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MCDOWELL NATL. BANK OF SHARON v. SMITH

October 4, 1973

McDOWELL NATIONAL BANK OF SHARON, Plaintiff,
v.
James E. SMITH, Comptroller of the Currency of the United States, Defendant, First National Bank of Slippery Rock, Applicant for Intervention


McCune, District Judge.


The opinion of the court was delivered by: MCCUNE

McCUNE, District Judge.

 Following the filing of a complaint by plaintiff seeking a preliminary injunction against the Comptroller of the Currency, who had issued an order permitting the First National Bank of Slippery Rock, Pennsylvania, to establish a branch office at 1319 West Main Street, Grove City, Mercer County, Pennsylvania, we ordered that the defendant show cause why he should not be enjoined from permitting the opening of the branch office. A hearing was held on September 5, 1973, where a certified copy of the official record of the Comptroller was introduced. No additional testimony was taken, it being agreed that the official record contained all of the proceedings and all of the testimony upon which the decision of the Comptroller was based when he issued approval of the branch bank.

 The plaintiff had opposed the approval of the branch bank or office of The First National Bank of Slippery Rock.

 The hearing took the form of argument, plaintiff contending that on the basis of the record the Comptroller had abused his discretion in granting approval and the defendant and the intervenor (The First National Bank of Slippery Rock) arguing a contrary position.

 It was agreed that the court should decide the issue on the record and the briefs submitted.

 We have reviewed the record and in our view we require clarification from the Comptroller.

 The record indicates on pages 7 and 7A that the applicant bank intends to invest $35,000.00 in land in Grove City and $200,000.00 in a building, $25,000.00 in furniture and fixtures, $25,000.00 in a vault and $25,000.00 for other equipment or a total of $310,000.00. It is noted on page 7A that this investment would, together with the investment in its present banking facilities, exceed the applicant banks capital stock. It is noted by the investigator that as of January 9, 1973, the applicant bank had $233,288.00 invested in bank buildings, less nominal depreciation and that the bank's capital stock equalled $210,000.00. It is noted that permission was granted to applicant on May 16, 1972, to invest up to $250,000.00 in fixed assets. It is stated that management (of the First National Bank of Slippery Rock, the applicant) fully realized that further fixed asset investment, plus marginal capital position, "will necessitate a new capital program. This they are willing to do. Supposedly such program will be large enough to avoid an over-investment of banking house to capital stock."

 Although there is an indication in the record that the program to raise additional capital is contemplated, there is no indication in the record whether it has been accomplished or even started.

 But we cannot find in the record any indication that the Comptroller has granted approval for additional investment in fixed assets or has refused to grant it for that matter.

 There is an indication that the estimate of the cost of establishing the branch was a very rough estimate and that the applicant intends to invest less than set forth in the portion of the report called "Investigation and Recommendation" but we have no definite projection of the investment in fixed assets other than the $310,000.00 projection set forth on page 7. This projection is apparently the applicant's projection and no other definite projection exists.

 The concern of the investigator over the investment in fixed assets compared with the capital stock of the bank was occasioned, no doubt, by 12 U.S.C.A. ยง 371d. The Act of December 23, 1913, as amended, provides the following:

 
"No national bank, without the approval of the Comptroller of the Currency, and no State member bank, without the approval of the Board of Governors of the Federal Reserve System, shall (1) invest in bank premises, or in the stock, bonds, debentures, or other such obligations of any corporation holding the premises of such bank, or (2) make loans to or upon the security of the stock of any such corporation, if the aggregate of all such investments and loans, together with the amount of any indebtedness incurred by any such ...

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