AoRDAt DRSRDfR BANK

Of CtRfRUNo1955 Annual Report

THE FOURTH FEDERAL RESERVE DISTRICT

CLE.VE.LAND I,OHIO

January 20, 1956

To the Banks in theFourth Federal Reserve District:

It may be ine"men

are import=edto gr=t credit to a greater array of cu,tomero than ever beforeand that each requ•• t ,.., merit, it i' perhap' appropriate that a~rd of caution be voiced about credit polic",and term' of repay-

ment. Concern h" been e""r •••• d by a number of leadero of thevario

u' segm

en" of the finandal community about deteriorating

credit term' and rel""ed criteria. Such observation, are ,oundand ,hou

ldbe beed

edin these day' of exuberance le,t an over-

burden of rapidly created debt r eeuit in 10" both to tbe lenderand to the borrower. con,tant and alert attention to each croditgr=ted" a re,pon,ibility of every loan officer and credit man.

We are pleased to present this report of Federal ReserveBank of Cleveland for 1955. ~he report thi' year contain' a sec rtion on the Cindunati br=ch and the area which it serve'. ~beofficer' and ,taff of thi' bank appredate the cooperation ,0 cordiallygiven us by banker' and bu,ine"men. Such cooperation h"materially aided US in carrying out our responsibilities.

president

Chairman of the Board

Economic Review of 1955

Monetary Policy for Sustainable Growth

Banking in the Fourth District .

4

9

1215

Upsurge in Industry

Agricultural Income Declines

Operations

Three Major Instruments of Federal Reserve Policy

Volume of Service Operations. . . . . . . . . .

The Pittsburgh Branch Begins a Building Program

The Cincinnati Branch and the Area it Serves . .

16

18

2021

Financial Report

Statement of Condition 28

Earnings and Expenses 29

Directors and Officers 30

Promotions and Retirements . . . . . . . . . . . . . . . . . 32

for sustainable growth

The past year may be aptly described as one ofdisillusionment-using that word in its originaland most constructive sense-but the ultimatebenefits to be derived therefrom are not visible atpresent in concrete form. They are almost com-pletely overshadowed by the immediate andtangible economic accomplishments of a trulycornucopian year.

In emphasizing the revelatory aspects of 1955,it is not intended to detract in any way from thescores of new high records established in industrialoutput and productivity, in business sales and re-tail trade, in employment, and in living standards.To the contrary, it is actually because of thesevery achievements that certain confusing illusionsand inhibitions have been at least partially dis-pelled.

Pattern of the YearFirst of all, it was forcefully demonstrated dur-

ing 1955 that a vigorous economic expansion canmaterialize without the stimulus of a war-deferredcivilian demand, such as existed in the early post-war years, and without being accompanied by aninflationary fiscal program on the part of the Fed-eral government. The strong year-long upwardtrend of industrial production into record highground, without special or outside help, may havedissipated some misconceptions as to the essenceof a free enterprise economy, taking the form espe-cially of an underestimation of its vitality. Dis-illusionment of that sort represents a net additionto the stock of economic knowledge.

Another development during 1955 which con-tained the seeds of disillusionment was the upturnof prices which emerged during midsummer, os-tensibly from nowhere. The upturn developedalong about the time when the economy was ap-proaching practically full employment and es-sentially full utilization of industrial capacity. Onsome occasions in American economic history, theoutpouring of goods and commodities on such anenlarged scale shortly would have produced a glutin the markets and would have precipitated priceconcessions all along the selling front.

The sequel during 1955, however, was quite theopposite, although by no means unprecedented.Prices of many raw materials and manufacturedproducts promptly began to go up-not down.Capacity production itself, despite the slow-but-continuing application of labor-saving equipmentand technology, was generating a record stream ofpurchasing power, week by week. Moreover, bymidsummer, inventories throughout every phaseof production and distribution had declined toalmost record peacetime lows in relation to sales.To put it another way, in April, after eight monthsof rapidly increasing production, business inven-tories were not any larger than they had been atthe beginning of the industrial recovery in late1954, whereas sales had improved substantially.Sellers could not meet the additional demand mere-ly by drawing down stocks. Instead, the demandfor stock-piling throughout trade and industry wassuperimposed upon the already growing rate oftakings by fabricators and consumers.

An important source of purchasing power be-hind this resurgence of demand is described below,but the fact remains that the consummation of ca-pacity operations, together with virtually full em-ployment, triggered an inflationary advance in theprice index of nonagricultural products. Given avolume of demand which was still in excess of cur-rent supply, no other outcome was possible in aneconomy where a free price mechanism is func-tioning. Any remaining illusion that full employ.ment and capacity operations constitute no threatto price stability has been seriously challenged bythe sequence of the past year.

In passing, a third disillusionment may benoted. It has been demonstrated once more thatgeneral prosperity can be attained without equalparticipation by all major industries. The pro-ducers of raw food and natural fibers, for example,as well as some lines of manufacture, failed by aconsiderable margin to share in the gains experi-enced by nearly all others. If agricultural pros-perity is not the sine qua non of general prosperityit was thought to be, certain other industries, con-ventionally described as being of a bellwether na-

4

II

II

ture, also may long have been overrated with re-spect to their importance in steering the economy.Conceivably then, should one of this year's frontrunners lag during 1956, such faltering may notnecessarily have an adverse effect upon the gen-eral level of activity.

Commercial Bank LendingAlthough the break-away of prices (on the up-

side) during the summer was not a foredrawn con-clusion, the backbone of the demand which pre-cipitated an inflationary climate had been underobservation for some time. It was the persistentrise in the growth of all kinds of loans, by all kindsof lenders, and for all kinds of purposes.

Borrowing is not necessarily inflationary per se.So long as the amounts borrowed are in harmonywith the rate of real savings, the inflationary in-fluence is held to a minimum. When home build-ing is financed, for example, out of insurance-com-pany premium income (which in turn was savedout of current income by the policy holder) no newpurchasing power is created. But loans by com-mercial banks represent newly-created purchasing

power which, when advanced to the constructionindustry, either directly or indirectly, will supple-ment the existing demand for lumber, cement,steel, and other building materials, all of whichwere in relatively short supply throughout muchof last year. By the same token, loans by com-mercial banks, whether directly to the would-bepurchaser of a motor vehicle, or indirectly to himthrough the channels of a sales finance company,have a similarly expansionary effect upon the de-mand for automobiles, and for the raw materialsused by the industry.

A chart on the next page suggests the rate atwhich private investments out of real savings havebeen supplemented by the creation of commercialbank credit over the past eight years. It is signifi-cant that the expansion in commercial bank loanssince late 1954 has been more rapid than at anyother time in the entire period.

In its earlier stages, the expansion in commercialbank credit was the occasion of no particular con-cern to the monetary authorities, provided thatthe lenders were adhering to time-tested principlesof credit extension. The outright creation of new

INDUSTRIAL PRODUCTION AND PRICES

INDEX (1947.49=JOO)160.---------------,---------------~-------

ISO

By mid-1955, industrialrecovery had retraced allof the preceding declineand production was ap-proaching capacity opera-tions in many lines.

Commodity prices (non-agricultural) had beencomparatively stable upto this point in the cycle,but then began to advance(into record high ground)at a rate which was symp-tomatic of an inflationary 110climate.

COMMODITY PRICES( Nonagricultural)

IOOr----------------r---------------f-------

5

Bllhons of Dollors

ALL COMMERCIAL BANKS (U. S.)Loans Outstanding and Holdings of U. S. Govt. Securities

90,----------------Bllhons of Dol/ors

------- -,90

80

70

60

50

40-

30

20

10

............. ..................

1948 19511949

80

70

6U

50

40

30

20

10

1952 1954 1955

The latest expansion in commercial bank loans, which began in late 1954, has been thelargest on record in peace time. In order to meet the prodigious demand for loans, thelending banks in the aggregate disposed of substantial quantities of government securities,

purchasing power, in addition to the currentstream, causes no problems under conditions whenadditional manpower, raw materials, and idleplant capacity can readily be brought into pro-duction to fulfill the increased demand. At a time,however, when scarcely any leeway remains, aswas the case by last midsummer, the creation ofsupplementary purchasing power through com-mercial bank credit truly upsets the applecart ofprice stability.

The mitigating aspect of the 1955 bank loan ex-pansion was the fact that it was accompanied by asubstantial liquidation-almost dollar for dollar-of Government securities. In a sense, therefore,the loan expansion was financed to a great extentby the owners of existing deposits, who exchangedtheir deposits, so to speak, for Government securi-ties; the deposits were then, in essence, conveyedto the various borrowers.

The tendency for commercial banks to disposeof Government securities almost pari passu with

commercial loan expansion was not an accidentaldevelopment, nor does it imply that the securitieswere sold at advantageous prices. Actually, theselling banks had scarcely any alternative (if theywished to accommodate the persistent demand forcredit) because of the fact that the unused lendingpower of commercial banks as a whole was slowlydiminishing. The gradual tightening in the re-serve position of member banks was consistentwith Federal Reserve monetary policy, one of themajor objectives of which was that the return ofprosperity should not be accompanied by suchover-commitments and speculative excesses asinevitably lead to trouble.

Member Bank Borrowing

Ordinarily a member bank may borrow fromits Federal Reserve bank to replenish its reserves.Such borrowing did, in fact, increase during thepast year, particularly through the second half.The $700-million increase in borrowings between

6

May and November was capable of supporting,theoretically at least, an increase of more than$4 billion in deposit liabilities which concurrentlywere rising because of bank credit expansion.

The aggregate of such advances to memberbanks, however, was considerably smaller thanduring the last preceding cycle of credit expansionwhich occurred in 1952-3, even though the vol-ume of activity in such credit-using industries asautomobiles and house construction 'has beenmarkedly higher this time than in the earlierperiod. From all indications, existing funds andsavings have been employed much more promptlyand effectively in the current boom than for manyyears past.

In order to discourage member banks frompatronizing the discount window too freely, andin order that the cost of such borrowing should bein line with the general rise in the cost of moneywhich was taking place, the discount rate of theFederal Reserve banks was raised in a series ofsteps from 1Y2 percent, which prevailed through-

out most of 1954, to 2Y2 percent. [On August 4,this bank went directly from 1% percent to 2;l4'percent; the other eleven banks (rate shown inchart) increased their rates only to 2 percent, andthen moved upward to 2;l4' percent in earlySeptember.]

Open Market OperationsOpen market operations throughout 1955 were

used in what may be termed a stabilizing role. Thenet change for the year in holdings of U. S. Gov-ernment securities and bankers acceptances wascomparatively small. Purchases or sales were madein most instances merely to offset the normalswings of float during each calendar month, tomitigate the effects of the ebb and flow of the cur-rency needs of the public and of the Treasury's de-posits at the Federal Reserve banks-movementswhich could be quite disruptive to the bankingsystem unless anticipated-and in the lattermonths of the year, to provide for an estimatedseasonal rise in bank loans and currency outflow.

BORROWINGS BY MEMBER BANKSat Federal Reserve Banks

BillJon$ of Dollars

1952 1953 1954 1955

Billions of Dollars

2.0

Two Phases of Rapid Expansion

Despite the record volume of new loans made, member bank borrowings from the Federal ReserveBanks expanded less rapidly during 1955 than during the 1952 wave of credit expansion. The discountrate was increased four times during 1955, whereas during 1952 it remained unchanged at 1%%.

7

For the year as a whole, the net outflow of cur-rency into circulation, which represents a directdrain on member bank reserves, was on the orderof $500 million. The movement of gold into or outof the country during 1955 was so small as to poseno problem with respect to member bank reserves.

In short, monetary policy was aimed at permit-ting only the normal seasonal expansion of pro-duction, marketing, and distribution to take placeduring the second half of 1955. In the face of infla-tionary tendencies in the realm of nonagriculturalprices, it was deemed unwise to expand centralbank credit so that every borrowing desire couldbe accommodated. To have permitted the busi-ness boom itself to dictate the degree of credit ex-pansion at such a time would have heen to induce

Percent

4

MONEY RATES(Yields on Selected Types of Securities)

CORPORATESAaa

Doily Average. by Months

-1955-

The continuing demand for credit during 1955 produced a sharpincrease in money rates in the short-term sector of the market.The market yield on 3-month Treasury bills advanced fromaround 174:% to well over 2%.The cost of borrowing in the longer-term capital markets alsoincreased during /955, but by relatisely moderate proportions.

the gravest kind of price and employment m-stability.

Interest Rates

Pernmf

4

Before ending this review, one more disillusion-ment might be mentioned-again in the sense thatthe dispelling of anything resembling an illusionis a net contribution to the art of economic analy-sis. Measuring the degree of tightness in themoney market, or the effects of higher interestrates, has once more been shown to be an inexactscience. As indicated on an accompanying chart,the gradual decline in the liquidity of money mar-ket institutions was not reflected in the same de-gree, nor wholly in accordance with precedent,through every segment of the market.

Short-term rates, as typified by the marketyield on 3-month Treasury bills, rose much morerapidly than longer-term interest rates. Although,as was indicated earlier, member bank borrowingsdid not parallel the 1952-3 phase, the cost of bor-rowing money at short term rose measurablyabove the 1952-3 peak.

On the other hand, longer-term rates seem tohave shown much greater immunity from tight-ening credit conditions. The decline in the pricesof long-term U. S. Government securities or ofcorporate and municipal securities has been muchmore moderate than during the 1952-3 cycle. Thisrelative immunity raises the question of whetherrestraint was of the degree desired, and, secondly,the question of the extent to which market psy-chology offsets-or accentuates-monetary policyfrom time to time. In any event, the illusion hasbeen dispelled that any given volume of borrow-ings, of net borrowed reserves, or of excess reserves,or any stated discount rate will create a preciselypredictable and measurable degree of monetaryrestraint.

The past year was a highly satisfactory one. Itwas prolific not only with respect to the produc-tion of economic wealth but also in terms of educa-tional content and provocative challenges. Thenation has been enriched both materially and in-tellectually as a consequence of the economic de-velopments of 1955.

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the Fourth District

The broad expansion of expenditures by con-sumers and business during the year broughtheavy credit demands to financial markets. Risingoutlays on goods and services were made possiblenot only by the high levels of income, but by asubstantial expansion in credit of all types.

In the Fourth Federal Reserve District, as inthe nation, the resurgence of demand for loans atmember banks marked a sharp change from thepreceding year. It was a profitable year for Dis-trict banks, even though the rate of expansion intheir total of loans and investments was moder-ated by Federal Reserve policy aimed at promot-ing sustainable economic growth by restraininginflationary pressures.

Total loans and investments held by FourthDistrict banks rose by less than 3Y2 percent in1955-the smallest relative growth in the past fiveyears. The moderate net growth of member bankcredit in 1955 resulted from two sharply differingforces: a vigorous upsurge in loans that was offsetin large part by a decline in bank holdings of U. s.Government securities. In order to finance one ofthe heaviest totals of loan demand of recent yearsat a time when loanable funds were tight, banksin this District as well as elsewhere found it neces-sary to dispose of a large volume of Governmentsecurities.

LoansAt Fourth District banks, loans rose by nearly

$900 million, or about 20 percent. One outcome ofsuch a development was that by mid-1955, totalloans of District member banks had risen abovetheir holdings of Treasury securities for the firsttime in many years.

Loan expansion at member banks in the fivereserve cities in the District was about 2Y2 times aslarge as that of all country banks. (The reservecities are Cincinnati, Cleveland, Columbus, Pitts-burgh and Toledo. The 22 reserve city banks holdover half of the total resources of all District mem-ber banks.) At the same time, the entire year-to-year reduction in Government security holdings

LOANSFourth District, Weekly Reporting Member Banks

Millions 01 Dollars

1750Millions 01 Do/lor$

1750

o (Del:. '55 Partly Estimated) 01950 1952 19551951 1953 1954

of District member banks, amounting to over $500million, occurred at reserve city banks; countrybank holdings of Treasury securities showed virtu-ally no change for 1955 as a whole. Country banks,however, expanded their portfolios of corporateand municipal securities, as compared with a de-cline in 1954; reserve city banks reduced theirholdings of such securities.

Business loans accounted for about 40 percent oftotal loan growth at weekly reporting banks in theFourth District during the year. Mainly becauseof the importance of heavy industry in the Dis-trict, the previous year's decline in business loanshad started earlier, had lasted longer, and hadgone further than in the nation as a whole. By theend of 1955, however, about three-fourths of thelost ground had been recovered.

As a reflection of the high level of building ac-tivity, business loans to construction firms rosesteadily throughout the year. In addition, realestate loans showed a strong trend at District

[Continued on Page 11]

9

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DEPOSITSFourth District Member Banks

Billions o( Dollars14

Billions of DollorS'

4

12

1

TOTAL LpOSITS ~ ./ ~

~ f'7 "'"1.:»

/ 1--DEMAND DEPOSITS

~ ~L'J-.. .~

V ,,--'

TIME DEPOSITS

(Oer. '55 Porlly Estimoted)

10

6

o1950 1951 19551952 1953 1954

banks, rising even more sharply than the large ex-pansion last year. Consumers have been buyinghouses-both old and new-at a record rate, witha greatly enlarged volume of mortgage credit.

The rise in consumer expenditures during 1955on durable goods other than houses was also fi-nanced by heavy borrowing. Such credit demandswere reflected in a record extension of businessloans to sales finance companies by District mem-ber banks, and also in a sharp growth of con-sumer loans.

DepositsThe expansion in total deposits at Fourth Dis-

trict member banks amounted to about 4 percent,a somewhat greater rate of increase than in theprevious year. The pattern of demand and timedeposits differed from that of 1954, however. Asmight be expected in a period of high-level busi-ness activity, about four-fifths of the depositgrowth during 1955 occurred in demand deposits.In 1954, by way of contrast, most of the expan-sion took place in time deposits-which are rela-tively inactive funds.

As in the case of total loans and investments,country banks accounted for ever two-thirds of theexpansion in total deposit accounts. Their shareof the demand deposit growth was even larger.

o

Not only did the volume of demand deposits atDistrict member banks rise substantially abovethat of the previous year, but the rate of spendingof such accounts also increased. For the threemonths ended in November 1955, for example, thevolume of checks written against privately-helddemand deposits was 17 percent larger than in theyear-ago period.

Since about 90 percent of all expenditures aremade by means of checking accounts, the com-bination of larger demand deposits and a higherrate of turnover was a significant factor in therising volume of consumer and business expendi-tures during the year. Both nationally and in theFourth District, idle funds were transferred tospenders, and the available money supply wasmore fully utilized.

8

6

4

Reserveso Free reserves of District member banks became

negative in the fourth quarter of the year (asshown by the chart) while for all member banks inthe nation, that situation had developed as earlyas August. With total member bank borrowing ex-ceeding excess reserves, the volume of memberbank deposits was being supported by net bor-rowed reserve funds, which is the main signifi-cance of "negative free reserves." Such a situationtends to militate against overly-rapid further ex-pansion in bank credit at a time when the demandfor goods and services is pushing hard against theproductive capacity of the economy.

MEMBER BANK BORROWINGS, EXCESSRESERVES, AND FREE RESERVES

Fourth District Member BanksMillions of Dollars Mdliom of Dollars

200200(Daily Average, Months)

150 ~----+-------t-----+------j 150

-----1100

50

1952

11

upsurge •In

It was a cornucopian year, as mentioned pre-viously in the discussion of monetary policy. Al-most every major business or economic indicator,with the exception of farm income, set a newrecord high for the year, and by a substantialmargm.

As the year was approaching its end, the nation'sindustrial machine was showing signs of strain.The shortage of various steel products-particu-larly structurals, plate, sheet, strip, and bars-was hampering a variety of industries and forcinga few to curtail production. Virtually every kindof nonferrous metal at times appeared to be inshort supply. Other materials whose supply wasless than current demand in varying degrees in-cluded glass, cement, and paperboard. A shortageof freight cars persisted through the fourthquarter.

The employment situation likewise reflectedthe upward surge of production and high activityin the trade and service industries. Total employ-ment was at record levels and unemploymenthardly more than 3 percent of the civilian laborforce (about the practical minimum in a peace-time economy) in the early part of the fourthquarter. Shortages of skilled labor of various kindswere growing more serious and forcing many com-panies to work their employees overtime to obtaindesired output.

Thus, with production in many industries beingpushed to capacity, or to the maximum permittedby the supply of raw materials, with a shortage oftransportation equipment hampering the free flowof goods, and with a labor force nearly fully em-ployed, it appeared at year end that not muchfurther expansion in output could be achieveduntil new production facilities were activated.

The continued rise of durable goods productionin the second half of 1955 had a particularly strongimpact upon the Fourth Federal Reserve District,whose economy is dominated by heavy industry.

Steel

Steel mills of the District, which have about40 percent of the nation's total steel ingot capaci-ty, pushed production steadily upward throughthe first half of the year to nearly 100 percent ofcapacity by mid-June. Production was then in-terrupted by preparation for a labor dispute whichlasted less than 24 hours as final negotiations fora new wage contract were concluded.

Steel production in the District, despite theheavy pressure for deliveries, did not return tonear-capacity levels until late September. Milloperators were hampered by the hot weather, bythe damage caused by the temporary shutdown,and by the need to make repairs that had beenpostponed earlier in the drive to produce allpossible tonnage. By October, four of the fivemajor steel producing areas in the District wereoperating at 100 percent or more of theoreticalcapacity.

Nevertheless, output was unequal to demandof consuming industries and order backlogs con-tinued to mount. By December 1, it appeared thatorders already booked, and inquiries for futuretonnage, would assure near-capacity operationthrough the first half of 1956.

The unexpectedly large demand for steel thatpersisted through the normally dull summermonths caused District producers-as well assteel companies located elsewhere in the nation-to reappraise the long-term demand for steel.Within less than a year, excess capacity, whichhad been thought sufficient to meet expectedgrowth in the rest of the decade, had given way toa recognized state of serious shortage.

Thus, as a result of long-term studies of thepotential demand for steel, the industry has al-ready begun its third large postwar expansionprogram. To date, 12 major steel companies ofthe District have publicly announced new expan-

12

STEEL PRODUCTION, U. S.'ngoll ond Sleel for Ca.ling.

MiIIiOf)$ of Net Tons125

Millions of Net Tons125

100

75

50

25

o1951 1953 19551947 1949

sion programs that will take from one to threeyears to complete. The new investment will in-crease steel ingot capacity in the District by about2,800,000 tons, to bring the District total toroughly 53,250,000 tons. In addition, large in-creases in steel finishing and supporting facilitieswill be made. The emphasis appears to be towardincreasing capacity for the hot and cold rolling ofsheet and strip. Substantial increases will also bemade for the production of galvanized steel, tin-plate, pipe, wire products, electrical steels, andalloys-chiefly stainless products.

Iron OreLake ore carriers worked the latter part of the

shipping season at near capacity, trying to bringenough ore down the lakes to supply steel millsand to build up adequate stockpiles of ore for thewinter months. At mid-November, 250 boatswere listed as still active in the ore trade, as com-pared with only 69 active boats a year ago.

About 87 million tons of ore moved down thelakes during 1955, making the year's total thefourth best on record.

Autos

100

The record-smashing production performanceof the automobile industry in 1955 in turning outabout 8 million passenger cars (an increase of 45percent over 1954, and 20 percent above the pre-vious 1950 record) had a heavy impact uponDistrict industrial activity.

A large part of the nation's automotive steelrequirements is produced in the Fourth FederalReserve District. The District's importance as asource of automotive steel, parts, and skilled laborbecame more evident during 1955 as car builderspushed ahead with expansion programs. Duringthe past twelve months, very large parts plantsof various descriptions have been proposed, putunder construction, or purchased in Toledo,Sandusky, Cleveland, Cincinnati, Mansfield,Columbus, and Twinsburg, Ohio.

Automotive demand has also stimulated a majorexpansion of plate glass making facilities in theToledo area, in order to increase the output of thecomplicated curved safety glass demanded bycurrent styles. Other industries which havespurted under the stimulus of automotive de-mand include rubber, paint, gray iron foundries,aluminum, zmc die casting, and electricalequipment.

75

50

25

o

AUTO PRODUCTION, U. S.Millions of CO"10

Millions of Ctm10

8

e

8

6 6

4 4

2

o19551947 1949 1951 1953

13

MANUFACTURING EMPLOYMENTFourth District

INDEX (1950= 100) INDEX (1950=100)130 130

100

90

801952 1953 19551954

Rubber

Booming auto production kept tire manufac-turers on an overtime basis through much of 1955.Production for the year was up about 25 percent.Tire producers continued their rapid shift to thetubeless tire, which is now standard equipmenton all new cars, and strove to make the new tirepredominant in the large replacement market.

The scarcity and high cost of natural rubberhave stimulated a further shift to synthetic rub-ber. Nearly 60 percent of all new rubber consumedwas synthetic as compared with a 51-percent pro-portion in 1954.

Machinery

The District's complex machinery industrygenerally surged forward in 1955 under the dualimpact of high-level consumer spending for allsorts of home appliances and the sharp turnaboutof business expenditures for new plant andequipment.

The largest increases in both production andemployment took place among producers of majorhousehold appliances, with output up by morethan 20 percent from 1954. Producers of generalindustrial machinery, both electrical and non-electrical, reported an order inflow well inexcess of sales, and order backlogs increased

steadily. The largest pile-up of orders has probablyoccurred in heavy steel mill equipment.

New orders for machine tools also improvedsubstantially. Although the new order intake formachine tools ran well above 1954 levels, toolshipments lagged far behind, at least until thefinal quarter of the year. Builders have been un-able to rebuild depleted skilled labor forces asrapidly as they would like, and often have hadto resort to heavy overtime schedules.

100

EmploymentTotal manufacturing employment in the Fourth

District by year end had advanced nearly 10 per-cent from the low point of the 1954 recession, butit was still below the peak of 1953.

90

Coal

80

The three-year decline in bituminous coal pro-duction was arrested during the year. Districtcoal production rose along with national produc-tion to register a 20-percent gain over 1954 output.A number of factors have improved the long-termfuture for coal, especially in this District.

ConstructionConstruction activity in the Fourth District

roughly paralleled that of the nation during 1955.As measured by construction contract awards,District activity was about one-fifth above 1954levels and, if allowance is made for the large con-tracts for the Portsmouth atomic energy plantawarded in 1953, the 1955 construction volumewas at a new peak.

Some easing of the rapid pace of homebuildingactivity became evident in this District, and acrossthe country, in September and October when thevolume of residential contracts fell below the un-usually high year-ago totals. By any other com-parison, however, the level of residential awardstoward the end of the year was exceptionally high,running a third or more above comparable totalsfor all years prior to 1954. Paced by awards forcommercial and manufacturing buildings, Districtactivity in the nonresidential building categorywas about one-sixth above that of the previousyear.

Material shortages-particularly of cement-plagued builders throughout most of the year.Rising materials prices and wage increases in thebuilding trades pushed construction costs up by3 to 5 percent during the year.

14

Under the burden of heavy surplus, agriculturalprices continued to decline during 1955; at thesame time, farm output for the year was boostedto record heights. Demand for farm productsduring the year was greater in magnitude thanever before, but it was not adequate to clear theexcessive stocks.

Gross returns from farming in 1955 averagedabout 3 percent below the previous year for allfarms in the nation. Net returns dipped about 10percent. Production costs moved up slightly, de-spite lower prices on goods of farm origin.

The decline in farm income was far from uni-form for the various types of agricultural enter-prises or for the various geographic areas of thecountry. Differences are illustrated by the accom-panying chart which shows the average declinein gross farm income in each of the states which isincluded (or partly included) within the FourthFederal Reserve District. Thus, percentage de-clines were more marked in Kentucky and Ohiothan in Pennsylvania or West Virginia. In Ohio,the sharp decline in hog prices was an especiallyimportant factor. Farm income in Kentucky wasaffected particularly by a 23 percent cut in burleytobacco acreage. The importance of dairy prod-ucts and poultry in Pennsylvania's agriculture wasprobably an important factor in limiting the in-come decline in that state, insofar as prices ofsuch products showed an improvement during1955.

Land Values

Values of farm real estate advanced to recordlevels in 1955, suggesting one of the perplexingaspects of the year's developments. Traditionally,land values are thought to follow the trends of in-come derived from the land or of prices of farmproducts. The contradictory movement in 1955has called for more searching explanations of the

income declines

real-estate market. The trend toward larger-sizeunits to permit more efficient use of machinerymay have been a contributing factor.

Farm CreditOutstanding credit in use by farmers was sub-

stantially greater in 1955 than in 1954, both na-tionally and in the Fourth Federal Reserve Dis-trict. Increased use of credit for feeder cattle wasone of the major factors in this District. Further-more, in an effort to cut costs per unit of pro-duction, farmers generally continued to findnecessary a heavy investment in farm enlarge-ment, machinery, fertilizer, insecticides and othergoods. With reduced incomes in 1955, farmerswere less able to cover such costs on a cash basis.

Collections on farm loans during the year werea bit slower than in the previous year, but werenot so slow as to create any widespread delin-quency problem.

15

THREE MAJ(and th

The Federal Reserother eleven Reser-the Federal Reserv.

BOARD OFGOVERNORS

of the

Making a change, either upward or downward, in the interest rate charged on loansto member banks is the historic prototype of central-banking instruments. Suchchanges usually signalize or confirm some variation in the System's monetaryand credit policy.

In initiating action in this sphere, a Reserve Bank takes into account national aswell as local conditions. Such steps are frequently, although not always, taken atabout the same time by all twelve Reserve Banks.

The Federal Open Market Committeemeets at regular and frequent inter-vals to review and to discuss theSystem's credit and monetary policy.At such meetings the broad objectiveis redefined in the light of latest de-velopments, and a general directive isagreed upon with respect to openmarket operations in U. S. Govern-ment securities. Proceeding under such direction, the Federal ReserveBank of New York acts for the account of all twelve Reserve Banksin carrying out the purchase-or-sale transactions through dealers inGovernment securities.

16

When an all-iof credit conGovernors rnawhich each 0against its deunder an arnrthe amend melwhich the Boaction.

)R INSTRUMENTS OF FEDERAL RESERVE CREDIT POLICYis bank's share in the responsibility for their useJIve Bank of Cleveland participates with there Banks and with the Board of Governors ofe System in the use of the three major instru-

ments of credit control. As depicted below, varying roles are playedby the Reserve Banks and the Board of Governors, respectively,in the use of the different instruments.

Changes in the discount rate are initiated by the Reserve Banks,while the Board of Governors' part is one of approval or dis-approval. In the case of open market policy, the Reserve Banks'part in policy determination is exercised through five of theReserve Bank presidents who, in rotation, share with the Boardof Governors in membership in the Federal Open Market Com-mittee. On the less frequent occasions when changes are madein the reserve requirements of member banks (within statutorylimits) the primary responsibility and final decision rest solelyupon the Board of Governors. The views of the Reserve Bankpresidents, however, may be solicited from time to time.

change.,if any,

crnd

nclusive action toward the easing or tighteningditions seems to be called for, the Board ofy reduce, or increase, the percentage of reservesf the 6,600 member banks is required to holdposit liabilities. The Board has this authority!nd~ent to the original Federal Reserve Act;it prescribes upper and lower limitations withinard may exercise its discretion in this t:ype of

three offices combined

Whether measured in physical units of workload or in the dollar volume of transactions, mostphases of the bank's service operations increasedduring 1955. At the same time, the number ofemployees showed a slight decline.

Continuing an outstanding growth trend, thenumber of checks handled at the three offices rose toabout 322 million for the year, or 6 percent abovethe large volume of 1954. Each of the postwaryears,without exception, has seen a rise in theload of check clearance. Since 1950, as visible onthe chart, the rise has been rapid.

Post office money orders, which are includedwithin the figures for total checks handled, repre-sent one type of instrument whose use has de-clined somewhat in recent years. Nonetheless, 26million of such items were handled by this bankduring 1955.

The demand for coin by business and consumersduring 1955 was unusually large. About $93 mil-lion in coin was paid out by the three offices ofthis bank, in order that commercial banks mightmeet the public demand. That represented a riseof 18;percent from the previous year's total. Asshown by the chart, the marked trend toward useof wrapped coin was continued during the year.

Currency payments also increased. Slightly over$2 billion in currency was paid out by the threeoffices, amounting to an 11 percent increase for theyear.

Sales of Treasury issues, handled by this bankas fiscal agent of the United States, increased dur-ing the year in each of the major categories exceptbond issues. Sales of Treasury bills were at a fairlysteady pace, averaging $242 million per month

COIN PAYMENTS

Millions of Dollo"

100r-~------------~~------------~~

25

Savings bond sales handled for the United StatesTreasury by the three offices totaled more than 13million pieces, or within one-half percent of thelarge number of bonds handled in the previousyear.

The increased volume of lending to member bankswhich occurred during the year represents a cen-tral-banking function somewhat distinct from theservice operations under consideration here. For a

chart showing the extent of such lending, seepage 1I.

The generally increased work load during 1955

was carried by a slightly reduced staff of em-

ployees. As shown by the chart, the number at

mid-year was 1615, or 28 below the number of em-

ployees at the three offices in mid-1954. That

represents the third year of moderate reduction.

"TIttw$ond.2.5 r'---------- --~-- __;

2.0t---------------------------1

19

the Pittsburgh Branch begins a building program

Construction of additions to the PittsburghBranch building totaling 79,000 square feet offloor space was begun September 1, 1955, follow-ing authorization by the bank's Board of Direc-tors and by the Board of Governors of the FederalReserve System at Washington, D. C. Completionis scheduled for the summer of 1957.

The present Pittsburgh Branch building (without the present frontentrances) is shown on the left. At the right is the architect's draw-ing of the ten-story addition which will include the new mainentrance.

The additions, first to be made since the presentstructure with its 49,000 square feet of floor space,was completed in 1930, will comprise two sections:One will be a rectangular 10-story building front-ing 50 feet on Grant Street, adjoining the presentbuilding on the north and extending 140 feet to awesterly frontage on William Penn Way. Theother will be a six-story rear section of the presentbuilding, bringing that part to the eight-storyheight of the existing structure. When the newadditions are completed, the present entrance willbe closed off and the main entrance will be on theGrant Street front of the ten-story addition.

The additions will enable the Branch to vacate13,000 square feet it now uses in the Gulf Building

next door and 8,000 square feet in another nearbybuilding.

The main banking room on the first floor willbe remodeled and modernized. The large 2Yz-storywindows will be removed and the openingsblocked in.

There will be three new passenger elevators, onefreight elevator and one coin elevator, all auto-matically operated. The two present passengerelevators and the security elevator will be mod-ernized. The new coin vault in the basement of the"large addition will provide ample accommodationsfor the storage of wrapped and loose coin.

The entire new additions will be fully air condi-tioned to tie in to the existing air-conditioninginstallation.

Breaking ground for the new Pittsburgh Branch addition are, foreground,left to right: John W. Kossin, vice president in charge of the Branch; E. P.Mellon I I, board chairman, Mellon-Stuart Company, contracting-engineer-ing firm; President Wilbur D. Fulton; Mayor David L. Lawrence of Pitts-burgh; Henry A. Roemer [r., chairman of the Pittsburgh Branch board. Inbackground, from left are:

Donald S. Thompson, first vice president of the bank; Dr. John C. Warner,Branch director; Lawrence N. Murray, president, Mellon National Bankand Trust Company, Pittsburgh, and former director of the bank; DouglasM. Moorhead of North East, Penna., Branch director; Albert H. Burch-field [r., president, Joseph Horne Company, Pittsburgh, and former Branchdirector; Thomas C. Swarts, president, Woodlawn Trust Company, Ali-quippa, Penna., and former Branch director; Arthur C. Foster, cashierof the Branch.

20

\Troy• :

- - - T - - -L-J._~pri:9field, , '-, ," Dayton· I • 'I , Xenia',F-'---T-------- , ,

• Middletow1I ,

• Hammeln I I-- _...L{- L / ~ L~

, I I ''r------i ~_,~orwood l l OH I (!) I

I _ -- ,_ I---, , L. --I.,,,,,

industry and agriculture in thearea served by the Cincinnati Branch

Diversification of industry in the territoryserved by the Cincinnati Branch is a fact ratherthan a slogan. Manufacturing of a wide variety ofproducts in both the hard-goods and soft-goodslines is supported by strength in transportationfacilities, in the extractive industries and inagriculture.

II

Leading Machine Tool Area

Cincinnati continues to be a leading center forthe production of machine tools-an industrywhich dates back to 1817 when it began as a by-product of the steamboat-building industry. Othertypes of machinery, as well as a wide variety ofprimary and fabricated metal products, are pro-duced in quantity in the area. Important manufac-turing centers for metal products in generalinclude: Cincinnati, Dayton, Hamilton, Middle-town, Springfield, Portsmouth, Chillicothe,Marietta, Ironton, and Troy-all in southernOhio; also, Covington, Newport, Lexington,Winchester, Ashland, and Richmond, in easternKentucky.

Aircraft engines and parts are manufactured in

II~

Cincinnati sky line

I~

Jet engine manufactured near Cincinnati

Die sinking machine produced in Cincinnati

22

Paper making in the Miami valley

One of world's largest soap-making plants

Cincinnati, Evendale, and Dayton, as well as inseveral other centers. Computing machines, cashregisters, and household appliances are outstand-ing products of Dayton. The office-furniture in-dustry is important in Mariet ta and Norwood,Ohio.

Nondurable GoodsSoft-goods manufacturing lines are represented

in the area by numerous enterprises (some ofwhich are among the world's largest) for the manu-facture of soaps, chemicals, paper, petroleumproducts, shoes, textiles, and apparel. The MiamiRiver valley and Chillicothe, for example, arehistoric centers of paper manufacturing; largenew chemical plants have been built in recentyears at various sites along the Ohio River. Meatpacking, once a leading industry in Cincinnati, isstill an important factor; large food processingplants also are located in Dayton, Piqua, andTroy.

23

Cutting coal in a Kentucky mine

Oil refinery in Ashland, Kentucky

The river towboat links the early history of theCincinnati area with its modern network of trans-portation facilities.Millions of tonsof products areshipped annuallyto or from the Cin-cinna ti river port;also, eight trunkline railroads, fiveairlines, and 128common-carnertruck lines servethe center.

Coal Mining

Coal mining has played a large part in the eco-nomic life of 27 counties in eastern Kentucky and7 counties in southeastern Ohio. The troubles ofthe industry, stemming in part from the inroadsof competitive fuels, have been reflected in theemployment patterns of such areas, as in othercoal sections of the nation. However, 1955 was amuch better year for coal mining than its prede-cessor, and in some respects the general outlookfor the industry is considered to be improved. Ineastern Kentucky, for example, the tonnage forthe year 1955 is estimated at about 20 percentabove the 1954 output. The recent industrial ex-pansion of the entire Ohio Valley has come aboutpartly through the availability of coal as a sourceof power.

Sheep raising in south central Ohio

Large atomic energy plants, operated by privateindustry for the Atomic Energy Commission, arelocated in Pike County, near Waverly, Ohio,and in Hamilton County, near Cincinnati.

Agriculture

In the area served by the Cincinnati Branchmay be found many types of agricultural endeavor.One of the principal items produced is burleytobacco, which provides a large portion of thecash income on many of the smaller farms locatedin the burley belt of Kentucky and Ohio. Themarket at Lexington, Kentucky, is the largest inthe world. Cigar leaf tobacco is produced Inseveral counties of southwestern Ohio.

Burley tobacco in a Lexington warehouse

Corn and small grains are important cropsgrown on the farms of the area. Production ofhogs, cattle, and sheep, as well as dairying enter-prises, is common. In southeastern Ohio can befound a thriving broiler industry and the area isstrong in truck gardens producing fresh marketvegetables.

The bluegrass area around Lexington, Ken-tucky, is famous as a breeding place for thorough-bred race horses.

24

from the LOG BOOK of the Cincinnati Branch1917

November 21. First meeting of the board of directors held inthe offices of the First National Bank of Cincinnati.

December 4. Decision made to lease quarters for the Branchin the Union Savings Bank and Trust Company Building.

December 14. Manager 1. W. Manning announces plans foremploymen t of necessary office force.

1918January 2. Opening date for the Branch definitely fixed by

the Federal Reserve Bank of Cleveland to be January 10, 1918.January 10. The Cincinnati Branch formally opened for

business with twenty-five employees. The Federal ReserveBank of Cleveland advises that there be designated for theBranch an additional officer who might perform the duties ofcashier, or such other duties as might be prescribed by theboard or required by the manager, pending the appointment ofa cashier by the Federal Reserve Bank of Cleveland.

February 19. First examination of the Branch made by theauditor ofthe Federal Reserve Bank of Cleveland.

1920November 20. Option closed for the purchase of the property

at Fourth and Race Streets.

1921February 11. The United States sub-Treasury of Cincinnati

discontinued and its functions assumed by the CincinnatiBranch. Operations of cash and bond exchange departmentstransferred to Federal Building in space previously occupiedby the sub-Treasury.

March 6. First examination of the Cincinnati Branch by ex-aminers from the Federal Reserve Board.

July 6. Due to overload of vaults in Federal Building, ar-rangements made to lease vault in St. Paul Building for storageof coin.

1923January 3. Fifth Floor of the Atlas National Bank Building

procured for use in connection with redemption of war savingsstamps.

1926April 1. Clifford F. McCombs appointed Managing Director

of the Cincinnati Branch to succeed 1. W. Manning, resigned.September 8. Application made for establishment of Post

Office sub-station.

1928January 3. Branch moves into new quarters in Chamber of

Commerce building.

1935February 28. Clifford F. McCombs, Managing Director, re-

tires at age 73-the first officer of the Cincinnati Branch tobe retired.

March 1. Following appointments made, effective immedi-ately: B. J. Lazar, Managing Director; H. N. Ott, Cashier;R. G. Johnson, Assistant Cashier; Clyde Harrell, Acting As-sistant Federal Reserve Agent.

1937January 25. Currency in the vaults of some member banks

under water from the flood condition of the Ohio River. Clean-ing, drying, and pressing of currency undertaken at the Branch.

1942December 4. Board' of Directors of the Branch approves pro-

cedure in regard to "Evacuation of Valuables and Records inthe Event of an Air Raid."

October 1. The fiscal agency department begins work of bondredemptions.

1943March 10. B. ]. Lazar appointed vice president.April 26. Inscription division is added to fiscal agency

function.April 21. Reissue division of fiscal agency function is opened.May 1. Entire fourth floor of the Chamber of Commerce

Building leased to be used by the expanded fiscal agencydepartmen t.

1944January 1. Department of general accounting opened at the

Branch.April 1. Functioning of registered bonds assumed by fiscal

agency department. Bestowal of full fiscal agency powers onthe Branch.

August 18. Increased volume of savings bond redemptionsrequires leasing of additional lobby space in the NeaveBuilding.

November 1. War Loan Accounts unit established in theBranch.

1945June 4. Number of Branch employees reaches the record

number of 503.

1947September 2. Announcement of purchase of the fifteen-story

Chamber of Commerce Building, to be renamed the "FederalReserve Bank Building."

September 15. Employees of the Branch begin working on afive-day week.

December 16. The first order for wrapped coin filled as Branchships $100 in wrapped cents to a state member bank in Rich-mond, Kentucky.

1948January 20. Structural changes and relocation of depart-

ments begun in the quarters of the Branch, including the in-stallation of a coin vault in the basement.

1949March 1. Wilbur D. Fulton, former vice president in charge

of bank examination at main office, becomes vice president incharge of the Cincinnati Branch. He succeeds B.]. Lazar, whoretires after 31 years of service.

1950AprilS. The Cincinnati Clearing House Association moves

into new quarters in the building.July 24. Employees' cafeteria opened.

1951July 1. Beginning of new operation of processing Post Office

money orders by punched-card system.

1953January 1. Wilbur T. Blair becomes vice president in charge

of the Cincinnati Branch. He succeeds Wilbur D. Fulton, whomoves to the main office as First Vice President of the FederalReserve Bank of Cleveland.

April 16. Work started on air conditioning the BranchBuilding.

July 15. Richard G. Johnson succeeds Wilbur T. Blair asvice president in charge of the Cincinnati Branch.

1954May 1. Branch designated as depository for Post Office de-

posits in the Fourth District.

1955January 31. Work started on security court.November 21. Security court first used for receipt and de-

livery of shipments of money and valuables.

25

Ipast directors of the Cincinnati Branch •

WILLIAM C. PROCTER

WILLIAM S. ROWE

CHARLES A. HINSCH

JUDSON HARMON

GEORGE D. CRABBS

THOMAS J . DAVIS

CHARLES W. DUPUIS

E. SHACKLEFORD LEE

JOHN OMWAKE

A. CLIFFORD SHINKLE

GEORGE M. VERITY

A. E. ANDERSON

BERNARD H. KROGER

FRED A. GEIER

THOMAS J. DAVIS

CHARLES N. MANNING

\VILLIAM H. COURTNEY

STUART B. SUTPHIN

JOHN J. ROWE

ALEXANDER THOMSON

FRANK A. BROWN

BUCKNER WOODFORDI·

i

1'~

Ii

Ii

FRANCIS H. BIRD

JOHN G. GUTTING

FREDERICK V. GEIER

WALDO E. PIERSON

S. HEADLEY SHOUSE

WALTER H. J. BEHM

PAUL G. BLAZER

NEIL McELROY

SPEARS TURLEY

ERNEST H. HAHNE

JOSEPH B. HALL

STERLING B. CRAMER

HENRY C. BESUDEN

GRANVILLE R. LOHNES

EDWARD S. DABNEY

JOHN C. BAKER

FRED A. DOWD

President, Procter & Gamble Company, Cincinnati, OhioPresident, The First National Bank of Cincinnati, Cincinnati, OhioPresident, The Fifth Third National Bank, Cincinnati, Ohio

1917-19201917-19221917-1923

Atterney, Cincinnati, Ohio 19l7-1925President, The Philip Carey Company, Cincinnati, Ohio 1920-1923Chairman of the Board, The First National Bank of Cincinnati, Cincinnati, Ohio 1923President, The Citizens National Bank & Trust Company, Cincinnati, Ohio 1924-1929President, The First National Bank and Trust Company of Covington, 1924-1932

Covington, KentuckyPresident, U. S. Playing Card Company, Cincinnati, Ohio 1924-1935President, The Fourth & Central Trust Company, Cincinnati, Ohio 1925-1926President, American Rolling Mill Company, Middletown, Ohio 1925-1936Moores-Cooney Company, Cincinnati, Ohio 1926Chairman of the Board, The Provident Savings Bank and Trust Company, 1926-1936

Cincinnati, OhioPresident, Cincinnati Milling Machine Company, Cincinnati. Ohio 1927-1934Chairman of the Board, The First National Bank of Cincinnati, Cincinnati, Ohio 1930-1935President, Security Trust Company, Lexington, Kentucky 1933President, The First National Bank and Trust Company of Lexington, 1934-1940

Lexington, KentuckyPresident, 1. V. Sutphin Company, Cincinnati, Ohio 1934-1941President, The Fifth Third Union Trust Company, Cincinnati, Ohio 1936-1942Chairman of the Board, Champion Paper & Fibre Company, Hamilton, Ohio 1937-1939Farmer, Clarksburg, OhioVice President and Cashier, Bourbon-Agricultural Bank & Trust Company,

Paris, KentuckyDean, College of Business Administration, University of Cincinnati,

Cincinnati, OhioPresident, The Second National Bank of Cincinnati, Cincinnati, OhioPresident, Cincinnati Milling Machine Company, Cincinnati, OhioPresident, The First National Bank of Cincinnati, Cincinnati, OhioTobacco and livestock raiser, Lexington, KentuckyPresident, The Winters National Bank and Trust Company of Dayton,

Dayton, OhioChairman of the Board, Ashland Oil & Refining Company, Ashland, KentuckyPresident, Procter & Gamble Company, Cincinnati, OhioVice President and Trust Officer, State Bank and Trust Company of Richmond,

Richmond, KentuckyPresident, Miami University, Oxford, OhioPresident, The Kroger Company, Cincinnati, OhioFirst Vice President, The Fifth Third Union Trust Company, Cincinnati, OhioSheep raiser, Winchester, KentuckyTreasurer, National Cash Register Company, Dayton, OhioPresident, Security Trust Company, Lexington, KentuckyPresident, Ohio University, Athens, OhioPresident, The First National Bank of Cincinnati, Cincinnati, Ohio

26

1939-19441940-1945

1942-1948

1943-19451943-19461945-19491945-19491945-1950

1945-19501946-19481946-1951

1949-19521949-19541950-19521950-19551951-19531952-19541952-19541953-1955

guiding the Cincinnati Branch today

DIRECTORS

ANTHONY HASWELL (Chairman)President, The Dayton Malleable

Iron Company, Dayton, Ohio

LEONARD M. CAMPBELL,President, The SecondNational Bank of AshlandAshland, Kentucky

W. BAY IRVINE,President, Marietta College

Marietta, Ohio

ROGER DUCKETT,President, The DrackettCompanyCincinnati, Ohio

IVAN JETT,Farmer,

Georgetown, Kentucky

BERNARD H. GEYER,President, The SecondNational Bank of HamiltonHamilton, Ohio

WILLIAM A. MITCHELL,President, The Central

Trust CompanyCincinnati, Ohio

RICHARD G. JOHNSON,Vice President of theFederal Reserve Bank ofCleveland, in charge ofthe Cincinnati Branch

PHIL J. GEERS,Cashier of

the Cincinnati Branch

27

Comparative statementDecember 30,1955 and December 31,1954

assetsGold certificates.Redemption fund for Federal Reserve notes .....

TOTAL GOLD CERTIFICATE RESERVES.

Federal Reserve notes of other banks.Other cash .

TOTAL CASH

Discounts and advances ..U. S. Government securities:

Bills.Certifica tes .Notes .Bonds .

TOTAL U. S. GOVERNMENT SECURITIES.TOTAL LOANS AND SECURITIES.

Uncollected cash items.Bank premises ..Other assets ....

TOTAL ASSETS.

liabilitiesFederal Reserve notes.

Deposits:Member bank-reserve accounts.U. S. Treasurer--general account ...Foreign ....Other deposits .

TOTAL DEPOSITS .

Deferred availability cash items .Other liabilities .

TOTAL LIABILITIES.

capital accountsCapital paid in ...Surplus (Section 7) ..Surplus (Section 13b).Other capital accounts.

TOTAL LIABILITIES AND CAPITAL ACCOUNTS ...

Contingent liability on acceptances purchased for foreign correspondents.Industrial loan commitments.

28

of condition

Dec. 30, 1955 Dec. 31, 1954

$1,702,370,444 $1,717,478,42378,193,284 76,998,629

1,780,563,728 1,794,477,052

17,923,050 16,882,00027,269,610 37,499,357

1,825,756,388 1,848,858,409

616,000 14,636,667

129,146,000 185,727,000508,843,000 1,189,814,000,

1,217,461,000 517,436,000240,791,000 240,130,000

2,096,241,000 2,133,107,000

2,096,857,000 2,147,743,667

653,563,169 371,458,5345,905,373 5,260,131

13,552,762 11,329,889

$4,595,634,692 $4,384,650,630

$2,492,709,245 $2,417,960,675

1,492,811,500 1,467,287,39926,036,179 42,858,26035,126,000 44,344,00012,883,559 13,024,590

1,566;857,238 1,567,514,249

432,140,750 299,651,9251,184.439 1,120,605

4,492,891,672 4,286,247,454

29,295,95062,563,178

1,005,6659,878,227

$4,595,634,692

27,318,05060,222,039

1,005,6659,857,422

~,650,630

s 3,048,500$ 321,632

ss

1,766,400598,300

Comparison of earnings and expensesFOR THE YEARS 1955 AND 1954

1955 1954

Total current earnings. 1> 35,055,198 s 37,422,140Net expenses ......... 9,953,355 10,131,271

CURRENT NET EARNINGS.. 25,101,843 27,290,869

Additions to current net earnings:Profit on sales of U. S. Government securities (net). -{l- 45,288All other ....... . ........ 16,316 11,556

TOTAL ADDITIONS. 16,316 56,844

Deductions from current net earnings:Loss on sales of U. S. Government securities (net) . 74 -{)-Reserves for contingencies 20,806 28,716

All other ... 1,381 1,455

TOTAL DEDUCTIONS. 22,261 30,171

Net additions. -{l- 26,673Net deductions ... 5,945 -0-

Net earnings before payments to U. S. Treasury. 25,095,898 27,317,542Paid U. S. Treasury (interest on F. R. notes). 21,070,509 23,166,338Dividends .. 1,684,251 1,577,114

Transferred to surplus (Section 7). s 2,341,138 1> 2,574,090

TO U. S. TREASURY

Disposition of Gross Earnings, 1955

29

DIRECTORSJOHN C. VIRDEN (Chairman)

Chairman of the Board, John C. Virden Company, Cleveland, Ohio

ARTHUR B. VAN BUSKIRK (Deputy Chairman)Vice President and Governor, T. Mellon and Sons, Pittsburgh, Pennsylvania

KING E. FAUVER, DirectorThe Savings Deposit Bank and Trust CompanyElyria, Ohio

JOSEPH B. HALL, PresidentThe Kroger CompanyCincinnati, Ohio

CHARLES Z. HARDWICK, Executive VicePresident

The Ohio Oil CompanyFindlay, Ohio

EDISON HOB STETTER, President andChairman of the Board

The Pomeroy National BankPomeroy, Ohio

J. BRENNER ROOT, PresidentThe Harter Bank & Trust CompanyCanton, Ohio

ALEXANDER E. WALKER, Chairmanof the Board

The National Supply CompanyPittsburgh, Pennsylvania

FRANK J. WELCH, Dean and DirectorCollege of Agriculture and Home EconomicsUniversity of KentuckyLexington, Kentucky

MEMBER OF FEDERAL ADVISORY COUNCIL(From the Fourth Federal Reserve District)

FRANK R. DENTONVice Chairman of the Board

Mellon National Bank and Trust CompanyPittsburgh, Pennsylvania

CINCINN ATI BRANCHDIRECTORS

ANTHONY HASWELL (Chairman)President, The Dayton Malleable Iron Company, Dayton, Ohio

LEONARD M. CAMPBELL, PresidentThe Second National Bank of AshlandAshland, Kentucky

ROGER DRACKETT, PresidentThe Drackett CompanyCincinnati, Ohio

BERNARD H. GEYER, PresidentThe Second National Bank of HamiltonHamilton, Ohio

W. BAY IRVINE, PresidentMarietta CollegeMarietta, Ohio

IVAN JETT, FarmerGeorgetown, Kentucky

WILLIAM A. MITCHELL, PresidentThe Central Trust CompanyCincinnati, Ohio

OFFICERSRICHARD G. JOHNSON, Vice President

PHIL J. GEERS, Cashier

JOHN BIERMANN, JR., Assistant CashierGEORGE W. HURST, Assistant Cashier

30

WALTER H. MacDONALD, Assistant Cashier

OFFICERSWILBUR D. FULTON, President

DONALD S. THOMPSON, First Vice PresidentDWIGHT L. ALLEN, Vice PresidentROGER R. CLOUSE, Vice President

and Secretary

GEORGE H. EMDE, CashierL. MERLE HOSTETLER, Director of ResearchRICHARD G. JOHNSON, Vice PresidentJOHN W. KOSSIN, Vice PresidentALFRED H. LANING, Vice President:VIARTIN MORRISON, Vice PresidentHAROLD E. J. SMITH, Vice PresidentPAUL C. STETZELBERGER, Vice PresidentCARL F. EHNINGER, General Auditor

PHILLIP B. DIDHAM, Assistant Vice PresidentCLYDE HARRELL, Assistant Vice PresidentJOSEPH M. MILLER, Assistant Vice PresidentHUGH M. BOYD, Chief ExaminerGEORGE T. QUAST, Assistant Chief ExaminerCHARLES J. BOLTHOUSE, Assistant CashierCHARLES E. CRAWFORD, Assistant Cashier

ELWOOD V. DENTON, Assistant CashierEDWARD A. FINK, Assistant Cashier

ELMER F. FRICEK, Assistant Cashier

HARMEN B. FLINKERS, Assistant Secretary

INDUSTRIAL ADVISORY COMMITTEEHERMAN R. NEFF (Chairman)

Chairman of the Board, The George S. Rider Company-Engineers, Cleveland, Ohio

HERBERT P. LADDS (Vice Chairman)President, National Screw and Manufacturing

CompanyCleveland, Ohio

SAM W. EMERSON, President and TreasurerThe Sam W. Emerson CompanyCleveland, Ohio

JOHN P. McWILLIAMS, President andChairman of the Board

Youngstown Steel Door CompanyCleveland, Ohio

ARTHUR W. STEUDEL, PresidentSherwin-Williams CompanyCleveland, Ohio

PITTSBURGH BRANCHDIRECTORS

HENRY A. ROEMER, JR. (Chairman)President, Forbes Steel Corporation, Canonsburg, Pennsylvania

JOHN H. LUCAS, Chairman of the BoardPeoples First National Bank & Trust

CompanyPittsburgh, Pennsylvania

DOUGLAS M. MOORHEAD, FarmerNorth East, Pennsylvania

SUMNER E. NICHOLS, PresidentSecurity-Peoples Trust CompanyErie, Pennsylvania

ALBERT L. RASMUSSEN, PresidentThe Warren National BankWarren, Pennsylvania

JOHN C. WARNER, PresidentCarnegie Institute of TechnologyPittsburgh, Pennsylvania

IRVING W. WILSON, PresidentAluminum Company of AmericaPittsburgh, Pennsylvania

OFFICERSJOHN W. KOSSIN, Vice President

ARTHUR G. FOSTER, Cashier

W. HUNTER NOLTE, Assistant CashierJOHN R. PRICE, Assistant Cashier

JOHN A. SCHMIDT, Assistant CashierROY J. STEINBRINK, Assistant Cashier

31

The following promotions, changes or retire-ments of officers of the bank became effectiveduring 1955:

Promotions and Retirements

Retirement. JAMES R. LOWE, Assistant VicePresident, retired as of June 30.

Changes and Promotions. EDWARDA. FINK be-came Assistant Cashier as of January 1.

ALFREDH. LANING, Vice President and Cashier,relinquished duties of Cashier on July 1.

The following promotions became effectiveJuly 1:

GEORGE H. EMDE, formerly Assistant VicePresident, became Cashier.

CLYDE HARRELL, formerly Assistant Cashierof the Cincinnati Branch, became Assistant VicePresident of the bank.

WALTER H. MACDONALD, formerly AssistantExaminer, became Assistant Cashier of the Cin-cinnati Branch.

GEORGE T. QUAST, formerly Senior Examiner,became Assistant Chief Examiner.

32

\