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FOURTEENTH ANNUAL REPORT TO THE FEDERAL RESERVE BOARD BY THE FEDERAL RESERVE AGENT FEDERAL RESERVE BANK SAN FRANCISCO FOR THE YEAR ENDED DECEMBER 31,1928 FOURTEENTH ANNUAL REPORT TO THE FEDERAL RESERVE BOARD BY THE FEDERAL RESERVE AGENT FEDERAL RESERVE BANK SAN FRANCISCO FOR THE YEAR ENDED DECEMBER 31, 1928 DIRECTORS AND OFFICERS OF THE FEDERAL RESERVE BANK OF SAN FRANCISCO January 1, 1929 Term Expires DIRECTORS Dec. 31 Class Group A 1 C. K. MCINTOSH, San Francisco, California - 1931 THOMAS H. RAMSAY, Red Bluff, California - 1929 President, Bank of California, N. A. President, Pacific National Agricultural Credit Corporation, San Francisco, California. VERNON H. VAWTER, Medford, Oregon - - - - Cashier, Jackson County Bank, Medford, Oregon. A. B. C. DOHRMANN, San Francisco, California President, Dohrmann Commercial Company. WILLIAM T. SESNON, San Francisco and Soquel, California Agriculturist. E. H. Cox, San Francisco and Madera, California President, Madera Sugar Pine Company, Madera, California. 1930 1929 1930 1931 - 1929 C WALTON N. MOORE, San Francisco, California - 1930 c Deputy Chairman, President, Walton N. Moore Company. WM. SPROULE, San Francisco, California President-Retired and Director, Southern Pacific Company. ISAAC B. NEWTON, LOS Angeles, California Chairman of the Board. 1931 MEMBER FEDERAL ADVISORY COUNCIL F. L. LIPMAN, representing District No. 12 President, Wells Fargo Bank and Union Trust Company, San Francisco, California OFFICERS ISAAC B. NEWTON, JNO. U. CALKINS, Governor Chairman of the Board and Federal Reserve Agent S. G. SARGENT, Assistant Federal Reserve Agent and Chief Examiner ALLAN SPROUL, Assistant Federal Reserve Agent and Secretary F. H. HOLMAN, General Auditor R. T. HARDY, Auditor WM. A. DAY, Deputy Governor IRA CLERK, Deputy Governor W. M. HALE, Cashier CHESTER D. PHILLIPS, Assistant Cashier C. E. EARHART, Assistant Cashier H. N. MANGELS, Assistant Cashier E. C. MAILLIARD, Assistant Cashier F. C. BOLD, Assistant Cashier J. M. OSMER, Assistant Cashier DIRECTORS AND OFFICERS OF BRANCHES January 1, 1929 SPOKANE BRANCH Term Expires Directors Officers Dec. 31 . . . . . G. I. TOEVS,* Chairman PETER MCGREGOR* . C. E . McBROOMfJ R. L. RtrTTERf D . L. DAVisf . . . . . . 1929 1930 1929 1930 1929 D. L. DAVIS, Managing Director J. M. LEISNER, Assistant Manager EVAN BERG, Assistant Cashier SEATTLE BRANCH CHAS. H.CLARKE,* Chairman HENRY A. RHODES* . 1929 C. R. SHAW, Managing Director . . 1930 B. A. RUSSELL, Assistant Manager 1929 Gy. W. RELF, Assistant Cashier M. A. ARNOLD! . . . . M. F. BACKUsf . . . . 1930 C. R. SHAW! 1929 PORTLAND BRANCH NATHAN STRAUSS,* Chairman 1929 R. B. WEST, Managing Director EDWARD C. PEASE* . . . 1930 S. A. MACEACHRON, Assistant Manager J. C. AiNSWORTHf . . . 1929 J. P. BLANCHARD, Assistant Cashier JOHN F. DALY! . . . 1930 . R. B. W E S T ! 1929 SALT LAKE CITY BRANCH LAFAYETTE HANCHETT,* Chairman G. G. WRIGHT* . . . CHAS. H. BARTON! • L. H. FARNSWORTH! W. L. PARTNER! . . . . . 1929 1930 1929 1930 1929 W. L. PARTNER, Managing Director H. M. CRAFT, Assistant Manager W. M. Smoot, Assistant Cashier L. W. DALBY, Assistant Cashier LOS ANGELES BRANCH W.L.VALENTINE,* Chairman J. B. ALEXANDER* . . . 1929 lt)30 J. F. SARTORI|T[ . . W. N. AMBROSE, Managing Director M. MCRITCHIE, Assistant Manager . . 1929 A. J. DUMM, Assistant Cashier HENRY M. ROBINSON! . . 1930 L. C. MEYER, Assistant Cashier W. N. AMBROSE! . . 1929 . *Appointed by Federal Reserve Board. !Appointed by Federal Reserve Bank. JOn February 7, 1929, C. E. McBroom resigned from the Board of Directors of the Spokane Branch. D. W. Twohy has been appointed to serve as a director of the branch for Mr. McBroom's unexpired term. TJOn March 21, 1929, J. F. Sartori resigned from the Board of Directors of the Los Angeles Branch. F. J. Belcher, Jr., has been appointed to serve as a director of the branch for Mr. Sartori's unexpired term. LETTER OF TRANSMITTAL Federal Reserve Bank, San Francisco, California, March 1, 1929. SIRS : I have the honor to submit the following report concerning conditions in the Twelfth Federal Reserve District and the operations of the Federal Reserve Bank of San Francisco, for the year ended December 31, 1928. Yours respectfully, Chairman of the Board and Federal Reserve Agent. Federal Reserve Board, Washington, D. C. ECONOMIC REVIEW OF THE YEAR 1928 IN THE TWELFTH FEDERAL RESERVE DISTRICT A full measure of economic growth was experienced by the Twelfth Federal Reserve District during the year 1928. Output of the District's farms, mines, and factories was larger, and the volume of trade transacted was greater than in any previous year. The record of agriculture, industry, and trade, in the absence of unfavorable price developments, affords what seems to be convincing evidence of an increase in District purchasing power. Financial transactions were in record volume, demand for credit at member banks was heavier than ever before, and the volume of Reserve Bank credit in use averaged higher than in any year since 1921. For convenience in general analysis the year 1928 may be divided into two periods of approximately equal length. During the earlier months of the year industry and trade were conducted at moderate levels, and an increased demand for bank funds was significant only by reason of the character of the credit (loans on securities) principally involved. Attempts, during this period, to stabilize production in important industries, notably the lumber, copper, and petroleum industries, were fairly successful, a development which had considerable bearing on business conditions during the remainder of the year. As demand for these commodities increased, their prices advanced and the resulting improvement in the industrial outlook found expression in a marked expansion of activity during the latter months of 1928. Relatively full employment of labor accompanied the rise of industrial operations, which came at the season of heaviest demand for help in harvesting and marketing the District's crops. Expanding profits and payrolls in industry, as well as a progressive improvement in the financial condition of farmers and livestock producers of the District, were reflected in a growing volume of trade at wholesale and at retail. Demand for credit rose to record levels and interest rates, from July to December, were firmer than in any recent year. An extraordinary expansion in activity in security markets preceded and accompanied improved business conditions during- the year. A more detailed discussion of some of the principal economic developments in the Twelfth Federal Reserve District during 1928 is presented in the following report. Agriculture The 1928 agricultural season was characterized by an increase in the aggregate volume and a slight decrease in the aggregate value of crop production as compared with the previous year, and by continued improvement in the condition of the livestock industry. Increased aggregate production was the result, chiefly, of larger yields of fruits and vegetables. The smaller aggregate value of the crops produced reflected reduced yields of wheat and lower prices for Avheat and other important grain crops, and substantially lower prices for deciduous fruits. Prices of most field crops were higher in 1928 than in 1927, and farmers obtained a larger return for the smaller harvest of the later year. The greatly increased production of vegetables during 1928 more than offset the effect of declining prices in this crop group, and total value of output was greater than in any 6 FOURTEENTH ANNUAL REPORT recent year. Increased quantities of livestock and of livestock products were sold during 1928 at higher prices than prevailed during 1927, with a resultant increase in gross income of livestock producers. The general improvement in the financial position of agriculture, noted in each of the past four years, continued during 1928. Debts, accumulated during the period which ended in the depression of 1921, have gradually been liquidated and an increasingly large proportion of the farmers' income has become available for current spending. The record for the year 1928 indicates that the effective purchasing power of livestock producers, and of growers of field crops and vegetables increased as compared with 1927, and that the purchasing power of farmers raising grains and fruits declined. INDEXES OF AGRICULTURAL PRODUCTION Twelfth Federal Reserve Districtt (1925-1927 Averaee=100) 1928* Volume Value Volume 1927 Value Grains 108.0 97.3 113.2 Field Crops 96.2 102.5 104.2 Fruits 128.1 101.5 100.2 Vegetables 127.3 114.8 109.1 All Crops 112.2 102.0 105.3 *Subject to revision. tComputed by Federal Eeserve Bank of San Francisco. 109.7 95.6 107.8 102.5 103.5 1926 Volume Value 91.8 87.6 96.1 92.4 104.7 91.5 99.7 103.7 98.3 92.0 The crops of the District were moved to market in an orderly manner during the 1928 season. Farmers of the Pacific Northwest are reported to have been slow in selling their wheat, with a resulting increase in stocks on farms and in country elevators. Storage holdings of apples in that territory were also considerably larger than usual at the close of 1928, a reflection partly of a large crop and partly of a growing tendency to store apples in the Pacific Northwest rather than in eastern distributing centers. AGRICULTURAL MARKETING ACTIVITY _ . . Exports* Wheat (bu.) Twelfth Federal Reserve District 1928 1927 1926 (Columbia River, Puget Sound Ports) . . 18,298,702 38,779,911 28,184,157 Barley (bu.) (San Francisco) 3,321,550 2,910,454 3,140,729 Carlot Shipments* Apples (Twelfth District) 44,786 32,572 40,742 Oranges (California) 46,922 57,163 50,030 Lemons (California) 12,474 13,437 13,610 Deciduous Fruitst California 109,692 107,275 102,009 Oregon 5,750 4,095 4,334 Washington 11,189 4,650 9,547 Wheat* 30,484 41,562 32,981 Receipts^ Livestock (Eight Markets—Twelfth Dist.) Cattle and Calves 1,067,831 1,257,485 1,310,129 Hogs 2,536,945 2,146,659 2,093,616 Sheep 3,832,643 3,510,826 3,403,892 *For crop season to December 31, except oranges and lemons which are shipped during the twelve months period beginning November 1 of the preceding year. tExcept apples. ^Received at Portland and Astoria, Oregon; Seattle and Tacoma, Washington. §For calendar year. FEDERAL RESERVE BANK OF SAN FRANCISCO The year 1928 was one of a succession of years during which physical and economic conditions have favored the livestock industry. Some measure of the progress made during the past year is afforded by a comparison of receipts and prices at eight principal livestock markets of the District with similar data for the year 1927. Such a comparison shows that prices paid for cattle and sheep were uniformly higher during the periods of heavy marketing in 1928 than in the correspondINDEX NUMBERS INDEX NUMBERS 110 110 / 100 \ 100 90 90 80 80 1924 1925 1926 1927 1928 1924 1925 1926 1927 I92& VALUE VOLUME Volume and Value of Crop Production in the Twelfth Federal Reserve District. (1925-1927 Average = 100). ing periods of 1927. Prices of hogs, on the contrary, were lower in 1928 than in 1927, except for a brief period during the summer when the number of hogs shipped to market was relatively small. Trends of development established in the various branches of the livestock industry during recent years were continued in 1928. An increase in the number of sheep bred and widespread retention of ewes for breeding purposes resulted in another increase in the number of sheep on the District's farms and ranges. A normal calf crop from herds which have diminished in size during recent years, resulted in a reduction in the number of beef cattle in the District. Some further expansion of hog raising was noted during the year, but the rapidity with which changes in hog production occur makes it inadvisable to assume that a trend has here been established. LIVESTOCK ON FARMS AND RANGES Twelfth Federal Reserve District Jan. 1st Milch Cows Other Cattle Sheep Hogs 1929 1928* 1927 1926 1925 1924 1,447,000 1,420,000 1,397,000 1,401,000 1,397,000 1,373,000 3,305,000 3,510,000 3,597,000 3,994,000 4,212,000 4,656,000 14,371,000 13,645,000 13,217,000 12,536,000 12,170,000 11,923,000 1,604,000 1,677,000 1,452,000 1,198,000 1,390,000 1,660,000 *Eevised. A not insignificant factor in the growing relative importance of the sheepraising industry has been the maintenance of a satisfactory wool market during recent years. The 1928 clip of 103,429,000 pounds has sold at prices which averaged from 3 to 10 cents per pound or about 8 per cent higher than prices paid for the 1927 clip of 96,751,000 pounds. 8 FOURTEENTH ANNUAL REPORT This summary of the agricultural situation in the Twelfth Federal Keserve District would not be complete without mention of the continuing and serious difficulties of certain large groups of growers of deciduous fruits, particularly the growers of grapes and canning peaches. Acute situations in important areas have arisen out of the marketing problems of these growers. Industry Starting slowly from the relatively low levels of late 1927, industrial activity increased moderately during the first half of 1928 and reached record proportions during the latter half of the year. General improvement in the great extractive industries of the District—• lumbering, mining, and oil production—and increased output of important manufacturing interests—flour milling, food canning and preserving, metal products, paper and pulp—were chiefly responsible for the rise noted in industrial activity as the year progressed. Conditions in the lumber industry improved materially during 1928. Some degree of stability in the lumber market was achieved by a partially effective regulation of output, and prices moved slowly upward. Estimates made by this Bank indicate that approximately 14% billion board feet of lumber were produced in the Twelfth Federal Reserve District during 1928, compared with 14*4 billion board feet in 1927, and a record cut of 15*4 billion board feet in 1926, as reported by the United States Bureau of the Census. Orders received and shipments made by the mills of the District were larger in volume than the lumber cut during the year, and a decline in mill stocks of lumber was reported. INDEX NUMBERS INDEX NUMBERS 120 120 A 110 100 100 1924 1925 1926 1927 PRODUCTION 1927 1926 CARLOADINGS Annual Indexes of Industrial Production and of Manufactures and Minerals. Monthly Indexes of Average Daily Carloadings of Industrial Commodities Adjusted for Seasonal Variation. (1923-1925 Average =100). Output of the mines of the District increased during 1928 as compared with 1927, as a result of a rapid expansion in production of copper during the last half of the later year. A sustained, heavy demand for this metal, at rising prices, stimulated mining activity and, toward the year's close, a number of leading copper producers were reported to be approaching the limit of their capacity for immediate FEDERAL RESERVE BANK OF SAN FRANCISCO 9 and rapid expansion of output. Despite greatly increased production during the year, stocks of copper at the end of 1928 were substantially smaller than at the end of 1927. Gold, silver, and lead were mined in increasing quantities during the latter part of 1928, but total production for the year was smaller than in 1927. The oil industry, which had experienced a distinctly unsatisfactory year in 1927, also effected some improvement in its condition during 1928. During the greater part of the year production and demand were kept in approximate adjustment, and prices for the higher grades of crude oil, which constitute about 85 per cent of the California output, moved sharply upward. Toward the close of the year, however, production was again increasing rapidly and in December, 1928, was larger than at any time since the autumn of 1923 when, output was at record levels. Total production of crude oil in California for the year 1928 was 231,982,597 barrels compared with 230,751,463 barrels in 1927. Demand for oil products, particularly gasoline, was heavy throughout 1928, and output of the District's refineries was larger than ever before. At the year-end stocks of gasoline and light crude oil were smaller and stocks of heavy crude oil and the heavier refined oils were larger than at the close of 1927. Flour mills of the District produced more flour during 1928 than during 1927. Not all of the increased output was sold, however, and millers' stocks of flour (and of wheat) were larger at the end of the year than at its beginning. Domestic demand for flour was fairly well maintained throughout 1928, but export demand was light, particularly in the early months of the year. / The District's 1928 pack of canned fruits and vegetables totaled 41,665,407 cases, of which 27,873,553 cases were fruits and 13,791,854 cases were vegetables. The pack was larger by 8,666,578 cases, or 26.3 per cent, than the 1927 pack and was 2,493,928 cases, or 6.4 per cent, larger than the previous record pack of 39,171,479 cases produced in 1926. In California alone, the 1928 pack of fruits and vegetables totaled 30,697,390 cases, an increase of 20 per cent as compared with the pack of the previous year. The principal items responsible for the gain in output during 1928 were canned pears, peaches, and spinach. The market for canned fruits and vegetables was relatively stable throughout the year and packers were able to sell their product at prices which approximated those quoted in 1927. The pack of salmon on the Pacific Coast of the United States was larger during the 1928 season (10,639,914 cases) than during the 1927 season (7,361,004 cases). The carry-over from the 1927 pack was small, demand was well maintained during 1928, and prices did not show the declines usually experienced in seasons of large production. Building and engineering construction did not participate in the increased industrial activity of the year 1928. The total value of building permits issued in reporting cities of the District was substantially smaller than in 1927, and a similar decline was recorded in the value of contracts awarded for engineering and heavy construction projects. Curtailment of building operations in a few large cities was chiefly responsible for the reported declines in both series of data. If the data of commercial and industrial building construction be excluded, the value of engineering projects was larger in 1928 than in 1927. 10 FOURTEENTH ANNUAL REPORT A real surplus of labor existed in theDistrictduringthespringmonths of 1928, but by July there were evidences of considerable improvement in the employment situation. In Arizona, Utah, and Washington, it was reported that labor was fully employed during the summer and autumn, and that less than the usual seasonal recession in employment was noted during November and December. In the remainder of the District (California, Idaho, Nevada, and Oregon) conditions were reported as better than in 1927, but a surplus of labor, attributable in considerable part to an influx of workers from other regions, was present at all times. Activity in mining, agriculture, food products INDEXES OF INDUSTRIAL PRODUCTION Twelfth Federal Reserve District (1923-1925 annual average = 100) 1928 1927 1926 1925 1924 1923 114 110 110 104 96 100 Manufactures Foods... Butter Canned Fruits Canned Vegetables Canned Fish Flour Slaughter of Livestock Cattle Calves Sheep Hogs Wool Consumption Lumber Paper and Pulp Befined Mineral Oils Gasoline Kerosene Lubricating Oil Gas and Fuel Oil Cement Metals and Metal Products Befining and Smelting Other Metals (Including iron and steel) 118 124 Ill 167 132 135 103 94 90 68 87 106 75 107 145 155 192 148 98 121 115 128 Ill 139 114 113 110 129 109 148 99 97 106 90 93 87 89 105 132 148 173 91 92 132 114 121 106 131 114 116 104 164 112 106 92 94 105 102 96 79 80 109 133 132 143 110 109 125 110 121 107 128 106 105 98 121 118 123 80 97 102 106 95 91 94 106 104 118 122 103 103 118 107 102 107 99 95 96 103 87 87 84 105 104 100 102 107 107 97 95 96 94 91 114 103 94 99 94 100 91 99 99 99 91 95 93 116 99 98 91 98 102 109 99 100 88 87 83 94 88 94 104 93 111 Minerals Petroleum Non-Ferrous Metals Copper Lead Silver 104 96 113 118 Ill 85 100 96 106 106 118 89 100 93 108 109 114 92 100 96 107 106 113 99 98 95 101 102 97 96 102 109 93 92 90 104 Carloadings (Industrial) 113 108 Building Permits (20 cities) 71 81 Engineering Projects and Heavy Construction Total .' 123 132 Excluding large Buildings 113 105 Electric Power Production 144 131 112 88 110 102 97 95 93 102 115 95 121 106 99 109 95 96 99 100 105 92 Industrial Production General Note: These indexes of production are based on figures of actual production, consumption, or sales as reported by government bureaus, trade associations, or producers themselves with the exception of indexes of paper and pulp and other metals which are based upon data of electric power consumption as published by the Electrical World and Electrical West. 11 FEDERAL RESERVE BANK OF SAN FRANCISCO industries, lumbering, road building, and hydro-electric construction work, and unusually favorable autumn weather, were important factors in the improved employment situation during the later months of 1928. Trade The year 1928 was a year of relatively active trade in the Twelfth Federal Reserve District. From January through June trade proceeded at a moderate pace, and data of the distribution and sale of goods showed slight declines as compared with the first six months of 1927. During the second half of the year trade responded vigorously to favorable influences—expanding industrial operations and increasing employment—both within and without the District, and the record for the year as a whole showed a slight improvement when compared with figures for the preceding year. INDEX NUMBERS INDEX NUMBERS 100 901927 1928 1927 1926 DISTRIBUTION TRADE Monthly Indexes Adjusted for Seasonal Variation (1923-1925 Average = 100). The total number of carloadings on railroads of the District was 1.8 per cent larger in 1928 than in 1927, the reported figures being 3,672,149 and 3,615,093 carloads, respectively. Loadings of merchandise and miscellaneous commodities, of livestock, and of forest products showed a gain over the year period, while loadings of grain were lighter than in 1927. The District's waterborne commerce was probably in smaller volume during 1928 than during the previous year, for, although there was a substantial increase in foreign trade, there was a considerable decline in intercoastal traffic. This decline was almost entirely the result of reduced shipments of lumber, petroleum and petroleum products to the Atlantic seaboard of the United States through the Panama Canal. Total value of sales at retail of 114 department, apparel, and furniture stores was 1.7 per cent greater during 1928 than during 1927. Sales in Salt Lake City and Seattle showed the largest increases as compared with the previous year. Throughout the District stocks carried by merchants averaged lower and stock turnover averaged higher than in 1927. A decline in the proportion of cash sales to total sales was reported during 1928, the principal increase in credit transactions being in installment sales. The rate of collections on ordinary accounts improved during the year, and that on installment accounts averaged practically the same as in 1927. 12 FOURTEENTH ANNUAL REPORT Total value of sales at Wholesale, as reported to this Bank by 169 firms in eleven lines of trade, was two per cent larger during 1928 than during 1927, the large volume of business done during the last five months of 1928 being responsible for the increase over the year period. In Southern California the value of sales during 1928 approximated the figures of the preceding year, while sales in Northern California exhibited moderate increases and those in the rest of the District substantial increases as compared with 1927. Some lines of Avholesale trade during recent years have been adversely affected by the development of direct buying on the part of chain stores and direct selling on the part of factory branches, so that the figures reported to this Bank no longer afford a satisfactory current indication of changes in the total movement of goods from manufacturer to retailer. They do give an indication, however, of variations in the volume of business transacted by a large group of the trading community and are, therefore, still of considerable value in analyzing changes in the state of trade. INDEXES OF TRADE Twelfth Federal Reserve District (1923-1925 annual averasre = 100) Carloadings Total Merchandise and Miscellaneous Foreign Trade Total Imports* Exports Intercoastal Trade Total Eastbound Westbound Wholesale Trade Sales Agricultural Implements Automobile Supplies Automobile Tires Drugs Dry Goods Electrical Supplies Furniture Groceries Hardware Shoes Paper and Stationery Retail Trade—Department Stores Sales Los Angeles Oakland Salt Lake City San Francisco Seattle Spokane Stocks Automobile Sales—New Cars Total Passenger Commercial ^Excluding raw silk. 1928 114 117 1927 112 116 1926 112 113 1925 108 107 1924 96 99 1923 96 130 116 138 121 114 124 125 120 102 104 92 127 102 106 101 108 89 80 120 97 94 110 99 96 107 85 82 96 100 102 91 99 139 96 118 115 89 121 102 92 95 102 97 97 132 94 122 108 88 112 97 89 94 110 98 100 134 96 137 110 90 08 87 99 93 101 99 99 98 99 96 90 97 101 94 104 86 91 106 95 101 104 106 109 102 101 120 98 121 108 95 106 101 97 98 99 101 119 123 123 110 116 117 102 108 115 122 119 103 113 106 103 108 112 117 119 103 111 103 105 101 105 107 106 103 105 102 96 102 99 99 98 98 100 100 97 103 96 94 96 99 95 98 99 99 96 89 86 95 109 102 103 98 91 109 105 112 102 94 99 104 92 89 94 95 90 115 116 113 102 107 95 107 105 113 FEDERAL RESERVE BANK OF SAN FRANCISCO 13 Sales of new automobiles were large in volume during 1928, a reflection partly of improved business conditions, and partly of the active re-entry of the Ford Motor Company into the selling field. New car sales for the year were well above those of 1927, but only in Arizona did they surpass the high levels of 1926. Prices The general level of commodity prices was relatively stable during 1928, although wide fluctuations were recorded in the prices of many individual products. Changes in prices of commodities important in this District were, on the whole, favorable to producers, and total income of the agricultural, livestock, and industrial producing groups, combined, is estimated to have exceeded that of 1927. Prices for agricultural products generally moved upward during the early months of 1928. Quotations for farm produce reached a high point for the year in May. Except for the usual spring peak in lamb prices, livestock quotations tended to advance until early autumn. Among those producers who were, in general, favored by price changes during the year were the growers of oranges, lemons, and prunes. Groups whose aggregate income was adversely affected by price changes included the growers of wheat, potatoes, and grapes. A combination of changes in prices and production has resulted in generally satisfactory total income returns to other groups such as those producing apples, barley, and cotton. The total income of livestock producers in 1928 was well above that of 1927, as a result of the substantially higher average prices for livestock prevailing in the later year. Advances in prices of certain non-agricultural products of the District were reflected in improved operating conditions in the industries affected. In three of the most important of these industries—lumber, copper, and petroleum—significant price advances accompanied concerted efforts toward adjustment of output to existing demand. At the close of 1927 prices for softwood lumber, which makes up the bulk of the lumber output of this District, had declined sharply to levels quite unsatisfactory to producers. As a result of a moderately effective adjustment of output to consumption, prices started to advance early in 1928. Production increased during the second half of the year, but generally was kept within the limits of demand, and price advances continued. In December, 1928, the average price of softwood lumber was 15 per cent higher than at the beginning of the year, and was slightly above prices prevailing in mid-1927, the high point for that year. Efforts to effect stabilization and improvement in the copper industry were aided by a rapid expansion in demand for the metal during 1928. Increases in output could not keep pace with the rapidly mounting consumption, and the price of copper advanced from 14 cents to 16*4 cents per pound during the year. Crude oil producers of the District benefited from an upward revision of petroleum prices during 1928. Growth in demand for oil, centering upon the higher grades, was accompanied by price advances which, in some cases, amounted to 50 per cent between December, 1927, and December, 1928. Prices of lower grade or fuel oils did not share in these advances and, as stocks accumulated toward the close of the year, prices of some grades of oil were actually reduced. 14 FOURTEENTH ANNUAL REPORT The Credit Situation During 1928, financial transactions in the Twelfth Federal Reserve District were of record proportions. The volume of payments by bank check (debits to individual accounts) was greatly increased, and the rate of turnover or velocity of bank deposits subject to check was considerably higher than in other recent years. There was also a remarkable growth in activity on the stock exchanges of the District. Stocks with a market value of 4,302 million dollars were purchased and sold on the principal exchanges (San Francisco, Los Angeles, and Seattle) during 1928, an increase of 3f465 million dollars or 414 per cent as compared with the figure (837 jnillion dollars) for 1927. Bond transactions at these markets totaled 20 million dollars in 1928 compared with 18 million dollars in 1927. MILLIONS OF DOLLARS PER CENT eoo 1927 1928 1927 1928 MEMBER BANK CREDIT INTEREST RATES Monthly Averages of Weekly Figures of Reporting Member Banks in Nine Cities. Interest Rates Prevailing in San Francisco at Middle of Month. Commercial Paper — Average Rate on Prime Commercial Loans. Discount Rate—Federal Reserve Bank of San Francisco. Bankers'Acceptances — Dealers'Offering Rates on Prime 90-day Bills. Such evidences of increased financial operations generally accompany or are accompanied by an increased demand for credit at commercial banks, increased transfers of funds within and without the District, and an increased volume of check clearances through the Federal reserve check clearing system. These developments, in time, frequently lead to an increase in member bank borrowing at the Federal Reserve Bank. Developments in the credit situation during 1928 conformed to this general pattern. Demand for member bank credit was heavier than ever before and member bank loans and investments expanded almost continuously throughout the year. The volume of checks and of wire transfers of funds handled for banks of the District by the Federal Reserve Bank of San Francisco was the largest on record. Member bank borrowing at the Federal Reserve Bank of San Francisco averaged higher than in any year since 1921, a year during which a large part of the borrowing represented delayed liquidation of earlier loans rather than demand for funds needed for current business and financial operations. The demand for funds, both at member banks and at the Federal Reserve Bank of San Francisco, was heaviest during the later months of the year when the District's crops were being harvested and mar FEDERAL RESERVE BANK OF SAN FRANCISCO 15 keted, industry and trade were at the year's highest levels, and security markets were quite active with prices tending upward. There was a slight advance in interest rates during this period, and in November and December they averaged higher than at any time in recent years. The discount rate eof the Federal Reserve Bank of San Francisco was raised from 3y2 P r cent, the rate in effect since September, 1927, to 4 per cent on February 4,1928. On June 2, 1928, the discount rate was raised to 4% per cent, where it remained at the close of the year. General changes in the banking situation of the District during 1928 are shown in the accompanying charts and are discussed in some detail below. Except for temporary declines in March, July, and early August, total loans and investments of reporting member banks increased steadily during 1928. On December 19, they stood at the record figure of 1,971 million dollars, an increase of 185 million dollars or 10 per cent as compared with the 1927 peak figure of 1,786 million dollars reached on December 21, 1927. All important classes of loans and of investments showed increases over the year period. Investments were increased by 98 million dollars, or 18 per cent; loans on securities by 44 million dollars, or 13 per cent; and commercial loans by 43 million dollars, or 5 per cent. There was a relatively continuous growth in the member bank investment holdings throughout 1928. Total loans increased during the early months of the year, reflecting for the most part growth in the volume of loans on securities, and after some decline in late June and July continued to advance until the end of the year. The increase during the last half of 1928 represented further growth in loans on securities, and, particularly in December, an increase in loans for commercial purposes. Loans reached their highest point for the year between December 19 and 26, when the total volume of loans outstanding at reporting member banks approximated 1,314 million dollars. The volume of Federal Reserve Bank credit outstanding also moved sharply upward in 1928. During the first half of the year fluctuations in total bill and security holdings at the Federal Reserve Bank of San Francisco reflected quite closely changes in the amount of discounts for member banks—chiefly city member banks. Changes in Reserve Bank holdings of United States government securities (which declined) and of bankers' acceptances (which increased) largely offset one another during this period. During the second half of the year a sharp increase in Reserve Bank holdings of acceptances was the chief factor in the marked rise of total holdings of bills and securities which took place. The factors directly reflected in the discount record of the Reserve Bank during the year were member bank transfers of funds to and from other parts of the United States (chiefly New York), United States Treasury receipts and disbursements within the District, and changes in District demand for currency. There was a slight increase in the reserve requirements of member banks of the District during the year, but its net effect upon the demand for Reserve Bank credit was negligible. During January and February, 1928, the effect of heavy Treasury disbursements within the District and a seasonal reduction in demand for currency was more than offset by transfers of funds to other districts. The Reserve Bank's holdings of bills and securities rose from FOURTEENTH A N N U A L REPORT 96 million dollars on January 4 to 126 million dollars on March 7, chiefly as a result of increased borrowing by city member banks. From April to June there was a decline in the total of these bills and securities, due to the sale of 15 million dollars in United States government obligations by the Federal Reserve Bank. In June the record was distorted by an abnormal development in the credit situation. Sharp declines in security prices—-particularly bank stocks—during that month made it seem desirable for banks in California to increase their vault holdings of cash in anticipation of possible demands on the part of depositors. A rapid and temporary increase in the currency demand accordingly took place. Large transfers of funds into the District enabled the member banks to obtain this currency from the Reserve Bank and at the same time to reduce their borrowings from that bank. On June 30, 1928, discounts of the Reserve Bank totaled less than 17 million dollars, the lowest figure for the year. This latter reduction was also a temporary development arising in part out of the reluctance of member banks to show indebtedness to the Reserve Bank in their mid-year reports of condition. MILLIONS OF DOLLARS MILLIONS OF DOLLARS 140 TREASURY OPERATIONS ' DEMAND FOR CURRENCY AT RESERVE BANK TOTAL BILLS SECURITIES V \ U.S. SECURITIES BANK TRANSFERS OF FUNDS TO AND FROM OTHER DISTRICTS 1927 1928 PURCHASED 1927 ACCEPTANCES 1928 DEMAND FOR CREDIT—FEDERAL RESERVE BANK OF SAN FRANCISCO Changes Cumulated from April 1, 1927, in: 1. Demand for Currency at the Federal Reserve Bank of San Francisco. 2. Net Transfers of Funds through Gold Settlement Fund, Chiefly for Account of Member Banks. A Rise in the Curve Indicates Transfers to Other Districts; a Decline Indicates Receipts from Other Districts. 3. Net Treasury Receipts, or Disbursements Within the District. A Rise in the Curve Indicates Disbursements; a Decline Indicates Receipts. A Rise in any of the Curves Generally Results in Increased Demand for Reserve Bank Credit. Figures of Total Bills and Securities, Discounts, Purchased Acceptances, and United States Securities are Monthly Averages of Daily Figures. During July member banks returned the greater proportion of the currency withdrawn from the Federal Reserve Bank during June. This influence toward credit ease was more than counterbalanced by Treasury withdrawals of funds from member banks of the District and by a heavy flow of funds to other districts. Member bank borrowings from the Reserve Bank increased sharply. Funds continued to leave the District in large volume during August and early September and member bank borrowings at the Reserve Bank continued to expand, reaching a high point for the year (102 million dollars) FEDERAL RESERVE BANK OF SAN FRANCISCO 17 on September 4. At about this time the Federal Reserve Bank's buying rate on prime acceptances of Twelfth District member banks for bills with maturities of 90 days or less was reduced from 4 ^ to 4 ^ per cent. Member banks thereupon began selling acceptances to the Reserve Bank using the proceeds of such sales to reduce their direct borrowings. This situation continued throughout the remainder of the year, and Reserve Bank holdings of bills and securities fluctuated around the average level of September. As is usual during the final month of the year, the most striking feature of the credit statistics for December, 1928, was the increase in coin and currency in circulation. This year the increase in currency needs of the District, which apparently approximated 20 million dollars, was indirectly met by transfers of funds into the District rather than by borrowing at the Federal Reserve Bank of San Francisco. The total of these transfers was approximately 65 million dollars and, in addition to providing for holiday currency needs, they served to offset a Treasury withdrawal of 15 million dollars and to enable member banks to reduce their borrowings at the Reserve Bank by 35 million dollars. This latter movement was facilitated by Reserve Bank purchases of acceptances amounting to 9 million dollars. The extent of the various changes in the credit situation during 1928 is reflected in some degree in the comparative statement of condition of the Federal Reserve Bank of San Francisco which appears in the second section of this report. 18 FOURTEENTH ANNUAL REPORT PRINCIPAL OPERATIONS FEDERAL RESERVE BANK OF SAN FRANCISCO The following table presents in comparative form for the past three years the volume of the principal operations of the bank, which are of such character that they can be expressed in quantitative terms. 1928 1927 1926 Supplying Currency and Coin Currency Received and Counted: 111,583,000 116,612,000 123,437,000 Individual notes counted Dollar amount received and $881,019,000 $854,270,000 $880,097,000 counted Coin Received and Counted, a service previously performed largely by the Sub treasury, but now entirely in the hands of the Federal Reserve Bank: Number of coins handled in re79,311,000 109,252,000 115,675,000 ceiving and counting Dollar amount received and $42,428,000 $46,482,000 $26,484,000 counted Making Loans and Investments BillsDiscountedforMember Banks, either discounted customers' paper or advances against notes of member banks secured by collateral in the form of United States government securities or commercial or agricultural paper: 28,264 16,117 21,044 Number of bills discounted $5,488,828,000 $2,949,165,000 $2,418,031,000 Dollar amount * Bills Purchased for the Account of this Bank: 31 567 22,403 29,601 Number $343,586,000 Dollar amount $321,122,000 $337,467,000 Collecting Checks, Drafts, Notes, and Coupons Checks handled for collection for banks in all parts of the country: 74,822,000 79,903,000 77,395,000 Number of items $15,136,437,000 $14,310,906,000 $15,627,527,000 Dollar amount Collection Items handled, including drafts, notes, and coupons: 3,002,000 Number of items 2,161,000 2,850,000 $344,932,000 $364,992,000 $369,624,000 Dollar amount Supplementary Services United States Government Securities issued, redeemed, or exchanged, including government bonds, notes, and certificates of indebtedness: 345,000 Number of items 367,000 362,000 $218,985,000 Dollar amount $477,401,000 $560,781,000 Funds Transferred to and from all parts of the country for the Treasury Department and for member bunks: 140,000 153,000 145,000 Number of transfers Dollar amount $16,399,407,000 $14,998,311,000 $12,268,428,000 ^Includes paper discounted for Federal Intermediate Credit Banks at Berkeley, California, and Spokane, Washington, amounting to $5,902,000 in 1928; $9,197,000 in 1927, and $7,264,000 in 1926. FEDERAL RESERVE BANK OF SAN FRANCISCO 19 OPERATIONS OF THE FEDERAL RESERVE BANK OF SAN FRANCISCO DURING 1928 Eecords of the operation of the Federal Reserve Bank of San Francisco during the year 1928 reveal the same general trend toward an increase in the total volume of work carried on which has been noted during the past several years. This steady year to year growth in activity arises out of the character of the major routine functions which the bank performs. It is to be expected that, over long periods of time, the work of collecting checks, supplying currency and coin, and transferring funds will increase just as does the population of the country to which, in the last analysis, such increases are related. The credit granting function of the bank pursues a more varied course, the volume of work connected with this function changing with the fluctuating needs of the business and credit situation. During all of 1928 the amount of Federal reserve bank credit outstanding was relatively large, and in the last months of the year it was larger than at any time since 1921. The total aggregate dollar amount of bills discounted increased from $2,949,165,000 in 1927 to $5,488,828,000 in 1928, but most of the borrowing was for the account of the larger city banks and the number of discount transactions was considerably smaller than in other recent years. The cost of carrying on the work of the bank was approximately the same in 1928 as in 1927, despite the increased volume of work done in the later year. Earnings showed a substantial increase for the year period, as a result both of larger holdings of earning assets and of a higher rate of return on those assets. After providing for all expenses and charge-offs, the bank was able substantially to increase its surplus account. The bank enjoyed a continuance of its pleasant relations with its member banks during the year, and there was a marked increase in public interest in its operations and policies. Statement of Condition The main factors underlying changes in the condition statement of the Federal Reserve Bank of San Francisco during the year 1928 have been reviewed in the first section of this report. As a matter of record the December 31st statements of the past two years are presented below. The chance fluctuations of the year-end period seriously diminish the value of these statements for comparative statistical purposes, but changes in some of the items shown are not without significance. It is proper to call attention here to : 1. The decrease of 53 million dollars in gold reserves; 2. The increase of 45 million dollars in holdings of acceptances ; 3. The decrease of 29 million dollars in holdings of government securities; 4. The decrease of 7 million dollars in the amount of Federal reserve notes in circulation. 20 FOURTEENTH ANNUAL REPORT STATEMENT OF CONDITION Federal Reserve Bank of San Francisco EESOUECES Dec. 31, 1928 Cash Reserves held by this bank against its deposits and note circulation: Gold and Gold Certificates in vault $ 27,809,670.08 Dec. 31, 1927 $ 29,363,981.92 Gold in the Gold Settlement Fund lodged with the Treasurer of the United States for the purpose of settling current transactions between Federal Reserve Districts Gold Held by the Federal Reserve Agent as part of the collateral deposited by the bank when it obtains Federal Eeserve notes. This gold is lodged in his name partly in the vaults of the bank and partly with the Treasurer of the United States. . . 55,642,511.14 55,318,623.69 172,301,350.00 226,184,995.00 Gold Redemption Fund in the hands of the Treasurer of the United States to be used to redeem such Federal Eeserve notes as are presented to the Treasurer for redemption 3,926,954.66 1,874,596.23 Legal Tender Notes, Silver, and Silver Certificates in vaults of the bank (available as reserve against deposits only) 8,581,374.00 6,942,838.00 $268,261,859.88 $319,685,034.84 Total Cash Beserves Loans and Investments Loans to.Member Banks: On the security of obligations of the United States $ 15,042,900.00 By the discount of commercial or agricultural paper or acceptances 22,744,710.56 $ 985,200.00 4,234,629.79 Acceptances bought in the open market 59,306,392.86 13,842,131.91 United States Government bonds, notes, etc. 17,101,800.00 46,075,350.00 Federal Intermediate Credit Bank Debentures 250,000.00 —0— Total Loans and Investments (or Earning Assets) $114,445,803.42 $ 65,137,311.70 Uncollected Items Checks and Other Items not yet collected... $ 41,910,791.86 $ 41,483,934.81 Miscellaneous Resources Bank Premises $ 3,686,741.28 Non-Reserve Cash, consisting largely of National Bank notes and minor coin 3,868,312.39 All Other Miscellaneous Resources Total Miscellaneous Eesources TOTAL EESOURCES $ 3,373,761.51 4,456,751.99 436,973.26 834,339.51 $ 7,992,026.93 $ 8,664,853.01 $432,610,482.09 $434,971,134.36 21 FEDERAL RESERVE BANK OP SAN FRANCISCO LIABILITIES Currency in Circulation D e c 31 1928 Federal Reserve Notes in actual circulation, payable on demand. These notes are secured in full by gold and by discounted and purchased paper $169,000,093.00 Deposits Reserve Deposits maintained by member banks as legal reserves against the deposits of their customers Dec. 31, 1927 $176,399,835.00 183,779,426.90 189,268,430.42 United States Government Deposits 2,000,453.78 1,704,276.87 Other Deposits, including foreign deposits, deposits of non-member clearing banks, etc. 8,985,433.01 5,000,925.27 $194,765,313.69 $195,973,632.56 Deferred Availability Items Deferred Items, composed mostly of uncollected checks on banks in all parts of the country $ 39,638,356.55 $ 36,598,114.02 Miscellaneous Liabilities Reserves and AH Other Miscellaneous Liabilities 360,975.29 $ Capital and Surplus Capital Paid In, equal to 3 per cent of the capital and surplus of member banks $ 10,867,950.00 $ Total Deposits $ 68,116.51 9,302,150.00 17,977,793.56 16,629,286.27 Total Capital and Surplus $ 28,845,743.56 $ 25,931,436.27 TOTAL LIABILITIES $432,610,482.09 $434,971,134.36 Surplus as permitted by law Earnings and Expenses The marked increase in the use of Federal reserve bank credit during 1928 and the higher rates of interest borne by such funds resulted in a substantial advance in earnings of the Federal Reserve Bank of San Francisco. Gross earnings of the bank totaled $4,757,292, the largest earnings reported in any year since 1922. The detail of the earnings statement directly reflects the credit policy of the bank, as part of the Federal reserve system, during the year. A reduction in earnings on government paper, following upon the sale of government securities early in the year, was more than offset by increased earnings on loans to member banks. In addition, income from acceptance holdings, the purchase of which placed a large amount of Federal reserve bank credit in the market during the later months of 1928, was materially increased. The current expenses of the bank were approximately the same in 1928, as in the past six years. Deductions from earnings, other than those growing out of current bank operations, were considerably smaller in 1928 than in 1927. This was due chiefly to a decline in charge-offs on account of furniture and equipment, which were unusually large in 1927 as a result of the occupancy of the new Salt Lake City Branch building during that year. A smaller decline was reported in the item "cost of Federal reserve currency." This decline represented a reduction in the number of Federal reserve notes printed 22 FOURTEENTH ANNUAL REPORT during 1928, in anticipation of the circulation of the new smaller-sized currency during the latter half of 1929. With larger gross earnings and smaller deductions from earnings, net income of the bank increased from $1,055,423 in 1927 to $1,974,258 in 1928. The principal sources of earnings of the Federal Reserve Bank of San Francisco during 1928 and 1927, with an enumeration of the major classifications of operating expenses, and a statement of distribution of net income, are presented in the following table: INCOME AND DISBURSEMENTS Earnings On Loans to Banks and Paper Discounted for Them On Acceptances Purchased On United States G-overnment Owned Other Earnings 1928 1927 $2,696,668.69 1,175,042.47 $1,676,695.99 630,905.95 807,952.93 77,628.03 1,395,670.89 150,168.90 $4,757,292.12 $3,853,441.73 Obligations Total Earnings Deductions from Earnings For Current Bank Operation $2,258,911.03 For Assessments for Federal Reserve Board Expenses 50,339.54 For Federal Reserve Currency, mainly the cost of printing new notes to replace worn notes in circulation, and to replenish the stock unissued and on hand 101,303.49 For Furniture and Equipment 16,119.48 For Reserves for Depreciation 141,064.13 For Reserves for Probable Losses on advances to member banks 104,090.12 All Other 111,206.22 Total Deductions from Earnings $2,249,151.70 54,788.66 157,006.58 144,047.76 140,953.68 52,069.94 —0— $2,783,034.01 $2,798,018.32 NET INCOME available for dividends, additions to surplus, and payment to the United States Government $1,974,258.11 $1,055,423.41 Distribution of Net Income In Dividends Paid to Member Banks, at the rate of 6 per cent on paid-in capital $ 625,750.82 In Addition to Surplus—The bank is permitted by law to accumulate out of net earnings, after payment of dividends, a surplus amounting to 100 per cent of the subscribed capital; and after such surplus has been accumulated to pay into surplus each year 10 per cent of the net income remaining after paying dividends 1,348,507.29 In Payment to the United States Government, as a franchise tax representing the entire net income of the bank after paying dividends and making additions to surplus (as above). No balance remained for such payments in 1927 and 1928 —0— TOTAL NET INCOME DISTRIBUTED $1,974,258.11 $ 547,061.56 508,361.85 —0— $1,055,423.41 FEDERAL RESERVE BANK OF SAN FRANCISCO 23 Changes in Membership There were 627 active member banks in the Twelfth 'Federal Reserve District on December 31, 1928. A year earlier the active membership roll included 658 banks, two years earlier, 721 banks. On December 31, 1921, when membership was at its highest level, the number of active member banks was 837. As in other recent years, however, the decline in number of member banks during 1928 reflected chiefly a concentration of bank ownership through branch banking groups, rather than a widespread withdrawal of banks from CHANGES IN BANK MEMBERSHIP DURING THE YEAR 1928 (By Class of Bank) t Member Banks t Number ^ National State Total Active member banks—December 31,1927 Additions to Membership: Organizations of National banks Conversion of non-member banks to National banks Admission of State banks Eesumption following suspension Conversion within the System Succession between member banks of same class TOTAL ADDITIONS \ Resources (in thousands) 526 132 658 $3,937,939 10 ... 10 9,491 1 1 2 ... 1 275 4,009 1* ... 2 ... ... 1* ... 1 2 15 13 ( 1,597) t ( $ 342)t 13,775 Losses to Membership: Merger between member banks: Intraclass Interclass Voluntary liquidation Suspension or insolvency Absorption of member by non-member banks Conversion of member to non-member banks Withdrawal of State banks Conversion within the System Succession between member banks of same class TOTAL LOSSES Net Change Active member banks—December 31,1928 12 1 2 18 7§ 1* 41 ... ... ... 1 12 1 ... 3 ($16,912) t ( 2,457) t 3f 21 249,227 ... ... 1* 7 ... 1 5,811 ( 1,597 )t ... 1 ( 342)t 5 46 $ 258,492 —$244,717 —28 —3 —31 498 129 627 3,454 $4,057,37511 *Changes not affecting total number of member banks. t Changes not affecting total resources of member banks. ^Includes one bank which consolidated with a non-member bank which was subsequently admitted to membership and is included among "Admissions of State b a n k s . " ^Includes one bank which was succeeded by a non-member bank which was subsequently admitted to membership and is included among "Admissions of State banks.'' TfShows a gain of $119,436,000 during 1928. Gain of $364,153,000 due to increases in resources of member banks throughout year, partially offset by loss of $244,717,000 shown in table due to changes in bank membership. 24 FOURTEENTH ANNUAL REPORT the Federal reserve system and a consequent reduction of the banking resources which it represents. Thus, while less than half of all of the banks of the Twelfth Federal Reserve District are now members of the Federal reserve system, the resources of member banks are only a little less than three-fourths of the total resources of all banks in the District. Total resources of active member banks increased from $3,937,939,000 to $4,057,375,000 during the year 1928. Branch Banking and Chain Banking Branch banking developed during 1928 at much the same pace as in immediately preceding years. Thus far the McFadden-Pepper Act of February, 1927, which denned the branch banking powers of all member banks and curtailed the branch banking powers of State member banks, appears to have influenced the direction but not the rate of growth of branch banking. Reflecting this influence, the increase in number of branch banks in the Twelfth Federal Reserve District during 1928 was largely outside of the Federal reserve system. The most important and most numerous changes took place in California* where the development of branch banking, at least on a statewide scale, has exceeded that of any other State in the country. The accompanying table indicates the extent and the character of these changes during the year 1928. These year-end figures partially mask extensive changes in the distribution of branches, as between State and national banks, which occurred during the year. A merger and the nationalization of a State bank branch system increased the number of national bank branches, but these were in turn reduced by other mergers which served to build up a statewide non-member State bank branch system, having approximately 140 branches at the close of the year. This latter system represented the absorption, late in December, 1928, of a national bank with 35 branches by a non-member State bank *Among the states of the Twelfth Federal Eeserve District, Arizona and California permit the establishment of branches of banks both in and outside of the city of head office; Oregon and Washington now prohibit the establishment of branches, but permit existing branches to operate; and Idaho, Nevada, and Utah prohibit the establishment of branches and have none in operation. The distribution of branches in the District on December 31, 1928, was as follows: i Banks Operating Branches \ State Non Na- Mem-MemTotal tional ber ber Total , State Number of Banks Branches •, ,— Operated by > Located Mem- Non OutNaber Mem- in side tional State ber Home Home Banks Banks Banks City City Statewide branch banking permitted: Arizona 46 8 - .. 1 7 25 . . 11 14 . . 25 California 459 55 13 7 35 865 446 163 256 320 545 Establishment of branches prohibited—Operation of existing branches permitted: Oregon Washington 242 352 1 3 1 1 .. 1 .. 1 1 5 1 2 .. 2 .. 1 .. 2 1 3 FEDERAL RESERVE BANK OF SAN FRANCISCO 25 with about 100 branches, the non-member bank having previously taken over a number of national and State banks with their branches. At the close of the year 55 of the 459 banks of all classes in California were operating 865 branches, and these branch offices were 6£> per cent of the whole number of banking offices in the State. Not only from the standpoint of numbers, however, are the branch banks preponderant in California, but also from the standpoint of resources. Total resources of all banks in the State of California on December 31, 1928, were $4,323,855,000 of which $3,882,948,000 or 89.9 per cent was contributed by the 55 branch banking groups. Legislative restrictions upon branch banking during recent years seem to have stimulated interest in so-called chain banking. Chain banking, to quote the Annual Report of the Federal Reserve Board, "covers a wide range of association of banking institutions under single control exercised principally through stock ownership by an individual or group of individuals, or by a holding, or investment, or financing company, or in some instances by a bank either directly or indirectly through a subsidiary company. A characteristic of chain banking systems which differentiates them, in many cases, from branch banking systems, is found in the composition of the chain banking groups, which frequently embrace in the same chain both State and national institutions, and may also embrace institutions located in two or more states." Although there are a few large integrated branch and chain banking systems in California chain banking in the strictest sense of the BRANCH BANKS IN CALIFORNIA Number Number °' °' Banks Branches Date Doc. 31, 1927: State Banks—Member* Non-Member Total number of State banks having branches Total number of National banks having branchest Total Dec. 31, 1928: State Banks—Member* Non-Member Total number of State banks having branches Total number of National banks having branchest Total ' Total Resources 8 47 173 186 $ 859,438,000 666,191,000 55 359 $1,525,629,000 13 68 448 807 1,432,916,000 $2,958,545,000 7 35 163 256 $ 865,358,000 903,835,000 42 419 $1,769,193,000 13 446 1,559,755,000 55 865 $3,328,948,000 *Does not include one foreign branch of the American Trust Company, San Francisco. tlncludes Bank of California, N. A., San Francisco, California, with branches at Portland, Oregon, and Seattle and Tacoma, Washington. 26 FOURTEENTH ANNUAL REPORT term has developed most extensively in those states of the District— Idaho, Nevada, Oregon, Utah, and Washington, which restrict or prohibit the establishment of branch offices by banks. Member Bank and Public Relations The year 1928 was marked by a revival of public interest in the policies and affairs of the Federal reserve system, including the Federal Reserve Bank of San Francisco, and member bank and public relations assumed an added importance by reason of this fact. More frequent conferences were held with member banks, the number of invitations for officers of the Federal Reserve Bank to speak at public gatherings increased, and the printed reports of the bank were in greater demand than heretofore. As in the past, member bank and public relations work received the attention of the whole staff, and particularly of the official staff, of the bank. The bank examination program of the Federal Reserve Bank of San Francisco was not changed during the year, and the number and character of inquiries into the condition of member banks were about the same as in 1927. There were 25 independent credit investigations of national and State bank members compared with 22 in 1927, while 85 credit investigations were conducted concurrently with examinations by the national or State bank Examiners compared with 97 in 1927. A tabular summary of examinations and credit investigations made during the year 1928 follows: MEMBER BANK EXAMINATIONS Independent examinations (for admission) Examinations made concurrently with National and State Banking Departments 1 0 Independent credit investigations: State banks National banks 21 4 Concurrent credit investigations: With State examiners With National examiners 84* 1 TOTAL NUMBER OF EXAMINATIONS AND INVESTIGATIONS MADE Ill *Includes two special credit investigations of National banks at the time of their conversion into State banks, which were made in lieu of admission examinations. The Division of Analysis and Research of the Federal Reserve Agent's Office has continued and expanded its studies of current business conditions, and has made further progress with a series of investigations all having to do ultimately with the demand for and supply of credit in the Twelfth Federal Reserve District. The public results of this work have been destributed by means of a Monthly Review of Business Conditions, through various special reports, and by correspondence with banks, business concerns, and individuals. FEDERAL RESERVE BANK OF SAN FRANCISCO 27 Bank Organization and Personnel Two elections of directors of the Federal Eeserve Bank of San Francisco were held during the year. In May a special election was called among the banks of Group Three (those having a combined capital and surplus of less than $125,000) to choose a successor to Howard Whipple, who resigned upon becoming an officer of a nonmember bank early in the year. As a result of this election, Vernon H. Vawter, Cashier of the Jackson County Bank of Medford, Oregon, became a Class A director for Mr. Whipple's unexpired term ending December 31,1930. In December the regular annual election of directors was held. In this election the banks of Group One (those having a combined capital and surplus of $600,000 or more) re-elected C. K. Mclntosh, who is President of the Bank of California, N. A. of San Francisco, California, as a Class A director for a three-year term ending December 31, 1931. The banks of Group Three re-elected E. H. Cox, who is a lumberman of San Francisco and Madera, California, as a Class B director for a like term. The Federal Reserve Board at "Washington, D. C. reappointed Wm. Sproule, PresidentRetired and Director of the Southern Pacific Company, a Class C Director for the three years which end December 31, 1931. Isaac B. Newton, a Class C Director whose term expires December 31, 1929 was redesignated Chairman of the Board and Federal Reserve Agent to serve during the year 1929. Walton N. Moore, President of the Walton N. Moore Company of San Francisco was redesignated Deputy Chairman of the Board, to serve during the year 1929. To represent the Twelfth Federal Reserve District on the Federal Advisory Council during the year 1928, the Board of Directors selected F. L. Lipman, President of the Wells Fargo Bank and Union Trust Company of San Francisco, California.* The directorates at the five branches of the Federal Reserve Bank of San Francisco, with one exception, were not changed at the yearend. At the Salt Lake City Branch, G. G. Wright, who had served as a director of the branch for eight years prior to 1926, succeeded F. J. Hagenbarth, who had served since January 1, 1926. The following changes in the official staff of the bank took place during 1928: January 1—G. W. Relf, formerly accountant at Seattle Branch, was appointed Assistant Cashier, Seattle Branch. April 1—W. N. Ambrose, formerly Cashier at Head Office was transferred to Los Angeles as Managing Director of the branch. April 1—W. M. Hale, formerly Managing Director of the Los Angeles Branch, was transferred to Head Office as Cashier. Following is a comparative summary of the number of officers and employees in the principal departments of the bank, with corre*On January 3, 1929, Mr. Lipman was appointed to serve as the representative of the Twelfth Federal Eeserve District in the Federal Advisory Council for the year 1929. 28 FOURTEENTH ANNUAL REPORT sponding aggregate annual salaries paid on January 1, 1928 and January 1, 1929. (Figures are for Head Office and Branches combined) : PERSONNEL AND SALARIES Federal Reserve Bank of San Francisco (Including Branches) Number Jan. 1, Jan. 1, 1929 1928 OFFICERS Annual Salaries Jan. 1, Jan. 1, 1929 1928* 32 31 $ 252,500 $ 246,000 753 28 7 20 758 29 7 16 1,181,612 71,760 15,600 35,100 1,167,397 77,180 15,180 36,000 840 841 $1,556,572 $1,541,757 2. 2 4,320 4,260 23 25 27,388 27,923 865 868 $1,588,280 $1,573,940 4 1 EMPLOYEES BY DEPARTMENTS : Banking Department Federal Eeserve Agent's Department Auditing Department Fiscal Agency Department TOTAL FISCAL AGENCY DEPARTMENT EMPLOYEES (whose salaries are reimbursed by the United States Treasury Department) OTHER EMPLOYEES (whose salaries are reimbursed to the bank, including employees in the bank cafeteria and employees in building space rented to tenants) GRAND TOTAL TEMPORARY EMPLOYEES (not included above) 5,100 1,500 *Eevised. Los Angeles Branch Building In March, 1928, the Federal Reserve Bank of San Francisco acquired a site in Los Angeles, California, on which to erect a building for its Los Angeles Branch. The property is located at the northwest corner of Olive and Tenth Streets and its dimensions when street-widening projects now under way are completed, will be 100 x 160 feet. Plans for the proposed building have been in the course of preparation during the past year. At present, they contemplate a five-story structure 100 by 110 feet, leaving a lot 50 by 100 feet for future development. It is expected that building operations will commence early in 1929. NOTE Detailed statistical tables pertaining to the Twelfth Federal Reserve District and the Federal Reserve Bank of San Francisco will appear in the Annual Report of the Federal Reserve Board. Copies of the Board's report may be obtained, when published, from the Federal Reserve Board at Washington, D. C. TWELFTH FEDERAL RESERVE DISTRICT Includes the States of Arizona, except the Five Southeastern Counties, California, Idaho, Nevada, Oregon, Utah and Washington SAN FRANCISl K>0 MILES Map showing territory of Head Office and Branches of the Federal Reserve Bank of San Francisco