REPORT OF THE COMMISSIONER, STATE BANKING DEPARTMENT, Lansing, December 31, 1894. TO HON. JOHN T. RICH, Governor of Michigan: As required by section 43 of the State banking law, I have the honor to submit for your consideration, my sixth annual report of this department. Although the year has been comparatively free from the financial trouble that confronted us in 1893, the year has been one of anxiety and perplexity, necessitating greater care and watchfulness on the part of the banking department, than at any former period. The depression in all kinds of business, the shrinkage in values of nearly all classes of property, has embarrassed many business firms and small dealers throughout the State, and necessitated a more careful investigation by bank officers and directors, of the paper offered for discount. The directors of the several banks have realized as never before the responsibility of their position, and with the assistance of this department, have been able thus far to pass through the "settling up" process, with the loss of but one State bank during the year. Supervision, as provided for in our State banking law, has fully met the expectations of its friends. The annual examinations, and the several reports called for, would all fall short of the desired result, if they were not supplemented by a careful supervision. The work most beneficial to both bank and depositor, is that which is privately done, and known only to the commissioner, the depositor, and association concerned. If made public, the information sought for by the commissioner would be withheld, and he would be unable to correct irregularities, or bring to justice violators of law. In view of the general depression of business, it is gratifying to know there has been an increase in deposits both in the commercial and savings departments of our state banks during the year. The commercial deposits December 19, 1893, were $21,287,947.08 and the savings deposits, $32,216,067.08, making the total deposits, $53,504,014.16, while the commercial deposits December 19, 1894, were $22,591,337.27, and savings deposits, $35,939,957.25, or a total of $58,531,294.52, a gain of With national banks, there is also an increase in deposits, viz., December 19, 1893, the deposits were $32,190,876.45, and December 19, 1894, $34,718,215.02, making the gain $2,527,339.02. For a more complete statement you are referred to pages 12 and 13 of this report. NEW BANKS. On account of the disturbed condition of trade, which calls for less banking facilities than formerly, only nine banks have been incorporated during the year, with an aggregate capital of $292,000. The following table gives the name, location, date of authorization and amount of capital of each: Of these, four were new organizations, four were formerly private banks, and one a national bank. CLOSED BANKS. There have been but three bank failures in the State during the year, and only one of these was under the supervision of this department, viz.: The Commercial and Savings Bank of Ludington. The other failures were the Third National Bank of Detroit, and A. B. Clark (Bank of Morrice), a private banker of Morrice, Mich. The Commercial Savings Bank of Ludington closed its doors Aug. 16, 1894. Liabilities, $124,749.85; assets, $178,421.78. On the recommendation of the commissioner, Mr. Frank Filer was appointed receiver and entered upon his duties August 25. Of the liabilities $86,354.52 was due Mr. A. E. Cartier, president of the bank, and $18.205.25 due to the Cartier Lumber Company, of which Mr. Cartier was also president. This large amount due Mr. Cartier and the Lumber Company consisted of the amounts deposited by Mr. Cartier during the panic of last year, hoping to carry the bank through the financial depression. On December 31, the amount due Mr. Cartier was increased to $95,023.34, he having paid all the depositors in full with the exception of the Lumber I cannot too heartily commend this generous and honorable act on the part of Mr. A. E. Cartier, who, though not obligated to do so, was determined to sustain the honor of the association of which he had been the worthy president. The cause of the failure was the panic, which followed so closely the injudicious loans, and indiscreet management of a former cashier. It is a gratifying fact that no depositor in Michigan has lost a dollar during the year just closed, by the failure of a State bank. This is more remarkable when we consider the depression and uncertainty through which we have passed. CONDITION OF FAILED BANKS. I submit for your consideration, a statement of the condition of the three State banks in the hands of receivers at the commencement of the year. MILFORD STATE BANK. Mr. E. J. Bissell, the receiver for this bank has paid depositors a 15 per cent dividend during the year. The injudicious acts of some of the depositors at the time of the failure of the bank, prevented the receiver from securing certain claims, and it is impossible to determine at this time the amount of future dividends. As Mr. Bissell was the first receiver appointed under the present banking law, he has had much to contend with, which other receivers will escape. He successfully contested two suits at law, in one of which the liability of the stockholders, and the constitutionality of the banking law was determined by the decision of the supreme court. This decision will be found on page 23 of this report. By the good judgment of Mr. Bissell, and the judicial wisdom of Hon. J. B. Moore, the circuit judge, many precedents have been established that will be of value to this department. CENTRAL MICHIGAN SAVINGS BANK. The total assets turned over to Hon. Geo. W. Stone, receiver, May 8, 1893, was $862,683.95. Of this amount the receiver has collected $422,818.89, and from this amount, under the direction of the commissioner, he has declared the following dividends: Of the above dividends there remains unpaid, the sum of $50,832.19, which is deposited in the State treasury. There also remains on hand These amounts together with the $122,523.48 paid out for the release of securities pledged by the bank for loans, constitute the whole amount thus far collected. The receiver has in his possession, real estate, bonds, stocks and mortgages, which, on account of the depressed condition of business, he has been unable to sell, except at a price very much below their value. It is deemed best not to sacrifice the property for the benefit of speculators, but to realize all that is possible from the assets of the bank for the benefit of its creditors. The commissioner desires to heartily commend the excellent work done by Hon. R. H. Person, circuit judge, and Hon. Geo. W. Stone, receiver, in collecting assets, adjusting claims, and compounding bad or doubtful debts. The law wisely provides that the circuit judge having jurisdiction, shall direct the selling of property and compromising of claims, as this relieves the receiver from unjust criticism as to favoritism or preference among creditors. In the settlement of the business of a failed bank, all the acts of the receiver cannot be publicly explained at the time, without disclosing facts that would embarrass his efforts in behalf of the creditors. The injudicious acts and incendiary remarks of angry creditors, often prevent the receiver from accomplishing that which would be for the very best interest of all concerned, as the assets of a failed bank, are much more difficult to collect, than those of a bank in active business. BANK OF CRYSTAL FALLS. The bank of Crystal Falls which closed its doors June 12, 1893, has thus far paid three dividends, amounting to 40 per cent, viz: In June of this year Mr. H. S. Brooks the receiver, tendered his resignation, which was accepted, and Mr. H. M. Pelham was appointed in his place. The depressed conditon of the iron market, has materially affected business of all kinds in the upper peninsula, making it almost impossible to sell real estate, or collect assets that in ordinary times would be easily converted into money. For this reason it is impossible at this time to say, what the receiver will be able to accomplish. I am satisfied, however, that Mr. Pelham will realize from the assets all that is possible. Hon. J. W. Stone, the circuit judge, has given personal attention to matters pertaining to the bank, which service is greatly appreciated by this department, and no doubt highly valued by creditors of the bank. AMENDMENTS. It is my judgment that our State is suffering from over legislation, rather than not enough, and for this reason I have, during the past six State banking law, believing that it should be given a thorough test before any material changes are attempted. The events of the past two years, however, have suggested the propriety of one amendment that will, in my opinion be of permanent benefit, and that is, the restriction of loans to directors and officers. It would not be prudent to prohibit a director from borrowing from his bank. Such a course would often deprive a bank of its best and most desirable loans, and have a tendency to prevent active business men from becoming directors. It is a well known fact that in the majority of cases, men engaged in active business make the most discreet, prudent and careful directors. They are in touch with the people and well informed as to the financial standing and business habits of the borrower, which is the leading characteristic of a good banker. 66 There is a great difference between a money loaner and a banker. The one, Shylock" like, is ever selfishly seeking the "pound of flesh," which degrades and impoverishes a community, while the other encourages business, promotes philanthropy, and benefits humanity. 46 That bank officers and directors may be, in a measure, debarred from using the bank's money, to the exclusion of other patrons, I would suggest that section 52 of the banking law be amended by adding the words, but no officer or director of a bank shall be allowed to borrow the funds of a bank, of which he is an officer or director, except by a vote of a majority of the members of the board of directors of said bank, duly recorded in the record book of said association. It is well known, that insecure loans are often made to a director by the bank officer under pressure, that would not be made if left to a vote of a majority of the directors. And I am equally certain that loans to officers would, in many cases, be better secured, if the matter was decided by a majority vote of the board. I would also suggest that the Legislature make some provision for the extension of bank charters. The charters of several banks' in the State will within the next few years terminate by limitation, and the banking law should be so amended that these banks, if they so desire, may extend their charters, instead of re-organizing, as they are compelled to do at the present time. PRIVATE BANKS. I have repeatedly called your attention and the attention of the legislature to those private bankers, who conduct their business under a corporate name, instead of their own individual or firm name. The most successful private bankers in the State are those who use their own names in advertising their business, and they, with the officers of incorporated banks, have repeatedly urged that a law be enacted that will prohibit private bankers using the title "exchange bank," "city bank," "farmers' bank," and other names which carry the idea of incorporation. It is urged by many, that section 3133 of chapter 85, Howell's annotated statutes is sufficient for the case, but a careful reading of the section will convince any one versed in law, that it is incomplete, insufficient and without proper provision for its enforcement. It permits the using of a corporate name, if the individual or firm name is used in connection there |