The Birmingham age-herald., 1915-06-28

ployed The capital stock of the bank
 appreciated rapidly untir at rast 1t com
 manded in the somewhat rare market in
 which it was offered for same-usually to
 close out an estate-a price which at one
 time was as much as S4O0O share.
 It was the example set by the Chemical
 bank which the Fifth avenue institution
 followed. and has maintained until this
 day. For years the earnings were added
 to the surplus until at last large surplus
 was gained. Now the market price of
 the stock of this institution is in the
 neighborhood of $40O0 share. But stock
 holders will not sell unless they can get
 considerably more than $4000.
 Some years ago the Chemical bank, in
 view of changes In the national banking
 law, found it advisable to change the
 longtime policy of the institution. The
 capital stock was increased from s3Oo, GOO
 to $1.000000, and, as was the case with
 other banks which increased their capital stock, this was paid for out of the sur
 plus. In other words the stockholders
 got what was really stock dividend. In
 magnitude the transa ction did not com
 pare with similar transaction whereby
 the capital stock of the First National
 bank was greatly increased. The trans action is now historic, and it illustrates the conservative courage and the far sighted management of George F. Baker, for when the time came when it was demed advisable to increase the capital stock of this institution 1t was learned that the bank possessed what to the pulp lie were unknown resources. President Baker with great shrewdness invested from time to time some of the bank g money in securities when they could be bought at low cost he knowing at the same time that the inherent value in these properties was far greater than the value reflected by the market price. This was in effect a building up of the surplus. and it was this unknown surplus which made it possible for the stockholders of the bank to pay for the new stock.
 About 10 years ago, 1t was evident that the old method which was SO signally
 maintained by President Williams of the Chemical was no longer the best method for a national bank to adopt. Yet in ef- feet the increase of capital and the con- sequent reduction of dividends mean, so far as income to stockholders Is con cerned. much the same that an extra divi-
 dend of 100 per cent means to the stock
 holders of the Fifth avenue institution.
 One of the leading bankers of New York said this morning that a diveslend of 100 per cent upon capital of $10000 is, so far
 as the money is concerned, no greater than dividend of 10 per cent upon a cap-
 ital of s1,0OO,000. The national banks have found it expedient to incerase their capi- tai stock, and if they have large surpluses these are frequently made up by pay
 ments on account of surplus made by stockholders.
 The Fifth avenue institution is a state chartered bank. however. The modifca- tions in the old national bank law which made 1t expedient to increase capital
 stock are matter of no concern to this or any other state chartered institution.
 But the probabilities are that 1t will con tinue the policy 1t has always followed,
 adding each year something to surplus and undivided profits and paying quar- terly dividends of 25 per cent and extra
 dividends each year of 100 per cent. and, it may be, by and by more than 100 per centl