Commercial Banks Financing Sources
Commercial banks store far more of the country's money than the Savings and Loans. However, only one bank dollar in six goes to real estate lending. As a result, in total number of dollars, commercial banks rank second behind Savings and Loans in importance in real estate financing and lending.
Of the loans made by banks on real estate, the tendency is to emphasize short-term maturities since the bulk of a bank's deposit money comes from demand deposits (checking accounts) and a much smaller portion from savings and time deposits. Consequently, banks are particularly active in making loans for financing real estate construction projects as these loans have maturities of 6 months to 3 years. They are less inclined to offer long-term real estate loans. When they do, maturities are usually 5 to 15 years rather than 25 to 30 years. There are, however, two exceptions to this. In rural areas where longer-term savings deposits make up a larger portion of a bank's money sources, the town bank is a major source of long-term real estate loans. The other exception is the bank that makes 20- and 30-year loans but afterwards sells them, rather than keeping them in its own investment portfolio.
Commercial banks operate under state or national charters, the latter being identified by the word "National" in the bank's name. National banks are chartered and supervised by the U.S. Comptroller of the Currency, and are required to be members of the Federal Reserve System (FRS) and the Federal Deposit Insurance Corporation (FDIC). The Federal Reserve System is the "nation's bank," and the FDIC provides insurance to checking and saving depositors. As of mid-1983, FDIC insurance was $100,000 per account. State-chartered banks are controlled by state banking regulatory agencies, usually in a manner similar to the national banks. State banks can voluntarily join the FRS and the FDIC. Banks offer depositors a choice of accounts similar to those offered by S&Ls.
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