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400 A meeting of the Board of Governors of the Federal Reserve SYstem was held in Washington on Monday, March 25, 1940, at 11:30 4. xte PRESD1T: Mr. Eccles, Chairman Mr. Ransom, Vice Chairman Mr. Szymczak Mr. Davis Mr. Draper Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman The action stated with respect to each of the matters hereinafter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Pederal Reserve System held on March 22, 1940, were approved unaniMoUsly. Bond, in the amount of el0,000, executed under date of March 14, 1940, by Mr. Owen D. Young as Federal Reserve Agent at the Federal Ilaserve Bank of New York. Approved unanimously. Letter dated March 23, 1940, to the board of directors of "Ile Bank of Quinwood", Quinwood, West Virginia, stating that, subJact to conditions of membership numbered 1 to 3 contained in the 1110tird's Regulation H and the following special conditions the Board Proves the bank's application for membership in the Federal Reserve SYstem and for the appropriate amount of stock in the Federal Reserve /44%1_ of Richmond: 401 3/25/40 "4. -2 - Such bank shall make adeauate provision for depreciation in its banking house and furniture and fixtures. Prior to admission to membership, such bank, if it has not already done so, shall charge off or otherwise eliminate estimated losses of 4g1,250, as shown in the report of examination of such bank as of February 27, 1940, made by an examiner for the Federal Reserve Bank of Richmond." Approved unanimously, together with a letter to Mr. Leach, President of the Federal Reserve Bank of Richmond, reading as follows: "The Board of Governors of the Federal Reserve System approves the application of 'The Bank of Quinwood', Quinwood, West Virginia, for membership in the Federal Reserve System, subject to the conditions prescribed in the enclosed letter which you are requested to forward to the Board of Directors of the institution. Two conies of such letter are also enclosed, one of which is for Your files and the other of which you are requested to forward to the Commissioner of Banking for the State of West Virginia for his information. "It is assumed that your office will follow the matter of the bank's revising its contract with savings depositors so as to reserve the right to require notice of intended withdrawals as provided in the Board's regulations. "It is noted that the copy of the bank's certificate Of incorporation and an amendment thereto, which eccomPanied the application for membership, was certified by the Secretary of State of West Virginia on August 31, 1933, and, in the absence of advice with respect to any subsequent amendments, the approval of the application is subject to the understanding that there have been none. Also, the copy of the certificate authorizing the bank to commence was not certified by anyone; and, in connection With other recent applications, questions have arisen as to whether the documents required as Exhibit IV were properly authenticated and whether there WBS satisfactory assurance that they were complete. Accordingly, for your guidance in future cases, attention is called to fact 402 3/25/4o "that, in acting upon applications, the Board desires the assurance of the appropriate State official that such documents are correct and complete." Letter to Mr. Arthur 0. Lee, Business Manager, St. Olaf Collage, Northfield, Minnesota, reading as follows: "This refers to your request that the Board determine that St. Olaf College, Northfield, Minnesota, is not engaged, directly or indirectly, as a business in holding the stock of, or managing or controlling, banks, banking associations, savings banks, or trust companies, within the meaning of section 2(c) of the Banking Act of 1933, as amended. "The Board understands that St. Olaf College is a denominational liberal arts college founded in 1874; that It is one of the largest educational institutions in the State of Minnesota; that it is not operated for private Profit; and that it is a corporation whose purposes and Powers are set forth in its articles of incorporation as follows: 'The general Purpose and scope of this corporation shall be the establishment and maintenance of an institution of learning of collegiate rank, in which higher education shall be given in harmony with the Christian faith as taught in the Evangelical Lutheran Church. 'The corporation shall have power to provide teachers, suitable grounds and buildings, libraries, apparatus and equipment, prescribe courses of study and equipment; grant such literary honors and academic degrees as are usually granted by similar institutions; acquire and receive by purchase, gift end devise, bequest, or in any other lawful manner, real and personal property, and own, hold, use and enjoy, sell and encumber such property, and establish and administer endowment funds for the benefit of the institution; and in general to do all things necessary and incidental to the successful conduct of the institution, consistent with law.' "The Board also understands that under the will of Herold Thorson St. Olaf College same years ago received 403 3/25/40 -4- "the residue of his estate, which consisted of real estate, bank stock, and other property valued at several hundred thousand dollars; that, under the terms of the will, St. Olaf College is required to use such property 'in the construction of a building suitable for the uses and needs of the college, and not otherwise'; that, since the property so received was such as could not be readily converted into cash and conditions have not been favorable for its disposal, much of it has not yet been liquidated; and that, of the bank's stocks so received, St. Olaf College still owns stock of active banks to the extent set forth below (treating as owned by St. Olaf College the stock of the first two banks which is held in the names of certain individuals): First National Bank of Bottineau, 100% Bottineau, North Dakota Fessenden, of Bank First National 90% Fessenden, North Dakota Enderlin, Bank, Citizens State 96°,7c North Dakota Lake, Elbow Lake, Bank of Elbow Minnesota First State Bank of Kensington, Kensington, Minnesota 40% Citizens State Bank of Barrett, 26% Barrett, Minnesota It appears that the above-named banks are small country banks which, measured by their total assets, range in size from 150,000 to 000,000, approximately; that in the aggregate the assets of the six banks are substantially smaller than the assets of St. Olaf College; and that the stock which St. Olaf College owns of such banks constitutes a relatively small portion of its assets. "It is understood that, under Mr. Thorson's will, St. Olaf College also received stock of other banks in the amounts set forth below: First State Bank of Lucca, Lucca, 71 shares North Dakota Berwick State Bank, Berwick, 115 North Dakota Deering State Bank, Deering, tt 245 North Dakota The Bank of Berthold, Berthold, 28 North Dakota The State Bank of Des Lacs, 20 Des Lacs, North Dakota 404 3/25/40 -5- "Farmers State Bank of Orrin, 10 shares Orrin, North Dakota Of such banks, it appears that those at Lucca and Berwick were placed in liquidation some years ago, the liquidation of the former having been completed; that the bank at Deering was placed in liquidation a few weeks ago; and that the stock of the others has been disposed of. "The Board understands that St. Olaf College takes en active interest in the operations of the banks of which it owns stock, having one of its officers serve as an officer and director of the banks and having in the past aided some of the banks financially; that, however, it definitely has no desire to retain control of the banks; and that it intends to dispose of the stock as soon as it can without undue sacrifice. and is under a duty to do SO in order to carry out the Purposes for which it was received. "Reference also should be made to the fact that St. Olaf Corporation, an 'auxiliary' corporation under the same management as St. Olaf College and engaged in performing certain service functions for it, owns 66 per cent of the stock of Vergas State Bank, Verges Minnesota, another small country bank with assets of less than $200,000. It appears that such stock was acquired in 1930 when the bank, then located at Laporte, Minnesota, was in difficulties and St. Olaf College believed that it should not permit the bank to close because it owned Property in the community served by the bank and one of its officers, who was actively managing the Thorson estate, was 8 stockholder in the bank. The policy with respect to this bank and the disposal of its stock apParently is much the same as that with respect to the Other banks. "St. Olaf College and St. Olaf Corporation also own other bank stocks, but it is understood that they do not own or control a significant portion of the stock of, or manage or control, any bank other than those referred to above. "In view of these facts, the Board has determined that St. Olaf College is not engaged, directly or indirectly, as a business in holding the stock of, or managing and controlling, banks, banking associations, savings banks, or trust companies, within the meaning of section 2(c) of the Banking Act of 1933, as amended. 405 -6- /25/40 "If, however,- the facts should at any time differ from those set out above to an extent which would indicate that St. Olaf College might be deemed to be so engaged, this matter should again be submitted to the Board. The Board reserves the right to make a further determination at any time on the basis of the then existing facts." Approved unanimously for transmission through the Federal Reserve Bank of Minneapolis. Letter to Mr. Hitt, First Vice President of the Federal Reserve Bank of St. Louis, reading as follows: "This refers to your letter of March 1 in which You inquire whether loans segregated by the FirstOwensboro Bank and Trust Company, Owensboro, Kentucky, in compliance with the provisions of Section 612(a) of the Kentucky Banking Laws, are required to be reported as 'pledged assets', against item 31 of condition reports on form F.R. 105. "It is understood that the section of State law to which you refer provides that one-half of the capital stock of a combined bank and trust company 'shall be securely invested for the trust business of the corporation and shall at all times be kept separate and distinct from its other assets, and shall be primarily liable for its fiduciary obligations'. It is also understood that the circumstances in the instant case are the same as in the case of the Lincoln Bank and Trust Company, Louisville, Kentucky, previously decided by the Board, except that in the present case loans are segregated pursuant to the provisions of State law Whereas in the former case banking house and other real estate were so segregated. "From a reading of the section of the :Kentucky Banking Laws in question, it Ikould not appear that assets segregated in accordance with the provisions thereof constitute 'pledged assets' within the meaning of that term as used in memorandum item 31 of the call report form P.R. 105. Accordingly, member banks should not be required to report such segregated assets against item 31 of the call report." Approved unanimously. - 406 Z/25/40 -7- Thereupon the meeting adjourned.
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