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Minutes for
To:
Members of the Board
From:
Office of the Secretary
February 4, 1966
Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
with respect to any of the entries in this set of
minutes in the record of policy actions required to
be maintained pursuant to section 10 of the Federal
Reserve Act.
Should you have any question with regard to
the minutes, it will be appreciated if you will advise
the Secretary's Office. Otherwise, please initial
below. If you were present at the meeting, your
initials will indicate approval of the minutes. If
you were not present, your initials will indicate
only that you have seen the minutes.
Chm. Martin
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel
435
Minutes of the Board of Governors of the Federal Reserve System
on Friday, February 4, 1966.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Martin, Chairman
Balderston, Vice Chairman
Robertson
Shepardson
Mitchell
Daane
Maisel
Mr. Kenyon, Assistant Secretary
Mr. Broida, Assistant Secretary
Mr. Young, Senior Adviser to the Board and Director,
Division of International Finance
Mr. Holland, Adviser to the Board
Mr. Solomon, Adviser to the Board
Mr. Molony, Assistant to the Board
Mr. Fauver, Assistant to the Board
Mr. Solomon, Director, Division of Examinations
Mrs. Semia, Technical Assistant, Office of the
Secretary
Mr. Furth, Consultant
Messrs. Brill, Koch, Axilrod, Gramley, Eckert, and
Ettin and Mrs. Peskin of the Division of Research
and Statistics
Messrs. Saitanons, Hersey, Katz, Reynolds, and Gemmill
of the Division of International Finance
Money market review.
Messrs. Axilrod and Eckert commented on
domestic financial trends, with special emphasis on the Government
securities market, the current Treasury financing, bank credit conditions, and the Federal budget outlook, after which Mr. Gemmill discussed
d
evelopments in foreign exchange markets and related matters.
Distributed
material related to perspective on bank reserve utilization and on the
capital and money markets, and bid rates for Euro-dollar and other Eurocurrency deposits.
436
2/4/66
-2After a discussion based on the presentations, all of the
staff members withdrew from the meeting except Messrs. Kenyon, Molony,
Fauver, and Solomon (Examinations) and Mrs. Semia and the following
entered the room:
Mr. Hackley, General Counsel
Messrs. O'Connell and Shay, Assistant General
Counsel
Mr. Thompson, Assistant Director, Division of
Examinations
Messrs. Heyde and Smith of the Legal Division
Mr. Lyon, Review Examiner, Division of Examinations
Discount rates.
The establishment without change by the Federal
Reserve Banks of New York, Philadelphia, and San Francisco on February 3,
1966, of the rates
on discounts and advances in their existing schedules
was 2
.2212YLI unanimously, with the understanding that appropriate advice
would be sent to those
Banks.
Approved letters.
Appropriate background information, including
staff recommendati
ons, had been submitted to the Board regarding the
following matters.
mously.
cop ies
After discussion, the letters were approved unani-
are attached under the indicated item numbers.
Item No.
Letter to Girard Trust Bank, Philadelphia,
Pennsylvania, approving the establishment of
a branch
in the Swarthmorewood Shopping
Center, Springfield Townsh
ip.
Letter to State Bank of Kewaunee, Kewaunee,
Wisconsin, approving an investment in bank
premises.
1
2
437
2/4/66
-3Item No.
Letter to the Federal Reserve Bank of Richmond
granting the request of International Bank,
Washington, D. C., for an extension of time in
Which to present views regarding the Board's
Preliminary determination of its status as a
bank holding company.
3
Application of Mid-Continent Bancorporation (Items 4 and 5).
There had been distributed drafts of an order and statement reflecting
the Board's denial
on January 18, 1966, of the application of Mid
Continent Bancorporation, Leadville, Colorado, to become a bank holding
company through acquisition of voting shares of Commercial Bank of
Leadville, Leadville, and First National Bank in Walsenburg, Walsenburg,
both in Colorado.
After discussion the issuance of the documents was authorized.
Copies of the order and statement, in the form in which they were issued,
are attached
as Items 4 and 5.
The meeting then adjourned.
Secretary's Notes: Governor Shepardson
today approved on behalf of the Board
the following items:
Letter to the Federal Reserve Bank of Richmond (attached Item No. 6)
approving the
designation of six employees as special assistant examiners.
Letter to the Federal Reserve Bank of Chicago (attached Item No. 7)
aPproving the appointment of Richard L. Coen as assistant examiner.
Memoranda recommending the following actions relating to the Board's
staff:
438
2/4/66
A
-4-
ointments
Mary Catherine Deese as Records Clerk, Office of the Secretary,
With basic annual salary at the rate of $4,641, effective the date
of entrance upon duty.
Angelina Roumel as Clerk-Typist, Division of Administrative
Services, with basic annual salary at the rate of $4,569, effective
February 7, 1966.
Annie L. Rush as Secretary, Division of Personnel Administration,
with basic annual salary at the rate of $5,523, effective the date of
entrance upon duty.
Donna Gail Sisk as Clerk-Typist, Division of Personnel Administration, with basic annual salary at the rate of $3,814, effective the date
of entrance upon
duty.
Transfers
.
Margaret E. Jenkins, from the position of Relief Cook to the position of Baker, Division of Administrative Services, with no change in
basic annual salary at the rate of $4,201, effective March 1, 1966.
Helen M. Lasko, from the position of Cafeteria Helper to the
Position of Relief Cook, Division of Administrative Services, with an
increase in basic annual salary from $3,745 to $4,072, effective March 1,
1966.
Governor Shepardson today noted on behalf
of the Board a memorandum advising that
Eva M. Brown, Baker, Division of Administrative Services, had filed application
for retirement, effective March 1, 1966.
Assistant Secretar
1:39
BOARD OF GOVERNORS
Item No. 1
2/4/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADORES'S
OFFICIAL
CORRESPONOENCE
TO THE BOARD.
February 4, 1966
Board of Directors,
Girard Trust Bank,
Philadelphia, Pennsylvania.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by Girard Trust Bank,
Philadelphia, Pennsylvania, of a branch in the
Swarthmorewood Shopping Center, Chester Road and Park
Lane, Springfield Township, Delaware County, Pennsylvania,
provided the branch is established within six months from
the date of this letter.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)
440
BOARD OF GOVERNORS
.•••O`v.....
r"Poilf
'\,
Item No. 2
2/4/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRIC•PONDENCE
TO THE BOARD
s•IALREst
February 4, 1966
Board of Directors,
State Bank of Kewaunee,
Kewaunee, Wisconsin.
Gentlemen:
Pursuant to the provisions of Section 24A of the
Federal Reserve Act, the Board of Governors of the Federal
Reserve System approves an investment in bank premises of
not to exceed $99,000 by State Bank of Kewaunee, Kewaunee,
Wisconsin, for the purpose of constructing new bank premises.
The above amount includes architect's fees of $6,000 and
allows for a maximum investment of 5 per cent greater than
the estimated cost of the new building ($88,565).
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
441
BOARD OF GOVERNORS
Item No. 3
2/4/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 4, 1966.
Mr. John L. Nosker, Vice President,
Federal Reserve Bank of Richmond,
Richmond, Virginia. 23213
Dear Mr. Nosker:
This acknowledges receipt of Mr. Horigan's letter of
January 25, 1966, enclosing a copy of a letter to you of
January 21, 1966, from International Bank, Washington, D. C.,
requesting an extension to March 15, 1966 of the time within
Which it may present views regarding the Board's preliminary
determination of its status as a bank holding company.
Please advise International Bank that the Board has
today authorized the extension of time requested.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
442
Item No. 4
2/4/66
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
Olt.
------------
------
In the Matter
of the Application of
MID-CONTIN
ENT BANCORPORATION,
LEADVILLE, COLORADO,
1
for approval
of action to become a bank
holding company throug
h the acquisition 1
of voting shares
of Commercial Bank of 1
Leadville, Leadville, and First National'
Bank in
Walsenburg, Walsenburg, both in '
Colorado.
------------
---
ORDER DENYING APPLICATION UNDER
BANK HOLDING COMPANY ACT
There has come before the Board of Governors, pursuant to
section 3
(a)(1) of the Bank Holding Company Act of 1956
(12 U.S.C.
1842(a)(1)) and section 222.4(a)(1) of Federal Reserve
R
egulation Y (12 CFR 222.4(
a)(1)), an application by Mid-Continent
Ban
corporation, Leadville, Colorado, for the Board's prior approval
f action
whereby Applicant would become a bank holding company through
the acquisition
of up to 91.6 and 92.5 per cent, respectively, of the
outstanding voting shares
of Commercial Bank of Leadville, Leadville,
and First
National Bank in Walsenburg, Walsenburg, both in Colorado.
As required by section 3(b) of the Act, the Board notified
the
Colorado State Bank Commissioner
and the Comptroller of the Currency
443
-2of receipt of
the application and requested their views and recommendations
thereon.
The Commissioner advised that the State Banking Board would
interpose no objection to the application.
The Comptroller recommended
approval of the proposed action.
Notice of Receipt of Application was published in the Federal
Register on June 11,
1965 (30 F.R. 7628), which provided an opportunity
for the filing
of comments and views regarding the proposed acquisition,
and the
time for filing such comments and views has expired and all
comments and views
filed with the Board have been considered by it.
IT IS HEREBY ORDERED, for the reasons set forth in the Board's
Statement
of this date, that the said application be and hereby is denied.
Dated at Washington, D. C. this 4th day of February, 1966.
By order of the Board of Governors.
Voting for this action:
Unanimous, with all members present.
(Signed)
Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
(SEAL)
444
Item No. 5
2/4/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION OF MID-CONTINENT BANCORPORATION, LEADVILLE, COLORADO,
FOR PRIOR APPROVAL OF ACTION TO BECOME A BANK HOLDING COMPANY
STATEMENT
Mid-Continent Bancorporation, Leadville, Colorado ("Applicant"),
has filed an
application pursuant to section 3(a)(1) of the Bank
Holding Company Act of 1956 (the "Act") for the Board's approval of
Proposed action whereby Applicant would become a bank holding company
through acquisition
of 91.6 per cent of the outstanding voting shares
f Commercial
Bank of Leadville, Leadville, Colorado ("Leadville Bank"),
and 92.5
per cent of the outstanding voting shares of First National
Bank in
Walsenburg, Walsenburg, Colorado ("Walsenburg Bank").
Views and recommendations of supervisory authorities. Since this
application involves both a State-chartered bank and a
national bank, pursuant to the requirement of section 3(b) of the
Act, the
Board notified the Colorado State Bank Commissioner and
he Co
mptroller of the Currency of receipt of the application and
requested their views and recommendations thereon.
Commis
The Bank
sioner advised that the State Banking Board would interpose
no ob
jection to the application. The Comptroller of the Currency
re
commended approval of the proposed action.
445
Statutory factors. - Section 3(c) of the Act requires the
Board to take into consideration the following five factors in
acting upon this application: (1) the financial history and condition of the holding company and the banks concerned; (2) their
Prospects; (3) the character of their management; (4) the convenience,
needs, and welfare of the communities and the area concerned; and
(5) whether or not the effect of the acquisition would be to expand
the size or extent of the bank holding company system involved beyond
limits consistent with adequate and sound banking, the public interest,
and the
preservation of competition in the field of banking.
The proposal. -
Applicant, a Colorado corporation organized
in June 1965,
proposes to bring together under its control two
Presently
affiliated banks and their respective insurance agency
affiliates.
Applicant's proposal involves the acquisition of the
afore-stated percentages
of stock of Leadville Bank and Walsenburg
Bank
(hereafter sometimes referred to together as the "Banks") by
merger Of two Nebraska corporations which now own such stock.
Mid
-Continent Financial Corporation ("Financial") owns 91.6 per cent
of the stock of
Leadville Bank (deposits $4.6 million!') and a similar
Percentage
of the stock of Hugh E. Smith, Inc., an insurance agency,
plains States
Financial Corporation ("Plains States") owns 92,5 per
Cent
like
of the stock of Walsenburg Bank (deposits $3.3 million) and a
percentage of the stock of Spanish Peaks Corporation, an
insurance agency.
Y
As of June 30, 1965. Unless otherwise indicated, all banking
noted are as of this date.
4ta
446
-3-
The Banks' stocks were purchased by their respective
corp orate
owners from the same interests.
In October 1964,
Financial purchased the stock of Leadville Bank and its affiliated
insurance agency for $774,760, with $760,000 of such purchase price
being borrowed from a Denver bank.
Financial subsequently retired
its bank debt through later sale of collateral debentures in the
Principal amount of $400,000, and 60,000 shares of common stock at
$8.25 per share.
c4Ins
Although none of Financial's 196 shareholders
individually as much as 5 per cent of Financial's outstanding
shares, the organizers and related interests own, collectively,
nearly 15 per
cent thereof.
The stock of Valsenburg Bank and its insurance agency
affiliate was purchased on or after December 29, 1964, by Plains States
for. $775,000, all of which was borrowed from a Denver bank.
Plains
States' bank debt is still outstanding and all of Plains States'
stock is
owned by its organizers.
Under the plan of merger, Applicant will issue one share
Of
itS stock for each share of Financial's stock outstanding and two
Shares
of its stock for each three shares of Plains States' stock
out
standing.
WIth'the exception of one individual in each instance,
Fillanoial and Plains States were organized by the same group, conSiSting of five individuals and a limited partnership composed of
three
individuals.
The top three officers of each corporation are
identical, and they hold similar positions with Applicant.
Four of
447
-4the five director
s of both Financial and Plains States are identical,
and all
members of those corporate boards serve on Applicant's seven
member board of directo
rs.
P.nancial history and coneqL1LL and prospects. - Applicant
has no
financial history.
Prospects
Its prospective financial condition and
are the subject of analysis and comment hereafter.
The
financial history and condition, and prospects of the Leadville Bank
are
considered satisfactory, as are the history and condition of the
Walsenburg
Bank.
Somewhat less promising, because of the economic
outlook of
its trade area, are the prospects of the Walsenburg Bank.
On the
basis of the information in the record, it does not appear to
the Board
that the prospects in the Walsenburg area for industrial
growth and related
economic expansion, or for rapid population growth,
are such
as to suggest that the Walsenburg Bank's deposit trend would
be significantly improved over that reflected for the period
December 31, 1959, to December 31, 1964.
In that period, the bank's
deposits decreased more than
$500,000.
The Board's findings, later stated, as to the prospective
finanr=ial condition and operating prospects of Applicant reflect
in
raspects the Board's concern over Applicant's proposed debt
P°sition in relation to its equity capital.
concern are as
follows,
The facts underlying this
Under Applicant's proposal, after the merger
With
Applicant of Financial and Plains States, Applicant's debt would
amount to
$1,175,000, consisting of $400,000 of collateral debentures
448
-5-
issued by Financial, and $775,000 short-term bank debt owed by Plains
States incident to its purchase of the Walsenburg Bank.
At the outset,
Applicant proposes to retire $435,000 of the $775,000 bank debt with
funds to be realized by sale of an additional 40,000 shares of Applicant's
common stock, and the issuance of $125,000 of convertible debentures.
The
a
remaining $340,000 of short-term bank debt would be refinanced on
long-term basis.
Thus, following the foregoing actions, Applicant
would have an outstanding debt of $865,000, and equity capital of
aPProximately $442,000, or a debt to equity capital ratio of nearly
2 to 1.
Applicant's equity capital position of approximately
$442,000 was determined by reflecting Applicant's investments in its
Proposed
bank and nonbank subsidiaries at Applicant's proposed
Pro
2/
2/
ionate interests in the net assets of those subsidiaries,
In reflecting Applicant's investments in its proposed subsidiaries
at net asset value, the Board is adhering to an established practice
f requiring that investments of a bank holding company in subsidiaries be
carried in financial statements issued to shareholders and
the
Public at not more than the company's interest in the net assets
3/
of ,
it. subsidiaries.
To sanction an alternative form for holding
2/ N
et asset values of the Banks were obtained from financial statements
ef June 30, 1965, submitted to supervisory authorities; such values
Of
vle_the proposed nonbank subsidiaries were as of December 31, 1964, and
submitted as part of the application in this matter.
3/
-e Board Statement In the Matter of Trans-Nebraska Co., Lincoln,
Nebraska, 1963 P.R. Bulletin 633, 637.
449
-6-
companies to reflect their investments in subsidiaries, such as a
cost basis, could result in an inflated statement of the holding
company,
sasset position that could prove misleading to prospective
investors
in the holding company and depositors of the subsidiary banks.
A bank holding
company's financial condition, directly related as it
is to the financial condition of its subsidiary banks, is most fairly
and
accurately stated if the holding company is required to reflect its
investments on a basis consistent with values reflected in the published
financial statements of its subsidiary banks.
Thus computed, the percentage of Applicant's proposed debt
to equity capital of nearly 200 per cent exceeds by far the debt to
equity capital ratio presented in any holding company formation pro"sal that the Board has heretofore considered.
Even if Applicant's
debt were reduced by $197,000 - the amount of cash on hand reflected
in APPlicant's pro forma balance sheet, which is greater than Applicant's
estimated
there
liquid reserves of $90,000 to $100,000 after refinancing -
would exist a proposed debt to equity capital ratio of about 1.5
to 1.
in any
This ratio greatly exceeds comparable ratios reflected not only
previous proposal considered, but in the financial statements of
11 registered bank holding companies on file with the Board.
Even if
APPlicant were permitted to carry its investments in subsidiaries on a
c°st basis rather than at net asset values, Applicant's ratio of debt
to equity capital would remain sufficiently out of proportion as to
Preclude the Board's approval of Applicant's proposed financial condition.
450
-7
Applicant's prospects. - Judgment as to the prospects for
APPlicant's system must reflect an appraisal of Applicant's ability
to reduce its proposed debt, and at the same time serve, when and
as required, as a source of financial assistance to its subsidiary
banks.
Both of these functions might normally be accomplished through
the use of funds realized primarily from additional borrowings resulting
in increased debt, the sale of Applicant's stock, and/or accumulation of
e
arnings.
In view of Applicant's proposed debt position, further in-
crease therein by borrowings would, as a practical matter, appear to be
nearly unavailable.
The Board is unable to view as favorable the pros-
pects for further sale of Applicant's stock with the existence of the
debt previously discussed and in the light of Applicant's stated present
intention
not to pay dividends on its common stock.
Ls
Neither circumstance
likely to engender public interest in an additional stock offering.
Regarding the accumulation of earnings, Applicant has projected
en earnings expectancy for the subsidiaries which, it argues, would enable
APPlicant to service its outstanding debt and, in addition, accumulate
funds for other purposes.
In the Board's opinion, the following con-
sid erations are persuasively against the occurrence of earnings at the
rate and in the volume projected by Applicant.
First, it is unlikely
that earnings in the Leadville Bank will continue to increase annually
at the average of the difference in earnings in 1960 and 1964, the
base used by Applicant in projecting future earnings.
At year-end
1964, the Leadville Bank's percentage of loans to deposits had increased
451
-8-
to nearly 61 per cent, as compared to year-end percentages from 1960
through 1963, respectively, increasing from 39 per cent to 55 per cent.
In view of the present rather high loan to deposit ratio, any future
increase in loans - the principal earnings asset of any bank - would
appear geared more directly to a rise in deposits.
There is no evidence
before the Board that supports a conclusion that bank's deposits are
likely to increase at a rate approaching that which would be required
to enable
a continued loan increase necessary to support the earnings
Projected for bank.
Second, the data presented to the Board in respect to
Walsenburg Bank's deposit structure covering the 5-year period
ecember 31, 1964, reflect a decrease in its deposits.
Prospects for
any significant change for the better in the bank's deposit trend are
not likely, absent a rather dramatic change in the economic outlook of
the bank's service area.
As earlier stated, nothing in the record
before the Board suggests such a decisive change.
A further fact that makes unlikely, in the Board's judgment,
4
better earnings position in the Walsenburg Bank is Applicant's stated
itItention to increase to 4 per cent the interest paid by the bank on
tegular savings accounts.
Walsenburg Bank has been paying 1 per cent
°II balances
up to $1,000 on such accounts, and no interest on amounts
above $1,000.
Even though the proposed increased interest rate would
likelY increase the bank's volume of savings deposits, the substantial
itlerease in expense incident
to such interest rate increase presents a
leas
glowing earnings prospect for Applicant's proposed system than
452
-9-
APplicant has projected.
Applicant's earnings projection is further
minimized upon analysis of the bases for that projection.
In arriving
at its projected earnings for the proposed system, Applicant determined
the difference in combined earnings of its proposed subsidiaries for
the years
1960 and 1964 and, based thereon, computed an average annual
rate of increase, which was used as the basis for projected increased
earflings for each year subsequent to 1964.
Use of the years 1960 and
1964 as base years for projection permitted inclusion of unusual or nonrecurring expense and income items in 1960 and 1964, thus distorting
the average annual rate of increase figure utilized by Applicant in its
earnings projections.
Among such items were nearly $17,000 more in
lean losses in the banks in 1960 than in 1964, net profits from sale of
securities in the Banks in excess of $6,000 greater in 1964 than in
1960) and an overstatement of a subsidiary's income in 1964 by $5,000.
On the basis of the foregoing and all of the relevant facts
Of
record, it is the Board's view that a realistic projection of earnings
ef APplicant's proposed subsidiaries does not show an adequate or prudent
coverage of the needs of Applicant to service and retire its proposed
debt and also to fulfill the responsibilities normally assumed by a bank
holding company with respect to its subsidiary banks. This conclusion
appears the more valid in light of Applicant's stated intention regardtt
future bank acquisitions.
It is Applicant's position that investments
additional banks would further enhance its prospects.
Such further
acquisitions would most likely involve either Applicant's purchase of
453
-10-
such bank shares for cash, or an exchange therefor of Applicant's shares.
In view of Applicant's projected financial condition, any significant
cash expenditure for bank stocks would necessitate the raising of funds
either by additional borrowings or the sale of additional shares of
APplicant's stock.
Absent a substantial improvement in Applicant's ratio
Of debt to equity capital, the Board could not sanction any proposal in"lying an outlay of cash for bank stocks with funds provided by increased
debt,
Further, lacking the inauguration by Applicant of a program for
dividend payments on its common stock - a program not presently contemPlated by Applicant - it appears to the Board that Applicant's sale of
additional
stock or its success in exchanging its stock for stock of
additional banks would be limited.
If dividends were to be paid on
APPlicant's stock, the additional drain on the earnings of Applicant's
sYstem would make even less favorable its financial prospects.
Management of Applicant and the Banks. - The evidence of record
satisfies the Board that management in each of the proposed subsidiary
banks is capable and experienced, and the Board concludes such managements
to be satisfactory.
Applicant suggests the existence of a problem re-
lating to management succession in both Banks, particularly in the
Walsenburg Bank, due to the size and location of the City of Walsenburg
and the fact that the Walsenburg Bank's two principal operating officers
are both near normal retirement age.
Conceding that the circumstances
mentioned by Applicant suggest that a management succession problem
1/1-11 arise in the foreseeable future, the Board is unable to concur in
APPlicant's premise that its ownership and operation of the Banks would
454
-11-
the management
offer significantly more potential for solution of
through the Banks' respecsuccession problem than can now be offered
tive owners.
ion existing between
In view of the management affiliat
corporate owners of the
Financial and Plains States, the respective
of personnel between
Leadville and Walsenburg Banks, equal movement
management training
these Banks, as well as the institution of a joint
feasible.
Program for the Banks, appears to be presently
While the
be somewhat
certitude of accomplishment as to either action might
likelihood of the same
greater under Applicant's control, sufficient
ce of this
result is offered at present so as to minimize the importan
aspect of Applicant's proposal.
diversified
The management proposed for Applicant reflects
backgrounds in finance, insurance, banking, and business.
In respect
proposed
to the professional competence and character of Applicant's
tory.
management, the Board finds management to be satisfac
t's
With respect to the Board's consideration of Applican
Applicant reflectProposed management, certain facts were presented by
to certain of the
ing prospective financial benefits that would inure
of the proposed sale
individuals comprising its management as a result
Of stock to the public.
Were these facts to play a decisive role in
the Board's decision on this application, further and more detailed
in order.
inquiry regarding and treatment of these facts would have been
case, such
However, in the context of the Board's statement in this
further inquiry and treatment are unnecessary.
455
-12-
Convenience, needs, and welfare of the communities and areas
111\701
- The Leadville Bank is located in Leadville, Colorado (Lake
County), about 113 miles west-southwest of Denver.
Its primary service
area 4/
)-- with a population of about 9,000, encompasses the limits of
Lake County.
There are no other banks in this primary service area.
The Walsenburg Bank is located in Walsenburg (Huerfano County), some
160 miles south-southeast of Denver.
The Walsenburg Bank's primary
4/ with an estimated population of 8,100, encompasses the
service area,lislits of Huerfano County.
service area.
There are no other banks in this primary
The two banks are approximately 225 miles apart.
The most significant single factor contributing to the economy
of the Leadville area is the molybdenum mining operations conducted
that area.
Approximately 2,500 persons are engaged in the
of molybdenum ore, which is used extensively as an alloy in the
manufacture of steel and steel products.
Applicant has made known a
Proposed major expansion in these mining operations, justifying the
"nclusion that the area's presently favorable economic climate will
continue in the foreseeable future.
Additional factors contributing
t° this outlook are major State and Federal irrigation and reclamation
Pt.°jects now under way, which are expected to result in recreational
facilities in the Leadville area and, in turn, to increased tourism.
" The area from which Applicant estimates that in excess of 90 per
cent of the bank's total deposits originate.
456
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Other elements contributing to the Leadville and Lake County economies
are activities relating to agriculture, forestry, and livestock.
The economy of the Walsenburg Bank's primary service area
appears somewhat less favorable than that of the Leadville area.
The
Ualsenburg economy is predominantly agricultural in nature, supported
in a minor degree by soft coal mining operations and small industries
located within the City of Ualsenburg.
While the area's economy has
remained stable within the past ten years, the record before the Board
does not support any reasonable expectation that the economy will grow
or improve appreciably in the foreseeable future.
In urging approval of this application, Applicant has stressed
the financial benefits to the Banks and service benefits to the public
that would flow from consummation of its proposal. The Board has reviewed
these assertions in the light of the financial condition and prospects of
APplicant's system, as hereinbefore discussed, and with a view to existing and likely banking requirements in the Banks' service areas.
Regard-
ing Applicant's asserted ability to render financial assistance to its
Proposed subsidiary banks, either in the form of additional operating
capital or funds for additions to or improvements on bank premises, the
13ard is
unable to conclude that any significant financial assistance
could be feasibly rendered by Applicant. This conclusion is premised
Upon the Board's foregoing appraisal of Applicant's proposed debt position,
44d its questionable ability to service and retire this debt and still
have substantial funds available for such assistance.
457
-14-
Regarding the institution or implementation of certain customer
services at the Banks, such as an increase in the rate of interest to be
Paid on regular savings accounts at the Walsenburg Bank, expansion of
the installment loan program at that bank, and assistance to both Banks
in respect to accommodating larger loan requests, the Board is unable
to conclude that such additional or implemented customer services could
not be equally effected and facilitated under the existing ownerships
and affiliated relationship.
Concerning the desire of both Banks to
serve any requests for large credit accommodations, it is noted that in
1964 Walsenburg Bank shared no loans with any other bank, while the
Leadville Bank originated but a single loan which it participated with
another bank.
Should either bank encounter a future need for loan par-
ticipations, it is further noted that both Banks have correspondent
relationships with larger banks in Denver and Pueblo,
Finally, as to specified advisory and accounting services that
APPlicant states would be provided by the members of the board of directors of Applicant, since the directors of Applicant are to be essentially
individuals who are now directors of Financial and Plains States, Applicant would appear to be in no better position to render such services
than are the present corporate owners of the Banks.
The Board concludes that considerations bearing on the
convenience, needs, and welfare of the communities and areas concerned
ford no measurable support for approval of the application.
458
-.15-
Effect on adequate and sound banking, the public interest,
....ast_i_larAing. competition, -
As earlier stated, the Leadville Bank has
total deposits of $4.6 million.
The Walsenburg Bank's deposits are
$3.3 million. The Banks are the only banks in their respective primary
service areas and are separated from each other by some 225 miles.
Neither bank has any deposits nor commercial and industrial, farm, or
consumer loans originating in the other's service area.
The three
banks located nearest to Leadville Bank, each with deposits under
$3 million, are, respectively, 30, 56, and 65 miles distant.
Approxi-
mately 50 miles separate the Walsenburg Bank and the bank nearest it.
hile neither the Leadville Bank nor the Walsenburg Bank offers
appreciable competition beyond the county in which it is located.
there is evidence that the banks located 30 to 65 miles from Leadville
compete for the business of that area, as do the large Denver banks,
and that these Denver banks and banks in Pueblo serve to some extent the
Walsenburg area.
The Board concludes that from the viewpoint of its
impact on banking competition, the size or extent of operation of
APPlicant's proposed holding company system would not be such as to be
inconsistent with adequate and sound banking, the public interest, and
the preservation of said banking competition.
The proposed financing of Applicant's system, hereinbefore
d iscussed, with its direct bearing on the statutory factors of Applicant's
financial condition and prospects, is of sufficiently questionable
soundness as to decisively outweigh considerations found herein to be
459
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consistent with approval of the application.
The Board concludes that
neither the interests of sound banking nor the public would be best
served by the Board's approval of the financial structure proposed by
Applicant for its holding company system.
On the basis of all the relevant facts as contained in the
record before the Board, and in the light of the factors set forth in
section 3(c) of the Act, it is the Board's judgment that the transaction
here proposed would not be consistent with the public interest and that
the application should therefore be denied.
Pebruary 4, 1966.
BOARD OF GOVERNORS
Item No. 6
2/4/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 7, 1966
Mr. John L. Nosker, Vice President,
Federal Reserve Bank of Richmond,
Richmond, Virginia. 23213
Dear Mr. Nosker:
In accordance with the request contained in
your letter of February 2, 1966, the Board approves the
designation of each of the following employees as a
special assistant examiner for the Federal Reserve Bank
of Richmond.
T. Noel Cooper
Cicero L. Ware
Barry D. Gettys
James M. Rice
William A. Sherrill
Donald R. Simpson
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 7
2/4/66
OF THE
FEDERAL RESERVE SYSTEM
•
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 4, 1966.
Mr. Leland M. Ross, Vice President,
Federal Reserve Bank of Chicago,
Chicago, Illinois. 60690
Dear Mr. Ross:
In accordance with the request contained in
your letter of January 31, 1966, the Board approves the
appointment of Richard L. Coen as an assistant examiner
for the Federal Reserve Bank of Chicago. Please advise
the effective date of the appointment.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER