Analysis of changes in number of banks and branches, July 1, 1938–June 30, 1939— Continued

1 Exclusive of new banks organized to succeed operating banks.

Exclusive of liquidations incident to the succession, conversion, and absorption of banks.

Exclusive of conversions of national banks into State bank members, or vice versa, as such conversions do not affect Federal Reserve membership.

Exclusive of conversions of member banks into insured nonmember banks, or vice versa, as such conversions do not affect Federal Deposit Insurance Corporation membership.

Includes 2 branches of an insured nonmember bank which was absorbed by a State member bank and

6 branches of 4 insured nonmember banks which became State member banks.

NOTE. The figures in this table were compiled by the Board of Governors of the Federal Reserve System.

REPORTS FROM NATIONAL BANKS

National banks were, in accordance with provisions of section 5211 of the Revised Statutes, called upon to submit four reports of condition during the year ending October 31, 1939. Reports were required as of December 31, 1938, March 29, 1939, June 30, 1939, and October 2, 1939. Uniform instructions and forms adopted by the Federal bank supervisory agencies and a number of State authorities were used in submitting these reports. In order to relieve banks of the burden of preparing detailed call reports four times a year, the report of condition form used by national banks for the call as of October 2, 1939, was reduced materially in size by eliminating schedules providing for detailed classifications of the loans and investments, etc., appearing in previous report forms. It is the present intention of the Comptroller to use the "short" form for future spring and autumn calls on banks under his supervision. Summaries from all condition reports by States were published in pamphlet form. National banks were also required by the statute to obtain reports of their affiliates and holding company affiliates other than member banks and to submit such reports to the Comptroller as of the four dates for which condition reports of the banks were obtained.

Under the general powers conferred upon him by law, the Comptroller required from each national bank two semiannual reports of

earnings, expenses, and dividends, one for the half year ending December 31, 1938, and one for the half year ending June 30, 1939; also reports of condition of all domestic and foreign branches of national banks for the first three calls in the year ending October 31, 1939. No reports of branch banks were called for as of October 2, 1939, the former practice of obtaining such reports for each call date having been abandoned with a view to requiring branch reports only annually in the future, as of the date of the midsummer call.

National banking associations authorized to act in a fiduciary capacity were called upon to submit reports of their trust departments as of the close of business on June 30, 1939. Reports of branch-bank trust departments heretofore required from national banks concerned were discontinued during the year.

In accordance with section 298 of the Code of Laws of the District of Columbia banks other than national banks in the District were required to make to the Comptroller all condition reports and reports of earnings and dividends obtained from national banks during the year. Building and loan associations and credit unions in the District of Columbia under the supervision of the Comptroller were required to submit semiannual reports of their assets and liabilities and receipts and disbursements, one for the 6 months ending December 31, 1938, and one for the 6 months ending June 30, 1939.

Detailed figures for reports of condition and earnings and dividends are published in the appendix to this report.

EXAMINATION OF NATIONAL BANKS

The most important duty of the Bureau of the Comptroller of the Currency is that of examining national banks with the end in view of correcting unhealthy situations to maintain national banks continuously in sound operating condition. The National Bank Act requires that each national bank be examined twice each year. In addition to these regular examinations, special examinations are conducted for various reasons, important among which are inquiries into the condition of banks the condition of which is regarded as unsatisfactory.

During the 12 months ending October 31, 1939, 10,506 examinations of banks, 3,162 examinations of branches, 2,381 examinations of trust departments, and 132 examinations of affiliates were conducted. Twenty-five State banks were examined in connection with conversions to or consolidations with national banks. Investigations were also conducted in connection with applications for 15 new charters and 31 new branches.

The machinery for conducting these examinations has been built up over the years. The function is administered by the chief national bank examiner in Washington. There are 12 examining districts in the country which coincide with Federal Reserve districts. The function of examining in each of these districts is administered by a district chief national bank examiner. There are assigned to him an appropriate number of examiners, assistant examiners, clerks, and stenographers. In Washington, the chief national bank examiner has seven assistants who review for him the reports of examination made in the field and an examiner is assigned to review reports of

Examining Division, of which 767 are in the field and 40 are in Washington. The expense of examining banks is assessed against the banks examined.

National bank examiners are appointed by the Comptroller of the Currency, with the approval of the Secretary of the Treasury. The appointment is made after an investigation of the individual's fitness and after he has successfully passed an oral and written examination and has been graded on his experience and personality. It has long been the practice to advance assistant examiners to these positions. The 12 examining districts are divided into subdistricts, each in charge of an examiner. There are usually more examiners than subdistricts and therefore many examiners are unassigned and work out of the district headquarters office under direct instruction of the district chief examiner.

Examiners are assisted in conducting an examination by assistant examiners and clerks. The principal duty of an examiner is to determine the bank's condition by an analysis and appraisal of assets; to ascertain whether or not the bank's affairs are being so conducted as to indicate capable and responsible management and to satisfy himself that the provisions of law covering the conduct of business are being properly adhered to.

LIQUIDATION OF INSOLVENT NATIONAL BANKS

In addition to other duties imposed by law, the Comptroller of the Currency is authorized under the National Banking Act of 1864, as amended, to appoint receivers for national banks when satisfied of the insolvency thereof. Receivers so appointed are required, under the direction and supervision of the Comptroller, to liquidate the assets of banks involved for the benefit of depositors and other creditors. In order to effectively administer such appointments of receivers and to supervise and direct the activities thereof in the liquidation of closed national banks, it became necessary early in the history of the Comptroller's Bureau to assign a personnel unit thereof to the handling of such matters. This unit, under the designation of the Division of Insolvent National Banks, now handles one of the major activities of the Bureau.

During the year ended October 31, 1939, there were four failures of national banks, involving total deposits of $1,322,500. All deposit accounts of these four banks were insured up to $5,000 by the Federal Deposit Insurance Corporation. In addition to such four failures receivers were, however, appointed in two other instances to levy and collect stock assessments covering deficiencies in value of assets sold, or to complete unfinished liquidation of banks formerly in voluntary liquidation. There have been 17 national-bank failures since the banking holiday of 1933, with total deposits at failure of $11,848,952. All deposit accounts of 14 of these banks, which failed from 1934 to 1939, inclusive, after the insurance of bank deposits became effective, were insured up to $5,000 by the Federal Deposit Insurance Corporation.

During the past year substantial progress has been made in completing the liquidation of failed national banks. Receiverships in process of liquidation have been reduced from a total of 520 banks in charge of 201 receivers to 367 banks in charge of 133 receivers, while

the book value of the unliquidated assets of such banks has been correspondingly reduced from 550 million to 450 million dollars, and the estimated values thereof from 173 million to 128 million dollars. During the year, a total of 245 dividend distributions were authorized, making available to depositors and other creditors the aggregate sum of 29 million dollars.

Total costs of liquidation of insolvent national banks during the year amounted to an average of 11.28 percent of total collections from all sources, including offsets allowed. This average cost closely follows the trend for the past several years and may be regarded as approximately normal in amount in view of the increasing average liquidation age of remaining receiverships. It may be pointed out in this connection that average percentage costs of liquidation are comparatively low during the early years of receivership administration but invariably increase progressively from date of failure to date of final closing. Furthermore, costs of liquidation have during recent years been considerably increased by reason of interest payments to the Reconstruction Finance Corporation and to lending banks upon loans made to receivers for dividend payment purposes. A summary of total receipts and disbursements of receivership funds resulting from the liquidation of insolvent national banks during the past year is given in the following table:

Liquidation statement, summary for year ended Oct. 31, 1939

1 Credit adjustment in accordance with revised figures submitted by receivers.

During the past year the liquidation of 159 receiverships, with total deposits at failure of $123,971,181, has been completed and all affairs of such receiverships finally closed. The depositors and other

distributions, are found to have received payments amounting to an average of 76.1 percent of amounts due. The average period of time required to complete the liquidation of each of these banks was 6 years and 5 months. Costs involved in the liquidation of these receiverships do not appear excessive since the total thereof amounted to but 7.34 percent of total collections from all sources. A statement of total receipts and disbursements of receivership funds involved in the liquidation of these 159 insolvent national banks is given in the following table:

Liquidation statement, 159 administered receiverships finally closed, year ended Oct. 31, 1989

The 367 receiverships remaining in process of liquidation at this time consist principally of the larger banks suspended during recent years. These larger receiverships have been found to involve a greatly increased number and complexity of liquidation problems requiring solution. The proper disposition of these more complex problems and situations, among which may be mentioned the disposition of large and involved trust departments, the conclusion of complicated and protracted litigation instituted both by and against receivers and the greater difficulty encountered in the disposal of large volumes of real estate and securities assets has, of course, correspondingly lengthened the average period of time required to complete liquidation.

While the returns to depositors of any given bank are limited by the nature of the assets found by the receiver upon his appointment, the extent to which these assets may have been hypothecated for borrowed money or for secured deposits and by the conditions under which their liquidation must be accomplished, nevertheless administration of the 367 receiverships still in process of liquidation has been productive of favorable results. The depositors and other creditors of such receiverships are found to have received dividend payments amounting to an average of 71.7 percent of their claims.

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