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Full text of "Banking turnover and facilities in Illinois"

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-.aNKi;:.^ TURNOVER 
AND FACILITIES 



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IIBRAR 

OF THE 

UNIVLRSITY 

Of ILLINOIS 



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IVERSITY OF ILLINOIS BULLETIN 



Vol. XXXIV 



Issued Twice a Week 
June 4, 1937 



No. 80 



[Entered as second-class matter December 11, 1912, at the post office at Urbana, Illinois, 
under the Act of August 24, 1912. Acceptance for mailing at the special rate of post- 
age provided for in section 1103, Act of October 3, 1917, authorized July 31, 1918.] 



BUREAU OF BUSINESS RESEARCH 

COLLEGE OF COMMERCE AND BUSINESS 
ADMINISTRATION 



BANKING TURNOVER AND 
FACILITIES IN ILLINOIS 



BY 



ARTHUR H. WINAKOR 




BULLETIN No. 55 



PUBLISHED BY THE UNIVERSITY OF ILLINOIS, URBANA 

1937 



It is the purpose of the Bureau of Business Re- 
search of the University of IlHnois — 



(1) to study and as far as possible to ex- 
plain economic and industrial conditions 
within the State ; 

(2) to direct attention to experience-tested 
practices of good business management; 
and, 

(3) to investigate methods for securing the 
best executive control of business. 



BUREAU OF BUSINESS RESEARCH 

Charles M. Thompson, Ph.D., LL.D., Director 

A. C. Littleton, Ph.D., C.P.A., Assistant Director 



Bulletin No. 55 



BAiNKING TURNOVER AND FACILITIES 

IN ILLINOIS 



BY 

ARTHUR H. WINAKOR 
Bureau of Business Research 



Published by the University of Illinois, Urbana 

1937 



UNIVERSITY 
OF ILLINOIS 

2900 — 6-37—12174 ••'- ''""^ = = 






PREFACE 

The data upon which this study is based have been collected over 
a period of several ^ears. Until recently, however, the time did not 
seem opportune for the publication of a banking study. Xow that 
banking is in a relatively stable condition, it is possible to appraise 
past events and perhaps to make some surmises as to the future. 

Within the past year or two an increasing number of studies have 
been published dealing with various aspects of banking. Some of 
these, such as the study of Bank Chartering History and Policies of 
the United States by the Economic Policy Commission of the Ameri- 
can Bankers Association, have surveyed the situation in the entire 
country. There is ample need for more detailed studies of the numer- 
ous aspects of banking in the various states. Some of this latter t}'pe 
have already appeared. The present study has been undertaken in 
order to provide a better understanding of the situation in Illinois. 
Some of the ideas on chartering policies were suggested b}" the study 
first mentioned. 

With little exception, the data for this study were taken from two 
main sources. For national banks the primar\- source has been the 
Annual Reports of the Comptroller of the Currency, including the 
Individual Statements of Condition of Xational Banks. In one or two 
instances these have been supplemented by the Abstract of Reports of 
Condition of Xational Banks. Data for state banks were taken mostly 
from the reports of the Auditor of Public Accounts entitled Statements 
Shozi'ing Total Resources and Liabilities of Illinois State Banks. 
Additional information regarding state banks was provided by the 
Monthly Bulletin issued by the Banking Department under the Auditor 
of Public Accounts. 

Dr. Clive F. Dunham and Dr. Rexford C. Parmelee, formerly of 
the Bureau staff, aided with the initial work on this study. Later, parts 
of the work were done by John \'. Machell. Jr.. as well as other 
members of the Bureau staff, whose help has been very valuable. 

Arthur H. Wixakor 

lune. 1937 



TABLE OF CONTENTS 

PAGE 

I. Introduction 7 

II. Private Banking in Illinois, 1917 to 1921 . . . . 9 

III. Banking Turnover in Illinois, 1921 to 1935 ... 15 

IV. Banking Facilities in Illinois Towns 41 

V. Conclusions 56 



I. INTRODUCTION 

The present time seems particularly suitable for presenting certain 
studies of banking. Unit banking has apparently reached or com- 
pleted a definite stage in its development. What the future holds in 
store is difficult to say. Analyses of past happenings, however, are 
always of value if they point out former weaknesses or in any way 
provide a background for the interpretation of current events. It would 
be a bold prognosticator, indeed, who would venture the supposition 
that our banking difficulties are all in the past. The failure of banking 
reforms of recent years to make any fundamental change in the nature 
and organization of the banking units and structure warrants a feeling 
of uncertainty as to the future. Such uncertainty prompts this study. 

After the period when banks expanded both in numbers and in 
resources, and after the subsequent contraction and losses, there have 
occurred a series of reforms. The full effects of these measures have 
not yet had an opportunity to manifest themselves. The question of 
whether these reforms are of such a sort that they will avoid or remedy 
the weaknesses of the past is still unanswered. This comment is not 
made with the intention of minimizing recent banking reforms; rather 
the purpose is to assist in placing them in their proper setting for more 
adequate appraisal. 

This study was undertaken with the purpose of adding some factual 
data to those available for answering such questions. The bulletin is 
confined to one section of the entire banking structure. Some of the 
major changes and influences in banking are omitted, not because they 
are unimportant, but because an analysis of them would extend the 
scope of the investigation beyond the facilities available. 

This study, as the title indicates, is confined to banking in Illinois. 
Banking conditions in this state provide a particularly suitable medium 
for examination of banking problems and experience. For one thing, 
Illinois has experienced rather severe banking difficulties. Furthermore, 
it contains a relatively large proportion of the country's banks, includ- 
ing the large financial metropolis of Chicago, as well as rural areas with 
small banks. This is a true unit-banking state with restrictions against 
branch banking, and with limited group or chain banking development. 
In respect to certain policies of bank control, Illinois has been a rather 
serious offender in the past. 

A brief section of the bulletin is devoted to the status of private 
banking in Illinois just prior to the state law of 1917 which abolished 
private banks and forced them either to take out state or national 



8 Bulletin No. 55 

charters, or to dissolve. These paragraphs provide a setting for the 
main study of corporate banks which follows. 

The focus of the study is centered in changes in the numbers and 
kinds of banks throughout the period of years, 1921 to 1935. Emphasis 
is placed on such aspects of banks as turnover, consolidations, failures, 
and chartering policies. In other words, the picture presented concerns 
the changes of banking facilities in a broad sense, and is not confined to 
failures alone. The availability of banking facilities in various-sized 
communities is examined under conditions of changing trends in 
banking. 



II. PRIVATE BANKING IN ILLINOIS, 1917 TO 1921 

In order to provide a background for later topics and also afford a 
convenient starting point in the recent banking development of the 
state, the banking situation that led to the passage of the state law 
abolishing private banks is briefly discussed. 

Prior to January 1, 1921, Illinois had a banking system composed 
of national banks, state banks, and unincorporated private banks. 
Neither the state nor the federal government exercised control or 
supervision over these private banks. They were free to operate as 
they chose in so far as capital, types of loans made, kinds of invest- 
ments, types of deposits, reserves, and the like, were concerned. 
Difficulties and abuses among the private banks led to insistence for 
reform. The remedy proposed took the form of the "Private Bank 
Bill,"^ passed by the state legislature in 1917, approved by the people 
in 1918, and effective January 1, 1921. 

This act abolished private banking. Since about three years inter- 
vened between the passage and the effective date of the act, it is evi- 
dent that private bankers had some time to choose whether to cease 
operations, or to incorporate as state or national banks. 

In June, 1918, there were 511 private banks in Illinois." By 1919 
the number had been reduced to approximately 400.^ 

Since 94 new state bank charters were granted from July, 1917, 
through June, 1919, it seems probable that many of the private banks 
had already changed over in accordance with the law.* Many more did 
likewise in the next year and a half. For the most part the private 
banks took out state rather than national charters. 

Most of those private bankers w^ho wished to continue in business 
took out state charters because of the very liberal provisions as to mini- 
mum capital requirements for state banks. In order to facilitate the 
change from private banking, the new act made it exceedingly easy for 
these banks to obtain charters. Effective December 1, 1920, the capital 
requirements set up in the law were as follows for incorporated places:^ 



^Clarence F. Buck, Illinois Blue Book, 1917-18, p. 65. 
^Ibid., p. 65. 

'Andrew Russel, Illinois Blue Book, 1919-20, p. 45. 
^Statement of Illinois State Banks, December 31, 1921, pp. 24-25. 
°"An Act to Revise the Law with Relation to Banks and Banking," Banking 
Laiv, State of Illinois, Auditor's Edition, 1921, pp. 8-9. 



10 Bulletin No. 55 

Population of Minimum Capital 

Community Requirement 

500 or less $ 10,000 

501 to 1,500 15,000 

1,501 to 5,000 25,000 

5,001 to 10,000 50,000 

10,001 to 50,000 50,000 to 3100,000 

More than 50,000 100,000 to 200,000 

For unincorporated places, whatever their size, a minimum capital of 
$10,000 was permissible. 

Prior to 1918 the minimum capital for state banks had been 
$25,000 for communities of 5,000 population or less, $50,000 if the 
population was 5,000 to 10,000, $100,000 if the population ranged from 
10,000 to 50,000, and $200,000 if the population- exceeded 50,000. An 
act which became effective in November, 1918, lowered the capital re- 
quirements in all groups except those with 5,000 to 10,000 population, 
in which the required capital was held at $50,000. Unincorporated 
communities were permitted banks with as little as $10,000 capital. In- 
corporated towns or villages with less than 1,500 population were per- 
mitted to have banks with as little as $15,000 capital. A minimum 
capital of $25,000 was authorized in towns and villages of from 1,500 
to 5,000 persons. In towns of 10,000 or more the former requirements 
were cut in half, but there were restrictions as to the amounts of 
deposits which could be accepted with these ininima. And, as was 
pointed out in the preceding paragraph, a still lower standard went 
into effect on December 1, 1920. 

Thus it is evident that the provisions setting capital requirements 
had been lowered even before the passage of the bill to facilitate the 
incorporation of private banks. The law which became effective on 
December 1, 1920, further liberalized capital provisions, setting up two 
groups where previously there had been only one. Formerly the banks 
in incorporated places of less than 1,500 population were required to 
have a capital of $15,000. The new act permitted minimum capital of 
$10,000 in incorporated places of less than 500 population, the same 
amount as for unincorporated places. In towns and villages of 500 to 
1,500 persons, banks had to have capital of at least $15,000, just as 
they had before. The net result of these changes was the provisions 
which are shown in tabular form above. 

These provisions, except for the modification in 1920, were in force 
from November, 1918, until December, 1924. They permitted a sharp 
lowering of the standards which had been in eft"ect for many years 
prior, both as to minimum capital and as to size of community m 
which the smaller capital was permissible. These acts did not require 
a paid-in surplus in addition to the share capital of the banks. 



Banking Turnover and Facilities in Illinois U 

Most of these changes were made in the interest of the small 
private banks. Without such changes in the law, many of them would 
have had no choice but to cease operating. There can be little doubt 
that the laxity of these laws gave rise to many bank difftculties in the 
following decade. Many of the private banks changed over to corpor- 
ate banks, for the most part to state banks. Once having organized 
with a small capital, they were not obliged by later acts to increase the 
amount. Many of these small banks with meager capital funds were 
elements of weakness later. Insufficient capital to absorb unusual losses 
and lack of funds and market for adequate diversification contributed 
to their difficulties. 

In 1918, 26 state banks in all were chartered. Only one of these 
had a capital of less than $25,000, the law lowering capital require- 
ments having been effective in only the last month of this year. In 1919 
the movement from private to state banks is clear. In this year 124 
charters were granted, 23 in Chicago and 101 downstate. All but six 
of the Chicago charters were for the minimum capital of $100,000. 
Of the other 101 banks. 29 had capital of $25,000, 3 had capital be- 
tween $15,000 and $25,000, 21 had capital exceeding $10,000 but not 
exceeding $15,000, and 6 had capital of $10,000. Thus, 30 of the 101 
had organized with less than $25,000 of capital stock. 

The following year was the last during which private banks were 
permitted to operate and the last in which they could take out state 
or national charters. In the last month of this year the still lower 
capital provisions became effective in the incorporated towns of 500 or 
less population. In this calendar year, 1920, a total of 416 state charters 
was granted. This number was approximately 30 per cent of the total 
number of banks in operation at the end of 1920. All but 18 of these 
banks were chartered outside Chicago. Thirteen of the 18 in Chicago 
had minimum capital of $100,000. Twenty-eight downstate banks 
chartered had $10,000 capital, 73 had capital in excess of $10,000 but 
not exceeding $15,000, 17 had capital between $15,000 and $25,000, and 
an additional 130 had $25,000 capital. 

There was a marked decline in the new state charters for 1921, 
after the effective date for abolishment of private banks; 50 were 
issued, of which 22 were for Chicago banks. Fourteen banks in Chi- 
cago organized with $100,000 capital. Ten banks outside Chicago 
were of $15,000 capital or less. 

In the three years from 1919 to 1921 inclusive, Illinois granted 590 
charters, 63 to Chicago banks and 527 to banks outside Chicago. This 
figure of 590 represented an unprecedented growth in state banks. On 
January 1, 1919, there had been 854 state banks in operation. The new 



12 Bulletin No. 55 

charters granted amounted to 69 per cent of the 854. Although a few 
banks were removed by faikire, consohdation, and the like, during 
this period, the number was relatively small. 

On January 1, 1919, there had been 96 state banks in Chicago, so 
that the 63 new charters were 66 per cent of the earlier total. Down- 
state, the 527 new charters were 70 per cent of the 758 banks operating 
at the beginning of the period. 

A comparison of the banks taking out state charters during this 
period that were the direct successors of private banks with all other 
state banks operating at this time was made, in order to see what their 
relative success was over a period of years. For this purpose all 
private banks in Illinois that were listed in Polk's Bankers Encyclo- 
pedia for September, 1918, were examined. A total of 524 private bank 
offices were found, a few of which were branches of private banks. By 
the time the prohibition of private banking became efifective in 1921, 
a total of 79 of these were no longer in operation. Sixty-three of the 
79 had discontinued business, 11 had consolidated with other banks, 
and 5 had lost their identity by being absorbed into other banks. 

This left 445 of the private banks which continued to function 
under state and national charters. Only 12, however, took out national 
charters. The remainder, 433, were incorporated under state charters. 

At the end of 1921 there were 1,897 state and national banks oper- 
ating in Illinois besides 2 in temporary suspension. By the end of 
1935 only 723 of these were left; the remainder of 1.176, or 61.9 per 
cent, had gone out of business. Of the 445 former private banks, 271, 
or 60.9 per cent, were gone by the end of 1935. In this respect the 
private banks did as well as all banks. Since only a few of the former 
private banks took out national charters, it may be fairer to compare 
them with state banks. Of the 1,400 state banks operating at the end 
of 1921, 62.3 per cent were gone by the end of 1935. State banks that 
had not recently been private banks lost almost 63 per cent of their 
number between 1921 and 1935. 

In each of these comparisons the former private banks seem to 
have done as well or slightly better than the other banks. The com- 
parison is not clear-cut, but it does suggest that those banks that took 
out charters incidental to the private bank act were as well managed 
and had a survival power equal to that of the other chartered banks, 
most of which did not directly have their roots in former private banks. 

The foregoing comparisons were made on the basis of banks gone 
for any reason, whether failure, consolidation, suspension, absorption, 
or liquidation. It is believed that more detailed examinations of these 
factors would not greatly change the inferences. In these former 



Banking Turnover and Facilities in Illinois 13 

private banks certain elements were present that are frequently lacking 
among many of the incorporated banks. One is the factor of family 
name and prestige. Many of the private banks were owned by old, 
established families. Even after incorporation, family responsibility 
and independence asserted themselves. No doubt, too, certain valuable 
lessons of experience had been learned by these old bankers. Incor- 
poration and supervision probably gave these banks a higher stability 
than they might otherwise have attained. 

These comparisons suggest that the banking difficulties of later 
years were more fundamental than the question of weaknesses intro- 
duced by private banks with small capital. No doubt these did add an 
element of weakness, but it was only one factor among many and 
should not be singled out for undue criticism. 

Minimum capital requirements for new state banks were exceed- 
ingly low from November 30, 1918, to November 1, 1924, particularly 
in the period from December 1, 1920, to November 1, 1924. These 
were the periods in which most private banks took out state charters. 
But there were also a number of entirely new banks organized at this 
time that took advantage of the exceedingly low capital requirements. 
As will be pointed out in later pages, new banks apparently are less 
stable than old, hence these might have introduced an unstable quality 
because of both their size and their newness. 

The banks chartered between November 30, 1918, and November 
30, 1924, were classified into those incorporated prior to December 1, 
1920, and those on or after that date. In the first of these two periods 
284 new state banks were organized, 66 of these with less than $25,000 
capital, of which 50 were formerly private bankers and 16 newly 
organized concerns. Twenty-eight of the private bankers, or 56 per 
cent, chose the minimum capital permitted when they incorporated ; 
eleven of the newly organized concerns, or 69 per cent, had the mini- 
mum capital. Only 8 of the 66 banks had over $15,000 capital, and 
none had over $20,000. 

In the second part of the period, when capital requirements were 
even more liberal, 260 state banks were chartered; 102 of these had 
less than $25,000 capital. Although the minimum capital remained at 
$10,000, it became possible to organize a bank of this size in incor- 
porated places with as little population as 500 or less. Of the 102 
banks, 84 were traced to former private banks, and 18 were evidently 
new bank outlets. Only 40 of the total, or approximately 40 per cent, 
incorporated at the minimum capital for the town in which they oper- 
ated. Six of these were new banks and 34 were former private banks. 
Thus about 40.5 per cent of the private bankers incorporated with 



14 Bulletin No. 55 

minimum capital as compared with 60 per cent in the earher period, 
even though requirements were somewhat lower in this later period. 
Though relatively fewer were chartered with the minimum, most 
of them were nevertheless very small. Of the 62 chartered with 
more tlian the required minimum capital, only 17 had more than 
$15,000 of capital stock. In this respect there was no significant varia- 
tion between newly organized banks and the successors of private 
banks. Fifteen of the 17 banks whose capital stock exceeded $15,000 
employed $20,000, and one employed $24,000. 



III. BANKING TURNOVER IN ILLINOIS, 1921 TO 1935 

Because of the prestige which for years has been associated with 
financial institutions, they have been looked upon as far more stable 
than they are as a matter of fact. It is not uncommon to see studies 
of the turnover and mortality of retail and other types of establish- 
ments. The same approach and point of view are here applied to the 
banks of Illinois. In this manner a fairly adequate picture may be ob- 
tained of banking stability or instability. 

A summary of the banks in operation in Illinois in the past fifteen 
years is contained in Table I. For state and national banks combined 
the picture shown is one of declining numbers. From 1,897 in opera- 
tion in 1921, the number rose to a peak of 1,912 in operation in 1922, 
after which there was an uninterrupted decline to 875 in 1933, and a 
slight increase since then to 890 in 1935. This was a shrinkage of 53.1 
per cent in the number from 1921 to 1935. The trends for the changes 
in numbers of state banks and national banks are similar, except that 
the losses of the former were more severe. The percentage change 
from 1921 to 1935 was a decline of 57.8 per cent for state banks as 
compared with 39.8 per cent for national banks. 

These figures give no clue to the actual number of banks which 
were in operation within this entire period. Actually there were 2,278 
dififerent banks in operation at some time in these fourteen years. If 
this total number is used as the basis of comparison, then the actual loss 
in number of banks in the period becomes 60.9 per cent. For state 
banks the number of dift'erent banks was 1,637, and the revised per- 
centage of loss is 63.9. The revised total of national banks is 641 and 
the percentage of loss, 53.4. These figures include as losses banks 
which failed, consolidated, converted from state to national, or vice 
versa. They do not in every case represent the loss of a bank, but they 
do indicate the exceptionally rapid rate of turnover of banks, usually 
regarded as stable. Since the number of transfers from one system to 
the other was small, the losses in bank numbers are attributable pri- 
marily to the other factors mentioned. The problems opened by this 
paragraph will be pursued in greater detail in later pages. 

Some other interesting information is to be found in Table I. In 
Cook county the number of banks continued to increase while the 
number of downstate banks steadily declined. There was a steady 
increase in the banks in Cook county from 261 in 1921 to 337 in 1928. 
The same trend is found for both state and national banks, although 
national banks reached their peak one year later. The entire number 
of banks in Cook county increased by 29.1 per cent from 1921 to 1928; 

15 



16 



Bulletin No. 55 



Table I 

Number of State and National Banks Operating in Illinois, Cook County, 

AND Downstate, 1921 TO 1935 

(Data as of December 31 of each year or for the last call as reported in Individual 
Statements of National Banks) 



Year 


AH Banks 


Cook County Banks 


Downstate Banks 


Total 


State 


National 


Total 


State 


N&tiona! 


Total 


State 


National 


1921 


1,897 


1,400 


497 


261 


221 


40 


1,636 


1.179 


457 


1922 


1,912 


1,411 


501 


270 


229 


41 


1,642 


1.182 


460 


1923 


1,911 


1,407 


504 


286 


241 


45 


1,625 


1.166 


459 


1924 


1,902 


1,402 


500 


293 


246 


47 


1.609 


1,156 


453 


1925 


1.898 


1,394 


504 


303 


253 


50 


1.595 


1,141 


454 


1926 


1,872 


1,379 


493 


321 


271 


50 


1.551 


1.108 


443 


1927 


1,836 


1,347 


489 


331 


280 


51 


1.505 


1,067 


438 


1928 


1,816 


1,328 


488 


337 


283 


54 


1.479 


1,045 


434 


1929 


1,765 


1,283 


482 


331 


274 


57 


1,434 


1,009 


425 


1930 


1,589 


1,145 


444 


303 


248 


55 


1.286 


897 


389 


1931 


1,294 


912 


382 


197 


156 


41 


1.097 


756 


341 


1932 


1,079 


742 


337 


124 


99 


25 


995 


643 


312 


1933 


875 


612 


263 


98 


73 


25 


777 


539 


238 


1934 


898 


606 


292 


99 


69 


30 


799 


537 


262 


1935 


890 


591 


299 


98 


66 


32 


792 


525 


267 



state banks alone increased by 28.1 per cent, as compared with 35.0 
per cent for national banks. Measured relative to their number in 
1921, by 1935 all banks in Cook county had declined by 62.5 per cent, 
and the state and national banks, respectively, had fallen off by 70.1 per 
cent and 20 per cent. 

The actual number of different banks operating in Cook county 
v\ras 439, of which 84 were national and 355 were state. By 1935 only 
22.3 per cent of the 439 were still operating. For state and national 
banks, the comparable figures were 18.6 per cent and 38.1 per cent, 
respectively. 

The situation in Chicago was not essentially different from that in 
Cook county as a whole, although the turnover of banks was even 
more rapid. In 1921 the city had 27 national banks and 155 state banks, 
a total of 182. By 1935 there were 21 national and 34 state, a total of 
55 banks. These figures indicate that 77.8 per cent of the national 
banks, 21.9 per cent of the state banks, and 30.2 per cent of all banks 
in Chicago in 1921 were operating in 1935. The adjusted figures show 
that the numbers of different banks in operation within the period 
studied were 61 national and 257 state, a total of 318. In the light of 
these figures, the percentage of banks operating in 1935 to the total 
banks chartered or operating at any time from 1921 to 1935 makes a 
much poorer showing. The adjusted figures indicate that the numbers 
operating in 1935 were 34.4 per cent for the national, 13.2 per cent for 
the state, and 17.3 per cent for both combined. 



Banking Turnover and Facilities in Illinois 



17 



Table II 
Percentage Declines in Number of Illinois Banks, 1921 to 1935 



Classification 


Illinois 


Downstate 


Cook County 


Chicago 


A. Based on Number Operating, End of 1921 


State 


57 8 
30.8 


55.5 
41.6 
51.6 


70.1 
20.0 
62.5 


78 1 


National 

Total 


22.2 
69 8 






B. 


Based on Entire Number Operating Within Period 




State 

National 

Total 


63.9 
53.4 
60.9 


59.0 
52.1 
56.9 


81.4 
61.9 

77.7 


86.8 
65.6 
82.7 



The remaining figures in Table I show the numbers of banks 
operating in the downstate counties. The trends are quite similar to 
those for the entire state. Except for interruptions in one or two 
years the number of banks in operation steadily declined. From the 
total of 1,636 downstate banks in 1921 to 792 in 1935 there was a loss 
of 51.6 per cent. The change in state banks from 1,179 in 1921 to 525 
in 1935 was a loss of 55.5 per cent. National banks in this same period 
fell from 457 in 1921 to 267 in 1935, a decrease of 41.6 per cent. 

There were approximately 100 more state and 100 more national 
banks operating in this period in downstate Illinois than Table I shows. 
If the basic figures are revised to allow for this greater turnover, the 
losses in bank numbers become 52.1 per cent for national banks, 59.0 
per cent for state banks, and 56.9 per cent for both combined. 

The various percentages which have been presented in the fore- 
going paragraphs are summarized in Table II. In each case the na- 
tional banks had a distinctly more favorable record than the state 
banks. Downstate counties as a whole made a better showing than 
either Cook county or Chicago. 

Comparisons of the figures in the upper and lower halves of the 
table indicate that those in the lower half, in every instance, reflect a 
greater loss in banks. The reason is that the figures in the lower half 
include all banks, irrespective of the length of time they operated, 
whereas the other set makes a comparison between 1921 and 1935 and 
overlooks any intervening changes. For national banks in Chicago and 
Cook county, the lower set of data reflects a much greater turnover of 
banks than the other. Although the numbers of national banks in 
operation in 1921 and 1935 were not greatly different, a number of 
national banks organized subsequent to 1921, as well as some operating 
at the end of 1921, had gone out of business by the end of 1935. 



18 



Bulletin No. 55 



Table III 

Per Capita Deposits of State and National Banks in Illinois, Downstate 

Counties, Cook County, and Chicago, 1921 to 1935 





Illinois 


Downstate 


Chicago 


Cook County 


Year 


Counties 


excluding Chicago 


1921 


J39S 


«228 


5622 


3205 


1922 


446 


240 


720 


231 


1923 


462 


257 


732 


260 


1924 


514 


264 


838 


277 


1925 


522 


273 


843 


290 


1926 


528 


274 


852 


289 


1927 


529 


278 


845 


298 


1928 


556 


287 


889 


310 


1929 


524 


270 


841 


272 


1930 


518 


237 


879 


206 


1931 


373 


182 


626 


112 


1932 


305 


144 


515 


71 


1933 


292 


119 


510 


72 


1934 


378 


155 


654 


107 


1935 


446 


180 


771 


141 



Another method by which the status of banking may be viewed is 
in terms of the deposits per bank. Related to this is the population 
of the area to be served. 

The factor of deposits is analyzed next, followed by an analysis of 
population relative to banks. 

Table III contains data regarding the average deposits per person 
in the entire state, in the downstate counties, in Cook county, in Chi- 
cago, and in Cook county exclusive of Chicago. For the state as a 
whole deposits per person steadily increased from $395 in 1921 to $556 
in 1928. From that year to 1933 there was a continued decline to $292, 
the lowest figure in the entire series. In 1934 and 1935, marked im- 
provement brought the per capita deposits up to $446, although they 
were still well below those of normal years. 

Because the figures for Chicago heavily weight the totals for Illi- 
nois, they are shown separately. Many of the large banks in the 
Chicago money market receive deposits from outlying banks in Illinois 
and in other states, and in addition are bankers to large corporations. 
Thus they differ materially from most banks in Illinois. 

Per capita bank deposits in Chicago showed a trend similar to that 
of the entire state, although on a higher level. Furthermore, the 
decline in per capita deposits from 1931 to 1933 was less severe and 
the recovery somewhat greater. In 1935 the deposit per person in 
Chicago was $771 as compared with $446 for the entire state. 

If Chicago and the remainder of Cook county are omitted from the 
total for the state, the deposits per capita are much lower. The figures 
range from $228 in 1921 to $287 in 1928, followed by a decline to 



Banking Turnover and Facilities in Illinois 19 

$119 in 1933. The recovery in 1934 and 1935 brought the figure back 
to $180. 

Cook county exclusive of Chicago reflects a peculiar trend. It 
shows a much wider range of fluctuation. Here the growth was from 
$205 in 1921 to $310 in 1928. The following slump was very severe, 
and only a minor recovery has occurred since. Each year after 1928 
deposits per person declined, from $310 in 1928 to $71 in 1932. By 
1935 the figure was $141, only 45.5 per cent of the peak figure. If 
the 1921 figure is taken as a base, then the peak figure of 1928 was 
51.2 per cent above, the low of 1932 was 65.4 per cent below, and the 
figure for 1935 was 31.2 per cent below the base. 

Chicago maintained a better per capita figure than either the re- 
mainder of Cook count}^ or all the other counties. Its 1935 figure was 
24.0 per cent above that for 1921. Part of this showing may be due 
to the corporation and outlying bankers' balances on deposit in Chi- 
cago. It is quite evident, however, that the banks as a whole had lost 
a large element of deposits which they formerly carried. 

There are a number of factors which account for these variations in 
per capita deposits. Besides the more obvious changes due to varia- 
tions in price levels, population, and the like, there are more funda- 
mental economic movements that have influenced banking and banking 
deposits. Among the latter one may mention banking failures with 
their influence upon confidence in solvent institutions, postal savings, 
and the depression influence upon the incomes and savings of the 
people. 

Changes in price level have a definite efifect upon deposits, particu- 
larly since a large part of the deposits represent business balances. 
Changes in volume of business and in price levels are reflected either 
in increasing or in decreasing deposits. Changes in employment, with- 
drawal of savings for consumption, and changes in wages largely 
influence savings deposits. As important as any of these factors is the 
opportunity provided by postal savings as a haven for scared money. 
In some communities such postal deposits exceed bank deposits. Then, 
too, certain communities which formerly had banks are now without 
such facilities. Part of the money formerly deposited in banks finds 
its way into the banks of neighboring towns, some into postal savings, 
and some is held on hand. 

Perhaps a more direct analysis ma}^ be made by an examination 
of deposits in terms of banks rather than population. This has been 
done in Table IV, the first three columns of which give the average 
deposits for all state banks in Illinois, all national banks, and both 
combined. 



20 



Bulletin No. 55 



Table IV 

Average Deposits per Bank for Illinois, Chicago, and Illinois Exclusive of 

Chicago, 1921 to 1935 

(000 omitted) 

















Illinois Exclusive 


Year 




Illinois 






Chicago 






of Chicago 




State 


National 


All 


State 


National 


All 


State 


National 


All 




Banks 


Banks 


Banks 


Banks 


Banks 


Banks 


Banks 


Banks 


Banks 


1921 


« 1.085 


«2,231 


« 1,385 


56,706 


«26,748 


$ 9,679 


?386 


$ 822 


?505 


1922 


1,263 


2,446 


1,573 


7,825 


29,554 


11,044 


418 


842 


534 


1923 


1,319 


2,608 


1,659 


7,532 


28.211 


10,690 


454 


930 


586 


1924 


1,552 


2,826 


1,887 


9,070 


30.022 


12,324 


486 


967 


619 


1925 


1,633 


2,840 


1,953 


9,423 


28.812 


12,485 


507 


1,020 


650 


1926 


1,686 


3,012 


2,035 


9,199 


29.143 


12,296 


521 


1.076 


675 


1927 


1,722 


3,180 


2,110 


8,856 


29.844 


12.121 


550 


1,125 


712 


1928 


1,783 


3,612 


2,274 


8,785 


33,113 


12.682 


585 


1.192 


758 


1929 


2,011 


2,851 


2,241 


10,638 


21,973 


12.611 


558 


1.168 


733 


1930 


2,237 


3,155 


2,494 


12,274 


24,843 


14,554 


523 


1,184 


717 


1931 


2,111 


2,480 


2,220 


15,849 


23,584 


17,359 


438 


1,066 


630 


1932 


1,063 


4,644 


2,182 


8,927 


90,105 


24,711 


397 


940 


571 


1933 


1,023 


6,224 


2,586 


10,902 


85,428 


32,984 


369 


1.093 


587 


1934 


1,324 


7,331 


3.276 


14,712 


88,870 


41,197 


476 


1.336 


754 


1935 


1,638 


8,428 


3,919 


18,901 


100,010 


49,870 


584 


1.510 


893 



In 1921 the average deposit of state and national banks in Chicago 
was $9,679,000. By 1924 the average had increased to the twelve- 
milUon figure, which it held through 1929. This relatively stable figure 
of deposits obscures the rapid increase in the number of Chicago 
banks, from 182 in 1921, to 231 in 1928. This increase in number 
tended to reduce the average deposits. With the rapid decline in 
number of banks which was in full swing by 1930, the deposits per 
bank mounted. This increase was due both to the smaller number of 
banks, and to the better survival power of the large banks, so that the 
deposits in terms of averages grew rapidly. By 1935 the average was 
$49,870,000 in deposits per Chicago bank, or about five times the 
figure for 1921, and by far the largest of the entire period. 

Although the trends of state and national bank deposits are quite 
similar, they do disclose some distinct variations. For the entire pe- 
riod national bank deposits averaged about four times the size of the 
state deposits. Some of the important movements in deposits were 
due to the occasional shifting of a large bank from a state to a national 
charter, or vice versa. The fluctuations in the average deposits of state 
banks were much wider than for the national banks. 

The banks in Illinois outside Chicago, of course, average much 
smaller than the Chicago banks. Combined state and national banks 
outside Chicago had $505,000 deposits in 1921. After a steady increase 
to $758,000 in 1928 and a sharp decline to $571,000 in 1932, their 
average deposits reached a new peak of $893,000 in 1935. 



Banking Turnover and Facilities in Illinois 21 

Their averages are also influenced by changes in the numbers of 
banks, but these changes were less severe and radical than in Chicago. 
Nevertheless, the changing deposit figures are due to a decrease in 
total banks, and in recent years to business recovery and government 
policy. Quite clearly, even in the years prior to 1930, the average 
deposits per bank did not show a healthy growth, if recognition is 
given to the reduction in the number of banks among which to divide 
the total deposits. 

The national banks ranged from two to three times the size of the 
state banks in their average deposits. Not only were the deposits of 
state banks smaller, but their fluctuations by way of losses were more 
severe. The average of $369,000 for 1933 was below the 1921 figure 
of $386,000. Two years later, however, the average deposits had 
jumped to $584,000, which practically equalled the peak in 1928. 
National banks varied from $822,000 in 1921, to a high of $1,192,000 
in 1928. The decline which set in reduced deposits to $940,000 in 1932, 
which was still above the 1921 figure. This low point occurred one 
year earlier than for state banks, and the recovery which followed 
started earlier. In both 1934 and 1935, average deposits of national 
banks established new peaks. 

These figures have dealt in averages. Just as there are many banks 
above these averages, so too there are many smaller banks. It is these 
smaller banks that are faced with the greatest problems. These are 
not new problems ; they are the same as those which have proved 
themselves deterrents to profitable and successful small-bank operation 
in other years. 

To list only a few, one may mention the small amount of earnings 
available to pay reasonable expenses and yield a fair return on the 
capital funds invested, without accepting poor quality loans or making 
hazardous investments. 

Besides, there is the ever present danger that a loan or a few loans 
or investments may prove bad, and the small capital funds thus be 
impaired. Lack of sufficient high-grade loans, as well as inadequate 
diversification, is another reason for the relatively greater difficulties 
of successful operation of small as compared with large banks. 

The automobile, by providing rapid transportation, has made it 
easy for the small-town business man to keep accounts in the larger 
centers. Chain stores have reduced the needs for local business loans. 
The continued decline of many small towns has reduced their popula- 
tion and at the same time decreased both the local activity and needs 
for business loans. 



22 Bulletin No. 55 

New kinds of competition have also develpped from the many types 
of federal activities. Efforts of the federal government to provide 
loans at very low rates to farmers for short and long term needs, home 
mortgage purchases, and the like, have in one way or another been 
reflected in reductions of bank activities and earnings. In some respects 
these activities have helped banks out of difficulties ; in others they 
have multiplied bank problems. Incessant pressure for lower interest 
rates, not only on loans to farmers, home owners, and others, but in 
the large money markets, with its reduction of yields on investment 
securities, has made it increasingly difficult for many banks, particu- 
larly the smaller institutions, to show a satisfactory volume of business 
or to earn a reasonable return on their capital. 

A condensed summary of what happened to banks in Illinois from 
1922 to 1935 inclusive, is found in Table V. The data in this table 
are in terms of numbers of banks. The first section of the table is for 
state and national banks combined. This is followed by separate 
summaries for state banks and for national banks. 

Section A of the table shows the total number of banks operating 
in Illinois, at the last call in 1921, classified according to Chicago, the 
remainder of Cook county, and the downstate counties. All additions 
to these banks within the fourteen years are summarized. This infor- 
mation is followed by items showing the disposition of the banks in 
this same period of time. 

In the fourteen-year period 379 banks were chartered and started 
operations. Only 362 of these were additions to the number of banks, 
since the other 17 represented new charters issued to former state and 
national banks which transferred from one system to the other. The 
entire number of banks operating in the period was 2,278. These con- 
sisted of 1,839 downstate banks, of which 201 were added subsequent 
to 1921; 318 Chicago banks, of which 136 w^ere additions; and the 
remainder of 121 in Cook county, of which 42 were added. In Cook 
county and in Chicago the number of new banks chartered was rela- 
tively greater in comparison with the number formerly operating than 
in the downstate counties. In part this greater increase may have been 
justified by the rapid growth of the metropolitan area of Chicago. 

From these totals of banks there are deducted the losses in bank 
numbers. Consolidations of one bank with another reduced the number 
of banks by 119, of which 51 were in Chicago, 8 in the remainder of 
Cook county, and 60 downstate. A somewhat smaller number of bank 
losses was attributable to absorption of one bank by another or to the 
assumption of debts and assets of one bank by another. There were 
85 of these cases, 71 in downstate counties and 14 in Chicago. Besides 



Banking Turnover and Facilities in Illinois 



23 



Table V 
Summary of Turnover of Illinois Banks, 



1922 to 1935 



Item 




Downstate 



Cook 
County 
Outside 
Chicago 



Chicago 



A. Total State and National Banks in Illinois 



Total banks operating, end of 1921 . . 
Additions to banks: 

Restored in 1922 

New banks chartered 

Conversions from national or state. 

Total additions 

Total operating, organized, etc 



Losses: 

Consolidated with national or state 

Absorbed by national or state 

Converted to national or state 

Total consolidations, absorptions, & conversions 

Receivership 

Liquidation 

Suspension 

Conservatorship 

Total defunct 

Total losses (consolidations, absorptions, defunct) . . 

Net number operating, end of 1935 

♦Suspended and restored 



1,897 



2 


2 


362 


193 


17 


8 


381 


203 


2,278 


1,839 


119 


60 


85 


71 


17 


8 


221 


139 


637 


469 


417 


343 


74 


59 


39 


37 


1,167 


908 


1,388 


1,047 


890* 


792* 


51 


46 



1,636 




182 



129t 

7 
136 
318 

51 
14 

7 

72 

127 

56 

8 

191 
263 

55* 
3 



B. State Banks in Illinois 



Total banks operating, end of 1921 . 
Additions to banks: 

Restored in 1922. 

New banks chartered 

Conversions from national 

Total additions 

Total operating, organized, etc 



Losses: 

Consolidated with state 

Consolidated with national 

Absorbed by state 

Converted to national 

Total consolidations, absorptions, & conversions 

Receivership 

Liquidation 

Suspension 

Conservatorship 

Total defunct - 

Total losses (consolidations, absorptions, defunct) . . 

Net number operating, end of 1935 

♦Suspended and restored 




155 



102 

102 

257 

39 
8 

"7 
54 

106 

55 

8 

169 

223 

34* 
3 



C. National Banks in Illinois 



Total banks operating, end of 1921 

Additions to banks: 

New banks chartered 

Conversion from state 

Total additions 

Total operating, organized, etc 

Losses: 

Consolidated with state 

Consolidated with national 

Absorbed by state 

Absorbed by national 

Converted to state 

Total consolidations, absorptions, & conversions 

Receivership 

Liquidation 

Suspension 

Conservatorship 

Total defunct 

Total losses (consolidations, absorptions, defunct) . . 

Net number operating, end of 1935 

♦Suspended and restored 




27 

27t 

7 
34 
61 

1 
3 
9 
5 

is 

21 
1 



22 
40 
21 



tSame bank. 

{Includes one bank which continued under old charter. 



24 Bulletin No. 55 

there were 17 conversions from one system to another. Total losses in 
bank facilities by consolidations, absorptions, and conversions were 
thus 221, or 9.7 per cent. This indicates the small extent to which 
declines in bank outlets were due to orderh^ combining of bank assets 
and facilities. 

By far the greater portion of changes in the number of banks was 
due to forced or involuntary reductions. These included receiverships, 
suspensions, conservatorships, and liquidations. Even these do not tell 
the complete story, since many of the 221 absorptions and consolida- 
tions no doubt had as their motive the assistance of one bank by 
another. 

By the end of 1935 there were 1,167 defunct banks other than 
those lost by absorptions, consolidations, and conversions. These 1,167 
were just about half (51.2 per cent) of the 2,278 banks which operated 
within the period. For the 101 downstate counties, the 908 defunct 
banks were slightly less than half of the total banks. In Chicago the 
191 defunct banks were three-fifths of the total. And in the remainder 
of Cook county the defunct banks constituted more than half of all 
banks in operation in the period from 1922 to 1935 inclusive. 

Of this total of 1,167 defunct banks, the largest group was ac- 
counted for by the 637 in receivership. The next largest group was 
those in liquidation, namely, 417.° The remaining two groups were 
small, 74 in suspension and 39 in conservatorship. Most of these were 
in the downstate counties. 

Chicago accounted for nearly one-third of all bank consolidations 
in Illinois ; it also contributed about one-sixth of losses from defunct 
banks. The same idea may be made clearer by comparing bank losses 
from voluntary and involuntary causes with the total number of banks. 
For the entire state, as has been mentioned, consolidations and absorp- 
tions equalled 9.7 per cent of the total banks. Defunct banks accounted 
for 51.2 per cent of the total. In the downstate counties consolidations 
and absorptions accounted for 7.6 per cent of the total banks as com- 
pared with 49.4 per cent defunct. Cook county, exclusive of Chicago, 
had percentages of 8.3 and 56.2, respectively. In contrast to these fig- 
ures, consolidations, conversions, and absorptions in Chicago amounted 
to 22.6 per cent of the total banks. This figure was almost three times 
as high as in the remainder of the state. It suggests the dynamic 
character of banking in Chicago, as well as the opportunities for com- 
bining banking facilities in a large city. Defunct banks in Chicago 



"This group contains a few banks that liquidated vokintarily without loss 
to depositors, but their number is too small to impair the general situation 
reflected by the data. 



Banking Turnover and Facilities in Illinois 25 

amounted to 60.1 per cent of total banks, a moderately higher figure 
than for the remainder of IlUnois. 

If the percentages of bank losses from all reasons are combined, 
they amount to 60.9, 56.9, 64.5 and 82.7 per cent for the entire state, 
for the 101 counties, for Cook county, and for Chicago, respectively. 
Because of absorptions and consohdations, Chicago differs materially 
from the others. Subtracting these percentages from 100 gives the 
percentage of banks operating at the end of 1935. The actual numbers 
operating are given at the bottom of Section A. For the entire state 
the number was 890. 

Even these figures give only a partial indication of bank changes. 
In addition to the gains and losses in bank numbers listed in the table, 
there were 51 banks which at some time after 1921 and before the end 
of 1935 had been suspended and then restored to good standing. For 
all practical purposes these 51 banks should be added to the 1,167 and 
the 1,388 to get the full measure of bank instability in these years. 
Practically all of these banks that were suspended and restored were 
in downstate counties. 

Section B of Table V contains data of a similar order for state 
banks alone. It shows more clearly the gains from and losses to na- 
tional banks. The total of 1,402 state banks operating at the beginning 
of 1922 was divided into 155 in Chicago, 66 in the remainder of Cook 
county, and 1,181 in downstate counties. 

To these there were added 235 banks from 1922 to 1935 inclusive. 
One of these represented a conversion of a national to a state bank; the 
rest were newly chartered. Although these additions constituted less 
than 9 per cent of the number initially operating in the downstate 
counties, they approximated 50 per cent of the Cook county banks, and 
66 per cent of the Chicago banks. 

Losses in bank numbers have been divided into two groups. The 
first represents those cases in which the bank going out of business 
was either taken over by another or changed in form. These represent 
for the most part, mild, orderly, and voluntary bank changes, with little 
likelihood of losses to depositors. In fact, in most cases they are 
healthy changes and helpful to the banking structure. 

Consolidations of one state bank with another removed 85 banks 
from the total. Consolidations of a state with a national bank removed 
another 20 units from independent status. Sixteen state banks con- 
verted to national banks. In all, 124 state banks were lost in these 
ways. These losses represented approximately 5 per cent of the down- 
state banks, 20 per cent of the Chicago banks, and 10 per cent of the 
banks in the remainder of Cook countv. 



26 Bulletin No. 55 

Involuntary losses, due to receivership, liquidations, suspensions, 
and conservatorships, accounted for 922 banks that went out of the 
state system. This constituted 56.3 per cent of the total operating in 
the period. The percentages of defunct banks were 54.3 for down- 
state counties, 58.2 for Cook county exclusive of Chicago, and 65.8 for 
Chicago. 

In addition to these changes in banks, 46 banks were suspended and 
then restored to good standing within the years 1922 to 1935. Practic- 
ally all of these were in downstate counties. 

In Section C of Table V the national bank data are summarized. 
At the end of 1921 there were 497 national banks in Illinois, 27 of 
which were in Chicago. A total of 144 national banks were added in 
the next 14 years, 16 of these banks representing conversions from 
state to national charters, and hence no change in total facilities. For 
the downstate counties the 100 additional banks amounted to more than 
20 per cent of the 1921 number. In the case of Chicago banks, the 34 
new charters exceeded the original number of 27. Even if the 7 state 
banks which converted to nationals are omitted, the charters issued 
to new national banks in Chicago between 1922 and 1935 equalled 100 
per cent of the number operating at the end of 1921. 

Losses of national banks in terms of numbers amounted to 342, 
made up of 97 consolidations, conversions, and absorptions and 245 
defunct banks. This is in the ratio of about 2 voluntary bank changes 
to 5 banks in receivership, liquidation, suspension, or conservatorship. 
For the state banks the ratio was less than 1 to 7. Downstate national 
banks had about one voluntary loss to each 3 involuntary losses. In 
Chicago national bank consolidations and absorptions approached in 
number the losses through defunct banks. Cook county, excluding 
Chicago, had only one voluntary loss. 

As a rule, the ratio of voluntary bank losses to involuntary losses 
was greater for the national banks and for the Chicago banks. A 
partial explanation is to be found in the fact that relatively more of the 
national banks operate in the cities, thereby affording greater oppor- 
tunity for bank consolidations of a purely voluntary type, as well as 
making possible the assumption of assets and deposits of weak banks 
by the stronger. Chicago, both because of the dynamic character of its 
banking, and because of the opportunities for some banks to lend 
assistance to others, reported relatively more consolidations and absorp- 
tions for both state and national banks than the rest of Illinois. 

Another series of facts evidencing the instability of banking in 
Illinois is contained in the data for Table VI and those immediately 
following. These tables present figures of a similar type, but for differ- 



Banking Turnover and Facilities in Illinois 



27 



Table VI 

Number of Banks Operating in Illinois at the End of 1921, New Banks 

Subsequently Organized, and the Number of Each 

Open and Closed, 1922 to 1935 

(Data are for December 31 of each year or last call as reported in Individual 
Statements of National Banks) 





Old Banks 


New Banks 


All Banks 


Year 






















Total 
1921 


Closed 


Open 


Organ- 
ized 


Closed 


Open 


Organized 
Plus Old 


Closed 


Open 


1922 


1,899* 


18 


1,881 


31 





31 


1,930* 


18 


1,912 


1923 


1,899 


57 


1,842 


70 


1 


69 


1,969 


58 


1,911 


1924 


1,899 


96 


1.803 


104 


5 


99 


2,003 


101 


1,902 


1925 


1,899 


120 


1,779 


124 


5 


119 


2,023 


125 


1,898 


1926 


1,899 


178 


1,721 


161 


10 


151 


2,060 


188 


1,872 


1927 


1,899 


231 


1,668 


181 


13 


168 


2,080 


244 


1,836 


1928 


1,899 


278 


1,621 


212 


17 


195 


2,111 


295 


1,816 


1929 


1,899 


341 


1,558 


239 


32 


207 


2,138 


373 


1,765 


1930 


1,899 


514 


1,385 


274 


70 


204 


2,173 


584 


1,589 


1931 


1,899 


765 


1,134 


287 


127 


160 


2,186 


892 


1,294 


1932 


1,899 


950 


949 


304 


174 


130 


2,203 


1,124 


1,079 


1933 


1,899 


1,150 


749 


334 


208 


126 


2,233 


1,358 


875 


1934 


1,899 


1,158 


741 


370 


213 


157 


2,269 


1,371 


898 


1935 


1,899 


1,176 


723 


379 


212 


167 


2,278 


1,388 


890 



*Two banks in suspension in 1921 were restored in 1922. 



ent detailed groups. The first table is for the entire state, both state 
and national banks, combined. This is followed by data in separate 
tables for all state banks, all national banks, Chicago banks, and those 
outside Chicago. 

Table VI provides a basis for examination of banks and policies 
from several view-points. First, there are shown the total number of 
banks operating at the end of 1921 and the losses in these banks by 
years through 1935. Then figures are presented for newly chartered 
banks in the same periods as well as the losses therein. In this manner 
a comparison is possible between the numbers of old and new banks 
lost. It is possible further to analyze the bank-chartering policies. 

The first column in Table VI shows that 1,899 banks, both state 
and national, were operating in 1922. The second column gives cumu- 
lative totals of the numbers of these banks that were gone in each year. 
The third column gives the difference between the first two, or the 
number operating at the end of each year. Cumulative figures through 
1935 indicate that of the orginal 1,899, only 723 were left in 1935. The 
remainder, 1,176, had failed, merged, consolidated and lost their 
identity, or otherwise disappeared. Thus, 61.9 per cent of the banks 
operating in Illinois in 1922 were gone by 1935. 

In the meantime, however, there w^as a continual succession of new 
banks being opened. Between 1921 and 1928 over two hundred new 



28 



Bulletin No. 55 



Table VII 

Turnover of New and Old Banks in Illinois, 1922 to 1935: Percentage of 

Banks Gone by the End of Each Year to Number of Banks in 

Operation at the Beginning of the Year 



Year 


Old Banks 


New Banks 


All Banks 


1922 


0.9 





0.9 


1923 


2.1 


3.2 


2.1 


1924 


2.1 


S.8 


2.3 


1925 


1.3 





1.3 


1926 


3.3 


4.2 


3.3 


1927 


3.1 


2.0 


3.0 


1928 


2.8 


2.4 


2.8 


1929 


3.9 


7.7 


4.3 


1930 


11.1 


18.4 


12.0 


1931 


18.1 


27.9 


19.4 


1932 


16.3 


29.4 


17.9 


1933 


21.1 


26.2 


21.7 


1934 


1.1 


4.0 


l.S 


1935 


2.4 


.* 


1.9 



Source: Data contained in Table VI. 

*Because of the restoration of one bank in 1935, the number of new banks closed was smaller in 
1935 than in 1934. 



banks were chartered, or more than one for every ten in operation in 
1922. In fact, the 212 newr charters issued by 1928 were not far below 
the losses of the original 1,899 banks, which by 1928 amounted to 278. 
By the end of 1935, the total new charters were 379 in number and 
represented the equivalent of about one-third of the losses from the 
original 1921 group. 

But in the intervening years, while these new banks were being 
chartered, some of them were also faiUng, consoHdating, or otherwise 
going out of business. Even by 1928, 17 of the 212 new banks had 
gone out of business ; by 1935, 55.9 per cent of these 379 newly char- 
tered banks were gone. When it is considered that these 379 banks 
operated on the average less than half as long as the original 1,899, 
since they were all chartered after the year 1921, the percentage of 
newly chartered banks which were gone by 1935 — namely, 55.9 — is 
very high when compared with the 61.9 per cent of the 1,899 banks 
which started out in 1922. 

In fact, there was a much greater turnover among these new banks 
than among those which were operating in 1922. This was shown in 
the following manner. The number of banks gone by the end of each 
year was divided by the number of banks in operation at the beginning 
of each year. These figures are summarized in Table VII. In five of 
the fourteen years, the percentages of new banks gone to the new 
banks operating at the first of the year were less than the comparable 
figures for the old banks. In the remaining nine years the percentages 



Banking Turnover and Facilities in Illinois 29 

of banks gone were greater for the new than for the old banks. Fur- 
thermore, the percentage gone was much larger for new banks than for 
old banks in the nine years, whereas there were only slight differences 
in the percentages in those five years when new banks gone were 
relatively less than old banks. 

in 1924, for example, the old banks gone by the year end were 
only 2.1 per cent as compared with 5.8 per cent for the new banks. In 
1929 the percentages were 3.9 and 7 .7 for old and new banks. In 1932 
they were 16.3 and 29.4 for old and new banks, respectively. And in 
1934 the percentages were 1.1 and 4.0. 

Another way of showing this greater turnover among the new banks 
is to compare the total number of years that the banks could have 
operated had they remained in operation in the entire period studied, 
or from their organization if chartered after 1921, with the total years 
they actually functioned. On this basis the old banks operated 73.6 
per cent of the possible total years contrasted with 64.6 per cent for 
banks chartered subsequent to 1921. Clearly, on any basis, the turn- 
over among new banks was more rapid and the risks of new ventures 
greater. 

The combined figures which are given in the last three columns of 
Table VI show that there were 2,278 banks operating at some time 
during the years 1922 to 1935, that 890 were still operating at the end 
of 1935, and that the difference of 1,388, or 60.9 per cent, were gone 
by the end of 1935. The percentages of banks gone to banks operating 
range from a minimum of 0.9 per cent in 1922 to a maximum of 21.7 
per cent in 1933. In 1935, 2 per cent of the banks were gone by the 
year end. 

The four tables which follow present the same data reclassified to 
disclose variations in bank turnover in state and national banks, and in 
Chicago banks and those outside Chicago. The record of new and old 
state banks in Illinois is contained in Table VIII. 

There were 1,402 state banks operating early in 1922. By the end 
of 1928 more than one out of each six, or 229, were closed. With 
numerous bank failures in following years, the number of banks gone 
by the end of 1935 was 874, or 62.3 per cent of the original number. 
For a time new banks were organized almost as fast as the old went 
out of business. By the end of 1928, 170 new charters had been issued, 
or somewhat less than the 229 lost among the older banks. Since 1930 
very few new state banks have been chartered. The numbers of state 
banks operating, however, both old and new, have continued to decline. 
No doubt, an important factor in this record is to be found in the 
relatively greater attractiveness of national than of state bank charters. 



30 



Bulletin No. 55 



Table VIII 

Number of State Banks Operationg in Illinois at the End of 1921, New 

Banks Subsequently Organized, and the Number of Each 

Open and Closed, 1922 to 1935 

(Data as of December 31 of each year) 





Old Banks 


New Banks 


All Banks 


Year 






















Total 
1921 


Closed 


Open 


Organ- 
ized 


Closed 


Open 


Organized 
Plus Old 


Closed 


Open 


1922 


1,402* 


17 


1,385 


26 





26 


1,428* 


17 


1,411 


1923 


1,402 


52 


1,350 


58 


1 


57 


1,460 


53 


1,407 


1924 


1,402 


81 


1,321 


85 


4 


81 


1,487 


85 


1,402 


1925 


1,402 


102 


1,300 


98 


4 


94 


1,500 


106 


1,394 


1926 


1,402 


145 


1,257 


130 


8 


122 


1,532 


153 


1.379 


1927 


1,402 


192 


1,210 


148 


11 


137 


1,550 


203 


1.347 


1928 


1,402 


229 


1,173 


170 


15 


155 


1,572 


244 


1.328 


1929 


1,402 


281 


1,121 


191 


29 


162 


1,593 


310 


1,283 


1930 


1,402 


414 


988 


218 


61 


157 


1,620 


475 


1.145 


1931 


1,402 


609 


793 


228 


109 


119 


1,630 


718 


912 


1932 


1,402 


750 


652 


234 


144 


90 


1,636 


894 


742 


1933 


1,402 


856 


546 


235 


169 


66 


1,637 


1,025 


612 


1934 


1,402 


858 


544 


235 


173 


62 


1.637 


1,031 


606 


1935 


1.402 


874 


528 


235 


172 


63 


1,637 


1,046 


591 



*Two banks in suspension in 1921 were restored in 1922. 



Losses, conversions, consolidations, and other deductions, had 
reduced the number of operating banks from among those chartered 
since 1921 to 63 at the end of 1935. The remainder of 172, or 73.2 
per cent of the total of new charters granted in the period, were gone 
by the end of 1935. This was a very poor showing, even after allow- 
ance is made for the unusual circumstances and economic conditions. 
A number of these new banks were no doubt organized as promotional 
schemes, with little intention that they would remain in business. 

Examination of the number of banks gone by the end of each 
year in comparison with the number operating at the beginning of the 
year again suggests the greater turnover of new than of old banks. In 
the fourteen years from 1922 to 1935 inclusive, the percentages of 
banks gone to total operating banks were distinctly larger for new 
banks than for old banks in all years except five. In no year were 
more than 20 per cent of the old banks gone, whereas for four con- 
secutive years from 20 to 30 per cent of the new banks went out of 
business each year. 

According to the number of years that these banks could have 
operated had they remained in business, the old banks operated on the 
average 72.2 per cent of this potential total. The new banks operated 
60.7 per cent of their possible maximum. 

Combined figures for all state banks indicate that there were 1,637 



Banking Turnover and Facilities in Illinois 



31 



Table IX 

Number of National Banks Operating in Illinois at the End of 1921, New 

Banks Subsequently Organized, and the Number of Each 

Open and Closed, 1922 to 1935 

(Data as of December 31 or last call as reported in Individual Statements of 

National Banks) 





Old Banks 


New Banks 


All Banks 


Year 


Total 
1921 


Closed 


Open 


Organ- 
ized 


Closed 


Open 


Organized 
Plus Old 


Closed 


Open 


1922 
1923 
1924 
1925 

1926 
1927 
1928 
1929 
1930 

1931 
1932 
1933 
1934 
1935 


497 
497 
497 
497 

497 
497 
497 
497 
497 

497 
497 
497 
497 
497 


1 

5 
15 
18 

33 
39 
49 
60 
100 

156 
200 
294 
300 
302 


496 

492 
482 
479 

464 

458 
448 
437 
397 

341 
297 
203 
197 
195 


5 
12 
19 
26 

31 
33 
42 
48 
56 

59 

70 

99 

135 

144 





1 
1 

2 
2 
2 
3 
9 

18 
30 
39 
40 
40 


5 
12 
18 
25 

29 
31 
40 
45 
• 47 

41 
40 
60 
95 
104 


502 
509 
516 
523 

528 
530 
539 

545 
553 

556 
567 
596 
632 
641 


1 
5 

16 
19 

35 
41 
51 
63 
109 

174 
230 
333 
340 
342 


501 
504 
500 
504 

493 
489 
488 
482 
444 

382 
337 
263 
292 
299 



different banks operating for some time between 1922 and the end of 
1935. These 1,637 banks operated on the average 71.0 per cent of the 
years which they might have operated since 1922 or their particular 
dates of organization. 

In several ways national banks have shown a resistance to failure 
superior to that of state banks. Although this margin has been distinct, 
it has not been sufficient to place the national banks on a satisfactory 
basis in so far as their failures and turnover are concerned. Their 
showing has merely been better than that of state banks. Both types of 
banks have shown exceedingly high rates of mortality, instability, and 
turnover. 

A classification of the national banks in Illinois by old and new 
banks is found in Table IX. Turning attention first to the 497 banks 
which were operating at the beginning of 1922, the table shows in the 
second column that these banks, just like the old state banks, encoun- 
tered a continual shrinkage in their number. By the end of 1928, 9.9 
per cent of the original 497 were gone. This was a much better show- 
ing than that of state banks, for by the end of 1928, 229 of the 1,402 
state banks, or 16.3 per cent, were gone. 

By the end of 1935, the old national banks had declined to 195, the 
remainder of 302 having gone out of business. The percentage of 
banks gone by the end of 1935 is only slightly different from the com- 
parable figure for state banks. 



32 Bulletin No. 55 

New national banks organized subsequent to 1921 practically 
equalled the losses in numbers of the old, this situation continuing 
until 1928 and 1929. Beginning with 1933 the new charters granted 
to national banks increased rapidly, the number more than doubling 
from the 70 issued from 1922 to 1932 to 144 by the end of 1935. This 
was in sharp contrast to the new state charters, which increased by 
only one, from 234 at the end of 1932, to 235 at the end of 1935. 

As already suggested, the old national banks showed a turnover 
almost as great as that of the old state banks. What is the situation 
with regard to the new banks, all but one of which have taken out 
national charters? Will this increase of national bank charters mean 
greater stability? 

Attention is again directed to the fourth to sixth columns of Table 
IX, which disclose changes in newly chartered national banks. Al- 
though new national charters issued after 1929 did not keep pace 
with the losses in the years following, they increased at a very rapid 
rate because of the relatively more attractive charters offered. By the 
end of 1935, 144 new charters had been granted, and 40 of these banks, 
or 27.8 per cent, were gone. This is a very much lower figure than 
the 73.2 per cent for new state banks. Such a comparison, however, is 
very unfair to the state banks. As has been pointed out, most of the 
new national charters were granted from 1933 to 1935. These new 
nationals have not had an opportunity to show their mettle, nor did 
they operate under the trying conditions of the preceding years. 

It is necessary to turn to some other measure of bank turnover to 
obtain a reasonably fair comparison between new state and new na- 
tional banks. One such measure is the comparison of banks gone at the 
end of each year with the number operating at the beginning of each 
year. In this respect the new national banks had a lower rate of turn- 
over than the state banks, but not a significantly better showing nor 
one which indicates a high degree of stability. 

Prior to 1929 the percentages of banks gone in each year were not 
very large for either type of bank; the national banks, however, held 
a modest margin over the state banks. In 1929, new national banks 
gone at the year end amounted to 2.5 per cent of their number as com- 
pared with 9.0 per cent for state banks. In the years 1930 to 1934 
inclusive, the percentages for state banks were 19.8, 30.6, 29.4, 27.8, 
and 6.1, respectively. For national banks the figures for the same years 
were 13.3, 19.1, 29.3, 22.5, and 1.7 per cent. Here again the national 
banks reflect a greater stability than the state banks, but their advan- 
tage is not very large. New national banks have been only moderately 
more stable than new state banks. 



Banking Turnover and Facilities in Illinois 



33 



Table X 

Number of State and National Banks Operating in Illinois (Exclusive of 

Chicago) at the End of 1921, New Banks Subsequently Organized, 

AND the Number of Each Open and Closed, 1922 to 1935 

(Data as of December 31 or last call as reported in Individual 
Statements of National Banks) 





Old Banks 


New Banks 


All Banks 


Year 






















Total 
1921 


Closed 


Open 


Organ- 
ized 


Closed 


Open 


Organized 
Plus Old 


Closed 


Open 


1922 


1,717* 


11 


1,706 


17 





17 


1,734* 


11 


1,723 


1923 


1,717 


40 


1,677 


32 


1 


31 


1,749 


41 


1,708 


1924 


1,717 


68 


1,649 


50 


3 


47 


1,767 


71 


1,696 


1925 


1,717 


91 


1,626 


66 


3 


63 


1,783 


94 


1,689 


1926 


1,717 


148 


1,569 


91 


7 


84 


1,808 


155 


1,653 


1927 


1,717 


198 


1,519 


102 


10 


92 


1,819 


208 


1,611 


1928 


1,717 


240 


1,477 


121 


13 


108 


1,838 


253 


1,585 


1929 


1,717 


293 


1,424 


133 


16 


117 


1,850 


309 


1,541 


1930 


1,717 


448 


1,269 


156 


40 


116 


1,873 


488 


1,385 


1931 


1,717 


651 


1,066 


165 


60 


105 


1,882 


711 


1,171 


1932 


1,717 


806 


911 


178 


82 


96 


1,895 


888 


1,007 


1933 


1,717 


995 


722 


203 


104 


99 


1,920 


1,099 


821 


1934 


1,717 


1.004 


713 


235 


106 


129 


1,952 


1,110 


842 


1935 


1,717 


1,019 


698 


243 


106 


137 


1,960 


1,125 


835 



*rwo banks in suspension in 1921 were restored in 1922. 



Another comparison may be made by examination of the number of 
years the national banks could have operated had they remained in 
business in comparison with the actual years of operation. The 497 
old national banks operated 77.4 per cent of this potential total. The 
new^ly chartered national banks operated 76.0 per cent of their possible 
maximum years of life. These figures compare with 72.2 per cent for 
old state banks and 60.7 per cent for new state banks. All national 
banks had a percentage of 77.3 as against 71.0 per cent for all state 
banks. 

The combined figures for state and national banks outside Chicago 
are contained in Table X. This table shows that there were 1,717 
banks in operation at the beginning of 1922, of which 1,019 were gone 
by the end of 1935. The percentage of loss was 59.3, a much more 
favorable figure than for Chicago, as will be pointed out in later para- 
graphs. Throughout the entire period (after 1922) the new banks 
chartered were well below the old banks which were gone. For ex- 
ample, by the end of 1928, 240 old banks had gone out of business, 
but only 121 new charters had been issued. The net result of these 
changes was an almost continuous decline in the total number of old 
and new banks operating in downstate Illinois. 

The 243 new charters issued from 1922 to 1935 equal about one- 
seventh of the 1,717 banks which were operating in 1922. Forty of the 



34 



Bulletin No. 55 



Table XI 

Number of State and National Banks Oper.\ting in Chicago at the End of 

1921, New Banks Subsequently Organized, and the Number of 

Each Open and Closed, 1922 to 1935 

(Data as of December 31 or last call as reported in Individual 
Statements of National Banks) 





Old Banks 


New Banks 


All Banks 


Year 


Total 
1921 


Closed 


Open 


Organ- 
ized 


Closed 


Open 


Organized 
Plus Old 


Closed 


Open 


1922 
1923 
1924 
1925 

1926 
1927 
1928 
1929 
1930 

1931 

1932 
1933 
1934 
1935 


182 
182 
182 
182 

182 
182 
182 
182 
182 

182 
182 
182 
182 
182 


7 
17 
28 
29 

30 
33 
38 
48 
66 

114 
144 
155 
154 
157 


175 
165 
154 
153 

152 
149 
144 
134 
116 

68 
38 
27 
28 
25 


14 
38 
54 
58 

70 

79 

91 

106 

118 

122 
126 
131 
135 
136 





2 

2 

3 

3 

4 

16 

30 

67 

92 

104 

107 

106 


14 
38 
52 
56 

67 
76 

87 
90 
88 

55 
34 
27 
28 
30 


196 
220 
236 
240 

252 
261 
273 
288 
300 

304 
308 
313 
317 
318 


7 
17 
30 
31 

33 
36 
42 
64 
96 

181 
236 
259 
261 
263 


189 
203 
206 
209 

219 
225 
231 
224 
204 

123 
72 
54 
56 
55 



243 new charters were issued in the two years 1934 and 1935. The 
percentage of new banks gone by the end of 1935 was 43.6. On the 
basis of the actual number of years in which the new banks operated 
in comparison with the possible number in which they might have 
operated, it was found that these banks functioned 69.3 per cent of 
their potential total. The old banks operated 75.0 per cent of their 
total, thus showing a better record than the new banks. The total 
number of banks shown in the last column of Table X operated 74.6 
per cent of their possible time. Of the 1,960 banks, 57.4 per cent 
were gone by the end of 1935. 

Judging from the percentages of banks gone at the end of each 
year, the new banks again show a less stable condition than the old. 
In practically every year the percentage of new banks gone was more 
than that of old banks. For both types, however, the figures are well 
below those for Chicago banks. 

Banks in Chicago, the data for which are summarized in Table XI, 
showed the most rapid rates of turnover. Only 25 of the 182 which 
were operating at the end of 1921 were left at the end of 1935. Until 
the end of 1931, new banks opened at a much more rapid rate than 
the old went out of business. Since 1931, only 14 new charters have 
been issued to Chicago banks. Only five charters have been granted 
since 1933. Nor did the new banks exhibit any better resistance than 



Banking Turnover and Facilities in Illinois 35 

the old. The percentage of old banks gone by the end of 1935 was 
86.3 as compared with 77.9 per cent for the new. 

If the years of operation are compared with the years in which 
the banks might have operated, the old banks in Chicago are found to 
have functioned 60.0 per cent of the possible maximum ; the corre- 
sponding figure for new banks is 58.1 per cent. 

The extraordinarily large number of new banks organized in Chi- 
cago is suggested by the fact that the number of 136 at the end of 
1935 equalled more than three-fourths of the number operating at the 
end of 1921. Although one would naturally expect more changes in a 
large metropolitan area in the way of consolidations, mergers, absorp- 
tions, and the like, the exceedingly rapid changes could only indicate a 
condition of undesirable instability in the long run. The mere fact that 
banks were consolidating or otherwise reducing their number is not 
so much open to criticism as is the continual succession of new banks, 
which suggests speculative promotions. 

Percentages of banks gone at the end of each 3^ear again suggest 
the less stable position of the new banks. Although new banks held an 
advantage prior to 1929, this was more than lost in the following years. 
From 1922 to 1928 the percentage of new banks gone did not exceed 
5.3 in any year. In fact, in four years there were no losses, and in two 
additional years the losses were less than 2 per cent of the number 
operating at the beginning of each year. Old banks reported some 
banks gone in each year, the figures ranging from 0.6 per cent to 6.7 
per cent. 

Beginning with 1929, however, the situation was reversed, and the 
percentages of banks gone were magnified. The percentages of old 
banks gone were 6.9 in 1929, 13.4 in 1930, 41.4 in 1931, 44.1 in 1932, 
28.9 in 1933, none in 1934, and 10.7 in 1935. For the new banks the 
corresponding percentages were 13.8, 15.6, 42.0, 45.5, 35.3, 11.1, and 
none in 1935. 

From the foregoing paragraphs certain tentative conclusions may 
be drawn. First among these is the pronounced turnover of banks in 
all categories. The rate of turnover in old banks, however, was con- 
sistently exceeded by that for new banks, suggesting the inherent risks 
and greater speculative aspects of many new ventures. This is not 
unlike conditions which ordinarily prevail in merchandising and manu- 
facturing establishments.'' 



*Paul D. Converse, Business Mortality of Illinois Retail Stores from 1925 to 
1920, Bulletin No. 41, Bureau o£ Business Research, University of Illinois, 
Urbana, 1932. 



36 Bulletin No. 55 

In appraising these conditions for old banks, i.e., those operating 
at the end of 1921, the great influx of corporate banks in the years 
just prior to this period, due to the prohibition against private banks, 
should not be overlooked. No doubt these former private banks and 
the many other small banks chartered in the years 1918 to 1924 pre- 
vented the "old" banks from making a better showing than they did. 

A second important factor was the rapid and continued issuance 
of charters to new banks in the face of marked instability among both 
new and old banks. Charters were granted for both state and national 
banks, for Chicago and downstate banks. But the most liberal issuance 
of permits for new banks was found in Chicago, which had a less 
stable condition than the remainder of the state. 

Banks in Illinois outside Chicago show a more favorable picture in 
several ways. Their turnover was less rapid, both for old and new 
banks. Furthermore the new charters issued were a smaller percentage 
of the downstate banks. 

As between state banks and national banks, the latter seemed to 
be more stable. Nevertheless the margin in favor of the national banks 
was not large. Both types of banks showed an exceedingly high turn- 
over, and both had a very large number of new additions to their ranks. 
In fact, relatively more new national banks than state banks were 
chartered. 

The preceding tables have shown a very marked decline in numbers 
operating for the year 1933, which included the so-called Bank Holi- 
day. All banks in Illinois were closed by proclamation of the Governor 
on March 4, 1933, two days before the national Bank Holiday. Subse- 
quent to these involuntary closings, banks were permitted to reopen 
only if they were known to be solvent, or if they made the necessary 
readjustments in their capital structures to place them in sound 
condition. 

One might assume that the reopening of banks under such condi- 
tions would disclose the relative condition of the various units, and 
that those that opened later would be the weaker. Numerous elements 
operated to weaken such inferences. In opening the banks, definite 
precedence was given to those in the Reserve Cities, then permission 
was granted to banks with clearing associations, and later to the small 
country banks. Furthermore, the tremendous pressure under which 
the reopenings functioned must have precluded the most satisfactory 
appraisal of each bank. The strict standards that were set for the 
reopening of banks, particularly in the case of national banks, aroused 
bankers and business men and resulted in political pressure for their 
relaxation. Although such limitations as the above vitiate an exact 



Banking Turnover and Facilities in Illinois 37 

comparison of banks reopened subsequent to the moratorium, they do 
not destroy much of the value of such an analysis. 

A chronological record of bank reopenings subsequent to the mora- 
torium is summarized in Table XII. On March 3, 1933, there were 
1,026 banks operating in Illinois, of which 326 were in the national 
system and 700 in the state system. 

From March 13, when the first reopenings were authorized, up to 
the end of 1935, a total of 876 of these banks were reopened and the 
remainder of 150 were not permitted to reopen. Of course, in between 
these two dates many of the 876 banks that reopened had made im- 
portant necessary additions and readjustments in their capital and 
reorganized their assets. But recognizing this, the fact remains that by 
the end of 1935, 14.6 per cent had not been granted permission to 
operate; conversely, 85.4 per cent had been opened. 

There was considerable variation, however, in the percentages of 
state and national banks which opened immediately and ultimately. By 
the end of 1935 the percentage of national banks which had reopened 
was 73.3 per cent. All 12 of the Chicago national banks opened in the 
first week. State banks were relatively slower in reopening, partly 
because of the larger number in downstate areas. By the end of 1935, 
however, a much larger percentage of state banks had reopened, 
namely, 91.0 per cent. Although all Chicago national banks reopened 
in the first week, only 56.1 per cent of Chicago state banks reopened so 
quickly, and 26.3 per cent had not opened by the end of 1935. In the 
remainder of Cook county and downstate a much larger percentage of 
state banks ultimately reopened, although less quickly than did national 
banks. 

Another element which must be considered in this connection was 
that a relatively larger percentage of national banks were in the larger 
towns and cities (see Table XVII). This would warrant the expecta- 
tion that national banks would open more rapidly than state banks, as 
was actually the case. 

But the relatively greater frequency with which state banks had 
opened than national by the end of 1935 suggests markedly different 
policies. Either a larger percentage of national than of state banks did 
not wish to reorganize, or were not permitted to do so. The logical 
inference is that the standards for national bank reopenings were 
higher. This point is borne out by the analysis of what happened to 
these reopened banks. Before taking up this analysis, however, a few 
more comments are in order regarding the rate of bank reopenings. 

In the six weeks from March 20 to April 30, 46.3 per cent of state 
banks reopened, as contrasted with 7.4 per cent for national banks. 



38 



Bulletin No. 55 






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Banking Turnover and Facilities in Illinois 39 

Only 5.3 per cent of Chicago state banks reopened in this period and 
none of the national, since they had all been opened previously. In 
Cook county (excluding Chicago) 25.0 per cent of the state banks 
reopened in these six weeks, but only 9.1 per cent of the national 
banks. And for downstate counties 51.6 per cent and 7.6 per cent of 
state and national banks, respectively, reopened in this period. During 
the few months from May to December, 1933, inclusive, state bank 
reopenings continued in substantial volume, but national banks were 
relatively fewer. 

In general a smaller proportion of national banks (except in 
Chicago) than of state banks reopened; but they opened in a much 
shorter interval of time. Furthermore, of the reopened banks, rela- 
tively more of the national banks remained open than of the state. 

Of the 200 national banks shown in Table XII as having opened in 
the first week following the moratorium, all but seven were operating 
at the end of 1935. The disposition of these seven, which were all 
downstate, was as follows: 1 was absorbed by a state bank, 3 were 
absorbed by national banks, and 3 were liquidated. The following week 
12 more national banks were authorized to open, of which 11 were 
still operating at the end of 1935. In the week of March 27 to April 2, 
1933, a total of eight national banks reopened ; seven of these were 
operating at the end of 1935. All together, of the 239 national banks 
reopened subsequent to the moratorium, 227 were still active at the 
end of 1935. These 227 represented 95.0 per cent of the 239. 

For the state banks the record of subsequent survival was some- 
what less favorable. Of the 700 state banks operating just prior to the 
moratorium, 637 had been authorized to reopen by the end of 1935, 
but only 577 of these were in operation at the end of 1935. Thus only 
90.6 per cent of the 637 were operating. 

In another respect the record of the state banks differs from that 
of the national banks. Those state banks that reopened in the first three 
weeks were less successful than the corresponding national banks. 
Although 95.9 per cent of the national banks that reopened in this 
period remained open by the end of 1935, only 88.0 per cent of the 
state banks were still functioning. 

In another way the policies and operations of state and national 
banking departments may be contrasted. Of the 200 national banks 
reopened the first week of March 13 to 19 following the moratorium, 
96.5 per cent were operating at the end of 1935. Of the total of 126 
banks unopened in this week, only 34, or 27.0 per cent, were operating 
on this latter date. Evidently a national bank that did not open the 



40 Bulletin No. 55 

first week had a poor chance of reorganizing and reopening. It would 
appear that records from which to determine whether national banks 
should reopen were in effective condition. 

As already mentioned, there were 171 state banks reopened in the 
week of March 13 to 19, of which 146, or 85.4 per cent, were operating 
at the end of 1935. Of the 529 remaining state banks, 466, or 88.1 per 
cent, subsequently reopened. Even 14 out of 65 state banks that were 
suspended as of March 3, 1933, reopened by the end of 1935. Thus the 
state banks, although slower in reopening, had a much better chance 
to reopen than the national. No doubt the number of state banks 
involved, as well as differences in records and severity of reopening 
standards, was a factor accounting for these variations. 



IV. BANKING FACILITIES IN ILLINOIS TOWNS 

In view of the severe losses in number of banks, both state and 
national, which have occurred, it is evident that many communities 
which formerly had banking facilities are no longer thus supplied by 
convenient local enterprises. Many other communities formerly pro- 
vided with more than one bank outlet are now being served by perhaps 
one bank. Some of these changes, where they relieved over-banked 
areas, must be regarded as beneficial from the long-run point of view. 
Other communities, however, that are now without banking facilities 
may find their business somewhat handicapped. 

There is a very definite relationship between the size or popula- 
tion of a community and the banking facilities which have been avail- 
able to it. Table XIII, which accompanies this text, shows the total 
number of towns of various sizes in Illinois for 1920 and 1930. In 
comparison it gives the total number of towns of these sizes which had 
banking facilities in 1921, 1930, and 1935. In listing the total towns, 
all communities, both incorporated and unincorporated, were tabulated. 
These data were taken from the census reports, but were supplemented 
by Rand McNally's Commercial Atlas of America for 1922 and 1932, 
for the many very small communities not listed by the census. 

A total of 3,739 towns and villages was found for 1920, and 4,160 
for 1930. 

In 1921 there were 1,042 communities in Illinois which had banks. 
By 1930 and 1935 the number had decreased to 939 and 655, respec- 
tively. The latter figure reflects a loss of banking facilities by 387 com- 
munities, or 37.1 per cent of those which had banks in 1921. There 
were 25 other communities that had banks subsequent to 1921, 6 of 
which were without facilities by 1930. In 1920 there were 1,362 com- 
munities which were without recognized population; in 1930, 1,605 
were in this class. No banks were found in any of the communities 
without definite population figure in 1921, 1930, or 1935.^ 

The number of towns with banks in 1921 constituted 27.9 per cent 
of the total towns in the state. In 1930 the percentage of towns with 
banks had fallen to 22.6 per cent, and in 1935 the towns with banks 
were only 15.7 per cent of the entire number reported in the 1930 
census and the Directory. 

In 1921, 14 communities with less than 100 population had banking 
facilities. By 1930 the number had dropped to 11, and by 1935 to 8. 



'The data for the banks are as of 1921 and are compared with the popula- 
tion data as of 1920. Likewise, the banking data for both 1930 and 1935 are 
compared with the population for 1930, the year of the latest census. 

41 



42 



Bulletin No. 55 



Table XIII 

Total Number of Illinois Towns, Classified According to Size, and 
Percentage with Banking Facilities, 1921, 1930, and 1935 



Population 


Total Number 
of Towns 


Number of Towns 
with Banks 


Percentage of Towns with 

Banks to Total Number 

of Towns 




1920 


1930 


1921 


1930 


1935 


1921 


1930 


1935 


Total 

No pop. given 

Less than 100 


3,739 

1.362 

754 

359 

255 

187 

121 

182 

111 

193 

123 

48 

27 

12 

4 

1 


4.160 

1,605 

914 

377 

259 

192 

113 

182 

105 

176 

121 

58 

34 

15 

8 

1 


1,042* 

ii 

78 
130 
128* 

88 

145 

90 

158 

119 

48 

27 

12 

4 

1 


939 

ii 

69 

105 

109 

79 

131 

80 

138 

106 

53 

34 

15 

8 

1 


655 

"s 

37 
48 
72 
47 

101 
51 

103 
91 
48 
27 
13 
8 
1 


27.9 

'['.9 

21.7 

51.0 

68.4 

72.7 

79.7 

81.1 

81.9 

96.7 

100.0 

100.0 

100.0 

100.0 

100.0 


22.6 

i'.i 

18.3 

40.5 

56.8 

69.9 

72.0 

76.2 

78.4 

87.6 

91.4 

100.0 

100.0 

100.0 

100.0 


15.7 
^9 


100- 199 


9.8 


200- 299 


18.5 


300- 399 


37.5 


400- 499 

500- 749 


41.6 

55.5 


750- 999 


48.6 


1,000- 1,999 


58.5 


2,000- 4,999 


75.2 


5.000- 9,999. . 


82.8 


10,000-24,999 


79.4 


25,000-49,999 


86.7 


50,000 and over 

Chicago 


100.0 
100.0 



*Two additional towns each had a suspended bank. 



Thus about one community of this size out of 50 had a bank in 1921, 
as compared with about one out of each 100 in 1935. Except under 
unusual circumstances there is not the proper economic environment 
to support a bank in communities of this size. 

In the towns with more than 100 population there is a marked 
increase in the percentage with banks. In the towns ranging from 200 
to 300 and from 300 to 400 population, approximately one out of five 
and one out of three, respectively, had a bank in 1935. Nearly half of 
the towns with populations ranging from 400 to 2,000 had banking 
facilities in 1935. 

There seems to be a noticeable change in the ratio of towns with 
banks to total towns when the population of 2,000 to 5,000 is reached. 
In 1935, 91 of the 121 towns in this group had a bank, or 3 out of 
every 4. As the larger towns are examined, there is a greater prob- 
ability of finding one or more banks in each town. However, in the 
5,000 to 10,000 population group only 48 of the 58 towns of this size 
reported in the 1930 census had banks in 1935. Even in the 10,000 to 
25,000 population group, 7 out of 34 towns had no banks. Most sur- 
prising of all was the finding that 2 of the 15 towns with populations 
of 25,000 to 50,000 were without banks. 

The figures in the table show the marked decline in the percentage 
of towns with banks to the total towns from 1921 to 1930, and to 1935. 
The severest losses in banking facilities occurred in the smaller com- 



Banking Turnover and Facilities in Illinois 43 

munities. If the number of towns with less than 500 population that 
had banks are combined, the total is 438 in 1921, and 212 in 1935, 
showing a loss of 51.6 per cent. This loss took place in the face of an 
actual increase in the total number of towns of this size from 1,676 
to 1,855 (omitting those without designated population). 

These figures are in marked contrast to those for larger towns. 
The towns with 500 to 5,000 population declined slightly in number, 
from 609 in 1920, to 584 in 1930. Five hundred and twelve of these 
had a bank in 1921, and 346 in 1935. This was a decline of 32.4 per 
cent, or decidedly less of a shrinkage in facilities than was found for 
the smaller communities. Thus the total towns in this group decreased 
as compared with an increase of smaller towns, but the loss of banking 
facilities was less than for the small towns. 

A similar grouping of towns with populations of 5,000 or more 
shows that there were 92 in 1921 and 116 in 1930. All 92 towns had 
banks in 1920. Although not all of the 116 had banks in 1935, the 
number of towns with banks was larger in 1935 at 97 than the figure of 
92 in 1920. These figures suggest the greater ability of large towns 
to support banks. The shrinkage in the percentages of towns with 
banking facilities is less as the size of town increases. 

The decrease in the number of towns with some banking facilities 
was far less severe than the decline in the total number of banks. 
Many towns which formerly had more than one bank lost some of 
them, but this did not have such a blighting influence as a complete 
loss of all banks. 

The data in Table XIV compare the number of banks, both state 
and national, with the number of towns which had banks, all classified 
by population of the town. The number of towns with banks declined 
from 1,042 in 1921 to 655 in 1935. In this same period the total num- 
ber of banks declined from 1,897 to 890. The banks fell off more 
rapidly, so that, in comparison with an average of 1.8 banks per town 
in 1921, there were only 1.4 banks per town in 1935. These figures 
omit towns without any banking facilities. 

Among those towns of less than 400 persons which had banks, only 
a few had more than one bank in 1921. None of this size had more 
than one bank in 1935. Whereas in 1921 many towns with more than 
400 population and up to 1,000 had more than one bank per town, by 
1935 few towns of 1,000 or less population had more than one bank. 
In 1921 there were 513 towns with less than 1,000 population which 
had one bank, 158 towns with two banks, and 2 with three banks. By 
1935 there were 346 with one bank, 18 with two banks, and none with 
more than two. 



44 



Bulletin No. 55 



Table XIV 

Number of Illinois Towns with Banks, Total Banks, and Banks per Town of 

Various Sizes, 1921, 1930, 1935 



Population 


Number of Towns 
with Banks 


Total Banks 


Banks per Town 




1921 


1930 


1935 


1921 


1930 


1935 


1921 


1930 


1935 


Total 


1,042* 

14 

78 

130 

128* 

88 

145 

90 

158 

119 

48 

27 

12 

4 

1 


939 

11 

69 

105 

109 

79 

131 

80 

138 

106 

53 

34 

15 

8 

1 


655 

8 

37 

48 

72 

47 

101 

51 

103 

91 

48 

27 

13 

8 

1 


1,897* 

14 

80 

134 

142* 

118 

201 

146 

276 

260 

135 

103 

73 

33 

182 


1,589 

11 

69 

109 

114 

91 

164 

102 

201 

203 

121 

88 

62 

50 

204 


890 

8 

37 

48 

72 

50 

109 

58 

124 

134 

76 

49 

38 

32 

55 


1.82 

1.00 
1.03 
1.03 
1.11 
1.34 
1.39 
1.62 
1.75 
2.18 
2.81 
3.81 
6.08 
8.25 
182.00 


1.69 

1.00 
1.00 
1.04 
1.05 
1.15 
1.25 
1.28 
1.46 
1.92 
2.28 
2.59 
4.13 
6.25 
204.00 


1.36 


Less than 100 

100- 199 

200- 299 

300- 399 

400- 499 

500- 749 

750- 999 

1,000- 1,999 

2,000- 4,999 

5,000- 9,999 

10.000-24,999 

25,000-49,999 

50,000 and over .... 
Chicago 


1.00 
1.00 
1.00 
1.00 
1.06 
1.08 
1.14 
1.20 
1.47 
1.58 
1.81 
2.92 
4.00 
55.00 



*Two additional towns each had a suspended bank. 

Table XV 
Average Population per Bank in Illinois Towns with Banks, 1921, 

1930, AND 1935 



Population 



Total 

Less than 100.. 

100- 199.. 

200- 299 . . 

300- 399 . . 

400- 499.. 

500- 749.. 

750- 999.. 

1,000- 1,999. . 

2.000- 4,999. . 

5,000- 9,999. . 

10,000-24,999. . 

25,000-49,999.. 

50,000 and over 

Chicago 



Average Population per Bank* 



1921 



2,760 

50 

146 

243 

315 

336 

451 

539 

859 

1,602 

2,667 

4,587 

6,164 

9,091 

14,845 



1930 



1935 



4,010 


6,675 


50 


50 


150 


150 


241 


250 


335 


350 


391 


423 


499 


579 


686 


769 


1,030 


1,246 


1,828 


2,377 


3,285 


4,737 


6,761 


9,643 


9,073 


12,829 


12,000 


18,750 


16,551 


61,390 



*For 1921 the 1920 census figures are employed; for 1930 and 1935 the populations as of the 1930 
census are used. For method of computation, see footnote 8. 



In towns of more than 1,000 population there was a rapid increase 
in the number of banks per town, particularly in 1935. There was an 
average of less than two banks for towns with populations below 
25,000. Although the average was below two banks per town, there 
were actually ten towns with as many as three banks each in towns 
with between 2,000 and 25,000 population. 



Banking Turnover and Facilities in Illinois 45 

Because of the dual movements in the number of banks on one 
hand and the shifts in population on the other, some rather significant 
changes have taken place in the population per bank. Although the 
data presented in Table XV give no recognition to the rural popula- 
tion, the results shown are sufficiently pronounced to justify rather 
clear conclusions. 

In this table the populations of those towns of various sizes which 
had banks at the last date of call in each of the three years, 1921, 1930, 
and 1935, are compared with the number of banks in these towns in 
order to arrive at figures for population per bank. These data omit 
the country population as well as the population of all communities 
that had no bank at the end of each of the selected years. ^ 

From this table it is readily seen that the town and city population 
per bank increases very markedly as the size of town increases. This 
condition holds good for each of the three years examined in Table 
XV. Even though the number of banks per town is larger in the 
larger towns, the population per bank increases rapidly. 

Perhaps more significant are the changes from year to year in each 
of the size-groups of towns. In towns of the very smallest size no 
appreciable change from 1921 to 1930 and to 1935 is evident. The 
banks in towns of 300-399 population served an average of 315 per- 
sons in 1921, and 350 in 1935. As the larger-sized towns are examined, 
progressive increase in population per bank is noted for 1935 over 
both 1921 and 1930. Thus the figure for banks in towns of 1,000 to 
1,999 population was 45 per cent greater in 1935 than in 1921. Banks 
in towns of 5,000 to 9,999 population had an average of 4,737 persons 
per bank in 1935 compared with 2,667 in 1921, or an increase of 
slightly over 75 per cent. Cities of 50,000 or more population (except 
Chicago) showed a more than 100 per cent increase in population per 
bank. In Chicago the increase per bank was more than three-fold. 

These data suggest that not only have the banks in larger towns 
and cities enjoyed a vastly larger potential number of customers than 
the banks in smaller towns, but this comparative advantage has moved 
sharply in a direction still more favorable to the banks in large towns 
and cities. 

Even though this table does not reflect country population and the 
population of many small and a few large towns without banks, it is 
evident that such data would not destroy its significance. Country 



*The population figures were computed from the mid-points of the class 
intervals rather than by tabulation of the individual town populations, thus 
avoiding considerable tedious work. Although less exact than the tabulation, any 
difference would have but a distinctly minor influence on the results of the table. 



46 Bulletin No. 55 

people and persons in small towns without banks tend to turn more 
to the towns of over 10,000 population for trading and banking facili- 
ties. This implies that the small banks in small towns are not getting 
the full impact of customers from other small towns which are now 
without banks, many of whom now go to larger cities. 

It would seem that in towns of less than 2,000 population, farm 
customers are as likely to go to a bank in a town of 500 population as 
to one in a town of 300 population. Since most of the towns of less 
than 2,000 population have but one bank, there would be no division of 
the business among two or more banks. Thus, in the small towns the 
farm-trade factor would probably increase the figures shown in Table 
X\' but would not change their relationships. 

In the next table, number XVI, the towns have been grouped in 
larger population intervals and the banks classified according to size 
of town and number of banks in the town. Thus the number of banks 
in towns with only one bank are shown separately, the banks in towns 
where they had one direct competitor grouped together, and so forth. 

In the lower half of the table percentages are presented which indi- 
cate the change from 1921 to 1935 in the number of banks according to 
size of town and the number of banks per town. 

As previously pointed out, the 890 banks operating at the end of 
1935 were 46.9 per cent of the 1.897 operating at the end of 1921. For 
towns of less than 500 population, the 215 banks operating were 44.1 
per cent of the 488 operating in 1921. By similar comparisons it is 
found that the number of banks operating in 1935 relative to the 
number in 1921 increases as size of town increases, with the exception 
of Chicago, which had peculiar problems. Thus, although the 1935 
banks were 44.1 per cent of the 1921 number in towns of less than 
500, the percentage increased steadily to 56.9 per cent for towns of 
10,000 or more population (exclusive of Chicago). From this show- 
ing the conclusion must be drawn that the loss in number of banks was 
less severe in the larger cities than in the smaller towns, again except- 
ing Chicago, and that the loss of banking facilities was in inverse 
relation to the size of city or town. In Chicago, the losses were severe ; 
only 30.2 per cent of the number of banks operating in 1921 were 
operating by 1935. 

In the losses of banks in these years there was a shifting of many 
towns from two-bank towns to one-bank towns, and likewise from 
three-bank towns to two- and one-bank towns. Some of these shifts are 
shown in the details of Table XVI. Since most of the small towns of 
less than 500 population never had more than one bank, it was obvi- 



Bankixg Turnover axd Facilities ix Illinois 



47 



Table X\T 
Illinois Baxks Classified According to Population and Number of 
Banks in Towns, 1921, 1930, and 1935 



Bank-Town Groups 



Population of Towns 



ToUl 



Less 
than 
500 



500- 
1,999 



2,000- 
9,999 



10.000 

or more 
(exclud- 
ing 
Chicago) 



Chicago 



A. Number of Banks, 1921, 1930, 


and 1935 








Total banks 

1921 


1,897* 
1,589 
890 

585* 

624 

515 

684 
472 
226 

198 

150 

51 

430 

343 

98 


488* 

394 

215 

388* 

352 

209 

100 

42 

6 


623 
467 
291 

173 
233 
219 

420 
228 

72 

30 
6 


395 

324 
210 

24 
37 
76 

158 
168 
110 

141 
99 
24 

72 
20 


209 
200 
119 

2 
11 

6 

34 
38 

27 
45 
27 

176 

119 

43 


182 


1930 


204 


1935 


55 


Number banks in towns with 1 bank 

1921 




1930 




1935 




Number banks in towns with 2 banks 
1921 




1930 




1935 




Number banks in towns with 3 banks 
1921 




1930 




1935 




Number banks in towns with more 
than 3 banks 
1921 


182 


1930 


204 


1935 


55 







B. Percentage of Banks in 1935 to Banks in 1921 



Total banks 

Number banks in towns with 1 bank. 



Number banks in towns with 2 banks . 
Number banks in towns with 3 banks. 
Number banks in towns with more 
than 3 banks 



46.9 


44.1 


46.7 


53.2 


56.9 


88.0 


53.9 


126.6 


316.7 


(None in 
1921) 


33.0 


6.0 


17.1 


69.6 


633.3 


25.8 






17.0 


100.0 


22.8 








24.4 



30.2 



30.2 



*Two additional towns each had a suspended bank. 



ously impossible for the shift to be as important in them as in larger 
towns. It was only in the larger cities and towns which formerly had 
two or more banks that a shift to one-bank towns was possible. 

The total number of banks in to\vns with one bank was 585 in 
1921, increased to 624 in 1930, and then declined to 515 by 1935. The 
1935 figure was 88 per cent of the 1921 figure. Obviously the losses in 
the one-bank towns were less than those of all the banks together. 
This fact was due in large part to the addition of many one-bank 
towns which formerly had two or more banks. As mentioned, 
however, in the towns of less than 500 population this could not have 



48 Bulletin No. 55 

been so important as in the larger towns. Nevertheless, that it was of 
some significance is indicated in the analysis of Table XVI. There 
were 50 towns of less than 500 population in 1921 which had two 
banks each, or a total of 100 banks. By 1935 only 3 towns had two 
banks. ]\Iany of those formerly with two now appear among the 515 
one-bank towns. 

Larger towns — i.e., those with 500 or more population — actually 
showed an increased percentage operating in 1935 over 1921 in the 
one-bank category. This was primarily attributable to additions to 
these groups and to losses of towns that formerly had more than one 
bank. For example, in the 500 to 1,999 population group there were 
420 banks in towns with two banks in 1921, and only 72 of these were 
still in the two-bank town category by 1935. In this same group of 
towns there were 30 banks in 10 three-bank towns in 1921, and none 
in 1935. 

The figures likewise show that whereas in 1921 all the towns of 
10,000 population or more had more than one bank each, and only 3 
towns had as few as two banks, by 1935 there were 11 with one bank 
and 19 watli two banks. As contrasted with 203 banks in 40 towns 
W'ith three or more banks each in 1921, there were only 70 banks in 18 
towns with three or more banks in 1935. 

The foregoing figures are based upon the total of state and national 
banks; they do not indicate the extent to w^hich facilities are provided 
by one or the other type of institution. Such a breakdown of the banks 
is shown in Table XVII. The percentages for state and national banks 
in this table are based upon the figures presented in Table XVI. 

As might be expected, the losses in the number of national banks 
were less severe than for state banks, so that the percentage of 
national banks to the total increased from 26.2 in 1921, to 27.9 in 1930, 
and 33.6 in 1935. A similar picture is found for towns wdth one bank, 
two banks, and so forth. There is a marked trend for the percentage 
of national to total banks to increase as the number of banks per tow-n 
increases. Thus in 1935, national banks accounted for 24.7 per cent 
of the banks in one-bank towns, 44.7 per cent in two-bank towns, and 
64.7 per cent in three-bank towns. The exception was in towns with 
four or more banks, in which national banks accounted for 38.8 per 
cent of the total. 

Without doubt these figures reflect the factor of size of town, 
since the number of banks tends to increase as the size of town 
increases. Thus they reflect in part the tendency of national banks to 
be a more important factor in the larger towns. They also suggest the 



Banking Turnover and Facilities in Illinois 



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50 Bulletin No. 55 

higher minimum capital requirements of national banks over state 
banks in earlier years, which, because it was difficult for small com- 
munities to support a fair-sized bank, frequenth- precluded them from 
having national banks. 

This point becomes clearer if the totals for the towns of various 
size are examined. In towns of less than 500 population national banks 
accounted for 10.2 per cent of the total in 1935. This increased to 
29.6 per cent for towns of 500 to 1,999 population, 52.9 per cent for 
towns of 2,000 to 9,999 population, and 49.6 per cent for towns of 
10,000 or above, exclusive of Chicago. In Chicago, national banks 
were 38.2 per cent of the total. With minor exceptions, each of the 
percentages is larger than the comparable figures for 1921 and 1930. 
National banks have held their own better than state banks in towns of 
all sizes. 

In each of the groups of one-bank towns by population size, the 
national banks increased their percentage to the total banks from 1921 
to 1935. A similar rise in the percentage of national to total banks is 
found in the various sizes of towns with two banks. Except in the 
towns with 500 to 1,999 population, in which the cases were few, a 
similar tendency is again noted in the three-bank towns. 

In the towns with four banks or more the same picture is found 
for the total although not in those of 10,000 population or over (ex- 
clusive of Chicago). Here state banks maintained their relative posi- 
tion quite well. Although Chicago has a very low proportion of 
national banks to total banks as compared with other towns in Illinois, 
it showed a marked difference in this respect. Whereas there was about 
one national bank for each six state banks in Chicago in 1921, by 1935 
the ratio was one national to two state banks. 

It is thus evident that over the period studied, in all sizes of towns 
and irrespective of the number of bank outlets, national banks showed 
a marked improvement in their number relative to the number of state 
banks. 

A still more detailed tabulation of the number of towns classified 
according to their size and the number of banks in each is contained 
in Table XVIII, which analyzes the changes in the period from 
1930 to 1935. 

Section A is concerned with towns which had one bank both in 
1930 and 1935. All together there were 624 towns of all sizes that had 
one bank each in 1930. By 1935 there were 515 towns with one bank 
each. The intervening items explain the difiference. Of the 624 towns 
in 1930, by 1935, 245, or 39.3 per cent, were without a bank and 2 had 
two banks each. This left 377 of the original 624 still supplied with 



Banking Turnover and Facilities in Illinois 



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52 Bulletin Xo. 55 

one bank. There were, however, 138 towns formerly in other categories 
which by 1935 were added to these 377 to bring the total of one-bank 
towns to 515. Six of the towns which had a bank in 1935 had been 
unsupphed in 1930. The largest number of additions. 114. came from 
towns which had formerly had two banks, but by 1935 had but one. 
An additional 18 towns formerly had three or more banks, but only 
one each by 1935. 

The other columns in Table X\^III show the changes in one-bank 
towns when grouped by population. The original 352 one-bank 
towns of less than 500 population lost 44.3 per cent of their number by 
1935. Furthermore, they gained only 13 towns from other categories. 

Larger towns fared better. The percentage of their loss was less 
and the gains from former over-banked towns were greater. Thus the 
500 to 1,999 population towns started with 233 in 1930, lost 77, or 33 
per cent, by 1935, and gained 63 other towns, 61 of which formerly 
had two banks and one of which had three banks. Losses in banking 
facilities to one-bank towns of the 2,000 to 9.999 population group 
were less severe, and gains from former two and three-bank towns 
relatively greater. 

Section B provides a similar picture for those towns which had two 
banks. All together there were 236 towns in this group in 1930. Forty- 
three of these, or 18.2 per cent, were without any bank outlet by the 
end of 1935. An additional 114 had lost one bank: they are the same 
114 gained by the one-bank towns. Actually, however, a much smaller 
percentage of these two-bank towns lost all banking facilities than did 
the one-bank towns. An additional 34 towns, most of which formerly 
had three banks, were added to this group. Only two towns which in 
1930 had one bank were able to climb into the two-bank group. 

Small towns ( less than 500 population) with two banks were few 
in number in 1930. and gained no new towns by 1935. Only three out 
of 21 still had two banks and an additional 10, one bank. Of the 
towns in the 500 to 1,999 population group in 1930. only 35 out of 
1 14 were able to maintain two banks. An additional 61 had one bank. 
Since only two towns of this size had more than two banks in 1930, 
and none in 1935, there were no significant additions to this group. 

The towns with three or more banks are analyzed in Section C. Of 
the 78 towns in this category in 1930, 26 still maintained three or more 
banks by 1935. Fifty of the 7^ towns had just three banks in 1930; 
only nine were able to support three banks by 1935. Two small towns 
in the 500 to 1,999 population group still had one out of three and 
two out of three banks by 1935. 

Thirty-eight towns in the 2.000 to 9,999 population group started 



Banking Turnover and Facilities in Illinois 53 

out with three or more banks in 1930. By 1935 one had no bank, 11 
had one bank, 18 had two banks, and only 8 had three or more banks. 
Even in this latter group not all the banks had survived. Five towns 
that in 1930 had four or more banks had less than four banks each 
by 1935. 

Ten of the 30 towns with populations of 10,000 to 49,999 in 1930 
remained in the three or more-bank group in 1935. One town of this 
size had no banks in 1935, 6 were served by one bank, and 13 by two 
banks. The 8 largest cities (excluding Chicago) with populations of 
50,000 or more, lost some of their banks, but each still had three or 
more banks by 1935. 

One of the weaknesses of the banking system in Illinois both in the 
past and at present, is the small proportion of state banks which are 
members of the Federal Reserve System. Although some of this 
weakness may be offset to a small degree by operations of the Federal 
Deposit Insurance Corporation, this agency does not provide a complete 
remedy. 

All national banks are members of the Federal Reserve System, 
but only about one state bank out of ten is a member bank. There are 
few member banks in small communities. Although the percentage of 
state banks which are members has increased over the period of years, 
this has been due rather to a decline in the total number of banks than 
to an actual increase of state banks that are members. 

In Table XIX the total number of state banks in Illinois is com- 
pared with the number of state member banks for the various sizes of 
town. The data in this table are for the years 1921, 1930, and 1935. 
In 1921 only 6.2 per cent of these banks were members. Few banks 
in small towns were members ; only two of the 447 in towns of less than 
500 population were members in 1921. Nor was there any significant 
change in this respect among these small banks in later years. Six out 
of 193, or 3.1 per cent, were members in this same size of town in 1935. 

As the size of bank and the size of town in which it is located 
become larger, there is a tendency for relatively more of the banks to 
be Federal Reserve members. Thus in the 500 to 1,999 population 
towns, 17 banks, or 3.8 per cent, were members. By 1935 the percent- 
age had increased to 7.?> per cent of the banks in these towns. In a 
similar manner, the banks in towns of 2,000 to 9,999 population had 
increased their percentage of membership from 8.4 in 1921 to 14.1 
per cent in 1935. In the towns of 10,000 and more population (exclu- 
sive of Chicago), 18 banks, or 14.4 per cent of the total, were members 
in 1921, 13 banks or 10.8 per cent in 1930, and 12 banks or 20.0 per 
cent in 1935. 



54 



Bulletin No. 55 



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Banking Turnover and Facilities in Illinois 55 

In Chicago the percentage of state member banks to total state 
banks showed marked changes, due both to changes in the total number 
of banks and in the number of member banks. In 1921 there were 155 
state banks, of which 31, or 20.0 per cent, were members. Although the 
number of state banks had increased to 167 by 1930, the member 
banks declined to 14, which constituted 8.4 per cent of the state banks. 
By 1935, member banks in Chicago had increased to 18 and total state 
banks had dropped to 34, so that the percentage of the former to the 
latter was 52.9. 

The figures are for state banks alone. The percentages given in 
this table do not completely reflect the extent to which both state and 
national banks are members in the Reserve System and the extent (as 
measured by number of banks) to which the Federal Reserve System 
is able to influence banking policies. By reference to Table XVII, a 
better portrayal of this situation may be obtained. That table showed 
what percentages of the banks in various sizes of towns were national 
and state banks. Thus, it was found that in 1935, 10.2 per cent of the 
banks in towns of less than 500 population were national banks. Quite 
clearly, the addition of national banks to the figures for state member 
banks does not increase the percentage of member banks to total banks. 
In the larger towns, however, the situation is different. In the 500 to 
1,999 population group, national banks accounted for 29.6 per cent of 
all banks in 1935. These national banks, together with the state bank 
figures in Table XIX, raise the percentages shown there. Such a 
combination of figures is still more favorable to the larger towns, in 
which the proportion of national banks to total banks is larger. 

The figures for member banks in the Federal Reserve System, 
particularly the state banks which were shown in Table XIX, suggest 
a high degree of instability. In the first place the percentages of state 
banks in the small communities which are members are too small for a 
healthy coordinated banking structure. Even recognizing all the vary- 
ing disturbing elements in the banking structure, the fact remains that 
the Federal Reserve System is unable to accomplish a satisfactory 
coordinating function without a fuller participation of many small 
banks. 

The change in state bank members from 87 in 1921 to 51 in 1930 
and to 65 in 1935 is indicative of this unstable condition. From the 
high to the low this represents a variation of almost one-third. Par- 
ticularly in the towns of 500 to 1,999 population have the variations in 
state bank membership been erratic. Other sizes of town also showed 
wide variations. The same situation was found in Chicago. 



V. CONCLUSIONS 

A thorough study of all aspects of banking in Illinois would develop 
into several volumes. So broad a subject as banking, with all its 
economic and financial ramifications, cannot be divorced from the many 
related fields of enterprise, government policy, and institutions influ- 
encing banking. Although this bulletin makes no pretence of being a 
complete and exhaustive study, it does show in considerable detail what 
has taken place over a period of years in the number of Illinois banks. 
From this study of limited scope it is feasible to make certain infer- 
ences which are undoubtedly valid. 

The three main headings of the sections of the bulletin are sug- 
gestive of the broad inferences which may be made. The first section 
dealt with private banks, the conditions under which they entered the 
incorporated banking system, and the related statutes for capital 
requirements. The second section was concerned with banking turn- 
over, instability, and consolidations, and with the chartering policies of 
state and national banking departments. The third section examined 
changes in banking facilities in various sizes of Illinois towns. 

It is proposed now to relate these three sections and to find in them 
suggestions for the avoidance of future difiiculties. There can be no 
question that many factors besides those here mentioned should be 
carefully weighed and considered, but the fact remains that these too 
must be taken into account ; indeed, they have already been recognized 
by many students, bankers, and legislators. The economic conditions 
of recent years are one of the important factors accounting for bank 
difficulties, but they merely aggravated rather than caused the trouble. 

The act prohibiting private banks in Illinois after January 1, 1921, 
and the acts reducing capital requirements for new banks from 
November, 1918, to December, 1924, paved the way for a great influx 
of small incorporated state banks. Approximately 600 state charters 
were granted in this period, most of them to former private banks, and 
most of them with capital of less than $25,000. Even among the new 
banks which had not been private banks in 1918, capital was small. 

Although this influx of new banks of small stature cannot be given 
primary blame for later bank failures, it undoubtedly represented an 
unwise granting of corporate powers. Even though those state banks 
which had their roots in former private banks showed a survival power 
almost as great as other banks operating prior to 1922, there can be 
no doubt that the low capital requirements, which admitted small 
banks, provided an element of instability in the entire banking 
structure. 

56 



Banking Turnover and Facilities in Illinois 57 

Obviously a bank of $10,000 or even $20,000 capital is not inher- 
ently different in size, management, policies, success, operations, profit- 
ableness, and mortality from the common run of small retailing and 
manufacturing establishments, which are usually individual or family 
enterprises. Only in the respect that such small banks are regulated 
and supervised do they differ from other types of enterprises, and 
even here the difference is merely one of degree. And it is a foregone 
conclusion that governmental control and supervision, no matter how 
adequate, can never hope to take the place of proper management. 
Consequently the inability of small bank enterprises to command the 
requisite management and the lack of a satisfactory economic environ- 
ment to support them will operate to face the small bank with a none 
too happy future. 

The admission of 590 banks to the state system in the three years 
1919 to 1921 represented an increase by two-thirds. There were also 
increases in national banks, but since most private banks did not seek 
to obtain national charters because of larger capital requirements, the 
increase among nationals was far less pronounced. This unwarranted 
increase in a very short time in incorporated banking facilities resulted 
in unnecessary competition and excessive duplication in many com- 
munities. Although there was an abatement in banks organized after 
1921, there was, nevertheless, a continual succession of new banks 
with little regard to existing facilities and needs. 

For a number of years new charters were granted as fast or faster 
than old banks failed or consolidated. In Chicago the number of 
banks increased, whereas in the remainder of the state it was already 
declining. Only as failures and absorptions became more frequent 
toward 1927 and 1928 did the number of banks operating show signifi- 
cant net declines from year to year. 

The pressure for new bank charters had greater success among 
national banks than state banks. The new national charters granted 
were relatively larger in number as compared with losses of national 
banks than among the state banks. Perhaps in part this may be ex- 
plained in terms of the vast increase in state charters which had taken 
place prior to 1922 and which precluded the continued issuance of new 
state charters to the same extent as national charters. 

Even more significant than the issuance of new charters was the 
instability of these new banks, which were, on the whole, less stable 
than the old. This condition continued to manifest itself even after 
1924, when the capital requirements of new state banks were raised to 
a minimum of $25,000. 



58 Bulletin No. 55 

The continued granting of new charters by both state and national 
authorities in the face of a continual loss in banks must be construed 
as an unsound procedure. The economic environment was inadequate 
to support the banks already in operation, and yet new enterprises 
were permitted to start. Furthermore these new enterprises, although 
not handicapped by the deficiencies that the older banks had accumu- 
lated, were soon bogged in the same entanglements and difficulties. 

It seems likely that this heavy mortality rate among new banks 
chartered after 1921 was due in part to the fact that some of them 
were not new in fact, but only in name. Some of these new banks 
represented new corporations that succeeded old ones or that retained 
some of the same officers and at times some of the same assets and 
liabilities. Occasionally the demise of one bank led to the establish- 
ment of a new enterprise to take its place with little or no prospect of 
a better future. 

Although the turnover of banks was due in part to consolidations 
and absorptions, by far the largest losses in numbers were attributable 
to receiverships, involuntary liquidations, and suspensions. In Chicago 
the consolidations and absorptions were relatively more numerous in 
explaining losses of facilities than in the other areas of the state. 
About one out of each four bank closings in Chicago was due to 
absorption or consolidation. 

Nevertheless the actual turnover of banks was very rapid and of 
large proportions. The more than average increase in number of banks 
in Chicago was accompanied by and followed by a greater than average 
number of losses. 

Even though consolidations and absorptions were relatively more 
important in Chicago, losses due to receivership and liquidations were 
not relatively less important. Bank turnover, irrespective of the cause, 
was far greater in Chicago than in the rest of the state. 

The cycle of bank growth and shrinkage from 1921 did not follow 
the same pattern in communities of various sizes. The lower capital 
requirements in effect prior to 1924 made it particularly easy to 
organize small banks in small communities. It was in small towns and 
villages that the greatest growth in new banks occurred in these earlier 
years. Consequently when the mortality of banks became high, it was 
but natural to find that the greatest relative losses in bank facilities also 
took place in smaller towns. 

Although there is a distinct tendency for fewer of the small towns 
to have banks than the large towns, the actual percentage of banks in 
the small towns which went out of business was not so very much 
larger relative to the number in small towns than was the case in larger 



Banking Turnover and Facilities in Illinois 59 

towns. One significant difference is found, however, in the fact that a 
bank loss in a small community often deprived the town or village of 
its facilities since there was frequently but one bank in small com- 
munities. Even though bank losses were heavy among larger towns 
and cities, the failure of some of their banks did not always deprive 
them of banking facilities. 

In another respect the losses of banks in larger communities Avere 
not so serious. If there are several banks in a community there is 
always opportunity for consolidations, absorptions, or assumption of 
the assets and liabilities of one bank by another. Such changes were 
relatively more common in larger towns and cities, and hence losses 
to depositors were frequently avoided by a method less feasible in the 
small towns. 

In another respect the banks in larger towns and cities have im- 
proved their status whereas those in smaller communities have failed to 
do so, or have failed to do as well. The consolidations, failures, and 
other reductions in numbers of banks have markedly increased the 
population per bank or the potential customers per bank. 

The population per bank doubled and tripled between 1920 and 
1935 in the larger towns and cities, but did not show an equally signifi- 
cant improvement in the small communities. These changes have been 
due to the dual movements in banks and population. While popula- 
tion was declining or just holding its own in small towns and country 
areas, it was growing in the cities. Furthermore, the losses in bank 
outlets, particularly in multiple-bank towns, gave a much greater popu- 
lation per bank in the larger towns and cities. 

In other ways the larger towns have gained at the expense of the 
small. The loss of the town bank frequently drove the town merchants 
and farmer customers to seek banking facilities elsewhere. But instead 
of going to another small town that has a bank they are now more 
likely to go to a larger town, even though it may be somewhat farther 
away. Not only do they take their bank trade with them, but quite 
frequently this new town becomes their headquarters for general trade 
and shopping purposes as well. 

Although not pronounced, there was a definite tendency for .the 
number of banks lost to decrease according to the size of the town. 
Thus in towns of less than 2,000 population, by 1935 the number of 
banks operating was somewhat less than half of the number operating 
in 1921. For towns of 2,000 population or more, the banks operating 
by the end of 1935 were somewhat more than half of the 1921 total. 
Chicago, which was an important exception, had only 30.2 per cent as 
many banks in 1935 as it had in 1921. 



60 Bulletin No. 55 

Because of the fact that many larger towns and cities that in 1921 
had several banks by 1935 frequently had only one or two banks, there 
was an actual increase in the aggregate number of banks in the larger 
one-bank towns and in the larger two-bank towns. 

There is a marked tendency for the national banks to constitute 
a relatively larger portion of the total luimber of banks as the size of 
city increases, indicating in part the inability of small towns to support 
national banks, which for the most part have had a higher minimum 
capital during the years studied than the state banks. 

Not only are national banks a larger percentage of the banks as size 
of town increases, but in the period 1921 to 1935 they constituted an 
increased proportion of the entire number for virtually every size of 
town. This was due not only to the relatively larger number of new 
national banks chartered during these years, but also to the better 
survival record of the national banks. With the present apparent 
advantages of national charters over state charters, due to elimination 
of double liability, exemption from social security taxes, and the fact 
that federal insurance does not relieve state-bank shareholders of 
assessments on their stock in case of failure, the new charters of the 
last two years have bolstered the national system instead of the state 
banks. Thus the trend towards a greater relative number of national 
banks in Illinois has been further accentuated. 



BULLETINS OF THE BUREAU OF BUSINESS RESEARCH 

COLLEGE OF COMMERCE AND BUSINESS ADMINISTRATION 

UNIVERSITY OF ILLINOIS 



1. Illinois Taxes in 192L (Out of print.) 

2. Illinois State Revenue, 1895-1920. (Out of print.) 

3. The Tax Rates of Illinois Cities in 1921. (Out of print.) 

4. Books About Shoes. (Out of print.) 

5. Methods of Training Employees in Stores of Moderate Size. (Out of print.) 

6. Books About Books. 

7. The Statistical Characteristics of Bookstore Sales. (Out of print.) 

8. The Method of Analyzing Business Data. (Out of print.) 

9. The Current Ratio in Public Utility Companies. (Out of print.) 

10. The Productivity Ratios of Public Utility Companies. (Out of print.) 

11. The Natural Business Year. (Out of print.) 

12. State Expenditures in Illinois, 1895-1924. 

13. The Disposition of Income in Public Utility Companies. 

14. Illinois Appropriations for Social and Educational Purposes. 

15. The Earning Power Ratios of Public Utility Companies. (Out of print.) 

16. The Nature of Cyclical Fluctuations in Electric Power Production Data. 

17. Chicago as a Money market. 

18. Property Investments in Public Utility Companies. 

19. The Automobile and the Village Merchants. (Out of print.) 

20. The Sources of Public Utility Capital. 

21. An Analysis of Bankers' Balances in Chicago. (Out of print.) 

22. Books About Business Cycles. (Out of print.) 

23. Stockholders' Equity in Chicago Banks. 

24. Capital Stock, Surplus, and Undivided Profits of Chicago Banks. 

25. The Determination of Secular Trends. (Out of print.) 

26. Standard Financial Ratios for the Public Utility Industry. (Out of print.) 

27. The Financial Plan of Gas Companies. (Out of print.) 

28. An Analysis of Earning Assets of Chicago Banks. 

29. Balance Sheet Structure of Automobile Manufacturing Companies. 

30. Seasonal and Cyclical Movements of Loans and Investments of Chicago 

Banks. (Out of print.) 

31. A Test Analysis of Unsuccessful Industrial Companies. (Out of print.) 

32. The Financial Plan of Department Stores. 

33. The Banking Structure of the Seventh Federal Reserve District. (Out of 

print.) 

34. A Community Labor Survey. 

35. The Financial Plan of Electric Light and Power Companies. 

36. Grocery Wholesaling in Illinois from 1900 to 1929. 

37. The Operating and Earning Power Ratios of Gas Companies. 

38. A Market Research Bibliography. (Out of print.) 

39. Investment Banking in Chicago. (Out of print.) 

40. A Demonstration of Ratio Analysis. (Out of print.) 



BULLETINS OF THE BUREAU OF BUSINESS RESEARCH 

COLLEGE OF COMMERCE AND BUSINESS ADMINISTRATION 
UNIVERSITY OF ILLINOIS 



41. Business Mortality of Illinois Retail Stores from 1925 to 1930. By P. D. 

Converse. 

42. Operating and Earning Power Ratios of Electric Companies. By Raymond 

F. Smith. (Out of print.) 

43. The Expenditure of State Funds in Illinois. By M. H. Hunter. (Out of 

print.) 

44. A Survey of a Retail Trading Area. By Fred M. Jones. (Out of print.) 

45. Costs of Township and County Government in Illinois. By M. H. Hunter. 

(Out of print.) 

46. Department Store Food Service. By Ina M. Hamlin and Arthur H. 

Winakor. (Out of print.) 

47. Some American Proposals for War Debt Revision. By E. L. Bogart. 

48. Legal Provisions Affecting Real Estate Tax Delinquency, Tax Sales, and 

Redemption. By M. H. Hunter. (Out of print.) 

49. Maintenance of Working Capital of Industrial Corporations by Conversion 

of Fixed Assets. By Arthur H. Winakor. 

50. Financial Aspects of Corporate Net Worth. By Arthur H. Winakor. 

51. Changes in the Financial Structure of Unsuccessful Industrial Corporations. 

By Raymond F. Smith and Arthur H. Winakor. (Out of print.) 

52. Costs and Services of Local Government in Selected Illinois Counties. 

By H. K. Allen. 

53. Capacity to Pay Current Debts. By Arthur H. Winakor. 

54. A Balance Sheet of the Nation's Economy. By Frank G. Dickinson and 

Franzy Eakin. 

55. Banking Turnover and Facilities in Illinois. By Arthur H. Winakor. 



UNIVERSITY OF ILLINOIS-URBANA 

332.1W72BA C001 

BANKING TURNOVER AND FACILITIES IN ILLIN 



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