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Twenty-second oAnnual ^Report
of the
FEDERAL RESERVE BANK
OF PHILADELPHIA
1936
Third Federal Reserve District
CONTENTS
Page
Letter to stockholders........................................
4
General summary................................................
5
Statement of condition......................................
7
Profit and loss account......................................
8
Business conditions:
9
Industry ........................................................
Employment....................................................
14
Trade and services........................................
16
Banking conditions:
Summary ............................................................
Reserve bank credit....................................
Member bank reserves................................
Reserve position of Federal Reserve Bank
18
19
Discount and interest rates........................
21
25
26
Condition of member banks........................
Member bank earnings and expenses........
28
34
Changes in membership.................... .........
, 35
Volume of work................................................
Changes in directors and officers....................
. 36
. 37
FEDERAL RESERVE BANK
OF PHILADELPHIA
June JO, 103/.
To the Stockholders of the
Federal Reserve Bank of Philadelphia:
It is my privilege to present herewith the
twenty-second annual report, containing a review
of business and banking conditions in this district
as well as an account of the operations of this bank
during the year 1936.
The annual report in previous years has been in
the nature of a report by the Federal Reserve
Agent to the Board of Governors of the Federal
Reserve System. By virtue of organization changes
brought about through recent legislation, the re
port for 1936 and for subsequent years will be
made directly by the President to the stockholders.
John S. Sinclair
President
Annual Report of the Federal Reserve Bank
of Philadelphia for 1936
Business recovery in this district continued during 1936 and
the rate of expansion was more rapid than in any other year since
the low level of the depression. Industrial production and employ
ment increased substantially between the spring and the end of
the year, owing principally to sharp additional advances in the out
put of durable goods. The demand for capital equipment was in
creasingly active, particularly in the lattei' part of the year.
Commodity prices advanced sharply and the volume of forward
commitments in the last quarter of the year showed aspects of
speculative buying. In consequence of industrial improvement
and larger earnings, activity in the various lines of trade and
services increased further, reaching the highest levels since 1931,
when general conditions had already reflected declining business.
The benefits of the continuous recovery have been pervasive
and cumulative. Labor felt the influence of an increased volume
of work, larger payrolls and rising wage rates. There was a further
increase in industrial disputes and strikes, which at times impeded
production to a considerable extent. This is a characteristic phase
of business revival. Nevertheless, the aggregate income of labor
as well as the average number of wage earners employed expanded
greatly, thereby lightening the burden of public relief through the
absorption of the unemployed. Largely as a result of increased
demand and higher prices for agricultural products, the cash income
of farmers rose almost steadily to the largest volume in several
years and was only partly offset by the rising prices for commodities
bought by the farmers. Corporate earnings also increased mate
rially and in some lines of enterprise they were not far behind
income realized in pre-depression years.
Demand for bank credit showed gains, particularly in the
larger industrial centers, though in the aggregate it lagged notice
ably behind the rate of industrial expansion and was far under
the volume recorded in 1928 and in 1929. Commercial loans of
member banks in Philadelphia increased but similar loans of banks
elsewhere in the district generally declined. Loans on securities to
customers also decreased, while real estate loans continued virtually
unchanged.
5
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
Member bank investments in securities, on the other hand,
increased further. Holdings of direct obligations of the United
States Government rose sharply in the course of the year following
a decline in the second half of the previous year, while securities
guaranteed by the United States Government as to principal and
interest registered little change. Holdings of other domestic se
curities, chiefly state and local governments, public utility, railroad,
and miscellaneous industrial obligations, continued to expand for
the third consecutive year. At the end of 1936, the volume of all
types of securities held by member banks was slightly over 60
per cent of total loans and investments, a somewhat larger pro
portion than was the case in the previous two years and a sub
stantially greater amount than in the years of the late twenties.
The volume of deposits expanded greatly and at the end of
the year was the largest on record. The increase was especially
pronounced in demand funds to the credit of individuals, firms,
and corporations, and the gain in time deposits over a year ago
was relatively smaller. Balances of member banks with the reserve
bank and with correspondent banks late in the year reached a
record volume. Reserves were greatly in excess of legal require
ments. Even after an increase in August of one-half in required
percentages to be held at the reserve bank against deposits, the
volume of excess reserves at the end of the year remained very
substantial, while the opportunity for employing these funds con
tinued to be limited. Figures on deposits at all classes of banks,
together with those of other financial institutions including insur
ance companies and various savings agencies, indicate that the
volume of savings by individuals and business grew considerably
during the year.
Profits of member banks improved materially despite the lo"'
yields of securities and short-term open market paper. This was
due principally to a reduction in the amount of charge-offs and i”
smaller measure to increased recoveries on assets and profits from
sales of securities. Income from current operations also made a
better showing than in recent years. Current expenses absorbed
about two-thirds of gross earnings.
The principal developments in the condition of this Federal
reserve bank consisted of a substantial expansion in the volum6
of member bank deposits and of a large rise in its own cash
reserves. There was a noticeable increase in currency demand
throughout the year, chiefly in response to increased payroll5'
largei \olume of trade, and the cashing of adjusted service check5
6
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
Statement of Condition
December 31
Federal Reserve Bank of Philadelphia
(000’s omitted in dollar figures)
1934
1935
1936
RESOURCES
Cold certificates on hand and due from U. S.
Treasury..................................................
Redemption fund-—Federal reserve notes
Other cash..................
$271,119
2,525
35,662
$370,230
1,168
34,078
$495,308
194
25,458
, Total reserves..........................
$309,306
$405,476
$520,960
556
437
250
127
285
28
_
Rills discounted:
Secured by U. S. Government obligations*
Other bills discounted...........................
$
Total bills discounted... .
Rills bought in open market...............
Industrial advances...............................
United States Government securities.
_
Total bills and securities...........
Cue from foreign banks.................................
r ederal reserve notes of other F. R. banks.
Uncollected items.............................................
Bank premises......................... ........................
All other resources...........................................
Total resources.
993
584
3,236
167,120
$
377
484
6,768
177,120
$
313
317
4,686
208,989
$171,933
87
1,373
38,755
4,411
5,178
$184,749
69
1,507
40,928
4,830
3,801
$214,305
21
1,736
58,663
4,952
3,122
$531,043
$641,360
$803,759
$240,443
$271,870
$312,078
211,579
4,315
1,995
1,977
274,326
10,519
2,881
10,174
381,210
6,258
9,209
2,219
$219,866
37,578
15,131
13,470
1,049
2,996
510
$297,900
40,293
12,328
13,406
2,132
3,000
431
$398,896
58,926
12,211
13,362
4,325
3,000
961
$531,043
$641,360
$803,759
67.2%
71.1%
73.3%
$68
$399
0
$861
0
$247
LIABILITIES
rederal reserve notes in circulation.
Deposits:
Member bank reserve account.........
U. S. Treasurer—general account...
r oreign bank........................................
Other deposits............. ........................
Total deposits. .
_
Deferred availability items.
Capital paid in..................
surplus—Section 7..
..
surplus—Section 13b.........
Reserve for contingencies..
All other liabilities................
R
.
1 otal liabilities.................................
atio of total reserves to deposit and Federal
reserve note liabilities combined..................
untmgent liability on bills purchased for
toreign correspondents..................................
ommitments to make industrial advances..
ment.
7
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
for veterans. Changes in discounts and advances were of no signifi
cance, indicating that member banks were able to take care of
such demands for funds as were made upon them by customers.
The discount rate continued unchanged at 2 per cent. Total re
sources of the reserve bank at the end of the year were o\ei
$800,000,000.
.
The earnings of this reserve bank fi'om discounts were neghProfit and loss account
Federal Reserve Bank of Philadelphia
(000’s omitted)
1935
Earnings from:
12
4
Bills discounted.....................................
Bills bought............................................
Industrial advances..............................
United States Government securities
Other sources.....................................
1936
$
2,821
32
3
312
2.855
79
$3,124
$3,256
$2,114
119
139
$2,212
152
161
Total net expenses.
$2,372
$2,525
Current net earnings.
$752
$731
$ 390
$ 582
$ 412
$ 590
99
192
4
1
$ 192
193
63
3
$ 296
$ 451
Net additions to current net earnings
S 116
$ 139
Net earnings available for distribution
$ 868
$ 870
S
$
Total earnings.
Expenses:
Operating expenses*..................................................
Cost of Federal reserve currency...........................
Assessments for expenses of Board of Governors.
Additions to current net earnings:
Profits on sales of United States Government se
curities .........................................................................
Other additions..............................................................
Deductions from current net earnings:
Assessment to apply on cost of building for Board
of Governors..........................................................
Prior service contributions to Retirement System
Added to reserve for contingencies........................
Other deductions.......................................................
Distribution of net earnings:
Paid to Treasury of United Slates
Dividends paid to member banks.
Transferred to surplus (Sec. 13b)
Transferred from surplus (Sec. 7).
—
42
856
34
64
—
84
736
94
44
* After deducting reimbursement received for certain fiscal agency ami other expend9
8
twenty-second Annual Report, Federal Reserve Bank of Philadelphia
gible and, even when supplemented by income from industrial
advances, were below the amount needed to meet operating ex
penses. The principal source of income, therefore, has been the
bank’s participation in Federal Reserve System holdings of United
States Government obligations. Current net earnings for the year
as a whole were slightly less than the amount required for dividend
payments. After sundry adjustments, however, a sufficient amount
remained to cover dividends and payments to the Treasury of the
United States on funds received in connection with industrial loans
and to increase the combined surplus accounts by about $50,000.
Business conditions
Business activity in the Philadelphia Federal Reserve
District during 1936 expanded at an unusually rapid
pace. Industrial production increased sharply and by the end of
the year was at about the same level as that prevailing in the
three years, 1923-1925. Demand for all classes of commodities
was increasingly active and buying of raw materials and products
for further manufacture and processing continued in large volume
throughout the year, extending into 1937.
Prices of commodities advanced sharply after the spring of
the year, following a comparatively narrow range of fluctuation
in the previous year. The most pronounced increase occurred in
farm products, while food prices showed little change. Quotations
for industrial products, chiefly manufactures, rose in the second
half of the year, after a three-year period of comparative stability.
The following data show comparisons for selected periods to indicate
trends of wholesale prices.
Industry
Commodity prices
(Indexes: 1926 = 100)
All commodities (784)....
Raw materials...
Semi-finished articles........
Finished goods.
Farm products...................
Foods.. . .
Other commodities............
Annual averages of monthly
indexes
Monthly
1929
1932
1935
1936
Dec.
1935
Dec.
1936
95
98
94
95
105
100
92
65
55
59
70
48
61
70
80
77
74
82
79
84
78
81
80
76
82
81
82
80
81
78
75
83
78
86
79
84
86
82
84
89
86
82
Source: Bureau of Labor Statistics.
9
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
INDUSTRIAL PRODUCTION
Inventories of finished goods held by industrial establishments
in this district at the end of the year as a whole showed no signifi*
cant changes as compared with a year before. Stocks of raW
materials at plants were larger, as is to be expected in a period
of increasing business. The supply of raw materials, including
foodstuffs, at source and at warehouses in this country and else*
where, on the other hand, showed additional declines and at the end
of the year appeared to be the smallest in many years. This
decline was accompanied by increasing production and rising prices,
reflecting a rather normal development in a period of business
recovery.
The sharpest expansion in manufacturing activity occurred i11
the output of durable goods, including metal products, transporta'
tion equipment, and building materials. By the end of the year, the
index number, measuring the rate of activity in this branch of
10
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
industry, rose to 90 per cent of the 1923-25 average as compared
to the depression low of 29. Productive activity in the industries
Manufacturing such non-durable goods as textile products, shoes
and other commodities for quick consumption also expanded some
what during the year, reaching in December an index number of
104 as against a low of 67 in 1932.
In general, all lines of manufacture have shared in this ex
pansion. The aggregate volume of commitments at the end of the
year was the largest since 1930 and was sufficient to sustain activity
at relatively high levels for several months of the ensuing year.
Mineral industries as a whole also registered gains. The sharp
est increase occurred in the output of bituminous coal, resulting
Principally from larger industrial demand for this fuel. The
th^U^
an^lracite, on the other hand, just about held the rate
at prevailed in the preceding year, owing largely to the adverse
ect of mild weather upon domestic consumption. Extraction of
ciude oil increased at an even greater rate than it did in 1929,
tl 01R after the installation of a changed method of production in
le Bradford field. The unusual increase in the output of electric
°" er reflected chiefly a substantial gain in industrial consumption,
'929
1930
1931
1932
11
1933
1934
1935
1936
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
although the use of electricity for household purposes also expanded
at a considerable rate, partly in consequence of the increasing use
of electrical appliances.
Building and construction activity increased further to the
highest level since 1931, although it was still very much lower than
in the period from 1924 to 1930. The aggregate value of contracts
awarded for new construction of all types during 1936 amounted
to about $170,000,000 as compared with $94,000,000 in 1935 and a
low of $68,000,000 in 1933. But this amount was small when compared with the 1923-25 average of $305,000,000 and the record
high of $503,000,000 established in 1928. Awards for residential
construction, particularly of one- and two-family houses, registered
the largest gain in the year and constituted about 30 per cent of
the 1936 total. Contracts let for non-residential buildings made
up nearly 40 per cent of the total while the remainder was for
public works.
Trends of industrial production, building, and farm income are
indicated by the following data:
Productive activity
Philadelphia Federal
Reserve District
(1923-25 average = 100)
Industrial production. . . .
Manufacturing......................
Durable goods...............
Non-durahle goods. . ..
Coal mining.......................
Anthracite......................
Bituminous..................
Crude oil........................
Electric power output ...
Building and construction
contracts awarded
Total (3-month moving avg.).
Residential...................
Non-residential...........
Public works and utilities. ..
Agricultural activity
(1932 avg. = 100)
Farm cash income............
Annual averages of monthly
indexes
1929
63
61
39
Dec.
1935
Dec.
1936
81
78
62
91
71
72
66
100
9«
90
104
75
73
88
60
62
SI
66
64
40
82
60
61
54
70
67
50
80
70
71
62
87
65
63
91
68
67
74
230
295
302
357
392
432
415
487
191
ITT
181
192
202
228
210
237
136
108
168
144
34
18
41
63
22
12
25
43
32
12
29
94
28
17
29
59
34
59
111
24
52
112
59
41
53
94
181
1(M)
101
122
138
149
137
164
73
I
i
I
j
I
I
i
|
I
I
Monthly
1932 1933 1934 1935 1936
110
111
no
112
92
91
98
j
86
61
The results of agricultural operations on the whole were moi'e I
satisfactory in 1936 than in any previous year since the beginnifl^ \
12
twenty-second Annual Report, Federal Reserve Bank of Philadelphia
e depression. Cash income of farmers increased by 7 per cent
ov a
$319,000,000, and this was a gain of nearly 50 per cent
hieH 6
low. This gain in income was due principally to
son er?')1^ces inasmuch as the yield of most commercial crops was
an ?e.T
smaller than in 1935. Income from the sales of livestock
tot 1 \Vest°ck Products, which accounts for about 70 per cent of
Prev' arm CaSh income *n ^is district, also was larger than in the
for l0Ua year' The accompanying figures show changes in prices
for
uc^s s°ld by farmers as well as in prices paid by farmers
nr. +V1 1C^es used in domestic consumption and supplies necessary
n the farms.
(1910-19U
average = 100)
Prices received
Pennsylvania
New Jersey
United States
1932
1935
1936
1932
1935
1936
1932
1935
1936
75
107
70
104
125
83
114
124
92
88
107
82
121
125
97
127
124
102
65
107
61
108
125
86
114
124
92
Agriculture.
13
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
Industrial employment and payrolls showed marked
gains during the year and reached the largest volume
.
since 1929-1930. The expansion in wage earnings and
working time was quite pronounced. Increases in wage rates were
widespread, especially after the middle of the vear, and this tend
ency has been carried into 1937. The following table shows the
tiend of employment and payrolls over the past four years:
Employment
Index of general employment
and payrolls—Pennsylvania.
(1932 average = 100; indexes
are annual averages.)
General index (weighted) *
Manufacturing. .
Anthracite mining. .
Bituminous coal mining
Quarrying and non-metallic mining
Crude petroleum producing. .
Public utilities. .
Retail trade.. . .
Wholesale trade..
Hotels..........
Laundries........
Dyeing and cleaning
Employment
Payrolls
1933 1934 1935 1936
1933 1934 1935 1936
99
105
83
99
93
139
92
101
98
94
93
99
97
108
85
100
94
122
86
95
91
82
85
90
108
116
95
121
105
183
90
109
103
106
94
99
108
121
86
120
97
193
89
110
106
104
95
94
114
130
84
121
107
180
91
113
111
106
99
100
118
138
104
154
124
163
88
106
96
100
92
103
126
155
89
161
128
170
91
108
100
103
95
101
151
189
85
199
184
178
97
117
107
111
105
108
♦ Includes
1,b... building andi construction.
~
„si,allvdnptlla dlSput®s again creased during 1936, a feature that
able Ln
Pa.nie+S business recovery and advancing prices. Availbv strikes htTh^dt ? tHe nUmbe1’ °f industrial P^nts affected
vea
Thp se
I
S 7aS noticeably larger than in the previous
pronounced
° °f th6Se diSPUteS also "ere morC
While the improved industrial condition resulted in a conpublic beliefTXri uf I1"6 UnempI°yed workers» the burden of
pended (t 2nec;:™nXS„X"??eaVy'
dXe aceon^^nn^ ? K
‘ aPPr°Ximated »«.000,000. but this
relief Durinu the , -S
1!lcrease *n the amount spent for work
—XTpep„eXfZ
,19r to April “■1937-
the appropriations pursuant to em"
Delaware under
1936 aggregated over $709 000 000,I
T °f 1935 “h
expenditures for materials ’ Th, figure. does not includ
the local government-1 . ’ bUppbes and supervision incurred by
expenditures necessarily
. These and other forms of Public
necessarily had a stimulating effect on trade activity14
Tlventy-second Annual Report, Federal Reserve Bank of Philadelphia
EMPLOYMENT AND PAYROLLS
PENNSYLVANIA
1923-25«IOO
PERCENT
ALL MANUFACTURING INDUSTRIES
100
EMPLOYMENT
PAYROLLS
DURABLE GOODS
EMPLOYMENT
PAYROLLS
CONSUMERS GOODS
120
EMPLOYMENT
PAYROLLS S
HOURS AND EARNINGS
120
total employe
HOURS WORKED
1929
1930
193 I
1932
J933
15
1935
1936
1937
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
Higher incomes from such important sources as wages,
salaries, dividends, and the sale of farm products
resulted in larger purchases of goods and services dur
ing 1936. The value of retail trade sales by all reporting stores
combined was 14 per cent larger than in the previous year. Con
sumer buying on the installment plan showed an even greater rate
of expansion than that indicated by the general average for all
reporting retail lines. For example, the sales of credit stores which
handle chiefly furniture and other household equipment such as
refrigerators, radios, vacuum cleaners and washing machines in
creased 31 per cent as compared with 1935 and 46 per cent as
compared with 1934. Retail financing of passenger automobiles
also showed a large gain over other recent years and the total
volume of new and used cars sold was the largest in several years.
Several factors accounted for the increase in installment sales.
Among these were reductions in the amounts required for down
payments, lower carrying charges, longer terms of sale and the
extension of the installment plan to more classes of merchandise,
particularly goods which depreciate in a comparatively short time.
The basic reason underlying this development is probably to be
found in the improvement of general business conditions, higher
incomes and the belief that business stability is to be maintained
for some time.
Dollar sales by eight wholesale lines in the aggregate showed
a gain of 11 per cent over the preceding year and were the largest
since 1930, reflecting in part higher prices. The greatest increases
occurred in the sale of dry goods, electrical supplies, jewelry, and
hardware.
The dollar volume of retail inventories at the end of the year
was 15 per cent larger than at the same time last year, while at
wholesale establishments the value of stocks was 6 per cent
greater. The rate of stock turnover at retail stores continued
to rise, the ratio for all reporting stores being about 4.6 as against
4.3 a year before. As in former years, the rate at which inventories
moved varied considerably between the individual stores. For
example, in the case of Philadelphia department stores the turn
over of inventories ranged from slightly over four to less than
six times a year, while the weighted average for these stores was
almost five times. The rate of stock turnover for the eight lines
of wholesale trade also increased from 5.7 in 1935 to 6.1 in 1936Settlements of customers’ accounts at retail stores showed
additional gains throughout the year, the ratio of collections to
Trade and
services
16
acco1'3?!68 r*sin& about 6 per cent. In the case of regular charge
rece^Tk a^ department stores the average ratio of collections to
the r 8 3 eS Was nearly 10 per cenl higher than in the previous year,
sittiifaillS k.eing increasingly pronounced as the year progressed. A
°thei^b rali° measuring payments of installment accounts, on the
estabp
Was °niy slightly higher than in 1935. For wholesale
of g snnients the collection ratio registered an average increase
Pei cent over that in the preceding year.
iCes Othei* indicators relating to the distribution of goods and servgenerally have registered continued improvement whether
17
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
measured in value or in volume. The following table gives a statis
tical summary of the trend in this branch of business:
Distribution
Annual averages of monthly
indexes
Philadelphia Federal
Reserve District
(1923-25 average = 100)
1929
Monthly
1932 1933 1934 1935 1936
Dee.
1935
Dec.
1936
Retail trade
Sales........................................
Stocks.....................................
Wholesale trade
Sales..........................................
Stocks.......................................
New passenger automobiles.
Commercial hotels
100
92
61
64
59
57
65
62
69
65
79
70
73
66
84
76
98
102
131
59
66
51
63
59
62
75
65
73
79
66
99
87
69
124
81
70
245
94
74
323
86
82
100
100
106
107
119
124
96
110
110
135
(1934 = 100)
Occupancy...............................
Income—total.........................
Freight car loadings
Allegheny district...................
Phila. industrial area.............
Port of Philadelphia
Exports.....................................
Imports...................................
Coastwise and intercoaslal.. .
. , , —uguies are
106
107
52
65
55
62
57
58
59
62
70
68
65
66
83
73
78
42
100
179
51
108
198
51
102
202
49
109
210
41
122
225
43
95
220
42
113
195
145
164
adjusted tor
mercial hotels and the Port of Philadelphia.
Banking conditions
. Among the principal features characterizing the banking situa
tion in this district have been a large accumulation of deposits at
the banks, a pronounced expansion in member bank balances held
with the reserve bank and a smaller rise in those with correspond
ent banks, a continuance of negligible demand for commercial
loans generally as well as for discounts and advances at the reserve
bank, increased demand for currency, and an improvement in bank
profits. Short-term money rates and yields on bonds have con
tinued at extremely low levels, reflecting the influence of easy
conditions engendered by the abundant supply of funds and a
limited demand for them.
The large volume of excess bank reserves throughout the
country including this district was curtailed by increased reserve
requirements to prevent the possibility at a later date of injurious
expansion of bank credit at a time of increasing business and
lising prices. Margin requirements on security loans by brokers
and dealers were raised and margin requirements were extended to
loans made by banks to purchase or carry registered stocks. More18
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
0Ver, to neutralize the effect of incoming gold on the credit base,
the Treasury in December adopted a policy of segregating gold in
an “inactive” account, thereby eliminating the expansionary effect
*t formerly had on the reserves of banks. These measures were
taken in the interest of maintaining sound credit conditions.
The most important development with respect to credit
extended by this bank during the year was a further
credit
increase in the holdings of United States Government
.
securities through the usual participation of this bank
111 the Federal Reserve System holdings. In the first half of the
^ear the amount held by this bank remained fairly steady at about
vl77,000,000 but at the end of June it was increased to more than
^11,000,000. This expansion was due to an adjustment made
the distribution of securities among the several reserve banks
accordance with a revised formula for allotment prescribed by
e federal Open Market Committee and based on earning require
ments for each quarterly period. At the same time such govern
ment securities as were held in the separate investment accounts
° the reserve banks were transferred to the System Open Market
ecount. In the last quarter of the year, total holdings of this
ank declined to less than $209,000,000. The following figures
S
changes in the total and in the composition of United States
? Rations held by this bank at the end of each of the past
tour years.
Reserve
bank
United States Government Securities
held by the Federal Reserve Bank of Philadelphia
(in thousands of dollars)
End of year
1933.
1934.
1935.
1936.
Bonds
Notes
Bills
Total
28,068
25,138
16,848
42,193
74,042
104,810
120,857
115,317
65,010
37,172
39,415
51,479
167,120
167,120
177,120
208,989
be ®or.row^n^s hy member banks during the year continued to
Negligible, the discounts seldom averaging more than half a
for 10n d°Uars in any one month. Little eligible paper was tendered
th 1,e(^^scount, loans secured by government obligations making up
ar^esl; Part of total loans to members. Only one small loan
aipS nia<^e under Section 10(b) of the Federal Reserve Act, as
mnded in 1935, and this loan was liquidated after nine days.
19
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
The small quantity of bills included in the earning assets of this
bank represented a participation in foreign bills held by the Reserve
System.
Industrial advances under Section 13 (b) of the Federal Reserve
Act declined from about $6,700,000 in January to $4,800,000 in
December, although the average outstanding for the year was larger
than in 1935. The decline in the number of applications and in the
amount of advances reflected largely the improvement in general
business conditions and the increasing ease in the credit situation
generally, with a consequent decrease in the demand for working
capital loans of this character. The accompanying table shows
changes in the activity of these loans since they were authorized
in June 1934. The figures refer to both the reserve bank and other
participating institutions.
Industrial Ioans
(Participations of other financing
institutions included)
In number:
Applications received—net.........................
Under consideration December 31.
Loans and commitments*.............................
In dollars:
Applications received—net...........................
Under consideration December 31............
June 1934
to
Dec. 1935
June 1934
to
Dec. 1936
512
6
576
0
506
136
576
163
$36,380,000
660.000
$39,031,000
0
$35,720,000
$39,031,000
22,992,000
24.090,000
Actual advances made...............................
Repayments.............................................
$12,378,000
3.391.000
$13,148,000
6.326,000
Advances outstanding at end of year.................
Commitments outstanding at end of year. . . '
$ 8.987,000
1,307.000
$ 6,822,000
439,000
Loans and commitments*.....................................
* Includes approved applications that subsequently were reduced or withdrawn, <’r
expired unused.
‘
Theie follows a statistical summary of changes in the principal
types of reserve bank credit outstanding:
20
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
Bill and security
holdings
fM-ir • B- of Phila^Millions of dollars)
In
United
Other
States securities Total
dustrial
advances securities
Bills
dis
counted
Bills
bought
45.3
9.6
0.6
0.4
3.6
1.7
0.5
0.4
0
0.3
4.4
5.4
146.3
167.1
172.7
193.8
0.6
0.4
0
195.8
179.1
178.2
200.0
0.5
0.4
0.6
0.5
0.4
0.4
0.5
0.2
0.3
0.4
0.2
0.2
0.4
0.5
0.5
0.5
0.5
0.5
0.4
0.3
0.3
0.3
0.3
0.3
0.3
0.3
6.8
6.7
6.6
5.6
5.3
5.2
5.2
5.1
5.1
5.0
5.0
5.0
4.8
177.1
177.1
177.1
177.1
177.1
177.1
178.2
211.2
211.2
211.2
209.0
209.0
209.3
0
0
0
0
0
0
0
0
0
0
0
0
0
184.9
184.7
184.8
183.7
183.3
183.1
184.2
216.8
216.9
216.9
214.5
214.5
214.8
Alf933al avepa«e8!
1934:
Reserve balances of member banks in this district in
creased from $274,000,000 to $381,000,000 during 1936
and this was the largest expansion shown for any year
in the history of this bank. Pronounced fluctuations
®ai’ly months were followed by a general trend downward to the
xy1
dune- Rut in the last half of that month this movement
bvasfrersed sliarPly upward as a result of large payments made
Th
treasury in cashing adjusted service checks for veterans.
infl°Ugh declining in volume, this factor continued to exert an
in tl>enCe °n kank reserves over the summer months. Moreover,
e autumn a further substantial rise in reserves resulted partly
orn the flow of funds to this district in payment for a new issue
levS^CUld^es by the Commonwealth of Pennsylvania. The highest
Oc^
by member bank reserves was over $422,000,000 on
°f th 61 20 and suT>se<luently it declined to $381,000,000 at the end
Wa 6 ^ear’ The daily average of member bank reserve balances
Ooq
^OOO.OOO as compared with $235,000,000 in 1935, $191,>°00 in 1934, and $121,000,000 in 1933.
ser, V er the greater part of the first seven months of 1936, releg.\es
member banks in Philadelphia were more than double
aver requ’ren'lents and those of members outside of this city
16
ah°ut 80 per cent above requirements. Effective August
’ e Percentages of reserves required to be maintained against
21
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
MEMBER BANK RESERVE DEPOSITS and RELATED ITEMS
PHILADELPHIA FEDERAL RESERVE DISTRICT
________ (MwtMy averages of Wednesday figures)
MILLIONS
400
MEMBER BANK
300
RESERVE DEPOSITS
200
100
Relaled ilwns — cumulated from Jan. 1.1932
MILLIONS
$
INTERDISTRICT
COMMERCIAL PAYMENTS *
+ 300
+ 200
+ 100
RESERVE BANK
CREDIT*
- 100
treasury
-200
+ 100
OTHER DEPOSITS
AT RESERVE
• 100
'933
1934
An increase tends Io increase member bank reserves
m
-------" "ICr>”e l""fa *°
r"tl,lb,r
reserves aryT-- -.*^
22
>935
1936
1937
Twenty-second Annual Report, Federal Reserve Rank of Philadelphia
deposits were increased by one-half by action of the Board of
Governors of the Federal Reserve System. The effect of this in
crease upon the excess reserves of member banks in this district
was virtually nullified by an immediate and pronounced increase
in reserves of country banks and within a month or so by a sharp
rise in those of city banks. As a result, reserve balances continued
into 1937 substantially above requirements. In December, for ex
ample, Philadelphia member banks still had average excess reserves
of 64 per cent and country banks 50 per cent over requirements.
Member banks in this district at the end of the year reported large
balances with their correspondents, far in excess of those carried
Prior to the depression.
RESERVE DEPOSITS OF MEMBER BANKS
PHILADELPHIA FEDERAL RESERVE DISTRICT
1932
1933
(licensed banks only /ter March 1933 )
The large expansion in bank reserves throughout the country
has reflected principally the influence of gold which has been coming
1J)to this country in unusually large amounts. While the immediate
result of imported gold is to increase deposits and reserve balances
banks at the port of entry, its subsequent effect on deposits
and reserves of banks in the interior is essentially the same because
the quick diffusion of funds among the various groups and classes
banks as well as different sections of the country. This distri
23
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
bution takes place partly through the normal processes of business
and financial transactions and to a greater extent in recent years
through the operations of the United States Treasury.
Payments arising out of innumerable commercial transactions
involving goods, securities and services are made constantly be
tween the various parts of the country. Each payment involves a
transfer of bank reserves in one form or another through the
clearance system. Public expenditures of funds obtained through
taxation and the sale of government securities to banks, especially
those in larger cities, exert an extremely important influence upon
the distribution of reserves among all banks. The disbursement
of funds by the Treasury continued to be widespread and member
banks outside large centers shared very substantially in the growth
of total bank reserves.
In the Philadelphia Federal Reserve District, the excess of
Treasury payments over receipts was especially large late in June
and in July when veterans were actively cashing adjusted service
bonds. Payments in connection with work relief during the year
also were large. The amount of disbursements by the United
States Treasury in this district exceeded the aggregate receipts
by $101,000,000 and this was the greatest single factor contributing
to a rise of $107,000,000 in member bank reserves during 1936.
This district gained $47,000,000 in commercial and financial
tiansactions with other districts. This favorable balance, however,
was due to the payment for securities sold by the Reconstruction
Finance Corporation outside this district. The proceeds of these
sales were credited to the local account of the Treasury and had
no effect on member bank reserves here until expended through
Treasuiy operations. In other transactions the balance of payments
was adverse to this district since banks made substantial purchases
of securities elsewhere requiring a transfer of funds to other dis
tricts, particularly New York.
The demand for currency continued to increase, largely as a
result of expanding trade and industrial payrolls. For the year
as a whole this increase amounted to $50,000,000 and its obvious
effect was to reduce member bank reserves. The sharp rise in
currency shipments in June was due chiefly to the cashing of checks
for the veterans. Following several months of small changes there
was a rise in demand at the winter holiday season, the expansion
this year being greater than is usual at that time.
A detailed analysis of changes in the various factors affecting
member bank reserves is given in the following table:
24
^^enty.second Annual Report, Federal Reserve Bank of Philadelphia
Changes during 1936
Member bank reserves
and related items
(Millions of dollars)
Jan. 1- June 18- Sept. 10- Oct. 22June 17 Sept. 9
Oct, 21 Dec. 31
Total
Sources of 1 „„,ls:
distHel1>ank <redit extended in
conin|er('ial transfers
^•'nt gold purchases.net...............
asury operations..........
Total. .
Ui*s of funds:
.............................
1VU revcy, den>and...........................
“(It'll 6j >ank reserve deposits. ..
Unev~.d®P°,sits” at reserve bank.
ser < r!< et, capital funds of restr\ e bank...
it
Total.
Reserve
+ 1.0
+ 12.7
+ 4.1
-15.4
- 1.7
- 24.0
+ 14
+ 120.5
- 0.9
+59.0
+ 0.7
+ 10.8
- 1.5
- 1.0
+ 2.0
— 15.0
- 3.1
+ 46.7
+ 8.2
+ 100.9
+ 2.4
+ 96.2
+69.6
— 15.5
+152.7
+21.3
-14.3
- 6.7
+ 6.4
+ 91.3
+ 0.5
+69.0
- 0.2
+22.4
-39.1
+ 0.6
+ 50.6
+ 106.9
- 8.0
+ 2.1
+
0.2
+ 0.3
+ 0.6
+
+ 2.4
+ 96.2
+69.6
-15.5
+ 152.7
3.2
Cash reserves of this bank at the end of the year
aggregated about $521,000,000 as against $405,000,000
a year ago. The low volume for the year was $392,
000,000 in the middle of February and the high was
Hank
$540,000,000 in October. The increase was due prinYj.
cipally to transfers of funds to this district by the
thisalUly and to deposits made by the Treasury to the credit of
me a11* *n
interdistrict settlement fund, and in a smaller
nik le to a gain in commercial and financial transactions with
°ther districts.
gjn PeP°sit liabilities also increased from $298,000,000 at the beSii^ji11^ °f 1936 to almost $400,000,000 at the end of that year
this h
osculation of Federal reserve notes issued by
aver
expanded from $272,000,000 to $312,000,000, the daily
thela&e ke’ng about $289,000,000 or substantially larger than in
Fed Previous three years. The amount of collateral held by the
on D1 al ^eserve Agent as security for notes issued to the bank
fUndecember 31 totaled $332,285,000. Credits in the gold certificate
omy <Sace up $332,000,000 of the total, while eligible paper was
Gov • °5’000. On only a few days of the year were United States
e^rnent obligations used as collateral.
babil'K ra^° °1 reserves to Federal reserve note and deposit
alth 1 leS ,combined averaged 72.4, the highest for several years,
in the
declined below 70 in the summer, following the increase
e holdings of government securities. Subsequently it advanced
Position of
Federal
Reserve
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
and at the end of the year was 73.3. The following table gives
annual averages of the reserve ratio derived from daily figures and
of the factors used in its calculation:
Reserve position
Federal Reserve Bank of Phila.
(Millions of dollars)
Federal
reserve
note cir
culation
Member
Total
bank
Total
Reserve
cash
reserve deposits
ratio
reserves
deposits
Annual averages:
1933 .......................
1934 .......................
1935 .......................
1936 .......................
245.6
242.6
244.4
289.4
121.5
190.8
235.3
324.6
134.7
204.6
256.8
351.7
228.3
296.7
345.0
464.0
60.0%
66.3"
68.8 "
72.4 “
273.1
265.5
269.3
277.7
280.3
281.9
291.6
299.6
295.3
296.3
297.3
303.9
313.9
266.3
294.3
283.2
295.2
292.5
275.6
276.1
315.6
320.3
353.8
405.8
397.4
383.0
289.4
329.3
298.6
330.6
340.1
313.2
316.4
343.9
342.1
374.4
419.8
410.6
399.7
396.6
431.6
405.4
446.3
460.0
435.1
447.0
449.6
443.5
476.4
525.2
523.7
521.5
70.5 “
72.6 “
71.4"
73.4"
74.1 “
73.1 “
73.5 "
69.9 “
69.6 “
71.0"
73.3 “
73.3 “
73.1 "
Monthly averages:
1935— December.
1936— January...
February..
March....
April..........
May..........
June. . . ...
July...........
August. ...
September.
October. . .
November.
December. .
Money rates during 1936 continued at abnormally
and
low levels, owing principally to a large supply of
interest
funds seeking investment and a restricted demand for
rates
these funds from various classes of borrowers. Frac. .
tional advances on street loans and bankers’ bills were
insignificant in effect. Commercial papei- sold at an unchanged
rate of 84 per cent for the second year; the lowest rate in many
years prior to 1930 was 3% per cent in 1924. Short-term rates
as a rule have continued considerably below those prevailing in the
long-term money markets.
•
Th®.™ost common rates charged customers by member banks
in this district on commercial and industrial loans in the latter part
of the year were from 5 to 6 per cent, although they were lower
in a number of instances depending on terms and conditions of the
loan and the risk involved. The same general observation is
equally applicable to other types of customer loans such as farm
and urban real estate and agricultural loans. The range of rates
on loans in cities with population of 100,000 or over was wider
than m other places in this district.
« was wiu
Discount
26
^Wenty-second A;; nual Report, Federal Reserve Bank of Philadelphia
Long-term rates declined to the lowest levels of the present cenUly. Yields of United States Government bonds in 1936 averaged
ess ^an 2(4 per cent as compared with the lowest average of
po^t^^ Per cent reacLed by these bonds in the twenties. Corvi
1 b°nds of the first three grades have sold on the average
rat . *s
3-24, 3.47 and 4.02 per cent, respectively, the lowest
ea
ln neaply three decades. The effect of such low rates on bank
nnings constituted a problem for the banking system,
du '
Federal Reserve Bank of Philadelphia made no change
an
year in its rates of discount and rediscount. The rate
se
rediscounts and advances to member banks under
per 10nS 13 and 13a of the Federal Reserve Act continued at 2
secfC6nt S*nce January 1935, and the rate on advances under
r 1011 10(b), secured to the satisfaction of the reserve bank,
lamed one-half per cent above the discount rate. Rates on other
asses of paper follow:
individuals, partnerships and corporations secured
obligations of the United States (under last paragat p . Section 13 of the Federal Reserve Act)......................
4%
^(jv°n industrial advances:
Advanp6S d'rect to industrial or commercial organizations....
4-6%
ces to financing institutions—
i 1% above
On portion for which institution is obligated
< established
(discount rate
On remaining portion............................................
*
bv'd'irr
Ri'ank ecI
* g mi^'Inenls to make advances...........................
unie as to borrower; minimum of 4%.
.
%-2%
dep . ax^muni rates payable by member banks on time and savings
°S1 s’ ur*der regulations of the Board of Governors, continued
an&ed during the year. They were:
pavings deposits ....................................................................................
2%%
Savings deposits.......................................................................
?r time deposits payable in—
®lx months or more.........................................................................
Ninety days to six months..............................................................
2% “
ess than ninety days.....................................................................
2% “
2 “
1
“
la§t
great majority of member banks of this district in the
savi QUarter of the year paid a flat rate of 2 or 2(4 per cent on
Vari dS> beP°sits. A number of banks had scales of rates which
beipG
acc°rdance with the amount of the deposits, such rates
paj(j^ as l°w as I/O per cent. Substantially the same rates were
011 Lme deposits having a maturity date of six months or
27
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
more. The most common flat rates on time deposits maturing be
tween ninety days and six months were
and 1 per cent in cities
of 100,000 population or over and 2 per cent in smaller places. In
the case of time deposits payable in less than ninety days the most
frequent flat rate was 1 per cent and the lowest reported rate was
1/4, per cent.
Continuing the upward trend from the depression low
levels, the deposits of member banks in this district
banks
increased further by over $300,000,000 to a new record
volume of $2,935,000,000 on December 31. All types
of deposits expanded except postal savings which again showed a
marked decline. Deposits of the United States Government regis
tered the largest relative growth. The increase in demand deposits
of individuals, firms and corporations was considerable at member
banks as a whole but especially so at country banks. Whereas
Philadelphia members showed an expansion of 9 per cent in this
type of deposits, country banks had a rise of over 26 per cent
between the end of 1935 and that of 1936. Time deposits likewise
increased at both classes of banks but by a smaller proportion than
in the case of demand funds.
Changes in various types of deposits are indicated by the
following figures:
Condition
of member
Philadelphia banks
Member bank deposits
Country banks
J.
Philadelphia Federal Reserve District
(Millions of dollars)
Individuals, partnerships and corporations:
Demand..................................................
Time..............................................................
State, county and municipal..........................
Interbank........................................................
United States Government and Postal
Savings............................................................
All other.....................................................
Total.................................
Dec. 31,
1935
Dec. 31.
1936
Dec. 31,
1935
Dec. 31,
1936
700
193
55
303
760
199
54
353
400
766
92
9
506
806
105
10
44
9
70
10
46
12
43
19
1,304
1,446
1,325
1,489
Total loans declined to $939,000,000 at the end of the year *
compared with $945,000,000 a year before. This reduction was due
chiefly to a decrease of $18,000,000 in loans on securities to cus
tomers other than brokers and dealers, in the face of sharp advances
in security prices. Decreases in interbank and real estate loans
23
^Wenty-second Annual Report, Federal Reserve Bank of Philadelphia
Licensed member banks
Philadelphia Federal Reserve District
(000,000’s omitted)
Loan«
Hans
on securities: ASSETS
To . ro, rs an(' dealers in New York City.
Tn
ers and dealers elsewhere...............
0 others (except banks)...............................
Dec. 31.
1934
Dec. 31,
1935
$
$
22
18
306
9
18
278
Dec. 31
1936
$
9
21
260
$ 346
22
212
6
426
$ 305
27
212
4
397
$ 290
35
211
2
401
United StT?ta LIoans....................................................
Securit;J. r i? Government securities......................
Other so • y guaranteed by XJ. S. Government.
uer securities.........
$1,012
505
62
606
$ 945
482
148
671
$ 939
576
147
732
Banhinr, ?o,al loans and investments.
$2,185
88
55
211
42
255
96
34
$2,246
88
69
275
47
285
104
30
$2,394
86
76
379
46
317
134
29
$2,966
$3,144
$3,461
$
$
$
Accenin80* °n securities to others than banks
Loans _nces ?nd commercial paper bought. .
Loan!?nvreal estate..................
.
. ..
............
0?£nsto banks..............
Ler loans...
Other
, ouse> furniture and fixtures. . . .
Reserve
°"ned...............................
Cash in vault ?et*era' Reserve Bank
Ohe^kTa
utLer banks...........................
Other l^tsOther CaSh it6mS.......................
Total assets.
deposits:
liabilities
gjted States...........................
pno^SgSand municipal
Other demand..................
uthertime.
....................
93
120
44
276
912
937
61
147
29
312
1.121
959
95
159
18
363
1,295
1,005
Rational h?1’?' deP°sits.......................
Rills pavnWn°tes outstanding.
..........
$2,382
73
9
30
$2,629
0
1
31
$2,935
0
•---32
........................................
Retiren? ^.oontingencies.................
ent fund for preferred stock.
195
215
41
28
—
198
212
48
24
1
194
214
58
27
1
Total liabilities......................
$2,966
$3,14-4
$3,461
656
656
658
N^lber of member banks.....................
rnei, • y were of no consequence. The volume of bills and con
loailC1^ PaPer purchased, loans to brokers and dealers, and othe
s ai’gely to business and agriculture rose by $15,000,000.
29
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
ALL MEMBER BANKS
PHILADELPHIA FEDERAL RESERVE DISTRICT
CALL OATES
MILLIONS
$
r
MILLIONS
3000
3000
TOTAL LOANS
AND INVESTMENTS
2500
2500
total deposits’
2000
2000
LOANS
1500
1500
DEMAND DEPOSITS
.(adjusted)
000
-time
INVESTMENTS
DEPO5IT5
RESERVES. CASH AND BALANCES
------- WITH OTHER BANKS
500
s
INTERBANK
1920
1922
1926
1924
1928
1930
LOANS
(other than to
1932
1934
1936
1938
millions
INVESTMENTS
banks)
S
800
700
OTHER LOANS
OTHER DOMESTIC
TO CUSTOMERS
---I---600
500
40G
—-----------LOANS ON
'*
SECURITIES
TO CUSTOMERS
400
30C
real estate
LOANS
STREET LOANS
oCsLYj_'t.?. . -..j___ .
!930 1932 1934
AFTER DEDUCTING CASH ITEMS
'1935
1938
1930
1932
©34
©35
1933
R^S „
commidal toaraIn th
7 c<>,,tinued to «Pand at * raPid ra‘
gain reflected largely
increased onl>' *L000.000. Th
especially to the secondlandS' °f
banks to PhiladelpW
hn d quarters of the year. Commerci
30
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
loans by country banks were smaller at the end of 1936 than at
the end of 1935. Undoubtedly new loans were made by these banks
but they were offset by repayments so that the net change was a
decline. The volume of this class of loans was less than one-half
of that in 1929 and substantially smaller than in other years when
business and prices were advancing.
Among the various explanations offered to account for this
trend is the fact that the method of financing business has been
changing over a period of years. The chief characteristics of this
change are reflected principally in the increase of corporate funds
resulting from such factors as mergers, consolidations and financial
readjustments, rapid turnover of goods, improved transportation
facilities, prompt payments by customers, and large government
disbursements. While some of these developments may be transi
tory, they have been significant factors affecting the income of
banks from a source which was most important in eailiei jears.
to consequence, banks have been searching for new sources foi the
employment of the large supply of funds on hand.
Figures below7 indicate changes in loans by type:
Philadelphia banks
Country banks
Member bank loans
hiladelphia Federal Reserve District
(Millions of dollars)
Dec. 31.
1935
Dec. 31.
1936
Dec. 31,
1935
Dec. 31,
1936
Loans on securities:
o brokers and dealers in N. Y. City. ..
o brokers and dealers elsewhere............
o others (except banks)..........................
8
16
123
9
18
120
1
2
155
1
3
139
total loans on securities...............
ai,ces an<* commercial paper bought
Ranson real estate....
...............
5??ns ’o hanks................................................
,|i't loans.......................................................
147
18
58
3
158
147
21
53
2
176
158
9
154
1
238
143
14
158
384
399
560
540
Accent
1 otal loans. ...................................
225
to striking contrast to the trend in commercial loans, the
0 ume of investments increased substantially. Holdings of direc
ssues of the United States rose $94,000,000 to $576,000,000, the
ighest on record and nearly one-quarter of the earning assets o
A banks. About three-quarters of these holdings were in bon s
1 e the remainder was almost entirely in Treasury notes. Ob iLations fully guaranteed by the United States as to principal and
31
Philadelphia Federal Reserve District
Country hanks
Philadelphia hanks
Figures are as of the end of year
(000’s omitted in dollar figures)
Direct obligations—U. S. Government.......
Treasury bonds—
Maturing by Dec. 31, 1949..........................
Maturing after Dec. 31, 1949......................
Ollier bonds............................................................
Treasury notes.......................................................
Treasury bills.........................................................
Obligations guaranteed by U. S. Governinent....................................................................
Heconstruction Finance Corporation...............
Federal Farm Mortgage Corporation
........
Home Owners' Ixran Corporation .................
h her securities................................................
Obligations of
States, counties, nii’riicipalilics.
Public utilities.................................................
llailronds.............................................................
Federal land, joint stock and intermediate
credit banks...............................................
Territorial and insular possessions.............
Iteal estate cor|s>rutions
Miscellaneous ...........
Slocks, domestic corporations
Foreign securities .................
Grant! totals
1935
1936
§265,503
§307,910
89.881
64,629
0
110,993
0
103,334
121,557
0
83,049
0
Change
1935
+16% 1 §216,666
Composi lion: 1936
1936
Change
Phila.
banks
Country
banks
§268,168
+ 24%
46.2%
34.0%
+15“
+88“
0
-25 “
0
64,511
88,053
1,668
60,860
1,574
86,865
118,258
1,508
59,985
1,552
+ 35“
+ 34“
- 10“
- 1“
- 1“
15.5 “
18.2“
0
12.5 “
0
11.0“
15.0“
0.2 “
7.6 “
0.2“
§84,074
25
21,727
62,322
- 6%
+
-24 “
+ 2“
§58,014
50
17,429
40,535
§62,574
0
22,030
40,544
+ 8%
-100 “
+ 26“
+ 0“
12.6%
0.0 “ +
3.3 “
9.3 “
7.9%
0
2.8 “
5.1 “
§251,689
§274,568
+ «%
§416,748
$457,994
+ io%
41.2%
58.1%
72,715
40,570
49,740
74,870
45,9,36
54,339
+ 3“
+ 13“
+ 9“
65,771
120,586
115,442
72,721
132,730
126,818
+ 11 “
+ 10“
+ 10“
11.2“
6.9 “
8.2 “
9.2 “
16.8“
16.1 “
4,834
277
2,991
31,847
38,970
12,745
9,599
237
2.961
35,111
37,054
14,461
+ 99 "
-14"
- 1 “
+ 10"
- 5“
+ 13 "
13,781
2,050
3,931
54,387
18,346
22,454
14,166
878
3,520
70,282
18,723
18,156
+ 3“
— 57 “
10"
+ 29“
+ 2“
- 19"
1.4 “
0.0 “ +
0.4“
5.3 “
5.6 “
2.2 “
*610,030
§666,582
§691,428
§788,736
+ H%
§89,838
0
28,543
61,295
+ 9%
100.0%
1.8"
0.1 “
0.5 “
8.9 “
2.4“
2.3“
100.0%
Twenty-second Annu al Report, Federal Reserve Bank of Philadelphia
Analysis of Member Bank Investments
twenty-second Annual Report, Federal Reserve Bank of Philadelphia
interest amounted to $147,000,000 or about the same as in the
Previous year. The holdings of other securities, chiefly obliga
tions of state and local governments, public utilities, railroads and
niiscellaneous industrials, expanded by $61,000,000 to $732,000,000,
the largest in several years. An accompanying table presents a
detailed analysis of the investments of member banks in this
district.
Two general observations are suggested by the figures in this
table—one relating to the change in investments during the year
and the other bearing on the composition of investments. It is
clear that member bank holdings of United States Government
securities increased considerably and that this increase was more
Pronounced both actually and relatively in the case of country banks
han in that of Philadelphia banks. A small decline in obligations
guaranteed by the United States Government at Philadelphia banks
'Vas largely offset by an increase at country banks. Increases in
oldings of other securities were greater at country banks than
at those in Philadelphia. Investments in all types of securities at
e end of the year were 9 per cent larger at Philadelphia member
auks and 14 per cent larger at country member banks than on the
Sauie date of the preceding year.
With respect to the composition of these holdings, the analysis
s °'vs that at the end of the year Philadelphia banks had a greater
concentration of investment in both direct and guaranteed obligalQns of the Federal government than did the country banks. The
^reP°nderance of other securities held by the latter was due prin
cipally to substantial amounts of public utility and railroad obligaUms, each of which made up about one-sixth of the investments
0 these banks.
,
From this summary it is obvious that expansion of member
^ank credit from $2,246,000,000 to $2,394,000,000 during the year
'as due primarily to investment in securities, particularly United
ates Government obligations. This increase was less than onea t of the rise in total deposits. The remainder of the deposited
Unds was held unused largely in the form of increased balances at
t> e reserve banks and with correspondent banks. In the aggregate
cse balances were about two and one-half times as large at the
1936 as they were at the close of 1929, although total deposits
creased less than one-fifth in this period.
33
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
Member banks
Phila. Fed. Res. District
(Millions of dollars)
Gross
deposits
Reserves at
F. 11. Bank
Balances
with other
banks
Bills
payable and
rediscounts
1,446
1.304
961
1,090
244
188
72
73
164
165
84
70
0
0
3
33
1.489
1,325
1,046
1,378
134
87
54
64
153
119
44
51
1
20
61
Banks in Philadelphia:
1936—Dec.
1935—Dec.
1933—Dec.
1929—Dec.
31. ...
31....
30...
31..
Banks outside Philadelphia-
1936—Dec.
1935—Dec.
1933—Dec.
1929—Dec.
31............
31...
30.... ............
31..........
___
member banks—capital stock, surplus, undi$10 000 (loot a<MQ9nnnrVeS duidng
increased over 1935 bv
at the end of i$?93’00,0’000 as compared with a low of $471,000,000
vidpd nmfit ■ UR u °
ities also incrpn
5650,000,000 in 1929. Deposit liabillow of about ^000°nn2’935’0^0’000 as compared with a depression
ratio o? cSfnl
n000 in 1933 and 52,500,000.000 in 1929.
since 1931 and^t th^ end o°f t?03113 h&S declined almost steadily
To exiirpss thiQ . i
°f
year was less than 17 Per cent
of capital funds there" were $5 95*
6Very
of 1936 as compared with
5 °1o™P°Slt habilities at the ?"d
banks in the country shnJ3/° “ 1929- Flgures for a11 member
the ratio of deposit Habilh/V Similar trend- Whereas in I92fl
it was $8.13 to $100 at
funds was ?5’67 to ?L°°
in the character of earning /"I °f?936’ In view of the change
this tendency in the relnf-^8^ °f banks over a Period of yearS,
capital funds takes on add'd” •• ,between deposit liabilities anc
management the responsihiiit Slgnificance- and imposes upon ban*
in the formulation and Q y?°r exercising special care and skd
policies.
xecu ion of sound loan and investment
policies
Member
bank
In ic»fi
700,000, o^lbout 9rankS Sh°Wed net profits
current nno +•
Per cent of total earnin
profits rXd ta Sl935ThH f°llo"'ed ?6'4°°
....
gating $95 onn non 935 d a Peri°d of losse:
Although the experience
°
four years 1931
the ratio of profits to current'” ldual banks varied consi
of one group, was remarkabL^1**88 in 1936’ with the e;
various sizes as measured h/th*®11 among a11 grouPs of 1
by their average deposits.
earnmgs and
34
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
The accompanying table shows the trend of the items deter
mining net profit or loss.
(Millions
of
dollars)
1928
1929
1930
1931
1932
1933*
1934*
1935*
1936*
Total
current
earnings
Current
expenses
Net
current
earnings
Recoveries
and profits
on sales of
securities
Losses
and
depre
ciation
156.8
170 2
162.8
154.6
132.7
105.4
105.6
105.9
108.9
112.3
116.9
118.0
109.4
98.9
74.6
72.6
71 6
73.9
44.5
53.3
44.8
45.2
33.8
30.8
33.0
34.3
35.0
13.2
10.1
7.7
7.9
6.2
7.8
14.4
28.7
30.7
13.4
16.8
24.8
58.5
87.4
61.6
66.6
56.6
37.0
Net
profit (+)
or net
loss (—)
+44.3
+46.6
+27.7
- 5.4
—47.4
-23.0
-19.2
+ 6.4
+28.7
* Licensed banks only.
The important change in current earnings since 1929 has been
a growth in income from investments and a decline in that from
loans. About two-thirds of the member banks reported income
from service charges on deposit accounts in 1936 but in amount this
source contributed less than 2 per cent of the gross income of all
banks. In late years income has improved particularly because of
a substantial increase in recoveries and profits on securities sold, as
well as a decrease in the items showing losses and depreciation.
The reduction in current expenses since 1929 has been in about
the same proportion as that shown by total earnings from current
^rations. This has been due principally to the elimination of
Wrest on virtually all demand deposits and to a marked decline in
interest rates paid on time deposits. Labor expenditure has de
ceased in actual amount but in relation to total earnings the tiend
bas been upward. In the past two years salaries and wages have
instituted the largest single item of current expenses.
The number of member banks in this district increased
during 1936 from 656 to 658, comprising 65 state bank
^bership members and 593 national banks. Two state institu,
tions were admitted to membership, one new national
bank was organized, and one national bank was absorbed by another
National bank. The number of national banks empowered to exer
cise part or an of tfie fiduciary powers authorized by the Federal
eserve Act declined from 256 to 255, one bank voluntarily rehn^aishing its privilege.
Changes
35
Twenty-seeani Annual Report, Federal Reserve Bant af Philadelphia
Volume of work
in~ to^VtabT6 °f W°rk
tHiS reS6rVe bank’ other than that relat'
as nartlv iX^dT^T f™Ctions’ leased further during 1936,
operations whTh
bel°W showin^ some of the routine
Y X
XXrinSaHvT'
for the Treasury th '
an“aSb
durable.
This increase oc-
'T'* *tems comPrising fiscal transactions
°' C™Cy’ and
clearance of cash
of currency" and& coin^ °f ^n^reasing business activity, the amount
handled expanded bothTnnumbe^of
°f Ordinary check®
transactions for the Treasury
in value- The usual
exchange of securities the cLv
t0 the 1Ssue’ redemPtion and
government checks, were materially^ C°Up™s and the handling of
in the number of work relief chn V Y inJreased b-v a great expansion
Preparation of adjusted serv^ bn,
°f the year by
Discounts continued negligib^ burthe'h’^dr011
receivable pledged as cnllX 1 J ’ •
tb handling of accounts
substantial volume. Transfers^ fm ?dustrial loans continued in
of the group clearings systems whhh
°Ut °f the operatl°n
trict, expanded in number Tn’m-? a n°W C°Ver m°st of the dlS*
was indicated by a rise in th«
aSed USe °f the custod.v service
for member banks from SK03 nnn
amount of securities so held
_____ _____ __
2°m $503,000,000 in 1935 to $589,000,000 in
Departmental operations
Federal Reserve Bank of Philadelphia
Currency counted.. .' ...................................
Coins counted
..................................
Items payable at a future dale-..................
cl<iarinesiyit^)(othw
for group
36
„Pieces or
, trans-----?nnn"S h“ndl‘‘d
Dollar amounts
handled
,,
(.000 s Omitted)
(000.000’s omitted)
wenty.second Annua/ Report, Federal Reserve Bank of Philadelphia
1936. Security purchase and sale transactions declined in number,
°ugh not in dollar volume.
Changes in directors and officers
w , At an election held in the autumn of 1936 George W. Reily
and TeeIected by member banks in Group 2 as a Class A director
Cl , Caf1 De La Cour was reelected by the banks in Group 3 as a
Jai}SS director, each to serve for a term of three years beginning
1937. The vacancy in a Class C directorship, resulting
filled h 6 res’®'na^on
J- David Stern in December, had not been
1 the Board of Governors up to the issuance of this report.
Clas apd L' Austin was reaPPointed by the Board of Governors as a
ThrS C ^’recl°r 1° serve for three years beginning January 1, 1936.
and r^°Ut the year Mr- Austin served as Chairman of the Board
Federal Reserve Agent.
Directors of this bank at the beginning of 1937 were as follows:
Residence
roup 1
GnOllp ;
Gnoup 3
Group i
H Group 2
Group 3
Joseph Wayne, Jr., President.
Philadelphia National Bank.
Philadelphia. Pa.
George W . Reily, President.
Harrisburg National Bank.
Harrisburg. Pa.
J- G. Henning, President.
W yoining National Bank,
Tunkhannock. Pa.
C. Frederick C. Stout. Member,
John R. Evans and Company,
Philadelphia, Pa.
Arthur W. Sewall,
General Asphalt Company,
Philadelphia. Pa.
J. Carl De La Cour, Vice President.
Wm. S. Scull Company,
Camden. N. J.
Richard L. Austin,
Chairman of the Board
Harry L. Cannon.
Farmer and packer
Vacancy
•“pl
^Oeb,
Term expires
Philadelphia. Pa.
Dee. 31. 1938
Harrisburg, Pa.
Dec. 31. 1939
Tunkhannock. Pa.
Dec. 31. 1937
Ardmore, Pa.
Dec. 31, 1937
Philadelphia. Pa.
Dec. 31, 1938
Riverton, N. J.
Dec. 31, 1939
Philadelphia, Pa.
Dec. 31. 1938
Bridgeville, Del.
Dec. 31. 1937
^oar<;l
Directors of this bank reappointed Howard A.
airman of the Board of the Tradesmens National Bank
37
Twenty-second Annual Report, Federal Reserve Bank of Philadelphia
and Trust Company of Philadelphia, to serve for the year 1936 as
a member of the Federal Advisory Council representing the Third
Federal Reserve District.
, ^ChtnSiS W6re made in the titles and status of certain officers
ot this bank pursuant to the amendment to the Federal Reserve Act
w nch became effective March 1, 1936, and which reads in part as
o ovs.
e piesident shall be the chief executive officer of the
bank and shall be appointed by the Board of Directors, with the
appioval ot the Board of Governors of the Federal Reserve System.
nUvtfa61T ft ? e ^ea's ’ and ad other executive officers and all emvice nreq-d
be directly responsible to him. The first
and for tlil 1
sha11 be aPP°inted in the same manner
disability o/th”6
m &S tbe Pres’dent’ and shall in the absence or
X eXe fl?HP?Sldent °r
a Vacancy in
of In
dent, seive as chief executive officer of the bank.”
sixteen°veLr ^”1!’ Wh° Served as governor of this bank for
March 1 193fi and who was appointed president effective as of
meriy depJt —n
thereafter’ William H- Hutt- for-
president He red
’ T** aPpointed and approved as first vice
InhJ' C «• T" efl“tiVe “ Of A»ril 3(l' 1536.
president wasTnimin/d™™1 j “ deputy S»vernor and later a vice
February’ 28 X anl ^±1 ‘V** ter” °f five years ending
Board of Governors of the p app°lntment was approved by the
the duties of president of thi^h^i Reserve System. He assumed
Drinnen was appoint and
°n March 14’ 1936’ Frank J’
like term and assumed the duties ofti'
PFesident f°f *
Other changes in official tie
°”
1936' a
Mcllhenny was aunointeT
tltles were made as follows: C. Awas made vice president• W tr Pr®sident and cashier; W. J. Davi?
were appointed X stal t’ XMcCreedy a"d L' E' Dp"pld5“'’
Earl and Glenn K .
M. Toy. Samuel KThe non-statutorv duties
cashiers'
„ 1
transferred on October 1 to tn itb<? federal reserve agent were
performance was assumed n
°ank and responsibility for then
merly an assistant federal re’
President Ernest C. Hill, for'
in charge of bank examination^! agent’ was made vice presided
as assistant federal reserve a?? Arthur E. Post continued to ser'e
of this office, and later w»o o
’ Performing the statutory dutig?
which was formerly held by tT’1”1? SGCretary of the bank, an
During 1936 John S Sin ! Cashler’
• Sinclair, president, served as an altern»te
38
^Wenty-second A nnual Report, Federal Reserve Bank of Philadelphia
iem er of the Federal Open Market Committee, which consists of
members of the Board of Governors of the Federal Reserve
s em and five representatives of the Federal reserve banks. The
eia^ Reserve Banks of Philadelphia and Cleveland jointly elect
c y ear one representative to serve on this committee.
As a result of these changes the official staff of the bank at
ne close of 1936 was as follows:
Richard L. Austin
William G. McCreedy
f hair man of the Board
and Federal Reserve Ayent
Assistant Vice President
L. E. Donaldson
•John S. Sinclair
Assistant Vice President
President
Arthur E. Post
Frank J. Drinnen
Secretary
E irst Vice President
* • A. McIlhenny
•James M. Toy
1 ice President and Cashier
■ J- Davis
F<ce President
Ernest C. Hill
Assistant Cashier
Samuel R. Earl
Assistant Cashier
Glenn K. Morris
J ice President
Assistant Cashier
t?
39
@FedFRASER