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The Legacy Of Community Banking


Throughout the history of our country, banks have changed their services and offered new technologies to respond to their customers' needs. What has not changed, however, is the vital role banks play in the lives of the people they serve, and the importance of trust between bank, customer, and community.

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Before 1860

While a few banks had been established in prominent American cities such as Philadelphia in the late 1700s, banks became more common as populations moved westward. After the Baltimore and Ohio Railroad began passenger service in the late 1820s, banks became a common sight in towns with railroad stations.

Banking services at this time included exchanging local currency for notes that would be accepted in other regions, and weighing coins to determine if they had been made from metals other than gold or silver.

Residents in growing towns could establish a savings account with initial deposits of as little as fifty cents, and banks worked to encourage savings.

To certify important documents, banks developed their own special seals, made by imprinting hot wax with an engraved press.

Before the Civil War, there was no centralized currency. Banks tried to accept only sound notes that would be readily accepted by others. This photo is a $20 dollar note issued by the Bank of Westminster, and retained by the Westminster Union Bank.

Civil War and Post Civil War

Banks in this era began using paper notes rather than gold coins and nuggets, but they had to operate with caution: Their notes were only as good as the gold that backed them. Cashiers had the important job of assuring the authenticity of notes that were submitted as deposits and used for payments.

During the Civil War, Congress passed the National Banking Act in an effort to stabilize currency in the northern states. Banks applied for charters that allowed them to be national banks so they could receive deposits of United States bonds and issue legal currency. This improved method of exchange meant state-to-state transactions became easier to handle.

Banks like the Mercantile Trust & Deposit provided impenetrable vaults to safe-guard valuables. Families entrusted their silver pieces to the bank every summer when they left the Baltimore area on vacation. This photo shows Mercantile Trust & Deposit employees standing outside the silver vault, 1895.

In Unionist strongholds like Frederick, banks provided stability. In southern cities, most banks collapsed because of unstable conditions. The Confederate States of America printed its own money and, as the costs of the war mounted, printed so much that it ultimately became worthless. The call to arms pulled many bank officers away from their homes so that banks were managed from afar.

The introduction of checks required a check canceling system, with banks imprinting a number on checks so they could not be re-used. Other efforts to provide security at this time included banks building safes and offering safe-deposit boxes to their customers.

While earlier banks had offered limited services, banks after the Civil War saw the need to consolidate a variety of banking services under one roof. Financiers in Baltimore established The Mercantile Trust & Deposit in 1884, the first "financial department stores," because it offered savings accounts, safe-deposit boxes, trust services, and more

Early Twentieth Century

The Federal Reserve was established in 1913 to further stabilize the nation's monetary system. Posting machines soon replaced hand-written ledgers as a way to create more viable records of deposits and other transactions.

During World War I, the federal government created savings bonds to raise funds for the war effort, and banks administered the program. The bonds could be purchased in small amounts, and banks welcomed those with moderate means who became first-time investors.

Farmers typically asked their merchants to handle basic financial matters, or they traveled long distances to reach city banks. In the early 1900s, leading citizens in rural areas began to form banks to serve the particular needs of their agricultural communities. Some would accept a cattle contract as collateral, for example, a practice most city banks would consider too risky.

After a number of banks failed during the Great Depression, President Franklin Roosevelt's New Deal reforms included the Federal Deposit Insurance Corporation (FDIC). The FDIC guaranteed the safety of deposits and raised the public's confidence in the banking system.


World War II

Just as they had during the first World War, banks administered a savings bond program during World War II. They also took on the additional responsibility of maintaining ration accounts for their customers, who received coupons that effectively limited the amount of sugar, gasoline, butter, and coffee in order to help the war effort.

The affluence that followed World War II had a tremendous impact on banking. The explosion of suburban living meant banks needed to build branch offices to better serve their customers, and they also added conveniences such as drive-through teller windows and night depositories.

Demand for mortgages and other loans soared, particularly among returning soldiers, and banks began to offer installment loans.

Banks promoted their services by demonstrating how they could help families plan their future. This photo is a Mercantile-Safe Deposit and Trust advertisement reminded men with young families to plan their estates, c. 1960.

The Computer Age

No longer skeptical of banks, the public demanded a wide array of new services. Computerized automation of routine tasks ultimately transformed the culture of banking.

To better protect their customers, banks installed cameras in the 1970s and began photographing depositors' records in the 1980s and storing them on microfilm or microfiche.

Automatic teller machines (ATM's) first appeared in the late 1970s, revolutionizing the way customers interacted with their banks.

During the 1980s and 1990s, Congress began deregulating the financial services industry, which allowed the establishment of nationwide banking networks. The telecommunications revolution and the growth of the internet made it possible for banks to further extend and improve services to customers, both nationally and internationally.

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