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SIXTEENTH ANNUAL REPORT TO THE FEDERAL RESERVE BOARD BY THE FEDERAL RESERVE AGENT FEDERAL RESERVE BANK SAN FRANCISCO FOR THE YEAR ENDED DECEMBER 31, 1930 SIXTEENTH ANNUAL REPORT TO THE FEDERAL RESERVE BOARD BY THE FEDERAL RESERVE AGENT FEDERAL RESERVE BANK SAN FRANCISCO FOR THE YEAR ENDED DECEMBER 31, 1930 DIRECTORS AND OFFICERS OF THE FEDERAL RESERVE BANK OF SAN FRANCISCO January 1, 1931 DIRECTORS p Class Group C. K. MCINTOSH, San Francisco, California A Dec. 31 THOMAS H. RAMSAY, Red Bluff, California 1932 1931 President, Bank of California, N. A., San Francisco, California. President and General Manager, Pacific National Agricultural Credit Corporation, San Francisco, California. A 3 KEITH POWELL, Woodburn, Oregon - - - - - - President, Bank of Woodburn and First National Bank, Woodburn, Oregon. 1932 A. B. C. DOHRMANN, San Francisco, California - Chairman of the Board, Dohrmann Commercial Company and Emporium Capwell Corporation, San Francisco, California. MALCOLM MCNAGHTEN, LOS Angeles, California - 1933 President, Broadway Department Store, Inc., Los Angeles, California. ELMER H. COX, San Francisco and Madera, California - President, Madera Sugar Pine Company, Madera, California. 1931 ISAAC B. NEWTON, LOS Angeles, California 1932 Chairman of the Board. WALTON N . MOORE, San Francisco, California 1933 Deputy Chairman, President, Walton N . Moore Companj T , San Francisco, California. W M . SPROULE, San Francisco, California 1931 President-Retired, Southern Pacific Company; President, Central Pacific Railway Co. a n d Southern Pacific Railroad Co., San Francisco, California. MEMBER FEDERAL ADVISORY COUNCIL HENRY M. ROBINSON, representing District No. 12 Chairman of the Board, Security-First National Bank, Los Angeles, California OFFICERS ISAAC B. NEWTON, Chairman of the Board and Federal Reserve Agent S. G. SARGENT, Assistant Federal Reserve Agent, Chief Examiner, and Secretary OLIVER P. WHEELER, Assistant Federal Reserve Agent F. H. HOLMAN, General Auditor R. T. HARDY, Auditor JNO. U. CALKINS, Governor WM. A. DAY, Deputy Governor IRA CLERK, Deputy Governor W. M. HALE, Cashier CHESTER D. PHILLIPS, Assistant Cashier C. E. EARHART, Assistant Cashier H. N. MANGELS, Assistant Cashier E. C. MAILLIARD, Assistant Cashier FRED C. BOLD, Assistant Cashier J. M. OSMER, Assistant Cashier DIRECTORS AND OFFICERS OF BRANCHES January 1, 1931 SPOKANE BRANCH Term Expires Dec. 31 Directors G. I. TOEVS*, Chairman 1931 PETER MCGREGOR* . D. W. TWOHYJ . R, M. HARDY! . . D. L. DAVIS! . . 1932 1931 1932 1931 Officers D. L. DAVIS, Managing Director J. M. LEISNER, Assistant Manager SEATTLE BRANCH CHAS. H. CLARKE*, . . . . . Chairman . HENRY A. RHODES* . M. A. ARNOLD! . M. F. BACKUS! . C. It. SHAWt . . . . 1931 1932 1931 1932 1931 C. R. SHAW, Managing Director B. A. RUSSELL, Assistant Manager G. W. RELF, Assistant Cashier PORTLAND BRANCH NATHAN STRAUSS*, Chairman . . . . . . EDWARD C. PEASE* . J. C. AlNSWORTHf JOHN F. DALY! R. B. W E S T ! . . . . . 1931 1932 1931 1932 1931 R. B. WEST, Managing Director S. A. MACEACHRON, Assistant Manager J. P. BLANCHARD, Assistant Cashier SALT LAKE CITY BRANCH LAFAYETTE HANCHETT*, Chairman . . . . G. G. WRIGHT* . . H. E. HEMINGWAY! • E. 0. HOWARD! . W. L. PARTNER! • . . . . . . 1931 1932 1931 1932 1931 W. L. PARTNER, Managing Director H. M. CRAFT, Assistant Manager W. M. Smoot, Assistant Cashier LOS AI CHARLES B. VOORHIS*, Chairman . . . . J. B. ALEXANDER* F. J. BELCHER, J R . ! . A. J. CRUICKSHANK! W. N. AMBROSE! . . . . . 1931 1932 1931 1932 1931 W. N. AMBROSE, Managing Director M. MCRITCHIE, Assistant Manager A. J. DUMM, Assistant Cashier L. C. MEYER, Assistant Cashier *Appointed by Federal Reserve Board. !Appointed by Federal Reserve Bank. LETTER OF TRANSMITTAL Federal Reserve Bank, San Francisco, California, March 2, 1931. Sirs: I have the honor to submit the following report concerning conditions in the Twelfth Federal Reserve District and the operations of the Federal Reserve Bank of San Francisco, for the year ended December 31, 1930. Yours respectfully, Chairman of the Board and Federal Reserve Agent, Federal Reserve Board, Washington, D. C. ECONOMIC REVIEW OF THE YEAR 1930 TWELFTH FEDERAL RESERVE DISTRICT The 1930 decline in business in the Twelfth District was one of the most severe thus far experienced in this area. Operations in nearly all industries were greatly reduced as compared with 1929 and total industrial output was the lowest since 1924. Distribution of commodities through both primary and secondary channels was likewise smaller than in any recent year. In conjunction with the decrease in production and distribution of commodities, unusually large numbers of workers were discharged and others were placed on a parttime working basis, resulting in what appears to have been an unprecedented reduction in payrolls. "Wholesale prices for many products which are important in this District declined during 1930 to the lowest levels in several years. In addition to the sharp decreases in prices of nearly all agricultural and livestock products and their manufactures, there were also marked declines in prices of copper, lumber, lead, zinc, paper and pulp, rubber, silk, and silver— the last two reaching the lowest quotations yet recorded. At the close of the year the cost of living in the principal cities of the District was about 6 per cent lower than at the close of 1929, according to data compiled by the United States Bureau of Labor Statistics. Business failures increased in both number and liabilities, the number exceeding all previous years save 1928, and the liabilities being the highest of record. Credit was in abundant supply throughout the year, and interest rates were at unusually low levels. Agriculture The agricultural situation in this District during 1930 was characterized by favorable weather conditions, a record volume of crop production, difficult problems of marketing, an unusually low level of prices for farm produce, and, according to this Bank's estimates, the smallest aggregate returns to growers for any year since 1924. Compared with 1929, the volume of crops produced increased 6 per cent while their value declined 21 per cent. The principal increases in production were among field crops and deciduous fruits, while the only important decline in production was in citrus fruits. INDEXES OF CROP PRODUCTION Twelfth Federal Reserve District (1925-1927 Annual Average = 100) / 1930 , r 1929 N , 1928 , , 1927 , , 1926 > Volume Value Volume Value Volume Value Volume Value Volume Value Grains Field Crops... Fruits Vegetables . . . All Crops 103 118 116 135 115 60 93 97 120 89 99 106 113 133 109 93 124 111 128 113 115 105 112 117 109 96 107 102 117 104 114 105 110 106 109 110 95 106 105 103 93 96 102 105 98 88 92 93 103 92 Available supplies of nearly all crops, of dairy and poultry produce, and of livestock and livestock products were excessive in relation to demand during 1930, and as a result marketing conditions were generally unsatisfactory. In the livestock industry overexpansion of sheep raising during recent years (not only in the Twelfth District but in many other parts of the world) was reflected in a drastic decline in market prices for lambs and wool, following upon b SIXTEENTH ANNUAL REPORT a declining tendency in prices for those products during most of 1929. Cattle raisers experienced a less satisfactory year in 1930 than in 1929 but the unfavorable turn of marketing conditions was not so marked in their case as it was in the case of sheep raisers. Industry and Trade A sharp drop in industrial output at the close of 1929 was followed by a moderate upturn in production during the spring months of 1930. That increase in activity proved to be of short duration, however, and operations in most industries declined steadily during the last seven months of the year. Curtailment was evident in about the same proportions in the extractive, manufacturing, and construction industries. Reduced demand for lumber, copper, and many other products was accompanied by sharp declines in prices of those commodities. Practically the only phase of industry in which output compared at all favorably with that of 1929 was the manufacture of food products, in which industry the canning and preserving of fruits and vegetables was stimulated by record-sized crops. The continued decline in construction, evident since 1925, was particularly marked in residential building, although most types of engineering construction were also sharply reduced. Building of highways and some other projects of a public or semi-public character were relatively well maintained, largely reflecting attempts to alleviate unemployment caused by the general contraction in industry. INDEXES OF INDUSTRIAL PRODUCTION Twelfth Federal Reserve District (1923-1925 Annual Average = 100) Industrial Production Carloadings, Industrial Electric Power Production Manufactures Foods Butter Canned Fruits Canned Vegetables Canned Fish Flour Slaughter of Livestock Wool Consumption Lumber Paper and Pulp Kenned Mineral Oils Cement Metals and Metal Products Minerals Petroleum Copper Lead Silver Building and Construction Building Permits Larger Cities Smaller Cities Engineering Contracts Awarded Excluding Buildings 1930 1929 1928 1927 1926 1925 1924 98 85 159 102 122 114 148 160 131 109 80 71 86 128 168 90 93 90 95 83 96 71 67 51 49 59 120 128 123 111 157 124 120 105 138 160 144 113 84 82 108 142 193 106 143 122 121 129 114 86 81 68 64 87 134 134 114 113 144 118 124 111 167 132 135 103 94 75 107 145 155 115 128 104 96 118 111 85 83 75 71 94 124 113 110 108 131 114 113 110 129 109 148 99 97 89 105 132 148 114 121 100 96 106 118 89 88 84 81 97 132 105 110 112 121 114 116 104 164 112 106 92 94 80 109 133 132 110 121 100 93 109 114 92 93 92 88 109 115 95 104 110 109 106 105 98 121 118 123 80 97 94 106 104 118 107 102 100 96 106 113 99 102 104 103 107 106 99 100 97 99 95 90 103 87 87 84 105 104 97 95 96 94 99 94 98 95 102 97 96 95 94 95 90 95 96 FEDERAL RESERVE BANK OF SAN FRANCISCO • Records of the distribution of goods in this area during 1930 correspond closely with data of production, that is, they show a brief increase in activity during the spring months followed by a continuous and steep decline during the remainder of the year. Both the volume and value of trade transacted receded sharply, with decreases in value data accentuated by downward movements in commodity prices. The decrease in goods distributed for consumption within this area evidenced lower wage and salary payments and smaller agricultural income than in any recent year. For the first time since 1921 the annual department store sales index of this Bank failed to show an increase over the preceding year and the value of sales of reporting wholesale firms was the smallest in nine years. Chain grocery systems reported some further expansion in the number of units operated, but sales per store averaged 13 per cent lower than in 1929. Severe declines in new car registrations of practically all makes of automobiles were recorded, with sales of cars in the lowest priced group showing the smallest declines. A 22 per cent decline in the movement of industrial freight by rail corresponded closely with the decrease in industrial output. Not since 1921 has the value of foreign trade dropped so sharply as in 1930, while tonnage of intercoastal trade was the smallest recorded for any year since 1925. INDEXES OF TRADE Twelfth Federal Reserve District U<)53-1925 Annual Avera?e = 100) 1930 1929 1928 1927 1926 1925 1924 Carloadings 97 Merchandise and Miscellaneous. . 107 112 117 114 117 112 116 112 113 108 107 96 99 Foreign Trade* Imports* Exports 109 105 110 141 128 147 130 116 138 121 114 124 125 120 127 102 104 102 106 101 108 Intercoastal Trade Eastbound Westbound Wholesale Sales Agricultural Implements Automobile Supplies Drugs Dry Goods Electrical Supplies Furniture Groceries Hardware Shoes Paper and Stationery 87 98 80 87 109 137 93 108 128 155 72 89 Ill 118 68 88 103 124 96-122 118 123 81 99 82 101 94 103 89 80 120 102 139 93 116 89 121 110 102 96 106 96 97 94 110 97 132 94 108 88 112 97 89 94 110 98 99 96 107 100 134 96 110 90 112 102 94 99 104 102 85 82 96 101 120 98 108 95 106 101 97 98 99 101 100 102 91 98 87 99 101 99 99 98 99 96 90 97 Department Store Sales Los Angeles Salt Lake City San Francisco Seattle 113 116 97 107 110 120 125 110 114 120 117 122 111 113 117 114 121 103 110 107 111 115 104 109 103 105 107 103 105 102 99 99 98 99 100 Department Store Stocks 104 106 108 108 101 102 103 Automobile Registrations—New Cars 95 Passenger 90 Commercial 151 133 129 180 99 99 96 89 86 95 109 109 105 102 103 98 91 92 89 Digitized * Excluding raw silk. for FRASER 8 SIXTEENTH ANNUAL REPORT The Credit Situation At the beginning of 1930, banks in the Twelfth Federal Reserve District found themselves in the early stages of a period of easy money conditions. Diminishing production and declining commercial activity generally had reduced the demand for commercial credit accommodation while credit supplies, on the contrary, had increased or were increasing as a result of reductions in loans to brokers and dealers in securities following the collapse in securities prices in the autumn of 1929, and because of a sharp drop in the amount of currency in circulation in the District during late December, 1929, and January, 1930. These circumstances provided the banks with excess funds which were utilized immediately in reducing borrowings at the Federal Reserve Bank of San Francisco. BANKER'S BALANCES MILLIONS OFA DOLLAR T 30 -2 -3 19 2 6 10 2 7 20 INTEREST RATES AND BANKERS' BALANCES DOTTED LINE—Per cent by which interest rates on demand security loans in San Francisco have differed from New York call money rates. SOLID LINE — Net balances due other banks by San Francisco banks. A change in the interest rate differential has usually been followed in about two months by a similar movement in net bankers' balances. Accompanying these changes, interest rates in San Francisco declined sharply during the opening weeks of 1930 and continued to move downward for the first nine months of the year, but strengthened slightly during the last quarter. The declines in rates in San Francisco and other financial centers of the Twelfth District were not so great as in New York, however, and there soon existed a sufficiently large differential in rates to attract substantial amounts of excess funds of banks in eastern centers to the larger cities of this District, particularly to San Francisco. Also seeking the most profitable money markets, balances from tributary country banks were attracted to San Francisco and to other District cities in greater amounts than usual. These balances, together with funds made available through the decrease in currency in circulation and an excess of United States Treasury expenditures over collections, increased credit resources of member banks. The availability of these funds— FEDERAL RESERVE BANK OF SAN FRANCISCO 9 increased bankers' balances, currency that had come out of circulation, and expenditures of the United States Treasury in excess of receipts—largely explains the ability of city banks of the District to remain out of debt at the Reserve Bank during most of 1930, and at the same time to satisfy demands made upon them for commercial credit, to maintain and even to expand slightly their security loans, and to build up their investment portfolios. Country banks also used less Reserve Bank credit during 1930 than in most other recent years. Because of the circumstances enumerated above, the volume of credit extended by the Federal Reserve Bank of San Francisco was at lower levels during 1930 than at any other time in post-war years. The entire decline was accounted for by reduced discounts, since there was an increase in Reserve Bank holdings of government securities and but little change in holdings of acceptances. Acceptance buying rates of this Bank were reduced by a greater amount than was its discount rate early in the year. The condition created by the establishment of these relatively lower acceptance rates favored the obtaining of Reserve Bank credit through the acceptance market rather than by means of discounting and rediscounting, a situation which continued throughout the year. The volume of acceptances held by this Bank was greater during most of 1930 than was the volume of its discounted bills, reflecting the increased use of acceptances by District banks and the decreased need for discounting to maintain reserve positions, which were adjusted through the use of bankers' balances previously discussed. Declines of country bank balances in the larger Pacific Coast cities at the end of the third quarter and small increases in commercial loans during the fourth quarter reduced the supply of surplus funds in the District. During September, October, and November, therefore, it was the excess reserves of eastern banks ("Federal" funds available on a day-to-day basis) that enabled city member banks to maintain their reserve positions without borrowing from the Reserve Bank. During December, however, the expansion of currency circulation and the closing of some eastern banks prompted banks in New York, Philadelphia, and other eastern banking centers to keep their excess reserves at home. Circulation of money expanded in the Twelfth District also during December, the increase being induced chiefly by seasonal requirements and secondarily by the closing of certain financial institutions. As a result of these conditions, borrowings from the Reserve Bank rose sharply in the last three weeks of December to the highest levels of the year. Considering the year as a whole, total credit extended by, and total deposits of, reporting member banks tended upward during 1930 and averaged slightly higher than in 1929. Commercial loans declined during the first three quarters of the year, following which they increased moderately. During the first nine months of the year, security loans remained at the high level to which they had risen late in 1929, but during the fourth quarter they declined sharply. Investments increased almost continuously throughout the year. The number of bank failures in the District increased during 1930 although less rapidly than in the country as a whole, there being 21 suspensions during the year compared with 16 in 1929 and 10 in 1928. Deposits of suspended banks in the three years were, respectively, $16,145,000, $20,254,000, and $4,768,000. 10 SIXTEENTH ANNUAL REPORT STATEMENT OF CONDITION Federal Reserve Bank of San Francisco RESOURCES Dec. 31,1930 Cash Reserves held by this bank against its deposits and note circulation: Gold and Gold Certificates in vault $ 43,003,674.95 Gold in the Gold Settlement Fund lodged with the Treasurer of the United States for the purpose of settling current transactions between Federal Reserve Districts 27,057,475.41 Gold Held by the Federal Reserve Agent as part of the collateral deposited by the bank when it obtains Federal Reserve notes. This gold is lodged in his name partly in the vaults of the bank and partly with the Treasurer of the United States 215,702,550.00 Gold Redemption Fund in the hands of the Treasurer of the United States to be used to redeem such Federal Reserve notes as are presented to the Treasurer for redemption 4,520,086.43 Legal Tender Notes, Silver, and Silver Certificates in vaults of the bank (available as reserve against deposits only) 8,392,116.00 Total Cash Reserves Dec. 31,1924 $ 27,106,664.24 48,783,508.67 211,762,550.00 6,450,166.90 ll,39S,038.00 $298,744,902.79 $305,509,927.Sl Loans and Investments Loans to Member Banks: On the security of obligations of the United States * $ 5,893,005.00 By the discount of commercial or agricultural paper or acceptances 9,590,701.58 Acceptances bought in the open market 31,023,120.89 United States Government Bonds, Notes, etc. 51,082,350.00 $ 11,628,200.00 Total Loans and Investments (or Earning Assets) $ 97,589,177.47 $ 85,941,704.70 Uncollected Items Checks and Other Items not yet collected. . . $ .".1,560,282.05 $ 36,113,847.28 Miscellaneous Resources Bank Premises $ 4,620,990.03 Non-Reserve Cash, consisting largely of National Bank notes and minor coin 5,310,820.80 All Other Miscellaneous Resources Total Miscellaneous Resources TOTAL RESOURCES 27,884,410.84 34,613,243.86 11,815,850.00 $ 4,261,326.41 7,834,503.86 783,629.84 397,748.26 $ 10,715,449.67 $ 12,493,578.53 $438,609,811.98 $440,059,058.32 FEDERAL RESERVE BANK OF SAN FRANCISCO 11 LIABILITIES Dec. 31, 1930 Currency in Circulation Federal Reserve Notes in actual circulation, payable on demand. These notes are secured in full by gold and discounted and purchased paper $185,838,075.00 Deposits Reserve Deposits maintained by member banks as legal reserves against the deposits of their customers Dec 31, 1929 $189,377,825.00 182,583,846.72 175,314,983.46 United States Government Deposits 1,409,493.75 2,910,845.10 Other Deposits, including foreign deposits, deposits of non-member clearing banks, etc. 7,432,342.65 8,934,645.99 $191,425,683.12 $187,160,474.55 30,793,003.42 31,924,115.63 Total Deposits Deferred Availability Items Deferred Items, composed mostly of uneollected checks on banks in all parts of the country Miscellaneous Liabilities Reserves and All Other Miscellaneous Liabilities $ 573,755.21 Capital and Surplus Capital Paid In, equal to 3 per cent of the capital and surplus of member banks $ 11,504,300.00 Surplus as permitted by law $ 668,912.78 $ 11,414,100.00 18,474,995.23 10,513,630.36 Total Capital and Surplus $ 29,979,295.23 $ 30,927,730.36 TOTAL LIABILITIES $438,609,811.98 $440,059,058.32 12 SIXTEENTH ANNUAL REPORT PRINCIPAL OPERATIONS FEDERAL RESERVE BANK OF SAN FRANCISCO The following table presents in comparative form for the past three years the volume of the principal operations of the bank, which are of such character that they can be expressed in quantitative terms: 1930 1929 1928 Supplying Currency and Coin Currency Received and Counted: 123,437,000 134,955,000 125,680,000 Individual notes counted Dollar amount received and $880,097,000 $912,188,000 $899,442,000 counted Coin Received and Counted, a service previously performed largely by the Subtreasury, but now entirely in the hands of the Federal Reserve Bank: Number of coins handled in re115,675,000 135,439,000 124,060,000 ceiving and counting Dollar amount received and $26,484,000 $74,913,000 $29,887,000 counted Making Loans and Investments BillsDiscountedforMemberBanks, either discounted customers' paper or advances against notes of member banks secured by collateral in the form of United States government securities or commercial or agricultural paper: 16,117 16,000 21,000 Number of bills discounted $1,109,586,000 $4,089,446,000 $5,488,828,000 Dollar amount* Bills Purchased for the Account of this Bank: 22,403 28,000 19,000 Number $337,467,000 $446,841,000 $301,741,000 Dollar amount Collecting Checks, Drafts, Notes, and Coupons Checks handled for collection for banks in all parts of the country: 79,903,000 67,180,000 76,800,000 Number of items $15,322,015,000 $15,399,865,000 $15,136,437,000 Dollar amount Collection Items handled, including drafts, notes, and coupons: 1,437,000 1,572,000 2,161,000 Number of items $364,992,000 $387,186,000 $353,899,000 Dollar amount Supplementary Services United States Government Securities issued, redeemed, or exchanged, including government bonds, notes, and certificates of indebtedness: Number of items 51,000 94,000 367,000 Dollar amount $311,343,000 $453,845,000 $477,401,000 Funds Transferred to and from all parts of the country for the Treasury Department and for member DanKS: Number of transfers Dollar amount 153,000 149,000 158,000 $25,282,661,000 $16,561,947,000 $16,399,407,000 *Includes paper discounted for the Federal Intermediate Credit Banks at Berkeley, California, and Spokane, Washington, amounting to $5,581,000 in 1930; $16,374,000 in 1929; and $5,882,000 in 1928. FEDERAL RESERVE BANK OF SAN FRANCISCO 13 OPERATIONS OF THE FEDERAL RESERVE BANK OF SAN FRANCISCO DURING 1930 Certain phases of the economic situation, particularly the shrinking demand for credit during the business depression in 1930, were reflected in the routine functional operations of the Federal Reserve Bank of San Francisco. Other influences, including changes in methods of procedure and in organization combined with economic circumstances in effecting a slight reduction in the volume of checks, drafts, notes and coupons collected and in the volume of government securities issued, redeemed and exchanged during the year. Economic conditions were chiefly responsible, however, for changing volumes in such operations as the handling of currency, the telegraphic transfer of funds through the gold settlement fund and acceptance and discount operations. For example: (1) The decline in volume of currency in circulation in the Twelfth District and the importation of approximately $34,000,000 of United States gold coin from the Orient during 1930 were accompanied by a considerable increase in the number of pieces and in the dollar amount of coin and currency received and counted at this Bank during the year. (2) The interest rate differentials between Pacific Coast and eastern money markets, discussed in a preceding section of this report, stimulated use of the Federal reserve system's telegraphic transfer facilities and the amount of funds transferred by this Bank between the Twelfth District and other parts of the United States was larger than in any previous year. (3) The sluggish movement of warehoused commodities at home and abroad and differences between various classes of interest rates were two factors which encouraged the use of acceptances rather than discounting or rediscounting at the Reserve Bank during most of 1930 and both the number and dollar amount of acceptances purchased during the year advanced sharply in contrast with a considerable decline in discount operations. Due both to repurchase agreements and to short maturities, the turnover of acceptance holdings was rapid, however, and as already noted the buying rates were low; consequently the earnings obtained from this operation were less by 45.2 per cent in 1930 than in 1929. It was inevitable that these conditions, particularly the relatively small demand for Reserve Bank credit and the low rates charged for its use, should have reduced this Bank's income. In fact, total earnings were less than half as large in 1930 as in 1929, and a deficit was incurred on the year's operations. Earnings and Expenses During 1930, total earnings of the Federal Reserve Bank of San Francisco reached the lowest levels recorded at any time since member banks commenced actively to use its facilities in 1918. The most important factors contributing to this decline were the sharp reduction in holdings of discounted and rediscounted paper and the accompanying low levels of interest and discount rates. Earnings from this 14 SIXTEENTH ANNUAL REPORT source were $558,033 in 1930, compared with $3,487,429 in 1929, and $2,696,669 in 1928, two years in which such earnings were larger than at any time since 1921. Earnings on acceptances purchased ($753,758) were larger than were earnings on loans, but this class of income was but little more than half as large in 1930 as in 1929. Only twice before, in 1916 and in 1917, have earnings on acceptances INCOME AND DISBURSEMENTS Federal Reserve Bank of San Francisco Earnings On Loans to Banks and Paper Discounted for Them On Acceptances Purchased 1930 $3,487,428.82 1,375,555.55 1,017,171.06 485,727.65 On United States Government Obligations Owned Other Earnings Total Earnings 79,548.44 117,363.44 $2,408,510.33 $5,466,075.46 Additions to Earnings 117,073.28 Deductions from Earnings Tor Current Bank Operation For Assessments for Federal Reserve Board Expenses For Federal Reserve Currency, mainly the cost of printing new notes to replace worn notes in circulation, and to replenish the stock unissued and on hand For Furniture and Equipment For Reserves and Depreciation, Self-Insurance, Losses, etc 2,544.311 2,251,862.72 2,282,670.73 55,015.21 55,804.96 190,870.83 186,309.15 215,204.99 25,258.02 188,840.88 All Other Total Deductions from Earnings 1929 $ 558,033.03 753,757.80 641,064.13 7,473.84 42,694.75t $2,885,856.58 $3,262,697.58f NET INCOME available for dividends, ad- ditions to surplus, and payment to the United States Government $ 355,689.02* Distribution of Net Income In Dividends Paid to Member Banks, at the rate of 6 per cent on paid-in capital $ 082,946.11 In Addition to Surplus—The bank is permitted by law to accumulate out of net earnings, after payment of dividends, a surplus amounting to 100 per cent of the subscribed capital; and after such surplus has been accumu]ated to pay into surplus each year 10 per cent of the net income remaining after paying dividends 1,038,635.13* In Payment to the United States Government, as a franchise tax representing the entire net income of the bank after paying dividends and making additions to surplus (as above). No balance remained for such payments in 1929 and 1930 —0— TOTAL NET INCOME DISTRIBUTED *Deficit. fRevised figures. $ 355,689.02* $2,205,922.19 $ 670,085.39 1,535,836.80 —0— $2,205,922.19 FEDERAL RESERVE BANK OF SAN FRANCISCO 15 exceeded earnings on loans. A partial offset to these reductions of income accrued through earnings on United States security holdings. These were more than twice as large in 1930 as in the previous year, and furnished 42.2 per cent of total earnings, whereas they have constituted but 16.7 per cent of total earnings since the Bank's organization in 1914. Although expenses for current bank operation, the largest single item of expense, declined but slightly during the year, total expenses were 11.6 per cent or $376,841 less than in 1929, the reduction being due chiefly to the smaller amount of charge-offs for reserves, depreciation, etc. The decrease in charge-offs between 1929 and 1930 reflected the fact that no unusual items entered that category during 1930, whereas in 1929 a reserve of $500,000 was set aside to establish a self-insurance fund. The decline of total expenses was much less than the reduction of total earnings, however, and an operating deficit of $355,689 was the result. Under authorization of the Board of Directors, this sum together with $682,946 for payment of the regular 6 per cent dividend on paid-in capital was withdrawn from surplus, and that account was reduced from $19,513,630 on December 31, 1929, to $18,474,995 on December 31, 1930. The principal sources of earnings of the Federal Reserve Bank of San Francisco during 1930 and 1929, with an enumeration of the major classifications of operating expenses, and a statement of distribution of net income, are presented in the table on page 14. Changes in Membership 1. 3 number of active member banks in the Twelfth District has tended to decline slightly each year since 1921, the year of highest numerical membership. The decline, which has been a natural accompaniment of the growth in average size of individual banks and the spread of branch banking, has approximately paralleled the decline in number of all banks during that period and has been accompanied by a consistent, though slow, growth in the member banks' proportion of all banking resources in the District. There were 9 additions and 35 losses to membership in 1930, a net loss of 26 banks, and on the last day of the year member banks numbered 581. The gross loss of 35 member banks was due chiefly to (a) the elimination of 11 banks through mergers between member banks, (b) the elimination of 10 member banks through their absorption by non-members and (c) suspension or insolvency of 5 member banks. Mergers between member banks although reducing their number do not reduce their total resources. Those losses to membership falling in other categories involved a loss of $24,451,000 in member bank resources during 1930. This slight loss was much more than made up by the absorption of non-member by member banks, (an operation without effect upon the number of member banks, but one which adds to system resources) and changes in bank membership during 1930 resulted in a net addition of $294,259,000 to resources. Most of that gain was offset by shrinkage in member bank resources during the year, however, and on December 31, 1930, total resources of members of the system were but $24,299,000 greater than on December 31, 1929. This gain in total resources accruing to the membership of the Federal reserve system during 1930 contrasts with a small decline in the total 16 SIXTEENTH ANNUAL REPORT resources of all banks in the Twelfth District from $5,729,771,000 on December 31, 1929, to $5,444,501,000 on December 31, 1930. It is interesting to note that 77.3 per cent of all banking- resources in the Twelfth Federal Reserve District were represented in the membership of the Federal reserve system on December 31, 1930, compared with 73.0 per cent on December 31, 1929, and an average of 71.8 per cent on December 31 of the past ten years. Detailed data concerning changes in bank membership are presented in the following table : CHANGES IN BANK MEMBERSHIP DURING THE YEAR 1930 (By Class of Bank) I / National Active member banks—December 31,1929 487 Additions to Membership: Organization of National Banks Conversion of non-member banks to National banks Admission of State banks Eesumption following suspension Conversion within the System Succession between member banks of same class Absorption of non-member banks by National and State member banks. . TOTAL ADDITIONS Losses to Membership: Merger between member banks: Intraclass Interclass Voluntary liquidation Suspension or insolvency Absorption of member by non-member banks Conversion of member to non-member banks Withdrawal of State banks Termination of membership by reason of expiration of charter Conversion within the System Succession between member banks: Intraclass Interclass TOTAL LOSSES Net Change Active member banks—December 31,1930 Member Banks Number \ State Total 120 N Resources (In thousands) 607 $4,182,149 2 .. 2 897 3 .. 2 .. .. 3 2 .. .. 4,290 4,072 .. 2 980 .. 2* .. .. 308,471 7 2 9 $ 318,710 7 2 9 2 .. 5 ($23,631)f ( 3,098)t 3 2 .. .. 2 8 2 10 10,379 2 .. 3 2 3 1,328 2,344 1 .. 1 .. 1,522 .. 1 2 1 712 460 24 11 35 —17 —9 —26 +294,259 470 111 581 $4,206,448 2* (9)* *Changes not affecting total number of member banks. fChanges not affecting total resources of member banks. 7,706 $ 24,451 FEDERAL RESERVE BANK OF SAN FRANCISCO 17 BRANCH BANKING There was no net change during 1930 in the number of banks operating branches in the Twelfth Federal Reserve District, although the number of state banks having branches was reduced from 42 to 41 and the number of national banks operating branches increased from 12 to 13. Consolidation of branches in some metropolitan areas reduced the number of branches from 897 on December 31, 1929, to 858 on December 31, 1930. The branch banking data appearBRANCH BANKS IN THE TWELFTH DISTRICT f Branches ——\ Banks Operating i Operated by ^ Located Branches 1 Mem- Non OutNumNaState Non Naher Mem- In side ber of tional Mem- Memtional State ber Home Home Banks Total Banks ber ber Total Banks Banks Banks City City , State Statewide branch banking permitted: Arizona* 25 6 .. 1 5 22 . . 11 11 . . 22 California 421 54 13 4 37 830 541* 104t 185 275 555t Establishment of branches prohibited—Operation of existing branches permitted: Oregon 225 1 1 .. .. 1 1 1 Washington 330 3 1 2 5 2 . . 3 3 2 *Includes three branches of Bank of California, I T A., located in Oregon and N. Washington. fDoes not include one foreign branch of the American Trust Company, San Francisco. *Does not include a part of the state of Arizona which is in the Eleventh Federal Reserve District. BRANCH BANKS IN CALIFORNIA Date December 31, 1929: State Banks—Member* Non-Member Total number of State banks having branches Total number of National banks having branchesf Total December 31, 1930. State Banks—Member* Non-Member Total number of State banks having branches Total number of National banks having branchest Total Number Number of of Banks Branches Total Resources 5 37 105 278 $ 537,733,000 854,301,000 42 383 1,392,034,000 12 483 $2,001,575,000 54 866 $3,393,609,000 4 37 104 185 $ 533,892,000 562,879,000 41 289 $1,096,771,000 13 541 2,108,610,000 54 830 $3,205,381,000 *Does not include one foreign branch of the American Trust Company, San Francisco. flncludes Bank of California, N. A., San Francisco, California, with branches at Portland, Oregon, and Seattle and Tacoma, Washington. 18 SIXTEENTH ANNUAL REPORT ing in the accompanying tables include figures for all banks operating offices other than their head office, wThether such offices are located in the same city as the head office or in another locality. The states of Idaho, Nevada, and Utah prohibit the operation of branches and have none in operation, while Oregon and Washington now prohibit the establishment of branches, but permit existing branches to operate. Branch banking in the Twelfth District is centered chiefly in Arizona and California, where the establishment of branches of banks both in and outside of the city of head office is permitted. Bank Organization and Personnel In the annual election of directors held in 11)30, two places on the Board of Directors were filled. The banks of Group Two (those having a combined capital and surplus of not less than $125,000 and not more than $599,999) re-elected Malcolm McNaghten, President of the Broadway Department Store, Los Angeles, as a Class B director for a three-year term ending December 31, 1933. The banks of Group Three (those having a combined capital and surplus of less than $125,000) elected Keith Powell, President, Bank of Woodburn and First National Bank, Woodburn, Oregon, as a Class A director for a similar three-year term. Isaac B. Newton of Los Angeles, California, a Class C director, was redesignated Chairman of the Board and Federal Reserve Agent for the year 1931. Walton N. Moore, President, Walton N. Moore Company, San Francisco, California, was redesignated Deputy Chairman of the Board to serve during the year 1931. Effective March 1, 1930, Allan Sproul resigned as Assistant Federal Reserve Agent and Secretary. Oliver P. Wheeler, formerly head of the Division of Analysis and Research, was appointed Acting Assistant Federal Reserve Agent and S. G. Sargent was appointed Secretary, succeeding Mr. Sproul. Effective October 1, 1930, Mr. Wheeler wTas confirmed as Assistant Federal Reserve Agent. To represent the Twelfth Federal Reserve District in the Federal Advisory Council during the year 1930, the Board of Directors selected F. L. Lipman, President of the Wells Fargo Bank and Union Trust Company of San Francisco, California.* A new chairman of the board was appointed at each branch in conformity with a policy of alternation in that office of the two branch directors appointed by the Federal Reserve Board. At the year-end A. J. Cruickshank was appointed a director of the Los Angeles Branch to succeed Henry M. Robinson, who had served since January, 1920, and at the Spokane Branch, R. M. Hardy succeeded R. L. Rutter who had served since November, 1918. On November 20, 1930, at the Salt Lake City Branch, H. E. Hemingway succeeded C. II. Barton, deceased, and E. O. Howard succeeded L. 11. Farnsworth, also deceased. There was but one change in the official staff of the Bank during *On January 8, 1931, Henry M. Eobinson was appointed to serve as the representative of the Twelfth Federal Eeserve District in the Federal Advisory Council for the year 1931, to succeed Mr. Lipman, who had represented the District for the past three years. FEDERAL RESERVE BANK OF SAN FRANCISCO 19 the year. On May 31, 1930, Even Berg, Assistant Cashier at the Spokane Branch, resigned. Following is a comparative summary of the number of officers and employees in the principal departments of the Bank, with corresponding aggregate annual salaries paid on January 1, 1930, and January 1,1931 (figures are for Head Office and Branches combined) : PERSONNEL AND SALARIES Federal Reserve Bank of San Francisco (including branches) -Number .. Jan. 1, Jan. 1, 1931 1930 OFFICERS , A n n u a l Salaries > Jan. 1, Jan. 1, 1931 1930 30 31 $ 251,800 $ 259,400 662 27 7 11 699 29 8 16 1,090,370 63,840 16,080 23,220 1,124,495 73,320 19,230 30,930 737 783 $1,445,310 $1,507,375 EMPLOYEES BY DEPARTMENTS : Banking Department Federal Reserve Agent's Department Auditing Department Fiscal Agency Department TOTAL FISCAL AGENCY DEPARTMENT EMPLOYEES : (Whose salaries are reimbursed by the United States Treasury Department) 2 2 4,320 4,320 30 27 34,440 31,885 OTHER EMPLOYEES : (Whose salaries are reimbursed to the bank, including employees in the bank cafeteria and employees in building space rented to tenants) GRAND TOTAL TEMPORARY EMPLOYEES 769 (not 812 $1,484,070 $1,543,580 7 5 6,408 7,080 included above) Los Angeles Branch Building Construction work on the new Los Angeles Branch Building, a five-story monumental type structure, was begun in April, 1929, and completed in April, 1930. On April 14, 1930, the new building, which is located at Tenth and Olive Streets, was occupied by the Los Angeles Branch. NOTE Detailed statistical tables pertaining to the Twelfth Federal Reserve District and the Federal Reserve Bank of San Francisco will appear in the Annual Report of the Federal Reserve Board. Copies of the Board's report may be obtained, when published, from the Federal Reserve Board at Washington, D. C. 20 SIXTEENTH ANNUAL REPORT TWELFTH FEDERAL RESERVE DISTRICT Includes the States of Arizona, except the Five Southeastern Counties, California, Idaho, Nevada, Oregon., Utah and Washington SAN FRANCISC Map showing territory of Head Office and Branches of the Federal Reserve Bank of San Francisco