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For release on delivery 10:00 a.m . EDT October 5, 1993 Statement by John P. LaWare Member, Board of Governors of the Federal Reserve System before the Committee on Banking, Housing and Urban Affairs United States Senate October 5, 1993 I am pleased to appear on behalf of the Federal Reserve Board to discuss the interstate banking and insurance provisions of S. 543 as approved by the Senate in 1991. For many years, the Board has believed that full interstate banking would benefit bank customers and lead to a stronger and safer banking system, and it has supported the thrust of various legislative initiatives to accomplish that goal. Similarly, the Board has long been on record in support of legislation to update the nation's banking statutes to allow banks to adapt to changes in the financial services marketplace and to better serve consumers. In this context, we have consistently supported the provision of insurance activities by banks and bank holding companies. Thus, we support the provisions of S. 543 which would permit national banks to engage in insurance agency activities permissible for state banks, but oppose other provisions which limit bank insurance activities. This morning, in addition to making some specific comments about the 1991 legislation, I would like to explain the reasons for our support of interstate banking and provide information about the current status of interstate activities. To assist the Committee in its deliberations, the appendices to my statement provide an up-to-date summary of state laws regarding interstate banking, a discussion of recent trends, and several statistical tables providing information relevant to the issue. 2 Nationwide Banking It is perhaps best to start with the observation that interstate banking is now a reality and has been for some time. For years, banks — both domestic and foreign — have maintained loan production offices outside of their home states, have issued credit cards nationally, have made loans from their head offices to borrowers around the nation and the world, have solicited deposits throughout the country, have engaged in a trust business for customers domiciled outside the banks' local markets and — through bank holding companies — have operated mortgage banking, consumer finance, and similar affiliates without geographic restraint. Since the early 1980s, moreover, individual states have modified their statutes to permit — under the Douglas Amendment to the Bank Holding Company Act — out-of-state bank holding companies to own banks within their jurisdiction. Indeed, today only Hawaii prohibits bank ownership by out-of-state bank holding companies. While state legislatures have supported interstate banking, and while over one-fifth of domestic banking assets are already held in banks controlled by out-of-state bank holding companies, the Board believes that there is a need for congressional action. Our dual banking system has a desirable genius for resisting government-imposed uniformity, but the large number of significant differences among the states impedes the 3 interstate delivery of services to the public, and reduces the efficiency of the banking business. The differences in state laws are discussed in the first appendix to this statement, but notable examples include restrictions on the home state of banking organizations allowed to enter some states, reciprocity requirements in some other states, the prohibition of de novo entry, and variable caps on the deposit shares of new entrants in still other states. they accept — In short, the states have made clear that and perhaps prefer — interstate banking, and their legislatures have made interstate banking a substantial reality today, but actions at the state level have resulted in a hodgepodge of laws and regulations that permit interstate banking, but in an inefficient and high cost manner. Restrictions on both intra- and interstate banking were imposed in an era in which commercial banks were the dominant provider of financial services to households and businesses. These restrictions were clearly intended to limit competition and thereby insulate local banks from market pressures. Over time, branching and other geographic restraints became part of the totality of regulations designed to protect bank profits through limitations on entry and deposit rate competition. In recent years, however, banks have seen their market position eroded by nonbank providers of financial services that are not subject to bank-like regulation. Indeed, the unwinding of the historically protected position of banks, such as the removal of deposit rate ceilings, has proceeded on most fronts as a lagged response to market developments that had themselves been encouraged by those same restraints on banks. Attempts to maintain antiquated geographic restrictions will only protect inefficient banks, disadvantage users of bank services, particularly those like small businesses that still have relatively few alternative sources of credit, encourage the entry of less regulated nonbank competitors, and increase the potential stress on the safety net as the long-run viability of banks is undermined. Action to provide more uniform rules for interstate banking would provide several public benefits. First, reducing obsolete barriers to entry would increase actual and potential competition in the provision of financial services to those customers that for one reason or another, have, at best, very limited access to out-of-market banks, nonbank lenders, or the securities markets. Bank customers would benefit from the resulting lower prices for credit, higher rates on their deposits, and improved quality and easier access to banking and related services. In addition, a significant proportion of our citizens 'ive in areas where state borders intersect; interstate banking would provide households and businesses in these regions with significantly increased convenience in conducting their banking business. 5 Second, greater opportunities for geographic diversification through interstate banking could help to restore a level of stability to the banking system that once was accomplished, in part, through protection of local banks from competition. While increased competition from nonbanks has undermined the protection intended to be provided to banks through controlled entry and geographic constraints, those same restrictions have made it more difficult for banks to diversify their risks and seek out new opportunities. Thus, many banks operating in a region that has experienced a local economic contraction have been neither protected by limits on bank competition nor able to avoid the disastrous impacts of dependence on one market for both deposits and loans. Being able to cushion losses in one region with earnings in others would make banks better able to contribute to the recovery of their local economy, and more diversified banks would expose the federal safety net to fewer losses. Clearly, greater geographic diversification would have provided more stability over the last decade to banks operating in the agricultural areas of the Midwest, the oil patch of the Southwest, and the high-tech and defense regions of New England and California. In short, the elimination of geographic restraints would provide an important tool in diversifying individual bank risk, providing for stability of the banking system, and improving the flow of credit to local economies under duress. 6 Third, interstate banking would facilitate the allocation of resources to regions that offer both safety and higher return and assist in the reduction of excess banking capacity. The U.S. will continue to be a dynamic economy with both expanding and declining industries and expanding and temporarily declining regions. Banks pinned by artificial geographic restrictions to local areas experiencing difficulties have no choice but to pull in their horns, as it were, to protect their own viability. Only through interbank credit extensions and loan participations can they diversify their portfolio and make loans to borrowers unaffected by the depressed local economy. In fact, many of these institutions no doubt tend to have lower loan-to-deposit ratios in part because of their inability to find bankable local credits. Note that, given banks' long-run interest in geographic diversification, banking offices would still remain in regions experiencing difficulty, but would be in a stronger position to finance local expansion when growth opportunities return. Comments on S. 543 The benefits from removal of restrictions on geographic expansion could occur through either the acquisition or de novo chartering of bank subsidiaries of bank holding companies headquartered in another state, or through the establishment of branches of a bank in another state. All of the interstate 7 banking laws enacted by the states provide for interstate banking through bank subsidiaries of bank holding companies, although some states permit interstate banking through branches for state nonmember banks. S. 543 would authorize interstate banking on a nationwide basis through the acquisition of existing banks one year after enactment. The Board strongly supports such statutory change and would recommend that the Congress authorize the interstate acquisition of de novo banks as well. Authorizing de novo banking should enhance competition in many markets, although we recognize that most expansion would occur through acquisition. The Board also supports removing entirely the McFadden Act's restrictions on interstate branching for national and state member banks. This would permit banking organizations to choose between alternative combinations of subsidiary banks and branches in the manner that best balances their own perceived costs and benefits. S. 543 takes the intermediate step of requiring the states to individually authorize interstate branching outside of the holding company structure. The Board believes that the positive experience with interstate banking, and the efficiencies that can be gained by some institutions through branching, provide a compelling case for authorizing interstate branching without further delay. Moreover, this cautious approach to branching could put independent banks at a competitive disadvantage in branching against banks in holding companies. 8 A limited number of studies comparing the costs of operating an interstate banking network to the costs of operating a branching system have been done. Those studies suggest that, on average, both delivery systems have about the same cost structure. However, this finding is not inconsistent with the view that for some banks branching may have the lowest cost structure. Indeed, as a matter of logic, the Board believes that the cost savings from elimination of separate boards of directors, separate management teams, and separate capitalization for banks that could be branches would be significant for some organizations. In any event, we believe that no good public policy purpose is served by restraining the freedom of choice of individual banking organizations that know best what is the least cost operating structure for them. We therefore support the provision of S. 543 that would permit interstate banking offices to be converted to branches, should a banking organization choose to do so. We also support the bill's approach of extending interstate branching powers only to those banks that are at least adequately capitalized and adequately managed (which we assume means having acceptable supervisory ratings). In the Board's testimony during the drafting of and debate about FDICIA, the Board supported the principle of expanded activities only for strongly capitalized banks. In drafting recent regulations, the banking agencies have attempted, where possible, to apply this 9 principle. A policy that rewards stronger banks is a desirable supplement to the regulatory limits imposed on weaker banks. Provisions authorizing the regulators to approve interstate combinations to improve the financial condition of critically undercapitalized bank holding companies are also desirable. State supervisors would no doubt prefer interstate operations through separate banks in each state, since it is much easier for them to supervise the activities of a single organization in their jurisdiction. It seems to the Board, however, that the criterion of ease of regulation for states is only one part of a broader cost-benefit test. So long as safety and soundness are not compromised, efficiency and least cost are far more important factors on which to base policy. We support the solution to this problem proposed in S. 543. As we understand it, the state in which branches of an out-of-state bank operates would negotiate a supervisory agreement with the bank's home state supervisor that is acceptable to both states and to the relevant primary federal regulator. Failure to reach agreement would require the primary federal supervisor to conduct examinations without deferring to the state authorities. Such an approach creates desirable incentives for the states to reach reasonable accord. When interstate banking is implemented through bank subsidiaries, the bank in each state has all the powers that go 10 with its charter — national or state. However, should interstate banking occur through branches, legislation must clarify whether those branches must limit their activities to those permitted to banks chartered in their host state, to activities permitted to banks in their home states, or — national and/or state banks — banks. for to the powers granted to national The issue of the powers that interstate branches should be permitted to exercise requires balancing a number of competing concerns, including preserving the dual banking system and creating incentives that could make certain types of bank charters more attractive than others. We read the Senate bill as attempting the balance by providing that interstate branches of state-chartered banks may not engage in any activities in the host state that are not permitted for banks chartered by the host state, while national banks would retain the same powers in all states. Under the bill, out-of-state branches of national banks would be subject to the same state laws governing intrastate branching, consumer protection, fair lending and community reinvestment as apply to national banks headquartered in that state. I should note also that the Board supports permitting foreign banks to establish and operate interstate branches on the same terms and conditions as apply to national and state banks. The Board believes that the provisions of S. 543 that prohibit foreign banks from opening new interstate branches except through 11 an insured subsidiary bank are not consistent with the principle of national treatment and should be reviewed to assure that foreign banks receive parity of treatment in their interstate operations. Whether interstate banking is achieved through bank subsidiaries, bank branches, or both, and regardless of how powers are exported from the home state to the branching host state, the arguments used by those that oppose interstate banking must be carefully reviewed. The first concern is that interstate banking would result in undue concentration — and lower deposit rates — and ultimately higher loan rates as large out-of-state banks drive small in-state banks out of business. In-state market evidence simply does not support this contention. All of the relevant evidence indicates that small banks generally survive entry by large out-of-market banks, and are very frequently more profitable than the entrant. Similar evidence indicates that new large bank entrants to local markets, whether by de novo or by acquisition, are able to expand market share by only modest amounts, if at all. In the 1970s, for example, when state-wide branching was authorized in New York State, a number of large New York City banks sought an upstate presence by acquiring small banks in 12 these markets. By the early 1980s, the acquired banks had gained on average less than one percentage point in market share, with the largest gain less than three percentage points. The acquired banks or branches continue to have small market shares or they have been sold to local banks, as the New York City banks have exited the market. Experience in California also illustrates the ability of small banks to remain viable in the face of competition from much larger organizations. California has permitted unrestricted statewide branching since 1927 and several of the state's banking organizations, most notably BankAmerica, have operated extensive branch networks for years. In spite of these extensive branch banks, California continues to have many successful independent banking organizations. For example, as of year-end 1992, there were 395 banking organizations in California of which 101 had less than $50 million in assets. Interestingly, in the period 1981 through 1991, some 311 de novo banks (almost 11 percent of the U.S. total of de novo banks formed in those years) began operation in this unlimited branching state. In addition to their difficulties in winning customers away from existing banks, entrants by acquisition often are soon confronted with competition from a de novo bank organized by local citizens, at times led by the former managers of the bank acquired. The potential for entry — both de novo and by acquisitions by other banks outside the market — plus evidence of continued small bank success, suggest it is unlikely that 13 there would be consumer harm from interstate banking. It is well to remember that since 1979, while over 5,000 banks were absorbed by merger, about 3,500 new banks were chartered. In addition, while almost 10,500 branches were closed, 24,000 new ones were opened in that period. The vast majority of local banking markets in the United States are incredibly dynamic and sensitive to consumer demand, and interstate banking seems likely to make them more so. The concern that interstate banking would lead to excessive concentration in local banking markets is mitigated further by the fact that antitrust enforcement in banking focuses on maintaining competitive local markets. As indicated by appendix table B-7, concentration ratios have not increased in local markets despite the substantial overall consolidation in banking in recent years. Local competition has been maintained in part because many bank mergers have been between firms operating in different local markets. In addition, increased concentration has been avoided by factors already noted: the antitrust laws, limited ability of new large banks to increase market share, and the continued vitality of small local competitors. The importance of local markets and the evidence of little change in local market concentration suggest that attempts to ensure competition through statewide or national deposit caps are unnecessary at best and may, in fact, be anticompetitive to the extent that they prohibit entry. The Board would recommend 14 deletion of the imposition of statewide and national deposit share caps. Another concern of some is that new entrants will vacuum up local deposits and channel them to out-of-market loans, or that managers brought into local markets will be insensitive to, or have no authority to adjust to, local demands. However, it is important to recall that an insured bank must fulfill its Community Reinvestment Act (CRA) responsibilities in all the markets in which it operates. Moreover, the ease of entry, just discussed, should soften concerns that out-of-market entrants will ignore local customers. If a local branch does not meet both the deposit needs and credit demands of the community, it will not succeed and it will attract a rival that will. In this context, the Board sees no need for the provisions of S. 543 which would require the promulgation of regulations prohibiting the establishment of branches for the purposes of deposit production. However, because the Board realizes that the expansion of nationwide banking raises a number of issues regarding the impact on local community credit needs, it supports provisions of S. 543 which would amend CRA to require that performance of interstate institutions be assessed on a statewide or metropolitan area basis. This approach would maintain the concept embodied in CRA that insured banks should be evaluated on 15 overall performance without imposing arbitrary or costly regulatory requirements at the level of the individual branch and would, in the Board's view, provide adequate information to determine that an interstate institution is meeting community needs in the markets it serves. Finally, in considering the needs of local markets, Congress should consider the fact that large banks have higher loan-to-deposit ratios than small banks. This implies that large banks entering new markets could make both more in-market loans and more out-of-market loans. Many assume that most of the loans would, in fact, be made outside the community. However, as I noted, banks must both meet their CRA requirements and service their customers in order to remain competitive in the market. It should also be kept in mind that small, independent banks also export funds: they are relatively large lenders to other banks through the federal funds and correspondent deposit markets, and purchase relatively more Treasury and out-of-market state and local bonds than large banks. Limitations on Bank Insurance Activities The Committee has also requested the Board's views of the insurance provisions included in S. 543 as approved on the Senate floor. S. 543 would permit national banks to engage in insurance agency activities in states that permit state chartered 16 banks to conduct these activities. In these states, national banks would be subject to the same rules and limitations that govern state banks that conduct insurance agency activities. The bill would also prohibit any banking organization— state or national— located in a state that authorizes banks to sell insurance from selling insurance in another state unless that state also had authorized the sale of insurance by banking organizations. Another provision of the bill would restrict the authority of national banks to sell insurance in small towns where the state has not otherwise authorized state banks to act as an insurance agent. The bill would overrule the OCC's current interpretation permitting national banks to use small towns as a base for selling insurance products broadly. Under the bill, national banks would be restricted to selling insurance to residents, businesses and workers within towns of 5,000, and within a 7.5 mile radius of these towns. An insurance provision of S. 543 that was enacted as part of the FDIC Improvement Act prohibits state banks from engaging in insurance underwriting activities other than underwriting credit related insurance. The bill retains the general prohibitions on bank holding companies selling or underwriting insurance, and does not expand the limited exceptions to these prohibitions, which currently limit bank 17 holding companies primarily to credit related insurance activities, certain grandfathered insurance activities, and insurance agency activities within small towns. The Board has consistently supported the provision of insurance agency activities by banks and bank holding companies, and believes that increased bank participation will enhance competition and improve customer convenience without adversely affecting safety and soundness. Thus, the Board sees no argument on either competitive or risk-management grounds to retain or impose limitations on insurance agency activities. A number of states already permit their state chartered banks to engage in insurance agency activities. The Board supports the bill's provisions to amend the National Bank Act to authorize national banks to conduct insurance agency activities to the same degree permitted for state banks in those states. However, the proposed limitations on existing authority to conduct insurance agency activities outside the state in which the bank is headquartered and the limitations on insurance activities in small towns promise continuation of the fractured and anti-consumer rules which currently hobble the banking industry, stifle competition and innovation, and divert resources toward legal and regulatory maneuvering. Particularly in the context of today's debate over the nature of appropriate regulation, there exists little justification for devising a 18 system of artificial controls based on the kind of statutory limits on population and geography proposed in S. 543. It is also the position of the Board that insurance underwriting activities should be authorized for banking organizations so long as the activities are conducted in a separate holding company subsidiary. While certain types of insurance underwriting activities pose more risk, those risks can be successfully managed and insulated from the deposit insurance fund through the umbrella of the holding company. The Board sees no reason to prohibit insurance underwriting activities when conducted in a holding company. In sum, the Board believes that interstate banking and branching and broader insurance authority would provide wider household and business choices at better prices. These needed reforms would also strengthen our Nation's banking system by increasing competitive efficiency, eliminating unnecessary costs associated with the delivery of services, and encouraging the reduction of risk through geographic and product diversification. * * * * A P P E N D IX A T H E STATU S O F IN T E R S T A T E B A N K I N G Federal law and regulations prior to 1956 did not prohibit multistate bank holding companies, but in floor debate on the Bank Holding Company Act of 1956 Senator Douglas introduced an amendment that still has a profound influence on the structure of the banking industry. The Douglas Amendment prohibits a bank holding company from acquiring a bank outside its home state unless the acquisition is specifically permitted by the statutes of the home state of the bank to be acquired. In 1956, no state had a statute to allow bank acquisitions by o u t-o f-s ta te bank holding companies; thus, no new multistate organizations could be formed. The Bank Holding Company Act, while effectively prohibiting new interstate banking organizations, provided grandfather rights for the existing multistate companies. They could retain their existing subsidiary banks, even though the acquisition of additional banks was not permitted. There were only 19 multistate organizations that were grandfathered in 1956. Most of the 19 were quite small, and the four largest held 86 percent of the deposits of the 19 interstate organizations. The Bank Holding Company Act of 1956 regulated only multibank holding companies. The smaller multibank, multistate organizations preferred to reorganize and give up their grandfathered multistate operating rights in order to avoid the new federal regulations being applied to multibank holding companies. Thus, over time, the number of grandfathered multistate bank holding companies decreased to seven. The option to allow bank acquisitions by o u t-o f-s ta te bank holding companies, provided to the states by the Douglas Amendment, went unused until 1975. In that year, a general revision of the M aine state banking code permitted the acquisition of Maine banks by out—o f—state bank holding companies beginning in 1978. The Maine A-l law initially required reciprocity; Massachusetts bank holding companies, for example, could only buy Maine banks if Maine bank holding companies were allowed to buy banks in Massachusetts. Because of the reciprocity requirement, no acquisitions of M aine banks were possible until other states enacted statutes allowing the acquisition of their banks by Maine bank holding companies. Other states began enacting interstate banking statutes in the early 1980s with Alaska, Massachusetts, and New York passing laws that became effective in 1982. In subsequent years, all states except Hawaii enacted some form of interstate bank holding company law. The Interstate Bank Holding Company Laws The interstate bank holding company laws passed by the states and the District of Columbia in the years 1975—1993 vary on a number of bases. Appendix table A —1 details the major provisions of the interstate banking laws of 49 states and the District of Columbia. On the federal level, the G arn —St Germain Depository Institutions Act of 1982 amended the Bank Holding Company Act of 1956 to allow for the interstate acquisition of large failed banks. Thirty—four states now provide for the acquisition of their banks by out—o f—state holding companies headquartered in any other state. Many of these states began their interstate banking period by allowing for entry from a limited list of states. Later, either at a predetermined trigger date or by subsequent legislation, the limited number of states from which entry was permitted was expanded to allow nationwide entry. However, twenty—one of those states that allow nationwide entry require reciprocal entry rights for their bank holding companies. Thus, although New York, for example, provides the potential for entry by bank holding companies headquartered in any other state, actual entry into New York is only allowed if the home state of the bank A-2 holding company allows entry by New York bank holding companies. Given that all states do not allow entry by New York holding companies, not all holding companies can enter New York. When they do allow entry from New York, they w ill simultaneously gain entry rights into New York. States that do not include a reciprocity requirement in the provisions of their interstate banking laws can be entered by bank holding companies located in any other state, regardless of the laws of that state. Except for Hawaii, the sixteen states that do not have provisions for nationwide entry allow, or in the case of Montana will allow, entry from selected states within a region that is defined in the enabling legislation. Regions are defined as areas as small as the six adjacent states and as large as 16 states and the District of Columbia. Although areas such as New England and the Southeast were initially thought of as interstate compact areas, there were no formal compacts or treaties between these states. Each state defined its region as it thought best. Only the Southeastern states remain as a somewhat cohesive unit, generally allowing entry from the other states in the region and generally excluding bank holding companies from outside the region. Even within this area, however, there are some differences between the regional definitions of the various states. A ll of the states with limited regions require reciprocity for their banking organizations. There are a variety of other conditions that have been placed on interstate banking activity as each state has crafted its own law on the subject. Montana, which has the newest legislation on the subject, can be used to illustrate some of the possible features of interstate banking legislation. First, as Appendix table A —1 indicates, Montana has a regional reciprocal law allowing entry from only seven states. Second, Montana does not allow o u t-o f-s ta te bank holding companies to acquire a charter for a de novo bank. A Montana bank must be at least six years old before it can be acquired by A-3 an out—of—state bank holding company. Although few large bank holding companies have chosen to enter new markets by forming a de novo bank, the desire to protect the franchise value of the existing bank charters has led to barriers to de novo bank formations as a means of expansion across state borders. A s a third measure, Montana, like 17 other states listed in Appendix table A —2, has placed a cap on the share of bank deposits that can be controlled by any one out—of—state organization. Often, those opposing interstate banking argue that the entering out—o f—state bank will have major operating advantages over local banks, or will use unfair competitive tactics to acquire an overwhelming share of the state’s deposits. M ontana’s law limits the market share that any one out—o f—state institution could acquire to 18 percent of the total of the state’s insured bank, thrift, and credit union deposits. Going beyond other states, Montana also limits the combined share of all out—of—state banking organizations to 49 percent of the state’s insured bank and thrift deposits. A s a fourth variation, some states designed their interstate banking laws to promote specific forms of economic activity. For example, Delaware encouraged holding companies from other states to establish Delaware banks for the purpose of issuing credit cards and processing credit card transactions. In some states, banks chartered for these specific purposes did not compete generally with the local banks, but rather concentrated on their specific functions. In spite of the various restrictive provisions initially included in interstate banking legislation, over time the laws have become more permissive. As more states allow nationwide entry, the expansion possibilities increase for bank holding companies in all states. Treating each pair of states (and the District of Columbia) as a combination, there are 2,550 possible two state pairs. For example, Alabama entry into Alaska would A -4 be one possibility and Alaska entry into Alabama would be a second, etc. A t this time, entry is permitted between 1,570 (62 percent) of the 2,550 possible state combinations. The Interstate Bank Holding Companies There are now 172 domestic multistate bank holding companies. These holding companies, as well as nine foreign bank holding companies with banks in multiple states, are listed in Appendix table A - 3 . W hile most of these are major banking organizations in terms of assets, as suggested by their average domestic deposit size of nearly $8 billion, there are 73 with less than $1 billion in domestic deposits that operate banks in two or more states. One hundred and sixteen of the 181 interstate bank holding companies have subsidiary banks in only 2 states, their home state plus one additional state. A t the other extreme, only three holding companies have bank subsidiaries in ten or more states, and two of these organizations— First Interstate Bancorp and Norwest Corporation— are among the grandfathered interstate bank holding companies that held some of their out—of—state subsidiary banks before the Bank Holding Company A ct of 1956. Thus far, only a few banking organizations, such as BankAmerica, Banc One, Citicorp, Fleet Financial, KeyCorp, and NationsBank, have made extensive use of the state interstate banking laws and have made significant progress toward becoming truly nationwide organizations. Interstate Banking Shares at the National Level The share of domestic commercial banking assets controlled by interstate bank holding companies has not expanded as rapidly as might have been expected. A s of December 31,1992, 20.81 percent of domestic commercial banking deposits were held by banks owned by o u t-o f-s ta te bank holding companies. W hile this percentage is A-5 relatively low, it began from a very low base consisting only of the seven grandfathered bank holding companies. A number of possible reasons can be advanced for the slower than expected increase of the interstate banking share of deposits. The first major reason would, most likely, be the financial problems encountered during the period by some of the largest banks. The spread of interstate banking laws coincided with significant banking system problems that left many banks that were expected to expand rapidly without the resources to grow at the anticipated rate. Second, the economic outcome of those mergers that have occurred is not generally conducive to further mergers. Although some bank holding companies are able to make repeated large acquisitions, integrate the new banks into their organization, and increase their profit rates in the process, studies of hundreds of mergers suggest that, on average, mergers do not increase the profitability or efficiency of the combined firm. Studies, over time, have not found the economies of scale that would require firms to grow larger in order to be competitive and profitable. Thus, smaller banks are not under great pressure to be acquired; they can remain independent and still be profitable. Finally, hostile takeovers are very difficult in banking. Below the top size—tier of banks, only a few have publicly traded stock. Thus, acquisitions must be negotiated in most cases. As the condition of the banking system continues to improve, additional interstate expansion can be expected. However, such expansion may still be limited by the high share price of the banking organizations that are the most attractive acquisition targets. A-6 Interstate Banking Shares at the State Level W hile the national data suggest that the progression to interstate banking has been relatively slow, the state data presented in Appendix table A —4 reveal a wide variance in the percentage of state banking assets and deposits held by o u t-o f-s ta te bank holding companies. In three states, over 70 percent of domestic banking deposits are held by banks controlled by out—of—state bank holding companies. In seven states, between 50 percent and 70 percent of deposits are under out—o f—state ownership. Twenty-eight states have o u t-o f-s ta te ownership of between 10 percent and 50 percent of state banking deposits, and in the final 13 states less than 10 percent of banking deposits are held by o u t - o f —state bank holding companies. The states in which out—o f—state bank holding companies have acquired 70 or more percent of domestic banking deposits are Maine, Nevada, and Washington. Prior to interstate banking, all had few large banking organizations, and a relatively high degree of banking concentration. Thus, only a few acquisitions by out—o f—state firms were required to bring over 70 percent of banking deposits under out—o f—state control. Another important factor explaining levels of out—o f—state ownership is bank failures. Especially in Texas, the percentage of out—o f—state ownership is due, in part, to the failure and subsequent acquisition of major banking organizations by out—o f—state bank holding companies. There are a wide variety of explanations as to why some states have very low percentages of o u t-o f-s ta te ownership. Some of these states may not be regarded as particularly attractive for entry because of low income levels or growth rates. Others states, such as New York, contain so many very large banks that it would be difficult for A-7 out—o f—state institutions to enter and acquire a large state share. Finally, some of the states have very low levels of concentration; even the acquisition of several of the largest banks could occur without transferring a large percentage of the total deposits to out—o f—state firms. Interstate Branching The likely final step in the geographic deregulation of banking is interstate branching. Historically, neither federal nor state laws have permitted general interstate branching. A few states, including Utah, New York, Rhode Island, and Massachusetts, have recently enacted laws that would permit interstate branching only for state nonmember banks, but there has been no general use of these laws yet. Over time, however, a number of interstate branches have been maintained. According to the Summary of Deposits for June 30,1992, there were 146 branches across the borders of states, territories or possessions, Most of these branches were owned by U.S. banks in the territories and possessions of the United States, or were U.S. branches of banks in the U.S. territories and possessions. Only forty—two of the branches are between states; they exist for three reasons. First, some were grandfathered from some earlier periods. Second, some were permitted as the means to resolve a failing institution problem. Third, some are branches of banks serving more than one military installation. A-8 APPENDIX A TABLE A - l IN T E R S T A T E B A N K IN G L E G IS L A T IO N B Y STA TE (AS O F O C T O B E R 1,1993) STATE L E G IS L A T IO N IN E F F E C T AREA D E PO SIT SHARE CAP Alabama Currently Reciprocal. 13 States and DC (AR, FL, G A, KY, L A , MD, MS, NC, SC, TN, TX, VA, WV, DC). No Alaska Currently National, no reciprocity. No Arizona Currently National, no reciprocity. No Arkansas Currently Reciprocal. 16 States and DC (AL, FL, G A, KS, LA , MD, MO, MS, NC, NE, OK, SC, TN, TX, VA,WV, DC). Yes California Currently National, reciprocal. No Colorado Currently National, no reciprocity. Yes Connecticut Currently National, reciprocal. No Delaware Currently National, reciprocal. No District of Columbia Currently Reciprocal. 11 States (AL, FL, GA, LA , MD, MS, NC, SC, TN, VA, WV). No Florida Currently Reciprocal. 11 States and D C (AL, AR, G A, LA , MD, MS, NC, SC, TN, VA, WV, DC). No Georgia Currently Reciprocal. 10 States and DC (AL, FL, KY, LA , MD, MS, NC, SC, TN, VA, DC). No Idaho Currently National, no reciprocity. No Illinois Currently National, reciprocal. No Indiana Currently National, reciprocal. No Iowa Currently Reciprocal. 6 States (IL, MN, MO, NE, SD, WI). Yes Kansas Currently Reciprocal. 6 States (AR, CO, IA, MO, NE, OK). Yes Kentucky Currently National, reciprocal. Yes Louisiana Currently National, reciprocal. No Maine Currently National, no reciprocity. No A-9 TABLE A - l (continued) STATE LEGISLATION IN EFFECT AREA DEPOSIT SHARE CAP Maryland Currently Reciprocal. 14 States and D C (AL, AR, DE, FL, GA, KY, LA , MS, NC, PA, SC, TN, VA, WY, DC). No Massachusetts Currently National, reciprocal. Yes Michigan Currently National, reciprocal. No Minnesota Currently Reciprocal. 16 States (CO, IA, ID, IL, IN, KS, MI, MO, MT, ND, NE, OH, SD, WA, WI, WY). Yes Mississippi Currently Reciprocal. 13 States (AL, AR, FL, GA, KY, LA , MO, NC, SC, TN, TX, VA, WV). Yes Missouri Currently Reciprocal. 8 States (AR, IA, IL, KS, KY, NE, OK, TN). Yes Montana Currently Reciprocal. 7 States (CO, ID, MN, ND, SD, WI, WY). Yes Nebraska Currently National, reciprocal. Yes Nevada Currently National, no reciprocity. No New Hampshire Currently National, no reciprocity. Yes New Jersey Currently National, reciprocal. No New Mexico Currently National, no reciprocity. No New York Currently National, reciprocal. No North Carolina Currently No July 1, 1996 Reciprocal. 13 States and D C (AL, AR, FL, GA, KY, LA , MD, MS, SC, TN, TX, VA, WV, DC). National, reciprocal. North Dakota Currently National, reciprocal. Yes Ohio Currently National, reciprocal. Yes Oklahoma Currently National. After initial entry, B H C must be from state offer ing reciprocity or wait 4 years to expand. Yes Oregon Currently National, no reciprocity. No Pennsylvania Currently National, reciprocal. No Rhode Island Currently National, reciprocal. No A-10 TABLE A - l (continued) STATE LEGISLATION IN EFFECT AREA DEPOSIT SHARE CAP South Carolina Currently Reciprocal. 12 States and D C (AL, AR, FL, G A, KY, LA , MD, MS, NC, TN, VA, WV, DC) No South Dakota Currently National, reciprocal. No Tennessee Currently National, reciprocal. Yes Texas Currently National, no reciprocity. Yes Utah Currently National, no reciprocity. No Vermont Currently National, reciprocal. No Virginia Currently Reciprocal. 12 States and DC (AL, AR, FL, GA, KY, LA , MD, MS, NC, SC, TN, WV, DC). No Washington Currently National, reciprocal. No West Virginia Currently National, reciprocal. Yes Wisconsin Currently Reciprocal. 8 States (IA, IL, IN, KY, MI, MN, MO, OH). No Wyoming Currently National, no reciprocity. No Source: Financial Structure Section, Board of Governors of the Fédéral Reserve System. A-l 1 APPENDIX A TABLE A-2 STATE DEPOSIT SHARE CAPS PERCENT LIMIT INCLUDES DEPOSITS OF PERCENT LIMIT BANKS Arkansas 25 X Colorado 25 Iowa THRIFTS CREDIT UNIONS X X X 10 X X X Kansas 12 X Kentucky 15 X X X Massachusetts 15 X Minnesota 30 X X X Mississippi 19 X X X Missouri 13 X X X Montana 18 X X X Nebraska 14 X X New Hampshire 20 X X X North Dakota 19 X X X Ohio 20 X X Oklahoma 11 X X X Tennessee 16.5 X X X Texas 25 X West Virginia 20 X X X STATE Source: Conference of State Bank Supervisors, amended by calls to state banking commis sions in some cases. A-l 2 A PPE N D IX A T A B L E A-3 INTERSTATE B A N K IN G O RG AN IZATIO N S A N D THEIR DEPOSITS December 31, 1992 Banking Organization Livingston SouthWest Corp. NationsBank Corporation Fleet Financial Group, Inc. Peoples Heritage Financial Group SunTrust Banks, Inc. T & C Bancorp, Inc. First Union Corporation Charter 95 Corp. First Nebraska Bancs, Inc. Magna Group, Inc. Bane One Corp. Valley Baneshares, Inc. Whitcorp Financial Company Community First Bankshares Suburban Baneshares, Inc. First Illinois Bancorp, Inc. American Interstate Bancorporation First Interstate Bancorp First Heartland Bancorp. Norwest Corp. Community First Financial, Inc. Chadwick Baneshares, Inc. First Banks, Inc. Wachovia Corp. Commercial Banegroup, Inc. U.S. Bancorp N B D Bancorp, Inc. West One Bancorp H N B Corporation Shawmut National Corporation American Community Bank Group KeyCorp Home State IL NC RI ME GA IL NC MN NE MO OH MN KS ND VA IL NE CA NE MN KY IL MO NC TN OR MI ID KS CT MN NY Number of States in which B H C has Insured Commercial Bank(s) 2 11 6 2 3 2 6 2 2 2 8 2 2 3 2 2 2 13 2 11 2 2 2 4 2 5 5 4 2 2 2 8 Domestic Deposits (bil of $) 0.18 82.55 32.28 0.32 28.95 0.12 38.20 0.11 0.06 3.34 48.06 0.06 0.13 0.95 0.10 0.15 0.10 43.48 0.10 27.04 0.04 0.10 1.20 22.98 0.17 15.21 29.29 5.34 0.28 16.54 0.23 21.00 Percent of B H C ’ s Domestic Deposits From Outside Its Home State 100.00 90.38 83.64 81.50 72.71 72.18 72.04 71.99 69.82 69.72 69.41 69.19 68.94 68.49 67.06 63.58 61.65 61.25 60.04 59.95 59.67 55.21 53.17 50.70 50.57 48.92 48.00 47.81 47.52 47.40 47.37 45.67 A-14 Banking Organization Home State First Security Corp. Resource Bancshares Corp. American Bancorporation National City Corp. Granby Bancshares Signet Banking Corp. Mid-South Bancorp, Inc. Frandsen Financial Corp. Boatmen’s Bancshares, Inc. Banner Bancorp, Ltd. Firstar Corp. F.S.B., Inc. SouthTrust Corporation Arrow Bank Corp. Otto Bremer Foundation Reelfoot Bancshares, Inc. Brighton Bancorp, Inc. Peoples Preferred Bankshares First Bank System, Inc. First of America Bank Corp. Midlantic Corp. Bessemer Group, Inc. Citizens Holding Company Bank of Boston Corp. First Community Bancshares Corp. Old National Bancorp PN C Financial Corp. Hancock Holding Company Central Bancshares of the South Dominion Bankshares Corp. National City Bancshares, Inc. Chemical Banking Corp. Chase Manhattan Corp. Synovus Financial Corp. State First Financial Corp UT SC wv OH MO VA KY MN MO WI WI NE AL NY MN TN TN GA MN MI NJ NJ OK MA IA IN PA MS AL VA IN NY NY GA AR Table A-3 (Continued) Number of States in which B H C has Insured Commercial Bank(s) 3 2 2 5 2 3 2 2 8 2 5 2 6 2 3 2 2 2 7 3 4 2 2 5 2 3 6 2 3 4 3 4 7 3 2 Domestic Deposits (bil of $) 5.51 0.58 0.26 22.65 0.02 7.86 0.17 0.10 18.25 0.05 10.88 0.07 9.64 0.66 1.78 0.10 0.03 0.05 16.60 16.26 13.45 0.27 0.20 19.84 0.08 2.40 29.39 1.55 5.00 7.22 0.42 74.05 40.04 4.37 0.60 Percent of B H C ’ s Domestic Deposits From Outside Its Home State 42.24 42.10 40.46 39.12 38.59 37.53 36.90 36.81 36.49 36.10 36.03 35.38 34.85 34.24 34.23 34.23 33.21 32.52 31.99 31.86 31.75 31.46 30.81 30.29 29.50 29.34 29.33 29.21 28.93 28.65 28.40 27.87 27.05 27.03 26.97 A-15 Banking Organization Home State Citicorp Decatur Corp. BankAmerica Corp. Mid-Citco Inc. Huntington Bancshares Inc. Grenada Sunburst System Corp. First Dodge City Bancshares, Inc. Corestates Financial Corp. FM B Banking Corp. Western Security Holding Company F & M National Corp. Miles Bancshares, Inc. Arvest Bank Group, Inc. First Affiliated Bancorp, Inc. United Community Banks, Inc. Deposit Guaranty Corp. M N C Financial, Inc. Baker Boyer Bancorp Sierra Tahoe Bancorp Johnson International, Inc. UJB Financial Corp. Crestar Financial Corp. Comerica Inc. Union Planters Corp. Society Corp. First Place Financial Corp. Heartland Financial USA, Inc. Farmers State Bancorp Commerce Bancorp, Inc. Susquehanna Bancshares, Inc. Century South Banks, Inc. Northern Trust Corp. Glendale Bancorporation Union of Arkansas Corporation NY IA CA IL OH MS KS PA FL NE YA MO AR IL GA MS MD WA CA WI NJ YA MI TN OH NM IA OH NJ PA GA IL NJ AR Table A-3 (Continued) Number of States in which B H C has Insured Commercial Bank(s) 9 2 9 2 6 2 2 3 2 2 2 2 2 2 2 3 2 2 2 3 2 3 6 4 3 2 2 2 2 2 2 5 2 2 Domestic Deposits (bil of $) 48.67 0.05 123.70 1.28 9.50 1.78 0.13 16.07 0.08 0.08 0.96 0.09 0.99 0.08 0.30 4.02 10.83 0.25 0.21 0.78 11.94 9.75 19.47 4.45 17.60 0.39 0.43 0.07 1.45 1.48 0.37 7.99 0.22 0.65 Percent of B H C ’s Domestic Deposits From Outside Its Home State 26.96 26.64 26.22 25.02 24.84 24.35 24.03 23.96 23.78 23.54 23.46 23.10 22.59 22.05 21.67 21.56 21.14 20.80 20.19 19.77 19.77 19.69 19.62 19.03 18.86 18.62 18.33 18.22 18.13 18.07 17.79 17.77 17.51 17.47 A-16 Banking Organization Home State Palmer Bancorp, Inc. W M Bancorp First West Virginia Bancorp Star Banc Corp. First Financial Bancorp Eufaula Bancorp, Inc The Lauritzen Corp. Fourth Financial Corp. Zions Bancorporation Wesbanco, Inc. First Western Bancorp First National Corporation Minowa Banshares, Inc. The Merchants Holding Company Old Kent Financial Corp. Riggs National Corp. Amsouth Bancorporation CN B Bancshares Inc. Southern National Corp. First Bank Corp. Vista Bancorp, Inc. Fifth Third Bancorp. Meridian Bancorp, Inc. First Virginia Banks, Inc. J.P. Morgan & Co. Inc. SouthWest Missouri Bancorporation Citizens Bancorp First Alabama Bancshares W.T.B. Financial Corp. First Commercial Corp. Citizens Banking Corp. First United Corp. Mark Twain Bancshares, Inc. Bank South Corp. IL MD WV OH OH AL NE KS UT WV SD MS IA MN MI DC AL IN NC AR NJ OH PA VA NY MO MD AL WA AR MI MD MO GA Table A-3 (Continued) Number of States in which B H C has Insured Commercial Bank(s) 2 2 2 3 2 2 2 2 3 2 2 2 2 2 2 3 3 2 2 2 2 3 2 3 2 2 3 4 2 3 2 2 2 2 Domestic Deposits (bil of $) 0.21 0.33 0.09 6.48 1.15 0.07 0.24 4.51 2.72 0.84 0.24 0.06 0.16 0.28 7.09 3.83 7.43 1.43 3.60 0.51 0.31 7.57 10.18 6.02 5.82 0.11 2.84 6.72 0.89 2.55 2.09 0.32 1.89 3.65 Percent of B H C ’s Domestic Deposits From Outside Its Home State 16.98 16.77 16.63 16.61 16.48 16.06 16.05 16.05 15.48 14.81 14.71 14.67 14.11 13.98 13.94 13.46 13.08 12.98 12.81 12.43 12.42 12.18 12.08 11.91 11.00 10.77 10.64 10.54 10.50 10.35 10.08 9.75 9.66 9.65 A-17 Banking Organization Home State United Carolina Bancshares Corp. United Missouri Bancshares Community Bankshares, Inc. Valley National Corp. Upbancorp, Inc. Key Centurion Bancshares, Inc. First Chicago Corp. BancorpSouth, Inc. State Bancshares, Inc. Associated Banc-Corp. Bankers Trust New York Corp. Pocahontas Bankshares Corp. B B & T Financial Corp. Commerce Bancshares, Inc. Mercantile Bankshares Corp. Liberty National Bancorp., Inc. Mercantile Bancorporation UST Corp. Provident Bancorp, Inc. Michigan National Corp. First Bancorp of Kansas Marshall & Ilsley Corp. Citizens Bancshares, Inc. First National of Nebraska, Inc. Mellon Bank Corp. Lincoln Financial Corp. Barnett Banks, Inc. Bank of New York Co. Inc. F.N.B. Corp. First Financial Corp. U.S. Trust Corp. United Bankshares, Inc. Bancorp Hawaii, Inc. Baybanks, Inc. NC MO GA AZ IL WV IL MS PA WI NY WV NC MO MD KY MO MA OH MI KS WI OH NE PA IN FL NY PA IN NY WV HI MA Table A-3 (Continued) Number of States in which B H C has Insured Commercial Bank(s) 2 4 2 3 2 2 3 2 2 2 3 2 2 4 3 2 2 2 2 2 2 2 2 2 3 2 2 3 2 2 3 2 2 2 Domestic Deposits (bil of $) 2.49 3.89 0.17 10.15 0.18 2.60 21.42 1.64 0.51 2.41 10.29 0.22 5.34 6.52 4.59 3.74 7.60 1.80 3.19 8.30 1.08 6.17 0.43 3.10 24.13 1.76 34.57 20.94 1.08 0.89 2.29 1.29 5.43 9.02 Percent of B H C ’ s Domestic Deposits From Outside Its Home State 9.64 9.49 9.36 8.58 8.06 7.98 7.84 7.73 7.71 7.64 7.58 7.44 7.42 7.30 7.26 6.84 6.53 6.06 5.59 5.42 5.39 4.72 4.44 4.38 3.48 3.48 3.27 2.91 2.69 1.80 1.79 1.79 1.40 0.61 Table A-3 (Continued) Banking Organization Continental Bank Corp. First Tennessee National Corp. B.M.J. Financial Corp. Credit and Commerce, Neth. Antilles A.B.N. - Stichting, Netherlands National Westminster Bank, England Banco Santander SA, Spain Sumitomo Bank, Japan Allied Irish Banks, Ltd,, Ireland Bank of Tokyo, Japan Bank of Montreal, Canada Saban SA, Panama Home State Number of States in which B H C has Insured Commercial Bank(s) Domestic Deposits (bil of $) Percent of B H C ’s Domestic Deposits From Outside Its Home State IL TN NJ 2 2 2 11.20 6.17 0.61 0.00 0.00 0.00 VA IL NY NJ CA MD CA IL NY 5 2 2 3 2 4 2 3 2 5.03 11.22 14.99 26.44 4.78 6.75 13.71 7.31 5.24 58.48 38.50 38.09 30.03 22.49 20.28 9.70 0.96 0.00 Sources: NIC Database, Reports of Condition and Income APPENDIX A TABLE A-4 O U T -O F -S T A T E BANK HOLDING COMPANIES’ SHARES OF DEPOSITS, BY STATE. DECEMBER 31,1992 PERCENT OF DOM ESTIC BANKING DEPOSITS HELD BV INSURED CO M M ER CIAL BANKS OWNED BY O U T-O F -S TA TE BANK HOLDING COMPANIES PERCENT STATE 2.51 Alabama Alaska 19.59 Arizona 64.24 Arkansas 2.08 California 14.51 Colorado 44.70 Connecticut 39.73 Delaware 41.71 District of Columbia 59.43 Florida 51.21 Georgia 39.07 8.74 Hawaii Idaho 57.22 Illinois 24.51 Indiana 51.23 Iowa 25.81 Kansas 1.15 Kentucky 36.15 Louisiana 5.17 Maine 78.48 Maryland 38.24 Massachusetts 25.15 Michigan 3.55 Minnesota 3.50 Mississippi 2.25 A-19 TABLE A-4 (continued) STATE PERCENT Missouri 0.61 Montana 37.74 Nebraska 10.06 Nevada 91.59 New Hampshire 27.92 New Jersey 38.49 New Mexico 34.61 New York 21.02 North Carolina 0.27 North Dakota 33.58 3.48 Ohio Oklahoma 11.44 Oregon 48.40 Pennsylvania 10.67 Rhode Island 38.41 South Carolina 63.81 South Dakota 57.99 Tennessee 28.39 Texas 46.98 Utah 29.24 Vermont 4.68 Virginia 22.93 Washington 72.64 West Virginia Wisconsin 4.51 17.14 Wyoming 44.03 National Average 20.81 Source: Reports of Condition and Income, December 31,1992. A-20 APPENDIX B STATISTICAL TABLES APPENDIX B TABLE B -l NUMBER OF INSURED U.S. COMMERCIAL BANKS, BANKING ORGANIZATIONS AND BRANCH OFFICES 1960-1992 YEAR NUMBER OF IN SURED U.S. COM MERCIAL BANKS NUMBER OF BANKING ORGANIZATIONS* 1960 13,079 12,791 10,216 1970 13,511 12,625 21,424 1980 14,478 12,347 38,353 1985 14,290 11,008 43,239 1990 12,211 9,110 51,305 1991 11,806 9,004 53,000 1992 11,363 8,729 53,744 NUMBER OF BRANCH OFFICES * Banking organizations are the sum of independent banks, one bank holding companies, and individual multibank holding companies. In 1992 there were 867 multibank holding companies. Sources: NIC Database, Bank-Branch Structure File. Note: Home offices are not included in branch data. B-l APPENDIX B TABLE B-2 ENTRY AND EXIT IN BANKING, 1980-1992 BANK BRANCHES NUMBERS NEW BANKS FAILURES OF FDIC-INSURED BANKS A L L M ERGERS AND ACQUISITIONS* LA R G E M ERGERS AND ACQUISI TIONS* OPENINGS CLOSINGS 1980 267 10 188 0 2,397 287 1981 286 10 359 1 2,326 364 1982 378 42 422 2 1,666 443 1983 419 48 432 6 1,320 567 1984 489 79 553 14 1,405 889 1985 346 120 553 7 1,480 617 1986 283 145 625 20 1,387 763 1987 217 203 710 21 1,117 960 1988 234 221 569 18 1,676 1,082 1989 204 207 388 9 1,825 758 1990 165 169 442 20 2,987 926 1991 106 127 23 lp 23 2,788 1,456 1992 94 122 n.a. 25 l,677p 1,313p Total 3,488 1,503 5,472p 166 24,05 lp 10,425p YEAR p = preliminary data, 1991 merger data includes only Federal Reserve approved transactions. * These numbers reflect the number of transactions; a merger may involve multiple banks. Sources: New bank data and branch data are from the Annual Statistical Digest. Bank failure data are from the Annual Report of the Federal Deposit Insurance Corporation. Merger and acquisition data are from Stephen A. Rhoades, ’’Mergers and Acquisitions by Commer cial Banks, 1960-1983,” Staff Studies. No. 142 (Federal Reserve Board, January 1985) and annual updates supplied by the author. Large mergers and acquisition data are for mergers in which both organizations have deposits in excess of $ 1 billion and exclude acquisitions of thrifts and failing banks. B-2 APPENDIX B TABLE B-3 TOP 25 BANKING ORGANIZATIONS RANKED BY DOMESTIC DEPOSITS DECEMBER 31,1992 ORGANIZATION DOMESTIC DEPOSITS (BILLIONS OF DOLLARS) PERCENT OF NATIONAL TOTAL OF DOMESTIC DEPOSITS IN INSURED COMMERCIAL BANKS BankAmerica Corporation 123.7 5.18 NationsBank Corporation 82.5 3.46 Chemical Banking Corporation 74.0 3.10 Citicorp 48.7 2.04 Banc One Corporation 48.1 2.01 First Interstate Corporation 43.5 1.82 Wells Fargo & Company 42.3 1.77 Chase Manhattan Corporation 40.0 1.68 First Union Corporation 38.2 1.60 Barnett Banks, Inc. 34.6 1.45 Fleet Financial Group 32.3 1.35 PNC Financial Corp. 29.4 1.23 NBD Bancorp 29.3 1.23 SunTrust Banks 29.0 1.21 Norwest Corp. 27.0 1.13 Banco Santander SA 26.4 1.11 Mellon Bank Corporation 24.1 1.01 Wachovia Corporation 23.0 0.96 National City Corporation 22.6 0.95 First Chicago Corporation 21.4 0.90 Keycorp 21.0 0.88 Bank of New York Co. 20.9 0.88 Bank of Boston Corp. 19.8 0.83 Comerica Inc. 19.5 0.82 Boatmen’s Bancshares 18.2 0.76 Source: NIC Database, Reports of Condition and Income. B-3 APPENDIX B TABLE B-4 NATIONAL CONCENTRATION OF DOMESTIC DEPOSITS IN INSURED COMMERCIAL BANKING ORGANIZATIONS PERCENTAGE OF DEPOSITS HELD BY YEAR TOP 10 TOP 25 TOP 50 TOP 100 1960 20.4 31.7 40.3 49.6 1965 21.3 32.7 40.9 49.8 1970 20.0 30.8 38.9 48.1 1975 19.9 30.6 38.7 48.2 1980 18.6 29.1 37.1 46.8 1985 17.0 28.5 40.5 52.6 1986 17.6 29.6 42.4 55.6 1987 18.1 31.1 44.1 57.4 1988 19.2 33.2 47.5 59.9 1989 19.9 34.1 48.1 60.5 1990 20.0 34.9 48.9 61.4 1991 22.7 37.5 49.6 61.3 1992 24.1 39.2 51.7 62.6 Sources: NIC Database, Reports of Condition and Income. B-4 APPENDIX B TA B LE B-5 PERCENT OF DOM ESTIC BANKING DEPOSITS HELD BY LARGEST BANKING ORGANIZATIONS DECEM BER 31,1992 3RD LARGEST ORGANIZATION LARGEST ORGANIZATION 2ND LARGEST ORGANIZATION Alabama 18.42 17.92 17.14 Alaska 42.63 25.12 18.80* Arizona 31.63* 31.17 21.25* Arkansas 11.01 10.29 4.42 California 37.35 17.29 6.89 Colorado 17.38* 10.51 9.46* Connecticut 32.69 23.95* 9.66 Delaware 16.12 14.94 10.89 District of Columbia 32.79 22.67* 12.05* Florida 26.94 18.45* 13.10* Georgia 16.46* 13.90 11.40* Hawaii 43.58 37.29 Idaho 34.96 28.40* Illinois 14.01 18.78* STATE 7.94 8.74** 12.40* 6.87* Kansas 12.55* 14.54 5.13** 9.24* 4.28 3.91 2.96 Kentucky 12.48* 11.30* 10.08 Louisiana 15.00 1 1 .8 6 Maine 33.21* 27.58* 14.34* Maryland 20.23 12.75** 10.07 Massachusetts 23.87 15.47 13.53* Michigan 2 0 .2 0 19.66 14.30 Minnesota 24.64 23.64 2.55 Mississippi 16.24 15.99 Missouri 20.78 12.74 7.70 10.84 Indiana Iowa 11.48* B-5 9.67 TABLE B-5 (continued) STATE 2ND LARGEST ORGANIZATION LARGEST ORGANIZATION RD LARGEST ORGANIZATION 3 Montana 16.89* 11.10 * 9.28 Nebraska 15.17 12.49 8.69* Nevada 35.64* 32.52* 11.61* New Hampshire 23.59* 19.25 14.49 New Jersey 21.54** 11.15 1 0 .6 8 New Mexico 25.24* 14.43 10.81 New York 20.71 15.50 12.84 North Carolina 2 0 .2 2 19.06 14.16 North Dakota 14.24* 11.24* Ohio 16.00 15.55 8.57 7.17 4.44* Oregon 37.79 25.22* 13.10* Pennsylvania 16.95 15.12 8.89 Oklahoma 6.26* 15.02 Rhode Island 55.71 30.62* 7 7 9 ** South Carolina 24.87* 6.61 South Dakota 26.45* 29.14* 18.03* 4.54* Tennessee 14.05 10.90* Texas 17.39* 12.50 10.94* Utah 31.53 22.77 Vermont 28.26 20.60 15.58 Virginia 18.19* Washington 36.12* 13.79 15.00* 11.75 9.64* West Virginia 14.60 14.14 7.73 Wisconsin 16.07 22.84* 13.57 1 0 .6 6 * Wyoming 8.30* * Out-of-state bank holding company. ** Foreign bank holding company. Sources: NIC Database, Reports of Condition and Income. B-6 9.88* 9.16* 6.93* APPENDIX B TABLE B-6 BANKING ORGANIZATIONS HOLDING OVER 20 PERCENT OF DOMESTIC DEPOSITS IN INSURED COMMERCIAL BANKS IN A STATE DECEMBER 31,1992 PANEL A - BANKING ORGANIZATION IS A N IN-STATE B A N K HOLDING COMPANY STATE BHC’S DOMESTIC DEPOSITS IN THE STATE (IN BIL LION OF DOLLARS) PERCENT OF STATE’S DOMES TIC BANKING DEPOSITS Fleet Financial Group Rhode Island 5.28 55.7 Bancorp Hawaii, Inc. Hawaii 5.36 43.6 National Bancorp of Alaska Alaska 1.54 42.6 U.S. Bancorp Oregon 7.77 37.8 Bank America Corporation California 91.26 37.4 First Hawaiian, Inc. Hawaii 4.58 37.3 West One Bancorp Idaho 2.78 35.0 District of Columbia 3.32 32.8 Connecticut 8.70 32.7 Utah 3.18 31.5 Valley National Corporation Arizona 9.28 31.2 Barnett Banks, Inc. Florida 33.44 26.9 BankNorth Group Vermont 1.36 28.3 First National Bank of Alaska Alaska 0.91 25.1 First Bank System Minnesota 11.29 24.6 Massachusetts 13.83 23.9 BANKING ORGANIZATION HOLDING OVER 20% OF DEPOSITS IN STATE Riggs National Corporation Shawmut Corporation First Security Corporation Bank of Boston Corporation B-7 TABLE B -6 (continued) STATE BHC’S DOMESTIC DEPOSITS IN THE STATE (IN BIL LION OF DOLLARS) PERCENT OF STATE’S DOMES TIC BANKING DEPOSITS Minnesota 10.83 23.6 Utah 2.30 22.8 Missouri 11.59 20.8 New York 53.45 20.7 Chittenden Corp. Vermont 0.99 20.6 Comerica, Inc. Michigan 15.65 20.2 North Carolina 11.33 20.2 Maryland 8.54 20.2 BANKING ORGANIZATION HOLDING OVER 20% OF DEPOSITS IN STATE Norwest Corp. Zions Bancorporation Boatmen’s Bancshares, Inc. Chemical Banking Corporation Wachovia Corporation M N C Financial, Inc. PANEL B - BANKING ORGANIZATION IS A N OUT-OF-STATE O R FOREIGN B A N K HOLDING C O M P A N Y STATE BHC’S DOMESTIC DEPOSITS IN THE STATE (IN BIL LION OF DOLLARS) BankAmerica Corporation Washington 12.33 36.1 BankAmerica Corporation Nevada 3.60 35.6 Fleet Financial Group Maine 2.37 33.2 First Interstate Bancorp Nevada 3.29 32.5 BankAmerica Corporation Arizona 9.41 31.6 Bank of Boston Corp. Rhode Island 2.90 30.6 Citicorp South Dakota 3.25 29.1 BANKING ORGANIZATION HOLDING OVER 20% OF DEPOSITS IN STATE B-8 PERCENT OF STATE’S DOMES TIC BANKING DEPOSITS TABLE B -6 (continued) STATE BHC’S DOMESTIC DEPOSITS IN THE STATE (IN BIL LION OF DOLLARS) PERCENT OF STATE’S DOMES TIC BANKING DEPOSITS First Security Corporation Idaho 2.26 28.4 KeyCorp Maine 1.97 27.6 South Carolina 5.14 26.4 Oregon 5.19 25.2 New Mexico 2.76 25.2 South Carolina 4.83 24.9 Fleet Financial Group Connecticut 6.37 24.0 Fleet Financial Group New Hampshire 1.42 23.6 Wyoming 1.00 22.8 M N C Financial Inc. District of Columbia 2.29 22.7 Banco Santander SA New Jersey 18.50 21.5 Arizona 6.33 21.2 BANKING ORGANIZATION HOLDING OVER 20% OF DEPOSITS IN STATE Wachovia Corporation First Interstate Bancorp Boatmen’s Bancshares, Inc. NationsBank Corporation KeyCorp First Interstate Bancorp Sources: NIC Database, Reports of Condition and Income. B-9 APPENDIX B TABLE B-7 AVERAGE THREE FIRM CONCENTRATION RATIO 1976-1992 METROPOLITAN STA TISTICAL AREAS YEAR NON METROPOLITAN COUNTIES 1976 68.5 90.0 1977 67.9 89.9 1978 67.4 89.9 1979 66.8 89.7 1980 66.4 89.6 1981 66.1 89.4 1982 65.9 89.4 1983 66.0 89.4 1984 66.4 89.4 1985 66.7 89.5 1986 67.5 89.5 1987 67.7 89.5 1988 67.8 89.7 1989 67.5 89.7 1990 67.3 89.6 1991 66.7 89.3 1992 67.5 89.2 Source: Summary of Deposits, 1976-1992. B-10
@FedFRASER