This section is from the "Practical Banking" book, by Albert S. Bolles.
Schedule A No. 3, is a special list of those mortgages, the interest on which is more than six months in arrears. By the law, in the State of New York, any mortgages, on which the interest is not more than six months in arrears, are to be taken at their full value, and the superintendent has a right, in case of the mortgages comprised in Schedule A, No. 3, to affix a value. It is not known that he has in any case made such a valuation. In a prosperous bank, in ordinary times, this schedule should be blank.
Schedule B is a list of the bonds or stock investments of the institution, and its arrangement is commendable. In the case of stocks and bonds, a different plan is pursued from the one adopted in reference to mortgages. In mortgages, the increase and decrease during the period are alone considered. In stocks, the increase and decrease are entirely disregarded, and only the final status given. This would seem a defect, as there is far more opportunity for covering up frauds by exchange, barter, purchase and resale of securities, than mortgages. Every purchase, and every sale of stock securities during the period, should be reported, with dates and prices.
Schedule B is recapitulated on a smaller blank for the convenience of the department.
Schedule C is headed "stocks upon which loans are made in, accordance with section 261," a rather inverted title, as the primary object is to give the amount loaned upon stocks.
Schedule D gives the details of cash; first, as to that deposited in banks and trust companies, not only is the amount on deposit stated, but also the capital and surplus of the depositary bank, as shown by its last official statement. The reason for demanding this information is, that a Savings bank is prohibited from depositing in any bank or trust company more than a certain proportion (twenty-five per cent.) of the capital and surplus of the latter.
Schedule E, No. 1, is intended for those investments which are contrary to the present law governing Savings banks. Only in case the bank has had such investments before the change of the law, which it has not been able to dispose of, can there be anything to enter in this schedule.
Schedule E, No. 2, is devoted to assets other than those enumerated, and would be very appropriate for miscellaneous and abnormal resources, but the bank department has included in it also, interest earned but uncollected, which is not an abnormal resource, but one which must exist in every Savings bank. There must always be interest which is earned and not collected, and it would therefore have seemed more appropriate to provide a separate schedule, under the head of income earned but uncollected, for interest and rents. Interest is divided into accrued and due, and the interest overdue is divided into that which is overdue less than six months and more than six months, and, finally the total is divided into collectable and uncollectable, and the collectable portion is extended into the principal money column. The remainder of the blank is for miscellaneous assets, other than income.
Schedule F contains a classified account of the current expenses of the bank for the period, such as salary, taxes, insurance, repairs, stationery, advertising, &c. The numbering of the schedules, which, previous to this point, was regular, now becomes arbitrary, as different schedules have been inserted according to the views of different officials.
Schedule G contains payments of all kinds not otherwise stated. It is difficult to see why there should not have been a similar schedule of receipts of all kinds not otherwise stated, or a schedule of both.
In Schedule H we again return to resources. This contains a description of all real estate owned by the bank, whether for banking purposes or purchased under foreclosure sale, giving the location, how acquired, when acquired, original cost, present appraised value, amount of income derived during the period, amount of expenditures on it during the period. Only one of these columns demands special remark—the one giving the cost. There is a difference of opinion as to what constitutes the cost of a piece of property bought in at foreclosure sale for less than the face of the mortgage, and other charges.
First.—It is the usual way to consider that the entire amount of the mortgage, interest, taxes, legal costs—that is to say, the entire cost of the mortgage investment is also the cost of the real estate. For example,
The face of the mortgage is...................................$ 10,000.
The interest is................................................ 600.
The bank has paid taxes...................................... 230.
And cost of suit.............................................. 325.
Now, under the present view, this $11,197 would be considered the cost of the real estate bid in, regardless of what the bidding price was, and regardless of what it was really worth. But, suppose the property is offered at public sale, and the bank bids $9,000, no one offering more, then,