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Minutes for
To:
February 5, 1963
Members of the Board
From: Office of the Secretary
Attached is a copy of he minutes of the
Board of Governors of the Feder
Reserve System on
the above date.
It is not proposed to include a statement
with resnect 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.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
Minutes of the Board of Governors of the Federal Reserve
System on Tuesday, February
5, 1963. The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
Shepardson
Mitchell
Mr. Sherman, Secretary
Mr. Kenyon, Assistant Secretary
Mr. Young, Adviser to the Board and Director,
Division of International Finance
Mr. Molony, Assistant to the Board
Mr. Fauver, Assistant to the Board
Mr. Noyes, Director, Division of Research and
Statistics
Mr. Farrell, Director, Division of Bank
Operations
Mr. Solomon, Director, Division of Examinations
Mr. Hexter, Assistant General Counsel
Mr. Shay, Assistant General Counsel
Mr. Goodman, Assistant Director, Division
of Examinations
Mr. Leavitt, Assistant Director, Division
of Examinations
Mrs. Semia, Technical Assistant, Office of
the Secretary
Mr. Potter, Senior Attorney, Legal Division
Discount rates.
The establishment without change by the
Federal Reserve Bank of Boston on February 14. 1963, of the rates
on discounts and advances in its existing schedule was approved
unanimously, with the understanding that appropriate advice would
be sent to that Bank.
Circulated or distributed items.
The following items, copies
Of which are attached to these minutes under the respective item numbers
indicated, were approved unanimously:
2/5/63
-2Item No.
Letter to First National City Overseas Investment
Corporation, New York, New York, granting consent
to the purchase of shares of a proposed Spanish
finance company.
1
Letter to Manufacturers Hanover Trust Company, New
York, New York, granting an extension of time to
establish a branch in Riverdale.
2
Letter to State Bank of Somerset County, Raritan,
New Jersey, approving an additional investment in
bank premises.
3
Letter to Cravath, Swaine & Moore, New York, New
York, regarding the proposed application of Chemical
Bank New York Trust Company, New York, New York,
for permission to purchase the assets of The Bank
of Rockville Centre Trust Company, Nassau County,
Long Island, New York.
Letter to the Federal Deposit Insurance Corporation
regarding the application of Citizens State Bank of
Milford, Milford, Illinois, for continuation of
deposit insurance after withdrawal from membership
in the Federal Reserve System.
5
Letter to the Colorado State Bank Commissioner
regarding the request of the Colorado State
Banking Board to be heard at a public hearing
on the application of First Colorado Bankshares,
Inc., to acquire shares of Security National
Bank, Denver, Colorado.
6
Letter to the Secretary of the Federal Advisory
Council suggesting topics for inclusion on the
agenda for its forthcoming meeting. (The approved
letter reflected changes suggested at this meeting
in the draft that had been distributed.)
7
During the discussion of Item No. 1, Governor Robertson
Observed that the proposed investment in the Spanish finance company
2/5/63
-3-
represented 40 per cent of the paid-in capital of First National City
Overseas Investment Corporation, whereas section 25(a) of the Federal
Reserve Act set a limit of 10 per cent on any such investment (except
With the approval of the Board of Governors), a limit that he assumed
was intended to promote diversification.
He also reiterated his
interest, as expressed at the Board meeting on January 31, 1963, in
obtaining information regarding the impact of investments by foreign
banking and financing corporations on the United States balance of
payments.
In making these comments, Governor Robertson indicated that
he would not oppose this particular application and that his comment
on the balance of payments impact, particularly, was directed more to
the over-all problem.
Report on competitive factors (Columbus, Ohio).
There had been
distributed a draft of report to the Comptroller of the Currency on
the competitive factors involved in the proposed merger of The Columbus
Savings Bank into The Huntington National Bank of Columbus, both in
Columbus, Ohio.
After a discussion during which a change in the wording of the
conclusion was agreed upon, the report was approved unanimously for transmission to the Comptroller.
The conclusion of the report, as approved,
read as follows;
It would not appear that a merger of these two
closely associated banks between which there has been
little effective competition for many years would have
any material effect on competition.
2/5/63
Warren Bank branch application.
There had been distributed
a memorandum dated January 28, 1963, from the Division of Examinations
in connection with the application of Warren Bank, Warren, Michigan,
for permission to establish an in-town branch.
The Federal Reserve
Bank of Chicago had recommended approval, and the Michigan State Banking
Department had given its approval, but the Division of Examinations
recommended denial.
Warren Bank had been placed in the problem
category, following a review of the June 1962 report of examination,
because of inadequate capital and unsatisfactory asset condition.
Since
then some corrections reportedly had been effected, and a program for
increasing capital was under way.
The Federal Reserve Bank of Chicago
felt that the remedial actions taken and proposed would improve the
bank's condition sufficiently to remove it from the problem category,
and believed that the establishment of the proposed branch would not
have an adverse effect on the condition of the bank.
The Division of
Examinations, however, took the position that even with the proposed
adjustments to capital, and even using the most favorable measurements
Of capital adequacy, the bank's capital would still be substantially
below a satisfactory level.
Moreover, no change was evident in the
liberal and aggressive policies of the present management.
At the Board's request, Mr. Leavitt commented on the application,
concluding with the statement that the Division could not find, after
studying Warren Bank's situation and particularly its capital position,
sufficient basis for a favorable recommendation.
One of the items of
2/5/63
-5-
information brought out by Mr. Leavitt, and by the memorandum from the
Division of Examinations, was the fact that the former president of
the applicant bank was a member of a group that had applied for a
charter for a national bank to be located in Madison Heights, outside
the town of Warren but close to the site of Warren Bank's proposed
branch.
Governor Mills stated that his leanings were strongly in the
direction of agreeing with the recommendation of the Division of
Examinations; it was his belief that the bank should be placed on
Probation before it was allowed to expand farther branchwise.
present management did not stand out with great credit.
The
The plans for
improving the capital position involved the issuance of preferred stock,
and the bank planned a sale-leaseback arrangement for the premises of
its present branch.
Governor Mills felt, on balance, that the Board
Should deny the request, although such a decision might have repercussions,
Particularly in view of the approval given the application by the Michigan
State authorities.
Governor Robertson remarked that he had the same feelings about
the application as expressed by Governor Mills and that he would be
inclined to deny the application.
Before doing so, however, he suggested
getting in touch with State Banking Commissioner Slay, who apparently
14as making an earnest effort to maintain high banking standards in
Michigan, to ask about the circumstances that had led him to approve
Warren Bank's application.
to the Board.
This information, he thought, might be helpful
2/5/63
-6After further discussion, there was general agreement with
Governor Robertson's suggestion.
Accordingly, it was understood that
the staff would get in touch with Commissioner Slay, following which
the Board would consider the matter again.
Bank Service Corporation Act (Item No.
8). There had been
distributed a memorandum dated January 31, 1963, from the Legal
Division submitting a draft of an interpretation of section 5 of the
Bank Service Corporation Act.
The draft interpretation expressed the
view that a national bank or a nonmember insured bank that performed
"bank services" for a State member bank must furnish assurances satisfactory to the Board that the performance of such services would be subject
to regulation and examination by the Board to the same extent as if they
were being performed by the State member bank itself on its own premises.
The memorandum reviewed the legislative history of the statutory provision
in question and the circumstances that had led to the preparation of
the proposed interpretation.
The draft, it was noted, would also
reaffirm an unpublished interpretation contained in a letter to the
Federal Reserve Bank of San Francisco dated January 14, 1963, in which
the Board took the position that a State member bank performing data
Processing services for a national bank or a nonmember insured bank
would be expected to give assurances to the appropriate supervisory agency
that its processing procedures would be subject to that agency's examination
and reporting requirements.
-7-
2/5/63
After discussion during which certain changes in wording were
agreed upon, the interpretation was approved unanimously, with the
understanding that it would be published in the Federal Register and
the Federal Reserve Bulletin.
A copy of the interpretation, as approved,
is attached as Item No. 8.
Application of Ann Arbor Bank (Items
9 and 10). Pursuant to the
decision reached at the meeting on January 17, 1963, there had been
distributed a proposed order and statement reflecting the Board's
approval of the application of Ann Arbor Bank, Ann Arbor, Michigan,
to merge with The Dexter Savings Bank, Dexter, Michigan.
After certain changes he had suggested in the wording of the
statement had been read, Governor Mills outlined the reasoning underlying
these suggestions.
It was his feeling that in a published statement,
Which would be read by persons in the local community and by the supervisory authorities of the particular State, the Board should be careful
about making comments, in the absence of good reasons, such as to
indicate that a bnnk involved in a merger was a problem bank.
The
bank in Dexter was not a problem bank, and such weakening of its asset
condition as may have occurred was not of such significance as to
suggest that the merger was of urgent necessity.
More generally
Speaking, he felt that the Board should avoid to the extent possible
casting aspersions on the actions of persons of long service who were
retiring from the banking profession.
To go back to a basic point,
2/5/63
-8-
Governor Mills said, it was his view that the wishes of parties to a
proposed merger normally could be respected, within the requirements
of the bank merger statute, unless there were circumstances involved
that would aggravate an already unsatisfactory competitive situation.
Such circumstances were not present in this case.
Governor Mitchell commented that he would not want to hurt
People's feelings unnecessarily.
However, he was concerned that the
Board's statements be complete enough to dhow that the Board was not
making arbitrary decisions.
He considered it important that the Board's
decisions be shown to flaw from the facts of the case.
Thus, if apparent
ineffectiveness of management was a factor in a Board decision, he would
regard it as appropriate to make some reference to that fact in the
Board's statement.
He also noted that if an application was rejected
more care presumedly should be exercised about what was said in the
Board's statement with regard to the condition of the banks concerned
and their management.
There followed a discussion during which the facts of the Ann
Arbor case were reviewed in the light of the comments by Governors
Mills and Mitchell, and certain suggestions were made as to how the
statement regarding this case might be modified at certain points to
/lecommodate the points of view that had been expressed.
The issuance of the order and statement was then authorized
subject to appropriate changes being made in the statement in reflection
Of the foregoing discussion.
Copies of the order and statement, as
subsequently issued, are attached as Items
9 and 10.
714',
2/5/63
_9_
The meeting then adjourned.
Secretary's Notes: Governor Shepardson informed
the Secretary that he had approved on behalf of
the Board the payment by the Board of the costs
of a dinner and a luncheon to be given at the
Cosmos Club on February 8 and 9, respectively,
in connection with a meeting of representatives
of the Bank of England, the British Treasury,
and the International Monetary Fund with
representatives of the Board, the U. S. Treasury,
and the Federal Reserve Bank of New York at
which Mr. Ralph Young, Adviser to the Board and
Director of the Division of International Finance,
would act as host.
Governor Shepardson today auroved on behalf of
the Board a letter to the Federal Reserve Bank
of Cleveland (attached Item No. 11) approving
the designation of six -employees as special
assistant examiners.
148
Item No. 1
2/5/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February
5, 1963
First National City Overseas
Investment Corporation,
399 Park Avenue,
New York 22, New York.
Gentlemen':
In accordance with the request and on the basis of the
information furnished in your letter of November 8, 1962, transIllItted through the Federal Reserve Bank of New York, the Board of
Ckwernors grants consent for First National City Overseas Investment
Corporation ("FNCOIC") to purchase and hold capital stock of a
Proposed Spanish finance company ("Finance Company"), in an amount
not to exceed US$1,000,0001 provided such stock is acquired within
°Ils year from the date of this letter.
The Board's consent is granted upon condition that FNCOIC
shall dispose of its holding of stock of Finance Company) as promptly
IP practicable, in the event that Finance Company should at any time
(1) engage in issuing, underwriting, selling or distributing securities in the United States; (2) engage in the general business of
T-V1ng or selling goods, wares, merchandise, or commodities in the
United States or transact any business in the United States except
such as is incidental to its international or foreign business; or
(3) otherwise conduct its operations in a manner which, in the judgment of the Board of Governors, causes the continued holding of its
stock by FNCOIC to be inappropriate under the provisions of Section
25(a) of the Federal Reserve Act or regulations thereunder.
engage in the
It is assumed that Finance Company will not
busifleas of receiving or paying out deposits or accepting drafts or
bills of exchange, and the Board's consent is given subject to this
additionAl condition.
Upon completion of the organization of Finance Company,
please furnish the Board of Governors, through the Federal Reserve
.tiliank of New York, (1) copies of the articles of association and by-Laws; (2) balance sheet; (3) brief description of the proposed business of the corporation; (4) list of directors and principal officers,
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
First National City Overseas
Investment Corporation
With addresses and principal business affiliations; (5) description
Of the stock acquired; (6) information concerning the rights and
Privileges of the various classes of stock of the corporation outstanding; and (7) list of all stockholders holding 10 per cent or
more of any class of stock of corporation and their holdings.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
Item No. 2
2/5/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFfICIAL CORRESPONDENCE
TO THE BOARD
February
5, 1963
Board of Directors,
Manufacturers Hanover Trust Company,
New York, New York.
Gentlemen:
The Board of Governors of the Federal Reserve
System extends to May 1, 1963, the tine within which
a
Manufacturers Hanover Trust Company may establish
branch at 5664 Riverdale Avenue, Riverdale, Borough of
the Bronx, New York, New York, under authority granted
in the Board's letter dated February 20, 1961.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
Item No. 3
2/5/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 5, 1963
Board of Directors,
State Bank of Somerset County,
Raritan, New Jersey.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves, pursuant to Section 214A of the Federal
Reserve Act, an additional investment of $25,000 in bank
premises by State Bank of Somerset County incident to the
establishment of a branch on Route 206 between Hamilton Road
and Amwell Road, Hillsborough Township, Somerset County,
New Jersey. This amount is in addition to the $70,000
approved in the Board's letter of October 24, 1962.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 4
OF THE
FEDERAL RESERVE SYSTEM
2/5/63
WASHINGTON 25, U. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 5, 1963
Cravath, Swaine & Moore,
1 Chase Manhattan Plaza,
New York 5, New York.
Attention
Richard S. Simmons, Esq.
Gentlemen:
concerning
This refers to your letter of January 14, 1963,
York Trust
New
Bank
al
the proposed application by your client, Chemic
Board of
the
of
al
approv
Company, New York, New York, for the prior
Trust
Centre
lle
the purchase of the aSsets of The Bank of Rockvi
Company, Nassau County, long Island, New York.
with respect
Your letter requested the Boards permission
ation:
applic
the
to the following matters in the preparation of
al be
"(1) for purposes of Exhibits A and E, Chemic
t,
accoun
ng
checki
l
permitted to check every fifth specia
and
loan
and
t
accoun
savings account, regular checking
loan) account;
discount (including mortgage and installment
11(2) for purposes of Exhibit D, all deposit accounts
Rockand loan and discount accounts, respectively, of
t
deposi
t
agains
d
checke
be
ville Centre of over $5,000
al;
Chemic
of
,
tively
respec
ts,
accounts and loan accoun
and
as relevant,
"(3) for purposes of showing, in so far
Nassau County,
the extent to which Chemical competes in
statistical
such bank be permitted to submit the same
applicadata which it submitted in connection with its
the
for
ors
tion in July of 1961 to the Board of Govern
Long
prior approval of its then proposed merger with
Island Trust Company."
FEDERAL RESERVE SYSTEM
BOARD OF GOVERNORS OF THE
Cravath, Swaine & Moore
t to items (1)
The Board grants its permission with respec
would be
items
two
these
by
aad (2). The procedures contemplated
for
in
1961
ation
applic
the same as those used in your client's
y.
merger of the Long Island Trust Compan
sion is granted
With respect to item (3), the Board's permis
Hour client
that
letter
your
in
Subject to the stipulation set forth
t per—
reques
to
not
agrees
and
data
Will be bound by that statistical
the
deny
should
you
event
the
in
data
mission to submit more recent
ing."
application and our client should request a rehear
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
45:1
Item No. 5
BOARD OF GOVERNORS
2/5/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS t3FFICIAL CORRESPONDENCE
TO THE BOARD
February 5, 1963
Honorable Erie Cocke, Sr., Chairman,
Federal Deposit Insurance Corporation,
Washington 25, D. C.
•
Dear Mr. Cocke:
Reference is made to your letter of January 11, 1963,
concerning the application of Citizens State Bank of Milford,
Milford, Illinois, for continuance of deposit insurance after
withdrawal from membership in the Federal Reserve System.
No corrective programs which the Board of Governors
believes should be incorporated as conditions to the continuance of deposit insurance have been urged upon or agreed to
by the bank.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
Item No. 6
2/5/63
BOARD OF GOVERNORS
OF THE
0 of Gol;•
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 5, 1963
The Honorable Frank E. Goldy,
State Bank Commissioner,
325 State Office Building,
Denver 2, Colorado.
Dear Mr. Goldy:
This refers to your letter of January 22, 1963, relating
to the application of First Colorado Bankshares, Inc., to acquire
Shares of Security National Bank, Denver, a proposed new bank. You
advise that the Colorado State Banking Board wishes to avail itself
of an opportunity to be heard at a public hearing on this application.
Under the applicable provision of the Bank Holding Company
Act of 1956, a hearing on the application is not required and, as yet,
110 decision has been made as to whether the Board of Governors, on
its own motion, should order a public proceeding of any nature. The
vicws of the Colorado State Banking Board are, of course, pertinent
to a decision on the question of a public proceeding. In this connection, the Board would benefit from any statement of reasons that
You or the Banking Board may wish to submiT, bearing upon the advisability of a public hearing on this application. It would be appreciated if any such statement could be received by the Board by
February 18, 1963.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
I5r,
Item No.
BOARD OF GOVERNORS
7
2/5/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 5, 1963.
Hr. Herbert V. Prochnow, Secretary,
Federal Advisory Council,
C/O The First National Bank of Chicago,
Chicago 90, Illinois.
Dear Mr. Prochnow:
The Board suggests the following topics for inclusion on the
agenda for the meeting of the Federal Advisory Council on February 18,
1963, and for discussion at the joint meeting of the Council and the
Board on February 19:
1. What are' the observations of the Council regarding
(a) recent domestic economic developments, and (b) the business outlook for the first half of 1963 and the year as a
whole? (c) Do the members of the Council believe that the
improvement in business psychology reported at the November
meeting with the Board has strengthened further since that
time, remained about the same, or receded?
2. In the opinion of the Council, what factors in the
current economic picture suggest the most strength or encouragement? Conversely, what factors appear to be of greatest concern?
3. What are the prospects for loan demand at banks during
the next several months, including demand in various loan categories? Is the liquidity of the banking system considered
ample to accommodate the present and foreseeable volume of
credit demands?
4. Does the Council detect any symptoms of deterioration
in lending standards, particularly in the field of real estate
credit?
5. (a) The Board would appreciate comments with respect
to developments in the area of time and savings deposits,
including the trend of such deposits, the cost burden of higher
t,t4- 1
Mr. Herbert V. Prochnow
-2-
of
interest rate levels, and whether the uses made by banks
with
tent
been
consis
have
funds represented by such deposits
y. (b)
accepted standards of bank liquidity and asset qualit
likely
are
abuses
itive
Does the Cbuncil believe that compet
corporate
to arise from the rapidly expanding use of negotiable
g
certificates of deposit or that unsound bankin conditions
ts of this type?
might arise from widespread reliance on deposi
per cent in
How would the Council regard an increase to 3-1/2
tion Q
the maximum permissible interest rate payable under Regula
?
months
six
on time deposits having a maturity of less than
heightened
6. Has the Council noted any tendency toward
ity
commun
ial
concern on the part of the business and financ
Are
?
pments
with respect to U. S. balance of payments develo
ic
Econom
an
Europe
the difficult negotiations going on within the
of
t
subjec
a
Community a factor to be taken into account and
concern to bank customers?
comments on
7. The Board would appreciate the Council's
tax credit
and
effects observed thus far from the depreciation
provisions adopted in 1962.
the impact of
8. What are the Council's views regarding
ions?
monetary and credit policy under current condit
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Item No.
BOARD OF GOVERNORS
2/5/63
OF THE
FEDERAL RESERVE SYSTEM
CORPORATION ACT
ASSURANCES REQUIRED UNDER BANK SERVICE
BANKS
IN SITUATIONS INVOLVING STATE MEMBER
on 5 of the
The Board has received an inquiry whether secti
Bank Service Corporation Act (P.L. 87-856; 12 U.S.C. secs. 1861-1865)
shed, as
requires that assurances satisfactory to the Board be furni
servspecified in that section, in the case of the performance of bank
tees for a State member bank by a national bank or a State nonmember
insured bank.
ce Corporation Act
Paragraph (a) of section 5 of the Bank Servi
Provides that:
al supervisory
"No bank subject to examination by a Feder
or otherwise,
agency may cause to be performed, by contract
any bank services for itself, whether on or off its premises,
ibed in
unless assurances satisfactory to the agency prescr
agency
such
to
subsection (b) of this section are furnished
that
ces
servi
by both the bank and the party performing such
and
ation
regul
the performance thereof will be subject to
as if such servexamination by such agency to the same extent
its awn
on
f
ices were being performed by the bank itsel
premises."
Under paragraph (b) of section
5
such assurances shall be
Governors of
flIrnished to the Comptroller of the Currency, the Board of
ration,
the Federal Reserve System, or the Federal Deposit Insurance Corpo
bank services are to be
dePending on whether the bank for which the
8
ri!
14
ting under the laws of the
Performed is a national bank or a bank opera
the Federal Reserve System,
District of Columbia, a member State bank of
or nonmember insured bank, as the case may be.
involved section 5 of the
In reedy to an earlier inquiry that
the view that assurance
Bank Service Corporation Act, the Board expressed
or the Federal Deposit
satisfactory to the Comptroller of the Currency
furnished by a State
Insurance Corporation, respectively, should be
nal bank or a
member bank which performed bank services for a natio
nonmember insured bank.
es that
The Board reaffirms this view and believ
in
the statute requires a similar conclusion in the situation described
the first paragraph hereof.
be noted that under
With respect to that situation, it should
section
5
Board with regard to
of the Act the assurances furnished to the
affairs of the national
regulation and examination do not apply to all
ces peror nonmember insured bank concerned, but only to the bank servi
extent as if such
formed for the State member bank and only to the same
member bank itself on its own
services were being performed by the State
Act is to make certain that the
premises. The purpose of section 5 of the
be able effectively to exercise
appropriate Federal banking agency would
rily to its superits responsibilities with respect to a bank subject prima
being performed for the bank
notwithstanding that bank services are
by some other party,
460
_3_
that section
Accordingly, it is the Board's view
5 of the
assurances satisfactory to
Bank Service Corporation Act requires that
nonmember insured bank
the Board be furnished by a national bank or a
member bank.
Which performs bank services for a State
February 5, 1963.
Item No.
UNITED S.LTES 07 nERICA
2/5/63
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
alb
In the Matter of the Application of
ANN ARBOR BANK
for approval of consolidation with
The
Dexter Savings Bank
•M•
ORDER APPROVING CONSOLIDATION OF BANKS
t to the
There has come before the Board of Governors, pursuan
Bank Merger Act of 1960 (12 U.S.C. 1828(c)), an application by. Ann
Arbor Bank, Ann Arbor, Michigan; a member bank of the Federal Reserve
SYstem, for the Board's prior approval of the consolidation of that
bank and The Dexter Savings Bank, Dexter, Michigan, under the charter
and title of
the former.
As an incident to the consolidation, the
Sole office of The Dexter Savings Bank would be operated as a branch
ol* Ann Arbor Bank.
apNotice of the proposed consolidation, in form
oved by the Board, has been published pursuant to said Act.
'
PI
in the light of
Upon consideration of all relevant material
the
factors
furnished by the
set forth in said Act, including reports
Com ptroller of the Currency, the Federal Deposit Insurance Corporation,
and the Department of Justice on the competitive factors involved in the
Proposed merger,
9
—2—
IT IS HEREBY ORDERED, for the reasons set forth in the
B°ard ls Statement of this date, that said application be and hereby
ja
aPProved, provided that said consolidation shall not be consummated
(a) within seven calendar days after the date of this Order or
(b) later than three months after said date.
Dated at Washington, D. C., this 5th
day of February, 1963.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Balderston, Mills, Robertson, Shepardson,
and Mitchell.
Absent and not voting:
Governor King.
(Signed) Merritt Sherman
Merritt Sherman)
Secretary.
(sEAL)
‘11.
),
BOARD OF GOVERNORS
Item NO. 10
2/5/63
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY ANN ARBOR BANK FOR APPROVAL OF
CONSOLIDATION WITH THE DEXTER SAVINGS BANK
STATEMENT
Ann Arbor Bank, Ann Arbor, Michigan, with deposits of $63.7
has applied, pursuant to the Bank Merger Act of 1960
a—
(12 U.S.C. 1828(c)), for the Board's prior approval of the consolid
tion of that bank and The Dexter Savings Bank, Dexter, Michigan
("Dexter Bani("), with deposits of $4.4 million, under the charter and
title of the former. Incident to the consolidation, the sole office
0.11 Dexter Bank would become a branch of the resulting bank, which
/4°1-11d therefore have six offices, pending the opening of an additional
°Ile which Ann Arbor Bank has received permission to establish.
Under the law, the Board is required to consider, as to each
Of the banks involved, (1) its financial history and condition, (2) the
4dequacy of its capital structure, (3) its future earnings prospects,
(4) the general character of its management, (5) whether its corporate
P°14ere are consistent with the purposes of 12 U.S.C., Ch. 16 (the Federal
Deposit Insurance Act), (6) the convenience and needs of the community
Deposit figures
herein are as of June 30, 1962.
It
114
to be served, and (7) the effect of the transaction on competition
(including any tendency toward monopoly).
The Board may not approve
the transaction unless, after considering all these factors, it finds
the transaction to be in the public interest.
and
Banking factors. - Ann Arbor Bank's financial history
condition are satisfactory, its capital structure is adequate, and it
has satisfactory management. The earnings prospects of Ann Arbor Bank,
like the economic prospects for the area, are regarded as favorable.
future
A management problem at the Dexter Bank bears on its
of
Prospects. In 1962 the chief executive officer and two directors
managDexter Bank died. Efforts of the bank to recruit an experienced
ing officer have been unsuccessful, although some necessary counsel and
advice have been obtained from Ann Arbor Bank. In addition, there
exists a need for strengthening the asset condition and capital structure of Dexter Bank.
prospects,
The financial condition, capital structure, earnings
and management of the resulting bank would be satisfactory.
the banks
There is no indication that the powers exercised by
involved are or would be inconsistent with the purposes of 12 U.S.C., Ch. 16.
Convenience and needs of the communities. - Ann Arbor
(1960 population about 67,000) is about 40 miles west of Detroit and
18 the center of a trade area with about 240,000 people. The University
Of Michigan helps to provide Ann Arbor and environs with a stable
ies
e"nomic base, and the attraction of manufacturing and research facilit
4 CF,
-.3—
to the area has contributed to the substantial growth and economic
development experienced during the past ten years by Ann Arbor, as well
a8
by Washtenaw County, of which Ann Arbor is the seat.
Dexter (population about 1,700) is about 10 miles west of
Ann Arbor.
While its trade area of some 5,000 to 6,000 persons is
essentially agricultural, there are two principal industries employing
about 1,800. Future growth of Dexter's economy is linked with the general
growth in the area centering on Ann Arbor, in connection with which the
interrelationship of the two communities would be expected to increase.
and the
Ann Arbor is served principally by Ann Arbor Bank
slightly smaller National Bank and Trust Company (deposits $55.4 million).
Ann Arbor Bank operates three branches within the city and one at Whitmore
Lake, about 10 miles north.
A fourth in-town branch has been approved but
18 not yet in operation. Ann Arbor Trust Company, the only other bank in
the city, provides only fiduciary services. The organization of a new
received pre"mmercial bank in Ann Arbor, Huron Valley National Bank,
liminary approval from the Comptroller of the Currency in October 1962.
there are
Dexter Bank is the only banking office in Dexter;
nine
several other banks in the general area but none is nearer than
Dexter to
rrilles and, except for the Ann Arbor banks, they do not serve
anY material extent.
Because of their size and since Dexter is to some
"tent a tributary community to Ann Arbor, the two commercial banks are
alternate sources of banking service to Dexter residents and businesses,
Bank's chief correspondent.
and Ann Arbor Bank has functioned as Dexter
1
have little
Consummation of the proposed consolidation would
effect on the convenience and needs of Ann Arbor.
However, there would
be made available in Dexter an office of a bank with greater resources
and higher loan limits than those of Dexter Bank which, it is reported,
have frequently been inadequate to accommodate local requirements.
There
also would be more conveniently available in Dexter banking services not
available at Dexter Bank, such as single payment loans to individuals,
FHA insured and VA guaranteed real estate and improvement loans, trust
of
services, night depository services, and other specialized services
the Ann Arbor Bank.
ess derives from
Competition. - Some of Ann Arbor Bank's busin
residents and businesses within the service area of the Dexter Bank°
to the relaPresent active competition is limited, however, with respect
tively high proportion of small customers in Dexter for which the Ann
the scope
Arbor banks would be inconvenient alternatives and for which
Of choice of banking service would therefore remain substantially uncredit and
changed by the consolidation. Similarly, as to needs for
bank
ePecialized services beyond those available at Dexter Bank, that
does not effectively compete with Ann Arbor Bank.
Thus, present competi-
tant to
tion between the consolidating banks is not such as to be impor
the public
the preservation of a reasonable choice of banking service for
concerned.
r Bank is depending
This is particularly true now when Dexte
assistance.
°11 Ann Arbor Bank for important management
1GT
The consolidation would not significantly affect the present
competitive situation in the immediate Ann Arbor area. It would increase Ann Arbor Bank's size further over that of National Bank and Trust
Company, but not so as to give it a significant advantage over that bank
Or so as to affect materially the smaller banks in the outlying areas,
and the elimination of the Dexter Bank as an independent bank would not
eliminate a significant alternative source of service for Ann Arbor.
ihile the alternatives in Ann Arbor are limited, a new national bank is
being organized there, as previously indicated.
Summary and conclusion. - The prospects for adequate and
convenient banking service to the Dexter community by Dexter Bank as an
independent bank are presently in question because of the failure of the
bank's efforts to obtain successor management.
Consummation of the pro-
Posed consolidation with Ann Arbor Bank would solve this problem as well
as the need for improvement in the capital position of Dexter Bank.
Elimi-
naticm of the moderate amount of competition between the two banks would be
c)ffset by these considerations.
Furthermore, there also would be made
available in Dexter the broader banking services of the larger bank.
Accordingly, the Board finds the proposed transaction to be
in the public interest.
F
ebruary
5, 1963.
468
Item No. 11
2/5/63
BOARD OF GOVERNORS
OF THE
0..
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 6, 1963
AIR MAIL
Mr, Paul C. Stetzelberger, Vice President,
Federal Reserve Bank of Cleveland,
Cleveland 1, Ohio.
Dear Mr. Stetzelbergers
In accordance with the request contained in your letter of
January 30, 1963, the Board approves the designation of the following
employees as special assistant examiners for the Federal Reserve Bank
of Cleveland for the purpose of participating in examinations of State
member banks except those shown opposite their names:
Donald Schwandt
Hazel Houghton
Nancy Atkinson
Daniel Puckett
WO
John M. Weber
-
The Cleveland Trust Company,
Cleveland, Ohio.
Marvin Lee Keane
-
The Central Trust Company,
Cincinnati, Ohio.
The authorizations heretofore given your Bank to designate Messrs.
Weber and Keane as special assistant examiners on an unrestricted basis
are hereby canceled. Appropriate notations have been made on our records
of the names to be deleted from the list of special assistant examiners.
Very truly yours,
(Signed) Elizabeth L. Carmichael
chael,
Elizabeth L. Ca
Assistant Secretary.
@FedFRASER