Branch Banks
The most characteristic feature of American banking is the extent to which the banks and trust companies are independent institutions. The national-bank act makes no provision for the establishment of branch banks except in cases of the conversion of state banks which already have branches. Such banks are allowed to retain their branches on condition that the capital is assigned to the mother bank and the branches in definite proportions, but only a few national banks have branches. Under none of the state banking laws has there been built up an important system of branch banks. This has been partly due to the very general desire of each American community, no matter how small, to have its bank managed by its own citizens, and partly to the fact that in most of the States the establishment of branch banks is either explicitly forbidden or in no way provided for by law. In eight States—Colorado, Connecticut, Mississippi, Missouri, Nevada, Pennsylvania, Texas, and Wisconsin—the opening of branch offices is forbidden by specific enactment. In a large number of other States the banking laws make no provision for the establishment of branches, and it has been held in most of these States that the opening of branch offices is unlawful.
The States in which state banks and trust companies are definitely permitted to have branches are California, Delaware, Florida, Georgia, New York, Oregon, Rhode Island, Virginia, and Washington. In Louisiana, Maine, and Massachusetts trust companies may have branches. In Maryland and North Carolina branches are operated by some banks and trust companies which were chartered by special act. There are in several of these States, however, restrictions on the opening of branch offices. In New York and Massachusetts branches may be established only in the city in which the principal office of the bank or trust company is located. In New York, moreover, only banks located in a city of 1,000,000 inhabitants or over may have branches; but any trust company may have branches. In Maine a trust company may establish branches only in the county in which it is located or in an adjoining county.
In nearly all the States which permit banks or trust companies to establish branches one or both of two conditions are imposed. In the first place, additional capital is required for each branch bank over and above the amount of the parent bank. Secondly, the establishment of a branch bank must be specifically authorized by some state official or officials.
The number of branches of banks and trust companies cannot exceed a few hundred in the entire United States. Compared with the total number of banks and trust companies this is a small development. Moreover, the most important affiliations among banking institutions are among those located in the same city. The "chains" of country banks possess, for the most part, little vitality, and in the total banking business of the country they play an insignificant rôle. The great mass of state banks and trust companies are independent institutions. The most enduring affiliations at present existing among the banking institutions are those between a national bank and a trust company or a state bank and a trust company. The comparatively limited powers of the national banks and in some States of the state banks have made it desirable for many of these institutions to affiliate trust companies with themselves in order that desirable business may not be lost.