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MONTHLY

REVIEW

of Financial and Business Conditions

FIFTH
FEDERAL

RESERVE
nc

Federal Reserve Bank of Richmond, Richmond 13, Va.

D is t r ic t

May 31, 1947

Business Conditions
here is a substantial element of strength in the cur­
rent business situation despite the fact that the per­
sistent expansion registered in consumer purchases
throughout the war and postwar periods appears to have
leveled off. Strength is still evident in the trade stiuation,
because selected stores report as late as the middle of May
that no material resistance is found in consumers’ reactions
to prevailing prices when the desired quality of goods is
on hand. There is very great resistance, however, to the
poor quality of wartime merchandise. The current char­
acteristics of the retail trade situation are important con­
siderations in the business outlook for the remainder of
the year, for they indicate that by and large price rise has
not materially deteriorated the aggregate flow of goods into
consumption channels.
Current trade statistics give evidence to the foregoing
conclusion. The weekly reporting department stores of
this District show figures reported in the weeks ended
May 10 and May 17 again running ahead of a year ago,
after showing slight losses in the three weeks following
Easter. The seasonally adjusted index of department
store sales for a broader group of stores, show April
sales 7 per cent ahead of a year ago, but 3 per cent less
than in March. Year to year gains in this District are
continuing to run below the national average, largely be­
cause o f the importance of Baltimore, Washington, Nor­
folk, and Charleston, South Carolina in these figures,
and because of the effect of the removal of the warboom condition from these cities.
Furniture store sales, though erratic in their movement,
have continued to hold at high levels. Other durable
goods stores, notably building-supply houses and auto­
motive concerns, have continued to show sales well in
excess of corresponding periods a year ago. Durable
goods sales also have been an important consideration in
the rise of department store sales, but non-durables also
show an increase in the first quarter of the year compared
with the same quarter a year ago. In these three months
comparisons home furnishings accounted for 45 per cent
of the total store sales increase. Women’s and misses’
wear sales in the first quarter of 1947 show the only de­
crease of a major department from the same quarter of
last year. Stores attribute this decline in part to lack of
desired quality merchandise.

T




Other factors of strength in the short-run business
outlook are a high level of construction put in place; and
a higher level of farm income for the great majority of
farmers of the District. Although new starts in con­
struction activity have slowed down very materially, the
amount of materials and labor required to complete pro­
jects already started will stay at a high level through the
summer. If building costs are not adjusted downward
sufficiently to meet the ideas of would be builders, this
industry will be a weakening factor in the business out­
look in the fall of the year. There is, however, a con­
siderable amount of public and commercial construction
evolving despite high costs, and this has raised both con­
tract and permit levels for April as compared with March.
Thus despite the slowing in residential and heavy indus­
trial construction starts, total construction contract awards
in April were high by past comparisons except during the
war years.
Cash farm income for the District in the first three
months of 1947 rose 62 per cent over the same months of
1946. These changes find reflection in the maintenance
of peak levels in the sales of wholesalers who deal pri­
marily with rural retailers. Most farm prices affecting
Fifth District products are strong, and no material weak­
ness need be expected at least until the new harvest.
Tobacco is an exception, in that British purchases are
expected to be well below a normal level.
On the unfavorable side of the business situation are
the excessive department store and selected wholesalers’
inventories and the repercussions these are likely to have
on the volume of production and employment. Depart­
ment store and presumably many general store inventories,
primarily in non-durable goods, are too high in relation
to a more or less stabilized level of sales. Since April
stores have been attempting to correct this position by re­
ducing their new orders below the sales level. A number
of store executives have expressed the opinion that the
adjustment would be made by July 1, others think it
may take a shorter or a longer time.
Reduction in orders from both wholesalers and retailers
causes reductions in manufacturers’ order banks, or causes
their inventories to rise, or forces a reduction in plant
operations. As of the middle of May, plant shut-downs
or reductions in operations in the Fifth District had been

MONTHLY REVIEW

2

of little consequence. A few specialty textile mills had
shut down, and some yarn mills had moderately cur­
tailed. Specialty furniture plants and small upholsterers
have curtailed or quit, but on the whole there has been very
little adverse effect on employment. Local labor markets
report data that indicate a stable employment level in
manufacturing industries up to July. Although cotton
yarns seem to be slackening somewhat, the cloth producers
are still able to sell all their available output at premiums
over contract prices.
Liquid savings as represented by time deposits in the
weekly reporting banks continue to move slowly upward.

Some banks, however, indicate that there has been an in­
crease in the rate of turnover of these deposits, which
indicates some usage of them for current transactions.
Series E savings bonds sales for the District in the first
quarter of 1947 totaled $93,971,000 which is $11,431,000
higher than redemptions of A — E savings bonds in the
same period. Maryland, however, shows redemptions
$3,660,000 higher than sales in the three months, while
Virginia, West Virginia, North Carolina, and South Caro­
lina show redemptions greater than sales in March. The
evidence is not clear whether these funds were used to
pay taxes, or used for purchases.

BUSINESS IN DEXES—FIFTH FEDERAL RESERVE DISTRICT
Average Daily 1935-39 = 100—Seasonally Adjusted
Apr.
1947
Bank Debits __________________
Bituminous Coal Production*..
Building Contracts Awarded_
Building Permits Issued______
Cigarette Production _________
Cotton Consumption
Department Store Sales____________
Department Store Stocks.....................
Electric Power Production_________
Employment— Mfg. Industries* ___
Employment— Nonmfg. Industries*
Furniture Sales— Retail _____________
Gasoline Consumption ______________
Life Insurance Sales_________________
Wholesale Trade:
Automotive Supplies**
Drugs
Dry Goods _______
Electrical Goods**
Groceries __________
Hardware
Industrial Supplies** ________
Paper and Its Products**____
Tobacco and Its Products**..
Business Failures
Lumber Production ______
Wheat Flour Production..
*Not seasonally adjusted
**1938-41 = 100




Mar.
1947

Feb.
1947

270
132
296
198
254
159
299
302r

293
150
272
144
242
152
307
300r
238
134

240

279r

246

239

291
159
240
246
262
157
281
307
234
134
123
236r
157
247

244
4
365
170
244
143
279
217
207
126
119
237
160
283

308
268
167
69
278
114
317
200
121
17

345
260
163
65
277
114
271
164
108
19
126
145

345
236
153
80
271
113
242
150
123
14
155
142

263
269
157
34
235
98
191
142
115
2
159
98

Apr.
1946

% Change
Apr. 1947 from
Mar. 47
Apr. 4t
— 8
— 12
+ 9
+ 38
+
5
+
5
— 3
+
1

+ 11
—
4+
4+
-j-

19
16
4
11
7
39

— 14

+

+

3

— 13

— 11
+ 3
+ 2
+ 6
0
0
4- 17
+ 22
+ 12
— 11

+ 17
0
4- 6
+103
+ 18
+ 16
+ 66
+ 41
+
5
+750

1

MONTHLY REVIEW

3

Regulation V Loans in the Fifth District
Conversion of this country’s industry to the manufac­
ture of the materials of war gave rise to new financial
requirements for the firms holding contracts to supply the
armed forces. Conversion and expansion of productive
equipment necessitated new financing and the new terms
of sale increased working capital requirements for the ac­
quisition of inventory and the payment of production
costs. Efforts were made to assure a supply of funds to
contractors through advance and progress payments and
the facilitation of bank loans through legislative authority
for the assignment of claims against the Government
(Assignment of Claims Act of 1940).
These steps were partially successful but had several
disadvantages. Only prime contractors were eligible for
advance payments, and while they in turn might make ad­
vance payments to their subcontractors, this was not done
in all cases, resulting in shortages of working capital for
the latter. Advance payments to contractors who were
also subcontractors or who had purchase contracts from
more than one service involved considerable administra­
tive difficulties that served to delay their receipt of pay­
ments. The advance of funds by the contracting agencies
without interest charges led to overstocking of inventory
and a consequent tying up of needed raw materials. Final­
ly, even the facility of the assignment of claims against
bank loans did not in all cases reduce risks to the extent
that lenders were willing to advance funds. The rapid
growth of many firms’ scale of operations and the shift
to new fields of production led to serious doubts as to the
ability to complete contracts in a manner satisfactory to
the contracting services. Growth in scale of operations
was not matched in all cases by increases in capital funds;
many contractors had financial needs far out of propor­
tion to their net worth, indeed, so far out of proportion
as to render them poor credit risks by normal standards.
On March 26, 1942, the President signed Executive
Order No. 9112 authorizing the War and Navy Depart­
ments and the Maritime Commission to enter into con­
tracts with the Federal Reserve Banks, the Reconstruction
Finance Corporation, and any other financing institutions
for the purpose of guaranteeing these institutions against
loss in financing contractors and subcontractors engaged
in operations deemed necessary, appropriate, or convenient
for the prosecution of the war; authority was granted to
make or to participate in loans for this purpose. The
Federal Reserve Banks were authorized to serve as agents
for the War and Navy Departments and the Maritime
Commission in carrying out the provisions of the order,
subject to the supervisions and regulations of the Board
of Governors of the Federal Reserve System. This power
of supervision and regulation included authority to de­
termine rates of interest, guarantee fees, and other charges
in connection with guarantees of loans.
The program contemplated by the executive order was
not intended to supplant the existing sources of funds for
war contractors and subcontractors. Rather it supple­
mented them as necessary to insure the maximum supply
of goods for the prosecution of the war, and employed
existing organizations and trainer personnel for that pur­
pose. Advance and progress payments were still made to




contractors; some requests for guarantee agreements ini­
tiated advance payments so that loans were not necessary.
Private financing arrangements were still made where
proposed loans lay within the limits of risk that the lend­
ing banks were willing and able to assume and the amounts
were within the legal limits of the lending banks. The
vast majority of requests for guarantees originated with
banks that had been approached by would-be borrowers
whose requirements were beyond their capacity to handle.
Acting under the authority granted by the executive
order, the Board of Governors issued Regulation V, effec­
tive April 6, 1942. The regulation stated: “ The objec­
tive of the Federal Reserve System in carrying out the
provisions of the executive order is to facilitate and ex­
pedite war production . . . by arranging for the financing
of contractors, subcontractors, and others . . . ” It
further announced that the Federal Reserve Banks had
been designated as fiscal agents of the United States by
the Secretary of the Treasury and would arrange guaran­
tees and loans under the supervision and direction of the
Board of Governors and in accordance with the instruc­
tions of the War and Navy Departments and the Mari­
time Commission. Interest rates, fees, and other charges
on loans would be determined by the Board of Governors
after consultation with the other agencies, and maturities
would be consistent with the needs of the borrower.
The approaching end of hostilities brought the question
of contract termination to the fore, and legislative action
was taken to simplify and to expedite procedures when
orders were cancelled by the armed forces. The Contract
Settlement Act of 1944 made necessary a change in the
form of guarantee, and accordingly Regulation V was re­
vised effective September 11, 1944 so as to take account
of the need for loans against claims arising from contract
terminations.
Under Regulation V, four types of loan guarantees
were issued. These took the form of an agreement on
the part of the guarantor to purchase a stipulated per­
centage of the outstanding amount of a loan from the
financing institution upon 10 days notice, regardless of
any default that might have occurred. In some cases the
guarantee covered a specific advance to the borrower; in
other cases advances were guaranteed in a revolving
credit with the maximum amount determined by payments
due or to become due or by a formula based upon the
outlays made against the completion of contracted work
less any payments received. The four types of loans were
designated as V, V T, 1944V, and T loans.
The V loans were essentially production loans although
in some cases they contained certain provisions for term­
ination financing as well. V T loans were similar, except
that they were intended to free working capital upon
termination of contracts as well as to provide working
capital to finance the contracts. These V T loans were
made between September 1943 and September 1944. With
the revision of Regulation V in September 1944, the form
of guarantee agreement was simplified and shortened, and
the new loans to provide working capital for war produc­
tion purposes or to provide funds for both production and
contract termination financing were designated as 1944V

MONTHLY REVIEW

4

loans. Contract termination loans, or T loans, were for
the purpose of enabling war contractors to obtain the use
of funds tied up in war production pending final settle­
ment of claims arising from terminated contracts. These
loans were made after the revision of Regulation V on
September 11, 1944.
From the beginning of the V loan program in April
1942 through February 1946 (the date of the last appli­
cation), the Federal Reserve Bank of Richmond received
347 applications for guaranteed loans aggregating $104,004,827. O f these applications, 26 were withdrawn be­
fore final action, and 45 aggregating $6,126,500 were re­
jected. The principal reasons for these rejections were
that the guarantor could not certify that the production
of the applicant was necessary, appropriate, or convenient
for the prosecution of the war, or that it was believed
preferable to provide the necessary financing by advance
payments. O f the 276 guarantees authorized, aggregating
$85,297,056, loans were actually made on 231 authoriza­
tions. The type of authorization, the amounts authorized
and the amounts actually borrowed (principally on revolv­
ing credit lines) are given in table I. It will be noted
from this tabulation that comparatively few T loans were
made. This may be accounted for by the fact that the
services made such prompt settlements or partial payments
on terminated contracts that only a few companies found
it necessary to borrow under the contract termination plan.

most 60 per cent of the total number of loans, they repre­
sented less than 20 per cent of the total amount authorized.
Loans of over $1,000,000, however, though less than 7 per
cent of the total number, accounted for almost half of the
total amount. The distribution of the number and the
amount of authorizations by size of loan is presented in
table 3.
Table 3
P E R C E N T A G E D IST R IB U T IO N OF R E G U L A T IO N V L O A N S
A U T H O R IZ E D A N D M A D E B Y SIZE OF LO A N
Size o f loan

Percentage o f total
num ber o f loans

Percentage o f total
am ount o f loans

10.0

.1

6.5
25.1
13.8
20.8
10.4
6.5
6.9

2.6
4.0
12.7
13.8
16.9
49.7

100.0

$5,000 o r less
5.001 - 10,000
10.001 - 50,000
50.001 - 100,000
100.001 - 250,000
250.001 - 500,000
500.001 - 1,000,000
Over 1,000,000

100.0

.2

About 51 per cent of the total number of Regulation V
loans carried the maximum interest rate of 5 per cent,
but this rate was being charged on but 12.6 per cent of
the total amount of loans. Around 10 per cent of the
total number of loans were made at an interest rate of 3
per cent, representing 54 per cent of the amount borrowed
under the program. Small loans were generally made at
the maximum rate, although some were made at rates of
4 or Aj 2 per cent.
/

Table 1

Table 4

R EG U L A T IO N V L O A N S A U T H O R IZ E D A N D M ADE
(A m ounts in thousands o f dollars)

PE R C E N T A G E D IST R IB U T IO N OF A M O U N T OF R E G U L A T IO N V
L O A N S M A D E B Y R A T E OF IN T E R E ST A N D B Y SIZE
OF B O R R O W E R

Type o f Loan

N o. o f
Loans

A m ount
Authorized

A m ount
Borrowed*

V
VT
1944V
T

180
14
32
5

$45,366.6
6,450.0
16,101.5
685.0

$87,674.5
5,716.5
16,111.2
567.6

231

$68,603.1

$110,069.8

Total

’•
‘The am ount borrow ed frequently exceeded the am ount authorized in the
case o f revolving credits due to loans being paid off and new loans being
made under the same authorization.

The total amount of credit available to borrowers in­
cluding amounts outstanding are shown in table 2. These
amounts are given for semiannual periods from June 30,
1942 through December 31, 1946, and for March 31, 1947.
The two loans aggregating $25,300 shown as outstanding
on March 31, 1947 were in process of collection in bank­
ruptcy proceedings.
Table 2
A M O U N T OF CREDIT A V A IL A B L E TO B O R R O W E R S
IN CLU D IN G A M O U N T O U TSTAN D IN G
R E G U L A T IO N V LO A N S
June 30, 1942— M arch 31, 1947
(In thousands o f dollars)
V Loans

Date
June
Dec.
June
Dec.
June
Dec.
June
Dec.
June
Dec.
Mar.

30,
31,
30,
31,
30,
31,
30,
31,
30,
31,
31,

1942
1942
1943
1943
1944
1944
1945
1945
1946
1946
1947

$ 4,922.7
17,667.3
25,227.6
18,448.8
19,867.3
13,108.5
4,977.0
1,726.7
168.6
13.2
10.3

V T Loans 1944V Loans

$2,075.0
4,900.0
4,350.0
2,000.0

$ 2,487.8
12,640.0
8,356.1
1,515.0
15.0
15.0

T Loans

$1,535.0
4,045.0
2,010.0
25.0

Total
$ 4,922.7
17,6>67.3
25,227.6
20,523.8
24,767.3
21,481.3
23,662.0
12,092.8
1,708.6
28.2
25.3

O f the 231 authorized borrowings, the smallest credit
guaranteed was for $500 and the largest for $4,000,000.
While loans from $10,000 to $250,000 accounted for al­




Loans to borrow ers w ith total assets o f
Rate o f
interest
(per cent) Total
2
2-3
3
3-4
4
4-5
5
Total

0.1
4.5
54.2
1.6
23.2
3.8
12.6
100.0

Less than
$50,000

$50,000250,000

6.9
14.9
85.1
100.0

17.0
6.4
69.7
100.0

$250,000750,000

$750,0005,000,000

1.8
4.5
50.0
10.8
32.9
100.0

0.2
6.8
69.4
1.2
19.9
2.2
.3
100.0

ooo,ooo

100.0

100.0

Producers of trucks, vans, trailers, spare automobile
parts, etc., for combat transportation accounted for more
than one-fourth o f the money borrowed. This does not
mean that there were many of such companies borrowing
since only-10 out of a total of 137 borrowers were involved.
These 10 borrowers included several large companies with
revolving lines of credit which accounted for the bulk of
the money borrowed in this category. This applied to a
less extent to construction contractors, who accounted for
more than 20 per cent of the money borrowed. One con­
struction company out of the 15 borrowers in this category
was a particularly heavy borrower on a revolving line of
credit. Ship construction and repair, and aircraft, air­
craft engines, parts and accessories accounted for 13 and
8 per cent respectively of the total amount borrowed.
There were 19 concerns represented under the first cate­
gory and 10 under the latter. Most of the authorizations
were for single loans rather than revolving credits, with
applications for additional authorizations being made for
a few borrowers. O f the concerns borrowing under the
Regulation V plan, several were new concerns and quite
a number converted from the manufacture of nonessential
products to war materials, while others expanded their

MONTHLY REVIEW

business in order to handle a greater volume of production.
Table 5 shows the amount of Regulation V borrowings
classified by type of product covered in contracts held by
the borrowers.
Table 5
R EG U L A T IO N V L O A N S B Y T Y P E OF PR O D U C T C O YE R ED
IN C O N TRA C T
(A m ounts in thousands o f dollars)
Am ount
Borrow ed

Type o f Product

P e r Cent

1. Metal and m etal products
A ircra ft, a ircra ft engines, parts and accessories $ 8,680.8
14,269.1
Ship construction and r e p a ir ; accessories
Combat transportation and other m otor veh icles;
28,890.1
accessories
Guns, am m unition, bombs, shells, e t c .; explosives
8,292.7
and am m unition loading and assem bling
2,414.6
M achinery, electrical equipm ent & appliances
Other m etal products ; iron & s te e l; nonferrous
metals and their p rod u cts; m achine tools and
6,355.7
other metal w orking equipm en t; etc.
638.9
2. Chemicals, drugs, rubber
5,301.1
8. Textile products, leather
3,965.7
4. Foods and related products
5. Other m anufactured products, including contracts
8,648.3
unallocable because o f diverse products covered
22,437.1
6. Construction
175.7
7. Other nonm anufacturing and nonindustrial

7.8
20.4
0.1

$110,069.8

100.0




Total

8.0
13.0
26.2
7.5
2.2
5.8
0.6
4.8
3.6

5

The Regulation V program was a means of assuring
the financing of war production contracts through the
utilization of the existing banking structure. The guaran­
teeing of large percentages of the loans by the Federal
Reserve Banks as agents for the contracting services made
it possible for local banks to finance local industries. Had
this method of financing not been available, it is probable
that the production of war materials would have been
more centralized, since it would have been difficult for
the smaller concerns in out of the way places to obtain
adequate credit. Not only did the V loan program prove
helpful to the business concerns participating, but it was
a good investment for the contracting services involved.
Although losses on loans have been written off by the
services, the receipts far outweighed the losses. Far
more important, the Regulation V program made an im­
portant contribution to the achievement of maximum pro­
duction by American industry and thus to the successful
prosecution of the war.

6

MONTHLY REVIEW

Banking
The four-week period ended May 14 saw a $20 million
decrease in the loans and investments of weekly reporting
member banks of the Fifth Federal Reserve District. As
has been the case during the past 14 months, a substantial
decrease occurred in investments while loans increased
slightly. Total loans and investments amounted to $1,840
million on May 14 as compared with $1,860 million on
April 16.
Commercial, industrial, and agricultural loans increased
by $1 million during the four weeks to $257 million. Loans
to brokers and dealers for purchasing and carrying securi­
ties remained constant at $5 million, while loans to others
than brokers and dealers for this purpose fell by $2 mil­
lion to $38 million. Real estate loans increased another
million dollars to a new high of $85 million, while other
loans showed a $1 million increase to $109 million.
Decreases were shown in holdings of all types of se­
curities except certificates of indebtedness, which gained
substantially from the April 16 level. Recent redemptions
of Treasury bills had no apparent effect upon holdings of
these obligations as the fluctuations were without discerni­
ble pattern. The drop of holdings of United States Gov­
ernment bonds is the largest for comparable periods in
recent years and occurred in the last two weeks of April.
The table below gives the weekly holdings of Government
obligations.
H OLD IN G S OF U. S. G O VE R N M EN T O B LIG A TIO N S
W E E K L Y R E PO R TIN G M EM BER B A N K S

second and third weeks. As may be seen from the preced­
ing table, reserves showed a net decline of $12 million for
the period, occasioned by losses of funds through com­
mercial and financial transactions and Treasury transac­
tions, these losses being partially offset through gains
from the other factors.
The last half of April saw a substantial decline in the
average total deposits held by Fifth District member banks
relative to those o f all member banks in the country. De­
posits declined in dollar amounts in all states except West
Virginia which held its own from the March level.
AVERAGE

D A IL Y

TOTAL

D E PO SITS*

OF M E M B E R B A N K S

L ast h a lf o f M arch
$ m illions
Maryland
Reserve city banks
Country banks
District o f Columbia
Reserve city banks
C ountry banks
V irginia
Reserve city banks
C ountry banks
W est V irgin ia
North Carolina
Reserve city banks
Country banks
South Carolina
F ifth D istrict

L ast h a lf o f A p ril

% o f U. S.

982
619
363
942
921
21
1,286
291
995
540
832
377
455
422
5,004

.95
.60
.35
.91
.89
.02
1.24
.28
.96
.52
.81
.37
.44
.41
4.85

$ m illions
977
619
359
928
907
21
1,270
291
980
540
815
370
445
416
4,947

% o f U . S.
.95
.60
.35
.90
.88
.02
1.23
.28
.95
.52
.79
.36
.43
.40
4.79

♦Excluding interbank demand deposits.

F ifth D istrict
A SS E T S A N D L IA B IL IT IE S OF M EM BER B A N K S
F ifth Federal Reserve D istrict
A p ril 30, 1947
P relim inary
(M illion o f D ollars)

(M illions o f D ollars)
Bills

Date

May

16
23
30
7
14

22
13
17
24
16

C. o f I.
166
170
173
174
173

Notes

Bonds*

Total

74
71
69
69
69

1,014
1,006
998
998
998

1,276
1,260
1,257
1,265
1,256
ITEMS

♦Includes guaranteed obligations.

Two of the four weeks ended May 14 were periods of
moderate pressure upon the reserve balances of Fifth
District member banks. Substantial Treasury withdraw­
als from the reserve funds of the District during the
weeks ended April 23 and May 14, supplemented by
drains through commercial and financial transactions, led
in the first case to a decline in reserves of $29 million and
in the closing week to an increase in Reserve Bank credit
of similar amount. Currency transactions made a net
contribution to reserves for the four weeks, although
losses to increased circulation were experienced in the
FA CTO RS A FFEC TIN G M EM B E R B A N K R ESE R V E S
F ifth D istrict
Factors increasing ( + ) or
decreasing (— ) reserves :
Reserve bank credit extended locally
Com m ercial and financial transactions
Treasury transactions
Currency transactions
Other factors
N et change in reserve balances




Reserve
Chg. from
city
Other
A ll
M ar. 26, *47
m ember m em ber member all member
banks
banks
banks
banks

Change fo r 4 weeks
ended M ay 14, 1947
^Millions o f dollars)
+ 19
— 9
— 37

+1
1
+ 4
—1
2

Assets
2,349
697
1,493
159
688
316
66

4,311
1,221
2,836
254
1,359
706
107

—
+
—
+
—
+
—

240
1
65
35
3,072

336
3
207
75
5,745

— 19

2,045
294
46
1,705
449
2,494
8
12
159

1,996
92
54
1,850
861
2,857
6
14
195

4,041
386
100
3,555
1,310
5,351
14
26
354

—
—
—
+
+
—
—

59
41
37
19
4
56
4

+
+

2
3

2,673

3,072

5,745

— 54

1,962
1. Loans and investments
524
a. Loans and discounts
b. U. S. Gov’ t obligations
1,343
95
c. Other securities
2. Reserves, cash, and bank balances
671
a. Reserve with F. R. bank
390
b. Cash in vault*
41
c. Demand balances with banks
96
in U . S.
2
d. Other bank balances*
e. Cash items in process o f collection 142
40
3. Other assets*
4. Total assets
2,673

31
18
66
17
26
15
18

— 4
+ 3
— 54

L iabilities and Capital
5.

6.
7.
8.
9.
10.
11.

Gross demand deposits
a. Deposits o f banks
b. W a r loan accounts
c. Other demand deposits
Tim e deposits
T O T A L D E PO SITS
B orrow ings from F. R. bank
Other liabilities*
Total capital accounts*
Total liabilities and capital
accounts*

7

MONTHLY REVIEW

EARNINGS A N D PROFITS
OF FIFTH DISTRICT MEMBER BANKS
Despite increases in nearly all expense items and de­
creased income from profits and recoveries on securities,
net current earnings and profits of Fifth District member
banks climbed to new highs in 1946, continuing the up­
ward trend of the past several years. Increased earnings
on loans more than offset the increases in expenses while
other earnings rose sufficiently to make up the lost in­
come from security transactions and to provide yet addi­
tional profits.
TABLE I
MEMBER BANK EARNINGS
FIFTH FEDERAL RESERVE DISTRICT
(Amounts in thousands of dollars)
ITEM
Earnings
Interest and dividends on secu rities:
U. S. Governm ent
Other
Interest and discount on loans
Service charges and fees on loans
Service charges on deposit accounts
Other charges, com m issions, fees, etc.
T rust department
Other current earnings

1946
110,277

Chg. from
1945
+ 16,634

49,527
4,865
36,953
259
5,666
4,100
4,657
4,250

+
+
+
+

4,959
330
9,740
10
515
304
751
45

67,732

+

8,065

12,434
18,954
800
10,647
110
4,288

+ 1,619
+ 2,975
116
+
+ 1,287
■
—
16
117
+

1,878
18,621

+
+

51
1,916

N et current earnings b efore incom e taxes

42,545

+

8,569

Recoveries and profits

11,860

— 2,581

1,158
6,822
2,355
1,545

,
—
347
— 1,986
411
4—
659

6,352

—

521

3,053
1,295
2,004

—

+
■
—

Expenses showed a 13.5 per cent increase over those
for 1945, which in turn had risen 12.2 per cent from the
1944 figure. More than one-half of the increase was at­
tributed to salaries and wages. Bank employment in­
creased by 9 per cent and aggregate salaries and wages
showed a 17 per cent gain. Payments of interest on time
deposits rose by 14 per cent and the catch-all expense
classification, “ all other expenses,” accounted for nearly
one-fifth of the total increase.
Because of the greater increase in earnings than in ex­
penses, net current operating earnings were up one-fourth
from the net earnings of 1945. Decreased profits and
recoveries on securities brought about a decrease in the
contribution of so-called non-operating factors to profits,
yet profits before income taxes were 15.7 per cent above
the 1945 figure and net profits showed an almost identical
increase.
Cash dividends declared increased 12.3 per cent over
those for 1945, but since this rate of increase was less
than that of profits, the proportion of profits paid out in
dividends declined from 1945’s percentage, being 31.9
per cent as compared with 32.9 per cent in the preceding
year.

103
241
659

Expenses
Salaries— officers
Salaries and wages— employees
D irectors’ and com m ittee m embers’ fees
Interest on tim e deposits
Interest on borrow ed m oney
Taxes other than on net incom e
R ecurring depreciation on banking house,
furnitu re and fixtures
Other current expenses

Recoveries on securities
Profits on securities
Recoveries on loans
A ll other
Losses and charge-offs
On securities
On loans
A ll other
Profits before incom e taxes

48,053

Taxes on net incom e

+
+
+

+

TRENDS IN EARNINGS
The chart below presents a graphic picture of the rela­
tionship of net current earnings, net recoveries and losses,
and net profits for the past 19 years and from it conclu­
sions may be reached as to the significance of the past
year’s record. Net current earnings surpassed those of
1928 for the first time in 1946 and the gain shown for
1946 over 1945 was the greatest of the 19-year period.
In spite of the record tax payments of 1946, the year's
gain in net current earnings after all taxes was slightly
greater than the increase that occurred from 1939 through
1945. This sharp upturn is doubly important because of
its effect upon the nature of bank profits and because of
its origin, an increase in commercial lending operations.

6,509

13,123

+

1,687

Federal
State

13,018
105

+
+

1,677
10

N et profits

34,930

+

4,822

Cash dividends declared

11,137

+

1,217

Holdings of United States Government obligations de­
clined during 1946 from the all-time high of the early
months of the year, but in spite of this fact, interest re­
ceived on Governments increased from the 1945 figure.
Larger portfolios of other securities provided increased
returns in the form of interest and dividends, although
the percentage increase was less than in the case of Gov­
ernments. As was noted, the greatest increase in earn­
ings came from the loan portfolio; the 29 per cent increase
in loans outstanding that occurred during 1946 brought
with it an increase of 36 per cent in interest and discount
received. All other forms of earnings showed increases
with the exception of service charges and commissions on
loans, which declined somewhat from the 1945 level.




Profits on securities and recoveries on assets exceeded
losses and charge-offs in 1946 for the fourth consecutive
year and the sixth year of the 19 shown. Banks are risktaking institutions and it has generally been considered
normal that since some portion of operating earnings
were in payment of the assumption of risk, losses and
charge-offs would exceed recoveries and profits on the
sale of assets. The contribution of net profits and re­

8

MONTHLY REVIEW

coveries on assets to profits has been looked upon as being
of a temporary nature and predictions have been made
that with a decline of profits on securities traded and in­
creased charge-offs as the volume of loans increases,
charge-offs and losses will exceed profits and recoveries
with the result that net profits will be decreased by these
factors. Profits and recoveries on securities did fall off
in 1946 as compared with 1945, and while losses were
slightly lower than in the preceding year, net capital gains
on securities declined. Loan recoveries, however, in­
creased more than did losses, and the net capital gain on
loans was larger than in 1945. The net effect of these
changes, together with a small increase in other net
charge-offs, was to reduce the net contribution of profits
and recoveries on assets to a figure below that for 1944
or 1945. It is not clear whether this portends a future
return of these factors to their pre-war influence upon
profits. Much will of course depend upon general busi­
ness conditions and the proportion of risks assumed that
will subsequently develop into losses.
Net profits for 1946 were at a high for the 19 years
shown as the result of the combined force of these two
sets of factors. Representing a 10.7 per cent return upon
total capital funds, they showed a slight increase as a
percentage of capital funds over profits of 1945. Table
II presents the record for the past 16 years as compared
with returns in other lines of endeavor.
T A B L E II
A N N U A L R A T E OF R E T U R N ON C A P IT A L FU N DS
5th D istrict
Member
B anksf
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
A verage
1931-46

— 2.0
— 6.6
— 10.5
— 1.3
4.9
8.4
7.1
6.7
6.8
7.8
7.4
6.5
7.8
9.7
10.4
10.7
4.6

Public
U tility
Corps.*

Service
Corps.*

3.9
6.4
0.2
3.3
4.3
7.3
6.5
2.9
5.9
6.8
10.4
9.9
10.1
10.2
10.9
22.3

2.1
0.7
0.4
1.5
1.5
2.5
3.0
1.6
3.2
3.2
4.4
7.3
7.2
6.1
6.7
8.2

— 1.8
— 10.9
— 7.0
— 5.4
— 4.1
— 0.7
0.1
1.0
3.0
3.9
5.6
10.7
12.7
12.3
11.8
19.4

6.3

3.7

3.2

M fg.
Corps.*

Trade
Corps.*

—
—

—
—
—

0.9
3.3
0.7
2.7
5.6
8.2
7.9
3.0
7.1
8.9
12.3
10.1
9.9
8.9
9.3
12.1
6.4

M ining
Quarrying
Corp.*
—
—
—

2.7
2.6
2.3
0.7
0.7
2.0
3.7
0.4
1.9
2.8
4.4
7.4
7.2
7.6
7.1
9.5
3.0

fM em ber banks 1931-41-—B anking and M onetary Statistics
1941-46— Mem ber B ank Call Reports
*1931-41— Statistics o f Incom e
1941-46— N ational City B ank Sam ple

OPERATIONS BY SIZE OF BANK
In order to provide the basis for a comparison of earn­
ings and profits for 1946 with those of the preceding year,
465 identical banks for the two years have been obtained
by making the necessary adjustments for banks eliminated
from or added to the Federal Reserve System during 1946
and for consolidations effected during the past year.
Similarly, adjustments have been made for those banks
which moved into a different size group during 1946.
The resultant grouping by deposit size discloses the de­
tailed changes in the sources and disposition of earnings
during 1946 and permits an analysis of the changes ex­
perienced in the reader’s bank against the average changes
of the pertinent size-group.




Earnings
Interest and discount on loans
Probably the most significant development in banking
operations throughout the country during 1946 was the
rapid expansion of commercial lending. That this ob­
servation is applicable also to the Fifth Federal Reserve
District has already been indicated in a preceding para­
graph where it was pointed out that the greatest increase
in Fifth District member-bank earnings derived from the
loan portfolio.
Whereas in 1945, 29.5 per cent of total earnings of the
465 member banks was accounted for by earnings on loans,
in 1946 the proportion climbed to 33.6 per cent. In all
size groups of banks the loan contribution to total earn­
ings was a larger percentage in the past year than it was
in 1945, ranging from 28 per cent to 44 per cent. The
largest gains in this direction were realized by the three
largest size-groups in which earnings on loans taken as
a percentage of total earnings increased more from 1945
to 1946 than they did in the four smaller groups shown.
As usual, this source of income comprised a substantially
larger proportion of total earnings in the case of the
smaller banks than it did in the larger banks. As can be
noted in Table III, the pattern of distribution is closely
comparable in the two years.
The percentage increase from 1945 to 1946 in interest
and discount on loans for the 465 member banks was 34.7,
ranging from 28.7 per cent for the largest size group of
banks with deposits of $50 million and over to 42.7 per
cent in the $10-25 million group. It will be seen in the
accompanying table that the pattern of gains is a mixed
one with no particular concentration of the largest in­
creases among either the large or small banks. This re­
flects the magnitude and extent of the base of credit de­
mand that has been created by the deferred demands for
goods, the high level of business activity, and the infla­
tionary pressures that have characterized the postwar
economy.
T A B L E III

Deposit size
($ M illion)

E arnings on loans
as a percentage
o f total earnings

Earnings on loans
1945

1946

U nder 1
1 - 1.9
2 -4 .9
5 - 9 .9
10 - 24.9
25 - 49.9
50 and over

162
1,001
3,779
3,374
5,697
2,987
10,041

465 banks

27,041

% Inc.

1945

1946

219
1,379
5,046
4,574
8,128
4,153
12,923

35.0
37.8
33.5
35.6
42.7
39.1
28.7

37.7
40.3
38.6
37.0
32.5
27.1
24.2

40.8
43.8
41.1
40.2
37.2
32.3
28.0

36,422

34.7

29.5

33.6

Interest and dividends from securities.
Although the amount of interest and dividends earned
by the 465 banks in the compilation increased from $48,185,000 in 1945 to $53,388,000 in 1946, the 10.8 per cent
growth was the smallest gain realized in this category since
the inception of the war financing program. It should be
pointed out that although Fifth District member bank
holdings of short-term, low-yield Treasury obligations
declined 47 per cent during 1946, holdings of U. S. Gov­
ernment bonds increased by about 5 per cent. The net
result was a reduction from December 31, 1945 to De­
cember 31, 1946 of 16 per cent in total portfolio of U. S.
Government obligations. Notwithstanding this reduction,

9

MONTHLY REVIEW

a number of factors combined to produce the increase
noted in interest and dividends from securities.
In the first place, substantially more than half of the
reduction in holdings of Treasury obligations occurred
during the last six months of the year. In fact, a greater
reduction was experienced during the last quarter than
for the first six months. Secondly, the average yield on
member bank holdings of Government securities was
higher during 1946 than it was for 1945 (1.48 per cent
as compared with 1.39 per cent for member banks through­
out the country). This reflected the decline in holdings
of lower-yield securities. Finally, there was a large in­
crease, from $178 million at the end of 1945 to $230 mil­
lion on December 31, 1946, in holdings of relatively highyield securities such as state and municipal bonds and
corporate stocks.
Contrary to the nature of the distribution of the in­
creases noted in the preceding section, the pattern of
gains in interest and dividends from security holdings
shows a concentration of the largest percentage increases
among the four smallest size-groups. This is a conse­
quence, for the most part, of the greater effect of the
Treasury’s debt retirement program on the earning assets
of large banks than of small banks. Another factor here
is the larger proportion of total deposits constituted by
the time deposits of smaller banks. As a consequence,
security maturities were longer and a higher rate of in­
terest was earned by the smaller banks.
As can be seen in Table IV, the range of gains is a
wide one, extending from only 3 per cent for banks with
deposits of $50 million and over to 24 per cent for banks
in the $2-5 million group.
Despite the increase from 1945 to 194-6 in interest and
dividends, this source of income provided a smaller per­
centage of total earnings in the latter year. Table IV
shows that for the 465 banks, interest and dividends as a
percentage of total earnings dropped from 53 per cent
to 49 per cent with decreases registered for each size
group of banks. As a consequence of the factors already
cited, the pattern of declines follows that of the increases
in earnings on loans. That is, the greatest changes from
1945 to 1946 were experienced by the three largest sizegroups of banks. Although interest and dividends con­
tributed more, of course, to total earnings in 1946 than
they did prior to the war, the slight declines in the contri­
butions to total earnings by this source during the year
did not establish a pattern of relative importance among
the various size groups materially different from that
which characterized the results of member-bank opera­
tions in 1939.
T A B L E IV

Deposit size
($ M illion)
U nder 1
1 - 1.9
2 - 4.9
5 - 9.9
10 - 24.9
25 - 49.9
50 and over
465 banks

Interest & dividends
on securities as a
percentage o f total
earnings

Interest & dividends
on securities
($ Thousand)
% Inc.

1945

1946

1945

1946

212
1,168
4,738
4,355
8,797
5,683
23,233

255
1,439
5,892
5,324
10,316
6,212
23,950

20.1
23.2
24.4
22.3
17.3
9.3
3.1

49.4
47.0
48.3
47.8
50.2
51.6
56.0

47.5
45.7
48.0
46.8
47.2
48.4
51.8

48,185

53,388

10.8

52.5

49.3

Service charges.
Table V shows that earnings in the form of service
charges on deposit accounts increased 10 per cent in 1946
over the preceding year. Aside from the 30 per cent in­




crease in the group of banks with deposits under $1 mil­
lion (here the large percentage increase was due to the
small size of the absolute figures involved), the most
significant increase in earnings from service charges was
realized by the largest banks, those with deposits over
$50 million. It is likely that the service charges of this
group of banks were influenced more than were those of
smaller banks by the extent to which the decline in U. S.
Government demand deposits was offset by an increase
in demand deposits of individuals, partnerships, and
corporations.
Inasmuch as the percentage increase in total earnings
was somewhat greater than the gain in service charges,
the latter earnings as a percentage of total earnings of
the 465 banks declined slightly from 5.5 in 1945 to 5.1
in 1946. All of the groups shown in the following table
realized a drop in the extent to which service charges
contributed to total earnings with the exception of the
two groups of largest and smallest banks in which slight
gains were recorded.
TABLE V
Service charges on
deposit accounts
($ Thousand)

Deposit size

A s a percentage
o f total earnings

($ M illion)

1945

1946

% Inc.

1945

1946

U nder 1
1 - 1.9
2 -4 .9
5 - 9.9
10 - 24.9
25 - 49.9
50 and over

22
133
486
576
1,180
757
1,914

28
148
526
604
1,276
812
2,182

29.6
11.5
8.3
4.8
8.1
7.3
14.0

5.0
5.3
5.0
6.3
6.7
6.9
4.6

5.2
4.7
4.3
5.3
5.8
6.3
4.7

5,067

5,576

10.4

5.5

5.1

465 banks

Trust Department earnings.
O f the 465 member banks included in the compilation,
168 maintained trust departments, an increase of 3 over
1945. Earnings from this source increased from $3,750,000 in 1945 to $4,639,000 in 1946, a gain of 24 per cent.
This was sufficient to increase slightly the contribution
made by these earnings to total earnings. The latter com­
putation is shown for each size group of banks in Table
V I and reflects the increasing number of banks with trust
departments as the size of the bank increases.
TABLE VI
Deposit size

T rust departm ent earnings
($ Thousand)

As a percentage
o f total earnings

($ M illion)

1945

1946

% Inc.

1945

1946

Under 1
1 - 1 .9
2 - 4.9
5 - 9.9
10 - 24.9
25 - 49.9
50 and over

* *4
127
151
446
671
2,351

7
133
207
603
694
2,995

75.6
4.7
37.1
35.2
3.4
27.4

.2
1.3
1.7
2.5
6.1
5.7

.2
1.1
1.8
2.8
5.4
6.5

465 banks

3,750

4,639

23.7

4.1

4.3

Total earnings.
The gross effect of the changes in the items considered
and in all other current earnings was an increase in total
earnings from $91,815,000 in 1945 to $108,275,000 in
1946, a gain of 18 per cent. It will be seen from Table X
that the banks in five of the size groups, those with de­
posits from under $1 million to $25 million, achieved in­
creases that approximated 25 per cent. The average gain
for all banks was drawn down by the 17 per cent and 12
per cent increases realized by the $25-50 million banks
and those with deposits of over $50 million respectively.
As we have noted, the effects of shifts from 1945 to
1946 in holdings of loans and investments were most pro­

MONTHLY REVIEW

10

nounced in the cases of the largest banks. On the average,
the contributions to total earnings by earnings on loans
and trust department gross earnings increased from 1945
to 1946 while interest and dividends on securities, service
charges, and other current earnings, as a percentage of
total earnings, decreased.
Expenses
Salaries and wages.
O f the $7,968,000 increase during 1946 in total expenses
of the 465 banks, $4,549,000 or 57 per cent of it was in
salaries and wages. While total expenses increased 14
per cent over costs in 1945, the salary and wages bill was
stepped up 17 per cent thus increasing slightly the pro­
portion (46 per cent in 1946) of total expenses accounted
for by this item. Table V II shows that the range of
percentage increases in salaries and wages among the
seven size groups of banks was a fairly narrow one, with
the group o f largest banks experiencing the smallest, 15
per cent, increase.
The overall increases in total earnings and in salaries
and wages were almost identical— 17.9 per cent for the
former and 17.3 per cent for the latter. As a consequence,
salaries and wages absorbed an almost identical percentage,
28.5 per cent, of total earnings in 1946 to that of 1945.
In only two size groups of banks, the two largest, were
the percentage increases in salaries and wages larger than
the growth in total earnings.
TABLE VII

($ M illion)
Under 1
1 - 1.9
2 -4 .9
5 - 9 .9
10 - 24.9
25 - 49.9
50 and over
465 banks

As a percentage
o f total earnings

Salaries and wages
($ Thousand)

Deposit size
1945

1946

% Inc.

1945

1946

129
695
2,598
2,536
4,829
3,485
12,012

150
806
3,091
3,044
5,792
4,128
13,821

16.6
15.9
19.0
20.0
19.9
18.5
15.1

30.0
28.0
26.5
27.8
27.6
31.7
29.0

27.9
25.6
25.2
26.8
26.5
32.1
29.9

26,284

30,832

17.3

28.6

28.5

Interest paid on time and savings deposits.
An 18 per cent increase amounting to $189,983,000 in
average time deposits from 1945 to 1946 resulted in a
growth of interest charges on deposits of 13 per cent or
$1,220,000. There is thus indicated a slightly lower
average rate of interest paid in 1946 than in 1945.
It will be seen in Table V III that the percentage in­
creases in interest paid on deposits were quite uniform
among the five size groups with deposits over $2 million.
In the two smallest size-groups, however, are found the
two extremes in the entire range of increases. In the
smallest size-group of 29 banks with deposits under $1
million the increase in interest charges amounted to only
9 per cent while in the next group of 90 banks with de­

posits from $1-2 million the percentage growth was 18
per cent.
Other current expenses.
Thirty-eight per cent of the total expenses of the 465
banks was accounted for in 1946, as compared with 39
per cent in 1945, by the category “ All other expenses.”
Although this item increased by 9.5 per cent in 1946, the
total increase of 18 per cent in current earnings resulted
in a lower percentage of the latter required by other ex­
penses, 23 per cent as compared with 25 per cent in 1945.
Table IX shows that the percentage increases in this ac­
count were quite uniform with the exceptions of a 15 per
cent growth in the $1-2 million group of banks and a 7
per cent increase for the 22 banks comprising the largest
size-group.
TABLE IX
Other expenses
($ Thousand)

Deposit size
($ M illion)

1945

1946

U nder 1
1 - 1.9
2 - 4 .9
5 - 9 .9
10 - 24.9
25 - 49.9
50 and over

112
620
2,336
2,186
4,236
2,843
10,705

125
710
2,656
2,442
4,714
3,131
11,459

11.6
14.5
13.7
11.7
11.3
10.1
7.0

465 banks

23,038

25,237

9.5

Total expenses and net current earnings.
The 14 per cent increase from 1945 to 1946 in total
expenses is shown in the following composite table to be
fairly evenly distributed among the seven size groups.
The smallest percentage increase was achieved by the
largst banks, those with deposits o f $50 million and over,
as a consequence of relatively small increases in their
salary and wages account and “ Other expenses.” The
favorable effect on net current earnings of this group was
offset, however, by an equally small percentage gain in
total earnings, and the result was a 12 per cent increase
in net current earnings that fell substantially below the
gain of 26 per cent for all banks.
Turning to the other end of the range of size groups it
is found that the smallest banks achieved the largest per­
centage gain in net current earnings. As a consequence
of a 25 per cent increase in earnings against an expansion
of only 13 per cent in expenses, net earnings were 56 per
cent higher in 1946 than in 1945.
Between these two extremes, there was a progressive
decline in the per cent of gain in net current earnings as
the size of the banks increased. This was due for the
most part to a similar pattern in the distribution of per­
centage gains in total earnings.
It has been pointed out that the gain in net current
earnings from 1945 to 1946 of all member banks in the
Fifth District was the greatest in the past 19 years. It

TABLE VIII

TABLE X

Interest paid on tim e and
savings deposits
($ Thousand)

Deposit size

Deposit size

($ M illion)

1945

1946

% Inc.

($ M illion)

Under 1
1 - 1 .9
2 -4 .9
5 -9 .9
10 - 24.9
25 - 49.9
50 and over

69
412
1,633
1,382
2,088
946
2,608

75
486
1,871
1,571
2,354
1,064
2,937

9.2
18.0
14.6
13.7
12.7
12.4
12.6

U nder 1
1 - 1.9
2 - 4 .9
5 - 9.9
10 - 24.9
25 - 49.9
50 and over

9,138

10,358

13.4

465 banks

465 banks




% Inc.

Total earnings
($ Thousand)

Total expenses
($ Thousand)

1946

%
Inc.

1945

537
3,150
12,277
11,373
21,870
12,843
46,225

25.0
26.8
25.3
24.8
24.8
16.7
11.5

91,815 108,275

17.9

1945
430
2,485
9,802
9,113
17,521
11,010
41,455

1946

%
Inc.

310
1,728
6,566
6,103
11,153
7,274
25,325

350
2,002
7,618
7,057
12,860
8,323
28,217

13.0
15.9
16.0
15.6
15.3
14.4
11.4

58,459

66,427

13.6

Net current earnings
($ Thousand)
1945

1946

Inc.

758
3,235
3,009
6,368
3,736
16,130

187
1,148
4,659
4,316
9,010
4,520
18,008

56.0
51.6
44.0
43.4
41.5
21.0
11.6

33,356

41,848

25.5

120

11

MONTHLY REVIEW

should be noted that this increase of 25 per cent is double
that of member banks throughout the country. Whereas
net current earnings as a percentage of total earnings of
all member banks in the country declined slightly from
39.7 per cent in 1945 to 38.9 per cent in 1946, the 465
banks in the compilation for the Fifth District experienced
an increase in this ratio from 35.9 per cent to 38.9 per cent.
Profits and recoveries; losses and chargeoffs
It has been pointed out previously that in recent years
the excess of profits on securities sold and recoveries on
loans and securities over losses and charge-offs, largely
due to profits from operations in Government securities,
has contributed materially to the net profits o f member
banks. The maximum excess occurred in 1945 when the
465 banks considered in this analysis realized over $7 mil­
lion in this respect, an amount that was 24 per cent of
total net profits. In 1946, as exhibited in Table X I, the
net from this source aggregated $5,475,000, a decline of
23 per cent due to the net effect of a decrease in net
capital gains on securities of $2,331,000, an increase of
$188,000 in net capital gain on loans, and a decrease of
$535,000 in net loss on all other accounts.
The last column of the following table shows the per­
centage declines resulting from the net effects of the
changes from 1945 to 1946 in recoveries, charge-offs, etc.
The heaviest declines were suffered by the two smallest
size-groups, while the 65 banks in the $10-25 million
deposit group practically equalled their 1945 record by
maintaining their net capital gain in 1946 within 1 per
cent of the 1945 figure.
The decline in the excess of profits and recoveries over
losses and charge-offs in every size group but one was
due mainly to reductions in the net gain from securities.
For the group of 90 banks with deposits from $1-2 mil­
lion, the net decline was due principally to an increase in
the net loss on accounts other than securities and loans.
TABLE

On securities

($ M illion)

1945

1946

Under 1
1 - 1.9
2 - 4 .9
5 - 9.9
10 -2 4 .9
25 - 49.9
50 and over

+
11
+
89
+ 481
+ 432
+1208
+ 1029
+ 3995

—
1
+
86
+ 204
+ 244
+1140
+ 536
+ 2705

465 banks

On loans
1945
+ 13
+ 35
+148
+103
+214
—
2
+330

1946
+
+
+
+
+
+
+

Other
1945

Total

1946

5~ +
1~+
16 —
4 —
125 +
26 +
125 +
37 +
313 — 130 —
125 —
64 +
320 — 869 —

1945

9~+
24
37 + 121
81 + 656
68 + 571
177 + 1 2 9 1
21 + 963
433 + 3 4 5 5

1946
+
13
-f
65
+ 410
+ 437
+1276
+ 682
+2592

_

Chg.
—
—
—
—
—
—
—

46
46
38
24
1
29
25

+ 7 2 4 5 + 4 9 1 4 + 8 4 1 + 1 0 2 9 — 1003 — 468 + 7 0 8 1 + 5 4 7 5 — 23

Taxes and net profits
Income taxes and net profits by size groups of banks
are summarized in Table X II. Income taxes for 1946
amounted to almost $13 million, an increase of 19 per cent
over the 1945 payment. With profits before income taxes
rising 17 per cent, the increase of 19 per cent in taxes
resulted in a gain of 16 per cent in net profits after taxes.
Despite the repeal of the excess profits tax, the increase
in net income of the 465 banks was sufficient to boost
income taxes to the $13 million mark. The range of
change in taxes within the seven size groups was very
wide, extending from an increase of 77 per cent for the
smallest banks to a reduction of 2 per cent for the 22
largest banks. As a consequence of these increases, the
percentage of profits before taxes absorbed by income
taxes rose in every group with the exception of that of
the largest banks where the proportion declined from 29




TA BLE X II
($ Thousand)
Incom e taxes as a
% o f net profits
Incom e taxes
before taxes

Deposit size
($ M illion)

N et profits

1945

1946

% Inc.

1945

1946

1945

1946

% Inc.

U nder 1
15
1 - 1.9
148
2 - 4.9
695
5 - 9.9
799
1 0 -2 4 .9
1,994
25 - 49.9
1,485
50 and over 5,720
465 banks 10,856

26
210
1,029
1,142
3,143
1,787
5,603
12,940

76.9
42.4
48.1
42.9
57.6
20.3
—- 2.1
19.2

10.3
16.8
17.9
22.3
26.0
31.6
29.2
26.8

13.0
17.3
20.3
24.0
30.6
34.4
27.2
27.3

129
731
3,197
2,782
5,665
3,214
13,864
29,582

174
1,003
4,040
3,611
7,143
3,415
14,997
34,383

35.2
37.3
26.4
29.8
26.1
6.3
8.2
16.2

Cash dividends declared

XI

N et Recoveries, Profits, Charge-Offs, and Losses
($ Thousand)
Deposit size

per cent in 1945 to 27 per cent in 1946.
It will be noted from Table X II that income taxes as a
percentage of net profits before taxes were lowest for the
group of smallest banks, amounting to 13 per cent as
compared with 34 per cent for banks with deposits of $2550 million. Between these two extremes of the range,
the proportion increased as the size of the banks became
larger.
The percentage increase in net profits ranged from 6
per cent for the 17 banks in the $25-50 million class to 37
per cent for the 90 banks in the $1-2 million group. There
was a uniformity in the pattern of distribution of gains
in that the highest percentage increases in net profits were
realized by the two groups of smallest banks and the lowest
increases were experienced by the two groups of largest
banks. The middle three groups of banks netted gains of
approximately equal size.
Despite the fact that the net gain from recoveries and
profits on loans and securities failed to continue the rise
of the war period but rather fell off from 1945 to 1946,
net profits reached record levels in the past year. The in­
crease of $8.5 million in net earnings from current opera­
tions was offset by a decrease of $1.6 million in net capital
gains from recoveries and profits and an increase in in­
come taxes of $2.1 million. The result was a rise in net
profits of $4.8 million.

Although the total amount of dividends declared by the
465 banks increased by 8 per cent to $10.9 million, the
greater percentage increase in net profits of 16 per cent
resulted in a reduction in the percentage which cash
dividends declared were of net profits from 34 per cent
in 1945 to 32 per cent in 1946. It will be seen in Table
X III that each of the five groups in the range of deposits
from under $1 million to $25 million declared an amount
of dividends that was a smaller percentage of net profits
in 1946 than in 1945. O f these five groups, however,
only the $2-5 million group failed to increase the actual
amount of dividends declared, and here the dividends had
amounted to 46 per cent of net profits in 1945. The two
groups comprising the largest banks also declared larger
amounts of dividends, but here the much smaller per­
centage increase in net profits resulted in a rise in the
percentage of the latter distributed as dividends.
T A B L E X III
Cash Dividends Declared
1945

1946

Deposit size
($ M illion)

$000

% of
net profits

$000

% of
net profits

U nder 1
1 - 1 .9
2 -4 .9
5 -9 .9
1 0 -2 4 .9
25 - 49.9
50 and over

34
231
1,461
810
1,864
1,018
4,694

26.4
31.6
45.7
29.1
32.9
31.7
33.9

42
244
1,174
933
2,107
1,118
5,336

24.1
24.3
29.1
25.8
29.5
32.7
35.6

10,112

34.2

10,954

31.9

465 banks

MONTHLY REVIEW

12

DEBITS TO INDIVIDUAL ACCOUNTS
(000 omitted)

FEDERAL RESERVE BANK OF RICHMOND
(All Figures in Thousands)
Chg. in Amt. from
May 14
4-16-47
ITEMS
1947
5-■15-46
Total Gold R eserves..................... $1,005,099
— 3,348
+ 95,301
— 4,269
15,596
+
13
1,020,695
— 3,335
Total Reserves ............................
+ 91,032
16,619
Bills Discounted ...........................
+ 11,371
+ 12,704
—
0
0
Industrial Advances ......................
33
— 38,474
— 34,859
1,399,720
Gov. Securities, Total....................
— 11,158
— 874
45,503
Bonds ..........................................
— 87,424
—
6
Notes ............................................
21,650
— 45,523
351,506
— 3,053
Certificates ................................
— 30,926
+ 105,631
Bills ............................................
981,061
— 25,803
— 23,488
1,416,339
Total Bills & Securities.................
238,041
— 16,290
Uncollected Items ..........................
+ 53,082
— 26,607
— 2,927
14,957
Other Assets ...................................
2,690,032
— 46,040
+ 91,704
Fed. Res. Notes in Cir......... .........
Deposits, Total ...............................
U. S. Treas. Gen. Acct..............
Foreign ........................................
Other Deposits ............................
Def. Availability Items.................

$1,663,650
783,212
718,498
34,949
27,473
2,292
207,717
730
34,723
2,690,032

— 19,409
— 14,059
— 12,218
— 7,679
+ 8,518
— 2,680
— 12,087
+
HI
— 596
— 46,040

+ 13,638
+ 21,462
+ 24,196
+ 1,949
2,926
— 1,757
52,442
+
133
+
+ 4,029
+ 91,704

41 REPORTING MEMBER BANKS—5th DISTRICT
(All Figures in Thousands)
Chg. in Amt. from
May 14
1947
4-16-47
5-15-46
ITEMS
+ 91,317
$ 495,741
+ 3,020
+ 74,052
257,223
+ 1,298
+ 29,939
85,237
+ 1,652
— 12,674
+
70
153,281
— 20,974
— 430,766
1,345,451
Total Security Holdings................
— 6,297
— 37,046
15,996
U. S. Treasury Bills ..................
173,084
— 250,803
+ 6,942
U. S. Treasury Certificates .......
— 4,835
— 117,856
69,328
997,786
— 15,758
— 30,839
U. S. Gov. Bonds ........................
— 1,026
89,257
+ 5,778
Other Bonds, Stocks & Sec.......
171,189
+ 1,291
+ 39,524
Cash Items in Process of Col.......
124,801*
+ 6,538
— 16,349
40,813
+ 1,394
+ 3,585
Currency & Coin...........................
341,955
— 2,276
— 3,076
+ 1,764
— 3,954
73,624
Other Assets .................................
$2,593,574
— 319,719
— 9,243
Deposits of Individuals ..............
Deposits of State & Local Gov...
Deposits of Banks ......................
Certified & Officers* Checks
Total Time Deposits......................
Other Time Deposits..................
Liabilities for Borrowed Money..
All Other Liabilities..................

$1,924,755
1,397,840
51,801
110,716
334,660*
29,738
399,431
382,703
16,728
10,510
107,653
151,225
$2,593,574

— 28,589
+ 5,321
— 16,106
+ 9,134
— 18,607
— 8,331
+
225
+
224
+
1
+ 10,250
+ 8,239
+
632
— 9,243

— 367,689
+ 10,900
— 336,574
+ 13,760
— 50,420
— 5,355
+ 21,276
+ 19,327
+ 1,949
+ 8,510
+ 8,906
+ 9,278
— 319,719

♦Net figures, reciprocal balances being eliminated.

DEPOSITS IN MUTUAL SAVINGS BANKS
8 Baltimore Banks
Apr. 30, 1947 Mar. 31, 1947 Apr. 30, 1946
Total Deposits ................ $386,575,159
$385,209,962
$361,125,325

D istrict o f Columbia
W ashington .............
Maryland
...............
Baltim ore
Cumberland .............
Frederick .................
H agerstow n
...........
North Carolina
Asheville .................
Charlotte .................
Durham ...................
Greensboro .............
Kinston ...................
Raleigh
...................
W ilm ington .............
W ilson .....................
W inston-Salem
South Carolina
Charleston ...............
Columbia .................
Greenville ...............
Spartanburg ...........
V irginia
Charlottesville
Danville ...................
Lynchburg ...............
N ew port News . . .
N orfolk
...................
Portsm outh .............
Richm ond ...............
Roanoke ...................
W est V irginia
Bluefield ...................
Charleston ...............
Clarksburg ...............
H untington .............
Parkersburg ...........

District Totals

April
1947

% Chg.
from
April 1946

4 Mos.
1947

+ 1

$ 2,500,904

$ 615,619

% Chg.
from
4 Mos. ’ 46

+ 4

840,919
20,853
17,988
24,434

+
+
+
+

4
14
25
16

3,454,505
79,905
69,095
95,918

41,567
189,339
84,554
57,083
9,805
86,362
32,547
12,775
105,769

+ 18
+ 15
+ 8
+ 12
— 10
+ 11
+ 3
+ 18
+28

175,653
796,828
358,548
242,043
49,941
380,271
130,716
57,110
456,101

+23
+ 80
+ 14

47,186
79,145
62,788
38,025

— 5
+ 15
+ 20
+ 31

194,761
328,534
267,915
158,647

+ 1

20,312
22,129
32,583
27,157
154,842
18,118
385,612
71,135

— 7
+ 11
+ 12
+29
+ 21
+ 10
+ 13
+ 16

81,559
106,813
133,221
111,948
610,124
72,425
1,564,421
283,391

31,302
106,725
26,269
47,630
23,897

+
+
+
+
+

17
11
20
18
24

+
+
+
+

4
13
24
18

+20

+ 23
+ 37

+ 2

+ 34
+ 35

+ 25
+ 30
+ 32
+
+
+
+

33
19
23
16

+ 8
+ 15
+ 23

+21

+ 16
+ 18
+ 16
+26

$13,727,633

$3,334,469

131,504
451,063
103,395
185,593
94,781

+14

COTTON CONSUMPTION AND ON HAND—BALES
April
April
Aug. 1 to Apr. 30
1947
1946
1947
1946
Fifth District States:
Cotton consumed ...............
433,419
388,760 3,759,839 3,286,518
Cotton Growing States:
Cotton consumed .............
772,411
710,872 6,838,429 5,972,921
Cotton on hand April 30 in
consuming establishments 1,789,037 2,027,781
storage and compresses 2,441,030 7,461,739
United States:
Cotton consumed ...............
882,880
812,749 7,802,330 6,769,817
Cotton on hand April 30 in
consuming establishments 2,112,346 2,387,846
storage and compresses 2,506,678 7,605,700
Spindles active, U. S........... 21,804,590 21,470,671

COTTON CONSUMPTION—FIFTH DISTRICT
(In Bales)
MONTHS
April 1947 .......
March 1947 . ..
April 1946 .......
4 Months 1947.
4 Months 1946.

N.
..
..
..
..
..

Carolina
228,521
228,162
211,872
920,948
827,657

S. Carolina
181,716
175,925
156,892
713,689
623,736

Va.
19,819
18,967
16,637
77,427
66,381

Md.
3,363
3,179
3,359
13,494
12,743

Dist.
433,419
426,233
388,760
1,725,558
1,530,517

PRICES OF UNFINISHED COTTON TEXTILES

MONTHS
April 1947 ...............
March 1947 .............
April 1946 ...............
4 Months 1947.........
4 Months 1946.........

COMMERCIAL FAILURES
Number Failures
Total Liabilities
District U. S.
District
U. S.
7
277
$ 358,000
$16,080,000
9
254
697,000
15,251,000
1
81
7,000
3,785,000
28
971
$1,606,000
$59,500,000
8
339
85,000
15,561,000

Source: Dun & Bradstreet




Average, 17 constructions..................
Printcloths, average (6 )....................
Sheetings, average (3 )........................
Twill (1) ..............................................
Drills, average (4 )...............................
Sateen (1) ............................................
Ducks, average (2 )...............................

Apr. 1947 Mar. 1947 Apr. 1946
86.15
88.19
50.72
110.41
114.40
54.90
79.81
79.45
45.67
79.86
79.86
51.94
65.03
67.97
46.85
97.61
97.61
66.58
62.54
62.54
44.92

Note: The above prices are those for the approximate quantities of
cloth obtainable from a pound of cotton with adjustments for
salable waste.

13

MONTHLY REVIEW

T O BACCO

B U ILD IN G PE R M IT FIG U R E S

M A N U F A C T U R IN G

F ifth Federal Reserve D istrict
T otal Valuation
A p ril 1947
A p ril 1946
Maryland
Baltim ore .......................................................
Cumberland ...................................................
Frederick .........................................................
H agerstown .....................................................
Salisbury
.......................................................
V irginia
Danville ...........................................................
Lynchburg .....................................................
N orfolk ...........................................................
Petersburg .....................................................
Portsm outh
...................................................
Richm ond .......................................................
Roanoke .........................................................
W est Virgrinia
Charleston .....................................................
Clarksburg .....................................................
H untington .....................................................
North Carolina
Asheville .........................................................
Charlotte
.......................................................
Durham ...........................................................
Greensboro .....................................................
H igh P oint ....................................................
Raleigh ...........................................................
R ocky M ount ................................................
Salisbury
.......................................................
W inston-Salem ................... .........................
South Carolina
Charleston .....................................................
Columbia .........................................................
Greenville .......................................................
Spartanburg ...................................................
Dist. o f Columbia
W ashington ................. .................................

$ 4,429,760
65,975
30,382
99,925
104,943

522,330
409,225
597,295
598,070
65,702
795,187
389,521

336,070
350,558
373,115
79,150
44,345
1,404,439
499,066

1,091,882
177,255
523,710

193,713
104,865
235,935

166,271
557,424
401,650
1,591,603
193,381
236,525
177,100
54,285
297,804

58,964
540,998
234,875
214,794
138,490
267,310
143,850
60,765
176,424

101,065
348,090
158,560
165,207
4,563,590

4,731,207
$15,276,295
$66,737,308

CO N STR U C TIO N C O N TR A C TS A W A R D E D
March
STATE S
1947
Maryland .....................
$29,706,000
5,410,000
Dist. o f C olu m bia. . . .
19,435,000
V irginia .......................
6,215,000
W est V irgin ia ...........
8,502,000
North Carolina .........
4,525,000
South Carolina .........
$73,793,000
F ifth D istrict ----S ource: F. W . Dodge Corp.

% Chg.
from
Mar. 1946
+
—
+
+
—
—
—

1
17
9
1
49
64
17

3 Mos. ’ 47
$ 59,536,000
19,399,000
50,418,000
15,128,000
31,500,000
12,522,000
$188,503,000

% Chg.
from
3 Mos. *46
+ 15
+ 38
+ 26
— 2
— 9
— 4
+

% Chg.
from
4 Mos.
1947
A p r. 19461947

Sm oking & Chewing tobacco
(Thousands o f l b s .) ...........
16,257
Cigarettes (Thousands) ___ 27,493,068
416,270
Cigars (Thousands) .............
Snuff (Thousands o f l b s .) . .
3,459

51,409
104,067
148,310
52,591

$17,847,269
$59,295,203

D istrict Totals ..............................................
4 Months ......................................................

$ 3,331,275
59,075
53,915
91,025
129,247

A p ril

A U C T IO N

— 2
+ 8
— 14
0

% Chg.
from
4 Mos. '46

63,080
108,617,899
1,799,361
12,892

0
+8
—5
—7

TO B A CC O M A R K E T IN G

ST AT E S
So. Carolina (Flue-cured) .. .
N o. Carolina (F lu e -cu re d ). .
(B urley) ............................... ,.
(T otal) ................................. , ,
V irgin ia (Flue-cured) ......... .
(Fire-cured) ........................, .
(B urley) .............................. . .
(Sun-cured) .........................
(T otal) .................................. .
Dist. Total, A ll Types ........... .1
T otal Flue-cured ...............
Total F ire-cured ............... .
Total Burley ..................... .
T otal Sun-cured .................

Season's Producers*
P rice
Sales, Lbs.
per hundred
1946-47
1945-46 1946-47 1945-46
150,954,510
124,191,116 $48.75 $43.94
894,228,339
773,606,716
49.83
44.11
11,902,988
14,010,639
38.49
41.26
906,131,327
787,617,355
49.73
44.01
160,422,969
137,649,532
44.97
44.71
16,391,113
11,149,629
29.46
32.35
14,729,284
17,968,252
38.89
40.13
3,915,868
2,231,652
24.17
33.77
195,459,234
168,999,065
43.26
42.79
252,545,071 1,080,807,536
48.53
43.89
1,035,447,364
47.08
44.17
16,391,113
11,149,629
32.35
29.46
26,632,272
31,978,891
39.41,
40.06
3,915,868
2,231,652
24.17
33.77

W H O L E S A L E T R A D E , 203 FIR M S
N et Sales
Stock
R atio A pr.
A p ril 1947
A p ril 30, 1947
collections
com pared with com pared w ith
to a cc’ ts
A p r.
Mar. A p r. 30 M ar. 31 outstanding
1946
1947
1946
1947
A p ril 1

LIN E S
A uto Supplies ( 6 ) * ...............
D rugs & Sundries ( 9 ) * ___
D ry Goods ( 7 ) * .......................
Electrical Goods (5) * ...........
Groceries (7 0)* .....................
H ardw are (1 7)* ...................
Industrial Supplies ( 7 ) * . . .
P aper & Products ( 5 ) * ----Tobacco & Products (1 0 )* .
M iscellaneous (6 7 )* .............
Dist. A vg . (2 0 3 )* ...............

+
+
+
+
+
+
+
+
+
+
+

21
12
15
99
21
34
74
51
4
15
22

+ 9
+ 1
+ 1
+ 11
0
+ 1
+ 11
+ 17
+ 6
0
+

2

+ 154

+ 17
+ 10
— 1
+ 13
+ 1

+ *36
+ 41
+ 69

84
136
78
93
167
101
92
98
142
90
7

0

+ 106
+ 130
+ 37
+ 114
+ 68

— *4
+ 4
+ 7

S ou rce: Departm ent o f Com m erce
♦Number o f reporting firms.

5
D E P A R T M E N T S TO R E T R A D E
R ichm ond

R E T A IL F U R N IT U R E S A L E S
Percentage Changes in A p ril and 4 Mos. 1947
Compared w ith Compared with
A p ril 1946
4 Mos. 1946
S TA TE S
+ 12
+ 4
M aryland (5 )* .........................
— 13
— 4
Dist. o f Columbia ( 6 ) * ...........
+ 4
+ 13
+ 8
W est V irgin ia (1 0 )* ...............
+ 8
+ 24
+ 20
+ 8
+ 9
South Carolina ( 1 0 )* ...............
+ 3
F ifth D istrict (6 5 )* .............
+ 9
Individual Cities
Baltimore, Md., ( 5 ) * .................
W ashington, D. C., ( 6 ) * .........
Lynchburg, Va., ( 3 ) * ...............
Richm ond, V a., ( 6 ) * ...............
Charleston, W . V a., ( 3 ) * . . . .
Charlotte, N . C „ ( 4 ) * .............
Columbia, S. C., ( 3 ) * .............

+
—
+
+
—
+
—

4
13
3
8
17
31
9

+ 12
— 4
+ 7
+20
— 15
+ 31
— 14

A pr. 1947

Rayon Y arn Stocks, Lbs..............
Staple Fiber Stocks, Lbs..............
S ource: R ayon Organon




Other Cities

District

SOFT C O A L P R O D U C T IO N IN T H O U SAN D S OF TONS

RAYON YA R N D A TA

,

W ashington

chg. in A p ril 1947 sales, com pared w ith sales in A p r. 1946:
— 2
— 3
-f-10
+ 1
chg. in 4 m onths sales 1947, com pared w ith 4 m onths in *46:
+ 5
+ 2
+ 7
+ 5
chg. in stocks on A p r. 30, 1947, com pared w ith A p r. 30, *46:
+23
+33
+39
+34
chg. in outstanding orders A p r. 30, '47 from A p r. 30, *46:
— 57
— 59
— 56
— 58
chg. in receivables A pr. 30, '47 from those on A p r. 30, ’ 46:
+31
+35
+30
+36
o f current receivables as o f A p r. 1, *47 collected in A p r .:
48
42
53
45
o f instalm ent receivables as o f A p r. 1, ’ 47, collected in A p r .:
27
23
32
25

M aryland D ist.of Col. V irgin ia W . V irgin ia N o. Carolina So. Carolina
Percentage chg. in A p r. 1947 sales from A pr. 1946 sales, by states:
— 1
—3
+ 7
+8
+10
+6
P ercentage chg. in 4 m onths 1947 sales fro m 4 m onths 1946 sa le s:
+ 5
+2
+11
+6
+10
+2

♦Number o f reporting stores.

Rayon Yarn Shipments, Lbs----Staple Fiber Shipments, L b s ...

Percentage
+ 11
P ercentage
+ 15
Percentage
+ 57
P ercentage
— ‘61
Percentage
+ 56
P ercentage
40
P ercentage
25

B altim ore

Mar. 1947

A pr. 1946

58,700,000
17,900,000

60,000,000
16,200,000

57,500,000
14,800,000

7,400,000
2,900,000

7,000,000
3,100,000

9,200,000
2,200,000

R EG ION S
W est V irgin ia ...........
V irgin ia ........................
M aryland .....................
F ifth D istrict .........
U nited States .........
% in D istrict...........

A p ril A p ril
%
1947 1946
Chg.
11,771
400 + 2 ,8 4 3
1,227
32 + 3 ,7 3 4
148
8 + 1 ,7 5 0
13,146
440 + 2 ,8 8 8
41,120 3,506 + 1 ,0 7 3
32.0
12.5
....

4 Mos.
1947
54,384
6,277
747
61,408
205,725
29.8

4 Mos.
1946
41,712
5,115
634
47,461
164,096
28.9

%
Chg.
+ 30
+ 23
+ 18
+ 29
+ 25

14

MONTHLY REVIEW

SUMMARY OF NATIONAL BUSINESS CONDITIONS
(.Compiled by the Board of Governors of the Federal Reserve System)

Industrial output and employment declined slightly
in April. Value of department store sales continued
to show usual seasonal changes in April, but increased
somewhat in May. The general level of wholesale
comm odity prices declined somewhat in April and
showed little change in the first three weeks of May.

I n d u s t r ia l P r o d u c t io n
Industrial production declined slightly in April ac­
cording to the Board’s seasonally adjusted index,
which was at a level of 187 per cent of the 1935-39
average for April as compared with 190 in March. Out­
put o f both durable and nondurable manufactures and of
minerals was below the March rate.
A slight decrease in activity in the durable goods
industries in April reflected mainly work stoppages
at plants producing communication equipment and
small declines in output of building materials after
allowance for usual seasonal changes. Output of nonferrous metals and products declined slightly in April
as decreases in some fabricating industries offset fur­
ther gains in activity at smelters and refineries. Steel
production was at 94 per cent of capacity in April, as
in March, and scheduled operations at steel mills dur­
ing May have been maintained at this rate. Autom o­
bile output in April continued at,an annual rate of
about five million cars and trucks; and activity in
other transportation equipment industries increased
somewhat. A decline in automobile production is in­
dicated for May, largely as a result of shortages of
steel sheets.
Production of nondurable manufactures was in
somewhat smaller volume in April owing mainly to a
decrease in output of textiles. Activity in the rubber
products industry was slightly below the exception­
ally high first quarter levels when tires for passenger
cars, trucks, and busses were being produced at an
annual rate of 100 million as compared with about 60
million in 1940. Production of most other nondurable
goods in April showed little change from the March
rate.
Output of coal declined 20 per cent from March to
April, reflecting work stoppages at bituminous coal
mines in the early part of the month. Production of
crude petroleum and of metals continued to advance.
Crude petroleum output rose further in the early part
of May to a new record rate.

E m ploym ent
Nonagricultural employment decreased by about
450,000 workers in April, according to Bureau of La­
bor Statistics figures as adjusted for seasonal varia­
tion by Federal Reserve. This decline was due chiefly
to work stoppages in the telephone, bituminous coal,
and electrical machinery industries. Employment in
industries manufacturing nondurable goods, chiefly
textiles and apparel, also declined. The number of
persons unemployed increased slightly in April.




C o n s t r u c t io n
Total value of construction contracts awarded, as
reported by the F. W . Dodge Corporation, showed
little change from March to April and was about onefifth smaller than in April 1946. Private residential
and nonresidential awards declined, although awards
usually show a seasonal increase in April. Awards for
publicly-financed construction expanded further, re­
flecting chiefly a large increase in the volume of con­
tracts for streets and highways.

D is t r ib u t io n
Department store sales continued to show little
change in April, after allowance for usual seasonal
changes. The Board’s adjusted index was 275 per
cent of the 1935-39 average in April, compared with
277 in March and an average of 271 in the first four
months of this year. In May dollar volume of sales
showed less than the usual seasonal decline and in the
first half of the month was 12 per cent larger than in
the corresponding period of 1946.
Freight carloadings declined in April largely be­
cause of a sharp drop in coal shipments early in the
month. Loadings of coal increased and shipments of
most other classes of freight were maintained in large
volume in the early part of May.

C o m m o d it y P r ic e s
Prices of most basic commodities showed little
change in the early part of May, follow ing declines in
April. Prices of feed grains and copper advanced,
while prices of rubber, wool tops, paint materials, and
lumber declined. The general level of wholesale prices,
according to the Bureau of Labor Statistics weekly
index, has been at 147 per cent of the 1926 average
since the middle of April as ^compared to an average
level of 149 per cent in March.

T r e a s u r y F i n a n c e a n d B a n k C r e d it
Treasury redemption for cash of part of the weekly
maturing bill issues continued into May. Between
April 17, when the program began, and May 22 one
billion dollars of Treasury bills were retired. Largely
as a result of these retirements Treasury war loan de­
posits at commercial banks were reduced by about
800 million dollars in the five weeks ending May 21.
Although Federal Reserve Banks held most of the re­
tired securities, their holdings of Treasury bills declined
by considerably less than the amount retired, as some com­
mercial banks sold bills to maintain their reserve positions.
A further increase in monetary gold stock of 300 million
dollars during the five weeks and a small inflow of cur­
rency from circulation supplied member banks with re­
serve funds and thereby reduced the need for additional
sales of securities to the Reserve System.
Commercial and industrial loans, which had expanded
rapidly from the middle of 1946 until March 1947, de­
clined somewhat during April and the first half of May
at banks in leading cities. Real estate and consumer loans
continued to increase. Government security holdings de­
clined between the middle of April and the middle of May.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102