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very other function having been eliminated but that of joint Tax, Auditing and Insurance Departments for all units.
Every effort has been put forth by your Management in the interests of economy and to reduce the burden of expense of the Holding Company to the a fHiliated units. The operating expenses of the Detroit Bankers Company itself, have been reduced from an average of approximately $46,000.00 per month at the first of the year of 1932, to an average estimated amount not to exceed $18,000.00 per month for the beginning of 1933. This reduction is at the rate of $336,000.00 a year. Further economies will be made in 1933, during which time the full benefit of this year's changes will be felt. Official salaries of the Detroit Bankers Company for the month of December, 1931, were $12,075.30; in December, 1932, $3,633.30, and in March, 1933, will be further reduced to $1,633.30. This alone is a reduction of $10,400.00, or at the rate of $124,800.00 a year. All other salaries were $21,973.30 for the month of December, 1931, and are estimated for the month of January, 1933, at $7,000.00—a monthly reduction of nearly $15,000.00 or at the annual rate of $180,000.00
The following are reports of various corporations owned by your Company:
FIRST NATIONAL BANK-DETROIT
On December 31, 1931, the First National Bank in Detroit and the Peoples Wayne County Bank were consolidated into the First Wayne National Bank, thus combining in one institution, under a National Charter, all of the Detroit city banking business of this Company. This has made possible substantial economies in corporate expenses and operating organization.
On October 10, 1932, the name was changed from First Wayne National Bank to First National Bank-Detroit, perpetuating the name of the oldest member of the banking units, originally established in 1863.
The total Operating and Other Income for the First National Bank-Detroit was reduced $3,645,068.95 in the year 1932 from the year 1931. This was largely represented by loss of Interest Income resulting from liquidation of loans and other assets and the reduced rates of interest obtainable on investments made in the year 1932. This reduction was partially offset by an increase of miscellaneous income due to the specific efforts of the Management to establish suitable charges for services that have heretofore been unprofitable.
To meet the reduction of Income, expenses of all kinds have been carefully surveyed and controlled. The expense reduction for the year 1932 as compared to 1931 was $2,753,240.79.
Net Operating Income, before recoveries and charges, for 1931 was $8,103,945.07; for 1932, $7,212,116.91, a reduction of $891,828.16, or approximately 11 per cent.
Dividends paid by the First National Bank-Detroit, to the Detroit Bankers Company during the year were $2,295,000.00 less than in 1931. This reduction in dividend payments recovered for the Bank the loss in Net Operating Income of $891,828.16, and retained $1,403,171.84 of operating profits. Provision was made for depreciation and more than $11,000,000.00 set aside for other Reserves.
Beginning the year 1933 the total annual payroll will be approximately $1,000,000.00 less than at the beginning of the year 1932, as a result of general equalizations and salary reductions of Officers and Employees and some necessary eliminations.
In keeping with the prevailing trend of interest rates on investments and the policies already established by large banks throughout the Country, interest rates paid on commercial accounts were reduced during the year. In addition, a regulation was recently passed by the Detroit Clearing House Association whereby, effective January 1, 1933, the maximum interest rate to be paid on Savings deposits will be 212% per annum instead of 3% as heretofore. These changes will be reflected in the year 1933 by a substantial reduction in interest expense.
During the year 34 branches with over-lapping territories were consolidated and substantial operating economies obtained with very little loss of deposits due to these changes. This policy of consolidating competing branches will be continued.
Resources, deposits and number of customers of First National Bank-Detroit, are greater than the total of all other Detroit banks combined.
DETROIT TRUST COMPANY
In last year's annual report to the Stockholders, attention was called i the fact that the Detroit Trust Company had transferred to the Detroi: Bankers Company its ownership of the First Detroit Company, which the acted the bond and investment business of the Company, and that it work thereafter devote its attention to activities of a purely corporate and fiducin nature.
The net earnings of the Company of 1932 were $782,614.39, which is also 10% upon the average of its Capital, Surplus and Undivided Profits for 1 year. During the year the Company has charged out of its Undivided Prus account and paid on account of its participation in the guaranty of depos of the American State Bank and other banks, the sum of $390,506.00. It 18 transferred to reserves from Undivided Profits and current earnings, alter payment of dividends, the sum of $955,114.39. Its Capital, Surplus and to divided Profits of December 31, 1932, were $7,273,008.18.
In spite of existing business and financial conditions, a large volume de new trust business has been placed upon the books of the Company duri: the year.
Peoples Wayne County Bank of Dearborn
During the year just passed the Detroit Bankers Company caused å Dex bank to be organized in Pontiac, namely, the First National Bank at Pontiac The present eight outlying units are the result of the merging and consolidating of fifteen affiliated or independent institutions. This completes our chain of eight wholly owned unit banks operating eighteen banking offices which serre suburban districts of Metropolitan Detroit and the city of Pontiac.
These units have a combined invested capital of $3,347,647.35 and are used as depositaries for upward of 70,000 customers. Deposits in these eight subur. ban institutions total in excess of $23,000,000.00.
Net Operating Income for these banks in the year 1932 amounted to $150.450.49. During the year provision for reduction in asset values were set-up, amounting to $543,350.28.
A comparison of the operations of these banks for the year 1931 and 1972 į is difficult, owing to the acquisition, during the latter year, of the First National Bank of Pontiac. If, and when, the Glass Bill passes, with its provision for State-wide branch banking, it is contemplated that all these banks, with the possible exception of the First National Bank at Pontiac, will become branches of First National Bank-Detroit.
FIRST NATIONAL BANK BUILDING COMPANY AND GARAGE The operations of this company are absorbed in the First National BankDetroit. Net income before depreciation, but after taxes, in 1932 was $349,447.57, as compared with $364,747.98 on the same basis for 1931, a decrease of only $15,300.41.
In 1932 as compared with 1931, building rental income was down $54,892, or 4.3%; operating expense was down $50,838, or 14.2%; construction expense was up $4,325, or 8.1%; fixed expense was down $36,262, or 6.8%.
Including the garage, the year closed with a net loss of $1,552, as compared to a net profit of $13,748 in the previous year. The garage loss in 1932 was greater by $20,197 than it was in 1931. (The garage paid the building $42,000 rent). It is seen, therefore, that except for the garage, earnings were better in 1932 than in 1931.
FIRST DETROIT COMPANY
This is the investment unit of your company. On December 31, 1932, had Capital, Surplus and Undivided Profits of $1,116,916.73. For the year 1932 its Net Operating Profit was $96,844.07. Of this amount $36,227.68 was transferred to the Reserve for Contingencies, making that Reserve $466,672.22, and adjusting the Company's inventory acquired prior to 1932 to market value, no adjustment being necessary on securities purchased during the year. $13,954.85 in Special Operating Reserve was carried forward into 1933, and the balance of $46,661.67 was transferred to Undivided Profits. For the second consecutive year each office of the Company was operated at a profit. Branch offices of the Company were operated in New York, Chicago and San Fran. cisco, the Boston and Los Angeles offices having been eliminated. Salaries and expenses were sharply contracted during the year, resulting in a total reduction of 46.71%.
DETROIT BANKERS SAFE DEPOSIT COMPANY
This corporation with a capital of $100,000 was operated at a small profit in 1932.
You will be interested in the following excerpt from a speech made by the Hon. Carter Glass, Chairman of the Senate Banking and Currency Committee, upon the floor of the United States Senate on Thursday, January 5th, commenting upon the two principal Michigan Banking groups.
“I am glad to testify from the thorough investigation of the Banking and Currency Committee, that the group banking system of the State of Michigan has been as thoroughly and effectively well-managed as is possible to a chain banking system, and has been of great service to the commercial, industrial and the credit requirements of that State, ... They are capitalized upon a fair and honest basis. They have not gone out, as the managers of some such systems have done and stripped their victims by watering their stock in a shameful way." By Order of the Board of Directors.
E. D. STAIR,
Albrecht, A. A., President, A. A. Albrecht Company.
Davidson, James E., Vice-Pres., Treasurer, American Ship Building Company.
Dillon, William M., Vice-President, Scotten-Dillon Company.
Ford, J. B, Jr., Vice-President, Director, Michigan Alkali Company.
Livingstone, T. W. P., Senior Executive Vice-Pres., First National Ba
ung, DuBois, President, General Manager, Hupp Motor Car Company.
COMMITTEE ON BANKING AND CURRENCY
UNITED STATES SENATE
THE TAXING POWER OR OTHER FEDERAL POWERS
Printed for the use of the Committee on Banking and Currency