Appendix — United States v. Phillipsburg National Bank & Trust Co.
Supreme Court brief1970
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_———— Dee — Sakis ROS
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
UNITED STATES OF AMERICA,
CIVIL ACTION No. 56-68
Plaintiff,
v.
THE PHILLIPSBURG NATIONAL BANK
AND TRUST COMPANY and THE SECOND
NATIONAL BANK OF PHILLIPSBURG,
Defendants.
WILLIAM B. CAMP, Comptroller of the Currency,
|-17-68
2-13-68
2-27-68
3-11-68
| 2-24-68
10-1 5-69
10-15-69
10-21-69
10-21-69
INTERVENOR.
RELEVANT DOCKET ENTRIES
Complaint filed 1-16-68.
Answer filed 2-9-68.
Order granting leave to William B. Camp.
Comptroller of the Currency to intervene filed
3-21-68.
Answer of intervenor, William B. Camp, Comptroller
of the Currency, filed 3-8-68.
Transcript of trial in XI volumes filed | 2-23-68.
Opinion, filed 10-14-69 (Shaw) (In favor of
defendants and intervenor)
Ordered stay continued until further order of the
Court (Shaw). (10-14-69)
Hearing on plaintiffs motion to re-open the record
und to amend the final findings of fact and
conclusions of 1aw. Ordered motion granted. (Shaw)
(10-20-69)
Order continuing the statutory stay for a period of
forty days from the date of judgment, etc., filed
10-20-69 (Shaw).
Dl IG Gin eR Le ha
ie.
ainda
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10-21-69 Plaintiffs motion to re-open the record and to
amend the final findings of fact and conclusions of
law, filed 10-20-69.
10-21-69 Judgment of dismissal of action, without costs, filed
10-20-69 (Shaw).
12-4-69 Notice of appeal, filed 11-28-69.
12-4-69 Amended Notice of Appeal to The Supreme Court
of U.S., filed 12-2-69.
12-17-09 Plaintiff's Designation and Certification of Record
on Appeal and certificate of service filed.
1-5-70 Order amending opinion filed on Oct. 14, 1969,
filed 1-2-70 (Shaw).
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
(CAPTION OMITTED IN PRINTING)
COMPLAINT
The United States of America, plaintiff, by its attorneys,
acting under the direction of the Attorney General of the
United States, brings this civil action to obtain equitable relief
against the defendants named herein and complains and
alleges as follows:
I
JURISDICTION AND VENUE
|. This complaint is filed and this action is instituted under
Section 15 of the Act of Congress of October 15, 1914, c.
323, 38 Stat. 736, as amended (15 U.S.C. § 25), commonly
known as the Clayton Act, in order to prevent and restrain
violation by the defendants, as hereinafter alleged, of Section
7 of the Clayton Act, 38 Stat. 731, as amended by the Act of
Congress of December 29, 1950, c. 1184, 64 Stat. 1125 (15
US.C. § 18).
2. Each of the defendants has its principal place of
business, transacts business, and is found within the District
of New Jersey.
II
THE DEFENDANTS
3. The Phillipsburg National Bank and Trust Company,
hereinatter referred to as “Phillipsburg National,” is made a
defendant herein. Phillipsburg National is a banking
association Organized and existing under the laws of the
United States of America, with its principal place of business
in Phillipsburg, New Jersey.
4. The Second National Bank of Phillipsburg, hereinafter
referred to as “Second National,” is made a defendant herein.
Second National is a banking association organized and
existing under the laws of the United States of America, with
its principal place of business in Phillipsburg, New Jersey.
ee ere ene See ee ee a
Ill
DEFINITIONS
5. As used herein, the term ‘‘Phillipsburg-Easton” means
the cities of Phillipsburg, New Jersey, and Easton,
Pennsylvania, and their environs.
IV
TRADE AND COMMERCE
6. Commercial banks fill an essential and unique role in the
Nation’s economy. Their principal functions are the
acceptance of deposits for safekeeping and convenience in
making payments by check, the granting of loans or advances
of funds to individuals and business firms, and the creation
through demand deposits of net additions to the supply of
money. Most money payments in the United States are made
through checks drawn against demand deposits, and the
creation and holding of such deposits is a function peculiar to
commercial banks and one which makes them to a great
extent the administrators of the Nation’s check payment
system. Through the making of loans to individuals and
businesses, commercial banks supply a significant part of the
credit requirements of the Nation’s economy. Commercial
banks also accept time deposits from various types of
depositors and provide a wide variety of other financial
services, including personal and corporate trust accounts, the
collection of drafts, bills, and other commercial instruments,
the acceptance of bills of exchange, the issuance of letters of
credit, the sale of cashier's checks, and drafts on
correspondent banks, the purchase or sale of securities for
customers, the sale of foreign exchange, and the renting of
safety deposit boxes. This combination of services is
unduplicated by other financial institutions.
7. Commercial banks, because of the importance of bank
credit to business and other borrowers and_ the close
relationship of banks with many such borrowers, and because
of their holdings of stock in trust accounts, have an important
influence on competition in all branches of industry and
commerce served by the banking system.
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8. Phillipsburg National is the largest of the three
commercial banks located in the city of Phillipsburg, and it is
third largest of the six banks headquartered in
Phillipsburg-Easton. As of September 20, !966, Phillipsburg
National had total assets of $21,529,000, total deposits of
$19,983,000, and loans and discounts of $12,342,000.
Phillipsburg National presently operates three banking offices,
all located within the city of Phillipsburg or environs.
9. Second National is the second largest bank located in
the city of Phillipsburg, and the fifth largest bank in
Phillipsburg-Easton. As of September 20, 1966, Second
National had total assets of $15,867,000, total deposits of
$14,498,000, and loans and discounts of $9,478,000. It
operates two offices, both located within the city of
Phillipsburg.
10. Commercial banking in Phillipsburg-Easton is heavily
concentrated. As of September 20, 1966, the two largest
banks headquartered there accounted for approximately 56%
of total deposits of commercial banking offices in
Phillipsburg-Easton, and the three largest banks accounted for
approximately 69.4% of such deposits. Phillipsburg National
held about 13.5% of the total deposits in all commercial
banking offices there, and Second National held about 9.9%
of such deposits.
1]. If the merger were consummated, the two largest banks
would account for approximately 65% of total deposits held
by commercial banking offices there, and the three largest
would account for approximately 79% of such deposits.
Phillipsburg National would become the second largest bank
in Phillipsburg-Easton, increasing its share of total deposits
from 13.5% to 23.4%, and it would operate five of the 16
commercial banking offices located there.
12. Phillipsburg National and Second National are each
substantial competitors in commercial banking in the City of
Phillipsburg and in Phillipsburg-Easton. The main offices of
Phillipsburg National and Second National are located across
the street from each other, as are their respective branches in
northeast Phillipsburg. Both defendant banks derive the
predominant share of their business from the same area,
namely Phillipsburg-Easton. The defendant banks directly
compete in this area with each other and with other
commercial banks having offices in Phillipsburg-Easton, in
offering and performing commercial banking services.
inane 4
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13. Customers of Phillipsburg National and Second
National have regularly utilized interstate communications,
including the mails, telephone and telegraph, to carry on their
business with, apply for, and obtain the services provided by
these banks. Phillipsburg National and Second National have
regularly utijized interstate communications, including the
mails, telephone and telegraph, to conduct business with
customers, and with other banks located in states other than
New Jersey. Phillipsburg National and Second National are each
engaged in interstate commerce.
V
OFFENSE CHARGED
14. Defendants’ Phillipsburg National and Second National
have entered into an agreement, approved by their respective
Boards of Directors on April 14 and April 17, 1967, which, if
carried out, will result in a merger of Second National with
and into Phillipsburg National under the charter of
Phillipsburg National and with the title of Phillipsburg
National. The Comptroller of the Currency granted approval
of the proposed merger of the defendants on December 18,
1967.
15. The effect of the merger of Phillipsburg National and
Second National, pursuant to the agreement described in
paragraph 14 above, may be substantially to lessen
competition or to tend to create a monopoly in violation of
Section 7 of the Clayton Act.
16. The offense alleged in this complaint will be carried
out and will continue unless the relief hereinafter prayed for
is granted.
VI
EFFECTS
17. The offense alleged in this complaint, if carried out
and continued, will have the following effects, among others:
(a) competition between the defendants will be
permanently eliminated;
(b) competition generally in commercial banking in
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Phillipsburg and Phillipsburg-Easton will be substantially
lessened and a tendency to monopoly created: and
(c) concentration in commercial banking in Phillipsburg
and Phillipsburg-Easton will be substantially increased.
PRAYER
WHEREFORE, plaintiff prays:
1. That the aforesaid merger of Phillipsburg National and
Second National pursuant to the Agreement described in
paragraph 14 of this complaint be adjudged unlawful, in
violation of Section 7 of the Clayton Act.
2. That the defendants Phillipsburg National and Second
National and all persons acting on their behalf be enjoined
from carrying Out the aforesaid agreement of merger or any
similar plan or agreement, the effect of which would be to
merge, consolidate, or in any other way combine the
businesses of, said defendants.
3. That the plaintiff have such other and further relief as
the Court may deem just and proper.
4. That plaintiff recover the costs of this action.
RAMSEY CLARK
Attorney General
DONALD F. TURNER
Assistant Attorney General
BADDIA J. RASHID
Attorney, Department of Justice
CHARLES L. WHITTINGHILL
Attorney, Department of Justice
United States Attorney
ROBERT C. WEINBAUM
Attorney, Department of Justice
Rae
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UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
(CAPTION OMITTED IN PRINTING)
ANSWER
The Phillipsburg National Bank and Trust Company and
The Second National Bank of Phillipsburg, jointly, by way of
answer to the Complaint herein say that:
1. As used herein, the term Trading Area means all of
Warren County, New Jersey, the northwestern portion of
Hunterdon County, New Jersey, (Alexandria Township,
Bethlehem Township, Bloomsbury Borough, Clinton Town,
Clinton Township, Flemington Borough, Franklin Township,
Frenchtown Borough, Glen Gardner Borough, Hampton
Borough, High Bridge Borough, Holland Township, Kingwood
Township, Lebanon Borough, Milford Borough, Raritan
Township and Union Township), all of Northampton County,
Pennsylvania, all of Lehigh County, Pennsylvania, and that
portion of Bucks County, Pennsylvania within 15 miles of the
Town of Phillipsburg, New Jersey.
2. Defendants admit that plaintiff purports to file the
complaint and institute this action under the Clayton Act, but
they assert that these proceedings are governed by 12 U.S.C.
§ 1828, the Bank Merger Act, as amended; except as admitted
hereby, defendants deny the averments of paragraph 1.
3. Defendants admit the averments of paragraph 2.
4. Defendants admit the averments of paragraph 3.
5. Defendants admit the averments of paragraph 4.
6. Defendants admit that as used in the complaint, the
term ‘‘Phillipsburg-Easton’’ purports to mean_ the
municipalities of Phillipsburg, New Jersey and _ Easton,
Pennsylvania, and their environs, but assert that the area as
described by plaintiff is vague and inadequate for a proper
consideration of this matter and further assert that the
pertinent geographic area in which to view this matter is the
Trading Area described herein.
7. Defendants admit that large commercial banks, in
general, provide the services iisted in paragraph 6. They deny
that the averments of paragraph 6 necessarily have a relevance
to or properly delineate the scope, nature and emphasis of
their own particular activities or areas of competition. Except
as admitted hereby defendants are without knowledge or
information sufficient to form a belief as to the truth of the
9
averments of paragraph 6 and leave plaintiff to its proofs
thereof as to these two defendants.
8. Defendants deny that the averments of paragraph 7 have
a relevance to or properly delineate the scope, nature and
emphasis of their own particular activities, or relationship.
Except as denied hereby, defendants are without knowledge
or information sufficient to form a belief as to the truth of
the averments of paragraph 7 and leave plaintiff to its proofs
thereof as to these two defendants.
9. The defendants admit the averments of paragraph 8 in
respect to the assets, deposits, loans and discounts and offices
of Phillipsburg National. Defendants are without knowledge of
the precise boundaries of the geographic area described as the
“environs” of Phillipsburg-Easton or of the methods used by
plaintiff in asserting the size of a bank, and assert that the
Trading Area is the proper geographic area in which to make
such a determination, wherefor except as admitted hereby
defendants are without knowledge or information sufficient to
form a belief as to the truth of the averments of paragraph 8
and leave plaintiff to its proofs thereof.
10. Defendants admit the averments of paragraph 9 in
respect to the assets, deposits, loans and discounts and offices
of Second National. Defendants are without knowledge of the
precise boundaries of the geographic area described as the
“environs” of Phillipsburg-Easton or of the methods used by
plaintiff in asserting the size of a bank, and assert that the
Trading Area is the proper geographic area in which to make
such a determination, wherefor except as admitted hereby
defendants are without knowledge or information sufficient to
form a belief as to the truth of the averments of paragraph 9
and leave plaintiff to its proofs thereof.
ll. Defendants deny that commercial banking in
Phillipsburg-Easton is heavily concentrated. Defendants are
without knowledge of the precise boundaries of the
seographic area described as the ““environs” of
Phillipsburg-Easton or of the methods used by plaintiff in
asserting the size of a bank. and assert that the Trading Area
is the proper geographic area in which to make such a
determination, wherefor except as denied hereby defendants
ae without knowledge or information sufficient to form a
belief as to the truth of the averments of paragraph 10 and
kave plaintiff to its proofs thereof.
So RRO ict ARAN Lean a
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12. Defendants are without knowledge of the precise
boundaries of the geographic area described as the “environs”
of Phillipsburg-Easton or of the methods used by plaintiff in
asserting the size of a bank, and assert that the Trading Area
is the proper geographic area in which to make such q
determination, wherefor defendants are’ without knowledge or
information sufficient to form a belief as to the truth of the
averments of paragraph 11 and leave plaintiff to its proofs
thereof.
13. Defendants deny the averment of paragraph 12
that they are each substantial competitors in commercial
banking in the Town of Phillipsburg and in
Phillipsburg-Easton. They admit that their respective main
offices are separated by a street but deny that their respective
branches are separated merely by a street or are both located
in northeast Phillipsburg, and assert that they serve different
areas. They admit that they derive the dominant share of
their business from the same area but deny that said area js
Phillipsburg-Easton, and assert that said area is more properly
described as the Trading Area. They admit that they compete
with other commercial banks having offices in
Phillipsburg-Easton, but assert that they also compete with
commercial banks and other financial institutions throughout
the Trading Area and beyond, Except as admitted hereby,
defendants deny the averments of paragraph 12.
14, Defendants admit the averments of paragraph 13,
15. Defendants admit the averments of paragraph 14 but
deny that said merger is an offense.
16. Defendants deny the averments of paragraph 15.
17. Defendants deny the averments of paragraph 16.
18. Defendants admit that the contemplated merger will
eliminate such insignificant competition as exists between
them, but deny that said merger is an offense. Except as
admitted hereby, defendants deny the averments of paragraph
17.
19. In further denial of plaintiff’s general averments as to
the product market within which defendants compete,
defendants assert that they are in competition with many
individuals, firms and corporations for the many services they
furnish. Such areas of competition, in addition to commercial
banks, include, among others:
(a) for time deposits consisting of 71% of the Phillipsburg
National Bar’.’s total deposits and 77% of the Second
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National total deposits the banks compete with the stock
market, building and loans, Savings institutions, bond market,
U. §. security and savings bond market, insurance companies,
mutual funds, pension funds, credit unions and other banks
throughout the country where banking by mail is on the
increase.
(b) for commercial or demand deposits which constitute
29% and 23% respectively of the two banks’ deposits they
must compete with banks throughout the Trading Area as
well as with the metropolitan banks of Philadelphia and New
York. Here, too, banking by mail increases the competition.
(c) for real estate loans which constitute 56% and 76%
respectively of the two banks’ Joan portfolio they must
compete with insurance companies, savings institutions and
building and loans in various parts of New Jersey and
Pennsylvania.
(d) for consumer installment loans which constitute 24%
and 10% respectively of their loans they must compete with
finance companies, credit unions, small loan companies,
diner’s clubs, department store credit accounts,
travel-on-credit arrangements and hosts of appliance and
motor vehicle finance companies associated with or aligned
with national corporate manufacturers of autos, TVs, radios
and appliances,
(e) for single payment loans to individuals which constitute
respectively 10% and 6% of the banks’ loans they must
compete with finance companies, credit unions, policy loans
by insurance companies and others,
(f) for commercial and industrial loans which are but 8%
and 3% respectively of total loans they must compete with
msurance companies, larger metropolitan banks, the bond
market and others,
(g) for check cashing services they must compete with
practically all trading outlets in the Trading Area.
(h) for checking accounts they must compete with savings
banks in New Jersey which are permitted to conduct such
business.
FIRST SEPARATE DEFENSE
The Complaint fails to state a claim upon which relief can
be granted,
OE Pte SEP: 4
SECOND SEPARATE DEFENSE
The proposed merger will not in any section of the country
substantially lessen competition or tend to create a monopoly,
THIRD SEPARATE DEFENSE
As and for an affirmative defense, defendants allege that
the Bank Merger Act of 1966, 80 Stat. 7, 12 U.S.C., §1828
(c), is an affirmative defense to this action. Said act provides
an affirmative defense for defendant banks in this case
because any anticompetitive effects of this merger (the
existence or substantiality of which defendants deny) are
clearly outweighed in the public interest by the probable
effect of the transaction in meeting the convenience and
needs of the community to be served. 12 U.S.C. §1828(c) (5)
(B).
The factors supporting this defense include among others:
(a) automation of the bank’s services can be undertaken
thus allowing for more prompt and efficient service to the
community.
(b) personnel can be procured to fill gaps presently existing
thus improving the managerial resources of the bank.
(c) an experienced, full-time trust officer can be hired to
undertake development of the bank’s lagging trust business,
(d) the increased lending capacity of the merged bank will
enable the making of larger loans and _ will stimulate
competition in the development of commercial and industrial
business, particularly among small business corporations.
(e) the resulting bank with stronger personnel and more
modern facilities will be able to compete more effectively in
the Trading Area and beyond.
(f) the resulting bank will be able to extend its services in
the Trading Area and beyond.
(g) the resulting bank will continue to maintain all of the
five offices presently operated by the two banks so that the
public will have access to the services they now enjoy and, in
addition, any customer will be able to transact business at any
of the five offices.
(h) the resulting bank will have a better capital structure
thus guaranteeing further the safety of customer deposits.
(i) the resulting bank will be able to procure capital more
readily.
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(j) the increased fiscal strength of the resulting bank will
enable it to provide better, more varied services to the area.
(k) the resulting bank will be able to engage in new
grvices which are constantly being introduced in modern
banking.
FOURTH SEPARATE DEFENSE
Phillipsburg-Easton is not the proper geographic area within
which to determine the effects of the proposed merger on
competition. The proper geographic area within which to
make such a determination is the Trading Area.
MEYNER AND WILEY
Attorneys for The Phillipsburg
National Bank and Trust Company
By
ROBERT B. MEYNER
CARPENTER, BENNETT & MORRISSEY and
ALFRED W. SEISS
Attorneys for The Second National
Bank of Phillipsburg
By
SYLVESTER C. SMITH, JR.
Dated: February 9, 1968
EINE PR ETS IN CRANE HE BBTV PID BT . —e
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
(CAPTION OMITTED IN PRINTING)
ANSWER
Intervenor, William B. Camp, Comptroller of the Currency,
by his attorney, answering the Complaint herein, alleges as
follows:
I. The Intervenor admits that the plaintiff purports to
bring this suit under Section 15, of the Act of Congress of
October 15, 1914, chapter 323, 38 Stat. 736, as amended (15
U.S.C. sectign 25) and in respect to all other allegations of
paragraph “1” the Intervenor alleges and avers, that the
standards to be applied by the Court in this case, are those
set forth in the Act of Congress of February 21, 1966, PLL.
89-356, 80 Stat. 7, amending section (c) of the Federal
Deposit Insurance Act (12 U.S.C. 1828) (C).
Il. Admits paragraphs “2, 3 and 4” of the Complaint.
Ill. Admits paragraph ‘“S” of the Complaint as to
plaintiff's use of the term ‘“Phillipsburg-Easton” in the
Complaint, but the Intervenor denies that the applicable
geographic area is as defined by plaintiff.
IV. Intervenor admits the allegations of paragraph “6” of
the Complaint, to the effect that banks fill an essential role in
the nations economy and that many Commercial banks
perform the functions outlined in said paragraph “6”, but
deny all other allegations contained in said paragraph and
deny any implications contained therein that banks are not in
competition with other financial institutions.
V. Admits the allegations contained in paragraph “7”
except that the Intervenor denies the implication that
Commercial banks as financial institutions, are the controlling
influence, in the economic life of a Community, Industry and
Commerce, that create competition within the purview of the
Clayton Act.
VI. The Intervenor admits the averments of paragraph 8 in
respect to the assets, deposits, loans and discounts and offices
of Phillipsburg National. However, it denies that
“Phillipsburg-Easton” is the applicable geographic area to be
considered in this matter.
VII. The Intervenor admits the averments of paragraph 9 in
respect to the assets, deposits, loans and discounts and Offices
15
of Second National. However, it denies that
“Phillipsburg-Easton” is the applicable geographic area to be
considered in this matter.
VIII. Intervenor denies that commercial banking in
Phillipsburg-Easton is heavily concentrated. Intervenor is
without knowledge of the precise boundaries of the
geographic area described as the ‘‘environs” of
Phillipsburg-Easton or of the methods used by plaintiff in
asserting the size of a bank, and asserts that the
|
“Phillipsburg-Easton” area is not the proper geographical area
in which to make such a determination. Except as denied
hereby, Intervenor is without knowledge or information
sufficient to form a belief as to the truth of the averments of
paragraph 10.
IX. Intervenor is without knowledge of the precise
boundaries of the geographic area described as the “environs”
of Phillipsburg-Easton or of the methods used by plaintiff in
asserting the size of a bank, and asserts that the
“Phillipsburg-Easton” area is not the proper geographical area
to be considered in this matter. Intervenor, therefore, is
without knowledge or information sufficient to form a belief
as to the truth of the averments of paragraph 11.
X. Intervenor denies the averments of paragraph 12 that
the defendants are substantial competitors in commercial
banking in the City of Phillipsburg and in Phillipsburg-Easton.
It admits that the main offices of the defendants are
separated by a street but denies that their branches are
separated merely by a street or are located in northeast
Phillipsburg, and asserts that they serve different areas.
Intervenor admits that they derive the dominant share of their
business from the same area but denies that the
“Phillipsburg-Easton” area is a proper geographical area to be
considered in this matter. It admits that the defendants
compete with other commercial banks having offices in
Phillipsburg-Easton, as well as with other financial institutions.
Xll. Intervenor admits the averments of paragraph 13.
XII. Intervenor admits the averments of paragraph 14 but
denies that said proposed merger is an offense.
XIV. Intervenor denies the averments of paragraphs 15 and
16.
XV. Intervenor admits that the contemplated merger will
tliminate such insignificant competition as exists between the
defendants, but denies that said merger is an offense. Except
—
as admitted hereby, Intervenor denies the averments of
paragraph 17.
XVI. Intervenor alleges that the Bank Merger Act of 1966,
80 Stat. 7, 12 U.S.C., §1828 (c), is an affirmative defense to
this action. Said act provides an affirmative defense in this
case because any anticompetitive effects of this merger (the
existence or substantiality of which is denied) are clearly
outweighed in the public interest by the probable effect of
the transaction in meeting the convenience and needs of the
community to be served. 12 U.S.C. §1828(c) (5) (B).
PHILIP L. ROACHE, JR.
Attorney, Comptroller of the Currency
Dated: Feb. 21, 1968
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UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
17
Civil Action No. 56-68
UNITED STATES OF AMERICA, Plaintiff,
v.
THE PHILLIPSBURG NATIONAL BANK &
TRUST COMPANY and THE SECOND
NATIONAL BANK OF PHILLIPSBURG.
Defendants,
and
WILLIAM B. CAMP, Comptroller of the Currency,
Intervenor.
Newark, New Jersey,
September 11, 1968.
Before: The Honorable ROBERT SHAW. U. S. im B
Appearances:
UNITED STATES ATTORNEY,
By: KENNETH P. ZAUBER. Esq., Assistant U. §
Attorney.
U.S. DEPARTMENT OF JUSTICE. Antitrust Division,
By: ROBERT C. WEINBAUM. Esq., and
EUGENE T. AUSTIN, Esq.
MEYNER & WILEY, Esqs.,
* Attorneys for Phillipsburg National Bank & Trust Co..
By: Robert B. Meyner, Esq., and
THOMAS D. HOGAN, Esq.
CARPENTER, BENNETT & MORRISSEY, Esgs.,
Attorneys for Second National Bank,
By: SYLVESTER C. SMITH, JR., Fsq., and
MICHAEL S. WATERS. Esq.
PHILLIP L. ROACHE, JR.. Esq.,
Attorney for the Comptroller of the Currency.
Spee...
TRANSCRIPT OF OFFICIAL NOTES OF TESTIMONY
ASHLEY B. CARRICK,C. S. R,
and FRANCIS H. BREMER,C.S. R.
Official Court Reporter
P.O. Box 397
Newark, N. J.
Newark, N. J.
September 11, 1968
|fol. 84) ROBERT LEUPO, sworn.
DIRECT EXAMINATION
BY MR. WEINBAUM:
Q Mr. Leupo, what is your occupation?
A 1 am an executive vice-president of the Phillipsburg
Trust Company and National Association.
Q Can you give us your business and professional
background?
A | am an accountant with a background of cost
accounting, a background of public accounting, a background
of auditing and banking.
fol. 85] Q How long have you been in banking?
A Eleven years.
Q And when did you join’ the Phillipsburg Trust
Company?
A In May of 1957.
* * * *
{fol. 86] Q How long has your head office been on
Memorial Highway”
A Since 1959.
Q Where was it prior to that time?
A On South Main Street, in Phillipsburg.
Q And by South Main Street in Phillipsburg can | fol.
87] you describe for the Court a little bit more about that
area?
A Well. South Main Street at that time was the
naten PE IN GA LG Se POOP 2D
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commercial street in Phillipsburg. The bank was located
approximately two blocks--three blocks away from the other
banks in the area. That is about the best description.
* * Kk *
(fol. 88] Qo Which of the three banks in Phillipsburg was
the first to establish a branch. Mr. Leupo?
A The Phillipsburg Trust Company, National Association.
Q And when was that?
A In 1961.
Q Have the other local banks established branches since
that time?
A They have.
Q Mr. Leupo, could you please describe for the Court the
various services available at your bank”
A Yes. We have the services of demand accounts, which
are checking accounts, Savings accounts, we have mortgage
wrvices, granting mortgage loans. we have personal loans. we
have safe deposit boxes.
Q Approximately how many demand deposit accounts
would you estimate you have?
A Approximately 2800.
Q And what is the passbook savings rate that you are
presently paying?
A 4 per cent.
Q Were you paying this rate as of the end of the year
1967?
A No. we weren't.
Q What rate were you paying at that time?
A 3-4 per cent.
fol. 89]. Q > And when did your rate £0 up to the present
rate?
A Effective July 1, 1968.
Q For how long was your bank Paying the 3-2 per cent
"te On passbook savings, Mr. Leupo, can you tell us that?
A No, I can’t, not the exact years.
Q Do you offer time deposits, Mr. Leupo?
A Yes, we do.
Q And can you explain a little bit about your rate on
ime deposits?
A We offer time deposits, and certificate deposits at 5 per
“mt, and the 5-% per cent rate, comparable to law.
Rta: Se PSs eect |
aa
20
regulations by Federal Reserve, and also the Comptroller's
Department.
Q You do offer certain certificates of deposit at 5-% per
cent?
A 5 and 5-2 per cent.
Q What determines, Mr. Leupo, what interest rate your
bank will pay on a certificate of deposit?
A What determines it?
Q_ Yes.
MR. MEYNER: If your Honor please, it seems to me we
are really prolonging the record here. It is well established by
the Federal authorities as to what [fol. 90]it is. The Court
can take judicial notice of it. Or you can put it in the record.
I see no point in asking this man that. The 5 per cent up toa
certain amount, and the 5-’% per cent over another amount.
THE COURT: Counsel, this is governed by regulations.
MR. WEINBAUM: Your Honor, I would like to establish
whether or not there is discretion on the part of his bank on
the rate that they may wish to accept deposits at, and what
rate they will pay in certain instances. And I believe that
there might be some flexibility on the part of the bank.
THE COURT: All right. Go ahead. Objection overruled.
MR. WEINBAUM: Thank you, your Honor.
Q Mr. Leupo, do you pay the maximum rate on a C.D. in
all instances?
A Yes.
Q_ And how about on your time deposits, is there a sirigle
rate that you pretty much adhere to?
A The single rate is in accord with our savings rate, time
savings rate.
Q_ The time and savings rate is identical?
A Yes.
Q_ The 4 per cent.
{fol. 91] A’ Yes.
Q_ So that you offer no time and savings deposit between
the 4 per cent and the 5 per cent.
A No, we don’t.
Q Could you please describe for us, or tell us whether
you have any school savings plans?
A No, we don’t.
Q Would you please explain in a little more detail the
type of mortgage lending that you do?
A Primarily residential.
Q_ Primarily residential?
A Primarily residential.
Q Do you do any VA lending?
A No.
THE COURT: Counsel, I didn’t hear that question.
MR. WEINBAUM: Any Veterans Administration mortgages.
THE WITNESS: No.
Q Do you do any FHA lending?
A No. We have them—-—let me clarify this. We do have
them, but we have not put them on in a number of years. So
we have not followed the policy of lending to the VA or the
FHA.
Q Do you do any commercial and industrial lending?
{fol. 92] A Yes.
Q And what are your rates in those situations?
A Comparable rate by law that it may be at the time.
Maybe 6, maybe 7, maybe 8.
Q. This varies?
A That is correct.
Q What are the factors upon which the rate depends, for
instance?
A The money situation, the demand and money situation.
Q Any other factors that the bank takes into
consideration in the rate it sets?
A The other factor naturally would be the customer. the
relations with the customer.
Do you do any installment lending?
Yes.
Do you lend money on automobiles?
Yes.
Appliances.
Yes.
Do you do any direct lending as opposed to indirect
lending?
A Yes.
Q Do you also do indirect lending?
A Yes.
| Q Can you explain for us, please, what the [fol.
_ %3)difference is between the direct and the indirect lending,
very briefly?
A My opinion of the direct and indirect would be a
two-party and a three-party transaction. The direct would be
between the bank and the customer. The indirect would be
21
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dealt through a dealer, where we are discounting paper for a
dealer, which would be a three-party transaction.
Q Can you tell us, Mr. Leupo, whether in the installment
lending field you would do a greater proportion of direct or
the indirect? .
A The direct.
Q_ Is there any particular lending, Mr. Leupo, which your
bank emphasizes more than any other?
No, there isn’t.
Do you offer trust services?
Yes, we do.
Can you describe the trust services which are offered?
Estate, executors, guardianships, also trustees.
Do you have a full-time trust officer at your bank?
Yes. Excuse me. Would you clarify that, full-time-
Do you have a person who devotes substantially all of
his time to the trust business?
A No, we don’t.
{fol. 94] Q Who in your bank is in charge of trust
business?
A lam.
Q Mr. Leupo, do many of your customers use several of
your banking services?
A Yes, they do.
Q Why is this so?
A Because of convenience.
Q Are your customers, as opposed to non-customers,
given any sort of preferential treatment when it comes to
banking services?
A None.
Q The non-customer and customer, would they be treated
in a similar fashion, with similar consideration?
A Yes.
THE COURT: You mean in every instance of a banking
transaction? Do you mean that there are no_ instances
whatsoever in any banking transaction where you would fail
to give any preference to a customer?
THE WITNESS: Oh, no.
THE COURT: | didn’t think you meant that.
O>O>rO>O>
x * K *
23
{fol. 97} Q Can you state for us, Mr. Leupo, whether, in
your opinion, the services of your bank and the services of
the other two banks in Phillipsburg are substantially identical.
A Yes, they are.
Q And can you state for us whether you believe that the
rates at which your services are offered to the public and at
which the services of the other two banks are offered to the
public are substantially identical.
A | would say they were, yes.
* eK *
{fol. 99] Q How long have you been at National Bank,
Mr. Leupo?
A Since February, 1958.
Q And prior to that time what was the status of your
bank?
A_ A State-chartered bank, the State of New Jersey.
Q Were you a member of the Federal Reserve System?
A Yes.
Q What in your opinion were the advantages to you of
becoming a national bank?
A Broader consideration of our assets.
THE COURT: Mr. Leupo, I am not too sure what that
means. | would appreciate your telling me in a little bit more
detail.
THE WITNESS: We found through experience that
consideration of the position of our mortgage folio, the
position of our loans on our mortgages in comparison with
being risk and non-risk assets have a better consideration by
the Comptroller's Department than over the State-chartered
system. We feel that our assets are in such good shape that
this is One point [fol. 100] of consideration for the evaluation
of the bank.
THE COURT: May I interrupt you at this point, counsel?
MR. WEINBAUM: Surely.
THE COURT: How is this relevant?
MR. WEINBAUM: We wanted to show, your Honor, that a
more liberal evaluation of assets might enable the bank to do
the various things that it might not have been able to do as a
State bank. That is all.
* * * *
24
{fol. 102} Q Could you describe some of the shopping
areas in Phillipsburg for us, Mr. Leupo, Phillipsburg and the
immediately surrounding area?
A We have a shopping center. We have a large commercial
store and we have various food chain stores.
THE COURT: This is in Phillipsburg?
THE WITNESS: This is in the area.
THE COURT: When you say “in the area” how large an
area are you speaking of?
THE WITNESS: The outlying townships.
THE COURT: What townships are those, Mr. Leupo?
THE WITNESS: Lopatcong, Pohatcong and Alpha Borough
have these shopping areas.
Q This commercial store you mentioned, which one is
that in?
A Pohatcong Township.
Q What is the name of that store?
{fol. 103] A Falk’s Department Store.
Q Is there a central or downtown business district of
Phillipsburg?
A Yes, there is.
Q Can you describe the bridges, Mr. Leupo, which link
the City of Easton and the City of Phillipsburg?
A Well, the free bridge links downtown Easton with the
downtown section of Phillipsburg.
Q. And the toll bridge?
A And the toll bridge links the highway bypassing Easton
with the highway circling through Phillipsburg.
Q Does the toll bridge highway circling through
Phillipsburg run through the central part of town?
A No, it doesn't.
Q Can you describe
MR. MEYNER: The central part of which town?
Q The central part of the business district of Phillipsburg,
excuse me.
(Question rephrased at direction of Court.)
Q Mr. Leupo, through the toll bridge, the toll bridge
road, can you state whether or not the road on the -
Phillipsburg side of the river runs through the central, the
south Main Street business district of Phillipsburg?
A No, it doesn’t.
{fol. 104] Q Where does that road lead?
A It leads through Phillipsburg to the highway.
25
Q Does it go into the city, into the city proper?
A No, it doesn’t.
Q Mr. Leupo, in a small town such as Phillipsburg do you
feel that the role of a local bank is an important one?
A Yes, I do.
Q Do you have an opinion as to whether the people in
the City of Phillipsburg itself would tend to bank locally as
opposed to traveling outside of town to do their banking?
* eK
fol. 105] THE COURT: It does seem to me that there is
no dispute about the fact that the City of Phillipsburg and
the Town of Easton—whatever it may be~are in such close
proximity that facilities are interchangeably used by the
residents of those areas. I don’t think there is any dispute
about that.
MR. WEINBAUM: We think there is some dispute about it.
THE COURT: Well, you Suggested in your opening that
you regarded the Phillipsburg and Easton area and environs as
the geographic area to be considered. | thought implicit in
that was the argument that close proximity of these towns to
each other, the easy access from one to the other, made the
facilities of either equally available to the residents of both.
MR. WEINBAUM: Your Honor, our position is that
Phillipsburg itself is an appropriate market, but that for
various considerations which we attempt to bring out through
our witnesses—but that the Phillipsburg-Easton area because of
iis proximity and perhaps not because of the same
circumstances | fol. 106] applicable to Phillipsburg alone as a
market might also be a relevant and appropriate geographic
market.
THE COURT: You are correct as far as your argument is
concerned. I recall now that you did make reference to the
fact that Phillipsburg could be considered alone as the
tkevamt geographic area. but you also urged that if that
narrow limitation was not placed upon the geographic area it
sould not go beyond Easton and its environs. Am I correct?
MR. WEINBAUM: Phillipsburg-Easton environs would be
he largest appropriate market. That is correct, but we do
el, your Honor, that it is necessary to show to the extent
that We are able to that Phillipsburg alone is a banking market
ind totally
Bieuc.s te
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THE COURT: My mind will be open to your argument,
but I will say to you that my tentative conclusion now is that
you narrowed the geographic area to such an extent,
considering the population of Phillipsburg, that it would be
most difficult to reach a conclusion on any rational basis that
Phillipsburg alone would be a relevant geographic area to the
issues in this case, but I told you my mind is open. You may
try your own case.
MR. WEINBAUM: I might only add on this question, [fol,
107) your Honor, that there is a state boundary running
between the two cities and at some point during the
presentation of our case that consideration will be explored,
THE COURT: I don’t know how the mere fact of a State
boundary would be significant. The circumstances which
would cause people to cross those boundaries and the
inducements to cross might be significant, but just the mere
division by a State line at the moment I cannot see to be of
any particular significance. Go ahead. I am sorry.
MR. WEINBAUM: That is all right.
BY MR. WEINBAUM:
Q Mr. Leupo, are you generally familiar with the areas in
which your bank conducts its banking business?
A tam.
Q What would you consider to be the primary geographic
area which is served by your bank?
A Phillipsburg, Lopatcong, Pohatcong and the Borough of
Alpha primarily.
Q And how would you characterize the amount of
business which you derive from the area that you have just
described?
A Through relationships, through activities, by
advertisement, and other means of relations, public relations.
{fol. 108] Q What I meant, Mr. Leupo, was that in
testifying that this is what you regard as the primary
geographic area can you tell the Court in quantitative terms
of some sort how much business you would derive from
people residing within this area?
MR. MEYNER: I object on the ground that it is too
general in the absence of some showing that hie made the
investigation.
THE COURT: I will overrule the objection, but so that
there is no question about what he refers to in his answer |
27
suggest that you reframe the question and specify the areas,
and if he can have him state the percentage of business that
the bank receives from each area, if he can.
Q Mr. Leupo, can you give any estimate of the amount of
your business which you derive from the City of Phillipsburg,
Lopatcong Township, Pohatcong Township and the Borough
of Alpha, all together collectively from these areas?
A lam not in a position to give you an answer.
Q Can you state for us, Mr. Leupo, whether the amount
of business you derive from this area would be a substantial.
moderate or small percentage of your total banking business?
MR. MEYNER: Objection.
(fol. 109} THE COURT: Sustained. The previous answer
was he didn’t know, so how can you, if you do not know,
with any reasonable degree of certainty in terms of
percentages, how can you then convert that lack of
understanding into terms of moderate, et cetera?
MR. WEINBAUM: I think that even though a witness
cannot put a percentage figure on it he could be in a position
to know if it was de minimus business that he derived from
the area or whether it was a substantial amount of business.
THE COURT: He has already testified that the primary
business of the bank is derived from this area, so how could
he come back now with a de minimus?
MR. WEINBAUM: We will go on.
THE COURT: I am sorry. Maybe I don’t follow you.
MR. WEINBAUM: He has testified that this is his primary
area, and we thought that he would be able to define this with
a little more particularity for the Court in terms of some
quantity, perhaps not in terms of percentages, but in terms
of-
THE COURT: Counsel, he said he doesn’t know. Am I
correct?
fol. 110] MR. WEINBAUM: He said he couldn’t—I think
he said he couldn’t estimate a percentage. I don’t know that
interms of amount he would -
THE COURT: (To witness) Counsel is not asking you for
any exact figures. He is asking you for an approximation. Can
you answer the question?
MR. WATERS: We would like to renew our objection to
speculation. We had this very same problem once before when
Mr. Weinbaum took the deposition of a bank official, Mr.
Rhimer of the Girard Trust, and he had the officer speculate
PII WI se pe eM AT eee wove
28
to some extent on where he had his deposits, and when we
got his books it turned out that he had five times as much in
the outlying areas as he thought he did. I think to speculate
on the basis of what he has and where he has it is a serious
mistake, and we found that out.
THE COURT: | don’t want him to speculate. I wil
instruct him not to guess or answer on the basis of conjecture
or speculation. If he does not know with any reasonable
degree of certainty then his answer should be “I don’t know.”
Mr. Leupo, to what extend do you know?
THE WITNESS: To the extent of my association of eleven
years with the bank, and being associated with—being the
mortgage officer and the loan officer [fol. 111] I would truly
say that it is in that area we do have the majority of our
business, from interviewing people and having mortgage
closings and the extent of opening new accounts.
Does that answer it?
THE COURT: I think that) is) approximately my
understanding of his previous testimony.
BY MR. WEINBAUM:
Q You regard this as the primary geographic area served
by your bank?
A Yes.
Q Mr. Leupo, do you solicit business by means of
advertising?
A Yes.
Q And could you tell us lew you advertise, in what
media, and so forth?
A In the local paper and the normal local publiciations of
associations and fraternal organizations. That is the extent of
it.
What papers do you advertise in?
The Easton Express.
Any others?
And occasionally in the Phillipsburg Free Press.
Do you do any personal solicitation of business?
Now? We have in the past but at present we do not.
[fol. 112] Q > As of the end of the year 1967 were you
personally soliciting business?
A No.
Q Do you advertise in any other areas of Warren County?
rPOPrOFO
29
No.
° Can you explain for us, Mr. Leupo, why it is that you
don’t choose to advertise elsewhere in Warren County?
A Well, the prime purpose would be we know the
economic conditions of this area that we are doing business
in, and we try to concentrate on that area. We also feel as if
we are obligated to serve our own immediate customers.
THE COURT: If you don’t mind. counsel, I would like to
ask a Question.
Tell me, Mr. Leupo, if my understanding of what you just
stated is correct. | gathered from what you stated that you
confine your services to the area where you say the source of
your primary business is because it is within your means to
service that area.
THE WITNESS: Yes.
THE COURT: And you service that area because you think
it better to service the immediate area that you have the
means to serve?
fol. 113] THE WITNESS: Yes.
THE COURT: And it would follow that you do not
attempt to go beyond that area because your bank does not
have the means?
THE WITNESS: No. I think we would attempt to go in an
outlying area. It is pretty tough to explain.
THE COURT: Perhaps | can put it this way, having a
limited capacity for service -
THE WITNESS: Right.
THE COURT: Are you giving preference to the immediate
areas in which your bank is located over those lying beyond?
THE WITNESS: Yes
THE COURT: Is that the answer?
THE WITNESS: Yes.
THE COURT: All right.
fol. 114) Q = Mr, Leupo, can you describe, to the best of
your ability, the amount of business you derived from
Hackettstown, New Jersey?
MR. MEYNER: | object on the ground that there is no
point~he hasn't investigated. He hasn't gone through his files.
MR. WEINBAUM: Your Honor, this town is quite a
distance away.
THE COURT: Wait. We are going to settle this quickly. Do
jou know with any reasonable degree of accuracy the
4
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30
approximate amount of business, if any, that you did in
Hackettstown?
THE WITNESS: No.
THE COURT: He doesn’t know.
Q Do you believe your bank, Mr. Leupo, has any sort of
substantial competitive influence in the Hackettstown area?
MR. MEYNER: Object
MR. ROACHE: Objection.
THE COURT: Sustained.
MR. WEINBAUM: Your Honor,——
THE COURT: He doesn’t even know whether his bank
does business in Hackettstown.
MR. WEINBAUM: Your Honor, but I think he would have
an opinion as to whether he is in competition [fol. 115] with
those banks up there.
THE COURT: You mean in the sense ——
MR. WEINBAUM: In the sense of whether he considers
them one of his principal rivals. This, I think, is important,
your Honor.
THE COURT: It might be, if it weren’t for the fact that
he stated that his bank does not seek business beyond the
limited area described. So how can you have competition
within an area where you don’t seek the business, and you
prefer not to service it, if it came to you?
MR. WEINBAUM: We will withdraw the question, your
Honor.
* * *k *
[fol. 115] Q Mr. Leupo, the Court directed a question to
you which, in substance, inquired whether it was because of
your resources, limited resources, which kept you from
soliciting business at distances from Phillipsburg. And I believe
you indicated that, no, it was not. | wondered if you could
explain what, if any, other factors come into your decision
with regard to doing business at great distances [fol. 116]
from Phillipsburg?
MR. ROACHE: Objection. | don’t know what he means by
great distances.
THE COURT: Overruled. I don’t know—
MR. WEINBAUM: Out of town.
THE COURT: Outside of Phillipsburg?
MR. WEINBAUM: Yes, sir.
31
THE COURT: Anywhere outside of Phillipsburg?
MR. WEINBAUM: Yes, sir.
THE COURT: You may answer.
A | would say our present position to loan or service the
area would predicate our position to do it. I would say that
we would go out of the area if we had the resources to do it.
| would also say that we would go out of the area if we had
the resources to do it. I would also say that we would go out
of the area, limited, so that the scope of the area could be
watched by our bank.
Q What do you mean by that last statement?
A Well, what I am driving at, possibly, would be the
point that we know whether there is a strike in our own
immediate area which would reflect the repayment of our
mortgages, Our loans, or reflect the deposits of our bank.
Where if we were out of an area that we could not continue
to watch it, we would possibly feel that we would not extend
loans or credit into that area, couldn’t watch it.
* * * *
\fol. 119] Q How far away is Blairstown from Phillipsburg,
Mr. Leupo?
A | would say approximately 25 miles.
Q Do you know whether you do any business up there?
A We have an occasional mortgage.
Q Any other business?
A No.
Q How far away is Flemington, New Jersey,
approximately?
A I would say in the same area, approximately 25 miles.
Q To your knowledge, do you do any business down there?
A No, we don’t.
Q How far away is Hope, New Jersey, from Phillipsburg,
approximately? .
A Twenty miles possibly.
Q Do you know if you have any business up in the Hope
area?
fol. 120] A Only in the mortgage field.
Q Do you know whether or not the amount of mortgage
business up there would be substantial?
A No, it would not be substantial.
* * kK &
HAE ONG EA DABLER ALES DN NEG: See. |
& OME Ao >?
32
[fol 121] THE COURT: In fact, counsel, this testimony we
ure getting now fits into the pattern of the previous part of the
witness’ testimony, that his bank services Phillipsburg primarily,
and that is coupled with his further testimony that the bank did
not seek business outside to any extent outside Phillipsburg.
Q_ Mr. Leupo, do you know whether or not you derive any
business from Allentown?
A Yes, we do.
Q And do you know whether or not the amount of
business that you derive from Allentown would be substantial?
A Not.
Q_ What about Bethlehem, do you derive any business from
Bethlehem?
A We do derive business from Bethlehem.
Q And would you know whether or not the business that
you derive from Bethlehem would be substantial?
MR. MEYNER: I object to the word “substantial” because
we don’t know what it means. It is general. The man said he did
business in Allentown. He says he has business in Bethlehem. If
he knows what it is, all right. He has been under subpoena. He
has had a chance to look it up. If he were [ fol. 122] adequately
prepared by counsel—but now to state it is substantial or not
substantial without denoting what it is, doesn’t seem to me—
THE COURT: How do I evaluate his answer, counsel,
without knowing what he has in mind when he characterized
the business as substantial or not substantial?
MR. WEINBAUM: I think these words have some meaning,
your Honor, on whether or not a bank is dependent on a
particular area for any important share of its business, and |
would like to make one comment addressed to what Governor
Meyner just said about preparation. It was pointed out this
morning that it is a tremendous burden on all of the banks that
we are Calling on in this case, whether the defendants’ witnesses
or ours, to ascertain with any minute particularity, your Honor,
the portions of business derived here or there, and it was
pointed out this morning by the Governor that we are doing our
best to frame some sort of a definition for the Court, and we
are trying to do the best we can absent an accountant’s audit
which I say—
THE COURT: I can appreciate the difficulties you would
have there, and it may or may not be that he doesn’t care to go
into percentages. However, as [fol. 123] I pointed out 4
moment ago | am going to have a little trouble when I get into
33
the matter of what he considers substantial. | don’t have factual
information. | know when | have to write an opinion the
opinion requires me to resolve the issue of whether there is
substantial evidence or not. I can’t just say that in my opinion
there was substantial evidence in my findings of fact. | must
refer to what the evidence was which caused me to reach the
conclusion that it was substantial.
What I do think is there is testimony. His testimony has
significance in this respect, it appears from what he said that the
bank does some business in Blairstown in the form of
mortgages, also on Hope and also it seems that some business
comes to the bank from Allentown, which would tend to
enlarge the geographic area of the customers seeking the services
of the Phillipsburg Bank.
MR. WEINBAUM: It is our contention that every place that a
bank derives its customers from doesn’t enlarge the geographic
market. That is our very point.
THE COURT: Not in and of itself.
MR. WEINBAUM: No.
THE COURT: It must be taken together with all [fol. 124]
the other factors.
MR. WEINBAUM: That is right.
THE COURT: And among others is the capacity to render
the service.
MR. WEINBAUM: We do think, if the witness is able to
indicate the amount of business he feels he gets from an area
without putting a percentage label on it that this is helpful to
the Court.
THE COURT: How could you do that without giving some
approximation?
MR. WEINBAUM: I think you can give an approximation by
any number of word descriptions. very little, or a lot. this type
of thing. I think we have to, your Honor. look to some sort of
characterization apart from percentages.
THE COURT: I am not pinning you down to percentages,
but | am trying to get some evidence that I can translate into
reasonable inferences, and of course the description of sub-
stantial and not substantial is a completely subjective one, and
it also furnishes very little guidance to the Court in the
matter of geographic area when the witness states that the
preference is not to do business outside of the Phillipsburg
area and that it is not sought there.
4
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34
[fol. 125] If the bank does not seek the business it cannot
then be said from that that the business is not available for a
bank rendering services.
You are at liberty to disagree with me. You are at liberty
at all times to disagree with me.
MR. WEINBAUM: Yes, sir. I will.
THE COURT: And state your reasons.
MR. WEINBAUM: All right.
THE COURT: But all I am trying to do is give you the
benefit of my tentative thinking as I go along, emphasizing
my mind will remain open in this case right to the conclusion
of the case and until I have reviewed it thoroughly and
reached the point of writing an opinion. Don’t take any
statement I make here as final.
* * * *
{fol. 128] Q Mr. Leupo, can you state for us which
commercial bank you consider to be your principal competition?
* * * *
THE WITNESS: I consider the Phillipsburg National Bank
and Trust Company, the Second National Bank, direct
competition.
* * * *
[fol. 129]. Q Mr. Leupo, which bank in Phillipsburg was
the first bank to extend banking hours?
A The Phillipsburg Trust Company, National Association.
** * *
THE COURT: What were your normal hours before [fol.
130] you went to the extended banking hours?
THE WITNESS: Normal hours, 9:30 to 3:00, and we
extended it from 9:00 o’clock to 3:00. The normal hour
were 9:30 to 3:00, and we have extended them into 5:00
p.m. to 8:00 p.m.
Q_ Every night?
A Sust on Friday night.
Q_ Why did you do this?
A_ To serve the public.
* ee *
35
(fol. 133] Q Mr. Leupo, how would you describe the
competition which exists between the defendants and your
bank?
* * * *
(fol. 134] A I would say it was healthy competition,
healthy competition to the extent that we have grown, that
we have been recognized and we have progressed. I would say
it was healthy competition.
THE COURT: When you define it as healthy competition,
do 1 understand correctly that you consider this competition
as a factor in your own growth?
THE WITNESS: Yes.
* ** *
(fol. 135] Q Mr. Leupo, what is the lending limit of your
bank?
A The present lending limit or are you referring to the
end of the year?
Q The end of the year 1967.
A About sixty-nine thousand.
Q And on what basis do you compute your lending limit?
A On the basis of capital surplus and undivided profits.
Q Mr. Leupo, have you found your lending limit to be
adequate with respect to the needs of your customers or
prospective customers?
A Yes.
Q Can you recall any instances where because of your
lending limit you have been forced to turn a customer or a
prospective customer away?
A I can only recall one instance where it was necessary to
participate—I will retract that. In my time, I can only recall
one instance where it was necessary to participate to satisfy
the customer.
Q And by “participate”, will you explain what you mean?
A Well, due to our loaning limitation in order to [ fol.
136] satisfy the customer we had to have assistance for the
additional funds that were necessary.
Q And where do you turn for such assistance?
A In this particular case we turned to the Phillipsburg
National Bank & Trust Company.
Q Do you ever have occasion to turn to other benks for
Participation?
—
36
A Phillipsburg Trust Company has turned to their
correspondent bank in prior cases, yes.
Q. And who is your correspondent bank
A National Newark & Essex Banking Company.
Q Does a participation work a particular hardship on your
bank?
; A No, it doesn’t.
* * *K *
[fol. 140] MR. WEINBAUM: Your Honor, | would like to
ask Mr. Leupo why his commercial and industrial loans are
9.5 per cent of his total loan portfolio.
THE WITNESS: Because this would represent our request
for commercial loans.
ont
* kK *
{fol. 143] Q Are any of these customers—are any of these
people customers of your bank in any respect?
A Yes. we have a relation with the Phillipsburg National
Bank in a participation loan with Shahmoon Industries.
Q Do you have any experience or knowledge, Mr. Leupo,
; based on your background as a banker, with respect to the
3 credit sources available to larger companies generally?
E A I have no knowledge on that.
2 Q_ Excuse me?
# A I have no knowledge of that.
Q Mr. Leupo, turning to Government Exhibit 39, |
wonder if you could explain, or how you would account for
the fact that 69.1 per cent of your loan—I am sorry, this is
Government Exhibit 43—69.1 per cent of your loan [fol.
144] portfolio as of year-end ‘67 was in real estate loans?
A Demand, possibly the demand. That’s the only answer |
could give.
4 [fol. 145] Q And do real estate loans constitute the
: largest category of loans which your bank has in its portfolio?
: A Yes.
3 Q Turning to Government Exhibit 39, Mr. Leupo, which
sets forth the deposit ratios of the banks in Phillipsburg and”
the Phillipsburg-Easton area, it is indicated that your time and
savings deposits are approximately 71.6 per cent of your total
deposits for the year ended 1967. How do you account for
“a bites tea ak Pen ala Sha
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37
the fact that your time and savings deposit percentage is that
amount?
A | would account for it by saying that this is a
convenient savings investment for people in our area,
convenient to the extent that it can be withdrawn under the
contract, the savings agreement. It is convenient.
Q Mr. Leupo, if there were a shift in demand in the
community -you have indicated there has been a demand for
certain types of things that your bank offers. If there were a
shift in demand for instance in type of loans that you believe
the community desired, in your opinion could your bank
accommodate such shift in demand?
A Yes.
Q Has your bank been prospering?
A Yes.
Q Have you paid a regular dividend?
A We have been paying a stock dividend prior to this
{fol. 146] year. This year we are paying a cash dividend.
MR. MEYNER: If your Honor please, I don’t think the
answer was responsive. A regular dividend means over a period
of years.
THE COURT: What about that, counsel?
Q For how long have you been paying dividends, either
cash or stock, Mr. Leupo?
A The history of the bank I cannot answer, but the
history of my association with the bank from °57 to ‘64,
there was a cash dividend. Then we went into the stock
dividend, and now we are giving consideration to possibly
both.
* ee *
fol. 152] Q > Mr. Leupo, yesterday during your testimony
we asked you on page 121 of the transcript, “Do you know
whether or not you derive any business from Allentown?”
and you indicated “Yes, we do.” Mr. Leupo, do you know
what type or types of business you derive from Allentown?
A Mortgage business.
Q Will you approximate for the Court the number of
mortgages that you derive from Allentown.
A We have three mortgages.
Q And can you approximate the dollar amount of these
three mortgages?
PEELE LTT EY SI EEN
| 43
38
A No, I can’t.
Q Can you state how these mortgages were obtained?
A These three mortgages in particular were obtained by
customers of the bank that moved into the Allentown area.
Q To the best of your knowledge, do you derive any
other types of business from Allentown?
A_ The only other type would be the common savings or
checking accounts that these customers are associated with.
Q_ Which customers?
A The mortgage customers.
Q Mr. Leupo, yesterday you indicated also at [fol. 153}
page 121 of the transcript in response to a question, “Do you
derive any business from Bethlehem?’’, you indicated we do
derive business from Bethlehem. Can you, if you know, tell us
what type or types of business you derive from Bethlehem.
MR. MEYNER: I object to the question. I think it js
proper to ask if he knows, to ask if he knows first.
MR. WEINBAUM: I have asked that.
THE COURT: Do you know what type of business you
service from Bethlehem?
THE WITNESS: Yes.
THE COURT: Go ahead. Answer the question.
Q_ Will you please tell us what type of business you derive
from Bethlehem, Mr. Leupo.
A | do know we derive mortgage business from
Bethlehem.
Q_ Do you know approximately the number of mortgages
you derive from Bethlehem?
A Approximately five mortgages.
Q Do you know the circumstances by which you
obtained or granted these mortgages in Bethlehem?
A Yes. On closing mortgages I know of them. I have
control of the mortgage funds.
Q Mr. Leupo, do you know if you do any other types of
business in Bethlehem in addition to the mortgage [fol. 154]
business?
A Only in the association that these people who have
mortgages with us have checking accounts.
Q Mr. Leupo, do you do any business in Bucks County,
Pennsylvania?
A We have one mortgage in Bucks County.
** * *
39
{fol. 156} Q Can you approximate how much mortgage
business you derive from the Easton area?
A Approximately 150 mortgages.
Q How many total mortgages are on your books,
approximately?
A 550.
** * *
iio. 157) Q Do you do any business, Mr. Leupo, in
Washington, New Jersey?
A Yes, we do.
Q Can you tell us what type of business you do in
Washington?
A We have mortgage business, we have checking accounts
and savings accounts.
Q How far is Washington from Phillipsburg?
MR. MEYNER: It is conceded that it is twelve miles. It is
in the record.
MR. WEINBAUM: I don’t know that the record does show
it, your Honor.
A Approximately twelve, fifteen miles.
Q Can you approximate for us, Mr. Leupo, the amount of
your total mortgage business that you have in Washington,
that is, the number of mortgages you would have in
Washington?
[fol. 158] A Approximately ten.
Q And can you approximate the dollar amount of
mortgage business you have there?
A No, I can’t.
Q Can you tell us approximately how many demand
deposit accounts you have in Washington?
A No, I can’t.
Q Can you approximate the total number of Savings
accounts you have in Washington?
A No, I can’t.
Q Do you do any business in Belvedere?
A Yes.
Q And approximately how far is Belvedere from
Phillipsburg?
A Say, ten to fifteen miles.
Q Can you tell us what type or types of business you do
in Belvedere?
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40
A Mortgage business, checking accounts and savings
accounts.
Q Can you approximate for us how much mortgage
business you do in Belvedere?
A Yes, we have three mortgages in Belvedere.
Q Is this mortgage business which your bank originated?
A Yes.
Q Can you tell us the circumstances of obtaining these
mortgages?
{fol. 159] A Yes. We also have a _ director in
Washington—from Washington, New Jersey, which is in
business, and the entrance of those mortgages was through
our director.
Q What other types of business did you say you got from
Belvedere?
A We have mortgage business, and checking accounts and
savings accounts.
Q And can you give us any idea of the number of
checking accounts you have in Belvedere?
A_ No, I can’t.
Q Can you give us any idea of the number of savings
accounts?
A No, I can’t.
Q Do you know who any of your checking or savings
accounts customers are up there?
A Well, we do have the County Freeholders, which
originates out of the Belvedere area. This is the only one |
could give you a definite description of.
Q Is that a checking account or savings account?
A Savings account.
Q Do you do any commercial and industrial lending to
your knowledge in Washington or Belvedere?
A Yes.
Q Do you do any commercial and industrial lending in
Washington?
[fol. 160] A In Washington, yes.
Q Do you do any in Belvedere?
A No.
Q Can you tell us approximately how many commercial
and industrial loans you have in Washington?
A Just one, to my knowledge.
** * *
-
(fol. 161] CROSS-EXAMINATION
BY MR. MEYNER:
4]
xx * *
(fol. 162] Q Do you know why the Phillipsburg Trust
Company moved their main office from South Main Street to
the Memorial Parkway?
A Yes, for a more desirable location.
Q And isn’t it true that the South Main Street section
where Phillipsburg Trust Company and the Second National
Bank and the Phillipsburg National Bank ,llave their main
offices is a deteriorating section of Phillipsburg?
A Deteriorating and a congested area for the bank to
service, yes.
Q And there is a change in the general tenor of business
in that area too, is there not?
A Yes, sir.
Q And most of the business—a great deal of the business
that was formally on South Main Street has now gone out to
where your bank’s main office is located.
A You are referring to the banking business or [fol. 163]
commercial business?
I’m talking about business generally.
I would say yes. Yes it has.
The Motor Club moved out.
Yes.
The supermarkets moved out there.
Yes.
The Hillcrest Shopping Center is out there, the liquor
store is out there, the restaurants are out there, the
automobile companies are out there.
A | answered yes.
Q So that there has been a movement away from the
downtown section of Phillipsburg and it has moved out to
Route 22 or Memorial Parkway, hasn’t it?
A Yes.
Q And your directors decided you would move with the
trend.
A Yes, sir.
Q Has it been a satisfactory move?
A It certainly has.
Q How long has Mr. Mamana been connected with your
bank?
OProroro
Nex Sera SPR CE eR ON PR i
42
A I can’t give you an exact year.
Q_ Roughly, five, ten, fifteen years?
A Fifteen years.
[fol. 164] Q And where does he live?
A He lives in Easton.
Q. And he is an Easton broker?
A Yes.
Q_ And he was an officer of your company at one time,
was he not?
A Yes, sir.
Q He had offices in your main bank, both when it was
downtown and now at the Memorial Parkway.
A He had offices in our bank? Not to my knowledge.
Q He had a desk, or he spent a good deal of time in the
bank.
A Yes.
Q_ And he was a producer of considerable business for the
bank, was he not?
A Yes, sir.
Q And he was going into the Easton-Bethlehem
Township, Bethlehem area.
A Yes, sir.
Q_ And he did get you business from that area.
A He did.
Q_ Now you have a Washington director, do you not?
A Yes.
Q_ And is he getting you some business from that area?
{fol. 165] A He is.
Q Have you had a chance to thumb through your
checking accounts and your savings accounts in preparation
for this trial?
A No.
Q Have you been able to go through the mortgage records
in preparation for the trial?
A Yes, sir.
Q And have you had a chance to talk with your tellers
and your people in the bank?
In reference to this?
Yes.
No, I have not.
Have you discussed this with your directors?
Yes.
rOPrO>
43
Q And on the basis of preparing yourself for the trial and
on the basis of looking over the mortgage records and on the
basis of your knowledge of the areas in which you do
business, what would you say is the area in which this bank
does business?
A I would say a radius of 25 miles at this time.
* * *
(fol. 169] Q You have had a number of withdrawals from
your bank, either a time or a — a withdrawal from time or
demand deposits in favor of the Regelsville branch of the
Girard Trust?
A Yes.
Q And wasn’t there quite a drive on their part to get
deposits from your area?
{fol. 170} A Yes, sir,
Q And you saw withdrawals from your bank?
A I saw withdrawals and I have acknowledged _ their
advertising, yes.
Q They did advertise extensively?
A Yes, sir.
Q Which of the two advertising media do you use more
often? | believe you said the local Phillipsburg paper which
comes Out weekly and the Easton Express.
A The Easton Express.
Q Which is a daily?
A Yes.
Q And which covers pretty much this twenty-five-mile
area you described?
A Yes.
Q When you answered the plaintiff's attorney about the
area he described—Phillipsburg and a few municipalities,
Easton and a few municipalities—you said that the majority of
your business came from there, did you not?
A Yes, to my knowledge.
Q And by “majority” you mean in excess of fifty
percent?
A Yes.
Q And you are not willing to specify any more than in
excess of fifty-one percent?
fol. 171] A Tam notina position to.
44
Q Do you know that two directors of your bank, one a
director and vice-president, and another a director, have been
borrowing regularly over the years at the Phillipsburg National
Bank & Trust Company?
A 1 know that they have borrowed, I have no knowledge
whether it’s regular or irregular. | know that they have
borrowed.
Q If you knew that they borrowed in excess of what you
said was your limit, would this alter your statement that there
wasn’t much demand for commercial and industrial loans?
A May | hear that again, please?
THE COURT: Read it back.
(Question read.)
A | would have to say yes.
* * *K
Q Isn't it true that you went from a State bank to a
national bank because you felt that the requirements of
capital and surplus were less with the national banking outfit
than the State banking outfit?
A. That is one of the reasons, yes.
[fol. 172] Q = And isn’t it true that over the years you have
tried to avoid paying cash dividends so that you could build
up your capital structure?
A Yes, sir.
Q On direct examination you indicated that there was
practically little difference in the amount you paid on
deposits and the amount of interest you got on loans, is that
not correct?
A I don’t recall that.
Q Is there very much difference between the rate—is there
any difference on the rate paid on a time deposit as between
your bank and the two banks involved in this litigation?
A There isn’t any difference.
Q Is there any substantial difference in the mortgage loan
rate?
A Not to my knowledge, there is no difference.
Q Is there any real difference in commercial and
industrial loan rates?
A Not to my knowledge, there isn’t.
Q So with respect to this area there is little direct
competition?
45
MR. WEINBAUM: We object, your Honor.
THE COURT: Overruled.
A In regard to the rate area, no.
(fol. 173] Q We are talking about time deposits, mortgage
loans, and commercial and industrial loans; little or no
competition?
A Right.
Q You are familiar with the bridges between Easton and
Phillipsburg?
Yes, sir.
There are two of them?
Yes, sir.
One a free bridge and one a toll bridge?
Yes, sir.
And there is an excessive amount of traffic on both, is
there not?
A There is.
Q And even the toll bridge has an advantageous rate for
the local people?
A It does.
Q Two and a half cents a ride if you buy a book for a
dollar?
A Yes.
Q And where would you say the shopping areas are now
moving? At one time they were Easton downtown and some
of Phillipsburg downtown. Where are the shopping areas now?
A I would say that the shopping areas are in the outlying
(fol. 174] areas of both vicinities.
Q And the Lopatcong branch of the Phillipsburg National,
and the outer edge of Phillipsburg of the Second National
branch, are the areas where that kind of business has been
moving, is that not correct?
A Yes, sir.
Q You have a director by the name of Falk, a
vice-president?
A Yes, sir.
OProro>r
* ke Kk
Q Is it true that the labor population is quite mobile, that
is, that they move greater distances as years go on?
A Yes,
er |
46
Q Do you have customers who work at the Riegel [fo),
175] Paper Company in Milford?
A Yes, we do.
Q Do you have customers who work at the American Can
Company in Washington?
Yes, we do.
Do you have some who work at Celanese in Belvedere?
This I don’t know.
Do you have some that work at Bethlehem Steel?
Yes, we do.
Your stockholders are limited, are they not, the
stockholders of your corporation are limited?
A In number, or what?
Q_ Yes, in number.
A Yes.
Q And one stockholder controls in excess of fifty-one
percent, does he not?
A Yes, he does.
QOPrOrO>
* * * *
{| fol. 176] CROSS-EXAMINATION
BY MR. ROACHE:
xk * eK
[fol. 180] Q Do you give loans to college students?
A_ Yes, sir.
Q You give not many loans? Do you know the number
approximately?
A We have given out about forty. We have approximately
forty loans.
* * * *
[fol. 181] Q When you advertise in the Express, do you
not try to find out where it is circulated?
A 1 know where it is circulated, in the Phillipsburg and
Easton area.
* KOK X
47
(fol. 182] CROSS-EXAMINATION
BY MR. MEYNER:
Q Isn't it true that of those industrial and commercial
loans we were talking about, a number of them were
participation with the Phillipsburg National Bank & Trust
Company and the Second National Bank?
A Yes, sir.
Q And it was business you were requested to participate
in because it affected the local community?
A Yes.
Q Something like People’s Water or Pohatcong sewer job?
A Yes.
Q And isn’t it true that your management presently has
the policy of let’s not encourage any trust business?
A Yes sir.
* * * *
REDIRECT EXAMINATION
(fol. 182]BY MR. WEINBAUM
* * * *
(fol. 183] Q You indicated in response to a question on
cross-examination that you considered—made reference to a
radius of 25 miles.
A Yes.
Q And this was the basis for what?
(fol. 184] A This was our area, our immediate area that
we were interested in under the present circumstances, the
situation, the economy.
Q And how do you arrive at this 25 mile figure, Mr.
Leupo, in determining that this is your area?
MR. MEYNER: If your Honor please, I asked this witness
to base it on having reviewed his mortgages and having
reviewed his deposits and his general knowledge, and he gave
the answer on that basis.
THE COURT: I will overrule the objection. | will see what
he says.
(Question read back at direction of Court.)
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A We arrived at that area because this is the designated
area of service projected by my Board, and which they are
immediately interested in.
THE COURT: I take it your present policy is not to service
beyond that area.
THE WITNESS: Your Honor, this is the present policy. We
would not if the circumstances provided—we would give
consideration, but the present policy is to service that area.
THE COURT: Is that policy dictated by lack of capacity to
service beyond that area?
THE WITNESS: No. That policy is dictated for [fol.
185]the purpose of the knowledge of that area, a 25 mile
radius. To explain myself, we know what industry is doing in
that area, whether cutting back or laying off or possibly
having strikes. We know what the point of risk may be. We
know what the economy is in that area, and if we extend it
beyond that area then we have to make provisions for a wider
scope.
THE COURT: And planning for a wider scope, any
planning for a wider scope, as | understand it, was not
adopted.
THE WITNESS: It was never adopted.
Q I would like to pursue this a bit further, Mr. Leupo.
You have indicated you do not solicit throughout this 25-mile
area.
A Only through the medium of advertisements in the
local paper.
Q Do you know whether or not your advertising reaches
the—saturates the Lehigh County area?
A 1 don’t know it for a fact, but I assume it would. It
has a large circulation.
Q Do you anticipate, Mr. Leupo, at some time more
actively soliciting business in this 25-mile radius, personally
soliciting business, than you do now?
MR. MEYNER: I object. That was not the question.
{fol. 186] THE COURT: The difficulty I find with the
question is it seeks an opinion from him as to what his
anticipation is. | presume the bank is operated by a Board of
Directors and in the absence of any policy or planning | don't
know what value the answer would have.
MR. WEINBAUM: He is on the Board.
THE COURT: That is all right. If there is any planning for
more activity in the area I will permit it, but when you ask
49
whether he anticipates I don’t know how much value the
answer would have.
Q Is there any plan, Mr. Leupo, made to more actively
solicit business within this 25-mile radius?
A The only plan that is being considered would be upon
the growth of the bank the bank would be in a position to
reach out into a greater area.
THE COURT: Mr. Leupo, I developed the thought on the
basis of your testimony yesterday that you don’t—that the
bank had all the business that it could handle. Now if I am
incorrect on that—
THE WITNESS: At this time.
THE COURT: At this time.
THE WITNESS: Yes.
THE COURT: Has the bank engaged in any planning of
any nature whatsoever to improve its financial [fol. 187]
condition so that it could service to a greater extent within
the Phillipsburg-Easton area and environs and beyond that?
Maybe I'll put it in a simpler form. As far as the present
policy is concerned, are you satisfied with the situation that
presently exists?
THE WITNESS: That presently exists, yes.
THE COURT: And there is no indication at the present
time upon the part of management of the bank to change
that situation.
THE WITNESS: No, there is not.
Q By your answer that you have all the business you can
handle, are you interested in developing business further?
A Of course, yes. The answer is yes.
Q Can you state whether or not in your Opinion the
linancial resources of your bank are adequate to grow
further?
A My Board feels as if they are, yes.
Q Do you feel that the area is growing?
A Ido.
Q Do you feel that—can you state whether you feel that
ismall bank such as yours will or will not be able to share in
wch growth?
Mr. MEYNER: I object, your Honor.
lol. 188] THE COURT: Overruled,
AI feel as if they can share, yes.
* kk *
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[fol. 192] Q Mr. Leupo, did you base your answer
concerning the 25-mile radius, called your area, on the fact
that you, as testified earlier, you derived certain business from
Allentown, certain business from Bethlehem, certain busines
from Washington, certain business from. Belvedere?
A Did I derive my opinion from my existing business?
Q_ Yes.
A No. I didn’t derive my opinion from that. I derived it
from the opinion that we know this 25-mile radius and we
have had experience in there, and in order to be acquainted
with it—it was a compromise.
[fol. 193} Q Mr. Leupo, can you explain for us why your
board has said, ““Let’s not encourage trust business”?
A Well, I think one of the prime factors is the existing
trust business we have today, and the return of profit from
what we have. And in order to encourage it, we would have
to elevate our Trust Department and go to a larger expense,
which we are trying to curtail at this point. I think this is the
prime part of it. Our Trust Department today is servicing
possibly the desires of our immediate customers. We have not
gone outside and solicited trust business.
Q At some point do you believe that the board would
consider hiring a trust officer?
MR. ROACHE: Objection.
THE COURT: Sustained.
Q In your opinion, Mr. Leupo, if it is shown to your
satisfaction that there is a demand for trust business in the
area, do you think that you would give consideration to
hiring a trust officer?
A When you say me, you are referring to the board, am!
correct?
MR. WEINBAUM: Yes.
MR. MEYNER: I object.
MR. WEINBAUM: He is a member of the board.
THE COURT: It is a hypothetical question. You are asking
him to assume something.
{fol. 194] All right. I think you have covered it, bui I am
not going to restrict you.
MR. WEINBAUM: We will withdraw the question.
THE COURT: Would you state again, Mr. Leupo, what
reasons, if any, there are, of your own personal knowledge,
why your bank does not want to expand its activities in
trusts?
51
THE WITNESS: The most obvious reason at this time is
that we do not have a Trust Department to the extent of
advertising for additional business. Our Trust Department
today is in a position to handle the trust work that we have.
THE COURT: Then am I correct in my assumption that
the reason for not expanding is the lack of facilities available
rather than the absence of availability of trust accounts?
THE WITNESS: Correct. Yes, I would say, to this extent,
that we have not had requests for a sizeable or large trust
work that would necessitate increasing our trust department.
THE COURT: I don’t know whether you understood my
question. | gathered from your testimony a moment ago—and
please do not hesitate to correct me if my recollection is
faulty-I gathered from your testimony a moment ago that
the trust services you [fol. 195] render were considered as in
the nature of an accommodation to customers rather than as
business for the bank.
THE WITNESS: Presently, yes.
THE COURT: Is that true?
THE WITNESS: True.
THE COURT: I think counsel was trying to find out what
you might do in the future. And I pose this question: Is it
true that the present policy of the bank is not to set up a
Trust Department, because it does not desire to handle trust
accounts that may be available within the area that you
service, except as an accommodation for customers?
THE WITNESS: Correct.
THE COURT: Is that correct?
THE WITNESS: That is correct, at this point.
MR. WEINBAUM: One further clarification, your Honor.
Q Mr. Leupo, has your bank had requests for trust
services which you haven’t been able to accommodate?
A No.
MR. WEINBAUM: We have no further questions, your
Honor.
RECROSS EXAMINATION
BY MR. MEYNER:
Q It is the present policy of your bank to do business
ARTA A CaN ite Aen Dinbeo 25 LC tee aks a Bal pha ba a STN age ae a
He BPS
eM
Biitsinc:; BL er ARG,
—
52
within a twenty-five-mile radius of your bank?
{fol. 196] A’ Yes, sir.
x* eK *
[fol. 197] EARLE J. LEWIS, sworn.
DIRECT EXAMINATION
BY MR. WEINBAUM:
Q Mr. Lewis, will you please state your address and
occupation?
A My home address?
Q_ Yes.
A 119 Mine Hill Road, Hackettstown, New Jersey. And |
am with the bank, Peoples National Bank of Hackettstown.
Hackettstown, New Jersey.
Q_ And what is your capacity at the bank?
A_ I am executive vice-president and cashier.
Q Where is Hackettstown located, Mr. Lewis, in relation
to Phillipsburg, New Jersey?
A Hackettstown is twenty-three miles east on Route 24
and 46, on the edge of—the eastern section of Warren County
and the western section, you might as well say, of Morris
County, on the boundary line.
S ** * *
[fol. 199]Q Can you briefly describe the various services
offered by your bank, please?
A We have a full service bank. We have mortgages, a trust
department, commercial accounts, savings, travelers’ checks,
business loans, consumer credit department, safe deposit
boxes.
x** Kk *
Q And can you tell us what rate you pay on your
passbook savings?
{fol. 200] A Four percent.
53
Q How long have you _ been paying four percent,
approximately?
A I think on the first of January of 1964. I am not sure
of that. I believe it was 1964.
Q Do you do any tuition financing?
A Very little. We do a little, but very little.
* * * *
Q Mr. Lewis, for purposes of this case, the government
has defined Phillipsburg and the environs to include the City
of Phillipsburg, Pohatcong, Lopatcong, and Greenwich
Township, and Alpha Burough. To the best of your
knowledge, Mr. Lewis, does your bank do any demand
deposit business in the Phillipsburg and environs area?
A Yes.
Q Do you know approximately how many accounts of
this type you have in this area?
A No.
Q Do you know anything about the demand deposit
business which you do in this area, if you do any?
MR. MEYNER: Objection. He already said he doesn’t
know
(fol. 201) MR. ROACHE: Objection.
MR. WEINBAUM: Do you know anything at all? I asked
him about the number, your Honor.
THE COURT: Read the question.
(Question read.)
THE COURT: He just said—
MR. WEINBAUM: The question before that.
A We do have accounts here.
* * * *
THE WITNESS: I believe the primary section of
Phillipsburg would be-—let’s Say around six miles, according to
the chart which they have established.
MR. WEINBAUM: Your Honor, we—
THE COURT: Wait a minute. Let the witness finish. |
don’t think he has finished.
THE WITNESS: And in this particular section [fol. 202]
of—our activity in this section, including our loans, including
our mortgages, including commercial savings, I would
f debt ase ae ed a NE Cae.
an
ee
SATS tes
4s'2 » * a
WS et fe
54
definitely say that we have less than one percent of our total
number of accounts. And our total number of accounts
approximately is 15,000—Christmas Club, loans, commercial
accounts and savings accounts. We have a very small portion
in this section.
Q. Fifteen thousand dollars?
A Fifteen thousand accounts.
Q Is this your total number of accounts of all categories?
| om OF
Q I would like to pursue further some of the various
kinds of business, Mr. Lewis?
A Right.
Q To the best of your knowledge, does your bank have
any loans from Phillipsburg and the environs?
A Yes.
Q Can you tell us what types of loans?
A We have one mortgage in this section. We have a few
consumer credit loans in this section.
Q Do you have any commercial and industrial loans in
this section?
A Not industrial loans, no.
Q Commercial loans?
A_ No.
[fol. 203] Q Do you have any dealers in this Phillipsburg
and environs area?
A No, no we don’t.
Q Do you advertise, Mr. Lewis?
A We do advertise, yes.
Q Where do you advertise, what mediums do you
advertise in?
A We use the Hackettstown Gazette. Once in a while
Washington Star. They are our main sources of advertising
plus billboards.
Q You advertise on the radio?
A We have advertised on the radio. We are not now
advertising on the radio.
Q What radio station or stations have you advertised on?
A One out of Washington, New Jersey.
Q Mr. Lewis, turning for a moment to Easton, we have
defined the Easton area to encompass the City of Easton, the
Townships of Forks, Williams and Palmer and the Boroughs of
Wilson, West Easton, Glendon, Stockertown and Tatamay. |
55
would like to ask you whether to the best of your knowledge
your bank does any business in that area.
A This would be the Easton area?
Q Yes, as we have defined it.
A To my knowledge, no. We may have—which all banks
[fol. 204] do, a few scattered accounts, a very few.
Q Would this apply to the various types of business your
bank does?
A Yes it would
** * *
(fol. 206] Q Getting back to Allentown, Mr. Lewis, can
you state for us to the best of your knowledge whether you
do any business in Allentown?
A No.
Q Mr. Lewis, approximately how far is Washington, New
Jersey, from Hackettstown?
A Twelve miles.
Q Can you state whether or not your bank does any
business in Washington?
A Some, yes.
Q Can you tell us what types of business you do there?
A We have savings, commercial, Christmas clubs,
mortgages.
Q Do you know approximately how many savings
accounts you would have in Washington?
A No.
Q How many Christmas clubs?
A No.
Q Do you have any idea of how many commercial loans
you would have there?
[fol. 207] A No, I don’t.
Q Do you know who your commercial accounts are in
Washington?
A Not offhand.
Q Can you tell us approximately how many mortgages
you have in Washington?
A Very few, very few.
Q Would you know the approximate dollar amount of
such mortgages?
A No, I wouldn’t.
56
Q Mr. Lewis, to the best of your knowledge, does your
bank do any business in Bloomsbury, New Jersey?
A_ Not to my knowledge.
Q_ To the best of your knowledge, does your bank do any
business in Milford, New Jersey?
A_ Not to my knowledge.
Q_ To the best of your knowledge, does your bank do any
business in Flemington, New Jersey?
A_ Not to my knowledge.
Q_ To the best of your knowledge, does your bank do any
business in Regelsville, Pennsylvania?
A No.
Q_ To the best of your knowledge, does your bank do any
business in Nazareth, Pennsylvania?
A No.
{fol. 208] Q To the best of your knowledge, does your
bank do any business in Bangor, Pennsylvania?
A_ No.
Q_ To the best of your knowledge, does your bank do any
business in Slatington, Pennsylvania?
A_ No.
Q_ To the best of your knowledge, does your bank do any
business in Coopersburg, Pennsylvania?
A No.
Q_ How about New Tripoli, Pennsylvania?
A_ No.
Q To the best of your knowledge, do you do any
business up in Blairstown, New Jersey?
A Yes.
Q Can you tell us what kind of business you do up there,
if you know.
A Savings, commercial, mortgages.
Q Do you know how many mortgages you have up in
Blairstown?
A I couldn’t say without a survey, no.
Q Do you say commercial and industrial loans up there?
A No, no.
Q Do you know how many savings accounts you have in
Blairstown?
A No, I wouldn’t.
[fol. 209] Q Do you know how many mortgages up
there?
A No, I don’t know.
a
57
Q Do you know any of your mortgage customers up
there?
A Personally?
Q Do you know who any of them are?
A Not without taking a survey, no.
Q Now, do you do any business in Belvedere?
A We may have a few savings accounts and checking
accounts, but very little.
Q Do you have any lending activity in Belvedere, to your
knowledge?
A Not to my knowledge now. There may be consumer
credit loans over there. We go out quite a distance.
LORIE LIS ELOLY BALE LENIN oe AIT |
eee *
(fol. 211] CROSS-EXAMINATION
BY MR. MEYNER:
eee *
\fol. 212] Q Have you made any detailed study of your
mortgages? Have you gone through a list of your mortgages
prior to your coming here?
A No, not just prior to coming here. :
Q In preparation for your answers, have you gone
through your list of mortgages?
A No.
Q Have you gone through a list of your demand and time
deposits?
A No. I didn’t take a fine survey, no.
Q Did you go through your automobile loans?
A Not before I came in here, not recently.
Q You have better than a million dollars in automobile
loans, do you not?
A In automobile loans alone we have a million dollars,
yes.
Q On installment credit you have about 400,000?
A On installment credit on total we have the best part of
two million. That includes all our installment paper of all
Sorts.
fol. 213] Q You have concentrated in this area? You
have made an endeavor to build up your installment loans?
ash $8 STAY
Lb GR EGE LEB Y
Av nha
TURAN 6 ho cnt
58
A Oh yes, yes.
Q And you have never determined to go beyond a few
miles from Hackettstown?
A We are seeking new business.
Q_ Have you gone to Washington and sent a man out there
trying to get new business?
A We have not recently, no.
Q_ Have you sent anybody to Phillipsburg or Easton?
A_ No, we have not recently, no.
Q Isn't it true that many of your customers for
installment loans do go to Phillipsburg or Easton or
Bethlehem and Allentown and then come back and want to
borrow so they can purchase an automobile or some
appliance?
* * * *
[fol. 214] THE WITNESS: This happens. There are a few
cases of this, yes.
* * * *
Q_ And Hackettstown presently has a growth development
that is shared in by all of Warren County, all of the Lehigh
Valley area, isn’t that so—well let’s say all of Warren County.
A Yes, yes.
Q_ In other words, the people are moving out [fol. 215]
towards the Delaware.
A Yes, yes. ;
Q_ That is the only area they can grow to.
A Yes.
Q_ And isn’t it true that just across the river, across the
Musconetcong on the road to Phillipsburg a new plant is being
established?
Yes.
What is the name of the plant?
I can’t tell you. I am sorry.
Was it U.S. Radium?
I am not sure. I think it is. I’m not sure.
And it is a prospective substantial employer.
Yes, yes, definitely.
And you have seen industry in Hackettstown grow?
Yes.
POPFOSFOFOS
Q And
Township?
A Yes. 59
What. .
: Yes. Is a development out in Mansfield
Q So as
ington,
oa ice farms are now becoming populated.
A Yes.
{fol. 216] travel Route 24 from Phillipsburg to
Washington tof the farm space is now being occupied by
A Yes.
Q Would
institution hnd the same is true from Phillipsburg—from
A No, itlipsburg, is it not?
Q That
number Of Mprise you to know that an Easton financial
A That : mortgages in Hackettstown?
Q That) not surprise me.
mortgages 'd Savings from Newark have a substantial
institUtlOnS os in your town?
your knowle
V surprise me.
A And ‘ston institution has as many as three
m.. nN field? Do you find that savings and loan
A Newa the mortgage field in Warren County, to
They
A Yes. astitutions are from as far away as what
Q Insur: |
A I don in New York City.
Q But Wing out there and putting out mortgage
A Yes.
Q And y.
savings banKipanies too?
A Yes. about that.
Q And now the savings and loans,
Hackettstov
A Yes. ings institutions, that is the {fol. 217]
Q Your
n what the
ithe Sense them from Easton are moving towards
S never chosen to try to develop business
describes as the Phillipsburg-Easton area.
send people there to try to get business?
Ta
ast
BIRD re SI BPR
60
A I can answer no and I can answer yes, so I will leave jt
unanswered.
* * * *
{fol. 218] Q Well, to your knowledge, have you ever sent
a person from your bank to Easton or Phillipsburg to try to
get—
A Not in Pennsylvania. It wouldn't be in Pennsylvania,
definitely.
Q There is a great growth of industrial enterprises in the
Warren County area—Celanese, and Hoffman-LaRoche in
Belvedere, and M. & M. Candy Company is increasing its
employment in its new plant that is to be located on the
Musconetcong, American Can in Washington—many of those
large corporations have moved in. Have you found from some
of the manufacturing outfits that they are desirous of giving
you trust business with reference to pension funds or pension
plans?
A Yes.
Q Would you say there is a need to service this in the
Warren County area generally?
A Yes, I would.
Q There is a potential for that kind of business?
A Yes, there is.
Q And would you say that there is a real need to develop
trust business in that entire area?
A Yes.
Q And is there competition for this business from outside
areas?
{fol. 219] A I would say yes. I would say yes.
* * * *
{fol. 221] Q There are people in the area where you are
doing business who are seeking the dollar that is being saved,
are there not?
A Yes.
Q Who are they? Are they savings institutions?
A I am going to make this statement. Maybe it isn’t the
right thing. We have in our section strong competition to the
east of us. We have it. And we have had it for a long while.
There are savings and loans and there are savings banks.
61
Howard Savings is one, Morris County Savings is one. Morris
County Savings is a very, very strong competitor of the Peoples
National Bank and the Hackettstown National in that section.
Q Trying to get the savings dollar?
A Yes.
Q How about mutual funds?
A Mutual funds, that is another source that takes money
out of our banks.
Q And how about insurance companies?
A To a certain extent, yes. I wouldn’t say insurance as
much as | would the other items.
Q How about credit unions?
A I can’t disagree with you.
Q How about the stock market?
A Well, I think that is a national thing all through the
(fol. 222] country. It does take some out, there is no
question about it. .
Q You see it in your bank, don’t you?
A That’s right.
Q And you see it on the extension of credit side, too,
other people that are seeking to make loans?
A Yes, true.
Q Especially in the automobile loans which are rather
heavy. There are financing companies working out
arangements with dealers, are there not?
A There could be. This I don’t know. I couldn’t answer.
Q Did you ever hear of the General Motors Acceptance
Corporation?
A Oh, yes.
Q Have you ever encountered them?
AI have.
Q Aren’t they competition?
A They are.
CROSS-EXAMINATION
BY MR. ROACHE:
* * * *
ifol. 223] Q Why do people travel distances to come into
Hackettstown to buy automobiles?
Ditties stisinccitsnniaies stains Paar Sota aie a lads Aaa ab hiih
62
{fol. 224] A_ I think to answer that—I think you will fing
that throughout the nation. I don’t think it is only
Hackettstown. | think it is Easton, Phillipsburg, every place.
They will shop for cars.
Q They go all through the. community, Easton,
Allentown, Phiilipsburg?
A Whether it is New York or Los Angeles, people like to
shop. Where they get the best deal, this is it. I think this js
just an ordinary thing that we have in our economy of our
country here today.
Q_ And in the purchase not only of automobiles but in
large consumer items people will travel distances?
A I think you are right. In some cases, they will shop.
* * * *
REDIRECT EXAMINATION
BY MR. WEINBAUM:
* * * *
{fol. 225] Q Do you personally solicit in the Phillipsburg
area?
A Not for some time. We did at one time, but not for
some time.
Q_ How long has it been since you have?
A When we first established our consumer credit
department, back in 1945, we did solicit the County, yes.
Q And when did you terminate that solicitation,
approximately?
A_ Id say a couple of years later, probably.
Q And did you at that time also start soliciting in
Pennsylvania?
A No.
Q_ Why didn’t you solicit in Pennsylvania?
A Well, our policy of the bank is not to go into
Pennsylvania.
Q_ Why is that?
A The laws are different and we just don’t move over. |
think that is one of the reasons, the laws are different and we
just never established going into Pennsylvania with a loan.
*x* * kK *
[fol. 248] CLARK C. BOWERS, sworn.
—
BY MR. AUSTIN:
BOFrOFOrOro
0
ae
FOPFroO >
[fol.
‘
63
Sena
DIRECT EXAMINATION
Would you please give your address, Mr. Bowers?
Home or business? &
Home address. ;
38 North Lincoln Avenue, Washington, New Jersey. i
And what is your occupation, sir?
Attorney and banker.
With what bank are you affiliated?
Washington Trust Company of Washington, New Jersey.
How long have you been with the Washington Trust
pany?
Forty-two years.
How long have you served in your present position?
Since about 1930.
And that position is—
President.
**e* *
251] Q What are the rates—what rate of interest do
you pay on passbook savings?
A
Q
A
Q
A
Q
Four percent.
And what rate do you pay on time deposits?
It is only four percent for both.
Do you offer certificates of deposit or CD’s?
We have not yet.
To the best of your knowledge do the other banks [ fol.
252] throughout Warren County, New Jersey, pay four percent
on passbook savings?
A
[fol.
I believe so. I am not quite sure.
**£ * *
253] Q Do many of your customers use more than one
banking service offered by your bank?
A
Beg your pardon?
Do many of your customers purchase more than one
service from your bank at the same time?
A
[fol.
Oh, they do, certainly.
254] Q Do you regard this as a valuable feature of
your banking business?
ea ee
Nereky
Beiticiisin: CAE i RR Ba Raia sis snad- ou baa acaba ag alibi! Fwalle
64
A Ido.
Q_ Do you actually encourage your customers to purchase
more than one of your banking services?
A Certainly, yes.
* * * *
Q_ To the best of your knowledge, does Washington Trust
derive any business from Phillipsburg and environs?
A It does.
Q_ What types of business do you derive from that area?
[fol. 255] A Automobile loans, appliance loans, personal
loans, collateral loans, and demand notes, and mortgages.
Q_ Do you know the approximate number of mortgages that
you have in the Phillipsburg area?
A Twenty-three.
Q Do you know the approximate dollar value of those
twenty-three mortgages?
A About $23,000. That's strictly a mortgage—strictly
mortgages, not notes secured by mortgages. It would be far
higher, if it were a note given to secure a mortgage.
*_* * *
Q Do you know approximately how many notes you have
that would fit that description?
A_ I believe there is only one. And that was probably a
quarter of a million dollars. That’s an approximate figure. But it
was participated in by the Philadelphia National Bank.
x*** *
[fol. 256] Q Thank you. Do you know the approximate
number of mortgages you have on your books at Washington
Trust?
A I'm sorry, I do not have that. | have the total— the dollar
value, but not the number.
Q_ What then is the total dollar value of the mortgages?
A About $4 million.
Q. And that is as of this date or-
A Current.
Q Current. Thank you. Do you know the approximate
number of consumer installment loans that you derive from
Phillipsburg and environs?
65
I do.
; What is the number, total number of consumer
installment loans you have in the area?
A If you would subdivide the question | could give it to
you in automobiles, appliances, and personal loans, rather than
asa gross, without me adding it up here.
Q What then is the total number of automobile installment
loans you have from the Phillipsburg area?
A Inthe Phillipsburg area we have 63 of about $85,500.
Q That is the total dollar value of those automobile loans?
(fol. 257] A In the Phillipsburg-Stewartsville vicinity.
Q What would be the total number of appliance loans you
have in that area?
A We only have about eight of $3,100.
Q What would be the total number of personal loans you
have in that area?
A We have 40 of about $23,000.
Q Do you know the approximate number of automobile
loans you have on your books in Washington Trust?
A About 450.
Q And what would be the total dollar value of those?
A $928,000, in round figures.
Q Do you know the approximate number of appliance
loans you have on your books?
A 250.
Q And do you know the approximate dollar value?
A $62,000.
Q Do you know the approximate total number of personal
loans you have on your books?
A 375.
Q Do you know the approximate total dollar value of those
loans?
A $371,000.
Q Do you know the approximate number of checking [ fol.
258] or demand accounts you have from the Phillipsburg area?
A Ido not.
Q Do you know the approximate total number of time and
savings deposits accounts you have in the area?
A lam sorry, I do not, no.
Q Do you have any commercial or industrial loans in the
Phillipsburg area?
A The one that I just spoke about, the large corporation in
RATAN Tepes
roa
SRAr RRA
we
PPRACLT I
66
which we have 10 per cent participation is, I believe, the only
one.
Q May I ask, in reference to that, Judge Bowers, did
Washington Trust originate that loan or simply participate with
its correspondent bank?
A No, we instituted the loan. That is, the party applied to
our bank for the loan. The Philadelphia Bank was requested by
us to participate because it exceeded the 10 per cent of our
capital and surplus.
Q What is your current lending limit?
A $125,000.
Q And how Jo you compute that lending limit, Judge
Bowers?
A The capital and surplus, 10 per cent of the capital and
surplus of the institution.
* * * *
{fol. 261] Q What types of business glo you have from the
City of Easton alone?
A Mortgage.
Q_ Do you know the approximate number of mortgages you
have there?
A We have one mortgage in Easton of $25,000.
Q Do you get any other type of business out of the City of
Easton?
A Yes, sir.
Q_ What types would it he, sir?
A We have loaned money on a taxicab business in Easton,
Diamond Taxicab.
Q And what was the dollar value of that loan,
approximately?
A Probably $10,000. I am not sure. That was guaranteed,
of course, by an endorsement, also. Although we do have liens
on all the taxicabs there.
Q Do you derive any other types of business out of the
City of Easton?
A Not to any extent.
Q Do you derive any business out of any of the townships
or boroughs I just named that surround the City of Easton?
A Yes, we have two mortgages at Windgap, Pennsylvania-|
believe that is in Northampton County, in which Easton is [fol
262] situated: | believe so. And we have one mortgage in Mt.
67
Bethel; and two in Pen Argyl, and one in Nazareth,
Pennsylvania. And they are in Northampton County, or
immediately next to it.
Q Do you know the total dollar value of those?
A Ido. The two in Windgap are $36,900. The one in Mt.
Bethel, $16,000. Pen Argyl, two of them, $30,400. The one in
Easton, $25,000. And one in Nazareth, $16,000. A total of
$124,300.
Q To the best of your knowledge, sir, do you get any
business from Hackettstown, New J ersey?
A Yes, sir.
Q What types of business do you get from that city?
A Various loans, automobiles, appliances, personal loans,
time deposits—or time collateral loans, mortgages.
Q Do you know the approximate number of mortgages you
have in Hackettstown?
A That’s one thing | Overlooked, not the number of
mortgages in any case.
Q Do you know the approximate total dollar value of the
mortgages you have there?
A I can’t give you that. (Examining papers.) Excuse me. We
do have 21 mortgages to Hackettstown, 21 mortgages,
Q Sir, do you know the approximate total dollar [fol.
263} value of the mortgages?
A (Negative response.)
Q Do you know the approximate number of Savings
accounts you have from Hackettstown?
A No, 1 do not.
Q Do you know the approximate number of demand
accounts?
A No, sir; 1 haven’t that information.
Q Do you know the approximate number of automobile
loans you have in Hackettstown?
A Yes, sir.
Q What is that number, please?
A $161,000; 103 of them.
Q Do you know the approximate number of appliance
loans you have in Hackettstown?
A We have eight amounting to—excuse me. We have ten,
$2600.
Q Do you know the approximate number of personal loans
you have in Hackettstown?
A Forty-four, $32,000, total. That takes in Hackettstown,
Port Murray, Port Colden and Great Meadows, in that vicinity.
eine |
a a a
68
Q Approximately how far is Hackettstown from
Washington?
A Ten miles.
* em
{fol. 268] Q Could you give an approximation, Judge
Bowers, of the amount of your total business derived from
Washington Borough?
x KK *
{fol. 269] A Automobiles, we have 188 loans, totaling
$554,400. Now, this is in addition to what I have testified to
before. Appliance loans, we have 172, amounting to $36,800,
Personal loans we have 135, totaling $240,000. And
miscellaneous small loans, 25 of $19,000. And time and notes,
collateral loans, $2,281,000.
And I’m sorry, I could have given you the grand totals, too. |
see they are here.
{fol. 270] Q Judge Bowers, am I to understand that those
figures are for Washington Borough or for Washington Borough
and the township combined?
A Washington Borough and the immediate vicinity
deducting what I have testified before, although I can give you
our Straight totals including them all, if you wish.
‘ xem
{fol. 272] Q Do you recall any instances over the past five
years where because of your lending limit you have been unable
to adequately provide for the credit needs of a customer or
prospective customer in the Washington area?
A Because of what?
Q_ Because of your lending limit for individual loans.
{fol. 273] A No. We have at least participation with
other—our correspondent banks. We have no trouble. They are
always glad to cooperate with us.
x** *K *
[ fol. 274] CROSS-EXAMINATION
BY MR. ROACHE:
69
+
(fol. 275) Q When did your bank first give a rate of interest
of 4 per cent, when did you first £0 up to 4 per cent?
A | would say within two years.
Q Are you sure of that, are you sure it wasn’t longer?
A If you have a definite date, | don’t recall when it was,
Q I don’t have a definite date, but | thought it was four or
five years ago.
A I doubt it. I believe two years would be nearer.
Q At that time what was the Phillipsburg National Bank
charging as a rate of interest, if you know?
A It occurs to me that they were always less than what we
paid; but what it was, I don’t know.
Q Did this enable you to get business from Phillipsburg,
because of the higher rate of interest?
A I wouldn’t say so. I don’t know. Certainly they never
complained and we never were glorified by it, anyway.
(fol. 276] Q Who never complained, Phillipsburg National
Bank?
A No, they are not the complaining type. And they didn’t,
anyway.
*** &
Q Do you think you could do a better job with a full-time
trust officer?
A Certainly.
Q Do you think there is trust business in the area to be had,
ifyou could devote more time to this?
A I would believe 80, though I don’t particularly lead that
line, that is, | don’t—if | wasn’t in there, I wouldn’t care for my
bank to be in the trust business.
Q So you don’t concentrate on this business.
A Not at all. But business is available, I will agree with that.
*kK* &
CROSS-EXAMINATION
BY MR. MEYNER:
* KX kK *
BLADE RE SE NEHY a a email
SCRA es
70
{fol. 277] Q And what would you say is the radius from
your main office in Washington by which you consider your
trading area?
A_ I would say maybe 20 miles. We have a lot of loans
within that period, and we have them all over the State of New
Jersey in the mortgage department, that we sometimes retain
and sometimes pass them on to the Seamen’s National Bank in
New York.
[fol. 278] Q In other words, as a matter of policy, you
would like to do your business within 20 miles, or 25 miles.
A Well, yes, because it is less investigation, we know the
people. But that doesn’t prohibit seeking business elsewhere,
only we would be more cautious, for we wouldn’t know the
people, that’s all.
Q But within an area of 20, 25 miles, you try to confine
your business.
A Well, yes, but we are open for business elsewhere.
Q_ Even beyond that.
A Yes, we are, certainly.
Q And you do have a large commercial loan in the
Phillipsburg area?
A We do, a participating loan.
Q You have lived in this area of Washington, or the Lehigh
Valley area, for most of your life, have you not?
A Ihave.
Q_ Will you tell us something about the shopping pattern.
A Well, in Washington, from a grocery standpoint we are
well taken care of. But for merchandise of women’s clothing,
men’s clothing. | would say that it could be improved. And sol
believe many people—I know my family—go to Allentown a
great deal, and to the suburban-—the great stores of New York,
out in Short Hills.
{fol. 279] Q Do you or your family go to Allentown, Hess
Brothers?
A Oh, yes, we do quite a bit of business with them, both!
and my wife.
Q And, as a matter of fact, where in this area of Warren,
Lehigh and Northampton Counties do you buy your suits?
A Well, I bought a couple over at Hess” just recently,
Governor.
Q_ And do you have a credit card there?
A Oh, yes.
-*
_—
Q And do quite a few people in Washington have credit
cards there?
A I believe so. Yes, sir; | would say they do.
** * *
(fol. 284] Q Would it surprise you that Valley Federal
Savings & Loan has forty mortgages in Washington Township?
A No. | would take your word for it, Governor, because |
see it on the records as I look over things a little. | know they
do a lot of business up in our way.
Q You are still the kind of practicing lawyer that does some
searching around?
A It’sa nice little vacation at times to go over there.
Q Are efforts being made by other banks and financial
institutions to get the depositor’s dollar?
A Sir?
Q Do you think that there are other people who want to
get the dollar that you want for a deposit?
A There is no question about it. Yes, sir.
Q How about the activity of mutual funds?
A I would say there are at least three agents in Washington
or vicinity that are seeking to sell mutual funds.
Q And have you seen—do some of your customers
subscribe to these mutual funds?
A They do.
Q How about insurance?
A They are competitors. Insurance companies, you refer
[fol. 285] to?
Q Yes.
A Yes. They are competitors.
Q And there is a concentration in your area?
A There are a few, really, the Prudential and Northwestern,
I believe.
Q And how about savings and loans, that is for the
depositors, too?
A Well, the Washington Building & Loan Association |
know is after the dollars. They have sought an investment from
me which I gave them, too.
Q Asa matter of fact, you have one of the more successful
building and loans there, don’t you?
A Yes. I think it is a sound institution.
4
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72
Q About four million dollars?
A 1 don’t know, but is sound enough. I believe so.
Q Are you aware of the fact that city banks are attracting
customers in the way of deposits? ;
A Once in a while I see mortgages go On Over to Belvidere.
Q_ I mean deposits, like certificates of deposit. 1 am talking
about the dollar that comes in to the bank.
A 1 wouldn’t know. You mean they are seeking money of
people, the insurance companies?
Q No.1 am talking about mutual savings banks.
A Yes.
[fol. 286] Q And commercial banks advertising for
certificates of deposit.
A | aminformed that a substantial amount of money leaves
Washington to those banks.
Q How about the stock market?
A Well, that is, of course, present in our vicinity. There is
one in Easton that does quite a business with Washington
people there, and even one in Allentown that even sought me.
Q Have you done some _ business with an Allentown
brokerage firm?
A Yes. They called me one day and recommended
something and I bought it and it is still where I bought it.
Q_ This is a stock brokerage firm in Allentown that called
you about a prospective purchase and you were persuaded and
bought it through the efforts of the Allentown brokerage
company?
A | did. Waldon Company, I think it was.
Q_ We talked about the people who are trying to get the
dollar that you want as a deposit. Now, how about the activities
of people who want to loan money to people in this area. Do
you have finance companies in the area?
A Yes. The American Finance Company has a rather
prominent office in Washington.
{fol. 287] Q And you are not familiar with the amount of
business they do?
A No, I don’t know, but one of my directors in the
automobile business has informed me that they do 4
considerable business.
Q And how about the finance companies that ar
connected with the motor companies OF the appliance
companies?
—
A
mentio
COMPAL, eens
the bus
the oth
one of 73
with th : oe
te quite competitive. One of the two that I
nen t| lot of business with one of the finance
when t) :
that baY are hard competitors, because I pressed for
A ‘told me that they can doa little better with
onit. and we do not get all of the business from
Q 's because he has a better deal, so he says,
A npany.
is bonason of their setting up a reserve and then
someOhches a certain amount they get a portion of
and ask correct?
insura? it is done or not I would have an Opinion
financla ng b
y insurance companies in the area?
oans, ¢
liar with that, although I know that money
insurance companies, especially when
where house, they get their downpayment on that
hes’ Te and get the reserve from the [fol. 288]
n the policy.
Admint Ss mortgage loans? Other banks and other
A do come into your area in order to make
up. Th A :
y do. We have had instances in the past
was paid off by an insurance company.
from an insurance company -—that has since
institution _ start with the Veterans
when they Originally came out?
ive two, three or four. We didn’t follow it
’€ SO much work involved.
We havuraged Veterans Administration loans?
Q
rFoOorororeo
‘onverage tuition loans?
{fol. 2
Q have very many of those?
1ot, if any. I’m not sure.
jeral Home Administration loans, FHA?
> two or three of those, and maybe not.
2ry few. Didn’t encourage them.
ds, you limit your business to the
type of loan?
ve did and do.
are of the fact that much of that business
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74
in Federal Home Administration loans has gone to other
sections of Washington or Northampton or Lehigh Counties?
A_ I understand that it has, yes, sir. | understand that it has,
Q_ In preparation for your appearance here I gather that
you did some homework and thumbed through the loans of
various types, is that correct?
A I had it done.
Q You had someone in the bank do it for you?
A_ I got a recapitulation on it, yes.
Q_ Who was in charge of that?
A Well, there is an assistant treasurer, Mrs. Flynn, who did
it, and the assistant secretary, Mr. Cunningham, and Mr. Rudd,
the treasurer and secretary of our bank. .
Q_ Mr. Rudd would be in charge of getting it?
A He is the one whom | directed to have it done.
Q And you did not choose to try to go through your
demand or time deposits in order to get a similar breakdown?
A lamsorry. I entirely overlooked that.
Q But you do have depositors within this twenty or
twenty-five-mile area?
{fol. 290} A Oh, there is no doubt about it. Certainly we
have depositors from Phillipsburg, certainly.
Q_ And from these other areas?
A Oh, yes, we do, all around there, quite some distance
away. I was up near Columbia the other day and asked a woman
for directions about things I am interested in up there, and she
said, “I am a depositor in your bank” and that must be twenty
miles away.
Q Columbia is just opposite Portland, Pennsylvania?
A Yes. I had no knowledge of it, but she said she wasa
depositor there in the bank.
You do permit banking by mail, do you not?
Yes, sir.
Have you found that that is on the increase?
I can’t answer the question. I don’t know.
You are not familiar with that detail, but you do have it?
Yes, sir.
And if someone from Pennsylvania comes to this
automobile dealer who is a director of yours and he wants to
give you that paper you finance that paper?
A Wedo.
MR. MEYNER: That is all I have.
OPrOPrOPrO
75
REDIRECT EXAMINATION
BY MR. AUSTIN:
**k * *
(fol. 293] Q_ I believe you testified, also, Judge Bowers, that
you regard your trading area as encompassing a 20-mile radius
of Washington, New Jersey. To what extent, if any, was that
statement based on the breakdown of the geographic origins of
your business that you gave me on direct examination?
A Well, the Hope vicinity there must be 20 miles away, and
certainly the Hunterdon County area would be 15 to 20 miles,
and Nazareth certainly would be 20 miles from my bank, and
Pen Argyl, and we have—I see a list of three-quarters of a
million in mortgages spread all over New Jersey, down in Ocean
County even.
Q Do you happen to know whether you have any accounts,
be they demand deposits, time or Savings deposits, or loans
originating out of New York City?
A We have some trust business originating out of New York
City. Mr. Harold Sloan, a brother of Alfred P., to make it
known who they are, we had some trust business that he set up
for his grandchildren and son.
Q Do you have any business Originating out of Newark,
New Jersey?
A Yes.
Q What type of business would that be, sir?
(fol. 294] A That’s quite a tragic affair, if you want me to
say. There was a man on your—Prince Street, | think, was
involved in difficulties here, and he ran a liquor store there, a
package store on Prince Street. He came out to Start a market in
Washington, New Jersey, and he wanted to borrow some-—say,
$25,000, and wanted to give us the mortgage on the building on
Prince Street there, which we didn’t take. And after this trouble
down here—we took a mortgage, however, on his home in the
Oranges, which is a very nice home, it’s a good mortgage, we
still get it. But then the poor fellow was murdered here on the
street, | understand, since then. So that is the story.
* ee *
fol. 198] TROY E. RHOADES, sworn.
Recs |
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76
DIRECT EXAMINATION
BY MR. AUSTIN:
Would you please state your address, Mr. Rhoades?
147 North Main Street, Nazareth.
And what is your occupation?
I am employed by the Nazareth National Bank.
In what capacity?
I am president.
How long have you worked in connection with banking’
Forty-four years.
{fol. 301] Q Approximately how far is Nazareth National
Bank from the City of Easton?
A Ten miles.
QQ Doyou have any branch offices?
A One.
Q_ Where is it located?
A_ It is located six miles from our main office in the
direction of Easton, in Forks.
Q_ Approximately how far is the Forks branch, your branch
office, from the City of Easton?
A Four or five miles.
Q_ What is the date of the establishment of your branch
office?
A December, 1964.
Q_ Would you please describe the various services offered by
the Nazareth National Bank, including the Forks branch?
A Well, I would say we were a full service bank. We offer all
types of banking services, checking accounts, savings accounts,
loans, Christmas Club, travelers’ checks, safe deposit boxes. We
buy and sell securities. I have a Trust Department.
Q_ Do you also offer mortgages for mortgage loans?
A Oh, yes.
Q Would you please state the interest rate on passbook
savings at Nazareth National?
A Four percent.
POPPA SO rN
* * * *
{fol. 302] Q How long, approximately, has Nazareth
National paid four percent on passbook savings?
A_ Two years, approximately.
Q What is the current rate of interest being paid on
passbook savings by the banks in Easton?
77
A To my knowledge four percent.
Q And approximately how long have they been paying that
rate of interest on passbook savings?
A Several months.
**¥* *
(fol. 303} Q What is or what was, rather, the size of your
Trust Department measured by total trust assets as of the year
end 1967?
A You mean corporate or individual?
Q Total.
A About ten million of each, ten million individual trust
and ten million corporate.
* * * *
fol. 304] Q Do many of your customers purchase more
than one of your banking services at a time, Mr. Rhoades?
A Oh, definitely.
Q Do you regard this as a valuable feature of your banking
business?
A Indeed.
Q Do you actively encourage your customers to purchase
additional services?
Oh, yes.
Do you do any advertising for the bank, Mr. Rhoades?
Oh, yes.
Through what media do you advertise?
Well, primarily in local newspapers.
In which ones?
They are weekly papers, the Nazareth Item, and the [ fol.
305] Nazareth Key. We are on the radio, too.
Q What is the name of the station?
A WEEX.
Q Do you ever advertise in any Easton paper?
A We advertise our Forks branch very infrequently, perhaps
once every two months, more or less in the form of institutional
advertising, nothing specific.
Q Do you currently advertise your interest rate on either
passbook savings or on certificates of deposit in Easton papers?
A To my knowledge, we have only done it once, and that
Was very recently, within the last months. That is the only time
that it has ever been done.
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Q At the time you went to four percent on passbook
savings, what was the rate of interest being paid on passbook
savings by other Easton banks?
A. Three percent.
* * * *
[fol. 307] Q Mr. Rhoades, the plaintiff, the Department of
Justice, has described for the purpose of this litigation
Phillipsburg and environs as encompassing the City of
Phillipsburg, Lopatcong Township, Greenwich Township,
Pohatcong Township and Alpha Borough. To the best of your
knowledge, does Nazareth National, either the main office or
the Forks branch, derive any business from the area just
described?
A To my knowledge, none
{fol. 308] Q How do you account for this fact, Mr.
Rhoades?
A Well, they are not in our area. They are not in our
trading area.
Q Are there any restrictions on your doing business in
Phillipsburg and environs?
A Well, insofar as it affects our trust department, yes,
definitely so. I’m sure there is a statute there to prohibit us
from doing business without a license. | am almost sure of that
statement.
Q Mr. Rhoades, what is your conception of the term
“service area”?
A 1 would consider the service area to be the area
immediately surrounding the main office and our branch that
we serve—that we have deposits, that we make loans to,
advertising, and so forth.
Q What then is the service area of your Forks branch
office?
A It would be almost entirely Forks Township, which
includes Stockertown and Tatamy, the Boroughs of
Stockertown and Tatamy. They are adjacent to Forks
Township. Actually, Forks surrounds it. They are boroughs in
the Township.
Q Do you know approximately what percentage of the
branch’s total business comes from that area?
A No, I would not.
79
** * *&
{fol. 310] Q What do you regard as the service area of the
(fol. 311] main office of Nazareth National?
A You are speaking of the main office.
Q Yes, sir.
A Not the branch.
Q Correct, sir.
A It is difficult to say. Of course, you can’t pinpoint it,
because it is like fingers going out. That’s true of every bank. |
would suspect that our service area would be probably a radius
of five miles north, east, south and west.
Q And what townships or boroughs—
A Well, that would encompass lower Nazareth—well, the
Borough of Nazareth primarily, upper Nazareth, lower
Nazareth, parts of Bushkill, and parts of Plainfield, and parts of
Palmer. It would not include Glendon or Williams. We have no
business there, to my knowledge.
Q Would it include the City of Easton?
A To a degree, yes; unsolicited business, yes. We have some
business in Easton.
Q What do you mean by “toa degree,” Mr. Rhoades?
A We do not solicit and have not solicited—actively
solicited business in Easton, either loans or accounts. We do
have some, as we do in Philadelphia or Allentown, but we do
not actively solicit.
THE COURT: What is the service area of your [fol. 312]
branch—which you state, as | recall, was located four or five
miles from Easton—
THE WITNESS: Yes. You want to know the service area of
our branch?
THE COURT: Yes.
THE WITNESS: Forks Township, which includes
Stockertown and Tatamy Borough.
Q Do you know what kind of business you derive out of
the City of Easton to the main office of Nazareth National?
A Are you speaking of accounts or loans, or both?
Q All kinds of business.
A Well, we have checking accounts and Savings accounts.
We have no large accounts, no business accounts of any nature
that I know of. We have no industrial loans there. We have
residential mortgages there. We have small checking accounts,
small savings accounts, some not so small, but individual, |
SF DEER AEE SALE MY NR NR at
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mean. Very few corporate accounts. I wouldn’t be able to put
my fingers on any at the moment.
Q Would you happen to know the circumstances through
which you happen to have placed mortgages in the Chy of
Easton? ;
A These were customers of the bank long before | was
there. They have come back repeatedly. And word of mouth,
perhaps, is the way it happens. But we have had customers [fol,
313] in Easton long, long before I came to the bank. So |
wouldn’t know how they originated.
Q Do you send any representative into Easton to solicit
business?
A We never have.
Q Do you regard Wilson Borough, or West Easton Borough,
as being withim’your service area, service area of the main
office?
A Let me say, we have accounts there. So | suppose we
have to give it some consideration in that form, yes.
Q Would you have any way of knowing approximately how
many accounts you have in those areas?
A_ No, not without a survey.
Q To the best of your knowledge, Mr. Rhoades, do you
obtain any business from Bethlehem, Pennsylvania?
A In isolated instances, yes.
Q To the best of your knowledge, do you obtain any
business from Allentown, Pennsylvania?
A I would reply the same way. There are some people
who wouldn’t do business any other place than our bank. |
don’t know why, but they do. They stay there, and stay, and
their children come back. But we do not advertise in that area,
never have.
Q Would the business you have in either of these two cities
constitute a sizeable percentage of your total?
[fol. 314) A Oh, no. We are talking about one, two per
cent, or something.
* * * *
THE COURT: Pardon the interruption, counsel. I might
observe here that I am becoming increasingly troubled with the
generalities with which I will have to deal, as they are
developing in the evidence. It seems to me that in the vital areas
81
there is such lack of specifics that I can foresee myself having a
little difficulty in attempting to evaluate these generalities.
x RK
(fol. 315} Q Do you obtain any business from any portion
of Warren County, New Jersey, outside of Phillipsburg and
environs?
A No.
Q Do you obtain any business from the northwestern
portion of Hunterdon County, New Jersey?
A No, we do not.
Q Do you obtain any business from Riegelsville,
Pennsylvania, in Bucks County?
A No.
THE COURT: Mr. Rhoades, I think you indicated before
that your business is concentrated within a radius of five miles
of the town of Nazareth—east, west, north and south. Has your
bank ever been particularly interested in extending its service
area?
THE WITNESS: No, sir; never. We are old fashioned.
THE COURT: And I also gathered from your
testimony~maybe | am wrong-—that you make no effort td do
it. ls that correct?
THE WITNESS: No. I would like to clarify (fol. 316] that, if
| may.
THE COURT: Go ahead.
THE WITNESS: We are a large bank in a small town. We have
about all we can handle right where we are there. We are
progressive and active. We take care of our people and we have
got just about all the business we can handle right there in
Nazareth.
THE COURT: So would I be correct then in reaching this
conclusion—-please don’t hesitate to disagree with me-—the
conclusion to which I refer is—strike it.
Is it true that your bank is not interested in extending its
service area because it is not in a position to service the needs of
more patrons than are generated within the service area you
described; is that correct?
THE WITNESS: Partially so. If we attempted to do that we
would have to change our complete structure, in the form of
additional help, officers, and so forth, | am sure. We don’t turn
anybody away. But we feel that we have no business in the
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Easton area, and they have enough banks there to take care of
their own business. They do not come into our territory, we
don’t go into their territory.
THE COURT: Summarized then, I understand this [ fol. 3} 7}
to be some absence of competition.
THE WITNESS: Well, our competition is local. We have got
plenty of that, savings and loan, and the other bank, we have
got plenty of competition, about all we want.
THE COURT: Go ahead.
Q What is the current lending limit for individual loans at
your bank, Mr. Rhoades?
A $240,000. That’s our basis. The Comptroller says we can
lend more, but we don’t believe him.
Q How do you compute your lending limit?
A 10 per cent of our surplus and capital. If we include the
undivided profits, which we are permitted to do, we could go
up to 300,000.
THE COURT: I didn’t hear you, Mr. Rhoades, when you
mentioned the figure before. What was that?
THE WITNESS: 240,000.
THE COURT: Thank you.
Q Do you recall any instance over the past five years where,
because of your lending limits, you have been unable to
adequately provide for the credit needs of a customer ora
prospective customer?
A We had occasion to lend amounts higher than that. We
have no problem furnishing them with the credit, none
whatsoever.
{fol. 318] Q And how were you able to furnish that
additional credit, Mr. Rhoades?
A We participated with local banks.
Q Were any of the banks which participated with you
located in the Easton area?
A Yes, I believe so, yes. At least one occasion, yes.
Q_ Which bank was that?
AI think it was Northampton National. I am not quite
sure. I believe it was Northampton National, yes.
Q_ In each of these instances, was your bank regarded as the
lead bank?
A In the instances I am speaking of, yes.
Q Have you been asked to participate on loans originated
by the other Easton banks?
A Yes, frequently.
83
Q During the past five years have you participated in a loan
with the Phillipsburg National Bank or the Second National
gank in Phillipsburg, New Jersey?
A No, we have not.
Q During the past five years have you Participated in loans
which, although not in excess of your lending limit, you simply
preferred to share with other banks, for any reason?
THE COURT: Would you read that question back, please?
{fol. 319] (Question read.)
A Yes, we have, with the local bank only, in Nazareth. And
the character of a loan of this type would be a church loan
where they want each of the banks to share in it. A matter of
convenience only, that’s all. No other reason.
fol. 320) Q Mr. Rhoades, do you know the approximate
ratio of your total demand deposits to your total deposits at
Nazareth National?
A Iwill give you the total of each, and you can figure the
ratio. Presently, or as of the year end?
Q As of the year end 1967.
A The year end, our total deposits were $28,700,000 of
which $7,800,000 were demand and $20,900,000 were time.
Q Do you happen to know the approximate ratio of your
real estate or mortgage loans in proportion to your total loans
as of the year end 1967?
Plaintiff's Exhibit 39 indicates, Mr. Rhoades, that as of the
year end 1967 Nazareth National’s ratio of real estate loans to
total loans was 63.2 percent and your ratio of commercial and
industrial loans to total loans was 12.7 percent. How do you
account, first, Mr. Rhoades, for the ratio between your demand
deposits and your total deposits
A Oh, this is normal for a small bank. This is probably a
pretty usual ratio throughout the entire area for a bank our size.
This is normal.
Q What factors would account for this?
A Well, we don’t have the industry you would have in a
larger city where your ratio would be perhaps fifty-fifty. You
do not have large industries there and consequently our
checking accounts are smaller and we are predominantly [fol.
321] a savings institution.
Q In what manner would the presence or absence of
industry in a particular area affect the level of your demand
deposits at any given time?
A Well, the more and the larger industries that you have,
naturally, the higher your demand deposits should be under
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normal conditions, and that would be affected by reason of this
fact.
Q Would this have anything to do with compensating
balances?
A Toa degree. :
Q How do you account for the ratio of your real estate
loans to total loans, Mr. Rhoades?
A Probably the same answer. These are mortgage loans
which—it’s a natural situation with a smaller bank in a smaller
town. You get into city banks, and they don’t make mortgage
loans. Your smaller bank must of necessary depend upon this
type of loan to exist, because though we perhaps have a higher
proportion than all these small banks would like to have—but
this is a situation that is not easy to correct.
Q According to your present policy and planning, Mr.
Rhoades, will you attempt to increase the level of your
commercial and industrial loans by extending your present
service area?
{fol. 322] A Weare not so planning, no.
Q_ Turning for a second to your Trust Department services,
Mr. Rhoades, approximately when was your Trust Department
established at Nazareth National?
A Between 1925 and 1927. I don’t know the exact year.
Q_ And how many persons manage your Trust Department
at present?
A Speaking of officers, or persons?
Q_ Yes, sir, officers.
A We would have one full-time Trust Officer and another
Trust Officer who supervises and about four employees in the
department.
Q Do you happen to know, Mr. Rhoades, the approximate
size of your bank at the time you hired your full-time Trust
Officer?
A Oh, that was—I am sure that he became associated with
the bank when we started the Trust Department, although |
have no way of knowing that. I just suspect our president who
was the Trust Officer at that time—I know he was one when!
came into the bank, and I would think that he would have been
made Trust Officer in addition to being president at the time we
took out trust powers.
THE COURT: Mr. Rhoades, I think counsel wants to know,
if you can answer the question, when the bank employed 4
84
85
full-time Trust Officer, not when the
(fol. 323] Trust Officer became associated—
MR. AUSTIN: That is correct. Thank you.
THE WITNESS: I would say 1950, close to 1950.
Q And would you have any way of knowing the
approximate size of Nazareth National Bank at that time?
A You mean of the commercial department or the Trust
Department?
Q I mean in terms of total assets of the bank.
A That would have to be a guess. I wouldn’t know without
my records what it was.
CROSS-EXAMINATION
BY MR. MEYNER:
* * * *
fol. 325] Q Haven’t you had an increase of better than
half a million a year in this Forks branch?
[fol. 326] A If we count the accounts that were brought
down from the main office, yes. Just yesterday there was a
gentleman who came in to see me. He said, “I am going to
transfer my account, my savings account, from here, from the
main office, to the branch, because it is more convenient,”
and this is being done constantly. He lives in that area. We
have no way of knowing what business Originated there that
we still retain. We could by analyzing—
Q Why did you move? Why did you decide to locate a
branch in Forks Township?
A To better service our area. We do a lot of business and
still do in just the region I gave you, Tatamy, Stockertown. We
were servicing these people in the main office, and we felt we
could do a better job, and it is a proven fact that we can take
care of them better in a branch than we could at the main
office—at the back door.
Q When you were advised you were to appear in this case
did you make any effort to go through the accounts and see the
post office addresses of the various depositors?
A Heavens, no.
Q So you may have some accounts from Phillipsburg or
Alpha or Washington, New Jersey?
PROMS MECN ACPD’ ANTS SNe SREP PLIES NE GRE ICG RY
BOO LATE POSS
OREN RTS CL
acy
86
A lI amsure we don’t. I would know it if we had.
Q How many accounts do you have, demand deposits,
altogether?
A About 10,000.
{fol. 327] Q And how many time? .
A Well, three and seven—that would be—
Q You would know out of 10,000 accounts whether you
have someone with a Post Office address in Phillipsburg?
A_ If the account was over $5,000, I certainly would.
Q_ If it were less than $5,000?
A_ I wouldn’t necessarily know that, no. | wouldn’t care.
Q You wouldn’t know if you had one in Riegels Ridge?
A No. I might have one in California, and not know. Out of
10,000 accounts—but I know any with any substantial amount,
I would know definitely.
Q_ This would be $5,000 or over?
A Yes.
Q_ So you could have fifteen accounts in Phillipsburg?
A_ I could have fifteen. I might have. I don’t know. All I do
know—
Q So you are not testifying on the basis of having looked
over a substantial number of your depositors?
A No. I am testifying on the basis that I spoke to my
managers at both the main office and at the branch and they
said they had no knowledge of any accounts in Phillipsburg, and
they would know.
Q Did you have them check through the accounts?
{fol. 327] A No, it is not necessary.
THE COURT: There is one thing that I would like to clarify
in my mind, Mr. Rhoades. You indicated that unless the
account—the demand account were $5,000 or more you
wouldn’t have knowledge as to the source of it.
THE WITNESS: Let me explain it this way—every account.
THE COURT: Rather, put it another way, you don’t have
knowledge at this time, Go ahead.
THE WITNESS: Every account that is opened and closed is
placed on my desk, every account, whether it is ten cents, itis
put on my desk, and anything that is $5,000 or over that is
closed or open, unless | am familiar with the account |
immediately check to see where it originated. I have never,
never had such an account that I found originated in
Phillipsburg.
THE COURT: You spoke a moment ago about information
87
given to you by employees, particularly with reference to any
account in Phillipsburg. To your knowledge would the same
apply to them, that is, that if they were not $5,000 or over they
wouldn't have particular information available?
THE WITNESS: No, that would not apply because [fol. 328]
the tellers, the managers of the branches are very familiar with
these accounts. I am not. They are working with these every
day and know the people and if there were a substantial amount
they would know about it in any substantial amount even
though the balance were small, because we address
communications to these people from time to time. They would
know about it.
THE COURT: Did you, before you came to court, and
discuss this matter with your employees, did you ask these
employees to check their records?
THE WITNESS: No.
THE COURT: So the information you've got, the best
information you have is from this recollection?
THE WITNESS: That is correct
THE COURT: Without checking the records?
THE WITNESS: That is right.
THE COURT: I have one further question. I would
assume—you correct me if the assumption is wrong—that there
are not too many individual demand accounts in excess of
$5,000 percentagewise?
THE WITNESS: Oh, no, that is incorrect.
THE COURT: All right. You mean that there would be a
very substantial percentage of individual demand accounts, not
business accounts, or industrial accounts?
(fol. 329] THE WITNESS: Oh, you are excluding—no. |
think you are correct in that.
THE COURT: What would you say, from your experience
in the banking business, that that ratio would be?
THE WITNESS: The percentage would be as to people who
cary $5,000 or more balance in checking accounts,
individuals? I wouldn’t—I couldn’t answer that—
* e * *
Q Do you still advertise?
A Yes.
Q How far does that reach?
A I don’t know.
ereceesceemerernrer teem a a
—
88
Q Didn’t you ever receive the bulletin or their brochure
showing the area covered by WEST?
A_ I possibly have. I wouldn’t recall.
Q Would it surprise you that it covered at least a
twenty-five or thirty-mile area? ;
A | hope it does or I am paying money for nothing.
Q_ In other words, you want to advertise in that area?
{fol. 330] A I said I hoped it covered that area.
Q So you are interested in a wider area than four miles
from your branch?
A 1 can’t stop people in Stroudsburg from listening to
WEEX. If I want to advertise on the radio I have to take
what they give me. Certainly I am_ not interested in
Stroudsburg, but perhaps they are heard up there. I don't
know.
Q Can you explain the inconsistency when you say you
wanted to serve a field of a five-mile area north, south and
east of the main office and of the branch and the fact that
you advertise twenty-five or thirty miles away?
A Well, if you could show me how I can tell that we can
cut it off. I don’t want to advertise in Phillipsburg or
Bethlehem. I don’t know how they can do this. If I want to
get on the radio I have got to accept their—
Q You only advertise so you can reach your own
neighborhood?
A We apply it to them primarily.
Q_ In other words, you don’t want to get out that far but
in order to get to the five miles beyond your two offices you
have to take that?
A_ I would assume so, yes.
Q And you are not interested in going beyond the five
miles?
[fol. 331] A Not primarily, no.
Q Could it be if you did reach out to a larger area you
would encounter more competition from the other banks?
A There is no doubt about it.
Q You would prefer to sit still and not have any
competition?
A No, sir. That is incorrect. What I am saying is this, we
are interested in growing, but we are interested in growing
soundly, and we are not interested in being the biggest bank
in the area, which I believe I am afraid is a failing of a lot of
us bankers today. We don’t want to be big just for bigness’
Speen
LF ptt,
2 oe 23:
_—
sake. We will take the business that comes to us and try to
take care of our customers, and we will be active and we will
compete, but we are not interested in being the biggest bank
in Northampton County and never have been, but we have a
sound business and we hope to keep it that way.
Q And you believe that you will remain sound by going
five miles—in a radius of five miles?
A No, I don’t say that. I say that this is what we have
done up to this point, because I believe sincerely we have no
business soliciting business in Bethlehem or Allentown or
Phillipsburg. I don’t think we are in business over there.
Q But there is nothing in the law that prevents [fol. 332]
you from doing it? 5
A Not to my knowledge.
Q And there are some bankers who would disagree with
you?
“A Oh, most of them would, I am sure.
Q So you are definitely in the minority in your concept
that your area is limited?
A I suspect I am, unfortunately.
Q Isn’t it a fact that under the Comptroller’s rulings that
your loan limit would be something like $325,000?
A It changes every day.
Q Well, you would concede that the Comptroller would
allow you ten percent of capital surplus and undivided
profits?
A Except your undivided profits change daily, and it
would depend on what day you pick.
Q As of June 30th, 1968, it happened to be $750,000 for
your bank.
A Then that would be correct.
Q As of that date you could have loaned up to
§325,000?
A if those figures are correct, yes.
Q I am looking at your statement of condition dated
June 30th, 1968, which Says common stock, $400,000; [fol.
333] surplus, $2,000,000; undivided profits, $750,000.
A’ Then you are absolutely correct.
Q You apparently have developed a sizeable Trust
Department. Would you say that there is competition? Would
you say that there is a demand for this kind of business?
A We try to make a demand for it. We sell trust services
quite actively.
89
by SMR ’ = |
ee tape ee eee TE iin Aetesianaraitaibisiets arable
90
Q Would you describe generally the nature of the
corporate trust?
A Well, perhaps the best way to explain it would be 4
local school issue in which case an authority would be set up
that would be named Trustee for the issue. That is my
conception of a corporate Trust. These are the types we have.
Q How about the small employer that has a pension fund
or profit sharing plan?
A I believe we have about two accounts like that.
Q_ But that is a potential for banks in the area?
A Oh, yes.
Q And more could be developed if people went out
actively for them?
A_ I suspect there wouldn’t be too much demand in our
area, due to the nature of our industry, and the reason I say
this is that our primary industries and large industries [fol,
334] are the national cement companies, and they would
have their New York banks take care of something like that.
They would not give us part of their business. Penn Dixon
Cement, and so forth.
** * *
{fol. 338] Q Do you find that you have any competition
with motor companies, finance companies?
A You mean automobile finance companies?
Q Yes.
A_ No, we do not.
Q Why don’t you compete with them?
A We have every automobile dealer in Nazareth. Every
automobile dealer in Nazareth does business with us. We have
quite active accounts. There is no competition. We have it all.
Q They don’t use the General Motors Acceptance
Corporation?
A Yes, they do. They all do that because every
automobile dealer gets deals no bank would take.
Q_ Isn’t it true that they are competing for business with
you on the installment loans?
A Some, perhaps, yes, but the one dealer we have
there—we don’t have many dealers in town. One dealer does
business one hundred percent with us. All accounts go to us,
and the two other dealers are not primarily our customer, but
every customer that deals with us is brought to our bank, so!
9]
wouldn’t say— I wouldn’t think that they were in competition
with us at all.
Q But you know they are trying to sell dealers?
A Sure, they are. Of course, they are.
(fol. 339] Q So that they endeavor to reach the very
customer you afe reaching?
You mean the bank or the finance company?
The finance company.
Well, it’s not nearly as active as it used to be.
It was more active at one time?
Yes.
Less active since credit has tightened? |
No. I think it is more active since the banks have
gotten awake and taken up some of this business themselves.
They are not as strict as we were, I think, a few years ago on
that, and we lost a lot of business, and today, why, this is not
so true.
Q You are reconciled to a percentage of write-off every
now and then?
A Yes.
FOPFrOro>
** * *
(fol. 340) CROSS-EXAMINATION
BY MR. WATERS:
Q Mr. Rhoades, are you aware of the presence of [fol.
341] the Girard Trust Bank in Riegelsville?
A Yes.
Q Do they solicit business in your area?
A That is the one that got the trust account.
Q Do you know if they actively solicit business in your
area?
A They haven’t bothered us, because we are pretty proud
of our trust department. We have done a good job, and it has
been a successful operation. And we are very active. And we
don’t fear competition in that area.
Q I understand that, but setting aside whether they
bother you, do they actively solicit business in your—
A I wouldn’t have any idea.
Q You don’t know. You did lose an account to them.
A Yes, we did. We didn’t lose it, we never got it.
ELIE NT OIE A RETO i
* * * *
|fol. 342] Q 1 believe you remarked that a smaller bank
could conceivably have a lot of very specialized personnel. Do
you regard this as a substantial factor, judging the ability of
bank? ;
A No, no, just the opposite. Just the opposite. Your city
bankers are more specialized, your small bankers are not.
They must have a more general knowledge of what is going
on. In other words, in a small bank, the president of the bank
has to have a pretty good talking knowledge of trust business,
whiereas in a city bank he doesn’t even know what it is.
Q And do you think that such an officer is better able to
handle trust business than a specialized trust officer?
A Oh, no, definitely not. He shouldn’t attempt it.
[fol. 343] CROSS-EXAMINATION
BY MR. ROACHE:
Q Just a couple of questions. Do you know what your
trust assets were back in 1950, when you first hired a
full-time trust officer?
A_ No, sir.
Q Would you have any idea whether it was under a
million dollars in trust assets?
A Oh, no, no. It was at least 50 per cent of what it is
now, perhaps more.
Q Do you attribute the 100 per cent increase to the fact
that you hired a full-time trust officer?
A No. I think a lot of the increase, quite frankly, is due
to inflation.
* * kK *
[fol. 344] REDIRECT EXAMINATION
BY MR. AUSTIN:
Q Mr. Rhoades, you have testified that you are primarily
interested in serving your own local area as opposed to serving
a larger area. I am wondering are there any particular
difficulties, from a banking standpoint, involved in attempting
to service a geographic area extending, say, to a 30 or 40-mile
radius from the home office.
93
A Not unless it were in another state. It would then,
definitely, because the instruments you use in your loans are
entirely different, and the laws are different.
| might add in that connection, if this will help, that we do
not have any instruments, any loan instruments in our bank
that we could use to make a loan in New Jersey. We do not
have a single instrument of that type. If we wanted to make
an automobile loan, we couldn’t do it in New Jersey.
Q Aside from any legal difficulties that you might
encounter in attempting to do business across a state line, is
there any concern on the part of a bank as to collection
problems associated with doing business at a considerable
distance from the home office where you have no branch
office located?
A Well, this naturally follows, but it shouldn’t be a
deterrent, in my opinion. If you are willing to go out and
[fol. 345] solicit business outside
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