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FR 609
Rev. 10/59
Minutes for
To:
June 1, 2960
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
with respect to any of the entries in this set of
minutes in the record of policy actions required to
be maintained pursuant to section 10 of the Federal
Reserve Act.
Should you have any question with regard to
the minutes, it will be appreciated if you will advise
the Secretary's Office. Otherwise, please initial below.
If you were present at the meeting, your initials will
Indicate approval of the minutes. If you were not present,
your initials will indicate only that you have seen the
minutes.
Chin. Martin
Gov. Szymczak
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
2023
Minutes of the Board of Governors of the Federal Reserve System
on Wednesday, June 1, 1960.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Martin, Chairman
Balderston, Vice Chairman
Szymczak
Mills
Robertson
King
Sherman, Secretary
Thomas, Adviser to the Board
Young, Adviser to the Board
Shay, Legislative Counsel
Molony, Assistant to the Board
Fauver, Assistant to the Board
Noyes, Director, Division of
Research and Statistics
Mr. Koch, Adviser, Division of Research
and Statistics
Mr. Landry, Assistant to the Secretary
Mr. Keir, Chief, Government Finance Section,
Division of Research and Statistics
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Report an money market developments.
Messrs. Thomas and Keir
reported on recent developments in the money market, including reference
to changes in bank loans and holdings of Government securities.
Following this presentation, Messrs. Koch and Keir withdrew,
and the following entered the room:
Mr. Hackley, General Counsel
Mr. Solomon, Director, Division of Examinations
Mr. Masters, Associate Director, Division
of Examinations
Mr. Hostrup, Assistant Director, Division
of Examinations
Mr. Nelson, Assistant Director, Division
of Examinations
Mr. Rudy, Special Assistant, Legal Division
Mr. Leavitt, Supervisory Review Examiner,
Division of Examinations
Mr. Reynolds, Economist, Division of
International Finance
Miss Hart, Assistant Counsel
e =
6/1/60
-2Discount rates.
The establishment without change by the
Federal Reserve Bank of Atlanta on May 30 and the Federal Reserve
Bank of Boston on May 31, 1960, of the rates on discounts and advances
in their existing schedules was approved unanimously, with the understanding that appropriate advice would be sent to those Banks.
Item circulated to the Board.
The following item, which had
been circulated to the Board and a copy of which is attached to these
minutes as Item No. 1, was approved unanimously:
Letter to the Green Lake State Bank, Green Lake,
Wisconsin, approving an investment in bank premises.
Notice of Tentative Decision regarding application by Eastern
Trust and Banking Company, Bangor, Maine
(Items 2 and 3).
Copies had
been distributed of a draft Notice of Tentative Decision prepared by
the Legal Division stating that the Board proposed to approve the
application by Eastern Trust and Banking Company, Bangor, Maine, to
acquire 70 per cent of the voting shares of Guilford Trust Company,
Guilford, Maine.
The draft Notice was accompanied by drafts of a
Tentative Statement and press release along with a memorandum dated
May 31, 1960, from the Legal Division that indicated the draft Notice
and statements were presented for consideration by the Board pursuant
to its action on this matter on May 25, 1960.
Miss Hart said that the Legal Division had prepared a substitute
paragraph to be placed in the Tentative Statement regarding the effect
of the proposed acquisition on the convenience, needs, and 'welfare of
,
520"
Atio"
6/1/60
the community and area concerned.
She then read the substitute
paragraph.
Noting that he was favorably impressed by this change in the
wording of the tentative statement, Governor Mills said that he would
like to submit a line of reasoning stemming from this and similar
cases that had come before the Board in the recent past.
His statement
read as follows:
In line with Section 3(c) of the Bank Holding Company Act
of 1956, the Federal Reserve Board in passing upon a bank
holding company application is required to take into consideration the following five factors: (1) the financial history
and condition of the holding company and bank concerned;
(2) their prospects; (3) the character of their management;
(4) the convenience, needs, and welfare of the communities
and area concerned; and (5) whether or not the effect of the
acquisition would be to expand the size or extent of the
bank holding company system involved beyond limits consistent
with adequate and sound banking, the public interest, and the
preservation of competition in the field of banking.
As time passes and a line of decisions sets precedents
for future Board decision, the weight that past decisions
has placed on these various factors will assume increasing
importance both in guiding the direction of the Boardts
findings and in enlightening bank holding companies as to
the treatment to be expected from their applications. The
Boardts rationalization and actions relating to factors 4
and 5 have most to do with setting precederts.
As regards factor 4, question can be raised whether the
Board, when considering the convenience, needs, and welfare
of the communities and the area concerned, should interpret
its regulatory duty as a requirement for passing a favorable
decision on either a finding that the effect of the transaction
would be a positive benefit to the community or area involved,
or would at least be neutral in that neither a positive or
negative benefit would result. A case can be made that this
sort of a Board approach to passing on factor 4 raised it to
greater importance than is intended by the Act in that a
6/1/60
-1+-
precedential inference is given that when the Board considers
factor 4, it is definitely seeking for positive evidence of
a community benefit deriving from the application, and that
in the absence of such a discovery a passive finding in
effect downgrades the merit of the application. Viewed in
this light, it would be preferable for the Board's comments
on factor 4 in a bank holding company application to confine
their tenor either to commendation where positive benefits
are recorded, or to a minimum of passive comment where the
effects of the transaction are neutral.
As regards factor 5, serious question can be raised
whether a favorable Board decision should hinge on a finding
that competition would not be reduced as a result of a
proposed bank holding company acquisition. Although factor 5
demands inquiry into the competitive effects deriving from
a bank holding company application, it does not dictate that
a Board finding should hinge on the absence of any reduction
in competition. Many bank holding company cases can occur
where a favorable Board decision would be justified even
though it would result in a minimal lessening of competition.
According to this point of view, Board decisions on bank
holding company applications that emphasized the fact that
competition "would not be reduced" are in a sense damaging
and contrary to the principles of the Bank Holding Company
Act in that the competitive factor is raised out of context
with the provisions and intention of the law and, in consequence,
if repeated in continuing decisions, would set an undesirable
precedent.
Following this statement, Governor Mills commented on the importance
of careful wording of decisions under the Bank Holding Company Act of
1956, since otherwise the Board might find itself frozen into positions
out of consistency with the statute.
Mr. Hackley stated that the Legal Division had given careful
attention to the language in this and other cases that had come before
the Board.
Although it was recognized that under the law the Board was
required not to give undue attention to any one of the five statutory
factors in section 3(c) of the Bank Holding Company Act, the legislative
6/1/60
history indicated an intent that the fifth factor relating in part
to the preservation of competition in the field of banking be of
primary importance. Where there was no lessening of competition,
this factor was to be taken into consideration and weighed against a
lack of positive benefits under the fourth factor relating to convenience,
needs, and welfare of the communities and area concerned.
Ch the other
hand, where there was a significant lessening of competition, benefit
smuld have to be shown under the other four factors to offset such a
lessening in order to warrant approval of an application by the Board.
Following further discussion, unanimous approval was given to
the Notice of Tentative Decision and to its publication in the Federal
Register, to the accompanying Tentative Statement, and to a statement
for the press, with the understanding that the Legal Division was
authorized to make minor editorial changes in the statements.
Copies
of the Notice of Tentative Decision and Tentative Statement are attached
to these minutes as Items 2 and
3.
Mr. Hostrup and Miss Hart then withdrew from the meeting.
Letter to Congressman Patman
(Item No. 4).
There had been
distributed to the Board copies of a draft letter to Congressman Patman,
together with an accompanying report on capital ownership and management
of foreign central banks, replying to his letter of May 20, 1960, written
in his capacity as Chairman of a Subcommittee of the House Banking and
Currency Committee.
Mr. Patmants letter had requested a list of the
4iCt(V,
10.,1
6/1/60
-6-
central banks of the world, with information as to whether or not
such banks have capital stock and, if so, the ownership of the stock.
This information was requested in preparation for hearings on H. R. 8516,
a bill to provide for the retirement of Federal Reserve Bank stock,
which were to commence on June
6, 1960.
In addition to the above infor-
mation, Mr. Patman had also inquired regarding the manner in which the
management of these central banks was selected.
Governor Balderston said that the form of the draft report
could be variously interpreted with respect to the desirability of
retaining the present structure of the Federal Reserve System, and he
inquired whether it would be desirable to rearrange the information so
as to separate the larger from the smaller central banks.
Mr. Reynolds replied that such a rearrangement might not accomplish the purpose that Governor Balderston apparently had in mind of
shaving that the larger foreign central banks were owned and managed
in a fashion similar to the ownership and management of the Federal
Reserve System.
He cited the Bank of England and the Deutsche Bundesbank,
both of which are government-owned, and went on to say that the table as
presented merely represented an up-dating of a similar report transmitted
to Congress in 1952.
There were, however, minor corrections to be made
in the tabulation which had been undergoing rechecking since draft
copies were distributed.
After further discussion, unanimous approval was given to the
letter transmitting the report to Mr. Patman with the understanding that
6/1/6o
the letter and report would be sent when the data in the report had
been verified, and with the further understanding that copies would
be sent to the Presidents of all Federal Reserve Banks.
the letter sent to Mr. Patman on June
A copy of
31 1960, is attached as Item No. 4.
meeting.
Messrs. Thomas, Shay, and Reynolds then withdrew from the
RegulaLetter to the Federal Reserve Bank of New York regarding
tion Q grace periods (Item No. 5).
There had been circulated under
date of May 24, 1960, a memorandum from Mr. Rudy of the Legal Division
noting that the Board had received a letter from the New York Reserve
Bank transmitting a copy of a letter dated April 20, 1960, from Mr. Dorsey,
Counsel for the New York State Bankers Association.
Mr. Dorsey had
bank to
requested that Regulation Q be amended so as to permit a member
pay interest on savings accounts in accordance with the present provisions
of subsection (d) of section
3 or, at its option, to pay interest during
the first 10 business days of a calendar month commencing a regular
busiquarterly or semi-annual interest period and during the first five
ness days of any other month.
Reference was made in the memorandum to
the fact that the Board had previously considered such a proposal and
expressed its views declining the amendment in a letter to the Reserve
Bank dated April 18, 1960.
Although Mr. Dorsey had been furnished
with the gist of the Board's letter of April 18, he had requested that
his letter be forwarded to the Board.
Mr. Rudy said that in a telephone conversation with the Federal
submitted
Deposit Insurance Corporation it was learned that Mr. Dorsey had
6/1/60
-8-
the same proposal to that Corporation.
Subsequently, the Legal Division
had been furnished a copy of the Federal Deposit Insurance Corporationts reply dated April 29, 1960, along the lines of the Boardts
previous correspondence of April 18 with the New York Reserve Bank.
He referred to the recommendation in his memorandum of May 24, that
the Board reaffirm its previous conclusion as expressed in the April 18
letter to the New York Reserve Bank.
He noted that the draft letter to
the New York Reserve Bank would be consistent with the Federal Deposit
Insurance Corporation's reply to Mr. Dorsey.
There being no Objection, a letter to the New York Reserve Bank
was approved unanimously in the form of attached Item No.
5.
Messrs. Young, Noyes, and Rudy then withdrew from the meeting.
Report on proposed merger of banks in Brookville and Salina,
Kansas (Items
6
and 7).
Copies of a memorandum dated May 31, 1960,
from the Division of Examinations had been distributed relating to the
competitive factors involved in a proposed merger of The Brookville
State Bank, Brookville, Kansas, with and into The Farmers National Bank
Of Salina, Salina, Kansas, under section 18(c) of the Federal Deposit
Insurance Act, as amended on May 13, 1960.
There had also been distributed
a draft of letter that would transmit the report required by the law to
be sent to the Comptroller of the Currency.
The memorandum proposed
that this report on an actual case also be sent to all Federal Reserve
Banks as a sample of an appropriate form of analysis, and a draft of
letter for this purpose was attached.
6/1/6o
Mr. Solomon stated that when the bank merger bill was signed
into law on May 13, 1960, about 17 merger applications were in process
at the Comptrollerts Office, all of which were then sent to the Board
and to the Justice Department for the written reports required by the
law to be made to the originating agency within 30 days with respect
to the competitive effects involved in each merger.
Requests for
information needed to prepare these reports had been forwarded to the
Reserve Banks, and since time was of the essence so far as this group
of applications was concerned, the Division of Examinations had considered how best to process these applications and others that would
be forthccmirg.
The first thought of the Division with respect to
the length of these reports was that they might conform to the reports
prepared by the Legal Division and the Division of Examinations for
transmittal to the Comptroller of the Currency concerning national bank
charters.
However, further consideration had led to the conclusion
that it would be more in harmony with the new bank merger law to have a
"full dress" reporting of the information coming to the Board on each
application, since this information might very well be made available
to the public subsequently.
A further consideration strengthening this
conclusion was the provision in the law stipulating that the Attorney
General must summarize each report, suggesting that the reports should
be fairly complete.
Mr. Solomon then referred to the specific case before the Board
for action, the application for merger of Farmers National Bank of Salina
6/1/60
-10-
and Brookville State Bank.
This represented a fairly simple case,
he said, and if the Board approved the proposed report, he believed
it would be helpful both to the Reserve Banks and to the Division of
Examinations if it could be sent promptly as a sample.
Following discussion, the report to the Comptroller of the
Currency and the letter transmitting copies of the report to all Federal
Reserve Banks were approved unanimously.
Copies of the report and
letter to the Reserve Banks are attached to these minutes as Items 6
and 7.
The meeting then adjourned.
Secretary's Notes: Pursuant to the action taken
on May 10, 19600 in 'which the Board authorized
a leave of absence with pay for Milton Moss,
Economist, Division of Research and Statistics,
for the purpose of completing a doctoral dissertation, Governor Robertson today approved in
the absence of Governor Shepardson an arrangement
under which Mr. Moss would be on leave with pay
through May 31, 19610 and
from September
on annual leave from June 1, 1961, through August 31,
1961.
6, 1960,
Acting in the absence of Governor Shepardson,
Governor Robertson also approved today on behalf
of the Board a letter to the Federal Reserve Bank
of New York (attached Item No. 8) approving the
appointment of Whitney R. Irwin as assistant
examiner.
Secre
t"t
BOARD OF GOVERNORS
Item No. 1
6/1/60
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS
orricIAL coRREsPoNocNce
TO THE BOARD
June 1, 1960
Board of Directors,
Green Lake State Bank,
Green Lake, Wisconsin.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of Chicago, the Board of Governors
of the Federal Reserve System approves, under the provisions of Section 24A of the Federal Reserve Act, an additional investment in bank premises by Green Inke State Bank
of not to exceed $8,000 for the purpose of constructing a
new bank building.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 2
6/1/60
OF THE
FEDERAL RESERVE SYSTEM
NOTICE OF TENTATIVE DECISION ON APPLICATION FOR PRIOR
APPROVAL OF ACQUISITION BY A BANK HOLDING COMPANY
OF VOTING SHARES OF A BANK
Notice is hereby given that, pursuant to section 3(a)
of the Bank Holding Company Act of 19560 Eastern Trust and Banking
Company, Bangor, Maine, a bank holding company, has applied for
the Board's prior approval of the acquisition of up to 70 per cent
of the 2/000 outstanding voting shares of Guilford Trust Company,
Guilford, Maine. Information relied upon by the Board in making
its tentative decision is summarized in the Board's Tentative
Statement of this date, which is attached hereto and made a part
hereof, and which is available for inspection at the Office of
the Board's Secretary, at all Federal Reserve Banks, and at the
Office of the Federal Register.
The record in this proceeding to date consists of the
application, the Board's letter to the Bank Commissioner for the
State of Maine inviting his views and recommendations on the application, the Commissioner's reply, this Notice of Tentative Decision,
and the Tentative Statement.
For the reasons set forth in the Tentative Statement,
the Board proposes to grant the application.
21)3
-2-
Notice is further given that any interested person may,
not later than fifteen (15) days after the publication of this
notice in the Federal Register, file with the Board in writing
any comments upon or objections to the Board's proposed action.
Communications should be addressed to the Secretary, Board of
Governors of the Federal Reserve System, Washington 25, D. C.
Following expiration of the said 15-day period, the
Board's Tentative Decision will be made final by order to that
effect, unless for good cause shown other action is deemed
appropriate by the Board.
Dated at Washington, D. C., this 1st day of June 1960.
By order of the Board of Governors.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(SEAL)
2036
Item ]Ro.'3
6/i/6o
BOARD OF GOVERN0RS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY EASTERN TRUST AND BANKING COMPANY,
BANGOR, MAINE, FOR PRIOR APPROVAL OF ACQUISITION OF
VOTING SHARES OF GUILFORD TRUST COMPANY, GUILFORD, MAINE
TENTATIVE STATEMENT
Eastern Trust and Banking Company, Bangor, Maine
("Applicant"), a bank holding company, has applied, pursuant
to section 3(a)(2) of the Bank Holding Company Act of 1956
("the Act"), for the Board's prior approval of the acquisition
of up to 70 per cent of the 2,000 outstanding voting shares of
Guilford Trust Company, Guilford, Maine ("Bank").
Viewsand recommendations of the Bank Commissioner for
the State of Maine. - As required by section 3(h) of the Act,
the Board forwarded notice of the application to the Bank Commissioner for the State of Maine.
The Commissioner interposed
no objection to the application.
Statutory factors. - Section 3(c) of the Act requires
the Board to take into consideration the following five factors:
(1) the financial history and condition of the holding company
and bank concerned; (2) their prospects; (3) the character of
their management;
(4) the
convenience,needs, and welfare of the
communities and area concerned; and
(5) whether
or not the effect
-
-2of the acquisition would be to expand the size or extent of the
bank holding company system involved beyond limits consistent with
adequate and sound banking, the public interest, and the preservation of competition in the field of banking.
Discussion. - Applicant is a State bank which awns a
majority of the shares of each of two other commercial banks in
Maine, the three banks having total deposits of approximately
$30,000,000.
The towns of Guilford and Greenville, where Bank and its
branch, respectively, are situated, are in Piscataquis County.
The
area is described by Applicant as one in which the population derives
its income from activities such as lumber and pulp operations, textiles,
slate quarries, hardwood products, furniture manufacturing, and tourist
trade.
The population of Guilford is about 1,850 and of Greenville,
1,900.
There are no other banking offices in either town.
The financial history and condition, the prospects, and
the management of both Applicant and Bank are satisfactory.
The Applicant states that the principal effect of the
proposed acquisition upon the convenience, needs, and welfare of
the communities and the area concerned would be the advantages
derived by Bank and its customers from supervision of Bank by a
larger institution.
Applicant also states that the population of
the area concerned is remaining fairly stable.
Nor is there any
Indication that the needs of the community will increase for any
_3_
other reason in the near future.
Consequently, there appears to be
no strong evidence supporting a community need to be satisfied by,
or benefit to the community welfare to result from, this acquisition.
At the same time, the Board finds no adverse considerations insofar
as the fourth statutory factor is concerned.
An additional judgment required of the Board in its consideration of this application is whether the effects of the acquisition proposed would be to eypand the size or extent of Applicant's
bank holding company system beyond limits consistent with adequate
and sound banking, the public interest, and the preservation of
banking competition.
Applicant and its two subsidiary banks hold approximately
5
per cent of the total deposits of commercial banks in Maine, and
have about 6 per cent of the total offices of such banks in the
State. Acquisition of Guilford would increase Applicant's control
of total commercial bank deposits and of such offices by approximately one percentage point.
The office of Applicant's subsidiary
banks which is nearest to Bank is some 43 miles from Guilford.
Bangor, where the Applicant's head office and several of its
branches are located, is 48 miles from Guilford.
Offices of a
substantial competing commercial bank are located on the highways
between Bangor and Guilford, and between Guilford and the areas
served by Applicant's present subsidiaries.
It was found that an insignificant amount of deposits of
individuals, partnerships, and corporations held by Bank originates
in the areas in which Applicant's banks primarily operate.
Likewise,
2039
-14"-
the business derived by Applicant's banks from the service area of
Bank appears to be negligible.
The competition between offices of
the present Eastern group and those of hank that would be reduced
or eliminated, if Bank were acquired by Applicant, would therefore
be insignificant.
Bank has approximately
57 per cent of the total deposits
of all commercial banks, and about
35 per cent of the deposits of
all banks located in Piscataquis County.
While there are no other
banking offices in the area designated by Applicant as Bank's
primary serVice area, Applicant also states that Bank is in active
competition with the remaining banks which have offices in Piscataquis
County.
On the basis of the evidence adduced it does not appear
that Applicant's acquisition of Bank would result in an undue
concentration of banking resources in the area concerned, or
produce results inconsistent with adequate and sound banking, the
public interest, and the preservation of banking competition.
Conclusion. - Viewing the relevant facts in the light
of the general purposes of the Act and the factors enumerated in
section 3(c), it is the judgment of the Board that the proposed
acquisition would be consistent with the statutory objectives and
the public interest and that the application should be approved.
June 1, 1960.
204
Item No. 4
BOARD OF GOVERNORS
OF THE
6/1/60
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE CHAIRMAN
June 3, 1960
The Honorable Wright Patman,
House of Representatives,
Washington 251 D. C.
Dear Mr. Patman:
In response to
I enclose tables showing
and the selection of the
central banks (excluding
for which information is
your letter of May 20, 1960,
the ownership of capital stock
management of all foreign
banks in Communist countries)
available to the Board's staff.
You will note that the heads of the banks are
called "Governors" in the tables, for the sake of simplicity, regardless of their official titles.
Central banks in CommLnist countries have been
excluded because all financial institutions in these
countries are so completely dominated by their governments that the details of their legal provisions concerning capital and selection of management are immaterial.
Sincerely yours,
Wm. McC. Martin, Jr.
Enclosures
BOARD OF GOVERNORS
Item No.
OF THE
5
6/1/60
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June 1, 1960
Mr. Howard D. Crosse, Vice President,
Federal Reserve Bank of New York,
New York 45, New York.
Dear Mr. Crosse:
This refers to your letter of April 251 1960, with which you
submitted a copy of a letter from Mr. Leo P. Dorsey dated April 201
1960. Mr. Dorsey, as counsel for and on behalf of the New York State
Bankers Association, requests that Regulation Q be further amended to
Permit a member bank to pay interest on savings accounts in accordance
with the present provision of subsection (d) of section 3 or, at its
Option, to pay interest during the first ten business days of a
calendar month commencing a regular quarterly or semiannual interest
period and during the first five business days of any other calendar
month.
The Board has carefully considered the amendment suggested
by Mr. Dorsey and arrived at the same conclusions expressed in the
Board's letter to you dated April 181 1960. The Board's decision is,
therefore, to decline the amendment suggested by Mr. Dorsey. Please
advise Mr. Dorsey along the lines of the Board's April 181 1960 letter
to you. In the event your previous letter to Mr. Dorsey has already
furnished those views, it would be appropriate to advise Mr. Dorsey
of the Board's reconsideration of the matter as set forth above.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Item No. 6
6/1/60
June 1, 1960.
Report by the Board of Governors of the Federal Reserve System, under
section 18(c) of the Act of September 21, 1950 (12 USC 1828(c)), as
amended by the Act of May 13, 1960, to the Comptroller of the Currency
on the competitive factors involved in the proposed merger of The
Brookville 6tate Bank, 3rookvi11e, Kansas, with and into The Farmers
__
National Bank of Salina Salina Kansas.
I. THE PROPOSAL
The Farmers National Bank of Salina, Salina, Kansas, (deposits
$11,977,000) has requested prior written consent of the Comptroller of the
Currency to merge The Brookville State Bank, Brookville, Kansas, (deposits
$941,000) into the national bank. Neither bank now operates any branches,
and the national bank cannot establish a branch in the present quarters of
the State bank as the establishment of branches is prohibited (except to a
very limited degree) by Kansas law.
THE COMMUNITIES
Brookville, a small town of about 250 situated approximately 15
miles west southwest of Salina, is located within the general trade area
s?rved by Salina which is the fourth largest city in Kansas, having an estimated population of 40,000. At the beginning of World War II the United
States Government acquired 25,600 acres of land south and east of Brookville
which diminished the town's trade territory and reduced job opportunities.
Of the total population of 250 people, 34 (probably 40 per cent or more of
area wage earners) work in Salina.
III.COMPETITION BETLEEN THE TWO INSTITUTIONS
The Brookville State Bank derives about 84 per cent ($760,000)
of deposits and 64 per cent ($245,000) of loans from Salina and within ten
miles of Salina. Despite the fact these two banks serve the same area and,
percentagewise, have similar deposit structures, their lending activities
are different. The State bank lends primarily to farmers and to borrowers
who secure their loans with automobiles whereas the national bank lends
Primarily to business and industry and to borrowers who pledge real estate
as security.
These two banks have 13 common borrowers currently owing $37,900
to the Brookville bank and $120,800 to the Salina bank. In addition to the
Saline County Treasurer who has $299,300 on deposit at Brookville and
$141.400 on deposit at Salina, the two banks have 28 common depositors with
$80,6O0 and $148,900, respectively, on deposit at Brookville and Salina.
Both banks, in common with all other area banks, pay 3 per cent interest on
savings. The following table indicates by percentages the sources of The
Brookville State Bank's savings deposits, demand deposits, and loans and
discounts.
204
-2Savings
Deposits
Originating in Brookville
Originating in Salina
Originating within 10 miles
of Salina
All other areas
Demand
Deposits
35
8
82
6
46
5
5
13
Loans and
Discounts
10
57
26
the
The proposed merger would eliminate banking facilities in
is
Bank
State
Brookville
small community of Brookville, and although The
granted
be
not
would
probably
operating profitably, a charter for a new bank
by State or Federal authorities at the present time for a bank to be established in a town of the present size and prospects of Brookville. Officers
and directors of the Salina bank now own a majority of the stock of the
State bank so probably little competition between the two banks actually
now exists. There is, of course, a certain amount of potential competition
should the relationship between the two banks change through sale of stock,
a.different business relationship, etc. It appears unlikely that competition would be appreciably lessened by the proposed merger.
IV. EFFECT ON OTLER INSTITUTIONS
two banks
In addition to the effect upon competition between the
upon all
merger
proposed
concerned, the probable competitive effect of the
commercial
Six
.
considered
banking institutions in the Salina area must be
banks located in this trade area held deposits aggregating 4.4,341,500 as
of December 31, 1959. The following table shows the percentage of bank
resources held by each of the area banks as of Jecember 31, 1959.
Bank
Percentage of
Total Resources
Farmers National Bank, Salina, Kansas
Brookville State Bank, Brookville, Kansas
National Bank of America, Salina, Kansas
Planters State Bank, Salina, Kansas
Assaria State Bank, Assaria, Kansas
Falum State Bank, Falum, Kansas
29,17
2.59
Merger Farmers National Bank of Salina
31.76
31.73
32.62
2.48
1.39
bank
Neither of the two banks now has, nor will the continuing
the
After
picture.
banking
area
have, a dominant position in the Salina
area
of
cent
per
96.11
have
will
proposed merger the three largest banks
likely to
resources, will all be very nearly the same size, and none is
or
existing
affect
adversely
would
Obtain a competitive advantage which
seem
not
would
merger
proposed
the
of
P?tential competition. Consummation
community.
the
in
mergers
bank
further
to
impetus
likely to lend significant
In addition to the six banks, there are several other lending institutions
associations
Competing for area business. There are two building and loan
loan comsmall
which, together, have total resources of $15,000,000, twelve
ation,
associ
panies, a production credit association, a national farm loan
solely
ting
consis
and one trust company which has deposits of about $500,000
of public funds and time certificates of deposit.
V. SUMMARY AND CONCLUSIONS
located in a
The proposed merger will combine a very small bank
operattown of declining population and opportunity with a much larger bank
to its
due
is,
ing in a growing community. The small Brookville institution
factor
icant
signif
size and location, not now nor is it likely to become a
in the Salina area banking picture. Cessation of operations by this bank will
on the
leave Brookville with no banking facilities; however, the effect
Salina area competitive picture will be negligible.
BOARD OF GOVERNORS
OF THE
4
4'4..
'
CO 6%914
sno
to
•
Item No. 7
6/1/60
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADORES
orricom. CORRESPONDENCE
TO THE SOARD
4
04444*
June 1, 1960
Dear Sir:
Insurance
As you know, section 18(c) of the Federal Deposit
to subAct, as amended by the Act of May 13, 1960, requires the Board
ng
continui
mit a report, to the Comptroller of the Currency where the
Corporae
bank is to be a national bank or the Federal Deposit Insuranc
on
tion where the continuing bank is to be a nonmember insured bank,
the competitive factors involved in a proposed merger.
such a reThere is enclosed for your information a copy of
port that is being forwarded to the Comptroller of the Currency. This
in
is being sent to you because of possible assistance it may afford
this
Since
indicating the various steps of analysis in such cases.
clearly
be
should
it
one,
simple
ly
Particular case was a relative
as to the
only
example
an
ed
consider
be
recognized that the report can
of informasteps of analysis and not as to the conclusion or the amount
ion and
informat
more
ably
consider
tion or discussion. In most cases,
analysis would be needed.
Discussions of competition in various statements of the
as
Board in decisions pursuant to the Bank Holding Company Act, such
d
at pp. 912-915 of the 1958 Federal Reserve Bulletin captione
preparing your
"Preservation of Competition," may also be helpful in
memoranda to the Board under the new merger legislation.
Very truly yours,
MerrittA rman,
Sedretary.
Enclosure'
TO THE PRESIDENTS OF THE FEDERAL RESZRVE BANKS
20,
Item No. 8
BOARD OF GOVERNORS
6/1/60
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
A0014E11111
orricom. CORMICSPONOIENCE
TO TUC •OAPIO
June 1, 1960
Mr. H. A. Bilby, Vice President,
Federal Reserve Bank of New York,
New York 45, New York.
Dear Mr. Bilby:
In accordance with the request contained
in your letter of May 25, 1960, the Board approves
the appointment of Whitney R. Irwin as an assistant
examiner for the Federal Reserve Bank of New York.
Please advise as to the date on which the appointment
is made effective.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
@FedFRASER