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COII?IDaiTTIAL
Preliminary d r a f t
Subject to r e v i s i o n

CLASSIFICATIONS 0 ? B A M S I IT OPEMTIOIT
PIT DECEMBER 3 1 .

December 31» 193&




1955

Preliminary d r a f t
Confidential

S u b j e c t t.^ Tj^jjn^ll

CLASSIFICATIONS Q]

r 'i

^JATT .. ^

D£0Eivli:3ER 31, 1935

Table o f C o r i e n t s
Paffi
By c l a s s e s of banks

1

According to r a t i o o f demand to t o t a l d e p o s i t s

5

According to population of p l a c e s in which s i t u a t e d
and a c c o r d i n g to si^e of loans -and Investments

9

According t o s i z e of d e p o s i t s

17

Banks not on the Federal Reserve Par i d s t

24

Capital requirements f o r Federal. t Reserve membership
and f o r conversion i n t o n a i o n a l banks

27

Nonraetiiber banks ( o t h e r than mutual savings banks)
with i n s u f f i c i e n t c a p i t a l f o r Federal Reserve
membership

29

Banks with i n s u f f i c i e n t c a p i t a l f o r conversion
n a t i o n a l brinks

35




into

CLASSIFICATIONS 0 ? BAI&S

Iff OPERATION; Oil DECEIS3R 3 1 ,

1935

By c l a s s e s of banks
Number o f banks,

When the banks In o p e r a t i o n on December 31, 1935,

were c l a s s i f i e d according t o membership i n the Federal Reserve System,

it

was found that 6 , 3 8 7 , o r 40 percent o f the 15,861 banks, were members and
that the t o t a l o f 1-4,178 member and nonmember insured banks comprised
approximately 89 percent of a l l banks.

The number of banks in o p e r a t i o n

on December 31, 1935, by c l a s s e s o f banks i s shown belows

Class o f bank
Commercial^/
Cash d e p o s i t o r i e s
Private
Morris Plan & I n d u s t r i a l
Mutual Savings
Branches o f f o r e i g n banks
Trust C o . , without d e p o s i t s
Other f i n a n c i a l i n s t i t u t i o n s
without d e p o s i t s
Total
Percent o f t o t a l
Percent o f t o t a l (commercial
only)l/

Numb;bt o f banks
Member banks
Nonmember banks
National : S t a t e
Insured Uninsured

Total
14,949
39
138
79
567
9

5,386

7,642
2.4
6

923
15
132

i

61
57

17
510
9

2

1

74

998

—

—

—

—

—
—
—

77

—

—

—

5

—

—

—

5

15,863

5,386

1,001

7,791

1,685

100.0

3-4.0

6.3

49.1

10.6

100.0

36.0

6.7

51.1

6.2

1 / Includes 28 banks which reported no demand d e p o s i t s and 172 (uninsured
nonmember) banks f o r which the d i s t r i b u t i o n o f demand and time d e p o s i t s
was not r e p o r t e d .




~

By Geographic d i v i s i o n s .

~

2

As nay be seen from the f o l l o w i n g

table,

the l a r g e s t numbers o f banks were l o c a t e d i n the West North Central and
East North Central S t a t e s which had 3,617 and 3,24-3 banks,

respectively,

i n o p e r a t i o n on December 31, 1935, and i n the Middle A t l a n t i c S t a t e s which
had 2,483 banks:

Geographic

divisioni/

Total

Number o f banks
Menbei banks
National State

Noanenber banks
Insured j[Uninsured

New England
Middle A t l a n t i c
East North Central

935
2,485
3,243

330
1,4)4
86 3

46
246
251

159
607
1,991

400
228
138

West North Central
South A t l a n t i c
East South Central

3,617
1,646
1,186

855
471
266

140
101
35

2,109
926
812

513
148
73

West South Central
wiountain
Pacific

1,673
521
557

748
224
225

64
70
48

741
205
241

120
22
43

15,863

5,386

1,001

7,791

1,685

Total
1 / New England:




Maine, New Hampshire, Vermont, Massachusetts, Rhode I s l a n d ,
Connecticut.

Lliddle A t l a n t i c :

New York, New J e r s e y ,

East North C e n t r a l :
West North C e n t r a l :
South A t l a n t i c :

Pennsylvania.

Ohio, Indiana, I l l i n o i s , Michigan, Wisconsin.
Minnesota, Nebraska,s s Kansas.
Dakota, Iowa, M i o u r i , North Dakota, South

Delaware, Maryland, D i s t r i c t o f Columbia, V i r g i n i a ,
West V i r g i n i a , North C a r o l i n a , South C a r o l i n a ,
Georgia, F l o r i d a .

East South C e n t r a l :

Kentucky, Tennessee, Alabama, M i s s i s s i p p i .

West South C e n t r a l :

Arkansas, Louisiana, Oklahoma, Texas.

Mountain8
Pacific:

Montana, Idaho, Wyoming, Colorado, New Mexico,
Utah, Nevada.
Washington, Oregon,

Califorala.

Arizona,

Ilumber o f _ " Commercial"!/ banks by geographic d i v i s i o n s .

Inasmuch

as a l a r g e m a j o r i t y o f the mutual savings banks, Morris plan and i n d u s t r i a l
banks, cash d e p o s i t o r i e s , p r i v a t e banks and o t h e r m i s c e l l a n e o u s c l a s s e s o f
nonmember banks are concentrated i n the eastern part o f the c o u n t r y , in the
Hew England, Middle A t l a n t i c , and South A t l a n t i c geographic d i v i s i o n s ,
f o l l o w i n g t a b u l a t i o n has been prepared t o show the geographic

the

distribution

o f commercial banks o n l y :

Geographic d i v i s i o n

Total

Number o f commercial banks
Member banks
Nonmember banks
Insured !Uninsured
National State

New England
Middle A t l a n t i c
East North Central

559
2,247
3,161

330
1,404
863

45
24$
250

139
575
1,963

45
23
85

West North Central
South A t l a n t i c
East South Central-

3,600
1,499
1,180

855
471
266

140
101
35

2,107
870
806

498
57
73

West South Central
Mount ain
Pacific

1,660
520
523

748
224
225

64
70
48

741
205
236

107
21
14

14,949

5,386

998

7,642

923

Total

This t a b l e snows that o v e r t w o - t h i r d s o f a l l commercial banks in
the Hew England and Middle A t l a n t i c d i v i s i o n s were member banks; in the
Mountain and P a c i f i c d i v i s i o n s , over o n e - h a l f were member banks, and the
p r o p o r t i o n o f member banks decreased i n the West North Central and East
Worth Central d i v i s i o n s t o a l i t t l e over o n e - f o u r t h .

1 / A l l o f the analyses which f o l l o w are l i m i t e d to the "commercial" banks
shown in the t a b l e on page 1 ; the other c l a s s e s o f banking i n s t i t u t i o n s
shorn i n the t a b l e have been excluded.




-

4

-

I t m i l be rioted from the above t a b u l a t i o n that over o n e - h a l f

of

the 923 uninsured banks were i n the West North Central s t a t e s which i n clude^

among o t h e r s , f o u r s t a t e s that have had experience with d e p o s i t

guaranty laws5

Kansas, Nebraska, South Dakota, and North Dakota.

f o l l o w i n g l i s t i n c l u d e s the s t a t e s having over f i f t y uninsured

The

commercial

banks o r having o v e r o n e - f o u r t h o f t h e i r nonmember commercial banks uninsured •
Number o f nonmember commercial banks
percent
Insured
Uninsured
uninsured

State
Kansas
Texas
Iowa
Nebraska

254
299
438
230

51
21
15
21

2
3
16
45

Rhode Island
New Hampshire
Maine
Connecticut

264
79
76
61
7
9
9
16

78
75
36
26

4-19 o f the 923 uninsured banks, o r approximately AA percent, are i n
Kansas, Texas, and Nebraska, three s t a t e s that had experience with guaranty
laws.

A high percentage o f the nonmember commercial b^nks i n the New

England s t a t e s are uninsured, but there are comparatively few nonmember
banks i n that d i v i s i o n .
Deposits.

Although the c l a s s i f i c a t i o n by number o f banks showed

that l e s s than 4-3 p e r c e n t o f a l l commercial b^nks were member banks, the
d e p o s i t s o f member banks comprised over 86 p e r c e n t o f a l l d e p o s i t s on
December 31, 1935.

The t o t a l d e p o s i t s of banks, by c l a s s e s o f banks,
of

t o g e t h e r with a comparison o f the p e r c e n t a g e / d e p o s i t s o f banks witn the
percentage o f number o f banks in each c l a s s are shown as f o l l o w s :




-

Class of buik
Member banks j
National
State
llonneriber banks s
Insured
Uninsured
Total

5

-

Amount o f d e o o s i t s
(In thousands
of dollars)

Percent
of total
deposits

2^,801,793
13,648,295

55.5
30.6

36.0
6.7

5,504,040
729,680

12.3
1.6

51.1
6.2

44,683,808

100.0

100.0

Percent of t o t a l
nuriber o f
commercial banks

Accordiiig to r a t i o o f demand to t o t a l d e p o s i t s .
Number o f buucs.

m a n a l y s i s o f banks according to the r a t i o o f

demand d e p o s i t s to t o t a l d e p o s i t s showed that w e l l over o n e - h a l f of the
± A > , 7 7 7 ^ c o m m e r c i a l banks had demand d e p o s i t s o f from 30 percent t o 70 p e r cent o f t o t a l d e p o s i t s .

Only 493 o f the banks were p r i m a r i l y savings

banks with r a t i o s o f demand d e p o s i t s to t o t a l d e p o s i t s o f l e s s than 20
percent and only 1 , 4 7 2 , o r about 10 p e r c e n t , o f the banks had demand d e p o s i t s of 90 percent o r more o f t o t a l d e p o s i t s .

The c l a s s i f i c a t i o n o f

the baiiKS according; to thy r a t i o o f demand d e p o s i t s t o t o t a l d e p o s i t s
shown below:




1 / Exclusive o f 172 "banks f o r which the d i s t r i b u t i o n
o f demand and time d e p o s i t s was not r e p o r t e d .

is

- 6

Ratio o f denancl d e p o s i t s
to t o t a l deposits
0.0
0.1 -

9.9

p ercent
t;
n

10
20

-

19,9
29.9

it

30
50

-

49.9
69.9

tt

70
80

- 79.9
- 89.9

tt

90
100

-

99.9

tt

tt

it
ti

Total

-

Number of c o n n e r c i a l banks
Nonnenbi .r banks
Moi-ibei banks
Total
Insured Uninsured
National State
28
67

13

1
3

21
45

6
6

398
1,196

191
574

10
82

180
506

17
34

4,066
4,228

1,547
1,438

325
299

2,089
2,315

105
176

1,856
1,466

616
483

113
73

1,014
779

113
131

962
510

338
186

72
20

466
227

86
77

14,777

5,386

998

7,642

lJ 751

—

A comparison o f the groups i n d i c a t e s t h a t a l a r g e r p r o p o r t i o n o f
the nonmember banks, p a r t i c u l a r l y the uninsured banks, have high r a t i o s
o f demand t o t o t a l d e p o s i t s , than have the member banks.

More than h a l f

o f the 751 uninsured banks had demand d e p o s i t s o f 70 percent o r o v e r o f
t o t a l d e p o s i t s , while only about 30 percent o f the 5,386 n a t i o n a l banks,
28 percent o f the 998 S t a t e nenber banks and 33 percent o f t h e 7 , 6 4 2 i n sured nonmember b*nks had a en and d e p o s i t s amounting t o 70 percent o r more
of total

deposits.
Deposits.

The f o l l o w i n g c l a s s i f i c a t i o n by r a t i o s o f demand d e -

p o s i t s t o t o t a l d e p o s i t s , but showing the t o t a l d e p o s i t s i n s t e a d of the
number o f banks, i n d i c a t e s a somewhat s i m i l a r d i s t r i b u t i o n i n the nonnember

l / E x c l u s i v e o f 172 banks f o r which the d i s t r i b u t i o n o f demand and time
d e p o s i t s was not r e p o r t e d .




-

7

-

groups, but i n member banks the bulk o f the d e p o s i t s was- i n the c l a s s i f i cations with high r a t i o s o f demand d e p o s i t s t o t o t a l d e p o s i t s :

Ratio o f den and
deposits to
t o t a l deposits

Member banks

Total

National

State

(In m i l l i o n s o f
0. 0
0. 1 -

78
302

percent
ii
9.9

Horaieiaber banks
Insured

Uninsured

dollars)

34

3
21

28
235

47
12

—

10.

20

-

19.9
29.9

ii
1
!

618
1,782

326
916

35
2.08

243
594

14
64

30
50

-

49.9
69.9

1
1
It

8,351
7,272

4,478
3,717

2,032
1,973

1,788
1,472

110

70

-

79.9
89.9

1
1
1
1

5,927
9,085

4,062
7,031

1,320
1,658

517
310

86

-

99.9

1
1
1
1

10,862
309

4,152
86

6,342
56

272
46

121

44,586

24,802

13,648

5,505

631

so

90
100

Total

53

28

96

Over o n e - h a l f o f the d e p o s i t s o f State member banks were in banks having
demand d e p o s i t s o f 80 percent o r over of t o t a l d e p o s i t s .

The 90-99 percent

r a t i o c l a s s i f i c a t i o n o f State member banks contained only 72 banks but these
banks had d e p o s i t s o f §6,3^2,000,000, an average o f almost $90,000,000 per
bank, as compared with average d e p o s i t s o f l e s s than §1^,000,000 f o r
s t a t e member banks.

all

The concentration i s explained by the f a c t that the

l a r g e s t a t e member banks in New York City with t o t a l d e p o s i t s o f nearly
s i x b i l l i o n d o l l a r s are in t h i s high r a t i o c l a s s i f i c a t i o n .

S i m i l a r l y , the

high average d e p o s i t s o f the n a t i o n a l banks i n the 80-89.9 percent and 9099.9 percent r a t i o c l a s s i f i c a t i o n s are caused by the large New York banks i n
these c l a s s i f i c a t i o n s .

In c o n t r a s t , however, t o the c o r r e l a t i o n o f large

member banks with high demand r a t i o s , the member banks which had demand d e p o s i t s o n l y , were comparatively small banks.




By geographic d i v i s i o n s .

8

-

Over o n e - h a l f o f the banks i n the Hew

England, Middle A t l a n t i c , and East North Central d i v i s i o n s had denand d e p o s i t s o f l e s s than 50 percent o f t o t a l d e p o s i t s ;

and the m a j o r i t y o f the

banks i n the Mountain and Vest South Central d i v i s i o n s had demand d e p o s i t s
o f 70 percent o r o v e r o f t o t a l d e p o s i t s .
bonks i n each geographic d i v i s i o n

The t o t a l number o f

commercial

i s c l a s s i f i e d by r a t i o o f denand t o t o t a l

d e p o s i t s i n the f o l l o w i n g t a b l e s

Geographic d i v i s i o n

Number o f con:.iercial banks with the f o l l o w i n g
r a t i o s o f denand d e p o s i t s t o t o t a l d e p o s i t s —
Total
0 -1956 20-49%
70-100$
50-69$

New England
Middle A t l a n t i c
East North Central

559
2,245
3,136

62
223
85

252
1,593
1,536

110
297
1,023

135
132
492

West North Central
South A t l a n t i c
East South Central

3,484
1,499
1,168

20
59
9

774
546
323

1,167
465
469

1,523
429
367

West South Central
Mount ain
Pacific

1,648
515
523

1
5
29

46
45
147

261
197
239

1,340
268
108

493

5,262

4,228

4,794

14,777

Total

I

Percent o f t o t a l number of banks with the above r a t i o s
o f deiland d e p o s i t s to t o t a l d e p o s i t s
New England
Middle A t l a n t i c
East North Central

100
100
100

11
10
3

45
71
49

20
13
33

24
6
15

•Vest North Central
South A t l a n t i c
East South Central

100
100
100

1
4
1

22
36
28

33
31
40

44
29
31

West South Central
Mountain
Pacific

100
100
100

1
6

3
9
28

16
38
46

81
52
20

Total

100

3

36

29

32




—

-

9

-

According to p o p u l a t i o n o f p l a c e s i n which s i t u a t e d and according to
s i z e o f loans and investments
Hurnber o f banks by s i z e o f loans and investments.

A classification

o f the commercial banks on December 31, 1935, according t o the amount o f
loans ana investments d i s c l o s e d a high percentage o f small banks.

More

than 6,000 o f the 14,949 banks had loans and investments o f l e s s than
§ 2 5 0 , 0 0 0 , and 9,073 banks had loans and investments o f l e s s than $500,000.
The d i s t r i b u t i o n o f banks according to s i z e o f loans and investments i s
shown b e l o w :

S i z e group —
Loans and investments

Total

Nunber o f commercial banks
Menber banks
Nonaember banks
Insured Uninsured
National j S t a t e

Under $150,000
150,000-250,000
250,000-500,000

3,613
2,400
3,060

407
602
1,181

78
115
172

2,596
1,538
1,587

532
145
120

500,000-1,000,000
1,000,000-2,000,000
2,000,000-5,000,000

2,483
1,623
1,071

1,235
930
633

162
139
154

1,024
522
271

62
32
13

341
272
86

203
150
45

63
76
39

68
35
1

7
11
1

14,949

5 , 386

998

7,642

923

5,000,000-10,000,000
10,000,000-50,000,000
50,000,000 and o v e r
Total

Percent o f t o t a l nur-iber of b-^nks
Under <?250,000
250,000-500,000
500,000-1,000,000

40
21
17

19
22
23

20
17
16

54
21
13

73
13
7

1,000,000-5,000,000
5,000,000-10,000,000
1 0 , 0 0 0 , 0 0 0 and over

18
2
2

29
4
3

29
6
12

10
1
1

5
1
1

100

100

100

100

100




Total

-

10 -

I t w i l l be noted that the percentage o f nonmember baxiKS i n the smaller
s i z e groups was p a r t i c u l a r l y h i g h .

Approximately 86 percent o f the un-

insured banks and 75 percent o f the insured nonmember banks had loans and
investments o f l e s s than §500,000.
Number of b a m s by p o p u l a t i o n o f p l a c e s i n which s i t u a t e d ,

A dis-

t r i b u t i o n of banks according t o the s i z e o f community i n which they were
s i t u a t e d showed that over o n e - h a l f o f the nonmember banks were i n towns
o f l e s s than 1,000 p o p u l a t i o n and that over o n e - h a l f o f the member banks
were i n towns with p o p u l a t i o n s o f l e s s than 5 , 0 0 0 .
ing t o p o p u l a t i o n i s shown i n the f o l l o w i n g

Population
of city

Total

The d i s t r i b u t i o n

accord-

table:

Number o f commercial banks
Menber banks
Nonnember banks
National | State
Insured Uninsured

Under 500
500-1,000
1,000-2,500

3,020
2,615
3,143

339
676
1,279

74
96
183

2,169
1,662
1,563

438
181
118

2,500-5,000
5,000-10,000
10,000-25,000

1,849
1,361
1,170

908
738
648

132
100
111

755
488
392

54
35
19

531
342
918

280
164
354

63
49
190

178
113
322

10
16
52

14,949

5,386

998

7,642

923

25,000-50,000
50,000-100,000
100,000 and over
Total

Percent o f t o t a l nunber o f banks
Under 1,000
1,000-2,500

38
21

19
24

17
18

50
20

67
13

2,500-5,000
5,000 and over

12
29

17
40

13
52

10
20

6
14

100

100

100

100

100




Total

-

11

-

Banks witn loans and investments o f l e s s than ^500,000,
following table

The

shows that 7 , 6 5 4 o f the 9,073 brinks with loans arid

investments of l e s s than &500,000 were s i t u a t e d i n towns with p o p u l a t i o n s
o f l e s s than 2,5001

Population
of c 'ity
Under 500
500-1,000
1,000-2,500
2,500-5,000
5,000-10,000
10,000-25,000
25,000-50,000
50,000-100,000
100,000 and o v e r
Total

Nur ibcr o f i3oniuercinl banks having loan,*3 md
investments o f l e s s th-an y500,000
Member banks
Nonn ernbr;r banks
Total
Insured Uninsured
National
State
436
2,120
70
307
2,933
178
1,557
2,375
89
551
2,346
838
100
133
1,275
836
305
110

336
124
22

39
37
92

4
5
3

9,073

2,190

56
13
3

415
154
76

29
14
9

1

29
24
71

6
8
17

365

5,721

797

—

—

Percent o f number o f banks
Under 1,000
1,000-2,500
2,500-5,000
5,000 and o v e r
Total

59
26

39
38

44
36

64
23

77
12

9
6

16
7

15
5

7
6

4
7

.100

100

100

100

100

A s i m i l a r c l a s s i f i c a t i o n o f banks with loans and investments o f

less

than ti250,000 showed t h a t nearly 95 percent o f them were s i t u a t e d i n towns
with p o p u l a t i o n s o f l e s s than 2 , 5 0 0 .
In the c l a s s i f i c a t i o n shown i n the t a b l e above and i n the
c a t i o n o f banks with loans and investments o f l e s s than y 2 5 0 , 0 0 0 ,
appear some e x c e p t i o n a l cases o f small b inks being i n the l a r g e r




classifithere
cities?

-

12

-

i t i s probable that these banks are in the o u t l y i n g or r e s i d e n t i a l
t r i c t s o f the l a r g e c i t i e s .

dis-

An a n a l y s i s by s t a t e s o f the 168 banks with

loans and investments o f l e s s than f'500,000 which were s i t u a t e d i n
o f o v e r 25,000 p o p u l a t i o n i n d i c a t e s no unusual c o n c e n t r a t i o n .

cities

They were

s c a t t e r e d among 34 s t a t e s and the D i s t r i c t o f Columbia and the o n l y s t a t e s
having 10 o r more werei

State

Number of commercial baiucs with loans ana
investments o f l e s s than $500,000 l o c a t e d
i n c i t i e s o f 25,000 o r over p o p u l a t i o n
14
17

Indiana
Wisconsin
Minnesota
Kansas
Missouri

11
10
14

There were 13 member banks wita loans and investments o f l e s s than
$500,000 l o c a t e d i n c i t i e s with p o p u l a t i o n o f 25,000 o r o v e r .
l o c a t e d i n the f o l l o w i n g s t a t e s t

Massachusetts., Rhode I s l a n d ,

They were
Pennsylvania,

Nebraska, Indiana, Kentucky, Texas, Colorado, and C a l i f o r n i a .
Banks with l o a n s and j j i v e s tments oi

,000 ,000 and o v e r .

The f o i l own-

ing c l a s s i f i c a t i o n o f banks with loans and investments o f o v e r B1,000,000
a c c o r d i n g to the p o p u l a t i o n o f the p l a c e s i n which they were s i t u a t e d shows
that comparatively few banks o f t h i s s i z e were i n the smaller towns; o n l y
222 o r about 7 p e r c e n t o f the banks o f t h i s s i z e were found t o be in towns
o f l e s s than 2,500 populations




-

Population
Oi- ui uy
„

13 -

Number o f commercial banks having loans and
investments o f £1,000,000 o r ove r
Nonmember banks
Member banks
rp_4_
"I
iotai
Insured Uninsured
State
National

Under 2,500
2,500-5,000
5,000-10,000

222
375
552

147
236
336

14
32
47

60
98
160

1
9
9

10,000-25,000
25,000-50,000
50,000-100,000
100,000 and over

810
<433
270
731

499
260
153
330

85
57
49
187

218
113
64
184

8
3
4
30

3,393

1,961

471

897

64

Total

Percent o f number o f banks
Under 2,500
2,500-5,000
5,000 and over

8
12
80

7
11
82.
100

Total

1
i.

3
7
90

7
11
82

2.
14
84

100

100

100

100

As i n the case o f small banks in l a r g e c i t i e s , i t i s probable that
some o f the l a r g e banks i n small p l a c e s are due t o s p e c i a l
such as being i n suburban v i l l a g e s adjacent t o l a r g e c i t i e s .

circumstances,
For i n s t a n c e ,

one bank with loans and investments o f over e i g h t e e n m i l l i o n d o l l a r s i n the
250 t o 500 p o p u l a t i o n c l a s s i f i c a t i o n was the National Stock l a r d s National
Bank o f National C i t y , I l l i n o i s , in the s t o c k yards d i s t r i c t a c r o s s the
r i v e r from St.

Louis.

By geographic d i v i s i o n s .

When banks with loans and investments o f

l e s s than $500,000 were c l a s s i f i e d g e o g r a p h i c a l l y i t was found that the New
England and Middle A t l a n t i c d i v i s i o n s had comparatively few o f the smaller
banks; however, i n the West North Central and West South Central d i v i s i o n s
approximately 80 percent o f the banks had loans and investments o f




less

$500,000•

-

14

The geographic d i s t r i b u t i o n o f baxucs witn loans and investments

o f l e s s than <3500,000 i s i n d i c a t e d i n the f o l l o w i n g

Geographic d i v i s i o n

table:

Barnes having loans and
Investments o f l e s s than &500*000
Percent o f t o t a l
Number
banics in d i v i s i o n
o f banks

18

New England
Middle A t l a n t i c
East North Central

99
487
1,884

West North Central
South A t l a n t i c
East South Central

2,905
891
853

West South Central
Mountain
Pacific

1,312
352
290

79

Total

9,073

61

22

60

81

59
72

68
55

The f o l l o w i n g t a b l e shows that i n the West North Central and the
West South Central s t a t e s , which had the l a r g e s t percentages o f small banks,
about 3,800 o f the 5,260 banks i n o p e r a t i o n were s i t u a t e d i n towns with a
p o p u l a t i o n o f l e s s than 2 , 5 0 0 , compared with o n l y 883 out o f a t o t a l o f
2,806 banks i n o p e r a t i o n in the New England and Middle A t l a n t i c
which had comparatively few small banks.




states,

-

Geographic d i v i s i o n

15 -

Number o f commercial banks l o c a t e d i n p l a c e s
with a p o p u l a t i o n o f —
5,000
Under
2,500 t o
Total
and over
5.000
2,500

New England
Middle A t l a n t i c
East North Central

559
2,247
3,161

100
783
1,872

74
381
334

385
1,083
955

West North Central
South A t l a n t i c
East South Central

3,600
1,499
1,180

2,742
851
798

289
209
165

569
439
217

West South Central
Mount ain
Pacific

1,660
520
523

1,055
311
266

250
70
77

355
139
180

14,949

8,778

1,849

4,322

Total

Percent o f t o t a l number o f banks
Hew England
Middle A t l a n t i c
East North Central

100
100
100

18
35
59

13
17
11

69
48
30

West North Central
South A t l a n t i c
East ^outh Central

100
100
100

76
57
68

8
.14
14

16
29
18

West South Central
Mountain
Pacific

100
100
100

64
60
51

15
13
15

21
27
34

Total

100

59

12

29

There was a rather c l o s e c o r r e l a t i o n between the p r o p o r t i o n o f
banns i n a geographic d i v i s i o n in p l a c e s with p o p u l a t i o n o f l e s s than
2 , 5 0 0 , and the p r o p o r t i o n o f bau^s that had loans and investments of
than #500,000.




less

The percentages are repeated below f o r comparative purposes.

-

Geographic d i v i s i o n

16

Percent o f t o t a l 1bulks i n d i v i s i o n —
In p l a c e s with
With loans and
population of
investments o f
l e s s than 2,500
l e s s thin #500,000

New England
Middle A t l a n t i c
East North Central

18
22
60

18
35
59

West North Central
South A t l a n t i c
East S 0 uth Central

81
59
72

76
57
68

West South Central
Mountain
Pacific

79
68
55

64
60
51

Population per bank.

The population per bank i n the West North

Central s t a t e s was o n l y 3,800 as contrasted with population p e r bank o f over
10,000 i n the Middle A t l a n t i c , South A t l a n t i c and P a c i f i c d i v i s i o n s .

The

approximate p o p u l a t i o n p-.r b m k , based on 1935 Bureau o f Census population
e s t i m a t e s , i s shown below?

Geographic d i v i s i o n
New England
Lliddle A t l a n t i c
East North Central

Population per b a n k i /
15,200

12,100
8,100

West North Central
South A t l a n t i c
East South Central

3,800
11,600

West South Central
Mountain
Pacific

7,700
7,100

15,800

Total

8,500

8,900

1 / I f the mutual savings bonks ? Morris P I m and i n d u s t r i a l banks, p r i v a t e
banks and the v a r i o u s otner c l a s s e s o f banking i n s t i t u t i o n s shown in the
t a b l e on page 1 were included in tne c a l c u l a t i o n s the p o p u l a t i o n per bank
would be lowered t o 8,000 f o r the country as a whole, t o 9,100 i n the New
England S t a t e s , 11,000 in the Middle A t l a n t i c S t a t e s , and t o 10,500 in
the South A t l a n t i c States.
In the other geographic d i v i s i o n s the a d d i t i o n
o f the other banking i n s t i t u t i o n s to the commercial banks would not
m a t e r i a l l y change the population per bank.




According to s i z e o f

17

-

deposits.

The f o l l o w i n g t a b l e shows that the d i s t r i b u t i o n o f banks according
t o s i z e o f d e p o s i t s i s very s i m i l a r t o the d i s t r i b u t i o n by s i z e o f loans
and inves tment s :

S i z e group —
Loans and investr-ients
or d e p o s i t s

D i s t r i b u t i o n by s i z e o f
loans and investments
Percent o f
Number o f
total
b^nks

D i s t r i b u t i o n by s i z e
of deposits
•reent o f
Number o f
banks
total

Under ^150,000
150,000-250,000
250,000-500,000

3,613
2,400
3,060

24
16
21

2,449
2,237
3,441

16
15
23

500,000-1,000,000
1,000,000-2,000,000
2,000,000-5,000,000

2,483
1,623
1,071

17
11
7

2,841
1,856
1,271

19
12
9

341
272
86

2

2

420
325
109

3
2

100

14,949

100

5,000,000-10,000,000
10,000,000-50,000,000
50,000,000 ana over
Total

14,9^9

—

1
±

I t v a i l be noted from the above t a b l e that i n the two smallest

size

groups the number o f banks i n the d e p o s i t c l a s s i f i c a t i o n was l e s s than the
number in the loans and investment c l a s s i f i c a t i o n , but i n the l a r g e r s i z e
groups there were more banks i n the d e p o s i t c l a s s i f i c a t i o n
loans and investment c l a s s i f i c a t i o n .

than i n the

This r e s u l t s from the f a c t that the

loans and investments o f trie average bank are l e s s than i t s d e p o s i t s .

In

the f o l l o w i n g t a b l e the t o t a l l o a n s ana investments and t o t a l d e p o s i t s o f
a l l commercial banks on December 31, 1935 are compared?




-

18

-

Member banks
Nonmerfiber banks
National State
Insured Uninsured
(in millions o f d o l l a r s )

Total

Loans and investments
Deposits

35,157
44,684

10,968
13,648

4,642
5,504

597
730

127.1

Deposits percent o f
loans ana investments

18,950
24,802
130.9

12.4,4

118.6

122.3

This comparison shows that the average d e p o s i t s o f a l l banks were 27 percent
g r e a t e r than the average loans and investments.
that i f

I t seems q u i t e probable

the banks were d i s t r i b u t e d i n t o s i z e groups according t o t o t a l d e -

p o s i t s approximately 27 percent l a r g e r than the corresponding loans and i n vestments s i z e g r o u p s , the number o f batiks i n the corresponding groups would
be about the same.

Insured nonmember banks with d e p o s i t s o f ^1,000,000 o r more.

Under

the t erms o f the Banking Act o f 1935 insured nonmember banks having average
d e p o s i t s o f $1,000,000 o r more during the year 1941 w i l l be r e q u i r e d t o
the Federal Reserve System or f o r f e i t t h e i r insurance p r i v i l e g e s .

join

On

December 31, 1935, there were 1,118 insured nonmember banks with d e p o s i t s
o f y l , 0 0 0 , 0 0 0 o r more.

Of these bariKS 1,042 were l o c a t e d i n 28 s t a t e s , as

shown

table:




i n the f o l l o w i n g

State

Number o f insured
nonnenber banks with
'
deposits of
#1,000 9 000 or o v e r

1 Jew England
Maine
Vermont
Massachusetts
Connecticut

11
20
2.9
32

Middle A t l a n t i c
New York
New J e r s e y
Pennsylvania

97
66
147

East Noxth Central
Ohio
Indiana
Illinois
id i c hi gan
Wisconsin

70
72
66
34
49

West North Central
Minnesota
Iowa
Missouri
Kansas

14
46
32
20

1 / Including D i s t r i c t o f ^olunbia.




State

Number o f insured
nonnenber banks with
deposits of
81.000,000 o r over

South A t l a n t i c
Maryland
Virginia
West V i r g i n i a
North Carolina
Georgia
Florida

2.2
18
29
12
10

East South Central
Kentucky
Tennessee
Mississippi

26
12
21

West South Central
Louisiana
Texas

15
14

Pacific
California

.36

T o t a l , 28 States
T o t a l , 21 o t h e r
Statesi/

DO

1,042
76

236 o f the insured nonnember beaks with d e p o s i t s o f §1,000,000 o r
more on December 31 9 1935, were s i t u a t e d in the Chicago Federal Reserve
d i s t r i c t , 160 i n the New York d i s t r i c t raid l48 in the Cleveland

district.

The insured nonmember banks with d e p o s i t s on December 31? 1935 o f
§1,000,000 or more are d i s t r i b u t e d by Federal Reserve d i s t r i c t s as f o l l o w s :

Federal Reserve d i s t r i c t
Boston
New York
Philadelphia

Number of insured nonmember
banks with d e p o s i t s o f
$1,00 •'0,000 o r over
S3
160
112

Cleveland
Richmond
Atlanta

148
99
57

Chicago
S t , Louis
Minneapolis

236
78
24

Kansas City
Dallas
San Francisco

47
20
54
1,118

Total

According to r a t i o s o f t o t a l c a p i t a l account t o t o t a l d e p o s i t s .
Number o f banks.

The c l a s s i f i c a t i o n o f a l l commercial banks a c c o r d -

ing t o the r a t i o o f t o t a l c a p i t a l account 1 / to t o t a l d e p o s i t s d i s c l o s e d that
a great m a j o r i t y o f the banks had book c a p i t a l accounts amounting to more
than 10 percent o f t o t a l deposits,-

9 , 5 4 4 , o r more than o n e - h a l f o f the

14,9^9 commercial banks, nad r a t i o s o f t o t a l c a p i t a l accounts t o t o t a l d e p o s i t s
o f 15 percent or o v e r .

Only 420 banks, o r about 3 p e r c e n t , had c a p i t a l

r a t i o s o f l e s s than 8 percent and 1,321 banks, o r approximately 9 percent
1 / Aggregate book value of c a p i t a l s t o c k , c a n i t a ! notes ,nr
surplus, undivided p r o f i t s and r e s e r v e s .




d-b-furps
' ^ ~"" *

~

21

~

o f the t o t a l , had c a p i t a l r a t i o s o f l e s s than 10 p e r c e n t .

The number o f

banks and a percentage d i s t r i b u t i o n o f the number o f banks in the c a p i t a l
r a t i o c l a s s i f i c a t i o n s are shown i n the f o l l o w i n g t a b l e s

Ratio o f book
c a p i t a l account t o
t o t a l deposits

Number o f commercial banks
Member banKs
j Nonmember banks
Total
Ins ured Uninsured
National State

II
II
II

10 -1-4.9
15 - 1 9 . 9
20 and over
Total

60
360
901

27
154
405

1
30
73

26
153
380

6
23
43

4,084
3,577
5,967

1,691
1,424
1,685

372
247
275

1,829
1,753
3,501

192
153
506

14,949

y.
Le• Ss than 6 )ercent
!l
6 - 7.9
II
8 - 9.9

5,386

998

7,642

923

Percent o f t o t a l number o f banks
Less than 8 percent
8 - 9.9
"
10 - 1 4 . 9
15 and o v e r
Total

"

3
6

3
8

3
8

2
5

3
5

27
64

31
58

37
52.

24
69

21
71

100

100

100

100

100

Book c a p i t a l account and, net sound c a p i t a l *

I t must be remembered

that the c a p i t a l r a t i o s used i n the above t a b l e are based on the book capi t a l at December 31, r935 9 unadjusted f o r a p p r e c i a t i o n o r d e p r e c i a t i o n in
s e c u r i t i e s , o r other hidden a s s e t s , o r assets c l a s s i f i e d i n r e p o r t s o f

ex-

amination as l o s s o r d o u b t f u l , but s t i l l c a r r i e d on the banks* books.

The

f o l l o w i n g comparison shows the d i s t r i b u t i o n o f insured nonmember banKS
a c c o r d i n g to c a p i t a l r a t i o s , based on net souna c a p i t a l at the date o f the
most r e c e n t report o f examination by the Federal Deposit Insurance Corporat i o n during 1 9 3 5 ^ , and based on book c a p i t a l at December 31, 1935.

(Com-

1 / Annual Report of tne Federal Deposit Insurance Corporation f o r the year
ending December 31? 1935, page 4-3.




-

22

-

parable data are not a v a i l a b l e f o r member banKS o r f o r uninsured nonmember b a n k s ) :
Percent o f insured nounember banks with
c a o i t a l r a t i o s to t o t a l d e p o s i t s ox Under 5%
Over 10%
5 t o 10So

Ratios based on Net sound c a p i t a l at date
o f l a t e s t examination
during 1935, bjr Federal
Deposit Insurance Corporation!/

87

11

2

Book c a p i t a l , Dec. 31, 1935

93

6

1

Some o f the improvement i n d i c a t e d between the examination date and
December 31, 1935, may be r e a l , due t o continued r e h a b i l i t a t i o n o f banks
during 1934-1935, current earnings, and the r i s e i n s e c u r i t y p r i c e s during
t h i s p e r i o d ; but the comparison i n d i c a t e s that the book c a p i t a l

ratios

should be s c a l e d down somewhat to r e f l e c t the r a t i o d i s t r i b u t i o n based on
net sound c a p i t a l .
Total deposits.

Another c l a s s i f i c a t i o n was made according t o t o t a l

d e p o s i t s rather than according t o the number o f banks and i t was found that
about 11 percent o f t o t a l d e p o s i t s were i n banks that had c a p i t a l
r a t i o s o f l e s s than 8 percent and that o v e r 25 p e r c e n t o f a l l d e p o s i t s were
in banks with c a p i t a l r a t i o s o f l e s s than 10 p e r c e n t .

The p e r c e n t o f d e -

p o s i t s i n uninsured banks that had c a p i t a l r a t i o s o f l e s s than 8 percent o r
10 p e r c e n t was s i m i l a r t o the p e r c e n t o f the number o f banks, but i n the
insured nonmember and member groups the p r o p o r t i o n o f the t o t a l

deposits

i n banks with c a p i t a l r a t i o s o f l e s s than 8 percent o r 10 p e r c e n t was c o n s i er ably l a r g e r than the p r o p o r t i o n o f the number o f banks with lower
1 / Annual Report o f the Federal Deposit Insurance Corporation f o r the year
ending December 31, 1935, p^ige 4-3.




capital ratios.

This i n d i c a t e s that trie l a r g e r banks had lower

r a t i o s than the smaller s i z e d banics.

The f o l l o w i n g t a b l e shows the d e -

p o s i t s and the p e r c e n t o f t o t a l d e p o s i t s i n each c a p i t a l r a t i o

Ratio o f book
c r v o i t a l account t o
t o t a l denosits

group!

Deposits ( i n m i l l i o n s o f d o l l a r s )
NonmembciX banks
Mernbei: banks
Total
Insured Uninsured
National State

It
II

Total

570
4,246
6,522

501
3 , m
4,373

6
926
1,614

57
190
510

6
19
25

19,406
8,550
5,390

11,796
2,898
2,123

5,609
4,301
1,193

1,861
1,228
1,658

140
123
4l6

44,684

U iss than 6 percent
ir
6 - 7.9
1!
S 9.9
10 - 1 4 . 9
15 - 1 9 . 9
20 and o v e r

capital

24,802

13,649

5,504

729

Percent o f t o t a l dci p o s i t s
Lesss than 8 p e r c e n t
ri
8 - 9.9
10 - 1 4 . 9
15 and o v e r

ii

Total

11
15

15
18

7
12

5
9

4
3

4.3
31

47
20

41
4o

34
52

19
74

100

100

100

100

100

In c o n t r a s t t o the c l a s s i f i c a t i o n

according t o the number o f banks, the

above c l a s s i f i c a t i o n by t o t a l d e p o s i t s i n d i c a t e s that only i n the nonmember
there
groups were/over o n e - h a l f o f the t o t a l d e p o s i t s i n banks having
r a t i o s o f over 15 p e r c e n t .

capital

Nearly t w o - t h i r d s o f a l l banks had book capital-

r a t i o s o f over 15 p e r c - n t but l e s s than o n e - t h i r d o f a l l d e p o s i t s were in
baiiKS with t h i s high r a t i o .
By geographic d i v i s i o n s .

As shown by the f o l l o w i n g t a b l e , 420 banks

with r a t i o s o f t o t a l c a p i t a l accounts to t o t a l demosits o f l e s s than 8 p e r c e n t




~

24

~

were concentrated l a r g e l y i n the West North Central and the East North
Central s t a t e s ;

Geographic D i v i s i o n

Number o f b m k s with r a t i o o f capital- account
d e p o s i t s o f l e s s than 8 percent
to t o t a l
Nonmenbc;r banks
Member banks
Total
Insured| Uninsured
National State

New England
Middle A t l a n t i c
East North Central

2
4
94

West North Central
South A t l a n t i c
East &outh Central
West South Central
Mountain
Pacific
Total

1

1
39

1
1
11

14-5
35
25

45
15
8

9
3
1

75
17
12

53
45
17

37
26
10

4
1

14
15
5

1

420

181

31

179

29

—

—

2
39

—

5
16
—

4
2

Banks not on the Federal Reserve Par L i s t .
On December 31* 1935, t h e r e were 2,553 nonmember commercial banks
with d e p o s i t s o f v7A3,000,000 t h a t were not on the Federal Reserve par
list.

The banKs not on the par l i s t represented approximately 30 percent

o f the number but o n l y 13 percent o f the d e p o s i t s o f a l l nonmember comm e r c i a l banks.

The Boston, New York, P h i l a d e l p h i a and Cleveland

Federal

Reserve d i s t r i c t s did not contain a s i n g l e bank not on the par l i s t ,




and

-

25

-

i n the other 8 d i s t r i c t s 1 / i t was found that the banks not on the par l i s t
were concentrated i n the Southeastern part o f the country and i n a few
North Central S t a t e s , as shown below:

State

Number o f nonmember banks
T o t a l in State

Hot on par l i s t

North Carolina
South Carolina
Georgia
Florida

160
80
198
95

144
75
188
78

Tennessee
Alabama
Mississippi
Arkansas

245
129
181
164

178
124
174
99

Louisiana
North Dakota
South Dakota
Nebraska

116
137
124
291

104
133
100
157

Minnesota
Wisconsin

465
487

392
164

2,872

2,110

T o t a l , 15 other S t a t e s 3,921

443

T o t a l , 14 States

l / D u r i n g 1936 a number o f n a t i o n a l banks in the Minneapolis Federal Reserve
d i s t r i c t have converted i n t o State banks and have withdrawn from the
par l i s t .
I n t h i s connection the f o l l o w i n g excerpt i s taken from a
r e p o r t o f Mr. Preston o f the Minneapolis Federal Reserve Bank, submitted
t o the Board with Mr, P e y t o n ' s l e t t e r o f October 24, 1936:




"A l a r g e number o f n a t i o n a l banks v i s i t e d i n d i c a t e d that they were g i v ing s e r i o u s c o n s i d e r a t i o n t o surrendering t h e i r n a t i o n a l c h a r t e r s and
o p e r a t i n g as s t a t e i n s t i t u t i o n s , thereby p e r m i t t i n g them to i n c r e a s e
t h e i r earnings through the revenue derived from exchange.
This exchange
s i t u a t i o n i s a s e r i o u s one i n our d i s t r i c t , and I am s a t i s f i e d beyond a
reasonable doubt that we have very l i t t l e chance o f o b t a i n i n g any new
s t a t e members and that many n a t i o n a l banks w i l l e v e n t u a l l y surrender
t h e i r charters f o r conversion i n t o s t a t e i n s t i t u t i o n s .
Now i f a l l banks
were permitted t o make an exchange charge, or i f a n a t i o n - w i d e arrangement could be d e v i s e d whereby the m a k e r 1 s a c c o u n t would be charged on a
uniform basis o f , say, 10^ a hundred d o l l a r s , when checks were issued and
transmitted out o f i t s trade t e r r i t o r y , that we would e x p e r i e n c e l i t t l e
d i f f i c u l t y i n b r i n g i n g i n t o the System v i r t u a l l y a l l the State banks that
could q u a l i f y .
I have o f t e n wondered, whether the s u p e r v i s i n g a u t h o r i t i e s
at Washington are f u l l y cognizant o f t h i s exchange s i t u a t i o n as i t e x i s t s i n the Ninth D i s t r i c t and the n e c e s s i t y f o r c o r r e c t i v e l e g i s l a t i o n .

26

By s i z e o f d e p o s i t s .

The c l a s s i f i c a t i o n o f banks not on the par

l i s t by s i z e o f banks showed t h a t the bonks were even smaller than the
average nonmember banK.

The average d e p o s i t s of nonmember banKs were

on December 31, 1935, comnored with average d e p o s i t s of banks not

$727,000

on the par l i s t of 0309,000.

1,590 o f the 2,?5;j baiks not on the par l i s t

had d e p o s i t s of l e s s than ^250,000 and 2,190 had d e p o s i t s o f l e s s than
$500,000.

The c o n c e n t r a t i o n of the non-par banks i n the small s i z e groups

i s shown i n the f o l l o w i n g t a b l e :
Deposits
( i n thousands o f d o l l a r s )
Banks
All no;iUv..:b-.r Banks A l l nonnember
not on
cor.r,ercial
not on
comerci il
par l i s t
b -inks
par l i s t
banks
Hunb-r o f banks

Size group -

deposits

Under ..1:0,000
150,000-250,000
250,000-500,000

2,237
1,734
2,098

988
602
600

209,063
338,494
734,549

89,443
116,852
206,218

500,000-1,000,000
1,000,000-5,000,000
5 , 0 0 0 , 0 0 0 and over

1,298
1,052
146

270
87
6

908,229
1,962,919
2,080,466

183,832
130,523
61,907

8,565

2,553

6,23

788,775

Total

Sy p o p u l a t i o n o f town.

,720

1 , 0 0 1 o f the 2,553 banks not on the par

l i s t wei\v l o c a t e d i n p l a c e s with a p o p u l a t i o n o f under 500, and 1 , 6 5 4 were,
l o c a t e d i n p l a c e s with a p o p u l a t i o n o f l e s s th<^n 1 , 0 0 0 .

By p o p u l a t i o n o f

towns i n which s i t u a t e d the non-par b oni s are d i s t r i b u t e d as f o l l o w s j




Population o f town
Under 500
500 - 1,000

Number of banks not on par l i s t

1,001
653

1,000 - 2 , 5 0 0
2,500 and o v e r

569
330

Total

2,553

Capital requirements f o r Federal Reserve membership and f o r conversion
i n t o national banKS.
Under trie terns of s e c t i o n 9 o f tne Federal Reserve A c t , as amended,
and Regulation H, t o be e l i g i b l e f o r admission to membership in the Federal
Reserve System a State bank, other than a mutual savings bank, must possess
s u f f i c i e n t c a p i t a l ! / t o entitle, i t t o becor:*. a n a t i o n a l banking a s s o c i a t i o n
i n the p l a c e where i t i s s i t u a t e d .

There are c e r t a i n exceptions t o t h i s

requirement, however, two of wnich a r e :
1. banks organized p r i o r t o June 16, 1933 (the date o f the
approval o f the Banking Act o f 1933) s i t u a t e d i n a p l a c e
the p o p u l a t i o n of which does not exceed 3,000 i n h a b i t a n t s ,
and at the time of admission having a c a p i t a l of not l e s s
than $25,000, may be admitted to membership, and
2. brinks (whether or not organized p r i o r to June 16, 1933)
situated i n a place the population o f which does not exceed
3,000 i n h a b i t a n t s , and which aia: e n t i t l e d to the b e n e f i t s o f
insurance and have a c a p i t a l o f not l e s s than $25,000, nay
be admitted to membership.
A mutual savings bonic must possess surplus and undivided p r o f i t s
o f not l e s s than the amount of c a p i t a l required f o r the o r g a n i z a t i o n o f
a n a t i o n a l bank in the place where i t i s s i t u a t e d i n order t o be e l i g i b l e
f o r membership.

1 / The word " c a p i t a l " r e f e r s to c a p i t a l stock o n l y .




-

28 -

The minimum c a p i t a l required f o r the o r g a n i z a t i o n o f a national
bonk i s as f o l l o w s :

Minimum
capital,,/

I f l o c a t e d i n a c i t y or town with a population

$50,000

Not exceeding 6,000 inhabitants
Exceeding 6,000 but not exceeding 50,000 inhabitants
Exceeding 50,000 inhabitants (except as stated below)
In an o u t l y i n g d i s t r i c t o f a c i t y with a population
exceeding 50,000 i n h a b i t a n t s ; provided State law
permits o r g a n i z a t i o n of State banks i n such l o c a t i o n with a c a p i t a l o f ^100,000 or l e s s

100,000
200,000

100,000

Banks operating branches (other than branches outside the head
o f f i c e c i t y e s t a b l i s h e d a f t e r February 25, 1927) are subject t o the sane
c a p i t a l requirements as banks operating no branches at a l l .

Banks operating

branches outside o f the head o f f i c e c i t y e s t a b l i s h e d since February 25, 1927,
are required to have $500,000 o f c a p i t a l unless they are l o c a t e d i n a State
the population of which i s l e s s than 500,000 and the l a r g e s t c i t y in which
has a population o f l e s s than 50,000, in which circumstances the minimum
c a p i t a l required i s $100,000; or i f l o c a t e d i n a State with a population o f
l e s s than 1,000,000, the l a r g e s t c i t y in which has a population o f l e s s than
100,000, the minimum c a p i t a l requirement i s $250,000,

I t i s a l s o required

that the aggregate c a p i t a l o f banks with such branches must not be l e s s than
the aggregate minimum required f o r the establishment of an equal number o f
n a t i o n a l banks situated in the various p l a c e s i n which such bank and i t s
branches are s i t u a t e d .

1 / The word " c a p i t a l " r e f e r s to c a p i t a l stock o n l y .




-

29 -

Honne::ber banks (other than mutual savings banks) with i n s u f f i c i e n t
c a p i t a l f o r Federal Reserve membership
Number of banks and t o t a l d e p o s i t s .

On December 31, 1935, 2,835

banks, other than mutual savings b a n k s ! / , with d e p o s i t s of £964,000,000
had i n s u f f i c i e n t c a p i t a l to q u a l i f y f o r Federal Reserve membership.

Of

the 2,835 banks i n e l i g i b l e f o r membership, 319 with d e p o s i t s o f #303,000,000
were operating branches outside of the head o f f i c e c i t y e s t a b l i s h e d a f t e r
February 25, 1927, and were thus s u b j e c t to higher c a p i t a l requirements
than the remaining 2,516 barucs with deposits o f $661,000,000 which were not
operating such branches.
Additional c a p i t a l required f o r Federal Reserve membership.

The

2,835 i n e l i g i b l e banks had t o t a l c a p i t a l o f -.90,000,000 on December 31,
1935.

They would have needed #187,000,000 o f a d d i t i o n a l c a p i t a l t o

q u a l i f y f o r Federal Reserve membership.

The 2,516 banks operating no

branches outside o f trie head o f f i c e c i t y established a f t e r February 25,
1927, had c a p i t a l o f $63,000,000 and they would have needed 358,000,000
o f a d d i t i o n a l c a p i t a l f o r Federal Reserve membership.

The 319 banks with

branches which were subject t o higher c a p i t a l requirements had c a p i t a l o f
#27,000,000 on December 31, 1935, and would have needed a d d i t i o n a l
o f n e a r l y $130,000,000 to q u a l i f y f o r membership.

capital

The t o t a l present cap-

i t a l and t h e ' a d d i t i o n a l c a p i t a l required by the i n e l i g i b l e banks f o r
Federal Reserve membership are tabulated below:
1 / On December 31, 1935, 37 o f the 567 mutual savings banks i n operation had
i n s u f f i c i e n t surplus and undivided p r o f i t s to q u a l i f y f o r Federal Reserve
membership. The 37 banks not e l i g i b l e f o r Federal Reserve membership had
surplus and undivided p r o f i t s o f 1.52,592,000 on that date and they would
have needed a d d i t i o n a l c a p i t a l funds of <'2,863,000 t o q u a l i f y f o r membership.




-

30

-

M d i t i o n a l capi t a1
required f o r Federal
Reserve membership
( i n thousands o f d o l l a r s )
2,516 banks o p e r a t i n g no
branches o u t s i d e the head
o f f i c e c i t y established
a f t e r February 25, 1927

63,003

319 banks operating one or
more branches o u t s i d e "the
heaa o f f i c e c i t y e s t a b l i s h e d
a f t e r February 25, 1927

26,970

129,830

89,973

187,AO2

T o t a l , 2,835 banks

Ratio o f c a p i t a l t o d e p o s i t s .

57,572

The 2,835 banks with i n s u f f i c i e n t

c a p i t a l t o q u a l i f y f o r Federal Reserve membership on December 3 1 , 1935,
had a r a t i o o f c a p i t a l to d e p o s i t s of 9 . 3 percent and a r a t i o o f t o t a l
and r e s e r v e s )
account ( c a p i t a l , surplus, nv

capital

undivided p r o f i t s / t o d e p o s i t s o f 15.5 p e r c e n t .

I f the c a p i t a l of these banks was increased to the minimum c a p i t a l required
f o r membership they would have a r a t i o o f c a p i t a l t o d e p o s i t s o f 2 8 . 7 p e r cent.

Because o f the higher c a p i t a l requirements f o r banks o p e r a t i n g

branches o u t s i d e the head o f f i c e c i t y e s t a b l i s h e d a f t e r February 25, 1927,
the minimum c a p i t a l required f o r Federal Reserve membership would provide
a r a t i o o f c a p i t a l t o d e p o s i t s f o r these banks o f 51.8 p e r c e n t .
r a t i o s are summarized i n the f o l l o w i n g t a b l e :




These

-

31 -

Ratio t o t o t a l d e p o s i t s of —
Minimum c a p i t a l
Total
Present
required f o r
capital
capital
membership
account
2,516 banks o p e r a t i n g no branches
o u t s i d e the head o f f i c e c i t y
e s t a b l i s h e d a f t e r Feb.25,1927

9.5%

319 banks operating one o r more
branches o u t s i d e the head
o f f i c e c i t y established after
February 25, 1927

8.9

13.7

51.8

9.3

15.5

28.7

T o t a l , 2,835 banks

By s i z e o f c a p i t a l

stock.

18.2%

From the f o l l o w i n g t a b l e

i t w i l l be see:

that 1,920 o f the 2 , 8 3 5 nonmember banks, o t h e r than, mutual savings banks,
with i n s u f f i c i e n t c a p i t a l f o r Federal Reserve membership on December 31,
1935, were banics with c a p i t a l o f

Banks with c a p i t a l
stock of —

Under #25,000
25,000 - 50,000
50,000-100,000
100,000-20(7,00,0 ^
200,000 ana over




Total

l e s :3 th,m ^25,000i

Number o f nonmember banks
Banks o p e r a t i n g
Bonks o p e r a t i n g
no branches o u t - one o r more branches
side the head
o u t s i d e the head o f Total
office city
f i c e c i t y established
e s t a b l i s h e d a f t e r a f t e r Feb. 25, 1927
Feb. 25,1927
i
1,920
1,898
22
260
359
99
351
176
29
2,835

255
103
—

2,516

96
73
29
319

By s i z e o f d e p o s i t s .

32

-

1,34-5 o f the 2,835 banks not e l i g i b l e

for

membership on December 31, 1935 because o f i n s u f f i c i e n t c a p i t a l had t o t a l
d e p o s i t s o f l e s s than $150,000 and 2,346 o f the banks had d e p o s i t s o f
l e s s than $500,000.

By s i z e o f d e p o s i t s the banks are d i s t r i b u t e d as

follows i

Banks with t o t a l
deposits of —

Number o f nonmember banks
Banks o p e r a t i n g no Banks operating one
branches o u t s i d e
o r more branches outthe head o f f i c e
s i d e the head o f f i c e
Total
c i t y established
c i t y established
a f t e r Feb.25,1927 a f t e r Feb. 25, 1927
1,3^5
521
480

1,340
477
393

5
44
87

284
162
43

190
97
19

94
65
24

2,835

Under ^150,000
150,000-250,000
250,000-500,000

2,516

319

500,000-1,000,000
1,000,000-2,000,000
2 , 0 0 0 , 0 0 0 and over
Total

By p o p u l a t i o n o f c i t y .

The f o l l o w i n g t a b l e shows that 1,851 o f the

2,835 i n e l i g i b l e banxs were l o c a t e d i n p l a c e s with a p o p u l a t i o n o f l e s s than
1,000 and 2,073 were l o c a t e d i n p l a c e s with a p o p u l a t i o n of l e s s than 3 , 0 0 0 :

Population o f

Under 1,000
1,000-3,000
3,000-6,000
6,000-50,000
50,000 and over




Total

city

Total

Number of nonmember banks
Banks o p e r a t i n g no Banks operating one
branches o u t s i d e
or more branches outthe head o f f i c e
s i d e the head o f f i c e
c i t y established
c i t y established
a f t e r Feb. 25,1927 a f t e r Feb. 25, 1927

1,851
222

1,773
154

78
68

187
288
287

143
2.43
2.03

44
45
84

2,835

2,516

319

By S t a t e s .

2,1^5 o f the 2,835 banks with i n s u f f i c i e n t

capital

f o r Federal Reserve membership were l o c a t e d i n the 15 States named i n the
t a b l e below.

I t w i l l be noted that Kansas, M i s s o u r i , Minnesota, and Iowa

each had more than 200 banks with i n s u f f i c i e n t c a p i t a l on December 31,
1935, t o q u a l i f y f o r Federal Reserve membership.

State

Number
of
banks

Additional capital
required f o r Federal
Reserve mem bership
( i n thousands o f e . o l l a r s )
5,764
6,236
5,728
5,897
4,844
5,356
Present
capital

Kansas
Missouri
Minnesota

321
284
264

Iowa
Kentucky
Oklahoma

211
136
138

7,116
3,078
2,356

43,909
5,722
2,544

Wisconsin
Nebraska
Tennessee

130
115
112

6,225
2,100
2,549

26,950
2,200
5,351

Texas
Illinois
Mississippi

94
75
68

2,119
2,342
2,286

1,481
1,583
7,0l4

Georgia
Indiana
Michigan

67
65
63

1,719
4,098
1,278

1,831
11,402
3,122

2,145

54,586

129,614

690

35,387

57,788

2,835

89,973

187,402

T o t a l , 1$ States
T o t a l , 33 other S t a t e s
T o t a l , United States




-

34

-

Banks o p e r a t i n g branches, by S t a t e s .

The 319 branch banks s u b j e c t

to higher c a p i t a l requirements f o r Federal Reserve membership were l o c a t e d
p r i n c i p a l l y i n seven S t a t e s , Iowa, Wisconsin, North Carolina,
V i r g i n i a , M i s s i s s i p p i and Louisiana.

Indiana,

The f o l l o w i n g t a b l e shows that the

24-5 branch banks i n the seven States needed more than e 1 0 0 , 0 0 0 , 0 0 0 o f
a d d i t i o n a l c a p i t a l t o q u a l i f y f o r Federal Reserve membership under present
law.

State

Umber
of
banxs

Additional c a m t a l
required f o r Federal
Reserve membership
(In.thousands o f d o l l a r s )
4,570
41,930
4,175
25,325
3,995
9,955

Present
capital

Iowa
Wiscousin
North Carolina

93
59
27

Indiana
Virginia
Mississippi
Louisiana

21
20
15
10

1,652
1,860
1,213
1,312

8,848
8,140
6,287
3,688

2-45

18,777

104,173

74

8,193

25,657




Total, 7 states
T o t a l , 19 o t h e r stats;s
T o t a l , United States

319

26,970

129,830

-

35

-

Banks with i n s u f f i c i e n t c a p i t a l f o r conversion i n t o n a t i o n a l banks.
Number o f banks and t o t a l d e p o s i t s .

On December 31, 1935, 5,963

banks, e x c l u s i v e o f mutual savings baiucs, with d e p o s i t s o f

^1,731,420,

o p e r a t i n g i n the United S t a t e s , had i n s u f f i c i e n t c a p i t a l f o r
i n t o n a t i o n a l banks.

These banks are c l a s s i f i e d as f o l l o w s :

Classes o f banks
State member banks
Nonmember banks:
With s u f f i c i e n t c a p i t a l f o r
Federal Reserve membership
but not f o r c o n v e r s i o n i n t o
n a t i o n a l banks
With i n s u f f i c i e n t c a p i t a l f o r
Federal Reserve membership o r
f o r conversion i n t o
n a t i o n a l banks




Total

conversion

Number
of
bank's

Deposits
( i n thousands
of d o l l a r s )

237

82,524

2,891

685,193

2,835

963,703

5,963

1,731,420

-

36

-

Additional c a p i t a l required f o r conversion i n t o n a t i o n a l banks.
As may be seen from the f o l l o w i n g t a b l e , the 5,963 banks would have needed
£252,697,000 o f a d d i t i o n a l c a p i t a l f o r conversion i n t o n a t i o n a l banks.

The

t o t a l c a p i t a l o f the banks on December 31, 1935, amounted t o $181,703,000
d i v i d e d between S t a t e member banks and nonmember banks as f o l l o w s !

Classes of banks

237 State member banks
Nonmember banks t
2 , 8 9 1 banks with s u f f i c i e n t
c a p i t a l f o r Federal Reserve membership
2,516 banKS o p e r a t i n g no
branches o u t s i d e the head
o f f i c e c i t y established
a f t e r Feb, 25, 1927 with
insufficient capital for
Federal Reserve membership
or f o r conversion into
n a t i o n a l banks
319 banks o p e r a t i n g branches
o u t s i d e the head o f f i c e
c i t y e s t a b l i s h e d a f t e r Feb.
2 5 , 1927 with i n s u f f i c i e n t
c a p i t a l f o r Federal Reserve
membership o r f o r conversion
i n t o n a t i o n a l banks
T o t a l , 5,963 banks

Additional capital
required f o r conversion
i n t o n a t i o n a l banks
(In thousands o f d o l l a r s )
Present
capital

7,426

5,074

84,304

60,2.46

63,003

57,572

26,970

12.9,830

181,703

252,722

The 319 nonmember batiks o p e r a t i n g brandies o u t s i d e o f the head
o f f i c e c i t y e s t a b l i s h e d a f t e r February 25, 1927, were d e f i c i e n t more than
^129,830,000 o f c a p i t a l f o r conversion ana the 5,643 banks without such
branches were short #122,892,000 o f c a p i t a l f o r




conversion.

-

37

-

Ratio ox c a p i t a l t o d e p o s i t s .

Tne 5,963 banks with i n s u f f i c i e n t

c a p i t a l f o r c o n v e r s i o n i n t o n a t i o n a l banics had a r a t i o o f c a p i t a l to
d e p o s i t s o f 10.5 percent and a r a t i o o f t o t a l c a o i t a l account
and r e s e r v e s )
surplus,.

undivided p r o f i t s / t o d e p o s i t s o f 1 6 . 5 p e r c e n t .

(capital,
I f the c a p i t a l

o f these banks was increased t o the minimum c a p i t a l required f o r membership the
banks.,

would have a r a t i o o f c a p i t a l to d e p o s i t s o f 2 5 . 5 p e r c e n t .

r a t i o s are summarized i n tne f o l l o w i n g

Classes o f banks

These

table:

Ratio t o t o t a l d e p o s i t s o f
Minimum
Total
Present
required
capital
capital
version
account
national

—
capital
for coninto
banks

237 State member banks

14.8 %

5,726 nonmember banks

10.6

25.6

16.6

10.5

16.5

25.1

T o t a l , 5,963 banks

9.0J6

15.1 %

In the case o f banks operating branches o u t s i d e the head o f f i c e
c i t y e s t a b l i s h e d a f t e r February 25, 1927, the r a t i o o f minimum c a p i t a l
r e q u i r e d f o r conversion i n t o n a t i o n a l ounits t o t o t a l d e p o s i t s o f tne banks
on December 31, 1935, woule amount t o more than 50 p e r c e n t .




By s i z e o f c a p i t a l s t o c k .

40

-

The d i s t r i b u t i o n o f trie 5,963 banks

with i n s u f f i c i e n t c a p i t a l on December 31, 1935 f o r conversion i n t o n a t i o n a l
banks shows that 1,92.0 o f trie banks had c a p i t a l o f ler.* than "'25,000 and
3,473 had c a p i t a l o f from ..-25,000 t o $50,000.

Included i n the 3,473 banks

with c a p i t a l o f from 025,000 to ."350,000 are 2,891 that had s u f f i c i e n t
c a p i t a l f o r Federal Reserve membership but lacked s u f f i c i e n t c a p i t a l f o r
conversion i n t o n a t i o n a l banks.

These f i g u r e s are summarized i n the f o l -

lowing t a b l e s

Banks with c a p i t a l
stock o f —
Under -.15,000

15,000-25,000

25,000-50,000

50,000-100,000

100,000-200,000

200,000 and over
Total

Number o f banks
State member
banks

Total
721
1,199
3,473

223

363

12

178
29

5,963

Nonmember
banks
721
1+199
*3,250
351

2

176

2.37

*5,726

--

29

* 2 , 8 9 1 o f these baiucs had s u f f i c i e n t c a p i t a l on December 3 1 , 1935, f o r
Federal Reserve membership but not f o r c o n v e r s i o n i n t o n a t i o n a l bariKP.




By s i z e o f d e p o s i t s ,

39 -

2,196 o f the 5,963 banks with i n s u f f i c i e n t

c a p i t a l on December 31, 1935 f o r conversion i n t o n a t i o n a l banks had t o t a l
d e p o s i t s of l e s s than ^150,000, and 5,276 o f these banks ha^ d e p o s i t s o f
l e s s than £>500,000*

The banks are d i s t r i b u t e d by s i z e o f d e p o s i t s as

follows:

Banks with d e p o s i t s o f

--

Number o f banks
State member J Nonmember
Total
1 banks
bunks

Under #150,000
150,000-250,000

2,196
1,599

33
64

2,163
1,535

250,000-500,000
500,000-1,000,000
1 , 0 0 0 , 0 0 0 and over

1/81
471
216

95
40
5

1,386
431
211

5,963

237

5,726

Tot.il

By p o p u l a t i o n o f c i t y ,

4,04-2 o f the 5,963 banks with i n s u f f i c i e n t

c a p i t a l f o r conversion i n t o n a t i o n a l banks were l o c a t e d i n p l a c e s with a
p o p u l a t i o n o f l e s s than 1,000*

By population o f c i t i e s i n which l o c a t e d ,

the 5,963 banks ar~ d i s t r i b u t e d as f o l l o w s ;

Population o f
Under 1,000
1,000-3,000
3,000-6,000
6,000-50,000
50,000 and overTotal

city

Number of banks
State member Nonmember
Total
banks
banks
4,042
1,147
190

130
95
3

3,912
1,052
187

295
289

r?
t
2

288
287

5,963

237

*5,726

"*The 2,891 banks with s u f f i c i e n t c a p i t a l f o r Federal Reserve membership but not
f o r conversion i n t o nation ,1 banks were d i s t r i b u t e d as f o l l o w s :
2,061 i n
p l a c e s with p o p u l a t i o n o f l e ^ s than 1,000 and 830 i n p l a c e s with a
p o p u l a t i o n o f 1,000 t o 3,000.




~
By S t a t e s .

4o

~

The banks with i n s u f f i c i e n t c a p i t a l on D-eenber 31,

1935, f o r conversion i n t o n a t i o n a l banks ?/ere concentrated p r i n c i p a l l y in
the East North Central and West North Central S t a t e s — 4,346 o f the 5,963
banks were s i t u a t e d i n 15 S t a t e s , as shown by the f o l l o w i n g

Number
of
banks

State

table:

Additional capital
required f o r c o n version into nati o n a l banks
(In thousands o f d o l l a r s )
Present
capital

Kansas
Missouri
Iowa

474
466
436

10,476
10,976
13,191

9,174
9,749
49,134

Minnesota
Illinois
Nebraska

431
304
276

10,124
8 , 9 45
6,465

8,426
6,630
5,885

Wisconsin
Texas
Indiana

273
255
250

10,914
7,142
10,081

29,411
4,558
14,669

Kentucky
Michigan
Ohio

237
213
204

5,946
7,509
7,894

7,804
8,191
6,856

Tennessee
Oklahoma
Georgia

192
181
154

4 , 8 43
3,471
4,171

7,057
3,579
3,729

T o t a l , 15 S t a t e s

4,346

122,148

174,852

T o t a l , 34 oth'..r S t a t e s ^ /

1,617

59,555

77,870

5,963

181,703

252,722

Total,United

States

1 / Including the D i s t r i c t o f




Columbia.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102