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AUDIT OF BANK RECORDS BEGUN THIS MORNING
Receiver Expected to Be Named Within Next Thirty Days
(Continued from Page 1) examiner stated, however, that all trusts in the department will have to be assigned to another trust company after details of the audit and receivership have been completed. St. Joseph was taking the closing of the Commercial calmly and in a manner that was as amazing as was the effort made four weeks ago to break the run on the bank. "We'll have another bank," was the main comment of business men, who today found themselves greatly inconvenienced by the suspension of the only financial house in the city. News of the bank's closing leaked out last night and was generally known before the formal notice was posted
Bank's Plight Revealed The bank's plight began coming to a head about Sept. last. It was first brought to public light before the city commission Last summer the bank and the city entered into contract whereby the bank was to post acceptable collateral to cover all city funds on deposit, in accordance with state law. The first of this month the bank notified the commission in a letter that had elected to post but $36,000 in collateral, and requested the city keep its deposits within that Tax payments were coming in, and the commission found itself in an embarrassing position if the letter of the law was to be followed. the public's money protected and the bank assisted the same time The deadline for paying summer taxes was extended from Sept. 15 to Oct. 15 to relieve the immediate strain on the bank and keep the size of the city's deposits down. City money in excess of $36,000 was placed in trust and then drawn out and deposited as fast as the city's checking account fell below the $36,000 figure set by the bank. Board Votes to Close Events then moved along until last night when President Theisen called a special meeting of the bank's directorate Mr. Theisen told the bank board that after a conference with federal banking department officials he had come to the conclusion that in the interest of all depositors he was of the opinion the bank should be closed He pointed out that a complete reorganization of the bank's affairs was necessary and then, through the organization of new bank. St. Joseph could have a banking house that would adequately meet the city's banking needs. The directors thereupon passed a formal resolution which brought the 38-year career of the Commercial bank to close. Ends Many Hectic Days The closing of the St. Joseph bank ended the most hectic period in all of St. Joseph's bank history. For the last month Mr. Theisen and his associates had made desperate efforts to keep the Commercial open. Ambitious plans to revive the bank's sagging financial reserves were outlined and partially put into effect. but the bank's affairs were in such shape that at least a 90-day period was needed to effect a reorganization that would bring a half million dollar relief to the bank. Tuesday afternoon Mr. Theisen and his associates had long conference with the federal banking officials in Chicago. The latter pointed out that a reorganization that would save the bank would require a half million dollars. They urged that the bank be closed. new one organized, and the affairs of the old bank liquidated.
May Not Lose Much Just how much the depositors will lose is problematical. They may not lose much, said one official of the Commercial today. This man said he thought the depositors would get at least 75 per cent. The Commercial is national bank and SO its affairs are in the hands of the federal banking department. Through the comptroller of the treasury at Washington receiver will be appointed and the bank's affairs liquidated. No local man will be appointed receiver. An outside official will be brought in to take charge of the bank.
Deposits of Three Millions When the Commercial closed this morning its deposits, savings and commercial, aggregated three million dollars. In its last published statement, the first of July, the bank's deposits aggregated a little better than three million. The Commercial was the county's largest bank, made so after its consolidation year ago last June with the Union bank. When the two structures were thrown together 15 months ago, the Commercial represerted bank of seven million in resources. Withdrawals Weaken Bank The primary cause for the Commercial's closing was the near exhaustion of its cash reserves. For more than a year withdrawals of the bank have been steady and continuous. Attorney R. E. Barr, speaking before a mass meeting two weeks ago, called for the purpose of pledging public support to the bank, said that in little more than year a million and half dollars was withdrawn from the Commercial. From May to September of this 000. year depositors withdrew some $600,-
Over the Labor y week-end depositors withdrev over $200,000 from the bank. It was this cor ant draining of cash that took the bank's life blood, reducing the institution's cash reserves in its own banks and with the federal reserve in Chicago, and other depositories, to a point where the bank was skating on thin ice. The federal banking department never declared the Commercial insolvent. In fact, the bank this morning was not insolvent, for had it been the comptroller of the treasury, through his agents, would have stepped in and closed the bank. But cash reserves were getting so perilously low that a forced closing was imminent. Thus, to avoid and to give the remaining depositors the last ounce of protection, the bank board decided to close. Think Action Was Wise Berrien bankers, who for months have been in close touch with the St Joseph situation, said today that they thought the Commercial officials were justified in closing the bank. These bankers pointed out that the safety of all the depositors was the only thing to be considered in such crisis, and that if the Commercial was allowed to remain open its deposits would have continued to dwindle and thus those depositors who stood by and refused to become panicky would be the losers. With the bank closed, the bankers pointed out, an orderly liquidation under a receivership could be effected. a new bank organized and opened and within few months the whole situation would be immensely improved with only a minimum loss to depositors.
Several Factors Blamed A number of factors were blamed today as being responsible for the failure of the Commercial. They were: Merger of the Union and Commercial 15 months ago. Gossip and rumors, resulting in an ever increasing number of withdrawals and general lack of public confidence. General depreciation of securities, due to the depression. Frozen assets and mark down of bond accounts due to slipping values in such securities. Uncollectable loans. The fact, however, that the Commercial stood a withdrawal that was threatening to merge into a two million dollar account indicates how strong the institution was when, for some strange reason, depositors began withdrawing their accounts Theisen's Effort Heroic The effort which Mr Theisen, St. Joseph oil man and president of the Commercial, made personally to save his bank will always stand out as an epic chapter in St. Joseph banking history. Theisen risked his own fortune to save the Commercial.
Oil men friends of his came to nis rescue, months ago, and deposited almost a quarter of a million in the Commercial to show their confidence in him. When the bank closed this morning this huge deposit was still in the bank. These associates of Theisen refused to take it out despite all the fears and rumors and excitement. For three months Theisen worked night and day on plan of reorganization which he believed would save the bank. Even as the bank closed he had nearly $100,000 in banking pool to throw into the bank, but he was advised against it by federal banking officials, who contended that the only way to effect a reorganization was through a new bank. It was only because of Theisen's bull-dog tenacity that the bank stayed open as long as it did. He refused to be whipped, refused to admit defeat, refused to accept the closing as the only way out of the difficulty, Theisen Heaviest Loser Theisen will, unquestionably, be the heaviest personal loser connected with the Commercial, for he owns between 300 and 400 shares of Commercial stock. The oil man, a self-made business success and long one of the outstanding oil men of Michigan as well as one of St. Joseph's first citizens, refused to give up until he was solemnly warned by federal banking officials that if he persisted in his heroic effort to save his bank he stood chance to lose his entire personal fortune. Theisen was still fighting today. He left for Chicago to confer with the federal officials on the receivership and determined that whoever was appointed receiver should be trained and experienced man who would get the last drop of value out of the Commercial's assets in order that the depositors might get the very last penny that could be obtained.
Broke Back of Run Last June the Commercial's affairs began to look critical, but Theisen and his associates were confident that the storm could be weathered. As the summer wore on, however, and as withdrawals persisted, the situation became more critical. A plan was outlined whereby the Commercial crowd and the Benton Harbor banks was to organize a $100.000 pool to help out in the emergency. This pool was practically completed a few days ago, but was not used because was then too late. Over Labor day real run set in at the Commercial. Then the bank appealed to the public. A 90-day withdrawal notice was required of savings depositors. A mass meeting was held to discuss the situation. A general reorganization committee headed by J. N. Klock of Benton Harbor was appointed. St. Joseph business men and others rallied to the support of the Commercial and almost overnight the back of the run was broken. Business men poured their money and acceptable notes into the bank in gallant gesture to stem the tide and save the city's only banking institution. There was never anything like it in the history of the city and Michigan and outside banking interests stood looking on, amazed that bank run could be broken by an appeal to civic pride. But withdrawals of commercial accounts began again in a few days. The normal demands of business, in fact, were greater than deposits and greater than what the bank's reserves could stand. Slowly the cash reserves melted down until finally the danger point was reached. Then came the Tuesday conference in Chicago; the "surrender" of gallant and fighting Theisen to the inevitable and the formal closing order. Organized 38 Years Ago The Commercial bank was organized 38 years ago as a state bank, but became national bank in 1909. Its trust department application was approved by the Federal Reserve board at Washington, D. C. on June 7, 1927. Throughout its years of existence the Commercial bank has had at its helm men listed among the business leaders of the community and heads of the leading industrial and commercial enterprises of the city. The bank's first president was Montgomery Shepard, who served from 1893 to 1894. He was succeeded in the following order by Newton Vanderveer, 1894-1895; James M. Ball, 1895-1913; E. A. Blakeslee, 19131921; W. A. Preston, 1921 1925; J. J. Thiesen was elected in 1925. The bank has occupied the same corner at State and Pleasant streets, in the center of the down town business district, for 38 years, but not in the same building. The original structure was replaced with a beautiful bank building in 1920.