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amount of net earnings in excess of such dividend," and further, that "such reports shall be attested by the oath of the president or cashier of the association," it is necessary that banks should make reports to the Comptroller, not only at their regular semi-annual dividend periods, but also of any quarterly or special dividends they may declare between those periods; and, in order to comply with the requirements of the law, reports of any such special dividends should be made in the same form as reports of earnings and dividends made at the regular semi-annual periods, so as to show not only the net profits on hand at date of previous report, but also the gross earnings from all sources since, as well as deductions for all expenses and taxes paid, losses incurred, and "bad debts," as defined by section 5204. Otherwise its "net earnings, in excess of such dividend," can not be truly shown by the report.

In making such special dividend reports, it is not necessary that a bank should close the accounts on its books, if it does not desire to do so, but it is essential that all items showing profit and loss for the period covered by the report should be fully entered in the report.

Capitalization of Surplus.

While a bank having a surplus equal to, or less than, the required 20 per cent. may not be permitted by the Comptroller to capitalize such surplus in case of any increase of its capital, any bank having a surplus exceeding this limit is, of course, permitted to convert the amount in excess of the 20 per cent. into capital if it so desires, for such excess practically represents "undivided profits."

Where the surplus is equal to, or less than, 20 per cent., the original shareholders may, however, utilize a portion of this surplus in the following

manner:

The capital being $50,000, the surplus $10,000, and the proposed increase $50,000, the ratio of the surplus ($10,000) to the increased capital ($100,000) will be 10 per cent. If the new stock be placed at 110 (its true value) a premium of $5,000 will be realized on the increase when sold, which premium should properly go to the original shareholders (the owners of the surplus) who in place of the premium so collected relinquish to the new shareholders a corresponding interest in the surplus fund.

The rate of premium in any given case may be obtained by dividing the amount of surplus by the amount representing the total capital stock after the proposed increase is added.

CHAPTER IX.

REPORTS OF CONDITION REQUIRED BY SECTION

5211.

SEC. 5211. Every association shall make to the Comptroller of the Currency not less than five reports during each year, according to the form which may be prescribed by him, verified by the oath or affirmation of the president or cashier of such association, and attested by the signature of at least three of the directors. Each such report shall exhibit, in detail and under appropriate heads, the resources and liabilities of the associations at the close of business on any past day by him specified; and shall be transmitted to the Comptroller within five days after the receipt of a request or requisition therefor from him, and in the same form in which it is made to the Comptroller shall be published in a newspaper published in the place where such association is established, or if there is no newspaper in the place, then in one published nearest thereto in the same county, at the expense of the association; and such proof of publication shall be furnished as may be required by the Comptroller. The Comptroller shall also have power to call for special reports from any particular association whenever in his judgment the same are necessary in order to a full and complete knowledge of its condition.

SEC. 5213. Every association which fails to make and transmit any report required under either of the two preceding sections shall be subject to a penalty of one hundred dollars for each day after the periods, respectively, therein men

tioned, that it delays to make and transmit its report. Whenever any association delays or refuses to pay the penalty herein imposed, after it has been assessed by the Comptroller of the Currency, the amount thereof may be retained by the Treasurer of the United States, upon the order of the Comptroller of the Currency, out of the interest, as it may become due to the association, on the bonds deposited with him to secure circulation. All sums of money collected for penalties under this section shall be paid into the Treasury of the United States.

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Defining the Verification of Returns of National Banks.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the oath or affirmation required by section fifty-two hundred and eleven of the Revised Statutes, verifying the returns made by National banks to the Comptroller of the Currency, when taken before a notary public properly authorized and commissioned by the State in which such notary resides and the bank is located, or any other officer having an official seal, authorized in such State to administer oaths, shall be a sufficient verification as contemplated by said section fifty-two hundred and eleven: Provided, That the officer administering the oath is not an officer of the bank.

Approved February 26, 1881.

Information with regard to Same; Filling Out Schedules.

The examination of five reports of condition a year from each of over 3,300 banks necessarily involves a large amount of correspondence between

the Comptroller's office and the banks. Much of this correspondence relates to violations of law, such as excessive loans, loans on, and investments in, real estate, deficient reserve, etc., but a very large proportion is made necessary by omissions on the part of those who make up the reports to fully fill out schedules on the back of the report, and a little more care in this respect would relieve the banks from the trouble and annoyance of replying to the thousands of letters which are addressed to them for the purpose of obtaining information which should be given in the report when rendered.

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The law requires the banks to make these reports to the Comptroller "five times a year," according to the form which may be prescribed by him," and, under this authority, he calls for certain information in the schedules on the back, which it is important to have in order to know the true condition of each bank, and whether its operations are conducted in conformity to law or not.

When it is remembered that, as a rule, the examiner visits each bank only once a year, it is very important that these sworn statements of condition should be full and complete in every respect. In very many cases violations of law and

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