TABLE II.-Number of branches of commercial banks in the United States, selected years, and status of State law on branch banking 1 Number of branches 1 * * 1 Some State laws make a distinction between branches and certain other types of additional offices. This table, however, covers all branches or additio al offices within the meaning of sec. 5155 U. S. R. S., which defines the term "branch" as "any branch bank, branch office, branch agency, additional office, or any branch place of business at which deposits are received, or checks paid, or money lent." However, the table excludes banking facilities at military and other Government establishments. The designations opposite each State indicate the maximum area in which branches may be established. From summary of State laws on branch banking as of July 1, 1951, compiled by the Board of Governors of the Federal Reserve System. 3 Only offices, agencies, or stations for limited purposes as distinguished from branches are permitted under certain circumstances. Prior to May 1947 this type of branch banking was permitted in Wisconsin. Prior to 1951, only agencies for limited purposes were permitted in New Mexico. Current law permits full-power branches in limited areas. A visual comparison since the beginning of the century of the rise and decline in number head office banks with the increase in branches and the extent of total banking offices is contained in the following graph. 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 Source: Federal Reserve Board. The decline in the number of banks in the United States, resulting from a number of factors which are discussed hereafter in detail, has resulted in a decrease in competing banking facilities in many areas. In 1950, there were 76 counties in the United States which had no commercial banking offices at all, while almost half of the 3,102 counties in the United States reported in the 1950 census of population had three or fewer commercial banking offices furnishing lending and depositing services. 17 Whereas in 1926, 34 percent of all banks were located in cities or towns where there were no other banking facilities to offer competition, by 1936 51.9 percent of all banks were in one-bank towns and in 1949 the percentage had risen to 52.8 percent.18 Of all towns and cities 17 Monetary Policy and the Management of the Public Debt, S. Doc. No. 123, pt. 1, 82d Cong., 2d sess. (1952), p. 572. 18 Alhadeff, The Market Structure of Commercial Banking in the United States, LXV Quarterly Journal of Economics (February 1951), p. 64., having banks in the United States, approximately three-quarters of them are dependent upon the services furnished by a single bank.19 Concomitantly, the number of people served by each bank in the country has necessarily increased with the decline in banking population and the rise in the number of banking customers. According to the Federal Reserve Board, "population per banking office increased 32 percent in 1920-30, 61 percent in 1930-40, and 8 percent in 1940-50." 20 This has undoubtedly been one of the factors leading to an increase in the size of the modern-day bank. III. MERGER AND CONSOLIDATION OF BANKS A study of the figures on the preceding pages revealing the continued decline in the number of banks throughout the Nation inevitably raises the question of why the banking mortality rate has continued, even in the face of hitherto unequaled levels of economic prosperity, to exceed the banking birth rate. Many of the Nation's banking woes have been caused by the financial instability of banks. The serious plight in which many banks found themselves during the depression years and their concomitant inability to withstand the rigors of an adverse financial climate are phenomena well known, if not personally experienced, by many. The loss of 9,000 bat ks between 1930 and the end of 1933 severely depleted the ranks of the country's banking system and left the financial structure of the Nation bereft of a goodly portion of its competitive foundation. Nevertheless, the loss of banks during the depression, while of significant proportions, does not completely account for the large scale contraction in the Nation's banking population. As we have indicated before, the downward trend in the Nation's total number of banking enterprises was well on its way several years prior to the onset of the countrywide depression in 1929, and has continued with only occasional reversals, until the present time. Undoubtedly, financial duress has caused many banking houses to depart reluctantly from the financial scene. But although banks proved to be more susceptible to the economic vagaries of the depression than other businesses and consequently suffered greater casualties than other forms of enterprise during the financial debacle which followed 1929, since about 1934 the banking structure has been on a sturdier financial basis than other business ventures. Thus, as shown on the chart on the opposite page, the rate of bank failures has been less during recent years than for other types of economic endeavor. Accordingly, the Nation's constantly diminishing banking populace must suffer from maladies other than the financial difficulties encountered by banking institutions in the ordinary course of business operations. One of the important factors in the decline in the number of the Nation's banks has been the many mergers between banks which have been commonplace in the financial world since the early 1920's. According to one student of the subject— During the period 1900-1931 inclusive, there were more than 7,175 bank consolidations in the United States, of which 3,801 took place during the 7 years from 1925 to 1931, inclusive.21 19 Chandler, Monopolistic Elements in Commercial Banking, XLVI Journal of Political Economy (February 1938), pp. 7-8. 20 Monetary Policy and the Management of the Public Debt, S. Doc. No. 123, pt. 1, 82d Cong., 2d sess. (1952), p. 571. 21 Chapman, Concentration of Banking (1934), p. 85. While the depression period served to accelerate the merger trend leading more than 2,300 banks to disappear through consolidations and absorptions during the brief period 1930-33, the mergers of banks have continued to lower the total number of independent banks in the United States even during the most prosperous periods of its history. Since the mid-thirties, except for the years 1945, 1946, and 1947, the annual number of additions to the banking system has always been more than offset by the decreases caused principally by banking consolidations. In the years 1945 through 1951, there were 581 consolidations and absorptions among the Nation's commercial banks. Between January 1 and June 30 of this year alone, 52 of the Nation's banks were consolidated or absorbed by other banking institutions. In the last decade the number of commercial banks lost to the Nation's depositors and borrowers through merger and consolidations has averaged more than 82 per year. According to the latest report of the Comptroller of the Currency, "The trend toward mergers is continuing and perhaps increasing * * * 22 Some of the many banks which have gone by way of merger within the past few years have been large and impressive financial institutions with a long history of growth and service to both lenders and depositors in their own right. Among them, are such illustrious concerns as Lawyers Trust Co., Title Guarantee & Trust Co, Brooklyn Trust Co., Commercial National Bank & Trust Co. of New York, and Continental Bank & Trust Co. of New York, all legendary institutions in the chronicles of New York City's financial history. It should be emphasized that mergers involving large banks are in no way a local phenomenon peculiar to the city of New York which is the financial capital of the world. Within the last 22 years more than seven large-sized banks, each with assets exceeding $100,000,000, have been absorbed by other competing banking institutions in various areas of the country. In Philadelphia, Girard Trust Co., one of the hundred largest banks in the United States, was merged in 1951 with the Corn Exchange National Bank & Trust Co., another leading bank, to form the Girard Trust Corn Exchange Bank with assets of more than $500,000,000. Merger plans have been approved for two of Delaware's largest banks, Equitable Trust Co. and Security Trust Co., both of Wilmington, to be effectuated in November of this year.23 In August of 1952, it was announced that the two largest banks in Mansfield, Ohio, Mansfield Savings Trust National Bank and Citizens National Bank & Trust Co., would merge to become the First National Bank of Mansfield with assets totaling $58,000,000. In Pittsburgh, Mellon National Bank & Trust Co. acquired Farmers Deposit National Bank, one of the country's large banks with assets exceeding $100,000,000 and deposits of about $140,000,000, in December of 1950. The toll of banks exacted by mergers and acquisitions has not been confined to large banks, but on the contrary, has fallen severely upon smaller banking houses. Between January 1, 1950, and June 30, 1952, for example, the Mellon National Bank & Trust Co. of Pittsburgh, acquired three small banks with assets from between $2 million and 22 89th Annual Report of the Comptroller of the Currency (1951), p. 2. 23 Wall Street Journal, August 14, 1952, p. 10. |