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9/61 Minutes for To: January 7 1962 Members of the Board Prom: Office of the Secretary 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 vere 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 Wednesday, January 17, 1962. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 9:30 a.m. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson King Mitchell Sherman, Secretary Kenyon, Assistant Secretary Molony, Assistant to the Board Fauver, Assistant to the Board Cardon, Legislative Counsel Hackley, General Counsel Solomon, Director, Division of Examinations Shay, Assistant General Counsel Leavitt, Assistant Director, Division of Examinations Mr. Veret, Attorney Mr. McClintock, Review Examiner, Division of Examinations Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Application of Hackensack Trust Company (Items 1 and 2). 1°1&17slaant to the decision reached by the Board on January 11, 1962, 4P1)roving the application of The Hackensack Trust Company, Hackensack, IleljerseY, for permission to merge with The Bank of Saddle Brook and L°41, Saddle Brook, New Jersey, and discussion at the meeting on January 12 or cll'aft documents prepared in reflection of that decision, there had been . distributed, with a memorandum from the Legal and Examinations ' Divisi 4-ons dated January 16, revised drafts of an order and supporting stat m„ along with language suggested for inclusion in the transmittal lette,. to Hackensack Trust with regard to the capital position of that There had also been distributed copies of suggestions by 201 -2- 1/17/62 Governor Mitchell for amendment of the statement and of the letter to Hackensack Trust Company. In explanation of his suggestions, Governor Mitchell said it not seem to him that the revised draft of statement was sufficiently sPeoific with respect to the key reason for approval of the merger, 118111e1Y) the continued dissension within the ranks of management of The 134ak of Saddle Brook and Lodi. As to the other revisions that he had slIggested, he had no strong feeling. Governor Robertson said he was not particularly concerned about the form of statement issued on the Hackensack application. However, he 'would like to suggest certain changes in format that might be 4PPropriate in this and other cases of a routine nature where approval Vas given without dissenting votes. Governor Robertson then related his suggested changes, following which he commented that he thought everY essential point would be covered. In his opinion, the Board shcluld get away, in routine cases, from the use of a pattern in which l'ererence was made specifically to all of the statutory factors required t° be considered in a case of this kind. Governor Robertson also suggested a change in the letter to 44ckensack Trust Company. Mr. Hackley commented, with regard to the form of statement -Totested by Governor Robertson, that it was true that the Legal Division 44 been following a pattern in drafting statements on merger cases. He 1/17/62 -3- saw no legal reason why a shorter form such as outlined by Governor Robertson could not be used in some instances. This might expedite, 134 some occasions, the drafting of statements for the Board's consideration. On the other hand, he would not want to see any statements, even in routine cases, abbreviated to a point where they did not cover the essential points related to the statutory factors. As long as the 1°61-rld, was making a record, that record should be unassailable. Governor Mills commented that when the Board used a formula statement, it was following a practice well known to those who were most Illterested in the subject. The Board's statements were written principally t011 lawyers, whose reasoning should be facilitated if they were able to e°111Pare a particular statement against others. The Board might think c)f the Hackensack application as a routine case, but there might be others Ilh° would take a different view regarding the case and think that the 13°61.rd's decision was wrong. In such circumstances, he felt there was to be said for following a standard formula in the issuance of titellger statements. Mr. Shay noted that in the Manufacturers Trust-Hanover Bank es'se a "basis for approval" was prepared after the Board's decision was l'ee'ehed. This statement presented conclusions only, without an analysis c)t the facts, and there was some criticism of it for that very reason. qh1 le certain cases might be regarded by the Board as quite simple, 4evertheless the outsider might look for something in the nature of an e4saYtical document. 1 1/17/62 The discussion then more specifically turned to the Hackensack ease, and Governor Robertson repeated that he had no strong view with IegaDi to the type of statement to be issued in this particular case. ' °a the broader question of the form of statement used in routine cases, he felt that the Board was using a lot of language for little purpose. Governor Mitchell commented that as he read the statement proposed te be issued in the Hackensack case, it had occurred to him that too many /7c)rds had been used to describe essential facts and that the critical t4etor on which the decision turned was so obscure as to make it difficult to tell why the decision actually was made. With reference to this comment, Mr. Shay pointed out that a lot cif People would be reading the Board's statements and looking for different things. The fact that the Board's principal reason for its Itetion was not underscored in such statements might have some advantage. leaders with various sentiments would be looking for possible points of ' ttibte'ek, and a broader statement that covered the various aspects of a e4se and did not over-emphasize any one reason for approval might be helpful. Chairman Martin agreed with the view that the statements of the Board that ought to be as clear as possible. However, it was his thought the decision as to the format of the statements might best be left to the Legal Division. 1/17/62 -5There followed further discussion of the revised draft of state- raeat on the Hackensack case and of the language suggested for inclusion 14 the letter to the bank with regard to its capital position. After several views had been expressed concerning the manner in which the letter might most appropriately be framed, revised language was suggested b5r Mr. Solomon and agreement with it was expressed. The order and statement were then authorized for issuance in the t°11t attached as Items 1 and 2, respectively. The language in the letter t° The Hackensack Trust Company, as agreed upon, was as follows: The New Jersey Department of Banking and Insurance felt the matter of The Hackensack Trust Company's capital position sufficiently serious to make approval of your latest branch application conditional on providing additional capital. The fact that a similar condition was not attached to the Board's approval of this merger does not mean it is indifferent to the need for more capital in the merged institution; to the contrary, the Board wishes to re-emphasize the need for further strengthening the bank's capital position. The meeting then adjourned. Secretary's Notes: At 10:00 a.m. the Board heard a public oral presentation on the application of Whitney Holding Corporation, New Orleans, Louisiana, for consent to certain actions that would cause it to become a bank holding company. A stenographic record of the proceeding was made, and a copy of the transcript has been placed in the Board's files. Pursuant to recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson today approved on behalf of the Board the following actions relating to the Board's staff: 208 1/17/62 flment , Robert G. Sampson, as Personnel Technician in the Division of rrsonnel Administration, with basic annual salary at the rate of 51325, effective the date of entrance upon duty. SalarY IE22122.21LbLchange in title Pearle E. Randour„ from $5,820 to $6,015 per annum, with a change 44 title from Statistical Assistant to Supervisor, Reserve-Member Banks statement Unit in the Division of Bank Operations, effective January 21, 1962. - Secretary Item No. 1 1/17/62 UN ITI:D STATES CF AN:RICA BEFORE THE BOARD OF GOV1RNCRS CF THE FLDEIAL RFZERVE SYSTEM WASHINGTON, D. C. the Natter of the Application of I-I ACKLIISACK TRUST COiTANY . PProval of merger with e 1)ank of Saddle Brook et Lodi ORDER APPROVING NERGER OF BANKS There has come before the Board of Governors, pursuant to / of the Federal Deposit Insurance Act (12 U.S.C. 1828(c)), - u‘c) n1° , ati a Pplieation by The Hackensack Trust Company, Hackensack, New Jersey, the Boardts prior approval of the merger of The Bank of Saddle Brook Lodi Saddle Brook, New Jersey, with and into The Hackensack Trust Co r1N nY) under the charter and title of the latter. Pursuant to said section 18(c), notice of the proposed merger, til t° rrrl aPproved by the Board of Governors, has been published, and qlre on the competitive factors involved in the proposed transaction een furnished by the Comptroller of the Currency, the Federal 4130V+ , I Insurance Corporation, and the Department of Justice and have ' 1)4r1 c, 'ricidered by the Board. IT IS ORDERED, for the reasons set forth in the Boards 4. of , teme this date, that said nerger be, and hereby is apnro7ed, L ' ' 4-led that said mrger shall not be consummated (a) sooner than at , " calendar days after the date of this Order or (b) later than ttirc.„ v months after said date. Dated et Jashington, . C., this 17th day of January, 1962. By order of the Board of Governors. Voting for this action: Unanimous, with all members present. (Signed) E'erritt Sherman ilcrritt Sherman, Secretary. (8470 Item No. 2 1/17/62 BOARD OF GOVERNORS OF THE FEDERAL RESERVL SYSTEM APPLICATION BY THE HACKENSACK TRUST COMPANY, FOR APPROVAL OF MERGER WITH THE BANK OF SADDLE EROOK & LODI STATLIINT The Hackensack Trust Company, Hackensack, New Jersey ackensack Trust"), has applied, pursuant to section 18(c) of the a.1 Deposit Insurance Act, for the Boardts approval of the merger that bank with The Bank of Saddle Brook & Lodi, Saddle Brook, N j el seY ("Saddle Brook Bank"). Under the Agreement of Merger, ' ' the l anks would merge under the charter and title of Hackensack Trust, ' 411"he main office and single branch of Saddle Brook Bank would becm `411e branches of the resulting bank. Under the law, the Board is required to consider (1) the 4411 elal history and condition of each of the banks involved, (2) the adeN, s acY of its capital structure, (3) its future earnings prospects, ' (4) the general character of its management, (5) whether its corporate Nler 8 are consistent with the purposes of the Federal Deposit Insurance Act k6) the convenience and needs of the community to be served, and A.; -2(7) the effect of the transaction on competition (including any tend encY toward monopoly). The Board may not approve the transaction 11114es, after considering all these factors, it finds the transaction to be in the public interest. For convenience, the first five of these factors may be e°11eidered together as "banking factors". The sixth and seventh tacters are considered separately. Banking factors. - The financial history and condition of llsack Trust are regarded as generally satisfactory, and this should ' hold ,grue also for the resulting bank, although the capital structure of the esulting bank will continue to reflect a need for some strengthening. ' The s addle Brook Bank, which opened for business in November 1958, has erij0 Yed unusually rapid growth, but has not been able to reconcile baS4 'e management differences which must be settled if the bank is to 4rve the community satisfactorily and provide adequate incentive to Ita ato ckholders. Hackensack Trust is competently operated, and it 41313ea I's that the resulting bank would have competent, unified manage114t nd that this would remedy the principal problem faced to date th e Saddle Brook Bank. The prospects for earnings of Hackensack -re favorable and this same prospect would apply to the resulting ot There is no evidence that the corporate powers of the banks are 41d be inconsistent with the Federal Deposit Insurance Act. Consideration of the banking factors, therefore, lends /lbstant...1 —.Lai support for approval of the merger. Convenience and needs of the communiti.es to be served. 11ack cnsock Trust's main office is in Hackensack (population: 30,500), the °°1111t1 seat of Bergen County, in northeastern New Jersey., near Hew York The bank maintains one in-town branch and another branch in ,,a 4 - ackensock; other annroved or proposed branches are at three 1%ati°Ils outside the Saddle Brook - Lodi areas. Hackensack is located about six miles east of Paterson (population: 143,600), the largest cttr in the county. In view of the banking facilities available in the Illokensack area, it appears that the effect of the nronosed merger °T1 thp - convenience and needs of this area would be of no significance. The township of Saddle Brook (population: 14,000) is located 111: 14w,.. 'Y between Hackensack and Paterson. The township is a mixed resident1 °1 and industrial cormunity which has experienced substantial growth in l'eeent years, and nrosnects for further growth are favorable. The main °41'e of Saddle 3rook Bank is the only commercial banking office in the tNnshin, although several offices of other banks are located in surroundOr As indicated by its rapid growth, Saddle Brook Bank has tti/ed a public need in the township. With improved management and re‘Ilting benefits, there is every reason to believe that this growth will teiltinue Lodi (population: 23,500), contiguous to Saddle Brook on the th '4.s served by an office of a large commercial bank in addition to t41 tr. allch of Saddle Brook Bank. This community has recently launched a Of urban renewal which offers fair prospects for municinal growth The resulting bank would make available in Saddle Brook and 441. the broader rang,, of services now offered by Hackensack Trust but 11c)t offered by Saddle Brook Bank. Among these are fiduciary services, , 'rugaCe loans, urban renewal loans, and other commercial and perfinancing and banking services. Therefore, the convenience and 11"8 of the Saddle Brook and Lodi communities would be served by the 11N3csednerger. Competition. - The proposed merger would increase Hackensack 1411st t s - 'P46.7 million of IPC deposits (deposits of individuals, partnerarid corporations) from about 6 to 7 per cent of the county's IPC but would not change its position as the fourth largest bank tho - county. The resulting bank would continue to be substantially 4%11 'er than the two larger banks with offices in the Hackensack area (kith 1411k . IPC deposits of $140.3 million and $97.8 million). Saddle Brook ricIAT has $8.5 million in IPC deposits. Only nominal percentages of each merging bank's deposits and 14%11 ell-O.-nate in the service area of the other, and only three "rs and one borrower do business with both banks. Although the Ot4ce 8 of the merging banks are grouped in a relatively small area, ktt c/t Saddle Brook Bank's competition appears to be from banking offices "°tile -r commercial banks located in the communities separating the tebiric e area of Hackensack Trust and Saddle Brook Bank. Banks in other 11Nhbo l'ing communities significantly closer to Saddle Brook Bank than ttice e of Hackensack Trust provide additional competition. -5Within a radius of about 1.5 miles of each of the 5 offices "he merginF banks, there are 19 offices of 11 other commercial banks. of this dense concentration of bankins , offices, the merger probably Ilcalldnot unfavorably affect competition, but would tend to enhance comletition through the extension of the operations of Hackensack Trust irto the Saddle Brook area. ammary and conclusion. - It appears that the Saddle Brook 4Ne , e;Terience substantial growth and increased business activity. `PacitY of Hackensack Trust to supply experienced management and bo e bankinf, services will benefit the residents of that area. There aetically no overlapping of the primary service areas of Saddle Brook knit 1 ' 4 Hackensack Trust, and the competition that would be eliminated tb“e merger would not be significant. In fact the entry of Hackensack t. -flt,(1) the Saddle Brook - Lodi area would result in increased comDettti °11 8ince that bank would then be able to compete more effectively th th Offices of other banks operating in and near that area. For these reasons the Board finds that the proposed merger in the public interest. 1962.