"Gross earnings" are derived from interest received from loans and discounts, bonds and mortgages, from dividends on stocks owned, rents from real estate owned, and in the case of loan and trust companies, also from commissions or fees charged for executing any trusts, rent of safe deposit vaults, storage warehouses, or any other source.

A statement of "gross earnings," "expenses," "losses," etc., is usually made up by banks every six months, or semiannually, on the 1st of January and the 1st of July, every year. Some banks select other semi-annual dates, and some make up these statements every three months, or "quarterly." These are usually known as "dividend periods," because "dividends" are then "declared" and paid if they have been "earned."

If the result of the statement warrants it, the directors who have the power to do this hold a meeting and "declare a dividend," or authorize the payment of a certain percentage of the capital stock, to be paid to the stockholders, or divided ratably among them.

These "dividends" are usually paid to the shareholders by checks payable to their order, called "dividend checks," mailed to the address of each shareholder.

Every bank prudently managed refrains from paying out all its net profits or earnings in dividends, and retains a part of these to create a "surplus fund." Usually the law requires a bank to do this, as, for instance, every National bank is required to set aside one-tenth of its net profits of each dividend period for the surplus fund before declaring a dividend, and to go on doing this until the surplus fund amounts

Evi

to at least twenty (20) per cent. of the capital stock. dently the theory of this is that as every banking institution is apt to encounter unusual losses in times of panic and depression of business, it should gradually accumulate a fund out of which it can meet such losses, without "impairing" or using up any part of its capital stock, which would require an "assessment" on the shareholders to make such "impairment" good.

This surplus, of course, belongs to the stockholders, and is really so much more capital used in the business for their benefit. Sometimes the "surplus" of a banking institution largely exceeds its capital stock, and in general the possession of a large surplus fund is regarded as evidence of the strength and good management of a bank, for it represents the accumulation of so much profits over and above the amount paid to shareholders in dividends, and serves as a measure of the "earning power" of the bank.

The net earnings of the National banks as a whole from 1894 to 1899 varied between 5 and 5.8 per cent. of their capital stock and surplus fund, and in 1900 rose to 8.2 per. cent., reflecting the general prosperity of business shared by the banks.

In 1870 these net earnings amounted to nearly 12 per cent., and the fall to 8.2 per cent. in 1900 illustrated a general decline, due to the accumulation of capital for investment on the one hand, and, on the other, to the fierce competition for business between banking institutions.

CHAPTER V.

DEPOSITS; CHECKS; LAWFUL MONEY RESERVE.

WHEN money is placed in a bank for safe-keeping, or "deposited," it is usually received from the "depositor" by an officer called the "teller." If a bank does a small business, one teller both receives money deposited and pays it out when wanted, but where the business done is large enough to require this, deposits are received by one or more "receiving tellers" and paid out to depositors by one or more "paying tellers."

When a deposit is made, the depositor must make a memorandum of the amount and description of the items composing same on a blank, usually furnished free, in printed form, by the bank, like the following:

This is handed, with the deposit, to the "receiving teller," who counts the money and other items (if any), compares the amount he finds with the amount on the ticket, and if found correct, makes an entry of the amount on the lefthand page of a book furnished by the bank to the depositor when the first deposit is made, or the "account is opened" with the bank. This book, called the "depositor's pass-book," the only receipt or voucher for money deposited given by the bank, is usually like the following:

Dr. THE FIRST NATIONAL BANK, in noo't with

Cr.

Ruling Pattern

46

THE A B C OF BANKS AND BANKING.

The amounts entered on the left-hand page represent deposits made at different dates, while those on the right-hand page represent the amounts received from the bank, or "drawn out" by the depositor.

Unless there is a special agreement to the contrary, it is understood that money deposited with a bank can be taken. out, or "drawn," by the depositor, on demand, at any time during the business hours, upon the presentation of a written or printed order for a stated amount, signed by the depositor, or some person duly authorized by him to sign his name for this purpose.

This order on the bank is called a "check," usually made payable "to order," like either of the accompanying:

S. CROW SHOE

CHEAKS, VE

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