For affirmance -- Chief Justice Weintraub, and Justices Burling, Jacobs, Francis, Proctor, Hall and Schettino. For reversal -- None. The opinion of the court was delivered by Hall, J.
[32 NJ Page 33] This appeal challenges a determination of the Commissioner of Banking and Insurance approving the application
of the Howard Savings Institution ("Howard"), a mutual savings bank with its main office in Newark, Essex County, to establish a branch at 27 Bloomfield Avenue, in the Borough of North Caldwell, in the same county. Appellants, objecting financial institutions in the general area, sought review in the Appellate Division pursuant to R.R. 4:88-8 and the appeal was certified on our own motion prior to argument there. R.R. 1:10-1(a).
The questions raised revolve around the meaning and application of certain of our statutory requirements for bank branches. N.J.S.A. 17:9 A -19 and 20. These provisions had their origin in the Banking Act of 1946. L. 1948, c. 67, §§ 19 and 20. Section 19, as amended by L. 1952, c. 220, § 1, deals with basic physical requisites. Beyond situations arising from merger or liquidation not pertinent here, both commercial and savings banks are thereby permitted to establish branch offices in the municipality where the principal office is located or in a municipality in the same county "in which no banking institution has its principal office or a branch office." "Municipality" is defined by the act, in effect, as a political subdivision (N.J.S.A. 17:9 A -1(10)) and "banking institution" as a state commercial bank or trust company, a savings bank or a national bank (N.J.S.A. 17:9 A -1(2)). It may be noted that neither state nor federal savings and loan associations are included within the latter definition. There is no dispute that the proposed branch location meets this requirement. There is no bank of any kind in North Caldwell or even a savings and loan association. This section also demands that the savings bank seeking to establish the branch have a specified minimum surplus, which, it is conceded, is amply satisfied here.
The crux of this case relates to the criteria prescribed by section 20. It is there provided that before any branch office shall be established, except those resulting from a merger, application shall be made for the Commissioner's approval, which he shall grant, if, after such investigation
or hearings as he "may determine to be advisable," he shall find, in addition to compliance with the requirements heretofore mentioned:
"(2) that the interests of the public will be served to advantage by the establishment of such branch office, and
(3) that conditions in the locality in which the proposed branch office is to be established afford reasonable promise of successful operation."
The Commissioner concluded these requisites had been met after a lengthy hearing at which the applicant and the objectors, appellants and two savings and loan associations who have not appealed, presented full factual and opinion evidence. Before considering the respects in which appellants say the determination is erroneous -- and some of the points they raise are of broad and fundamental significance -- it is important to summarize the particular physical and economic setting, undisputedly disclosed to the Commissioner by the proofs as a whole.
The location of the proposed branch is near the center of a geographical region commonly known as West Essex. This area, comprising the northwestern corner of the county, has and always has had considerable physical and economic separation and differing characteristics from the heavily urban section to the east. Topography largely accounts for physical separation, the barrier, so-called, being the first ridge of the Watchung Mountains. West Essex extends from this crest five miles or more west to the Morris County boundary and about the same distance from north to south. The densely populated urban section of the county may be said to end with Montclair, which occupies the easterly slope of the ridge.
The area is composed of seven municipalities: Verona, North Caldwell, Essex Fells, Caldwell, West Caldwell, Caldwell Township and Cedar Grove, all of which have been in governmental existence since at least 1908. The first six are closely knit geographically and economically. Cedar
Grove has fewer ties with them and consequently is a less important part of the picture before us. They are almost entirely high type residential communities and small-town rather than urban in character. A large part of the working population commutes to Newark, New York City and other parts of the metropolitan area. Caldwell and, to some extent, Essex Fells have been largely built up for many years and have had less recent population growth. The others, with large amounts of vacant land, have experienced a heavy increase in single-family dwellings and residents since the war. Taken as a whole, the area population has increased about 70%, from 26,985 in 1940 to an estimated 45,886 in 1957. Continued extensive growth is predicted with an expected population levelling off 10 or 15 years hence at approximately 60,000. Most of this future increase will undoubtedly take place in West Caldwell, North Caldwell, Caldwell Township and Cedar Grove where large amounts of vacant land still remain as contrasted with the present almost saturated condition in Caldwell, Verona and Essex Fells.
The area also has considerable independence in the matter of retail trade. The centers are found in the long established business sections of Caldwell, serving all of the Caldwells and Essex Fells, and Verona, serving its residents and part of Cedar Grove, where most of the populace do their ordinary day-to-day shopping and procure their usual services, including family banking. The other municipalities presently have very few retail facilities.
A most important element in this setting is the general mode and main route of transportation binding the whole area together. West Essex is to a very great extent dependent upon the automobile rather than public transportation for all kinds of travel, including commuting and shopping. And the main artery for both local and through traffic, in fact the spinal column of the region, is Bloomfield Avenue, running from Newark and Montclair through the area we are describing to join U.S. Route 46 just over the Morris County line, thereby serving also the central and northern
portions of that county and providing an interstate route west. It is not only the principal route east and west to and from West Essex (except for Cedar Grove which principally uses State Route 23 running northwesterly from Montclair into Passaic County), but also is the main business street of Verona and Caldwell and the site of a shopping center now in the development stage in West Caldwell. Roads to the various residential sections of all the communities lead north and south from the avenue. Counts near the site of the proposed branch established traffic of better than 10,000 vehicles in a ten-hour daytime period.
This brings us more particularly to North Caldwell itself. The shape of the borough resembles an electric bulb with the small base representing the southerly boundary, running along the north side of Bloomfield Avenue for a distance of about 1,100 feet between the westerly line of Verona and the easterly one of Caldwell. In the neck of the bulb are two large Essex County institutions, the penitentiary and the sanatarium, with a third one, the mental hospital, just over the line in Cedar Grove. The largest portion of the borough's area where its residential districts are found lies in the bulbous part to the north. Mountain Avenue, one of the three main roads from this residential section to Bloomfield Avenue, enters that highway within Caldwell about 400 feet west of the branch site. Its 1957 population was estimated at 3,094, a 60% increase since 1950. A further 100% rise was predicted within the next 15 years. It has practically no shopping facilities. Its residents are entirely dependent upon motor vehicles and shop and bank primarily in Caldwell. Essex Fells, a smaller municipality of about 2,000 people, which also has no financial institution of any kind, is somewhat similarly shaped but oppositely located, with the narrow base forming its northern boundary running along the south side of Bloomfield Avenue across from the North Caldwell line. Access to the avenue is had either in the center of Caldwell or just over the Verona boundary.
The proposed location lies on the north side of the avenue about midway of this North Caldwell frontage. The section is not now a general retail area, land uses being mixed residential and commercial. The opposite Essex Fells frontage is occupied by railroad tracks. The site is about equidistant from the business centers of Verona on the east and Caldwell on the west, approximately a mile from each. The new West Caldwell shopping center is a mile or so further west and the Morris County line an additional similar distance. The business section of Montclair is over the ridge about three miles east. A circle, with its center at the proposed location, a radius of two miles and bisected by Bloomfield Avenue, includes most of West Essex.
Present financial institutions in the area comprise: two commercial banks in Caldwell, both former local institutions but now branches (by merger) of Newark banks and both having substantial savings departments; one commercial bank in Verona, also formerly a local bank and now a branch of appellant Montclair National Bank and Trust Company ("Montclair National"), also with time deposits; two state savings and loan associations in Caldwell, who were objectors but are not appellants; and one state savings and loan association in Verona. A branch commercial bank and a state savings and loan association in Cedar Grove were not considered to have any particular bearing. In addition Montclair National has authority and is now constructing a branch at the West Caldwell shopping center. With this exception, all of the institutions were established long prior to the recent development period. All have been and are successful and have shown rapid growth in deposits in late years consistent with the local expansion. The total savings deposits of all are close to $20,000,000. There is no mutual savings bank in West Essex and, outside of the West Caldwell branch, there has been no new bank or branch office established in the trading area for many years.
Appellant Montclair Savings Bank ("Montclair Savings"), the sole mutual savings bank in the picture, has its only
office in the business center of Montclair, but some 12% of its $37,700,000 of deposits are those of West Essex residents, including school savings accounts from most of the area schools. Montclair National has its main office and three branches in that municipality in which, apart from the Verona branch, savings of West Essex people aggregate over $2,000,000. A sizeable federal savings and loan association is also located there.
Certain well-known modern banking fundamentals which were implicit in the presentation before the Commissioner and his findings should be mentioned. A mutual savings bank is a different type of financial institution from a commercial bank. Its purpose has frequently been stated as encouragement of thrift by mutuality of ownership. It has no stockholders. The profits from its operations not retained for surplus are divided among its depositors in the form of percentage dividends periodically declared, popularly referred to as "interest." N.J.S.A. 17:9 A -186. Its investments are limited largely to selective bonds, first mortgages on dwellings under strictly defined conditions, and secured loans on accounts and certain types of securities. N.J.S.A. 17:9 A -174 to 183. By reason thereof it is permitted to pay, and customarily does, a rate of "interest" 1/2 of 1% or so higher than is allowed to commercial banks on time deposits. Such time deposits are important, however, to the scheme of operations of suburban and small town commercial institutions and generally constitute half or more of the total deposits in these banks. They compete with the savings banks by offering additional types of banking and services. State and federal savings and loan associations, which have grown tremendously in recent years and are today in ...