The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
SECOND ANNUAL REPORT OF THE FEDERAL RESERVE BANK 'OF CLEVELAND FOR THE YEAR ENDED DECEMBER 31, 1916 WASHINGTON GOVERNMENT PRINTING OFFICE 1917 TABLE OF CONTENTS. Dividend declared Daily average invested funds Balance sheet Profit and loss account . Growth of resources of member banks Discount operations Discount rates Acceptances United States bond operations Municipal warrants purchased Reserve position of bank Member banks in district Capital stock , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . Election of directors Internal organization of bank , . Government deposits Federal Reserve note issues Deposits and overdrafts Clearings and collections Gold settlement fund 'Borrowings of member banks , Fiduciary powers granted : : Page. . . . . . . . . . . . . . . . . '" 7 8 9 \ . . . . . 3 5 5 6 9 10 11 12 12 13 13 15 15 16 17 19, 20 21 • 21 21 SECOND ANN VAL REPORT OF THE FEDERAL RESERVE BANK OF CLEVELAND. D. C. WILLS, Chairman and Federal Reserve Agent. It was to be expected that the Federal Reserve Bank of Cleveland from an earning .standpoint would make a much improved showing in its operations for 1916 over 1915. The increase in revenue, however, did not come through rediscounting for member banks, but- from thy reserve banl~'s open market transactions and from pur- , chases, conversions, and sales of United States notes and bonds.· The net earnings for 1916 were sufficient to permit the charging off of the entire item of organization expense which appeared in the statement of December 31, 1915, and of all furniture and other fixtures except vault equipment and mechanical equipment which are being amortized. On December 2 there was declared an initial dividend of 6 per cent per annum for the period to June 30, 1915. This dividend, amounting to $143,236.51, was credited to the accounts of member banks December 30, 1916, with previous advice, in order to give them the opportunity of entering the dividend in their own earnings for the current year. On December 31, 1915, the bank had 110 per cent of its capital in revenue-producing assets. At the close of 1916 this percentage had risen to 363 per cent, the daily average in 1916 being 246 per cent. The following table shows the daily average of iuvested Tnnds, earnings from investments, and rates of earnings for each month during the year: Daily average invested funds. ; . Bills discounted, members. Bi!ls bought In 0Ean mar et. 5414,537.89 5981, 173. 58 $2,816,477. 61 $2,501,300.00 $6,713,489.08 976,360.05 2,954,676.86 3,389,862.07 7,592,971. 68 1,121,930.04 3,852,506.19 3,993,613.00 9,221,692.48 1,688,989.00 4,869,198.00 4,180,767.00 11,175,356.00 2,613,246.00 5,486,443.00. 6,166,642.00 14,550,828.00 4,400,822.83 4,509,667.00 6,614,333.00 15,802,266.38 6,595,523.00 4,781,391. 00 6,653,358.00 18,449,856.00 7,051,901. 80 4,597, 141. 96 6,375,258.06118,306,385.52 7,284,566.60 2, 780, 179.64 6,798,550.00 17,461,209.31 6,695,266.52 4,218,861. 06 6,878,430.96 18,163,244.64 6,884,224.51 3,680,377.16 6,739,200.00 17,575,574.54 9,589,687.29 2,712,953.35 7,959,820.84 21,468,216.82 1 Municipal warrants. United States bonds. Total invested funds. 1916 January ......................... ~1~~~~::::::::::::::::::253,643.25 :::::::: 272,072.70 436,402.00 ~~~:::::::::::::::::::::::::::: 284,497.00 June ............................. July ............................. August .......................... ~~~~r~~r:::::::::::::::::::::: November ....................... December ....................... 277,443.55 419,584.00 282,083.70 597,913.07 : 370,686.10 271,772.87 1,205,755.34 5 6 ANNUAL REPORT OF FEDERAL RESERVE BANK OF CLEVELAND. Daily average invested funds-Continued. Earnings. January February March ...............•.... April. . $15,721. 61 . 16,869.29 20,413.73 . 23,300.29 29,821. 61 31,959.46 . 39,826.01 40,260.69 37,634.77 Average rate on invested funds. Per cent. 2.76 2.71 2.62 2.53 2.44 2.48 2.55 2.60 2.63 ¥d'le:::::::,:::::::::::::: : July August ...........•....... September ........•....... Average rate on invested funds. Earnings. October. . . . . . . . . . . . . . . . .. November................ December. Profits realized on United States notes and bonds. Tota\............... Per cent. 2.74 $44,904.20 40,091. 23 51,124.91 2.7Z 2.75 391,927.80 37,228.53 429,156.33 RECAPITULATION. Dail~if~e,r~~~~~~~~~,;;~J~~:.~ .~~~~. :~~~~...........•.................................. Bills discounted-bought '.......•.................•..... Municipal warrants ...................................................•........•....... United States notes and bonds : . TotaL ...........................••.......••......................................... Volume of business handled: Bills discounted-members. 14,733,834.37 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • . . . . . . . ~~~f~~Y~~:;~;t~~~~~.t:::::::::::::::: United States notes and bonds $425,175.75 4,672,647. 68 3,943,462.52 5,692,548.42 . ::::::::::::::::::::::::::::::::::::::::::::::: , ....•..•.....••................•.•............ TotaL 6,792,429.30 fb:~:gg~: ~ 11,721,160.00 ~ 56,711),828.99 Ave~ilrs rJi;~~t~~~~er:~~:.~:. Per c:'~5 . . . . . . .. . . . . . . . .. .. .. . . . •• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ~~i~f~~Y~:;~t~~~~~.t:::::::::::::::::::::::::::::::::::: ::::::::::: United States notes and bonds......................................................... Total funds employed , ~:~ 2.54 , •........•........•...... Ear~nf; J~~~!t;g~:e:ge~.~~~~~~~~~: Bills discounted-bought ...................•••• Municipal warrants United States notes and bonds Total. :::::::::::::::: ====2.=63= : ~......•................................ ~..................•.............. . . . : 518,064.41 106,993.11 116,925.13 144,843.65 386,826.30 Other earnings: .. Sundry profits......................................................................... Penalties.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Profits realized on United States bonds __ Total................................................................................. Average capital , Rate of gross earnings on capltal., •........... ,.................. 5, -......... 1,779.47 3,322. 03 3_7:..., 2_2_8._5_3 9~c~9c~~? 429,156.33 7.17 The following is a comparative balance sheet as at the close of business December 31 and 30, 1915 and 1916: 1916 1915 RESOURCES. Bills discounted for members.................. Bills discounted, bankers' acceptances... ..... Investments-short-time municipal obligations........................................ United States bonds. .. , Premium and accrued interest on United States bonds. Cost of unissued Federal Reserve notes........ Furniture, vault and other equipment..... Expense, organization... Expenses paid in advance..................... 5527,762.01 803,724.54 2,846,067.50 2,357,000.00 1--'--'--- ,55,774.48 6,486.36 $1,006,773.50 10,153,694.75 56,534,554. 05 103,808.13 42,757.61 20,187.08 62,260.84 2,684,589.64 7,979,460.00 1--'--'--- $21,824,517.89 297,660.08 39,544.25 20,163.92 934.76 \ ANNUAL REPORT OF FEDERAL R,ESERVE BANK 7 OF CLEVELAND. \ ]916 1915 RESOURCEs-continued, Due from other Federal Reserve Banks, net... Due from banks and bankers Deferred debits Goldcoin and certificates.... Goldsettlement fund,Washington............ Goldredemption fund......................... $9,593,320.00 11,042,000.00 Legal-tendernotes and silver certificates....... Federal Reserve notes on hand................ Other cash and coin. . . . . . . . . . . . . . . . . . . . . . . . . . . Mutilated currency forwardedforredemption Other resources 1----- , . . S3,657,895.98 129,610.22 10,4]7,595.49 . . $2,10],321. 01 32,756,632.50 484,417.00 588,935.00 91,.816.77 140,000.00 28,554.65 $]5,761,382.50 16,953,000.00 42,250.00 20,635,320.00 I--~-],206,352.00 271,405.00 110,082. 85 70,478,278.51 31,088,048.57 LIABILITIES. Capital paid in................................ Profit and lossaccount........................ Un~arnedinterest and discount. United States Government deposlts........... Due to memher banks (reserve account)....... Deferredcredits :......................... Other liabilities............................... 5,941, ]50. 00 25,121,175.38 4,385.85 I---------~---I·----------~--31,088,048.57 70,478,278.51 Federal Reserve notes outstanding . Golddeposited with or to the credit ofthe Federal Reserve Agent . Reserverequired . Reserve carried . Excess reserve. __ _ _ _ _. _ 6,021,800.00 94,797.44 37,978.59 974,809.73 54,586,226.61 8,759,174.62 3,491. 52 21,337.34 . 10,832,305.00 11,000,000..00 11,000,000.00 35 %~ 8,056,961.16 9~8%~ 21, 845,777.65 59. 8%~ 13,788,816.49 10,832,305.00 35 %~ 17,482, 104.85 66. 6%~ 33,282, 180.80 31. 6%~ 15,800,075. 95 The following is a detailed comparative statement of profit and loss account for the years 1915 and 1916: Profit and 1088 account. 1915 Ear~~f; Jj~~\;ted, members.................................................. Bills discounted, bankers' acceptances :............................. Investments-short time municipal warrants _.................... ¥~~r~ ~t;'\ri;.~c.,:,i:ie~:: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : Balance to organizationexpense.................................... Profits realized on United States securities.................................. S31,632.35 1~,281.48 50,971. 66 ~M: ~ 15, 55,774.48 1916 118,064.41 106,993.11 116,925.13 ~U:~ 14~; . 37,228.53 1------1----.:...--170,999. 71 _........... 429, 156.33 123,197.63 9,014.25 185,251. 94 5,870.44 170,999. 71 Expenses: Current expense : Costof issued Federal Reserve notes. 429, 156.33 ~fifa~!~;~al~r;;:~~L~~~~~~~..~::?~~~:: ~! ~~:~ ~~ ~~ ~~~ ~ ~~:~~: : ~:~~~~:~~ ~ ~ ~~ ::~~i i Percentage ofnet earnings to average capital 3.98 per cent. The record of business and banking in district No. 4 for the year again proves the self-contained character of the district. The industries of the district not only were large beneficiaries of foreign orders, but shared in an enormous amount the domestic prosperity in such industries as steel, glass, rubber, petroleum, coal, electrical goods, automobiles, etc. Its rail, river, and lake transportation was taxed beyond capacity. Its agricultural products of corn, wheat, 8 ANNUAL REPORT OF FEDERAL R,ESERVE BANK OF CLEVELAND. . ( oats, tobacco, sugar beets, hemp, etc., brought funds into the country banks in unprecedented amounts. Labor has been attracted to the district by the continuous advance of wages already high. In the steel and coal industries the available supply of labor has been insufficient and men by the thousands havebeen brought from other parts of the country, principally from the South, This remarkable situation has reflected itself in a number of directions. Trade of all kinds reports record figures, Statistics of traction travel, amusements and hotels furnish an added evidence of purchasing power of the people and their willingness to use it. Naturally the banks of the district have participated in this increase of the district's wealth and in its wide distribution: Savings banks and banks conducting savings departments' report record totals of deposits, and record figures in the number of new accounts opened. The nation-wide thrift campaign has also stimulated savings in this period of increased earning power. The following tables show the growth of resources during the year of the member banks, also comparative figures of deposits in State .institutions as well as member banks in our three large centers. In the four reserve cities of this district clearings show an increase for the year of 36,5 per cent, I Memberbanks, total resources............................................ Deposits: Nov. 17,1916. Nov. 10,1915. ~1, 498, 514, 751 $1,216,387,374 ~g;i~~;m iM;m;~~: ~r::~~·.:::::::::::::::::~::::::::::::::::::::::::::::::::::::::::::: Comparison of deposits of the national banks in the three largest cities in district No.4. Nov. 17, 1916. Nov. 10, 1915, Cincinnati, Ohio. Cleveland, Ohio........................................................... Pittsb;:~::.~~::::: ::':::::::::: $97,410,620 146, 4OS,910 :1__ :::::::::::::::::::::::::::::::::::::::::: 581,512,677. 102,884,342 :~_5_: ~_5_~--::-8:-::-:-:~-1: :-:~-: 1 Comparison of deposits of the State banks and trust companies in the three largest cities in . district No.4. State banks. Trust companies.' City. Date. Cincinnati, Ohio. Cleveland, Ohio Pittsburgh, Pa TotaL ..........•..................................... Amount. Sept. 30,1916 do....... Nov. 17,1916 574,296,267 322,120,966 277,588,040 674,005,273 Investment houses found a ready market within the district. , Date. Sept. 25,1915 do . Nov. 11,1915 Amopnt. $66,439,542 258,190,273 234, lOS,945 558,738,760 for their securities .' ANNUAL REPORT OF FEDERAL RESERVE BANK 9 OF CLEVELAND. Generally the banks, member and nonmember, of this district have had on hand funds available for loaning in excess of the demands. upon them, and there has been but slight demand for rediscounts, during the year. Partial failure of crops in some counties, a shifting of public deposits in some communities, or other causes have led to. sporadic demand for more funds than could be supplied locally". but in nearly every instance this demand has been short lived. The following table shows the operations of the bank in rediscounts for member banks during the year, classifying the loans made as to kinds and maturities: Operations in discounts and invest,,!,-ants department, year 1916. Bills discoun.ted-members: Commercial and agricultural paper Trade acceptances Member bank collateral notes . $4,232,244.04 . 175,185.26 . 2, 385, 000. '00 Total.... . . . . . .. .. . . . . .. . . . . . . .. . . . .. .. . . . .. . . . . 6, 792, 429. 30 Average rate per cent .. \ 4.25 Classification by maturities: Within 10 days : . $2,288,100.00 11 to 30 days , . 3,203,600.00 31 to 60 days . 778,100.00 61 to 90 days . 376,000.00 Beyond 90 days . 146,600.00 TotaL.... ...................................... 6, 792,400. 00 The demand for money and rates of interest on loans throughout .the district has changed very slightly during the year and there has been no cause for serious modification of the rates of rediscount in force at the Federal Reserve Bank of Cleveland. The following table gives the rates at the beginning of the year, and the changes made from time to time: . Maturities. 10 days _____________ In force: Jan. Mar. Aug. Sept. Jan. I 1, 1916............................ 10, 1916.......................... 1, 1916........................... 15, 1916 1, 1917 3~ 3t 31 857]8-17-2 Over 15 to 4 4 Over 30 to Over 60 to . . . . •.•.•.••.• •.•.••..•. 4 •.•.•..•.. . . 4 4 Agrlcul- 1, 1916 10, 1916 1, 1916................••.......... 15, 1916 1, 1917 15 days y -r-a_nd_Ies_s_''.!_a_n_d_Ies_S. _30_d_a_yS_' d_a_ys_,_60_d_a_ s_,inclusive. YS_, inclusive. _30_. inclusive. . inclusive. _90_d_B_ 1 fi~r:~to~~ aper ove p 90 days. r In force: Jan. Mar. Aug. Sept. Jan. Over 10 to 5 5 5 5 T_rad-;-e_a_cc_e_pt_a...,nc,..e_s· Not over 30 <lays. 3! 3 3 3 3 Over 30 to 60 days. 1 n?!r~~t Over 60 to 90 days. purchases of bankers' acceptances. 4 2 to 2 to 2 to 2 to 2 to 3! 4 4 4 4 4 4 4 4 10 ANNUAL REPORT OF FEDERAL RESERVE BANK OF CLEVELAND. Bankers' acceptances form a considerable portion of the earning assets of this bank. There is a comparatively small amount of such business originating in this district, and practically all of these acceptances purchased by the bank have been secured .through the Federal Reserve Banks of Boston and New York.' At various times acceptances of three member banks of this district were held. The bank's officershave been constantly watchful of proper diversification of the acceptance lines purchased, both as to character of business and acceptors. The following table succinctly shows the volume of business, classification by maturities, and character of acceptances dealt in during the year: Bills bought in open market (acceptances). Export and import Domestic '.................. Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Average rate.' per cent.. Classification by maturities: Within 10 days ! . 11 to 30 days ',' . 31 to 60 days '.......................•.. 61 days to 3 months . Total. .•....................................... $27,237,096.49 304,905',75 27, 542, 002. 24 2.29 o $1,542,425.48 5,788,427.94 20,211,148.82 27,542,002.24 This bank has been especially active in seeking to introduce in industrial and commercial pursuits the use of trade acceptances in place of open book accounts. What is known as the Trade Accept-' ance Primer, called" Why accept," was compiled in this bank, and through our agency over 120,000 of these pamphlets were distributed in 40 cities located in 19.5tates. A great deal of progress has been made and inquiries are received daily, not only from this district but from all over the United States, concerning the methods and manner of introducing this desirable change in relations between seller and, buyer. Statistics are not available at present covering the volume of trade acceptances now existing in the district. While this bank has not been an active competitor in the general market for Government bonds the volume of dealings by the bank in these issues has been considerable throughout the year with substantial gain to the bank. The prices paid for bonds purchased have been maintained at a low average, and the cost of securities owned is less by a good margin than the present market price. The following table shows the bonds purchased during the year and held at the close of the year. ANNUAL REPORT OF FEDERAL RESER.VE RANK 11 OF CLEVELAND. United States note and bond operations. , I Purchased. 2 per cent consols purchased in open market. . . . . 2 per cent Panamas purchased in open market ,............... 3 per cent war Joan 1918purchased in open market :.................... 3 per cent conversion bonds................ ..............•........... ..•........ 4 per cent of 1925purchased in open market. r-year Treasury notes............................................. Total. . Held Dec. 31. 1916. S3, 196,900 2,125,000 1,401,060 1,000 '1,629,200 50,000 1----1---8,403,160 5903,900 1,500,000 2,586,560 1,800 2,369,200 618,000 7,979,460 Average rate of earnings on United States notes and bonds, 2.54 per cent. During the year the bank, in accordance with section 24 of the Federal Reserve Act, has converted United States 2 per cent bonds into 3 per cent l-year Treasury notes and 3 per cent 30:-year conversion bonds, as follows: Conversion. l-year 3 per cent Treasury notes received for 2 per cent bonds. . . . 3D-year 3 per cent conversion bonds received for 2 per cent bonds. On hand Dec. 31. 3618,000 1,800 3,318,000 Total. . . . $1,658,000 1,660,000 619,800 All of the conversion bonds have been disposed of except $1,800 par value, and several round blocks of the one-year Treasury notes have been sold. Some sales of other Government bonds have been made. The prices realized on all these transactions have resulted in a substantial profit to the bank. The following table shows bond sales during the year: Sales: 3 3 3 4 per per per per cent cent cent cent Spanish war loan 1918 1·year Treasury notes 30·year conversion bonds of 1925 1,500 . ,. 1,090,000 . 1,659,200 30,000 . Total. ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2, 780, 700. 00 Proper steps are being taken looking to the conversion of an additional amount of 2 per cent bonds during next year under the authorization of the Treasury Department and in accordance with the act. From the foregoing table it will be seen that the bank owns $2,586,560 par value of the 3 per cent Spanish war loan bonds of 1918 and $2,369,200 of the 4 per cent bonds of 1925, the aggregate of which is available as security for Federal Reserve bank notes. If an emergency should arise in which the Federal Reserve notes of the bank would not suffice, this additional amount of currency would be promptly issued. The Comptroller of the Currency has printed and holds available for immediate issue $5,000,000 of bank notes of this Federal Reserve Bank, which can be drawn upon when required. 12 ANNUAL REPORT OF FEDERAL RESERVE BANK OF CLEVELAND. In its operations in relation to the short-term borrowings of municipalities, as authorized under section 14 of the Federal Reserve Act, this bank has been specially helpful to member banks and to the municipalities served. There has been a constant effort on the part of the bank to standardize loans of this nature and to make them properly liquid investments, and this has been accomplished in practically every instance. The following table shows the volume of business of this nature handled, the time for which the borrowings were effected, and the average rate, as well as distribution and character of borrowings, whether State, county, city, town, or other political subdivision. Municipal warrants purchased. City. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $10, 051, 988. 72 State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260,028. 02 County. . . 172,845.36 Other... .. . .. . .. .. . .. .. . .. .. .. . .. . ... . .. . .. .. . .. . 175, 375. 35 Total.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Average rate of earnings per cent. . Classification by maturities: Within 10 days . 11 to 30 days . 31 to 60 days . 61 to 90 days . Beyond 90 days to 6 months . . Total.......................................... 10, 660, 237. 45 2. 97 o 381,633.20 2,221,525.66 497,590.02 7,559,488.57 ------ 10,660,237.45 The reserve position of the bank has been maintained throughout the year at a percentage without material variation. It has been the general policy of the bank, under existing conditions to maintain a reserve of 65 per cent to 70 per cent, so that the bank may be in position in case of unusual demand or stress to meet calls upon it without difficulty. The following table indicates the reserve position of the bank at the close of each month throughout the year: Changes in the reserve position of the bank during the year. Required (35 per cent). Carried. Per cent. ---1---January........................... February.......................... March............................. ~~~:::::::::::::::::::::::::::::: Juue.......... July :.............. August..... ........•......... September.......... October .... ""................ November......................... December Dollars. 8,820,538.05 9,339,164.20 9,124,846.70 Dollars. 22,944,786.20 23,545,004.55 22,516,944.20 13,784,843.45 13,953,265.97 14,178,013. 7i 14,343,683.51 17,489,737.78 17,482,104.85 26,252,246.05 26,678,284.70 28,917,345.75 28,762,925.75 37,826,869.30 33,282,180.80 1~; m;~~:~~ ~7;l~~; ~ ~~: 12,960,406.41 25,220,721.80 I I 91 88.2 86 75.7 69.6 68.1 66.6 66.9 71.3 70.1 75.7 66.6 'I Excess. Dollars. ' 14, 124,248.15 14,205,840.35 13,392,097.50 11,029,429.44 12,007,663.24 12,260,315.39 12,467,402.60 12,725,018.73 14,739,331.98 14,419,242.24 20,337,131.52 15, sao, 075.95 Per cent. 56.0 53.2 51.0 40.7 34.6 33.1 31.6 31. 9 36.3 35.1 40.7 31. 6 ANNUAL REPORT. OF FEDER,AL RESERVE BANK 13 OF CLEVELAND. Below are shown the number of member banks which have liquidated during the year, as well as the number of new national banks formed, showing the total of member banks in this district to be 753 at the close of business for 1916. There is also indicated the distribution of member banks according to gross assets. Member banks, district No.4. Number of member banks Dec. 31, 1915 New banks organized . . . _. Closed by Comptroller of the Currency Liquidated : . _.. .. _. . _._ __.. _ . _______ : __. __. _ -. . Number of member banks January 1, 1917 _. __. _. __. _.. Distribution: In reserve cities . . . In other than reserve cities.. . . __. _. 762 1 2 763 8 10 . _ 753 . 45 . __. __ 708 -753 Distribution according to assets. Kentucky. Under 8100,000 assets .......... 8100,000 to $200,000 ............ $200,000 to $300,000 .. _......... $300,000 to $500,000 ............ $500,000 to $2,500,000 ........... $2,500,000 to $20,000,000 ........ Over 320,000,000_ .............. TotaL .. __.............. Pennsylvarua. Ohio. 1 10 12 16 24 5 0 68 West Virginia. Total Nov. 17, 1916. Total Nov. 10, 1915. 1 31 41 52 197 46 5 , 0 13 28 71 146 35 6 0 0 0 2 9 2 0 2 54 81 141 376 88 11 3 69 101 147 357 75 10 373 299 13 753 762 1 It has been reported to the Federal Reserve Bank that the reason for the liquidation of the eight national banks above reported which have converted into State banks was to enable them to make real estate loans to a greater extent than permitted under the nationalbank act as amended, all of the banks being located in rural communities. There 'have been adjustments of the capital stock of this bank owned by member banks by increases and reductions as shown by the following statement, leaving a net capital stock of the bank at the close of business December 31, 1916, of 120,436 shares, 50 per cent of which is fully paid. Total capital stock Dec. 31, 1915 . __. Stock allotted member banks for quarter ending: Mar. 31, 1916 . .. .. . .. _. _.. _. .. June 30,1916 . __. _. ._ Sept. 30, 1916 . __. ______ Dec. 31, 1916 . _. . . . _.. . ____ TotaL .. __ $11,876,300 $48,800 47,700 90,700 68, 900 256,100 . ____ 12, 132, 400 14 ANNUAL REPORT OF FEDERAL Stock surrendered, quarter ending: Mar. 31, 1916 June 30,1916 : Sept. 30, 1916 Dec. 31, 1916 RESERVE BANK OF CLEVELAND. . $31,200 . 9,700 . 34,900 . 13,000 ~ Total capital stock Dec. 31, 1916................................ $88,800 ·12,043,600 Total paid-up capital stock Dec. 31, 1915............................. Subscriptions paid in quarter ending: Mar. 31, 1916 $24,,350 June 30, 1916.......... 23,900 Sept. 30, 19i6........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,350 Dec. 31, 1916.......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,450 5,938,150 Total. Cash subscriptions refunded ending: Mar. 31, 1916 June 30, 1916 Sept. 30, 1916 Dec. 31, 1916 6, 066,200 '.' . . . . . . . . . . for surrender of stock, quarter . $14,400 . 6,050 . 13,850 ~ . 10,100 Total paid-up capital stock Dec. 31, 1916....................... 128,050 44,400 6,021,800 In its dealings with the trust companies and State banks of the district this bank has maintained an attitude of willingness to give all information requested concerning any of the features of the Federal Reserve Act, and it has constantly evidenced a cordial spirit toward all such institutions which have indicated or might show an inclination to join the Federal Reserve System. One large State institution in one of the important cities of the district is a member bank, and it is understood that several large trust companies and State banks are considering membership. There can be no question that the year 1916 has witnessed further progress in the development of cordial relations between the Federal Reserve Bank and its member banks. There are quite a few of the member banks which continue more or less evidence of disaffection, but in the main all of these instances can be traced to an unwillingness to become informed concerning the facilities the system affords, or more often to the lack of occasion for using the Federal Reserve Bank or meeting its officers. , A table is appended giving the number of member banks for which rediscounts have been made during the year, the number of separate pieces handled, and the range of amounts of such rediscounts. r ANNUAL REPORT OF FEDERAL RESERVE BANK 15 OF CLEVELAND. Accommodation of member banks through discount and purchase of acceptances.. Banks accommodated. Kentucky Ohio..•............................................................. . ~~s~I;~'i.1~·:: :::::::::::::::::::::::::::::::::: :::::::::::::::::: Total. : . 8 32 9 1 50 Applica- tions handled. I Number 01pieces. 60 152 26 2 231 1,.060 240 1,401 lO!> 4 Amount 01smallest note or bill rediscounted, ~31. Amount oflargest note or bill rediscounted, $100,000. Thirteen meetings of the board of directors have been held during 1916, with an average attendance of seven. Twenty-five meetings of the executive committee were held. The executive committee always includes a quorum of members located in Cleveland, in order to facilitate prompt action on rediscounts. The other members of the committee alternate every 60 days. Mr. John Stambaugh, treasurer of the Brier Hill Steel Co., Youngstown, Ohio, succeeded Mr. A. B. Patrick, of Salyersville, Ky., as a class B director on January 1, 1916. Otherwise the personnel of the board has remained the same as in 1915. Mr. W. S. Rowe, president of the First National Bank of Cincinnati and class A director of this bank, was reelected for 1916 a member of the Federal Advisory Council, and serves on the executive committee of the council. At the beginning of the year no marked changes were made in the internal organization of the bank, although owing to the resignation of the then acting assistant cashier, the auditor, Mr. M. J. Fleming, was made assistant cashier, the assistant auditor; Mr. W. F. Taylor, was made auditor; and Mr. L. W. Manning, who had been a member of the staff since the organization of the bank, was appointed assistant secretary. During the first half of the year only minor adjustments of duties were made. Since the inauguration of the collection system, it has been necessary to double the force of employees, and a number of changes in organization in the accounting and transit departments have been made, as a result of experiments with the aim ·of producing the best possible results. On July 1, the chief teller" who had served since the organization of the bank, resigned, to accept the position of secretary and cashier of .a newly organized State bank in Akron, Ohio, and his place was filled by the appointment of the assistant teller, Mr. C. L. Bickford. In all, 7 employees who were on the roll January 1, 1916, have since left, and there are 42 emlpoyees on the roll who were not in the employ of the bank on that date. The total roll of officers and employees is 65, including the department of the Federal Reserve Agent. 16 ANNUAL R.EPOR.T OF FEDERAL R.ESER.VE BANK OF CLEVELAND. Conforming to the procedure suggested by the' Federal Reserve Board to be adopted by banks where the Deputy Federal Reserve Agent is not active, the secretary of the Federal Reserve Agent, Mr. Horace G. -Davis, was appointed assistant to the Federal Reserve Agent, The executive and accounting offices of the bank have been located on the second floor of the Williamson Building, on one of the principal corners of Cleveland. The tellers' department surrounds the large armor-plate vault in the basement of the same building, and the transit department occupies a room which adjoins the fourth floor. This arrangement has proved satisfactory in respect to the transit department, but has been more or less unsatisfactory otherwise. The directors have therefore leased the corner room on the street floor of the same building; which has been used until recently as temporary quarters of the Union National Bank. This location is being prepared for our occupancy about the middle of January. These new offices, while not elaborate, are a more dignified and appropriate housing of the institution, and will permit of greater efficiency in conducting the bank's business, beside being more convenient for the member banks. , Two examinations of the bank were made during the year by the Federal Reserve Board examiner and his staff. Complete copies of the reports of both examinations were filed with the bank, and examined and initialed by each member of the board of directors. These examinations included an audit of the funds and accounts of the Federal Reserve Agent. The Federal Reserve Agent's funds are also audited periodically by a special examiner of the Federal Reserve Board. On January 1, 1916, the Federal Reserve Bank of Cleveland became a Government depository, having been authorized by the Secretary of the Treasury to receive funds for the customs office and the collector of internal revenue. The balances at the close of each month in this account of the Government are shown in the following table: Government deposits. January 3 January 31. .....•........ February March April. May June . . . . . . $258,851. 37 I July $1,948,247.84 435,178.31 August................... 2,356,055.27 726,226.28 September... . . . . . . . . . . . 2,241,487.51 891, 449. 89 October.. .... .• . . . . . . . . . . 1, 481, 872. 76 745,676.82 November............... 1,543,696.24 908,899.28 December. . . . . . . . . . . . . . . 974,809. 73 3,244;249.30 By the opening of this account, and also by our dealings in Government bonds through purchases, sales and conversions (April, July, and October) active relations with the United States Treasury have been established. ANNUAL REPORT OF FEDERAL RESERVE BANK OF CLEVELAND. 17 The cordial spirit of cooperation between the officers of this bank and the chief national bank- examiner of the district continues.' By direction of the Comptroller of the Currency, the chief examiner held two conferences of his examiners in Cleveland during the year. The governor and chairman of the bank were present during part of the deliberations on each occasion, by invitation of the chief examiner. At the close of 1915 there were outstanding approximately $11,000,000 of Federal Reserve notes of this bank. The policy during 1916 has been to maintain this amount, except during a period when there appeared to be no pressing demand, and notes were being redeemed rather freely through the Treasury Department. We were able during December to accommodate member banks requesting new currency, by issuing in that month $2,700,000 of Federal Reserve notes. The deposit in the Federal Reserve Bank of gold certificates of the $10 and $20 denominations, the retirement of emergency and national bank currency of these denominations, and the increased demand for such notes for pay-roll necessities have all tended to a shortage of currency, and it has been the policy of the bank, where practicable, to issue its Federal Reserve notes to meet the needs of the district in this respect. The following table shows the present status of the Federal Reserve Agent's account for notes issued: . Cover of notes issued. Gold certificates....... . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . United States Treasury gold order certificates.............. $1,870,000.00 8,350.000.00 Gold redemption fund with United States Treasurer 10.220,000.00 612, 305.00 Total.... :.. . . . . . . • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ·10, 832. 305.00 Below are given the denominations of all Federal Reserve notes issued and destroyed up to the close of 1916, and outstanding on that date: Denominations of Federal Reserve notes issued, destroyed, and outstanding. Denominations. Fives Tens................................................................ Twenties........................................................... Fifties..... Hundreds Total. Issued. :........... Destroyed. Outstanding. $3,600,000' $1,226,960 3,840,000 1,280,965 5,440,000 1,108,620 950,000 66,750 730,000 44,400 $2,373,040 2,559,035 4,331,380 883,250 685,600 14,560,000 10,832,305 1 Returned for destruction by Federal Reserve Agent.... .. . .. . .. .. .. .. .. ... .. Returned for destruction by Federal Reserve Banle.... .. .. .. .. .. .. .. . .. .. . .. Returned for destruction by Treasurer of United States...................................... 13,727,695 .. . .... . .. . .. . .. .. .. . .. .. $120,000 1,380,000 2,227,695 3,727,695 18 ANNUAL REPORT OF FEDERAL R,ESERVE BANK OF CLEVELAND. The following statement shows the inter-district Federal Reserve notes during the year. FEDERAL RESERVE NOTES RECEIVED movements of AND RETURNED. Amounts of Federal Reserve notes of the several denominations received from other Federal Reserve Banks for redemption or credit and returned to other Federal Reserve Banks for redemption or credit by the Federal Reserve Bank of Cleveland for the period Jan. 1, to Dec. 31,1916. Fives. Exchanged with Federal Reserve Bank 0(- Received from. Tens. Returned to. Received from. Returned to. Received (rom. Returned to. 2,130 S3,750 109,250 12,480 10,250 6,705 8,720 7,205 14,170 11,680 5,100 3,090 S51,22O 256,830 64,120 10,260 9,930 204,500 19,710 11,540 2,770 3,220 5,240 S5,760 116,0i0 21,440 15,970 9,150 1,270 4,600 11,910 9,610 8,620 2,230 $49,040 350,880 88,260 18,080 22,680 192,000 26,300 12,540 4,640 5 400 8;080 $560 56,14Q 10,500 19,420 8,140 4,800 2,980 6,500 4280 8;660 2,280 401,705 Boston ....................... NewYork .................... Philadelphia .................. Richmond .................... Atlanta ....................... Chicago ....................... St. Louis ..................... 192,400 639,340 206,630 777,900 124,260 834,590 157,000 34,050 5,830 4,345 142,000 12,125 7,~gg ~:;::~W~::::: :::::::::::: 1,240 : Dallas ........................ San Francisco ................ Total. .................. Fifties. Exchanged with Federal Reserve Bank 0(- Twenties. Returned to. Received from. Received from. $950 6,200 ............ 9,100 1,000 1,700 450 150 1 250' 800 1,350 1;400 3,700 800 Total. .................. Received from. Returned to. 500 3,200 $150,000 912,860 221,280 38,620 48,805 572,000 75,935 33,935 9,000 11,710 23,150 $13,820 299,760 44,420 57,340 26,895 17,190 15,235 33,130 26,820 24,280 11,600 24,200 2,097,295 570,490 $2,800 12,100 ............ 2,600 1,900 700 . ........... 400 500 4,000 23,000 159,150 Returned to. $6,200 65,600 14,100 2,600 5,400 13,600 5,900 1,~ $8,950 82,550 20,750 1,850 6,450 19,900 11,~ Boston ....................... New York .................... Philadelphia .................. Richmond ... " ............... Atlanta ....................... Chicago ....................... St. Louis ..................... Minneapolis .................. Kansas City .................. Dallas ........................ San Francisco ................. Total. One hundreds. ., .......... 119,200 The following statistics concerning the cost of Federal Reserve notes are given: Cost of Federal Reserve notes. _______________ I January February................................. March.................... Fives. ~ Twenties. $120,000 $40,000 40,000 140,000.......... Hun· dreds. Fifties. $SO,OOO.................... 80,000 80,000.......... ~ 8324.88 123.63 316.56 ~~~::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: : June ......................•................................................... \. July August........................... September October November ...............•................. December TotaL.............................. .. 40,000 __ 1,140,000 SO,ooo . _. 440,000 . . . 208.29 . . SO,OOO.......... ._. _0 720,000 • _. _ •• $200,000 •• ••••••••••••••• 8200,000 2,676.58 3,649.94 ANNU,AL 0; REPORT OF FEDERAL RESERV.E BANK 19 OF CLEVELAND. The banks in the cities of Cincinnati and Pittsburgh have maintained substantial excess deposits in the Federal Reserve Bank since the inauguration of the collection system, by reason of their agreement that all checks upon them should be charged immediately to their accounts. Since the amendment of September 7 permitting a portion of vault reserve of member banks to be carried in the Federal Reserve Bank, an additional amount of excess deposits has been transferred to the Federal Reserve Bank. The following table shows the monthly averages of member bank deposits and overdrafts. Deposits. January ................ February ............... March .................. April.. ................. May .................... June ................... July ...........•........ 825, 895, 145.21 26,774,042.88 25,830,421. 38 27, 520, on 65 34,598,527.42 36, 552, 713.60 38,504,879.57 Overdrafts. '$5;443."52 27,415.10 . ':i; 282:87 Deposits. August ................. September ............. October ................ November .............. December .............. A verage for year .. Overdrafts. S39, 381, 867. 74 41,198,406.77 42,534, 853. 12 53,747,310.14 .54,586,226.61 '4,372.74 51,790.76 828.87 37,260,372.67 7,780.17 228.22 The bank has been almost free of overdrafts, and such as have existed, being due to remittances through the collection system, have been promptly liquidated and the reserve balances restored. Since the organization on July 15 of the collection system, weekly reports of net deposits of member banks have been required and with very few exceptions have been regularly furnished. The copies of called statements of condition of member banks, as requested by the Comptroller of the Currency, have been promptly received, and recently a duplicate copy oLthe reports of examination by the national bank examiner has been supplied by the chief national bank examiner of the district for the confidential use of the Governor and the Federal Reserve Agent. These reports are carefully examined when received, and in this manner the officers of the bank have kept in close touch with the condition of the various member banks. There have been two failures of member banks during the year, and from reports received three State 'banks have been obliged to close their doors. The national banks which have been placed in receivers' hands failed by reason of misma'nagement and bad loans. At the close of business for the year 1916 the Federal Reserve Bank of Cleveland had no past due paper upon its books, and had not suffered any loss whatever by reason of charging oft doubtful or worthless assets, The loans maturing September 28, 1916, and October 1, 1916, to the city of Toledo, Ohio, upon pledge of current revenues were not paid when due. Under a decision of the supreme court of Ohio the city officials of Toledo had felt obliged to make full payment of the city's sinking-fund assessments, and by so doing 20 ANNUAL REPORT OF FEDERAL RESERVE BANK OF CLEVELAND. depleted the funds on hand from current revenues to such extent that payment of the floating indebtedness could not be made. After conference, it was agreed to extend the time of payment of the warrants held by this bank pending sale of deficiency bonds then in process of being issued. This deficiency bond issue ·has since been sold, and- payment of the entire amount due the bank, with interest, is now being arranged. ' Prior to July 15, 1916, when the general plan of clearings went into effect, this bank had in operation a voluntary clearing system in which 116 of our member banks participated. This system was of course discontinued on the above date. Coincident with the inauguration of the present plan of clearing, the Federal Reserve Bank became 'a special member of the Cleveland Clearing House Association, with clearing privileges and responsibilities only. The figures appended show the progress made in collecting checks. The list of State banks agreeing to remit at par is growing. The number of items and volume represented are also increasing. Clearings to July 15, 1916. Daily average. Number of items. January ......................•....................... 52,454 Amount. 44,364 ~~~~~~~~.'.:::::::::::::::::::::::::::::::::::::::::: : 51,916 ~~~..-::::::::::::::::::::::::::::::::::::::::::::::: June July ; . . 45,778 55,549 71,084 26,662 Number of items. 519,926,000 16,554,000 24,803,600 28,887,000 50,416,100 56,306,300 25,911,600 2,017 1,848 1,922 1,831 2,134 2,734 2,051 Amount. $766,361 689,750 918,651 1,155,480 1,939,080 2,165,627 1,916,300 Clearing8 after July 15, 1916. Number of Items. July August., September October November December ., . . . . . . 118,924 286,668 354,174 397,818 392,587 445,951 I Daily average. Amount . 554:310,350 120,685,287 163,662,697 189,574,370 219,220,650 209,933,421 N~t::~~~ of 9,148 10,618 14,167 15,193 15,704 17,838 Amount. $4,177;720 4,469,825 6,546,508 7,582,975 8,768,826 8,397,337 NOTE.-Number of State banks in collection system December 30, 496. Through the gold settlement fund at Washington we have been able to accept from our member banks, for credit, exchange on any of the Federal Reserve cities. Our member banks are able to replenish their reserves with us through deposits by their correspondents for our credit in the other Federal Reserve Banks, while we agree to furnish exchange for excess balances. The demand from our member banks for this service has been only nominal. ANNUAL REPORT OF FEDERAL RESER,VE BANK 21 OF CLEVELAND. The establishment of the gold settlement fund has without doubt contributed to equalizing exchange conditions, and a constant scarcity of eastern exchange which existed in several centers of this district before the fund was available has now disappeared altogether. The following table shows the monthly aggregates of operations of this bank through the gold settlement fund for the year: ~ . Monthly totals of debits and credits to the Federal Reserve Bank of Cleveland in the gold settlement fund. Debits. January ............... February ............. March ................. April.. ................ May .................. June .................. July .................. Credits. $4,868,000 4,163,000 8,290,000 6,440,000 8.418,000 11,904,000 12,714,000 $5,356,000 4,346,000 6,366,000 4,367,000 11,919,000 12,030,000 13,822,000 Debits. ~:l:~: ~~: g:~:::~:~ mt:::::::::::::::::::::::: August.. ............. September ........... October .............. November ........... December ............ Credits. sao, 773,000 $32,241,000 41,021,000 50,245,000 57,217,000 70,908,000 Total ..•....... 43,219,000 49,017,000 65,162,000 67,963,000 308,429,000 314,340,000 .:'::; ::::::::::::::::::::::::::::::::::: sU:~;:: The following is a comparative schedule of the borrowings of member banks in this district, at the dates of reports: Bills payable. With banks outside of district.......................... With other banks in district............................ With Federal Reserve Bank $752,000 1,203,927 . $251,472 443,879 274,853 Total Nov. '17,1916. SI, 003, 472 1,647,806 274,853 Total Nov. 10,1915. $1,347,520 2,824,540 ,540,161 ~-----~--~-I--~--I·-~~ 970,204 2,926,131 !=1;,'9=55",;,=9=27=1===~=1:~=~=1'=~~= TotaL Per cent Per cent Bank Per cent Bank, Rsdiscounts. with Federal Reserve Bank of rediscounts in district with Federal Reserve of rediscounts 1915 4,712,221 . . 38.2 . ............ . in district with Federal Reserve 28.3 45.6 . ........... ............ 9.3 11.5 ............ Information relative to applications for fiduciary powers granted under the provisions of section ll-k of the act', in accordance with the regulations of the Federal Reserve Board, is shown in .the following exhibit: Powers granted. Pannsylvania. Ohio. ----------'--"--1---- --- Trustee only '," : .. Registrar of stocks and bonds............. Trustee and registrar of stocks and bonds.. . Trustee, executor, administrator, and registrar of stocks and bonds................ West Virginia. Total. 2 1 2 2 3 6 8 21 1 1 3 : 5 2 8 2 5 Applications pending trustee only......... Registrar of stocks and bonds.............. Trustee and registrar of stocks and bonds.. For executor, administrator, and registrar. Total granted since organization. --------1--- 2 1 2 --------------1--- TotaL.............................. Total pending Kentucky. -----4 1 -----1 . . . ==----- ----6-1-.-. -•• -. -•• - •• -.- •• 22 ANNUAL REPORT OF FEDERAL RESERVE BANK OF CLEVELAND. The following is a statement of the number of applications for permission to serve as officers and directors of two or more banks, under the Kern amendment to the Clayton Act, handled by the Federal Reserve Agent in ~onformity with the Board's requirements. Interlocking directorates. Applications approved Applications refused · ·.·· 205 11 . Total. ' '. . . . . . . . . . . . . . . . . . . . . .. 216 Applications pending............................................. 4 Co At the close of the year 1916 the Federal Reserve Bank of Cleveland occupies a position of unquestioned importance in its district. The inauguration of dividend payments has caused member banks to have a feeling of greater security in their investment in the capital stock. The new order of banking, noninterest-bearing reserve deposits, direct routing of checks and no remittance charge, liquidity of assets representing demand deposits, more general use of borrowers' financial statements, and other desirable changes from the old order, all have become better understood by banks and the public, and the new procedure is steadily gaining favor. A great advance has already been made, and the field of usefulness and service of the Federal Reserve Bank for the future appears broad and fertile. There is no question that the best banking opinion of the district tends more and more to recognize the Reserve Bank's ability to care for its members in an emergency and to meet its full responsibilities on any occasion. This bank now has a force of trained officers and employees capable of handling its business satisfactorily and of expanding to meet future progress and growth. The earnings of the bank are now sufficien't to meet its current operating charges and dividend requirements. The amount of the earnings will probably be augmented during the coming year so as to enable the bank to make payment of an additional amount of arrears in the cumulative dividend. o
@FedFRASER