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ANNUAL REPORT OF THE FEDERAL DEPOSIT INSURANCE CORPORATION FOR THE YEAR ENDED DECEMBER 31,1944 L E T T E B OF T R A N S M IT T A L F e d e r a l D e p o s it I n s u r a n c e C o r p o r a t io n , Washington, D. C., August 21, 19^5. SIR: Pursuant to the provisions of subsection (r) of section 12B of the Federal Reserve Act, as amended, the Federal Deposit Insurance Corporation has the honor to submit its annual report. Respectfully, L e o T. C r o w le y , T h e P r e s id e n t T he Sp e a k er of t h e of th e Se n a t e H ouse of R e p r e se n t a t iv e s Chairman. FEDERAL DEPOSIT INSURANCE CORPORATION FEDERAL DEPOSIT INSURANCE CORPORATION N a t i o n a l P r e s s B u ild in g — F ie ld B u ild in g — W a sh in g to n 25, D. C. C h ic a g o 3, I l l i n o i s BOARD OF DIRECTORS Chairman..................................................................... L eo T. Crowley ( P hillips L ee G oldsborough Directors...................................................................... (P reston D elano Comptroller of the Currency OFFICIALS— AUGUST 21, 1945 W ashington 25, D . C. Secretary...................................................................... Miss E. F. Downey Executive Officer.......................................................... Henry W. Riley Assistant Executive Officer.......................................... Walter F. Oakes Special Assistant to Board of Directors.................... Alfred J. Loda Confidential Assistant to Chairman.......................... Miss Beryl Roberts Secretary to Chairman................................................ Miss Dorothy Dale Special Assistant to Chairman.................................. •J. Forbes Campbell Special Assistant to Chairman.................................. Edward C. Tefft Assistant to Director................................................... Albert G. Towers Secretary to Director.................................................... Mrs. Madeline G. Von Eberhard General Counsel........................................................... Francis C. Brown Counsel......................................................................... Goodwin J. Oppegard Counsel........................................................................ Irving H. Jurow Counsel........................................................................ Russell D. Miller Chief, Division of Examination................................. Vance L. Sailor Mutual Savings Bank Advisor.................................. Raymond T. Cahill Special Assistant to Board of Directors, Federal Credit Union Section............................ C. R. Orchard Chief, Division of Research and Statistics................ Homer Jones Assistant Chief, Division of Research and Statistics. .Harry L. Severson Librarian..................................................................... Miss Amy Dene Early Director of Personnel.................................................. Carl W. Satterlee Chief, Service Division................................................ Frank C. Bio we Chicago 3, I llinois Chief, Division of Liquidation................................... Wheeler McDougal Supervising Liquidator, Division of Liquidation. . . .Ralph E. Zimmerman Supervising Claim Agent, Division of Liquidation.. .James M. Gaffney Supervising Accountant, Division of Liquidation.. . .H. R. Burling Counsel........................................................................ James M. Kane Assistant Counsel (on military leave) ........................ John L. Cecil Fiscal Agent................................................................ W. G. Loeffler Chief, Audit Division................................................. Mark A. Heck v DISTRICT OFFICES D is t. No. S u p e r v is in g E x a m in e r A ddress S t a t e s i n d is t r i c t 1. Leo J. Carr Room 765, No. 10 Post Square, Boston 9, Mass. Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut 2. Leon F. Stroefer Room 1900, 14 Wall Street, New York, New Jersey, New York 5, N. Y. Delaware 3. Leon F. Stroefer City National Bank Ohio, Pennsylvania Building, 20 East Broad Street, Columbus 15, Ohio 4. Lundie W. Barlow 909 State Planters Bank & District of Columbia, Mary Trust Company Building, land, Virginia, West Vir Richmond 19, Va. ginia, North Carolina, South Carolina 5. W. Clyde Roberts 625 First National Bank Building, Atlanta 3, Ga. Georgia, Florida, Alabama, Mississippi, Louisiana 6. Neil G. Greensides 1059 Arcade Building, St. Louis 1, Mo. Kentucky, Tennessee, Missouri, Arkansas 7. Raby L. Hopkins 715 Tenney Building, Madison 3, Wis. Indiana, Michigan, Wisconsin 8. Carol L. Pitman Illinois, Iowa 741 Federal Reserve Bank Building, 164 W. Jackson. Blvd., Chicago 4, 111. 9. Rollin 0 . Bishop 1200 Minnesota Building, St. Paul 1, Minn. 10. Gerhard F. Roetzel 901 Federal Reserve Bank Building, Kansas City 6, Missouri 11. Linton J. Davis Federal Reserve Bank Building, Station K, Dallas 13, Tex. Minnesota, North Dakota, South Dakota, Montana Nebraska, Kansas, Oklahoma, Colorado, Wyoming Texas, New Mexico, Arizona 12. William P. Funsten Suite 1120, 315 Montgomery Idaho, Utah, Nevada, Street, San Francisco 4, Washington, Oregon, Calif. California CONTENTS Page 3 Summary PART ONE OPERATIONS AND POLICIES OF THE CORPORATION Introduction............................................................................................................. Suggestions for legislation...................................................................................... Deposit insurance and loan risk........................................................................... Deposit insurance protection................................................................................. Legal developments................................................................................................ Supervisory activities............................................................................................. Organization and financial statements of the Corporation............................... 7 8 11 14 20 22 25 PART TWO BANKING DEVELOPMENTS Assets, deposits, and capital accounts................................................................. Earnings of insured commercial banks................................................................ 35 44 PART THREE GROWTH IN BANK DEPOSITS AND IN TOTAL MONEY SUPPLY, 1940-1944 Deposits in commercial and mutual savings banks............................................ Total money supply................................................................................................ 53 66 PART FOUR LEGISLATION AND REGULATIONS Federal legislation relating to insured banks or the Corporation................... Report of the Corporation on absorption of exchange charges........................ Regulations of the Corporation............................................................................. State legislation relating to bank supervision and bank operations.............. 71 72 96 102 PART FIVE STATISTICS OF BANKS AND DEPOSIT INSURANCE Number, offices, and deposits of all operating banks........................................ Assets and liabilities of operating banks.............................................................. Examiners' evaluation of insured commercial banks......................................... Earnings, expenses, and dividends of insured banks.......................................... Deposit insurance disbursements.......................................................................... ix 108 122 132 138 146 LIST OF CHARTS Organization chart of the Federal Deposit Insurance Corporation............... Map: Federal Deposit Insurance Corporation districts................................... A. B. C. Total assets of all operating banks by type of asset, 1934-1944.............. Percentage distribution of assets— all operating banks, 1934-1944.......... Percentage distribution of direct U. S. Government obligations held by insured commercial banks, 1939-1944.......................................................... D. Ratios of net earnings, net profits, and cash dividends to average total capital accounts— all insured commercial banks, 1934-1944..................... E (Map). Percentage increase in deposits of individuals, partnerships, and corporations in commercial and mutual savings banks, June 30, 1942, to December 31, 1944..................................................................................... F. Percentage increases, 1939 to 1944, in income payments, and in deposits of individuals, partnerships, and corporations, by State............................ G. Percentage increases, 1939 to 1944, in interbank deposits and in deposits of individuals, partnerships, and corporations, by State............................ H. Deposits and currency owned by individuals and business, by type, 1939-1944......................................................................................................... L IS T OF Page iv vii 35 37 40 46 56 61 64 67 TABLES PART ONE OPERATIONS AND POLICIES OF THE CORPORATION D eposit insurance protection: 1. 2. 3. 4. Number of depositors, amount of deposits, recoveries, and losses in insured banks placed in receivership or merged with the financial aid of the Corporation, 1934-1944...................................................... Payment by the Corporation and receivers of deposits in insured banks placed in receivership, 1934-1944............................................ Disbursements by the Corporation to protect depositors in insured banks placed in receivership or merged with the financial aid of the Corporation, 1934-1944................... ............................................. Disbursements to protect depositors, recoveries, and losses by the Corporation from insured banks placed in receivership or merged with its financial aid, 1934-1944.......................................................... 15 16 19 19 Supervisory activities : 5. Action to terminate insured status of banks'charged’with engaging in unsafe or unsound practices or violations of law or regulations, 1936-1944................................................................................................ 23 Organization and financial statements of the corporation: 6. Officers and employees of the Federal Deposit Insurance Corpora tion, December 31, 1944....................................................................... 26 7. Income and expenses of the Federal Deposit Insurance Corporation, calendar year 1944................................................................................ 27 X LIST OF TABLES xi Page Organization and financial statements of the corporation — Continued 8. Income and expenses of the Federal Deposit Insurance Corporation since beginning operations.............................................................................. 28 9. Assets and liabilities of the Federal Deposit Insurance Corporation, 1934-1944............................................................................................................... 28 10. Assets and liabilities of the Federal Deposit Insurance Corporation, December 31, 1944, and December 31, 1943........................................... 29 11. Federal Deposit Insurance Corporation comparative balance sheet, June 30, 1944 and 1943— from auditors’ report........................ 30 PART TWO BANKING DEVELOPMENTS A ssets, deposits , and capital accounts : 12. Increase in total assets of all operating banks, 1941-1944................ 36 13. Substandard asset ratios of insured commercial banks examined in 1939-1944............................................................................................................... 38 14. Bank holdings of United States Government obligations, direct and guaranteed, 1941 and 1944............................................................................. 39 15. Direct United States Government obligations held by insured commercial banks, 1939-1944........................................................................ 40 16. Capital accounts of insured commercial banks, 1941 and 1 9 4 4 . . . . 42 17. Capital ratios of insured commercial banks, year-end call dates, 1934-1944............................................................................................................... 43 18. Distribution of insured commercial banks examined in 1944 ac cording to adjusted capital ratio and by amount of deposits.. . . 44 E arnings of insured commercial b a n k s : 19. Earnings, expenses, and dividends of insured commercial banks, 1942-1944............................................................................................................... 44 20. Ratios of net profits, net earnings, and cash dividends to average total capital accounts, all insured commercial banks, 19 34-1944.. 46 21. Distribution of insured commercial banks according to rate of net profits on total capital accounts, 1942-1944.................................... 47 22. Amounts and rates of income received by insured commercial banks, 1934-1944................................................................................................ 48 23. Net earnings and net profits ratios of insured commercial banks, 1944 Banks grouped by amount of deposits...................................................... 49 24. Distribution of insured commercial banks according to ratio of net profits to total capital accounts and amount of deposits, 1 9 4 4 .. 50 PART THREE GROWTH IN BANK DEPOSITS AND IN TOTAL MONEY SUPPLY, 1940-1944 D eposits 25. 26. in commercial and m utual savings b a n k s : Deposits in commercial and mutual savings banks in the United States and possessions, by class of owner, June 30 and December 31, 1939-1944....................................................................................................... 53 Increase in deposits in commercial and mutual savings banks, United States and possessions, by year and class of owner, 19401944......................................................................................................................... 54 LIST OF TABLES xii Page D e p o s it s i n c o m m e r c ia l a n d m u t u a l s a v in g s b a n k s — Continued 27. 28. 29. 30. 31. Assets acquired by commercial and mutual savings banks in the United States and possessions, 1940-1944.......................................... Deposits of individuals, partnerships, and corporations in com mercial and mutual savings banks, by Federal Deposit Insurance Corporation district and State, December 30, 1939, June 30, 1942, and December 30, 1944........................................................................ Percentage increase in deposits of individuals, partnerships, and corporations, 1940-1944, by Federal Deposit Insurance Corporation district..................................................................................................... Governmental deposits in commercial and mutual savings banks, by Federal Deposit Insurance Corporation district and State, December 30, 1939, and December 30, 1944..................................... Interbank deposits in commercial and mutual savings banks, by Federal Deposit Insurance Corporation district and State, Dec ember 30, 1939, June 30, 1942, and December 30, 1944................. 55 58 59 60 62 T o tal m o n ey s u p p l y : 32. 33. 34. 35. Total deposits and currency, excluding interbank obligations, June 30 and December 31, 1939-1944................................................ Total deposits and currency, excluding interbank obligations, June 30 and December 31, 1939-1944, by class of owner......................... Classification of deposits and currency owned by individuals and business, 1939-1944............................................................................... Annual increase in deposits and currency owned by individuals and business, 1940-1944............................................................................... 65 66 67 68 PART FIVE STATISTICS OF BANKS AND DEPOSIT INSURANCE N u m b e r , o f f ic e s , a n d d e p o s it s o f a l l o p e r a t i n g b a n k s : Explanatory note............................................................................................... 101. Changes in number and classification of operating banks and branches in the United States and possessions during 1944............ 108 110 102. Number of operating banks and branches, December 31, 1944 Grouped according to insurance status and class of bank, and by State and type of office....................................................................... 112 103. Number and deposits of operating commercial and mutual savings banks, December 31, 1944 Banks grouped according to insurance status and by district and State..................................................................................................... 120 A s s e t s a n d l i a b i l i t i e s o f o p e r a t in g b a n k s : Explanatory note............................................................................................... 104. Summary of assets and liabilities of operating banks in the United States and possessions, June 30, 1944 Banks grouped according to insurance status and type of bank___ 105. Summary of assets and liabilities of operating banks in the United States and possessions, December 30, 1944 Banks grouped according to insurance status and type of bank.. . . 106. Assets and liabilities of operating insured commercial banks, December 30, 1944, June 30, 1944, and December 31, 1943.......... 122 124 125 126 LIST OF TABLES xiii Page A s s e t s a n d l i a b i l i t i e s o f o p e r a t in g b a n k s — 107. 108. Continued Summary of assets and liabilities of operating banks in the United States and possessions, 1942-1944 Banks grouped according to insurance status and by type of bank.. Percentage distribution of assets and liabilities of operating insured commercial banks, call dates, 1934-1944............................................ 128 130 E x a m i n e r s ' e v a l u a t i o n o f i n s u r e d c o m m e r c ia l b a n k s : Explanatory note.............................................................................................. 109. 110. Examiners’ appraisal of assets, liabilities, and capital of insured commercial banks examined in 1939-1944......................................... Examiners’ appraisal of assets, liabilities, and capital of insured commercial banks examined in 1944 Banks grouped according to amount of deposits............................... 132 134 136 E a r n in g s , e x p e n s e s , a n d d iv id e n d s o f in s u r e d b a n k s : Explanatory note............................................................................................... 111. Earnings, expenses, and dividends of insured banks, 1944 By class of bank................................................................................. 112. Ratios of earnings, expenses, and dividends of insured banks, 1944 By class of bank................................................................................. 113. Earnings, expenses, and dividends of insured commercial banks operating throughout 1944 Banks grouped according to amount of deposits.............................. 138 140 142 144 D e p o s it i n s u r a n c e d i s b u r s e m e n t s : Explanatory note.............................................................................................. 114. Disbursements by the Federal Deposit Insurance Corporation to protect deposits; number and deposits of insured banks placed in receivership or merged with the financial aid of the Corporation, 1934-1944 Banks grouped by class of bank, year of disbursement, amount of deposits, and State.............................................................................. 115. Assets and liabilities of insured banks placed in receivership and of insured banks merged with the financial aid of the Federal Deposit Insurance Corporation, 1934-1944 As shown by books of bank at date of closing................................... 116. Depositors and deposits of insured banks placed in receivership, 1934-1944 As shown by books of FDIC, December 31,19kk............................ 117. Disbursements to protect depositors, recoveries, and losses by the Federal Deposit Insurance Corporation from insured banks placed in receivership or merged with the financial aid of the Corporation, 1934-1944 As shown by books of FDIC, December 31,19kk ............................ 146 148 150 151 152 SUMMARY S u m m ary The period since the establishment of the Federal Deposit Insurance Corporation in 1933 has been one of rising prices, continuous business expansion and growth in total bank assets. The tempo of expansion was greatly accelerated by our participation in the war and the transition from an all-out war effort to peacetime economy will give rise to banking problems decidedly different from any which the Federal Deposit Insurance Corporation has heretofore encountered. Federal insurance of bank deposits has been highly successful and the Corporation recommends certain extensions of the basic principles of deposit insurance so that the banking system and the Corporation can make the maximum contribution to the business community in the difficult period ahead. An increase of deposit coverage is recom mended combined with more flexibility in the handling of the affairs of banks in financial difficulties. The seriousness of the declining capital ratios of insured commercial banks is pointed out in this report and banks are urged to increase capital by a sale of common stock to the public. It is further suggested that it would be prudent for banks to take advantage of present high earnings to build reserves against the uncertainty of the future. Another recommendation is that restraints be placed upon the development of monopolies in banking. The Corporation believes that bank supervision should not interfere with the proper function of bank management. Among the necessary conditions for banks to meet the credit needs of business and to play their proper role in maintaining a high level of production and em ployment after the war are: competition in the banking business, adequate capital, and a will on the part of the banker to engage actively in business. 3 PART ONE OPERATIONS AND POLICIES OF THE CORPORATION I n t r o d u c t io n The 11-year period since the establishment of the Federal Deposit Insurance Corporation has been one of business expansion, rising prices, and growth in the total volume of deposits held by the banking system. During the first part of this period the increase in bank de posits reflected the recovery from the depths of the great depression of the early 1930’s; during the past four years the increase has reflected the rapid growth in governmental expenditures for war activities. The Federal Deposit Insurance Corporation has contributed to and bene fited from this large increase in business activity. Banking developments during the past decade have followed a pattern essentially similar to that of former periods of rising prices and expansion in the volume of business. With progressively higher valuations placed upon assets, banks appear in a more favorable light and few become involved in financial difficulties. Since January 1, 1934, the Corporation has been called upon to make disbursements totaling $260 million to protect depositors in 397 banks, most of which were in a weak asset position when they were admitted to deposit insurance.1 Inasmuch as there is a tendency for losses to concentrate in periods of declining business activity, the Corporation’s experience during a period of almost constant business expansion cannot be assumed to represent the degree of aid which it may be required to render to banks in financial difficulties in the future. The Federal Deposit Insurance Corporation receives income from two principal sources: assessments paid by insured banks at the annual rate of one-twelfth of 1 percent of average deposits, and the income from its holdings of Government bonds. Even though the loss experience has been low and substantial additions have been made to the surplus of the Corporation, deposits of insured banks have grown so large that the resources of the Corporation are now smaller in relation to those deposits than ever before. At the same time the degree of protection afforded deposits by the capital of the banks has declined markedly, since capital accounts have increased only moderately, while deposits have doubled in the past four years. 1 Under subsection (y) of the original deposit insurance law (Section 8 of the Banking Act of 1933) the Corporation was required to admit to insurance under the temporary Federal deposit insurance plan every member bank of the Federal Reserve System, and every nonmember bank which was found to be “ in solvent condition", regardless of the quality of its assets or the amount of its capital. When the permanent insurance plan was inaugurated under the Banking Act of 1935, these banks automatically became entitled to permanent insurance. See subsections (e) (1) and (f) (1) of the Federal deposit in surance law, as amended, Title 12, U. S. C., 1940 ed., sec. 264. 7 8 FEDERAL DEPOSIT INSURANCE CORPORATION S u g ge stio n s for L e g isla tio n The experience of the eleven years of operation of the Corporation suggests that application of the principles which are embodied in the Federal deposit insurance law should be extended in certain respects. Insurance coverage and aid to distressed banks. The Congress, in 1935, gave the Corporation power to aid banks in financial diffi culties through advances to facilitate mergers (including consolidations, and sales with assumption of liabilities). Originally adopted as a temporary measure, this provision operated so satisfactorily that Congress made it permanent and this method has since been used extensively to handle weak or insolvent banks. The use of advances made to assist in mergers assures continuity of banking services, thus greatly reducing the shock to the community and also decreasing the loss to the Corporation. In addition, a merger protects all deposits regardless of size, giving, in effect, 100 percent deposit insurance. In some instances, however, a merger is not feasible and in such cases owners of large bank accounts are not fully protected and one of the chief advantages of deposit insurance, namely, unquestioned confidence in the safety of bank deposits, is not fully attained. The growth in bank balances over the past few years has made increasingly inadequate a protection of only $5,000. In 1934, when the Congress set the $5,000 limit on deposit insurance, total deposits of insured commercial banks were about $36 billion whereas deposits of this group of banks at the end of 1944 totaled $126 billion. While this three-fold increase in total deposits has been accompanied by an increase in the number of depositors, there has been a substantial rise in the average size of deposit accounts and today a larger propor tion of the depositors have balances in excess of $5,000 than in 1934. With the present limited coverage, the failure of a bank is a serious matter for the community. A large part of the deposits used in making payments in production and trade are in business accounts with balances far in excess of the present insurance coverage. Freezing of these balances may make it difficult for business concerns to meet their payrolls and other commitments. The Corporation recommends that Congress give consideration to the desirability of raising the maximum amount of insurance coverage for any one depositor. The cost to the Corporation of additional coverage is not likely to be large. It is believed that the indirect benefits of increased coverage resulting from the increased confidence in the safety of bank deposits, combined with broadened powers of the Corporation to assist banks in financial difficulties, would more than compensate for the relatively small increase in expenditure which might be experienced because of higher insurance coverage. SUGGESTIONS FOB LEGISLATION 9 The experience of the Corporation has shown that insured banks in financial difficulties should not always be paid off and liquidated, and thus eliminated from their communities. Even though a bank is in financial difficulties, there may be need for banking facilities in the community and opportunity for profitable operation may still exist. In such cases it is desirable that the Federal Deposit Insurance Corporation and the stockholders of the banks take their losses while provision is made for a continuity of banking services. The present law contains two provisions which serve to permit continuity of banking services. The law provides that the Corporation may make loans to or purchase assets from insured banks in financial difficulties where such action will facilitate a merger. It also provides that the Corporation, upon the closing of an insured bank in financial diffi culties, may organize a new national bank to operate under the management of the Corporation, without capital, for a temporary period, providing continuing banking service of a limited nature to the community where the closed bank operated. A merger with an existing bank involves either a net reduction in banking facilities or an extension of branch banking. In rural com munities there is usually no other bank with which the one in diffi culties can be merged and in urban communities a merger often results in a partial monopoly and in some instances a complete monopoly. In such cases the Corporation can best discharge its obligations to protect depositors and to absorb the impact of banking disturbances in the community by keeping all existing banking facilities open. It should be possible for the sound business of a weak bank to be trans ferred in an orderly manner to a newly organized Deposit Insurance National Bank as well as to an existing institution. Another difficulty of the present law is that arrangements for effecting a merger fre quently involve recapitalization and other changes in the internal affairs of the absorbing bank. The steps are usually time consuming and delay action to protect the depositors of the affected bank. During these delays the condition of the insolvent bank may become worse since it continues to operate in its insolvent condition while the terms of the merger are being arranged. When a bank becomes involved in financial difficulties because a limited number of large lines of credit have gone bad, the most economical method of rehabilitation may be to remove the bad assets, although in some instances a thorough reorganization may be required and it may be more feasible to organize a new bank. It is therefore suggested that the Corporation be given the power to purchase preferred stock and to make direct advances to a bank in financial difficulties without requiring a merger. Such advances could be protected by imposing appropriate conditions as to change in manage 10 FEDERAL DEPOSIT INSURANCE CORPORATION ment. It is further suggested that subsection (e) of the Federal deposit insurance law which provides for the organization of new national banks be amended so that such a bank will be able to provide the community with a complete banking service during a temporary period not in excess of two years, and will be empowered to transfer its business to a suitably capitalized, privately owned and managed State or national bank sometime during the 2-year period. If no acceptable privately capitalized bank takes over the business of the Deposit Insurance National Bank, it would be liquidated at the end of the 2-year period. With increased coverage and broadened powers of reorganiza tion, the task of rehabilitation could be adjusted to the needs of the particular situation. There would thus be no necessity for a hastily conceived merger or the establishment of a new bank in order that the banking service in the community may be maintained without interruption. Mefgers effected or chain banks or branch offices established under the urgency of preventing an impending bank failure, tend to promote monopolies and it is difficult at a later date to organize a locally owned and managed bank. An advance to facilitate a merger, however, could still be made when it seemed best. Restriction of banking monopoly. The business of lending money is well suited to private initiative and is best performed under com petitive conditions. Monopoly in banking is a threat to American traditions, both because it limits the opportunities to engage in the business of banking, and because it provides an opportunity for favoritism in the extension of credit which may foster monopolies in other industries. The growing tendencies toward monopoly in the banking business are serious, and prompt action should be taken to curb them. Monopolistic practices in the banking system have con tributed to the growing demand for credit agencies operated by the Federal Government. The Corporation believes that the maintenance of genuine competition among banks is a much better solution to this problem than the further extension of governmental lending activities. A partial monopoly which develops when one bank obtains a disproportionate percentage of the total banking resources of an area may have a serious effect on the economic life of the district. Another monopolistic tendency which has aroused customer discontent is the agreement among banks, in some areas, to fix charges and limit serv ices. Bankers can do much to improve this situation by making active efforts to fit their services to the needs of the public rather than by relying upon restrictive agreements for profits. Partial monopolies over large areas may develop both by means of branch banking and through the holding company device. The Corporation recommends that such branch banking as is permitted SUGGESTIONS FOR LEGISLATION 11 by the laws of the respective States be strictly regulated so that no bank will control a disproportionate percentage of the total banking resources or offices of an area. Holding companies not only tend to become monopolistic, but increase the problem of supervision. The ease with which assets may be transferred from one affiliated corporate unit to another and the possibility of the manipulation of the accounts of these enterprises make adequate examination of affiliated banks and the appraisal of their condition and capital position extremely difficult. The Corporation recommends that Congress enact legislation which will prohibit the future creation of holding companies and which will require the liquidation of existing holding companies after al lowing a reasonable time for orderly distribution to their own stock holders of the bank stock which they now hold. The Corporation believes that such legislation is distinctly preferable to the enactment of further regulatory laws in the bank holding company field. D e po sit I n su r an ce and L o an R isk Bank capital. The ratio of capital to total assets is lower for banks than for any important class of business enterprise. For more than 40 years the ratio of capital to total assets has been declining, a trend which has been accelerated during the two world war periods. Total assets have increased markedly while capital has grown at a much less rapid rate, with the result that the ratio of proprietorship to assets for all insured commercial banks is now less than 6 percent and the downward trend is still continuing. This downward trend in the margin of protection is unfortunate and should be reversed. A low capital ratio tends to force a bank into pursuing an ultraconservative lending policy because of its inability to withstand misfortune as readily as one which is adequately capitalized, and results in failure to meet all of the credit needs of the community. When the credit needs of any sizeable number of communities are not satisfactorily served by private enterprises, it is to be expected that the public will demand, and receive, such services from governmental agencies. The most satisfactory solution to the problem of a small amount of proprietorship is the sale of additional capital stock to investors. The retention of earnings is helpful in this regard but decidedly inadequate with the sharp rise in assets which has occurred over the past three years. The banking business is profitable and since the double assess ment feature on bank stock has been virtually eliminated there is no reason why such stock should not be attractive to investors. The experience of banks which have offered stock for sale over the past two years has been reassuring and it is to be hoped that banks with low capital ratios will avail themselves of the present favorable time to provide a more adequate capital structure. 12 FEDERAL DEPOSIT INSURANCE CORPORATION If banks wish to continue as lending institutions they must arrange their affairs so that they can assume the risks involved in lending operations without jeopardizing their deposits or subjecting their stockholders to undue risk. To do this, banks should not only have adequate capital but should also follow a policy of making periodic additions to reserves for losses. These reserves should be accumulated in amounts which reasonable expectation and loss experience indicate will be adequate to cover operating losses, while the capital of the bank should be strong enough to provide a protection against extra ordinary and unforeseen hazards. The attitude of the Corporation regarding the accumulation of adequate reserves for losses has been previously stated as follows: “ It is desirable . . . th a t. . . each bank should make provision on a systematic basis for losses, which can be expected to develop in periods of readjustment, on assets acquired during the prosperous periods. Where banks do not already follow such a practice, reserves for losses should be set aside annually in the form of valuation allowances, or unallocated charge-offs, or in some other manner, against those groups of assets from which losses ordinarily arise. Such reserves should, of course, not be regarded as a part of the capital accounts. *'Within certain limits, the amount of reserves or loss allowances set aside annually at a rate in keeping with the experience of the bank over a reasonable period of years, or with the experience of a comparable group of banks, and with due regard for substandard assets, may be deducted from income in determining net income for Federal income tax purposes by banks employing the reserve method of charging off bad debts. Such deductions may be claimed even though losses have not actually been ascertained during the taxable year. The requirements of the supervisory authorities, subject to certain limitations, also constitute sufficient ground for the taking of losses for income tax purposes/'1 Deposit insurance versus asset insurance. Deposit insurance should be sharply distinguished from the insurance or guarantee of bank assets. Insurance of bank deposits by a Federal government agency represents an exercise of the accepted governmental function of controlling and protecting the circulating medium of the nation. The insurance or guarantee of individual bank assets, however, is the assumption by the Federal Government of the function of credit extention and risk taking. Under deposit insurance a bank management conducts its business in traditional fashion, extending credit and assuming full risk. It is responsible to its stockholders, and subject only to general govern 1 Annual Report for 1942, pp. 6-7. DEPOSIT INSURANCE AND LOAN RISK 13 mental supervision. Under a system of asset insurance banks would collect some interest as a fee for the use of their facilities but the standards for credit extension, and, therefore, the determination as to whom money can be lent, would be largely made by governmental agencies. The exercise of discretion in the extension of credit and, eventually, the sense of duty for serving the credit needs of the com munities, now the responsibilities of private management, would be dulled by reason of the inevitable shifting of these responsibilities to the insuring agency. This Corporation has always doubted the wisdom of extending asset insurance and has made this position public on several occasions. The Annual Report for 1942, for example, contained the following statement: “ A method of transfer of risk frequently proposed is to insure various types of assets of the banks against loss. While certain classes of loans, particularly real-estate mortgages, readily lend themselves to this method of financing, the creation of a series of governmental corporations which would insure most bank loans has serious long run implications to the free enterprise system. Since each corporation of this kind would of necessity be forced to super vise the extension of credit to avoid undue losses and since achieve ment of uniformity in regulations would be difficult, such a method of finance, if generally used, would impose additional restraints and interferences with the normal processes of business. “ Insurance of bank assets seeks to avoid, by payment of a fee, the risk of extending credit. The insuring Federal agencies would be assuming the primary risk of loss in the extension of credit while the profits would be received by banks which would not bear the risks that are the justification for profit-taking. Under such a general system of insurance of bank assets some of the most powerful incentives for sound banking practices would be lacking. One of the sound features of deposit insurance lies in the fact that the stockholders of a bank still bear the first risk of loss since they lose their entire stake in the business before the Federal Deposit In surance Corporation bears any loss. Self-interest, therefore, still provides the primary incentive for the sound management and operation of the bank and for prudence in the extension of credit.” 1 The extension of asset insurance with its disastrous effect on the initiative of the bankers of this country can be prevented only if the bankers show themselves both willing and able to satisfy the credit needs which will arise in the post-war period. Important conditions necessary for the banks to meet the credit needs of business are com petition in the banking business, adequate equity, an understanding 1 Annual Report for 1942, pp. 7-8. 14 FEDERAL DEPOSIT INSURANCE CORPORATION that supervision will not interfere with the banks’ performance of proper functions, and a will to engage actively in business. At the present time a general expansion of bank loans would be inflationary and undesirable. The immediate problem of the banks, therefore, is to assure the public that its post-war credit needs will be met by the banks without Government aid. When the need for credit arises, the bankers must show initiative and willingness to meet the needs of the public. This involves both an aggressive lending policy and a willingness to make sound loans of types suited to the needs of business. The Corporation believes that the bankers of the nation can meet this challenge and that they will play their proper role in maintaining a high level of production and employment after the war. Deposit insurance risk and the depression problem. The great economic problem of preventing deep or protracted business depressions and of maintaining a reasonably high level of business activity and employment is of the utmost importance to the success of deposit insurance. Numerous bank failures and large losses to bank depositors have, in the past, occurred only in periods of deep depres sions. If the nation is able to follow policies which prevent depressions and severe unemployment, deposit insurance will never be subject to inordinate stresses. On the other hand, if public policy is not such as to prevent serious deflation and large scale unemployment, the in surance fund may experience strains and losses which will be ex ceedingly burdensome. Bank failures contributed substantially to the depression of the 1930’s. Deposit insurance itself constitutes a sub stantial contribution to the prevention of deflation but is only one part of public policy necessary to attain this end. We hope that the Congress will give favorable consideration to legislation looking toward a unified, consistent treatment by the Government of the problems of unemployment and inflation. If Government policies can conform to principles which will avoid widespread unemployment on the one hand and inordinate price rises on the other, deposit insurance will be able to perform its function successfully. D e po sit I n su r an ce P r o tectio n Continuation of wartime prosperity during 1944 kept direct ex penditures by the Federal Deposit Insurance Corporation for the protection of depositors to a low level. During the year only two banks required an insurance disbursement: one was placed in receivership and the other was merged with another institution. The 5,489 de positors in the two banks held accounts totaling $1.9 million, and 15 DEPOSIT INSURANCE PROTECTION only 15 had accounts not fully protected by insurance or in some other manner. Both banks were closed in May, and available statistics indicate that the last seven months of 1944 make up the longest period since 1870 in which there has been no bank failure in the United States. During the eleven years of deposit insurance 397 insured banks have been placed in receivership or merged with the financial aid of the Corporation. Total disbursements of $260 million have been made to protect the $499 million of deposits in these banks. It is now estimated that of the 1,297,000 depositors only 5,000 will have any loss on their accounts, and that their losses will be about $2.6 million, approximately one-half of 1 percent of the total deposits. It is now estimated that the Corporation's loss will be less than $39 million. This favorable loss experience is due chiefly to the improvement in economic conditions since 1934. Losses have also been reduced by the development of the merger device in handling the affairs of weak or insolvent banks and by the general experience gained by the Cor poration in liquidating assets acquired through receiverships or mergers. Data on deposits, disbursements, recoveries, and losses in insured banks placed in receivership or merged with the financial aid of the Corporation are given in Tables 1 and 4 and in Tables 114 and 117, pages 148 and 152. Table 1 . N um ber of D e p o s ito r s , A m ount of D e p o s its , R e c o v e r ie s , and L o s s e s in I n s u r e d B a n k s P la c e d in R e c e iv e r s h ip o r M e r g e d w it h t h e F in a n c ia l A id o f t h e Item C o r p o r a tio n , 1934-1944 Banks placed in receivership Total Banks merged with financial aid of FDIC Number of banks............................................................ 397 245 152 N um ber o f d epositors................................................. 1,297,217 380,510 916.707 Depositors paid in full............................................... Depositors partially paid1.......................................... Depositors filing no claims........................................ 1,250,068 4,788 42,361 333,361 4,788 42,361 916.707 A m ou n t o f deposits.................................................... $499,233,000 $109,590,000 $389,643,000 Estimated recovery by depositors............................ Estimated loss by depositors1.................................... Unclaimed deposits.................................................... 496,188,000 2,614,000 431,000 106,545,000 2,614,000 431,000 389,643,000 Disbursement by F D IC ................................................. $259,696,000 $ 86,979,000 $172,717,000 Estimated loss to F D IC ................................................ $ 38,810,000 $ 18,611,000 $ 20,199,000 1 1,635 depositors will lose an estimated $2,532,000 in accounts which exceeded the limit of $5,000 insurance and were not otherwise protected; and 3,153 depositors will lose about $82,000 in accounts which had been restricted or deferred prior to 1934 or were otherwise ineligible for insurance protection. Methods of providing insurance protection: direct payment of depositors. At present two procedures are followed by the Cor poration in carrying out its deposit insurance obligations: it may pay 16 FEDERAL DEPOSIT INSURANCE CORPORATION insured deposits in a bank which is closed, or it may assist financially in merging a weak or insolvent bank with another institution. The Corporation does not have a free choice as to which method to use, nor does it have the power to force a bank either to suspend operations or to merge. As the insurer of bank deposits the Federal Deposit Insurance Corporation can only terminate the insurance of a bank found to be. financially unsound or of a bank whose management persists in following illegal or unsound practices. The power to close a bank and place it in receivership is reserved for the bank's board of directors and for the State or Federal authority which chartered it. The decision to merge a bank is made by the bank's stockholders. When an insured bank is closed and cannot meet the demands of its depositors, the Corporation immediately prepares to pay the insured deposits. Promptness in the payment of claims is considered essential to avoid adverse economic reactions in the area, to reduce inconvenience to the depositors, and to maintain confidence in the banking system. Payments are made in the regular business office of the closed bank, and for the depositor the process is much like closing an account. At the time payments are made, the depositors subrogate the Corporation to their rights to dividends or recoveries on the portion of their accounts paid from the insurance fund. The liability which the Corporation assumes includes all unrestricted deposits up to a maximum of $5,000 for each depositor after claims which the bank has against the depositor are deducted. Table 2. PAYMENT BY THE CORPORATION AND RECEIVERS OF DEPOSITS IN I n s u r e d B a n k s P l a c e d in R e c e i v e r s h i p , 1934-1944 (Amounts in thousands of dollars) Status of deposits Total Paid by Dec. 31, 1944 Unpaid on Dec. 31, 1944 Deposits—total..................................................... $109,590 $105,362 $4,228 Insured................................................................. Secured, preferred, and subject to offset.......... In excess of $5,000, not otherwise protected. . Other uninsured............................. ..................... Unclaimed1.......................................................... 87,138 11,304 9,784 933 431 86,979 11,277 6,380 707 19 159 27 3,404 226 412 Deposits, terminated receiverships—total. Insured............................................................. Secured, preferred, and subject to offset... . In excess of $5,000, not otherwise protected Other uninsured.............................................. Unclaimed1....................................................... $45,161 35,815 5,311 3,721 191 123 $44,396 35,815 5,311 3,101 150 19 $765 Deposits, active receiverships—total.......... Insured............................................................. Secured, preferred, and subject to offset... . In excess of $5,000, not otherwise protected Other uninsured.............................................. Unclaimed................... .................................... $64,429 51,323 5,993 6,063 742 308 $60,966 51,164 5,966 3,279 557 $3,463 159 27 2,784 185 308 620 41 104 1 Unclaimed deposits indicated as paid have been placed in trust by receivers in some States to meet claims presented after termination of receiverships. DEPOSIT INSURANCE PROTECTION 17 The payments on uninsured deposits, as shown in Table 2, indicate that substantial recoveries have been made on all deposits in banks placed in receivership. At the end of 1944, 96 percent of the $110 million of deposits in these banks had been paid to the depositors either by the Corporation or by the receivers. The largest part of the deposits remaining unpaid at the end of the year was the uninsured portion of accounts exceeding $5,000 and most of this, $2.8 million of the $3.4 million, was in banks whose receiverships had not been terminated. Further payments on these deposits will be made as the liquidation of the assets continues. Actual losses to depositors in banks whose receiverships had been terminated by the end of the year, the deposits unpaid on December 31, amounted to only $0.8 million. About one-seventh of this was in deposits which were unclaimed notwithstanding extensive efforts by the Corporation to reach all depositors after the banks closed. Un claimed deposits shown as paid in Table 2 are deposits for which reserves were established by receivers, although the depositors had not appeared to claim them. In some States, laws governing receiver ships require that dividends on deposits still unclaimed when a receivership is terminated be held in trust by a State authority. The Corporation makes no payment on unclaimed deposits. Methods of providing insurance protection: advances to banks. The claims of depositors in insured banks are met directly only when a bank is placed in receivership, but a second satisfactory method of protecting the depositors in an unsound bank has been provided by Congress. In 1935 the Corporation was given the power to make loans to or purchase assets from insured banks to "facilitate a merger or consolidation of an insured bank with another insured bank” when "such action will reduce the risk or avert a threatened loss to the Corporation.” 1 In such a consolidation acceptable assets of the merging bank are transferred to the absorbing bank, and the Corporation makes available enough cash so that the value of the assets and cash equals the amount of the liabilities which the absorbing bank assumes. To extend its financial aid, the Corporation may make a loan secured by assets of one or both of the banks, or it may purchase assets from them. The purchase of assets has been used exclusively in the mergers of the past four years. Assets may be bought outright or, as is the current practice, they may be bought under an agreement that any excess recovery from their liquidation will be returned to the stock holders of the bank from which they were purchased. Before any distribution is made to the stockholders the Corporation recovers the 1 For a full statement of this power see the Federal deposit insurance law, as amended, Title 12, U.S.C., 1940 ed., sec. 264 (n)(4). 18 FEDERAL DEPOSIT INSURANCE CORPORATION price paid for the assets, the liquidation costs, and a fair return, now equivalent to 4 percent interest, on its funds for the time they are outstanding. In many ways the procedure of making advances to banks provides a more flexible method of liquidating the affairs of an insolvent bank than does placing it in receivership. Depositors are fully protected; there is no break in the banking service either for the depositors or the community; and the community does not suffer the economic dislocations which inevitably follow a bank suspension. In addition, the Corporation is not restricted in liquidating assets it has acquired, as is the receiver of a closed bank. Such assets may be held until their sale will not upset the economic stability of the community, and until they may be liquidated advantageously from the standpoint of the deposit insurance fund. On the other hand advances to banks are not always feasible. Occasionally the affairs of a bank may be in such condition that the only solution is to place it in receivership and remove it completely from the banking system. The procedure of making advances is limited by law to those instances where the advance will “ facilitate a merger” and “ avert a threatened loss” to the insurance fund. Furthermore, action to merge an unsound bank can be taken only with the consent and cooperation of the bank’s stockholders and of an institution willing to absorb it. Often the requirement that advances be made only when two insured banks merge works against the maintenance of an adequate competitive banking system. In a rural area there may be no bank to absorb the unsound one. To follow the one alternative and place it in receivership may deprive the area of all banking facilities. In an urban community closing a bank, either by merger or suspension, may tend to create a banking monopoly and thus to deprive the community of the benefits of competitive banking service. Statistical data on the two methods. Since 1934, 245 insured banks have been placed in receivership, and 152 have been merged with the Corporation's financial aid. Disbursements totaled $87 million to pay depositors in the banks placed in receivership and $173 million to assist those which were merged. Deposits in the two groups of banks were $110 million and $389 million respectively; and the number of depositors, 380,000 and 917,000 respectively. Estimates of the ultimate losses to the Corporation on its disbursements were, at the end of 1944, $19 million in the receiverships and $20 million in the mergers. Data by years concerning the two methods of protecting depositors are given in Table 3. Assets and liabilities of insured banks placed in receivership or merged are given in Table 115, page 150. 19 DEPOSIT INSURANCE PROTECTION T able 3. DISBURSEMENTS BY THE CORPORATION TO PROTECT DEPOSITORS IN I nsured B anks P laced in R eceivership or M erged w ith the F inancial A id of the C orporation , 1934-1944 Amount of disbursements (in thousands of dollars) Number of banks Year Placed in receiver ship Total Merged Total Insured Loans made deposits paid and assets purchased in receiver in mergers ships Total............................. 397 245 152 $259,696 $86,979 $172,717 1944........................... 1943........................... 1942........................... 1941........................... 2 5 20 15 1 4 6 8 1 1 14 7 1,498 7,137 10,824 23,878 399 5,465 1,612 12,276 1,099 1,672 9,212 11,602 1940........................... 1939........................... 1938........................... 1937........................... 43 60 74 75 19 32 50 50 24 28 24 25 74,232 67,792 30,474 19,202 4,895 26,184 9,082 12,045 69,337 41,608 21,392 7,157 1936........................... 1935...................... 1934........................... 69 25 9 42 24 9 27 1 14,828 8,890 941 8,055 6,025 941 6,773 2,865 Recoveries on insurance disbursements. At the end of 1944 more than $195 million, 75 percent, of the Corporation's disbursement of $260 million to protect depositors had been returned to the insurance fund. The amount of the Corporation's recoveries and its losses are given in Table 4 and in Table 117, page 152. Table 4. DISBURSEMENTS TO PROTECT DEPOSITORS, RECOVERIES, AND L osses b y the C orporation from I nsured B anks P laced in R eceivership or M erged w ith its F inancial A id , 1934-1944 (Amounts in thousands of dollars) Book entry Dec. 31, 1944 Total D isbursem ents......................................................................... Receiverships.......................................................................... Mergers.................................................................................... $259,696 86,979 172,717 Estim ated additional disbursem ents in receiverships1. $159 Liquidation terminated Liquidation active $48,217 35,815 12,402 $211,479 51,164 160,315 $40,446 28,404 12,042 $154,588 33,716 120,872 $159 R ecoveries................................................................................. Receiverships.......................................................................... Mergers................................................................................... $195,034 62,120 132,914 Estimated additional recoveries......................................... Receiverships.......................................................................... Mergers................................................................................... $26,011 6,407 19,604 Losses by FDIC2....................................................................... Receiverships.......................................................................... Mergers................................................................................... $38,810 18,611 20,199 $7,771 7,411 360 $31,039 11,200 19,839 Num ber of bank s.................................................................... Receiverships.......................................................................... Mergers................................................................................... 397 245 152 230 176 54 167 69 98 $26,011 6,407 19,604 1 Estimated additional disbursements in receiverships are the insured deposits which have not been paid. See Table 2. 2 Losses in terminated cases are the established losses; those in active cases are estimated. 20 FEDERAL DEPOSIT INSURANCE CORPORATION Recoveries by the Corporation included $62 million, 71 percent, of the $87 million disbursed in receiverships, and $133 million, 77 percent, of the $173 million disbursed in the mergers. Recoveries in banks where liquidation was still in progress at the end of the year, both receiverships and mergers, were 73 percent of the disbursement. Recoveries in those whose liquidation had been terminated were 84 percent of the disbursement. Of the 230 banks where liquidation had been terminated, 100 had repaid the Corporation in full, including 81 which paid interest amounting to approximately $840,000. When a bank is placed in receivership and the amount of the de positors’ claims is established, or when a loan is made or assets are purchased to aid in a merger, recoveries by the Corporation are estimated and a reserve equal to the estimated losses is set up. The estimates are reexamined and adjusted every six months. During the past five years, an expanding market has made possible a high recovery on assets acquired by the Corporation, and has resulted in a net reduction of $19 million in the sum of the reserve for losses and the amount of losses actually written off. Receivership activities. The Federal Deposit Insurance Cor poration acts as receiver for all national banks and it may be appointed receiver for State banks which are placed in receivership. At the end of 1944 it was acting in this capacity for 10 national banks which closed with deposits of $12 million and for 13 State banks which closed with deposits of $6 million. According to its practice the Corpora tion obtained during the year quarterly reports from the receivers or statutory liquidators of the remaining 46 State banks in which deposit insurance payments had been made. As liquidation proceedings come to a close, and particularly when the costs of continuing the receivership exceed the expected recovery on the unliquidated assets, the Corporation sometimes buys the remaining assets from the receiver under competitive bidding ar rangements. This is done to terminate the receivership and to reduce the expenses of liquidation. By the end of 1944, $1.1 million had been disbursed to purchase assets from the receivers of 61 banks. Most of these assets have been resold without loss to the Corporation. L e g a l D eve lo pm e n ts Absorption of exchange.1 Following the passage of H.R. 3956 by the House of Representatives on March 2, 1944, the bill was referred to the Committee on Banking and Currency of the Senate but no action was taken thereon, nor on the companion bill, S. 1642, until December 1944. Hearings were conducted by the Senate Committee, 1 For a summary of prior developments see Annual Report of the Corporation for 1943, pages 18-19. LEGAL DEVELOPMENTS 21 starting on December 7 and continuing through December 15. The hearings were not concluded in time to submit the bill to the Senate prior to the adjournment and expiration of the 78th Congress. How ever, the provisions embodied in these two bills were offered as an amendment to the then pending Federal Crop Insurance bill (H.R. 4911). The amendment was debated on the Senate floor on December 13 and 14, and was rejected by a vote of 25 to 45. Thereupon the Senate hearings were closed and no further action was taken on either of the “ absorption of exchange” bills. At the request of the Senate Committee the Corporation submitted a report on the bills in the form of a letter to the Chairman of the Committee, with supporting memoranda, which appear at pages 72-94 of this report. At the close of the hearings the Chairman of the Corporation, at the suggestion of the Committee, addressed a further letter on January 3, 1945, which appears at page 95 of this report. Other legal developments affecting the Corporation or in sured banks. Under Public Law 346, 78th Congress, known as the Servicemen’s Readjustment Act of 1944, approved June 22, 1944, provision is made for the guaranteeing of loans to veterans for the purpose of purchasing or constructing homes, farms and farm equip ment, and business property. The Contract Settlement Act of 1944 (Public Law 395) was ap proved on July 1, 1944. The Surplus Property Act of 1944 (Public Law 457) and the War Mobilization and Reconversion Act of 1944 (Public Law 458) were approved on October 3, 1944. Public Law 541, approved December 22, 1944, amended Section 3656 of the Internal Revenue Code (Title 26 U.S.C., 1940 ed., Sup. IV, section 3656) so as to authorize collectors of internal revenue to receive not only certified checks but also cashiers’ and treasurers’ checks, as well as United States postal, bank, express, and telegraph money orders in payment for internal revenue taxes and internal revenue stamps. The text of this Act is given on page 71 of this report. Regulations of the Corporation. On June 15, 1944, a number of changes were made in the regulations relating to the payment of assessments—former sections 302.3(a), 302.3(d), and 302.3(e) were repealed and former sections 302.3(c) and 302.3(f) were amended and redesignated as 302.3(a) and 302.3(b), respectively; and former section 302.3(b) was redesignated 302.3(c). By resolution adopted on January 27, 1944, the provisions of sections 303.1(b) and 303.2(a), relating to advertisement of membership, and section 306.1, relating to service of process, were amended. A new part, known as Part 309, relating to the voluntary termination of insured status was adopted on March 17, 1944, as an additional regulation of the Corporation. 22 FEDERAL DEPOSIT INSURANCE CORPORATION The texts of these regulations, as amended and adopted, are given on pages 96-102 of this report. State legislation. A summary of State legislation in 1944 relating to banking is given on pages 102-106 of this report. S u p e r v iso r y A c t iv it ie s Bank examinations. The policy of the Corporation from its establishment has been to examine annually each insured State bank which is not a member of the Federal Reserve System. National banks are examined by representatives of the Office of the Comptroller of the Currency, and State banks members of the Federal Reserve System by representatives of that System. The information of the Corporation relating to these banks is derived from a review of the reports of examination furnished by those agencies. Only under unusual circumstances, and with the prior consent of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System, has the Corporation examined national banks or State banks members of the Federal Reserve System. The Corporation in 1944 was unable to conduct all the examinations called for under its established policy. This was because of the sub stantial increase in the volume of bank assets, and the handicap of a further reduction in personnel resulting from the manpower re quirements of the war effort. However, the number of examinations completed, 6,378, was not far below the total for 1943, and neither the effectiveness of the examinations conducted nor the accuracy of the examination reports submitted is believed to have been adversely affected by the conditions encountered during the year. Unsafe and unsound banking practices and violations of law or regulations. During 1944 proceedings were initiated against one insured bank for engaging in unsafe and unsound banking practices and were continued against six other banks. The status of these cases at the end of the year and also a summary of all cases for the entire period since the effective date of the Banking Act of 1935 are given in Table 5. The bank against which proceedings were initiated in 1944 was charged with the following unsafe and unsound practices: Continued operation of the bank with impairment of its capital and with an inadequate net sound capital; Continued operation of the bank by a management which had failed and neglected to take proper and necessary steps to correct the bank's unsafe and unsound condition; 23 SUPERVISORY ACTIVITIES Large and excessive amounts of assets of substandard quality and of doubtful value upon which substantial losses are probable; Insufficiency of earnings and inadequacy of available capital funds to provide for current and developing losses; Failure to obtain financial statements and other supporting information; Permitting borrowers to renew their obligations with no likelihood of repayment; Classifying potential other real estate as loans. Table 5. ACTION TO TERMINATE INSURED STATUS OF BANKS CHARGED w i t h E n g a g in g in U n s a fe o r U n s o u n d P r a c t i c e s o r V i o l a t i o n s o f L aw o r R e g u la tio n s , Disposition or status T otal banks against which action was tak en ................. Cases closed during p eriod : Corrections made................................................................... Insured status terminated, or date for such termination set by Corporation, for failure to make corrections: Banks suspended prior to or on date of termination of insured status2............................................................ Banks continued in operation3.......................................... Banks suspended prior to setting of date of termina tion of insured status by Corporation.......................... Banks absorbed or succeeded by other banks4.................... Cases pending December 31, 1944: Corrective program pending............................................. 1936-1944 Total cases 1936-19441 130 Pending beginning of year 6 Started during year 1 20 7 3 32 63 2 5 4 1 1No action to terminate the insured status of any bank was taken before 1936. In 4 cases where initial action was replaced by action based upon additional charges, only the later action is included. 2 Includes one national bank which, in accordance with the provisions of the law, suspended im mediately following the action of the Corporation in terminating its insured status. 3 On<? of these suspended 4 months after its insured status was terminated. 4 In all except 4 of the 63 cases the Corporation made loans to facilitate the mergers or reorganizations. Back data— See the following Annual Reports of the Corporation: 1941, p. 188; 1942, p. 13; 1943, p. 16. Admission to insurance and operation of branches. During 1944 the Corporation approved applications of 106 banks for ad mission to insurance. Of these, 51 were new banks, including two which succeeded discontinued branches of other insured banks, and five which succeeded cooperative credit associations or industrial loan companies. Of the remaining banks approved for admission to insurance, 41 were banks in operation but not insured at the beginning of the year, and 14 were insured banks reorganizing or withdrawing from the Federal Reserve System. The application for admission to insurance of one bank was disapproved. Of the applications for admission to insurance during the year, 18 had not become effective by the end of the year. During the year 12 banks whose applications previously had been approved became 24 FEDERAL DEPOSIT INSURANCE CORPORATION insured. Further details regarding admissions to insurance, and also figures regarding the number of insured banks which ceased operations or otherwise terminated their insured status, are given in Table 101, page 110. During 1944 the Corporation approved the establishment of 46 branch offices by 40 banks not members of the Federal Reserve System. These offices included twelve banking facilities at military establishments and nine conversions of absorbed banks into branches. In three cases the Corporation disapproved the establishment of branches. Of the branches approved by the Corporation six had not been established by the close of 1944. During the year 10 branches were opened which had previously been approved by the Corporation. In addition 117 branches, about three-fourths of which were for the purpose of providing banking services at military establishments, were opened by national and State banks members of the Federal Reserve System. Approval by the Corporation was not required for the establishment of these branches. Capital and other financial adjustments. Insured banks examined by the Federal Deposit Insurance Corporation are required by law to secure the Corporation's approval to retire any part of their capital obligations. Applications for approval of the retirement of capital stock were filed by 612 such banks in 1944. Retirement of obligations held by the Reconstruction Finance Corporation in amounts aggregating $9,078,000, and of those held by others in amounts aggregating $1,571,000, was approved. The Corporation disapproved retirement of capital obligations amounting to $2,436,000. During the year the Corporation approved the assumption by insured banks of deposit liabilities of two noninsured institutions. In two insured banks the Corporation approved the payment of certifi cates of beneficial interest representing deposits which had been waived at the time of the Banking Holiday of 1933. ^Reports from banks. Semi-annual statements of deposits were submitted by each insured bank as required by law for the purpose of determining the amount of the insurance assessment. The Cor poration called for reports of assets, liabilities, and capital accounts as of June 30 and December 30, 1944, and for reports of earnings, expenses, and disposition of profits for the calendar year 1944, from each insured bank required by law to submit such reports to the Corporation. With the exception of banks in the District of Columbia and Territorial national banks all insured banks not members of the Federal Reserve System are required to submit such reports to the Corporation. SUPERVISORY ACTIVITIES 25 Summaries of the tabulations from the reports of assets, liabilities, and capital accounts are given in the pamphlets “ Assets and Lia bilities of Operating Insured Banks” , Report No. 21 and Report No. 22 and in Table 104 of this report, page 126. Summaries of the reports of earnings, expenses, and disposition of profits are given in Tables 111-113, pages 140-145 of this report. Federal credit unions. During 1944 the Federal Deposit Insurance Corporation continued its supervision of Federal credit unions. Examination and supervision of these cooperative associations, or ganized to encourage thrift among their members and to provide them with a limited source of credit, were transferred to the Corpora tion from the Farm Credit Administration by Executive Order of the President, No. 9148, of April 27, 1942. At the end of 1944, 4,048 credit unions held charters, but 233 of these were not active. During the year 285 charters were canceled, and 69 were granted to new groups. While personnel shortages again made it impossible to examine all Federal credit unions, more than 2,900 were examined during the year. Statements of the operations of Federal credit unions are received twice a year. A report summarizing the statements for the calendar year is prepared and published annually. O r g a n iz a tio n and F in a n c ia l S tate m e n ts op th e C o r po r a tio n Organization and staff of the Corporation. No change in the directorship of the Corporation occurred during 1944. Mr. Leo T. Crowley continued as Chairman; Mr. Phillips Lee Goldsborough and Mr. Preston Delano, Comptroller of the Currency, continued as Directors throughout the year. On December 31, 1944, the total personnel of the Corporation consisted of 1,546 officers and employees, compared with 1,899 at the beginning of the year and 2,411 at the close of 1942. The number of officers and employees in each division of the Corporation as of December 31,1944, is given in Table 6. On July 1, 1944, effect was given to an action by the Board of Directors to divide the Division of Administration into two divisions: Personnel Division, and Service Division. An organization chart of the Corporation is shown on page iv of this report. Income and expenses. The income of the Corporation in 1944 was $99.5 million, of which $80.9 million was from assessments upon in sured banks and $18.5 million from investments and other sources. 26 FEDERAL DEPOSIT INSURANCE CORPORATION T able 6. OFFICERS AND EMPLOYEES OF THE FEDERAL DEPOSIT I nsurance C orporation , D ecember 31, 1944 Division and office Officers and administra Clerical, tive, super stenographic, visory, and and custodial technical employees employees Total T o ta l........................................................................................... 1,546 668 878 Washington office................................................................. Chicago office........................................................................ Field offices.......................................................................... 230 260 1,056 79 10 k U85 151 156 571 Directors................................................................................. 3 3 Executive Division................................................................. Washington office................................................................. Chicago office........................................................................ 25 .......... 2U 1 16 16 9 8 1 Legal Division........................................................................ Washington office................................................................. Chicago office........................................................................ 30 12 18 17 8 9 13 U 9 Division of Examination....................................................... Washington office................................................................. District and field.................................................................. 488 35 U53 344 19 325 144 16 128 Division of Liquidation......................................................... Chicago office........................................................................ District and field.................................................................. 696 93 603 203 U3 160 493 50 US Division of Research and Statistics..................................... Washington office................................................................. '36 36 18 18 18 18 Personnel Division................................................................. Washington office................................................................. Chicago office........................................................................ 30 26 U 9 8 1 21 18 3 Service Division...................................................................... Washington office................................................................. Chicago office........................................................................ 137 9U US 10 7 3 127 87 ho Audit Division........................................................................ Chicago office........................................................................ 24 2k 19 19 5 5 Fiscal and Accounting Division........................................... Chicago office........................................................................ 77 77 29 29 48 U8 Deposit insurance losses and expenses in 1944 amounted to $0.1 million and administrative expenses were $3.8 million. The surplus of the Corporation was increased $101.3 million during the year, consisting of $95.6 million net income in excess of expenses and $5.7 million adjustment in surplus applicable to prior periods. A detailed statement of the income and expenses of the Corporation for the year 1944 is given in Table 7. A summary statement for each year since its organization is given in Table 8. Assets and liabilities. On December 31, 1944, the Corporation held the following assets: assets acquired through bank suspensions and mergers amounting at face value to a total of $56.8 million which were carried on the books of the Corporation at a net or appraised value of $26.1 million, United States obligations valued at $762.1 million, cash amounting to $17.8 million, and other assets amounting to $0.3 million. 27 ORGANIZATION AND FINANCIAL STATEMENTS T able 7. INCOME AND EXPENSES OF THE FEDERAL DEPOSIT INSURANCE C orporation , C alendar Y ear 1944 Income: Deposit insurance assessments................................................. Interest earned (less provision for amortization of premiums) and profit on government obligations sold.......................... $ 80,940,596.80 Other income.............................................................................. 783,571.49 17,761,695.92 Total income........................................................ $ 99,485,864.21 Expenses: Deposit insurance losses and expenses..................................... Administrative expenses (see below)....................................... Furniture, fixtures and equipment purchased and charged off $ 74,599.81 3,815,651.41 14,695.24 Total expenses...................................................... $ Net income added to surplus........................... $ 95,580,917.75 3,904,946.46 Surplus, December 31, 1943: As previously reported.............................................................. $413,755,022.56 Plus—net adjustments applicable to periods prior to January 1, 1944..................................................................................... 5,705,757.53 Surplus as adjusted, December 31, 1943....... $419,460,780.09 Surplus, December 31, 1944.............................. $515,041,697.84 d is t r ib u t io n o f a d m in is t r a t iv e expen ses Salaries............................................................................................................................... Professional services......................................................................................................... Services of other governmental agencies........................................................................ Transportation.................................................................................................................. Subsistence................................... .................................................................................... Office rental....................................................................................................................... Printing, stationery and supplies.................................................................................... Postage, telephone and telegraph................................................................................... Insurance and fidelity bond premiums........................................................................... Subscriptions..................................................................................................................... Equipment rental............................................................................................................. Repairs and alterations.................................................................................................... Transportation of things.................................................................................................. Miscellaneous.................................................................................................................... $ 2,875,949.37 23,141.62 50.00 103,177.99 412,409.35 279,716.52 59,166.38 45,834.02 549.15 10,896.84 7,903.10 12,887.87 8,091.04 5,347.21 $ 3,845,120.46 $ 3,815,651.41 Less: Inter-departmental expense transfers......................................................................... Administrative expenses for the year ended December 31, 1944...................... 29,469.05 Liabilities of the Corporation at the end of 1944 were $1.9 million. Total capital of the Corporation consisted of $289.3 million capital stock issued at its organization and $515.0 million accumulated surplus. A summary of the assets and liabilities of the Corporation at the close of each year since its organization is given in Table 9. A more detailed statement of its assets and liabilities as of December 31,1943 and 1944, is given in Table 10. 28 FEDERAL DEPOSIT INSURANCE CORPORATION Table 8. INCOME AND EXPENSES OF THE FEDERAL DEPOSIT INSURANCE C o r p o r a t io n S in c e B e g i n n i n g O p e r a t i o n s 1 (In millions of dollars) Income Expenses Deposit Investment insurance income assess and ments2 profits Year Total Total Deposit insurance losses and expenses Adminis trative expenses3 37.7 1933-1944.............. 592.1 470.0 122.1 77.0 39.3 1944................... 1943................... 1942................... 1941................... 1940................... 1939................... 1938................... 1937................... 1936................... 1935................... 1933-344................. 99.5 86.7 69.4 62.0 55.9 51.2 47.8 48.1 43.8 20.7 7.0 81.0 70.0 56.5 51.4 46.2 40.7 38.3 38.8 35.6 11.5 18.5 16.7 12.9 10.6 9.7 10.5 9.5 9.3 8.2 9.2 7.0 3.9 4.9 4.8 5.1 14.7 15.9 5.9 6.6 5.2 5.6 4.4 .1 .7 .8 1.4 11.1 12.5 2.9 3.9 2.7 2.9 .3 3.8 4.2 4.0 3.7 3.6 3.4 3.0 2.7 2.5 2.7 4.15 Net income added to surplus 515.1 95.6 81.8 64.6 56.9 41.2 35.3 41.9 41.5 38.6 15.1 2.6 1 Figures of total expenses, deposit insurance losses and expenses, and net income added to surplus for years prior to 1944 differ from those shown in previous Annual Reports because of revisions in esti mates of losses allocated to the different years. 2 Assessments collected from banks insured in the temporary insurance funds were credited in full to their accounts at the termination of the temporary funds, and were applied toward subsequent assess ments under the permanent insurance fund. This procedure resulted in no income to the Corporation from assessments for the term of the temporary insurance funds. 3 Includes furniture, fixtures and equipment purchased and charged off. 4 Includes expenses from date of organization, September 11, 1933, to December 31,1934. 6 After deducting portion of expenses and losses charged to banks withdrawing from the tem porary funds on June 30, 1934. Table 9. A s s e t s AND LIABILITIES OF THE FEDERAL DEPOSIT I n s u r a n c e C o r p o r a tio n , 1934-1944 (In millions of dollars) Dec. 31 1 9 4 4 .... 1 9 4 3 .... 1942___ 1 9 4 1 .... 1 9 4 0 .... 1 9 3 9 .... 1 9 3 8 .... 1 9 3 7 .... 1 9 3 6 .... 1 9 3 5 .... 1 9 3 4 .... Cash 17.8 20.0 19.4 20.0 20.4 28.3 22.2 20.6 9.1 33.5 16.0 U. S. Govern Insurance ment se assets curities 762.0 638.8 536.8 453.9 384.5 363.5 372.8 348.5 332.6 298.2 316.7 26.1 46.2 62.0 81.7 92.2 64.2 26.5 16.1 11.4 5.4 .5 Other assets Total assets and lia bilities Lia bilities .3 .5 .5 .1 .1 .1 .1 .1 .1 .1 .1 806.2 705.5 618.7 555.7 497.2 456.1 421.6 385.3 353.2 337.2 333.3 1.9 2.4 1.8 2.2 1.2 3.4 1.1 2.2 9.8 31.2 41.6 Capital and surplus 804.3 703.1 616.9 553.5 496.0 452.7 420.5 383.1 343.4 306.0 291.7 Ratio— FDIC Total de posits in capital and surplus to insured deposits in banks insured banks 134,662.1 111,649.8 89,868.7 71,209.3 65,287.4 57,485.8 50,790.2 48,227.8 50,280.9 45,125.1 40,059.9 .60% .63 .69 .78 .76 .79 .83 .79 .68 .68 .73 29 ORGANIZATION AND FINANCIAL STATEMENTS T able 10. ASSETS AND LIABILITIES OF THE FEDERAL DEPOSIT INSURANCE C orporation , D ecember 31, 1944, and D ecember 31, 1943 1944 1943 ASSETS Assets acquired through bank suspensions and m ergers: Subrogated claims of depositors against closed insured banks... Net balances of depositors in closed insured banks pending settle ment or not claimed, to be subrogated when paid— contra.. . . Loans to merging insured banks, to avert deposit insurance losses, and recoverable liquidation expenses............................. Assets purchased from merging insured banks, to avert deposit insurance losses, under agreements to return any excess re covery to selling banks................................................................ Assets purchased from merging insured banks and receivers of closed insured banks to avert deposit insurance losses. . $ 17,448,278.33 $ 25,805,676.76 158,676.40 841,927.72 19,744,575.59 29,412,363.96 18,849,778.67 28,041,173.53 581,623.15 $ 56,782,932.14 696,387.25 $ 84,797,529.22 Less: Reserve for losses.......................................................... 30,714,169.10 $ 26,068,763.04 38,547,754.80 $ 46,249,774.42 Gash on hand and on d ep osit............................................. 17,804,318.72 19,961,081.20 United States Governm ent securities (cost less reserve for amortization of premiums) and accrued interest receivab le.. 762,064,352.35 638,776,370.88 Due from Governm ental agencies............................................... 192,217.91 292,931.08 Miscellaneous receivables.............................................................. 32,338.78 109,775.64 Furniture, fixtures, and equ ipm en t........................................... 1.00 1.00 Deferred charges............................................................................... 84,161.45 73,911.69 T otal assets................................................................. $806,246,153.25 $705,463,845.91 $ $ LIABILITIES Current liabilities: Accounts and assessment rebates payable......................... Earnest money deposits and collections in suspense.......... Net balances of depositors in closed insured banks pending settlement or not claimed— contra................................... 329,611.43 1,220,847.00 158,676.40 421,550.06 904,320.42 841,927.72 Deferred cre d its....................................................................... 143,772.35 107,619.54 Reserve for deposit insurance expenses............................ 51,991.24 133,848.62 T otal liabilities................................................. $ 1,904,898.42 $ 2,409,266.36 CAPITAL Capital stock : United States.......................................................................... Federal Reserve banks.......................................................... $150,000,000.00 139,299,556.99 $150,000,000.00 139,299,556.99 $289,299,556.99 $289,299,556.99 Surplus (see Table 7 )..................................... $515,041,697.84 $413,755,022.56 T otal ca p ita l............................ $804,341,254.83 $703,054,579.55 T otal liabilities and ca p ita l. $806,246,153.25 $705,463,845.91 Audit. In accordance with the Corporation’s policy of having an annual independent audit, the accounts as of June 30, 1944, were audited by Arthur Andersen & Co. The balance sheet of the Cor poration as of that date, as shown in the auditors’ report, is given in Table 11. The auditors’ certificate is given on page 32 of this report. 30 FEDERAL DEPOSIT INSURANCE CORPORATION T a b le 11. FEDERAL DEPOSIT INSURANCE CORPORATION COMPARATIVE B a l a n c e S h e e t , Ju n e 30, 1944 a n d 1943— fr om a u d it o r s ’ r e p or t June 30 ASSETS 1944 1943 Gash on deposit, in transit and on hand................................. $ 27,187,132.72 $ 32,112,817.18 United States Government securities and accrued interest receivable thereon: Principal amount $686,526,300 and $570,043,400 at June 30, 1944 and 1943, respectively, stated at cost............................. Less— Reserve for amortization of premiums............................. $688,931,112.31 1,169,200.52 $573,394,017.19 1,845,336.86 $687,761,911.79 2,452,367.77 $571,548,680.33 1,785,212.44 $690,214,279.56 $573,333,892.77 $ 22,160,090.58 $ 25,742,036.04 254,409.13 446,126.57 24,555,079.29 34,459,768.53 23,724,303.01 521,699.53 74,367.40 32,076,233.98 557,907.52 219,007.89 $ 71,289,948.94 35,172,158.51 $ 93,501,080.53 38,792,706.64 $ 36,117,790.43 $ 54,708,373.89 Accrued interest receivable........................................................... Assets acquired through bank suspensions and mergers, less collections: Subrogated claims of depositors against closed insured banks. . Net balances of depositors in closed insured banks pending settlement or not claimed, to be subrogated when paid— per contra.................................................................................... Loans made to, and assets purchased from, merging insured banks to reduce or avert deposit insurance losses— Loans and recoverable liquidation expenses (Note 1 )........ Assets purchased under agreement to return any excess recoveries to the selling banks, and recoverable liquida tion expenses (Note 1 )....................................................... Assets purchased, other......................................................... Assets purchased from receivers of closed insured banks.......... Less—Reserves for losses.............................................................. Miscellaneous receivables and deferred charges: Receivable from other governmental agencies............................ Federal Credit Union examination and supervision fees........... Other............................................................................................... Furniture, fixtures and equipment, at nominal value........ .. $ 376,136.12 23,411.38 101,896.55 $ 485,569.92 112,445.82 93,466.62 $ 501,444.05 $ 691,482.36 $ 1.00 $ 1.00 $754,020,647.76 $660,846,567.20 NOTES: (1) Loans to merging insured banks are evidenced by demand notes bearing interest at the rate of 4% per annum, and the Corporation is entitled to a return of 4% per annum with respect to its in vestments in assets purchased from merging insured banks under agreements to return any excess re coveries to the selling banks. The Corporation follows the practice of taking into income only such amounts of interest and allowable return as are realized after recovery in full of its investments (in cluding recoverable liquidation expenses) in the respective loans and purchased assets. The amount of such interest realized during the year ended June 30, 1944 was $426,558.50. (2) Under the provisions of Section 12B ot' the Federal Reserve Act, as amended by Title I of the Banking Act of 1935 (subsection “ o” ), the Corporation is authorized and empowered to issue and to have outstanding its notes, debentures, bonds or other such obligations in a par amount determined in accordance with said provisions, which amount at June 30, 1944 was $974,600,000. 31 ORGANIZATION AND FINANCIAL STATEMENTS T a b l e 11. FEDERAL DEPOSIT INSURANCE CORPORATION COMPARATIVE B a l a n c e S h e e t , J u n e 30, 1944 a n d 1943— f r o m a u d i t o r s ' r e p o r t — C o n tin u e d June 30 1944 LIABILITIES Liabilities: Accounts payable........................................................................... Earnest money deposits and collections in suspense, arising from assets acquired through bank suspensions and mergers, etc.. Net balances of depositors in closed insured banks pending settlement or not claimed—per contra.................................... Reserve for expenses of paying insured deposits........................ Deferred credits.............................................................................. $ T ota l liabilities................................................. $ Capital stock and surplus (the entire capital stock and surplus is considered by the corporation to constitute a reserve for future deposit insurance losses and related expenses with respect to insured banks. The corporation estimates that the insured deposits in operating insured banks amounted to approximately $46 billion at June 30, 1944 and $36 billion at June 30, 1943): Capital stock, without nominal or par value (nonvoting and not entitled to payment of dividends)— Held by United States Government................................. Held by Federal Reserve banks........................................ Surplus— Balance at beginning of year.................................................... Net increase in surplus during the years— Income— Deposit insurance assessments.......................................... Interest earned and net profits from sales of United States Government securities, less provision for amortization of premiums............................................. Other interest received (Note 1 )....................................... Fees from Federal Credit Unions..................................... Expenses— Deposit insurance losses and expenses applicable to assets acquired through bank suspensions and mergers occurring in— Current year.................................................................... Prior years (credits, representing adjustments of reserves for losses)...................................................... Total (credit)....................................................... Administrative expenses.................................................... Furniture, fixtures and equipment purchased................. 368,132.39 1943 $ 359,839.61 961,637.33 985,898.61 254,409.13 65,306.31 86,879.39 446,126.57 137,465.92 98,402.92 1,736,364.55 $ 2,027,733.63 $150,000,000.00 139,299,556.99 $150,000,000.00 139,299,556.99 $289,299,556.99 $289,299,556.99 $369,519,276.58 $294,587,895.18 $ 77,159,327.80 $ 61,110,632.07 16,881,263.65 528,465.96 140,796.65 14,319,669.93 90,758.67 222,884.66 $ 94,709,854.06 $ 75,743,945.33 $ $ 1,654,168.18 1,612,099.56 ( 4,404,822.11) ( 4,771,231.79) ($ 2,750,653.93) ($ 3,977,866.46 17,191.89 3,159,132.23) 4,212,329.79 33,213,12 $ 1,244,404.42 $ 1,086,410.68 $ 93,465,449.64 $ 74,657,534.65 Net increase in surplus....................................... $ 93,465,449.64 $ 74,931,381.40 Surplus at end of y ea r................................... $462,984,726.22 $369,519,276.58 T otal capital stock and su rp lu s.................. $752,284,283.21 $658,818,833.57 $754,020,647.76 $660,846,567.20 Transfer from Farm Credit Administration with respect to Federal Credit Unions....................................................... 273,846.75 The Secretary of the Treasury, in his discretion, is authorized to purchase such obligations of the Corporation; and he is authorized and directed to purchase obligations of the Corporation in an amount not to exceed $250,000,000 par value whenever, in the judgment of the Board of Directors of the Cor poration, additional funds are required for insurance purposes. The Reconstruction Finance Corporation, as provided in subsection (b) of section 5e of the Recon struction Finance Corporation Act, as amended, shall purchase at par value such obligations of the Corporation as are authorized to be issued, upon request of the Board of Directors of the Corporation, whenever, in the judgment of said Board, additional funds are required for insurance purposes; pro vided, that the Reconstruction Finance Corporation shall not purchase or hold at any time said obligations in excess of $250,000,000 par value. If the Reconstruction Finance Corporation fails for any reason to purchase any of the obligations of the Corporation, the Secretary of the Treasury is authorized and directed to purchase such obligations in an amount equal to the amount of such obligations the Recon struction Finance Corporation so fails to purchase. 32 FEDERAL DEPOSIT INSURANCE CORPORATION A R T H U R A N D E R S E N & CD. 120 SOUTH LA SALLE STREET CHICAGO 3 To th e B o a rd o f D ir e c to r s , F e d e r a l D e p o s it I n s u r a n c e C o r p o r a t i o n : We have examined the balance sheet of the Federal D eposit I nsurance C orporation (a corporation created under Section 12B of the Federal Reserve Act, as amended by Title I of the Banking Act of 1935) as of June 30, 1944, and the related statement of surplus for the year then ended, which statement of surplus is summarized in the balance sheet. In connection therewith, we have reviewed the system of internal control and the accounting procedures of the Corporation and, without making a detailed audit of the transactions, have examined or tested accounting records and other supporting evidence maintained in the general office of the Corporation (except the records as to the closed insured banks for which the Corporation is receiver), by methods and to the extent we deemed appropriate. We did not examine the collateral under loans to merging insured banks nor the documents evidencing ownership of assets purchased from merging or closed insured banks, which collateral and assets for the most part are held by Liquidating Agents of the Corporation at various locations throughout the country; but we reviewed the reports of the Corporation’s internal auditors on the examinations made by them during the year of such collateral and purchased assets. The examinations by the internal auditors are on a rotating basis, covering the collateral under each loan and the documents evidencing ownership of the assets purchased from each merging or closed insured bank approximately every eighteen months. We made a similar examination for the year ended June 30, 1943. In our opinion, the accompanying balance sheet presents fairly the position of the Federal Deposit Insurance Corporation at June 30, 1944 and the results of its operations for the year ended that date. A rth u r A n d ersen & Chicago, Illinois, October 20, 1944. Co. PART TWO BANKING DEVELOPMENTS A ssets, D e p o s it s , a n d C a p it a l A c c o u n t s Assets of all banks.1 The upward trend of bank assets continues. During the year 1944, total assets of all commercial and mutual savings banks increased $25 billion, and by the end of the year had reached the unprecedented total of $152.6 billion. This 19 percent increase in 1944 was a continuation of the sharp upward trend which has prevailed since the beginning of large scale war financing in 1942. Nearly all the rise in total assets during the last three years has oc curred in bank holdings of Government obligations. CHART A T o tal A s s e t s o f a l l O p e r a t in g B a n k s b y Ty p e of A s s e t 1 9 3 4 - 1944 BILLIONS OF DOLLARS BILLIONS OF DOLLARS Between 1934 and 1941 business recovery was reflected in a con tinuous rise in bank assets, as shown in Chart A, with the exception of the slight down-turn during the business depression of 1937-38. Two-thirds of the $15 billion increase from the end of 1938 to the end of 1940 was in cash and amounts due from other banks, prin cipally reserves with the Federal Reserve banks. The increase in reserves was due primarily to the substantial inflow of gold from 1 In order to present a complete picture of the private banking system, the discussion in this section, as far as possible, covers all commercial and mutual savings banks in the United States and possessions (see page 108). However, data for insured commercial banks are in some instances more complete, and at times it is necessary to confine the discussion to this group of banks. 35 36 FEDERAL DEPOSIT INSURANCE CORPORATION abroad. In 1941, the $6 billion rise in total bank assets was chiefly the result of increases in the holdings of United States Government obligations and in the volume of loans, reflecting the intensification of our defense activities. In the years immediately prior to our entry into the war, bank assets were rising at the rate of 9 percent a year. With the augmented tempo of war financing in the middle of 1942, the rate of increase rose sharply and there was a 19 percent gain in total assets during the last six months of 1942. The rate of increase then declined, and has been 18 percent a year during the last two years as shown in Table 12. Table 12. INCREASE IN TOTAL ASSETS OF ALL OPERATING BANKS, 1941-1944 (Amounts in millions of dollars) Total assets Call date Increase from previous call date Amount December 30, June 30, 1944 December 31, June 30, 1943 December 31, June 30, 1942 December 31, 1944........................................................ 1943........................................................ 1942........................................................ 1941........................................................ 1 In computing the change from the fact that on and after June 30, cluded in the total. Reciprocal bank Detailed figures—See Table 107, $152,618 139,225 127,794 116,983 109,305 92,081 91,037 $13,393 11,431 10,811 7,678 7.0 17,224 l,658i 1.8 Percentage 9-6% 8.9 9.2 18.7 December 31, 1941, to June 30, 1942, an adjustment was made for 1942, reciprocal bank balances due from other banks were not in balances were $614 million on June 30, 1942. page 128. Changes in types of assets. A marked change in the relative importance of the various types of assets held by banks has accom panied the rise in total assets. The major shift has been, of course, the increase in the volume of United States Government obligations. At the end of 1938, these securities made up only one-fourth of all bank assets, whereas at the end of 1944 they constituted more than one-half of total assets, and nearly three-fourths of earning assets. Loans, on the other hand, have declined in relative importance. Loans amounted to $21 billion, or approximately 30 percent of all bank assets, at the end of 1938. From 1939 to the end of 1941, the volume of loans rose from $22 billion to nearly $27 billion. This 20 percent rise in the amount of loans was approximately the same as the 18 percent gain in total bank assets. After declining slightly in the early period of our par ticipation in the war, the volume of loans increased and on December 30, 1944, amounted to $26 billion, slightly below the peak at the end of 1941. With the sharp rise in the volume of total assets, however, the proportion of loans fell to 17 percent at the end of 1944. Bank holdings of securities other than Governments have declined gradually 37 ASSETS, DEPOSITS, AND CAPITAL ACCOUNTS from $10 billion to $8 billion over the last decade, and have decreased in relative importance as total assets have increased. These trends are shown in Chart B. CHART B Percentage D is t r ib u t io n o f A s s e t s - A ll O p e r a t in g Ba n k s 1934 - 1944 PERCENT OF TOTAL A SSET S 1935 1936 PERCENT O F 1937 1998 1939 1940 1941 1942 TOTAL ASSETS 1949 1944 E xam in ers’ app raisal o f assets o f in su red c o m m e r c ia l b a n k s. As would be expected during a period of accelerated business activity, the proportion of total assets of insured commercial banks classified as substandard by the examiners continued to decline in 1944. This decline was due to three factors: first, criticized assets form a smaller proportion of total assets simply because the increase in bank assets during the war period has been confined almost entirely to United States Government obligations and cash; second, in a period of good business, assets appear in a more favorable light and therefore are not as likely to be classified substandard as formerly; and third, banks have been able to dispose of many of these assets at favorable prices. In 1944, substandard assets amounted to 0.7 percent of total assets, compared with 1.2 percent in 1943, and 2.1 percent in 1942. The ratio of substandard assets to the appraised value of assets other than cash and United States Government obligations fell from 5.9 percent in 1942 to 3.0 percent in 1944 as the result of a decrease of nearly 50 percent in the amount of substandard assets held by insured com mercial banks. The downtrend of substandard asset ratios from 1939 38 FEDERAL DEPOSIT INSURANCE CORPORATION to 1944 is shown in Table 13. Of the 12,983 insured commercial banks examined during 1944, 2,285, or 18 percent, had no substandard assets, as compared with 10 percent in 1943 and 5 percent in 1942. Table 13. SUBSTANDARD ASSET RATIOS OF INSURED C o m m e r c ia l B a n k s E x a m i n e d i n 1939-1944 Ratio of substandard assets to— Year 1944..................................................................... 1943..................................................................... 1942...................................................................... 1941...................................................................... 1940...................................................................... 1939...................................................................... Appraised value of total assets •69% 1.24 2.13 2.84 3.93 5.12 Appraised value of assets other than cash and U. S. Government obligations 2.98% 4.75 5.93 0) 0) 0) Adjusted capital accounts 10.92% 17.84 25.26 31.12 40.35 48.21 1 U. S. Government obligations are not available separately prior to 1942. Detailed figures—See Table 109, page 134. As a result of the decrease in substandard assets, the ratio of such assets to the adjusted capital accounts1has fallen from 48 percent in 1939 to 11 percent in 1944. This low ratio for all insured commercial banks in 1944 should not obscure the fact that there are still a number of banks in which substandard assets constitute a substantial propor tion of adjusted capital accounts. Bank holdings of United States Government obligations. From the end of 1941 through 1944, $61 billion of the $62 billion increase in bank assets occurred in holdings of United States Govern ment obligations. At the close of 1944, all operating banks held $86 billion of United States Government obligations, nearly three and one-half times the $25 billion held at the time of our entry into the war. The largest rise for any six-month period, both in absolute and relative amounts, occurred during the last half of 1942 when bank holdings of Government obligations rose by $16 billion, an increase of more than 50 percent. This reflected the heavy participation of the banks in the first war loan drive and the large purchases during this period of certificates of indebtedness which the Treasury began issuing in April 1942. The banks also participated heavily in the second war loan drive in April of 1943, and another $12 billion was added to bank holdings during the first six months of 1943. In the next year and a half, to the end of 1944, banks added $28 billion to their Government portfolio, an amount approximately equal to that added from the middle of 1942 to the middle of 1943. In the later 1 Adjusted capital accounts represent the difference between total bank assets and total bank liabilities as appraised by the examiners (see page 133). 39 ASSETS, DEPOSITS, AND CAPITAL ACCOUNTS period the bulk of the banks' purchases was made between drives since the Treasury adopted a policy of sharply restricting bank participation in the third, fourth, fifth and six war loan drives. From the end of 1941 to the middle of 1943, banks acquired Govern ments at a faster rate than the rate of increase in the Federal debt outstanding; while during the next 18 months, the debt increased more rapidly than holdings of the banks. From December 31, 1941, to June 30, 1943, the amount of Governments held by banks increased by 127 percent, whereas the interest-bearing Government debt rose by 119 percent. From the middle of 1943 to the end of 1944, the total outstanding debt increased by two-thirds, while bank holdings in creased less than one-half. At the end of 1944, all operating banks held a slightly smaller proportion of the total Government debt outstanding than three years earlier. When the holdings of the Federal Reserve banks, which rose from $2 billion to $19 billion over the three year period, are included, the proportion of the Government debt held by the banking system rose slightly between the time of our entry into the war and the end of 1944. The holdings of the various classes of banks at the end of 1941 and 1944 are shown in Table 14. Table 14. B a n k H o l d i n g s OF UNITED STATES GOVERNMENT OBLIGATIONS, D ir e c t and G u a ra n teed , 1941 a n d 1944 December 31, 1941 Type of holder Amount (In billions) Percent December 30, 1944 Amount (In billions) Percent T otal interest-bearing d ebt o u tsta n d in g .. $63.8 100.0% $230.4 Banking system—total................................... 27.8 43.6 105.1 45.6 Commercial banks...................................... Mutual savings banks................................ Federal Reserve banks............................... 21.8 3.7 2.3 34.2 5.8 3.6 78.0 8.3 18.8 33.8 3.6 8.2 100.0% Types of Government obligations held by insured com mercial banks. Detailed data on the various types of Treasury issues held by commercial and mutual savings banks are available only for insured commercial banks. However, the data for this group of banks are significant since they held almost 90 percent of the total of all bank holdings of Governments at the close of 1944. The war-time trend of insured commercial bank purchases of Government obligations has brought a marked shift in the maturity distribution, as shown in Chart C and Table 15. At the end of 1939, bonds maturing in more than ten years constituted over 40 percent of all insured commercial bank holdings of United States Government obligations, while at the end of 1944 they constituted only 10 percent. 40 FEDERAL DEPOSIT INSURANCE CORPORATION Concomitant with this decline in the proportion of long term maturities has been a very sharp increase in the proportion of short term ma turities, particularly certificates of indebtedness. c ch art P e r c e n t a g e D i s t r i b u t io n o f D ir e c t U.S. G o v 't. O b l i g a t i o n s H e l d b y I n s u r e d C o m m e r c i a l B an k s * 1939 - 1944 PERC E N T PERCEN T 194-0 1941 1942 1943 1944 D istribution o f b on ds based upon num ber o f years to fin e ! m aturity. Table 15. D i r e c t U n i t e d STATES GOVERNMENT OBLIGATIONS H e l d b y I n s u r e d C o m m e r c ia l B a n k s , 1939-1944 (Millions of dollars) Bonds maturing within1 Call date Dec. 30, June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, June 29, Dec. 30, 1944..................... 1944..................... 1943..................... 1943..................... 1942..................... 1942..................... 1941..................... 1941..................... 1940..................... 1940..................... 1939..................... Total 74,919 66,141 56,192 48,880 37,994 23,062 16,945 15,291 13,344 12,530 12,153 Certifi cates of Treasury Treasury indebted bills notes ness 15,303 15,469 13,220 10,315 6,729 1,978 3,972 4,709 4,637 6,557 4,462 1,536 988 1,135 662 805 571 15,781 11,835 7,673 5,717 5,800 3,732 3,159 2,758 2,756 2,699 2,388 5 years 5,918 5,650 5,791 5,497 2,865 1,765 1,551 1,471 1,458 750 837 5-103 years 26,231 20,641 17,092 11,511 10,331 5,588 3,970 3,837 3,153 3,489 3,308 After 10 years 7,714 7,837 7,779 9,283 7,807 8,463 7,277 6,090 5,315 4,787 5,049 1 The maturity distribution of insured commercial bank holdings of U. S. Government bonds is based upon the number of years to first maturity. 8 Includes United States Savings Bonds. ASSETS, DEPOSITS, AND CAPITAL ACCOUNTS 41 During 1942 and the first half of 1943, insured commercial banks added to their holdings of Treasury bills, generally maturing in 91 days after issue, which reached a peak in June of 1943, when they held $6.6 billion, 55 percent of the total outstanding. Since that time insured commercial bank holdings of bills have declined and on December 30, 1944, the amount held was only $4 billion, or less than one-fourth of the total outstanding. Certificates of indebtedness, which have a maturity when issued of approximately one year, formed a large part of bank acquisitions during the first and second war loan drives and the banks also bought these securities between drives. In the first year of their offering insured commercial banks took a large proportion of the amount offered and on June 30, 1943, held approximately two-thirds of the total outstanding. Certificates of indebtedness have been included in all the later drives, but sharp restrictions have been placed on bank purchases. Even though insured commercial banks have steadily added to their holdings by purchasing certificates between drives, their proportionate holdings have gradually declined until on Decem ber 31, 1944, they held 50 percent of the total outstanding. Insured commercial bank holdings of Treasury notes, issued in maturities of from one to five years, have increased from 50 percent of the total outstanding at the end of 1941 to nearly 70 percent at the end of 1944. The banks have also made substantial increases in their holdings of United States Government bonds maturing in five to ten years. At the end of 1941, they held $4 billion of such securities, and by December 30, 1944, holdings reached $26.2 billion. The holdings of bonds maturing in more than ten years, however, have remained at approximately the same level throughout the war period. Treasury policy has tended to discourage bank acquisition of longer maturities, and insured commercial banks now hold a considerably smaller proportion of outstanding long term issues maturing in more than ten years than they did before the war. Deposits of all banks. The trend of deposits in commercial and mutual savings banks during the war has been the counterpart of the trend of total assets. Deposits rose $61 billion from the close of 1941 to the end of 1944, while assets increased $62 billion. At the close of 1944, total deposits of all banks amounted to $142 billion of which $135 billion, or 95 percent, were held in all insured banks and $126 billion, or 89 percent, were held in insured commercial banks. Total deposits of all banks rose $19 billion, or 23 percent, during 1942, most of the increase occurring in the last half of the year. There was an $18 billion increase in deposits during 1943, and a $24 billion increase in 1944, while the percentage increases were 18 percent and 20 percent respectively. 42 FEDERAL DEPOSIT INSURANCE CORPORATION Nearly two-thirds of the deposit increase since the war has been in deposits of individuals, partnerships, and corporations, while most of the remaining increase was in deposits of the Federal Government. The sale of bonds for war financing has in the first instance given rise to an increase in Government deposits. Then, as expenditures have been made, the bulk of these deposits has shifted to the accounts of individuals and business enterprises. Interbank deposits and deposits of State and local governments have increased moderately. There has been considerable variation in the rate of growth of deposits during the war in the various geographic regions and States. The growth has been relatively high in most of the States west of the Mississippi River and in the southern States, and relatively moderate in the northeastern States. The geographic pattern of the growth in deposits during the last three years has corresponded to a considerable extent with the geographic pattern of the expansion in individual and business incomes. A study of the deposit shifts which have occurred is to be found in Part Three of this report. Capital accounts of insured commercial banks. The increase in bank capital has not kept pace with the rapid expansion in total assets. On December 30, 1944, total capital accounts of all insured commercial banks amounted to $8 billion. This was $1 billion above the total at the time of our entry into the war, and only $2 billion above the 1934 level. During the past three years, capital accounts have increased by 17 percent, compared with an increase in total assets of 76 percent. Nearly all of the increase in capital during the war years has been due to the retention of bank earnings. At the end of 1944, capital stock made up 36 percent of total capital accounts of all insured commercial banks, as shown in Table 16, compared with 42 percent three years earlier. Table 16. CAPITAL ACCOUNTS OF INSURED COMMERCIAL BANKS, 1941 AND 1944 (Amounts in millions of dollars) Percentage distribution Dec. 31, 1941 Capital accounts Dec. 30, 1944 Increase or decrease 1941 T o ta l.............................................................. $6,845 $7,990 debentures: 2,850 2,912 + 62 41.6 36.4 Common stock............................................ Preferred stock............................................ Capital notes and debentures..................... 2,U70 806 7U 2,660 202 50 +190 -10 A -2h 86.0 4.5 1.1 83.8 2.5 6 Surplus...................... .................................... Undivided profits.......................................... Reserves......................................................... 2,687 896 412 3,402 1,169 507 +715 +273 + 95 39.3 13.1 6.0 42.6 14.7 6.3 Capital stock, notes, and $+1,145 100.0% 1944 100.0% . ASSETS, DEPOSITS, AND CAPITAL ACCOUNTS 43 There has been only a moderate rise in capital stock since the end of 1941, as the additions to common stock of $190 million have been largely offset by the retirement of $128 million of preferred stock and capital notes and debentures, most of which were owned by the Reconstruction Finance Corporation. The investment of the Recon struction Finance Corporation in insured commercial banks reached a peak of about $900 million in 1935. This investment now amounts to about $250 million. With the increasing disparity between the rate of growth in total capital accounts of the banks and the rate of growth of assets, the decline in the stockholders' equity relative to total assets has been accelerated during the war years. However, due to the fact that the greatest increase in bank assets has been in the holdings of cash and United States Government obligations, the ratio of total capital accounts to assets other than United States Government obligations and cash increased moderately in this period. At the end of 1944, this ratio was 27.6 percent or slightly above the 26.3 percent at the end of 1934. Any expansion of bank loans during the post-war reconversion period will bring about a decline in this ratio unless additional capital is obtained. The ratio of total capital accounts to total assets and to assets other than cash and Governments is shown in Table 17. Table 17. CAPITAL RATIOS OF INSURED COMMERCIAL BANKS Y e a r -E n d C a l l D a te s , 1934-1944 Total capital accounts as a percentage of— Year Total assets Assets other than cash and U. S. Govern ment obligations 1944....................................................................................... 5.94% 1943....................................................................................... 6.64 1942....................................................................................... 7.39 8.91 1941....................................................................................... '1940....................................................................................... 9.44 1939....................................................................................... 10.33 1938....................................................................................... 11.33 1937....................................................................................... 11.81 11.26 1936....................................................................................... 12.19 1935....................................................................................... 13.24 1934....................................................................................... 27.58% 28.28 25.99 22.82 24.38 25.38 25.62 25.00 24.60 26.09 26.69 Capital ratios by size of bank. Small banks generally have higher ratios of total capital accounts to total assets than the large banks. This is shown by the data summarized in Table 18 for the 12,983 insured commercial banks examined during 1944. Of these banks, 2,267, or 17 percent, had adjusted capital accounts equal to more than 10 percent of the appraised value of their assets. Of the 241 smallest banks examined during 1944, 76 percent had capital ratios of over 10 percent, and this proportion steadily declined as the 44 FEDERAL DEPOSIT INSURANCE CORPORATION size of the banks increased until only 4 percent of the 249 largest banks had capital ratios of over 10 percent and nearly half had ratios of less than 5 percent. Table 18. DISTRIBUTION OF INSURED COMMERCIAL BANKS EXAMINED IN 1944 A c c o r d in g t o A d j u s t e d C a p i t a l R a t i o a n d b y A m o u n t o f D e p o s it s Banks with adjusted capital accounts per $100 of appraised value of assets of— All banks Size of bank All bank s.............................................. $0.01 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 to $14.99 $15.00 or more 12,983 2,108 5,414 3,194 1,839 428 $250,000 or less................................. $250,000 to $500,000......................... $500,000 to $1,000,000..................... $1,000,000 to $2,000,000.................. 241 1,297 2,888 3,423 4 31 195 563 18 260 1,279 1,598 37 512 902 765 114 394 434 416 68 100 78 81 $2,000,000 to $5,000,000.................. $5,000,000 to $10,000,000................ $10,000,000 to $50,000,000.............. More than $50,000,000..................... 2,950 1,101 834 249 650 273 276 116 1,299 515 351 94 613 194 142 29 321 100 53 7 67 19 12 3 Banks with deposits o f— E ar n in g s of I n su r ed C o m m ercial B a n k s Insured commercial banks during 1944 had the highest level of net profits since deposit insurance began in 1934. Net profits before taxes in 1944 were $954 million, a gain of 25 percent over 1943 and 83 percent over 1942. Net profits after taxes were $751 million in 1944, which was 18 percent above 1943 and 70 percent above 1942. Operating earnings and expenses and net profits for the three years are shown in Table 19. Table 19. E a r n i n g s , EXPENSES, AND DIVIDENDS OF INSURED C o m m e r c ia l B a n k s , 1942-1944 (Amounts in millions of dollars) Item 1944 1943 1942 Total current operating earnings............................................. Total current operating expenses............................................. Net current operating earnings......................................... $2,215 1,357 858 $1,959 1,256 703 $1,790 1,222 568 Profits on assets sold, recoveries on assets, etc...................... Losses, charge-offs, etc.............................................................. 362 266 353 290 223 271 Net profits before income taxes................................................ Taxes on net income.................................................................. Net profits after taxes............................................................... 954 203 751 766 128 638 520 79 441 Cash dividends declared and interest paid on capital........... Net profits retained................................................................... 253 498 233 405 228 213 Number of banks....................................................................... 13,268 13,274 13,347 Detailed figures for 19M—See Table 111, page 140. EARNINGS OF INSURED COMMERCIAL BANKS 45 Total current operating earnings have not increased as rapidly during the last three years as earning assets, both because of the larger proportion of assets invested in Governments which have a lower rate of return than loans and because of a continuation of the gradual decline in the average rate of return on loans. However, total current operating expenses have increased more slowly than have total current operating earnings. Total current operating expenses took 61 percent of total current operating earnings in 1944 compared with 68 percent in 1942. As a result, net current operating earnings have increased during the last two years at about the same rate as the earning assets of insured commercial banks. Losses and charge-offs in 1944 amounted to only $266 million, the lowest in the history of Federal deposit insurance. Recoveries on assets and profits on securities sold or redeemed were $362 million in 1944, and for the third time since 1934, recoveries and profits exceeded charge-offs. Total income taxes of $203 million on earnings of insured commercial banks in 1944 were 59 percent higher than the $128 million total for the previous year and two and a half times the $79 million in 1942. Income taxes amounted to 21 percent of net profits before taxes in 1944 compared with 15 percent in 1942. The substantial rise in net profits during the war has not been accompanied by a significant increase in cash dividends. The 1944 total of $253 million was the same as in 1941, the previous high, and moderately above the 1942 and 1943 totals. The result of the main tenance of dividend payments at prewar levels during the war has been a sharp increase in net profits retained by insured commercial banks. In 1944, nearly $500 million, or two-thirds of net profits after taxes, was added to total capital accounts. This compares with $405 million, or 63 percent, of net profits retained in 1943 and $213 million, or 48 percent, retained in 1942. Rate of net profits. Net profits after taxes of all insured commer cial banks in 1944 represented a return of 9.7 percent on average total capital accounts, substantially above the 8.8 percent return in 1943 and more than 50 percent above the 6.3 percent return in 1942. The rate of return in the last two years has been higher than at any other time during the last decade. The rise in the ratio of net profits to total capital accounts during the war years is due, in large part, to the fact that total capital ac counts grew less rapidly than earning assets. The ratio of net earnings to total capital accounts rose from 7.0 percent in 1942 to 8.5 percent in 1944. An additional factor contributing to the rise in net profits was the excess of recoveries and profits on assets over losses and 46 FEDERAL DEPOSIT INSURANCE CORPORATION charge-offs in both 1943 and 1944. The effect of net charge-offs or net recoveries is represented by the difference between the rate of net earnings and the rate of net profits. In Chart D and Table 20 ratios of net profits, net earnings, and cash dividends to total capital accounts are shown for each year since the beginning of deposit insurance. CH ART D Ratios of Net Earnings , N et P rofits and C ash D i v id e n d s T o Average Total Capital A ccounts -A ll Insured Commercial Banks 1934 1934 j 1935 T able 20. 1936 R a t io s 1937 op 1938 1944 - 1939 1940 1941 N e t P r o f it s , N e t E a r n in g s , A v e r a g e T o tal C a p it a l A cc ou n ts , all 1942 and 1943 1944 C ash D ivid e n d s to I n s u r e d C om m er cia l B a n k s , 1934-1944 Ratios to average total capital accounts1 Year Net profits after taxes 1944.................................................... 1943.................................................... 1942.................................................... 1941.................................................... 1940.................................................... 1939.................................................... 1938.................................................... 1937.................................................... 1936..................................................... 1935.................................................... 1934.................................................... 9.7% 8.8 6.3 6.7 6.1 6.0 4.7 6.0 8.3 3.4 -5.5 Net operating earnings after taxes2 8.5% 7.9 7.0 6.9 6.6 6.9 6.6 7.3 7.0 6.5 6.5 Cash dividends declared and interest paid on capital 3.3% 3.2 3.3 3.7 3.6 3.6 3.5 3.5 3.6 3.4 3.0 1 Total capital accounts are averages of figures for beginning, mid-year, and year-end call dates. a After all taxes, including income taxes which were not available separately prior to 1942. 47 EARNINGS OF INSURED COMMERCIAL BANKS The rise in bank earnings has been general. With few exceptions, the prosperity has been shared by all banks. Whereas, 22 percent of the banks in 1942 and 37 percent in 1943 reported net profits after taxes in excess of 10 percent of average total capital accounts, one-half of the banks in 1944 had net profits in excess of 10 percent of average total capital accounts. Conversely, the proportion of banks reporting net losses fell from 6 percent in 1942 to 2 percent in 1943 and only 1 percent in 1944. The distribution of banks according to the rates of net profits on total capital accounts for 1942, 1943, and 1944 is shown in Table 21. T a b le 2 1. D i s t r i b u t i o n o f I n s u r e d C o m m e r c ia l B a n k s A c c o r d in g t o R a t e of N e t P r o f i t s o n T o t a l C a p i t a l A c c o u n t s , 1942-1944 Number of banks 1942 1943 1944 Rate of net profits Percentage distribution Number of banks Number of banks 100.0% 13,141 Banks with net loss.......... 117 0.9 257 2.0 749 5.7 1,288 5,062 4,475 1,618 581 9.8 38.5 34.1 12.3 4.4 2,290 5,678 3,418 1,067 435 17.4 43.2 26.0 8.1 3.3 3,963 5,647 2,129 520 218 30.0 42.7 16.1 3.9 1.6 100.0% 13,226 Percentage distribution AH banks1............................ 100.0% 13,145 Percentage distribution Banks with net profits after taxes per $100 of total capital accounts of — 2 $0.00 to $4.99................... $5.00 to $9.99................... $10.00 to $14.99............... $15.00 to $19.99............... $20.00 or more................. 1 Excludes banks submitting reports covering less than the full year’s operations or materially affected by mergers. 2 Total capital accounts are averages of figures at beginning, mid-year, and year-end call dates. Sources of earnings. Total current operating earnings increased from $1,790 million in 1942 to $1,959 million in 1943 and to $2,215 million in 1944. The substantial rise in earning assets which caused this increase in gross earnings has been accompanied by a marked shift in the relative importance of the various types of assets as sources of income. Prior to 1943, income on loans was the most important earnings item, accounting for approximately 45 percent of total current operating earnings in each year from 1934 to 1941. In the war years this proportion declined and by 1944 income on loans accounted for less than one-third of total current operating earnings. In the last two years income on securities has exceeded income on loans and in 1944 income on securities constituted almost one-half of total current operating earnings. Since 1941, the expansion of the earning assets of banks has been confined to holdings of United States Government obligations, and as a result, income on securities has increased rapidly, reaching $1,090 million in 1944. The average rate of return on securities, however, 48 FEDERAL DEPOSIT INSURANCE CORPORATION continued to decline and was 1.49 percent in 1944. This decline in recent years has been a result of both the increased holdings of Govern ment obligations and the concentration of these holdings in short term issues. Total income from loans, on the other hand, has steadily declined since 1941. While the volume of loans outstanding rose moderately during 1944, the average rate of return fell from 3.85 percent in 1943 to 3.44 percent in 1944 resulting in a slight decline in total income from loans. Earnings from other sources have increased in the last two years. The 1944 total of $427 million was 9 percent above 1943 and 14 percent above 1941. The increase, which was primarily due to higher income from service charges, was not, however, as rapid as the rise in total current operating earnings. In 1944, 19 percent of gross earnings was derived from sources other than loans and securities in contrast to 22 percent in 1941. These trends are shown in Table 22. Table 22. A m o u n t s AND RATES OF INCOME RECEIVED BY INSURED C o m m e r c ia l B a n k s , 1934-1944 Total current operating earnings (millions of dollars) from— Year Loans Securities Other sources Income on loans per $100 of loans1 Income on securities per $100 of securities1 1944............................................ 1943............................................ 1942............................................ 1941............................................ 1940............................................ 1939............................................ $698 706 817 848 769 727 $1,090 861 610 509 500 522 $427 393 364 373 363 357 $3.44 3.85 4.08 4.27 4.41 4.46 $1.49 1.52 1.782 1.95 2.16 2.38 1938............................................ 1937............................................ 1936............................................ 1935............................................ 1934............................................ 705 710 663 643 691 532 572 574 548 550 347 352 330 295 278 4.36 4.28 4.34 4.40 4.63 2.56 2.68 2.66 2.87 3.17 1 Loans, securities, and deposits are averages of figures reported at beginning, middle, and end of year by banks submitting statements of assets and liabilities. 2 For 1942, average securities are based on amounts reported at end of month in the Treasury survey of ownership of Government securities as well as upon amounts reported at call dates. Detailed figures for 19UU— See Tables 111-112, pages 140-143. Expenses. Total current operating expenses amounted to $1,357 million in 1944, 8 percent above the $1,256 million in 1943. Of the total increase of $101 million in 1944, $46 million represented an increase in salary and wage payments. The number of officers and employees increased 2 percent during 1944, while total salaries, wages and fees paid rose 8 percent in 1944 as compared with 1943. Because of the increase in the volume of time and savings deposits, interest paid on these deposits rose to $187 million in 1944, $23 million or 14 percent higher than in 1943. This increase in 1944 reversed the downward trend in evidence since 1934. However, the average rate of interest paid continued to decline and was .87 percent in 1944. 49 EARNINGS OF INSURED COMMERCIAL BANKS Earnings by size of bank. There was little relationship between size of bank and the ratio of net profits to total capital accounts in 1944. Except for the fact that the 1,105 smallest banks, those with deposits of $500,000 or less, had an average ratio of net profits after income taxes to total capital accounts substantially below the ratios of the larger banks, there appeared to be no relationship between size of bank and the net profits ratio. The fact that the small banks had the highest ratios of net operating earnings to total assets, as shown in Table 23, was primarily due to the larger proportion of earning assets held in the form of Government securities and to their greater concentration of these holdings in short term issues by the large banks. The higher ratio of net earnings to total assets shown by the small banks was, however, counteracted by their higher ratios of total capital accounts to total assets. As a result, when net earnings are related to total capital accounts, the smallest banks had the lowest ratios while the two groups of the largest banks had the highest ratios. Table 23. N e t E a r n i n g s AND N ET PROFITS RATIOS OF INSURED C o m m e r cia l B a n k s , 1944 BANKS GROUPED BY AMOUNT OF DEPOSITS Ratios to total capital accounts2 Size of bank All ba n ks.................................... . Number of banks1 13,177 Net profits after taxes 9.46% Net current operating earnings Ratio of net current operating earnings to total assets2 10.82% 0.65% Banks w ith deposits o f : $500,000 or less............................... $500,000 to $1,000,000................... $1,000,000 to $2,000,000................ $2,000,000 to $5,000,000................ 1,105 2,578 3,520 3,378 7.98 9.82 10.13 9.59 8.01 9.73 10.35 10.16 0.83 0.77 0.72 0.67 $5,000,000 to $10,000,000.............. $10,000,000 to $25,000,000. .......... $25,000,000 to $50,000,000______ $50,000,000 to $100,000,000.......... More than $100,000,000................. 1,328 742 238 129 159 9.26 9.21 9.08 9.65 9.49 9.99 10.12 10.00 11.55 11.27 0.63 0.60 0.60 0.58 0.66 1 Excludes banks submitting reports covering less than the full year’s operations and trust companies not engaged in deposit banking. 2 Total assets and total capital accounts are averages of figures for December 31, 1943, June 30, 1944, and December 30,1944, for banks submitting reports to the Federal Deposit Insurance Corporation and as of December 30, 1944, for other banks. The same picture for rate of net profits is shown by Table 24 which shows the banks grouped by rate of net profits and amount of deposits. About half of all insured commercial banks had net profits in excess of 10 percent of average total capital accounts. This proportion was closely approximated in each of the size groups except for the smallest banks with deposits of $500,000 or less, and 50 FEDERAL DEPOSIT INSURANCE CORPORATION in this group only about one-third of the banks had net profits in excess of 10 percent of average total capital accounts. Table 24. DISTRIBUTION OF INSURED COMMERCIAL BANKS ACCORDING TO RATIO o f N e t P r o f i t s t o T o t a l C a p it a l A c c o u n t s a n d b y A m o u n t o f D e p o s its , 1944 Banks with net profits after taxes per $100 of total capital accounts of—2 Size of bank Banks All banks1 with net loss $0.01 to $4.99 $5.00 to $9.99 $10.00 to $14.99 $15.00 to $19.99 $20.00 or more 13,141 117 1,288 5,062 4,475 1,618 581 $500,000 or less........................... $500,000 to $1,000,000............... $1,000,000 to $2,000,000............ $2,000,000 to $5,000,000............ 1,464 2,843 3,503 3,080 24 23 26 28 327 295 272 227 586 1,078 1,255 1,160 371 939 1,237 1,138 111 355 529 402 45 153 184 125 $5,000,000 to $10,000,000.......... $10,000,000 to $25,000,000........ $25,000,000 to $50,000,000 $50,000,000 to $100,000,000___ More than $100,000,000............. 1,116 661 206 127 141 7 6 1 2 99 46 8 9 5 459 304 98 52 70 396 218 78 47 51 115 68 15 13 10 40 19 6 4 5 All banks1....................................... Banks with deposits of— 1 Excludes banks submitting reports covering less than the full year’s operations or materially affected by mergers. 2 Total capital accounts are averages of figures at beginning, mid-year, and year-end call dates. PART THREE GROWTH IN BANK DEPOSITS AND IN TOTAL MONEY SUPPLY, 1940-1944 D e p o s it s in C o m m e r c ia l and M utual S a v in g s B a n k s At the close of 1944, total deposits in commercial and mutual savings banks in the United States and possessions amounted to $142 billion, more than twice the amount five years earlier. Four-fifths of the growth in deposits during the five years occurred in the latter half of the period. From the end of 1939 to the middle of 1942 deposits increased by $15 billion; during the next two and a half years to the end of 1944 they increased by $59 billion. The large growth in deposits since the middle of 1942 is the result of participation by the banks in financing the Federal Government wartime deficit. Growth in deposits by class of owner. About two-thirds of the increase during the period, 1940-1944, in total deposits in commercial and mutual savings banks was in deposits of individuals, partnerships, and corporations. The bulk of the remainder, or more than one-fourth of the total growth in deposits, occurred in deposits of the United States Government. Deposits of States and political subdivisions, and also interbank deposits, grew at a relatively moderate rate. The amount of deposits owned by each of these groups, at each year-end and mid-year during the 5-year period, is shown in Table 25. The change in such deposits, by years, is shown in Table 26. T a b le 2 5. DEPOSITS IN COMMERCIAL AND MUTUAL SAVINGS BANKS IN THE U n it e d S t a t e s a n d P o s se s sio n s , b y C la ss of O w n e r , Ju n e 30 a n d D e c e m b e r 31, 1939-1944 (In millions of dollars) Date 1944— Dec. June 1943— Dec. June 1942— Dec. June 30.............. 30.............. 31.............. 30.............. 31.............. 30.............. 1941— Dec. June 1940— Dec. June 1939— Dec. 315............. 305............. 31»............. 295............. 305............. Total $142,077 129,127 118,100 107,622 100,153 82,9873 83,6014 82,073 78,392 76,248 70,994 68,413 Interbank $12,229 11,201 11,000 10,887 11,309 10,279* 10,8934 10,997 10,955 10,952 10,192 9,884 United States and States political Government subdivisions Individuals, partnerships, Certified checks etc.2 and corporations1 $20,834 19,591 10,433 8,080 8,467 $5,061 4,933 4,848 4,783 4,491 $102,586 91,841 90,140 82,730 74,657 $1,367 1,561 1,679 1,141 1,229 1,889 1,941 793 799 877 906 4,437 4,278 4,119 3,921 3,696 3,495 65,606 63,763 61,719 59,597 55,697 53,506 776 1,094 806 979 532 622 1 For 1942-1944, includes unclassified deposits in noninsured banks and total deposits in mutual savings banks. 2 Certified and officers’ checks, cash letters of credit and travelers’ checks outstanding, and amounts due to Federal Reserve banks. 8 Excluding reciprocal deposits reported by insured commercial banks. These figures are comparable with those for subsequent dates. 4 Including reciprocal deposits reported by insured commercial banks. These figures are comparable with those for prior dates. 6 From reports of Comptroller of the Currency. Possessions included are Alaska, Hawaii, Puerto Rico, and the Virgin Islands. Figures for total deposits differ slightly from those in the Annual Report of the Federal Deposit Insurance Corporation, 1941, p. 122, which are not available by class of owner. N ote: Figures are rounded and will not necessarily add precisely to totals. 53 54 FEDERAL DEPOSIT INSURANCE CORPORATION T a b le 2 6. INCREASE IN DEPOSITS IN COMMERCIAL AND MUTUAL SAVINGS B a n k s , U n it e d S t a t e s a n d P o s s e s s io n s , b y Y e a r a n d C l a s s o f O w n e r , 1 940-1944 Year Total1 Inter bank1 United States Government States and political subdivisions Individuals, partnerships, Certified and checks etc. corporations Amount of increase (thousands of dollars) 1940-1944.................. 1944....................... 1943....................... 1942....................... 1941....................... 1940....................... $74,189 23,977 17,947 18,605 5,825 7,835 $2,871 1,229 -309 837 46 1,068 $19,928 10,400 1,967 6,526 1,142 -106 $1,565 213 357 213 356 426 $49,081 12,446 15,482 10,894 4,167 6,091 $745 -312 450 135 115 357 108% 20 18 23 8 11 29% 11 -3 8 (2) 11 2,201% 100 23 336 143 -12 45% 4 8 5 9 12 92% 14 21 17 7 11 120% -19 37 12 12 57 Percentage increase 1940-1944................. 1944....................... 1943....................... 1942....................... 1941....................... 1940....................... 1 Increase for 1944 and 1943 computed from figures excluding reciprocal deposits reported by insured commercial banks; increase for 1942, 1941 and 1940 computed from figures including reciprocal deposits. 2 Less than one-half of 1 percent. N ote: Figures are rounded and will not necessarily add precisely to totals. The rate of growth in deposits of the United States Government was far higher than the rate of growth in the deposits of individuals, partnerships, and corporations. The latter nearly doubled during the 5-year period, rising from $54 billion to $103 billion; the former increased by more than 20-fold, rising from less than $1 billion to nearly $21 billion. The growth in the deposits of the United States Government represents primarily the larger cash balance needed in connection with the greatly increased expenditure of the Government in wartime. However, the growth in bank deposits owned by the Government has been relatively greater than the growth in its ex penditure. In 1939, the amount of Government deposits in com mercial and mutual savings banks was less than 10 percent of its annual expenditure. For 1944 the deposit balance of the Government averaged about 15 percent of its annual expenditure. Relation, of deposit growth to war finance. The growth in total deposits is an accompaniment of the acquisition of additional assets by the banks. During the war period the assets acquired by the banks have consisted almost exclusively of United States Government obligations, and in the defense period chiefly of such obligations. From the end of 1939 to the middle of 1942 the net increase in assets of commercial and mutual savings banks (excluding balances with other banks) amounted to $14.4 billion, of which three-fourths consisted of United States Government obligations; from the middle of 1942 to the end of 1944 the net increase amounted to $59.0 billion, of which'95 percent consisted of United States Government obligations DEPOSITS IN COMMERCIAL AND MUTUAL SAVINGS BANKS 55 and 4 percent of currency and reserve balances at Federal Reserve banks. In the latter period the increase in assets of Federal Reserve banks, accompanying the increase in commercial bank reserves and the issue of currency, also consisted of United States Government obligations. From the middle of 1942 to the end of 1944 the net increase in bank assets other than United States Government obligations, reserves at Federal Reserve banks, and currency was less than the increase in the banks' capital accounts and miscellaneous liabilities. The increase in deposits was therefore slightly smaller than the increase in the banks' holdings of Government obligations and of other assets based on such holdings. The amount of increase in deposits, other than interbank, was $57.1 billion; the increase in Government obligations and assets based on such obligations was $58.3 billion (see Table 27). T a b le 2 7 . A s s e t s ACQUIRED BY COMMERCIAL AND MUTUAL SAVINGS BANKS in th e U n it e d S t a t e s a n d P o s s e s s io n s , 1940-1944 (In millions of dollars) Dec. 30, 1939, to June 30, 1942 June 30, 1942, to Dec. 30, 1944 Dec. 30, 1939, to Dec. 30, 1944 $10,878 $55,941 $66,819 1,739 967 816 -649 2,317 1,370 1,090 3,284 2,186 Total assets acquired, excluding balances with other banks....................................... 14,400 58,979 73,379 Deduct: Increase in capital accounts and miscel laneous liabilities................................................... 386 1,446 1,832 Assets, capital and liabilities United States Government obligations.................. Other loans and investments and miscellaneous assets...................................................................... Currency and reserves with Federal Reserve banks1 Float (cash items in process of collection)............. Balance.............................................................. 14,014 57,533 71,547 Increase in deposits other than interbank. . . . 14,180 57,139 71,319 1 From the end of 1939 to the middle of 1942 the increase in assets of Federal Reserve banks con sisted primarily of gold so that the increase in currency and reserves held by commercial banks was based primarily upon gold; during the period from the middle of 1942 to the end of 1944 the assets ac quired by the Federal Reserve banks consisted almost exclusively of United States Government obliga tions so that for this period the increase in currency and reserves of commercial banks was based primarily on those obligations. Sale of Government obligations affects bank deposits in different ways depending upon the identity of the buyers and sellers. When Government obligations are sold by the Treasury directly to in dividuals or business enterprises, the immediate effect is to reduce the deposit balances of individuals, partnerships, and corporations and to increase the deposits of the Federal Government, leaving total deposits unchanged. As expenditures are made by the Government the balance is transferred back to individuals. When Government obligations are sold by the Treasury directly to banks an expansion takes place in the deposits of the Federal Government with no reduc CHART E P e r c e n t a g e I n c r e a s e in D e p o s i t s o f In d i v i d u a l s , P a r t n e r s h i p s C o r p o r a t i o n s in C o m m e r c i a l a n d M u t u a l S a v i n g s B a n k s J u n e 3 0 , 1 9 4 2 t o D e c e m b e r 3 1 ,1 9 4 4 OX O* an d FEDERAL 29 R.I. 36 36 CONN. DEPOSIT ■MASS. INSURANCE CORPORATION I*. •1 2 5 % -4 -9 % 50% -7 4 % V //A 7 5 % -9 9 % tffl 100% ,-12 4 % 125% ,-149% , 150% and over DEPOSITS IN COMMERCIAL AND MUTUAL SAVINGS BANKS 57 tion in the deposits of others, so that total deposits are increased. As the Government spends the money this increase is transferred to the accounts of individuals, partnerships, and corporations. When banks purchase Government obligations previously held by other investors an increase takes place in the deposits of individuals, partnerships, and corporations, with a corresponding rise in total deposits. Some of these aspects of the acquisition of Government obligations by the banks and the accompanying creation of bank deposits are markedly influenced by the timing of the bond drives. Other aspects of the flow of deposits from the Government to individuals and business and from the latter to the Government (particularly Govern ment expenditures and the payment of taxes) have little relation to the timing of the bond drives or of the purchase of Government obligations by banks. For these reasons substantial differences may appear, for short periods, between the amount of Government obliga tions purchased by the banks and the amount of growth in the de posits of individuals, partnerships, and corporations. However, for the war period as a whole the entire amount of United States Govern ment obligations acquired by commercial and mutual savings banks, and also the amount of Government obligations acquired by Federal Reserve banks which is accompanied by increased reserve balances in those banks, will appear in the growth of deposits of individuals, partnerships, and corporations—except to the extent that the Govern ment maintains a larger cash balance, in the form of deposits in commercial and mutual savings banks, in the postwar than in the prewar period. Change in deposits of individuals, partnerships, and cor porations by regions and States. For the entire nation, excluding territories and possessions, the growth in the deposits of individuals, partnerships, and corporations from the end of 1939 to the end of 1944 amounted to $49 billion, or 91 percent. Three-fourths of this increase occurred during the latter half of the 5-year period. The increase in deposits of individuals, partnerships, and cor porations has not been uniform throughout the country. The growth has been relatively highest in the southern and western part of the nation, and relatively lowest in the northeast. The accompanying map (Chart E) shows the percentage change in deposits of individuals, partnerships, and corporations in each State during the 2 3^ year period from the middle of 1942 to the end of 1944. In Table 28 the amount of these deposits in each State is shown for the three dates, December 30,1939, June 30,1942, and December 30, 1944, with percentage changes for each of the 2 year periods between these dates, and for the 5-year period. 58 FEDERAL DEPOSIT INSURANCE CORPORATION T a b le 28. DEPOSITS OF INDIVIDUALS, PARTNERSHIPS, AND CORPORATIONS IN C o m m e r c ia l a n d M u t u a l S a v i n g s B a n k s , b y F D I C Amount (millions of dollars) FDIC District and State D is t r i c t a n d S t a t e Percentage change Dec. 1939 June 1942 Dec. 1939 to to to June 1942 Dec. 1944 Dec. 1944 Dec. 30, 1939 June 30, 1942 Dec. 30, 1944 United States (excluding p ossession s)......................... $53,358 $65,326 $102,045 22% 56% 91% District 1—t o t a l. .................... Maine...................................... New Hampshire..................... Vermont................................. Massachusetts........................ Rhode Island.......................... Connecticut............................ 6,190 311 267 162 3,695 470 1,284 7,004 346 291 172 4,124 550 1,520 9,261 516 381 235 5,308 746 2,075 13 11 9 6 12 17 18 32 49 31 36 29 36 36 50 66 42 45 44 59 62 D istrict 2—t o ta l...................... New York............................... New Jersey............................. Delaware................................. 20,058 17,936 1,891 230 23,197 20,744 2,187 266 30,327 26,573 3,374 379 16 16 16 15 31 28 54 43 51 48 78 65 D istrict 3—t o ta l...................... Ohio......................................... Pennsylvania.......................... 6,834 2,192 4,642 8,320 2,974 5,346 12,330 4,872 7,457 22 36 15 48 64 40 80 122 61 District 4—to ta l...................... Maryland................................ Virginia................................... West Virginia......................... North Carolina....................... South Carolina....................... Dist. of Col............................. 2,258 755 493 250 315 124 322 2,990 876 695 328 447 179 465 5,011 1,334 1,102 529 961 392 693 32 16 41 31 42 44 44 68 52 59 62 115 119 49 122 77 123 112 205 216 115 D istrict 5—t o ta l...................... Georgia................................... Florida.................................... Alabama................................. Mississippi.............................. Louisiana................................ 1,374 344 282 243 163 343 1,973 507 417 394 206 449 4,098 1,007 979 756 459 897 44 48 48 62 27 31 108 98 135 92 123 100 198 193 248 211 182 162 District 6—t o ta l...................... Kentucky................................ Tennessee............................... Missouri.................................. Arkansas................................. 1,937 383 387 1,019 148 2,530 457 529 1,321 224 4,587 923 1,035 2,158 471 31 19 37 30 51 81 102 96 63 111 137 141 167 112 219 D istrict 7—to ta l...................... Indiana................................... Michigan................................. Wisconsin............................... 2,887 745 1,331 811 3,933 999 1,938 997 7,178 1,863 3,485 1,830 36 34 46 23 83 87 80 84 149 150 162 126 D istrict 8—t o ta l...................... Illinois..................................... Iowa........................................ 3,950 3,425 525 5,084 4,389 695 8,214 6,936 1,278 29 28 32 62 58 84 108 103 143 D istrict 9—to ta l...................... Minnesota............................... North Dakota........................ South Dakota......................... Montana................................. 1,023 766 68 73 116 1,213 886 93 100 133 2,399 1,584 284 226 306 19 16 36 38 15 98 79 206 125 129 135 107 317 210 164 District 10—t o ta l.................... Nebraska................................ Kansas.................................... Oklahoma............................... Colorado................................. Wyoming................................ 1,140 235 280 302 270 53 1,511 311 403 396 339 62 3,154 688 911 774 651 130 33 33 44 31 26 18 109 121 126 95 92 108 177 193 226 156 141 145 D istrict 11— t o ta l.................... Texas....................................... New Mexico........................... Arizona................................... 1,198 1,077 46 74 1,698 1,533 62 102 3,563 3,172 156 236 42 42 34 38 110 107 150 131 197 194 235 218 D istrict 12—t o ta l.................... Idaho....................................... Utah........................................ Nevada................................... Washington............................ Oregon..................................... California................................ 4,509 79 122 33 475 263 3,537 5,873 103 162 53 718 383 4,454 11,922 278 340 96 1,541 884 8,783 30 31 33 59 51 46 26 103 169 110 80 115 131 97 164 252 180 186 224 236 148 N ote: Figures are rounded and will not necessarily add precisely to totals. DEPOSITS IN COMMERCIAL AND MUTUAL SAVINGS BANKS 59 Table 29 shows the percentage growth of deposits of individuals, partnerships, and corporations by Federal Deposit Insurance Cor poration districts listed according to rate of growth. Table 29. PERCENTAGE INCREASE IN DEPOSITS OF INDIVIDUALS, PARTNERSHIPS, and FDIC District No. C o r p o r a t io n s , 1940-1944, States by F D I C D is t r ic t Dec. 30, 1939, to June 30, 1942 June 30, 1942, to Dec. 30, 1944 Dec. 30, 1939, to Dec. 30, 1944 5. Georgia, Florida, Alabama, Mississippi, Louisiana................................................ 44% 108% 198% 11. Texas, New Mexico, Arizona.................. 42 110 197 10. Nebraska, Kansas, Oklahoma, Colorado, Wyoming................................................ 33 109 177 12. Idaho, Utah, Nevada, Washington, Ore gon, California....................................... 30 103 164 7. Indiana, Michigan, Wisconsin................. 36 83 149 6. Kentucky, Tennessee, Missouri, Arkansas 31 81 137 9. Minnesota, North Dakota, South Dakota, Montana................................. 19 98 135 4. Maryland, Virginia, West Virginia, North Carolina, South Carolina, Dis trict of Columbia................................... 32 68 122 8. Illinois, Iowa............................................. 29 62 108 3. Ohio, Pennsylvania................................... 22 48 80 2. New York, New Jersey, Delaware.......... 16 31 51 1. Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Con necticut................................................... 13 32 50 The wide variation in the growth of these deposits in the various regions and States is due to numerous factors, among which the fol lowing may be mentioned: the location of factories producing ma terials for military purposes, the relatively rapid growth in prices of farm products, the geographic incidence of Federal taxation, and the geographic distribution of bond purchases. Some of the wartime conditions which influence the relative growth of deposits have also had a similar influence on the income of the people of the various geographic regions. The percentage increases by States in income payments from 1939 to 1944 are compared in Chart F with the change in the deposits of individuals, partnerships, and corporations from the close of 1939 to the close of 1944.1 In the dominantly agricultural States the rate of growth in deposits was higher than in income payments, while in dominantly industrial regions the rate of increase in deposits was smaller than in income payments. The industrial population has continued during the war to purchase the chief products of the agricultural regions and has 1 Income payments are from the Survey of Current Business, June 1943 and August 1945, 60 FEDERAL DEPOSIT INSURANCE CORPORATION Table 3 0 . GOVERNMENTAL DEPOSITS IN B an ks, by F e d e r a l D e p o s it I n s u r a n c e COMMERCIAL AND MUTUAL C o r p o r a t io n United States Government FDIC District and State Amount (millions) Percentage increase 1939 to 1944 Dec. 30, 1939 Dec. 30, 1944 United States (excluding possessions).......................... $899 $20,763 D istrict 1—to ta l...................... Maine..................................... New Hampshire..................... Vermont................................. Massachusetts........................ Rhode Island......................... Connecticut............................ 38 2 1 1 26 1 6 1,424 47 31 15 931 114 286 3684 1882 2303 2159 3539 9103 4312 D istrict 2—t o ta l...................... New York............................... New Jersey............................. Delaware................................. 192 165 25 1 8,739 8,105 574 60 D istrict 3—t o ta l...................... Ohio......................................... Pennsylvania.......................... 145 30 115 District 4—to ta l...................... Maryland................................ Virginia................................... West Virginia......................... North Carolina...................... South Carolina....................... Dist. of Col............................ 58 36 8 5 7 1 2 D istrict 5— to ta l...................... Georgia................................... Florida.................................... Alabama................................. Louisiana................................ 59 17 10 8 4 20 D istrict 6—t o t a l...................... Kentucky................................ Tennessee............................... Missouri.................................. Arkansas................................. D is t r ic t SAVINGS and St a t e States and political subdivision Amount (millions) Percentage increase 1939 to 1944 Dec. 30, 1939 Dec. 30, 1944 $3,467 $5,047 172 9 7 4 96 17 38 245 17 11 6 149 19 44 43 75 50 47 55 9 18 4460 4810 2181 4197 760 581 173 6 835 599 220 16 10 3 27 168 2,055 836 1,219 1322 2729 960 397 169 228 489 254 235 23 50 3 1,110 371 239 118 224 51 107 1822 927 2977 2475 3218 6571 5943 185 45 39 22 52 27 329 59 66 42 116 45 i 78 32 70 93 122 64 22 588 156 150 107 58 117 892 832 1377 1180 1520 473 217 35 53 33 29 67 411 79 108 85 50 90 89 125 103 156 70 35 54 8 19 25 2 792 144 196 402 50 1369 1789 924 1486 2738 176 29 39 88 20 325 50 76 154 44 84 71 95 75 123 District 7—to ta l...................... Indiana................................... Michigan................................ 64 21 28 15 1,136 283 547 306 1663 1258 1835 1894 273 108 121 43 444 172 195 77 63 58 62 77 D istrict 8—t o ta l...................... Illinois..................................... Iowa........................................ 98 94 5 1,977 1,758 219 1908 1773 4632 356 281 76 489 347 142 37 24 88 D istrict 9— t o ta l...................... Minnesota............................... North Dakota........................ South Dakota......................... Montana................................. 7 6 (*) 1 1 486 399 31 25 30 6960 7578 6701 3992 4834 128 83 4 20 20 222 103 52 28 39 73 24 1071 37 97 D istrict 10—t o ta l.................... Nebraska................................. Kansas.................................... Oklahoma............................... Colorado................................. Wyoming................................ 23 3 8 10 2 (*) 435 109 119 125 69 12 1761 3141 1386 1145 4329 3051 196 29 82 57 17 10 310 37 142 95 22 14 58 31 72 66 25 33 D istrict 11— t o ta l.................... Texas....................................... New Mexico........................... Arizona................................... 41 40 1 0) 557 516 15 26 1251 1177 2340 11086 165 136 15 13 253 215 20 18 54 58 30 37 D istrict 12—t o t a l.................... Idaho....................................... Utah........................................ Nevada................................... Washington............................ Oregon..................................... California................................ 119 1 (l) (x) 8 6 104 1,463 25 37 11 274 123 993 1126 4146 13934 5151 3450 1805 854 442 17 19 6 38 25 338 696 25 27 11 91 72 469 57 46 46 103 140 190 39 1 Less than $500,000. 2211% i 46% N ote: Figures are rounded and will not necessarily add precisely to totals. 61 DEPOSITS IN COMMERCIAL AND MUTUAL SAVINGS BANKS paid higher prices for those products, while purchases of industrial products by the agricultural population have been curtailed by the diversion of industrial production to war supplies. CHART F P e r c e n t a g e In c r e a s e s , 1 9 3 9 t o 1 9 4 4 , in Income Payments, and in D e p o s i t s o f I n d i v i d u a l s , P a r t n e r s h ip s , and C o r p o r a t io n s , b y S t a t e s PERCENTAGE INCREASE IN INCOME PAYMENTS. 1939-1944 220 WASH. A 200 180 ALA. • • VA. 160 • CAL. 140 IND. • M D .0 120 ME 0*'° R.I. « • •CONN. 100 DE -• 80. *> • MINN. • N.Y 60 ' j V * * KAN. • 9 ORE. S.C. • 0 a r iz 7 FLA. • IDAHO • N.DAK. & •N.C. « N.MEX. >KLA. » KY. *C • S. DAK. • COLO. •JA. o^°- N .I >PA. MASS C > •M/SS. • TENN. , , GA. U1 iAH • i| * AAONT. • N.H. 40 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 PERCENTAGE INCREASE IN DEPOSITS OF INDIVIDUALS , PARTNERSHIPS, AND CORPORATIONS, DEC.3M939-DEC.31,1944 Change in governmental deposits by regions and States. Deposits in commercial and mutual savings banks owned by govern ments—Federal, State, and local—at the end of 1944 were nearly six times as large as at the end of 1939. For the 5-year period deposits of the United States Government increased by nearly $20 billion, and those of States and their political subdivisions by less than $2 billion. About 95 percent of the increase in United States Government deposits occurred during the second half of the period. The amounts of Federal and other governmental deposits, respec tively, held by commercial and mutual savings banks in each region and State on December 30, 1939, and December 30, 1944, are shown in Table 30. Percentage changes for the 5-year period are also given. 62 FEDERAL DEPOSIT INSURANCE CORPORATION T a b le 3 1. INTERBANK DEPOSITS IN COMMERCIAL AND MUTUAL SAVINGS BANKS, BY F e d e r a l D e p o s i t I n s u r a n c e C o r p o r a t io n D i s t r i c t a n d S t a t e Amount (millions of dollars) FDIC District and State Dec. 30, 19391 June 30, 1942, with reciprocal deposits Included Excluded Percentage change3 Dec. 30, 19442 Dec. 30, 1939,to June 30, 1942 June 30, 1942,to Dec. 30, 1944 Dec. 30, 1939,to Dec. 30, 1944 19% 31% U nited States........... $9,880 $10,891 $10,277 $12,228 D istrict 1— t o ta l. . . . New Hampshire.. . . Vermont.................. Massachusetts........ Rhode Island.......... Connecticut............ 416 8 6 1 353 11 37 457 10 6 1 382 13 45 435 10 6 1 362 12 44 402 9 7 1 333 12 40 10 22 -6 5 8 22 20 -8 -12 19 36 -8 5 -9 2 7 12 42 -1 28 10 D istrict 2—t o ta l. . . . New Y ork............... New Jersey............. Delaware................. 4,686 4,640 42 3 4,322 4,278 41 4 4,250 4,212 35 3 4,278 4,235 40 3 -8 -8 -4 31 1 1 15 -7 -7 10 31 D istrict 3—t o t a l. . . . Ohio......................... Pennsylvania.......... 942 201 741 1,014 279 736 904 251 653 971 323 648 11 39 -1 7 28 -1 19 78 -1 District 4—to ta l. . . . Maryland................ Virginia................... West Virginia.......... North Carolina....... South Carolina....... Dist. of Col............. 388 119 87 15 125 10 32 502 117 123 26 169 16 51 435 105 109 26 139 12 42 614 116 157 37 234 23 47 29 -1 42 76 35 51 58 41 11 43 40 68 92 11 83 10 103 146 127 191 75 D istrict 5— t o ta l. . . . Georgia.................... Florida..................... Alabama.................. Mississippi.............. Louisiana................. 340 100 63 45 14 118 482 150 100 68 19 145 416 127 89 56 18 126 711 210 160 78 58 205 42 49 59 53 40 22 71 65 81 40 224 63 142 146 186 113 355 99 District 6— t o ta l. . . . Kentucky................ Tennessee................ Missouri.................. Arkansas................. 691 64 127 470 30 970 112 201 613 44 896 102 176 578 40 1,285 151 302 767 65 40 73 59 30 48 43 48 71 33 64 101 155 172 73 142 D istrict 7—t o t a l----Indiana.................... Michigan................. Wisconsin................ 284 76 127 80 369 104 158 107 357 101 153 103 440 129 180 131 30 36 24 33 23 28 18 27 60 74 47 69 D istrict 8—t o t a l. . . . Illinois..................... Iowa......................... 1,004 944 60 1,273 1,172 101 1,226 1,127 99 1,412 1,297 114 27 24 68 15 15 16 46 43 95 D istrict 9—t o t a l. . . . Minnesota............... North Dakota......... South Dakota......... Montana.................. 177 158 3 5 12 250 220 9 7 13 238 211 8 6 13 328 280 13 8 26 41 40 197 55 14 37 33 56 29 102 94 86 362 99 131 D istrict 10— t o t a l ... Nebraska................. Kansas..................... Oklahoma................ Colorado.................. Wyoming................. 240 65 39 79 51 6 338 98 65 99 69 6 313 95 59 88 65 6 516 145 100 163 97 11 41 52 68 25 35 6 65 53 70 84 48 85 132 132 187 131 100 97 D istrict 11—t o t a l ... Texas....................... New Mexico............ Arizona.................... 321 316 3 2 391 384 5 3 358 351 4 3 685 673 9 4 22 21 58 63 92 92 108 44 134 133 230 134 D istrict 12—t o ta l. .. Idaho....................... Utah......................... Nevada.................... Washington............. Oregon..................... California................ 391 3 22 1 52 23 290 522 4 31 1 76 33 377 449 3 29 1 63 28 324 586 6 47 1 89 39 403 34 26 42 40 46 40 30 30 59 61 -38 42 41 24 74 101 129 -13 107 98 62 10% DEPOSITS IN COMMERCIAL AND MUTUAL SAVINGS BANKS 63 Change in interbank deposits by State. The rate of growth in interbank deposits during the period from the end of 1939 to the middle of 1942 was less than one-half, and during the period from the middle of 1942 to the end of 1944 approximately one-third, of the rate of growth in deposits owned by individuals, partnerships, and corporations. However, in both periods the variation among the States in rate of growth was greater in interbank deposits than in the deposits of individuals, partnerships, and corporations. This is not remarkable, since interbank deposits are directly affected by the flow of payments throughout the nation and for this reason are particularly volatile. From the end of 1939 to the middle of 1942 the percentage change in interbank deposits ranged from a loss of 8 percent in New York to an increase of 197 percent in North Dakota. From the middle of 1942 to the end of 1944 the percentage change varied from a decline of 38 percent in Nevada to an increase of 224 percent in Mississippi. The figures for each State are given in Table 31. A comparison, for the 5-year period from the end of 1939 to the end of 1944, between the change in interbank deposits and that in deposits of individuals, partnerships, and corporations in each State is given in Chart G. This chart indicates a fairly close relation between the growth in the two categories of deposits. The northeastern part of the United States, in which the rate of growth in deposits of in dividuals, partnerships, and corporations has been the lowest, is the area with the smallest growth in interbank deposits; while the growth in interbank deposits has been most rapid in the southern and western region in which the growth in deposits owned by individuals, partner ships, and corporations has been the highest. T o ta l M oney S u p pl y Deposits in commercial and mutual savings banks are the major part of the nation’s means of payment, or money supply. Checks on demand deposit accounts are used directly in the business transactions of the people of the nation. Time and savings deposits are held largely as available reserves should need arise for an additional amount of cash, or means of payment. However, bank deposits do not constitute all the nation’s means of payment. Currency, including silver and minor coins, is used for many transactions; the United States Govern ment maintains checking accounts with Federal Reserve banks; and Footnotes to Table 31: 1 Includes reciprocal deposits. 2 Excludes reciprocal deposits in insured commercial banks. 3 Change for December 30, 1939, to June 30, 1942, derived from figures including reciprocal de posits; for June 30, 1942, to December 30, 1944, from figures excluding reciprocal deposits. Change from December 30, 1939, to December 30, 1944, derived from the percentage changes for the two shorter periods. N ote: Figures are rounded and will not necessarily add precisely to totals. 64 FEDERAL DEPOSIT INSURANCE CORPORATION CHART S P e r c e n t a g e I n c r e a s e s , 1 9 3 9 t o 1 9 4 4 , in In t e r b a n k D e p o s it s a n d in D e p o s i t s o f In d iv id u a l s , Pa r t n e r s h i p s , a n d C o r p o r a t i o n s , b y S t a t e s p e rc e n ta g e in c r e a s e in INTERBANK DEPOSITS, 1939-1944 370' 360. N.DAK. • •MISS. 340. 320_ 300_ 280. 260. 240. • fsJ.MEX. 220 200 KAN. 180 160 KV! » W.1/A. • 140 \. ° i— <O VA. 100. M IN f • 80 Di * /via 60 * OHIO. WIS. • ILL. • ALA. P* LA. • S. DAK. WASH • lHO • ORE. IND c*a • #VT. JVRK. Z. •N.C. 120 40 FLA • TE NIJ. J 1 MICH. • DEL. • R.f 20 N.H. o J/IAtt ., 20 40 y — , ME. , , ,_,__;__,__,--,_,--,--, *PA. A y. N.J NEV. • 60 80 100 120 140 160 180 200 220 240 260 280 300 320 PERCENTAGE INCREASE IN DEPOSITS OF INDIVIDUALS, PARTNERSHIPS, AND C OR POR ATION S, 1939 TO 1944- 65 TOTAL MONEY SUPPLY deposits in the postal savings system are essentially similar to savings deposits in banks. On the other hand, one class of bank deposits— interbank—is customarily excluded from the total money supply in order to avoid double counting. Total money supply. At the close of 1944 the total money supply of the nation, understood as the total of deposits and currency other than those owned within the banking system, amounted to $156 billion. This figure is made up of the following items: Billions of dollars Total money supply................................................................. Deposits in commercial and mutual savings banks.............. Deposits in the postal savings system................................... U. S. Treasury deposits in Federal Reserve banks.............. Currency outside banks........................................................... $156.4 129.9 2.3\ .4/ 23.8 Percent of total 100% 83 « 15 At the end of 1939 the total money supply amounted to $67 billion. The increase during the five years, 1940-1944, was $90 billion, or $134 percent. The amounts on each June 30 and December 31 during this period are shown in Table 32. Table 32. T o t a l D e p o sit s a n d C u r r e n c y , E x c l u d in g I n t e r b a n k O b l ig a t io n s , J u n e 30 a n d D e c e m b e r 31, 1939-1944 (In millions of dollars) Date 1944— Dec. June 1943— Dec. June 1942— Dec. June 1941— Dec. June 1940— Dec. June 1939— Dec. 3 0 ........ 30........ 31 30 ........ 31 . . . 30 ........ 3 1 ........ 30........ 3 1 ........ 29........ 3 0 ........ Total $156,388 141,677 128,490 114,742 105,084 85,326 82,917 77,960 74,337 69,072 66,887 Deposits in commercial and mutual savings banks $129,847 117,926 107,100 96,734 88,844 72,708 71,076 67,437 65,296 60,802 58,529 Deposits in postal savings system $2,342 2,034 1,788 1,577 1,417 1,316 1,314 1,304 1,304 1,293 1,279 U. S. Treasury deposits in Federal Reserve banks $440 650 579 455 799 290 867 980 368 234 634 Currency outside banks1 $23,759 21,067 19,023 15,976 14,024 11,012 9,660 8,239 7,369 6,743 6,445 1 Includes Treasury cash other than gold. Ownership of the money supply. Of the total money supply at the end of 1944, over $26 billion was owned by governments—Federal, State, and local. The remaining $130 billion may be treated as the money supply of individuals and business, including religious, civic, and other organizations. This figure is somewhat exaggerated, since it includes deposits of foreigners in commercial and mutual savings banks in the United States, currency owned by State and local governments, United States currency held in foreign countries, and probably some currency which has been destroyed. Table 33 shows how much of the money supply was owned by governments, and how much by business and individuals, on each June 30 and December 31, FEDERAL DEPOSIT INSURANCE CORPORATION 66 from the end of 1939 to the end of 1944, and also the change in each category during each six months of the 5-year period. T a b le 33. T o t a l DEPOSITS AND CURRENCY, EXCLUDING INTERBANK OBLIGATIONS, J u n e 30 a n d D e c e m b e r 31, 1939-1944, b y C l a s s o f O w n e r (In millions of dollars) Change during 6 months Owned by— Owned by— Date Total Govern ment1 1944—Dec. 30.............. June 30.............. 1943— Dec. 31.............. June 30.............. 1942— Dec. 31.............. June 30 .............. 1941— Dec. 31.............. June 30.............. 1940— Dec. 31.............. June 29.............. 1939— Dec. 30.............. $156,388 141,677 128,490 114,742 105,084 85,326 82,917 77,960 74,337 69,072 66,887 $26,588 25,360 16,046 13,480 13,835 6,692 7.131 5,927 5.132 4,851 5,079 Individuals and business2 $129,800 116,317 112,444 101,262 91,249 78,634 75,786 72,033 69,205 64,221 61,808 Total Govern ment $14,711 13,187 13,748 9,658 19,758 2,409 4,957 3,623 5,265 2,185 $1,228 9,314 2,566 -3 5 5 7,143 -4 3 9 1,204 795 281 -2 2 8 Individuals and business $13,483 3,873 11,182 10,013 12,615 2,848 3,753 2,828 4,984 2,413 1 Includes deposits of the United States Government and of States and their political subdivisions in commercial and mutual savings banks; United States Treasurer’s general account in Federal Reserve banks, and Treasury cash other than gold. 2 Includes deposits of individuals, partnerships, and corporations, and certified checks, etc., in commercial banks; total deposits in mutual savings banks; deposits in the postal savings system; and currency outside the Treasury and banks. Of the increase in the money supply during the five years, $22 billion occurred in the amount owned by governments, chiefly the Federal Government, and $68 billion in the amount owned by in dividuals and business. By years the growth in deposits and currency of individuals and business is as follows: Billions of dollars 1940-1944.......................................................................................... 1944............................................................................................... 17.3 1943................................................................................................21.2 1942............................................................................................... 15.5 1941............................................................................................... 6.6 1940............................................................................................... 7.4 $68.0 Percent 110% 15 23 20 10 12 Types of deposits and currency owned by individuals and business. Of the $130 billion of deposits and currency owned by individuals and business at the end of 1944, $67 billion was in the form of demand deposits in commercial banks, $40 billion in savings deposits in commercial and mutual savings banks and the postal savings system, and $23 billion in the form of currency. The dis tribution for year-end and mid-year dates for the preceding five years is shown in Chart H. During the 5-year period, 1940-1944, the portion of the deposits and currency owned by individuals and business which was in the form of currency increased from 10 to 18 percent. The portion held 67 TOTAL MONEY SUPPLY in demand deposits rose from 47 to 51 percent, and that in the form of time deposits declined from 43 to 30 percent. For the three war years, and also for the entire 5-year period, about one-fourth of the increase in deposits and currency owned by individuals and business was in the form of currency. The figures are given in Tables 34 and 35. CHART H D e p o s it s a n d C u r r e n c y O w n e d b y In d i v i d u a l s B u s in e s s , b y T y p e 19 3 9 - 1944 and BILLIO N S OF D O LLA R S B IL L IO N * OF D O L L A R S Table 34. CLASSIFICATION OF DEPOSITS AND CURRENCY O w n e d b y I n d iv id u a ls a n d B u s in e s s , Amount (millions of dollars) Date Total 1944— Dec. June 1943— Dec. June 1942— Dec. June 1941— Dec. June 1940— Dec. June 1939— Dec. 30___ 30.... 31___ 30.... 31----30.... 31___ 30.... 31___ 29.... 30___ $129,800 116,317 112,444 101,262 91,249 78,634 75,786 72,033 69,205 64,221 61,808 Time and savings deposits1 Demand deposits* $39,532 35,440 32,462 29,950 28,097 26,863 27,319 27,497 27,304 27,048 26,613 $66,762 59,996 61,145 55,499 49,205 40,834 38,852 36,333 34,575 30,474 28,793 Currency3 $23,505 * 20,881 18,837 15,814 13,946 10,936 9,615 8,204 7,325 6,699 6,401 1939-1944 Percentage of total in— Time and savings deposits Demand deposits Currency 30% 30 29 30 31 34 36 38 39 42 43 51% 52 54 55 54 52 51 50 50 47 47 18% 18 17 16 15 14 13 11 11 10 10 1 Includes all deposits in mutual savings banks and the postal savings system. a Includes certified checks, etc., and unclassified deposits in noninsured commercial banks. * Currency outside banks and the United States treasury. Currency held abroad and by State and local governments is included. N o t e : Figures are rounded and will not necessarily add precisely to totals. 68 FEDERAL DEPOSIT INSURANCE CORPORATION T a b le 3 5 . ANNUAL INCREASE IN DEPOSITS AND CURRENCY O w n e d b y I n d i v i d u a l s a n d B u s i n e s s , 1940-1944 Amount (billions of dollars) Year Total Percentage of increase in— Time and savings deposits Demand deposits Currency T o ta l..................... $68.0 $12.9 $38.0 $17.1 1944....................... 1943....................... 1942....................... 1941....................... 1940....................... 17.4 21.2 15.5 6.6 7.4 7.1 4.4 .8 5.6 11.9 10.4 4.3 5.8 4.7 4.9 4.3 2.3 .9 N o te: .7 Time and savings deposits Demand deposits Currency 19% 56% 25% 41 21 5 32 56 67 65 78 27 23 28 35 13 9 Figures are rounded and do not necessarily add precisely to totals. The increase in the proportion of business and individual cash balances held in the form of currency is due to various factors, in cluding the following: the relatively large rise in incomes of wageeamers, many of whom have not been accustomed to maintain checking accounts; the inconvenience of cashing checks under wartime conditions and the inconvenience of charge accounts under consumer credit restrictions; the movement of population and difficulties in establishing bank accounts and charge accounts in new places; illegal transactions such as “ black market” sales; and the stimulus to tax evasion resulting from high tax rates. PART FOUR LEGISLATION AND REGULATIONS F e d e r a l Le g is l a t io n R e l a t in g t o In su r e d B a n k s o r t h e C o r p o r a t io n INTERNAL REVENUE COLLECTORS— CHECKS AND MONEY ORDERS [Pu b l ic L a w 541— 78 t h C o n g r e ss ] [C h a p te r 672— 2 d S ession ] [H. R. 5565] AN ACT To authorize collectors of internal revenue to receive certain checks and money orders in payment of taxes and for revenue stamps. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 3656 of the Internal Revenue Code (relating to payment of taxes by check) is amended to read as follows: “ SEC. 3656. PAYM ENT BY CHECK AND MONEY ORDERS. “ (a) C e r t i f i e d , C a s h ie r s ’ , a n d T r e a s u r e r s ’ C h e c k s an d M o n e y O r d e r .— “ (1) A u t h o r i t y t o r e c e i v e . — It shall be lawful for collectors to receive for internal revenue taxes or in payment of stamps to be used in payment of internal revenue taxes certified, cashiers’, and treasurers’ checks drawn on National and State banks and trust companies, and United States postal, bank, express, and telegraph money orders, during such time and under such regulations as the Commissioner, with the approval of the Secretary, may prescribe. “ (2) D is c h a r g e o f l i a b i l i t y .— ‘ ‘ (A) Check Duly Paid.— No person who may be indebted to the United States on account of internal revenue taxes or stamps used or to be used in payment of internal revenue taxes who shall have tendered a certified, cashier’s, or treasurer’s check or money order as provisional payment therefor, in ac cordance with the terms of this subsection, shall be released from the obligation to make ultimate payment thereof until such certified, cashier’s, or treasurer’s check or money order so received has been duly paid. “ (B) Check Unpaid.— If any such check or money order so received is not duly paid the United States shall, in addition to its right to exact payment from the party originally indebted therefor, have a lien for the amount of such check upon all the assets of the bank on which drawn or for the amount of such money order upon all the assets of the issuer thereof; and such amount shall be paid out of its assets in preference to any or all other claims whatsoever against said bank or issuer except the necessary costs and expenses of ad ministration and the reimbursement of the United States for the amount expended in the redemption of the circulating notes of such bank. “ (b) O t h e r C h e c k s . — “ (1) A u t h o r i t y t o r e c e iv e . — Collectors may receive checks in addition to those specified in subsection (a) in payment of taxes other than those payable by stamp during such time and under such rules and regulations as the Commis sioner, with the approval of the Secretary, shall prescribe. “ (2) U l t i m a t e l i a b i l i t y . — If a check so received is not paid by the bank on which it is drawn the person by whom such check has been tendered shall remain liable for the payment of the tax and for all legal penalties and additions to the same extent as if such check had not been tendered.” Approved December 22, 1944. 71 72 FEDERAL DEPOSIT INSURANCE CORPORATION R e p o r t o f t h e C o r p o r a t io n o n A b s o r p t io n of Ex c h a n g e Ch a r g e s LETTER TO THE CHAIRM AN, SENATE COMM ITTEE ON BANKING AND CURRENCY April 27, 1944 F. W a g n e r , Chairman Senate Committee on Banking and Currency Washington, D. C. H onorable R obert M y dear Senator: As requested, we are pleased to submit herein the report of this Corporation on S. 1642 entitled “ A Bill to amend the Federal Reserve Act, as amended, to provide that the absorption of exchange and collection charges shall not be deemed the payment of interest on deposits” . We recommend enactment of H. R. 3956, an identical measure, which already has been passed by the House of Representatives. While this legislation is in the form of an amendment of the existing law, the primary issue before the House in its consideration of the Bill was what Congress meant to include in the term “ interest” in the 19331 and 19352 statutes prohibiting payment of interest on demand deposits. As is obvious from the debates on the Bill, the House concluded that in its opinion Congress never intended that ab sorption of exchange be included in the term “ interest” . We share this view and in our administration of the 1935 Act, in its application to non-member insured banks, which substantially restates the provisions of the 1933 Act applicable to member banks, we have so construed the law. Historically the two practices are separate and distinct and the legislative history of both Acts clearly shows that Congress intended to regulate payment of interest only. The evils which these statutes were designed to correct, as the hearings and the debates in Congress show, were attributed to actual interest payments and not to absorption of exchange or other expenses for customers. At no place in the legis lative record of the present statutory provisions is there any mention of absorption of exchange. It is a fact, however, that as respects member banks, an administrative ruling has been made which prohibits them from absorbing exchange and this ruling is based solely upon the interest statute. If, therefore, the interest statute does not extend to absorption of exchange, as we believe is clear as a matter of law, the ruling is invalid for lack of legislative authorization. But while its invalidity seems clear, it is nevertheless being actively and continuously enforced so that it will continue to have the force of law unless Congress enacts the pending Bill which specifically states that absorption of exchange is not interest. As the adverse impact of the ruling is borne principally by non-member banks, judicial relief to test the correctness of the ruling is not available, since these institutions have no standing to question a ruling which does not by its terms apply to them, even though its full impact falls upon them indirectly. Although enactment of the Bill merely declares and reaffirms the intent of the present law, failure of passage means submitting to continued enforcement of a ruling which lacks Congressional sanction. 1 Section 19 of the Federal Reserve Act, Act of June 16, 1933, ch. 89, sec. 11(b), 48 Stat. 181, sup plemented by Act of August 23, 1935, ch. 614, sec. 324(a), 49 Stat. 714. * Act of August 23, 1935, ch. 614, sec. 101, 49 Stat. 702. ABSORPTION OF EXCHANGE CHARGES 73 Opposition to the Bill has been solicited upon the ground that its passage means a blow to par clearance of checks. But par clearance of checks was not deterred by the practice of paying interest on demand deposits and the interest statute was not designed to further par clearance, but was intended only to prevent attraction of funds to money centers for use in stock market speculation. Desire to achieve more wide-spread par clearance is not a sufficient reason for sustaining a ruling which misapplies the interest statute. Opposition to enactment of the Bill on this ground is a confession that the present law is not only being misconstrued but is being misapplied to a field in which Congress has pointedly refrained from legislating since in 1917 it expressly authorized member and non-member banks to charge exchange on clearings through private commercial banking channels. (Section 13 of the Federal Reserve Act, Act of June 21, 1917, ch. 32, sec. 4, 40 Stat. 234.) Par clearance is pertinent to this legislation only because the prohibition against absorption operates to force banks which charge exchange to clear at par. This circumstance demonstrates that, in enacting the interest statutes, Congress did not intend to affect absorption of exchange because the historic bitterness engendered by the par clearance controversy is such that some mention of the problem would have been made in the 1933 or 1935 Congressional considerations of the interest laws. But no mention was made. Thus, while the effect of absorption on par clear ance may be pertinent to a discussion favoring the enactment of the Bill, it is not a reason which may be advanced in opposition to its passage, unless the opposition is prepared to sacrifice the constitutional supremacy of Congress in legislative matters in order to strike a blow at non-par banking. Furthermore, while the defeat of the Bill would be a direct blow at banks which charge exchange, the passage of the Bill will not spread the practice of charging exchange to any greater degree than has been marked the past 10 years. During this period, exchange has been absorbed by banks desiring to do so, and the interest statute was not enforced against exchange absorption, unless covertly, until the recent ruling (September 1943) defining absorption of exchange as interest. This was the first revival of the issue after it had been laid to rest in 1937 following its brief and uncertain career in that year. During this 10 year period, the number of banks charging exchange has diminished until today only slightly more than 2500 institutions impose these charges. How, then, can the mere return to a practice so briefly interrupted tend to increase the number of banks which charge exchange? If par clearance is jeop ardized by exchange absorption, we believe the facts should be fairly assembled and the issue squarely and openly presented for Congressional consideration and not resolved indirectly in the disguise of an interest ruling. But it must be said that evidence thus far produced has consisted only of fearful apparitions of the consequences of general departure from par clearance instead of facts indicating that absorption of exchange threatens par clearance. Opposition to the Bill is also being drummed up on the false premise that ab sorption of exchange has led to diversion of funds from “ normal” banking channels and to “ unsound banking” conditions. The facts submitted in the cases cited during the hearings on the Bill to the House Committee on Banking and Currency where these charges were made do not support these conclusions. In five of the seven cases we have received information from the banks involved showing affirmatively that banking funds have not been diverted from “ normal” banking channels and unsound banking conditions have not arisen as the result of exchange absorption. If such conditions do occur, ordinary supervisory methods can easily effect timely corrections. Here again the fact that unsound practices have not resulted from actual experience in absorption of exchange charges during the past ten years is submerged in the dreadful descriptions of possible consequences, which are wholly imaginary. Care must be exercised that the opprobrious connotations of the terms “ unsound” 74 FEDERAL DEPOSIT INSURANCE CORPORATION banking and “ unnatural” balances are not accepted as substitutes for facts to show that absorption of exchange has produced either consequence. It should be observed that exchange charges have been singled out as the one expense which banks may not absorb for depositors without violating the interest law, while other expenses may be absorbed with approval. The distinction is rested on the theory that exchange charges are “ out-of-pocket” expenses. The term “ outof-pocket” expenses has no precise significance by legal definition or common usage. It suggests expenses of the type which one may pay for “ incidentals” as distinguished from more important expenses. Treating the term to mean expenses identifiable only with a particular transaction as distinguished from those which are not, we find that exchange charges are the only “ out-of-pocket” expenses which are ad ministratively prohibited from being absorbed. Thus all banks are permitted to absorb their own service charges by service charge allowances in consideration of balances maintained. Banks today generally have established service charge schedules which allow the theoretical earning value of their customers’ accounts to be offset against their charges for the services which they render to customers in collecting checks de posited, paying checks and otherwise furnishing them depositary service. These charges are frequently called “ activity” charges. If the allowances to the customers for the earning value of their accounts are less than the activity charges for the services they require, the excess is billed to the customers as service charges. How ever, where the earning allowances exceed the activity charges, the customers are neither paid nor credited with the difference. These service charge credit allowances to customers are granted in direct proportion to the size of the balances which they maintain. This is accomplished either through schedules under which activity allowances increase proportionately with the minimum balances maintained by depositors or through individual analysis of costs of handling depositors’ accounts, the latter system being generally employed by banks in handling the accounts of their bank customers and other large depositors. The effect of these allowances is that the banks absorb their own service charges in direct proportion to the size of the balances which their depositors maintain. This has been held not to be a violation of Section 19 of the Federal Reserve Act prohibiting payment of interest on demand deposits. (January 1944 Federal Reserve Bulletin, p. 13). As banks may absorb their own service charges without violating the regulations of either the Federal Deposit Insurance Corporation or the Board of Governors of the Federal Reserve System, why should member banks be prohibited from absorbing the exchange charges which they pay to other banks? We must bear in mind that exchange charges are service charges of the banks making the charges. When paid out by collecting banks in connection with their depositors’ business, they are merely one of the expenses of collecting checks and historically have been treated as part of the expenses of bank operation. The Federal Reserve Board has expressly ruled that member banks may pay and absorb the intangible property taxes levied by states such as Michigan, Indiana and Kentucky computed on their depositors’ bank balances, without violating the interest statute. These taxes are laid on the depositors and not on the banks. They are in every sense “ out-of-pocket” expenses as the term is used in relation to ab sorption of exchange. Rulings on this question follow the exception contained in the Board’s Revision of Regulation Q, effective January 1, 1936, which provided that: “ The term ‘interest’ includes the payment or absorption of exchange and collection charges which involve out-of-pocket expenses, but does not include the payment or absorption of taxes upon deposits whether levied against the bank or the depositor nor the payment or absorption of premiums on bonds securing deposits ABSORPTION OF EXCHANGE CHARGES 75 where such bonds are required by or under authority of law.” (1935 Federal Reserve Bulletin, p. 864). (Emphasis supplied). We think, therefore, that apart from the question whether the interest statute was designed to prevent absorption of “ out-of-pocket” expenses, it would be entirely inconsistent to permit the prohibition against absorption of exchange to be con tinued since all other types of “ out-of-pocket” expenses may be absorbed. This circumstance, as well as the fact that the Corporation has from the beginning interpreted the interest statute governing non-member banks which it administers as not prohibiting absorption of exchange, prompted the Federal Deposit Insurance Corporation to caution the Federal Reserve Board on August 20, 1943 before its controverted ruling was issued that “ the theory of the Board of Governors would appear to require it to outlaw as well the absorption of service charges and other expenses for depositors which all banks now incur to some degree” , that its proposed ruling was “ simply another attempt to force par clearance upon non-member banks” and that “ it hopes that the Board of Governors will not give rise to a situation where two Federal agencies make conflicting decisions to the consternation of the public” ; and to suggest that “ in such a situation we consider it singularly ap propriate to await precise directions from Congress” . (House Hearings, p. 599). Even if our concept of the Congressional intent be wrong, the evidence adduced at the hearings before the House Committee on the present Bill is abundantly convincing that absorption of exchange by a correspondent bank pursuant to arrangement with its bank customers involves no interest because the bank which absorbs the exchange is usually, if not always, a complete stranger to the depositorowner of the check, who is the person ultimately benefited by the absorption. Since the forwarding bank derives no financial benefit from the absorption because it acts as agent for the owner of the check, and since the latter maintains no deposit in the intermediate correspondent bank which absorbs the exchange charges, wherein can there be a “ payment of interest on demand deposits” ? Under the most generous construction of the law in this state of facts there is no violation of the law because the “ payment” is not made to a “ depositor” of the bank, that is, unless the “ sins” of the correspondent bank be attributed to the customer-bank. Since consideration of the Bill by the House, the Board of Governors has partially receded from its position that absorption of exchange is interest and now holds that a bank may, without violating the law, absorb exchange charges where it does not agree to do so as a means of soliciting new accounts or retaining existing accounts and where the expense involved in making collection from depositors would exceed the amount of the exchange charges. This leaves each bank subject to the uncer tainties of arbitrary administrative action in individual cases. Examiners may, applying no uniform rule, permit one bank to absorb exchange in amounts which another bank is prohibited from absorbing. Compensation, in the sense of interest, is the benefit received by the person compensated; thus it operates upon the recipient and is wholly independent of the intent of the person from whom the alleged payment flows. Indeed, under the Federal Reserve's basic theory, compensation occurs even though the party ab sorbing an expense for another would suffer a greater loss by collecting than by foregoing collection. Consequently, the new thesis of “ permissible compensation” has no basis in law and cannot be sustained upon any legal principles. The law does not say that interest on demand deposits may be paid in small amounts, nor that it may be paid to effect operating efficiency, nor that it may be paid when not intended as an inducement to attract or retain deposit accounts. The statute provides that interest on demand deposits may not be paid at all. If, as is contended, absorption of exchange is interest, then all absorption of exchange is prohibited. No amount of rationalization can create a distinction between per 76 FEDERAL DEPOSIT INSURANCE CORPORATION missible absorption and prohibited absorption. Such an arbitrary distinction may not be made by “ administrative” definition of legal terms which have well estab lished meanings in the law. There are forceful affirmative reasons for urging Congress to pass this legislation. Approximately 2500 banks in the United States derive a substantial part of their operating revenues from exchange charges. In most instances these institutions are small, locally-owned, independent banks operating in rural communities. In 1942 less than 100 of these banks had deposits exceeding $2 million. They are not only small businesses, but are the financial institutions which serve small business. These banks are required to maintain legal reserves and surplus funds on deposit with city banks. The banking system derives substantial profit and benefit from these interbank deposits and has been willing and is well able to absorb exchange charges imposed by the non-par banks without passing them back to the public. Many banks were absorbing these charges until prevented by the recent administrative ruling, and investigation does not disclose that any unsound banking practices resulted therefrom. Nor can it be said that these interbank balances represent a diversion of funds from “ normal” banking channels. Interbank deposits—both as to size and location— are determined by the necessities of banking conditions and are dictated by the banking requirements of the depositing banks and their patrons. There has been no evidence produced to substantiate the charge that these inter bank balances have deviated from normal channels in order to obtain benefits outside the pale of normal banking service. It is clear that if exchange absorption remains outlawed, the effect will be to force banks to discontinue charging exchange and the customer relationships of those which continue to do so will be, as they already have been, seriously disturbed. There is grave danger that many of these banks will be forced to discontinue business if they are deprived of the revenue which they have been deriving from exchange. While the smaller banking institutions which charge exchange will be affected severely by a continuance of the prohibition against absorption of exchange, neither the larger banks nor the banking system as a whole will be injured by the passage of the pending Bill which simply permits banks to absorb exchange if they desire to do so, but places them under no compulsion so to do. The banks which are ad versely affected, therefore, are entitled to greater consideration by Congress than those which have only an academic interest in the problem as is the case with most of the banks which have opposed passage of this legislation. We call the attention of the Committee to the fact that the Federal Deposit Insurance Corporation has adopted a formal ruling which holds that the law (49 Stat. 702, ch. 614) prohibiting payment of interest on demand deposits by non member insured banks, does not prohibit absorption of exchange. This ruling restates in codified form the position which the Corporation has taken on this issue since 1935 when the law was first passed and reads as follows: “ The absorption of normal or customary exchange charges by an insured nonmember bank, in connection with the routine collection for its depositors of checks drawn on other banks, does not constitute the payment of interest within the provisions of Section 304.2 (a) of Part 304 of the Corporation's Rules and Regulations.” For the foregoing reasons, we recommend that the Bill H. R. 3956 be voted out by your Committee and passed by the Senate. A memorandum dealing with the principles of law involved, is enclosed for the information and use of the Committee. By direction of the Board: F r a n c is C. B r o w n General Counsel ABSORPTION OF EXCHANGE CHARGES 77 GENERAL COUNSEL’S M EMORANDUM R e : H. R. 3956 Reason for Favoring Legislation: The proposed Bill reverses an administrative ruling of the Board of Governors of the Federal Reserve System which, we believe, goes beyond the field of regulation authorized by Congress and which, under the pretense of regulating interest, is designed to discourage and eliminate the practice of charging exchange. Our support of the measure stems principally from our opposition to the practice of circum venting the legislative authority of Congress by administrative regulation, and secondarily, from our interest as insurer of a large group of banks, not members of the Reserve System, which feel the full impact of the ruling although without legal right to contest its validity, and finally, from our apprehension of the con sequences of the campaign to compel these institutions to discontinue their practice of charging exchange— a practice expressly authorized both by Congress and by many state legislatures. The Present Law: We observe a common and single legislative purpose in the laws prohibiting the payment of interest on demand deposits administered, as to member banks of the Federal Reserve System, by the Board of Governors of the Federal Reserve System (Sec. 19 of the Federal Reserve Act, as amended by Sec. 11 (b) of the Banking Act of 1933, and Sec. 324 (a) of the Banking Act of 1935) and, as to nonmember insured banks, by the Federal Deposit Insurance Corporation (Sec. 12B of the Federal Reserve Act, as amended, subsec. (v), paragraph (8), added by Sec. 101 of the Banking Act of 1935). Although some differences in the two laws exist, it is evident that Congress used the word “ interest” in the same sense in each provision. Because of the absence of legislative standards circumscribing the power of the Reserve Board under Sec. 324 (a) of the 1935 Act, to determine what shall be deemed to be a payment of “ interest” , the asserted delegation to it of legislative power to broaden the common legal meaning of the term is of doubtful validity under decisions of the Supreme Court of which Panama Refining Co. v. Ryan (1935) 293 U. S. 388, 79 L. ed. 446, is a typical example. There the Court said that executive regulations “ become, indeed, binding rules of conduct, but they are valid only as subordinate rules and when found to be within the framework of the policy which the legislature has sufficiently defined” (p. 428). Therefore the law under which the Reserve Board operates is necessarily on a parity with that governing the Federal Deposit Insurance Corporation, which does not expressly contain such delegation. Regardless of the validity of the delegation, however, the Reserve Board has not currently exercised its power to define interest to include the practice of absorbing exchange. It has issued a ruling in a specific case and has published general discussions of the subject which constitute administrative “ case law” on the question of absorption of ex change applicable to member banks. The Board explained before the House Banking and Currency Committee that its recent action was based not on its power of definition but on its application of the word “ interest” to the practice of absorbing exchange. Although applicable only to member banks, the adverse impact of this ruling operates directly and almost exclusively upon nonmember institutions, since principally member banks act as clearing or collecting agents or correspondents on items forwarded for collection from nonmember banks (2529 in number) which charge exchange on out-of-town remittances. History of Par Clearance Controversy: To understand the true significance, social and economic, of the question of absorption of exchange, it is necessary briefly to review the history of the fight for 78 FEDERAL DEPOSIT INSURANCE CORPORATION and against compulsory and universal par clearance through the Federal Reserve System. The banks which now charge exchange are located principally in sixteen states of the south and middle west. These institutions are primarily small, inde pendent, locally-owned banks in important agricultural areas which have been providing local credit accommodations and banking facilities to their communities. The revenue which these banks derive from exchange has been a substantial, and in many cases a vital, part of their income. They have adhered steadfastly to their age-old practice of charging exchange on remittances out of town, notwithstanding recurrent efforts on the part of the Federal Reserve Board in past years to force them to remit at par on collections by member banks through the Federal Reserve banks. After the Federal Reserve System was set up certain Federal Reserve banks instituted compulsory par remittance by member banks on checks sent through them. In 1915 the Federal Reserve Board instituted a voluntary par remittance plan. However, this failed in a number of areas because of the small percentage of banks (25%) which agreed to remit at par. In 1916 the Federal Reserve Board instituted compulsory par remittance which was put into effect in the face of intense opposition on the part of many national banks in country areas, and the efforts of a committee of the American Bankers Association to obtain postponement of the compulsory plan failed. Although many of the larger banks favored the compulsory plan because they were already remitting at par, the then (1916) president of the American Bankers Association declared his sympathies with the country banks in these words: “ The transfer of funds is a service which is as much entitled to compensation, when made by a bank, as it is when made by an express company or by the postal official” . A committee of the American Bankers Association reported at the 1917 convention that it had sounded the opinion of bankers and that over 75% opposed the par collection plan. However, as the Federal Reserve Board had observed in the preceding year, the force of competition with par clearing member banks was driving many non-member banks onto the par list. In 1917, section 13 of the Federal Reserve Act was amended expressly to permit banks to make reasonable exchange charges on collections otherwise than against the Federal Reserve banks. In accepting this amendment the non-par banks, sup ported by an opinion of the General Counsel of the American Bankers Association, had understood that the amendment would permit non-member banks to charge exchange on collections which the Federal Reserve banks were handling in the customary agency capacity. However, the Attorney General in 1918 (31 Op. Atty. Gen’l. 245, 251) issued an opinion to the contrary, so that non-member banks were prohibited from charging exchange not only on collection items owned by the Federal Reserve banks, but also on those which they were handling in an agency capacity. This deprived banks of the clearing facilities of the Federal Reserve banks for checks drawn on non-par banks and the situation in this respect has since remained unchanged. The struggle, however, between the conflicting economic philosophies raged unabated. The Reserve Board continued its pressure upon the non-par banks by first persuading as many banks as possible in a district to remit at par, and then, when a majority had so agreed, announcing that all banks in the district would, on a specified date, be put on the par list, enforcing the pronouncement by pre senting checks over the counter by messengers, or by postal officials, or by par banks located in the same towns, and demanding cash settlements at par. In Brookings, Oregon, for example, it maintained an agent for practically a year at an expense of $3542. for the purpose of presenting such checks on the Brookings State Bank. Brookings State Bank v. Fed. Res. Bank (D. C. Ore., 1922) 281 Fed. 222, 227. Some non-par banks claimed that checks were accumulated and presented in large amounts ABSORPTION OF EXCHANGE CHARGES 79 to harrass them and that this made it difficult, if not impossible, for them to meet the payments because of the large amount of vault cash required for such purpose. Charges of coercion and oppression were flung at certain Federal Reserve banks and recriminations abounded. From 1920 to 1927 six suits were instituted against Federal Reserve banks in an effort to stop this practice. Others were avoided only by the Federal Reserve abandoning the practice. Many non-par banks, however, yielded to this persuasion and the number of non-par banks was gradually reduced. After unsuccessful efforts by certain banks to enjoin judicially a Federal Reserve bank from presenting checks over the counter, state legislatures enacted laws permitting their banks to settle by draft for such checks. These laws led to the decision in Farmers & Merchants Bank of Monroe v. Federal Reserve Bank of Richmond (1923) 262 U. S. 649, 67 L. ed. 1157, in which the Supreme Court, speaking through Justice Brandeis, held that the Federal Reserve had no authority to enforce universal par clearance, and said (pp. 664-666): “ ***Congress did not in terms confer upon the Federal Reserve Board or the federal reserve banks a duty to establish universal par clearance and collection of checks; and there is nothing in the original act or in any amendment from which such duty to compel its adoption may be inferred. The only sections which in any way deal either with clearance or collection are 13 and 16. In neither section is there any suggestion that the Reserve Board and the reserve banks shall become an agency for universal clearance. On the contrary § 16 strictly limits the scope of their clearance functions. It provides that the Federal Reserve Board: ‘may at its discretion exercise the functions of a clearing house for such Federal reserve banks . . . and may also require each such bank to exercise the functions of a clearing house for its member banks/ “ There is no reference whatever to ‘par’ in § 13, either as originally enacted or as amended from time to time. There is a reference to ‘par1 in § 16; and it is so clear and explicit as to preclude a contention that it has any application to non-member banks, or to the ordinary process of check collection here involved. * * * “ Moreover, the contention that Congress has imposed upon the Board the duty of establishing universal par clearance and collection of checks through the federal reserve banks is irreconcilable with the specific provision of the Hardwick Amendment which declares that even a member or an affiliated non-member may make a limited charge (except to federal reserve banks) for ‘payment of checks and . . . remission therefor by exchange or otherwise’ . The right to make a charge for payment of checks, thus regained by member and preserved to affiliated non-member banks, shows that it was not intended, or expected, that the federal reserve banks would become the universal agency for clearance of checks.” The importance of this issue is cogently summed up in the following quotation from “ Deterrents to Membership in the Reserve System” , an article by B. Magruder Wingfield, the then Assistant General Counsel for the Reserve Board, published by the Reserve Board in a volume on “ Banking Studies” (1941), at page 277: “ To many smaller banks, exchange charges are a source of substantial revenue they are reluctant to do without and, in many instances, state they can not do without. In view of these facts and the differences in Federal and State laws with respect to par clearance, it is clear that the requirement that checks be paid in full by member banks is an important obstacle to membership in the Reserve System, particularly since no such requirement is applicable to nonmember insured banks.” (Emphasis supplied). 80 FEDERAL DEPOSIT INSURANCE CORPORATION In 1920 and again in 1932 Committees of Congress held hearings at which the par clearance controversy was aired.1 At each of these hearings numerous references were made to the practice of charging exchange and absorption of exchange and its inextricable relationship to par clearance was apparent. However, prior to the hearings on the present Bills, the par clearance issue had not been directly reopened since the Supreme Court decided the Richmond case. Today whether a bank remits at par is essentially a matter of policy with the bank's management. In many communities, however, this policy is largely governed by the necessities of meeting the competition of banks which, to a large extent, do remit at par. The force of this competition, in many instances, has extended into communities adjoining the locations of the par institutions, and as the infiltration of national banks and state member banks into non-par areas increases, the non-par list probably will further contract. City banks are now generally par remitting banks, whereas in many states non-par banks are confined to rural communities. The forces of competition are at work. These forces have, for many years past, led to arrangements between banks and their depositors whereby the former have absorbed the exchange charges imposed by non-par banks on items which are col lected through their facilities. Correspondent banks have made similar arrangements with their bank customers whereby they absorb exchange charges imposed on remittances by non-par banks to the extent that the balances of their customers justify. The correspondent banks have been able and willing to absorb this expense, as well as the other costs of collection, and to render other services, because banks for whom they act as correspondents maintain with them deposits of part of their available reserves— and deposits being the banker’s principal stock in trade, these funds have been so invested as to warrant the correspondent banks making these arrangements. Moreover, these deposit accounts have been so maintained not only to obtain these services but also because inter-bank balances are a necessary part of the entire banking system ; they are required to enable a bank to furnish its customers the full measure of banking facilities. These absorbing arrangements, in many instances, have been confined to local areas. So far as the public is con cerned and from a practical standpoint, the result of these arrangements is that the non-par banks operate on a par basis and thus have been able to meet the competition of nearby par banks. The issue of absorption of exchange for this reason is inextricably mingled with the whole issue of par clearance. Indeed, the Board of Governors of the Federal Reserve System, in a letter dated October 14, 1942, addressed to the Honorable Preston Delano, Comptroller of the Currency, dealing with the bank at Lincoln, Nebraska, which appears in the record of the hearings on the present measure before the House Banking and Currency Com mittee, made the following significant statement (p. 592): “ The Board does not believe that the problem of exchange absorption can be considered alone. It is only a part of the whole question of par clearance with its many involved and related questions.” Moreover, that the question of exchange absorption cannot logically nor prac tically be divorced from the paramount issue of par clearance is made clear beyond doubt by the recent action of a state bankers association which issued a circular containing the following significant passage: “ If all banks will cease absorbing these charges, it is predicted that it will be only a matter of time until all banks throughout the United States will be on a par clearance basis” . In the face of this very plain understanding by bankers as to the consequences which will flow inevitably from the enforcement of the Federal Reserve Board’s recent ruling outlawing the ab sorption of exchange and the Board’s continuing pressure upon exchange charging 1 House Hearings, Committee on Banking and Currency, Par Collection of Checks, 66th Cong., 2nd Sess.; House Hearings, Committee on Banking and Currency, To Provide a Guaranty Fund for Depositors in Banks, 72nd Cong. 1st Session. ABSORPTION OF EXCHANGE CHARGES 81 banks, we have been unable to accept unreservedly the Board’s statement that its ruling was not motivated by the hope of achieving universal par clearance but only by the desire to enforce the law prohibiting the payment of interest on demand deposits.1 The literal acceptance of its disclaimer is rendered even more difficult in view of the letter sent out to banks by the Reserve Board on February 18, 1944, encouraging opposition to the pending Bill and containing the following quotation: “ This matter of exchange charges is nothing but a ‘gouge1, a kind of racketeering against the depositors of banks, and, against the commerce and industry of the nation.” Nor can the statement readily be reconciled with the pressure campaign against the pending Bill which has been carried on by the Reserve-Board-controlled Federal Reserve Banks, one of which, on March 10, 1944, wrote all of the operating banks in its district stating: “ If the Senate joins the House in enacting this legis lation within the next week or two, the progress made in the past thirty years in building a par collection system will be reversed.*** The two Senators from your State as well as the members of the Senate Committee on Banking and Currency undoubtedly will wish to understand the significance of the Maybank Bill (S. 1642). No one is better able to interpret its possible effects than you. As for ourselves, it is our considered judgment that this legislation is not in the public interest.” Moreover, the Board’s disclaimer must be viewed in light of the past history of its attitude toward absorption of exchange. In 1936, the Board of Governors re quested the Federal Advisory Council for its opinion as to whether the promulgation and enforcement of Regulation Q, with the inclusion therein of the definition out lawing absorption of exchange as a payment of interest, would have an adverse effect upon membership in the Federal Reserve System; and the Federal Advisory Council replied that it would not. (1936 Annual Report of the Federal Reserve Board, p. 233). If the motive of the Federal Reserve Board was enforcement of the law and not the achievement of par clearance, why, it is fair to ask, was it concerned with the effect of its ruling forbidding absorption of exchange upon membership in the Federal Reserve System? If the law prohibiting interest upon demand deposits compelled such a ruling, then whether membership in the Federal Reserve System was affected or not it would seem that the Reserve Board was required to make that ruling. We may justly ask, would the Federal Reserve Board have persisted in its attitude had it been advised by the Federal Advisory Council that such a ruling would have a detrimental effect upon membership in the system? Moreover, the Federal Advisory Council’s reply is not consistent with the Board’s present statement that it was confronted with the unhappy possibility that such a ruling would result in member banks withdrawing from the System. The ruling of the Board has singled out absorption of exchange charges alone, of all expenses identifiable with a depositor’s account, for classification as a prohibited interest payment; while other rulings hold that other expenses, equally identifiable, such as, intangible property taxes against depositors based upon their bank balances, bond premiums and expenses of clearing checks, may be absorbed without violation of the law. Thus, for example, the Federal Reserve Board has held that member banks may pay and absorb intangible property taxes upon depositors’ bank balances such as those levied in the states of Michigan, Indiana and Kentucky, without i “ The Board is even more surprised at the statement in your letter that as you view the proposed ruling it is simply another attempt to force par clearance upon nonmember banks. The Board does favor Nation-wide par clearance, but it agrees with you that the final determination of the question is one for appropriate legislative bodies. Consequently it must most emphatically disagree that forcing par clear ance was the motive of the Board’s ruling. To the contrary, the Board was confronted with the unhappy possibility that, by making such a ruling, member banks resorting to the practice in question would feel that they should withdraw from the Federal Reserve System. It must reiterate that its purpose in making the ruling was solely to carry out what it believes to be its responsibility under the law, in response to a request from the Office of the Comptroller of the Currency for a ruling in the particular case disclosed by reports of examination made by National bank examiners.” (From letter of L. P. Bethea, Asst. Sec., Board of Governors of the Federal Reserve System, to Hon. Leo T. Crowley, Chairman, Federal Deposit Insurance Corporation, dated Sept. 9,1943, Hearings on H. R. 3956 before House Committee on Banking and Currency, 78th Cong., 2nd Sess., p. 601). 82 FEDERAL DEPOSIT INSURANCE CORPORATION violating the interest statute. It is to be noted that these taxes are laid on the depositors and not on the banks and are in every sense “ out-of-pocket” expenses insofar as the bank is concerned. Nevertheless, the Federal Reserve Board has ruled that the term “ interest” includes the payment or absorption of exchange and collection charges “ but does not include the payment or absorption of taxes upon deposits whether levied against the bank or the depositor” . Federal Reserve Bulletin (1935), p. 864; id. (1944), p. 13. Interpretation of Interest-Prohibition Statute: Mindful of this turbulent history of the par clearance issue, we pass to considera tion of the question whether Congress intended that absorption of exchange be deemed the payment of interest. What did Congress mean by the term “ interest” as used in the laws prohibiting payment of interest on demand deposits? The laws themselves contain no definition. The Banking Act of 1933 became law on June 16,1933. The Senate bill contained a provision prohibiting interest payments on demand deposits; the House bill contained only a provision for regulating interest rates on savings and time deposits. The reports on these bills cast no light on the question under consideration here, but we do learn from the Congressional Record that the purpose of the Senate provision was to attract surplus bank money away from the large money markets, where it had been used for speculative purposes, and return it to the home communities of the banks where it could be loaned out. It was thus explained to the Senate: “ * * *. The payment of interest on demand deposits has resulted for years and years in stripping the country banks of all their spare funds, which have been sent to the money centers for stock speculative purposes. * * *. If they have abundant funds and credits they can lower the rate of interest in order to stimulate business and industry and farming activities. “ * * *. They have their standard rates and stick to them, and would rather send their surplus funds to New York to be used for stock-gambling purposes at a wonderful rate of 2 percent, reduced now, I think, to ^ percent, than to loan to their merchants and business men at less than their standard rates. So that this payment of interest, particularly on bank demand deposits, has resulted in drawing the funds from the country banks to the money centers for speculative purposes, to be polite about the matter.” (77 Cong. Rec. p. 3729). 13 And thus to the House: “ * * *. We departed from sound banking principles. Our great banking system was diverted from its original purposes into investment activities, and its service devoted to speculation and international high finance. * * *. Agriculture, com merce, and industry were forgotten. Bank deposits and credit resources were funneled into the speculative centers of the country for investment in stocks operation and in market speculation. Values were lifted to fictitious levels. Call-money rates went soaring, community bankers over the Nation were lured away from normal and legitimate channels into a maelstrom of untried and destructive activities.” (77 Cong. Rec. p. 3835). It was suggested also that prohibiting the payment of interest on demand deposits would make it easier for banks to pay their deposit insurance assessments by relieving them of the heavy interest burden— a burden which averaged, for the 5 years prior to 1933, an annual expenditure of approximately $250 millions. It is significant that nowhere in the Congressional Record of the proceedings on the 1933 Act nor in the reports of the Congressional Committees was there any ABSORPTION OF EXCHANGE CHARGES 83 reference to absorption of exchange, or any intimation that the provision outlawing interest on demand deposits would affect, directly or indirectly, either the charging or the absorption of exchange. In the hearings before the House Banking and Currency Committee on H. R. 3956 (78th Congress)—the companion bill to S. 1642 now under consideration in the Senate— it was disclosed (p. 497) that the Reserve Board had received numerous inquiries from banks during 1933 and 1934 for rulings on the question whether absorption of exchange was a violation of the interest prohibition. The Reserve Board's 1933 Annual Report, submitted to Congress on May 28, 1934, contained a copy of its interest Regulation Q as well as recommendations for amendments to the law prohibiting payment of interest on demand deposits, including a recom mendation that the Board be given power to prescribe rules and regulations to prevent evasions of the law. But neither the interest regulation nor the recommenda tions for legislation contain any reference to absorption of exchange. The Annual Report of the Board for 1934 contained a recommendation from the Federal Ad visory Council regarding Regulation Q but again there was no mention of absorption of exchange. And although extensive hearings were held in 1935 before the Banking and Currency Committees of both Houses of Congress on the bill later enacted as the Banking Act of 1935, again no mention was made of absorption. The 1935 bill contained the provision that the Federal Reserve Board should have the power to determine what should be deemed “ interest” for the purposes of the interest statute. It was included in Title III of the bill under the heading “ Technical Amendments” . Chairman Eccles of the Federal Reserve Board did not touch upon these provisions in his testimony before the Senate Committee on Banking and Currency but in testifying before the House Committee he referred to the amendments in this Title as “ in the nature of technical improvements of a non-controversial nature” . (House Hearings, Committee on Banking and Currency, Banking Act of 1935, p. 185.) Again he said: “ They are largely of a technical nature” . (Id., p. 346.) Comptroller of the Currency O'Connor in testifying upon the bill before the Senate Committee filed a statement in explanation of the objects of the proposed amendments contained in Title III. (Senate Hearings, Committee on Banking and Currency, Banking Act of 1935, p. 113.) It will be observed that his explanation of Section 323(a) of the bill, which contained the provision authorizing the Federal Reserve Board to define what shall be deemed the payment of interest, reads as follows: “ Authorizes Federal Reserve Board to define ‘deposit' and related terms for reserve and interest requirements respecting deposits” . (Id., p. 116.) He further explained that section as follows (Id., p. 168): “ Mr. O'CONNOR............... Section 323(a) is partly new, and authorizes the Federal Reserve Board to define ‘deposit' and related terms for reserve and interest requirements re specting deposits. Senator TOWNSEND. Who defines those deposits? Mr. O'CONNOR. The Federal Reserve Board. Senator BULKLEY. I think we ought to have a more full explanation of that. I am frank to say that I do not see what that is driving at. Senator COUZENS. Was that new over last year's act? Senator BULKLEY. Yes. Mr. O'CONNOR. Yes; part of it is new. Senator BULKLEY. It is all new in the sense that it was not contained in our omnibus bill last year. FEDERAL DEPOSIT INSURANCE CORPORATION 84 Mr. O’ CONNOR. I am reading from the report of the House, page 21: Section 323(a) amends section 19 of the Federal Reserve Act so as to repeal the rigid statutory definitions of “ demand deposits” and “ time deposits” and authorizes the Federal Reserve Board to define for the purposes of the section the terms: “ Demand deposits” , “ gross demand deposits” , “ deposits payable on demand” , “ time deposits” , “ savings deposits” and “ trust funds” , to de termine what is to be deemed a payment of interest and to prescribe regulations to effectuate the purposes of the section. Oh, yes; it comes back to me now: We had a number of discussions in the Federal Reserve Board, gentlemen, after the passage of the 1933 act, when you eliminated the interest on demand deposits, as to what constituted a demand deposit, a time deposit, or a savings deposit. We found great difficulty in applying the definitions that were in the act, and we found some of the banks attempting to circumscribe the prohibitions; and we wanted, when we found those evasions, to keep correcting the definition until they could not evade it” . It will be noted that not one word was said about absorption of exchange; indeed not a word about interest. The explanation was that the provision authorized the Federal Reserve Board to define the term “ deposit” , in view of the difficulty which had been experienced in determining what were demand deposits. Not only was absorption of exchange not mentioned but that portion of the authorization with respect to the definition of the term “ interest” was not even discussed. Similarly, in the House hearings, the Comptroller of the Currency said (House Hearings, Committee on Banking and Currency, Banking Act of 1935, p. 661) that “ practically all of the things I am going to talk about are technical matters * * and he described the section which included the power of definition as follows: “ Section 323(a), which is partly new, authorizes the Federal Reserve Board to define ‘deposit’ and related terms for reserve and interest requirements respecting deposits” . (id., p. 665). In light of this background, how can it fairly be said that Congress intended to eliminate or authorize the elimination of the absorption of exchange as a “ device” for the indirect payment of interest on demand deposits? Nothing was said about it at the hearings on the bill; on the contrary, the silence on that subject justifies us in saying that Congress did not intend to authorize this elimination through the regulation of interest payments. If the absorption of exchange was then an acute evil and an obvious device for the indirect payment of interest on demand deposits, as the Federal Reserve Board now asserts it then believed, how can it justify the complete silence of every one on the subject when the 1935 bill was before Congress? The true interpretation of the statute depends not upon what the Federal Reserve Board claims it intended in proposing the 1935 amendment to Congress, but upon what Congress intended in enacting it into the law. Although the problem may have been acute to the Federal Reserve Board in 1934 and 1935, as it did not communicate its anxiety to Congress, but on the contrary represented the amendment to be “ technical” and “ non controversial” , neither of which descriptions fits legislation which would permit it to disturb the practice of exchange absorption, we must conclude that Congress did not intend to authorize its recent ruling. The provision governing interest payments by non-member insured banks (initially proposed to be enforced by the Federal Reserve Board but changed before passage to the Federal Deposit Insurance Corporation) was also discussed fully by representatives of the several banking agencies but no mention was made there of any intention to prohibit absorption of exchange. ABSORPTION OF EXCHANGE CHARGES 85 It cannot be said that Congress, in enacting the Banking Act of 1935 and con tinuing therein the prohibition against the payment of interest upon demand deposits, adopted the administrative interpretation laid down by the Federal Reserve Board in 1934. We do not contest that the courts have held that the existence of an administrative regulation during several re-enactments of a statute is persuasive evidence of the Congressional approval of such administrative action. McCaughn v. Hershey Chocolate Co. (1931) 283 U. S. 488, 492, 75 L. ed. 1183, 1187; Jones v. Magruder (D. C. Md., 1941) 42 F. Supp. 193, 199; Railroad Federal Savings and Loan Association v. U. S., 135 F. (2d) 290, 293 (CCA 2, 1943). But in almost all cases it will be found that the administrative regulation was in existence a con siderable length of time and usually through several statutory re-enactments. Where the regulation is only of short life, the rule is not applied. Commissioner of Internal Revenue v. Sun Pipe Line Co., 126 F. (2d) 888 (CCA 3, 1942). The theory upon which the rule is based is that there is a presumption that the legislature is aware of the administrative ruling and impliedly adopts it by failing to legislate against it. This presumption, however, is thoroughly overcome as far as the 1935 Act is concerned, since Congress actually was kept in complete ignorance of any ruling on this subject. As an eminent authority has said: “ While the acquiescence of the legislature seems to be of small matter where there is no evidence to the effect that the statute or contemporaneous interpretation was called to the legislature’s attention, it is believed that when action has been taken upon a statute by the legislature, and where a practical and contemporaneous interpretation was called to its attention, the failure of the legislature to change the interpretation should be regarded as presumptive evidence in its correctness” . 2 Sutherland, Statutory Construction (3rd ed.), 525. Even had the legislative record been such as to warrant the conclusion that Congress did intend to adopt the Reserve Board’s views, its rulings on the subject were so confusing and contradictory that no clarification of the issues could have resulted. Thus, the Board had held that absorption of exchange charges by a bank for depositors who maintained balances of $1000. or more was not a violation of the law; this, notwithstanding the interest statute prohibits the payment of any interest on demand deposits. Yet in another case it held that ab sorption of exchange charges by a bank “ up to an amount equivalent to a certain specified percentage of the amount of the collected balance” of its correspondent bank customers was a violation of the law (Federal Reserve Bulletin (1934), p. 395). Furthermore, these rulings appear to have been entirely precatory to the extent that they declared exchange absorption to be illegal, as the practice continued to be indulged in by member banks throughout the system without interference by the Board until 1944. We think it cannot reasonably be said that Congress, in passing this legislation, could have had any intention of prohibiting the long established banking practice which was so completely wrapped up in the explosive par clearance issue without some mention having been made of the problem in the debates, the reports on the bills or the testimony upon which the Congressional Committees acted. There are certain well established rules for determining legislative intent. One of these is that penal statutes must be strictly construed and the statutes in this case are plainly penal. The one governing insured nonmember banks carries with it the specific penalty of $100 for each violation as well as the general penalty of the forfeiture of deposit insurance. The one governing member banks carries the general penalty of forfeiture of charter, in the case of national banks, and forfeiture of membership in the Federal Reserve System, in the case of state member banks, as well as the loss of federal deposit insurance, or the removal from office of the bank officers responsible for the violations. Statutes which provide for forfeitures upon their violation are penal. State of Maryland v. The B. & O. R. Co. (1845) 3 How. FEDERAL DEPOSIT INSURANCE CORPORATION 86 (U. S.) 534,11 L. ed. 714; Chase v. Curtis, et a l (1885) 113 U. S. 452, 28 L. ed. 1038; Hall v. Norfolk & W. R. Co. 44 W. Va. 36, 28 S. E. 754 (1897); Vestal Co. v. Robertson, 277 111. 425, 115 N. E. 629 (1917); Manhattan Trust Co. v. Davis, 23 Mont. 273, 58 P. 718 (1899). Another of these rules is that words having a precise and well-settled meaning in common usage are to be understood in the same sense when used in statutes. This rule has been applied to the use of the word “ interest” in statutes in two decisions of the United States Supreme Court involving provisions of the Internal Revenue Code. Deputy v. DuPont (1940) 308 U. S. 488, 84 L. ed. 416; Old Colony R. Co. v. Commissioner of Internal Revenue (1932) 284 U. S. 552, 76 L. ed. 484. In Deputy v. DuPont, the Court, speaking through Mr. Justice Douglas, said: . . In the business world ‘interest on indebtedness’ means compensation for the use or forbearance of money. In absence of clear evidence to the contrary, we assume that Congress has used these words in that sense. In sum, we cannot sacrifice the ‘plain, obvious and rational meaning’ of the statute even for ‘the exigency of a hard case’ .” In the Old Colony case the Court, speaking through Mr. Justice Roberts, said: . . as respects ‘interest’ , the usual import of the term is the amount which one has contracted to pay for the use of borrowed money * * *. We cannot believe that Congress used the word having in mind any concept other than the usual, ordinary and everyday meaning of the term, or that it was acquainted with the accountants’ phrase ‘effective rate’ of interest and intended that as the measure of the per mitted deduction” . Furthermore, judicial precedents concerning interest for the purpose of deter mining whether usury has been practiced, establish that the question whether a particular payment by a borrower to a lender is interest or reimbursement of an expense, involves intent. There is no presumption of an illegal or usurious intent, but on the contrary the burden rests upon the party seeking to impeach the trans action for usury to prove the illegal intent. Brown v. Robinson (1918) 224 N. Y. 301, 314, 120 N. E. 694, 698. Here, however, for purposes of administrative dis position, it appears that the Reserve Board has reversed the presumption and burden of proof by ruling {Federal Reserve Bulletin (1934), p. 396)— “ * * * that, in any case in which a member bank pays or absorbs exchange or collection charges or other expenses in connection with any deposit payable on demand, the burden will be upon it to show that such payment or absorption of charges is not a device to evade the provisions of Section 19 of the Federal Reserve Act forbidding the payment of interest on deposits payable on demand.” The extensive hearings which were had before the House Banking and Currency Committee on the present measure have clearly demonstrated the importance of absorption to many bankers and the intensity of their opposition to any restriction of this practice, which was a well known banking custom and was separate and distinct from the payment of interest. That the two practices are different both in origin and economic effect is borne out also by numerous witnesses who testified at those hearings. It is significant that just as bankers have long differentiated between the payment of interest which they consider compensation and the absorption of exchange which they consider expense, so have courts in usury cases similarly differentiated between the payment of interest and exchange. Cayuga County Bank v. Hunt, 2 Hill (N. Y.) 635; Holford v. Blatchford, 2 Sandf. Ch. (N. Y.) 149. ABSORPTION OF EXCHANGE CHARGES 87 In Buckingham v. McLean (1851) 13 How. (U. S.) 151, 14 L. ed. 91, the Supreme Court said: “ The reason why the addition of the current rate of exchange to the legal rate of interest does not constitute usury is, that the former is a just and lawful com pensation for receiving payment at a place where the money is expected to be less valuable than at the place where it is advanced and lent.” Absorption of Exchange—Administrative Interpretations: Let us now consider the historical development of the administrative concept that absorption of exchange constitutes payment of interest in violation of section 19 of the Federal Reserve Act. In 1935 the Reserve Board revised its Regulation Q (effective January 1, 1936) to include the following definition of interest: Section 1(f)— “ The term ‘interest’ means a payment, credit, service, or other thing of value which is made or furnished by a bank as consideration for the use of the funds constituting a deposit and which involves the payment or absorption by the bank of out-of-pocket expenses (i.e., expenses arising out of specific trans actions for specific customers and definitely attributable to such transactions as distinguished from overhead and general operating expenses), regardless of whether such payment, credit, service, or other thing of value varies with or bears a substantially direct relation to the amount of the depositor’s balance. The term ‘interest’ includes the payment or absorption of exchange and col lection charges which involve out-of-pocket expenses, but does not include the payment or absorption of taxes upon deposits whether levied against the bank or the depositor nor the payment or absorption of premiums1 on bonds securing deposits where such bonds are required by or under authority of law. Notwithstanding the foregoing, the payment or absorption of isolated items of out-of-pocket expense in trivial amounts and not of a regularly recurrent nature, where the charging of such items to customers would cause undue friction or misunderstanding, will not be deemed to be a payment of interest, provided that the banks acts in good faith and does not utilize the absorption of such items as a basis for soliciting accounts or obtaining an advantage over com petitors and provided further that the bank maintains and makes available to the examiners authorized to examine the bank a record showing the amounts of such items paid or absorbed by it, the dates of such payment or absorption, and the names of the customers for whom such items were paid or absorbed.” At about the same time the Federal Deposit Insurance Corporation issued a revision of its interest Regulation IV, also to become effective January 1, 1936, containing the following definition of interest: Section 1(f)— “ The term ‘interest’ means a payment or credit which is made or furnished by a bank as consideration for the use of the funds constituting a deposit. The term ‘interest’ includes any direct or indirect payment by the bank of the purchase price of premiums given to depositors or prospective depositors in connection with obtaining deposits. The term ‘interest’ does not include the payment or absorption of taxes upon deposits, whether levied against the bank or the depositor, nor payment or 1 The provision permitting banks to pay and absorb the taxes for their depositors is supported by later specific rulings of the Board to the same effect. Why the Board permits taxes to be paid and ab sorbed but prohibits banks from absorbing exchange can be explained only by the fact that the former has no bearing upon the issue of par clearance. The provision relative to bond premiums constituted a reversal of an earlier ruling by the Board. (Federal Reserve Bulletin (1933), p. 500). 88 FEDERAL DEPOSIT INSURANCE CORPORATION absorption of premiums on surety bonds securing deposits where such bonds are required by or under authority of law.” The Reserve Board requested the Federal Deposit Insurance Corporation to hold its definition of interest in abeyance and deferred until further notice the effective date of its own definition pending discussions between the two agencies with a view to having the Federal Deposit Insurance Corporation issue its interest regulation in language paralleling the Reserve Board’s Regulation Q. These discussions centered on the question whether the payment or absorption of exchange or collection charges constituted interest and this appears to have been the first time the issue was raised between the two agencies. Their viewpoints were irreconcilable in this respect. On January 20, 1936 the Federal Deposit Insurance Corporation advised the Reserve Board by letter that “ both the practice of paying interest on demand deposits and the practice of charging for exchange and collection and absorbing such charges where the advantage lay existed long prior to the Banking Act of 1933 and thus far Congress has expressly prohibited only the former” , and that “ in the present state of the law and the practices we are not prepared to say that the practice which would be proscribed by Regulation Q is unsupported by principles of banking specially applicable to the business of exchange.” The Reserve Board announced in its January 1937 Bulletin (p. 11) that during the preceding year it had given exhaustive consideration to the subject and “ as a result of this consideration, has taken action fixing February 1, 1937” as the date on which the definition of interest in its Regulation Q would become effective. In its March 1937 Bulletin (p. 186) it announced that the effective date had been postponed from February 1, 1937 to May 1, 1937 at the request of the Chairmen of the Banking and Currency Committees of both Houses of Congress. In the same Bulletin (p. 187) there was printed the February 12,1937 press release of the Reserve Board and the Federal Deposit Insurance Corporation jointly announcing the amendment of the Reserve Board’s Regulation Q and of the Federal Deposit Insur ance Corporation’s Regulation IV, and the addition to each Regulation of the sentence: “ Within this regulation, any payment to or for the account of any depositor as compensation for the use of funds constituting a deposit shall be considered interest.” This joint press release included the following statement: “ The Board of Governors, in its original definition of the term ‘interest’ (sec tion 1(f) ), specified that such term should include the payment or absorption of exchange or collection charges which involve out-of-pocket expenses. The present action of the Board of Governors removes this finding or specification from its regulation. Henceforth under both regulations the question of what in a particular case is a payment of interest upon a demand deposit or a device to evade the prohibi tion against the payment of such interest, becomes, for both agencies, a matter of administrative determination under the general law in the light of experience and as specific cases may develop.” (Emphasis supplied). This release was widely interpreted to constitute an abandonment by the Board of its previous theory that absorption of exchange could be interest. Absorption of exchange was a dead issue from 1937 until 1943. The Reserve Board’s Bulletins contain no rulings on the subject during this long period. Many member banks which had notified their customers in 1936 or 1937 that because of Regulation Q they could no longer absorb exchange, withdrew their notices. The practice of absorption continued to be a matter of individual bank policy until ABSORPTION OF EXCHANGE CHARGES 89 September 1943 when the ruling in the Lincoln case was published in the Reserve Board’s Bulletin. Between 1937 and September 1943 thousands of examinations of member banks were conducted by national and Federal reserve bank examiners. From this it seems clear that for over 6 years the practice was at least tolerated if not approved by the Comptroller of the Currency and the Federal Reserve Board.1 Throughout this period the Federal Deposit Insurance Corporation consistently held to the position that absorption of exchange by insured nonmember banks in connection with routine collection of checks could not be considered payment of interest. In October 1942 the Reserve Board notified the Federal Deposit Insurance Corporation of the fact that the Comptroller of the Currency had requested a ruling from it on the absorption of exchange by a national bank and suggested a conference on the subject. Conferences were held between staff members at which the Reserve Board outlined its proposed ruling substantially as later issued. The Federal Deposit Insurance Corporation’s representatives at these conferences restated the Corporation’s position on the question, asserting (1) that Congress had not intended to treat absorption of exchange charges as interest, (2) that exchange charges could not be differentiated from many other expenses which banks absorbed for their customers and which all agencies agreed were not interest, and (3) that the evil which Congress sought to eradicate by the restriction against payment of interest was not present in absorption of exchange, as the amount of exchange absorbed varies only as the dollar amount of checks issued by depositors in non-par banks might vary and hence there could be no competitive bidding. The Reserve Board’s ruling was published in September 1943. This ruling was allegedly confined to the facts of a particular case and the Federal Deposit Insurance Corporation did not learn that it was being used generally as a precedent against all absorption of exchange until shortly before the hearings started before the House Banking and Currency Committee last December. It then learned that based upon this ruling action had been taken to outlaw all absorption of exchange by member banks. In the meantime the legal staff of the Corporation had again reviewed the question and in November, 1943 the General Counsel advised the Board of Directors of the Corporation that routine absorption of exchange cannot be considered a payment of interest within the terms of the interest regulations of the Federal Deposit Insurance Corporation. Based upon this opinion the Federal Deposit Insurance Corporation adopted a ruling on the subject, of which a copy, together with the General Counsel’s opinion, is attached hereto. It will be noted that this ruling contained the qualification that it was applicable “ in the absence of facts or circumstances establishing that the practice is resorted to as a device for the payment of interest.” This clause had no special significance. The purpose of including it was to follow the wording of the law, in case the ingenuity of man devised schemes for payment of interest under the guise or pretense of absorbing exchange. We had in mind no hypothetical state of facts which would bring a case of absorption of exchange within the statute prohibiting payment of interest where it is absorbed by a bank in connection with its routine collection of checks. 1 The September 1943 ruling appears to have the practical effect of reinstating the specification which the Reserve Board had removed from its Regulation in 1937, with the same unfortunate con sequences which Mr. Justice Roberts referred to in the recent case of Maknich v. So. Steamship Co. (1944) 321 U. S. 96, 88 L. ed. 561, when he said: “ The evil resulting from overruling earlier considered decisions must be evident. In the present case, the court below naturally felt bound to follow and apply the law as clearly announced by this court. If litigants and lower federal courts are not to do so, the law becomes not a chart to govern conduct but a game of chance; instead of settling rights and liabilities it unsettles them. Counsel and parties will bring and prosecute actions in the teeth of the decisions that such actions are not maintainable on the not improbable chance that the asserted rule will be thrown overboard. . . . But the more deplorable consequence will inevitably be that the administration of justice will fall into disrepute. Respect for tribunals must fall when the bar and the public come to understand that nothing that has been said in prior adjudication has force in a current controversy” . 90 FEDERAL DEPOSIT INSURANCE CORPORATION As a result of the detailed elaboration of the practice which is contained in the record of the hearings on this Bill before the House Committee, this Corporation concluded that the foregoing qualification is unnecessary and possibly leaves open to some doubt the true intention of the Corporation in making its ruling. Accord ingly, it recently amended its ruling to read as follows: “ The absorption of normal or customary exchange charges by an insured nonmember bank, in connection with the routine collection for its depositors of checks drawn on other banks, does not constitute the payment of interest within the provisions of Section 304.2 (a) of Part 304 of the Corporation’s Rules and Regulations” . No actual case of absorption of exchange has come to our attention which would not be exempt under this latest ruling of the Corporation. However, we wish to emphasize that this represents merely a change in phraseology and does not represent a change in the position which this Corporation has consistently adhered to since the enactment of the Banking Act of 1935—the Act which directed the Board of Directors of the Corporation to prohibit, by regulation, the payment of interest on demand deposits in insured nonmember banks. The Federal Reserve Board’s September 1943 ruling has been the subject of a recent “ interpretation” , promulgated by the Board, in which absorption of exchange is declared not prohibited if not offered “ as compensation for the use of funds on deposit.” This “ interpretation” serves only to confound the confusion precipitated by the original ruling. Under this “ interpretation” every bank examination will give rise to a dispute; and, in practice, will result—as is evident from what has transpired in the few months since the September ruling—in banks ceasing all absorption. No bank will expose itself to criticism under an “ interpretation” which furnishes it no standard whereby it may determine whether in any given case it has crossed the line of transgression. It serves no purpose and resolves no question to say that “ compensation for the use of funds” is interest. This is only to state the obvious. The question remains whether it is accurate to hold that absorption of exchange, as known to bankers and as ordinarily practiced by them in the course of normal service to a depositor or a correspondent bank, can ever be “ compensation for the use of funds” and consequently interest. If exchange absorption, under any of the circumstances in which it is customarily practiced, can be considered as interest, how can absorption of service charges or taxes upon a depositor’s bank balance be free of the prohibition by blanket absolution? If exchange absorption constitutes a violation only when employed as a competitive device for “ the solicitation of deposits” , how can absorption of service charges, when similarly employed, be given official sanction? Even if our concept of the Congressional intent be wrong, the evidence adduced at the hearings before the House Banking and Currency Committee has fully convinced us that the absorption of exchange by a correspondent bank by arrange ments with another bank involves no interest because the bank which absorbs the exchange is usually a complete stranger to the depositor-owner of the check, who is the person ultimately benefited by the absorption. Where a correspondent bank absorbs exchange charges on items forwarded for collection from non-par banks by another customer-bank, the amount absorbed cannot constitute a prohibited “ payment of interest on demand deposits” because the forwarding customer-bank acts as agent for its depositors in collecting the checks drawn on the non-par banks and as it derives no financial benefit from the absorption cannot be said to receive a “ payment” ; while its depositors who derive the benefit of the absorption are not depositors of the absorbing bank as they maintain no deposits with it. ABSORPTION OF EXCHANGE CHARGES 91 We wish to comment briefly at this point on one aspect of our view of the law. The avowed purpose of the prohibition against payment of interest on demand deposits was to curb speculative use of bank funds attracted to large money centers by attractive interest rates. This condition resulted from the complete absence of regulation of the use of borrowed funds for speculative purposes. The Banking Act of 1933 took member banks out of the business of speculating in securities. It divorced them and their officials from their securities affiliates. The Securities Act of 1933 (Public, No. 22, 73rd Congress, 48 Stat. 74) and the Securities Exchange Act of 1934 (Public, No. 291, 73rd Congress, 48 Stat. 881), not only brought under government supervision the distributors of securities and stock exchanges, but also gave the Board of Governors of the Federal Reserve System broad power to regulate the use of credit for the purchase or carrying of securities. The Reserve Board has exercised this power through its Regulations T and U. But again we suggest that even in the absence of these specific safeguards, the free absorption of exchange cannot bring about even a slight recurrence of the attraction of bank funds to money centers. The amount of exchange absorbed depends upon two factors over which the banks which absorb exchange have no direct control. The first is the rate of exchange which by long usage has customarily been charged at not over 3^ of 1 % of the aggregate amount of checks presented and paid and is limited by law in seven states1 where 1020 non-par banks out of the total of 2529 are situated. The second is the dollar amount of the checks which individual customers of non-par banks will send to out of town points, a matter which is governed entirely by the purchasing power and practices of the customers of these banks. While the dollar volume of these checks may vary from year to year, it will not be increased by the amount of exchange which banks may absorb or the number of banks which absorb it. The forces of competition always have controlled and will continue to control the exchange rate, and the economic cir cumstances of non-par bank customers will control the number and amounts of their checks. If this legislation is passed these natural laws and forces will work without inter ference. If any bank should make unwise engagements with its customers, the situations can be handled with complete effectiveness, where necessary, by ordinary bank supervisory methods as easily as other operating problems involving matters of judgment are now handled. For the purpose of encouraging opposition to the measure, many appeals have been made to banks expressing fear that the program to achieve universal par clearance would be jeopardized if the proposed law should be enacted. Any ad ministrative effort to compel banks to remit at par on clearings which do not pass through the Government-controlled Federal Reserve banks is wholly illegal and contrary to the Act of Congress expressly authorizing member banks to charge exchange to which we have already referred. {Farmers & Merchants Bank of Monroe v Federal Reserve Bank of Richmond, 262 U. S. 649.) In this field par clearance is strictly a matter of voluntary choice on the part of the banking system. Compulsion may not be used directly or indirectly, however desirable universal par remittance may seem. For these reasons I advise the Board of Directors of this Corporation to recom mend favorable action upon the Bill in question. F r a n c is C . B r o w n General Counsel i Florida, Georgia, Louisiana, Mississippi, North Carolina, South Dakota and Tennessee. FEDERAL DEPOSIT INSURANCE CORPORATION 92 RULING OF THE BOARD OF DIRECTORS OF THE FEDERAL DEPOSIT INSURANCE CORPORATION ADOPTED DECEM BER 6, 1943 R e : A b s o r p t io n o f E x c h a n g e C h a r g e s a s P a y m e n t of I n t e r e s t The Federal Deposit Insurance Corporation recently has received a number of inquiries from insured banks concerning whether the absorption by insured non member banks of exchange charges imposed by other banks on checks deposited by customers for collection or clearance constitutes a payment of interest in violation of the Corporation’s interest regulations, Code of Federal Regulations, Title 12, Part 304 (Section 304.2). The Board is of the view that the absorption of exchange charges by an insured nonmember bank in connection with its routine collection for its depositors of checks drawn on other banks cannot be considered a payment of interest, within the terms of the interest regulations of the Federal Deposit Insurance Corporation, in the absence of facts or circumstances establishing that the practice is resorted to as a device for the payment of interest. Attached hereto is a copy of the memorandum opinion of the General Counsel for the Corporation on this question. November 24, 1943 M em orandum— Q u e s t io n : Does the Absorption by an Insured Bank of Exchange Charges Con stitute a Payment of Interest Prohibited by the Regulations of the Federal Deposit Insurance Corporation? The Federal Deposit Insurance Corporation recently has received a number of inquiries from insured banks concerning whether the absorption by insured non member banks of exchange charges imposed by other banks on checks deposited by customers for collection or clearance constitutes a payment of interest in violation of the Corporation’s interest regulations, Code of Federal Regulations, Title 12, P^rt 304 (Section 304.2). The renewed inquiries concerning"this"question appear to be prompted by recent publicity given to a ruling of the Board of Governors of the Federal Reserve System interpreting the provisions of its Regulation Q. The interest regulations of the Federal Deposit Insurance Corporation are applicable only to insured banks which are not members of the Federal Reserve System, whereas Regulation Q is applicable only to member banks of that system. The Corporation’s interest regulations provide that with certain exceptions not here applicable, “ no insured nonmember bank shall directly or indirectly, by any device whatsoever, pay any interest on any demand deposit” , and that “ any pay ment to or for the account of any depositor as compensation for the use of funds constituting a deposit Jshall be considered interest.” The question presented is whether the absorption of exchange charges constitutes a “ payment to or for the account” of the insured bank’s customers and if so, whether such payment is “ as compensation for the use of funds constituting a deposit.” If both of these questions are answered in the affirmative, the act of absorbing the exchange charge would be a prohibited payment of interest; otherwise, it would not be a violation of the regulation. ABSORPTION OF EXCHANGE CHARGES 93 The absorption of exchange charges arises out of the collection of checks drawn on out-of-town banks which are not cleared through the Federal Reserve banks and for which the drawee bank makes a charge against the collecting bank. These checks are deposited by the payees or endorsees in other insured banks which forward them for collection to the drawee banks. The latter remit the face amount of these checks less their charges for clearing or honoring the checks. The collecting banks absorb the difference between the face of the checks and the amount remitted, which is the amount of the exchange so deducted. More than 2100 insured com mercial banks not members of the Federal Reserve System do not clear such checks at par and thus are listed by the Federal Reserve banks as “ non-par” banks. In addition, many other banks, both members and nonmembers of the Federal Reserve System which clear at par through the Federal Reserve banks, make a practice of charging exchange on so-called “ direct sendings” , i.e., items forwarded by cor respondent banks directly rather than through the Federal Reserve banks. It is our opinion that the absorption of exchange charges by an insured non member bank in connection with its routine collection for its depositors of checks drawn on other banks cannot be considered a payment of interest, within the terms of the interest regulations of the Federal Deposit Insurance Corporation, in the absence of facts or circumstances establishing that the practice is resorted to as a device for the payment of interest. The reasons for this opinion are as follows: (1) The absorption of expenses in connection with handling a depositor’s account under the law is not ordinarily a payment to or for the account of the depositor. Banks customarily absorb many expenses in connection with the handling of cus tomers’ accounts which the law recognizes to be investments in customer good will. Therefore, these are expended for the account of the bank rather than for the account of its depositors, even though the depositors may derive benefit therefrom. Thus, for valued customers, banks frequently absorb expenses such as telephone and telegraph charges, postage, clerk and teller hire, and the cost of printing check forms. Most banks have installed schedules of service charges to be levied upon deposit accounts. While numerous differences of detail obtain, the common rule underlying such schedules is that the deposit is worth something to the bank and the bank will absorb costs of handling the account up to the average worth of the account on the basis of an assumed rate of return on an investment of the account. In most cases, a basic charge is made for any account which is not kept above a certain minimum balance. For such charge, or the maintenance of such minimum balance, a certain number of items, i.e., checks or deposits, are handled. Items in excess of the minimum allowed, if not compensated for by larger balances, are charged for at published or established rates. In a large proportion of the banks which use this “ measured” system of service charges, the larger accounts, or the more active accounts, are also subjected to analysis to determine the cost or profit to the bank of handling such accounts, and the customer is charged accordingly. In many other banks all service charges are based upon account analysis regardless of size of the account. Approximately 70 percent of the clearing houses participating in a survey conducted by the American Bankers Association in 1938 reported use of account analysis in levying service charges upon depositors. (“ Service Charge Survey, 1938” Bulletin 77, January 1939, American Bankers Association.) Under this latter system, charges are made against the account for all costs incurred by the bank in handling the account and credit is given for the amount which the account earns for the bank. These costs include exchange and collection costs absorbed, book keeping and transit costs of handling items deposited or checks or drafts drawn, 94 FEDERAL DEPOSIT INSURANCE CORPORATION and charges for miscellaneous services such as collecting notes, handling out-oftown collections, transferring money by wire or otherwise, or providing credit information. So long as the worth of the account to the bank exceeds the cost of performing services, no charge is levied against the customer. Where exchange charges are absorbed within the frame-work of schedules of service charges, and the motive is only to establish, maintain, or strengthen customer good will rather than to attract funds for money consideration, such absorption cannot be differentiated from the absorption of other ordinary items of expense, including internal expenses (such as rents, clerk hire, etc.) connected with handling a customer’s account. (2) Exchange charges are expenses of collecting items drawn against banks which regularly make a practice of imposing such charges and thus are comparable to the costs of maintaining clearing houses, hiring messengers, and other expenses of like character connected with normal check-clearing activities which are customarily absorbed as part of the operating expenses of banks, even though these charges may enter into computations forming the basis for service charges which when collected constitute operating income of the bank. (3) The feature of progressive competitive bidding characteristic of interest is lacking in the case of absorption of exchange charges, as the amount of the exchange charge is fixed not by the depository bank but by the non-par drawee bank and would not vary as between depositories regardless of the bank selected as the collecting medium. (4) Although the practice of absorbing exchange charges antedated the legislation on which the Corporation’s interest regulations are predicated, no suggestion may be found in the legislative record or history of this provision to indicate any purpose on the part of Congress to permit any regulations of the practice of charging ex change in connection with the regulation of interest. Any restriction against ab sorption of exchange charges would naturally act as a direct deterrent to the im position of such charges by the many banks which now impose them. In view of the well-known and turbulent history of the par-clearance issue and the absence of a specific congressional mandate, it seems evident that Congress did not authorize the Corporation to hold that the absorption of exchange charges in the ordinary course of business constitutes payment of interest. This opinion will not apply to cases where the particular circumstances are such as to establish that the practice has been resorted to deliberately as a device for the payment of compensation to a depositor for the use of his funds. F r a n c is C. B r o w n General Counsel ABSORPTION OF EXCHANGE CHARGES 95 LETTER TO THE CHAIRMAN, SENATE COM M ITTEE ON BANKING AND CURRENCY January 3, 1945 T h e H o norable R obert F. W a g n e r United States Senate Washington, D. C. M y dear Senator Wagner: I am informed that the Senate Banking and Currency Committee closed the hearings on the Maybank Bill, S. 1642 on Friday, December 15, 1944 and gave permission to all interested parties, including this Corporation, to file statements of their views, if they so desired, on or before December 21, 1944. It was impossible for me to file a statement by December 21 owing to a number of pressing matters which were occupying my time, and permission was granted me to file the statement at a later date in order to give me a reasonable opportunity to consider the matter. I understand that it was necessary to limit the hearings due to the fact that they were started a few days before the Seventy-eighth Congress adjourned, and that many witnesses desiring to testify could not be heard. I also understand that the hearings were discontinued following the action of the Senate on the Maybank amendment to the Crop Insurance Bill and that the Committee had no opportunity to consider many aspects of the bill before adjournment and that it did not act upon the measure. In view of these facts, I have concluded that there will be no purpose in my filing a detailed statement of my views on the Maybank bill, as it would simply be incorporated in the record without having been actually considered by the Committee. However, I believe a bill such as the Maybank Bill should be enacted to prevent disruption of the time-honored business practice of nonpar banks and to permit banks to absorb on a voluntary basis exchange charges, as well as other expenses connected with the handling of their depositors’ accounts, in the same manner as they have been doing for the past ten years and longer, and as many of them are doing today. I think the present situation is particularly unfortunate because it is common knowledge that member banks in some areas are freely absorbing exchange charges whereas member banks in other areas are being prevented from doing so, so that aside from having no legal foundation, the administrative rule against absorption of exchange is not being uniformly applied to all member banks. As even the American Bankers’ Association which opposed the Maybank-Brown bills has recommended that the existing practice not be changed abruptly, and that the entire problem be studied, it seems probable that the new Congress will wish to act on this matter in some way. Therefore, I have concluded not to exercise the privilege which you have kindly afforded me of filing a statement at this time. However, I will be very happy to submit testimony on any measure which may be offered in the new Congress dealing with this subject. Anyone desiring to know my views on this subject in greater detail is referred to my testimony before the House Banking and Currency Committee appearing in the printed hearings on the Brown Bill (H. R. 3956) at pages 112 to 132, 150 to 155, and 669 to 694. I would appreciate it very much if you would have this letter made a part of the record in the event the hearings before the Senate Banking and Currency Com mittee of the Seventy-eighth Congress on the Maybank Bill are to be printed. Yours very truly, (Signed) L e o T . C r o w l e y Chairman FEDERAL DEPOSIT INSURANCE CORPORATION 96 R e g u l a t io n s o f t h e C o r p o r a t io n * PART 302— ASSESSMENTS As Amended June 15, 19kk Section 302.1* * *. 302.2* * *. 302.3 Payment of assessments by banks whose insured status has termi nated— (a) Assumed deposits of terminating bank become deposits of assuming bank. The deposit liabilities of one bank, if assumed by a second insured bank, will, except to the extent that depositors of the first bank by affrmative action signify their express intention to hold the first bank liable as a debtor, be presumed for assessment purposes to cease being deposit liabilities of the first bank on the date the assumption becomes effective, Provided, the requisite notice of assumption be given to the depositors. The assumed deposits, for assessment purposes, are deposit liabilities of the assuming bank from the date of assumption, whether or not the requisite notice of assumption has been given to the depositors. (b) Payment of assessments by assuming bank on assumed deposits of terminating bank. Where the deposit liabilities of an insured bank are assumed by another insured bank and the assuming bank agrees to file the certified statement which the terminating bank is required to file, the filing of such certified statement and the payment of the assessment thereon by the assuming bank shall be deemed the acts of the terminating bank: Provided, the requisite notice of assumption be given to the depositors of the terminating bank and, Provided further, That such certified statement shall be filed separately from that required to be filed by the assuming bank. (c) Resumption of insured status before insurance of deposits ceases. If a bank whose insured status has been terminated under paragraphs (1) or (2) of subsection (i), of section 12B of the Federal Reserve Act, as amended (12 U. S. C. 264 (i) (1) and (2) ), makes application to the Corporation, before the insurance of its deposits shall have ceased, to be permitted to continue or to resume its status as an insured bank and if the directors grant the application, the bank will be deemed, for assessment purposes, to continue as an insured bank and must thereafter furnish certified statements and pay assessments as though its insured status had not been terminated. PART 303— ADVERTISEMENT OF MEMBERSHIP As Amended January 27, 19kk Section 303.0* * *. 303.1 Mandatory requirements with regard to the official signs and their display— (a) * * *. (b) Official sign. The official sign referred to in paragraph (a) of this section shall be seven inches by three inches in size, and shall be of the following design: 1 A new print, revised as of July 15, 1944, is available upon request. The Rules and Regulations of the Corporation are to be found in Chapter III, Title 12 of the Code of Federal Regulations. REGULATIONS OF THE CORPORATION 97 D E P O S IT S IN S U R E D BY The Federal Deposit Insurance Corporation WASHINGTON, D. C. cennn fd U U U m a x im u m in s u r a n c e FOR EACH DEPOSITOR ccnnfl $*>UUU Any insured bank may procure the standard signs from the Corporation or may use any other sign of the same size, wording and appearance which shall have been approved in writing by the Corporation as conforming to the requirements of this section. Such approval will be given only in individual cases where the standard sign does not harmonize with the bank’s counters and fixtures or where it cannot be adequately displayed because of the type of construction of the bank’s counters or fixtures. The Corporation shall furnish to banks an order blank for use in procuring the official signs. Any bank which promptly, after receipt of the order blank, fills it in, executes it, and properly directs and forwards it to the Federal Deposit Insurance Corporation, Washington, D. C., shall not be deemed to have violated this regulation on account of not displaying an official sign or signs, unless the bank shall omit to display such official sign or signs after same have been tendered to the bank through the instrumentality of the United States mail or otherwise. (c) * * *. (d) * * *. 303.2 Mandatory requirements with regard to the official advertising statement and manner of use— (a) Insured banks to include official ad vertising statement in advertisements of types enumerated. Each insured bank shall include the official advertising statement, prescribed in paragraph (b) of this section, in advertisements issued or caused to be issued by it after November 20, 1936, of the types enumerated in paragraph (c) of this section as being of the class in which the official statement is required to be included. No bank which becomes an insured bank after October 26, 1936, is required to include the official advertising statement in such advertisements until 60 days after its first day of operation as an insured bank. In cases where the Board of Directors of the Federal Deposit Insurance Cor poration shall find the application to be meritorious; that there has been no neglect or wilful violation in the observance of this paragraph, and that undue hardship will result by reason of its requirements, the Board of Directors may grant a tem porary exemption from its provisions to a particular bank upon its written ap plication setting forth the facts. In cases where advertising copy not including the official advertising statement is on hand on the date the requirements of this paragraph become operative, the insured bank may cause the official advertising statement to be included by use of a rubber stamp or otherwise. 98 FEDERAL DEPOSIT INSURANCE CORPORATION PART 306—AGENTS FOR SERVICE OF PROCESS As Amended January 2 7 ,19M Section 306.1 Agents for service of process. The board of directors has desig nated an agent upon whom service of process may be made in each state, territory and other jurisdiction in which an insured bank is located. A current list containing the names and addresses of such agents is kept on file in the Office of the Corpora tion, Washington, D. C.; a current list of such agents in each Federal Deposit Insurance district is kept on file in the office of the supervising examiner for the district; and, the name and address of such agent for each state, territory and jurisdiction are on file with the secretary of state or corresponding official in such state, territory or jurisdiction. Persons desiring to serve process upon the Federal Deposit Insurance Corporation may obtain the name and address of the proper agent by communicating with such local official, the supervising examiner for the district, or the Federal Deposit Insurance Corporation, Washington, D. C. PART 309—VOLUNTARY TERMINATION OF INSURED STATUS Adopted March 1 7 ,1 9M Sec. 309.1 Steps to be taken and records to be furnished the Corporation by an insured nonmember bank in liquidation. Sec. 309.3 Steps to be taken and records to be furnished the Corporation where deposits are assumed by another insured bank. 309.2 Steps to be taken and records to be furnished the Corporation by a member bank in liquida tion (both state and national). Section 309.1 Steps to be taken and records to be furnished the Cor poration by an insured nonmember bank in liquidation (a) Whenever a non member bank goes into liquidation and its insured status has not been terminated by the board1 and its deposit liabilities are not assumed by another insured bank, it shall terminate its status as an insured bank in accordance with the provisions of paragraph (1), subsection (i) of section 12B of the Federal Reserve Act, as amended.2 To effect such termination the bank shall adopt a resolution in form substantially as follows: “ R esolved: (1) that the status of the.................................................................. (Name of bank) ..............................................as an insured bank under the provisions of section (City or town) (State) 12B of the Federal Reserve Act, as amended, shall terminate ninety (90) days from the date of the receipt by the Federal Deposit Insurance Corporation of a copy of this resolution;3 1 Board means board of directors of the Federal Deposit Insurance Corporation. 2 The Federal Deposit Insurance Act (12 U. S. C., 264) provides in subsection (i) (1), in part, as follows: “ Any insured bank (except a national member bank or State member bank) may, upon n ot less than nin ety days’ w ritten n otice to the C orporation, and to the Reconstruction Finance Cor poration if it owns or holds as pledgee any preferred stock, capital notes, or debentures of such bank, terminate its status as an insured bank. * * * After the termination of the insured status of any bank * * * the insured deposits of each depositor in the bank on the date of such termination, less all sub sequent withdrawals from any deposits of such depositor, shall continue for a period of two years to be insured, and the bank shall continue to pay to the Corporation assessments as in the case of an insured bank during such period. * * *” (Bold face supplied.) * If the bank desires to fix a later date of termination, it may do so as the law prescribes only the minimum notice period which is 90 days. REGULATIONS OF THE CORPORATION (2) that............................................................................. is (Cashier or other officer) 99 hereby directed to immediately forward a certified copy of this resolution to the Federal Deposit Insurance Corporation, Washington, D. C., which shall constitute the notice of termination prescribed in paragraph (1), subsection (i) of said section 12B.” Upon receipt of a certified copy of the aforesaid resolution the Corporation will promptly advise the bank of the date of the receipt thereof, and confirm the date of the termination of its insured status. Thereupon, and prior to the termination date, the bank shall give notice to its depositors of the termination of its insured status. Such notice shall be (1) mailed to each depositor at his last address of record as shown upon the books of the bank; (2) published in not less than two issues of a local newspaper of general circulation, and (3) in form substantially as follows: «< (Date) N o t ic e t o D e p o s i t o r s : P l e a s e b e a d v is e d that the status of the.............................................................. (Name of bank) ..........................................................as an insured bank under the provisions of (City or town) (State) section 12B of the Federal Reserve Act, as amended, will terminate on the.......... day o f......................................,1 9 ......... Y ou a r e F u r t h e r A d v is e d that your insured deposits in this bank on the date of termination will continue to be insured within the limitations provided by law. (Name of Bank) (Address)" (There may be included in such notice any additional information or advice the bank may deem desirable.) (b) The bank shall furnish to the Corporation the following records and in formation: (1) An affidavit of the mailing and an affidavit of the publication of the notice to depositors. The affidavit of mailing should be executed by the person mailing the notice and should state (a) the date of mailing, (b) that it was mailed to each depositor at his last address of record as shown on the books of the bank and (c) that a copy of the notice as mailed is attached. (2) A certified copy of the resolutions pursuant to which the bank was placed in liquidation and/or any other document or instrument required by law to place the bank in liquidation. (3) The bank shall continue to file certified statements and pay assessments thereon for the period its deposits are insured, as provided by the Federal Deposit Insurance Law:4 Provided, That after the bank shall have paid in full its deposit liabilities and the assessment to the Corporation required to be paid for the semi annual period in which its deposit liabilities are paid in full, and after it shall under applicable law have ceased to have authority to transact a banking business and to have existence except for the purpose of, and to the extent permitted by law for winding up its affairs, it shall not be required to file further certified statements nor to pay further assessments. (4) When the deposit liabilities of the bank shall have been paid in full, the bank shall furnish to the Corporation an affidavit executed by two of its officers, which * See footnote number 2. 100 FEDERAL DEPOSIT INSURANCE CORPORATION affidavit shall state the fact that the deposit liabilities have been paid in full and give the date of the final payment thereof.5 (5) Where the bank has unclaimed deposits the affidavit to be furnished pursuant to the preceding paragraph, shall further state the amount of such unclaimed deposits and the disposition made of the funds to be held to meet such claims. For assessment purposes, the following will be considered as payment of such unclaimed deposits, viz: (i) the transfer of cash funds in an amount sufficient to pay such unclaimed and unpaid deposits to the public official authorized under the law to receive the same; or (ii) if no provision is made by law for the transfer of funds to a public official, the transfer of cash funds or compensatory assets to an insured bank in an amount sufficient to pay the unclaimed and unpaid deposits in consideration of such insured bank assuming the payment thereof: Provided, That, prior to such transfer, the liquidating bank shall have given notice, as hereinafter provided, to the owners of the unclaimed deposits of the intended transfer and a reasonable time shall have elapsed after the giving of such notice to enable the depositors to obtain their deposits. Such notice shall be mailed to each depositor and shall be published in a local newspaper of general circulation. The notice shall advise such depositors of the liquidation of the bank; shall request them to call for and accept payment of their deposits; and shall state the disposition to be made of their deposits upon their failure to promptly claim the same. If such unclaimed and unpaid deposits are disposed of as provided in (i) above, a certified copy of the public official’s receipt issued for such funds shall be furnished to the Corporation. If such unclaimed and unpaid deposits are disposed of as pro vided in (ii) above, an affidavit of the publication and of the mailing of the notice to depositors, together with a copy of such notice, and a certified copy of the contract of assumption shall be furnished to the Corporation. (6) The liquidating bank shall advise the Corporation of the date on which the authority or right of the bank to do a banking business shall have terminated and the method or means whereby such termination shall have been affected, that is, whether such termination has been effected by the surrender of its charter, by the cancellation of its authority or license to do a banking business by the supervisory authority, or otherwise.6 309.2 Steps to be taken and records to be furnished the Corporation by a member bank in liquidation (both state and national), (a) Whenever a bank which is a member of the Federal Reserve System goes into liquidation and its insured status has not been terminated by the board7 and its deposit liabilities are not assumed by another insured bank, it shall notify its depositors of the date of the termination of its insured status.8 Such notice shall be in the form prescribed in the preceding section and shall be given at the time and in the manner therein provided. 5 The issuance of a draft or officer's check does not constitute the discharge of a deposit liability or relieve the bank of assessment until such draft or other evidence of payment has been duly presented for payment and has been paid. 8 As the governing law of the various jurisdictions is not uniform in this respect, it is suggested that the applicable statute be consulted and that this Corporation be advised of the manner in which the termination or cancellation of such authority has been effected. 7 See footnote number 1. 8 Said subsection (i) (2) provides, in part, as follows: “ Whenever a member bank shall cease to be a member of the Federal Reserve System, its status as an insured bank shall, without notice or other action by the board of directors, terminate on the date the bank shall cease to be a member of the Federal Reserve System, with like effect as if its insured status had been terminated on said date by the board of directors after proceedings under paragraph (1) of this subsection.” Section 10, subsection (c) of regulation H of the Board of Governors of the Federal Reserve System provides, in part, as follows: “ A bank's withdrawal from membership in the Federal Reserve System is effective on the date on which the Federal Reserve bank stock held by it is duly canceled.” REGULATIONS OF THE CORPORATION 101 (b) The bank shall furnish to the Corporation the records and information mentioned in, and comply with the requirements of, subsection (b) of the preceding section. 309.3 Steps to be taken and records to be furnished the Corporation where deposits are assumed by another insured bank.9 (a) Whenever the deposit liabilities of an insured bank are assumed by another insured bank, the bank whose deposits are assumed or the assuming bank as its agent shall give notice to its depositors of such assumption. Such notice shall be (1) mailed to each depositor at his last address of record as shown upon the books of the bank; (2) published in not less than two issues of a local newspaper of general circulation, and (3) in form substantially as follows: (Date) N o t ic e t o D e p o s i t o r s : P l e a s e b e a d v i s e d that the deposit liabilities shown on the books of the undersigned bank as of the close of business o n ....................................... 19___ have been assumed by the (Name of assuming bank) (city or town) (State) and that the status of the undersigned bank as an insured bank will therefore terminate as provided in section 12B (i) (4) of the Federal Reserve Act, as amended. Y ou a r e f u r t h e r a d v is e d that............................................................................. (Name of assuming bank) is an insured bank and that your deposits will continue to be insured by the Federal Deposit Insurance Corporation in the manner and to the extent provided in said Act. .................................................. 10 (Name of bank) (Address)’ * (There may be included in such notice any additional information or advice the bank may deem desirable.) The bank shall furnish to the Corporation an affidavit of mailing and an affidavit of publication of the notice to depositors. The affidavit of mailing should be in the form prescribed in paragraph (1), subsection (b) of section 309.1. (b) The liquidating bank shall continue to file certified statements and pay assessments thereon for the period its deposits are insured, as provided by the Federal Deposit Insurance Law: Provided, That if the liquidating bank, or the assuming bank as its agent, has given the requisite notice to the depositors of the assumption of the deposit liabilities within thirty days after such assumption takes effect, then the liquidating bank shall file a final certified statement, which statement shall be executed to reflect its average daily deposit liabilities for the semiannual period in which its deposit liabilities are assumed and shall pay to the Corporation the normal assessment thereon.11 9 Said subsection (i) (4) provides, in part, as follows: “ Whenever the liabilities of an insured bank for deposits shall have been assumed by another insured bank or banks, the insured status of the bank whose liabilities are so assumed shall terminate on the date of receipt by the Corporation of satisfactory evidence of such assumption with like effect as if its insured status had been terminated on said date by the board of directors after proceedings under paragraph (1) of this subsection: Provided, That if the bank whose liabilities are so assumed gives to its depositors notice of such assumption within 30 days after such assumption takes effect by publication or by any reasonable means, in accordance with regula tions to be prescribed by the board of directors, the insurance of its deposits shall terminate at the end of 6 months from the date such assumption takes effect, and such bank shall thereupon be relieved of all future obligations to the Corporation, including the obligation to pay future assessments.” 10 If this notice is given by the assuming bank as agent for the liquidating bank, it may add its own name designating itself as agent. 11 See section 302.3 of part 302 of these Rules and Regulations. 102 FEDERAL DEPOSIT INSURANCE CORPORATION (c) The Corporation will consider receipt of the following as satisfactory evidence of such assumption: (1) A certified copy of the resolution (a) duly authorizing the bank’s officers to enter into a contract for the sale of the bank’s assets to another insured bank upon the consideration of the assumption by it of the deposit liabilities, and (b) duly placing the bank in liquidation. (2) A certified copy of the assumption agreement, provided it contains an express undertaking by an insured bank to pay the deposit liabilities of the bank going into liquidation. (d) The bank shall furnish to the Corporation the information called for in paragraph (6), subsection (b) of section 309.1. St a t e Le g is l a t io n R e l a t in g and b a n k to bank Su p e r v is io n O p e r a t io n s Regular sessions of State legislatures were held during 1944 in nine states. All but ten State legislatures held extra or special sessions which were devoted prin cipally to the enactment of war legislation. Many of the legislatures enacted statutes beneficial to persons in military service and protecting others in their dealings with them, such as acts relating to proof of wills of persons in military service, appoint ment of conservators or interim trustees, and acts validating actions taken under powers of attorney of such persons. The Legislatures of Kentucky and Mississippi enacted statutes (Kentucky Ch. 15, Mississippi Ch. 253) for the purpose of con forming their laws to Executive Order No. 9112 of March 26, 1942, and Federal Reserve Regulation V so as to exclude from statutes prescribing bank loan limita tions loans which are guaranteed by commitments to purchase same given by Federal Reserve banks, the United States or agencies thereof (including wholly owned corporations). Some of the more important subjects dealt with by State legislation during 1944 are listed below. AFFECTING BANKING AND SUPERVISORY AUTHORITY Internal functions: Abolishing the office of general attorney for the banking department, directing the Attorney General to advise the department on legal matters, and au thorizing the State Comptroller, with Attorney General’s approval, to employ special counsel in litigation....................................................Mississippi (Ch. 260) Increasing from two-thirds to three-fifths the percentage of votes required for action by the banking board in discharging various duties. .New York (Ch. 52) Banks in financial difficulties: Amending provisions relating to circumstances under which superintendent may take possession of banking institutions..................................New York (Ch. 40) Providing that on petition of superintendent showing that a bank has ceased to transact business, or not completed voluntary dissolution, or abandoned and forfeited its charter and has distributed its assets a court may order such bank dissolved and terminated. Providing for the disposition of securities of such banks deposited with the superintendent after the expiration of prescribed period....................................................................................... New York (Ch. 40) STATE LEGISLATION 103 Banks in financial difficulties:— Continued Providing that statements executed and acknowledged by superintendent and setting forth extracts from records of or relating to banking organizations in his possession shall be received in evidence with the same effect as the original ..................................................................................................... New York (Ch. 40) Other: Making the commissioner of banking and insurance the lawful attorney for service of process against foreign banking institutions and national banks pertaining to any trust or estate in respect to which such bank is acting in a fiduciary capacity................................................................. New Jersey (Ch. 209) Amending law relating to the destruction of reports and documents received by the banking department and declaring that reproductions thereof shall be deemed for any purpose to be equivalent of the original___ New York (Ch. 23) Authorizing the superintendent to deduct from allowed claims for unclaimed deposits a service charge of one percent, plus any court allowed costs and fees............................................................................................. New York (Ch. 40) Permitting the superintendent of banks to levy assessments against banking organizations at rates lower than those previously specified.. New York (Ch. 25) OPERATIONS OF BANKS OF DEPOSIT Limitations on loans, investments and deposits: Excepting from the loan limitations loans and discounts secured by Federal or State securities when maximum par value of such securities that may be loaned is fixed by the Comptroller....................................................Mississippi (Ch. 253) Providing that industrial banks may not deal in bonds or notes which are in default as to either principal or interest when acquired, but permits the holding of such bonds or notes not in default when acquired..........New York (Ch. 247) Amending the law relating to limitation on amount of deposits.......................... ................................................................................................. Mississippi (Ch. 255) Amending method of computing the maximum deposits which a bank or trust company may hold......................................................... Rhode Island (Ch. 1523) Checks: Providing that stop-payment order must be in writing to be effective against local banks, and providing for renewal thereof every six months...................... ................................................................................................. Mississippi (Ch. 256) Providing that no bank or trust company shall be liable for non-payment through mistake or error of a check unless the depositor proves actual damage thereby ................................................................................................. Mississippi (Ch. 257) Reducing the time in which a depositor must notify his bank of a raised or forged check against his account in order to hold the bank liable. .Virginia (Ch. 18) Security and pledge of assets: Permitting the State Treasurer to require deposit of United States or state bonds as security for deposits of public moneys in banking institutions.................. ................................................................................................. New Jersey (Ch. 79) 104 FEDERAL DEPOSIT INSURANCE CORPORATION Security and pledge of assets:— Continued Removing the qualification of “ market” in respect to the value of securities deposited by foreign banking corporations as applied to the amount of such securities in excess of that required to be deposited which may be withdrawn ................................................................................................. New York (Ch. 21) Permitting banks, industrial banks, and trust companies to act as financial agents of the United States Government and as depositories of public money of the United States. Permitting such institutions to pledge assets to secure such de posits and to secure the faithful performance of duties as such agent.............. ................................................................................................... New York (Ch. 13) Other: Amending the law relating to annual transfer of earnings to surplus.................. ................................................................................................. Mississippi (Ch. 254) Prescribing period during which records and files of a bank must be preserved ................................................................................................. Mississippi (Ch. 258) Authorizing the establishment and maintenance of branch banking offices or agencies upon approval of application by bank commissioner.............................. ................................................................................................... New Jersey (Ch. 30) Repealing the authority of safe deposit companies to maintain branches in place outside the state but permitting certain such companies owned by other banking institutions to open branches where such other institutions have a branch ................................................................................................... New York (Ch. 15) Amending requirements relating to applications to change location of an office (other than the principal place of business) of a safe deposit company.............. ................................................................................................... New York (Ch. 26) Amending law relating to change of location of place of business of licensed lenders..................................................................................... New York (Ch. 26) Providing for guaranteed bank loans to certain war veterans for the purpose of re-establishing themselves in small businesses or professions.............................. ................................................................................................. New Jersey (Ch. 126) Permitting state officials having public funds deposited in banks to participate in and consent to certain amendments to the certificate of incorporation of such banks................................................................................. New Jersey (Ch. 13) Allowing banks and trust companies having shares of capital stock to fix the par value thereof at not less than $1.00 per share......................New Jersey (Ch. 25) Repealing Act relating to the creation of corporations to receive assets of banks ................................................................................................... New York (Ch. 12) Amending law relating to qualifications of directors of safe deposit companies ................................................................................................. New York (Ch. 151) Regulating and licensing check cashing agencies.................. New York (Ch. 593) Providing that wages owing to bank employees for services shall, under certain circumstances, be preferred claims against banks.............. New York (Ch. 40) Requiring bank directors to cause an examination to be made of their bank only once a year............................................................................... Virginia (Ch. 17) Legalizing business transacted by banks or cash depositories on any day other than Sunday..................................................................... South Carolina (Ch. 499) STATE LEGISLATION 105 Other:— Continued Providing for the assignment of accounts receivable without notice...................... ................................................................................................... Virginia (Ch. 223).. SAVINGS BANKS, TRUST FUNDS, AND FIDUCIARY INSTITUTIONS Common trust funds and legal investments: Authorizing banks to establish common trust funds and prescribing conditions precedent to investment of fiduciary funds..............................Virginia (Ch. 369) Changing time for valuing common trust funds held by trust companies.......... ................................................................................................. New York (Ch. 158) Prohibiting fiduciary bank or trust company from purchasing own stock for estate under its management unless expressly authorized by the trust instrument but permitting such fiduciary to hold such shares originally received directly from the testator or donor if considered a proper investment under the prudent man rule................................................................................... Kentucky (Ch. 13) Revising the requirements relating to the legality of railroad mortgage bonds as legal investments for savings banks......................................New Jersey (Ch. 104) Permitting board of managers of savings banks in determining whether invest ments meet legal requirements, to rely on statistical, financial or other in formation in publications accepted as reliable by the commissioner. Providing that investments, legal when made, shall continue to be legal, but requiring that securities illegal when exchanged under reorganization or recapitalization must be disposed of within the prescribed period..............New Jersey (Ch. 104) Permitting savings banks to invest in mortgages on real property in adjoining states......................................................................................... New York (Ch. 24) Reducing the amount of stock of certain national banks which a savings bank or trust company may hold as investment or as security for loans...................... ........................................................................................... Rhode Island (Ch. 1379) Authorizing savings banks and trust companies to invest in notes or bonds secured by mortgages issued under Title III of the Servicemen’s Readjustment Act of 1944................................................................................................. Maine (Ch. 925) Deposits: Providing that until six months after the war deposits of a savings bank in any other bank shall not exceed 10 percent of its deposits, nor the capital stock and surplus of such depository......................................Rhode Island (Ch. 1389) Other: Permitting banks and trust companies acting as fiduciaries to cause securities held in such capacity to be registered and held in the name of a nominee.................. ......................Kentucky (Ch. 11), New Jersey (Ch. 114), New York (Ch. 215) Providing for cancellation of bonds without surety given by banks or trust com panies where the assets of estate have been distributed to persons entitled thereto and discharging the fiduciary from all liability on such bonds.............. ................................................................................................. New Jersey (Ch. 181) Providing that the deposit required of trust companies may consist of United States guaranteed securities, as well as United States securities, and requiring that such deposit be equal to the par value but not less than market value of 10 percent of the capital stock of the trust company___ New York (Ch. 21) 106 FEDERAL DEPOSIT INSURANCE CORPORATION Other:— Continued Providing for discretionary orders of the Supreme Courts in litigation involving mortgage and bond holders who object to modification of the terms of such bonds by trust companies................................................... New York (Ch. 128) Including trust companies, except members of the Federal Reserve System, among the banks which are required to maintain a reserve fund. Member banks must maintain the reserves required by Federal law.......... Rhode Island (Ch. 1522) Permitting two or more savings banks in the same county to merge or consolidate into a single savings bank....................................................New Jersey (Ch. 22) Regulating the pensioning of officers and employees of savings banks, exempting such pensions from execution or attachment, and including the time spent in military service in computing the length of service under such pensions.......... ................................................................................................. New Jersey (Ch. 147) Authorizing savings banks, credit unions, and savings and loan associations to establish death, disability, and retirement plans for employees........................... ........................................................................................... Rhode Island (Ch. 1495) Adopting Uniform Trust Receipts A ct....................................Virginia (Ch. 368) Requiring banks and other fiduciary institutions to furnish information to Family Court upon request relative to funds of persons chargeable with support of others and persons asking for such support... .South Carolina (Act No. 509) BANKS IN FINANCIAL DIFFICULTIES OR RECEIVERSHIP Authorizing surviving directors as trustees on dissolution of dissolved banks and trust companies to sell or distribute assets of inter vivos trusts held by the institution as trustee prior to dissolution and validating instruments previously executed by such directors in such actions.........................New Jersey (Ch. 176) Authorizing the State Treasury to dispose of bonds, mortgages, and stocks of corporations standing in his or the state's name received in liquidation of claims against insolvent banks..........................................................New Jersey (Ch. 15) Amending the law relating to the disposition of contents of safe deposit boxes of banks in the possession of superintendent..........................New York (Ch. 40) Amending law relating to payment of dividends by superintendent of banks to creditors of banks in his possession. Providing that no creditor shall be entitled to receive interest on dividends because of delay in their payment.................. ................................................................................................... New York (Ch. 40) CREDIT UNIONS AND SMALL LOANS Authorizing credit unions to sell to members negotiable checks drawn by or on it and payable by or through a trust company or national bank...................... ......................................................................................... Rhode Island (Ch. 1493) Restricting the pledge of shares or deposits in a credit union.................................. ................ ...........................................................................Rhode Island (Ch. 1494) Revising the small loan law............................................................. Virginia (Ch. 370) PART FIVE STATISTICS OF BANKS AND DEPOSIT INSURANCE o 00 Table 101. and D eposits of A l l O p e r a t in g B a n k s Table 102. Number of operating banks and branches, December 31, 1944 Table 103. Number and deposits of operating commercial and mutual savings banks, December 31, 1944 INSURANCE Grouped according to insurance status and class of bank, and by State and type of office DEPOSIT Changes in number and classification of operating banks and branches in the United States and possessions during 1944 FEDERAL N u m b e r , O f fices , Banks grouped according to insurance status and by State savings banks, with a few exceptions, accept only savings deposits, while most banks classified as commercial banks also accept checking accounts and other deposits subject to withdrawal on demand. However, a few banks included in the commercial group hold only savings and time deposits. Trust companies are included with commercial CORPORATION The line of demarcation between banks and other types of financial institutions is not always clear. In these tables provision of deposit facilities for the general public is the chief criterion. However, trust companies not engaged in deposit banking are included because uninvested trust funds may be insured by the Federal Deposit Insurance The data in the tables which follow relate to banks operating in the continental United States and in Alaska, Hawaii, Puerto Rico, and the Virgin Islands, including branches of foreign banks which engage in a general deposit business in this area. Noninsured banks: Board of Governors of the Federal Reserve System; State banking authorities; Rand McNally Bankers Directory; and Polk’s Bankers Encyclopedia. 109 Insured banks: records of the Federal Deposit Insurance Corporation; Office of the Comptroller of the Currency; and Board of Governors of the Federal Reserve System. BANKS The traditional distinction between commercial banks and mutual savings banks has been followed. Mutual Sources of data: OF OPERATING A bank is classified as an insured bank when its deposits are insured by the Federal Deposit Insurance Corporation. All banks members of the Federal Reserve System are required by law to be insured banks. Other banks may be admitted to deposit insurance upon meeting conditions prescribed by law. Banks members of the Federal Reserve System are separated into two groups: national and State. All na tional banks in the continental United States are required to be members of the Federal Reserve System; State chartered banks may become members of the Federal Reserve System upon meeting certain conditions. None of the six national banks in the possessions is a member of the Federal Reserve System; four have been admitted to deposit insurance. DEPOSITS Banks are classified on the following bases: Insurance status Commercial and mutual savings Membership in the Federal Reserve System banks since most institutions known as trust companies accept checking accounts. NUMBER, OFFICES, AND Corporation, and credit unions which accept deposits are excluded. A more detailed statement of institutions included and excluded is given in the Annual Report of the Corporation for 1943, pages 59-60. T able 101. CHANGES IN NUMBER AND CLASSIFICATION OF OPERATING BANKS AND BRANCHES in t h e U n ite d S ta te s a n d P o s s e s s io n s D u r in g In Non sured insured Total Insured1 Noninsured Members F. R. System Trust Not Total mem Banks com panies bers of de not ac F. R. posit cepting System deposits Total National State Non In sured2 insured 14,167 14,206 13,268 13,274 5,025 5,040 1,786 1,695 6,457 6,539 816 847 83 85 543 545 192 184 351 361 -41 +2 -43 -39 -6 -15 +91 -82 -31 -2 -2 +8 -10 Banks beginning deposit operations New banks . . .... .. ..................... Financial institutions becoming banks of deposit 70 65 5 61 56 5 9 9 70 65 5 61 56 5 8 8 5 5 48 43 5 9 9 Banks ceasing deposit o p e ra tio n s...................................... Suspended banks not reopened or succeeded Merged with financial aid of FDIC—net decrease Other mergers and absorptions—net decrease.................... Other liquidations .... 111 1 1 74 35 96 1 1 67 27 15 109 1 1 72 35 95 1 1 66 27 32 9 54 1 12 2 2 1 1 1 26 5 8 1 32 21 4 8 2 2 1 1 +39 +4 +35 -39 -4 -35 + 30 +4 +26 + 30 +4 + 26 -30 -4 -26 +9 -9 +9 -9 -2 -2 +2 +2 -2 -2 -2 -2 +2 +2 Net change during y e a r............................................................ Changes resulting fr o m — Noninsured banks becom in g insured . Successions to noninsured banks Admissions to insurance, operating banks^ . .... . . . Insured banks becom in g noninsured Succession to insured bank Other changes in classification am ong banks National banks succeeding State banks State banks succeeding national banks Admissions to F R System Withdrawals from F R System . +9 + 13 -4 . . Changes n ot involving num ber in any class: Successions . ...................... Changes in title location, or name of location ............ 7 8 5 58 5 56 2 5 57 5 55 17 + 95 -6 + 108 -7 -104 -7 +4 -108 +7 2 13 3 25 2 1 1 CORPORATION 1,250 1,293 INSURANCE 13,460 13,458 DEPOSIT BANKS N um ber o f banks, Decem ber 31, 1944....................................... 14,710 Num ber o f banks, D ecem ber 31, 1943....................................... 14,751 FEDERAL Total Mutual savings banks Commercial banks and trust companies All banks Type of change 1944 BRANCHES N um ber o f branches, D ecem ber 31, 1944. N um ber o f branches, D ecem ber 31, 1943. 4,141 4,000 3,974 3,839 167 161 4,001 3,864 3,875 3,744 1,815 1,742 1,080 1,049 980 953 125 119 + 141 + 135 +6 + 137 + 131 + 73 +31 +27 Branches opened for bu siness............................. Facilities provided as agents of the government. Absorbed banks converted into branches............ Branches replacing offices closed or relocated. . . Other branches opened.......................................... 174 96 36 166 95 33 8 1 3 22 13 7 37 4 164 95 32 1 36 95 73 12 41 170 96 34 1 39 10 2 47 9 13 1 24 Branches d isco n tin u e d .......................................... Facilities provided as agents of the government. Other branches discontinued................................. 33 16 17 33 16 17 33 16 17 33 16 17 22 16 6 2 9 2 9 -2 +2 + 11 + 3 -1 +9 -11 -1 -1 -9 Net change during y ear........................................... 1 1 140 136 99 95 41 41 +6 +4 +4 6 1 2 4 2 2 1 1 3 2 1 1 +2 -2 Changes resulting fro m — 1 +2 Branches o f banks adm itted to in su ran ce............ -2 Other changes in classification am on g branches. Branches transferred as result of absorption............ From State banks to national banks......................... Admissions to F. R . System....................................... 1 11 1 11 1 5 2 4 1 1 1 1 ALL BANKING OFFICES 1,417 1,454 18,168 18,070 17,143 17,018 6,840 6,782 2,866 2,744 7,437 7,492 941 966 84 86 683 681 291 279 392 402 + 100 +137 -37 + 98 + 125 + 58 + 122 -55 -25 -2 + 2 + 12 -10 Offices opened. Banks............ Branches........ 244 70 174 227 61 166 17 9 8 240 70 170 225 61 164 103 8 95 27 5 22 95 48 47 15 9 6 Offices closed . Banks.......... Branches------ 111 144 129 96 15 15 142 109 33 128 95 33 54 32 22 11 9 2 63 54 9 12 12 + 39 +39 -39 -39 +2 -2 + 28 +30 -2 +9 + 106 -87 +30 -2 -28 -30 +2 +9 + 95 + 11 -104 -11 Net change during y ear......... Changes resulting fr o m - Changes in classification............................. Noninsured banks to insured banks........... Insured banks to noninsured banks............ Noninsured branches to insured branches. Among insured banks................................... Among branches of insured banks.............. 33 -2 +2 2 2 2 2 2 2 1 1 1 1 + 11 +9 -11 -9 +2 -2 111 1 Includes 10 trust companies not engaged in deposit banking on December 31, 1944 and 11 on December 31, 1943. 2 Includes three mutual savings banks, members of the Federal Reserve System, for December 31, 1944 and December 31, 1943. * Operating at beginning of year. Back figures— See the Annual Report for 1943, pp. 68-69, and earlier reports. 2 2 4 4 BANKS 17,434 17,297 OF OPERATING 18,851 18,751 N um ber o f offices, D ecem ber 31, 1944. N um ber o f offices, Decem ber 31, 1943. DEPOSITS Changes n o t involving num ber in any class: Branches transferred as result of absorptions... Changes in title, location, or name of location. . NUMBER, OFFICES, AND 1 2 Table 102. NUMBER OP OPERATING BANKS AND BRANCHES, DECEMBER 31, 1944 GROUPED ACCORDING TO INSURANCE STATUS AND CLASS OP BANK, AND BY STATE AND TYPE OF OFFICE Members F. R. System Total National State Trust Not com mem Banks panies Total of de not ac bers F. R. posit cepting System deposits 94.4 93.7 93.4 96.1 96.9 42.6 35.4 30.7 61.4 70.7 291 192 141 51 99 392 351 319 32 41 93.0 91.7 91.5 94.5 97.6 94.9 93.9 93.6 96.9 98.5 42.6 35.4 30.7 61.4 70.7 6.4 12.5 10.3 18.2 2.9 6.4 12.5 10.3 18.2 2.9 98.4 98.2 98.1 98.4 98.2 98.1 100.0 100.0 100.0 100.0 95.9 85.7 77.8 95.9 85.7 77.8 3 6 100.0 100.0 100.0 100.0 157 140 125 15 17 91.9 91.2 90.3 91.9 91.2 90.3 100.0 100.0 100.0 100.0 6,840 5,025 A,691 33k 1,815 2,866 1,786 1,583 203 1,080 7,437 6,457 5,881 576 980 941 816T 772 44 125 84 83 82 1 83 140 United S ta tes...................................... 18,741 All banks............................................ 14,670 Unit banks...................................... 13,UO Banks operating branches.............. 1,230 Branches............................................. 4,071 17,427 13,455 12,293 1,162 3,972 1,314 18,058 17,136 1,215 14,127 13,263 1,147 12,980 12,152 1,111 68 1,147 3,873 99 3,931 6,840 5,025 4,691 334 1,815 2,866 1,786 1,583 203 1,080 7,430 6,452 5,878 574 978 843 786 751 35 57 79 78 77 683 543 7 5 3 98 30 5 5 5 Possessions All banks Unit banks Banks operating branches Branches.............. 110 40 29 7 5 3 11 2 2 70 7 5 3 103 35 26 9 68 110 40 29 70 2 4 4 4 245 217 208 9 28 241 213 204 9 28 11 21 1 1 1 2 9 68 18 17 16 131 130 129 4 4 4 1 1 2 2 11 5 2 2 2 2 2 2 683 543 460 460 83 140 State Alabam a . .. All banks . Unit banks Banks operating branches Branches A rizon a........ All banks Unit banks Banks operating branches Branches Arkansas........ All banks. . . Unit banks Banks operating branches Branches........................... 245 217 208 9 28 49 14 9 5 35 247 226 207 19 21 241 213 204 9 28 47 12 7 5 35 227 206 187 19 21 2 2 2 20 20 20 49 14 9 5 35 247 226 207 19 21 47 12 7 5 35 227 206 187 19 21 92 66 59 7 26 34 5 3 1 2 2 29 55 51 47 4 4 15 15 15 1 17 17 17 3 3 3 CORPORATION 92.5 91.5 91.3 93.8 96.0 1,417 18,168 17,143 1,250 14,167 13,268 1,173 13,009 12,155 1,113 77 1,158 3,875 167 4,001 INSURANCE 392 351 319 32 41 17,434 13,460 12,296 1,16 A 3,974 DEPOSIT 291 192 141 51 99 18,851 14,710 Unit banks...................................... 13,469 Banks operating branches.............. 1,241 Branches............................................. 4,141 United States and possessions....... Com Mutual All In Non sured2 insured banks mercial savings banks banks FEDERAL Non Total Insured insured Total Insured banks as percentages of— Noninsured Insured1 State and type of bank or office Mutual savings banks Commercial banks and trust companies All banks 1,066 186 155 SI 880 15 14 13 C olora d o ................................ All banks............................ Unit banks...................... Banks operating branches Branches............................. 154 150 1U6 138 134 ISO h 4 16 16 16 C on n e cticu t......................... All banks............................. Unit banks...................... Banks operating branches Branches............................. 208 189 181 112 101 U 7 11 96 88 87 D elaware............................... All banks............................ Unit banks...................... Banks operating branches Branches............................. 56 42 52 39 32 7 13 D istrict o f C o lu m b ia ......... All banks............................ Unit banks...................... Banks operating branches Branches............................. 55 U 4 8 1 1 1,081 200 168 32 881 1,066 186 155 SI 880 807 91 82 9 716 154 150 1 U6 U 4 138 134 ISO U 4 81 77 73 U 4 15 15 15 136 117 109 110 99 92 7 59 51 U6 5 8 16 13 4 3 53 40 S3 7 13 52 39 32 7 9 55 21 9 55 21 9 55 21 9 12 12 12 34 12 34 34 34 F lorid a................................... All banks............................ Unit banks...................... Banks operating branches Branches............................. 190 171 156 15 19 183 165 151 U 18 1 190 171 156 15 19 183 165 151 1U 18 G eorg ia .................................. All banks............................ Unit banks...................... Banks operating branches Branches............................. 393 350 SSO 76 74 72 393 350 330 43 317 276 258 18 41 I d a h o ..................................... All banks............................ Unit banks...................... Banks operating branches Branches............................. 89 46 89 7 43 88 45 38 7 43 1 Illin ois................................... All banks............................ Unit banks...................... Banks operating branches Branches............................. 844 838 832 828 822 816 16 16 16 SU 8 14 21 20 6 6 6 6 2 1 1 7 6 5 1 11 2 43 1 1 89 46 39 7 43 88 45 38 7 43 844 838 832 828 822 816 2 20 6 6 6 6 42 42 U2 1 98.6 93.0 92.S 96.9 99.9 98.6 93.0 92.S 96.9 99.9 9 9 9 16 16 16 89.6 89.3 89.0 89.6 89.3 89.0 100.0 100.0 100.0 100.0 70 70 70 53.8 53.4 51.9 87.5 57.9 80.9 84.6 8U.U 87.5 57.9 92.9 92.9 9U.1 87.5 92.9 98.1 97.5 97.0 1 25 17 16 11 1 1 1 1 13 13 13 32 22 18 U 27 9 U 5 18 24 9 68 56 U6 5 5 5 5 6 15 10 12 12 31 57 16 10 6 19 12 9 3 7 10 10 10 41 356 350 SU 6 6 2 2 2 1 1 3 2 3 2 1 1 1 1 1 1 1 10 78 47 35 72 72 72 8 13 317 276 258 18 41 6 5 u 4 3 2 1 1 110 4 3 100 2 1 220 217 76 74 72 104 U 21U S 3 21 19 18 1 3 3 S 1 2 2 1 1 1 124 124 12 U 348 348 3U8 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 96.3 96.5 96.8 93.3 94.7 96.3 96.5 96.8 93.3 94.7 80.7 78.9 78.2 90.0 95.3 80.7 78.9 78.2 90.0 95.3 98.9 97.8 97.k 98.9 97.8 97.U 100.0 11 11 11 5 5 5 100.0 100.0 100.0 100.0 2 100.0 100.0 100.0 98.1 98.1 98.1 98.1 98.1 98.1 100.0 100.0 100.0 100.0 2.8 2.8 2.8 113 19 7 124 116 76 61 15 40 BANKS 8 8 12 OF OPERATING 1 19 143 19 DEPOSITS 1,081 200 168 32 881 NUMBER, OFFICES, AND C alifornia.............................. All banks............................ Unit banks...................... Banks operating branches Branches............................. Table 102. NUMBER OF OPERATING BANKS AND BRANCHES, DECEMBER 31, 1944— Continued GROUPED ACCORDING TO INSURANCE STATUS AND CLASS OF BANK, AND BY STATE AND TYPE OF OFFICE All banks Commercial banks and trust companies Insured1 Non Total Insured insured Iowa........................................ All banks............................ Unit banks...................... Banks operating branches Branches............................. 807 650 534 116 157 738 586 474 Kansas................................... All banks............................ Unit banks...................... Banks operating branches Branches............................. 625 619 613 455 449 6 6 6 Kentucky.............................. All banks............................ Unit banks...................... Banks operating branches Branches............................. 428 392 87 U 18 36 398 363 Louisiana.............................. All banks............................ Unit banks...................... Banks operating branches Branches............................. Maine..................................... All banks............................ Unit banks...................... Banks operating branches Branches............................. 163 98 73 25 65 6 45 75 112 152 US 170 170 170 571 495 449 46 76 547 472 427 45 75 137 124 116 807 650 534 116 157 738 586 474 152 1 1 625 619 61S 455 449 443 182 176 170 292 245 13 118 103 100 3 15 S4 47 1 1 99 98 97 63 63 63 576 425 314 8 95.7 95.2 94.9 97.8 98.7 95.8 95.4 95.1 97.8 98.7 91.4 90.2 91.4 90.2 151 69 64 60 4 5 235 235 235 168 168 168 211 88.8 96.6 96.8 96.6 96.8 72.8 72.5 72.3 72.8 72.5 72.8 6 100.0 6 100.0 100.0 100.0 93.0 92.6 92.5 94.4 97.2 93.0 92.6 92.5 94.4 97.2 99.5 99.3 99.2 99.5 99.3 99.2 100.0 112 111 111 17 35 398 363 346 17 35 18 10 212 149 118 211 148 117 212 149 118 211 135 108 63 63 63 63 32 25 7 31 40 35 40 17 7 SI SI 119 63 45 18 56 31 129 66 1*8 28 63 20 19 18 88.8 428 392 37 k\ 18 36 sue Com Mutual In All Nonsured2 insured banks mercial savings banks banks 148 117 31 63 113 57 89 18 56 93 90 3 81 260 250 240 10 27 10 23 100.0 100.0 73.0 64.3 61.6 72.0 86.2 75.0 75.0 75.0 CORPORATION 550 475 430 Trust Not com mem Banks panies Total Total bers of de not ac F. R. posit cepting National State System deposits INSURANCE 575 499 453 46 76 Noninsured Members F. R. System 100.0 87.6 86.4 90.7 78.8 88.9 DEPOSIT Indiana.................................. All banks............................ Unit banks...................... Banks operating branches Branches............................. Total Insured banks as percentages o f- FEDERAL State and type of bank or office Mutual savings banks 17.6 18.8 20.0 Maryland............................... Massachusetts....................... All banks.............................. Unit banks........................ Banks operating branches. Branches............................... 546 388 321 67 158 312 188 147 41 124 Michigan................................. All banks............................... Unit banks........................ Banks operating branches. Branches............................... 624 445 su 51 179 Minnesota.............................. All banks.............................. Unit banks........................ Banks operating branches. Branches............................... M ississippi.............................. All banks.............................. Unit banks........................ Banks operating branches. Branches............................... 257 202 172 SO 55 252 197 167 30 55 5 5 5 Missouri.................................. All banks............................ . Unit banks........................ Banks operating branches. Branches............................... 599 594 590 4 5 568 563 559 4 5 31 31 31 Montana................................. All banks.............................. Unit banks........................ Banks operating branches. Branches............................... 111 111 28 85 75 63 59 4 12 234 200 174 26 34 323 197 155 42 126 312 188 147 41 124 193 124 105 19 69 582 411 363 48 171 42 34 31 3 8 624 445 394 51 179 582 411 363 48 171 139 75 63 679 673 671 651 645 643 28 28 28 678 672 670 2 2 2 6 6 28 96 14] 10 7 3 4 259 174 255 171 144 27 84 146 146 60 17 10 7 43 76 30 n 16 46 120 91 75 16 29 43 34 28 6 3 57.1 48.5 45.8 61.2 78.5 96.6 95.4 94.8 97.6 98.4 8 93.3 92.4 92.1 94.1 95.5 93.3 92.4 92.1 94.1 95.5 27 27 27 95.9 95.8 95.8 95.9 95.8 95.8 100.0 100.0 9 8 1 64 650 644 642 190 184 182 25 25 25 435 435 485 2 2 6 6 257 202 172 30 55 252 197 167 SO 55 25 23 599 594 590 4 5 568 563 559 4 5 85 80 76 4 5 96 96 111 111 111 111 111 111 111 111 111 111 41 41 41 33 33 S3 37 37 37 Nebraska............... ................. All banks.............................. Unit banks........................ Banks operating branches. Branches............................... 420 415 420 415 5 5 359 354 349 5 5 5 5 359 354 349 5 5 134 130 126 4 4 17 17 17 208 207 206 Nevada..................................... All banks.............................. Unit banks........................ Banks operating branches. Branches............................... 26 9 4 5 17 26 9 4 5 17 26 9 4 5 17 26 9 4 5 17 19 6 3 3 13 410 61 61 61 410 3 223 191 166 25 32 1 2 100.0 224 171 143 21 2 2 28 53 387 387 387 1 1 3 2 1 1 1 29 29 29 53 53 53 100.0 98.1 97.5 97.1 98.1 97.5 97.1 100.0 100.0 100.0 100.0 94.8 94.8 94.7 94.8 94.8 94.7 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 85.5 85.3 85.1 85.5 85.3 85.1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 60.0 30.0 28.6 33.3 80.0 100.0 100.0 100.0 115 34 26 23 3 2 BANKS 206 183 161 6 12 3 237 153 139 14 84 22 15 10 7 5 223 191 166 25 32 11 2 23 15 3 98.5 98.3 98.6 96.4 98.8 1 1 1 9 12 25 1 10 7 95.1 94.6 95.4 90.3 96.0 2 OF OPERATING 270 174 DEPOSITS 284 184 153 31 100 NUMBER, OFFICES, AND All banka.............................. Unit banks........................ Banks operating branches. Branches............................... Table 102. N u m b e r o f O p e r a t in g B a n k s a n d B r a n c h e s , D e c e m b e r 31, 1944— Continued GROUPED ACCORDING TO INSURANCE STATUS AND CLASS OF BANK, AND BY STATE AND TYPE OF OFFICE Commercial banks and trust companies All banks Insured1 1 1 500 367 307 60 133 480 351 29h 57 129 474 345 288 57 129 49 41 49 41 49 41 49 41 7 7 8 7 8 7 8 1 1 1,355 696 588 108 659 1,342 684 578 106 658 369 17 U 376 227 178 149 147 149 147 10 178 153 137 16 25 170 147 133 lh 23 178 153 137 16 25 170 147 133 42 42 New Jersey............................ All banka............................ Unit banks...................... Banks operating branches Branches............................. 508 375 315 60 133 New M e x ico.......................... All banks............................ Unit banks...................... Banks operating branches Branches............................. New Y o r k .............................. All banks............................ Unit banks...................... Banks operating branches Branches............................. 1,545 827 678 1U9 718 1,532 815 N orth C arolin a.................... All banks............................. Unit banks...................... Banks operating branches Branches............................. 376 227 178 369 222 N orth D a k o ta ...................... All banks............................ Unit banks...................... Banks operating branches Branches............................. 3U U9 1 1 3h 668 1U7 717 U8 Sh U9 n 222 1 1 262 220 196 n U7 74 52 U5 22 23 5 5 5 21 14 588 403 36h 39 185 607 190 1U0 147 91 7h 17 56 55 45 19 9 7 2 295 168 128 17A U8 138 73 26 65 22 21 86.6 87.7 88.9 50.0 50.0 2 2 98.4 97.9 97.5 98.8 98.3 98.0 92.9 91.7 90.5 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1 1 2h 42 52.7 53.3 53.8 33.3 33.3 2 7 8 6 7 50 417 10 U0 127 128 105 91 U 23 190 131 90 hi 59 190 131 90 hi 59 100.0 100.0 100.0 100.0 100.0 99.2 98.5 98.5 98.7 99.9 99.0 98.3 98.1 97.8 97.8 98.0 98.7 98.1 97.8 97.8 98.0 98.7 95.5 96.1 97.1 87.5 92.0 95.5 96.1 97.1 87.5 92.0 100.0 100.0 100.0 100.0 100.0 CORPORATION 2 3 3 43 42 hi INSURANCE 58 57 56 107 Com Mutual All In Non sured2 insured banks mercial savings banks banks 53 52 51 67 65 63 2 58 57 56 10 h Trust Not com mem Banks panies Total of de not ac bers F. R. posit cepting National State System deposits DEPOSIT 110 New H a m p sh ire.................. All banks............................ Unit banks...................... Banks operating branches Branches............................. Noninsured Members F. R. System NonTotal Insured insured Total Insured banks as percentages o f- FEDERAL State and type of bank or office Mutual savings banks 379 373 367 6 6 6 6 O regon ................................... All banks............................ Unit banks...................... Banks operating branches Branches............................. 143 71 6k 7 72 139 67 60 7 72 4 4 k 142 70 63 7 72 138 Pennsylvania........................ All banks............................ Unit banks...................... Banks operating branches Branches............................. 1,167 1,042 985 57 125 1,143 1,022 968 5k 121 24 20 17 3 4 1,146 1,035 982 53 1,122 1,015 965 50 107 R hode Isla n d ....................... All banks............................ Unit banks...................... Banks operating branches Branches............................. 82 35 31 19 13 71 26 13 47 51 16 9 7 35 12 45 South C arolin a.................... All banks............................ Unit banks...................... Banks operating branches Branches............................. 179 146 137 9 33 153 120 111 26 26 26 179 146 137 9 33 South D a k o ta ...................... All banks............................ Unit banks...................... Banks operating branches Branches............................. 209 164 lk l 23 45 208 163 IkO 23 45 T ennessee.............................. All banks............................ Unit banks...................... Banks operating branches Branches............................. 355 296 27k 344 285 263 22 22 59 59 T ex as...................................... All banks............................ Unit banks...................... Banks operating branches Branches............................. 884 857 831 26 27 815 788 762 26 27 22 9 33 11 11 11 6 6U0 39 171 834 663 62k 39 171 390 384 378 379 373 367 6 111 n 12 16 16 16 15 15 15 158 158 158 9 9 9 3 3 3 6 6 66 59 7 72 92 24 8 8 21 8 3 719 666 139 101 6kl 86 38 34 30 k 4 2 2 2 264 248 238 22 25 53 15 38 10 16 18 15 3 4 51 16 9 7 35 21 11 20 2 10 3 17 7 2 2 1 2 10 18 7 153 120 50 8 6 k 95 92 89 3 3 8 3 22 5 10 2 2 2 11 9 11 9 8 1 8 1 2 2 26 26 26 22 95 70 63 7 25 19 8 7 I 11 230 207 193 lk 23 7 7 7 59 344 285 263 22 59 884 857 831 26 27 815 788 762 26 27 463 436 102 102 250 250 250 68 68 1 1 68 1 23 45 355 296 27k 22 U10 26 27 102 21 7 3 k 14 3 3 3 126 103 8k 19 23 2 2 1 1 1 21 7 3 k 14 24 24 2k 111 1 1 1 2 2 2 58 36 32 k 1U1 3 3 3 2 2 2 208 163 IkO 23 45 209 164 69 69 69 19 k 267 246 233 13 21 9 33 1 1 11 11 206 200 288 177 159 18 111 18 k 28 1 11 6 279 240 232 1 1 1 4 4 k 98.1 97.7 97.5 98.1 97.6 97.5 100.0 100.0 100.0 100.0 97.2 97.1 97.1 97.2 97.1 97.1 100.0 100.0 100.0 100.0 97.2 94.4 93.8 97.2 94.3 93.7 100.0 100.0 100.0 97.9 98.1 97.9 98.1 98.3 9k.3 96.4 62.2 45.7 k0.9 53.8 74.5 71.8 61.5 6 k.S 58.3 77.8 85.5 82.2 81.0 85.5 82.2 81.0 100.0 100.0 100.0 100.0 99.5 99.4 99.3 99.5 99.4 99.3 100.0 100.0 100.0 100.0 96.9 96.3 96.0 96.9 96.3 96.0 100.0 100.0 100.0 100.0 92.2 91.9 91.7 92.2 91.9 91.7 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 117 390 384 378 850 679 BANKS O klah om a............................. All banks............................ Unit banks...................... Banks operating branches Branches............................. 16 16 16 OF OPERATING 837 666 627 39 171 DEPOSITS 853 682 6k3 39 171 NUMBER, OFFICES, AND O h io ....................................... All banks............................ Unit banks...................... Banks operating branches Branches............................. Table 1 02 . N u m b e r o f O p e r a tin g B a n k s AND B r a n c h e s , December 31, 1944— Continued 00 GROUPED ACCORDING TO INSURANCE STATUS AND CLASS OF BANK, AND BY STATE AND TYPE OF OFFICE All banks Commercial banks and trust companies Insured1 Non Total Insured insured Vermont.................................. All banks.............................. Unit banks........................ Banks operating branches. Branches............................... 98 80 72 97 79 71 18 18 Virginia................................... All banks.............................. Unit banks........................ Banks operating branches. Branches............................... 401 312 267 1>5 89 401 312 267 h5 89 Washington............................ All banks.............................. Unit banks........................ Banks operating branches. Branches............................... 232 128 115 13 104 229 125 West Virginia........................ All banks.............................. Unit banks........................ Banks operating branches. Branches............................... 178 178 178 Wisconsin............................... All banks.............................. Unit banks........................ Banks operating branches. Branches............................... 702 559 8 m 88 143 8 112 13 77 57 50 7 77 57 50 7 20 15 81 72 65 7 9 80 71 41 39 37 401 312 267 U5 401 312 267 k5 89 120 10 226 123 136 41 20 229 126 6k 7 9 llh 12 111 12 173 173 173 178 178 178 173 173 172 690 548 U61 87 142 698 555 U67 687 545 k58 87 142 104 103 88 143 103 27 23 20 156 130 26 3 4 38 31 26 5 7 Com Mutual All In Non sured2 insured banks mercial savings banks banks 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.0 98.8 98.6 98.8 98.6 98.5 100.0 100.0 100.0 100.0 78 64 57 7 14 167 118 90 28 49 16 15 lk 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 98.7 97.7 97.k 98.7 97.6 97.k 95 1 1 74 67 6k 3 7 76 76 76 30 30 30 67 67 67 97.2 97.2 97.2 97.2 97.2 97.2 503 384 306 78 119 98.3 98.0 97.9 98.9 98.4 98.2 98.1 98.9 99.3 33 8 in 96 92 k 15 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 75.0 75.0 75.0 CORPORATION 20 50 7 20 77 57 Trust Not com mem Banks panies Total Total bers of de not ac F. R. posit cepting National State System deposits INSURANCE 77 57 50 7 Noninsured Members F. R. System DEPOSIT Utah......................................... All banks.............................. Unit banks........................ Banks operating branches. Branches............................... Total Insured banks as percentages o f- FEDERAL State and type of bank or office Mutual savings banks W y o m in g .............................. All banka............................ Unit banks...................... Banks operating branches Branches............................. 98.3 98.2 98.2 100.0 100.0 98.3 98.2 98.2 100.0 100.0 Hawaii4.................................. All banks............................ Unit banks...................... Banks operating branches Branches............................. 21.1 17.6 15.3 50.0 50.0 1.9 11.1 21.1 17.6 13.3 50.0 50.0 1.9 11.1 14.3 66.7 66.7 Puerto R ic o .......................... All banks............................ Unit banks...................... Banks operating branches Branches............................. Virgin Islands5.................... All banks............................ Unit banks...................... Banks operating branches Branches............................. 50.0 100.0 100.0 50.0 100.0 100.0 OF OPERATING 1 Includes 10 trust companies not engaged in deposit banking: 2 national banks, 1 each in Illinois and Kansas; 3 State banks members of the Federal Reserve System, 1 each in California, Illinois and Massachusetts; and 5 State banks not members of the Federal Reserve System, 1 each in Florida, Missouri and Wisconsin, and 2 in Pennsylvania 2 Includes 3 mutual savings banks, members of the Federal Reserve System. 3 Includes 4 national banks, 3 among insured banks not members of the Federal Reserve System, and 1 among noninsured banks. 4 Includes, among noninsured banks, 1 national bank operating 21 branches. 5 Includes, among insured banks not members of the Federal Reserve System, 1 national bank operating 1 branch. Back figures— See the Annual Report for 1943, pp. 70-75, and earlier reports. BANKS 119 DEPOSITS 14.3 NUMBER, OFFICES, AND Possessions Alaska3................................... All banka............................ Unit banks...................... Banks operating branches Branches............................. T a b le 1 0 3 . NUMBER AND DEPOSITS OF OPERATING COMMERCIAL AND MUTUAL SAVINGS BANKS, DECEMBER 31, 1944 BANKS GROUPED ACCORDING TO INSURANCE STATUS AND BY DISTRICT AND STATE Deposits (in thousands of dollars) Number of banks Commercial banks and trust companies Mutual savings banks Mutual savings banks Noninsured All banks Total In sured1 Banks of de posit In sured Nonin sured All banks Total Insured Nonin sured Total Insured Nonin sured 13,268 816 83 543 192 351 142,076,855 128,701,304 125,751,795 2,949,509 13,375,551 8,910,338 4,465,213 14,127 13,263 786 78 543 192 351 141,444,810 128,069,259 125,713,909 2,355,350 13,375,551 8,910,338 4,465,213 40 40 5 30 5 897 1,258 1,724 1,068 1,089 1,508 1,503 1,488 1,101 1,625 912 537 543 1,101 1,714 1,058 1,089 1,508 1,495 1,488 1,100 1,625 912 534 488 1,069 1,678 1,019 999 1,417 1,428 1,408 1,065 1,366 841 490 50 29 34 36 87 77 53 75 33 246 68 28 5 3 2 3 3 14 14 5 2 13 3 16 105,288 7,480,449 992,910 57,622 4,129,970 82,880 9,976 State Alabama Arizona Arkansas California Colorado 217 14 226 200 150 217 14 226 200 150 213 12 206 186 134 17 5 16 Connecticut........ Delaware............. Dist. of Columbia Florida Georgia 189 42 21 171 350 117 40 21 171 350 99 39 21 165 276 Possessions 632,045 632,045 37,886 594,159 11,407,131 44,754,338 15,955,147 7,130,226 5,851,735 7,038,995 9,282,299 12,170,679 3,470,471 4.460.656 5,157,611 15,397,567 7,171,873 37,191,009 14,962,237 6,830,217 5,851,735 7,038,995 9,240,776 12,170,679 3,365,742 4,460,656 5,157,611 15,259,774 6,729,684 36,058,267 14,916,074 6,708,301 5,809,075 6,991,923 9,117,470 12,069,613 3,289,587 4,292,693 5,073,867 14,695,241 442,189 1,132,742 46,163 121,916 42,660 47,072 123,306 101,066 76,155 167,963 83,744 564,533 1,031,336 288,077 633,393 10,827,241 845,468 1,031,336 288,077 633,393 10,827,241 845,468 1,025,768 288,077 629,069 10,769,982 840,237 4,324 57,259 5,231 2.463.657 464,640 855,710 1,409,795 1,464,446 1,481,117 401,066 855,710 1,409,795 1,464,446 1,304,667 399,981 855,710 1,404,146 1,440,931 FDIC District District District District District District District District District District District District District 1 ............ 2 ............ 3 ............ 4 ............ 5 ............ 6 7 ............ 8 9 10 11 12 16 153 10 3 338 4 8 6 2 1 i 3 3 354 157 10 10 7 4 2 3 9 17 1 1 3 74 3 72 2 2 70 2 4,235,258 7,563,329 992,910 300,009 41,523 31,547 104,729 104,729 137,793 137,793 982,540 63,574 18,865 242,387 5,568 176,450 1,085 5,649 23,515 963,675 63,574 CORPORATION 14,167 United States. . . 14,670 INSURANCE United States and possessions........ 14,710 DEPOSIT Trust Total com panies not ac cepting deposits FEDERAL FDIC District and State Commercial banks and trust companies 1 11 19 64 168 Kentucky.......... Louisiana.......... Maine................ Maryland.......... Massachusetts.. 392 149 98 184 388 392 149 363 148 57 171 188 24 1 9 2 9 5 Michigan........... Minnesota......... Mississippi........ Missouri............ Montana............ 445 673 445 672 411 644 197 563 26 27 5 29 2 Nebraska........... Nevada.............. New Hampshire New Jersey....... New M exico___ 415 9 107 375 41 415 9 65 351 41 354 9 57 345 41 53 8 8 3 3 New Y ork......... North Carolina. North Dakota. . Ohio................... Oklahoma.......... 827 227 153 682 384 684 227 153 679 384 222 12 4 5 16 9 1 1 Oregon............... Pennsylvania. . . Rhode Island. . . South Carolina. South Dakota. . 71 1,042 35 146 164 70 1,035 26 146 164 1,015 16 Tennessee.......... Texas................. U tah.................. Vermont............ Virginia.............. 296 857 57 80 312 296 857 57 72 312 Washington. . . . West Virginia... Wisconsin.......... W yoming.......... 128 178 559 57 126 178 555 57 202 594 111 Possessions Alaska................ Hawaii............... Puerto R ico. . . . Virgin Islands.. 66 174 197 202 594 111 111 147 663 373 66 5 4 4 3 1 1 32 10 191 6 3 26 7 191 8 1 1 1 2 2 2 18 7 26 1 2 2 3 285 788 57 71 312 7 68 4 1 123 173 545 56 3 4 8 120 163 14 3 12 1 42 24 22 131 131 3 3 1 7 9 1 7 1 8 8 1 2 1 2 2 4 3 5 42 2 9 1 335,897 10,402,500 2,471,041 1,768,179 1,279,823 335,897 10,402,500 2,438,336 1,768,179 1,279,823 329,146 10,376,731 2,411,112 1,692,882 1,148,613 6,751 25,769 27,224 75,297 131,210 1,277,380 1,319,177 591,822 1,887,870 6,762,882 1,277,380 1,319,177 415,752 1,587,861 4,202,610 1,257,635 1,318,430 384,918 1,510,403 4,077,598 19,745 747 30,834 77,458 125,012 4,442,975 2,395,021 626,981 3,508,102 405,248 4,442,975 2,290,292 626,981 3,508,102 405,248 4,354,045 2,278,316 619,800 3,493,238 405,248 88,930 11,976 7,181 14,864 985,418 120,971 432,220 4,246,024 202,029 985,418 120,971 198,309 3,870,446 202,029 958.482 120,971 185,720 3,864,125 202,029 26,936 39,924,181 1,549,320 381,887 6,347,905 1,181,405 32,800,004 1,549,320 381,887 6,173,545 1,181,405 1,132,061 9,607,242 898,076 514,773 288,315 32,705 23,167 9,538 176,070 300,009 2,560,272 19,431 57,622 156,639 242,387 2,560,272 104,729 104,729 12,589 6,321 233,911 375,578 356,272 31,789,904 1,527,964 319,168 6,162,943 1,176,819 1,010,100 21,356 62,719 10,602 4,586 7,124,177 7,124,177 174,360 174,360 1,125,354 8,788,692 682,603 514,773 288,315 1,119,122 8,753,131 585,299 499,986 286,855 6,232 35,561 97,304 14,787 1,460 6,707 818,550 215,473 6,707 818,550 1,620,120 4,667,505 454,501 258,474 1,586,415 1,620,120 4,667,505 454,501 191,482 1,586,415 1,611,981 4,583,761 454,501 191.482 1,586,415 8,139 83,744 66,992 66,992 2,014,344 736,138 2,368,283 168,542 1,883,258 736,138 2,359,465 168,542 1,867,890 727,823 2,352,313 168,542 15,368 8,315 7,152 131,086 131,086 8,818 8,380 51,473 461,079 115,156 4,337 51,473 461,079 115,156 4,337 20,381 13,248 31,092 447,831 115,156 80 4,257 233,911 19,306 215,473 438 121 1 Includes 10 trust companies not engaged in deposit banking: 2 each in Illinois and Pennsylvania and 1 each in California, Florida, Kansas, Massachusetts, Missouri and Wisconsin. Back figures—See the following Annual Reports: 1943, pp. 76-77; 1942, pp. 76-77; 1941, pp. 108-109. BANKS 45 822 472 586 449 OF OPERATING 46 838 495 650 619 DEPOSITS 46 838 499 650 619 !ER, OFFICES, AND Idaho................. Illinois............... Indiana.............. Iow a.................. Kansas............... Table 104. and L ia b il it ie s of O p e r a t in g B a n k s 122 A ssets Summary of assets and liabilities of operating banks in the United States and possessions, June 30, 1944 Banks grouped according to insurance status and type of bank Summary of assets and liabilities of operating banks in the United States and possessions, December 30, 1944 Table 106. Assets and liabilities of operating insured commercial banks, December 30,1944, June 30, 1944 and December 31, 1943 Banks grouped according to insurance status and by type of bank Percentage distribution of assets and liabilities of operating insured commercial banks, call dates, 1934-1944 Statements of assets and liabilities are submitted by insured commercial banks upon either a cash or an accrual basis, depending upon the bank's method of bookkeeping. Assets reported represent aggregate book of the loan. Such loans are reported gross if, under contract, the payments do not immediately reduce the unpaid balances of the loan but are assigned or pledged to assure repayment at maturity. CORPORATION Table 108. INSURANCE Table 107. Summary of assets and liabilities of operating banks in the United States and possessions, 1942-1944 DEPOSIT Banks grouped according to insurance status and type of bank FEDERAL Table 105. value, on the date of call, less valuation allowances and premiums. Other insured Corporation. banks: Federal Deposit Insurance Noninsured banks: State banking authorities; Rand McNally Bankers Directory; and Polk's Bankers Encyclo pedia. BANKS State banks members of the Federal Reserve System: Board of Governors of the Federal Reserve System. OF OPERATING Instalment loans are ordinarily reported net if the instalment payments are applied directly to the reduction National banks and State banks in the District of Columbia not members of the Federal Reserve System: Office of the Comptroller of the Currency. LIABILITIES Since June 30, 1942, demand balances with and demand deposits due to banks in the United States exclude reciprocal interbank deposits. Reciprocal interbank de posits arise when two banks maintain deposit accounts with each other. Sources of Data: AND In the case of banks with one or more domestic branches, the assets and liabilities reported are consolidations of figures for the head office and all domestic branches. In the case of a bank with foreign branches, net amounts due from its own foreign branches are included in “ Other assets” , and net amounts due to its own foreign branches are included in “ Other liabilities” . Data for noninsured trust companies not accepting deposits are excluded. Data for some noninsured com mercial banks are omitted because of unavailability of reports. On December 30, 1944, 83 noninsured trust companies and 30 noninsured commercial banks were excluded. Because of these exclusions, the number of noninsured banks in the following tables does not agree with the number shown in the previous section. ASSETS Assets and liabilities held in or administered by a savings, bond, insurance, real estate, foreign, or any other department of a bank, except a trust department, are consolidated with the respective assets and liabilities of the commercial department. “ Deposits of individuals, partnerships, and corporations” include trust funds de posited by a trust department in a commercial or savings department. Other assets held in trust are not included in statements of assets and liabilities. Total deposits shown in these tables are not the same as the deposits upon which assessments paid to the Federal Deposit Insurance Corporation are based. The assessment base is slightly lower due to certain deductions which may be claimed. T able 104. SUMMARY OF ASSETS AND LIABILITIES OF OPERATING BANKS IN THE UNITED STATES AND POSSESSIONS, JUNE 30, 1944 BANKS GROUPED ACCORDING TO INSURANCE STATUS AND TYPE OF BANK (Amounts in thousands of dollars) Mutual savings banks Commercial banks Asset, liability or capital account item All banks Total Insured1 Noninsured Total Insured N oninsured 545,968 542,877 380,628 162,249 73,227,763 67,103,707 3,393,594 2,388,042 342,420 1,781,076 1,611,406 70,327 44,634 26,263 28,446 8,557,824 7,300,590 164,794 961,160 131,280 5,377,663 4,751,980 119,590 491,932 14,161 3,180,161 2,548,610 45,204 469,228 117,119 Loans, discounts, and overdrafts (including rediscounts).................... 25,487,832 21,071,435 ,/20,732,091 339,344 4,416,397 J 3,111,443 1,304,954 Miscellaneous assets—total............................................................................ Bank premises owned, furniture and fixtures................................................ Other real estate— direct and indirect............................................................ All other miscellaneous assets.......................................................................... 1,892,165 1,092,660 331,019 468,486 139,226,086 1,496,999 1,569,155 987,839 971,648 171,882 179,871 353,469 401,445 , 125,385,978 £22,647,434 72,156 16,191 7,989 47,976 2,738,544 323,010 104,821 151,148 67,041 13,840,108 248,827 77,949 120,277 / 50,601 J 9,118,561 74,183 26,872 30,871 16,440 4,721,547 129.127.408 12.473.274 2,474,537 850,126 389,098 121,542 12.473.274 720,016 162,818 10,266 220,671 J 8.234.962 4.238.312 129.127.408 116,654,134 •'114,179,597 57,364,373 58,214,499 20,543,888 20,932,986 4,811,792 4.933.334 18,864,831 19,584,847 11,038,203 11,201,021 1,550,679 1,560,945 5,831 226,502 8.234.962 4.238.312 Miscellaneous liabilities— total...................................................................... Rediscounts and other borrowed money........................................................ All other miscellaneous liabilities.................................................................... Total liabilities (excluding capital accounts).................................... 824,268 86,692 737,576 129,951,676 778,509 86,440 692,069 117,432,643 757,250 84,240 673,010 114,936,847 21,259 2,200 19,059 2,495,796 45,759 252 45,507 12,519,033 20,494 25,265 252 25,013 ..........20,494 4,258,806 8,260,227 CAPITAL ACCOUNTS Capital accounts— total................................................................................... Capital stock, notes, and debentures............................................................. Surplus .. ............................................................................................ Undivided profits, including all other capital accounts............................... Total liabilities and capital accounts.................................................. 9,274,410 2,995,981 4,203,295 2,075,134 139,226,086 7.953.335 2,991,265 3,271,672 1,690,398 125,385,978 7,710,587 2,894,735 3,190,416 1,625,436 122,647,434 242,748 96,530 81,256 64,962 2,738,544 1,321,075 4,716 931,623 384,736 13,840,108 462,741 858,334 4,716 665,281 ........266,342 196,399 188,337 4,721,547 9,118,561 Number of banks included................................................................................... 14,608 14,064 13,269 795 544 LIABILITIES Deposits—total.................................................................................................... Demand deposits of individuals, partnerships, and corporations............... Time deposits of individuals, partnerships, and corporations..................... States and political subdivisions...................................................................... United States Government.............................................................................. Interbank............................................................................................................ Certified and officers’ checks, cash letters of credit, etc.............................. Not classified, including postal savings.......................................................... 1 Includes 10 trust companies not engaged in deposit banking. Back figures— See the following Annual Reports: 1943, pp. 78-79; 1942, pp. 78-79; 1941, pp. 122-125. 192 352 CORPORATION 27,190,581 75,008,839 68,715,113 3,463,921 2,432,676 368,683 28,446 INSURANCE 27,736,549 83,566,663 76,015,703 3,628,715 3,393,836 499,963 28,446 DEPOSIT 28,279,426 Securities— total................................................................................................. United States Government obligations, direct and guaranteed................... Obligations of States and political subdivisions............................................ Other bonds, notes, and debentures............................................................... Corporate stocks................................................................................................ FEDERAL ASSETS Gash, balances with other banks, and cash items in process of col- T a b le 1 0 5 . SUMMARY OF A s s e t s AND LIABILITIES OF OPERATING BANKS IN THE UNITED STATES AND POSSESSIONS, DECEMBER 30, 1944 BANKS GROUPED ACCORDING TO INSURANCE STATUS AND TYPE OF BANK (Amounts in thousands of dollars) Commercial banks Asset, liability or capital account item All banks Total Insured1 Mutual savings banks Noninsured Total Insured Noninsured 581,188 583,835 399,579 184,256 United States Government obligations, direct and guaranteed.................. Obligations of States and political subdivisions............................................ Other bonds, notes, and debentures.............................................................. 82,053,067 75,896,226 3,423,732 2,385,706 347,403 2,230,876 2,056,562 76,329 46,026 26,878 25,081 9,559,461 8,327,763 126,986 970,101 134,611 6,112,598 5,508,720 95,789 493,394 14,695 3,446,863 2,819,043 31,197 476,707 119,916 Loans, discounts, and overdrafts (including rediscou nts).................... 26,079,480 21,707,210 i 21,354,758 352,452 4,372,270 J 3,110,134 1,262,136 M iscellaneous assets— t o t a l............................................................................ Bank premises owned, furniture and fixtures............................................... Other real estate— direct and indirect............................................................ All other miscellaneous assets......................................................................... T ota l assets................................................................................................. 1,783,700 1,057,751 242,137 483,812 152,617,916 1,511,125 1,459,031 955,941 940,042 145,109 139,049 410,075 . 379,940 137,829,775 <134,613,165 52,094 15,899 6,060 30,135 3,216,610 272,575 101,810 97,028 73,737 14,788,141 204,954 75,677 , 75,454 / 53,823 J 9,827,265 67,621 26,133 21,574 19,914 4,960,876 LIABILITIES Deposits—to ta l................................................................................................... 142,076,855 Demand deposits of individuals, partnerships, and corporations............... Time deposits of individuals, partnerships, and corporations..................... States and political subdivisions..................................................................... United States Government.............................................................................. [142,076,855 Interbank........................................................................................................... Certified and officers’ checks, cash letters of credit, etc.............................. Not classified, including postal savings......................................................... J 128,701,304 Jl25,751,795 65,131,825 64,148,968 23,814,595 23,362,909 5,060,616 4,943,810 20,828,457 19,861,966 12,229,376 12,074,356 1,366,668 1,354,421 269,767 5,365 2,949,509 13,375,551 982,857 451,686 116,806 966,491 [ 13,375,551 155,020 12,247 264,402 J 8,910,338 4.465.213 8,910,338 4.465.213 926,049 124,486 801,563 143,002,904 891,356 123,893 767,463 129,592,660 871,103 121,549 749,554 126,622,898 20,253 2,344 17,909 2,969,762 34,693 593 34,100 13,410,244 24,715 90 24,625 8,935,053 9,978 503 9,475 4,475,191 CAPITAL ACCOUNTS C apital accou n ts— t o ta l................................................................................... Capital stock, notes, and debentures............................................................. Surplus .................................................................................................. Undivided profits, including all other capital accounts............................... T ota l liabilities and capital a c c o u n ts.................................................. 9,615,012 3,014,030 4,470,157 2,130,825 152,617,916 8,237,115 3,009,177 3,485,846 1,742,092 137,829,775 * 7,990,267 2,912,455 3,401,995 1,675,817 134,613,165 246,848 96,722 83,851 66,275 3,216,610 1,377,897 4,853 984,311 388,733 14,788,141 892,212 4,853 699,772 187,587 9,827,265 485,685 ..... 284,539* Number of banks included.................................................................................. 14,597 14,054 13,268 786 543 192 351 1 Includes 10 trust companies not engaged in deposit banking. Back figures—See Table 104 and the following Annual Reports: 1943, pp. 78-79; 1942, pp. 78-79; 1941, pp. 122-125. 201,146 4,960,876 BANKS M iscellaneous liabilities— t o ta l..................................................................... Rediscounts and other borrowed money........................................................ All other miscellaneous liabilities.................................................................... T ota l liabilities (excluding capital a cco u n ts).................................... OF OPERATING 29,746,309 84,283,943 77,952,788 3,500,061 2,431,732 374,281 25,081 LIABILITIES 30,327,497 93,843,404 86,280,551 3,627,047 3,401,833 508,892 25,081 AND 30,911,332 ASSETS ASSETS Cash, balances w ith other banks, and cash item s in process of col- T a b le 1 0 6 . A s s e t s AND LIABILITIES OF OPERATING INSURED COMMERCIAL BANKS, DECEMBER 30, 1944, 126 Ju n e 30, 1944 a n d D e c e m b e r 31, 1943 (Amounts in thousands of dollars) ASSETS Dec. 30, 1944 27,190,581 1,467,749 12,811,799 27,191,292 1,447,018 12,834,452 8,721,213 64,241 17,936 4,107,643 67,103,707 6,156,841 3,423,732 2,385,706 6,124,056 3,393,594 2,388,042 162,541 184,862 158,123 184,297 Total securities.............................. 82,053,067 73,227,763 Loans, discounts, and overdrafts (including rediscounts)— total................................. 21,354,758 Commercial and industrial loans (including 7,921,036 open market paper).................................... Loans secured by agricultural commodities, covered by purchase agreements of the 805,503 Commodity Credit Corporation............... Other agricultural loans (excluding loans on 917,363 farm land)......................................... 20,732,091 7,407,284 77,908,261 57,364,373 20,543,888 76,918,566 58,346,160 18,572,406 1,354,421 1,550,679 1,668,876 Governm ent deposits—to ta l........................... 24,811,141 United States Government— demand: War loan and Series E bond accounts........ 19,455,586 303,205 Other accounts............................................... 103,175 United States Government—time................... 5,365 Postal savings.................................................... States and political subdivisions— demand. . . 4,520,308 423,502 States and political subdivisions—time.......... 23,682,454 14,823,570 Deposits of individuals, partnerships, and 87,511,877 corporations— t o ta l...................... 64,148,968 Demand..................................................... 23,362,909 Time.......................................................... 8,382,577 Certified and officers’ checks, cash letters of credit and travelers’ checks o u t 68,615 standing, and am ounts due to Fed 20,398 eral Reserve b a n k s................................. 4,438,232 9,665,368 285,343 117,206 4,636,858 7,097 13,220,074 4,353,497 7,673,192 395,059 316,032 5,790,533 16,775,686 6,159,925 Interbank deposits— t o t a l............................... 12,074,356 11,038,203 10,704,765 9,743,462 Banks in the United States— demand............. 11,063,174 U0,030,896 1,619,819 63,861 57,136 52,672 Banks in the United States—time................... 2,501,430 893,382 2938,813 947,651 Banks in foreign countries— demand.............. 4,060 11,358 10,859 Banks in foreign countries—time.................... 5,984,550 3,287,646 T ota l deposits.............................................. 125,751,795 114,179,597 104,115,777 2,342,211 Demand....................................................... 101,793,313 93,051,9UO 81+,956,088 Time............................................................ 23,958,1*82 21,127,657 19,159,689 153,983 200,710 676,488 757,250 871,103 M iscellaneous liabilities—to ta l........ Bills payable, rediscounts, and other liabilities 64,678,099 45,679 84,240 121,549 for borrowed money....................... 55,006 58,232 72,693 Acceptances outstanding......................... 41,695 44,040 48,357 Dividends declared but not yet payable 45,449 45,499 46,728 Income collected but not earned............ 18,843,488 197,759 245,245 278,974 Expenses accrued and unpaid................ 290,900 279,994 302,802 Other liabilities......................................... 7,777,748 58,693,549 504,101 598,466 970,155 906,787 18,431,347 331,631 101,853 5,831 4,404,201 407,591 T ota l liabilities (excluding capital 126,622,898 114,936,847 104,792,265 a ccou n ts)..................................... CORPORATION Other securities— total................................ Obligations of States and political subdivisions Other bonds, notes, and debentures1. . . Corporate stocks: Federal Reserve banks........................ Other corporate stocks........................ Dec. 31, 1943 Dec. 30, 1944 INSURANCE 4,708,982 15,468,690 11,835,200 620,564 5,650,408 20,019,989 6,046,361 1,790,461 963,052 June 30, 1944 LIABILITIES AND CAPITAL DEPOSIT Obligations of the United States Govern 75,896,226 ment— total........................................ Direct: 3,972,299 Treasury bills............................................ 15,302,996 Treasury certificates of indebtedness. . . 15,780,732 Treasury notes.......................................... 763,842 United States savings bonds................... 5,917,794 Other bonds maturing in 5 years or less 25,467,314 Other bonds maturing in 5 to 10 years. 5,796,636 Bonds maturing in 10 to 20 years.......... 1,917,000 Bonds maturing after 20 years............... 977,613 Guaranteed obligations............................... Dec. 31, 1943 FEDERAL Cash, balances with other banks, and cash items in process of collection— total. . 29,746,309 1,625,675 Currency and coin............................................. Reserve with Federal Reserve banks.............. 14,259,603 Demand balances with banks in the United States (except private banks and Amer 9,732,661 ican branches of foreign banks)................ 64,239 Other balances with banks in the United States 17,088 Balances with banks in foreign countries 4,047,043 Cash items in process of collection.......... June 30, 1944 Consumer loans to individuals: Retail automobile instalment paper............ Other retail, repair and modernization in stalment loans............................................. Personal instalment cash loans.................... 174,164 169,333 191,742 317,571 1,204,933 2,269,381 172,911 312,608 1,207,383 2,220,652 2,264,758 2,296,144 7,453,726 7,710,587 7,990,267 Capital accoun ts—t o t a l................................... 2,874,548 2,894,735 2,912,455 Capital stock, notes, and debentures.............. 3,089,817 3,190,416 3,401,995 Surplus................................................................ 1,129,712 1,006,406 1,169,389 191,913 Undivided profits............................................... 495,724 482,955 506,428 310,389 1,205,670 1,414,365 T otal liabilities and capital accounts 134,613,165 122,647,434 112,245,991 921,583 449,614 3,156,607 737,930 59,374 884,782 468,271 3,153,238 743,728 61,303 1,044,980 448,577 3,203,587 785,826 57,939 860,182 Loans and securities— t o ta l................. 103,407,825 93,959,854 83,521,587 1,079,091 868,882 71,160 63,522 1,143,530 895,051 76,597 91,671 1,201,282 914,292 79,977 122,728 75,527 80,211 Loans to brokers and dealers in securities. . . . Other loans for the purpose of purchasing or 353,469 62,801 216,599 11,930 88,610 51,660 205,919 11,792 84,098 25,622,389 680,101 17,570,199 655,191 299,489 30,127 275,981 40,499 23,442,333 14,852,101 22,569,642 13,936,664 845,005 25,712 1,974 897,046 16,901 1,490 13,269 13,274 T otal assets............................................... 134,613,165 122,647,434 112,245,991 Number of banks................................................... 13,268 13,269 13,274 Number of banks........................ 13,268 127 BANKS 1 Includes obligations of United States government corporations and agencies not guaranteed by the United States government. 2 Revised. Back figures—See the following Annual Reports: 1943, pp. 80-81; 1942, pp. 80-81; 1941, pp. 126-129; 1940, pp. 144-147; 1938, pp. 164-167. OF OPERATING 379,940 18,541,870 LIABILITIES M iscellaneous assets— to ta l............................. Customers’ liability on acceptances out standing....................................................... Income accrued but not collected.................... Prepaid expenses Other assets........................................................ 84,285 Secured and preferred liabilities—t o t a l. . . . 24,843,282 Deposits secured by pledged assets pursuant to requirements of law.............................. 23,846,867 331,830 Deposits preferred under provisions of law 901,915 but not secured by pledge of assets......... 44,625 Borrowings secured by pledged assets............ 93,743 179,435 Other liabilities secured by pledged assets. . . . 757 11,920 95,850 26,632,106 AND Bank prem ises, fu rn itu re and fixtures, and other real estate— t o ta l......................... Bank premises.................................................... Furniture and fixtures....................................... Real estate owned other than bank premises. . Investments and other assets indirectly repre senting bank premises or other real estate. MEMORANDA Pledged assets and securities loaned—total 27,727,300 United States Government obligations, direct and guaranteed, pledged to secure lia 26,831,454 bilities 561,779 Other assets pledged to secure liabilities........ Assets pledged to qualify for exercise of fidu ciary or corporate powers, and for pur 300,421 poses other than to secure liabilities........ 33,646 Securities loaned................................................ ASSETS Real estate loans: On farm land.................................................. On residential properties............................... On other properties........................................ Loans to banks................................................... All other loans (including overdrafts)............. 160,456 Table 107. SUMMARY OF ASSETS AND LIABILITIES OF OPERATING BANKS IN THE UNITED STATES AND POSSESSIONS, 1942-1944 BANKS GROUPED ACCORDING TO INSURANCE STATUS AND BY TYPE OF BANK (Amounts in thousands of dollars) Asset, liability or capital account item June 30, 1942 ALL BANKS IN SU RED December 31, 1942 NON IN SU RED ALL BANKS to oo June 30, 1943 N O N IN SU R E D ALL BANKS N O N IN SU R E D 109.305.505 28,809,564 46,036,206 8,286,363 23,961,174 2,212,198 97.713.102 27,723,412 41,572,955 7,037,939 19,647,248 1,731,548 11.592.403 1,086,152 4,463,251 1,248,424 4,313,926 480,650 116.983.581 26,771,369 57,912,891 7,914,650 22,294,293 2,090,378 105.414.414 25,707,425 52,805,608 6,775,165 18,405,526 1,720,690 11.569.167 1,063,944 5,107,283 1,139,485 3,888,767 369,688 T otal liabilities and capital a c c o u n ts .. Total deposits............................................ Miscellaneous liabilities............................ Total capital accounts.............................. 92.081.685 82,986,623 665,434 8,429,628 80.765.023 73,026,710 603,606 7,134,707 11.316.662 9,959,913 61,828 1,294,921 109.305.505 100,152,825 638,689 8,513,991 97.713.102 89,868,741 587,315 7,257,046 11.592.403 10,284,084 51,374 1,256,945 116.983.581 107,621,968 657,726 8,703,887 105.414.414 97,321,366 606,085 7,486,963 11.569.167 10,300,602 51,641 1,216,924 Number of banks included.......................... . 14,827 13,456 1,371 14,731 13,403 1,328 14,666 13,363 1,303 ALL COM M ER CIA L IN SU RED COM M ERCIAL NON IN SU RED COMM ERCIAL ALL CO M M ERCIAL IN S U R E D C O M M ERCIAL N O N IN SU R E D C O M M ERCIAL ALL CO M M ERCIAL IN S U R E D COM M E R C IA L N O N IN SU R E D CO M M ERCIAL T otal assets.................................................. Cash and amounts due from other banks United States Government obligations1. . Other securities......................................... Loans, discounts, and overdrafts............ Miscellaneous assets................................. 80.394.510 24,914,120 26,457,825 6,982,370 20,303,587 1,736,608 78.709.455 24,381,860 25,936,082 6,790,346 19,922,804 1,678,363 1.685.055 532,260 521,743 192,024 380,783 58,245 97.368.511 28,139,627 41,483,606 6,815,643 19,248,743 1,680,892 95.459.111 27,593,375 40,711,697 6,632,557 18,906,869 1,614,613 1.909.400 546,252 771,909 183,086 341,874 66,279 104.555.146 26,049,517 52,627,666 6,532,988 17,704,857 1,640,118 102.405.464 25,537,614 51,541,848 6,348,275 17,392,157 1,585,570 2.149.682 511,903 1,085,818 184,713 312,700 54,548 T otal liabilities and capital a c c o u n ts .. Total deposits............................................ Miscellaneous liabilities............................ Total capital accounts.............................. 80.394.510 72,588,851 622,388 7,183,271 78.709.455 71,162,431 594,204 6,952,820 1.685.055 1,426,420 28,184 230,451 97.368.511 89,478,713 604,225 7,285,573 95.459.111 87,820,427 582,450 7,056,234 1.909.400 1,658,286 21,775 229,339 104.555.146 96,475,864 617,011 7,462,271 102.405.464 94,582,458 593,666 7,229,340 2.149.682 1,893,406 23,345 232,931 14,280 13,403 877 14,185 13,347 838 14,121 13,302 819 Number of banks included.......................... ALL M UTUAL SA V IN G S IN S U R E D M U TU A L SAVIN GS N ON IN SU RED M UTU AL SAVIN GS A LL M U TU A L SAV IN G S IN S U R E D M UTUAL SA V IN G S N O N IN SU R E D M UTUAL SA V IN G S ALL M U TU A L S A VIN G S IN S U R E D M UTUAL SA V IN G S N O N IN SU R E D MUTUAL SAV IN G S T otal assets......................................................... Cash and amounts due from other banks.. . . United States Government obligations1......... Other securities................................................. Loans, discounts, and overdrafts.................... Miscellaneous assets......................................... 11.687.175 753,240 3,881,884 1,655,498 4,829,088 567,465 2.055.568 143,320 686,409 421,621 692,324 111,894 9.631.607 609,920 3,195,475 1,233,877 4,136,764 455,571 11.936.994 669,937 4,552,600 1,470,720 4,712,431 531,306 2.253.991 130,037 861,258 405,382 740,379 116,935 9.683.003 539,900 3,691,342 1,065,338 3,972,052 414,371 12.428.435 721,852 5,285,225 1,381,662 4,589,436 450,260 3.008.950 169,811 1,263,760 426,890 1,013,369 135,120 9.419.485 552,041 4,021,465 954,772 3,576,067 315,140 T otal liabilities and capital a c c o u n ts.......... Total deposits.................................................... Miscellaneous liabilities.................................... Total capital accounts...................................... 11.687.175 10,397,772 43,046 1,246,357 2.055.568 1,864,279 9,402 181,887 9.631.607 8,533,493 33,644 1,064,470 11.936.994 10,674,112 34,464 1,228,418 2.253.991 2,048,314 4,865 200,812 9.683.003 8,625,798 29,599 1,027,606 12.428.435 11,146,104 40,715 1,241,616 3.008.950 2,738,908 12,419 257,623 9.419.485 8,407,196 28,296 983,993 Number of banks included.................................. 547 53 494 546 56 490 545 61 484 CORPORATION 11.316.662 1,142,180 3,717,218 1,425,901 4,517,547 513,816 INSURANCE 80.765.023 24,525,180 26,622,491 7,211,967 20,615,128 1,790,257 DEPOSIT 92.081.685 25,667,360 30,339,709 8,637,868 25,132,675 2,304,073 FEDERAL T otal assets................................................. Cash and amounts due from other banks United States Government obligations1. . Other securities......................................... Loans, discounts, and overdrafts............ Miscellaneous assets................................. December 31, 1943 June 30, 1944 December 30, 1944 A LL B AN K S IN SU RE D Total assets.................................................. Cash and amounts due from other banks United States Government obligations1. . Other securities.......................................... Loans, discounts, and overdrafts............ Miscellaneous assets.................................. 127.794.459 28,570,225 66,156,026 7,444,630 23,652,670 1,970,908 120.609.856 27,750,323 62,537,544 6,592,571 21,916,838 1,812,580 7.184.603 819,902 3,618,482 852,059 1,735,832 158,328 139.226.086 28,279,426 76,015,703 7,550,960 25,487,832 1,892,165 131.765.995 27,571,209 71,855,687 6,749,739 23,843,534 1,745,826 7.460.091 708,217 4,160,016 801,221 1,644,298 146,339 152.617.916 30,911,332 86,280,551 7,562,853 26,079,480 1,783,700 144.440.430 30,145,888 81,404,946 6,760,719 24,464,892 1,663,985 8.177.486 765,444 4,875,605 802,134 1,614,588 119,715 Total liabilities and capital accounts.. T otal deposits............................................ Miscellaneous liabilities............................ Total capital accounts............................... 127.794.459 118,099,719 733,447 8,961,293 120.609.856 111,649,837 698,381 8,261,638 7.184.603 6,449,882 35,066 699,655 139.226.086 129,127,408 824,268 9,274,410 131.765.995 122,414,559 782,515 8,568,921 7.460.091 6,712,849 41,753 705,489 152.617.916 142,076,855 926,049 9,615,012 144.440.430 134,662,133 895,818 8,882,479 8.177.486 7,414,722 30,231 732,533 Number of banks included............................ 214,632 13,458 21,174 14,608 13,461 1,147 14,597 13,460 1,137 A LL COM M ERCIAL IN SURED COMMERCIAL N O N IN SU R E D COM M E RCIAL ALL C OM M E RCIAL IN S U R E D CO M M ERCIAL N O N IN SU R E D COM M ER CIA L ALL COM M ERCIAL IN S U R E D COM M ERCIAL N O N IN SU R E D C O M M ERCIAL Total assets........................................................ Cash and amounts due from other banks.. . United States Government obligations1....... Other securities............................................... Loans, discounts, and overdrafts.................. Miscellaneous assets....................................... 114.734.158 27,766,100 60,059,086 6,145,420 19,170,886 1,592,666 112.245.991 27,191,292 58,693,549 5,984,550 18,843,488 1,533,112 2.488.167 574,808 1,365,537 160,870 327,398 59,554 125.385.978 27,736,549 68,715,113 6,293,726 21,071,435 1,569,155 122.647.434 27,190,581 67,103,707 6,124,056 20,732,091 1,496,999 2.738.544 545,968 1,611,406 169,670 339,344 72,156 137.829.775 30,327,497 77,952,788 6,331,155 21,707,210 1,511,125 134.613.165 29,746,309 75,896,226 6,156,841 21,354,758 1,459,031 3.216.610 581,188 2,056,562 174,314 352,452 52,094 Total liabilities and capital accounts....... Total deposits.................................................. Miscellaneous liabilities................................. Total capital accounts.................................... 114.734.158 106,349,452 697,676 7,687,030 112.245.991 104,115,777 676,488 7,453,726 2.488.167 2,233,675 21,188 233,304 125.385.978 116,654,134 778,509 7,953,335 122.647.434 114,179,597 757,250 7,710,587 2.738.544 2,474,537 21,259 242,748 137.829.775 128,701,304 891,356 8,237,115 134.613.165 125,751,795 871,103 7,990,267 3.216.610 2,949,509 20,253 246,848 Number of banks included................................ 214,087 13,274 2813 14,064 13,269 795 14,054 13,268 786 IN S U R E D M U TU A L S A V IN G S N O N IN SU R E D M U TU AL S A VIN G S ALL M U TU A L SA V IN G S N O N IN SU R E D IN S U R E D M UTUAL S A V IN G S N O N IN SU R E D MUTUAL SAV IN G S 13.060.301 804,125 6,096,940 1,299,210 4,481,784 378,242 8.363.865 559,031 3,843,995 608,021 3,073,350 279,468 4.696.436 245,094 2,252,945 691,189 1,408,434 98,774 13.840.108 542,877 7,300,590 1,257,234 4,416,397 323,010 9.118.561 380,628 4,751,980 625,683 3,111,443 248,827 4.721.547 162,249 2,548,610 631,551 1,304,954 74,183 14.788.141 583,835 8,327,763 1,231,698 4,372,270 272,575 9.827.265 399,579 5,508,720 603,878 3,110,134 204,954 4.960.876 184,256 2,819,043 627,820 1,262,136 67,621 Total liabilities and capital accounts......... Total deposits.................................................... Miscellaneous liabilities................................... Total capital accounts...................................... 13.060.301 11,750,267 35,771 1,274,263 8.363.865 7,534,060 21,893 807,912 4.696.436 4,216,207 13,878 466,351 13.840.108 12,473,274 45,759 1,321,075 9.118.561 8,234,962 25,265 858,334 4.721.547 4,238,312 20,494 462,741 14.788.141 13,375,551 34,693 1,377,897 9.827.265 8,910,338 24,715 892,212 4.960.876 4,465,213 9,978 485,685 Number of banks included.................................. 545 184 361 544 192 352 543 192 351 1 Includes both direct and guaranteed obligations. 2 Revised. Back figures— See the Annual Report for 1941 pp. 122-125. BANKS Total assets......................................................... Cash and amounts due from other banks.. . . United States Government obligations1......... Other securities................................................. Loans, discounts, and overdrafts.................... Miscellaneous assets......................................... OF OPERATING ALL M UTUAL S A V IN G S ALL BANKS LIABILITIES N O N IN SU RE D M U TU A L SA V IN G S NO N IN SU RED AND IN SU RE D M UTU AL SAVIN GS ALL BANKS ASSETS A LL M U TU A L SAVIN GS N O N IN SU R E D to T a b le 1 08 . PERCENTAGE DISTRIBUTION OF ASSETS AND LIABILITIES OF OPERATING INSURED COMMERCIAL BANKS C a l l D a t e s , 1934-1944 ________________________________________________________________________________________________________________________________________________________ 1938 1937 1936 1935 1934 ^ CO 1939 Asset or liability item Cash, balances with other banks, and cash items Dec. 31 100.0% 100.0% June 29 100.0% Dec. 31 June 30 Dec. 31 June 30 Dec. 31 June 30 Dec. 31 June 30 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Dec. 30 100.0% 27.2 26.2 28.0 26.5 27.5 30.1 30.2 32.6 34.7 39.5 41.4 39.7 38.6 37.8 37.3 37.8 37.0 35.5 23.7 5.2 7.5 1.6 25.4 5.2 7.1 1.4 26.1 5.5 7.3 1.4 26.1 5.2 7.0 1.2 27.6 5.2 7.4 1.2 26.3 4.9 7.4 1.1 25.5 4.9 7.1 1.1 25.3 4.8 6.6 1.1 24.9 4.9 6.4 1.1 25.6 5.3 6.0 .9 25.3 5.3 5.5 .9 24.6 5.2 4.9 .8 Loans, discounts, and overdrafts (including re discounts) ................................................................ 35.0 31.5 30.7 28.9 28.2 28.4 31.0 30.9 28.9 28.2 27.0 26.7 Miscellaneous assets— to ta l........................................... Bank premises owned, furniture and fixtures............... Other real estate— direct and indirect1......................... All other miscellaneous assets......................................... 5.5 2.7 1.0 1.8 5.3 2.6 1.0 1.7 4.8 2.6 1.1 1.1 4.4 2.3 1.1 1.0 4.2 2.2 1.1 .9 3.9 2.1 1.0 .8 3.9 2.1 1.0 .8 3.8 2.1 1.0 .7 3.7 2.2 .9 .6 3.8 2.0 1.1 .7 3.4 1.9 1.0 .5 3.1 1.7 .9 .5 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 82.5 84.0 85.3 86.7 87.0 87.6 87.2 87.1 87.3 87.7 88.0 88.8 34.4 36.0 38.1 39.5 40.0 41.6 41.3 40.8 40.5 41.3 41.6 43.0 26.1 5.5 3.9 1.5 10.2 .9 25.1 5.6 3.6 1.1 10.7 1.9 26.0 6.2 1.7 .8 11.6 .9 24.6 6.0 1.7 .5 12.6 1.8 24.2 6.2 2.1 .4 12.5 1.6 24.0 5.8 1.7 .2 12.6 1.7 25.4 6.4 1.2 .2 11.2 1.5 25.8 6.0 1.5 .2 11.3 1.5 25.8 6.3 1.0 .2 12.2 1.3 24.7 6.2 1.5 .2 12.8 1.0 24.1 6.2 1.2 .1 13.4 1.4 22.9 5.4 1.3 .1 15.1 1.0 23.1 .2 22.9 22.8 .1 22.7 21.6 .1 21.5 1.1 .1 1.0 1.2 .1 1.1 1.1 .1 1.0 1.2 1.1 .1 1.0 .9 1.0 1.0 1.2 .9 1.0 1.0 .9 .1 .8 14.4 7.7 4.5 2.2 13.2 7.2 4.1 1.9 13.1 7.1 4.0 2.0 12.2 6.5 3.8 1.9 11.8 6.0 3.9 1.9 11.3 5.5 3.9 1.9 11.6 5.6 4.0 2.0 11.8 5.6 4.2 2.0 11.8 5.6 4.2 2.0 11.3 5.3 4.1 1.9 11.0 5.0 4.0 2.0 10.3 4.6 3.9 1.8 13,896 14,137 14,175 14,123 14,059 13,970 13,885 13,795 13,723 13,659 13,569 13,535 United States Government obligations, direct and Total liabilities and capital accounts............................. Deposits— total ............................................................. Demand deposits of individuals, partnerships, and corporations............................................................... Time deposits of individuals, partnerships, and corporations............................................................... States and political subdivisions..................................... United States Government.............................................. Postal savings ................................................................. Interbank........................................................................... Certified and officers’ checks, cash letters of credit, etc. Miscellaneous liabilities—total..................................... nf’ViOT V in rrn w P n TYinnPV All other miscellaneous liabilities................................... Capital accounts—total................................................... Capital stock, notes, and debentures............................. Surplus............................................................................... Undivided profits, including all other capital accounts Number of banks included...................................................... CORPORATION 24.2 40.3 INSURANCE 24.1 39.1 DEPOSIT 21.5 38.0 FEDERAL Total assets ........................................................................... June 30 1940 T otal assets............................................................................................................. 1944 June 29 Dec. 31 June 30 Dec. 31 June 30 Dec. 31 June 30 Dec. 31 June 30 Dec. 30 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 34.3 33.6 31.0 28.9 24.9 24.2 22.2 22.0 Corporate stocks............................................................................................... 34.2 24.1 5.1 4.3 .7 36.0 26.5 4.9 4.0 .6 36.5 27.3 4.8 3.8 .6 41.6 33.1 4.4 3.6 .5 49.6 42.7 3.7 2.8 .4 56.6 50.3 3.4 2.5 .4 57.6 52.3 2.9 2.1 •3 59.7 54.7 2.8 1.9 .3 61.0 56.4 2.5 1.8 .3 Loans, d iscounts, and overdrafts (including rediscou n ts).................... 25.9 26.0 27.2 27.6 25.3 19.8 17.0 16.8 16.9 15.9 M iscellaneous assets— t o t a l............................................................................ Bank premises owned, furniture and fixtures.............................................. Other real estate—direct and indirect............................................................ All other miscellaneous assets......................................................................... 2.9 1.6 .8 .5 2.6 1.4 .7 .5 2.5 1.5 .6 .4 2.3 1.4 .5 .4 2.1 1.3 .4 .4 1.7 1.1 .3 .3 1.5 1.0 .2 .3 1.4 .9 .2 .3 1.2 .8 .1 .3 1.1 .7 .1 .3 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 89.7 45.8 21.2 5.4 .9 .1 14.9 1.4 89.9 47.1 20.8 5.5 .9 .1 14.4 1.1 90.4 47.6 19.7 5.4 2.3 .1 13.9 1.4 90.4 49.8 18.9 5.5 2.3 .1 12.8 1.0 92.0 49.3 16.5 4.6 8.6 92.3 52.1 16.5 4.6 7.6 92.8 52.1 16.5 4.2 9.0 93.1 46.7 16.8 3.9 15.4 93.5 47.6 17.4 3.7 14.8 11.7 1.3 10.4 1.1 9.5 1.5 9.0 1.3 9.0 1.0 M iscellaneous liabilities— t o ta l..................................................................... Rediscounts and other borrowed money........................................................ All other miscellaneous liabilities.................................................................... .8 .8 .8 .7 .8 .6 .6 .6 .8 .8 .8 .7 .8 .6 .6 .6 .6 .1 .5 .6 .1 .5 Capital accou n ts— t o ta l................................................................................... Capital stock, notes, and debentures............................................................. Surplus............................................................................................................... Undivided profits, including all other capital accounts............................... 10.1 4.4 3.8 1.9 9.5 4.1 3.6 1.8 9.3 3.9 3.6 1.8 8.9 3.7 3.5 1.7 8.8 3.6 3.5 1.7 7.4 3.0 2.9 1.5 7.1 2.8 2.8 1.5 6.6 2.6 2.7 1.3 6.3 2.4 2.6 1.3 5.9 2.2 2.5 1.2 13,480 13,438 13,423 13,427 13,403 13,347 13,302 13,274 13,269 13,268 Number of banks included...................................................................................... BANKS 100.0% 89.1 44.1 22.5 5.5 1.2 .1 14.9 .8 OF OPERATING 100.0% Deposits—t o ta l................................................................................................... Demand deposits of individuals, partnerships, and corporations............... Time deposits of individuals, partnerships, and corporations..................... States and political subdivisions..................................................................... United States Government.......................... ................................................... Postal savings.................................................................................................... Interbank........................................................................................................... Certified and officers’ checks, cash letters of credit, etc.............................. T otal liabilities and capital a cco u n ts ............................................................. LIABILITIES 37.2 34.8 24.3 5.3 4.5 .7 AND 36.4 Securities—t o ta l................................................................................................ United States Government obligations, direct and guaranteed.................. ASSETS Cash, balances w ith other banks, and cash item s in process of co l lection ....................................................................................................... 1943 1942 1941 1 Includes direct only prior to December 31, 1938. 2 Includes circulating notes outstanding. CO CO to E x a m i n e r s ' E v a l u a t i o n o f I n s u r e d C o m m e r c ia l B a n k s Table 110. Examiners’ appraisal of assets, liabilities, and capital of insured commercial banks examined in 1944 Banks grouped according to amount of deposits CORPORATION appraised value of assets regarded as suitable for bank investment; and (2) substandard, which represents the appraised value of assets believed by the examiners to involve a substantial degree of risk, or to be otherwise undesirable for bank investment. For a description of the procedure followed in examiners’ evaluation of assets, see the Annual Report of the Corporation for 1938, pages 61-78. Appraised value of United States Government obliga tions exceeds book value because the excess of redemption value of United States Savings Bonds over book value is INSURANCE The tables in this section present a summary of the evaluation of bank assets and liabilities made by exam iners of the Federal supervisory agencies. Since bank examinations are made at various dates during the year, these tables differ from those in the previous sections, which are based on reports submitted by the banks for specified dates. These tables have been prepared from reports of examination available during the year and do not cover precisely the banks examined in that year. The figures for 1944 include 12,945 insured commercial banks operating at the close of the year and 38 banks DEPOSIT Examiners’ appraisal of assets, liabilities, and capital of insured commercial banks examined in 1939-1944 FEDERAL Table 109. greater than the examiners' deductions of unamortized premiums on other United States Government bonds purchased above par. Appraised value of other securities and of loans and discounts do not include assets not shown on the books. Assets not on the books, other than United States Government obligations, are included in the appraised value of fixed and miscellaneous assets. Evaluation of Liabilities and Capital Evaluation of Assets Book value of assets is the net value, after deduction Examiners’ deductions from total assets represent the difference between the appraised value and book value of assets shown on the books. 133 BANKS Appraised value of total assets represents the value of all assets as determined by examiners and is segregated into two groups: (1) not criticized, which represents the Adjusted capital accounts equal book value of total capital accounts plus the value of assets not shown on the books, less examiners' deductions from total assets, and less liabilities not shown on the books. The term “ adjusted capital accounts" corresponds to the term “ net sound capital” used in the Annual Reports of the Corporation for the years 1939-1943. COMMERCIAL Assets not on the books represent the determinable sound value of assets which are not included in the bank's statement of assets or are carried at nominal values. Book value of capital accounts refers to the net worth or equity of the stockholders (including holders of capital notes and debentures) shown on the books at the time of examination. OF INSURED of valuation and premium allowances, at which the assets are carried on the books of the banks at the time of examination. Adjusted liabilities include all liabilities shown on the books and such others as have been determined by the examiners. EXAMINERS’ EVALUATION which ceased operations or were taken over by other banks during the year. Figures for 307 insured banks operating at the close of the year were not included in the tabula tions: 10 because they were not engaged in deposit banking, and 297 because reports of examination were, for various reasons, not available for tabulation. For 252 banks the figures are derived from reports of examina tion made in the last three months of 1943. CO 4^ Table 109. E x a m in e r s ’ A p p r a is a l o f A s s e t s , L i a b ilit ie s , a n d C a p it a l o f I n s u r e d C o m m e r c ia l B a n k s E x a m in e d in 1939-1944 (Amounts in thousands of dollars) 1939 1940 1941 65,184,983 36,777 255,876 64,965,884 62,1+13,890 2,552,1+91+ 71,697,320 19,851 174,037 71,543,134 69,512,512 2,030,622 Cash and due from b a n k s................................................................................. 18,643,164 23,308,292 24,107,119 U. S. G overnm ent obligations—book v a lu e ................................................. Appraised value1.................................................................................................. 8 8 102,021,738 26,346 97,144 101,950,940 100,690,81+3 1,260,097 1944 118,843,675 20,897 54,193 118,810,379 117,981+,985 825,391+ 24,618,882 25,342,868 26,036,187 26,799,729 26,807,855 50,067,210 50,073,639 65,089,147 65,096,303 221,315,369 221,234,173 220,027,268 1,206,905 222,758,101 222,698,345 221,659,1+91 1,038,851+ 225,759,640 225,722,984 *21+,970,1+12 752,572 6,682,798 6,651,951 6,031+,558 617,393 6,055,350 6,040,897 5,578,71+3 1+62,151+ 5,805,695 5,800,937 5,1+99,037 301,900 Loans and discou nts— book v a lu e ................................................................... Appraised value................................................................................................... Not criticized..................................................................................................... Substandard...................................................................................................... 16,055,860 15,898,191 11+,669,527 1,228,661, 17,037,342 16,924,352 15,870,628 1,053,721+ 19,544,145 19,467,422 18,618,309 81+9,113 20,136,352 20,071,927 19,303,969 767,958 18,290,697 18,251,118 17,710,001 51+1,117 19,562,561 19,539,481 19,180,11+1+ 359,337 Fixed and m iscellaneous assets— book v a lu e ............................................... Appraised value................................................................................................... Not criticized..................................................................................................... Substandard...................................................................................................... 2,240,032 2,177,196 1,61+2,691+ 531>,502 2,081,248 2,034,895 1,571+,979 1+59,916 2,286,416 2,245,609 1,816,672 1+28,937 2,212,195 2,173,689 1,81+1+,811+ 328,875 2,265,613 2,242,418 1,985,592 256,826 2,350,085 2,337,471 2,173,311+ 161+,157 T ota l liabilities— book v a lu e ............................................................................. Other liabilities—book value.............................................................................. Liabilities not on the books................................................................................ Adjusted total liabilities..................................................................................... 51,781,865 50,976,656 805,209 10,436 51,792,301 58,627,148 57,919,547 707,601 12,927 58,640,075 65,012,512 64,218,740 793,772 6,084 65,018,596 73,529,826 72,755,007 774,819 7,362 73,537,188 94,882,516 94,087,113 795,403 4,491 94,887,007 111,242,503 110,177,295 1,065,208 7,563 111,250,066 T ota l capital accoun ts— book v a lu e ............................................................... Assets not on the books...................................................................................... Examiners’ deductions from total assets.......................................................... Liabilities not on the books................................................................................ Adjusted capital accounts.................................................................................. 6,472,560 38,996 340,697 10,436 6,160,423 6,557,835 36,777 255,876 12,927 6,325,809 6,684,808 19,851 174,037 6,084 6,524,538 6,920,130 20,089 145,741 7,362 6,787,116 7,139,222 26,346 97,144 4,491 7,063,933 7,601,172 20,897 54,193 7,563 7,560,313 CORPORATION O ther securities— b ook valu e............................................................................ Appraised value................................................................................................... Not criticized..................................................................................................... Substandard...................................................................................................... INSURANCE 8 80,449,956 20,089 145,741 80,324,304 78,610,078 1,711+,226 1943 DEPOSIT Substandard...................................................................................................... 58,254,425 38,996 340,697 57,952,724 51+,982,653 2,970,071 Total assets—book v a lu e.................................................................................... Assets not on the books...................................................................................... Examiners’ deductions........................................................................................ Appraised value................................................................................................... 1942 FEDERAL Asset, liability or capital item Adjusted capital accounts per $100 of— Appraised value of total assets.................... Book capital................................................... Substandard loans and discounts per $100 of— Appraised value of loans and discounts................... Number of banks. $9.74 96.46 $9.12 97.60 $8.45 98.08 $6.93 98.95 $6.36 99.46 5.12 48.21 3.93 40.35 2.84 31.12 2.13 25.26 1.24 17.84 .69 10.92 7.73 6.23 4.36 3.83 2.9 1.84 13,505 13,437 13,308 13,303 13,207 12,983 1 Appraised value is in excess of book value due to the excess of redemption value of U. S. Savings Bonds not shown on the books over examiners’ deductions of unamortized premiums on U. S. Government obligations purchased above par. 2 Prior to 1942 U. S. Government obligations not available separately, included under other securities. OP INSURED COMMERCIAL BANKS 135 EXAMINERS’ EVALUATION Substandard assets per $100 of— Appraised value of total assets. . . . Adjusted capital accounts.............. $10.63 95.18 CO Oi T a b le 1 1 0 . EXAMINERS’ APPRAISAL OF ASSETS, LIABILITIES, AND CAPITAL OF INSURED COMMERCIAL BANKS EXAMINED IN 1944 BANKS GROUPED ACCORDING TO AMOUNT OF DEPOSITS (Amounts in thousands of dollars) Asset, liability or capital item $250,000 Af DO QD O U1 1 1C $1,000,000 to $2,000,000 $2,000,000 to $5,000,000 $5,000,000 to $10,000,000 $10,000,000 to $50,000,000 More than $50,000,000 8,121,511 1,557 5,404 8,117,664 8,038,280 79,384 17,851,335 3,112 13,417 17,841,030 17,680,274 160,756 74,752,498 8,467 22,234 74,738,731 74,342,459 396,272 53,777 40 57 53,760 52,820 940 555,719 469 502 555,686 548,363 7,323 2,324,557 1,701 1,406 2,324,852 2,301,135 23,717 5,298,445 2,744 3,556 5,297,633 5,245,057 52,576 9,885,833 2,807 7,617 9,881,023 9,776,597 26,036,187 22,440 200,549 747,529 1,543,449 2,597,352 1,935,285 4,072,948 14,916,635 U. S. Governm ent obligations—book value Appraised value1............................................. 65,089,147 65,096,303 16,124 16,151 209,365 209,694 1,009,900 1,011,353 2,468,966 2,471,132 4,900,364 4,902,412 4,351,255 4,351,956 9,925,487 9,925,857 42,207,686 42,207,748 Other securities— book value....................... Appraised value............................................... Not criticized................................................. Substandard.................................................. 5,805,695 5,800,937 5,499,037 301,900 1,898 1,893 1,690 203 23,390 23,370 21,497 1,873 121,706 121,590 115,455 6,135 318,016 317,701 304,300 13,401 710,094 709,460 680,303 29,157 559,668 558,950 536,181 22,769 1,011,901 1,011,245 965,209 46,036 3,059,022 3,056,728 2,874,402 182,326 Loans and d iscou nts—book v a lu e .............. Appraised value............................................... Not criticized................................................. Substandard.................................................. 19,562,561 19,539,481 19,180,144 359,337 12,513 12,482 11,889 593 116,383 116,047 111,141 4,906 421,853 420,951 405,252 15,699 904,539 902,478 869,790 32,688 1,542,601 1,538,908 1,480,541 58,367 1,152,740 1,150,099 1,108,232 41,867 2,515,380 2,509,166 2,437,274 71,892 12,896,552 12,889,350 12,756,025 133,325 2,350,085 2,337,471 2,173,314 164,157 802 794 650 144 6,032 6,026 5,482 544 23,569 23,429 21,546 1,883 63,475 62,873 56,386 6,487 135,422 132,891 115,989 16,902 122,563 121,374 106,626 14,748 325,619 321,814 278,986 42,828 1,672,603 1,668,270 1,587,649 80,621 111,242,503 110,177,295 1,065,208 7,563 111,250,066 46,208 46,037 171 12 46,220 499,767 498,687 1,080 60 499,827 2,136,012 2,132,185 3,827 138 2,136,150 4,903,583 4,895,176 8,407 256 4,903,839 9,169,727 9,145,860 23,867 462 9,170,189 7,559,347 7,535,770 23,577 200 7,559,547 16,704,103 16,612,289 91,814 2,427 16,706,530 70,223,756 69,311,291 912,465 4,008 70,227,764 Gash and due fro m b a n k s............................. Fixed and m iscellaneous assets— book value Appraised value............................................. Not criticized............................................... Substandard................................................ T ota l liabilities— book v a lu e ...................... Total deposits................................................ Other liabilities— book value....................... Liabilities not on the books......................... Adjusted total liabilities............................... 104,426 CORPORATION 118,843,675 20,897 54,193 118,810,379 117,98^,985 825,394 T ota l assets— book v alu e............................... Assets not on the books................................. Examiners’ deductions.................................... Appraised value............................................... Not criticized................................................. Substandard.................................................. INSURANCE $500,000 to $1,000,000 DEPOSIT $250,000 to $500,000 FEDERAL Banks with deposits of— All banks 7,601,172 20,897 54,198 7,563 7,560,313 7,569 40 57 12 7,540 55,952 469 502 60 55,859 188,545 1,701 1,406 138 188,702 394,862 2,744 3,556 256 393,794 716,106 2,807 7,617 462 710,834 562,164 1,557 5,404 200 558,117 1,147,232 3,112 13,417 2,427 1,134,500 4,528,742 8,467 22,234 4,008 4,510,967 A djusted capital accou n ts per $100 o f— Appraised value of total assets....................... Book capital................................................. $6.36 99.46 $14.03 99.62 $10.05 99.83 $8.12 100.08 $7.43 99.73 $7.19 99.26 $6.88 99.28 $6.36 98.89 $6.04 99.61 S ubstandard assets per $100 o f— Appraised value of total assets....................... Adjusted capital accounts............................... .69 10.92 1.75 12.47 1.32 13.11 1.02 12.57 .99 13.35 1.06 14.69 .98 14.22 .90 14.17 .53 8.78 S ubstandard loans and discou nts per $100 o f— Appraised value of loans and discounts......... 1.84 4.75 4.23 3.73 3.62 3.79 3.64 2.87 1.03 12,983 241 1,297 2,888 3,423 2,950 1,101 834 249 Number of banks.............................................. COMMERCIAL BANKS 137 OF INSURED 1 Appraised value is in excess of book value due to the excess of redemption value of U. S. Savings Bonds not shown on the books over the examiners’ deductions of unamortized premiums 011 U. S. Government bonds purchased above par. EXAMINERS’ EVALUATION T ota l capital accou n ts— book v a lu e ............ Assets not on the books................................. Examiners' deductions from total assets....... Liabilities not on the books........................... Adjusted capital accounts............................... E a r n in g s , E x p e n se s , Table 111. and D iv id e n d s op I n su r e d B a n k s Earnings, expenses, and dividends of insured banks, 1944 By class of bank Table 112. Ratios of earnings, expenses, and dividends of insured banks, 1944 By class of bank Table 113. Earnings, expenses, and dividends of insured commercial banks operating throughout 1944 Banks grouped according to amount of deposits Reports of earnings, expenses, and dividends are submitted to the Federal supervisory agencies on either a cash or an accrual basis. This year income taxes are shown separately, for the first time, for all classes of insured banks. Averages of assets and liabilities are based upon the beginning, middle, and year-end call report data and include figures for banks which reported on one or two call dates only. Consequently, the assets and liability averages are not strictly comparable with the earnings data, but the differences are not large enough to affect the totals significantly. Some further incomparability is also introduced by shifts between classes of banks during the year. State banks members of the Federal Reserve System: Board of Governors of the Federal Reserve System. Other insured banks: Corporation. Federal Deposit Insurance OF INSURED National banks and State banks not members of the Federal Reserve System in the District of Columbia: Office of the Comptroller of the Currency. DIVIDENDS S ou rces o f d a ta : EARNINGS, EXPENSES, AND BANKS 139 Earnings data are included for all insured banks op erating at the end of the year. Earnings for national banks reporting for the first half of the year only are also included. T a b le 1 1 1 . EARNINGS, EXPENSES, AND DIVIDENDS OP INSURED BANKS, 1944 BY CLASS OF BANK (Amounts in thousands of dollars) Insured commercial banks Insured commercial banks National State Not members F. R. System 78,234 109,659 127,640 251 2,827 638 86,575 10,093 20,658 1,350,760 239,102 384,706 5,920 1,252 1,640 1,903 14,838 12,842 186,422 1,101 96,926 65 351 11 381 3,359 35,724 41,778 387,883 67 2,153 111,254 209,134 855,932 2,293 43,636 9,967 13,582 11,684 8,403 101,473 31,423 30,677 14,763 24,610 360,666 92,683 129,598 84,069 54,316 1,060 95 236 155 574 33,704 13,296 9,807 10,601 113,691 17,625 68,179 27,887 265,438 110,386 70,001 85,051 443 53 89 301 78,485 112,486 128,278 35,064 37,387 71,978 18,138 66,944 35,783 25,283 8,155 20,517 1,356,680 240,354 386,346 722,285 121,873 207,821 404,206 65,595 129,592 230,189 52,886 48,933 12,907 186,773 1,112 97,307 6,377 96,807 452 53,800 3,135 47,168 515 29,035 3,395 42,798 145 14,472 41,845 390,036 24,404 210,751 10,531 118,635 6,910 60,650 Net current operating earnin gs.......................................... 858,225 479,650 267,321 Recoveries and profits—to ta l............................................... Profits on securities sold or redeemed.................................. 361,726 92,778 129,834 84,224 54,890 193,870 50,290 68,846 50,240 24,494 124,220 32,521 47,406 22,300 21,993 On securities............................................................................ 265,881 110,439 70,090 85,352 142,418 67,556 41,023 33,839 89,759 29,587 19,260 40,912 Salaries and wages—employees....................................... Fees paid to directors and members of executive, dis count, and other committees......................................... Interest on time and savings deposits.................................. Interest and discount on borrowed money.......................... Taxes other than on net income........................................... Recurring depreciation on banking house, furniture and fixtures............................................................................. Other current operating expenses......................................... (*) CORPORATION 538 26,359 341,443 130,633 132,557 2,423 21,875 INSURANCE 8,213 2,780 1,448 19 250 671,527 329,700 189,084 6,309 25,569 DEPOSIT 2,206,692 1,087,473 679,260 17,301 107,125 1,201,935 629,920 359,067 8,588 59,931 C urrent operating expenses— t o t a l.................................... Operating legs than full year2 295,709 127,550 141,262 2,214,905 1,090,253 680,708 17,320 107,375 Interest and dividends on securities..................................... Interest and discount on loansf............................................. Service ch&rges find other fees on bctnks’ lo&ns « . .. Service charges on deposit accounts................................ Other service charges, commissions, fees, and collection and exchange charges..................................................... Trust department .. ...................................... Other current operating earnings......................................... Operating throughout the year FEDERAL Members F. R. System Total Insured mutual savings banks1 Non-operating profit.............................................................. 95,845 1 9,932 -12,218 95,228 617 531,102 301,782 121,186 196,916 951,160 2,910 Taxes on net income— total................................................. Federal..................................................................................... State........................................................................................ 202,821 187,032 15,789 120,431 111,675 8,756 63,284 57,461 5,823 19,106 17,896 1,210 122 122 202,071 186,342 15,729 750 690 60 Net profits after taxes............................................................ 751,249 410,671 238,498 102,080 196,794 749,089 2,160 Dividends and interest on capital— total........................ Dividends declared on preferred stock and interest paid on capital notes and debentures................................... Cash dividends declared on common stock........................ 253,193 144,001 82,000 27,192 132,912 252,079 1,114 13,645 239,548 5,294 138,707 4,392 77,608 3,959 23,233 482 *132,430 13,635 238,444 10 1,104 Net additions to capital from profits............................... 498,056 266,670 156,498 74,888 63,882 497,010 1,046 Average assets and liabilities5 Assets— total............................................................................ Cash and due from banks..................................................... U. S. Government obligations.............................................. Other securities....................................................................... Loans and discounts.............................................................. All other assets....................................................................... 123,168,863 28,042,727 67,231,161 6,088,482 20,310,112 1,496,381 70,378,946 16,528,328 38,665,434 3,447,852 10,936,478 800,854 38,529,099 7,951,948 21,652,390 1,682,079 6,743,473 499,209 14,260,818 3,562,451 6,913,337 958,551 2,630,161 196,318 9,164,873 449,751 4,723,004 628,821 3,115,939 247,358 Liabilities and capital— total.............................................. Total deposits......................................................................... Demand deposits.................................................................. Time and savings deposits.................................................. Borrowings and other liabilities........................................... Total capital accounts........................................................... 123,168,863 114,682,390 9S,267,11k 21,1*15,276 768,280 7,718,193 70,378,946 65,801,156 5 k,293,819 11,507,337 472,607 4,105,183 38,529,099 35,672,528 29,992,910 5,679,618 249,974 2,606,597 14,260,818 13,208,706 8,980,385 k,228,321 45,699 1,006,413 9,164.873 8,280,998 26,436 121,926 11,247 71,336 18,811 36,115 1,276 9,719 56,146 228,067 348 1,310 5,025 1,786 6,457 192 13,177 91 56,494 229,377 1 Number of banks, December 30.............................................. 13,268 141 BANKS 1 Includes 3 mutual savings banks, members of the Federal Reserve System. * Includes banks operating less than full year and trust companies not engaged in deposit banking. * Interest and dividends paid depositors of mutual savings banks are shown as a deduction from net profits. 4 Interest and dividends paid depositors. See footnote 3. 6 Averages of figures reported at beginning, middle, and end of year. N o t e : Minus (-) indicates non-operating loss. Back figures—See the Annual Report for 1943, pp. 96-97, and earlier reports. 8,280,998 23,974 859,901 OF INSURED Number of active officers, December 30................................. Number of other employees, December 30............................. DIVIDENDS 34,461 954,070 EARNINGS, EXPENSES, AND 51,452 Net profits before income taxes.......................................... Table 112. R a t io s of E a r n in g s , E x p e n s e s , and D iv id e n d s of I n s u r e d B a n k s , 1944 BY CLASS OF BANK Members F. R. System Total State Insured mutual savings banks1 $100.00 52.41 30.59 4.99 12.01 $100.00 49.10 29.09 3.81 18.00 $100.00 38.26 39.53 6.41 15.80 $100.00 43.13 47.77 Current operating expenses— t o t a l............................................................................................ Salaries, wages, and fees............................................................... .............................................. Interest on time and savings deposits......................................................................................... Other current operating expenses................................................................................................. 61.25 28.88 8.43 23.94 60.09 27.96 8.05 24.08 60.19 29.53 7.02 23.64 67.42 30.82 12.53 24.07 29.28 11.04 Net current operating earn in gs..................................................................... ........................... 38.75 39.91 39.81 32.58 70.72 A m ou n ts per $100 o f total assets* Current operating earnings— total................................................................................................... Current operating expenses—total................................................................................... Net current operating earnings........................................................................................................ Recoveries and profits—total ........................................................................................................ Losses and charge-offs— total ......................................................................................................... Net profits before income taxes....................................................................................................... Net profits after income ta x e s .......................................................... ............ ............................... 1.80 1.10 .70 .29 .22 .77 .61 1.71 1.03 .68 .27 .20 .75 .58 1.74 1.05 .69 .32 .23 .78 .62 2.39 1.61 .78 .31 .24 .85 .72 3.23 .95 2.28 1.11 1.24 2.15 2.15 A m ou n ts per $100 o f total capital accounts* Net current operating earnings......................................................................................... . Recoveries and profits— total .............................................................................. .......................... Losses and charge-offs— total........................................................................................................... Net profits before income taxes .................................................................................................... Income taxes on net income............................................................................................................ Net profits after income taxes.................................................................................................... Cash dividends d eclared.................................................................... . ........................................... Net additions to capital from profits............................................................................................... 11.12 4.69 3.45 12.36 2.63 9.73 3.28 6.45 11.68 4.72 3.47 12.93 2.93 10.00 3.51 6.49 10.26 4.76 3.44 11.58 2.43 9.15 3.15 6.00 11.05 4.34 3.35 12.04 1.90 10.14 2.70 7.44 24.32 11.80 13.22 22.90 .01 22.89 <15.46 7.43 9.10 (a) 18.24 CORPORATION $100.00 49.22 31.52 4.85 14.41 INSURANCE A m ou n ts per $100 o f current operating earnings Current operating earnings—t o t a l........................................................................................... Interest and. dividends on securities............................................................................................ Income on loans ....................................................................................................................... Service charges on deposit accounts............................................................................................ Other current operating earnings................................................................................................. DEPOSIT National Not members F. R. System FEDERAL Insured commercial banks A KQ. 4*0o 2,38 3.44 1.49 .12 .87 3.36 1.50 .11 .84 2.90 1.41 .09 .83 5.13 r.66 .24 1.01 Assets and liabilities per $100 of total assets* Assets— total.............................. Cash and due from banks................................................. U. S. Government securities............................................. Other securities.............................. Loans and discounts......................................... All other assets.................................. 100.00 22.77 54.59 4.94 16.49 1.21 100.00 23.48 54.94 4.90 15.54 1.14 100.00 20.64 56.20 4.37 17.50 1.29 JLuU.lfU 9A*Q S7ft0 AR Aft A O. 79 iL* 1ft.44 AA ±o 1too 3ft X Liabilities and capital— total............................... Total deposits............................................ Demand deposits..................................... Time and savings deposits................................... Borrowings and other liabilities.................................... Total capital accounts................................................... 100.00 93.11 75.72 17.39 '.62 6.27 100.00 93.50 77.15 ft.00 10 .67 5.83 100.00 92.58 77.8 A 1U.7U .65 6.77 inn ah 1AA AA lvU»uu lUv«UU Q9 A9 Qfi .uo Qft yu 62.97 ............... * ** 29 >65 yo.s 6 Q9 9ft •o£ 7.06 9.38 Number of banks, December 30....................................... 13,268 5 025 1 786 1 Q9 XV A OF INSURED BANKS 143 1AA AU A lU U.U A Q1 4.*71 p;i D -L.OO ftA 0 .O D fin 04 .U U 9 A u •7(U DIVIDENDS 1 Includes 3 mutual savings banks, members of the Federal Reserve System. * Interest and dividends paid depositors of mutual savings banks are shown as a deduction from net profits. Asset and liability items are averages of figures reported at beginning, middle, and end of year. 4 Interest and dividends paid depositors. See footnote 2. Back figures— See the Annual Report for 1943, pp. 98-99. a A^ni 0,40 \J EARNINGS, EXPENSES, AND Special ratios3 Income on loans per $100 of loans.......................... Income on securities per $100 of securities................................. Service charges per $100 of demand deposits....................... Interest paid per $100 of time and savings deposits..................... Table 113. EARNINGS, EXPENSES, AND DIVIDENDS OF INSURED COMMERCIAL BANKS OPERATING THROUGHOUT 1944 BANKS GROUPED ACCORDING TO AMOUNT OP DEPOSITS (Amounts in thousands of dollars) Total1 $500,000 or less $500,000 to $1,000,000 $1,000,000 to $2,000,000 $2,000,000 to $5,000,000 $5,000,000 $10,000,000 $50,000,000 More than to to to $100,000,000 $10,000,000 $50,000,000 $100,000,000 111,570 42,665 46,726 510 7,804 218,126 93,825 83,099 1,147 16,306 183,276 86,179 61,348 844 13,880 381,787 181,877 114,718 1,891 26,538 154,321 77,502 43,321 672 8,020 1,100,533 586,788 304,015 11,788 30,951 78,234 109,659 127,640 1,508 39 361 4,923 29 1,474 9,607 268 3,990 13,031 1,574 9,144 7,882 3,518 9,625 12,487 16,103 28,173 4,256 8,515 12,035 24,540 79,613 62,838 1,350,760 239,102 384,706 8,062 3,201 856 30,807 11,042 3,697 74,352 23,015 11,176 145,821 35,962 28,291 123,805 24,561 28,943 257,695 42,282 71,656 99,084 15,232 29,944 611,134 83,807 210,143 12,842 186,422 1,101 96,926 156 957 4 522 665 4,818 11 1,876 1,586 13,111 26 4,869 2,769 27,085 46 10,254 1,808 23,750 45 8,532 2,603 41,893 224 18,818 693 13,369 99 7,439 2,562 61,439 646 44,616 41,778 387,883 270 2,096 980 7,718 2,426 18,143 5,239 36,175 4,479 31,687 8,663 71,556 3,198 29,110 16,523 191,398 Net current operating earnin gs.................................. 855,932 3,462 14,748 37,218 72,305 59,471 124,092 55,237 489,399 Recoveries and profits— t o ta l....................................... 360,666 92,683 129,598 84,069 54,316 1,300 236 196 575 293 5,033 1,113 1,047 1,961 912 12,866 3,177 3,065 4,142 2,482 26,079 6,044 8,254 7,206 4,575 23,650 5,425 8,112 6,019 4,094 60,118 14,171 22,482 13,319 10,146 19,109 3,723 9,234 3,442 2,710 212,511 58,794 77,208 47,405 29,104 265,438 110,386 70,001 85,051 714 199 337 178 2,659 973 994 692 8,106 3,356 2,491 2,259 19,501 8,295 5,647 5,559 17,960 8,339 4,595 5,026 45,616 19,827 9,842 15,947 14,385 6,741 2,814 4,830 156,497 62,656 43,281 50,560 Other current operating earnings.................................. C urrent operating expenses— t o t a l............................ Salaries and wages—employees..................................... Fees paid to directors and members of executive, discount, and other committees............................ Interest on time and savings deposits.......................... Interest and discount on borrowed money.................. Taxes other than on net income................................... Recurring depreciation on banking house, furniture and fixtures.............................................................. Other current operating expenses................................. Profits on securities sold or redeemed.......................... Losses and charge-offs— t o ta l...................................... On loans........................................................................... All other........................................................................... CORPORATION 45,555 15,583 20,275 277 2,994 INSURANCE 11,524 3,054 5,758 172 632 Interest and discount on loans...................................... Service charges and other fees on banks’ loans.......... Service charges on deposit accounts............................. Other service charges, commissions, fees, and col* lection and exchange charges................................ DEPOSIT 2,206,692 1,087,473 679,260 17,301 107,125 Current operating earnings— t o t a l............................ FEDERAL Banks with deposits of—.2 95,228 586 2,374 4,760 6,578 5,690 14,502 4,724 56,014 Net profits before income taxes. 951,160 4,048 17,122 41,978 78,883 65,161 138,594 59,961 545,413 Taxes on net income— total. Federal.................................... State........................................ 202,071 186,342 15,729 600 558 42 2,246 2,094 152 5,551 5,185 366 10,634 10,042 592 10,010 9,450 560 25,810 24,465 1,345 13,768 12,949 819 133,452 121,599 11,853 Net profits after taxes................................................ 749,089 3,448 14,876 36,427 68,249 55,151 112,784 46,193 411,961 Dividends and interest on capital— total................ Dividends declared on preferred stock and interest paid on capital notes and debentures.............. Cash dividends declared on common stock............. 252,079 1,003 4,187 10,337 19,658 15,495 32,596 13,956 154,847 13,635 238,444 102 901 325 3,862 807 9,530 1,390 18,268 1,398 14,097 2,904 29,692 2,373 11,583 4,336 150,511 Net additions to capital from profits.................... 497,010 2,445 10,689 26,090 48,591 39,656 80,188 32,237 257,114 Number of active officers, December 3 0 .... Number of other employees, December 30. 56,146 228,067 2,019 1,120 5,780 4,320 9,636 10,791 11,984 22,262 6,357 20,023 7,885 45,145 2,363 18,150 106,256 13,177 1,105 2,578 1,520 3,378 1,328 980 129 159 Number of banks, December i OF INSURED BANKS 145 DIVIDENDS 1 This group of banks is the same as the group shown in Table 111 under the heading “ Operating throughout the year/* * Deposits are as of December 30, 1944. 10,122 EARNINGS, EXPENSES, AND Non-operating profit..................... D e p o s it I n s u r a n c e D Table 114. is b u r s e m e n t s State Depositors and deposits of insured banks placed in receivership, 1934-1944 A s shown by books of FDIC, December SI, 194b Disbursements to protect depositors, recoveries, and losses by the Federal Deposit Insurance Corporation from insured banks placed in receivership or merged with the financial aid of the Corporation, 1934-1944 As shown by books of FDIC, December SI, 191*1+ Disbursements by the Federal Deposit Insurance payment from the receiver because of their preferred Corporation to protect depositors are made whenever status. Unpaid depositors are primarily those whose insured banks because of financial difficulties are placed claims are disputed, and those whose claims although not in receivership or are merged with the aid of the Corpora- filed are not yet legally barred from payment by FDIC. CORPORATION Table 117. INSURANCE Table 116. DEPOSIT Table 115. Assets and liabilities of insured banks placed in receivership and of insured banks merged with the financial aid of the Federal Deposit Insurance Cor poration, 1934-1944 As shown by books of bank at date of closing FEDERAL Disbursements by the Federal Deposit Insurance Corporation to protect depositors; number and deposits of insured banks placed in receivership or merged with the financial aid of the Corporation, 1934-1944 Banks grouped by class of bank, year of disbursement, amount of deposits, and tion. In receiverships the disbursement is the amount paid by the Corporation on insured deposits. In mergers the Corporation’s disbursement is the amount loaned to merging banks, or the price paid for assets purchased from them. DISBURSEMENTS Sources of data: Books of bank at date of closing; and books of FDIC, December 31,1944. 147 Deposits of insured banks placed in receivership as given in tables with data taken from the books of FDIC at the end of the year, will differ from the deposits in tables with data taken from books of bank at date of closing. This is because the former include deposits discovered or reclassified after the date of a bank’s closing. INSURANCE Depositors eligible for insurance protection are all depositors except those holding only accounts which were restricted or deferred prior to 1934, and those whose deposits were made after the termination of a bank’s insured status. Depositors not eligible for insurance protection are those whose total accounts are thus ex cluded from insurance, and those whose accounts are barred from payment by FDIC because the accounts were not claimed before the expiration of the period set by law. Depositors paid by FDIC are all those who receive any payment from the Corporation. Depositors fully paid by other methods are those who receive no pay ment from FDIC, but do receive full compensation for their accounts by offset, by sale of security, or by direct secured, not preferred, and not subject to offset are those not covered by insurance or other specific arrangement. They may be paid in full, however, by the receiver as common claims. DEPOSIT Depositors and deposits in insured banks placed in receivership have been grouped in Table 116 to show the ways in which depositors’ claims against these banks were met. Because the claim of a single depositor may be paid in several ways, the number of depositors cannot be correlated with the amount of deposits in the various categories as given in the table. Insured deposits are the deposits for which FDIC is legally liable. This includes the net amount due each depositor after deductions of offset, of amounts in excess of $5,000, and of amounts not eligible for insurance protection as described in preceding paragraphs. Secured deposits are those covered by pledge of specific assets. Preferred deposits are those which, under Federal or State law, are paid from proceeds of the liquidation before common claims against the bank are met. Deposits sub ject to offset are those met by claims which the bank holds against the depositor. Deposits uninsured, un Table 114. DISBURSEMENTS BY THE FEDERAL DEPOSIT INSURANCE CORPORATION TO PROTECT DEPOSITORS; NUMBER AND DEPOSITS op I n s u r e d B a n k s P la c e d in R e c e iv e r s h ip o r M e r g e d w it h t h e F in a n c ia l A id o f t h e C o r p o r a tio n , 1934-1944 BANKS GROUPED BY CLASS OF BANK, YEAR OF DISBURSEMENT, AMOUNT OF DEPOSITS, AND STATE Total Receiver ships1 Mergers1 Receiver ships Total 397 77,993 99,405 82,298 14,787 20,928 51,264 63,206 78,477 31,034 312 Calendar year 193 4 193 5 193 6 193 7 941 8,890 14,828 19,202 941 6,025 8,055 12,045 2,865 6,773 7,157 1938. 1939. 1940. 1941. 30,474 | 67,792 74,232 23,878 9,082 26,184 4,895 12,276 21,392 41,608 69,337 11,602 1942. 1943. 1944. 10,824 7,137 1,498 1,612 5,465 399 9,212 1,672 1,099 Banks with deposits o f$100,000 or less...................... $100,000 to $250,000............ $250,000 to $500,000............ 4,956 12,852 14,323 4,309 11,542 10,210 647 1,310 4,113 106 108 58 $500,000 to $1,000,000... $1,000,000 to $2,000,000. $2,000,000 to $5,000,000. 24,011 26,545 42,317 13,878 8,961 12,409 10,133 17,584 29,908 49 35 25 20,135 114,557 25,670 20,135 88,887 $5,000,000 to $10,000,000. . $10,000,000 to $50,000,000. More than $50,000,000. . . . 245 152 Receiver ships1 Mergers2 499,233 109,590 389,643 218 94,716 179,081 225,436 19,474 26,538 63,578 75,242 152,543 161,858 9 25 69 75 24 42 50 1,966 13,320 27,528 33,346 1,966 9,091 11,241 14,961 4,229 16,287 18,385 74 60 43 15 50 32 19 59,724 157,779 142,389 29,721 10,296 32,740 5,657 14,730 49,428 125,039 136,732 14,991 4 19,011 12,534 1,915 1,816 6,636 456 17,195 5,898 1,459 6,358 17,609 20,657 4,947 13,918 12,463 1,411 3,691 8,194 36,807 49,319 77,568 17,591 11,747 16,279 19,216 37,572 61,289 51,791 239,124 32,645 51,791 206,479 65 20 20 I 5 2I 21 6 8 6 1 24 9 5 CORPORATION 172,717 Total INSURANCE 86,979 Mergers DEPOSIT 259,696 Class of bank National banks.................................... State banks members F. R. System. Banks not members F. R. System... All banks. Deposits (in thousands of dollars) FEDERAL Number of banks involving disbursement Disbursement by FDIC (in thousands of dollars) 1,236 Florida............... Georgia.............. Illinois............... Indiana.............. Iow a................... 300 862 3,273 4,334 1,462 Kansas............... Kentucky.......... Louisiana.......... Maryland.......... Massachusetts.. 974 I 4,614 1 Michigan........... Minnesota......... Mississippi........ Missouri............ Montana............ 5,340 640 257 4,920 94 841 668 I 3,109 fl 1,571 | I 8 I I North Dakota. . Ohio................... Oklahoma.......... Oregon............... Pennsylvania. . . 2,649 1,610 I 1,218 I 962 47,386 | South Carolina.. South Dakota. . Tennessee.......... Texas................. Vermont............ Virginia.............. Washington West Virginia... Wisconsin.......... 1 Data from books of FD IC , December 31, 1944. 2 Data from books of bank at date of closing. 1 I I I | 2 5 1 1 2 203 845 1,220 3,091 385 97 17 2,053 1,243 1,077 2 8 14 18 482 3,329 668 735 492 1,285 139 640 257 4,335 186 469 25,097 10,834 1,156 143 2,374 1,571 5,201 585 27 118 54,143 56,598 292 1 5 1 2 217 998 1,637 3,932 498 274 29 4,772 5,778 5,018 9 22 3 5 2 5 18 3 4 4 3 2 539 3,953 1,652 828 694 3,997 2 1,233 7,950 1,652 4,569 3,019 7 5 3 45 3 5 3 34 3 4 160 818 334 5,116 215 12,244 11 1 12,404 818 334 7,001 298 1 26 22 4 538 296 184,511 138,826 2,290 30,916 13,286 1,420 6 4 4 1 37 25 4 11 3 2 10,121 85 962 37,265 135 2,411 1,278 2,512 3,444 135 2,388 1,164 2,468 3,258 23 114 44 186 1 23 12 17 3 1 22 8 16 2,887 935 1,458 6,384 511 2,376 935 6 1 3 30 3 1,458 5,096 1,288 8 1,526 428 1,078 491 1,027 6,409 9,710 5,516 18 2 5 8 1,262 101 1,168 1 1 8 3 3 6 1,387 1,610 1,133 529 1,168 1,078 8 1,526 1 7 6 15 3 29 2 7 1 25 I 1 1 2 3 20 11 538 1,885 83 296 153,595 125,540 870 2,278 2 1 17 3,830 2,345 2,226 1,114 67,430 14,340 567 1.114 53,090 1 4 1 1 136 2,988 1,943 3,318 3,725 136 2,862 1,621 3,241 3,375 126 322 77 350 4,735 1,538 2,006 8,698 629 2,006 5,964 4,106 1,538 3 1 10 1,552 2,345 1,659 3,741 3,019 2,734 DISBURSEMENTS Nebraska........... New Hampshire New Jersey....... New York......... North Carolina. 213 469 118 79,240 67,432 1,448 * 861 INSURANCE 237 841 861 8 1,236 DEPOSIT State Alabama............ Arkansas............ California.......... Colorado............ Connecticut T able 115. ASSETS AND LIABILITIES OF INSURED BANKS PLACED IN RECEIVERSHIP AND OF INSURED BANKS MERGED WITH t h e F in a n c ia l A id o f t h e F e d e r a l D e p o s it I n s u r a n c e C o r p o r a tio n , 1934-1944 AS SHOWN BY BOOKS OF BANK AT DATE OF CLOSING Liabilities and capital accounts Assets Total U. S. Gov ernment obligations Other securities Loans, discounts, and overdrafts Banking house, furniture & fixtures Other real estate Other assets Total Total deposits Other liabilities R .F . C. capital Private capital stock Other capital accounts1 $105,577,803 $74,923,118 $73,477,580 $229,247,826 $22,225,616 $59,539,990 $13,360,756 $578,352,689 $497,017,139 $11,468,774 $25,130,464 $37,145,961 $7,590,351 $65,569,217 $5,375,616 $12,293,686 $8,330,507 $140,290,048 $107,374,564 $10,122,023 $5,896,246 $12,254,299 $4,642,916 603,519 698,440 902,215 1,293,683 273,638 510,479 1,955,104 2,307,696 1,329,865 6,842,116 6,454,624 11,107,699 79,365 459,055 459,700 486,995 120,319 242,274 734,874 837,966 69,565 1,597,403 273,559 1,010,689 2,661,327 12,323,948 12,974,788 19,283,376 1,951,992 8,700,485 11,039,098 14,715,286 104,963 2,111,886 93,695 1,132,758 90,000 223.000 788.000 755,250 432,100 950,000 1,069,350 2,498,815 82,272 338,577 -15,355 181,267 1938 1939 1940 1941 1,610,297 3,329,557 1,018,215 6,462,157 451,570 1,052,424 452,574 3,493,431 2,215,638 4,855,519 1,519,677 1,810,346 6,574,061 21,839,422 3,314,762 5,398,218 412,911 1,845,901 694,900 91,311 2,125,022 7,221,558 435,526 106,615 530,408 3,781,385 523,899 449,458 13,919,907 43,925,766 7,959,553 17,811,536 10,124,255 32,557,805 5,599,438 14,627,158 1,213,354 4,695,820 455,788 298,526 1,052,900 2,249,996 422,750 195,500 1,059,200 2,775,001 1,045,533 1,582,000 470,198 1,647,144 436,044 1,108,352 1942 1943 1944 500,513 2,910,826 196,220 119,650 968,872 117,700 52,364 405,011 41,090 777,953 1,846,467 84,030 70,685 772,493 2,300 55,222 414,310 25,030 63,677 5,434 1,601,417 7,381,656 446,774 1,379,526 6,274,311 405,210 1,520 13,582 131 81,750 32,500 4,600 140.000 675.000 27,300 -1,379 386,263 9,533 $5,030,249 $438,062,641 $389,642,575 $1,346,751 $19,234,218 $24,891,662 $2,947,435 1934 1935 1936 1937 404,834 3,109,830 4,717,074 233,395 2,071,296 2,495,254 1,403,807 2,080,059 3,520,186 2,256,417 8,917,554 8,678,629 608,467 1,277,605 562,181 1,184,658 926,359 10,808 325,362 186,497 4,917,728 18,966,364 21,086,180 4,228,816 16,287,262 18,384,923 140 19,769 262,651 310,000 609,200 315,000 1,664,000 1,808,400 373,772 685,333 21,006 1938 1939 1940 1941 8,133,887 27,451,442 30,227,874 3,167,243 7,018,796 27,929,162 17,183,076 801,273 10,377,037 16,266,036 17,987,527 2,835,309 20,896,236 44,289,765 60,687,428 8,178,623 2,873,257 5,142,882 4,553,388 798,028 3,913,009 15,459,743 22,840,095 1,014,582 2,380,489 1,049,600 458,831 197,669 55,592,711 137,588,630 153,938,219 16,992,727 49,428,383 125,038,946 136,731,549 14,990,768 168,674 679,659 157,766 57,508 3,726,463 6,103,500 7,186,655 289,000 2,697,650 6,381,000 8,666,162 1,111,250 -428,459 -614,475 1,196,087 544,201 1942 1943 1944 4,159,617 1,216,987 368,633 3,547,766 2,903,771 585,251 2,275,392 555,383 230,282 7,731,137 1,675,734 367,086 759,861 274,331 1,824,586 15,844 67,428 354,362 34,523 32,108 20,652,721 6,676,573 1,650,788 17,195,146 5,897,691 1,459,091 584 913,400 96,000 1,748,200 300.000 200.000 795,391 382,882 -8,303 i Includes surplus, undivided profits, and reserve funds minus operating deficit, if any, as shown by books. Minus (-) indicates net operating deficit. N o t e : One insured bank was placed in receivership and one was merged with the financial aid of FDIC during 1944. The Brownsville State Bank, Brownsville, Indiana, (Case 245) suspended operations on May 12, 1944, and was placed in receivership. The Indiana State banking authority was named receiver for this State bank which was not a member of the Federal Reserve System. The First National Bank of Susquehanna, Susquehanna, Pennsylvania, (Case 152) with 4,589 accounts, was merged with The First and Farmers National Bank and Trust Company, Montrose, Pennsylvania, on May 27, 1944. A disbursement of $1,098,842 was made by the Corporation in connection with this merger. Data for individual insured banks placed in receivership and for those merged with the financial aid of FDIC before 1944 are given in earlier annual reports. CORPORATION MERGJ 3RS $82,957,421 $64,769,040 $57,531,018 $163,678,609 $16,850,000 $47,246,304 Total INSURANCE 1934 1935 1936 1937 185,056 1,974,181 2,194,712 2,238,648 DEPOSIT RECEI VERSHIPS $22,620,382 $10,154,078 $15,946,562 Total FEDERAL Cash and due from banks T a b le 1 1 6 . DEPOSITORS AND DEPOSITS OF INSURED BANKS PLACED IN RECEIVERSHIP, 1934-1944 AS SHOWN BY BOOKS OF FDIC, DECEMBER Eligible for insurance protection Unpaid Not eligible for insurance protection Unpaid Secured and preferred Subject to offset Total Total Paid In excess of insurance maximum Other 289,106 36,233 12,810 $158,676 $4,983,028 $6,320,584 $9,784,177 $1,364,379 15,545 32,275 41,831 74,151 11,262 23,422 30,924 56,813 937 2,986 4,677 7,761 2,761 1,509 22 78 585 4,358 6,208 9,499 1,966,373 9,090,632 11,240,970 14,961,275 944,764 6,028,994 8,055,590 12,047,836 941,008 6,024,650 8,055,563 12,044,562 3,756 4,344 27 3,274 831,832 538,951 659,381 1,140,812 91,005 561,288 660,363 1,084,311 30,607 1,935,853 1,048,034 642,707 68,165 25,546 817,602 45,609 1938 1939 1940 1941 43,700 90,212 20,671 38,594 31,765 72,212 15,681 29,885 7,390 6,245 2,937 1,709 20 3,917 8 11 4,525 7,838 2,045 6,989 10,296,261 32,739,801 5,656,748 14,730,243 9,087,499 26,259,973 4,895,745 12,278,587 9,082,444 26,184,011 4,894,723 12,276,408 5,055 75,962 1,022 2,179 340,557 576,440 182,441 391,711 526,183 1,921,758 341,818 793,302 252,043 3,949,352 221,323 997,814 89,979 32,278 15,421 268,829 1942 1943 1944 5,717 16,914 900 4,210 12,173 759 562 933 96 631 3,808 45 314 1,816,180 6,635,864 455,725 1,613,939 5,519,353 405,624 1,612,049 5,464,979 398,831 1,890 54,374 6,793 59,824 261,079 80,906 244,334 15,316 60,561 611,098 34,785 950 42,361 $109,590,072 $87,137,904 $86,979,228 Only one insured bank was placed in receivership in 1944. For name of bank and other information see Note to Table 115. Back figures—See the Annual Report for 1943, p. 105, and earlier reports. N o te: DISBURSEMENTS 380,510 1934 1935 1936 1937 T ota l INSURANCE Paid by FDIC Fully paid by other methods Uninsured, unsecured, not preferred, and not enhio/>f nffaot Insured DEPOSIT Amount of deposits Number of depositors Total 31, 1944 or to DISBURSEMENTS TO PROTECT DEPOSITORS, RECOVERIES, AND LOSSES BY THE FEDERAL DEPOSIT INSURANCE CORPORATION FROM I n s u r e d B a n k s P la c e d in R e c e iv e r s h ip o r M e r g e d w it h t h e F in a n c ia l A id o f t h e C o r p o r a tio n , AS SHOWN BY BOOKS OF FDIC, DECEMBER 1934-1944 31, 1944 FEDERAL Table 117. (Amounts in thousands of dollars) 1934 $259,696 1 86,979 f 172,717 1 $941 941 1936 1937 1938 1939 1940 1941 1942 1943 1944 $8,890 6,025 2,865 $14,828 8,055 6,773 $19,202 12,045 7,157 $30,474 9,082 21,392 $67,792 26,184 41,608 $74,232 4,895 69,337 $23,878 12,276 11,602 $10,824 1,612 9,212 $7,137 5,465 1,672 $1,498 399 1,099 6,020 12,123 6,548 5,575 15,050 9,225 5,825 25,466 7,710 17,756 44,708 13,730 30,978 54,636 3,407 51,229 21,353 11,954 9,076 1,243 7,833 4,779 3,215 1,564 1,130 4,194 1,826 616 616 71 21 50 195,034 62,120 132,914 Estimate of losses by F D IC .......................................... Receiverships1.............................................................. Mergers........................................................................ 38,810 18,611 20,199 208 208 2,786 1,770 1,016 2,635 1,471 1,164 3,770 2,579 1,191 2,892 1,214 1,678 12,409 9,568 2,841 11,167 653 10,514 1,339 219 1,120 917 292 625 Banks placed in receivership or merged—liquidation terminated Disbursement by F D IC ................................................. Receiverships............................................................... Mergers........................................................................ 48,217 35,815 12,402 521 521 5.149 5.149 7,393 6,921 472 8,085 7,694 391 8,489 5,977 2,512 12,780 7,195 5,585 2,743 1,264 1.479 675 675 2,382 419 1.963 Recoveries by F D IC ...................................................... Receiverships............................................................... Mergers........................................................................ 40,446 28,404 12,042 429 429 3.641 3.641 5,881 5,475 406 6,052 5,704 348 7,650 5,324 2,326 11,366 5,846 5,520 2,621 1,142 1.479 488 488 2,318 355 1.963 Losses by F D IC ............................................................. Receiverships............................................................... Mergers........................................................................ 7,771 7,411 360 1.508 1.508 1,512 1,446 2,033 1,990 43 839 653 186 1,414 1,349 65 122 122 187 187 64 64 66 201 929 CORPORATION Recoveries by F D IC ...................................................... Receiverships............................................................... Mergers........................................................................ INSURANCE All banks placed in receivership or merged Disbursement by F D IC ................................................. Receiverships............................................................... Mergers........................................................................ 1935 DEPOSIT Banks placed in receivership or merged in Total Banks placed in receivership or merged—liquidation active 211,479 51,164 160,315 420 420 3,741 876 2,865 7,435 1,134 6,301 11,117 4,351 6,766 21,985 3,105 18,880 55,012 18,989 36,023 71,489 3,631 67,858 23,203 11,601 11,602 8,442 1,193 7,249 7,137 5,465 1,672 1,498 399 1,099 Recoveries by F D IC ...................................................... Receiverships............................................................... Mergers........................................................................ 154,588 33,716 120,872 264 264 2,379 553 1,826 6,242 1,073 5,169 8,998 3,521 5,477 17,816 2,386 15,430 33,342 7,884 25,458 52,015 2,265 49,750 20,865 11,466 9,399 6,758 888 5,870 4,779 3,215 1,564 1,130 201 929 Estimate of losses by F D IC ......................................... Receiverships1............................................................. Mergers........................................................................ 31,039 11,200 19,839 116 116 1,278 262 1,016 1,123 25 1,098 1,737 589 1,148 2,053 561 1,492 10,995 8,219 2,776 11,045 531 10,514 1,152 32 1,120 853 228 625 616 616 71 21 50 397 9 25 69 75 74 60 43 15 20 5 2 Receiverships................................................................... Mergers............................................................................ 245 152 9 24 1 42 27 50 25 50 24 32 28 19 24 8 7 6 14 4 1 1 1 Liquidation terminated................................................. Receiverships............................................................... Mergers........................................................................ 230 176 54 7 7 18 18 52 39 13 47 38 9 54 42 12 32 20 12 13 8 5 2 2 5 2 3 Liquidation active.......................................................... Receiverships............................................................... 167 69 98 2 2 7 6 1 17 3 14 28 12 16 20 8 12 28 12 16 30 11 19 13 6 7 15 4 11 5 4 1 2 1 1 DISBURSEMENTS 1 Estimates of losses for banks placed in receivership are based on total insured deposits, unpaid as well i i paid. The disbursements in the receiverships as given in the table are the amounts paid on insured deposits by December 31, 1944. For amounts unpaid on insured deposits sc s Table 116, page 151. INSURANCE Number of banks......................................................... DEPOSIT Disbursement by F D IC ................................................. Receiverships............................................................... Mergers........................................................................ CR CO INDEX INDEX Page Absorption of exchange charges. See Exchange charges, absorption of. Absorptions, consolidations, and mergers: Of insured banks, 1934-44. See Mergers of insured banks with financial aid of the Corporation, Terminations of insurance. Of operating banks, 1944............................................................................... 110-111 Adjusted capital account. See Capital of banks. Adjusted liabilities. See Assets and liabilities of insured commercial banks, examiners’ appraisal. Admissions to insurance: Applications approved and disapproved....................................................... 23-24 By class of bank, 1944................................................................................... 110-111 Applications from banks: For admission to insurance............ ................................................................. 23-24 For approval of assumption of deposit liabilities of other banks............... 24 For approval of capital retirement or reduction........................................... 24 24 For approval of establishment of branches................................................... For approval of repayment of waived deposits............................................ 24 Appraised value of assets. See Assets and liabilities of insured commercial banks, examiners’ appraisal. Assessments on insured banks for deposit insurance: Amount.............................................................................................................. Basis o f ............................................................................................................... By banks whose insured status has terminated............................................ 28 7 96 Asset insurance....................................................................................................... 12-14 Assets and liabilities of closed banks. See Receivership, insured banks placed in. Assets and liabilities of insured commercial banks, examiners’ appraisal: Banks examined in 1939-1944....................................................................... 134-135 Banks examined in 1944, grouped by amount of deposits......................... 136-137 Definitions of terms used: Adjusted liabilities...................................................................................... 133 Appraised value........................................................................................... 133 Book value................................................................................................... 133 Examiners’ deductions............................................................................... 133 Substandard................................................................................................. 132 Uncriticized............................................................................................... 132-133 ’ Sources of data.................................................................................................. 133 Assets and liabilities of operating banks (see also Assets and liabilities of insured commercial banks, examiners’ appraisal; Capital of banks; Deposits): Acquired, 1940-1944......................................................................................... 55 All banks, June 30 and December 30, 1944................................................124, 125 Commercial banks, June 30 and December 30, 1944................................ 124, 125 Insured commercial banks: Call dates, December 30, 1944, to December 31, 1943.......................... 126 Reports o f.................................................................................................... 24-25 Mutual savings banks, June 30 and December 30, 1944.......................... 124, 125 Noninsured banks, June 30 and December 30, 1944................................. 124, 125 Sources of data........................................ ......................................................... 123 Types of assets, 1934-1944............................................................................... 35-37 Assets and liabilities of the Federal Deposit Insurance Corporation.............. 26-31 157 158 FEDERAL DEPOSIT INSURANCE CORPORATION Page Assets purchased by the Federal Deposit Insurance Corporation: From banks in receivership to facilitate liquidation.................................... From banks merged with financial aid of the Corporation. See Mergers of insured banks with financial aid of the Corporation. Liquidation o f .................................................................................................... 29 18 Assets of insured banks, quality of. See Assets and liabilities of insured commercial banks, examiners’ appraisal. Assets pledged to secure bank obligations........................................................... 127 Bank supervision (see also Examinations of banks): Activities of the Federal Deposit Insurance Corporation in 1944............. 22-24 State legislation regarding, during 1944...................................................... 102-106 Banking monopoly............................................................................................... 9, 10-11 Banking offices, establishment of: Banks beginning operations, 1944.................................................................. 110 Branches, establishment approved by Corporation..................................... 24 Branches opened, 1944.....................................................................................24, 110 Banking offices, number of. See Class of bank, banking data presented by. Banking practices. See Unsafe and unsound banking practices. Banks beginning operations. See Banking offices, establishment of. Banks ceasing operations, 1944............................................................................. 110 Banks closed because of financial difficulties (see also Mergers of insured banks with financial aid of the Corporation; Receiverships, insured banks placed in ): Depositors protected by the Federal Deposit Insurance Corporation: Fully protected, in insured banks placed in receivership, or merged with the financial aid of the Corporation.......................................... 14-16 Number o f ................................................................................................... 15 Number of, in insured banks merged with financial aid of the Corporation........................................................................................... 15 Number of, in insured banks placed in receivership..............................15, 151 Insured banks placed in receivership or merged with financial aid of the Corporation: Deposits protected................................................................................15-17, 151 Disbursements by the Corporation in connection with...................15-16, 151 Loss to depositors........................................................................................ 15, 17 Loss to Federal Deposit Insurance Corporation................................15,18, 19 Number and deposits of, 1934-1944.................................................. 15, 148-149 Suspensions: Number, 1944................................................ * ........................................... 110 23 Of banks charged with unsafe and unsound banking practices............ Banks in financial difficulties (see also Banks closed because of financial difficulties): Methods of handling under existing law ........................................................ 15-16 Recommendations of the Corporation............................................................ 9-10 Banks, number of. See Number of operating banks and branches. Banks operating branches. See Banking offices, establishment of; Number of operating banks and branches. Board of Directors of the Federal Deposit Insurance Corporation...............iv, v, 25 Board of Governors of the Federal Reserve System: Actions on absorption of exchange charges and enforcement of par clear ance. See Exchange charges, absorption of. Data obtained from ................................................................... 22, 109, 123, 139 Review of examination reports submitted b y ......................................... 22 INDEX 159 Page Book value of bank assets and liabilities. See Assets and liabilities of insured commercial banks, examiners’ appraisal; Assets and liabilities of operating banks; Capital of banks. Branches. See Banking offices, establishment of; Classification of banks and banking offices; Number of operating banks and branches. Capital of banks (see also Assets and liabilities of operating banks; Earnings, expenses, and dividends of insured banks): Adequacy o f.................................................................................................. 11, 42-44 Definition of terms used in examiners’ appraisal o f: Adjusted capital accounts.......................................................................... 133 Book value of capital accounts................................................................. 133 Net sound capital....................................................................................... 133 Examiners’ appraisal, insured commercial banks, 1944: Grouped by adjusted capital ratio........................................................... 44 Grouped by amount of deposits............................................................. 136-137 Examiners’ appraisal, insured commercial banks, 1939-1944 ....... ............ 134 Of insured banks placed in receivership........................................................ 150 Ratios to assets: Insured banks, 1944.........................................................................137, 143, 145 Insured commercial banks, by years....................................................... 43, 135 Retirements approved by the Corporation.................................................. 24 Total capital accounts: Commercial and mutual savings banks, insured and noninsured, June 30 and December 30, 1944....................................................... 124, 125 Insured commercial banks.................................................. 42-43, 127, 134-137 Unsafe and unsound practices......................................................................... 22-23 Charge-offs on bank assets. See Earnings, expenses, and dividends of insured banks. Class of bank, banking data presented by: Admissions to and terminations of insurance............................................. 110-111 Assets and liabilities....................................................................................... 124-125 Banks which suspended operations................................................................ 148 Deposits.......................................................................................... 120-121, 124, 125 Earnings of insured banks.......................................................................44, 140-141 Insured banks placed in receivership or merged with financial aid of the Corporation............................................................................................ 148 Number of banking offices.............................................................110-111, 112-119 Number of banks............................................................ 110-111, 112-119, 120-121 Classification of banks and banking offices.......................................................108, 109 Closed banks. See Banks ceasing operations; Banks closed because of financial difficulties; Receivership, insured banks placed in. Commercial banks. See Assets and liabilities of insured commercial banks, examiners’ appraisal; Assets and liabilities of operating banks; Capital of banks; Deposits; Earnings, expenses, and dividends of insured banks; Number of operating banks and branches. Comptroller of the Currency: Data obtained from.........................................................................22, 109, 123, 139 Director of Corporation.................................................................................iv, v, 25 Examination of insured banks b y ................................................................... 22 Review of reports of examinations made b y ................................................. 22 Consolidations. See Absorptions, consolidations, and mergers. Consumer loans. See Instalment loans. Criticized assets. See Assets and liabilities of insured commercial banks, examiners’ appraisal. Currency, amount of. See Money supply, 1939-1944. Demand deposits. See Assets and liabilities of operating banks; Deposits, classified by type of deposit. 160 FEDERAL DEPOSIT INSURANCE CORPORATION Page Deposit Insurance National Banks...................................................................... 9-10 Depositors (see also Insurance coverage): Claims against closed insured banks. See Receivership, insured banks placed in. Losses. See Banks closed because of financial difficulties; Receivership, insured banks placed in. Protected in insolvent or hazardous banks suspended or merged. See Banks closed because of financial difficulties. Deposits: Amount of, banks grouped by: 148 Banks which received financial aid from the Corporation.................... Banks which suspended operations.......................................................... 148 Insured commercial banks examined in 1944........................................136-137 Insured commercial banks operating throughout 1944.......................... 144 Classified by type of deposit: Commercial and mutual savings banks, June 30 and December 31, 1939-1944............................................................................................... 53 Commercial banks, June 30 and December 30, 1944.......................... 124, 125 Insured banks placed in receivership, 1934-1944.................................... 151 Insured commercial banks, call dates, December 1944 to December 1942......................................................................................................... 126 Demand. See Deposits, classified by type of deposit. Growth...........................................................................................................41, 53-63 Governmental, December 30, 1939 and 1944................................................ 60, 61 Insured and otherwise protected: In banks merged with financial aid of the Corporation........................ 14-15 In banks placed in receivership.................................................... 14-15, 16, 151 Interbank (see also Deposits, classified by type of deposit): By FDIC district and State, December 31, 1939, June 30, 1942, and December 30, 1944............................................................................... 62, 63 Percentage increase..................................................................................... 62, 64 Of individuals and business, by type, 1939-1944.......................................... 66-67 Of individuals, partnerships, and corporations (see also Deposits, classified by type of deposit): By FDIC district and State, December 30, 1939, June 30, 1942, and December 30, 1944................................................................................ 58 Percentage increase................................................................... 56, 58, 59, 61, 64 Paid and unpaid in closed insured banks......................................................15, 151 Payments of, to insured depositors. See Receivership, insured banks placed in. Postal savings deposits. See Deposits, classified by type of deposit. Preferred. See Deposits, secured and preferred. Protected by the Corporation. See Deposits, insured and otherwise protected. Public funds. See Deposits, classified by type of deposit. Savings and time. See Deposits, classified by type of deposit. Secured and preferred: Insured banks placed in receivership, 1934-1944................................... 15, 151 Insured commercial banks, call dates, December 30, 1944, to Decem ber 31, 1943............................................................................................ 127 Sources of data.................................................................................................. 147 Subject to offset. See Receivership, insured banks placed in. Uninsured deposits of insured banks placed in receivership...................... 16, 151 Unsecured. See Receivership, insured banks placed in. Deposits in: All commercial and mutual savings banks: December 31, 1944.........................." ...................................................... 120, 125 June 30, 1944............................................................................................... 124 June 30 and December 31, 1942-1944.................................................... 128-129 June 30 and December 31, 1939-1934, by class of owner...................... 53 Percentage change, 1940-1944, by class of owner................................... 54 All commercial banks: Call dates, December 30, 1944 to December 31, 1943........................... 126 December 30, 1944................................................................................... 120, 125 June 30, 1944............................................................................................... 124 INDEX 161 Page Deposits in:— Continued All insured banks: June 30, 1944............................................................................................... 124 December 30, 1944................................................................................... 120, 125 All mutual savings banks: December 30, 1944...................................................................................120, 125 June 30, 1944............................................................................................... 124 Banks located in each State and possession, December 30, 1944............ 120-121 Banks for which the Corporation is receiver................................................. 20 Banks which received financial aid from the Corporation............14-15, 148, 150 Insured banks merged with financial aid of the Corporation. .*.14-15, 148, 150 Insured banks placed in receivership...............................................14-15, 148, 151 Insured commercial banks: At time of examination. See Assets and liabilities of insured com mercial banks, examiners' analysis. Call dates, December 30, 1944 to December 31, 1943........................... 126 December 30, 1944................................................................................... 120, 125 June 30, 1944............................................................................................... 124 Insured mutual savings banks: December 30, 1944................................................................................... 120, 125 June 30, 1944............................................................................................... 124 Noninsured banks: December 30, 1944................................................................................... 120, 125 June 30, 1944............................................................................................... 124 Suspended banks............................................................................................... 148 Depreciation. See Earnings, expenses, and dividends of insured banks. Depressions and deposit insurance....................................................................... Dividends: To depositors in mutual savings banks......................................................... To stockholders of operating insured banks. See Earnings, expenses, and dividends of insured banks. 14 141 Earnings, expenses, and dividends of insured banks: Insured commercial banks: Amounts, 1942-1944................................................................................... 44 Amounts by class of bank, 1944............................................................... 140 Amounts by size of bank, 1944................................................................. 49 Discussion o f ............................................................................................... 44-50 Rates of income received, 1934-1944........................................................ 48 Rates of net earnings and net profits....................................................... 45-47 Ratios to average total capital accounts.................................................. 46 Ratios to total current earnings................................................................ 142 Insured mutual savings banks, 1944.............................................................. 140 Sources of data.................................................................................................. 139 Sources of earnings........................................................................................... 47-48 Employees: Federal Deposit Insurance Corporation........................................................ 26 Insured commercial banks, December 30, 1944............................................ 141 141 Insured mutual savings banks, December 30, 1944..................................... Examinations of banks (see also Assets and liabilities of insured commercial banks, examiners’ appraisal; Capital of banks): Banks cited for unsafe and unsound practices.............................................. 23 Banks examined by the Federal Deposit Insurance Corporation.............. 22, 109 Data from reports of examination................................................................132-137 Definition of terms........................................................................................... 133 Effect of war on ................................................................................................ 22 Procedure.........................................................................................................132-133 Review of examinations made by Comptroller of Currency and Federal Reserve banks....................................................................................... 22 Exchange charges, absorption of: Congressional action......................................................................................... 20-21 Letters to Chairman, Senate Committee on Banking and currency___72-76, 95 Memorandum of General Counsel of the Corporation................................ 77-91 16 2 FEDERAL DEPOSIT INSURANCE CORPORATION Page Exchange charges, absorption o f:— Continued Relation to par clearance of checks..................................................... 73, 77-82, 91 Rulings by Board of Directors of the Corporation......................76, 87-90, 92-94 Ruling of Board of Governors of the Federal Reserve System........74-75, 87-90 Expenses of banks. See Earnings, expenses, and dividends of insured banks. Expenses of the Federal Deposit Insurance Corporation. See Federal Deposit Insurance Corporation. Failures of banks. See Banks closed because of financial difficulties. Federal bank supervisory authorities. See Bank supervision; Board of Governors of the Federal Reserve System; Comptroller of the Currency; Federal Deposit Insurance Corporation. Federal credit unions.............................................................................................. 25 Federal Deposit Insurance Corporation: Actions by: On absorption of exchange charges. See Exchange charges, absorption of. On applications from banks. See Applications from banks. To terminate insured status of banks...................................................... 23 Assessments on insured banks......................................................... 7, 23, 25, 27, 28 Assets and liabilities...............................................................................26-29, 30-31 Audit................................................................................................................... 29-32 Banks examined by, and submitting reports t o ............................................ 22 Bank supervision by. See Bank supervision. Board of Directors..........................................................................................iv, v, 25 Borrowing power............................................................................................... 30-31 Capital................................................................................................................27, 31 Claims held against suspended and merged banks....................................... 29, 30 Depositors protected by. See Banks closed because of financial difficulties. Disbursements for protection of depositors...................................... 7, 19, 152-153 Districts............................................................................................................. vi, vii Divisions............................................................................................................ iv, 26 Employees.......................................................................................................... 26 Examination of banks. See Examinations of banks. Expenses............................................................................................................ 26-28 Income............................................................................................................... 25-28 Insured banks receiving financial aid from. See Banks closed because of financial difficulties. Insured deposits. See Deposits, insured and otherwise protected. Investments....................................................................................................... 30 Liquidation of assets of insured banks in financial difficulties. .15, 17-18, 19-20 Loans to and purchase of assets from insured banks. See Mergers of insured banks with financial aid of the Corporation. Losses incurred: During 1944................................................................................................. 27 During 1934-1944................................................................... 15, 19, 28, 152-153 Reserve for............................................................................................. 20, 29, 30 Officers............................................................................................................. v, vi, 26 Organization and staff..................................................................................iv, 25, 26 Payments to insured depositors................................................................15-17, 151 Policies............................................................................................................... 8-20 Powers..............................................................................................................8-10, 17 Protection of depositors. See Banks closed because of financial difficulties. Purchase of assets to facilitate completion of liquidation of banks in receivership............................................................................................. 17-18 Receiver for insured banks..............................................................................20, 150 Recoveries from banks in financial difficulties................................19-20, 152-153 Regulations: Amended or adopted in 1944..................................................................... 21 Advertisement of FDIC membership....................................................... 96-97 Agents for service of process..................................................................... 98 Assessments.................................................................................................. 96 Voluntary termination of insured status..................................................98-102 INDEX 163 Page Federal Deposit Insurance Corporation:— Continued Reports from banks.......................................................................................... 24-25 Reserves for losses................................................................................. 12, 20, 29, 30 Supervisory activities. See Bank supervision. Surplus................................................................................................................27, 31 Federal Deposit Insurance Corporation Districts: Banks classified b y ............................................................................................ 120 States and possessions served..........................................................................vi, vii Federal Reserve Act. See Exchange charges, absorption of. Federal Reserve Bulletin. See Exchange charges, absorption of. Federal Reserve System. See Board of Governors of the Federal Reserve System. Fixed and miscellaneous assets. See Assets and liabilities of insured com mercial banks, examiners’ appraisal; Assets and liabilities of operating banks; Receivership, insured banks placed in. Holding companies................................................................................................. 10-11 Insolvent or hazardous banks. See Bank supervision; Banks closed because of financial difficulties; Banks in financial difficulties. Instalment loans, how reported............................................................................ 123 Insurance coverage: In closed banks. See Deposits, insured and otherwise protected. Recommendation of the Corporation............................................................. 8 Insurance of bank assets........................................................................................ 12-13 Insurance status, banks classified by: Assets and liabilities o f.................................................................................. 124, 125 Deposits o f .......................................................................................................120-121 Number o f ....................................................................................................... 110-121 Suspensions o f ................................................................................................. 148-149 Insured banks. See: Absorptions, consolidations, and mergers; Admissions to insurance; Assets and liabilities of operating banks; Assets and liabilities of insured commercial banks, examiners’ appraisal; Banking offices, establishment o f; Banks ceasing operations; Banks closed because of financial difficulties; Capital of banks; Class of bank, banking data presented by; Deposits; Deposits in; Earnings, expenses and dividends of insured banks; Employees; Examinations of banks; Mergers of insured banks with financial aid of the Corporation; Mutual savings banks; Number of operating banks and branches; Receivership, insured banks placed in; Securities; States, banking data classified by; Terminations of insurance; Unsafe and unsound banking practices. Insured commercial banks not members of the Federal Reserve System. See Class of bank, banking data presented by. Insured commercial banks submitting reports to the Federal Deposit In surance Corporation............................................................................. 24-25 Insured deposits. See Deposits, insured and otherwise protected. 1 64 FEDERAL DEPOSIT INSURANCE CORPORATION Page Insured mutual savings banks. See Mutual savings banks. Insured State banks members of the Federal Reserve System. See Class of bank, banking data presented by. Interbank deposits. See Deposits, interbank. Interest: See Earnings, expenses, and dividends of insured banks. Investments of banks. See Assets and liabilities of insured commercial banks, examiners’ analysis; Assets and liabilities of operating banks; United States Government obligations; Unsafe and unsound banking practices. Investments of the Federal Deposit Insurance Corporation............................ 29-30 Law, violations of by insured banks.................................................................... 22, 23 Legislation related to deposit insurance and banking (see also Exchange charges, absorption o f): Federal, enacted in 1944.................................................................................. 21, 71 Recommended by the Corporation................................................................. 8-11 State, enacted in 1944.................................................................................... 102-106 Liquidation, banks placed in ............................................14-15, 19, 110, 148-149, 150 Loans by banks: Amounts and types. See Assets and liabilities of operating banks. Examiners’ evaluation. See Assets and liabilities of insured commercial banks, examiners’ appraisal. Interest on. See Earnings, expenses, and dividends of insured banks. Loans to insolvent or hazardous insured banks by Federal Deposit Insurance Corporation. See Mergers of insured banks with financial aid of the Corporation. Losses: Of banks: Charged off. See Earnings, expenses, and dividends of insured banks. Reserves fo r................................................................................................. Of depositors. See Banks closed because of financial difficulties; Receiver ship, insured banks placed in. Of the Federal Deposit Insurance Corporation. See Federal Deposit Insurance Corporation. 12 Mergers. See Absorptions, consolidations, and mergers; Mergers of insured banks with financial aid of the Corporation. Mergers of insured banks with financial aid of the Corporation (see also Banks closed because of financial difficulties; Banks in financial difficulties): Banks cited for unsafe and unsound practices............................................. 23 Classification of banks merged........................................................................ 148 Collections by Corporation on assets purchased or held as col lateral....................................................................................... 17-20, 152-153 Deposits protected............................................................................................ 15 Disbursements by Corporation...............................................19, 148-149, 152-153 Loans and assets purchased by the Corporation.......................................... 19 Losses incurred by Corporation........................................................19, 28, 152-153 Name and location of bank merged, 1944...................................................... 150 Number of banks merged......................................................... 15, 19,148,149,153 Procedure...................................................................................................9-10, 17-18 Repayments to Corporation.............................................................. 19-20,152-153 Money supply, 1939-1944: Amount, June 30 and December 31, by type............................................... 65 Increase by 6-month periods........................................................................... 66 Owned by government and by individuals and business............................ 66 Owned by individuals and business, by typ e................................................ 66-68 INDEX 165 Page Monopoly in banking.......................................................................................... 9, 10, 11 Mutual savings banks: Insured: Assets and liabilities, June 30 and December 30, 1944....................... 124, 125 Deposits..................................................................................... 120-121, 124, 125 Earnings, expenses, and dividends......................................... 140-141, 142-143 Number...................................................................................................... 110-121 Insured and noninsured: Assets and liabilities, June 30 and December 30, 1944....................... 124, 125 Classification................................................................................................ 109 Deposits, by State, December 30, 1944................................................. 120-121 Number...................................................................................................... 110-121 National banks. See Class of bank, banking data presented by; Comptroller of the Currency. Net earnings of insured commercial banks. See Earnings, expenses, and dividends of insured banks. Net profits of insured commercial banks. See Earnings, expenses, and divi dends of insured banks. Net sound capital of insured commercial banks. See Capital of banks. New banks. See Banking offices, establishment of. Noninsured banks. See: Absorptions, consolidations, and mergers; Admissions to insurance; Assets and liabilities of operating banks; Banks closed because of financial difficulties; Capital of banks; Class of bank, banking data presented by; Deposits; Number of operating banks and branches. Number of operating banks and branches: All banks: Admissions to insurance...................................................................... 23-24, 110 Approved for admission to insurance....................................................... 23-24 Changes during 1944................................................................................ 110-111 December 30, 1944, by class of bank, FDIC district, and States and possessions........................................................................................... 120-121 June 30 and December 30, 1944............................................................. 124-125 Terminations of insurance....................................................................... 110-111 All banks and branches: Changes during 1944................................................................................ 110-111 December 31, 1944, by class of bank and States and possessions... .112-119 Banks operating branches............................................................................. 112-119 Branches: Changes during 1944.................................................................................. Ill December 31, 1944, by class of bank and States and possessions... .112-119 Commercial banks: Admissions to insurance...........................................................................110-111 Changes during 1944................................................................................ 110-111 December 30, 1944, by class of bank, FDIC district, and States and possessions........................................................................................... 120-121 June 30 and December 30, 1944............................................................. 124-125 Insured commercial banks: Applications approved and disapproved.................................................. 23-24 Call dates, December 30, 1944, to December 31, 1943.......................... 126 Changes during 1944................................................................................ 110-111 December 30, 1944, by FDIC district, and States and possessions. .120-121 Examined in 1944, by amount of deposits.............................................. 137 Operating throughout 1944, by amount of deposits.............................. 145 Mutual savings banks. See Mutual savings banks. 166 FEDERAL DEPOSIT INSURANCE CORPORATION Page Number of operating banks and branches (continued): Noninsured banks: Changes during 1944................................................................................ 110-111 December 30, 1944, by class of bank, FDIC district, and States and possessions............................................................................................120-121 June 30 and December 30, 1944............................................................. 124-125 Unit banks, December 30, 1944, by class of bank and States and pos sessions................................................................................................. 112-119 Officers, active, of insured banks. See Employees. Officers and employees of the Federal Deposit Insurance Corporation.......... v, 26 Operating banks. See Number of operating banks and branches. Par clearance of checks. See Exchange charges, absorption of. Payments to depositors in closed insured banks. See Receivership, insured banks placed in. Polk's Bankers Encyclopedia, data obtained from .......................................... 109,123 Possessions, banks and branches located in: Deposits o f .......................................................................................................120-121 Number o f .......................................................................................112, 119, 120, 121 Postal savings deposits. See Deposits, classified by type of deposit. Preferred deposits. See Deposits, secured and preferred. Profits. See Earnings, expenses, and dividends of insured banks. Protection of depositors. See Banks closed because of financial difficulties; Deposits, insured and otherwise protected. Public funds. See Deposits, classified by type of deposit. Purchase of bank assets by Corporation. See Assets of banks purchased by the Federal Deposit Insurance Corporation. Rand McNally Bankers Directory, data obtained from................................. 109,123 Real estate, loans on. See Assets and liabilities of operating banks. Receivership, insured banks placed in (see also Banks closed because of financial difficulties): Activities of Corporation as receiver o f.........................................................20, 150 150 Assets and liabilities of, at dates of suspension, 1934-1944........................ Depositors: Extent of protection by insurance......................................................14-16, 151 Methods of protection................................................................................ 15-19 Number eligible for protection, paid and unpaid................................... 151 Payments t o .......................................................................................... 15-16, 151 Deposits: Insured, paid and unpaid by December 31, 1944.................................. 16, 151 Not eligible for insurance protection....................................................... 16, 151 Paid and unpaid, December 31, 1944......................................................16, 151 Secured, preferred, and subject to offset................................................. 16, 151 Unclaimed accounts................................................................................... 16, 151 Uninsured.................................................................................................... 16, 151 Liquidation o f.................................................................... 15, 19, 110, 148-149, 150 Losses by Corporation on depositors' claims paid........................................ 19 Name and location of, during 1944................................................................ 150 Number of banks..............................................................................................18, 148 Payments to depositors............................................................................. 15-16, 151 Purchase of assets from .................................................................................... 17-18 Receivers..................................................................................................146-147, 150 Sources of data................................................................................................ 146-147 Reconstruction Finance Corporation, capital of insured banks held by: Amount. See Capital of banks. Retirements approved by Federal Deposit Insurance Corporation........... 24 INDEX 167 Page Recoveries: By banks on assets charged off. See Earnings, expenses, and dividends of insured banks. By Federal Deposit Insurance Corporation on disbursements in closed banks........................................................................................ 19-20, 152-153 Regulations. See Federal Deposit Insurance Corporation. Reports from banks................................................................................................ 24-25 Reserves: In bank assets and liabilities. See Assets and liabilities of operating banks. Of Federal Deposit Insurance Corporation........................................12, 20, 29, 30 Risk bearing and the operations of banks........................................................... 11-14 Savings and time deposits. See Deposits, classified by type of deposit. Secured and preferred deposits. See Deposits, secured and preferred; Re ceivership, insured banks placed in. Securities (see also United States Government obligations): Examiners’ appraisal of, method used........................................................... 132 Held by Federal Deposit Insurance Corporation.................................... 28, 29, 30 Held by insured banks placed in receivership, 1934-1944........................... 150 Held by insured commercial banks: See Assets and liabilities of insured commercial banks, examiners’ analysis, geld by operating banks, See Assets and liabilities of operating banks, interest on securities held by banks. See Earnings, expenses, and divi dends of insured banks. Rate of income on ............................................................................................. 48 Size of banks, banks classified by. See Deposits, amount of, banks grouped by. State banks members of the Federal Reserve System. See Class of bank, banking data presented by. State banks not members of the Federal Reserve System. See Class of bank, banking data presented by. State bank supervisory authorities: Data obtained from ........................................................................................109, 123 State legislation regarding............................................................................. 102-103 State legislation regarding bank supervision and bank operations..............102-106 States, banking data classified by: Deposits, December 30, 1944: Commercial banks, insured and noninsured..........................................120-121 Mutual savings banks, insured and noninsured................................... 120, 121 Number of operating banks or offices, December 31, 1944: All banking offices, by class of bank and type of office....................... 112-119 All banks....................................................................................................120-121 Commercial banks, insured and noninsured..........................................120-121 Mutual savings banks, insured and noninsured....................................120-121 Suspensions, receiverships, and mergers........................................................ 149 Stockholders of banks: Losses of. See Banks closed because of financial difficulties. Net profits of insured commercial banks, available for. See Earnings, expenses, and dividends of insured banks. Substandard assets. See Assets and liabilities of insured commercial banks, examiners’ analysis. Supervision. See Bank supervision. Suspensions. See Banks closed because of financial difficulties; Receivership, insured banks placed in. Taxes paid by insured banks. See Earnings, expenses, and dividends of in sured banks. 168 FEDERAL DEPOSIT INSURANCE CORPORATION Page Terminations of insurance: For unsafe and unsound banking practices and violations of law or regulations............................................................................................. 23 Number, 1944........................................................................................... 23, 110-111 Voluntary termination of insured status, regulation of the Corporation. .98-102 Time and savings deposits. See Deposits, classified by type of deposit. Total money supply. See Money supply, 1939-1944. Trust companies: Classification o f............................................................................................... 108-109 Number not engaged in deposit banking.................................... 120-121, 124, 125 Unit banks. See Number of operating banks and branches. United States Government obligations (see also Assets and liabilities of insured commercial banks, examiners’ analysis; Assets and lia bilities of operating banks): Acquired by commercial and mutual savings banks, 1939-1944................ Held by Federal Deposit Insurance Corporation.................................... 28, Held by the banking system, 1941 and 1944................................................ Types held by insured commercial banks, 1939-1944.................................. Unsafe and unsound banking practices: Actions of the Corporation.............................................................................. Number of banks cited..................................................................................... Types of, for which banks were cited............................................................ 54-56 29, 30 38-39 39-41 23 23 §2-23 Unsecured deposits. See Receivership, insured banks placed in. Violations of law or regulations............................................................................ 22-23 War: Bank supervision and the war........................................................................ 22 Effects of wartime changes on the banks...................................................... 53-68 Growth in bank assets and deposits, 1940-1944........................................... 55