v;u'' ;.' /iTo 9 •To /e X^ // Z' * • 3 i 7 /DO Joo /■no . / yTo -^J^./S^.r.<^,^ CL«*.r 'So 7-^ >- 2- 2-- J~o / oo 6 -r /f^o /.Te ZivT 7-^ Fig. 4. occur in all banks to a greater or less degree, and unless the records are kept in a clear and systematic manner confusion will be sure to take place. In many banks that I have seen, even where the running work was systematically performed, the capital stock records were badly confused, the idea seeming to be that once the certificates are issued the records cease there, often taking no account of the transfers, the record of which is fully as important as of the issues. The next book to consider is the stock register and transfer book. This is in reality two books combined. Some small banks may con- sider this book unnecessary, but my experience leads me to advise it as a book of ready reference, and if kept carefully will be found very satisfactory. The form for such a book most commonly used is shown in Fig. 4. The left-hand side is used for the record of the issues of stock, BOOKS AND RECORDS OF THE BANK. 57 the items being obtained from the stubs of the certificate book, and the right-hand columns are used for recording the transfers. The diagram shows the issue of the original stock January 2, 1895, 1,000 shares. During the period between January 2 and Sep- tember 11 there were issued 450 more shares, and the transfers show the canceling and transferring of 450 shares, which of course leaves the original 1,000 shares. In explanation of this diagram one in- stance will suffice. L. B. Brown, who as an original stockholder held certificate No. 2 for 150 shares, disposes of fifty shares to E. J. Brooks, who receives certificate No. 9, and twenty-five shares to James Peebles, as shown by certificate No. 10 ; this leaves Mr. Brown with only seventy-five shares, and the old certificate for 150 shares Tssues /Came's 'J^a.ns-/^-rS IJate Cert Slu^'^s T^aU MS Me^J^zy 'i-.jCe/trfu^s / ■J~o 3-S- 7'S~ /cf-C 3 6 7 f too /o o JU^ f J-o d^^,^^7fo^^ z 'o ^^ % f/ 7-^ 2- CL.^ o />■ makes the transaction legal and binding. In small banks where the transfers are few, the mere endorsement of the transfer or assign- ment that is usually printed upon the back of the certificate of stock is sufficient ; in fact, this will at any time constitute a legal assign- ment if the signature is witnessed, but the records are more complete and full where the transfer book is used. No transfers should ever be made except upon presentation of the old certificate. If the old certificate should unfortunately be lost or ^ -•^/ TRANSFERRED BT ^^^3j^ rV2A!31^ ^^ffitrt{.^S^j.^i^ei>tru! for ^alttt Qtttiveil, .?>_ .^, _^ji'a^«4^lj=><^_/^2c<^«4^2»v^__ '/ _^ Skaris o/ tkt CapUnl Slotk t/ Tlie Mercliants National Bank of Sentre Gity, Pi li.M»rf l ilHiri H itti l » /^'^ yQ ^-— ^ Fig. 6. — Stock Transfer Book. destroyed, the stockholder should give a bond of indemnity to the bank for double the amount of the stock so lost before a duplicate is issued. In so issuing a duplicate the stub of the new certificate should state clearly the circumstances. When a certificate is presented to the bank for cancellation and transfer, unless the person presenting it is well known, or is identi- fied, it is safe for the officers to refuse until the rule is complied with. A certificate may come into a person's hands accidentally or wrong- fully, and in either case he would have no right to have it transfer- red and a new certificate issued to him. It is well also to carefully examine the endorsements to the trans- fers on the back of the certificates when not presented by the original owner, to avoid forgery; and when transfers are made through a power of attorney great care should also be exercised here to avoid forgery. When transfers are made by a trustee or executor he should be obliged to present a certified copy of his appointment, as his au- thority for acting in that capacity, and this should be kept on file in the bank. Certificates of stock made out to a trustee or executor should al- ways state for whom, or for whose estate the party acts, thus, " Geo. L. Parsons, trustee for Jas. B. Lee," or " B. F. Brown, executor for estate of P. H. Malone." 60 MODERN BANKINa METHODS. '^o signature of a trustee or executor should be considered valid unless stating for whom acting. It sometimes occurs that a single woman, a stockholder, desires to make a transfer after she has become a wife. Her name having been legally changed she cannot use her maiden name in making the transfer, or signing the assignment, except in connection with her married name, and both names should appear, thus " Mrs. Ehza Smith Romain, formerly Miss Eliza Smith." Executors or administrators of estates sometimes hold among their assets shares of bank stock that were made out in the name of the deceased person, and finding no difficulty in collecting the divi- dends they carelessly or thoughtlessly neglect to have the stock properly transferred to themselves as executors or administrators. Very troublesome complications have sometimes arisen where this condition existed, in consequence, for instance, of the death of the executor or administrator, or serious change in the conditions in the bank. It is a safe plan therefore for the officers of a bank to watch these things, and to endeavor to have all transfers in cases of this kind promptly made. Where a transfer is requested by the officer of another corpora- tion who is not personally known to the bank, and especially if it comes through another person holding a power of attorney, it is safe to first obtain from the corporation a copy of the vote or resolution of the board of directors of such corporation, authorizing the trans- fer, with the seal of the corporation attached. Form of Stock Ledger, with Description. The stock ledger, in which should be recorded the ledger account with every stockholder, should be kept with the greatest care, the postings in it only being made from actual transactions as shown by the certificate book and transfer book. Too frequently I have seen it used so carelessly as to make its records useless, arbitrary entries being made in it, apparently from the memory of some officer, a very unreliable source, and frequently the issues of all stock are found posted, but the transfers ignored. This ledger should be kept in such a way, and all the transac- tions posted up so promptly, that a list of the stockholders and the balance standing to each account can be taken off whenever re- quested, and the amount of stock held should agree with the capital stock account on the general ledger. It is customary for the Cashier to keep this ledger, as it is con- sidered a confidential record, but in many large banks the Assistant Cashier or some confidential clerk takes charge of it. The work is simple and only needs a little care to have it satisfactory. BOOKS AND RECORDS OF THE BANK. 61 A very complete form and one much used is here presented (Fig. 7). When a man is an original stockholder, as in the case here shown of L. B. Brown, it is customary to use the term " cash" in crediting him with his stock, for his stock comes to him from the bank and not from any other stockholder. When transfers are made the ac- count of the stockholder making the transfer is charged with the amount of stock transferred, the number of his certificate from which Vtett To ulrm Tratu/UrtiC Sia Xrom C4rH.ami,/iect.^,^t4C SAa^-i^ II CtmruirU^ (O. ^, ^. -ctr^ ^^^ fc^ a^^ au£^ Jl^ ^ oC./^. /^■rtw*-' <^^i^c^ ^y<»>« * ' -"l,000. ) CIRCULAR LETTER. Information REGARDiNa Dividend Periods. Treasury Department, Office of Comptroller of the Currenct, Washington, June 22, 1886. Sir : As there appears to be much misapprehension as to the proper time for declaring dividends, the following sumjmary of the law and rules is pub- lished for the information of National banks : Section 5199, Revised Statues, allows " dividends " out of "net profits" to be declared semi-annually, on certain conditions. Section 5212, Revised Statutes, requires that within ten days after declar- ation of dividend, report thereof shall be made to the Comptroller. The rules of this ofiBice require each bank to file here the dates selected for its semi-annual dividends. There is no law or rule Umiting the choice of the banks as to dates ; nor is any bank restrained from changing the date when it likes ; but whatever dates are selected must be reported and adhered to until formally changed and notice of the change is filed here. Whatever days banks may select for declaring their dividends must neces- sarily be coincident with or subsequent to the dates on which their books are closed, and net profits for the preceding six months ascertained, for, until the books are closed, the net profits cannot be ascertained, and, until these profits are ascertained, a dividend cannot lawfully be declared. The report should be made within ten days after the dividend Is declared. Very respectfully, Comptroller. To the President or Cashier. BOOKS AND RECORDS OF THE BANK. G^ Before the declaration of a dividend the bank must carry one-tenth part of the net profits to the surplus fund until that fund shall amount to twenty per cent, of the capital stock. The customary method of declaring and paying dividend is about as follows : At the usual semi-annual (or quarterly or annual) meet- ing of the board of directors the Cashier presents a statement to the board, obtained from the general ledger, showing the gross profits of the bank for the past regular period, and the running expenses, also the losses from bad debts ; this will show the net profits, if any. The board then decides what sum is to be charged off to surplus li/fot^Lr^M^ Zoo /oo /oo too So /d~0 foo /.HO /o o >Fco Coo ¥.0 L 1 fOoO 4-0 oo Fig. 8.— Dividend Book fund, and what to profit and loss, such as a portion of the premium account, and a portion from furniture and fixtures account and taxes and expenses, and also instructs the Cashier regarding the charging off to profit and loss of bad debts. From the net result they are able to determine what dividend to declare, if any, and upon motion the proper action is taken. If a dividend has been declared it then be- comes necessary for the Cashier to prepare for it. This preparation consists of entering the names, and the amounts due, upon the dividend book and the making out of the proper divi- dend checks. The dividend book is very simple in its arrangement, a form most commonly in use being shown by Fig. 8. It will be noticed that this form has a space upon which those stockholders who come to the bank for their dividends can sign a 64 MODERN BANKING METHODS. receipt. This is the old custom and many prefer to continue it. On some accounts it is very satisfactory to have the stockholders come to the bank to meet the officers, and talk over the business and the prospects, just as in other lines of business it is pleasant for the cus- tomers and heads of the house to meet. Many banks are, however, adopting the plan of mailing all the dividend checks, and as these are always made payable to order the proper endorsement of the checks is considered a sufficient re- ceipt. Where this is done the column for receipts is unnecessary, and is usually left out. The dividend checks are generally made upon a form especially used for this purpose, and indicate some- where on their face the number of the dividend paid, and are signed by the Cashier, Assistant Cashier, or President. The following is a very good form for a dividend check, and one much in use : No. 171 Centre City, November ist, 1898. o c *> Merchants National Bank, - Pay x^y^Jr<^-.^ Xo. of Diyidend..^^ REPORT OF EARNINGS AND DIVIDENDS OF at .(S<*ZJS....:^£-^~r....... m the State of U£^fe»--_,r^ "The for the perUxi of .^-r^^ «^ ■ing ?Z:^:v-..l^,190'k^I>eelaTed.^^^....^J'. .1902 PayaiU .MfrTTT:/^..^. . 19oZ^ FIHST SECTION. & PKmiomaonU.S.boDdBcliareedoffBiDcela«tr«port — 4. Lo«8es euAUlned throagfa bad debts, decreajie of values. eU: . einc© laat report H. Eipensesand tazeepud siDCe last report carried donn to second Eection.. Total.. J> .^^ ■r-//\// C¥, -Tl o Total _..z ^V/ \± la. Dlvidendof.jfa^.- peroOTKoncapitalJ-/."?.?..'?!?.'?-...! 14. Arooniit of net pro&ta ncdiTided or loM to tM carried forward tolt«m 7 of next report SECOND SECTIO^ 2^.9 )£2^.-^r7. r^C pronts or loEs of put 8li moaths 8. Amoant withdrawn fTom iurplus «inc« tut report to. AuthorizedredDctioiiof capital QBed to meet locsea or passed to profit accoant Eince last report 10. Paid aoeeaemeDt on capital stock elnce taat report 11. SubBcrtbed and paid Id by Bhareholdert since laat report as eorplus or profits ^~po THIRD SECTION IB. Total SDrploB f tui^ proper at date of thia report. ^.... 10. Total divideods since organization as National Bank.. 30. Amount of net pro&ts undivided or lou to be carried forward to it«m 7 of next report Statt of .CS^^^f^^AL^A _Sworn, to and subscribed befot -J£ i/Js^ ~ meet looses and paased to profits . .^.■^.; ^..:^.?.±7-^?J.. Sworn to and subscribed before me this _^.^ day of ..J?pry:T. ......IS07< .C/^f7:gc-t4=r^_- .^^^'^^'T'^i^^ii*^... Cashier of the abous-named banlcTtfo solemnly swear that the above statement is true, to the belt of my knowledge .^'^^(^r:^^ Cashier. * la ow tb>! low eicecdt tbt pnflto Fur Uiv Ui uoatli^ tb« exccM fmi t^Ul ftUMiB'. chugT4 off. iltenu S, 4, kad S.) Fig. 11. pn*«-t Fay to the Order of when tvithin voiuiher is properly receipted. <^^.^6CT^ .Dollars, sl^ Cashier^ CNOORSe ON OPPOSITE SIDE AND DEPOSIT IN BANK. Fig. 14. It is well to oblige each employee to open his envelope at once and count the money, that any errors may be more readily rectified. The various expenditures incidental to the running of a bank are usually paid by the Cashier or Assistant Cashier. In most banks these payments are generally made in currency or by means of a Cashier's check, or a bank draft where necessary. In any case it is 70 MODERN BANKING METHODS. important that a bill be obtained for each expenditure so far as pos- sible, and that this be properly receipted when paid, A bank being a corporation the stockholders have a right to know how the money is being used, and the records for all expenditures should be very carefully kept, and the receipts so filed that they can be referred to at a moment's notice. Some banks simply file the bills according to date of payment, and when a detailed statement is asked by the directors it should be • — h-f^^r--^ #-7 -<^.^ X ^„ ^ ^^. - gv-y' # ^ta^ /°' ;?■.-.- J ^'^-Z ■s^ :,.^^<«^ ^ <^- ^^ y^ ^ <^X-T--^— fc-^ ^yc^^rzisl. -^^ ^■/y^ / J M <^ ■vU-^. ^ a ^«^^ -^ /--^ ^^-f^ -r-*^^ M U Fig. 15. — Vodcheb Record. made up from the records, and the receipted bills should accom- pany it. The voucher system is being adopted by many active banks, it being a much more complete method. The best form of a voucher is one which combines the voucher and check. A form for such is shown in Fig. 13, which gives the face of the voucher. When this is folded lengthwise it becomes about the size of an ordinary check, and on the outside is the voucher check, which is made payable at bank. When the voucher is properly receipted on its face and endorsed on the blank side, it can be cashed or depos- ited in bank the same as a check or draft, and can be used to pay out-of-town bills as well as the local ones. This class of voucher is sure to be returned to the bank (unless lost in the mail) ; the bank is sure to have a receipt, and they are in proper shape for filing and BOOKS AND RECORDS OF THE BANK. 11 for easy reference. Fig. 14 shows the voucher folded and exhibits the voucher check. A very useful auxilliary to the voucher system is the voucher record. This is a book ruled as shown in Figs. 15 and 16, which give the left-hand and right-hand page. The book is about ten inches wide and fifteen inches long. When a voucher is issued it is recorded in this book opposite its proper number, and the amount carried into the amount column, and then entered in its proper classification column on the right- hand page. The sum of the totals of the various classification col- umns must equal the total amount shown on the left-hand page. As 6Uf£/-£ 101 ""-^ /--jT JDiaTKISTTTIOBT *,;v.n,a»g TBse« Snndn.. Ujhlioj LcK'l PDrt*g« R«.t Solana Smionery T.ltgrM» E. t.,~ 1 T" 1 << ?./ - 1 1 Ziilk 1 to -I ■>o 1 £ Jf" ^- V 1 1 r-^ 1 1 ! '*<•= II i -J. 1 1 i //.<; 1 c^ ij=t _ i~: ij ,^ 1' . ' £i. , u^ 5 ' / ' ^ J,4- - 4.t -rj - it ,/5 1 h ^ ^ nr ^ iir^s - I J 11, L 1 J , ) Fig. 16. — Vcdchek Record. the vouchers are paid the date of payment is noted in the proper col- umn on the left-hand page. By footing the classification columns monthly the total can be readily proved, and this must agree with the total of the expense ac- count on the general ledger, it being necessary to keep only one gen- eral expense account on the ledger with this system. The voucher record is a detailed statement in itself and can be laid before the board of directors with the accompanying vouchers. It is well to attach the original bills to their respective vouchers, as this gives any explanation necessary. 7a MODERN BANKING METHODS. Qyccu-a^ciy (y>^**^ y^ 33.6 ji.' " Treab. Ctf's. tj \f^ o y "^ BiLVKB COIK. M 6 &o SB •* Treab. Orfe. Jx^^/ 6/ J6 / d-o Natiosal Basi Notes. ?- rcTo , KlOKEL COIS ASD pESSTES. «^^c^ -4x 8USDBT ItSHS. 3x6 (^.£^. /6//i^a2' Legal, '^i.^ vTV. Natl. J-^'J-o. CM, / o.\* •«. Sihir. ■x^.6 ^o,\/o N,a)u/Qs„ ^jlks:6x- (Lltaa, Fig. 18.— Teller's Settlement Book. BOOKS AND RECORDS OF THE BANK. 73 For small banks, having only one teller, which are in the ma- jority, the simpler the forms for keeping their accounts, and pro- ducing the proper result, the better. Recognizing the fact that the detail of the day's work is concentrated at the general ledger desk, and that the cash balance as shown by the final result at that desk must be verified by the cash on hand at the teller's desk, many of these banks use a very simple form of teller's cash book in which is indicated simply the items which constitute his cash. The proof being the comparison with the balance from the general ledger desk. Figs. 17, 18 and 19 show forms quite popular, and very use- ful for this kind of a teller's cash book. These forms are seven inches wide by eight and one-half inches long, and are generally bound in a book with two on a page. Teller's Settlement Book. The teller's settlement book is, as its name implies, the book upon which the teller makes his records, and upon which he balances his cash at the close of the day. In large banks, where there is more than one teller, the paying teller being in reahty the chief teller, each of the other tellers proves his own cash and then turns it over to the paying teller. The latter, besides proving his separate cash, makes up a general settlement which must show the total of all the cash in the bank, and this total must agree with the cash balance as called for by the general ledger bookkeeper. The balancing time, after the close of the bank for the day, is generally the anxious time, for the proof of the teller's cash is the test of the correctness of most of the running work of the day. When the various vouchers taken from the teller's desks have been entered twice and their totals prove by comparison at various periods during the day, there is generally very little trouble in balancing. Some- times even with care something will be overlooked ; then comes the trouble, and the checking back of the work. If after aU the entries have been proved to be correct, and correctly footed, the difference still remains, it is pretty conclusive that an error has been made at the tellers' desks either in counting the money on hand, or possibly during the day in paying or receiving. When the cash is short or over at the close of the day the teller should enter the item on the proper side of his settlement book with the proper notation ; this item given to the general ledger bookkeeper should be entered in his journal and posted to the debit or credit of an account styled overs and shorts account. 74 MODERN BANKING METHODS. J.elle.rs i^ash ""ZZ^^y, /c^r //; tjUver , jra.eTZinal Jfic/Ctls V Ce->i^ C/tfTs. en. e?/f>r^«US Fig. 19.— Teller's Settlement Book. In large banks there is a variety of systems, but I give here some of the best. Those giving the regular transactions for the day's business, where both paying and receiving tellers are employed, show the connection between the two departments. One feature consid- BOOKS AND RECORDS OF TEE BANK. 75 ered important in the settlement books is the proper classification of the money, and the nearer this conforms to the classification required by the Government, either State or National, in the mak- ing of reports, the less trouble will be found. In Fig. 20 will be seen a book called first teller's cash details in which is placed at the close of the day, as the cash is counted, the amounts of each character of money, or vouchers representing the same, under or opposite their proper classification. The item at the bottom of the right-hand page of this form called checks represents the checks of all kinds paid by the paying teller during the day, and the amount is obtained from the check scratchers, either individual or foreign. Figs. 21 and 22 belong to the same set and show the second or receiving teller's work in balancing. Fig. 21 gives the cash details at the close of the day at this tel- ler's desk, and Fig. 22 shows the receiving teller's settlement. Fig. 23 shows the teller's general settlement. After each teller has proved his own desk, the work and items of the two are then combined in this book, and this gives the total cash balance of the bank, which, as said before, should agree with the balance called for by the gen- eral ledger bookkeeper. This book is kept by the first teller. Figs. 20, 21, 22 and 23 all belong to one set, and show one day's actual transactions at the two tellers' desks in one of the best man- aged large banks in the country. Fig. 24 shows the settlement book of a large and very flourishing bank. This is in reality a general settlement similar to the one be- fore shown, but in this case the details of the cash and vouchers are kept on scratchers. The cash items are written up and footed on narrow strips by use of the arithmometer, and these strips pasted in a scratcher. The receiving teller makes a separate balance, as is seen by Fig. 25. This book, as will be seen, is used with a stub. The receiving teller notes on the stub the totals of each classification, which should agree in aggregate with the settlement slip. This is his memoranda. The settlement slip is torn from the stub at the perforated line, and really forms a receiving teller's report, which is turned over to the first teller with the money and vouchers representing the same. The first teller enters the amounts as shown by the report in his general settlement in the column marked receiving teller, and in the column marked total are extended the amounts comprised in both tellers* desks, which makes the total cash balance of the bank. To facilitate an early balance, soon after the closing of the doors, it is extremely necessary that the tellers keep their currenc}^ counted pretty closely. This especially applies to the receiving teller who is 76 MODERN BANKING METHODS. First Teller's Cash Details. Mil.C /^ Trust Companies ^/ /7 ^ S'o 610 o 7}'i,trcrt-<,'^ c?^ 'S'~0 ^^ y C/-2 / cTcp y3.e^ J-^^ /^^^^ ty/r-iA^f^ li "^^-Z. <^. /f-/^ c// ^0 ^ ^7 //=■£> : <^-2 .^To -2./ - / ^ -?^c? Jf^'o -^Z-^r<^»-/ / t3 O 7' .^iS^ ^<^ Fig. 23. BOOKS AND RECORDS OF THE BANK. 81 TeHer's General Sett1ement__<^^«^--i!^A^-.J8g/ Paying Tellhs. RBCErvmG TwxBk. Total Cash. Temporary Loacs AiDoiflil fram 9d Teller') sent to Clearug Uou&e 3¥J ■J ^ ^7 ^^J- S~fa cT-^ National Bank Notes / Ji- c J 'XyJ^O ^7 ;Z'crc> Nickela and Cente • ^ / Due by Receiving Teller Cash Items / o M^ ^c '°7 ^f:i •/ ''7 <*'p-^ 60 Nat'l Bank Notel 60 V / / ^?9 f4' Silver Coiti i ^J'O 4 >;» dTo Legal Tender Notes / & i> & f /J yj~^ - /fp^ jTVyS - U S. Legal Tender Ctfs. / f 000 / foc OB U S. Gold Ct6. / ^ e /^i ~o e C H. Gold Ctf*. S"?-*) 000 />o 000 2'J*»-7 f 3 / -ec< 'st^ajs ?7^ ^^ 3J%o 7^7 rs^ Checks x- 1 VS-f U^ f/¥(> o3^^/ Ehie by Firet Tellei / /'^6 aJ^ y Sandnes '"7 ^rx. ■/ o Gold /-s'^ ^o. /j(>J, lo Silver / 7^7 / o / ^.o o c NatL Bani Notw / 6> coo / SlS-J-jT, Legal Tender Note* y J ycTif f 6/. JS-f^ Checks Due to First Teller ^f-os(>l.fS ^.i'^o.sil.¥S 3 J^ o or"<6 / ^ ^ 33*^-0 cTZ. / ^s- Fig. 25. receiving money of all kinds during the day. As the bills are re- ceived they should be assorted according to denominations, and placed in their proper tills. Another thing to be considered when assorting the notes is to separate the legal tenders from the National bank notes. This is important, for in computing the reserve of the bank these two classes should be considered differently, the legal tenders (which comprise the greenbacks), and the gold certificates and silver certificates, being the class that can be considered as part of the reserve. In the small banks the receiving teller occupies much of his spare time in putting his money up in packages, the $1 and $2 bills in packages of $100 each, the $5, $10 and $20 bills in packages of $500 each. These packages are then bunched, ten packages in a bundle, each bundle representing $1,000 of the small denominations or $5,000 of the large. In large banks the receiving teller has assistants who are kept busy in this recounting, assorting and bundling of the money. The coin is put in bags, the bags of gold containing $5,000 each, and silver dollars in bags containing $1,000 each. The fractional silver that is not required for immediate use is put into smaller bags, generally containing from $250 to $500 in a bag. The nickels and pennies not needed for immediate use are also kept in bags or in boxes, and it is very customary to have these put up in rolls contain- ing $1 each of the former and 25 cents each of the latter. Many banks also have some small change put up in quite small bags con- BOOKS AND RECORDS OF THE BANK. 35 taining from $5 to $25 in each, to facilitate the disbursing of these coins in large numbers when wanted. The fact that the gold and silver coins are considered a part of a bank's reserve makes the necessity of keeping this class by itself apparent. Most banks which handle considerable coin have coin scales, which are so delicately balanced that they will show even the effect of the usual abrasion of the coins, by the short weight. It simpli- fies the counting of the coin very much to be able to put a bag full upon the scales and judge its value. If a considerable quantity of the coins are old and much worn it is safer to count, as the abrasion may make a difference of several dollars in a bag. The Certification of Checks. Part of the duties of the paying teUer of a bank is to certify checks, as has been previously shown. This is a custom almost ex- clusively confined to the large cities, although there is nothing to pre- vent its being done in any banks, unless some local rule against it should prevail. While in some banks certifying is done by the Cash- ier, still the general custom makes it one of the duties of the teller. Great care should be exercised to see that the depositor has the amount actually on deposit before certifying a check. Section 5208 of the Revised Statutes makes it an offense "for any officer, clerk or agent of any National banking association to certify any check drawn upon the association unless the person or company drawing the check has on deposit with the association, at the time such check is certified, an amount of money equal to the amount specified in such check." The penalty for the violation of this law is the placing of the bank in the hands of a Receiver, and the punishment of the offender by a fine of not more than $5,000, or imprisonment for not more than five years, or both, at the discretion of the court. It is right that this law should be a strict one, and the penalty severe, for more than one bank has been wrecked by its non-observ- ance. The certifying of a check is virtually the paying of the check, and the bank becomes obligated by marking the check "good," to set aside the money for it by which it shall be paid on proper presen- tation. A bank, however, cannot be compelled to certify a check. It may prefer for good reason to pay the check, and it has the right to so elect if preferred. A banker will rightly hesitate to certify a check for a small sum, as many cases have occurred where such checks have been raised to much larger amounts and passed to an innocent third person. It is certainly good banking to cash such checks instead of certifying. 80 MODERN BANKING METHODS. The customary way to certify a check is to write or stamp across its face the sentence " Good when properly endorsed," the signature of the officer immediately following. A safe plan is to also number IbFFONTa ZLl80yfK6./t£^ ^DOIXARS Fig. 26. and date the certification, the number to be that shown by the certi- fied check register. Fig. 26 shows a check certified by the method suggested. It is necessary that a book called the certified check register be kept by the teller, or his assistant, in which should be note"d at the Cerfi/i'ecl C^eck /tejtsler Ji-^m6er iMa.-rrie. Jc OvAnt. C^U,,r- d^-t^c^.i^n/' ■to<^(Pi^ Ci,U:0'^U' orvr ^' I'/ VA \ 1 lj~ 1 — 1 Fig. 37. time of certification of a check, opposite its regular number, the de- scription of the check, and when the check is presented for payment, the date of payment and the amount should be entered opposite the first entry. This book is numbered consecutively, fifty numbers on a page. A good form for such a book is seen in Fig. 27. At the close of the day the bookkeeper obtains his entry from BOOKS AND RECORDS OF TEE BANK. 87 the certified check register and charges the depositor's account wnth the amount, and the certi- fied check accoiuit should be cred- ited with the same amount on the general ledger. When the check is paid, the proper entry should be made on the register as before stated and the certified check ac- count charged with the amount. Clearing-House Due Bills. Another of the duties attached to the paying teller's desk, in cities where there is a clearing-house, is the issuing of the clearing-house due bills. These due bills are given in settlement of the bal- ances due to the clearing-house and to individuals for immediate use, such as the payment of a note at another bank. In this they often take the place of the certi- fying of checks. They also pass between banks in payment for ex change. The due biUs are bound in a book with a stub, and when is- sued are to be signed by one offi- cer and coimtersigned by another. Fig. 28 shows the customary form for due biUs. Money for Pay Rolls of Customers. In some manufacturing cities where the competition between the banks is great, for the pur- pose of securing accounts some banks agree to put up the money for the pay roUs of their custom- ers in the necessary individual packages, these roUs being fur- nished them by the manufactur- 5 88 MODERN BANKING METHODS. Tbe Philadelphia National Bank ing companies and others. Where the pay rolls are large this re- quires a great amount of extra labor, and I think it is questionable whether it really pays. Some banks furnish their customers who draw money for large pay rolls with a blank slip on which they can indicate the amount of money required in the various denominations. This is a convenience both to the bank and to the customer. The slips being retained on file by the paying teller, become one of his vouchers. Fig. 29 shows the customary form for these pay roll sUps. will please prepare for <^^ ^~ /^o^ Dollars, .pay roll.. in amounts as follows i NOTES, lOCe, . . \foo 50'8,. . 2-yr^O 20'8,. . / O o o • lO-a.. , / o o o 6'8.. , / i^OO I'S & 2'8, / o o o TC »TAL NOTES, SJsi oo eiLVEB. W . . • •*•'• • \foc « HalTw,. • QusrtetB. Diipee. . .Jo mCEEUS, . . . ' 2.^ / O - PENNIES, . . . 4^vr- Receiving Teller's Deposit Record. The receiving teller generally keeps a record of all the depos- its received by him during the day. These he enters upon a book by name and aanount from the deposit tickets before these tickets are given to the book- keeper. It is right that he should keep this record and that none of the tickets or vouchers should be given up until the record has been made. This book upon which such a record is kept is usually called the deposit scratcher, and Fig. 30 gives the usual style. The narrow column, in which figures are seen, is used for not- ing the amount of currency con- tained in the deposits. The keeping of such a record may often aid the teller in discovering errors in his balance. The usual form of the deposit ticket is well known, but I give here in Fig. 31 one with the initiaUng mentioned before. Another useful feature, besides the initialing, is that of stamping all the deposit tickets that come in before noon with the letters a. m., as it is sometimes very important to be able to state when a deposit TOTAL, v/ ':^rec6^^ CS-crcrJ^ yJertr^ c^tttf^^^ c:^<:)^, /6 ' ^/"ff ■€^4^ „ I Q^^.£^i4^t€£t'C€t&^^^€^^c& ''CtcrvC^vc^^ C^cJ^ ^Xe/S^^ d^u,**x£*^ .Jh-a^ f-rC»t,c^ J.ai4.yj. 3 >■> •»J "7 7J«.^ tM^-Si t±£j. Sf. j/>t*7 V^/^^. J-ijij'iuj »-j7j- &a fo ^7 ././|j 7" A/1 7-^- *7 ■J. VA f7 'ft' 'P. J* Fig. 38 (Continued). bank on accoxint of loans of various kinds, which in some banks are kept in separate accounts, such as demand loans, collateral loans (demand), collateral loans (time), and bills discounted representing the usual discounted time paper. Most banks keep only one account representing all their loans and discounts, which is kept under the name of bills discounted or notes discounted, but I think it will be found advisable to have a separate account for the demand loans. The accounts with the various correspondent banks and with the reserve banks are kept on this ledger, also the cash account of the bank, in aggregate, and the redemption fund account. In large banks it is customary to keep the accounts with the va- rious correspondent banks in a separate ledger, or ledgers called bank ledgers (they are often subdivided alphabetically). A represen- 94 MODERN BANKING METHODS. cx^^^x^ cM^-rri^tcAtY-^ C^<^^^?€r^ /'^ff -^..(o^ / T^JZa. //>//>/ ^vT Fig. 33. tative account, called bank ledger, is kept upon the general ledger, just as a representative account for the individual or deposit ledger is kept, called individual ledger. And while being generally consid- ered a part of the general ledger department, they are in reality a separate department, as much so as the individual ledger. As in most instances these accounts are kept on the general ledger proper, or books auxiliary to it, I will treat the subject in connection with that department. From the records of this desk, therefore, the officers, directors or stockholders of the bank should be able to obtain at any time a state- ment of its assets and liabilities, showing clearly what the condition of the bank is, and from its records, together with detail from the paying teller's desk, and amount of overdrafts from the individual ledger, is made up the reports of condition that are called for by the Comptroller of the Currency five times a year. The system to be employed, and the necessary number of books for this department, depend largely upon the amount of business done. In a small country bank the system is quite simple, the nec- essary books being simply a journal (called cash book by some), ledger and statement book. In banks doing a larger business, espe- BOOKS Am) RECORDS OF THE BAKK. 95 /^ ( l^^ui^c^cL^ Fig. 34. cially where there are many items with correspondents, it is found advisable to subdivide the journal, using a book called the foreign scratcher, in which are entered during the day the various checks upon foreign banks that have been received, and are to be sent away to the correspondent and collecting banks ; thus this detail is entered only in the scratcher and the aggregates carried into the journal. I give here in Fig. 33 a good form for a foreign scratcher, one that is much in use. Fig. 34 shows another style much liked by many. Some banks make it a rule to record the names of the drawer and endorser as well as of the bank on which the check is drawn. This, of course, takes more time and space in making the entries in the scratcher, but there is no doubt that it makes a very complete record, and one that may be of considerable value in case it be necessary to obtain duplicate checks, as has occurred more than once in my own experience, in consequence of railroad accidents in which the mail was destroyed by fire. 96 MODERN BANKING METHODS. ^■SfU-rtt^Mrut^^w^ ^^^/^cM. Fig. 35. — Left-Hand Page. BOOKS AND RECORDS OF THE BANK. 97 ^■'£l^u.rrfjt'^_^tnA*'v*.Cb£ tf-o /^ ft r T / ?-j-(i^Jjr?c J3-i / o / 7' / oy IAS ft 79 '9 3y J'fjf-, i>/ I o yyc •^-f 'yito •/j, rye 'f i::8.C(ii/ CJii 6y. 7' fir /CO foj"- CJ^ di, iff-if "^T 1 i i i i ^ '■)..jf /i^—^si, O^ i-uj. y^i ?v:c /c^r 77 Zf3 *n ;2v •f/f >/;p .Fig. 36. 100 MODERN BANKING METHODS. various charge items charged against the individual depositors' ac- counts. The charge against bills discounted represents the loans made by the bank during the day, and is the amount shown by the discount register. The charges to exchange account represent exchange charged to the bank by other banks, these having been credited to the other banks on the page marked Cr. The charges to Cashier account, certified check account and cer- tificates of deposit represent checks and certificates paid and entered here in detail because it simplifies the keeping of these accounts cor- rectly to have the credit items posted in detail when they occur, and to post the debits against their corresponding credits. By this method one can always tell what items are outstanding and unpaid. NATIONAU RESERVE BANK Philadelphia. /^^ P-^ — 189^ e^-ct^u::^ -^yYT^fZe^^-c Su- ^:^ee...:<-^^cre" ^(tf:^. CREDIT. Fig. 37.— Chauge Slip. Asvr. Cashier. In very large banks where the volume of business is heavy, this detail is kept in registers prepared for the purpose, descriptions of which will be given later on. The charge to " Carbondale $75" represents a collection item which the bank at Carbondale had collected for one of the bank's depositors. The Carbondale bank reported the collection but did not remit, consequently its account is charged with the amount and the credit to the depositor is made through the individual ledger. The general ledger bookkeeper obtains his vouchers for this charge, and for the charges to exchange mentioned, from the Cash- ier by means of a charge shp (see Fig. 37). The charges to expense account, as shown, are made from the bills that have been paid and endorsed by the Cashier. Many ex- pense items are for so trifling amounts that no bills accompany them. Items of this character, are, having been first acknowledged by the Cashier, generally entered in a small memorandum book, called a petty expense book and carried by the paying teller in his cash among his cash items until the end of the month, when they are BOOKS AND RECORDS OF THE BANK. 101 ' ^ charged up in lump to expense account by means of a charge sHp made by the Cashier. Expense items in the shape of salaries should come from the pay roll book. This book becomes an important voucher and receipt for the payment of the salaries, and when marked O. K. by the Cash- ier, or a charge slip given by him for the total amount, is ready to be charged to salary account. On the credit side of the journal are seen various items to banks representing remittances in settlement of collection items or bal- ances ; the aggregate of deposits made by individual depositors ; the aggregate of loans that have been paid ; the amount of discount and exchange received ; and the amounts of certified checks, certificates of deposit, drafts, and Cashier's checks issued. The bookkeeper would have the letters enclosing the remittan- ces, or the proper credit tickets, after having been marked by the Cashier, from which to make these entries ; the total of deposits he would get from the receiving teller ; the amount of loans paid from the note teller or tickler ; and the amounts of the certified checks, certificates of deposit, drafts, and Cashier checks from their respect- ive registers. The item of discount comes from the discount register and ex- change from the draft register. It will be seen that the general bookkeeper makes his entries from actual transactions, and he should always make them from the com- pleted transactions entered in a regular book of original entry or from some voucher or letter duly authorized by the Cashier, or by some officer of the bank empowered to do this. He should have some authority for entering every transaction before placing it upon his journal. A good plan adopted by many banks is to have a report, which, being passed from desk to desk, is filled out with the aggregates needed from these departments, by those having charge there, and then comes to the general bookkeeper. From this report he makes the entries. The following is a good form for such a report : April 25, 1902. Individual deposit account (checks) $28,625.06 " (deposits) 20,025.60 Time " " (checiis) 2,031.99 " " (deposits) 1,672.33 Bills discounted, Dr 13,834.64 " " Cr 9,763.64 Drafts drawn, Hanover 2,132..34 " " Corn Exchange 250.00 Discount, Cr 131.74 Exchange, Cr 2.33 Cash balance. . 59,752.18 102 MODERN BANKING METHODS. After the items have all been entered in the journal, and the work footed, and the balance struck and found to agree with the cash on hand as shown by the paj^ng teller, then comes the posting of the items into the ledger to their proper accounts. Various styles of ledgers are in use. First of all the old-fash- ioned debit and credit ledger used by the fathers of most of us and the grandfathers of some. Used at a time when the transactions in banks were comparatively few to what they are to-day, these ledgers seemed all that was necessary. The first improvement was seen in the introduction of the balance ledger, between thirty-five and forty years ago. By some this has been called the Cincinnati ledger, because it first appeared in use in the banks in that city. It has been and is a great favorite, very many banks preferring it now to any other style. The ease with which the balances of the accounts '^O-TK^ ^Q-ti£^Hay^M^ V^-_^ .,°;s. .^;s!. ■Te roc -Tc ". U5.Bi>Hb KBMn Obnluk*. »77' < &,o^ -,/:<. ";- " f-. J.ji 2 a^,i. 3.0 ■'■^/' ? cs-> h^^lr^ v'i J :-,;- '^Ji - *»*('/ " ■'S?- '& r ' ^Ir . ''^'■i /J =™.^.„x^ * nd ( 3/C ■" "'■■'7 - <:_ ' z^< 7 - ohwMirui. 'J-.t^ ; /y^j ; -S™ I^ff«.0>.E^BMMU. a.. . ~' J It >^ 2^? )/c > s-c } — '< SJ^ i ^ X-r , £:2^>fl» '"> "ji r„U..i - t - '-4 J «>&- JSC. , CJ-B*^ Cjj ^■iJ- A.V. - 'T" at-K .<-/t.cJit^^uin^%^ C^ui.^^ ^ -Atiui^z c^ -».?-si:.^ Fig. 41. 106 MODERN BANKING METHODS. ^ 0) z jr > hi oc -J u f (0 O oe z o -1 < Z' u cr o o 1- lb < z r. C>4^.U^crr/^y^^j~a^^i^r^-^fcUr (2a '^a^.f^ Paf/er. ^y^js^ Where p^^*/^ ^'V%'-ZC^ _ ^tL...^ 2?^^ ^m*^^ CC-^^u:^ 7-^ ^. ££•*»* Ifc^ /-^ /-' /^. — Fig. 43. BOOKS AND RECORDS OF THE BANK. 107 c-.-ei^^'C^^mZ' r#r-e-<^^ u^.^Si' ^xiU^^.:./- /9».m^ ■^J*u*v>u •^ 7 7 / *' f Fig. 44. ruled on both sides. The keeping of these records upon sheets greatly facilitates the handling of the large number of items, by dis- tributing the work among a number of clerks. Each day's work is kept carefully filed, and every few months the sheets are bound. Figs. 40 and 41 show in an abbreviated form the two journals mentioned. The entries on these journals are made from the items, with the exception of the foreign collections, which are made from slips, as is shown by Fig. 42, which come from the foreign collection desk. After all the items are entered upon the debit and credit journals they are footed, as shown, and their aggregates carried to the gen- eral journal, as will be seen by the debit and credit pages given in Figs. 43 and 44. Of course many items on this general journal will not be found on the debit and credit journals mentioned, as these last, as was said before, are simply scratchers and are used for the foreign bank items 108 MODERN BANKING METHODS. ^^ei-r-cX^ "•7? ^•A*tX M-e/iM^AXT" •y*^-c^^^i/tt u/- jL/y^^<.i^ All,. -^' ^i'»7"*-- ^^ ->^ -<" Xo-^. -<^^ //^ y6 r,L. ■V„/,j ■c 1 1 leoi 1 1 1901 DEC 1 1 (90 Fig. 46. BOOKS AND RECORDS OF THE BANK. Ill ion COLUCTtON ANO ReMITTIUVCe TO BANKERS NATIONAL BANK, CHICAGO. PROTEST REMIT IN CHICAGO EXCHAh4GE RETURM AT OMCE IF NOT PAID. 00 NOT HOLD FOR C0M«M1ENCE OF PUniE& REPORT BY NUMBER WITHOUT FAIt OR RETURN THIS SUP. Fig. 47. — Letter of Enclosure. "^Ire non-paytnent of atl itrsu |BUO or over. Protest all itema ^0 or over, anlesa oLherwise instructed b; oa. Do not protest items under $10, naless so instructed by as. Documpcts attached mnst be surrendered on payment only. Return at once if onpaid. 1 NUMBER r^7 //^^^ rr called sundry banks, the items being charged separately, and the credits, when payment is received, being entered in the account op- posite their respective charges. Some large banks where several hundred of such items are handled daily, use sheets, and charge them up the same as any other bank items, charging the items in groups to some active bank at, or comparatively near, the points of a large number of the miscellaneous items. Thus a bank in Kansas City will collect from sundry miscellaneous banks throughout sev- eral of the adjoining States ; Butte, Montana, will collect from sun- dry banks throughout that section; San Francisco will collect Cali- fornia items, etc. It is, however, generally the custom for these banks to charge such items in aggregate daily to a representative account on the general ledger, such as bills in transit, or sundry banks. The detail is kept on registers or scratchers. Fig. 46 shows such a register. The items, as they come from the various departments, are listed in the register. They are then sent to the banks with a brief letter of enclosure, of which Fig. 47 is a form. This form, as will be seen, calls for settlement in Chicago exchange ; another printed on paper of a different color is sent to those banks from which a remittance is desired in New York exchange. The letter has a number, which is the page number of the register. This number is applied to every item on that page, and assists in tracing. At the close of the day the register is footed and must compare with the total of the items made on the adding machine. This total goes to the general ledger desk and is charged to bills in transit, its representative account in this case. When remittances are received for the items the letters and checks are turned over to this department. The credits represent- 112 MODERN BANKING METHODS. The Bankers' National Bank, credit bills in transit. ing the face of the items are Hsted on a credit slip, which, to dis- tinguish it, is printed in red. Fig. 48 shows such a shp. The numbers as seen in the left-hand margin are abbreviated, only the first one being in full. These numbers are taken from the letters, also the items of exchange. The exchange, where any has been deducted, is entered in its re- spective colimin. The total of this exchange column deducted from the column of totals should equal , the amount of the face of the checks — received in settlement, as shown by the proof at the bottom of the slip. The slip after being proved goes, in connection with the checks, to the teller, and from there goes to the general bookkeeper who credits bills in transit the total of the slip and charges exchange account with the exchange. The items on the register that have been paid are then stamped from the letters, with a hand stamp, giving the date of payment, and the letters receive the same stamp. Returned items are marked so on the register and the general account credited. About once a week a proof is made of the outstanding items by listing them with the add- ing machine, and the total should agree with the balance as shown by the bills in transit account. Vouchers for Entries. Before making entries in the general books of a bank it is a wise policy to have some sort of a voucher for each transaction, and these vouchers should be explanatory. Charge and credit slips or tickets are much used in some banks as a convenient form of voucher, especially for making transfer en- tries. Some banks, however, prefer a book called a charge and credit book. One advantage of this book is that it becomes a permanent record which is not easily lost or misplaced. The slips are usually made out by the Cashier, or Assistant Cashier, then the entry is made in the charge and credit book from the shps, and they are passed on to the tellers or collection clerks, to whichever department Fig. 48. BOOKS AND RECORDS OF TEE BANK. 113 ^/< a/u^'^'^^ DaCT i/o CcU.r^'^ CiCajry.tM— U?^^6r rr "-^c.-^ics:. '' Merchants' National Bank CHARQB . °<7,wfv'<^ '■-^^.^;;=;j: Fig. 51. — Credit and Charge Slip. a record of it on a stub it is less liable to be overlooked, and when the accounts current are made out there is a double check upon these items. Another form of slip will be seen in Fig. 52. This is also bound in a book and used with a stub. The slip being filed with the letters of the correspondent bank, and attached to the letter referring to i Speeiaf fltm!tfnc* for ertdit of Uadtby *». 4.798 FiLC THIS WITH IXTTCRS ReceiVCD FROM >^— o O Spteial flamlttaiiu of $*</~o c> Disconnt DiscDuct Exchange. Cashiers Acxount. /-f-j -J .rV FcrtigTl BilU, Loam end Disccurts, City >Tol«M, «c?7 o o O 7-^ Fordgu Nctes, / 7 ^ vi ~ Foreign Notes, Foreign Notes Excluinge, o ^-^ ExchiDge, X^ - Exchange. 7^ Pirst Tellers Cbeckt, Foreign Checks. New York Checks. 2 o^^ '7f Paying Tellers Amocnt, Receiving Tellers Axnoant, / 7" Xodividoal Ledger Aiat., <^.Z.c <^ RcdMooimted .76 :'. /■^ £rt| Bulk I ItKtirkloal DepoMla Tool Dcpaiu l^m Exempboti ftoa Rcsenr f 'f vi'J-J Ifkbibly Cur Reaem '^■r^ JfoZi^.<^e>i^a..^. Uot/C//a, ^n^. ^J-i StcJl,B-..Ai.'A„Ji, sd 'y < 70 ?i /j- J^^jtr-^j, G^CtCV 3jo^yi Fig. 55. — Daily Statement Book. BOOKS AND RECORDS OF THE BANE. 119 244 STITEMENT DP HDNHITION, ^fU^ //jy Up\iViky TUESDAY WEDNESDAY eilUDiacoaated. 'Ovcrdnft&, V, S. Bonds to SecoiT Circulation. Qth«r Bobds u»d Stocky Interest Paid, jbrpeoxa, B»nkintHf6 4'i 0\f - 0«r. ITnder, fyo 5V ■ - — >7 J U; // ^teai.y9a,.JIi r /3».U6^ 3 ;^ 3 3 i6J ■'7 /i f^ 7^ 2^ 33 7is ^7 //^ jSi f Fig. 55 (Continued).— Daily Statement Book. 120 MODERN BANKING METHODS. Daily Statement Demaodl/Muu Time Loans, ColktenI Timel/wa* C. & Bonds Aect. Clieulatioa Premiam - U. S. Bonds Acct. U. S. Deps. Premiam V. S. Bonds Premium Other InTCStmenis >~/(^ j /; V -0f >o fSpt Fig. 56.— Daily Statement Book. BOOKS AND RECORDS OF THE BANK. 121 ftlfM tue^ piire. Daily Statement, ^^^?:^:_'^-!__i89-^. £L3snAT« AoBirrs. Ca. Bj:^. Totai.. Chue, KT. Central. " CenrineiiUl. " Fint '■• J'ff-L'i.rCZr „ ^Mwyt Agents Total / J~o / 3,^ / o o 3oc /^<7 S ^*i-»i^v^e.^^c ^i^Y- I 'hvtXfi^^iUi:^ 3 @i*fcZ*Ta-,4-^^t^<, ,< &:rz^tari^<, 1902^ P^ .Oife^.^:?r>^. - " do solemnly swear that the above statement is true, and tJuit the SCHED ULES on back ofdhe report folly and correctly represent the true state of the several m,atters therein contained^ to the best of my knowledge' and belief Correci.—Attesti any other officer; attested by not lesa than three birectors, and forwarded t ConiptroUerof the Currency without delay Each day's delay, after five days subject the bank to a penalty o£ one hundred dollars. See Sections 0211 C313, Revised Statutes of the Uiilled States, To be attested by three Directors other than the officer verifying the re- tonus miD DISCOUNTS. (Ineludlnt Loam A. On demand, paper with one or more indiWdual or firm ns B. On demand, secured by stocks, bonds, and other personal C. On time, paper with two or more individual or firm names - D. On time, single name paper (one person or firm) without other security E. On time, secured by stocts, bonds, and other personal securities F. Secured by real estate mortgages or other liens on realty (see schedule). Total (item 1, CERTinCATES OF DEPOSIT REPRESEHTIHO MONEV BORROWED. IMCLDDED IN THE ABOVE ARE— G. Bad debts, as defined in Section 5204. Revised Statutes $ ....Ct^ tlw^x. *< J . 1 'V? *.70,j fr-c^-^^^ *• ^^ — -- Total (item 7. resources) 5-o o ..... ^JtJCy ^^XjULtC ^A^^c^'.f-e^ V''' f=/°je. ..^. BALANCES DUE FROM OR TO APPROVED RESERVE AGENTS. /.??. ^.^fi/^. J^.% A±... Total (item 12, resources) . ..4^.7 A.4. .7. 2.8 .^.^. ^S- Z/i-i ^z.^^/ fr.u ,K i^«X/< /O^ . (,„ — Total (item 9. liabilities) . by d ■-;?■ '9-'~ / i^ 3'^0 *s~o LIUBILITIES OF OFFICERS RHD DIRECTORS ■a Names of Offlcerv and Directora. oa.MT,u., Llftbilitj(iQ(liYiduol or firm) Llabi1it)-([DiUTidaBlorfiTm) OTCidnfbi. s^iJo^ A //^ ». 4 S 3.0 e .ii'.Vf.^... 2.0 \ » 2. 700 :S y^r 00 » .-- ;? 00 ■7 ^ a 6 \5~o /o /2.0 a ....do -..-do ^.^ J-00 ^ ^/ i. •7,» 3g 1 2.3 SSo ..... / 2. 2. --.do /& 0^^ 7 ' f • e? — „^-..f the Revised Statutes, including Amounts which Exceed this Limit due from * lies, and Savings Banks. Overdrafts, if any, to be classed with Loans. ched" II amount oan. 1, r. Name of borrower. Enter full amount of loan. %. RDR iM OR TO APPROVED RESERVE AGENTS. To— 3 4 / 2 Enter name and location of bank. xP'tr^S?^ ^^'C o 8 S ^/ ^^ 7- >y^ e V c/^ e? / "7- f- gmei '-? ^'^A C/\i B.y^y\^>\^K^ C>t_< J* rf-^ Od^yC^ OL vrT ^_<.^^-7 S / <^v2 c^ .. /%J a J y^^.^A. y^ / Total (item 9, liabilities) /^ '3\£'o vrtf LESO'' OFFICERS AND DIRECTORS. f prior Liability (individual or firm) aa Payers. Liability (individual orfirm) as Indorse rs or Guarantors. Overdrafts. No. of Shares Stock Owned. ty, Ifa I ./.y..!^. <9 a 4 a S ...v'-^-;z- 9 X J7jO_a_ J 2.0 o 1 BOOKS AND RECORDS OF THE BANK. 125 Bank Officers aye requested to use the following form for printern' No. <^^^^..- REPORT OF THE CONDITION OF The ..Oki^k(c:s?^i:<^Ti^^si^...^ ai/2^ in the State o/.-<^?«=6^':^^^^^?C?^^a< the close of business, jM^^ C^Z'^^C^-.^Z^^^V'^-^-il^t \.^.....,mo:^^ 1"! •2 - -a E fe~ '■•g s ^ S o l1^ 0,-0 g .b-sig ^^'.^s l-S °3 — " » g >.2 2; g- t; j; ^ "2 -^ -^ ^ z 3 a notified eposits 811 of Depoe le expens % f-.'O m ^ 5-sf 5 1 •5? s ^i-s £ E C3 • 8 § ja M.S. F: i3^^ g u ^ 1 ^ ^ ^. - § § s RESOURCES. Loans and Discounts Overdrafts, secured and unsecured , C S. Bunds to eecure circulation _ .. U S. Bonds to»9CDre U. S. Deposits U. 8. Bonds on band Premiums on D. 3, Bonds- . Stocks, eecurities, etc.. - , Banking house, furniture, and f^ures , Other real estate owrjed Due from National Banks (not reserve agents) Due from State Banke-iAid Bankers Due from approved reserve agent*........... Internal -Revenue Stamps Checks and other caeb items Exchanges for clearing house... Notes of other National Banks ... Fractional paper currency, nickels, and cents Lawful Mokey Resebvb » Baks. viz: Specie Legal-tender notes Redemption fund with U. 8. Treasuper (5 % of circulation) Pne frum U. 8. Treasurer, other than 6 i redemption fund . . DOLLARS. -/^.^..■hi^.^..'i 3.^ £Aji^..iLi.« :Z^ ^-A '-7- ^T^ LIABIl-lTI Capital stock paid in ....- Surplus fund Undivided profits, less expenses and taxes paid National Bank notes outetand-'ng State Bank notes outstanding Due toother National Banks Due to State Danks and Bankers Due to Trust Companies and Savings Banks Duo to approved reserve agents Dividends unpaid ...._ Individual deposits subject to check Demand certificates of deposit Time certificates of depobit _ Certified checks Cashier's checks outstanding Cnited States deposits — Deposits of U S. disbursing officers .. Notes and bills rediscounied - Bills payable, including certificates of deposit for money borrowed . Liabilities other than those above stated Total.. DOLLARS. 7-^ _^L '2£ y..^. State OF.../^&cifer..(^5?^^?;tlrfrr7^?777'-. , Cashier of Die above-naracd bank, do solemaly swear that the^ove statement is true to the best of my knowledge and belief. Subscribed and sworn to before me this j day of .fe3^«?^^r^;l-!»tSry_ , lOO,;^.^ Notary Public. ECT— Attest ['jverJ Fig. 59. 126 MODERN BANKING METHODS. TEEASURY DEPARTMENT, OFFICE OF COMPTROLLER OF THE CURRKNCY. Form 200. PUBLISHER'S CERTIFICATE. ENTER CHARTER NUMBER) ^, „,„„ OF BANK HERE. 5 NO. 6500. CUT THE PRINTED REPORT FROM THE NEWSPAPER AND ATTACH HERE. PASTE SO THAT NO PART CAN BE TORN AWAY. SEE SAMPLE FORM ON THE BACK OF THIS CER- TIFICATE. FORWARD CERTIFICATE TO COMPTROLLER OF CUR- RENCY AS PROMPT- LY AS POSSIBLE. PLEASE OBSERVE THE FOLLOWING REQUIRE- MENTS. I. Each National Bank report must be published in a newspaper in the place where the bank is estab- lished; or, if there be no newspaper in the place, then in the one published nearest thereto in the same county. II. It must be published in the same form, and the same order of items as in the sample form on the back of this certificate. Including the full title and location of bank, the aflBdavit of Cashier, the notary's certifi- cate, and the attestation of at least three directors. III. Items which remain blank in the original may be omitted from the printed report, but the publication must never be condensed by combining two or more items Into one. IV. The original report should not be delayed on account of publication, but should be forwarded at the earli- est moment possible, and the published report can follow at a later date. The form herewith can be used to furnish " copy " for the printer. (See sections 5211 and 5213 U. S. R. S.) STATE OF COUNTT OF On this day oL , 190 , personally appeared before the undeirsigned, a Notary PUBLIC within and for said county and State , publisher of the a newspaper published at , County of , State of who, being duly sworn, states on oath that the Report of "The " of A. , in the State of ,a true copy of which is hereto annexed, was published in said newspaper in its issue of the day of 190 Subscribed and sworn to before me this, day of , 190 Notary Public. Fig. 59 (Continued). BOOKS AND RECORDS OF THE BANK 12? on real estate, a brief memorandum should accompany it explaining the man- ner in which each mortgage was acquired. 9. Full information as to progress made in reducing overdue paper, and improving the position of bad debts, with a note to each item as to its prob- able value, should accompany every report. 10. It is important that the charter number of the bank should appear both in the report and at the head of the publisher's certificate forwarded to this office. 11. In case it is not possible to have the report promptly attested by three directors, it should, nevertheless, be sworn to and forwarded immediately upon receipt of call ; the report will afterward be returned for completion. 13. Every report should be sworn to before some officer having an official seal, who is not connected with the bank, and care should be taken that the seal is affixed. By carefully noting the above and guarding against the errors most com- mon to reports, as pointed out, a large amount of unnecessary correspond- ence will be avoided. Very respectfully, , Comptroller. To the President or Cashier. N. B. — It is auggested that you paste this circular on cardboard and hang it up at the desk of the officer having charge of these reports. Fig. 59 shows the form for a statement made out from the report for publication. On the reverse side is seen the space in which the clipping of the published report from the newspaper is to be attached, and the affidavit of the publisher. As a part of this report it is necessary for the bank to furnish a ScycjBc 4^*t.go S"**^ k^^K-^— cfV~« <^"o I / /o S' c Fig. 60. 128 MODERN BANKING METHODS. separate schedule of stocks, securities and other investments where the number of such is too great to be contained in the space left for them on the inside of the report. The customary form for such schedule is shown by Fig. 60. The column market value is not always used, but it is convenient to have it, as sometimes it is quite import- ant to know the comparative market value with the book or par value. When this schedule is sent with the report it should be noted in the space on the inside headed stocks, securities, etc., by writing there the words see schedule attached, and the schedule should be firmly attached to the report. National Bank Reserves. According to section 5191 of the National Banking Law aU Na- tional banks in reserve cities or central reserve cities are obliged to maintain a reserve of at least twenty-five per cent, of the aggregate amount of their deposits. All other National banks must maintain a reserve of fifteen per cent, of their deposits. The failure of any bank to do this debars it from making loans or increasing its liabilities, or declaring any dividend until such defi- ciency in its reserve shall have been made good. This law naturally obliges a bank to keep a close watch on the condition of its reserve. While it is good business management to keep the allowable por- tion of a bank's funds actively loaned on good security, yet in doing this the bank ofiicers must necessarily watch lest they encroach upon the reserve. The figuring of the reserve is sometimes a troublesome matter. To arrive at its condition with a degree of accuracy some banks use a form of statement which is very convenient and complete. Fig. 61 shows this statement filled out properly, representing a bank hold- ing fifteen per cent, as reserve. Some banks use a form for a daily statement of reserve, which, while being more condensed than the former, is very good and shows at a glance the condition of the reserve. This is shown by Fig. 62, This form is also used by some banks on which to report the reserve when sending a report of condition to the Comptroller. The making out of these statements of reserve is generally one of the duties of the general ledger bookkeeper, and where the daily statement of such is kept in a book it often becomes an interesting record for comparison. A large proportion of the bank accounts kept with a bank, except with banks in reserve cities, are generally settled for weekly. These frequent settlements enable the ofl&cers to keep a close watch of the account and to be able to correct any errors that may creep in. When a settlement is received, an acknowledgment is necessary, and it is BOOKS AND RECORDS OF TEE BANK 129 LITEMS ON WHICH RESERVE: IS TO BE COMPUTEO^ LIABILITIES. Should the a*-! ^oe to Nmional BanH, - - gresaW "Duel from** exceed IDoe to Sute Banlts and Banken the aggregate / "Dne to"< 1X88 Bat>k^. both ] Items mnal tm/Dae ftom otber National Banks omitted from! the calcDtailoo. I _ .„ . \ Doe from State Dalits find Banken tz ^7 7 ^ 6 7^ ^7 3 3 7- " ^ Invttends mpaid - . - Individ ufll Deposits > . ^ « Q Colted Statn Dvpcelts - Depoaits o( C. & Dtetraretng Offleera Gross amoQiu OEBUCTtONS ALLOWED. Excbaages for Clcanof-Uouee Checks 01 omer Bmkl In U» asae place < Ka'^tnal Bant Vnta . . . . ■^•3 O nfkeea per eenk «r una Amonotty la the entire 8aenrenqaUei «lit Treuoia U. B. Ket Reaene to he held yJJCi^?.^'^ ^?7 ^J^ y ty 31 f ^V ^J 54^/ i/ t 6 'Ay tf- f ^y^2. (,C ITEMS COMPOSING THE NET RESERVE AND THE DISTRIBUTION OF THE SAME. Three-flflhs of the Net I!?Mrvc la Itema making op the same may cor.si^l d* Balnncfa *n)i foltowlng a{li: ^x '/;r. sr& 'Bnoi enth BecrvB Ketta e Brtetovrr ln Cold Ti«asor7 Cert'a Legal-Tender Notes D. 8. Cert's of Depoelt for Legal-Teoders a B. OerVa for Coin •bd Leiat-Tendere ■ S'oa / s^ o e> o Excess In tho two-G^ths Beserve held Deficiency In the two-Snhs Reserve held a-j"^ ' j~o ■J~ entire BeMrre held, t .6i^ J8ff »-a B«< n ■«■■»«. ^ /^x/;;^ "^ •' "- "-^ 1 ?.^or^ o/- BAl.WlTHRI8HV!AtUTS. ^/.j "fM, KAM RESUVL ^v/TlT UanoTer Sal. Damk, H. V. y>, fiti .. cWnctteBsl SUmk .2-^ «e, PUIa. '<^73?.,V^c UT»r DoUan, Zv/o o 1.CM diM to RcMrve A|[*nlA, - TreaaBrir Cwtlfltam, UoM Colli, /iSo a o / O a o o ** Tivaniiy Crrtlflcatca, UgKl TmdcT SMM, Excess y>,^^:^p Excess RECAPITULATION. Excess in entire Reserve, Xyrt>/At.;£3 Deficiency in entire Reserve, ^J y.^^&C^ Fig. 62.— Condensed Statement of Reserve. BOOKS AND RECORDS OF THE BANK. 131 a great satisfaction to the remitting bank to know if the amount of the settlement sent was correct. A very simple and comprehensive form for such acknowledgment is seen in Fig. 63. t M» M.4S. GENERAL LEDGER OEPARTASCNT or T«e MERCHANTS NATIONAL BANK Centre City Psl ..J^<^.^/li£p^jQ Your draft in payment of balance due us on^.^C...^ _^s received. Accounts agree, ■~~~''~~'~~~~''^" Fespeetfully, ' /fy\fr/^T^<^^-r^ Ca9hhi\ Ptr OtMral Bock it«p»^ Fig. 63. — Acknowledgment of Settlement. Where the banks keep a running account, and especially an ac- count that is drawn against, it is necessary to make out a statement, or account current, at the close of the month, showing by items all the debit and credit transactions, and the balance. This must be sent to the depositing bank. It is customary to send with it a blank form upon which to re- port differences. Fig. 64 shows a style much in use. tiooaI Banlu SEMI-ANNUAL RETURN OF CIRCULATION SUBJECT TO DUTY. %t\nxn of the overage amount of JVotes of the ~^r./Jji<. on U. S. two per cent Consols of 1930, - - .- $A^9..9..Z.^... Duty on Average amount of Notes in circulation based on U. S. two per cent _^ „ Consols of 19)0. at one-fourth of one per cent, $.^ifj:^ 7 . . ■ o e 00 Average amount of Notes in circulation for the period based _ on any or all other U. S. Bonds, .... $^,o_o,s._x — Duty on Average amount of Notes in circulation based on aU other U.S. Bonds at one-half of one per cent, ..,..-- r $c^£^L^ Total amount of duty. ...... ^ . $/2^C^- ~, of the above-named National. Bank, do solemnly swear that the above is a true statement of the Average amount of the J^otea of said Bank in circulation for the time Tuatied. Subscribed and "sworn to before me this .ji^SiiSic?:^^^^*:^ ^ day of-^^.^^ii^ , 190t<' ^P" Send your semi-annual return, and make payment of duty, to the Treasurer of the United States. ^° New Banks, and Banks having circulation outstanding for less than six months, will notice particularly paragraphs 10 and 12 of the instructions. Gp" Care should be taken to keep a separate account of notes in circulation hased on two per cent, consols for 1930. Fig. 68. 136 MODERN BANKING METHODS. employed in the paying of the tax, all of which it is well for the bank officers to read carefully. The following instructions appear on the inside of the report. INSTRUCTIONS FOR MAKING RETURN AND PAYMENT OF SEMI-ANNUAL DUTY. 1. By section 5215, Revised Statutes, it is made the duty of the Treasurer of the United States to prescribe the form for making return by each Na- tional bank of the average amount of its notes in circulation for each half year. 2. This return, with each blank filled with the proper amount as indicated, and subscribed and sworn to by the President or Cashier of the bank before an oflScer qualified to administer oaths, must be sent to the Treasurer of the United States within ten days from the first days of January and July, re- spectively, in each year, under a penalty of two hundred dollars, and pay- ment must be made within the months of January and July. 3. Payment may be made by deposit of the amount of duty to the credit of the Treasurer of the United States, with him, or with any Assistant Treas- urer or National bank depositary. Triplicate certificates should be issued therefor, the original of which must be forwarded to the Secretary of the Treasury, the dupUcate to the Treasurer, and the triplicate held by the bank making the deposit as its voucher therefor. No other receipt will be issued. The certificate must state that the deposit is on account of semi-annual duty. 4. If there is no depositary convenient, payment may be made by draft on New York (collectible through the clearing-house) to the order of the Treas- urer, or by remittance to him in lawful money of the United States, or notes of National banks, for which the Treasurer will issue his certificate of de- posit, and send the duplicate to the bank. 5. The duty on circulating notes is one-half of one per centum on the av- erage amount outstanding for the six months based on all United States bonds, except the two per cent, consols of 1930 ; on notes based on two per cent, consols of 1930 the duty is one-fourth of one per cent, on the average amount of notes in circulation for the six months. 6. Liability begins on the first days of January and July in each year, un- less a bank had at that time no circulation outstanding, in which case it be- gins with the date of the first issue of notes, and terminates on June 30 or December 31 (as the case may be), date of commencement and termination both included. 7. Banks that have heretofore made returns will report for the full semi- annual term of 181, 182, or 184 days, as the case may be ; and banks that have not heretofore made returns will report their circulating notes from and in- cluding the date of their first issue. 8. To ascertain the average amount, add together the daily balances of the notes in circulation from the proper date of the commencement of the Ua- bility to duty (including for each Sunday and hohday the balance of the pre- ceding business day), to and including June 30 or December 31, as the case may be. The aggi*egate of daily balances for the first six months of any year will be divided by 181 — the number of days from January 1 to June 30, except in leap year, when the sum will be divided by 182. The aggregate of daily bal- BOOKS AND RECORDS OF THE BANK. 137 ances for the last six months of any year will be divided by 184 — ^the number of days from July 1 to December 31. 9. Banks not making daily statements, and obtaining their averages from weekly statements, should add together the weekly balances, including for each day in any fractional part of a week one-seventh of the weekly balance next preceding such fractional part. The aggregate of balances for the first six months of any year will be divided by the number of weeks from January 1 to June 30 (25 ^ or 26, as they case may be). The aggregate of balances for the last six months will be divided by 26y — the niimber of weeks from July 1 to December 31. 10. Banks having circulation subject to duty for a period less than half a year, which make their estimates from daily balances, wiU divide the aggre- gate of the balances of the item for the time for which it is liable to duty by the number of days in the half year; and banks which make their estimates from weekly balances, by the number of weeks and the fractions thereof in the half year. The quotient thus found will be the average amount subject to duty for each six months, respectively, and should be entered in the re- turn, and duty computed thereon at the full semi-annual rate. 11. A bank retiring its circulation, or any portion of it, is relieved from duty on the amount retired from the time of making the deposit of lawful money to redeem the same. 12. A bank which has gone into Uquidation, in making its final return must estimate duty upon circulation to the time of making the deposit of lawful money with the Treasurer of the United States to redeem the same. The item should be averaged for the full six months, according to the fore- going rule, and the duty calculated at the prescribed rate. The amount thus determined is the correct proportion for the time for which the item is liable. As there has appeared to be considerable difficulty with some banks regarding the keeping of the circulation and redemption ac- counts properly, consequently improperly reporting the same, I give here a copy of instructions that have at times been sent from the office of the Comptroller : "The proper method of keeping the circulation account, and other ac- counts connected therewith, is as follows : When the bank receives notice from the Treasurer of the United States of the redemption of any of its notes, whether fit for circulation or not, its redemption fund account with the Treas- urer should be credited with the amount so notified and the account of circu- lation outstanding charged with the same. When the Treasurer is reimbursed by the bank the amount of such reimbursement should be charged to the re- demption fund, thus restoring that fund to its former amount. When the bUls received by the bank in consequence of this are reissued the circulation account should be credited. By this method the circulation account wUl agree with that kept in the Comptroller's office, except as to amounts in transit. In reporting circulation in the reports of condition the bank should enter on the UabUity side the full amount of its original circulation, deducting therefrom any sums that may be either in their hands for reissue, or with the Treasurer for redemption and reissue. 138 MODERN BANKING METHODS. If at any time the bank should permanently reduce its circulation by ■with- drawal of bonds and the deposit of legal-tender notes, they should charge the circulation account with the amount of such reduction. The moment the le- gal tenders are deposited with the Treasurer he becomes responsible for the redemption of the bank's circulation." Accounts with Other Banks. In large banks, and particularly those in the reserve cities, nu- merous accounts of other banks are kept. In fact, considerable com- petition often exists in the efforts to secure these bank accounts, some banks even employing a man to travel and soUcit them. This class of deposits is generally taken upon some agreement or under- standing regarding several points, such as the payment of interest on the balance kept, and the charges for collection. These rates of exchange vary, naturally, according to existing conditions. To a bank having many accounts of other banks, and with various agree- ments, it becomes troublesome to keep track of the terms. If any question arises it is necessary to refer to the correspondence, and sometimes much time is lost in hunting for the record of special terms. This to a busy banker is very annoying. To obviate the difficulty, and to enable the officers to arrive at the information de- sired in a prompt manner, a large busy bank which has several hun- dred accounts of other banks has adopted the use of proposition cards. These cards are eight and one-half inches long by five and three- quarter inches wide. At the top is placed the name of the bank, and in a column down the center is put the date of the proposition or arrangement, as shown by the correspondence. In the left-hand space are put any general terms ; such as free balance, no charge, charge, no interest, deduct ; and these terms are stamped on with hand-stamps. In the right-hand space are detailed any specifications regarding the terms. Any changes in the terms are noted on the cards under the proper date, so that the card becomes a complete and ready reference at aU times for these matters. These cards are filed away in draw- ers, and being arranged alphabetically can be quickly referred to at any time. Fig. 69 shows such a card. To keep this record properly it is necessary for some one to ex- amine the correspondence daily and note down in brief any proposi- tion, which is afterwards copied upon the proper cards. This is usually done by the stenographer. Questions often arise between banks as to certain terms for the handling of foreign items, which can be easily and satisfactorily settled if the actual correspondence is easy of access for reference, and there is no doubt that the system mentioned simphfies the mat- ter considerably. BOOKS AND RECORDS OF THE BANK. 139 OUR PROPOSITION. ^ iH% hic^^^A Fig. 69, The cards in this case are preferable to an indexed book, because when a bank ceases to become a depositor its card can be removed to a drawer or box called the dead file, to be again replaced in the regular file if the bank resumes as a depositor. Determining the Value of an Account. In these busy days when banking, as well as other business, is often done upon comparatively small margin, and when it is neces- sary to watch the corners closely, it often becomes a question if some bank accounts, and individual accounts as well, are a loss or a gain to a bank. Of course, very much discretion must be exercised, as it often happens that an account may, of itself, be of little or no profit to the bank, in fact, may be a loss, yet the party may influence other de- positors whose accounts are profitable. A bright Cashier may be able to keep a general run of the prin- cipal accounts, and so judge in a general way of their value to the bank. But such a generahzing method would be unsatisfactory to large manufacturing concerns, and why not to banks, more especially to large banks. One of the most progressive banks in our country with deposits away up in the many millions, realizing the unsatisfactory method, or want of method, in the old plan, has adopted a system of analyz- ing the foreign and individual accounts, and thereby learning with some degree of certainty their value to the bank. Aside from the value of the account, this system is of inestimable value to the officers of the bank in aiding them to decide regarding demands for loans. This department is called the analysis department. The accoimts chiefly dealt with are the active ones; the inactive, or those leaving balances unchanged for long periods, hardly need analyzing. 140 MODERN BANKING METHODS. The information regarding the bank accounts is taken from the letters from these banks containing foreign items, and from their ac- counts on the general ledger. The mail containing the foreign items, after the distribution of the items and acknowledgment, is turned i 3 1 - n - o. I 3 'A X ;^"^ Ji? X '^- >s-- i< 0. •- '^ ?. i .t- -^^ 5^ • s X "^ V * ■v k ** «^ o K •i X a 3 ^^ J^ ^ ^ ''^ «K ^ l\ "•0 1 ^ \ix f\ a. •^ ^ s rv^ ° i < X S -^ S » \ ^ -- 1\ * A til 1 ,^N^ l^s ^?4(s$;sW .^ ^i'3 ^ ^^^ - 4 ^(^^^^- r in^"^- ill ' ,. ^ , .^-^i s g 1 1 i 1 1 -s .-f," T< a.§ o^ § s^ c d '',i ^ ^ ^ ^ over to the clerks in the analysis department, who are supplied with sheets properly ruled and printed upon which to make the records. These sheets are eleven and a half inches wide by eighteen inches long, printed and ruled on both sides, and are represented here by Fig. 70. Each sheet is headed with the name of the correspondent and depositing bank. The first column on the left shows the dates upon BOOKS AND RECORDS OF THE BANK. 141 which the items were received. The next column gives the names of the towns upon which the items are drawn. A third shows the amount of each item. If there should be more than one item for the same town on the same day, each should be entered separately. The balance of the columns show what it costs to collect the items, either in time or in exchange, indicating the time and rate, and to its respective column each item in the total column is extended. The clerks in this department are kept informed of any change in terms for collection. At the end of the month each column is footed, and at the bottom of the page is a condensed statement which is filled out in the following manner : First, the number of items as shown by the total amount column are counted. On the form given it shows thitty-three. From the account of the bank on the general ledger is obtained the average balance for the month, which is shown by the illustration to be $07,000. The average amount outstanding is then obtained by mul- tiplying the total of each of the columns of days by its respective number of daj^s, 4, 7, 10, or 15, and by adding these results together. In the example given it makes a total of $202,191. This sum is now- divided by the number of days in the month (31), and the result in round figures will be found to be $6,500. This being deducted from the average balance, gives the average working balance $60,500. From this working balance is now deducted the amount that must be retained as reserve (in the bank represented in this case it is twenty-five per cent.), and this leaves a balance of $45,375, which is the sum that the banker knows he can loan out. An examination of the account in the ledger shows charges to the First National Bank, of Centre City, Pa., during the month, for exchange, of $27.46, as is shown in the recapitulation. The banker calculates that he can safely count upon obtaining an average of four per cent, for his loans. This is figured upon the loanable amount given above ($45,375) for thirty-one days, and the amount is found to be $156.28. The two sums given, charge for ex- change, $27.46, and income, $156.28, footed together give the re- ceipts from the account, $183.74. From this is to be deducted the various costs to the bank. First of these is the cost of cash items, $14.47. This is found by figuring the exchange at the various rates given (1-20, 1-10, i, \ and special) upon the total amount in each re- spective column, and the sum of these amounts of exchange makes the total of $14.47. Next is an item of expense which the bank has had to pay for the collection of some check, and which is properly chargeable to this bank. The next item is the amount of interest allowed upon the daily balances for which a statement is rendered every month. The total of the charges or outlay is shown to be $128. 63,, 143 MODERN BANKING METHODS. which, being deducted from the total income mentioned above, gives a profit of $55.11 upon this account for the month. These large sheets, while accomplishing the purpose for which they were intended, would be a little unhandy for the busy bank officer. All he needs is a summary of results for ready reference. Consequently, for his especial use a summary is made and entered upon a card, these cards being kept on file in alphabetical order in drawers made for the purpose. These cards are six inches wide by eight and a half inches long, made of good stiff cardboard, and are ruled and printed on both sides, with a year for each side. ctiu^h-Tl^i^d*"*^ .e^^.uj'^j^i^ ■ (?^. ICCOUNT OPENEO ^^;'*t_«^/^ '/' /Foc> of rt.m. Amount A.er.je 1 tllowed Cod 1 Ct>«rje Workinii baltnes -P^cf-^T^ Jan 33 Jj z,; ^'^7 oco //v3 r& /^ 77 ^; 'fC 6o ^oo <5'^'~// Feb. Mar. » Ap-. » June ° July ° A.g, ° Sept. " Oct. ° Nov. ° Dec. ° Toull r 1 Fig. 71. — Analysis Card. Fig. 71 shows such a card with the complete summary of the sheet as shown by Fig. 70, and is self-explanatory. In the column average cash balance are seen small letters L. and D. opposite each month. These represent the words loans, discounts, and in case any loans or discounts have been made for the bank dur- ing the month the amount is noted in red or green ink opposite the proper letter, as a matter for reference for the bank officer. The individual depositors' accounts, especially those who deposit many foreign items, are treated in a similar way. The deposit tickets being properly filled out with the names of the towns upon which the checks are drawn, are, after the completion of the day's work, taken to the analysis department, and each of these deposit- or's names being given a sheet, such as shown by Fig. 70, the for- eign items as shown by his deposit tickets are entered upon the sheet BOOKS AND RECORDS OF THE BANK. 143 and extended into the proper columns, and a similar summary made at the close of the month. This summary is entered upon a card ruled and printed the same as shown by Fig. 71, and these cards are kept filed in a different set of drawers from those representing the bank accounts. With these ready references at his hand, the busy banker can tell in a moment what an account is worth to his bank, and what line of discount he can afford to allow. Much of the success of banking depends upon the ability to grasp the situations promptly and suc- cessfully as they appear, and aids, such as those mentioned, are cer- tainly of great value to the officers. Analytical Statements. The great advantage to bankers in having presented before them, at certain periods, a statement of their affairs has already been men- tioned, and various diagrams of statement books to be used for that purpose have been given. These, however, deal with the matter in aggregates only and seldom go beneath the surface. Although the majority of banks seem satisfied with this form of statement, yet to the large and busy concern it can hardly prove perfectly satisfac- tory, because it does not deal with the conditions sufficiently in detail. Every good business man understands the importance of having an analysis made of his business affairs once or twice a year. By this means he can learn of the weak points in his business, and a careful comparison of such analytical statements from period to pe- riod is found to be of material service. Probably no business needs more careful watching in all its de- tails than a large bank. The larger the bank the more chance for leakage, just as with other large concerns. One of our largest and most active banks, reahzing the necessity for keeping a close watch upon its business, has adopted the plan of having an analytical statement made every six months. This not only shows the volume of business done, but it gives an analysis of the expense and income, the cost of foreign collections, and the pro- portion of profits. This analytical statement is made in a book ruled and printed for the purpose called the analytical statement book, and covers two pages for each period. It is of course founded upon the general ledger statement, which is taken off at the same time in the general statement book. In Figs. 72 and 73 will be found working diagrams of such statement, made out for a fictitious bank, but sufficiently clear to show the proper use. It is part of the duties of the general ledger bookkeeper to make out this statement, its confidential nature being such that only a man 144 MODERN BANKING METHODS. ZaZ^ ^■^j a-tt' Qs-sd^^ f°7 7 7 0/l ^<€^ . t ^xy 77 7 ■^^'^- -r-^- Jlti ^ Orxf^^T I CS^»2£^ 7'' 3 e-^^ 7f f7' MJ'^y / c .i_J= 9^^ e (,6 f f\ . o ^» 6 ay/ VjI (Ciir!o35v ■Tf Fig. 73. filling such a position should be entrusted with it, and as most of the accounts represented in the statement are kept on his ledger the duty would very naturally fall to him. If those accounts have been kept with sufficient detail, and especially if an analysis department is kept. 10 146 MODERN BANKING METHODS. as described in Figs. 70 and 71, it will be found to materially aid in making out such an analytical statement. The Individual Ledger Desk. A bank, being the depository for the funds of other people, and the records of the transactions — the depositing and the checking out of these funds — being kept at the individual ledger desk, naturally makes this desk one of the most important departments. Among banks the greatest competition often exists in their efforts to secure deposits, and very naturally so, because the funds thus left in their hands form their chief working capital. A bank may have a comparatively small capital stock, but with a large Hne of deposits it has the means to enable it to do a large business. As a bank's chief function is to receive deposits and to loan money, so its growth is judged by the increase in these departments. And as a bank can not loan money until it first receives it, conse- quently the deposits stand first in order. There is probably no desk in a bank where the detail is heavier than at the one mentioned, and consequently none where greater care and accuracy are required. And as the numerous items come pour- ing into the bank throughout the whole business day, it requires a man who is a rapid worker to be able to keep up his end. When we consider that ninety-five per cent, of the business of this country is transacted by means of checks we can have some idea of the detail necessary in the proper recording of these checks. The principal book of record for this department is the individual ledger, or deposit ledger as it is sometimes called. In this are kept the accounts of the various depositors, and to these accounts are posted daily the transactions representing deposits, loans, and collec- tions for the credit of their respective accounts, together with the charges of the checks by which the depositors have withdrawn any sums of money. The careful recording of these transactions should show at the close of each day the true state of every depositor's ac- count. In fact, by the frequent recording of the transactions during the day their condition can be closely watched. This, by the way, is often very necessary to prevent the overdrawing of accounts. Overdrafts are one of the troublesome things bankers have to contend with, and every careful banker uses all the means in his power to prevent them. Except were special arrangements have been made, or collateral deposited for the purpose, the overdraft is an abnormal condition and is in reality a misapplication of the bank's funds. Depositors have the right to draw out all money deposited to their own accounts, but they have no right, except by making arrange- BOOKS AKD RECORDS OF TEE BANK. 147 ments with the officers of the bank, to draw out the money belong- ing to other depositors. As the overdraft may be caused by some error in the bank, it is well to send at first a notice similar to the following, which is in use in muny banks : Mbrchants' National Bank, Centre City, December 1, 1902. Mr. . Tour account with this bank appears to be overdrawn to the amount of $ . Please send us your pass book that we may compare the account. Yours respectfully, , Bookkeeper. If the account is proved to be correct, it is well to send a notice reading the same as the above with the exception of the last clause, which should read, "Please give the matter your immediate at- tention." The individual ledger is not always a book of original entry, the transactions recorded in it having come from other departments. Thus the deposits come from the receiving teller, where they may have first been entered upon his deposit scratcher; the collections and discounts come from their respective desks, and the checks from both paying and receiving tellers where they are often entered upon the proof book before going to the bookkeeper. Even at the indi- vidual desk it is quite a common custom in many banks, and with some methods very necessary, to have the checks entered by name and amount in a check scratcher before posting them in the ledger. There being few books that are handled more actively or more continuously than the individual ledger, it becomes very necessary that it should be made of the best material and thoroughly bound. The removable leaf system which is being used by some banks I can- not recommend, for the reason that it brings an element of danger and temptation into the bank. I have seen more than one instance of fraud, or the attempt to cover fraudulent transactions, by the re- moval of leaves or by substitution, and this is so much easier where the removable leaf ledgers are used. Have the ledgers paged throughout, for by so doing any attempt at removing leaves may be quickly detected. This removing of leaves applies especially to the old-fashioned debit and credit ledger, and to the Cincinnati or three-column bal- ance ledger, because in these ledgers single accounts can be kept, and often are, on a page or leaf, whereas with the Boston ledger so many accounts are kept on a page — often as many as twenty-five — that it would be impossible to remove any one account without af- fecting many. 148 MODERN BANKING METHODS. The styles of ledger chiefly in use are the three above mentioned. While some of the smaller banks still prefer the old-fashioned ledger, as shown by Fig. 74, yet it would hardly be possible to keep the records satisfactorily by that system in any of our large and active banks of to-day. Fig. 74 gives this style of ledger. /ot r*^-^^^ h ^CZd'. ^. ^y(^:^n^ <^ i. •J) j3i/c/ ■> Jony 6 ^^ J-o. ^^ 9 /J - 3 ■ J- * . 2-/ 7# 2 y/daZt^ yt, ^c^ ^7,1. 7^ 37/t 76 . "<5i>^ / i6ovJ 7^ Fig. 74.— Deposit Ledger, Old Style. In using this ledger the items are posted from scratchers, or check and deposit journals as sometimes called. On the debit side the figures 2, 3, in the marginal space indicate the number of checks making up the sum posted. On the credit side the letters D. and C. mean discount and collection. In this case it is supposed that the pass book of the depositor has been balanced and the account ruled off at that point. Some banks have the custom of ruling a single line when balancing accounts and bringing down no footings. This is certainly an incomplete and unsatisfactory way and gives no evi- dence of the account being proven. The example given above is the best and safest method. As will be noticed, each side is footed in pencil and the balance struck also in pencil at the close of the various days' postings. To facilitate this the bookkeeper, when posting, places a marker, gen- erally^ a slip of thin pink or blue blotting paper, between the pages upon which he has made entries. At the close of the day's work he has only to foot up the accounts and strike the balances at the places so marked. A proof balance of this ledger should be taken off monthly at least, oftener if possible. This should be taken in a balance book as it is sometimes important to be able to refer to it. The form for the balance book is shown in Fig. 75 somewhat abbreviated, as the book is so arranged that balances can be taken for twelve months by once entering of the names. A very popular form of ledger with many, and one that has been BOOKS AND RECORDS OF THE BANK. 149 in use about thirty-five years, is the Cincinnati, or three-column bal- ance ledger (Fig. 76). One great advantage of this ledger over any other is the readi- ness with which the state of a depositor's account, for a long period back, can be ascertained at a glance. Another advantage is the ease with which the average balance of an account for any period can be obtained. It is necessary to use the check and deposit scratchers or journals with this ledger just as with the former. But the postings in the TfU^uT- C.'y 1-^*^ / u'>e^'3- tSr^^i^G" r // 3.J- rtt tic f/i 6, A -y^^ ■^^ aj. /i6 tut ^7 r° ■^r Fig. 75. — Balance Book. ledger are made from the deposit tickets and from the checks, ob- taining the totals, where there are several checks for the same ac- count, from the scratcher. The balances should be extended every day, and always in mfc, never in pencil, as is sometimes done. Many plans are adopted by careful bookkeepers to avoid errors. Among them are the checking back of the posted items between the check and deposit scratchers and the ledger. Another method is to use an auxiliary scratcher ruled simply in columns headed checks, deposits. This is often used in sheets merely, as they are not a matter of reference beyond the day of their use, and when tableted are quite convenient. Fig. 77 shows one of these sheets. 150 MODERN BANKING METHODS. (0 Vs Vli =:^ T~^ -^ % ' ^ ^ r\ ^ ■o-VV ^ ^0 & (0 ,0 S T) ^ ■><> '^ J ^ IT) l4 ;, H Kl N N TTI vS H v> s. ^ K ft^ <^ "^ > '^ c>. «i **» Id TTt" ^A ^ BOOKS AND BECORDa OF THE BANK 151 It is used by the bookkeeper when posting. Every time he posts an item of checks or of deposits to an account on the ledger he enters the same amount in its proper column on the auxiliary sheet. When the postings are completed he foots the two columns on the auxiliary sheet, and they should agree with the amounts as shown by the check and deposit scratchers. No work can be well and satisfactorily done without system, and no department in a bank requires more system than the individual ledger desk. In the first place the accounts on the ledger should be arranged in order, according to the letters of the alphabet and the vowels. J' -(Sd*«& 7 .0^^ i -Aa-*^ O ^^ vi^Vt^' ,,i^^ ^ ■e^ljt.,^'^ Jc^: ,Z/<- 7 'J' •3 f 7 7- •so ->/' Fig. 77. — Auxiliary Scratchek. thus : Ba, be, bi. When the checks and deposit tickets are received by the bookkeeper they should be arranged in the same order in which the accounts are opened on the ledger, and be entered in the scratchers in this order, thus greatly f acihtating posting and check- ing back. An excellent plan for the proper arrangement or spacing of the ledger, of the kinds already mentioned, is to carefully draw up a chart covering the number of pages in the ledger, and setting apart the number of pages needed for each letter of the alphabet and its vowels. Fig. 78 gives such a chart, that has been used by the writer for the last thirty years. The letters of the alphabet are arranged on the left-hand column. The extreme right-hand column shows the number of pages assigned 152 MODERN BANKING METHODS. a J- S. j^ J' n o G> 2 a c7 lo ft T •S-f Jo/ 3t(, «(,(, iib 7,i Hi. u / O / o / o / o / O /oik / O /3M/ 3^o to/ U7J. j!Tf/ (cT / a /o / o /o 2^S~ ' / o 77' /o 97' -2o /oo/ /a XS- /IM/ 'iS^ /3S<> ;2o ?-/ ■yst •/■fb / o / <^ / o / O / o Xo /o ' /o / o 3fk ^7 o- 7f4. /a / o /oft l/J/ 2^ ^rj~ u ¥/ vT- t-7<' 3.S1i \} H/i, /■ii c^/ ^ So6 ^ /o3/ /^^/^^ '"' ^ /^3i/ /f^& /O ^ <<<& . — «*■// , i'3/ / O 7" ^^ //// / o /3<,i, / O / o /^3 /?- 7 (L/cr'taJ^ / XJ~ ^/.* ^ Z.?w* T^o„ : 1<« '7W» 70^ 7°^ v / / o J 7 Fig. 80. — Combined Check and Deposit Soratcher. positors, yet by taking down the balances m the same order in which the accounts are placed in the ledger, they are easily checked back if necessary. These figures can be taken on sheets eight or nine inches wide, six columns to a sheet, the machine doing the footing of each column, also making a summary and footing of the various columns, thus completing the work with a great saving of wear and tear. These sheets can then be pasted in a scrap book and will form a com- plete proof on file for any reference. The scratchers or journals mentioned above form an important auxihary to the two styles of ledgers illustrated. The most common form is shown in Fig. 79. The form for a deposit scratcher is ruled in the same way. An- other and convenient form in use by smaller banks is shown in Fig. 80. BOOKS AIW RECORDS OF THE BANK 155 In both these forms the names have been arranged alphabeti- cally, thus obviating the using of any paging on the scratchers when posting, the check marks as shown opposite the amounts indicating that the items have been posted. In Fig. 80 are seen two colums headed decrease, increase. These are found very useful in connection with the three-column balance ledger, and are an addition by the writer, who has found the method an aid in the prevention of errors in the accounts. Take, for in- stance, the first name, S. L. Andrews. By posting both items on the same line in the ledger space is saved, and the scratcher shows the amount to be deducted. Then by obtaining the total of the de- creases and the total of the increases, and striking the difference, one arrives at the net, which in the above instance is an increase of $551.09. This agrees with the difference between the total checks and total deposits. When entering the checks on the scratcher, or posting from them direct to the ledger, they are generally piled upon the desk in front Fig. 81. and to the left-hand side of the bookkeeper. In this position the pile is apt to be knocked over, or some of the checks to slide off the desk if the top is very sloping, thus disarranging them and causing trouble. Many plans have been adopted to prevent this, such as the placing of a weight or a book in front of the checks, but the writer has used a Httle implement for many years which has served him so well that he gives the idea to others with the hope that some may find it equally useful. He got the tinman to make hira a check-rack like the accompanying (Fig. 81). The dimensions of this rack are six inches wide and four inches high. When entering the items in the scratcher, or posting in the 156 MODERN BANKING METHODS. ledger, the checks He in the first compartment, and as they are en- tered up they are placed face downward in the rear compartment. The angle of the slopes places the checks in a position to be easily read, and it is impossible for them to slide off. This little check- rack can be made of wire if preferred, but I found a tin one was more serviceable and not so easily bent out of shape. It is light, can be put in a drawer or hung up out of the way, and will be found a very useful adjunct to the bookkeeper's desk. Changes in Individual Deposits. It is of great advantage to the ofiicers of the bank to be able to know daily the increase or decrease in the individual deposits, not only in aggregate but in detail. Particularly is this so where the competition is great. They should also be able to know what the overdrafts are, in detail, at the close of each day. To this end blank ACCOUNTS OPENED, /^T CX**^^^ Fig. 82. ACCOUNTS CLOSED. 1 iA <^c.i(Ct~-a, Fig, 84. statements are used by many active banks styled accounts opened, accounts closed, and overdrafts. These are filled out each morning by the individual ledger bookkeepers and given to the Cashier or President. These statements are about 7^ inches wide by 11 inches long, containing twenty-five lines, and are perforated at one end so they can be filed in a binder. The foregoing (Figs. 82, 83 and 84) show the forms in use. The Boston Ledger. Recognizing the fact that the detail of the work at the individual ledger desk is very great, it has been the endeavor of many to try and minimize it as much as possible, within the bounds of safety. The results of some of these efforts have been seen in the various forms of individual ledgers, some being improvements and some not. One of the most popular improved forms is called the Boston Ledger. Although this method originated more than forty years ago, yet it did not begin to come into general use until about twenty years ago. Fig. 85* shows the usual form for this ledger. The ledger is made so that the two adjoining pages contain the six days of the week. Some ledgers have the names on the left-hand margin of the page, but by placing them in the middle the distance across the page from the names to the columns is lessened, and the danger of errors in posting to a wrong account thereby decreased. Originally these ledgers had two balance columns, a debit and a credit, and this plan is sometimes followed, but it was soon seen that the same plan that was adopted with the three-column balance ledger, of using one balance column, and entering the credit balances in black ink and the debit balances in red ink, was applicable here, * The form here given is for Monday and Tuesday only. Space is provided in the book for Wednesday also on the same page, the other days following on the next page. 158 MODERN BANKING METHODS. *N i a a 1 - *~" """^-^ "^^ -^ -r.j>,^>-,- 1 1 !> -§ 1 < 4 ( C 1 9 S 1 c E m t 1 i" c c2 1 i 1 J X t £• -I, i 1 6 S i 1 n k ^ 'S \ ■vj ^ - i,x ^' ^ "T , ^ ^, ' ^^ rt I V ^ «» ^ vf 1^ •5 5 s^ 1 X "5 s f'. ^" 3 1 ^ '^ t \ ? 1 !^ h " . . <^ '^ V 1 ^ ^^ 1 ^ fi X" ^ "1 . ? 1 ^ ^: K "^ N ^ ■^1 \ S 1 T 3 ^ 1 -< 1 V^ S n K ^ ^ k ^ ^ *. (s , -t N 1 t\ ^ ^ 1 ^^ ^,- s ^ > '^ ^ K S 3 H "^ \ ! "5 ,f 1 s e :; 1. u5 1 ■^ " c ^ r^ , S-vS i ^ ^ %■<> * ? % '^ s^^^ c '•o'^iX ^■,5, ^ <(. No \ >i ■1 >? 1 '^ 1 "^ ,4^ ^ k If 1 N>- -ttx ■^». k^^ txufs ^ I s ^ 1 Ns ^ C ^ ^' ^ s ~^ •^ i\ !? ^^^ t V N N. X ^A ^ i \ ^ 1 •* d ^ ^ I H 1 J vi BOOKS AND RECORDS OF THE BANK. 159 and as these books are necessarily larger than either the old-fash- ioned debit and credit ledger, or the three-column balance ledger, any safe reduction in size was an advantage. The size of a page of this ledger is generally about twenty inches wide 9,nd twenty to twenty-two inches long, and will accommodate from twenty to twenty-five accounts. The accounts are opened on the ledger in systematic order accord- ing to their letters of the alphabet, spaces being left between each letter for the introduction of new names. The printer has become a very useful factor in the making qf these ledgers, by the printing of the depositors' names and the days of the week, thus saving much labor. The posting of items into this form of ledger is made from the deposit tickets and checks, the book being a combination of journg,! and ledger. The total footing of the column of deposits at the clo^e of the day must agree with t|ie total shown by the receiving teller's deposit scratcher, plus the discounts from the discount register, and the total of the checks must agree with their total as shown by the proof book. The total of the black ink figures in the balance column, minus the red ink figures, or overdrafts, should agree with the bal- ance as called for by the individual deposit account on the general ledger. It is customary in cities where there is a clearing-house to u^e the first column to the left under the heading checks in detail for entering the checks receive4 from the morning exchanges. The footing of this colunm should agree with the total of thesfe checks coming from the clearing-house. By this method of proving the debits and credits it leaves the chief source of errors to be in the posting of items to the wrong accounts. Another proof of the day's work is made in the following mari- ner : If the total of the checks for the day is the larger, deduct f ror^i it the total of the deposits, then deduct this difference from the tota,l of the balances of the previous day; the sum resulting from this should agree with the total of the balances for the day. If the tot^l of deposits is the larger, of course the total of the checks would be deducted, and the difference added to the previous day's total of balances. If a difference should occur in the balance at the close of the day, as between the amount shown by this ledger and the amount called for by the individual deposit account on the general ledger, the proo;^ just explained, if taken at the bottom of each page, will materially aid in locating the error. In the figure just shown two methods are seen of indicating th(? point at which a pass book has been balanced, one under January 160 MODERN BANKING METHODS. 2, for the account of Eilenberger & Huffman, where the point is in- dicated by a check mark V, and the other under January 3 for the account of Robert M. Evans, where the indication is made by the letter B. As a similar check mark is used to represent so many things the letter B, or the abbreviation Bal. is much preferable. In the form shown the page is creased on the dark line between the columns headed balances and checks in detail on the extreme left-hand side. This enables the bookkeeper to fold this portion back upon the previous page when striking the balances at the close of the previous week, and by at once placing these balances in this col- umn in their respective positions, time is saved, and the danger of errors, which would be liable to occur if the balances were trans- ferred from one page to the other, minimized. The chief objections to this style of a ledger are its size, and the difficulty in quickly arriving at the condition of a depositor's account over any considerable period of time. The question is often asked at the meetings of the board, when considering paper presented for discount, how does the applicant's account stand, and how has it been running for the past six months ? A glance at the account when kept on the three-column balance ledger will answer the question, for a single page wiU exhibit all the transactions of the depositor for that period, and often longer ; but with the Boston ledger -only one week can be shown without turning the pages. The principal advantage of the Boston ledger is the read- iness with which the work can be proved daily. To obviate the first objection many plans have been adopted. Some banks use only the three columns, total checks, deposits and balance, entering the detail of checks in a check scratcher. This plan in the form shown would reduce the width of the page three inches (from twenty inches to seventeen inches) and make a ledger much more convenient to handle, while nothing would be lost in the advantages of the system. Another advantage by this method is found in the much less crowding of the checks on the ledger. In many banks it is almost impossible to enter the innumerable number of checks for a depositor's account in the ledger. In some instances there will be as many as twenty-five to fifty checks for one depositor in a single day, and I have seen bookkeepers in their efforts to ex- hibit these checks in detail on the ledger write them in various places on the page, on the margin at the top, diagonally across the page, almost anywhere, thus making most unsightly work, and difficult to decipher. When using the check scratcher the posting in the ledger is made from the checks, the scratcher only being referred to to obtain the total where more than one check for the same deposi- tor is present. BOOKS AND RECORDS OF THE BANK. 161 162 MODERN BANKING METHODS. Another modified form of the Boston ledger, and one that is be- ginning to be quite extensively used, especially in the large cities, is shown in Fig. 86.* In this it will be seen that only two columns are used, the balance colmnn being eliminated. This further reduc- tion in size permits the whole six days to appear on one page, as is shown, and this makes it only eighteen inches wide. The postings are made as before from the checks and deposit tickets, the check scratcher being used so that no detail appears on the ledger. At the close of the day the balances are struck in the depositor's accounts, and these are carried forward to the next day, the credit balances being entered in the credit column and the debit balances, or overdrafts, in the debit column, care being taken to place these balances immediately on the heavy dividing line. An improvement in this method will be found by either entering the overdrafts in the debit column in red ink, or to use the credit col- umn as the balance column, placing all the balances in it and writ- ing the overdrafts in red ink. The necessity of having the over- drafts show conspicuously is very apparent. In the form just shown it will be noticed that there ar^ two sets of figures in most of the debit columns. This is given to show the posting of the checks from the exchanges separately from the oth- ers. The posting of these checks is often made in either red or green ;ink to distinguish them from the others. In case the overdrafts are •shown in red ink, which is always advisable, the green ink will of •course be preferable. Even in towns where there is no clearing-house it is an advan- tage to make two postings of the checks in a day, one between twelve and one o'clock and the other after the close of the bank. This method keeps the work up closer. Of course in that case only the black ink need be used in posting. The example given will re- fer to this method also. A useful addition to the customary form, which has been added by the writer, is a narrow colimin one-eighth of an inch wide on the left side of each debit column. This is used for inserting the num- ber of checks making up the amount posted. Two total footings are shown in the credit columns. The lower ones represent the footings of the balances, and the ones above, those of the deposits for the day. In the debit columns are shown only the footings of the day's checks, which should agree with the footing of the check scratcher. Had there been any overdrafts in this form, and placed in the debit columns, their total would have appeared in the lowermost space of those columns. * The form here given shows only three days of the week ; the other three should fol- low, on the same page. BOOKS AND RECORDS OF THE BANE. 163 /S-ff 7^Zo'>-Z£'6ciyY 3 O^^^^-^c^fc^iq^-v- ^ C ^ curt^-rx^o-n^ 6^^<^ a. Cf4f-^l i 3 f f 6 6^ y ..[ J. vi ^7 Fig. 87. — Check Scratcher. The form for the check scratcher which is most generally used has been shown before, but a great improvement, especially where the Boston ledger is used, is shown in Fig. 87. Although the names here are shown in writing, it is intended that the printer should again lend his assistance by printing the names in the same consecutive order in which the accounts are found on the ledger, leaving spaces for new names. The bookkeeper simply enters the amounts of the checks opposite their respective names, and in the proper date column, as they are gathered up during the day, and posts them in totals to the ledger. In the form shown two days appear, the other four days are in- tended to be exhibited on the next adjoining page, so that the one column of names operates for the whole week, just as in the ledger. The entries here shown in Fig. 87 will be found posted in the ledger, Fig. 86, to show the operation. Realizing the fact that no one is exempt from the possibility of errors, banks have sought for means to prevent them, especially on the individual ledger where they are likely to make much trouble. 164 MODERN BANKING METHODS. Fig. 88. — Duplicate Deposit Ledger. We have shown how to prove the total postings, but there remains the danger of posting either checks or deposits to the wrong accounts. The old custom of checking back the postings between the scratchers and the ledger, and where the scratchers are not used, of calling back from the checks and deposit tickets to the ledger, two clerks working together, has been an old stand-by, and is still used in many banks, even in some of the large ones in our largest cities. Various other methods have been tried, and among them one which has come in favor in many large active banks, that of keeping a duplicate set of individual accounts, and the clerk being careful to place a marker (generally a slip of thin red paper) in the pages of the duphcate ledger where the balances have been changed by any postings, then when the day's work is complete the two bookkeepers caU back the changed balances to verify them. The duplicate ledger is kept on sheets made of ordinary moderate weight ledger paper, or linen pa- per. These are loose leaves, and are held in a binder at the left-hand edge in such a way that they can be easily removed when necessary. They are not intended to be a permanent record but simply a daily verification of the permanent individual ledger. They also form a statement of the account, in the portion to the left of the dotted line BOOKS AND RECORDS OF THE BANK. 165 perforation, which appears between the columns deposits and to- tal checks. These can be taken out of the binder, and after re- moving the narrow strip on the right of the perforation can be sent to the customer with his pass book and checks when balancing the same, or sent without the use of the pass book. The narrow strip to the right of the perforation is filed away in the bank. These are kept in the same relative order as the ledger accounts so they can be referred to whenever necessary. Fig. 88 shows the form for such a duplicate ledger described, the transactions on it showing the work for the month and the final closing or balancing. This method has also been found to be a safe- guard against collusion in this department. The work on the duplicate ledgers is not so heavy as on the regu- lar set, as there is nothing to do but posting, striking balances, and verifying. In one bank where four individual ledgers are kept two men keep the duphcate set on the form mentioned. Some banks that have adopted the policy of keeping a double set of individual ledgers, as a safeguard, use a ledger similar to Fig. 86 for what is called a skeleton ledger. Each set of ledgers is kept by a different set of men, the balances being expected to agree. In this case two full sets of men are necessary, as the whole daily work is duplicated. Inactive Accounts. A troublesome feature to all bankers is the filhng up of individ- ual ledgers with inactive accounts. In many banks efforts are made to cull them out and keep them on a separate ledger. Of course it is sometimes difficult to judge when a depositor first opens an ac- count whether it will be an active or an inactive one. Much can sometimes be learned from the character of the depositor's business. If the account is simply of a private or personal character it is gen- erally safe to open it on the inactive ledger. Inactive accounts sometimes become active, or active accounts, inactive, and these changed conditions necessitate transfers to their proper ledgers. As the daily items are not very numerous, it is customary in many banks to keep this class of accounts on the three-column bal- ance ledger, the form for which was exhibited on a previous page. An improvement, however, and one modeled somewhat upon the Bos- ton ledger system, is shown in Fig. 89. This is divided, as will be seen, into monthly sections, instead of daily. Each month has its date column besides its columns for num- ber of checks, total checks, deposits, daily balance, and monthly bal- ance. 166 MODEBN BANKING METHODS. /f^^ tJ ay^UOUCL^T'U tJ^''Jrrz<.cl^tf I ' ^ \ - ( NAivIES v^ }L e/u^j [27y.--^|J'^^S^ ^r;:nN i:^ <*C!0,0 2!9^<^ / Adams. G«o L -f^-o il- y -3 ■<<,; '> ^oo< *'<'7 ^To -\ p^ il ■n ^<•a z'4 .r* { Ji '- /'(. ^ ■ ' is; /■^ ' ■J7 7-' i. Ack^rman. VVillim ■ ^c Jl-i -., ',i 6= /O. "r-> /" 'T-' 7' c i Archibfld. Harry. Ae'- VK ^ .9 ^^. ''rif ^^ ;° P- ^.^;.< -^ -/? 7/-0 •^ ^« 7¥^ "J .J/ /■» ^' Beers. Silas H ?7." 7- A* >^' ri X ^7' n / 20I £ Brown, Iam« P ^.i V n 7- ."^ ,<^ O; 1 XO /Jo *" ^f, Vf ^ 1 ( 7 Brown & Keller / / / */ ^7 ^.■f _ ^ir, v?- '9 -.'.:^ ■- Jc : "7 >-> ''' ' ' ' «/rf " / ^f-J •"•^ f Durnett. R. L if.ir 7o ^ / fO ( Ji > f° r- J// 7" f %u- f Cirmer, lohn P. /,<:< L V , fo tJo j A3 _Collms. Chn. r io >■ ^, ^ s V '!) '^ ") >. ^ ^ 2- :|^^- '^ :^- < "^ T \ V3 ^ '^ BOOKS AND RECORDS OF THE BANK. 171 At the close of each month the balances standing to tne credit of the accounts are brought forward into the balance column of the next month; this makes the trial or proof balance, as by footing these balances the total is readily obtained. The interest, as is seen, is computed on each transaction instead of on the balances, and is charged or credited in its proper interest column and added to or deducted from the interest balance. At the end of the interest period, generally each six months, the interest balance column shows at once the amount to be credited to the de- positors' accounts, and the total footing of these final interest bal- ances gives the sum necessary to be charged to interest account and credited to interest ledger account on the general ledger. In the use of this ledger the scratcher or journals for the entry of the checks and deposits are necessary, as it would be a difficult matter to obtain the daily totals of these from the ledger. Care op Checks and Deposit Tickets. The care of the checks and deposit tickets is a feature that should be given much attention. These papers are vouchers representing the transactions for the receiving and paying of money, the checks in particular, as they are the orders on the bank signed by the de- positors. These vouchers should always be kept carefully under lock and key, and should be tiled away in the vault after the completion of the day's work. Before filing it is particularly advisable that they be cut or punched in such a way as to effectually cancel them, so there can be no possible way of their being used again should they get into the hands of some evil-disposed person. There are various methods of filing away checks. It is well, however, to observe the custom in use with the division of the accounts ; that is, to distri- bute them according to the letters of the alphabet and the vowels, giving the large accounts, that issue many checks, separate com- partments. The main idea should be to have them so filed that they can be readily found whenever necessary, for the balancing of pass books or other purposes. Some banks use small compartments in an upright cabinet built into the vault for the filing of the checks. Some use drawers divided into convenient compartments. The most convenient method I have seen is with drawers and movable card partitions, each parti- tion having an elevated portion large enough to contain a letter, or letter and vowel combined, or a name. The checks are placed in the drawers on edge between the card partitions, thus occupying the smallest space possible, and are not easily lost by accidentally slip- 172 MODERN BANKING METHODS. ping out, as will sometimes happen when kept in the open compart- ments or tills. In the filing away of deposit tickets the old custom of tying them into packages daily, or holding them together with rubber bands — the bands rotting and break- ing and the tickets becom- ing scattered, much to the discomfort of the book- keeper or clerk — has been superseded by a very neat plan, here illustrated. Procure from any good stationer a fish -tailed letter file, small size, like the ac- companying Fig. 92. Get a double cutter which will punch the nec- essary two holes in position to conform to tha spindles on the file. The whole can be generally obtained at the same place, and would not cost over a dollar, sometimes much less. The cutter or punch can be screwed fast to the board of the file. Have the deposit tickets made with Fig. 92. =/^A_^/. <~.y7-H>7-a^e^ ^Jcnylt^ ~Cc^ ^fo. ^elpi^'i^^ ^1/3. L/Z^'^c.4^ ^ o-^^^^^^-^^t,^^ Z'J 9n^,^^^/~ -/3. ■ ny ZJ, "ff ^xC't-L-<5t'/~Ot**^^ .^^2^i*«^ xii/-- X^&o-tr' ;?^5r»V^i,.^ ■Of^-t Sa.c^ <^-/^ -/9 J- /iS^»t,^»<>' C?. -(Sci'r^Z^T — d- "O" V iS* / i Z^ ;^>-rHt<^ 4i^ '^J X' ■'yCM^ii^y^^i '/ O -Sl^>i».t,c-./«>^.<-?KlV^x^ JL^^ -ti^ ^n -(%^-&r,-cCf Fig. 93. BOOKS AND RECORDS OF THE BANK. 173 three-quarters of an inch margin on the left-hand side. The mar- gin is for the holes, and the stationer who makes the tickets will supply them with the holes punched if requested. This will, in that case, dispense with the punch mentioned. At the close of the day's work the tickets can be slipped upon the spindles and the hooks closed so they can be examined with ease without removing or danger of dropping off. Between every two days a card can be slipped on the file with a protruding portion upon which may be noted the day of the month. At the close of the month open the hooks and insert the two ends of a bent piece of copper wire, about a foot long, into the hollow spindles, then lift off the tickets from the spindles and the ends of the wire will be seen protruding through the holes. These can be brought together and twisted, thus binding the month's tickets together firmly. If a piece of heavy manila paper be put on the spindles at the bottom and at the top, and thus bound with the tickets, it will protect them and they can be filed away on shelves like books, and if a strip of manila paper is gummed across the back, the month and year can be written upon it, and then they can be readily found when wanted. I have seen no way more complete and convenient than this, and its inexpensiveness makes it certainly worth a trial. Where more than one individual ledger is used, and it is there- fore an advantage to keep the tickets of each by themselves, a file t-y^VtyrcL^-^ /Jcrcr/C rci^-k fU~l^^ Z^-. y^ y^ J.U~y K^^- ^.J~^ 7>la^ M a^ J^ ci<^ ?u^ cS«^. Jo/J- 2 Sec, ZCoo 2Zoc 27=0 i/.o 2^»o 2.iaa sr^o 3ooo 3 /CO iiyr J/oo Jco 3 fa a 3.f>o i-foo 7.60^ zyoo ij-c 7.C Xf'o 3yco 32.0 itfi jy.o Jjoc Jao. 1 Soo 2 Foe Xloo ^9<.o i-£oa 27.0 3c,, 33CO Voo. 'O SS a /16„^ /J-OO ><.„ /oo. j/\ /yo^'^i Jf.JB, r 1^0.4*. ^<^/M. •*«-<- «|^ -^M^ o-*A^ Uy^jij /j<^t7.c 9^**.oly ^^eZIZr-ai^ Fig. 95. Who Should Balance the Pass Books. The balancing of the pass books is supposed to be the proof of the correctness of the accounts, and to assure the bank of this it is safe to take certain precautions. First of all the bookkeepers, wherever possible, or those who make the entries, should not write up or bal- ance the pass books. It is a very simple thing for the bookkeeper to work in collusion with a depositor, give him false credits, and if al- lowed to balance the pass books himself, to cover his tracks for a considerable time. Collusion sometimes takes place inside the bank. A bookkeeper and teller, in a certain bank, worked in collusion ; the bookkeeper, when reporting his total checks paid during the day, would report $1,000 more than was actual, or when reporting his deposits would report $1,000 less than actual. Of course, the teller's cash would in either case have been over, but no " overs " appeared, the cash mak- ing it up having been abstracted, and the two scamps divided the spoils. Where two entries and footings of the checks or deposit tickets are made, this is more difficult, as it would require a collu- * This is intended to be placed in each pass book when balanced, that the depositor after making the proper examination may fill out and sign and return. BOOKS AND RECORDS OF THE BANK. 179 sion with a third party. But I know of an instance where even this was done for several years, two of the three being brothers. While the customary form of a pass book is familiar to most bankers, yet there being several methods of writing them up, or bal- ancing them, I give here two of the most common forms. In Fig. 96 is seen the face of both sides of a pass book, written up and bal- anced in the most customary way. In large banks where the ac- counts are nimierous and active the labor is too great to enter the checks in the pass book as shown below. Two very good methods are adopted in such cases ; one is to use an auxihary pass book ex- clusively for the checks ; these are entered in this book daily as they are charged up to the account, and being footed as the work pro- MERCHANTS NATIONAL BANK CENTRE CITY PA tj(n *% Urad 'eZC g^ ^-JjOiX^ 1 i y ^^v^ •^ / / xJ C 4^ c - 2- / e> J J'^c 7^ -i. 2. '7 .// /^c^ yyTT yJ^^ -.3 c /^ ' e^ / Z-^d ^S~o / c* o /^ i./ -V /vT-o. /-^^ yj- / 6 > ^7 >j » ■ / /o / O G <^o ,9 '3.0 ,f e^ /"/V fo '.n •^ y N V "I ^ / / ao / ^ -f Vi> .^^ e^ ^6-^ " y& i- X p& Cy //^ J^O -3 ■'■ ^ >/ J ^ // /A J 7-' 3c e^ ^/^ // 9^J n A •4 / M f Fio. 96.— Pass Book. gresses, when the pass book containing the deposits is left to be bal- anced it is only necessary to enter the total of the checks in this pass book and strike the balance, the detail having been completed. Another method quite popular with some large banks, especially where a special force is employed for the balancing of pass books, is the use of a slip Uke that shown in Fig. 97. The checks are kept written up daily, as with the auxiliary pass books mentioned. In the sHp shown the number of the checks or vouchers is easily determined, because of the column of numbers, each slip holding 100 checks. The clause at the bottom about sign- 180 MODERN BANKING METHODS. MERCHANTS NATIONAL BANK CENTRE CITY PA Lht of checks returned, ^.<-<-*-v€^ / iSgt^ ing and returning is excellent, as it becomes an acknowledgment from the depositor of the correctness of his account. In the writing up of the checks upon slips the adding machine comes extensively into use, because of the rapidity and certainty with which the work can be done by this means. Then there is the system of state- ments mentioned before. Some banks use the statements where they do not use the dupHcate ledgers, post- ing the charges and credits daily from the checks and deposit tickets, but not striking a balance till the close of the month. This is done by the pass book balancing department. After the paid checks have passed from the teller to the book- keeper, and the teller has balanced his cash, they become the vouchers of the bookkeeper, and the teller should not have access to them ex- cept by applying to the bookkeeper or the check clerk. After the checks have been completely entered in the books they should be canceled in such a way as to prevent their use again. A paying teller who had free ac- cess to everything took from the tills checks that had been formerly paid, cashed them, putting the money in his pocket, and placed them on his spindle. Of course his cash bal- anced. The checks being charged twice to the depositors' accounts, it became necessary to watch for their pass books. He did so, and when they came in, very kindly offered to help ; thus he covered his tracks for a while, but of course was eventually discovered. The bank, however, had lost $75,000. Had the checks been muti- lated when filed away, or the teller not permitted to have access to them, this could hardly have happened. J f correct, pUau iign and return. Fig. 97. — Check Slip. books and records of the bank. 181 Lost or Mislaid Checks. The checks cannot be too carefully cared for. Accidental loss of checks has caused serious loss to banks in more than one instance that I know of. It is customary in many banks, in case of lost or mislaid checks, when balancing the pass books to insert a slip in place of the missing check, giving the date of the charge and the amount, and stating ' ' check missing. " This is a dangerous custom. In several instances within my recollection these depositors sued the banks, declaring they never gave any such checks, and the banks lost. A teller, who had access to the check tiUs, and where the checks were not mutilated, would take a check from the tiUs, cash it for himself, and place it on his file, as the one before mentioned. After the charging up and distribution of the checks to the tills, he would again obtain the same check and tear it up. When the pass book was balanced of course there were missing checks which were ex- plained by the slips. The robbery was eventually discovered, but not until several thousand dollars had been stolen. Issue of Checks in Duplicate. It quite often happens that a customer desires, for some reason best known to himself, to stop payraent on a check, or a check may have been lost in the mail, and it has become necessary to issue a duplicate, in which case, of course, payment upon the original needs to be stopped. In cases of this kind a notice in writing should be given to the paying teller, and the individual ledger bookkeeper should also be notified that he may place the name and description of the check to be stopped upon a list to be kept before him for ref- S^ In issuing a duplicate Check please mark DUPLICATE across the face. Centre City Pa ^.f^.../.L MERCHANTS NATIONAL BANK // not paid before receipt of this notice, please stop payment of..y^^:^^...Original Check, Ko,./..^.k..... -..„...., date(^...J2.l<^^.^...^^^^^ payable to '-H^../^^ . for$L^.Zr~..,. /^;Z^-..,„..,..-...T.-.„^x<:::-^:r..„...:.'.r;.T^.. Fig. 98, /U^-C-«/ ^C^.'Ty^^^i^^^^ 182 MODERN BANKING METHODS. erence. The names on these lists should always be arranged alpha- betically, that they may be readily found. One of the best forms for a stop payment notice is here shown in Fig. 98. If these notices are printed in red ink it will be found an advan- tage, as making a greater contrast between the printing and black ink writing. CHAPTER IV. THE LOANS AND DISCOUNTS. Care in Making Loans. It is part of the chief business of a bank to loan money. As a business institution it must make sufficient to pay its expenses, lay aside a certain surplus, which the law requires, especially with Na- tional banks, and if it wishes to continue in good favor with its stock- holders, at least pay a fair rate of interest upon its capital stock. From the loaning of money is derived the chief part of this revenue, f The National Banking Act under section 5136 defines the incidental powers of a National bank as f oUows : " To exercise by its board of directors, or duly authorized officers; or agents, subject to law, all such incidental powers as shall be nec- essary to carry on the business of banking ; by discounting and ne- gotiating promissory notes, drafts, bills of exchange, and other evi- dences of debt; by receiving deposits; by buying and selling ex- change, coin and bullion ; by loaning money on personal security ; and by obtaining, issuing and circulating notes according to the pro- visions of this title." As will be seen by this section the board of directors is consid- ered the main directing body in the bank. This is a wise provision, for in no one man is all wisdom and knowledge found. The princi- pal business of a board of directors is supposed to be the selection of the paper upon which the loans are made, and in consequence of this it is very desirable that the board be made up of representative men from various branches of trade, manufactures, etc., who can thus by their varied knowledge and experience aid in the matter of standing and credits. As the board of directors seldom meets more frequently than twice a week, and in small banks only once a week, the paper that is offered in the interim, or between boards, is usually acted upon by the President, Cashier, or a finance committee which meets every day. At the next meeting of the board, however, all the paper dis- counted during the interim should be presented to the board for its examination and action, and any real dissatisfaction over any loan 184 MODERN BANKING METHODS. should result in the selling or disposing of that piece of paper as soon as practicable. The first claim upon the bank for loans naturally belongs to its depositors, in proportion to the value of their respective deposit ac- counts. After their wants are satisfied any remaining surplus funds can be used to loan to outsiders, or for the purchase of paper from the note brokers. In relation to this last method of using the bank's available funds, I will state that an eminent judge in the United States court, in a case in which I was interested, ruled that it was illegal for a National bank to go into the market and buy paper; that such powers were not given to it by the National Banking Act. Technically speaking, this is no doubt true, but for many years cus- tom has permitted the banks to use their available fluids in this way, and a large proportion avail themselves of this means of employing their otherwise unused funds. Before proceeding to discount paper, it is necessary for the board or proper officers to know what available resources the bank has for that purpose. This information is obtained from the daily statement book, a full description of which is to be found in the description of the general ledger in the preceding chapter. The note tickler, which will be described later on, should show what paper will be due upon any day, and by referring to this upon the day of meeting the board can see what funds can be reloaned, and thus keep the bank's money actively employed. The Credit Department. One very necessary adjunct to the discounting department, espe- cially in a large and busy bank, is a credit or information depart- ment, for it is exceedingly important, particularly when loaning upon the ordinary single-named time paper, that the standing of the pro- posed borrower be known. The standing or credit, as enquired into, should cover more ground than merely his present financial condi- tion. His past history as far as possible should be obtained. His character should be learned, for if a dissipated man or one disposed to gamble or to plunge into risky speculations, he should be handled very cautiously and loans only made him upon sufficient collateral security. His manner of transacting his business should be learned, for carelessness in business is sure to bring its losses. If he is dis- posed to be tricky or dishonest in dealing, the bank had better have nothing to do with him. To aid the officers and directors in coming to conclusions regard- ing the value of certain customers, and the probable line their ac- counts are entitled to, the use of the average book, as fully described, will be found of great service. If the bank is large enough to war- THE LOANS AND DISCOUNTS. 185 rant it, the use of an analysis department, as previously described, will be found invaluable. It often occurs that special inquiries need to be made as to the standing of the proposed borrower. The use of commercial agency reports will be found helpful in a measure, and special reports from these agencies can be obtained, but not always as quickly as needed. Here is where the need of a credit department is to be found. In every well-organized business, of any size, a careful consider- ation of credits before filling the orders is always made. If this be so in the mercantile and manufacturing world, it should be more carefully and thoroughly attended to in the financial world. In small banks the discount clerk or the Cashier can attend to the duties, for in the small towns and cities, where all are acquainted with each other, the duties would be comparatively light, but it should not be overlooked upon the ground of acquaintance. In large cities, however, it will be found economy to have an experienced credit man in every bank, whose business it is to keep himself posted regarding the assignments, judgments, conveyances, mortgages, petitions in bankruptcy, etc., that may concern the bank's custom- ers. He should keep himself posted upon the conditions of trade. He should see all paper presented for discount, make a memorandum or record of it, and should at once set the proper inquiries on foot to be able to report upon the standing of the parties. These inquiries may be to the commercial agencies or to members of the trade. All information obtained should be properly recorded and filed so it can be referred to on a moment's notice. He should be promptly noti- fied of all protests either of checks or notes, and make memoranda of the same. All statements from would-be borrowers should be taken charge of by him and properly filed and recorded. Statements from Borrowers. It frequently becomes necessary for the bank to require a state- ment from a customer, and the question often arises as to the best form for such a statement. These statements are usually made up by the parties themselves upon blank paper, simply a very brief showing of assets and liabiUties in aggregates. There is nothing to prevent their being manufactured to suit the desires of the parties presenting paper for discount, and it is very difficult to obtain any redress if it is proven that they are not true. I give here in Fig. 99 the form that has been adopted by the New York State Bankers' Association, which is considered very complete. As some banks may prefer a form not quite so extensive, I give here in Fig. 100 an excellent one that is in use by many well-managed institutions. 186 MODERN BANKING METHODS. The following statements (Figs. 99 and 100) represent two condi- tions, Fig. 99 representing a favorable and Fig. 100 an unfavorable statement, as an examination will show. It will certainly be agreed that it is far better to have the state- To The /idZTryui^ (A^X^ire^ ^U-i<^fC....'^xJv^'i^ /vcnrK^.^ — S tvr Oit purpose of procuring aitd ettailishing credit from, time to time wUh the above Sank for daims anS demands agaiTist the undersigned, the undersigned furnish the following at bang a true and correct state- jnent of his or their fLnantAal statement of his or their condition on *he t2lMi~C^--j^^trrt,f^^. 180S—,. and agree Utat in case any change occurs uiat materially reduce* his or their ability to pay all claims and demands against him or them, the undersigned wUl notify ths said Bank witJwut delay. In consideration of granting any credit by said Bank, the undersigned agree that in ease of failure or iTudvenry on the part of the undersigned, or in the event of it appearing at any tiTne that any of the foUoiving representations arc untrue, or in case of the occurrence of siuih change as aforesaid or of failure to notify euch change as above agreed, all or any of the claims or demands against the undersigned held by said Bank, sluHl, at the option thereof, immediately becom,e due and payaljle. further, that the exercise of or omission to exercise such option in any instance shall not waive or affect any other or subsequent right to exercise the same. ASSETS. LIABILITIES. Cub on hmd fuX.^.lT^. Cosh in. .^ftl6.<^?^frr:-r:frr?. Bank.. .^^. . . Bins Receirable, jood, dut from Customen BUts Receivable, dae from Partoen AccOQbts Receivable, g:ood, due from Ccstomen Accsiuls Receivable, due from Pancers MerchandiseilA' actual present cash vilue) Ileal Estate belonpo^ to Fiim , Ifachinery and Fixtures.. g| \}?j^^'Z/^"^'' rt ^/V^ o 7^\ Bilb Payable for Merchandise Bills Payable toovn Banks Dills Payable for Paper Sold. . ..,.., . Open Acccimts Deposits of Moneys with qs Mortgages or Liens on Real Estate , / 0,0 oc «• Total Uabilitiel. , Net Worth .... is-c,^ I33../TJ V^fi^ir^ jy £1 Contingent Liability f Accommodation Endorsements. , ( Endorsed Bills Recdvable OntsUnding ... . i ...^J^=r*^f^.r5>^..-^^ft;*r,.. .., ,. Waines in fon of tl) General Partners. X ^^T/^^e-t^-T-v- ••i/ L?!s>-ixLt^ ' " Kames in full of Special Partners with ( ^-i^^irrf-fr- . . .<:i7^.':/!^r:^-*n^..„„,.i'i, Fig. 99.— Application fob Credit (Standard Form, New York State Bankbrs' Association). ments made upon some regular prescribed form, drawn up in such a way as to be, in a measure at least, some protection to the bank, than the haphazard method in use by many. The methods of filing or caring for these reports and statements differ with the ideas of the Cashiers of various banks, according ta THE LOANS AND DISCOUNTS. 187 To Um MATIONAI. RESERVE BAIfK of Phdade^hUn Finn Name_ s ^^ aa LIABILITIES. Bills Payable for Merchuidisb BiU$ Payable to Ranks ^ Open Account Loaos mm&mfmit% ^ ~ Mortgages or Liens «n Real EiMe . iS(;: Total Liabilities., Net Wonb 7' 2- 3 o >3 o 6 JL .J ^-(T o 6 ^ ^ ^ ^ s33 t> i 3 o Stote last date of taldngitrtal balance proof Repilar times of balaudng bocoks Natneo of all General Partners. Kaolcs of Special Ftutners vith aaoODta contributed by each and tinlil when. Memorandam >•• ^.f:^.<^^±eA_ (^ ^'^ ^^^^^..l^^^-t^^-^l^^- ^■.^^^^^-^■^^^■^^ ^ J^QJJ^J^^ Fig. 102. in the body of the note. This enables the drawer of the note to make an accurate memorandmn of the due date, or to name some specific date best suited to him. ^^^^ ^^ Reserve National Bank (^^^-trt.<^'UL^J^r:-<^^ (7''^^^^ Fig. 103, In consequence of the laws of some States enabling men who are disposed to take advantage of them, and thereby avoid the payment of their obligations by claiming certain exemptions, banks in those sections have been obliged to use notes containing a waiver of the in MMMmw iwoooeaooBBi i i iinmu iiaeM ■oaaeooaaooBoodBgseeoaooeea When.you.ffiytv.rwUpaytiiUttlMimkypUast'uU-whmilieconus dmand. Oausampnitslchargei. Cittn City Pa d^U^-t^ .// y^OS_ f/OVO.^ . c^V^yve-fc^-— 7nonlhsM/te7:4aleu>€ffreiiJier(fusproMise^topa7/to Merchants National Bank, s Cha, c^g>T^c^< " ^•^- ^Dollars * s3coa&acoB. ir > fvnu t vi ubOK Fig. 104. 190 MODERN BANKING METHODS. exemption. Such a form, in use in some sections of the country, is here shown in Fig. 104. This form also shows a convenient arrangement for a special loca- tion for the number, due date, and any memoranda necessary. This is an excellent idea, being very systematic and enabhng the banker to know just where to look on the note for this information, a fact that is too often uncertain, as sometimes these data are placed on the back of the note, and sometimes on the face, sometimes on the upper side and sometimes on the lower, or in fact it too often occurs that any convenient spot suffices. ^^ THE NATIONAL RESERVE BANK Fig. 105. In Fig. 105 ^vill be seen a similar note, but it has the addition of (Jj^J?^rr!:^::^:!l:iL;^l^^^ ^^.^^ af/er iiiils...^J^:.^_^3mst to fay ta <^C^^Z^ C^H'J__iJ^_J.ase diUv^ed hfrtwith /CO ■f'/dc.^r^ (?.e^^ ^6^. ^- ■ the payment of this note and any and all such indei>Udtuss or liability as aforesaid, or either of them, ci i/s opth^n, in full or partially, as such proceeds may Sitffiee, holding '7jtX£^..siil/ responsible for any deficiency^ Furthermore — cJ^. — a^ee, that so often as the market price of the aboz'e teeuriiiej end subse- quently dtpcsiied securities shall fall to a price insu^dcnt to cover the indebtedness for uhich said coVaterals have been deposited as security in amount, with ten per cent, margin added thereto, 4^ vAll, ofi demand, toithin twentyfour hottrs thereafter deposit xoiih the holder additional teeurity, to be c^frooed by said holder, sujicieni to cover said amount and margin; and that, in default thereof, this note and any and all indebt- edness far whith said securities have been deposited as collateral shall become instantly due tmd P'~yable, precisely as though said indebtedness had actually matured, and all the foregoiKg authority to transfer or sell and transfer said collateral shell at once be exercisable, at. .-^c?*^. .-risk, in ease of any deficiency in realizing proceeds : All of vshich agreement applies with equal force to any and all securities added to the above original collaterals, as zucU as to any and all sectuities held by the holder hereof as collateral for ^ny obligation of which this note is or mtay be a rc/ie;vQl or substitution or part renewal or suistituiioiu Fig. 106. THE LOANS AND DISCOUNTS, 191 the day of the week upon which the note will come due. This ena- bles the drawer to avoid Sundays, holidays, pay-days, etc., and is found convenient by many. Fig. 106 represents a good form for a collateral note. It may be used either as time or demand, as will be seen. While it is a little more full in its contract than the ordinary collateral form, still it is much more complete. There are times when banks have to handle judgment notes, chiefly as security for some deferred claim. Fig. 107 gives the usual form for such a note. .,i^:£<^ ^:^(tri;J^^^........~^^^ dale, <;£...,,. fromise la gas la Ihe ordtr <»/...t^fe<^...^^*:<*=?^.-V:.^^ C^^^^.E.. } " ■ "~ ~ ■"" ^' too-*" ""' I ailhout defateation, value remimS, with interett. And further isjf, io hmtg aulhorite and empower any attorney of t any Court of Record of the Stats of Penmytcania, or any other State, to appear for and eonfeet Judgment againtt^ 'P'TZJ^ _ J far eaid above turn, with or without declaration, with costs ^ suit, release of errors, without stay of exeevlian, and wifft^..x^^^.-. * per cent, added for eoUeeting fees; and _ izjf, ...also waive the right of inquisition on any real estate that may be levied upon 1 to eo'deet this note, and do hereby voluntarily condemn the same, and authorise the Prolhonotary to enter upon the FI. FA^. ^Z^^ _ j said voluntary eorAemnation, and o^ further agree that said estate may he sold on a FI. FA., and._ ^.. ner^by i waios and release all relief from any and all appraisement, stay, or exemption laws of any Stats, now in foros or hereafter to be \ passed. ^u ^illltSB ^htriof, cP. tiaae hereunto get^..._.;^;^i^,.. hand ant seal tht day and year afonsaid. { VITNESSI mlrrCL..^ Fig, 107, Many banks have recently adopted a method of loaning money on call or demand upon a form of contract, which is intended to cover not only money loaned, but any money paid for the use or ac- count of the contracting party, or for any overdraft, or upon any en- dorsement, draft, guarantee or any other claim. This form of con- tract is used chiefly with brokers and is always accompanied by col- lateral. The usual form for these contracts is given below : Know all men by these presents, That the undersigned, in consider- ation of credits or advances hereafter to be made to the undersigned by The Reserve National Bank op Phildelphia, hereby agree with the said bank that whenever the undersigned shall become directly or contingently indebted to the said bank for money lent, or for money paid for the use or account of the undersigned, or for any overdraft or upon any endorsement, draft, guarantee or in any other manner whatsoever, or upon any other claim, the said bank shall then and thereafter have the following rights, in addition to those created by the circumstances from which such indebtedness may arise against the undersigned, or his, or their executors, administrators or as- signs, namely : 1. All securities deposited by the undersigned with said bank, as collateral to any such loan or indebtedness of the undersigned to the said bank, shall 192 MODERN BANKING METHODS. also be held by said bank as security for any other hability of the undersigned to said bank, whether then existing or thereafter contracted ; and said bank shall also have a hen upon any balance of the deposit account of the under- signed with said bank existing from time to time, and upon all property and moneys of the undersigned of every description left or deposited with said bank for safe keeping or otherwise, or coming to the hands of said bank in any way, as security for any liability of the undersigned to said bank now ex- isting or hereafter contracted. 2. Said bank shall at all times have the right to require from the under- signed that there shall be delivered to said bank, as security for all existing liabilities of the undersigned to said bank, approved collateral securities to an amount satisfactory to said bank ; and upon the failure of the undersigned at all times to keep a margin of securities with said bank for such liabilities of the undersigned, satisfactory to the said bank, or at the market value thereof equal to twenty per cent, in excess of such habiUties, or upon any failure in bushiess or making of an insolvent assignment by the undersigned, then and in either event all liabilities of the undersigned to said bank shall at the option of said bank become immediately due and payable, notwithstand- ing any credit or time allowed to the undersigned by any instrument evidenc- ing any of the said liabilities. 3. Upon failure of the undersigned either to pay any indebtedness to said bank when becoming or made due, or to keep up the margin of collateral se- curities above provided for, then and in either event said bank may immedi- ately, without advertisement, and without notice to the undersigned, sell any of the securities held by it as against any or all the Uabilities of the under- signed, at private sale or broker's board or otherwise, and apply the proceeds of such sale as far as needed toward the payment of any or all of such liabil- ities, together with interest and expenses of sale, holding the undersigned re- sponsible for any deficiency remaining unpaid after such application. If any such sale be made at brokers' board or at public auction, said bank may it- self be a purchaser at such sale free from any right or equity of redemption of the undersigned, such right and equity being hereby expressly waived and released. Upon default, as aforesaid, said bank may also apply toward the payment of the said liabilities all balances of any deposit account of the un- dersigned with said bank then existing. It is further agreed that these presents constitute a continuing agreement, applying to any and all further transactions between the undersigned and said bank. Bronson, White & Co. Dated, Philadelphia, Pa., the 12th day of January, 1902. It is customary for the discount clerk to send a notice to the makers of the various notes made payable at bank a week or ten days before they are due. This is not obligatory on the part of the bank, but is the general custom and is done out of courtesy. The customary form of such notice is as follows Merchants' National Bank, Center City. Mr. , Your note for $ will be due at this bank 1902. THE LOANS AND DISCOUNTS. 193 It is the custom in some banks to send a notice to the endorsers of paper, giving a description of the paper. This is done as a pro- tection against forged or fraudulent endorsements. Loan and Discount Records. It is particularly important that all the records of the loans and discounts be kept with extreme care, so clearly as to be self-explana- tory, and that the transactions be easily traceable at any time by any one, either clerk, officer, or director. With many it is often the custom to have the forms for the keeping of these records so abbre- //lo^T^u^Y c7'.ey/^. /-?/ ., / c <7 oo 9?'.^/^^'^- or- A^^^cJCC^^r^ ^i^c c/y<,i-i^^ C'6t-t<^n4*.or U\C*i<.a^rA^ Fig. 108.— Offering Book. viated, using private signs or marks understood only by themselves, that any change of employees in this department is apt to cause trouble. A regular system for the course of all paper upon which money is to be loaned, or has been loaned, should be adopted, and whatever the system, provided, of course, that it is a system^ let it be carried out without deviation. "Where the board of directors meets only once a week, or once a month, as often occurs, it is necessary that some of the officers be authorized to decide upon the loans that may be presented between the board meetings. This generally devolves upon the President or Cashier, sometimes both. Whichever officer passes upon the loan, he should place his initial, or initials, on one comer of the note, gen- erally the upper left hand. This is evidence that he has seen it and passed upon it. No discount or loan should be placed upon the books of the bank until it has been so initialed. Where there is a discount 13 194 MODERN BANKING METHODS. or finance committee which meets every day to pass upon loans, an excellent plan is to have at least three of the committee place their initials in small letters on some obscure portion of the note. Where an offering book is used it is customary, after marking off such paper as is refused, for the members of the committee present L COUATEfMLS PAYAOLE AT tt^'lj? ^*-iJ«i 'c/?... 03-_5-tfC.<€,Vi=;t. ill i Fig. 109. — Combined Offering Book and Discount Register (Left-Hand Page). to either sign their names or place their initials at the bottom of the page, or at the day's offering. Only in the large banks in our cities can the offering book be found useful. Fig. 108 gives the simplest form for such a book. In this figure one loan is seen rejected ; it is marked with the letter R and is ruled off. The ruHng off is done by the discount clerk after the book has been marked by the committee. The initials of the committee are seen in the lower left-hand comer. Another form for an offering book, which is in use in a large and active bank, is shown <^(cert «!<*-<, )/ei^-r. 1 1 -7— TIME DUE DAVS RATE DEMAriD BILLj DISCOUNTED FOREJGN BILLS DISCOUNT EXCHAIGE NET /:: t4 « HW 'f - ^ J^ / -i ,.. 1 '" .#-;. 9 Ji 7 •3 r^.t. <^, . , . Fig. 109 (Continued). — Combined Offering Book and Discount Register (Right. Hand Page). by Fig. 109. This book serves not only as an offering book but also for a discount register. The paper is entered on this book in full. Besides this, interesting and important information for the commit- tee is entered opposite each name, giving the business of the appli- cant, the line of discount allowed him, the amount of loans he al- ready has obtained from the bank, and the average balance as shown by his individual account for a month previous to his present appli- cation. In Fig. 109 (continued) showing the right-hand page of the same book, the loans are shown divided into three classes — demand, biUs discounted and foreign bills. The totals of these columns are posted each day to their respective accounts on the general ledger. It will be found of advantage in every bank doing much business THE LOANS AND DISCOUNTS. 195 to separate the demand loans from the time loans, and in a bank do- ing a large foreign business the still further subdivision of a sepa- rate account for the foreign bills is a decided advantage. An im- provement upon the form shown would, I think, be the addition of a column for numbers. There are some banks that do not use the system of numbering their discounted paper. StiU, my experience has shown me that it is an advantage to do so. Turning for a moment from banking to other business interests where many papers are handled, such as trust companies, insurance companies, Savings banks, railroad companies, and building and loan associations, and in fact most all large corporations, they have found by experience that a proper system of numbering for their various documents, shares of stock, mortgages, loans, accounts (in Savings banks and building and loan associations), pohcies, vouch- ers, etc., was almost indispensable. If such a system proves itself of value to these institutions, it certainly will to banks, where the most careful system should be found. With the duplicating num- bering hand stamp now in use it is a simple matter to number each piece of paper at the same time that the number is placed in the proper column on the register. One small column will be seen in Fig. 108 in which is shown the letter A. This column is used in the board room in which to mark the paper, the letter A meaning ac- cepted. If any paper is rejected, it is ruled off in red ink by the dis- count clerk, who is of course notified, and who sees an R in place of an A in the column mentioned. In those banks where an offering book by itself would hardly be of use, and they are in the majority, it is customary to present the discount register to the board at their meetings, together with the paper that has been passed upon by the bank's officers in the interim. The paper should be carefully examined by the board and the corre- sponding records on the discount register compared. The discount register is the book upon which the records of the discounted paper or loans are kept. The record shows a complete description of the paper, the names of borrower and endorser, the time it has to run, when it will become due, the amount of discount charged, and the amount of the proceeds. This is the customary form and is shown by Fig. 110, which gives the adjoining pages of the book. In Fig. 110 will be seen a column styled sundry account. This represents such paper as is bought by the bank, or loans made to those not customers of the bank, where a Cashier's check is given for the proceeds. Some banks call it Cashier account ; others again consider that the charging of these items to an account styled Cash- 196 MODERN BANKING METHODS. C'^cfTZ-e^^ Jfct-f^. /sf'/<^< DISCOUNTER Fig. 110. — Discount Registbr (Left-Hand Page). ier account has an appearance on the face of being charged to the Cashier of the bank, and may raise a question. So, many have adopted the term sundry account. It has been conceded by some that the foregoing form was not complete enough, in that, in the first place, renewals could not be traced as quickly as was sometimes necessary, particularly when a query comes from the board of directors, also that the record on the usual register closes without giving the final disposition -of the note. An improved discount register has been devised which has been much liked by those who have used it, intending to cover the feat- ures mentioned, and Fig. Ill shows the adjoining pages of such a book. ^ c--^ O-pUP^^a^^.^ c Ci^c-'t^ •s^, f ^7 Aut-t^M J? Fig. 110 (Continued).— Discount Register (Right-Hand Page). In this form the date of discount is placed at the extreme left hand. This can be left out if desired and the date placed at the top of the page. The column consecutive nmnbers is for the usual regular num- bers, and that called preceding numbers is to be used in cases of re- newals, the regular number of the former note being recorded in this column. By this means, the bank, of course, holding the last note, it will be found a simple matter to trace back all the renewals. Any officer of the bank, or the discount board, can by this method inform himself in a moment as to how often a note has been renewed. The column renewal number, shown in Fig. Ill, is for entering the reg- THE LOANS AND DISCOUNTS. 197 ular number of the new note in case the old note is renewed, and this should be placed opposite the old note. This column may, how- ever, be used for where payable, if preferred, as in reality the col- umn preceding number gives sufficient aid for tracing renewals. The columns, when paid or renewed, and amounts paid or renewed, are to be used for posting the payments or settlements of notes from u^ia To Whom CaomD /-V' .^£cir. :^ CA^r^tnt. OTC!" ^ a>. <&.^, yOtt. <^. 09r.--t c rC: \ Fig. 111.— Impkoveu Form of DiscotrNT Register (Left-Hand Page). the tickler. By this means a complete history of each note is kept. In case of partial payments the cash paid and the amount of the new note are both entered in the column amount paid or renewed. The blank spaces left in the last two mentioned columns should at all times correspond with the notes on hand, and can easily be verified from the paper by the examining committee of the board of direct- ors, the discount clerk, or any ofl&cer. The total footing of the colmnn, amount paid or renewed, de- ^7" Renewed Fig. Ill (Continued). — Improved Form of Discount Register (Right-Hand Page). ducted from the column amount, would show the total of the notes discounted on hand, and should agree with the notes discounted ac- count in the general ledger. The location of the columns for numbers is a matter of taste. Some prefer them in the center of the book, some at the extreme left hand, and some next to the amount. In Fig. 110 it will be seen that the proceeds are distributed to two individual ledgers, A to L and M to Z. Wherever the individ- ual ledgers are divided, and a separate account with each kept on the general ledger, this will be found of great advantage. It is also of assistance to the individual ledger bookkeepers, as they can see at a glance which items belong to their respective ledgers. In some 198 MODERN BANKING METHODS. large and active banks it is found necessary to subdivide the dis- count register, having one for demand loans, and a separate one for each of the individual ledgers ; all this is, of course, arranged ac- cording to the demands, the general principle remaining the same. In some banks the individual ledger bookkeepers obtain their items by posting direct from the discount register to their ledgers ; in some they copy the items from the discount register into a mem- orandum book or scratcher, and post from that ; in others the dis- count clerk makes a credit ticket for each discounted item, showing the name of the party obtaining the credit, the face of the note, the amount of discount deducted, and the proceeds. These credit tick- ets being placed on a spindle are taken by the individual ledger book- keepers and posted, as would be done with the deposit tickets. These credit tickets are usually printed in some distinguishing color, as they are filed among the the deposit tickets. For myself I prefer the first plan wherever it can be done ; it simplifies the work, and there is less liabihty for error than where the items are copied off, for it is a known fact that the more times an entry is copied the more danger there is of errors. The method of carrying the amount of the discounts made to the bills discounted account on the general ledger varies. Some banks use a ticket system on which is written by the discount clerk or Cash- ier the number, name of the discounter, and the amount. This ticket being headed charge bills discounted, is sent to the general ledger bookkeeper; he then enters this in full in his journal. The objection to this method is the unnecessary number of times each transaction is obliged to be written, consequently incurring greater risk of errors and much extra labor. The better plan will be to con- sider the discount register as the record and book of original entry for the loans and discounts, and at the customary period, whether daily or weekly, foot the columns representing the face of the notes and proceeds and the discount, and carry these totals direct to the general journal, charging biUs discounted with the total represent- ing the face of the notes and credit discount account with the total discount, and the individual deposit account and sundry account with their respective totals of the proceeds. Any inquiry regarding the items can always be obtained from the discount register. After the paper has been entered upon the discount register, it must then be recorded upon the tickler, under its due date. The figuring of the due date requires great care, as the mistake of even a single day may cause the bank serious loss. The tickler is in real- ity merely a memorandum book divided into days of the month, each note being entered as to its number, the names of the maker and en- dorser, where payable, and the amount, under its respective due THE LOANS AND DISCOUNTS. 19& date. This is the customary form. The usual method when the day arrives is to scratch off the notes that remain unpaid at the close of the day, by ruling a line through them, and credit up the balance to bills discounted account. With the banks that use the ticket sys- tem for charging, as mentioned above, the same system is used for the credits, thus as in the former case triphcating the entries. An improvement has been made with the tickler which is much liked by the banks that have tried it. This improved form is shown in Fig. 112. Tuesday. TTUi^i^ /^r ft^oi ImM DSAWEt ETOOBSn Dm iunM KIHA&ES V67^ Cu^ cur- / eo / / CO - 4J^o Fig. 112.— Note Tickler. This form, as will be seen, has two columns for the amount, one for amount due, and one for amount paid. Instead of using the crude and unsightly method of ruling off the unpaid notes, the paid notes are carried into their proper column, so that at the close of the day the total of that column shows at once the amount to be cred- ited to bills discounted account. Just as the discount register shows the amount of money loaned on discounted paper, so the tickler shows, in this form, the amount received from the repayment of loans. If a note is paid in advance it is at once transferred from its regular due day to the day upon which it is paid, a memorandum being made in the remarks column of each day, one referring to its regular due day under which it was originally entered, and the other referring to the day on which it is paid. A similar action is taken when a note is paid when past due. Examples of these transactions are shown in the figure. If a note is paid by renewal the letter R is placed in the remarks column oppo- site the amount paid. If a partial payment is made only, the amount so paid is entered in the amount paid column, unless the balance is paid by a renewal note ; in that case both amounts are entered, the letter R being written opposite the amount of the renewal note. By this method this book becomes a valuable addition to the dis- count department, showing clearly how each note has been paid. If a note is protested the abbreviation prot. can be noted opposite it. 200 MODERN BANKING METHODS. The Liability Ledger. The next book of importance in the discount department is the liabiUty ledger, or, as it is sometimes called, discount ledger, or credit ledger. By means of this book the bank officers should be able to tell what the habilities of their customers are to the bank as discounters or borrowers, and as endorsers for others. A man may not be a heavy borrower himself, but he may have <^^^fit6-?^^.-Jl^ zJ^yrt^r-^^ EmwuBsn ASDocoinrm Fig. 113. — Liability Ledger. 3Uy endorsed for others to such an extent as to seriously impair his credit. Borrowers are generally given a certain hne, whatever their account with the bank and their general credit will seem to permit. To be able to keep the run of this, is one of the particular uses of this ledger. Furthermore, it is contrary to the National Banking Act for any individual or firm to be allowed to borrow more than ten per cent, of the capital stock of the bank upon his or their own name. In a large and active bank it is impossible to keep the proper track of these GEO. J . COLLINS RUVM* .,«.«» "r Tr A3 MAKER OR D.SOOUMTBR A3 BNDORaBR. WTl oJilJSS'io, nrk" «^.«. »S«rU> "r' »UM««. OM.A Ate. 4 "'" SdJft V. dAUlB. '"1 iiOOO ttOOQ fMOO. tiooo. tiooo. 0. Fig. 114. — Liability Ledger. loans without the use of this ledger. The customary form for such a ledger is shown in Fig. 113. The items are posted in the ledger from the discount register, and when a note is paid, as shown by the tickler, the amount is simply ruled off from the account, generally with red ink. This practice, however, is not wholly satisfactory ; as, in the first place, it makes very unsightly looking accounts, and the difficulty in arriving at the indebtedness of a borrower without going over the account and pick- THE LOANS AND DISCOUNTS. 201 ing out the amounts standing unruled, makes it troublesome. Then, again, as no dates of payment appear on the accounts, it makes an incomplete record. Considerable trouble is experienced to trace the dates of payments, if they should happen to have been made at irregular periods. An improved form for this hability ledger is seen in Fig. 114. By this method the condition of every borrower's account can be seen at a glance, either as maker or borrower, or as endorser. A Ust of the balances as shown for maker or borrower should, when footed, agree with the balance of the bills discounted account on the general ledger. In very many banks the records of the transactions only are kept at the discount desk, as has been explained, the discount clerk, how- ever, handling no money or checks. This is the safest method, for as has been before remarked, it is unwise to permit those who keep the records to handle the money, or vice versa. If the borrower desires the money instead of having the proceeds credited to his account, after the proper record of the note has been made in the discount register, an order is given on the paying teller by the Cashier in the shape of a Cashier's check or Cashier's ticket, where the money is obtained. In these banks the repayments of loans is generally made to the Cashier or to the receiving teller. If to the Cashier the money and memoranda for the same are turned over by him to the receiving teller. Some banks treat the discount desk as a separate department, not only keeping all the records of the loans and their repayments, but receiving the money or checks in their settlement. Where this is done it becomes necessary for the note or discount clerk to act somewhat in the capacity of a receiving teller, or note teller. In such cases it has been found advisable for him to prove up his work every night, of course turning over all his receipts to the teller. To enable him to do this properly a settlement book is used, and Fig. 115 shows the adjoining pages of such a book in use by some banks. Fig. 115 shows the left-hand page. Upon this is entered in the first left-hand column the amounts of interest or discount received from loans. Next are three columns showing respectively the num- bers, names and amounts of the loans that have been repaid that day. On the lower left-hand corner is shown the proceeds of discoimts that have been credited to various depositors under their proper respect- ive individual ledgers. Fig. 115 (continued) shows the right-hand page, and here in the first left-hand column is shown the checks re- ceived upon the home bank in repayment of loans or payment of in- terest. In the next column are seen the loans or discounts made dur- ing that day, as shown by the discount register. Below these are 202 MODERN BANKING METHODS. Loans and Discounts ^^. c^^^^^-J.^ A^ (3. V'6 Fig. 115. — Discount Clerk's Settlement Book seen under their proper heads the checks on other banks, renewals, etc., received in settlement. The next column is the balancing col- umn in which the proof of the work is shown. The item tellers' L and D means a loan made and paid over the counter by the teller on a Cashier's order or check. An improvement upon this form could, I think, be made which would occupy only one page instead of two. Let the discount reg- ister be the complete record for the history of each loan, showing the interest or discount, and the net proceeds. Let the tickler show the complete record of repayments. This will then avoid the necessity of entering the loans, and repayments, and interest in this balance book in detail ; it simply being necessary to enter the totals as shown by the discount register and tickler. The items making up the cash THE LOANS AND DISCOUNTS. 203 Reserve National Bank 1900 Hon Checks A-O 2- e> o 13 o 'se-r 2. / t ' y ■o % / d 7-^0 2./ o

^ Fig. 133. sponsibihty of the party upon whom the draft is drawn, and should then exercise his judgment. Let me advise bankers to be exceedingly careful regarding the making of advances upon drafts with bills of lading attached, and be sure that the bills of lading are in the first place genuine^ and next that they have been properly drawn up, or in such a way as to secure the bank. There have been such cases as fictitious bills of lading and warehouse receipts, attached to drafts which the banks discounted. Of course the banks were the losers. When men will 212 MODERN BANKING METHODS. ^ 3^ WHOSE ACCOUNT COUiCTEO ytmik Fig. 124. do such things, and even worse, to obtain money illegally, the banks must be continually on their guard. The careful recording of the collections that pass through a bank >f.//~/-.*^ Av^ FOREIGN /<7CO K. w„.»..v«. row.o»s... /e-o^. »o,^ ' ^ S-za/ c3 ««^ ^ -%*^ u. Fig. 125. ■?ltr- is an exceedingly important feature. The collection register is the principal book of record. In a small bank in a country town one such book will be found to answer the purpose for both foreign and city collections. Figs. 122 and 123 show a customary form for such a collection register. COLLECTIONS ^t^A^t***4^ /l,*^^ Fig. 125 (Continued). ^>/ 0'Ur<&.^. a/y./^ In large city banks where the collections are heavy it is necessary to have two departments, foreign and city, and in some very large and busy banks these are subdivided according to districts, which does not, however, change the form of the books materially. THE COLLECTION DEPARTMENT. 213 In Fig. 124 will be seen a form for a city collection register in use by an active bank. The book in which is recorded the foreign collections is styled the foreign collection register. As the course of this class of collections is more indirect than with the city collections, the record is natur- ^ To^r^^-.^^C^r~^ /Z-^^ /—^PZ^T^ ■^/..,. . Ptfer- Whera Payabh ^ (^ /?r ^^...f^ f^iTG, y ^(C-r-,^'- ^ °f "^A^/^<^»^ r.w J "f-^ Dqiosiior Ddt» Credited or Hthtmed, OCT 20 1901 Fig. 126.— Foreign Collection Slip. ally more extensive. Fig. 125 gives a good form for a foreign col- lection register in use by many active banks. Some very large banks doing a heavy collection business have found the collection register, as commonly in use, too cumbersome a method and have adopted a system of using slips for their foreign collections. Fig. 126 is the form of one of these collection slips in use by a large and active city bank. These slips are made of good linen paper, eight inches long and three and one-half inches wide. Their method of use is as follows : When collection items are received, if by mail, of course the first thing is to check off the letters with the items. The items are then entered on the foreign collection register (see Fig. 127). This register is very simple, as is seen. The figure shows one set of columns which are about four inches wide. There are three columns to a page. The banks from which collection items are received are given one or more pages each, the items being en- tered daily as received. The col- lection items are then assorted alphabetically, according to the towns of the banks through which this bank collects. They are then en- tered upon these slips to the banks to which they are to be sent, and to which the amount is to be charged if advice is received of WHCRC mkYABlS <^ A^ ^^ Fig. 127. — Foreign Collection Register. 214 MODERN BANKING METHODS. payment, care being taken to put the number as shown on the col- lection item, or the date of the sender's letter, on the lower left-hand corner of the slip. The slips are filed away, on edge, in drawers (alphabetically, according to the banks the collection items have been sent to) separated by partitions. When advice of payment and credit, or remittances, are received The Fourth Street National Bank Philadelphia. ^c-^^-tr- /c^" \^Q,2' CHARGE ^.C'iU^i^^tXy' ?^,c>oZ^ c2r~e-€^ZJZ^ /f o o ^ ^^ AseT. Cashier. Fig. 138. — Chabge and Credit Slip. the slips representing them are taken from the drawers, arid the let- ters checked, and the slips are stamped with the date of the receipt or credit on the right-hand lower corner, the clerk at the same time striking off the word returned. The slips are then listed on the ma- chine. The slips now go to the general ledger desk, and the proper charges and credits for the various banks are made. Any slips showing credits for individual depositors are sent from the general ledger desk to the individual ledger desk where these items are listed The Fourth Street National Bank Phiuideu»hia. — ^^«-^ / y/^ f o^- charoe ^c:^^ "^^ji^ «=' — o^^l-y^^ (Z^ — c-^ CREDIT ''^^^t^r^^'^c^^ ^^-^'^-''--a-*^^ Fig. 129. — Chakgk and Credit Slip. on a scratcher and posted from there to their respective individual accounts. These two desks, after checking the items they have en- tered up, return the shps to the collection department and settle, or compare their totals with the total originally taken off by the ma- chine. The slips then being ready for advising go to the typewriter, arranged alphabetically according to credits. This being done they THE COLLECTION DEPARTMENT. 215 The Fourth Street National Bank Interest on. Dg g t^^-^-e^ 3 //f »oZ- ^ $ ^cyB. ^ CREDIT- G^L2^:^^^t,^^J~~ ^ Fig. 130.— Charge and Credit Sup. are ready for filing away permanently, by binding them together with a strong brass fastener through the hole in the left-hand end, a stiff piece of pasteboard being bound with them on the top and bottom for protection. The package is then marked plainly, stating the day of the month and year, and filed in a filing compartment according to date. When items are returned unpaid the slips representing them are taken from the drawers and stamped the date of the return. They Dr. Cr. aUK LEDCER (-y/ J'?" ;>-r . »|Kt,ED6ER tJiji. 5*a ^ BMK LEDCER icofnemoM ua tuairra /X* H sun LEPQER (coKitmsii mo nuwnii n,/ ^f (EIERU UCJOITS tElERU MCOUim f f^ 9-^ BEIEUL ICGOVRTS :> Fig. 131. — Collection Desk Proof. are then arranged alphabetically according to the banks from which they are returned and filed as returned items by themselves, in a binder similar to the others. The items are of course returned to their owners in the collection letters. Colored slips are used for various sundry charge and credit items that pass through the collection desk; one, a green slip, for corrections, a yellow slip for protest fees, a purple slip for interest, and a general slip printed the same as the green slip, but on yellow paper, for expense items sucn as telegrams, telephone, etc. These slips are shown by Figs. 128, 129 and 130. 216 MODERN BANKING METHODS. It is claimed that by this system a larger number of collections can be handled successfully with one-half the force than by the old method, as many as fifteen hundred having been handled on a busy day. At the close of the day the lists made on the machine are pasted in a book and a proof made. This is made on a blank which is afterwards pasted in the same book on one of the pages with the lists. Fig. 131 shows the form for this proof. The collection clerk is enabled by this method, by watching the NATIONAL RESERVE BANK COLLECTION DEFABTMEKT. PhiUdefpMa, Pa., / O // Oa o \iave the following collections been paid? Please reply hereon by RETURN MAIL. ^J^yj" J/'^^ocL^ OC a~tHX..c,..^jL^ ^^^' DUB. AHomni. ^ J^o Correspoadents will greatly fitoilitate our handling of oolIeMiona by sending prompt and explicit advice of their payment. Close attention tA tlila matter irill be highly appreciated by us. Fig. 132. — Letter of Inquiry or Tracer. daily slips and calculating the customary time for reports, to keep a pretty close watch upon the items, and more readily than by hunt- ing through a collection register. If a bank to which a collection has been sent is a little slow in notifying, it is quickly discovered, and a tracer, or letter of inquiry, is then sent. Fig. 132 shows a good form for such letter. Another excellent form for a tracer in use by some of the best banks is shown in Fig. 133. This is better than the postal-card tracer, for it states in full just what is wanted, gives full description of the paper, and has a special place for the answer. A tracer like this when returned to its bank can be filed, and is easily referred to, and will give the full history. In sending collections to foreign banks a form of letter of enclos- THE COLLECTION DEPAPTMENT. 217 €. S. Butts. President. H. C, KuyV«ndaII,.Vic«-P«C ViGKSBURG Bank. -J^^l^y^ oj/^ 7€«;tyi, ^^<4. ff^€^ i ^..^^^/^^AOufHo. x^^^ y- • - , • \ Sent m ^je^^(^ ^ <^^!!fe^^^^^^<%58<' Fig. 134.— Letter of Enclosure. ure is used. A good form for this class of letter is shown in Fig. 134. The adding machine becomes a useful adjunct in large banks in assisting in the writing of the letters of transmission, the letter THE WASHINGTON NATIONAL BANK OF VASBIHGTOH. JVashingJon, New yersey,. ''^-:^.<^r:'r:!!::i^^ ?^ You lidve credit this day for the items stated below. Yours respectfully, R. M. EILENBERGER. Cashier. Fig. 135. — Letter of Advice. THE COLLECTION DEPARTMENT. 219 RET'D FEB 19 1902 WE RETURN UNPAID. Reasons, if any, indorsed thereon. NO ATTENTION TO NOTICE. FLBASE REPORT BT NO. TRADERS' NATIONAL BANK. sheets in that case being ruled with several columns, the amounts being entered in the columns by the machine and the total instantly obtained. With relation to all time acceptances it is necessary to use a tickler in which to enter the items under their proper maturity date. The tickler for this pur- pose does not differ materi- ally from that in use in the discount department. When a collection has been paid it is customary with many banks to send a letter of advice, where the items are not remitted for at once. Fig. 135 shows a good form for such a letter. In forwarding items for collection, and in returning items unpaid, the use of the hand stamp has been found to play an important part, and to save much time and labor. The samples given in Fig. 136 show those chiefly in use and speak for them- selves. It sometimes occurs, after a collection item has been placed in the hands of a bank by one of its customers, that the party desires, in con- Fig. 136.-Form3 of Hand Stamps. sequence possibly of having heard from his debtor, to withdraw the collection item ; he there- fore notifies his bank to that effect, and the bank at once sends notice to its correspondent to whom the item had been sent. This is generally done upon a form printed especially for the purpose. Fig. 137 gives such a form. A very convenient and concise form of slip for use when return- ing an unpaid collection is seen in Fig. 138, with a table of excuses that are very comprehensive. All that is necessary is for the bank returning the collection to make a cross or check mark opposite the excuse. The forms for letters of advice and notification, while being in most cases similar, are generally drawn up to accommodate the taste of the Cashier of the bank, and as all men do not think alike. SCBANTON, Pa. PAY ANY BANK, BANKER OR TRUST CO. OR ORDER, FEB 26 1902 PRIOR ENDORSEMENTS GUARANTEED, TRADERS NAT'L BANK, SCRANTON, PA. PRANK L. PHILLIPS, Cashier. 220 MODERN BANKING METHODS. ©HE Philadelphia Raoiional Bani^, Mr. .....^. J^......^!/Z^is::.^ QwV^. Esq., Cashier: ::.i^iJ!::?:::^.. accept above described Draft on.y'^^i^.^ _>. Charge ^^?±5::?r_.-...- account with same when due. Respectfully yours. Fig. 141.— Notification to Pater. in the bank which sent the notice. If otherwise, the order upon the Cashier would simply be filled out to the Cashier of the bank in which he deposited. The question of endorsements is one of considerable importance. Up to a few years ago it was customary to use the restrictive form THE COLLECTION DEPARTMENT. 225 for endorsing all collection items sent by mail, the form generally reading for collection only, but a case came before the courts in New York which materially changed this custom. The case was that of the National Park Bank vs. the Seaboard National Bank, and is found reported on the appeal in Reports of the New York Court of Appeals, 114, 28. The circumstances in brief were these. A draft had been drawn on the National Park Bank for $18, and was re- ceived in due course of business by an out-of-town bank which sent it stamped for collection only to the Seaboard National Bank, for col- lection and credit. The account of the out-of-town bank was duly credited with $1,800, as it appears that the draft had been fraudu- lently altered from $18 to $1,800, and the National Park Bank paid it as $1,800. Sometime afterwards it was discovered that the amount had been fraudulently raised, but in the meantime the out-of-town bank had drawn out its balance from the Seaboard National Bank. Suit was brought by the National Park Bank to recover the differ- ence. The court, however, held that the Seaboard National Bank (and consequently the out-of-town bank) was not liable. The argu- ments in the case were extensive, the plaintiff' claiming that when the draft was collected by the defendant that the defendant was the owner of it ; and that the out-of-town bank became a creditor of the defendant bank. The defendant claimed that both he and the out- of-town bank were merely collecting agents and that neither ever acquired any ownership in the draft, and that an agent who receives money for his principal is, after passing over the same to the princi- pal, absolved from all liability ; that the endorsement of the out-of- town bank was a restrictive endorsement and did not bind the en- dorser to the rules and liabilities of a general endorser. Under such a restrictive endorsement, it was argued, the endorser was compe- tent to prove that he was not the owner of the draft and did not mean to give title to it or to its proceeds when collected. The case created considerable excitement in banking circles, and resulted in the New York Clearing- House abolishing restrictive en- dorsements for all items collected through its channels (unless such paper is guaranteed by the bank presenting it). This, of course, applies to bank drafts, checks, acceptances payable at a bank, and all items which are generally considered cash and collected through the exchanges. This rule has been followed by banks throughout the country. For purely collection items between business concerns, the bank simply acts as the agent or collecting medium ; presenting by its messenger and collecting, or returning unpaid. For this class of items the former restrictive endorsement is still largely in use, there being no doubt that the bank is simply an agent. 15 226 MODERN BANKING METHODS. The question of forged paper sometimes presents itseK, but I am glad to say not often. The forgery may be in the shape of an alter- ation or raising of a draft from a smaller to a larger amount, or it may be in the forging of the signature of an officer of a bank to a fictitious draft, or it may be in the forging of an endorsement or ac- ceptance, in which instance the bank is generally approached to dis- count the paper or make an advance pending collection. With regard to the first class, banks should be very careful to whom they issue drafts. A banker who is a good student of char- acter can most always judge the type of customer with whom he is dealing, and however the customer may have been introduced, un- less he is very sure of the standing of the man, he will do well to act with caution. As a precaution against the altering of drafts most banks use a chemically-prepared paper of some delicate tint which will not bear any alteration without exhibiting it. They also use a cutter or stamp, which cuts or pricks out the amount for which the draft was originally issued. Some also use an indelible ink, specially prepared, which cannot be removed or altered without de- stroying the paper. All these methods are good. With the second class there is one thing sure, and that is that forgers seldom attempt to forge the very plain signature. Some bank officers seem to delight in making a signature in which hardly a single letter of the alphabet appears, and which no one can read but themselves. Such signatures are the forgers' harvest. The more plainly a signature can be read the more difficult it is to copy. The danger is greater in cases of this kind to the innocent third party than to the bank upon whom the draft is drawn, for such drafts are generally "manufactured out of whole cloth," and the bank upon whom they were drawn would soon detect the difference, either in the design of the draft, or the general handwriting in the body of the draft, or the number, even if the signature was a good forgery. Then again many banks have adopted an excellent system of notifying the bank upon whom they have drawn, giving the date, number and amount of all drafts drawn. As I said before it is the innocent third party who cashes the draft who is more apt to be th3 loser in such cases. This should make banks very careful regarding the cashing of drafts for any but their regular customers or those personally known to them and responsible. Days of Grace. Formerly it was the general custom, and was acknowledged in law, to grant an extension of time beyond the regular maturity date upon all time paper. This was termed grace, and was generally con- fined to three days. Instances, however, are on record of four days TEE COLLECTION DEPARTMENT. 227 having been allowed, and in fact any grace that may be agreed upon would be binding in law. This custom arose at a time when the country was young, and when it seemed to the best interests of all to deal leniently with the creditor, allowing him a little time limit beyond his contract. Of late a disposition has been shown in banking circles, especially in the older States, to abohsh this custom, for it was found to be of annoy- ance in figuring the maturity date on time obligations, and was felt to be in reality of little or no value. In the appendix will be seen a table showing the present grace allowed on notes and bills and on sight drafts in the various States. It will be seen that in the majority grace has been abolished. It would be of great advantage, the country over, if all the States should adopt the same custom regarding the settlement of time ob- ligations. Paper Maturing on Holidays. As regards the observance of holidays by the banks, of course they can not close their doors unless there is some legal enactment permitting them to do so. The bank is in a measure a public insti- tution, and it is bound to be open for the business of the public, es- pecially for the settlement of matured obligations, within certain recognized business hours upon all business days, except those rec- ognized by law as legal holidays. As to what days are legal holi- days varies in many States. The customary holidays, January 1, February 22, May 30, July 4, Thanksgiving Day (generally the last Thursday in November) and December 25, are pretty generally rec- ognized. Some States observe February 12 (Lincoln's birthday), Good Friday, Labor Day (the first Monday in September) and the various election days, either State or National. As to the treatment of paper maturing upon holidays or Sundays, here again the custom varies. In some States all paper maturing on these days must be paid the nearest business day prior thereto, while in others they must be paid the next following secular or business day. This state of affairs has resulted in the introduction into bank- ing circles of a form of note in which, instead of specifying a time Hmit, such as three months, or sixty days, the actual date of matur- ity is stated, thus, on July 16, after date. This enables the maker of the note to avoid both holidays and Sundays. An illustration of this form of note was shown in the chapter on the discount depart- ment. Hints About the Collection Department. One very important feature should not be overlooked in the col- lection department or by the bank receiving from the owner any pa- 228 MODERN BANKING METHODS. per for collection, and that is to obtain specific instructions as to whether the paper should be protested or not for non-payment. Many take the position that if the paper bears no endorsement there is no need to protest ; but this does not always follow, for there are many cases where the owner of the paper may desire it protested with a view of bringing suit. In many banks it is the rule, and a very good one, to protest all unpaid paper unless otherwise directed. All unpaid paper should be referred to the Cashier or the Presi- dent of the bank before resorting to the extreme measure of protest- ing, and great care should be exercised, by endeavoring to commu- nicate with the maker of the paper if possible, by telephone, or pri- vate messenger, lest the non-payment be merely caused by some unforeseen accident or oversight, and the credit of some good cus- tomer be injured. Then the bank should be sure that no error has been made within its doors. When paper is given the notary to protest, it is a safe plan for the collection clerk to make a record of such in a small book, which may be called the protest record. No special ruling is necessary for this book ; it is simply a small, plain journal-ruled book in which the collection clerk notes under the date of non-payment the number and description and amount of the paper and name of the notary. In some banks this book is used as a receipt book, and the notary receipts for the paper under the record made. This is a good plan, for the bank then has an evidence of the passing of the paper into other hands, and when the paper is returned to them the receipt is marked canceled, with the date thereof. Accidents sometimes occur in banks as elsewhere, and instances have occurred where paper left in their hands for collection has been lost or mislaid. In a case of this kind is seen the necessity of the banks having a clear and complete description of the paper, for with that record a perfect description can be given to the notary and the paper protested for non-payment. In the protesting of drafts, time drafts may be protested for both non-acceptance and non-payment, if both conditions exist. In case of sight drafts it is not advisable to protest except for non-payment. If a note is made payable at some particular place or bank it must be presented there for payment before it can be protested. If no lo- cality is indicated upon it, and there is no means of finding the maker, it may be protested to hold the endorsers, if any, although presenta- tion had not been made, but that fact should be stated by the notary and the reasons given. The question of the profit or loss in connection with the collection department is one which interests all banks. It is often argued that THE COLLECTION DEPARTMENT. 229 the competition between banks is so great that it is impossible to make the collection business profitable. Many banks make a rule of collecting for their regular depositors at par ; this, of course, makes the collection department a pure expense. Others only collect at par for such depositors as keep a certain specified balance with the bank. Yet this is a matter which cannot always be controlled. Here is where the analysis department of the bank, mentioned in a previous chapter, comes to its assistance. By means of this department the bank officer can easily see what the depositor's account (whether individual or bank) is worth to his bank; how much collection paper passes through it, and what it costs to make these collections. With competition active as it is, it becomes very necessary for the banks to be able to figure closely, and the bank that is able to do so the most successfully will do the most profitable business. Another element to be considered is the business method em- ployed. We all like to deal with a man who transacts his business in a straightforward, business-Uke way ; is prompt in his correspond- ence and satisfactory in his dealings. A bank in offering to make collections for others offers certain service; if that service is per- formed in a prompt and satisfactory manner the bank has a right to charge for it, and my experience has been that few will object to the paying of a reasonable compensation for such service. I have one case especially in mind. The bank had, through bad management, fallen into ill repute. The management changed, and one of the especial features of the new management was their clean, prompt, method of doing business. The competition was heavy, but they persisted in these methods, charged fair rates for collecting, and in a few years had a very large and profitable collection business. There is no reason why the collection department of a bank should not be a source of profit, and properly handled it certainly can be. Domestic Exchange. One of the busy departments of an active bank is the exchange department, or as some call it the draft department. The exchange business is divided into two classes, foreign and domestic ; the foreign, as I will here treat it, pertaining to business with foreign countries, and the domestic to the business between banks in the United States. The large majority of the banks at- tend only to the domestic branch, so of that I will treat chiefly. Banks keep accounts with other banks just as individuals keep accounts with them, making deposits and drawing against these de- 230 MODERN BANKING METHODS. posits. It is to the advantage of the banks throughout the country to keep accounts with the banks in the large financial cities, and drafts issued upon these city banks are considered the best and safest means for the transmission of funds. It is in reality the transmis- sion of credit, and the credit of a bank is seldom questioned. The country merchant or trader desiring to settle an account at some distant city would find himself greatly inconvenienced if he was obliged to take the currency there in person, or even to ship it by express. While at the present date the personal checks of the merchant might be taken at the distant city if he was well and favorably known, yet many object to this because of the risk, and of the charges for collection often made by the city banks ; he there- fore goes to his bank and obtains a bank check or draft upon its correspondent, the merchant feeling perfectly assured that this manner of payment will be accepted. The issuing, or selling, of these drafts, being an accommodation, is generally made a source of profit, the rate of exchange depending chiefly upon the value of money at the point where it is needed. Banks make their settlements between each other by.means of these drafts. They are also used for the transmission of credits from one financial city to another, or a bank may draw on its cor- respondent for currency to be used in its regular business. It is necessary that this department be managed with system and care. Banks object, and wisely, to issuing their drafts to strangers, for the reason that there have been many cases where the drafts have been altered to a much larger sum ; others where, by the ob- taining of the bank officer's signature from the draft, it has been forged to other papers. Many banks object to the issuing of drafts for small amounts, and here also they act wisely, but in this they should be governed much by the circumstances. The customary form for a bank draft may be seen in Fig. 142. THE BANKERS NATIONAL BANK. Duplicate unpaid Chicago, III., May 1, 1902. No. 175,690. Pay this the original. $150.00. PA T TO THE ORDER OF Samuel Potter One hundred and fifty ^ _._^-_„_ -^DOLLARS. In current funds. John L. Smith, Cashier. To Chase National Bank, New York. Fig. 142.— Bajjk Draft. TEE COLLECTION DEPARTMENT. 231 'D-ra/a ■ ^a^^ />/ ' ""^ 2.^ Fig. 144. 232 MODERN BANKING METHODS. signature, and the ticket then put upon a file, when checked by the Cashier. The records of the drafts are kept in two ways. In a small bank, doing a limited business, if the drafts are bound in a book with a stub, the record on the stubs will be all-sufficient. But in a larger bank it is customary to have the drafts made loose and bound in tablets, then to use a book, called a draft register, upon which to make the proper records. This system will be found serviceable for a bank of any size, and for large banks a draft register for each of its correspondents will be found necessary. Fig. 144 gives a form for a draft register useful for moderate- sized, or even small banks, where they prefer to use the loose drafts rather than to have them bound in a book with stubs. DRAFTS DRAWN ON-S: f IN FAVOR OF Bv Whom Puichaseo. dA. dfX- /^ 'J^. '7 f 50 51 52 53 54 65 se 57 68 5& 60 61 (52 ^'/x^ Fig 145. — Draft Register. Fig. 145 shows the usual form for a draft register for a busy bank. At the close of each day a report is made giving the total of the drafts drawn on each correspondent, and the amount of exchange, and this is given to the teller and to the general bookkeeper. From this, the latter credits the respective banks the amount drawn on them and credits exchange account with the total of exchange re- ceived. At the close of each month the correspondent banks return the paid drafts, together with a statement called an account current, and after these drafts have been checked off from their stubs or the draft register, they have a strong Manila wrapper put around them upon which is marked the month and year, and are then filed away. Some keep these canceled drafts on shelves and some in drawers ; however kept, they should be so filed as to be readily accessible for reference. THE COLLECTION DEPARTMENT. 233 Some banks have a cus- tom, and it is a safe one, of notifying their corres- pondent banks of the issue of all drafts on them. This is a safeguard against the fraudulent raising or issu- ing of any drafts. Fig. 146 gives a customary form for such a notice. It sometimes occurs that a draft becomes lost or destroyed before being used, consequently the owner desires it replaced. The bank should at first look to its own protection in such matters, and re- Centennial National Bank. Centre City, fA. We have drawn on you as follows: ;z^ /-o V 7 /O t4 j / o o 7_ ¥-■2-^' Fig. 146.— Notification Sheet or Drafts Drawn. -National .,i^fc<<^«?2«-0;^^^.fe^&^ w<^ ^ 'J4^ MERCHANTS NATIONAL BANK CENTRE CITY PA We have this day issued Duplicate ol Draft No. Z»?_^j!?r 6i\e<\_^r^:^^^-^~^_'?:^fo_ payable la J' ^ *^ci.i^u .c<.t^ lof $ /-<-<=-C- FiG. 148.— Foreign Drafts. the amount in the foreign money, and another giving the rate, and another the amount of American money represented. The form of the foreign drafts differs in some measure from the domestic drafts, and they are usually made in duplicate. Advice is sent the foreign correspondent daily of the issuing of FOREIGN DRAFTS AND LETTERS OF CREDIT. 235 drafts, giving a full description of each draft. This is considered a necessary precaution. In fact, the foreign correspondent would not pay a draft drawn on him until he had received such a notice. . J//r. //Y/////. ///rr//////u/////y/h///r, Xit,-i ?t-; ■»■{ >t -i' X 'i- -H-i-^ I'- ,,vu... M.,,;,,:^ , liXsvTff^is fptf (Ixrur^xv. ' \ 00 nr^^^.A//.Ar,,. ■'//. /// /" ■•-•// ////.v ///,//// ,■ I t,/r- /////• ////M//'/i /•>'/■ .■ ^J--'j5\ ■■,'.■>''////■'/■:■ '.■.■■•■/','/''//■' V/V/// /V/'/A.v/ Fig. 149.— Lettbr of Credit. Fig. 148 shows a customary form for a foreign draft. Letters of credit are often more convenient to the traveler than drafts. These are issued by those banks having correspondents in foreign countries, or that have arrangements made with banks hav- ing direct foreign connections. 236 MODERN BANKING METHODS. The customer deposits a certain sum in the bank for which he receives a letter of credit, less commissions and exchange. His signature is taken, the transaction is entered upon a journal, showing both the American and the foreign money represented, and the commission and the exchange. An account is opened with the THE AMOUNT DRAWN AGAINST THIS CREDIT NOT TO EXCEED POUNDS STERLING. Date when paid. By whom paid. Name of town. Amount paid expressed in words. Amount i7i figures. Fig. 149 (Continued). depositor on a ledger kept for the purpose, crediting him with the sum represented by the letter of credit. The various correspondents are notified at once of the issue of the letter. As sums are drawn by the traveler ihe amount is endorsed in the place prepared for it ok the inside of the letter ; the home bank is at once notified, and the ledger account charged with the sum. Fig. 149 and 149 (continued) show the forms for both sides of a lotter of credit. CHAPTER VII. CERTIFICATES OF DEPOSIT, CASHIERS' CHECKS AND DUE BILLS. Certificates of Deposit. It is customary for banks to receive deposits and to account for them by other means than by keeping a ledger account with the de- positor. For this class of deposits the bank gives the depositor a receipt or a certificate. These certificates of deposit are not subject to check, and should so state on the face. They form a convenient means of depositing for savings, and it is customary in such cases to allow the depositor interest for a specified time. The fact that money cannot be drawn from this class of deposits by checks, as with the ordinary deposits, makes this form too inconvenient for the usual commercial transac- tions. Their chief use is for the deposit of trust funds, for savings deposits, as before mentioned, for the safe transmission or carriage of money from one section of the country to another, and for the transfer of funds from one individual to another. The certificates state upon the face that a certain specified sum has been deposited payable to either the depositor or to some other individual, whose name must appear. If the depositor has the cer- tificate made payable to himself he should leave his signature at the bank, but this is not necessary if it be payable to some one else. There are two classes of certificates of deposit issued — demand cer- tificates, which permit the holder to present them at any time for payment, and time certificates, in which some specified time is men- tioned. Upon these latter the banks generally pay interest, the rate depending often upon the length of time the money is to remain. In many banks a time limit is specified in the certificate, and no inter- est is paid after the expiration of this limit. This is a safe measure. In fact, the time certificate will be found an advantageous form. During a financial pressure the bank is protected by the time limit from any danger of a run. In such times it is very comforta- ble to be able to look over the* certificate register and learn when certificates will mature, and their amount, and be able to prepare for them. 238 MODERN BANKING METHODS. The time limit, both as to the interest and the principal, should be very specifically stated, how- ever, otherwise, according to the ruling of the courts in some States, the bank may sustain a loss. Fig. 150 shows the usual form for a demand certificate of deposit. This is shown with a stub attached, as many small banks prefer to have them bound in a book, with stub, and in such an institution it will be found convenient, but the larger banks prefer to have the certi- ficates made in tablets, num- bered consecutively, and to keep the record on a certificate reg- ister. Fig. 151 shows a time cer- tificate, the limit of time and the rate of interest being specified. Fig. 152 shows a form for a certificate of deposit in which two time limits are specified, each bearing a different rate of interest, which is often found convenient. It is of course necessary that the records regarding both the issuing and the paying of the certificates of deposit be kept with great care. The first to be considered is the issuing. It too often occurs that when a customer wishes a certificate of deposit the certifi- cate is issued upon his verbal in- structions. This is not as it should be, for there should be a voucher for the receipt of the money, containing full written directions, as much so as for the CERTIFICATES OF DEPOSIT, CASHIERS' CHECKS AND BILLS. 239 receipt of ordinary deposits or for the issuance of drafts. This voucher should be in the form of a ticket and should state specifi- cally the date of issue, the name of the depositor, for whose benefit, y-.. yy — ^Ml^^ ■ IN CURRENT FUNDS. NOT SUBJECT TO CHECK. a/7 A <^.<:/(^S->,^ ./^^?^^ ^^ '^ J^^^^^^:Me^ ^1900. 3 ^rfV /7^ Fig. 160. — Clearing House Slip. The following morning after the items received in the mail have been added to the slips, the totals are then entered on a sheet called the setthng clerk's sheet, opposite their respective names and num- bers, in the debit column. Fig. 161 represents the settling clerk's sheet somewhat abbre- viated. The figures on the credit side are not entered until after the exchange has been made at the clearing-house. They are shown here simply to illustrate the completed sheet. All figures in these forms are fictitious and only used for illustration. THE CLEARING-HOUSE. 251 No. 74. CHASE NATIONAL BANK. fettling (UtxWs statement, Jlul ., ?ir, Bank of N.Y.Nat'l Bank'g Aseo Manbattao Company, MerchanU' National Bank, Mechanics' National Baak, Bank of America, Fbenix National Bank, National City Bank, Chemical National Bank, 0^it.^!ix-<-<_e-t_^— Fig. IGl. The sheet mentioned having been prepared, a ticket is now made out called a credit ticket, and upon this is entered the grand total of the debit column as shown by the sheet. This ticket is generally- printed in red, or upon red paper to distinguish it. Fig. 162 gives the form for this ticket as used in New York. m I No. 74. Credit Chase National BaHfc, % AJ^^j££?L^~- fettling Clerk. Fig. 162.— Clearing-House Credit Ticket. The amount of the exchange against each bank, as shown by the sheet, is now entered on a corresponding ticket called a check ticket or small ticket, which is shown by Fig. 163. This ticket may, however, be made out by the settling clerk after he . reaches the clearing-house. On it is written the amount of the exchange as shown by the exchange slip. As the packages of checks and their respective exchange slips are taken away from the clear- 252 MODERN BANKING METHODS. No. 3. Merchants National Bank, Frond No. 74., Chase National Bank. ing-house soon after the exchange is made, generally in from ten to fifteen minutes, these small tickets are used by the settling clerks in place of them, to check back the amounts as originally entered on the packages, the packages being no longer in the clear- ing-house and available for that purpose. A duplicate list of the debit items mentioned is made on a sheet called clear- ing-house delivery sheet or settling clerk's receipt or package receipt, as shown in Fig. 164. The packages being sealed, which is done in most cities, and is advisable, shortly be- fore the hour for making the exchanges two clerks leave the bank for the clearing-house to make exchanges ; one, entitled the settling clerk, carrying his sheet and the credit ticket, the othep, called the /d cP ;7 ^^ ^ Fig. 163.— Clearing-House Check Ticket. No. 74. CHASE NATIONAL BANK. ^^' . /fffi 1 2 3 4 6 7 8 12 Bank of N.Y.Nat'l Bank'g Aeso Manhattan Company, Merchants' National Bank, Mechanics' National Bank, Bank of America. Pbenii National Bank, National City Bank, Chemical National Bank, \j"-/ a^ct*'r- /d a^^-^^ V.'^'^ Fig. 164. messenger or delivery clerk, carrying the packages, the check tick- ets and the delivery sheet. This completes the principal work in the bank of preparing for the exchanges. After the exchanges have been made, and the mes- senger has returned to the bank with the package of checks and col- THE CLEARINO-EOUSB. 253 lection items payable by them, these must first be carefully exam- ined as to signatures, endorsements and the condition of the accounts against which they are drawn. If there is any irregularity in signatures or endorsements those items are at once returned to the bank from which they came, where they will be redeemed. Where it is found that an account has not sufficient balance to meet the items presented against it, these items are generally marked with pencil on the back the words not suffi- cient and returned to the bank whence they came, unless the depos- itor has previously arranged for their payment. On entering the clearing-house the delivery clerk gives the credit ticket mentioned to the proof clerk at the Manager's desk, and the two clerks (settling and delivering clerk) then pass to their desk. Each settling clerk has his desk, and these desks are arranged in serial order, according to the bank numbers, thus facilitating the distribution and collection of the exchanges. The settling clerk oc- cupies the desk with the settling sheet before him, and the deHvery clerk takes his position in front of the desk, carrying his packages of checks and his deUvery sheet previously mentioned. Promptly at ten o'clock the Manager takes his position on the platform with his Assistant Manager and staff, one of whom is the proof clerk, who has a proof sheet upon which he enters the amounts of the credit tickets in the third, or credit, column opposite the names of the respective banks. At the first tap of a gong every clerk must be in his place and ready for business. At the second tap the exchange begins, each delivery clerk advancing to the next desk, where he delivers the checks belonging to that bank and takes the receipt for them, from the setthng clerk, upon the delivery sheet. They pass in this manner from desk to desk until the exchange is completed. Each settling clerk upon receiving a package of checks enters the amount noted on the envelope on his settling sheet opposite the name of the bank from which he received it. In about ten minutes the exchanges have been completed, bring- ing each delivery clerk back to the point opposite his own desk, and his delivery sheet, signed by every settling clerk, is a voucher to his bank that all the exchanges he has brought to the clearing-house have been received by the proper parties. The settling clerk now fills out a small check ticket for each bank, with the amount of their respective exchanges, which are properly distributed. The delivery clerk receives the exchanges lef 1; at his desk from the other banks, counts the number of packages, compares them with the settUng clerk's sheet, and if found correct takes them to his bank. The settling clerk remains to make the final proof. He foots up his 254 MODERN BANKING METHODS. settling sheet and then fills out a ticket called a debit ticket, which is here shown in Fig. 165. This ticket shows the amount of checks brought to the clearing- house by the bank, and the amount of checks received from other No. 74. gpi M\\ Chase National Bank, Amt. rec'd, $ y,^/j'.^o£. fpr i lit Mil " " " brought, %-^^7-2,j3j^^r^_ ^ ^ I o. ^flI. aw Chase National Bank, %-^>>£^J2/'.^ JMHt Balance Due Clinrin^ Souse, ^ .Siltllnjf Clark. Fig. 165.— Clearing-House Debit Ticket. banks through the clearing-house, and the balance or amount due the bank or the clearing-house, as the case may be. This ticket is given to the proof clerk at the Manager's desk. This clerk having already entered the amount shown by the credit ticket, before men- tioned, on his proof sheet, now enters on the same sheet in the NEW YORK CLEARING HOUSE PROOF C^f^^ti26^J^ Bank of N. Y. N.tl Bk'g Awac'D, Bank of the McDbatton Cum [uny. Merchants' Nattoaal Bank. MechaDics* Katiooal Bank. Dank of Amorica, Phenii National Back, National Cit; Bank. Chemical National D&oJLt DUS CLIARING H0U5£. 3^ J~^ ^ ^ t '-7 """f-^ / J'o a >■ fj^ y f /v/^^ J-7 /< T—i /3 <3X» J7-& 3. r .fyb ^ J->-'3S ^3 t i I f t / -6 Xf^ /•i't '^'> I e^ J f / ^fy^ •.< »' /oV'Z/^ ^ j^ J ^ / ^S~f^ .S~t> .3 yf^i / f J i^f £^ro i^ij ',/7-uTS J 7>^> 7-^ V t y r t/ -ft- ^ (. •3 f o 9 ' ^J ^^ './~3i>-J / < >->*■ Fig. 166. second or debit column the amount marked debit on the debit ticket, and the balance in the proper respective column. Fig. 166 shows the clearing-house proof sheet. When the amounts on all the debit tickets have been entered on the proof sheet, and the sheet footed, if all the work has been done TEE CLEARING-HOUSE. 5i55 correctly the aggregates of the debits and credits should agree, and the debit and credit balances be the same. The proof is generally announced in about half an hour, as it is seldom correct at first. Various methods are adopted to correct errors, such as the exchanging of sheets to the right, or left, for ex- amination of footings and the checking off of the items with the check tickets. If a proof is completed within forty-five minutes from the time of beginning, no fine is imposed, and the proof is an- nounced ; but if more than that time is occupied the bank or banks causing the delay are fined according to a fixed scale. After a proof is arrived at in the clearing-house the Manager or Assistant Manager calls off to the setthng clerks of the various AUG 24 1900 189 No. BANKS Dr. Cr. 8 13 Bank of N. Y. N»« Bk'g Amoo'n, Bank of ths Manhattan Companj, Merchantg* National Bask. Heehanica' Xational Bank, Bank of America, Phonix Natiooal Bank. Kattonal City Bank, Ohemieal National Bark, ^9 /oy Exchanges, ys.1 \j~6 3 Balances, /J ~J 6>jZy Fig. 167.— Clearing-House Memorandum of Baxances. banks the balances over $1,000, which they copy on long narrow lists called memorandimi of balances. These lists are taken with them to their respective banks and given to their officers for their information regarding the relation of each bank to the clearing-house for that day. The list also shows the total of the clearings and the total of balances. Fig. 167 gives the form for this list, of course much abbreviated. The clearing-house proof, as is seen, exhibits the total amount of exchanges received from each bank and the total taken away by each bank, and the balances due to or from the banks. The colunm on the left-hand side of the proof sheet shows the balance due from each debtor bank to the clearing-house. This amount must be paid to the clearing-house between 12.30 and 1.30 P. M., for which the banks rec'eive receipts. Fig. 168 shows the form of this receipt. 256 MODERN BANKING METHODS. /goo No.6 1 |if uj §01;^ (KTUariog ^ousj. ^titmi^e^ NATIONAL RESERVE BANK Dollars in full for balance due the Associated Banks. ^pa^JLc^ Z± .bOM^ t.^'Uanaael. Fig. 168.— Cleaking-House Receipt fob Settlements. Upon the back of the receipt is a statement showing how the debt was paid, which is exhibited by Fig. 169. No.61 Cbange 7^ Legal Tenders, . / Legal Tender Ctfk,, x% a o o Bearer Gold Ctft., yno o o o Order " 1T.S.Troa8Qr7 Notes ^/y 4 7^^ v^/7 ji Fig 169.— Statement of Cleabing-House Settlement. At 1.30 P. M., or as soon as the amounts are proved, the credit banks receive from the clearing-house the balances due them, for which they give their receipts in a book for that purpose. To enforce the necessary discipline among the bank clerks in the clearing-house the system of fines mentioned is as follows : THE CLEARING-HOU&E. 257 Errors on credit side of settling clerk's sheet $3 Errors on debit side of settling clerk's sheet 2 Errors in tickets 2 Errors in footing amount received 1 Disorderly conduct 2 Want of punctuality 2 Debtor banks failing to pay balances by 1.30 p. m 3 Errors in delivery on receipt of exchanges 1 The fines are charged daily to the respective banks, and at the close of a month a statement of them is sent to the banks. Fig. 170 shows the form of this statement. 77-83 CEDAR ST New York, «^^;-<5-e-^ '-^ ^ igna Cashier. Sir: As required by the Circular of the Clearing House Committee dated Aug. 8th, 1854, I report the following fines against your bank for the month of. iJ^^?!^^^^^t Xoo f -^ \3 ^^J^ tj 00 /crease. Specie, /yj 0^ ^ lational Broadway Bank Mercantile National Bank....... »7 iS Pacific Bank. 29 National Bank of the Republic. . 30 Chatham National Bank. 31 People's Bank. 32N! nal Bank of North America 33]HanoTer National Bank 34jlrving National Bank. . . 36| National Citizen's Bask. 40! Nassau Bank 42|Market and Fulton National Bask 44' National Shoe and Leather Bask. . 45 iCom Exchange Bank 47 ContinenUl National Bank 49lOriental Bank SSJImporters'and Traders' Nat'l Bank VilNational Park Bank 59|East River National Bank. . ^I Fourth National Bank 63 Central National Bank: . . . 63 Second National Bask.. . . 64 Ninth National Bank 65 First National Bank 6; New York Nat'l Exchange Bank. Bowery Bank New York County National Bask German-American Bank 74|Chase National Bank 76|Fifth Avenue Bank..... 77 German Exchange Bank 78|Gcnnania Bark go Lincoln National Bank 61 GatficM National Bank 83 Fifth National Bank 83|Bank of the Metropolis 84West Side Bank Seaboard National Bank Western National Bank First National Bank. Brooklyn. . Liberty National Bask N. 'V. Produce Exchange Bask. . . Bank of New Amsterdam Astor National Bank ■ . . . liide and Leather National Bank. . Total, Natiokju. Banks. . Stat* Bamks... 3.050, 3,000, 3,000. 1.500. 1. 000, 10,000, 300, 10,000, 1,000, 1. 000, tS.ooo, 1,000, 1,400, 1,000, *,oao, 350, J.ooo, I.OOO, 350,000 350,000 500,000 |63,eoO,000 11,433,700 ta,i58.8oo 3,303,600 1,305,400 3,393.000 3.011,100 374.000 5,278,600 6,964.000 338,500 [,850,600 89,400 114.S00 176.300 $06 600 323 600 536,600 3.848,600 7.029.300 1.647.8CO ■ ,333.800! 493.900 1,143,300 1,000,700 3»5,300 659.500 t5.oi4,ioo 467,fX)0 430.500 374.800 [,020, 311,300 1,840,100 510,600 406.500 6.150,100 3. 306. SCO 163.900 1,376,000 539.900 799.000 163.800 9i>7, 103 708.800 375.800 350,100 1,994,600 1,387,000 614,700 8oa,coo 890,100 1.073,500 359.100 963.600 409,100 748.700 1,696,400 538.300 535.800 374.900 411,000 331,800 302,100 $14,903,000 19,916,000 13,284.300 12,450,000 21,837,400 4,756,000 97,582.000 34,233,000 4,765.000 8,937,600 1.075.900 2,234.000 947.200 3.727.500 3,594,600 4,395.300 27.676.000 64.500,500 6686,700 13,191,000 2,799.200 30,161,500 6,106,200 3.193,500 13,005.000 43.493.300 4,350,000 3,095,700 3,644,900 6,416,700 3.933,000 18,980,800 4,887,100 3 002.400 34,803,000 46,464,000 1,344,600 33,538,300 11,436,000 8,689,000 3,311,100 39.369 2,970,300 3,154,000 3,083,400 3,541,600 38,349,000 8,597.300 3,545,400 3.077.300 9.555.900 6,094,500 2,084,400 6,631,300 3,516.000 11,434,000 36,868,000 4,001,000 6.049,400 3.750,500 5,033,300 3.971,000 3,464,500 $3.'37.ooo 6,829,000 3,269,200 3,126,000 4.341,300 1,264,000 36.883.000 4.744,400 873,900 909,400 195.900 191.' 102,500 661.100 543.700 297.600 3.349.000 6,563,900 941.500 3,544,300 164,800 4,295.800 674.500 99.800 3,357,800 11,578,300 779.900 443.400 434,500 • .309,500 1,018,400 3,611,000 948,300 189 800 6,319,000 6,938,000 199.700 4,636,100 3.608,000 1,7*5.000 631,000 6,732,900 559.900 350,000 765,— 598,500 8,663,300 3,386,500 188,500 403, 1,466,500 1.333.500 508,800 1,137,500 417,000 1.762,000 9.733,500 657,000 1.510,100 491,600 363,200 753.000 431,300 tl,4IO,000 3,963,000 1,676.300 347.000 3,130.100 323,000 5.566, 3,261.700 583,800 908,300 62.900 204,000 180.300 198.600 370.400 419,900 3.035, 6,645,900 398.800 1,464,900 569,900 1,456.400 947.500 594.900 1,068,000 3,861,100 593.800 306.900 369,400 647.300 307.900 3,876.000 549.300 291,600 1,863,000 5,789,000 137,800 1,090,300 1,135.000 679,000 339,000 1,791,400 307,700 346, 383,300 351,000 3,986,300 304,400 730.500 550.500 1,369,700 308,600 149.000 541.900 355.000 3,099.000 3.565,700 953,000 375.000 383.300 1,146.900 381,000 79.300 $15,601,000 36,440 000 16,552,800 1^,934,000 35,390,106 5,159,000 133.381,000 35,391.100 5.427,700 7,295,500 1,006,400 2,316,000 872,900 3,403 000 4.445.700 3,658,700 31,444,000 53.778.100 5,820,000 t4.059.300 3,290,600 33,768,100 6,253,700 3,673,200 14,350,600 49,663,200 4,773.000 3,096,800 3,058,000 6,923,700 4,583,800 33.353,300 5,910,000 1,920,000 38,433,000 56,923.000 1,330,300 35,^68.900 15,830,000 9,571,000 3.757.300 38,368,100 3.159,400 3,391,000 4,030,700 3,473,000 47,090,100 9.863,800 3,040,100 4,405,800 10.677.300 6,808,900 3,313,100 7.131,400 3,931,000 14,189,000 45,403,100 4.734.000 6.373.100 3,463,400 5.910,800 4,227,000 1,771,700 38.000 3,953.600 464.500 399.700 4,564.900 7,056.100 300,000 x.ooo.ooo 678,400 I.575-4O0 184.900 >95.700 183.400 JO.OOO 311,600 47,300 49.400 50,000 50,000 60.000 182,000 49.900 493. 156.500 346.700 48.600 170,300 49^.000 50.000 75.000 498.000 Totals •Ai p«r official reports.— 44 NatiocAl Bubs, Juae a9tb. r^oa 19 State Backs. May 3.9M, t, 168,400 1.565.300 164,400 •.364,700 1,336,900 303,600 664,3 7a8,aoo »,44S.50o », 777.800 905,600 3.706.0. 3.53'.o< 679,700 8A6,loo 559.300 450.900 1,100,300 484,3<» 661,500 4.5'3.8oo • .947.9GO 961,600 1,983,100 758,500 59.591. 78,600 AvmRACl Amount oi Snai. AVSRAGB Amount o Lkcal Tbndu Notes an Bank Notes 30.900 15.900 8s, 9.800 198.0 iS,6oo 47.500 50,300 90500 3.3-» •?• 9.700 84.51 16,800 4,8co 17.400 104,800 87.600 58, 30.300 116,600 63,100 t,8«4,6oo Increase 70,900 1100,900 78.000 48,700 90,t 114,300 I16 400 105.000 65,300 99.< 165. L-- 114,800 itS,90o 13.900 89.100 114,800 47,900 15.400 13.700 198,300 3,843.600 Xacreue taS.Soo amount on Deposit Clbakinc HOITSX ACXNT. I3I9.7OO 360,000 304,000 35,600 336,000 338,100 199.600 198.800 175.000 63.300 105,000 117.800 149.500 to.loo 190.' 177.800 160,400 43,300 44.500 70,300 617.700 ■ 74.11 Amount o Deposit, with other New York City and Brooklyn Banks and Trust Co's. 55J.300 156,800 139.600 136.C 157.700 63,6oo 84,900 30.500 18,: i8,c 161.C 887,500 131,60a 55.600 6j,7' 8,500 1,800 17.600 113.400 J4«» 189.700 15.300 6,377.300 Incnase 130,100 4.634.300 Increas* 337,700 AVEKACE Amount or Nrl DsrosiTS, ATBUoa AMOtXITT OP ClKCULATIO* ■.637,c 3.356.300 1,342,800 1,580,500 1,860,000 930,600 3.146.1 1,661, 1.155. 1.485,600 1.694.500 ■95.700 195,300 617.700 780, 3,160,300 1,977,! 940,800 4k408, 1,987,000 1,491,400 970,700 559,600 435.5 987.C 517.S 659,400 737,600 419,800 964,300 915.500 1,898,800 856,500 68,396,400 Increase 766,300 U^Kn 58,50* aoo.ooo 5a,«n 1,113,100 ZocreaMe' Fig. 174, 262 MODERN BANKING METHODS. ' No. 32, BOYLSTON FROM TIO. 100. O^.,.^^^^ ^^o. / /' / o o / o 3 3Jof /T-'^ o Y ^7 ^ 6 "7 4 6 Po the stamping of all the checks or other items passing through the exchanges with the bank number as shown before. The methods in use in various parts of the country are naturally similar, yet in many instances there are slight differences. I will endeavor to illustrate the methods in use in several of the principal cities, also some smaller ones, for comparison. Methods of the Boston Clearing- house. Beginning with Boston, which was the second city to adopt the clearing-house, we find that they have naturally put in use many of the same forms seen in New York. Thus Fig. 175 shows the exchange slip. Fig. 176 shows the settling clerk's state- ment. In the settling clerk's statement there will be seen two more columns than on the New York sheet — first debit and additions. The first debit column is used in which to write the totals of the slips at the close of the day. On the following morning, up to shortly before the hour for going to the clearing-house, many items come into the bank, through the mail and otherwise, that are to be collected through the clearing-house ; these are listed separately and their total put in the column named additions. The figures in these two columns are then added together Fig. 175. No. 33. BLACKSTONE NATIONAL BANK. Settling Clerk 's Statement (£^<^^/,p o o ., BANKS. FIRST DEBIT. tDomoNS. TOTAL DEBIT. BANKS CR. No. 1 MsMachuMtta Nttionil. / / J Mf 7^ >:> eye JLC '7 3-> V f^ >> 7^ f / 1 2 NatioDil Union. y f y ~j-C: J. -J 7 6^-^ -=F/ ■ye 6 , % o c 3^ '■^ 1 £ J-0 2 3 Old Boston Nttion>l. .26 7^^ J^a f ■>f^ > ■- 3 4 Suite Nitional. .2^ C, 'Vi '? / / S f^ ~'^o V-c OJJ ^f -^; J^S-6 #o 4 6 New EngUnd National. JJ '•'fd, .2-0 / y- J^f (,y ■^e >j V f f J 3.^' 7^ G 10 Washington KationaL >f '^) ?' 9 Cif^t V ^c £f f^J O ^ 1 f f jr^ ^9° 7 ° 12 3.9 f>-T^J^Si,X, 7>r-i rr n-^, a^^ e 0^ //JV >U ^7 J \ . Fig. 176. THE CLEARING-HOUSE. 263 No. 17, SECOND NATIONAL BANK, No. 2, National Union Bank. ./..if ..■:^_^.jiZ"DOLLS. /.^cts. Fig. 177. — Check Ticket Boston CLEARrNG-HousE. and the totals carried into the total debit column. This subdividing of the debits may be considered an advantage in facilitating the tracing of any items. h U O H 5 u cc o No. 46. Boston clearing house. Credit. National Security Bank. %^£ ^^<' ettling Clerk. Fig. 178. — Credit Ticket Boston Clearing-House. Figs. 177, 178 and 179 show respectively the small or check ticket, the credit ticket and the debit or balance ticket. H U "^ O h ii] o < < CQ No. 46. Boston clearing HousE.ig^-^4/° Dr National Security Bank. Cr Ain't Rec'd. >.^-^^.^^„^„ Am'tBro't. $..g£,- ^ ^-C^ Balance $. ^ -due Clearing House. Balance due the National Security Bankj % .'^T-^ j , /y^~^ . :^.._„Settiing Clerk. Fig. 179. — Balance Ticket Boston Clbaring-Housb. Fig. 180 show^s the form for the receipt given to the clearing- house for credit balances. As will be seen this is signed by the Cash- 264 MODERN BANKING METHODS. ier and taken by the messenger to the clearing-house at the proper hour for settUng, generally one p. M. In New York this receipt is in a book and is signed by the clerk receiving the money for the bank. Fig. 181 is a form for a transfer check and is used, as its face WINTHROP NATIONAL BANK. »*<-*^-^-- ^^^^Boston. - ^ceitif 2i from W . - O. «6 NELhHQ G, Manager of the Boston Clearing House, ftK Jli^?^''*^ /^^!/^ '''*^'^^~*~^- '-' •'•'iswcn^ar of this Bank, fc^ir^.*"^**' C/iot^<-^a^vL.^^ C/tr<^ 'Ur'^i-'^'/^^^r-'-t^ y'^t-r^.^j*^^ Dollars, being the amount gained by this Bank to-day at the Clearing House. .Cashier. Fig. 180.— Receipt for Credit Balances Boston Clearing-House. shows, in transferring any funds due the bank from the clearing- house to some other bank. This is only used between the local banks, and is a convenience. In Philadelphia a due bill, as it is 'CO o O cc CO o <^??s^j?.^.J' Boston, ........ C^^<^<^. ./..... ® ^9"^ Transfer to the Credit of rff£J''^-:'^I^<^*^'f^^:'^l/C- ...or order, Cr/j^fU^-r^ih-^^ ' . ■ - - — ' . THOUSAJfD DOLLARS. And Charge the same in Settlement of the balance due to THE To N:-«>«N£UJNC, Uaaa«Cy . la 3.i rCtln- 3ai:.iO ZiS-y^i-s Z 2i .i'^.^Xii *« J^_i^:£eJ^£^ 3 ye, Hi U q^ aGOREOATES. ■•JJ^ jj'k yS v-r . 13 Fig. 183. 11 A. M., and the settlements are made an hour earlier than on other days. Fig. 184 shows the form of the settling clerk's sheet, and Fig. 185 the form for the runners' exchange sheet used in Philadelphia, both abbreviated. Fig. 186 shows the Manager's settlement sheet, or as it is called in New York and Boston, proof sheet, also abbreviated. It will be noticed that in these sheets the names of the banks are 266 MODERN BANKING METHODS. PHILADELPHIA CLEARING HOUSE. No. 39. The Fourth Street National Bank Settlement, CQ^ 6 1900. Debtor BanXs. Total Debits. Ajnoum Received. No. BANKS. Amoant SeoL Total Credits. Creditor Banks. i¥ f M, ^ , J- ~S / « PHILADELPHIA, ut yuU /V f>f // '7^7^ ~j-& 2 NORTH AMERICA. 1 ^ •^ J » fl &^y // ^ y, e, ■30 ^ / f J i • 3 rARMERSA MECHANICS f^b f J'i''3^ 7' ^ 7 Uf o S^^^^y ' 9 6 MECHANICS. 97''- ■J-^ A/ ? •^'■J ■f J'y I ■J-/ 6 NORTHERN LIBERTIES. 6^,^ sJ / 3 , i> ■yf-i/ i' 6 ^f i /f 7 SOUTHWARK. 7'-' ' '^- '/'^i^ ¥ (, J'C, f-^' 7 ' - 8 KENSINGTON.

3 / •w Mi. y^e ^u- «/• - ^■^'^.3 (. 13 GIRARD. 3 a f^^ys3 f6^ *7 ■J~/ e i, o '- J,^ crUZ,^ ■^ix^.-u-O ^M-^ ^ >l3 ff y:L-^y-a t. .i-o AGGREGATE, f bo r f i' ^? /•3 i, J i, c -^; BALANCE. Fig 184.— Settling Clerk's Sheet. in the center, the debit and credit items being arranged on the left and right-hand side respectively. This method, it is claimed, helps to prevent errors. In Philadelphia, as in New York and Boston, the same character Philadelphia Clearing House, RUNNERS. EXCHANGE, ^^v. AMOUNT RECEIVED D». No. u 3 3. / 6> / ^ 7 A ^ / 6 o ■S J- / NORTH AMERICA. J-fj- -J'^l /' £<. ,U "7 Jo / ^7" y i. FARM'S & MECH'S NATIONAU J.y J'f ^ c /■d -i...'.} / r3> •*/ ^r* t/ti r ^ MECHANICS NATIONAU ze^ 7" t^d o^y •j-i ,o t i-^^ 'f NATIONAL BK. N. UBERTIEi 7' ^/v a <: / t 'U 7' SOUTHWARK NATIONAL, ^j cr>«" 7' V ->■?? ?<■ V r f i ^/ * / .tXyl '7 KENSNCTON NATIONAU 7' ttji ./% J ^7' -r JJC V^y >.i PENN NATlOdAU 3 >i 7^^ -/I / ^f fj ^,£ •J j^ -J,/ ■o WESTERN NATIONAL •3a'* £ft j-^ 7 7*-' f^ r? i^l *^i •1 MANUFACTURERS NATIONAU f ' f /*. tfj V. J / J r-' " IJ CIRARD NATIONAU M-ry tfv/ Lt /( JX f ' .2^ 'tsT^ y-j-^ r* -.*,.. ■ ' ■* ■tminU tKCKAJKC. 1 Fig. 186. place one of the banks is designated to act, and this selection lasts for two years. While in the first two cities the payments of the balances are made by and to the clearing-house, in the latter city these are made between the banks direct. The Chicago Clearing-House. In Chicago it is the custom to have the exchange slips made in long sheets, 9| inches wide, containing the names of six banks ; the sheet being perforated lengthwise between each two banks enables them to be torn apart easily. The object of this is the saving of time. This sheet is made just the proper width for the arithmome- ter, and when used is placed in that machine in connection with an unperforated sheet and carbon paper. By filling out the sheet with the machine an actual copy is also made at the same time on the un- perforated sheet. This copy is retained in the bank. The slips when separated at the perforations are, as elsewhere. 268 MODERN BANKING METHODS. sent to the clearing-house with the checks. Fig. 187 shows such sheet of slips. BANKERS BANKERS BANKERS BANKERS BANKERS NAT. BANK NAT. BANK NAT. BANK NAT. BANK NAT. BANK ON ON ON ON i ON MET'POLITAN i HIBERNIAN BANK OF UNION TRUST i CHICAGO NAT. NAT. BANK, i B'KG ASS'N. MONTREAL. COMPANY. • BANK. $129.62 $1.95 $28.06 $4.50 $20.59 7.00 1.50 70.95 11.80 . 2.25 27.00 12.69 6.00 40.00 65.50 100.00 16.63 13.71 1.52 15.00 51.00 j 35.73 124.30 62.62 78.72 30.00 i 20.00 72.14 5.64 6.76 168.00 ! 19.31 32.27 11.85 250.35 248.26 i 1.32 17.28 2.00 3.63 194.90 9.90 17.07 201.26 40.25 42.00 8.30 8.50 249.96 46.10 264.80 1.88 16.93 509.66 114.77 48.55 1.68 43.24 200.00 100.00 24 55 150.00 280.50 100.00 4.10 65.36 300.00 1,103.25 41.71 63.83 23.96 118.95 47.64 285.02 100.00 65.14 55.20 175.40 12.92 6.83 10.21 11.80 509.42 147.05 400.00 46.53 468.38 14.76 24.88 275.00 12.94 2,952.45 204.57 26.58 100.00 33.13 340.00 138.87 31.83 63.27 112.01 560.00 4.00 91.00 - 89.91 45.94 5.88 200.00 53.62 14.11 112.08 300.00 3.35 272.73 40.00 1,424.40 300.00 36.37 .79 16.55 11.60 2,000.00 4.40 9.66 7.18 7.27 1,000.00 46.85 26.35 15.00 81.00 2.50.00 18.64 247.67 105.45 107.77 50.00 2,770.67 45.00 110.00 40.00 8.75 88.50 .50.45 304.46 591.64 17.45 129.62 19.57 43.36 220.11 5.00 100.00 117.75 1.75 691.63 38.50 51.00 43.00 570.62 144.80 78.00 157.00 247.67 81.25 344.95 .05 .75 ; 600.00 117.75 $5,528.15 $9,142.05 $7,135.26 $3,313.81 $3,156.49 Fig. 187.— Sheet of Clearing-House Slips. Fig. 188 shows the settling clerk's statement as used in Chicago. Figs. 189 and 190 show the form of credit ticket and balance ticket respectively. The latter being printed in red ink on yellow paper. Fig. 191 is an order on the clearing-house from a creditor bank authorizing them to pay their messenger the amount due them in the settlement of the day's exchanges. Fig. 193 is a form of draft or order on the clearing-house, and is used to transfer funds to some other bank, similar to the transfer check used in Boston. Figs. 193 and 194 go together. They have a perforated line be- tween them to permit of easy separation. They are used to pay er- rors in the exchanges of large amounts, also to redeem large checks THE CLEARING-HOUSE. 269 Mo. 24 Chicago Clearing House. BANKERS' liATlOML BANK. SETTLING CLERK'S STATEMENT. i^<^L^ 3 ftfcro Debit Balance No. BANKS Credit Balance- BANKS DEBIT BANKS CREDIT No. T-H-^.f O 1 First National Bantc, V/^ y)4 0/ s & « Union National Bank, 3390c /^ J'3^ ^ ^S> ?f j^ 6 yryo. ; Mer. Loan and Trust Co, / -3 cjTiS G ^r 6 V /^> '^3 7 33. 6-^ c 8 Com Exchange Nat. Bank. tf< ~v - 21 f Z'^yJ^ o 23 NaL Bank of the Republic x3v5 •0 >- J- o^U ^/ .28 21 TofJl Footlnzs. / j^ / v/lf ^ J" Proof, foyjt- / j-f ^ Fig. 188. Cliioago, .f!^^:^.....'^. ^^/^^ BANK No. I CREDIT FIRST NATIONAL BANK. - - / .-r:?. .te...,^...!C'..l..±:...::^.^ I"^.?.l Amount of exchanges to Clearing House this day per Messenger. Fig. 189,— Credit Ticket. 270 No. MODERN BANKING METHODS. Chicag:o Clearing Hnus^ (Sc^ 3. /^o o Amount Received, $. AfiHNint Brought, $ . ^<$ ^ t^' '^ 6 ?-^ A/ y ^ o 6 Jt-O Debit. S. Balance Due Clearing House. Credit Balance Due FIRST NATIONAL BANK, ■5 l^^./'^K^ ^ 7\n\ /3. 7^;^pc:i.t.<.^ s^,^,„^ Clerk. Fig. 190.— Balance Ticket. C. H. Bank No.j;^^^ , W. D. C STREET, Manager. Q) CHICAGO CLEARisQ HOUSE. ?t^j..,<::^. DOLLARS, Being the Balance due us fn^m the Assoicated BanUs m to day's Exchange*. ^^ Orders (if any) given to other banUs this day will be received itipait payments Oisbier. Chicagc—^^Hsf -TlZ^c. o Fig. 191. — Order on Cleaeing-House. Bank No.Z^. W. D. C STREET, Manager. CHICAGO CLEARING HOUSE. Pay '^c^^.-/^ '-'i^k^^^^-^ n/^'^^ ^iyc:i>*-t>^^ tyx order, % ^■^^■Ooc>71r and deduct from balance due us this day Dollars, Fig. 192. — Cleap.ing-House Okder or Draft. Credit Clearing House Checks. PAYABLE TO-^.-2:_?r__ ^^.^^^C&^^'^^rr^.. C^vuu/Q^ Chccks, / o o Z-.o C^ / f^ y X vTo S o o Errors, 6 :l •^6 j7-¥- ^f C, f or ■T^^?:5*f4^ &<.«i**2!yl^-s^ 1^.0- ///•^ i,o o ^ 5 ? > 3 7' s-f Li Fig. 195. Fig. 196. 272 MODERN BANKING METHODS. is the portion given in settlement. This is returned to the bank the next day through the clearing-house. Figs. 195 and 196 are the obverse and reverse of one slip. They are a statement in aggregate of the out clearings, or checks going to the clearing-house, and the in clearings, or checks received from the clearing-house, respectively. After the clearing has been com- pleted these statements are made for the ofl&cers of the bank, for their reference. Another slip is used for the benefit of the officers and is shown in Fig. 197. This is filled up at the close of the day and shows in the The bankers National Bank, CHrCAGO, ILL. CLEARING HOUSE CHECKS. a?c^, VO Paying Teller, . . Heoehing Teller A to K, . " LtoZ. '.. Dote Teller, , . , TOTAL. / f 7 ^9 3 ^-^ i^ 7- 2- 7^ t/- Y 3 Mi t^ C X 1 "§ i i i ^^ .J ^ ^ "~ 5 «> -* i t i 1 ft.>^ -^^)i:^m <4-^c;^^-i ^i Cv s •4 {^^c^ ^. -^5, ^; :s^- ^ 1 1 ^ « 5t- <« ~k i ^ <\, ^ ~^^"^ ¥-*^S ->-<>-.«„ ifl ^ CO O z DC ■i It t< t>^-io »-v.S-ri ^-^0 (j-,ik .^-t (fc -4 <, LU _J e «VV5 ^». ■>* ^^^ IJ^-NO-^vt.^ ^VoS O ■\, ^ >^o«~p '*^.o^;>'^S'r»'°rSS' 2 s^-,-» «^^s ^^^ A^- s- c ■^~ .^o ij^^ ^Oo::i-^Q-«N«,> i.> ^ K b ^N^S ^ ?^C: 5 b :^ ^"^ '^ "^S "^ ;? D -~-tvrj^-4-~^m ^ '^ ( ^ ^ Tvo ^6 0<. -« »/l i-t^O Cl*^- Ot*"^ t^^^* t) ^ ^ f^^o '^ 5 J ^ %aoS--S,^v. S,^c^^i,l, ■^ ^ %^ 'S h s "V f; ^1 1^ 6 fT) t^-, ^xo ^ >^~\ 5 % Ci <^ 'i ^" ^ -^ '3-.^:t -^ ^ ^> '^ o i nil \\\\\\\\\\\\\\ . 18 274 MODERN BANKING METHODS. bank in the following morning's mail, which are added to the clear- ing-house sheet. Fig. 199 shows one of the pages of this book. OUT CLEARINGS. (&^ 3 DIFFERENCES o o '^02 f U^f no <^>s>^vP BANKS First National, NaL Bank of America, Merchants Nat Bank, North-Westero Nat. Ban! Commercial Nat Bank. >n'Nat Bank. Mer. Loan & Trust Co. Com Exchange Bank, Metropolitan Nat Bank, Hibernian Bank'g Ass'n, Bank of Montreal, Union Trvst Co. Chicago National Bank. Continental Nat Bank, Ft Dearborn Nat Bank, Nat Bank Republic, Northern Trust Ca Illinois Trust & Savings B'l Checks as per Scratchcr, Total Checks perScratchc DiSerence Acct. Fig, 199. to CjOl // / 7 3 iL I ■T'S'/ o > 3 >/ / VJ^ '^^o ■11 \7^ I / o o yys'L 4 4, r^', 31 lo 'f/'J'^i, /0 3Fiy 7f 3> 3 3B 7 '7 7f > y-L o 0^ 3 3 7" >t;ii^<^ 0S'y3 'i^ S''>"i •> 1^ loJ-i./s^^h.S Fig. 195 is compiled from this book. The clearing-house proof-sheet is similar to that used elsewhere. It differs chiefly in the addition of the two columns styled settlement. These columns are used in which to note the debit or credit settle- ment made by the clearing-house. In Chicago the drafts or orders on the clearing-house, such as TRE CLEARING-HOUSE. 275 CLEARING Chicago,— HOUSE PROOF. i9oa SETTLEMtNT No. BANKS SKI!ffc'5'S;S BANKS OR. BANKS CR. lAlJkKCE OUE No. SETUEMENT i 6^.i yyc o6 ^ i^e, i <^/d ^2-e- >/->f'7 /V .^H^^ r> •f / i }'r fM6 3,^ ■7 7?>^-"S '7 Modiutf NxuxalBaak. S/^*-v^ fo 6j ' r» -^a- /J },.li «* IL-w / ' ' J>- CttnawcU Htt. Bttk. JJ rjs >Af ftffy^-f^ rifJ*-> 'f U>k» Ibtkol B. rf/Yi) 'f <5jJ«';>^ " rf*p*7 ij. » /^ ■to UiaaTUCO, 71^ 6^ /V 7» Iv^iaJ '' V ^JoJyJ /6 1* */^ /«J V/ ' po of J •ri f-l fi?}f> / •/ y rifj^/ / »/ yooof^ J/ Fig. 200. shown in Fig. 192, are much in use, and when a settlement of a bal- ance is made by the clearing-house these drafts are, of course, con- sidered and they are noted in the settlement column, thus keeping a record of the character of the settlement. Fig. 200 shows a clear- ing-house proof-sheet in abbreviated form. The Minneapolis Clearing-House. Minneapolis being a smaller city than those before mentioned, the method of clearing is naturally more simple. Both in Minneap- olis and Chicago the package clerk's receipt is used, and this being /O Minneapolis Clearing House SettlirJ CUrKtStatemetit- cz<>/- ^ Noitliwntenl N>fl Baok, Secofity Bank of Minn., Henaeptfl Co. Bar. B'k, First National Bank, NlcoUct National Bank, Nat*l Bank of Commerce. Floor City National £ank. SwMUah Amer. Natl Bank, Metropolitan Bank, Footings, Balance, Proof, tjai/m /^J¥^ /0^67'/<^ so-f cfj.^if, 6n r/ 3f 1 J >■ * ^'¥ 7 A 77/>7 '^« F^rr/ -^ /^ > 3^ cTcfa Fig. 201. 276 MODERN BANKING METHOUa. identical with that used in New York, a description of it is unnec- essary. In Fig, 201 is shown the settling clerk's statement, which, as ig seen, is much simpler than any before shown. No.Z..l5 Minneapolis Clearing House Association;-J^;^<£!Zli£_J900 CREDIT .Sr^^/^^.V^a^^^^ %^&f _ 7..zA..£.Jj^ Fig. 203. Fig. 203 is the balance ticket used. This is similar to the same in use in other cities, and is made up by the settling clerk after the exchanaes have been made, and is given to the Manager. Uo-Z.Q. MINNEAPOLIS, ^—^^^9::Z^..J^, MINNEAPOLIS, :r=±i!e:e^Z_ ^./.Z.f.s s«™i55!J5! Minneapolis Clearing House Association, t^ <5f^^±^^^Ie<<^:i^li?:gtj:^^ Dollars. In fuU for balance due this day ta^:^^-^^^^*'^^*^^^^^^-^^ — - $.;zz.4.„^.:r^ .Cashier. Fig. SO'l. THE CLEARIJ^Q-HOUSE. 277 Fig. 204 is the form of receipt given by the Cashier of a creditor bank to the Manager upon receiving the funds in settlement. Fig. 205 is the form for the receipt given by the Manager to a debtor bank upon payment of the balance due. Fig. 206 shows the Minneapolis clearing-house proof-sheet, which No. 2^ Minneapolis Clearing House, ., ^-^'^ ^//f^ ^ Received tfom^C^^tgjg^:^^-^^^^- ^^^^^^M^l .<:^- %^A^.:?r.'^.. ''^^f^r"^'^^^-^^^^^^ ^^~ /^o^ Dollars. In fun for balance due this '7 7 7'^ 3(> 10 nxST HATIOHAI. BAHK 77 fry M / ra. frr 7^ 7 / ^v 3y 11 HICOUBT HATIOHAI. BAMt. / o oyi "'z •o J (^ //^ A^/ j>% 3/ 1« HAnONAI. BANE OP COlOSaCB 3/ 6 of Mi. j(^/ 3?->i V / > 7'^ -c^ !• FLOmt CITY HATIONAl idlK ^6. ^-Vf c?? ^/-/ ^3i ' ? 7.^ Jf; A^3' /■¥ 0-4, >/-<= 91 MaTBOPOUTAH BAKE ^j V// / 6 .?-/ Jlr^ -f 7 J ^7> >-(, writ yjo Jyi'i J-c Vf J> ■}, V ''U jf i- '7 ^o J^li: 'y-i, \ . Fig, 3 6.— Minneapolis Cleaking-House Proof Sheet. in that city is bound in a book instead of being a loose sheet as in the former cities. ScRANTON, Pa., Clearing-House. In this city, as in all the others, itemized lists of the checks are, of course, made at the bank. The totals of these are then entered upon a slip called the exchange list, which fills the place of the set- tling clerk's sheet used in the large cities, and before described. The messenger takes the checks and list to the designated bank, where the various messengers meet and make the proper exchange of checks. The exchange list mentioned is left at this bank, which acts as a clearing-house (the banks having their own memoranda). Fig. 207 shows the exchange list mentioned. 278 MODERN BANKING METHODS. Scranton Clearing-House Association. EXCHANGE LISX. ^/n^ei/ Bent <^^^/ iqno ■ « fi>i( Kalioml Bank Scranton Savingi Bank Merehttnis and Mechanics Bank Third National Bank Weit Side Bank County Savings Bank and Trust Co, laeKa Trust & Safe Deposit Co Tradtri WaUmai Bank Dime Depoat i Ktanait Bttak Fig. 207. From these exchange hsts a record is kept daily by the bank act- ing as clearing-house in a book prepared for the purpose. Fig. 208 shows the form used in this book. No proof sheet is in use here and none is necessary, as no set- SCR ANTON CLEARING HOUSE ASSOCIATION f . nm mttoMl. ^-4 ^£^2J ^ ^1 ypi ti »?///j.< i^ ■>/•< ^ ii4U ^JuA ilj. TMt P^ pi- X. UorfatMa ■ l^P4j. 24z£; iiL fi i^L TZi'n Liuiii^ 4. thM NMkMl. Ilti^ nZ^ WtL liil J.f£2-Il l^^ 7i^ «. Vut Sid. Buk. iSiit 2jif_ (11 y^ — i. Ir^i4-Lik j£^£. :^^ ±1C I4A1. J.ill ill ^-diH^f^ in dZf4 lijb. hilLi.'- "^'L itJ. i'—i.f^'L-M.iHii- XU-tA ■f^^ itfin iflL t^P liifi i^n ,/yo, i^ y^LL ^fh n^vi ji[tsaiva«niiiMiL LiLLiU-nLi^lL ^Si^i^ -J-^^p —itl^ii -^l^U ^^U-LU uJiiMti M.ai»i CCtfdiiL. Fig. 308.— Scranton, Pa., Cleaking-House Record. THE CLEARINO-EOUSE. 279 tlements are made by or through the clearing-house bank. The banks settle with each other directly, paying or receiving the bal- ance due. This method, as is seen, is very simple, and the forms used very few, but it accomplishes the purpose, and for a city of this size seems all that is necessary. CHAPTER IX. GENERAL MANAGEMENT. The Origin of Banking. To arrive at an understanding of some of the underlying princi- ples relative to the general management of a bank, let us look at the origin of banking. The word bank is supposed by some writers to be derived from the Italian word hanc or banco, which signifies a bench or counter, such as was used by the Lombardy Jews or money changers, for convenience in counting their coin. In those early days money was carried in coin, and it was necessary to exchange these moneys be- fore passing from one country to another. Other authorities say the Italian word banco is derived from banck, signifying a heap, or com- mon fund. The first known bank, such as we understand it, was the Bank of Venice, which was organized in 1171. This was, however, purely a bank of deposit, for the safe keeping of money, jewelry, or other valuables. This bank made loans to the Government, and was em- inently successful, but was finally destroyed by the French in 1797. For more than two hundred years this bank stood alone, then the Banks of Barcelona and Genoa were organized. In 1609 came into existence the Bank of Amsterdam ; in 1694 the Bank of England; in 1695 the Bank of Scotland, and in 1783 the Bank of Ireland. These were all banks of deposit and discount or loan, similar to what we know them to-day. The first bank in the United States was organized in 1781 in Phil- adelphia, and called The Bank of North America. This bank is still in existence, and flourishing, an example of careful conservative management. From that day to the present the growth of the bank- ing business has kept pace with the other various interests ; in fact, it has become so intimately interwoven with all the other varied in- terests of the country that they have become interdependent. Gilbart says " a banker is a dealer in capital, or, more properly, a dealer in money. He is an intermediary between the borrower and GENERAL MANAGEMENT. 281 the lender. By this means he draws into active operations those small sums of money which were previously unproductive in the hands of private individuals, and at the same time furnishes accom- modation to those who have need of additional capital to carry on their business." A bank of the present day is defined to be " an institution au- thorized to receive deposits of money, to lend money, and to issue promissory notes, or to perform some one or more of these func- tions."* The business of banking in its broadest sense includes the receiv- ing of deposits, paying of checks, the loaning of money, dealing in bills of exchange and the issuing of paper money. In looking back over the history of banking it is seen that the bank was the natural outgrowth of man's necessities. In the earliest ages barter was simply carried on by the exchange of commodities. As this increased beyond the point of convenience various mediums of exchange were adopted, such as pieces of metal, flint, or shells. As the trade and barter between individuals in a community increased and extended to other communities the neces- sity began to be felt for some recognized mediurc of exchange that would be acceptable in communities outside their own, and have more recognized value. The governments of various countries or communities then issued certain mediums of exchange, and passed laws regarding their val- ues. As the values varied in the different countries or communities, it necessitated the money changer, who was to be found in the mar- ket places of the various cities on the borders of the Mediterranean, where the earhest trade appeared. The increase in trade and the natural increase in the volume of these mediums of exchange (coin) began to make it very inconveni- ent and unsafe, in the then condition of society, to carry this coin on the person except in limited quantities. At first the bulk was kept in strong chests in the houses of the merchants or traders, but this became dangerous as robbers infested the countries. Then arose a demand for a strong and safe place of deposit, and upon this was organized the first bank. A building suitable to the business was erected and vaults built, and here the traders deposited their surplus mediums of exchange daily for safe keeping. As I have before stated, the banks at this period received for safe keeping various ar- ticles of value, and a fee was charged for their care. At first there was no common general fund, each depositor leav- ing his coin or valuables in a bag or bags upon which he had in- scribed his private mark. * Bouv. Diet., Vol. 1, Tit. Bank. 282 MODERN BANKING METHODS. As the business increased the responsibihties of the banks grew^ and for their own protection, as well as for the protection of their customers, they adopted a simple system of giving and receiving a form of receipt or acknowledgment when a deposit was made or with- drawn. Introduction op Bank Notes and Drafts. As time went on, and the business of trade and barter increased apace, so that from the Mediterranean ports it extended to Spain, France, Germany and the British Isles, it was found extremely in- convenient and cumbersome to carry the large sums of coin neces- sary to meet all demands. Then came, to meet the demand, the in- troduction of bank notes. Still later a closer interchange among the banks of those coun- tries was called for by the mercantile community, consequently they adopted the plan of depositing sums of money with each other, and then selling orders or drafts against these, this being a more safe and convenient method of carrying money from one country to another. These deposits could only be made in coin, and they had to be sent by a special armed messenger, sometimes accompanied by an armed guard, consequently the rate of exchange, or cost of a draft, was necessarily high. Still later came the individual check, or order upon the bank, it being the natural outgrowth of the personal receipt to the bank when withdrawing any sums, just as the pass book has been the outgrowth of the simple receipt given by the bank for the deposit of any sums or valuables. The original checks were simply an order, and had to be pre- sented at the bank by the drawer for the withdrawal of any sum. As the demands of business increased these were made negotiable, consequently transferable, and thus we have the check of the present day, by which over ninety per cent, of the immense business of our country is transacted. With the increase of trade came naturally the great increase in volume of the negotiable checks, and as it became necessary for each check to find its home bank, the system of exchanging between the banks in the cities by messengers soon grew too cumbersome, so the clearing-house system was organized. The deposit between banks at a distance is now safely conducted by the mails and by the use of drafts and checks, in place of coin and the armed messenger, thus greatly reducing the expense. GENERAL MANAGEMENT. 283 The People Benefited by Banks. I have given this brief account of the growth of the banking business to show its intimate connection with the commercial world. The banks are the outcome of the demands of trade, and they have increased with the natural growth of trade. The various conveni- ent methods in use to-day are the gradual outcome of the demands of business for convenience and safety. The banks may be said to be an excellent system of combination, by which the best results may be obtained. By means of the com- bined amounts of numerous depositors the banks have at their com- mand an amount for loaning to business interests, to the benefit of the community, consequently for the benefit of the people of the country, such as few individuals could possibly have. One writer has very aptly compared the bank to a river into which flow num- erous small streams each too small to do more than to water or fer- tilize its own immediate territory, while the river has power to move the wheels of myriads of mills, and float the ships from all parts of the world. Another position a bank fills in a community, and by no means the least, is as a sort of trustee of the funds of its depositors. These fimds are deposited with the confidence that they will be repaid whenever called for. The banks therefore, in a sense, hold them in trust, and are bound by the law to use all due diligence in their care and safety. They are permitted by the law to loan out a cer- tain proportion of these deposits under certain restrictions, and these restrictions are made for the protection of the depositors. I speak particularly of this position, for it is an important one, and I fear is sometimes overlooked. A bank may thus hold an in- fluential position in a community, and if carefully managed can wield it for the benefit of all. A bank, and particularly a bank for savings, is a great encour- ager of thrift in a community. Such an institution comes near to the lives of the people ; it helps them to save, and by such savings to elevate the poor to a better position. The immense increase in savings deposits in our country in the last twenty-five years well attests the growth of thrift among the working people. In spite of the benefits that the banks are to a community they are not philanthropic institutions. They must exist, and to be en- abled to do so must make money, as there are running expenses to be paid always, besides, if possible, a fair rate of interest upon the invested capital in the case of discount and deposit banks, and in- terest to the depositors in the case of Savings banks. These profits are made from the loaning of money and from. 284 MODERN BANKING METHODS. careful investments, and from selling exchange, and in some sections of the country from collection fees. Banks may be classified into two kinds, private and public or chartered. A private bank is like any other private business, owned and run by private individuals or firms. The chartered banks are corporations, and obtain their authority from either the United States Government (National banks), or from the State govern- ments. In our previous chapters we have seen the machinery of banking ; but, however beautiful the machine may be, unless it is set in mo- tion, and in a direction to be of some use, it becomes like any other inanimate matter. It may be a curiosity to look upon, but wiU be passed by and hardly thought of again. We see a beautiful and powerful engine. To us it represents a great deal, because we have seen it move, and we know what it can accomplish ; but if we knew nothing of it and of its power, it would mean no more to us than an inanimate piece of metal. Until the hand of the skilled engineer takes control of the engine it is really useless. So it is in the bank; no matter how beautiful and complete the machinery, there must be the engineer, the head and brains, to operate the machinery in the right direction. As has been shown in early chapters, the management of a bank is divided into two departments — the legislative, or board of direct- ors, and the executive, or President and Cashier. A full description of the necessary qualifications for these various positions, and the powers and duties of these officers, has been given, so it will be un- necessary to repeat the matter here. If sand gets into the bearings of an engine it produces friction, the bearings get hot, the engine must be stopped and the irritating cause removed. So in a bank there should be as little friction as possible between the executive and the legislative departments if there would be any real success. There may be differences of opin- ion, but the two bodies should fuUy recognize each other's position and responsibilities. It is natural that a board of directors should defer to the opinions of the executive officer, feeling that he possibly has more personal knowledge on the question before them than they, as sometimes oc- curs ; but the officer should give the board all the information in his possession, and let them decide as to the best course. A one-man bank in which the board of directors is a mere figure-head too fre- quently occurs, and often results in the wrecking of the institution. GENEEAL MANAGEMENT. 385 Making the Bank Popular. A bank to be really successful must be in a measure popular, es- pecially in these days of active competition. When a bank first opens its doors for business it must have cus- tomers, that is, depositors and borrowers — one is as important as the other. Its stockholders, having a personal interest in its success, may reasonably be expected to be among its depositors. But these of course are limited. If it would succeed it must seek to build up as large a line of depositors as possible. To do this it should start from the foundation. Seek to obtain among its stockholders as many strong leading men, men of the highest standing, both finan- cially and socially, as possible. The board of directors should be made up of men of this type, and in their selection of the officers they should choose the best, not the cheapest, as is too often done. The cheapest men often prove the dearest. The confidence of the people must be obtained. This should be the first move towards popularizing the bank. Having obtained it, never by word or act do anything to shake it. To obtain depositors often requires much solicitation. This more properly belongs to the stockholders and directors than to the exec- utive officers or employees. In soliciting depositors the oait of increased accommodation is sometimes unwisely used. The question of loans or accommodation is one that should be considered strictly by itself, and should depend upon many things which will be treated of later. The bank started, its policy in popularizing it should oe to treat everyone, rich or poor, with the same courtesy. Be perfectly honest and frank with the people. Let the bankers never forget that they have in their care the money and credits of the people, which have been entrusted to them, and they will be watched, particularly at first, with anxious eyes as to the conservatism and carefulness of the management. Borrowers are not so difficult to obtain, except under some ex- treme conditions, as depositors. The question here is as to the se- curity. Here is another line upon which a bank can make itself popular, not by lending to everyone, but by exhibiting such care in making its loans, and if necessity compels the refusal of a loan to do it in such a manner that even the one refused wiU feel the justice of the act, and his confidence will be strengthened. Men like to transact business where they know they will be treated honorably and with courtesy, and where the interests of all will be well guarded. 286 MODERN BANKING METHODS. To be popular a bank must be broad spirited and liberal. A petty spirit soon disgusts the people, and they will not hesitate to show it at the first opportunity. Whatever is worth doing is worth doing well, and the people sel- dom object to paying for a first-class article. Ways op Advertising the Bank. Wise advertising is a feature in banking that is worth consider- ing. The customary business card is, of course, put in the papers, and at regular periods statements of the condition of the bank are published. Banks desiring to increase their list of correspondents will find the banking and financial periodicals of the highest class valuable advertising mediums. A plan frequently adopted, especially where the bank is in a healthy, growing condition, is to have a copy of a pubHshed state- ment printed on a neat card, and enclose one of these cards with every letter that is sent away, and place them at the disposal of de- positors and others coming into the bank. The people Hke to watch the growth of a bank, and are pleased when they see the one- in which they deposit steadily growing. Some banks get up a nice little pamphlet in which are brief in- structions regarding notes and their forms, endorsements, the proper form in which to fill up a check, the forms of drafts, a few simple rules regarding the making of deposits and the care of the pass book, also the postal rates. These they send to all their depositors and place them on their counters within the reach of all. Some have rulers and pencils made, also calendars, memorandum books, pocket atlases, needle cases (for the ladies), and various other little useful articles, all with the bank's card on them, to give away to their customers and others. The paying of interest on deposits is another means of drawing business, but whether this is a source of profit, except under certain circumstances, is a doubtful question. The most satisfactory way is to keep this class of accounts as purely savings fund accounts, un- der the usual restrictions of Sa^angs banks, not subject to check. Many banks are doing this with success. In the competition to secure deposits from banks and bankers some large banks employ canvassers who travel over the country visiting the banks in small towns and cities, and soliciting their ac- counts. Another means of popularizing a bank is for the bank to own its building. The people certainly feel more confidence in the bank that is fortunately able to have its own building. But it would hardly be considered good business management for a bank to erect or buy GENERAL MANAGEMENT. 287 a building for its use unless it is in a financial position to warrant doing so. With all these various means nothing succeeds so well as the points first mentioned — starting the bank on the right foundation, winning the confidence of the people and retaining it by kindly, courteous treatment and the best of service. Depend upon it, it pays. As an instance let me tell of the success of a bank that followed the above policy. The bank started in a section of the country where it had been the custom to collect without charge. It had old compet- itors, but it took the position that it would transact all business promptly and give the best of attention. It pushed for business, and to-day, while only seven years old, it is the largest bank in that sec- tion of the country, and has fully demonstrated the fact that the people are willing to pay for good service. The Loans and Credits. As has formerly been stated, a bank's principal source of profit is derived from the loaning of money, or the buying of paper, the loans being made chiefly to those engaged in various business pur- suits. The basis for loans is credit, just as the basis of all business is credit. A bank discounts paper, or buys paper ; it does so upon the knowl- edge it has regarding the maker or endorser of the paper. Even where a bank loans upon collateral security it is done upon the knowl- edge of the value of that collateral, and of the financial abihty of the corporation issuing the collateral. Good credit is often worth more to business houses than the actual capital employed, and the consideration of credits is a leading feature of the banking business, especially in our larger cities and towns. A credit department in a bank is as necessary as in a mercantile house, and it should be managed with the same care. A description of such a department with diagrams of the best forms will be found in the chapter on loans. It is comparatively easy to loan money, the difficulty being to be sure of the repayment of the loan. More banks have been ruined by the losses sustained from bad loans than from defalcations, and, as has been stated in previous chapters, too great care cannot be exhibited in a careful study of a borrower's personal character, as well as his financial abiUty. A man's financial condition may apparently be good, yet his personal habits be such as to wreck him. Let me give a case in point. A merchant in one of our cities, who was a very active business man, and apparently successful, was quoted in the mercantile reporters "capital over one million, credit high;" at that very time he was 288 MODERN BANKING METHODS. selling his paper, through brokers, in various parts of the country. The question was finally raised as to why a man of such standing should have to go so far from home to raise money, and an investi- gation showed that he had ruined his credit in his own locality by unsatisfactory and unreliable methods of doing business, by his per- sonal habits and by his manner of treating people. He failed for a large amount, a natural conclusion to such a condition. The dispensing of credit is one of the most responsible features of banking, for it may be the means of the making or breaking of any business man or firm unless handled with great care and dis- cretion. The banker is in a position to know when a borrower is going be- yond the safety line, and he should take the liberty of cautioning him or of withholding further loans. The difficulty here is that too often the banker allows himself to be led by an over-confident cus- tomer into loaning him more than was safe, then, when the pinch comes, he is persuaded into advancing more with the hope that by so doing the whole loan may be secured by the final success of the project. In most such cases the operation is speculative in its char- acter, and in all such loans the deposit of collateral cannot be too strongly recommended. The question naturally arises here as to the margin of credit in such cases. This depends largely upon the character of the collat- eral. If the collateral should be United States bonds, of course it is perfectly safe to loan the full face value. The same can be said re- garding the bonds of some of the States. With regard to railroad or industrial securities, it will be well to act with great care, for the value of these securities is dependent upon so many contingencies, that their actual realizing market value must be carefully considered and kept continually in view. Among the most careful and success- ful bankers it is considered wise with this class of securities to keep a margin of from twenty-five per cent, to fifty per cent, beyond their actual selHng value. One point should ever be before the banker regarding his collat- eral loans, and that is the readiness with which they can be turned into money when needed. It is for this reason that mortgages are not considered a good class of securities for loans for banks of de- posit, where the depositor's money is payable on demand, for they are what is considered slow assets, it seldom being able to realize upon them quickly, especially if a pressure comes. Savings banks often adopt mortgages as their form of invest- ments, but they are generally protected by their rules from any sud- den heavy drafts, which gives them the opportunity to raise the nec- essary funds. GENERAL MANAGEMENT. 289 It is customary to require a statement of their affairs from many- borrowers, as was mentioned in the chapter on loans. It is well to keep in mind that there are two ways of " padding " a statement — one by a fictitious increase of assets, the other by a fic- titious decrease of liabilities. The former method is the more com- mon. Let me give two instances that came to my personal attention. A large corporation that was actively pushing for business all over the country had a mail-order department, and employed a large force of typewriters and others constantly sending out circulars, and corresponding with people, seeking for business. The expense of doing all this they estimated at $100,000, a,nd reported it in their statement of assets as "prospective customers" for the amount named. While they may have valued to themselves the work done as being worth that much to them, yet this could not legitimately be considered an asset, nor could a bank, loaning upon the strength of such an asset, have realized from it if forced to do so, which is the proper way in which to consider an asset. Another concern, a large dealer, in making a statement to a bank increased their assets over and above what was called for by their books, by $50,000, adding this sum to the statement of merchandise on hand. An inquiry showed that this fictitious sum was added be- cause they thought they could probably sell out their business and good- will for this advance, and they could not show solvency with- out it. This was not a realizable asset, as was shown later when the con- cern failed. It is a fact that the legal limit of ten per cent, of the capital stock is ignored by many banks. The Comptroller of the Currency in his report for 1901 stated that it was shown on June 29, 1900, over forty per cent of the National banks reporting on that date had made loans in excess of the statutory limit. With the natural increase in business, and heavy demands for money, there is every temptation to, break this statute, but while it is a statute, and as it was placed there as a safeguard, bankers will do well to obey it. Some banks with comparatively small capital and heavy deposits, having large demands for money, and not wishing to increase their capital stock, or to break the law regarding the ten per cent, limit, adopt the policy, whe"a desiring to grant heavy accommodation, of obliging the customer to present first-class marketable securities, bonds, for from fifteej\ to twenty per cent, more than the sum de- sired. The bank then purchases these securities outright, making what is called a temporary purchase, for the amount desired, it being agreed with the customer that he is to purchase them back at the same figure at a certain time, or in installments if desired. If 19 290 MODERN BANKING METHODS. they depreciate materially he is to furnish the bank more or they have the right to sell in the market. A record is kept of this temporary purchase in a book for that purpose, in which a description of the securities is noted, from whom purchased, the date of purchase, and the amount actually paid. The sum paid is charged on the books of the bank to the account of stocks and bonds, consequently never appears in the loans. The danger of this method lies in a want of care and conservatism in the selection of the securities. Those qualifications, care and conserv- atism, are considered by some to be the opposite of energy or en- terprise, but never were they more mistaken. They are partners who can be of the greatest service to each other. Many banks adopt the policy of treating the surplus as a portion of their capital, consequently when making loans the ten per cent, limit is considered with reference to the combined capital and sur- plus. This naturally gives a much larger basis for loans in many instances, and still observes the law regarding the limit. Defalcations and Embezzlements. While it is no doubt true that the majority of bank officers and employees are honest, yet it is a fact that too much dishonesty ex- ists, and while occasionally a case gets into public print, yet in most of the instances the loss to the bank is made good by the friends of the faithless clerk or officer, and he is allowed to quietly resign. This policy may not be conducive to good discipline in the bank, but very naturally banks feel sensitive about having a stain of this char- acter become known to the public, often bringing upon them and their management severe criticism, and naturally shaking that con- fidence they have been earnestlj^ seeking to secure. In treating of this subject it may be well to consider first the causes. The officers and employees of banks are naturally brought in contact with men of all kinds, and the temptations which are thrown out to them to speculate, in the hopes of accumulating a little wealth, are numerous. As a general rule these defalcations are not committed in one stroke. Once in a while an officer or employee helps himself to the money in sight and "skips" for unknown regions, but more often the money is drawn out by degrees as needed for the schemes at hand, and every attempt made to cover the tracks. The delinquents often begin in a comparatively small way, of course intending to re- turn the money abstracted as soon as the profits from the scheme into which they have embarked have materialized. Once started, the demands for more money increase, for, of course, the scheme is a "sure thing," but the profits promised do not GENERAL MANAGEMENT. 291 appear, and the man is dragged on, hoping against hope. Falsifi- cation naturally follows the robbery, just as lying follows stealing, and an investigation finally develops the fact, which closes his career with disgrace, often behind the prison doors. This speculative fever, which seems to have affected all classes, and has grown tremendously in the past thirty years, has proved to be the principal cause of embezzlements in banks. Much of the speculation now carried on, such as dealing in futures, or on margin, is simply gambling, and when we consider gambling we must asso- ciate with it horse-racing, pool-selling and book-making, the gamb- ling houses, and their accompaniments, fast living and dissipation, all calculated, sooner or later, to ruin a man. The political field, with its excitement and promise of great pos- sibilities, is very enticing, and too often the banker is led within its meshes. He aspires to be a political leader, to go to Congress, or perhaps be Governor; to do this requires money, plenty of it, and if he is not a wealthy man the bank too often has to pay it, to its seri- ous loss. More than one banker has been wrecked on this reef. Extravagance in living is another cause. Bankers are expected to maintain a certain social position, but whatever their aspirations are in this respect nothing should ever lead them to live beyond their means, for with the accumulation of debts comes the temptation to obtain the money illegally with which to pay them. Discouragement may be considered another cause, although not as frequent a one as those before mentioned. A man may some- times be driven by discouragement to commit an act that he would not think of doing under different circumstances. Nothing is more encouraging than a recognition of faithful services, and it pays to adopt this policy. Few things are more discouraging than, when the chance for promotion comes, it is found that political, business, or family influence has more weight with the bank management than honesty, integrity and ability. Too many banks pay their employees insufficient salaries, the re- sponsibility not being considered as it should be. This is an unwise policy, for bank clerks as a rule are expected to appear like gentle- men, and they can hardly take the interest in the bank's affairs that they should if no interest is taken in them. Inducing them to be- come stockholders has worked well in many instances. One serious cause of defalcations is an inherent weakness, which sometimes makes it difficult for a good-natured bank officer to use with proper effect that valuable word "no," and the failure to do this has been the cause of serious loss, and has led to defalcations, misapplication of funds, and their attendant, the falsification of ac- counts. 292 MODERN BANKING METHODS. Nearly ever}^ department of the bank has been the sufferer at some time from the dishonesty of officers or employees, and the methods employed have been numerous, but I doubt if it would be wise to detail more than a few in a general way. It may, however, be set down, almost as a rule, that where there has been embezzlement, falsification of the records may be found as a natural accompaniment. Banks have been started in fraud, the capital stock considered paid in and so reported, when in reality the only payments were by notes, and these continually renewed from time to time when the bank examiner was expected. The whole scheme being to obtain deposits with which to carry on some operations. Of course such a bank could not last very long. Fictitious persons, or mere straw men, have been used upon paper for the purpose of obtaining money from the bank in an ap- parently legitimate manner. Loans have been obtained by officers upon good and well secured paper, which has been afterwards re- moved from the bank and worthless paper substituted. Collaterals have been removed from the bank by officers and employees having access to them and hypothecated for their private use. Overdrafts of officers and those connected with them to the ex- tent of hundreds of thousands of dollars have been allowed, and upon the advent of the bank examiner his assistant has been paid not to disclose them, and at other times the pages of the ledger con- taining these have been torn out and the books falsified. Loans have been made in the legitimate way to bank officers upon collat- eral, and the notes with the collateral, when due, simply removed, not paid, and the accounts falsified. Clerks sometimes, through fear of being discharged if they re- fuse, feel obliged to make entries in the books which they know to be false and intended to cover fraudulent transactions. My advice to all such is to most positively refuse. Better to lose your position in the bank and preserve your honor and self-respect. I know of more than one instance where the clerk who profited not one cent, but simply obeyed orders, had to suffer the penalty of the law for aiding and abetting a criminal officer. In more than one instance collusion has been discovered between various employees in the bank, or between some employee or officer and an outsider. In the case of collusion between employees it may be certain that one of the tellers is one of the guilty parties, for it is money the thieves are after. While collusion between employees does sometimes occur, still the most frequent form is between some one inside the bank and an outsider, and this is done in various ways ; among them, are giving false credits, suppressing overdrafts,. GENERAL MANAGEMENT. 293 cashing and suppressing fictitious checks, issuing certificates of de- posit, or Cashier's checks, or drafts on other banks without pay, re- hnquishing discounted notes or collateral without the paper being paid, and many other methods too numerous to mention. Carelessness in the management, or want of a proper system in the accounting of a bank, often opens the door, and is taken advan- tage of by the sharp and unscrupulous. In fact, in almost every in- stance of embezzlement that has come to my personal attention some looseness in the methods or carelessness in carrying out of the oper- ations has been taken advantage of by the guilty one. The system employed in a bank cannot be too perfect, nor can its rules of operation be too inflexible. The Prevention of Defalcations. The prevention of defalcations is a subject in which all bankers are interested. While it is a fact that neither strict rules nor even legislation will prevent all dishonesty, yet such careful supervision can be employed, and such restrictions can be placed upon those connected with tJbe bank, that it will be difficult to do much injury before detection. Character is the first point to be considered, for in the selection of officers or employees this comes prominently to the front. No man addicted to gambling, either with cards, stocks or otherwise, or to habits of dissipation, should be considered for a moment, no mat- ter what his popularity or influence. If at any time a suspicion, however slight, should arise reflecting upon the character or habits of any one connected with the bank, he should be subjected to an investigation. This should be done as a matter of business, without sentiment, and should the suspicion be well founded, he should be either dismissed or requested to resign, whether any loss has been sustained by the bank or not, for the business of a bank is such that there is too much risk attending the retaining of such a person in its employ. It is not a good plan to permit employees to have their personal accounts in the bank with which they are connected, unless it be the only bank in town, and only then under rigid restrictions, and no overdrafts of such should be permitted. Special privileges should not be granted to officers or employees with regard to borrowing money from their bank. When such loans are requested they should be passed upon in the regular way by the board of directors, and special inquiry should be made as to the con- ditions and circumstances under which the loan is required, and, wherever possible, collateral should be obtained. It is advisable that the mail coming into a bank be received and 294 MODERN BANKING METHODS. opened by some officer, not by an employee, he distributing to the proper departments such as belongs to them. It is very advisable that the work of a bank, however few the transactions, should be properly closed up and posted daily. Some small banks have a practice of posting their ledgers once or twice a week, and entering up their discounted paper once a week. This practice is careless, and it is hardly possible with such methods to keep as close track of the business as should be done. Some banks have a faulty method of carrying large amounts of the checks, foreign as well as local, coming into their hands through the various channels, for instance all received after one o'clock, over into the next day's business. This method is exceedingly unsafe, and has been taken advan- tage of frequently. Each day's business should be cleaned up so far as possible, with extremely few carry-overs, and those small and well accounted for. Some banks oblige their employees to secure certain lines of de- posits. This is a very unsafe pohcy, as it places the employee under obUgations to a customer, and this often opens the door to collusion. The duty of securing customers should devolve upon the stockhold- ers, and no one connected with the active management of the bank should be placed in such position. Whenever it is possible it will be found safe to permit no officer or employee handling the money of a bank to make the records, and it will be found a safeguard to have all the transactions for the re- ceiving or paying of money recorded twice by separate individuals, one being a check upon the other. Tellers sometimes take it upon themselves to make temporary loans upon mere checks or receipts. This often opens the door to crookedness, or the means of cover- ing it. Each department in a bank has one regular channel through which its transactions should go, and any departure from this is sure to let down the bars and leave the way open for wrong-doing. Thus, there is only one proper channel through which loans should be made, and no well-managed bank will allow such innovations as mentioned. The cash items or carry items at the teller's desk often form a ' ' hole " in which to conceal irregularities or defalcations, and should be watched carefullJ^ With regard to the individual ledgers — the three-column balance ledgers should be proved at least once a month, instead of yearly as I have seen many times. The Boston ledger system is preferable in enabling a proof to be taken daily. In either of the above systems the daily balances should be ex- GENERAL MANAGEMENT. 295 tended in ink, never in pencil. Some of the most glaring frauds I have seen covered for a time by having the daily balances extended in pencil, enabling them to be altered easily to suit the occasion. The balancing of pass books monthly is one of the surest proofs of the correctness of the accounts, and it is much better, where possi- ble, to have them balanced by some one other than the bookkeeper. In cases where it is impossible to obtain the pass-book, a statement of the account should be made from the ledger or vouchers, and this should be sent to the customer with a postal card for return as to the correctness of the account. Keep a close watch on the loans and discounts, for through these channels many defalcations have been committed and successfully covered for quite a period before detection. The want of care often exhibited in the keeping of the two principal books in the discount department, the discount register and tickler, has frequently opened the way to crooked transactions. As the discount register is the dailj^ record of the loans made, so the tickler, when properly kept, should be the daily record of all loans repaid, in whatever way. The loans should be proved frequently, either by a committee, or by some one appointed for that purpose. "While proving the loans it is well to take into consideration the question of interest and dis- count, for these are channels to be watched. The manner in which the majority of these examinations are made by the committees, even by those who are striving to do their duty, also a large proportion of the examinations of paper as made by the National and State bank examiners, is such that it is compar- atively easy for a dishonest employee or official to fool them for a considerable time. I understand fully the hmitations of time in many of these examinations, yet, in more than one case that has come to my personal attention, had only a few more hours been given to it, and a little more attention to the detail, the banks could have been saved heavy losses. Bank officials are often in demand for positions of trust in other corporations in their locality, but the wisdom of permitting such combinations to exist should receive the consideration of the board of directors, for the division of interest, with the natural demands for accommodation required in trade, present temptations too seri- ous to be ignored. Should circumstances appear to warrant them, however, it will be found advisable to have periodical audits made with the view of preventing the application of the funds of one office to conceal any possible defalcation in the other. 296 MODERN BANKING METHODS. Methods for Safeguarding the Bank. Various methods are employed by banks to prevent or circum- vent defalcations, such as the shifting of the clerks from desk to desk ; the employment of a double force of clerks, one set working at night to verify the work done during the day ; the appointment of an examining committee of the clerks to examine the affairs of the bank. The objections to these are, for the first plan, that it can hardly be carried on with any degree of success without seriously interfer- ing with the regular work of the bank, except merely the shifting of desks with the individual or general bookkeepers. The chief objection to the second plan is the heavy expense, in reality about doubling the usual expense for salaries. For the third plan the objec- tion is, that, in the first place the only time in which such an exam- ination can be made is at night, and the clerks who have been work- ing all day are hardly in a condition to work at night and do justice to it. Then again, the usual friendly feeling existing between the clerks acts as a bar against that spirit of perfect impartiahty which should exist in an examination of this kind. I have more than once heard clerks reviled by their fellows for reporting to the officials an irreg- ularity that was neccessary to be known, and that would have caused loss and trouble if not reported. Another objection is that those working side by side get into the habit of taking it for granted that the work of their fellows is correct, consequently do not give that careful attention to the detail in an examination that they should. Some banks employ an auditor as one of their regular working force. The trouble with this is that, where everything has been smooth, clean sailing for a long time he naturally falls into a perfunctory way of performing his work, consequently the sharp, shrewd fellow circumvents him. The plan that has given the best satisfaction, when properly car- ried out, is to have an examination made by an experienced bank public accountant, an outside man, once or twice a year. He should be a man thoroughly familiar with the banking business, and should be allowed to set his own date, not even the officers knowing when he is coming. The fact that such an examination will be made, and will be absolutely impartial, and that the exact condition of each de- partment will be reported upon to the board of directors, will be the means of deterring many from careless or irregular transactions, or from worse. Let me emphasize the point that the examiner should he familiar with the hanking husiness. Banking is like any other trade, and can only be learned by working at it. A man may be a GENERAL MANAGEMENT. 297 good mercantile accountant, but be really useless in making a thor- ough examination of a bank. The experience of some banks, especially where the officers have been consulted as to how the examination of various departments should be made, has been rather unpleasant in this respect. A careful examination by a competent man, concluding with a detailed report covering the condition of each department, is a great satisfaction to both officers and directors. The weak places can be shown and improved methods can be recommended, and the effect upon the public that such an examination is made periodically is to strengthen its confidence in the bank. The examinations made by the directors are necessary, but can be only supervisory, as they have little time to go into the detail. The same can be said of the majority of the examinations made by National and State bank examiners, their special object being simply to learn if the bank is carrying on its business according to the law. Forgeries and Check-Raising. The fact that banks are the custodians of large amounts of the people's money seems to make them liable to the attacks of all kinds of sharp, shrewd and unprincipled people, desirous of obtaining a portion of the money illegitimately. Of course there is the profes- sional bank burglar, but in consequence of the great improvements in recent years in the structure of vaults and locks, he seems to have little occupation. Then there is the *' hold-up " method, but this has become pretty precarious, and the banks subject to such visits, by protecting their officers with bullet-proof screens, make it compara- tively difficult for the desperadoes to succeed. The professional forger and check-raiser next demand our attention, and here is some- thing which has caused serious losses and is difficult to contend with. Individual cases of forgery of notes or checks sometimes occur among the officers or employees or customers of banks, but these seldom extend far, or are of very large amounts, and are soon dis- covered. The most dangerous forger is the professional — the man or men who make a business of robbing by this method. I said men, be- cause the operation is generally performed by a gang of three who work together, each having his part to perform. One is called the backer, a shrewd, sharp, businesslike man who plans the scheme and furnishes the necessary money ; the next is called the writer, who is expert as a penman and in the handling of certain necessary chem- icals ; and the next is the presenter, and for this purpose is generally selected a bright, intelligent, gentlemanly appearing man with a pleasing manner and fluent tongue. 298 MODERN BANKING METHODS. Drafts are obtained for small amounts, generally for even dol- lars, between the sums of ten and one hundred, most often between ten and thirty. These are skillfully altered or raised by the addi- tion of the word hundred or thousand and of the necessary ciphers. Where the writing or figures of a draft are to be altered, the orig- inal is obliterated by the use of chemicals, and where sensitive paper is used the proper color is returned. Even where fine lines are made by the lithographer upon the draft as a protection against alteration and they become partially destroyed in the alteration, they are re- placed by the expert penman in so skillful a manner as to almost defy detection. Even the punched-out holes, giving the amount, are most skillfully filled up by pieces of the same size, and by the use of paper pulp, the whole being afterwards ironed so as to completely obliter- ate the former punchings, and new punchings are made to corre- spond with the raised figures. Forged letters of advice and letters of credit are easily manufactured. Even where it becomes necessary to obtain the endorsement of a Cashier to a draft guaranteeing the endorsement of a payee, this is most skillfully forged. Where it becomes important for the pre- senter to make the acquaintance of officers of a bank, forged letters of introduction are easily made. One of the gang will sometimes open an office in some town and put out a sign as though transacting a legitimate business ; make the acquaintance of some business man, and through him get an in- troduction to a bank, ostensibly for the purpose of opening an ac- count, and will apparently transact a legitimate business for a time, obtaining, if possible, the confidence of the bankers until finally the scheme is worked, and the bank is the loser and the bird has flown. I have told something of the methods of these fellows for the purpose of putting the unwary on their guard, for no one can tell where these sharpers will strike, as they seldom work continuously but in sudden moves in different parts of the country, and the least suspecting ones are liable to be victims at any time. To judge something of the extent to which forgeries have been carried on by professionals, it is learned that capitalized syndicates have engaged in it, and only a few years ago one of these gangs, it was estimated, victimized banks in different parts of the country to the amount of $300,000 in three months. One word regarding the signatures of bank officers. Some are made very oddly, but at the same time almost illegible. The most difficult signature to forge is the one written in a plain round hand. A few precautionary rules it may be well to consider. In the first place, eternal vigilance is the price of safety in cases of this kind. GENERAL MANAGEMENT. 299 If a stranger presents himself to the bank for the purpose of transacting any business, no matter how introduced, investigate him thoroughly. For matters of identification place no value upon letters or papers of any kind, for it is unsafe to pay money on a check or draft with- out positive identification, or the certainty that the endorsements are correct. Study human nature. There is no criminal or man who is will- ing to knowingly connect himself with a criminal act but shows something in his face that will arouse the suspicion of a discerning man. There is always more or less lying connected with every criminal act, and a close student of character can detect this sooner or later, either upon the facial lines or in the eyes, or certainly some- thing in his manner upon conversing with the party. Such a person can never bear close inquiry or cross-questioning upon any subject. Never compromise with a criminal, whether he be a defaulting officer or employee or an outsider. Such a course is sure to encour- age others. The protective committee of the American Bankers' Assaciation has done very effective work in the breaking up of gangs of forgers. If every bank in the United States would become a member of this association, and thus exhibit to the public the metal card telling of their membership, it would have a deterrent effect upon forgers or check-raisers, for the banks would then form an unbroken line work- ing together, and calling to their aid the best legal talent and strong- est detective force in the country. The confession of a professional thief may not be out of place here : " If there were two banks standing close together, and one was a member of the Bankers' Association, the boys would tackle the one that was not a member first." Why Banks Fail. The same general conditions will produce a failure in a bank as in other business. That is, when a bank, from whatever cause, is unable to meet its liabilities, it fails. The failure may be perma- nent, or temporary, the latter generally being called a suspension. A bank may have sufficient assets to meet all its liabilities, yet, in consequence of a stringency in the money market, and an inabil- ity to realize upon a large proportion of its assets, it may be forced to close its doors. A severe stringency in the money market is apt to be followed by a great depreciation in values. Such a condition, if continued for any considerable period, will be apt to cause failures in banking circles. In times like these the greatest care is necessar}^, and it is then 300 MODERN BANKING METHODS. that the effect of good management is felt. It is comparatively easy to steer the ship through the smooth waters of flush and easy times, but it is in just such times, when he is making money, that the care- ful banker prepares for the troublous times that are sure to come. He prepares by keeping a very close watch of his loans, recognizing that here is the principal point of weakness ; reducing the single- named paper to the lowest minimum. He will accept as collateral only such securities as are of high standing and can be marketed readily. He will endeavor, as far as possible, to keep the lines of his borrowers drawn to the legitimate limit, realizing that it is far safer to have the loans well distributed in comparatively small amounts among many borrowers than in large sums among a few. If the bank is in or near a city where the market reports of se- curities are pubhshed daily, he will carefully watch these as regards the value of the securities held by him as collateral, and should anj^ depreciation take place, reducing the value of the security below the amount of the loan, or below a safe margin, he will at once call for more security. More than one bank has been wrecked by the unwise plan of *' putting too many eggs into one basket," also by extensive invest- ments in real estate, hoping through the prospective boom to make immense profits. Many banks have been wrecked by the making of excessive loans, especially to their oflficers and directors. These gentlemen enter into some schemes, led into them possibly by an oily promoter ; not hav- ing the necessary money, they call upon the bank, borrowing the money upon their individual paper. These schemes are generally more or less speculative, and the element of risk is heavy, but they seem to forget that as sworn officers of the bank their first duty is to look out for its interests, and they have no right to use the funds of other people, in the care of the bank, for their own speculative en- terprises, to the endangering of the bank. Whatever profit would be derived from these schemes would not benefit the bank, the insti- tution only receiving the usual interest for the loans, while the ac- tual loss, if any, would be sustained by the bank. Such action has frequently been denominated a misapplication of the funds, and as such is punishable. Injudicious banking is the cause of many failures. This covers of course want of judgment in making loans, and careless and im- prudent methods of transacting business, among which is the per- mitting of heavy overdrafts unsecured. There are certain conditions existing in some sections of our coun- try where it seems necessary to adopt methods that would in other sections be looked upon as reckless ; for instance, in some sections of GENERAL MANAGEMENT. 301 the far West loans are frequently made to the owners of large herds of cattle or sheep, the security being the live etock. This live stock is moving over the plains and may be many hundreds of miles away when the notes become due. The notes often become past due be- cause of the impossibility of the payer reaching Ihe bank. This character of loans is generally made in the spring, and in the fall when the Ifve stock is sold the notes a: e paid, and the loans are made largely upon the personal knowledge of the honor of the payer. Protesting in such cases is seldom resorted to. In a time of stringency this class of loans would be of very little use to a bank as collateral, and might be the cause of a failure. The accumulation of bad debts and the paying of unearned divi- dends have been the cause of more than one failure. A bank sustains heavy losses through bad loans ; it manages to have the loans appar- ently renewed every three or six months, the new notes being signed by bankrupts or former officers of failed concerns, and made with interest added, this interest being credited to their profit and loss ac- count and dividends declared in consequence. The bank receives nothing, but continually pays out; failure is bound to appear in time. Probably the most trying cause of failure is dishonesty. When one has shown every confidence in bank officials, and has had it rudely shaken by frauds or defalcations, it is apt to breed a feel- ing of bitterness which cannot be blamed. According to the report of the Comptroller of the Currency for 1900 there have been 390 complete failures of National banks since 1863. The chief causes of these failures, with the number of banks to each cause, are reported as follows : Banks. Defalcations of oflScers 30 Fraudulent management 93 Wrecked by Cashier 13 Excessive loans to oflScers, directors and others 71 Depreciation of securities 15 Investments in real estate and mortgages 14 Failure of large debtors 7 Injudicious banking and imprudent methods 98 General stringency in the money market and shrinkage in values 49 Total 390 It will be seen by this that if we take the first three causes it makes 136 banks, or more than one-third, and if we add to it the fourth cause, we have 207, nearly all of which might be considered in the category of dishonesty. Of course, the great majority of those engaged in banking, in- cluding clerks as well as officers, are absolutely honest, but it should be the constant study of those charged with bank management to 302 MODERN BANKING METHODS. seek to reduce the number of these failures, whether due to dishon- esty or other causes. What to Do When the Bank Gets into Deep Water. In all the previous chapters the bank has been considered chiefly in the light of prosperity, but troublous times come, business depres- sion, followed by fuaancial panic, and naturally the question arises. What is to be done under those conditions ? A general financial panic, such as this country went through in 1837, 1857, 1873 and 1893, does not come suddenly, but is the result of certain business conditions that have been gradually growing, like a coming storm. Mills close for want of orders, collections are hard to make, thousands are out of work, thus taking millions of dollars out of circulation, promissory notes cannot be met ; then comes the feeling of uncertainty, the want of confidence, which always precedes the panic. The careful banker will make mental note of the gradually ap- proaching storm, and if he has been a careful manager through the period of prosperity he has comparatively' little to fear. The old maxim, "in time of peace prepare for war," applies as well for banks as for anything else. The man who is careful and cautious in the making of his loans, and who keeps his assets in a readily available condition, remembering that "every dollar a bank loans above its capital and surplus it owes for," * is in a well- forti- fied position. On the other side, however, the man who has taken great risks in making loans, considering more the high rate of in- terest he expects to make rather than the security of the principal, has much to fear. Such a man finds it impossible to shorten his lines of discounts without producing the ver^^ disturbing element he is try- ing to avoid. His sudden change in business methods will be con- sidered an exhibition of weakness by his customers, which may re- sult in a run on his bank. In times of panic courage is of the greatest importance. The mere fact of keeping up a strong, cheerful, hopeful front is of great assistance in allaying that feeling of want of confidence. Much judgment must be displayed towards borrowers, for man}^ really good customers will need assistance in the shape of renewals of loans, and it would be unwise to attempt to push them to the wall and thus produce a failure, and only add fuel to the fire. If a run upon a bank should occur, the main thing is to quiet the panicky feeling among the depositors. Obtain all the currency pos- sible, especially coin, and exhibit it on the counters inside the bank. In paying the checks of depositors drawing their balances do it with * Hon. Hugh McCuUoch, " Suggestions to Managers of Banks." GENERAL MANAGEMENT. 303 great deliberation, examining the account in every instance before payment, and taking advantage of every plea for time. By this means the payment goes on very slowly, and after a few days the depositors, seeing the bank continuing business, recover from their fright and the run is stopped. The disposition among banks to help each other out of the tight places is a great security. In the trouble of 1893 the action of the clearing-houses in coming to the assistance of the banks and issuing certificates that could be used by the banks in their settlements, saved many from going to the wall. In some cities the clearing- house issued certificates in small denominations, and these passed current in general business, giving great assistance to all. The United States Treasury Department endeavored to take some action taxing this issue the ten per cent, according to law, but nothing was done, as it was considered only a temporary measure to relieve the local stringency, and under the circumstances would have been an unwise move on the part of the Government. General Suggestions Regarding Management. Banking, like any other business, cannot be carried on without some necessary expenses, such as taxes, insurance, repairs, salaries, stationery and many incidentals. The taxes may be considered in the light of one of the fixed charges. To banks that rent a banking room the only insurance necessary is for their furniture, counters, etc., which of course would be trifling, but these being the property of the stockholders the management should certainly take every means to protect them against loss by fire. It is wise for a bank to own its building, and if constructed with well arranged office apartments above the banking room it can be made a good source of income upon the investment. A poorly constructed building with poorly arranged offices for renting, like anything else poorly done, will not pay. " Whatever is worth doing, is worth doing well." Repairs should be attended to promptly, like the "stitch in time that saves nine." Nothing deteriorates so rapidly as real estate or fixtures looking dingy or out of repair, and it has a bad effect upon the standing of a bank. The live banker will keep everything around him looking bright and in good condition. It is poor economy to pay poor salaries. In no business is it more important to have the best of service and the most trustworthy em- ployees, and good service, like anything else that is good, is worth its price. The bank that takes an interest in its employees may be sure that they will take an interest in its affairs, and a mutuality of that kind pays. Some banks besides paying fair salaries, when doing a successful 304 MODERN BANKING METHODS. business, give each employee at the close of the year five per cent, or ten per cent, of his salary in addition. Thus the man receiving $1,500 a year salary would receive at the end of the year $75 or $150. Other banks give inducements to their employees to become stock- holders, receiving payment for the stock in monthly installments. Each of these methods makes the employee feel a personal interest in the success of the bank. It is an unwise policy to give clerks more work than they can do properly. There is a hmit to human endurance, and while some clerks have the natural ability of disposing of more work satisfac- torily in a given time than others, yet none are made of iron or steel, I was once requested to visit one of the most active and success- ful large banks in our country, to learn, if possible, what were their methods, as they had such a reputation for transacting their business in a remarkably prompt and efficient manner. I found there was nothing very new in their methods, but they had a sufficient force to perform all the detail work with ease, and they had shown wis- dom in their assignment of work according to ability. Another poor economy, which is too often seen, is poor station- ery. A bank is often judged, by a stranger, by the character of its stationery, and the few dollars more expended for that which is first- class often makes such a good impression that it will be found a pay- ing investment. There are of course progressive and non-progressive banks, as there are people of these two classes. The first keeps up with the times, takes the best journals treating of the business, obtains the best new ideas and appliances to aid in transacting the business ; in fact, is wide awake. The pubUc appreciate this and show it by their preference. Progressive banks never stand still but are ever seeking to in- crease their business by all legitimate methods. They do every- thing to encourage thrift among their customers, for success of the business of the public means success to the bank. A banker is of necessity in a measure a public man, and he should be broad-minded and public-spirited, but I would not advise him to be a politician. The bank deals with people of all political parties, and while the banker has a right to his pohtical ideas, still it is seldom wise for him to enter the field as a pohtician. Growth of the Co-Operative Spirit. The spirit of co-operation is growing among banks as elsewhere. The old spirit of exclusiveness is fast passing away, although some of it still exists, and there is yet room for improvement. Much has been done to open the gates by the various State associations of GENERAL MANAGEMENT. 305 bankers and the American Bankers' Association. By attending these meetings and coming in contact with each other, the rough corners are rubbed off, new thoughts and ideas are exchanged, and the former weary banker returns to his labors refreshed in mind as well as body. Bankers get into ruts as well as other people, and the meetings of these associations are one of the best means to help one out of the rut. It would be a wise move if there was a bankers' as- sociation in every State, and if every bank in the State was repre- sented at its meetings. And every State should be well represented at the conventions of the American Bankers' Association. Fundamental Principles of Banking. There are certain fundamental principles that it is well to keep in view, and no one has stated them better than the Hon. Hugh McCulloch, the first Comptroller of the Currency and twice Secre- tary of the Treasury. They are as follows : "The capital of banks should be real not fictitious. The managers should not be the chief borrowers, nor should loans be made to stockholders merely because they are stockholders. A certain amount of the annual profits should be carried to the surplus ; the larger the surplus the better, not only for the safety of the stockholders, liable as they are, under the bank act, but for the protection of depositors. Banks should be kept strong in their cash reserves, as times frequently occur when the strongest stand in need of them. Nothing in the long run pays better than a goodly amount of idle money, especially when specie is the only legal money. As banks are commercial institutions, created for commercial purposes, preference in discounts should always be given to paper based upon actual commercial transactions. Banks are not loan offices. It is no part of their business to furnish their customers with capital, nor should loans be made under any circumstances for speculative operations in stocks. Renewals should only be permitted to secure doubtful debts, or in cases in which more time is required than was anticipated when the loans were made, to complete the transaction upon which they were based. Such salaries should be paid to officers and clerks as wUl relieve them from the temptation to dishonest practices ; and the services of those whose expenditures exceed their salaries should be promptly dispensed with. Let no loans be made that are not secured beyond a reasonable doubt. Give facilities only to legitimate and prudent transactions. Make your dis- coimts on as short time as the business of your customers will permit. Never renew a note or bUl merely because you may not know where to place the money with equal advantage if the paper is paid. In no other way can you properly control your discount line, or make it at all times reliable. Distribute your loans rather than concentrate them in a few hands. Large borrowers are apt to control the bank, and when this is the relation between a bank and its customers it is not difficult to decide which in the end wUl suffer. 80 306 MODERN BANKING METHODS. Treat your customers liberally, bearing in mind the fact that a bank pros- pers as its customers prosper, but never permit them to dictate your poUcy. If you doubt the propriety of discounting an offering, give the bank the benefit of the doubt and decline it. If you have reason to distrust the integ- rity of a customer, close his account. Never deal with a rascal under the im- pression that you can prevent him from cheating you. The risk in such cases is greater than the profits. In business know no man's politics. Manage your bank as a business in- stitution, and let no poUtieal partiality or prejudice influence your judgment or action in the conduct of its affairs. Bank managers should bear in mind that they are not only trustees of the stockholders, but that they owe something to the public — that their whole duty is not performed when good profits are made and when solvency is se- cured, but that they should do all in their power to encourage morality in business and to elevate credit, especially commercial credit, to the highest standard." APPEISTDIX. ♦ORGANIZATION OF NATIONAL BANKS. Increase of Capitax Stock. A National banking association may, with the consent of the Comptroller of the Currency, and by a vote of shareholders owning t^ro-thirds of the shares, increase its capital stock to any sum approved by him. No increase is vahd until the whole amount is paid in cash and the Comptroller's certifi- cate of approval is issued, prior to which additional bonds must, if necessary, be deposited as security for circulation. (Section 5142 ; also act of Congress approved May 1, 1886.) A portion of a proposed increase will not be approved by the Comptroller. The whole amount, as stated in the resolution adopted by the vote of the shareholders, must be paid in and the payment certified to the Comptroller. The increase becomes operative upon the issuance of the Comptroller's certi- ficate of approval. An association that contemplates increasing its capital stock should advise the Comptroller thereof before formally submitting the matter to the share- holders, and, if the proposition is approved, he will furnish necessary blanks and instructions for procedure. (See notice for shareholders' meeting.) In increasing the capital stock of a bank no moneys in the surplus fund or to the credit of undivided profit account can be used except by the declar- ation of a dividend by the board of directors in the regular course, where- upon the shareholders, if they so desire, may use the proceeds thereof in pay- ment of their subscription to the additional stock. Such portion only of the surplus fund as exceeds the amount required by law may be capitalized in the manner indicated. Resolution to Increase Capital Stock. No. . The National Bank op , (Date) . At a meeting of the shareholders of The National Bank of held on thirty days' notice of the proposed business having been given, at which share- holders were present in person and by proxy, representing shares of the stock of this association, it was Resolved, That, under the provisions of the act of May 1, 1886, the capital stock of this association be increased in the sum of % , making the total capital $ . The above resolution was adopted by the following vote, representing more than two- thirds of the capital stock of the association : * The other regnirements to be observed in organizing a National bank are fully set forth in Chap- ter I. 308 APPENDIX. Same of shareholder. Eesidence. Name of proxy. Total number of shares voted In favor ol the resolution Total numV)er of shares voted against the resolution — Total number of shares represented at the meeting — No. of shares. I hereby certify that the above is a true and correct report of the vote and of the resolu- tion adopted at a meeting of the shareholders of this bank held on . [Seal of bank.] , President or Cashier, Subscribed and sworn to before me this day of , A. D. . [Seal of notary.] , Notary Public. Cebtificate of Increase of Capital Stock. No. . National Bank of , To the Comptroller of tfw Currency, Washington, B. C. : It is hereby certified that the capital stock of "The National Bank of " has been increased, pursuant to the provisions of the act of Congress approved May 1, 1886, in the sum of dollars, all of which has been paid in, and that the paid-up capital stock of said bank now amounts to dollars. [Seal of bank.] , Cashier. I hereby certify that the foregoing certificate, by me subscribed, is true. State of , County of , ss : Cashier. Subscribed and sworn to before me this [Seal of notary.] daj' of -, A. D. -, Notary Public. Reduction of CAPiTAii Stock. A National banking association may, with the consent of the Comptroller of the Currency and by a vote of shareholders owning two- thirds of the shares, reduce its capital stock to any sum not below the minimum amount required by the National Bank Act. The reduction becomes operative upon the issuance of the Comptroller's certificate of approval, prior to which the circulation of the bank must be reduced to the amount of the capital after reduction by a deposit of lawful money with the Treasurer of the United States. An association that contemplates reducing its capital stock should advise the Comptroller thereof before formally submitting the matter to the share- holders, and, if the proposition is approved, he wUl furnish necessary blanks and instructions for procedure. (See notice for shaxeholders' meeting.) Resolution to Reduce Capital Stock. No. . The National At a meeting of the shareholders of The National - Bank of - (Date) — — Bank of ■ -, held on -, thirty days' notice of the proposed business having been given, at which APPENDIX. 309 shareholders were present in person and by proxy, representing shares of stock of this association, it was Resolved, That, under the provisions of section 5143, United States Revised Statutes, and of the law amendatory thereof, the capital stock of this association be reduced in the sum of $ , leaving the total capital after said reduction $ . The above resolution was adopted by the following vote, representing more than two- thirds of the capital stock of the association : Name ofthareholder. Name of proxy. No. ofihares. Total number of shares voted in favor of the resolution Total number of shares voteil against the resolution Total number of share:! represented at the meeting — I hereby certify that the above is a true and correct report of the vote and of the resolu- tion adopted at a meeting of the shareholders of this bank held on . [Seal of bank. J , President or Cashier. Subscribed and sworn to me this day of , A. D. . [Seal of notary.] , Notary Public. Certificate op Reduction of Capital. The , To tfie Comptroller of the Currency, Washington, D. C. : It is hereby certified that the capital stock of " The National Bank of -" has been reduced by. a vote of the shareholders owning two- thirds of the stock of the associa- tion, in accordance with the provisions of section 5143 of the Revised Statutes of the United States, in the sum of dollars, and that the paid-up capital stock of said bank since said reduction is dollars. , Cashier. [Seal of bank.] State of I, -, County of , ss , Cashier of " The National Bank of " in the State of do solemnly swear that the foregoing certificate, by me subscribed, is true. day of . Subscribed and sworn to before me this [Seal of notary. ] -, Cashier. -, Notary Public. Note. — A record of the vote of stockholders should be kept and forwarded with this notice. No part of the reduction can be carried to surplus or to undivided profits without the unanimous consent of the shareholders. When the reduction is made the shareholders should return their old certificates. New certificates for the capital as reduced should then be issued. It is competent to issue certificates for fractional shares. 310 APPENDIX. CONVERSION OP STATE BANKS. Section 5154 provides for the conversion of banks existing under State laws into National banking associations, and reads as foUows : Any bank incorporated by special law, or any banking institution organized under a gen- eral law of any State, may become a National association under this title by the name pre- scribed in its organization certificate ; and in such case the articles of association and the organization certificate may be executed by a majority of the directors of the bank or bank- ing institution ; and the certificate shall declare that the owners of two-thirds of the capital stock have authorized the directors to make such certificate, and to change and convert the bank or banking institution into a National association. A majority of the directors, after executing the articles of association and organization certificate, shall have power to execute all other papers, and to do whatever may be required to make its organization perfect and complete as a National association. If preferred, the State bank may be placed in voluntary liquidation in the regular course and those interested therein organize a National bank, which will be at liberty to buy the properly purchasable assets of the former, and there need be no interruption in business. In case of conversion, however, the shareholders should execute a form similar to the following : AUTHORITT OF ShAKBHOLDERS TO DIRECTORS FOR THE CONVERSION OF A StATE BANK INTO A National, Bank. We, the undersigned, stockholders of the , located in the , county of , State of , having a paid-up capital of dollars, do hereby authorize and empower the directors thereof to change and convert said bank into a National banking association under the sections of the Revised Statutes which authorize the conversion of State banks into National associations, approved June 22, 1874, "and of subsequent acts in addition to or amendatory thereof ; " and we do also authorize the said directors, or a majority thereof, to make and execute the articles of association and organization certificate required to be made or contemplated by said statutes, and also to make and execute all other papers and certifi- cates, and to do all acts necessary to be done to convert said into a National banking^ association, and to do and perform all such acts as may be necessary to transfer the assets of every description and character of said to the National banking association into which it is to be converted, so that the said conversion may be absolute and complete ; and we do hereby assume, and authorize the said directors to assume, as the name of the National banking association into which the said is to be converted, " The ; " and we do hereby appoint , , , , who are now the directors of the said bank, to be the directors of the said National bank, to hold their oflBces as such directors until the regular annual election of directors is held, pursuant to the provisions of said Revised Statutes, and until their successors are chosen and qualified ; and we do hereby authorize the said directors of the said National bank to continue in ofiSce the oflBcers of the said State bank, or to appoint or elect others, as to them may seem best. In witness whereof, we have hereunto set our hands and vrritten against our names the number of shares owned by us, respectively, this day of , A. D. 19 — . Signatures of stockholders. Number of shares owned by each. NOTB.— The siguatures of the owners of at least two-thirds of the stock APPENDIX. 311 This authority for the action of the directors in converting the State bank into a National bank should be carefully preserved, and a copy thereof entered upon the minute book of the National banking association. The original, or a certified copy thereof under seal of the bank, should accompany the con- version papers sent to the Comptroller of the Currency. The directors, having been authorized by the shareholders to change the bank into a National association, should execute articles of association, organization certificate, and other papers. The following are submitted as general forms : Articles of Association. We, the undersigned, directors of the , having been authorized by the own- ers of two-thirds of the capital stock of said bank to change and convert the said bank into a National banking association, under section 5154 of the Revised Statutes of the United States, and of subsequent acts in addition to or amendatory thereof, and to execute articles of association, do hereby, . in our own behalf, and in behalf of the stockholders whom we represent, make and execute the following articles of association : First. The name and title of the association into which the said is to be changed and converted shall be " The ." * Second. The place where its banking house or oflBce shall be located and its operations of discount and deposit carried on and its general business conducted shall be the , county of , State of . Third. The board of directors shall consist of shareholders. Fourth. The regular annual meetings of the shareholders for the election of directors shall be held at the banking house of this association on the second Tuesday of January of each year ; but if no election shall be held on that day it may be held on any other day, according to the provisions of section 5149 of the Revised Statutes of the United States, and all elections shall be held according to such regulations as may be prescribed by the board of directors, not inconsistent with the provisions of the National Banking Law and these articles. Fifth. The capital stock of this association shall be thousand dollars, to be divi- ded into shares of $100 each ; but the capital may, with the approval of the Comptroller of the Currency, be increased at any time by shareholders owning two-thirds of the stock, according to the provisions of an act of Congress approved May 1, 1886 ; and in case of the increase of the capital of the association, each shareholder shall have the privilege of sub- scribing for such number of shares of the proposed increase of the capital stock as he may be entitled to according to the number of shares owned by him before the stock is increased. Sixth. The board of directors, a majority of whom shall be a quorum to do business, shall elect one of its members President of this association, who shall hold his office (unless he shall be disqualified, or be sooner removed by a two-thirds vote of all the members of the board; for the term for which he was elected a director. The directors shall have power to elect a Vice-President, who shall also be a member of the board of directors, and who shall be authorized, in the absence or inability of the President from any cause, to perform all acts and duties pertaining to the office of President, except such as the President only is author- ized by law to perform, and to elect or appoint a Cashier, and such other officers and clerks as may be required to transact the business of the association ; to fix the salaries to be paid to them, and continue them in office, or to dismiss them, as in the opinion of a majority of the board the interests of the association may demand. The directors shall have power to define the duties of the officers and clerks of the asso- ciation ; to require bonds from them and to fix the penalty thereof ; to regulate the manner in which elections of directors shall be held, and to appoint judges of the elections ; to make all by-laws that it may be proper for them to make not inconsistent with law for the general regulation of the business of the association and the management of its affairs, and gener- ally to do and perform all acts that it may be legal for a board of directors to do and perform under the Revised Statutes aforesaid. * Care should be taken to state the title correctly. 312 APPENDIX. Seventh. This association shall continue for the period of twenty years from the date of the execution of its organization certificate, unless sooner placed in voluntary liquidation by the act of its shareholders owning at least two-thirds of its stock, or otherwise dissolved by authority of law. Eighth. These articles of association may be changed or amended at any time by share- holders owning a majority of the stock of the association, in any manner not inconsistent with law ; and the board of directors, or any three shareholders, may call a meeting of the shareholders for this or any other purpose, not inconsistent with law, by publishing notice thereof for thirty days in a newspaper published in the town, city, or county where the bank is located, or by mailing to each shareholder notice in writing thirty days before the time fixed for the meeting. In witness whereof we have hereunto set our hands this day of , nineteen hundred . 1. I certify that the articles of association of The are executed in duplicate ; that one of the instruments so executed is the foregoing, and that the other, in all respects iike the foregoing, is on file with said bank. , Cashier or President. (Date) Organization Certificate. We, the undersigned, directors of the -, having been duly authorized by the •owners of two- thirds of the capital stock of said bank to change said bank into an associa- tion, and to make the necessary organization certificate, under the sections of the Revised Statutes which authorize the conversion of State banks into National associations, approved June 32, 1874, and of subsequent acts in addition to or amendatory thereof, do sign and exe- cute the following organization certificate, which we hereby declare we are authorized to make by the owners of two-thirds of the capital stock of said . First. The name and title of this association shall be " The ." Second. The said association shall be located and continued in the of , county of , and State of , where its operations of discount and deposit are to be carried on. Third. The capital stock of this association shall be dollars ($ ), and the same shall be divided into shares of dollars each, as it is now divided in the said . Fourth. The name and residence of each of the stockholders of the said which is to become a National bank under the provisions of the Revised Statutes aforesaid, and the number of shares of dollars each, held by each stockholder, are as follows : Fifth. The certificate is made in order that the said and the stockholders thereof may avail themselves of the advantages of the aforesaid Revised Statutes, and that the said may be changed and converted into a National banking association, under the name and title of " The ." APPENDIX. 313 In witness whereof we have hereunto set our hands this day of , nineteen hundred . The signatures of the directors on this page. State of , County of , ss : On this the day of , A. D. , personally came before me, a of said county, , , directors of the , to me well known, who severally acknowledged that they executed the foregoing certificate for the purposes therein mentioned. Witness my hand and seal of oflSce the day and year aforesaid. [Seal of notary.] , Notary Public. All other papers and proceedings will be similar to those required of new associations organized under the National banking laws. Extension of Corporate Existence. The act of Congress approved July 12, 1882, provides for the extension of the corporate existence of National banking associations whose periods of suc- cession are about to expire. Section 5136 provides that aU associations organ- ized under it shall have succession for twenty years from the date of the execution of their organization certificates. The officers of a National bank can, therefore, ascertain the date of the expiration of the corporate existence of the association from the date of the last acknowledgment in the organiza- tion certificate. If the paper has been lost or the date is uncertain, informa- tion can be obtained upon application to the Comptroller. Under the act of July 12, 1882, and the regulations of the Comptroller's office, banks are per- mitted to file their application for extension at any time within two years prior to the expiration, and the necessary blanks and instructions will be sent a sufficient time in advance to enable them to do so. Application of President or Cashier. [Section 2, act July 12, 1882.J National Bank , (Date) . To the Comptroller of the Currency, Washington, D. C. Sir : I hereby request the Comptroller of the Currency to approve the inclosed amend- ment of the articles of association of this bank, extending its corporate existence for twenty years, pursuant to the provisions of the act of Congress entitled " An act to enable National banking associations to extend their corporate existence, and for other purposes," approved July 12, 1882. The amendment is accompanied by the certificate required by law. Respectfully, , President or Cashier. Amendment to Articles of Association. National Bask . In accordance with and in pursuance of the provisions of "An act to enable National banking associations to extend their corporate existence, and for other purposes," approved July 13, 1882, we, the undersigned, shareholders of " The ," located at in the county of and State of , owning the shares of the capital stock of said asso- ciation set opposite our respective names, aggregating not less than two-thirds of the stock 314 APPENDIX. of said association, the total number of shares representing the capital stock of said National banking association being shares, do hereby consent and agree that the article of the articles of association of said National banking association be, and is hereby, amended to read as follows : " This association shall continue until , , unless sooner placed in voluntary liquidation by the act of its shareholders owning at least two-thirds of its stock, or otherwise dissolved by authority of law." In witness whereof, we, the undersigned, have hereto set our hands. Date of gigning. No. of shares. National Bank To the Comptroller of the Currency, Washingtcm, D. C. Sir : I do hereby certify, in pursuance of the provisions of " An act to enable National banking associations to extend their corporate existence, and for other purposes," approved July 12, 1882, that the amendment of the articles of association to which this certificate is attached of " The ," and the consent to the same in writing, was executed in duplicate by shareholders owning not less than two-thirds of the stock of said bank ; and I do further certify that the signatures of the shareholders to said consent and said amendment of the articles of association are the true and correct signatures of said shareholders or of their lawfully appointed attorneys, and that one of the instruments so executed is the fore- going, and that the other, in all respects like the foregoing, is on file in said bank. [Seal of bank. J , President or Cashier. (Date) I certify that the said amendment to the articles of association of " The — was duly recorded upon the minute book of said association on the day of -,190—, and that the above certificate was certified under the seal of the association in accordance with a resolution of its board of directors, duly adopted at a meeting of said directors on the day of , . [Seal of bank.] . , Cashier. The law does not require that a meeting of the shareholders shall be held ; it is suflBcient to secure the consent of those representing two-thirds of the stock. In case of the absence of a shareholder, power of attorney ia the following form may be used : -,of. -, hereby constitute and Know all men by these presents, that I, appoint irrevocably my true and lawful attorney, for me and in my name and stead to sign all necessary papers in connection with the extension of the corporate existence of " The ," under the act of Congress approved July 12, 1882, and I hereby consent that the article of the articles of association of " The ," be so amended as to read as follows : This association shall continue until close of business on unless sooner placed in voluntary liquidation by the act of its shareholders owning at least two-thirds of its stock, or otherwise dissolved by authority of law. Hereby granting unto said attorney full power and authority to act in and concerning the premises as fully and effectually as I might do if personally present. APPENDIX. 315 In witness ■whereof, I have hereunto set my hand and seal, this day of in the year nineteen hundred Signed and sealed in presence of — These powers of attorney, signed by the shareholders, should be sent to the Comptroller, with the amendment to the article of association, on which their names, signed by their authorized attorney, appear. If preferred, a shareholders' meeting may be called in order to vote for the extension and to sign the necessary papers. Proper notice of the meeting should be given to the shareholders. (See notice for stockholders' meeting.) At this meeting the shareholders may appear in person or by attorney, the proxy given to the latter being simOar to the foregoing form. In executing and forwarding the papers the following instructions should be strictly observed : The certificate of the President or Cashier, certif3ring that shareholders owning at least two-thirds of the stock have consented, in writing, to the amendment, should be executed in duplicate and one copy transmitted to this oflSce, together with the letter applying for approval of the Comptroller, at least two months prior to the expiration of the corporate existence of the bank, in order that the Comptroller may have sufiScient time to cause the special examination to be made, as required by section 3 of said act. If any shares of the bank stand in the name of administrators, executors, trustees, or guardians, and it becomes necessary to have the votes of these shares to make up the major- ity required to authorize the amendment, duly certified copies of the legal appointment of such administrators, executors, trustees, or guardians should be sent to the Comptroller. In the case of stock held by a corporation, a certified copy of a resolution of the board of direct- ors, authorizing the President or other officer to consent to the amendment, is required. When stock voting for an amendment stands in the name of an assignee, there must be evidence showing that the shares of stock have been regularly transferred to him as such assignee, on the books of the bank. When the amendment is signed by an attorney acting for shareholders, properly executed powers of attorney must be furnished. Upon the receipt of the papers in due form, the Comptroller will order the special examination required by section 3, which must be paid for by the bank, and if the report of the examiner is favorable, the Comptroller wiU, at the date of expiration of charter, issue his certificate of extension. The law requires that circulating notes issued to the bank after the date at which the period of succession begins shall be of different devices from those issued before. This necessitates the procuring of new plates, which are prepared at the expense of the bank. A blank to enable a bank to order the engraving of plates and the printing of new circulation ^vill be furnished. The order should be transmitted with the appUcation for extension. (For cost of plates see page 20.) No transfer of bonds is necessary, as the extended association is, in all respects, identically the same as before extension. The new circulating notes wiU be issued as the old issues are received for redemption, until the end of three y^ars from the date of extension, when the law requires the bank to deposit lawful money for the redemption of such portion of the old circula- tion as may then remain outstanding. Officers' Bonds. When the corporate existence of a National bank is extended, the renc^rJ of bonds of officers and employees should have attention. 3l(j APPENDIX. Shareholders not Desiring to Extend the Corporate Existence OF the Association. Some shareholders may not assent to the extension, and may wish to with- draw from the association. Section 5 of the act of July 12, 1882, provides what may be done in such cases, as follows : That when any National banking association has amended its articles of association as provided in this act, and the Comptroller has granted his certiflcate of approval, any share- holder not assenting to such amendment may give notice in writing to the directors, within thirty days from the date of the certificate of approval, of his desire to withdraw from said association, in which case he shall be entitled to receive from said banking association the value of the shares so held by him, to be ascertained by an appraisal made by a committee of three persons, one to be selected by such shareholder, one by the directors, and the third by the first two ; and in case the value so fixed shall not be satisfactory to any such share- holder, he may appeal to the Comptroller of the Currency, who shall cause a reappraisal to be made, which shall be final and binding ; and if said reappraisal shall exceed the value fixed by said committee, the bank shall pay the expenses of said reappraisal, and otherwise the appellant shall pay said expenses ; and the value so ascertained and determined shall be deemed to be a debt due, and be forthwith paid, to said shareholder, from said bank ; and the shares so surrendered and appraised shall, after due notice, be sold at public sale, within thirty days after the final appraisal provided in this section. Notice for Shareholders' Meeting. No notice is required for an annual meeting when the time and place are provided for in the articles of association (unless the by-laws make a notice necessary) if at said meeting business of the ordinary character only is to be transacted. For an annual meeting, at which business of an unusual or extraordinary character, such as the amendment of articles of association, is to be consid- ered, and for all special meetings of shareholders, notice should be given as required by the by-laws and articles of association of the bank. If no pro- vision is made therein, thirty days' notice is required. The notice, a copy of which must accompany the papers transmitted to the Comptroller, showing date of issue, should state clearly (1) the place for holding the meeting, (2) the time, specifying the hour, and (3) the business proposed to be transacted. Change of Name or of Location. A National banking association may, with the consent of the Comptroller of the Currency and by the vote of the shareholders owning at least two- thirds of the stock of the association, change its name or may change the place where its operations are carried on to any other place in the same State not more than thirty miles distant. When an association desires to make such change, it is necessary to corre- spond with the Comptroller of the Currency, submitting the proposed change, and when approved call a meeting of shareholders that the required vote may be obtained. Due notice of the meeting must be given and a copy thereof, together with a certified copy, under seal of the bank, of the resolutions, showing in detail the vote by which adopted, sent to the Comptroller of the Currency, accom- panied by a copy of the resolution of the board of directors authorizing the Treasurer of the United States to assign to the bank under its new title the bonds held by him as security for circulation. APPENDIX. 317 No change of name or location is valid until the Comptroller's certificate of approval is issued. (See act of Congress approved May 1, 1886, to be found in the National Bank Act.) Liquidation. A National banking association may, under section 5220 U. S. Rev. Stat., go into voluntary liquidation by a vote of the owners of two-thirds of the stock. Before calling a meeting of shareholders, however, for the purpose of voting upon the proposition, application should be made to the Comp- troller for his approval and the necessary blanks. When a meeting has been held and a resolution adopted by the required vote, it is the duty of the board of directors to cause notice of the fact to be certified, under seal of the association, to the Comptroller of the Currency by the President or Cashier, and publication thereof to be made for a period of two months in a newspaper published in the city of New York and also in the place in which the association is located ; or, if no newspaper is published in such place, then in the newspaper pubUshed nearest thereto, that the asso- ciation is closing up its affairs and notifying the holders of its notes and other creditors to present the notes and other claims against the association for pay- ment. (See section 5221 U. S. Rev. Stat.) "When an association, with the approval of the Comptroller, goes into liqui- dation, its affairs pass into the hands of its shareholders for such legal dispo- sition as may be deemed proper. Notice as herein elsewhere provided should be given to the shareholders of the meeting at which it is proposed to take the vote above required. (See notice for shareholders' meeting.) Resolution for Voluntary Liquidation. No. . The National Bank of — (Date)- At a meeting of the shareholders of The National Bank of thirty days' notice of the proposed business having been given, at which held on — share- holders were present in person and by proxy, representing shares of the stock of this association, it was Resolved, That " The National Bank " be placed in voluntary liquida- tion, under the provisions of sections 5220 and 5221, United States Revised Statutes, to take effect . The above resolution was adopted by the following vote, representing two-thirds of the capital stock of the association. Name of ihareholder. Name of proxy. No. of ihares. Total number of shares voted in favor of the resolution Total number of shares voteil against the resolution — Total number of shares representeU at the meeting — 318 APPENDIX. I hereby certify that the above is a true and correct report of the vote and of the resolu- tion adopted at a meeting of the shareholders of this bank held on . [Seal of bank.] President or Cashier. Subscribed and sworn to before me this day of , A. D. . [Seal of notary.] , Notary Public. Certificate of Voluntart Liquidation. No. . National Bank , TotJu Comptroller of the Currency, Washington, D. C: SiK : It is hereby certified, in pursuance of sections 5220 and 5221, of the Revised Stat- utes of the United States, that at a meeting of the stockholders of the , located at , in the State of , duly notified and held pursuant to law and the articles of association of said bank at the office of said association at , aforesaid, on the day of , it was voted by the stockholders of said association owning two-thirds of its stock that said association go into liquidation and be closed. In testimony whereof I have, by instruction of the board of directors of said association, hereto subscribed my name and afiSxed the seal of said association at , aforesaid, the day and year above written. [Seal of the bank. ] , President or Cashier. Notice. The National Bank , located at , in the State of , is clos- ing up its affairs. All noteholders and others, creditors of said association, are therefore hereby notified to present the notes and other claims against the association for pajTnent. , P-esident or Cashier. Dated . Note. — The above notice to be published for a period of two months in a newspaper in the city of New York, and also in a newspaper published in the place in which the bank is located. See section 5221, Re^ased Statutes. A certificate of the publisher that the required publication has been made, together with a slip containing notice from one issue of each paper, should be sent to the office of the Comptroller of the Currency. APPENDIX. 319 GRACE AND STATUTES OF LIMITATIONS. States anb Territories. Notes, bills. Sight drafts. Open accounts. Notes and contracts. Judg- ments. Alabama Grace No Grace Grace No Grace No Grace No Grace No Grace No Grace No Grace Grace No Grace No Grace Grace. . . Grace Grace Grace Grace Grace No Grace No' Grace No Grace Grace Grace Grace Grace No Grace Grace Grace No Grace No Grace Grace No Grace Grace No Grace No (irace Grace No (irace No Grace No (Trace Grace Grace No Grace Grace No Grace . . . No Grace — No Grace No Grace No Grace No Grace Grace Grace . No Grace Grace No Grace No Grace No Grace No Grace No Grace No Grace No Grace No Grace No Grace Grace Grace Grace No Grace Grace No Grace No Grace No Grace Grace Grace Grace Grace No Grace N o Grace (irace No Grace Grace IN o( irace Grace No (irace. . . . Grace No Grace No Grace Grace No<:irace No Grace Grace Grace Grace No Grace Grace No Grace No Grace No Grace No Grace No Grace No Grace Grace Years. 3 3 3 2 6 6 3 3 2 4 4 5 3 6 5 3 2-5 3 6 3 6 6 6 3 5 3 4 4 6 6 4 6 3 6 6 3 6 6 6 6 6 6 2 4 6 2-3 3 5 6 8 Years. 6 5 3-5 2-4 6 6 6 8 5 6-20 5 10 5 10 10 5 15 5 6-20 3-12 6 6 6 6 10 8 5 6 6 6 6 6 3 6 15 5 6 6 6 6 6 6 4 6 6 5-10 6 10 6 5 Years. 20 5 10 5 6 20 20 12 20 Arizona California Colorado Connecticut Delaware District of Columbia Florida Georgia Idaho 6 20 10 20 Illinois Indian Territory Indiana Iowa 20 5 Kansas Kentucky 15 10 Lousiana Maine 20 Maryland 12 Massachusetts 20 Michigan 6-10 10 Minnesota Mississippi 7 Missouri Montana 10 10 Nebraska 5 Nevada Q New Hampshire 20 New Jersey 20 New Mexico New York North Carolina 20 10 North Dakota 10 Ohio Oklahoma 5-26 1 5 Oregon 10 20 Rhode Island 20 South Carolina 20 20 South Dakota 10 Texas 10 3 Vermont g Virginia Washington 10-20 West Virginia 10 Wisconsin 20 5 320 APPENDIX. INTEREST LAWS. States and Territories. Legal rate of interest. Alabama Arizona Arkansas California Colorado Connecticut Delaware District of Columbia. Florida Georgia Idaho Illinois Indian Territory Indiana Iowa Kansas Kentucky Louisiana. . . . .. Maine Maryland Massachusetts. . . Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire. New Jersey New Mexico New York * North Carolina. North Dakota.. Ohio Oklahoma Oregon Pennsylvania. . . Rhode Island. . . South Carolina. , South Dakota. . Tennessee Texas Utah Vermont Virginia Washington West Virginia. , Wisconsin Wyoming. Hawaii Per cent. 10 Bate by coTitract. Per cent. 8 Any rate. 10 Any rate. Any rate. 6 6 10 10 8 12 7 10 10 6 8 Any rate. 6 Any rate. 7 10 10 8 Any rate. 10 Any rate. 6 6 12 6 6 12 8 12 10 6 Any rate. 8 12 6 10 Any rate. 6 6 12 6 10 12 Any rate. Penalty for usury. All interest forfeited. None. Principal and interest forfeited. None. No forfeit except with pawnbrokers. None. Forfeiture of double amount of loan. Forfeiture of interest. All interest forfeited. Excess of lawful rate forfeited. Creditor may recover but 10 per cent, of debt. Entire interest forfeited. Principal and interest forfeited. Excess of interest forfeited. Forfeiture of interest and costs with 10 per cent, per year to school fund. Excess of interest forfeited. Interest forfeited. None. Excess of interest forfeited. None. Interest forfeited. Principal and interest forfeited. Interest forfeited. Interest forfeited. None. Interest and cost forfeited. None. Three times excess of interest forfeited. Entire interest and costs forfeited. $100 fine and forfeiture of twice the amount. Principal and interest forfeited. Contract void. Twice amount paid forfeited. Entire interest forfeited. Excess forfeited. Interest forfeited. Principal and interest forfeited. Excess of interest forfeited. None. Double the excess forfeited. All interest forfeited. Excess of interest forfeited. Entire interest forfeited. None. Forfeiture of usury. Interest forfeited. Excess of interest forfeited. Excess of interest forfeited. Entire interest forfeited and treble excess paid recoverable. Forfeiture of interest and costs. None. * On demand loans for $5,000 and over with collateral, any rate may be charged. lE^DEX A. PAGE Acceptance, form of 210 Account current, form of 132 Accounts, differences in 131 Accounts with other banks 138 Acknowledgment, letter of 223 Acknowledgment of settlement 131 Advertising the bank, methods of 286 Advice, letter of. 218,223 Amendment of by-laws 15 Analysis of accounts 140 Analytical statements 143, 144 Annual meetings of stockholders 12 Appendix 307 Application for credit 186, 187 Application for permission to organize Na- tional bank 3 Articles of association, form of 4 Articles of association of converted State bank 311 Assistant Cashier, his qualifications and du- ties 30 Attorney for the bank, selection of 30 Authorization certificate of National bank.. 21 Auxiliary scratcher 149, 151 Average book, form of 172, 173 B. Bad debts, definition of 9 Balance book, form of 149 Balance ledger, form of 168 Balance ticket, Boston Clearing-House 263 Balance ticket, Chicago Clearing-House 270 Balance ticket, Minneapolis Clearing-House 276 Balancing pass books 174, 178 Bank, derivation of the word 280 Bank draft, form of 230 Banker, definition of 280 Bank, how to make popular 285 Banking, fundamental principles of 305 Banking ofiice, the 23 Banking, origin of 280 Bank management, general suggestions 303 Bank, methods for safeguarding 296 Bank notes, introduction of 282 Bank, organization of 1 Banks, benefits of to people 283 Banks, causes of failures 299 Banks, classification of 284 Bank, ways of advertising 286 Bank, what constitutes 281 Bills in transit, register of 110 Bonding of officers and employees 15 Bonds, deposit of required of National banks 18 21 PAGB Books and accounts, power of directors to change form of 15 Books and records of the bank 4S Boston Clearing-House, methods of 262 Boston Clearing-House proof 265 Boston ledger, the 157, 158, 161 Borrowers, statements from 185, 186, 187 By-laws, amendment of 15 By-laws of National banks, form of 13 Capital, dividend not to be declared from .... 9 Capital of National bank, increase of 13 Capital stock, amount of required by Na- tional Banking Law 2 Capital stock, certificate of final payment. . . 17 Capital stock, certificate of payment of first half 16 Capital stock, failure of stockholder to pay amount subscribed 18 Capital stock of National bank, increase of.. 307 Capital stock of National bank, reduction of 308 Capital stock, payments on account of 15 Capital, withdrawal of prohibited 9 Cashier, his qualifications and duties 27 Cashier, how elected 12 Cashier of National bank, liabilities of 13 Cashier's checks 241 Cashier's receipt, Minneapolis Clearing- House 276 Certificates of deposit, ledger account 240 Certificate of deposit register 241 Certificate of deposit ticket 240 Certificates of deposit 237,238,239 Certification of checks 85 Certified check, a 86 Certified check register 86 Change of name or location of National bank 316 Changes in individual deposits 156 Charge and credit book 113 Charge and credit slip 214, 215 Charge slip, form of lOO Check, Cashier's 241, 242 Check-rack, a 155 Check-raising and forgeries 297 Checks and deposit tickets, care of 171 Checks and vouchers, return of by banks.. . . 177 Checks, certification of 85 Checks, clearing-house, forms of used in Chicago 270, 271 Check scratcher, form of 163 Checks, early use of 282 Checks, issue of in duplicate 181 322 INDEX. PAGE Checks, lost or mislaid 181 Checks, record of for clearing-house 272 Checks, slip for list of those returned hy bank 180 Check ticket, Boston Clearing- House 263 Check ticket used by New York Clearing- House 252 Chicago Clearing-House, the 267 Circulation account, how to keep 137 Circulating notes, how issued 18 Circulating notes received from Comptroller —receipts for to be signed by President or Cashier 15 Circulation, plate and order for 20 Circulation, report on 134 Circulation, semi-annual return of 135 City collections 212 Clearing-house check ticket 252 Clearing-house checks, form of used in Chi- cago 270,271 Clearing-house debit ticket 254 Clearing-house credit ticket 251 Clearing-house delivery sheet 252 Clearing-house due bUls 87, 243 Clearing-house envelope 249 Clearing-house, lines imposed by 256 Clearing-house, how established 248 Clearing-house, list of checks for 272 Clearing-house memorandum of balances... 255 Clearing-house methods, description of 249 Clearing-house methods in Boston 262 Clearing-house methods in Chicago 267 Clearing-house methods in Minneapolis 275 Clearing-house methods in New York 249 Clearing-house methods in Philadelphia 265 Clearing-house methods in Scranton 277 Clearing-house operations, description of... 253 Clearing-house order or draft, form of used in Chicago 270 Clearing-house proof 254 Clearing-house proof, Chicago 275 Clearing-house proof, form used in Boston . . 265 Clearing-house receipt for settlements 256 Clearing-house record, Scranton, Pa 278 Clearing-house settlement, statement of 256 Clearing-house settlements, how made 246 Clearing-house settling clerk's statement... 251 Clearing-house slip 250 Clearing-house slips, forms of used in Chi- cago 268 Clearing-house, statement of banks to.. 258, 259, 260, 261 Clearing-house statementof fines 257 Clearing-house, the 245 Clearings, out and in— Chicago 271, 273, 274 Collateral envelope, form of 208 Collateral loans 204 Collateral loans, care of 288 Collateral note, form of 190 Collateral register 205,207 Collaterals, caring for 207 Collateral withdrawal order 206 Collection and remittance slip Ill Collection clerk, duties of 44 Collection department, hints about 227 Collection department, the 209 Collection desk proof 215 Collection register, foreign 213 Collection register, form of 211 Collections, city 212 PAGE Collections, foreign 212 Collections, letter of enclosure 218 Collection slip, foreign 213 Collections, profit and loss in making 228 Collections returned, slip giving reasons lor 220 Collection, withdrawal of 220 Combined letter form 223 Comptroller's circular letter calling for re- port of condition 123 Contracts, President or Cashier to sign 15 Conversion of State bank into National bank 310 Conveyances of real estate by National banks 13 Co-operative spirit, growth of 304 Corporate existence, extension of 313 Corporations and firms not permitted to hold stock of National bank 3 Credit, application for 186, 187 Credit and charge slip 113, 114 Credit bills in transit 112 Credit department, the 184 Credit, dispensing of 288 Credit journal 105 Credit slip 114, 115 Credit ticket, Boston Clearing-House 263 Credit ticket, Chicago Clearing-House 269 Credit ticket, form of used by New York Clearing-House 251 DaUy statement book 115, 118, 119, 120,121 Days of grace 226 Debitjournal 104 Debit ticket used by New York Clearing- House 254 Defalcations and embezzlements, causes of. 290 Defalcations, prevention of 293 Delivery sheet used by New York Clearing- House 252 Demand loans, special contract 191 Depositors' accounts, averages of... 172, 173, 174 Deposit ticket 90 Determining the value of an account 139 Diiferences in accounts, statement of 131 Directors, election of 12 Directors' Joint oath, form of 11 Director's oath, form of 11 Directors of National banks— number and election of— qualifications— oath required. - 8 Directors of National bank, term of oflice 8 Directors of National banks, their qualifica- tions and duties 6 Directors of National banks, time for meet- ings of 14 Directors of National banks — vacancies, how filled- limit of liabilities for money borrowed— liabilities and penalties for vio- lation of law 9 Directors, power of to change form of books and accounts 15 Discount clerk, duties of 43 Discount clerk's settlement book 202, 203 Discount committee, how composed— duties of 14 Discount register, the 195, 196, 197 Dividend book, form of 63 Dividend check 64 Dividend, how declared 63 INDEX. 323 PAGE Dividend of National banks, not to exceed net profits 9 Dividend periods, letter relating to 62 Dividends of is'ational banks, bow declared. 9 Domestic exchange , 229 Draft, customary form of 230 Draft, notice of issue of duplicate 233 Draft register, a 231,232 Draft, form of 210 Draft records 231 Drafts drawn, notification sheet 233 Drafts, foreign 234 Drafts, introduction of 282 Drafts, forged 226 Drafts, protest of 228 Draft ticket, form of 231 Due bills, clearinghouse 243 Duplicate checks, issue of 181 Duplicate draft, notice of issueof 233 Duplicate ledger, form of 164 Duties of the Cashier 28 E. Election of directors 12 Embezzlements and defalcations, causes of.. 290 Embezzlement of funds of National bank, penalty for 10 Employees of the bank, their duties and qual- ifications 31 Enclosure, letter of for use in making collec- tions 218 Endorsements, restrictive 224 Errors in posting, prevention of 164 Examinations, by ■whom made 15 Exchange, domestic 229 Exchange, early methods of efifecting 281 Exchange list, Scranton Clearing-Hoxise 278 Exchange slip used by Boston Clearing- House 262 Expenses of the bank, Cashier to pay 15 Expenditures of the bank, vouchers for 68 Extension of corporate existence 313 Failures of banks, causes of 299 False entries, penalty for making in books of National bank 10 Fines, clearing-house statement of 257 Fines imposed by clearing-house, list of 257 Forgeries and check-raising 297 Foreign collection register 213 Foreign collections 212 Foreign collection slip 106, 213 Forgeddrafts 226 Foreign drafts and letters of credit 234 Foreign scratcher 94, 95 Furniture and fixtures, the 23 G. General accounts 108, 109 General journal 96,97,99,106,107 General ledger bookkeeper, duties of 41 G eneral ledger, the 91 General management of a bank'. 280 General settlement book 115, 116 Gilbart, definition of banker by 280 Grace, daysof 226,319 H. PAGE Hand stamps, forms of 219 Holidays, paper maturing on 227 I. Inactive accounts 165, 166 Increase of capital stock 307 Increase of capital stock of National bank 13 Individual deposits, changes in 156 Individual ledger bookkeeper, duties of 4 Individual ledger desk, the 146 Instructions for making return and payment of semi-annual duty on circulation 136 Interest laws 320 Interest ledger, form of 170 Interest statement 134 J. Joint oath of directors, form of 11 Journal, form and description of 98 Judgment note, form of 191 L. Ledger, duplicate form of 164 Ledger, form of 148 Ledger, spacing of 152 Ledgers, styles of 147 Legal holidays, customary 227 Letter form, combined 223 Letter of advice 218 Letters of credit 235 Letter of enclosure 218 Letter of inquiry or tracer 21(> Letter of remittance 222 Liabilities of directors for violating National Banking Law 9 LiabiUty ledger, the 200 Limit of liabilities of any one person or firm 9 Liquidation of National bank, proceedings in regard to 317 Loan and discount records 193 Loans and credits, the 287 Loans and discounts, the 183 Loans, classes of 187 Loans, limitation of to ten per cent, of capi- tal 289 Loose-leaf ledgers 110 Lost or mislaid checks 181 M. Management, general suggestions regarding 303 Manager's receipt, Minneapolis Clearmg- House 277 Manager's settlement, Philadelphia Clear- ing-House 267 Married women as stockholders 3 McCulloch, Hugh, views of on banking 305 Meetings of directors, time for holding 14 Memorandum of balances, form of 255 Messenger, duties of .\ 45 Minneapolis Clearing-House, the 275 Minute book, proceedings to be recorded in. 14 Minute book, the 50 Money borrowed of National bank by one person or firm limited to one-tenth the bank's capital 9 334 INDEX. N. PAGE Name of bank— word "National" must be included in title of National bank 3 National and State banks, comparative ad- vantages of 1 National bank, authorization certificate of . . 21 National bank, capital required for organiz- ing 2 National bank, change of name or location of 316 National bank circulation, how to make re- turn and payment of semi-annual duty — 136 National bank circulation, limitation of notes of the denomination of $5 20 National bank circulation, plate and order for notes 20 National bank circulation, profit on 19 National bank, conversion of State bank to. 310 National bank, how placed in liquidation 317 National bank, increase of capital stock of. . 307 National bank notes, tax on 19 Nationalbank officers, how elected 12 National bank, publisher's certificateof pub- lication of statement 126 National bank, reduction of capital stock of. 308 National bank reserves 128 National bank, responsibilities of officers of. 13 National bank, what days required to be open for business 14 National banks, bonds required to be depos- ited by 18 National banks, general form of by-laws for 12 National banks, how to keep circulation ac- count 137 National banks, instruction for preparing reports to Comptroller 124 National banks, quaUficationa and duties of directors 6 National banks, reports of dividends and earnings 64 National banks, reports of to Comptroller of the Currency 121, 124 (inset) National bank, statemen t f or publication.. . . 125 New York Clearing-House methods 249 New York Clearing-House proof 254 New York Clearing-House, statement of banks to 259,260,261 Notes, forms of 189 Note tickler, the 198,199 Notice of issue of duplicate draft 233 Notice of shareholders' meeting 316 Notification sheet of drafts drawn 233 Notification to payer 224 O. Oath of directors, form of 11 Oath required from directors of National banks 8 Oflering book, forms of 194 Officers of National bank, how elected 12 Officers of National bank, tUo 12 Order on clearing-house, form of used in Chicago 270 Organization certificate, form of 5 Organization certificate of converted State bank 312 Organization of National banks 307 Organization of State banks 23 Organizing a bank 1 PAGE Origin of banking, the 280 Overdrafts, notice of 147 P. Paper maturing on holidays 227 Panics, what to do to counteract 302 Pass book, form of 179 Pass books, method of balancing 174 Paying teller, duties and qualifications of . . . 36 Pay-roll book, the 67, 68 Pay-rolls, money for 87 Payer, notification to 224 Payments of capital stock of National bank, how made 15 Penalty for embezzlement, making false en- tries in books and reports — National Bank- ing Law 10 Philadelphia Clearing-House, methods of . . . 265 Plates for printing National bank notes, cost of- 20 Popularity of a bank, how made 285 Posting, prevention of errors 164 Power of attorney for sale or transfer of stock 54 President and Vice-President, how elected.. 12 President of National bank, duties and lia- bilities of 13 President, qualifications and duties of 25 Prevention of defalcations 293 Profit of bank accounts, summary of 142 Profit on National bank circulation 19 Profits and expenses, statement of 145 Profits and loss in making collections 228 Profits under National and State systems compared 2 Proof book 92,93 Proof sheet, Minneapolis Clearing-House... . 277 Proposition card 139 Protest, instructions in regard to 228 Protest of drafts and notes 228 Proxies, who may not act as 10 Proxy, form of 10 Publisher's certificate of publication of re- port of condition of National back 126 Qualifications and duties of officers and em- ployees 25 Qualifications of National bank directors.. . . 8 Quorum, lack of at annual meetings 12 Quorum, what shall constitute 15 R. Rates of interest 320 Real estate, conveyances of by National bank 13 Receipt for credit balances, Boston Clearing- House 264 Receipt for pass book and vouchers 177 Receiving teller, his qualifications and du- ties 40 Receiving teller's settlement 79 Reconcilement book, form of 133 Record of meetings, how kept 51 Reduction of capital stock 30JS Register of bill in transit 110 INDEX. 325 PAGE Eemittance, letter of 222, 223 Reports of condition, instructions for pre- paring 124 Report of condition to the Comptroller of the Currency 121, 124 (inset) Report of earnings and dividends 65, 66 Reserve, condensed statement of 130 Reserves required for National banks 128 Reserve, statement of 129 Restrictive endorsements 224 Return of collections, slip for use in making 220 Runners' exchange, Philadelphia Clearing- House 266 S. Safeguarding the bank, methods for 296 Sale or transfer of stock —power of attorney 5 4 Savings bank department 167 Schedule of securities owned 127 Scranton Clearing-House 277 Scratcher, auxiliary, form of 151 Scratchers, forms of 153, 154 Seal of bank, the 13 Securities owned, schedule of 127 Settlement, acknowledgment of 131 Settlements, clearing-house receipt for 256 Settlement, statement of clearing-house 256 Settlement ticket, Boston Clearing-House... 265 Settling clerk's clearing.house statement.... 251 Settling clerk's sheet, Philadelphia Clearing- House 266 Settling clerk's statement, Boston Clearing- House 262 Settling clerk's statement, Chicago Clear- ing-House 269 Settling clerk's statement, Minneapolis Clearing-House 275 Shareholders not desiring to extend corpo- rate existence 316 Shareholders' meeting, notice of 316 Stamps, hand, forms of 219 State and National banks, comparative ad- vantages of 1 State bank, conversion of into National bank 310 State banks, how organized 22 Statement of banks to clearing-house 258 Statement of National bank for publication . 1 25 Statements from borrowers 185, 186, 187 Statutes of limitations regarding accounts, notes, contracts and judgments 319 Stock certificate book, the 52 Stock certificate, form of 53 Stock certificate, record of 54 Stock certificate, stub of 55 Stockholder of National bank, failure of to pay amount of subscription 18 Stockholder of National bank, privilege of to subscribe for new stock 14 PAGE Stockholders, annual meetings of 12 Stockholders, married women as 3 Stockholders of a bank, selection of 1, 3 Stockholders of National banks must be in- dividuals 3 Stock, increase of 13 Stockledger, description of 60 Stock ledger, form of 61 Stock register and transfer book 56, 57 Stock transfer or assignment, form for 59 Stock transfers, method of making 14 Stop-payment notice 181 Stub of stock certificate 55 Summary of profit of bank accounts 142 Surplus fund of National banks— one-tenth of net profits to be added until surplus equals twenty per cent, of capital !» T. Tax on National bank notes 19 TeUer of National bank, liabilities of 13 Teller's cash book 72 Teller's credit, Minneapolis Clearing-House. 276 Teller's, first, cash details 76, 77 Teller's, first, settlement 82, 83 Teller's general settlement 80,81 Teller's, second, cash details 78 Teller's settlement book 73 Tellers, work of 74 Three-column balance ledger 148, 150 Tracer, form of 217 Tracer or letter of inquiry 216 Transfer check, Boston Clearing-House 264 Transfer of bank stock 56 Transfer or assignment of stock, form for. . . 59 Transfers of stock, how made 14 U. Usury, penalties for 320 V. Vacancies in board of directors, how filled .. 9 Value of an account, how to determine 139 Vaults, arrangement of 24 Vice-President, his qualifications and du- ties 27 Voucher check, form of 69 Voucher record, the 70, 71 Vouchers for entries 112 Vouchers and pass book, receipt for 177, 178 w. Withdrawal of collectloiL 220 0^- TH,'-- '^ \