, some bankers did discriminate in
real estate lending to women. We heard
several stories of unjustifiable discrimina
tion against women at our 1972 hearing.
Sex discrimination was not illegal at that
time, and I am sure that simply passing a
law making such discrimination illegal
and bringing this action to the attention
of the bankers had a significant impact in
reducing such discrimination.
The next step was somewhat harder.
We required banks to include a statement
in real estate advertising saying that they
were a fair housing lender and to post a
notice in their lobby alerting bank cus
tomers that discrimination in mortgage
lending was illegal. The lobby poster in
forms the customer with a complaint that
he can tell either the FDIC or HUD of the
complaint. While this kind of requirement
seems rather innocuous, some of our staff
questioned whether this was an appro
priate step. After all, most bankers are
law-abiding, and many are offended by

149

being required to post a notice suggesting
they may be violating the law.
None of these requirements have gen
erated many complaints from potential
borrowers. Since 1968, the FDIC has
received very few complaints regarding
discrimination in mortgage lending. This
may mean that there is no such discrimi
nation, but it may also reflect an unw ill
ingness of loan applicants to get involved
in the complaint procedure, a skepticism
on their part about our sincerity in fo l
lowing up on complaints, an ignorance
about the process of complaining, or any
of a number of other reasons.
The civil rights groups have told us
that reliance on the complaint procedure
is necessarily ineffective, and that we
could not expect a large volume of com
plaints. They argue that those discrimi
nated against have no faith that action
will be taken unless they have indisput
able proof that they were victims of ille
gal discrimination and that examples of
such proof are very rare; discrimination is
generally much more subtle or sophisti
cated. They also argue that m inority
applicants go to lenders who make loans
to m inority applicants, and that word
"gets around" as to who w ill and who
w on't give a real estate loan to a qualified
m inority or a woman. I recognize there is
some validity to these arguments, but it is
d ifficu lt to conclude that discrimination
is widespread when we receive so few
complaints.
There are steps that could be taken to
generate more complaints. We might soli
cit complaints more actively by, for
example, running a newspaper advertising
campaign on the law, and urging bor
rowers to write us if they have any suspi
cions that they have been discriminated
against, or even if they suspect that a
given institution is not a fair housing
lender. Obviously, such a program would
be expensive, might simply generate un
justified complaints, and might appear to
suggest that we believe that discrimina
tion is widespread. I am certainly not

150

F E D E R A L DEPOSIT INSURANCE CORPORATION

endorsing such a program at this time,
but it might be one way of convincing the
public that we take the complaint process
seriously.
The problem becomes even more d iffi
cult when we talk about recordkeeping
requirements. The first piece of informa
tion that becomes necessary in any rec
ordkeeping program designed to monitor
compliance with fair lending require
ments is information on the race, religion,
sex, and national origin of the borrower.
Many bankers dislike asking a loan appli
cant about his race or religion, and many
borrowers would be offended by being
asked such questions. Such information
really is none of the lending officer's busi
ness (if he is doing his job correctly).
Moreover, there may be concern on the
part of the borrower that such informa
tion w ill be used to discriminate against
him. In any case, it is hard to require the
furnishing of such information, and many
borrowers would decline to furnish it
voluntarily. On our pilot surveys, for
example, we found that about 18 percent
of mortgage applicants refused to fill out
the voluntary racial questionnaire.
Another problem with the recordkeep
ing requirements is that many applica
tions are disposed of informally, even
before they get to the stage of the written
application. In some cases, telephone or
other casual inquiries are rejected with
the simple statement that the bank is not
making mortgage loans at the present
time. The banker who wants to discrimi
nate may find it fairly easy to discourage
the filing of an actual application. This
might then lead into the need for some
sort of log of informal inquiries or even
phone calls. We recognize that this could
be burdensome and d ifficu lt to enforce.
In some cases, discrimination may occur
even before a potential loan applicant
approaches the bank. He may be dis
couraged by a real estate agent or broker,
either with or w ithout the bank's knowl
edge or approval.
Since the laws are aimed at racial,

ethnic, religious, and sex discrimination,
and not discrimination on an economic
basis, any sort of reporting or recordkeep
ing designed to prove a case of discrimina
tion must include detailed information on
the financial situation of the borrower
and the property being financed. We have
not yet determined what sort of reporting
or recordkeeping is essential to monitor
compliance with the law. The civil rights
groups have told us that, in their view, we
have to be alert to patterns of discrimina
tion, and hence, some sort of recordkeep
ing is necessary. To the extent that red
lining fits this category, the Home Mort
gage Disclosure Act recently passed
should help resolve this problem since it
mandates that certain records shall be
k e p t. O b v io u s ly , however, redlining
doesn't cover all possible patterns of dis
crimination.
It has been suggested that our exam
iners are not skilled enough nor trained
enough in the kind of investigative work
necessary to detect discrimination, and
that we might do better if we had FBI
agents participating in examinations
aimed at compliance with civil rights
legislation. We have not been convinced
of this, however, and would prefer to
train our own staff to the extent neces
sary. We have been devoting a part of our
examiner training program to the fair
housing area, and we are developing an
expanded training program that w ill in
clude investigatory techniques.
I think this description of some of the
possible techniques indicates the source
of my concern and frustration. We rec
ognize the shortcomings of various en
forcement techniques, but we must en
force the law and meet our responsibil
ities.
I would like to return briefly to the
specific problem of sex discrimination. As
I noted, in the course of the hearings we
held on fair mortgage lending, it was clear
that the most convincing evidence of dis
crimination related to discrimination on
the basis of sex. Numerous documented

STATEM ENTS BY CO RPO RATIO N DIRECTORS

instances of such discrimination were
presented. The problem of sex discrimi
nation is a particularly knotty one. As I
have mentioned, there appears to be
strong evidence that discrimination on
the basis of sex has taken place in banks
and other financial institutions, and I am
in sympathy with the Congressional deci
sion to do something about it. I also rec
ognize, however, that women do bear
children and frequently leave the work
force to rear those children, although it
can also be argued (1) that women now
have more control over the question of
pregnancy or not, and (2) that those
women who need an income do not leave
the work force for a sustained period
when they have a child. Alim ony and
child support payments are probably not
as steady and reliable a source of income
as salaries and wages. Thus, one might
argue that discrimination against women
in the past had more of an economic
foundation than the racial and religious
discrimination covered by the Civil Rights
Act of 1968.
Even after recognizing this, however, it
appears that for some time, many bankers
did not follow very enlightened policies
with respect to lending to women. The
role of women in our economy has
changed, with the m ajority now part of
the labor force, but bankers did not ad
ju s t sw iftly to this profound social
change. I concede that the ground rules

151

on lending to women are not very clearcut, but we do intend to meet our obliga
tions to enforce fair lending requirements
in this case, as in the case of all other
areas. Many bankers have already devel
oped credit standards for dealing with
lending to women in an equitable and
n o n d is c rim in a to ry manner, and we
encourage the remaining bankers to fo l
low suit.
Bankers, just like other citizens, do
not participate enough in a positive way
when legislation and regulations are being
drafted. They have a tendency to argue
that certain laws or regulations are un
necessary, and then depart from the
scene. Perhaps the supervisory agencies
are somewhat at fault in not more ac
tively soliciting comments and sugges
tions from the banking community and
giving them the weight they deserve. A t
the same time, I hope you all realize that
it is not the practice of the FDIC to put
out regulations for comment when a deci
sion has already been made. Here, where
we are not at this time putting out addi
tio n a l regulations for comment, but
where we are wrestling w ith the problems
of enforcement in a specific area, we
clearly have an open mind as to the best
way to proceed. I am earnestly soliciting
your suggestions and hope you w ill be
able to come up with ideas that will be
helpful for all of us.

152

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

Address by Robert E. Barnett, The Bur
den of Regulation*
We are all frustrated by the extent to
which government interferes with our
businesses and the extent to which we are
required to complete government forms
and maintain government records. I am
just as frustrated about it as Chairman of
a governmental agency as you are. What
can be done about it?
The quantity of paper crossing my
desk as Chairman of the FDIC is over
whelming. I have asked our Management
Systems Office to review the paper flow
across my desk and have discovered that I
will receive to review and respond to, on
an average, 28 letters, memoranda, re
ports, Congressional inquiries, Board of
Directors cases, etc., each day throughout
each year of my term. In addition, I will
have 10 separate items per day for my
signature and my secretaries w ill handle
75 phone calls per day, many of which
w ill pass through to me. By itself, that's a
large paper load; when you consider the
problem created by an absence from the
office for a few days, it's an over
whelming load. Clearly, something has to
be done about the flow of work across
the desk of the Chairman of the FDIC
and I am in the process of doing some
thing at the present time.
I know that each of your desks has
more than enough work on it but I hope
that you have had a better plan for resolv
ing the paper load problem than we have
had. I know you also generate paper since
some of the paper I receive consists of
letters from banks complaining about the
volume and complexity of reports they
are required to file w ith the FDIC. Some
of it consists of proposals originating with
our staff or w ith the Federal Reserve
suggesting additional surveys to be col
lected from banks. Some of it consists of
correspondence from the Office of Man
*Presented before the 75th Annual Convention
of the Colorado Bankers Association, Colo
rado Springs, Colorado, June 4, 1976.

agement and Budget and the Commission
on Federal Paperwork asking what I am
doing to meet my obligations to reduce
the flow of Federal paperwork. The Pres
ident has directed each agency head to
reduce the reporting burden for the pub
lic by 10 percent this year. And some of
it consists of letters from me to the chief
executive officer of the nonmember
banks in the country carrying a message
about a new regulation or policy state
ment or some continuing request for data
from the banks.
When I began w riting this speech, I
had in mind discussing my desire to re
duce the amount o f time and money
banks have to spend complying with
governmental regulations and reducing
the paper banks have to submit to Wash
ington. As I attempted to write this, how
ever, I found that I could offer very little
besides desire when it comes to reducing
governmental regulations. Congress and
the agencies are under great pressure from
a great variety of groups (including
banks) to pass legislation or promulgate
regulations to correct real or perceived
abuses. When legislation is passed by
Congress, regulations frequently must be
promulgated by the agencies to imple
ment the legislation. The FDIC, there
fore, promulgates regulations and issues
policy statements and w ill continue to, as
will the Comptroller of the Currency, the
Federal Reserve, the Federal Home Loan
Bank Board, and everyone else. I wish I
could be more optimistic, but I can't.
Pressure groups are simply too well organ
ized, concepts of appropriate business
activity have changed, the government is
accepted (rightly or wrongly) as the an
swer to d iffic u lt problems, and abuses in
banking continue to surface.
I then decided to discuss some of the
reports required by the FDIC; the u tility
of these reports to banks; what, if any
thing, the Corporation can do to reduce
the number of reports submitted to it or
to reduce the cost and d iffic u lty of pre
paring them; and finally to make some

STATEM ENTS BY CORPO RATIO N DIRECTORS

comments about the inordinately high
error rate, the tardiness of report sub
missions, and statutory penalties that the
Corporation will begin invoking for con
tinued grossly inadequate or tardy report
ing. Since these comments are not all
good either, I decided to wind up w ith a
comment or two on ways the Corpora
tion has attempted to speed its decision
processes by delegating to our regional
offices and by expediting handling w ithin
the Corporation. A t least that should be
good news.
Turning to reports, we should look
first at the Reports of Condition and
Reports of Income which comprise the
major part of the FDIC's reporting and
statistical operation. Each insured bank
prepares Reports of Condition four times
a year, and a Report of Income, starting
this year, twice each year. This amounts
to over 85,000 reports coming to Wash
ington each year, or 6 per bank.
You are all familiar w ith these reports
since each of your banks has been sub
m itting them for years and years and
since the reports resemble the financial
statements which all of you must prepare
annually for one purpose or another.
Originally, the information on the indi
vidual Reports of Condition and Income
was used primarily by the FDIC to moni
tor the collection of assessments of in
sured banks. For all bank regulatory
agencies, State and Federal, they com
prise the basic information we receive on
individual banks between periodic exami
nations. If it were not for our ability to
follow the progress of some banks on this
basis, more frequent examination or
other supervisory procedures would be
necessary. This supervisory use has been
increasing since these routine Reports of
Condition and Income are the basic raw
material for efforts at the FDIC and other
agencies to design "early warning" or
statistical surveillance systems. This in
creasing use as an ongoing supervisory
tool demands accuracy and timeliness of
the data.

153

In addition to our own use of these
data, we have been able to prepare statis
tical reports for all banks—e.g., providing
data on a variety of operating ratios, com
paring each bank w ith other banks in the
same State or smaller geographic area,
etc. —that have been used by many
others. These comparative reports have
been received enthusiastically by the
banks (particularly by the banks that
come o ff well in the comparisons), and
bankers seem to be making increasing use
of these data for analysis of their own
operations, the operations of corres
pondent banks, and the operations of
banks they deal with in the Federal funds
market. Again, these comparisons are
valuable only if the data are timely and
accurate.
Aggregate data compiled from these
reports (and many other reports) have
been an important part of the financial
information relied on by the Federal
Reserve in carrying out monetary policy.
The aggregate statistics are also used by
other government agencies for a variety
of purposes. More recently, particularly
since both reports became publicly avail
able in 1972, the use has multiplied. Now
bank asset and liability and income infor
mation is also used by:
•

banks that wish to know how their
competitors are doing;

•

financial analysts and market re
searchers in banks and universities;
consulting firms, bank associations,
and reporting services who buy
computer tapes of these data, per
form their own analyses, and offer
these analyses for sale;

•

bank stockholders interested
their investments; and

•

corporate treasurers who seek infor
mation on which to base their selec
tion of banks as depositories or
lenders.

Last year, for example, we filled 1,250
individual requests fo r Reports of Condi

FE D E R A L DEPOSIT INSURANCE CO RPORATION

154

tion and Income involving a total of
24,000 documents. About half of these
requests came from banks, but individuals
(particularly lawyers) also asked for these
reports in sizable numbers. As of the end
of May this year, we had filled 820 re
quests involving over 16,000 documents,
significantly higher than the comparable
period last year. Forty-three of these
requests originated in Colorado and
covered primarily Colorado banks. Clear
ly, there is interest in the Reports of
Condition and Income.
I have been continually amazed at the
volume of errors made by banks in com
pleting these required reports. Some of
these errors may be due to the complex
ity of the reporting requirements or to
the inadequacy of our instructions, but
neither complexity nor inadequacy on
our part can explain the following amaz
ing facts culled from State nonmember
reports filed for the December 31, 1975
Call:
•

1 12 reports indicating that the
banks were operating w ithout any
currency or coins or w ithout com
mon stock,

•

1,184 banks reporting that they
were operating w ithout any em
ployees, and
2,400 banks indicating either that
they had income on their Report of
Income from assets that their Re
port of Condition indicated that
they did not have, or that they had
no income from earning assets that
their Report of Condition showed
them as holding.

•

By far the most common errors in the
reports are mathematical or mechanical.
That is, totals that do not equal the sum
of the subtotals, or an item in the Report
of Condition not agreeing with the same
item in the Report of Income. For ex
ample, banks report total capital as of
year-end in both the Report of Income
and the Report of Condition. Obviously,
accurate reporting would find total cap

ital the same in both reports but we have
hundreds of banks that report different
figures in the two reports. Almost half of
all errors handled by our staff are of this
sort.
In total, out of the 8,600 insured non
member commercial banks that sub
mitted Reports of Condition and Income
to us at year-end 1975,** no less than 54
percent of all the Reports of Condition
and 84 percent of the Reports of Income
failed to pass one or more of the initial
tests in our verification procedures. The
total number of edit messages (potential
errors) came to 51,318 for year-end 1975
Reports of Condition and Reports of
Income. Both the banking industry and
the FDIC should be embarrassed by that
number—the banking industry because its
members are submitting such sloppy
reports, and the FDIC because it has to l
erated such reporting.
Let me emphasize that the largest
single category of errors was mathemat
ical or logical errors, errors which only a
modest amount of care and concern on
the part of the reporting banks could
eliminate.
Not only is the information we get on
reports frequently in error, it is also fre
quently late. Currently, the Report of
Condition is due w ithin 10 days after the
Call date, and the Report of Income is
due 30 days after the end of the reporting
period, a backwards order for reporting if
I have ever seen one—more about this
later. For year-end 1975, 481 banks
were delinquent in submitting one or
more of the reports at the end of January
(the final report did not come in until 73
days after year-end). Of course, the vast
majority of banks do report reasonably
promptly, but even a small number of
**N a tio n a l banks subm it th e ir reports to the
Com ptroller of the Currency, State member
banks subm it theirs to the Federal Reserve
System. The FDIC u ltim ate ly processes data
from all the banks on its computers. Error
rates fo r all banks appear to be about the same
as the error rate fo r State nonmember banks.

STATEM ENTS BY CO RPO RATIO N DIRECTORS

delinquent reports can cause serious de
lays in processing since errors are often
found on the delinquent reports, and that
means further delays for corrections.
It makes very little sense for us to
publish any data before we have received
all of the reports from all of the banks.
As of the present time, data from our
condition report and income report are
published approximately 4 months after
the date of the Call; if all banks were to
report w ithin 30 days correct information
on both reports, we could publish that
data w ithin 50 days of the Call, cutting
the time lag in half and saving thousands
and thousands of dollars.
I recognize that the reporting require
ments of the Report of Condition and the
Report of Income are rather complex,
and they have tended to become more
complex over time. To some extent, that
is a reflection of some change in the use
of the reports from a statistical one to
one of serving as the basic public financial
report of the bank. This has led us to
change the accounting required in the
direction of "generally accepted account
ing principles." Some of these changes
have added complexity, and have led to
complaints from banks. We received quite
a volume of complaints a few years ago,
for example, when we required that
banks with over $25 m illion in assets pre
pare their reports on the basis of accrual
accounting. Many banks in the affected
size range complained that accrual ac
counting was just too complicated for
them. I confess that I find it d ifficu lt to
feel a great deal of sympathy with the
management of a $25 m illion bank, that
is in the business of making loans and
analyzing the financial statements of
borrowers, claiming that accrual account
ing is too complicated.
It was adherence to generally accepted
accounting principles that led us to re
quire a breakdown of the loan loss reserve
into a valuation portion, a deferred liabil
ity portion, and a contingency portion.
There I concede that the accounting and

155

the accompanying tax calculations have
become complicated. We have also added
additional detail on types of loans and
maturity distribution of securities that
have increased the reporting burden on
the banks. For the most part, however, I
feel that the information required in the
Report of Condition and the Report of
Income is information that the banker
should have in order to run his bank
effectively. Some bankers complain, for
example, about our requirement that the
bank, even if it is operating on a cash
basis, must estimate the taxes due on its
current year's income. It seems reason
able to conclude, however, that in order
for the bank to make correct investment
decisions, it should know what its current
tax position is and what the tax implica
tions of its financial decisions are.
The situation I am describing has ex
isted for a long time. In the past, for
whatever reasons, the FDIC has over
looked this problem. But now, when
much more intensive use is made of these
financial data, both w ithin the banking
agencies and outside, we feel that it no
longer can be overlooked.
Recognizing that we must continue to
receive Reports of Condition and Reports
of Income, we plan to schedule the re
porting in a logical way and to give the
banks sufficient time so that we can
reasonably expect prompt and accurate
reports. One of the difficulties for the
banks is our current requirement that the
Report of Condition be submitted w ithin
15 days after the end of the quarter—a
rather tight schedule. We give banks 30
days to complete the Report of Income,
which appears to be more generous, but
the conscientious banker recognizes that
a Report of Condition as of year-end can
not be completed accurately until after
the bank has completed its Report of
Income. That is, there are many year-end
income adjustments that must be reflect
ed in the year-end Report of Condition.
These requirements are illogical, and I see
no reason to continue them. Effective

F E D E R A L DEPOSIT INSURANCE CORPO RATIO N

156

with the June 30 reports, I am proposing
that we set a uniform date for submission
of both reports, 30 days from the end of
the reporting period. Both the Report of
Condition and the Report of Income,
therefore, for the June 30, 1976 period
will be due by the end of July. I believe
that is a reasonable period, and if banks
are delinquent in meeting that require
ment, we intend to pursue the penalties
provided by the Federal Deposit Insur
ance Act which authorizes us to levy a
fine of up to $100 per day for each day a
report is delinquent. The Comptroller o f
the Currency recently announced his in
tention to follow this procedure, and
indicated that a fine of $6,600 had been
levied on a national bank that was fla
grantly and repeatedly late in submitting
its required reports.
Some action must also be taken to
reduce the number of errors in the Re
ports of Condition and Income, and we
intend to take the following steps to
improve the accuracy of reports sub
mitted :
(1) Improve the format and instruc
tions of the reports. We are con
sidering, for example, whether it
would be productive to have d if
fe re n t instructions for smaller
banks (those $25 m illion or less in
assets) or whether it would be
productive and reasonable to have
different reports for such banks.
(2) We have contacted the Bank
Administration Institute and are
trying to arrange for meetings in
volving our staff and their officers
to solicit their suggestions for
improving the instructions and
forms.
(3) We plan to solicit comments from
all banks through a questionnaire
mailed with the June reports.
(4) We are installing a toll-free tele
phone number that a bank may
call for assistance in completing or
correcting reports.

(5) We would like to consider, al
though we recognize the extreme
d ifficu lty of this, adopting an
agreement among all the bank
agencies that there would be no
change on the reports more fre
quently than every 5 years. Banks
would have the benefit of working
with the same forms for an ex
tended period, and suggestions for
changes by the agencies would
have to stand the test of the pas
sage of a reasonable period of
time. Frankly, the possibility of
getting such an agreement seems
slim to me, although I personally
would support it, at least until an
exception came along that I'd like
to make.
We believe all of these suggestions or
actions would minimize the cost both to
banks and the agencies by reducing the
time spent on completing and correcting
these reports. Obviously, it would also
put the data into the public domain much
faster. If those carrots don't work, how
ever, we will consider either fining those
banks up to $100 per day whose error
rate is so high as to constitute no filing, or
proceeding against such banks under sec
tion 8 of our statute.
The FDIC and the other agencies can
not be successful w ithout the help of the
industry. Banks must believe it is impor
tant to complete the reports accurately
and promptly.
To summarize, we suggest that some
major steps for improvements in the qual
ity of the Reports of Condition and In
come are needed at this time. The errors
in the reports submitted appear to be
primarily the result of carelessness, but
the design of the forms, the instructions
given, the assistance provided, and the
attention given to promptness and accu
racy by the agencies may have a bearing
on the matter.
I have reviewed other reports required
to be sent to the FDIC in addition to
Reports of Condition and Income. While

STATEM ENTS BY CO RPORATION DIRECTORS

preparing these other reports and the sur
veys occasionally taken does involve some
burden and some staff time, I think the
burden is exaggerated by most banks.
First of all, many of our surveys are con
ducted on a sample basis. This may not
be much consolation to the bank in
cluded in a sample, but we have different
samples for each survey, so that if your
bank is included in one, it is probably not
included in several others. Only a total of
about 42 banks in Colorado, for example,
are included in any of our sample surveys.
Others, of course, may be included in the
surveys by other agencies.
Second, in many of our surveys, the
information is relatively simple for the
bank to provide, though I recognize that
just typing up the report form is some
burden for some banks.
Third, much of the data we are asking
for in these surveys is information the
banker should have to manage his bank
effectively and, therefore, probably does
have or can find profitable use for once it
is prepared. While we ask the banker to
report the information, for example, we
think there is great u tility to him in
knowing the m aturity distribution of his
municipal portfolio, or the amount of his
time deposits in different maturities, or
the market value of his trust department's
assets. Since he probably already has and
uses such data, it's not onerous to report
it to the FDIC.
It is a mistake to assume that all sur
veys and statistical reports are imposed
by the agencies on a reluctant and resist
ing banking industry. There are some
reports and surveys which we conduct
which the banking industry has either
initiated or strongly supported. Let me
mention just a couple of these. Several
years ago, the American Bankers Associa
tion commissioned a sizable research proj
ect, carried out by Arthur D. Little &
Company, to investigate the ability of the
banking system to handle the rising vol
ume o f paper checks in the future. Sub
sequent to that survey, the ABA asked

157

the FDIC to conduct follow-up surveys,
which we did and have continued to do.
While this information is of some interest
to the FDIC, it is not considered vital by
us and we could reduce the burdens
which we are putting on responding
banks by elimination of this survey. We
do plan to reduce the frequency of this
survey to every second or third year.
Another example is a survey we did a
couple of months ago on the volume and
rate structure of IRA and Keogh ac
counts. Many bankers have been very
unhappy about the current interest rate
ceiling structure which has been applied
to IRA accounts as well as all other ac
counts. This rate structure, as you know,
gives savings institutions a quarter-percent
rate advantage. In an account that is
going to be maintained for 20 or 30
years, a quarter-point interest rate differ
ential is very significant. Commercial
bankers feel they are unable to compete
with savings institutions for IRA ac
counts, and that their customers are put
at an unfair disadvantage as compared
with customers of savings institutions. To
determine whether the bank share of such
accounts is really being adversely affected
by the interest rate differential, the bank
ing agencies conducted a survey of both
banks and savings institutions. We got
strong support from the banking industry
for conducting this survey and, I might
add, a very rapid response. This seems to
be illustrative of the fact that where
bankers can see some payoff to their in
stitution from a survey, there is support
for it and a willingness to cooperate. We
hope to encourage the same support and
rapid response for all of our reports.
Some reports are collected for the use
of other agencies. For example, we col
lect detailed and extensive monthly data
from a sample of banks on the volume of
mortgage loans extended. These data are
collected as part of the government-wide
program coordinated by the Department
o f Housing and Urban Development.
Again, this is a survey which we could

158

FE D E R A L DEPOSIT INSURANCE CO RPO RATIO N

dispense w ith as far as the FDIC is con
cerned, but I am convinced that the sur
vey would continue to be taken by HUD
or the ABA.
The Federal Government has been
aware of and sensitive to this general
problem of governmental paper, although
not very successful yet in solving it. The
National Commission on Productivity in
its analysis of the financial industry gave
considerable attention to the question of
whether reporting requirements of Fed
eral agencies imposed a burden that ad
versely affected productivity in the finan
cial sector of the economy. There is now
a Commission on Federal Paperwork with
responsibility for attempting to minimize
the flow of paper both w ithin the govern
ment and between the government and
the private sector. I am hopeful that the
commission w ill be able to make signifi
cant progress, though there is some initial
burden of reporting to the Commission
on Paperwork.
Apart from government-wide efforts
and c o n c e r n , the FDIC and the other
banking agencies have been giving atten
tion to this matter fo r some time. Several
years ago, a join t banking agency-industry
task force began work on a project now
called ISBAR (Information System for
Bank Agency Reporting.) This is a system
designed for use by large, automated
banks w ith substantial agency reporting
requirements. When it is fu lly imple
mented, it w ill allow banks to report bits
of information on magnetic tape which
will then be processed by the agency
w ithout the need to fill out printed re
port forms. While it w ill be a long time
before any bank is actually using the
system to meet a substantial fraction of
its reporting requirements, we have al
ready experimented w ith receiving some
reports in tape form. This is an example
of join t agency-industry forward planning
on a long-range problem rather than
simply reaction to an immediate crisis.

Within the FDIC, we have reduced the
flow of paper into Washington and back
again and have reduced the time during
which you must await our decisions by
delegating certain responsibilities to our
Regional Directors. These delegations in
clude decisions on branch applications,
office relocations, offering of trust serv
ices, continuation o f deposit insurance
after withdrawal from Federal Reserve
membership, and others. The Regional
Director has the authority to approve,
but not to deny, such applications in the
majority of instances. We have allowed
banks to determine whether they wish to
have their unmanned cash dispensers or
automated teller facilities considered as
branches or not. If the bank decides that
the facilities should not be viewed as a
branch, then we have dispensed w ith our
branch application procedure, and require
only a brief information notification. As
a result of these delegations and other
efforts w ithin the FDIC, there has been a
substantial improvement in the speed
with which we process applications. We
estimate that a banker receives an answer
from the FDIC to an application for
merger approval, insurance, new branch
es, etc., a month sooner than he would
have 3 years ago.
Let me return to the beginning. I had
in mind pointing out to you today ways
the FDIC could remove some of the bur
den of Federal regulations and reporting
requirements. My analysis of the situa
tion, however, is that regulations will
continue to be promulgated, and you will
be required to continue to submit re
ports. Hopefully, we can make the prep
aration of reports easier and less costly
for you—perhaps we can make them more
useful. Whatever the case, we are going to
insist on tim ely and accurate submission
of reports because we feel that only if
they are tim ely and accurate can they be
useful to us in our supervisory respon
sibilities.

STATEM ENTS BY CO RPORATION DIRECTORS

Address by Robert E. Barnett, Deposit
Insurance*
There are times when it seems most
propitious to encourage public exami
nation and discussion of issues that affect
our banking system for the purpose of
seeing whether and how things might be
improved. This would appear to be one of
those times. Many banks that had en
countered difficulties in the past year or
so seem to be gradually working out of
them. Things are likely to be better for
most banks during the balance of this
year and next. Both bank regulators and
Congress are less preoccupied with emer
gency situations and thus, hopefully,
better able to view issues in perspective.
In light of all of this, I would like to dis
cuss the adequacy and fairness of deposit
insurance as it exists today, and make a
few preliminary remarks about 100 per
cent deposit insurance as one alternative
to the current system.
Except for occasional increases in the
limits of deposit insurance coverage, there
has not been any fundamental change in
our system of Federal deposit insurance
since the beginning of the FDIC. While I
am far from dissatisfied with our present
deposit insurance system, there are sev
eral reasons for raising the issue o f change
of the system at this tim e—if the mere
passage of some 40-odd years is not suffi
cient in itself.
First, the Hunt Commission made
suggestions for change that relate to de
posit insurance, but none of the commis
sion's recommendations in that area
found their way into the legislation the
Congress has recently considered. Neither
have other possible changes, among which
was 100 percent deposit insurance, which
the commission considered but rejected.
These issues have thereby escaped the
public attention and discussion which the
legislative process always provides.
*Presented before the 82nd Annual Convention
o f the Kentucky Bankers Association, Louis
ville, Kentucky, September 13, 1976.

159

Further, deposit insurance is obviously
linked to bank failures, and some recent
failures are different enough from earlier
ones to require reconsideration of our
unspoken premises. For most of the life
of the FDIC, bank failures have involved
relatively small banks. From the begin
ning of the Corporation in 1934 through
1970, only one insured bank which failed
had over $50 m illion in deposits, and
almost all of them were under $5 m illion
in deposits. The number of depositors
and dollar amount of deposits in any fail
ure, therefore, were quite small. In just
the last 6 years, however, we have seen
failures of some very large banks, includ
ing two over $1 billion in deposits, two of
$100 m illion to $500 m illion and five
between $50 and $100 million. Even
though banks generally have grown dra
matically in size,** the number of depos
itors affected by recent failures has grown
relatively as well as absolutely.
Finally, the appropriate role of the
FDIC and other bank agencies in bank
supervision has been raised in a number
of ways recently, and I believe it is appro
priate to review the varying functions of
the Corporation, including its role as an
insurer, in some depth.
Today I plan to discuss the adequacy
and fairness of the current deposit insur
ance system, in part by describing how
the FDIC deals with bank failures and the
basis for our decisions. I will then briefly
consider the rationale for the one alter
native normally suggested—100 percent
deposit insurance. In other scheduled
speeches over the next several weeks, I
intend to explore more thoroughly the
arguments and implications not only of
100 percent deposit insurance, but also of
other alternatives to the present system.
* * l n 1956, a $500-m illion-deposit bank would
have been the 42nd largest bank in the U.S.,
and a b illio n -d o lla r bank w o u ld have been
the 18th largest. As o f June 30, 1976, a
$ 5 0 0-m illio n bank w ould be only the 186th
largest, and a b illio n -d o lla r bank only the
89th largest.

160

F E D E R A L DEPOSIT INSURANCE CO RPORATION

It is not the present intention of the
FDIC to propose such legislation, nor do
I wish to leave the impression that the
Corporation would favor such legislation
if it were proposed at the present time.
But we do plan to review all the issues
surrounding the matter as well as others
basic to the FDIC.
The basic purpose of deposit insurance
is to protect the banking system against
destructive runs on deposits as well as to
protect the depositors themselves. With
respect to the latter, most depositors have
fared extremely well in the 519 insured
banks which were closed since the estab
lishment of the Federal Deposit Insurance
Corporation. About 99.8 percent of all
depositors, large or small, fu lly recovered
their deposits almost immediately, with
only one-tenth of 1 percent having to
wait for the liquidation of bank assets.
And less than 5,000 out of nearly 3 m il
lion depositors are expected to experi
ence any deposit loss at all. Out of $4
billion in deposits at failed banks through
1975, approximately $267 m illion was
lost or is expected to be lost. Of this
amount, unprotected depositors stood to
lose about $13 m illion, the Corporation
absorbing the remainder. These loss fig
ures do not take account of foregone
interest in situations where recoveries
have required extended periods of time.
If we take this into account, even using
modest interest rate levels for this pur
pose, losses on an opportunity-cost basis
would be approximately 50 percent great
er than the figures I have cited. In view of
the number of years involved and the
volume of deposits, most would agree
that losses of this magnitude are not sub
stantial.
The high recovery rate for depositors
is attributable at least in part to the fact
that $9 out of every $10 in deposits were
in bank failures which were handled by
purchase and assumption transactions in
which the FDIC provided assistance en
abling another bank to assume the failed
bank's liabilities. This arrangement pro

vides, in effect, 100 percent insurance to
uninsured depositors and general cred
itors as well as to FDIC-insured depos
itors. If one or more of the large bank
failures (United States National Bank or
Franklin National Bank, for example) had
been paid off, the number of depositors
not having de facto 100 percent insurance
would have been substantially larger.
However, even in banks which were
handled by a payoff of insured deposits,
more than 99 percent of the depositors
are assured of payment in full and more
than 98 percent of all deposits (in dollars)
are expected to be recovered. Insurance
covered about 70 percent of these de
posits, and another 16 percent were pro
tected via pledged assets, preference, or
loan offsets; as in a purchase and assump
tion, these deposits were made available
to depositors almost immediately.
But the consequences of a payoff to
individual depositors who held the re
maining 14 percent of the excess deposits
were not quite so favorable. Although
one-third of these depositors have histor
ically recovered their deposits in full, in a
typical payout, the depositors who are
not fu lly insured have lost about 12 per
cent of their individual deposits. In addi
tion, these depositors, including those
who are lucky enough to recover in full,
must forego interest on the recoverable
portion of their deposits while waiting for
the bank's assets to be liquidated. In
many instances, the foregone interest has
been considerable and, as I have sug
gested, may equal one-half of the losses
of principal incurred.
The depositors caught in this situation
comprise a mixed group, and a group that
to a great extent includes depositors that
would have to be among the more sophis
ticated and knowledgeable about the
condition of a bank. Savings and loan
associations accounted for close to onethird of the total of these deposits. The
next largest amount was held by individ
uals, followed by nonfinancial corpora
tions, credit unions, public entities, and

STATEM ENTS BY CO RPO RATIO N DIRECTORS

banks, in that order.
In a deposit payoff, balances in se
cured and preferred deposits, as well as
insured deposits, are paid over to their
owners, usually beginning 5 to 7 days
following the closing of the bank, for
which the Corporation receives the sub
rogated claims of these owners against the
bank's assets. Owners of uninsured de
posits having any indebtedness to the
bank also may request to have their loans
offset against their deposit balances. Both
the Corporation and uninsured holders of
excess deposits not protected by the fore
going features must await recovery on
their claims from an often lengthy liqui
dation of the bank's assets and must bear
a pro rata share of any loss that ensues.
In a purchase and assumption, the
acquiring bank assumes all the deposit
liabilities of the failed bank ensuring little
or no disruption in banking services to
the community and providing full pro
tection to both insured and uninsured
depositors alike. To the extent that the
initial transition also involves little change
in personnel and facilities, the transaction
is also likely to minimize any secondary
reactions affecting the public's confi
dence in the banking system. Where rela
tively large banks are involved or where
the failure coincides with uncertainty in
financial markets, this confidence factor
is one that should not be minimized.
If the acquiring bank acquires or pur
chases a substantial amount of assets, this
not only facilitates the disposition of the
assets for the FDIC but also is consistent
with maintaining the established banking
relationship between loans and deposits
which is necessarily severed in a payoff.
In recognition of the value of acquiring a
going business, the assuming banks will
usually pay a premium for the assets and
deposits of the failed bank, thus reducing
the net loss resulting from the bank fa il
ure. In effect the FDIC is able to recover,
for the benefit of creditors and share
holders, a "going business" value or good
will from the failed bank. In contrast, the

161

necessary transfer of deposits to other
banks by individual depositors following
a payoff commands no such special price
from the recipient banks.
Despite these advantages, it has not
always been possible for the FDIC to
arrange a purchase and assumption. Since
January 1, 1971, for example, purchase
and assumptions could not be arranged in
15 of the 40 banks that closed. In unit
banking States it may be impossible to
find a nearby bank that is interested or in
a position to acquire the failed bank.
Since the office of the failed bank must
be closed, the potential purchasing bank
cannot be sure of retaining the bulk of
the failed bank's business. Similarly, in
unit banking States or States in which
branching statutes are restrictive, other
wise suitable banks located elsewhere in
the State cannot even be considered.
Even in unit bank or restricted branching
States where multibank holding com
panies are permitted, the cost or com
plexities of establishing another bank (as
opposed to a branch) may be enough
greater as to make the acquisition of the
defunct bank unprofitable. Of the 13
payoffs since January 1, 1971, all of
them have been in States which at the
time of failure had either unit banking or
limited branching laws.
Even in full branching States, however,
it may be that the market served by the
defunct bank simply has insufficient val
ue to attract the interest of any bank
large enough to manage the assets and
liabilities.
In order to make the purchase and
a ssu m p tio n transaction attractive to
potential takeover banks, the FDIC in
demnifies that bank against unknown
liabilities that may surface after the take
over. That indemnity is one given by the
Corporation in its role as a Corporation,
not in its role as a receiver, and therefore
is not limited by the estate of the failed
bank, but rather is supported by the
deposit insurance fund. In cases of fraud,
the consequences may be so severe as to

162

FE D E R A L DEPOSIT INSURANCE CO RPO RATIO N

convince the Corporation that granting
such an indemnity to the acquiring bank
may involve too much risk to the insur
ance fund. More specifically, since the
Corporation is permitted under section
13(e) of the statute to assist in a purchase
and assumption transaction only if doing
so w ill "reduce the risk or avert a threat
ened loss" to the Corporation (inter
preted over time by the Corporation to
mean "o n ly if it's cheaper") if the assets
and contingent liabilities of the closed
bank are too ill-defined for the Corpora
tion to make a reasonable estimate of the
comparative costs of an assumption ver
sus a payoff, it may not do so. Despite
our care, under such uncertain conditions
the Corporation probably has erred on
both sides, opting for a payout in some
instances of fraud or embezzlement when
subsequent developments suggested that a
purchase and assumption transaction
would have been less costly and, in a few
instances, opting for a purchase and
assumption which later proved to involve
considerably more liabilities or worthless
assets than expected.
In several recent bank failures, the
FDIC has concluded that it was necessary
to exclude from assumption contingent
and suspected claims in order to deter
mine that the purchase and assumption
was cheaper. We believe we have the
power to do that. But that determination
is being challenged in court. If the claim
ants prevail, under our present statute it
may be d ifficu lt to arrange a purchase
and assumption where we are unable to
define the liabilities of the bank on the
date it closes.
Even in bank failures not beset by
embezzlement or wrongdoing, however,
there are still many uncertainties concern
ing the financial status of the closed bank
and the possible outcome following clo
sure. Since 1951, the Corporation has
attempted to make informed cost esti
mates in accordance with statutory re
quirements to choose the most econom
ical alternative. Under the method used,

we first estimate the insured and unin
sured shares of the expected loss. The
Corporation assumes the full loss in an
assumption and only the insured share of
the loss in a payout. Thus, the difference
in these two figures—represented by
the uninsured share of the loss—deter
mines the additional cost to the Corpora
tion of an assumption. From the resulting
fig ure, we also usually subtract the
administrative costs of distributing de
posit balances to insured depositors—
costs which are incurred in a payout but
not in an assumption. The remaining d if
ference must be made up in some manner
in order for the Corporation to justify a
purchase and assumption on a cost basis.
Typically, this is done by a premium paid
by the acquiring bank which assumes the
liabilities and certain of the assets of the
failed bank. The premium offered is
usually determined through closed bids
submitted by potential buyers—usually,
but not always, existing banks or bank
holding companies.
In practice, the assuming bank usually
does not take over all of the assets of the
failed bank. Many of those are of such
poor quality that we do not want to
weaken the takeover bank by requiring it
to take them. These are taken over by the
FDIC which then provides cash to make
up the difference between assets pur
chased and liabilities assumed (less, of
course, the premium paid).
For example, assume a bank fails with
deposits and nonsubordinated liabilities
of $100 m illion and of this total $75 m il
lion (75 percent) is insured deposits.
Anticipated losses are projected at $20
million. In a payoff, uninsured depositors
and other creditors would absorb 25 per
cent of the loss, or $5 million. In a pur
chase and assumption, assuming the FDIC
buys back all questionable assets, all
losses would be absorbed by the FDIC.
Thus, an acquiring bank would have to
bid at least a $5 m illion premium (less the
saving to the FDIC of avoiding the cost of
paying insured depositors in a payoff) to

STATEM ENTS BY CO RPO RATIO N DIRECTORS

justify the transaction on a cost basis.
Since October of 1974, following an
announcement to that effect by thenChairman Wille, the FDIC has made a
special e ffort in all failures to arrange a
purchase and assumption transaction,
including developing and using the con
cept of an "all cash" or "clean bank"
transaction, one in which the Corporation
delivers to the takeover bank cash equal
to the liabilities assumed less the pre
mium. Since that time, only 4 of the 24
banks which have failed have been han
dled by a payoff rather than a purchase
and assumption transaction. These four
banks were each under $20 m illion in
deposits when they failed. As I have sug
gested, it is the preferred method for rea
sons other than cost, and one might
expect that this might lead us to fudge
our cost estimates in favor of a purchase
and assumption. However, that does not
seem to have been the case. In fact, a
recent review of our method of calcu
lating comparative costs revealed that
some additional considerations should
properly be taken into account, which
would significantly improve the relative
cost status of assumptions so that in even
more cases than now they would be less
costly to the FDIC than payoffs, even if
the premium bids were to fall short of the
uninsured depositors' share of the loss as
currently calculated.
Depending on how long a bank is
known or suspected to be in trouble be
fore being closed, there is a strong likeli
hood that a significant number of unin
sured depositors, especially those holding
sizable demand deposits, will have w ith
drawn the exposed portion of their de
posits, leaving balances that to a consider
able extent are protected from any loss
by preferred status, pledged assets, or
offsetable loans. The latter had not figured
in our calculations until examination of
the F ra n k lin National Bank failure
showed how significant a factor offsets
could be, particularly in a large-bank fa il
ure. We estimate that about three-fourths

163

of the uninsured demand deposits and
one-third of all uninsured domestic de
posits remaining at Franklin at the time it
closed were protected by loan offsets. On
this basis, the premium required to justify
arranging a purchase and assumption
rather than paying o ff insured depositors
was nearly one-third smaller than the
amount estimated by ignoring offsets.
Where there is sufficient time and the
stakes are relatively high, we have tried to
structure the transaction so that the ac
quiring bank takes a considerable portion
of the assets of the failed bank. This both
puts individual borrowers in a much bet
ter position than they would be if their
loans were left in the receiver's hands and
disrupts the community less. In addition,
it minimizes the FDIC's cash outlay and
foregone interest, and tends to reduce our
losses on collections as well as liquidation
expenses.
O ur liquidators are skilled profes
sionals who do an excellent job of collect
ing on the assets of closed banks. Never
theless, in many instances an acquiring
bank has advantages in loan collection
compared with the FDIC acting as re
ceiver. Where loans are current and asso
ciated with a deposit relationship, they
are worth more to the bank than to the
FDIC. A bank may be very happy to
carry or even extend a loan arrangement
where sizable deposit balances are in
volved. Where workouts involving addi
tional advances are necessary, the bank as
an ongoing financial institution typically
has more fle x ib ility than the FDIC acting
as a receiver. Frequently, though not
always, the acquiring bank has staff,
experience, and expertise in the local
market and because of this may be able
to move more knowledgeably in the early
phases of the collection process. In prac
tically all cases, buildings, leases, and
other physical facilities are worth more
on a going-concern basis to the acquiring
bank than they would have been if they
were liquidated in a payoff. If a collec
tion matter ultimately ends up in court,

164

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

the FDIC sometimes appears as an out
sider with unlimited resources attempting
to take all the assets of an unfortunate
local merchant or businessman.
In many of the smaller purchase and
assumption transactions, we have not
required bidding banks to take loans of
the failed bank. Even in these trans
actions, however, acquiring banks fre
quently buy some loans, thereby facilitat
ing the liquidation process. Within the
FDIC we have been looking at the pur
chase and assumption process to see how
such transactions might be modified and
improved. It may be feasible to structure
transactions so that acquiring banks
usually take a high percentage of assets.
By minimizing FDIC cash outlays, fore
gone interest, and liquidation expenses,
the overall cost to the FDIC might be
further reduced.
In 1951 a Congressional committee
was severely critical of what appeared to
be an automatic FDIC decision to use the
purchase and assumption alternative in all
bank failures. In fact, there had been no
payoffs between 1944 and 1951, and
comparative cost tests had been virtually
ignored. The result, of course, could be
predicted: one bank with total assets of
only $637 thousand required an outlay
by the FDIC of $1.8 m illion and an u lti
mate loss of $1 m illion, to effect FDICassisted purchase and assumption with
accompanying indemnities to the take
over bank. Following that criticism, the
FDIC became and has remained very care
ful to arrange purchase and assumption
transactions only when the costs justify
that decision, and as I have mentioned,
there have been a few instances in which
payoffs have occurred.
Nevertheless, all of the considerations
I have mentioned suggest that we are like
ly to continue to handle most bank fa il
ures through purchase and assumption
transactions as we have during the past
few years. While subordinated creditors
and equity investors typically lose most
or all of their investment in purchase and

assumption transactions, depositors and
nonsubordinated creditors incur no los
ses.
As a result we have had de facto 100
percent insurance for all depositors in
most banks in recent years. What we have
not had is equity, fairness, and logic in
determining which are to be the few
depositors who do not have 100 percent
insurance. Those instances where depos
itors have experienced losses in payoffs
have reflected special circumstances from
the FDIC's standpoint—not from the
depositors'.
For example, there were some cases
where it was not possible to arrange for a
purchase and assumption because of the
location of the bank, because of the
State's branching and holding company
laws, because the FDIC could not get a
good fix on liabilities because of pending
lawsuits or suspected fraud, etc. Uncer
tainty and potential cost considerations
may have afforded logical reasons for a
payoff in such cases as far as the FDIC
was concerned. However, uninsured de
positors were not necessarily at fault.
They were unlucky. I recognize that these
were large depositors who presumably
were sophisticated and knowledgeable
enough to scrutinize the condition of the
bank before making their deposits. The
fact is, however, that would not have
helped in all cases. The sophisticated
depositor is more likely to be able to
detect poor management, which will
probably lead to a purchase and assump
tion transaction in which he will be 100
percent insured if he leaves his deposit
with the bank, than to detect fraud,
which is more likely to lead to a payout
and some loss on his deposits.
In a few other instances where the con
tinued existence of the failing bank was
essential to the community served, the
FDIC has provided direct assistance under
section 13(c) of its statute, thereby elimi
nating or postponing the need for closing
the bank and losses to depositors. This
section has been used rarely by the FDIC,

STATEM ENTS BY CO RPORATION DIRECTORS

at least partly because it requires a fin d
ing that preservation of the bank in ques
tion is . essential for providing adequate
banking services to the community. While
I do not quarrel with the appropriateness
of this test, it has nothing to do with
any equitable determination from the
depositor's standpoint of which depos
itors get covered in full and which do not.
A n othe r factor affecting depositor
losses has been the timing of bank clos
ings. Decisions on bank closings are made
by agencies that charter the banks: the
Comptroller of the Currency and the
State bank supervisors. The Federal Re
serve may play an important role in con
nection with advances to member banks
and the FDIC provides input to the
Comptroller and the States. Delays in
closing a bank, avoidable or unavoidable,
particularly after adverse publicity, en
able some large depositors to withdraw
funds to avert a possible loss. In some
instances such delays have benefited spe
cific depositors, perhaps just those depos
itors who we have argued over the years
provide the discipline to top manage
ment. It may also be, however, that
those depositors who leave during the
delays just happen to be those whose
deposit certificates mature during the
period, a relatively illogical basis for pre
ferring one uninsured depositor over
another. Such withdrawals, whatever the
basis, increase the share of loss borne by
other uninsured depositors if the bank is
paid off.
If we have almost 100 percent deposit
insurance and the present system appears
to work in an almost random way in its
treatment of depositors—similar depos
itors are treated differently in different
cases—why not go to 100 percent deposit
insurance? Obviously, this proposition is
more complicated than that. The possibil
ity that presently uninsured depositors
will lose money in the event of a bank
failure, for example, does make a differ
ence in the behavior of some depositors
and, as a result, in the behavior of some

165

bank managers. This difference is impor
tant and its impact, I believe, has some
good and bad consequences. I do not
have the time today to trace those effects
in detail—that is in fact another speech
which I plan to make soon—but I would
like to briefly review the arguments for
and against 100 percent deposit insur
ance, w ithout, at least for the time being,
committing to the support of any of
them.
First, the obvious arguments in sup
port:
1. One-hundred percent deposit insur
ance obviously will provide additional
protection to those depositors whose
deposits are not now fully protected.
Based on past experience, the cost of this
additional insurance coverage to the
FDIC would be small. We have calculated
that the additional cost to the FDIC of
payoffs made throughout the Corpora
tion's history, if none of the loss had
been borne by uninsured depositors and
the same banks had failed, would be
about $13 million. Of course, that is a
small figure in part because large bank
failures have been handled through pur
chase and assumptions. For example, if
USNB had been handled as a payoff rath
er than a purchase and assumption, this
figure would be $88 million. An impor
tant point, as we have noted, is that in
effect, we already have almost 100 per
cent deposit insurance because of our pol
icy of arranging purchase and assumption
transactions wherever possible.
2. With 100 percent deposit insur
ance, depositors would have no need to
withdraw funds from banks with prob
lems, and runs on such banks would not
be likely to cause a failure. Under our
present system, when a bank gets into d if
ficulty or is exposed to adverse publicity,
some uninsured depositors tend to flee,
exacerbating that d ifficulty. One-hundred
percent deposit insurance would lim it
d e p o s it outflows in adverse circum
stances, thus providing more time to
work out a solution for the problem bank

166

FE D E R A L DEPOSIT INSURANCE CORPORATION

or for management to turn the bank
around. If these considerations prevail
over other contradictory considerations,
we would expect to have fewer bank fa il
ures under a system of 100 percent de
posit insurance.
3. One-hundred percent deposit insur
ance would have a beneficial impact on
competition among banks. A t present,
institutions deemed to be more solid or
more conservative have an advantage in
competing for deposits. Perhaps this is as
it should be. However, depositors may
not be able to differentiate accurately
among banks according to risk, and for
some depositors, size becomes a proxy
for soundness. Or depositors may simply
assume that we will not allow a large
bank failure to result in a payoff* **. Onehundred percent deposit insurance would
probably improve the competitive posi
tions of small vs. large banks and of new
vs. established institutions. Over time this
would ordinarily be expected to reduce
the level of concentration in banking and
to lead to more competitive pricing of
banking services.
4. Because, as I have mentioned, we
would not need to fear provoking runs on
troubled banks, fuller public disclosure of
adverse information on a bank's financial
condition could be made. This would lead
to more informed business decisions by
investors and customers of the bank.

* * * Statistical I y, there is some support fo r that
position, as evidenced by the fo llow ing:
During the period 1971 to September 1,
1976, of the banks that closed, 29 were less
than $25 m illio n in deposits. Twelve of
these were paid out, 15 were acquired by a
th ird party in an FDIC-assisted purchase
and assumption transaction, and 2 became
deposit insurance national banks. Seven of
the failed banks were between $25 m illio n
and $100 m illio n , and o f these only one
was paid out. Four were over $100 m illio n
and none o f those were paid out. Logically,
legally, and historically, however, the fact
remains th a t no one can be certain that the
FDIC w ill always be able to avoid paying
o ff even a large bank.

5.
There has been much discussion in
the past about the distortions caused by
State pledging requirements for deposits
of public funds. With 100 percent deposit
insurance, such requirements could be
eliminated w ithout any risk of loss to the
depositors.
The obvious arguments against 100
percent deposit insurance:
1. The principal and traditional argu
ment against 100 percent deposit insur
ance is that uninsured depositors place
limits on the riskiness of bank operations.
While there is some debate about how
effective such influence is, few would
deny that to a degree at least, it exists.
With 100 percent insurance, banks anx
ious to increase their risk by bidding
aggressively for deposits and loans might
be able to do so w ithout any market re
straints. No banker wants to lose money
or fail, but some would be willing to take
on considerable risk if they consider
potential rewards in the form of growth
and earnings to be sufficient.
This weighing of risk and reward
works in most sectors of our economy,
but we normally expect most of the risk
to be assumed by equity investors. Where
leverage is sought, lenders restrain the
extent of overall risk by imposing restric
tions—higher interest rates—and limiting
available funds as risk is increased. In the
banking system, depositors provide most
of the funds, and if 100 percent deposit
insurance were to exist, much or most of
the risk would be borne by the deposit
insurance fund.
Let me emphasize that the argument is
not that most or even many bankers
would behave irresponsibly if we had 100
percent deposit insurance. Rather, it is
that 100 percent deposit insurance would
eliminate market restraints that many be
lieve presently exist which lim it the
amount of deposits available to the overly
risky, overly aggressive, overly optimistic,
or self-serving operation.
2. To protect its position, the FDIC
might need authority to restrict leverage

STATEM ENTS BY CO RPORATION DIRECTORS

or the composition of bank asset port
folios if 100 percent deposit insurance
were to exist. Traditionally, the FDIC has
opposed the regulation of the operational
mix and I think most bankers have op
posed it, fearing that regulatory restric
tions might be more costly than the bene
fits of 100 percent deposit insurance.
3. As long as there are no runs or
liquidity pressures on banks in d ifficulty,
supervisors might be reluctant to close
banks that are insolvent or operating in
an excessively risky fashion.
4. In view of the greater risks which
banks might take and the longer time
before they are closed, the ultimate losses
to the insurance fund might be large. In
fact, our past experience of very limited
losses may not be a true indication of the
potential risks under 100 percent deposit
insurance.
There are, of course, other issues in
volved that I have not even mentioned.

167

These include the premium structure for
deposit insurance. The suggestion has
often been made that deposit insurance
premiums be tied to the riskiness of the
bank, a suggestion that is easier to justify
in principle than to work out in practice.
Others argue that there is an inequity in
that banks pay premiums on all deposits
even though part are not insured. What
should we do about insurance coverage
for deposits of American banks abroad?
Or about the deposits of U.S. branches of
foreign banks? If deposits are insured 100
percent, what are the implications for
capital needs in a bank? Would the new
m ix of risks affect monetary policy
mechanisms? I cannot resolve all these
issues today, but I believe that the bank
ing system would benefit from public dis
cussion of the issues I have raised today,
and as I indicated at the outset, this is
probably a good time to begin such dis
cussion.

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

168

Address by Robert E. Barnett, Six A lter
natives to the Present Deposit Insurance
System*
In a recent speech I discussed the
adequacy and fairness of the current
deposit insurance system, and described
in detail how the FDIC deals with bank
failures and the bases for our decisions in
handling failing banks. After pointing out
the inequity in the present system for
certain uninsured depositors, I went on to
consider briefly the rationale for the one
alternative normally suggested-100 per
cent deposit insurance. Today I intend to
explore more thoroughly the arguments
and implications not only of 100 percent
deposit insurance, but also of other alter
natives to the present system, some of
which may be more desirable than 100
percent insurance.
The basic purpose of deposit insurance
is to protect the banking system against
destructive runs on deposits as well as to
protect the depositors themselves. With
respect to the latter, most depositors have
fared extremely well in the 531 insured
banks which have been closed since the
establishment of the Federal Deposit
Insurance Corporation. About 99.8 per
cent of all depositors, large or small, fu lly
recovered their deposits almost imme
diately. Out of $4 billion in deposits at
fa ile d banks through 1975, approxi
mately $267 m illion was lost or is ex
pected to be lost. Of this amount, unpro
tected depositors have recovered or will
recover all but about $13 m illion, the
Corporation absorbing the remainder.
The high recovery rate for depositors
is attributable mainly to the fact that
over $9 out of every $10 in deposits were
in bank failures which were handled by
purchase and assumption transactions,
transactions in which the FDIC provides
assistance enabling another bank to
assume all of the failed bank s liabilities,
* Presented before the Nebraska Correspondent
Bank Conference, Lincoln, Nebraska, Sep
tember 2 4 ,1 9 7 6 .

e ffe c t, p ro v id in g

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a lik e .

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th e ir

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g e n e ra lly

in v e s tm e n ts

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p e rc e n t in s u ra n c e
in s u re d d e p o s ito rs

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lo s e

m o st

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a p a y o ff

of
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a s s u m p tio n .

The present law, however, restricts our
ability to arrange a purchase and assump
tion in all cases. It requires that we ar
range an assumption only when the cost
of doing so is less to the FDIC than a
payoff. In addition, of course, the FDIC
has to be able to find a buyer and in some
cases, particularly in unit banking States,
that has proved impossible. In Nebraska,
for example, of the eight failures since
the FDIC was created all have been pay
offs, with the attendant disruptions, rath
er than assumptions.
Nevertheless, since October of 1974,
when the FDIC made this policy explicit,
only 4 of 28 bank failures have been
handled by payoff rather than purchase
and assumption.
By resorting to purchase and assump
tions whenever possible, we have pro
vided de facto 100 percent insurance for
all depositors in most banks in recent
years. What we have not provided is
equity, fairness, and logic in determining
which are to be the few depositors who
do not have 100 percent insurance. Those
instances where depositors have experi
enced losses in payoffs have reflected
special circumstances from the FDICs
s ta n d p o in t-n o t necessarily from the
depositors'. That is, there were some
cases where it was not possible or appro
priate to arrange for a purchase and
assumption because of the location of the
bank, or because of the State's branch
and holding company laws, or because
the FDIC could not get a good fix on
liabilities because of pending lawsuits or
s u s p e c te d fraud. Uncertainty and poten
tial cost considerations may have af
forded logical reasons for a payoff in such
cases as far as the FDIC was concerned.
However, uninsured depositors were not
necessarily at fault. They were unlucky. I

STATEM ENTS BY CO RPO RATIO N DIRECTORS

recognize that these were large depositors
who presumably are sophisticated and
knowledgeable enough to scrutinize the
condition of the bank before making
their deposit, but that probably did not
help. The sophisticated depositor is more
likely to be able to detect poor manage
ment which w ill probably lead to a pur
chase and assumption than fraud which is
more likely to lead to a payoff.
If we have almost 100 percent deposit
insurance and the present system appears
to work in an almost random way in its
treatment of depositors—similar depos
itors getting treated differently in differ
ent cases—why not protect those inno
cent uninsured depositors by going to
100 percent deposit insurance? Let's
explore the possibility.
First, the five most obvious arguments
in support of such a change:
1. One-hundred percent deposit insur
ance would provide protection to those
depositors whose deposits are not now
fu lly protected. This can be done with
only minimal additional cost to the
FDIC, if past experience is any guide. The
additional cost to the FDIC of payoffs
made throughout the Corporation's his
tory, if none of the loss had been borne
by uninsured depositors and the same
banks had failed, would be about $13
million. Let me insert a caveat at this
point, however. If one or more of the
recent large bank failures had been pay
offs, the amount of loss to uninsured
depositors would be much larger and
therefore, the cost of moving to full in
surance much more costly to the FDIC. If
just one bank failure, U.S. National Bank
in San Diego, California, had been re
solved with a payoff rather than a pur
chase and assumption, the cost to unin
sured depositors would have increased
from $13 m illion to $88 million.
2. With 100 percent deposit insurance,
depositors would have no need to w ith
draw funds from banks with problems,
and runs on such banks would n o t be
likely to cause a failure. Under our pres

169

ent system, when a bank gets into d iffi
culty or is exposed to adverse publicity,
some uninsured depositors tend to flee,
exacerbating that d ifficulty. We must
remember, when comparing banks with
other corporations, that much of bank
liabilities are payable on demand and free
to leave in response to adverse publicity.
One-hundred percent deposit insurance
should lim it deposit outflows in adverse
circumstances, thus providing more time
to work out a solution for the problem
bank or for management to turn the bank
around. Of course, not all deposit out
flows would be forestalled since depos
itors typically want to do business with
banks that can provide loans and other
services, and the troubled bank is apt to
be less able to serve its customers.
We expect that these factors would
lead to a reduction in the number of bank
failures, but that is by no means assured.
What is more certain is that there would
be fewer payouts. The purchase and
assumption procedure could be used in
almost every failure if deposits are in
sured in full.
3.
One-hundred percent deposit insur
ance would have a beneficial impact on
competition among banks. A t present,
institutions deemed to be more solid or
more conservative have an advantage in
competing for deposits. This is as it
should be. However, depositors may not
be able to differentiate accurately among
banks according to risk, and for some
depositors, size becomes a proxy for
soundness. Or depositors may simply
assume that we will not allow a large
bank failure to result in a payoff. Statis
tically, there is some support for that
position, as evidenced by the following:
During the period 1971 to the present, of
the banks that closed, 30 had less than
$21 m illion in deposits. Twelve of these
were paid out, 16 were acquired by a
third party in an FDIC-assisted purchase
and assumption transaction, and 2 be
came deposit insurance national banks.
Only one of the seven failed banks be

170

FE D E R A L DEPOSIT INSURANCE CORPO RATIO N

tween $21 m illion and $100 m illion was
paid out, and none of the five with more
than $100 m illion in deposits was paid
out.
The present system, then, gives a de
cided competitive edge to very large
banks. One-hundred percent deposit in
surance would probably improve the
competitive positions of small vs. large
banks and of new vs. established institu
tions. Over time this would ordinarily be
expected to reduce the levels of concen
tration in banking and to lead to more
competitive markets for banking services.
4. Because, as / have m e n tio n e d w e
would not need to fear provoking runs on
troubled banks, fuller public disclosure o f
adverse inform ation on a bank's financial
condition could be made. This would lead
to more informed business decisions by
investors and customers of the bank, and
some of the controversy about proper
bank disclosure could be eliminated. The
FDIC has been concerned that in recent
years the capital markets have become
less open to banks, particularly to smaller
banks. Fuller disclosure would make it
easier for well-run banks to open these
markets, and to open them at reasonable
rates. Large customers could become
more confident that their business was
safe in smaller banks if they had more
disclosure of the condition of the bank.
5. I f we had 100percent deposit insur
ance, pledging requirements fo r State and
local governments could presumably be
eliminated. State and local governments
already have preferred treatment with
respect to their deposits in banks. They
now have insu ra n ce coverage o f
$100,000, and the remainder, in most
States, is protected by pledging require
ments. Those bankers and others who
view pledging requirements as an impedi
ment to the efficient utilization of bank
assets, and a reduction in bank liquidity,
would count its elimination as an advan
tage of 100 percent insurance coverage.
Those treasurers of public bodies and
others concerned with the market for

State and local government securities
probably would view the elimination of
pledging requirements as an undesirable
aspect of 100 percent deposit insurance.
There are other techniques for providing
a continuing market for municipal secur
ities, however, that probably would be
effective even if pledging requirements
were eliminated. Municipalities may be
able to improve their markets, for ex
ample, by providing fuller disclosure or
by moving to taxable, subsidized borrow
ings.
Let me turn to the obvious arguments
against 100 percent deposit insurance:
1.
Uninsured depositors place limits on
the riskiness o f bank operations. While
there is some debate about how effective
such influence is and no hard evidence is
available, few would deny that, to a de
gree at least, this influence exists. With
100 percent insurance, banks anxious to
increase their risk by bidding aggressively
for deposits and loans might be able to do
so w ithout any market restraints.
No banker wants to lose money or fail,
but some would be willing to take on
considerable risk if they considered
potential rewards in the form of growth
and earnings to be sufficient. This weigh
ing of risk and reward works in most sec
tors of our economy where most of the
risk is assumed by equity investors. Where
leverage is sought, lenders restrain the
extent of overall risk by imposing restric
tions, e.g., higher interest rates, and lim it
ing available funds as risk is increased.
In the banking system, however, de
positors provide most of the funds. With
100 percent deposit insurance, there
would be little reason for large depositors
to im pose such market constraints.
Aggressive high-risk-oriented banks, there
fore, would be able to bid successfully for
sizable additional time deposits at moder
ately elevated interest rates, which under
current conditions might have been avail
able to them only at prohibitive rates or
not at all. Under 100 percent insurance,
then, all of this additional exposure to

STATEM ENTS BY CO RPO RATIO N DIRECTORS

loss would be borne by the deposit insur
ance fund.
Let me emphasize that the argument is
not that most or even many bankers
would behave irresponsibly if we had 100
percent deposit insurance. Rather, it is
that 100 percent deposit insurance would
significantly reduce the market restraints
that many believe presently lim it the
amount of deposits available to the overly
risky, overly aggressive, overly optimistic,
and self-serving operation. Of course,
there would still be some competitive
forces working in the direction of sound
bank operations. Many depositors, partic
ularly large business firms, are attracted
to a bank by its ability to provide services
efficiently and to grant credit when
needed. A bank whose continued exist
ence is in question is hindered in this
competition for customers.
2.
Since under 100 percent deposit
insurance the exposure o f the FDIC fund
may increase, the Corporation may need
authority to restrict leverage or the com
position o f bank asset p ortfolios in order
to offset the greater risk exposure and
costs. Some possible restrictions would be
limitations on capital ratios, limitations
on asset combinations, or some form of
both. Traditionally, the FDIC has not
sought additional powers over bank lever
age or asset composition. In fact, we have
tended to favor broader lending and in
vestment powers for banks. Likewise,
most bankers have opposed the mix of
increased insurance and increased regula
tion, fearing that regulatory restrictions
might be more costly than the benefits of
100 percent deposit insurance.
Over the last year or so, several large
banks have gone to market to raise very
sizable amounts of capital. Obviously, we
are pleased to see that, because increased
bank capital becomes part of the cushion
for the deposit insurance fund. To some
extent, these capital issues may have re
sulted from informal pressure from the
supervisory agencies, but I would not
want to exaggerate our influence in these

171

decisions. The major factor probably was
the bank's concern that capital ratios play
a role in the competitive battle for large
deposits. In a world of 100 percent de
posit insurance, however, bankers may be
able to attract fu lly insured large deposits
with very low capital ratios. Since bank
ers w ill not have the same incentive to
maintain this cushion of capital protec
tion for the deposit insurance fund, we
may need authority to impose minimum
capital requirements (or minimum liquid
ity requirements, or more control over
types of investments).
3.
As long as there are no runs or
liq u id ity pressures on banks in d iffic u lty ,
supervisors might be reluctant to close
banks that are insolvent or operating in
an excessively risky fashion. This raises a
very important issue concerning bank fail
ures and insurance. Do we want a situa
tion in which a bank cannot fail? That is,
do we want to keep inefficient, marginal
banks open indefinitely? I do not think
so, and 100 percent deposit insurance
does not necessarily lead to that result.
But there is a legitimate concern that
supervisors may be reluctant to close a
bank that could otherwise continue to
operate indefinitely. Suppose a State
supervisor concludes that a bank, on the
basis of examiner classifications and mar
ket depreciation of securities, is insolvent.
Under present conditions, such a bank is
closed on an asset valuation basis, or
tends to lose deposits, finds it d iffic u lt to
borrow Federal funds, and is closed on a
liquidity basis in a relatively short time.
W ith 100 percent deposit insurance,
depositors w ill not shy away from such a
bank and liquidity pressures w ill be ab
sent. In such a case, human nature might
well lead the supervisor to delay taking
action to close the bank. He may not
intend to delay indefinitely, but it might
appear desirable to delay until after the
next election or until the supervisor's
term is up. The temptation to leave such
problems to one's successor is great, and
is not unreasonable. A fter all, perhaps the

172

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

examiner's loan classifications were too
harsh, or perhaps the market will turn
around and eliminate the depreciation in
the bond portfolio, or maybe something
else w ill come up to improve the bank's
condition. Whatever the reason, if super
visors react in this way, the risk of failure
for inefficient, incompetent, or crooked
owners and managers will be substantially
decreased.
4.
In view o f the greater risks which
banks m ight take and the longer time be
fore they are dosed, the ultimate losses
to the insurance fund might be large. In
fact, our past experience of very limited
losses may not be a true indication of the
potential risks under 100 percent deposit
insurance. I mentioned earlier that if our
past bank failures had involved 100 per
cent deposit insurance the additional cost
to the FDIC would only have been about
$13 m illion. But that was in a world in
w h ich in s o lv e n t banks were closed
promptly and in which the prudence of
uninsured depositors made it d ifficu lt for
crooked or incompetent bankers to ob
tain deposits. If large depositors, with no
fear of loss, could put large amounts of
fu lly insured funds in the hands of swin
dlers, incompetents, or swingers, our
losses could be much larger than past
experience suggests.
Where do these pros and cons lead us
with respect to a position on 100 percent
deposit insurance? Allow me to duck that
question for the present and suggest other
alternatives than 100 percent deposit
insurance for dealing with the inequities
of the present system.
I see at least four or five alternatives:
1.
It is clear that we can achieve all
the benefits of 100 percent deposit insur
ance by adopting a policy of always ar
ranging for purchase and assumption
transactions in the case o f bank failure.
We can do so nearly all the time now, but
there are some situations in which exist
ing statutes do not allow us to use the
assumption technique. There are some
cases where the amount of uninsured lia

bilities is so great, or the value of the
bank's business is so low, that no poten
tial assuming bank is willing to offer a
premium sufficient to meet the statutory
test that an assumption transaction can
be assisted by the FDIC only if the cost
to the FDIC will be less than in a payout.
In cases of suspected fraud, we must be
concerned that there are liabilities that do
not appear on the bank's books, which
we obviously do not want to underwrite.
In other cases an assumption may appear
undesirable because the potential acquir
ing bank already has too large a share of
the market, and an increase in that share
would have anticompetitive effects on
bank structure.
In some of these cases, we can avoid a
payout (and avoid the disruption to the
local community from a bank closing) by
using a provision of our law which allows
us to provide assistance directly to a fail
ing bank to keep it operating. This pro
vision allows us to provide such assist
ance, however, only when the continued
existence of the failing bank is "essential"
to its community. Obviously, there are
very few cases in which that finding can
be made—in fact, we have successfully
used that section only four times in the
history of the FDIC.
To accomplish all the effects of 100
percent deposit insurance by a purchase
and assumption in each failed bank case,
we need a change in the law such that the
FDIC would be required to arrange an
assumption in all cases or, if an assump
tion proves impossible, to provide direct
assistance to keep the bank in operation.
Actually, I believe we could accomplish
about the same result w ith only very
minor statutory changes which would
give the FDIC Board of Directors greater
discretion in arranging assumptions or in
providing direct assistance to open banks.
Some would object to putting greater
discretionary authority in the hands of
the FDIC Board on these matters w ithout
also having clearer Congressional direc
tion as to the policy to be followed.

STATEM ENTS BY CO RPORATION DIRECTORS

2. One of the simpler proposals, and
perhaps the most promising, is to provide
100 percent insurance o f demand de
posits and lim it insurance on time de
posits, i f any insurance is provided for
such deposits at all, to something less
than $100,000. Large CDs for which
Regulation Q ceilings are not applicable
would carry only limited insurance or,
perhaps, none at all. Such "deposits," in
most cases, are really money market in
struments and logically could be distin
guished from deposits. The SEC, for
example, has long argued that they are
securities. Keeping these funds at risk
would retain some market discipline for
banks, since it would place limits on the
ability of the bank operating at high risk
to bid successfully for funds on a regional
and national basis.
One appeal of this proposal is that it
would not represent a substantial depar
ture from present de facto arrangements.
Unless a bank fails very suddenly (per
haps as a result of some kind of fraud or
theft), demand depositors generally can
get out quickly by closing accounts, re
ducing balances to the level of their out
standing loan, or borrowing an amount
equivalent to their demand balance.
Under present arrangements, perhaps un
fortunately, demand depositors frequent
ly protect themselves by getting out,
further exacerbating the bank's problem.
If demand balances were 100 percent
insured, protection for these depositors
would not require the outflow of de
posits. CDs would run off in periods of
adverse publicity, but this would be a
function of the m aturity structure of the
bank's CDs, rather than a sudden col
lapse. The troubled bank would generally
have more time to work out its problem
and the overall deposit outflow would be
less.
3. A third approach toward expanding
deposit insurance, one already suggested,
would be to combine 100percent deposit
insurance with minimum capital ratios,
limitations on asset composition, or some

173

combination o f the two. A t the present
time, the supervisory agencies' attitude
toward capital adequacy is not subject to
explicit rules. Many variables are con
sidered in determining whether a bank's
capital is adequate, including such factors
as subjective as the quality of the bank's
management. We may urge some banks to
increase their capital (or their liquidity),
but some may not do so, either because
they are not able to or because they do
not agree with our assessment. Actually,
the supervisory agencies tend to be most
successful in this area when the bank
needs agency approval in connection with
some application (say for a branch or
holding company acquisition). Also, some
bankers are more easily intimidated by
the examiner or by the agency than
others. Rules and standards are thus not
always evenly implemented or adhered
to. As a result, supervisory standards do
not always seem uniform —within as well
as between agencies.
In view of this situation, perhaps it
would be desirable if all insured banks
were required to adhere to an explicit
minimum capital-to-deposit or capital-toloan ratio. Such a requirement would not
necessarily have to be related to deposit
insurance. However, the imposition of
such a standard could mesh well with a
move toward 100 percent deposit insur
ance and would probably be necessary if
there is 100 percent insurance. Banks
would be prevented from using the ex
panded insurance to expand their leverage
drastically.
4. A modest variation on this alter
native would be to allow banks to get
expanded or 100 percent insurance i f
they meet some minimum capital ratio or
other standard. However, it would be
crucial under such a fluctuating system
that there be no doubt or misconception
in the depositor's mind as to whether his
deposit was fu lly insured.
5. Another proposal would combine
expanded or 100 percent deposit insur
ance with a system o f variable rate insur

174

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

ance premiums. The idea of a variable
rate insurance premium has been dis
cussed periodically, particularly by aca
demic economists, and not necessarily in
conjunction with expanded deposit insur
ance. While there is no necessary link be
tween the two concepts—the proposal for
a variable rate premium can be analyzed
on its own—the variable rate premium
could conceivably provide a substitute for
the market discipline that is lost under
100 percent deposit insurance.
The advantage of a variable rate insur
ance premium in this setting is that pre
miums are geared to risk. The conserva
tively run bank whose operations pose
little risk to the insurance fund is re
warded with a low premium rate and vice
versa, just as now the capital require
ments serve as a rough approach to the
same end.
It is extremely d ifficu lt to put risk of
failure on anything like an actuarial basis.
We have not had that many failures dur
ing the past four decades, and despite the
substantial efforts in recent years to zero
in on those variables providing early
warning about failures, few, if any, would
attempt to construct and defend a ra
tional premium system based on research
that has been completed so far. Similarly,
while we try very hard to standardize our
criticism of assets, there is sufficient vari
ation between reviews to make it unfair
to base any finely tuned system on an
asset-classification foundation.
I would not necessarily rule out the
idea of variable rate insurance premiums
because a rational, actuarially sound sys
tem cannot be constructed. It might be
feasible to establish a simple, seemingly
arbitrary system that has the effect of
putting banks into, say, three, four, or
five risk categories. These might be based
on a few simple ratios relating such vari
ables as capital ratios, asset mix, income
ratios, etc., w ithout attempting to defend
the premiums in actuarial terms. Rather,
they would be related to things the super
visors consider relevant and their level

would be set so as to bring about some
desired result in terms of bank portfolios.
Insofar as a bank placed into a high-risk
class was unhappy about that, it could
adjust its policies to change its risk cate
gory. In that sense, there could be an
element of choice in such a system.
If premiums were set sufficiently high
for banks in the highest risk category, the
system might have a self-regulating qual
ity such that the discipline of the un
insured depositor might not be necessary,
and such a system of insurance premiums
could mesh with 100 percent deposit
insurance.
I recognize that the premiums set
under such a system, and the levels of
particular financial ratios, would be essen
tially arbitrary. But that is not so far
removed from our present system. The
level of premiums at the present time
appears adequate for the present risks of
the banking system, but we cannot be
sure that it is precisely correct or even
anywhere near some hypothetical "cor
rect" level. Also, under the present super
visory system, while we attempt to coax
many banks to raise capital, the results
are certainly not uniform, and the figures
we aim at are essentially arbitrary—except
that we know "more is better."
How steep would the variable rate
structure have to go to discourage excess
risk-taking while still keeping overall pre
mium income in about the same relation
ship to deposits as exists today? How do
you appraise the capital position and
asset mix of a bank where half its re
sources are in foreign branches? Should
we base premiums on subsidiary banks or
should they be applicable for an entire
holding company system? All these are
questions that would have to be answered
before variable premium rate insurance
could be adopted.
Let me conclude not with a selection
or advocacy of a particular position but
w ith some few additional comments
about the present system. I have heard
complaints from small banks that the

STATEM ENTS BY CO RPORATION DIRECTORS

present structure of deposit insurance and
assessment is unfair to small banks. I have
heard the same claim made by large
banks. Perhaps we can simply assume that
if both small and large banks think the
present system is unfair to them, then it
must be pretty good. But I think the issue
is more complicated than that.
Small banks argue that we provide 100
percent insurance for large banks but not
small banks in that we have never had a
payout of a large bank with losses to un
insured depositors, whereas we have had
such treatment of small bank failures.
The small banks argue that this inhibits
their ability to compete for large de
posits. A large depositor may decide to
put his uninsured deposit in a large bank,
not necessarily because it is better run or
a sounder institution, but because of his
belief that in case of d ifficu lty the FDIC
will not allow a payoff in a large bank
situation. As I mentioned earlier, sta
tistics do support this argument. The
FDIC has paid o ff only one failed bank
with deposits over $41 m illion, that one a
$67-million Texas bank, even though 15
banks of over $41 m illion have either
failed or required FDIC assistance to stay
open.
Large banks sometimes complain
about the fact that deposit insurance pre
miums are based on the total domestic
deposits of the bank, not just on insured
deposits. Thus a bank with a large per
centage of its domestic deposits above
$40,000 pays a premium that is higher in
proportion to those insured deposits than
a small bank with fewer uninsured de
posits. Originally, this was done inten
tionally to provide for a subsidization of
the insurance fund by a large bank fo r the
benefit of small banks. Since we now
have a world in which large banks can and
do fail, it does not appear that large bank
premiums are subsidizing the cost of

175

small bank failures. Furthermore, large
banks have many correspondent accounts
and clearly benefit from a strong banking
system. Small banks also argue that the
assessment system is equitable since, in
practice, large banks have had 100 per
cent deposit insurance and hence it is
only reasonable that they pay insurance
premiums on 100 percent of their de
posits.
There is another complicating issue
involved here, however. Deposit insurance
premiums are based on total domestic
deposits. Large banks now obtain a signi
ficant percentage of their deposits from
branches abroad. These deposits are not
subject to insurance assessments, nor are
they insured under the law. In practice,
however, since we have always had as
sumption transactions for large banks,
these foreign deposits as well as all other
unsubordinated liabilities of the bank
have been protected in full. This appears
to be an inequitable arrangement, though
it is not clear in what direction we should
move to resolve it. Perhaps deposits of
American branches abroad should receive
the same deposit insurance protection as
their domestic offices. And perhaps these
deposits, insured or not, should be sub
ject to insurance premiums. These are just
a few of the considerations I will leave for
others to discuss.
While I have suggested six proposals
fo r dealing with expanded insurance
coverage, each has several possible varia
tions. As a result, there are lots of possibilites—some relatively simple and easy to
implement such as 100 percent insurance
on demand deposits. On the other hand,
proposals related to variable rate pre
miums are much more complicated.
I am not sure where I come out at this
moment. I believe, however, that the
banking system would benefit from pub
lic discussion of these issues.

176

F E D E R A L DEPOSIT INSURANCE CORPORATION

Address by Robert E. Barnett, Consumer
Issues*
I would like to discuss today a con
glomeration of ideas relating to laws and
attitudes concerning banks and their cus
tomers. Just as the consumer movement
relating to banking has grown like Topsy,
so has this speech. It has no logical se
quence, reaches no major conclusions,
and makes no dramatic philosophical
statement. Still, in it I hope to address
myself to issues which cause as much
bitterness and frustration among bankers
as any issues now outstanding, to laws
whose enforcement is very costly and
whose benefits remain unknown, and to
questions the answers to which have had
or w ill have dramatic impact on the
three-way relationship of the regulator,
the banker, and the public.
I
Congress has addressed itself to the
relationship between the bank and its
customer in several areas. In recent years,
this has been most obviously and notably
in truth-in-lending, fair credit reporting,
real estate settlement procedures, fair
credit billing, fair housing lending, equal
credit opportunity, and home mortgage
disclosure.
If nothing else can be said about these
laws, it can at least be stated that their
enforcement has been controversial.
As we at the FDIC discuss issues with
bankers around the country, it is clear
that this panoply of consumer laws has
caused more irritation and frustration
than almost anything else they care to
discuss with their regulators. Similarly, as
I visit with FDIC bank examiners as I
attend our regional meetings around the
country, similar frustration is voiced.
Congress likewise is unhappy with the
enforcement of some of these laws. And
the presumed benefits to the consumer
* P re s e n te d b e f o r e t h e 7 4 t h A n n u a l C o n v e n t io n
o f T h e S a v in g s B a n k s A s s o c ia tio n o f C o n n e c t
ic u t ,

D o ra d o

Beach,

25, 1976.

P u e r to

R ic o ,

O c to b e r

have yet to be measured.
The complaint raised by both the regu
lated and the regulator in some respects is
quite similar—there are too many new
laws and regulations and they are too
complicated; we can't keep up with them.
We want to obey (or enforce) the letter as
well as the spirit of the law, but we can't
be sure we know what it is.
Many bankers go on to say (particu
larly those 12,800 bankers who run
mutual and commercial banks $50 m il
lion or smaller in size) that they are di
verted from their main banking respon
sibilities by this mass of confusing laws
and regulations, and that customers of
their banks are being charged higher
prices on bank services and products
because of the added expense of com
plying with laws the substance of which
they had never violated anyway.
The typical FDIC bank examiner says
that enforcement of consumer laws con
flicts directly with his primary charge to
see that banks operate safely and remain
solvent. As he is required to adopt more
and more of an adversary position with
the banker in the consumer area, espe
cially in light of the examiner's belief that
95 percent of the banks try hard to be
law-abiding and fair, and to provide a
service to their community, the coopera
tion he will receive from the banker in
conducting traditional safety and sound
ness examinations of the bank will dim in
ish, costs w ill escalate, and the accuracy
of the examination will suffer.
Examiners could add that their train
ing has been to deal confidentially with
banks and supervise them in such a way
that they w ill remain solvent, their prob
lems w ill remain private, the confidence
of the public in the banking system w ill
endure, and the public w ill benefit as a
result. They are very thorough by training
and find it hard to take shortcuts in
analyzing a problem. When faced with the
tremendous number of consumer trans
actions that take place during the course
of a year between any bank and its cus

STATEM ENTS BY CO RPO RATIO N DIRECTORS

tomers, if the proper supervisory posture
to be adopted is one of retroactive rem
edy rather than prospective compliance,
examiners w ill argue that it w ill be essen
tial to review all consumer transactions so
that everyone is treated fairly, a proce
dure which w ill be overwhelmingly costly
and time-consuming.
The Senate and House Banking Com
mittees are dissatisfied with the enforce
ment of these consumer laws by the
FDIC and the other banking agencies. As
a quotation from a recent Committee
Report states: 'T h e Committee found an
unsatisfactory level of enforcement activi
ties by all three agencies."
There is a yearning for simplicity
found in the reports of these committees
quite similar to the yearning for simplic
ity in the irritation expressed by the
banks and the frustration expressed by
the bank examiners. The Senate Com
mittee, for example, criticizes the Federal
Reserve Board for creating regulations
"th a t are lengthy, complex, and tech
nical . . . . with the result that both com
pliance and enforcement are made more
d iffic u lt." That same committee also
renewed its recommendation that the
FDIC, the Comptroller of the Currency,
and the Federal Reserve Board institute
fair housing lending regulations, including
a requirement for racial recordkeeping.
Actually, last August the FDIC and the
Comptroller of the Currency began test
ing fair housing lending forms and an
nounced at that time that those forms
were a necessary prologue to the creation
of corrective regulation in the field. The
chairman of the Senate committee has
objected informally to the FDIC that
those data collection forms are too com
plex and lengthy and w ill frustrate the
purposes of the Fair Housing Lending
Act. While we disagree and feel the data
requested are essential if we are to en
force the act effectively, we also share
this desire for simplicity and believe that
our data collection in this area probably
can be met by most banks w ithout the

177

use of additional forms beyond what
they're already using.
While I certainly agree that a simple
law, a simple regulation, or a simple form
is easier to follow or to complete, the fact
remains that to enforce adequately the
laws adopted by Congress one needs more
than a simple regulation or a simple form.
It is the statute, the purpose of the stat
ute, and the complexities of the society
in which we live, which lead to the regula
tions or the forms which create the d iffi
culties in compliance and enforcement.
Nevertheless, the yearning for simplicity
combined with effective compliance and
enforcement exists in the Congressional
Committees.
Beyond that, however, there seems to
be an im plicit belief that the bank regula
tory agencies should become consumer
advocates vis-a-vis the banks those agen
cies regulate. This may well be the crux
of the difficulties that I see in continuing
to expect the bank regulatory agencies to
adequately enforce the consumer laws.
While this is what we hear from bank
ers, bank examiners, and Congress, I
cannot summarize what consumers have
told us since we have no organized way of
meeting w ith consumers. Our Office of
Bank Customer Affairs, the unit created
in the FDIC in response to recent legisla
tion, has only been staffed for a few
months and so far has not generated
systematic input from consumers relating
to their judgment of the benefits they
have received from these many pieces of
legislation or to the cost, both direct and
indirect, they have paid. While proposed
regulations are published for comment,
we almost never receive a comment from
an individual consumer. On the basis of
inquiries received, it appears that con
sumers are more concerned about insur
ance coverage and interest rates than
about recently enacted consumer protec
tion laws. I expect that over time we will
develop improved means of learning of
consumer concerns and interests.

178

F E D E R A L DEPOSIT INSURANCE CORPORATION

II
It is important that you be aware of
the framework w ithin which the FDIC
operates. The FDIC is a creature of Con
gress. When Congress passes laws which
we are supposed to enforce, we'll enforce
them, even if we might have disagreed
with the creation of the law. If the appro
priate Congressional Committee disagrees
with the way we are enforcing laws, we
must and w ill consider their comments.
While we think our enforcement activi
ties have generally been in accord with
our statutory responsibilities, two recent
reports by Congressional Committees
have been critical of the consumer protec
tion enforcement activities of the bank
regulatory agencies. One was issued by
the Subcommittee on Consumer Affairs
of the Senate Committee on Banking,
Housing and Urban Affairs, and the other
was a staff report of the Subcommittee
on Consumer Affairs of the House Com
mittee on Banking, Currency and Hous
ing.
The House subcommittee staff report
included a survey of approximately 20
percent of the consumers who sent w rit
ten complaints to the agencies in 1976.
We received some good reviews and some
bad reviews. The good news is that "the
Federal Deposit Insurance Corporation
had the highest percentage of consumers
who considered the agency's overall com
plaint handling process to be excellent."
The bad news is that only 32 percent of
the consumers surveyed called our han
dling "excellent," and only 27 percent
indicated that they were satisfied with
our resolution of their problem. While the
subcommittee staff considers this to be
rather poor performance, I am not so
sure. Remember, consumers complain to
us only after they have tried w ithout
success to get their bank to resolve the
matter w ithout our intervention. If we
were able to effect a solution satisfactory
to 27 percent of these unhappy bank
customers that does not seem bad to me.
In effect, the staff report seems to imply

that in any dispute between a consumer
and a bank, the customer is always right.
I don't agree with this, though neither do
I agree with the attitude of some bankers
that "we never make a mistake, and
hence, if there is a disagreement, the cus
tomer must be wrong."
The committee reports make a number
of recommendations, most of which are
already in effect or which make a good
deal of sense i f we accept the view that
the FDIC should play a greater role as a
consumer advocate with respect to bank
ing problems. The fact remains that there
is a strong body of opinion in the Con
gress that has put a number of consumer
laws on the books and would like to see
the bank regulatory agencies become
more of a consumer advocate than they
have been.
I believe it is informative fo r our agen
cies as well as the banking industry to list
some of the major recommendations
made by these Congressional Com
mittees:
1. The FDIC should promulgate regu
lations on fair housing lending, requir
ing notations of the race and sex of
applicants.
2. We should consider whether com
pliance examinations should be con
ducted separately from regular exami
nations and by separately trained
investigators.
3. The FDIC should insist upon af
firmative remedies for violations of
consumer laws, retroactive as well as
prospective.
4. The FDIC should not hesitate to
publicize violations of consumer laws.
5. The FDIC should create an "o u t
reach" capability so that consumers
will be able to file more easily their
complaints w ith the FDIC; this would
require not only an expansion of the
Office of Bank Customer Affairs into
the regions but apparently beyond the
regional office.
6. The FDIC should educate con
sumers on their rights vis-a-vis the

STATEM ENTS BY CO RPORATION DIRECTORS

banks, by the use of leaflets, posters,
toll-free telephone numbers, and shop
ping guides.
7. The FDIC should expand the Of
fice of Bank Customer Affairs so that
it will review and resolve all com
plaints received from consumers w ith
in its own unit rather than making use
of bank examiners already existing in
the Division of Bank Supervision.
8. The FDIC should create and dis
tribute a consumer complaint form.
Ill
Whatever else may be the case, it is
clear that the examination system already
in existence gives the banking agencies a
much greater ability to enforce consumer
legislation in banks than any other exist
ing agencies. The banking agencies period
ically examine each and every bank in the
United States. No other existing agency
that might take over this enforcement
responsibility periodically and systemat
ically examines the entities it regulates.
For example, the Federal Trade Com
mission has the responsibility of enforc
ing truth-in-lending laws with respect to
furniture stores, appliance dealers, etc.,
but the commission obviously can en
force such laws only as a result of a
complaint. They are not on the premises
examining the records of furniture stores
or appliance dealers on an annual basis.
The banking agencies, on the other hand,
are in the bank every year looking in
detail at the loan transactions of the
bank. Thus, in the normal course of bank
examination, we find some violations of
law that would never be found by the
Federal Trade Commission if it were the
enforcing agency.
To some extent we have been given
these responsibilities because we already
have an enforcement mechanism in place.
But the mere fact that there is an exami
nation force in operation does not mean
that using that force to enforce consumer
laws is free. All of our examiners are al
ready at work full-time. Using an exami
nation approach to enforcing consumer

179

laws requires the creation, in effect, of an
additional examination force. We cur
rently estimate that about 10 percent of
our supervisory effort is taken up with
reviewing compliance with laws and other
matters not related to safety and sound
ness. This amounts to approximately $5
million annually. Said another way, we
have added approximately 230 employees
to our work force to enforce consumer
laws. This is tending to increase as the
number of our responsibilities increases
and as we seek to do a better job in this
area. We need to add, for example, a sub
stantial additional training program, since
the regulations are extremely complex,
and as I mentioned earlier, I hear com
plaints from our examiners that they do
not understand all the rules and are hard
put to find the time to keep up with
changes and additions.
Since the area is not a static one, it is
d ifficu lt to predict just what the cost will
be ultimately in enforcing these laws
through the examination process. Vigor
ous enforcement along the lines the
committees have recommended would
cost substantially more than the current
$5 m illion—at least double that amount.
It is not up to us to determine whether
the benefits justify these costs: that is a
matter on which reasonable men may
differ. I believe that Congress should and
will consider these costs if we present
them in an understandable way. We hope
to be able to do that during the next
session of Congress. Of course, we have
no way of estimating the cost to the con
sumer because of the additional costs
added to the banking system itself but,
obviously, the total additional cost to the
banking system dwarfs the costs to the
FDIC.
An additional factor supporting this
role for the banking agencies is the fact
that in the past both the banking com
munity and the banking agencies have
supported the idea that any kind of legis
lation affecting banks should be enforced
by the banking agencies rather than other

180

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

governmental agencies. That has been the
policy that has led to the enforcement of
the financial disclosure laws by the bank
ing agencies rather than the SEC and the
definition of deceptive banking practices
by the Federal Reserve Board rather than
the Federal Trade Commission. That view
on the part of the banking community in
the past was based partly on the view that
the banking agencies are more knowl
edgeable about the real day-to-day prob
lems and operations of banks than other
agencies would be. That is still valid to
day. It may also have been based on the
view that the banking agencies would not
enforce the laws as vigorously as other
government agencies. I doubt that this
was valid in the past, and I certainly do
not believe that it is today. It may be
time to rethink the general policy that
enforcement of a wide variety of laws be
enforced, with respect to banks, by the
banking supervisory agencies.
IV
In considering whether the FDIC
should take a stronger role as a consumer
advocate, that is, go beyond what we al
ready are doing, I am troubled by one
important consideration: Will our taking
a stronger adversary position vis-a-vis the
bank with respect to consumer matters
adversely affect the performance of our
major activity, examination of the safety
and soundness of banks? It has frequently
been said before that the examination
process is a cooperative one between the
examiner and the bank rather than an
adversary proceeding. If the banks begin
to perceive the examiner as an enemy,
will that destroy some of the free ex
change of information and general co
operation that facilitates an examination?
I do not know whether that would be the
case, but it is obviously a matter of great
concern. I have raised this question in a
number of recent meetings with our
examiners and supervisors. A very large
majority felt that increased enforcement
a c tiv ity on consumer matters would
adversely affect their ability to do a good

job on safety and soundness examina
tions. They may be wrong, of course, but
their perception of the situation w ill alter
the way the job gets done.
It is possible that this effect differs
with respect to the condition of the bank.
It may be that with respect to a bank
whose condition is poor and which is sub
ject to substantial criticism from the ex
aminer, the relationship is already an
adversary one and would not be affected
by what we would do in the consumer
area. On the other hand, most of our ex
amination time is spent in the overwhelm
ing majority of banks that are in good
condition. If in that majority of cases the
ability of the examiner to do his job is
going to be impeded and examination is
going to take significantly longer, then
that would be a severe loss to our exami
nation program as well as a substantial
increase in cost.
I am concerned about this because I
think that our performance in what up to
now has been our major responsibility,
the supervision of safety and soundness
of banks, has been very good. I am reluc
tant to see changes in that that may upset
the quality of that performance in the
absence of a clear-cut understanding of
what we are doing. I recognize, however,
that in some areas w ithin the general area
of safety and soundness our relationship
with banks is becoming more formal and,
in some cases, more of an adversary rela
tionship. We now issue many more ceaseand-desist orders in matters relating to
bank safety and soundness. We recently
imposed fines on banks that were delin
quent in submitting required reports to
us. These are evidences of a more armslength rather than cooperative relation
ship between supervisor and supervised.
V
It is useful, I believe, to make a com
ment at this time about the approach of
the State of Connecticut and its banking
department to truth-in-lending, as com
pared w ith the approach of the FDIC.

STATEM ENTS BY CO RPO RATIO N DIRECTORS

The FDIC handles complaints differ
ently from violations discovered during
the course of an examination. With re
spect to complaints, about 60 percent of
which are handled in the Regional Office
and the remainder in the Washington Of
fice of Bank Customer Affairs, either the
Regional Office or the Office of Bank
Customer Affairs attempts to resolve the
complaint either by telephone with the
affected party and the bank or by author
izing a field investigation by an examiner.
If in the judgment of the examiner, the
Regional Office, or the Office of Bank
Customer Affairs the complainant has
had his or her rights violated, the exam
iner or the Regional Office will tell the
bank the conclusion that they have
reached and recommend that the bank
make restitution or take whatever other
affirmative action is necessary to remedy
the violation. In nearly all cases, the bank
is willing to do that.
If a violation of a consumer law is dis
covered during the course of a bank
examination, however, the efforts of the
Corporation are devoted to insuring that
the bank w ill not continue the procedures
which result in that violation in the fu
ture. In other words, the remedy is pro
spective rather than retrospective. The
customer affected by the violation is not
notified by the FDIC and the bank is not
urged to take affirmative action with
respect to that individual customer. It
should be said that only a sample of
truth-in-lending transactions is reviewed
during the examination, a sample suffi
ciently large to permit the examiner to
judge whether the bank is complying with
the law.
The State of Connecticut, on the other
hand, has a separate corps of examiners
whose only examination responsibility is
to examine banks and other financial in
stitutions to insure that they are com
plying with the Connecticut truth-inlending law. Rather than reviewing a
limited sample, these examiners review
nearly every consumer transaction that

18 1

has taken place in the bank since the last
State bank examination. Every violation
discovered, even those which in no way
are harmful to the customer, is w ritten up
and discussed with the banker. As I
understand it, the Connecticut examiner
and the department then make a decision
on what affirmative action to take with
respect to the violation and in many cases
require the bank to compensate its cus
tomer for damages suffered as a result of
the violation.
We are convinced that the Connecticut
Banking Department and its compliance
examiners do a more thorough job of
reviewing the truth-in-lending violations
in the State of Connecticut than the
FDIC examiners do. Whether the addi
tional cost the State incurs is worth the
benefits to the Connecticut consumers we
feel is a question for the State of Con
necticut to answer, not the FDIC or the
Federal Government.
Connecticut is one of five States (the
others being Maine, Massachusetts, Okla
homa, and Wyoming) which the Federal
Reserve, the Federal agency which has
been given the authority by Congress to
make such decisions, has exempted from
the Federal truth-in-lending laws.
The FDIC has decided that its exam
iners should no longer examine banks in
these five exempt States to see if they are
complying with the truth-in-lending laws.
It clearly is an unnecessary duplication
with the activities already being con
ducted by the state examiners in those
States.
VI
Let me turn to some specific issues
and conflicts in dealing w ith consumer
matters. I mentioned earlier that in some
cases where we find consumers have been
treated unfairly, we have been successful
in gaining restitution for the consumer.
But our legal basis for this is not com
pletely clear. Under section 8(b) of the
Federal Deposit Insurance Act, the FDIC
is empowered to order an insured non
member bank to cease and desist from

182

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

any violation of law, "and further, to
take affirmative action to correct the con
ditions resulting from any such viola
tions." While the limits of this authority
have not been tested in the consumer
protection context, we believe that the
authority probably includes the power to
order restitution in appropriate cases.
What is an appropriate case, of course,
will depend on a number of considera
tions, not the least of which is the partic
ular nature of the consumer's injury and
whether restitution is necessary to com
pensate for that injury. Our existing
authority may be sufficient, but we believe
it would be preferable to have a specific
legislative authorization and mandate to
require restitution. Despite comments by
Congressional Committees that we should
do more in protecting consumers, we
have not been given this specific legis
lative mandate nor, we must confess, have
we specifically sought it.
These considerations rest heavily on
interpretations of law and regulation, and
are somewhat afield from the a r e a of r e a l
expertise of our examiners. I mentioned
that over time we could fill this gap with
appropriate training of our bank examina
tion force. An alternative approach would
be to have a separate consumer com
pliance staff to handle enforcement in
this area and separate compliance exami
nations. We already have had the experi
ence of separate compliance examinations
in three States in which, on an experi
mental basis and to a limited extent, we
are not conducting safety and soundness
examinations. While we have dropped the
concept of separate examinations, there is
strong support among our examiners for a
separate staff of specialists. In part that is
because they find the work dull, in part
because they feel it is a deviation from an
examiner's career path, in part it is be
cause they feel the purposes of the two
examinations are inevitably in conflict,
and in part it is because it is too d ifficu lt
to stay current w ith the changing laws
and regulations in addition to their other

responsibilities. As I mentioned before, if
we do develop a separate corps of con
sumer law examiners conducting separate
examinations, there will obviously be a
substantial additional cost to the FDIC,
the banks, and the general public.
Should we publicize a bank's mis
handling of customer transactions? As I
have indicated, we have usually been
successful in getting banks to agree to
change practices that we believe violate
existing laws and regulations. We see no
purpose to be served by public announce
ment of past violations we have dis
covered which have been inadvertent or
technical, or have been corrected. If we
are unable to gain agreement by the bank
to change the offending practice, we can
take some formal action under section
8(b) of the Federal Deposit Insurance
Act. It should be said, however, that we
have seldom been unable to get the cor
rection made, and so seldom have con
sidered a section 8 action. Once we in iti
ate such a formal enforcement action,
there may be some merit in publicizing
that fact, the nature of the charges, and
the eventual result. Such publicity may
well have a legitimate deterrent effect,
w ithout generally carrying with it the
same potential for mischief present in the
case of publicizing formal cease-and-desist
actions involving unsafe or unsound prac
tices.
Nevertheless, it is quite probable that
the threat of publicity may aid us in get
ting the bank to resolve disputes in favor
of the customer even if the bank feels it
has acted fairly. I have serious reserva
tions about using the threat of unfavor
able publicity as a means of coercing a
bank to do something it does not believe
it is legally required to do. If there are
differences concerning the legality or fair
ness of certain practices, those should be
resolved in accord with the judicial proc
ess and not by a threat of unfavorable
publicity. A fter all, our judgment is not
infallible so why should we be permitted or
encouraged to enforce it as though it were.

STATEM ENTS BY CO RPO RATIO N DIRECTORS

The idea of greater publicity leads to
other problems as well. What if the bank
has serious supervisory problems? In that
situation the conflict between safety and
soundness and enforcement of consumer
laws is most obvious.
I do not plan to discuss the merits of
the consumer protection legislation that
has been enacted. I must stress, however,
that the merits deserve attention, review,
and analysis. The experience of RESPA is
a case in point. There undoubtedly were
some abuses in real estate settlement
procedures, and some changes in law were
probably warranted. The specific action
that Congress took, however, was too
elaborate, too complex, and too cumber
some. When the results of the law became
apparent, Congress recognized reality and
substantially revised the law, and I think
the Congress deserves credit for that. You
may feel that the shortcomings of the
original law were obvious beforehand; in
fact, many real estate lenders pointed out
its shortcomings to the relevant Congres
sional Committees. Obviously, their testi
mony was not persuasive, perhaps be
cause Congress has heard nothing but
opposition to c o n s u m e r legislation f r o m
bankers and no longer pays any attention
to it. The experience of RESPA should
improve the credibility with Congress of
those who responsibly point out burdens
in proposed consumer legislation in the
future.
Truth-in-lending is another example
where the costs of the legislation are be
ing recognized by the Congress. The
Senate Banking Committee has called on
the Federal Reserve to propose revisions
in the law to simplify the regulations.
It is d iffic u lt for us to articulate clear
ly the estimated costs of compliance with
consumer protection laws. But it is even
more d iffic u lt to show the actual benefits
to consumers from such legislation. The
original objective of the truth-in-lending
law was to enable consumers to shop for
the lowest source of credit. The law does

183

make that possible, but we do not know
whether consumers are taking advantage
of that possibility and, hence, whether
they are being benefited by the law. A
study completed a few years ago con
cluded that:
Consumers who borrowed on install
ment loans since the truth-in-lending
law went into effect are more aware of
the true rate of interest that they are
paying than were consumers who bor
rowed before the law was enacted. In
spite of this improvement, however,
borrowers are still largely unaware of
the rate of interest they are paying
even though this rate has, by law, been
imparted on them. Only one-tenth of
borrowers can estimate the rate of
interest they are paying on a car loan
with a 10 percent margin of error, and
nearly half of all borrowers miss the
mark by 50 percent or more.
I
think an updating of this sort of
study is important, as well as a determina
tion of whether consumers are actually
shopping for credit. If consumers aren't
benefiting from this legislation, then a lot
of time and money is being wasted. If
they are benefiting, then Congress has a
way to measure the value of the legisla
tion and to demonstrate, if that is the
case, that these benefits outweigh the
costs.
The essential point here is simply that
increased consumer protection laws have
both benefits and costs. The net effect of
every increased piece of consumer protec
tion legislation is not necessarily to the
good, nor is the resulting increased regula
tion of banks necessarily bad. We need
more objective calculation and evaluation
of these costs and benefits.
It is pretty clear, however, that we are
going to have a substantial volume of
legislation designed to protect consumers
in their dealings with banks and other
lenders, and we hope to contribute to a
careful analysis of the costs and benefits
of such legislation.

184

F E D E R A L DEPOSIT INSURANCE CO RPORATION

V II
These are just a few of the issues raised
by the creation of legislation designed to
establish standards of performance for
banks in this country vis-a-vis consumers
of banking services. The FDIC is in the
midst of trying to adapt to the additional
role given to it by this legislation. In
many respects, this new role conflicts
directly w ith the traditional role and

function of the Corporation as a regulator
of the safety and soundness of banks.
While the costs and benefits are just now
becoming apparent, I do not feel that it is
the function of the Corporation to judge
the merits of the legislation against these
costs and benefits, but that it is our func
tion to bring the costs and benefits to the
attention of Congress.

STATEM ENTS BY CO RPO RATIO N DIRECTORS

Address by Robert E. Barnett, Bank Ex
amination and Supervision*
The FDIC examines and supervises
8,628 commercial banks and 331 mutual
savings banks w ith combined deposits of
over $285 billion. The Comptroller of the
Currency examines and supervises 4,745
commercial banks w ith deposits of $450
b illio n . The Federal Reserve System
examines and supervises 1,032 banks with
deposits of $143 billion. While the num
ber and size of banks examined by the
Comptroller of the Currency have re
mained relatively constant in relation to
the growing number and size of banks in
the country, the number and size of those
examined by the FDIC have increased
faster than the averages, and those ex
amined by the Federal Reserve have
dramatically decreased. Over 60 percent
of the deposits supervised by the Federal
Reserve, for example, now are concen
trated in only 22 banks.
The Corporation is thought of as the
Federal agency that supervises only small
banks; the Comptroller and the Federal
Reserve are thought of as the agencies
that supervise the large banks. This no
longer is accurate. We now supervise three
times as many banks with deposits over
$100 m illion as the Federal Reserve and
are approaching the number supervised
by the Comptroller. We supervise more
banks with deposits of over $1 billion,
commercial and mutual savings com
bined, than does the Federal Reserve.
The trends over the past few years also
support the growing importance of the
FDIC as a Federal supervisor of banks. In
1956, 20 years ago, the Corporation
supervised 6,983; the Comptroller, 4,651;
and the Federal Reserve, 1,807. In 1966,
10 years ago, the Corporation supervised
7,724 banks with deposits of $108 bil
lion; the Comptroller, 4,799 banks with
deposits of $207 billion; and the Federal
* P r e s e n te d
c ia t io n 's

b e fo re
Bank

th e

M is s o u ri B a n k e rs A s s o

D ir e c t o r s '

C o n fe r e n c e ,

B e a c h , M is s o u r i, N o v e m b e r 1 1 , 1 9 7 6 .

Osage

185

Reserve, 1,350 banks w ith deposits of
$86 billion. Five years ago, the numbers
showed the FDIC with 8,211 banks with
$183 billion deposits; the Comptroller,
4,600 banks with $316 billion deposits;
and the Federal Reserve, 1,128 banks
with $112 billion deposits. If those trends
continue, especially if the 22 large banks
currently supervised by the Federal Re
serve were to cease to be supervised by
the Federal Reserve, either by w ith
drawing from Federal Reserve member
ship or by converting to national charters,
there w ill be only 2 rather than 3 Federal
bank supervisory agencies.
It is extremely important, therefore,
that the FDIC make known its views on
bank examination and supervision. The
public, Congress, and the banking indus
try should know what we view as the
strengths and weaknesses in FDIC super
vision, and what changes appear to be
desirable, and perhaps even essential, in
the near future.
I
Let me begin by saying that we expect
bank examinations to continue. We recog
nize that an argument can be constructed
that concludes that it would be cheaper
and no more risky to eliminate all bank
examinations and use the money saved to
pay o ff the "fe w " additional banks that
might fail, to increase the capital position
of weak banks, etc. The most important
response to these arguments at this time
is simply to say that we have had bank
examinations in this country for 147
years and that we see no sign that we"ll
eliminate them in the foreseeable future.
The public expects banks to be examined
by governmental agencies.
It is more fru itfu l for the Corporation
to attempt to analyze weaknesses that
may exist in our supervisory process and
to attempt to correct those weaknesses.
II
First, a quick review of the bank reg
ulatory environment is in order. The
1960s and 1970s have brought changes

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F E D E R A L DEPOSIT INSURANCE CO RPORATION

which have important implications for
the process of bank examination and
supervision. One of these changes is
simply the fact that banks have gotten
bigger. As I have mentioned above, this is
a much more significant change for the
FDIC than for the other supervisory agen
cies. I don't think we have completely
adjusted to our new situation yet.
Not only have banks gotten bigger, but
banking has become more complex and a
riskier business, particularly for these
larger banks. Some years ago, we used to
think that big banks could not get into
serious trouble and that the real focus of
bank supervision should be on the smaller
banks. While there are many different
ways to define the riskiness of different
parts of the banking system, none of
them perfect, it does appear that there
has been an increase in risks in some large
banks. One statistic which has received
increasing attention in the last year or so
has been the size of our "problem list."
Although 971/2 percent of all banks are
not on any problem list, we are con
cerned about both the number and the
size of banks which are on the problem
list, some of them larger banks. Let me
say quickly that the problem list reflects
the condition of banks when they are
examined, not necessarily their current
condition. There is a substantial time lag
between the time that a bank is found to
be in a "problem " condition and the time
it appears on the FDIC problem list; in
cases of large banks, the time lag may be
as much as 10 months. To a great extent,
therefore, our problem list reflects the
condition of the industry some time ago.
It is our judgment, for example, that the
condition of the banking industry is
much better now than it was at the begin
ning of the year, even though there were
fewer banks on our problem list then.
A n o th e r important change in the
banking environment has been the entry
of the consumer movement into banking,
the result of which has been a sizable
volume of consumer protection legisla

tion enacted by the Congress in recent
years. The major part of a typical bank
examination has been and still is loan
evaluation. The bank examiner, however,
is responsible now for many other aspects
of banking than the extension of loans
and other aspects of the loan than its
credit quality. The bank examiner must
e n fo rc e truth-in-lending, equal credit
opportunity, fair housing lending, home
mortgage disclosure, and several other
consumer protection laws. The banking
agencies have been criticized in recent
months for devoting inadequate resources
to consumer protection. I think some of
this criticism has been justified and we
are increasing our attention to these mat
ters. But with limited time and resources,
this has implications for our ability to do
the job of examining the safety and
soundness of banks with current tech
niques.
We used to carry out the process of
bank examination and supervision in an
atmosphere of confidentiality and se
crecy. Banks fe lt no obligation to disclose
bad news about their operations, and the
supervisory agencies certainly did little to
encourage the disclosure and publication
of bad news—in fact, just the opposite.
There was such general acceptance of this
as the appropriate approach in the bank
ing field, I am told, that even if reporters
or newspapers came across damaging in
formation about banks, they did not
think of publishing such information.
That situation has changed. Banks are
subject to disclosure under the securities
laws, and the banking agencies as well as
the SEC are prodding for increased dis
closure. Whatever reluctance the media
may have had to publish bad news about
banks has certainly disappeared. A l
though I am not happy about the ele
ments of sensationalism that have occa
sionally crept into some stories, I think
the move toward broader disclosure is
appropriate and desirable. But regardless
of our feelings as to the desirability of
increased disclosure, it is a fact of life and

STATEM ENTS BY CO RPO RATIO N DIRECTORS

is going to remain with us.
These are some of the changes in the
environment which have taken place in
the past few years. I will discuss other
changes in the context of specific changes
we have made in our supervisory process
to deal with them.
Ill
In the light of these changes, let me
simply list what we at the Corporation
have perceived as the most apparent de
fects of our examination and supervision
policies:
1. The best run and soundest banks
have been examined too often. They
are on approximately the same sched
ule as poorly operated institutions.
Over the past several years the record
of examinations by all Federal author
ities showed that two-thirds of the
banks examined received almost no
e x a m in e r criticism. The criticized
banks tended to be the same banks
year after year.
2. Large banks and small banks have
been examined in much the same way,
even though the differences in the
banks may be such that an objective
observer would argue that they are not
even in the same business.
3. The weakest banks have not been
examined often enough. Nor have the
deficiencies revealed by examination
always been followed up by the indi
cated degree of aggressive action. Fair
banks become poor before sufficient
pressure for changes is applied to
management and the directors and
then it is often too late.
4. Too small a part of the examina
tion has been dedicated to an in-depth
analysis of matters other than the loan
portfolio.
5. Insufficient attention has been
given to changes in liquidity, securities
portfolio, and source of funds. A
bank's liquidity may be quickly erod
ed by a change in investment policy or
a change in liquidity needs.

187

6. Insufficient attention has been
given to current earning trends. Quar
terly or semi-annual income data are
becoming widely available for the first
time, which w ill provide the basis for
closer monitoring of earnings deterio
ration.
7. Too much of the examiner's time
has been taken up on verification and
audit-type work. Insufficient emphasis
has been placed on evaluating and im
proving internal controls.
8. Examination costs in travel and
manpower are very high because of the
great number of very small banks
examined.
9. The training of a bank examiner
has relied too much on an apprentice
ship system, even though we have cre
ated during the past few years a supe
rior educational and training program
which uses the classroom as its training
ground. In addition, our judgment as
to how good an examiner is has been
based too much on his ability to assess
loans.
We appreciate that this is a lengthy list
for a confessional. Nevertheless, we feel
we have identified these weaknesses and
we are attempting to deal with them.
IV
Rather than attempting a complete
detailing of all the changes that have been
made in bank examination and super
vision in recent years, I want to highlight
some specific changes which are signifi
cant and illustrative of the adaptation of
supervision to changing conditions.
Several months ago, we instituted a
new regulation relating to insider trans
actions. We found that about half of our
bank failures resulted from abuse of the
bank by insiders. Some people would
favor severe restrictions on or even pro
hibitions of insider transactions. We did
not feel that this is appropriate because in
many cases the bank's board of directors
comprises the best sort of customers for
the bank. Others favored the idea of

188

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

broader disclosure of insider transactions,
which are required in any event for reg
istered banks. But we still have some con
cern for the confidential nature of indi
v id u a l c u s to m e r's transactions and
adopted instead an approach that requires
board of directors' approval of all loans
and other transactions of certain sizes
with insiders. We think this approach puts
the responsibility where it should be,
with the board of directors, and does so
w ithout a blanket prohibition or wide
spread public disclosure of what are
appropriately personal transactions.
Linder section 8 of the Federal Deposit
Insurance Act, we have long had powers
to take legal action against banks which
are following practices we regard as un
safe and unsound. Traditionally, bank
supervision has been a relatively informal
process with the examiner, supervisors,
and senior FDIC staff meeting and dis
cussing with bankers the problems we see
in their bank. That inform ality is still
characteristic of most of the bank super
visory process, but there has been a per
ceptible shift to greater use of formal
actions. In 1960, there were two section
8 actions taken by the FDIC. This rose to
four in 1965. In October 1966, the Cor
poration received cease-and-desist powers,
and since then section 8 activity has in
creased with 7 actions in 1970 and 13 in
1975. Already during just the first 10
months of 1976, the FDIC has issued or
authorized our lawyers to begin the proc
ess of issuing 49 cease-and-desist orders.
This is a reflection of our experimenta
tion with these powers and our finding
that there are some situations that call for
formal action, and that the response we
get from some banks in some situations is
better with a formal action.
We have taken several actions aimed at
making the bank examination process
more efficient. In some cases, these ac
tions were necessitated by the fact that
although the size of our examination
force has increased, their responsibilities
have increased even more rapidly. I men

tioned earlier that the source of these
increased responsibilities lies in the in
creased size of banks, the increased com
plexity of banking, and the increased
responsibilities of the examiner for en
forcement of laws and regulations not
related to safety and soundness of the
bank.
One of the most important changes we
have made is a greater delegation of
authority to our Regional Directors. A
number of relatively routine actions can
now be approved in the Regional Office
w ithout their being referred to Washing
ton at all. This includes establishment of
a new branch, moving an office, approval
for a new issue of capital notes, and
others. We have not delegated authority
to deny applications and we have not
delegated authority in certain d ifficu lt
cases, but the change in the flow of paper
and the burden in our Washington Office
can be illustrated by the fact that in
1970, 527 applications for new branches
were decided by the Board of Directors
(after substantial analysis by Washington
Office staff as well as field staff), while in
1975, only 137 such applications were
decided by the Board of Directors. Some
368 were handled by our Regional Direc
tors under delegated authority, with a
savings in manpower we estimate at 9,000
man-hours in 1975 alone.
Another attempt to be more efficient
has been our withdrawal experiment. For
the last 3 years, we have been carrying
out an experiment in three States where
by the FDIC foregoes its normal examina
tion of the safety and soundness of a cer
tain number of banks, and instead leaves
that examination to the State banking
department. We went through a careful
and detailed process before selecting the
States of Washington, Iowa, and Georgia
for this experiment. There are some
pluses and minuses to this experiment
and we are not ready to provide a com
plete evaluation at this time. It may be
that the responsibility for certain func
tions, e.g., audit-type functions in banks

STATEM ENTS BY CO RPO RATIO N DIRECTORS

lacking adequate internal controls, can be
delegated to State supervisors while our
examiners concentrate on loan and man
agement evaluation. It may be that we
should withdraw from examining certain
sized banks, or certain banks of long
standing proven quality. It may be that
we should withdraw entirely from exam
ining in certain States. It may be that we
should simply drop the experiment and
judge it a good e ffort but unsuccessful.
A t any rate, the experiment has been one
means by which we have attempted to
deal with the pressure on our resources,
the desire of some States to take a greater
role in banking supervision, and the gen
eral concern over duplication and over
lapping in government regulation and
supervision.
Banking operations have become in
creasingly computerized over the last 10
years or so, and so have bank records.
Examination of the bank now involves
analysis of files that consist of magnetic
tape rather than neatly organized paper
records. A whole new line of EDP courses
have been created to train our examiners
to use these new techniques. We have
developed data processing packages to
simplify the task of examining data cen
ters and computerized banks. These are
programs designed to work on a variety
of computer configurations that produce
the output needed by the examiner. This
minimizes the disruption of a bank's
computer center during an examination
and provides our examiners with the in
formation in precisely the format they
need.
In part because of these steps to make
bank examination more efficient, some
routine has been eliminated from exami
nation. We are encouraging more discre
tion on the part of the individual exam
iner and the Regional Director. We have
included some special pages in the exami
nation report to be used when the Cor
poration feels they are needed for evalu
a tin g a bank's trust operations and
nondomestic loans. We have tried to cut

189

what seems least essential and to rely on
generally accepted sampling techniques
ra th e r th an exhaustive reviews and
counts. We don't believe there is any sig
nificant risk in our being less detailed, but
it is correct that the examination is some
what less complete than it used to be. We
are experimenting with specialization
among examiners, which has the potential
for more sophisticated and streamlined
examination procedures, as well as more
thorough examination in the fields in
which the specialization is developed.
Some changes in the bank examination
process have been the result of policy
decisions rather than attempts at better
management of existing functions. For
example, we have changed our policy to
encourage more frequent meetings be
tween the bank examiner and the board
of directors of the bank examined. A
number of years ago, we introduced a
policy of a meeting of the examiner and
the board of directors at the conclusion
of an examination. We found that rep
resented a waste of time since most banks
were in relatively clean condition and
getting the directors together for a meet
ing with no real substance represented an
undesirable imposition on the Board
members, so the policy was discontinued.
In the last couple of years, however, con
ditions have changed. Now there usually
is some matter appropriate for a dis
cussion among the examiner and the
directors, regardless of the condition of
the bank. Directors have been more eager
to meet with our examiners. The Comp
troller of the Currency has recently
changed its policy so that national bank
examiners are required to schedule a
meeting with the directors immediately
after each examination. We have not yet
made such meetings a universal policy but
have certainly encouraged more meetings
between examiners and boards of direc
tors.
In addition to developing specialists
among our examiners and expanding their
training to make them more cognizant of

190

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

recently enacted legislation, we are ex
panding the pool of people from which
we hire our examiners. Our examination
force now has by far more female exam
iners and members of minorities than was
the case 5 or 10 years ago. Some of this
change results from the elimination of
past policies which were based on a feel
ing that some characteristics of the job of
bank examiner, for example, the constant
travel involved, were such as to create
problems for women. But more of the
change is due to an affirmative action on
the part of the FDIC to recruit members
of minorities and women for examination
positions.
We have changed the policy of exam
ining every bank every year, and now use
various modifications of a full examina
tion in different situations. Hopefully,
this w ill permit us to spend more time
examining banks that need the attention.
As our newly revised examination policy
states:
. . . the scope of the examination may
be curtailed. Full use should be made
of the bank's EDP and management
reports, sampling should be utilized
wherever possible, and proof and veri
fication procedures may be eliminated
or substantially limited unless circum
stances indicate additional effort is
needed in these areas. Additionally,
the volume of loans subjected to anal
ysis may be reduced, and less impor
tant branches need not be examined.
Emphasis at these modified examina
tions should be placed on management
policies and performance; the evalua
tion of asset quality, alignment, and
liquidity; capital adequacy; and com
pliance with applicable laws and regu
lations.
That policy goes on to say that, in cer
tain circumstances, "fixed assets sched
ules may be omitted from these examina
tion reports," examiners may "utilize the
output of (the bank's) systems, cash
counts and proof and verification pro
cedures may be omitted, branch offices

which do not have a significant volume of
important assets need not be examined,
the Corporation's automated bank exami
nation programs and monitoring systems
will be used wherever possible in an effort
to provide increased efficiency and con
serve manpower, and sampling techniques
should be used wherever possible."
The changes I have described are sig
nificant and we are now in the process of
developing additional training programs
to ensure their complete integration into
operations. I would like to turn now to
some additional changes in the process of
bank examination that are not com
pletely integrated in operations today but
which will be in a relatively short time.
V
First, a comment about the efforts of
the Comptroller of the Currency. The
Comptroller of the Currency is just start
ing to im p le m e n t some substantial
changes resulting from the review of that
office and its procedures by Haskins &
Sells. It is d iffic u lt to summarize these
changes but, to a great extent, they rep
resent a reorientation of examination
philosophy. Our present procedures start
with a lot of detailed investigations of
various aspects of the bank's activities
and culminates in a meeting with top
management of the bank to discuss over
all findings and bank policy. The changes
being made by the Comptroller's Office
involve starting out with a review of se
lected statistical data in a bank to be
examined followed by a discussion of
bank policy w ith top management of the
bank, that then followed by an attempt
to evaluate how well the bank is imple
menting its own policies. This may well
be the philosophy upon which bank
examinations of large banks must be con
ducted, and we are watching the Comp
troller's efforts very closely.
The future is going to see more use of
the computer by bank examiners. I have
already mentioned the packages devel
oped by the FDIC for assistance in exam
ining the computerized records of the

STATEM ENTS BY CO RPO RATIO N DIR ECTORS

bank, but we are going to see in the fu
ture more use of techniques that the com
puter makes possible. Work has been
done at the FDIC and at a number of
other places aimed at developing early
warning systems for spotting bank prob
lems. Development of early warning
systems rests on the fact that we rou
tinely collect massive amounts of finan
cial data on the operations of banks. We
have the computer capability to manipu
late these vast amounts of data, and there
are statistical techniques available which
allow us to develop profiles of banks like
ly to become problems in the future,
unless appropriate action is taken. These
systems are becoming operational, but
there are definite weaknesses in them
now, the most distressing of which is the
length of time required to process the
reports. We must do better. In part, we
feel that the fines we have levied on
banks which have filed late reports will
assist us in accelerating the processing,
but we must, in addition, change some of
our techniques.
Our early warning systems generate a
list of banks that have similarities with
banks that develop problems. These lists
are circulated to our Regional Offices. In
some cases, the regional staff is familiar
with the bank's situation and knows that
despite the ominous financial figures,
there is really no cause for concern. In
other cases, the lists include banks that
the supervisory staff knows are problems
and has been following closely. In some
cases, however, the early warning system
represents a new source of information to
the bank examiners concerning potential
problems.
It may be possible to go further with
this approach in the future. But I think
that the emphasis in the future will be on
greater use of financial analysis tech
niques to spot banks that deviate substan
tially from the average. The financial
analysis techniques are needed to fill the
gap between the output of early warning
systems and the costly detail of a full

191

scale, on-site examination. We think it will
be possible to develop techniques where
by skilled financial analysis can review
the inform a tion available concerning
bank operations to determine which ones
require closer attention, more frequent
examination, or special kinds of review.
Incidentally, our work on early warn
ing systems has reached the same conclu
sion of some leading bank analysts that
income ratios and operating results fre
quently are very important indicators of
future banking problems. The traditional
bank examination has given primary
attention to the balance sheet and capital
ratios and our discovery that the income
report and income ratios provide useful
indicators of future troubles may well be
extremely important in determining fu
ture directions of examination and super
vision.
There are some other changes in pro
cedures which are starting to take place
and which will become more important in
the future. One of these worth mention
ing is a system started by the Comp
troller's Office to develop a uniform clas
sification system for national credits.
That is, when a large national firm is bor
rowing from a large number of banks,
that credit should be classified in the
same way at each bank that is lending to
that firm . It is wasteful and inefficient
(and occasionally embarrassing when d if
ferent conclusions are drawn) to have the
examiner in each of those banks do his
own analysis of the financial position of
the borrower. This responsibility can be
centralized in one group of examiners
which will produce a uniform classifica
tion of that loan for use by all examiners.
We have participated in these reviews
with the Comptroller when we have non
member banks which are participants in
the credits. The Comptroller's Office,
whose national banks have more of these
national credits in their portfolios than
others, has spearheaded this effort. But as
nonmember banks become larger, they
are making more of these loans, and the

192

F E D E R A L DEPOSIT INSURANCE CO RPORATION

FDIC is planning to lead similar efforts.
VI
I would like to conclude by comment
ing on some, but certainly not all, of the
other issues of examination and super
vision which I have not discussed.
The question that comes up most fre
quently in discussions between the FDIC
and bankers concerning supervisory prac
tices is that of capital adequacy. There is
clearly not the time for a full discussion
of the FDIC's views on capital adequacy.
I might just mention that there have been
some analyses attempting to determine
whether the supervisory agencies have
much impact on the capital decisions of
banks. Some of these suggest that we do
not have much influence and that may be
the way it should be. Our real efforts are
aimed at nudging banks that we think
have less capital than they should to rais
ing more. I recognize that it is easier to
prod than it is to actually raise the cap
ital. In the last few years, both debt and
equity markets have been d iffic u lt for
banks to tap, and bank earnings have not
been growing at a rate rapid enough to
allow retained earnings to meet all capital
needs. We do seem to have much greater
influence on bank capital decisions when
a bank is asking us for something, say,
approval for a new branch. We do take
advantage of this leverage and use these
opportunities to require banks to raise
additional capital. The Federal Reserve
has done the same when bank holding
companies have brought applications
before the Board. There is some criticism
of this practice, and some question as to
whether it is fair and equitable that banks
coming to us with applications should
thus be subject to more effective pressure
than banks that are not asking for some
thing. This possible inequity troubles me,
but not so much that I am willing to fore
go the opportunity to get additional cap
ital from banks whose capital accounts
are clearly below what they should be.
The last Congressional session saw the

introduction of a bill to create a Federal
Bank Examination Council. This council
would be intended to provide uniform ity
and consistency of examination standards
for all of the examining agencies. We can
see some benefits and some problems
with such an institution. Let me quote
briefly from our letter to the Senate
Banking Committee on this proposal:
While we heartily endorse the bill's
objective of promoting "progressive
and vigilant bank examination," we
have serious reservations as to the need
for nationally uniform examination
standards and procedures. If there is
any merit to the concept of separate
Federal supervisory agencies, and to a
dual banking system with State and
Federal supervision of banks, the bene
fit would seem to be the opportunity
to try different approaches and to
have a diversity of examination and
supervisory procedures. The possibility
of useful innovation and improvement
in the bank examination and super
visory processes is greater if there are
several agencies trying different ap
proaches than if every change in examin a tio n methodology required ap
proval of all the agencies. The changes
in the examination process now being
made by the Comptroller of the Cur
rency at the recommendation of his
consultants are a worthwhile experi
ment that all supervisors w ill follow
with careful attention. Implementing
such changes should not, however, re
quire the approval and commitment of
each of the other Federal bank regula
tory agencies.
I mentioned earlier our experiment in
which we have withdrawn from some
parts of bank examination in three States.
We are facing the issue of whether this
experiment should be put into more gen
eral operation or be simply terminated.
That is, should we certify that certain
States are able to take over the bank
examination process and thus allow the

STATEM ENTS BY CO RPO RATIO N DIRECTORS

FDIC to drop that function and respon
sibility? If we are to do this in certain
States, how are we to determine which
States? Or should we do this in all States?
That is, should the FDIC get out of the
bank examination business and leave it
completely to the States? We do not feel
that many States, if any, have adequate
bank examination capability at the pres
ent time, but it is possible that if we
simply stopped examining banks, and
that left a real unfilled need, perhaps the
States would move to fill that need. Or
should we, as I mentioned before, w ith
draw from part of the banks—i.e., those
which contribute the least risk to the
deposit insurance fund? The other side, if
you w ill, of that coin is for the FDIC to
examine national banks or State member
banks.
I mentioned earlier the interesting
characteristic of the training and develop
ment of bank examiners by the use of the
apprenticeship system, modified in recent
years by a substantial classroom training
program which is clearly the best among
the agencies. Essentially, all of our exami
nation personnel have developed as gen
eralists through this type of training. This
was an ideal approach when our examina
tion mission consisted of examining the
safety and soundness of mostly small
banks, w ith examiners having few other
responsibilities. Now, as I have indicated,
our responsibilities have broadened and
the types of banks and activities we are
examining have diversified. For the most
part, however, we have viewed the bank
examiner as the Jack or Jill of all trades,
able to examine competently all aspects
of banking activity.
We have made some modest moves in
the direction of specialization. We have
recently set up specialists in trust exami
nations in several of our regions, though
these specialists are bank examiners and
not lawyers. Some examiners have re
ceived special training to enable them to
examine computer facilities. Again, these
are bank examiners trained in data pro

193

cessing and not computer professionals
trained in banking. We have been giving
consideration to, though have yet taken
no steps to implement, the possibility of
having a special examination force to
examine for compliance with consumer
protection laws. The possibility of in
creased reliance on financial analysis tech
niques in bank examination also may re
quire different expertise and specializa
tio n th an the traditional apprentice
training route to the general bank exam
iner.
We may have to consider different
career paths for different specializations
or perhaps the hiring of bank examiners
at different levels and with different
backgrounds to fill particular needs rather
than relying on our traditional hiring and
training system.
The development of bank holding
companies has been an important facet in
the growth of banks and the increasing
complexity of banking activities. The
holding company movement obviously
creates some problems for the process of
bank supervision. Some of those prob
lems have been delegated by the Congress
to the Federal Reserve to worry about,
such as the question of allowable activi
ties for holding companies, for example,
and the passing on specific applications of
specific holding companies. We are more
concerned with the relationship between
the bank holding company and the bank
and other affiliates of a holding company.
We have seen in some recent major fail
ures, e.g., American City Bank & Trust
Co. in Milwaukee and Hamilton National
Bank in Chattanooga, how a series of
transactions with a holding company
affiliate brought down a bank. The FDIC
already has some authority to examine
bank holding companies and the affiliates
of insured nonmember banks. We have
not generally exercised this authority,
however, and we are now wrestling with
the question of whether we should do
more examination of bank holding com
panies than we do. It may well be that we

194

FE D E R A L DEPOSIT INSURANCE CO RPO RATIO N

should urge Congress to pass bank hold
ing company supervision and examination
to the agency with the responsibility for
supervising the lead bank.
Perhaps the most important issue in
the future will be the treatment of large
and small banks. I noted that we still
examine large and small banks in much
the same way. I think this is inappro
priate, but I am not sure in which direc
tion we should move. Since it is mostly
small banks that fail, and small banks are
most likely to be in need of advice and
suggestions about operations, it can be
argued that we should devote a greater
effort to examination of small banks.
Large banks have access to competent
management and advice, and generally
can be assumed to know what they are
doing, and hence, it may be argued, need
our examination less. On the other hand,
we have found that there is not much
public concern about small bank failures.

Part of the FDIC's responsibility is to
maintain confidence in the banking sys
tem, and even a sizable number of small
bank failures appear not to shake that
confidence. A few large bank failures
might, however.
This would make the case for more de
tailed investigation of large banks. Cer
tainly, the deposit insurance fund covers
more insured deposits in the approxi
mately 2,000 banks with over $50 m illion
in deposits than in the 12,700 under $50
million. We have to think this through,
and we have not reached any conclusion.
A t this point, however, I am leaning in
the direction of the view that the FDIC
should concentrate its examination ef
forts and resources on a more detailed
investigation of large banks with a result
ing less frequent emphasis on small bank
examinations. That is the current thrust
of our examination policy, and I believe
it is a step in the right direction.

STATEM ENTS BY CO RPO RATIO N DIRECTORS

Address by Robert E. Barnett,
Disclosure*
During the past few years, senior staff
and Board members of the FDIC have
spent a great deal of time on problems
related to accounting, financial reporting,
and disclosure. Proposals and decisions
affecting the form and substance of bank
accounting and reporting have been gen
erated in great quantity over the last
couple of years from the Financial Ac
counting Standards Board, the AICPA,
and the SEC, as well as from the FDIC
itself and from the other banking agen
cies. I would like to review these develop
ments, my attitude toward them, and the
implications they have for banks and
supervisors.
I
It was not many years ago that the
bank supervisor's primary concern was
that banks be able to raise capital when
needed. The attitude with respect to
buyers of securities was essentially that
the investor, large depositor, borrower,
creditor, and the general public really did
not need much information because the
supervisor had plenty of information and
was using his best efforts to see that the
bank did not fail. Even where Congress
and the SEC took actions to improve dis
closure in other industries, banking was
left almost solely to the banking agencies.
Five years ago, disclosure to the public
of the individual bank information we
collected was not a major consideration
at the FDIC or, for that matter, at any of
the Federal bank regulatory agencies. The
contents of the annual reports of income
of individual banks were regarded as
strictly confidential, except for a few
hundred banks with 500 or more share
holders subject to the 1964 amendments
to the Securities Exchange A ct of 1934.
Those banks had, since 1964, been com
* P re s e n te d b e f o r e t h e C P A S o c ie t y a n d R o b e r t
M o r r is A s s o c ia te s , S t. L o u is , M is s o u r i, N o v e m
ber 18, 1 9 7 6 .

195

plying with the registration, annual re
ports, proxy rules, insider trading regula
tions, and other requirements of Federal
securities laws. But for the overwhelming
majority of the banks, this was not so.
While the fro n t of the Report of Condi
tion, the balance sheet information, was
public, the detailed loan schedules on the
back of the Reports of Condition were
confidential. An important item in each
special survey questionnaire we sent to
banks was the notice that returns would
be treated as confidential and results
would be released only as aggregates or
averages. A t that time, no outsider had
managed to gain access to internal files or
to photocopy reports of examination,
listings of banks on the problem list, or
critical memoranda by the regulators.
And even if he had, newspapers would
probably not have published such mate
rial.
But even 5 years ago there were signs
of growing interest in the details of the
operations of individual banks. Some of
the nation's large banks were publishing
in their annual reports a considerable
amount of information about their own
operations beyond what regulatory rules
required. Competition among banks and
between banks and other types of finan
cial institutions was increasing and with it
was an increased interest in what individ
ual competitors were doing. Moreover,
whenever a bank submitted an applica
tion to merge w ith another bank, it was
required to give an account of the com
petitive factors that were involved in the
relevant market areas. With mergers the
vogue at that time, there was a brisk de
mand for information about competing
institutions which would enable bankers
to measure market shares of the various
banks operating in local and regional mar
kets. A t the FDIC, we were receiving
large numbers of requests not only for
the aggregated data we regularly com
piled, but also data aggregated in special
ways for small areas and for particular
groups of banks. Academicians were be

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FE D E R A L DEPOSIT INSURANCE CO RPO RATIO N

sieging banks and the bank regulatory
agencies with requests for individual bank
data to enable them to carry on compara
tive analyses involving a whole host of
other issues with broad public policy
implications. And the accounting profes
sion was hard at work on bank account
ing problems, persistently but with a
somewhat piecemeal approach. In short,
there was evidence of growing interest in
unpublished bank data.
The SEC gained more clout over the
banking industry about this time, al
though almost by accident. While banks
were exempt from much of the securities
legislation of the 1930s, bank holding
companies were not. Thus the expansion
of the bank holding company movement
of the 1960s and early 1970s led, inciden
tally, to more power for the SEC over
bank subsidiaries of holding companies.
The long tradition of the banking
agencies has been tied to confidentiality
of unfavorable news. This has reflected
the viewpoint of banks, their depositors,
their borrowers, their creditors, and the
supervisors. Bankers have been willing to
discuss their problems forthrightly with
examiners, and examiners have been w ill
ing to relay their suspicions to the banker
because each appreciates that the entire
procedure is treated in confidence. The
examiner w ouldn't discuss his findings
with a newspaper reporter, and the bank
er has felt no obligation to report the
examiner's judgments to his stockholders.
When a bank has been found to be in very
weakened condition, the FDIC and the
other agencies have attempted to explore
possible solutions (or to seek potential
purchasers). Obviously, the more public
ity given to such a situation, the more
d iffic u lt it is to solve the problem success
fully.
I
doubt if much thought was given to
the need for data by security-holders,
creditors, large depositors, or the general
public. During this period, banks did not
g e n e ra lly have securities outstanding
other than stock and of that, most was

closely held and not actively traded. If
any further thought was given to stock
holders, I suspect the conclusion drawn
was that what benefited the bank and its
depositors probably benefited security
holders as well.
The situation has changed. In all pub
licly held corporations, the obligations on
management and insiders for full disclo
sure of the financial condition of their
company have become more clear-cut.
Banks and bank holding companies have
more securities outstanding and they are
traded on a regular basis. As a result of a
series of Congressional actions, it has
become clear that the banking agencies
cannot rely on the confidentiality that
has been a basis of traditional regulation.
II

The move toward broader disclosure
has taken several different directions.
There has been a clear requirement for
more disclosure of relevant information
concerning the finances of the bank.
Until about 5 years ago, for example,
many banks did not distribute, even to
stockholders, an annual income state
ment. The banking agencies had always
collected such a statement but, until
1972, treated it as confidential.
The FDIC led the way in 1972 in
making public the Reports of Income and
C o n d itio n for individual banks. Our
thinking at the time was that publishing
this information provided equal access to
information then known only to " in
siders," greater competition in good
banking markets, incentive for banks to
perform well, better access to capital mar
kets for banks making such disclosure,
availability of more complete data for
researchers and legislative committees,
development of more uniform accounting
rules, and consistency with the spirit of
the Freedom of Information Act. It is a
sign of change in only 4 years to recall
that at the time the decision to make this
information public was a controversial
one—one on which we received many com
ments including some compliments and

STATEM ENTS BY CO RPO RATIO N DIRECTORS

some complaints. Despite the complaints,
we think this has proven to be a construc
tiv e development. We have supplied
copies of thousands of documents to
bankers, academicians, and other ana
lysts. We are continuing to push for
meaningful disclosure in this area, and are
attempting to increase both the quality
and the timeliness of the reports sent in
by the banks.
In the last few years, the need for
additional information by the public has
grown. Economic developments—unusu
ally severe inflation, fluctuating foreign
exchange rates, the most serious recession
in 40 years—and banking developments
such as rapid expansion of overseas opera
tions of multinational corporations and
greater reliance on borrowed funds—all
have combined to produce a growing
interest by diverse groups in the financial
results of bank operations. In the past 2
to 3 years, losses have been sustained by
shareholders in many commercial banks
and holding companies as the market has
turned down on bank stocks. Partly as a
result, public accountants, bank stock
analysts, and the SEC, among others,
have stepped up their efforts to dig deep
er into bank financial operations. Bankers
are being pressed not only to describe
what they are doing, but to predict where
they think they are going.
My personal position is that the disclo
sure of information which reveals the
earnings characteristics of the asset base,
its stability and profitability, will subject
those banks in bank holding companies
whose stock and debt are traded on ex
changes or over-the-counter to market
forces which in turn w ill be a powerful
force in compelling the banks to correct
weak asset conditions. A t the same time,
banks in good condition should be re
warded by the market with easier and
cheaper access to the capital markets,
solid growth, and good profitable oppor
tunities. Too often supervisory pressure
on bank managements whose policies are
dilatory or involve excessive risk-taking

197

are ineffective. Supervisors seldom crit
icize bank management in public on the
assumption that publicity might have ad
verse effects on the stability, or even sol
vency, of the bank. Investors informed by
adequate disclosure, however, can affect
the price of that bank's securities in a
manner which will promptly compel
management attention. This is not to say
that disclosure should or could displace
regulatory surveillance; both are tools to
strengthen the banking system and they
can be complementary.
A t the other extreme, there have been
unauthorized disclosures of information
about banks and bank holding companies
that we consider best left confidential.
Bank examination reports and names of
banks on agency problem lists, for ex
ample, probably w ill help sell newspapers,
but it is doubtful that their publication
contributes to confidence in the banking
system. Even if the stories in which such
information is revealed would emphasize
or even explain the nature of problem
lists or examination reports, which they
seldom do accurately or thoroughly, most
regulators w ill argue that such stories do
much more harm than good.
Each of the banking agencies has its
own list of problem banks or problem
holding companies. These are classified in
accord with the differing criteria of the
different agencies in accord with their
differing responsibilities. We find these
classifications useful even though they are
reached through subjective judgments. As
Chairman of the FDIC, I want to know
all the banks that our examiners, in their
best opinion, think pose a risk to the Cor
poration. I want to know which banks
they are, even if the examiner cannot pro
vide conclusive proof that the bank is in
poor shape (by that time it may be too
late to do anything about it). This means
that the list, in addition to being subjec
tive, w ill include some banks which will
easily recover from their difficulties. It
will most certainly reflect the condition
of the banks as the review process began,

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F E D E R A L DEPOSIT INSURANCE CORPORATION

sometimes many months before, and not
necessarily the condition of the bank at
the time it appears on the problem list. In
part because of these reasons, we do not
generally formally notify even the man
agement or directors of a problem bank
that the bank is on our problem list.
Obviously then, we do not want the prob
lem list publicized.
Likewise, we consider the examination
report part of a confidential process.
Bankers are willing to discuss frankly the
weaknesses in their loans because they are
confident that anything told to an exam
iner w ill be treated in confidence. Bank
examination represents an independent
assessment of a bank's condition by a
trained professional. The necessary infor
mation gathering and loan discussion are
facilitated because the banker views it as
a cooperative affair rather than an adver
sary process. Time and money can be
saved if this cooperation continues, and
our career examiner employees are con
vinced that the data gathered through this
process and the criticism extended by our
examiners are both honest and thorough.
If the confidentiality is lost or the process
becomes adversary, there quite possibly
would be a deterioration in the quality of
examinations.
Ill
I feel that what has been discussed so
far is rather clear-cut. There is need for
disclosure of financial information about
banks and there is some information
which should not be made public. There
are d iffic u lt areas that fall somewhere
between these poles, however. In recent
months, we have seen various groups, in
cluding the FASB, the AICPA, and the
SEC, propose accounting and disclosure
treatments that may lie beyond what is
essential but perhaps is not a violation of
necessary confidentiality. Some of the
accounting changes that have been made,
which we have supported, were intended
to correct obvious deficiencies of tradi
tional bank accounting. Until recently,
for example, bank accounting for loan

loss reserves did not distinguish realistic
provisions for losses from allowances set
up on a formula basis to accord with tax
provisions. Now it does. That, plus treat
ment of deduction of unearned discount
on loans, inclusion of capital notes as
liabilities, and others, are examples of
improvements in bank accounting made
in recent years with the concurrence and
support of the banking agencies, the ac
counting profession, and the SEC. Re
porting has been improved this year by
the requirement for semiannual income
reports from all banks and quarterly re
ports from the large banks. Some of these
changes have been traumatic to some
bank managements, but these changes
have not involved d ifficu lt issues of prin
ciple or caused interagency controversies.
There are controversial issues that remain,
however.
Let me look first at the recent FASB
proposal that theoretical market losses on
corporate stock held by a bank must be
reflected on its balance sheets. This has
lim ite d a p p lic a b ility to commercial
banks, since banks in only a few States
can hold corporate stock. Mutual savings
banks, however, hold large amounts of
common and preferred stocks. These
investments are made as a permanent
commitment of funds, and the banks
generally have the liquidity and the stay
ing power to hold these securities indef
initely. We, therefore, opposed running
these losses (and subsequent gains)
through the income statement and capital
accounts, although we favored disclosure
of the amounts involved.
I would like to spell out some of our
reasons for opposing this accounting
change because it is relevant to other ac
counting issues that have arisen. I am not
an accountant and I will not argue the
fine points of accounting theory. I do be
lieve that accounting should be a guide
for management and investors which pre
sents financial statements that serve as the
foundation from which sound managerial
and investment decisions can be devel

STATEM ENTS BY CO RPO RATIO N DIRECTORS

oped. In order to be a useful guide, ac
counting rules followed logically should
lead to correct managerial and investment
decisions. Yet the opposite may occur
here. If mutual savings banks must write
down to market price theoretical losses in
preferred stocks, or if they must show
losses and gains on theoretical trans
actions that they have never contem
plated entering into, they might be dis
couraged from making such investments.
But, according to most State laws, pre
ferred stocks are an appropriate invest
ment for savings banks (and, in some
cases, for commercial banks). I do not
like to see an investment deemed appro
priate by legislative action refused simply
because of an accounting rule. (One
might argue that investment in preferred
stock is not a good bank investment, re
gardless of what State legislatures have
decided. But I feel that those who wish to
argue this point should do so directly in
the legislature.)
A t the same time, I recognize that our
present accounting rules do not neces
sarily lead to correct decisions with re
spect to securities transactions. Some
bankers are reluctant to sell securities at a
loss, if they must recognize it as such,
even when tax laws and reinvestment
opportunities make that the right eco
nomic decision. Our present accounting
requires such recognition of a loss if they
sell.
Of more concern than the FASB deci
sion on equity securities is the possibility
that the FASB may seek to expand this
decision to debt securities as well. That
has not yet become a proposal of FASB,
and perhaps it w ill not. If it does, I sus
pect that the FDIC will want to testify
along the lines that I have outlined.
While we were not able to convince
the FASB of the error in their position
that theoretical losses on corporate stock
should be taken, we like to think that our
comment to the FASB on that proposal
had some influence on the final decision
to require writedowns directly against

199

capital accounts thereby avoiding impact
on the net income line.
Of more significance than the account
ing for losses on securities is the consider
ation by the FASB of a proposal for
writedown of loans that have been re
structured. Several days of public hear
ings were held on this matter and many
banks and bank trade associations reg
istered their disapproval. The FDIC sub
mitted a comment on the proposal in
accord with principles I have referred to.
I believe that investors are entitled to
meaningful information about the quality
of a bank's loan portfolio. Where loans
have been restructured—that is where the
m aturity has been extended or the inter
est rate reduced-full and complete dis
closure of material information regarding
the restructured debt should be included
in supplementary schedules and fo o t
notes. The disclosure should include a
comparison of the principal values, the
interest rates, the m aturity dates, and a
computation of any material effect on
future earnings. On the other hand, it
would clearly get into the realm of con
fidential matters for the bank to disclose
the details of particular loans subject to
new terms.
The real issue goes to the appropriate
accounting for these restructured loans.
We cannot agree that the loans in ques
tion should be revalued to some approxi
mation of market value. Loan restruc
turing is not an unusual experience in a
bank loan. If a borrower is having d iffi
culty meeting the original terms of a loan,
extending the maturity or lowering the
rate may be the best way of assuring that
the principal will ultimately be paid in
full. A writedown to "m arket value" has
several shortcomings. It implies that a loss
of principal has occurred or w ill occur
and, hence, is likely to be misleading.
Moreover, its impact on management
might well be perverse. The requirement
for writedown may cause bank manage
ments to be more reluctant to agree to
the restructuring that may, as I have

200

F E D E R A L DEPOSIT INSURANCE CO RPORATION

noted already, actually improve chances
of full recovery. Even worse, if temporary
difficulties with loans are going to be sub
ject to such accounting treatment, per
haps the bank w ill decide not to make the
normal risk loans that can lead to such
difficulties, or w ill elect to take adverse
action against the borrower rather than to
effect w orkout arrangements. If banks
change their lending policy away from
one of assuming normal risks and toward
one of making only riskless investments,
small business, farmers, and the whole
economy w ill be the losers. I appreciate
that this exaggerates the possible result
but it does, I believe, illustrate the point.
Again, as a non-accountant, I view any
accounting treatment that leads to poorer
management decisions as poor account
ing. We thus opposed the FASB proposal
and noticed the large number of com
ments from various sectors of the finan
cial community in agreement w ith our
position. Let me stress that we are not
opposing investors' and depositors' right
to know what is relevant to them. We
favor disclosure of the aggregate amount
of loans that have resulted in renegotiated
terms. Disclosure is important to in
vestors and depositors. Reflection on
financial statements as a writedown, how
ever, is a separate question—one which
goes to the ultimate theory and purpose
of accounting statements.
I have stressed that we favor appro
priate disclosure for investors in bank
securities and for bank depositors. Secur
ities laws provide that firms publicly of
fering securities, including bank holding
companies, must make certain disclosures
to investors and potential investors. This
reporting requirement does not directly
apply to banks, though all issuers of
securities are subject to the fraud pro
visions of the law.
IV
The Comptroller of the Currency has
recently issued proposed regulations for
an offering circular describing informa
tion that must be furnished by all na

tional banks before they may issue new
debt or equity securities. Two years ago,
the FDIC issued a proposed offering cir
cular regulation covering the offering of
securities by nonmember banks. We re
ceived many comments on that proposed
reg ula tion , and while our staff has
worked on revisions of the proposal, we
have never issued it in final form. The
reasons are relatively simple. Adopting
SEC-type regulations for smaller institu
tions involves a substantial burden on
small banks seeking to issue securities.
This burden, plus less-than-bullish infor
mation which might be revealed by some
banks, might make it more d iffic u lt for
some banks to raise capital. These are
d ifficu lt hurdles for our agency to over
come. On the other hand, it is clearly
appropriate that potential investors have
the information at hand to determine
whether the securities they are planning
to buy are worth the price. We certainly
recognize that banks are susceptible to
lawsuits based on common law fraud and
violations of section 10(b)(5) in the sale
of their securities.
We have been reviewing the Comp
troller's proposal and find it similar to
ours in most basic respects, although the
Comptroller's proposal would exempt
only issues of under $100 thousand while
ours would exempt issues under $500
thousand. While our Board of Directors
has not reached a conclusion on the staff
revision, the proposed regulation remains
on our pending agenda. The extent to
which we treat large and small banks
differently is an important part not only
of this issue, but of a great many other
supervisory issues.
This discussion of SEC-type regulation
of offering circulars brings us to what is
the most recent issue we have had con
cerning disclosure, and that is negotia
tions concerning the SEC's Guides 3 and
61 that apply to new issues of securities
and to annual reports of bank holding
companies or banks subject to SEC regu
lation. The banking agencies have been

STATEM ENTS BY CO RPO RATIO N DIRECTORS

discussing these matters with the SEC for
about 2 years. A t that time, the SEC was
concerned that bank holding companies
were not making sufficient disclosure
concerning the quality of their subsidiary
banks' loan portfolios. The initial SEC
proposal was that banks be required to
disclose the amount of loans classified
substandard, doubtful, and loss by bank
examiners. We objected to that for the
reasons I mentioned earlier. We would
view it as compromising the confidential
nature of the bank examination process.
For over a year since that time, we have
been discussing, both at the staff level
and among the heads of agencies, what
the best substitute for classified loans
would be in attempting to get some meas
ure of the quality of loan portfolio.
We have had mixed success on the
basic issues discussed. The SEC, for ex
ample, recognized the d ifficu lty in getting
comparable figures on loan commitments
and so dropped that requirement. On the
other hand, the SEC is now requiring that
all bank holding companies offering
securities disclose the amount of loans
past due and the amount of loans on
which the terms have been renegotiated.
Incidentally, the SEC calls these "nonperforming" loans. A more accurate de
scription, in my judgment, is "underper
form ing." While different people may
differ as to whether loans past due should
include loans 30 days past due or 60 or
90, at least these are reasonable objective
categories and we support the effort to
show the potential income impact of
underperforming loans. Our disagreement
has focused on the SEC's desire for
another category of underperforming
loans—loans that raise in management's
mind "serious doubts" that the borrower
will be able to meet the original terms of
the loan. We think this is too subjective
and, in any case, that the principal
amount of such loans is rather meaning
less.
Our discussions over the months with
the SEC have produced some agreements

201

and some moderation of original SEC
positions. I feel that this is a tribute to
the ability of the individuals at the differ
ent agencies to reach positions acceptable
to each other, even though the statutory
philosphy (i.e., disclosure versus con
f id e n t ia lit y ) often was dramatically
opposed.
I believe I can summarize my views on
this whole matter rather simply. I favor
broad and full disclosure. I believe that
depositors and investors in bank securities
should have full information on which to
base their investment or deposit deci
sions. I do not want to see details of indi
vidual transactions made public, nor do I
want to see the confidentiality of the
supervisory examination function seri
ously compromised. I believe that the ac
counting procedures followed by banks
should be in accord with accounting prin
ciples and procedures accepted by the
accounting profession and applied to
o th e r industries, making only those
changes and exceptions for banks that are
warranted by the nature of the banking
business. If a proposed accounting prin
ciple leads to worse economic or business
decisions, serious consideration should be
given to the wisdom of adopting such a
principle, even if it seems to make sense
from an accounting standpoint. If an
accounting change by itself, leads banks
to make poorer investment decisions, or
leads them to refuse to consider a debt
restructuring that may benefit both the
bank and the borrower, or leads the bank
to reject a swap proposal from a REIT
that would benefit all parties, then I
would send the accountants back to the
drawing board. Likewise, of course, if a
banker chooses to make poor business
decisions (such as holding or selling secur
ities) just because of the way he has to
reflect such actions on his books in the
short run, I would like to send him down
to the minor leagues.
In any case, and regardless of differ
ences of opinion on accounting prin
ciples, we are going to see a trend toward

202

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

wider disclosure that I think is healthy
and desirable. We do intend to defend to
the greatest extent possible the preserva
tion of confidentiality in those areas that
should be confidential and we will seek to
avoid disclosures that we think would be
misleading or harmful.
V
Thus far today I have been talking
about accounting and financial disclosure.
But there is another type of disclosure
opportunity available to the banking
industry today that may not be available
much longer. That is the opportunity to
disclose voluntarily and in their own way
the extent to which banks are meeting
what many view as the "social responsi
bilities" of banks. Most businesses are not
subject to pressure along these lines, and
bankers may object to being singled out
for special treatment rather than wel
coming the pressure as an opportunity.
But bankers have often argued that bank
ing is different in that it has greater im pli
cations for public welfare and, thereby,
themselves have supported the arguments
that it may be appropriate to subject
banks to higher social standards.
One area in which banks have lost the
opportunity to to u t their own accom
plishments is the area of disclosure of
investments in mortgages. The Home
Mortgage Disclosure Act now requires
most banks to disclose, by zip codes or
census tracts, the location of their home
mortgage lending activity. By waiting
until Congress acted, banks may have lost
the opportunity to lead disclosure in this
area. This legislation grew out of concern
with redlining and disinvestment in our
cities. While I have grave doubts that this
disclosure w ill shed much light on the

problem of urban disinvestment, this is an
example of interest by the public in the
way the deposits of the public are being
administered and invested by the banks,
and I believe an example in which banks
generally had a good story to tell but in
which they lost the opportunity to tell it
voluntarily.
As I have already indicated, some
types of financial disclosure by banks can
represent violations of privacy or may be
unwise for other reasons. The same may
be true of disclosures of "social respon
sibilities" information. There are some in
o u r s o c ie ty who favor governmentdictated, mandatory credit allocation to
see that what they regard as high priority
credit needs are met. I personally hope
that we can avoid any more government
interference than we already have with
the bank lending function but this may
not be possible or, some would argue,
even desirable. I think we must recognize
that there is a broad social interest in the
lending decisions of the banking industry.
Somehow, bankers must find some way
of disclosing meaningful information to
the public about the nature and character
of their investment decisions. Most banks
probably do a creditable job of meeting
high priority credit needs. But that fact
has not always been demonstrated very
thoroughly or convincingly. If bankers
want to avoid greater pressure on the
direction of government-directed, manda
tory credit allocation, they are going to
have to understand the public perception
of desirable lending and get their message
across as to the type of lending activity
they are conducting. This is a different
type of disclosure than balance sheets and
the forms of financial reports, but it is a
real need.

STATEM ENTS BY CO RPO RATIO N DIRECTORS

Address by Robert E. Barnett, Liquida
tion A ctiv ity *
Over the last few months I have given
a series of talks on .the major functions of
the Federal Deposit Insurance Corpora
tion. These talks have discussed as frankly
and as openly as possible some of the
problems and issues raised by our existing
procedures and policies, and have ex
plored various proposals for change.
These talks have covered our deposit in
surance function, bank examination and
supervision, our handling of consumer
protection regulations, and our responsi
bilities for overseeing financial reporting
and disclosure by banks. There is one
major area of FDIC activity and responsi
b ility that I have not yet discussed—the
liquidation activity of the FDIC.
When a bank fails, we either pay off
the insured depositors or we arrange for
another bank to assume the liabilities and
to purchase some of the assets of the
failed bank. In either case, we have a siz
able liquidation task. In the case of a pay
out, we are left to liquidate all of the
assets of the failed bank. In the case of a
purchase and assumption, we are usually
left with the bulk of the assets to liqui
date, including all of the poor quality
assets. This responsibility for liquidation
of failed bank assets has a number of
aspects which I wish to discuss today.
The two most striking aspects are the size
and growth of that activity.
In terms of assets administered, the
FDIC Liquidation Division is the largest
REIT in the country, the 17th largest
diversified financial firm in the country
(ahead of such giants as Beneficial Fi
nance and First Boston), and the 49th
ranking conglomerate on the Fortune
magazine list of the 500 largest corpora
tions in the country (just ahead of Armco
Steel, Sperry Rand, and Honeywell).
There are 78,000 assets being admin
* P re s e n te d

b e fo re

A s s o c ia tio n ,

San

th e
Juan,

ber 9 , 1976.

P u e r to
P u e r to

R ic o

B a n k e rs

R ic o , D e c e m

203

istered by our liquidators with an aggre
gate book value of $2.6 billion. Over
$900 million of these assets are real estate
related.
To administer these assets, our Liqui
dation Division employs only 583 men
and women operating in 30 States, cover
ing over 79 liquidations. It operates at a
cost of approximately 2 percent of collec
tions, substantially below the costs of
15-20 percent found in nonbanking cor
porate bankruptcies.
This massive size is a recent develop
ment albeit, in our judgment, not neces
sarily a temporary one. In 1974, our
Liquidation Division consisted of 233
employees and comprised about 7 per
cent of all FDIC employees. In 1976, its
583 employees account for over 16 per
cent of all FDIC employees. As recently
as 1972, the assets in our liquidations
totaled under $300 million.
The recent rapid growth of the liqui
dation activity can be easily understood
when we realize that the eight largest
bank failures in FDIC history have occured since October 1973. That 1973 fa il
ure was U.S. National Bank of San Diego
which left us w ith $1.2 billion of assets to
liquidate, our first massive liquidation.
We were trying to absorb that when the
Franklin National Bank failure dropped
$3.6 billion of assets in our laps. All this
can be said as emphatically by saying that
these 8 largest failures consisted of over 5
times as many assets as all the 500 banks
liquidated by the FDIC from its begin
ning until the failure of U.S. National
Bank. This contrasts with the situation
about 15 years ago when our biggest
worry in liquidation cases was the prob
lem of how to value and sell the banking
house of a failed $5-million bank.
O ur e n tire liquidation activity is
guided by one overriding tenet: we are a
fiduciary. That is, we are attempting to
liquidate assets so as to recover the funds
advanced by the Federal Deposit Insur
ance Corporation and to recover funds
for other creditors and stockholders, all

204

F E D E R A L DEPOSIT INSURANCE CO RPO RATIO N

of whom are ultimate beneficiaries of the
receivership estate.
In the case of a payout, all insured
depositors are paid promptly by the
FDIC. Usually, but not always, the FDIC
is appointed receiver of the failed bank.
The Federal Deposit Insurance Corpora
tion, as a result of subrogation of the
insured depositors' claims, becomes a
sizable creditor of the bank and, hence,
has a sizable claim against the receiver
ship. But there are other creditors who
have a claim equal with that of the FDIC.
Frequently there w ill be subordinated
creditors that have a claim that ranks
behind the FDIC and the other general
creditors. There are always stockholders
who have a residual claim if the liquida
tion of the assets generates sufficient
funds to meet all of the creditors' claims.
Wearing our hat as receiver, therefore, we
have an obligation to collect as much as
possible on every asset so as to protect
the rights of creditors and stockholders of
the failed bank.
When we arrange a purchase and
assumption transaction, the FDIC be
comes the major creditor w ith a claim
against the estate of the failed bank. But
even in this case there are claimants, such
as subordinated creditors and stock
holders, who are entitled to any funds
remaining after payment of all general
creditors and after the FDIC recovers the
full amount of its advance (plus interest).
In either case, therefore, whether we have
a payout or a purchase and assumption
transaction, the FDIC is operating as a
fiduciary with an obligation to recover as
much as possible for the ultimate claim
ants on the estate of the failed bank.
The Federal Deposit Insurance Act
itself provides some specific instructions
to the Corporation in its liquidation activ
ity. Our liquidations are to be conducted
"having due regard to the condition of
credit in the locality." Essentially, this
means that the disposition of assets of a
failed bank is to be conducted in an
orderly manner, rather than on a forced

sale basis. This is consistent with both
concern for the impact of forced liquida
tion on the local community and concern
with recovering the maximum amount
possible for the beneficiaries of the liqui
dation. Receiverships of failed banks, like
any receivership, are conducted under the
jurisdiction of the court, and sales of
assets by the receiver are subject to ap
proval by the court.
The receiver's actions, as you would
expect, are more circumscribed and sub
ject to more limitations than an on-going
bank would have in dealing with the same
assets. That is, a bank can take account of
its whole business relationship with a
customer in dealing with the treatment of
a particular loan. For example, in making
a decision whether to foreclose or extend
a loan in default, an operating bank may
consider the deposit business it gets from
the borrower, or the existence of trust
business, or the business of associates of
the borrower that may be promoted or
endangered depending on the decision on
the particular loan. The receiver can make
no such trade-offs and consider no such
outside factors. He must make a credit
decision on the best way to handle a par
ticular loan so as to maximize recovery
on that asset. These characteristics of the
liquidation pose some knotty problems
for us to which I will return later in this
talk.
One reason why our liquidation activ
ities have not been discussed very much
in public by past Chairmen of the FDIC is
that until rather recently our liquidation
activity was modest in size and scope. It
was also a rather simple and straight
forward activity, not requiring direct and
frequent involvement by the Board of
Directors of the FDIC (other than final
approval of sales of assets). One illustra
tion of that is the fact that during World
War II our entire liquidation activity was
moved to Chicago and operated very well
800 miles away from the Board of Direc
tors of the Corporation. Now, however,
liquidation activities are bigger and more

STATEM ENTS BY CORPO RATIO N DIRECTORS

complex and require the frequent involve
ment of FDIC Board members.
I have described the massive size of
our liquidation activity and its extremely
rapid growth. These facts, however im
pressive they may be, do not adequately
convey the change that has taken place in
our liquidation operations. Now we have
not only a higher dollar amount of assets,
but we are getting assets which are much
more complex to administer, let alone sell
or liquidate.
Our philosophy of an orderly liquida
tion frequently requires us to manage
assets for lengthy periods before they can
be sold or collected. In pursuing that
philosophy, we have operated a sizable
navy w ith a fleet consisting of tuna boats,
shrimp boats, and oil tankers. Running a
navy is a complicated business. We have
even had d ifficu lty keeping our boats
afloat. We had an oil tanker run aground
off Havana, and we had a shrimp boat
blown into the main street of Aransas
Pass, Texas, by Hurricane Celia. We have
acquired a loan to the distributor of
movies, one of whose properties is a
major X-rated film . Our prospects for
ultimate collection of that loan depend
on good attendance at that film . We be
came creditor of an individual whose
main source of income to repay our loan
was rental paid for the use of a property
as a bawdy house. We had interests in
taxicab fleets in California, Arizona, and
New York, and in real estate of literally
all kinds in all forms of development and
nondevelopment throughout the United
States.
We have faced the problems of aban
doning or developing farm properties
such as citrus orchards or vineyards in all
stages of development. We have bought
47 wind machines to protect our citrus
crops from freezing (at a total cost of
$427 thousand) and have had to purchase
beehives to assure pollination of our
almond trees. Religion has been part of
our business also. We have foreclosed on
abandoned churches and synagogues al

205

though, fortunately, we have never had to
evict a congregation. We also have posses
sion now of a copy of the Koran valued
in seven figures.
While these may appear to be unusual
assets to be acquired as a result of bank
failures, it is important to realize that we
never get to liquidate the assets of a nor
mal bank. We are always liquidating the
assets of failed banks, and banks that fail
tend to be unusual and into some oddball
financial ventures. Back in the 1950s and
early '60s, when it was mostly small rural
banks that were failing, the liquidation
activity was a simpler one. We took over
an assortment of loans (consumer loans,
home mortgage loans, farm loans, small
business loans) with which our liquidators
built up some fam iliarity and expertise.
We may have had to wait several years to
collect the final payment of a home m ort
gage loan, and there may have been some
d iffic u lt work-out situations on farm
loans, but our liquidators developed ex
pertise in appraising farm property in
many parts of the country and deter
mining the best way to deal with those
loan situations. Oil tankers, movies, vaca
tion home condominiums, taxicab fleets,
and international loans were a different
kind of activity. The liquidator who was
perfectly comfortable in dealing with a
loan secured by 300 acres of cotton in
Texas was not so comfortable in dealing
w ith 30,000 acres in California on which
oranges, avocados, and grapes were being
grown and wine produced.
In this talk, I can describe the scope of
our liquidation activities and tell you how
we have been operating. The scope and
nature of our operation have changed so
dramatically in the last few years that it is
unlikely that the management or pro
cedural approach that was best for the
1960s is still optimal today. We have a
number of studies of our liquidation ef
fo rt under way, and I expect that there
will be both organizational and proce
dural changes introduced in the near fu
ture. Clearly the speed with which we

206

F E D E R A L DEPOSIT INSURANCE CO RPORATION

have been forced to deal with larger and
more complex assets has necessitated
going outside our organization to hire
consultants with knowledge in some of
these particular areas, rather than try to
develop our expertise internally. The
costs associated with this approach dis
turb all of us at the FDIC because we
have always taken pride in our low collec
tion expenses. I suspect that we must be
very careful not to be penny-wise and
pound-foolish in this area, however.
Our administrative and collection costs
have run 2.3 percent of collections over
the years. That is an extremely low figure
compared with any similar business. I rec
ognize that that is not a completely fair
comparison since the FDIC bears some
costs that could reasonably be charged to
liquidations but, in any case, a 2.3 per
cent cost ratio is impressively low. I
might note that one reason for the low
costs is that our salary structure is com
paratively low—our liquidators would be
happy to switch to the 1.5 to 2.0 percent
or more commission basis that private
firms in the liquidation business are
awarded.
Up until the failure of U.S. National
Bank of San Diego, the FDIC recovered,
through its liquidation efforts, 90 percent
of its total cash outlay. That record has
deteriorated recently because of the U.S.
National Bank failure, a failure which left
in the receivership a lot of very poor qual
ity assets. If all our liquidations had assets
like that, our recovery record would be
miserable. As to realization on classified
assets, our collections have averaged
about 30 percent recovery on loans and
other assets classified as “ loss” by exam
iners. We have collected 50 percent of
assets classified as "d o u b tfu l" and about
68 percent of assets classified as "sub
standard." As an aside, I would suggest
that this might show that examiners' eval
uation of assets is pretty accurate.
Because they represent 62 percent of
the assets in the liquidation inventory, it
is worth reviewing our current status with

respect to our largest failures, Franklin
National Bank and U.S. National Bank.
The Corporation has succeeded in col
lecting $1.06 billion on the assets ac
quired in the Franklin liquidation and has
paid over $1 billion of this amount to the
Federal Reserve Bank of New York,
thereby reducing the principal amount
due on the “ w indow " loan extended to
FNB at the time of closing October 8,
1974, from $1.7 billion to $707 million.
Interest at the rate of 7.52 percent per
annum on the note will not be due until
the note matures on October 8, 1977.
The principal book value of assets remain
ing to be liquidated is $1.25 billion com
pared with the principal and accrued
interest on the FDIC's outstanding debt
to the Federal Reserve Bank of New York
of $901 million.
On October 8, 1977, it w ill probably
be necessary for the Corporation to ad
vance an estimated $465 m illion to $665
million from its accumulated trust fund
in order to pay the Federal Reserve Bank
the remaining balance due on the original
$1.7-billion obligation which was owed
by FNB as of its closing. Based on a num
ber of assumptions as to the duration of
the receivership, the pace of collections,
and the results of matters in litigation, it
appears that the Corporation itself will
not suffer any loss in this liquidation.
In the case of U.S. National, the Cor
poration has collected $73 m illion on the
assets acquired and has used $53.3 m il
lion of this amount to repay the Corpora
tion for monies advanced to the receiver
ship. The principal book value of assets
remaining to be liquidated is $392 m il
lion. The question in this liquidation is
how large the loss to the Corporation will
be, not whether there will be one. A t the
pre sen t tim e, we have estimated a
$150-million loss.
I have mentioned the complexity of
the current liquidation activities and
mentioned the requirement we now have
for greater expertise in particular lines of
business and types of loans. We have also

STATEM ENTS BY CO RPORATION DIRECTORS

had a great need for massive legal expert
ise not only because of the great number
of legal problems, but also because of the
legal complexities of the new liquida
tions. Obviously, we have had to employ
private attorneys to assist our own staff.
In arranging a purchase and assump
tion transaction, we retain private counsel
for advice and assistance with respect to
questions of State law and to present the
transaction to the local court. In every
liquidation we need expertise in special
ized areas of State law in connection with
c o lle ctio n litigation and foreclosures.
Some of these claims involve the Bank
ruptcy A ct or arrangement of complex
loan restructurings or workouts. In the
recent large liquidations we have been
involved in unusual and specialized areas
of law. These include class actions, viola
tions of securities laws, common law
fraud, obligations under letter of credit,
attorney's and accountant's malpractice,
and admiralty law.
We spent $4.3 m illion in legal fees in
connection with liquidation activities in
1975, and expect to spend about $7 m il
lion in 1976. While these figures seem
large, if we relate them to the assets we
are liquidating, it appears that legal fees
run well under one-half of 1 percent of
the assets being administered, and under
1 percent of collections. I think this is an
impressively low figure when we compare
it with the legal fees involved in corporate
bankruptcies and receiverships. In fact,
the legal fees individual home buyers
incur in the course of an ordinary sale of
a home, uncomplicated by bankruptcy or
receivership, tend to be higher. We are
concerned about the magnitude of these
costs, however, and have been giving
some consideration to whether we should
expand our own in-house legal staff to
handle some of these legal matters rather
than relying, as we do now, primarily on
hiring local counsel. One problem with
doing the legal work in-house is that we
are conducting liquidations in a variety of
different States and successful work on

207

these liquidation matters requires a
knowledge of local law. It may be cheap
er for us to hire local counsel with the
knowledge of local law at hourly rates
than to attempt to educate and maintain
the fixed costs of an in-house staff to deal
with particular loan situations.
A n o th e r problem that arises fre
quently in liquidation activities involves
further extension of credit. Federal de
posit insurance arose because of concern
about bank depositors. We have been so
successful in our major function that
bank depositors rarely lose when banks
fail. Now it frequently turns out that the
injury to borrowers is more significant
than losses to depositors. In many cases,
borrowers are not affected when a bank
fails. If a borrower has a mortgage loan
from a bank that fails, the FDIC may end
up taking over that loan but the bor
rower's rights are not affected at all.
There is a greater problem for the busi
ness borrower who is expecting to borrow
on a continuing basis from a bank.
A receivership, of course, is not in the
money-lending business. While most busi
ness borrowers are able to shift their
business to another bank and are not sig
nificantly inconvenienced or injured by a
bank failure, some borrowers are faced
with a real problem, or even risk of finan
cial ruin, in the case of a bank failure.
The borrower who has run into d iffic u lty
with his loan and would like additional
funds advanced is going to have a hard
time dealing with a receiver. There may
be some cases in which a receiver will
extend additional credit, but they are
infrequent. Take the situation of a build
er who has a project underway with con
struction financing being provided by the
failed bank. He may need additional
funds to complete the project. The re
ceiver is not inclined to throw good
money after bad and is not in a situation
of a bank lender who may be reluctant to
admit the original mistake. The receiver
may feel that if the project is a good one,
the builder should be able to get credit

208

FE D E R A L DEPOSIT INSURANCE CO RPORATION

somewhere else.
About the only case in which the
FDIC liquidation can advance additional
funds to a borrower is when it is con
cluded that such an advance w ill improve
the net recovery to the estate of the
failed bank. Our concern is with protect
ing the assets that are our responsibility.
The FDIC has occasionally been criticized
for its tight-fisted attitude on the exten
sion of additional credit. While we can
understand and sympathize with the
plight of the borrower, such criticism
misses the point that we are operating in
a fiduciary capacity with our decision
scrutinized by a court from the point of
view of the ultimate claimants on the
failed bank's estate. It is irrelevant to
look at the assets of the FDIC and argue
that the FDIC can afford to extend addi
tional credit. In the final analysis, it is not
FDIC funds that are being loaned. The
funds involved belong ultimately to the
receivership estate of the bank.
While not as painful as the decision to
extend or not to extend additional credit
to a borrower, a much more common prob
lem is the choice between sale of an asset
and continued holding of it. A liquidator
is always anxious to sell an asset when he
feels he has been offered a good price for
it. But if the loan or other asset seems to
pose no credit risk and is paying interest
at an acceptable rate, there may be a
tendency to hold the asset in the hope
that a better offer will materialize or that
the accumulated interest on the asset will
lead to larger total collections. We are
attempting to use the most modern port
folio management techniques to make
correct sell-or-hold decisions but this is a
d iffic u lt task, particularly when we are
faced w ith a divergence of interests be
tween those who would like to get their
money as soon as possible and those
claimants who recognize that their only
hope of any recovery on their investment
is that the liquidation lasts a long time
and earns a great deal o f interest income.
Although we have always tried to

make the optimal decisions in these cases,
some years ago our policy favored hold
ing rather than liquidating assets as quick
ly as possible. Besides that seeming like
the best philosophy for ultimate recov
ery, we had an additional reason for
taking that approach. The FDIC did not
have a great deal of liquidation activity
for a number of years and we felt some
need to maintain trained liquidators so
that we would be prepared for any emer
gency that might arise. This no longer is a
problem. We now have more than enough
work to be done in our on-going liquida
tions. In fact, with liquidation assets now
amounting to a significant fraction of the
insurance fund, we have every incentive
to sell assets as quickly as possible if to
do so maximizes recovery.
Perhaps the most d iffic u lt areas of
decisionmaking with respect to liquida
tion activity are those choices involving
social considerations. We are under an
obligation to do as well as we can for the
ultimate claimants on the estate of the
failed bank. While we try to do well, we
would also like to do good. In many
cases, the borrower whose loan is in de
fault has faced some adversity, frequently
not of his doing. In many cases, we would
like to tell a debtor, after hearing his tale
of woe, that because of his hard luck we
are going to forgive his repayment of his
obligation to us. Unfortunately, we are
not in a position to do that.
To stress once again, we have a fidu
ciary obligation to collect all we can on
the assets we inherit from a failed bank.
We try to be firm but reasonable and
ethical collectors, but collectors we are
and collectors we must be. While this may
be clear in principle, in practice we have
great difficulties. Take this example: We
have taken over a loan to a private school.
The school is in default in its obligation.
The school's physical plant and land is
security for the loan. We can foreclose
and sell off the land and buildings and
recover enough to come out whole. We
do not want to put an educational institu

STATEM ENTS BY CO RPO RATIO N DIRECTORS

tion out of business, yet we have to meet
our fiduciary responsibility.
While we may have d iffic u lt decisions
to make with respect to how hard to
press honest borrowers who have fallen
on hard times, we have no d ifficu lty in
deciding to press our remedies to the
fullest in dealing w ith the people that we
feel are responsible for the demise of the
bank. In many cases, these are insiders—
managers and directors of the bank. Since
1960, we have filed 32 suits against direc
tors and we have 15 additional cases
under consideration. We believe that firm
prosecution in these cases not only is a
means of adding to our recoveries for the
benefit of the bank's creditors and stock
holders, but firm action may be a useful
deterrent to insiders in similar situations.
This aspect of our liquidation activities
thus becomes an intrinsic part of the total
program of bank supervision.
In summary, then, the rapid growth of
our liquidation assets has fundamentally
changed the nature of our liquidation
activity. These new liquidations are not
only bigger and more complex, they are

209

going to be longlasting. While we hope
and expect that the rapid growth of our
liquidation assets is over, we do not ex
pect the size of the operation to shrink
back to its 1973 levels in the foreseeable
future. It w ill take a long time to com
pletely wrap up the affairs of Franklin
and U.S. National Bank, and in the mean
time we w ill inevitably be acquiring other
assets. The failure of International City
Bank of New Orleans w ithin the last
week, for example, added over $100
million to our liquidation portfolio.
In reflection of the size, diversity, and
complexity of our liquidation activity, we
are going to continue to adopt modern
management techniques and make greater
use of outside expertise even though we
recognize that this may add to our costs.
What will be unchanged in the future
is the conduct of our liquidation activities
in a manner befitting the fiduciary nature
of our responsibilities. We expect that our
liquidation operations will be carried on
as efficiently and effectively in our pres
ent complex environment as in the sim
pler pre-billion-dollar failure days.

STATISTICS OF BANKS
AND DEPOSIT INSURANCE
PART SIX

212

Table 102. Changes in number of commercial banks and branches in the United States (States and other
areas) during 1976, by State

Table 105. Number, assets, and deposits of all commercial banks in the United States (States and other
areas), December 31, 1976
Banks grouped by asset size and State

C O R P O R A T IO N

Table 104. Number and assets of all commercial and mutual savings banks (States and other areas),
December 31, 1976
Banks grouped by class and asset size

IN S U R A N C E

Table 103. Number of banking offices in the United States (States and other areas), December 31, 1976
Banks grouped by insurance status and class o f bank, and by State or area and type o f office

D E P O S IT

Table 101. Changes in number and classification of banks and branches in the United States (States and
other areas) during 1976

FEDER AL

NUMBER OF BANKS AND BRANCHES

Banks: Com m ercial banks i n c lu d e t h e f o llo w in g c a te g o rie s o f b a n k in g
in s t it u t io n s :

d e p o s its a n d

are p r o c e e d in g t o

l iq u id a t e t h e i r assets a n d p a y o f f e x is tin g

d e p o s its ;

N a tio n a l b a n k s :

B u ild in g

In c o r p o r a t e d S t a t e b a n k s , t r u s t c o m p a n ie s , a n d b a n k a n d t r u s t c o m p a n ie s
r e g u la r ly e n g a g e d

in t h e b u s in e s s o f re c e iv in g d e p o s its , w h e t h e r d e m a n d o r

t im e , e x c e p t m u t u a l s av in g s b a n k s ;

and

u n io n s , p e rs o n a l

lo a n

a s s o c ia tio n s ,

savings

and

lo a n

a s s o c ia tio n s ,

c r e d it

lo a n c o m p a n ie s , a n d s im ila r in s t it u t io n s , c h a r t e r e d u n d e r

law s a p p ly in g t o su c h in s t it u t io n s o r u n d e r g e n e ra l in c o r p o r a t io n la w s , re
gardless o f w h e t h e r such in s t it u t io n s are a u t h o r iz e d t o a c c e p t d e p o s its fr o m
th e p u b lic o r f r o m t h e ir m e m b e r s a n d reg ard less o f w h e t h e r su c h in s t it u t io n s

In d u s t r ia l a n d

are

M o r r is P la n b a n k s w h ic h

o p e ra te u n d e r g e n e ra l b a n k in g

c a lle d

"b a n k s "

fe w

in s t it u t io n s

a c c e p tin g

d e p o s its

under

p o w e rs

c o d e s , o r a r e s p e c if ic a lly a u t h o r i z e d b y la w t o a c c e p t d e p o s its a n d in p r a c t ic e

g ra n te d in sp e c ia l c h a rte r s a re in c lu d e d ) ;

d o so, o r t h e o b lig a t io n s o f w h ic h a re r e g a rd e d as d e p o s its f o r d e p o s it in s u r
ance;

and s im ila r i n s t it u t io n s e x c e p t th o s e m e n t io n e d in t h e d e s c r ip tio n o f in s t it u

r e g u la t e d c e r t if i c a t e d b a n k in G e o r g ia ; g o v e r n m e n t -o p e r a te d b a n k s in
o p e r a tin g

C om pany

W a s h in g t o n
in

New

Y o r k ; t h e S a v in g s

in t h e S t a t e

a g e n e ra l

in T e x a s ; th e S a ving s B a n ks T r u s t

B a n k and T ru s t C o m p a n y N o rth w e s t

o f W a s h in g t o n ; a n d b ra n c h e s o f fo r e ig n b a n k s e n

d e p o s it

b u s in e s s in

Illin o is , M a s s a c h u s e tts , N e w

Y o rk ,

O r e g o n , W a s h in g t o n , P u e r t o R ic o , a n d V i r g in Islan d s;

B ra n c h e s o f fo r e ig n b a n k s a n d p r iv a te b a n k s w h ic h c o n f in e t h e ir business
t o fo r e ig n

I n s t it u t io n s c h a r t e r e d u n d e r b a n k in g

F e d e ra l R e s e rv e B a n k s a n d o t h e r b a n k s , su c h as t h e F e d e r a l H o m e L o a n
B a n ks

Nondeposit trust companies in c lu d e in s t it u t io n s o p e ra tin g u n d e r t r u s t
c o m p a n y c h a r te r s w h ic h a re n o t r e g u la r ly en g a g e d in d e p o s it b a n k in g b u t a re
e n g a g e d in f id u c ia r y b u s in e s s o t h e r t h a n t h a t in c id e n t a l t o real e s ta te t i t l e o r
in v e s t m e n t a c t iv it ie s .

a n d t h e S a vin g s a n d

Branches; B ra n c h e s in c lu d e all o ffic e s o f a b a n k o t h e r th a n its hea d
o f fic e , a t w h ic h d e p o s its a re re c e iv e d , c h e c k s p a id , o r m o n e y le n t. B a n k in g
fro m

a b a n k in g h o u s e , b a n k in g f a c ilitie s a t g o v e r n m e n t

and

o th e r

f a c ilitie s

o p e r a te d

fo r

l im it e d

p u rp o s e s

are

d e f in e d

c lu d e d , t h o u g h s u c h in s t it u t io n s m a y p e r f o r m m a n y o f th e sa m e f u n c t io n s as
c o m m e r c ia l a n d s av in g s b a n k s :

th e f a c t t h a t in c e r t a in S ta te s , in c lu d in g sev eral t h a t p r o h i b i t t h e o p e r a tio n

have

suspended

h av e ceased

accept new

o f b ra n c h e s , su c h l im it e d

f a c ilitie s a re n o t c o n s id e re d b ra n c h e s w it h i n t h e

m e a n in g o f S t a t e la w .

213

o p e r a tio n s

are

s e p a ra te

e s ta b lis h m e n ts , o ffic e s , a g e n c ie s , p a y in g o r re c e iv in g s ta tio n s , d r iv e - in f a c il
b ra n c h e s u n d e r t h e F e d e r a l D e p o s it In s u r a n c e A c t , s e c tio n 3 ( o ) , reg ard less o f

th a t

c a te g o rie s

Y o r k , w h ic h

B anks

f o llo w in g

B a n k o f t h e S ta te o f N e w

in s t it u t io n s .

itie s ,
th e

Loan

o p e ra te as r e d is c o u n t b a n k s a n d d o n o t a c c e p t d e p o s its e x c e p t f r o m fin a n c ia l

f a c ilitie s

M utual savings banks in c lu d e all b a n k s o p e ra tin g u n d e r S ta te b a n k in g
co d e s a p p ly in g t o m u t u a l s av in g s b a n k s .
in

la w s , b u t o p e r

BRANCHES

r e p o r t e d b y r e lia b le u n o f f ic ia l s o u rc e s t o b e e n g ag ed in d e p o s it b a n k in g .

In s t it u t io n s

o r tru s t c o m p a n y

a tin g as in v e s t m e n t o r t i t l e in s u ra n c e c o m p a n ie s a n d n o t en g ag ed in d e p o s it
b a n k in g o r f id u c ia r y a c tiv itie s ;

P r iv a te b a n k s u n d e r S t a t e s u p e r v is io n , a n d such o t h e r p r iv a te b a n k s as a re

In stitutio ns excluded.

e x c h a n g e d e a lin g s a n d d o n o t r e c e iv e " d e p o s its " as t h a t te r m is

c o m m o n ly u n d e r s to o d ;

AND

gaged

u n d e r s p e c ia l c h a r t e r

tio n s in c lu d e d ;

BANKS

p a n y ,"

D a k o t a a n d P u e r t o R ic o ; a sav in g s i n s t it u t io n , k n o w n as a " t r u s t c o m

A
N o rth

M o r ris P la n c o m p a n ie s , in d u s tr ia l b a n k s , lo a n a n d in v e s t m e n t c o m p a n ie s ,

NUM BER

S t o c k savings b a n k s , in c lu d in g g u a r a n t y savings b a n k s in N e w H a m p s h ire ;

214

Table 101. CHANGES IN NUMBER AND CLASSIFICATION OF BANKS AND BRANCHES IN THE UNITED STATES
(STATES AND OTHER AREAS) DURING 1976
All banks

Commercial banks and nondeposit trust companies
Insured

Type o f change
Total

Insured

Non
insured

Members F.R.
System

Total

Mutual savings banks

Noninsured

State

21,460
21,073

5,695
5,453

18,578
18,043

Non
deposit
trust
com
panies1

Banks
of
deposit

278
264

90
84

Total

Insured

Non
insured

2,553
2,322

2,125
1,897

428
425

ALL BANKING OFFICES
Number of offices, December 3 1,1 97 6 ....................................................................
Number of offices, December 3 1,1 97 5 ....................................................................

48,654
47,239

47,858
46,466

796
773

46,101
44,917

45,733
44,569

Net change during year............................................................................................

1,415

1,392

1,184

1,164

387

242

535

231

228

Offices o p e n e d ...................................................................................................
Banks...............................................................................................................
Branches.........................................................................................................

1,819
193
1,626

1,767
162
1,605

52
31
21

1,574
192
1,382

1,539
161
1,378

691
65
626

197
11
186

651
85
566

26
23
3

9
8
1

245
1
244

228
1
227

17
0
17

Offices closed......................................................................................................
Banks...............................................................................................................
Branches.........................................................................................................

404
153
251

390
144
246

14
9
5

391
150
241

381
141
240

198
58
140

67
20
47

116
63
53

7
6
1

3
3
0

13
3
10

9
3
6

4
0
4

Changes in classification...................................................................................
Among b a n k s ...............................................................................................
Among branches . . .♦................................................................................

0
0
0

+15
+8
+7

-1 5
-8
-7

+1
+1
0

+6
+6
0

-1 0 6
-1 4
-9 2

+112
-1 4
+126

0
+34
-3 4

-5
-5
0

0
0
0

-1
-1
0

+9
+2
+7

-1 0
-3
-7

Number of banks, December 3 1 ,1 9 7 6 .......................................................................
Number of banks, December 3 1 ,1 9 7 5 .......................................................................

15,170
15,130

14,740
14,714

430
416

14,697
14,654

14,411
14,385

4,737
4,744

1,023
1,046

8,651
8,595

2074
195

794
74

473
476

329
329

144
147

Net change during year............................................................................................

+40

+26

+14

+43

+26

-7

-2 3

+56

+12

-3

Banks beginning operation................................................................................
New banks......................................................................................................
Banks added to count2 ................................................................................

193
180
13

162
162
0

31
18
13

192
179
13

161
161
0

65
65
0

11
11
0

85
85
0

23
13
10

8
5
3

1
1
0

0
0
0

Banks ceasing operation...................................................................................
Absorptions, consolidations, and m e rg ers ..............................................
Closed because of financial d iffic u ltie s .....................................................
Other liquidations.........................................................................................
Discontinued deposit operation.................................................................
Banks deleted from c o u n t..........................................................................

153
144
4
4
1
0

144
141
2
1
0
0

9
3
2
3
1
0

150
141
4
4
1
0

141
138
2
1
0
0

58
57
1
0
0
0

20
20
0
0
0
0

63
61
1
1
0
0

6
2
2
2
0
0

3
1
0
1
1
0

3
3
0
0
0
0

0
0
0
0
0
0

Noninsured banks becoming insured..........................................................................

BANKS

-9

-6

-3

FEDERAL DEPOSIT INSURANCE CORPORATION

National

Not
mem
bers
F.R.
System

Total

0
0
0
0
0
0
0

-1
0
0
0
0
-1
0

+1
0
0
0
0
+1
0

+1
0
0
0
0
0
+1

0
0
0
0
0
-1
+1

-1 4
+10
-2 4
0
0
0
0

-1 4
-2
+1
+10
-2 3
0
0

+28
-8
+23
-1 0
+23
-1
+1

+1
0
0
0
0
+1
0

0
0
0
0
0
0
0

-1
0
0
0
0
0
-1

0
0
0
0
0
0
0

Changes not involving number in any class
Change in t it le ...............................................................................................
Change in lo c a t io n .....................................................................................
Change in title and lo c a tio n ......................................................................
Change in name of lo c a tio n ......................................................................
Change in location w ith in c ity ...................................................................

350
18
5
6
267

347
18
5
6
263

3
0
0
0
4

344
18
5
6
262

342
18
5
6
258

124
8
2
2
85

27
0
3
0
7

191
10
0
4
166

1
0
0
0
3

1
0
0
0
1

6
0
0
0
5

5
0
0
0
5

1
0
0
0
0

...

Number of branches, December 31, 19763 .............................................................
Number of branches, December 3 1 , 19753 .............................................................

33,484
32,109

33,118
31,752

366
357

31,404
30,263

31,322
30,184

16,723
16,329

4,672
4,407

9,927
9,448

71
694

11
104

2,080
1,846

1,796
1,568

284
278

Net change during year............................................................................................

+1,375

+1,366

+1,141

+1,138

+394

+265

+479

+234

+228

Branches opened for business.........................................................................
Facilities designated by T re a sury.............................................................
Absorbed bank converted to b ra n c h .......................................................
Branch replacing head office relocated....................................................
New branches...............................................................................................
Branches and/or facilities added to count2 ..........................................

1,626
3
127
28
1,418
50

1,605
3
127
28
1,398
49

21
0
0
0
20
1

1,382
3
125
28
1,181
45

1,378
3
125
28
1,177
45

626
2
65
6
524
29

186
1
28
2
149
6

566
0
32
20
504
10

3
0
0
0
3
0

1
0
0
0
1
0

244
0
2
0
237
5

227
0
2
0
221
4

17
0
0
0
16
1

Branches discontinued......................................................................................
Facilities designated by T re a sury.............................................................
Branches........................................................................................................
Branches and/or facilities deleted from c o u n t.......................................

251
8
218
25

246
8
213
25

5
0
5
0

241
8
208
25

240
8
207
25

140
4
129
7

47
1
36
10

53
3
42
8

1
0
1
0

0
0
0
0

10
0
10
0

6
0
6
0

4
0
4
0

Other changes in classification.........................................................................
Branches changing class as a result of conversion.................................
Branches of noninsured banks admitted to insurance...........................
Branches transferred through absorption, consolidation, or merger. .
Branches of insured banks withdrawing from F.R.S.............................

0
0
0
0
0

+7
0
+7
0
0

-7
0
-7
0
0

0
0
0
0
0

-9 2
-3 1
0
-6 1
0

+126
+ 16
0
+165
-5 5

-3 4
+15
0
-1 0 4
+55

0
0
0
0
0

+7
0
+7
0
0

-7
0
-7
0
0

Changes not involving number in any class
Changes in operating powers of b ra n c h e s .............................................
Branches transferred through absorption, consolidation, or merger. .
Changes in title , location, or name of lo c a t io n ....................................

5
485
555

5
485
554

0
0
1

5
485
555

5
483
516

1
176
256

1
264
69

3
43
191

0
0
0

0
0
1

0
2
38

0
0
0

Change in corporate powers
Granted trust pow ers..................................
BRANCHES

215

11ncludes noninsured nondeposit trust companies, members of the Federal Reserve System.
2 Banks or branches opened prior to 1976 but not included in count as of December 31, 1975.
3 1ncludes facilities established at the request of the Treasury or commanding officer of government installations, and also a few seasonal branches that were not in operation as of December 31.
4 Revised.

NUMBER OF BANKS AND BRANCHES

Other changes in classification.........................................................................
National succeeding State b a n k ................................................................
State succeeding national b a n k ................................................................
Admission of insured bank to F.R. S y s te m ..........................................
Withdrawal from F.R. System w ith continued insurance.....................
Insured bank becoming noninsured bank
..........................................
Mutual savings bank converted to commercial b a n k ...........................

216

Table 102. CHANGES IN NUMBER OF COMMERCIAL BANKS AND BRANCHES IN THE UNITED STATES
(STATES AND OTHER AREAS) DURING 1976, BY STATE

Other

Branches

Other

156

141

208

155

140

202

0
0
0
0
0

27
11
20
22
125

2
0
0
1
3

1
0
0
1
4

0
0
1
0
1

2
0
5
0
15

0
1
0
0
2

9
2
0
0
12

6
0
0
0
0

2
7
6
4
30

1
3
0
0
3

1
2
0
0
2

1
0
0
0
0

1
2
0
3
2

0
0
1
0
1

+27
+2
+11
+17
+39

4
0
0
19
3

0
0
0
1
0

29
2
12
20
37

11
0
0
1
3

6
0
0
0
2

0
0
0
0
0

12
0
1
2
1

1
0
0
2
0

-2
NA
+1
0
-5

+13
+18
+51
+49
+4

0
0
3
1
0

0
0
0
0
0

15
18
50
47
6

3
0
1
2
2

2
0
1
1
3

0
0
1
0
2

3
0
0
0
2

2
0
0
0
2

751
905
1,560
52
546

-2
-2
+9
+5
-1

+32
+23
+73
+5
+31

0
1
9
5
1

0
1
0
0
1

38
29
83
5
32

2
4
2
0
3

2
4
0
0
3

0
0
0
0
0

5
10
11
0
3

3
0
1
0
1

320
16
96
111
112

+5
+2
+3
NA
NA

+19
+2
+2
+2
+7

6
2
2
0
0

0
0
1
0
0

20
2
5
2
9

2
0
0
0
0

1
0
0
0
0

0
0
0
0
0

2
0
2
0
2

1
0
1
0
0

Other

New

Other

+1,141

179

1,226

+1,141

177

1,221

457
88
443
318
3,585

+4
+1
+1
-1
+9

+27
+10
+15
+23
+ 111

5
1
2
0
14

346
72
18
16
747

54
564
137
130
196

+13
0
NA
NA
+10

+2
+8
+5
+1
+30

718
156
211
233
948

444
11
24
1,235
407

691
154
200
216
909

-2
NA
NA
+20
+1

659
616
343
254
43

421
169
560
634
291

661
616
342
254
48

408
151
509
585
287

M aryland.....................................
Massachusetts............................
M ichigan.....................................
M inn eso ta ..................................
Mississippi..................................

113
148
360
752
184

783
928
1,633
57
577

115
150
351
747
185

M is s o u ri.....................................
M o n ta n a .....................................
Nebraska.....................................
Nevada........................................
New Hampshire.........................

711
158
456
8
79

339
18
98
113
119

706
156
453
8
79

Branches

30,263

+43

29,980

+41

283

484
98
458
341
3,696

299
11
23
262
216

359
72
18
16
757

56
572
142
131
226

Georgia........................................
H a w a ii........................................
Idaho...........................................
I llin o is ........................................
Indiana........................................

442
11
24
1,255
408

I o w a ...........................................
K ansas........................................
Kentucky ..................................
Louisiana.....................................
Maine...........................................

Branches

31,404

14,654

31,121

14,630

283

A la ba m a .....................................
Alaska ........................................
A rizona........................................
Arkansas.....................................
C a lifo rn ia ..................................

303
12
24
261
225

C olorado.....................................
C o nn e cticut...............................
Delaware.....................................
D istrict of C o lu m b ia ...............
F lo rid a ........................................

Branches

Total United States...................

14,697

50 States and 0.C ......................

14,671

Other areas..................................
States

FEDERAL DEPOSIT INSURANCE CORPORATION

Absorptions

New

Banks

Branches

Banks

Branches

Banks

Dec. 31, 1975

Dec. 31, 1976

Ceasing operation in 1976

Beginning operation in 1976

Net change
during 1976

In operation
State

195
83
277
92
171

1,462
210
3,266
1,621
94

209
81
305
94
172

1,417
206
3,206
1,585
89

-1 4
+2
-2 8
-2
-1

+45
+4
+60
+36
+5

2
2
10
2
0

0
0
0
0
0

47
7
67
35
5

15
0
38
4
1

16
0
38
4
0

0
0
0
0
1

14
2
37
3
1

3
1
8
0
0

O h io ...........................................
O kla ho m a ..................................
O regon........................................
Pennsylvania...............................
Rhode Is la n d ............................

490
475
48
392
17

1,739
104
478
2,324
224

496
467
47
398
16

1,674
99
447
2,275
220

-6
+8
+1
-6
+1

+65
+5
+31
+49
+4

3
7
2
0
0

0
1
0
0
2

65
5
33
58
5

8
0
1
6
0

9
0
1
6
0

0
0
0
0
1

8
0
3
15
1

0
0
0
0
0

South C a ro lin a .........................
South D a k o ta ............................
Tennessee..................................
Texas...........................................
U t a h ...........................................

90
157
348
1,363
67

607
129
814
157
209

90
158
344
1,342
64

601
125
772
138
204

l\IA
-1
+4
+21
+3

+6
+4
+42
+19
+5

0
1
5
25
3

0
0
0
0
0

12
2
49
18
5

0
2
4
2
0

0
2
1
3
0

0
0
0
1
0

6
0
11
0
0

0
0
0
1
0

V e rm o n t.....................................
Virginia........................................
W a sh ing ton ...............................
West V ir g in ia ............................
W isc o n s in ..................................
Wyoming.....................................

30
284
91
222
630
78

142
1,211
722
49
347
2

32
291
98
219
628
77

139
1,174
685
35
336
2

-2
-7
-7
+3
+2
+1

+3
+37
+37
+14
+ 11
NA

0
5
2
3
3
1

0
0
0
0
0
0

3
35
31
14
10
0

2
12
9
1
1
0

2
12
9
0
1
0

0
0
0
0
0
0

2
9
3
1
0
0

0
1
0
0
0
0

1
0
18
7

29
2
226
26

1
0
15
8

32
2
221
28

NA
NA
+3
-1

-3
NA
+5
-2

0
0
2
0

0
0
1
0

0
0
5
0

0
0
0
1

0
0
0
0

3
0
0
3

0
0
0
0

Other areas
Pacific Islands............................
Canal Zone..................................
Puerto R ic o ...............................
Virgin Isla nd s............................

NA—No activity.

217

NUMBER OF BANKS AND BRANCHES

New Jersey..................................
New M e xico ...............................
New Y o r k ..................................
North C a ro lin a .........................
North D a k o ta ............................

218

T A B L E 103. N U M B E R OF B A N K I N G O F F IC E S IN T H E U N I T E D S T A T E S (S T A T E S A N D O T H E R A R E A S ), D E C E M B E R 31, 1976
BANKS GROUPED BY INSURANCE STATUS AND CLASS OF BANK, AND BY STATE OR AREA AND TYPE OF OFFICE
A ll banks

Commercial banks and nondeposit trust companies
Insured

Total

United States-all offices............... 48,657
Banks.............................................. 15,172
Unit banks.................................. 9,039

Insured

Non
insured

Total

Na
tional

State

Nonmem
bers
F.R.
Sys
tem

Members F. R.
System

Banks
of de
posit2

Non
deposit
trust
com
panies3

Total

Insured

Non
insured

All
banks
of
#4n
oeposit

Com
mercial
banks
of
deposit

Mutual
savings
banks

47,858
14,740

799
432

46,104
14,699

45,733
14,411

21,460
4,737

5,695
1,023

18,578
8,651

281
209

90
79

2,553
473

2,125
329

428
144

98.5
97.7

99.4
98.6

83.2
69.6

6,133

8,744
5,996

295
137

8,958
5,741

8,698
5,713

2,603
2,134

526
497

5,569
3,082

188
21

72
7

81
392

46
283

35
109

97.5
97.9

97.9
99.6

56.8
72.2

Branches4 ..................................... 33,485

33,118

367

31,405

31,322

16,723

4,672

9,927

2,080

1,796

284

98.9

99.8

86.3

50 States & D.C.-all offices. . . . 48,348
Banks.............................................. 15,146
Unit banks.................................. 9,027

47,590
14,726

758
420

45,795
14,673

45,465
14,397

21,402
4,735

5,695
1,023

18,368
8,639

240
197

90
79

2,553
473

2,125
329

428
144

98.6
97.7

99.5
98.7

83.2
69.6

6,119

8,740
5,986

287
133

8,946
5,727

8,694
5,703

2,602
2,133

526
497

5,566
3,073

180
17

72
7

81
392

46
283

35
109

97.6
97.9

98.0
99.7

56.8
72.2

Branches4 ..................................... 33,202

32,864

338

31,122

31,068

16,667

4,672

9,729

2,080

1,796

284

99.0

99.9

86.3

309
26

268
14

41
12

309
26

268
14

58
2

0
0

210
12

41
12

0
0

86.7
53.8

0.0
0.0

Banks operating branches . . .

12
14

4
10

8
4

12
14

4
10

1
1

0
0

3
9

8
4

0
0

33.3
71.4

0.0
0.0

Branches4 .....................................

283

254

283

254

198

89.8

0.0

787
303

0
0

787
303

401
97

41
18

345
188

0
0

100.0
100.0

0.0
0.0

Banks operating branches . . .

153
150

0
0

153
150

35
62

10
8

108
80

0
0

100.0
100.0

0.0
0.0

Branches........................................

484

304

157

100.0

0.0

Alaska-all offices............................
Banks..............................................
Unit banks.................................

114
14

0
0

110
12

83
6

0
0

27
6

0
0

4
2

0
0

100.0
100.0

Banks operating branches . . .

Banks operating branches . . .
Other Areas—all offices...................
Banks..............................................
Unit banks..................................

State
Alabama-all o ffic e s ......................
Banks..............................................
Unit banks..................................

Banks operating branches . . .

3
11

0
0

2
10

0
6

0
0

2
4

0
0

1
1

0
0

100.0
100.0

Branches ........................................

100

100.0

Arizona—all offices.........................
Banks..............................................
Unit banks..................................

482
24

474
16

8
8

482
24

474
16

311
3

0
0

163
13

0
0

8
8

0
0

100.0
100.0

0.0
0.0

Banks operating branches . . .

14
10

6
10

8
0

14
10

6
10

1
2

0
0

5
8

0
0

8
0

0
0

100.0
100.0

0.0
0.0

Branches ........................................

458

308

150

100.0

0.0

FEDERAL DEPOSIT INSURANCE CORPORATION

State and type of hank
or office

Percentage insured1

Mutual savings banks
Noninsured

Arkansas-all o ffic e s ......................
Banks..............................................
Unit banks..................................

602
261

598
257

4
4

Banks operating branches . . .

117
144

113
144

4
0

144

113
144

Branches ........................................

341

169

154

California-all offices......................
Banks..............................................
Unit banks..................................

3,921
225

3,898
210

23
15

3,921
225

3,898
210

2,778
58

333
7

787
145

602
261
777

598
257

242
73
77

25
7
7

331
177

95
82

1
1
7

3
3

0
0

99.8
99.6

0.0
0.0

3
0

0
0

99.1
100.0

0.0
0.0

100.0

0.0

0
0

23
15

0
0

100.0
100.0

0.0
0.0

78
147

68
142

10
5

78
147

68
142

13
45

0
7

55
90

0
0

10
5

0
0

100.0
100.0

3,696

3,688

3,696

3,688

2,720

326

642

100.0

0.0

Colorado-all o ffices......................
Banks..............................................
Unit banks..................................

415
359

337
281

78
78

415
359

337
281

163
132

19
16

155
133
7 14

78
78

0
0

81.2
78.3

0.0
0.0

Banks operating branches . . .

309
50

231
50

78
0

309
50

231
50

103
29

14
2

78
0

0
0

74.8
100.0

Branches ........................................

100.0

0.0

Connecticut-all o ffic e s ................
Banks..............................................
Unit banks..................................

983
138

982
137

1
1
7

644
72

643
71

285
23

275
46
77

1
1
7

0
0

339
66
7

0
0

99.9
99.3

99.8
98.6

100.0
100.0

0
0

339
66
7

0
0

95.7
100.0

93.8
100.0

100.0
100.0

229

273

100.0

150
12

0
0

1
1
7

25
2

0
0

100.0
100.0

Banks operating branches . . .

23
115

22
115

16
56

15
56

3
20

Branches..................... ..................

845

572

262

83
2
7
7
81

Delaware-all o ffices......................
Banks..............................................
Unit banks..................................

185
20

184
19

1
1
7

160
18

159
17
7

9
5

0
0

Banks operating branches . . .

8
12

7
12

8
10

2
3

0
0

5
7

0
0

0
2

0
0

100.0
100.0

0.0
100.0

Branches ........................................

165

142

138

100.0

D.C.-all offices...............................
Banks..............................................
Unitbanks ..................................

147
16

0
0

147
16

144
15

0
0

3
1

0
0

100.0
100.0

0.0
0.0

3
13

0
0

3
13

3
12

0
0

0
1

0
0

100.0
100.0

0.0
0.0

Banks operating branches . . .
Branches........................................

131

129

100.0

0.0

Florida-all o ffic e s .........................
Banks..............................................
Unit banks..................................

983
757

979
753

4
4

983
757

979
753

384
306

35
31

560
416

1
1
7

3
3

0
0

99.9
99.9

0.0
0.0

Banks operating branches . . .

554
203

550
203

4
0

554
203

550
203

230
76

28
3

292
124

3
0

0
0

99.8
100.0

Branches ........................................

226

144

100.0

0.0

Georgia—all offices.........................
Banks..............................................
Unit banks..................................

1,160
442

1,159
441

1
1
7

1,160
442

1,159
441

387
64
77

82
9

690
368

1
1
7

0
0

99.9
99.8

0.0
0.0

Banks operating branches . . .

220
222

219
222

220
222

219
222

2
7

200
168

0
0

99.5
100.0

Branches ........................................

718

323

322

100.0

0.0

Hawaii-all offices............................
Banks..............................................
Unit banks..................................

167
11
7

161
8

6
3
7

167
11
7

161
8

13
2

0
0

148
6

0
0

6
3
7

0
0

100.0
100.0

0.0
0.0

0
0

0.0
100.0

0.0
0.0

100.0

0.0

Banks operating branches . . .

0
8

Branches ........................................

156

153

0
8

0
2

0
0

0
6

0
0

156

153

142

2
3

219

2
3

NUMBER OF BANKS AND BRANCHES

Banks operating branches . . .
Branches4 .....................................

220

TABLE 103. NUMBER OF BANKING OFFICES IN THE UNITED STATES (STATES AND OTHER AREAS),
D EC E M B E R 31, 1 9 7 6 - C O N T I N U E D
BANKS GROUPED BY INSURANCE STATUS AND CLASS OF BANK, AND BY STATE OR AREA AND TYPE OF OFFICE

Insured

Total

Insured

Non
insured

Total

Members F.R.
System

Na
tional
Idaho-all o ffices............................
Banks..............................................
Unit banks..................................

Banks operating branches . . .

Noninsured

State

Nonmem
bers
F.R.
Sys
tem

Banks
of de
posit2

Non
deposit
trust
com
panies3

Total

Insured

Non
insured

A ll
banks
of
de
posit

Com
mercial
banks
of
deposit

Mutual
savings
banks

235
24

0
0

235
24

172
6

10
4

53
14

0
0

100.0
100.0

0.0
0.0

9
15

0
0

9
15

1
5

2
2

6
8

0
0

100.0
100.0

0.0
0.0

Branches ........................................

211

166

100.0

0.0

Illinois-all offices............................
Banks..............................................
Unit banks..................................

1,488
1,255

1,458
1,225

30
30

1,488
1,225

1,458
1,225

540
425

87
70

831
730

23
23

0
0

98.4
98.2

0.0
0.0

1,029
226

999
226

30
0

1,029
226

999
226

314
111

54
16

631
99

23
0

7
7
7

0
0

97.7
100.0

0.0
0.0

Banks operating branches . . .
Branches ........................................

233

115

101

100.0

0.0

Indiana-all offices.........................
Banks..............................................
Unit banks..................................

1,362
412

1,360
410

2
2

1,356
408

1,354
406

601
120

97
44

656
242

1
1

6
4

0
0

99.9
99.8

100.0
100.0

Banks operating branches . . .

158
254

156
254

2
0

156
252

154
252

33
87

21
23

100
142

1
0

2
2

0
0

99.4
100.0

100.0
100.0

Branches ........................................

950

948

481

414

100.0

Iow a-all offices...............................
Banks..............................................
Unit banks..................................

1,080
659

1,073
652

185
100

91
46

797
506

6
6

402
257

395
257

52
48

25
21

318
188

6
0

1
1
7

Banks operating branches . . .

395
257

7
7
7

1,080
659

402
257

Branches ........................................

421

291

Kansas-all offices............................
Banks..............................................
Unit banks..................................

785
616

784
615

1
1

785
616

784
615

240
169

25
20

519
426

0
0

Banks operating branches . . .

499
117

498
117

1
0

499
117

498
117

122
47

16
4

360
66

1
1
7

0
0

Branches ........................................

169

96
10

494
250

1
1

Kentucky-all offices......................
Banks..............................................
Unit banks..................................

903
343

902
342

1
1

903
343

902
342

312
82

0
0

99.4
99.1

0.0
0.0

0
0

98.5
100.0

0.0
0.0

100.0

0.0

0
0

99.9
99.8

0.0
0.0

0
0

99.8
100.0

0.0
0.0

100.0

0.0

0
0

99.9
99.7

0.0
0.0

0
0

99.4
100.0

0.0
0.0

100.0

0.0

Banks operating branches . . .

158
185

157
185

1
0

158
185

157
185

25
57

4
6

128
122

1
0

0
0

Branches ........................................

560

230

244

FEDERAL DEPOSIT INSURANCE CORPORATION

State and type of bank
or office

Percentage insured1

Mutual savings banks

Commercial banks and nondeposit trust companies

A ll banks

Louisiana-all o ffic e s ......................
Banks..............................................
Unit banks..................................

Banks operating branches . . .

888
254

0
0

888
254

308
54

58
7

522
193

0
0

100.0
100.0

0.0
0.0

79
175

0
0

79
175

11
43

1
6

67
126

0
0

100.0
100.0

0.0
0.0

Branches ........................................

634

254

329

100.0

0.0

M aine-all o ffic e s ............................
Banks..............................................
Unit banks..................................

431
74

0
0

334
43

135
17

37
3

162
23

0
0

97
31

0
0

100.0
100.0

12
62

0
0

4
39

1
16

0
3

3
20

0
0

8
23

0
0

100.0
100.0

357

291

118

139

100.0

M aryland-all o ffic e s ......................
Banks..............................................
Unit banks ..................................

946
116

0
0

896
113

413
41
7

101
6

382
66

0
0

50
3

0
0

100.0
100.0

1
5

24
42

0
0

0
3

0
0

100.0
100.0

0.0
100.0

Banks operating branches . . .

32
84

0
0

32
81

0
0

Branches ........................................

830

783

372

316

100.0

Massachusetts-all o ffic e s ............
Banks..............................................
Unit banks..................................

1,625
316

1,186
165

439
151

1,079
150

1,068
143

580
75

183
12

305
56

10
6

1
1

546
166

118
22

428
144

73.0
52.4

99.1
96.0

21.6
13.3

Banks operating branches . . .

59
257

21
144

38
113

20
130

17
126

9
66

0
12

8
48

2
4

1
0

39
127

4
18

35
109

36.2
56.0

89.5
96.9

10.3
14.2

Branches4 .....................................

1,309

1,021

288

929

925

505

171

249

380

284

78.0

99.6

25.3

M ichig a n-a ll o ffic e s ......................
Banks..............................................
Unit banks..................................

1,993
360

1,990
359

3
1

1,993
360

1,990
359

915
122

576
89

499
148

3
1

0
0

99.8
99.7

0.0
0.0

Banks operating branches . . .

85
275

85
274

0
1

85
275

85
274

19
103

18
71

48
100

0
0

100.0
99.6

0.0
0.0

Branches ........................................

1,633

1,631

1,633

1,631

793

487

351

0
1
2

99.9

0.0

M innesota-all offices......................
Banks..............................................
Unit banks..................................

810
753

808
751

2
2

809
752

807
750

231
203

33
31

543
516

2
2

0
0

1
1

0
0

99.8
99.7

100.0
100.0

100.0
0.0

Banks operating branches . . .

701
52

699
52

2
0

700
52

698
52

180
23

29
2

489
27

2
0

0
0

1
0

0
0

99.7
100.0

Branches........................................

100.0

0.0

Mississippi-all o ffic e s ...................
Banks..............................................
Unit banks..................................

761
184

760
183

1
1

761
184

760
183

261
38

24
6

475
139

0
0

1
1

0
0

100.0
100.0

0.0
0.0

Banks operating branches . . .

49
135

48
135

1
0

49
135

48
135

6
32

2
4

40
99

0
0

1
0

0
0

100.0
100.0

Branches ........................................

577

223

336

100.0

0.0

M issouri-all offices.........................
Banks..............................................
Unit banks..................................

1,050
711

1,045
706

5
5

1,050
711

1,045
706

186
115

102
62

757
529

1
1

4
4

0
0

99.9
99.9

0.0
0.0

Banks operating branches . . .

431
280

426
280

5
0

431
280

426
280

61
54

32
30

333
196

1
0

4
0

0
0

99.8
100.0

0.0
0.0

Branches ........................................

339

228

100.0

0.0

M ontana-all o ffic e s ......................
Banks..............................................
Unit banks..................................
Banks operating branches . . .
Branches........... ............................

176
158

173
155

3
3

176
158

173
155

64
56

50
45

59
54

0
0

3
3

0
0

100.0
100.0

0.0
0.0

140
18

137
18

3
0

140
18

137
18

48
8

40
5

49
5

0
0

3
0

0
0

100.0
100.0

0.0
0.0

100.0

0.0

NUMBER OF BANKS AND BRANCHES

Banks operating branches . . .
Branches ........................................

222

TABLE 103. NUMBER OF BANKING OFFICES IN THE UNITED STATES (STATES AND OTHER AREAS),
D EC E M B E R 31, 197 6 —C O N T I N U E D
BANKS GROUPED BY INSURANCE STATUS AND CLASS OF BANK, AND BY STATE OR AREA AND TYPE OF OFFICE

Total

Insured

Non
insured

Total

Members F.R.
System

Na
tional
Nebraska-all offices......................
Banks..............................................
Unitbanks ..................................

554
456

548
450

6
6

554
456

548
450

171
120

State

Nonmem
bers
F.R.
Sys
tem

Banks
of de
posit2

Non
deposit
trust
com
panies3

Total

Insured

Non
insured

All
banks
of
de
posit

Com
mercial
banks
of
deposit

Mutual
savings
banks

10
8

367
322

0
0

6
6

0
0

100.0
100.0

0.0
0.0

7
1
2

285
37

0
0

6
0

0
0

100.0
100.0

0.0
0.0

100.0

0.0

19
1

20
3

0
0

100.0
100.0

0.0
0.0

Banks operating branches . . .

383
73

377
73

6
0

383
73

377
73

85
35

Branches ........................................

I\levada-all o ffic e s .........................
Banks..............................................
Unit banks..................................

121
8

0
0

121
8

82
4
7

0
1

0
3

0
0

100.0
100.0

100.0

0.0

1
1
7

1
1

60
27

0
0

99.6
99.0

99.5
98.7

100.0
100.0

Banks operating branches . . .

1
7

0
0

1
7

Branches ........................................

113

121
8
7
7
113

New Hampshire-all offices . . . .
Banks..............................................
Unit banks..................................

258
106

256
104

2
2

198
79

196
77

132
43

4
2

60
32

Banks operating branches . . .

39
67

37
67

2
0

27
52

25
52

10
33

1
0

12
15

0
0

97.4
100.0

96.2
100.0

100.0
100.0

152

119

1
1
2

14
18

Branches ........................................

100.0

New Jersey-all offices...................
Banks..............................................
Unit banks..................................

1,803
215

0
0

1,657
195

1,124
104

231
19

302
72

0
0

146
20

0
0

100.0
100.0

0
19

20
52

0
0

3
17

0
0

100.0
100.0

126

100.0

Banks operating branches . . .

34
181

0
0

31
164

11
93

Branches........................................

1,588

1,462

1,020

212

230

New Mexico-all o ffic e s ................
Banks..............................................
Unit banks..................................

293
83

292
82

1
1

293
83

292
82

153
38

21
7

0
0

1
1

0
0

100.0
100.0

0.0
0.0

Banks operating branches . . .

20
63

19
63

1
0

20
63

19
63

8
30

2
5

118
37
9

0
0

1
0

0
0

100.0
100.0

0.0
0.0

Branches ........................................

210

115

100.0

0.0

New Y o rk-all offices......................
Banks..............................................
Unit banks..................................

4,417
395

4,361
348

56
47

3,543
277

3,487
230

1,539
129

1,751
56

197
45

51
42

5
5

874
118

0
0

98.8
89.2

98.6
84.6

100.0
100.0

Banks operating branches . . .

111
284

70
278

41
6

108
169

67
163

36
93

13
43

18
27

36
6

5
0

3
115

0
0

66.0
97.9

65.0
96.4

100.0
100.0

Branches4 .....................................

4,022

4,013

3,266

3,257

1,410

1,695

152

756

99.8

99.7

100.0

FEDERAL DEPOSIT INSURANCE CORPORATION

Noninsured

Insured
State and type of bank
or office

Percentage insured1

Mutual savings banks

Commercial banks and nondeposit trust companies

A ll banks

North Carolina-all offices............
Banks..............................................
Unit banks..................................

1,702
91

11
1

1,713
92

1,702
91

815
28

Banks operating branches . . .

20
72

20
71

0
1

20
72

20
71

6
22

Branches........................................

1,621

1,611

1,621

1,611

North Dakota-all o ffic e s .............
Banks..............................................
Unit banks..................................

265
171

259
169

6
2

265
171

259
169

Banks operating branches . . .

102
69

101
68

1
1

102
69

Branches ........................................

Ohio—all offices...............................
Banks..............................................
Unit banks..................................

2,229
490

2,228
489

Banks operating branches . . .

154
336

153
336

1
1
7

Branches ........................................

1,739

Oklahoma-all offices......................
Banks..............................................
Unit banks..................................

579
475

882
61

11
1

0
0

13
48

0
1

0
0

787

5
2
7
7
3

821

68
43

7
4

184
122

0
0

101
68

21
22

2
2

78
44

0
0

6
2
7
7
4

2,229
490

2,228
489

1,244
219

542
113

442
157

154
336

153
336

45
174

44
69

64
93

1,739

1,025

429

285

573
469

6
6

579
475

573
469

255
195

14
13

304
261

0
0
0

0
0

99.4
98.9

0.0
0.0

0
0

100.0
98.6

0.0
0.0

99.4

0.0

0
0

97.7
98.8

0.0
0.0

0
0

99.0
98.6

0.0
0.0

95.7

0.0

0
0

100.0
99.8

0.0
0.0

0
0

99.4
100.0

0.0
0.0

100.0

0.0

5
5

1
1
7

0
0

99.1
98.9

0.0
0.0

1
1
7

Banks operating branches . . .

375
100

369
100

6
0

375
100

369
100

138
57

12
1

219
42

5
0

0
0

Branches ........................................

104

Oregon-all offices.........................
Banks..............................................
Unit banks..................................

532
49

528
47

526
48

522
46

0
0

197
39

6
1

15
32

16
32

15
31

0
0

14
25

0
0

0
1

Branches4 .....................................

483

481

478

476

318

158

4
2
7
7
2

0
0

16
33

325
7
7

Banks operating branches . . .

4
2
7
7
2

Pennsylvania-all offices................
Banks..............................................
Unit banks..................................

2,903
400

2,895
394

8
6

2,716
392

2,708
386

1,597
237

203
14

908
135

6
4

Banks operating branches . . .

126
274

121
273

5
1

126
266

121
265

84
153

4
10

33
102

Branches4 .....................................

2,503

2,501

2,324

2,322

1,360

189

Rhode Island-all offices................
Banks..............................................
Unit banks...................................

315
23

302
20

241
17

228
14

120
5

Banks operating branches . . .

4
19

3
17

13
3
7

4
13

3
11

Branches ........................................

292

282

224

South Carolina-all offices............
Banks..............................................
Unit banks..................................

697
90

0
0

Banks operating branches . . .

25
65

0
0

Branches ........................................

607

South Dakota-all o ffic e s ............
Banks..............................................
Unit banks..................................

286
157

285
156

0
0
0
0
0
0
0
0

0
0

98.7
100.0

100.0

0.0

0
1

0
0

99.2
95.9

99.2
95.8

100.0
100.0

0
0

93.8
97.0

93.8
96.9

0.0
100.0

99.6

100.0

2
2

187
8

187

0
0

99.8
99.0

100.0
100.0

3
1

2
0

0
8

0
0

97.6
99.6

0.0
100.0

773

179

99.9

100.0

0
0

108
9

12
2

74
6

0
0

96.2
90.9

95.0
87.5

100.0
100.0

0
5

0
0

3
6

0
2

1
1
7

0
6

0
0

100.0
89.5

100.0
84.6

0.0
100.0

214

115

96.6

95.5

100.0

697
90

317
19

15
6

365
65

0
0

100.0
100.0

0.0
0.0

25
65

3
16

2
4

20
45

0
0

100.0
100.0

0.0
0.0

607

298

300

1
1
7

286
157

285
156

112
32

40
27

133
97

0
0

1
1

0
0

0
6

0
6
0
6
68
0
0

0
0
0
0
0

100.0

0.0

0
0

100.0
100.0

0.0
0.0

Banks operating branches . . .

108
49

107
49

108
49

107
49

19
13

19
8

69
28

0
0

1
0

0
0

100.0
100.0

0.0
0.0

129

0
0

Branches ........................................

129

100.0

0.0

223

NUMBER OF BANKS AND BRANCHES

1,713
92

224

Noninsured

Insured

Total

Insured

Non
insured

Total

Members F.R.
System

Na
tional

State

Nonmem
bers
F.R.
Sys
tem

Banks
of de
posit2

Non
deposit
trust
com
panies3

Total

Insured

Non
insured

All
banks
of
de
posit

Com
mercial
banks
of
deposit

Mutual
savings
banks

1,162
348

1,160
346

2
2

1,162
348

1,160
346

427
74

66
13

667
259

1
1

0
0

99.9
99.7

0.0
0.0

Banks operating branches . . .

113
235

111
235

2
0

113
235

111
235

9
65

2
11

100
159

1
0

0
0

99.1
100.0

0.0
0.0

Branches ........................................

814

353

408

100.0

0.0

Texas—all offices............................
Banks..............................................
Unit banks..................................

1,520
1,363

1,514
1,357

6
6

1,520
1,363

1,514
1,357

621
596

56
41

837
720

6
6

0
0

99.6
99.6

0.0
0.0

Tennessee-all offices.....................
Banks..............................................
Unit banks..................................

Banks operating branches . . .

1,224
139

1,218
139

6
O

1,224
139

1,218
139

575
21

28
13

615
105

6
0

0
0

99.5
100.0

Branches ........................................

157

117

100.0

0.0

Utah-all offices...............................
Banks..............................................
Unit banks..................................

276
67

275
66

276
67

275
66

115
13

76
7

84
46

0
0

1
1

0
0

100.0
100.0

0.0
0.0

43
24

42
24

1
1
7

43
24

42
24

8
5

2
5

32
14

0
0

1
0

0
0

100.0
100.0

0.0
0.0

100.0

0.0

110
15

0
0

1
1

18
6

0
0

100.0
100.0

Banks operating branches . . .

Branches ........................................

209

102

Verm ont-all o ffices......................
Banks..............................................
Unit banks..................................

190
36

189
35

1
1

172
30
7

171
29

61
14

0
0

Banks operating branches . . .

9
27

8
27

1
0

6
23

4
10

0
0

2
13

0
0

1
0

2
4

0
0

100.0
100.0

Branches........................................

154

142

100.0

Virginia-all offices.........................
Banks..............................................
Unit banks..................................

1,495
284

1,494
283

1
1

1,495
284

1,494
283

798
108

308
67

388
108

0
0

1
1

0
0

100.0
100.0

0.0
0.0

Banks operating branches . . .

81
203

80
203

1
0

81
203

80
203

16
92

25
42

39
69

0
0

1
0

0
0

100.0
100.0

0.0
0.0

Branches ........................................

1,211

690

241

280

100.0

0.0

Washington-all offices...................
Banks..............................................
Unit banks..................................

930
100

923
93

7
7
7

813
91

806
84

589
21

37
4

180
59

6
6

1
1

117
9

0
0

99.4
93.9

99.3
93.3

100.0
100.0

0
9

0
0

84.2
100.0

0.0
100.0

108

100.0

Banks operating branches . . .

39
61

32
61

39
52

32
52

3
18

2
2

27
32

6
0

1
0

Branches^ .....................................

830

722

568

121

O
9
108

FEDERAL DEPOSIT INSURANCE CORPORATION

State and type of bank
or office

Percentage insured1

Mutual savings banks

Commercial banks and nondeposit trust companies

All banks

West Virginia-all offices. . . .
Banks........................................
Unit banks............................

Banks operating branches .

271
222

0
0

271
222

130
103

34
29

107
90

0
0

173
49

0
0

173
49

0
0

100.0
100.0

0.0
0.0

173
49

76
27

24
5

73
17

0
0

100.0
100.0

0.0
0.0

Branches ..................................

100.0

0.0

Wisconsin-all offices...............
Banks........................................
Unit banks............................

980
633

975
628

5
5

977
630

972
625

217
130

54
31

701
464

0
0

5
5

3
3

0
0

100.0
100.0

100.0
0.0

425
208

420
208

5
0

422
208

417
208

85
45

21
10

311
153

0
0

5
0

3
0

347

0
0

100.0
100.0

347

100.0
100.0

347

237

100.0

0.0

Wyoming-all offices...............
Banks........................................
Unit banks............................

80
78

0
0

80
78

47
46

14
14

19
18

0
0

76
2

0
0

76
2

0
0

100.0
100.0

0.0
0.0

Banks operating branches .

76
2

0
0

76
2

45
1

14
0

17
1

0
0

Branches ..................................

0
0

100.0
100.0

0.0
0.0

100.0

0.0

30
11

18
11

12
0

30
1

18
1

7
0

0
0

11
1

12
0

0
0

0
1

0
0

0
1

0
0

60.0
100.0

0
1

0.0
0.0

Banks operating branches .

0
1

0
0

0
1

0
0

0.0
100.0

Branches® ...............................

0
0

0.0
100.0

0.0
0.0

58.6

0.0

Canal Zone—all offices............
Banks........................................
Unit banks............................

2
0

0
0

2
0

0
0

2
0

0
0

0.0
0.0

0
0
2

0
0

0.0
0.0

0.0

21
6
2

244
18

223
12

24
1

0
0

199
11

21
6

0
0

91.4
66.7

4
8

0.0
0.0

1
0

0
0

3
8

2
4

0
0

66.7
66.7

0.0
0.0
0.0

Other areas
Pacific Islands—all offices5. . .
Banks........................................
Unit banks............................

Banks operating branches .
Branches7 ...............................

Puerto Rico-all offices............
Banks........................................
Unit banks............................

244
18

223
12

6
12

4
8

6
12

226

211

226

211

188

93.4

33
7

27
1

6
6

33
7

27
1

0
0

6
6

0
0

81.8
14.3

6
0

81.8
14.3

0.0
0.0

6
1

0
1

0
0

6
0

0
0

0.0
100.0

0.0
0.0

100.0

0.0

Banks o
Branches1
Virgin Islands—all offices. . .
Banks.....................................
Unit banks.........................

Banks operating branches
Branches9 ............................

225

NUMBER OF BANKS AND BRANCHES

Banks operating branches .
Branches ..................................

226

D E C E M B E R 31, 1 9 7 6 - C O N T IN U E D
B A N K S G R O U P E D B Y IN S U R A N C E S T A T U S A N D C L A S S O F B A N K , A N D B Y S T A T E OR A R E A A N D T Y P E OF O F F IC E

1 Nondeposit trust companies are excluded in computing these percentages.
2 1ncludes 14 noninsured branches of insured banks: 12 in the Pacific Islands and 2 in the Canal Zone.
3 lncludes noninsured nondeposit trust companies that are members of the Federal Reserve System.
^California: 1 branch operated by a State nonmember bank in Puerto Rico.
Massachusetts: 1 branch operated by a noninsured bank in New York.
New Y ork: 19 branches operated by 3 State nonmember banks in Puerto Rico.
Oregon: 1 branch operated by a national bank in California.
Pennsylvania: 2 branches operated by a noninsured bank in New Y ork and a national bank in New Jersey.
Washington: 3 branches operated by a national bank in California.
5 United States possessions: American Samoa, Guam, and Midway Islands.
Trust Territories: Caroline Islands, Mariana Islands, and Marshall Islands.
6 Pacific Islands: 28 branchesAmerican Samoa: 3 insured branches operated by a State nonmember bank in Hawaii and a national
bank in New York.

Guam: 13 insured branches operated by 2 State nonmember banks in Hawaii, 2 State nonmember
banks and a national bank in California, and 2 national banks in New York.
Caroline Islands: 4 noninsured branches operated by a national bank in California and a State non
member bank in Hawaii.
Mariana Islands: 4 noninsured branches operated by a national bank and a nonmember bank in
California and a State nonmember bank in Hawaii.
Marshall Islands: 3 noninsured branches operated by a national bank in California and a State non
member bank in Hawaii.
Midway Islands: 1 noninsured branch operated by a State nonmember bank in Hawaii.
7Canal Zone: 2 noninsured branches operated by 2 national banks in New York.
8 Puerto Rico: 23 insured branches operated by 2 national banks in New York.
9 Virgin Islands: 25 insured branches operated by 2 national banks in New York, a national bank in
California, and a national bank in Pennsylvania.

FEDERAL DEPOSIT INSURANCE CORPORATION

Table 103. NUMBER OF BANKING OFFICES IN THE UNITED STATES (STATES AND OTHER AREAS),

Table 104. NUMBER AND ASSETS OF A LL COMMERCIAL AND MUTUAL SAVINGS BANKS
IN THE UNITED STATES (STATES AND OTHER AREAS), DECEMBER 31, 1976
BANKS GROUPED BY CLASS AND ASSET SIZE

Insured commercial banks
Asset size

Members F.R. System
Total
National

Number of banks
Less than $5.0 m illio n .........................
$5.0 to $9.9 m i llio n ............................
$10.0 to $24.9 m illio n .........................
$25.0 to $49.9 m illio n .........................
$50.0 to $99.9 m illio n .........................
$100.0 to $299.9 m i llio n ..................
$300.0 to $499.9 m i llio n ..................
$500.0 to $999.9 m i llio n ..................
$1.0 to $4.9 b illio n ...............................
$5.0 billion or m o r e ............................

1,687
2,888
5,032
2,732
1,451
868
194
157
144
18

1,515
2,857
4,984
2,642
1,311
724
145
108
107
18

223
563
1,558
1,095
655
396
89
73
74
11

Total b a n k s ...............................

15,171

14,411

4,737

Nonmembers
F.R. System

State

Non
insured
banks
and trust
companies

Mutual savings banks
Non
insured

Insured

60
165
335
198
112
84
25
19
18
7

1,232
2,129
3,091
1,349
544
244
31
16
15
0

171
22
20
13
11
19
14
12
5
0

1
5
13
48
82
82
30
36
32
0

0
4
15
29
47
43
5
1
0
0

1,023

8,651

287

329

144

(In thousancIs of dollars)
Amount of assets
Less than $5.0 m illio n .........................
$5.0 to $9.9 m i llio n ............................
$10.0 to $24.9 m illio n .........................
$25.0 to $49.9 m illio n .........................
$50.0 to $99.9 m illio n .........................
$100.0 to $299.9 m i llio n ..................
$300.0 to $499.9 m i l l i o n ..................
$500.0 to $999.9 m i llio n ..................
$1.0 to $4.9 b illio n ...............................
$5.0 billion or m o r e ............................

5,582,998
21,341,734
82,635,960
94,835,066
99,846,194
141,197,371
74,708,438
111,794,869
274,200,787
264,644,114

Total a ssets...............................

1,170,787,531

5,307,658
21,114,899
81,844,925
91,358,196
89,599,469
116,862,063
55,815,216
76,126,629
204,650,613
264,644,114

798,112
4,289,799
26,271,160
38,158,023
44,920,647
63,779,61 1
34,028,495
51,427,793
143,298,408
176,376,977

213,743
1,241,829
5,612,194
6,892,801
7,759,421
13,381,321
9,882,381
14,132,248
42,190,889
88,267,137

4,295,803
15,583,271
49,961,571
46,307,372
36,919,401
39,701,131
11,904,340
10,566,588
19,161,316
0

271,455
153,414
292,366
480,797
839,097
2,908,173
5,303,494
9,255,572
9,139,143
0

3,885
42,044
210,226
1,918,766
6,020,816
14,635,441
11,711,654
25,885,964
60,411,031
0

0
31,377
288,443
1,077,307
3,386,812
6,791,694
1,878,074
526,704
0
0

1,007,323,7821

583,349,025

189,573,964

234,400,793

28,643,511

120,839,827

13,980,411

NUMBER OF BANKS AND BRANCHES

All
banks

1Does not include assets of branches in "O ther areas" of U.S. banks.

227

Table 105. NUMBER, ASSETS, AND DEPOSITS OF ALL COMMERCIAL BANKS1 IN THE UNITED STATES (STATES AND OTHER AREAS),
228

D E C E M B E R 3 1 , 1976
B A N K S G R O U PE D B Y A S S E T S IZ E A N D S T A T E
(Amounts in thousands of dollars)
Banks with assets o f Less
than
$5.0 m illion

$5.0 million
to
$9.9 million

$10.0 million
to
$24.9 million

14,698
1,035,967,293
841,888,945

1,686
5,579,113
4,779,644

2,879
21,268,313
19,034,504

5,004
82,137,291
74,249,818

Alabama
Banks.....................................
Assets.....................................
D e po sits...............................

303
11,872,788
10,169,563

16
55,133
45,540

66
513,617
458,432

Alaska
Banks.....................................
Assets.....................................
D e po sits...............................

12
1,593,077
1,374,073

0
0
0

Arizona
Banks.....................................
Assets.....................................
D e po sits...............................

24
7,544,612
6,733,710

Arkansas
Banks.....................................
Assets.....................................
D e po sits...............................

$25.0 million
to
$49.9 million

$50.0 million
to
$99.9 million

$100.0 m illion
to
$299.9 million

$300.0 m illion
to
$499.9 m illion

$500.0 million
to
$999.9 m illion

$1.0 billion
to
$4.9 billion

$5.0 billion
or
more

2,655
91,838,993
82,663,367

1,322
90,438,566
80,571,153

743
119,770,236
104,615,915

159
61,118,710
50,560,186

120
85,382,201
68,032,131

112
213,789,756
162,377,297

18
264,644,114
195,004,930

139
2,295,995
2,060,602

52
1,814,123
1,642,865

13
889,657
771,691

9
1,309,771
1,167,917

4
1,691,546
1,451,630

3
2,008,027
1,510,062

1
1,294,919
1,060,824

0
0
0

2
36,840
30,515

4
147,419
132,315

1
55,054
50,888

3
470,472
395,918

1
351,609
306,137

1
531,683
458,300

0
0
0

9
9,533
3,047

4
28,319
23,788

3
48,264
44,991

0
0
0

1
52,841
49,348

3
520,333
465,447

1
333,818
306,195

0
0
0

3
6,551,504
5,840,894

0
0
0

260
7,587,904
6,612,958

21
62,002
53,886

56
432,253
389,768

102
1,693,647
1,538,713

53
1,877,405
1,683,255

17
1,221,266
1,096,262

9
1,462,609
1,237,766

1
330,585
231,573

1
508,137
381,735

0
0
0

California
Banks.....................................
Assets.....................................
De po sits...............................

224
108,726,003
88,899,045

23
55,370
27,958

19
140,643
111,225

64
1,067,814
954,858

44
1,511,929
1,384,904

28
1,941,639
1,706,630

27
4,549,987
4,044,721

8
3,112,038
2,769,796

2
1,606,277
1,386,898

4
10,052,858
8,503,238

5
84,687,448
68,008,817

Colorado
Banks.....................................
Assets.....................................
Deposits...............................

361
9,936,731
8,520,261

108
254,506
196,937

67
497,782
441,212

109
1,712,983
1,544,495

38
1,305,454
1,173,201

26
1,751,233
1,556,367

9
1,162,123
1,030,478

1
452,638
390,040

2
1,523,150
1,247,151

1
1,276,862
940,380

0
0
0

Connecticut
Banks.....................................
Assets.....................................
D eposits...............................

72
8,992,875
7,615,606

5
19,654
16,842

5
34,552
26,103

28
455,537
396,483

13
466,934
420,487

9
627,958
554,388

4
692,214
610,328

3
1,300,102
1,086,403

3
1,901,197
1,682,572

2
3,494,727
2,822,000

0
0
0

Delaware
Banks.....................................
Assets.....................................
Deposits...............................

18
2,803,038
2,268,666

1
4,316
3,808

3
22,346
19,775

7
113,196
100,064

1
32,575
0

2
127,727
115,589

0
0
0

1
317,033
282,850

2
1,057,253
942,502

1
1,128,592
804,078

0
0
0

D istrict of Columbia
Banks.....................................
Assets.....................................
Deposits...............................

16
4,551,476
3,885,286

0
0
0

2
19,435
15,747

1
20,551
19,408

5
188,063
166,476

3
234,114
206,731

0
0
0

1
339,833
308,504

2
1,122,636
965,799

2
2,626,844
2,202,621

0
0
0

Total United States and
other areas2
Banks.....................................
Total assets3 ........................
Total deposits3 ..................
States

FEDERAL DEPOSIT INSURANCE CORPORATION

All
banks

757
30,533,816
26,776,283

34
125,517
96,695

120
914,084
787,127

262
4,276,0-2
3,851,611

176
6,268,847
5,676,464

7,827,877
7,052,684

Georgia
Banks.....................................
Assets.....................................
D e po sits...............................

442
15,965,119
12,891,885

62
201,068
175,250

101
747,994
669,151

179
2,916,943
2,611,919

63
2,061,604
1,838,194

1,620,183
1,410,195

Hawaii
Banks.....................................
Assets.....................................
D e po sits...............................

11
3,265,115
2,893,434

1
330
0

1
9,166
0

2
35,704
22,976

0
0
0

Idaho
Banks.....................................
Assets.....................................
D e po sits...............................

24
3,302,747
2,950,020

0
0
0

7
54,415
49,828

6
98,923
90,982

5
169,389
150,937

Illinois
Banks.....................................
Assets.....................................
D e po sits...............................

1,255
81,810,312
63,101,895

124
441,299
367,301

243
1,832,848
1,626,820

400
6,396,952
5,787,865

Indiana
Banks.....................................
Assets.....................................
D e po sits...............................

408
23,085,155
19,579,743

19
63,409
53,646

43
323,036
294,326

Iowa
Banks.....................................
Assets.....................................
D e po sits...............................

659
14,628,063
13,054,966

59
222,822
200,441

Kansas
Banks.....................................
Assets.....................................
D e po sits...............................

616
11,128,990
9,749,221

Kentucky
Banks.....................................
Assets.....................................
D e po sits...............................

112

46
6,953,334
6,118,687

2,414,483
1,843,606

10
1,619,284
1,429,478

404,122
333,511

0
0
0
1
722,660
535,668

1
1,753,592
1,349,409

0
0
0

3
5,671,261
3,888,519

0
0
0

2
2 ,0 2 2 ,2 0 0

0
0
0

5
922,261
848,258

1
79,872
72,648

2
404,155
. 364,055

392,365
355,163

925,967
806,833

1
1,177,661
1,059,574

0
0
0

239
8,493,935
7,594,819

152
10,564,854
9,223,450

76
11,516,755
9,591,282

13
4,665,278
3,302,694

3
2,321,181
2,029,028

3
8,813,987
6,493,670

26,763,223
17,084,966

140
2,338,280
2,140,342

105
3,531,227
3,210,998

60
4,078,659
3,712,831

33
5,490,805
4,868,397

4
1,488,639
1,292,345

1
690,020
482,717

3
5,081,080
3,524,141

0
0
0

199
1,457,762
1,324,033

251
4,076,482
3,726,380

102
3,325,337
3,020,358

30
2,004,566
1,802,346

14
1,940,127
1,708,263

3
965,897
794,140

1
635,070
479,005

163
544,151
487,999

158
1,141,010
1,035,608

185
2,890,329
2,606,370

75
2,546,572
2,291,176

24
1,519,260
1,316,935

10
1,937,341
1,582,266

343
12,291,764
10,614,898

32
105,176
91,402

66
486,866
436,989

143
2,445,454
2,223,649

61
2,186,716
1,978,577

26
1,884,615
1,723,112

9
1,187,242
1,067,808

3
1,134,763
906,529

1
609,188
480,378

2,251,744
1,706,454

Louisiana
Banks.....................................
Assets.....................................
D e po sits...............................

254
15,369,442
13,106,310

10
35,534
31,507

30
228,528
202,971

91
1,597,819
1,445,359

71
2,449,740
2,221,883

24
1,567,362
1,399,617

17
2,977,301
2,609,445

5
1,886,863
1,563,800

5
3,217,582
2,508,871

1,408,713
1,122,857

0
0

Maine
Banks.....................................
Assets.....................................
D e po sits...............................

43
2,451,315
2,156,771

0
0
0

4
29,810
27,163

18
334,789
302,071

9
295,982
266,380

6
392,632
347,690

5
1,088,021
942,976

310,081
270,491

0
0
0

Maryland
Banks.....................................
Assets.....................................
D e po sits...............................

113
11,204,340
9,472,695

4
17,780
14,579

22
173,251
154,998

33
570,825
516,015

27
965,076
874,231

16
1,170,305
1,059,611

4
564,727
515,812

878,164
753,638

1,775,849
1,555,540

3
5,088,363
4,028,271

0
0

Massachusetts
Banks.....................................
Assets.....................................
D e po sits...............................

148
18,842,134
14,798,810

5
14,654
10,093

12
95,329
84,528

50
852,587
736,227

26
995,868
880,861

24
1,719,037
1,516,278

3,440,818
3,027,365

5
1,906,978
1,699,961

525,557
433,974

4
9,291,306
6,409,523

0
0
0

0
0
0
1

1
550,327
428,867

0
0
0

2,297,654

0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0

229

0
0
0

NUMBER OF BANKS AND BRANCHES

Florida
Banks.....................................
Assets.....................................
D e po sits...............................

Table 105. NUMBER, ASSETS, AND DEPOSITS OF ALL COMMERCIAL BANKS1 IN THE UNITED STATES (STATES AND OTHER AREAS),
230

D E C E M B E R 31, 1 9 7 6 -C O N T IN U E D
B A N K S G R O U P E D B Y A S S E T S IZ E A N D S T A T E
(Amounts in thousands of dollars)
Banks with assets o f A ll
banks

Less
than
$5.0 m illion

$5.0 m illion
to
$9.9 m illion

$10.0 million
to
$24.9 million

$25.0 million
to
$49.9 million

$50.0 m illion
to
$99.9 m illion

$100.0 m illion
to
$299.9 m illion

$300.0 m illion
to
$499.9 m illion

$500.0 million
to
$999.9 million

$1.0 billion
to
$4.9 billion

$5.0 billion
or
more

360
36,925,844
31,762,715

12
36,931
25,090

41
312,394
275,808

114
1,874,082
1,702,765

92
3,209,938
2,918,985

47
3,297,959
2,995,518

37
5,896,645
5,365,046

7
2,790,159
2,521,121

4
3,190,466
2,808,918

5
9,942,478
8,411,284

1
6,374,792
4,738,180

Minnesota
Banks.....................................
Assets.....................................
D eposits...............................

752
19,635,845
16,216,155

125
465,207
422,046

235
1,682,809
1,542,943

246
3,905,883
3,568,772

92
3,077,534
2,798,726

40
2,671,512
2,418,598

11
2,007,192
1,659,184

0
0
0

3
5,825,708
3,805,886

0
0
0

Mississippi
Banks.....................................
Assets.....................................
D eposits...............................

184
7,264,680
6,404,449

14
47,015
37,071

37
287,153
258,367

70
1,176,458
1,071,086

36
1,210,606
1,093,829

17
1,117,978
1,003,178

7
1,297,382
1,171,824

1
303,207
265,905

2
1,824,881
1,503,189

0
0
0

Missouri
Banks.....................................
Assets.....................................
D e posits...............................

711
23,168,612
19,014,388

113
378,231
332,681

164
1,177,081
1,062,632

249
4,085,368
3,698,244

111
3,778,243
3,362,236

45
2,993,001
2,687,909

23
3,469,026
2,970,440

0
0
0

4
3,092,862
2,205,553

2
4,194,800
2,694,693

0
0
0

Montana
Banks.....................................
Assets.....................................
D e po sits...............................

158
3,570,331
3,203,247

19
65,134
56,394

41
293,159
266,645

61
974,544
891,527

20
667,439
601,635

12
826,361
739,517

5
743,694
647,529

0
0
0

Nebraska
Banks.....................................
Assets.....................................
D eposits...............................

456
7,707,473
6,718,439

155
483,564
425,291

114
828,512
747,453

135
2,148,582
1,934,347

29
1,003,868
904,068

16
998,830
891,382

2
213,395
186,753

4
1,440,453
1,171,401

1
590,269
457,744

0
0
0

Nevada
Banks.....................................
Assets.....................................
D eposits...............................

8
2,372,489
2,143,151

0
0
0

1
14,834
12,317

0
0
0

1
67,423
61,791

4
812,685
735,650

1
443,538
395,088

0
0
0

1
1,034,009
938,305

0
0
0

New Hampshire
Banks.....................................
Assets.....................................
D eposits...............................

79
2,131,876
1,900,380

7
22,478
20,043

15
108,144
96,950

31
528,856
473,650

16
536,318
480,837

7
473,403
415,467

3
462,677
413,433

0
0
0

New Jersey
Banks.....................................
Assets.....................................
D eposits...............................

195
26,807,588
23,463,784

1
4,402
2,932

8
65,675
54,712

39
679,863
601,249

57
1,999,502
1,786,707

36
2,597,043
2,334,242

29
5,217,332
4,679,165

8
3,119,635
2,751,988

13
8,393,027
7,274,421

4
4,731,109
3,978,368

0
0
0

New Mexico
Banks.....................................
Assets.....................................
D e posits...............................

83
3,699,204
3,319,732

3
7,625
5,941

5
34,949
30,856

35
610,924
552,993

24
842,326
767,415

9
586,738
534,951

5
636,015
572,960

1
383,669
335,227

1
596,958
519,389

0
0
0

New York
Banks.....................................
Assets.....................................
D eposits...............................

277
191,725,555
137,745,313

16
51,524
34,206

19
148,774
123,159

64
1,117,149
971,564

42
1,461,536
1,265,932

39
2,897,253
2,362,331

42
7,233,065
5,904,179

15
6,020,267
4,109,240

21
15,358,522
9,603,738

11
23,857,731
16,574,190

8
133,579,734
96,796,774

FEDERAL DEPOSIT INSURANCE CORPORATION

Michigan
Banks.....................................
Assets.....................................
D e po sits...............................

3
12,707
10,528

14
107,465
90,900

28
472,093
410,602

20
700,747
623,728

716,309
624,529

9
1,970,929
1,766,658

North Dakota
Banks.....................................
Assets.....................................
D e po sits...............................

171
3,595,674
3,196,353

18
69,380
62,228

51
391,302
353,949

66
956,353
862,993

23
767,166
686,618

10
754,333
678,633

209,631
190,361

447,509
361,571

Ohio
Banks.....................................
Assets.....................................
D e po sits...............................

490
40,082,286
33,306,393

18
71,655
64,457

68
502,758
452,850

161
2,696,026
2,422,945

115
4,047,900
3,596,493

62
4,164,753
3,670,766

44
6,712,786
5,939,769

3,070,807
2,698,346

4,707,675
3,892,670

Oklahoma
Banks.....................................
Assets.....................................
D eposits...............................

476
13,328,788
11,561,600

87
296,887
261,634

125
861,173
771,660

152
2,445,244
2,222,446

69
2,366,990
2,134,272

32
2,117,820
1,904,121

1,023,819
920,112

388,148
300,513

Oregon
Banks.....................................
Assets.....................................
D eposits...............................

48
8,457,140
6,867,662

4
13,382
11,278

5
36,645
33,708

15
231,038
206,154

12
412,750
358,792

5
324,297
297,994

4
687,316
586,830

446,623
391,154

Pennsylvania
Banks.....................................
Assets.....................................
D e posits...............................

392
58,855,897
46,894,398

9
30,595
25,377

42
317,951
276,026

113
1,913,563
1,727,430

97
3,437,304
3,109,164

59
4,000,720
3,604,419

42
6,987,797
6,296,180

4,334,952
3,866,791

Rhode Island
Banks.....................................
Assets.....................................
D e posits...............................

17
4,338,660
3,535,380

2
1,700
1,279

3
22,504
17,793

5
79,246
70,547

1
40,943
36,639

South Carolina
Banks.....................................
Assets.....................................
D eposits...............................

90
5,107,695
4,427,318

11
38,090
33,246

19
152,535
131,937

34
548,204
486,286

13
478,749
421,066

341,894
307,442

376,604
341,471

1
325,254
294,424

South Dakota
Banks.....................................
Assets.....................................
D eposits...............................

157
3,559,403
3,229,056

24
85,870
77,383

65
479,554
436,660

44
698,067
637,292

9
305,720
278,607

9
532,510
483,391

4
719,086
643,244

738,596
672,479

Tennessee
Banks.....................................
Assets.....................................
D eposits...............................

348
16,422,846
14,250,174

33
112,890
98,009

70
532,822
479,720

120
2,025,949
1,841,167

67
2,293,801
2,068,334

40
2,631,514
2,385,742

9
1,437,955
1,252,463

Texas
Banks.....................................
Assets.....................................
D e posits...............................

1,363
63,400,779
53,014,873

174
581,214
504,961

253
1,860,682
1,657,961

483
8,009,779
7,265,387

250
8,585,873
7,763,381

116
7,674,017
6,909,639

Utah
Banks.....................................
Assets.....................................
D eposits...............................

67
4,293,953
3,801,934

15
47,726
38,882

12
81,749
73,776

25
394,878
358,999

6
222,137
202,240

Vermont
Banks.....................................
Assets.....................................
D eposits...............................

30
1,637,919
1,486,037

3
4,640
3,906

2
17,295
15,327

12
240,979
219,744

4
121,062
110,982

3
1.207.011
1.075.012

0
0
0

5
10,763,764
8,546,967

0
0
0

8
14,107,926
10,568,097

0
0
0

2
2,171,360
1,599,436

0
0
0

2
1,657,347
1,447,406

0
0
0

6,305,089
4,981,752

2
13,238,917
8,376,193

1
991,168
806,913

2
2,842,964
2,283,500

0
0
0

4
2,846,365
2,411,446

0
0
0

3
2,067,240
1,730,170

4
4,456,237
3,642,117

864,438
752,452

57
8,816,846
7,893,254

16
5,844,072
4,918,478

7
4,819,832
3,952,135

7
17,208,464
12,149,677

0
0
0

161,794
143,079

3
579,501
494,772

316,654
277,536

5
353,454
317,773

4
900,489
818,305

0
0
0

3
360,135
318,709

0
0
0

0
0

1,125,970
973,582

0
0

0
0
0

231

0
0
0

2
1,363,544
1,239,068

BRANCHES

19,945,793
15,440,553

AND

7
4,648,305
4,172,265

BANKS

92
15,951,025
13,148,924

N U M BER

North Carolina
Banks.....................................
Assets.....................................
D e po sits...............................

232

Table 105. NUMBER, ASSETS, AND DEPOSITS OF ALL COMMERCIAL BANKS1 IN THE UNITED STATES (STATES AND OTHER AREAS),
D E C E M B E R 3 1 , 1 9 7 6 —C O N T I N U E D
B A N K S G R O U PE D B Y A S S E T S IZ E A N D S T A T E
(Amounts in thousands of dollars)
Banks w ith assets o f All
banks

Less
than
$5.0 m illion

$5.0 million
to
$9.9 million

$10.0 million
to
$24.9 million

$25.0 million
to
$49.9 million

$50.0 million
to
$99.9 million

$100.0 million
to
$299.9 million

$300.0 m illion
to
$499.9 million

$500.0 million
to
$999.9 million

$1.0 billion
to
$4.9 billion

$5.0 billion
or
more

284
16,994,757
14,854,842

23
81,236
64,462

53
392,326
348,125

80
1,346,148
1,218,140

75
2,649,656
2,399,844

18
1,124,861
1,014,315

25
3,879,063
3,510,854

5
2,051,576
1,774,965

3
2,298,769
1,851,799

2
3,171,122
2,672,338

0
0
0

Washington
Banks.....................................
Assets.....................................
D eposits...............................

91
13,651,330
10,841,778

14
48,723
36,350

16
118,477
104,141

29
449,402
408,104

14
499,279
416,976

5
379,410
343,042

5
783,932
572,963

3
1,130,589
797,016

2
1,741,782
1,474,669

3
8,499,736
6,688,517

0
0
0

West Virginia
Banks.....................................
Assets.....................................
D e po sits...............................

222
7,252,81 1
6,195,486

11
37,660
31,886

34
253,667
224,845

93
1,575,765
1,414,626

48
1,616,395
1,463,333

23
1,591,945
1,412,398

12
1,802,149
1,405,239

1
375,230
243,159

0
0
0

Wisconsin
Banks.....................................
Assets.....................................
D e posits...............................

630
19,026,593
16,485,504

61
207,580
180,487

129
939,378
854,925

249
4,083,043
3,719,855

127
4,284,521
3,870,623

41
2,858,484
2,548,943

19
2,773,268
2,409,939

1
399,488
337,314

2
1,406,733
1,059,101

1
2,074,098
1,504,317

0
0
0

Wyoming
Banks.....................................
Assets.....................................
D e posits...............................

78
2,099,297
1,877,756

9
31,529
26,829

10
72,926
66,658

33
553,014
504,215

16
556,521
506,279

8
516,497
447,764

2
368,810
326,011

0
0
0

Guam
Banks.....................................
Assets.....................................
D eposits...............................

1
50,182
45,173

0
0
0

1
50,182
45,173

0
0
0

Puerto Rico
Banks.....................................
Assets.....................................
D eposits...............................

18
5,170,342
3,560,591

2
7,888
4,482

0
0
0

2
25,961
22,477

1
29,974
27,245

3
219,700
176,391

6
1,062,393
879,294

0
0
0

2
1,554,695
1,305,637

2
2,269,731
1,145,065

0
0
0

Virgin Islands
Banks.....................................
Assets.....................................
D e posits...............................

7
193,603
189,861

4
3,396
3,354

1
5,408
4,426

0
0
0

1
65,860
65,424

1
118,939
116,657

0
0
0

Other areas

11ncludes nondeposit trust companies: 8 in Arizona, 3 in Arkansas, 15 in California, 1 in Delaware, 3 in Florida, 3 in Hawaii, 7 in Illinois, 1 in Indiana, 1 in Iowa, 1 in Massachusetts, 1 in Mississippi, 4 in Missouri, 3 in Montana,
6 in Nebraska, 1 in New Hampshire, 1 in New Mexico, 5 in New Y ork, 1 in Oklahoma, 2 in Pennsylvania, 1 in Rhode Island, 1 in South Dakota, 1 in Tennessee, 1 in Utah, 1 in Vermont, 1 in Virginia, 1 in Washington, and 5 in
Wisconsin.
2 Excludes data fo r branches in U.S. territories o f banks headquartered in the United States, and excludes data for 19 insured branches in New York of 3 insured nonmember banks in Puerto Rico and 1 insured branch in
California of an insured nonmember bank in Puerto Rico.
3 Does not include assets and deposits of branches in "O ther areas" of U.S. banks.

FEDERAL DEPOSIT INSURANCE CORPORATION

Virginia
Banks.....................................
Assets.....................................
D e posits...............................

ASSETS AND LIA B ILITIE S OF BANKS
Table 106.

Table 107.

Table 108.

Table 110.
Table 111.

Com m ercial banks

m ajority-ow ned premises subsidiaries are fu lly consolidated; other m ajorityowned domestic subsidiaries (but not commercial bank subsidiaries) are
consolidated if they meet any of the fo llo w in g criteria: (a) any subsidiary in
which the parent bank's investment represents 5 percent or more of its
equity capital accounts; (b) any subsidiary whose gross operating revenues
amount to 5 percent o f the parent bank's gross operating revenues; or (c)
(beginning in December 1972) any subsidiary whose “ Income (loss) before
income taxes and securities gains or losses” amounts to 5 percent or more o f
the "In co m e (Loss) before income taxes and securities gains or losses" o f the
parent bank. Beginning in 1972, investments in subsidiaries not consolidated
in which the bank d ire ctly or in d irectly exercises effective control are re
ported on an equity (rather than cost) basis w ith the investment and un
divided p ro fits adjusted to include the parent's share o f the subsidiaries' net
w orth.

233

Insured banks having resources o f $25 m illio n or more are required to
report th e ir assets and lia b ilitie s on the basis o f accrual accounting. A t the
o p tio n o f the bank, tru s t departm ent accounts may be reported on a cash
basis. Where the results w o u ld n o t be significantly d iffe re n t, certain other
p articular accounts may be reported on a cash basis. Banks not subject to
fu ll accrual accounting are required to report the instalment loan fu n ctio n
on an accrual basis, or else to su b m it a statement o f unearned income on
instalm ent loans carried in surplus accounts. A ll banks are required to 're p o rt
income taxes on an accrual basis.
Each insured bank having foreign offices is required to subm it a consoli
dated report including these offices; however, the tables in.this report con
Digitized
foroFRASER
tain
n ly the dom estic assets and lia b ilitie s o f banks. Beginning in 1969, all

OF BANKS

Table 113.

LIABILITIES

Table 112.

ASSETS AND

Table 109.

Assets and liabilities of all commercial banks in the United States (States and other areas), June
30, 1976
Banks grouped by insurance status and class o f bank
Assets and liabilities of all commercial banks in the United States (States and other areas),
December 31, 1976
Banks grouped by insurance status and class o f bank
Assets and liabilities of all mutual savings banks in the United States (States and other areas),
June 30, 1976, and December 31, 1976
Banks grouped by insurance status
Assets and liabilities of insured commercial banks in the United States (States and other areas),
December call dates, 1971-1976
Assets and liabilities of insured mutual savings banks in the United States (States and other
areas), December call dates, 1971-1976
Percentages of assets, liabilities, and equity capital of insured commercial banks operating
throughout 1976 in the United States (States and other areas), December 31, 1976
Banks grouped by amount o f assets
Percentages of assets and liabilities of insured mutual savings banks operating throughout 1975
in the United States (States and other areas), December 31, 1976
Banks grouped by amount o f assets
D istribution of insured commercial banks in the United States (States and other areas),
December 31, 1976
Banks grouped according to amount o f assets and by ratios o f selected items to assets or
deposits

Mutual savings banks

Sources of data

Insured banks: see p. 256; noninsured banks: State banking authorities
and reports fro m individual banks.

CORPORATION

Since June 30, 1974, a consolidated statement of domestic and foreign
assets and liabilities of U.S. banks has been published semiannually by the
C orporation in Assets an d Liabilities—Com mercial and M u tual Savings
Banks. On June 30, 1976, the consolidated assets o f insured commercial
banks totaled $1,101.3 b illio n , compared to domestic assets of $949.5 b il
lion (see table 107). The 141 insured comm ercial banks th a t reported foreign
operations held consolidated assets o f $599.8 b illio n .

INSURANCE

Foreign assets of banks

DEPOSIT

The Reports o f C ondition and Income fo r m utual savings banks were
revised in major respects in 1971. Am ong the changes was a requirem ent fo r
consolidating the accounts o f branches and subsidiaries w ith the parent
bank, on a comparable basis w ith comm ercial bank reports (see above). A
1972 revision broadened the criteria fo r consolidated reporting; it also pro
vided fo r the reporting o f investments in unconsolidated subsidiaries on an
eq u ity basis, comparable w ith commercial bank reporting.
One objective of the revisions in 1971 was to provide a sim plified report
ing form . To this end, the schedules fo r deposits and securities were con
densed and sim plified.
Several changes were made in the reporting of specific items. Loans are
reported in somewhat more detail than form erly. In real estate loans, con
structio n loans are shown separately, and loans secured by residential prop
erties are detailed as to those secured by 1- to 4 -fa m ily properties and by
m u ltifa m ily (5 or more) properties.
A n o th e r im p orta n t change shifted various reserve accounts which had
been carried as deductions against assets (about $200 m illio n in 1971) into
the surplus accounts.
Beginning June 30, 1972, m utual savings banks w ith total resources of
$25 m illio n or more are required to prepare Reports o f C ondition on the
basis o f accrual accounting. A ll banks, regardless of size, are required to
report income taxes on an accrual basis.

FEDERAL

o f the Report o f C ondition. Accordingly, "capital accounts" became the
"e q u ity ca p ita l" section.
Asset and lia b ility data fo r noninsured banks are tabulated from reports
pertaining to the individual banks. In a few cases, these reports are not as
detailed as those subm itted by insured banks.
A d d itio n a l data on assets and lia b ilitie s o f all banks as o f June 30, 1976
and December 31, 1976, are shown in the C orporation's semiannual publica
tion Assets and Liabilities—Com m ercial and M u tual Savings Banks.

234

In the case o f insured banks w ith branches outside the 50 States, net
amounts due fro m such branches are included in "O th e r assets” and net
amounts due to such branches are included in "O th e r lia b ilitie s." Branches
o f insured banks outside the 50 States are treated as separate entities b u t are
not included in the c o u n t o f banks. Data fo r such branches are n o t included
in the figures fo r the States in w h ich the parent banks are located.
From 1969 through 1975, all reserves on loans and securities, including
the reserves fo r bad debts set up pursuant to Internal Revenue Service ru l
ings, were included in "Reserves on loans and securities" on the lia b ility side
o f the balance sheet. Beginning in 1976, the IRS reserve is divided as fo l
lows: (a) the "v a lu a tio n " p o rtio n o f the reserve (plus any other loan loss
reserve) is shown on the asset side o f the face o f the report as an offset to
gross loans; (b) the "deferred income ta x " p o rtio n is included in "o th e r
lia b ilitie s ” ; and (c) the "c o n tin g e n c y " p o rtio n is included in "undivided
p ro fits ,” o r "reserves fo r contingencies and other capital reserves" (prefer
ably the fo rm e r). The valuation reserve on securities, fo rm e rly shown on the
lia b ilitie s side, is included in "reserve fo r contingencies and other capital
reserves" beginning in 1976.
"Unearned incom e on loans,” previously reported in "o th e r lia b ilitie s," is
reported separately as an exclusion fro m to ta l loans and total assets begin
ning December 31, 1976.
Individual loan items are reported gross. Instalm ent loans, however, are
o rd in a rily reported net if the instalm ent payments are applied d irectly to the
reduction o f the loan. Such loans are reported gross if, under contract, the
payments do not im m ediately reduce the unpaid balances o f the loan but are
assigned or pledged to assure repaym ent at m a tu rity .
The category "T ra d in g account securities" was added to the co n d itio n
report o f com m ercial banks in 1969 to obtain this segregation fo r banks that
regularly deal in securities w ith o ther banks or w ith the public. Banks occa
sionally holding securities purchased fo r possible resale report these under
"Inve stm e n t securities."
Assets and lia b ilitie s held in o r adm inistered by a savings, bond, insur
ance, real estate, foreign, o r any o th er departm ent of a bank, except a trust
departm ent, are consolidated w ith the respective assets and liabilities o f the
comm ercial departm ent. "D eposits o f individuals, partnerships, and corpora
tio n s " include tru s t funds deposited by a tru st departm ent in a commercial
or savings departm ent. O ther assets held in tru st are not included in state
ments o f assets and liabilities.
Demand balances w ith , and demand deposits due to , banks in the United
States, except private banks and Am erican branches of foreign banks, ex
clude reciprocal interbank deposits. (Reciprocal interbank deposits arise
when tw o banks m aintain deposit accounts w ith each other.)
In 1976, the caption "C a p ital notes and debentures" was changed to
"subordinated notes and debentures," to be shown in the liabilities section

Table 106. ASSETS AND LIABILITIES OF A LL COMMERCIAL BANKS IN THE UNITED STATES (STATES AND OTHER AREAS),
JU N E 3 0 , 1976
B A N K S G R O U PE D BY IN S U R A N C E S T A T U S A N D C L A S S OF B A N K
(Amounts in thousands of dollars)
Noninsured banks

Insured banks

Asset, lia b ility, or equity capital item

Members of
Federal Reserve System

Total
Total

Total

Not
members
of F.R.
System National

Total

Banks
of
State deposit1

Nondeposit
trust
companies2

949,527,514

732,120,775

552,476,068

179,644,707

217,406,739

23,266,004

22,843,515

422,489

129,299,134
45,765,409
31,114,886
6,973,433
6,573,247
5,169,938
4,158,107
12,061,882
28,213,586

124,808,261
45,659,879
28,927,646
6,173,248
5,837,576
3,793,024
3,317,090
12,040,878
28,213,586

106,117,626
44,023,996
17,868,497
3,823,843
3,700,186
3,186,258
2,739,669
9,001,446
28,213,586

75,695,179
28,841,893
12,175,900
3,416,052
3,321,802
1,927,638
1,685,201
6,930,799
22,402,897

30,422,447
15,182,103
5,692,597
407,791
378,384
1,258,620
1,054,468
2,070,647
5,810,689

18,690,635
1,635,883
11,059,149
2,349,405
2,137,390
606,766
577,421
3,039,432
0

4,490,873
105,530
2,187,240
800,185
735,671
1,376,914
841,017
21,004
0

4,456,254
105,495
2,155,053
797,923
733,986
1,376,892
841,017
20,891
0

34,619
35
32,187
2,262
1,685
22
0
113
0

S ecu ritie s-to tal.........................................................................................
Investment s e c u ritie s -to ta l.................................................................
U.S. Treasury s e c u ritie s ....................................................................
M a tu rity -1 year and less...............................................................
Maturity-Over 1 through 5 years.................................................
Maturity-Over 5 through 10 years..............................................
Maturity-Over 10 years .................................................................
Obligations of other U.S. Government agencies and corps. . . .
Maturity- 1 year and less..............................................................
Maturity-Over 1 through 5 years.................................................
Maturity-Over 5 through 10 years..............................................
Maturity-Over 10 years .................................................................
Obligations of States and political subdivisions............................
Maturity- 1 year and less..............................................................
Maturity-Over 1 through 5 years.................................................
Maturity-Over 5 through 10 years..............................................
Maturity-Over 10 years .................................................................
Other bonds, notes, and d eb e n tu re s ..............................................
Maturity- 1 year and less..............................................................
Maturity-Over 1 through 5 years.................................................
Maturity-Over 5 through 10 years..............................................
Maturity-Over 10 years ................................................................
Corporate s to c k ......................................................................................

238,747,838
231,413,565
88,231,425

235,286,450
228,045,581
87,699,469

166,384,175
159,486,168
62,507,021

128,357,992
123,609,479
47,410,419

38,026,183
35,876,689
15,096,602

68,902,275
68,559,413
25,192,448

3,461,388
3,367,984
531,956

3,311,156
3,250,035
504,965

150,232
117,949
26,991

34,069,413
46,840,988
6,417,003
904,021

33,782,244
46,642,651
6,386,796
887,778

24,839,719
33,073,372
3,925,547
668,383

19,007,898
24,754,636
3,080,784
567,101

5,831,821
8,318,736
844,763
101282

8,942,525
13,569,279
2,461,249
219,395

287,169
198,337
30J07
16,243

266,897
193,290
28,799
15,979

20,272
5,047
1,408
264

33,671,530

33,136,256

20,049,125

16,506,342

3,542,783

13,087,131

535,274

530,614

4,660

10,327,754
16J978,018
3,641,408
2,724,350

9,970,045
16,888,410
3,603,795
2,674,006

5,786,658
10,188,090
2,193,102
1,881,275

4,799,659
8,314,610
1,803,379
1,588,694

986,999
1,873,480
389,723
292,581

4,183,387
6,700,320
1,410,693
792,731

357,709
89,608
37,613
50,344

355,704
87,430
37285
50,195

2,005
2,178
328
149

102,850,323

101,889,864

73,463,570

56,912,632

16,550,938

28,426,294

960,459

906,098

54,361

17,608^34
29,231,295
29,573,354
26,437,440

17,361,759
28,643,672
29,512,123
26,372,310

13,464,409
19,524,007
20,290,157
20,184,997

10,153,766
15,428,008
15,981,543
15,349,315

3,310,643
4,095,999
4,308,614
4,835,682

3,897,350
9,119,665
9^21,966
6,187,313

246,475
587,623
61,231
65,130

207,058
583,645
56254
59,141

39,417
3,978
4,977
5,989

6,660,287

5,319,992

3,466,452

2,780,086

686,366

1,853,540

1,340,295

1,308,358

31,937

2,293,110
1,940,670
1,060,739
1,365,768

1,060,635
1,890,593
1,046,814
1,321,950

564,120
1,279,013
687,625
935,694

475,369
1,075,365
517,773
711,579

88,751
203,648
169,852
224,115

496,515
611,580
359,189
386,256

1,232,475
50,077
13,925
43,818

1203,884
49,121
13,135
42,218

28,591
956
790
1,600

1,539,449

1,495,536

1,244,329

923,577

320,752

251,207

43,913

11,630

32,283

Trading account securities....................................................................

5,794,824

5,745,333

5,653,678

3,824,936

1,828,742

91,655

49,491

Federal funds sold and securities purchased under agreements to
r e s e ll- to ta l.........................................................................................
With domestic commercial banks.......................................................
With brokers and dealers in securities and f u n d s ............................
With o th e r s ............................................................................................

36,218,662
31,051,345
2,660,470
2,506,847

34,281,373
29,487,855
2,460,671
2,332,847

26,820,516
22,171,546
2,375,755
2,273,215

21,701,787
18,030,587
2,082,119
1,589,081

5,118,729
4,140,959
293,636
684,134

7,460,857
7,316,309
84,916
59,632

1,937,289
1,563,490
199,799
174,000

1,891,904
1,518,605
199,799
173,500

45,385
44,885
0
500

235

972,793,518

Cash and due from b a n k s -to ta l..............................................................
Cash items in process o f c o lle c tio n ....................................................
Demand balances w ith banks in the United S ta te s .........................
Other balances w ith banks in the United States...............................
Including interest bearing balances.................................................
Balances w ith banks in foreign countries...........................................
Including interest bearing balances.................................................
Currency and c o i n ................................................................................
Reserve w ith Federal Reserve Bank....................................................

ASSETS AND LIABILITIES OF BANKS

Total a sse ts..................................................................................................

236

Table 106. ASSETS AND LIABILITIES OF ALL COMMERCIAL BANKS IN THE UNITED STATES (STATES AND OTHER AREAS),
JUNE 30, 1976—CONTINUED
BANKS GROUPED BY INSURANCE STATUS AND CLASS OF BANK
(Amounts in thousands of dollars)
Insured banks

Asset, lia b ility, or equity capital item

Noninsured banks

Members of
Federal Reserve System
Total

National

State

Not
members
of F.R.
System

Total
Total

Banks
of
deposit1

Nondeposit
trust
companies2

n e t ...................................................................................................
Reserve fo r possible loan losses.................................................
t o t a l ...............................................................................................
Unearned income on loans . • . ..................................................

503,171,628
6,221,670
509,393,298
12,078,777

491,142,844
6,149,901
497,292,745
12,018,031

377,027,408
4,918,094
381,945,502
8,304,185

286,109,442
3,563,964
289,673,406
6,805,205

90,917,966
1,354,130
92,272,096
1,498,980

114,115,436
1,231,807
115,347,243
3,713,846

12,028,784
71,769
12,100,553
60,746

11,952,278
71,049
12,023,327
60,121

76,506
720
77,226
625

Loans, gross................................................................................................
Real estate lo a n s -to ta l..........................................................................
Construction and land development ..............................................
Secured by farmland ..........................................................................

521,472,075
143,698,778

509,310,776
143,369,924

390,249,687
101,587,579

296,478,611
80,315,012

93,771,076
21,272,567

119,061,089
41,782,345

12,161,299
328,854

12,083,448
315,208

77,851
13,646

17^30,354
6,363,365

17,214,773
6,351,163

14,076,462
2,717,325

10,528,128
2,209,615

3,548,334
507,710

3,138,311
3,633,838

15,581
12,202

15,581
11,787

0
415

8,570,867
68,113,559

8,535,611
67,941,884

7,206,740
47,696,523

6,033,227
38,429,376

1,173,513
9,267,147

1,328,871
20,245,361

35,256
171,675

35,109
159,109

147
12,566

429,667
3,997,296
38,993,670

429,076
3,991,369
38,906,048

321,113
2,883,811
26,685,605

184,412
2,114,875
20,815,379

136,701
768,936
5,870,226

107,963
1,107,558
12,220,443

591
5,927
87,622

591
5,927
87,104

0
0
518

41,834,761

36,783,173

34,742,470

22,966,290

11,776,180

2,040,703

5,051,588

5,048,689

2,899

10,616,704
5,268,489
8,631,795
1,664,985
15,652,788

10,570,435
3,207,793
6,076,080
1,599,392
15,329,473

10,172,087
2,530272
5,907,436
1,449,455
14,683,220

6,894,785
1,914,997
3,373,198
1,209,987
9,573,323

3277,302
615275
2,534,238
239,468
5,109,897

398,348
677,521
168,644
149,937
646,253

46,269
2,060,696
2,555,715
65,593
323,315

46,269
2,060,696
2,555,715
65,593
320,416

0
0
0
0
2,899

11,776,021

11,539,769

10,763,677

6,022,136

4,741,541

776,092

236,252

7,743,327
4,032,694

7,521,606
4,018,163

7,390,097
3,373,580

3,344,357
2,677,779

4,045,740
695,801

131,509
644,583

221,721
14,531

0
0

22,181,908
176,583,562
111,274,886

22,156,350
171,035,263
110,833,004

12,379,981
141,017,919
77,877,404

10,825,193
105,366,398
62,610,185

1,554.788
35,651,521
15,267,219

9,776,369
30,017,344
32,955,600

25,558
5,548,299
441,882

25,554
5,508,699
420,259

4
39,600
21,623

37,171,422

36,882,538

24,232,711

20,006,885

4225,826

12,649,827

288,884

267,422

21,462

9,570,888
2,697^70

9,569,734
2,694,294

8,572,206
2,206,143

6,870,574
1,436,651

1,701,632
769,492

997,528
488,151

1,154
2,976

0
0

8,722,932
6,879,284
6,148,883

8,720,532
6,858,824
6,146,582

6237,584
4,493,793
4,336,040

5,354,544
3,760,387
3,504,307

883,040
733,406
831,733

2,482,948
2,365,031
1,810,542

2,400
20,460
2,301

2,392
20,456
2,301

8
4
0

Secured by 1 - to 4-fa m ily residential properties:
Insured by FHA and guaranteed by V A .....................................
Conventional...................................................................................
Secured by multi-family (5 or more) residential properties:
Insured by FHA ................................................................................
Conventional...................................................................................
Secured by non farm nonresident!al properties ............................
Loans to financial in s titu tio n s -to ta l.................................................
To real estate investment trusts and mortgage companies . . . .
To domestic commercial banks .......................................................
To banks in foreign countries ...........................................................
To other depository in stitu tio n s ....................................................
To other financial institutions...........................................................
Loans fo r purchasing or carrying securities-to tal............................
To brokers and dealers in securities.................................................
Other loans for purchasing or carrying securities .........................
Loans to fa rm e rs ...................................................................................
Commercial and industrial lo a n s ........................................................
Loans to in d iv id u a ls -to ta l....................................................................

To purchase private passenger automobiles on instalment basis.
Credit cards and related plans:
Retail (charge account) credit card plans. ..................................
Check credit and revolving credit plans. .....................................
To purchase other retail consumer goods on instalment basis:
Mobile homes (excludes travel trailers) ........................................
Other retail consumer goods...........................................................
Instalment loans to repair and modernize residential property .
Other instalment loans for household, family, and other
personal expenditures ....................................................................
Single-payment loans for household, family, and other
personal expenditures ....................................................................

17,095,879

17,034,293

11,425,682

9,047,803

2,377,879

5,608,611

61,586

61,567

22,988,328

22,926,207

16,373245

12,629,034

3,744,211

6,552,962

62,121

61,991

130

A ll other loans.........................................................................................

14,122,159

13,593,293

11,880,657

8,373,397

3,507,260

1,712,636

528,866

528,787

Total loans and s e c u ritie s ..............................................................

778,138,128

760,710,667

570,232,099

436,169,221

134,062,878

190,478,568

17,427,461

17,155,338

272,123

FEDERAL DEPOSIT INSURANCE CORPORATION

Loans,
Plus:
Loans,
Plus:

Total

Direct lease financing............................................................................
Bank premises, furniture and fixtures, and other assets
representing bank p re m is e s .............................................................
Real estate owned other than bank p re m ise s .................................
Investments in unconsolidated subsidiaries and associated
com panies............................................................................................
Customers' lia b ility on acceptances o u ts ta n d in g ...........................
Other assets............................................................................................

4,683,072

4,462,972

3,488,528

974,444

220,100

563

16,124,250
2,486,255

11,932,939
2,006,442

9,609,742
1,358,866

2,323,197
647,576

4,191,311
479,813

94,369
18,650

65,847
5,162

28,522
13,488

2,113,184
10,704,879
29,131,034

2,104,856
10,327,922
28,282,231

2,062,735
9,997,337
25,308,625

1,609,514
6,222,837
18,322,181

453,221
3,774,500
6,986,444

42,121
330,585
2,973,606

8,328
376,957
848,803

6,303
376,957
777,091

2,025
0
71,712

Total liabilities and equity capital.............................................................

972,793,518

949,527,514

732,120,775

552,476,068

179,644,707

217,406,739

23,266,004

22,843,515

422,489

Business and personal d e p o sits-to ta l....................................................
Individuals, partnerships, and corporations-dem and .....................
Invididuals, partnerships, and co rp ora tio ns-savin g s.....................
Individuals and nonprofit organizations-savings........................
Corporations and other profit organizations-savings..................
Individuals, partnerships, and co rp o ra tio n s-tim e ...........................
Deposits accumulated fo r payment of personal loans-tim e . . . .
Certified and officers' checks, travelers' checks, letters of
c re d it-d e m a n d ...................................................................................

663,098,603
237,702,850
182,576,171

654,921,316
236,511,588
182,104,366

484,027,630
179,450,785
129,995,388

375,115,169
136,671,383
102,845,835

108,912,461
42,779,402
27,149,553

170,893,686
57,060,803
52,108,978

8,177,287
1,191,262
471,805

8,157,887
1,186,995
471,805

19,400
4,267
0

176,497217
6,078,954

176,036,679
6,067,687

125,466,009
4,529,379

99,339,337
3,506,498

26,126,672
1,022,881

50,570,670
1,538,308

460,538
11267

0
0

230,001,371
175,492

224,414,068
171,089

164,938,007
136,363

129,750,856
103,895

35,187,151
32,468

59,476,061
34,726

5,587,303
4,403

5,572,509
4,403

14,794
0

12,642,719

11,720,205

9,507,087

5,743,200

3,763,887

2,213,118

922,514

922,175

339

Government d e p o s its -to ta l...................................................................
United States G overnm ent-dem and.................................................
United States Government-savings....................................................
United States G o v e rn m e n t-tim e .......................................................
States and political subdivisions-dem and.......................................
States and political subdivisions-savings...........................................
States and political su b d iv is io n s -tim e ..............................................

69,801,622
4,658,681
46,431
688,486
17,621,707
2,615,554
44,170,763

69,338,931
4,641,470
46,395
682,045
17,479,371
2,612,195
43,877,455

49,314,798
3,733,071
40,050
550,201
12,339,476
1,769,759
30,882,241

39,530,299
2,863,644
28,464
421,691
9,771,061
1,351,193
25,094,246

9,784,499
869,427
11,586
128,510
2,568,415
418,566
5,787,995

20,024,133
908,399
6,345
131,844
5,139,895
842,436
12,995,214

462,691
17,211
36
6,441
142,336
3,359
293,308

462,625
17,150
36
6,441
142,331
3,359
293,308

66
61
0
0
5
0
0

Domestic interbank d e p o s its -to ta l.......................................................
Commercial banks in the United S tates-dem and...........................
Commercial banks in the United S ta te s-sa vin g s...........................
Commercial banks in the United S ta te s -tim e .................................
Mutual savings banks in the United S ta te s-d e m a n d .....................
Mutual savings banks in the United States-savings........................
Mutual savings banks in the United S ta te s - tim e ...........................

41,012,080
30,928,032
5,285
8,293,668
1,299,965
2,684
482,446

39,942,761
30,629,621
5,285
7,731,889
1,113,753
2,684
459,529

37,914,996
29,486,773
2,933
6,964,357
1,013,679
2,583
444,671

22,727,275
17,251,742
2,143
4,787,281
490,615
2,583
192,911

15,187,721
12,235,031
790
2,177,076
523,064
0
251,760

2,027,765
1,142,848
2,352
767,532
100,074
101
14,858

1,069,319
298,411
0
561,779
186,212
0
22,917

1,066,735
295,827
0
561,779
186,212
0
22,917

2,584
2,584
0
0
0
0
0

Foreign government and bank d e p o s its -to ta l.....................................
Foreign governments, central banks-dem and.................................
Foreign governments, central b a n ks-sa vin g s .................................
Foreign governments, central b a n k s -tim e ........................................
Banks in foreign c o u n trie s -d e m a n d .................................................
Banks in foreign countries-savings....................................................
Banks in foreign c o u n trie s -tim e .......................................................

21,075,092
1,757,367
39,461
10,367,194
6,348,158
5
2,562,907

18,221,546
1,296,107
38,709
9,218,217
5,821,067
5
1,847,441

17,738,632
1,249,918
38,292
8,965,983
5,696,530
5
1,787,904

9,561,945
703,488
18,736
5,076,788
2,620,338
5
1,142,590

8,176,687
546,430
19,556
3,889,195
3,076,192
0
645,314

482,914
46,189
417
252,234
124,537
0
59,537

2,853,546
461,260
752
1,148,977
527,091
0
715,466

2,851,008
458,722
752
1,148,977
527,091
0
715,466

2,538
2,538
0
0
0
0
0

Total deposits...................................................................................
Demand .........................................................................................
Savings............................................................................................
Tim e ...............................................................................................

794,987,397

782,424,554

588,996,056

446,934,688

142,061,368

193,428,498

12,562,843

12,538,255

24,588

312,959,479
185^85,591
296,742,327

309213,182
184J809,639
288,401,733

242,477,319
131,849,010
214,669,727

176,115,471
104248J959
166,570258

66J61,848
27,600,051
48,099,469

66,735,863
52,960,629
73,732,006

3,746297
475,952
8,340,594

3,736,503
475,952
8,325,800

102,914,479

93,047,188

86,895,274

63,426,805

23,468,469

6,151,914

9,867,291

9,704,473

60,832,375

59,057,251

55,906,282

42,719,423

13,186,859

3,150,969

1,775,124

35221,697
8,126,355
17,484,323

33,976,476
8,049,480
17#31 295

32,667,475
7,511,662
15,727,145

25,065,539
6236,616
11,417268

7,601,936
1275,046
4209,877

1,309,001
537,818
1,304,150

1,245221
76,875
453,028

1245221
76,875
453/328

O
0
0

6,739,369
813,425
11,309,882
23,219,428

4,883,481
811,430
10,928,953
17,366,073

4,578,765
577,889
10,598,341
15,233,997

2,464,780
447,141
6,264,277
11,531,184

2,113,985
130,748
4,334,064
3,702,813

304,716
233,541
330,612
2,132,076

1,855,888
1,995
380,929
5,853,355

1,827,984
447
380,929
5,719,989

27,904
1,548
0
133,366

9,794
O
14,794
162,818

237

Miscellaneous lia b ilitie s -to ta l................................................................
Federal funds purchased and securities sold under agreements
to repurchase-total............................................................................
With domestic and commercial b a n ks ...........................................
With brokers and dealers in securities and fu n d s ........................
With o th e rs .........................................................................................
Other liabilities fo r borrowed money.................................................
Mortgage indebtedness.........................................................................
Acceptances outstanding......................................................................
Other lia b ilitie s ......................................................................................

ASSETS AND LI ABI LITI ES OF BANKS

4,683,635
16,218,619
2,504,905

238

Table 106. ASSETS AND LIABILITIES OF ALL COMMERCIAL BANKS IN THE UNITED STATES (STATES AND OTHER AREAS),
JU N E 30, 1 9 7 6 -C O N T IN U E D
B A N K S G R O U PE D B Y IN S U R A N C E S T A T U S A N D C L A S S O F B A N K
(Amounts in thousands of dollars)
Insured banks

Asset, lia b ility, or equity capital item

Noninsured banks

Total

National

State

Not
members
of F.R.
System

Members of
Federal Reserve System

Total
Total

Banks
of
deposit1

Nondeposit
trust
companies2

187,406

Total liabilities (excluding subordinated notes and
deben tures)...................................................................................

897,901,876

875,471,742

675,891,330

510,361,493

165,529,837

199,580,412

22,430,134

22,242,728

Subordinated notes and debentures.......................................................

5,002,343

4,864,369

3,934,623

2,610,607

1,324,016

929,746

137,974

136,712

1,262

Equity c a p ita l- to ta l................................................................................
Preferred sto ck-p a r v a lu e ...................................................................
Preferred stock-shares outstanding (in thousands).........................
Common stock-pa r v a lu e ....................................................................
Common stock-shares authorized (in th o u s a n d s ).........................
Common stock-shares outstanding(in thousands).........................
Surplus.....................................................................................................
Undivided p ro fits ...................................................................................
Reserve fo r contingencies and other capital reserves.....................

69,889,299
81,323
7,134
16,040,604
2,151,875
1,738,152
28,018,885
23,866,579
1,881,908

69,191,403
75,229
7,066
15,913,201
2,056,461
1,730,868
27,746,889
23,651,959
1,804,125

52,294,822
33,811
3,807
11,724,203
1,349,797
1,240,703
20 677,161
18,563,984
1,295,663

39,503,968
19,437
420
8,960,644
1,117,208
1,024,626
15,222,322
14,231,837
1,069,728

12,790,854
14,374
3,387
2,763,559
232,589
216,077
5,454,839
4,332,147
225,935

16,896,581
41,418
3,259
4,188,998
706,664
490,165
7,069,728
5,087,975
508,462

697,896
6,094
68
127,403
95,414
7,284
271,996
214,620
77,783

464,075
5,692
57
75,693
52,437
4,951
220,893
97,807
63,990

233,821
402
11
51,710
42,977
2,333
51,103
116,813
13,793

PERCENTAGES
Of total assets:
Cash and due from b a n k s ....................................................................
U.S. Treasury securities and obligations o f other
U.S. Government agencies and corporations..................................
Other securities......................................................................................
Loans (including federal funds sold and securities purchased
under agreements to re s e ll) .............................................................
Other assets............................................................................................
Total equity capital3 .............................................................................

13.3

13.1

14.5

13.7

16.9

8.6

19.3

19.5

8.2

12.5
12.0

12.7
12.1

11.3
11.5

11.6
11.7

10.4
10.8

17.6
14.1

4.6
10.3

4.5
10.0

7.5
28.1

55.4
6.7
7.2

55.3
6.7
7.3

55.2
7.6
7.1

55.7
7.4
7.2

53.5
8.4
7.1

56.9
3.8
7.8

60.0
5.8
8.74

60.6
5.4
4.94

28.9
27.4
55.3

9.94

5.64

64.8

278

198

Of total assets other than cash and U.S. Treasury securities:
Total equity capital3 .............................................................................

9.3

9.4

9.3

9.2

9.5

9.7

Number o f b a n ks.........................................................................................

14,663

14,385

5,778

4,749

1,029

8,607

11ncludes asset and lia b ility figures fo r branches of foreign banks (tabulated as banks) licensed to do a deposit business. Capital is not allocated to these branches by the parent banks.
2Amounts shown as deposits are special accounts and uninvested trust funds, with the latter classified as demand deposits of individuals, partnerships, and corporations.
3 0 n ly asset and lia b ility data are included fo r branches located in "o th e r areas” of banks headquartered in one of the 50 States; because no capital is allocated to these branches, they are excluded from the computation of
ratios of equity capital to assets.
4 Data fo r branches of foreign banks referred to in footnote 1 have been excluded in computing this ratio for noninsured banks of deposit and in total columns.
Note: Further inform ation on the reports of assets and liabilities of banks may be found on pp. 233-234.

FEDERAL DEPOSIT INSURANCE CORPORATION

Total

Table 107. ASSETS AND LIABILITIES OF ALL COMMERCIAL BANKS IN THE UNITED STATES (STATES AND OTHER AREAS),
DECEMBER 31, 1976
BANKS GROUPED BY INSURANCE STATUS AND CLASS OF BANK
(Amounts in thousands of dollars)
Insured banks

Asset, lia b ility, or equity capital item

Noninsured banks

Members of
Federal Reserve System

Total
Total
Total

National

State

Not
members
of F.R.
System

Total

Banks
of
deposit1

Nondeposit
trust
companies2

1,040,090,484

1,011,329,205

776,563,296

586,989,332

189,573,964

234,765,909

28,761,279

28,277,435

483,844

Cash and due from b a n k s -to ta l.............................................................
Cash items in process of c o lle c tio n ....................................................
Demand balances w ith banks in the United S ta te s ........................
Other balances w ith banks in the United States..............................
Including interest bearing balances.................................................
Balances w ith banks in foreign countries...........................................
Including interest bearing balances.................................................
Currency and c o i n ................................................................................
Reserve w ith Federal Reserve Bank....................................................

136,819,182
48,494,888
36,918,231
7,090,972
6,335,221
6,136,266
4,962,612
12,209,845
25,968,980

130,221,094
48,366,003
33,022,738
5,874,949
5,568,150
4,796,214
4,409,156
12,192,210
25,968,980

109,012,645
46,567,875
19,717,500
3,629,066
3,474,363
4,047,726
3,704,275
9,081,498
25,968,980

76,153,027
30,120,105
13,039,645
3,189,407
3,073,814
2,261,870
2,056,869
7,056,236
20,485,764

32,859,618
16,447,770
6,677,855
439,659
400,549
1,785,856
1,647,406
2,025,262
5,483,216

21,208,449
1,798,128
13,305,238
2,245,883
2,093,787
748,488
704,881
3,110,712
0

6,598,088
128,885
3,895,493
1,216,023
767,071
1,340,052
553,456
17,635
0

6,560,134
128,365
3,863,253
1,210,903
762,704
1,340,052
553,456
17,561
0

37,954
520
32,240
5,120
4,367
0
0
74
0

S e cu ritie s-to ta l.........................................................................................
Investment s e c u ritie s -to ta l................................................................
U.S. Treasury s e c u ritie s ...................................................................
M a tu rity -1 year and less. .............................................................
Maturity-Over 1 through 5 years.................................................
Maturity-Over 5 through 10 years..............................................
Maturity-Over 10 years................................................................
Obligations of other U.S. Government agencies and corps. . . .
M a tu rity -1 year and less................................................................
Maturity-Over 1 through 5 years.................................................
Maturity-Over 5 through 10 years ..............................................
Maturity-Over 10 years ................................................................
Obligations of States and political subdivisions...........................
M aturity-1 year and less. .............................................................
Maturity-Over 1 through 5 years.................................................
Maturity-Over 5 through 10 years..............................................
Maturity-Over 10 years ................................................................
Other bonds, notes, and d eb e n tu re s ..............................................
M a tu rity -1 year and less................................................................
Maturity-Over 1 through 5 years.................................................
Maturity-Over 5 through 10 years ..............................................
Maturity-Over 10 years ................................................................
Corporate s t o c k .......................................................................................

253,223,706
243,739,255
97,996,602

249,976,105
240,552,476
96,883,068

177,785,391
168,822,076
69,718,945

136,062,717
130,121,619
52,612,836

41,722,674
38,700,457
17,106,109

72,190,714
71,730,400
27,164,123

3,247,601
3,186,779
1,113,534

3,132,977
3,101,621
1,088,569

114,624
85,158
24,965

37,868,154
50,701,523
8,660,176
766,749

37,114,370
50,418,474
8,604,072
746,152

26,790,566
36,876,115
5,529,785
522,479

21,233,471
26,880,111
4,109,208
390,046

5,557,095
9,996,004
1,420,577
132,433

10,323,804
13,542,359
3,074^87
223,673

753,784
283,049
56,104
20,597

736,118
278,334
53,724
20,393

17,666
4,715
2,380
204

34,895,426

34,326,811

21,176,688

17,005,880

4,170,808

13,150,123

568,615

563,560

5,055

11,177,569
15,783,815
3,653,118
4,280,924

10,711,513
15,756,455
3,634,463
4,224,380

6,224,844
9,641,900
2,191,996
3,117,948

4,965,291
7,642,513
1,799,291
2,598,785

1,259,553
1,999,387
392,705
519,163

4,486,669
6,114,555
1,442,467
1,106,432

466,056
27,360
18,655
56,544

463,565
25251
18,349
56,395

2,491
2,109
306
149

104,452,519

103,505,764

74,104,493

57,471,096

16,633,397

29,401,271

946,755

913,778

32,977

17,004,987
30,379,079
30,905,132
26,163,321

16,755,606
29,797,439
30,847,464
26,105^55

12,843,331
20,202,377
21,180,572
19,878,213

9,932,149
15,911,985
16,665,610
14,961,352

2,911,182
4,290,392
4,514,962
4,916,861

3,912,275
9,595,062
9,666,892
6,227,042

249,381
581,640
57,668
58,066

233,648
577,012
51,190
51,928

15,733
4,628
6,478
6,138

6,394,708

5,836,833

3,821,950

3,031,807

790,143

2,014,883

557,875

535,714

22,161

1,730,282
2,293,568
1,127,321
1,243,537

1290,379
2,227,649
1,119,625
1,199,180

706,310
1,559^47
742,633
813,760

577,721
1,247,888
573,834
632,364

128,589
311,359
168,799
181,396

584,069
668,402
376,992
385,420

439,903
65,919
7,696
44,357

420,347
65,200
7242
42,925

19,556
719
454
1,432

1,541,489

1,312,816

967,319

345,497

228,673

39,446

10,007

29,439

7,903,516

7,882,140

7,650,499

4,973,779

2,676,720

231,641

21,376

21,349

Federal funds sold and securities purchased under agreements
to re s e ll-to ta l......................................................................................
With domestic commercial banks.......................................................
With brokers and dealers in securities and fu n d s ........................
With oth e rs .............................................................

48,528,794

45,869,893

36,407,620

30,164,710

6,242,910

9,462,273

2,658,901

2,554,621

104,280

40,310,198
5,786,342
2,432,254

37,907,597
5,705,042
2,257,254

28,784,377
5,499,323
2,123,920

23,872,468
4,374,445
1,917,797

4,911,909
1,124,878
206,123

9,123220
205,719
133,334

2,402,601
81,300
175,000

2299,021
81,300
174,300

103,580
0
700

239

1,580,935

Trading account securities...................................................................

ASSETS AND LI ABI LITI ES OF BANKS

Total assets..................................................................................................

240

Table 107. ASSETS AND LIABILITIES OF ALL COMMERCIAL BANKS IN THE UNITED STATES (STATES AND OTHER AREAS),
D E C E M B E R 31, 1 9 7 6 -C O N T IN U E D
B A N K S G RO U PED B Y IN S U R A N C E S T A T U S A N D C L A S S OF B A N K
(Amounts in thousands of dollars)
Noninsured banks

Insured banks

Asset, lia b ility, or equity capital item

Members of
Federal Reserve System

Total
Total

National

State

Not
members
of F.R.
System

Total

Banks
of
deposit1

Nondeposit
trust
companies2

533,173,947
6,276,386
539,450,333
12,670,956

518,731,657
6,186,775
524,918,432
12,617,065

395,571,230
4,899,797
400,471,027
8,640,126

302,339,065
3,589,367
305,928,432
7,147,538

93,232,165
1,310,430
94,542,595
1,492,588

123,160,427
1,286,978
124,447,405
3,976,939

14,442,290
89,611
14,531,901
53,891

14,405,014
89,101
14,494,115
53,258

37,276
510
37,786
633

Loans, gross...............................................................................................
Real estate lo a n s -to ta l..........................................................................
Construction and land development..............................................
Secured by farmland ..........................................................................

552,121,289
151,212,618

537,535,497
150,904,938

409,111,153
105,743,837

313,075,970
83,946,290

96,035,183
21,797,547

128,424,344
45,161,101

14,585,792
307,680

14,547,373
302,476

38,419
5,204

17,287,047
6,728,660

17,273,179
6,716,845

13,750,392
2,867,959

10,304,238
2,332,884

3,346,154
535,075

3,622,787
3,848,886

13,868
11,815

13,868
11,378

0
437

8,237,447
73,045,660

8,198,789
72,881,477

6,917,873
50,719,721

5,772,751
41,080,081

1,145,122
9,639,640

1,280,916
22,161,756

38,658
164,183

38,518
160,189

140
3,994

423,971
4,168,016
41,321,817

423,194
4,158,942
41,252,512

343,130
2,985,052
28,259,710

218,997
2,152,088
22,085,251

124,133
832,964
6,174,459

80,064
1,173,890
12,992,802

777
9,074
69,305

777
8,671
69,075

0
403
230

Loans to financial in s titu tio n s -to ta l.................................................

42,697,527

35,900,747

33,831,892

22,764,961

11,066,931

2,068,855

6,796,780

To real estate investment trusts and mortgage companies . . . .
To domestic commercial banks .......................................................
To banks in foreign countries ..........................................................
To other depository in stitu tio n s ....................................................
To other financial institutions..........................................................

10,065,506
4,646,319
10,883,636
1,491,687
15,610,379

9,939,141
2,782,815
6,620,910
1,348,516
15209,365

9,534,175
2,199,056
6,486,546
1,181,921
14,430,194

6,581,108
1,570,528
3,981,745
864,340
9,767,240

2,953,067
628,528
2,504,801
317,581
4,662,954

404,966
583,759
134,364
166,595
779,171

126,365
1,863,504
4,262,726
143,171
401,014

126,365
1,863,504
4262,726
143,171
401,014

0
0
0
0
0

Loans fo r purchasing or carrying securities-to tal............................
To brokers and dealers in securities ..............................................
Other loans for purchasing or carrying securities .........................
Loans to fa rm e rs ...................................................................................
Commercial and industrial lo a n s .......................................................
Loans to in d ividu a ls-to ta l....................................................................

15,452,083

15,089,724

14,122,017

8,637,269

5,484,748

967,707

362,359

358,170

4,189

11,420,303
4,031,780

11,074,748
4,014,976

10,793,313
3,328,704

6,001,747
2,635,522

4,791,566
693,182

281,435
686,272

345,555
16,804

345,330
12,840

225
3,964

23,292,269
185,051,846
119,343,511

23,268,314
178,751,008
118,905,722

12,971,464
146,745,904
83,185,857

11,324,334
110,358,836
67,054,049

1,647,130
36,387,068
16,131,808

10,296,850
32,005,104
35,719,865

23,955
6,300,838
437,789

23,955
6,290,298
426,463

0
10,540
11,326

40,104,935

39,806,519

25,824,450

21,308,028

4,516,422

13,982,069

298,416

287,544

10,872

11,373,757
3,059,284

11,373,566
3,054,209

10^05,648
2,503,761

8,249,951
1,645,947

1,955,697
857,814

1,167,918
550,448

191
5,075

0
0

8,744,615
7,265,334
6,570,272

8,743,103
7,246,252
6,567,706

6,217,654
4,757,096
4,608,507

5,363,832
4,001,540
3,718,471

853,822
755,556
890,036

2,525,449
2,489,156
1,959,199

1,512
19,082
2,566

1,504
19,079
2,557

8
3
9

17,848,164

17,792,293

11,790,555

9,409266

2,381,289

6,001,738

55,871

55,437

434

3,921,172

7,043,888

55,076

To purchase private passenger automobiles on instalment basis.
Credit cards and related plans:
Retail (charge account) credit card plans. ..................................
Check credit and revolving credit plans......................................
To purchase other retail consumer goods on instalment basis:
Mobile homes (excludes travel trailers)........................................
Other retail consumer goods...........................................................
Instalment loans to repair and modernize residential property .
Other instalment loans for household, family, and other
personal expenditures ....................................................................
Single-payment loans for household, family, and other
personal expenditures ....................................................................

24,377,150

24,322,074

17,278,186

13,357,014

A ll other loans.........................................................................................

15,071,435

14,715,044

12,510,182

8,990,231

3,519,951

2,204,862

356,391

349,231

7,160

Total loans and se c u ritie s ..............................................................

834,926,447

814,577,655

609,764,241

468,566,492

141,197,749

204,813,414

20,348,792

20,092,612

256,180

FEDERAL DEPOSIT INSURANCE CORPORATION

n e t ..................................................................................................
Reserve fo r possible loan losses.................................................
t o t a l...............................................................................................
Unearned income on lo a n s .......................................................

Loans,
Plus.
Loans,
Plus:

5,118,065

4,871,509

3,815,367

1,056,142

246,556

16,776,648
2,916,570

16,694,773
2,894,630

12,280,558
2,386,976

9,902,857
1,749,620

2,377,701
637,356

4,414,215
507,654

81,875
21,940

66,374
6,827

15,501
15,113

2,346,993
9,523,489
31,663,090

2,303,869
9,153,957
30,365,162

2,272,494
8,761,706
27,213,167

1,777,388
5,090,626
19,933,955

495,106
3,671,080
7,279,212

31,375
392,251
3,151,995

43,124
369,532
1,297,928

41,332
369,532
1,140,624

1,792
0
157,304

Total liabilities and equity capital.............................................................

1,040,090,484

1,011,329,205

776,563,296

586,989,332

189,573,964

234,765,909

28,761,279

28,277,435

483,844

Business and personal d ep osits-tota l....................................................
Individuals, partnerships, and corporations-dem and.....................
Individuals, partnerships, and co rp ora tio ns-savin g s.....................
Individuals and nonprofit organizations-savings ........................
Corporations and other profit organizations-savings..................
Individuals, partnerships, and co rp o ra tio n s-tim e ...........................
Deposits accumulated fo r payment of personal loans-tim e . . . .
Certified and officers' checks, travelers' checks, letters of
credit—d e m a n d ...................................................................................

704,785,327
256,753,877
198,257,884

695,593,860
255,418,592
197,697,188

511,051,452
193,117,435
141,240,298

397,057,876
146,963,287
111,860,590

113,993,576
46,154,148
29,379,708

184,542,408
62,301,157
56,456,890

9,191,467
1,335,285
560,696

9,173,420
1,318,107
560,696

18,047
17,178
0

189,584,737
8,673,147

189,038,090
8,659,098

134,812,483
6,427,815

106,881,881
4,978,709

27,930,602
1,449,106

54225,607
2,231,283

546,647
14,049

0
0

236,657,522
150,713

230,768,986
146,318

167,509,058
117,979

132,070,447
87,404

35,438,611
30,575

63,259,928
28,339

5,888,536
4,395

5,887,998
4,395

538
0

12,965,331

11,562,776

9,066,682

6,076,148

2,990,534

2,496,094

1,402,555

1,402,224

331

Government d e p o s its -to ta l...................................................................
United States G overnm ent-dem and.................................................
United States Government-savings....................................................
United States G o v e rn m e n t-tim e .......................................................
States and political subdivisions-dem and........................................
States and political subdivisions-savings...........................................
States and political su bd iv is io n s -tim e ..............................................

72,285,537
3,058,030
56,345
684,081
18,075,657
6,060,378
44,351,046

71,883,024
3,039,886
56,306
679,580
17,985,499
6,057,276
44,064,477

50,055,992
2,110,196
48,387
514,340
12,204,931
4,672,068
30,506,070

40,453,728
1,681,067
42,335
410,149
9,857,622
3,701,874
24,760,681

9,602,264
429,129
6,052
104,191
2,347,309
970,194
5,745,389

21,827,032
929,690
7,919
165,240
5,780,568
1,385,208
13,558,407

402,513
18,144
39
4,501
90,158
3,102
286,569

402,455
18,091
39
4,501
90,153
3,102
286,569

58
53
0
0
5
0
0

Domestic; interbank d ep os its -to ta l.......................................................
Commercial banks in the United S tates-dem and...........................
Commercial banks in the United S ta te s-sa vin g s ...........................
Commercial banks in the United S ta te s -tim e .................................
Mutual savings banks in the United S ta te s-d e m a n d .....................
Mutual savings banks in the United States-savings........................
Mutual savings banks in the United S ta te s - tim e ...........................

45,564,839
36,289,906
10,871
7,238,449
1,684,386
1,232
339,995

44,480,526
35,958,351
10,871
6,807,485
1,384,810
1,232
317,777

42,176,172
34,692,076
7,012
5,926,583
1,253,838
794
295,869

24,143,335
19,356,161
5,628
4,052,455
553,174
594
175,323

18,032,837
15,335,915
1,384
1,874,128
700,664
200
120,546

2,304,354
1,266,275
3,859
880,902
130,972
438
21,908

1,084,313
331,555
0
430,964
299,576
0
22,218

1,067,913
315,155
0
430,964
299,576
0
22,218

16,400
16,400
0
0
0
0
0

Foreign government and bank d e p o s its -to ta l....................................
Foreign governments, central b anks-dem and.................................
Foreign governments, central b a n ks-sa vin g s.................................
Foreign governments, central b a n k s -tim e .......................................
Banks in foreign c o u n trie s -d e m a n d .................................................
Banks in foreign countries-savings....................................................
Banks in foreign c o u n trie s -tim e .......................................................

22,421,012
2,414,723
103,701
10,080,294
7,418,229
5
2,404,060

18,966,712
1,846,518
102,796
8,482,379
6,766,596
5
1,768,418

18,322,583
1,813,423
91,927
8,217,976
6,511,588
5
1,687,664

10,469,477
1,111,331
18,263
4,788,636
3,251,854
5
1,299,388

7,853,106
702,092
73,664
3,429,340
3,259,734
0
388,276

644,129
33,095
10,869
264,403
255,008
0
80,754

3,454,300
568,205
905
1,597,915
651,633
0
635,642

3,454,184
568,089
905
1,597,915
651,633
0
635,642

116
116
0
0
0
0
0

Total deposits..................................................................................
Demand .........................................................................................
Savings................................................................................... . . .
Tim e .........................................................................................

845,056,715

830,924,122

621,606,199

472,124,416

149,481,783

209,317,923

14,132,593

14,097,972

34,621

338,660,139
204,490,416
301,906,160

333,963,028
203,925,674
293,035,420

260,770,169
146,060,491
214,775,539

188,850,644
115,629,289
167,644,483

71,919,525
30,431^02
47,131,056

73,192,859
57,865,183
78,259,881

4,697,111
564,742
8,870,740

4,663,028
564,742
8,870,202

34,083
O
538

116,660,435

103,020,572

96,350,686

70,813,471

25,537,215

6,669,886

13,639,863

13,431,397

72,979,442

70,320,490

66,899,303

51,678,941

15,220,362

3,421,187

2,658,952

42,842,543
5,694,086
24,442,813

40,636,816
5,667,886
24,015,788

39,194,674
5,344,928
22,359,701

31,328,798
3,675,702
16,674,441

7,865,876
1,669,226
5,685,260

1,442,142
322,958
1,656,087

2,205,727
26,200
427,025

2205,727
26,200
427,025

0
0
0

7,570,913
801,087
10,136,501
25,172,492

5,127,666
799,100
9,762,309
17,011,007

4,845,541
549,930
9,369,842
14,686,070

2,747,298
407,767
5,144,593
10,834,872

2,098,243
142,163
4,225,249
3,851,198

282,125
249,170
392,467
2,324,937

2,443,247
1,987
374,192
8,161,485

2,416,315
449
374,192
7,981,489

26,932
1,538
0
179,996

208,466

241

Miscellaneous lia b ilitie s -to ta l................................................................
Federal funds purchased and securities sold under agreements
to repurchase-total............................................................................
With domestic and commercial ba n ks ...........................................
With brokers and dealers in securities and fu n d s ........................
With o th e rs .........................................................................................
Other liabilities fo r borrowed m oney.................................................
Mortgage indebtedness.........................................................................
Acceptances outstanding......................................................................
Other lia b ilitie s ......................................................................................

ASSETS AND LIABILITIES OF BANKS

Direct lease financing............................................................................
Bank premises, furniture and fixtures, and other assets
representing bank p re m ise s.............................................................
Real estate owned other than bank p re m is e s.................................
Investments in unconsolidated subsidiaries and associated
com panies............................................................................................
Customers' lia b ility on acceptances o u ts ta n d in g ...........................
Other assets............................................................................................

242

Table 107. ASSETS AND LIABILITIES OF ALL COMMERCIAL BANKS IN THE UNITED STATES (STATES AND OTHER AREAS),
DECEMBER 31, 1976-CONTINUED
BANKS GROUPED BY INSURANCE STATUS AND CLASS OF BANK
(Amounts in thousands of dollars)
Noninsured banks

Insured banks

Asset, lia b ility, or equity capital item

Total
Total

Total liabilities (excluding subordinated notes and
d eb en tures)...................................................................................

961,717,150

933,944,694

Total

National

717,956,885

542,937,887

State

175,018,998

215,987,809

Total

Banks
of
deposit1

Nondeposit
trust
companies2

27,772,456

27,529,369

243,087

Subordinated notes and debentures........................................................

5,261,430

5,123,725

4,082,288

2,726,628

1,355,660

1,041,437

137,705

136,627

1,078

Equity c a p ita l-to ta l................................................................................
Preferred s to ck-p a r v a lu e ....................................................................
Preferred stock-shares outstanding (in thousands).........................
Common sto ck-p a r v a lu e ....................................................................
Common stock-shares authorized (in tho u san ds).........................
Common stock-shares outstanding (in thousands).........................
Surplus......................................................................................................
Undivided p ro fits ...................................................................................
Reserve for contingencies and other capital reserves......................

73,111,904
73,422
6,806
16,320,780
2,172,803
1,719,918
29,326,051
25,492,839
1,898,812

72,260,786
67,328
6,740
16,219,259
2,067,077
1,702,805
28,893,882
25,251,535
1,282,782

54,524,123
25,213
3,573
11,884,153
1,294,118
1,179,077
21,409,674
19,925,999
1,279,084

41,324,817
18,754
491
9,106,275
1,065,235
965,665
15,853,738
15,271,833
1,074,217

13,199,306
6,459
3,082
2,777,878
228,883
213,412
5,555,936
4,654,166
204,867

17,736,663
42,115
3,167
4,335,106
772,959
523,728
7,484,208
5,325,536
549,698

851,118
6,094
66
101,521
105,726
17,113
432,169
241,304
70,030

611,439
5,692
55
52,142
62,552
14,757
379,720
116,706
57,179

239,679
402
11
49,379
43,174
2,356
52,449
124,598
12,851

13.2

PERCENTAGES
Of total assets:
Cash and due from b a n k s ....................................................................
U.S. Treasury securities and obligations of other
U.S. Government agencies and corporations..................................
Other securities......................................................................................
Loans (including federal funds sold and securities
purchased under agreements to re s e ll)...........................................
Other assets............................................................................................
Total equity capital3 .............................................................................

12.9

14.0

13.0

17.3

9.0

22.9

23.2

7.8

12.8
11.6

13.0
11.7

11.7
11.2

11.9
11.3

11.2
10.8

17.2
13.6

5.8
5.4

5.8
5.2

6.2
17.5

55.9
6.6
7.0

55.8
6.6
7.1

55.6
7.4
7.0

56.6
7.2
7.0

52.5
8.2
7.0

56.5
3.7
7.6

59.5
6.3
7.34

60.0
5.7
5.3 4

29.3
39.2
49.5

Of total assets other than cash and U.S. Treasury securities:
Total equity capital3 .............................................................................

9.1

9.2

9.1

9.0

9.5

11.34

6.44

56.9

Number of b an ks.........................................................................................

14,698

14,411

5,760

4,737

1,023

8,651

1<2- 3' 4 See notes to table 106.
Note: Further inform ation on the report of assets and liabilities of banks may be found on pp. 233-234.

287

1209

FEDERAL DEPOSIT INSURANCE CORPORATION

Not
members
of F.R.
System

Members of
Federal Reserve System

Table 108. ASSETS AND LIABILITIES OF ALL MUTUAL SAVINGS BANKS IN THE UNITED STATES (STATES AND OTHER AREAS),
JUNE 30, 1976, AND DECEMBER 31, 1976
BANKS GROUPED BY INSURANCE STATUS
(Amounts in thousands of dollars)
June 30,1976

December 31,1976

Asset, lia b ility , or surplus account item
Insured

Noninsured

Total

Insured

Noninsured

Total assets............................................................................................................................................

128,457,216

114,013,807

14,443,409

134,820,238

120,839,827

13,980,411

Cash, balances with banks, and collection ite m s-to ta l............................................................
Currency and c o i n ....................................................................................................................
Demand balances w ith banks in the United S ta te s ............................................................
Other balances w ith banks in the United States..................................................................
Cash items in process of c o lle c tio n ........................................................................................

1,572,981
336,058
585,559
550,635
100,729

1,419,290
283,842
502,637
544,888
87,923

153,691
52,216
82,922
5,747
12,806

2,370,167
395,273
1,022,366
816,010
136,518

2,188,926
338,001
925,344
807,240
118,341

181,241
57,272
97,022
8,770
18,177

Secu rities—to tal................................................................................................................................
United States Government and agency s e c u ritie s -to ta l...................................................
Securities maturing in 1 year or le s s ...............................................................................
Securities maturing in 7 to 5 years ..................................................................................
Securities maturing in 5 to 10 ye a rs ...............................................................................
Securities maturing after 10 years.....................................................................................

39,404,525
13,361,719

35,237,267
1 1,783,018

4,167,258
1,578,701

41,976,649
14,764,846

37,984,627
13,194,506

3,992,022
1,570,340

1890,595
3,981,288
1,787,492
5,702,344

1,621,307
3,274,058
1,492,423
5,395,230

269288
707,230
295,069
307,114

2,274,842
3,783,778
1,655,589
7,050,637

1,981,205
3237,461
1,383,006
6,592,834

293,637
546,317
272,583
457,803

Corporate b o n d s ......................................................................................................................
State, county, and municipal obligations...............................................................................
Other bonds, notes, and d eb en tures.....................................................................................

15,993,543
2,343,174
3,361,651

14,696,937
2,225,089
2,889,972

1,296,606
118,085
471,679

16,904,069
2,407,041
3,540,853

15,781,623
2,301,574
3,019,191

1,122,446
105,467
521,662

Corporate s to c k - to ta l.............................................................................................................
B a nk ......................................................................................................................................
Other......................................................................................................................................

4,344,438

3,642,251

702,187

4,359,840

3,687,733

672,107

543,679
3,800,759

376,524
3^65,727

167,155
535,032

548,733
3,811,107

387,161
3,300,572

161,572
510,535

Federal funds sold and securities purchased under agreements to resell..............................

1,874,504

1,636,845

237,659

1,535,036

1,322,316

212,720

Other loans-total.............................................................................................................................
Real estate lo a n s -to ta l.............................................................................................................
Construction loans .............................................................................................................
Secured by farmland ..........................................................................................................

82,121,307
78,838,767

72,538,149
69,751,108

9,583,158
9,087,659

85,294,638
81,639,570

75,990,422
72,820,626

9,304,216
8,818,944

934,712
57,298

813,117
43,319

121,595
13,979

955,370
60,016

854,499
46,364

100,871
13,652

12,151,588
12,284,679
26,279,969

11,335,565
11,230,240
21,217,100

816,023
1,054,439
5,062,869

11,846,517
12,185,076
28,687,780

11,147,343
11,221,051
23,393,029

699,174
964,025
5,294,751

2,267,553
11,245,405
13,617,563

2^12,618
10,648,078
12,251,071

54,935
597,327
1,366,492

2,444,114
11,443,577
14,017,120

2,428,166
10,874,242
12,855,932

15,948
569,335
1,161,188

33,712
45,190
0
1,808
990
481,413

32,275
45,078
0
1,520
990
472,519

1,437
112
0
288
0
8,894

28,442
57,346
0
1,758
918
609,393

26,955
57,234
0
1,494
918
599,849

1,487
112
0
264
0
9,544

Secured by residential properties:
Secured by 1- to 4 - family residential properties:
Insured by Federal Housing Administration ......................................................
Guaranteed by Veterans Administration ............................................................
Not insured or guaranteed by FHA or VA .........................................................
Secured by multifamily (5 or more) residential properties:
Insured by Federal Housing Administration ......................................................
Not insured by F H A ..............................................................................................
Secured by other properties ..............................................................................................
Loans to domestic commercial and foreign banks...............................................................
Loans to other financial in s titu tio n s ....................................................................................
Loans to brokers and dealers in se curities...........................................................................
Other loans fo r purchasing or carrying se curities...............................................................
Loans to farmers (excluding loans on real estate)...............................................................
Commercial and industrial lo a n s ...........................................................................................

ASSETS AND LIABILITIES OF BANKS

Total

244

Table 108. ASSETS AND LIABILITIES OF ALL MUTUAL SAVINGS BANKS IN THE UNITED STATES (STATES AND OTHER AREAS),
JUNE 30, 1976, AND DECEMBER 31, 1976—CONTINUED
BANKS GROUPED BY INSURANCE STATUS
(Amounts in thousands of dollars)
December 31, 1976

June 30,1976
Asset, lia b ility, or surplus account item
Total

Noninsured

Insured

Total

Noninsured

Insured

2,607,892
111,535

2,184,137
50,522

423,755
61,013

2,862,400
94,811

2,412,478
70,868

449,922
23,943

Total loans and s e c u ritie s ............................................................................................

123,400,336

109,412,261

13,988,075

128,806,323

115,297,365

13,508,958

Bank premises, furniture and fixtures, and other assets representing bank premises . .
Real estate owned other than bank p re m ise s......................................................................
Investments in subsidiaries not consolidated.........................................................................
Other assets................................................................................................................................

1,139,611
515,838
113,633
1,714,817

1,003,968
463,473
108,493
1,606,322

135,643
52,365
5,140
108,495

1,190,297
539,844
122,338
1,791,269

1,063,867
490,059
112,754
1,686,856

126,430
49,785
9,584
104,413

Total liabilities and surplus accounts..................................................................................................

128,457,216

114,013,807

14,443,409

134,820,238

120,839,827

13,980,411

D e p o s its -to ta l................................................................................................................................
Savings and time d ep osits-total...............................................................................................
Savings deposits....................................................................................................................
Deposits accumulated for payment of personal loans....................................................
Fixed maturity and other time deposits .........................................................................
Demand d e p o s its - to ta l...........................................................................................................

117,599,055
116,617,621

104,538,180
103,592,741

13,060,875
13,024,880

123,653,736
122,517,852

110,998,759
109,895,767

12,654,977
12,622,085

73,469,580
2
43,148,139

65,101,518
1
38,491,222

8,368,062
1
4,656,817

67,295,029
1
42,600,737

8,058,055
0
4,564,030

981,434

945,439

35,995

1,135,884

1,102,992

32,892

Miscellaneous lia b ilitie s -to ta l........................................................................................................
Securities sold under agreements to repurchase...................................................................
Other borrow ings.......................................................................................................................
Other lia b ilitie s ..........................................................................................................................

2,125,610
50,290
435,906
1,639,414

1,868,279
50,290
421,214
1,396,775

257,331
0
14,692
242,639

2,112,377
72,718
362,913
1,676,746

1,865,047
69,118
356,329
1,439,600

247,330
3,600
6,584
237,146
12,902,307

75,353,084
1
47,164,767

Total lia b ilitie s ..............................................................................................................

119,724,665

106,406,459

13,318,206

125,766,113

112,863,806

M inority interest in consolidated subsidiaries............................................................................

Surplus a ccounts-total....................................................................................................................
Capital notes and d ebentures..................................................................................................
Other surplus accounts..............................................................................................................

8,732,491
213,080
8,519,411

7,607,288
206,930
7,400,358

1,125,203
6,150
1,119,053

9,054,064
219,470
8,834,594

7,975,960
213,264
7,762,696

1,078,104
6,206
1,071,898

1.2
10.4
20.3

1.2
10.3
20.6

1.1
10.9
17.9

1.8
11.0
20.2

1.8
10.9
20.5

1.3
11.2
17.3

65.4
2.7
6.8

65.1
2.8
6.7

68.0
2.1
7.8

64.4
2.7
6.7

64.0
2.8
6.6

68.1
2.1
7.7

PERCENTAGES
Of total assets:
Cash and balances with other b a n k s ............................................................................................
U.S. Government and agency s e c u ritie s ......................................................................................
Other securities................................................................................................................................
Loans (including federal funds sold and securities purchased under
agreements to re s e ll)...........................................................................................................
Other assets......................................................................................................................................
Total surplus accounts....................................................................................................................
Of total assets other than cash and U.S. Government obligations:
Total surplus accounts....................................................................................................................

7.7

7.5

8.9

7.7

7.6

8.8

Number of b an ks...................................................................................................................................

474

328

146

473

329

144

FEDERAL DEPOSIT INSURANCE CORPORATION

Loans to individuals fo r personal e xpe nd itu re s...................................................................
A ll other loans (including overdrafts)......................................................................................

Table 109. ASSETS AND LIABILITIES OF INSURED COMMERCIAL BANKS IN THE UNITED STATES (STATES AND OTHER AREAS),
DECEMBER CALL DATES, 1971-1976
(Amounts in thousands of dollars)
Asset, lia b ility, or equity capital item

Total a ssets..............................................................................................................

Dec. 31,1971

Dec. 31, 1972

Dec. 31, 1973

Dec. 31, 1974

Dec. 31, 1975

Dec. 31, 1976

737,699,385

832,658,280

912,529,261

952,451,011

1,011,329,2055

98,690,700
38,658,890
21,962,456
2,427,914

111,844,113
45,386,844
28,156,064
2,783,379

116,939,181
44,661,826
30,128,768
2,771,041

126,081,191
47,281,289
34,414,497
4,090,428

129,024,072
47,332,821
32,168,464
7,566,509

567,033

739,928

787,960

1,449,086

2,820,929

7,591,590
27,482,817

8,703,008
26,074,890

10,768,844
27,820,742

11,727,595
27,118,296

12,355,374
26,779,975

130,221,094
48,366,003
33,022,738
5,874,949
5,568,150
4,796,214
4,409,156
12,192,210
25,968,980

S ecu ritie s-to tal....................................................................................................
Investment s e c u ritie s -to ta l.........................................................................
U.S. Treasury securities .........................................................................

169,167,078
163,859,514

183,760,796
178,632,700

188,230,092
179,574,763

193,902,967
185,919,136

227,847,169
222,515,186

249,976,105
240,552,476

62,696,667
17,071,836
80,135,021
3,955,990

64,709,715
21,156,678
87,418,538
5,347,769

55293,300
27,538214
91,227,882
5,515,367

51,873,986
31,087,341
96,791,360
6,166,449

81,011,010
33298,668
100,801,477
7,404,031

96,883,068
34,326,811
103,505,764
5,836,833

5,307,564

5,128,096

8,655,329

7,983,831

5,331,983

7,882,140

19,643,272

25,634,862

34,379,920

38,937,288

37,345,238

45,869,893

Obligations of other U.S. Government agencies and corporations. .
Obligations of States and political subdivisions.................................
Other bonds, notes, and debentures ...................................................
Corporate stock1 ...........................................................................................

1,541,489

Trading account securities................................................................
Federal funds sold and securities purchased under agreements
to re s e ll-to ta l..............................................................................................
Loans net ..............................................................................................................
Plus: Reserve for possible loan losses1 ......................................................
Loans, t o t a l...........................................................................................................
Plus: Unearned income on loans1................................................................
Loans, gross...........................................................................................................
Real estate lo a n s -to ta l..................................................................................
Construction and land development1...................................................
Secured by farmland ...............................................................................

Secured by 1- to 4-fa m ily residential properties:
Insured by FHA and guaranteed by V A .......................................
Conventional.....................................................................................
Secured by multi-family (5 or more) residential properties:
Insured by FHA ..................................................................................
Conventional......................................................................
Secured by non farm nonresidential properties .................................

388,902,133
99,086,276

459,755,788
118,787,181

506,378,800
131,751,383

502,289,682
136,186,930

4,173,726

4,752270

5.420.190

6,030,620

6,370,913

17,273,179
6,716,845

10,442,621
37,438,104

10,418,222
46,425,199

10,156,517
57,639,300

9,348,308
65204281

8,869,801
68,149,590

8,198,789
72,881,477

803,880
3,177,970
26,277,989

1,225,769
4,550,113
31,714,703

1.293.191
5,636,229
38,641,754

939,083
6,652,445
43,576,646

513,947
5,401,104
46,881,575

423,194
4,158,942
41252,512

21,313,511

29,527,538

39,696,478

45,202,429

38,966,705

35.900.747

9,939,141
j 2,782,815
\ 6,620,910
f 1,348,516
i 15209,365

}

4,405^98

6,119,843

9,155,496

10,082,525

9,556,714

16,908,213

23,407,695

30,540,982

35,119,904

29,409,991

10,848,504

15,632,717

11,926,687

9,195,911

10,879,642

7,202,440
3,646,064

11,165,572
4,467,145

7,625,741
4,300,946

5,192,896
4,003,015

7,055262
3,824,380

11.074.748
4,014,976

12,506,206
118,401,203
74,796,848

14,302,106
132,497,555
87,629,904

17,150,320
158,688,202
100,382,510

18,225,296
184,216,999
103,714,164

20,135,056
175,922,939
106,819,480

23,268,314
178,751,008
1 18,905,722

15,089,724

245

Loans to financial in s titu tio n s -to ta l.........................................................
To real estate investment trusts and mortgage companies1 ............
To domestic commercial banks ............................................................
To banks in foreign countries ...............................................................
To other depository in stitu tio n s .........................................................
To other financial institutions 2 .............................................................
Loans for purchasing or carrying se curities-to tal....................................
To brokers and dealers in securities......................................................
Other loans for purchasing or carrying securities..............................
Loans to fa rm e rs ...........................................................................................
Commercial and industrial lo a n s ................................................................
Loans to in dividu a ls-to ta l............................................................................

328,225,896
82,314,290

518,731,657
6,186,775
524,918,432
12,617,065
537,535,497
150,904,938

ASSETS AND LI ABI LITI ES OF BANKS

639,903,322

Cash and due from b a n k s -to ta l.........................................................................
Cash items in process of c o lle c tio n .............................................................
Demand balances w ith banks in the United S ta te s .................................
Other balances with banks in the United States.......................................
Including interest bearing balances1 ...................................................
Balances with banks in foreign countries...................................................
Including interest bearing balances ' ...................................................
Currency and c o i n ........................................................................................
Reserve with Federal Reserve Bank.............................................................

Asset, liab ility, or equity capital item

Dec. 31, 1976

Dec. 31, 1971

Dec. 31, 1972

Dec. 31, 1973

Dec. 31, 1974

24,850,695

29,084,924

33,477,132

32,949,382

33,455,998

39,806,519

4,523,889
1,463,857

5,443,349
1,780,153

6,878,593
2,262,700

8,327,292
2,810,808

9,551,255
2,827,207

11,373,566
3,054,209

4,674,364
4,655,510
3,865,597

6,436,145
5,170,118
4,326,916

8,371286
6,206,851
4,906,940

8,998,167
6,514,415
5,625,691

8,720,369
6,720,411
5,955,100

8,743,103
7,246,252
6,567,706

11,409,477

12,903,659

14,538,048

15,491,334

16,455,919

17,792,293

19,353,459

22,484,640

23,740,960

22,997,075

23,133,221

24,322,074

A ll other loans..................................................................................................

8,045,334

10,226,037

13,124,410

14,072,618

13,378,930

14,715,044

Total loans and s e c u ritie s .................................................................

517,036,246

598,297,791

682,365,800

739,219,055

767,482,089

814,577,655

Bank premises, furniture and fixtures, and other assets representing
bank premises............................................................................................
Real estate owned other than bank p re m ise s ...........................................
Investments in unconsolidated subsidiaries and associated companies .
Customers' lia b ility on acceptances o u ts ta n d in g .....................................
Other assets.....................................................................................................

10,285,384
390,833
911,550
3,914,186
8,674,423

11,524,646
369,193
1,077,700
3,471,203
11,114,739

12,788,763
433,860
1,403,400
4,356,527
14,370,749

14,296,959
811,080
1,739,054
10,653,382
19,728,540

15,598,230
1,908,880
1,992,754
8,687,996
27,756,990

16,694,773
2,894,630
2,303,869
9,153,957
30,365,162

Total liabilities and equity capital.............................................................................

639,903,322

737,699,385

832,658,280

912,529,261

952,451,011

1,011,329,205

Business and personal dep osits-tota l.................................................................
Individuals, partnerships, and corporations-dem and...............................
Individuals, partnerships, and co rporations-savings...............................

439,568,884
191,775,515
112,165,951

504,283,757
221,204,645
124,188,716

555,151,799
231,956,880
127,818,434

604,637,647
235,984,680
136,268,612

645,305,033
246,710,621
160,716,975

695,593,860
255,418,592
197,697,188

226,851,406
280,452

230,768,986
146,318

5,118,065

189,038,090
8,659,098

Individuals and nonprofit organizations—savings
Corporations and oth&r profit orQanizations—savinc/s^
147,083,850
554,001

184,010,925
503,468

221,618,614
386,635

Individuals, partnerships, and c o rp ora tio ns-tim e .....................................
Deposits accumulated for payment o f personal lo a n s -tim e ...................
Certified and officers' checks, travelers' checks, letters of
c re d it-d e m a n d .........................................................................................

125,087,661
677,179
9,862,578

11,252,545

10,862,092

10,379,106

10,745,579

11,562,776

Government d e p o s its -to ta l................................................................................
United States G overnm ent-dem and...........................................................
United States Government—savings
United States G ove rn m e n t-tim e .................................................................
States and political subdivisions-dem and.................................................
States and political subdivisions—savings
States and political s u bd ivisio n s-tim e ........................................................

58,987,158
10,263,251

67,554,342
10,939,672

73,660,934
9,887,668

74,219,736
4,821,969

70,704,640
3,126,532

530,769
17,714,586

614,035
18,672,774

440,641
18,746,900

500,147
18,710,659

588,481
18,879,179

71,883,024
3,039,886
56,306
679,580
17,985,499
6,057,276
44,064,477

Domestic interbank d ep os its -to ta l....................................................................
Commercial banks in the United States—demand.....................................
Commercial banks in the United States—savings
Commercial banks in the United S ta te s -tim e ...........................................
Mutual savings banks in the United S ta te s-d e m a n d ...............................
Mutual savings banks in the United States—savings
Mutual savings banks in the United States—t i m e .....................................

30,478,552

37,327,861

44,585,725

50,186,961

48,110,448

31,906,847
28,014,732

33,677,534
28,569,727

37,444,862
29,861,879

45,328,505
35,101,553

44,280,973
33,491,673

2,441,489
1,163,740

3,548,503
1,205,688

5,783,907
1,155,682

8,563,604
1,197,332

9,129,775
1,159,714

286,886

353,616

643,394

466,016

499,811

44,480,526
35,958,351
10,871
6,807,485
1,384,810
1,232
317,777

FEDERAL DEPOSIT INSURANCE CORPORATION

To purchase private passenger automobiles on instalment basis. . .
Credit cards and related plans:
Retail (charge account) credit card plans. .....................................
Check credit and revolving credit plans. ........................................
To purchase other retail consumer goods on instalment basis:
Mobile homes (excludes travel trailers). .........................................
Other retail consumer goods..............................................................
Instalment loans to repair and modernize residential property . . .
Other instalment loans for household, family, and other personal
expenditures.........................................................................................
Single-payment loans for household, family, and other personal
expenditures.........................................................................................

Dec. 31, 1975

246

Table 109. ASSETS AND LIABILITIES OF INSURED COMMERCIAL BANKS IN THE UNITED STATES (STATES AND OTHER AREAS),
DECEMBER CALL DATES, 1971-1976-CONTINUED
(Amounts in thousands of dollars)

Foreign government and bank d e p o s its -to ta l.................................................
Foreign governments, central b anks-dem and..........................................

8,721,173
803,364

11,391,934
908,731

15,361,830
1,355,645

22,227,034
1,882,054

20,458,022
1,659,374

Foreign governments, central b a n k s -tim e .................................................
Banks in foreign c o u n trie s -d e m a n d ..........................................................

5,053,554
2,681,096

6,517,493
3,637,309

8,506,931
5,279,635

12,078,963
6,339,583

11,374,159
5,649,939

Banks in foreign c o u n trie s -tim e ................................................................

183,159

328,401

219,619

1,926,434

1,774,550

Total deposits.....................................................................................
Demand .........................................................................................
Savings............................................................................................
Tim e ...............................................................................................

539,184,062

616,907,567

681,619,425

746,412,922

780,748,668

830,924,122

262278,862
112,165,957
164,739,249

296,391,091
124,188,716
196,327,760

309,106,381
127,818,434
244,694,610

314,416,936
136,268,612
295,727,374

321,422,611
160,716,975
298,609,082

333,963,028
203,925,674
293,035,420

47,370,832

61,514,816

85,391,650

94,152,187

93,975,434

103,020,572

24,179,742
1,463,429
668,331
4,039,643
17,019,687

33,731,069
3,919,796
1,160,675
3,570,900
19,132,376

50,480,996
7,179,644
771,519
4,486,309
22,473,182

51,224,639
4,867,119
724,845
11,226,448
26,109,136

52,190,147
4,651,050
774,094
9,275,803
27,084,340

70,320,490
5,127,666
799,100
9,762,309
17,011,007

Total liabilities (excluding subordinated notes
and debentures)............................................................................

586,554,894

678,422,383

767,011,075

840,565,109

874,724,102

933,944,694

Subordinated notes and debentures...................................................................

2,956,180

4,092,820

4,117,351

4,259,531

4,407,892

5,123,725

Reserves on loans and securities—total4 ..........................................................
Reserves for bad debt losses on loans..........................................................
Other reserves on loans..................................................................................
Reserves on securities.....................................................................................

6 443,382
6 J 51,274
113,427
178,681

6,909,306
6,623^801
112,167
173,338

7,808,584
7*526744
107,994
173,846

8,676,953
8^3 76,683
131,581
168,689

9,010,387
8*6 54^714
169,113
186,560

Equity c a p ita l- to ta l............................................................................................
Preferred s tock-pa r v a lu e ............................................................................
Common s tock-pa r v a lu e ............................................................................
Surplus..............................................................................................................
Undivided p ro fits ............................................................................................
Reserve for contingencies and other capital reserves..............................

43,948,866
91,930
11,811,129
19,895,816
11,135,068
1,014,923

48,274,876
68,924
12,853,653
21,528,422
13,012,232
811,645

53,721,270
65,650
13,846,071
23,593,311
15,361,857
854,381

59,027,668
43,460
14,789,463
25,313,257
17,969,789
911,699

64,308,630
47,881
15,565,026
26,712,935
21,182,330
800,458

15.4

15.2

14.0

13.8

13.5

12.95

12.5
14.0

11.6
13.3

9.9
12.7

9.1
12.2

12.0
11.9

13.05
11.7s

54.4
3.8
6.9

56.2
3.7
6.5

59.3
4.0
6.5

59.8
5.2
6.5

56.7
5.9
6.8

55.85
6.65
7.15

9.2

8.6

8.1

8.0

8.7

9.25

13,612

13,733

13,976

14,228

14,384

PERCENTAGES
Of total assets:
Cash and due from b a n k s ............................................................................
U.S. Treasury securities and obligations of other U.S. Government
agencies and co rp o ra tio n s ............................................................................
Other securities.....................................................................................................
Loans (including federal funds sold and securities purchased under
agreements to re s e ll).....................................................................................
Other assets.....................................................................................................•. .
Total equity capital...............................................................................................
Of total assets other than cash and U.S. Treasury securities:
Total equity capital...................................................................................
Number of banks........................................................................................................

14,411

247

1 Not available before 1976.
2 Before 1976 included loans to real estate investment trusts and mortgage companies.
3 1ncludes m inority interest in consolidated subsidiaries.
4 Reporting of reserves fo r losses on loans and securities was revised in 1976; see page 234.
5Total asset data fo r 1976 are based on "Loans, net.''

72,260,786
67,328
16,219,259
28,893,882
25,251,535
1,828,782

ASSETS AND LIABILITIES OF BANKS

Miscellaneous lia b ilitie s -to ta l............................................................................
Federal funds purchased and securities sold under agreements
to repurchase-total..................................................................................
Other liabilities fo r borrowed m oney..........................................................
Mortgage indebtedness..................................................................................
Acceptances outstanding...............................................................................
' Other liabilities3 ............................................................................................

18,966,712
1,846,518
102 796
8,482,379
6,766,596
5
1,768,418

248

Table 110. ASSETS AND LIABILITIES OF INSURED MUTUAL SAVINGS BANKS IN THE UNITED STATES (STATES AND OTHER AREAS),
DECEMBER CALL DATES, 1971-1976
(Amounts in thousands of dollars)
Dec. 31, 1971

Dec. 31, 1972

Dec. 31, 1973

Dec. 31, 1974

Dec. 31, 1975

Dec. 31, 1976

T otal a ssets...................................................................................................................................................

77,891,927

87,650,051

93,012,515

95,589,401

107,280,765

120,839,827

Cash, balances w ith banks, and collection ite m s -to ta l...................................................................
Currency and c o i n ..........................................................................................................................
Demand balances w ith banks in the United S ta te s ...................................................................
Other balances w ith banks in the United States.........................................................................
Cash items in process of c o lle c tio n ..............................................................................................

1,273,735
195,679
551,149
445,384
81,523

1,520,399
215,345
568,211
627,530
109,313

1,847,776
226,905
711,172
817,495
92,204

2,053,353
268,102
683,943
1,022,757
78,551

2,195,390
308,887
706,116
1,091,274
89,113

2,188,926
338,001
925,344
807,240
118,341

S e cu ritie s-to ta l......................................................................................................................................

18,491,379

22,636,737

21,871,412

22,684,614

30,421,034

37,984,627

United States Government and agency s e c u ritie s -to ta l.........................................................
Securities maturing in 1 year or le s s .....................................................................................
Securities maturing in 1 to 5 years ........................................................................................
Securities maturing in 5 to 10 years .....................................................................................
Securities maturing after 10 years. ........................................................................................

5,156,321

6,386,003

5,971,200

5,967,835

9,468,682

13,194,506

867,992
1,823,997
832,859
1,631,473

968,157
1,915,014
1,095,116
2,407,716

831,719
1,513,476
789,936
2,836,069

712,274
1,604,165
694,251
2,957,145

1,312,116
2,761,242
1,167,218
4,228,106

1,981,205
3,237,461
1,383,006
6,592,834

State, county, and municipal obligations.....................................................................................
Corporate b o n d s .............................................................................................................................
Other bonds, notes, and d eb e n tu re s...........................................................................................

373,810
9,293,507
1,194,941

857,353
1 1,086,004
1,370,862

907,013
10,026,920
1,713,867

882,620
10,560,303
1,856,557

1,488,631
13,503,561
2,329,685

2,301,574
15,781,623
3,019,191

Corporate s t o c k - to t a l....................................................................................................................
B a nk ............................................................................................................................................
Other............................................................................................................................................

2,472,800

2,936,515

3,252,412

3,417,299

3,630,475

3,687,733

288,373
2,184,427

329,426
2,607,089

364,066
2,888,346

348,290
3,069,009

374,851
3,255,624

387,161
3,300,572

Federal funds sold and securities purchased under agreements to re s e ll....................................

493,536

596,255

1,252,753

964,856

897,063

1,322,316

Other lo a n s -to ta l...................................................................................................................................
Real estate lo a n s -to ta l....................................................................................................................
Construction loans ....................................................................................................................
Secured by farmland .................................................................................................................

56,066,722
54,222,077

60,950,481
59,094,330

65,870,714
63,946,513

67,449,217
65,339,748

70,812,040
68,371,859

75,990,422
72,820,626

736,386
41,656

1,002,712
51,459

1,090,262
51,160

821,250
49,185

824,494
48,239

854,499
46,364

13,532,344
10,923,517
13,031,229

13,388,433
11,413,769
14,804,568

12,828,775
11,728,249
17,087,533

12,052,069
11,501,239
18,275,751

11,587,451
11,342,670
20,123,915

11,147,343
11,221,051
23,393,029

1,396,791
7,136,586
7,423,568

1,399,794
8,265,926
8,767,669

1,523,751
9,416,887
10,219,896

1,688,126
10,076,268
10,875,860

1,949,245
10,693,613
11,802,232

2,428,166
10,874,242
12,855,932

Loans to domestic commercial and foreign banks................................................................
Loans to other financial in s titu tio n s .....................................................................................
Loans to brokers and dealers in se curities............................................................................
Other loans for purchasing or carrying se curities................................................................
Loans to farmers (excluding loans on real estate)................................................................
Commercial and industrial lo a n s ...........................................................................................
Loans to individuals for personal e xpenditures...................................................................
A ll other loans (including overdrafts).....................................................................................

49,628
36,492
5,951
3,485
1,110
463,001
1,260,144
24,834

29,751
29,927
28,922
3,446
1,305
252,438
1,451,401
58,961

13,679
29,473
4,441
2,221
1,323
173,322
1,665,365
34,377

18,339
26,324
743
930
1,416
175,360
1,812,329
74,028

25,275
32,714
0
1,480
1,456
288,976
2,052,147
38,133

26,955
57,234
0
1,494
918
599,849
2,412,478
70,868

Total loans and s e c u ritie s ..................................................................................................

75,051,637

84,183,473

88,994,879

91,098,687

102,130,137

115,297,365

FEDERAL DEPOSIT INSURANCE CORPORATION

Asset, lia b ility, or surplus account item

Bank premises, furniture and fixtures, and other assets representing bank premises . .
Real estate owned other than bank p re m ise s..................................................................
Investments in subsidiaries not consolidated........................................................................
Other assets........................................................................................................

590,326
90,987
41,518
843,724

661,118
147,340
59,309
1,078,412

760,289
180,671
64,883
1,164,017

857,879
233,775
82,292
1,263,415

963,664
418,233
94,253
1,479,088

1,063,867
490,059
112,754
1,686,856

77,891,927

87,650,051

93,012,515

95,589,401

107,280,765

120,839,827

D e p o s its -to ta l..............................................................................................................
Savings and time d ep osits-tota l............................................................................
Savings deposits......................................................................
Deposits accumulated for payment o f personal loans.......................................................
Fixed maturity and other time deposits ..............................................................................
Demand deposits—t o t a l ........................................................................................

71,500,831
70,818,051

80,571,993
79,781,381

84,890,128
84,008,571

86,814,415
85,904,825

98,126,107
97,133,340

110,998,759
109,895,767

57,644,100
80
13,173,871

60,573,427
25
19,207,929

57,591,849
476
26,416,246

56,497,626
295
29,406,904

62,050,661
430
35,082,249

682,780

790,612

881,557

909,590

992,767

1,102,992

975,996
(1)
100,045
875,951

1,114,469
22,757
98,980
992,732

1,609,538
26,089
445,901
1,137,548

1,952,443
217,561
667,256
1,067,626

1,815,359
108,715
465,279
1,241,365

1,865,047
69,118
356,329
1,439,600

Total lia b ilitie s ...........................................................................................

72,476,827

81,686,462

86,499,666

88,766,858

99,941,466

112,863,806

M inority interest in consolidated subsidiaries.........................................................

5,415,099
10,456
5,404,643

5,963,589
59,372
5,904,217

6,512,849
114,953
6,397,896

6,822,543
169,460
6,653,083

7,339,229
190,279
7,148,950

7,975,960
213,264
7,762,696

Miscellaneous lia b ilitie s -to ta l....................................................... , ..................................................
Securities sold under agreements to repurchase........................................................................
Other borrow ings....................................................................................................
Other lia b ilitie s .............................................................................

Surplus a ccou nts-to tal.........................................................................................................................
Capital notes and debentures..............................................................................................
Other surplus accounts...........................................................................................

67,295,029
1
42,600,737

PERCENTAGES
Of total assets:
Cash and balances w ith other b a n k s ....................................................
U.S. Government and agency s e c u ritie s ..........................................................................................
Other securities...................................................................................
Loans (including Federal funds sold and securities purchased under agreements to resell). . .
Other assets.........................................................................................
Total surplus a ccounts.................................................................................................
Of total assets other than cash and U.S. Government and agency securities:
Total surplus a ccounts.......................................................................................................
Number of b an ks......................................................................................

1.7%
6.6
17.1
72.6
2.0
7.0

1.7%
7.3
18.5
70.2
2.2
6.8

2.0%
6.4
17.1
72.2
2.3
7.0

2.1%
6.2
17.5
71.6
2.5
7.1

2.0%
8.8
19.5
66.8
2.8
6.8

1.8%
10.9
20.5
64.0
2.8
6.6

7.6

7.5

7.6

7.8

7.7

7.6

327

326

322

320

329

ASSETS AND LIABILITIES OF BANKS

Total liabilities and surplus accounts.......................................................................................................

1 Not reported separately prior to 1972.

249

T a b le 111. PERCENTAGES OF ASSETS, LIABILITIES, AND EQUITY CAPITAL OF INSURED COMMERCIAL BANKS

250

OPERATING THROUGHOUT 1976 IN THE UNITED STATES AND OTHER AREAS, DECEMBER 31, 1976
BANKS GROUPED BY AMOUNT OF A S S E T S
Banks w ith assets o f Asset, lia b ility , or e q u ity capital item

T o tal a s s e ts ..........................................................................................

A ll
banks

Less
than
$5 m illio n

$5.0 m illio n
to
$9.9 m illion

$ 10.0 m illio n
to
$24.9 m illio n

$25.0 m illio n
to
$49.9 m illio n

$50.0 m illio n
to
$99.9 m illio n

$ 100.0 m illio n
to
$299.9 m illio n

$300.0 m illio n
to
$499.9 m illio n

$500.0 m illio n
to
$999.9 m illio n

$ 1.0 b illio n
to
$4.9 b illio n

$5.0 b illion
or
more

100.0%

10 0.0 %

10 0.0%

10 0.0 %

10 0.0%

11.0
16.3

9.8
14.0

9.5
12.1

9.3
11.4

9.8
10.9

11.1
10.9

12.4
9.5

12.8
9.1

14.1
8.5

16.4
7.6

3.4
10.2
.7

8.6
5.3
.7

7.7
8.9
.5

6.4
12.1
.7

5.4
13.8
.8

4.9
13.9
.8

5.0
13.2
.9

3.3
12.1
.8

3.1
11.7
1.0

2.0
9.5
.7

1.2
5.8
.3

4.5

6.3

5.2

4.7

4.1

4.0

4.5

5.5

6.3

5.9

2.8

Loans, n e t .......................................................................................
Unearned income on loans..........................................................
Reserve fo r possible loan losse s................................................
Loans, g ro ss....................................................................................
Real estate l o a n s ....................................................................
Loans to financial in s titu tio n s .............................................
Loans to purchase or carry secu ritie s................................
Loans to farm ers (excluding loans on real e state ). . . .
C om m ercial and ind ustrial lo a n s .......................................
Instalm ent loans fo r personal e x p e n d itu r e s ...................
Single paym ent loans fo r personal expenditures.............
A ll othe r loans..........................................................................

51.2
1.2
.6
53.1
14.9
3.6
1.5
2.3
17.6
9.3
2.4
1.4

49.0
1.3
.4
50.7
12.6
.2
.1
16.2
7.4
10.4
2.9
.8

51.0
1.4
.4
52.9
15.5
.2
.1
12.9
8.8
11.2
3.2
.9

51.5
1.7
.4
53.7
18.1
.2
.2
8.7
10.2
12.0
3.3
.9

51.5
1.8
.5
53.9
19.6
.3
.2
4.7
11.6
13.1
3.5
.8

51.8
1.8
.5
54.1
19.7
.4
.4
2.5
14.1
12.8
3.3
.8

50.4
1.6
.5
52.5
18.7
1.0
.6
1.2
15.7
11.8
2.7
.8

51.7
1.6
.6
54.0
17.2
1.4
.9
1.3
16.3
12.9
2.9
1.0

50.7
1.2
.5
52.5
15.9
2.8
1.4
.9
16.7
10.0
3.1
1.6

49.6
.9
.5
51.0
12.7
4.7
1.4
.7
19.6
7.9
2.2
1.8

52.6
.6
.7
54.0
9.7
8.0
3.4
.7
24.0
5.0
1.0
2.1

A ll othe r a s s e ts ................................

...................

7.4

2.7

2.8

2.9

3.6

3.8

3.9

4.6

5.2

9.6

13.2

T otal lia b ilitie s and e q u ity c ap ital....................................................

100.0

D e p o s its - to ta l.............................................................................
D e m a n d .............................................................................
Time an d s a v in g s .............................................................
In dividuals, partnerships, and c o rp o ratio n s -d e m a n d . .
In dividuals, partnerships, and c o rp o ra tio n s -tim e
and savings..........................................................................
U.S. G o v e rn m e n t....................................................................
States and po litic a l subdivisions..........................................
Foreign governments and o ffic ia l in s titu tio n s ................
Com m ercial b a n k s ................................................................
C ertified and o ffic e r s 'c h e c k s .............................................

82.0
33 .0
49.1
25.4

88.7
36.0
52.7
31.5

89.8
32.6
57.2
28.2

90.3
31.5
58.9
27.1

90.2
30 .5
59.7
26.4

89.5
30.9
58.5
26.5

88.0
31.9
56.1
25.9

85.8
33 .5
52.3
26.8

82.8
34.9
48 .0
27.2

77.3
33.9
43.4
26.2

73.6
34.3
39.3
22.2

42.4
.3
6.7
1.0
5.0
1.1

46.7
.3
9.1
(3 )
.3
.7

51.7
.4
8.4
(3 )
.2
.7

53.2
.4
8.5
(3 )
.2
.8

53.7
.5
8.3
(3 )
.3
.8

52.0
.5
8.5
(3 )
.9
.9

48.8
.4
9.1
.1
2.6
.9

44.9
.4
8.6
(3 )
4.1
.9

41.6
.4
8.0
(3 )
4.4
1.1

37.5
.3
6.3
.4
5.5
.9

32.0
.1
3.2
3.4
10.9
1.6

Federal funds purchased and securities sold under
agreements to re p u rc h a s e ....................................................
O ther lia b ilitie s fo r borrowed m o n e y.......................................
A ll othe r lia b ilitie s 2 .......................................................................
Subordinated notes and debentures..........................................
E q u ity c a p ita l................................................................................

6.9
.5
2.9
.5
7.1

.2
(3 )
.6
(3 )
10.4

.3
(3 )
.7
(3 )
9.0

.4
(3 )
1.1
.1
8.0

.6
(3 )
1.3
.2
7.6

1.3
(3 )
1.3
.3
7.5

2.9
.1
1.4
.4
7.1

5.2
.1
1.5
.4
6.9

7.8
.2
1.9
.6
6.6

11.6
.5
3.1
.7
6.6

12.0
1.2
5.6
.5
6.9

N um ber o f b a n k s ................................................................................

14,249

1,309

721

145

108

107

1,399

2,826

4,975

2,641

S e c u ritie s held in trading accounts are included in "O th e r assets."
in c lu d e s m in o rity interest in consolidated subsidiaries.
3 Less than 0.05 percent.
N ote: For income and expense data by size o f bank, see tables 117 and 118. Assets and liab ilities (in $000) o f insured com mercial banks by size o f bank are contained in Assets and L ia b ilitie s -C o m m e rc ia l and M u tu a l Savings Banks (w ith 1976 Report of
Incom e), December 31, 1976.

INSURANCE CORPORATION

100.0%

12.9
9.6

FEDERAL DEPOSIT

10 0.0%

Cash and due from b a n k s ..........................................................
U.S. Treasury securities1 .............................................................
Obligations o f othe r U.S. G overnm ent agencies
and co rp o ra tio n s1....................................................................
Obligations o f States and po litic a l subdivisions1 ................
O ther securities1 ..........................................................................
Federal funds sold and securities purchased under
agreements to resell................................................................

Table 112. PERCENTAGES OF ASSETS AND LIABILITIES OF INSURED MUTUAL SAVINGS BANKS OPERATING THROUGHOUT 1976 IN
THE UNITED STATES (STATES AND OTHER AREAS), DECEMBER 31, 1976
BANKS GROUPED BY AMOUNT OF ASSETS

Banks w ith assets o f—
Asset, lia b ility, or surplus account item

Total a ssets..............................................

All
banks1

Less
than
$10.0 million

$10.0 million
to
$24.9 m illion

$25.0 m illion
to
$49.9 m illion

$50.0 m illion
to
$99.9 m illion

$100.0 m illion
to
$299.9 m illion

$300.0 million
to
$499.9 m illion

$500.0 million
to
$999.9 million

$1 billion
or
more

100.0%

1.8
10.9
13.1
1.9
5.6

4.2
14.6
10.1
.1
4.8

2.4
10.9
7.2
.8
5.6

2.5
10.1
9.2
1.0
5.6

1.8
10.4
7.3
1.0
5.9

2.0
10.7
9.3
1.6
5.3

1.9
13.1
10.3
2.0
4.7

1.6
11.1
11.9
1.8
5.0

1.8
10.5
15.7
2.1
6.0

1.1

2.2

1.6

1.5

1.9

1.5

1.7

1.4

Other loans and d iscounts.............................................................
Real estate lo a n s -to ta l...................................................................
Construction loans ...................................................................
Secured by farmland ................................................................

62.9
60.3
.7
(2)

61.8
56.6

70.0
65.1

67.9
63.4

69.2
65.0

67.0
63.6

63.7
60.9

64.3
61.9

60.3
58.0

.4
.4

.5
.5

1.0
.2

1.5
.2

(2)

Secured by residential properties:
Insured by FHA ...................................................................
Guaranteed by I/ A .............................................................
Not insured or guaranteed by FHA or VA .....................
Secured by other properties ....................................................

.6
(2)

11.2
9.3
28.4
10.6

4.3
.6
44.1
6.8

1.8
4.6
49.5
8.1

2.5
3.0
50.2
6.5

5.9
5.9
43.0
7.5

10.7
10.1
31.1
8.1

11.9
9.7
30.1
9.6

13.4
10.4
20.8
12.9

Commercial and industrial lo a n s .................................................
Loans to individuals fo r personal expe nd itu re s........................
A ll other loans including overdrafts..............................................

.5
2.0
.1

.5
4.7
.1

.5
4.3
.2

.2
4.1
.2

4.1
5.0
47.5
6.5
.2

.2
3.0
.1

.2
2.3
.2

.3
2.0
.1

.7
1.4
.1

Other assets..........................................................................

3.9
.2

1.3

.5
(2)

2.8

2.1

1.5

2.3

2.5

2.6

2.9

Total liabilities and surplus accounts.................................................

100.0

Deposits—t o t a l ................................................................................
Savings deposits.........................................................................

91.9

91.6

92.2

91.5

91.4

91.9

55.7

76.3

58.3

59.3

58.9

56.1

57.4

59.1

(2)

35.3
.9

15.3
.1

33.2
.7

31.7
.6

31.8
.8

35.0
.8

33.7
.8

31.5
1.3

37.7
.8

Deposits accumulated for payment of personal loans. . . .
Fixed maturity and other time deposits ..............................
Demand deposits......................................................................

53.3

Miscellaneous liabilities...................................................................

1.5

1.0

1.2

1.3

1.1

1.3

1.9

Surplus a c cou nts............................................................................
Capital notes and debentures.................................................
Other surplus accounts.............................................................

6.6
.2

8.0
.7

6.9

7.5

6.8

6.9

6.8

6.3

6.4

7.2

.3
6.6

.1
7.5

7.4
.7

7.3

.1
6.7

.1
6.9

.1
6.7

.2
6.0

329

Number of b anks.............................................................................

1 Dollar amounts of assets and liabilities of all mutual savings banks are shown in Assets and Liabilities-Commercial and Mutual Savings Banks (with 1976 Report of Income), December 31, 1976.
2Zero or less than 0.05 percent.

ASSETS AND LI ABI LITI ES OF BANKS

100.0%

Cash and due from b a n k s .............................................................
United States Government and agency securities.....................
Corporate b o n d s ............................................................................
State, county, and municipal o b lig a tio n s .................................
Other securities...............................................................................
Federal funds sold and securities purchased under
agreements to resell....................................................

252

Table 113. DISTRIBUTION OF INSURED COMMERCIAL BANKS IN THE UNITED STATES (STATES AND OTHER AREAS),
DECEMBER 31, 1976
BANKS GROUPED ACCORDING TO AMOUNT OF ASSETS AND BY RATIOS OF SELECTED ITEMS TO ASSETS OR DEPOSITS

All
banks

Less
than
$5 million

$5.0 million
to
$9.9 million

$10.0 million
to
$24.9 million

$25.0 million
to
$49.9 million

$50.0 million
to
$99.9 million

$100.0 million
to
$299.9 million

$300.0 million
to
$499.9 m illion

$500.0 m illion
to
$999.9 m illion

$1.0 billion
to
$4.9 billion

$5.0 billion
or
more

Ratios of cash and due from banks to total assets o f Less than 5.............................................................................
5.0 to 7.49.............................................................................
7.5 to 9 .9 9 .............................................................................
10.0 to 1 2 .4 9 .......................................................................
12.5 to 1 4 .9 9 .......................................................................
15.0 to 1 7 .4 9 .......................................................................
17.5 to 1 9 .9 9 .......................................................................
20.0 to 24.99 .......................................................................
25.0 to 29.99 .......................................................................
30.0 or more..........................................................................

1,183
3,847
3,853
2,349
1,319
781
447
395
118
119

126
328
350
213
144
112
66
90
42
44

267
825
704
436
247
150
94
83
26
25

451
1,423
1,374
792
428
234
131
99
27
25

196
795
755
437
224
112
57
52
9
5

92
325
396
240
117
65
33
28
7
8

39
128
199
156
79
56
34
22
2
9

6
11
41
29
22
16
7
8
3
2

2
11
18
21
29
13
9
4
1
0

4
0
16
20
27
18
15
7
0
0

0
1
0
5
2
5
1
2
1
1

Ratios of U.S. Treasury securities to total assets o f Less than 5.............................................................................
5.0 to 9 .9 9 .............................................................................
10.0 to 1 4 .9 9 .......................................................................
15.0 to 1 9 .9 9 .......................................................................
20.0 to 24.99 .......................................................................
25.0 to 29.99 .......................................................................
30.0 to 34.99 .......................................................................
35.0 to 39.99 .......................................................................
40.0 to 44.99 .......................................................................
45.0 to 49.99 .......................................................................
50.0 or more..........................................................................

2,823
4,063
3,103
1,854
1,097
639
356
192
117
77
90

270
308
268
204
141
110
72
32
42
25
43

473
726
581
381
287
172
107
52
31
22
25

1,037
1,398
1,084
649
356
216
112
65
30
20
17

518
823
617
351
170
84
34
28
6
7
4

281
416
307
157
82
31
19
12
5
1
0

141
243
173
85
45
23
9
1
1
2
1

40
54
28
12
9
0
0
2
0
0
0

24
49
21
7
2
1
2
0
2
0
0

31
42
19
7
5
2
1
0
0
0
0

8
4
5
1
0
0
0
0
0
0
0

FEDERAL DEPOSIT INSURANCE CORPORATION

Banks w ith assets of
Ratios
(In percent)

1,186
446
537
968
1,403
1,735
2,018
2,024
1,521
1,115
1,044
414

440
181
174
178
169
107
89
66
43
31
27
10

417
104
162
289
372
397
343
306
161
130
116
60

287
93
132
291
465
637
797
736
566
414
406
160

22
41
43
106
193
286
387
500
388
295
271
110

17
12
11
48
89
146
191
244
213
151
139
50

3
11
13
24
48
94
136
126
115
70
66
18

0
2
1
12
14
21
33
20
15
14
11
2

0
2
0
5
17
17
21
19
14
5
4
4

0
0
1
10
26
28
21
6
6
5
4
0

0
0
0
5
10
2
0
1
0
0
0
0

Ratios of net loans to total assets o f Less than 2 0 ..........................................................................
20.0 to 24.99 ......................................................................
25.0 to 29.99 ......................................................................
30.0 to 34.99 ......................................................................
35.0 to 39.99 ......................................................................
40.0 to 44.99 ......................................................................
45.0 to 49.99 ......................................................................
50.0 to 54.99 ......................................................................
55.0 to 59.99 .......................................................................
60.0 to 64.99 ......................................................................
65.0 to 69.99 ......................................................................
70.0 to 74.99 ......................................................................
75.0 or more.........................................................................

202
203
430
664
1,076
1,550
2,056
2,368
2,457
1,863
1,013
387
142

71
54
96
101
152
146
168
172
197
151
117
59
31

52
47
104
149
237
316
370
412
412
357
238
106
57

51
67
129
229
361
528
702
799
846
693
387
154
38

18
18
62
98
180
292
406
482
484
382
168
42
10

4
10
22
46
76
132
221
264
282
167
66
18
3

5
6
14
27
51
87
117
152
149
80
30
5
1

0
0
2
8
4
12
27
36
38
13
4
1
0

1
0
0
5
7
15
17
24
28
9
1
0
1

0
1
1
1
8
20
22
25
16
9
1
2
1

0
0
0
0
0
2
6
2
5
2
1
0
0

Ratios of total demand deposits to total deposits o f Less than 2 5 ..........................................................................
25.0 to 29.99 ......................................................................
30.0 to 34.99 ......................................................................
35.0 to 39.99 .......................................................................
40.0 to 44.99 ......................................................................
45.0 to 49.99 .......................................................................
50.0 to 54.99 .......................................................................
55.0 to 59.99 ......................................................................
60.0 to 64.99 ......................................................................
65.0 to 69.99 .......................................................................
70.0 to 79.99 .......................................................................
80.0 to 89.99 ......................................................................
90.0 or more..........................................................................

2,085
2,537
2,893
2,494
1,791
1,170
651
273
190
100
81
41
105

109
199
275
232
199
153
105
59
39
31
32
18
64

395
504
575
478
366
237
120
50
44
32
18
8
30

800
907
1,024
874
576
383
222
88
50
24
18
10
8

448
529
558
455
336
174
84
32
18
3
3
2
0

211
246
256
259
148
108
44
17
12
6
3
1
0

104
116
156
132
90
63
32
13
7
1
5
2
3

8
21
18
27
36
15
11
2
6
0
1
0
0

7
6
18
15
18
18
13
3
10
0
0
0
0

3
8
11
18
20
17
17
8
4
1
0
0
0

0
1
2
4
2
2
3
1
0
2
1
0
0

253

ASSETS AND LIABILITIES OF BANKS

Ratios of obligations of States and political subdivisions
to total assets o f Z e r o ......................................................................................
More than 0.0, but less than 1.0........................................
1.0 to 2.49.............................................................................
2.5 to 4 .9 9 .............................................................................
5.0 to 7.49.............................................................................
7.5 to 9 .9 9 .............................................................................
10.0 to 1 2 .4 9 ......................................................................
12.5 to 1 4 .9 9 ......................................................................
15.0 to 1 7 .4 9 ......................................................................
17.5 to 1 9 .9 9 ......................................................................
20.0 to 24.99 ......................................................................
25.0 or more.........................................................................

254

Table 113. DISTRIBUTION OF INSURED COMMERCIAL BANKS IN THE UNITED STATES (STATES AND OTHER AREAS),
D EC E M B E R 31, 1 9 7 6 - C O N T I N U E D
BANKS GROUPED ACCORDING TO AMOUNT OF ASSETS AND BY RATIOS OF SELECTED ITEMS TO ASSETS OR DEPOSITS

Banks w ith assets of
Ratios
(In percent)

banks

$5.0 million
to
$9.9 million

$10.0 million
to
$24.9 million

$25.0 million
to
$49.9 m illion

$50.0 million
to
$99.9 million

$100.0 million
to
$299.9 million

$300.0 m illion
to
$499.9 m illion

$500.0 m illion
to
$999.9 million

$1.0 billion
to
$4.9 billion

$5.0 billion
or
more

Ratios of total equity capital to total assets o f Less than 5.............................................................................
5.0 to 5.99.............................................................................
6.0 to 6 .99.............................................................................
7.0 to 7.99.............................................................................
8.0 to 8 .99.............................................................................
9.0 to 9 .99.............................................................................
10.0 to 1 0 .9 9 .......................................................................
11.0 to 1 1 .9 9 .......................................................................
12.0 to 1 2 .9 9 .......................................................................
13.0 to 1 4 .9 9 .......................................................................
15.0 to 1 6 .9 9 .......................................................................
17.0 or more..........................................................................

403
1,174
2,728
3,464
2,547
1,469
874
547
331
341
169
364

13
30
128
231
228
189
131
99
87
102
57
220

27
129
432
608
531
346
225
163
106
127
61
102

122
375
980
1,271
942
547
319
186
96
75
38
33

79
258
590
757
479
241
124
57
27
20
7
3

60
166
304
358
221
91
57
27
10
10
3
4

60
125
185
178
102
36
15
12
1
5
3
2

17
32
31
24
25
10
0
2
2
2
0
0

14
24
34
21
7
5
1
0
2
0
0
0

7
32
39
14
10
3
2
0
0
0
0
0

4
3
5
2
2
1
0
1
0
0
0
0

Ratios of total equity capital to total assets other
than cash and due from banks, U.S. Treasury
securities, and obligations of other U.S.
Government agencies and corporations o f—
Less than 7 . 5 .......................................................................
7.5 to 9 .99.............................................................................
10.0 to 1 2 .4 9 .......................................................................
12.5 to 1 4 .9 9 .......................................................................
15.0 to 1 7 .4 9 .......................................................................
17.5 to 1 9 .9 9 .......................................................................
20.0 to 22.49 ......................................................................
22.5 to 24.99 .......................................................................
25.0 to 29.99 .......................................................................
30.0 to 34.99 .......................................................................
35.0 to 39.99 .......................................................................
40.0 or more..........................................................................

971
4,350
4,177
2,151
1,059
550
327
203
250
106
82
185

21
151
286
225
195
128
88
65
111
48
51
146

72
567
790
553
309
191
114
83
91
42
20
25

289
1,571
1,580
808
364
171
94
44
32
14
8
9

215
1,033
871
327
122
35
18
5
12
1
2
1

156
535
393
149
44
16
8
4
4
1
1
0

128
309
184
68
18
7
5
1
0
0
0
4

35
57
38
8
4
2
0
1
0
0
0
0

24
60
17
5
2
0
0
0
0
0
0
0

27
58
15
6
1
0
0
0
0
0
0
0

4
9
3
2
0
0
0
0
0
0
0
0

Number of b anks.......................................................................

14,411

1,515

2,857

4,984

2,642

1,311

724

145

108

107

FEDERAL DEPOSIT INSURANCE CORPORATION

Less
than
$5 m illion

INCOME OF INSURED BANKS
Table 114.
Table 115.
Table
Table

Table
Table

INCOME OF INSURED

Table

Income of insured commercial banks in the United States (States and other areas), 1971-1976
Ratios of income of insured commercial banks in the United States (States and other areas),
1971-1976
116. Income of insured commercial banks in the United States (States and other areas), 1976
Banks grouped by class o f bank
117. Income of insured commercial banks operating throughout 1976 in the United States (States
and other areas)
Banks grouped by amount o f assets
118. Ratios of income of insured commercial banks operating throughout 1976 in the United States
(States and other areas)
Banks grouped according to amount o f assets
119. Income of insured mutual savings banks in the United States (States and other areas),
1971-1976
120. Ratios of income of insured mutual savings banks in the United States (States and other areas),
1971-1976

BANKS

The income data received and published by the Corporation relate to iaries and other nonbank subsidiaries that were significant according to cer
tain tests. Beginning in 1976, the consolidated income report must include
comm ercial and m utual savings banks insured by the Corporation.
also all m ajority-ow ned Edge A c t and Agreement Corporations, and all
Com mercial banks
m ajority-ow ned significant foreign subsidiaries and associated companies to
Banks having assets o f $25 m illio n or more are required to report con the extent th a t the income o f such subsidiaries is rem ittable.
solidated income accounts on an accrual basis. Where the results w ould not
Banks were required to report income and expenses more frequently
be sig n ifica n tly d iffe re n t, certain accounts may be reported on a cash basis. beginning in 1976. Banks having assets o f $300 m illio n or more subm it
Smaller banks continue to have the o p tio n of subm itting their reports on a quarterly statements and other insured banks subm it semiannual reports. In
cash or an accrual basis, except th a t unearned discount on instalment loans, this report, income data are included fo r all insured banks operating at the
and income taxes, must be reported on an accrual basis.
end of the respective years, unless indicated otherwise. In addition, when
Prior to 1976, insured banks were required to subm it a consolidated appropriate, adjustments have been made fo r banks in operation during part
Report of Income, including all m ajority-ow ned domestic premises subsid of the year but not at the end o f the year.
255

256

R E P O R T IN G O F LOSSES A N D R E S E R V E S
FO R LOSSES O N L O A N S ,
1948 - 1976
Commercial banks

Use of the reserve method of loan accounting was greatly encouraged
when, in 1947, the Internal Revenue Service set form al standards fo r loan
loss transfers to be perm itted fo r Federal tax purposes. In their reports
subm itted to the Federal bank supervisory agencies p rio r to 1948, insured
commercial banks included in non-operating income the amounts o f recov
eries on loans (applicable to p rio r charge-offs fo r losses) w hich included, fo r

CO RPORATION

National banks and State banks in the D istrict o f Colum bia not members
of the Federal Reserve System: O ffice o f the C om ptroller o f the Currency.
State bank members of the Federal Reserve System: Board o f Governors
of the Federal Reserve System.
Other insured banks: Federal Deposit Insurance Corporation.

INSURANCE

For a discussion o f the report o f income and expenses fo r mutual savings
banks p rio r to 1971, see the 1951 Annual R eport, pp. 50-52.
Beginning December 31, 1971, income and expenses fo r mutual savings
banks are reported on a consolidated basis in the same manner as required o f
comm ercial banks, including all domestic branches, domestic bank premises
subsidiaries, and o ther significant nonbanking domestic subsidiaries (see page
255).
Beginning in 1972, banks w ith total resources o f $25 m illio n or more are
required to prepare th e ir reports on the basis o f accrual accounting. A ll

Sources of data

DEPOSIT

Mutual savings banks

banks are required to report income taxes on an accrual basis.
Under operating income, certain income from securities fo rm e rly in the
"o th e r" category are shown separately beginning in 1971. Income from U.S.
Treasury securities is combined w ith income from U.S. Government agency
and corporation securities. Somewhat fewer items are detailed under oper
ating expenses. Beginning in 1971, actual net loan losses (charge-offs less
recoveries) are included as an expense item in the operating section o f the
report (see discussion below). In 1970 and p rio r years (table 119), the
amounts shown fo r this expense item were "Recoveries credited to valuation
adjustment provisions on real estate mortgage loans" less the "realized losses
charged to valuation adjustment provisions on [these] loans," which were
reported in those years in the memoranda section.
The nonoperating sections of the report were condensed in 1971, w ith
realized gains and losses on securities, mortgage loans, and real estate re
ported " n e t" rather than in separate sections and captions as before. De
tailed data fo rm e rly reported on reconcilement of valuation adjustment
provisions were almost e ntirely elim inated, except fo r a simple reconciliation
o f surplus.

FEDERAL

Several changes were made in 1976 in the fo rm a t of the income reports
subm itted by banks, m ainly involving additional separate items on the face
o f the report. Those changes are indicated in several historical data tables to
fo llo w , w ith explanatory notes where necessary.
In 1976, the m ethod used fo r determ ining “ Provision fo r possible loan
losses” was changed sig n ifica n tly. Also, beginning in 1976, "m em oranda"
data in table 114 and elsewhere on charge-offs and recoveries to loan loss
reserves include also the gross charge-offs and recoveries on loans by banks
not on a reserve basis o f accounting (see pp. 257).
"A p p lic a b le incom e taxes" on income before securities gains or losses is
an estimate o f the tax lia b ility th a t a bank w o u ld incur if its taxes were
based solely on operating income and expenses; that is, if there were no
security gains or losses, no extra o rd in ary items, etc. The amount reported by
each bank consists o f Federal, State and local, and foreign income taxes,
estimated using the tax rates applicable to the reporting bank. Income taxes
cu rre n tly payable, and deferred income taxes, are included.
The memoranda item " to ta l provision fo r income taxes" includes applic
able taxes on operating income, applicable taxes on securities gains and
losses and e xtra o rd in ary items, and tax effects on differences between the
provision fo r loan losses charged to operating expense and transfers to the
reserve fo r bad debt losses on loans. For banks generally the transfers to
reserve fo r bad debts have exceeded the provision fo r loan losses and conse
q u e ntly have tended to reduce tax lia b ility . (Since enactment of the Tax
Reform A c t o f 1969, additions to loan loss reserves fo r Federal tax purposes
have been subject to a schedule o f lim ita tio n s th a t w ill eventually put these
reserves on a current experience basis.)

Mutual savings banks

While m utual savings banks reported loan losses and transfers to loss
reserves p rio r to 1951, the C orporation's published statistics did not show
these data separately, as was the case also fo r recoveries and transfers from
reserves. When the reporting form was revised extensively in 1951, these
various nonoperating expenses were item ized, and a memoranda section was
added to show also the losses and recoveries in reserve accounts. "R ealized"
losses (and recoveries) fo r which no provision had been made, and transfers
were included in the nonoperating expense (income) section, while direct
write-downs and other loan losses fo r which provision had been made, were
reported separately in a memoranda account.
Follow ing 1951, the loan loss section o f the reports of condition and
income and expense remained unchanged un til 1971. Beginning in 1971, the
income report was revised in a manner sim ilar to changes in 1969 applicable
to commercial banks, to show actual net loan losses as operating expenses.
(Mutual savings banks did not have the o p tio n available to commercial banks
of reporting losses based on recent years average experience.) A t the same
tim e, all valuation reserves were merged into surplus accounts on statements
o f co n d itio n subm itted to the Federal supervisory agencies.

BANKS
257

o f the formulas was discontinued. Banks are instructed to expense an
amount which in the judgm ent o f bank management w ill maintain an ade
quate reserve, and to provide a fu lly reviewable record fo r bank examination
purposes o f the basis fo r the determ ination o f the loan-loss provision.
Also beginning in 1976, banks not on a reserve basis report gross chargeoffs and recoveries; the difference—net losses—is reported as the "provision
fo r loan losses" in operating expenses. Banks continue to report all transfers
to and from reserves in the memoranda section of the income statement, but
this detailed in fo rm a tio n is not included in the tables to fo llo w .

INCOME OF INSURED

banks using the reserve m ethod, transfers from loan loss reserves. Direct
charge-offs and losses on loans, and transfers to reserves were included to
gether in non-operating expenses. Banks using the reserve method were not
required to report separately th e ir actual losses, that is, charges against loan
loss reserves. (In statements o f c o n d itio n p rior to 1948, insured banks re
ported loans on a net basis o n ly, after allowance fo r loan loss reserves.
Beginning w ith th