REPORT OF COMMISSIONER. STATE OF MICHIGAN, OFFICE OF THE COMMISSIONER OF THE HON. JOHN T. RICH, Governor of Michigan: SIR-In compliance with the provisions of section 43 of the State banking law, I have the honor to submit for your consideration my fifth annual report of the State Banking Department of Michigan. Although the year covered by this report, which ended December 31, has been one of unusual distress and disaster to banking corporations throughout the United States, I am pleased to report that Michigan's State and National Banks, with four exceptions, have withstood the financial storm which carried down so many banking institutions in other states, and today stand as monuments to the intelligence of our citizens, the honesty and integrity of bank officers, the financial ability of directors and the excellency of our State and national banking laws. Never in the history of banking has there been a financial panic that was confined so exclusively to banks, as the panic of 1893. In other panics, commercial circles suffered as severely as banking corporations, and where banks were affected, the quality of the currency was a prime factor. In the panic through which we have just passed, no one questioned the quality of our money, though they may have doubted its sufficiency. The chief anxiety of the public seemed to have been centered on the solvency of the bank where the money was deposited. Confidence is the foundation stone upon which is built a successful banking business, and I have no hesitancy in saying that the adequacy of our State banking law has been a prominent element in establishing confidence in our State banking institutions. When we consider that our State banking law has been in force but a little over four years, it is a matter of gratulation that Michigan, with her 162 State banks, was able to pass through the ordeal with a loss of but two banks, viz.: The Central Michigan Savings Bank, of Lansing, and the Bank of Crystal Falls, L. S. Too much praise cannot be given the press of the State, which, by paragraph and editorial, so noble assisted every effort to allay the excitement in financial circles, and make stronger the confidence of the public in our State and National banking corporations. Not only should the newspapers be commended for what they published, but for their refusal to give extended publicity to sensational bank news. from cities in other states, notwithstanding the publication of such news at the time might have increased the sale of the paper. Seldom has the power of the Detroit press been better exemplified, and never has it been more highly appreciated. NEW BANKS. Despite the unfavorable conditions, there have been incorporated during the year, eighteen new State banks, with a capital of $956,000. The following table gives the name, location, date of authorization and amount of capital of each: Two State and two National banks have gone into receiver's hands during the year. One State bank, the Ingham County Savings of Lansing, and one National bank, The First National of Sturgis, were closed for a short time during the panic, but were reopened with increased capital, and now seem to have the confidence of the public. Nine private banks have closed during the year. These banks were not under any supervision whatever, and should not be classed among the banks of the State. They are mentioned in this report, merely to call your attention to the necessity for State or national supervision of all institutions receiving public deposits. The following is a list of banks closed during the year ending December 31, with approximate amount of assets and liabilities. The Central Michigan Savings Bank closed its doors April 18, 1893, and Hon. George W. Stone was appointed receiver and entered upon his duties May 8. Two dividends amounting to 24 per cent have been paid creditors, and unless there is an unexpected shrinkage of values, the assets will be sufficient to pay all depositors. The immediate cause of the closing of the bank was the failure of the Lansing Lumber Company, and the Lansing Iron and Engine Works. The president of these two companies was also president of the bank, which held a large amount of their paper. This paper was rediscounted largely with national and private banks, which are outside the jurisdiction of this department. As no entry of this rediscounted paper was made on the books of the bank, it was impossible that any examination would reveal the excessive loans made to these companies, unless it were by accident. Rather than cause undue excitement among depositors by making a personal examination of the bank, a day or two before it closed, in order that I might be fully informed as to its condition, I asked for and received from the cashier a sworn statement of the condition of the bank as shown by its books at the close of business April 14. Had the condition of the bank been as reported, I have no doubt but that it would have reopened, but upon an examination made after the bank closed, and from private sources, I found that instead of there being $33,857.39 rediscounted paper as reported, there was over $150,000.00 of such paper outstanding. In lieu of $40,009.48 overdrafts as reported, the books of the bank showed the overdrafts to be $80,009.48. A discrepancy was also found in the cash items. I immediately called a meeting of the board of directors, and reported to them that they were not only holden to depositors in the sum of $666,484.31, as reported, but were also liable as endorsers on over $150,000.00 of rediscounted paper. The cashier being present was placed under oath and admitted that the rediscounted paper was more than $100,000.00 in excess of the amount he had reported, and that his former reports were untrue. On this admission, the directors realized the folly of further efforts being made to reopen the bank, and united with me in a petition to the court for the appointment of a receiver to wind up the affairs of the bank. Aside from the annual examination, the only means this department has of knowing the condition of the several banks under its supervision, is from the report called for by the Commissioner. When these reports are correct, the Commissioner is enabled to form au opinion as to the standing of the bank; but when they are untrue they are misleading, worse than useless, in fact, vicious. We cannot conceive of any violation of the banking law that is fraught with so much danger as the false, inaccurate bank report, made with intent to deceive. It not only nullifies bank supervision, but it deceives the depositors and misleads the public. Believing that the public good would be best served by insisting that these reports exhibit a true and correct statement of the condition of the bank, led me, on the 25th day of October, to cause the arrest of the cashier of the closed Central Michigan Savings Bank on a criminal warrant. charging him with making a false report. Upon a partial examination, and upon a waiver by him of a further examination, he was held for trial at the ensuing term of the circuit court for the county of Ingham. BANK OF CRYSTAL FALLS. The Bank of Crystal Falls closed its doors June 12, 1893, and H. S. Brooks was appointed receiver. The immediate cause of the failure was the closing of the Plankinton Bank, of Milwaukee, which was the principal correspondent of the Crystal Falls Bank. One dividend of twenty per cent has been paid depositors, and another dividend of a like amount will be paid within a few weeks. By the closing of the mines in the upper peninsula real estate that was once valuable is now almost unsalable. Notwithstanding this the receiver VOLUNTARY LIQUIDATION. Two banks, one State and one National, have gone into voluntary liquidation during the year. The First State Bank of Hillsdale, by a vote of its stockholders, went into voluntary liquidation May 10, 1893, and turned over to the Hillsdale Savings Bank sufficient assets to pay depositors and all other obligations of the closed bank. The Farmers' National Bank of Constantine went into voluntary liquidation August 28. EXAMINATION. During the year I have caused an examination to be made of each State bank and trust company in the State, and notwithstanding the excitement in financial circles throughout the country, they were, with a few exceptions, found to be in excellent condition. Many, on account of the unusual demands of depositors, were found with less than their legal reserve, but in no case were additional obligations assumed by the bank until that reserve was made good. BANK DIRECTORS. In a former report I had occasion to criticise the policy of electing directors who gave little or no attention to the banking business they were elected to direct. Since the 1st of May, however, I have had no reason to complain of lack of attention on the part of directors of the several banks. This is especially true of the directors of the banks of Detroit and Lansing. Detroit being the chief reserve city of the State, nearly all interior banks keep a large portion of their reserve there. At the commencement of the panic the interior banks, in order to protect and strengthen themselves, withdrew their reserve, amounting to several millions of dollars, at a time when it was most needed to pay depositors who had become frightened by the reports of numerous failures in other States. It was fortunate for the credit of Detroit that the largest and best managed banks were attacked first, as they were best able to cope with a condition never before experienced by the oldest financier. In this emergency, the directors came to the front and demonstrated that the boards of directors of the several banks of Detroit were not "honorary" members, but active, honest, fearless men, strong in the knowledge of their ability to pay all obligations of the bank if given time, and standing shoulder to shoulder they passed through the ordeal with reputation unsullied and honor intact. When we realize that the banks of the State draw their inspiration largely from Detroit bankers, we will then appreciate the heroic efforts made to protect the integrity of the banks of the metropolis of the State. What was true of Detroit directors was unqualifiedly true of those of Lansing. The failure of two of the largest manufacturing establishments in the |