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639
Minutes for
To:
January 30, 1963
Members of the Board
From: 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
vith respect to any of the entries in this set of
!linutes in the record of policy actions required to
oe 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
el°Ve Secretary's Office. Otherwise, please initial
,w. If you were present at the meeting, your
laitials will indicate approval of the minutes. If
You were not present, your initials will indicate
(2411Y that you have seen the minutes.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
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Federal Reserve Bank of St. Louis
28/-3
Minutes of the Board of Governors of the Federal Reserve
SYstem on Wednesday, January 30, 1963.
The Board met in the Board
1°0121 at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
Shepardson
Mitchell
Sherman, Secretary
Kenyon, Assistant Secretary
Fauver, Assistant to the Board
Hackley, General Counsel
Noyes, Director, Division of Research
and Statistics
Mr. Solomon, Director, Division of
Examinations
Mr. Johnson, Director, Division of Personnel
Administration
Mr. O'Connell, Assistant General Counsel
Mr. Shay, Assistant General Counsel
Mr. Hooff, Assistant General Counsel
Mr. Conkling, Assistant Director, Division
of Bank Operations
Mr. Goodman, Assistant Director, Division
of Examinations
Mr. Leavitt, Assistant Director, Division
of Examinations
Mr. Thompson, Assistant Director, Division
of Examinations
Mr. Landry, Assistant to the Secretary
Mr. Bakke, Senior Attorney, Legal Division
Miss Hart, Senior Attorney, Legal Division
Mr. Potter, Senior Attorney, Legal Division
Mr. Smith, Senior Economist, Division of
Research and Statistics
Mr. Poundstone, Review Examiner, Division
of Examinations
Mr. Doyle, Attorney, Legal Division
Mr. Entriken, Attorney, Legal Division
Mr. Phillips, Consultant
Mr.
Mr.
Mr.
Mr.
Mr.
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Federal Reserve Bank of St. Louis
1/30/63
-2-
Circulated or distributed items.
The following items, copies
or 'which are attached under the respective item numbers indicated,
were a
roved unanimously:
Item No.
Letter to the Federal Reserve Bank of New York
,
!
- Iving the assessment of penalties incurred by
The
Farmers and Merchants National Bank of Matawan,
—"tawarl, New Jersey, because of deficiencies in its
required reserves.
1
&tter to International Banking Corporation,
2
itter
l
to the Federal Reserve Bank of
3
'
ev York, New York, granting consent to the
:!!I
fase of shares of M. Samuel & Co. Limited,
""Iclon, England.
t radelPhia approving the payment of salary
at :!Mee P. Giacobello as Examining Officer
b. '"e rate fixed by the Bank's Board of
Irectors.
plltetter to Park National Bank
of Pueblo,
,
r 21/10, Colorado, granting permission to
-g-tritain reduced reserves.
Lett
n
er to Valley
Bank of Grand Forks,
e
Forks, North Dakota, approving the
iablishment of a branch in the North Side
-ustrial and Shopping Area.
14-
5
/It
tter
to the Federal Deposit Insurance
0ration regarding the application of
081st State Bank of Lynwood, Lynwood,
itifc)rnia, for continuation of deposit
1,-"k'ance after withdrawal from membership
'1 the
Federal Reserve System.
0
tette
phi]. r to the Federal Reserve Bank of
or '
aclelPhia regarding the permissibility
'
Qe
Member bank's (1) advertising time ,
ollificates of deposit as "savings bond-"
4 r bank savings bonds," and (2) advertising
of return in excess of the present
'
4401 rate of 14 per cent.
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Federal Reserve Bank of St. Louis
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7
,
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-3-
With respect to Item No. 2, there was a discussion at the
instance of Governor Mills concerning the various types of business
engaged in by M. Samuel & Co., which it was noted encompassed the
fields of banking, foreign exchange, investment management, and the
r4arketing of new issues.
Attention was directed particularly to the
underwriting activities of the company, which led to a discussion of
the conditions proposed to be stated in the draft of letter to InterIlEttional Banking Corporation that in effect would consent to the
13r°Posed investment only if M. Samuel & Co., its subsidiaries, and its
4friliates did not engage in the underwriting, sale, or distribution
(31' securities in the United States.
It was explained that such language
W48 considered necessary in the letter because the restrictions found
14 Regulation K would not be applicable to a subsidiary in which an
Edge
or agreement corporation, such as International Banking Corporation,
had,
4 minority interest.
However, a change to simplify the wording of
°Ile Part of the proposed letter was agreed upon, with the result that
the letter was sent in the form attached to these minutes.
With respect to Item No. 7, relating in part to the advertising
°r tim
,
-- certificates of deposit as "savings bonds" or "bank savings
botds ”
/ it was noted in discussion that the matter had been referred to
the,
`'°MPtroller of the Currency several months earlier, when inquiry
1?az
wacte by a national bank, in view of the question of possible confusion
°11 t
he part of the public between the time certificates of deposit so
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Federal Reserve Bank of St. Louis
1/30/63
designated
-4and United States Savings Bonds.
However, it was understood
that no action on the matter had been taken by the Treasury Department.
the Board's standpoint, the question was one of conformity with the
recillirements of Regulation Q, Payment of Interest on Deposits, rather
than the name applied to the certificates of deposit.
Mr. Conkling then withdrew from the meeting.
Interest on funds represented by "savings shares."
There had
been circulated to the members of the Board a file containing a draft
01 1etter
to the Federal Reserve Bank of Boston regarding a request by
illdlan Head National Bank of Nashua, Nashua, New Hampshire, for a ruling
11141 respect to the payment of interest on funds represented by "savings
hares" to be acquired by the bank as the result of the purchase of assets
(14'1 assumption of liabilities of Claremont Co-operative Bank, a building
1141 10an association. The national bank wished to know whether it might
lranie •
diately pay interest at the maximum 4 per cent rate on funds that
had
been on
"deposit" in the other institution for a period of at least
1.1e4e months.
The draft reply would indicate that in consideration of
the Customer's position the Board would not object to the national bank's
154Yillg interest at the rate of 4 per cent per annum on "deposits" taken
over
I rom the building and loan association if such funds had been held by
the ,
c.ssociation for at least 12 months.
In discussion, a view was expressed that the draft reply went
too r
ar in suggesting that the share accounts in the building and loan
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Federal Reserve Bank of St. Louis
1/30/63
association hall the status of deposits.
It was agreed, therefore,that
the letter would be redrafted in this regard for futher consideration by
the Board.
Mr. Hooff then withdrew from the meeting.
Report on competitive factors (Kalamazoo, Michigan).
There had
been distributed a draft of report to the Comptroller of the Currency
l'egarding the competitive factors involved in a proposed purchase of assets
84ad assumption of liabilities of The Home Savings Bank of Kalamazoo,
Kale•mazoo, Michigan, by The American National Bank and Trust Company of
ICalamazoo, Kalamazoo, Michigan.
After discussion, the report was approved unanimously for transMission to the Comptroller of the Currency.
The conclusion read as
rollows:
This absorption of The Home Savings Bank of Kalamazoo,
Kalamazoo, Michigan, by The American National Bank and
Trust Company of Kalamazoo, Kalamazoo, Michagan, would
eliminate one of four banks headquartered in downtown
Kalamazoo and concentrate banking in the county into
three banks. While Home Savings has not been a particularly aggressive competitor, it does represent an alternative source of banking services, the elimination
of which would have an adverse effect on competition.
Home Savings' competitive efforts are presently restricted
by management succession problems.
Wisconsin holding company applications (Items 8-13).
At the
r4eeting on January 24, 1963, consideration had been given to drafts
(31' 0rders and statements regarding applications by First Wisconsin
km,Shares Corporation, Milwaukee, to acquire shares of American Bank
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Federal Reserve Bank of St. Louis
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-6-
and Trust Company, Racine, and Merchants & Savings Bank, Janesville,
Wisconsin, and by The Marine Corporation, Milwaukee, to acquire shares
°f The Beloit
State Bank, Beloit, Wisconsin.
Pursuant to the under-
stculding at that meeting, revised drafts of the statements had been
distributed under date of January 28, 1963.
After a discussion during
hich agreement was reached on changes in the language of certain
Po
rtlons of the statements, the issuance of the orders and statements
was authorized.
Copies of the orders and statements, as subsequently
issued., are attached as Items
8 through
13.
Messrs. O'Connell, Thompson, Bakke, Potter, Smith, Entriken, and
Phillips then withdrew from the meeting.
.b2plication of Hackensack Trust Company (Items 14-16).
Copies had
"distributed under date of January 28, 1963, of drafts of an order
be
411d statement reflecting approval on January 17, 1963, of the application
°f
--4e Hackensack Trust Company, Hackensack, New Jersey, to merge with
tank
°f Bogota, Bogota, New Jersey.
kbert
-8°n,
A dissenting statement of Governor
with which Governor Mitchell expressed concurrence, also had
distributed.
Certain changes in the language of the majority statement having
been
agreed upon, the issuance of the order and statements was authorized
tbje
et to such changes being made.
Copies of the order, statement,
a.rld
issenting statement, as subsequently issued, are attached hereto
as Tte
/..21_1§, respectively.
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Federal Reserve Bank of St. Louis
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_7-
Miss Hart and Mr. Leavitt withdrew at this point and Messrs.
Yoling,
Adviser to the Board and Director, Division of International
Finance,
and molony, Assistant to the Board, joined the meeting.
Statement by Chairman before Joint Economic Committee.
There
1184 been distributed copies of a draft of statement to be made by
Chain
Martin before the Joint Economic Committee on Friday, February 1,
1963.
Following a general discussion during which various changes were
slIggssted, it was understood that the statement would be reviewed by the
start in the light of these suggestions and that it would be presented in
4 final
form satisfactory to Chairman Martin.
Messrs. Young, Molony, Fauver, and Noyes then withdrew from the
taeetinge
Revision of Regulation K.
Pursuant to the understanding at the
IlleetIng on January 28, 1963, further consideration was given to the proposed
l'ev1610n of Regulation K, Corporations Doing Foreign Banking or Other
For..
'Ign Financing under the Federal Reserve Act.
After discussion, based principally on a second revised draft of
the
section relating to investments in stock of other corporations that
44.4 been distributed under date of January 25, 1963, it was suggested
that it would be helpful if a "clean" draft of revised Regulation K
,k be made available to the members of the Board for review.
There
"g agreement with this suggestion, the Legal Division was requested
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Federal Reserve Bank of St. Louis
1/30/63
to
-8-
Prepare such a draft.
It was understood that the principal purpose
a°1' the clean draft would be to take into account the comments and suggestions made during the previous discussions by the Board relating to the
e°11temP1ated revision of Regulation K, prior to publication of a draft
°I' revised
Regulation in the Federal Register for the receipt of comments;
it vas also understood that the Legal Division would be given a certain
41110Unt of elbowroom
in preparing the clean draft.
Messrs. Hackley, Solomon, Shay, Goodman, Poundstone, and Doyle
then 'withdrew from the meeting.
Pursuant to the dis8astiuranta(ItemNo.17.
*uctea'.,_Al1S
-1°4.0n at the meeting on November 28, 1962, copies had been distributed
°r a revised
draft of letter to the Federal Reserve Bank of Atlanta
l'eglIrding a proposed revision in the nonofficer salary structure at the head
(4fice and branches.
The draft would indicate that the Board had approved,
etrective
immediately, revised salary ranges for Grades 12 through 16 of
the 40nofficer salary structure applicable to the head office, as fixed
by +1.,
'
44e Bank's Board of Directors. The draft letter would state further
that the Board would appreciate review by the Reserve Bank of proposed
Illisions for the same grades at its branches.
The Bank's letter of
(let°ber 12, 1962, indicated that the revised ranges were intended to
e.seist in recruiting employees for the professional staff, including
raecee
'
llch Personnel.
Since such positions did not exist at the branches,
vel'y it was believed that an increase in salary structures would not
be
Portable on such a basis.
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Federal Reserve Bank of St. Louis
991;
1/30/63
-9-
At the request of the Chairman, Mr. Johnson commented on the
814tter, noting that as a result of informal discussion with Reserve
Bank. representatives since the November 28
Board meeting it now appeared
that the
Bank would be willing to accept approval of the revised head
°ftice salary structure for nonofficer staff and to review the branch
situation.
Governor Mitchell, Chairman of the Board's Committee on Organization,
Coivensation, and Building Plans, noted that the Reserve Bank had shown
8°45 sensitivity regarding the matter.
to On
This seemed to have been dissipated
extent, although a degree of feeling with respect to the branch
844ation might still exist among the Bank's directors.
Governor Mitchell
8431‘eed with the proposed letter, which would leave the matter in a status
that vould allow the Reserve Bank to make a further representation to the
11°8"
on the situation at the branches if it so desired.
After further consideration of the draft letter, during which it
1148'cited that department heads at Reserve Bank head offices entered more
Policy determination than department heads at branches, and usually
114i l'esPonsibility for larger staffs, the letter, a copy of which is
attached as Item No. 17, was approved mulmimouay.
The meeting then adjourned.
Secretary's Notes: On January 29, 1963, Governor
Shepardson approved on behalf of the Board a letter
to the Federal Reserve Bank of Richmond (attached
Item No. 18) approving the designation of Francis
L. Richbourg, Kenneth E. Bailey, Charles D. Koonce,Jr.,
and Woody Y. Cain as special assistant examiners.
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Federal Reserve Bank of St. Louis
07),
1/30/63
-10Governor Shepardson also approved on behalf
of the Board on January 29, 1.63, a list of
persons to be invited to attend the dinner
to be given in connection with the annual
meeting of representatives of bank examination
departments of Federal Reserve Banks on March 11
and 12, 1963. The list was attached to a memorandum from the Division of Examinations dated
January 24, 1963.
Pursuant to the recommendations contained
in memoranda from appropriate individuals
concerned, Governor Shepardson today approved
on behalf of the Board the appointment of
the following persons to the Board's staff,
effective the respective dates of entrance
upon duty:
Charles C. Baker, Jr., as Economist, Division of International
Finance, with basic annual salary at the rate of $11,150.
Margie W. Lakatos as Mailing List Clerk, Division of Administrative Services, with basic annual salary at the rate of
$3,820.
Governor Shepardson today noted on behalf of
the Board a memorandum advising that the application
for disability retirement of Edna Kiatta Noyes,
Statistical Clerk in the Division of Bank Operations, had been approved by the Retirement
System of the Federal Reserve Banks, effective
September 4, 1962.
'V"
Sqcrtary
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
Item No. 1
1/30/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 28. O. C.
ADDRESS
arrocaAL
CORREBPONDIENCE
TO THL BOARD
January 30, 1963
D. C. Niles, Manager,
4ec0unting Department,
?ederal Reserve Bank of New York,
Neli York 45, New York.
j3e9.1‘ Mr
Niles:
This refers to your letter of January 17 regarding
th
Penalties of $222.27 and $97.81 incurred by The Farmers
aria it
Lnerchants National Bank of Matawan, Matawan, New Jersey,
deficiencies of 12.3 and 5.4 per cent, respectively, in its
,ecillired reserves for the computation periods ended December 26,
-L962, and. January 9, 1963.
r
raci.
It was noted that the deficiencims resulted from the
u that the member bank credited payment of your cash letter
- ted December 10, totaling $122,525.43, to the account with its
J
1"esp0hdent instead of to its reserve account wiLh your Bank;
'
i.°1
error was not discovered by the member bank until January 7,
e,73) when it received your report of deficiency for the period
t cled December 26, which was too late to avoid a deficiency for
'
Period ended January 9; and that the member bank has a fine
c°rd in maintaining its required reserves.
In the circumstances, the Board authorizes your Bank
to
ended
n 14'810-ve the assessments of the penalties for the periods
4.1e
cember 26, 1962, and January 9, 1963.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.,
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Federal Reserve Bank of St. Louis
29 .4
Item No."!
1/30/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 30, 1963
Int
ernational Banking Corporation,
499 Park Avenue,
13
-ew York 22, New York.
Gentlemen:
In accordance with the request and on the basis of the
illf°rMation furnished in your letter of December 13, 1962, transmitted
thm
, ugh the Federal Reserve Bank of New York, and your letter of
uanu
,arY 9, 1963, the Board of Governors grants consent for International
13
iflg Corporation ("IBC") to purchase and hold 600,000 shares, par
07-11.1A £1 each, of M. Samuel & Co. Limited, London, England, (”MSCL"),
417 the equivalent of approximately £1,900,000, provided such shares
e acquired within one year from the date of this letter.
The Board's consent is granted upon condition that IBC shall
diePose
of its holding of stock of MSCL, as promptly as practicable,
.wr the event that MSCL should at any time (1) engage in issuing, under(2)-ting, selling or distributing securities in the United States; •
engage in the general business of buying or selling goods, wares,
flier
Ile chandise, or commodities in the United States or transact any busiin the United States except such as is incidental to its interor foreign business; or (3) otherwise conduct its operations
th a manner which, in the judgment of the Board of Governors, causes
e c
stock by IBC to be inappropriate under
the ontinued holding of its
Provisions of the agreement of IBC pursuant to Section 25 of the
cleral Reserve Act or Regulation K.
The Board's consent is given with the additional condition
that
will neither MSCL nor any subsidiary bank or other affiliated company
un, maintain any branch, agency, office, or representative in the
States and that MSCL or any subsidiary bank or other affiliated
Corn
4131,134nY, in issuing, underwriting, selling or distributing securities
di °Eld, shall not engage or participate in the underwriting, sale or
02611buti0n of securities in the United States, and may not so engage
c'(-) Participate directly or indirectly or through an agency or on a
I.:mission or consignment basis or in any other manner. If a security
alie is
being sold or distributed partly in and partly outside the
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Federal Reserve Bank of St. Louis
FEDERAL RESERVE SYSTEM
BOARD OF OOVERNORS OF THE
300
International Banking Corporation -2United States, MSCL or any subsidiary bank or other affiliated
basis, that portion
,
nIPallY may not underwrite, even on a standby
matter by whom
1V-Rg sold or distributed in the United States (no
being so sold or distributed.)
t
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
301
BOARD OF GOVERNORS
Item No.
OF THE
3
1/30/63
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS orriciAL CORRESPONDENCE
TO THE BOARD
January 301 1963
ziappITIAL (FR)
Mr. Robert N. Hilkert,
Pirst Vice President,
Federal Reserve Bank of Philadelphia,
Philadelphia 1, Pennsylvania.
Dear Mr. Hilkert:
The Board of Governors approves the payment of
841arY to Mr. James P. Giacobello as Examining Officer,
Federal Reserve Bank of Philadelphia, at, the rate of $12,000
Per annum for the period February 1 through December 31,
1963. This is the rate which was fixed by your Board of
Directors
as reported in your letter of January 17.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No.
1/30/63
4
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 301 1963
Board of Directors,
Park National Bank of Pueblo,
Pueblo, Colorado.
G
entlemen:
Pursuant to your request submitted through the
Pe-e]. Reserve Bank of Kansas City, the Board of Governors
,,eting under the provisions of Section 19 of the Federal
IllUerve Act, grants permission to the Park National Bank
°f Pueblo to maintain the same reserves against deposits
48 are required to be maintained by nonreserve city banks,
effective with the first biweekly reserve computation
ellosi beginning after the date of this letter.
Your attention is called to the fact that such
IlerMission is subject to revocation by the Board of Governors.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
Item No. 5
OF THE
1/30/63
FEDERAL RESERVE SYSTEM
WASHINGTON 28, D. C.
ADDRESS OFFICIAL CORRESPONDLNLI.
TO THE BOARD
January 30, 1963
Board of Directors,
Valley Bank of Grand Forks,
Grand Forks, North Dakota.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by Valley Bank of Grand
Forks, Grand Forks, North Dakota, of a branch in the North
Side Industrial and Shopping Area, Grand Forks, North
ilakota, provided the branch is established within 12 months
from the date of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
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 (8-1846),
Bhould be followed.)
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Federal Reserve Bank of St. Louis
304
BOARD OF GOVERNORS
Item No.
OF THE
6
1/30/63
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 30, 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 15,
1963, concerning the application of First State Bank of
LYnwood, Lynwood, California, 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.
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Federal Reserve Bank of St. Louis
Item No.
BOARD OF GOVERNORS
1/30/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 30, 1963
;
111;:d j°3ePh R. Campbell, Vice President,
P41ral Reserve Bank of Philadelphia,
adelphia 1, Pennsylvania.
1)ear' Ivir,
Campbell:
I'lqina„,
This refers to your letter of February 7, 1962, requesting
by the Board on two questions with respect to the issuance
of ti
detepe certificates of deposit, and to your subsequent inquiry
The 'December 24 as to whether the Board had issued such rulings.
eerjstions are whether it is permissible (1) to advertise such
G4ve-4,icates as "savings bonds" or "bank savings bonds", and (2) to
4De tise a rate of return in lxcess of the present maximum rate of
eent.
With respect to the first question, the Board's authority
arli th,sheneral, limited to the definition of time and savings deposits
,T1e/Iti fixing of maximum rates of interest on such deposits. Conse. 1., as long as certificates of deposit meet the requirements of
4 0
Q, the name applied to such deposits is not significant
;4111erZ as the Regulation is concerned. It is recognized that the
ement of deposits as "savings bonds" may be directed toward
Nripe
ion with United States Savings Bonds, and the Treasury Departbatik
ht wish to discourage the use of this term. Because a national
0011,13tjPresented the question, it was referred to the Office of the
No
t41/1 °11er of the Currency, an agency of the Treasury Department.
office
Comptroller's
the
either
from
received
„esPonse
°rth
has been
Nas- 'reasury Department, although informal advice is that the
Department has as yet taken no action regarding this question.
Re
The second question has a bearing upon compliance with
.11at*
-titer,1°n Q, since the bank appears to be stating that it is paying
at a rate in excess of 4 per cent. As you know, when interest
'
I at the maximum Permissible rate and is compounded on a quarterly
QNs '
Ileriorl\as permitted by Regulation Q), the actual return for a given
for example, one year -- will be greater than the amount that
'orllooth,
ol
s'e Paid if the maximum percentage were applied without quarterly
''100Zdtng. For example, interest at 4 per cent on a deposit of
- would amount to $14.00 if not compounded quarterly. However,
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Federal Reserve Bank of St. Louis
7
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Joseph R. Campbell
-2-
1),Y adding the quarterly interest payments to the principal and, in
u payinsi,
, interest on these added amounts, the payment to a deposi40r would total about $4.o8 on a deposit of $100.00. This apparently
the rationale behind the bank's advertising 4.08 per cent interest
A7,!rage on a five year "Bank Savings Bond" if held to maturity.
111"Lchough the bank is actually not paying interest in excess of the
lnurn permitted by the Regulation, it would seem desirable, in fairto all, for the bank to indicate that the offer of interest in an
2unt apparently in excess of the maximum rate permitted by
Q
authorized
by
the
illade possible only by the compounding of interest as
gulation.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
307
Item No.
8
1/30/63
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
.41
the
hatter of
the Application of
Sri%
W/SCONSIN BANKSHARES CORPORATION
for
approval of acquisition
of
c)f • A
merican
Bank
and
Trust
Company, g
ne, Wi
sconsin
kaci
8
•
ORDER DENYING APPLICATION UNDER
BANK HOLDING COMPANY ACT
There has come before the Board of Governors, pursuant to
Li°11 3(0(2) of the
Bank Holding Company Act of 1956 (12 U.S.C. 1842)
sctioti 1,„
444 4(a)(2) of Federal Reserve Regulation Y (12 CFR 222.4(a)(2)),
ell 1113lication h
It cotIsill, for uY First Wisconsin Bankshares Corporation, Milwaukee,
o
or
ra e f the
A
the Board's prior approval of the acquisition of 80 per cent
voting shares of common stock of American Bank and Trust
) Racine,
Wisconsin.
As
required by section 3(b) of the Act, the Board notified
CoN_
'
411118‘,.
10th
Lier of Banks for the State of Wisconsin of the receipt of
th
ati°11
and requested his views.
The Commissioner replied that
ri
441.
"erPose no objection to the Board granting its approval to the
tcation.
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Federal Reserve Bank of St. Louis
308
-2-
A Notice of Receipt of Application was published in the
Pederal Re
gister on June 27, 1962 (27 F.R. 6057), which provided an opporNrlitYfor the filing of comments and views regarding the proposed
44148ition,
and the time for filing such comments and views has expired
4"411 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
Stetezent
of this date, that the said application be and hereby is denied.
Dated at Washington, D. C., this 31st day of January, 1963.
By order of the Board of Governors.
Voting for this action:
Unanimous, with all members present.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(stAL)
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Federal Reserve Bank of St. Louis
Item No.
9
1/30/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION OF FIRST WISCONSIN BANKSHARES CORPORATION,
0, MILWAUKEE,
WISCONSIN, FOR PRIOR APPROVAL OF ACQUISITION
SHARES OF AMERICAN BANK AND TRUST COMPANY, RACINE, WISCONSIN
STATEMENT
First Wisconsin Bankshares Corporation ("Bankshares"), has
1)1311ed to the Board of Governors, under the Bank Holding Company Act of
1956 ("the
Act"), for permission to acquire 80 per cent or more of the
30,000
outstanding
voting shares of the common stock of American Bank
Trus
Company, Racine, Wisconsin ("American").
thQ toard
In determining whether to approve the proposed acquisition,
tak
is required by section 3(c) of the Act (12 U.S.C. 1842) to
into
consideration the following factors:
(1) the financial history
kid coridi
-tion of the proposed holding company and the banks concerned;
thei'
t Prospects; (3) the character of their management; (4) the
nien- _
needs, and welfare of the communities and the area concerned;
411(1 (5) a
Ilgether the effect of such acquisition would be to expand the
(2)
extent of
Bankshares' system beyond limits consistent with adequate
sc)tind banking,
tio
the
the public interest, and the preservation of competi-
field of banking.
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Federal Reserve Bank of St. Louis
in
-2General background. - Racine, with a population of almost 90,000,
is the trading center of Racine County and a part of the industrial complex
etending from Milwaukee to Chicago along the shores of Lake Michigan.
111812e, American is the second bank in Racine and the eighteenth in the
States with $33.9 million in deposits,11 about half those of its chief
"n1Petit°r, First National Bank and Trust Company, which has $63 million
dePosits, and ranks fifth among banks in the State.
It is a key fact to be remembered in scrutinizing banking in
Wise° .
"ln that the top banks decline very sharply in order of size.
41'st u
-isconsin National Bank, Milwaukee ("First Wisconsin"), the leading
bank in
Applicant's system, has $682.5 million in deposits. The second
barlk
4 size, Marshall and Ilsley Bank, of Milwaukee, has $261.2 million,
4" the third, Ma,
inr. National Exchange Bank, also of Milwaukee, has
million.
silbsicr1-a
The fourth is a $90 million bank in Madison which is a
rY of the Applicant.
Each of the three largest banks is the
d°"nant institution in a bank holding company system.
h°P°eed
shtems
Disregarding
acquisitions, total deposits of the respective holding company
are:
Bankshares - $875 million, Marshall and Ilsley Bank Stock
Corporation
C°I'Pc)ati°n ("Bank Stock") - $336 million, and the Marine
eillkrine).
$320
million.
Bankshares now has 3.3 per cent of the offices
44(1 18-3 Per cent of the total deposits in the State, and Bank Stock and
11441-ne have .8
and 7.0 per cent, and 1.6 and 6.7 per cent, respectively.
Se otherwise indicated, deposit figures herein stated are
30, 1962.
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Federal Reserve Bank of St. Louis
-3-
In eru. .
mv ition, there are three other holding companies having subsidiary
bank$
1n Wisconsin.
All existing holding companies, taken together, now
e°11tr°1 6.4 per cent of the banking offices and 33.7 per cent of the
total deposits
in the State.
Concurrently with the application discussed in this Statement,
the—
Lu were
before the Board applications by Bankshares to acquire a
Coritrnil
Marine
in6 interest in Merchants & Savings Bank, Janesville, and by
to acquire a controlling interest in Beloit State Bank.
The
Niarr
-ment of Justice filed a Statement in opposition in respect to the
hese„
application, as it also did in regard to the applications in the
Jatle .
avIlle and Beloit cases. Applicant filed a Rebuttal to the Statement,
kidt
he Board has considered all these documents in reaching its decision.
.!t.Pking_Sactors. - The financial history, condition, prospects,
atid
44nagement of both Bankshares and American are satisfactory.
Applicant was organized as Wisconsin Bankshares Corporation in
1929 a
4d adopted its present name in 1960.
Bankshares' system includes
sev"arlka and one trust company, a reduction from 43 banks and three
trust companies
in 1930. Bankshares states that none of its subsidiary
114t1" haa failed, and that no depositor of any of its subsidiary banks
448
suffered a deposit loss or been subjected to deferred payment.
As
Of
Nce
-raver 30, 1961, 93.9 per cent of its assets consisted of its
44/eat e
-11t in capital stock of the subsidiary banks and trust company.
1114e b
4--3 include, in addition to First Wisconsin, Southgate National
Milwaukee, with deposits of $5.3 million, Mayfair National Bank,
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Federal Reserve Bank of St. Louis
-4-
Wauwatosa, with deposits of $4.2 million, First National Bank, Fond du
14/e) with deposits of $30.7 million, First National Bank of Madison, with
clePosits of $90.8 million, Union National Bank, Eau Claire, with deposits
"25.8 million, and First National Bank, Oshkosh, with deposits of
$33.7 ,
nullion. The deposits of the First Wisconsin Trust Company,
hiiva
ukee, were $2.3 million.
Earlksh
Their condition and the condition of
ares itself are satisfactory, and on the basis of their size and
1°tat*1(3n
and their record of past operations, the Board considers Bankshares
1118Pects to be favorable.
Its management is highly competent, and if-
(41ductS a
management training program jointly with First Wisconsin for
Inclre than 30 young college graduates with both general and
Profe
"tonal technical training have been hired within the last three
Years,
Trades
American was organized in 1916 under the name of American
kw s
avings Bank, and assumed its present name in 1932. In 1933, The
kacio
became,
e City Bank merged with it, and the sole office of that bank
44d
one of the
still is, the only branch of American. Racine County is
41°st
--iustrialized counties in Wisconsin, and it has experienced a
Nor°us economic growth in recent years.
4te (If
In this favorable climate, the
growth of American, as measured by IPC deposits,1/ slightly
t/teeecled that
Company,
of its larger rival, First National Bank and Trust
lurirlg the
years from 1948 through 1961.
Prospects for its continued
sits of individuals, partnerships, and corporations.
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Federal Reserve Bank of St. Louis
Cp.
-5-
gt°14th are favorable, whether or not it joins the Bankshares
].Can
system.
has sold no stock since it was organized in 1916, and while
APPlicant states it would furnish additional capital if the proposed
acquisition is approved, the Board is of the opinion that any capital
414ease which the bank believed necessary could be effected directly by
414Tican as an independent bank.
Management of American is satisfactory.
However, Applicant
"Iltends that the bank's executive management is not supported by sufficient
t'ePlacements to fill the gaps which will appear, in the relatively near
ftlture, as key
executives reach normal retirement age.
Access to the
11%1 ctf trained management provided by the joint program of First
W'48-r
°"in and Bankshares, it is urged, will solve a serious existing
TI*La"ment problem.
The Board agrees that entering into Applicant's
Nte,Da
would simplify American's recruiting problem, and concludes that
tili8 factor lends some small weight for approval of the application.
}love
vet, to give critical, or even considerable, weight to this advantage
Quid b
latoe,
e to suggest that any $33 million bank located in a relatively
attractive community, easily accessible to two of the biggest
eitie8 in the nation, may find it so difficult to recruit management
iluccession that resort to a pool recruited by a holding company provides
the °41Y solution.
independent
If this were the case, the day of the
totti
41tY-owned and managed bank would indeed be over.
Other advantages listed by Bankshares in support of its
4Ppli
eati°n, by way of increased services which American would render
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Federal Reserve Bank of St. Louis
P-4 4
-648Part of the holding company system, would, it is urged, tend to improve
the
Prospects of the bauk.
However, the impact of these advantages,
r.L.ailt argues, would be felt more under the fourth factor, and they
exed
iscussed below.
Convenience and need
others
of communities. - While customers of
c
°I. Applicant's banks might benefit to some degree from access
4144 affiliated tank in Racine, the chief effect of the acquisition
'4°1114
' of course, be felt in the Racine area.
Reduced to essentials,
the thrust
of Applicant's argument is that this area is heavily
irlduatr
ialized and is becoming more so, that no banks in the area are
ecluiPPed to offer the services which local firms of a certain size
relui_
) and that, as a result, the growing businesses tend to bank,
. te're and more, outside Racine.
Ilankshares,
If American were affiliated with
it is argued, many of the specialized facilities which
these firms
need could be offered to them, and a substantial portion of
their b
uainess might be recaptured or retained in the area.
There are 37 Racine manufacturers who employ 100 or more
Persons
Five of these employ over 1,000, six from 500 to 800,
44d eight from 300 to 475.
Many of the larger firms serve a
114ti(Inal market, and local banking facilities are not sufficient
Ic't their needs.
some
Although some of them may be willing to do
131rLking locall y
_, it seems doubtful that much of their business
be
tat
concentrated in Racine.
Indeed, although Applicant
that Racine (and Wisconsin) banks should enjoy a "fair
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Federal Reserve Bank of St. Louis
9-4
-7-
silare" of the banking done by large businesses located in Racine, it appears
(1°Ikff
---111 that much of this type of banking can be held in or brought back
t° Raci ne.
The contention that permitting affiliation of American with
8ankahares would make it possible to keep in Racine banking business which
flow
Of
f
lows to the money centers seems to be directed principally at the business
me
dium-size local firms as they grow toward the size where they will
tend to look
for outside banking connections.
The first and most
Pottant advantage American could offer as a member of the Bankshares
sYstein
would be access to an increased loan limit. American's lending
limit ,
ls $270 thousand, and that of its larger competitor is $264
th0usand.
The four other banks in Racine are relatively small, and the
e°Mbined
lending limit of all six banks is less than $1 million.
The
111(1trig 1 intit of the Bankshares system is over $5 million, and since
APPlicant states that the loan ratios of the system banks were lower
that
for all federally insured banks, it is possible that larger loans
be
CI4141
made available in Racine without taking loanable funds away
frora
maller local borrowers elsewhere.
This larger lending limit would not, of course, be American's
to c°1.1
1-1d.
Over-limit loans by a holding company bank, as by any bank,
be TnE:de
only through participations.
t° so Participate.
tri r
The other banks must be willing
On the other hand, participations might be arranged
quicklY and more easily through the system than through non-affiliated
sPondent
banks.
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Federal Reserve Bank of St. Louis
316
-8-
Much can validly be said on both sides of the question, in a
discu .
ssion of the relative merits of participations within a holding
"'IlY system as compared with participations through non-affiliated
1)4s. The fact remains that, on the record, American has made very
little
use of the latter technique, preferring, evidently, to keep as
r4lch as it could of the business of its local clients, rather than
tisk 1°sing them to big-city correspondents to whom it might introduce
t.hem.
Even if participating larger loans with correspondent banks is
tiot
,
ricable, as Applicant contends it is not, there is no evidence that
needs are going unserved in the area.
While American would
14"°tibted1 Y prefer to retain its accounts as long as possible, the custoniers themselves are not greatly disadvantaged in having to go to
Chicago, or New York for larger loans; hence, the slight added
e°11venience of obtaining the funds at home adds little ueight under the
Nirth
factor for approval of the application.
As an added argument,
APPlicant suggests that, if more of the larger loans were made locally,
"clitional deposits would remain in the community and would benefit local
1418iness.
Predc
The point to consider, however, is whether these large concerns
minantly depositors or borrowers, in their banking relations.
if th ey
are predominantly credit users, the community is better off
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Federal Reserve Bank of St. Louis
-9eeQacmlically if the credit is supplied from outside markets, because this
means that
locally generated deposit resources remain available to other
looni
users to a greater extent than would be the case if the large
e°111cerns were absorbing more of those resources.
On the other hand, if
the concerns are primarily depositors, there are no legal restrictions
141lich would limit the amount of their deposits in an independent local
batk.
Aside from enlarged credit facilities, Applicant suggests that,
4s
a
member of the Bankshares system, American would be in a position
to fu
tnlah a variety of specialized services to the Racine business
coullaw
nitY, which it does not now enjoy. Among these are advice on
ttt
national banking transactions, advice on industrial development,
fac
ities for specialized types of lending, and advice and assistance
illhandling larger and more complex trust accounts than American can now
haridle.
Emphasis has been placed on the international banking aspect.
414qicant
states that, while larger Racine firms sell abroad as a matter
Of co
tit", many of the smaller firms, which may actually be ready for
fore4
'all markets, may not even recognize the opportunity, or understand
the 4vailability of banking counsel in this field. According to Applicant,
tIlese tirms are too small to be visited by specialists from international
f4Pettnents of big city banks, and they remain unserved.
If the
441i-cation were approved, First Wisconsin would presumably educate and
uP American's personnel in offering advice of this kind.
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Federal Reserve Bank of St. Louis
However,
-10it se
erns doubtful that any business in Racine with foreign trade potential
14°14d
ml8s an opportunity to increase its business because a local bank
e°111dn°t give guidance on foreign banking.
Milwaukee is only 25 miles,
and Chi
not seem reasonable
cago 67 miles, distant from Racine, and it does
'
bo as
sume that the larger banks in these cities would not give service
to Ra
eine firms which requested advice and counsel in these matters.
established
Similarly, an industrial development committee was
it
'
'
- 111e in 1961, under the leadership of a vice-president of American.
.
A.
'rican were a member of Bankshares' system, Applicant states)the
established industrial development department of First Wisconsin
4P and advise this committee and lend prestige to American's
"f°rts.
Since American is already actively participating in the com-
kitte,,
- 8 work, however, the Board considers that any added assistance
that .
might be lent by the larger Milwaukee bank is not of significant
exght *
-oward approval of the present application.
states
In a third category, specialized lending, Bankshares
that
-merican has refused numerous loan requests in the past because it
data or legal counsel
lending officers or analytical personnel and
With a
requests have ranged
PPropriate background and experience. These
ftott, 1
subdivisions
egally complex financial arrangements with political
to
ri8ecured credit requests of small and medium-sized businesses where
.
44dIted
statements were unavailable.
Applicant states that its extensive
4tItz,
of
alized credit information is made available to all banking offices
tts
provided American
members, and that additional assistance would be
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Federal Reserve Bank of St. Louis
Nth r r,
-sPect to credit analysis and collation and preservation of credit
,
' and in other ways, which would tend to overcome these handicops.
vu3h furnishing this data and expert assistence might to some extent
4I've th e convenience of the Racine community and thus weigh slightly in
favor
of
are
approval, there is no evidence that needs id th.is respect
Ceitig unmet in the community, and the veiLhc accorded this consideration
atIttot be
very substantial.
American hired a full-time trust officer in 1960.
Prior to
that t4'me, the
trust department had been operated primarily as a convenience Ifor the bank's commercial customers.
The application states
that, in a
number of instances, trust business has gone outside Racine
be
Inse local facilities were inadequate, and that this number would
d by American's affiliation with Applicant.
However, Applicant
elicedes that a number of large accounts would probably always be placed
°4t"-de
Racine.
American's department appears to have been growing
business
tatisfactorily, and between American and First National, trust
e'Ea Mature
will probably
likely to be required by the local community
Elde
quately served without the help Applicant could give through the
la
t'let.
and more highly developed trust facilities of First Uisconsin.
community are
Essentially, then, the banking needs of the
s erved at present, but Applicant argues that Racine and Wisconsin
1)411k8
,
are entitled to a "fair share" of banldng business generated in
'and that, if the independent local banks cannot attract this
41are,
then the facilities of a holding company and of its more powerful
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Federal Reserve Bank of St. Louis
320
-12T441er banks should be brought into the community to capture and hold
14111it
rightfully belongs there.
Had Congress intended such regional
8Plitting up of the national banking market to be a basis for approving
be*
'nolding company expansion, it would have so stated. It did not so
dil'ett the
Board.
This is not to say that the banks in a community should not
be
qt.
°ng and supple enough to serve the banking needs of that community.
14heze banking
under the
needs were going unmet, and where considerations
tettai .
acquisitions, then the
rang factors were not adverse to holding company
hoard h
as granted its approval to those acquisitions.
Considerations under the fourth factor, then, lend some but
8
ight
weight for approval.
_Competitive effect. - The United States Court of Appeals for
the
Ighth Circuit recently held that, under the fifth factor, the Board
vlew "the structure of the entire industry of banking" in a relevant
and not the holding company and the bank concerned alone. To do
411ert,
18e, the Court held, "would be to force the Board to act more or
"
less .
ln a vacuum. Realities must be considered."—
3
Holding companies now control roughly a third of the deposits
onsin banks, and of this amount, Bankshares controls more than
1141
here important, the development pattern of the three Milwaukee448
"hid;
°---ng companies, Applicant, Marine, and Bank Stock, has involved
./ N
(etticItjhliest Bancorporation v. Board of Governors, 303 F. 2d 832 at 842
lr. 1962).
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Federal Reserve Bank of St. Louis
121
-13-
(in the case of Applicant, selectively retaining) dominant or
45
A
MOrfailant
banks in the more densely populated areas of the State.
has offices in three of the State's Standard Statistical Metropolitan
Areas —.
(Milwaukee, Madison, and Green Bay); Bank Stock has offices in the
41410 ,
gll ee Metropolitan Area; and if Applicaat is permitted to acquire
Akeri,
-an, it would have offices in the Milwaukee, Madison, and Racine
Of
ec4ltan Areas and in three (Eau Claire, Fond du Lac, and Oshkosh)
the stateis
twelve cities having lc.:60 populations in excess of 25,000
have been
%tell are not located within the four metropolitan areas which
ketItioned.
These four metropolitan areas and three cities contained in
tile aggregate
45.5 per cent of the State's 1960 population and, as of
44 30, 1962, 20.5 per cent of all banking offices in the State.
°f
AS
that date, banks in those areas and cities held 53.4 per cent of the
'Posits of
all banks in the State, and the three Milwaukee-based holding
Nantes
held 59.2 per cent of that 53.4 per cent; the acquisition of
ketican by Applicant would increase the proportion to 60.6 per cent.
Bankshares is a leading factor in this increasing tendency
tovard holdins
bankcompany dominance of the larger and more profitable
14 1114tkets.
t%Ity_ tirst,
Five Bankshares banks rank first, fourth, nineteenth,
and twenty-ninth in the State.
More significant, in
l'it414"ee) Eau Claire, Fond du Lac, Oshkosh, and Madison, a Bankshares
batlk
is
largest in the city and in the respective county. True, the
teeqd does not
suggest that the system has been at all predatory in
ita
relati
-ons with the remaining, smaller banks in these areas. Deposits
of scl
iler banks in these areas have shown greater relative growth during
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Federal Reserve Bank of St. Louis
-14the
last
fact
decade than have deposits of holding company banks.
But this
could as well he due to public. preference for local banks, rather
thart to lack
of competitive vigor.
Or it might be due, in part at least,
tcla tendency on the part of larger banks to concentrate on serving the
lart,
5e, and more profitable, accounts and a willingness to leave small
customers to smaller banks.
The existence of a tendency to concentrate activity in larger
batiks,
in the denser, more profitable markets, is borne out by the fact
that r)f 19 banks sold by Applicant between 1934 and 1944, 11 had approxie
"Posits of $1 million, and 8 more had deposits of less than $4.5
t'1111.i°11*
Applicant's two remaining small banks are both recently
eatablished, in rapidly growing sections of the Milwaukee area.
As the
)4tclilldicated in its Statement in connection with the denial of the
aPplication of Morgan New York State Corporation to become a bank holding
affiliates
c°41P4nY.A/ where one or more of the larger banks in an area
tth
a holding company, the smaller banks are left with a longer uphill
disin their
i efforts to catch up - their existing competitive
4th'antage is
increased.
not be
The resulting competitive situation may
"b4laticed unduly, at least as yet, but bolstering the position of the
k8
hia ba,
necessarily has that tendency.
Any tendency to extend the
81:th re of
therefore, be
Bankshares' influence at the same level must,
1114/ed
with particular caution.
62
ederal Reserve Bulletin 567.
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Federal Reserve Bank of St. Louis
99‘
,
41.'
-15-
to
Turning from the general competitive picture in the State
that .la
the Racine area, it appears that neither the deposits and loans
nkshares
subsidiaries, other than First Wisconsin, which originate
ft°111 Racine, nor the deposits and loans of American, which originate
the five counties where Bankshares' present subsidiaries are located,
4e
significant.
As of March 6, 1962, First Wisconsin had deposit relationships
11411 14 large industrial concerns located in Racine whose aggregate
41)°81t8 Were over $4 million.
144ititained
These deposits represented balances
by
y the firms in connection with large loans, aggregating over
million,
made to them by First Wisconsin, and Applicant stated that
illeach case the credit requirements of the firm were greater than the
e°141411.A
loan limit of all Racine banks.
Moreover, First Wisconsin was
one of the large banks located in various sections of the country
ttb 1,71,
--J-ch
these concerns had banking relationships.
While American
4ght co
some
nceivably have been able to participate, in a small way, in
q the
First Wisconsin.
''°ans, it was hardly an effective competitor of
tte
g the Bankshares system would, if anything, increase the proportion
84°1 loans which might, from time to time, fall to the share of
A.N rican.
The impact of approval on competition in Racine would be felt,
Elther, by the remaining independent local banks, chiefly in respect to
firms.
41e4abilitY to attract and hold accounts of small to medium-size
If it
13
true that the small individual depositor prefers a locally
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Federal Reserve Bank of St. Louis
`24
-16%41ed bank,
he would lose one such alternative source of banking facilities
tht°118h approval, but five would remain, four of them relatively small.
Parine
ts & Merchants Bank has deposits of $4.8 million, North Side Bank
q45.7 million, West Racine Bank of $12.2 million, and Bank of Elmwood,
144ith was organized in 1960, of $2.6 million.
As to medium-sized business accounts, on the other hand, the
Pt°Posed affiliation would enable American further to widen the gap
between
%a
the two large and the four smaller Racine banks.
At present,
business customer of one of the smaller banks grots to the size
'ere it Will need larger credit lines and more varied services than that
batqc, or
any group at Racine banks, can provide, it may go outside the
qty
"ut its local business, presumably, remains with and continues to
Nrish its original local bank. If a larger Racine bank, bolstered by
b°41'n„,
c° company affiliation, could meet all of those needs, there could
be
a tendency for all the banking of the firm to be transferred to that
'thus inhibiting the ability of the smaller banks to grow into
NI4ded
b
service institutions and, by sharing in locally generated banking
broad range
s) augment the number competing in the provision of a
services in the Racine market.
ktlaller
Applicant argues that large banks and
banks are intrinsically different species, but it must be
tetlemered that American was once a small bank, and grew to its present
4ize in
the normal course of business life.
In the Board's judgment,
4PProval of
this application would inhibit the development and maintenance
(4 a
VigorouS
competitive atmosphere over the full range of banking
4tvices in
Racine.
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Federal Reserve Bank of St. Louis
-17-
A further consideration as to competition has been urged by
the De
partment
of Justice.
A director of Applicant is also a director
13jEkllerican's larger competitor in Racine, and it has been suggested that,
this
reason, effective competition between the two sizable Racine
would be reduced if American entered 4p1icant's fold.
Since the
ctaN has denied
the application on other grounds, it does not find it
Iteces
earY to pass on the degree to which a link of this kind might
redu •
ce future competition.
Conclusions. - Evaluating the whole picture, it appears that
NIProwl
of this application might produce some small advantages under
the
anagement factor, and to the convenience, although not, apparently,
tc) the
rieeds of the Racine community or area. These advantages are
°k1tvei
°lad, however, in the Board's judgment, by the dangers implicit
tll
the
situation under the competitive factor. Acquisitions by larger
11014
48 companies in the State of the first or second biggest banks in
industrial areas may, if continued, result in more and more
nitieS being dominated by one or another holding company system.
This is
nct to say that the Board would not, in an appropriate case,
441,0I7
e further holding company formations or acquisitions in Wisconsin,. /
htit
with
t does mean that each such application will be scrutinized
ap
ular care as to the effect of an increase in size and extent of
Plicant's
system, and of bank holding companies in the relevant
e
114
!)
he Board's Order and Statement in Matter of the Application of
zancorporation.
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Federal Reserve Bank of St. Louis
;
-18-
tolmmnities
preservation
public welfare and the
and area generally, on the
banki118 competitiml.
factsas contained ia the
On the basis of all the relevant
factors set forth in
tecQrd befo e the Board and in the light of the
it is
underlying purposes of the Act,
i°n 3(c) of the Act and the
th
would not be
hard's judgment that the transaction here proposed
application should
stent with the public intereat and that the
tortsi
therefo
be denied.
r 31, 1963.
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Federal Reserve Bank of St. Louis
•
Item No. 10
1/30/63
UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
--------------the Matter of the Application of
?11137,
ki-SCONSIN BANKSHARES CORPORATION)
"aukee, Wisconsin,
tor
Prior approval of the acquisition
Per cent or more of the voting
tiar,ses of Merchants & Savings Bank,
-"vale, Wisconsin
ORDER DENYING APPLICATION
UNDER BANK HOLDING COMPANY ACT
There has come before the Board of Governors, pursuant to
3(a)(2) of the Bank Holding Company Act of 1956 (12 U.S.C.
142)
(lz
and section 222.)4(a)(2) of Federal Reserve Regulation Y
First Wisconsin
PR 22
2.4(a)(2)), an application on behalf of
tatik
Board's prior
M4res Corporation, Milwaukee, Wisconsin, for the
r
of the voting shares
Iral of the acquisition of 80 per cent or more
mer
chants & Savings Ban'.:, Janesville, Wisconsin.
Act, the Board gave
As required by section 3(b) of the said
-Ce
°f receipt of the application to the Commissioner of Banks of
State of Wisconsin, soliciting his views and recommendation. By
tte
of May 25, 1962, the Commissioner of Banks recommended denial
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-2-
Otthe aPplication.
However, the letter was not received within the
Pell°d of thirty days within which the receipt of such a recommendation
to hold a formal
11°111d/ under the Act, have required the Board
heaj
on the application.
published in the
Notice of Receipt of Application was also
Pe4ral
provided an
Register on April 12, 1962 (27 F.R. 3530), which
"
°131: 1.1nity for submission of comments and views regarding the proposed
Board a
The Department of Justice submitted to the
of the United States in Opposition to the proposed acquisi1°116 The Applicant filed with the Board a Rebuttal to the said
:
tatenlent of the United States.
Following the expiration of the time
proceeding
1-1111C views and comments, the Board ordered a public
r()r th
published in
e oral presentation of views, notice of which was
aderal Register on June 27, 1962 (27 F.R. 6057). In accordance
there
on
the said proceeding was conducted before the Board
411ell
8t 73 1962,
the Board's
IT IS HEREBY ORDMED, for the reasons set forth in
4 t.eplA„
denied.
of this date, that said application be and hereby is
January, 1963.
Dated at Washington, D. C., this 31st day of
BY order of the Board of Governors.
Voting for this action:
Unanimous, with all members present.
(Signed) Merritt Sherman
Eerritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
Item no. al
1/3063
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION OF FIRST WISCONSIN BANKSHARES CORPORATION,
MILTITAUME, WISCONSIN, FOR APPROVAL OF ACQUISITION OF SHARES OF
MERCHANTS & SAVINGS BANK, JANESVILLi3, WISCONSIN
STATEMENT
First Wisconsin Bankshares Corporation ("Bankshares" or
"Ah„,.
vv-Lacant10, lalwaukee, Wisconsin, a registared bank holding company,
has f.
ed an application pursuant to section 3(a)(2) of the Bank Hold111C CoMpany Act of 1956 ("the Act") for the Board's approval of tha
accu. .
sltion of 80 per cent or more of the outstanding voting shares of
ants& Savings Bank ("Merchants"), Janesville, Wisconsin.
Bankshares owns seven banks and one trust company operating
totn1
24 offices in five counties in Wisconsin. As of
1/
30, 1962,— the seven banks and the trust company had total
Of
of approximately $875 million, of which approximately
mialion were held by First Wisconsin National Bank, Milwaukee,
13 Offices.
TWO of the other six banks and the trust company are
ted in Milwaukee County, with one office each and about $12 million
statistics
-Leated.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-rein are as of June 30, 1962, except as otherwise
330
-2.-
total deposits combined.
Lo
The other four banks are located in Fond du
(Fond du Lac County), Eau Claire (Eau Claire County), Madison
thane County), and Oshkosh (Winnebago County).
Merchants, with about $22 million in total deposits, operates
Lt
°n1Y office in Janesville, Rock County, about 71 miles southwest
orMilwaukee.
As stated in the Board's Order, the recommendation of denial
by,
'"e Wisconsin Commissioner of Banks was not received in time to
1111:e mandatory a formal hearing on this application. It is nevertheless
appropriate for the Board to take his views into account. The
gli°11nds of the Commissioner's recommendation were, in part, that in
(Ildlition to controllinz more than 50 per cent of the volume of deposits
in mi,
-1-11aukee the Applicant already controls the "largest and most
cl°171-inant bank" in four other Wisconsin cities and would, by the ac-
c114-sition
barli
Of Merchants, gain control of the "largest and most dominant
in Janesville; that Merchants
currently is well managed, has an adequate reserve for
successor mana7em.nt, and is in a position to adequately
111?et the credit needs of the community in cooperation
with other existing banks in said city";
t1(1 that
stmmary . . . growth and expansion of holding companies
n the State of Wisconsin should be halted if monopoly cf
banking operations is to be avoided, particularly when such
l'owth and expansion involves the acquisition of the dominant
Independent banks in the respective areas where such banks
are located."
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Federal Reserve Bank of St. Louis
331
—3—
section 3(c) of the Act
With respect to this application,
ream,
following factors:
-res the Board to take into consideration the
'
company and the bank
4
(1) financial history and condition of the
their management;
concerned; (2) their prospects, (3) the character of
and the
00 th
e convenience, needs, and welfare of the communities
area
acquisition
Concerned; and (5) whether or not the effect of such
holding company system
1.4)111c1 be to
expand the size or extent of the bank
adequate and sound banking, the
1417O1veci beyond limits consistent with
field of
1111blic interest, and the preservation of competition in the
banking.
financial history
nking Factors. - Consideration of the
B,
am c
discloses nothing that
°Ildition of both Applicant and Merchants
Vo1llA
disapproval. Merchants
-4"u. constitute a reason for either approval or
operated since its
ear to
have been soundly and successfully
°1'Mlization in 1875 without being party to any mergers, reorganizatiolls
in 1922 of a bank that had
'or the like, except for its absorption
ea
to larger banks and
In spite of an asserted loss of business
°'-4t np
31, 1961, saw
4--State banks the ten-year period ended December
4*eh
per cent, and the bank has
4--5t deposits grow by more than 40
Bankshares system
fled well capitalized. At the same time, the
haa
of
its banks and its control
4 sound record in the operation of
adverse effect on the condiants would not be expected to have any
ttcri
of that bank.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
32
1
The past performance of the holding company's banks indicates
falrorable prospects for the system, and there is no reason for supposing
that
affiliation of Merchants with this system would adversely affect
that bank's prospects.
However, on the basis of the bank's past per-
f(311ance, Present situation, and the prospects for the economy of the
aliea served by the bank, its prospects would be favorable without the
1410Posed holding company affiliation.
This latter conclusion takes into account assertions by
APPlicant that Merchants, while strongly and capably managed at present,
lad'
8 sufficient management depth to ensure continuity of quality leaderslitP and
that the bank, on the basis of past experience, anticipates
culty in recruiting and retaining adequate personnel.
There is
)rrie ground for belief that affiliation with Bankshares would facilitate
Pr°17ision for management succession, but it appears that Merchants has
'stently obtained competent ManagementA.n .the past, and the evidence
that.
lt cannot continue to do so is not strong. Consequently, while
con-, ,
-uclerations relative to the management factor may be regarded as
'
I
rable in a slight degree, they do not argue strongly for approval
°rthe
4Pplication.
Convenience, needs, and welfare. - Since the Bankshares
81.1bA4..3
'iary nearest to Merchants is about 11 miles distant in Madison,
bari „
'ounty, and since the addition of Merchants to the system would
11°t Substantially affect the service capacity of the system's banks
illaiv
idually or as a group, consideration of the convenience, needs,
welfaz-e of the communities and area involved is properly focused
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-5°II the area served by Merchants and the effect which its affiliation
Ilith Bankshares would be expected to have on banking service in that
area now and in the future.
The City of Janesville, comprising about 12 square miles with
a Population
of about 35,C00, substantially represents the primary
'
r 111-ce area .?./ of Merchants, whose only office is located in the cityts
PlIncipal commercial district. Janesville is the largest cit. in Rock
Co
t41tY and is a principal industrial and trading center of the County.
Th e
$35
are four other banks in Janesville, with an aggregate of about
•
million in total deposits, the largest of these having about $17 million
48 compared with $22 million for Merchants.
One of the four, the Bank
J'nesville, with a little over $1 million in deposits, was recently
anized by and is now owned by directors and principal stockholders
ofilerchants.
While its size limits its present importance in the local
bank.;
-411g scene, the Bank of Janesville should be regarded more as an
ate than as an independent competitor of Merchants.
Besides the Janesville banks, there are eleven banks in Rock
ecttn
tor, seven of which are believed by Applicant to draw a substantial
of their banking business from Janesville.
Of these seven, four
41'8 in the $1 million to $4 million deposit range, the other three being
tko c
c"mercial banks and one mutual savings bank in Beloit, with about
4Mil1ion, $20 million, and $14 million, respectively, in total deposits.
Thila
'It appears that banking service is being provided to Janesville
he area
from
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
which the bank draws about 75 per cent of its deposits.
334
—6—
the surrounding area in varying degrees by a number of banks. The
4PPlicant asserts, however, that there remain banking needs that the
4triliation of Merchants with Bpnkshares could help fill, and that also,
t4ou,
would
g" improvements in present banking service, such affiliation
be
enefit to the community and the area.
alleges that
With respect to lending services, the Applicant
la
.
outside
ouslnesses with operations in Janesville now turn to
ge
zotiro
and New York,
eS, in particular the financial centers of Chicago
heir credit needs.
It is urged that, through participations with
could make
"''rest other subsidiaries, Merchants, as a subsidiary,
able an effective lending limit of $5 million that would aid in
Ntai„
-4.11g and recovering the loan accounts of large customers. In other
g activities such as installment loans, equipment loans, and inY
tr118t
banking,
financing, and in other fields such as international
technical services,
---Lces, investment portfolio management, and
the A
provide to
'PPlicant urges that the advice and assistance it could
-vs would substantially improve the scope and quality of the
area it serves.
°ffered by Merchants and therefore benefit the
1Pated assistance in the provision of management succession and
ate
4CCeSS
for their indirect
to additional capital are also cited
beNt
leial effect on the bank's service capacity.
arki
access to the experience
Conceding the alleged advantages of
organization that could be afforded
acilities of the holding company
,
1 c) lie_
1"Chants as a member of the Bankshares system, the question is not
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-7..
80 much how a particular bank may improve or expand its services as
whether such improvement or expansicn is indicated for the provision
Or adequate
and convenient banking service to the community and area.
While all the Applicant's presentations of fact and opinion on this
aelpect of the application have been considered, the Board is not convinced that the Janesville area so lacks scope and quality in banking
service as to indicate a need for the step here proposed.
To the extent
service is desired beyond the capacity of the area's banks, the resources
Of
competitive correspondent banking alternatives would seem adequate to
the demand for local service.
The fact that large national industries or business concerns
hs
'lle operations in or near a community does not necessarily mean that
the community must be in a position to satisfy all their banking needs
'even that such apparent convenience is desired by the businesses in
(11
Taestion.
Large industries locate their offices all over the country
even though they are aware that they will be turning directly to the
ritiancial centers for their major credit needs. Geographical proximity
to
sources of adequate credit is not a prime consideration to the
ger business borrowers; moreover, it is not inimical to the welfare
s community in Wisconsin that it is unable to compete on an equal
or '
With New York, Chicago, or even Milwaukee, in the credit service
it can afford to large concerns with local operations.
Nor is it
111411lica1 to the interests of individuals and the smaller local businesses
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-8that their credit needs do not have to compete with those of the
largest concerns in the area.
The extent to which economic growth
14 the Janesville area can be accelerated by better banking and credit
l'acilities depends more on the quality and adequacy of service to the
161ler businesses of the area than to the large businesses with
"
alt
ernatives elsewhere.
Furthermore, any increase the affiliation might effect in
Merchants' ability to service the larger credit accounts locally
11()Iiicl not necessarily mean that the banking resources generated thereby
17'311ld. be wholly retained by Merchants.
In general effect as to such
"coUnts the affiliation would represent at best an improvement in the
ec)rrespondent banking service available in Janesville, and as the other
1144k8 in the system (notably First Wisconsin National Bank in Milwaukee)
1114de their resources and facilities available to Merchants so would they
be
exDected to participate in the benefits of the business thereby
4ttracted to the system. Depending on the policies and practices within
the
sYstem Merchants might fare better in this respect than it would
"411 arm's-length correspondent; nevertheless, only a portion of the
"ess attracted from out of town to Merchants as an affiliate would
l'eT resent increased economic benefit to Janesville.
At that, for the
11111°0ses of the Act less importance would attach to such economic benefit
th
" vould attach if the area's economy were not prospering.
For the above reasons, the Board does not believe that a
etre
4g case for approval has been presented under the fourth factor.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
. $•"1
fr)."
-974ffect on adequate and sound banking, the public interest,
"banking competition. - For the most part, the information on distllblition of banking resources and offices in Wisconsin does not, on
iterace, Present a picture of a situation that is now manifestly hostile
to he
competition or that would be substantially altered in that
direction by the proposed acquisition.
Nor does it appear that the
Prioposecl acquisition would so extend the holding company system as to
beineonsistent with adequate and sound banking.
The situation in the
Pertinent markets of the State is such, however, that if the proposed
4egill8ition would have a tendency contrary to the statutory aim of
kleserving banking competition, such fact must be viewed adversely
though the acquisition's direct effects might be slight.
The nearest 13anksharest subsidiary to Merchants is in
liadtson
) 42 miles distant, and Milwaukee, where First Wisconsin
1 Is located, is 71 miles away. Thus, while it appears that
'
the
latter bank, as the largest bank in Wisconsin, draws some kinds of
competieS8 from a State-wide market, the elimination of present
t4t b
acetweeh Merchants and Bankshares' subsidiaries by the proposed
1114iti,„ .
-4' is not a significant consideration.
As regards concentration of banking resources, consideration
4.
1.,0 b
t11144. e given to the position of the Bankshares system in the markets
i+
-- operates, to the position of Merchants in its market, and
t° the
Probable effect of the proposed acquisition on these positions.
ectle $875 million of deposits, the Bankshares banks comprise the
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
.10amount representing
largest banking organization in the State, that
Of the $875 million
abQut 18 per cent of the total for the State.
rilere than
Bank,
75 per cent is held by First Wisconsin National
the largest in the
ililwaukee, the "keystone" bank of the system and
State.
cent of the total
That bank's deposits represent over 40 per
Posits of banks in Milwaukee County.
In each of the other four
subsidiaries, their deposits represent
eeunties in which Bankshares has
for all banks
l'roirl about 27 per cent to about 45 per cent of the totals
ln each county.
necessarily indicate
It cannot be said that these figures
banks in
an undue competitive advantage on the part of Bankshares'
their markets, particularly in view of the generally lower rates of
other banks in the same
/1°.1"Ith of Bankshares' banks as compared with
system's present subsideas. The fact remains, howeve-vi, that the
41
'
organization in the State,
ies not only comprise the largest banking
ial
'
their respective counties.
but also are individually the largest banks in
Janesville, and in the County
Merchants is the largest bank in
Merchants' $22 million
18 second only to Beloit State Brnk, Beloit.
total deposits of
°t* total deposits represent about 39 per cent of the
offer considerable
all banks in Janesville. Other banks in the area
advantage not
e°111Petiti0n, but Merchants' size gives it a competitive
banks in the
s3tilY in serving credit needs too large for the other
business - both that
Janesville area but also in drawing other banking
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-11to the large crdit accounts and other business not so related -
relate
all of which could be handled by the other banks.
Since it appears,
apart from
ship
questions of convenience, needs, and welfare, that member
thf;
tive capacity
'Jankshares system would increase Merchants' effec
to sil
PP-LY business credit and serve specialized business needs, to the
exten
t such added capacity were utilized the affiliation would set
lier„
'larits further apart as the bank for business customers in Janesville
alict thus
expand its potential for dominance.
The acquisition would
other
thils tend to
restrict the range of opportunities within which
jatles •
ss of
banks could effectively compete for the banking busine
the
J°41.1ssville area.
If Merchants were thus enabled to pre-empt an even greater
Bhare
Of Janesvillefs banking business than it now has without having
to re,
the similar
'Y. on the success of its direct competitive efforts,
e:NT
ts of the other banks would be in part negated and the future
etwt4
and development of those banks would be further inhibited.
e and thereby
turn, would dull their very incentive to compet
a en
'
the vigor of banking competition in the area.
void in
As discussed previously, there seems to be no such
ban,.
that the imp3ct of the
cl-ng service required in Janesville
'
C1111 Si + •
-.Ion
te major changes
of Nerchants by Bankshares would work immedia
th,
- area's competitive picture, but it does appear to the Board that
s1111
effects as would result would be contrary to the public's interest
41 the
Preservation of competition.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
:140
-12The addition of Merchants to the Bankshares system could
also
be
regarded as contributing to the
protection of First Wisconsin National
". In its position as the leading bank in a State financial
center.
"Iscussed in connection with
the fourth factor, the acquisition
'rerlants would not necessarily result in a substantial shift of
the
.
'king business of Janesville concerns to the Bankshares'
banks;
bt t
he affiliation of the
largest bank in the State with the largest
ln a fifth area of the State outside
Milwaukee would tend contrary
te fi
'exibility and vigor of competition in the broader
commercial and
` rial market served by Milwaukee banks.
'
)
Conclusion. - The declared aims and desires of the parties to
Pric3Pcssal sur.h as that
before the Board are not to be disregarddd.
11011kiver,
even granting full force to the assertions of the proponents
"..° the
benefits that would flow to both the bank and the holding
e°1T43arlY from
the affiliation, they do not add up to the degree of public
bllerit
which would make it consistent with the terms and purposes of
e Act
to permit the absorption of a strong
and vigorous independent
b411t, the
largest in its own area, by the largest banking organization
14 the
State. The responsibility imposed on the Board by Congress to
trairl the.
of banking resources through the holding company
grgaticri
(litlee is not limited to
situations where immediate adverse effects
trtr
be fo
reseen, but extends also to those where already existing
Netitiady
,
ge would be increased without foreseeable compensating
to the public.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
light of
Accordingly, viewing the relevant facts in the
the ,
sec4.eneral purposes of the Act and the factors enumerated in
proposed acquisition
'4°11 3(c) it is the judgment of the Board that the
VolLid
not be consistent with the statutory objectives and the public
ter ,
esb and that the application should be denied.
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Federal Reserve Bank of St. Louis
341:
Item No. 12
1/30/63
UNTIED STATES OF AMERICA.
SYSTEM
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE
WA3HLIGT014, D. C.
F
III the Matter of the Application of
T!IE PIARIM CORPORATION,
4014aukeel Wisconsin,
DOCKET NO. BHC-65
t
ri°
,0 Prior approval of the acquisition
80 Per cent or more of the voting
:
'
13 4eS of The Beloit State Bank,
e.Loit, Wisconsin.
Or.DO, DEllraiG APPLICATION
UNDER BAN:: HOLDING COITANY ACT
to
There has come before the Board of Governors, pursuant
section
alld
U.S.C. 1842)
3(a)(2) of the Bank Holding Company Act of 1956 (12
section 222.4(a)(2) of Federal Reserve Regulation
y (12
CFR 222•4
Milwaukee,
an application on behalf of The Marine Corporation,
Ill consin, for the Board's prior approval of the acquisition of 80 per
Bank, Beloit,
eelat or
more of the voting shares of The Beloit State
the Board gave
As required by section 3(b) of the said Act,
otiee of
Commissioner of Banks for
receipt of the application to the
application was also
the State
of Wisconsin. Notice of receipt of the
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Plablished in the Federal Register on June 201 1962 (27 F.R. 5828),
afording opportunity for submission of comments and views regarding
the proposed acquisition.
Within 30 days after having been notified of the Boardts
receipt of the application, the Commissioner of Banks for the State
that
"-sconsin advised the Board in writing of his recommendation
the aPplication be disapproved. In such circumstances, the Board is
l'equired by section 3(h) of the Act to order a hearing. Accordingly,
the
the
-00
d issued an Order for Public Hearing, which was published in
Federal Register on July 21, 1962 (27 F.R. 6958), and a hearing
Ilas held before a duly selected Hearing Examiner on August 14 and
15
application
3 1962, at which testimony and exhibits bearing on the
were
received.
Fact
Applicant has filed a Brief and Proposed Findings of
and. C
filed with the
onclusions of Law, and the Hearing Examiner has
approval of the
-4.u. a Report and Recommended Decision recommending
aRaication. In addition, the United States Department of Justice
has ,
Recommended Decision
submitted Objections to Hearing Examiner's
he Applicant has filed a Reply to Department of Justice
Neotionse
Board in
Having considered all matters properly before the
thie Proceeding,
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-3forth in the
IT IS HEREBY ORDERED, for the reasons set
and
81)4Tdis Statement of this date, that the said application be
41037 is denied.
31st day of January, 1963.
Dated at Washington, D. C., this
By order of the Board of Governors.
Hartin, and
Voting for this action: Chairman
rtson, Shepardson,
Governors Balderston, Mills, Robe
and Mitchell.
King.
Voting against this action: Governor
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(szkt)
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
345
Item No. 13
1/30/63
BOARD OF GOVLIINORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION OF THE HARINE CORPORATION, MILWAUKEE, W1SCON IN,
FOR APPROVAL OF ACQUISITION OF SNARES OF
THE BELOIT STATE BANK, BELOIT, alscomsim
STATEIENT
The Marne Corporation ("Applicant"), 1.alwaukee, Wisconsin,
ba'r,1
holding company, has applied, pursuant to section 3(a)(2) of
the
“14 Holding Company Act of 1956 ("the Act"), for the Board's
p o
aPPro-val of the acquisition of Co per cent or more of the voting
°f The Beloit State Bank ("Beloit State" or "Bank"), Beloit,
Dackground,
the filing of thc application and
llant to requirement of the Act, views on the application
were reCI 0f the Commissioner of Banks for the State of aisconsin. Notice
t e
celPt of the application was also transmitted to the United States
-ent of Justice and was
published 4n the Federal Register on
h„e 20
c
$ 1962 (27 F.R. 5828).
BY letter dated July 13, 1962, the Commissioner recommended
th
(),7'.rd that the application be
disapproved.
This recommendation
within 30 days of the Board's notice to the Commissioner of
f the application and, therefore, as
required by section 3(b) of
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Federal Reserve Bank of St. Louis
-2the
Act,
to
°DI/Renee on August 14, 1962. Applicant and the Commissioner were
dire"4.1
Ilas
a public hearing
the Board, by Order dated July 18, 1962, scheduled
and notice of the hearing
notified, as required by the statute,
1962 (27 F.R. 6958).
Published in the Federal Register on July 21,
August 14, 1962,
The hearing was held in Chicago, Illinois, on
kid i
ner
n Beloit, Wisconsin, on August 15, 1962, before Hearing Exami
Choi.
se by the United
W. Schneider, who was selected for such purpo
state
11 of the AdminisCivil Service Commission pursuant to section
- e Procedure Act (5 U.S.C. 1010).
Witnesses called and examined by
41Micant
counsel for the Board,
were also subjected to examination by
41.4 exhibits were introduced on behalf of the Applicant and of the Board.
l'itnesses opposing the application appeared at the hearing, although
the
disapproval and a Statement
etter of the Commissioner recommending
°tthe
Department of Justice,
United States in Opposition, filed by the
e
received in evidence.
filed a Brief and Proposed
Subsequent to the hearing, Applicant
1962, the Hearing
'nes of Fact and Conclusions of Law. On November 9,
4artlir,
with the Board,
er filed his Report and Recommended Decision
'
1 ecorarn
,
Thereafter, the Department of
ending approval of the application.
mended Decision,
e submitted Objections to Hearing Examiner's Recom
444 the
Justice Objections.
Applicant filed a Reply to Department of
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Federal Reserve Bank of St. Louis
-3On the basis of the factual record made at the hearing,
including the Hearing Examinerts report and the pleadings described
above
presenting argument based upon the heTring record, the matter is
ri014before the Board for decision.
Views and recommendation of supervisory authority. - As noted,
the
C ommissioner of Banks for the State of Wisconsin has recommended
cli84PProval of the application. His letter to the Board containing
thi8 recommendation stated in part that II
• . the major bank holding companies of Wisconsin
are engaged in a struggle for control of our dominant
independent banks and, unless stopped at this point,
will ultimately lead to monopoly control of banking in
the State of Wisconsin."
Statutory factors. - Section 3(c) of the Act requires the Board
,
to
"Ke into consideration the following five factors: (1) the financial
hi t
°rY and condition of the holding company and bank concerned; (2) their
Prop
'Peots; (3) the character of their management; (4) the convenience,
liee48, and welfare of the communities and the area concerned; and
(5)
Whether the effect of the acquisition would be to expand the size or
tent
of the bank holding company system involved beyond limits consis-
terlt•
Wlth adequate and sound banking, the public interest, and the preserIla"tio,,
of competition in the field of banking.
Financial history and condition, - Applicant began operations
4a
a
bank holding company on December 31, 1958, and at the present time
'41'tt.
°--s 10 banks operating in the State of Wisconsin.
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Federal Reserve Bank of St. Louis
These banks,
-4tctether with their deposits as of March 26, 1962,1/ are as follows:
114114e National Exchange Bank, Milwaukee ($173 million); Wisconsin
14allns Bank, Milwaukee ($32 million); Security State Bank, Madison
($21 Mi111on);2/ National Manufacturers Bank of Neenah ($18 million);
l'ecl°11ss Trust and Savings Bank, Green Bay ($17 million); Capitol Marine
84k, Milwaukee ($15 million); Cudahy Marine Bank, Cudahy (`:;14 million);
th Milwaukee Marine Bank, South Milwaukee ($9.3 million); Waukesha
C(un tY'
l
Marine Bank, Pewaukee ($9.2 million); and Oak Creek Marine Nationa
-‘3 Oak Creek ($1.3 million). In addition, the Board has given its
4PArol,
'al to Applicant's acquisition of Waukesha Marine National Bank,
-'esha (a new bank, not yet open). In terms of total deposits, Applieallt •
ls the third largest of the holding companies headquartered in the
State
fifteenth largest
Wisconsin, and (as of December 31, 1961) the
the
United States.
stocks of its
Since Applicant's principal assets are the
principal factor
larY banks, the condition of those banks is the
beari
ng on the financial condition of Applicant.
Total deposits and
and
- accounts of Applicant's subsidiary banks are $308 million
$29 raj.
available information
lion, respectively, and on the basis of all
'
r.
satisfactory. AccordInahcial condition of these banks appears to be
1
Applicant's
'the Board finds, as did the Hearing Examiner, that
al history and condition are satisfactory.
41
ess otherwise indicated, all figures used herein are of this date.
figures
Thi
/
2 bank was acquired by Applicant on June 29, 1962, and all
N11.
tion.
acquisi
have been adjusted, where necessary, to reflect this
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Federal Reserve Bank of St. Louis
Beloit State was organized and began operations in 1892 and
has shown a relatively consistent pattern of growth.
41ereased siz-fold since 1940.
Deposits have
Since 1955 this deposit growth has
been largely in time deposits; from year-end
1955
to March 26, 1962,
le total deposits were increasing from $24 million to $34 million
demand deposits actually declined slightly (by $300 thousand), a
Situation
which appears attributable, in large part, to a decline in
latbge commercial and industrial demand accounts.
(31* $16 million and total assets of $38 million.
Beloit State has loans
From December 31, 1956,
to
"arch 26, 1962, Beloit State's capital accounts increased from
$2.
to $2.9 million from retained earnings and its reserve for bad
clebts •
increased from $258 thousand to $656 thousand.
The Hearing
-4alftiner found, and the Board agrees, that the financial history and
e°11blition of Beloit State are satisfactory.
Prospects. - The prospects of Applicant are intimately related
to th
--e Prospects of its subsidiary banks. Each present subsidiary is
loen4
'"'ed in a prosperous and growing area of the State. Six of these
Ilbeidiaries are located in Milwaukee County:
located in downtown Milwaukee, is the third largest bank in the
411k3
City,
Marine National Exchange
and State; Capitol Marine Bank is located in the northeast section
lwaukee in a prosperous business, industrial, and residential area;
4t,1•1
'alwaukee Marine Bank is located in South Milwaukee, a growing
s11101111,1,
-' of the City of Milwaukee; Cudahy Marine Bank is located in Cudahy,
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Federal Reserve Bank of St. Louis
1S(1,
alIcther suburb of Milwaukee, which has experienced substantial population
Wisconsin Marine
gl'°11th and industrial development in the last decade;
Bank has
located in a section
experienced a striking recent growth and is
"Ila south side of the City of Milwaukee which is being redeveloped,
• Oak Creek Marine Bank is located in a growing community in the
bounded
sout
heastern corner of Milwaukee County with its service area
• the north by the city limits of Milwaukee.
41'0,
PeWaUkee,
The Waukesha County Marine
Milwaukee County,
is located in the county to the west of
4nd its head office is approximately 20 miles west and somewhat north of
the
A
U°14ntaWn
Milwaukee. Peoples Trust
business district of the City of
• s .
a prosperous community
airings Bank is located in downtown Green Bay,
lkated
Milwaukee. The National Manuapproximately 115 miles north of
the cities of
"wers Bank of Neenah, the second largest bank in
lieeh-411
and Menasha, is located approximately 70 miles northwest of
Security State
ukee in Winnebago County. The recently acquired
}kik .
is located in a rapidly growing trade area on the east side of the
city
Of Madison 77 miles west of Milwaukee in Dane County. The Waukesha
4111,,
-".e National Bank, when opened, will be located in downtown Waukesha,
'es west of the downtown business district of Milwaukee. Each of
these banks appears to have good prospects, and therefore the Board
prospects of Applicant
tides/ as did the Hearing Examiner, that the
Qat
lsfactory.
the view
So far as concerns Beloit State, Applicant expresses
th44.
the prospects for continued growth and expansion and development
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Federal Reserve Bank of St. Louis
151.
..7°I. its services are good if it can meet the challenge arising from the
ectension of its primary trade area and the increasing competition from
banks in the large metropolitan centers for the credit and deposit
business
of the principal industrial concerns in its primary trade area,
his latter point was the subject of considerable attention and emphasis,
bc)th in the application and during the course of the hearing, and, in
the final analysis, may be characterized as the primary consideration
4°r1 which Applicant seeks to justify the proposed acquisition.
It is possible, as contended by Applicant, that if Beloit State
l*Tel'e to become affiliated with Applicant's holding company system, some
o
the credit and service requirements of the large industrial concerns
1the
Beloit area might be more readily accommodated locally, and that
thio
In turn, might enable Beloit State to recapture some of the loan
44(1 clePosit business of these firms which has migrated to the large
"eial centers such as Chicago and New York.
Assuming, without con-
the correctness of Applicant's assertion that a major portion
Of the
recaptured deposits could be expected to remain with Beloit State
1114dhe utilized in the Beloit area, nevertheless this is only one of the
eeotioni c
1 considerations which has a bearing on the prospects of Beloit
ate,
The City of Beloit is in the center of an area which has demonatrat d
e- a vigorous upward trend in population and business over the past
tlik)
decade
and according to a population study prepared for the Beloit
Planning Commission in March 1962, there is every indication that
U48
trend
will continue.
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Federal Reserve Bank of St. Louis
Based on Beloit State's pattern of growth to
152
date and taking into account its dynamic management, it appears
Iseasonable to conclude that it will capture a fair share of the new
banking activity inherent in the expansion of population and business
in ths vicinity of Beloit, and that effective steps will be taken by
13ank to keep pace with the demand from the community at large for new
44d iMproved banking services.
The Hearing Examiner found Beloit State's
be true
1:4s°sPect8 to be good and, in the Board's opinion, this would
141ether or not it is affiliated with Applicant, although its prospects
11°1116- Probably be bettered to some degree by consummation of the pro'
1)esed acquisition.
15 are officers
Malmgem9nt. - Applicant has 21 directors;
anqor directors of Marine National Exchange Bank, including its
131'esident, 3 are presidents of other subsidiary banks (Cudahy Marine
'44) National Manufacturers Bank of Neenah, and Wisconsin Marine Bank),
1 is
2 have no
a director of Oak Creek Marine National Bank, and only
Orti
Applicant's
eial relationship with Applicant's subsidiaries.
otri
officers of Marine
eers are drawn predominantly from the ranks of
ary. Collectively,
4111.443nal Exchange Bank, Applicant's largest subsidi
tiles
e directors and officers represent considerable knowledge and
the
l'a-ence in the field of banking, and in the Board's opinion
ths,„
'acter of Applicant's management is satisfactory. This is in accord
the finding of the Hearing Examiner.
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Federal Reserve Bank of St. Louis
.15
..9_
Applicant states that the present management of Beloit State
18 competent, and all indications support this comment.
Its Board of
Directors includes the President of Beloit College and the presidents
or four large local manufacturing concerns, which gives Bank access to
IX3°1
of mature and thoughtful business judgment.
Beloit State's
Qtricers are relatively young and appear to be able and aggressive.
trl light of the foregoing, the Board is of the view that the character
(It Bank's management is satisfactory, which is consistent with the
ly outstanding".
Ilealling Examiner's finding that management is "apparent
the present
Applicant claims, however, that notwithstanding
it increasingly
(11411tY of Beloit State's management, Bank is finding
"icult to fill management vacancies and attract adequate personnel,
access is had
44c1 that this situation bodes ill for the future unless
to the pool of experienced personnel in Applicant's system.
Board.
contention merits careful consideration by the
Certainly
However, the
l'ecord shows that during the past five years Beloit State has been able
tO
4-4-nd and employ five capable executives. Viewed in perspective, there
is,
t
-° indication that Beloit State's problems with regard to managemen
alleeession and replacement differ markedly from those facing the banking
itiau
similar size
86rY in general or, more particularly, other banks of
8." oPerating circumstances.
Thus, while it is recognized that staffing
1/'()133-ems might be solved more readily as a member of a holding company
is
the Board cannot conclude that affiliation with Applicant
e
°111,Y reasonable means of insuring continued vitality and competenc
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Federal Reserve Bank of St. Louis
354
-10not regard this
ill Bank's management ranks, and therefore does
consideration as weighing significantly in favor of approval of the
1icat
communities and the
Convenience, needs, and welfare of the
2-.12Z.L.00ncerned.
located in the City of
- Beloit State's only office is
the
13-0it, Rock County, Wisconsin, which is immediately north of
Illinois-Wisconsin border, 107 miles northwest of Chicago,
s°11:thwest of Milwaukee,
s°1):th of Janesville.
73 miles
miles
48 miles southeast of Madison, and 13
encompasses all of
Bank's primary service area
Town of Beloit and the Town
the cItY of Beloit and almost all of the
of the date of the
"Iztle; the estimated population of this area, as
a.1P
lalcation, was 45,541.
$34 million, there
Besides Beloit State, with deposits of
First National Bank and
41‘e two other banks in the City of Beloit - the
Trus4.
insured mutual savings
'-' Company and the Beloit Savings Bank (an
bellk), having deposits of '20 million and (i'14 million, respectively.
each other.
three banks are located within a block of
113,913 at the time of the
Rock County had a population of
1960
the preceding
census, representing a 22.8 per cent increase over
lo years.
In addition to the
other banks
3 Beloit banks, there are 13
16 banks, followed
14 the County. Beloit State is the largest of these
by m
million), First
'
erohants & Savings Bank, Janesville (deposits $21
million), First
Bank & Trust Company, Beloit (deposits $20
°nal Bank of Janesville (deposits $16 million), and Beloit Savings
(
range
deposits $14 million). The 11 remaining Rock County banks
ael3osits from $9.2 million down to $1.2 million.
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Federal Reserve Bank of St. Louis
-11served by Beloit State
According to Applicant, the trade area
1/°11.14 benefit in the following ways from approval of the proposed
acr
its experienced
(a) Bank would be able to maintain and add to
service areas,
staff) both on the management level and in the various
thel
banking
,-60Y bringing to the area a degree of specialization in
ces which is now lacking.
the large
(b) Bank would be better able to compete with
located
0Politan banks in serving the large industrial concerns
t4
demands and with
ta Primary service area, both in terms of credit
in the field of foreign
et to highly specialized counsel such as
ta e
balances from these firms
'thereby attracting larger deposit
enhance its growth, leadwould increase the strength of Bank and
ttle t° improvement in the financial strength and stability of the comadvanced is that local
Y* A collateral consideration also
avail .
attract new
'ability of the necessary banking services could
torlee
existing firms to expand
rns to the Beloit area and encourage
(Ilellati°r1s in Beloit rather than elsewhere.
develop its installment
(c) Bank would be better able to
loah
.4 business,
potential in the
a service for which there is great
°it area.
and investment
(d) Bank would be able to provide better trust
N114,4
Cc s, particularly in the field of corporate fiduciary operations.
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Federal Reserve Bank of St. Louis
In addition to the foregoing, it is claimed that affiliation
th Applicant would give Beloit State access to improved operational
features such as automation, Portfolio management and analysis, system
and Procedure studies, participation in joint advertising prop-rams,
credit investigation and review, centralized purchasing, personnel
tzsaining and development, coordinated fringe benefit administration, and
coverage in group insurance policies; also, that new capital would be
111°re readily available when required. Presumably, it is Applicant's
P°8ition that these incidental advantages of Bank's affiliation would
red
°11nd to the benefit of the individuals and businesses in the Beloit
are
by making Bank stronger and more efficient, thereby enabling it
better to serve its customers.
With respect to the circumstances bearing on the fourth
ilt°rY factor, the Hearing Examiner concluded that-"On the basis of the evidence presented the program
would appear to be in the public interest, in that it
would contribute to the convenience, needs, and welfare
of the community and the area concerned and introduce
desirable competitive forces within the affected banking
structure. It would seem reasonable to conclude that
strengthening a local financial institution so as to
enable it to serve local neeCs with greater adequacy,
and thus to compete more effectively with out-of-area
banks for area business should provide a broader competitive
ase, and consequent better service, and thus further the
-legitimate interests of the local community. In this
sense the tendency of the result would appear to be to
diffuse and to moderate existing concentration of banking
Power and resources. It would thus seem that unless
there are substantial countervailing considerations the
application should be anproved. * * *fl
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Federal Reserve Bank of St. Louis
1"--$-^"4
1. e
-13"lough agreeing in principle with the conclusion of the Hearing
s bearconcerning the favorable impact of the circumstance
ing on the fourth statutory factor in this case, the Board does not
l'egard the evidence relating thereto as being quite so persuasive.
that there are
There is no evidence of record to indicate
bank;
-ng needs within Beloit State's service area which are presently
11118erlred.
ity would
Nor would it appear that the welfare of the commun
ed transaction.
'terially affected by consummation of the propos
State become
Applicant asserts its belief that should Beloit
-gated with Applicant's holding company system, a substantial portion
the
thereafter
large business concerns in and around Beloit would
ze Bank's service to a greater extent, resulting in Bank's acquirtri
in Chicago,
ge°Irle of the deposits of these businesses now held by banks
that a suband New York. While it appears equally likely
-kaal part of any such deposits moving to Beloit State from the banks
the large
transferred to other
financial centers might in fact be
ge Bank,
allb"cliaries of Applicant, principally Marine National Exchan
to the
advantageous
extent that Applicant's management found it
to
a e these deposits in Beloit State, there could be, as Applicant
'llee, some positive influence on the economy of the Beloit
alr
area
6
he
State
However, former customers attracted back to Beloit
company system
larger loan and service potential of the holding
well be borrowers as well as depositors, and it may be questioned
*leth
-er their additions to the local pool of loanable funds (through
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
recaptured deposits) would exceed their drains upon the local pool of
loanable funds (through repatriated loans).
To be sure, the management of the holding company system
44d that of its larger customers may arrange the distribution of
1°ans, deposits, and services through the holding company system in
anY desired fashion that conforms to legal limitations.
Nevertheless,
he long-run incentives for management to make such distribution in
WaYs which enlarge the net lending potential of Beloit State will
4rise out of the useful services available through Bank and the profitable
°Portunities for investment in the area which it serves. With regard
to
'4118 point, there is no indication in the evidence before the Board
fs a relatively profitable unsatisfied margin of local credit demands
ih the Beloit area, nor are there signs that the growth of the Beloit
area has been or will be hampered by
of inadequate bank credit.
ThIls, there can be no firm reason to believe that the proposed acquiition would have a significant impact in this respect on the welfare
°Is Beloit and environs.
banking services in
So far as concerns the convenience of
telo,,
the general banking
", the record supports the conclusion that
s are adequately and
l'eglairements of the majority of Beloit's resident
principal beneficie°4veniently served by the local banks, and that the
ion would be
411es, in terms of convenience, of the proposed acquisit
the Lew
which might
large business enterprises in the Beloit area
'4.ra.t from having a local conduit for counsel and services of a
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
0/r- 41
-1540111
-7 specialized nature, such as foreign trade and corporate
'
fiduciary activities, as well as from having an augmented supply of
eliedit available through a local source.
Certainly Bank's desire to accommodate this segment of the
ss community as well as the public at large is a legitimate and
laud,,,
, case, whatever the
33-Ls objective, and it appears in the pres&n4
'
,
v-1- situation with regard to correspondent rclatonships may be, that
State has found resort to its correspondent bani:s for credit and
,
seri)
'-ce assistance unsatisfactory, comoounding the djfficultics which
-s faced and foresees in aspiring to the patronage of the large
b(1slq_
sses in the Beloit area. Possibly Beloit State could, by diligent
"3 find a correspondent or correspondents whic.ii would be willing
to eh
'Cage in a viable and mutually satisfactory working rclationship.2/
the
same token, in light of Beloit State's past history and the
tilte
might reasonably
11)1'1-sing character of its present management, it
bq e
However,
t'P"ted to take necessary action to broaden its services.
the t
affiliation to take
act of the matter is that were the pro2osed
Dlete
well be in a
It is reasonable to predict that Beloit State might
Do
(In better to meet at least part of the banking requirements of the
in question, and the local availability of this alternative source
ervice could reasonably be regarded as representing a greater
%live
nlence to such firms.
It
'4T0-111aY
well be that this has already been accomplished, since shortly
lat re
the public hearing Marine National Ez:change Bank in Milwaukee, the
biZ?.t bank in Applicant's holding coLvany system, became Beloit State's
Ipal correspondent.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-16-Thus, while the circumstance' sorrounding the application
licre
con_
11131" Considera'Aon which have a bearing on the statu'ory factor of
Ittni„
'flee, needs, and welfare of the community and area involved resole
the
Ilselves into a questjon primarily of the convenience of Beloit Staters
1318erit and potential customers, and in this regard the issue is one
uulally of the convenience of the large industrial concerns in 3Pnkrs
zem.,
'"-ce area, the Board regards the contribution to the convenience of
this ,
J-rnportant segment of the community as weighing, although not heavily,
ravOr of approval of the application.
Effect on adequate and sound banking, the nublic interest,
,•••••*n.
atia
is
- The fifth statutory factor which the Board
titre .L
c ued to consider is whether the proposed acquisition would expand
the
dIze or extent of the holding company system involved beyond limits
cob.,
'1-stent with adeouate and sound banking, the public interest, and
the
Pl'eservation of competition in the field of banking.
As pointed out by the Board in the liorgan New York State
0 n+4 On
e each
case (1962 Federal Reserve Bulletin (Ilay) pp.
579 et seq.),
of the statutory factors is important and no single one
significance of the various
Ilt°11ing, in evaluating the weight and
,
j-(Lerations which are found to exist with respect to a given proposal
the
b
4"°31rd must bear in mind the over-all purposes of the statute. The
1 U-s1„,
-L'ore history of the Act reveals that a principal impetus for its
kktin-ent
was the belief of the congress that there was need for
—1/4.1rY control aver affiliations of banks through the holding company
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Federal Reserve Bank of St. Louis
110
-17c/elfice because, uncontrolled, such activity could lead to undue
.°111centration of banking resources and activities as well as rescraint
inhibition of competition.
this factor
The first point to be considered in relation to
the effect of the proposed acquisition in this case upon the size
441 extent of Applicant's holding company system.
banks having
Applicant, with its 10 operating subsidiary
million
'
4114ing offices in the state of Wisconsin and controlling 008
11/
company head-.
11/II IDosits,
ranks as the third largest bank holding
cli
tered in Wisconsin and (as of December 31, 1961) the fifteenth
141'erst (out of 46) in the United States.
Although only a bit over
Ile`third (36%) as large as the largest Wisconsin holding company in
terra_
Of deposits, if the deposits of the principal bank in each system
tl'e dsducted from the ratio, Applicant is almost three-quarters (73%)
th
size of the largest.
aggregate deposits
If this application were to be approved, the
$343 million and its bank°r41: l1cant's subsidiaries would increase to
'
IfIces to 13.
second largest Wisconsin
This -would make Applicant the
ng company in terms of total deposits.
The proposed acquisition
Wisconsin counties.
11°1134 give Applicant representation in six
of Beloit and in
Beloit State (the largest bank in the City
County) has deposits of 04 million and operates one banking office,
1/14c.,11
represents 50.7 per cent and 25.0 per cent, respectively, of the
Elte,
has
eerl -Ludes the Marine National Bank of Waukesha, acquisition of which
but
business,
for
open
yet
not
is
which
hiq e.PProved by the Board but
1962.
dCS
Security State Bank, Madison, which was acquired on June 29,
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ITb
(
-.
‘1
—18—
Posits and banking offices in the City of Beloit and 23.2 par cent
atld
''Y Per cent, respectively, of the deposits and banking offices
p
5/
ck County.There is no indication that consummation of the acquisition
under consideration would be inconsistent with adequate and sound
g, either in Beloit or elsewhere.
However, the impact of the ac-
Ilsition upon the preservation of competition in the field of banking,
4rid,
lore broadly, the public interest, deserves close attention.
Applicant claims that the proposed acquisition would not
't In any adverse effect upon banking competition in the Beloit
Apart from the fact that none of Applicantis present subsidiary
batik_
Is located in or does any significant amount of business in Beloit
Ntet,
" Primary service area, it is suggested that the present pattern
Ot c
°111Petition between Beloit State and the two other local banking
,Altions would not be disturbed, because the objective and effect
clt the
Proposed acquisition would be to strengthen Peloit State's ability
c
(3111Pete with large metropolitan banks for the business of large
Ote clients in the Beloit area, which neither of the other local
14411is in a position to seek. Indeed, it is argued, the competitive
c
14ttlir,
- of banking in the community will actually be enhanced, since
1hr
P
'
4Iliation with Applicant Beloit State will be better able to service
th
b'IahL,
— ng demands of the large local businesses, thereby bringing to
t1,1
c°1411unity a new alternative source of banking.
inclu es deposits of $14 million and one office of a mutual
bank in Beloit.
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Federal Reserve Bank of St. Louis
-19Hearing
This line of argument was found persuasive by the
4artliner, and he concluded that "there is no apparent reason to
4PPrehend that affiliation of the Bank with Applicant will adversely
alter existing competitive relationships as between the Beloit banks".
Hoard does not agree.
transaction would, through
It may well be that the proposed
the
third largest Wisconsin
enefits of direct affiliation with the
batk holding company (which would become second if the application were
to k,
a position to compete
approved), serve to place Beloit State in
kore .
York, and elsewhere.
vlgorously with other banks in Chicago, New
in fact, the impact
lance, however, it may be questioned whether,
().,f
or would be
eloit State's enhanced competitive strength could be
business now handled by the large
"eled only into the recapture of
410Politan banks; many of the improved and expanded services which
following affilia413Pii.eant claims will be instituted by Beloit State
ttOrl
Bank in serving
llould, perforce, redound to the benefit of the
4q.„I
public at large.
--LY large corporate clients but the
evidence adduced which
The Board is not unmindful of the
Nr,
communiyorts to show that independent banks in certain Wisconsin
tlent.
with a local bank holding
- "ave flourished in the face of competition
ftPe.t1-Y subsidiary. However, there is nothing to indicate that, as
involved or the
Ied to the Beloit area, the nature of the banks
circumstances are comparable; nor
demographic, or geographic
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Federal Reserve Bank of St. Louis
-2018
clear as to what the eYplanation for this phenomenon is or tha
it
elent to which it may be true in other locations.
In this posture of
the record, the Board does not feel at liberty to infer that Beloit
State s
in
affiliation with Applicant would not place the other banks
vIt and, to a lesser extent, in Rock County at a disadvantage in
()PIPs-Ling with Bank for business.
It is the opinion of the Board that consummation of the
what
e
1)1'()P°sed acquisition would increase the local market dominanc of
'ready the largest bank in the City of Beloit and in Rock County,
ther.1,
ive effect
''Y having a potential long-range detrimental competit
'41 t
he remaining smaller independent banks located therein, and this
t at*lye
le circumconsideration is sufficient to outweigh the favorab
'es found to exist with respect to the first four statutory factors
case and to call for disapproval of the application.
A further aspect of the competitive question to which
o1Si
ation of the
has been given is the effect which consumm
Prop
ation of banking resources
°sed acquisition would have on the concentr
111 the
State of Wisconsin.
The three largest Wisconsin bank holding companies together
ke%111.1
31.7 per cent and 34.2 per cent,
t for 42 offices (5.8 per cent) and
re
`'''117.a1y, of the deposits and loans of the insured commercial banks
&Il the
d, these three
State; and if this application were to be approve
1101cli
rig
ial banking
companies would control 6.0 per cent of the commerc
Orti
ees in Wisconsin, and 32.4 Per cent and 35.0 per cent, respectively,
th
e dePosits and loans of these offices.
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Federal Reserve Bank of St. Louis
-21ant's acquisition
The Hearing Examiner concluded that Applic
of Beloit State would not tend to monopoly control of banking in the
State of wisconsin.
While this may be true, the Board's responsibility
ly
under the Act requires it to consider more than the question of monopo
control.
the extent to which Beloit
Perhaps, viewed in the abstract,
commercial banking offices
State's acquisition would add to the total
or in the
and deposits under holding company control in the State
County involved would not be considered substantial.
However, since the
y control a sigthree largest bank holding companies in Wisconsin alread
nlficant portion of the deposit and loan business of banks in the State,
the large
Under circumstances such as those here presented, where one of
the largest bank in a trade area (indeed,
holding companies proposes to add
ts in the State) to an already
Beloit State ranks 17th in amount of deposi
ces by the large holding
significant pattern of control of banking resour
er itself remiss in its
companies in the State, the Board would consid
statutory duties were it to grant approval without the most clear-cut
Showing of countervailing benefits.
considered, it is the conclusion of
Conclusion. - All things
t dominant position of
the Board that, taking into account the presen
ng degree of control of
13sloit State in its trade area and the existi
companies in the State of
banking resources by the three large holding
be inimical to the
Wisconsin, Applicant's acquisition of Bank would
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Federal Reserve Bank of St. Louis
Ifif;
-22Nsenration of competition in the field of banking and contrary to th.3
/1/blic interest. This adverse consideration Is not sufficiently offset,
the Board's judgment, by favorable considerations under other statutory
f4et°1's as to warrant approval of the application.
'
liat7 31, 196
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Federal Reserve Bank of St. Louis
367
Item No. 14
1/30/63
UNITED STATES OF AlIERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
•••
In the Matter of the Application of
THE HACKLNSACK TRUST COMPANY
for approval of merger with
Bank of Bogota
ORDER APPROVING NERGER OF BANKS
There has come before the Board of Governors, pursuant to the
Bank Merger Act of 1960 (12 U.S.C. 1828(c)), an application by
The Hackensack Trust Company, Hackensack, New Jersey, for the Boardts
Plajor approval of the merger of that bank and the Bank of Bogota, Bogota,
Nell Jersey, under the charter and title of the former. As an incident
to the merger, the sole office of the latter bank would be operated as
a
in form
branch of the former bank. Notice of the proposed merger,
pursuant to said Act.
aPProved by the Board, has been published
in the light of
Upon consideration of all relevant material
d by the
the factors set forth in said Act, including reports furnishe
e°111Ptroller of the Currency, the Federal Deposit Insurance Corporation,
'flia the Departmcat of Justice on the covpetitive factors involved in
Proposed merger,
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Federal Reserve Bank of St. Louis
368
—2—
IT IS HEREBY ORDERED, for the reasons set forth in the
13°ard15 Statement of this date, that said application be and hereby is
aPloraved, provided that said merger 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 30th
day of January, 1963.
By order of the Board of Governors.
and
Voting for this action: Chairman Martin,
son.
Shepard
and
Governors Balderston, Hills,
Voting against this action:
Absent and not voting:
Governors Robertson and Mitchell.
Governor King.
(Siriled)
Merritt Sherman
Merritt Sherman,
Secretary.
(SUL)
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Federal Reserve Bank of St. Louis
363
BOARD OF GOVERNORS
Item No. 15
1/30/63
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY THE HACKENSACK TRUST COMPANY FOR
APPROVAL OF MERGER WITH BANK OF BOGOTA
STATEMENT
The Hackensack Trust Company, Hackensack, New Jersey
("Hackensack Trust"), with deposits of $64.6 million,* has applied,
Pursuant to the Bank Merger Act of 1960 (12 U.S.C. 1828(c)), for the
8°4rdt5 prior approval of the merger of that bank and the Bank of
8°g0ta, Bogota, New Jersey ("Bogota Bank"), with deposits of $8.6 mil-
lion.*
The banks would merge under the charter and title of Hackensack
Trust, which is a State-chartered member bank of the Federal Reserve
4.8tem. As an incident to the merger, the sole office of Bogota Bank
/4°1-11d become a branch of Hackensack Trust, increasing the number of its
Offices from six to seven.
Under the law, the Board is required to consider, as to each
0f the banks involved, (1) its financial history and condition, (2) the
4dequacy of its capital structure, (3) its future earnings prospects,
at) the general character of its management, (5) whether its corporate
kllers are consistent with the purposes of 12 U.S.C., Ch. 16 (the Fed-.
el'al Deposit Insurance Act), (6) the convenience and needs of the
1aUT
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Federal Reserve Bank of St. Louis
rc
s OZ Jum, 30, 1962.
fn
-2-
community to be served, and (7) the effect of the transaction on
competition (including any tendency toward monopoly).
The Board may
"t approve the transaction unless, after considering all these factors,
it finds the transaction to be in the public interest.
Banking factors. - Hackensack Trust and Bogota Bank have
satisfactory financial histories.
The financial condition of Bogota
Bank also is satisfactory, its capital structure is adequate, and the
hank's earnings compare well with the average for banks of similar
l ze in the Third Federal Reserve District.
'
The management of Bogota
Bank, while satisfactory at present, is lacking in depth, and the bank
has not been successful in its efforts to recruit a successor to its
Present president.
The street on which Bogota Ban!: is located was once the main
th°roughfare of Bogota. However, the elimination of railroad grade
er°ssings a few years ago left the bank on a street ending at the railr°ed with access to the more densely populated areas restricted to a
bridge and underpass.
This appears to have had an unfavorable effect
°4 the growth of Bogota Bank which has not kept pace with the growth of
the more accessible larger bank in Bogota.
Hackensack Trust's financial condition is generally satisfactory,
lthough its capital structure is somewhat below an appropriate level.
The bank's earnings prospects are favorable, and its management is
c0r4Petent.
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Federal Reserve Bank of St. Louis
_3_
sack
The resulting bank would be under the management of Hacken
Trust and would be expected to have favorable earnings prospects.
The
financial condition of the resulting bank would compare favorably with
that now prevailing at Hackensack Trust, but the need for some strengthening of capital structure would continue.
te powers of the banks
There is no evidence that the corpora
U.S.C., Ch. 16.
are, or would be, inconsistent with 12
ities. - Hackensack and
Convenience and needs of the commun
and 8,000, respectively)
the Borough of Bogota (1960 populations 31,000
d on the west bank of the
are located in Bergen County, which is situate
Hudson River opposite New York City.
Hackensack lies in the southern
Part of the County, of which it is the seat, about
6 miles west of New
York City, and is separated from Bogota on the east by the Hackensack
(1960 population 780,000) has
During the past decade the County
River.
rial and residential
been one of the most rapidly developing indust
sections of the State.
While the areas for expansion in Hackensack and
ically from the residential
8°gota are quite limited, each benefits econom
and industrial growth of neighboring communities.
office and one branch in
Hackensack Trust, with its main
four commercial banks in the
Raokensack, is the second largest of the
eitY.
Hackensack Trust serve areas
The four out-of-town branches of
south and west of Hackensack.
banks in the borough.
Bogota Bank is the smaller of the two
and Bogota
The areas served by Hackensack Trust
tank encompass much of the commercial and industrial activity in the
county.
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Federal Reserve Bank of St. Louis
372
Both Hackensack and Bogota are served by numerous other banks
Ilith offices in the County, as well as by New York City banks which
advertise in the County and are conveniently accessible to the many
residents of Hackensack and Bogota who commute to and from the City.
If the proposal were consummated, the resulting bank would
$421,0001 as against the
have a loan limit to any one borrower of
and $80,000 for Bogota
Present limits of $300,000 for Hackensack Trust
Countyls highly diversified
18411k. The aggregate credit needs of the
has
irldustrial and commercial complex= large, and Hackensack Trust
ing bank
a number of customers with maximum credit lines. The result
increased number of
11°111d be able to serve the credit needs of an
borrowers who now seek credit accommodations from the two largest banks
in the County, or from larger out-of-County banks, including banks in
4%7 York City.
make available to
Consummation of the proposal also would
a broader range of
Present and prospective customers of Bogota Bank
ories and plant expanservices, including financing of seasonal invent
property improvement loans,
ei°11, comprehensive personal loan service,
and expanded trust
PaYroll deduction plans for industrial employees,
services.
Hackensack Trust is about
Competition. - The main office of
°Ile mile west of Bogota Bank, which would become the larger bank's
4earest branch if the proposed merger were effectuated. The Hackensack
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Federal Reserve Bank of St. Louis
AnTIT73
River separates the service areas of the banks (i.e., the areas from
which each of the banks derives
75
per cent or more of its deposits,
both demand and time, of individuals, partnerships, and corporations).
Nevertheless, it is evident that the two banks are in competition with
°Ile another, as well as with the other banks in the immediate region,
and with larger banks in the County and in New York City.
There are
13 depositors with accounts in both banks, and no common borrowers.
°f Hackensack Trust's total deposits and loans, 3.6 per cent and .58 per
Cent, respectively, originate in the service area of Bogota Bank, while
9 1 per cent and 13.6 per cent of the deposits and loans, respectively,
'
°f Bogota Bank originate in the service area of Hackensack Trust.
The relatively high proportion of deposits and loans from
Ilackensack which are held by Bogota Bank appears to be due to personal
efforts of its president. In view of the difficulty which the bank has
e)cPerienced in trying to provide for management succession, it seems
131'01:ab1e that the bank's business originating in Hackensack would
diminish with his retirement, and that the expanded loan limit and exPanded services which the merger would bring to Bogota would serve to
strengthen competition in the Hackensack-Bogota area.
are located in
Thirty-two commercial banks with 85 offices
d, Hackensack
r5.r1 County. If the proposed merger were consummate
largest bank in the
'llet would be the third, rather than fourth,
Itt
°°44V, but would continue to rank in second place in Hackensack.
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Federal Reserve Bank of St. Louis
374
ed by out-of-County banks;
Additional competition in the County is provid
savings and loan associations in the service areas of the two banks
°ffer strong competition for savings and mortgage loans; and credit
unions, sales finance companies and personal loan companies are also
active competitors in the County.
Act requires the
Summary and conclusion. - The Bank Merger
Board to take into consideration not only the effect on competition
on the general competibetween the banks involved, but also the effect
While consummation
tive situation in the areas served by those banks.
of the proposal would eliminate the moderate competition existing between
Hackensack Trust and Bogota Bank, there would remain readily accessible
to residents of Bogota a wide variety of alternative sources for bank
services and credit.
Furthermore, the transaction would replace Bogota
Bank with the office of a bank offering a broader range of banking
ment depth
services, remove the present problem with respect to manage
y of Hackensack
and succession at Bogota Bank, strengthen the abilit
Tr45t to meet the credit needs of its customers, and enable that bank
y populated and highly
t° compete more effectively in the heavil
s on other banks
industrialized area concerned without adverse effect
serving Hackensack and Bogota.
that the proposed merger
For these reasons, the Board finds
140uld be in the public interest.
JarlUary
30, 1963.
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Federal Reserve Bank of St. Louis
Item No. 16
1/30/63
DISSENTING STATEMENT OF GOVERNOR ROBERTSON,
WITH MICH GOVERNOR MITCHELL CONCURS
Today the majority of the Board is approving the merger of
a small, exceptionally sound and well-managed neighborhood bank, which
has been adequately serving the needs of its residential community,
into an aggressive larger bank with a head office only 1.1 miles away.
The small bank has been surprisingly successful in competing with the
to acquire it.
larger one, so much so that the larger one seeks
This
competition will be eliminated by the merger.
r which is not
This constitutes a basic negative facto
outweighed by any of the reasons cited by the majority.
1.
For example:
er bank has been
Assuming that the success of the small
the fact that this
due in part to the efforts of one man,
y
fies wiping
man will retire in a few years hardl justi
the bank out of existence today.
d in beyond a
2. If the location of the smaller bank, hemme
operations, then it
railroad underpass, handicaps its
easily as a larger
could move its office--quite as
bank can move a branch.
for an increased loan
3. If the larger bank has a real need
business of larger concerns
limit, in order to attract the
there are other ways than
than it can now accommodate,
merger of increasing its capital.
4.
ially in view of the
There is nothing in the record - espec
nity - to indicate
residential character of the commu
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Federal Reserve Bank of St. Louis
1'71;
-2-
unsatisfied credit or service needs in Bogota on a scale
that would justify approval of the application to merge
a sound independent bank and eliminate the competition it
affords.
5. There is nothing in the record to establish a likelihood
that the merged institution, with its head office in
Hackensack, will better serve (through a branch office)
the banking needs of the people in Bogota than is now
being done by the existing Bank of Bogota.
If there are needs on the part of some people in Bogota for
banking services more specialized than those provided by the Bank of
130gota, those needs can admittedly be met with ease through remaining
alternative sources.
But the existence of those alternative sources of
banking facilities does not comfort me, as it does the majority, for
here it is being used as a justification for the elimination of competition which I think should be preserved.
I do not think Congress intended, in enacting the Bank Merger
Ptt of 1960, that competitive neighborhood banks should be absorbed
thr°ugh mergers simply because larger banks would like to eliminate
e°111Petition or because the neighborhood banks do not provide the whole
L1111.1t of specialized services which could be provided by larger instituti°118
. Consequently, I would deny the application.
ti.e.1111ary 30, 1963.
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Federal Reserve Bank of St. Louis
177
Item No. 17
1/30/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADORCBB OFFICIAL CORRESPONDENCE
TO THE BOARD
January 30, 1963
CONFIDENTIAL (FR),
Mr. maloelm Bryan, Prerieent,
Federal aeserve Bank of Atlanta,
Atlanta 3, Georgia.
Dear Mr. Bryan:
immediately,
The Board of Governors has approved, effective
12
Grades
for
through 16
aalaries
the following minimum and maximum
to
e
the
Head
Office
applicabl
structure
of the nonofficial salary
by
of
fixed
your
Board
as
Atlanta,
of the Federal Reserve Bank of
in
your
of
the
letter
reported
and
Directors on October 12, 1962,
same date:
Grade
12
13
14
15
16
Minimum
Maximum
$ 6,900
7,700
8,600
9,500
10,600
$ 9,300
10,500
11,600
12,900
14,400
However, the Board would appreciate your reviewing the
grades at your Branches. Your letter
Proposed revisions for the same
revised ranges are intended to assist
the
of October 12 indicates that
nel staff in the Research
2rofessio
the
in recruiting employees for
at Branches, the Board
exist
not
do
positions
Department. As these
s would not be supportstructure
Branch
believes that an increase in
able on this basis.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
378
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 18
1/30/63
WASHINGTON 25, D. C.
ADONESb OFFICIAL CORREBPONOENCE
TO THE EIOARO
January 29, 1963
Mr. John L. Nosker, Vice President,
Federal Reserve Bank of Richmond,
Richmond 13, Virginia.
Dear Mr. Nosker:
contained in your
In accordance with the request
es the designation
approv
Board
letter of January 23, 1963, the
Charles D.
and
Bailey
E.
c't Francis L. Richbourg, Kenneth
the Federal
for
ers
examin
K°°nce, Jr., as special assistant
of
ipating in
e
partic
purpos
Reserve Bank of Richmond for the
examinations of State member banks.
designation of
The Board also approves the
the Federal
for
er
examin
ain as a special assistant
ipating in
partic
of
e
purpos
Dial* of Richmond for the
and Trust
Bank
ia
Wachov
°f State member banks except
na.
Winston-Salem, North Caroli
Woody Y.
Reserve
examinations
Company,
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
@FedFRASER