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UNION NATIONAL BANK OF BELOIT FAILED
National Bank Examiner Is Now in Charge
TOTAL LOSS IS UNCERTAIN
Conference of Beloit Bankers Decided Re-Organization Impracticable.
The greatest financial calamity in the history of Mitchell county occurred Monday morning when the Union National Bank of Beloit failed to open its doors for business. A notice posted on the door states that the bank was closed by order of the board of directors and that National Bank Examiner D. L. Noone is in charge. This action was taken after the members of the board of directors had spent many weary hours in canvassing the situation and in discussing with Examiner Noone and the representatives of the other three banks of this city plans for reorganizing the Union National Bank or of having it taken over by some one of the other three banks.
The Union National Bank was originally organized as the German National Bank of Northern Kansas, but changed its name to the Union National Bank upon the entrance of this country into the war against Germany. The officers of the bank were: Frank Mergen, president; T. P. Downs, vice president; L. A. Mergen, cashier; Miss Phoebe M. Brennan, assistant cashier. The bank was capitalized for $50,000 and the last statement filed in the office of the county clerk indicates that the 500 shares of stock are held as follows: Frank Mergen, 66 shares; E. F. Mergen, 10 shares; L. A. Mergen, 91 shares; F. M. Daily Estate, 115 shares; R. W. Dockstader, 27 shares; J. E. Morris, 20 shares; T. P. Downs, 20 shares; M. P. Carrico, 20 shares; J. P. Corpstein, 15 shares; John Grelinger, 15 shares; N. Eck, 11 shares; Joseph Fischer Estate, 10 shares; D. N. Freeman, 10 shares; J. M. Grotz, 10 shares; Olive D. Noah, 10 shares; W. Steichen, 10 shares; W. J. Heidrick, 10 shares; Mrs. A. T. Rodgers, 9 shares; Karl Schaeffer, 5 shares; L. Schellinger, 5 shares; Mrs. Clara Manifold, 5 shares; Wm. Weagel, 4 shares; C. F. Faas Estate, 2 shares. The bank accumulated a surplus fund of $100,000 and at one time the deposits were around $1,000,000.
During the last years of his active business career, the late A. T. Rodgers was chairman of the board of directors and kept in active touch with the affairs of the bank. After the death of Mr. Rodgers, things did not go along so smoothly. Frank Mergen was president but his son, Leo. A. Mergen, was in active charge of the bank. The Felix Broeker failure at Salina brought out the fact that the Union National Bank was closely connected with the Broeker transactions. This caused a loss of confidence in the management of the bank. Frank Mergen moved to Albuquerque, New Mexico on account of the illness of his wife, leaving L. A. Mergen in charge. Special examiners went over the affairs of the bank recently and the knowledge leaked out that they had ordered charged off $85,000 in bad loans. Many of these loans are said to have been made to persons that reside outside of Mitchell county. The condition of the bank became desperate by this time with the result that L. A. Mergen made trips to other cities in an attempt, it is said, to collect some of the bad loans. The absence of L. A. Mergen and the fact that the bank was for days without a responsible head, caused much talk, loss of confidence and the withdrawal of business.
Special Examiner D. L. Noone returned to Beloit the latter part of last week. It is said that the purpose of his visit was to have the Union National Bank taken over by some of the other three banks or to have a re-organization of the bank effected that would provide additional funds and restore public confidence. In the meantime, the situation became acute and a run was started on the bank on Saturday. The cash withdrawn on Saturday amounted to approximately $3,000 but this does not represent the total withdrawals, as a number of depositors were given cashier's checks instead of cash. The bank was practically without funds at the close of business on Saturday and the condition of the bank had become such a subject of comment that a heavy run on Monday was certain. The situation was carefully considered on Sunday by the board of directors of the Union National and representatives of the other three banks of Beloit with the result that the board ordered the bank to be closed. This, in a few words, is the story of the failure of the Union National Bank. This bank failed not because of frozen credits or local business conditions but because of improper management.
The last official statement of the Union National Bank was published in the Gazette on September 19th and represented the condition of the bank at the close of business on September 14th. This statement showed loans of $735,784.81; overdrafts, $3,707.92; stocks, bonds, etc., $27,041.45; real estate owned other than banking house $21,391.54; reserve with federal reserve bank, $34,501.88; banking house and fixtures, $10,700; cash and amounts due from national banks, $51,452.01; and the other small items that usually appear in bank statements.
The deposits at the time of the last statement were $306,032.09 subject to check and $333,157.43 time deposits. The bank at this time owed other banks and bankers $14,952.00 and owed the War Finance Corporation $72,767.02. The surplus at this time amounted to $100,000 but within a few days after the publication of this statement, loans to the amount of $85,000.00 were charged off on instructions from the comptroller. The stockholders are subject to an assessment of the amount of their stock, but it is said to be doubtful whether the full assessment will be paid on the 167 shares owned in the Mergen family. The loans of the bank must be paid and then any surplus left from the collection of loans made by the Union National Bank and the assessment of its stockholders will be pro rated among the depositors. There has been some talk of a reorganization of the bank, but this talk has not taken tangible form and it is very doubtful whether the plan ever gets farther than talk. It is impossible to predict at this time the percentage of their deposits that will finally be paid to the depositors.
Mitchell county will be one of the heaviest losers by this bank failure. The county had in the Union National Bank at the time of the failure approximately $14,000.00. This was supposed to be protected by a bond given to the county by the bank. The bond in this instance was signed by L. A. Mergen and T. P. Downs as sureties and by "The Union National Bank by L. A. Mergen, Cashier." It is said that the failure has affected the financial standing of Mergen and Downs to such an extent that little is likely to be realized on this bond. In this event, Mitchell county will receive only the pro rata paid other depositors. The City of Beloit played in better luck. Beloit also had approximately $14,000.00 on deposit at the time of the failure. This amount is protected by a bond that is believed to be good. This condition is due to the good judgment of City Treasurer C. P. Bartleson in demanding additional security for city funds.
In conclusion, this story would be incomplete were no mention made of Joe Morris, W. J. Heidrick, Mrs. F. M. Daily and the other directors and stockholders that did their utmost to bring the Union National Bank through the financial storm that confronted it. It may be said that these directors and stockholders should have kept in closer touch with the situation, but let this remark be made by him that has never himself made a mistake. When the situation became apparent to these directors and stockholders, they did their utmost and that is all that any of us could have done. The Union National Bank was wrecked as the result of bad loans, too much get-rich-quick business and poor management, but inside information is to the effect that nothing has as yet been discovered to indicate any criminal intent in connection with the failure. It is a sad story and one that no good citizen of Mitchell county will read with delight. Frank Mergen, already beyond the three score years and ten prescribed by the prophet, will have swept away the savings accumulated during a lifetime of industry and frugality; Leo A. Mergen, bright and likeable, will lose his fortune and will be compelled to start life over as the results of mistakes that ruined him and injured many of his friends; and the depositors will have to assume their losses. When Macbeth showed a disposition to dwell on the past and to throw up the sponge, his wife exclaimed: "Things without remedy should be without regard; what's done is done." This is a good motto for the people of this community to remember at the present time. Beloit has three good banks, two state and one national, and they are all in good condition and are amply able to care for the banking needs of this community. The deposits in the state banks are protected by the state guaranty law and the Union National Bank is the first national bank to fail in Kansas since 1914. These banks are managed by men of the highest integrity and the deposits in them are as safe as the deposits of any other city in Kansas. Remember these things and face the future with confidence. Should anyone try to scatter gloom, frown upon him and should he try to rock the boat, throw him out. In this way, the winter will quickly pass and the time of the singing of birds will be at hand. We shall then proceed to the more serious problems of life by licking the Hon. Hays B. White for the Republican nomination for congress in this district and by electing a Republican president next fall by an increased majority. Thus all things will work out well to them that love the Lord."
