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1922 Annual Report

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1922 Annual Report This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library ([email protected]) FEDERAL RESERVE BANK OF DALLAS ~~------------------------------!~ EIGHTH ANNUAL REPORT of the Federal Reserve Bank of Dallas For the Year Ended December 31 1922 Eleventh Federal Reserve District ' --------------------------------~ LETTER OF TRANSMITTAL Federal Reserve Bank Dallas, Texas, February 14, 1923 Gentlemen: I have the honor to submit the following report con­ cerning the operations of the Federal Reserve Bank of Dallas and conditions in the Eleventh Federal Reserve District, for the year ended December 31, 1922. Yours respectfully, W . B. NEWSOME, Chairman of the Board and Federal Reserve Agent Federal Reserve Board Washington, D. C. DIRECTORS AND OFFICERS OF THE FEDERAL RESERVE BANK OF DALLAS 1923 D IRECT ORS CLASS A CLASS B JOHN T. SCOTT, Houston Texas MARION SANSOM, Fort Worth, Texas HOWELL E. SMITH, )IcKinney, Texas FRANK KELL, Wichita Falls, Texas W. H. PATRICK, Clarendon, Texas J. J. CULBERTSON, Paris, Texas CLASS C LYNN P. TALLEY. Dallas, T exas CLARENCE E. LINZ, Dallas, Texas W. B. NEWSOME, Dallas, Te:<as OFFICERS LYNN P. TALLEY, Chairman and Federal B. A. McKINNEY Governor Reserve Agent R. G. EMERSON, b eputy Governor W. B. NEWSOME, Deputy Chairman R. R. GILBERT, Cashier CIIAS. C. HALL, Assistant Federal Re· R. BUCK .ER COLEMAN, Assistant serve Agent Cashier DWIGHT P. REORDA , Assistant Fed· FRED HARRIS, Assistant Cashier era! Reserve Agent W. 0. FORD Assistant Cashier VAL J. GRUND, General Auditor JAMES L. LUMPKIN, Assistant Cashier CHAS. C. HUFF, General Counsel REECE T. FREEMAN, Assistant Cashier E. B. STROUD, JR., Counsel EL PASO BRAN CH DIRECTORS W. C. WEISS, El Paso, Texas J. F. WILLIAMS, El Paso, Texas W. W. TURNEY, El Paso, Texas E. M. HURD, EI Paso, Texas A. P. OLES, El Paso, Texas OFFICERS W. C. WEISS, Manager W. P. CLARKE, Assistant Federal Re· M. CRUMP, Cashier serve Agent ALLEN SAYLES, Assistant Cashier HOUSTON BRANCH DIRECTORS FLOYD IKARD, Houston, Texas FRANK ANDREWSi Houston, Texas R. M. FARRAR, Houston, Texas GUY M. BRYAN, I ouston, Texas E. F . GOSSETT, Houston, Texas OFFICERS FLOYD IKARD, Manager S. H. LEAVELL, Acting Assistant Federal M. D. JENKINS, Cashier Reserve Agent L. G. PONDROM, Assistant Cashier MEMBER FEDERAL ADVISORY COUNCIL R. L. BALL, San Antonio, Texas EIGHTH ANNUAL REPORT OF THE FEDERAL RESERVE BANK OF DALLAS While the closing months of 1921 witnessed some improve­ ment in the banking situation in the Eleventh District, and in December of that year this institution was enabled to retire its indebtedness to other Federal reserve banks, the new year open­ ed with considerable uncertainty, and the financial outlook was far from encouraging. Of the many problems experienced in the operations of the bank during the past twelve months, the most difficult was un­ questionably that of adopting a safe credit policy for those mem­ ber banks in an extended condition. The activities of the Eleventh District are devoted in a large measure to primary pro­ duction, and since our prosperity is dependent upon the basic in­ dustries of farming and cattle raising, it necessarily follows that any influences affecting those interests are immediately reflected in our commercial life. The depreciation in the value of our principal commodities in 1920, and crop failures over a large part of the agricultural belt in 1921, left many member banks, particularly the smaller institutions in strictly farming communi­ ties, in a very distressing condition. They bad exhausted their sources of liquidation, and with a gradual shrinkage in deposits were obliged to seek further advances, in order to maintain re­ serves and provide their customers with sufficient funds to make another crop. It resolved itself, therefore, into a question of meeting the credit requirements of those banks until another crop was harvested. This condition, largely inherited from 1920-1921, has been the most serious confronting the management of the Federal Reserve Bank of Dallas in 1922. Fortunately, the War Finance Corporation began making loans in the district early in the year. The use of those facilities by banks in an over-extended condition, as a means of obtaining long time credits, was rather encouraged. 8 Federal Reserve Bank of Dallas While the effect of the advances was immediately felt in the re­ duction, or retirement of member banks' indebtedness here, this was not the only advantage. The Corporation's advances to non­ member banks lessened the demands of those institutions on mem­ ber banks, and both member and non-member banks were enabled, with the proceeds of the advances, to retire indebtedness outside the district, which, but for the assistance mentioned, would have increased the demands on this bank. In the early spring months the increase in price of commodi­ ties was the means of some liquidation, and a more optimistic feeling among the bankers was created. This improvement, while not appreciably reducing the lines of credit to extended banks, nevertheless afforded them some relief, and proved beneficial in meeting their current demands. The heavy decrease in volume of business, and lower prices, lessened the credit requirements of members, and except in the months of June, July and August, there was a gradual decline in the bank's holdings of rediscounted paper from the first of the year. At the same time the reserve ratio was increasing, and purchases of government securities, and bankers' acceptances, were engaged in as a means of in­ creasing the bank's earnings. In September the active autumn liquidating season began, and for the balance of the year the reduction in bank loans was quite heavy. The liquidation was more manifest in the cities, but many of the smaller banks anticipated their maturities and re­ tired their lines in full, for the first time since 1919. The im­ proved credit situation in the agricultural section, however, was offset by developments in west Texas, and southern New Mexico, where the livestock industry was seriously threatened by a long drouth. Member banks in the El Paso territory have suffered severe losses through the depreciation of livestock values, as the cattle are not in condition to market. Remedial measures are being taken by moving the cattle to old Mexico, and other places where pasturage is good, but the outcome is lmcertain, and the situation most distressing. Were it not for this the outlook for business in the Eleventh District in 1923 could be described as most encouraging. It is certain that credit conditions are much improved over a year ago. Federal Reserve Bank of Dallas 9 FEATURES OF 1922 OPERATION Loans and discounts, 108,463 items, aggregating $222,556,513. Acceptances purchased, 3,145 items, aggregating $47,820,221. Federal reserve notes and other paper money handled and counted, 30,923,378 pieces, aggregating $162,972,524. Shipments of currency and coin to banks outside of Dallas, El Paso and Houston, 14,026 shipments, aggregating $74,822,669. Checks (drawn on banks) collected, totaled 27,304,947 items, aggregating $4,416,658,700. Notes and drafts, bonds and coupons, received for collection, 125,706 items, aggregating $133,845,329. Telegraphic transfers of funds, 18,709 transfers, aggregating $663,139,000. Balances settled through gold settlement fund, $4,696,969,629. United States Government checks and warrants handled, 2,259,444 items, aggregating $116,243,156. Government bond department transactions 1,966,810 items, aggregating $450,931,625. Securities received as custodian, $244,628,456. EARNINGS AND EXPENSES The volume of earning assets held by the bank on December 31, 1922, was 4.9 per cent less than in 1921, and about the same ratio has been maintained throughout the year. The bank's gross earnings during the year were $2,085,774, as compared with $4,243,648 in 1921. Of this amount $197,994, or 9.5 per cent, re­ sulted from the purchase of paper, and 77.2 per cent, or $1,609,383, resulted from the rediscount of paper. Current net earnings were $570,384, as compared with $2,382,792, in 1921. The average rate on bills discounted was 5.08 per cent, compared with 6.25 per cent in 1921, and on purchased paper 3.67 per cent, against 6.10 per cent in 1921. The annual rate of net earnings to paid in capital was 13.5 per cent in 1922, compared with 56.7 per cent in 1921. 10 Federal Reserve Bank of Dallas Current expenses in 1922, including furniture and equip­ ment, were $1,548,100, as compared with $1,860,856 in 1921, a decrease of $312,756, or 16.8 per cent. The expense account of the bank has received close attention throughout the year, and reductions have been made wherever possible. The partial ab­ sorption of the expense of Fiscal Agency functions offset the large decrease in other activities, and there was no diminution in the free service and facilities rendered member banks, notwith­ standing the decreased physical volume of transactions. On December 31, 1921, after adjustments necessary in clos­ ing the bank's books for the year had been made, the bank's capital was $4,203,000, and surplus $7,394,097. Semi-annual divi­ dends were paid to member banks on June 30 and December 31, 1922, at the rate of 6 per cent per annum. After providing for depreciation allowances and reserves to care for probably losses in the bank's assets, the balance in current net earnings of $102,209 was transferred to surplus, making that account $7,496,307, on December 31, 1922. Schedule 1 shows comparative balance sheet as of December 31, 1920, 1921, and 1922. Schedule 2 shows comparative statement of earnings and ex­ penses in 1920, 1921 and 1922.
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