View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

TY-15-95

TESTIMONY OF

RICKI HELFER, CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION

ON

INTERSTATE BANKING

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT
COMMITTEE ON BANKING AND FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES




1:00 P.M.
TUESDAY, OCTOBER 17, 1995
ROOM 2128, RAYBURN HOUSE OFFICE BUILDING

Madam Chairwoman and members of the Subcommittee, I appreciate
the opportunity to testify on the status of interstate banking and
trends

in bank consolidation.

For over a decade,

the growth of

interstate banking has been a fundamental element of the rapidly
changing structure of the nation's banking industry.

Last year,

Congress,

advantages

recognizing

the

economic

and

competitive

produced by removing the long-standing geographical restraints on
banking organizations,
enacting

the

added

Riegle-Neal

impetus to the interstate trend by
Interstate

Banking

Efficiency Act (the "Riegle-Neal Act").
over the

last

few months,

between

large

banking

and

Branching

This year, and especially

a number of mergers
organizations

have

and acquisitions
been

announced.

Attachment 1 lists the largest merger announcements of 1995.

Thus,

the banking industry is in a period of change and transition.

The

challenges for the Federal Deposit Insurance Corporation and the
other banking regulators as the industry passes through this time
of restructuring are many.

The first section of this testimony contains a description of
the banking industry's ongoing restructuring,

a process in which

the growth of interstate banking organizations has played a central
role.

The

description

restructuring

and

places

includes
the

historical

recent

background

activity

in

on

the

mergers

and

acquisitions between banking organizations in the context of longer
term developments.
banking

in

Statistics.




This section draws from a study on interstate

progress

by

the

FDIC's

Division

of

Research

and

The study examines trends in FDIC-insured institutions

2

over the past decade.

The second section of the testimony focuses

on the impact of the banking industry's restructuring on customers
of

banks,

and

the

community bank.

third

section

examines

the

future

of

the

The final section reviews the FDIC's statutory

authority, and the agency's plans and initiatives, with respect to
matters affected by the restructuring of the industry.

AN INDUSTRY IN TRANSITION

For much of the nation's history, state boundaries controlled
and curtailed the growth of individual banking organizations.
most

instances,

a U.S.

In

banking organization could not establish

domestic deposit-taking offices outside of the state where its home
office was
home

located.

state was

Moreover,

often

its ability to expand within its

limited.

Attachment

according to their branching laws.
was a banking

laws

limitations.

that

states

One result of this situation

industry with numerous participants

geographic markets.
federal

2 categorizes

and protected

The industry was also constrained by state and
added

product

limitations

to

the

geographic

Under the product limitations, banking organizations

were restricted to offering a limited number of financial products
and services.

Moreover, the limitations were often interpreted in

a narrow fashion that hindered the ability of banks to adjust their
products to changes in technology and the marketplace.

These geographic and product limitations had a number of long-




3
term negative impacts.
benefits

of

full

Businesses and consumers did not enjoy the

competition

among

depository

institutions

and

between depository institutions and other providers of financial
products and services.

Benefits from greater competition can be in

the form of lower prices, better products, and better availability
of products.

The

less-than-optimal

level

of

competition

among

depository institutions hindered the movement of banking resources.
This allowed less efficient banks to command excess resources, and
prevented more

efficient

competition

financial services industry.

from

benefitted

other

from

and

Finally, banking organizations were constrained in their
the

have

capital

presence.

meet

could

their

to

to

that

from bringing

expertise

ability

markets

banks

segments

their

of

the

The competitive disadvantage banking

organizations operated under is evidenced by their declining share
of the assets of the financial services industry.
1952,

banks and thrifts held

For example, in

63 percent of those assets.

That

proportion declined steadily over the years and at midyear 1995 was
32 percent.

The marketplace distortions arising from the geographic and
product limitations on depository institutions led to a variety of
pressures

for

change.

At

the

institution

level,

creative

management explored ways under existing laws to offer the products
and

services

that

businesses

and

consumers

demanded.

At

the

industry level, changes were sought in the state and federal laws
that created the competitive inequities.




4
Indeed,
the U.S.
change

over the brief period of little more than a decade,

banking

of

industry has undergone a geographic structural

considerable

proportions.1

Attachment

3

enumerates

mergers,

failures and new charters of FDIC insured institutions

over

past

the

ten

significantly.
assets

were

years.

State

barriers

have

dropped

At midyear 1984, 33 percent of the nation's banking

controlled

by

bank

and

operations in two or more states.
was 64 percent,

thrift

organizations

with

At midyear 1994, the proportion

almost two-thirds of the nation's banking assets

(See Attachment 4).
banking has

banking

been

A major consequence of the rise of interstate

consolidation

in the

industry.

The number of

banking organizations has declined, and the proportions of banking
assets and deposits controlled by larger banking organizations have
risen.
of

This is reflected in a corresponding decline in the number

commercial

increase

in

banks

the

and

number

savings

and

assets

institutions,
of

larger

as

well

institutions

as

an
(see

Attachment 5).

Concerning consolidation —

defined as the reduction in the

‘The focus of the discussion is full-fledged interstate
banking, meaning the operation of commonly owned banks or
or their deposit-taking branches, in two or more states.
Banking organizations have other means to conduct operations on
an interstate basis, including loan production offices (LPOs),
nonbank affiliates, credit cards, deposit brokers, and money
desks.
Use of some of these options, notably LPOs and nonbank
affiliates, pre-date the efforts since the late 1970s and early
1980s to bring about full-fledged interstate banking.
LPOs
became popular in the 1960s, and the Bank Holding Company Act
Amendments of 1970 opened the door to interstate expansion
through nonbank affiliates.




5
number of institutions due to mergers and acquisitions of healthy
institutions and to failures of troubled institutions offset by the
addition of new institutions2 —
decline

in

the

combined

number

independent banks and thrifts.
14,887

to

9,804,

Attachment 6) .

a representative statistic is the

between

of

holding

companies

and

This decline was 32 percent, from

year-end

In contrast,

bank

1984

and

midyear

1995

(see

the decline does not mean that new

institutions are not being established.

In fact, between 1984 and

mid-year 1995, 2,476 new commercial banks and savings institutions
were

chartered.

At

the

national

level,

the

share

of

deposits held by the largest institutions has increased.

industry
At year-

end 1984, the 42 largest banking organizations held 25
percent of the nation's domestic deposits.

By midyear 1995,

25

percent of domestic deposits was held by the largest 16 banking
organizations

(see

Attachment

increased consolidation

8).

It

in the banking

should

be

noted

that

industry at the national

level has not resulted in more concentrated local banking markets.
Among the reasons are that much of the consolidation has involved
mergers

between

organizations

in

different

markets

and

new

2Mergers and acquisitions that have not involved federal
assistance have accounted for most of the consolidation among
commercial banks and savings institutions over the last decade.
From the end of 1984 through the second quarter of 1995, almost
5,800 commercial banks and savings institutions were absorbed in
unassisted mergers.
Over the same period, more than 2,400
insolvent banks and savings institutions were closed or merged
into healthy institutions with federal assistance-, while nearly
2,500 new commercial banks and savings institutions were
chartered during the period.
Overall, there was a net decline of
5,652 commercial banks and savings institutions during the period
(see Attachment 7).




6

institutions have entered markets.

The

states

interstate

have

banking

played

and the

a

major

role

accompanying

in

industry

Beginning in the late 1970s and early 1980s,
acknowledged

the

changing

economics

of

the

growth

of

consolidation.

a number of states

banking

by

allowing

the

creation and development of interstate bank holding companies —
companies that own banks in two or more states (see Attachment 9).
The

state

laws

varied

considerably.

Some

states

acted

individually, while others entered into compacts with neighboring
states.

Some states required reciprocity —

an out-of-state bank

holding company could acquire an in-state bank only if the out-ofstate

holding

company's

home

state

granted

similar

privileges to holding companies in the target state.
laws,

particularly those

limited

permissible

acquisition
Other state

enacted pursuant to regional

out-of-state

entrants

to

compacts,

those

from

the

neighboring geographic region.

Any

uncertainties'

regarding

state

initiatives

to

remove

barriers to bank holding company expansion across state lines were
eliminated in 1985.

In the decision of Northeast Bancorp v. Board

of Governors of the Federal Reserve System. 472 U.S. 159, the U.S.
Supreme

Court

selectively,
Company

Act,

companies.




upheld

under

the

the

ability

Douglas

restrictions

on

of

the

states

reduce

Amendment

to

Bank

Holding

entry

out-of-state

holding

by

the

to

7
In

1994,

Congress

element to the states'
the Act,

most

in the

removed

Act

added

a

initiatives on interstate banking.

remaining

expansion were

Riegle-Neal

state barriers to bank holding
on September

29,

1995.

Holding

federal
Under
company
company

growth, however, will be restrained by explicit, statutory deposit
concentration limits:

a 10 percent nationwide and a 30 percent

statewide limit.3

The Riegle-Neal Act also authorizes another form of interstate
expansion for banks —

branching.4

may merge across state lines,

Beginning June 1, 1997, banks

a process that will result in the

offices of one bank becoming branches of the other.
branching

through

mergers

is

subject

to

the

same

Interstate

concentration

limits as are interstate acquisitions by bank holding companies.
States may elect to prohibit interstate branching through mergers
or to authorize it prior to June 1, 1997.
authorize

de

novo

interstate

branching.

States may also elect to
The

current

status

of

state elections is summarized in Attachment 10.

3 The Riegle-Neal concentration limits refer to the
proportion of national or statewide deposits controlled by a
banking organization.
Generally, other than for initial entry
into a state, the responsible federal banking agency cannot
approve an application for a merger or an acquisition .by a
banking organization if the resulting organization would exceed
the statutory concentration limits.
In addition, the growth of
banking organizations will continue to be subject to state and
federal antitrust laws.
4 Savings associations have not been subject to the same
federal restrictions on branching across state lines as have
banks, and a number of savings associations with branches outside
their home states exist.




8

Recent announcements of mergers and acquisitions by a number
of large banking organizations should be viewed in the context of
the ongoing trends of consolidation and interstate growth.

The

long-existing economic pressures on banking organizations to grow
and

to

cross

barriers

state

based

on

lines,

coupled

geography,

are

with

the

removal

likely

to

continue

of

legal

for

the

foreseeable future, and the number of banking organizations likely
will continue to decline for some time.

Assuming the current restructuring of the industry continues,
consumers of banking products and services should benefit.

The

marketplace over time is likely to perform its function of matching
supply and demand, although there may be some disequilibrium during
transition

periods.

competition

should

financial

needs

available

at

Over the
foster

are

the

met

long term,

innovation
and

lowest

that

economic

fewer restrictions

and

ensure

products
prices.

and

that

on

consumer

services

are

Furthermore,

the

reduction of legal barriers based on geographic boundaries should
enable banking organizations to expand operations more easily into
underserved banking markets.

For their part, banking organizations also should, benefit.
consolidating
eliminated

and

industry
costs

is
are

one

where

being

excess

cut.5

In

capacity
addition,

is

being

when

5A number of studies have indicated the existence of
economies of scale in banking, meaning that up to a point, size
can result in lower average costs, whereas beyond the point,




A

an

9
institution expands geographically,
risk

against

recessions.
ten

years

being

subject

to

it is able to diversify
both

localized

and

its

rolling

For example, Attachment 11 shows that in nine of the
during

institutions

in

the

period

multi-state

1985

to

banking

1994,

banks

organizations

and

savings

failed

less

frequently than multi-institution banking organizations confined to
single states.

The lessons learned from this experience, as well

as more recent experience with failed banks in California and New
England,

are

that

less

diversification

renders

banks

more

vulnerable to regional economic downturns than more diversification
does.

Recent statistics on the profitability of the commercial

banking industry in California indicate that the state's largest
banks were least affected by the severe recession, reflecting their
diverse income sources beyond California's borders.

In addition,

full interstate banking could also offer to many banks significant
risk

reduction

through

increased

opportunities

for

building

a

economies of scale are less evident.
Studies of scale economies
in banking differ somewhat on the ranges of bank size over which
economies of scale can be achieved, as well as when these
economies disappear.
In one recent survey of this literature,
Humphrey states that studies generally find economies of scale at
small banks but statistically significant diseconomies among
large banks.
("Why Do Estimates of Bank Scale Economies Differ"
by David B. Humphrey, Federal Reserve Bank of Richmond Economic
Review. Sept/Oct 1990, pp. 38-50).
Despite these conclusions,
however, bankers often cite cost savings in mergers, especially
when they involve institutions that operate in the same markets.
As a practical matter, it is difficult to compare efficiencies
after mergers because other changes are taking place that affect
both revenues and expenses.
In addition, post-merger cost­
cutting measures such as asset write-downs, severance pay, early
termination of leases and contracts, and amortization of any
goodwill can result in higher reported expenses for a number of
years after a merger's consummation.




10

stable retail deposit base.

IMPACT ON BANK CUSTOMERS

The pace
raised

of the

concerns

on

restructuring

the

part

negative

impacts

on bank

however,

of

such

detrimental

competition

that

is

should

not

availability

only
and

some

customers.

causing

prevent
quality

of

of the banking

There

effects.
the

any
of

observers
is

long-term

banking

about
little

Moreover,

restructuring

industry has

evidence,

the

of

increased

the

degradation

services

but

possible

industry
in

ensure

the
that

availability remains widespread and that quality increases.

One indication that bank customers are being served adequately
in

this

period

of

restructuring

is

that

bank

growing steadily since the recession of 1990-91.
month period ending this past June,

loans

have

been

For the twelve-

loans of commercial banks and

savings institutions grew by 10.6 percent.

In addition, the FDIC's

data show that roughly half of the increase in loans by commercial
banks and savings institutions consists of growth in retail loans — home mortgages and other loans to consumers.

And significantly,

for every dollar of loans that banks and thrifts carry on their
books,

an

additional

outstanding.

This

65

cents

suggests

that

in

unused

the

credit

thrift customers are more than being met.




loan

commitments

needs

of

bank

is
and

11
Although

the

number

of

banking

organizations

has

been

declining over the past decade, the number of banking offices has
not significantly changed.

As of midyear 1995, there were nearly

83,000 deposit-taking offices of banks and thrifts.
number of offices was approximately 81,000.

The

In 1984, the
fact that the

number of banking offices is not much different than it was eleven
years ago is an indication that access to banking offices has not
been curtailed.

The statistic is significant when viewed against

the decline in the number of banks and thrifts described in the
first

section

institutions

of this

testimony.

is occurring,

Although

consolidation

among

banks and thrifts are in general not

closing offices.

Furthermore, electronic means of delivering banking services
have grown significantly.
(ATMs)

reached

over

The number of automated teller machines

109,000

in

1994,

up

15

percent

from

the

previous year and almost double the 55,000 in existence in 1984.
There

also

terminals.
later,

has

been

significant

growth

in

point-of-sale

These numbered 95,000 in June of 1992,

and 344,000 in June of 1994,

(POS)

155,000 a year

an increase of more than 250

percent in two years.

Finally, deposit-taking offices, ATMs, and POS terminals are
not the only means through which the banking needs of customers are
met.
also

Loan production offices and offices of nonbank affiliates
are




significant,

and

numerous.

Moreover,

the

nation's

12

customers and businesses are served by a diverse financial industry
consisting not only of depository institutions but also of such
product and service providers as finance companies, credit unions,
pension funds,

mortgage bankers,

and mutual funds.

securities brokers and dealers,

Regional banking companies have expanded their

office networks to compete in markets beyond the states where they
have established deposit-taking branches.

An analysis of recent

Annual Reports from six prominent bank holding companies shows that
while they operate deposit-taking branches in 8 to 15 states, they
have loan production offices in nearly three times as many states.

In summary, the ongoing restructuring of the banking industry
does not seem to have reduced the availability of bank services to
their customers.

THE FUTURE OF THE COMMUNITY BANK

Despite

the

overall

benefits

that

should

result

from

the

current restructuring of the banking industry, some observers have
concerns.

One set of concerns involves the community bank.

What

is the future of institutions based in, and serving mainly, a local
community?

This question is important for their customers and the

communities served by these institutions.

In addition, the future

of these banks is particularly relevant to the FDIC, which is the
primary

federal

regulator

for

two

out

of

every

institutions with less than $100 million in assets.




three

insured

These 4,912

13
institutions hold $180 billion in deposits in more than 25 million
accounts.

They operate

in 4 9 states and the U.S.

territories.

Their future is important for their customers as well.

There are many reasons to believe that community banks will
continue to play a critical role in the financial system.
banks still account for the majority of institutions.
30,

1995,

there were

nearly

8,000

commercial

banks

Smaller

As of June
and

savings

institutions with less than $100 million in assets, accounting for
two out of every three FDIC-insured depository institutions.
than

95

billion

percent
in

of

all

assets.

insured

Although

institutions

institutions

have

with

less

less

More

than

than

$1

$100

million in assets together represent only 6.8 percent of industry
assets,

they

businesses.
are

no

supply

nearly

one-quarter

of

all

loans

to

small

They operate in over 4,000 communities in which there

offices

of

larger

banks,

providing

essential

financial

services to consumers and businesses.

Moreover,
role

smaller banks have continued to play an important

in states such as California,

statewide
California,

branching
which

has

has

long

allowed

been

New York,
allowed.

unrestricted

and Virginia where
For

example,

statewide

in

branching

since 1927, community banks generally have prospered, despite being
challenged by the statewide systems of California's largest banking
organizations.

Recently, we have observed an increase in charters

throughout the country.




This would seem to indicate that community

14
banks can develop combinations of products, services, and fees that
are

competitive with those

of

larger

institutions.

enabling smaller banking organizations to contract

Indeed,

by

for off-site

back-office support and to offer products and services from remote
vendors, technology in the form of computerized communications may
be leveling the field on which small and large banks compete.

In the Federal Reserve Board's most recent Annual Report to
the Congress on Retail Fees and Services of Depository Institutions
(September 1995), the competitive abilities of local institutions
are

highlighted.

The

report

compared

for

the

first

time

fees

charged by in-state and out-of-state banks.

The report concluded

that

banks

average

fees

charged

by

out-of-state

higher than those charged by in-state banks.

are

generally

This would seem to

support the contention that the growth of interstate banking is not
necessarily a death knell for local depository institutions.

If

they can compete on price or service with out-of-state competitors,
in-state

banks

would

seem

to

be

assured

of

a

place

in

a

restructured banking industry.

The recent performance of small banks and thrifts provides
testimony to their viability.
in

four

of

the

last

six

In four of the last six years, and

quarters

through

the

middle

of

1995,

institutions with less than $100 million in assets have been more
profitable
assets




than

(ROA).

the

industry

average

as

measured

by

return

on

In 1994, and through the first six months of 1995,

15
more than 95 percent of these institutions were profitable.

More

than half reported ROAs above one percent, which is recognized as
a benchmark for strong profitability.

More than three-quarters had

ROAs above 0.75 percent.

These proportions are comparable to those

of larger

and demonstrate the competitiveness

institutions,

viability of the small-bank segment.
$100 million
assets

and

in assets have the

the highest

and

Institutions with less than

lowest proportions

capitalization

levels

of

of troubled

any

asset-size

group.

Finally, along with all other banks and savings associations,
community

banks

are

protected

from

monopolistic

unfair competition by the antitrust laws.

practices

and

Community banks may be

subject to rigorous competition, but the antitrust laws ensure that
it is fair competition.

The competitive effects of mergers and

acquisitions between banks are considered both by the appropriate
bank regulator and the Department of Justice.

Combinations that

would result in a monopoly are prohibited by law.

Combinations

that would lead to concentration in an unconcentrated market may
only be approved if such anticompetitive effects would be clearly
outweighed

by

the

public

interest

in meeting

the

needs

of the

community to be served.

In

summary,

the

smaller

service to a particular

banking

organization,

focused

on

local community and taking advantage of

competitive strengths resulting from that focus, continues to have




16

a place in the restructuring U.S. banking industry.

FDIC INITIATIVES

The restructuring of the banking industry —

a restructuring

due in large measure to the growth of interstate banking —
many

challenges

federal

for

levels.

The

industry

regulators

foremost goal

at

both

the

poses

state

of banking regulation

and

is to

ensure that regulated institutions adhere to appropriate standards
of safety and soundness.
prudential issues,

Regulators are not just concerned with

however.

Congress also has given the federal

banking agencies duties regarding such matters as the adequacy of
banking services to communities, the prevention of discriminatory
lending practices,

and anti-competitive effects.

The Regulatory Approval Process

Many of the concerns that are raised about particular merger
and acquisition transactions between large institutions, including
ii"it-®^*state transactions, can be examined and alleviated during the
applications

process.

Banking

organizations

have

long

been

required to file applications with the federal banking.agencies to
merge

with

provisions

or
are

acquire
found

other

in the

institutions.

Bank

Merger

Act,

Pertinent
the

Bank

legal
Holding

Company Act, and the Riegle-Neal Interstate Banking and Branching
Efficency Act.




These laws set forth criteria that the regulatory

17
agencies

must

consider

in

determining

whether

to

approve

transactions.

For example, under the Bank Merger Act, approval is required
from

the

appropriate

federal

institution to merge with,

agency

an

insured

acquire the assets of,

liability to pay deposits made
institution.

for

in any other

depository

or assume the

insured depository

In considering applications under the Bank Merger

Act, the agencies are required to focus on the competitive effects,
the financial and managerial resources and future prospects of the
existing and proposed institutions, and the convenience and needs
of

the

community

to

be

served.

Under

the

Riegle-Neal

Act,

interstate mergers are subject to the above-discussed nationwide
and statewide deposit concentration limits as well as an even more
probing CRA review.

Merger and acquisition applications also trigger a review of
an institution's record under the Community Reinvestment Act
meeting

the

credit

needs

of

its

community,

including

low-

in
and

moderate-income neighborhoods.

As

a result

of the

statutory

requirements,

thé. effects

of

merger and acquisition proposals by banking organizations receive
thorough

scrutiny.

Competition

issues,

safety

and

soundness

matters, and community service records all are examined.
is

satisfied




that

the

current

statutory

framework

The FDIC

allows

the

18
consequences

of

organizations,

merger

and

including

acquisition

the

largest

proposals

ones,

to

by

be

banking

addressed

adequately.

Supervision

Interstate banking organizations generally involve multiple
charters and subsidiary banks located in different states.
as

the

number

of

interstate

organizations

Thus,

increases,

the

coordination of activities and the sharing of information among the
banking regulators will become more important.
history

of

working

departments.

and

(CSBS)

adoption

working

issued

a

joint

agreements

banking departments.

the

state

banking

matters

as

resolution

between

the

encouraging

FDIC

and

the

the

state

Virtually every state now has some type of

working agreement with the FDIC.
such

assisting

In 1992, the FDIC and the Conference of State Bank

Supervisors
of

with

The FDIC has a long

the

frequency

examination procedures,

These agreements typically cover
and

type

of

examinations,

pre­

common examination and application forms,

the coordination of enforcement actions, the sharing of supervisory
information,

the training of personnel,

and access to the FDIC's

computerized database.

The CSBS has played a key role in the cooperative process.
This past May,

CSBS

issued a protocol on interstate banking and

branching that outlined the responsibilities of home and host state




19
regulators

in the evolving interstate banking environment.

The

FDIC is working with CSBS and state regulatory authorities in the
implementation of this protocol.

Among the issues under discussion

are the precise roles and responsibilities of home and host states
with regard to supervision, enforcement of state laws and regula­
tions, and the types and frequency of information exchanges.

Concerning coordination among the federal banking regulators,
the FDIC is currently working with the Office of the Comptroller of
the Currency

(OCC), the Federal Reserve Board,

Thrift Supervision

(OTS)

and the Office of

to implement Section 305 of the Riegle

Community Development and Regulatory Improvement Act of 1994.

This

provision directs the federal banking agencies to coordinate their
examinations of institutions and to develop a system for selecting
a lead agency to manage a unified examination of each depository
institution.

This system will be particularly useful for ensuring

that large multi-state institutions are adequately supervised.

Since the primary federal regulator of most

large banks is

either the OCC or the Federal Reserve Board, the FDIC is dependent
to a significant degree on those agencies, as well as the OTS, for
some of the information on large institutions required to monitor
risks to the deposit

insurance

funds.

The types and amount of

financial and other information needed by the FDIC for monitoring
risk

to

the

institutions,




funds,

for

direct

supervision

of

state

nonmember

and for backup supervision of nationally chartered

20

institutions and state-chartered Federal Reserve members are likely
to undergo changes as industry restructuring and interstate banking
growth continue.

For example, in order to assess insurance risk and to monitor
liquidity, examiners may need to focus more on cash flows, deposit
stability,

loan commitments, and borrowing arrangements.

Data on

geographical diversification and product segments may prove to be
important.

The FDIC does not expect that more information will be

needed, only that the type of information may change.

The FDIC is also looking at how data and information might
best be gathered.

While on-site examinations will continue to be

a mainstay of bank supervision, they are expensive to undertake and
are generally conducted no more frequently than once a year.

In

view of these considerations, the FDIC is investigating the use of
automated

examination

tools,

and enhanced

off-site

surveillance

techniques.

For example, the FDIC will soon field-test an automated loan
review program.
examiners

spend

This initiative will reduce the amount of time
evaluating

assuring a thorough review.

loan quality while

at the

same time

The program will capture relevant loan

data in a standardized electronic format from a bank's data files.
Those records will then be converted into an automated loan review
package.




This method of evaluating the loan function will reduce

21
the number of specialized loan reports requested from the institu­
tion by the field examiner and will reduce on-site examination time
because the electronic record will be analyzed outside of the bank.

Further, the FDIC is investigating the use of the Internet to
permit electronic submission of applications, and to make available
materials such as examination manuals, rules and regulations, and
agency publications.

The FDIC has already used the Internet to

receive public comments on proposed rules and to provide banking
statistics each quarter from the FDIC's Quarterly Banking Profile
and other publications.

Off-site monitoring has long been a tool of the regulators.
The

FDIC

Report

and the

data

and

other regulators have
other

off-site

traditionally used

information

to monitor

Call

changing

risks in individual institutions and in groups of institutions and
holding companies.
Call

Report

data

For example, financial ratios computed from the
enable

regulators

to compare banks with

their

peers and to spot movements in an institution's risk profile over
time.

Call Reports also have been used to link bank performance

with the condition of state and local economies.

Interstate banking will likely impact the way the FDIC uses
off-site data to support supervision and risk analysis.
the

number

of

institutions

that

operate

in

several

Because
states

or

regions is growing, current off-site information is becoming less




22
useful to identify high growth and high risk markets.

It may be

possible to monitor risks to the insurance funds more closely by
having large multi-state banking organizations report on geographic
and product

segments.

Reporting requirements would

have

to be

structured to weigh the usefulness of the information against any
significant

reporting

burden.

This

burden may be minimized

or

eliminated by relying on information already developed by banking
organizations themselves to manage risk internally.

Resolutions

The resolution of a failed or failing large interstate banking
organization

would

present

the

FDIC,

and

the

other

banking

regulators involved, with a wide variety of difficult problems and
complex issues.

FDIC staff has been examining what problems and

issues might arise and to the extent feasible we are formulating
contingency plans for handling a large institution in trouble.

In

formulating these plans, the FDIC is in part drawing upon its past
experiences

in

resolving

large

failed

or

failing

institutions.

Among the sizeable institutions included in the FDIC's resolution
history are Continental Illinois National Bank and Trust Company
(1984),

eight of the ten

largest banking organizations

in Texas

(1987-1993), Bank of New England Corporation (1991), and Southeast
Bank, N.A.

(1991).

More broadly, the FDIC has undertaken a project to analyze the




23
lessons of the banking problems of the 1980s and early 1990s.

This

project will document the historical record of this period both
through the study of written sources and through interviews with
bank regulators, bank executives, and other industry experts.

The

project will attempt to distill any lessons that can be gleaned
regarding early warning signals of banking problems, the efficacy
of

regulatory

efforts

to

prevent

failures,

and

the

cost-

effectiveness of alternative strategies for handling bank failures
and

disposing

combined

of

their

experience

of

assets.

The

both

FDIC

the

project
and

will

the

draw

RTC

in

on

the

handling

failures and disposing of assets.

Local Community Needs

The Riegle-Neal Act amended the Community Reinvestment Act (1)
to establish an expanded evaluation process for institutions with
interstate

branches;

(2)

to

require,

in

CRA

evaluations

for

institutions wholly located in one state, a separate evaluation for
each metropolitan area in which an institution has branches; and
(3)

to

require

a more

searching

CRA

review

in

connection

applications to establish interstate banking facilities.
Community

Reinvestment

Act

(CRA)

requirements

with

These new

• are

being

incorporated into evaluation procedures that will go into effect on
January 1, 1996, in conjunction with revised CRA regulations.

The

new procedures and revised regulations, which also streamline the
CRA examination




process

for smaller

institutions,

are currently

24
under

review

by

all

four

federal

regulators

of

depository

institutions: the FDIC, the Federal Reserve Board, the OCC, and the
°f Thrift Supervision.

We expect to complete that review

soon.

Under the expanded CRA evaluation process
with

interstate

branches,

such

institutions

for

are

institutions

to

receive,

in

addition to an overall CRA evaluation, an evaluation for each state
in which they have a branch.
information

separately

for

A state-level evaluation must present
each metropolitan

area

in which

the

institution has a branch and the state's nonmetropolitan area if
the

institution has a branch

in this area.

In addition,

if it

maintains branches in the portions of two or more states comprising
a multi-state metropolitan area,

an institution

is to receive a

separate CRA evaluation for this metropolitan area.

The state-

level evaluations are to be adjusted by any required evaluation for
a multi-state metropolitan area.

An important aspect of the revised CRA regulations is the way
in

which

they

communities.

encourage
This

institutions

to

provide

is particularly true for

including interstate institutions,

considered
performance.




provides
in

the
The

services
rating
banking

of

to

to

large institutions,

that are more likely to serve

multiple communities in both urban and rural areas.
institution

services

each

the

of

these

institution's

agencies

will

How a large

areas

will

overall

evaluate

be
CRA

service

25
performance

in several ways,

including the availability of full

service branches throughout the community,
deliver services,

alternative means to

and community development services provided to

low- and moderate-income areas.

Convenient access to full-service branches within a community
is an important factor in determining the availability of credit
and non-credit financial services.

The FDIC will continue to focus

evaluations on an institution's current distribution of branches
among

all

areas.

particularly

in

An
low-

institution's

distribution

and moderate-income

areas,

of

can

branches,
enhance

an

institution's rating.

This

may

be

particularly

applying to open new branches,

important

for

large

institutions

or to acquire or merge with other

institutions, as such applicants will need to demonstrate how they
intend to meet the convenience and needs of their communities.

As

in the past, the CRA evaluation will continue to take into account
an

institution's

record

of

opening

and

closing

branches,

particularly branches located in low- and moderate-income areas or
primarily serving low- and moderate-income individuals.

The
services

new regulations
to

low-

also encourage

and moderate-income

institutions to provide

areas

in

other

ways.

In

evaluating an institution, the regulators will consider ATMs, loan
production offices,




banking by telephone or computer,

and other

26

services.

Such means, however, are considered only to the extent

they are effective alternatives to providing services through full
service branches.

Lastly, the new regulations promote community services that
are targeted to low- and moderate-income individuals, or activities
that revitalize or stabilize low- or moderate-income areas.

The

service test of the new CRA examination procedures elevates the
importance of services considered vital to the development of safe
and

sound

lending

moderate-income

and

areas

investment

that

opportunities

otherwise

may

lack

in

the

low-

and

capital

to

sustain such activity.

For

example,

consideration
government,
income

for

or

financial

institutions will

providing

technical

tribal

housing

or

organizations

economic

receive

expertise

serving

revitalization.

to

low-

favorable

non-profit,

and

moderate-

Providing

credit

counseling, home buyers counseling, and home maintenance counseling
to promote community development will also benefit an institution's
performance.
government
result,

In

check

the

addition,
cashing

importance

programs

activities
of

such

such
will

vital

as
be

low-cost

or

considered.

affordable

free
As

services

a
in

underserved lower income neighborhoods will be emphasized.

Thus
local




the

performances

community

needs

are

of

banking

subject

to

organizations
a detailed

in meeting

statutory

and

27
regulatory scheme.

The FDIC believes that this structure provides

adequate monitoring powers to the regulatory agencies and, coupled
with

incentives

from the marketplace,

sufficient motivation

for

banking organizations to provide localized services.

SUMMARY

The

many

mergers

and

acquisitions

announced

by

banking

organizations this year are part of a long-term restructuring of
the banking industry.
the

forces

of

technology,
economy,

the

and

The restructuring, which is a response to
marketplace,

the

greater

the

greatly

mobility

of

expanded

resources

use

within

of
the

has been underway since at least the early 1980s.

The

Riegle-Neal Act of 1994 removed several impediments to this trend.

Although

the

restructuring

of

the

industry

is

a

natural

response to economic and technological changes, and may have real
advantages
without

in

encouraging

its disruptive

greater

aspects.

diversification,

While

the number

it

is

not

of community

banks has declined, the evidence suggests they can hold their own
competitively
profitability,
continue

to

against

larger

banking

price and service.
be

effective

organizations

in

terms

of

Community banks aire likely to

competitors

because

they

can

take

advantage of the opportunity to serve particular credit needs or
particular markets and to offer products and services at fees that
are competitive.




28

Bank

customers

restructuring.

ultimately

will

benefit

from

the

current

Fewer restrictions on competition should result in

innovations in products and services and greater efficiencies in
meeting

consumers'

financial

needs.

The

challenge

to

banking

regulators is to ensure that any disruptive aspects are monitored
mitigated

industry

that

the

is not threatened

disadvantaged.




so

basic

safety

and

and bank customers

soundness

of

the

are not unfairly

The FDIC is striving to meet this challenge.

Attachm ent 1

and

t

Attachm ent 1

T o p 2 5 A c q u is itio n s A n n o u n c e d in 1 9 9 5
(T h ro u g h 1 0 /1 1 )

Announcement
Date
1
2
3
4
5
6
7
6
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23 *
24
25

Seller

08/28/95 Chase Manhattan Corporation
07/12/95 NBD Bancorp, Inc
06/19/95 First Fidelity Bancorporation
02/21/95 Shawmut National Corporation
10/10/95 Meridian Bancorp
08/28/95 Integra Financial Corp
07/10/95 Midlantic Corporation
02/05/95 Michigan National Corporation
05/08/95 West One Bancorp
05/30/95 FirstFed Michigan Corporation
05/19/95 BanCal T ri-State Corporation
08/25/95 Fourth Financial Corporation
09/05/95 Bank South Corporation
09/11 /95 Summit Bancorporation
07/19/95 Premier Bancorp Inc
07/05/95 CSF Holdings
09/24/95 Brooklyn Bancorp Inc
08/28/95 SFFed Corp
08/07/95 FirsTier Financial Inc
03/08/Ö5 Chemical New Jersey Holdings
04/06/95 Columbia First Bank, FSB
04/28/95 Loyola Capital Corp
01/03/95 Coral Gables Fedcorp Inc
10/11/95 Boston Bancorp
08/04/95 Hawkeye Bancorporation

Bank/
Thrift
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Thrift
Bank
Bank
Bank
Bank
Bank
Thrift
Thrift
Thrift
Bank
Bank
Thrift
Thrift
Thrift
Thrift
Bank

Seller Assets Total

* This merger was completed on 6/1/95. All others are pending.
Securities


Source: SNL


Seller
Total
Assets
($000)
118,756,000
47,755,844
35,399,736
32,399,000
14,911,000
14,810,661
13,634,216
8,691,969
8,656,701
8,512,279
7,762,312
7,504,594
7,439,701
5,512,343
5,494,245
4,703,250
4,139,215
4,057,142
3,580,427
3,345,000
2,911,221
2,493,485
2,463,933
2,086,000
1,982,428

1369.002.902

Buyer
Chemical Banking Corp
First Chicago Corporation
First Union Corporation
Fleet Financial Group, Inc
CoreStates Financial Corp.
National City Corporation
PNC Bank Corp
National Australia Bank
US Bancorp
Charter One Financial, Inc
Union Bank
Boatmen’s Bancshares, Inc
NationsBank Corp
UJB Financial Coip
Banc One Corporation
NationsBank Corp
Republic New York Corporation
MacAndrews & Forbes Holdings Inc
First Bank System, Inc
PNC Bank Corp
First Union Corporation
Crestar Financial Corporation
First Union Corporation
Bank of Boston
Mercantile Bancorporation Inc

Bank/
Thrift

Buyer
Total
Assets
($000)

Bank
Bank
Bank
Bank
Bank
Bank
Bank
Foreign
Bank
Thrift
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Thrift
Bank
Bank
Bank
Bank
Bank
Bank
Bank

178,531,000
72,378,000
77,854,608
48,757,090
29,031,000
34,561,538
62,094,000
NA
21,438,970
6,293,892
17,211,942
33,407,940
184,188,000
15,442,954
86,783,317
183,854,000
41,715,692
14,642,942
33,456,000
64,145,000
77,313,505
14,426,885
74,243,118
45,254,000
15,296,293

Deal
Value
($MM)
11358.4
5107.0
5555.0
3645.8
3198.0
2081.7
3026.0
1517.9
1574.6
555.8
1006.4
1179.9
1624 6
1124 1
6955
516.0
529.6
266.1
7128
504.0
2328
254 5
5138
2229
345 5

Attachment 2

State Branching Laws*

Boston

Limitations on Branching’
Statewide Branching Enacted Within Past Ten Years
Statewide Branching in Effect For Over Ten Years

* States are grouped into the eight FDIC DO S supervisory regions.
'Arkansas permits statewide branching after 1998; Colorado permits statewide branching in 1997.




Prepared by: Division of Research and 9
Sources: Conference of State Bank Supt




Attachm ent 3
Com m ercial Banks and Savings Institutions

Y ear

New
Institutions1

Unassisted
Mergers and
Total
Aquisitions2_______Failures3

1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
19954

598
431
316
317
217
198
122
81
69
75
52

(395)
(388)
(660)
(678)
(462)
(455)
(527)
(525)
(638)
(670)
(393)

(149)
(199)
(231)
(413)
(537)
(379)
(269)
(179)
(51)
(14)
(6)

1 9 8 5 -1 9 9 5 4

2,476

(5.791)

(2,427)

1 New institutions include DeNovo charters, new charters created to combine other charters, and charters created
for other types of uninsured financial institutions.
2 Unassisted mergers and acquistions include combinations of charters and any voluntary liquidations.
3 Failures include assisted payouts, assisted mergers, and any transfer to the Resolution Trust Corporation.
Failures do not include any assistance to institutions that remain open.
4 Through June 30.1995.

Attachm ent 4

Percent of Bank and Thrift Assets in Multi-State Organizations

Percent of Bank and Thrift Domestic Deposits in Multi-State Organizations
Percent

70




--------------

6/84

6 /85

------------

6/8 6

6 /8 7

6 /88

6/8 9

6 /9 0

6/91

6 /9 2

6 /9 3

6/94

Prepared by: Division of Research and Statistics
Sources: Bank Summary of Deposits
Thrift Branch Office Survey
FRB NIC Database
FDIC DR S RIS Database

A tta c h m e n t 5
Number of F ed era lly-Insured Comm ercial Banks and Savings Institutions
By Asset Size*
Yr./Qtr.
95:2
94:4
93:4
92:4
91:4
90:4
89:4
88:4
87:4
86:4
85:4
84:4
84:1

Less than
$100 Million
Number
|% of
7,930
8,254
8,837
9,401
9,982
10,576
11,177
11,911
12,676
13,221
13,631
13,807
14,034

Total

$100 Million to
$1 Billion
Number
|% of Total

64.7
65.5
66.8
67.9
68.9
69.8
70.8
71.9
73.1
74.0
75.6
77.1
78.5

30.7
30.1
28.9
28.0
27.1
26.2
25.2
24.1
23.2
22.7
21.3
20.1
19.0

3,759
3,792
3,827
3,884
3,921
3,967
3,973
3,985
4,025
4,049
3,836
3,594
3,399

$1 Billion to
$5 Billion
Number

$5 Billion to
$10 Billion

% of T otal

388
389
405
426
435
470
499
511
507
484
462
409
375

Number

3.2
3.1
3.1
3.1
3.0
3.1
3.2
3.1
2.9
2.7
2.6
2.3
2.1

$10 Billion
or more

% of Total

92
93
87
82
86
85
88
92
71
75
68
59
50

Number

0.8
0.7
0.7
0.6
0.6
0.6
0.6
0.6
0.4
0.4
0.4
0.3
0.3

Total

% of Total

80
74
64
59
58
60
59
62
57
47
36
32
28

0.7
0.6
0.5
0.4
0.4
0.4
0.4
0.4
0.3
0.3
0.2
0.2
0.2

12,249
12,602
13,220
13,852
14,482
15,158
15,796
16,561
17,336
17,876
18,033
17,901
17,886

Assets of Federally-Insured Commercial Banks and Savings Institutions
By Asset Size*
Less than
$100 Million
Yr./Qtr.

Assets

95:2
94:4
93:4
92:4
91:4
90:4
89:4
88:4
87:4
86:4
85:4
84:4
84:1

$354,785
366,345
388,472
401,966
412,705
423,960
436,058
457,330
477,774
490,312
489,922
484,170
482,454

$100 Million to
$1 Billion

% of Total

6.8
7.3
8.3
8.9
9.1
9.1
9.2
9.7
10.6
11.3
12.3
13.3
14.3

Assets

% of Total

$962,844
969,139
975,725
996,429
1,008,979
1,020,390
1,028,182
1,037,334
1,031,801
1,038,162
985,035
934,770
874,915

* Excludes Institutions operating in RTC conservatorship.

FDIC Division of Research and Statistics, RIS



18.6
19.3
20.7
22.0
22.2
22.0
21.8
21.9
22.9
24.0
24.7
25.6
25.9

$1 Billion to
$5 Billion
Assets

$836,752
850,211
883,409
927,719
964,673
1,034,167
1,093,290
1,096,655
1,073,738
992,492
936,800
827,910
746,222

$10 Billion
or more

$5 Billion to
$10 Billion

% of Total

16.1
16.9
18.8
20.5
21.2
22.2
23.1
23.1
23.8
22.9
23.5
22.7
22.1

Assets

$644,157
671,097
626,293
580,012
604,639
605,861
639,324
620,073
483,646
515,354
472,688
403,091
332,415

% of Total

Assets

12.4 $2,389,397
2,162,509
13.4
1,833,181
13.3
1,629,763
12.8
1,552,646
13.3
1,564,271
13.0
1,530,020
13.5
1,525,893
13.1
1,435,100
10.7
1,291,245
11.9
1,108,881
11.8
1,003,176
11.0
938,115
9.9

Total

% of Total

46.1 $5,187,935
43.1
5,019,301
38.9
4,707,080
35.9
4,535,889
34.2
4,543,642
33.7
4,648,649
32.4
4,726,874
32.2
4,737,285
31.9
4,502,059
29.8
4,327,565
27.8
3,993,326
27.5
3,653,117
27.8
3,374,121

Attachm ent 6
Number of Bank Holding Companies
Number
7 ,0 00

r —

4 ,0 0 0

3 ,0 00

One-Bank Holding Companies
1,000
0
12/84

12/85

12/86

12/87

12/88

12/89

12/90

12/91

12/92

12/93

12/94

6/95

Multi-Bank Holding Companies

7 30

876

959

9 80

976

9 56

965

921

8 75

848

839

830

One-Bank Holding Companies

4 ,9 77

5,101

5 ,025

5,001

4,961

4 ,9 5 9

4 ,9 1 3

4 ,9 0 9

4 ,8 3 8

4 ,6 85

4 ,547

4,497

Total

5,707

5,977

5,9 84

5,981

5 ,9 37

5 ,9 15

5 ,8 7 8

5 ,8 30

5 ,7 13

5 ,5 33

5,386

5,327

Number of Banking Organizations
Number
16,000
14.000

12.000
10,000

Bank Holding Com panies

8,000

6,000
4 .0 0 0

2.000

Independent Banks & Thrifts

0
12/84

12/85

12/86

12/87

12/88

12/89

12/90

12/91

12/92

12/93

12/94

6/95

Bank Holding Com panies’

5,707

5,977

5,984

5,981

5 ,9 37

5 ,9 15

5 ,878

5 ,8 30

5 ,7 13

5 ,533

5,386

5,327

Independent Banks & Thntts

9,180

8,8 00

8,331

7 ,880

7 ,3 4 3

7 ,0 20

6 ,4 1 6

5 ,9 05

5 ,536

5 ,128

4,664

4.477

14,887

14,777

14,315

13,861

13,280

12,935

12,294

11,735

11,249

10,661

10,050

9.804

Total

* Includes one-bank holding companies




Prepared by: Division of Research and Statistics
Sources: FRB NIC Database
FDIC DRS RIS Database

Attachm ent 7

Number of Commercial Banks, 1984 -1995

12/84

12/85

12/86

12/87

12/88

12/89

12/90

12/91

12/92

1 2 /93

12/94

6 /95

12/94

6 /9 5

Number of Savings Institutions, 1984 -1995*
Number of Institutions

4.000

3.000

2.000

1.000

12/84

12/85

12/86

12/87

Excludes institutions in RTC conservatorship




12/88

12/89

12/90

12/91

12 /92

1 2 /93

Prepared by: Division of Research and Statistics
Sources: FDIC DRS RIS Database

Attachm ent 8
th e Proportion of Domestic Deposits
Held by the Largest Banking Companies
Number of Companies with 25% of Domestic Deposits

12/84

12/85

12/86

12/87

12/88

12/89

12/90

12/91

12/92

12/93

12/94

6/95

12/94

6/95

Number of Companies with 50% of Domestic Deposits

193
176

12/84

12/85

12/86

12/87

12/88

12/89

12/90

12/91

12/92

12/93

Number of Companies with 75% of Domestic Deposits

* Includes deposits of insured commercial banks and savings institutions.
Individual companies have been accounted for at their highest level of consolidation
(multi-bank bank holding companies, single-bank bank holding companies or independent
banks/th rifts)




Prepared by: Division of Research and Statist
Sources: FDIC DRS RIS Database

Attachm ent 9

Number of Multi-State Organizations, 1984 -1994*

* Multi-state organizations are bank holding companies and
independent depository institutions with banking operations
m two or more states.




Prepared by: Division of Research and Statistics
Sources: Bank Summary of Deposits
Thrift Branch Office Survey
FRB NIC Database
FDIC DR S RIS Database

Attachm ent 10

State Elections Under the Riegle-Neal Act
as of September 29, 1995
Legislation Passed
Opt-In
Alabama —Brings state's existing interstate banking law into conformance with the Riegle-Neal
Act, allowing nationwide banking on September 29, 1995. Allows interstate branching through
mergers and acquisitions in May 1997.
Colorado —Allows interstate branching through acquisition on June 1, 1997.
Connecticut — Allows interstate branching d£ novo and by acquisition, effective upon passage.
Delaware — Allows interstate branching by acquisition of institutions at least five years old,
effective September 29, 1995.
Idaho —Allows interstate branching through acquisitions, effective July 1, 1995.
Illinois — Permits interstate branching through acquisition; de novo branching prohibited,
effective June 1, 1997.
Louisiana —Allows interstate branching by acquisition of institutions at least five years old; dg
novo branching prohibited, effective June L 1997.
Maryland — Out-of-state banks would have several options for establishing a presence: (1)
acquisition of existing banks; (2) purchases of single bank branches; (3) de novo entry. The
legislation contains a reciprocity provision. Effective September 29, 1995.
Nevada — Provides for interstate branching by acquisition beginning September 28, 1995;
acquired institutions must be five years old. De novo branching prohibited in counties of more
than 100,000 people.
New Hampshire —Allows interstate branching by acquisition of institutions at least five years
old, effective June 1, 1997.
North Carolina —Allows interstate branching <âg novo and by acquisition of all or substantially
all of the assets of a bank or branch, effective immediately (reciprocal until June 1, 1997,
unrestricted thereafter).
North Dakota — Removed restrictions in state's interstate banking law.
branching by acquisition or merger after May 31, 1997.




Allows interstate

Oregon —The first state to pass opt-in legislation. A 1993 law authorized state-chartered banks
to branch across state lines. The current legislation extends this branching authority to national
and state member banks.
Pennsylvania —Authorizes reciprocal interstate branching by acquisition or de novo, effective
upon Governor's signing of the legislation.
Rhode Island —Allows interstate branching d£ novo on a reciprocal basis, permits acquisition
of branch only; effective immediately.
Tennessee —Provides for interstate branching on June 1, 1997.
Utah — Mergers and acquisitions across state lines permitted as of June 1, 1995. Institutions
must be at least five years old prior to acquisition. Dç novo branching is prohibited.
Virginia — Opt-in legislation includes provision for dê novo branching on a reciprocal basis.

Opt-Out
Texas -- Opted out of interstate branching, sunsets on September 2, 1999.

Legislation Pending
Opt-in — California"', Massachusetts, Michigan, New Jersey and New York.

"'Legislation authorizing interstate branching on June 1, 1997, has cleared both the House and
Senate; the Governor has yet to sign the legislation.




Attachm ent 11

Failures by Banking Organization
(includes commercial banks and savings institutions)
(dollars in thousands)

Year o f
failure

One-institution organizations
Number Failures Percent

Multi-institution, one-state
organizations
Number Failures Percent

Multi-institution, multi-state
organizations
Number Failures Percent

1985

14,165

144

1.02

675

3

0.44

55

0

0.00

1986

13,908

175

1.26

806

5

0.62

70

0

0.00

1987

13,362

214

1.60

858

8

0.93

101

0

0.00

1988

12,897

364

2.82

845

8

0.95

135

1

0.74

1989

12,316

466

3.78

825

11

1.33

151

0

0.00

1990

11,984

355

2.96

787

10

1.27

170

1

0.59

1991

11,332

249

2.20

779

5

0.64

187

5

2.67

1992

10,821

151

1.40

728

3

0.41

193

0

0.00

1993

10,377

48

0.46

681

1

0.15

194

0

0.00

1994

9,814

15

0.15

646

0

0.00

202

0

0.00




Sources: FDIC Division of Research RIS database and failed bank database
FRB NIC database
Prepared 10/10/95 by FDIC Division of Research and Statistics (WSK)