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170 A meeting of the Federal Reserve Board was held in the office of the Federal Reserve Board on Tuesday, December 13, 1927, at 11 o'clock a.m. PRESENT: Governor Young Mr. Platt Mr. Hamlin Mr. Miller Mr. James Mr. Cunningham Mr. Eddy, Secretary Mr. McClelland, Asst. Secretary The minutes of the meeting of the Federal Reserve Board held on December 12th were read and approved. Governor McDougal of the Federal Reserve Bank of Chicago, entered the 'fleeting and presented to the Board a request of the Board of Directors Of his bank for approval at this time of an increase from $25,000 to 11 '030,000 per annum in the salary of Mr. J. H. Blair, Deputy Governor the Chicago bank, effective January 1, 1928. of He stated that in accord- ance with the Board's request the bank's regular salary recommendations for officers would be submitted following their meeting in January, but that special consideration is being requested in the case of Deputy Governor Blair in an effort to retain his services. 131air He stated that Mr. has received another offer at a salary in excess of $30,000 per annum, but that he would prefer to remain with the Federal Reserve bank, and it is believed that he would do so for not more than $30,000. In reply to an inquiry, Governor McDougal stated that action by the oard at this time in approving the increase recommended for Deputy Governor Blair would not place the Board in a position where it would Ilecessarily have to approve increases in the salaries of other officers Of the bank. He discussed with the Board informally certain adjustments 171 12,13,27 -2_ which will probably be recommended at the proper time in other official salaries. Governor McDougal also advised the Board that the Detroit Branch of his bank will move into its new building the first of next week, probably °11 Monday. He expressed the hope that some member or members of the Board will find it possible to visit Detroit either on the occasion of the Opening of the building or shortly thereafter. Governor McDougal then left the room. The Board then discussed further the request of the Chicago directors as Presented by Governor McDougal. Following the discussion, Mr..Cunningham submitted and moved adoption of the following resolution: "iihereas, the Governor of the Federal Reserve Bank of Chicago has advised the Federal Reserve Board of an emergency situation that is confronting the Chicago bank because of the fact that Deputy Governor J. H. Blair has been tendered an outside position at a salary considerably above that which he is receiving from the Federal Reserve bank; "Whereas, in the regular course the salaries fixed by the directors of the Federal Reserve Bank of Chicago for officers of that bank during the year 1928 would not be submitted to and considered by the Federal Reserve Board until January, 1928, but unusual circumstances demand that the salary of Deputy Governor Blair should be considered prior to January, 1928; "Therefore, be it resolved, that it is the sense of the Federal Reserve Board that the directors of the Federal Reserve Bank of Chicago should be advised that the Board approves their recommendation that the services of Deputy Governor Blair should be retained at a salary of not exceeding 40,000 per annum, effective January 1, 1928. Carried. At this point, Dr. Cunningham left the meeting. A. -3- 12/13/27 Report of Committee on Salaries and Expenditures, dated December 12th, With respect to the closing of books of the Federal Reserve Bank of Boston and the payment of the usual semi-annual dividend on December 31, 1927, as follows: "Your committee has examined the statement submitted by the Federal Reserve Bank of Boston with its request for authority to close its books and pay the semi-annual dividend, and finds that on the basis of the flgures shown therein the estimated gross earnings will be sufficient to cover current operating expenses, accrued dividends, and other proposed Charges against current earnings, and leave a balance for transfer to surplus of about $248,100. Estimated earnings and proposed deductions therefrom are as follows: Gross earnings Current expenses Current net earnings Sundry credits $2,937,153.49 1,978,593.01 $958,560.48 11,997.72 Proposed deductions: Furniture and equipment 50,000.00 2 per cent reserve on bank building . 55,832.00 10 per cent reserve on fixed machinery 66 215.75 and equipment Total deductions Balance available for dividends and surplus ... .. 268 342.75 Dividends paid June 30 282 093.19 Estimated dividends July 1 to December 31 Total dividends Balance to be transferred to surplus 172,047.75 798,510.45 550,435.94 248,074.51 "According to statements accompanying the dividend resolution the bank has no paper of failed banks or banks in an over-extended or unsafe condition on which it expects to sustain a loss. "YOUR COMMITTEE finds that all the proposed deductions from current net earnings conform to the general principles heretofore followed and Which have been prescribed by the Board for the present year, and recomTherlds that they be approved. It is also recommended that the bank be 4uthorized to pay the usual semi-annual dividend on December 31." Upon motion, the recommendations of the Committee were approved. Report of Committee on Salaries and Expenditures, dated December 12th, 14'4 12/13/27 -4- With respect to the closing of books of the Federal Reserve Bank of New York and the payment of the usual semi-annua l dividend on December 31, 1927, as follows: "Your committee has examined the statement submitted by the Federal Reserve Bank of New York with its request for autho rity to close its books and pay the semi-annual dividend, and finds that on the basis of the figures shown therein the estimated gross earnings will be sufficient to cover current operating expenses, accru ed dividends, and other proposed charges against current earnings, and leave a balance for transfer to surplus of about1,013,000. Estimated earnings and proposed deductions therefrom are as follows: Gross earnings $10,286.922.90 Current expenses 6,479,877.87 Current net earnings Additions to current net earnings: Estimated net income from annex building 101,087.07 Profit on Equitable building lease • • • • 24,181.44 Sundry credits 812.66 Total additions Proposed deductions: Furniture and equipment 2% reserve on main building Reserve on fixed machineryand equipment • • 2% reserve on annex building Depreciation reserve on fixed machinery and equipment - Annex buildirg Reserve for self-insurance fund Sundry debits Total deductions Balance available for dividends and surplus Dividends paid June 30 Estimated dividends July 1 to December 31 Total dividends • Balance to be transferred to surplus $3,807,045.03 126,081.17 89,128.91 179,526.99 203,260.96 21,933.45 10,770.92 78,303.59 4,255.11 1,140,026.00 1,192,974.00 2,333,000.00 1,012,946.27 "According to the statements accompanying the divid end resolution, no tounts are due to the reserve bank from failed banks or banks considered o be in an unsafe condition. "The $78,303.59 which the bank desires to add to its reserve for selfwaraace represents the income and profit during the year on the securities 4 which the fund, now amounting to $1,30 6,860.45, is invested, which earnhave been included with earnings of the bank in accordance with the "°ardt s instructions. 1 474 12/13/27 -5- "YOUR COTalITTEE finds that all the proposed deductions from current /let earnings come within the gener al procedure heretofore followed and recommends that they be approved. It is also recommended that the bank be authorized to pay the usual semi-annual divid end on December 31." Upon motion, the recommendations of the ConuAttee were approved. Report of Committee on Salaries and Expenditures, dated December 12th, With respect to the closing of books of the Federal Reserve Bank of Philadelphia and the payment of the usual semiannual dividend on December 312 1927, as follows: "Your committee has examined the statement submitted by the Federal , I ceerve Bank of Philadelphia with its request for authority to close its ucoks and ray the semi-annual dividend, and finds that on the basis of the flgures shown therein the estimated gross earnings will be sufficient to cover current operating expenses, accru ed dividends, and other proposed charges against current earnings, and leave a balance for transfer to IPPlus of about :$323,000. Estimated earnings and proposed deductions 'horefrom are as follows: T Gross earnings Current expenses Current net earnings Sundry credits Proposed deductions: Furniture and equipment Sundry debits Total deductions Balance available for dividends and surplus Dividends paid June 30 Estimated dividends July 1 to December 31 Total dividends Balance to be transferred to surplus '3,308,000 2,113,000 1,195,000 2,000 90,000 2,000 92,000 1,105,000 385,900 396,100 782,000 323,000 "According to statements accompanying the dividend resol ution, no ;t7°Unts are due to the reserve bank from failed banks or banks considered 0 be an unsafe condition. 'The "The Philadelphia building, which has been extensively ba.bi... remodeled for v-rang house nurposes, together with the new annex, is now carri ed contl erably below its market value and the bank therefore has not asked for 4chority to set up any depreciation reser ves. 12/13/27 -6- "YOUR COMMITTEE finds that all the proposed deductions from current net earnings conform to the general principles heretofore followed and Which have been prescribed by the Board for the present year, and recommends that they be approved. It is also recommended that the bank be authorized to pay the usual semi-annual dividend on December 31." Upon motion, the recommendations of the Committee were approved. Report of Committee on Salaries and Expenditures, dated December 12th, With respect to the closing of books of the Federal Reserve Bank of Cleveland eald the payment of the usual semi-annual dividend on December 31, 1927, as follows: "Your committee has examined the statement submitted by the Federal Reserve Bank of Cleveland with its request for authority to close its books and pay the semi-annual dividend, and finds that on the basis of the figures shown therein the estimated gross earnings will be sufficient to cover current operating expenses, accrued dividends, and other proposed charges against current earnings, and leave a balance for transfer to sUrplus of about $232,000. Estimated earnings and proposed deductions therefrom are as follows: Gross earnings Current expenses Current net earnings Sundry credits ' .4,143,060.74 2,602,192.17 ,540,868.57 1,600.00 Proposed deductions: Furniture and equipment 81,000.00 2 per cent reserve on Cleveland building 92,778.06 10 per cent reserve on Cleveland fixed machinery and equipment 154,134.00 2-0 per cent reserve on Pittsburgh bldg. 14,011.49 10 per cent reserve on Pittsburgh fixed 13,899.45 machinery and equipment 100,000.00 Reserve for undetermined liabilities 21,700.00 Reserve for self-insurance fund Total deductions Balance available for dividends and surplus 414,525.00 Dividends paid June 30 418,033.00 Estimated dividends July 1 to December 31 Total dividends Balance to be transferred to surplus • • • • • • 477,523.00 1,064,945.57 832 ) 558.00 232,387.57 496 12/13/27 -7- "According to the statements accompanying the dividend resolution the unpaid indebtedness of suspended banks on November 30 amounted to 55,198.48 &rid this amount had been reduced to $49,735.48 by December 9. The bank also held on December 9, $196,000 of paper of banks considered to be in afl unsafe condition. Mile the bank does not anticipate that it will sustain any loss on the above paper it asks authority to increase its reserve for undetermined liabilities by $100,000, making a total reserve for undetermined liabilities of $200,000. Your committee recommends that the re(Most be approved. "In accordance with the plan heretofore approved by the Board, the 9/141eveland bank asks authority to increase its self-insurance fund by 21,700, the income on the present balance in the fund, $500,000. Your committee recommends that the request be approved. "YOUR COMI:ITTEE finds that all the proposed deductions from current net earnings conform to the general principles heretofore followed and Which have been prescribed by the Board for the present year, and recommends that they be approved. It is also recommended that the bank be authorized to pay the usual semi-annual dividend on December 31." Upon motion, the recommendations of the Committee were approved. Report of Committee on Salaries and Expenditures, dated December 12th, With respect to the closing of books of the Federal Reserve Bank of Richmond and the payment of the usual semi-annual dividend on December 31, 1927, as follows: "Your committee has examined the statement submitted by the Federal Reserve Bank of Richmond with its request for authority to close its books pay the semi-annual dividend, and finds that on the basis of the lures shown therein the estimated gross earnings will be sufficient to cover current operating expenses, accrued dividends, and other proposed Charges against current earnings, and leave a balance for transfer to sUrplus of about „;80,700. Estimated earnings and proposed deductions therefrom are as follows: Gross earnings Current expenses Current net earnings ?unary credits Proposed deductions: Furniture and equipment 25 reserve on Richmond building 107', reserve on fixed machinery and equipment, Richmond building '2,050,000 1,395,000 655,000 1,000 75,000 31,001.13 41,040.91 "Ir7 1: ti 4 12/13/27 -8- Charge-off on property on North Ninth Street purchased during year Net expense - other real estate Total deductions Balance available for dividends and surplus Dividends paid June 30 .. Estimated dividends July 1 to December 31 . • Total dividends Balance to be transferred to surplus 50,000 600 • • • 185,093 187,207 * • • • 203,042.04 452,957.96 372,300 80,657.96 "During the year the Richmond bank purchased the Foster property on North Ninth Street for $150,000. The estimated market value of the land °T1 the basis of the assessed valuation is approximately 195,000. The bank Proposes to demolish the buildings on the land as soon as it obtains possession, and in accordance with the announced policy of the Board is asking for authority to charge off $50,000 of the difference between the cost and the estimated market value, bringing the book value down to $100,000 as compared with an estimated market value of 195,000. "The statements accompanying the Richmond dividend resolution show that the bank now holds $340,826.01 of paper of suspended banks on which lt expects to sustain a loss of 1125,300 and $1,108,144.37 of paper of banks in an over-extended or unsafe condition on which no losses are expected. The bank now has a reserve for probable losses of 1350,000 or about $225,000 in excess of its estimated loss. "YOUR C0MITT14]13 finds that all the proposed deductions from current net earnings conform to the general principles heretofore followed and which have been prescribed by the Board for the present year, and recom'Rends that they be approved. It is also recommended that the bank be Iluthorized to pay the usual semi-annual dividend on December 31." Upon motion, the recommendations of the Committee were approved. Report of Committee on Salaries and Expenditures, dated December 12th, With respect to the closing of books of the Federal Reserve Bank of Atlanta kad the payment of the usual semi-annual dividend on December 31, 1927, as follows: "Your committee has examined the statement submitted by the Federal Reserve Bank of Atlanta with its request for authority to close its books Wad pay the semi-annual dividend, and finds that on the basis of the ures shown therein the estimated gross earnings will be sufficient to cover current operating expenses, accrued dividends, and other proPosed charges against current earnings, and leave a balance for trainsto surplus of about $498,000. Estimated earnings and proposed N 1 178 ;11 12/13/27 -9- deductions therefrom are as follows: :$2,080,844.94 Gross earnings Current expenses Current net earnings Additions to current net earnings: 40,548.22 Recoveries on losses previously charged off Withdrawal from reserve for losses on 70,000.00 failed banks Total additions Proposed deductions: 46,703.31 Furniture and equipment 25 reserve on bank buildings: 20,01749 Atlanta 11,527.08 New Orleans 2,875.79 Nashville 3,273.53 Jacksonville 4,426.61 Birmingham 105 reserve on fixed machinery & equipment: 17,345.26 Atlanta New Orleans 15,757.97 2,510.06 Nashville . • • ............ Jacksonville 2,595.61 Birmingham 4,678.79 10,000.00 Reserve for probable losses Sundry debits 588.62 Total deductions Balance available for dividends and surplus 151,698.43 Dividends paid June 30 154,109.64 Estimated dividends July 1 to December 31 . • • • •. • Total dividends Balance to be transferred to surplus $835,631.56 110,548.22 142,299.92 803,879.86 305,808.07 498,071.79 "According to the statements accompanying the dividend resolution, the bank holds $536,825.18 of paper of suspended banks, on which it estimates a loss of $85,000, and $1,592,018.09 of paper of banks in an unsafe condition, on which it estimates that it will sustain no loss. "The bank proposes to return to its profit and loss account $40,548.22 Of recoveries of amounts previously charged off, and $70,000 of its present reserve for losses, and then to charge its current earnings with $10,000 to cover an estimated loss on the North Georgia Trust and Banking Company, 74Inder, Ga. Your committee feels that a conservative procedure for the ,Atlanta bank to fallow would be to retain the above-mentioned $40,548.22 and %70,000 in its reserves for losses until more definite information is obtained as to actual losses to be sustained on paper now held. If this is cl°Ae, it will not be necessary to approve the $10,000 additional reserve 179 12/13/27 -10- the bank proposes to set up. "YOUR COMMITTEE finds that all the other proposed deductions from Current net earnings conform to the general principles heretofore followed and which have been prescribed by the Board for the present year, and recommends that they be approved. It is also recommended that the bank be authorized to pay the usual semi-annual dividend on December 31. Upon motion, the recommendations of the Committee were approved. Report of Committee on Salaries and Expenditures, dated December 12th, 'With respect to the closing of, books of the Federal Reserve Bank of Chicago aad the payment of the usual semi-annual dividend on December '31, 1927, as follows: "Your committee has examined the statement submitted by the Federal Reserve Bank of Chicago with its request for authority to close its books and pay the semi-annual dividend, and finds that on the basis of the figures shown therein the estimated gross earnings will be sufficient to cover current operating expenses, accrued dividends, and other proposed Charges against current earnings, and leave a balance for transfer to surplus of about $817,300. Estimated earnings and proposed deductions therefrom are as follows: Gross earnings Current expenses Current net earnings Sundry credits $6,053,000 3,861,000 Proposed deductions: 115,000 Furniture and equipment 90,996.72 • • 2 per cent reserve on bank building • . fixed machinery 6-2/3 per cent reserve on 74,200 and equipment 57,494.41 losses probable Reserve for 16,000 Net expense - other real estate 1,500 Sundry debits . deductions Total Balance available for dividends and surplus 508,730.85 Dividends paid June 30 525,000.00 Estimated dividends July to December 31 • Total dividends Balance to be transferred to surplus • • • • 0 0 • • 0 $2,192,000.00 14,169.90 355 191.13 1,850,978.77 1,033,730.85 817,247.92 180 12/13/27 -11- "The statements accompanying the dividend resolutions of the Federal Reserve Bank of Chicago show that the bank now holds 8852,790.86 net of Paper of suspended banks on which it expects to sustain a loss of 121,000. The bank also holds $2,929,994.56 of paper of banks in an over-extended or unsafe condition but states that they are unable at this time to estiIllate any definite loss that may be sustained through the closing of any 2f the banks. The bank asks authority to charge its reserve with about i?68,000.00 on account of claims against banks suspended in 1924 and to set up an additional reserve of about 857,000 in order to maintain its reserve, after allowing for recoveries, at the present amount of 0,250,000. Your Committee recommends that the above additional reserve Of 57,000 be approved, and that the bank be authorized to charge its reserve with the $68,000 requested. "YOUR COITTEE finds that all the proposed deductions from current 'let earnings conform to the general principles heretofore followed and Which have been prescribed by the Board for the present year, and recomzends that they be approved. It is also recommended that the bank be authorized to pay the usual semi-annual dividend on December 31." Upon motion, the recommendations of the Committee were approved. Report of Committee on Salaries and Expenditures, dated December 12th, With respect to the closing of books of the Federal Reserve Bank of St. Louis and the payment of the usual semi-annual dividend on December 31, 1927, as follows: "Your committee has examined the statement submitted by the Federal Reserve Bank of St. Louis with its request for authority to close its books and pay the semi-annual dividend, and finds that on the basis of the figures shown therein the estimated gross earnings will be sufficient te cover current operating expenses, accrued dividends, and other proposed charges against current earnings, and leave a balance for transfer to surplus of about $305,000. Estimated earnings and proposed deductions therefrom are as follows: Gross earnings Current expenses Current net earnings Sundry credits Proposed deductions: Furniture and equipment 2,-/. reserve on head-office building • • • • 10';', reserve on head-office fixed machinery and equipment $2,228,177.22 1,382,796.86 $845,380.36 8,164.30 24,110.23 33,615,06 112,603.63 481 12/13/27 -12- 2% reserve on Louisville building 10% reserve on Louisville fixed machinery and equipment 2% reserve on Little Rock building . . . . 10% reserve on Little Rock fixed machinery and equipment Reserve for probable losses (claims, etc.) 0 Sundry debits Total deductions Balance available for dividends and surplus Dividends paid June 30 Estimated dividends July 1 to December 31 . Total dividends Balance to be transferred to surplus 2,902.67 3,506.02 3,757.30 10,360.78 40,000.00 17.07 230,872.76 622,671.9d 158,645.00 159,042.83 317,687.83 304,984.07 "The statements accompanying the dividend resolution of the St. Louis bank show that the net unpaid indebtedness of failed banks amounted to 362,051.54 on November 30, on which the Federal reserve bank estimates a Possible loss of ,';296,000. The bank also reports the indebtedness of banks considered to be in an over-extended or unsafe condition as 202,360.38, on which it estimates a possible loss of $65,000. The bank therefore estimates that it may sustain a total loss of $361,000 °/1 paper now held, and as they have a reserve for that purpose of 503,500, the Board of Directors has ordered that subject to the approval of the Federal Reserve Board 142,500 be returned to the profit and loss account. The bank also recommends that it be authorized to set up a reserve of :40,000 to cover losses on account of suits and claims, pending collections, cash letters, etc. Your committee recommends that; the above reserve of $40,000 be authorized and that the bank be permitted to return the 0142,500 to its profit and loss account. "YOUR C01,71ITTEI finds that all the proposed deductions from current net earnings conform to the general principles heretofore followed and which have been prescribed by the Board for the present year, and recomMends that they be approved. It is also recommended that the bank be authorized to pay the usual semi-annual dividend on December 31." Upon motion, the recommendations of the Committee were approved. Report of Committee on Salaries and Expenditures, dated December 12th, With respect to the closing of books of the Federal Reserve Bank of 1Tinneapo1is and the payment of the usual semi-annual dividend on December 31, 1927, as follows: 482 12/13/27 -13- "Your committee has examined the statement submitted by the Federal Reserve Bank of Minneapolis with its request for authority to close its books and pay the semi-annual dividend, and finds that on the basis of the figures shown therein the estimated gross earnings will be sufficient to cover current operating expenses, accrued dividends, and other proposed charges against current earnings, and leave a balance for transfer to surplus account and payment of franchise tax of about $121,300. EstiMated earnings and proposed deductions therefrom are as follows: Gross earnings Current expenses Current net earnings Credit balance in profit and loss account $1,385,000.00 1,047,000.00 Proposed deductions: 10,000.00 Furniture and equipment • building • Minneapolis 5,665163 on reserve 2% fixed Minneapolis on 10% reserve 62,005.35 machinery and equipment • • • OO 2,700.00 2% reserve on Helena building 10% reserve on Helena fixed machinery 10610.90 and equipment Total deductions Balance available for dividends, surplus, and franchise tax 90,500.00 Dividends paid June 30 • • • • O • O 90,229.76 Estimated dividends July 1 to December 31 Total dividends Balance available for surplus and franchise tax • • Estimated transfer to surplus • • Estimated franchise tax 338,000.00 46,000.00 81,981.88 302,018.12 180,729.76 121,288.36 12,128.84 109,159.52 "According to statements accompanying the dividend resolution, amounts clue to the reserve bank on November 30 from suspended banks amounted to 41 f?-1.,030,949.09, on which the reserve bank estimates that it will sustain a loss of $210,400. In addition the bank held paper of member banks in an over-extended condition amounting to $487,485.60, on which it estimates 110 loss. The Minneapolis bank now has a reserve of $700,000, which is something over three times the amount of its estimated losses. "In accordance with the request of the Minneapolis Board of Directors, the Federal Reserve Board recently authorized that bank to charge its 8Urp1us account with c;;500,000 in order to reduce the book value of its building to approximately its resale value. In order that the bank may over a period of 50 years accumulate a reserve equal to the book value of its building, as is the case with the other reserve banks, it will be necessary to calculate its reserve on the basis of the new carrying Iralue, $1,283,281.50, instead of its replacement value, which is I,500,00Dhigher. A 2 per cent depreciation reserve on the new carrying 483 12/13/27 -14- value for the 3 years 1925, 1926, and 1927, during which the bank has occupied the building, would amount to $76,996.89, or $5,665.63 in excess of its present reserve of $71,331.26, and your committee recommends that the bank be authorized to set up an additional reserve of 5,665.63 at the end of this year. The amount requested by the Minneapolis bank is 030,000 more, or 45,665.63, as its request was based on replacement cost, being submitted before the authorized charge-off of $500,000 was approved by the Boar0. "YOUR CONLIITTEE finds that all other proposed deductions from current net earnings conform to the general principles heretofore followed aad which have been prescribed by the Board for the present year, and recommends that they be approved. It is also recommended that the bank be authorized to pay the usual semi-annual dividend on December 31." Upon motion, the recommendations of the Committee were approved. Report of Committee on Salaries and Expenditures, dated December 12th, With reference to closing of books of the Federal Reserve Bank of Kansas City and the payment of the usual semi-annual dividend on December 31, 1927, as follows: "Your committee has examined the statement submitted by the Federal Reserve Bank of Kansas City with its request for authority to close its books and pay the semi-annual dividend, and finds that on the basis of the figures shown therein the estimated gross earnings will be sufficient to cover current operating expenses, accrued dividends, and other proPosed charges against current earnings, and leave a balance for transfer to surplus and payment of franchise tax of about $171,900. Estimated earnings and proposed deductions therefrom are as follows: 2,324,746.48 1,686,778.52 Gross earnings Current expenses Current net earnings Sundry credits Proposed deductions: Furniture and equipment . .. 2% reserves on bank buildings: Kansas City Oklahoma City Omaha Denver $637,967.96 3,073.28 • * 48,187.20 50,052.65 6,617.90 6,390.27 7,250.87 fi 181-15- 12/13/27 105 reserves on fixed machinery & equipment: 77,794.06 Kansas City 7,489.07 Oklahoma City 7,048.75 Omaha 5,544.79 Denver Total deductions Balance available for dividends, surplus and franchise tax 125,998.47 Dividends paid June 30 126,724.74 Estimated dividends July 1 to December 31 Total dividends Balance available for surplus and franchise tax Estimated transfer to surplus Estimated franchise tax 216,375.56 424,665.68 252,723.21 171,942.47 17,194.25 154,748.22 "According to statements accompanying the dividend resolution, a-Mounts due to the reserve bank on November 30 from suspended banks atIounted to ,'',299,346.77 on which the bank estimates its loss at $47,400. The bank also held 1.,180,631.89 of paper of banks considered to be in ka unsafe condition, on which it estimates its loss at about 10 per cent Of the total, or $118,000. The bank now has a reserve for probable losses of 001,708, or $136,308 in excess of its estimated losses and therefore makes no request for an additional reserve at this time. "YOUR COMMITTEE finds that all the proposed deductions front current net earnings conform to the general principles heretofore followed and Which have been prescribed by the Board for the present year, and recomMends that they be approved. It is also recommended that the bank be allthorized to pay the usual semi-annual dividend on December 31." Upon notion, the recommendations of the Committee were approved. Report of Committee on Salaries and Expenditures, dated December 12th, With respect to the closing of books of the Federal Reserve Bank of Dallas 412 the payment of the usual semi-annual dividend on December 31, 1927, as follows: "Your committee has examined the statement submitted by the Federal Reserve Bank of Dallas with its request for authority to close its books 1c1 pay the semi-annual dividend, and finds that on the basis of the ures shown therein the estimated gross earnings will be sufficient to "ver current operating expenses, accrued dividends, and other proposed eharges against current earnings, and leave a balance for transfer to !Urplu s of about $149,600. Estimated earnings and proposed deductions cherefrom are as follows: 2 .185 -16- 12/13/27 Gross earnings . Current expenses Current net earnings $1,742,147.61 1,263,354,88 Proposed deductions: Furniture and equipment 2 per cent reserve on bank buildings: Dallas .. El Paso Houston Annual reserve on fixed machinery and equipment: Dallas El Paso Houston Other debits Total deductions Balance available for dividends and surplus Dividends paid June 30 Estimated dividends July 1 to December 31 . Total dividends Balance to be transferred to surplus 478,792.73 19,919.41 18,593.53 1,793.77 4,749.31 14,250.14 737.43 2,285.55 10,536.72 72,865.86 405,926.87 128,266.00 128,051.15 256,317.15 149,609.72 "According to the statement accompanying the dividend resolution, amounts due the reserve bank on November 30 from suspended banks, after deducting amounts previously charged off, aggregated $39,005.72 on which the bank estimates a probable additional loss of $5,871.12. The bank estimates that it will sustain no losses on paper held under discount for member banks in an unsafe condition. The bank now has a reserve for losses amounting to $348,500 or over $300,000 in excess of its estimated losses; and recommends that approximately $183,200 of this reserve be returned to profit and loss in order to increase the surplus account to 4PProximately the amount of its subscribed capital. Your committee recommends that this credit to profit and loss be approved by the Board. "YOUR COMMITTEE finds that all the proposed deductions from current xlet earnings coaform to the general principles heretofore followed and Which have been prescribed by the Board for the present year, and recomteadsthat they be approved. It is also recommended that the bank be authorized to pay the usual semi-annual dividend on December 31." Upon motion, the recommendations of the Committee were approved. Report of Committee on Salaries and Expenditures, dated December 12th, With respect to the closing of books of the Federal Reserve Bank of San Prancisco and the payment of the usual semi-annual dividend on December 486 12/13/27 -17- 31, 1927, as follows: "Your committee has examined the statement submitted by the Federal Reserve Bank of San Francisco with its request for authority to close its books and pay the semi-annual dividend, and finds that on the basis Of the figures shown therein the estimated gross earnings will be sufficient to cover current operating expenses, accrued dividends, and other proposed charges against current earnings, and leave a balance for transfer to surplus of about ;496,000. Estimated earnings and proposed deductions therefrom are as follows: Gross earnings Current expenses Current net earnings $3,848,000 2,465,000 Proposed deductions: Furniture and equipment 2 per cent reserve on Head Office Bldg. 10 per cent reserve on Head Office fixed machinery and equipment 2 per cent reserve on Salt Lake City building 10 per cent reserve on Salt Lake City fixed machinery and equipment Reserve for probable losses Sundry debits Total deductions Balance available for dividends and surplus Dividends paid June 30 Estimated dividends July 1 to Dec. 31 • • Total dividends Balance to be transferred to surplus $1,383,000 147,000 48,263.00 77,490.78 6,698.75 8,292.30 52,069.94 1,000.00 340,814.77 1,042,185.23 269,368.00 277,632.00 547,000.00 495,185.23 "According to statements accompanying the dividend resolution, the bank held on November 30, $2,167,929.32 of paper of suspended banks on which it estimates its loss as $1,576,660.02. The bank also holds 0389,000 of paper of banks considered to be in an unsafe or unsatisfactory condition and on -which it anticipates to sustain no loss. The bank's estimated loss on paper of suspended banks, $1,576,660.02 is $52,069.94 in. excess of its present reserve of $1,524,590.08 and it asks authority to set up an additional reserve of that amount. The committee recommends that the additional reserve be authorized by the Board. "YOUR COYMITTEE finds that all the proposed deductions from current /let earnings conform to the general principles heretofore followed and Ilhich have been prescribed by the Board for the present year, and recomIllends that they be approved. It is also recommended that the bank be 187 -18- 12/13/27 authorized to pay the usual semi-annual dividend on December 31." Upon motion, the recommendations of the Committee were approved. Letter dated December 10th from the Chairman of the Federal Reserve Bank of Atlanta, advising of resolutions adopted at the meeting of the board of directors of that bank held on December 9th: (1) Requesting the Board to so amend its rules and regulations relating to the directors of Branch Federal Reserve banks as to permit the selection of the Managers Of the Branches of the Federal Reserve Bank of Atlanta from outside the personnel of the directors of such Branches and to render the Managers Of the Branch Banks ineligible to serve as directors thereof; (2) Pro'riding for the selection of a committee of three to present the foregoing resolution to the Federal Reserve Board; (3) Providing that the election of directors of the Branches of the Federal Reserve Bank of Atlanta be postponed until the January meeting of that board; and (4) Requesting the Chairman to secure an opinion from Counsel to the Federal Reserve Bank of Atlanta upon the question whether there would be any hiatus in the management of the Branch Banks by postponing the election Of the Managing Directors to the January meeting. With his letter the Chairman transmitted copy of an opinion by Counsel to the Atlanta bank tO the effect that despite the fact that the terms for which the Managers .cT the Branches were appointed as directors may have expired, theycould Properly hold over as managing officers of their respective branches Until formal appointments are made at the January meeting of the Atlanta 488 .1) -19- 12/13/27 board. After a detailed discussion, it was voted to be the sense oT the Federal Reserve Board that the request of the directors of the Atlanta bank above referred to should be denied, it being the view of the Board that there is no occasion for a change in its Regulations governing directors of Branch Federal Reserve banks, and that the Governor of the Board be authorized to use his discretion as to the time and manner of communicating.the Board's views to the Federal Reserve Bank of Atlanta. Memorandum from Counsel dated December 12th with respect to telegram dated December 6th from the Federal Reserve Agent at Richmond, advising that the Bank of Cheraw, S. C., a member bank having no branches, proPoses to consolidate with the Bank of Chesterfield County, Chesterfield, 8. C., with one branch in Chesterfield and four branches in other towns, and inquiring whether the member bank may, after the consolidation, remain a member of the Federal Reserve System and operate the head office arid branches of the non-member bank as branches of the consolidated bank; Counsel stating that it is his opinion that the consolidated institution May lawfully retain and operate as a member of the Federal Reserve System all of the branches which had been established and were in operation by the non-member bank prior to February 25, 1927, but may not retain the head office of the non-member bank and operate it as a branch, and tUrther, that in order for the consolidated institution to be a member Of the Federal Reserve System an application for membership must be tiled by it or on its behalf. In connection with the above memorandum, the Secretary also subMitted a report by the Board's Law Committee stating that it sees no 189 12/13/27 -20- legal reason why the branches of the non-member bank should not be retained by the consolidated bank, and advising that the Committee is informed by Honorable William F. Stevenson, Member of Congress from South Carolina, that the consolidated bank is not expecting to retain the head office of the Bank of Chesterfield County as a branch, recognizing the doubt with regard to its legality indicated in the memorandum from the Board's Counsel. After discussion, it was upon motion, voted that the Federal Reserve Agent at Richmond be advised that there is no legal objection to the retention and operation of the branches of the Bank of Chesterfield County by the institution to be formed through the consolidation of that institution with the Bank of Cheraw, but advising that before the consolidation is effected the Federal Reserve bank should be granted the privilege of making a thorough investigation of the condition of the banks involved therein. Draft of reply, prepared by the Board's Committee on Examinations, to letter dated November 30th from the Federal Reserve Agent at Richmond, with respect to the jurisdiction of the Board over a proposed reduction from250,000 to 0.25,000 in the capital of the Commercial and Savings Bank of Florence, S. C., which was admitted to the Federal Reserve System Without the imposition of a condition of membership requiring prior approval of the Federal Reserve Board to reductions in capital; the proposed reply (1) Stating that the Board is advised by its counsel that under the circumstances it has no jurisdiction in the matter so long as there is 110 undertaking to reduce the bank's capital below the minimum required for the organization of a national bank in Florence, S. C.; (2) Requesting definite recommendations from himself and his board of directors as 490 12/13/27 -21- to what action should be taken by the Board in view of the apparently serious condition of the bank as disclosed by the last report of examination on file dated January 22, 1927; and (3) Inquiring if a later examination has been made and if not suggesting that the Federal Reserve Examiners be instructed to make an early examination of the institution. Upon motion, the proposed letter was approved. REPORTS OF STANDING COMMITTEES: Dated, December 13th, Recommending changes in stock at Federal Reserve banks as set forth in the Auxiliary Minute Book of this date. Recommendations approved. The meeting adjourned :00 p.m. Secretary Approved: or
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