§ 109 — Closing of books; profits; how to be computed

§ 109. Closing of books; profits; how to be computed. 1. Every bank\nand every trust company shall close its books not less frequently than\nannually for the purpose of transferring its net profits to the\nundivided profits and surplus fund accounts.\n 2. To determine the amount of gross income of any bank or trust\ncompany for the purpose of computing its net profits for any period, the\nfollowing items may be included:\n (a) All income received or properly accrued, provided that no interest\nshall be accrued upon interest-bearing assets upon which a default of\nprincipal or interest has existed for a period which shall be determined\nby the superintendent except interest-bearing assets secured by\ncollateral the ascertained value of which is at least equal to the\namount at which the asset plus all interest accrued thereon is carried\non its books.\n (b) Realizable profits resulting from a revaluation to ascertained\ncurrent market of a foreign exchange position, provided that a\nconsistent practice is followed in the deduction from gross income of\nlosses so resulting.\n (c) Amounts added to cost or charged to amortization reserve for the\npurpose of amortizing discounts on securities purchased for less than\npar, provided that no discount shall be amortized on securities upon\nwhich a default exists.\n (d) Any profits actually realized from the sale or other disposition\nof securities, real estate or other property.\n (e) Amounts recovered on assets previously charged off, including\namounts allowed by the superintendent on account of assets previously\ndisallowed by him and other amounts allowed by the board of directors on\naccount of assets previously disallowed by it. For the purpose of this\nparagraph amounts transferred to valuation reserves shall be considered\nas amounts charged off.\n (f) Provided the superintendent shall have approved, and only to the\nextent of such approval, any increase in the book value of the real\nestate and building or buildings thereon used by it as its place or\nplaces of business.\n (g) Such other items as the superintendent, in his discretion, may\npermit to be included.\n 3. To determine the amount of net profits for such period, the\nfollowing items shall be deducted from gross income:\n (a) All expenses paid or properly accrued in the transaction of its\nbusiness and the management of its affairs.\n (b) Interest paid or properly accrued upon debts owing by it.\n (c) Amounts deducted from cost or credited to amortization reserve for\nthe purpose of amortizing premiums on securities purchased for more than\npar.\n (d) All losses sustained, including assets, or portions thereof,\ndisallowed by the superintendent, and other assets, or portions thereof,\ndisallowed by the board of directors. With the approval of the\nsuperintendent, any items referred to in this paragraph may be excluded.\nFor the purposes of this paragraph, provision for disallowances may be\neffected by charge off or by establishment of valuation reserve and any\nexisting valuation reserve may be deducted from the related asset in\ndetermining the amount of loss sustained.\n 4. The balance thus obtained shall constitute the net profits of such\nbank or trust company for such period.\n