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Twenty-First Annual Report

Federal Reserve Bank
of San Francisco
For the Year Ended December 31, 1935

Federal Reserve Agent
Twelfth Federal Reserve District




Twenty-First Annual Report

Federal Reserve Bank
of San Francisco
For the Year Ended December 31, 1935

Federal Reserve Agent
Twelfth Federal Reserve District




DIRECTORS AND OFFICERS
OF THE

FEDERAL RESERVE BANK OF SAN FRANCISCO
January 1, 1936
Term
Expires
Dec. 31
1937

DIRECTORS
Class Group
A
1 C. K. MCINTOSH, San Francisco, California
President, The Bank of California, N. A., San Francisco,
California.
A

2

A

3

B

1

B

2

B
C
C

3

THOMAS H. RAMSAY, Red Bluff, California

-

-

-

-

President and General Manager, Pacific National Agricultural Credit Corporation, San Francisco, California.
KEITH POWELL, Salem, Oregon
President, Salem Federal Savings and Loan Association,
Salem, Oregon.
A. B. C. DOHRMANN, San Francisco, California Chairman of the Board, Dohrmann Commercial Company
and The Emporium Capwell Corporation, San Francisco,
California.
MALCOLM MCNAGHTEN, LOS Angeles, California

-

-

-

1936

1938

1936

President, Broadway Department Store, Inc., Los Angeles,
California.
ELMER H. COX, San Francisco and Madera, California
President, Madera Sugar Pine Company, Madera, California.
,
Chairman.
WALTON N. MOORE, San Francisco, California

1938

-

-

1937
1938
1936

Deputy Chairman,
President, Walton N. Moore Company, San Francisco, California.
C

ANDREW WELCH, San Francisco, California

-

1937

Chairman of Board, Welch and Company, San Francisco,
California.
MEMBER OF FEDERAL ADVISORY COUNCIL
M. A. ARNOLD,

President, Seattle-First National Bank,
Seattle, Washington
OFFICERS
JNO. U. CALKINS,

Chairman of the Board and
Federal Reserve Agent
S. G. SARGENT,
Assistant Federal Reserve Agent
and Secretary
OLIVER P. WHEELER,

Assistant Federal Reserve Agent

F. H. HOLMAN, General Auditor
R. T. HARDY, Auditor




Governor
W M A DAY

j

R A

Deputy Governor
QLERK
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
J. M. OSMER, Assistant Cashier
H. F. SLADE, Assistant Cashier
M. MCRITCHIE, Acting Assistant Cashier

DIRECTORS AND OFFICERS OF BRANCHES
January 1, 1936
SPOKANE BRANCH
Term

Expires

Directors

Dec. 31

D. L. DAVIS, Managing Director

STANLY A. EASTON,*

Chairman .

1937
1937
1936
1937
1936

*
R. M. HARDYf

.

N. A. TELYEAJ
D. L. DAVISf

.
.

Officers

.

FRED C. BOLD, Assistant Manager

A. J. DUMM, Assistant Cashier

SEATTLE BRANCH
Chairman .

1937
1937
1936
1937
1936

*
J. W. Maxwell f .
G. H. GREENWOOD!

C. R. SHAWf .

.

C. R. SHAW, Managing Director
B. A. RUSSELL, Assistant Manager
G. W. RELF, Assistant Cashier

PORTLAND BRANCH
HARRY M. HALLER,*

Chairman .

1937
1937
1936
1937
1936

*
RICHARD S. SMITH! .

E. B. MAcNAUGHTONf
R. B. WESTf . . .

R. B. WEST, Managing Director
S. A. MACEACHRON, Assistant Manager
J. P. BLANCHARD, Assistant Cashier

SALT LAKE CITY BRANCH
Chairman

1937
1937
1936
1937
1936

E. O. HOWARD f .

J. E. HALVERSONf
W . L. P A R T N E R ! .

W. L. PARTNER, Managing Director
W. M. SMOOT, Assistant Manager
W. M. SCOTT, Acting Assistant Cashier

LOS ANGELES BRANCH
Chairman .
*
VICTOR H. ROSSETTI!

C. E. BROUSEf

.

W. N. AMBROSE!

1937
1937
1936
1937
1936

W. N. AMBROSE, Managing Director
H. M. CRAFT, Assistant Manager
Jos. M. LEISNER, Assistant Manager
L. C. MEYER, Assistant Cashier

*Appointed by Board of Governors of the Federal Reserve System.
!Appointed by Federal Reserve Bank.



LETTER OF TRANSMITTAL

Federal Reserve Bank,
San Francisco, California,
May 8,1936.
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, 1935.
Yours respectfully,

Assistant Federal Reserve Agent.
Board of Governors of the
Federal Reserve System,
Washington, D. C.




TWENTY-FIRST ANNUAL REPORT
FEDERAL RESERVE AGENT
FEDERAL RESERVE BANK OF SAN FRANCISCO
Business activity in the Twelfth Federal Reserve District expanded
markedly during 1935, continuing the upward tendency noted during
most of 1934 and 1933. Measures of the value of industrial output,
building, factory payrolls, wholesale and retail trade, payments to
transportation agencies, corporate and individual income tax returns,
securities transactions, and agricultural income all showed increases
during the twelve-month period. Most volume measures of business
increased along with advances in prices and value. Factory employment averaged higher than in 1934 and available information indicates
that the number of persons employed by trade, financial, and public
utility companies increased. There is no adequate information on
changes in the number of persons unemployed.
The increased value of business was accompanied by a rise in the
value of checks drawn. The expansion in debits to bank deposits resulted in only a small increase in the average rate of turnover, because
deposits in district banks rose substantially during the period. Most
of the increase in deposits resulted from large disbursements by the
United States Treasury, partly from the proceeds of the sale of United
States Government obligations to banks in this district. Loans rose
during the last six months and showed a net gain for the year as a whole.
Part of the rise reflected loans extended under Title I of the Federal
Housing Act for repairs and alterations to homes and other buildings.
The number of banks operating in the district continued to decline
during 1935, reflecting principally an extension of branch banking
through acquisition of existing institutions which were converted to
branch offices.
Federal laws governing the Reserve Bank and commercial banks of
this district were amended extensively during 1935. Discussion of such
legislation will be found in issues of the Federal Reserve Bulletin and
also in the Twenty-second Annual Report of the Board of Governors
of the Federal Reserve System.
BANKING AND CREDIT
Changes in the condition of Twelfth District banks during 1935 were
largely the result of influences similar to those which had operated
during 1934 and most of 1933. As in the preceding year, United States
Treasury disbursements and Mint payments for gold tended to increase
reserves of member banks, but the 312 million dollars coming from
those sources during 1935 was largely offset by other transactions which
took funds from Twelfth District banks.



D

TWENTY-FIRST ANNUAL REPORT

The most important factor tending to increase bank reserves during
1935 was the payment into the district by the United States Treasury of larger amounts than were taken out in the form of taxes,
borrowings, and other revenues. Aggregate disbursements of the Treasury for normal and emergency activities in the TAvelfth District totaled
207 million dollars more than was collected (including receipts from
sales of securities) by the Treasury from the Twelfth District during
1935. Disbursements of the Treasury included payments for such
agencies as the Farm Credit Administration, Reconstruction Finance
Corporation, Home Owners' Loan Corporation, Public Works Administration, Works Progress Administration, Veterans' Administration,
Army, Navy, and Post Office, and other Federal Government departments and independent offices. These disbursements were made to individuals, corporations, and other agencies, largely by checks drawn upon
the Treasurer's account at the Reserve Bank. The checks were deposited
principally in member banks throughout the district, and upon presentation at the Reserve Bank were credited to the reserve balances of
those banks. To the extent that the payments exceeded local collections
of the Federal Treasury, they resulted in an addition to deposit liabilities of Twelfth District banks. At the same time, they provided funds
which banks used to purchase investments (largely Government securities), to increase their balances at the Reserve Bank, to meet net
payments to other districts arising from commercial transactions, and
for other purposes.
Another important source of funds which built up reserve deposits
of banks, as well as deposits of their customers, was the production, importation, and reclamation of gold. Sales of such gold to the Mint and
MILLIONS OF DOLLARS
TRE> SURY

OPERA T1ONS
\

/

800

\

/

y

400

\

r

^ .

n
000
SOLD P ROOUC

noN.E'
^-

500

J

0

\

/

INTE RDIST »ICT CLEARI MGS

—
1929

1930

1931

1932

1933

1934

1935

1929

1930

1931

1932

1933

1934

1935

PRINCIPAL FACTORS AFFECTING BANK RESERVES-Twelfth District
(Changes cumulated from January 2, 1929)
Treasury operations—Net excess of United States Treasury disbursements over collections in
the Twelfth District.
Gold production, etc.—Twelfth District production.net imports, and gold reclaimed from secondary sources.
Inter-district clearings—Net movement of funds out of the Twelfth District in connection with
commercial andfinancialtransactions.



FEDERAL RESERVE BANK OF SAN FRANCISCO

7

its agencies were valued at 105 million dollars during the year. Of this
total, gold valued at 15 million dollars was imported from foreign
countries, 85 million dollars was newly mined in the United States and
possessions, and 5 million dollars was reclaimed from secondary sources.
The proceeds from these sales were deposited in district banks, thus
increasing deposits and reserve balances in the same manner as did
Treasury disbursements.
MILLIONS OF DOLLARS
350

RESERVE BALANCES OF MEMBER BANKS—Twelfth District
Figures of required reserves are charted only since July 1932. Prior to that time, reserve balances
corresponded closely with reserve requirements.

The most important factor taking funds from district banks during
the year was the use of local bank deposits to meet a net balance of
payments due to other regions because of commercial and financial
transactions. Total value of goods, investments, and insurance and
other services purchased by the Twelfth District from other areas was,
as has been customary for many years, much larger than sales of such
goods and services by the Twelfth District to outside regions. As a
result, local banks in 1935 were drawn upon by depositors to pay other
districts considerably larger sums than were received from outside districts in settlement of these transactions. In addition, banks purchased
in outside districts more securities for their own accounts than were
sold. The net movement of funds out of the Twelfth District because of
these inter-district clearances was 259 million dollars. Local banks were
also called upon to meet a net increase of 20 million dollars in public demand for currency for circulation. Other factors which add to or take
from district banking reserves were of minor influence during 1935,



8

TWENTY-FIRST ANNUAL REPORT

and the increase in member bank reserve balances amounted to 32
million dollars.
This increase of 32 million dollars in reserve balances of Twelfth
District members was distributed among banks throughout the district.
In the closing month of the year, city banks held reserves averaging
CHANGES IN FACTORS AFFECTING RESERVE DEPOSITS OF
MEMBER BANKS

TWELFTH DISTRICT

January 1 to December 31, 1935

Transactions Which Increased Reserves
United States Treasury Operations
This figure shows the net amount by which Federal Government disbursements in the district exceeded collections during the year, thus adding to reserve funds and to deposit
liabilities of district banks.
G-old Purchases by United States Mint
This figure shows the amount that the Mint paid out to
individuals and business houses because of its purchases of
newly mined, imported, and reclaimed gold. This payment,
like United States Treasury operations, added to reserve
funds and to deposit liabilities of district banks.
Reserve Bank Credit
This figure shows the amount of increase in Eeserve Bank
credit extended directly to the Twelfth District. Discounts
and open market investments purchased in the Twelfth District declined during the year, but credit extended to banks
for checks upon which collection had not been completed
increased slightly.

(Millions of
dollars)

207

105

TOTAL TRANSACTIONS INCREASING MEMBER BANK EESERVES. . .

Transactions Which Decreased Reserves
Inter-district Payments
This figure shows the net amount of funds paid to other districts in settlement of commercial and financial transactions.
The resulting decrease in reserve funds of banks was offset
by decreased deposit liabilities of banks, or in the cases
where banks transferred funds to purchase securities for
their own accounts, in additional investments of banks.
Demand for Currency
This figure shows the amount by which vault cash holdings
of banks and public holdings of currency increased. This
was accomplished through banks withdrawing part of their
deposits at the Eeserve Bank in the form of currency.
Other Federal Eeserve Accounts
This shows the increase in nonmember bank and other miscellaneous Eeserve Bank accounts which withdrew funds
from the banking structure.
TOTAL TRANSACTIONS DECREASING MEMBER BANK EESERVES. . .

Member Bank Reserve Deposits at Federal Reserve
Bank of San Francisco Increased



314

259

20

3

282

32

FEDERAL RESERVE BANK OF SAN FRANCISCO

9

47 percent in excess of the legal requirement, and country banks had
reserve balances 75 percent in excess of their legal requirements. These
excess reserves did not include any of the balances carried with correspondent banks in eastern money markets, although considerable parts
of such balances were in excess of needs for usual banking purposes and
at the option of the member banks could be used to build up balances
at the Reserve Bank. Of the 350 member banks in the district, nearly all
had a substantial margin of excess reserves. Borrowings from the Federal Reserve Bank during the year were negligible.
MILLIONS OF DOLLARS
1800

1930

1831

1932

1933

1934

DEPOSITS OF MEMBER BANKS—Twelfth District

The moderate increase in reserve balances with the Federal Reserve
Bank of San Francisco was only one of several significant changes in
balance sheet items of Twelfth District member banks during 1935. Deposits of those banks increased 429 million dollars during the year. As
is shown in the chart on this page, both demand and savings deposits
shared in the increase, the largest expansion having been in demand
deposits. Time deposits other than savings also increased somewhat
during the year, despite the fact that large amounts of postal savings
funds (classified as time deposits) were returned to the United States
Treasurer by banks no longer willing or able to pay the mandatory
percent interest rate thereon.



10

TWENTY-FIRST ANNUAL REPORT

The growth in bank deposits during the year was a result of gains
in funds because of a number of factors. As stated before, when the
United States Treasury paid funds to individuals, businesses, and
others, the checks (drawn upon the Treasurer's account at the Reserve
Bank) were ultimately deposited in banks, thus increasing deposit
liabilities of the banks. Payment of 105 million dollars for gold purchased by the Mint also acted to build up deposits. Loans of member
banks expanded by 68 million dollars, net, during 1935, the proceeds
of such loans entering banks as additional deposits. Investments of
banks also increased substantially during the year, the rise in such investments being reflected in larger deposits.
Expansion of 68 million dollars in total loans of member banks was
a net result of a variety of changes in types of loans made. Loans on
securities declined 32 million dollars, advances both to brokers and to
other customers having been reduced. Total loans on real estate declined 8 million dollars during the year, a decrease of about 1 percent.
This decrease resulted from repayments of principal on outstanding
loans, from transfer of some real estate loans to the Home Owners'
Loan Corporation and the Farm Credit Administration, from foreclosures, and from write-down of loans which had declined in value.
MILLIONS OF DOLLARS

TOTAL LOANS AND INVESTMENTS OF MEMBER BANKS-Twelfth District
(Classified by types)



FEDERAL RESERVE BANK OF SAN FRANCISCO

11

A substantial volume of new loans on real estate was made during the
year, partly under Title II of the Federal Housing Act. Those loans
were largely to finance new construction and, in addition, banks participated in financing increased building by loans for alterations and
repairs to existing structures under Title I of the Federal Housing Act.
The latter type of advance is not classified as a real estate loan. It
was loans of this type, in fact, which accounted for a substantial portion
of the expansion of 105 million dollars in "other" loans of member
banks during the year. The increase in "other" loans also included
considerable expansion in commercial borrowing.
In connection with the real estate market, banks found it practicable
to dispose of some of the properties that had been acquired through
foreclosure or deed in earlier years. At least partly because of this
condition, a net decrease of about 2 million dollars or 5 percent was
shown during the year in '' other real estate owned''.
Total investments of member banks increased 221 million dollars
during the year. This represented largely acquisition of direct and
guaranteed obligations of the United States Government, but some
increase was also shown in holdings of other securities.
Another significant change in the consolidated balance sheet of
Twelfth District banks during 1935 was the elimination of liability for
circulating notes of national banks. At the beginning of the year,
Twelfth District national banks had a note liability of 121 million
dollars, 18.5 percent of note liability of all national banks in the United
States. Bonds having the permanent note circulation privilege were
called for redemption in July and August, while the temporary circulation privilege accorded several issues of low interest coupon bonds
expired by law on July 22, 1935. As a result of elimination of all
collateral for circulating notes, banks found it necessary to deposit
with the Treasurer of the United States sufficient funds to retire their
liability for such notes which, in turn, became obligations of the Treasury. The net result of the retirement of national bank notes upon
reserves of banks was negligible. In effect, banks holding Consols and
Panama Canal bonds turned these in to the Treasury and were relieved
of liability for an equal dollar value of notes. The principal element
of change existed in the return to those banks of the 5 percent lawful
money redemption fund deposited with the Treasury, a factor which
tended to increase member bank reserve balances. This exchange did
not balance out for all banks, since some held called bonds in excess of
their note circulation and thus received a net payment from the Treasury. Other banks had notes outstanding secured by bonds which were
not called but which lost the circulation privilege on July 22, and those
banks were called upon to make a net payment to the Treasury.
After August 1, 1935, both fit and unfit national bank notes were
withdrawn from circulation as rapidly as they were received at the
Reserve Bank. During the year, a total of 64 million dollars of national
bank notes was retired from actual circulation at this bank. Other types
of currency placed in circulation during the year totaled more than
the national bank notes retired.
Rates of interest charged by banks as well as rates paid upon savings
deposits declined further during 1935. The decrease in rates charged



12

TWENTY-FIRST ANNUAL. REPORT

customers may be explained by the large amount of idle bank reserves
seeking employment. The decline in rates paid on savings was a result
of the same factor—banks did not need to bid for deposits by paying
higher rates, and, with gross earnings declining, they found it desirable
or necessary to reduce this item of expense. The rate of interest that
may be paid upon time deposits by member banks is limited by regulations of the Board of Governors of the Federal Reserve System. Effective February 1, 1935, the Board reduced the maximum rate permitted
upon all classes of time deposits from 3 percent to 2 ^ percent per
annum, compounded quarterly. The prevailing rate upon savings deposits in leading Twelfth District cities was 2y2 percent prior to that
reduction. In the second half of the year, a rate of 2 percent prevailed
upon savings deposits, although in some cases l1^ percent was the
maximum and in a few instances, 2% percent was paid. The Banking
Act of 1935 directs the Federal Deposit Insurance Corporation to limit
the rate of interest that may be paid upon time and savings deposits
in insured banks which are not members of the Federal Reserve System.
A regulation of the Federal Deposit Insurance Corporation adopting
the same maximum as that in the regulation of the Board of Governors
was issued late in 1935, to become effective February 1, 1936.
The discount rate of the Federal Reserve Bank of San Francisco was
2 percent throughout 1935.
LICENSED BANKS IN OPERATION
,
Member Banks >
Number
Assets
(000 omitted)

Arizona . . .
California .
Idaho
Nevada . ..
Oregon . . . .
Utah
Washington
Twelfth
District . . .
Arizona . . .
California .
Idaho
Nevada . . .
Oregon . . .
Utah
Washington
Twelfth
District . . .

TWELFTH DISTRICT

Nonmember Banks*
Assetst
Number

December 31,
$ 29,220
3
134
3,286,255
28
61,007

6
59
32
94

17,963
211,824
113,473
359,613

26
111

379

$4,079,355

352

$662,928

84

$ 42,799
3,550,334
69,962
23,155
234,633
125,812
389,316

350

$4,436,011

6

139
33

6
50
32

(000 omitted)

1934

$ 7,695
476,872
17,688
3,849
29,972
26,152
100,700

7
146
35

,
All Banks*—
Assetst
Number

(000 omitted)

4
46

December 31, 1935
3
$ 8,219
132
502,588
27
20,841
4
4,850
48
34,766
27
28,154
104
108,119
345

$707,537

10
280
63
10
105
205

$ 36,915
3,763,127
78,695
21,812
241,796
139,625
460,313

731

$4,742,283

58

188

51,018
4,052,922
90,803
28,005
269,399
153,966
497,435

695

$5,143,548

9

271
60
10
98

59

$

* Includes mutual savings banks and trust companies.
t Includes corporate assets of trust companies, but not trust funds held by
them in fiduciary capacity.



FEDERAL RESERVE BANK OF SAN FRANCISCO

13

Changes in Banks and System Membership

A substantial reduction in the number of banks in the Twelfth District took place during 1935, the number of licensed institutions decreasing from 731 at the beginning of the year to 695 at the end. During
1934, the number of licensed banks had declined from 733 to 731, consolidation and liquidation of operating banks during that year having
been largely offset by granting of licenses to other banks which, on
January 1, 1934, were still on a restricted basis as a result of action
taken at the time of the banking holiday in 1933 or shortly thereafter.
During 1935, some reduction in the number of banks occurred in each
state of the district except Nevada. The largest reduction came in
Washington, where two banks increased the number of their branches
considerably by acquiring other banks. Substantial declines in the
number of bank charters also took place in Oregon and California
because of mergers. Several banks went into voluntary liquidation
during the year. Except for the closing of the San Francisco Branch
of the Bank of Canton, Ltd., of Hong Kong, no bank suspension
occurred in the Twelfth District during 1935, although one bank in
Utah was placed in liquidation by supervisory authorities. Liquidation
of that bank did not affect the number of licensed banks since it was
restricted at the beginning of the year. A reduction from 1,652 to 1,641
in the total number of district banking offices, including branches, was
recorded during the year. This reduction came almost entirely in California, where both the number of banks and the number of branches
declined.
CHANGES IN BANK MEMBERSHIP DURING 19 3 5
i

TWELFTH DISTRICT

Number

—
»

/—Assets—>,

National

Member Banks, December 31, 1934
Unrestricted
Restricted
Additions to Membership:
Absorption of nonmember banks by
member banks
Losses to Membership:
Mergers between member banks
Suspension**
Voluntary liquidation
TOTAL LOSSKS

Member Banks, December 31, 1935

State

Total

(000 omitted)

300
299
1

80
80
..

380
379
1

$4,079,945
4,079,355
590

8*

..

8*

2,360

25
1
2

2
..
..

27
1
2

84,991t
590
446

28

2

30

1,036

272

78

350

$4,436,011

* Does not affect total number of member banks,
t Does not affect total resources of member banks.
** Represented final disposition of bank that was unlicensed January 1, 1935.

Most of the reduction in the number of district banks came among
members of the Federal Reserve System, inasmuch as member branch
banks showed most expansion during the year and most of the banks
which they took over in the process were members at the time of con


14

TWENTY-FIRST ANNUAL REPORT

solidation. The number of members on December 31, 1935 was 350,
by far the lowest number in any year since the System was organized
in 1914. Although the number of members decreased considerably during 1935, that did not represent any contraction in the portion of
banking resources in the Reserve System in this region. In fact, more
than 86 percent of district bank assets was in member banks at the end
of 1935, a slightly higher proportion than at any previous time. Total
assets of all district banks increased from $4,742,283,000 on December 31,1934 to $5,143,548,000 on December 31, 1935.
Branch Banking
Both the number of banks operating branches and the number of
branches in the Twelfth District increased during 1935. Although all
states of the district except California showed some increase in the
number of branches, the largest expansion came in Washington and
Oregon. For the most part, extension of branch systems was accomplished by conversion of existing banks into branches, although new
offices were authorized in a number of locations. One important new
branch banking system came into existence, the result of development
of a regional branch system by a national bank in the State of Washington through absorption of previously affiliated country banks.
Extension of branch banking during 1935, as in 1934 and 1933, was
in sharp contrast with the competitive buying of banks and opening of
branches that marked much of the rapid growth in the number of
branches in California prior to 1929. In those earlier years, California
and Arizona were the only district states that permitted statewide
branch banking, and the spectacular expansion occurred entirely in
California. By 1929, the period of rapid growth in number of branches
had come to an end, and in that year there was a tendency to consolidate
or close offices when that could be done without depriving a community
of essential banking facilities or weakening a competitive position.
This tendency continued during 1930, 1931, and 1932, and in those
years there was a moderate net decrease in the number of branches,
closing and consolidation of offices having exceeded the number of new
branches established.
With passage of legislation in 1933 authorizing branch banking in
each Twelfth District state which had formerly not permitted it, a
new period of expansion developed. During these recent years, however, branch systems have been developed primarily on the basis of
needs of communities and prospects of profitable operation of each
branch, rather than for the purpose of obtaining competitive locations,
as was frequently the case prior to 1929.
Aside from a change in attitude on the part of bankers, additional
safeguards against unsound extension of branch banking have been
provided by the Banking Act of 1935. Prior to passage of that Act in
August 1935, establishment of branches by national banks and by state
bank members of the Federal Reserve System was subject to approval
of Federal supervisory authorities. For state members, such approval
was, of course, in addition to requirements that might be imposed by
state authorities. Since passage of the Banking Act of 1935, establishment of branches of nonmember banks insured by the Federal Deposit



FEDERAL RESERVE BANK OF SAN FRANCISCO

15

Insurance Corporation is subject to the approval of that organization.
The establishment of branches, therefore, by these three classes of
banks is, by Federal law, subject to approval of Federal supervisory
authorities as follows:
a. National banks must obtain the approval of the Comptroller of the
Currency for establishment of any branch.
b. State banks which are members of the Federal Reserve System
must obtain the approval of the Board of Governors of the Federal Reserve System for establishment of any branch, as well as
permission of state chartering1 authorities.
c. State banks which are not members of the Federal Reserve System
but which belong to the Federal Deposit Insurance Corporation
must obtain the consent of that organization before establishing
any branch, in addition to complying with requirements of state
chartering authorities.
BRANCH BANKS IN OPERATION

TWELFTH DISTRICT

Branches Banks Operating
Operated by > Located
\
f
Branches
State NonOutN
No, of
Na- State NonNa- Mem- mem- In
side
Licensed
tional Mem- memtional ber ber Home Home
Banks Total Banks ber ber Total Banks Banks Banks City City
,

State

December 31, 1934

Arizona*
California
Idaho
Nevada

10
280
63
10

Oregon
Utah
Washington
Total

2
40
4
2

0
12
2
2

1
8
1
0

1
17
0
20 804$ 602
1
25r
9
0
5
5

105
58

3
3

2
3

0
0

1
0

205

8

4

2

2

731

62

25

12

25

13
156
14r
0

4
46
2
0

0
17
255 549
Or 25
1
4

30 29
9r 9r

0
0

1
0

11 19
lr 8

31

6

2

13

921r 677r 189r

55

23

18

281r 640

December 31, 1935

Arizona*
California
Idaho
Nevada
Oregon
Utah

9
271
60
10
98
59

3
39
5
2
3
4

2
11
3
2
2
3

0
8
1
0
0
0

Washington

188

8

5

1

2

44

37

5

2

14

30

695

64

28

10

26

946

734

155

57

272

674

Total

1 19 15
0
4
0 19
20 798* 615 136 47 245 553
1 26 10 14
2
0 26
0
7
7
0
0
1 6
1 42 41
0
1 11 31
1 10
9
0
1
1 9

No unlicensed banks had branches at the end of 1934 or 1935.
*Figures for Arizona do not include banks located in Eleventh Federal Reserve
District, and do not include one Twelfth District branch of a nonmember state
bank with home office located in Eleventh District. Figures for 1934 include 3
and figures for 1935 include 4 Eleventh District branches of a member bank with
home office and 10 branches located in Twelfth District. {Includes Portland,
Tacoma, and Seattle branches of Bank of California National Association, San
Francisco. Does not include London Branch of Bank of America National Trust
and Savings Association, San Francisco, r Revised.



16

TWENTY-FIRST ANNUAL REPORT

This recent legislation results for the first time in Federal supervisory agencies having effective authority over the development of
branch banking, since nearly all banks are members of the Federal
Deposit Insurance Corporation. The wide authority of Federal supervisory bodies which have common objectives for sound development
of branch banking provides a means for avoiding in other states the
rapid competitive development of branch banking which took place in
California during several years prior to 1929.
By the close of 1935, branch banking had progressed to a point
where more than half of total bank assets in each Twelfth District state
except Utah were in branch institutions. In the district as a whole, 78
percent of assets of all banks, including mutual savings banks, were in
branch institutions. The greatest proportionate increase during the
year was shown in Arizona, but all states except Utah recorded some
increase.
BRANCH BANK ASSETS

TWELFTH DISTRICT

(000 omitted)
National

Arizona
California
Idaho
Nevada
Oregon
Utah
Washington

$
2,171,178
14,640
13,339
156,849
46,107
171,808

Twelfth District... $2,573,921

State
Member

Nonmember
December 31, 1934

All
Branch
Banks

Ratio Branch
Bank Assets
to all Bank
Assets

48.5
83.3
50.2
61.2
65.3
33.0
47.2

41,866

3,525

17,886
3,133,607
39,531
13,339
157,890
46,107
217,199

$700,276

$351,362

$3,625,559

76.5
77.2
83.6
51.0
64.1
69.3
32.8
52.7
77.6

$ 15,352
620,784
22,274

$ 2,534
341,645
2,617
1,041

December 31, 1935

Arizona
California
Idaho
Nevada
Oregon
Utah
Washington

$

35,773
2,344,625
17,905
17,944
185,398
49,278
240,808

Twelfth District... $2,891,731

688,039
25,506

$

3,620
355,322
2,941

18,732

1,197
1,214
3,691

$ 39,393
3,387,986
46,352
17,944
186,595
50,492
263,231

$732,277

$367,985

$3,991,993

A net reduction during 1935 from 804 to 798 in the number of
branches in California resulted from consolidation of branches, principally of home city offices, to eliminate unnecessary duplications of
banking service. The tendency to consolidate offices was most evident in
the San Francisco Bay Region, although it also occurred to a small
extent in other parts of the State. During the same period, a number
of branches were added to existing systems, partly by taking over
other banks and partly by opening new offices. One national bank in
California which had been a local system prior to December 1934 extended its branches to a number of cities throughout northern California by acquiring previously affiliated banks.



FEDERAL RESERVE BANK OF SAN FRANCISCO

17

SECURITIES MARKETS
Trading- on Pacific Coast stock exchanges increased materially during 1935. Price averages of Pacific Coast stocks fluctuated within a
narrow range during the first three months of 1935 but advanced
steadily throughout the rest of the year, showing gains of 70 to 100
percent. The greatest advances took place in machinery, store, and
utility shares, while oil and bank stocks advanced least.
Prices of higher grade bonds of Pacific Coast corporations advanced
five to ten points during 1935. Bonds having more speculative attractions showed greater gains, an average of 123 bonds rising twenty
points. Municipal bond prices reached the highest levels of many years,
yields declining more than ^ percent.
New Pacific Coast securities distributed during 1935 totaled about
$450,000,000. Of this total $70,000,000 represented municipal bonds.
Corporate issues were mainly public utility refundings. New capital
issues for private undertakings were comparatively small in amount.
Securities Exchange Act and Regulation T
Continuing the activities begun in October 1934, the Federal Reserve
Agent's Department received numerous inquiries as to the interpretation and operation of Regulation T issued in accordance with the
Securities Exchange Act of 1934 for the purpose of governing the
extension and maintenance of credit by members of national securities
exchanges and brokers and dealers transacting a business in securities
through such members.
In September and October 1935, there was inaugurated a system of
monthly reports from Twelfth District members of the New York Stock
Exchange, San Francisco Stock Exchange, Los Angeles Stock Exchange, and San Francisco Curb Exchange. In conjunction with
similar reports from other districts, these are primarily for the purpose
of ascertaining the amount of credit extended by brokers and dealers
to their customers.
INDUSTRY, TRADE, EMPLOYMENT
Expansion in Twelfth District industrial production during 1935
was somewhat broader than in either of the two preceding years. In
general, changes in total output of industry in this district were similar
to changes in the country as a whole.
One of the most outstanding developments in the district during
1935, as in the remainder of the United States, was a marked increase
in residential building. Expansion in building of homes was practically continuous throughout the year, as is shown upon the accompanying chart, and was extended throughout the district. Most of the buildings were single-family dwellings. Total value of residential construction was larger than in any year since 1931, although it was well below
annual totals recorded from 1922 through 1929. Some tendency for
rents on dwellings to advance was indicated by indexes of the United
States Bureau of Labor Statistics and by nonstatistical reports, a



18

TWENTY-FIRST ANNUAL REPORT

factor pointing to greater demand for housing1 facilities. Insured
mortgages issued under Title II of the Federal Housing Act, as well
as customary mortgages of real estate loan institutions were used extensively in the financing of new home construction during 1935.

/s
/ 's
• — ,

/
/

\

/
/

\

\

VALUE OF RESIDENTIAL BUILDING PERMITS—Twelfth District
Based upon figures for 11 cities. Annual indexes 1920 to 1932; monthly indexes 1933 to date.
(1923-1925 average=100)

The expansion in residential building, in the district and elsewhere,
together with increases in the manufacture of boxes and crates and
in railroad maintenance and equipment expenditures, contributed directly to improvement in the Twelfth District lumber industry. Volume
of lumber output was 10 percent larger in 1935 than in 1934, notwithstanding temporary curtailment in the important Douglas fir region
during May and June because of a protracted strike of loggers and
mill workers. Lumber shipments were about equal to production during
the year, and as a consequence mill inventories of finished lumber
remained at the relatively low levels that existed at the beginning of
1935. Gross income of the Twelfth District lumber industry increased
considerably during 1935. This was entirely a result of the larger volume of lumber sold, since prices for the industry as a whole averaged
about the same as in 1934.
Contracts for public works construction expanded in the last half
of 1935, but during the year as a whole totaled somewhat lower than
in 1934, when a number of large projects were started. Cement production, closely related to changes in heavy construction, also1 advanced
during the latter part of the year, but averaged lower in 1935 than
in 1934.
Mining and development work on nonferrous metals properties was
more active than in 1934, and smelting of ores increased. Operations
were stimulated by advances in the Federal Government buying price
for newly mined silver, and by increases in demand for copper, lead,
and zinc. An influence contributing to the increase for the year as a
whole was the larger output of mines that had first been brought into
production in 1934. Petroleum output averaged 18 percent higher during 1935 than in 1934, increases in production having followed removal



19

FEDERAL RESERVE BANK OF SAN FRANCISCO

in June of the restraints imposed by the National Recovery Administration petroleum code. Tin can factories and steel works and rolling mills
in the district also operated at a somewhat higher rate in 1935 than in
1934. Motion picture studios were reported to have produced at record
levels during the year. Output of automobile assembly plants was
considerably larger in 1935 than in 1934, judging from increases in the
number of workers employed in that industry.
With the exception of livestock slaughter, most district food industries were more active in 1935 than in 1934. Livestock slaughter
was 20 percent lower than in 1934 when totals were increased by large
receipts of animals from drought-stricken areas.
PER CENT
ISO

j

V

"

r

/

1921

\

1922

1930

-V-

\

1931

1932

1933

1934

1835

VOLUME OF INDUSTRIAL PRODUCTION—Twelfth District
Index adjusted for seasonal variation (1923-1925 average 100)

Although the number of persons employed in manufacturing averaged only slightly higher in 1935 than in 1934, available statistics indicate that pay rolls in manufacturing industries increased 10 to 15 percent as a result of larger earnings per employee. No adequate statistical
data are available concerning employment in this district in nonmanufacturing establishments. A substantial increase occurred during the
second half of the year in employment on projects under the Federal
Works Progress Administration.
The volume and value of trade in the Twelfth District expanded
further during 1935. Retail trade, as reflected in sales of department,
apparel, specialty, and furniture stores expanded throughout the district. Particularly sharp increases occurred in the sales of new passenger automobiles and commercial vehicles. Wholesale trade also was
higher in 1935 than in 1934. Railway freight traffic averaged considerably higher than in 1934, notwithstanding a temporary reduction
in lumber shipments during May and June because of a strike of
lumber workers in the Douglas fir region. Westbound cargo shipments
through the Panama Canal also were higher in volume in 1935 than
in 1934, but eastbound water-borne shipments declined as a result of
decreased petroleum shipments. Value of the district's foreign trade
was somewhat higher in 1935 than in 1934; imports (excluding raw silk)
were the largest in amount since 1930, and exports the largest since 1931.



20

TWENTY-FIRST ANNUAL REPORT

INDEXES OF INDUSTRY, EMPLOYMENT, TRADE
Twelfth Federal Reserve District
(1923-192 5 Annual Averaee=100)
1928

1929

88
85

106
87

1930
100
102
122
114
148
160
167
105
99
64
84
168
93
94
95
88
98
262
102
73

83
75
71
94

81
68
64
87

67
51
49
59

114 123
Industrial Production
118 124
Manufactures
124 120
Foods
111 105
Butter
167 138
Canned Fruits
132 160
Canned Vegetables
135 189
Canned Fish
111 115
Flour
101
99
Slaughter
Wool Consumption (Revised) . . . 77 77
108 110
Lumber
155 193
Refined Mineral Oils
116 107
Cement
103 122
Minerals
96 121
Petroleum
118 130
Copper
112 116
Lead
-.,-.
220 288
„.
Mine
»**

:::::::::

Silver
Building and Construction
Building Permits
Larger Cities
Smaller Cities
Construction excluding buildings. .
Electric Power Production
Industrial Employment
Employment—California (Revised)
Pay Rolls—California (Revised).. .
Employment—Oregon
Pay Rolls—Oregon
Trade
Carloadings
Industrial
Merchandise
Foreign Trade, excluding silk
Imports, excluding silk
Exports
Intercoastal Trade
Eastbound
Westbound
Wholesale Sales
Agricultural Implements
Automobile Supplies
Dry Goods
Electrical Supplies
Furniture
Groceries
Hardware
Shoes
Paper and Stationery .. .
Department Store Sales . . .
Department Store Stocks..
Automobile Sales—New . . .
Passenger
Commercial
Bank Debits



113 134 128
144 157 159

1931 1932
58
75
59
76
94
106
121 122
82
110
83
77
79
118
90
102
108 107
82
79
35
58
140 134
46
71
57
73

1933

64
68
113
124
128
109
114
89
110
84
46
127
53
55
74
72
79
24
21
62
51
50
70
193 113 162
76
74
78
38
48
36
62 34 39
14
12
31
13
11
29
14
12
36
187 116 149
156 139 139

1934
70

74

80

126
119
129
159
137
97
123
78
50
123
67
61
73
30
53
187
99
49
43
12
11
18
161
150

128
115
142
180
161
104
99
116
55
140
64
75
86
46
59
215
123
67
50
24
22
32
152
161

110
112
99
99

119
123
102
104

107
106
90

86
82
74
63

74
61
59
40

83
60
69
46

113
111
114
130
116
138
87
79
114
102
139
93
89
121
110
102
96
106
96
117
105
98
98
98
148

112
109
114
141
128
147
97
87
132
108
155
89
88
124
122
123
99
101
103
119
103
135
130
180
154

75
96
57
84
89
105
109 72
64
105
76
110
71
86
66
80
84
106
73
93
72
128
54
72
52
68
70
103
77
96
118 105
81 60
82 62
94 79
111
98
87
101
97
67
91
62
151 114
131 103

57
37

58
66
43
48
70
81
47
59
43
51
49
64
70
76
69
76
75
78
56
67
43
72
41
45
42
48
45
61
66 69
85
99
47
58
51
58
62
75
71
77
61
63
48
63
46
58
75 121
69
78

74
48
43
50

54
50
67
55
43
43
37
41
49
86
43
47
63
75
68
34
32
57
74

1935
79

96 101
71 82
73 80
54 67
72
56
85
70
72
69
66
59
90
77
113
50
51
81
85
110
68
59
85
84
62
104
97
179
93

21

FEDERAL RESERVE BANK OF SAN FRANCISCO

AGRICULTURE
The economic condition of agriculture continued to improve in the
Twelfth District during 1935, and this improvement contributed to an
expansion in the sales of agricultural implements, automobiles, and
other merchandise. Cash receipts from marketing of the principal
crops and of livestock and livestock products are estimated to have
totaled $822,946,000 during 1935, compared with $712,795,000 during
MILLIONS OF D O L L A R S
1500

IOOO

500

1929

1930

1931

1933

1932

1934

1935

CASH INCOME FROM AGRICULTURAL PRODUCTS MARKETED—Twelfth District
(Annual totals)

]934. Income from crops marketed increased only 5 percent, but returns
from sales of livestock and livestock products advanced 30 percent.
Farm income was augmented by rental and benefit payments from the
Agricultural Adjustment Administration totaling $33,135,000 in 1935
and $21,081,000 in 1934.
Expansion in farm income during 1935 resulted from a much larger
volume of crop production and from higher prices for livestock and
livestock products. Prices of crops averaged somewhat lower than in
INDEXES OF CROP PRODUCTION
Twelfth Federal Reserve District
(1925-1927 Avera£e=100)
1926

Volume—All Crops
Vegetables
Field Crops
Grains
Fruits
Value—All Crops
Vegetables
Field Crops
Grains
Fruits



1927

1928

1929

1930

98
105
96
93
102
92
103
92
88
93

109
106
105
114
110
103
105
95
110
106

109
117
105
115
112
104
117
107
96
102

109
133
106
99
113
113
128
124
93
111

110 96 106
137 128 141
105 85 88
95 75 98
121 116 122
84 58 46
123 94 85
81 57 45
54 36 31
100 68 47

1931 1932

1933

1934

1935

100 95 111
129 133 135
91 89 94
87 72 83
112 109 138
56 65 70
78 97 105
56 66 62
45 47 55
57 68 78

22

TWENTY-FIEST ANNUAL. REPORT

1934, and volume of livestock and livestock products marketed was
smaller.
The 1935 growing season, although delayed by spring storms, was
favored by good weather in most sections. Irrigation water was adequate in all districts. A killing freeze in November damaged only a
few late maturing crops. Range conditions were excellent during 1935,
although water for stock became unusually scarce in sections of the
Pacific Northwest late in the summer.
Nineteen thirty-five was a relatively favorable year for the Twelfth
District livestock industry. Ranges in almost all areas were in better
condition than in any other recent year. Supplemental feeds were
cheap. As a result, good to excellent quality stock made up the bulk of
marketings during the year. While the total number of cattle and hogs
sold was smaller than in 1934, when large numbers of drought-stricken
animals were slaughtered, the number approximated that of other
recent years. Receipts of lambs and sheep at district markets were 12
percent larger than in 1934. It is estimated that prices received by
livestock producers averaged 50 to 75 percent higher in 1935 than in
the preceding year, and that income of the group was 30 percent larger.




FEDERAL RESERVE BANK OF SAN FRANCISCO

23

OPERATING STATISTICS
Volume of Operations
As a result of further large additions to their supply of idle funds
and, to a lesser degree, because of the lending operations of Government agencies, member banks found little need to borrow from the
Federal Reserve Bank of San Francisco during 1935. Discount operations, therefore, continued to be negligible. Daily average holdings of
discounted bills (not including industrial advances) amounted to
$166,000 compared with $722,000 in 1934 and $28,816,000 in 1933.
Holdings of purchased bills consisted wholly of participation in
foreign accounts, since there were no other bills acquired in the open
market during the year. This bank's share of the Federal Reserve
System's investment in United States Government obligations increased from $166,330,500 on December 31, 1934 to $199,330,500 on
December 31, 1935. This represented a redistribution of open market
investments of the Federal Reserve banks, since total System holdings
of Government securities did not change materially during the year.
There was some increase during the year in the amount of credit
extended to established industrial and commercial enterprises, as provided in section 13b of the Federal Reserve Act, approved June 19,
1934. Although the amount of credit extended under this provision
remained comparatively small, a large amount of work was required in
considering applications. The following figures show the volume and
value of applications for loans that were received and approved following passage of that section:
1. Applications received:
1935
1934
Number
561
634
Amount
$18,711,400
$19,499,479
2. Applications approved:
Number
147
88
Amount
$ 7,891,000
$ 2,452,000
The figures of loans approved during 1935 include a number of applications received in the latter part of 1934. Federal Reserve banks may
either participate with banks, trust companies, and other financial institutions in extending loans under section 13b, or may make commitments to discount or purchase such loans. Advances and commitments have been made as follows:
ADVANCES

Number made during year
Amount made during year
Amount outstanding December 31

1935

1934

29
$ 621,869
$1,110,949

7
$587,600
$587,600

115
$4,407,301
$4,580,297

39
$817,590
$808,339

COMMITMENTS

Number made during year
Amount made during year
Amount outstanding December 31

The personnel of the Industrial Advisory Committee for the Twelfth
Federal Reserve District remained the same throughout 1935 except
that Mr. H. L. Terwilliger was succeeded in February by Mr. William G. Volkmann of A. Schilling and Company, San Francisco. At the



TWENTY-FIRST ANNUAL REPORT

end of the year the membership included Ralph H. Burnside, Pacific
Spruce Corporation, Portland, Oregon; Shannon Crandall, California
Hardware Company, Los Angeles, California; Henry D. Nichols, Tubbs
VOLUME O F OPERATIONS
1935

1934

1933

Number of Pieces Handled—(In thousands)
Bills discounted
..
1
10
Notes received as collateral
2
13
54
Bills purchased for own account
..
..
5
Currency received and counted
145,370
132,043
126,920
Coins received and counted
140,356
130,186
130,013
Shipments of coin and currency to outof-town banks
60
54
48
Payments of coin and currency to city
banks
11
10
11
Checks handled for collection—
United States Government
6,916
9,816
5,464
All other
47,823
39,700
37,804
Collection items handled—
United States Government coupons
paid
803
1,240
1,108
All other drafts, notes, coupons. . .
537
690
768
United States Government securities
issued, redeemed, or exchanged*..
332
215
150
Transfers of funds
94
106
120
Amounts Handled—(In thousands of dollars)
Bills discounted
8,756
29,488
1,045,057
Bills purchased for own account
2,201
7,219
80,570
Currency received and counted
770,221
726,615
811,817
Coins received and counted
34,293
35,204
66,047
Shipments of coin and currency to outof-town banks
281,427
215,396
299,969
Payments of coin and currency to city
banks
517,354
460,596
536,898
Checks handled for collection—
United States Government
1,598,453
1,702,635
1,372,692
All other
10,115,123
8,625,425
7,270,234
Collection items handled—
United States Government coupons
paid
22,953
27,356
22,757
All other drafts, notes, coupons
350,009
368,053
299,707
United States Government Securities
issued, redeemed, or exchanged*..
740,006
654,299
598,764
Transfers of funds
8,008,610
8,093,289
8,417,474
* Figures for 1933 and 1934 include Federal Intermediate Credit Bank Debentures and Federal Farm Loan Bonds. Data for 1935 exclude obligations of United
States Government agencies. In that year, volume of securities of various
Government agencies handled amounted to 213,000 pieces, with a value of
$98,684,000.



FEDERAL RESERVE BANK OF SAN FRANCISCO

25

Cordage Company, San Francisco, California; Stuart L. Rawlings,
Calaveras Cement Company, San Francisco, California; William G.
Volkmann, A. Schilling and Company, San Francisco, California.
The number and dollar value of checks handled for collection during
1935 were greater than in any year since 1931. Excluding Government
checks, the number of items handled was 20 percent larger than in 1934
and the aggregate amount involved increased 17 percent. Although
both physical volume and amount of Government checks paid declined
in comparison with 1934, the amounts handled were above those for
other years. In the first half of 1934 a large number of Government
checks were paid in connection with funds disbursed through the Civil
Works Administration. Drafts, notes, and coupons other than Government coupons collected during 1935 were smaller in number and value
than in the previous year. Payments of coupons from direct obligations
of the United States Government declined but there was a substantial
increase in the volume of coupons from securities of other Government
agencies, such as the Home Owners' Loan Corporation and Federal
Farm Mortgage Corporation.
Statistics on funds transferred showed a decrease in comparison
with 1934. The decrease is largely explained by the fact that transfers
for account of the United States Treasurer have been eliminated from
the 1935 figures. There was little change in the volume of transfers
made for member banks. A factor which tended to decrease such transactions was the discontinuance of transfers from national banks to the
Treasurer of the United States to replenish the 5 percent redemption
fund maintained against national bank note circulation.
Coin and currency operations showed a marked increase during 1935.
Expansion in the volume of coin handled took place principally in
coins of small sizes and reflected the improvement in general business
conditions, as well as the increased demand for minor coin for sales
tax purposes. This same trend was apparent in currency figures, inasmuch as the rise in dollar value was not so large as the increase in the
number of pieces of currency received and counted. Both shipments
of coin and currency to country banks and payments to city banks
were well above those of 1934. On December 31, 1935 Federal Reserve
notes of this bank in actual circulation amounted to $279,623,040 compared with $211,367,495 on December 31, 1934. This expansion resulted
in large part from the demand for currency to replace retired national
bank notes subsequent to August 1, and also from increased requirements for business purposes. Since that date all national bank notes
deposited at the bank have been cancelled and forwarded to the Treasury for redemption. During 1935 all gold coin and bullion held by the
bank in custody for the Treasurer of the United States was transferred
to the Denver Mint in accordance with the Federal Government's policy
of concentrating the gold reserves of the nation at interior points.
A further increase took place during 1935 in the volume of work
performed by the Federal Reserve Bank of San Francisco as Fiscal
Agent of the United States. New securities totaling1 $398,214,850 were
allotted in the Twelfth District, compared with $381,189,800 in 1934
and $353,956,300 in 1933. Although the greater part of the dollar
value of new securities allotted represented Treasury bonds and notes,



26

TWENTY-FIRST ANNUAL REPORT

75 of the 90 issues of securities were in the form of Treasury bills, sold
on a discount basis. There were no issues of certificates of indebtedness.
Redemptions of matured and called Government obligations aggregated
$236,160,899, compared with $134,384,902 in 1934 and $118,261,286
in 1933. First Liberty Loan bonds and the remainder of Fourth
Liberty Loan bonds were called for payment by the Secretary of the
Treasury during the year. Obligations amounting to $203,117,300 were
taken in exchange for new securities issued during 1935.
The bank continued to perform various services as custodian and
fiscal agent for other Government agencies, such as the Reconstruction
Finance Corporation, Federal Farm Mortgage Corporation, Home
Owners' Loan Corporation, and the Federal Administration of Public
Works. The work involved includes acting as custodian for collateral
held by these agencies, as well as activity connected with the issue,
exchange, and redemption of their securities.
INCOME AND DISBURSEMENTS
Earnings
1935
On Loans
$ 52,031.82
On Acceptances Purchased
2,511.00
On United States Government Obligations Owned 3,074,175.11
Other Earnings
123,136.48

$

1934
30,759.51
15,991.03
3,086,621.31
89,048.60

Total Earnings

$3,251,854.41

$3,222,420.45

Additions to Earnings

$ 503,628.99

$ 597,427.43

Deductions from Earnings
For Current Bank Operations
$2,580,213.31
For Assessments of Board of Governors of the
Federal Reserve System for:
General Expenses
96,761.26
Expenses attributable to building to be
erected for Board's occupancy
70,121.00
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
103,224.51
For Furniture and Equipment
10,650.99
For Depreciation on Bank Premises
289,172.93
For Reserves for Losses
All Other
1,707.80
Total Deductions from Earnings

$2,369,716.51

98,150.72

42,473.76
12,098.56
219,879.79
433,323.07
3,631.78

$3,151,851.80

$3,179,274.19

Net Income available for dividends and additions to surplus
$ 603,631.60

$ 640,573.69

Distribution of Net Income
Dividends Paid to Member Banks, at the rate of
6 percent on paid-in capital
$ 636,866.27
Excess of Dividends over Net Income
$ 33,234.67

$ 643,242.08
$
2,668.39

Deductions from Surplus Account
Excess of Dividends over Net Income

$




$

33,234.67

2,668.39

FEDERAL RESERVE BANK OF SAN FRANCISCO

27

Earnings and Expenses

Total earnings of the Federal Reserve Bank of San Francisco were
slightly larger in 1935 than in 1934. United States Government securities continued to provide the principal source of income. Additions
to earnings included $432,185 net profit on transactions in Government
obligations.
Current operating expenses were $210,497 larger in 1935 than in
1934. Although there was little change in the aggregate amount of
salaries paid, contributions to the Retirement System of the Federal
Reserve banks were $165,665 above the 1934 figures. This increase
resulted largely from an added contribution to the Retirement System
on December 31, 1935 representing accrued liability of the bank for
prior service of employees. It was originally planned that such payments were to be spread over a twenty-year period, but subsequently
it was decided to complete the accumulation by December 31, 1939.
The only other material change in items of operating expenses was an
increase of $38,507 in expenditures for postage.
Deductions from earnings included an assessment of $70,121 for the
new building to be erected in Washington, D. C. for the Board of Governors of the Federal Reserve System. Charges for depreciation on
bank premises were $69,293 larger than in 1934 because of a change
in the basis of writing down buildings and vaults. There was an increase of $60,751 in the cost of Federal Reserve currency.
Net earnings were $33,235 less than dividends paid to member banks
on their holdings of Federal Reserve bank stock. This amount was
withdrawn from surplus set up under provisions of section 13b of the
Federal Reserve Act, since income from industrial advances made under
that section was smaller than expenses involved in handling such loans.
An increase during the year in surplus under section 13b resulted from
advances by the Secretary of the Treasury amounting to $469,195.
CHANGES IN DIRECTORS, OFFICERS, AND EMPLOYEES
At the regular annual election held in 1935, T. H. Ramsay, President
and General Manager, Pacific National Agricultural Credit Corporation, Fresno and San Francisco, was reelected a Class A director for
a three-year term ending December 31, 1938, by banks in Group 2
(those having a combined capital and surplus in excess of $150,000
and less than $1,000,000). A. B. C. Dohrmann, Chairman of the Board,
The Emporium Capwell Corporation, San Francisco, California, was
reelected a Class B director for a similar three-year term by banks in
Group 1 (those having a combined capital and surplus of $1,000,000
and over).
The office of Chairman of the Board and Federal Reserve Agent remained vacant during the year. The Board of Governors of the Federal
Reserve System redesignated Walton N. Moore, President of Walton N.
Moore Company, San Francisco, Deputy Chairman of the Board of
Directors for 1936.
At the beginning of 1936, vacancies existed in the directorates of
each of the five branches of this bank. These vacancies followed ex


28

TWENTY-FIRST ANNUAL REPORT

piration of terms of directors appointed by the Board of Governors
of the Federal Reserve System.
M. A. Arnold, President, Seattle-First National Bank, Seattle, Washington, was reappointed to represent the Twelfth Federal Reserve
District in the Federal Advisory Council during 1936.
There were no changes in the official staff of the bank during 1935.
The number of employees engaged directly in the service of the bank
on January 1, 1936 was considerably smaller than a year earlier, but
there was a substantial increase in the number of employees whose
salaries are reimbursed to the bank. Most of these employees were
assigned to the "Work Relief Checks Division. That department was
organized during 1935 for the purpose of paying checks drawn on the
Treasurer of the United States which are issued for work performed
on various relief projects.
PERSONNEL AND SALARIES
(Including branches)

(

OFFICERS

Number
Jan. 1 Jan. 1
1936
1935
31
31

-Annual Salaries
Jan. 1
Jan. 1
1936
1935

\

$ 242,900

$ 242,600

EMPLOYEES BY DEPARTMENTS:

Banking Department
Federal Eeserve Agent's Department
Auditing Department
Fiscal Agency Department

715
37
9
11

757
42
13
27

1,172,164
92,100
18,180
18,060

1,232,415
104,820
23,820
41,700

803

870

$1,543,404

$1,645,355

Fiscal Agency Department
Other Employees

14
132

21
97

24,720
189,716

35,760
144,105

GRAND TOTAL

949

988

$1,757,840

$1,825,220

TOTAL
EMPLOYEES WHOSE SALARIES ARE
REIMBURSED TO BANK :




FEDERAL, RESERVE BANK OF SAN FRANCISCO

29

NOTE
Statistics appearing in this report will be supplemented by additional statistical data pertaining to the Twelfth Federal Reserve District and the Federal Reserve Bank of San Francisco, in the Annual
Report of the Board of Governors of the Federal Reserve System.
Copies of the Board's report may be obtained, when published, from the
Board of Governors of the Federal Reserve System at Washington, D. C.
This bank's statement of condition at the end of 1935 and 1934 appears upon the following two pages.




30

TWENTY-FIRST ANNUAL REPORT
STATEMENT OF CONDITION
EESOUECES
December 31, 1935

Cash Reserves held by this bank against its
deposits and note circulation:
Gold Certificates on Hand and Due from United
States Treasury—Eepresents gold holdings of
the bank lodged in the Inter-district Settlement Fund, held by the Federal Reserve
Agent as collateral, to Federal Eeserve notes,
or held in own vault
$401,044,265.39
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 Treasury for redemption
2,891,213.46
Other Cash — United States notes, Treasury
notes of 1890, silver certificates, national
bank notes, Federal Eeserve bank notes,
standard silver dollars, subsidiary sil,ver
and nickels and cents (Excludes Federal Eeserve notes issued by this bank)
16,230,425.65
Total Cash Eeserves

$420,165,904.50

December 31, 1934

$310,252,132.68

3,632,028.83

16,878,993.70
$330,763,155.21

Loans and Investments
Loans:
Against pledge of obligations of the United
States, direct and/or fully guaranteed
Against eligible commercial, industrial, and
agricultural paper, or acceptances discounted or pledged, or the pledge of other
collateral
$
24,500.00
Acceptances bought in the open market
328,178.46
Industrial advances
1,110,948.65
United States Government Bonds, Notes, etc. 199,330,500.00
Total Loans and Investments
Assets)

$

95,000.00

37,590.50
390,537.83
587,600.00
166,330,500.00

(or Earning
$200,794,127.11

$167,441,228.33

Uncollected Items
Checks and Other Items not yet collected

$ 29,417,419.38

$ 20,987,081.05

Miscellaneous Resources
Bank Premises
All Other Miscellaneous Resources

$ 3,579,660.17
$ 3,043,713.85

$ 3,868,833.10
$ 3,168,960.99

$ 6,623,374.02

$ 7,037,794.09

$657,000,825.01

$526,229,258.68

Total Miscellaneous Resources
TOTAL EESOUBCES




FEDERAL RESERVE BANK OF SAN FRANCISCO

31

LIABILITIES
December 31, 1935

December 31, 1934

Currency in Circulation
Federal Reserve Notes in actual circulation,
payable on demand. These notes are fully
secured. The security may be gold, discounted or purchased paper, or direct obligations of the United States
$279,623,040.00

$211,367,495.00

Deposits
Reserve Deposits maintained by member banks
as legal reserves against the deposits of their
customers
$287,367,049.32

$255,377,043.56

United States Government Deposits

24,182,687.01

3,198,541.31

Other Deposits, including deposits of nonmember clearing banks, foreign deposits, etc. 16,082,183.05

12,641,869.96

Total Deposits

$327,631,919.38

$271,217,454.83

Deferred Availability Items
Deferred Items, composed mostly of uncollected
checks on banks in all parts of the country. .$ 26,678,393.12

$ 20,450,838.89

Miscellaneous Liabilities
Reserves and All Other Miscellaneous
Liabilities

$ 2,204,081.41

$ 2,204,189.20

Capital and Surplus
Capital Paid In, equal to 3 percent of the capital and surplus of member banks
$ 10,197,700.00

$ 10,759,550.00

Surplus (Section 7, Federal, Reserve Act)

9,644,799.15

9,644,799.15

Surplus (Section 13b, Federal Reserve Act) . . .

1,020,891.95

584,931.61

$ 20,863,391.10

$ 20,989,280.76

$657,000,825.01

$526,229,258.68

Total Capital and Surplus
TOTAL LIABILITIES

Memorandum:
Commitments to make Industrial Advances $ 4,580,297.10




$

808,339.36

32

TWENTY-FIRST ANNUAL REPORT

TWELFTH FEDERAL RESERVE DISTRICT
Includes the States of Arizona, except the five southeastern counties,
California, Idaho, Nevada, Oregon, Utah, and Washington

SAN FRANCISC

100 MILES

Map showing territory of Head Office and Branches of the
Federal Reserve Bank of San Francisco