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Research Papers in Economics

1084 FEDERAL RESERVE BULLETIN NOVEMBER 1937
CHANGES IN THE NUMBER OF NATIONAL AND STATE BANKS
1921-1936
DURING
During the years 1921-1936 the number of
national and State banks
1 in operation de-
creased by 14,238, from 29,206 at the begin-
ning of 1921 to 14,968 at the end of 1936. The
number of national banks decreased during
the 16-year period from 8,124 to 5,325, or by
2,799, and the number of State banks de-
creased from 21,082 to 9,643, or by 11,439.
The net decrease of 14,238 during the
period 1921-1936 in the number of operating
national and State banks is accounted for
principally by the suspension of 14,344 banks,
the consolidation, merger, or absorption of
6,852 banks, and the liquidation of 1,141
banks. The decreases were offset in part by
the organization of 4,601 new banks during
the period, the reopening of 1,905 suspended
banks, and the licensing and reopening of
1,233 banks which were not granted licenses
by June 30, 1933 and were counted as sus-
pensions in 1933.
Of the 4,601 new banks which were or-
ganized
 2 during the period, 1,437 were na-
tional banks and 3,164 were State banks. The
number of national banks discontinued
through consolidation, merger or absorption
during the period was 2,054 and the number
of State banks thus discontinued was 4,798.
The 14,344 suspensions in the 16-year period
comprised 2,719 national banks and 11,625
State banks. There were conversions of 617
State banks into national banks and 254 con-
versions of national banks into State banks
during the 16-year period.
The tabulations that follow analyze changes
in the number of national banks and State
banks during 1921-1936 by years and by
States. The various classifications of changes
in the number of banks are defined in the fol-
lowing paragraphs.
A primary organization represents the
chartering of a newly organized bank. A pri-
mary organization can usually be distin-
guished without difficulty from a consolida-
tion, merger, absorption, succession or con-
version of a going bank, in spite of the fact
that any of these transactions may require the
issuance of a new charter, but it is frequently
difficult to distinguish from a reopening. The
1 Exclusive of mutual savings and private banks. See also note
following Table 3. 2 These figures exclude new banks organized to succeed operat-
ing banks ; for the years 1933-1936, however, they include new
banks organized to succeed unlicensed national and State banks.
extent to which the stockholding interests, as-
sets and deposits of a suspended bank con-
tinued intact was the important factor in de-
termining whether to classify the bank as a
primary organization or a reopening. For the
years 1933-1936, however, the figures of pri-
mary organizations include all new banks or-
ganized to succeed unlicensed national and
State banks, because it was not practicable to
determine from available information the ex-
tent to which the stockholding interests, as-
sets and deposits of the unlicensed banks con-
tinued intact in the new bank. If a suspended
national bank reopened as a State bank, or
vice versa, it was considered a primary or-
ganization and not a reopening. A new bank
chartered to succeed an operating bank was
not counted as a primary organization.
A conversion constitutes the issuance to an
active bank of a national charter to supersede
a State charter under which it has previously
been operating, or of a State charter to super-
sede a national charter. In other words, a
charter in one system is given up and a
charter in another system is procured. A con-
version from a private bank constitutes the
issuance of a national or State charter to an
existing private bank. A conversion to a pri-
vate bank constitutes the surrender by an in-
corporated national or State bank of its
charter and continuance of its business as an
unincorporated enterprise.
Only simple conversions looking towards
permanent operation under the newly issued
charter and involving no other change in
status were included in this category. Some
conversions are effected merely as a necessary
legal step in a consolidation, merger, or ab-
sorption, the new charter being surrendered
shortly after the conversion. In such cases a
conversion was not regarded as having oc-
curred but rather a consolidation, merger or
absorption, with the exception that if the tem-
porary bank's existence ran over the end of
the calendar year it was considered as a con-
version in the year in which it occurred and
as a consolidation, merger or absorption in
the year following. This was necessary in
order to make the status of changes agree, in-
sofar as practicable, with the number of banks
shown in year-end abstracts of condition re-
ports.
Federal Reserve Bulletin: November 1937NOVEMBER 1937 FEDERAL RESERVE BULLETIN 1085
A reopening of a suspended bank (other
than an unlicensed bank) constitutes the re-
sumption of operations by a bank which had
previously suspended. The reopening may be
accompanied by a change of name and the
issuance of a new charter and still be classed
as a reopening rather than as a primary or-
ganization. For the years 1933-1936, how-
ever, all new banks organized to succeed un-
licensed national and State banks have been
classed as primary organizations rather than
as reopenings, because it was not practicable
to determine from available information the
extent to which the stockholding interests,
assets and deposits of the unlicensed bank
continued intact in the new bank. A reopen-
ing under a single charter of two or more
suspended banks was classed as a single re-
opening. In cases where a national bank re-
opened as a State bank, or vice versa, the
transaction was counted as a primary or-
ganization and not as a reopening.
A reopening of an unlicensed bank consti-
tutes the resumption of operations by a bank
which had not been granted a license to re-
open following the banking holiday (in March
1933) by June 30, 1933. Unlicensed banks
which were granted licenses to reopen be-
tween March 15 and June 30, 1933, have not
been included in the tabulations (either as
suspensions or reopenings). All banks not
granted licenses to, reopen by June 30, 1933,
have been included among suspensions, and
any of such banks which subsequently were
granted licenses to reopen have been consid-
ered as reopenings of unlicensed banks.
A suspension constitutes the closing of a
bank to the public, either temporarily or per-
manently, by supervisory authorities or by
the bank's board of directors on account of
financial difficulties, whether on a so-called
moratorium basis or otherwise, unless the
closing was under a special holiday declared
by civil authorities. If a bank closed under
a special holiday declared by civil authorities
and remained closed only during such holi-
day or part thereof, it has not been counted
as a suspension. Banks which, without ac-
tually closing, obtained agreements from de-
positors to waive a portion of their deposits
or to defer the withdrawal of a portion of
their deposits have not been classed as sus-
pensions. Banks which were reopened or
taken over by other institutions after suspen-
sion have been included as suspensions. The
figures for 1933 include all banks not granted
licenses following the banking holiday in
March 1933 which were subsequently placed
in liquidation or receivership (including un-
licensed banks absorbed or succeeded by other
banks), and all other unlicensed banks which
had not been granted licenses to reopen by
June 30, 1933.
A consolidation, merger or absorption rep-
resents the corporate union of two or more
going banks into one bank which continues
under a single charter, whether new or old.
The term is used not in a legal or technical
sense but in an economic sense, the essential
factor being that the business of two or more
going banks becomes concentrated under one
charter and one management. Banks ab-
sorbed by other banks and converted into
branches have been counted as consolidations,
mergers or absorptions. This classification
also includes cases in which a given bank was
absorbed by two or more banks which distrib-
uted its business among themselves and cases
in which the assets and liabilities of a weak
bank were transferred to another bank in
order to avoid suspension. The figures shown
for this classification represent the number
of banks that went out of existence or were
converted into branches by reason of consoli-
dations, mergers or absorptions, i. e., the con-
tinuing or absorbing banks are not counted.
A voluntary liquidation constitutes the
voluntary discontinuance of operations and
the surrender of its charter by an active bank.
Voluntary liquidations legally incidental to
conversions or consolidations, mergers or ab-
sorptions have not been counted separately
as liquidations but have been included among
conversions or among consolidations, mer-
gers or absorptions. If a bank transferred
its assets, or the greater portion of them, to
another bank under an agreement whereby
the latter assumed the liabilities of the for-
mer, the change was classified as a consolida-
tion, merger or absorption, not as a liquida-
tion.
Unclassified changes include all cases in
which, because of lack of essential data or be-
cause of special circumstances involved in the
change, it was impossible to classify the
change under any of the headings shown in
the tables. In order that the increases and
decreases might be reconciled with the actual
net increase or decrease during the period in
the number of banks, minor differences not
accounted for were shown as "Unclassified."
The number of "Unclassified" changes was
Federal Reserve Bulletin: November 19371086 FEDERAL RESERVE BULLETIN NOVEMBER 1937
larger in 1933 than in any other year as a re-
sult of the numerous and, in some cases, in-
volved changes in the status of banks, also
because of the temporary disruption of the
reporting services following the banking hol-
iday. The number of "Unclassified" changes
is very small, however, in relation to the num-
ber of other types of changes and in relation
to the net reduction of more than 14,000 banks
during the 16-year period 1921-1936, which
the tabulations were designed to analyze. All
unclassified changes occurred with respect to
State banks and none with respect to national
banks.
Federal Reserve Bulletin: November 1937

Changes in the number of national and state banks during 1921-1936

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Changes in the number of national and state banks during 1921-1936

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