SCHEDULE 21.-Number and amount of United States coupons, etc.-Continued. Average per month on total coupons handled, 142,344; amount $493,527.15. SCHEDULE 22.-Total debits and credits of Federal Reserve Bank of St. gold settlement fund in Washington for each week during 1918, and the credit on the dates shown. Louis through balance to its Balance to credit of Federal Reserve Bank of St. Louis. $21,314, 400 23, 169, 400 20,820, 400 26,656, 400 26, 968, 900 23, 402, 400 32, 184, 400 26,776, 400 30, 519, 900 30, 270, 400 34,642, 400 33, 169, 900 29, 485, 900 23,780, 900 21, 693, 400 18,368, 400 Mar. 21. Mar. 28. Apr. 4. Apr. 11. Apr. 18. Apr. 25. May 2. 57, 464,000 16, 187, 800 May 9. 55, 401, 000 53, 255, 000 May 16.. 51,341, 000 17, 605, 800 May 23. 54, 553, 000 May 31. 61, 304, 000 June 6. 41, 500, 000 June 13. 57, 283, 000 56, 128, 000 Aug. 15. 44, 804, 000 Aug. 22. 55, 619, 000 Aug. 29. Sept. 5. Sept. 12. Sept. 19. Sept. 26. Oct. 3.. 54, 011, 000 74, 860, 000 62, 251,000 2,815, 701, 000 52, 149, 000 57,649,000 44,294,000 55, 169, 000 49,669,000 63,823, 000 62,783,000 55, 190, 000 51,439,000 56, 639,000 57,819,000 53,707, 000 58,989,000 60,300,000 59,797, 000 47,401, 000 55, 806, 000 64,955, 000 62, 603, 000 55, 499,000 60, 652, 000 65, 937, 000 75, 240, 000 83,338, 000 60, 898, 000 63,319, 000 72, 439, 000 74,712, 000 57,329,000 67,529, 000 72, 211, 000 61,048, 000 2,898, 242, 000 23, 122, 800 37, 421,000 23,401, 500 40, 636, 600 27,488, 300 33, 247,300 22,476,000 32,352, 300 23,235,000 35, 052, 000 21, 279, 000 22, 270, 000 25,768,000 35,270,000 28, 162, 000 29, 180,000 27,584,000 24,932,000 16,513,000 21, 116,000 17,510,000 13,934, 000 10,713,000 17, 261,000 17,578,000 28, 999,000 27, 669,000 30,372,000 33, 356,000 26, 493,000 21,388,000 23,963,000 31, 141, 000 30,038, 000 DISTRICT NO. 9-MINNEAPOLIS. JOHN H. RICH, Chairman and Federal Reserve Agent. The year 1918 was of peculiar significance to the Federal Reserve Bank of Minneapolis and constituted the first period since organization during which it had opportunity for the full exercise of its powers in supporting member banks as well as the banking situation in the district generally, and during which its facilities could be made useful in a broad way throughout the area under its jurisdiction. Beginning, as it did, with a period of hesitation, the year developed many serious and unusual problems, and will be remembered as one which created an unlooked-for and unusual expansion in all departments, bringing the bank for the first time into close and intimate contact with all banks, both member and nonmenber, within this district, and imposing upon it responsibilities arising out of the services it rendered, which were of a particularly important character.1 FINANCIAL RESULTS OF OPERATION. There is attached hereto as Schedule 1 a comparative statement of condition at the close of 1917 and at the close of 1918, together with profit and loss account, December 31, 1918. The gross earnings for the year arising out of the largely increased volume of business amounted to $2,049,954.80. Operating expenses were $325,269.80. The cost of Federal Reserve notes and Federal Reserve bank notes printed during the year was $125,021.66, in addition to which the current assessments for expenses of the Federal Reserve Board were charged to expense. Total operating and current expenses were $464,408.23, leaving an excess of earnings over current expenses amounting to $1,585,545.84. 1 There are appended to this report the following schedules: Schedule 1, Comparative statement of condition at the close of 1917 and 1918, and profit and loss account, Dec. 31, 1918; Schedule 2, Gross earnings by months; Schedule 3, Changes in discount rates; Schedule 4, Details of rediscount operations; Schedule 4a, Volume of rediscounts; Schedule 5, Collateral loans; Schedule 6, Trade acceptances; Schedule 7, Domesticacceptances bought; Schedule 8, Acceptances purchased; Schedule 9, Rediscounts for other Federal Reserve Banks; Schedule 10, Data on offerings of certificates of indebtedness; Schedule 11, Government deposits for 1918; Schedule 12, Subscriptions to third Liberty loan; Schedule 13, Subscriptions to fourth Liberty loan; Schedule 14, Bond issue data, 1918; Schedule 15, Bonds delivered, 1918; Schedule 16, Warsavings and thrift stamp sales; Schedule 17, Check clearing statistics; Schedule 18, Federal Reserve note issues and data; Schedule 19, Federal Reserve bank notes; and Schedule 20, Gold holdings of Federal Reserve agent and Federal Reserve Bank. Under authority of the Federal Reserve Board, the bank was permitted to charge off the balance on the construction of its main vault, amounting to $29,500, and abrasion on gold received from member and nonmember banks amounting to $10,199.23. Dividends fully paid on December 31 amounted to $168,102.97. Out of the substantial remainder, the bank was able to transfer $688,871.82 to its surplus account, pursuant to law, while transferring an equal amount to special account reserved for franchise tax. Capital and surplus at the end of the year represented the satisfactory total of $3,657,571.82, as against $2,620,150 at the close of the previous year. GENERAL BUSINESS AND BANKING CONDITIONS. The unusual conditions attending the advent of 1918 produced reactions which were strongly felt in all lines of trade and industry and which have not yet entirely disappeared. The momentous events attending the progress of the war produced a natural hesitation in merchandising activities everywhere, resulting almost immediately in the adoption of a well-defined "hand-to-mouth" policy, under which retail stocks were reduced to the minimum requirements and replenished by small and frequent purchases. This resulted in sharply fluctuating and irregular demands on all wholesale and distributing concerns. The unending changes in price levels in the earlier part of the year, together with the scarcity of goods, which became more serious as Government requisitions made themselves felt, produced conditions which caused considerable uncertainty in merchandising operations. In industrial lines, also, there was much uncertainty as to the course of the Government in requisitioning the producing capacity of the district. The States of this district were fortunate, however, in having an attractive agricultural outlook, with a promise of excellent planting conditions and good prices for the farm products which are the chief production of this area. Under the influence of a very favorable planting season with adequate moisture, trade conditions became somewhat more settled, and as the Government called increasingly upon the manufacturing institutions of the district for production, directly and indirectly, on account of the war, the business situation steadied perceptibly and continued to show a satisfactory condition throughout the remainder of the year. The very favorable crop outlook during the early part of the growing season was seriously altered in late June and July by the lack of moisture when urgently needed in practically all of the northern and eastern section of Montana and throughout the western portion of North Dakota. Crop yields in the areas referred to were very seriously reduced, while the production of the district as a whole was short of the returns indicated during the spring and early summer months. The money returns were considerably in excess of those of an average year, due to guaranteed Government prices and the heavy demand for coarse and fine grains, live stock, dairy products, and all other items of agricultural production. In the western portion of the district there were large areas where the 1917 crop was short. Fall and early winter conditions in that year practically ruined the available supply of seed corn, and the spring planting season of 1918 brought on a very severe shortage. The Federal Reserve Bank and other interests were obliged to make the closest investigation as to available seed supplies, but by means of energetic cooperation were able to locate and advertise all the seed within the district that could be spared for shipment. By effecting proper distribution, sufficient seed was obtained to plant a normal acreage, and the 1918 crop was very large and of good quality. In common with corn, other seed was also high in price. The demands of the spring planting season put an unusually heavy burden on all commercial banks, reflected in a sharp rise of the rediscounted paper of the Federal Reserve Bank in April, followed by a steady and rapid increase, which continued until after harvest in the fall. With the beginning of the movement of the new crop, there was rapid liquidation, and the amount of rediscounted paper held fell off to moderate figures in December. These conditions, together with unusual demands arising out of the Liberty loans of 1918, subjected member and nonmember banks alike to a much heavier demand than in a normal year, and the banks did not hesitate to use the facilities of the Federal Reserve Bank, both in the rediscount of paper and for short-time loans, thus relieving the strain upon correspondents at the larger centers and making available to the district as a whole a large volume of credit that, except for the facilities of the Federal Reserve Bank, in large part at least, would not have been available. The steady drawing of men for military service produced a severe shortage of farm labor in all parts of the district, while at the larger centers the expansion in manufactures created a steady labor demand. Labor was fully employed throughout the year at excellent rates, and the district was free from labor disturbances. Bank rates steadied during the early part of the year, and after a gradual advance remained very firm and were free from fluctuation during the remainder of the period. Some slight softening was apparent during the closing months of the year, but the rate levels did not appreciably change. DISCOUNT OPERATIONS. Discount rates of the Federal Reserve Bank were altered in harmony with the movement of bank rates during the year. These 100823°-19 40 changes were infrequent and the policy of the bank was to maintain stability, while avoiding too frequent fluctuations, but to preserve at the same time a proper and consistent relation between discount rates and the general level of rates throughout the district. In view of changing conditions, the rate on 30 and 60 day rediscounts was changed on April 8 by an advance of one-fourth of 1 per cent to 43 per cent. The rate on trade acceptances of 15 to 60 days' maturity was advanced, from 3 to 4 and 44 per cent; and the 4 per cent rate on 90-day acceptances was advanced to 4 per cent. Advances were also made in rates for notes secured by Government bonds and collateral notes. No further change was made until September 10, when the 15-day rediscount rate was advanced from 4 to 4 per cent. The 30, 60, and 90 day rates remained unchanged. The 15-day rate on trade acceptances was advanced from 4 to 41 per cent, and the rate on 15-day notes supported by eligible collateral was advanced from 4 to 4 per cent. The total amount of paper rediscounted during January was comparatively small. In February there was a small increase, but in March there was a decrease. With the opening of spring farming operations in April, the total amount of paper rediscounted rose rapidly, the steady advance continuing during May, June, July, and August. There was some falling off in September, followed by moderate liquidation in October and very rapid liquidation in November and December. The service afforded by the discount facilities of the bank was extended to 580 institutions during the year and covered 32,226 separate items, aggregating $433,791,800.07. Collateral loans secured by eligible paper or Government securities assumed, during 1918, considerable importance. The figures remained small during the first quarter, but advanced rapidly under the influence of the second Liberty loan in May, and continued strong until the close of the year. Large advances were made to representative city institutions in anticipation of the fall crop moving and of the pressure resulting from the third Liberty loan following almost immediately and coming in conjunction with the heavy movement of farm products to their markets. The movement of collateral loan totals during the year was practically parallel with the changing volume of rediscounts. A sharp drop in the totals was noticeable during November and December. The accommodation extended during the year amounted to $276,916,606. It is not the policy of the bank to carry separate accounts showing loans upon eligible collateral and collateral loans upon Government securities. Government securities were, however, very freely used by member banks throughout the year, and the volume of loans so |