BENTON CTY. S. & L. v. Federal Home Loan Bank Bd.

• Decision Date: 05 April 1978
• Docket Number: Civ. No. 77-5009.
• Citation: 450 F. Supp. 884
• Parties: BENTON COUNTY SAVINGS & LOAN ASSOCIATION et al., Plaintiffs, v. FEDERAL HOME LOAN BANK BOARD et al., Defendants.
• Court: U.S. District Court — Western District of Arkansas

450 F. Supp. 884

BENTON COUNTY SAVINGS & LOAN ASSOCIATION et al., Plaintiffs, v. FEDERAL HOME LOAN BANK BOARD et al., Defendants.

Civ. No. 77-5009.

United States District Court, W. D. Arkansas, Fayetteville Division.

April 5, 1978.

COPYRIGHT MATERIAL OMITTED

Herman Ivester, Friday, Eldredge & Clark, Little Rock, Ark., for plaintiffs.

John Gunther, Federal Home Loan Bank Board, Washington, D. C., for defendant, Federal Home Loan Bank Board.

Roy Danuser, Mountain Home, Ark., Brad Jesson, Hardin, Jesson & Dawson, J. H. Evans, Warner & Smith, Fort Smith, Ark., for defendant, First Federal Savings & Loan of Harrison.

MEMORANDUM OPINION

PAUL X WILLIAMS, Chief Judge.

This is an action to review a resolution of the Federal Home Loan Bank Board permitting the defendant, First Federal Savings & Loan Association of Harrison (Harrison) to establish a branch facility in Bentonville, Arkansas. This Court has jurisdiction pursuant to 28 U.S.C. § 1331(a) and 12 U.S.C. § 1464(d)(1).

The action was originally filed February 24, 1977, by six existing and established savings and loan associations in Washington and Benton Counties, Arkansas. On April 5, 1977, two of those associations, First Federal of Fayetteville, and First Federal of Rogers, dismissed their complaint without prejudice. The cause is pursued by the four remaining plaintiff associations: Benton County Savings & Loan Association of Bentonville, Arkansas (Benton); Liberty Savings & Loan Association of Siloam Springs, Arkansas (Liberty); Washington Federal Savings & Loan Association of Springdale, Arkansas (Washington); and Fayetteville Savings & Loan Association of Fayetteville, Arkansas (Fayetteville).

On July 16, 1976, First Federal Savings & Loan Association of Harrison filed application with the Board to establish a branch office on U.S. Highway 71 in Bentonville, Arkansas. Notice was published in accordance with applicable regulations and the plaintiffs filed formal protests. All parties supplied relevant economic data to the Board in support of their respective positions. The Board determined that the protests were "substantial" and set the matter for hearing and oral argument before a supervisory agent. Through their officers and attorneys all plaintiffs appeared in Little Rock, Arkansas, on September 21, 1976, and offered oral argument in opposition to the application. A copy of the application, protests, economic analyses and oral arguments are a part of the administrative record filed in this case. On January 12, 1977, the Federal Home Loan Bank Board approved the branch application by Resolution No. 77-35 and this action for review followed. All parties have filed motions for summary judgment and have waived oral argument.

The one preliminary issue is whether the Board has made available the complete administrative record. The plaintiffs contend that the Board should disclose certain data and supervisory ratings relating to the financial condition and operations of First Federal of Harrison. A similar argument was rejected by this Court in the recent case of First Federal Savings & Loan Association v. Federal Home Loan Bank Board, 426 F.Supp. 454 (W.D.Ark.1977), affirmed 570 F.2d 693 (8th Cir. 1978). The Court of Appeals stated at page 698:

"The district court found that in passing upon Superior's application, the Board acted pursuant to law and complied with the requirements of due process; that in granting the application the Board did not act without evidentiary support or arbitrarily or capriciously and did not abuse its discretion; and that the Board was not required to disclose the recommendations that it had received from its staff and Supervisory Agent and certain confidential financial material that it had received and considered.

"We agree with the district judge. We think he correctly perceived the governing principles of law and permissibly applied them to the facts of the case." Emphasis added

In its Resolution No. 77-35, the Federal Home Loan Bank Board granted Harrison's branch application, having found that 1) there would be a necessity for the proposed branch office at the time Harrison contemplated its opening; 2) that there was a reasonable probability of usefulness and success on the part of the proposed branch office; and 3) that the proposed branch office could be established without undue injury to existing institutions. See 12 CFR § 545.14(c).

In reviewing the actions of the Federal Home Loan Bank Board, this Court must affirm unless the Board erred in its application of the law or unless its factual determinations are and were arbitrary, capricious and an abuse of discretion. First Federal Savings & Loan Association of Fayetteville v. FHLBB, supra; Bank of Ozark v. FHLBB, 402 F.Supp. 162 (E.D.Ark.1975); First National Bank of Fayetteville v. Smith, 508 F.2d 1371 (8th Cir. 1974).

First Federal Savings & Loan Association of Harrison has its principal office in the City of Harrison, Boone County, Arkansas. At the time of filing the application for the branch at Bentonville, it was already operating other successful branches. Bentonville, Arkansas, is some 63 miles from Harrison, but both are located within what is generally described as Northwest Arkansas. First Federal of Harrison proposes to build a 2,400 square foot office building for its branch on the west side of U.S. Highway 71 just north of its intersection with North Third Street. Land in the vicinity of the site is devoted to commercial use and U.S. Highway 71 is the principal north-south traffic artery through Bentonville and Benton County. Much of the new commercial development taking place in Bentonville is located along this highway. The proposed branch would include all the usual and customary services afforded by a full service savings and loan branch facility.

The record before the Court amply demonstrates the tremendous growth and vitality of Northwest Arkansas in general and of Benton County in particular. The proposed primary market area (PMA) for the branch was designated as all of Benton County. Bentonville is a city of some 7,238 people and there are over 59,000 people presently residing in Benton County. This represents a growth in population for the county from 36,272 in 1960 to 50,476 in 1970. The population of Bentonville grew 34.9 percent between 1970 and 1975. Information in the record also reflects that Benton County has a large potential for new home construction, given the present rate of population growth, which will require an accelerated pace of mortgage lending. The number of year-round housing units in the PMA increased by 40.8 percent between 1960 and 1970 and the Northwest Arkansas Regional Planning Commission has estimated that the number of these units in the City of Bentonville increased by 28.5 percent between 1970 and 1975. This trend is expected to continue over the next 15 years.

Other standard economic indicators reflect a strong and growing economic base in Benton County. During the last decade the labor force, retail sales and personal income have all risen dramatically.

First Federal Savings & Loan Association of Harrison has already been active in the Benton County lending market. At the time of the application, First Federal of Harrison had $6,600,000 in home loans in Benton County and over $342,000 in savings accounts. It was estimated by Harrison that the branch would close some $4,000,000 in loans its first year to give it an outlet to invest some of its excess savings flow generated by its existing offices in Harrison and Mountain Home, Arkansas. The 6.6 million dollars in loans which First Federal of Harrison already has in Benton County represents 11.8 percent of the total loans of this association.

Benton County Savings & Loan Association is the only association having a office in Bentonville, Arkansas. No other association has a branch office there. It would be the association most directly affected by the establishment of the branch and the record reflects that it is a growing, strong financial institution fully capable of competing against the applicant for savings and loans in the Benton County market.

Benton County Savings & Loan had assets of over $28,000,000 as of September 30, 1976, as compared with assets of $6,868,000 in December of 1970. Its assets have increased over four times during the six years. In addition to its main office in Bentonville, Benton County has branch offices in Bella Vista, Arkansas, four miles to the north and in Siloam Springs, Arkansas, some 22.7 miles to the southwest.

The only other plaintiff-association with an office in Benton County is Liberty Savings & Loan Association of Siloam Springs. The record reflects that Liberty had over $12,000,000 in deposits as of September 30, 1976, as compared with $2,821,000 in December of 1970. This indicates extremely rapid growth. In addition to its home office in Siloam Springs, Liberty operates a branch office at Gravette, Arkansas, as well as one in the highly competitive market of Rogers, Arkansas. It is evident that both Benton County Savings & Loan and Liberty Savings and Loan have grown and prospered through branching activities. Neither association has hesitated to branch into a community which already had an existing savings and loan association as is demonstrated by the record reflecting the branching of Benton County Savings and Loan into Siloam Springs in 1975 and the branching of Liberty Savings & Loan into Rogers in 1972.

The two remaining plaintiffs in this action are both Washington County savings and loan associations and are outside the PMA. Washington has its only office in Springdale, Arkansas, and Fayetteville Savings has its only two offices in Fayetteville, Arkansas. The record demonstrates that the principal activities of these two associations are far removed from the proposed branch at Bentonville, and will not be adversely affected by it.

The administrative record amply supports the Board's...