A matter of considerable interest to the shareholders of a bank, as well as to its depositors or other creditors, is its "condition," and so far as these interested parties and the general public are concerned, information as to this is to be obtained only through the "statements" or "reports of condition" which the law requires banking institutions to publish in the newspapers from time to time.

In the case of National banks, the law compels them to make not less than five reports of condition every year to the Comptroller of the Currency, at such dates as he may decide to call for them, which reports must also be published in a local newspaper. Not knowing when these reports will be required, the banks are not able to make special preparation for them, and thus they usually represent what may be called the "normal" condition of the bank's affairs. They must also be made up in such form as the Comptroller prescribes, no matter in what form the bank's accounts are kept, or its books, and finally, the correctness of the report must be verified under oath before a notary public by the cashier or president of the bank, and attested by the signatures of three of the directors.

To insure the correctness of these reports, the law prescribes a heavy penalty of imprisonment for not less than five years nor more than ten, on any officer swearing to a report of condition which at the time he knew to be false in any statement. Notwithstanding this penalty, occasionally an officer swears to a false report, hoping thereby to conceal some act of theft or other dishonesty on his part.

Such dishonest reports, however, are rare and exceptional, and as a rule bank reports can be relied on as representing the condition of the bank as actually shown by its books. Again, while such a report shows the "book value" of a bank's resources or assets, this will not be the actual or market value in a case where losses have been sustained on its loans and discounts or other investments and have not yet been written or charged off the books.

The following is a specimen of the "report of condition" of a National bank, as it is published in the newspaper, at or near the place where the bank is located, viz.:

This information enables the Comptroller of the Currency to form an opinion as to the condition of the bank and the way in which its affairs are managed, and also, within certain limits, whether or not it is violating the law.

While National banks are required to make five reports of condition each year, and some States require the same number of reports from commercial banks under their authority, the number and form of reports required from such banks and from savings banks and from loan and trust companies vary according to the laws and regulations made by the various States.

Bank Reports Examinations 18 Bank Reports Examinations 19

Treastry Department

Comptroller Of The Currency. - Form 24.

Reports.

No. of Bank..........Capital Stock At Close Of This Earning Period. $......... No. of Dividend......

Report Of Earnings And Dividends Of

"The......................................," located at............,in the State of.........

for the period of.............months ending.....,190 . Declared.............,190 . Payable..........................,190

First Section.

3. Premiums on U.S. bonds charged off since last report..

1. Grosscearnings and profits made since last report...

4. Losses sustained through bad debts, decrease of values. etc., since last report.............

2. Losses recovered since last report (if any).......

5. Expenses and taxes paid since last report.......

Total of items 3, 4, and 5................

*6. Net earnings and profits or loss of past six months carried down to second section...............

____

___

Total............................................

Total...............................................

Second Section.

12. Carried to surplus fnnd (not less than one-tenth of item 6, unless surplus is already 20 per cent of capital)...

*6. Net earnings and profits or loss of past six months brought down from first section...............................

7. Undivided profits or loss brought forward from item

14 of last report...................................................

13. Dividend of.........percent (on capital)$..............

14. Amount of net profits undivided or loss to be carried forward to item 7 of next report..............................

8. Amount withdrawn from surplus since last report...

9. Authorized reduction ofcapital used to meet losses or passed to profit account since last report.....................

10. Paid assessment on capital stock since last report.....

11. Subscribed and paid in by shareholders since last report as surplus or profits...........................................

Total......................................

Total..............................................

Third Section.

18. Total surplus fund proper at ate of this report..........................

15. Total profits as National Bank since organization (less expenses, premiums, losses, etc. )........

19. Total dividends since organization as National Bank..

16. Add profits and surplus of old organization at date of conversion to the national system...................................

90. Amount of net profits undivided or loss to be carried forward to item 7 of next report...........

17. Total paid in by shareholders and reduction of capital used to meet losses and passed to profits.........................

Total..............................................................

___

Total....................................................................................

State of..........

Country of .......................................

Sworn to and subscribed before me this ........................day of................... ..,190 .

Notary Public.

I,.................................... , Cashier of the above-named bank, do solemnly swear that the above statement is true, to the best of my knowledge and belief.

......., Cashier.

* In case the loss exceeds the profits for the six months, the excess of loss over the profits should be entered in item 6 in red ink and deducted from total amount charged off. (items 3, 4, and 5.)

* Any reduction of capital other than that used to meet losses or passed to undivided profits is not to be entered on this report and can be omitted where previously included.

(Ed. 4-4-1901-25,ooo.) 2-55

Reports of earnings and dividends are also required semiannually or oftener from National banks, made up in the following form, furnished by the Comptroller:

In addition to the reports of condition and reports of earnings and dividends which are required by the proper authorities from banking institutions of all kinds, it is also the rule further to inquire into their actual condition by sending to the institution an officer, usually called an "examiner," to inspect it, audit its accounts, and make a thorough and searching examination of its loans, securities, money and valuables of any and all kinds.

In the case of National banks, each bank is visited in this way twice a year, or oftener if necessary. After the examiner has concluded his inspection, he makes a confidential report of its condition to the Comptroller on a blank furnished him for the purpose, and if the report shows any violations of law or any bad management, a letter is addressed to the bank, criticising these points, and calling for their correction.