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MONTHLY REVIEW TWELFTH FEDERAL R E S E RV E D I S T R I C T F e d e r a l R e se r v e Ba n k o f S a n F r a n c is c o M arch 1952 REVIEW OF BUSINESS CONDITIONS h e m o s t str ik in g fe a tu r e o f th e c u r r e n t b u s in e s s s itu tio n , an d a p p a rel w e r e th e m a jo r fa c to r s o p e r a tin g to re a tio n in th e T w e lf t h D is t r ic t a n d in th e n a tio n is the d u ce e m p lo y m e n t b e lo w y e a r -a g o le v e ls. S in c e th e K o r e a n T m a r k e d c o n tr a s t w ith co n d itio n s a y e a r a g o . T h e first o u tb r e a k in J u n e 1 9 5 0 a la r g e p o r tio n o f th e se a so n a l q u a rte r o f 1 9 5 1 w itn e s s e d th e s e c o n d o f th e p o s t -K o r e a m o v e m e n ts in th e se in d u str ie s h a s been o ffs e t b y e m p lo y s c a r e -b u y in g sp re es th a t d r o v e reta il sale s to re c o rd h ig h s . m e n t a d v a n c e s in th e d e fe n se related in d u str ie s. D u r in g B u s in e s s firm s w e r e in th e m id s t o f a d riv e to b u ild in v e n th e first tw o m o n th s o f th is y e a r , h o w e v e r , e m p lo y m e n t to rie s in th e fa ce o f w h a t lo o k e d lik e a n e x te n d e d p e r io d a d v a n c e s in th e d e fe n se se g m e n t o f th e D is tr ic t e c o n o m y o f s h o r ta g e s r e m in is c e n t o f W o r l d W a r I I . T h e d e fe n se h a v e b een v e r y m u c h s m a lle r ; an d in so m e a r e a s, m o s t p r o g r a m w a s j u s t sta rtin g to be fe lt a n d w a s e x p e c te d to n o ta b ly in th e P a c ific N o r t h w e s t , th e se ac tiv itie s h a v e e x e r t a m a jo r in flu en ce in th e p e r io d a h e a d . P r ic e s a n d s h o w n little o r n o c h a n g e in th e p a st se v e ra l m o n th s . In p r o d u c tio n ro se sh a r p ly u n d e r th e im p a c t o f th e in ten se C a lifo r n ia d e fe n se e m p lo y m e n t has c o n tin u e d to rise, b u t b u ild -u p in d e m a n d a n d th e a p p a r e n t o u tlo o k w a s fo r a the rate o f g r o w th th is y e a r h as n o t a p p ro a c h e d th a t m a jo r in fla tio n a r y m o v e m e n t fo r s o m e tim e in th e fu tu r e . a c h ie v e d in the first se v e ra l m o n th s o f 1 9 5 1 . T h e first q u a rte r o f th is y e a r p re s e n ts a fa r d iffe re n t e c o n o m ic p ictu re , h ow ever. C o n su m er d em an d as T h e e m p lo y m e n t o u tlo o k fo r th e re st o f 1 9 5 2 is c o n s id re e ra b ly d iffe r e n t f r o m th a t w h ic h fa ce d th e D is t r ic t a t this fle cted in retail sa le s is s u b s ta n tia lly b e lo w th e re c o rd h ig h tim e a y e a r a g o . T h e d e fe n se p r o g r a m w a s th e n in th e le v e ls o f a y e a r a g o , a n d th e ra te o f c o n s u m e r sp e n d in g sta g e o f ra p id b u ild -u p , p a r tic u la rly f o r th e T w e lft h D i s o u t o f cu r re n t in c o m e c o n tin u e s fa r b e lo w le v e ls ty p ica l trict w h e r e an u n u su a lly la r g e p r o p o r tio n o f the e a r ly o f m o s t p o s t - W o r l d W a r I I y e a r s . I n v e n to r y a c c u m u la p r im e d e fe n se co n tr a c ts w e r e let, a n d e m p lo y m e n t in a ir tio n , e x c e p t in a fe w m a jo r d e fe n s e in d u s tr ie s , h as a b ate d . c r a ft a n d a w id e ra n g e o f m e ta l fa b r ic a tin g in d u str ie s R e ta il a n d w h o le s a le in v e n to r ie s h a v e been re d u ce d . E x m o v e d s w ift ly a h e a d . T h i s y e a r d e fe n se e m p lo y m e n t w ill p e n d itu re s o n n e w c o n s tr u c tio n d u r in g th e first q u a rte r , c o n tin u e to rise b u t at a s lo w e r rate b e ca u se o f th e s o - p a r tic u la rly fo r n e w ca lle d s tr e tc h -o u t o f th e d e fe n se p r o g r a m . I n a d d itio n , re sid e n tia l b u ild in g s , w e r e b e lo w e a rlie r p e a k s, a fte r a llo w a n c e f o r s e a so n a l fa c to r s . H o w e m p lo y m e n t at G o v e r n m e n t m ilita r y e sta b lish m e n ts e v e r , re sid e n tia l c o n s tr u c tio n s h o w e d c o n s id e r a b ly m o r e n o w n e a r its p la n n e d le v e ls , w h e r e a s it w a s ra p id ly e x str e n g th ex p a n d in g la st y e a r . F u r t h e r m o r e s o m e civ ilia n in d u str ie s p e c te d . D e fe n s e o u tp u t h as n o t in cr e a se d a s s h a r p ly as h a v e re d u ce d th e n u m b e r o f th e ir e m p lo y e e s b e lo w y e a r - in F ebru ary e a r lie r p la n n e d and and M arch a d e c is io n th a n w as had been re c e n tly m ade is to a g o le v e ls. A s a co n se q u e n c e , th e e x p a n s io n o f to ta l e m s p re a d th e p r o g r a m o v e r a lo n g e r p e r io d o f tim e th a n p lo y m e n t in th e n e x t s e v e ra l m o n th s w ill be m u c h s lo w e r s o m e p la n s h a d ca lle d fo r . T h e s e c o n d itio n s h a v e c o m th a n in 1 9 5 1 . b in e d to re d u ce th e s q u e e ze o n critic a l m a te r ia ls , a n d a llo ca tio n s fo r c iv ilia n u se h a v e b e c o m e m o r e lib e ra l. A t th e sa m e tim e , h o w e v e r , s o m e s o ft sp o ts h a v e d e v e lo p e d in th e e c o n o m y , p a r tic u la r ly in s o m e o f th e la r g e in d u stria l ce n te rs o u ts id e th is D is t r ic t w here re str ic te d c iv ilia n o u tp u t h as n o t be e n fu lly re p la ce d b y d e fe n s e o u tp u t. Unemployment increases sharply in the District S e v e r e w in te r w e a th e r th a t h as e ith e r p re v e n te d o r s e r io u sly in te r ru p te d o u td o o r ac tiv itie s a n d m in o r w e a k n e ss in a fe w c iv ilia n lin es h a v e ra ise d th e lev el o f u n - Seasonal influences dominate employment scene R e d u c e d e m p lo y m e n t ca u se d b y w e a th e r a n d o th e r se a so n a l fa c to r s d o m in a te d D is t r ic t la b o r m a r k e ts in e a rly 1 9 5 2 . P r e lim in a r y d a ta in d ica te th a t lo s s e s in su ch se a so n a l ac tiv itie s as f o o d p r o c e s s in g , lu m b e r in g , c o n s tr u c A ls o in This Issu e Member Bank Earnings and Expenses— Twelfth District, 1 9 5 1 38 FEDERAL RESERVE B A N K OF S A N FRA NC ISCO M arch 1952 e m p lo y m e n t s h a r p ly th r o u g h o u t the D is t r ic t. A t the end c e n tly a n d a d r o p in c o n str u c tio n e m p lo y m e n t th r o u g h of o u t th e c o u n tr y . I t is to o e a r ly to a s se ss fu lly th e p r o b a b le January in s u r e d u n e m p lo y m e n t to ta le d m ore th a n 2 5 2 ,0 0 0 w o r k e r s , 2 0 p e r c e n t m o r e th a n in J a n u a r y a y e a r re su lts o f th e se c h a n g e s. T h e r e are a lso o th e r im p o r ta n t ago. A c o n s id e r a b le p a r t o f th e c u r re n t u n e m p lo y m e n t fa c to r s in th e situ a tio n . R e s tr ic tio n s o n c r e d it f o r u se in w ill p r o b a b ly b e a b s o r b e d as o u td o o r a c tiv itie s are re n e w h o u s in g c o n str u c tio n a n d so m e ty p e s o f n o n r e s id e n - su m e d a n d b u s in e s s a c tiv ity p ick s u p se a s o n a lly . H o w tial b u ild in g s e v e r, a d r o p in u n e m p lo y m e n t b e lo w y e a r -a g o le v e ls d o e s m o r tg a g e m a r k e t m a y w e ll k e e p e ffe c tiv e d e m a n d b e lo w and p o ssib le co n tin u e d tig h tn e s s in th e n o t a p p e a r lik e ly at lea st f o r s o m e m o n th s . I n th e c o n the le v e l n e c e ssa r y to p r o v id e a s tr o n g m a r k e t f o r D is t r ic t s tr u c tio n tr a d e s u n e m p lo y m e n t h a s b e e n g r o w in g since lu m b e r . D o w n -p a y m e n t r e q u ir e m e n ts a re cite d b y r e s i th e m id d le o f la st y e a r . I n th o s e a re a s w h e r e re sid e n tia l d en tia l b u ild e rs as the m a jo r d e te r re n t in th e sale o f n e w c o n str u c tio n a c tiv ity h a s b een c o n s id e r a b ly re d u c e d an d h o u se s. o th e r ty p e s o f c o n s tr u c tio n are n o t p a r tic u la rly a c tiv e, P r e lim in a r y d a ta in d ica te a n o tic e a b le fir m in g in lu m th is ty p e o f u n e m p lo y m e n t m a y w e ll p o se a p r o b le m in b e r p ric e s a fte r th e ir s o m e w h a t e rr a tic b e h a v io r d u r in g th e m o n th s a h e a d . the la st p a r t o f 1 9 5 1 . P r ic e in c r e a se s h a v e b e e n re c o r d e d Lumber market improves slightly fo r a w id e ra n g e o f lu m b e r p r o d u c ts in re ce n t m o n th s r e fle c tin g im p r o v e d m a r k e t c o n d itio n s a n d r e str ic te d p r o D u r i n g th e first tw o m o n th s o f 1 9 5 2 th e d e m a n d fo r D is t r ic t lu m b e r im p r o v e d f r o m th e lo w le v e ls o f late 1 9 5 1 . N e w o r d e r s re c e iv e d in th e first n in e w e e k s o f th e y e a r w e r e u p a lm o s t 2 0 p e r c e n t f r o m th e v o lu m e o f n e w b u s i n e ss re ce iv e d in th e la st tw o m o n th s o f la st y e a r . A lt h o u g h d u c tio n o w in g to se v e re w in te r w e a th e r . I n d u s t r y so u r c e s , h o w e v e r , re p o r t little c o n fid e n c e in th e fu tu r e c o u r s e o f p ric e s, p rin c ip a lly b e ca u se o f u n c e r ta in ty c o n c e r n in g r e si d en tia l c o n str u c tio n . this im p r o v e m e n t w ill h e lp su sta in lu m b e r o p e ra tio n s in Department store sales th e n e x t se v e ra l m o n th s , it d o e s n o t n e c e s s a r ily p o r te n d decline further a c h a n g e in th e u n d e r ly in g e c o n o m ic s itu a tio n th a t h as fa ce d the in d u s tr y sin ce la st M a y . L u m b e r m a r k e ts are still w e a k re la tiv e to th e e a r ly m o n th s o f 1 9 5 1 . W e s t e r n p in e o r d e r s , d esp ite th e rise n o te d a b o v e , are still 1 4 p e r ce n t b e lo w th e c o r r e s p o n d in g p e r io d o f 1 9 5 1 , a n d D o u g la s fir o r d e r s are d o w n m o r e th a n 7 p erce n t. T h e p r im e so u r c e o f w e a k n e s s in th e lu m b e r m a rk e t c o n tin u e s to be th e re la tiv e ly lo w lev el o f d e m a n d fo r n e w h o u s in g at c u r r e n t p ric es a n d te r m s . S in c e h o u s in g c o n str u c tio n d o m in a te s th e d e m a n d f o r lu m b e r , th e recen t s tr e n g th e x h ib ite d in lu m b e r m a r k e ts m a y w e ll p ro v e T h e c o n tin u e d d e te r m in a tio n o f c o n s u m e r s to sp en d less o u t o f c u r re n t in c o m e s r e m a in s th e d o m in a n t fa c to r in the retail sales situ a tio n in th e T w e l f t h D is t r ic t. D e p a r tm e n t sto re sale s d u r in g J a n u a r y w e r e 1 6 p e r ce n t u n d e r J a n u a r y a y e a r a g o a n d w e r e a lm o s t 5 p e r c e n t u n d e r sales in D e c e m b e r , a fte r a llo w in g f o r se a so n a l fa c to r s. A fu r th e r m o d e s t d eclin e o c c u r re d in F e b r u a r y . A p o r tio n o f th e d e c lin e in re ce n t m o n th s m a y re fle ct n o m o r e th a n th e u n u s u a lly s e v e re w in te r w e a th e r w h ic h has k e p t b u y e r s a w a y f r o m th e sto re s in g r e a te r n u m b e r s th a n in sim ila r p e r io d s in th e p a st se v e ra l y e a r s. tr a n s ito r y in th e a b se n c e o f a n y b a sic c h a n g e in th e c u r re n t o u tlo o k f o r th is ty p e o f co n s tr u c tio n . T h e r e h a v e S to c k s h e ld b y D is t r ic t d e p a r tm e n t sto re s in c r e a se d b e e n , h o w e v e r , s o m e v e r y re ce n t in d ica tio n s th a t th e n u m o n c e a g a in in J a n u a r y , r e v e r s in g a d e c lin in g tr e n d in e v i be r o f n e w h o u s in g sta rts m a y e x c e e d e a r lie r e stim a te s. d e n c e sin ce la st A u g u s t . T h i s in cr e a se is a c c o u n te d f o r b y T h e N a tio n a l P r o d u c tio n A u t h o r it y h a s r e la x e d se v e ra l th e s o m e w h a t lo w e r th a n e x p e c te d le v e ls o f C h r is tm a s re str ic tio n s o n th e u se o f critic a l m a te r ia ls in n e w h o u s sale s as w e ll as th e fu r th e r d e c lin e in J a n u a r y . T h e s to c k - in g c o n s tr u c tio n a n d h a s e a se d th o s e o n s o m e n o n r e s i- sales ra tio , h o w e v e r , re m a in s w e ll b e lo w th e b u r d e n s o m e d en tia l p r o je c t s . T h e s e d e c is io n s h a v e b e e n p r o m p t e d b y le v e l o f th e first h a lf o f 1 9 5 1 , d e sp ite th e m o d e r a te rise in the a p p a r e n t e a s in g in th e su p p lie s o f critical m e ta ls re January. MEMBER BANK EARNINGS AND EXPENSES—TWELFTH DISTRICT, 19 5 1 s u s t a i n e d d e m a n d f o r b a n k c r e d it b y in d iv id u a ls a n d s o m e w h a t h ig h e r in c o m e ta x e s . N e t p ro fits w e r e o n ly 2 b u s in e s s e s w a s th e p rin c ip a l fa c to r in a 1 2 p erce n t p e r c e n t a b o v e th e 1 9 5 0 fig u r e . F o r th e n a tio n as a w h o le , g a in in to ta l e a r n in g s o f T w e l f t h D is t r ic t m e m b e r b a n k s m e m b e r b a n k o p e r a tin g e x p e r ie n c e w a s g e n e r a lly sim ila r , A d u r in g 1 9 5 1 . R e fle c tin g th e y e a r -t o -y e a r e x p a n s io n o f “ r is k ” a s s e ts , e a r n in g s o n lo a n s w e r e 1 8 p e rce n t h ig h e r th a n in 1 9 5 0 , w h ile in te r e s t a n d d iv id e n d s o n se cu ritie s o th e r th a n G o v e r n m e n t s ro se 1 6 p e r ce n t. D e s p ite h ig h e r b u t a t a x b o o st o f m o r e th a n o n e -th ir d b r o u g h t n e t p ro fits b e lo w th e y e a r -a g o lev el. Loan expansion boosts earnings y ie ld s o n G o v e r n m e n t s e cu ritie s, m e m b e r b a n k e a r n in g s T h e ra p id g r o w th o f m e m b e r b a n k lo a n s fo llo w in g th e fr o m th is so u r c e d r o p p e d 6 p e r ce n t b e ca u se o f lo w e r a v e r m i d - 1 9 5 0 o u tb r e a k o f w a r in K o r e a w a s th e m a jo r fa c to r a g e h o ld in g s . A lt h o u g h g r o s s e a r n in g s w e r e s u b sta n tia lly re sp o n sib le f o r h ig h e r lo a n e a r n in g s in 1 9 5 1 . M o s t o f th is h ig h e r th a n in 1 9 5 0 , m o s t o f th e g a in w a s w ip e d o u t b y e x p a n s io n to o k p la ce in th e la tte r h a lf o f 1 9 5 0 , th o u g h in c r e a s e d e x p e n s e s , la r g e r lo s s e s a n d c h a r g e -o f fs , an d lo a n s c o n tin u e d a m o d e r a te u p w a r d c lim b th r o u g h o u t M arch 1952 39 M O N T H L Y R E V IE W SOURCES AND USES OF THE INCOME DOLLAR OF TWELFTH DISTRICT MEMBER BANKS—1951 E a r n in g s a n d E x p e n s e s o f T w e l f t h D is t r ic t M e m b e r B a n k s (millions of dollars) Percent change 1951. A s a re su lt, th e a v e r a g e v o lu m e o f lo a n s a n d d is co u n ts h eld b y T w e lft h D is t r ic t b a n k s in 1 9 5 1 w as 19 p erce n t h ig h e r th a n th e p r e v io u s y e a r , a n d e a r n in g s o n lo a n s in cre a se d 1 8 p e rce n t. I n o th e r d is tr ic ts th e y e a r -t o y e a r rise in lo a n e a r n in g s w as even g r e a t e r ; fo r the U n it e d S ta te s as a w h o le , th e g a in a m o u n te d to 2 4 p e r cen t. B o th la r g e an d sm a ll b a n k s in th e T w e lft h D is tr ic t re ce iv ed s u b sta n tia lly m o r e in c o m e f r o m le n d in g o p e r a tio n s th a n in 1 9 5 0 . C o m b in e d lo a n e a r n in g s o f th e fifteen 1949 1950 1951p Earnings on l o a n s ................................. Interest and dividends on Government securities .................... Other securities ................................. Service charges on deposit accounts. Trust department earnings ............... Other e a r n in g s ....................................... 2 8 6 .7 3 2 0 .7 3 7 7 .2 + 18 1 0 3 .8 2 0 .4 3 2 .8 13.9 2 7 .8 1 0 6 .5 2 4 .6 3 6.3 1 5 .4 3 0.1 1 0 0 .4 2 8 .5 3 9 .8 1 6.3 3 3 .4 — 6 + 16 + 12 1950-51 + 10 + 6 + 11 Total earnings ................................... 4 8 5 .4 5 3 3 .6 5 9 5 .6 Salaries and wages ............................... Interest on time d e p o s it s .................... Other e x p e n se s ....................................... 1 4 7 .8 6 6 .3 1 6 2 .8 7 1 .4 1 8 2 .2 + 12 + 29 9 1 .9 9 7 .1 9 2 .3 1 0 3 .1 Total expenses ................................... 306.0 3 3 1 .3 3 7 7 .7 + 14 2 1 7 .9 + 1 7 9 .5 Net current earnings .......................... N et recoveries and profits (losses— ) On securities ..................................... + 1.6 On loans .............................................. — 2 5.4 + 0 .8 Total net recoveries and profits. — 2 3 .0 2 0 2 .3 0 .4 — 6.4 — 1 7.7 + 1.3 — 19.3 — 16.8 — 2 5 .4 — + + 6 8 __ — — 0 .3 — Net profits before income taxes......... Taxes on net i n c o m e ............................. 1 5 6 .5 4 9 .8 1 8 5 .5 7 2.5 1 9 2 .5 7 7 .5 + + Net profits after taxes ........................ Cash dividends declared .................... Undistributed profits .......................... 1 0 6 .6 4 6 .8 59.8 1 1 3 .0 5 7.5 5 5.5 1 1 5 .0 6 4 .7 5 0 .4 + 2 + 12 — 4 7 9 p— preliminary. N o te : Because of rounding, com ponent items may not add to tota ls; per cent changes are based on the original unrounded figures. la r g e st b a n k s w e r e u p 1 9 p e r ce n t, w h ile all o th e r s as a g r o u p e a rn ed 15 p e r ce n t m o r e o n lo a n s th a n in 1 9 5 0 . A l l on G o v e r n m e n t s th a n in 1 9 5 0 , th e la r g e st g a in b e in g 4 o f the fifteen la r g e s t b a n k s b o o s te d th e ir lo a n e a r n in g s, p e r c e n t ; the o th e r tw e lv e sh o w e d d eclin es r a n g in g u p to the in cre a se s r a n g in g f r o m 11 to 7 2 p e r c e n t ; s e v e n o f 21 p e rce n t. T h e c o m b in e d fig u re fo r all o th e r s in th e D i s th e m m a d e g a in s e x c e e d in g 3 0 p e rce n t a n d th e m e d ia n trict d ro p p e d 5 p erce n t. T h e a g g r e g a te fo r all m e m b e r b a n k s in th e c o u n tr y w a s o f f 3 p erce n t. g a in w a s 2 7 p erce n t. T h e w a r -s tim u la te d d e m a n d f o r ca p ita l h as a ffe c te d Incom e from Governm ents T w e lft h declines b o n d s in m u c h the sa m e w a y in w h ic h lo a n e a r n in g s h a v e T h e first y e a r o f th e K o r e a n w a r w a s m a r k e d b y an im p o r ta n t sh ift in b a n k e a r n in g a s s e t p o r tfo lio s as G o v e rn m e n t se cu ritie s w e r e s o ld to m a k e r o o m fo r n e w lo a n s to b u sin e ss an d o th e r p riv a te b o r r o w e r s . I n m i d -1 9 5 0 , G o v e r n m e n t se cu ritie s h a d m a d e u p 3 9 p erce n t o f total a sse ts o f T w e lft h D is t r ic t m e m b e r b a n k s , a n d lo a n s an d d isc o u n ts c o m p r is e d 3 4 p erce n t. A y e a r la ter, lo a n s an d d isc o u n ts h ad ju m p e d to 4 0 p erce n t o f to ta l a sse ts, w h ile G o v e r n m e n t s h a d d w in d le d to 31 1951 p erce n t. S in c e J u n e th e d o w n w a r d tr e n d o f G o v e r n m e n t se c u rity h o ld in g s h as been r e v e r s e d ; lo w e r p ric e s r e s u ltin g fr o m a tig h te r m o n e ta r y p o lic y ch e ck e d th e sale o f G o v e r n m e n ts D is tr ic t m e m b e r bank e a r n in g s on c o rp o r a te been a ffe c te d . A v e r a g e h o ld in g s o f se cu ritie s o th e r th a n G o v e r n m e n t s in cre a se d 1 9 p e r ce n t o v e r 1 9 5 0 , a n d e a r n in g s o n th e m w e r e u p 1 6 p erce n t. B o th la r g e a n d sm a ll b a n k s e a rn ed m o r e f r o m p riv a te ly issu e d se cu ritie s th a n in 1 9 5 0 ; f o r th e fifteen la r g e st b a n k s th e in cre ase w a s 1 6 p e rce n t, a n d fo r th e o th e r s 1 4 p erce n t. Total earnings up 7 2 percent O t h e r so u r ce s o f b a n k in c o m e a lso b r o u g h t in cre ase d re v en u e in 1951. S e r v ic e ch a rg e s o n d e p o sit a c co u n ts w e r e 1 0 p erce n t h ig h e r th a n the p r e v io u s y e a r . T r u s t d e p a r tm e n ts earn ed 6 p e r ce n t m o r e . O t h e r cu r re n t e a r n in g s w e r e u p 11 p erce n t. G r o s s e a r n in g s w e r e th e h ig h e s t on b y the b a n k s a fte r M a r c h , a n d th e h ig h e r y ie ld p r o v e d re co rd , 1 2 p e rce n t g r e a te r th a n in th e p r e v io u s p e a k y e a r su fficien tly a ttr a ctiv e so th a t b a n k s b e g a n b u y in g G o v e r n o f 1 9 5 0 . F o r m e m b e r b a n k s oth er th a n th e fifteen la r g e st, m e n ts b y J u ly , a n d at y e a r ’s en d h a d b u ilt u p th e ir G o v to ta l e a r n in g s g a in e d s lig h tly less, 9 p erce n t. I n the U n it e d e rn m e n t p o r tfo lio s to th e h ig h e s t le v e l sin ce A u g u s t 1 9 5 0 . S ta te s as a w h o le , the in cre a se in to ta l e a r n in g s o f m e m H o w e v e r , th e a v e r a g e v o lu m e h e ld d u r in g 1 9 5 1 w a s 11 be r b a n k s a m o u n te d to 11 p erce n t. p e rce n t less th a n in 1 9 5 0 . W i t h a n a v e r a g e rate o f retu rn o f 1 .6 7 p erce n t, c o m p a r e d w ith 1 .5 7 p e r c e n t th e p re v io u s year, to ta l in te re st in c o m e on G overn m en t secu rities d ro p p e d o n ly 6 p e rce n t. L ik e th e g a in in lo a n e a r n in g s, interest on savings leads expense rise A b o u t $21 m illio n , o r o n e -th ir d o f th e in cr e m e n t in the d eclin e in e a r n in g s o n G o v e r n m e n t s w a s c o m m o n to g r o s s e a r n in g s o v e r 1 9 5 0 , w a s d istr ib u te d to d ep o sito rs m o s t b a n k s. O f th e fifteen la r g e s t, o n ly th re e e a rn ed m o r e in the fo r m o f in cre a se d in te r e st o n tim e a n d sa v in g s d e - FEDERAL RESERVE B A N K OF S A N FRANC ISCO 40 P ercent C h a n g e s , 1950-51, in S elected E a r n in g s a nd E xp e n se I t e m s of T w e l f t h D istrict M ember B a n k s , by S ize G roup a n d by A rea (------------ All 15 largest banks banks Earnings on loans... + 1 8 +19 Interest and dividends on Gov’t securities . . . — 6 — 6 Other securities . . . + 16 +16 Total earnings.......... + 1 2 +12 Salaries and wages. . . + 1 2 +12 Interest on time deposits .................. + 2 9 + 31 Total expenses.......... + 1 4 +14 Net current earnings.. + 8 + 9 Profits before taxes. . + 4 + 4 Taxes on net income. + 7 + 4 + 4 Net profits ................ + 2 Cash dividends.......... + 1 2 +13 Other banks + 15 Banks in------------ s Ariz. Idaho Ore. Nev. Califand and fornia Wash. Utah +17 + 25 +14 — 5 +14 + 9 + 11 — 4 + 25 +12 + 12 — 10 —1 7 +12 +14 — 5 + 17 +10 +12 + 21 +12 + 4 + 4 + 21 — 6 + 11 + 33 + 15 + 8 + 3 + 1 + 4 + 13 + 13 + 13 +10 + 8 +40 — 4 + 6 +12 +13 4" 5 4” 6 + 25 — 7 +28 p o s its . A lt h o u g h th e a v e r a g e a m o u n t o f tim e d e p o sits at T w e l f t h D is t r ic t m e m b e r b a n k s in 1 9 5 1 w a s 3 p erce n t g r e a te r th a n in 1 9 5 0 , th e p rin c ip a l ca u se o f th e 2 9 p erce n t rise in in te r e st p a y m e n ts w a s th e c o m p e titiv e ra isin g of ra te s. T h e c o m p u te d a v e r a g e rate p a id w a s 1 .4 3 p erce n t f o r 1 9 5 1 as a w h o le , c o m p a r e d writh 1 .1 4 p e r c e n t fo r the p r e v io u s y e a r . A n a l y s i s o f d a ta re p o r te d b y th e fifteen la r g e s t b a n k s u n d e r lin e s th e c lo s e a lig n m e n t o f ra tes p aid o n s a v in g s a c c o u n ts b y b a n k s o p e r a tin g in th e sa m e area, as w e ll as s ig n ific a n t re g io n a l d iffe r e n c e s . F o r th e fifteen la r g e s t b a n k s , in te r e st p a y m e n ts o n tim e d e p o s its ro se 31 p e r c e n t o v e r 1 9 5 0 . T h e la r g e s t in cr e a se s— a n d th e h ig h e st a v e r a g e ra te s— w e r e p a id b y b a n k s writh h e ad offices in S a n F r a n c is c o a n d P o r tla n d . March 1952 R atios to C a p it a l A ccounts a n d R ates of R etu rn on E a r n in g A ssets — T w e l f t h D istrict M ember B a n k s Ratios to capital accounts Net current earnings 1950 All banks ........ ................................................................. 20.0 15 largest........................................ ................................. 20.5 Other ........................................................................ ....... 18.2 Net profits after taxes All banks .................................................................. ....... 11.2 15 largest .................................................................. ....... 11.4 Other ........................................................................ ....... 10.5 Rates of return on Loans All banks .................................................................. ..........5.0 15 largest .................................................................. ..........4.9 Other ........................................................................ ..........5.3 Government securities All banks .................................................................. ..........1.6 15 largest .................................................................. ..........1.6 Other.......................................................................... ..........1.6 1951 19.9 20.4 17.7 10.5 10.8 9.2 5.1 5.0 5.4 1.7 1.7 1.7 Note: Ratios computed from dollar totals, not by averaging individual bank ratios. Balance sheet items used are averages of amounts reported as of December 31, 1950, June 30, 1951, and October 10, 1951. Net profits up slightly L o s s e s a n d c h a r g e -o ffs e x c e e d e d r e c o v e rie s a n d p ro fits, a fte r a d ju s tm e n t o f re s e rv e s , b y m o r e th a n in 1 9 5 0 . P r o b a b ly o w in g to th e d r o p in G o v e r n m e n t se c u rity p ric es, lo sse s o n secu rities a m o u n te d to $ 6 m illio n m o r e th a n the p re v io u s y e a r . A s a re su lt o f la r g e r lo sse s a n d s m a lle r re c o v e rie s, p ro fits b e fo re ta x e s w e r e o n ly 4 p erce n t h ig h e r th a n in 1 9 5 0 . T a x e s o n n e t in c o m e w e r e u p 7 p erce n t, a sm a ll figu re in v ie w o f th e n a tio n a l in cre a se o f 3 5 p erce n t. T h e fifteen la r g e st b a n k s a s a g r o u p re p o rte d p r o v is io n fo r in co m e ta x e s o n ly 4 p erce n t g r e a te r th a n th e p re v io u s y e a r , w h ile fo r th e o th e r b a n k s th e b o o s t w a s 2 1 p erce n t. I t m u s t be b o rn e in m in d th a t b a n k s w h o s e ta x e s are o n a ca sh b a sis re p o rte d ta x e s a c tu a lly p a id , w h ic h relate to 1950 Salaries and wages boosted in c o m e , w h ile th o se o n an a ccru al b a sis re p o r te d e stim a te d ta x e s o n 1 9 5 1 in c o m e . T h e t a x fig u re s re p o rte d P a y r o lls , w h ic h a c c o u n t fo r n e a r ly h a lf o f all o p e ra tin g e x p e n s e s , ro s e 1 2 p e r c e n t as a re su lt o f a n in cre a se o f s lig h tly m o r e th a n 7 p e r c e n t in n u m b e r o f e m p lo y e e s an d a n in cr e a se o f n e a r ly 4 .5 p e r ce n t in a v e r a g e sa la rie s. A l l o f th e fiftee n la r g e s t b a n k s in cre a se d to ta l s a la r y p a y m e n ts , w ith little v a r ia tio n in th e p erce n t c h a n g e ; fo r the s m a lle r b a n k s th e a g g r e g a t e in cre a se w a s o f a p p r o x i m a te ly th e sa m e re la tiv e m a g n itu d e . b y th e latter b a n k s m a y reflect a d ju s tm e n t s fo r o v e r a c cru al in th e p re v io u s y e a r . T w e lv e o f th e fifteen la r g e s t b a n k s re p o rte d v e r y su b sta n tia l in cre a se s in p r o v is io n fo r n et in co m e ta x e s , ra n g in g fr o m 3 7 to 2 2 6 p erce n t, w h ile th ree liste d m o r e o r less s iza b le d e c li n e s ; th e m e d ia n c h a n g e w a s + 5 6 p erce n t. N e t p ro fits a fte r ta x e s wrere up o n ly 2 p e r c e n t ; b u t in th e U n it e d S ta te s as a w h o le , a fte r the la rg e in crease in t a x e s , n et p ro fits o f m e m b e r b a n k s O t h e r e x p e n s e s in cre a se d 6 p erce n t. T h e o v e r -a ll e x w e r e 3 p erce n t less th a n in 1 9 5 0 . F o r th e T w e lft h D is tr ic t p a n s io n in g r o s s c u r re n t o p e r a tin g e x p e n s e s w a s equ al m e m b e r ba n k s o th e r th a n th e fifteen la r g e s t, 1 9 5 1 b r o u g h t to 1 4 p e r ce n t, a g a in w ith little v a ria tio n a m o n g th e fifteen a 6 p erce n t d eclin e in net p ro fits a fte r ta x e s . T h e la r g e s t la r g e s t b a n k s a n d b e tw e e n th e la r g e b a n k s a n d th e oth er b a n k s re p o rte d w id e ly v a r y in g n et p ro fits c o m p a r is o n s , b a n k s as a g r o u p . T h e in cre a se in e x p e n s e s w a s re la tiv e ly d e p e n d in g in la rg e p a rt o n th e ir t a x re se rv e p o licie s ; n et g r e a te r f o r m e m b e r b a n k s in th e T w e lft h D is t r ic t th a n p ro fits w e r e up in n ine ca ses, d o w n in five, w h ile o n e b a n k in th e c o u n tr y as a w h o l e ; c o m b in e d n a tio n a l fig u r e s rose re co rd e d n o ch a n g e . 11 p e r c e n t. P a r tly as a re s u lt o f th is fa c to r , a n d p a r tly C a s h d iv id e n d s d ec la re d w e r e in cre a se d su b sta n tia lly , b e ca u se o f th e sm a lle r in cre a se in T w e lft h D is t r ic t loa n d esp ite the sm a ll o v e r -a ll in cre a se in n e t p ro fits. T h e a g e a r n in g s , n e t c u r re n t e a r n in g s g a in e d o n ly 8 p e rce n t c o m g r e g a te b o o s t fo r T w e lft h D is t r ic t m e m b e r b a n k s w a s p a r e d w ith 1 6 p e r ce n t fo r th e U n it e d S ta te s as a w h o le . 1 2 p erce n t, w ith la rg e a n d s m a ll b a n k s fo llo w in g a sim ila r F o r th e b a n k s o th e r th a n th e fifteen la r g e s t, th e c o m p a r i p o licy . F o r th e c o u n tr y as a w h o le , d iv id e n d s w e r e 8 p e r so n w a s e v e n less fa v o r a b le — n et c u r r e n t e a r n in g s up cen t la r g e r th a n in 1 9 5 0 , e v e n th o u g h n e t p ro fits w e r e 4 p e r ce n t. A l l o f th e fiftee n la r g e s t b a n k s r e p o r te d g a in s lowrer. A m o n g th e fifteen la r g e s t b a n k s, e le v e n ra ised in n et c u r re n t e a r n in g s , w ith a m e d ia n in cre a se o f 2 3 p e r d iv id e n d s an d o n ly o n e re d u ce d the a m o u n t o f p ro fits cen t. d istrib u te d to s to c k h o ld e r s. M arch 1952 FEDERAL RESERVE B A N K OF SAN FRANCISCO 40A B U S I N E S S I N D E X E S — T W E L F T H D IS T R I C T i (1947-49 average= 1 0 0 ) Waterborne Car Total Dep’t foreign Retail m f’g loadings store tra<Je3»8 food sales Wheat Electric employ (num Copper8 flour8 power ber)2 (value)2 prices*»5 Exports Imports ment4 Industrial production (physical volume)5 Year and month 1929________ 1931.............. 1933________ 1934________ 1935________ 1936________ 1937________ 1938........ . 1939__.......... 1940________ 1941............. 1942.............. 1943________ 1944________ 1945________ 1946............. 1947________ 1948________ 1949________ 1950.......... .. 1951________ Petroleum8 Lumber Crude Refined Cement 87 54 97 78 57 55 36 51 27 52 50 41 52 35 44 50 33 62 56 54 64 58' 61 70 74 71 65 56 75 64 45 58 67 72 63 56 67 63 61 79 69 81 68 93 74 71 96 93 85 79 83 90 63 93 93 90 65 97 72 98 94 91 81 85 100 98 96 97 104 104 101 100 99 100 103 99 112 98 112 103 128 112 114 106 Lead8 165 100 72 76 86 96 114 92 93 108 109 114 100 90 78 70 94 105 101 109 89 105 49 17 24 37 64 88 58 80 94 107 123 125 112 90 71 106 101 93 115 115 90 86 75 81 87 81 84 81 91 87 87 88 98 101 112 108 113 98 88 86 95 29 29 26 28 30 34 38 36 40 43 49 60 76 82 78 78 90 101 108 119 136 113 102 94 93 90 81 83 90 96 96 99 101 112 1951 January___________ February__________ March____________ April______________ May______________ June______________ July______________ August____________ September_________ October___________ November_________ December_________ 122r 112 110 124 131 124 101 114 105 118 109 99 104 105 105 105 105 106 107 107 107 107 107 106 108 115 110 111 110 110 112 115 116 114 116 109 118 126 122 122 138 132 142 138 129r 130 124 119 97 103 101 102 95 91 84 67 74 80 88r 118 116 118 127 119 114 112 98 108 116 114 118 1952 January___________ 93 106 111 94 89 109 85r ' *47 54 60 51 55 63 83 121 164 158 122 104 100 102 98 105 119 102 68 52 60 66 77 81 72 77 82 95 102 99 105 100 101 106 100 94 97 100 30 25 18 21 24 28 30 28 31 33 40 49 59 65 72 91 99 104 98 105 108 64 50 42 45 48 48 50 48 47 47 52 63 69 68 70 80 96 103 100 100 113 129 129 135 135 135 135 140 141 135 141 140 136 114 117 118 118 120 120 120 120 118 120 121 120 97 92 99 113 106 107 92 94 104 101 101 100 125 112 102 102 104 103 108 106 108 106 114 110 111 110 112 112 113 112 113 112 112 113 114 117 142 122 86 105 116 190 138 110 132 135 131 170 164 163 132 124 80 72 78 109 116 119 87 95 101 "¿ 9 129 86 85 91 **57 81 98 121 137 156 115 150 168 187 192 196 201 240 215 187 182 153 167 178 183 140 166 147 142 155 172 144 130 B A N K I N G A N D C R E D IT S T A T IS T IC S — T W E L F T H D IS T R I C T (amounts in millions of dollars) Bank rates on short-term U.S. Demand Total Loans business deposits time and Gov’t loans9 discounts securities adjusted8 deposits Condition items of all member banks7 Year and month 2,663 4,068 5,358 6,032 5,925 7,105 7,907 495 547 720 1,064 1,275 1,334 1,270 1,323 1,450 1,482 1,738 3,630 6,235 8,263 10,450 8,426 7,247 6,366 7,016 6,392 6,533 1,234 984 951 1,201 1,389 1,791 1,740 1,781 1,983 2,390 2,893 4,356 5,998 6,950 8,203 8,821 8,922 8,655 8,536 9,244 9,940 1,790 1,727 1,609 1,875 2,064 2,101 2,187 2,221 2,267 2,360 2,425 2,609 3,226 4,144 5,211 5,797 6,006 6,087 6,255 6,256 6,720 1951 February March April May June July August September October November December 7,184 7,293 7,367 7,422 7,509 7,473 7,630 7,704 7,791 7,885 7,907 5,811 5,734 5,696 5,685 5,708 6,005 6,000 5,998 6,204 6,356 6,533 8,824 8,809 8,818 8,834 8,862 9,052 9,058 9,235 9,485 9,584 9,940 6,352 6,338 6,332 6,357 6,448 6,510 6,547 6,576 6,642 6,625 6,720 1952 January February 7,806 7,760 6,543 6,413 9,951 9,420 6,806 6,900 1929 1931 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 2,239 1,898 1,486 1,469 1,537 1,682 1,871 1,869 1,967 2,130 2,451 2,170 2,106 2,254 Member bank reserves and related items10 Reserve bank credit11 __ + 3.20 3.35 3.66 3.48 3.67 3.65 3.82 Coin and Commercial Treasury currency in operations12 operations12 circulation11 34 21 2 — 7 2 + 6 + 1 — 3 2 + 2 + 4 + + 107 + 214 98 + 76 9 + 302 17 + 13 + 39 + 21 0 - 154 - 110 - 198 - 163 - 227 90 - 240 - 192 - 148 - 596 -1,980 -3,751 -3,534 -3,743 -1,607 - 510 + 472 - 930 -1,141 -1,582 b 23 - 154 b 150 b 257 b 219 - 454 - 157 - 276 ~ 245 - 420 -1,000 -2,826 -4,486 -4,483 -4,682 -1,329 - 698 - 482 + 378 +1,198 +1,983 — — — + + 32 3 45 13 73 14 + 159 — 43 — 121 + 236 276 + - 38 124 200 162 113 342 80 18 143 239 102 + + + + + + + + + + + 6 130 226 150 199 298 86 42 283 118 279 84 180 - 228 109 + - 194 I ll + + + + + + + + + Reserves Bank debits Index 31 cities3»18 (1947-49 = 100)2 6 48 18 4 14 38 3 20 31 96 227 643 708 789 545 326 206 209 65 14 189 175 147 185 242 287 479 549 565 584 754 930 1,232 1,462 1,706 2,033 2,094 2,202 2,420 1,924 2,026 2,269 42 28 18 21 25 30 32 29 30 32 39 48 61 69 76 87 95 103 102 115 132 21 8 26 36 39 19 41 32 17 18 14 2,206 2,186 2,180 2,149 2,217 2,186 2,312 2,293 2,291 2,392 2,269 129 134 125 131 134 125 129 129 134 137 141 86 20 2,416 2,365 134 138 1 Adjusted for seasonal variation, except where indicated. Except for department store statistics, all indexes are based upon data from outside sources, as follows: lumber, various lumber trade associations; petroleum, cement, copper, and lead, U.S. Bureau of Mines; wheat flour, U.S. Bureau of the Census; electric power, Federal Power Commission; manufacturing employment, U.S. Bureau of Labor Statistics and cooperating state agencies; retail food prices, U.S. Bureau of Labor Statistics; carloadings, various railroads and railroad associations; and foreign trade, U.S. Bureau of the Census. 2 Daily average. 8 Not adjusted for seasonal variation. 4 Excludes fish, fruit, and vegetable canning. 8 Los Angeles, San Francisco, and Seattle indexes combined. • Commercial cargo only, in physical volume, for Los Angeles, San Francisco, San Diego, Oregon, and Washington customs districts; starting with July 1950, ‘‘special category” exports are excluded because of security reasons. 7 Annual figures are as of end of year, monthly figures as of last Wednesday in month or, where applicable, as of call report date. 8 Demand deposits, excluding interbank and U.S. Gov’t deposits, less cash items in process of col lection. Monthly data partly estimated. 9 Average rates on loans made in five major cities during the first 15 days of the month. 10 End of year and end of month figures. 11 Changes from end of previous month or year. 12 Minus sign indicates flow of funds out of the District in the case of commercial operations, and excess of receipts over disbursements in the case of Treasury operations. 13 Debits to total deposit accounts, excluding inter bank deposits. r—revised.