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CONFIDENTIAL S M A Y OF SPECIAL REPORTS O LOANS TO COMMERCIAL A D INDUSTRIAL U MR N N BUSINESSES Y.ITF MATURITIES OF O E YEAR OR MORE, SUBMITTED BY N WEEKLY REPORTING M M E BANKS IN 101 LEADING CITIES E BR (Preliminary) June 1 , 1939 I t should be bcrne in mind that the reports cover only such loans as are represented by notes with maturities of one year or more; they do not include advances on notes given f o r shorter periods or on demand notes even i f the banks and the borrowers have an understanding t h a t , in the absence of unforeseen developments, the advances w i l l be extended for periods of a year or more. Furthermore, t h i s i s the f i r s t time data of t h i s type have been asked f o r , and i t is quite probable that a l l of the banks have not interpreted the questionnaire uniformly* One large bank stated that i t was impracticable f o r i t to segregate i t s small business loans from other loans made by the personal loan department. If other banks had the same d i f f i c u l t y the number of loans as reported may be considerably understated. It i s b e l i e v e d , however, that the d o l l a r amount of loans as reported represents a f a i r picture of the volume of loans extended t o commercial and industrial businesses on notes with maturities of one year or more. N M E A D ORIGINAL O FACE A O N OF LOANS TO COMMERCIAL AND INDUSTRIAL U BR M R MUT BUSINESSES ITF MATURITIES OF O E YEAR O MORS HELD O APRIL 19. 1939* N R N BY ABOUT UOO WEEKLY REPORTING MEMBER BANKS IN 101 LEADING CITIES Number of loans Installment loans Non-installment loans Total Size of loans; Less than $100,000 $100,000 t o $999,909 $1,000,000 and over Maturities of loans: 1 year or more but less than 3 years 3 years or more Amount 21,800 2,800 $950,000,000 Ii.60,000,000 2l<,600 1,L10,000,000 22,600 170,000,000 ij.50,000,000 790,000,000 113,000 l.]20,000,000 990,000,000 1,700 300 6,600 Examination of the reports and data compiled therefrom shows that — 1. Of the t o t a l commercial, i n d u s t r i a l , and a g r i c u l t u r a l loans of weekly reporting member banks outstanding on April 19, 1939, nearly $1,000,000000 or about 25 por cent had a maturity when o r i g i n a l l y iiiade of one year or more. In a d d i t i o n the banks held on the same date about $175,000,000 of loans secured by r e a l estate made t o commercial and i n d u s t r i a l businesses. B-1239 2« The o r i g i n a l or f a c e amount of these intermediate and l o n g term loans to commercial and i n d u s t r i a l businesses was $1,1.1.00,000,000. Of t h i s t o t a l , somewhat more than 50 per cent represented loans made by New York City banks; in f a c t , 6 banks in New York and 6 outside of New York accounted f o r $860,000,000 of the t o t a l . 3. Of the approximately I - O weekly reporting banks, 65 reported 4O no intermediate or long-term loans t o commercial or i n d u s t r i a l businesses, and 70 reported l e s s than 5 such l o a n s . As p r e v i o u s l y pointed out, however, some of the banks have extended a s u b s t a n t i a l volume of such c r e d i t on the b a s i s of demand or short-term n o t e s . II. The t o t a l number of intermediate and long-term loans reported by the weekly r e p o r t i n g banks was approximately 2i).,600. Of t h i s t o t a l , L 0 \ per cent represents loans by the 9 banks which reported 500 or more loans. The i n d i c a t e d c o n c e n t r a t i o n in the number of loans doubtless i s due in part t o d i f f e r e n c e s in methods of reporting"". Some banks, f o r example, may have considered that a l l notes discounted under a s i n g l e l i n e of c r e d i t c o n s t i t u ted one loan, while other banks counted each customer's, note discounted f o r a borrower as a separate loan. At l e a s t one bank, a l s o , excluded small business loans made through i t s personal loan department. 5. Of the 2lj,600 intermediate and long-term l o a n s , about 22,600 amounting t o $170,000,000 were f o r l e s s than $100,000 each, approximately 1,700 amounting t o $[£0,000,000 were f o r $100,000 or more but l e s s than $1,000,000, and about 300 loans amounting t o $790,000,000 were f o r $1,000,000 or more. 6. The average s i z e of the loans in the group of loans of l e s s than $100,000 each was $7,000, and ranged from $[j00 t o $20,000 at the 9 banks which reported 1>0 per cent of these l o a n s . 7 . About 75 per cent of the t o t a l number of intermediate and. l o n g term loans t o commercial and i n d u s t r i a l businesses matured in l e s s than three y e a r s , but measured in d o l l a r s only 30 per cent matured in l e s s than three y e a r s . At New York banks, about 50 per cent of the number and 25 per cent of the d o l l a r amount had maturities of l e s s than three y e a r s . Apparently the large l o a n s , made mostly by the New York banks, are f o r longer maturities than the small loans made mostly by banks outside of New York. 8. Approximately 90 per cent of the t o t a l number and 67 per cent of the d o l l a r amount of loans wore made on an installment or amortization b a s i s . 9* About 800 of the loans wore made in p a r t i c i p a t i o n with other banks (some apparently in p a r t i c i p a t i o n with the R e c o n s t r u c t i o n Finance Corporation or the Federal Reserve banks). 10. Approximately 100 of the 1;00 weekly r e p o r t i n g banks ansv/ercd a f f i r m a t i v e l y the question whether or not they knew of any commercial or i n d u s t r i a l b u s i n e s s e s , in the t e r r i t o r i e s served by the r e s p e c t i v e banks, which had requested but were unable t o obtain intermediate or long-term c r e d i t f o r working c a p i t a l or other purposes. Nearly a l l of these 100 banks indicated that there was no reasonable- basis f o r bank c r e d i t in the cases coming t o t h e i r a t t e n t i o n and that what was needed in most cases was equity c a p i t a l . Poor earnings and unfavorable prospects were the p r i n c i p a l reasons given why bank c r e d i t could not be extended. B-lc09