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federal reserve board WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD November 19, 1926 s t . 5163. SUBJECT: Earnings, Expenses, and Dividends Reports of State Bank and Trust Company Members. Dear S i r : . There are being forwarded to you today under separate cover copies of form 107. r e v i s e d i n October 1926, f o r the use of s t a t e bank and t r u s t company members i n submitting t h e i r r e p o r t s of e a r n i n g s , expenses, and dividends f o r the s i x months ending December 31, 1926. The r e v i s e d form c a l l s f o r more d e t a i l e d information r e garding e a r n i n g s and expenses, which w i l l , i t i s b e l i e v e d , "be of m a t e r i a l help to the banks themselves i n analyzing t h e i r own income and expense accounts and i n comparing t h e i r f i n a n c i a l r e s u l t s of o p e r a t i o n s w i t h those of other banks as shown i n published r e p o r t s . The p r i n c i p a l change, as you w i l l n o t e , i s the d i v i s i o n of the i n t e r e s t items so t h a t separate f i g u r e s w i l l be r e p o r t e d of i n t e r e s t p a i d on demand, time, and bank d e p o s i t s , and of i n t e r e s t r e c e i v e d on loans and d i s c o u n t s , investments, and balances with other banks. The item " P r o f i t s on s e c u r i t i e s sold" has a l s o been added i n the e a r n i n g s group, i n order t o insure a l l "banks r e p o r t i n g such income uniformly. Section 2 c a l l s f o r separate f i g u r e s of d e p r e c i a t i o n on "banking house, f u r n i t u r e and f i x t u r e s , i n order t h a t t h e r e may "be no doubt as t o where such amounts are charged and t h a t a l l r e p o r t s may be on a comparable b a s i s . A new s e c t i o n has been added t o show t o t a l c r e d i t s t o p r o f i t account since o r g a n i z a t i o n and d i s p o s i t i o n of p r o f i t s , p r i marily t o provide a check on the t h r e e preceding s e c t i o n s . While i t i s r e a l i z e d t h a t some banks may have d i f f i c u l t y i n f i l l i n g out s e c t i o n 4 the f i r s t tirrbj i t i s thought t h a t t h i s may be l a r g e l y overcome i f the s i g n i f i c a n c e of the s e c t i o n i s f u l l y a p p r e c i a t e d . The d a t a r e q u i r e d i n t h i s s e c t i o n may be explained as f o l l o w s ; 454. - 2 455 - Item 19. "Total surplus fund a t date of t h i s r e p o r t , " itom 21. "Hot amount reserved, f o r , " and item 2.2, "Amount of net p r o f i t s or l o s s . " The amounts r e p o r t e d a g a i n s t each of t h e s e items should correspond with the amounts shown by the books of the "bank on December 31, 192b, t h a t i s , item 19 should agree with the "Surplus fund a t date of t h i s r e p o r t " as shown a t the top of the form; item 22 should agree with item 15, "Amount of net p r o f i t s undivided or l o s s t o "be c a r r i e d forward t o item J of next r e p o r t ; " while item 21 should r e p r e s e n t the amounts set aside a s a reserve and not a c t u a l l y paid oujb or charged o f f , as shown "by the books of the bank a f t e r close of b u s i n e s s on December 31, 1926. Item 20. "Total dividends since o r g a n i z a t i o n . " Some of the banks may have d i f f i c u l t y i n determining t h i s amount, but i t i s assumed t h a t i n most c a s e s i t can be obtained from t h e i r r e c o r d s . If the exact amount i s not known i t i s suggested t h a t the banks f u r n i s h an estimate of the amount of dividends p a i d , based on the b e s t sources of information available. Itom 17. " P r o f i t s and surplus of old o r g a n i z a t i o n a t date of conversion r e t a i n e d by p r e s e n t o r g a n i z a t i o n . 11 This item, of course, w i l l apply to only such banks as have been reorganized, or converted from a p r i v a t e , n a t i o n a l or, other c l a s s of bank, and have r e t a i n e d p r o f i t s of the old o r g a n i z a t i o n . Item 18, "Total obtained by r e d u c t i o n of c a p i t a l not repaid to s h a r e h o l d e r s , by assessment on shareholders and by v o l u n t a r y cont r i b u t i o n s since o r g a n i z a t i o n . " This item a l s o probably w i l l be used by r e l a t i v e l y few banks, o r d i n a r i l y only where a bank has s u s t a i n e d l o s s e s i n such amount a s t o impair i t s c a p i t a l account. Item 16. "Total net p r o f i t s since o r g a n i z a t i o n , " w i l l r e p r e s e n t the d i f f e r e n c e between the t o t a l of items 19, 20, 21, and 22 and the t o t a l of items 17 and 18. In sending out these forms to the banks f o r use a t the end of t h i s y e a r , i t i s suggested t h a t you enclose a statement embodying s u b s t a n t i a l l y the above i n f o r m a t i o n , i n order to make i t as c l e a r as possible to the banks j u s t how the r e p o r t s should be prepared. Very t r u l y yours, Walter L. Eddy, Secretary. TO ALL FEDERAL BE SERVE AGENTS
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