View original document

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