Seward daily gateway., 1924-05-14
HOW DOES A BANK MAKE
 A PROFIT? First Prize in High School Essay
 Contest
By CLARA PERRY

A little girl came to me the other day; she wanted to know how bank made money. She asked, "How can bank make profit? It has so many expenses, such as, salaries, water, heat, light, and taxes"
 I answered, Besides the things you have mentioned, when person de posits money in our bank, we give him blank checks, pass book, check book, a page in our ledger, also we give him a statement of his account every month. This all costs the bank money. To pay for this we must have some profit making source. We have three outstanding ways of mak ing money, not mentioning numerous small ways. The principal ways are: First, bank loans; second, exchang- ing checks; third, renting safe de- posit boxes.
 Loaning money is the banks best source of making money. If bank can't loan money it can't make pro- l fit.
 So you will be fully able to under stand loans, had better tell you how bank starts. We will say that you have fifty thousand dollars and I have fifty thousand. We get together and start bank. We have a sum | total of one hundred thousand dol lars. We would probably use twen- l ty five thousand to start our bank, for a building, furniture, etc. Then we have seventy five thousand left. As soon as our bank is opened people begin depositing money. MT. Brown might deposit thousand dollars, John Doe six hundred, Al. Jenks three hum dred and fifty, John Silver eight hun dred. This would amount to two thousand seven hundred and fifty dollars. We pay our depositors four per cent on their deposits.
 Now comes the loans. We can only loan certain per cent of our capital. This is to protect our depositors for if we loaned all of our money we would be broke and if one of our de- positors wanted to draw out his sav- ings we would have no money to give him, so we can only loan part of our sum total. Suppose man want ed to start a store; he would come to us for money to start it. If we thought he would De a success, we would loan him the money. He wants to borrow twenty thousand dollars. upon good security we loan him this sum at twelve per cent interest; thus from this loan a gross profit of three thousand dollars. From this we must pay our customers four per cent and other expenses.
 Mortgages are another form of loans from which we make a profit. We will say that Silas Manner needs some money to harvest his crop. He comes to the bank and mortgages his farm for thirty thousand dollars. After his crops are harvested and sold he pays US thirty thousans dollars and three thousand six hundred dollars for the interest. On this loan we make a gross profit of three thous- and six hundred dollars. Mortgages are an additional safeguard to banks and banks are often able to get val uable property for less than they would usually pay for it. They make 3 good profit by selling this property again at a good price.
 Exchange on checks is another source of profit to bank. When a check is cashed at our bank we charge a small amount for the trouble. The charge varies with the amount of the check.
 Our third way of making profits is in renting safe deposit boxes. We charge five dollars year for the rem tai of one of these.
 Exchange on checks and renting safe deposit boxes are not a great source of profit to bank; but they certainly count. Loans are the great rrof;+ y,,aLinU means If hank