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Minutes for March 23, 1962
To:
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. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
Minutes of the Board of Governors of the Federal Reserve
System on Friday, March 23, 1962.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
King
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Sherman, Secretary
Kenyon, Assistant Secretary
Thomas, Adviser to the Board
Molony, Assistant to the Board
Fauver, Assistant to the Board
Cardon, Legislative Counsel
Noyes, Director, Division of Research
and Statistics
Holland, Adviser, Division of Research
and Statistics
Koch, Adviser, Division of Research
and Statistics
Landry, Assistant to the Secretary
Eckert, Chief, Banking Section, Division
of Research and Statistics
Yager, Chief, Government Finance Section,
Division of Research and Statistics
Money market review.
Mr. Yager presented a review of money
market conditions, following which Mr. Eckert reported on developments
Iii bank credit, the money supply, and related matters.
Mr. Eckert,
Who had recently attended a savings conference sponsored by the
American Bankers Association, also reported on his impressions of banker
reaction to the increase, effective January 1, 1962, in the maximum
rates permitted to be paid on time and savings deposits.
This led to
a further discussion of interest payments on such deposits during which
-2-
3/23/62
Messrs. Hackley, General Counsel, Farrell, Director, Division of
Bank Operations, and Shay, Assistant General Counsel, joined the
meeting.
In this connection reference was made to a memorandum from
Mr. Farrell that had been distributed under date of March 80 19620
concerning (1) certain problems under Regulation Q, Payment of
Interest on Deposits, raised by the United Securities Account scheme
of the Citizens Bank and Trust Company, Park Ridge, Illinois, recently
the subject of Board discussion, and (2) the growth of "daily interest"
arrangements at some banks, a subject on which the Reserve Banks had
been requested to report not later than April 1, 1962, pursuant to
the Board's letter of December 270 1961.
As a means of meeting the
Problems referred to, the memorandum proposed that the Board rule:
That when withdrawals are made from a savings
account no interest shall be paid or credited
on the amount withdrawn during the quarter in
which the withdrawal was made unless 30 days'
advance notice shall have been given by the
depositor of his intention to make the withdrawal.
The memorandum pointed out that such a ruling would mean that Citizens
Bank and Trust Company could not offer current interest on amounts
that were deducted from savings account balances to cover checks
drawn by "United Security Account" depositors.
With respect to
"daily interest" arrangements, the proposed ruling would not completely
Preclude short-term, interest-earning deposits, but it would require
-3-
3/23/62
that such deposits, to earn interest, would have to remain for at least
30 days and that notice of withdrawal must have been given at least
30 days in advance.
At the request of the Board, Mr. Farrell commented on his
memorandum, indicating that it had long been his belief that savings
accounts should not be subject to unlimited withdrawals without penalty
and that his proposal was designed to deal with the threat of sizable
fluctuations in such accounts that might be brought about by large
deposits and withdrawals within an interest computation period.
On
the other hand, he said, the withdrawal privilege should not, in
his opinion, be unduly hampered by arbitrary restrictions. Under
his plan, if a depositor were to give 30 days' notice of intent to
Withdraw from such account, interest could be paid from the last
interest computation date to the date of withdrawal.
However, in
the absence of such notice no interest could be credited, on the
amount withdrawn, for any portion of the computation period.
Mr.
Farrell expressed the view that his proposal probably would not require
much additional work incident to interest computation by banks.
In further discussion, it was brought out that Mr. Farrell's
suggestion would be no more strict than the practice followed generally
by banks before the "daily interest" arrangement was instituted by
some banks.
Mr. Hackley observed that reports received thus far from
Federal Reserve Banks regarding development of the "daily interest"
3/23/62
-4-
practice, pursuant to the Board's letter of December 27, 1961, indicated
that the practice did not appear to present too much of a problem.
So far as the United Security Account scheme of the Citizens Bank
and Trust Company was concerned, Mr. Hackley said that a special
investigation by the Federal Reserve Bank of Chicago had been completed.
After the investigation report was received, it would be analyzed
and a memorandum prepared for the Board's consideration.
He under-
stood, however, that since January 15, 1962, when the amendment to
the definitions of "savings deposits" as contained in Regulation
D, Reserves of Member Banks, and Regulation Q, Payment of Interest
on Deposits, became effective, no withdrawals from savings deposits
had been wine for the repayment of loans.
On the other hand, the
bank was continuing to advertise the plan.
After additional discussion, it was agreed that Mr. Farrell's
Proposal was deserving of further consideration.
It was suggested
that such a proposal might be made the subject of discussion with
the Federal Advisory Council at some forthcoming meeting with that
group.
Messrs. Holland, Koch, Eckert, and Yager then withdrew from
the meeting and the following entered the rooms
Mr. Solomon, Director, Division of Examinations
Mr. Leavitt, Assistant Director, Division of
Examinations
Mr. McClintock, Supervisory Review Examiner,
Division of Examinations
103c4
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3/23/62
Mr. Young, Senior Attorney, Legal Division
Mr. Partee, Chief, Capital Markets Section,
Division of Research and Statistics
Discount rates.
The establishment without change by the
Federal Reserve Banks of New York, Philadelphia, Cleveland, Richmond,
St. Louis, Minneapolis, Kansas City, and Dallas on March 22, 1962,
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.
Circulated items.
The following items, which had been circulated
to the Board and copies of which are attached to these minutes under
the respective item numbers indicated, were approved unanimously:
Item No.
Letter to Franklin County Trust Company, Greenfield,
Massachusetts, approving the establishment of a branch
at 399 Federal Street.
1
Letter to The Vienna Trust Company, Vienna, Virginia,
approving an investment in bank premises.
2
Letter to The Commercial Savings Bank, Adrian, Michigan,
approving an amendment to a proposal approved by the
Board of Governors on February 5, 19620 for retirement
Of certain outstanding preferred stock and an increase
in capital structure.
3
Letter to the Federal Deposit Insurance Corporation
regarding the application of Farmers Snd Merchants
State Bank of Springfield, Springfield, Minnesota, for
continuation of deposit insurance after withdrawal from
membership in the Federal Reserve System.
14.
Report on competitive factors (Millersburg-Elizabethville,
Pennsylvania).
Distribution had been made unner date of March 19, 1962,
L.tS,
-6-
3/23/62
of a draft report to the Federal Deposit Insurance Corporation on the
competitive factors involved in the proposed merger of Millersburg
Trust Company, Millersburg, Pennsylvania, and Lykens Valley Bank,
Elizabethville, Pennsylvania.
Following discussion, during which a minor change in the
conclusion of the report was suggested and agreed upon, the report
was approved unanimously for transmittal to the Corporation in a
form containing the following conclusion:
While the proposed merger of Lykens Valley Bank,
Elizabethville, Pennsylvania, with Millersburg Trust
Company, Millersburg, Pennsylvania, would eliminate
existing competition between the subject institutions,
it would have no significant effect on any other banks
in the area.
Draft bill to amend Housing Act of 1949 (Item No. 5).
There
had been distributed with a memorandum from the Legal Division dated
March 22, 1962, copies of a proposed letter to the Bureau of the
Budget reporting on a draft bill "to amend title V of the Housing
Act of 1949, as amended, to provide an alternate method of financing
rural housing loans, & for other purposes."
There was included in the
materials that had been distributed a memorandum dated March 21, 1962,
from the Division of Research and Statistics presenting a detailed
analysis of the proposal.
As noted in the memoranda, the basic
Purpose of the draft bill was apparently to permit the rural housing
Program to be operated to the extent possible outside the limitations
imposed by the Federal budget.
-7-
3/23/62
The draft reply would indicate that: (1) the proposed sale
by the Secretary of Agriculture of securities under the authority
of the draft bill, depending on time and maturity, could on occasion
have a somewhat disrupting influence on the securities market and
could at times conflict with Treasury financing operations; (2)
the maximum interest rate on rural housing loans specified in the
bill, although raised from
4 to 5 per cent, would still fall short
of the rate at which such credit would customarily be extended by
local lenders; and (3) the direct issuance of fully-guaranteed
obligations by the Secretary of Agriculture was likely to involve
a somewhat higher interest rate than would be required on Treasury
obligations. The reply would also state that the Board was inclined
to feel that the bill should specify consultation with the Secretary
Of the Treasury on the terms, amounts, and timing of new issues, by
the Secretary of Agriculture.
Governor Mills commented that he was inclined to feel that
the reply should deal in a more forthright and critical manner with
the proposal, particularly the method that was to be used to provide
funds for the program.
Beyond that, he believed there might be a
substantial question as to the economic need for legislation of this
sort.
In the discussion that ensued, Mr. Cardon observed that the
bill was likely to be referred to the House Banking and Currency
1040
-8-
3/23/62
Committee.
Chairman Rains of the Housing Subcommittee had already
introduced a more liberal bill, and there were tentative plans for
holding hearings on his bill and the one under discussion.
Following further discussion, agreement was expressed with
a specific suggestion designed to strengthen the report to the Bureau
of the Budget.
Unanimous approval then was given to a letter in
the form attached as Item No. 5.
Messrs. Thomas, Molony, Partee, and Young then withdrew
from the meeting.
Orders and statements on approved mergers (Items 6-10).
There had been distributed under date of March 22, 1962, drafts of
a proposed order and statement concerning the Board's approval on
March 14 of the application by City Trust Company, Bridgeport,
Connecticut, to merge with The West Side Bank, also of Bridgeport.
A dissenting statement by Governors Balderston and Robertson also
had been distributed.
Distribution had likewise been made of a proposed order and
statement reflecting the Board's unanimous approval on March 22 of the
application by The Peru Trust Company, Peru, Indiana, to merge with
Farmers State Bank, Mexico, Indiana.
The Chairman stated reasons why, in his opinion, it would be
desirable to issue today the orders and statements in the two cases
concerned, and there was agreement.
The reasons related to the length
-9-
3/23/62
of time one of the applications had been before the Board and to certain
inquiries that had been made regarding the status of both applications.
Following discussion as to the procedure to be followed in
this connection, it was understood that if any Board member present
should have a question regarding the draft statements upon reviewing
them in more detail, a meeting of the Board would be held later in
the day.
Absent any such question, it was understood that the
respective orders and statements would be issued.
Secretary's Note: No such question having
been raised, the orders and accompanying
statements were issued later in the day.
Copies are attached as Items 6 through 10,
inclusive.
Director appointments.
Chairman Martin reported that Frederic
S. Hirschler had expressed willingness to accept appointment as Class
C director of the Federal Reserve Bank of San Francisco for the
unexpired portion of the three-year term ending December 31, 1964.
He also stated that he had talked with Chairman Whitman and would
recommend that John D. Fredericks, currently serving as a Class C
director, be appointed Deputy Chairman of the Bank for the year 1962.
Accordingly, it was agreed unanimously to appoint Mr. Fredericks
as Deputy Chairman.
The meeting then adjourned.
Secret
k. )
4 4e
0/
.1.1
BOARD OF GOVERNORS
***
*0
ir OF tiovq.
OF THE
FEDERAL RESERVE
SYSTEM
WASHINGTON 25. CI. C.
Item No. 1
3/23/62
ADDRESS OFFICIAL CORRESPONOCNCE
TO THE BEARD
March 23, 1962
Board of Directors,
Franklin County Trust Company,
Greenfield, Massachusetts.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by Franklin County
Trust Company, Greenfield, Massachusetts, of a branch
at 399 Federal Street, Greenfield, Massachusetts, provided the branch is established within six months from
the date of this letter.
Very
truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS
Item No. 2
3/23/62
arrtciAL cORRESPONOENCE
TO THE SOAR°
March 230 1962
Board of Directors,
The Vienna Trust Company,
Vienna, Virginia.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves, under the provisions of Section 24A of
the Federal Reserve Act, an additional investment of
$50,000 in bank premises by The Vienna Trust Company,
Vienna, Virginia, for the purpose of construction of bank
premises for the bank's branch at the intersection of
Maple Avenue and Berry Street in Vienna, Virginia. This
approval is in addition to $450,1300 approved by the
Board of Governors on January 24, 1962.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item NO. 3
3/23/62
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
March 23, 1962
Board of Directors,
The Commercial Savings Bank,
Adrian, Michigan.
Gentlemen:
The Board of Governors hereby approves the amendment
of the proposal under which t55,000 outstanding preferred stock
of The Commercial Savings Bank, Adrian, Michigan, would be
retired, and 2,500 shares of common stock with a par value of
$50,000 would be issued for t134,200 instead of 1135,000 as
previously submitted to and aprroved by the Board of Covrnors
on February 5, 1962.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Ca michael,
Assistent Secretary.
104.3
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No. 4
3/23/62
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
March 23, 1962
The Honorable Erle Cooke, Sr., Chairman,
Federal Deposit Insurance Corporation,
Washington 251 D. C.
Dear Mr. Cooke:
Reference is made to your letter of March 6,
1962, concerning the application of Farmers and Merchants
State Bank of Springfield, Springfield, Minnesota, for
continuance of deposit insurance after mithdrawal 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.
GOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
V/ASHIN-GTOM 25. D. C.
Item No.
5
3/23/62
ADDRESS OrrICIAL CORRESPONDENCE
TO THE IJOARD
March 230 1962
Mr. Phillip S. Hughes,
Assistant Director,
Legislative Reference,
Bureau of the Budget,
Washington 25, D. C.
Dear Mr. Hughes:
This is in response :to your memorandum request of March 15,
1962, for the views of the 'Board on a draft bill proposed by the
Department of Agriculture "To amend title V of the Housing Act of
1949, as amended, to provide an alternate method of financing rural
housing loans, & for other purposes."
It is understood that the basic purpose of the draft bill
is to permit the Department of Agriculture to obtain funds with which
,to make direct loans for the rural housing program without relying
entirely on Treasury borrowing as is done currently. Accordingly, it
is proposed to authorize the Secretary of Agriculture to sell obligations to private investors in order to obtain the necessary funds for
the program. These obligations would be direct obligations of, and
the payment thereof guaranteed by the full faith and credit, of the
United States. However, Should the funds derived from their sale be insufficient, the Secretary of Agriculture would be permitted to borrow
additional funds from the Treasury.
Direct loans may now be made to farmers for housing purposes
under section 502 of title V and loans made by private lenders to provide
farm labor housing may be insured under section 514 of title V. The
funds necessary for the section 502 program are presently provided by
borrowing from the Treasury, while the insured loan program under seccreated under the
5Th utilizes the insurance fund originally
would permit
amendment
proposed
The
Bankhead-Jones Farm Tenant Act.
section 514
be
made
to
under
loans,
insured
direct loans, as well as
502
would
loans
section
on
rate
interest
and the maximum permissible
Direct
loans
5
per
to
cent.
cent
per
4
be increased from the present
5
cent
per
of
rate
interest
maximum
a
have
under section 51h also would
that
loans
under
section.
insured
the
for
Which is the present maximum
The Board understands that the purpose of the proposed
legislation is to permit the rural housing program, to the extent
104T
Mr. Phillip S. Hughes
-2-
possible, to be operated outside the present limitations imposed by
the Federal budget, since funds for this program have been limited in
recent years by the Bureau of the Budget to $75 million or less annually.
If the proposed amendments to existing law are adopted, there would be
no statutory or budgetary limitation on the amount of funds which could
be used for the program.
It is probable, therefore, that the program will be substantially expanded in the period ahead. Though no specific estimates
of volume are available, it seems conceivable that sales of securities
by the Secretary of Agriculture, depending on timing and maturity,
could on occasion have a somewhat disrupting influence on the securities
market and could at times conflict with Treasury financing operations.
At a minimum, the Board believes that the bill should specify consultation with the Secretary of the Treasury on the terms, amounts, and
timing of new issues.
The Board has no further comment regarding the specific
Provisions of the bill. It Should be noted, however, that the
Specified maximum interest :'ate on these rural housing loans, though
raised from 4 to 5 per cent;, is still below the rate at which such
credit would customarily be extended by local lenders. It should also
be pointed out that the issuance of special obligations by the Secretary
Of Agriculture, even if fully guaranteed, is likely to involve a somewhat higher interest rate than would be required on direct Treasury
Obligations.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
1048
Item No. 6
3/23/62
UNITED STATES' OF AIIERICA
BEFOPE THE BOARD CF GOVIRNORS OF THE FED:EAL RESERT2: SYSiL1.1
\:ASEIHGTCN, D. C.
In the Matter of the Application of
CITY TRUST C012ANY
for approval of merger uith
The West Side Bank
GREIF APPRCVIG ulDli_11 OF BANKS
There has come before the Board of Governors, pursuant to
cection 18(c) of the Federal Deposit Insurance Act (12 U.S.C. 1820(c)),
an application by City Trust Corpany, Bridgeport, Connecticut, a member
bank of the Federal Deserve System, for the Board's prior approval of
the mer-ier of The West Side Bank, Bridgeport, Connecticut, with and
into City Trust Comnany, under the charter and title of the latter.
Pursuant to said section 18(c), notice of the proposed merger,
in form approved by the Board of Governors, has been Published, and
l'a)orts on the comootitive factors involved in the pr000sed transac-Lon
l'ave been furnished by the Comptroll -r of the Currency, the Federal
Deposit Insurance Corporation, and the Department of Justice and have
becn considered by the Board.
-2IT IS ORMInD, for the reasons set forth in the Boardls
approved,
Statement of this date, that said merger be, and hereby is,
than
provided that said merger shall not be consummated (a) sooncr
seven calendar days after the date of this ':Tder or (b) later than
three months after said date.
Dated at Washington, D. C., this 23rd day of liarch, 1962.
By order of the Beard of Governors.
Votng for this action: Chairman iiartin, and Governors
.
Shepardson, and Kin,
Voting against this action:
Absent and not voting:
Governors Balderston and Pobertson.
Governor
(Signed) 1::erritt Sherman
lierritt Sherman,
Secretary.
Item No,
7
3/23/62
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY CITY TRUST COMPANY
FOR PRIOR APPROVAL OF THE MERGER OF THE WEST SIDE BANK
STATEMENT
,
City Trust Company, Bridgeport, Connecticut ("City Trust")
vith deposits of $140.3 million, has applied, pursuant to section 18(c)
cf the Federal Deposit Insurance Act, for the Boards prior approval
Qf the merger of that bank and The West Side Bank, Bridgeport,
Connecticut ("West Side"), with deposits of $13.2 million.
Under the
Agreement of Merger the banks would merge under the charter and title
°f City Trust; and the single office of West Side would become a branch
°I' City Trust, the total banking offices of which would be thereby increased from 7
to 8.
The law requires the Board to consider (1) the financial
history and condition of each of the banks involved, (2) the adequacy
°f its capital structure, (3) its future earnings prospects, (4) the
general character of its management, (5) whether its corporate powers
are consistent with the purposes of the Federal Deposit Insurance Act,
(6) the convenience and needs of the community to be served, and (7) the
effect of the transaction on competition (including any tendency toward
Monopoly).
The Board may not approve the transaction unless, after
1051
-2considering all these factors, it finds the transaction to be in the
Public interest.
of
Banking factors. - The financial history and condition
the two banks are satisfactory.
Each bank has an adequate capital
and the
structure; the earnings prospects of each are satisfactory;
and backed by ample
management of City Trust is competent, progressive,
Provision for succession.
This would be true also of the resulting
bank, which would be under City Trust's management.
ce of
West Side has capable management; but lack of assuran
adequate management succession for that bank, while not now a matter
of urgency, has been cited by applicant in support of the merger.
-to
Efforts thus far by West Side--which first proposed the mergerfind qualified and acceptable personnel for senior positions with the
bank have not been successful.
Approval of the merger would resolve
any- problem at West Side in this respect.
There is no evidence that
the corporate powers of the banks are or would be inconsistent with the
Purposes of the Federal Deposit Insurance Act.
ry factors
Thus, consideration of the first five of the statuto
to the application.
enumerated above--the "banking factors"--lends support
Convenience and needs of the communities. - The City of
in the
Bridgeport (population about 157,000) lies on Long Island Sound
southwestern part of Connecticut about 60 miles northeast of New York
concerns, many nationally known,
citY. With about 500 manufacturing
of Connecticut,
8ridgeport is regarded as the most industrialized city
_3_
and is among the 100 most important industrial cities in the United
States.
Bridgeport also serves as the largest retail shopping area
in the southwestern part of the State.
Greater Bridgeport (popula-
tion 290,000) includes the City and the neighboring townships of
Stratford, Trumbull) Fairfield, and part of Westport. These townhips have had substantial increases in population since 1950.
The service area of City Trust includes Greater Bridgeport
and two smaller communities beyond Greater Bridgeport.
The bank has
r°ur offices in Greater Bridgeport and three offices in the other two
localities.
Three of City Trust's seven offices are within the City
Of Bridgeport.
West Side's primary service area lies inside the
service area of City Trust and is comprised of a highly industrialized
atd densely populated section of about two square miles within the
City.
Part of this area is undergoing an extensive redevelopment pro-
m which will contribute substantially to its economy and growth.
The effect of the proposed merger cm the convenience and
teeds of the Bridgeport area would be limited almost entirely to the
area of the City served by West Side. While West Side has experienced
sllbstantial growth in loans and deposits over the past ten years) it
°Perates under conservative policies and has not aggressively sought
to
expand its services or solicit new business.
Consummation of the
Ilisrger would make more convenient to West Side's customers such services
48 complete trust facilities) an active installment loan department,
4td those specialized services which benefit such an area financially.
A further result would be to increase more than tenfold the basic loan
limit applicable to customers of West Side. This would help meet the
expected increase in demand for large loans as the area undergoes redevelopment.
Competition. - There are four commercial banks with over
$481 million of deposits serving the City of Bridgeport with 11 offices.
The largest is Connecticut National Bank with about $180 million of
dePosits and six offices in Bridgeport. In second place is the National
Bank and Trust Company of Fairfield County, Stamford, with $149 million
Of ieposits and one Bridgeport office, which is substantially removed
from the downtown area of the City.
City Trust is third, and West Side
is the smallest of the four banks. If the merger is approved, City
Trust will rank in second place.
In addition, Bridgeport is served by eight offices of three
avings banks which, due to the broad powers they have under Connecticut
law, are able to offer the commercial banks keen competition.
These
savings banks hold about $423 million of deposits or 47 per cent of the
total deposits of all banks serving Bridgeport.
West Side, which is 1.3 miles from City Trust's main office
and which lies within the service area of City Trust, obtains about
25 Per cent of both its loans and deposits from that area.
City
Trust obtains about five per cent of both its loans and deposits from
West Side's primary service area.
Of the deposit volume of the two
banks held by common customers, most is held by the City of Bridgeport
and a few nationally known firms; while over
75
per cent of City Trust's
loans to common customers represent average borrowings far above West
Side's loan limit.
Much of the business acquired by City Trust from
the area served by West Side has been due to the wider range of services provided by the larger bank that are customarily regarded as
necessary by large business accounts.
Competition between the two
g between banks
institutions is not of the magnitude frequently existin
so situated.
expandConnecticut National Bank, an aggressive and rapidly
ing institution and City Trust's chief commercial bank competitor,
located
recently received permission to establish another branch to be
three blocks from West Side.
This may be expected to intensify competi-
tion in the area.
and
The rates of interest charged on loans by City Trust
West Side are generally comparable, while no significant variation
exists in their service charges.
deposits, as compared to
4
Both pay 3-1/2 per cent on savings
per cent at Bridgeport's three savings
banks.
will
Summary and conclusion. - Although the proposed merger
Bridgeport
eliminate some competition in the highly industrialized
s to West
area, the merger will provide a full range of banking service
greatly increased lending
Side's customers and make available to them a
limit without any serious diminution in competition.
This will not
1055
West Side
only aid in the redevelopment program for the area in which
is located, but will enable City Trust to compete more effectively
With the largest bank in Bridgeport.
will
Accordingly, the Board finds that the proposed merger
be in the public interest.
March 23, 1962
10'
Item No.
8
3/23/62
DISSENTING STATEMENT OF GOVERNORS BALDER3TON AND ROB2RTSON
Approval of this application, in our view, clearly will result
in a substantial diminution in competition in the City of Bridgeport.
It is significant that, while the volume of business of City Trust that
°riginates in the service area of West Side is not large in relation
to City Trust's total business, the latter obtains about one-third of
the business available to the two banks in the service area of West Side.
This merger will add to an already heavy concentration of bankresources,
Of the
$481 million of deposits held by the four com-
Illercial banks now with offices in the City of Bridgeport, Connecticut
National Bank has about
40 per cent, The National Bank and Trust Company
Of Fairfield County has
30 per cent) City Trust has over 28 per cent,
arld West Side has less than
the
3 per cent. Eliminating from consideration
149 million of deposits of The National Bank and Trust Company of
Fairfield County--whose only branch in Bridgeport is substantially renI°ved from the downtown area--the concentration of banking resources
ia of serious magnitude, with Connecticut National Bank and City Trust
holA4
'LLng
54 per cent and 42 per cent, respectively, of the $332 million
()f commercial deposits, or 96 per cent. The merger of City Trust and
ilest Side will further increase the seriousness of the situation.
By the elimination of West Side--a sound, well-managed and
gt.°14ing institution--the public will be deprived of not only an alternative
source of commercial banking, but of the privilege and the
lu
-2tution of demonstrated
advantages of doing business with a small insti
ability.
to deal with
Solely from the patronage of those who chose
It, West Sidets deposits have increased 47 per cent and its loans
with
have increased 87 per cent over the 10 year period that ended
1960.
r or find it necesFor those members of the public who prefe
the distances between hest Side
sary to do business with a large bank,
if any, consequence.
and alternative larger institutions are of little,
proof rests, has not
The applicant, upon whom the burden of
in the public interest. The
established that the merger would be
management succession for West
alleged lack of assurance of adequate
Side is not convincing.
We are not satisfied that the problem of
ved through the diligent efforts
management succession cannot be resol
.
of West Sidels present, capable management
r, therefore, has led us to
Our consideration of the matte
the conclusion that the public interest would not be served by permitting
consummation of the merger.
March 23, 1962.
Item No. 9
3/23/62
UNITED STATES OF A ERICA
BEFORE THE BOARD OF GOVTNORS OF TH3 FEDERAL RESERVE SYSTM
WASHINGTON, D. C.
In the Matter of the Application of
THE PERU TRUST COMPANY
for approval of merger with
Farmers State Bank
=ER APPROVIrG LERGER OF BANKS
There has come before the Board of Governors, pursuant to
section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. 1828(c)),
an application by The Peru Trust Company, Peru, Indiana, a member bank
Of the Federal Reserve System, for the Bcardis prior approval of the
Merger of Farmers State Bank, flexico, Indiana, with and into The Peru
Trust Company, under the charter and title of the latter.
Pursuant to said section l8(c)i notice of the proposed
merger, in form approved by the Board of Governors, has been published,
and reports on the competitive factors involved in the proposed
transaction have been furnished by the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, and the Department of
Justice and have been considered 1J3r the Board.
1059
IT IS ORDERMI for the reasons set forth in the Boardts
Statement of this date, that said merger be, and hereby is
approved,
provided that said merger shall not be consummated (a) sooner than
seven calendar days after the date of this Order or (b) later than
three months after said date.
Dated at Washington, D. C., this 23rd day of March, 1962.
By order of the Board of Governors.
Voting for this action: Chairman Kartin„ and Governors
Balderston, Mills, Robertson, and King*
Absent and not voting:
Governors Shspardson and Mitchell,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(SEAL)
Item No. 10
3/23/62
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY THE PERU TRUST COMPANY
FOR PRIOR APPROVAL OF MERGER WITH FARMERS STATE BANK
STATEMENT
The Peru Trust Company, Peru, Indiana ("Peru Trust"), with
to section 13(c) of
deposits of $10.3 million, has applied, pursuant
the Federal Deposit Insurance Act, for the Board's prior approval of
the merger of that bank and Farmers State Bank, Mexico, Indiana
("Farmers State"), with deposits of $359,000.
Under the Joint Agree-
Lent of Merger the banks would merge under the charter and title of
Peru Trust; and the single office of Farmers State would become a
branch of Peru Trust.
Under the law, the Board is required to consider (1) the
the banks involved, (2) the
financial history and condition of each of
adequacy of its capital structure, (3) its future earnings prospects,
(4) the general character of its management, (5) whether its corporate
Powers are consistent with the purposes of the Federal Deposit InsurarIce Act,
(6) the convenience and needs of the community to be served,
on competition (including any
and (7) the effect of the transaction
tendency toward monopoly).
The Board may not approve the transaction
unless, after considering all these factors, it finds the transaction
to be in the public interest.
-2-
The first five of these factors may be considered together
O.s "tanking factors".
The sixth and seventh factors are considered
separately.
Banking factors. and conditions.
Both banks have good financial histories
Each has a strong capital structure; and Peru Trust
has competent management and favorable earnings prospects.
These
Farmers State, with
attributes would hold true for the resulting bank.
modest but well-conserved earnings, is capably managed by one salaried
Officer for whom eventual successor management, without considerable
increase in salary expensel appears doubtful. There is no indication
that the corporate powers of the banks are or would be inconsistent
With the purposes of the Federal Deposit Insurance Act.
Consideration of the banking factors, therefore, lends
support to the application.
Convenience and needs of the communities. - Peru, Indiana
(Population 14,500), is the county seat of Miami County and lies
75 miles north of Indianapolis.
Peru has several small diversified
industries, and Bunker Hill Air Force Base is 7 miles southwest of the
City,
The economy of the County (population 38,000) relies largely on
agriculture.
Mexico (population 800) is a rural town 5 miles northwest
Of Peru in a good farming area and is primarily an agricultural trading
center.
Farmers State is the town's only bank.
Miami County constitutes the service area of Peru Trust, while
the service area of Farmers State is limited to Mexico and vicinity and,
larger bank.
therefore, is surrounded by the service area of the
over the past several
Farmers State, which has shown little growth
nor does it offer
Years, does not accept interest-bearing deposits,
Safe deposit or trust department facilities.
r on the convenience
If approved, the main effect of the merge
to the customers
and needs of the communities would be to make available
and the more complete
of Farmers State a much greater bank loan limit
banking facilities of the resulting bank.
ary banking facility at the
Competition. - Except for a milit
operates only from its main
Bunker Hill Air Fero° Base, Peru Trust now
office.
to a branch and will do
The bank plans to convert the facility
SO as soon as authority is received from the Air Force.
Peru Trust's
larger 1Jabash Valley Bank (which
Principal competitor is the slightly
Bunker Hill and at Denver,
is Peru's only other bank) with branches at
11 miles north of Peru.
if any, effect
The merger would have little,
to equalize competition beon competition in Peru, but it would tend
the area north of the city
tween Peru Trust and Wabash Valley Bank in
and at Bunker Hill.
business from the service area
While Peru Trust obtains some
no common customers, and
of Farmers State, the banks have virtually
between the two institutions
there is no competition of significance
Or between Farmers State and any other bank.
sed merger will provide
Summary and conclusion. - The propo
broader banking services to the Mexico area.
While the merger would
IL't..„1(' I
-4the competitive
eliminate little, if any, competition, it might improve
tor.
situation between the resulting bank and its principal competi
The
ion problem at
merger would also eliminate any management success
Farmers State.
d merger would
Accordingly, the Board finds that the propose
be in the public interest.
March 23, 1962
@FedFRASER