Appeal from a grant of summary judgment in the United States District Court for the Southern District of New York, Lloyd F. MacMahon, Judge, holding that Comptroller of the Currency's approval of a new branch for a national bank was made in accordance with applicable law and was supported by the administrative record.
Lumbard, Anderson and Oakes, Circuit Judges.
Hempstead Bank, a New York state-chartered commercial bank with branches in Nassau and Suffolk Counties, brought this action in the Southern District to set aside as arbitrary and capricious the Comptroller of the Currency's approval of the establishment of a branch of Chase Manhattan Bank, a national bank, in Locust Valley, New York.*fn1 The district court held that there was an adequate factual basis in the administrative record to support the Comptroller's decision and that it had been made in accordance with New York law that was incorporated by reference into federal law. We find a substantial likelihood that the Comptroller failed to consider the relevant New York law in approving the new branch. We therefore vacate the judgment of the district court with instructions to remand to the Comptroller for further findings.
On August 6, 1974, Chase filed its application for permission to establish a branch banking office in Locust Valley. At the time the application was submitted, the area to be serviced by the branch*fn2 contained 10,150 persons comprising 2200 families with an average annual income of approximately $20,000. Little room remains in the area for further residential development. Chase proposed to locate its branch at a site adjacent to a shopping center in Locust Valley; the branch would thereby serve the same community currently serviced by appellant, the Nassau Trust Company, and a branch of the Prudential Savings Bank of Manhattan.
Hempstead Bank and the Nassau Trust Company filed with the Office of the Comptroller of the Currency protests opposing Chase's application. Hempstead argued that although the average family income of the area was relatively high, projected population growth was minimal. Hempstead contended that the needs of the community were sufficiently served by existing bank branches, the financial condition of which would be impaired by a drain of funds to the new Chase branch. It pointed out that deposits and loans in its own offices had either remained relatively stable or had diminished since 1970. The Regional Administrator of National Banks denied as untimely the Nassau Trust Company's request for a hearing on the matter, but officers of the competing banks were interviewed with respect to the propriety of approving Chase's application.
Unanimous recommendation to approve the application was made to the Comptroller by a Deputy Comptroller, the Chief National Bank Examiner, the Director of the Bank Organization Division, and the Regional Administrator. The recommendation was based on findings that, although future growth in the area would likely be minimal, (1) establishment of the branch would add a competitive factor to the area; (2) the branch would enable Chase to extend its facilities into an area that it did not currently serve; and (3) the area was sufficiently affluent to support the branch without adversely affecting conditions. The Comptroller approved Chase's application on October 10, 1974, without making additional findings.
Hempstead thereafter instituted this action to have the Comptroller's approval declared null and void as having been made in contravention of law. On February 4, 1976, the district court, after reviewing the administrative record upon which the Comptroller based his action, Camp v. Pitts, 411 U.S. 138, 142, 36 L. Ed. 2d 106, 93 S. Ct. 1241 (1973), held that the Comptroller had complied with the applicable law and that the record supported his decision. The district judge granted summary judgment for the Comptroller and this appeal by Hempstead followed.
Federal law provides that a national bank, such as Chase, may establish branches only under the conditions permitted to state-chartered banks by the law of the state in which it is located. 12 U.S.C. § 36(c).*fn3 See First National Bank of Logan v. Walker Bank & Trust Co., 385 U.S. 252, 17 L. Ed. 2d 343, 87 S. Ct. 492 (1966). The purpose of incorporating state standards into federal law is to prevent an institution licensed by one governmental entity from expanding into a geographical area forbidden to competing banks licensed by another entity and thereby to maintain competitive equality between state-chartered and federal-chartered banks. See First National Bank of Logan v. Walker Bank & Trust Co., supra, 385 U.S. at 258-61. To effectuate this purpose, courts have consistently held that in determining whether to approve branch applications from national banks, the Comptroller not only must consider whether the relevant state allows branching in some form, but must also, in each case, make such specific findings as are required by state law. See, e.g., First National Bank of Logan v. Walker Bank & Trust Co., supra, 385 U.S. at 261-62; First Bank and Trust Co. v. Smith, 509 F.2d 663 (1st Cir. 1975); First National Bank of Catawba County v. Wachovia Bank and Trust Co., 448 F.2d 637 (4th Cir. 1971); First-Citizens Bank and Trust Co. v. Camp, 409 F.2d 1086 (4th Cir. 1969).
In determining whether state standards have been satisfied, the Comptroller need not conduct formal hearings or make detailed findings. Nor may his judgment be questioned in a de novo hearing in the district court; any review is limited to the question of whether the decision was arbitrary, capricious or not in accordance with law in light of the administrative record. Camp v. Pitts, supra. The Comptroller's findings, however, must be adequate to allow for meaningful judicial review. See Camp v. Pitts, supra, 411 U.S. at 142-43.
In the present case, the Comptroller was required to determine the validity of Chase's application in accordance with the law of New York, which provides that a branch office may be authorized if it is found "upon investigation that the public convenience and advantage will be promoted by the opening of such branch office. . . ." N.Y. Banking Law § 29 (McKinney 1971). Although this language is general and leaves ample room for discretion, presumably it requires that a branch should be established in an area only if the banking structure in the community to be serviced is not adversely affected and that the public will thereby be better served.*fn4 The administrative record before us allows for substantial doubt whether this criterion was properly considered by the Comptroller. See City National Bank v. Smith, 168 U.S. App. D.C. 221, 513 F.2d 479, 485 (1975).
Throughout the record there are references to the benefits that will accrue to Chase if it is permitted to establish its proposed branch. Thus the National Bank Examiner and the Regional Administrator of National Banks found that "establishment of the branch would enable the bank to extend its facilities into an area not currently serviced by the applicant," and the Deputy Comptroller concluded, "this is a lucrative market in which applicant is not represented." We do not doubt the validity of these findings, but since the public's advantage may well not be identical to Chase's advantage, we consider the increased opportunities for the applicant's expansion irrelevant to the standards by which the Comptroller was required to evaluate the application. The paramount consideration is the public interest and not the private interest of a very large banking institution which seeks to grow larger.
Nor is the fact that the new branch would add a competitive factor to the area sufficient to show that the Comptroller has properly evaluated "the public convenience and advantage" as that phrase is used in § 29. While the Comptroller need not make explicit findings of fact, the record may not be so paltry and conclusory as to frustrate effective judicial review. 411 U.S. at 142-43. The tautological statement that a new branch would add to competition in the area, unsupported even by a conclusion that additional competition is necessary or would promote the public interest, provides no basis for judicial analysis of the reasonableness of the Comptroller's approval of the application. On remand, reliance on competition becomes all the more doubtful, as the New York legislature has recently enacted a law permitting savings banks such as Prudential, which has a branch in the area, to offer checking accounts, a factor that may affect competition in Locust Valley without the addition of another bank branch. See 1976 Laws of New York, 199th Session Ch. 225.
We do not accept the proposition, urged by the Comptroller, that additional competition per se promotes the public convenience and advantage and that therefore consideration of the New York standard is implicit in the Comptroller's findings. Those cases that suggest that additional competition is synonymous with the public good concern the need to prevent monopolistic or oligopolistic conditions within the banking community. See United States v. Phillipsburg National Bank and Trust Co., 399 U.S. 350, 26 L. Ed. 2d 658, 90 S. Ct. 2035 (1970); United States v. Philadelphia National Bank, 374 U.S. 321, 10 L. Ed. 2d 915, 83 S. Ct. 1715 (1963); Clermont National Bank v. Citizensbank National Association, 329 F. Supp. 1331, 1339-45 (S.D. Ohio 1971). In this instance, however, the record contains no allegation or evidence of the need for or desirability of additional competition. Indeed, the paucity of ...