The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
1927 Thirteenth 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 1927 Thirteenth 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- 10, 1928. Federal Reserve Board, Washington, D. C. Sirs:— I have the honor to transmit herewith the thirteenth annual report on the operations of the Federal Reserve Bank of Philadelphia, covering the year 1927. Very truly yours, R. L. AUSTIN, Chairman of the Board and Federal Reserve Agent CONTENTS Page Profit and loss statement 5 Business and financial conditions 6 Statement of condition 11 Loans and discounts of the bank 13 Reserve position of the bank 15 Federal reserve note issues 18 Fiscal agency activities 18 Departmental operations 19 Discount rate 20 Internal organization: Directors 20 Federal Advisory Council 22 Officers and employees 22 Banks of the district: Membership 22 Fiduciary powers 24 Acceptance powers 25 Bank examination 25 ANNUAL REPORT of the FEDERAL RESERVE BANK OF PHILADELPHIA for 1927 The profit and loss account of the bank for 1927 follows, with comparison of the two preceding years: 1927 1926 1925 $3,363,626 2,106,682 $3,626,648 2,056,274 $3,135,550 2,036,268 $1,256,944 $1,570,374 $1,099,282 Additions to current net earnings.... Deductions from current net earnings $2,646 83,121 $1,130 37,771 $566 21,728 Net deductions from current net earnings $80,475 $36,641 $21,162 Net earnings available for dividends, surplus and franchise tax $1,176,469 $1,533,733 $1,078,120 $781,540 $730,598 $673,212 o 0 803,135 404,908 Gross earnings Current expenses Current net earnings Distribution of net earnings: Dividends Paid to Government as a franchise tax Transferred to surplus account . . . . 394,929 o Smaller average holdings of bills and securities than in 1926 and a reduction in the average rate of return from 3.8 per cent in 1926 to 3.6 per cent in 1927, resulted in a decrease in the earnings derived from bills and securities from $3,579,393 to $3,263,737, and gross earnings decreased from $3,626,648 to $3,363,626. The volume of work continued large and in a number of departments was heavier than in 1926. Current expenses increased from $2,056,274 to $2,106,682. If expenses incident to printing and redeeming Federal reserve notes are omitted from these figures, other expenses would show a reduction from $1,923,462 to $1,920,364. Deductions from current net earnings were made up for the most part of $81,245 charged off on furniture and equipment. Following year-end adjustments, $1,176,469 remained for distribution Thirteenth Annual Report, Federal Reserve Bank of Philadelphia at the close of 1927, of which $781,540 was paid out in dividends and $394,929 was transferred to surplus. Net earnings in 1927 amounted to about 9 per cent of the average paid-in capital. Since the organization of the bank in 1914, net earnings have totaled $33,958,254. Of this amount $6,737,096 was distributed as dividends, $21,662,257 was added to surplus, and $5,558,901 was paid to the Government as a franchise tax. In the table which follows, current expenses are divided according to departments: Maintaining the accounts of the bank Loans and discounts Currency and coin Transit and collections Fiscal agency functions Custody of securities, including purchase and sale Transfer and telegraphic service . . . . Official salaries and supervisory expenses Federal reserve agent's department (Custody of collateral against Federal reserve notes, note issues, bank examination, library, statistical and business reporting work) Maintaining the general audit Bank relations Insurance (other than on currency, coin and security shipments) Operation of banking house This bank's portion of Federal Reserve Board expenses Miscellaneous Current expenses 1927 1926 1925 $95,873 53,097 618,412 436,406 44,006 $98,760 52,677 560,972 433,749 39,415 $95,491 53,436 621,345 423,133 51,144 67,970 20,257 68,720 20,740 68,044 19,694 155,391 149,694 142,814 86,009 59,124 12,513 82,235 56,459 12,041 105,109 61,615 13,364 33,292 188,471 31,814 215,960 32,169 126,554 74,621 161,240 68,636 164,402 66,139 156,217 $2,106,682 $2,056,274 $2,036,268 business and financial conditions The year just past witnessed a continued and substantial decline in the business volume of the Philadelphia Federal reserve district from the high levels attained in 1926, Factory employment and payrolls, in Pennsylvania, New Jersey, and Delaware, which furnish a good measure of industrial activity, fell off noticeably during 1927 and by the end of the year were about 11 and 16 per cent, respectively, below the levels of a year previous. The iron Thirteenth Annual Report, Federal Reserve Bank of Philadelphia BUSINESS INDICATORS PHILADELPHIA FEDERAL RESERVE DISTRICT INDEX NUMBERS 1923 IOO IMOFY Retail sales 180 160 140 120 100 80 60 y f < •Mr 1926 V — ***** -^? too Wholesale sales 95 90 85 80 75 70 65 60 • • , / ••• 1926 ^ • ; f Si- ^N V 1927 —/Vv 100 Factory employment Pa. N.J. £ Del. 95 • *••« 926 / *<* 90 J27 ——«• 85 '—^^ * * » 80 100 Factc>ry wage paymer IIS *,+ Pa. N.J. & Del. 95 "S 1926 90 1927 85 80 JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC Thirteenth Annual Report, Federal Reserve Bank of Philadelphia and steel and metal fabricating industries were chiefly responsible for this large decline, which was more pronounced than in the country as a whole. The leather and some of the textile industries of the district, however, displayed considerable strength. Coal mining operations in the district also decreased considerably. Output of anthracite and payrolls of the collieries were smaller than in 1926 in almost every month of the past year, owing chiefly to the prevalence of mild weather. Industrial recession and labor difficulties in the mining regions were mainly responsible for the reduced production of soft coal. In contrast to the situation in manufacturing and mining, building activity in the district held up well during the year. Building contract awards in 1927 were 16 per cent greater than in 1926. This compares with a decline of 0.5 per cent for the United States as a whole. Real estate transactions were in larger volume, the value of mortgages recorded in Philadelphia in 1927 increasing nea'rly 7 per cent over the previous year. 'Business indicators Philadelphia Federal Reserve District 1927 compared with 1926 Factory employment, average (Pa., N. J., & Del.) .. Factory wage payments, average (Pa., N. J., & Del.) Productive activity: Shoe production Wool consumption Cotton spindle hours (Pa. & N. J.) Pig iron production Iron casting production Steel casting production Hosiery production Cement production Anthracite production Bituminous coal production (Pa.) Electric power production Building contracts awarded Mortgages recorded, value (Phila.) Commercial failures, liabilities Freight car loadings (Allegheny district) Retail sales Wholesale sales Life insurance sales (Pa., N. J. & Del.) 8 — 5.7% — 8.3% + 8.3% + 4.0% —10.0% —12.1% —16.3% —29.7% + 1.6% + 4.8% — 4.4% —14.7% + 6.4% +16.4% + 6.7% +24.6% — 3.9% — 3.9% — 3.3% + 3.0% Thirteenth Annual Report, Federal Reserve Bank of Philadelphia Distribution of goods in this district was in smaller volume than in 1926. While freight car loadings in the Allegheny district showed small increases in the early months of the year, material decreases occurred in the later months, and the total for 1927 was 4 per cent below 1926. Smaller shipments of coal account for much of this decline, although loadings of merchandise and other commodities also showed decreases. The dollar volume of wholesale trade was less than in 1926 throughout the year; the total decline amounted to more than 3 per cent, about the same as for the country as a whole. District retail sales in 1927 were nearly 4 per cent smaller as compared with a gain of 0.6 per cent reported for the United States. Funds have been in ample supply throughout 1927. The total loans and investments of reporting member banks in Philadelphia reached a higher point than in 1926, although loans and discounts declined. Deposits increased and holdings of Government and other securities were added to materially. Commercial loans did not follow closely the seasonal trends so apparent in the preceding year. From a low at the beginning of the year, expansion took place with little of the recession usual in May and June, and the peak for the year was reached in August, although it usually comes in the fall. A decline/ in commercial loans in the year is not surprising in view of quieter business and lower prices than in 1926. Following the attainment of a high figure in the first week of the year, loans on securities, as reported by Philadelphia banks, turned sharply downward, reaching the lowest point late in July. Material changes followed and in the last week of the year these loans were larger than at any time since July, but, even so, failed to equal the figure reached in the last report of December, 1926. The weekly average was lower than in 1926. Outside of Philadelphia, monthly figures are available for 88 member banks in twenty of the larger cities. Their reports likewise show an increase in total loans and investments. Both loans on securities and investments were responsible for this advance, and there was little change in other loans (largely of a commercial character). Thirteenth Annual Report, Federal Reserve Bank of Philadelphia Figures for reporting member banks in twenty one of the cities of the district are summarized in the table: Changes from December 15,1926, to December 14, 1927 (Thousands of dollars) Number Loans and Investments Net demand of banks discounts deposits Allentown Atlantic City Bethlehem Chester Easton Harrisburg Hazleton Johnstown Lancaster Lebanon Norristown Philadelphia Reading Scranton Trenton Wilkes-Barre Williamsport Wilmington York Other cities Totals, 21 cities . . . B a n k s outside of Philadelphia Time deposits 6 8 3 5 4 3 5 4 3 3 3 33 6 4 4 5 3 6 11 2 + 1,401 — 3,462 + 1,275 + 763 + 7 + 925 — 227 + 45 + 680 + 296 + 348 —33,949 + 446 — 402 + 1,014 + 962 + 190 + 5,259 + 126 + 1,704 — + + + — 340 1,420 2 256 145 0 + 854 + 3,086 + 415 + 486 + 1,707 +51,772 — 1,072 + 2,062 — 1,132 + 2,371 + 601 + 173 + 1,518 + 3,188 — 486 — 3,153 + 146 + 502 + 345 + 380 — 336 + 929 + 213 — 257 + 205 +10,954 — 725 + 707 — 3,639 + 602 + 916 + 1,737 + 6 — 31 + 515 + 2,322 + 926 + 602 + 397 + 779 + 1,016 + 2,329 + 1,025 + 952 + 712 +20,164 + 881 + 1,924 + 1,067 + 2,511 + 1,266 + 547 + 2,360 + 4,316 121 —22,599 +67,222 + 9,015 +46,611 88 +11,350 +15,450 — 1,939 +26,447 Reflecting easier monetary conditions, large member banks in Philadelphia reported a decline in rates on prime customers' commercial paper from 4i/2-4% per cent in the week ended December 15, 1926, to 41/4-41/2 per cent in the corresponding week of 1927. Sales of commercial paper in 192T, as reported by dealers, were 24 per cent larger than in 1926. Notwithstanding the lower level of business and trade in 1927, check payments in most of the cities of the Philadelphia Federal reserve district exceeded the 1926 figures. The total of 17 cities increased from $29,159,000,000 in 1926 to $30,150,000,000 in 1927, or 3.4 per cent. Percentage changes for individual cities follow: 10 Thirteenth Annual Report, Federal Reserve Bank of Philadelphia Allentown Altoona Camden Chester Harrisburg Hazleton Johnstown Lancaster Lebanon + 2.0% + 5.1% — 0.4% —14.8% —10.3% + 2.8% — 1.8% + 0.03% + 1.3% Philadelphia Reading Scranton Trenton Wilkes-Barre Williamsport Wilmington York + 4.1% — 0.7% + 0.9% + 3.9% + 3.8% + 8.6% +15.4% + 1.3% Statement of condition The statement of the Federal Reserve Bank of Philadelphia at the close of 1927 reveals that discounts for member banks have changed little in the year, but that the total of its credit in use has expanded through increases in holdings of purchased paper and United States securities. The cash reserves of the bank declined and, together with increases in the note and deposit liabilities, caused a falling off in the reserve ratio from 66.9 to 52.9 per cent. Of interest during the year were the foreign transactions. In the week of May 11 gold was purchased abroad by the Federal reserve system, this bank's participation being $5,717,000, which shortly was increased to nearly 6 millions. This was gradually reduced by conversion into foreign banks' credits, which credits in turn declined as they were disposed of through sales of exchange against them. This bank's share in the contingent liability assumed by the Federal reserve banks on bills purchased for foreign correspondents increased from $5,363,000 to $21,963,000 during the year. The statement of the bank as of December 31 of 1927 and 1926 follows: ll Thirteenth Annual Report, Federal Reserve Bank of Philadelphia (OOO's omitted) December 31, 1927 December 31, 1926 Changes during 1927 RESOURCES Gold reserves Reserves other than gold Total reserves $143,894 6,066 $180,057 5,266 —$36,163 $149,960 $185,323 1,490 1,611 —$35,363 — 121 $50,042 17,329 $46,556 21,285 $67,371 44,523 45,663 0 $67,841 26,839 20,230 2,000 Uncollected items All other resources $157,557 63,738 2,009 $116,910 64,554 2,006 +$40,647 — 816 Total resources $374,754 $370,404 + $4,350 $137,551 $134,067 + $3,484 143,833 1,242 701 $145,776 139,247 1,019 2,764 $143,030 + + 4,586 223 — 2,063 56,309 13,237 21,662 219 59,202 12,605 21,267 233 — 2,893 + 632 + 395 — 14 $374,754 $370,404 + $4,350 52.9% 66.9% — 14.0% $5,363 +$16,600 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 inter, credit bank bonds . . . Total bills and securities LIABILITIES Federal reserve notes in actual circulation Deposits: Member bank—reserve account . . . . Government Other deposits Total deposits Deferred availability items Capital paid in Surplus All other liabilities Total liabilities Ratio of total reserves to deposit and Federal reserve note liabilities combined Contingent liability on bills purchased for foreign correspondents 12 $21,963 + 800 + $3,486 — 3.956 — $470 + 17,684 + 25,433 — 2,000 + 3 + $2,746 Thirteenth Annual Report, Federal Reserve Bank of Philadelphia Loans and discounts of the bank Over the greater part of 1927 holdings of bills and securities by the Federal Reserve Bank of Philadelphia were in smaller volume than in 1926, but late in the year, by the purchase of bills a'nd United States securities and larger discounts for member banks, the total of bills and securities was carried to the highest point since 1921. Average daily holdings follow: Bills discounted Purchased bills United States securities Other securities Totals 1927 1926 1925 $42,691,000 17,432,000 29,248,000 1,033,000 $50,931,000 18,581,000 21,336,000 2,903,000 $43,466,000 18,508,000 21,383,000 3,149,000 $90,404,000 $93,751,000 $86,506,000 Easier credit conditions in the district during 1927 were reflected in a lower average level of borrowings from this bank than in the previous year. Following the close of 1926, borrowings declined in January and February. The trend was upward in the second quarter, to be succeeded by a decrease in the third quarter. During October and November no special tendency was manifest, but in the last three weeks of December a strong increase occurred, although the highest point reached, 71.8 millions on December 30, was exceeded in December, 1926. In the year a slight decline, from 67.8 to 67.4 millions, took place. Changes in holdings of purchased bills and United States securities were material. The portfolio of purchased paper declined from 26.8 millions at the beginning of the year to 3.1 millions on August 31, the lowest point since October, 1924, but the increase thereafter was large., a total of nearly 45 millions being on hand at the end of the year. United States securities held continued with little change during the first five months, approximating twenty millions, but additions in succeeding months carried the total to about 46 millions on December 31. A considerable percentage of the notes and bills rediscounted by this bank for its member banks was the paper of manufacturers and dealers in textiles and textile materials. Food products and building materials also made up a substantial proportion, but manufacturers and dealers in metals and metal products, in view 13 Thirteenth Annual Report, Federal Reserve Bank of Philadelphia of the importance of their industry in this district, were only moderately represented. Percentages for various industries follow: Textiles and textile materials Foods and food products.... Building materials Hides, leather and shoes .. Metals and metal products .. Automobiles Department stores Cigars and tobacco 21.6% 15.3% 9.7% 6.9% 5.4% 4.1% 3.9% 3.6% Paper and printing 3.2% Contractors and builders . . . 3.0% Furniture 2.7% Agriculture 1.7% Rubber 1.6% Chemicals and drugs 1.3% Miscellaneous 16.0% These percentages are interesting, but do not indicate that the paper in the portfolios of member banks is divided industrially in the same proportions. BILLS DISCOUNTED - 1 9 2 7 MILLIONS FEDERAL RESERVE BANK OF PHILADELPHIA OF DOLLARS BANKS OUTSIDE OF PHILADELPHIA 1ST. QUAR. 2ND. QUAR. 3RD. QUAR. 4TH.QUAR. Banks in Philadelphia continued to account for the more extreme fluctuations in borrowing, accommodation extended to mem 14 Thirteenth Annual Report, Federal Reserve Bank of Philadelphia ber banks outside of this city being more uniform in amount, as the chart shows. Borrowings by cities follow: Allentown Atlantic City Bethlehem Chester Easton Harrisburg Hazleton Johnstown Lancaster Lebanon Norristown Philadelphia , Reading Scranton Trenton Wilkes-Barre Williamsport Wilmington York Other communities Totals under discount December 31, 1927 December 31,1926 Change $77,000 1,943,000 585,000 1,583,000 945,000 0 534,000 60,000 0 150,000 150,000 43,893,000 240,000 1,318,000 1,193,000 250,000 395,000 85,000 160,000 13,810,000 $330,000 3,341,000 612,000 625,000 1,354,000 0 721,000 40,000 0 200,000 270,000 36,509,000 1,572,000 540,000 671,000 756,000 1,240,000 190,000 655,000 18,215,000 $67,841,000 — $253,000 —1,398,000 — 27,000 + 958,000 — 409,000 0 — 187,000 + 20,000 0 — 50,000 $67,371,000 — 120,000 +7,384,000 —1^332,000 + 778,000 + 522,000 — 506,000 — 845,000 — 105,000 — 495,000 —4,405,000 — $470,000 Reserve position of the bank The reserve ratio of this bank was above 70 per cent over most of 1927 and on numerous occasions exceeded 80 per cent. Nevertheless the close of the year found the bank with a ratio of 52.9 per cent, which compared with 66.9 per cent at the end of 1926. A rapid decline in cash reserves and in the reserve ratio during the last quarter of the year was due in part to this bank's participation in an increase of the Federal reserve system's holdings of bills and United States securities purchased by the open market investment committee. In this quarter there was a loss in the transit clearings with other districts, whereas in each of the first three quarters of the year a large gain had been realized. The falling off in the reserve ratio also reflected the increased need for currency in the latter part of November and in December prior to the holidays. Federal reserve note circulation, following a contraction in the earlier months, increased thereafter, reaching 15 Thirteenth Annual Report, Federal Reserve Bank of Philadelphia its highest point at 157 millions on December 23. At the end of the year the Federal reserve note circulation was somewhat larger than it was on December 31, 1926. This is not necessarily an indication of a greater need for currency, as circulation of other types of currency was smaller than in 1926. Of the new notes paid out in 1927, 131 millions were Federal reserve notes and 122 millions other kinds of currency, while in 1926 these sums were 123 and 143 millions, respectively. The average level of deposits somewhat exceeded that in 1926, as the chart shows. These deposits are largely made up of the reserves of member banks, which averaged about 3 millions more in December, 1927 than in December, 1926. The deposits of member banks, against which these reserves are maintained, on December 7 were 111 millions larger than they were on December 29, 1926, but 98 millions of this increase was in time deposits, against which only a 3 per cent reserve need be maintained, thus accounting for the slight difference in reserves. Changes in the reserve ratio and in the factors from which it is computed are given in the accompanying table by periods which approximate quarter years. (Dollar figures in millions) 1927 Jan. 1- Mar. 31- June 30- Sept. 29Mar. 30 June 29 Sept. 28 Dec. 31 Totals 1926 totals Gains or losses in gold holdings of bank: —$1.1 + $.1 — $.8 — $4.3 — $6.1 — $4.8 Note clearings Transit clearings . . . +41.4 +58.3 + 62.2 — 32.5 +129.4 + 90.1 Transfers for Government —39.0 —51.5 — 34.5 — 23.2 —148.2 —120.5 Payments to and receipts from Gov— 4.6 —13.0 — 1.6 — 6.8 — 26.0 — 6.0 ernment* Member banks + 6.1 + 5.6 + 4.1 — 1.0 + 14.8 + 4.4 Total change in gold +$2.8 — $.5 +$29.4 —$67.8 —$36.1 -$36.8 holdings Changes in other cash — .3 + -7 + 2.0 — 1.7 + -7 + .4 reserves Total cash reserves . . . + 2.5 + .2 + 31.4 — 69.5 — 35.4 — 36.4 Federal reserve note -17.5 +13.3 + 4.6 + 3.1 + 3.5 — 21.9 circulation Total deposits —14.2 + 7.2 + 3.7 + 6.0 + 2.7 + 1.3 Reserve ratio + 9.6% — 5.8% + 9.3% — 27.1%— 14.0%— 7.6% • Includes currency and coin transactions, reimbursements of Government for amounts expended in direct redemption of Federal reserve notes, payments to and receipts from Government officers, transfers for national banks to 5% fund maintained for redemption of national bank notes, etc. 16 Thirteenth AnnwaX Report, Federal Reserve Bank of Philadelphia FEDERAL RESERVE BANK , M.LUOHSOF DOLLARS 0 F PHILADELPHIA (Monthly averages of daily figures.) 240 220 200 180 I6O Federal Reserve note circulation 140 *'••-**** Total deposits 120 100 Total bills and securities 80 60 ./v 40 Other bills and securities 20 1925 1926 17 1927 Thirteenth Annual Report, Federal Reserve Bank of Philadelphia Federal reserve note issues Issues of Federal reserve notes to the bank in 1927 amounted to $130,900,000, redemptions $124,974,725, and $3,000,000 of fit Federal reserve notes were returned to the Federal reserve agent. This resulted in an increase in the amount outstanding from $175,841,510 at the end of 1926 to $178,766,785 on December 31, 1927. The collateral pledged to secure these notes at the close of 1927 totaled $180,825,567, of which $74,766,785 was gold, and $106,058,782 eligible paper. Fiscal agency activities In addition to caring for the functions formerly handled by the sub-treasuries, the Federal reserve banks perform many other duties for the Government. During 1927 this bank handled 2,003,000 Government checks and warrants amounting to $291,961,000 and paid 3,467,000 coupons totaling $37,826,000. Of special interest during the year were the steps taken to retire the Second Liberty loan bonds. Originally $280,184,100 of these bonds were allotted in this district. They were called for payment on November 15, 1927, but during the year various exchange offers and purchases also were made. The total retired by this bank through cash redemption, purchase for Government account, or exchange for other issues was $173,210,850, made up as follows: Exchanged for: Treasury notes, A, 1930-32 Treasury notes, B, 1930-32 Treasury bonds, 1943-47 Certificates of indebtedness—TJ—1928 Purchased from surplus money Purchased for sinking fund: At 100%2 At 100%2 At 100y32 At 100 Cash redemption—November 15 Total $69,338,450 16,736,150 24,196,650 8,400 1,696,500 3,372,000 1,486,550 1,338,800 244,100 54,793,250 $173,210,850 Redemptions of maturing certificates of indebtedness and Treasury notes during the year totaled $56,056,700 out of original allotments to the district of $158,294,300. In every instance redemptions fell short of the amount of the issue originally allotted to the district. This was particularly true of certificates of indebtedness, the redemptions of which were only 15 per cent of the 18 Thirteenth Annual Report, Federal Reserve Bank of Philadelphia allotments, as compared with 53 per cent for two issues of the longer term Treasury notes. New issues of Government securities included two issues of Treasury notes, one of Treasury bonds, and four of certificates of indebtedness. Subscriptions totaled $634,316,000 and allotments (including exchanges) $288,998,650. 'Departmental operations Several of the largest service departments of the bank, including among these the currency, transit and collection departments, showed a further increase in activity in 1927, but the discount department reported a smaller volume than in 1926. Chiefly as a result of the retirement of the Second Liberty loan bonds, the quantity of Government securities handled expanded materially. Percentage changes in the operations of the principal departments follow: 1927 compared with 1926 Bills discounted Bills bought in open market Currency received and counted Coin received and counted Checks handled (excluding return items) Collections handled: United States Government coupons paid All other United States securities issued, redeemed, cancelled and exchanged by fiscal agency department . . . . Transfers of funds: To 5% redemption fund of national banks Other transfers Number of items handled Dollar amounts handled — 7.2% —21.8% + 9.9% + 4.1% + 2.7% — + + + — — 6.5% + 4.4% — 15.6% + 10.4% +54.6% +132.6% — 1.8% + 8.8% + 3.2% + 12.0% 17.1% 5.0% 5.7% 5.7% 1.2% The total volume of currency counted increased from 188,980,000 pieces in 1926 to 207,700,000 pieces in 1927. A considerable gain in output per employee was realized through the introduction of 35 specially devised machines for counting paper money. Using these machines an efficient operator can count and sort as many as 23,000 pieces a day. In 1926 the average number of individual checks and bundles of checks (which had been treated as single items) handled daily was 227,000 and this year the average rose to 233,000. On Novem 19 Thirteenth Annual Report, Federal Reserve Bank of Philadelphia ber 12, following a holiday, 403,614 items, including a total of 456,204 checks, were put through the work. Other service departments not listed in the table given above include the custody department, which in 1927 held, on the average, $223,372,000 of securities in custody for member banks, and the securities department, which handled 18,484 purchase and sale transactions involving $78,686,000 for the account of others than this bank. ^Discount rate The discount rate of the bank continued at 4 per cent from November 20, 1925 to September 8, 1927, when it was reduced to 3V2 per cent. At that time declining market rates for commercial paper and bankers' acceptances gave evidence of ease in money and reports on business conditions in the district indicated that production and sales were not keeping pace with the corresponding period of 1926. The effect of decreases in the rates of the various reserve banks and the accompanying declines in money rates was to make domestic rates less attractive than those abroad, tending to divert funds abroad and to strengthen exchange rates on those centers at a time when the foreign demand for the agricultural products of this country was active. Internal organization Directors With the close of 1927, the terms of Francis Douglas, Charles K. Haddon, and Charles C. Harrison, as directors of this bank, expired. The First National Bank, of Wilkes-Barre, Pa., of which Mr. Douglas is cashier, owing to the increase in its capital and surplus, was transferred from group 2 to group 1, making it impossible for Mr. Douglas longer to represent, as a director of this bank, banks of group 2. His services as a director terminated with the close of the year. This group of banks elected George W. Reily, president of the Harrisburg National Bank, of Harrisburg, Pa., as a class A director, taking the place which so ably had been filled, for nine years, by Mr. Douglas. Mr. Haddon expressed the desire to withdraw from the directorate at the end of his term. To succeed him, Arthur C. Dorrance, acting general manager of the Campbell Soup Co., of Camden, N. J., was elected by the group 3 banks as a class B director. 20 Thirteenth Annual Report, Federal Reserve Bank of Philadelphia The term of Charles C. Harrison, a class C director since 1918 and over much of this time deputy chairman of the board, expired December 31, 1927. Due to failing health he was unable, longer, to serve the bank. The Federal Reserve Board appointed Alba B. Johnson, who has been a class B director of this bank since its organization, as a class C director, succeeding Mr. Harrison. C. Frederick C. Stout, senior member of the firm of John R. Evans & Co., Philadelphia, was elected by the banks of group 1 as a class B director to fill the unexpired term of Mr. Johnson. The retirement from the board of these three directors was the cause of deepest regret to the board. They had served through the difficult post-war period with its intricate problem^ incident to the general business conditions of that time. Their tactful clear-thinking, good judgment and fidelity to public service were of invaluable assistance in conducting the affairs of the bank. Board of Directors Class A. Residence Name Term expires Group 1 Joseph Wayne, Jr., president, Philadelphia, Pa. Dec. 31, 1929 Philadelphia-Girard National Bank, Philadelphia, Pa. Group 2 Francis Douglas, cashier, First Wilkes-Barre, Pa, Dec. 31, 1927 National Bank, Wilkes-Barre, Pa. Group 3 John C. Cosgrove, director, First Johnstown, Pa. Dec. 31, 1928 National Bank, Hastings, Pa. Group 1 Alba B. Johnson, chairman of Rosemont, Pa. Dec. 31, board, Southwark Foundry and Machine Co., Philadelphia, Pa. B . . Group 2 Arthur W. Sewall, president, Philadelphia, Pa. Dec. 31, General Asphalt Co., Philadelphia, Pa. Group 3 Charles K. Haddon, merchant, Haddonfield, N. J. Dec. 31, Camden, N. J. Richard L. Austin, chairman of Philadelphia, Pa. Dec. 31, the board Charles C. Harrison, deputy- Philadelphia, Pa. Dec. 31, chairman of the board Harry L. Cannon Bridgeville, Del. Dec. 31, 21 1928 1929 1927 1929 1927 1928 Thirteenth Annual Report, Federal Reserve Bank of Philadelphia Federal Advisory Council Levi L. Rue, by election of the board of directors at their first meeting in 1927, was selected to represent the Third Federal Reserve District on the Federal Advisory Council during 1927. Officers and employees By appointment of the Federal Reserve/ Board, Richard L. Austin served a's chairman of the board of directors and Federal reserve agent, and Arthur E. Post and Ernest C. Hill as assistant Federal reserve agents during 1927. The board of directors, at its meeting of January 5, reappointed the following officers to serve during 1927: governor, George W. Norris; deputy governor, William H. Hutt; cashier and secretary, C. A. Mcllhenny; assistant cashiers, W. J. Davis, James M. Toy, R. M. Miller, Jr., F. W. LaBold, S. R. Earl. William G. McCreedy again was designated comptroller of the bank at this meeting. The number of officers continued unchanged at 12 during 1927, but the number of employees was reduced from 746 to 717. of the district Consolidations of banking institutions in various parts of the country were numerous during 1927. A variety of reasons account for this, but among them may be found the hope that greater economy of operations would result, that advantageously located branches might be obtained, or that an increased capacity for service would be realized through the ability to extend larger lines of credit to customers. During the year there were three consolidations of national banks and two of state bank members in this district without the liquidation of any of the combining institutions. In addition, two national banks and one state member bank liquidated to form a new state member bank, and five national banks and one state member liquidated to join with non-members. All withdrawals from membership during the year were the result of consolidation. The organization of new national banks and the admission of state institutions to membership exceeded the withdrawals. The total number of member banks increased from 771 to 779 in the year, as the following table shows: 22 Thirteenth Annual Report, Federal Reserve Bank of Philadelphia National State member banks banks Membership, December 31, 1926 Changes during 1927: Gains: New national banks Non-member bank converted to national bank New state bank members 686 Membership, December 31, 1927 771 13 13 9* 1 9* 9* 23* 2 3 2 2 1 3 5 1 6 1 14 Losses: Consolidation of national banks Consolidation of state bank members. Liquidation and consolidation into a state bank member Liquidation and consolidation with non-members National bank converted into a state bank member 85 Totals 3 1 1 11 4 15 689 90 779 * Not including two state member banks liquidated and rechartered under new names, but including one national bank liquidated and converted into state member bank. From June 30, 1926 to June 30, 1927 the resources of member banks in the Philadelphia Federal reserve district increased from $2,960,000,000 to $3,082,000,000, or 4.1 per cent, and in the four years from September, 1923, to October, 1927, an increase of 29.9 per cent took place, as compared with 28 per cent for the Federal reserve system. Loans and discounts in this district increased 35.9 per cent in the four years and in the country, 24.6 per cent, whereas investments increased 25 per cent in the district and 30.4 per cent in the country. The percentage of capital, surplus and undivided profits to total deposits in this district was 22.3 per cent on October 10, 1927, as compared with 14.9 per cent for all members of the Federal reserve system. Figures compiled by the Federal Reserve Board show that in the middle of 1927 the loans and investments of all banks in the Philadelphia Federal reserve district amounted to $4,120,000,000, of which member banks had 61.6 per cent, and deposits, exclusive of bank deposits, totaled $3,645,000,000 of which 60 per cent were in member banks. 23 Thirteenth Annual Report, Federal Reserve Bank of Philadelphia The distribution of member bank deposits in cities of various sizes is given in the following table: (000's omitted) Places of less than 5,000 population: Net demand deposits Time deposits Places of 5,000 to 15,000 population: Net demand deposits Time deposits Places of 15,000 to 100,000 population Net demand deposits Time deposits Places of 100,000 population or more: Net demand deposits Time deposits All member banks: Net demand deposits Time deposits December 7,1927 December 29,1926 Changes $147,580 287,840 $143,702 263,865 +$3,878 +23,975 76,332 145,944 76,131 136,382 + 201 + 9,562 159,950 272,274 161,379 241,565 — 1,429 +30,709 840,680 328,701 829,987 295,116 +10,693 +33,585 1,224,542 1,034,759 1,211,199 936,928 +13,343 +97,831 Gross earnings of all member banks in the district amounted to $155,340,000 in the year ended June 30, 1927, and net profits to $45,717,000. Net profits were equivalent to $1.84 on each $100 of loans and investments, and compare with $1.94 in the preceding year. This rate of earnings was higher than in any other Federal reserve district, a result, not of a' high rate of gross earnings, but of low expenses and losses. Losses per $100 of loans amounted to only 26 cents, and per $100 of investments to 36 cents. Fiduciary powers During 1927, 31 additional national banks were granted fiduciary powers in this district, but the liquidation of four banks and the consolidation of five others already having these powers resulted in a net gain of only 22, from 238 to 260. In addition to these original grants of fiduciary powers, six banks which were privileged to exercise certain of them were granted further powers in the course of the year. On December 31, 1927, the distribution of national banks with fiduciary powers was as follows: 24 Thirteenth Annual Report, Federal Reserve Bank of Philadelphia Full powers Partial powers Totals Pennsylvania New Jersey . Delaware . . . 177 40 7 27 6 3 204 46 10 Totals 224 36 260 Acceptance powers During the year one additional bank was granted the right to accept up to one hundred per cent of paid-up and unimpaired capital and surplus, the number becoming six. For the first time in years an increase was recorded in the amount of bankers' acceptances executed by member banks in this district. On June 30, 1927, the amount of acceptances of member banks outstanding was $12,339,000, as compared with $7,449,000 a year before, a gain of 66 per cent. Figures tabulated by the American Acceptance Council show that on November 30, 1927, a total of $1,029,490,000 of acceptances of banks in this country was outstanding, an increase of 42 per cent in the course of a year. 'iBank examination The department of bank examination co-operated with the state banking departments and the office of the comptroller of the currency in the examination of 87 member institutions, 85 state bank and trust company members and 2 national banks. In addition, 6 complete examinations were made of state banking institutions which had applied for membership. Representatives of the department also participated by special request in three other examinations or audits. Investigations were conducted, in connection with 24 applications for the organization of new national banks and 2 applications for the conversion of state banks into national banks; 37 applications by national banks for permission to exercise fiduciary powers were received and a'cted upon; and 61 applications for interlocking directorates under the Clayton Act were examined and recommendations made in connection therewith. Among the general services rendered member banks by representatives of the department were,—assistance in the installation or revision of trust department and banking department forms of accounting, conferences with officers and directors relating to matters of criticism and constructive suggestions contained in the reports of examinations, and advising with banks regarding increases in capital stock, bank mergers, and other matters. 25 Federal Reserve Bank of Philadelphia 'Directors and Officers oAppointed and Sleeted for the Year 1928 DIRECTORS Class A John C. Cosgrove, Johnstown, Pa. George W. Reily, Harrisburg, Pa. Joseph Wayne, Jr., Philadelphia, Pa. Class B Arthur C. Dorrance, Camden, N . J. Arthur W. Sewall, Philadelphia, Pa. C. Frederick C. Stout, Philadelphia, Pa. Class C Richard L. Austin, Philadelphia, Pa. Harry L. Cannon, Bridgeville, Del. Alba B. Johnson, Rosemont, Pa. Member of Federal Advisory Council Levi L. Rue, Philadelphia, Pa. OFFICERS Richard L. Austin, Chairman and Federal Reserve Agent Alba B. Johnson, Deputy Chairman Arthur E. Post, Assistant Federal Reserve Agent Ernest C. Hill, Assistant Federal Reserve Agent George W. Norris, Governor William H . Hutt, 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. La Bold, Assistant Cashier S. R. Earl, Assistant Cashier William G. McCreedy, Comptroller