the best investments for banks to make, and can be readily converted into cash, should occasion require.

Loans on real estate also show an increase of $7,065,815.16; this class of investments nets a larger income than those above referred to, and, if the loans be judiciously made, should be equally safe, though slower to realize upon in case of need.

Cash on hand and on deposit in banks shows an increase of $2,588,240. The total of this item bears about the same ratio to the aggregate assets as heretofore.

and notes of railroad companies have entirely disappeared. Of the loans on personal security, amounting to an aggregate of $89,624,614.69, the banks, in addition to the principal and sureties required by statute, hold collateral security for $44,317,581.95 of the amount, while the balance of $45,307,032.74 is not so secured.

Sundry stocks and bonds taken to secure indebtedness show an amount of $825,328.07 in excess of the previous year; this increase is occasioned principally by the settlement of deferred claims existing a year ago, and not in consequence of added failures during the past year.

Real estate by foreclosure shows an increase of $441,259.77, -an item which, taken in connection with the increase of the last two years, is not pleasing to contemplate.

In the form adopted for the last annual reports, the banks were requested to give much fuller information regarding the estates held than has been the practice heretofore. The information thus obtained discloses the following facts, viz. :—

Number of banks holding real estate by foreclosure,
Number of estates so held,

Value of the estates, as shown by the books of the
banks,

Of the estates, 347 are in the vicinity of the place where the bank by which the loans were made is located, and stand at

121

626

$2,494,654 35

1,258,304 98

The remaining 279 estates are more or less distant from the location of the bank, and stand at .

1,236,319 37

Investments in bank stock show a decrease of $1,933,871.04; this is owing in part to the reduction in capital stock by some banks and the liquidation of others. The stock of those banks in Boston, 9 in number, the controlling interest in which has been bought by a syndicate for the purpose of liquidating the associations, appears in the returns as the property of the savings banks, while the payment of 10 per cent. of the price agreed to be paid for the stocks appears to the credit of "bank liquidation account." This plan was adopted in order that the market value of these stocks should be uniform in the returns of all the banks, those which had agreed to dispose of their holding, as well as those which had not so agreed.

-

The full effect of the proposed liquidation of 14 banks in Boston and the establishment of 3 new ones will not be evidenced in the holdings of bank stocks until another report is called for.

During the year actual sales of bank stock appear to have been made by 47 banks, 4,809 shares being thus disposed of, while 4,682 shares have been eliminated by reduction of capital and 5,763 shares by the liquidation of banks; and there has been charged off for depreciation in bank stocks still held the sum of $118,473.46.

Purchases of bank stock have been made by 31 banks, to the extent of 1,106 shares.

The banks, in making returns of the market value of bank stocks held by them, have heretofore varied considerably in their estimate of value of the same stock, the difference being in some instances as much as $25 a share. In order to secure more uniformity in the returns, this Board, when sending out blanks for the same, notified the banks that it would, as soon as possible after October 31, send a price at which to estimate the value of shares in those national banks the stock of which was very generally held by the savings banks. These prices were obtained from the most reliable sources which the Board could command, and each bank was requested to use them in estimating the value of the stocks held by it.

There are a number of banks located outside of the larger business centres, but few shares of which are held by savings banks, and the Board did not undertake to obtain a rate at which to estimate the value of those stocks, and a difference

of from $1 to $5 per share in the estimates may exist in those cases; otherwise, the returns are uniform in respect to the value of shares, inasmuch as, with the exception of some slight variations (which do not materially affect the result) in the case of one or two returns, the quotations named were adopted by the banks, and the returns are made more valuable as a basis on which to compute the actual standing of a bank than has been the case heretofore.

The quotations of prices were not intended as a basis for sales or purchases, and may not, especially in cases of banks the shares in which are seldom offered for sale, have been the actual value; but they have served the purpose for which intended, viz., uniformity in the estimates, and the introduction of the plan has met the approval of the bank officials generally.

Verification of Books of Depositors.

The provisions of the statutes require that every third year the banks shall call in the books of their depositors for verification, under rules to be prescribed by the board of investment, duly approved by this Board.

Such action became requisite during the calendar year just closed; and, except in the case of a few of the largest banks, where it was possible to detail one or more of a large clerical force (not connected with the deposit department) to receive and verify the books presented, it was required that some person entirely disconnected with the clerical or executive business of the banks should be specially employed for the purpose for a fixed period, during which the depositors had been requested by public notice to present their books for verification.

This course involved additional expense to the banks, and consequently in the smaller banks the time within which the books were to be presented was limited to a shorter time than would otherwise have been specified. The notice of requirement for books to be brought in varied in the various banks, some sending notice by mail to each depositor, while others merely advertised in the papers published in the immediate vicinity of the banking rooms. Many banks kept a transcript of the books verified and the amount of deposit each represented; but, in the absence of a uniform practice, it is not possible to give exact data in relation thereto.

In some of the larger banks, where the verification was continued for a considerable portion of the year, a large percentage of the books outstanding was verified; but the depositors as a whole do not appear to appreciate or comprehend the advantage to themselves, as well as to the bank officials, of having the books verified, and therefore do not put themselves to the trouble of presenting their books; this indifference in part annuls the advantages which it was expected the law would accomplish.

FRAMINGHAM SAVINGS BANK.

On the eighth day of March, 1898, this institution was placed under injunction, and Patrick H. Cooney of Natick and Arthur V. Harrington of South Framingham were appointed receivers to wind up its affairs. This is the second time that this bank has been closed.

The history of events which led to the closing of the bank from 1885 to May, 1890, is given in the reports of this Board covering that period. The causes which led to the present injunction are not wholly of recent origin, and must in part be sought in the transactions of the bank following its reopening in May, 1890.

When the bank resumed business, its bank stock, public funds and railroad bonds were carried on its books at par, and a premium account, representing the amounts invested in these securities above par, appeared among its assets. At the time of the injunction much of this premium had become valueless through the depreciation of bank stocks, so that a considerable loss was shown in this item. The premium at this time amounted to $60,438.17.

The first report of the receivers shows that, after the sale of all these stocks and bonds, $33,189.60 was received above par, to be applied towards the premium account. This sale shows a loss of over $27,000.

Another factor which contributed to the insolvency of the bank was the depreciation in the value of its real estate loans. Shortly after the reopening of the bank some large loans were made on unimproved real estate, which it was supposed would be very valuable in time to come. of 1893 coming on, and the owners involved financially, no interest was

But the business depression
of the real estate becoming
paid on these loans after

they were made, and the market for real estate became dead. The bank entered for foreclosure, and it was hoped that with the coming of business prosperity the market for land would open again and that real estate values would increase; but the expected prosperity never came, and the bank was obliged to hold the property. There were other loans also which the bank was obliged to foreclose, and to expend considerable money on the properties in order to make them rentable.

In May, 1897, the treasurer of the bank resigned, and Mr. A. V. Harrington was elected treasurer in his stead. Soon after Mr. Harrington's election he caused a trial balance of the depositors' ledgers to be made by an expert accountant, and it soon became evident that there was a discrepancy in the depositors' accounts. An investigation showed that a defalcation had been going on for a considerable time in small amounts by the book-keeper of the bank (W. H. Bird).

The examination of the accounts of the bank was continued by the expert, acting under the direction of the Board, and a defalcation of between $16,000 and $17,000 was disclosed. During this time Mr. Bird was kept under the surveillance of the State police, and was finally arrested and brought into court. Insanity rapidly developed, and before he was brought to trial he was committed to the Worcester Insane Asylum. The defalcation was not so large as of itself to cause the insolvency of the bank, but, taken with the losses caused by depreciation and unfortunate loans, it developed a condition of affairs which called for the winding up of the bank.

The first report of the receivers is made up to Oct. 17, 1898, and shows the amount of $425,536.89 on hand, after deducting expenses. The report has been allowed by the supreme court, and a dividend of 50 per cent. to depositors ordered. This dividend is now being paid. A statement showing the liquidation of the assets of the bank, up to Oct. 31, 1898, will be found on page xxiv.

HAMPSHIRE SAVINGS BANK.

The Hampshire Savings Bank and the Hampshire County National Bank of Northampton occupied the same room and did business over the same counter. Lewis Warner, the treasurer of the savings bank, was also president of the national