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Thirteenth Annual Report of
the Federal Reserve Bank
of Boston for the year ended
December 31, 1927

'Boston, ^^Massachusetts



^

THIRTEENTH ANNUAL REPORT
OF THE

Federal Reserve Bank
of Boston
For the year ended
December JI,

BOSTON, MASSACHUSETTS




FEDERAL RESERVE BANK OF BOSTON
OFFICERS AND DIRECTORS
December 31, 1927

OFFICERS
FREDERIC H. CURTISS, Federal Reserve

W. P. G. HARDING, Governor

Agent

WILLIAM W. PADDOCK, Deputy Governor
CHARLES F. GETTEMY, Assistant Federal

Reserve Agent

WILLIAM WILLETT, Cashier
KRICKEL K. CARRICK, Secretary

HARRY F. CURRIER, Auditor

ELLIS G. HULT, Assistant Cashier
ERNEST M. LEAVITT, Assistant Cashier
L. WALLACE SWEETSER, Assistant Cashier

DIRECTORS

Class and
Group

President, Merchants National
Bank
Vice-President and Cashier
New Britain National Bank

A i ALFRED L. RIPLEY
A 2 F. S. CHAMBERLAIN

Term Expires
December 31

Boston, Mass.

1929

New Britain, Ct. 1928

A 3 EDWARD S. KENNARD

Vice-President and Cashier

B i PHILIP R. ALLEN

Rumford National Bank
Vice-President, Bird & Sons

Rumford, Me.
1930
E. Walpole, Mass 1929

B 3 CHAS. G. WASHBURN

President, The John T. Slack
Corporation
President, The Washburn Co.

Springfield, Vt. 1928
Worcester, Mass. 1930

C

Chairman

Boston, Mass.

Deputy-Chairman, Lawyer

Concord, N. H.

B 2 ALBERT C. BOWMAN

FREDERIC H. CURTISS

C

ALLEN HOLLIS

C

CHAS. H. MANCHESTER President, Providence Gas Co.

1930
Providence, R. I. 1928

GENERAL COUNSEL
ARTHUR H. WEED, Boston, Mass.

MEMBER OF FEDERAL ADVISORY COUNCIL




ARTHUR M. HEARD

President, Amoskeag National Bank,
Manchester, N. H.

1929

LETTER OF TRANSMITTAL

BOSTON, MASS.,

January 28, 1928.

HON. ROY A. YOUNG,

Governor, Federal Reserve Board,
Washington, D. C.
SIR:

I have the honor to submit herewith the Thirteenth Annual Report of
the Federal Reserve Bank of Boston, covering industrial and credit
conditions in New England, and the operations of the bank for the period
January 1, 1927, to December 31, 1927.




Respectfully yours,
FREDERIC H. CURTISS,

Chairman and Federal Reserve Agent.

THIRTEENTH ANNUAL REPORT OF THE FEDERAL
RESERVE BANK OF BOSTON
BUSINESS AND CREDIT CONDITIONS IN NEW ENGLAND DURING 1927

The function of the Federal Reserve Banks in furnishing credit to
their member banks which in turn is passed on to industry and the importance of Federal Reserve policies in their effect upon general credit
conditions make it highly necessary for the reserve banks to keep in
close touch at all times with business and industrial conditions. No annual
report of this character covering banking and financial transactions would
be complete, therefore, if there were not presented as a background to
the record a fairly clear picture of the conditions under which industry
and trade have been operating during the year.
For the year 1927 New England business activity compared favorably
with that of the rest of the country. There was no marked recession in
New England industries such as took place in the iron and steel, automobile and crude oil industries in other parts of the country.
The determined effort of New England management to adopt more
efficient manufacturing and more efficient sales methods in almost all
lines of industry has been a prominent factor in the stability of New
England business activity during the year.
Textile Activity: While there was continued liquidation in the textile
industry with subsequent removal of a certain amount of manufacturing
TEXTILE
1919

1 9 2 0




ACTIVITY

1 9 2 1

COMPARED W,TH GENERAL
NEW ENGLAND
1 9 2 3 1 9 2 4

1 9 2 2

BUSINESS
1 9 2 5

ACTIVITY
I 9 c 6

1 9 2 7

1 9 2 8

ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

5

equipment to the South, there was also an improvement in the demand
for both fine and coarse cotton goods during the year which created more
favorable conditions than had prevailed in that industry during the
prior few years. The New England textile industries were in the aggregate operating at a higher average rate of activity during 1927 than at
any time since 1923. An index of textile mill activity compiled by this
bank, and composed of cotton consumption, wool consumption, the
production of fine cotton fabrics, and the rate of silk mill operations, all
seasonally adjusted, in 1927 averaged fully 10 per cent higher than in
1926. January activity was below the 1923-24-25 average, but successive
increases, especially in cotton and wool consumption and fine goods production, brought the activity in June to the high point for the year,
considerably higher than that of the 1923-24-25 average. Since June,
the seasonally adjusted volumes of cotton and wool consumed had declined until in November they were at the low points for the year. Silk
mill activity, which reached a peak for the year in Jury, has also receded
since that time to its low for the year. While the production of fine cotton
goods has been curtailed, it is still larger than at the first of the year.
In addition to the generally high rate of mill activity, the outstanding
feature of the cotton textile situation was the increase in the prices of
raw cotton and cotton goods. Spot cotton advanced from thirteen cents
per pound at the first of the year to nearly twenty-four cents per pound
near the middle of September and then declined to nineteen to twenty
cents per pound at the close of the year. Cotton goods prices have followed the movements of raw cotton, although the variations have been
of smaller magnitude. The low prices at the close of 1926 and at the
beginning of 1927 acted as a stimulus to the cloth markets. The wide
price fluctuations in the raw cotton markets early in the autumn led to
uncertainty in the cloth markets where a sharp reduction in sales volumes
was followed by production curtailment. With the more stable raw cotton
prices of the last month or two, sales in the cloth markets have again improved.
Raw wool prices, after declining during the first five months of 1927,
by which time they were nearly 20 per cent below the 1926 high, began to
strengthen during the summer, and by the close of the year had risen
approximately 10 per cent above the year's low, and were over 7 per cent
higher than on January 1, 1927. Raw silk prices, on the other hand, have
declined about 20 per cent since April to the lowest point in several years,
and only during the latter part of December did they show even a tendency toward firmness.



ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

Boots and Shoes: The production of boots and shoes in the New England
district during 1927 also averaged larger than in any year since 1923. The
output of boots and
SHOE PRODUCTION
shoes for 1927 was 5
ALL OTHER STATES
NEW ENGLAND
per cent larger than in
1926, over 6 per cent
larger than in 1925,
nearly 7 per cent larger
than in 1924, although
12 per cent smaller
H926
than in 1923. Produc1927
tion during the first
few months of the year
was below the 1926
record, but in each
month from April
through October the
1927 output was from
3 to 20 per cent larger than in the corresponding month of 1926. The
Fall seasonal peak in 1927 established a new high record for August and
September.
Building: In only two months of 1927 did the value of new construction
awards exceed corresponding months of 1926. The peak of building activity was reached in
VALUE OF BUILDING CONTRACTS AWARDED
the summer of 1925,
NEW ENGLAND
and since that time,
1920 1921 1922 1923 I9g4 1925, 1926
1927
with the exception of
an occasional record
month, such as March,
1927, the trend has
been downward. Construction costs have
declined 3 or 4 per cent
between 1925 and 1927,
due chiefly to lower
material prices, but
this has been responsible for only a portion
of the decline in building values. An actual reduction in the volume of building, as compared
with 1926, has taken place in practically all classes of construction.



ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

J

While building in 1927 was in reduced volume by comparison with both
1925 and 1926 it still was considerably larger than in any year previous
to 1925.
Freight Carloadings: The distribution of commodities originating in
New England, as indicated by the loadings of merchandise and miscellaneous classes of freight in this district during 1927, was slightly more
than one per cent less than in 1926. During the first half of the year there
was little change in the volume of loadings between 1926 and 1927 but
since that time the 1927 record has been consistently below 1926. The
total loadings throughout the country showed a loss from 1926, due in the
first place to the bituminous coal strike, which resulted not only in the
smaller volume of coal shipments this year, but in unusually large shipments a year ago during the English coal strike and prior to and in anticipation of the impending strike in this country; and in the second place
to smaller shipments of ore, coke, and forest products. Loadings of manufactured goods, merchandise and miscellaneous classes, however, were
slightly larger than in 1926 for the country as a whole.
Retail Trade: Reports received from New England department stores
indicate that the volume of retail trade in this district during 1927 was
about one per cent larger than the total during the previous year.
Inasmuch as 1926 was a record year for retail trade, and less favorable
business conditions in general prevailed during 1927, this gain is more
significant than it appears. The greater part of the improvement was due
to larger instalment and regular charge sales. Collections of both regular
and instalment accounts showed decided gains over those in 1926, the
greater increases being made in instalment collections.
Employment: The number of workers on the payrolls of New England
manufacturing establishments throughout 1927 was on the whole smaller
than in 1926. There was also a slackened demand for workers at the
public employment offices in this district, in comparison with 1925 or
1926. Total amount of payrolls in Massachusetts factories was smaller
than in 1926, but the average wage was slightly higher than in 1926.
Agriculture: The aggregate production of New England crops in 1927
did not measure up to the preceding five-year average or to the 1926
volume, and, notwithstanding the generally higher prices, the estimated
value of New England agricultural products was considerably less than
in 1926.
On November 4, 5 and 6, devastating floods caused great damage in
three of the New England States, — Vermont, New Hampshire and




ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

Massachusetts. The damage was greatest in Vermont. In spite of the
large property damage, there has been no visible effect upon the New
England credit situation. It seems likely, however, that Vermont is
faced with the necessity of carrying through a building program which
has already started, but will be especially active next Spring, and which
will be greater than the usual rate of growth for new building. The state
of Vermont floated a bond issue of $8,500,000 for repairs in the flood area
to bridges, highways and state property, and the New England Flood
Credit Corporation was formed to raise $1,000,000 credit in behalf of
merchants, farmers and manufacturers.
Although commodity prices showed an improvement during the last
half of the year, the level for the year was lower than in 1926. This factor,
together with the decrease in general business activity throughout the
country, and but slight improvement in New England, resulted in a
decrease of demand for commercial loans on the part of the member banks
in the district.
BUSINESS INDICES — FIRST FEDERAL RESERVE DISTRICT
1. Average number employed in over
1,300 identical manufacturing establishments in New England.. . .
396,500
2. Average monthly payroll in 1,300
identical manufacturing establishments in New England
$9,660,000
3. Average weekly wage in 1,000 Massachusetts factories.
$24.51
4. Number of new business incorporations in Massachusetts
2,363
5. New England commercial failures:
Number
2,465
Liabilities
$55,075,000
6. Cotton consumed by New England
mills, in bales
1,685,000
7. Monthly average hours operated
per spindle in place in New England
163
8. Average number of spindles active —
New England
13,469,000
9. Average number of spindles in place
New England
17,006,000
10. Wool consumed by New England
mills — in pounds
253,998,000
11. Shoe production in New England —
in pairs
106,521,000
12. Total value of new building contracts
awarded in New England
$412,767,300
13. Volume of check transactions: (000
omitted:)
Boston
$25,239,900
New England, excluding Boston $10,800,000
Total District
$36,039,900




1926

Per Cent
Change

411,000

— 3-5

$ 10,000,000

—3-4
+0.6

$24.36
2,303
. 2,396
$ 47,803,000

+2.5
+2.8
+ 16.5

1,711,000

—2-5

155

+5-2

13,657,000

—1.4

17,998,000

—4.4

233,920,000

+8.5

101,484,000

+5-O

$441,183,100

-6-5

$ 23,450,200
$ 10,018,600

+7-6
+7-8
+7-7

$ 33,468,800

ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

9

Per Cent
IQ2?

14. Volume of department store sales:
Boston
New England, excluding Boston
Total District
15. Number of freight cars loaded in
New England:
Manufactured products
(mdse. and misc.)
1,973,662
Total number — all classes..
2,241,733
16. Number of sales of new automobiles
in New England
171,670
17. Estimated value of farm products
in New England
$159,057,000

1926

Change

+0.5
+2.9
+1-4

1,990,882
2,259,238

—1.2
—0.7

I97.O48

—12.9

$186,753,000

—17.3

MONEY AND BANKING

The first eight months of 1927 were conspicuously a period of inflowing
gold from foreign countries. Up until September 1 the net amount of
gold imported into the United States was about $147,000,000. A substantial part of this, however, was offset by gold earmarked in the United
States for the account of foreign countries. The gold stock of this country,
BOSTON MONEY
NINETY

MARKET

DAY MATURITIES

which increased during the first four months of the year by nearly
$118,000,000, fell off during the four months following by $21,000,000,
giving a net increase for the first eight months of 1927 of $96,000,000. The
effects of this augmented supply of monetary gold were, of course, not
confined to the centers at which the actual physical importation took
place. An importation of gold permeates fairly quickly throughout the
credit structure of the entire United States.




10

ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

MEMBER

BANK

CREDIT

SITUATION

REPRESENTATIVE BANKS IN 9 NEW ENGLAND
1800

19 2 5

19
LOANS

NET

AND

DEMAND

192

26

7

INVESTMENTS

DEPOSITS

. COMMERCIAL

O 800

CITIES

LOANS

'••4

* 700
600

TIME DEPOSITS

500
400
INVESTMENTS

COLLATERAL LOANS

300
200
I 00
BORROWINGS FROM F R.B.-BOSTON
.
0



ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

11

The substantial increase of $96,000,000 of new gold in the foundation
of the credit structure was reflected promptly in expanding banking
liabilities and in money rates. Deposit liabilities, both demand and time,
rose steadily throughout that period in New England banks as well as in
those elsewhere in the country.
During 1927 the deposits of the reporting member banks in the first
Federal Reserve district, which represent about two-thirds of those in all
the member banks, averaged $72,000,000 higher than in 1926 exclusive of
government deposits. Of this, $41,000,000 represented the gain of banks
in eight cities outside of Boston; $45,000,000 of the gain in deposits was in
time deposits, this gain being about equally divided between the Boston
and outside banks. This increase in deposits of member banks continued
throughout the year, the year ending with total deposits of these banks
$147,000,000 higher than on the corresponding date of 1926. Of this gain
),000,000 represented the increase in time deposits of which expansion
5,ooo,ooo was in Boston banks. Deposits of member banks did not cease
to expand when the international flow of gold turned against the United
States, although the net reduction in the United States gold stock during
the last four months of the year was more than double the net increase
which had taken place during the first eight months. This continued
growth in deposits wras due, doubtless, to the continued ease in the
money market. The pressure on the banks to keep their funds profitably
at work and the decrease in the demand for loans for commercial use had
a tendency not only to force money rates down but to induce the member




FEDERAL

RESERVE BANK

12

ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

banks to seek other fields for investment. The volume of commercial
loans reported by the member banks in the district averaged $7,000,000
less than in 1926, the decrease being entirely that of the Boston banks, the
outside banks showing actually a slight increase. At the year's end, however, the Boston banks showed an increase of $25,000,000 in commercial
loans as compared with a similar date in 1926 and the outside banks a
slight decrease. Through this situation the expansion of credit in this
district has been evidenced in the increase in holdings of bonds and stocks,
loans secured by bond and stock collateral and real estate mortgages.
There are no records that show the increase of loans against real estate as
such loans are not segregated by the reporting banks, but there is ample
evidence in the reports of examinations of these banks. The member
banks show an average increase in the holdings of bonds and stocks of
$60,000,000 in 1927 over 1926, the increase being about equally divided
between the Boston and outside banks; and an increase in bonds and
stocks of $98,000,000 at the end of the year of which $46,000,000 consists
of United States Government securities held by the Boston banks. Loans
against bond and stock collateral averaged $15,000,000 higher than in
1926, this increase being about equally divided between the Boston and
outside banks. At the end of the year the increase in collateral loans as
compared with a year ago showed an increase of $28,000,000 of which
all but $8,000,000 was in loans made by banks in the eight cities outside
of Boston.
MONEY RATES
Money rates in the New England district were steady during 1927 with
a slight tendency downward, prime commercial paper averaging around
4 per cent throughout the year although in June and July, \yi per cent
for a short period was the ruling rate, the year ending with a 4 per cent
rate contrasted with 4 ^ per cent at the close of 1926. Bankers' prime
ninety day acceptances were generally quoted at 3 ^ per cent during the
first half of the year, although there were short periods in February and
again in June when 3H per cent was the customary yield. During July
the course of acceptance rates was steadily downward, the first reduction
occurring on July 11 when brokers reduced their asking rate from 3 ^
to 2>H per cent; a few days later it was reduced to 3 ^ per cent, followed
in quick succession by other reductions which ultimately brought the
rate to 3 ^ per cent on August 1, — several days previous to the reduction
in the discount rate of the Federal Reserve Bank of Boston on August 5.
This low $}i per cent rate remained effective until early in October when
it reacted to 3 ^ per cent where it stood at the close of the year. Rates on




ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

13

time collateral loans averaged between 4 ^ to 5 per cent, 4>^ per cent
being the current rate as the year ended. Real estate mortgages were
available from 5 to 6 per cent, the former rate on highest grade loans.
The total earning assets of the Federal Reserve Bank of Boston, i.e.
advances to member banks and purchases in the open market of United
States Government securities and bankers' acceptances, averaged
$4,600,000 less than in 1926. This reduction came in advances to member
banks. Although the acceptance market in Boston was more active
than in 1926, the holdings of such investments by the Boston reserve
bank averaged $6,900,000 less, large amounts of its purchases being
distributed to other Federal Reserve Banks. On the other hand, the
holdings of United States Government securities purchased in the
open market showed an average increase of $6,700,000 during the year
over those held in 1926. Federal Reserve notes averaged $12,000,000
less than in 1926, a reflection, no doubt, of the decrease of business
activity in the country. The deposits of member banks in the Reserve
Bank of Boston averaged $4,600,000 higher than in 1926. This represents
the increase in reserve requirements caused by the increase of deposit
liability of member banks. The combined ratio of cash reserves to Federal
reserve note and deposit liabilities averaged 76.3 per cent contrasted with
76.2 per cent in 1926.
In conjunction with the reduction of discount rates by the New York
Reserve Bank and several other reserve banks the directors of the Federal
Reserve Bank of Boston, acting with the approval of the Federal Reserve
Board, reduced its rate of discount from 4 per cent to 3>£ per cent on
August 5. While this change of discount rate was felt on rates charged by
member banks to their customers and on acceptance rates through the
reduction of the purchase rate it made no material difference in the
volume of advances made by the reserve bank to its member banks. This
reduction of rates did, however, bring into the Boston district a demand
for acceptance credits against raw material, credits which usually at the
Fall season are taken out in Europe, and the acceptance liability of
member banks in New England increased from $82,000,000 in July to
$137,000,000 on December 31, the highest figure on record, see tabi^at bottom of
BUYING RATES ON ACCEPTANCES
Date of Change

* January I, 1927
July 29, 1927
August 5, 1927
August 22, 1927
*In effect on.




I-I5
Days

16-45
Days

$}4

3^2

3A

46-00
Days

91-120
Days

121-180
Days

3/4
3lA

33A
3

33A
33A
33A

33A

3/4

3
3

2,yi
3

33A

3A

4

14

ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

COMPARATIVE STATEMENT OF CONDITION
(000 omitted)
RESOURCES

IQ2?

IQ26

I. EARNING ASSETS: —

1. Loans to Member Banks: —
(a) On the security of obligations of the United States. .
(b) By the discount of commercial or agricultural paper
or acceptances

$ 19,061

$ 32,294

9.537

2. Acceptances bought in the open market

33>8o8

$ 28,598

Total loans to member banks

$ 66,102

48,410

47,201

3. United States Government securities bought in the open
market: —
(a) Bonds
(b) Treasury Notes
(c) Certificates of Indebtedness

15.157
2,463
15,738

530
2,141
7.493

Total U. S. Government Securities Bought

$ 33,358

$ 10,164

TOTAL BILLS AND SECURITIES

$110,366

$123,467

126.364

96,738

9,258

6,351

19,922
38,893

39,336
35,4-87

Total Gold Reserves
$194,437
5. Legal tender notes, silver, and silver certificates in t h e
vaults of the bank, and available as reserves only against
deposits
14,477

$ I 77,9i2

II. CASH RESERVES held by this bank against its deposits and
circulation: —
1. Gold held by the Federal Reserve Agent as part of t h e
collateral deposited by the Bank to secure Federal Reserve Notes as issued by the Agent partly in his own
vaults at the bank and partly with the Treasurer of the
United States at Washington
2. Gold Redemption Fund in the hands of the Treasurer of the
United States for use in redeeming such Federal Reserve
Notes as are presented to the Treasury for redemption . .
3. Gold in the Gold Settlement Fund maintained by the
Federal Reserve Board and lodged with the Treasurer
of the United States for the purpose of settling current
transactions between Federal Reserve Districts
4. Gold and Gold Certificates in the bank's own vault

TOTAL CASH RESERVES

III. NON-RESERVE CASH (National Bank Notes, Federal Reserve Bank Notes and minor coin)

15,326

$208,914

$193,238

9,860

7,902

IV. MISCELLANEOUS: —

Checks and other items in process of collection
Bank premises
All other resources
TOTAL MISCELLANEOUS
TOTAL RESOURCES




$ 69,175
3,824
115

$ 65,525
3,946
75

$ 73,114

$ 69,546

$402,254

$394,153

ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

15

COMPARATIVE STATEMENT OF CONDITION
(000 omitted)

LIABILITIES

IQ27

IQ26

I. CAPITAL AND SURPLUS: —

1. Capital paid in, equal to 3 per cent of the capital and
surplus of member banks
$ 9,412
2. Surplus — that portion of accumulated net earnings
which the bank is legally required to retain
17*893
Total Capital and Surplus
$ 27,305

$ 8,800
17,606
$ 26,406

II. DEPOSITS: —

1. Deposits maintained by member banks as legal reserves
against the deposits of their customers
158,024
2. U. S. Government deposits carried at the Reserve bank
for current requirements of the U. S. Treasury
1,642
3. All other deposits (including foreign deposits, deposits
of non-member banks, etc.)
652
Total Deposits
$160,318

147,016
i,95i
2,268
$151,235

III. CURRENCY IN CIRCULATION: —

Federal Reserve Notes in actual circulation, payable in
gold on demand; these notes are secured in full by gold
and discounted and purchased commercial paper and
acceptances

149,630

154,363

64,791
210
65,001

61,867
282
62,149

$402,254

$394,153

IV. MISCELLANEOUS LIABILITIES: —

1. Deferred items, composed mostly of uncollected checks
on banks in all parts of the country; such items are
credited as deposits after the average time needed to
collect them elapses, ranging from 1 to 8 days
2. All other liabilities
Total Miscellaneous Liabilities
TOTAL LIABILITIES

The principal changes as between December 31 of 1927, compared
with December 31, 1926, reflected by this statement of condition, are
as follows:—
1. A decrease in loans to member banks of $38,000,000.
2. An increase in the holdings of acceptances bought in the open market of $1,000,000.
3. An increase of $23,000,000 in the holdings of government securities.
4. An increase of $17,000,000 in the gold reserve.
5. An increase of $899,000 in capital and surplus.
6. An increase of $11,000,000 in reserve deposits of member banks.
7. A decrease of $5,000,000 in Federal Reserve Notes in actual circulation.




16

ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

A comparison of the income and disbursements of the Federal Reserve
Bank of Boston for the years 1926 and 1927 appears in the following
table:
INCOME AND DISBURSEMENTS
EARNINGS: —

1Q27

From loans to member banks and paper discounted for
them
$1,242,463
From acceptances owned
1,025,348
From U. S. Government obligations owned
607,374
Other earnings (including deficient reserve penalties)
100,172
Total earnings
Additions to earnings

1Q26

$1,463,790
1,278,862
401,552
174,873

$2,975,357
3.7O7

$3,319,077
8,530

2,979,064

3,327,607

1,976,935

2,032,412

164,518

138,322

Total Deductions
$2,141,453
NET INCOME available for Dividends, Surplus and Franchise
Tax to the U. S. Government
$ 837,611

$2,170,734

Total applicable to expenses and other deductions
DEDUCTIONS: —

For the expense of current bank operation, including the
non-reimbursable expense incurred as Fiscal Agent of the
U. S. and for printing of Federal Reserve Notes
All other deductions, including those on account of depreciation on bank premises, machinery and equipment,
cost of new furniture and equipment, and miscellaneous
small items

$1,156,873

DISTRIBUTION OF NET INCOME: —

Dividends paid member banks at rate of 6 per cent on
paid-in capital
Additions to Surplus (the bank is required 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
accumulated, to pay into surplus each year 10 per cent
of the net income remaining after paying dividends).. ..
Franchise tax paid U. S. Government (representing the
entire net income of the bank after paying dividends
and making additions to surplus; Federal Reserve notes
are not taxed, and this payment is in lieu of taxes on
notes and other Federal taxes)
Deficit of net income after dividend payments charged to
Surplus account
Total

•.

55O.445

525,023

287,166

585,888

None

45,962

None

None

$ 837,611

$1,156,873

The total gross earnings for the year 1927 were $2,979,064, or $348,543
less than in 1926, largely due to the decrease in the volume of borrowings
by member banks and to the lower level of discount rates — discount
rate being reduced from 4 to 3^2 per cent on August 5. The expense of
current operations of the bank, including expenses incurred as Fiscal
Agent of the United States, was $55,477 less than in 1926, although the




ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

17

volume of checks and currency handled and other services for member
banks, has increased during the year, as will be seen from the table
showing the volume of operations. The net income for the year was sufficient to pay the 6 per cent dividend on the capital stock to member banks
provided for by the Act after setting aside $164,518 for depreciation of
building and other reserves, and to add to surplus $287,000 ,which, under
the law, must be increased by net income after dividends until it is equal
to the total subscribed capital stock of the bank.
VOLUME OF OPERATIONS
The following table indicates that the volume of operations in the
principal departments of the bank have for the most part continued to
increase from year to year.
NUMBER OF PIECES HANDLED:—

Bills Discounted: —
Applications
Notes discounted
Bills purchased in open market for
own account
Currency received and counted...
Coins received and counted
Checks handled (including government)

1927

1926

1925

6,842
37,6oi

8,527
42,290

8,038
46,961

37,i6i
240,778,000
181,602,000

38,962
237,828,000
191,127,000

27,772
228,605,000
182,778,000

81,334,000

76,920,000

70,534,000

Collection items fiandled: —
U. S. Government coupons paid.
All other

3,000,192
415,000

3,364,000
418,000

3,906,000
428,000

U. S. Securities: —
Issues, redemptions, and exchanges by fiscal agency department
Transfers of funds (including 5%
fund, National banks)

569,000

362,000

561,000

57,ooo

55,ooo

53. 0 0 0

AMOUNTS HANDLED: —

Bills discounted
$2,119,260,000 $2,767,740,000 $2,065,956,000
Bills purchased in open market for
own account
548,592,000
539,002,000
396,319,000
Currency received and counted...
1,481,109,000
1,446,805,000
1,404,472,000
Coin received and handled
21,281,000
21,328,000
20,945,000
Checks handled (including government)
20,931,495,000 20,387,366,000 18,208,989,000
Collection items handled: —
U. S. Government coupons paid.
46,227,000
54,516,000
59,024,000
All other
636,360,000
636,317,000
705,261,000
U. S. Securities: —
Issues, redemptions and exchanges by Fiscal Agency Department
710,990,000
326,918,000
318,786,000
Transfers of funds (including 5%
fund, National Banks)
7,637,204,000 7,419,450,000
6,329,210,000




18

ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

CHANGES IN MEMBERSHIP

The total number of member banks on December 31, 1927, was 414,
a net loss of two members during the year. Three new national banks
were organized, — the Capitol National Bank, the name of which was
afterwards changed to the Capitol National Bank and Trust Company,
Hartford, Connecticut; the Cambridge National Bank, Cambridge,
Massachusetts; and the First National Bank, Revere, Massachusetts,
which has become a stockholder but which has not yet commenced business. There was a loss of five members during the year, — the Fitchburg
Bank and Trust Company, Fitchburg, Massachusetts, consolidated with
the Merchants National Bank of Worcester, Massachusetts, under the
name of the Worcester County National Bank, which is maintaining as a
branch at Fitchburg the former branch office of the Fitchburg Bank and
Trust Company; The Wamesit National Bank, Lowell, Massachusetts,
was absorbed by the Union National Bank of Lowell, Massachusetts;
the Chicopee National Bank of Springfield, Massachusetts, consolidated
with the Third National Bank of Springfield, Massachusetts, the name,
Third National Bank and Trust Company being subsequently adopted;
the Citizens National Bank of Boston, Massachusetts, was absorbed by
the National Shawmut Bank of Boston, Massachusetts; and the Merrill
Trust Company of Bangor, Maine, withdrew from membership.
The capital stock of the Federal Reserve Bank of Boston which represents an investment by the member banks of 6 per cent of their capital
and surplus, it will be noted, increased $612,000 during the year.
RELATIONS WITH FOREIGN BANKS OF ISSUE
During 1927 the Federal Reserve Bank of Boston continued its participation in arrangements made by the Federal Reserve Bank of New York
with foreign banks of issue. The additional participations taken by this
bank during the year 1927 were in agreements between the Federal
Reserve Bank of New York and the following foreign banks: The Finlands Bank, the Bank of England, the Bank of Poland, the Banca d'ltalia,
the Norges Bank, and the Commonwealth Bank of Australia.
BANK ORGANIZATION AND PERSONNEL
Directors: On December 31, 1927, the terms of Mr. Edward S. Kennard
as Class A director, Mr. Charles G. Washburn as Class B director, and
Mr. Allen Hollis as Class C director, expired. Mr. Kennard and Mr.
Washburn were re-elected for three year terms by the member banks in
Group 3, — banks having a combined capital and surplus of less than




ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF BOSTON

19

$300,000, — and Mr. Hollis was reappointed by the Federal Reserve
Board for a similar term of three years. The Federal Reserve Board also
redesignated Mr. Frederic H. Curtiss as Chairman and Federal Reserve
Agent, and Mr. Allen Hollis as Deputy Chairman, for the year 1928.
Advisory Council: At a meeting of the Board of Directors held on
January 12, 1927, Mr. Arthur M. Heard, President of the Amoskeag
National Bank of Manchester, N. H., was appointed Member of the
Federal Advisory Council to represent the First Federal Reserve District
for the year 1927. Mr. Heard was a member of the first board of directors
of the Federal Reserve Bank of Boston and served as a Class A director
of the bank until December 31, 1918.
Personnel: No changes in the official staff occurred during the year
1927. The number of employees on December 31, 1927 was 700, compared
with 699 on December 31, 1926.
STOCKHOLDERS' MEETING
The Fifth Annual Meeting of the Stockholding Member Banks was
held on November 11, 1927, at the Federal Reserve Bank of Boston.
Delegates representing 208 member banks and sixty-seven other member
banks' representatives were in attendance. The principal speaker was
Hon. Ogden L. Mills, Under-Secretary of the Treasury, who delivered
an address on the subject of "Federal Taxation." At the morning session
Hon. Channing H. Cox, Vice-President of the First National Bank of
Boston, and Mr. W. F. Augustine, Vice-President of the National Shawmut Bank of Boston, led a discussion of resolutions before the meeting.
Hon. C. S. Hamlin, a member of the Federal Reserve Board, was among
the invited guests. At the afternoon session there was a report of progress
by the Bankers' Committee co-operating with the Research Committee of
the New England Council, Mr. Charles F. Mills, Vice-President of the
First National Bank of Boston being Chairman of the Bankers' Committee. Following the report of the Committee on Resolutions, a resolution
favoring the continuance of national bank note circulation was adopted.
ACCEPTANCE LIABILITIES
Of all Banks and Acceptance Corporations in Federal Reserve District 1
1927

January 31
February 28
March 31
April 30
May 31
June 30
July 31
August 31
September 30
October 31
November 30
December 31



$ 86,000,000
86,000,000
90,000,000
90,000,000
82,000,000
82,000,000
82,000,000
86,000,000
91,000,000
110,000,000
122,000,000
137,000,000

1926

$94,000,000
99,000,000
96,000,000
90,000,000
84,000,000
77,000,000
71,000,000
66,000,000
64,000,000
58,000,000
71,000,000
82,000,000

1925

$97,000,000
99,000,000
99,000,000
92,000,000
80,000,000
68,000,000
60,000,000
60,000,000
60,000,000
68,000,000
71,000,000
82,000,000