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THINKS NEW ORGANIZATION LIKELY FOR FAILED BANK
J. W. Marvel Reviews Situation—New Bank Might Well Have Many of Old Personnel—The Guarantee Fund.
Reorganization of the Citizens' State Bank of Holdrege, which closed its doors Thursday, is expected by J. W. Marvel, cashier of the Adams County Bank, Hastings.
"I would consider it more probable, however, Mr. Marvel said, "that it would open not as the Citizens State Bank but as an entirely new bank, with probably a large number of the personnel of the Citizens State Bank in the new bank."
Such a reorganization would mean the purchase of the building and other assets of the Citizens State Bank by the new organization.
Mr. Marvel is in close touch with the situation from the fact that he is one of the nine directors of the State Agricultural Loan Association, an organization composed of about 900 state banks the purpose of which is to deal with the affairs of failed state banks.
The association is a voluntary one but all but about seventy of the state banks of Nebraska are members.
Heavy Drafts Met
The state guarantee fund, Mr. Marvel said, has paid out in two years, 1921 and 1922, about $4,500,000.
"While this is a large sum," Mr. Marvel said, "it should be remembered that there is now in the hands of the state banks, who make up the guarantee fund, assets of failed banks which at a conservative estimate have a value of $6,000,000.
"After all the obligations of the guarantee fund up to date have been paid," Mr. Marvel continued, "there will remain salvage which will net about $4,500,000."
Failed banks, of course, have buildings, much good paper, etc., and these are taken over by the state banks when a bank fails and are administered for the state banks by the receiver.
The buildings are disposed of, the paper nursed along and from this salvage the bank that put up the draft on the guarantee fund are reimbursed.
The maximum assessment the law allows for the guarantee fund in any one year is 1.1 per cent of the deposits of any individual bank.
With nearly 60 state banks having failed in the last two years, the question is often asked if the assessments made have not proven burdensome and have themselves become a factor in causing banks to fail.
Not Alarming
"In some instances," Mr. Marvel said, "the assessments may have been temporarily burdensome, but generally speaking the burden has no where near been alarming."
After a bank has failed Mr. Marvel explained, and a receiver has been appointed, money can be borrowed, and is borrowed, on the good assets of the failed bank, the loans being made on the receivers' certificates after they have been endorsed by the State Agricultural Loan Association, made up of 900 state banks.
The money so borrowed is used in the payment of depositors of the failed bank. By this plan the banks that might be embarrassed by the assessments to make up the draft on the guarantee fund are relieved.
The amount thus realized on receivers' certificates, Mr. Marvel continued, aggregates $2,500,000.
In each case the receivers' certificates are issued under the authority of the court.
1923 Assessment
Mr. Marvel explained further that while a conservative estimate of the net salvage remaining to the guarantee fund is $4,500,000 it is without counting the assessment for 1923, the maximum of which would be 1.1 per cent of the deposits in all the 970 state banks of Nebraska.
Sometimes, he pointed out, banks reopen shortly after they close. In Chadron, a bank opened 30 days after it closed, and was able to proceed, while in other cases they have been able to resume after 2 or 3 days.
Group 4 of the State Agricultural Loan Association, of which Mr. Marvel has recently been reelected a director, and of which O. A. Riley is president, comprises about 130 state banks, in a territory embracing the state west of Clay and Nuckolls counties and south of the Platte.
Disclaims Responsibility
Attorney General O. S. Spillman has written a letter to his predecessor in office, Clarence A. Davis, replying to the communication addressed to Spillman and to Governor Bryan, which Davis gave out last Thursday simultaneously with the closing of the Citizens' State bank, of which he is vice-president.
In his letter Mr. Spillman discusses the deal whereby the Citizens' State bank in May, 1921, took over the business of its insolvent competitor, The Holdrege State bank, and assumed the liabilities of the latter institution, afterwards paying off the depositors.
Spillman denies any responsibility on his part for the closing of the Citizens' State bank, which Davis declared was due to publicity given its affairs by state officials and their refusal to permit $187,000 to be taken from the state guaranty fund to make good the excess of what it had paid to depositors in the Holdrege State bank over what was seized from the assets of that institution.
Was a Consolidated Deal
The attorney general says that the transaction between the two banks was, in all essential particulars, a consolidation and that there is no warrant in law for holding the guaranty fund liable for any loss which the Citizens' State bank may have subsequently sustained. He calls attention to the fact that the deal was consummated while Mr. Davis, one of the interested parties was attorney general and acting as adviser to the state banking bureau, which sanctioned it.
