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FEDBRAy RESERVE BANk/
of)RICHMOND
March1953
a
i l
lth o u g h
gross earnings of Fifth District
member banks have more than doubled since
1945, net profits derived from these earnings have
increased by less than one-third. Earnings and ex
penses of the District’s member banks in 1952 and
principal changes over the postwar years are
discussed in the article beginning on Page 3.
Also In This Issue
—
Fifth District Trend, Charts__________ Page 2
Record Amount of State and Municipal
Financing in 1952 ________________ Page 5
Treasury Financing_____________ ___ Page 7
Business Conditions and P rospects____ Page 9
Fifth District Statistical D ata_________ - Page 11
Federal Reserve Bank of Richmond
F
DEPARTMENT
if t h
D
is t r ic t
STORE SALES
COTTON SPINDLE HOURS
Spindle hours operations in the cotton textile industry dropped
2 % on an adjusted basis from December to January, but the Jan
uary level was 7%, ahead of a year ago. This contrasts with a drop
of 12% in adjusted cotton consumption during January to a level
V/c below a year ago. A s regards the operations of the industry,
the spindle hour figure is the better measure of the two.
TOTAL CONSTRUCTION CONTRACT AWARDS
STORE OUTSTANDING ORDERS
Outstanding orders of department stores, after seasonal correc
tion, rose 1 8% in January over December to a level 2 7 % ahead of
January 1952. These figures are indicative of an improved outlook
in the trade level and are particularly significant in view of the
rise in inventories which would seem to indicate that the higher
inventories were not involuntarily increased.
Adjusted level of total construction contract awards in January
was down 26% from December but 3 4 % ahead of January 1952.
All types of construction awards dropped, after seasonal correction,
from December to January with the exception of one- and tw o-fam ily
houses.
Pronounced gains over a year ago are noted in factory,
commercial, public works and utility awrards.
COMMERCIAL CONSTRUCTION CONTRACTS
COTTON PRICE - %
Continued strength in the trade level combined with relaxation of
controls for commercial building has found reflection in a substan
tially improved level of commercial contract awards. Although the
January level of commercial construction awards dropped 1 2% from
December on a seasonally adjusted basis, awards were 103% ahead
of last year and have been exceeded only a few times in the past.
r e n d s
ACTIVE
January adjusted department store sales dropped 3 % from the
December level but continued 1 % ahead of January 1952. Depart
ment store stocks, adjusted, rose 7 % from December and were 9%
ahead of a year ago.
The January drop in sales has in no way
changed the saw-toothed rising trend of these sales that has been in
evidence since Fall of 1949.
DEPARTMENT
T
-{ 2 \
INCH
The price of middling 15/16 inch cotton in January in ten desig
nated markets was 32.9 cents, a drop of nearly 2 % from December
and a drop of nearly 2 8 % from the peak in May 1950. The weak
ened cotton price situation is due primarily to a reduction in ex
port demand, which is running substantially below last season.
March 1953
Bank Earnings, 1952—Fifth District
banks in the Fifth District, in the aggregate,
earned a larger gross income in 1952 than in any
of the other postwar years.
Afore loans and a slightly higher average rate pro
vided a tonic for gross earnings. Similarly, though the
amount of bank-held Government bonds fluctuated con
siderably during the year, it rose on balance, and with
higher average yields on all maturities, short, medium
and long, it provided almost a quarter of all bank rev
enue.
If one looks at the longer trend, two facts stand o u t:
first, total dollar earnings last year were more than
double the amount earned in 1945; second, net profits
realized from these gross earnings were up a modest
30% above the 1945 level, or an average of 49c per
year. Soaring operating costs and tax payments which
exceeded the rapid expansion of gross earnings are the
obvious explanation. By way of contrast, the Depart
ment of Commerce and Council of Economic Advisers
place the percentage growth in member banks' net prof
its from 1945 to 1952 at less than one-third the estimated
growth in net profits of all corporations.
In spite of the better showing in net current earnings
in 1952, the ratio of net profits to capital accounts in
the District, at 8.2% , was the same as in 1951 (the na
tional average for 1952 was 7 .9 % ). Income tax pay
ments were the principal factor causing net profits to
show a much slower growth than net current earnings
in the postwar years. Net current earnings in 1952 dou
bled the 1945 figure— but income tax payments almost
tripled in the same period. T ax payments rose from
27.5% of profits before taxes in 1945 to 44.3% in 1952.
In addition, District member banks as a whole ex
perienced net losses and transfers to reserves in 1952,
so that net current earnings were again reduced, leav
ing a smaller net profit than would have been the case
otherwise.
M
em ber
Loans Provide M ajor Share of Earnings
Interest and discount on loans provided, as usual in
recent years, more than half of their total earnings—
54.9%— last year as against 55.2% in 1951.
Earnings from loans in 1952 were 12.4% greater than
in 1951. Higher dollar earnings from this source re
sulted primarily from a $230 million expansion in loans
outstanding over the year and secondarily from a higher
average return (4.81% vs. 4 .5 8 % ).
In response to growing business and consumer needs
as well as relaxed governmental controls, the banks ex
panded their loan portfolios in 1952 much more sharply
than the $100 million of net new loans in 1951. All
major loan categories showed increases in amounts out
standing. Commercial, industrial, and agricultural loans,
after declining moderately in the first half, increased
considerably in the second. Loans to individuals in
creased substantially, especially after the removal of
Regulation W . Loans to farmers and real estate loans
also contributed, but to a lesser extent, to the over-all
loan expansion.
Interest on Government Bonds Rose
U. S. Government securities, as a source of income,
have declined considerably in relative importance in the
postwar years, in interesting contrast to loans, which
have been the major source of earnings. A t the close
of the war, member banks in this District held over
$3.5 billion of U. S. securities and received nearly half
of their total earnings from this source. A t the end
of 1952 they held $1 billion less, and interest received
accounted for a little less than a quarter of total earningSEarnings from Governments in 1952, however, ex
ceeded amounts received in any other year since 1946
and contributed 24.8% of total earnings compared with
24.2% in 1951. The average yield in 1952 on long
term bonds was 2.68% , as against 2.57% a year earlier.
The yield on Treasury bills averaged 1.75% in 1952
as compared with 1.52% in 1951, while three- to fiveyear issues rose from an average of 1.93% in 1951 to
2.13% last year.
Actually, District member banks’ Government bond
holdings were $38 million above holdings at the end
of 1951. Holdings fluctuated considerably, however,
during the year— they were reduced gradually to the
end of June, at which time the banks increased them
E A R N IN G S A N D E X P E N S E S
Fifth District Member Banks
(Dollars in thousands)
Earnings
Interest and dividends on
securities:
U . S. Government ______
Other _____________________
Interest and discount on
loans _____________________
Other charges on loans ....
Service charges on deposits
Other charges, fees, etc. ..
Trust department ________
Other current earnings ....
Total _____________________
Expenses
Salaries— officers __________
Salaries and wages— other
Directors’ fees, etc. _______
Interest on time deposits
Taxes, other than income
Recurring depreciation
Other current expenses
Total _____________________
N et current earnings ____
Recoveries, transfers from
reserves, and profits „
Losses, charge-offs, and
transfers to reserves „
Profits before income taxes
Taxes on net income ____
N et profits ________________
Cash dividends declared Profits retained ___________
N ote:
-(3 y
% change
1951 to 1952
1952
1951
46,995
8,426
40,895
6,921
+ 14.9
+ 21.7
104,028
901
10,270
5,486
7,282
6,066
189,455
92,581
850
9,757
5,281
6,972
5,869
169,125
+ 12.4
+ 6.0
+ 5.3
+ 3.9
+ 4.4
+ 3.4
21,440
35,222
1,462
14,955
5,327
3,601
30,574
112,581
76,873
19,775
31,336
1,315
13,321
5,160
3,277
27,308
101,492
67,632
+
+
+
+
+
+
+
+
+
+ 12.0
8.4
12.4
11.2
12.3
3.2
9.9
12.0
10.9
13.7
3,409
3,924
— 13.1
10,402
69,881
30,930
38,951
16,252
22,699
9,796
61,760
25,691
36,069
15,500
20,569
+ 6.2
+ 13.1
+ 2 0 .4
+ 8.0
+ 4.9
+ 10.4
May not add to totals because of rounding.
Federal Reserve Bank of Richmond
nearly $80 million (the increase consisted chiefly of
2^8% Treasury Bonds of 1958 acquired either under
original allotment from the Treasury or in the market
immediately thereafter). Holdings were again slowly
reduced until early October, when the first issue of Tax
Anticipation Bills was offered. Purchases of this and
a second issue of T ax Anticipation Bills in November
brought holdings of Governments to their highest level
of the year, about $2,718 million. During December
these were reduced by about $85 million.
E A R N IN G A SSE TS
Fifth District Member Banks
(M illions of Dollars)
Loans and Discounts
Commercial and Industrial
loans _______________________
Loans to farm ers ____________
Loans to brokers and dealers
in securities ________________
Other loans for purchasing
and carrying securities ....
Real estate loans:
On farm land
On residential property __
On other properties ______
Instalment loans to
individuals:
Retail automobile paper ..
Other retail paper _______
Repair and modernization
loans _____________________
Cash loans __________________
Single paym ent loans ______
Loans to banks ______________
All other loans _______________
Loans— Gross ________________
Reserves ______________________
Loans— N et __________________
Other securities (chiefly municipals) earned $1^2
million more for the banks in 1952 than in 1951. H old
ings increased rather steadily through September, then
declined slightly to year-end, for a year-to-year increase
of $24 million.
Trust department earnings and service charges on
deposits in 1952 continued the steady rate of increase
which they have experienced throughout the postwar
years.
Dec. 31
1952
Dec. 31
1951
827
55
767
50
% Change
1951 to 19
+
+
7.8
10.0
13
15
-
13.3
102
72
+
41.7
47
416
153
45
385
144
+
+
+
4.4
8.1
6.3
151
61
116
45
+
+
30.2
35.6
36
93
277
5
61
2,299
26
2,273
26
75
258
2
66
2,065
24
2,041
+ 38.5
+ 24.0
7.4
+
+ 150.0
— 7.6
+ 11.3
8.3
+
+ 11.4
353
438
— 19.3
236
473
306
426
__ 23.1
+ 11.2
143
134
+
829
856
—
3.2
598
427
436
403
+
+
37.1
6.0
U . S. Government Secruities
Treasury bills _______________
Treasury certificates of
indebtedness ________________
Treasury notes _______________
United States nonmarketable bonds _________________
Other United States bonds
m aturing within 5 years
from date of call report ..
Other United States bonds
m aturing over 5 years ___
Other securities _____________
Operating Costs— A smaller Share of
Total Earnings
Operating costs of District member banks rose $11
million during 1952 and took 59.4% of gross earnings
as compared with 63.7% in 1945. The banks have
6.7
Continued on page 12
F IF T H
A SSE TS A N D L IA B IL IT IE S *
D I S T R I C T ]M E M B E R B A N K S B Y
December 31, 1952
(In Millions of Dollars)
ST A T E S
Fifth District
Md.
D. C.
Va.
W . Va.
N . C.
s. c.
Dec. 31, 1952
----------Loans and Investm ents —
Loans and discounts (including over
drafts ) -----------------------------------------------U . S. Government obligations ----------Other securities -------------- -------------------Reserves, Cash, and Bank Balances ----Reserve with Federal Reserve Banks
Cash in vault -----------------------------------------Balances with banks --------- ------------------Cash items in process of collection
Other Assets --------------------------------------------Total Assets _______________________
L IA B IL IT IE S
1,060.0
886.4
1,501.7
561.6
890.8
433.5
5,333.9
5,040.0
403.3
571.1
85.6
357.6
174.3
29.0
73.3
81.0
17.5
1,435.1
366.4
470.7
49.3
324.6
180.5
24.5
57.2
62.4
19.5
1,230.5
681.4
692.7
127.6
528.8
221.1
43.7
132.6
131.3
23.5
2,054.0
208.0
308.3
45.2
191.0
81.2
19.1
65.8
25.0
7.8
760.4
449.7
361.5
79.6
350.6
135.3
24.5
74.0
116.7
15.2
1,256.5
164.5
229.4
39.6
162.7
59.9
18.6
52.1
32.2
5.5
601.7
2,273.3
2,633.7
426.8
1,915.3
852.3
159.4
455.1
448.5
89.1
7,338.3
2,041.3
2,596.1
402.6
1,908.9
855.7
159.6
495.1
398.5
85.4
7,034.4
Demand Deposits -------------------------------------Individuals, partnerships, and cor
porations ---------------------------------------------U . S. Government -----------------------------States and political subdivisions ------Banks ___________________________________
Certified and officers’ checks, etc. ----Tim e Deposits -------------------------------------------Individuals, partnerships, and cor
porations ---------------------------------------------U . S. Government and Postal Sav
ings ___________________________________
States and political subdivisions ------Banks ____________________________________
Total Deposits -----------------------------------------Borrowings _______________________________
Other Liabilities ---------------------------------------Total Liabilities -------------------------Total Capital Accounts --------------Total Liabilities and Capital A c
counts ___________________________
Demand Deposits Adjusted --------------------Number of Banks ------------------------------------
1,042.3
941.7
1,338.4
528.0
980.3
492.9
5,323.6
5,148.5
802.4
40.0
91.5
100.9
7.5
294.0
819.5
32.2
.2
66.8
23.0
206.2
965.0
44.0
94.S
198.7
36.0
555.6
386.5
18.8
64.3
40.9
17.5
169.3
695.8
36.8
76.0
148.4
23.4
175.1
371.1
24.0
67.8
20.0
10.0
72.6
4,040.3
195.7
394.6
575.6
117.5
1,472.9
3,911.7
116.5
414.8
599.8
105.6
1,384.6
286.3
171.6
500.5
167.3
136.9
64.2
1,326.9
1,256.1
7.1
.5
17.4
.2
17.1
1,147.9
1.3
.3
.3
697.3
1.3
3.4
701.9
58.5
5.7
32.2
.3
1,155.5
.5
21.2
1,177.1
79.4
7.7
.6
.2
565.5
4.9
570.5
31.3
60.3
67.3
18.3
6,796.5
5.1
60.8
6,862.4
475.9
49.9
61.0
17.6
6,533.0
2.4
50.0
6,585.4
448.9
760.4
443.4
97
1,256.5
678.5
55
601.7
416.7
33
7,338.3
4,103.9
477
7,034.4
4,033.6
477
ASSETS
1,336.3
.2
7.9
1,344.4
90.7
8.2
1,156.1
74.4
21.1
33.6
.4
1,894.0
3.1
15.3
1,912.4
141.5
1,435.1
820.5
73
1,230.5
780.3
15
2,054.0
964.5
204
____
1 Preliminary.
Source:
I.B .M . Call Report Tabulation by class and state.
N o te:
May not add to total due to rounding.
i
4 j*
___
Dec. 31, 1951
March 1953
Record Amount of State and Municipal Financing in 1952
TXTYrn AVest V irginia leading the wav with an un-
VV
precedented volume, the states and local govern
ments of the Fifth District offered investors $422 mil
lion of tax-exem pt bonds in 1952. This was the largest
volume of public financing ever undertaken in this D is
trict.
It was, however, only $13 million, or 3.1 G ,
greater than the previous record total of the preceding
year, the smallest absolute and relative increase of the
postwar period. Total state and municipal bond issues
in the nation also reached an all-time record with a
volume of $4.4 billion, but unlike the Fifth District
total, this amount was substantially in excess of pre
ceding records— 34' v above 1951 and 19G higher than
the previous record set in 1950.
In looking back at District bond issues in 1952, in
terest centers on flotations by the State of W est V ir
ginia. Issues of the Mountain State amounting to S14S
million swelled the total of its state and municipal offer
ings to $179 million, the largest amount ever issued in
any state of this District in one year. The biggest single
issue was $96 million o f turnpike revenue bonds with
a net interest cost to the state of around 3.95 G . The
proceeds will be used to construct a north-south express
traffic turnpike in order to provide the state's rapidly
grow in g industries with additional specialized trans
portation facilities.
Potentially such an expressway
could create a new industrial transportation pattern e x
tending from the Carolina Piedmont to the Great Lakes
region. It has been reported, for example, that much
truck traffic originating in the Carolinas and destined
for the G evelan d -T oled o-D etroit area circumvents what
would be the most direct route, through W est Virginia,
and goes northward along the seaboard, turning west
ward on the Pennsylvania Turnpike.
W est V irginia, the only state in the Fifth District
to issue W o rld W a r I f bonus bonds, sold a second is
sue, amounting to $30 million, of an authorized m axi
mum total issue of $90 million of veterans'’ bonus bonds.
T he second sale carries a net interest cost to the state
of 1.74G as com pared with an average interest rate of
2.225G on the first issue of $37.5 million sold in D e
cember 1951. It is understood that the second instal
ment will be the last one under the V eterans’ Bonus
Am endm ent.
T he bonus bonds are payable from “ an additional
cigarette tax, or an additional tax on nonintoxicating
beer, or an additional charge on the sale of each bottle
of wine and liquor, or an additional general consumers
sales tax, or a graduated income tax, or any two or m ore
thereof, in such amount as may be required to pay an
nually the interest on such bonds and the principal
thereof. . . . "
G row in g Popularity of Revenue B onds
In addition to the W est V irginia Turnpike bonds,
there were 26 other revenue bond issues in the Fifth
District during 1952 totaling $17 million. These were
all offered in W est \ irginia and South Carolina and fi
nanced a variety of projects including water, sewerage,
and drainage installations, roads and bridges, parking
facilities, and state college dorm itories.
Strangely
enough, available records do not disclose any revenue
bond issues during the past year in M aryland, V ir
ginia, or X orth Carolina. All told, revenue bonds ac
counted for about 2 7 /i of total state and municipal
issues in the District in 1952 as com pared with around
21 G in 1951. T he trend towards increasing use of
revenue bonds for financing public improvements was
ST A T E AN D M U N IC IP A L BOND O F F ER IN G S-—1952
Md.
Am t.
No. of
$000
issues
School Building and
Improvements
W ater, Sewer, and
Drainage Systems ___________
Street, H ighw ay and Bridge „
Building and Improvements
Public Improvement _________
Public Utility Systems
(E xcl. water system s)
15
1
5
1*
18,800
11,032
8
14,145
1,500
10
2
5,725
140
9,525
16,005
5
13,045
-------
Hospitals _______________________
Refunding ______________ _______
Public Housing Authority ----V eterans’ Bonus ______________
Miscellaneous __________________
T o ta l1
4
9*
__________ __ _________
1
9
9
2*
20
Va.
No. of
Am t.
issues
$000
17,100
1
3,000
2
1,740
14,311
W . Va.
Amt.
No. of
issues
$000
6
6
4
4*
1
18,073
2,104
10,780
117,000
30
3
1,140
2,500
2
1,857
103,343
27
56,918
1*
5
1*
28
28
18,073
S. C.
Am t.
No. of
issues
$000
7
619
38
5
14,656
1,115
21
6
4,950
620
5
515
6
3,052
7
31,198
1
2,900
104
110
968
30,000
600
200
7
390
1
100
178,787
96
69,041
44
1.3,423
600
28,096
N. C.
No. of
Am t.
$000
issues
3
8
14
509
1,582
1,003
1
1
1
* State issues.
1 Totals will not equal the sum of the individual items as some issues are divided among more than one category.
Source:
Weekly listings in “ The Commercial and Financial Chronicle.’
5th Dist.
No. of
Amt.
issues
$000
53
2*
72,665
11,032
90
18
4*
22
1*
41,580
14,155
117,000
26,167
16,005
5
10
17
13
1*
17
3*
215
Per
cent
)
)
9.9
I
/
)
)
6,409
2,286
2,853
74,573
30,000
4,087
2,700
421,512
19.9
31.1
10 0
1.5
.5
.7
17.7
7.1
>
/
1A
1.0
100.0
Federal Reserve Bank of Richmond
also evident nationally and was highlighted by the $326
million Ohio Turnpike issue, the largest single issue of
these bonds to reach the market.
issues and priced their bids and reofferings accordingly.
This forward-looking approach appears to have been
successful in widening the demand for this issue beyond
the relatively small investor group concerned primarily
with tax exemption.
All told, there were 13 issues by local housing au
thorities in the Fifth District during 1952 for a total of
$74,573,000. These bonds accounted for 18% of the to
tal state and municipal issues in the District and enabled
housing to push ahead of water, water drainage, and
sewerage as the third most important purpose of public
borrowings in the District last year. W est Virginia is
the only state in the District that has not had any local
housing bond issues.
The fifth issue of housings was sold on January 21 of
this year for a total amount of $127,215,000 at a net in
terest cost of 2.396% . Dis
trict participation totaled
$23,755,000 consisting of
80N D YIELDS
the following sales : LumPer Cent
berton, N. C.— $805,000,
Charleston and Columbia,
S. C.— $1,890,000 and $4,310,000, Danville, N or
folk, and Richmond, V a.—
$1,375,000, $ 7 ,4 5 5 ,0 0 0 ,
and $7,920,000 respective
ly. This offering was to
finance low-cost housing
projects and differed from
previous issues in having
uniform maturities of 30
years instead of ranging
from 37-40 years.
Municipalities seem to be broadening the scope and
nature of revenue bond financing. In the last few years
considerable interest, and opposition, has been aroused
in the use of self-liquidating bonds for municipal pur
chase or construction of industrial facilities which, un
der a lease or lease-purchase agreement, are operated
by private corporations. A t last count, six states had
enacted specific legislation permitting this municipalprivate industry hookup : Alabama, Illinois, Kentucky,
Louisiana (which requires the use of general obligation
bonds), Mississippi, and Tennessee. A new twist ap
peared in 1952 in connection with a $1.3 million issue
of 5 % first mortgage industrial development revenue
bonds of Florence, Ala
bama, c o n s is t in g o f the
right of the holder of the
COMPARATIVE
municipal bonds to con
PerCent
vert into common stock of
the leasing private corpo
ration.
The net interest cost of
3.95% cited in connection
with the W est Virginia
Turnpikes is indicative of
the attractive yields that
have appeared on reoffer
ing p r ic e s o f r e v e n u e
bonds. Yields on some is
sues s u b s ta n tia lly above
levels at which recent high
grade corporates have been
offered have attracted con
siderable buying by insurance companies and other or
ganizations normally not influenced by the tax-exemption feature. The Dow-Jones index of representative
revenue bonds closed 1952 at 2.68% and, reflecting
continued downward pressures on prices of these se
curities, had moved up to 2.77% by the end of January.
Roads Still Main Purpose of Borrowing
A s throughout the postwar period, street, highway,
and bridge construction accounted for the lion’s share
of state and municipal long-term financing in this Dis
trict last year, amounting to $131 million, almost onethird of the total for all purposes. Had it not been for
the $96 million W est Virginia turnpike issue, how
ever, school building and improvement would have
moved out of its usual second position to top all cate
gories with its total of $84 million. Issues for refund
ing purposes amounted to $2.9 million, only 0.7% of
the total.
Housings Attract Broader M arket
The third and fourth sales of local housing authority
bonds under the 1949 amendments to the Federal H ous
ing A ct were made during 1952. The third issue in
January 1952 for $133.8 million netted the lowest aver
age interest cost, 1.959%, of all issues to reach the
market so far. The largest single borrowing in this
issue was the $25 million sold by Baltimore.
Yields Highest in Decade
Despite the large amount of new municipal issues
during the first quarter of 1952, the market was un
usually firm. In fact, it improved from a 2.26% yield
basis at the opening of the year (Dow-Jones average)
to a 2.12% basis at the end of the second week of April.
From that point, however, there was a steady decline in
prices that ran yields up to 2.44% on the final price
The fourth sale was made in September at an aver
age interest cost of 2.544% , the highest cost on any of
the new housing issues. This issue reached the market
at a time of great uncertainty as to further advances
in money rates and reaction of investors. Dealers ap
proached this issue with the idea of tapping a broader
retail market than had prevailed for earlier housing
Continued on page 12
i
6
y
March 1953
Treasury Financing
million. In total, the Treasury realized $6,878 million
T T T h e n the Treasury’s current fiscal year ends on
from debt transactions through November 1952 (the
f f June 30 next, budget expenditures will again ex
latest published final figures). There have been no is
ceed budget receipts. Latest estimate is that the deficit
sues for cash since then, and net redemptions in two
will approximate $6 billion. H ow the public debt will
later exchanges, one in December and one in February,
be affected by this budget deficit will depend on whether
were small in dollar amount.
cash balances accumulated in the General Fund in the
preceding fiscal year are used in the current year and
In addition to debt transactions for the purpose of
what happens to surplus re
raising n ew m o n e y , the
ceipts received this month
Treasury has been faced
and June.
with five major refundings
PRINCIPAL PUBLIC DEBT TRANSACTIONS
thus far in fiscal year 1953,
Up to March 1 (first
JULY I, 1952 THROUGH FEBRUARY 28, 1953
Q N e t Cash Redemptions Q N e t Cash Sales Q Rollover or Exchange
not including the weekly
eight months of fiscal 1953)
5 0___________ 2 _ _________ 4___________ 6___________ 8___________ 10
roll-over of 91-day Treas
budget expenditures have
ury Bills ranging in amount
amounted to $47,829 mil
from $1.2 to $1.5 billion.
II mo. C of I.
lion, exceeding budget re
for l%% II mo C of I
These roll-overs, exchanges,
ceipts by $10,085 million.
Savings Bonds
and new issues are shown
The Treasury met almost
in the accompanying chart
$8>4 billion of this deficit
2% I yr. C.of I |
for I^8% 11mo C of I.
with the resulting net cash
with increases in the public
receipts or redemptions be
Savings Bonds
debt. The remaining $ lj^
ing indicated.
b illio n w as c o v e r e d by
drawing down a portion of
the cash balance built up
from surpluses in the last
half of fiscal 1952. A simi
lar procedure was employed
to finance a cash deficit of
about $ 5 ^ billion in the sec
ond half of calendar year
1951; the General Fund bal
ance was drawn down and
new money was realized
from the sale of Tax A n
ticipation Bills.
SEPTEMBER Savings Bonds
During the remainder of
calendar y e a r 1953, t h e
Treasury will be faced with
OCTOBER 2'/s% Iyr 2 mo Treasury Notes
for l?a%
mo. C of I.
$30.9 billion of maturing se
curities plus $17.2 billion of
Savings Bonds
bonds which may be called
Tax Sills
for payment in June. Sec
NOVEMBER
retary Humphrey has al
| Savings Bonds
ready called for payment on
2%
mo. C.of I.
June 15, 1953, $725 million
for l?8% II mo C. Of I.
DECEMBER
2% Treasury Bonds ma
Savings Bonds
turing June 15, 1955. Fur
ther, approximately $70 bil
Savings Bonds
1
lion of 91-day bills will have
T h r e e n ew is s u e s o f
2 'h X I yr. C. of I.
for 1%% II1/? mo. C.of I.
to be refinanced on a week
Treasury s e c u r it ie s have
Z'h.% 5 yr. 10 mo. Bonds
FEBRUARY
ly basis during the year. In
for
I life mo. C .of I.
been offered to raise new
(Savings Bonds figures for February not available.)
addition to this tremendous
money so far in fiscal year
1953. Last July an offering
refinancing job facing the
was made of 2
Treas
Treasury, budget estimates
ury Bonds m a tu r in g on
for fiscal year 1954 call for
an over-all deficit of $9.9 billion, and the need for fi
June 15, 1958, and $4,245 million were sold. In that
nancing this deficit will arise primarily in the first six
month the Treasury realized net cash of $3,597 million
from debt transactions, the receipts from the bond offer
months of the fiscal year— from July through December.
ing being offset primarily by net redemptions in an ex
Because of the Mills Plan, the Treasury is expected to
realize net receipts in the last half of the fiscal year and
change of Certificates of Indebtedness, and net redemp
tions of nonmarketable debt.
may well attempt to tap accumulating corporate tax re
In October the Treasury sold $2,502 million of Tax
serves before calendar year and by again issuing Tax
Anticipation Bills.
Anticipation Bills for cash, but again, primarily because
of net redemptions in an exchange of Treasury notes
The first major debt transaction under the new ad
for Certificates of Indebtedness, net cash realized in the
ministration appeared to indicate a Treasury desire to
tailor Treasury offerings to market demands. The
month from debt transactions was less than the amount
of new bills issued. A second issue of T ax Anticipa
optional exchange into either a short-term certificate
tion Bills in November brought the Treasury $2,003
(one year) or an intermediate-term bond (5 years, 10
Tax Anticipation
Bids
<{ 7
y
Federal Reserve Bank of Richmond
months), plus a more attractive rate of return, made the
February exchange operation very successful from the
viewpoint of attrition—only alxnit 1}4% of the matur
ing issue of 1*6% C. of I/s were presented for cash re
demption. Excluding the Federal Reserve System's
exchange of $3.7 billion of the maturing certificates for
a like amount of the new 2j4% C. of L.\s, 85% of the
remaining holdings were exchanged for the new one
year certificates, alwmt 12% were exchanged for the 5
year, 10 month bonds, while about 3% were presented
for redemption.
Acceptance of Higher Rates
Recent financing implies Treasury recognition of the
desirability of more attractive rates on its offerings in
order to meet its refunding requirements without un
duly large attrition. In August the Certificate rate was
upped to 2% from the 1?#%. hi October a 14 month
note was offered at 2)/&c/< and in December an eight
and a half month certificate bore a 2% rate. The Feb
ruary refinancing offered a 2j4% one year Certificate
of Indebtedness in exchange for a 1J/$%, 111/> month
Certificate, and its success echoes the market's approval
of the terms offered. That the market demands such
rates under current monetary conditions is indicated by
the history of bill offerings (open to competitive bid
ding on a discount basis) during the past year. The
average bill rate rose from 1.688% in January 1952 to
2.126% in December, whereas in 1951 it averaged
1.552% . The average rate on four- to six-month prime
commercial paper was 2.33% for 1952 having risen
from 1.45% for 1950 and 2.17% for 1951.
Savings Bonds in the Public Debt
In January 1953 the Treasury realized net cash re
ceipts from transactions in savings bonds of all series
combined for the first month in over two years. Re
demptions of savings bonds (including accrued dis
count ) which reached a post-Korean peak of $653 mil
lion in January 1951, had fallen to $435 million by Jan
uary 1953. Total sales, on the other hand, aggregated
$504 million in January of this year in contrast with
sales of $475 million in January 1951. Sales in January
1953 were 14% above the $441 million sold in January
a year ago, while redemptions were 12% below the
January 1952 level of $493 million.
Despite the fact that 1952 was the first year that
substantial amounts of Series E bonds matured, total
redemptions of this series amounting to $4,098 million
were only slightly more than 1% above redemptions in
1951. To make the comparison more meaningful, re
demptions, exclusive of accrued discount, amounting to
$2,928 million in 1952 were almost one-sixth less than
the 83,504 million in 1951. Since these bonds 1>egan
maturing in Alav 1951, $4,853 million have matured,
but only $1,207 million, less than a fourth of the ma
turing bonds, have been redeemed. Interestingly, more
than three-fourths are being retained by their owners
under the automatic extension privilege, which provides
for continuing increase in cash value at a 3% annual
rate, compounded semi-annually.
In 1952, redemptions of all series of savings bonds,
excluding Series E, were almost double the amount of
sales—$976 million of redemptions as compared with
$586 million of sales. This is only a slightly better
record than in 1951 when redemptions totaled $1,615
million, over double the $771 million of sales.
The cash value of outstanding savings lx>nds of all
series at the end of January 1953 exceeded $58 billion,
more than one-fifth of the total public debt. Over $35
billion of this amount was in the form of Series E bonds
held by individuals. Since these securities may in gen
eral be redeemed at the option of the owner, Treasury
debt management policy must continually take into con
sideration the fact that net redemptions of savings Ixmds
necessitates refinancing in addition to that it currently
planned. The improvement in the terms of savings
bonds after May 1, 1952, has undoubtedly contributed
toward improvement of sales relative to redemptions.
March 1953
y y & jM y jfiv ie u p
Business Conditions and Prospects
u s i n e s s volume in the Fifth Federal Reserve District was maintained at near-record proportions as
1953 began. For both seasonal and psychological rea
sons some receding would have been both logical and
expectable, and that is exactly what happened. Jan
uary adjusted indicators generally were lower than in
December, but, interestingly, many gains were recorded
over a year earlier.
Durable goods industries, other than lumber, which
had felt the effects of materials restrictions for a year
or more, have responded favorably to an improved sup
ply situation. Defense-related industries continue to
maintain near peak levels, although the Savannah River
Atomic Energy Project has passed its peak and a de
clining employment trend is expected. Non-durable
goods employment is at peak levels and will probably
maintain those levels until late Spring when a seasonal
decline usually sets in. The outlook for non-durable
goods output is considered favorable in most quarters,
despite the setback which occurred in January.
The construction industry in general continued to be
a source of strength in the District’s economy and, in
spite of the fact that January failed to maintain Decem
ber’s level, new awards were 34% ahead of a year
earlier. Commercial, factory, and public works con
struction exhibited the greatest strength.
Trade levels in January receded moderately from De
cember in most lines, although automotive trade con
tinued to expand. Department store sales (adjusted)
declined 3% from December, and furniture store sales
11%. In the department stores, January sales were
still 1% ahead of a year ago, while those of furniture
stores were 3% ahead. Wholesalers’ sales were gen
erally lower in January than in December after season
al adjustment, and mixed tendencies were shown in
changes over a year ago, with drugs, groceries, and
paper showing gains and other lines showing losses.
Bituminous coal mining continued as a weak spot in
the District’s economy. January output was 21% be
low a year ago, partly due to reduced export require
ments and partly to unseasonably high average tempera
tures which reduced heating requirements generally.
On the banking scene, loans and discounts of member
banks reversed the sharply rising trend of the last quar
ter of 1952 and dropped $29 million (1.3%) during
January. The decline was much greater than that of
January 1952, but these loans were still $230 million
(11.4%) higher than a year ago. Demand deposits,
excluding interbank, dropped $148 million (3.2%)
from December 31 to January 28 but were still $228
million (5.2%) higher than a year earlier. Time de
posits increased $14 million (1%) during January and
stood nearly 6% ahead of a year ago. Bank borrow
ings from the Federal Reserve Bank and others on
D
January 28 amounted to $96 million, a gain of $53 mil
lion or 126% over a year ago. Bank debits (adjusted)
during January rose to an all-time high, 3% above De
cember and 3% ahead of a year ago.
Construction
Total construction contract awards in the Fifth Dis
trict during January were 26% lower than December
(seasonally adjusted), although 34% ahead of January
1952. Whether this decline in awards is evidence of
an impending down-drift in the construction boom is
a moot point, but the fact is that the December figure
was the second highest on record. All types of construc
tion showed seasonally adjusted declines from Decem
ber to January with the exception of one- and twofamily houses, which showed a gain of 16%. However,
relative to a year ago, one- and two-family housing was
the only type of construction which was down, the drop
amounting to 15%.
Commercial construction, which had been widely ex
pected to show marked expansion, is following true to
prediction. Although adjusted January figures were
12% below December, commercial construction was
103% ahead of a year ago and at a point exceeded by
only a few months in past history.
Awards for new factories in the District during Jan
uary, though 27% lower than adjusted December levels,
were 339% higher than a year ago.
Contract awards for public works and utilities in Jan
uary (adjusted) dropped 12% from December, but ran
63% ahead of a year ago. Although irregular in move
ment, there has been a continuous upward trend in this
type of construction in the District since 1944. Ex
pansion of the electric utilities should continue for some
time, and the growth in housing and delayed municipal
needs augurs well for a further expansion.
Residential construction contract awards dropped
26% from December to January, on a seasonally ad
justed basis, and were 4% under January 1952. Al
though many analysts believe that a lessening in this
type of activity is likely, the fact is that it continues at
very high levels.
Textiles
Cotton consumption during January made a fairly
poor showing, down 12% (adjusted) from December
and 1% below a year ago, although this is hardly a
good indication of the textile market at the present time.
Nearby and spot goods have been in strong demand,
particularly in print cloth, broad cloth, and denim, and
forward coverage on some of these has been made
throughout the entire year. The industry is fairly well
sold up on these types through the second quarter, and
there is some evidence of retail demand expanding.
The decline in the price of raw cotton has had little
adverse effect on forward coverage since prices quoted
i 9 Y
Federal Reserve Bank of Richmond
appear to have adjusted to lower cotton prices. Spot
and nearby goods command a premium over forward
business, indicating a fairly strong current demand in
the face of weakening staple.
Industrial goods, particularly those required by the
automotive trade, have improved markedly. Business
for the yarn spinners has improved considerably, with
the knitters supplying the bulk of the demand. From
these facts there is more than a hint that the cotton
textile industry will improve over its January level and
continue at a higher level during the second quarter.
Style trends apparently are still favorable to cotton,
but this has not applied equally to the rayon and acetate
industries. As a consequence, some cutbacks have been
noted in rayon production.
The volume of business in the District’s knitting
mills is back to a level similar to 1950 and early 1951,
while that of the apparel industry is at an all-time high
level. In the over-all, it is expected that the textile in
dustry will be a source of strength, rather than weak
ness, in the District’s economy during the first half.
Trade
Department store sales in January declined 3% from
December’s high level and were but 1% ahead of sales
a year ago. January was an unseasonably warm month
in this area, and this found adverse sales reflection in
such departments as men’s clothing and women’s and
misses’ coats and suits. On the other hand, substan
tial gains over a year earlier were achieved in the hard
goods lines—in radios, television sets, major household
appliances, and floor coverings. These gains were no
doubt responsible for the 10% increase in instalment
sales (adjusted basis) from December to January, and
26% above a year ago.
The declining trend in furniture store sales, in evi
dence for several months, continued in January, with
adjusted sales down 11% from December. January
sales, however, were 3% higher than in January 1952,
and it is interesting to note that cash sales in these
stores rose after seasonal correction in January and
were considerably ahead of a year ago. Credit sales,
adjusted, declined 15% from December to a level even
with January last year.
Xew passenger automobile sales in December, the
latest figures available, showed a gain of 14% over No
vember and 27% over a year earlier. Trucks in the
same months rose 3% from the previous month and
13% from a year earlier. Trade reports indicate that
January sales will run ahead of last year. Since sales
of consiuner durables and automobiles weigh heavily
in determining business attitudes toward prospects for
coming months, these favorable tendencies in the Dis
trict seem to match the optimistic views and trends on
the national scene.
F if t h D is t r ic t Ba n k in g
DEBITS TO INDIVIDUAL ACCOUNTS
(000 omitted)
January
January
1953
1952
Dist. of Columbia
1,055,092
% 1,258,178
Washington
Maryland
Baltimore
1,390,724
1,267,730
28,730
Cumberland
27,019
Frederick ...
23,445
22,485
Hagerstown
38,069
36,541
North Carolina
68,303
Asheville ___
68,995
Charlotte
882,137
360,721
109,594
114,117
Durham
112,774
123,439
Greensboro
23,643
Kinston —
21,519
232,124
Raleigh .
174,436
50,010
Wilmington —
48,129
21,752
Wilson
20.719
Winston-Salem
170,873
190,893
South Carolina
85,421
91,146
Charleston
144,581
161,572
Columbia-----117,038
109,169
Greenville----74,442
72,910
Spartanburg ...
Virginia
28,028
27,769
Charlottesville
45,025
39,238
Danville
52,143
47,875
Lynchburg ----53.719
48,267
Newport News
257,764
Norfolk
245,237
28,483
31,356
Portsmouth .
589,298
624,066
Richmond
127,527
117,587
Roanoke .
West Virginia
Bluefield___
49,647
53,400
191,647
204,461
Charleston ~
Clarksburg 42,023
50,729
82,800
79,367
Huntington .
31,985
31,228
Parkersburg
_$ 5,801,841
$ 5,677,298
District Totals .
s t a t is t ic s
50 REPORTING MEMBER BANKS
(000 omitted)
Change in Amount From
Jan. 14,
Feb. 13,
Feb. 11,
1952
ITEMS
1953
1953
..$1,339,799** + 6,418
+162,515
Total Loans
.. 612,003
— 8,468
+ 40,095
Bus. & A gric.------—
784
.. 260,485
4- 19,226
Real Estate Loans .
+103,775
All Other Loans__
- 483,334
+ 15,675
— 89,194
— 52,797
Total Security Holdings______.. 1,813,064
— 41,458
— 66,511
U. S. Treasury B ills-----------.. 227,038
— 42,104
— 15,575
„ 142,726
U. S. Treasury Certificates —
— 2,758
— 2,127
U. S. Treasury N otes---------- 286,260
+ 51,795
— 30,220
U. S. Treasury Bonds----------_ 931,472
+ 6,150
Other Bonds, Stocks & Secur. 225,568
+
817
+ 18,066
— 6,056
Cash Items in Process of Col. _ 293,924
— 24,105
Due From Banks------------------- 179,292* — 18,994
— 2,258
— 5,769
77,326
Currency and Coin
+ 50,716
Reserve with F. R. Banks .
582,057
+ 12,978
+ 2,365
+ 1,409
Other A ssets----------------58,246
— 98,252
+153,546
4,343,708
Total Assets
+ 96,922
Total Demand Deposits----------- 3, >335,757
— 95,553
— 86,669
+ 41,020
Deposits of Individuals-------- 2, ,471,350
+ 64,815
Deposits of U. S. Government 145,533
- f 29,427
+ 19,978
Deposits of State 6 Local Gov. 187,692
+ 2,119
— 15,727
Deposits of Banks__________ 471,671* — 55,586
— 2,703
59,511
+ 4,695
Certified & Officers* Checks _
+ 22,024
+ 2,077
Total Time Deposits--------------- 660,045
+ 2,197
+ 20,517
Deposits of Individuals---------- 582,087
77,958
—
120
+ 1,507
Other Time Deposits----------88,100 — 11,500 + 14,500
Liabilities for Borrowed Money
43,138
+ 5,523
+ 7,776
All Other Liabilities_________
+ 12,824
1,201
Capital Accounts------------------- 266,668
+158,546
— 98,252
Total Liabilities-----------------$4 ,343,708
+
* Net figures, reciprocal balances being eliminated.
** Less losses for bad debts.
y t fo n M
y
j(b M
March 1953
£ u *
F if t h D is t r ic t S t a t is t ic a l Da t a
SELECTED INDEXES
Avg. Daily 1935-39=100—Seasonally Adjusted
BUILDING PERMIT FIGURES
January
1953
% Chg.—
Latest Mo.
Dec. Jan.
Prev.
Yr.
1952 1952
Mo.
Ago.
184
156
Automobile Registration*
+14
H1-27
+ 3
AE 3
454
453
467
Bank Debits
—3
—21
133
163
129
Bituminous Coal Production
693r 381
—26
H1-84
511
Construction Contracts-------1 9
Htio
43
53
39
Business Failures—N o .------+ 5
Hrl7
257
258
Cigarette Production---------- 2
H 7
147
157
161
Cotton Spindle Hours
—3
Hh
Department Store Sales**----- 117p 121r 116
h1
358
405
Electric Power Production___
+ 2
Hhl4
Ar 8
153
o
159
Manufacturing Employment* 188
Retail Furniture: Net Sales _ 194p 217
-1 1
H 8
-1 2
Hh
323
383
h4
Life Insurance Sales------------ 337
* Not seasonally adjusted.
** 1947-1949=100.
Back figures available on request.
Jan.
1953
WHOLESALE TRADE
Sales in
Jan. 1953
compared with
Dec.
Jan.
1952
1952
LINES
—9
—17
Auto supplies (13) —20
—10
Electrical goods (8)
—8
Hardware (12)
+11
—5
—11
Industrial supplies (6) +19
Drugs and sundries (13)
+
?z
—12
—5
Dry goods (15)
—1
Groceries (56)
+ 6
Paper and products (5)
+ 1
+ «
—15
Tobacco products (11) ~
T 6
—6
Miscellaneous (1 0 9 )----T 8
—1
District Totals (248) + 8
Stocks on
Jan. 81, 1953
compared with
Jan. 31 Dec. 31
1952
1952
0
t't
±1
±1
+1l
tu
1!
+23
—15
—5
±%
—9
Number of reporting firms in parentheses.
Source: Department of Commerce.
DEPARTMENT STORE OPERATIONS
(Figures show percentage changes)
Other
Rich. Balt. Wash. Cities
0.0 + 6.7
Sales, Jan. *53 vs Jan. *52 „ — 1.0 + 5.3
Sales, 12 Mos. ending Jan. 81, *53
vs 12 Mos. ending Jan. 81,
+ 4.2 — 0.1 + 6.8
*52----------------------------- + 4.5
Stocks, Jan. 81, *53 vs *52 _ + 0.9 + 6.8 + 6.8 + 6.4
Outstanding orders
.. +23.8 +30.2 +32.0 + 4.9
Jan. 31, *53 vs *52
Open account receivables Jan. 1
41.7
46.9
41.9
collected in Jan. *53 ----34.3
Instalment receivables Jan. 1
16.3
11.4
13.3
13.6
collected in Jan. *53 —
Md. D.C. Va. W.Va. N.C.
Sales, Jan. *53 vs Jan. *52 +5.1 0.0 +3.5; + 4 .9 +7.3
Dist.
Totals
+ 3.2
+ 5.5
+ 6.1
+26.2
41.7
13.3
S.C.
-0 .3
Maryland
Baltimore
Cumberland
Frederick —
Hagerstown
Salisbury __
Virginia
Danville
Lynchburg __
Newport News
Norfolk -------Petersburg __
Portsmouth__
Richmond___
Roanoke .
Staunton
West Virginia
Charleston .
Clarksburg
Huntington —
North Carolina
Asheville ___
Charlotte----Durham
Greensboro
High Point .
R aleigh ------Rocky Mount .
Salisbury
Winston-Salem .
South Carolina
Charleston------Columbia_____
Greenville ____
Spartanburg---Dist. of Columbia
Washington ---District Totals----
January
1952
5,249,825
16,950
92,450
49,115
80,180
$ 8,812,555
10,950
856,782
106,170
63,294
724,926
839,641
116,015
948,340
60.500
276,385
944,485
608,798
55.500
242,742
142,794
216,624
1,488,385
143,304
4,091,860
1,128,485
637,704
139,400
834,802
94,500
220,665
174,350
83,885
125,471
128,893
4,560,776
1,279,376
1,212,914
591,855
1,437,060
183,879
63,975
500,621
142,662
3,853,077
400,077
825,454
257,260
2,239,827
826,321
85,600
531,043
200,225
530,845
619,500
98,315
133,598
643,010
756,487
125,489
.. 2,925,067
-$24,545,878
3,494,060
$26,278,720
RETAIL FURNITURE SALES
Percentage comparison of sales in
period named with sales in
same period in 1952
January 1953
STATES
Maryland (6) —
Dist. of Col. (7)
=
±*8
Virginia (18)
West Virginia (10)
North Carolina (12)
—4
South Carolina (5) ..
District (58)
+ 8
INDIVIDUAL CITIES
Baltimore, Md. ( 6 ) -------±1
Washington, D. C. (7) —
—8
Richmond, Va. (6)
+46
Charleston, W. Va. (3)
Number of reporting firms in parentheses.
i 11 h
Federal Reserve Bank of Richmond
Bank Earnings, 1952—Fifth District
Continued from page 4
been able to show as net current earnings an increasing
share of gross earnings in the seven-year period.
Salary and wage payments in 1952, at $57 million,
continued the several-year uptrend and accounted for
just over half (50.3%) of all expense payments. In
1940 total salary and wage payments of $17 million
represented less than 40% of total expenses, while in
1945 they totaled $27 million and were about 45% of
total expenses.
Interest paid on time deposits in 1952 was $1)4 mil
lion above 1951 but took about the same proportion of
total expenses—a proportion, incidentally, which has
shown a significant decline over the years, from 15.4%
in 1940 to 7.9% in 1952.
Dividends Declined Relative to Total Earnings
These member banks paid out in dividends 42% of
their net in 1952, in dollar amount the highest ever
distributed but a smaller share of total earnings than
in any other postwar year. In 1945, dividends were
10^2%. of total earnings. By 1947 this percentage had
dropped to 9 l/ 2c/c and last year to 8J^%. When re
lated to total capital accounts, dividend payments in
1952 did not compare unfavorably with 1945 and the
postwar years; the 1952 ratio was 3.41% while the 1945
figure was 3.35%. This was accounted for by a much
slower growth in capital accounts than in gross earn
ings and in dividend payments.
The banks retained in their capital accounts (in 1952)
over $2 million more of net profits than in 1951, and
the amount was equal to 58% of all net profits. As a
result, retained earnings ranked first among the factors
which left capital accounts at year-end 6% above the
previous January. Since total deposits increased only
4% over the year, the ratio of capital to deposits rose
slightly, from 6.9% in 1951 to 7.0% in 1952.
Record Amount of State and Municipal Financing in 1952
Continued from page 6
quotations of 1952. This deterioration was a conse
quence in general of a tightened money market and in
particular of the continued heavy flow of new offerings
of state and municipal bonds that produced the record
amount of $4.4 billion for the year.
Opening 1953 with $267 million of state and munici
pal bonds listed in the Daily Bond Buyer's Visible Sup
'! 12
ply of issues scheduled for sale in January, the market
continued to decline, reaching 2.62% at the end of the
second week of February. This is the highest yield
since July 1940 when a figure of 2.65% was recorded.
With a still heavy supply of bonds due in the market
within the next 30 days, many dealers feel that the price
decline has not yet run its course.
Y
@FedFRASER