The internal organization of trust com panies is quite similar to that of ordinary banks, except that the variety of duties under taken necessitates the maintenance of separate departments (required by law in many States) for the transaction of trust, savings, general banking, safe deposit and other lines of busi ness. Subject to the State laws, a trust com pany is governed by by-laws adopted by the stockholders; is under the general direction of a board of directors; and is administered by a group of officers whose number and duties are determined by the needs of the business.
In addition to the character of its business in the trust department, the typical trust com pany differs from an ordinary commercial bank in the character of the deposits which it attracts and in the resulting methods in which it invests the funds received in such deposits. The typical commercial bank handles demand deposit accounts of active business concerns whose funds are in constant use and whose balances fluctuate radically from clay to day or week to week. Such a bank must therefore invest its funds in short-time loans so maturing that it will always have ample funds available with which to meet the demands of its de positors, and will be able to reduce the amount of its outstanding loans on short notice. On the other hand, the typical trust company does not handle deposits of active business concerns. Its deposits are composed of inactive funds, of gradually accumulating savings or of funds set aside for a considerable period for special purposes, the balances of which, as a whole, do not fluctuate greatly, and normally tend to steady increase. These are "time deposits" rather than odemand deposits." The trust com ,pany, therefore, need not confine its invest ments to short-time loans, but may place its funds in long-time loans and in certain ap proved classes of securities,— in bonds and in real estate mortgages. Trust funds, as already stated, are kept entirely separate from other funds of the company. Their investment is hedged about with many safeguards required by law, by the by-laws of the company and sometimes by the provisions of the trust.
Historical and Statistical.— The first com pany in the United States granted the power to do a trust business was The Farmers' Fire In surance and Loan Company (now The Farmers' Loan and Trust Company) of New York city, to which extensive trust powers were granted in 1822. Similar powers were granted to The New York Life Insurance and Trust Company in 1830. Two companies in Philadelphia,— The Pennsylvania Company for Insurance on Lives and Granting Annuities, and The Girard Life Insurance, Annuity and Trust Company (now The Girard Trust Company),— were granted trust powers in 1836. All four are still in ex istence.
As is indicated by the names of these early companies, the trust business was at first closely associated with the insurance business, and was not regarded as of sufficient importance to require separate organizations. A few other companies of the same kind flourished for a time during the next 20 years, but went out of business for various reasons. The first com pany in the country organized to transact ex clusively a trust business was The United States Trust Company of New York city, in corporated in 1853. The number of companies authorized to exercise trust functions increased slowly down to the time of the Civil War, immediately following which a number of such companies were organized. By 1875 perhaps 50 trust companies were doing business, located in New York, Pennsylvania, New Jersey, Maryland, Illinois, Iowa, Georgia, all the New England States except Maine, and possibly a few other States.
Prior to 1875 no statistics regarding trust companies are available, but in that year the Comptroller of the Currency began the publica tion of such statistics in his annual reports. As the trust companies are State institutions and not under the jurisdiction of the comptroller he had no authority to compel the rendering of reports by them, and as a consequence his figures represent only such companies as were willing to report to him. Nevertheless they reveal the relative growth of trust companies from year to year, and in recent years repre sent the great majority of such companies. For the year 1875 he reports 35 trust comffies, with total resources of $122,890,175. ring the eighties there was a considerable increase in number of companies, and the trust cornpany as an institution began to attract some atten tion, particularly from the banks, which saw danger of competition. In 1890 the comptrol ler's reports showed 149 companies with total resources of $503,801,336. The real develop ment of the trust company began along in the nineties, though the period of most rapid growth did not begin until the first decade of the 20th century. In 1900 the comptroller re ported 290 companies with total resources of $1,330,160,343, an increase in resources in 10 years of 164 per cent. At the end of the next decade, in 1910, the comptroller's report showed 1,091 companies with total resources of $4,216, 850,062, an increase during the decade in num ber of companies of 801, or 276 per cent, and in resources of $2,886,689,719, or 217 per cent. The 1915 report shows a further great increase, to 1,664 companies with total resources of $5, 873,120,341. The table at top of page shows leading figures of the comptroller's reports from 1875 to 1915 inclusive.
Beginning in 1903, The United States Mort gage and Trust Company of New York has