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Twenty-third oAnnual ^Report
of the
FEDERAL RESERVE BANK
OF PHILADELPHIA
1937
Third Federal Reserve District
CONTENTS
Page
better to stockholders......................................................................................
4
business conditions..........................................................................................
5
Industry..........................................................................................................
5
Employment..................................................................................................
9
Trade and services......................................................................................
^leniber bank reserves.................................................................................... 44
Condition of member banks............................................................................ 20
deposits ......................................................................................................... 21
Loans and discounts..................................................................................... 22
Investments.................................................................................................... 23
'nings and expenses................................................................................. 26
Membership ................................................................................................. 30
federal Reserve Bank..................................................................................... 30
Heserve bank credit..................................................................................... 31
Reserve position........................................................................................... 34
discount and interest rates......................................................................... 35
Volnme of work............................................................................................. 36
warnings and expenses................................................................................. 3"
Actors and officers................................................................................... 39
FEDERAL RESERVE BANK
OF PHILADELPHIA
June 30, 1938.
To the Stockholders of the
Federal Reserve Bank of Philadelphia:
It is my pleasure to present herewith the
twenty-third annual report of this bank, giving
a review of business and banking conditions in
this district as well as an account of the opera
tions of this bank during the year 1937.
John S. Sinclair
President
Business conditions
Industrial activity in the Philadelphia Federal Reserve
District during the first four months of 1937 expanded to
fhe highest level in seven years but subsequently declined, first gradually
and then precipitously, so that by the end of the year production was
lowest since 1935. In manufacturing the expansion in output during
the first part of the year was principally in durable goods, but the sub
sequent drop in the production of these goods was greater than in any
similar period shown by available records. Activity at industries produc
Industry
es nondurable goods began to slacken shortly after the
first quarter and
the recession during the last three quarters of the year, while unusually
se^eie, was not so pronounced as that in industry producing heavy goods,
Particularly iron and steel products and building materials.
tn anticipation of a continued rise in prices and in the face of laboi
^settlement, forward buying which began in the previous year conlnued at an accelerating rate, with the result that the volume of unfilled
”rders in the first quarter of 1937 was the largest in many years. Fol°"lng this quarter, new commitments fell off sharply and production
as sustained largely7 by7 orders previously obtained. Cancellation of
°r ers became widespread.
The effect of these developments was the accumulation of inventories
finished goods and raw materials, so that production was curtailed
^aiply along with declining demand. The accompanying table gives
ata on employee-hours actually worked in manufacturing industry to
l0" the wide fluctuation in productive activity7 and to indicate inven• p1 accumulation followed by a period of liquidation which was canied
lnto 1938.
th ?loduction of bituminous coal at the end of the first quarter reachec
largest volume since 1929 but thereafter fluctuated sharply downtk. to an unusually low level by the end of the year. Output of an^'’acite fUej Wag smaner tjlan jn u,e previous three years, receding to
n
the same level as that in 1932. Extraction of crude oil m the
rd field expanded considerably in the summer months but conc ed in the last quarter of the year.
5
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia
Employee-hours actually worked
in manufacturing industry—Pennsylvan
All manufacturing
First quarter........
Second quarter. . .
Third quarter....
Fourth quarter. . .
Metal products
First quarter....................................................................
Second quarter................................................................
Third quarter..................................................................
Fourth quarter................................................................
Textile products
First quarter....................................................................
Second quarter................................................................
Third quarter..................................................................
Fourth quarter................................................................
Index: 1935 avg. = 100
1936
1937
108.4
124.0
131.9
1-14.8
149.2
153.3
144.6
119.2
112.7
137.2
144.8
160.3
170.1
178.0
169.6
130.3
100.6
97.7
107.6
118.4
121.6
112.0
101.7
85.7
because of curtailed demand for power by industry.
fi
Twenty-third Annual Eeport, Federal Reserve Bank of Philadelphia
Building and construction activity in the aggregate continued in
about the same volume as in the previous year, although there was a
marked upward tendency in the last half of 1937. The expansion in the
residential field which occurred in 1936 was not maintained and the level
at the end of the year was substantially below a year earlier. There was
some increase in nonresidential construction but a decrease in public
works and utilities. Cost of building materials and labor increased in
the first quarter and was maintained at a relatively high level for sev
eral months, but toward the end of the year prices of materials began to
s°ften somewhat. High cost of construction is given as one of the prineipal deterrents to the expansion of activity in residential building.
.
The following figures give a general summary of industrial activity
ln this district during 1937 as compared with other years:
Annual averages of monthly
indexes
Productive activity
Philadelphia Federal
Reserve District
(1923-25 average = 100)
1929 1932 1934 1935
"dustrial production.............
Manufacturing.........................
Durable goods......................
^on-durable goods..............
C°jd mining...........................
^pthracite.............................
bituminous...........................
Crude oil...............................
pi
.
ectric power output.............
hdiiig contracts awarded
*otal. . .
Residential.
onresidential.
Public works and utilities..
1936 1937
92
Dec.
1936
Dec.
1937
76
72
68
74
68
69
56
531
228
357
76
73
56
87
65
64
63
392
86
84
77
91
69
68
74
433
88
91
61
62
76
498
99
98
90
104
75
73
88
187
177
192
202
228
212
237
132
31
101
160
116
17
31
12
II
28
66
92
31
18
33
65
56
36
59
108
57
38
70
83
181
100
118
141
151
163
112
92
91
98
230
63
61
39
77
60
62
51
295
191
110
111
no
70
67
50
80
70
71
62
marketing
stl income (1932 avg. = 100).
Monthly
‘Ml
59*
41‘
53*
94*
161
66*
30*
102*
73*
153
1 hree-
ee-months’ moving averages.
-
Agricultural conditions in 1937 showed considerable improvement
hrev'ous year and were the most satisfactory since 1930. Out^rnP°r^an^ crops increased substantially as compared with 1936
"’ith few exceptions production was above the average for the five
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia
years, 1931-1935. Prices of farm products advanced appreciably during
the first quarter of the year, reaching in early April the highest level i”
seven years. Subsequently, prices of farm crops declined sharply to ^’e
lowest point since 1934.
Farm cash income from the sale of crops and livestock products i®
creased substantially. Total receipts from the sale of agricultural co»r
modifies produced in Pennsylvania, New Jersey and Delaware appr®*1'
mated $375,000,000, or 8 per cent more than in 1936. This total was abo®1
Farm cash income—
Pcuna., New Jersey. Delaware
(In millions of dollars)
1929............
1930.
1931 ...
1932...
1933........
1931........
.............................
...............................
.............................
.............................
.............................
1935 ...........
..........................
1936 ..........
1937 ............
"
Crops
Livestock
products
$153.5
132.9
101.7
80.2
105.6
96.6
111.3
123.6
133.5
$266.4
241.8
194.0
152.4
151.0
176.4
214.2
224.1
241.9
8
Government
rental and
benefit
payments
$...
.8
2.3
1.8
3.0
3.1
Toi«>
^enty-third Annual Report, Federal Reserve Bank of Philadelphia
GO
Pei cent above the low of 1932 but 10 per cent less than in the preePression year 1929. The preceding table shows the trend of farm income
armg the past nine years.
th
holesale commodity prices continued to advance until April, when
shar reathed the highest level since 1930, but subsequently declined. The
dr°P WaS ’n farm Products’ followed by foods in the closing
m0(j J
^le year- The general level of prices for industrial comtlian 'eS "3S
stable and the December index was slightly higher
r.„, 8 ^ear before. The following figures indicate the general trend of
commodity prices;
W holesale
o,»ini()(ljtv prices
Annual averages of monthly
indexes
Mont hl v
ind"°f^b0r Stafs.ics
■ndex. 1926 = 100)
’ "'nniodities (781). .
b;,'v materials
tlni'fiS',ed
"•shed goods. .
1929
1932
1936
1937
Dec.
1936
Dec.
1937
93
65
81
86
81
82
98
94
95
55
59
70
80
76
82
85
85
87
86
82
81
73
78
83
103
100
92
18
61
70
81
82
80
86
86
85
89
86
82
73
80
81
fcdSPrOducts- ' ■ •
)lber commodities.
p
,
general employment in twelve branches of trade and in
dustry was well maintained until the latter part of the year
sati011 .
" ben a sharp decline took place. The amount of compenci’oed ,tacileti the largest monthly volume in May and June but deCtnploy.
ment
^otitlis fIealter’ reaching in December the lowest level since the early
to a re i° .^le Prev>ous year. This decline in payrolls was due primarily
°f Os.i P 100 in "O1’king hours reflecting largely an increased proportion
* dlt'time work.
W,
Inff time in the manufacturing industry generally averaged in
exCless
defined
hours a week during the first four months but subsequently
h^mber Robing a weekly low of 32 hours in December. The average
a Weej.
employee-hours actually worked in 1937 as a whole was 37.9
*■
32,g in jot compared with 38.6 in the previous year, 34.5 in 1935 and
b’nm
1 he average earnings per hour, on the other hand, increased
Ot» abc
l,t 63 cents an hour in the first four months of the year to over
9
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia
EMPLOYMENT AND PAYROLLS
PENNSYLVANIA
10
twenty-third Annual Report, Federal Reserve Bank of Philadelphia
70 cents an hour in the remaining months. The average for the year was
nearly 69 cents an hour as compared with 59 cents in 1936, almost 58 cents
ln 1935 and 57 cents an hour in 1934.
'I lie following table gives a general summary of the trend of indusf*ial employment and payrolls:
Index of general ein“Jnient and payrolls
Relative
impor
Pennsylvania,
tance.
avg. = ioo; indexes
%of
e annual averages.)
total
<;‘‘neral index*
}'anufacturing.
^nOiraciie...
.........
“luminous coal
Spying................'
pfke6 l’e,roleuin
.
t . !? utilities.. .
trade .
ti^le trade...
Laundries.. . / \
yeing and cleaning. . .
'Include
100.0
18.9
6.9
5.7
0.6
0.2
1.4
15.8
4.7
1.1
0.7
0.2
Employment
Pay rolls
1934 1935 1936 1937
1934 1935 1936 1937
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
178
91
113
111
106
99
100
123
142
81
123
119
161
96
119
118
112
105
105
118
138
101
154
124
163
88
106
96
100
92
103
127
155
89
161
128
170
91
108
100
103
95
101
151
189
85
199
184
160
97
117
107
111
105
108
179
232
81
217
228
171
104
130
119
123
119
120
s building and construction.
a'?°r disputes were quite prevalent in the early months of the year
as industrial activity slackened the number of strikes and lockouts
in
Increases in wage rates continued well into the spring
a ,°nt ls> while toward the end of the year, there was evidence of downward
„ ,Ub ^ent in wages partly through voluntary cooperation between labor
L ( management.
hut
Llie volume of public relief, direct and through public works, con-
ublic assistance in Pennsylvania
in 1937 by type
Average
number of
persons
163,000
700.000
86,000
11,000
37,000
relief . .
a2s|stance............
^'d to ,|S °r jl*e blind .
u« Pendent children
Old a;,‘
Total.
1,297,000
“uiount spent for Federal \\ ork Relief is not available.
11
Amount
spent
$57,813,200
♦
22,639.500
3.749.000
6,091,000
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia,
tinued substantial, increasing toward the end of the year, largely because
of growing unemployment. Assistance rendered in other forms was larger
than in the preceding year. The preceding table indicates the extent of
public assistance given in 1937 by type.
Trade and
Services
'
Retail trade sales increased further during 1937, although
Christmas business failed to measure up to the usual vol
ume principally because of declining industrial activity
and income.
DISTRIBUTION
WHOI FSAI F TRAnr
12
'^^enty-third, Annual Report, Federal Reserve Bank of Philadelphia
Sales at wholesale establishments were well maintained in the first
eight months but declined sharply in the closing months when seasonal
e 'anges are taken into consideration.
^nven^or’es at retail establishments on the average were 16 per cent
'ger than in the previous year, although by the end of December they
eie reduced to a level where they were only 3 per cent larger than at
16 end of 1936. This was also substantially true of inventories at
Wholesale establishments.
la
,
Sales of new passenger automobiles for the year as a whole were the
^aigest since 1929 but the decline in the second half of the year was quite
rastic. Business at commercial hotels increased further by 4 per cent
as compared with 1936.
The trend of commodity shipments by rail was similar to that of
e]Cneial industrial activity in that it increased in the first part but dep]lned steadily in the last half of the year. Foreign trade at the Port of
aelphia increased noticeably over the previous four years with reeet
both exports and imports.
+,.• The following table summarizes the trend of distribution in this dis-
Distribution
Philadelphia Federal
flG9?e??rve District,
'
average = 100)
ft
s£trade
kales.. trade
k, Stocks.-
Pccupanev
auton,°nftes •
°le,S (193‘ = 100)
Annual averages of monthly
indexes
Monthly
1929 1933 1931 1935 1936 1937
Dec.
1936
Dec.
1937
100
92
59
57
65
62
69
65
79
70
82
81
84
76
78
78
98
102
131
63
59
62
75
65
73
79
66
99
86
68
124
97
76
136
93
72
323
86
86
82
100
100
106
107
119
124
123
129
110
135
109
Al|,,„l,tar loadings
74
189
137
.P<>rpKTI
Strict.......................
t of |»id-l|1S,r‘!,l area...................
106
107
55
62
57
58
59
62
70
68
74
70
83
73
58
63
Ln,Ports'..................................
>’..............................
78
115
163
51
51
102
237
49
109
250
41
108
223
122
279
59
136
290
42
113
lit
'
coastwise commerce..
tier,’c*al luxfigures are adjusted for seasonal variations except those for
,els and the Port of Philadelphia.
13
65
coin-
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia
Member bank reserves
At the opening of 1937 the volume of excess reserves of member
banks in this district aggregated $135,900,000 and demand balances car
ried by these banks with their correspondents totaled S298.000.000. Ex
cess reserves were 56 per cent and correspondent balances 123 per cent o*
required reserves.
The amount of excess reserves in the aggregate continued unusually
large, even after the requirements were increased by one-half in the
summer of the previous year. A similar situation prevailed in the entire
System. In view of the expansionary tendencies that were apparent, the
reserve requirements were increased further by one-third to the full meas
ure of the law, one-half of the increase becoming effective on March 1
and the remainder on May 1.
Not only were the reserves large in the aggregate but they also "'elt
substantial in the great majority of individual banks. According to a®
analysis made early in January 1937, nearly half of the members in thi*
district had deposits with the reserve bank which were one-third or more i”
excess of requirements. Nine-tenths of the banks were in a position t°
meet an increase of the proportion indicated either with existing bal'
ances or by recalling one-half of the funds from their correspondents. 1”
the case of the remaining banks, the amount of additional funds required
was relatively small, only about $1,000,000.
Banks in this district, therefore, had comparatively little difficult
in meeting the increase in requirements, although declining deposits pr*°f
to March 1 reduced somewhat the level of their reserves. Country bank'
wherever necessary, supplemented reserves by drawing upon correspond
ents. There is little evidence to show that many banks had to resor
to the sale of investments. Country banks actually increased loans
purchased governments during the first half of the year to a grc»tfl
extent than they sold other securities.
Banks in Philadelphia also were well supplied with funds. In M»rc1'
and April their reserves were increased largely as a result of funds r®'
ceived from the marketing of electric utility securities and the accum»la'
tion of state balances preparatory to the redemption of securities. Und®r
these circumstances, the excess reserves of banks in Philadelphia in 1 1
aggregate continued heavy, despite increased requirements and
drawals by country banks.
14
Twenty-third An
niml Report, Federal Reserve Bank of Philadelphia
RESERVE POSITION OF MEMBER BANKS
PHILADELPHIA FEDERAL RESERVE DISTRICT
millions
S
400
total
300
200
100
0
13
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia
In the first half of May, following the final increase, the reserves of
.
Philadelphia banks were $75,000,000 or 35 per cent and those of country
banks were $30,000,000 or 26 per cent above requirements. In the firsj j
half of June, 17 of the 24 member banks in Philadelphia had excess reserves
and amounts due from banks equal to over 40 per cent of required re
serves. In the case of the 632 country banks, 565 of them had surplus (
reserves and balances with correspondents which together exceeded J
per cent of required reserves.
Over the last eight months of the year the reserve position of t ie
country banks in this district was remarkably uniform. Semi-month >
figures show that the excess over requirements varied only fio"
$27,000,000 to $32,000,000 or, in proportion to requirements, from 24 to|
28 per cent.
In the case of the reserve city banks in Philadelphia, there
®
continuing decline in deposits over the greater part of the summer an
an accompanying expansion in loans. The funds to meet these demaneis
half of
were supplied partly by drawing upon reserves. By the first
10
September excess reserves had declined to less than $20,000,000 or >
per cent of requirements. Further losses of deposits sustained tla^
after were more than compensated for by reductions in loans and in'
ments. Accordingly, the reserve position of the member banks in P*"
delphia improved somewhat; the excess in the last half of Decern
averaged $31,000,000 or 17 per cent, and increased further in Janu-U.
While increased reserve requirements caused a sharp decline m
excess reserves of all classes of member banks throughout the count'^1
those in the money centers were subject to additional pressure thro"=
the withdrawal of bankers’ balances in order to meet the higher rCtlU1'j,
ments and the increase in the demand for commercial loans. As a re?
the excess reserves of central reserve city banks were as low as 5 Per 11
in August as compared with 15 per cent at reserve city and 31 Per 1
at country banks. To assure the continuance of easy credit condith”^.
several steps were taken. The discount rates of virtually all reserve b""^
were reduced in August or September, purchases of government sect"11
for the System account were authorized, and $300,000,000 of
"
released by the Treasury from its inactive account.
Despite marked fluctuations in reserves and correspondent bah1"
especially at banks in larger centers, aggregate surplus funds la h
member banks at the end of the year were ample to meet any credit
mands that could be reasonably anticipated.
16
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia
The reserve position of member banks in the Philadelphia Federal
Reserve District in the week ended January 14, 1938 is shown by the
following data:
Member banks
fihila. F. R. Dist
(Dollar figures
in millions)
Reserves
Due from
domestic
banks
Excess
reserves
Due from
banks
$120.7
27%
64%
5.6
12.4
12.4
33.2
26.8
47.8
20”
33”
25”
120”
72”
97”
$81.3
$228.5
27%
76%
Held
Required
Excess
Cni**?6 c'1-’ banks...
Lounby banks in
c*Ues and towns
*'th population
$238.3
$187.4
$50.9
Jor more. . .
m,000 to 99,999
Lnder 15,000
33.3
49.5
61.8
27.7
37.1
49.4
$382.9
$301.6
Totals.
___
Per cent of re
quired reserves
In this district excess reserves of $81,300,000 immediately after the
of the year compared with only §3,000,000 in January 1929, Corren,'ent balances carried by the members with other banks at the end
mJ-929 tofaled Si 18,000,000 as compared with §245,000,000 on June 30,
t 7 antl «228,000,000 in the week of January 14, 1938. In sharp cony3
former years, these comparisons emphasize the amounts of unec* funds after a vear and a half, during which period requirements had
°een doubled,
t
detailed analysis of the several classes of banks immediately after
fiii ‘l‘°*e
193~ indicated that holdings of excess funds were not coneitv k a few institutions but were quite general. There were no reserve
ba v
" hose reserves were under requirements, but there were seven
8er^ s "’hose ratio of average reserve balances to average required reab CS Was under 110- The ratio of the remaining sixteen banks was
is^y, dlftt figure. If one-half of the balances carried with other banks
.( ed to excess reserves, a total of §111,200.000 or nearly 60 per cent of
Ulred reserves is shown.
l1(Jh yAspect to country banks located in cities and towns with a
sli8htlti0D °f 10()-0()0 or more> there was one bank whose reserves were
tr;ill .' °oder requirements, a fact which was largely due to currency in
largp11 ,^he amount due this bank from correspondents was nearly as
of r(? as hs required reserves. There were also two banks whose ratios
^r\e balances to required reserves were under 110. The remaining
17
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia
seventeen banks had higher ratios. Excess reserves and one-half of the
correspondent balances of the twenty banks in this group totaled $22,200,
000 or 80 per cent of required reserves.
The next group is made up of eightv-eight member banks in cities
and towns with a population from 15,000 to 100,000. Here there were three
banks whose reserves temporarily were under requirements by $27,000-
The amount due them from correspondents was about 144 per cent o
required reserves. There also were in this group twenty-nine banks who--£
ratio of reserve balances to required reserves was under 110, while a
the remaining banks the ratio was over that figure. Excess reserves plll!
one-half the amount of correspondent balances of this group were $25S00,000 or 70 per cent of required reserves.
The last group comprised 523 member banks in towns having a pop"
lation of less than 15,000. Twenty-two banks had reserves which total*-’
$112,000 under requirements and correspondent balances equal to ■
per cent of required reserves. There were 165 banks whose reserve ba
ances were less than 110 per cent of required reserves, while the otl>cr'
maintained ratios substantially above that figure. Excess reserves a"*
one-half of the correspondent balances carried bv the 523 banks total1
$36,300,000 or about 75 per cent of required reserves.
This analysis shows that all member banks in this district, short '
aitci the turn of the year, had $81,300,000 in excess reserves and
500,000 in balances carried with domestic banks, a total of $309,800'
as compared with required reserves of $301.600,000. Adding one-ha11 °]
coi lespondent balances to excess reserves, the member banks had a tot^
of readily usable funds amounting to $195,500,000, or 65 per cent of
quiied reserves. This large volume was sufficient to expand credit •
an amount in excess of the loans then outstanding.
A decrease in member bank reserve deposits from $381,000,000 1
$31^,000,000 during 1937 was due principally to a very substantial ex<'t>:
ol ieasur> receipts over local disbursements, which reflected pa'rl!
« ec me in work relief disbursements and large amounts of unemplo!"1^
trust funds that were turned over by the states to the Treasury for in'c’
men
1 io withdrawal of funds from the local market through Tre»?l‘
operations and additional demands upon the banks incident to a modf"
mciea. c in cunency demand were largely offset by a favorable 1,:ll‘\ ,
m lommiK i,d and financial transactions with other districts. The
. lin< ' ® 1 ls district through the settlement' was chiefly the >e'11
local security issues an,l sales
investment, bv banks.
18
Twenty-third Annual Report, Federal Reserve Rank of Philadelphia
MEMBER BANK RESERVE DEPOSITS and
related items
PHILADELPHIA FEDERAL RESERVE DISTRICT
19
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia
The increase in currency demand was much smaller in 1937 than
1936, when the needs resulting from active trade were supplemented in
the early summer by the cashing of large amounts of adjusted service
bonds for veterans. Even in the first half of 1937, demand for currency
increased less and the seasonal rise prior to the December holidays fell
materially below that experienced in 1936, owing principally to the de
cline in industrial payrolls and the failure of retail trade to measure up
to the usual volume.
In the following table changes in member bank reserves and in re
lated factors are shown for the years 1935, 1936 and 1937:
Member bank reserves ami related items
Philadelphia Federal Reserve District
(Millions of dollars)
193'
1935
1936
Reserve bank credit extended in district
Interdistrict commercial t ransfers.........
Mint gold purchases, net.........................
Treasury operations.................................
+ 2
- 59
+ 12
+ 110
- 3
+ »7
+ 8
+ 101
Total.............................................
+ 95
+ 153
+ 25
+ 63
+ 8
1
+ 51
+ 107
- 8
+ 3
+ 95
+ 153
Sources of funds:
Uses of funds:
Currency demand...................................
Member bank reserve deposits.................
Other deposits” at reserve hank............
Unexpended capital funds of reserve bank
-
Total................
Condition of member banks
A sharp increase of over $950,000,000 in deposits at member ba«^
in this district from the middle of 1933 to the end of 1936 was folk1'
All member banks
Philadelphia Fed. lies. District
(Millions of dollars)
Dec.
1929
June
1933
Dec.
1936
Loans....
Investments........
Reserve with Federal Reserve Rank
Demand balances with domestic banks
1,859
828
137
118
1.085
957
i«
939
1.455
379
298
2,168
55
01
619
1,977
2,935
0
Deposits........
National hank notes outstanding
Bills payable and rediscounts
Capital account
20
29
473 .
493
Wenty-third Annual Report, Federal Reserve Bank of Philadelphia
^5 a decline of §186,000,000 in 1937. A similar reversal of the earlier
Oend also occurred in member bank investments, reserves and corre
spondent balances. While increasing a little, loans fluctuated narrowly
dt a level far under the high average of 1929. Data showing changes in
e Principal assets and liabilities are given in the foregoing table.
Member
Deposits of member banks reached the highest point on
record early in January. Thereafter the trend was irreg
ularly downward to a low point in December. The decline
of §186,000,000 for the year as a whole was due to a contractic
cUon of §226,000,000 in demand deposits, most of which occurred at
11 adelphia banks. All classes of demand deposits declined, one-third
•
le drop being in bankers' balances. Substantial losses also were regered in balances held for the Treasure and for individuals and cor
porations.
*
bank
deposits
of S4hCreaSeS *n
deposits were general, most of the aggregate gain
the • ’^^’000 being at country banks. It is probable that the bulk of
idl \ncrease Was due to the accumulation of savings and to transfers of
in • Unc^s ^rom demand to time in order to earn some return, particularly
dei/0"
Prohibition, effective in August, of payment of interest on
and deposits held for public bodies or savings institutions.
Phil
Deposits of
tmbep ba»ks
(Mil •P‘1' des- Distr
Mlll'<’ns of dollars)
Reserve city banks
Country banks
Dec. .31, Dec. 31, Dec. 31,
1937
1936
1935
Dec. 31, Dec. 31. Dec. 31,
1937
1936
1935
SUals' Partners
V S p0rPorations .
S‘ate« )'m"nen' ■■
i^bankn’Un,cipaL
other ...................
^‘P>e:
700
II
51
286
9
761
67
15
335
10
716
24
40
263
6
399
20
76
9
12
506
28
89
9
18
189
10
69
7
18
1.090
1.218
1.019
516
650
593
193
3
1
17
199
3
10
17
209
3
7
16
766
26
16
1
806
15
16
1
829
13
29
1
211
229
235
809
838
872
1,304
1.117
1.281
1.325
1,488
1.465
*Stals- p-"Postal 0rP,,ri'tions
......
ln,crb«nk ,un,c'Pal
I<J,al deposits.
21
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia
ALL MEMBER BANKS
PHILADELPHIA FEDERAL RESERVE DISTRICT
CALL DATES
MILLIONS
millions
(LICENSED BANKS ONLY AFTER 1932J)
3000
TOTAL LOANS
AND INVESTMENTS
TOTAL DEPOSITS
DEMAND DEPOSITS
,(adjusted)
TIME DEPOSITS
RESERVES, CASH AND BALANCES
—I--------- 1-----------!---------------------—WITH 0T1CR BANKS
INVESTMENTS
INTERBANK
1920
MILLIONS
BALANCES
1922... 1924..... 1926.... 1928..... 1930
__ __
1932
1934
1936
investments
loans
OTHER LOANS
_
OTHER DOMESTIC
TO CUSTOMERS
SECURITES
nZ
LOANS ON
SECURITIES
TO CUSTOMERS
\
USGW'T DIRECT
As,
OBLIGATIONS
REAL ESTATE
LOANS
SECURITES GUARANTEED
BI UiCOft
STATE AM) LOCAL
STREET
GOV'T SECURITIES
PURCHASED RAPER
■aficr deducting CASH ITEMS
- t 1^'
An increase in loans of member banks during 193” "‘U p|V
first in any year since 1929, but the expansion " aS
from $939,000,000 to $956,000,000 anti the average
1
was about one-half of what it was in 1929.
r
oans and
discounts
oo
?Wenty-third Annual Report, Federal Reserve Bank of Philadelphia
This rise in the year was due chiefly to a growth of §41,000,000 in
nn*cellaneous loans, largely at banks in Philadelphia. Much of the in
crease was in commercial loans, which expanded materially from the
5' spring up to September. During this period business was sustained
a’ge volume relative to former years. Subsequently these loans de
ed, reflecting seasonal tendencies as well as the contraction of greater
an Usual amount in business activity.
Country banks expanded loans on real estate and added to their
r 1 o ios of open market paper. Philadelphia banks, on the other hand,
Ported declines in loans of these types.
del
Shrinka®e of $26,000,000 in loans on securities, chiefly at Pliilaothe *1 kanks’ constituted a substantial offset to expansion in several
in
C^aSses
loans. This decline in security loans was to be expected
Pr.?1C" 01
sharp drop in prices and trading volume in the market for
cMUities.
Philadelphia banks
Country banks
Dec. 31. Dec. 31, Dec. 31.
1936
1937
1935
Dec. 31. Dec. 31, Dec. 31,
1935
1936
1937
pi!.e,,‘ber bank loans
Res. District
^"Mllions of dollars)
ToY°n, Purities:
]>kerS and dealers in
To h?niork Ci,y...........
T^£e. and d6alerS
8
9
5
1
1
1
°°thers (except banks) . .
16
123
18
120
11
108
9
155
3
139
135
147
147
124
158
143
110
18
58
3
158
21
53
9
154
1
238
11
158
176
12
47
9
211
225
19
169
1
231
384
399
396
560
540
560
'Ccep^'°ans °n securities
^^a,con,mcrci,‘i
J^oatis to irea* estate.
Other |‘° bat>ks
*°an.s. ..
Tot«l loans
9
4
s^nteents Following an expansion in investments by $500,000,000 beholdi11(r.
tween the middle of 1933 and the close of 1936, security
to $1 35'"1 n,einher banks in this district declined in 1937 by $100,000,000
total as<! ’000,000. At the close of the year they were still 41 per cent of
Pare,] w’t? an^ 50 Per cent
nggregflte loans and investments, as com1 1 25 and 31 per cent respectively in 1929.
^0; over']11^
&overnments
Philadelphia banks declined $40,000,la" of this decline was in bonds and the remainder in Treasury
23
Analysis of Member Bank Investments
Investment distribution: 1937
Philadelphia Fed. Res. District
Reserve city
(Philadelphia)
banks
Figures as <»f end of jear
(000,000’s omit led in dollar figures)
Obligations guaranteed bv V. S. Government
Reconstruction Finance Corporation..................
Federal Farm Mortgage Corporation.................
Home Owners’ Loan Corporation........................
Other securities.......................................................
Obligations of—
States, counties, municipalities........................
Public utib’ties...................................................
Railroads..............................................................
Federal land, joint stock and intermediate
credit banks.....................................................
Territorial and insular possessions..................
Real estate corporations....................................
Miscellaneous.......................................................
Stocks, domestic corporations..............................
Foreign securities....................................................
Grand totals ..................................
•Central reserve cit\ banks excluded.
1935
1936
1937
1935
1936 ! 1937
*265
#308
*268
*216
*268
46.2%
63.8%
35.6%
43.9%
16.3 ”
20.1 ”
.1 ”
25.6 ”
1.7”
10.6 ”
16.4 ”
.4
8.1 ”
.1 ”
11.3 ”
17.6
.6
13.9”
.5”
United
States
61
1
60
*78
*.58
*63
0
*73
13.5%
10.2%
9.4%
11.9%
21
57
17
41
41
19
54
3.6 ”
9.8”
2.7”
7.3 ”
2.4 ”
7.0”
3.5
8.2”
*274
*234
*417
*458
*126
40.3%
26.0%
55.0%
44.2%
75
68
37
16
66
121
115
73
133
127
66
118
124
11.7 ”
6.4 ”
7.9 ”
11.0 ”
2.7”
3.3 ”
8.5 ”
15.2 ”
16.0 ”
15.3 ”
8.7”
8.8”
11
2
4
54
18
23 1
14
1
3
70
19
18
11
1
3
67
19
17
1.4 ”
.5 ”
4.3”
6.0”
2.1 ”
1.5”
.1 ”
.4”
2.8”
3.4 ”
.8”
1.4”
.1”
.4”
8.7”
2.5 ”
2.2 ”
1.7”
.1 ”
.3 ”
5.8”
2.2”
i.3 ”
$775
100.0%
100.0%
100.0%
100.0%
95
109
61
88
64
*90 1
0
29
61
*84
0
22
62
*255
73
10
50
$610
Phila.
district
82
127
3
63
1
103
122
0
83
0
3
32
39
13
Phila. j United
States*
district
87
118
1
90
61
0
111
0
5 1
*276
Country
bunks
16
54
10
8
3
35
37
14
3
25
35
12
$666
$580
$691
$789
16.4 ”
18.8 "
H.6”
fede ra l Reserve Ban k of Ph ila de lp hi a
Direct obligations: I . S. Government
Treasurv bonds—
Maturing bv December 31. 1919
Maturing after December 31. 1949
Other bonds.............................................................
Treasury notes........................................................
Treasury bills..........................................................
Reserve citybanks
Country
banks
Twenty-third Annual Report, Federal Reserve Rank of Philadelphia
notes. The amount of Treasury bills held by these banks was negligible.
There were also decreases of SB,000,000 in obligations guaranteed by the
United States Government and of $40,000,000 in other securities, chiefly
corporate and municipal bonds.
The shrinkage of $86,000,000 or 13 per cent in the investments of
Philadelphia member banks was in sharp contrast with a decline of but
$14,000,000 or less than 2 per cent at the country member banks. The
volume held by the latter was better sustained by virtue of increases of
$8,000,000 and $10,000,000 respectively in direct and guaranteed obliga
tions of the United States, which raised country bank holdings of these
securities to the highest point on record. Approximately $32,000,000 of
other securities were sold or charged off, about $15,000,000 being in utility
bonds.
Banks in the Philadelphia district, especially the country banks, are
heavy holders of rail and utility bonds. While all members in this dis
trict at the end of 1937 had but 7 per cent of the resources of all member
hanks in the Federal Reserve System, their holdings of both rail and
public utility obligations were over 19 per cent of similar securities held
by all member banks.
•'he greatly increased importance of bond investments in recent
years has further complicated the problems of bank management. Ob
viously no loan or investment is entirely free from risk, the degree varying
"ith the nature of assets involved. However, bonds are subject to con
stant price fluctuations in the market, as business and credit conditions,
interest rates and many other factors affect their current value. In the
1 'isc of loans a personal relationship usually exists between the borrower
anil the lender, whereas with bond investments this relationship is imperonal and remote. This basic distinction and the unavoidable change
mm loans to investments by banks call for reorientation of policy and
nu t iods with respect to the employment of funds.
An analysis of the investments of member banks in this district, as
■ town by examination reports available at the middle of the year, is
given in the table on the next page.
• i\ i-sixths of total investments were in direct or guaranteed obligai ais of ||1(. United States Government, municipal or state securities, or
chii fl"-ll'c ”','’®a^ons
three highest grades. The balance consisted
and bf° , °WC.1 Sl n<^c corporate bonds, and smaller amounts of stocks
iik r ■ n".111
*SBUe8‘ Bong-term issues predominated; securities having
’ '• airi ten years to run to maturity comprised nearly two-thirds of
11 a i ic ratio being especially high in the corporate issues.
25
'I irmly third Annual Report, Federal Reserve Rank of Philadelphia
Distribution of securities in
vestments of member banks
by types and maturities
Philadelphia Fed. Ilea. District
United States Government direct
and guaranteed obligations
Municipals, etc..................................
('orp>rates: first three grades. .
fourth grade..............
lower grades..............
Defaulted issues
........
Stocks.....................................
Totals
Maturity ranges
0-5
years
5-10
years
10-15
years
15-20
years
6.5%
2.1 "
2.2 ”
hi”
.7”
H.2%
1.0”
2.8"
1.1 ”
.8 ”
1 18%
2.2”
2.0 ”
1.0”
.7”
11.1%
1.7”
2.5 "
.8"
.9 "
23.0%
12.6%
16.9%
17.7%
Percent
of total
invest
Over 20 ment
years
6.6%
3.4 "
11.0”
2.9”
1.6”
1.8”
2.5 ”
50.2%
13.4 ”
20.5 ”
6.9 ”
4.7 ”
29.8%
100.0%
1.8 "
2.5 ”
I licsc proportions become especially significant when related to the
capital funds of the banks, for it is these funds primarily that constitute
the depositors' safeguard against losses. It appears that the proportion
of corporate securities of the fourth and lower grades, defaulted issues
and stocks to net capital funds was about 46 per cent. Similarly, securi
ties maturing in over ten years were nearly double the net capital funds*
The proportion of capital funds to total deposits of member banks
increased Iron. 16.8 per cent in 1936 to 18 per cent in 1937. In other
«°«8’?Vho“J
X?37 for eve*y dollar of capital funds there were
ol deposit liabilities as compared with #5.95 in 1936; in the neriod
"’Hl 92/ to 1929 the average of deposit liabilities was about #4 19 f,„.
every dollar of cap,tai funds. The apparent improvement in the relation
-hip between depo.-,ts and capital structure from 1936 to 1937 was
'<> n deelme of #186,(XX),(XX) in gross deposits ami an increase of #•> 000 O n
< cpital funds, chiefly in surplus ami undivided profits
$2’00°’000
Figures for the System as a whole also show a rise in the nronowi
of capital finals to ileposits .luring 1937. The ratios, however were
lower than those tor this district, and indicate #7.60 of deposits for , 1
at
dose of the vear as agLst #813 J
December 31, 1936.
Earning,
and
against 58.13 on
Member banks continued to experience increasing diffienl
ties w.th respect to their earnings from current one r
'
woSX*'“7■7™“c. ..........
’-T4.IS.IXX)
as compared
with #28,679,000 in
average rate of net profits was 3.7 per cent nt capital
26
f Xut
193ft
I wenty-third Annual Report, Federal Reserve Rank of Philadelphia
'ng capital stock, surplus, undivided profits and reserves. On total
H'nilnble funds, whic.h also include deposits and borrowed money, tbe
average rate of net profits in 1937 was 0.6 per cent.
Unusually low interest rates have been the principal factor affecting
he earning position of banks in this district as elsewhere. Following a
iaip increase in March, yields on high grade securities including gov
ernments declined almost steadily to the end of the year. Customers’
intes, especially in larger centers, also continued to decrease and rates
"a "pen market paper including Treasury bills fluctuated at levels about
"'a pci cent or less. Loans in the first three quarters of tbe year showed
a inai ed upward trend but subsequently declined. Investments, on the
" in land, decreased following a sharp expansion in the previous three
Under these and other influences income continued to show sigiii Kant variations as compared with former years.
J he billowing data illustrate fundamental changes in the sources of
income of member banks in this district:
Member banks
1 '"'“delphia Federal Reserve District
Loans..............
Earnings therefrom...............................
Investments
Earnings therefrom.
1927-29
(averages)
1937
Per cent
change
$1,7111,000,000
95,501,000
$ 952,000,000
42,790,000
-45%
924,000,000
46,773,000
1,102,000,000
47,680,000
+52 ”
+ 2”
16,007,000
20,185,000
+28”
I'larningg from Other sources
—----------------- ----------------------
055000 •inC'[e“Se in total earnings from $108,919,000 in 1936 to $110,dcparti '."t
Wa8 ^UC l’r'nc*l)a"y to such diversified sources as trust
A rise i" "
'*
serv*(:c c'iargcs, commissions and foreign departments,
creases
exPenses f,'"m *73,915,000 to $76,409,000 reflected inOPlOOo •$2’702’,°00 ’n UXeS °ther than thosc on real estate> and of
"ii the nil 1.1' i'"'1 o'cc (,<)lnI)cnsation and fees. Interest paid on deposits,
operations" ' ii'';- *®Crea8ed
*1,122,000. Net earnings from current
*35 004 (inn"-1 , i ’ 1 ieridore> declined to $34,546,000 as compared with
’
in the previous year.
«»«» » ftgainst
27
I wenty-tliird Annual Report, Federal Reserve Hank of Philadelphia
losses ami depreciation over recoveries and profits on securities of
$11,048,000 in 1937 as against $6,325,000 in 1936.
1 rofits on sales of securities declined to $9,270,000 as compared with
$19,848,000 a year before. This change was probably due to the fact that
bond prices in 1936 advanced rather rapidly and in consequence the
turnover in securities for profit or portfolio adjustments increased, espe
cially toward the end of the year. But in 1937 bond prices declined and
the incentive to sell securities for profit diminished. In the case of
loans, recoveries declined to $3,139,000 as compared with $3,592,000 in
1930, while losses decreased to $10,523,000 from $17,233,000, indicating
a substantial improvement.
1 he following table summarizes the results of operations of member
banks in this district:
Earnings and expenses
of member bunks
Pliihiilclphin Fed. Res. District
1937
1936
Averages
1927-28-29
S 42,790,000
47,680,000
20,485,000
$ 42,736,000
47,542,000
18,641,000
$ 95,501,000
46,773,000
16,007,000
$1 10,955,000
$108,919,000
$158,281,000
$ 27,207,000
20,339,000
28,863,000
$ 26,249,000
21,461,000
26,205,000
$ 29,069,01
52,644,0<
29,887,01
Current earnings
Interest and discount on loans. . . .
biterest and dividends on securities
Other.....................
Total
Current expenses
Salaries and wages..
Interest on deposits
Other...........
Total
* 76,109,000
$ 73,915,000
Net current earnings
Recoveries and profits on sides
$111,600,0
« 31,546,000
17,398,000
$ 35,004,000
30,662,000
$ 46,681,1
12,292,i
losses and depreciation............
« 51,911,000
28,116,000
$ 65.666,000
30,987.000
$ 58,973 ,
13,387,
Net addition to profits
(lush dividends declared.
$ 23,498,000
19,597,000
$ 28,679,000
18,588,000
Percentage of loans:
Interest and discount
Percentage of investments:
Interest and dividends
$ 45,580,
29,188,
4.5%
4.6%
5.6%
3.4 ”
3.4 ”
5.1 ”
'
" 'lr
declared by member banks in this district i77
"mounted to $19597,000 or 5.4 per cent larger than in 1936
v
only about two-tlurds of what they were in the years from 1927 +1
1929. Similarly, for all member banks
in the
United States cash divin°
"“hiding interest paid on capital notes and debentures,'
28
Twenty-third, Annual Report, Federal Reserve Bank of Philadelphia
EARNINGS AND EXPENSES OF MEMBER BANKS
PHILADELPHIA FEDERAL RESERVE DISTRICT
29
I icenti1/-third Annual Report, Federal Reserve Bank of Philadelphia
creased 1 per cent over 1936 but were only 57 per cent of the three-year
nverage.
I he total membership in 1937 deereased from 658 to 655.
As ’n the previous year there were 65 state bank members,
while the number of national banks declined from 593 to
590 ns a result of the absorption of two banks and the suspension of
operations by a third bank.
Member-
At the dose of the year member banks accounted for approximately
70 per cent ol the number and resources of all banking institutions in the
distiict. Details by states are given in the following table:
Bunks io 1'liiludclphia Federal
Heserve District
(Dollar figures in millions)
Pennsyl
vania*
New
Jersey*
Delaware
777
550
71%
lilt
85
72%
57
20
35%
952
655
69%
lot til r<*H(»u r<'CH
1 otal........
$4,027
Member liunk.H .
2,857
Proportion memlier of total
71%
■----- fortion of slate in Philadelphia district
$399
266
67%
$253
154
61%
$4,679
3,27ft
70%
of hunks
Total............
Member bunks
Proportion member of totnl
District
totals
NiiihImt
—
I he number of member banks having the right to exercise fiduciary
powers Was unchanged at 255. An additional bank was granted these
powers, but another bank which already had them was absorbed.
Federal Reserve Bank
Throughout
of 1937 total resources of the Federal Reserve Ban!
o I hiladelphia exceeded *800,000,000. A record high of annroxim, i
funds raised deposits and cash reserves to new peaks.
“ember banks were Ught and there was little calif,
the extension of industrial loans. In consequence earnings from +1
*®d the principal source of inc...... conti.... , . 7
substantial 1ml,hugs of United States Government securities The h
was coa.mually in a position to expan,1 its outstanding credit Very mot”
rially, as indicated by high ratios of reserves to liabilities
30
Twenty-third Annual Report, Federal Reserve Rank of Philadelphia
Annual averages of selected items contained in the statement of con
dition are given below. A more complete statement as of the year-end
appears on page 33.
Annual averages of daily figures
Federal Reserve Bank
of Philadelphia
(Dollar figures in millions)
Bills discounted...
Bills bought..
Industrial advances.
’ nited .Suites securities..........
Other securities..
lotal hills and securities. . . .
tyleral reserve note circulation............
/tuln , *,an^ re«erve deposits..............
Other deposits
1 otul cash reserves..,
Reserve ratio.
1935
1934
$
9.6
1 7
03
167.1
0.4
$179.1
242.6
190.8
13 8
296 7
66.3%
.$
0.6
0.5
4.4
172.7
$178.2
244.4
235.3
21 5
345 0
68.8%
1937
1936
$
0.4
0.4
5.4
193.8
0
$200.0
289.4
324.6
27.1
464.0
72.4%
.$
1.4
0.3
4.0
208.9
0
$214.7
313.1
381.2
32.6
534.4
73.5%
Reserve
bank
Bill and security holdings of the Federal Reserve Bank of
Philadelphia in 1937 averaged $214,700,000 and were the
credit
largest since 1920, when discounts were exceedingly heavy.
At the end of the year total holdings amounted to $222,
926,000
. , or ,621,000 more than on the same date of the preceding year,
his increase was due principally to an addition of $7,864,000 in governimut, obligations, resulting from participation in the System’s account
which was increased in April and November.
All obligations of the United States Government held by the System
»•£ pooled in a joint account, the allocation being made among the re<1Vt hanks in accordance with a formula, based chiefly on earning re
finements, prescribed by the Federal Open Market Committee. The pro'i0,1/,in.
*3<! 'leld by each reserve bank is determined at quarterly
h' °kVa l.
v*’'tue of this participation, the holdings of the reserve
sefl <S ° S° Va,y ™ comP°sition and in total as the System purchases or
II .
’<),ls Masses of Treasury securities. Changes in the holdings of
11,. ''<Iil' Reserve Bank of Philadelphia, therefore, do not affect directly
reserves of member banks in the district.
held ?'C ,\ren(l an^ composition of United States Government securities
folln.
<■' i’cderal Reserve Bank of Philadelphia are shown bv the
"mowing figures:
‘
31
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia
(Thousands <4 dollars)
December 31:
1933.................
1934..
1935 .
1936.
1937.................
Bonds
Notes
Bills
Total
28,068
23,138
16,818
12,193
63,561
71,012
103,810
120,857
115.317
97,685
65,010
37,172
39,415
51,479
55,607
167,120
167.120
177.120
208,989
216,853
............av uic eiiu
01 ia.jz amounted to §2,153 -
000 08 0..... .
"»>' *313,000 in
.,,,,1 §377,000 in 1935. While this
was a substantial increase, the actual volume continued small in coffipariSS4 Him n T”’ d,8C°unts at the cnd of 1928> for example, being
$81,300,000. Banks generally had abundant funds for current require•""l the majority of the 159 borrowing hanks needed only leinporarv accommodation for adjustment purposes.
(dealer use than in 1936 was made of the privilege of borrowing
nt' er s«.(. , ,, l()ihl. whk,h pcrmits
^<8
± n, 8eCUr,
y S0UDd aS8et8 accePtable to the reserve bank
,..... ""
year borrowing under this section was intermittent, l,,„
spring and m the last two months a small amount of such accom
ino.lal.ons was be,ng extended at all times. The highest point reaeb, I
doseofttS
h°WM« Wil' °Dly •Sl51"""'
the amount held at the
Tne
1 1OS< O| the year was §385,000.
Few requests were received from industry and trade for wnrl-i
Untnl loans, which the hank may grant for periods up to fivl vo ®
n. et ie continuing provisions of section 13(b) of the Federal Res <US
A- • Hepayment of existing loans continued steadily with th^re H
‘r’. .t »***» «■
i™
i;."'*';;:,":."':™".....
1837 fora dollar amount m 81-r^ wp ','•'
!"atlons werc re°eived in
extension of $640,000. Annual totals showing'r apPr°Ved lnvoJvinB the
approved were as follows:
'
8 aPPhcations received and
Working capitul loans
I'cdiTid Reserve Bank
of Philadelphia
1931: June to Dcccnd>cr
1935
1936
1937., .
................
........
Applications received
Applications approved
Number
Amount
Number
340
172
64
17
Amount
$15,661,000
20,715,950
2,650,900
1,922,000
67
69
27
9
$ 6,338, ton
16.318,300
1,017,900
640,000
$ 10.952,830
172
$2 1,31 I,G0()
593
32
7 wenty-third Annual Report, Federal Reserve Bank of Philadelphia
Statement of Condition
December 31
Federal Reserve Bunk of Philadelphia
(000 s omitted in dollar figures)
19.35
1936
1937
$370,230
1,168
34,078
$495,30!!
194
25,458
$474,891
500
26,940
.. *o,ul reserves..............
mils discounted:
nil|"reil-ny V'S' G<)vern'»enl obligations*
‘Jther hills discounted.
$105,476
$520,960
$502,331
250
127
285
28
1,498
655
leu i
l°tal bills discounted... .
I s bought in open market...............
industrial advances....................
mted Stales Government securities.
$
Dm. r,.
a,,<l securities,
from foreign hanks.
UenXSriXOteS°fOlherF- l, l‘“nks:
$184,749
69
1,507
40,928
4,830
3,801
$214,305
21
1,736
58,663
4,952
3,122
$222,926
18
1,662
54,588
4,826
5,067
$611,360
$803,759
$791,418
$271,870
$312,078
$318,036
274,326
10,519
2,881
10,174
381,210
6,258
9,209
2,219
365,046
1,092
17,002
2,269
$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
$385,109
53,747
12,258
13,466
4,411
2,999
1,092
$611,360
$803,759
$791,418
71.1%
73.3%
71.4%
0
$861
0
$247
$166
$173
p
n
RESOURCES
uoid certificates on hand and due from U. S.
Ireasury ............
Jh-deinption fund—Federal reserve notes. . .
'Jtlier cash.........
Aunk Premwes..................... \\ .....................
other resources............
I olal resources.
LIABILITIES
OenoX:rC8erVe n°te8 in c*ruu’a,*ol>E..,1
377
484
6,768
177,120
$
313
317
4,686
208,989
$
2,153
293
3,627
216,853
,
Member hank reserve account.
H. S. T,reasurer—general account.
•‘’reign hank .
nher deposits
l)ef(.,.»..i ’"l!!l.,!V.I»»“tK
cXd ^““ability items
' "I'llal paid in
■Surp ns-Seclion 7.........
orpins-Section 131,.
A Hu*’ f','r ,co,'tingencies.
A 1 °thor liabilities............
I olal liabilities.
l<,X?L%tnm<revm-l°deP°sil a,»l Federal
G'ailiim,.,,, • 'v.d’ddies combined..........
.....— *
■‘■"nnilmcnls to make industrial advances:
, ’’“dudes bills
went.
By United States Govern
33
Ttuenty-lhird .Innual Report, Federal Reserve Hank of Philadelphia
The amounts approved include credit extended by this bank on its own
account and by other financing institutions which participated in the loans.
The volume of bills bought carried by the bank was negligible in
1937, as in 1936. The small amount on the books continued to reflect
almost entirely participation in foreign bills held by the Federal Reserve
System.
Loans made to banks, which subsequently suspended operations, are
not carried among the bill and security holdings of the bank but are ineluded in its miscellaneous assets. In April 1933, immediately after the
banking holiday, the volume of such loans outstanding was $29,316,000.
By the end of 1937 this total was reduced through liquidation to $1,776,
000, secured by $-1,889,000 of collateral.
The cash reserves of the bank during 1937 declined from
$520,960,000 to a low of $502,331,000 at the end of the
year. The high point of cash reserves was $632,900,000
late in March. Very large amounts were acquired from other districts
in the settlement of commercial and financial accounts, but they were
more than offset by transfers made to other sections for the account of
the Treasury.
Reserve
position
The total deposit liability likewise declined from $398,896,000 to
$•185,409,000, but the average for the year was more than $60,000,000
above that in 1936. Member bank reserves, the principal deposit item,
advanced to new high levels in the spring, but showed a net decrease of
$16,164,000 in the year. Treasury balances also declined, while denosits
of foreign banks increased.
'I he volume of Federal reserve notes in circulation expanded from
1812,078,000 to $318,036,000 in the course of the year Virtually all < f
the collateral pledged with the Federal Reserve Agent to secure outstand
ing notes was in the form of credits in a fund payable in gold certificates
as the amount of discounted paper on hand was small.
Under the statutory provision, the required reserves curried by this
bank on December 31, 1937 were $127,214,000 against Federal reserve
notes and $134,893,000 against deposit liabilities, making an aggregate
r«iu.rement of $262,107,000 out of total cash reserves amounting to $502
331.000, I he surplus reserves thus were $240,224,000 or 92 per cent r
requirements as compared with 97 per cent a year ago.
Fluctuations in the combined deposit and note liabilities were accom
pnmed for the most part by largely compensating variations in the
34
,
7 wenty-third Annual Report, Federal Reserve Rank of Philadelphia
nnKiunt of, cash reserves, so that the reserve ratio of the bank was quite
"icauy.
“ ....... i"tlc average ratio was 73.5 as compared with 72.4 in 1936 and
58.8 in 1935. The high ratio in 1937 was 78.2 and tile low 71.2.
Discount
and
interest
Under the continuing pressure of unused funds in the hands
oi banks and other investors, the general level of money
rates continued at very low levels throughout 1937. There
rates
were temporary advances in the early spring, but the high
est points reached were under the levels prevailing in the
s- Depressed business conditions and reduced earning power, rather
I I'in monetary conditions, were responsible for substantial increases, ex1111 mg into 1938, in the yields on corporate securities of the lower grades.
Animal averages
December 31
Money rates and yields
' ■'■'"Miereiul paper, prime............
acceptances, 90 days.
• II money renewals, New York
Ireasury bills, 91-day
rk...........
1 reasury notes, 3-5 year
lr< usury bonds, over 11 venrs
Corporate bonds-AaaraS................
Corporate bonds-Baa ™iing...............
1935
1936
1937
1936
1937
•76%
.13 ”
.56 ”
.17”
1.29”
2.70 ”
3.60 ”
5.75 ”
•75%
.15”
.91 ”
.17”
1.11 ”
2.17”
3.24 ”
4.77 ”
.95%
.43 ”
1.00 "
.28”
1.40”
2.57 "
3.27 ”
5.11 ”
■75%
.19”
1.00 ”
.20 ”
1.13"
2.27 ”
3.09 ”
4.54 "
1.00%
.44”
1.00"
.12”
1.23”
2.52”
3.21 "
6.02 ”
the ret"1 heia‘ ^CVe'
short-term rates continued substantially under
prime UIh °n '°n^cr *-erin bonds. Small increases occurred in rates on
vear *‘’ni,nel c*a^ Paper and bankers’ acceptances, but over most of the
hills oi,1.' 1111 i,ll< h paper did not fluctuate. The discount on Treasury
Per cent'" a 'e/car at '20 pcr ceilt and advanced to approximately .625
month 111 Pn ’ ')Ut suhsequently dropped materially and in the last two
no"th8 was at new low levels of approximately .125 per cent.
Year it/'r o n<lt appear t,iat there were significant changes during the
drift downu<S i '.‘llSe< by hanks on loans to customers, although a
nite’£ ” "*•
«» hisl> Br.de com,™,rial loan,
deavor to aconirn h
r tc.nd®ncy elsewhere to reduce rates in the en1
some of this desirable class of business was observable.
I'hia loweredits rate'
k^8’
Fedcral Reserve Bank of Philadelsections 13 and 13U oHl'VT" w?™’ advances to member banks under
and 13a of the Federal Reserve Act early in September. The
35
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia
reduction from 2 per cent, in effect since January 1935, to 1% per cent
established the lowest rate of discount ever in effect at this bank and
served to bring the rate into line with the level of short-term money rates.
I his change was accompanied by a reduction from 2% to 2 per cent in
the rate on advances under section 10(b), which is set by law at a point
not less than one-half per cent above the discount rate.
Interest rates in effect at this bank at the end of 1937 as compared
with those on the same date of 1936 were as follows:
Discount and i ntercBt rates
Federal Hescrvu Bank of Philadelphia
Discounts for member hanks (Sections 13 and 13a)...
Advances Io member hanks under Seclion lll(h)
Discounts secured by I . S. Government obligations
for indn idiinls, pnrtncrnliipH and corporations under
Section 13...................................................
Hates oil industrial advances Section 13(h):
Advances direct Io industrial or commercial organi
zations ........................................................
Advances to financing institutions—
On portion for which institution is obligated.......
On remaining portion................................
Commitments to make advances..............
December 31
1936
1937
2%
2^”
1^%
2"
4”
4”
4-6”
4-6 "
(1% above
established
disc, rate)
*
K-2%
(1% above
established
disc, rule)
^-2%
•Siiini: as to borrower: minimum of 4%.
1' urther reductions in rates paid by member banks on time and sav
n.gs deposits were numerous. No change, however, was made in'the
maximum rates which may be paid under the regulations of the Board of
Volume
of work
Not all operations of a reserve bank can be measured
statistically, but there arc certain routine items which
constitute a large volume of daily work. Some of these are
presented in the table.
The largest volume of work was in connection with currency anti
Currency and coin received and counted during 1037
“•*»»• rtrnv »line™, ol o»,r 4 per centcompared
" Ith 193b. I he average per working day was 679,000 pieces of currency
I "in.iHHi of corn. The most striking expansion, however, was in the
tram,, department, which handled over 86,000,000 of ordinary ehoe compared w.th 75,600,000 in the previous year. These figures exclude
Bullions Ol checks drawn on banks in this Vicinity which are I,
check collection.
36
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia
Volume of work
Federal Reserve Bank of
Philadelphia
discounts and advances...
Currency counted.................
’-oiiis counted..............
’Ordinary checks
> >• S. Government checks.............
Work relief checks.............
Collection items:
Coupons of U. S. Government and
. agencies.....................
r, All other............
transfers of funds...
Issues, redemptions ami exchanges by
Hseal agency department:
U. S. Government direct obliga
tions .......................
All other... .
Pieces or trans*
actions handled
(000*s omitted)
Dollar amounts
(000,000’s omitted)
1936
1937
1
192,1127
291,110
75,609
3,019
7,651
2
203,132
301,684
86,058
2,700
5,660
1,106
366
61
1,193
366
66
42
266
2,611
48
248
3,137
1,568
53
201
27
651
64
394
45
1936
$
14
838
27
21,121
715
237
1937
$
59
869
28
23,714
465
189
*n packages by the automobile run service. The work becomes espe
cially heavy following holidays that are not observed in other disrequiring additional help in the transit department. The largest
mini ier of checks handled on any one day up to the close of the year was
0,000 on October 14 and the next largest volume was 570,000 on June 10.
I he average amount of securities held in custody for member banks
increased from $589,000,000 in 1936 to $668,000,000 in 1937. Security
I’111 iase and sale transactions, however, declined materially.
•j.1^ (,l>einylons handled for the United States Government decreased.
tieT "t|S ^,u ^cu'ar’y true of issues, redemptions and exchanges of securin. . , |10 define hi the volume of government and work relief checks
wi s'p*'
° WaS sut>stnntial, although the total of 8,360,000 items in 1937
1 di gi cater than in any year preceding 1936.
W01^ resulting from discount operations continued
as (■( l’l/i1TIK '
confined to the handling of accounts receivable pledged
decliii 'l*1 'll i°r in,’ustr*a^ loans. The work of the liquidation division
■
t iei changes in the volume of operations during the year
smaU 1° • V°^U™6
Earnings
and
expenses
Cm lent, earnings of this reserve bank increased from
«3,256,000 in 1936 to $3,559,000 in 1937. This was due
principally to larger holdings of United States securities,
which accounted for nearly 92 per cent of total income.
37
i
Twenty-third Annual Report, Federal Reserve Bank of Philadelphia
I rofit mid Iohh Account
Federal Hescrvc Bank of Philadelphia
(ooo s omitted)
Earnings from:
Bills discounted...................
Bills llOllght.......................
Industrial advances........ / ’
United States Government securities
Ollier sources..................
1936
$
Total earnings..................
Expenses:
Operating expenses*..................
Cost of |« ederal reserve currency.............................
Assessments for expenses of Board of Governors.
1'oial net expenses..........
Current net earnings............
1937
7
3
312
2,855
79
$
26
2
223
3,257
51
$3,256
$3,559
$2,212
152
161
$2,099
141
172
$2,525
$2,412
$ 731
$1,147
$ 582
8
$ 201
$ 590
$ 201
$ 192
193
63
3
$ 140
193
0
6
$ 451
$ 339
+ $ 139
- $ 138
$ 870
$1,009
$
$
Additions l<> current net earnings:
I rofits on sales of United States Government i
Other additions
< du, ii„„„ from current net earnings:
of........ °n C“t °f buildin* f0r Board
Added 'n. r?' “*nlr.il,,ltion,iHctiremen't System:. '
ol
i .
:rve for 00,11 Agencies. ...
Other deductions.............
...................
XnS,^ °rTon, (-) cur-
Net earnings available for distribution
Distribution of net earnings:
aid to Treasury of United States
Dividends paid to member banks. . .
transferred to surplus (See. 13b)
Transferred from (-) or to (+) surplus'^. 7)'. . '.
cm,reimbursements
received I
84
736
94
44
+
84
735
86
104
ertani fiscal agency andXlwr
’ on the other hand, were reduced from $2,525 000 to S2 4TO™
I;,::1,"",;;;;1 . .......*.... —* .. .............. ...... •w™
“nr*My
.xt
*............. ...
-
38
Twenty-third, Annual Report, Federal Reserve Bank of Philadelphia
lions to the retirement system for prior service continued unchanged.
After adjustment for these and other items, current net earnings were
reduced to $1,009,000.
Out of this sum member banks received $735,000 as dividends under
statutory provisions. The amount of $84,000 was paid to the Treasury of
die United States as a return on funds received from it in connection with
industrial loans. The balance of $190,000 was added to the surplus
accounts of this bank.
There was no change during 1937 in the directors repre
senting the member banks. C. Frederick C. Stout was re
elected by member banks comprising Group 1 to serve as a
Glass B director and J. B. Henning by banks in Group 3
ns a ( lass A director. In August Thomas B. McCabe, President of the
' cott 1 aper Company, was appointed by the Board of Governors to fill
it vacancy in the Class C directorship. The term of Harry L. Cannon,
a - ass C director since 1924, expired at the close of the year. In accord
ance with the decision of the Board of Governors in January 1935 that
officers and
directors
List of Directors as of January 1, 1938
Class
and group
•■roup 1
•■roup 2
• Iroup 3
■roup |
1 'roup :
Group 3
Name
Residence
Joseph Wayne, Jr., President,
Philadelphia National Bank,
Philadelphia, Pa.
George W. Reily, President,
arrisburg National Bank,
Harrisburg, Pa.
Henning, President,
VV yoming National Bank,
I unkhannock, Pa.
C. Frederick C. Stout, Member,
m •',11 j ’■ ?vans and Company,
1 hdadclphia, Pa., and
Camden, N. J.
Arthur W. Sewall,
General Asphalt Company,
Philadelphia, Pa.
' ' w H 12eJja ,9°"r- Vice President,
Wm. S. Scull Company,
Camden, N. J.
Richard L. Austin,
Chairman of the Board.
I honiasB. McCabe, Deputy Chairjnan: President, Scott Paper Co.,
Chester, Pa.
Vacancy*
Philadelphia, Pa.
Dee. 31, 1938
Harrisburg, Pa.
Dee. 31, 1939
Tunkhannock, Pa.
Dee. 31, 1910
Ardmore, Pa.
Dee. 31, 1910
Philadelphia, Pa.
Dee. 31, 1938
Riverton, N. J.
Dee. 31, 1939
Philadelphia, Pa.
Dee. 31, 1938
Chester, Pa.
Dee. 31, 1939
’••‘Hed by appointment of F
’runeis C. Biddle i
39
Term expires
April 1938.
Twenty-third. Annual Report) Federal Rcscrve Bank gf Phiiadelphia
if'thc^hndZvi0 arC aPPOi"ted by thc Board would not bc ^appointed
I
«
?r m°rC consccutivc years, except in the cases of
™d I A, r rC8e,rVe bank8’ Mr Cannon was not reappointed.
.m M M T? aS Chairman Of thc Board and Federal Re
Agent and Mr. McCabe was designated Deputy Chairman.
n,an onKtaXVn'
°f Direct°r8’ Howard A- L°eb, Chairnf I ' Il
10 rrades,ncns National Bank and Trust Company
c a AdlS cZSUCd dUring 1937 to ™ aS a mC-b- e^Fed-
'?
representing the Third Federal Reserve District.
by the boards 0^7
John S. Sinclair, President, was elected
.
8 °f the Fcdcral Reserve B»"ks of Philadelphia
-d Cl-eland to serve as a member of the Federal Open Market Com-
rctircment’of t^elT F 7“a
?C
°f
tb° year
Consistcd
Cnsimir A. Sienkiewicz bTas ?sbrtaiR Casl”er, and the appointment of
search and staS” Mr 4 v
President.
^arge of rethe President. The official staff al'tl" V VI°US,y bad bcGn Assistant to
*al 8taff at tbe beginning of 1938 was as follows
Richard L. Austin,
Ernest C. Hill,
Vice President.
illiam
G. McCreedy,
Thomas B. McCabe,
Assistant
Vice President.
Deputy Chairman.
L. E. Donaldson,
John s. Sinclair,
Assistant Vice President.
President.
C. A. Sienkiewicz,
l'KANK J. Drinnen,
Assistant Vice President
Hrst I me President.
Arthur E. Post,
C. A. McIlhenny,
Secretary.
l ire President and Cashier.
James M. Toy,
\\ J. Davis,
< Assistant Cas/tier.
Vice President.
Glenn K. Morris,
Assistant Cashier.
of 1937 was 780, a9 agahirt 799^ yelr^rHe^and MO t^eamago.
Chairman of the Board and
Federal Reserve Agent.
40
@FedFRASER