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W. P. 0. HARDING. GOVERNOR PAUL M. WARBURG, Vice Governor FREDERIC A. DELANO ADOLPH C. HILLER C H A g gj^ ?. HAMLIN EX-OFFICIO MEMBERS WILLIAM 0. HcADOO SECRETARY O F THE TREASURY CHAIRM AN JOHN SKELTON WILLIAMS FEDERAL RESERVE B O A R D COMPTROLLER O F THE CURRENCY WASHINGTON H. PARKER WILLIS. SECRETARY SHERMAN P. ALLEN. ASST.SECRETARY and fiscal Agent ADDRESS REPLY TO FEDERAL RESERVE BOARD Dear Sir:The Federal Reserve Board has bad under consider ation the payment of dividends by Federal Reserve banks. In the future when it is the intention t d ’ Sabmit to the Board of Directors of your bank the quest fin the payment of a divi dend, the Federal Reserve Board desires tj#vhave you furnish it, a sufficient length of time prfcbr submission, with the following information 1. Darnings. 3. Current expenses, including post of Federal reserve notes used; Depreciation in vault and equipment; Ket earnings; . Per cent and amount if dividend suggested; Balance the surplus and profit and loss accounts at the time of rendering statement, and estimated surplus after allowing for payment of dividend. 3. Unpaid indebtedness' of closed banks to Federal Reserve • bank: (a) How secured, . (b) Estimated losses. 4, Indebtedness1 to Federal Reserve bank of^ member banks considered to be in ever-extended or unsafe condition, giving names of banks, indebtedness o & each, and se curity, if any. . For your information it may be stated that the Boa^rd w • \ hflds that a Federal Reserve bank should, p r i w - t o the declara- • p . t i t o o f a dividend, make provision for the following:- « 500 ■2- d. Provide far its entire organization expense; 2. Provide for the cost of Federal Reserve notes used; 3* Provide for depreciation in furniture, vaults and ' equipment, and ' . 'here real estate is owned, pro vide a substantial amount to reduce the book value; 4. Provide an amount equal to its estimated losses on obligations of closed institutions; 5. Frovide an amount equal to hotes or obligation's bear ing the endorsement of failed banks where such notes have been past' due fsr three months or more; 6. Set aside an amount equal to at least 10^«tf its not earnings during the first fer years to provide -fior unexpected expenses and losses. Attention >s directed' t4 tne f.-.ct dividends ..re cu.milative and constitute a first claift upon che earniags -of the banks. Deferred dividends should be p>.-id'when the earnings of the bank permit. It ia regarded as better policy to show a gradually increasing dividend than to establish a high rate -.vith the possibility that ic may be reduced. The policy of declaring full dividends to a specified date is more highly regarded than *r that of declaring dividends at a lower rate for a longer period. Very respectfully, Governor ♦
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