§ 109. Closing of books; profits; how to be computed. 1. Every bank
and every trust company shall close its books not less frequently than
annually for the purpose of transferring its net profits to the
undivided profits and surplus fund accounts.

2. To determine the amount of gross income of any bank or trust
company for the purpose of computing its net profits for any period, the
following items may be included:

(a) All income received or properly accrued, provided that no interest
shall be accrued upon interest-bearing assets upon which a default of
principal or interest has existed for a period which shall be determined
by the superintendent except interest-bearing assets secured by
collateral the ascertained value of which is at least equal to the
amount at which the asset plus all interest accrued thereon is carried
on its books.

(b) Realizable profits resulting from a revaluation to ascertained
current market of a foreign exchange position, provided that a
consistent practice is followed in the deduction from gross income of
losses so resulting.

(c) Amounts added to cost or charged to amortization reserve for the
purpose of amortizing discounts on securities purchased for less than
par, provided that no discount shall be amortized on securities upon
which a default exists.

(d) Any profits actually realized from the sale or other disposition
of securities, real estate or other property.

(e) Amounts recovered on assets previously charged off, including
amounts allowed by the superintendent on account of assets previously
disallowed by him and other amounts allowed by the board of directors on
account of assets previously disallowed by it. For the purpose of this
paragraph amounts transferred to valuation reserves shall be considered
as amounts charged off.

(f) Provided the superintendent shall have approved, and only to the
extent of such approval, any increase in the book value of the real
estate and building or buildings thereon used by it as its place or
places of business.

(g) Such other items as the superintendent, in his discretion, may
permit to be included.

3. To determine the amount of net profits for such period, the
following items shall be deducted from gross income:

(a) All expenses paid or properly accrued in the transaction of its
business and the management of its affairs.

(b) Interest paid or properly accrued upon debts owing by it.

(c) Amounts deducted from cost or credited to amortization reserve for
the purpose of amortizing premiums on securities purchased for more than
par.

(d) All losses sustained, including assets, or portions thereof,
disallowed by the superintendent, and other assets, or portions thereof,
disallowed by the board of directors. With the approval of the
superintendent, any items referred to in this paragraph may be excluded.
For the purposes of this paragraph, provision for disallowances may be
effected by charge off or by establishment of valuation reserve and any
existing valuation reserve may be deducted from the related asset in
determining the amount of loss sustained.

4. The balance thus obtained shall constitute the net profits of such
bank or trust company for such period.