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F E D E R A L R E S E R V E BANK O F N E W YORK Fiscal Agent of the United States TCircular No. 4 7 8 3 L September 24, 1959 ] O F F E R IN G O F T W O S E R IE S O F T R E A S U R Y B IL L S $1,100,000,000 o f 9 1-D a y Bills, A dditional Am ount, Series D ated July 2, 1959, D ue D ec. 31, 1959 (T o B e Issued O ctober 1, 1959) $400,000,000 o f 182-D ay Bills, D ated O ctober 1,1959, D ue M arch 31, 1960 T o A ll Incorporated B anks and Trust Companies, and Others Concerned, in the Second Federal R eserv e D istrict: F ollow in g is the text o f a notice issued by the Treasury Department, released for publication in morning new spapers, T h u rsd ay, Septem ber 24, 1959: T h e T reasu ry D epartm ent, by this pu blic n otice, invites tenders fo r tw o series o f T reasu ry bills to the a ggregate am ount o f $1,500,000,000, o r thereabouts, fo r cash and in exch a n ge for T reasu ry bills m aturing O ctober 1, 1959, in the am ount o f $1,500,204,000, as fo llo w s : 91-day bills (to 1959, in the representing 2, 1959, and issued in the o rigin a l bills m aturity date) to be issued O ctob er 1, am ount o f $1,100,000,000, or thereabouts, an addition al amount o f bills dated July to mature D ecem ber 31, 1959, origin a lly am ount o f $499,965,000, the addition al and to be freely interchangeable. 182-day b ills, f o r $400,000,000, or thereabouts, to be dated O ctober 1, 1959, and to mature M a rch 31, 1960. T h e bills o f both series w ill be issued on a discou n t basis under com petitive and n oncom petitive b idd ing as h ereinafter p rovided, and at m aturity their face am ount w ill be payable w ithout interest. T h e y w ill be issued in bearer form on ly, and in den om in ation s o f $1,000, $5,000, $10,000, $100,000, $500,000 and $1,000,000 (m aturity va lu e). T en ders w ill be received at F ed eral R eserve Banks and B ranches up to the clo s in g hour, tw o o ’ c lo ck p.m., Eastern D ayligh t S a vin g time, M on day, Septem ber 28, 1959. Tenders w ill n ot be received at the T rea su ry D epartm ent, W ash ington. E a ch tender m ust b e fo r an even m ultiple o f $1,000, and in the case o f com petitive tenders the price offered m ust be e x pressed o n the basis o f 100, with n ot m ore than three decim als, e.g., 99.925. F raction s m ay n ot be used. It is urged that tenders be made on the printed form s and forw a rd ed in the special envelopes w hich w ill be supplied b y F ed eral R eserve Banks o r B ran ches o n application therefor. O thers than ban kin g institutions w ill n ot be perm itted to subm it tenders excep t fo r their ow n a ccou nt. T en ders w ill be received w ith ou t deposit from in corporated banks and trust com panies and from responsible and recogn ized dealers in in vestm ent securities. T en ders from others must be accom panied by paym ent o f 2 percent o f the fa c e am ount o f T reasu ry bills applied fo r, unless the tenders are accom panied b y an express gu aranty o f paym ent b y an in corporated bank o r trust com pany. Im m ediately a fte r the clo s in g h our, tenders w ill be opened at the Federal R eserve Banks and B ranches, fo llo w in g w hich public announcem ent w ill be made b y the T reasu ry D epartm ent o f the am ount and p rice range o f accepted bids. T h o s e su b m itting tenders w ill be advised o f the acceptance o r rejection th ereof. T h e S ecretary o f the T rea su ry exp ressly reserves the right to accep t or reject any or a ll tenders, in w hole o r in part, and his action in any such respect shall be final. S u b ject to these reservations, noncom petitive tenders f o r $200,000 o r less fo r the addition al bills dated July 2, 1959, (91 days re m aining until m aturity date on D ecem ber 31, 1959) and n on com petitive tenders fo r $100,000 o r less fo r the 182-day bills without stated price from any one b idder w ill be a ccep ted in fu ll at the average price (in three decim a ls) o f a ccep ted com petitive bids fo r the respective issues. Settlem ent fo r a ccepted tenders in accord a n ce w ith the bids must be m ade or com pleted at the F ed eral R eserve Bank on O ctob er 1, 1959, in cash o r other im m ediately ava ila b le funds o r in a like fa ce am ount o f T reasu ry bills m aturing O ctober 1, 1959. Cash and exch ange tenders w ill receive equal treatm ent. Cash adjustm ents w ill be made fo r differences betw een the par value o f m aturing bills a ccepted in exch a n ge a n d the issue p rice o f the new bills. T h e in com e derived from T rea su ry bills, w hether interest or gain from the sale o r other d isp osition o f the bills, does not have any exem ption, as such, and loss from the sale o r other disp osition o f T rea su ry bills does n ot have any special treat ment, as such, under the Internal Revenue C od e o f 1954. T he bills are subject to estate, inheritance, g ift or oth er excise taxes, w hether F ed eral or State, but are exem pt fro m all ta x a tion n ow o r hereafter im posed on the principal or interest th ereof by any State, o r any o f the possessions o f the U nited States, o r by any loca l ta x in g authority. F o r purposes o f ta x a tion the am ount o f discou n t at w h ich T rea su ry bills are o rig in a lly sold b y the U nited States is con sidered to be interest. U n der S ections 4 5 4(b) and 1221(5) o f the Internal Revenue C ode o f 1954 the am ou nt o f discou n t at w h ich bills issued hereunder are s o ld is n ot con sidered to a ccru e until such bills are sold, redeem ed or otherw ise disposed of, and such bills are exclu d ed from con sideration as capital assets. A ccord in g ly , the ow n er o f T rea su ry bills (oth er than life insurance co m pan ies) issued hereunder need include in his incom e ta x return only the difference betw een the price paid fo r such bills, whether on orig in a l issue o r on subsequent purchase, and the am ount actu a lly received either upon sale o r redem ption at m aturity du rin g the taxable year f o r w hich the return is made, as ord in a ry gain o r loss. T reasu ry D epartm ent C ircu lar N o. 418, R evised, and this notice, prescribe the terms o f the T reasu ry bills and govern the con dition s o f th eir issue. Copies o f the circu la r m ay be obtain ed from any F ed eral R eserve Bank or Branch. T h is Bank w ill receive tenders fo r both series up to 2 p.m., Eastern D a yligh t Saving time, M onday, Septem ber 28, 1959, at the Securities D epartm ent o f its H ead O ffice and at its B uffalo Branch. T en d er form s for the respective series are enclosed. Please use the appropriate form s to subm it tenders and return them in an envelope marked “ T en d er for T reasu ry B ills.” T en d ers m ay be subm itted b y telegraph, su bject to w ritten confirmation; they may not be submitted by telephone. Payment for the Treasury bills cannot be made by credit through the Treasury Tax and Loan Account. funds or in maturing Treasury bills. Settlement must be made in cash or other immediately available R esults o f the last offerin g o f T reasury bills (91-day bills to be issued Septem ber 24, 1959, representing an additional am ount o f bills dated June 25, 1959, and m aturing D ecem ber 24, 1959; and 182-day bills dated Septem ber 24, 1959, m aturing M arch 24, 1960) are show n on the reverse side o f this circular. A lfred H a y e s , President. m r Please note that the closing tim e for the receipt o f tenders has been extended to 2 p. m., Eastern Daylight Saving time. (o v e r) RESULTS OF LAST OFFERING OF TREASURY BILLS (TWO SERIES ISSUED SEPTEMBER 24, 1959) Range of Accepted Competitive Bids 91-Day Treasury Bills Maturing D ecem ber 24, 1959 182-Day Treasury Bills Maturing March 24, 1960 Price Approx. equiv. annual rate 99.007a 3.928% 97.609 4.729% L o w ....................... ........... 98.976 4.051% 97.578 4.791% A verage 99.000 3.958% 97.591 4.766% ..................... ........... H ig h ............... .......... Price Approx. equiv. annual rate a E x ce p tin g one tender o f $600,000. (7 percent o f the am ount o f 91-day bills b id fo r at the low price was accep ted .) (70 percent o f the am ount o f 182-day bills bid fo r at the lo w price was accepted.) Total Tenders Applied for and Accepted (By Federal Reserve Districts) 91-Day Treasury Bills Maturing D ecem ber 24,1959 District Applied for B oston ...................... ........... N ew Y o r k ................... ........... $ 27,339,000 1,342,152,000 182-Day Treasury Bills Maturing March 24, 1960 Accepted $ 17,339,000 $ 7,868,000 Accepted $ 6,968,000 520,151,000 255,251,000 17,453,000 9,777,000 4,777,000 40,004,000 26,553,000 26,553,000 16,141,000 2,978,000 2,978,000 27,486,000 27,486,000 5,124,000 4,424,000 C h icago .................................... 196,754,000 167,754,000 61,916,000 35,595,000 St. L o u i s ....................... .......... 27,031,000 25,631,000 4,368,000 4,368,000 M inneapolis ................. .......... 11,399,000 11,399,000 3,392,000 3,392,000 8,775,000 8,675,000 Philadelphia ............... ........... 32,453,000 Cleveland ................... ........... 40,004,000 R ich m on d ..................... ........... 16,141,000 ................................... A tlan ta 766,152,000 Applied for K ansas C i t y ................. .......... 33,578,000 * 32,578,000 D a l l a s .............................. .......... 23,181,000 21,181,000 4,308,000 4,308,000 San F ran cisco ............. 66,739,000 57,429,000 49,416,000 42,726,000 T ota l ............. ......... $1,844,257,000 $1,200,547,000b b In cludes $291,836,000 n on com petitive tenders a ccep ted at the a vera ge price o f 99.000. c Includes $57,318,000 n on com petitive tenders accepted at the a verage price o f 97.591. $704,626,000 $400,015,000c At U783 FED ERAL OF RESERVE NEW BANK YO RK September 24, 1959 T o A ll M em ber Banks in the Second F ederal R eserve D istrict : Following is an analysis o f the earnings and expenses o f our member banks for the first six months o f this year, prepared by our Bank Examinations Department. We are pleased to send the analysis to you, with the thought that it will be helpful as a management tool in making comparisons o f the operating perform ance o f your bank with the average performance of other banks in the District. Additional copies o f the analysis will be furnished upon request. A l f r e d H ayes, President. Earnings and Expenses of Second District M ember Banks in the First Half of 1959 Net current operating earnings of Second District member banks in the first 6 months o f 1959 were $367.7 million, a new peak for the first half of a year and a rise of 5.5 per cent over the first half of 1958. The percentage increase, while falling short o f the percentage increases for the com parable periods in 1955-57, was substantially better than the 1.8 per cent increase registered for the first half of 1958 over the comparable 1957 period. Despite operating gains, net profits after income taxes were down by 35.2 per cent to $149.2 million and resulted from nonrecurring losses from securities sales as against gains from this source during the first 6 months o f 1958. At all member banks in the United States, net operating earnings rose by 8.6 per cent, while net profits after income taxes declined by 27.8 per cent. Gross operating earnings of Second District member banks were $954.3 million, 7.2 per cent higher than in the first half of 1958. The increase fell below the increase of all member banks in the United States, however, their rate of increase being 9.4 per cent over the first half of 1958. The improvement in this District stemmed mainly from higher interest rates on loans and investments even though earning assets were only moderately higher than a year ago. At New York central reserve city banks, interest income from loans was up by nearly 4.5 per cent despite a slight reduction in average outstandings compared with a year ago. Interest income on Government securities, higher by $15.4 million, or 19 per cent, also contributed substantially to higher gross earnings at such City banks this year compared with the comparable period in 1958. At other member banks in the District, higher average yields raised earnings on Govern ments by almost 11 per cent. The rise in operating expenses of District member banks continued, amounting to $45.1 million over the first six months o f 1958, but the increase o f 8.3 per cent represented a slackening in the rate of increase from the 12 per cent increase of a year ago. Interest paid on time and savings deposits led the expense rise (excluding minor items) — $15.6 million, or 12.9 per cent, above last year’s outlay. The sharpest increase was reported by New York central reserve city banks where interest expense amounted to 15.2 per cent over the first half of 1958. Wage and salary outlays began leveling off from the increases in earlier years, the 4 per cent rise amounting to only one half of last year’s rate of increase. Additions to staff accounted for the greater part of the rise. Nonrecurring losses from securities sales, charge-offs, and adjustments of valuation reserves resulted in lower net profits, with the decline cushioned by lighter taxes. The reduced net profits, coupled with moderately increased cash dividend payments, caused a sharp drop in profits carried to capital accounts. EARNINGS ON LOANS Receipts from interest and discount on loans totaling $577.5 million reached a new high, the rise being nearly $34 million, or 6.2 per cent, above last year’s level for all District member banks. Both groups of banks benefited from the higher average interest rates that prevailed during the half year, raising the average yield on loans to 5.0 per cent in contrast with the 4.7 per cent average yield that prevailed during the two previous reporting periods. None theless, interest earnings from loans contributed a slightly lesser proportion of this year’s first-half total operating earnings, accounting for 60.5 per cent thereof as against 61.1 per cent in the previous year’s first half. As between the two bank groups, the almost $16 million improvement in loan income at central reserve city banks lagged behind the sharper rate o f increase reported by reserve city and country banks, the increase in total earnings from loans and discounts amounting to 4.5 per cent for the central reserve city banks compared with 9.5 per cent for reserve city and country banks combined. For the central reserve city banks, however, the gain represented a sharplyaccelerated increase over an only nominal gain in income from this source during the first half o f 1958, the increase accounting for nearly one-half of the total increase in this year’s first-half operating gross in contrast with only nomi nal assistance to last year’s first-half earnings’ increase. In other Second District member banks loan income rose to $207.2 million, higher by $18.0 million, or 9.5 per cent, over the comparable 1958 period. INTEREST ON U. S. GOVERNMENT AND OTHER SECURITIES Interest received on U. S. Government securities con tributed sizably to operating gross of both bank groups, although holdings were only moderately higher— 7.5 per cent above the first half of 1958— as many banks sold their holdings to acquire loanable funds and reserves. For all District member banks, interest on Governments increased by almost $21 million and resulted from the rise in average yields from 2.48 per cent to 2.67 per cent between the two Table 1 Earnings and Expenses of Member Banks in the Second Federal Reserve District During the First Six Months of 1958-1959 (Dollar amounts in m illions) New York central reserve city banks Item 1958 Number of banks. Earnings On United States Government securities. On other securities.................................................. On loans (including service charges and fees on loans).................................................................... Service charges on deposit accounts and other charms....................................................................... Trust department earnings.................................... Other current earnings........................................... Total current operating earnings. Expenses Salarilea and wages— officers and employees*___ Interest on time deposits (including savings deposits)................................................................ Interest and discount on borrowed money.......... Taxes other than on net income........................... Recurring depreciation on banking house, fur niture and fixtures............................................... Other current operating expenses......................... Total current operating expenses * Change 1959 Change 17 29.8 96.3 33.7 + + 15.4 3.9 + + 354.4 370.3 + 15.9 28.0 59.5 32.6 27.2 585.2 621.1 + 35.9 150.1 155.7 + 54.6 3.5 62.9 7.8 9.3 + + 7.2 100.4 + 6.6 94.9 6 6.1 27.5 + 1959 527 500 % Change Net profits after income taxes. Cash dividends paid or declared on common stock holdings..................................................................... Net profits after dividend payments........................ 545 517 + 10.8 + 10.6 131.8 51.6 152.7 57.8 + 20.9 + 33.9 + + 5.5 2.3 + 4.5 189.2 207.2 + 18.0 + 9.5 543.6 577.5 - 2.9 29.3 8.2 - 15.6 27.8 7.3 7.9 + + 1.5 .9 .1 + + + 5.4 12.3 1.3 55 8 66.8 40.5 56.5 74.3 35 5 + 6. 1 304.9 333.2 + 28.3 + 9.3 890.1 5.6 + 3.7 87.5 91.5 + 4.0 + 4.6 8.3 4.3 + 15.2 + 122.9 + 13.4 66.6 73.9 1.5 + 7.3 + 11 0 8.2 + + 7.0 54.6 1.1 .6 5.5 9.1 5.8 .4 7.5 8.0 7.8 60.4 + + 1.1 + .7 + 275 0 + 9.3 + .8 + + 5.8 11.4 + 10.6 + 8.8 + 10.6 317.9 328.7 156.2 177.5 72.5 172.5 105.0 77.3 95.2 79.1 25.9 -151.2 - 83.7 + 15.9 + 12.0 + 6.2 .7 7.5 5 0 + 1.3 - 12.3 954.3 + 64.2 + 7.2 237.6 247.2 + 9.6 + 4.0 121.2 3.9 15.7 136.8 9.3 17.5 + + 15.6 5.4 13.6 149.5 15.0 160.8 + + 1.4 11.3 + + 10.3 7.6 541.5 586.6 + 45.1 + 8.3 348.6 367.7 + 19.1 + 5.5 + 74.1 -125.3 + + - + 1.8 + 11.2 + 12.9 + 1 3 8 .5 + 11.5 94.0 36.2 64.9 20.7 - 29.1 15.5 - 31.0 42.8 422.7 192.4 242.4 93.2 -1 8 0 .3 - 99.2 - 42.7 51.6 149.2 - - 35.2 103.3 45.8 + 3.3 - 84.4 - 67.5 - 39.1 57.8 44.2 - 13.6 - 23 .5 230.3 + 1.8 69.3 + 2.3 - 72.8 22.7 35.1 24.2 20.0 + - 15 15.1 + 6.6 100.0 - + 6.2 Change 46.0 53.6 * Includes fees paid to directors and members of executive, discount, and other committees. ** N o breakdown of nonrecurring items is shown because these figures are usually highly tentative at the midyear. Note: Certain columns of figures may not add to totals because of rounding. Source: Board o f Governors of the Federal Reserve 8ystem; 1958 and 1959 figures compiled by the Federal Reserve Bank of New York. 1959 56.4 24.1 + 11.1 S Change 1958 21.8 Net current operating earnings before income taxes Recoveries, charge-offs, transfers to and from val uation reserves, and securities profits-Net**___ Net profits before income taxes................................ Taxes on net income................................................... Change 50.9 5.1 + 1958 19.0 13.1 + 6.6 - All Second District member banks Reserve city and country banks - 43 .0 130.3 81.1 + 3.3 - 64.8 review periods. The favorable impact was more in evidence at central reserve city banks where interest income on Gov ernment securities was $15.4 million, or 19 per cent, above the 1958 half-year, on average holdings that were 8 per cent higher. Earnings from this source accounted for 15.5 per cent of the central reserve city banks’ total earnings in the first six months of 1959 contrasted with 13.8 per cent during the same period of 1958. At reserve city and country banks, average yield on Government investments was also running higher this year, 2.74 per cent compared with 2.62 per cent in the first half of 1958, and raised their earnings from this source by $5.5 million, or 10.8 per cent, above a year ago. OPERATING EXPENSES Operating expenses continued their unbroken rise, but at a notably slower rate than in 1958. For all Second District member banks, total operating costs of $586.6 million were 8.3 per cent higher than a year ago in contrast with the 12 per cent rise in costs between the first halves of 1957 and 1958. The increase was paced by the $15.6 million rise in interest payments on time and savings deposits. Compared with the first half of 1958, a higher effective interest rate on a 12 per cent higher volume of time and savings deposits resulted in an increase in interest payments of 12.9 per cent above last year’s outlay for all District member banks. The sharper increase was registered by New York central reserve city banks where interest expenses rose by $8.3 million, or 15.2 per cent, above the January-June 1958 outlays. Elsewhere in the District, interest costs on time and savings deposits rose by 11 per cent, $7.3 million above the outlay in the comparable review period. For all District member banks combined, the heavier interest outlays accounted for more than one-third of the total increase in operating expenses, absorbing approximately one quarter of total growth in operating earnings for the reporting period. Interest and discount on borrowed money, normally a minor expense, this year reflected tighter money conditions and the greater volume of borrowings from the Federal Reserve and among banks. Outlays of $7.8 million at the central reserve city banks more than doubled those of last year. Banks elsewhere in the District likewise reported a substantial percentage rise in this expense item. Wage and salary payments continued their upward climb at nearly the same rate for both groups of banks under review, but at a slackening rate this year compared with last. The increase of 4.0 per cent in aggregate outlays was only slightly more than half of the rate of increase in 1958 over 1957. For the review period, wages and salary expense, compared to other outlays, accounted for a slightly lower portion of total current expenses than a year ago, 42.1 per cent as against 43.9 per cent. All remaining items o f ex pense also rose above their 1958 levels. NET CURRENT OPERATING EARNINGS The 5.5 per cent increase in net current operating earnings over the 1958 figure compares favorably with the 1.8 per cent increase registered between the first half of the 1957 Table 2 Selected Ratios, Member Banks in the Second Federal Reserve District During the First Six Months of 1958-19S9* Central reserve city banks 1958 Reserve city and country banks 1959 1958 1959 All Second District member banks 1958 1959 Per cent of average aggregate assets Total current operating earnings........................................................................ Total current operating expenses...................................................................... Net current operating earnings before taxes on net income............................ Net profits............................................................................................................ 3.36 1.83 1.53 .99 3.53 1.95 1.58 .59 4.14 3.04 1.10 .78 Net current operating earnings before taxes on net income............................ 16.86 10.88 4.87 6.00 16.90 6.38 4.81 1.57 2.40 2.97 2.63 2.96 2.62 2.69 Interest paid on deposits to average total time deposits................................. Average total time deposits to average total deposits..................................... 4.33 2.38 15.43 4.58 2.40 17.46 Average aggregate capital accounts (in millions)............................................. Number of banks................................................................................................. $34,740 $ 3,170 18 $35,113 $ 3,287 17 4.24 3.10 1.14 .56 3.60 2.19 1.41 .93 3.75 2.30 1.44 .58 Per cent of average aggregate capital accounts Net profits after dividends.................................................................................. 16.43 10.85 4.71 6.14 16.66 2.74 2.61 2.48 2.84 2.67 5.75 2.35 42.18 5.83 2.36 43.78 4.74 2.36 23.75 $14,696 $ 1,072 525 $15,695 $ 1,127 502 $49,436 $ 4,243 543 15.16 10.78 4.23 6.54 15.95 7.84 4.29 3.54 4.68 2.08 Miscellaneous percentages Average yield on United States Government securities................................... Average yield on other securities....................................................................... Interest and discount on loans and mortgages to average total loans and ♦Half year figures placed on an annual basis. Note: Averages of balances in the last three call reports were used to compute ratios. Ratios are based on aggregate dollar figures. 25.95 $50,808 519 and the first half of 1958. However, the improvement fell short of the 8.6 per cent increase reported in 1959 for all member banks throughout the country. Within the District, the relatively modest 3.9 per cent increase registered by the central reserve city banks was considerably below the 10.6 per cent gain reported for banks elsewhere in the District. NONRECURRING ITEMS, TAXES, AND DIVIDENDS Nonoperating items, subject to later readjustment, played a more critical role than did current operations in deter mining net profits for the half year, with net losses on securi ties sales supplanting last year’s gains. The weight o f these nonrecurring items was mainly confined to the central reserve city banks where, as in several other years, mid-year net profits have lagged behind other banks because o f higher deductions for nonrecurring items. Net losses taken by such city banks on securities, combined with other nonrecurring charge-offs and adjustments o f valuation reserves, resulted in a drop in net profits before income taxes of 46 per cent below a year ago. In many cases, however, security losses resulted from transactions that assured the banks o f future offsetting capital gains. Reduced taxes on the lower net income had the effect of cushioning the extent of the decline. On balance, net profits after income taxes of the central reserve city banks came to only about 60 per cent of the 1958 six-months’ net. To a lesser degree, nonrecurring adjustments at banks elsewhere in the District likewise netted out to both lessened income tax liability and diminished net profits after income taxes. The 35.2 per cent reduction in net profits for the District as a whole was somewhat more severe than the 27.8 per cent decline reported by all member banks through out the nation for the half-year. Cash dividend payments were slightly increased, causing the volume of profits retained and added by both groups of banks to their capital accounts to drop sharply in contrast with substantial additions to their capital accounts last year. Although the amount o f dividends paid to stockholders was only 3.3 per cent higher than in January-June 1958, the payments represented 69.2 per cent o f net profits for the first half o f 1959 compared with 43.4 per cent in the corre sponding period o f 1958. On an annual basis, dividends on common stock were $4.68 per hundred dollars of average capital accounts, approximately the same as in the 1958 half year. However, the decline of $84.4 million in net profits after dividends resulted in retained profits of $2.08 per one hundred dollars of average aggregate capital accounts (annual basis) as compared with $6.14 a year earlier. Further details may be seen in the accompanying Tables 1 and 2.
@FedFRASER