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A n n u al R ep o rt

Federal Reserve Bank of St. Louis
1965

T h e f e d e r a l r e s e r v e ba n k o f s t . l o u is
conducts day-to-day operating and supervisory func­
tions, as well as participating in the formulation of
monetary policy. As a part of the Federal Reserve Sys­
tem it contributes to economic growth, a high level of
employment, and a viable price level. Its policy actions
and the economic information upon which they are
based are frequently discussed in this Review. This
article, however, focuses primarily on the operating
aspects of the bank during 1965. Its operating and
supervisory functions contribute to efficient commer­
cial bank and Government financial operations in the

Eighth Federal Reserve District.
Although the basic demand for Reserve Bank serv­
ices reflects such factors as the area’s population,
income, and level of business and financial activity,
the size and structure of the commercial banking sys­
tem in the district is important in determining the
volume of Reserve Bank activities. Some measures of
the size and structure of commercial banking in the
Eighth District and the nation since 1950 which have
influenced the volume of operations at the Federal
Reserve Bank of St. Louis are discussed in this article.

Structure of Eighth District Banking
As of June 30, 1965 there were 1,500 commercial
banks, with combined assets of nearly $16 billion and
deposits exceeding $14 billion, located in the Eighth
Federal Reserve District. About 11 per cent of all
commercial banks in the nation (7 per cent of all
banking offices) are located in the district. However,
reflecting their smaller average size, Eighth District
banks hold only 4.4 per cent of the nation’s bank assets
and 4.5 per cent of all bank deposits.

The commercial banking system in the United States
at mid-1965 comprised 13,791 banks maintaining a
total of 28,938 banking offices. As in the Eighth Dis­
trict, the number of banking offices has increased rap­
idly in recent years, rising from 18,964 in 1950. Bank­
ing office gains in the nation resulted entirely from new
branches and additional offices, as the number of banks
declined from 14,121 in 1950 to 13,791 in 1965. The
number of branches and additional offices more than
tripled during the period, rising from 4,843 to 15,147.

B a n k in g O ffices
Eighth District banks in mid-1965 maintained 2,054
offices for conducting banking business ( Table I ). The
total number of banking offices has increased substan­
tially during the last 15 years, rising from 1,616 in
1950. The gain in banking offices reflects primarily the
establishment of branches and additional offices rather
than organization of new banks. The number of banks
increased by only 30, from 1,470 in 1950 to 1,500 in
1965, while the number of branches and additional
offices increased from 146 to 554.
Page 4




Table I

COMMERCIAL BANKS AN D BANKING OFFICES1
(December 31)
Eighth District
Banks

United States

Banking
Offices

Banks

Banking
Offices

1950

1,470

1,616

14,121

18,964

1955

1,459

1,677

13,716

20,639

1960

1,476

1,826

13,472

23,955

1965 (June 30)

1,500

2,054

13,791

28,938

1Banking offices include banks, branches, and additional offices.

R a tio o f B a n k i n g O ffic e s to P o p u la t io n

The number of banking offices relative to population
may be used as a rough approximation of the avail­
ability of banking services. In the Eighth District the
number of banking offices per 100,000 persons was 16.3
in 1965, somewhat above the average of 14.8 for the
nation (Table II).
Table II

RATIO OF BANKING OFFICES TO POPULATION
Population
(Thousands)

Banking Offices
per 100,000 Persons1
Change
Number
1950-65

1950
Eighth D istrict 2

1965

1950

1965

10,472

11,460:i

15.1

16.3

8%
5
4

Arkansas

1,910

1,972

12.3

12.9

Illinois

1,319

1,361

20.6
21.3

693

740

1,561

Indiana
Kentucky

19.9
18.2

1,810

16.0

18.8

17
18
15

Mississippi

1,041

1,050

13.5

Missouri

2,970

3,341

14.9

15.5
14.4

— 3

978

1,186

13.0

15.6

20

152,271

194,583

12.6

14.8

17

Tennessee
United States

ilncludes banks and branches. District data exclude “limited service”
offices and are not precisely comparable with United States data.
2Includes all of Arkansas but only portions of the remaining states.
^Estimated by the Federal Reserve Bank of St. Louis, based on county
population data prepared by state health departments or agricultural ex­
periment stations.

The rapid growth of branches and other offices in
the district and the nation in recent years has resulted
in a faster rate of increase in total banking offices than
in population. Banking offices per 100,000 people in
the district increased 8 per cent from 1950 to 1965; in
the nation there was a 17 per cent increase.
Prior to the agricultural recession of the 1920’s and
the general depression of the 1930’s substantially more
banking offices existed in the United States relative to
population (Table III). With the advantage of hind­
sight it appears that there may have been more banks
Table III

BANKING OFFICES PER 100,000 PERSONS
United States
1915........................................... .... 26.5
1920........................................... .... 28.5
1925........................................... .... 26.2
1930........................................... .... 21.7
1935........................................... .... 14.6
1940........................................... .... 13.5
1945........................................... .... 12.8
1950........................................... ....12.6
1955........................................... .... 12.5

number of offices declined almost 50 per cent. Eco­
nomic expansion was slow during the rest of the 1930 s,
and relatively few banking offices were established.
Also, entry into banking was hampered by rules de­
signed to prevent abuses caused by an excessive num­
ber of banks. The war effort required most of the
nation’s resources in the first half of the 1940’s, and the
ratio of banking offices to population continued rela­
tively low.
Since World War II economic conditions have pro­
vided a strong demand for new banks or new banking
offices. The rate of increase in banking offices, how­
ever, did not exceed that of population until about
1955. The number of banking offices is now almost as
large as at the peak in 1920 but is far less in relation
to population. A lower banking office-population ratio
may be appropriate; first, there may have been an
uneconomically large number of offices in the 1920’s,
and second, increased urbanization and improved
transportation may have decreased the economical
number of banking offices in relation to population.
The banking office-population ratio varies consider­
ably within the Eighth District. In 1965 there were
12.9 offices per 100,000 people in Arkansas compared
with 21.3 in Indiana. Since 1950 the ratio of offices
to population has increased rapidly in the district por­
tions of the branch banking states of Indiana, Ken­
tucky, Tennessee, and Mississippi but has remained
relatively stable in the nonbranching states of Arkan­
sas, Illinois, and Missouri.
Several factors may be of importance in explaining
variation in the banking office-population ratio. In­
cluded are variations in state banking laws and popu­
lation density. State laws pertaining to branch bank­
ing apparently exert a strong influence, since those
states which permit branching have had greater bank­
ing office-population ratio gains than have unit bank
states. Urban areas have lower banking office-popula­
tion ratios than rural areas. For example, there are 5.3
banking offices per 100,000 people in the St. Louis
Metropolitan Area compared with 21.8 offices per
100,000 people in the rest of the district portion of Mis­
souri. While rates of population and economic growth,
differences in attitudes of state regulatory agencies in
granting bank charters, and other factors are impor­
tant in influencing the ratio of banking offices to popu­
lation, the extent of their impact is more difficult to
assess.

1960........................................... ....13.4
1965........................................... .... 14.8

in the 1920’s than were economical. Many failed and
were not replaced. During the four years 1929-33 the




B a n k D ep o sits
Total deposits at commercial banks in both the dis­
trict and the nation increased throughout the 1950 s,
Page 5

and since 1960 the growth has accelerated. Deposits
at Eighth District banks rose from $6.7 billion in mid1950 to $14.1 billion on June 30, 1965, an average an­
nual rate of 5.1 per cent (Table IV). During this
period deposits in the nation grew at an average rate
of 5.3 per cent. Since 1960 total deposits in the dis­
trict have risen 7.7 per cent annually compared with
8.3 per cent for the nation.

Demand deposits at district banks rose from $5.4
billion in 1950 to $8.5 billion on June 30, 1965, an aver­
age annual increase of 3.1 per cent. In the nation
such deposits rose from $106.5 billion to $173.2 billion,
a gain of 3.3 per cent annually. Since 1960 such de­
posits in the district have increased at a 3.6 per cent
rate compared with 4.3 per cent in the nation.
Total bank deposits per capita increased at an an­
nual rate of 3.5 per cent in the Eighth District from
1950 to 1964 compared with 2.9 per cent in the nation
(Table V). Per capita demand deposits in the district
and nation rose at annual rates of 1.5 per cent and 0.4
per cent, respectively, while per capita time and sav­
ings deposits rose at rates of 8.9 per cent and 6.0
per cent.

The growth of time and savings deposits has pro­
ceeded much faster than the growth of demand de­
posits. From 1950 to 1965 time and savings deposits
at district banks rose from $1.4 billion to $5.6 billion,
an annual rate of 9.9 per cent. Since 1960 such depos­
its have risen at an annual rate of 16.4 per cent. Time
deposits in the nation increased somewhat less rapidly,
rising at a 9.1 per cent annual rate during the whole
1950-65 period and at a 14.9 per cent rate since 1960.
The substantial growth in time and savings accounts
is the result of increased aggressiveness by commercial
banks in seeking funds to meet a rising demand for
credit. Reflecting this increased competition for funds
were more liberal interest rates paid by banks. Banks
have also developed additional sources of funds by
issuing unsecured notes, subordinated debentures, and
an increasing variety of certificates of deposit.

The higher rate of increase in district per capita de­
posits has reduced the disparity between the district
and the national averages. Total deposits per capita
in the district rose from 62 per cent of the national
average in 1950 to 67 per cent in 1964. Per capita de­
mand deposits rose from 73 per cent to 84 per cent,
and time deposits, from 34 per cent to 50 per cent.
Although the district has made sizable gains in per
capita deposits relative to the nation, a considerable

Table IV

SELECTED ASSET AN D LIABILITY ITEMS OF COMMERCIAL BANKS
(June 30)

Amount
(Billions)
1950
District

1955

1960

1965

U.S.

District

U.S.

District

U.S.

District

U.S.

Total deposits ....................................

$143.8

$8.3

$181.5

$ 9.7

$209.0

$14.1

$311.6
173.2

Demand ........................................

106.5

6.5

131.5

7.1

139.9

8.5

Time 1 .............................................

37.3

1.8

50.0

2.6

69.1

5.6

138.4

Loans ....................................................

44.8

3.3

75.2

4.8

114.8

7.9

187.9

U. S. Government securities.............. .........
O ther s e c u ritie s .................................. ...........

2.9

3.0

63.3

2.9

54.2

3.2

56.8

11.2

0.7

16.8

1.0

19.9

2.0

42.2

0.5

11.4

0.7

14.9

1.4

29.2

9.1

199.3

1.0
10.8

20.3

156.9

Total capital a c c o u n ts ....................... .........
Total assets .........................................

65.8

0.5

237.0

15.7

353.5

Average Annual Rates of Change
1950-55
District
Total deposits ....................................

1955-60
U.S.

District

4.8%

3.1%

Demand .........................................

4.3

Time 1 ...........................

6.0

1.7
7.4

Loans ................................
U. S. Governm ent securities.............. .........
Other s e c u ritie s ................................ .........
Total capital a c c o u n ts ....................... .........
Total assets .......................................
1 Includes both time and savings deposits.

Page 6



1960-65
U.S.

2 .8 %
1.2

District
7.7%

1950-65
U.S.

District

U.S.

8.3%

5.1%

5.3%

3.6
16.4

4.3

3.1

3.3

6.7

14.9

9.9

9.1

10.9

7.5

8.8

10.7

10.4

9.0

10.1

— 0.6

— 3.1

1.9

1.0

0.6

— 1.0

7.7

— 0.8
8.4

5.3

3.4

15.4

16.3

9.4

9.2

7.1

5.5

6.6

6.3

7.5

7.0

6.5

4.9

3.5

3.5

8.7

7.8
8.4

5.3

5.6

0.6

Table V

DEPOSITS PER CAPITA
Dem
and Deposits1
1950
Eighth District 3 .................... ................
Arkansas ......................... ................
Illinois

............................. ................
........................... ................

1964

$437

$536

310

432

Annual Rate
of Increase
1.5%
2.4

________ Time Deposits 1
1950

1964

$123

$407

51

295

Annual Rate
of Increase
8.9%
13.4

Total Deposits 2
1950

1964

Annual Rate
o f Increase

$ 712

$1,158

443

867

4.9

3.5%

399

522

1.9

186

473

6.9

743

1,246

3.8

372

484

1.9

200

407

5.2

672

1,072

3.4

......................... ................
Mississippi ....................... ................

455

548

1.3

72

258

9.5

689

1,013

2.8

231

299

1.9

33

216

14.4

317

601

4.7

Missouri ........................... ................
Tennessee ...................... ................

611

698

1.0

180

532

1,498

2.9

490

0.7

126

560

805

1,342

3.7

United S ta te s ......................... ................

598

635

0.4

361

818

8.0
11.2
6.0

1,001

443

1,151

1,727

2.9

Indiana

Kentucky

1Excluding government and interbank deposits.
2 Including government and interbank deposits.
3Includes all of Arkansas but only portions of the remaining states.

gap still remains. Both demand and time deposits per
capita are below the national average. It is generally
believed that demand deposits are desired as a conve­
nient means for settling day-to-day transactions and as
a means of storing wealth. If this is the case, the per
capita level is likely to be related to both per capita
income and wealth in a community. Per capita in­
come in the Eighth District is below the United States
average but, like demand deposits, is increasing at a
somewhat higher rate than in the nation. Per capita
time and savings deposits, in addition to their rela­
tionship to income and wealth, are perhaps associated
with the convenience and competitive features of
banking versus other savings-type institutions. Banks
in the Eighth District may be less competitive in this
respect than in the nation, due both to the structure
of district banking and to legal restrictions. Four dis­
trict states limit the rates paid on time and savings
deposits.

In contrast to Government securities, the relative im­
portance of “other” securities (mostly obligations of
state and local governments) in bank asset structure
has been increasing. Such securities held by district
banks increased from $0.5 billion in 1950 to $2.0 bil­
lion in 1965, an annual rate of 9.4 per cent. Between
mid-1960 and mid-1965 district bank holdings of these
securities more than doubled. Relative to total assets,
these other securities increased from 7.1 per cent in
1950 to 12.6 per cent in 1965. A similar growth in such
securities has occurred at commercial banks in the na­
tion, with holdings increasing at an average annual
rate of 9.2 per cent during the 1950-65 period. Such
securities increased from 7.1 per cent of assets to 11.9
per cent.

B a n k C red it

B a n k C a pita l

Loans at Eighth District banks increased from $2.2
billion in 1950 to $7.9 billion in 1965, an average
annual rate of 9.0 per cent. During this period bank
loans in the nation rose at an annual rate of 10.1
per cent. Since commercial banks have been increas­
ing their loans faster than deposits, the loans-to-deposits ratio rose from 32.4 per cent in 1950 to 56.3 per
cent in 1965. In the nation this ratio rose even faster,
from 31.1 per cent to 60.3 per cent.

Total capital accounts of commercial banks in the
Eighth District rose from $0.5 billion in 1950 to $1.4
billion in 1965, an average annual increase of 7.0
per cent. Bank capital has increased at a greater rate
than some other important banking variables over this
period. The 7.0 per cent annual rate of growth in bank
capital compares with an annual increase of 5.1 per
cent in total deposits, 5.8 per cent in bank credit, and
5.3 per cent in total assets. As a consequence, the
capital-to-assets ratio of district banks rose from 6.9
per cent to 8.8 per cent during the period.

A decline in the holdings of U. S. Government secu­
rities relative to total bank assets has been a major
complement to the increase of the loans-to-deposits
ratio. While the amount of such securities held by dis­
trict banks has remained about unchanged since 1950,
Government securities have declined from 40 per cent




of total assets to 20 per cent. In the nation, Govern­
ment securities declined from 42 per cent to 16 per
cent of total bank assets.

In the nation total bank capital rose from $11.4 bil­
lion in 1950 to $29.2 billion in 1965, an average annual
increase of 6.5 per cent. The capital-to-assets ratio rose
from 7.3 per cent to 8.2 per cent.
Page 7

Bank capital relative to deposit liabilities has in­
creased since 1950 in both the district and nation. Cap­
ital accounts at district banks rose from 7.4 per cent of
deposits in 1950 to 9.8 per cent in 1965 (Table V I). In
the nation capital relative to deposits rose from 7.9 per
cent to 9.4 per cent. All of the rise in the ratio of cap­
ital to deposits occurred in the 1950-60 period; since
1960 this ratio has been about unchanged.

June 30, 1965, whereas the 10 per cent containing the
smallest banks held less than 1 per cent of total de­
posits (Table V II).
Table VII

DISTRIBUTION OF DEPOSITS BY BANK SIZE
Eighth District
Size G roups 1

1950

1955

1960

1965

Top 10 per cent .........

Table VI

63.15

64.03

60.88

59.69

12.11

2 nd 10 per cent .........

1955

Per Cent of Deposits

7.40

7.61

5.20

5.06

5.59

5.76

5th 10 per c e n t .........

4.03

3.85

4.34

4.45

3.08

2.95

3.31

3.46

7th 10 per c e n t .........

1965

11.69

6.87

6th 10 per c e n t .........

1960

11.14

7.01

4th 10 per c e n t .........
1950

11.27

3rd 10 per c e n t .........

BANK CAPITAL AS A PER CENT OF DEPOSITS
AN D RISK ASSETS

2.35

2.26

2.55

2.64

2.00

Eighth District ...........................

7.4

8.4

9.9

9.8

8th 10 per cent .........

1.83

1.76

1.93

United States .............................

7.9

8.2

9.7

9.4

9th 10 per cent .........

1.31

1.30

1.42

1.44

10 th 10 per cent

0.77

0.78

0.89

0.84

100.00

100.00

100.00

100.00

Per Cent of Risk Assets1
Eighth District ...........................

18.0

16.8

16.6

13.7

United States .............................

19.7

15.7

14.5

Total

....................

12.3

1 Total assets less cash assets and U. S. Government securities.

Relative to certain risk assets, bank capital has de­
clined, both from 1950 to 1960 and since 1960. Capital
relative to all assets less cash assets and U. S. Govern­
ment securities declined from 18.0 per cent in 1950 to
13.7 per cent in 1965 at district banks. Most of this
decline has occurred since 1960. Similarly, the capitalto-risk assets ratio in the nation declined from 19.7
per cent in 1950 to 12.3 per cent in 1965.
These data do not necessarily indicate that commer­
cial banks are becoming more risky or that coverage
for loan and security losses has declined. Many bank
loans are guaranteed by agencies of the United States
Government, which in effect makes the risk equiva­
lent to that of Government bonds. Also, foreclosures
and forced sales are at a very low rate compared with
some historical periods. Furthermore, most banks
maintain a sizable bad debt reserve which is deducted
from loans and not reflected in the capital account.

C o n c e n tr a t io n in D istrict B a n k in g
Another important aspect of the banking structure
in the district is the degree of concentration of bank­
ing activity. Other factors equal, it is generally as­
sumed that a greater concentration of banking activity
indicates less competition. To determine the level of
concentration in the Eighth District, all insured banks
were divided by volume of total deposits into 10
groups, each containing an equal number of banks.
This array of groups revealed that the 10 per cent con­
taining the largest banks in the district accounted for
nearly 60 per cent of total deposits of all banks on
Page 8



1A11 insured banks grouped by total deposits. Each group in 1950 con­
tained 141.9 banks; in 1955, 142.4 banks; in 1960, 145.2 banks; and
in 1965, 148.3 banks.

Since 1950 the percentage of total deposits held by
the various groups of banks has changed somewhat.
From 1950 to 1955 the share held by the group of
largest banks rose slightly, from 63.15 per cent of all
deposits to 64.03 per cent, while the share of each
other group, except the smallest size group, declined.
Since 1955 this trend has been reversed; total deposits
of the group of largest banks declined from 64.03 per
cent in mid-1955 to 59.69 per cent on June 30, 1965.
The diminution since 1955 in the percentage of total
deposits held by the group of largest banks has per­
mitted a small increase in the relative share of all other
groups. Thus, it appears that, based on total deposits,
the banking industry in the Eighth District since 1955
has become less, rather than more, concentrated.
However, in a particular state or city the situation may
be considerably different than in the district as a whole.
The trends in relative amounts of most other vari­
ables held by banks in the various groups are similar
to the trend in total deposits. The proportion of total
assets, time deposits, loans, and Government securi­
ties all declined for the group of largest banks and
increased for all other groups. An exception to this
generalization was the trend in total capital accounts.
The proportion of capital in the first and the sixth
through tenth groups increased slightly between 1950
and 1965, while the second through fifth groups
showed declines.
C l if t o n
W il l ia m

B.

L u ttrell

E . P e t t ig r e w

Operations
a t t h e F e d e r a l R es erv e B a n k o f S t. L o u is
M o n e y H a n d lin g

Operations in the Money Department of the bank1
rose rapidly in 1965, primarily as a result of increased
coin counting. Following three successive years of
coin shortage, supplies began to gain on demand in
Coin Counted

nickel. These cupronickel faces are bonded to a core
of pure copper. Nonsilver dimes, scheduled to go
into circulation in early 1966, will be made of the
same materials and in the same manner. Later in the
year half dollars of reduced silver content will be
introduced. They will be faced with layers ot 80 per
cent silver and 20 per cent copper, bonded to a core of
79 per cent copper and 21 per cent silver, giving them
an overall 40 per cent silver content. All of the new
coins have the same designs and are of the same size
as their silver counterparts; however, the dime and
quarter are 9.3 per cent lighter and the half dollar is
8 per cent lighter. The traditional dimes, quarters, and
half dollars, all containing 90 per cent silver, are to
remain in circulation with the new coins.
Currency counting at the Federal Reserve Bank of
St. Louis rose to 219 million pieces in 1965 from 201
million pieces in 1964, an increase of 9.0 per cent. The
dollar value rose to $1.4 billion, an increase of 9.4 per
cent. Currency counting has shown little net change

1965. By the end of the year most
requests for coin, with the excep­
tion of half dollars, could be filled
on schedule. During the shortage
member banks seldom had excess
coin to return to the Federal Re­
serve, and counting operations de­
clined drastically. In 1965, how­
ever, coin counting rose to 318
million pieces from 227 million in
1964, a gain of 40 per cent. The
dollar value rose from $24.5 mil­
lion to $27.0 million, an increase
of 10 per cent. This, however, was
still substantially below the 1961
peak when 490 million pieces val­
ued at $48.3 million were counted.
Introduction of a nonsilver quar­
ter in early November contributed
to increased supplies of coin. The
new quarter is a three-layer coin
with outer faces of the same alloy
as is used for the five cent piece75 per cent copper and 25 per cent

Table V III

VOLUME OF OPERATIONS1
Dollar Amount
(M illions)
1960

1964

1965

43.3
Checks handled 2 ......................................

27.0

1,300.2

1,421.9

68,537
391.1

Noncash collection item s..........................
Transfers of funds ...................................

24.5

1,186.0

Currency counted ......................................

61,434

91,837
466.7
94,453

102,900
566.2
109,066

U. S. Savings Bonds handled 3 ................

685.9

615.5

624.3

O ther Government securities h a n d le d '.

10,933.3

16,015.5

16,282.6

U. S. Government coupons p a id .............

123.1

144.9

136.6

17.4

5.8

15.3

Loans to member banks—
d a ily average outstanding..................

Number
(M illions)
1960

1964

1965

Coin counted ............................................

426.6

226.8

317.5

Currency c o u n te d ......................................

201.4

201,2

218.8

Checks handled 2 ......................................

170.7

226.1

244.6

Noncash collection item s..........................

.560

.528

Transfers of funds ...................................

.152

.188

.587

.200

U. S. Savings Bonds handled 3 ...............

7.534

8.155

8.784

O ther Government securities handled3 .

.457

.554

.564

U. S. Government coupons p a id .............

.872

.791

.733

1 Total for the St. Louis office and the Louisville, Memphis, and Little Rock branches.

1 Including the L ittle Rock, Louisville,
and Memphis branches.




2 Excludes Government checks and money orders.
3Issued, exchanged, and redeemed.

Page 9

since the early 1950’s. Both dollar value and number
of pieces declined from 1953 to 1961 but recovered
the loss by 1965.

Relative to personal income, coin and currency in
circulation rose rapidly during World War II but has
declined fairly steadily since the early postwar years.
From 10.0 per cent of personal income in 1940 the vol­
ume of coin and currency in circulation rose to 15.6
per cent in 1945 but has since declined to 7.6 per cent
(Table X ). All the relative coin and currency de­
cline has occurred in the currency component, which
dropped from 14.9 per cent of personal income in 1945
to 6.9 per cent in 1965. Coin totaled about 0.7 per cent
of personal income in 1945, the same as in 1965.

Currency Counted

Table X

COIN A N D CURRENCY IN CIRCULATION
A S A PER CENT OF PERSONAL INCOME
Coin

Currency

Coin and
Currency

1940.........................

Total in circulation 1
Total currency

10.0%

14.9

15.6

0.6

11.3

11.9

1955.........................
1960.........................

0.6
0.6

9.1
7.4

9.7
8.0

1965.........................

0.7

6.9

7.6

C h e c k C o llectio n s
Progress toward automated check collection con­
tinued during 1965. A third computer for check han­
dling was installed at the St. Louis office in September.
Plans for automation were made and computer equip­
ment ordered for delivery to the Memphis and Little
Rock branches. Target dates for delivery are mid-1966
for Memphis and early 1967 for Little Rock. Such
equipment at the branches will be used for numerous
other operations in addition to check collections.

Coin and currency counting at the Federal Reserve
Bank is related to the volume in circulation. In turn,
the volume in circulation is associated with the amount
of transactions paid for by coin and currency. An indi­
vidual has the choice of holding money either in the
form of coin and currency or demand deposits. Since
1950 the amount of coin and currency held has totaled
about 30 per cent of the amount of demand deposits.
Coin has increased somewhat relative to demand de­
posits, while currency has declined slightly.

Total coin

9.2%

0.7

1950.........................

The amount of coin and currency in circulation in
the country has risen rapidly since 1960. Coin in cir­
culation has risen at a rate of 9.4 per cent in the last
five years compared with a 4.5 per cent annual rate
during the 1945-60 period (Table IX ). Currency in
circulation rose at an average annual rate of 3.9 per
cent from 1960 to 1965 after increasing at a 1.0 per
cent rate from 1945 to 1960.

0.8%

1945.........................

About 83 per cent of all checks received at the St.
Louis office in recent months were sorted through
electronic check processing equipment. This compares
with about two-thirds of all
Table IX
checks similarly processed a
year earlier. At the Louisville
C OIN AN D CURRENCY IN CIRCULATION
branch, automated in mid-1964,
June 30
about 90 per cent of all checks
(Millions)
received in recent months were
1940
1945
1950
I960
1965
1955
SOrted thrOUSh elec‘’ ° “ c equip$7,848
$26,746
$27,156
$30,229
2,338
3,662
ment. This compares with about
599
1,205
1,496
1,858
25,542
7,250
25,662
28,372
29,727
36,059
70 per cent a year earlier.

Currency denom inations:

1,440

1,752

$1
$2

546

981
73

1,307
61

1,226

35

72

84

116

$5

1,015

2,215

1,966

2,061

$10
$20

1,791

6,515

5,891

6,471

2,141

2,447

1,599

8,193

8,363

9,625

$50 and above

2,264

7,565

8,344

8,917

1 Outside the Treasury and Federal Reserve Banks.

Page 10



6,604
10,363
9,095

7,489

12,723

n,532

The Federal Reserve Bank of
St. Louis may receive checks
from each of the 483 member
banks2 in the Eighth District,
other Federal Reserve Banks and
2Number as of D ecem ber 31, 1965.

their direct-sending member banks, and Government
agencies. Checks are sent to member banks and non­
member par-remitting banks in the Eighth District and
to other Federal Reserve Banks for collection.
The number of checks cleared through the Federal
Reserve Bank of St. Louis, including the branches, rose
from 226.1 million in 1964 to 244.6 million in 1965. The
dollar volume of these collections rose from $91.8 bil­
lion in 1964 to $102.9 billion in 1965.

N o n ca sh C o llectio n s
In addition to maintaining facilities for check collec­
tion, Federal Reserve Banks handle numerous other
items for collection. Included are drafts, promissory
notes, bonds and bond coupons, and various other
documents. The combined dollar value of these non­
cash collections was up 21.3 per cent in 1965 from
1964, while the number of items was up 11.2 per cent.
N o n ca sh Collection Items

Millions

Millions

Checks Collected*

The growth in check collections at this bank and in
the Federal Reserve System has generally paralleled
the growth in gross national product. Since 1953 the
Checks Collected and G N P

T ra n sfers o f F u n d s
Transfers of funds are largely movements of mem­
ber bank balances between Federal Reserve Banks,
which for the most part result from Federal funds
transactions, check collection settlement, and transfers
in connection with transactions in U. S. Treasury ob­
ligations. Such transfers by this bank in 1965 totaled
Transfers of Funds

Billions

dollar value of checks collected at the Federal Reserve
Bank of St. Louis increased at an annual rate of 5.9
per cent, while such collections in the System rose at
a 5.6 per cent rate, and GNP rose at a 5.3 per cent
rate. From 1964 to 1965 checks collected at the Fed­
eral Reserve Bank of St. Louis rose 12.0 per cent and in
the System rose 10.6 per cent compared with a 7.5 per
cent increase in GNP.




Billions

200,000, up 6.4 per cent from a year earlier. The dol­
lar value of transfers, totaling $109 billion, was up 15.5
per cent.
Page 11

D ir e c to r s

and

O ffic e r s

Directors
Chairman of the Board and Federal Reserve Agent
Raymond Rebsamen, Chairman of the Board
Rebsamen & East, IncLittle Rock, Arkansas
Deputy Chairman of the Board
Smith D. B roadbent, J r.
Broadbent Hybrid Seed Co.
Cadiz, Kentucky
H. Lee Cooper, President, Ohio Valley National Bank of
Henderson, Henderson, Kentucky
Harry F. Harrington,i Chairman o the • Q t The
r> .
? tv •
t
d i c of r Board,
*.
•
Boatmen s INationai Bank oi ot. Louis, St. Louis,
Missouri

Harry E. Rogier, President, The First National Bank of
Vandalia, Vandalia, Illinois
Wttxt.,, King Self, d -j .. Riverside Industries,
-j
•
William
President,
, » . . . .
Marks, Mississippi

Roland W. Richards, Senior Vice President, Laclede Steel
Company, St. Louis, Missouri

S herwood J. S mith, Vice President, Whirlpool Corporation, Evansville, Indiana

t

Mark T ownsend, Chairman of the Board
Townsend Lumber Company, Inc.
Stuttgart, Arkansas

Member of Federal Advisory Council
A. M. Brinkley, J r., Chairman of the Board
and Chief Executive Officer
Citizens Fidelity Bank and Trust Company
Louisville, Kentucky

Officers
Darryl R. Francis, President
Dale M. Lewis, First Vice President
Marvin L. Bennett, Vice President
John F. Breen, Vice President
Donald L. Henry, Vice President
Homer Jones, Vice President
Stephen Koptis, Vice President
John W. Menges, Vice President
Howard H. Weigel, Vice President and Secretary
Joseph C. Wotawa, Vice President
Orville 0. Wyricic, Vice President
George W. Hirshman, General Auditor
Gerald T. Dunne, General Counsel and
Assistant Secretary

Page 12



Norman N. Bowsher, Assistant Vice President
Earl H. Chapin, Assistant Chief Examiner
Edgar H. Crist, Assistant Chief Examiner
George W. Dennison, Assistant Vice President
J. M. Geiger, Assistant Vice President
Woodrow W. Gilmore, Planning Officer
John J. Hofer, Assistant Vice President
Wilbur H. Isbell, Chief Examiner
W illis L. Johns, Assistant Vice President
Richard 0. Kaley, Assistant Vice President
Eugene A. Leonard, Assistant Vice President
William R. Mueller, Assistant General Auditor
F. Garland Russell, Jr., Assistant Counsel
Paul Salzman, Assistant Vice President
W. E. Walker, Assistant Vice President

j

«.

LITTLE ROCK BRANCH
Ross E. Anderson, Chairman of the Board, The
mercial National Bank of Little Rock, Little
Arkansas
Frederick P. Blanks, Planter, Parkdale, Arkansas
Cecil W. Cupp, President & Chairman, Arkansas
and Trust Company, Hot Springs, Arkansas

D ir e c to r s
Louis E. Hurley, President, The Exchange Bank & Trust
Com­
Company, El Dorado, Arkansas
Rock,
R. M. LaGrone, J r., President, The Citizens National
Bank of Hope, Hope, Arkansas
R eeves E. Ritchie, President, Arkansas Power & Light
Company, Little Rock, Arkansas
Carey V. Stabler, President, Little Rock University,
Bank
Little Rock, Arkansas
O f f ic e r s

John F. Breen, Vice President and Manager
John K. Ward, Cashier
Howard J. Jensen, Assistant Cashier

Michael T. Moriarty, Assistant Cashier

LOUISVILLE BRANCH
D ir e c t o r s
Lisle Baker, J r., Executive Vice President & General
Manager, The Courier-Journal & Louisville Times
Company, Louisville, Kentucky
Ray A. Barrett, President, The State Bank of Salem,
Salem, Indiana
Wm. G. Deatherage, President, Planters Bank & Trust
Co., Hopkinsville, Kentucky

C. Hunter Green, Vice President and General Manager,
Southern Bell Telephone and Telegraph Company,
Louisville, Kentucky
J ohn H. Hardwick, President, The Louisville Trust
Company, Louisville, Kentucky
J. E. Miller, Executive Vice President, Sellersburg State
Bank, Sellersburg, Indiana
R ichard T. S mith, Farmer, Madisonville, Kentucky

O f f ic e r s
Donald L. Henry, Vice President and Manager
James E. Conrad, Cashier
Louis A. Nelson, Assistant Cashier

Clarence J. Woertz, Assistant Cashier

MEMPHIS BRANCH
D ir e c t o r s
Leon C. Castling, President, First National Bank at
Marianna, Marianna, Arkansas
Sam Cooper, President, HumKo Products Division,
National Dairy Products Corporation, Memphis,
Tennessee
W. W. Hollowell, President, The First National Bank
of Greenville, Greenville, Mississippi

E dw ard B . L e M a s t e r , President, E d w ard L eM a ste r C o.,
In c ., M em p h is, T en n essee
A l l e n M organ , President, T h e First N atio n al B a n k of
M em ph is, M em p h is, T en n e sse e
W e l c h , President, Citizens Bank, Savannah,
Tennessee
J ames S. Williams, Plant Manager, American Greetings
Corporation, Osceola, Arkansas

C on T .

O f f ic e r s
John W. Menges, Vice President and Manager
Benjamin B. Monaghan, Cashier
Paul I. Black, Jr., Assistant Cashier




Joseph P. Garbarini, Assistant Cashier
Page 13

F is c a l A g e n c y O p era tio n s

U.S. Government Coupons Paid

Millions

To facilitate orderly Government financial transac­
tions in all parts of the country, the Reserve Banks act
as fiscal agents of the United States Government. They
carry the principal checking accounts of the Govern­
ment, issue and redeem Government securities, admin­
ister the Treasury tax and loan deposit accounts at
commercial banks, and perform various other Govern­
ment financial duties.

15 0 r

The Federal Reserve Bank of St. Louis issued, ex­
changed, and redeemed 8.8 million United States Sav­
ings Bonds in 1965 compared with 8.2 million in 1964.
The dollar value of such bonds was up 1.4 per cent
from a year earlier.

50

U.S. Savings Bonds Issued, Exchanged,
Millions
and Redeemed
Millions

140
130

o V lu e
llar o m

120
10
1
100
90
80
70
60

/

/

6=
T-

m
ouse

Nme o C u o s
u br o p n

650
600

T h e D is c o u n t R a te a n d L e n d in g
O p era tio n s
The interest rate charged on loans to member banks
(commonly called the discount rate) was raised from
4 to 4/ per cent in December 1965.3 This increase,
2
which followed rising market rates, was the highest
rate charged on such loans since early 1929. The cur­
rent uptrend in the discount rate began in mid-1963
with an increase from 3 to 33* per cent. The rate was
increased to 4 per cent in late 1964.
Discount Rate

Other Government securities issued, serviced, or re­
tired in 1965 totaled 564,000, valued at $16.3 billion.
Other Government Securities Issued, Serviced,
and Retired

on_i 2c.
_

Tho
550
500

N br o P c s
u e f iee
m

450

—
-—

550

/

500
450

400

400

350

350

300

300

250

200
o c~

250

_0
20

This was an increase of 1.8 per cent in number and 1.7
per cent in dollar value from 1964. Government cou­
pons paid were down 7.3 per cent in number and 5.7
per cent in dollar value.
Page 14



Federal Reserve credit is generally extended on a
short-term basis to a member bank to enable it to ad­
just its asset position when necessary because of devel­
opments such as a sudden withdrawal of deposits or
seasonal requirements for credit beyond those which
can reasonably be met by use of the bank’s own re­
sources. Federal Reserve credit is also available for
3 T he rate charged under Sections 13 and 13a of the Fed eral
Reserve Act on advances secured by U. S. Government securi­
ties and discounts of and advances secured by eligible paper.

longer periods when necessary to assist member banks
in meeting unusual situations resulting from national,
regional, or local difficulties or from exceptional cir­
cumstances involving only particular member banks.
Lending operations at the Federal Reserve Bank of
St. Louis during 1965 approached the average of the
1954-60 period, following four years at relatively low
levels. Average daily outstandings to member banks
in the Eighth District in 1965 were $15.3 million, up
from $5.8 million in 1964. In comparison, average
daily borrowings were about $17 million for the seven
years 1954-60.
L oans to M e m b e r B a n k s

M
illions of Dollars

(DilyAe g Otsta d g M
a v ra e u n in !
illions of Dollars

F u n c t io n a l C ost A na ly sis
The Federal Reserve Bank of St. Louis, in coopera­
tion with other Reserve Banks, in 1965 instituted a
functional cost analysis program as a service to mem­
ber banks in assessing their operations. This program
is designed to provide participating banks a detailed
breakdown of income and expenses by various func­
tions. It also provides a comparative measure of each
participating bank’s performance with the average ex­
perience of a group of banks of similar functional size.
Member banks provide the Reserve Bank with in­
come and expense data, certain item counts, and asset
and liability averages for the year. The data is comput­
er processed and each of the participating banks is
given a report in which costs and income are allocated
among the functions of loans and investments, demand
deposits, time deposits, safekeeping, and trust depart­
ment. The loan function is further broken into install­
ment, real estate, and others, and the demand deposits
function, into regular and special checking accounts.
The program is provided without charge to member
banks and is strictly on a voluntary basis for those
banks which have expressed a desire to participate.

Statements
o f t h e F e d e r a l R eserv e B a n k o f S t. L o u is
Net earnings, before payments to the United States
Treasury, rose to $47.2 million in 1965, up 13.5 per
cent from 1964. Dividends to member bank stock­
holders, limited by law to 6 per cent of paid-in capital,
were up 5.3 per cent. Payments to the Treasury (in­
terest on Federal Reserve notes) of $44.9 million, were
less than a year earlier, when the remainder of current
earnings, after dividends, was augmented by a $16.3
million withdrawal from surplus.

Table XII

COMPARATIVE STATEMENT OF CONDITION
(Thousands)

Assets

December 31, December 31,
1965
1964
$ 527,575

$ 636,030

42,029

32,033

7,128

Gold certificate re se rve s................................
Federal Reserve notes of other banks . . . .

6,401

1,220

1,546,710

1,436,374

Uncollected items ...........................................

412,676

409,868

Other assets ...................................................

40,003

26,543

Total a s s e ts .............................................

COMPARATIVE PROFIT AN D LOSS STATEMENT

1,394

U. S. Government s e c u ritie s .........................
Table XI

Discounts and a d v a n c e s ...............................

$2,577,515

$2,548,469

(Thousands)
1965

1964

Total e a rn in g s ...............................................................

$58,246

$52,073

N et e xp enses.................................................................

11,053

10,488

$47,193

$41,585

N et earnings

..........................................................

Net additions { + ) or deductions (— ) ....................

~f~ 39

~t~ 27

Net earnings before payments to U. S. Treasury. .

$47,232

$41,61 2

Distribution o f net earnings:
Dividends .................................................................
Interest on Federal Reserve n o te s .......................
Transferred to s u rp lu s .............................................
Total

.............................................................




Liabilities and Capital Accounts
Federal Reserve notes (net) .........................

$1,450,866

$1,409,903

Deposits:
Member banks— reserve a c c o u n ts .........

690,741

694,156

U. S. Treasurer— general account...........

55,282

56,288

14,589
$ 1,110

$ 1,054

44,935

56,863

1,187

— 16,305

$47,232

$41,612

Deferred a va ila b ility cash ite m s ................

11,497

320,883

318,377

Other lia b ilities and accrued dividends .

6,894

22,362

Total capital a cco u n ts..................................

38,260

35,886

$2,577,515

$2,548,469

Total liab ilitie s and capital accounts. . .

Page 15


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102