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1925 Sleventh oAnnual %eport of the FEDERAL RESERVE BANK OF PHILADELPHIA MADE TO THE FEDERAL RESERVE BOARD FOR THE THIRD FEDERAL RESERVE DISTRICT BY THE CHAIRMAN OF THE BOARD AND FEDERAL RESERVE AGENT LETTER OF TRANSMITTAL February 18, 1926 Federal Reserve Board, Washington, D. C. Sirs: I have the honor to transmit herewith the eleventh annual report on the operations of the Federal Reserve Bank of Philadelphia, covering the year 1925. Very truly yours, RICHARD L. AUSTIN Chairman of the Board and Federal Reserve Agent 1925 dleventh oAnnual %eport of the FEDERAL RESERVE BANK OF PHILADELPHIA MADE TO THE FEDERAL RESERVE BOARD FOR THE THIRD FEDERAL RESERVE DISTRICT BY THE CHAIRMAN OF THE BOARD AND FEDERAL RESERVE AGENT CONTENTS Page Profit and loss statement 5 Statement of condition 7 Loans and discounts 8 Reserve position 10 Federal reserve note issues 11 Money rates and the discount rate 12 Departmental operations 13 Internal organization 16 Banks of the district: Changes in condition of member banks 17 Membership 18 Fiduciary powers 18 Earnings and expenses of member banks 19 Relations with banks 20 Business conditions: General conditions during 1925 20 Car loadings 22 Employment and wages 22 Building activity 22 Retail and wholesale trade 23 • • Eleventh Annual Report of the Federal Reserve Bank of Philadelphia Profit and loss statement The profit and loss account of the Federal Reserve Bank of Philadelphia for 1925 is given below in comparison with results in the two preceding years: 1923 Gross earnings Current expenses Current net earnings Additions to current net earnings.... Deductions from current net earnings Net deductions from current net earnings Net earnings available for dividends, surplus and franchise tax Distribution: Dividends Paid to Government as a franchise tax Transferred to surplus account.... 1924 1925 $4,592,771 2,295,726 $2,915,845 2,153,835 $3,135,550 2,036,268 $2,297,045 $762,010 $1,099,282 19,617 138,825 22,131 37,049 $119,208 $14,918 $21,162 $2,177,837 8747,092 $1,078,120 $582,292 $615,135 $673,212 416,957 1,178,588 131,957 404,908 566 21,728* ''Of this sum $16,887 represents furniture and equipment charged off. Various causes contributed to a better demand for credit, necessitating more rediscounting than during the previous year. The average of bills and securities held increased from $71,608,000 in 1924 to $86,506,000 in 1925, but the rate of return declined from 4.02 per cent to 3.58 per cent. Gross earnings surpassed those in 1924, but current expenses were lower than at any time since 1919. In comparison with 1921, the year of heaviest expense, a saving of $331,000 was realized, principally owing to declines in salary pay Eleventh Annual Report, Federal Reserve Bank of Philadelphia ments, printing and stationery, supplies, and in the cost of printing and redeeming Federal reserve currency. Net earnings increased from $747,092 in 1924 to $1,078,120 in 1925. Increased capital, due to growth in membership and in the capital and surplus of member banks, made larger dividend payments necessary, leaving $404,908 for transfer to the surplus account, which is still less than 100 per cent of the subscribed capital. A comparison of current expenses in 1925 with those in 1924 is given in the table below: 1924 Operating departments: Loans and discounts Currency and coin (includes insurance, mail and express charges for shipments) Transit and collections Fiscal agency functions Custody of securities and cash. .. Purchase and sale of securities (includes insurance, mail and express charges for shipments) Transfer of funds Bank relations Federal Reserve Agent's dep'ts i (includes custody of collateral j against Federal reserve notes, i note issues, examination of j banks, research and preparation of statistics, publication of monthly business review and reference library) Maintenance of accounts Maintenance of the audit Service departments: Telegraph and telephone (ex-1 penses in 1925 largely distrib- j uted to other departments).. j Personnel Mail distribution and filing Printing and supplies Guards 1925 Percent change $56,975.07 $53,436.09 — 6.2% 616,690.95 425,605.44 62,280.91 37,318.37 621,344.55 423,133.48 51,143.49 36,371.23 — 0.6 " —17.9 " — 2.5 " 25,753.89 11,329.73 8,042.43 31,672.75 15,996.09 13,364.06 +23.0 " +41.2 " +66.2 " 148,725.09 96,744.93 72,774.35 105,108.86 95,491.56 61,615.18 —29.3 " — 1.3" —15.3 " 44,298.52 20,818.14 20,240.85 45,476.62 62,150.79 20,718.96 17,253.17 18,329.91 27,117.55 55,715.57 —17.1 " — 9.4 " —40.4 " —10.4 " 146,913.55 142,813.91 — 2 8" 7,565.40 7,176.34 — 5.1" + 0.8" General: Official salaries and supervisory expenses Directors' fees and traveling expenses Eleventh Annual Report, Federal Reserve Bank of Philadelphia 1924 Assessment on account of Federal Reserve Board Expenses. . Insurance Legal expenses Traveling expenses (expenses in 1925 distributed to other de- j partments) ! Operation of banking house Miscellaneous Total—current expenses.... Percent change 1925 $60,321.67 34,575.80 5,462.02 $66,139.02 32,169.06 2,846.91 5,288.64 128,279.15 10,203.44 126,553.87 10,756.77 + 9.6" — 7.0 " —47.9 " i 1 o ii JL.o + 5.4" $2,153,835.75 | $2,036,268.38 Statement of condition The statement of this Bank at the end of 1925 appears in the following table, together with statements at the close of 1924 and 1923: (000's omitted) December 31,1923 December December 31,1924 ! 31,1925 RESOURCES Gold reserves Reserves other than gold Total reserves Non-reserve cash Bills discounted: Secured by Government obligations Other bills discounted Total bills discounted Bills bought in open market U. S. Government securities Federal intermediate credit bank bonds. Foreign loans on gold Total bills and securities. Uncollected items All other resources Total resources $249,034 10,747 $231,567 4,994 $216,812 4,910 j $259,781 \ 1,345 $236,561 1,731 $221,722 1,716 42,814 16,110 27,411 8,873 34,450 18,807 $58,924 $36,284 $53,257 33,261 12,952 18,276 29,889 1,550 582 16,923 24,063 3,050 725 $105,137 $86,581 $98,018 53,356 59,472 65,526 1,295 1,317 1,518 | $420,914 $385,662 $388,500 Eleventh Annual Report, Federal Reserve Bank of Philadelphia (OOO's omitted) December j December December 31,1923 31,1924 | 31,1925 LIABILITIES Federal reserve notes in actual circulation $221,038 i $168,737 I $155,933 Deposits: Member bank—reserve account Government Other deposits Total deposits 119,129 [ 2,437 ! ' 337 I 129,677 , 2,152 i 807 ! 139,272 1,256 1,211 $121,903 $132,636 $141,739 47,805 9,941 19,927 53,591 10,518 20,059 58,539 11,623 20,464 300 121 202 $420,914 $385,662 $388,500 Ratio of total reserves to deposit and Federal reserve note liabilities combined. . . 75.8% 78.5% 74.5% Contingent liability on bills purchased for foreign correspondents $1,633 $4,140 $6,541 Deferred availability items Capital paid in Surplus All other liabilities Total liabilities Loans and discounts of the Bank Holdings of bills and securities by this Bank increased from $86,581,000 on December 31, 1924, to $98,018,000 at the end of 1925. Bills discounted followed a generally rising course during the year, a course which was very similar to that followed by the Federal reserve banks as a whole. The lowest point here was 22.6 millions on January 20 and the highest, 66.5 millions on December 23. The net increase for the year was 17 millions, or 47 per cent. Holdings of other bills and securities rose from 50 millions at the beginning of the year to a peak of 66 millions on March 17. The total subsequently declined to 31 millions on July 28. Over the last five months of the year fluctuations were less striking and the year ended with holdings of 45 millions, a decline of 5 millions from the beginning of the year. In past years variations in borrowing have mainly resulted from the changing needs of banks in the larger cities. Their weekly reports of condition, therefore, are of particular interest to those who would understand the changes in borrowings at the reserve banks. Borrowings by member banks in smaller centers show much less variation. Eleventh Annual Report, Federal Reserve Bank of Philadelphia MI LLtONS OF DOLLARS FEDERAL RESERVE BANK OF PHILADELPHIA (Monthly avercig'es of daily fig'ures) 300 280 RESERVE CASH 220 200 180 FEDERAL RESERVE NOTE CIRCULATION 160 14-0 TOTAL DEPOSITS ... 120 TOTAL BILLS AND SECURITIES 100 80 LLS DISCOUNTED 1923 1924 925 Eleventh Annual Report, Federal Reserve Bank of Philadelphia Reserve position of the Bank Owing to the fact that an increasing amount of gold certificates has been put into circulation, taking the place of Federal reserve notes in a measure, it is interesting to note the effect upon the reserve ratio. This ratio is the percentage of reserve cash to the combined liabilities—total deposits and Federal reserve notes in circulation. The offsetting of a deposit liability by an issue of notes makes no change in the actual liabilities of the reserve bank. However, if gold certificates are issued, reserve cash is diminished and the reserve ratio declines. The amount of money in circulation in the United States has remained relatively steady during the past two years. The extent to which Federal reserve notes have been replaced by gold certificates appears in the table: (000,000'a omitted)1 cerS£Ls January 1, 1924. . "1925.. "1926.. $582 970 1,114 j reJrcnrtes $2,224 1,842 1,816 Other money i Total money $2,145 2,181 2,078 $4,951 4,993 5,008 The circulation of gold certificates increased 532 millions in the years 1924 and 1925 and Federal reserve notes declined 408 millions. The total circulation of Federal reserve notes fell 17 per cent in 1924 and a little over 1 per cent in 1925. The notes issued by this Bank decreased to a greater extent—24 per cent in 1924 and 8 per cent in 1925. From 169 millions on January 1, 1925, the circulation of this Bank declined to 148 millions on January 22, but rose to 164 millions on March 14. Thereafter the trend was irregular, but mainly downward, the lowest point being 143 millions on November 18. Undoubtedly the strike in the anthracite coal regions was partially responsible for the low level reached so late in the year. The Christmas season's demand for currency followed the usual course and circulation reached its maximum at almost 170 millions on December 24, dropping to 156 millions at the close of the year, which was nearly 13 millions less than at the beginning of the year. The growth of the banks of the district is reflected in an increase in the balances carried here, a gain of more than 9 millions taking place from 129.7 millions on January 1 to 139.3 millions at the close of the year. Reserve cash decreased by almost 15 millions during 1925. At the beginning of the year and in the last two months seasonal 10 Eleventh Annual Report, Federal Reserve Bank of Philadelphia changes in Federal reserve note circulation exerted a greater influence upon the reserve ratio than did changes in deposits or reserve cash, but over the balance of the year the ebb and flow of gold more largely accounted for the significant changes in this ratio, as will be noted in the table below: Changes in reserve ratio Jan. 1—Jan. 21 Jan. 21—Mar. 18 Mar. 18—July 8 July 8—Oct. 21 Oct. 21—Nov. 4 Nov. 4—Dec. 28 Dec. 23—Dec. 31 Total changes.... +4.2# Changes in factors from which reserve ratio is computed (000's omitted) Cash F. R. note Total reserve? circulation deposits —8.5 " +7.2 " —9.1 " +6.0 " —6.2 " +2.4 " —$5,700 —18,300 +18,000 —28,200 +18,100 — 5,300 + 6,600 —$20,300 + 8,200 — 3,400 — 8,800 + 1,300 + 23,000 — 12,800 —$2,000 700 + 100 + 5,300 + 400 — 6,000 +12,000 —4.0% —$14,800 —$12,800 +$9,100 During 1925 the reserve ratio of this Bank fluctuated more than 15 per cent, from a high point of 83.6 per cent on January 24 to a low of 68.2 per cent on October 16. At the close of the year the ratio was 74.5 per cent, only 4 per cent below the figure on December 31, 1924. During the last two years the reserve ratio of this Bank has usually been higher than that of the system. Federal reserve notes A statement of the accounts of the Federal reserve agent follows: December 31 1923 RESOURCES Federal reserve notes on hand. . Federal reserve notes outstanding Collateral security held: Gold certificates on hand Gold in gold redemption fund. Gold with Fed. Reserve Board Eligible paper Total resoui*ces December 31 1924 December 31 1925 $38,400,000 $32,000,000 $28,000,000 255,836,875 215,664,025 195,800,860 14,000,000 13,180,115 153,889,260 80,849,544 6,000,000 14,847,265 147,389,260 52,898,583 2,000,000 11,784,100 127,389,260 56,640,423 $556,155,794 11 $408,799,133 $421,614,643 Eleventh Annual Report, Federal Reserve Bank of Philadelphia December 31 1923 LIABILITIES Federal reserve notes received from comptroller—net Collateral pledged by Bank against outstanding notes: Gold and gold certificates.... Eligible paper Total liabilities December 31 1924 December 31 1925 $294,236,875 $247,664,025 $223,800,860 181,069,375 80,849,544 168,236,525 52,898,583 141,173,360 56,640,423 $556,155,794 $468,799,133 $421,614,643 Federal reserve note circulation was lower in 1925 than in 1924, nevertheless a larger amount of new notes was required. In the table below amounts outstanding, issued and redeemed in 1924 and 1925, are given: 1924 1925 $255,836,875 128,160,000 16,000,000 $215,664,025 133,200,000 10,000,000 Notes redeemed and fit notes returned* $399,996,875 184,332,850 $358,864,025 163,063,165 Outstanding at end of year $215,664,025 $195,800,860 Federal reserve notes: Outstanding, beginning of year Issued (new notes) during year Issued (fit notes) during year * Includes $16,000,000 fit notes returned in 1924 and $10,000,000 in 1925. Money rates and the discount rate In the last half of 1924 the market rate for commercial paper fell to 3-3^4 per cent and 90-day bankers' acceptances were offered as low as 2 per cent. Towards the close of the year increasing firmness was manifested and this continued over the greater part of 1925, although rates for such paper were comparatively stable in the middle of the year. At the close of 1925 commercial paper was quoted at 41/4-4i/^ per cent, as compared with 3 ^ - 3 % per cent at the close of 1924, and bankers' bills were offered at 3% per cent as against 3 per cent in December, 1924. Increasing demand for credit during 1925 was indicated in the expansion of the loans of member banks, and was followed by 12 Eleventh Annual Report, Federal Reserve Bank of Philadelphia larger borrowings from the reserve banks. Rates for money strengthened throughout the country as was shown by increases in the discount rates of several of the reserve banks, including this Bank. The change in the rate of this Bank took place on November 20, when it was advanced from 3*/2 to 4 per cent. Departmental operations In the following table comparison is made of the operations of the principal departments of the Bank during 1925 with those in 1924: Number of items Dollar amount of items Bills discounted + 3.8% Purchased bills +36.4M Currency received and counted + 6.3 " Coin received and counted +22.7" Checks handled +12.1" Collections handled: U. S. Government coupons paid —13.3 " All other + 5.9" U. S. securities issued, redeemed and exchanged by fiscal agency department —50.7 " Transfers of funds (exclusive of clearings by wire) j + 4.0 " +59.4% +45.2" + 3.0 " +18.3" +23.8" — 8.9 " +14.4" —20.6 " + 3.3 " These percentages indicate a considerable increase in the volume of work handled by this Bank. In comparison with 1921, the year in which current expenses were largest, the changes are still more striking, as the following percentages (based on number of items handled) show: bills discounted, decreased 48 per cent; purchased bills, increased 53 per cent; currency counted, increased 67 per cent; checks handled (including return items), increased 23 per cent; United States Government coupons paid, decreased 51 per cent; other non-cash collection items handled, increased 119 per cent; the issue, redemption and exchange of United States securities, decreased 84 per cent; wire transfers and transfers for national banks to the 5 per cent redemption fund, increased 40 per cent. The number of officers and employees has been reduced by 161, or 18 per cent, since the end of 1921. 13 Eleventh Annual Report, Federal Reserve Bank of Philadelphia Details of the operations of the principal departments of the Bank are given in the table following: 1923 1924 1925 Total number of piece ft handled Bills discounted: Applications received Notes discounted Bills purchased in open market for own account Currency received and counted Coin received and counted.... Checks handled (exclusive of return items) Collection items handled: U. S. Government coupons paid . All other U. S. securities — issues, redemptions, and exchanges by fiscal agency department... Transfers of funds (exclusive of clearings by wire) 17,583 53,614 14,029 35,579 15,978 36,921 11,367 156,722,000 194,118,000 6,630 164,432,000 216,525,000 9,044 174,790,000 265,610,000 51,325,000 59,010,000 66,164,000 6,355,000 382,000 4,952,000 458,000 4,292,000 485,000 6,754,000* 1,211,000 597,000 78,662 81,822 74,031 Total dollar amounts handled Bills discounted $1,264,030,000 $2,014,776,000 : $2,911,142,000 Bills purchased in open market for own account \ 159,105,000 89,140,000 129,441,000 Currency received and counted 1,011,761,000 1,084,405,000 i 1,117,470,000 Coin received and counted. .. . 27,062,000 30,353,000 35,901,000 Checks handled (exclusive of return items) 15,808,129,000 i 20,795,229,000 25,743,036,000 Collection items handled: U. S. Government coupons paid 63,054,000 55,876,000 50,890,000 All other 432,479,000 462,479,000 529,267,000 U. S. securities — issues, re- j demptions, and exchanges by j fiscal agency department... j 578,493,000 456,097,000 361,969,000 Transfers of funds (exclusive j of clearings by wire) j 3,379,281,000 4,748,989,000 4,907,549,000 * Large total due to redemption of war savings securities which matured January 1, 1923. 14 Eleventh Annual Report, Federal Reserve Bank of Philadelphia The number and amounts of items handled on the average working day appear in the following table: 1923 Average number of pieces handled Bills discounted: Applications received Notes discounted Bills purchased for own account Currency received and counted Coin received and counted Checks handled (exclusive of return items) Collection items handled: U. S. Government coupons paid All other collections United States securities—issues, redemptions and exchanges by fiscal agency department Transfers of funds (exclusive of clearings by wire) Average dollar amounts handled Bills discounted Bills purchased for own account Currency received and counted Coin received and counted Checks handled (exclusive of return j items) i Collection items handled: U. S. Government coupons paid All other collections United States securities—issues, re-1 demptions and exchanges by fiscal agency department Transfers of funds (exclusive of clearings by wire) 1924 1925 59 179 46 118 53 123 38 522,000 647,000 22 544,000 717,000 30 581,000 882,000 171,000 195,000 220,000 21,183 1,275 16,397 1,516 14,260 1,610 22,513 4,010 1,984 247 260 272 $9,704,000 ! $4,186,000 530,000 ! 295,000 3,373,000 3,591,000 90,000 101,000 $6,694,000 430,000 3,713,000 119,000 52,694,000 I 68,858,000 85,525,000 185,000 1,531,000 169,000 1,758,000 1,928,000 ! 1,510,000 1,203,000 11,264,000 I 15,725,000 16,304,000 210,000 1,442,000 During 1925 the department of bank examination made 56 credit investigations and examinations of member state institutions in co-operation with the state banking departments. In addition the department examined independently 11 state banks and trust companies which had applied for membership, made 3 independent credit investigations, and conducted 9 investigations in connection with the organization of new national banks. Twentyone applications for fiduciary powers and 14 applications under the Clayton Act also were handled. 15 Eleventh Annual Report, Federal Reserve Bank of Philadelphia Internal organization The annual election for directors resulted in the re-election of Alba B. Johnson and John C. Cosgrove as directors for terms of three years from January 1, 1926, representing banks of class B, group 1, and class A, group 3, respectively. The Federal Reserve Board reappointed Harry L. Cannon as a class C director for a like term. By election of the board of directors, Levi L. Rue, president of the Philadelphia National Bank, represented this district on the Federal Advisory Council during 1925. Board of Directors Name Class Residence Term expires Group 1 Joseph Wayne, Jr., president Philadelphia, Pa. Dec. 81, 1926 Girard National Bank, Philadelphia, Pa. Group 2 Francis Douglas, cashier, First Wilkes-Barre, Pa. Dec. 81, 1927 A..< National Bank, Wilkes-Barre, Pa. Group 3 John C. Cosgrove, director, Johnstown, Pa. First National Bank, Hastings, Pa. Dec. 31, 1925 ' Group 1 Alba B. Johnson, chairman of Rosemont, Pa. Dec. 31, 1925 board, Southwark Foundry and Machine Co., Philadelphia B . . . Group 2 Edwin S. Stuart, merchant, Philadelphia, Pa. Dec. 31, 1926 Philadelphia, Pa. Group 3 Charles K. Haddon, merchant, Haddonfield, N. J. Dec. 81, 1927 Camden, N. J. f 1 I A. Dyer, the cashier of the Bank, tendered his resignaWilliam Richard L. Austin, chairman of Philadelphia, Pa. Dec. 31, 1926 "Hit* \J\JtXl KA. hojiY*fi tilt. Charles C. Harrison, deputy- Philadelphia, Pa. Dec. 31, 1927 chairman of the board Harry L. Cannon Bridgeville, Del. Dec. 31, 1925 tion to take effect May 31. A minute adopted by the board of directors read in part as follows: "The Board of Directors of the Federal Reserve Bank of Philadelphia desires to record the regret with which it receives the resignation of Mr. William A. Dyer as cashier. . . "His resignation represents to this bank the loss of a most efficient officer, and to the directors and other officers the loss of a trusted and valued friend and colleague. . . . " 16 Eleventh Annual Report, Federal Reserve Bank of Philadelphia Mr. Dyer closed a service of almost seven years at this institution to take up the presidency of the Manayunk National Bank of Philadelphia. C. A. Mcllhenny, formerly an assistant cashier, was appointed to succeed him. At the end of 1925 the official staff numbered 11, as compared with 13 at the beginning of the year. The number of employees was reduced from 771 to 725. Construction of a six-story addition to the Bank on a plot adjoining the rear of the building at the corner of Tenth and Ludlow Streets was started early in the year. This building should be completed within a few months and will give much needed space to the various departments of the Bank. Banks of the district The industrial activity, large building programs, and the rising and active security markets which prevailed during 1925 resulted in increased loans by the member banks in the third district as in the country as a whole. The following are changes which took place in the condition of member banks during 1925: Member banks Third district +$199,000,000 — 28,000,000 + 163,000,000 + 17,000,000 Loans and discounts Investments Deposits, total Borrowings United States +$2,094,000,000 + 79,000,000 + 1,867,000,000 + 355,000,000 The situation revealed by these figures differs materially from that in 1924, when deposits accumulated much more rapidly than did loans, with the result that borrowings were reduced and very large additions were made to investments in securities. During 1925, loans continued to increase, but deposits did not quite keep pace and the banks added to their borrowings. The weekly reports of member banks in leading cities divide loans into "loans on securities" and "all other" loans, the latter being largely commercial in character. "Loans on securities" rose rather steadily from the middle of 1924 up to the end of 1925. At member banks in four cities of this district the increase in the years 1924 and 1925 was 118 millions, or 41 per cent, and at banks in 100 cities throughout the country was 1,661 millions, or 39 per cent. The greater part of these gains took place in 1925. Commercial loans in the third district and in the United States showed approximately the same percentages of change in 1924 and 1925: 17 Eleventh Annual Report, Federal Reserve Bank of Philadelphia Member banks in leading cities Third district United States Commercial loans 1924—changes in dollars. .. " " per cent . 1925—changes in dollars. . . " per cent . +$19,100,000 + 5.7% + $4,600,000 + 1.3% +$407,000,000 + 5.2% +$101,000,000 1.2% Fluctuations during 1925 in this district were very similar to those in 1924. In both years a high point was attained in the spring, and a peak was reached in the late summer or fall. The peak in 1925 was 386 millions and 1924, 390 millions. Over most of 1925 such loans slightly exceeded loans on like dates in 1924, but, allowing for seasonal changes, they have been very stable over the past year and a half. Membership The number of member banks in this district increased from 743 at the end of 1924 to 755 on December 31, 1925. Six national banks were liquidated in the course of the year, of which three were acquired by state banks or trust companies which already were members or later became members. Additional losses of national bank membership included a consolidation of two national banks and the insolvency of another. Offsetting these was the organization of ten new national banks. Ten additional state institutions were admitted to membership. Total membership at the end of 1925, by states, is given in the table below: Pennsylvania New Jersey Delaware Totals National banks State institutions Totals 565 90 18 68 10 4 633 100 22 673 Number of member banks 82 755 Fiduciary powers The number of national banks now having either partial or full fiduciary powers is 214, out of a total of 673 national banks in the district. Figures by states follow: is Eleventh Annual Report, Federal Reserve Bank of Philadelphia Totals Partial powers 8 4 171 33 10 169 Pennsylvania New Jersey Delaware Full powers 138 25 6 National banks having trust powers 45 214 Totals Earnings and expenses of member banks An analysis of operating expenses and earnings of member banks for the year ended June 30, 1925, shows that expenses and net profits of banks in the third district compare favorably with those of members throughout the country: Earnings and expenses of member banks Amount on each $100 of loans and investments Third district United States $5.30 .92 $5.36 1.05 $6.22 $6.41 1.07 .07 2.00 .30 .62 1.26 .07 2.17 .35 .74 $4.06 $4.59 $2.16 $1.82 .17 1.06 .93 .50 .91 .41 $487 1.99% $626 1.32% 9.68% 8.24% Interest received Other income Gross earnings Salaries and wages Interest on borrowed money Interest on deposits Taxes Other expenses Total expenses Net earnings Net losses Dividends Net to profits and reserves Other comparisons of interest: Loans and investments per $100 of capital, surplus and undivided profits Profits* on loans and investments Profits* on capital, surplus and undivided j profits * After deducting net losses, but before dividends. 19 Eleventh Annual Report, Federal Reserve Bank of Philadelphia Relations with banks In order to facilitate co-operation between the banks of the district and the Federal Reserve Bank, a Federal reserve relations committee was appointed, consisting of twenty-four bank officers representing the New Jersey and Delaware Bankers' Associations and the six groups of the Pennsylvania Bankers' Association included in this district. Two meetings were held in 1925. At the meeting held on December 7 a plan was adopted to provide for a nominating advisory committee, which would recommend candidates to the member banks to fill vacancies in the board of directors of the reserve bank. Contact with the banks of the district also is maintained through personal visits and attendance at bankers' meetings held in various parts of the district. During 1925 more than 800 visits were made to member and non-member banks. Business conditions The industries of the third Federal reserve district are diverse and of manufactured products firms in this district produce a large part of the country's total. In mining the operations are large, the output of its coal mines including all of the anthracite coal and a substantial quantity of bituminous coal. The district experienced in 1925, excepting for the coal strike, the satisfactory conditions that prevailed generally throughout the country. Manufacturing was steadier than in 1924 and the output was greater. In wholesale prices there was less fluctuation than has occurred in the last ten years and the average for the year was 6 per cent above that in 1924. Debits to individual account, which are regarded as the most representative figures on the dollar volume of business, were 11 per cent larger at banks in the 18 most important cities of the district. At the opening of 1925 the outlook for business in this district was good; prices were strong and production had recovered materially from the low point of the preceding summer. Sales in the early months of the year, however, did not come up to expectations and distribution in wholesale and retail channels was impeded by inclement weather; production declined, but not to nearly the same extent as in 1924. Meanwhile building had gone forward in unusual volume and contracts reached record totals. The production of automobiles absorbed much material. Greatly increased sales of farm implements testified to an improved situation on the farms. Later in the 20 Eleventh Annual Report, Federal Reserve Bank of Philadelphia BUSINESS ACTIVITY IN THE THIRD FEDERAL RESERVE DISTRICT Employment 3 STATES ^ no Wade Payments 3 STATES STATES I5O Wholesale 3RD I6O I4-O 12O IOO 8O Trade DISTRICT SO Retail Trade 3RD DISTRICT E>ui Id i nc£ Contracts Awarded 3RD DISTRICT 3 - Debits to Individual Accounts IS CITIES 923 924 21 1925 Eleventh Annual Report, Federal Reserve Bank of Philadelphia year the railroads, which hitherto had been backward in purchasing, bought large quantities of equipment and supplies. Favorable conditions such as these, combined with steadiness of prices, were followed by greater activity and figures for the year show that production was the largest on record. The anthracite strike, which began on September 1, had the effect of curtailing the distribution of goods in the mining regions, but this section is well equipped with manufacturing plants which are not affected by mining operations. Car loadings The volume of business in the United States, as indicated by car loadings in the fifty-two weeks ended December 26, exceeded that in 1924 by 5.4 per cent, and in the Allegheny district (which comprises a group of railroads serving the third Federal reserve district and adjacent territory) the increase was 4.9 per cent. Loadings of merchandise and miscellaneous freight were heavier and large gains were made in ore and coke shipments. Larger crops of wheat, corn and oats in the third Federal reserve district probably account in part for heavier loadings of grain and grain products in the Allegheny district. Loadings of these commodities in the country as a whole declined. The output of corn in the United States was larger in 1925 than in 1924, but much of this crop is used on the farms and never enters into car loadings. The production of wheat was much smaller in 1925. Employment and wages Employment and payrolls fluctuated to a smaller extent in 1925 than in 1924 and were on higher average levels. In the states of Pennsylvania, New Jersey and Delaware the average of payrolls in 1925 was 3.4 per cent higher and in the United States, 3 per cent above 1924. There is a close relation in the movements of payroll figures in the three states to the national totals. Building activity The third district, in common with many other sections, shared in the building activity which marked 1925, but the increase in building contracts awarded over those in the previous year was 20 per cent as compared with a gain of 30 per cent in 36 states. The consumption of building materials was proportionately increased and caused a demand for labor sufficient to maintain the high rates of wages heretofore prevailing. Contracts awarded in this section for residential, educational, social and recreational buildings showed 22 Eleventh Annual Report, Federal Reserve Bank of Philadelphia particularly large gains, but the construction of industrial buildings, public works and public utilities was in smaller volume than in 1924. Retail and wholesale trade Sales by department stores in all parts of the United States in 1925 were 5 per cent higher than in 1924 and at stores in the third district the increase was 2 per cent. Four mail order houses with a national distribution showed an increase of 12 per cent in sales and gains also were reported by chain stores, but the figures submitted by the latter are not altogether representative of changes in retail sales because of the constant increase in the number of stores. The figures for the third district would have been somewhat larger if the coal strike had not been in effect in the last four months of the year. This, probably, accounts for the decline of 3 per cent from 1924 to 1925 in sales at wholesale by firms in this district, as national figures on wholesale distribution increased 2 per cent. The figures for the country as a whole show only slight changes in sales of groceries, shoes and drugs, but in meats the increase was 13 per cent, in dry goods 2 per cent, and in hardware 4 per cent. 2:5 Federal Reserve Bank of Philadelphia 'Directors and Officers DIRECTORS Class A Class B Joseph Wayne, Jr., Philadelphia, Pa. Alba B. Johnson, Rosemont, Pa. Francis Douglas, Wilkes-Barre, Pa. Edwin S. Stuart, Philadelphia, Pa. John C. Cosgrove, Johnstown, Pa. Charles K. Haddon, Haddonfield, N. J. Class C Richard L. Austin, Philadelphia, Pa. Charles C. Harrison, Philadelphia, Pa. Harry L. Cannon, Bridgeville, Del. Member of Federal Advisory Council Levi L. Rue, Philadelphia, Pa, OFFICERS Richard L. Austin, Chairman and Federal Reserve Agent Charles C. Harrison, Deputy Chairman Arthur E. Post, Assistant Federal Reserve Agent George W. Norris, Governor William H. Hutt, Deputy Governor Edwin S. Stuart, Deputy Governor C. A. Mcllhenny, Cashier and Secretary W. J. Davis, Assistant Cashier J. M. Toy, Assistant Cashier R. M. Miller, Jr., Assistant Cashier F. W. LaBold, Assistant Cashier S. R. Earl, Assistant Cashier William G. McCreedy, Comptroller