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ANNUAL REPORT FmKBAL RJSSERVS -BANK O f MINNEAPOLIS 19Uj Board of Directors, Federal Reserve Bank of Minneapolis. This report, revealing the results of our operations during I9H1 . is respectfully sub mitted., January 1, 19^2. INDEX Comments............... ......... 1 Assets and Liabilities.......... . * 3 Bank and Public Relations Departmental Comments Earnings . . . . . . . . . 0 . . , . . 27 ......... 26 . . . ........ 11 Expenses 12 Profit and Loss, Surplus and Eeserves. . 2^ COMMENTS The year 19^1 marks the beginning of another period of emergency in our country and these abnormal times are reflected in the additional expendi tures this Bank was obliged to make in order to carry out new duties imposed and brought about by war time conditions„ While the activities of the Bank during 19^1 are presented in detail in a subjoined section of this report, a very brief resume is made a part of these opening remarks* In addition to the regular and routine duties performed by the fiscal agency department, the sale of defense bonds was added in April 19UI requir ing an enlarged staff and more space, It is expected that the financing of this war will greatly increase the volume of activity in this department A new department - the Installment Credit Department - was created in August for the purpose of administering the new Regulation W and this de partment has been employing from l4 to 19 persons since it was organized,, The problem of finding space in the building for these and other in creased activities is becoming acute, The policy of the management of the Bank is to develop and maintain an aggressive bank and public relations program, and thiB policy is reflected in the increased activities during 19UI0 Member banks have not found it necessary to make use of our discount facilities to any great extent and, therefore, loans to member banks have been at a low ebb throughout the year. creased. Outstanding industrial advances in The new advances were few in number and were made principally to finance war industries* The check collection department handled more items in 19^1 than dur ing any previous year* The volume of Twin City clearings, checks on member and nonmember banks and direct sent items increased, while items drawn on Montana banks, the Treasurer of the United States and work relief checks dev creased in number, The volume of items handled in the noncash collection department remained practically unchanged from 19U0 . The number and amount of currency and coin delivered to member banks increased while incoming shipments and dollar volume decreased* No unusual activities were engaged in by the bank examination depart ment during the year. The number of State banks remains unchanged from one year ago at 88, while the number of member banks declined from U6U to U53 * No material change occurred in the volume of work handled in the safe keeping department although the dollar volume was somewhat larger than during 1^0 o The activities of the custodian for the Reconstruction Finance Corp oration during 19^1 were mostly administering and liquidating loans previ ously made, coupled with a continuation of the duties performed for the Commodity Credit Corporation The custody of notes and warehouse receipts for the Commodity Credit Corporation constituted the major part of the work in the department in 19U1 , as was true also in I9U0 , Considerable administrative work was carried* on in connection with foreign funds control during the year* Specifically, this work was the distribution of Treasury Department circulars to banks, interpreting Treas ury Department instructions for interested parties and licensing certain transactions* V CHANGES IN OUR BALANCE SHEET FIGURES The following comparative statement of condition shows the changes which have occurred in our balance sheet figures since December 31, I9UO; COMPARATIVE STATEMENT OP ASSETS FEDERAL RESERVE HELENA BRANCH Increase or De crease since December 31 , 19U1 (OOO’s "omitted) Cash Reserv Interdistric? ^ettle^en^ f Gold certificates with F.R Redemption Fund - F.R. Notes 180 , ^ 696*95 66 2lU,000 , 000.00 Uoi,l9U„8U Total gold certificate reserves ........ . $ 395 . 395«065,S9lj>79 ^ 065 , .79 891 Other cash ........................... .. * , 5,UlS,238.49 U00 ,U8U.13G „28 Total cash reserves ...... ............... Bills and Securities? Bills secured by U.S. Government obligations, direct or fully guaranteed ........... Bills otherwise secured and unsecured... . Foreign loans on gold ....... ,....... «... Industrial advances *...... ............. U.S. Government securities .... Total bills and securities .............. $ + + + + - + 50 . 000,00 • $ 513.99U.,01 66.509,000*00 ^ " s. " 67,072.99^01 v - + 35.069 us,500 69 0 3 .6 3 3 ... 1 .15.8 82.U80 59 86 21 295 U.262 ^391' Due from Foreign banks ........... FoR« Notes of other Federal reserve banks 459.65 651 , 000,00 Uncollected Items; / Transit items ...... .; v : ........ Exchanges for clearing house... . Other cash items .,......... ........ 24.829.8U2.79 983 ,782*UU _ _ _ _ _757.05^.22 + .. 26 ,570 , 679.“ +5 + 7,016 2.1 *5°.579-39 1.112,Ul7..82 + 1 Total uncollected items... ..... ......* $ Bank premises Less reserve Bank premises - Net .......... . Miscellaneous Assets? Industrial advances past due three months*... Less reserve .................. ......... Industrial advances past due 3 months -Net Misc, assets acquired in settlement of claims account failed banks,,........... . F.D.I.C. stock........ ....... ........ Less reserve «......... ............ Difference account .................... . . ^Premium on securities ....... .......««•«,« Interest accrued .... .............. Reimbursable expenditures .............. Deferred charges .............. ........ All other asset*... ............... .♦... Total miscellaneous assets TOTAL ASSETS ................ ......... $ 1 .338 .161.57 175.301.00 863 ** 6,909 uu + J S - 29 mm 35 - 35 73 , 000.00 102 ,301.00 1.00 3.509.^7.65 3 . 509 . U 67.65 37.31 * 829 . 900.91 S6U. 71+ 7.87 89 . 661.35 I8 . H.28 92 ____ 3,53^.77 1 .309 .108.52 U9 7 , ,533 . 426 1*8 $ U97.U26,533*U8 + 125 22 Us 2 1 - 87 + ‘ 92,908 o O f COMPARATIVE STATEMENT OF LIABILITIES FEDERAL RESERVE BANK Of MINNEAPOLIS AND HELENA BRANCH December 31» 19^1 FoR.. Notes in actual circulaUon^^/^.i^.. « $ .. |\ Deposits* ^Members - Reserve a c c o u n t ^ if*:........ . Uo f> Treasurer^- General account 0.,.... '. . cc 7T Foreign "balances ............. .......... Nonmembers - Clearing account ............. Officers5 checks ... ......... ..... . Other deposits ............... ..... . 206,509,760°00 Increase or De crease since D C . 31 . 19^0 et (000*8 omitted) $ + ± * 178«535il52«29 “ $2,¥60,.366002 ““ 16 ,796»hUc*13 I,305»718„l6 7«183,537®9& 2,324,628.3** + U7.801 JLQSa. 29.603 252 133 3,792 + + + 38, SU/ •f 6,211 + 13 M l 11 83 *955*53 + 2 Capital stock paid in .♦__ __3 * _ 003 *^5®*-00 Surplus Fund - Section 7 ... . 3*152.*+20.27 Surplus Fund - Section 13 b ............... . . l„000t298..8J Reserves for contingencies .... . 2 ,5l6 « U7 1 7 6 + 29 + 18 Total Deposits .... ................... $ Deferred availability items ................ 258,605 ,8^2,92 22,55^*^58°72 Miscellaneous Liabilities; Accrued taxes unpaid ......... 65,040.00 Sundry items payable ....... .......... . 18eU05«07 Unearned discount 0....... .... .................. 168.19 Discount on securities........ ............ 166*97 Suspense account ................... ........... 175*30 Total Miscellaneous Liabilities ........ TOTAL LIABILITIES..... ..... ........... $ $ ^97.^26,533.^8 92,90s Gold certificate reserves against F.R. Notes in actual circulation after setting aside 35# legal reserve against deposits 150.1# 1 .8$ Reserve ratio against combined net deposits and note liabilities 86.1 # 2a % Commitments to make industrial advances $ 28 , 053,00 Float absorbed........ ................. $ 4,016,221.00 22 $ + Total assets increased 92,9 million dollars during the year. an increase of about 23 per cent in the twelve month period. 1,017 This is All but about 10 million dollars of this Increase occurred in our “gold funds'* balances (gold certificates pledged with the Federal Reserve Agent, interdistrict settlement fund and redemption fund) which totaled 395 million dollars on December 31 , 19^1 - &n increase of 83°^ million dollars as compared to December 31 e 19} 40& Increases or decreases in our “gold funds" balances (after allowing for unex pended transfers of funds in and out of the district) may be regarded as indica tions of the trend of trad8 between this District and other districts in the System. The sale of goods and services outside this District ie eventually 4 paid for by increases in our balance in the interdistrict settlement fund., The Bale of securitise outside the District would be reflected in the same manner. Spending of government funds in this District obtained from outside the District is also a purchase of goods and services and our interest in the settlement fund is increased as these new funds come into this District. On the other hand, purchases of goods, services and securities from outside the District and payments of Federal taxes reduce our credit balance in the fund as final payments are made and serve to reduce our so called trade balance. other factors of importance which result in There are increases or decreases in our “ gald funds'*, but those mentioned seem to be the most important» We might con clude then that incrsases in our gold certificate reserves reflect a balance of trade in favor of this District and decreases in these reserves reflect unfavor able trade balance, and as we gained 87„9 million dollars of gold reserves (out of which funds our participation in Government securities was increased U„3 million dollars) it is evident that the trade balance was favorable to the District during 1 * 1 94, This represents an increase over 19U0 of about 28 per cnfe e'c Cash Reserves, Total cash reserves on December 3 1 , 19U1 were U0Q„5 million dollars as compared to 3^8 millions on December 31 , 19*40 - an increase of 82 ,5 million dollars. These reserves reached the highest total at the close of 19^1 experienced in the history of the bank. Gold certificate re serves Increased 83*6 million dollars while vault cash was reduced 1*1 million dollars. Of the 395 million dollars of gold certificate reserves, 2 * million 14 dollars was pledged with the Federal Reserve Agent as collateral for Federal reserve note issues and these pledged gold certificates also reached an all time high total. One year ago 165,5 million dollars of certificates were Vault cash was reduced to 5 * million dollars,, as compared to 6,5 *4 pledged, million dollars one year ago, Our supply of U S , notes was reduced from «< $700,000 to $550,000 (a decrease of $150 * )j the supply of silver certifi 000 cates from U «9 million dollars to million dollars (a decrease of $700 , ) 000 and other currency and coin from $900,000 to $650,000 (a decrease of $250 , ) 000 , Bills and Securities, Even though reserve requirements have been in , creased, defense bonds are being sold and the demand for currency on the part of the public has increased, member banks still have excess funds and do not o need to avail themselves of the discount facilities of the Bank. We held $50t 000 of member bank paper on December 3 1 * 19^1. a decrease of $1^6,000 since December 3 1 , 19 J * *O The-volume of bills held at the close of the year was lower than at an/ month end since March I9H0 „ when member banks were borrowing $25*OOOo Industrial advances totaled $51^,000 and were $295,000 greater than on December 3 1 , 19UO0 purposes. The new advances were made mostly for defense and war Our participation in investments in Government securities through the System account increased from 62c3 million dollars in December 19UO to 66 „5 million dollars in December 19^1. an increase of H , million dollars• .2 This account» however, fluctuated above and below those figures during the year. In January 19 HO our participation was adjusted upward to 66 *S million dollars and was maintained at that point during February and March0 In April the ac count was reduced to 65*9 million dollars and remained there through the quarter ending in June,, During the quarter ending in September the account was further reduced to 6l06 million dollars. In October and November our participation was raised to 65 million dollars and in December to 66*5 million dollars. Uncollected Iterns, Changes in the asset account "uncollected items*’ and the liability account “deferred availability items'1 originate principally in the check collection department, These accounts are so interrelated that they have become known as "twin items" in check collection accounting. Under ideal circumstances one account would offset the other, but due to the fact that our outgoing transit letters may be paid before or after the date to which those items were deferred and that noncash collections and transfers of funds also have a bearing on the net uncollected items outstanding on any day* these accounts do not offset each other* When total uncollected items exceeds total deferred availability items, the difference represents “float" which the Reserve bank carries for member hanks. Very rarely do we experience the opposite con dition of a float in our favor, as the check collection time schedule (as revised) was designed to favor member banks and in those rare instances where the float favors the Reserve bank, it is usually due to a transfer of funds or a noncash collection credit* Uncollected items totaled 26,6 million dollars on December 31 , 19 U1 * an increase of 7 million dollars over December 31 , 19^0, » crease This in is due to an expansion in the number of items and dollar volume of items handledo For the same reason total deferred availability items increased 6,2 million dollars to 22*6 million dollars„ The total uncollected items at the close of the year exceeded total deferred availability itemB by 1 million * dollars, which represents the amount of float our bank was cariying for member banks. This is an increase of 1 million dollars in float absorbed, as com pared to December 31 , 19UO when the total waB 3 million dollars. Bank Premises, The book value of bank premises was increased $731 in November 19^1, representing the cost of installing “electric eye" protective equipment on the roof of the bank buildingo Reserve for depreciation was in creased in a like amount in addition to normal depreciation charges of $28,8U6, The detail of changes in bank premises account is as follows1 LAND Head Office Book value January 1„ 19M (No change during year) $ 1*00,$20.66 Helena Branch 10,000,00 Total Ul0,520.66 BANK BUILDING Book value January lt 19UI Less; Reserve for depreciation Net book value December 31 , 19U1 $ 1,283,281,50 75,000.00 1,358,281,50 **36,315«>56 5,250*00 M*1p565q56 $ 84b,9&5.91 '” 97750.00“ ' 9lk,71$<91 * * MACHINERY AND EQUIPMENT Book value January 1, 19UI Increase during 19^1 $ Lesss Reserve for depreciation Net Book Value Dec, 31, 19U1 66^,238 ,3 $ l6,S07»88 68lr 0U6e83 ______ T£L*QQ 731oGO 3577969.35 10,807t88 ^817777723 664, , 3 _____ 5P882,9l____ 670 ,852,26 969 , 5 - 10.92M7 10,92U,97 BANK PREMISES COMBINED (Land, Buildings, Machinery and Equipment) Book value January 1, 1911 * Less* Reserve for depreciation $ 2,31+8,771.$! 1,101,28**,91 101,807.88 11,132,91 2,^50,579-39 l,112,Ul7,82 Net Book Value December 31, 19U1 $ 1,247,1*86,60 90.67M7 1 ,338 ,161,57 Miscellaneous Assets, Premium on our participation in Government securi ties through the System account dropped from $95^»6$0 on December 3 1 , 19^0 to $829,900 on December 3 1 * 19^1 “ & reduction of $12**,750» though the System's holdings of Governments remained unchanged during the year until December 8 when additional securities were purchased.. The premium account was reduced by amortiza tion and the sale# on several occasions, of short term securities carrying a premi um and the purchase of longer term securities at or near par. Interest accrued on bills and securities held is $22,176 greater than on December 31 , 191* . 0 Total earning assets have increased during the last two months and with the slight stiffening in our earning >rate the interest accrued account is somewhat larger„ Reimbursable expenditures is really an accounts receivable and the total of $89,700 in this account at the close of the year is the amount of current sal aries and expenses the Bank has advanced in performing services for the Treas ury Department and governmental agencies for which reimbursement has not "been received* This total exceeds the December 31 e 19*40 total by $4S,2l6, due to the greatly expanded fiscal agency services this bank is performing. Past due industrial advances were reduced $34,792 during the yeart either^ through vol untary reductions, foreclosures or the sale of our interest to other creditors. Federal Reserve Notes in Actual Circulation. Our note circulation has increased from 158 *7 million dollars on December 3 1 , 19^0 to 206,5 million dollars on December 3 1 , 19^1o 30 per cent0 This is an increase of U7*8 million dollars or Circulation expanded more than twice as fast as in 19^0 when notes outstanding rose 20 million dollars*. There was not a single month in 19^1, except January * when circulation did not exceed the previous month* It is too early in the year to learn whether our circulation will be reduced sub stantially by a return of currency following the Christmas Holiday shopping periode If our experience is to be the same as during January of last year, circulation will not be greatly reduced. Some concern is being manifested regarding the phenominal increase in money in circulation and the trend in the next three or four months is being watched with deep interest,, Money in circu lation in the United States totaled ll# 6 l million dollars on December 31 , 19 UI l - an increase of 2,^29 million dollars in the past year. If money in circula tion should rise as much in 19^2 as in 19U1 , member banks' excess reserves might be reduced to a point where many banks may be forced to borrow to maintain re serves at the required level and be without funds to meet the private demand for loans and assist in financing the Nation’ war effort0 s Member Bank Reserve Accounts, Member hank reserve balances in this District did not expand as rapidly in I9 U1 as in 19^0. During 19UO these balances increased from l^Uog million dollars at the beginning of the year to 17 Ur million dollars at the close of the year - an increase of 19*7 million .5 dollarsc Between January 1, 19U1 and December 31 * 19I I member bank balances + rose from 17^.5 million dollare to 178*5 million dollars - an increase of only k million dollars, Although no accurate information is available pertaining to money in circulation in this district alone, other than the abrupt rise of our notes outstanding, the increase in money in circulation and the larger balances carried with the Treasurer of the United States are probably the principal reasons for the smaller increase in member bank reserve balances in I9 U1 as compared to 19 *0 « + Daily average excess reserves of member banks in this district during the first half of December 19^0 totaled 73°^ million dollars, Excess reserves dropped to 45*1 million dollars by December 19U1 - a reduction o . 28„3 million f dollars in excess reserves. The most pronounced decrease occurred when the increased reserve requirements became effective on November 1, 194l„ that time excess reserves decreased 15-5 million dollars., At The following comparative analysis of excess reserves gives the detail of the changes by groups of banks and the District as a whole. Ninth District Member Bank Reserves " (Daily’ averages') Country Banks Ninth District____ Reserve Cities____ > December Change since December Change since December Change Since 1 to 15 m m rnm Dec0 1940 1 to 15 Dec* 1940 •tin u nmmx m v immmmw ffw m mm umDec. 1940m m 1 to 15 m m tm m m imitmwm iuli u tmrm+imur mmmwmmai mm mm m m mmmmmm (000*s omitted) Reserve carried $ 103,988 - 11,449 $84,572 - 20,985$ 188,560 t + 9,536 Reserve required 85,972 + 19,237 57,^37 + 18,644 143,409 + 37,881 Excess reserves 18,016 - 30,686 27,135 + 2>3^l **5.151 28,345 — h ■iM i inr.Mj 1 — u ftn w « tiw —»'■irm im w— ■ tfwmi . w m i^ jw im i im i— i During the period under analysis, reserves carried by Reserve city banks decreased 11<>4 million dollars and reserves carried by country banks increased 20,9 million dollarst or an increase in the District of 9*5 million dollars,. Required reserves increased 19*2 million dollars in Reserve cities; 1806 million dollars in country banks and 37»S million dollars in the District, While Reserve city banks lost 3O 06 million dollars in excess reserves, country banks gained 2„3 million dollars of excess funds with a net loss to the District of 28*3 millions of dollars., In addition to the increase in reserve requirements, the two most important factors contributing to the decline in excess reserves in this District are the same as those mentioned in connection with the discus sion of member bank reserve balances, namelyj the increase in money in circula tion and funds withdrawn from member bank reserve accounts and placed to the credit of the Treasurer of the United States, Daring 1940 balances to the credit of the U.S0 Treasurer’s general account ranged between a high of 33*2 million dollars in March, to a low of l6.1 million dollars in November* These balances were higher in 1941, with a low of 21*1 million dollars in September and a high of 52,4 million dollar^ 9 at the close of the year. The increase of was at Helena Branch,, million dollars in officers5 checks outstanding As has been stated before,, Montana banks pledge our cashier’s checks with public officials in lieu of securities as collateral for public deposits* The Branch had 7°1 million dollars of officers1 checks outstanding on December 31 , 19*41, compared to $25*280 at Head Office, Miscellaneous or “Other Deposits*' increased 1„5 million dollars*. Of the 2«3 million dollars in this account on December 3 1 , 2 million dollars were payments received for subscriptions to United States Defense Savings Bonds end not credited to the Treasurer of the United States pending issuance of the bonds« Reserves for Contingencies* Other than an increase of $17.9$^ *n re serves for contingencies, no changes occurred in our capital account except an increase of $28,650 in shares of stock issued to member bankso The in crease in reserves for contingencies represents the net earnings (after divi dends) of the bank for the year 19U1 , after remitting $*49001 4 * Treasurer of the United States as net profits from industrial advances during 19*41c The following comparative statement shows the changes which occurred in our income and disbursements, as compared to 19 4 « *0 19 4 *1 Current earnings Current expenses Net current earnings $ 1 , ,236.78 223 1♦ 07*51* 2 *52 46 $ 147,808,26 Additions to earnings from profit and loss transactions' Net earnings $ Increase or Decrease as compared to 19 U0 $ + $ “ *42,266 . 9,4* 0*94 132,760 - 363.227 1495.987 50, *456005 193,26*4*31 Disposition of Net Warnings Dividends paid Paid Uc Sc Treasurer Transferred to reserves for con tingencies Withdrawn from Surplus (Sec- 13 b) $ 179.789-68 * .1*4 490 $ 17.98*4, * 9 + $ ‘ 193 ,2614,31 $ 2.389 *490 + + + - *499 >251 . . . ,., m * , ? 495 98 EARNINGS Compared to 19 U0 19Hi $ 1 , ,195=91 223 Ho087 $ ~ $ 1,223,236.7s $ - ' 42,210 56 42 , 2b£ The source of earnings did not change materially in 19UI0 Income from our participation in investments in Government securities through the About 98 per cent came System account contributed 97 per cent of earnings. from that source in 19^0 and 9^ per cent in 1939 > -9^1 these investments provided us with $1,191,000 of earnings,, which was $46,000 less than in 19UO when this income totaled $1,237*000. gated $1,070,000c In 1939 income from Governments aggre During 19 UI we held a monthly average of 65 million dollars of Government securities yielding 1*8 per cento average was 71 million dollars, yielding 1,7 VeT cent. source of income was from industrial advances. In 19^0 the monthly The next important During I9H1 we obtained $20,500 of earnings from these advances which was $5»500 more than in 1940* In 19 U1 these advances averaged $404,6008 yielding 5 per cent, while in 19 U0 we held $253,000 yielding 6 per cent. Earnings from discounted bills of $2,650 were slightly under 19^0 earnings, which totaled $2 ,760. , Earnings from foreign loans on gold are included in these figuresa and these earnings were $44 in 1941 and $344 in 1940, During 1941 the volume of bills discounted for member banks averaged $173*000 and in 1940 $152v 0 « 00, not vary greatly from 1940 figures and were as follows* Other earnings did commitments to make industrial advances, $4l6* deficient reserve penalties, $677» sale of waste paper, bags, etc.* $135 * monthly letters sold, $llj clearinghouse fines, $56 , and savings in registration fees on mail shipmentse $1 , * 058 All of the earnings reported by Helena Branch for the year 19UI were from assessments for deficient reserve penalties. For 1940 the Branch re ported $38 earnings from discounted bills and $60 from penalties for defici ent reserves. Average total earning assets has declined year by year since 1937. while the earning rate has strengthened slightly. Adjustments in our partici pation in Government securities is the cause for the lessening total of all earning assets. The slight firming in the yield on Governments is the reason for the very slight increase in the yield rate on all earning assets* The EARNINGS - Cont«d following comparison presents these changes in a rough manners Total Earning Assets 1937 Includes Governments Totaling; $ 84,1Hi,000 1938 1939 19U0 1941 83 , H t000 02 75.413.000 75.281.000 70 , 961.000 64,905,000 $ 76.6U7.000 76.36)4,000 7 1 .^ * 0 0 0 65.518.000 Yield on All Earning Assets U 65& 1,4 1,5 1..8 lc9 EXPENSES X3bl Head Office • Helena Branch $ ' 972*537-^3 102,891 < 0 >9 $ 1,075,1*28.52 Gross expenses during 194l were $1,470,500 and exceeded gross expenses in 19UO by $233,700 when expenses totaled $lf236,800o Reimbursable expenses, however* totaled $395,100 and were $143,200 more than in I9U0 when these ex penses aggregated $251,900-, As a result the net expenses of the Bank in 19U1 were $1 , ,^00 , as compared to $984,900 in 19UQ - an increase of $90 ,500 * 075 . The budget for 1941 contemplated expenditures of $1,328,200, of which it was estimated $298,400 would be expended for the Treasury Department, the Commodity Credit Corporation, the Reconstruction Finance Corporation and other govern^ mental and semi-governmental agencies in our capacity as fiscal agent, leaving a net expense of $1,029,800 to be absorbed by the Bank., According to these estimates the oost of performing fiscal agency functions would exceed 1940 costs by $46r500 and the net expense absorbed by the Bank would exceed 1940 expenses by $44,800« As it turned out reimbursable expenses incurred as fiscal agent exceeded budget estimates by $96,700 and expensee absorbed by the Bank exceeded estimates by $45,600* When the budget for the year 1941 was prepared, estimated expenses were based on what was then, thought to be the requirements for the ensuing twelve months, The Bank operated within gross budget estimates for the first three-quarters of the year* although our activities began to accelerate rapidly in the third quarter* Although our activities have expanded quite generally, we can point to two items of expense which were not contemplated when the budget was prepared and the costs in curred in these instances account for the greater portion of excess expendi tures over budget estimates, namely* the cost of operating the new install- rnent credit department, requiring expenditures of $20 , ; and the purchase 100 EXPENSES - Cont*d of additional furniture and equipment needed with our larger staff and en larged duties, $13 , . 000 Additional postage costs of considerable amount were also absorbed in connection with the installment credit department, _ J ^0 , SALARIES Head Office Helena Branch $ U67,l*05o20 59,839-J & $ 527,2^.96 Net salary costs in 19 UI exceeded 19^0 costs by $23,500* this expense aggregated $503,700, During 19^0 Salaries were $16,000 greater at Head Office and $7,500 more at the Branch, The combined net cost of salaries of officers at Head Office and Helena Branch was $99,000, as compared to $100,000 in 19U0 - a decrease of $1,000-. The combined salaries of employees at Head Office and Helena Branch was $^28,000 in 19^1 - an increase of $25,000 over 19^0 costs* when the total was $U03«000o ing reimbursable expenditures. Those costs were net after deduct The combined gross salaries of officers was $110,700 in 19^1 , as compared to $111,200 in 19 U0 - a decrease of $500 and the combined gross salaries of employees was $711,200 in 19^1 - an increase of $129,600 over 19 UO costs when employees* salaries aggregated $581,U00* Certain officers* salaries have been increased during the year and all employees, other than officers, received a flat increase of $10 per month beginning November 1, 19Ul* The staff of the bank has been considerably expanded also. Daring the past twelve months the combined staff at Head Office and Helena Branch has increased from UU2 on January I9U1 to 592 on January 1, 19U2 - an increase of 150 employees. The following comparative figures show which departments absorbed the additional employees. January 1, 19^2 Head Office Officers General staff Transit and mail departments Installment credit department Industrial coordination department Fiscal agency department R„F„C, Custody division Contract Division of 0 8P 6M> < 10 19U 105 Increase or Decrease s i i Jan„ Helena Branch - 122 109 1 555 J7 + + + + + + + +' 15 91 10 1 lUg 2 Head Office and Helena Branch combined ... 592 + 150 Ik 22 25 Ik 18 EXPENSES - Cont’ d RETIREMENT SYSTEM CONTRIBUTIONS $ 23 .S63 .lO „ g.9f5,05 $ 26 . W 8 .T5 Head Office Helena Branch Ihese contribution® were $2,100 more than in 19 UO. The amount absorbed by the Bank is in direct relation to increases and decreases in salary costs, For the first six months the rate was 5*15# of employees’ salaries and during the last six months 5°66$* These payments are made directly to the Retirement System of the Federal Reserve Banks* LEGAL FEES Head Office Helena Branch' $ 9. 665,37 $ ~9V^5 3? ' Legal fees were $ 4 0 more than in 1940c *0 paid to our counsel as a retainer fee* These fees include $9*000 Of the $700 remainingc $400 was spent in connection with the suit instituted in Billings, Montana against the bank; $100 was counsel‘ expenses attending a foreign funds control meeting in Wash s ington, and the balance was for miscellaneous expenses* DIRECTORS1 FEES AND EXPENSES Head Office Helena Branch $ 7.79^26 2,272.69 $ 10 . &6.95 0 These fees were $1,600 less than in 1940* The various items contribut ing to this expense were* 19^1 Head Office Directors® meetings Executive committee meetings Discount committee meetings Audit committee meetings Chairmen*s meeting at Washington Directors8 luncheons Incidentals $ 5,600 500 500 600 200 100 300 Helena Branch Fees and expenses 2,300 $ 10,100 Increase or Decrease com pared to 1940 $ - 900 200 200 100 200 100 300 400 $- 1,600 FEDERAL ADVISORY COUNSEL Fees and Expenses Head Office $ 1,397*15 This item includes fees and expenses of our representatives attending EXPANSES - Oont*d Federal Advisory Committee meetings at Washington, During the past three years the expense has amounted to about $1,300 or $ltU0Q per year„ TRAVELING EXPENSE Head Office Helena Branch $ 21,35^63 1 , ^2.52 6 $ 22,997.15 The following table compares travel expense in 19U1 with 19^0c The plus and minus signs indicate increases or decreases in 19^1 , as compared to 1 *K 9 >. 19^0 19^1 Head Office Bank examinations $ 7»117*5^ Visiting banks in our district 3*7^0.78 Bank relations (Preston) 639*35 Industrial loan investigations 1 ,19^96 Industrial advisory committee expense 512*89 Failed banks" expenss 3U6eSl Presidents' conferences 57^°75 Open market committee meetings 95«00 Retirement system committee meetings 182..U8 Planning transit operations for new member banks 32*30 Bank Examiners" conference at Washington 0 Showing bank movie 20,53 Graduate School of Banking 105*65 Obtaining statistical information 72*U0 Visiting newspaper publishers 6 3 =51 5Wagner committee meeting 0 Conference on National Defense 282*22 Auditors' conference 2U8„27 Employees attending A,I,B. convention 650^05 Planning operations at Helena Branch 155«60 Group meetings, conventions and conferences 2,018*8^ Talks before various groups 128.1+6 Michigan meeting of Board of Directors 217.29 1 , ^8.88 9 Installment loan meetings____ . Defense bond liaison office, St* Paul 213*96 Picture book plans ~ Washington 108„il5 Miscellaneous 93*66 $ 21 . M 3 35 Helena Branch Attending member bank conference at Minneapoli s Officers attending bankers' conference at Seattle and Pullman, Washington Montana Bankers* Association Conference National Defense, Washington Bank relatione and membership contacts Travel expense of Head Office auditors Per diem expense of auditor’s representative Pacific Northwest Banking school Talks before various groups Conventions and conferences Training employees at Head Office Transfer Head Office employees to Branch TOTAL $+ + + -+ + - - + + + + + + + + 300 i,5oo 600 Uoo 300 0 200 100 0 200 200 100 100/ 600 100 100 100 200 200. 0 0 0 200 2,000 200 100 0 1,500 110 05 0 8Uc20 88 , Ok 0 277.ou 0 0 200 300 200200 0 200 0 100 200 c - - 120.00 U7o>40 158.11 32^3 12Uo 05 15M6 l',M2.52 $ 22 , 997.15 + + + — — $ + 10 *0 1.100 EXPENSES - Cont'd POSTAGE AMD EXPRESSAGE Head Office Helena Branch $ 121,679,74 17,662,37 $“13973ESF.il Postage and expressage costs were $12,100 greater in 1941 than in 1940, The cost of ordinary mail is the largest single item in this expense group. The transit department uses more ordinary postage than any other function in the bank and ordinary postage costs have been considerably expanded as a result of the larger number of circulars, letters and mail leaving the bank during the past four months, The cost of postage in the installment credit department was the most important factor resulting in increased postage costs this year0 Postage used on incoming and outgoing currency and coin shipments totaled $60,000 - an increase of $6,400 over 1940 costs* Currency shipments to country banks increased from 19,200 in 1940 to 20,700 in 194l; coin shipments increased from 8,500 to 10 , i while shipments of currency received from 100 country banks dropped from 12,000 to 11,700, Express charges did not change materially except that the cost of expressing checks to member banks for col lection increased $le 600, A continuing effort is being made to use express services rather than mail services in forwarding cash letters to member banks for collection, as that is more economical- The detail of postage and express costs is as follows; 19^0 1*1 9* Postage (Head Office) Absorbed on incoming currency shipments Placed on outgoing currency shipments Placed on outgoing coin shipments Net amount used on ordinary mail Postage used on security shipments 30,417,21 20.44l.l6 9.239.90 46,727=61 202*63 $ 106 ,b23 o25 $ Expressage (Head Office) Absorbed on incoming currency shipments Absorbed on incoming coin shipments Government checks sent by express Checks sent to member banks by express Paid to Brink*s Inc. for express service Expense incident to operating our mail car Head Office postage and expressage costs Helena Branch postage and expressage costs $+ + + + 143.14 6,242*17 605,82 4, 444,39 3 ,300.00 .320.97 $ 15.055.49 + - $ 121 , .7 ^ 679 + + $ $ 139 .3 ^2*11 - + 1*500 2,900 2.000 4,000 700 9.700 0 300 0 1,600 300 0 1,000 10,700 1,400 12,100 TELEPHONE AND TELEGRAPH Head Office Helena Branch $ 10,880c95 4, 331*05 $ 15, 212,00 This expense in I94l exceeded 1940 telephone and telegraph charges by $3,500, EXPENSES - Cont’ d During December about 8*300 telegrams were sent to dealers in installment credit* advising them of the necessity of applying for permits to do business after December 31 , 19^1* at a cost of about $2*700« This accounts for the major portion of the increased cost* PRINTING, STATIONERY AND SUPPLIES Head Office Helena Branch > $ 36,UU6026 2,631 ,,96 $ 39,078o22 The cost of printing and supplies was $13,300 more than in I9U0 , A multitude of items used in all the departments of the bank are included in this expense, such as paper stock* printing, letterheads, envelopes, circulars, small office equipment items, Bmall tools* etc. The new installment credit department used $3 t 900 of supplies in the last four months which contributed to the increased cost. Most of the other departments of the bank used more supplies this year and the purchasing agent did some forward buying of items which might be more difficult to get later o , n. INSURANCE ON CURRENCY AND COIN SHIPMENTS Head Office Helena Branch $ 7. , 638 1*7 1,103.12 $ 8*>1„59 This cost is $1*300 more than in 19HO. The greatsr volume of outgoing currency shipments explains this increase. OTHER INSURANCE Head Office Helena Branch $ 12*591.35 971,50 $ 137562*85 Insurance other than, on currency and securities shipments was $1*000 less than in I9UO0 The type of coverage carried, premium cost and changes in premi um cost, as compared to 19^0 , is shown below; Head Office Group life insurance Bankers1 blanket bond Workmen’s compensation Premises and elevator liability insurance Fire insurance on building and contents Steam boiler insurance Burglary - securities Collision insurance - Officers and employees Public liability - bank owned cars^fwO Public liability - (auto) Non-ownership jaia* 1.607*97 9.075® 53 1,0U4.16 276,90 750<>00 108.28 70,U0 130.86 213o25 123ol7 Increase or Decrease compared to 19^0 EXPENSES - C an t'd Increase or Decrease compared to 3 9 * ^ »*0 i2iH Special police bonds Riot and civil commotion Fidelity bonds (FoR* Agent, Asst, S\R. Agent, and Alternate Asst* R. A*ent) Notarial bond Camera property floater and insurance on bank movie film I 26.00 50,00 200 U0.00 21.00 $ ft,294,33 600 0 1 *702*98 + + < V 1*00 600 - Lessx Unearned premium - fire insurance on building and contents Dividend on group life insurance $ - soo - $ 1 3 ,562,85 $ - 0 0o t 971.50 \V0 rT 1,100 LIGHT, HEAT, WATER AND POWER Head Office Helena Branch $ 18,275*69 1 ,530->68 $ “1978017ff The cost of light, heat and power has not changed much during the past three In 1939 this cost was $19,600 and in 19^0, $19,600* years* REPAIRS AND ALTERATIONS Head Office Helena Branch $ 13,552.93 1,816,19 $ 1 5 . 3^9-12 Repair and alterations to Head Office and Branch buildings during 19U1 were? Head Office Elevator service contract Moving wash bowls Redecorating executive offices and reception room Manifold door in lunch room Alterations on basement floor Sidewalk repairs Installing women’s washroom on bank floor Laying floor in sub-basement (coal room) Miscellaneous Helena Branch Bronze entrance doors Mi scellaneous $ 2,800 300 900 500 1,200 500 1,500 2,700 3,200 $ 1,100 700 1 5 .W O $ During 1 * 0 repaire aud altarations cost $13,600 which included $6,300 9+, for cleaning the outside of the bank building. The heavier expenditures in 19^1 were due to providing space for a larger number of clerks and additional activity. 18 EXPENSES - Coat'd FURNITURE AND EQUIPMENT Head Office $ 25.536.51 $ •257963:60 The cost of furniture and equipment during 19U1 was $14,900 greater than in 19U0 when $11,100 was used for this purpose * Rapidly expanding ac tivities required much additional equipment and our near future needs were con sidered alsoo The more expensive items purchased during the year were* Head Office Chairs Desks Typewriters Files Mimoograph Lookers Light fixtures for bank floor Calculator Addressograph Adding machines Graphotype Bookkeeping machine Carpets - officers’ lunch room Multigraph Electric formwriters for typewriters (4) Miscellaneous $ 2^000 900 Ji.500 1,400 600 900 1,900 600 600 5* 500 * 300 — 1,600 1,000 500 1*500 2,200 Helena Branch Addressograph UOO $ 25*900 ALL OTHER EXPENSES Head Office Helena Branch $ U3 ,829c31 2,119.17 These expenses were about $7,300 more than in 19^0, For comparative purposes all items exceeding $500 are listed b8low« 19^1 Rental, repairs and maintenance of furniture and equipment Outside protection, vault inspection, etc* (Includes $1,400 cost of installing "electric eye” on roof of building) Outside laundry and cleaning charges Postage meter rental Newspapers, periodicals, books,, etc* Supplies furnished member banks Copies of bank examination reports Commercial agency credit reports and services Medical services, supplies and physical examinations Cafeteria * net expense Entertainment of bankers and others not in bank’s employ Employees education? A^I^B. Federal Reserve Club Bankers’ association dues Increase or Decrease compared to 1940 2,800 1.900 $+ 200 1.300 100 700 2,400 700 3*700 900 1,000 3.100 - 800 0 200 1,100 400 100 400 500 2,300 1.700 1,900 500 + + - 400 900 100 0 EXPENSES - Cont“d Incre&e© or Decrease compared to 19^0 lf H fl Member bank conference - Head Office Helena Branch Foreign Department Preparation and presentation of radio material Study of official compensation "TSducational picture book story "TTonference - National Assn, of State Bank Super visors ^Jransit Manual of Instruction ^l[tudy of career system for executive personnel Not classified Moo 0 2,300 0 1,100 8,900 $+ + 1,U00 500 900 2,200 Tfs.sfoo $ + $ + + $+ 200 1,700 Uoo 1,800 1,100\ 8,900 ! l.too^ 500 900^ 600 7,300 It can be seen that the usual miscellaneous expenses compared favorably with 19)40 expenses and that the unusual expenses, such as special studies and the cost of the education picture book, are the items which increased “all other" expense during 19UI0 JBQABP ASSESSMENT $ U0,61^.36 Head Office The assessment in 19^1 was $2,200 more than in 19^0 when this expense totaled $3S.U00» In 1939 the assessment was $36,S00o These assessments are made to defray the cost of maintaining the Board’s staff and Board building at Washington* COST O f FEDERAL RESERVE CURRENCY f Original cost (including shipping charges) Coat of redemption $ UU,lUl035 5t26Uo90 $ 1 9 606.25 *, Although the cost of our currency in I9 U1 was $15,500 more than in I9U0 , currency costs have been larger in years past. During the past five years 1939 iijo J2 ! i t $ 35.700 2,800 U .100 1,000 39,^00 2,500 3,600 .900 23,000 2,500 900 18,000 3 r*+00 5.500 1,200 26.000 5.900 10 *200 1,500 200 $ 1+3,800 6 ,Uoo 300 30,900 6.100 200 28,300 5,600 E o -r i -l f $ 50,200 51,^00 37.000 33*900 1 9 U00 *, i221 Printing coats ^Postage , Surcharges Insurance Salaries of issue and redemp tion division Cost of redemption b.SOO 888 1938 *1 = ~J —Jk4 . * OOO 0 ojo these costa were as follows; When we examine these figures we see that although printing costs wei higher than in 19* , the increase in this cost does not eaqplain the greater 10 EXPENSES - Cont’ d total cost during the year,, While printing coata increased $8,000, postage, surcharge and insurance costs also rose $2 ,500, $4,700 and $300 , respectively, and these increased costs were due to the hea?y demand for currency this year requiring more shipments of new currency from Washington. REIMBURSABLE EXPENDITURES Earlier in the report it was stated that reimbursable expenses in 19^1 were $143,000 greater than in 1940<, The comparative figures which fol low classify the expenses which were reimbursed and show what governmental departments or agencies absorbed those expenses., This comparison indicates the rapidly expanding activities the Bank is performing for the government in various ways. 1941 Classification of Expense; Salaries? Officers Enployees Retirement System contributions Traveling expense Postage and expresaage Telephone and telegraph Printing, Stationery and supplies Rent Furniture and equipment Space maintenance Rental of furniture and equipment All other $ 12,000 283,000 13.000 3,000 23,000 8,000 18,000 1,000 1,000 27,000 6,000 1,000 $ 396,000 Increase or De crease as compared to 1940 $+ + + + + + + + + + $ + 1,000 105,000 4,000 3,000 10,000 1,000 10,000 1,000 1,000 6,000 1,000 0 1^3,000 Departments or agencies for which these expenses were incurred? Treasury Department; U. S, Government issues U« So Savings and Defense bonds Works relief checks Foreign Exchange Reconstruction Finance Corporation Commodity Credit Corporation Federal Farm Mortgage Corporation Federal Land Banks Federal Houeing Authority Federal Emergency Adm« of Public Works Home Loan Banks and Home Owners Loan Corporation Leased wire service charges Defense contract service $ 38,000 96,000 12,000 13.000 63,000 138,000 4,000 1,000 1,000 1,000 + + 3,000 2,000 24,000 $ 396 .OOO - + - + - $ + 12,000 60,000 3,000 5,000 3.000 52,000 1,000 0 1,000 0 1,000 1,000 24,000 ll+3,000 COMPARATIVE STATEMENT OF EARNINGS FEDERAL RESERVE BANK OF MINNEAPOLIS AND HELENA BRANCH Minneapolis Earnings from* _____ Discounted bills........................ . . . . . . Industrial advances . . . . .............. Commitments to make industrial advances . . . . . . . . . UoSo Government securities ....... . . . . . . . . . . . Deficient reserve penalties ............... . . . . . Interest received on advances to protect collateral « . . Interest on past due industrial advances....... . Sale of vaste paperc money bags, etc* Service chargee on collection items returned unpaid . . . Interest on Hungarian Credits . . . . ....... . . . . . Clearing house fines . . ............................ Interest received on personal loans to employees . » . . . Monthly letters sold ................... . . . . . . . Savings in registration fees, etc. on registered mail ship ments for member banks ....................... . . All other . . . . . . . . . ......... . . . ......... TOTAL EARNINGS . ......... 1.223,195.91 $ 2 .649.35 i > 790.46 £, 4i 6c03 l,l9l,36lo92 636*44 Helena Branch ____ i2 >SL $ Uo.87 Combined 19^1 2,649.-35 20,790.46 416.03 1,191,361.92 677.31 Increase or Decrease since Dec._31*19^0 ■ ii m m — i- 1fcwi ■ iw mn V $ + - 6t o4g.44 135*05 6 , 0* 16.44 135o05 - - 86*00 11.00 86.00 *66 11,00 1, 058*21 2 o35 1,058021 2«35 M *40.87 $ 1,223,236*78 + - + - $ - 107 5.526 157 *5.977 * 13 10 625 48 14 443 48 21 11 476 57 42,267 02 COMPARATIVE STATEMENT NET CURRENT EXPENSES OF TH11 FEDERAL RESERVE BANK OF MINNEAPOLIS AND HELENA BRANCH Increase or De crease since Dec. ,31. 19U0 Minneapolis 19^1 Officers Combined 1941 81, *#9,59 385 , 915,61 23 .863.10 9. 665.37 7 ,794.26 1 .397.15 21 .354.63 121 . 679,74 10,880.95 36 ,446.26 7 .638.47 12,591-35 65,040.00 26,396.60 18,275.69 13.552.93 25.536.51 43 ,829.31 17.W.72 U2 ,3U5 .oU 2,985.05 1.6U2.52 17,662*37 M3l*05 2 ,631.96 1 ,103.12 97U50 1 ,682.60 3,180*8** 1,530*68 1 ,816.19 U27.09 2 ,119.17 98,984.31 428,260.65 26,848.15 9.665.37 10 , 066.95 1,397.15 22,997.15 139 .342 .II 15 ,212.00 39,078.22 8,741.59 13.562.85 66 , 922.60 29.577.44 19 ,806.37 15 ,369.12 25 , 963,60 45 , 9118.48 0 0 + + + — + + + + 1 .26U 2U.79U 2,099 U22 l,6lU 16 1,128 12,119 3 .U58 13,279 1.328 1 ,0*18 832 731 232 1 r790 lU,86l 7.328 $ 913.347.52 Salaries* Helena Branch .... . 19M _ 10U,396.59 1,017.744.11 + 78,827 26, 912.25 + + 5.7H6 376 $ Retirement System contributions for current service . , Federal Mvisory Council fees and expenses Insurance on currency and security shipments . . . . . „ <,*0 . 0 Received from Government Agencies for; Rental of space 25*0^7’ $ 882,516*82 2f 272069 l,ib; 56 ■ s 3.02,891.09 + + + » f + + 72,705 985eli07c Ql A UO, 61* 1.36 + 2,217 UU.1U105 5 f26H „90 $ Federal Reserve Currency; Original cost, including shipping charges . . . . . . Cost of redemption, including shipping charges . . . * 0 6 1^ 3 6 4, UU.1 U1.35 5 .26^,90 + - 15.926 35 U lt075.H28.52 + 90,U9U $ 972.537 <^3 102,891.09 PROFIT AND LOSS ACOOUKP Current earnings Carrenfc Sxpensas Current Net Earnings $ 1,221,236,78 1,075,428„52 ~ l4|e808^26 PR > m s s Profit on sal© of Uo So securities $ 1*0*889*24 ■ from sale, liquidation or income from assets e acqiiired through failed bankas First National Bank First National Sank Birst National Bank ’ First National Bank Merchants National Bank First National. Bank First National Bank First National Bank First National Bank Kenmare National Bank First National Bank White Lake, Pollock Poplar Golva Wimbledon Scobey Van Hook Ryder Sisseton Kenmare, Plentyvood So D0 S„ D, Montc N. Do No D„ Mont, N, D„ N 0 D„ S„ D„ N„ Do Mont, 5 ,56l*48 3,2k}aJ2 U01*8U 1 ^3,,31 44b <,97 500„80 65 ,00 , 285,00 5* 782*09 100,00 7,,98 Dividend #9 of 2$ received on our transit claim filed against Pondera Valley State Bank, Conrad, Mont* 20*00 Profit on redeemed mutilated coin 29,62 Sale of one~quarter interest in deep sewer to Farmers and Mechanics Savings Bank U25*71 Sale of miscellaneous scrap iron and metal 76*25 Sale of two wooden doors by Helena Branch 35*00 Recovery on personal loan made to a former employee (pre viously charged off) 105*00 Recoveries on industrial advances previously charged off? Minn, Minn, IO0I5 291*38 Profit on replacement of securities for member bank wire instructions misinterpreted 22,41 Gianares & Thompson Cook, Inc, Minneapolis Minneapolis LOSSES; Industrial advances charged off as not collectibles __ St Cloud Brewery Company , St, Cloud, Minn* Ward Owsley Company Aberdeen, S, D, , Goldammer, Cranna, Weaver Co., Lakota, N„ D, Counterfeit currency and coin found in our cash Discount on foreign coin Interest paid to a member bank as an adjustment on ties collection handled in error $ 3r5^3«>82 1,645„49 366,3 H 85*53 3 „07 a securi 4,44 24 PROFIT AND LOSS ACCOUNT - C ont«d 'Expenditures incurred in connection with National Defense Contract service in excess of reimbursement $ Shortage in shipment of new currency to a member bank 1,184*74 13*00 Unadjusted Differences - Year igUl 1,011*30 Lcsa on securities sold for a member bank 129«17 TOTAL DEDUCTIONS................................. . * $ 7,9S6„90 Net additions to current net earnings $ 50,456,05 Net earnings $ 198,264,31 Dividends paid Paid Uo S„ Treasury Transferred to Surplus (Section 7) $ 179,789*68 490*14 17,984*49 Surplus (Section 7) January 1, 1941 Addition as above Transferred to reserves for contingencies 3,152.420,27 17,984*49 17,984*49 Surplus (Section 7 ) December 31 , 1940 3,152,420.,27 SURPLUS (SECTION 7) Surplus (Section 7) December 3 1 , 1940 Change during year Surplus (Section 7) December 31 , 19U1 $ 3 •152»420*27 None 3,152,420.27 SURPLUS (SECTION 13b) Surplus (Section 13b) December 3 1 , 1940 Change during year Surplus (Section 13 b) December 31 , 194l $ 1,000,298„87 None 1*000,298*87 RESERVES (Other than for F,D0I,C0 Stock and Depreciation on Bank Premises) Reserves for contingencies December 31 , 1940 Other reserves (December 3 1 , 1940)1 Losses on past due industrial advances Total reserves December 31 , 1940 Debits during year* Credits during years Added to Reserves for Contingencies Reserves December 3 1 , 1941 < Reserves for Contingencies Reserves for losses on past due industrial advance® TOTAL RESERVES DECEMBER 31, 1941 $ 2,498,662.68 73*000*00 27571,662*65 None 17.984t49 $ 2,5l6t-6^7'>17 73»000»00 . ........... ......... $ 2,589.647,17 DEPARTMENTAL COMMENTS Bank and Public Relations * . 27 Fiscal Agency . „ . „ . . „ 0 . . . . « * • 29 Installment Credit 30 Loans and Discounts . . . « ......... . „ 31 Check Collection ............. 32 •••••••••••• }k Currency and Coin ....... . . . . . . . . 34 Bank Examination 35 Noncash Collection . . . . . ....... , . . Safekeeping * . . ..........................................37 REPOET OF B A M AND PUBLIC RELATIONS ACTIVITIES AT TEE FEDERAL RESERVE BANK OF MINNEAPOLIS _ _ _ ______ PURINS 1941_________ Bank officers and representatives attended 217 meetings, delivered l4l addresses to an estimated audience of 16,672 people, and made 732 visits at member banks and 971 viBits at nonraember banks in the district* The number of public addresses was greatly increased this year owing to the campaign to ex plain installment credit control, the defense bond sales promotion program, and the explanation of foreign funds control* The attendance at showings of the Federal Reserve Bank movie during 1941 was 16 , * 689 The bank continued its cooperation with the Wisconsin Bankers' Association with regard to showings of the Federal Reserve movie* A copy of the booklet “The Federal Reserve System, Its Purposes and Functions* was sent to all employees of the Head Office and Branch at their home 1 addresses with a letter signed by the President0 A comparative statement of operating ratios for 193^» 1939 and I9U0 was sent to each member bank in the district. In addition, operating ratios were computed for the State banks of North Dakota at the request of the North Dakota Banking Commissioner. On March 8 , we held our Fourth Member Bank Conference with a registra tion of bank officers and directors numbering 1 , ° 005 in our bank lobby between 9<00 and 11;30 A.M, bankers registered A luncheon was served at noon, The speaking program began with an economics panel comprising three agricultural economists* Dr. Louis H. Bean, Counselor of the United States Department of Agriculture; Dr. Joseph S Davis, Professor of Economic Research at Stanford . University; and Dr. 0« B„ Jesness, Professor and Chief of the Division of Agri cultural Economics of the Department of Agriculture of the University of Minne sota. The panel was followed by a talk “I Knew Hitler” by Bernard H. Ridder, Publisher of the St, Paul Dispatch and Pioneer Press in St. Paul. A banquet was held in the evening and the group was later entertained at a hockey game. In April the Chippewa Valley Bond Club, a group of Wisconsin Bankers who meet monthly for the purpose of reviewing their bank holdings of securities, met at our bank. They had lunch with our directors and after lunch they listened to an address by Dr. Simeon Ee Leland, Chairman of the Department of Economics at the University of Chicago and Class C director of the Federal Reserve Bank of Chicago., 27 The directors' meeting was held at Mackinac Island in June. En route our directors had lunch at Rice Lake8 Wisconsin with a group of Wisconsin bankers in that vicinity and dinner at Land of Lakes, Wisconsin with another group of Wisconsin and Michigan bankers• The bankers and directors were guests of this banko On September 25, this bank held a party for the delegates attending the convention of the National Association of Supervisors of State Banks in St0 Paulo The program consisted of golf at the Interlacben Club, a tour of the Twin Cities in the afternoon, and a reception, dinner and entertainment at the Interlachen Club in the evening. There were 184 guests present* In October, the book "Banking Studies" published by the Board of Governors was mailed to all colleges and universities in this district. Twelve issues of the Monthly Review were printed and distributed to a mailing list which in December consisted of 5,6Gk names, Daring the past year* editors of papers in upper Michigan, Northern Wisconsin, Minnesota and South Dakota with a circulation of 2,000 or over were visited by representatives of this bank* The greater proportion of these men had been receiving our releases for some time and when visited were apprecia tive and cordial. Three of these men later made trips of some hundreds of miles to pay a friendly visit here at the bank* were contacted initially during these trips. Approximately fifty editors These men were responsive and interested and as a result of the calls about thirty-five new papers were added to our mailing lists,, Acting on the suggestion of several editors, releases of local business news are prepared specially for the newspapers each montho Through use of a clipping service, we have measured the ratio of use on our releases and found that during the past six months it has ranged from 35 to 47 per cent0 During the coming year, those papers which appear to be finding no opportunity to use our stories will be removed from our listsc A catalog of the 107 ABA Graduate School theses in our library was sent to all banks in the district with a letter from the Presidents year 1,073 requests for these theses were received, During the The activities of all sections of the bank library have been multiplied several fold during the past year. During 1941, 1,966 books and theses were circulated to bankers and others outside of this bank as compared with 299 in 1940 and 335 in 1939, similar increase has occurred in the circulation of books and theses among A employees Inside the bank* The inside circulation was 1*733 pared with 506 in I9U0 and 142 in 1939 , J- 1 &8 com 9^ In addition to the increase in book circulation* there has also been a large increase in the circulation of clip pings, pamphlets and marked copies of magazines, FISCAL AGENCY FUNCTIONS Volume of Operations New issues, redemptions and exchanges of various United States Govern ment securities, including United States Savings bonds and Adjusted Service bonds aggregated 1 15 , l6 pieces and amounted to $456 , , * 0 286 413,50 as compared with 152,061 pieces amounting to $239 ,450,OS5 **75 in 19*+0, In addition, on exchange transactions, such as denominational exchanges, exchanges of coupon for registered securities, etc,, 12,284 pieces were delivered, amounting to $82 , 96 ,700 , as compared with 16*562 pieces amounting to $69 , O 128,550 in 19HO0 Purchases of Government securities numbering 485 BDd sales numbering 2,390, valued at $14,327 ,250, were handled,, In addition, we handled for banks and trust companies S6l transactions in Government securities amounting to $173 »773 * , also 7l6 transactions of miscellaneous general market securities 950 amounting to $5 »* 7 »510 , the purchases or sales of which were arranged by banks *9 direct with brokerso Altogether, of these various transactions8 there were U.U68 , totaling $193*59st710 , as compared with 5»030 totaling $165,024,810,46 Deliveries of 13*206 pieces totaling $9 1 t f251.50 were made on 051 in 1940, purchases and resale transactions for other than our own account, as compared with 12,195 pieces totaling $86 ,525,065 in I9UQ, The total number of individual securities received and delivered by the Fiscal Agency Department (including securities of Governmental Agencies) during 19^1 was 769 » 436 totaling $698 , ,340, as compared to 196,430 totaling 640 $408,72^,519,75 in 19 ^0 , Other Services During 1941 we received 38,830 individual orders for United States Savings bonds, as compared to 19,484 during 1940* We issued 7^*330 pieces of United States Savings bonds amounting to $50,576*525* as compared to 40,257 pieces amounting to $l6 r 890,225 during 19*0 < * > We received for redemption 21,802 Adjusted Service bonds amounting to $1 , 090 , , as compared to 29 ,7^2 pieces amounting to $1,487,100 during I9I ) 100 K, also 58,228 United States Savings bonds amounting to $13,824,725 as compared to 49,77*4 pieces amounting to $11,000,350 during 1940« On May 1, 1941, the Treasury Department announced the sale of Defense Savings Bonds of Series E, F, and G« Under Department circular No0 657 , as amended, banks and other agencies may qualify as issuing agents for the sale of Series E bonds* At the close of business December 3 1 , 1941, we had qualified 1,359 issuing agents* of which 1,272 were banks, 99^ of all the banks in the district, Since May 1, 1941, qualified issuing agents have sold and issued 201,93^ pieces of Series E bonds, maturity value $25,5S8,825<> Of this 100,805 pieces, maturity value $10,446,300, were issued during the month of December0 On August I, 1941, the Treasury Department offered for sale United States Treasury Notes of Tax Series A-I943 and Tax Series B-1943* At the close of business December 3 1 , 19^1. 2,374 orders of both series for 14,091 pieces aggregating $35 * 325*975 were filled. During the year we issued 25.020 United States Treasury checks in pay ment of Adjusted Service bonds, United States Savings bonds„ and other Public Debt redemptions, as compared with 26,098 checks during 1940» 1941 ANNUAL REPORT OF THE INSTALLMENT CREDIT DEPARTMENT The Installment Credit Department was created during August to adminis ter Regulation W relating to Consumer Installment Credit issued by the Board of Governors,, This department has varied in size from a peak of nineteen em ployees in September to a level of fourteen on December 31 * Extra help has been used extensively, however, for mailing, sorting, and typing purposes« The first task was to diseminate the Regulation and educate lenders, dealers, and the public on itB purposes and requirements,, A mailing list of approximately 18,000 names was compiled, including sales finance companies , small loan companies* credit unions, auto dealers, hardware stores, depart ment stores, appliance stores, etc* In addition, a special mailing list of approximately 2,200 names including banks, chambers of commerce, credit bureaus and trade associations was compiled, Addressograph plates were made for both lists o Copies of Regulation W, the two amendments, two sets of printed rulings, 30 a letter announcing the series of discussion meetings on Regulation W, as well as registration "blanks and the statements of the borrower and necessity were mailed to both mailing lists* In addition the special mailing list received mimeographed copies of the Board of Governors' interpretations twice weekly while the rulings were being issued rapidly and later at weekly and bi-weekly intervals* Also during this period five press releases were issued to the lUOO newspapers in the Ninth District, several press conferences were held and many special releases prepared for trade journals, During September, October, November and December members of the Install ment Credit staff traveled 18,000 miles to discuss the regulation at 66 meet ings which were attended by 9»500 lenders and venders. Business firms were slow in filing thsir registration statements and on December 22 only H,000 had registered in spite of the issuance of two letters, a press release and a red lettered tab on one of the printed compilations of the Board’s interpretations. Therefore,on December 23 . 8,600 prospective regis trants were sent a telegram reminding them that they must register by January 1 if they extended installment credit,, By January 1 more than 12,000 firms had registered and it appeared that the remaining 1,500 or 2,000 would be in within a few days. ,vv /; Registration certificates were sent to all of these registrants and follow ups on about 1,300 that had not correctly completed the registration statement were made. Also, a large part of the registration statements were classified and all mathematical computations completed preliminary to a statis tical tabulation of all of the registrants* sales and receivables which is to be completed by February 15. 19^2, DISCOUNT DEPARTMENT During the year 19^1. l6 banks took advantage of the rediscount and loan privileges, borrowing an aggregate amount of $2 ,6^5 , 819«^2 for a total of 191 items, One loan in the amount of $350 was made to an individual. In I9U0 25 banks were accommodated for an aggregate amount of $2 ,310 ,355 *78 , for a total 255 items. One Twin City tank was accommodated to the extent of $300,000 for two days in 19U1 , tirely out of our debt. At no time during the year 19U1 were banks en The discount rate has remained at 1^6 during the entire year„ 31 The volume of activity in industrial loans increased in 19^1, during which year 17 U advances were made in the aggregate amount of $3 ,130 , ,43 , 476 with participating institutions taking $1 ,721,000 of this amount at time of disbursements leaving a net amount of $1,409*476,43 disbursed by the Federal Reserve Bank* Of this net amount $l43»706,01, being 80$ of balance of prin cipal of three loans to the Northern Pump Company* was sold to participating banks after disbursement. With the exception of two loans amounting to $9*000, all of the 174 advances made were loans to aix different borrowers on accounts receivable, government contracts and warehouse receipts» The total of $3 , ,^760^3 includes $1 , 130 026,000 to one borrower and $1 ,520,000 to another* Repayments on advances during the year rcduced the balance $l,l4s,851*60 , leav ing a net balance of $689.295°01 on December 31 , Repayment of seven loans in the amount of $913,000 (our share) appears to have been through refinancing,, The balances of principal of four loans amounting to $5«365*3** were charged off to Profit and Loss during the year 194l„ Of this amount S291«38 was recovered during the year on one loan and repayments are to continue at the rate of $15 per month* Commitments made in accordance with the provisions of Section 13 b amounted to $88 , 826<,69 in I94l, and the contingent liability resulting from such commitments at the end of the year was $28 , »35 « 053 In addition to advances made and commitments given during 1941, two loans totaling $220,000 were recommended favorably by the Industrial Advisory Committee and approved by the Discount Committee* One loan for $25,000 was recommended favorably by the Industrial Advisory Committee with Discount Com mittee action deferred. Interest charged by the Federal Reserve Bank of Minneapolis on indus trial loans remains on the sliding scale of 3 as of October 30» 1940, P er cent to 6 per cent in effect At the close of December 3 1 , 1941, our unpaid balance of 6 per cent industrial loane amounted to $429,379«**9 and 4 per cent $259 , *52, 915 CHECK COLLECTION DEPARTMENT The Check Collection Department handled 31,840,902 cash items totaling $6 , 418 , ,298,92 during the year 1941* which was 987,989 items more than the 266 number handled during 1940 and an all-time high total. The figures given below are the number and amount of items handled, the average number of employees and the total expense of the Check Collection Department, which includes Government and Work Relief checks for the years 1936 through 19I I +: Average Humher of Employees Year Number of Itsms Amount 1941 19^0 1939 1938 1937 1936 31,840,902 30,852,913 30 , 351.227 30 . 013.593 28,778,033 28.859,625 $ 6 ,1 18 ,266, + 298,92 5 , , ,107 .3 ! 091 698 * + i , i,580,798.96 * 36 i , ,18! , . * + 673 + + 397 1 9 i,902 ,* , + 109 983.53 H.75^.957.277.09 75-22 66.61* 6U.85 63.98 62.12 60.91 Total Expense * 102,288,98 93,197.65 92 , 990.90 91.969.80 * 97. 835.16 92 , .1+ 961 9 The following table indicates the number of items handled by the sub) divisions of the Check Collection Department for the years 19^0 and 1941; Items Handled on 19 * *0 Twin City Banks (Clearings) Member and Nonmember banks Other Federal Reserve Districts Direct to member banks other Fc H. Districts To Helena Branch, Helena, Montana Treasurer of the United States UoSB Government work relief checks ^,667*093 17*320,642 3»320,5S7 70*371 151,676 2,926,29U 2 ,396,250 19^1 5*25^,075 18,782,057 3*019*876 7^,108 133*958 2,725*923 1,850,905 The cost of handling 100 items in three units of this department for the years 19^0 and 19U1 follows; Year City Checks (Clearings) Country Checks (Outgoing) 19^1 1940 l6 „l cents l6»3 cents 23»02 cents 18.10 cents Heturn Items $ 1 =3 ^ lAl6 The average number of items handled per person per day in these three units during the years 19^0 and 19^1 followss 1941 1940 1,613 1,814 2,7^6 2,780 389 404 The number of banks reported closedt number voluntarily liquidated, number reopened, and the number added to or removed from our par list during the years I9U0 and 19U1 is given below; ____ _ _ _ _ _ ___ Ninth Federal Heserve District______________ Banks Banks volun Banks Banks added Banks refleported tarily liquireported to our par moved from closed____ dated______ reopened list____ par list Year 0 3 1941 1940 4 20 0 0 0 1 13 14 In July 19^1 we discontinued the single-run plan whereby the first proof on 70$ of the incoming checks was eliminated,. Due to the numerous errors in listing on incoming cash letters we adopted the practice of proving all incom ing checkso This change in procedure increased our cost and the number of employees to a slight degree* However, this increase in cost and the number of employees have been offset to some extent by the increased volume of checks handled and also as we ondeavor to carry on our staff in the Check Collection Department an extra three or four clerks for training purposes to keep ahead of the turn-over in help in this department* NOSGASH COLLECTION DEPARTMENT The number of city collections handled increased slightly over 191*0 while the volume of country collections, coupon and country security collec tions and direct sent collections was just under 19HO figures< > city grain drafts collected increased quite substantially* The number of The following figures compare the activity in this department during 1941 with 1940o Amount Number of Items. City Collections jpi 191*0 -Country 35.170 32,832 $ 106,230,000 56.911 57 . U 60 26.646.000 31.892.000 807,366 639,479 236 ,361,000 15* . 1 159.000 30.607 33.28H 39.316.000 33.445.000 6,608 6.961 20 B270,000 15.847,000 79.92S,000 Collections 19^0 City Grain Drafts 19U0 Coupon and Country Security Collections ipr 191*0 Direct sent Collections 191*0 CURRENCY AND COIN DEPARTMENT Outgoing Currency shipments and deliveries? .• . . 1941 Number . Amount Local Banks Country members Nonmembers - others 1,864 20,707 147 22,718 $ 98 , 278,000 85.737.000 2,401,000 $ 186 ,¥16,000 1240 Amount Number 1*755 19.179 $ 85,258.000 ___ JjO $ 21,104 70, 208,000 2, 216,000 157, 682,000 Outgoing Coin shipments to local and country banks and others? 10,100 $ 4,621,000 8, 1+86 $ 3 ,551*,000 3.090 17.719 $ 66 , 912,000 73.310.000 3.091.000 $143 , 313,000 2,117 $ 3,294,000 Incoming currency shipments and deposits: Local Banka Country members Nonmembers - others 2,95*5 11,723 3,055 17.736 $ 65 .517.000 76 ,* 1 52,000 8, 606,000 $ 150 . 575.000 12,001 2,628 Incoming coin shipments and deposits; 1.976 ? 3, 201,000 34 BANK EXAMINATION DEPARTMENT There were on December 3 1 , igUl* eighty-eight State member banks* Bach State member bank in this district received at least one examination by exami ners for the Federal Reserve Bank of Minneapolis during the calendar year 19^1 c As of the end of the yeare fourteen State member banks were exercising trust powers, including three having only escrow and custodianship accounts. Thirteen regular examinations of trust departments of State member banks and two examinations in connection with membership were made* Eighty-three national bankB held permits to exercise full or limited trust powersv and dur ing the past year forty-four of them were exercising certain of these powers. The trust examiner reviewed twenty-six reports of examination made by the Comptroller of the Currency, Activity with respect to fiduciary powers included the receipt and ap proval of two applications of national banks during 194l« Membership of one national bank which had been granted fiduciary powers was cancelled* The examinations by this Department in the various States were as fol lows? State Banks Michigan Minnesota Montana North Dakota South Dakota Wisconsin National Banks Holding Company Affiliates lb 25 25 22 6 92 1 1 1 2 _ _ 1 Examination of Holding Company Affiliates An examination of the Northwest Bancorporation, a holding company affil iate, was commenced as of the close of business December 8U 19^15 the examina tion was not completed as of December 31 . An examination of the First Bank Stock Corporation, which commenced as of the close of business November 22, 19^0, was completed during 19^1 State Bank Applications for Membership Sight applications for membership in the Federal Reserve System were received from State banks during the year., Applications of the following banks were approved by the Board at Washington and membership in the System completed? The Gwinn State Savings Bank, Gwinn, Michigan, and The Onida Bank, Onida, South Dakota» The application for membership of the American State Bank of Moorhead, Moorhead, Minnesota, received in 1938* and that of the Flint Creek Valley Bank, Philipsburg, Montana, received in 19^0. are being held in abeyance- The ap plications of the Olmsted County Bank & Trust Company, Rochester, Minnesota, The First Bank of Oakes, Oakes, North Dakota, and The Security State Bank, Minocqua, Wisconsin, the latter submitted in 1940, were withdrawn* Applica tions submitted by the State Bank of Northfield, Northfield, Minnesota, the Austin State Bank, Austin, Minnesota, and the State Bank of Virginia, Virginia, Minnesota have been forwarded to the Board of Governors at Washington and action thereon is pending. Analysis of the application of the Bank of Menom- onie0 Menomonie, Wisconsin is incomplete. Applications for permission to exercise Fiduciary Powers Received, etc. Applications of the following banks for trust powers were approved by the Board at Washington; Name of Bank Location The First National Bank of Austin The Superior National Bank of Hancock in behalf of The Superior National Bank and Trust Company of Hancock Powers Austin, Minnesota 1 to S Hancock, Michigan Full Date Approved 11-21-41 11-14-41 effective 12-6-41 Applications for National Charters Two applications for national bank charters wsre referred to this office for recommendation during the year, and the charters were granted by the Comp troller of the Currency, B A M CHANGES IN 1941 (per Stock Book Records) Total number of member banks in the district January 1 , 19U1 National banks organized State banks admitted National banks succeeded by nonmember State institutions National banks absorbed by other national banks National banks absorbed by member State institutions National banks absorbed by nonmember State institutions National banks liquidated State member banks withdrawn State member banks converted to national banks 460 2 , 2 5 1 1 1 1 1 1 Total number of member banks holding stock in the Federal Reserve Bank of Minneapolis at the end of the year ............... ... „ » 11 453 State Bank Membership According to States Ho* of State Bank Members l- l- U l State Michigan Minnesota Montana North Dakota South Dakota Wisconsin Ik 21 25 0 23 No of State Banks Withdraw ing from Membership in 19 U1 N . of State o, No® of State Banks Admitted Bank Members in 19*11_______ 12-31-**! 1 0 0 0 1 JO 2 1 0 0 0 1 -2 2 lU 21 25 0 23 —5 88 SAFEKEEPING DEPARTMENT Securities held in our custody for safekeeping and for collateral pur poses, exclusive of unissued stock held for the Treasury Department and other governmental agencies, increased $26,05^.1^5.37 over 19^0< The total govern ment and miscellaneous securities held free in safekeeping for member banks increased $20,363,69sA 3, while the total of pledged securities increased $^259,099.51. During 19*H« the total lh So Savings Bonds of all the series held for individuals, firms, corporations* and nonmember banks increased $1 , 631*925 C* ( mpared with an increase of $3 ,582,925 the previous year, and U ,207 safekeeping receipts covering U* S, Savings Bonds were issued as compared with 3,112 issued in 19UO0 U« S Savings Bonds deposited for safekeeping have shown a steady . Increase since the service was inaugurated in 1935 * a total of 795 receipts were issued for the years 1935 &&& 193^5 817 receipts in 1937 * 1123 receipts in 1938 ; 1927 receipts in 1939- At the close of business December 3 1 * 332 non- member banks and 2322 individuals and firms availed themselves of the safe keeping service in connection with U, S Savings Bonds„ . The latter figure includes J82 individuals and firms who have deposited U„ S. Savings Bonds, Defense Series, with us. In 19^1. we received ^3*99® pieces compared to U2.562 pieces in 19 K) * » and delivered 39 *7^8 pieces compared to 4U.31** the previous year. The number of coupons clipped last year was 201 , , as compared with 2l6 ,Ul9 the prev 982 ious year a RECONSTRUCTION FINANCE CORPORATION - CUSTODIAN The activities of the Custodian for the Reconstruction Finance Corpora tion for 19^1 were mostly the administration and liquidation of loans previous ly made* 3 7 During the year the following notee were purchased in behalf of the Commodity Credit Corporation; 19UQ Crop Jo, of i« Notes Amount 194l Crop No* of Notes Amount Farm stored wheat8.963 $ 5.248,245.83 1,419 $ Warehouse stored wheat 101.276 62,608,4l4.77 Farm stored barley 1,828 379»960„98 Warehouse stored barley Farm stored flax Warehouse stored flax Farm stored rye 4,674 952.276*68 606,397-39 5.728 249 4 44 32 86 1.304,467.11 56 *436,02 l,406o 05 14,063*39 10,559>93 18.789-33 Warehouse receipts covering the 1940 crops securing notes purchased both in 1940 and 1941 and which notes were not repaid at maturity were pooled and subsequently large portions released, all in accordance with Regional Director's instructions* During 1941 we transferred from loan status to wheat pool the following; • tfieat Kye Barley 1939 Crop ' Bushel8 1,132.519:38 103.^95*53 - 1940 Crop Bushels 75.064,598 ;40 276,575^3 15,767:00 PUBLIC WORKS AIM INISTRATION During the year all of the bonds owned by P* W„ A* were either liquidated or sold to the Reconstruction Finance Corporation, UNITED STATES HOUSING AUTHORITY The Federal Reserve Bank as fiscal agent of United States Housing Author ity handled eight transactions during 1941 aggregating $2,257.000„ These trans actions were principally refinancing of the $1 , 965,000 handled during 1940* Included in the $2,257,000 are bonds totaling $1,755»000 which were exchanged for advance loans made largely during 1940« Advances totaling $369,000 and interest totaling $27,094*51 were paid during 1941, 38