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Z #j A4JL 7 ocjM ju l & Cl'ow u/^JL I9S4 A N N U A L REPORT FEATURING THE EALTIMORE BRANC FORTIETH ANNUAL SEPOGT FEDERAL RESERVE S A N K Of RICHM OND ■ BRANCHES IN BALTIMORE AND C H A R L O T T E 1354 T his Fortieth A n n u a l R e p o rt of the F e d e ra l R e se rve Bank of B ra n ch . R ic h m o n d is d e d ic a te d to our B a ltim o re O n the c o v e r is a n a rtis t's re p re s e n ta tio n of the B ra n c h 's g re a t b ro n z e d o o r, a n d o n p a g e s f o llo w in g a re articles a n d p ic tu re s tha t a tte m p t to tell s o m e th in g o f the w o r k th a t g o e s o n b e h in d this d o o r a n d of the e c o n o m y o f the te rrito ry th a t the B ra n c h se rve s. It is h o p e d that this d e p a r t u r e fr o m the " s t a n d a r d " a n n u a l re p ort w ill p ro v e o f in te re st not o n ly to tho se of y o u w ith in the B a ltim o re B ra n c h te rrito ry but a ls o to y o u in oth e r p a rts o f the Fifth D istrict w h o sh a r e o u r p rid e in o u r a s so c ia tio n w ith th a t a re a . A n o th e r ye a r our A n n u a l R e p o rt w ill fe a tu re o u r C h a rlo tte B ra n c h a n d its te rrito ry. O n oth e r p a g e s o f this re p o rt a re a b rie f re v ie w o f b u sin e s s a n d b a n k in g in the Fifth D istrict in 1 95 4 , so m e notes o n the e x p a n d i n g o p e r a t io n s o f this F e d e ra l R e se rve B a n k , a n d o u r c o m p a r a t iv e sta te m e n ts o f co n d itio n a n d o f e a r n in g s a n d e x p e n s e s . O n c e a g a in , fo r the d ire c to rs, o ffic e rs, a n d sta ff o f this b a n k I e x te n d t h a n k s to y o u , o u r sto ck h o ld e rs, fo r y o u r c o o p e ra tio n d u r in g the p a s t y e a r. I a ssu re y o u th a t w e sh a ll c o n tin u e to s e rv e y o u to th e best o f o u r a b ility . V e r y tru ly y o u r s, P re sid e n t A v ig n e tte o f the a r e a s e rv e d b y the B a ltim o re B ra n c h of the F e d e ra l R e se rv e B a n k o f R ic h m o n d Reaching westward from the Atlantic across the Chesapeake Bay and over the Alleghenies to the broad Ohio and from the Potomac on the south to Mason and Dixon’s line on the north, the territory served by the Baltimore Branch of the Federal Re serve Bank of Richmond is an area rich in its history and rich in its present. The area comprises the entire state of Maryland and 30 of West Virginia’s 55 counties. It covers some 22,600 square miles. Its population is upward of 3,000,000 . Diversity is a marked characteristic of the area, in industry, commerce, agricul ture. and, for that matter and for another illustration, in its institutions of higher edu cation: many excellent privately endowed schools, two great state universities, and the United States Naval Academy at An napolis. Baltimore - City of Industry The largest city of this thriving and en terprising segment of America is the great city of Baltimore, some 300 years old. proud o f its past but prouder of its present; a city of bustling industry, commerce, and finance; a city whose people have always looked toward the future. Even in the old days, Baltimore business men weren’t ones to sit by idly when any thing threatened their livelihood. Back in 1827 a group of business leaders in that city met together one day to consider ‘ ‘the best means o f restoring to the city o f Baltimore that portion o f western trade which has lately been diverted from it by the intro duction o f steam navigation and by other causes.” How well they succeeded a cen tury and a quarter ago is attested by his tory. One o f the immediate results o f that early “ Baltimore Association of Commerce” meeting was the founding of the Baltimore & Ohio Railroad. Operating over thirteen miles of track running west from Baltimore in 1830, the B&O has a substantial claim to being one o f the first, if not the first, railroads in the country. The success that attended subsequent attempts to promote the econom ic progress of the Baltimore area is reflected in a glit tering list o f achievements. Illuminating gas was first used in Baltimore. . . . the first telegraph line was erected and operated between Baltimore and Washington. . . . the great-grandfather o f the Empire State Building and all other skyscrapers was a five-story cast-iron b u i 1 d i n g daringly erected in Baltimore. . . . the first electric streetcars picked up fares on a Baltimore street. . . . and one o f the nation’s most popular industries, the ice cream industry, had its birthplace in this old city. The payrolls o f almost 2,000 manufac turing enterprises are the best proof o f the Sparrows Point plant has an annual capacity of 6,000,000 to n s of steel Q O B a ltim o re b o u n d fre ight c ro ssin g Potom ac from W e st V ir g in ia to M a r y la n d success of more recent meetings and en deavors to promote the business welfare o f the Baltimore Metropolitan Area. There are nearly 200,000 workers on these pay rolls receiving an annual income of $827 million. And they are in some of the bestpaying industries in the country. O f the eight leading industries in the area, ac counting for about 81% of total manufac turing employment, six have national aver age hourly earnings that exceed the nation al average for all manufacturing workers. Another feather in the industrial cap of Baltimore is the diversification o f its manu facturing structure. O f the 280 separate industries listed for Maryland in the Cen sus of Manufactures, 249 are reported to be represented in the Baltimore area. Unlike the heavy concentration o f employment in a single industry that is characteristic of a number o f the nation’s metropolitan cen ters, Baltimore’s m ajor industries range over a wide area o f activity— from pro ducers’ durable equipment to consumers’ nondurable items. No one industry group accounts fo r as much as 20 % o f total manu facturing employment, and the three lead ing industries— primary metals, transpor tation equipment, and food products— pro 4 vide jobs for less than 50% of all manufac turing employees. Making up Baltimore’s manufacturing structure are some o f the largest plants in their industries in the world. Here are located the w orld’s largest manufacturer of portable electric tools. . . . the largest plant in the world devoted entirely to the production o f stainless steel . . . the largest producer o f crown bottle caps and closures in the world. . . .the w orld’s largest plants making spices, Venetian blinds, paint brushes, weather instruments, long distance telephone cable, superphosphates, bichro mate, and porcelain insulators. . . .the larg est meat-packing and steel-making plants on the Eastern Seaboard are in Baltimore . . . the second largest copper refinery in the world. One of the consequences o f the Baltimore area’s industrial diversification is an ap parently narrower range o f fluctuations of economic activity during periods o f general expansion or contraction than is the case in most other metropolitan areas. For ex ample, from 1929 through the depression o f the early Thirties to 1939, value added by manufacturing in Baltimore increased lhree oulomolic coal-loading piers in Port of Baltimo can load ships at o rate of 9,7 0 0 tons on hour. Ecich con handle two ships at the some time. More lhan 1,0 0 0 000 Ions ore exported yearly 4 .6 % , whereas it declined in the great ma jority o f metropolitan areas. From 1939 to the last Census of Manufacturers in 1947, on the other hand, Baltimore’s gain lagged behind those of most of the other large industrial areas. The net result over the entire 18-year period was that Balti more realized greater growth, as measured by value added by manufacturing, than all but a few of the standard metropolitan areas in the nation. The Proof of the Pudding Baltimore does not take its industrial ad vantages and leadership position for granted. It realizes that in this era of competitive industrialization, it must be dynamic. Its industrial structure must always be “ under construction.” It can never be a completed project. It must be forever changing with growth coming from Oro corner discharging of B a lt im o r e pier within and from outside sources. One of the most striking features of the shifts among the components of national income in the quarter-century follow ing 1929 was the large increase in the relative impor tance of manufacturing. O f all the various industry groups— construction, trade, min ing, finance and real estate, etc.— income from manufacturing activities had the larg est percentage increase during the 25-year period. Area participation in this growth required constant investment in new manu facturing plant and equipment— by new companies coming into the area and by ex pansion of existing firms. One o f the many services ably perform ed by the Industrial Bureau o f the Baltimore Association of Commerce is keeping track o f (and securing!) such investment. As shown in the accom panying chart, plotted from data gathered by the Bureau, this in vestment has fluctuated from year to year, plumbing a low in the middle o f the Great Depression and skying to an all-time high in 1952. But it has never let up, and as a consequence the Baltimore area now has almost double the number o f persons on manufacturing payrolls it had in 1929. Down to the Sea in Ships There is a cosmopolitan air about Balti more— and why not? A fter all, it is one of the great ports of the w orld. Its 30 miles o f waterfront, lined with piers, ware houses, and cargo-handling equipment, reach into cities all over the world. And its maritime facilities make it a neighbor of the great agricultural centers and inland industrial cities of the nation that carry on extensive foreign trade. This port has been a vital factor in enabling Maryland to achieve an economic ranking among the states of the Union well beyond that which might be associated with its comparatively small size. Indeed, this magnificant port has long been the principal reason why many firms chose to locate in Baltimore or in other areas of Maryland. It has been estimated that the port adds as much as $200 million to the city’s annual income. All told, there are some 270 piers, wharves, and docks to handle the 20 mil lion tons o f foreign commerce as well as the coastwise domestic traffic that passes through the Port of Baltimore. Included among these facilities are modern, impressive-size coal-loading piers and ore-discharging docks that can handle aggregate loads up to 9,700 tons an hour. Other fa cil ities include three huge exports grain elevators with a total capacity of 12 million bushels, specially-equipped warehouses, o n g e st o v e r-w a te r 7 and modern cold storage facilities. An integral part of the port are 12 ship building and ship repair yards. These yards can perform all types of work rang ing from the construction of super-tankers and high-speed ore carriers to complex engine and hull repairs. Together with its multiple-trunkline rail road facilities and its great Friendship In ternational Airport, the seaport gives the Baltimore area transportation facilities and services that measure up to the most exacting requirements of any business or industry. The Tie That Binds Money, the great facilitator, seeks its level in the ebb and flow o f commerce and industry. Paralleling the growth in manu facturing and in trade, Baltimore’s finan cial institutions have shown the strength and vigor needed to provide the highly sought wherewithal to support the rapid expansion of production equipment, of plant space, o f inventories; as well as the credit needs of individual consumers. The area’s commercial banks, mutual savings banks, savings and loan associations, in surance companies, sales finance com panies, securities dealers, and organized exchanges have not only efficiently gar nered the savings o f local individuals and business firms, but have also channeled into the area from all parts o f the nation the funds needed to meet the ever-developing credit needs o f its individual and busi ness citizens. In the process, Baltimore has become one o f the top-ranking financial communities in the nation. As measured by total assets o f all o f its banks, Baltimore is first in the Fifth Federal Reserve District — its banking assets amount to $1.7 billion. The Richmond Reserve Bank’s Baltimore Branch was established in order to handle more efficiently the vast quantity and variety o f transactions flowing through this center. This branch now has direct deal ings with all member banks in the state of Maryland and about half o f those in West Virginia. Thus, added to the financial transactions indigenous to the trade and in dustry o f the Baltimore area, are literally billions o f dollars o f payments and other transfers o f funds facilitated by the Fed eral Reserve outlet there. Ships and Shoes and S e a lin g W a x Baltimore is the biggest city of the ter- M o r e th a n 8 ,0 0 0 to n s o f co a l a re o n w a y d o w n M o n o n g a h e la R iv e r S e a m of b it u m in o u s coal in m in e n e a r M o r g a n t o w n , W e st V ir g in ia is o v e r e ig h t feet in d epth 8 Aircraft plant n e a r Baltim ore H u ge c a rg o a n d transport planes are m a d e in plant at H agersto w n, M a r y la n d 9 Just above this rural region, at the door step of the nation’s capital, is one o f Mary land’s most heavily populated regions. In the 330 square miles which the State As sembly has designated as the MarylandWashington Regional District dwell more people than in any other area o f the state except Baltimore. Unincorporated Silver Spring alone had a population o f 117,000 at the beginning of 1954. ritory served by the Baltimore “ F ed," to be sure, but it has no monopoly as a center of economic importance. There are other cities whose industry, commerce, and sur rounding agricultural production make significant contributions to the American scene. For instance: On M aryland’s Eastern Shore, reached from Baltimore via the new (1952) $45,000,000 Chesapeake Bay bridge, longest over-water steel bridge in the world, are a wide variety of enterprises. In and near its two principal cities, Salisbury and Cam bridge, are more than three-score indus tries, some employing 500 to 700 persons. Canning o f food in huge quantity is a m ajor industry, and other principal products in clude men’s clothing, boats, steel and cop per woven wire, building materials, and cans and crates. Particularly important in Eastern Shore economy is the production o f poultry and truck crops. And O n W estw ard Small city industry is scattered through out the state. In Elkton, in the north, are plants manufacturing spark plugs, radios, explosives, hosiery, paper, and, among other things, rubber toys. In Hagerstown, toward the west, is one o f the country’s big aircraft manufacturers, and among the city’s 75 or more industries are plants mak ing shoes, leather, furniture, hosiery, steel castings, and canned goods. Back across the bay, in southern Mary land, farming is a mainstay in the economy. Here is the home of Maryland tobacco, a unique weed that is used in almost every brand of cigarettes, and here too are some o f the state’s many farms where thorough bred horses are raised. Farming is a big business in all of Maryland. Still farther west in Cumberland, Mary land’s second city, are one of the country’s large synthetic fiber plants and a sizable tire manufacturing concern. Cumberland is also an important railway center, with shops employing hundreds o f persons. Between Hagerstown and Cumberland, Maryland narrows to a strip about five Investments in New Plants and Expansions m il l io n s B a l t i m o r e of do llars 1□ □ 7 5 5 □ _ 1934 1936 1938 1940 1942 1944 Source, industrial Bureou, Baltimore Association of Commerce 10 1946 1948 1950 1952 1954 m e t r o p o l i t a n a r e a s Big bu sine ss in M a r y la n d is ca n n in g of hu ge tom ato crops miles wide, with W est Virginia’s eastern panhandle intruding almost to the Penn sylvania line. In this W est Virginia region are Martinsburg and Berkeley Springs, the latter a spa known to George Washington 200 years ago and at present a leading pro ducer o f fine glass-making sand. Glass manufacture is an important busi ness in the Baltimore “ F ed” territory— some o f the finest hand-blown glassware in the country comes from plants at Morgan town and W eston; Clarksburg makes most o f the w orld ’s marbles and its six large glass plants produce important amounts of sheet glass, windows, instruments, table ware, and other items; Fairmont makes glass containers and lamps; and Parkers burg has several glass factories employing from 300 to 600 persons. In M organtown are a chemical plant and a faucet manufacturing concern, each em ploying about 1,000 persons, three textile firms em ploying more than 600, and one o f the w orld ’s largest coal mines. The U. S. Bureau o f Mines has lately com pleted a $3,000,000 experiment station at M organ town, and at the state university, located here, work is progressing on a $30,000,000 medical, dental, and nursing school. Fairmont, at the center o f one o f the na tion’s biggest bituminous coal fields, with estimated reserves o f five and a half billion tons or enough to last 300 years at the pres ent rate o f consumption, is a leading pro ducer of coal, aluminum, mining machin ery, and coal-tar products. Clarksburg produces graphite electrodes fo r the steel industry, zinc products, pot tery, concrete, w om en’s wear, machine tools, cans, and processed wires. Parkersburg has some 125 industrial plants, which em ploy more than 13,000 persons and have an annual payroll o f more than $45,000,000. Am ong its biggest in dustries are synthetic fibers, with one plant employing more than 1,500 and others em ploying from 600 to 1,500. The city is an important producer of dies and tools, elec trical procelain, tile, oil and gas well equipment, structural steel, pigments and dyes, and other chemical products. Binding this whole structure together, providing the capital to keep it going and expanding, is the banking system. Through its member banks, whose total resources are more than $1.7 billion, the Baltimore Branch of the Federal Reserve Bank of Richmond serves the industry, commerce, and agriculture of the area. 11 Baltim ore B ra n c h 's First H o m e % ss » • hH R . B R r R p B B HR (in RR BB Sketch s h o w s h o w B ranch b u ild in g w ill look at com pletion of new e xp a n sio n project that w ill b e g in in 1955 12 RB One P re se nt B ra n c h B u ild in g of th re e p h o t o -m u r a ls lobby, this in shows M a ry la n d 's f a m e d M iddletow n Valley As in most Federal Reserve Banks, there is a deceptively placid appearance about the lobby, or main banking room, of the Baltimore Branch o f the Federal Reserve Bank of Richmond. Ordinarily there is only a moderate flow o f traffic to be seen, B a lt im o r e 's busy w a te rfro n t and metropolitan sky line are f e a t u r e d in a n o t h e r mural and often the uniformed guards on duty outnumber the customers. This could be, at first glimpse, the foyer o f a salon, fo r in view are murals of heroic size and much bronze and marble and glass, and the at mosphere is one of appropriate tranquility. At first glimpse, that is. C o a l-m in in g , leadin g gin ia W est industry, p ic tu r e d a V ir is in third Branch a r e a scene Appearances, however, often are deceiv ing, and this is indeed the foyer o f a big and busy institution that helps to make Baltimore one of the financial capitals of the nation. Behind the bronze and marble glass there is the bustle of billions, the bil Like all Federal Reserve Bank branches, lions o f dollars in currency, coin, and credit the Baltimore Branch is a service institu whose flow in and out o f this building is the tion, serving directly the Federal Reserve lifestream o f the economy o f the rich and System member banks o f Maryland and enterprising area served by the Baltimore thirty counties of West Virginia and indi “ F ed.” rectly the area’s entire financial structure, in its commerce, its industry, its agriculture, and its millions of people. In broad terms, the Branch performs for the Federal Reserve System member banks In the realm of over-all policy the basic of its territory many o f the same services concern o f the Federal Reserve System is that those banks perform fo r their own to make possible a flow of money and credit customers. that will foster orderly economic growth posit accounts, called “ reserve” accounts It holds member banks’ de This is a prime con because the funds that the law requires cern o f the Baltimore Branch, too, but as them to hold as a reserve against their de what bankers call an “ operating” office its posits are held in this form ; it provides the work mainly is carried on not at “ policy level” but directly with the banking system. to meet the requirements o f their custo What, then, is the work o f the Branch? mers ; it handles their checks in its role as and a stable dollar. banks with the currency and coin they need a part of the Reserve System’s nationwide “ clearinghouse” ; it makes loans to the banks when they need funds; it provides them with a swift means o f transferring funds about the country through the Re serve System’s nationwide wire transfer network; it holds their securities in safe keeping; and countless other things. In addition, as agent and banker for the Government, it does several important Oeportm ent things for Uncle Sam. A Record of Growth Some idea o f the size of these operations, and o f their growth since 1919, the first full year o f business at the Branch, may be seen in some random figures: In 1919 the Branch handled 7,569,161 checks amount ing to $3,531,340,500; in 1954 the figures were 59,642,000 checks and $16,084,050,000. In 1919 it received and paid out $325,419,730 in currency and coin; last year it handled $1,458,152,670. Member bank reserves on deposit at the end of 1919 R sco' Age„cy totaled $18,000,000; at the end of 1954 they were $185,994,895. -"-"IP. ~W S- The Baltimore Branch was established on March 1, 1918, less than four years after the opening o f the Federal Reserve Bank of Richmond on November 16, 1914. Balti more had w aged a strong fight to be desig nated as the seat o f the Reserve Bank, but the Reserve Bank Organization Committee — the Secretary o f the Treasury, Secretary T ransit D ep artm ent o f Agriculture, and Com ptroller o f the Cur rency— selected Richmond. The city’s im portance as a financial center was so great, however, that it soon becam e apparent that a Reserve Bank branch was needed there. Of the twelve Federal Reserve Banks’ present tw enty-four branches, the Balti more Branch o f the Richmond “ F ed” was the ninth to be established. In size now, measured in terms o f member banks’ re A rm ore d Truck in Security Court serve accounts on deposit, it ranks twelfth among the branches. New Expansion N e a r When the Branch first opened its doors fo r business it had a staff o f twenty-nine persons. At the end o f 1954 it had 299. Its first quarters were second-hand— it had purchased the building at the corner o f South and Redw ood Streets form erly occu pied by the old M echanics National Bank. But these shortly proved to be too small to house the people and machines necessary to handle the grow ing volume o f work. So, in the words o f a report in the archives, “ Soon outgrow ing these quarters and, in anticipation o f further expanding opera tions, a new $1,500,000 building was fo r mally opened on D ecem ber 28, 1927.” This is the present six-story building at the corner o f Calvert and Lexington Streets, of square feet of space to the present build facing Battle Monument Square. And now, ing. at the end o f 1954, its sides are again bulg ing. But they w on’t be for long. As the economy of the territory it serves expands, so too does the work of the Balti Starting in more Branch. Its officers, directors, and 1955 w ork will begin on a $2,000,000 p roj staff members take pride in the area and in ect that will add four stories and thousands the bank that helps to shape its destiny. B u ii n B a m n a k n in g d in /954 There were three “ economic seasons” in 1954. The first one was a period of de others were well along the path to recov ery. Then too, there were some fields of cline in business activity that extended over activity, construction fo r about the first three months. never gave continuation of the This was a recession that had started the previous summer. notice. the recession example, that even passing They just boom ed all year long. Then there was a change in the economic climate and a season o f stability when a number of Tug of W a r The “ year o f three seasons” was unique m ajor economic indicators flattened out. in other respects. A long about September there were the changes were in sharp contrast with the faint stirrings, becoming definitely stronger strength and extent o f individual adjust as the year closed, of the third season— ments in specific sectors of the econom y. recovery. None o f the three seasons was During a good part o f the year there was so clearly demarcated that specific dates can be assigned to them. Some lines of business activity were still declining while a sharp tug o f war between deflationary 18 The temperate overall pressures and expansionary forces. The uninterrupted reduction in spending by the Manufacturing Employment f i f t h d i s t r i c t SM B m B H N M h h I 6<X) 9CX) Construction Contracts Awarded I2C o 3C >0 1500 FIFTH D I S T R I C T 1'.) Federal Government, for example, was a spending by personal consumers for serv potent deflationary force in the 1954 econ ices contributed also to curbing the reces omy. Although the rate of decline lessened sion and setting the stage for recovery. during the year, the curtailment of such outlays tugged On the basis o f past experience, it might harder than any other have been expected that the recession in single force on the downward side in 1954. the early part o f 1954 would have resulted Another strong deflationary pressure in declines in the money supply and the was exerted by liquidation of business in volume of credit outstanding and in per ventories. sonal income. In the Spring of 1953, manu facturers and tradesmen were building up Thanks in large part to in come tax reductions and larger social se their stocks at an annual rate of over $5 curity benefit payments, disposable per billion. sonal income rose during the year. In the third quarter of 1954 busi This ness was reducing inventories at an annual also was a unique economic developm ent rate of almost $5 billion. in 1954. The net result was a drag on general business activity of over $10 billion. Significantly, however, Banks Fared W ell in 1954 inventory liquidation did not accelerate The District’s member banks weathered during the year and thus did not exert an the changing tides o f econom ic activity increasingly stronger downward pull. with little strain in 1954. deflationary forces Throughout the year banks were able to were reinforced by a reduction in business obtain without great difficulty the funds spending for producers’ durable equipment. needed to meet the loan demands o f their Although personal consumption expendi customers. tures for durable goods increased during ing with the policy set by the Federal Open the year, the average was below that for Market Committee at its meeting on De cember 15, 1953, continued the general policy of maintaining member bank re serves adequate to promote growth and stability in the economy with emphasis in implementing this policy on “ actively main taining a condition o f ease in the money market.” To this end the discount rate of the Reserve banks was reduced from 2% to 1 % % in January and then from 1 % % to 11/2% in April-M ay. During the sum mer the Board o f Governors o f the Federal Reserve System reduced the reserve re quirements of the member banks, releasing approximately $1.5 billion o f reserve funds. This action was taken in anticipation of seasonally rising credit demands on the banks and the Treasury’s financing needs. A portion o f these released funds was taken up by open-market operations at the time and then fed back into the banking These two strong 1953. The reason that these strong deflationary forces did not produce a severe and snow balling downturn in business activity was that there were substantial sustaining and expansive forces operating at the same time. The big tug on the upward side was given by construction. Private outlays for new construction, seasonally adjusted, rose in each quarter of 1954 and helped offset the reduction in spending for capital and defense goods. New residential building, favored by more liberal loan provisions and a plentiful supply of mortgage money, up set earlier forecasts and increased sharply after the first quarter. A steady rise in outlays by state and local governments as well as increased 20 The Federal Reserve, in keep Electric Power Production billions of k i lo wa tt hours U N IT E D S T A T E S F I F T H D IS T R IC T 10 0 1948 1946 1950 1954 1952 Nov«tnb«r and Dec«mt>«r 1954 Estim ated Although general business activity w a s low er last year than in record 1953, electric pow er production reached new peaks. Continuation of the extraordinary p o stw a r grow th in the use of electricity in the home w a s a feature o f the 1954 electric power story. Deposits and Major Earning Assets fifth district m ber banks em 1953 1954 B ILLIO N S OF D O LLA R S Fifth District b an kin g in 1954 w a s at the h ig h est level yet achieved. Total loans of member banks at year's end were more than 9 % ab o ve those at the close o f 1953, w hile total deposits and holdings of G overnm ent securities showed increases of 6 °/o an d 4 % respectively. l l l l l l l l ° I The continued rise in business failures in 1954 w as attributable large ly to the intensification of competition and the rise in new business incor porations. Due to heavy mortality a m o n g infant enterprises, an increase in new starts is often follow ed by a rising number of failures. lo an s AND DISCOUNTS 5 3 Dec*m ber New Business Incorporations and Failures f if t h < r t o GOVERNMENT SE CU R ITIES ° • TOTAL DEPO SITS 1954 Estimated d is t r ic t NEW B U S IN E S S IN C O R P O R A TIO N S B U S IN ES S FA ILU R E S 8000 -----------------------8 0 0 6000 4000- -4 0 0 200 0 - -200 1946 Source 1948 Dun and Bradstr**! Incorporated 1950 1952 1954 Nov«mb«r and D»c»mb«r 1954 Estimated 21 system through purchases in the market as the banks’ credit needs materialized. Within the general policy of the Commit tee, open-market operations continued flex ible throughout the year, being constantly adapted to the needs of a growing economy but being cautiously administered with a watchful eye toward stability in the pur chasing power of the dollar. The demands for bank loans in the Fifth District remained at record levels during 1954. In the first half of the year, total loans outstanding advanced only slightly but by early August the fairly strong rise, which continued to the end of the year, was under way. This was almost the reverse of the trend in 1953 when loan demands were unseasonably strong in the first part of the year and equally unseasonably weak in the last half, reflecting the moderate slidingoff of economic activity after late-summer. The lending activities of the District’s member banks in 1954 had several distin guishing features. First, loans secured by real estate provided a much stronger out let for funds than in any year since the rec ord homebuilding year 1950. Demands for mortgage loans against residential proper ties, stimulated by the unusually easy terms permitted by Government m ortgage insur ing or guaranteeing agencies as well as by the persisting high level o f personal in comes, gave lending agencies an attractive employment fo r long-term funds. Funds were readily made available to meet this demand, by the banks as well as other mortgage lenders, and the result was the second highest year o f housing starts in the history o f the nation. A second distinguishing feature o f Dis trict bank lending activities in 1954 is found in the field o f consumer credit. Over the first six months o f the year, new loans to consumers were hardly more than enough to offset repayments on previously made loans. It was not until the fall of the year that the demands on the banks for loans to purchase automobiles, home ap pliances, and the like broke the status quo which had persisted since the fall o f the preceding year, and caused a significant increase in the amount o f such loans out standing. Agricultural lending o f the District’s member banks follow ed a m arkedly differ ent pattern in 1954 than in 1953. Starting Sources of District Farm Income 31% CROPS 64% TOTAL 12% 9% 3% FRUITS ond VEGETABLES PEANUTS OTHER CROPS L IV E S T O C K * 14% 36% 10% 6% ♦ Includes livestock p rod ucts 22 COTTON 9% 100% S o u rc e : U. S T08ACC0 D e pa rtm en t of A g ricu ltu re 5% '% POULTRY ond EGGS DAIRY PRODUCTS CATTLE and CALVES HOGS OTHER LIVESTO CK* the year with a considerably larger amount outstanding, the banks over the first six months o f 1954 expanded their loans to farmers by half again as much as in the same period the year before. Then, in the ensuing three months in 1954, farm bor rowers cut their bank indebtedness almost in half whereas in the third quarter o f 1953 they had added to their bank loans out standing. Further, loans to farmers failed to advance by as much in the last quarter o f 1954 as in that portion o f the preceding year. Total deposits at the member banks, largely in response to the high level of lend ing activity over the year, established a new record at the end o f the year. A fter a no-more-than seasonally expected decline over the first half of 1954, total deposits expanded by over 8% to reach $7.1 billion. The growth came primarily in demand de posits although time deposits increased at two and a half times the 1953 rate. The substantially larger volume of earn ing assets held by District member banks during 1954 more than offset the easing in interest rates and produced a gross income topping 1953’s record perform ance. As in immediate past years, loans and discounts continued to provide the backbone o f the member banks’ total earnings. The aver age annual return on loans outstanding was very little changed from the preceding year— just under 5 % — and the amount of loans held continued to account for about one-third of the total assets of the banks. Earnings on loans provided almost twothirds of gross earnings. The Federal income tax bill met by Dis trict member banks in 1954 was the largest on record in dollar amount. Uncle Sam’s share, however, was slightly less per dollar of net profits before taxes than in the pre ceding year. Operating costs, on the other hand, were not only larger in dollar amount than in any year on record ; they also took a larger share of each dollar of total income than in any year since 1949. A portion of the increase in operating costs was due to increasing salary and wage pay ments, but a predominant share came from interest payments to savings depositors. In spite of higher operating costs and the heavy tax bill, the member banks were able to realize a net profit on the year’s opera tions equal to just over 9% of their owners’ equity, slightly above 1953’s net return. Farm Income Declined The year just closed was the third in succession in which Fifth District farmers sustained a loss in farm income. The drop in 1954 was the combined result of a slight ly lower general level o f farm product prices, lower acreage allotments of some crops, and drought. Am ong the District states, the income drop was less in Mary land and West Virginia and greatest in the Carolinas— particularly South Carolina. Farm production expenses have failed to adjust downward as rapidly as the drop in gross incom e; thus net farm income has shrunk even more than gross. While smaller farm incomes were felt first, and to the greatest extent, by the farmers who experienced the drop, the adverse effects have, in fact, been felt throughout the busi ness community. fm November 16, 1954 marked the fortieth anniversary of the establishment of the Federal Reserve Bank of Richmond. The date was observed without ceremony and with only a few backward glances (one of which revealed that this was the first Fed eral Reserve Bank to notify the Secretary of the Treasury that it was open for busi ness) for forty years is only a short while in the annals of the area that this bank serves— historic Virginia, Maryland, North Carolina, South Carolina, West Virginia, and the District of Columbia. And, al though much has been accomplished in these two-score years, much is yet to be accomplished in the next forty years and beyond. There's work to be done; let’s get on with it, was the anniversary thought. Volume of Operations A lot of work was done at this bank and its Baltimore and Charlotte Branches in 1954. In banking operations, for instance: We handled 223,784,000 checks amounting to $73,752,728,000 (Richmond 116,777,000 and $39,583,403,000; Baltimore 59,642,000 and $16,084,050,000; Charlotte 47,365,000 and $18,085,275,000) and 746,962 noncash collection items amounting to $219,807,314 (Richmond 181,244 and $72,439,038; Bal timore 532,961 and $110,051,716; Char lotte 32,757 and $37,316,560). We made 116,403 transfers o f funds for member banks adding up to $47,002,428,590 (Richmond 58,355 and $20,554,892,539; Baltimore 23,591 and $8,586,681,045; Charlotte 34,457 and §17,860,855,186). We received and paid out a total of 832,690,137 pieces of currency amounting to $5,111,552,726 ( R i c h m o n d 425,115,390 and $2,680,696,968; Baltimore 223,791,872 and $1,406,827,842; Charlotte 183,782,875 and $1,024,027,916). 24 r 'A C M I m O u W e received and paid out 1,217,781,918 coins totaling $98,336,231 (Richm ond 379,097,995 and $31,422,133; Baltimore 665,826,298 and $51,324,828; Charlotte 172,857,625 and $15,589,270). Government securities (exclusive o f Sav ings Bonds) issued, exchanged, and re deemed during 1954 amounted to 155,535 pieces and $4,900,377,196 in value (Rich mond 77,074 and $1,906,007,316; Balti more 53,161 and $1,978,312,627 ; Charlotte 25,300 and $1,016,057,253). Savings Bonds issued and redeemed through the bank to taled 13,396,721 pieces valued at $804,414,092. The comparative statements of condition and of earnings and operations on the pages follow ing are standard and, to bankers, self-explanatory. O f these fig ures, this might be sa id : The most significant thing about this balance sheet is that it shows no really significant changes from the balance sheet at the end o f 1953. This is significant be cause changes in the balance sheet o f a Federal Reserve bank are brought about as a result of Federal Reserve action to in fluence the financial climate o f the nation — not to provide the Reserve banks with greater earning resources. True, the Decem ber to Decem ber figures do not reveal what transpired during the intervening months. The year 1954, how ever, was characterized by relatively mild and orderly fluctuations in the financial markets and the com parison o f year-end Federal Reserve figures is not misleading. They indicate that the record high level of economic activity remained, on balance over the year, about in equilibrium — that declines in some areas o f activity and dur ing some months o f the year were about offset in other areas or in other months. The Reserve Accounts o f member banks, for example, experienced a barely percepti ble net increase over the year, indicating the Federal Reserve did not find it neces sary to greatly alter reserve funds available to the banks as a means o f combatting either excessive deflationary or inflationary tendencies. The moderate increase in Fed eral Reserve notes outstanding is a good indication that the normal seasonal changes in needs fo r currency were met as they ap peared, but that no important growth or decline in the use o f this form of money ap peared, on balance, over the year. The moderate increase in Discounts and A d vances to member banks reflects only the normal tightness which develops from time to time at individual banks, not any general credit tightness causing member banks in large numbers to borrow. C h an ges in Boards of Directors The year brought changes in our Board of Directors. On Decem ber 31, Deputy Chairman W . G. W ysor, Management Counsel o f Southern States Cooperative, Inc., Richmond, ended eighteen years of service as a Class C director. Dean W . Colvard, Dean o f Agriculture at North Carolina State College, was appointed by the Board o f Governors o f the Federal Re serve System to succeed him. James D. Harrison, President o f the First National Bank, Baltimore, ended nine years o f serv ice as a Class A director, and Edwin Hyde, President o f Miller and Rhoads, Inc., Rich mond, left the Board after serving four years as a Class B director. Member banks elected Daniel W . Bell, President and Chairman o f the American Security and Trust Company, W ashington, to succeed Mr. Harrison and Robert O. Huffman, Pres ident o f Drexel Furniture Company, Drexel, North Carolina, to succeed Mr. Hyde. John B. W oodw ard, Jr., Chairman o f the Board o f Newport News Shipbuilding and Dry Dock Company, was re-appointed as our Chairman and Federal Reserve Agent. Alonzo G. Decker, Jr., Vice President of Black and Decker Manufacturing Com pany, Towson, Maryland, was appointed Deputy Chairman. At Baltimore, Charles A. Piper, Presi dent of the Liberty Trust Company of Cum berland, Maryland, and Clarence R. Zarfoss, Vice President of the Western Maryland Railway Company, Baltimore, were re-appointed to the Branch Board. At Charlotte, Thomas J. Robertson, Pres ident o f the First National Bank of South Carolina, Columbia, retired from the Branch Board on December 31 after six years o f service. Appointed to succeed him was Ernest Patton, Chairman of the Board of the Peoples National Bank, Greenville, South Carolina. Paul T. Tay lor, President o f the Taylor Warehouse Company, Winston-Salem, North Carolina, was re-appointed to the Board. N ew Mem ber Banks Five Fifth District banks became mem bers of the Federal Reserve System in 1954. In January, the University National Bank, Chapel Hill, North Carolina began opera tions, and in the same month the form er Myrtle Beach Bank and Trust Company, Myrtle Beach, South Carolina converted to the First National Bank of Myrtle Beach. In April, the Bank o f Clarke County, Berryville, Virginia became a state mem ber bank. In June, the Guaranty Bank and Trust Company of Huntington, West Virginia converted to a national bank un der the name of the Guaranty National Bank and simultaneously entered the Sys tem. In September, the Bank o f Virginia, with offices in Richmond, Roanoke, Nor folk, Portsmouth, Newport News, and Petersburg, became a state member. 25 C O M P A R A T I V E S T A T E M E N T OF C O N D I T I O N D ASSETS: ecem ber 31,1954 D ecem ber 31,1953 $1,156,033,013.39 $1,064,891,949.85 74,913,000.78 76,974,050.78 1,230,946,014.17 1,141,866,000.63 22,851,810.00 24,156,354.76 7,550,000.00 30,147,320.00 22,579,777.93 1,950,000.00 60,000.00 127,632,000.00 817,643,000.00 355,583,000.00 165,017,000.00 153,962,000.00 344,921,000.00 786,536,000.00 215,919,000.00 1,465,875,000.00 1,501,338,000.00 1,473,425,000.00 1,503,348,000.00 1,140.09 333,589,980.75 4,495,308.58 7,853,762.64 1,134.38 335,529,332.99 4,719,402.56 8,852,436.09 $3,097,319,370.99 $3,047,043,404.58 $1,864,244,945.00 $1,849,093,270.00 829,940,097.83 44,619,021.03 24,582,000.00 5,626,323.09 827,255,389.37 11,126,571.48 20,460,000.00 6,762,414.24 T otal D e p o s its _________________________________________ 904,767,441.95 865,604,375.09 Deferred availability cash item s_________________________________ 270,806,430.95 555,780.20 277,384,537.57 762,447.99 3,040,374,598.10 2,992,844,630.65 12,618,200.00 33,480,005.72 3,349,144.81 7,497,422.36 11,655,200.00 31,749,515.58 3,349,144.81 7,444,913.54 $3,097,319,370.99 $3,047,043,404.58 Gold certificates---- -------- ------------------------------------Redemption Fund for Federal Reserve notes T o t a l G o ld C e r t if ic a t e R e s e r v e s Federal Reserve notes o f other banks------------Other cash—.----- ---------------------------------------------------Discounts and advances..-------- -------------------------Industrial loans__________________________________ -------- U . S. G O V E R N M E N T S E C U R I T I E S : B i l l s ___________________ __________________ Certificates N otes ......... Bonds _____ T o t a l U . S. G o v e r n m e n t T otal s e c u r it ie s l o a n s a n d s e c u r it ie s ____________ Due from foreign banks Uncollected cash item s.... Bank prem ises___________ Other assets______ _____ TOTAL ASSETS LIABILITIES: Federal Reserve notes___ ___ ______________________________________ D E P O S IT S : Member bank— reserve accounts____________________ U . S. Treasurer— general ac co u n t.............................................. __ Foreign _______________ ___ _____________________ _________________ Other ............................. ............................. ..................... .......................... Other lia b ilitie s ____________ ___ ____________ ____________ ___ ______ T O T A L L IA B IL IT IE S ____ ______________ CAPITAL ACCOUNTS: Capital paid in ____ _________ _________________ _____ ______________ Surplus (Section 7) ____________________________ _______ Surplus (Section 13b) __________________ _____ _____ ________________ Other capital accounts ___________ T O T A L L IA B IL IT IE S A N D C A P IT A L A C C O U N T S Contingent liability on Acceptances Purchased for Foreign Correspondents Commitm ents to make industrial loans 26 979,200.00 39,000.00 $ 1,196,605.24 51,190.55 C O M P A R A T I V E S T A T E M E N T OF E A R N I N G S AND E X P E N S E S E a r n in g s : 1954 Discounts and advances_________________________________ Interest earned on industrial loans under Section 13b___ Fees received on commitments to make industrial loans Interest on U. S. Governm ent securities________________ Other earnings___________________________________________ Total Current Earnings. $ 220,539.06 304.52 447.76 25,627,427.68 6,532.64 1953 $ 710,297.11 2,274.20 560.38 33,343,105.55 11,127.96 25,855,251.66 34,067,365.20 Operating expenses (including depreciation on bank premises) after deducting reimbursements received fo r certain Fiscal A gency and other expenses___________ Assessments fo r expenses o f Board o f G overn ors__________________ •- ___________ Cost o f Federal Reserve curren cy___________________________________________________ 6,945,073.95 212,900.00 649,696.81 6,932,124.38 206,400.00 1,134,695.74 N et Expenses________________ _______________________________ ________________ 7,807,670.76 8,273,220.12 18,047,580.90 25,794,145.08 31,734.87 9,213.26 129,574.04 33.02 40,948.13 129,607.06 52,508.82 637.20 167,576.43 64,578.80 2,124.18 53,146.02 234,279.41 -12,197.89 -104,672.35 $18,035,383.01 $25,689,472.73 $15,573,732.87 731,160.00 1,730,490.14 $22,511,392.27 676,502.00 2,501,578.46 $18,035,383.01 $25,689,472.73 $31,749,515.58 1,730,490.14 $29,247,937.12 2,501,578.46 $33,480,005.72 $31,749,515.58 E xpenses : Current Net E a rn in gs_______________________________________________ ____________ __ A d d it io n s t o C u r r e n t N e t E a r n i n g s : Profit on sales o f U. S. Governm ent securities ( n e t )________________________________ A ll other_________ ___ _________________________________________ __ ________ Total A dditions D e d u c t io n s f r o m C u r r e n t N e t E a r n i n g s : Retirement System (adjustm ent fo r revised benefits). Reserves fo r Contingencies___________________________ A ll other________________________________________________ Total D eductions____________________________________ Net Additions (-J-) or D eductions ( — ) _____________________ N e t E a r n i n g s B e f o r e P a y m e n t s to U. S. T r e a s u r y . Paid U. S. Treasu ry (In terest on Federal Reserve notes) Dividends paid_____________________________________________ Tran sferred to surplus (Section 7 ) ________________________ Total ________ _____________________________________________ _________ _ _ SURPLUS ACCOUNT (Section 7) Balance at close o f previous year_______________________________________ « " ■ “-------- ■ Addition a / c profits fo r year_______________________________________________________ B a l a n c e a t C l o s e o f C u r r e n t Y e a r --------------------------- ------------------------------ CAPITAL STOCK ACCOUNT icribed) $11,655,200.00 1,014,600.00 $11,013,750.00 668,450.00 Cancelled during the y ea r_________________________ 12,669,800.00 51,600.00 11,682,200.00 27,000.00 B a l a n c e a t C lose of C u r r e n t Y ear . $12,618,200.00 $11,655,200.00 Balance at close o f previous year Issued during the y e a r___________ 27 D v u u t i t m a n d DI R E CTOR S Jo h n B. W o o d w a r d , Jr. Chairm an of the Board and Federal Reserve A ge n t A lo n z o G. Decker, Jr. Deputy Chairm an of the Board D a n ie l W . Bell President and Ch airm an of the Board, Am erican Security and Trust C o m p an y CLASS W ashington, D. C. W a rre n S. J o h n so n Investment Counselor, Peoples Sa v in g s Bank a n d Trust C o m p a n y W ilm ington, North Carolin a Jo h n A. S y d e n stric k e r Executive Vice President, First N a tio n a l Bank in M arlinton B Marlinton, W est V irgin ia Robert O . H u ffm a n President, Drexel Furniture C o m p an y CLASS Drexel, North Carolin a H. L. Rust, Jr. President, H. L. Rust C o m p an y W ashington, D. C. W m . A. L. S ib le y Vice President and Treasurer, M on arch M ills C Union, South Carolin a D e a n W . C o lv a rd Dean of Agriculture, North C a ro lin a State C o lle ge o f Agriculture a n d Engineering CLASS Raleigh, North Carolina A lo n z o G. Decker, Jr. Vice President, The Black and Decker M a n u fa c tu rin g C o m p a n y Towson, M a ryla n d Jo h n B. W o o d w a r d , Jr. Chairm an of the Board, N e w p ort N e w s Sh ip b u ild in g a n d Dry Dock Co m p an y N ew port New s, V irgin ia R rcOERAL ADVISORY COUNCIL iuiiDtn FFnr t R o be rt V . F le m in g President and Ch airm an of the Board, R iggs N a tio n a l Bank W ashingto n , D. C. FOR 1955 FEDERAL RESERVE B I T Z AS K 1 O IF R IO in n lS H v O rX D OFFICERS H u g h Le ach President E d w ard A. W a y n e First Vice President N . L. A r m is t e a d Vice President J. D e w e y D a a n e Assistant Vice President R o b e rt L. C h e r r y Vice President J a m e s W . D o d d , Jr. Assistant Vice President D o n a ld F. H a g n e r Vice President R obert G . H o w a r d Assistant Vice President A u b r e y N . H e flin Vice President a n d G eneral Counsel J o h n L. N o s k e r A ssistant Vice President U p to n S. M a r t in Vice President T h o m a s I. Sto rrs Assistant Vice President J a m e s M . S la y Vice President G. H a ro ld S n e a d Chief Examiner C. B. S t ra th y Vice President a n d Secretary V icto r E. P re ge a n t, I Assistant General Counsel C h a r le s W . W illia m s Vice President E. B. C o le m a n Assistant Cashier J o s e p h M . N o w la n Cashier H. Ern est Ford Assistant Cashier R. S. B rock, Jr. General A u d itor W y t h e B. W a k e h a m Assistant Cashier E d w a r d W a lle r, Jr. Assistant Cashier INDUSTRIAL ADVISORY COMMITTEE J. G . H o ltz c la w , C h a ir m a n President, V irgin ia Electric and Power C om pan y Richmond, V irgin ia O v e r t o n D. D e n n is Dom inion O il Co m p an y Richmond, V irgin ia R o ss Puette President, C aro lin a Paper Board Corporation Charlotte, North Carolin a W a lk e r D. S tu a rt President, Richmond H ardw are Co m p an y Richmond, V irgin ia J o h n L. W h it e h u rs t President and Treasurer, Burt Machine Com pany, Inc. Baltimore, M a ry la n d 29 D i M d o 1 / 5 a n d FOR 1955 0 BALTIMORE DIRECTORS H o w a rd M . T a ylo r, Jr. Chairm an o f Branch Board President, International Bedding C o m p a n y Baltimore, M a ry la n d T h e o d o re E. Fletcher, Sr. Senior Partner, Albert W. Sisk a n d Son Preston, M a ryla n d C h a rle s W . H o ff President, Union Trust C o m p an y o f M a ry la n d Baltimore, M a ry la n d C h a rle s A . Piper President, Liberty Trust C o m p a n y Cum berland, M a ry la n d Lacy I. Rice President, O ld N a tio n a l Bank M artinsburg, W est V irgin ia S ta n le y B. Trott President, M a ry la n d Trust C o m p a n y Baltimore, M a ry la n d C la re n ce R. Z a rfo ss Vice President, W estern M a ry la n d R a ilw a y C o m p a n y Baltimore, M a ry la n d OFFICERS D o n a ld F. H a g n e r Vice President A. A . Stew art, Jr. Cashier A. C. W ie n e rt A ssistant Cashier B. F. A r m s t r o n g A ssistant Cashier E. R ig g s Jones, Jr. A ssistant Cashier C DIRECTORS H A R L O T T E T. H e n ry W ils o n Chairm an of Branch Board President and Treasurer, Henredon Furniture Industries, Inc. M organ ton , North C aro lin a G e o rg e S. C ro u c h Chairm an o f the Board, Union N a tio n a l Bank Charlotte, North C aro lin a A rc h ie K. D a v is Senior Vice President, W a ch o v ia Bank and Trust C o m p a n y W inston-Salem , North C aro lin a W illia m H. G rie r Executive Vice President, Rock Hill Printing an d Finishing C o m p a n y Rock Hill, South C aro lin a Ernest Patton C hairm an of the Board, Peoples N a tio n a l Bank Greenville, South C a ro lin a P au l T. T a y lo r President, Taylor W arehou se C o m p a n y W inston-Salem , North Carolin a J o n a th a n W o o d y President, First N a tio n a l Bank W aynesville, North C a ro lin a OFFICERS Robert L. C h e r ry Assistant Cashier E. C. M o n d y Cashier R. L. H o n eycu tt 30 Vice President S. A . Ligo n Assistant Cashier Pictures used in this booklet should be credited as follow s: Pages 2 & 3, Bethlehem Steel Com pany; 4, Blakeslee-Lane, Inc., Baltimore; 5 & 6, Baltimore A ssociation o f Comm erce; 8, M organtown, W . V a. Chamber o f Comm erce; 9 (u p p e r) Glenn L . Martin Company, Baltimore, (low er) Fairchild A ircra ft, H agerstow n, Md.; 11, U niversity o f Maryland. Photographs o f Baltim ore Branch are by Blakeslee-Lane, Inc. A p preciation is extended also to the Maryland Departm ent o f Inform ation : Chambers o f Comm erce o f Salisbury, Hagerstown, and Cumberland, Md. and Clarksburg, M organtow n, and Parkersburg, W. V a.; Fairm ont, W . V a . Developm ent A ssociation; and Silver S pring, Md. Board o f Trade. This report was printed by the Federal Reserve Bank o f R ichm ond P rin tin g Departm ent.