In July 1957, discussions began between the First National Bank and Trust Company and Security Trust Company regarding the consolidation of the two institutions. At the time, First National was the largest commercial bank in Lexington while Security Trust acted primarily as a trust company. The two institutions complemented each other, while a combination would better serve the community's commercial needs with an enlarged capital base and greater lending capacity. The larger capacity was needed to keep up with the expanding economy experienced in the 1950s.
During the 1950s Lexington banks increased total assets by twenty five percent, loans by thirty eight percent and deposits by twenty six percent. At the same time, retail sales increased fifty three percent, manufacturing payroll one hundred seventy one percent and capital expenditures five hundred seventy eight percent.
By the end of 1960, agreement had been reached by both banks to consolidate and on January 10, 1961, the plan was approved by the stockholders of both institutions. The consolidation called for the stockholders of First National and Security Trust to receive sixty one percent and thirty nine percent, respectively, of the new bank's stock. The Comptroller granted permission for the merger on February 27, 1961.
On March 1, 1961 at 10 o’clock, the directors of both institutions met jointly to legally consummate the merger. Edward S. Dabney, of Security Trust became Chairman and LeRoy M. Miles of First National, became President of the new institution. The consolidated bank controlled fifty three percent of the banking assets, fifty two percent of total deposits and ninety four percent of the trust assets in Fayette County. The new institution was named the First Security National Bank and Trust Company of Lexington and continued to operate under charter number 906, originally issued to the Lexington City National Bank in 1865.
Within minutes of the Board's meeting, officials from the Justice Department arrived from Washington to prevent the merger on anti-trust grounds. Their train from Washington had been delayed by a rockslide in West Virginia. Since the merger had already been completed, the Justice Department filed suit that afternoon charging violations of the Sherman Anti-trust Act. The complaint, signed personally by Attorney General Robert F. Kennedy, alleged that the merger gave the combined bank a virtual monopoly on trust accounts handled by commercial banks in the Lexington area and gave it a "substantial commercial advantage" in other respects. Specifically, the complaint argued that the consolidation violated Sections 1 and 2 of the Sherman Anti-trust Act, involving mergers, which caused a restraint of trade and mergers, which formed a monopoly, respectively. The Justice Department requested an injunction preventing the merger.
Several days later, on March 6, 1961, U. S. District Court Judge H. Church Ford allowed the merger to stand, but ordered First Security to operate in such a manner that it could separate equitably if the consolidation was not permitted.
After several hearings, trial was finally held before Judge Ford over an eight days period, beginning February 19, 1962. The government called as witnesses the Presidents of three local banks, who expressed their fear that the consolidated bank would cause a serious loss of business to their banks. These witnesses were Ernest S. Clarke, Jr. of the Citizen Union National Bank, Robert C. Stilz of the Bank of Commerce and Robert Layman of the Central Bank. The President of the Second National Bank refused to testify against the merger. First Security presented its case with fourteen witnesses, led by President LeRoy Miles, who refuted the government claims. President Miles testified that the primary incentive for the merger was a "very substantial lag" in the growth of Lexington banks in relation to the community's industrial growth.
Judge Ford ruled on July 27, 1961 that the merger “clearly appears to have been the result of a lawful program of expansion rather than an invidious scheme to restrain competition and to secure monopoly in the local field of banking" and "does not constitute a combination in unreasonable restraint of interstate trade or commerce in the field of commercial banking.” Judge Ford noted that "the financial history and condition of both the merged banks were excellent and that both had a long record of successful operations and high community standing."
The Justice Department appealed Judge Ford's ruling to the Supreme Court. Attorneys for the bank argued the case on March 14, 1964, before the Supreme Court saying that the merger did not establish a banking monopoly or cause a restraint of trade. On April 6, 1964, the Supreme Court ruled against the bank stating that the merger violated Section 1 of the Sherman Anti-trust Act regarding restraint of trade in the banking industry in Lexington. Justice William O. Douglas wrote the majority opinion that the "bank established by the consolidation was larger than all the remaining banks in Fayette County . . . (and that it was) ... clear that significant competition will be eliminated by the merger.” The Court ordered the case back to the District Court for final resolution.
This case would become one of the landmark rulings by the Supreme Court, concerning which Federal agency controlled “regulated” businesses when the policies of these two agencies conflicted with each other.
After this, ruling representatives from First Security and the Justice Department met to work out the details of the settlement for submittal to the District Court. The Justice Department required a full divestiture of the merger and the Court gave the bank until September 1, 1964 to submit a plan of divestiture. The above deadline was extended several times while the bank worked out details with officials from the Justice Department, FDIC, Comptroller and the Kentucky Department of Banking.
At the stockholders meeting on January 27, 1965 Garvice D. Kincaid and Dages I. Boyle, a business associate of Mr. Kincaid, spoke out criticizing the bank's officers for failing to implement the bank's demerger. Mr. Kincaid had acquired a large block of First Security's stock prior to the merger in 1961 during a takeover attempt. After failing in the takeover attempt, he began a campaign to force the breakup of the bank.
In early 1965, First Security and the Justice Department jointly submitted a plan that recommended the creation of a new state bank, to be called Security Trust Company, from a portion of First Security's assets. First Security would revert to the name First National Bank and Trust Company. Stock in the new bank would be held by a trustee for one year and then distributed prorata to the stockholders of First National.
On February 16, 1965, Federal District Court Judge Mac Swinford rejected the plan and held the bank, with its executive officers, in contempt by its failure to comply with the order to demerger. The Court imposed a one hundred dollar a day fine on the bank until the divestiture was completed. He also ordered that the bank show cause by March 2, 1965 why he should not appoint a special master to separate the two institutions. On March 18, First Security was again ordered by Judge Swinford to create without a delay a bank that was the equivalent of the old Security Trust and to change First Security's name back to First National. The bank appealed this ruling to the Supreme Court.
Associate Justice Potter Steward issued a stay on April 8, 1965 of the District Court's order and gave the bank until May 17, 1965 to submit written arguments and records to the full court.
While this appeal was pending, a bill was introduced by Senator A. Willis Robertson of Virginia, Chairman of the Senate Banking Committee, which would exempt bank mergers from the restrictions of the Sherman Anti-trust Act. The Comptroller was the regulatory agency created by Congress to oversee banking activities (including mergers). This measure quickly passed the Senate and was forwarded to the House of Representatives for consideration. Congressman Wright Patman, Chairman of the House's Banking and Currency Committee, came out strongly against the act and began a bitter fight to prevent the passage of the bill. He delayed any action on the bill by holding a series of hearings that continued through the fall of 1965.
On September 14, 1965, four Lexington bankers appeared before one of these hearings. These bankers were Garvice D. Kincaid, Chairman of the Central Bank;, Robert C. Stilz, President of the Bank of Commerce; Ernest S. Clarke, President of the Citizens Union and Joseph C. Graves, director of the proposed Bank of Lexington (then being formed). Mr. Kincaid was quoted as saying "that the combined banks owned ninety five percent of all Lexington trust business and seventy five percent of all business properties in trust, and said this is a monopoly. He further stated that at one time there were 16 business locations for rent in downtown Lexington and each of them had a sign in the window to rent from First Security.” He also stated that the leadership of First Security controlled both Lexington newspapers, one of two television stations and two radio stations. He further claimed that First Security controlled the Second National Bank (a claim that was denied by all concerned).
This legislation was "tabled" by Congressman Patman in October 1965 for the remainder of the 1965 session.
The Supreme Court on October 18, 1965 overturned Judge Swinford's contempt judgment against First Security for it’s failure to quickly demerge. The bank, with the support of the Justice Department, had appealed the District Court's ruling. The Supreme Court once again returned the case to the District Court for final settlement.
After Congress reconvened in 1966, the House passed the banking bill on February 8, 1966 that established guidelines for bank mergers and legalized those mergers already consummated, including First Security's. The vote climaxed a month long battle, often very bitter, over this legislation in the House Banking and Currency Committee. Congressman Patman continued his opposition to the bill until a compromise was reached providing the Justice Department with thirty days to intervene with a proposed bank merger. The Senate approved the bill two days later on February 10, 1966 and President Johnson signed the Bank Merger Act of 1966 into law on February 21, 1966.
The Justice Department on April 28, 1966 once again renewed the suit against the bank charging a violation of Section 2 of the Sherman Anti-trust Act. This section prohibiting combinations, which might form a monopoly, which was not addressed in the final Bank Merger Act or the original Supreme Court ruling. The Supreme Court ruled in 1964 on the restraint of trade issue and had not specifically ruled on Section 2.
In February 1967, Judge Swinford upheld the merger and overruled the Justice Department's motion that the merger violated Section 2. Judge Swinford wrote "in light of the whole history of the litigation and as the record now stands, it is my opinion that the merger of these two banking houses must be upheld . . . . it is my judgment that it was the intention of Congress by the enactment of the Bank Merger Act to immunize this particular merger from all further attacks on the ground that it violated the law." He continued that Judge Ford had ruled in 1961 that the merger did not violate either sections of the Sherman Anti-trust Act. He pointed out "that since the Supreme Court did not reverse the decision of the Court on Section 2 of the Sherman Act that ruling is the law of the case."
The Justice Department appealed this ruling to the Supreme Court in March 1967. Before this motion was heard, a settlement was reached between the bank and the Justice Department. This plan was jointly submitted to the Supreme Court on August 7, 1967. The merger would be allowed to stand under the following restrictions:
1. First Security would not merge with another bank in Fayette County for ten years.
2. First Security would be restricted from opening additional branch that exceeded one third of the total banking offices in the county for five years.
3. First Security would be restricted from accepting any additional trust business, except by appointment in wills, for ten years.
While this agreement was under review, Central Bank and Dages I. Boyle filed motions with the District Court to have the settlement rejected on the grounds than the Bank Merger Act of 1966 was unconstitutional. Mr. Boyle filed his motion as a stockholder of the old First National. Judge Swinford overruled both of these motions on December 29, 1967 and granted final approval to the merger.
In May 1968, the Supreme Court affirmed Judge Swinford's decision and refused to hear the petitions of Central Bank and Mr. Boyle. Both tried again in June 1968 to have the Supreme Court review their petitions.
Ten years after discussions began and after seven years, seven months and thirteen days of legal proceedings the merger was finally allowed to stand and all legal actions against the Bank dismissed. ____________________
In the fall of 1962, the consolidated bank, for the first time, reached the one hundred million dollar level in total assets. On March 26, 1964, the Lexington banks began to distribute the Kennedy half dollars to customers. In 1966, the bookkeeping of customer's checking accounts was automated, greatly reducing the costs over manually posting items to accounts.
In 1965, the Chevy Chase Branch was rebuilt and enlarged on the same site and the Northland Branch was relocated to the Northland Shopping Center. During the same year, the Gardenside Branch was opened in the Gardenside Shopping Center. In addition, the Southland Branch was relocated in June 1968 to Longview Drive. First Security, under restrictions of the merger settlement, opened the Tates Creek Branch (in early 1970 - named changed in 1987 to the Lansdowne Branch) and the Richmond Road Branch (in 1972). It is interesting to note that many staff members questioned opening a branch on Richmond Road, since at the time, it was on the outer edge of the city.
In early 1969, the bank converted all the existing First National cards over to Bank Americard (later VISA) system. There were outstanding over 75,000 cards at the time. During the next year, First Security began issuing the portrait card, with a customer's picture on the reverse side. The portrait card was discontinued shortly after due to the costs.
In December 1970, the Pettit family deeded the block bounded by Walnut, Short, Main and Esplanade to First Security in exchange for the First National and Security Trust Buildings. Construction of the First Security Plaza started in June 1971. The building was designed to be fifteen stories and was the first major urban renewal project completed in downtown Lexington by private means. The cost of the new building exceeded six and a quarter million dollars. The plaza opened for business on November 5, 1973.
During 1973, Walter W. Hillenmeyer, Jr. was promoted to President of the bank, from the Chairman of the Executive Committee (a position he held since 1967). A year later, he became Chairman of the Board of Directors.
Chairman - Past and Present, 1974
Left to right: Walter W. Hillenmeyer, Edward S. Dabney and LeRoy M. Miles.
Board of Directors, November 13, 1973.
During 1974, First Security was the first Lexington bank to install Automated Teller Machines (24 Hour Bankers). In July 1974 a demonstrational 24 Hour Banker was displayed to the public for the first time at the Blue Grass Fair. On September 9, the first 24 Hour Banker was put into operation at the Eastland Branch, with other branches installing 24 Hour Bankers within the next few months
During 1975, the First Security Corporation of Kentucky was formed and First Security National Bank and Trust Company continued operations as a subsidiary.
