Copyright
Massachusetts. Division of Banks and Loan Agencies.

Annual report of the Commissioner of Banks for the year ending .. (Volume 1928) online

. (page 1 of 19)
Online LibraryMassachusetts. Division of Banks and Loan AgenciesAnnual report of the Commissioner of Banks for the year ending .. (Volume 1928) → online text (page 1 of 19)
Font size
QR-code for this ebook


MASS.
P.D.
1928
pt.4




in ii mil mil i

312Dbb 02fl5 1AD4 2



RECEIVED

SEP 2 11983
DOCUMENTS COLLECTION



Digitized by the Internet Archive

in 2010 with funding from

Boston Library Consortium Member Libraries



http://www.archive.org/details/annualreportofco1928mass4



Public Document



No. 8



Qttp (Eatnmamtftaltl? of MuBmt^mttiB



ANNUAL REPORT

OF THE

Commissioner of Banks

FOR THE

Year ending December 31, 1928
PART IV

RELATING TO

CREDIT UNIONS



Department op Banking and Insurance




Publication op this Document approved by the Commission on Administration and Finance
400 ll-'28 Order 3980



2ty? fflommomuraitfj of itajsarijmirtlfi



Office of the Commissioner of Banks,
State House, Boston, January 16, 1929.

To the Honorable Senate and House of Representatives of the Commonwealth of Massa-
chusetts in General Court assembled:
The annual report of the Commissioner of Banks, required by General Laws,
Chapter 167, section 9, is respectfully submitted herewith. The complete report
covering the work of this department and containing statements of the institutions
under its supervision and other statistical information will be submitted as here-
tofore at a later date.

Consolidated Statement of Resources of All Institutions under Supervision of the Com-
missioner of Banks, October 31, 1928 1









Percentage of








Increase


1




Increase for








Year


1928


1927




$2,168,548,458 41


$146,851,688 77


7.26


7.58


99 Trust companies:










99 Commercial departments .


768,502,452 08


58,738,829 26


8.28


2.61


84 Savings departments


246,784,362 99


24,613,802 45


11.08


14.17


57 Trust departments ....


609,073,864 78


106,239,469 44


21.13


7.37


226 Co-operative banks .....


516,138,387 56


38,133,240 07


7.97


12.34


3 Savings and loan associations


4,159,308 06


302,579 95


7.85


4.93


Mass. Hospital Life Insurance Company


36,745,198 85


658,986 44


1.83


2.32


1 Foreign banking corporation, branch office .


1,610,334 60


709,173 50 2


30.57 2


.98*


292 Credit unions ......


14,486,299 70


1,932,939 74


15.40


32.25


18 Persons, partnerships or corporations receiv-










ing deposits for safekeeping and trans-












2,864,323 26 3


657,848 00 2


18. 68 2


22.51




84,368,912,990 29


$376,104,514 62


9.42


7.59


154 National banks 4


$1,560,911,000 00


$20,614,000 00


1.34


5.13



1 Figures of trust companies and national banks as of October 3, 1928; co-operative banks as of the close
of October business; credit unions as of June 30, 1928.

2 Decrease. . .

s Assets of those receiving deposits for safekeeping are shown herewith in so far as they are within the
provisions of General Laws, Chapter 169.

4 Not under supervision of State Banking Department. Figures included to show total banking assets
of the Commonwealth.

SAVINGS BANKS

Savings bank assets increased during the year ending October 31, 1928, $146,-
851,689 and now total $2,168,548,458.41. The amount of this increase, as well
as the net increase in deposits, establishes a new high mark, although the net gain
in the number of accounts is the lowest since 1921. The deposits have nearly
doubled in amount in the last decade and the average savings deposit has also had
a marked increase, rising from $631.53 in 1927 to $674.97 in 1928.

Seventy banks paid regular dividends during the year at the rate of 5%, the
average rate of all banks being 4.71%, a slight increase over the average rate of
the previous year. Five banks paid extra dividends.

Additions to the guaranty fund and profit and loss accounts during the year
amounted to $8,975,000, making the total surplus accounts $158,877,015 or 8%
of the deposit liability.

Due largely to the industrial depression in some of the larger cities there has been
an increase in the amount of real estate held under foreclosure but the total amount
so held is but 2/10 of 1 per cent of the total assets.

The increase of $5,346,000 in the amount of securities acquired in settlement
of indebtedness is primarily due to the re-organization and the subsequent re-
financing of the Chicago, Milwaukee & St. Paul Railway Company. The market
value of the new bonds received in this re-organization and carried in this account
now shows an appreciation over the book value.



ii P.D. 8, Part IV.

Our banking statutes prohibit any corporation, person, partnership or asso-
ciation, excepting savings banks and trust companies, using any name or other
words indicating that their business is that of a savings bank or that their place
of business or office is that of a savings bank. During the past year the contem-
plated establishment of a national bank with the word "savings" in its title clearly
violated the letter and spirit of these statutes although not contrary to the federal
statutes. Upon learning of the proposed name the matter was reported to the
Attorney General and the statute affecting the situation was called to the attention
of the Comptroller of the Currency in Washington as well as to the persons in-
terested in the formation of the new bank. The savings banks, through the Massa-
chusetts Savings Banks Association, were also informed of the new development
and they, to whom such a title means so much and who have jealously guarded
it through the past century, made preparations to contest this infringement of their
rights through the courts. However, such action was avoided and the justice
of the stand of the savings banks acknowledged, when the use of the word "savings"
in the title of the national bank was abandoned.

TRUST COMPANIES

Not for many years have our trust companies made such substantial progress
in a twelve months' period as they have shown during the year ending October
3, 1928. Their aggregate assets on that date amounted to $1,624,360,680, being
greater by $189,592,101 than the amount reported last year. While a part of
this growth is accounted for by the addition of six to the number of trust companies,
and the consolidation of three national banks with two trust companies, there
has also been among the others an unusual increase in assets. To the progress
made, the commercial departments, the savings departments and the trust de-
partments have all contributed. The greatest contribution was made by the trust
departments, the aggregate assets of which have increased from $502,834,395 in
October, 1927, to $609,073,865 in October, 1928. This unprecedented growth of
trust department business is convincing evidence of the high regard in which the
corporate fiduciary is held by the public.

Coincidental with the increase in the deposits of the trust companies, cor-
responding additions have been made to their capital and surplus accounts, thereby
maintaining in general a proper ratio of capital to deposits.

The enactment of Chapter 128 of the Acts of 1928, an act authorizing banking
associations and corporations having their principal office in states granting
reciprocal privileges to act as fiduciaries in this Commonwealth, has proved ben-
eficial to our trust companies in their fiduciary activities in connection with prop-
erty situated outside Massachusetts. To date only four banks outside this
Commonwealth, which have been called upon to act as fiduciaries over property
situated in Massachusetts, have availed themselves of the reciprocal privileges
of this act.

CO-OPERATIVE BANKS

The increase in the assets of co-operative banks during the past year, although
somewhat less than that shown in each of the preceding five years, has been sub-
stantial. The lessened increase may be partially accounted for by two factors:
the diminished demand for real estate loans, and the disbursement by several
banks of the resulting accumulation of cash to holders of maturing shares in lieu
of the issuance of matured share certificates. In spite of this partial curtailment
the increase in matured and paid-up share certificates for the year is more than
eighteen millions of dollars.

Probably the most noticeable development in the business of the co-operative
banks is the increase in the amount of real estate held under foreclosure. The
book value of real estate so held in the aggregate is, however, less than 1% of the
total assets of these banks. This ratio has been considerably exceeded at various
times in the past. The losses so far incurred have been limited to an amount not
exceeding the legal and other expenses incident to foreclosure.

It is a significant fact that a large part of the loans which have resulted in fore-
closure were made within the last three or four years during the time when the
assets of co-operative banks were increasing at a rapid rate, and it is a matter
of record that on many of these loans only the first or very few payments were made.



P.D. 8, Part IV. iii

Another contributing cause is the custom of making loans on real estate in com-
munities located at some distance from the main office of the bank and in locali-
ties with which the security committee is not familiar. This condition of affairs
has apparently been brought about by the desire of many to increase the business
of their banks through the sale of maturing and paid-up shares resulting in an
influx of money which could not be absorbed by the demand for loans from re-
sponsible "home owners" and consequently loans have been made to unreliable
parties and in a larger amount than warranted by the value of the property and
other circumstances. These facts should serve as a warning to security committees
and to directors that new loans should be made with due caution, that a fair and
conservative valuation should be placed on property, and in addition that the
ability of the borrower to meet his obligations regularly be determined as definitely
as possible.

A marked gain in the guaranty fund and surplus accounts has been shown during
the year, for the first time exceeding 3%, the aggregate of these two accounts now
being 3.11 per cent of the total liabilities. The increase in members for the year
numbers 15,494 as compared with 34,015, the average for the five-year period
just preceding. The average real estate loan now stands at $3,497, an increase
of $70.

CREDIT UNIONS

Since the revision in 1926 of the statutes relating to credit unions there has been
a rapid increase in the number of such organizations, and during the year just
ended thirty-one have completed organization and commenced business.

There are several types of credit unions among which the industrial type is the
most numerous, more permanent and successful. Its success results from having
as a nucleus some industrial plant or occupation in which all the members are
employed. The largest unit in this industrial group is that of the telephone em-
ployees, having a membership in their several credit unions of upwards of 11,500.
Included among the industrial group are the postal employees' credit unions of
which there are eleven now in operation and others in process of organization in this
Commonwealth. Among the postal employees throughout the United States
187 credit unions are now in operation.

The credit union, particularly that of the community type, in many cases is
short lived, the length of its existence depending on the sustained interest and
cohesive power of the group which promoted its organization. In some of these
cases the accounting and financial details incident to its proper management have
been found to be beyond the ability of those having its affairs in charge and volun-
tary liquidations have ensued. During the year nine credit unions completed
liquidation and twenty-two are now in process of closing up their affairs.

The most recent compilation of statistics of operation show dividends paid to
shareholders at an average rate of 6.8%. Rates of interest charged on personal
loans average 7.02% while those charged for the first and second mortgage loans
average 6.23% and 7.99% respectively. The net increase in membership for the
first six months of this year was 2,535.

Supervision of these organizations is still largely a costly task of educating their
officers in accounting and banking methods, and the expense increases, of course,
as the credit unions grow in number.

PRIVATE BANKERS

In Massachusetts, as in many other states, the record of the so-called private
bankers, in so far as the receiving of deposits of money is concerned, has been in
general unfortunate and unsuccessful. There are a few outstanding exceptions to
this general rule.

In 1905, in an attempt to correct glaring abuses of trust and to prevent fraud
and failure among these bankers who in many cases lacked not only financial
training but also business experience, a law was enacted regulating the business
of receiving deposits of money for safe keeping. From time to time since its en-
actment this law has been amended as weaknesses developed or necessity required,
but such increase in the rigidity of the statutory regulations has failed in actual
practice to remove the hazards incident to such banking when conducted as a
private enterprise.



iv P.D. 8, Part IV.

Several factors have so adversely affected the business of the so-called private
bankers that a large number have discontinued entirely. It becomes increasingly
evident each year that, after a trial of more than twenty years, this phase of
banking has outlived its usefulness and should be eventually abolished, leaving
the banking business of the community to be transacted by our regularly in-
corporated banks. A bill seeking to accomplish this object has been prepared
and has been submitted accompanying the following recommendation.

Recommendation Relative to Deposits with Others than Banks

The steady decrease in recent years in the number of others than banks licensed
to receive deposits of money for transmission to foreign countries and for safe
keeping, commonly called private bankers, has continued through the past year.
No new licenses have been issued during this period.

On October 31, 1928, there were eighteen persons, partnerships and corporations
licensed to receive deposits of money for transmission, eight of whom were also
licensed to receive deposits for safe keeping. The peak of this class of banking
during the last decade came in 1920, at which time there were eighty-three licensed
to receive deposits for transmission, of whom fifty-six were also licensed to receive
deposits for safe keeping. The decline in the amount of business transacted
by these bankers is illustrated by the following comparison. On October 31, 1920,
the amount of deposits held for safe keeping was 83,079,657, as compared with
$1,826,722 on the same date in 1928. The amount transmitted by licensees for
the year ending October 31, 1920, was $23,933,943, as compared with $3,032,339
for the year ending October 31, 1928.

During the year ending October 31, 1928, there has been a decrease of eight in
the number of those receiving deposits for safe keeping. One was converted into
a trust company, four surrendered their licenses and discontinued the business,
and three were placed in the hands of receivers. Since that date one has sur-
rendered his license, and it became necessary to revoke the license of another and
apply for the appointment of a receiver, thus further reducing the figures given.
With one exception all of those now licensed to receive deposits of money for safe
keeping have been engaged in this business for several years.

Formerly these bankers derived substantial profits from the fluctuations in
foreign exchange and from the transmission of money to foreign countries, but with
the stabilization of foreign exchange and the restriction of immigration, their
income diminished to such an extent as to cause many of them to discontinue
business.

The assimilation and Americanization of our residents of foreign birth, who
formerly transacted their financial affairs with the banker of their own nationality,
still further reduces the field from which the business is drawn. Furthermore,
through the establishment of branches and extension of service, our regularly
incorporated banks and trust companies now furnish and have made available to our
residents of foreign birth banking facilities of every nature, and it is evident that
there is no real need for this form of banking.

In 1922 a special committee of the Legislature was appointed to investigate the
subject of private banking and the need of further regulation, and reported their
recommendations for the consideration of the General Court. The results of this
investigation and the changes in the law suggested, covered the subject fully and
completely, and may be found in their report. (See House 1275, 1923.) While
the changes enacted during the 1923 session of the Legislature, based on the recom-
mendations of this committee, were progressive, they were, however, a modification
of the recommendations of the Special Committee.

Developments since then, and especially during the past year, have disclosed
additional weaknesses in this law and this, together with the evident lack of need
for this form of banking, seems to justify the recommendation that chapter 169
of the General Laws, which provides for the issuance of licenses permitting the
receipt of deposits for safe keeping by others than banks, be so amended as to
provide for the discontinuance of the issuance of such licenses and the eventual
termination of this form of banking.



P.D. 8, Part IV.



CHRISTMAS CLUBS



The following table shows the amount saved and distributed through the medium
of Christmas Clubs with the number of members thereof. Through the co-
operation of the national banks, the figures include the amounts distributed by
those institutions, making the compilation more complete. For comparison with
last year the amounts distributed by all banks show an increase of $505,608 in
amount and 19,910 in membership. The figures this year were furnished by banks
located in 132 cities and towns, as compared with 127 one year ago.





Comparative Statement of Christmas Club Deposits








No. of Banks


Members


Amount Distributed




1928


1927


1928


1927


1928


1927


National banks
Savings banks ■
Trust companies




94

127

66


87

122

62


187,451
218,573
172,157


184,805
207,617
165,849


$9,858,285

10,880,306

8,616,713


$9,903,846

10,256,964

8,688,886




287


271


578,181


558,271


$29,355,304


$28,849,696



DIVIDENDS PAID

Dividends paid to depositors in savings banks, savings departments of trust
companies and to shareholders in co-operative banks during the past year, com-
pared with those paid in the previous year, are as follows :





Average Dividend (Per Cent.)




1928


1927


Savings banks ..........

Savings departments of trust companies .....

Co-operative banks:

Paid-up share certificates . . . . .


4.71
4.28

5.63

5.29
5.00


4.70
4.24

5.65
5.31
5.02*



* One bank paid an extra dividend of 3%.

TRIENNIAL VERIFICATION OF DEPOSITORS' PASS BOOKS.
The triennal verification of depositors' pass books and accounts was made
during the first ten months of 1928 in all savings banks, savings departments of
trust companies, co-operative banks and credit unions. The total amount of
deposits in all banks verified was $1,480,970,770 or 59.96% of the total deposits.
A comparison of the percentage of accounts and deposits verified in the years 1928
and 1925 is given below:





Percentage of
Deposits Verified


Percentage of
Accounts Verified




1928


1925


1928


1925


Savings banks ........

Savings departments of trust companies .

Co-operative banks .......

Credit Unions (shares and deposits) ....


49.06
69.07
92.52
79.89


43.55
68.10
93.88*
81.19


39.70
46.34
91.17
67.07


36.83
47.50
93.25*
70.87



* Not verified in 1925, figures of 1922 used.

UNCLAIMED DIVIDENDS IN LIQUIDATION.

_ Pursuant to the provisions of Chapter 240 of the Acts of 1925, all unclaimed

dividends in the hands of the Commissioner of Banks for the creditors of the

following liquidated institution were delivered to the State Treasurer, together

with schedules showing the names of the individuals to whom the money is due:

Dec. 31, 1928, Polish Industrial Association, Inc., Boston.

These funds will be held by the State Treasurer in trust for the various indi-



vi P.D. 8, Part IV.

viduals for six years from the date of receipt by him when the remaining balances,
together with the interest earned thereon, if any, will escheat to the Commonwealth.
TREASURER AND RECEIVER-GENERAL
The cash and securities held by the Treasurer and Receiver-General were ex-
amined by this department as of September 1, 1928, at the request of the Finance
Committee of the Executive Council, to whom a report was rendered.
Comparative statements and statistics relating to credit unions follow. ■
Respectfully submitted,

ROY A. HOVEY,
Commissioner of Banks.

CREDIT UNIONS

Comparative Statement





June 30, 1928


Dec. 31, 1927


June 30, 1927


Number of credit unions ....


292


279


275


Assets








Personal loans :








Unsecured ......


$4,827,883 19


$4,414,586 40


$4,485,015 32


Secured .......


1,667,895 40


1,373,203 33


933,773 05


Real estate loans:








First mortgages .....


2,525,597 81


2,591,182 73


2,480,313 02


Second mortgages .....


2,186,796 79


2,359,787 10


2,120,732 72


Bonds . . . * .


1,070,643 85


902,243 39


859,411 97


Real estate by foreclosure ....


87,257 66


40,036 71


-


Furniture and fixtures .....


53,616 45


41,509 80


44,384 66


Co-operative bank shares ....


452,043 91


394,357 78


371,418 26


Deposits in savings banks ....


615,488 30


490,635 16


437,388 51


Due from banks subject to check


890,262 72


681,697 66


616,218 26


Cash ........


84,431 37


133,442 91


139,351 89


Other assets ......


24,382 25


22,248 13


65,352 30


Liabilities
Shares .......


$14,486,299 70


$13,444,931 10


$12,553,359 96


$9,230,242 75


$8,472,333 79


$7,S08,536 01


Deposits .......


4,019,858 01


3,831,939 15


3,672,550 21


Guaranty fund ......


581,373 51


552,367 44


484,575 65


Reserve fund ......


32,968 21


47,216 47


49,579 66


Undivided earnings .....


266,744 26


267,630 32


199,104 24


Current income ......


310,214 17


113,628 02


288,431 77


Bills payable ......


4,500 00


145,017 51


39,777 43


Other liabilities ......


40,398 79


14,798 40


10,804 99




$14,486,299 70


$13,444,931 10


$12,553,359 96


Miscellaneous








Number of members .....


91,245


88,710


83,106


Number of borrowers .....


44,550


41,692


38,604


Number of depositors .....


28,879


28,895


25,133



Credit Unions in Voluntary Liquidation
Abraham Frank Credit Union, Maiden. 1
Amalgamated Credit Union, Boston. 1
Andersen Credit Union, Boston. 2

Brockton Independent Workman's Circle Credit Union, Brockton. 1
Bryant Credit Union, Maiden. 1
Chelsea Young Men's Credit Union, Chelsea. 1
Community Credit Union, Boston. 1
Crossett Credit Union, Abington. 1
East Boston Credit Union, Boston.
Elmco Credit Union, Boston.
Essex County Credit Union, Lawrence. 2
Fur Workers Credit Union, Boston. 1
Greater Boston Credit Union, Boston.
Grove Hall Credit Union, Boston. 2
Hamilton Credit Union, Southbridge. 1 - 2
Lovering Credit Union, Boston. 1
Massachusetts Credit Union, Boston. 2
Merrimac Credit Union, Boston.
Metropolitan Credit Union, Boston. 2



1 Commenced liquidation during the year.



2 Completed liquidation during the year.



P.D. 8, Part IV.

Navy Employees' Credit Union, Boston.
Novelty Credit Union, Boston. 1
Palace Credit Union, Boston.
Paul Revere Credit Union, Revere. 1
Roxbury Credit Union, Boston. 2
St. Joseph Credit Union, Waltham.
Sisterhood Credit Union, Boston. 2
Tolman Credit Union, Boston. 1
Traders Credit Union, Boston.
Waltham Watch Credit Union, Waltham.
Washington-Essex Credit Union, Boston. 2
Zagerer Credit Union, Boston. 1



vu



Commenced liquidation during the year.



2 Completed liquidation during the year.



Credit Unions which commenced Business between January 1, 1928, and December

81, 1928, inclusive



Name


Location


Date Business
commenced


New Bedford Alliance Credit Union . . .


New Bedford


Mar.


1, 1928


Tolman Credit Union ....










Boston


Jan.


1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Online LibraryMassachusetts. Division of Banks and Loan AgenciesAnnual report of the Commissioner of Banks for the year ending .. (Volume 1928) → online text (page 1 of 19)