officers' indebtedness and stock loans taken up and a reduction made in the furniture and fixture account. A reply was received signed by the cashier of the bank stating that the objectionable matters would be adjusted. Relying upon his statement, as was done in numerous other cases, and desiring to give them an opportunity to place the bank in harmony with the law, it was permitted to continue in operation and its depositors secured the protection of the depositors' guaranty law on the day the state banking board levied the assessment creating the guaranty fund, February 14, 1908. The bank's report, made in response to call for statement February 29, 1908, showed that it had not complied with the instructions of this office. They were again ordered to comply with the law. I then directed Mr. D. W. Watson, an assistant, to examine the bank and he did so on May 1, 1908. I quote from his report as follows: "I found the affairs of this bank in anything but good condition. They have not complied with your instructions in any particular. More than two-thirds of their paper is past due and a great majority of the active paper has been in existence from one to three years and is plastered all over the back with extensions. They show a loss now and if they continue in the same way they will show further loss. Officers loans $10,181.22, other doubtful paper $5,485.44." I immediately addressed a letter to the board of directors of the bank stating that the law must be complied with without further delay and ordered the removal from office of the president and cashier of the bank, both of whom were active in its management. The board was further informed that the bank would be closed unless it complied with the law. This letter was sent to Examiner Watson with instructions to return to Coalgate, call a meeting of the directors, and lay the letter before them. He did so and in accordance with his instructions remained at Coalgate to assist the directors in placing the bank in proper condition and in harmony with the banking laws. He spent seven days there, at the end of which time he notified me that nothing had been done and that there was but little hope that anything would be done. He said the directors were not satisfied and expected the banking department to act. I im mediately went to Coalgate, called a meeting of the board of directors, at which the officers of the bank and Mr. Watson were present, and informed the board that the matter could be delayed no longer. I explained in detail what had already been done and told them that unless the bank was placed in harmony with the laws it would be necessary for me to close it. They said they wanted it closed, that they were not satified with the manner in which the business had been conducted and desired the state authorities to take charge. I again requested the officers of the bank to take up their loans. They wanted more time. I called their attention to the fact that they had already been given 90 days and that they had failed to do one single thing ordered done. They requested that they be given until the next day noon to take up their loans. Their request was granted. At noon the next day they had done nothing and the president of the bank apparently made no effort in that direction. The bank was closed at noon May 21, 1908 and a notice was placed on the door stating that the bank was in the hands of the bank commissioner and that its deposits would be paid in full by the state banking board. At the time the bank was closed it had total deposits of $36,744.93. To pay depositors immediately $24,843.73 of the guaranty fund was used. Mr. Herman C. Schultz was appointed to take charge of the bank and to liquidate its business. All claims were paid and the guaranty fund reimbursed in full and the remaining property was delivered to the stockholders September 4, 1908. The bank has recently been reorganized under the title of the Citizens State Bank of Coalgate. It is under different management, has a capital of $25,000, surplus $1,000 and its assets are in a clean and sound condition. Extracts from resolutions adopted by the board of directors of the International Bank of Coalgate, September 4, 1908: "Be it resolved by the board of directors of the International Bank of Coalgate, Oklahoma, "That, Whereas, The board of directors, by the assistance of Mr. D. C. Meminger, an expert accountant employed for that purpose, has his day checked out Herman C. Schultz, assistant state bank commissioner for the state of Oklahoma and received from his hands the property and affairs of said bank, and Whereas, We find that he has well and faithfully administered the trust reposed in him as such officer as concerns the affairs of said bank, and rendered an account thereof which we find true and correct in every detail, and Whereas, We find the condition of the affairs of said bank very much improved as compared with their condititon at the time the said assistant bank commissioner took charge thereof, and Whereas, Much uncalled-for comment has been indulged in concerning the taking charge of said bank by the state authorities; Now, Therefore, We, The board of directors of said bank, extend to the state bank commissioner, H. H. Smock, and to Assistant State Bank Commissioner H. C. Schultz, our thanks and our appreciation for the careful and efficient manner in which they have conducted the settlement of this bank's affairs and express our entire approval of the bank commissioner's action in taking charge of the affairs of said bank at the time he did because of the unsatisfacttory condition and irregularities in the management thereof by the president of said bank. That a copy of these resolutions be spread upon the minutes of this meeting and a copy thereof furnished to the state bank commissioner, H. H. Smock, and to Assistant Bank Commissioner Herman C. Schultz. JOHN GENTILINI, Chairman. ANTHONY SHAW, Secretary. (Signed) THE PRAGUE BANK CASE. On April 27, 1908, a charter was granted by the secretary of state for the organization of the Farmers Union State Bank of Prague, with a capital of $10,000. The incorporators were Wm. G. Botts and E. L. Garnett of Oklahoma City and W. S. Overstreet of Prague. The first meeting of the stockholders was not held until August 13, 1908, at which time directors were elected, by-laws adopted and the organization completed. A short time thereafter application was made to this department for authority to open the bank. According to the last federal census (July, 1907) the town of Prague has a population of 998 inhabitants. It has two national banks, capitalized for $25,000 each and one state bank, capitalized for $10,000, and the combined deposits of the three were at this time approximately $160,000. The town has a limited territory from which business may be expected to come and there is no apparent reason for the belief that its population will materially increase within the next few years. Believing that Prague already had sufficient banking capital to supply the needs of its community and that a fourth bank there would be a bad business venture the application for authority to open the bank was refused. In further support of such refusal was the fact that should a fourth bank be permitted to organize at Prague the same situation would be presented in many other towns of the state, the business of banking would be greatly overdone, and the depositors' guaranty fund would thereby be endangered. Upon being denied authority to open the bank its incorporators immediately applied to the district court of Logan county for a writ of mandamus to compel the issuance of a certificate of authority. The case was heard and the court granted the writ. An appeal was taken to the supreme court of this state where the case is still pending. The proposition to limit in some manner the number of banks which may be organized in the same town or city is considered, under our guaranty of deposit law, a very important matter. For the established banks. to attempt to meet the competition of an unlimited number of new banks, organized perhaps by men of good character and the best intentions, although it may be without the special training and practical experience necessary to fit them for the banking business, would lead sooner or later to a less regard for conservatism on the part of all, the result of which would damage in no small degree the entire banking system of the state. It has been the consistent policy of the department to safeguard the interests of legitimate banking so far as possible and to discourage the establishment of new banks where there is no apparent need of them. Careful inquiry has been made regarding the cha.ater, business reputation and financial responsibility of all those seeking to enter the banking business. Several applications have been refused, a number in small towns on account of the fact that the banking facilities are already ample. Should the supreme court decide that the bank commissioner is not clothed by law with such discretionary powers the legislature will doubtless supply the necessary authority or provide in some other manner the method by which the number of banks may be properly limited. SALARIES OF ASSISTANTS. The salaries of the assistants in this department are fixed by law at $1,500.00 per annum. Considering the character of the service and the responsibility of the position this compensation is not sufficient to attract and keep thoroughly qualified men in the service and about the time an examiner has reached the point where his expert knowledge is most valuable to the state he is offered a better paying position elsewhere. The nature of his employment is such as to keep him almost constantly away from home and family and he is compelled to endure all of the inconveniences of travel. National bank examiners receive from $2,500 to $3,500 per annum for their services and other states pay their examiners from $1,800 to $2,400 and traveling expenses. I therefore recommend that the assistants' salaries be increased to an amount commensurate with the services performed. EXAMINATION FEES. The present law requires that all banks and trust companies shall be examined by this department at least twice during each year and that the fees collected therefor shall be paid to the treasurer of the state banking board. The expenses of maintaining the department, excepting salaries, are paid from these funds by the banking board on approved vouchers. BANKING LAWS CODIFIED. All of the laws of this state relating to banking were codified, revised and re-enacted in complete form in house bill No. 615, approved May 26, 1908 and are printed in this report. Statistical matters and statements showing the condition of each bank and trust company in the state at the close of business September 23, 1908, are included herein and made a part of this report. Respectfully submitted, · HERBERT H. SMOCK, Bank Commissioner. |