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APRIL, 1950 Volume X X X I I Number 4 Drifting Dollars At the end of January, 1950, demand deposits of individuals, partnerships and corporations* at all Eighth District banks totaled $4.2 billion, or vir tually the same as a year earlier. But while the district total remained unchanged, the year pro duced changes in demand deposit volume held in the different regions of the district and held by different types of owners. In general, banks in the district's metropolitan centers gained funds and those in rural areas lost funds. Holdings of nonfinancial busi nesses and of farmers declined, while those of finan cial businesses and of individuals (other than farm ers) increased. In broad outline, these are the principal findings of the most recent survey of demand deposit owner ship, conducted by the Federal Reserve Bank of St. Louis with the cooperation of some 200 commercial banks in the Eighth Federal Reserve District. FACTORS IN DEPOSIT CHANGES Previous articles on deposit changes, in geographic location and in ownership, have noted that the total amount of bank deposits in the United States changes mainly in response to changes in (1) bank loans and investments, (2) the amount of monetary gold or silver, and (3) the amount of currency out standing. But without any change in the total amount of deposits in the nation, there can be shifts of funds from one location to another or from one owner to another. Or, if the national total varies, different regions or owners can experience greater or smaller variation than that occurring nationally. *U nless otherwise noted, “ demand deposits” or “ private demand de posits*’ will be used throughout this article to denote “ demand deposits of individuals, partnerships and corporations” (reported in line 13 of Call R eport). There are two principal factors behind these geo graphic or ownership shifts. First, and probably more important, is the income-expenditure pattern in the different regions or different owner classes. Second, is the preference of individuals and busi nesses for particular forms in which they hold their liquid assets. The first factor— income-expenditure pattern— influences deposit holdings in a region, or by a cer tain type of owner, as follows. Over a period of time, the people of a particular region receive a certain amount of income, which is available for taxes, for spending, and for saving. If tax pay ments and expenditures are less than income, the balance goes into savings and a part of these savings is held in the form of liquid assets. If taxes plus expenditures exceed income, some previously acquired liquid assets may be used to make up the difference. Liquid assets are usually defined as currency, bank deposits, and U. S. Government securities. It is possible, of course, to have income exceed expendi tures plus taxes and have no change occur in liquid assets— in other words, to have all savings flow into other uses than building up liquid assets. Or, it is possible to have an increase in liquid assets and to have no change in deposits— the addition could be in currency or Government securities. Ordinarily, however, if there is a difference be tween income and expenditures (including taxes), there will be a change in liquid assets and a change in that portion of liquid assets that are bank deposits. And since demand deposits of individuals, partner ships and corporations constitute a substantial and a volatile portion of total bank deposits, changes in the income-expenditure pattern tend to be reflected in somewhat similar changes in such deposits. The variation in private demand deposits will not parallel fully the variation in income relative to expenditure, but the correlation ordinarily will be fairly good. One additional point should be noted in consider ing geographic and ownership changes in demand deposit levels. There are seasonal factors that influ ence deposit levels both geographically and by type of owner— in other words, the flow of income and expenditure varies over the course of a year among different regions and among different types of own ers of funds. For example, in the Eighth District, where agricultural income constitutes a much more important part of total income than it does in the entire nation, the flow of income to farmers has a pronounced seasonal movement and is much heavier in the periods when the big cash crops such as cotton, tobacco and livestock are marketed. Farm ers* expenditures also have some seasonal character istics, although probably not as pronounced as in come. As another example, crop harvests in the South usually come earlier in the year than those in the North. This seasonality also extends to other lines of business. Deposit Ownership Surveys HISTORY AND DESCRIPTION OF THE SURVEYS—The Federal Reserve System began this series of surveys of demand deposit ownership in 1943. A number of member arid some nonmember banks participate in the surveys on a voluntary basis. Nearly all large banks and enough smaller banks participate to provide a satisfactory sample of ownership of all private demand deposits. The result, districtwise and nationally, is a breakdown of individ ual, partnership and corporation demand deposits—com prising 80 per cent of all demand deposits—into five broad categories: Those owned by domestic business, by individ uals, by nonprofit institutions, by foreigners, and the trust funds of banks. The first two of these are still further subdivided. Personal accounts are separated into deposits of farmers and others, and the business deposits group is divided into six classifications plus the indication as to whether or not the owner is a corporation. REASON FOR THE SURVEYS—Deposits are clas sified in call reports—and for many of the larger banks, in weekly reports—in two ways: by type of owner—Govern ment (United States and state and local), bank, or individ ual, partnership and corporation—and by availability— demand and time. However, no information is provided about the make-up of the major item—demand deposits of individuals, partnerships and corporations. The deposit ownership surveys attempt to fill this gap, at least partially, and to measure, the changes in ownership from year to year. This information may be used along with other known and measured economic facts to make more precise judgments as to future deposit movements. USE OF SURVEY RESULTS—Obviously, information on private'demand deposit ownership is most useful when it is combined with other data relative to banking. But, by itself, the data are some real use. From the basic information obtained it is possible to measure the dollar and per cent change in the volume of deposits owned by each of the 11 groups for the period covered, to measure the same type of changes in deposits as between corporate and noncorporate business in each of the six business classifications, arid finally to compare the changes for any classification or group with changes for preceding periods of time back to 1944 and in some cases to 1941. Deposit survey facts, recording the cash balance posi tions of the 11 groups of owners, may be used to confirm and make more exact tentative conclusions drawn from other data. For example, from January, 1948 to January, 1949 depbsits of unincorporated firms declined more rapidly than deposits of corporations, not only in the aggregate but also for nearly every category of business. This evi Page 50 dence tended to set forth more exactly what had been developed independently from other data, viz., that the small enterprise had been appreciably affected by the business readjustment. As another example: the drop in net farm income in 1949, coupled with continuing com mitments to pay on machinery and land purchased, sug gested that demand deposits held by farmers were being reduced. The 1950 deposit survey affirms this, and, further, provides a more precise measurement of the reduction. It is useful to know that in a free market supply will be “greater than last year'*, but it is still more useful to know that supply will be “ 10 per cent, or 20 per cent, or 30 per cent greater than last year”. So with the deposits of farmers—measurement of the change provides anyone who uses the data in any connection with a sharper tool—and every business, every banker, and every prudent individual weighs present evidence in order to come to some conclu sion as to future events. Also, the surveys enable those interested to explain better any shifts in deposits from region to region. The Board of Governors of the Federal Reserve System, each of the Federal Reserve Banks, many banks and .busi ness research organizations, and students—high school and college level—use the information developed in the surveys. The survey data are being found useful by an increasing number of banks as a market research tool, gauging the volume of deposits in any one of the 11 categories in the individual bank against the volume available to other banks in similar economic situations and with similar over-all deposit volumes. Further, because the rate of turnover tends to differ among the deposits of various types of hold ers, banks have found survey data useful in measuring their probable gain or loss of deposits and, therefore, they have found it valuable in formulating their investment programs. The question of getting information on a particular sub ject usually comes down to consideration of getting all of the detail that would be useful regardless of effort and cost, and getting the optimum detail consonant with rea sonable effort and cost. The surveys represent compromise between further detail as to ownership than is now provided and the effort and cost of providing even more detailed data. The 11 principal classifications were developed because the economic factors affecting changes in any one of these categories tend to be different from the factors affecting another category. As noted, information provided by the surveys on deposit ownership will not provide all of the answers to all of the questions in banking, but it throws more light on an important area. TABLE I DEM AND D E P O S IT S A L L B A N K S IN OF IN D IV ID U A L S , P A R T N E R S H IP S AND C O R P O R A T IO N S E IG H T H F E D E R A L R E S E R V E D IS T R IC T B Y A R E A S Indexes 1 9 4 1 = 1 0 0 D ec. 31, 1941 D ec. 31, 1945 D ec. 31, 1948 D ec. 31, 1949 1945 1948 1949 $ 558.2 137.4 89.4 30.5 29.9 $ 891.2 271.0 194.0 74.6 75.6 $1,138.3 323.9 258.8 84.8 91.6 $1,181.4 311.6 264.8 88.0 92.3 160 197 217 245 253 204 236 289 278 306 212 227 296 289 309 Total— Metropolitan A reas................................. $ 845.4 $1,506.4 $1,897.4 $1,938.1 178 224 229 $ $ $ XI X II X III B ast Mississippi’ Tennessee.............................. Kentucky-Indiana......................................... ......... 124.5 36.6 92.6 58.3 67.5 132.5 37.9 118.0 $ x St. Louis O utlyin g............................................... Louisville O utlying............................................... N orth Missouri............................................... ......... O zark............................................................................ South Arkansas...................................................... 424.8 113.4 319.5 223.0 233.3 415.2 140.9 454.2 298 290 314 386 333 260 398 362 349 333 350 390 366 332 416 404 341 310 345 383 346 313 372 385 Total— Rural A reas.............................................. Total— D istrict.............................................. .......... $ 667.9 $1,513.3 $2,324.3 $4,262.4 321 241 364 286 348 282 D ollar Am ounts (in millions) I II III IV v VI V II V III IX St. Louis.................................................................... Louisville..................................................................... M emphis...................................................................... Little R ock................................................................ Evansville.................................................................... If the timing and extent of the seasonal move ment were just the same each year, it would be possible to compare demand deposit levels in any one region on a certain date with the same date a year earlier and get a close measurement as to whether the region was tending to gain or lose funds in that period. Actually the timing is not that exact; the cotton harvest, for example, may be a little earlier or a little later than usual in any given year. And also the crop may be larger or smaller than usual. This may be illustrated by demand deposit be havior in the Eighth District in the past three years. Private demand deposits at the end of January were lower than a month earlier in 1948, 1949 and 1950, but the apparent seasonal drop varied being $180 million, $135 million and $78 million, respectively. Because of this variation, comparing demand de posits on January 31 in each year shows the 1950 level above that of 1948 and only $7 million below 1949. Using December 31 totals shows demand deposits at the end of 1949 below those at the end of 1948, which in turn were lower than at the close of 1947. Against the background noted above, the most likely conclusion to be drawn about district demand deposit changes over the past year is that the district as a whole lost a small amount of such deposits but probably the decline was less than 1 per cent. This fractional loss reflects in the main the weakness in farm prices and the greater-thannational-average decline in farm production in 1949. The demand deposit decline, slight as it was, probably overstates the decline in total liquid asset holdings in the Eighth District. Despite lower farm income, total Eighth District income in 1949 appar ently came within 1 per cent of the 1948 amount, and income after taxes was about the same in both 371.5 106.0 291.0 225.3 224.6 344.2 150.8 427.5 $2,140.9 $3,647.3 434.2 121.7 324.5 227.1 247.0 440.5 157.6 476.7 $2,429.3 $4,326.7 years. Currency holdings evidently dropped a little and U.S. Government security holdings (outside banks) went up a little— in both cases, the district change was in line with the national change. Time deposits at district member banks, however, rose about 2 per cent in 1949, in contrast to no change in such deposits nationally. Increased inter est rates paid on time balances in some areas of the district presumably has led to some shift in funds from a demand to a time basis. REGIONAL DEPOSIT SHIFTS While the district as a whole at the end of 1949 showed little change in demand deposits relative to a year earlier, there were shifts in funds among the various areas of the district. The map and Table I give data showing the extent of such changes among thirteen district areas. The dates shown in Table I correspond roughly to the beginning of active par ticipation in W orld W ar II for the United States (December, 1941) ; the deposit peak just after the close of the war (December, 1945) and the two most recent year-end dates. Taken together, the map and table point up the fact that the metropolitan areas gained demand deposits in 1949 while the rural areas lost funds— reflecting the developments in farm income noted earlier. Another way of emphasizing this is to show deposit changes by size of bank. Table II groups the district's 1500 commercial banks into four size classes— size being determined by the amount of private demand deposits held in December, 1945. Of the 1386 banks with less than $5 million in demand deposits, 1281 are located in the rural areas. Deposits at banks in these areas were off 4 per cent from their level at the close of 1948 and each area showed some loss. Page 51 DEPOSIT MOVEMENTS IN 1949 DEMAND DEPOSITS OF INDIVIDUALS, PARTNERSHIPS AND CORPORATIONS. ALL BANKS IN EIGHTH FEDERAL RESERVE DISTRICT. BY AREAS ROMAN NUMERALS INDICATE AREA. ARABIC NUMERALS SHOW PER CENT CHANGE FROM DECEMBER 1 9 4 8 TO DECEMBER 1949. T A B L E XI D IS T R IC T D E M A N D D E P O S IT S B y Size of B ank* D ec. 31, D ec. 31, Dollar (D ollar amounts in millions) 1949 1948 Change Under $1 million..... .(6 5 2 banks) $ 407.1 $ 435.5 $— 28.4 $ l - $ 5 million................ (734 banks) 1,694.6 1,765.3 — 70.7 $ 5 -$ 1 0 million..............( 6 6 banks) 495.9 499.2 — 3.3 $10 million and over..( 37 banks) 1,664.8 1,626.7 + 3 8 .1 E IG H T H Total District $4,262.4 $4,326.7 $— 64.3 Percent Change --6 .5 % — 4.0 — 0.7 + 2 .3 — 1.5 *Size of the reporting bank as of December, 1945 is used in grouping the banks according to volume of deposits in order to improve the com parisons of one year to the other, despite the fact that some shifting into different groups has taken place. The number of banks will vary slightly from the customary count of bank facilities because branch offices and the Arkansas exchange offices are included in the deposit survey tabulations. Page 52 Rural banks received the lion’s share of the de mand deposit growth in the war period. In the first two postwar years, they received diminishing shares of the expansion in such deposits and, in the last two years, suffered losses in demand deposit volume. In the rural areas, the percentage declines in 1949 were greater than in 1948 when the decreases ranged from 2 to 4 per cent. The area of greatest loss in 1949, Area X II, showed an 11 percent decline for the year. Some of the variations in the loss of demand deposits by the banks in the eight rural areas can be explained, in part, by the different types of agricul ture practiced in each and by the variation in relative importance of farm income and labor income to total income among the eight areas. The Delta region, heavily dependent upon cotton production, showed a 6 percent loss in demand de posits for the year 1949 as did the South Arkansas area. A 5 percent decline in area X III (amounting to slightly over $22 million in deposits) was occa sioned primarily by losses at the smaller banks in western Kentucky. The small banks in Indiana lost some demand deposits but generally fared better than those in western Kentucky. The shrinkage in demand deposits in area V II was likewise attributa ble to losses at banks under $5 million in deposit size. The banks in the St. Louis Outlying region and the Ozark region reported relatively less decline than the other rural areas, reflecting less dependence upon one crop and probably somewhat greater diver sification of industry. Northwest Missouri fared the best of all the rural areas, being off less than 2 per cent. Agricultural income in these counties, em phasizing livestock rather than crop production, suffered less than in the Delta region. In contrast with the loss of demand deposits in these rural areas, the metropolitan areas (I through V ) gained 2 per cent during the year. The growth in deposits at the banks in the metropolitan areas— for the most part, the larger banks— reflects the steadiness of noncorporate business incomes and wage and salary incomes in 1949 in comparison with these incomes in 1948. For the country as a whole, despite the recession in the first half of 1949, total wages and salaries paid in the year remained virtu ally unchanged from 1948. Likewise, business, pro fessional and rental income of individuals showed very little decline in 1949. Corporate profits after taxes were off in 1949, but corporate bank balances might have been expected to stay up despite this, since requirements that would absorb liquid funds were not so large. For example, adjustments could be made in inventory valuation and in actual physical inventory held. Also tax liabilities were smaller. While the income factors pointed generally to gains in demand balances at city banks, and such occurred, the differences in income-expenditure pat terns led to variation in demand deposit growth in the district’s five urban centers. Gains were most pronounced at St. Louis, Little Rock and Memphis. Evansville showed a small increase and Louisville a decrease, reflecting the greater impact of the 1949 DEMAND DEPOSITS EIGHTH DISTRICT BANKS AT OWNERSHIP PATTERN, 1946-1950 Billions of Dollars 5 Billions of Dollars MANUFACTURING AND MINING OTHER NONFINANCIAL FINANCIAL (Including trust funds and foreign) NONPROFIT PERSONAL * FARMERS PERSONAL * OTHER THAN FARMERS FEB. 1947 JAN. 1948 JAN. 1949 downturn in those cities’ industries and employ ment. SHIFTS IN DEPOSIT OW N ERSH IP Table III presents data on demand deposit owner ship in the Eighth District. Such changes as occurred bear out the broad analysis noted earlier. Farmers’ deposits were down as were those of non financial business as a group. The major declines were in public utility and trade balances. Financial business accounts were up as were those of individu als other than farmers. Trust fund balances de creased but those of nonprofit organizations rose somewhat. TABLE III O W N E R S H IP O F D E M A N D D E P O S IT S O F IN D IV ID U A L S P A R T N E R S H IP S A N D C O R P O R A T IO N S Eighth Federal Reserve District (D ollar amounts in millions) Change in Jan. 31, 1950 Jan. 31, 1949 R Ownership Am ount Percent Am ount Percent Am ount Percent Total Business ........... $1,889.2 Nonfinancial ........... 1,647.0 Manufacturing and M ining ................ . 528.3 Public Utilities...... 143.1 Trade ....................... 747.9 Other nonfinancial 227.7 Financial .................. 242.2 Insurance Companies 66.1 A ll Other Financial 176.1 Trust Funds of banks 50.5 Other ............................ 1,489.0 4 5 .2 % 39.4 $1,983.7 1,763.9 4 7 .3 % 42.1 12.6 3.4 17.9 5.5 5.8 1.6 4.2 1.2 ** 535.9 179.6 821.2 227.2 219.8 58.0 161.8 54.8 12.8 4.3 19.6 5.4 5.2 1.4 3.8 1.3 3.7 49.9 14.3 35.6 154.8 1,998.3 622.0 1,376.3 3.7 47.7 14.9 32.8 $— 94.5 — — 116.9 — — — — 7.6 36.5 73.3 0.5 22.4 8.1 14.3 — 4.3 0.1 2.3 89.2 — 23.5 112.7 — 7.2 5« 7 —1 — 20 — 9 * 10 14 9 — 8 — 1 4 4 8 # R — Revised *— Less than 0 .5 % * * — Less than 0 .0 5 % Page 53 to business accounts in banks in the sanie areas. The 1950 survey points to a different conclusion. Farm ers’ deposits at the rural banks declined, but so did business balances— the latter by a greater percent age and more dollars than those of farmers. In other words, the flow of funds from the rural regions was general and not confined to farmers. Corporate Deposits— Demand balances, due to cor porations were off slightly at* the end of January, 1950 relative to a year earlier. Manufacturing and mining corporation accounts were up 1 per cent and miscellaneous business deposits (mainly those of service industries) were up 16 per cent. Corpora tions doing a wholesale or retail trade business experienced a 10 per cent decline, and public utility balances were off 15 per cent-—the latter probably reflecting the very extensive building program underway by these industries. Demand deposits of financial business corporations were up appreciably. Farmers’ Deposits— The decline in farmers’ bal ances in the year was more moderate than the drop in farm income would indicate— in fact, was smaller in per cent and in dollars than the decrease a year earlier. It was concentrated in the small banks (under $1 million in demand deposits). On the basis of such evidence as the survey de velops on ownership by size of account, the decline in farmers’ demand balances seems to indicate that the smaller owner-operator has suffered more from the farm income decline than has the larger-scale operator. Or perhaps the income decrease has hit larger, medium, and small farm operators with about equal intensity, but the larger operator has been better able to balance his income loss with curtailed expenditures. In 1949, the ownership survey indicated that most of the funds transferred from farmers’ and other personal accounts in the rural banks in 1948 shifted DEMAND DEPOSITS AT EIGHTH DISTRICT BANKS MAJOR JANUARY TOTAL $138 CHANGES 31, 1950 COMPARED INCREASE MILLION O W N E R S H IP WITH JANUARY TOTAL $145 NET Page 54 IN DECREASE $7 MILLION 31, 1949 DECREASE MILLION In contrast to this experience, unincorporated businesses, in general, showed demand deposit de clines—-January, 1950 against January, 1949— the total being off about 9 per cent. Most of this drop was in the rural banks, reflecting some of the factors noted earlier. Individuals’ Deposits— Demand deposits of indi viduals (other than farmers) increased about $113 million in the year ending January 31, 1950, about half in the rural banks and half in the urban institu tions. W ith nonfarm personal income up in 1949, some modest growth in such accounts was to be ex pected. TABLE IV O W N E R S H I P P A T T E R N F O R D E M A N D D E P O S I T S O P $1000 A N D O V E R IN B A N K S W I T H D E M A N D D E P O S IT S O F L E S S T H A N $1 M I L L I O N January 31, 1950 Percentage Distribution Area Area Area D is V I V I I I X I I I trict T otal Business............................ ............................................ 26.3 16.3 24.2 15.5 Nonfinancial Business...... ............................................. M anufacturing and M in in g.............................. 3.3 0.6 Public Utilities........................... ................................... 1.6 0.5 Trade....................... ......................................................... 16.7 9.0 Other Nonfinancial .................................................. 2.6 5.4 Financial B usiness...................... ................................... 2.1 0.8 Insurance Companies ............................................. 0.9 0.4 A ll Other Financial.................................................... 1.2 0.4 Trust funds.......................................................................................................... Nonprofit.......... ............... ............... .>...... ......................... *.... 2.5 .0.6 Personal...................................................................................... 71.2 83.1 Farm ers..............„ . . . . . . ^ ..................................................... 31.8 4 4:6 O ther....................................................................................... 39.4 38.5 Percent of total classified................................................... 76 75 21.1 2 0.4 4.5 1.2 12.8 1.9 0.7 0.1 0.6 0.3 3.8 74.8 32.3 42.5 71 24.1 22.6 4.7 1.3 13.4 3.2 1.5 0.4 1.1 0.1 4.3 71.5 28.9 42.6 76 REGION AL DIFFERENCES IN OW N ERSH IP The pattern of demand deposit ownership in the Eighth District differs appreciably from that for the country as a whole. For example, business balances in Eighth District banks represent less than half of private demand deposits in contrast to almost 60 per cent of the total for the nation. Generally speaking, all types of business deposits, except those of trade establishments, are relatively more important in the national deposit structure than in that of the district. Farmers’ deposits here are about one-seventh of all demand deposits while nationally they are less than 10 per cent of the total. Ownership patterns also vary among the different regions of this district and among the different sizeclasses of banks. T o get a complete picture of own ership in each of the thirteen regions of the district and for each size-group of banks in each region, how ever, would require a much more extensive sample of reporting banks than currently used. But it is pos sible to show some data on ownership by size of bank for a few regions. Tables IV and V present ownership patterns for some of the rural areas for the two smaller sizeclasses of banks. Not all private demand deposits are classified as to ownership in the surveys. The smallest banks (less than $1 million in demand deposits) classify by owner-type all balances of $1000 or more. The next size-class ($l-$5 million) classifies balances above $3000. The tables show the ownership pattern just for the deposits classified. TABLE V O W N E R S H I P P A T T E R N F O R D E M A N D D E P O S I T S O F $3000 A N D O V E R IN B A N K S W I T H D E M A N D D E P O S IT S O F $ l-$ 5 M I L L I O N January 31, 1950 Percentage Distribution Area Area Area Area Area Area DisV IV III IX X X I X III trict Total Business----------- ------------------ 4 6.2 36.8 41.8 42.5 40.3 39.0 44.7 Nonfinancial B usin ess..............42.6 33.3 38.6 39.8 35*3 35.9 39.9 M anufacturing and M ining. 10.6 6.0 6.2 17.0 3 .6 7.1 8.3 Public Utilities....................... .. 3.9 2.1 5.3 2 .0 3.4 2 .4 3.1 T rade............................................2 0 .8 19.1 23 .9 18.8 2 4.3 19.6 22.0 Other nonfin ancial............... 7.3 6.1 3.2 2.0 4.0 6.8 6.5 4 .8 Financial Business.................... - 3 .6 3.5 3.2 2.7 5.0 3.1 0.4 0 .6 0.9 0.4 0.1 0.2 0.2 Insurance Companies...... . 4.4 A ll Other Financial............... 3.0 2.6 2.8 2.6 4 .8 2.9 0.3 T rust funds........................................... 0.2 0.2 .... 0.1 0.1 0.7 3.4 5.9 1.9 3.5 2.7 2.1 Nonprofit............................................... 3.6 Personal...................... ...........................50.0 57.1 56.3 53.9 56.9 58.2 51.6 Farm ers............................................. 16.0 2 3 .6 19.6 10.1 21.3 2 4 .9 17.4 Other............................ .....................34.0 33.5 36.7 4 3.8 3 5 .6 33.3 34.2 Percent of total classified...............59 53 49 53 68 47 59 It would be more useful to have this data for all areas and all size-classes and with all deposits classi fied. But the patterns given in the table, even with their limitations, should be more useful to banks in general than totals for the entire district or for the nation as a whole. W ith such patterns, the indi vidual bank can more closely compare its pattern against the average for banks of the same size-class in the same area. In future surveys, more effort will be devoted to building up these regional patterns by size of bank. W m. J. Abbott, Jr. Norma B. 'Lynch Page 55 Member Bank Earnings The year 1949 will be entered in the pages of banking history as a very profitable year for Eighth District member banks. Gross earnings (before payment of any expenses) reached an all-time high. Operating costs also reached their peak but the rate of increase was smaller and banks had left larger net current earnings than before. After pay ing income taxes, setting up reserves for bad debt losses on loans, and taking care of charge-offs (or recoveries), they still had left a larger amount as net profits than in 1948, although not as much as in the peak year 1946. The all-time high in gross earnings of $113 million reached in 1949 topped by $6.9 million the previous peak reached in 1948.1 It was more expensive to operate a bank in 1949 than in 1948 and $3.2 million, or 46 per cent of the increase in gross earnings, was absorbed in higher operating costs. But despite increased costs, net current earnings were larger than in 1948— by $3.7 million-^-and, when nonoperat ing income was added in, profits before income taxes showed an increase of $5.4 million. The banks paid $1.4 million more in income taxes and thus finished the year with net profits after taxes that were up $4.0 million from 1948. The chart shows total earnings, total expenses, net current earnings, and net profits for the period 1939 through 1949. Total earnings and expenses both climbed during this period but expenses in creased by a smaller amount. As a result, net current earnings show a steady gain. Profits (after net charge-offs or recoveries, income taxes and reserves) increased through 1946, dipped in the next two years but moved up again in 1949. Changes in Earning Assets—-Total assets held by Eighth District member banks increased each year from 1939 through 1946. After declining some what in 1947, they rose again in 1948. On the basis of the average of the three call reports used in this study, total assets in 1949 apparently were slightly smaller than in 1948—$5,067 million as against $5,085 million. Earnings of banks depend upon the amount of total assets, the proportion of these assets used to produce income, and the rate of return earned by 1 F i g u r e s and percentages used throughout this article are taken from the study of member bank operating ratios, an annual report issued by this bank. In computing the aggregates and the ratios, the asset and liability items used represent averages of figures from the call reports of December 31, 1948, June 30, 1949 and Novem ber 1, 1949. learnings and expense items are those reported for the calendar year 1949. Ratios are arithmetic averages of individual ratios of 492 member banks grouped in eight deposit-size classes. Ratios computed in this way differ in some instances from ratios computed from aggregate dollar amounts. A copy of the study may be had by writing the Research Department. Page 56 them. During the war years Eighth District mem ber banks, like other banks, invested heavily in Government securities. By 1946 more than half of their total assets was held in this form. While these holdings were increasing, the proportion of total assets in loans was shrinking, and at the low point in 1945 only one-eighth of the banks’ assets was in loans. Since 1939, cash assets have repre sented a fairly high proportion of the total. At their peak in 1942 they accounted for 39 per cent of member bank assets. Since the end of the war, there has been a pronounced shift in the proportion of Governments, loans, and cash assets held by the district’s member banks. Loan demand increased steadily and at the same time the Treasury’s debt retirement program reduced the volume of securities eligible for bank investment. As a result, the proportion of assets held in the form of loans increased but the propor tion held as investments decreased. There was also a shrinkage in cash assets relative to the total. The shift continued in 1949. Last year the aver age Eighth District member bank had 42 per cent of its assets in Governments, 7 per cent in other securities, and 25 per cent in loans. Cash assets represented 25 per cent of the total, and miscel laneous items accounted for the remaining 1 per cent. SELECTED EIG H TH EARNING D IS T R IC T REPORT ITEMS M EM B E R BANKS 1 9 3 9 -1 9 4 9 Millions of Dollars Millions of Dollars PERCENTAGE DISTRIBUTION OF ASSETS BY DEPOSIT SIZE GROUPS EIGHTH D IS T R IC T MEMBER BANKS 1949 Per Cent Per Cent 1 3 2 4 6 5 DEPOSIT mn BBSS GOVT. SECURITIES OTHER SECURITIES MWM LOANS E3 CAS* □ OTHER ASSETS 7 S IZ E 8 GROUPS UNDER $ 5 0 0 ,0 0 0 i. $ 5 0 0 ,0 0 0 TO *1 1 $1 MILLION TO $2 4 *2 MILLION TO $5 & *5 MILLION TO $10 6 $10 MILLION TO $25 7. $25 MILLION TO $50 . OVER $ 5 0 MILLION 9. DISTRICT 2. 8 9 MILLION MILLION MILLION MILLION MILLION MILLION ASSETS On the average, banks in all deposit-size groups had a higher proportion of total assets in the form of earning assets in 1949 than in 1948, although the proportion varied among the different depositsize groups. Banks with the largest proportion of total assets held as earning assets were those in the group with deposits between $10 million and $25 million, and those with the smallest proportion of earning assets were in the group having less than $500,000 in deposits. All groups of banks, except one, had a smaller proportion of total assets in the form of Government securities and a larger proportion in loans to cus tomers in 1949 than in 1948. The exception was the group of banks with average deposits of more than $50 million; these increased their share of total assets held in Government securities and reduced the share held in loans. Despite this shift in proportions, in 1949 the large banks still held less of their total assets in Governments and more in loans than any other group except the very small banks. In dollar amount, security holdings last year were roughly twice as large as loan volume, but earn ings from Governments provided less income than that from loans. The average interest rate on Government securities tends to be lower than the average rate of return on other securities, which in turn is lower than it is on loans. The average rate earned on Governments last year was 1.8 per cent; on other securities it was 2.7 per cent; while on loans the return averaged 5.5 per cent. Because of the higher rate of return, loans con tributed slightly more than one-half of total earnings in 1949, although they represented only one-fourth of total assets. The lower rate of return on Gov ernments and other securities resulted in just 37 per cent of total earnings coming from such assets. Earnings from service charges, income from trust departments and real estate divisions, and all other earnings accounted for 11 per cent of total earnings in 1949. Disposition of Earnings — Operating expenses absorb the largest proportion of total earnings of district member banks. Last year they totaled $3.2 million more than in 1948— but because earnings increased more, operating costs took a slightly smaller proportion of total income. Out of each dollar of earnings last year, 60 cents was required to operate the banks. Of this amount, 29 cents was used to pay salaries and wages to offi cers and employees— a slightly higher proportion than in 1948. Interest paid on time deposits took another 8 cents— about the same as in 1948. In dollar amount, interest payments rose last year as a number of banks liberalized their policies relative to time deposits. In most size-groups, however, the increase was smaller than the gain in gross earnings. The only exceptions were banks in the two groups with average deposits under $1 million and thpse in the $10 million to $25 million group. In these instances, time deposit interest payments took a larger pro portion of gross earnings last year than in 1948. The remaining 23 cents of operating expense per dollar of gross earnings covered fees to directors and committee members, interest on borrowed money, taxes other than those on income, recurring depreciation, and miscellaneous operating expenses. These costs took a smaller part of total income last year in all groups of banks except those with deposits of $500,000 to $1 million. After paying operating expenses, the district’s member banks had left, as net current earnings, almost 40 cents out of each dollar of grass earnings. This was a little better than in 1948. Banks with average deposits of $1 million to $10 million con verted more of their gross into net current earnings than those in other size-groups did. On the other hand, banks with deposits under $500,000 showed Page 57 SOURCES AND DISPOSITION OF THE INCOME DOLLAR OF EIGHTH DISTRICT MEMBER BANKS IN 1949 HOW IT WAS OBTAINED the smallest proportion of total earnings after operating expenses. This group of very small banks, however, was successful in making major reductions in operating costs during 1949. When measured against total assets, net current earnings of district member banks increased from 0.94 per cent in 1948 to 1.02 per cent in 1949. Com pared with total capital accounts, they were off slightly— from 16.0 per cent to 15.9 per cent in 1949 — but this decline reflected an increase in capital accounts. Banks1 net current earnings, of course, are not net profits available to stockholders. Out of these earnings banks make charge-offs for loans and securities (or recoveries, as the case may be), set aside valuation reserves on loans, and pay income taxes. Last year these deductions were equal to 12 cents of each dollar of total earnings. Chargeoffs took nearly 5 cents— as against almost 6 cents the year before—-and taxes on net income absorbed a little more than 7 cents of each dollar of gross earnings. Taxes took fractionally more of each Page 58 HOW IT WAS USED dollar earned in 1949 than in 1948* but the 1948 figure was lower than it normally would have been due to the large reserves established in that year. On the surface, the 5 per cent charge-off rate in 1949 and the 6 per cent rate in 1948 give the impres sion of substantial losses in these two years. Actually this was not the case. The high percentages pri marily reflect a change in accounting procedure in setting up valuation reserves on loans. For years, banks were permitted by Federal tax law to set up “ reasonable reserves” for bad debt losses on loans. It was not until December, 1947, when “ reasonableness” was more clearly defined, that interest in this method of tax accounting became active. Under the accounting method used, trans fers to valuation reserves on loans are included with charge-offs and transfers from the account are included with recoveries. In 1949, district banks increased reserves for bad debt losses by $4 million. The following table shows additions to valuation reserves by deposit-size groups for the years 1948 • and 1949. A D D IT IO N S TO V A L U A T IO N RESERVES ON LOANS EIG H TH DISTRICT MEMBER BANKS 1948-1949 (Thousands of Dollars) B anks with A verage D e p o sits1 $ 1,000,000 or less...... .............................................................. $1,000,000 to $ 2,000,000.................... ................... .......... $2,000,000 to $ 5 ,000,000............ . ............................ ......... $5,000,000 to $ 1 0,000 ,000 ................................................ . $10,000,000 to $ 2 5,000 ,000................................................ $25,000,000 to $ 50,000 ,000......................... ..................... $50,000,000 and over.................. ..................................... A ll District M em ber B anks................................... ......... 1948 14.8 103.5 390.2 531.3 626.0 537.2 3,583.6 $5,786.6 $ 1949 10.0 112.7 324.7 353.3 428.2 445.4 2,376.2 $4,050.5 $ 1 Deposits were averaged from three call reports made on December 31, 1948, June 30, 1949* and N ovem ber 1, 1949. After paying operating expenses and income taxes, making charge-offs on loans, and setting aside reserves, a little less than 28 cents out of each dollar of gross earnings remained as net profit. This represented earnings of 10.9 per cent on total capital accounts and 0.70 per cent on total assets last year. O f this amount, 8 cents was paid to stockholders as dividends while 20 cents was plowed back into the capital structures of the banks. The policy of retaining a large part of net profits in order to strengthen capital structures has been followed rather consistently by banks in the district. The retained portion of profits last year was equal to 7.9 per cent of total capital accounts. This strengthening of the capital structure increased the ratio of capital accounts to total deposits from 6.5 per cent to 7.3 per cent. The ratio hks been as high as 15.5 per cent in 1939 and as low as 6.0 per cent in 1946. Earnings in future years may be higher but 1949 will be remembered by Eighth District bankers as a very profitable year. The banks paid substantial income taxes, more than met increased operating costs, and set aside reserves for possible losses on loans. 1949 will also be remembered as a good year for stockholders who received their usual dividend, and for depositors whose funds were backed by increased capital acounts. E. Francis De Vos Marie Wahlig Survey of Current Conditions The economic outlook for the nation improved with the settlement of the coal strike and the resump tion of operations in that industry. As fuel supplies are restored, production schedules in industries that had been forced to cut back operations are being restored to levels approximating those which pre vailed prior to the strike. In some instances, notably in the steel industry, the recovery has been sizable. Nevertheless, it is likely that several months of highlevel activity will be required to compensate for the production that was lost during the strike. In the Eighth District, this recovery problem prob ably is less serious than it is in many other parts of the country—principally because cutbacks were less abrupt here. Even so, industry in the district no doubt will feel the effects of the strike for some time. This is particularly true where operations are dependent upon steel shapes that are in limited supply. The setback in steel and other heavy goods indus tries pretty much obscured the fact that total pro duction of nondurables in February was close to the all-time peak for these industries. The value of new orders received by manufacturers of nondurables in January was about 4 per cent larger than in Decem ber and a little larger than in January, 1949. The backlog of unfilled orders also moved up in January. In the heavy industries, too, bookings increased in January. In part, this reflected a more favorable near-term outlook for business, but much of the busi ness was placed in anticipation of probable shortages resulting from the coal strike. The total value of new orders received by manufacturers in January was about $1.5 billion more than the value of sales during the month; in December as well as in January last year, sales were larger than new orders. Employment in some manufacturing industries dropped in February, but total nonfarm employ ment held at the January level, according to the U. S. Bureau of the Census, and was larger than it was last February. It is becoming increasingly apparent, however, that even the present high level of economic activity is not sufficient to provide work PRICES W H O L E S A L E P R IC E S IN T H E U N IT E D S T A T E S Bureau of Labor F eb., *50 compared with Statistics F e b ., 50 Jan., ’ 50 F eb., *49 Jan., ’ 50 (1926 = 100) F eb ., *49 + 0 .7 % A ll Commodities.. ....152.7 151.6 158.1 — 3 .4 % 155.3 168.3 + 2.4 — 5.5 Farm Products ....159.1 — 2.9 154.7 161.5 + 1.4 Foods ........... .. ....156.8 — 3.9 145.8 151.8 + 0.1 Other ............. .... ,...145.9 R E T A IL F O O D Bureau of Labor Feb. 15, Jan. 15, Feb. 15, Statistics 1950 1949 1950 (1 9 3 5 -3 9 = 1 0 0 ) 196.0 199.7 U . S. (51 cities).. ,...194.8 204.6 207.1 St. Louis........... ,,..202.9 197.2 196.4 Little R o c k ...... ,...194.5 189.2 183.7 Louisville ......... ,...183.1 203.1 212.2 Memphis ........... Jan. — — — — — Feb. 15, *50 compared with 15, *50 Feb. 15, '4 9 0 .6 % — 2 .5 % 0.8 — 2.0 1.0 — 1.4 0.3 — 3.2 0.5 —- 4.7 Page 59 for all those who are seeking jobs. In February, total employment held at the January level but the number of unemployed persons increased by some 200,000, reflecting an increase of that number in the labor force. As a result, total unemployment climbed to the 4.7 million mark, which was the highest it has been since early in 1942. There apparently was a rise in unemployment in this region in February, according to the available data. The number of unemployment compensation claims in the seven district states was larger than it was in January or in February of last year. Three of the nation’s “ critical areas” are in this district— Mount Vernon, Grab Orchard and Cairo, Illinois. However, this condition is not general in the district. In St. Louis, the claims load declined slightly in February. Consumers in the nation and in this district con tinue to maintain their expenditures at a high level. Total retail sales in the nation were larger in January than they were a year ago. The increase was due almost entirely to a gain in automobile sales which totaled only a little below the peak month last year, on a seasonally adjusted basis. Sales of other items in January again were less than in the same month a year earlier. There has been an upward trend in consumers' expenditures for goods other than auto mobiles since the third quarter of 1949, but a sizable amount of total retail sales continues to be concen trated in automobiles. Personal income receipts in January were up about $1 billion, on a seasonally adjusted annual basis, even excluding the G. L insurance refunds received during the month. Wage and salary re ceipts were about the same as in December but pro prietors* and rental income increased $2.7 billion on an annual basis. EM PLOYM EN T There was little change in employment between mid-January and mid-February in either the nation or this district. A small gain in factory jobs about offset seasonal losses in nonmanufacturing jobs. Unemployment moved upward, however, as the mid term school graduates began to hunt work. Employment conditions, except in agriculture, W H O LE SA LIN G Line of Commodities N et Sales D ata furnished by February, 1950 Bureau of Census, compared with Feb.,’ 49 Jan.,’ 50 U . S. Dept, of Commerce * Autom otive Supplies ................................ — 5% — 5% — 6 + 6 Drugs and Chemicals................................ - 0- 0D ry Goods .................................................... — 2 — 1 Groceries ........................................................ — 8 Hardware ........................................................ 4 — 3 Tobacco and its Products...................... — 10 Miscellaneous ............................................... — 1 — 7% **T o ta l A ll Lines.................................. + 2% "Prelim inary. **Includes certain items not listed above. __ Page 60 Stocks Feb. 28, ’ 50 comp, with Feb. 28, *49 — 20 % — 3 + 6 — 1 — 8 — 6 — 15 — 4% were generally more favorable this February than a year ago. At that time there was a substantial drop in nonagricultural employment which was accom panied by a sharp increase in unemployment due to nonseasonal industrial cutbacks. This year employ ment remained relatively stable between January and February and the rise in unemployment was much less than last year. On the other hand, the number of workers on the farms expanded less than last year and was well below the 1949 level. The mid-February estimates, however, did not fully reflect the impact of the coal strike on employ ment in other industries. Subsequently, there were some scattered layoffs throughout the Eighth Dis trict, but with the end of the strike most of the affected workers were recalled. The upward trend in unemployment is causing increasing concern. Nationally, the February un employment rate (the proportion of the labor force seeking work) was higher than at any time since early 1942. Although more people were working in nonagricultural industries this February than last, unemployment was almost half again as large as a year ago since the number of new entrants into the labor market exceeded the number of new jobs. Unemployment apparently increased in the dis trict states in February, as measured by the change in the volume of unemployment compensation claim ants. In the seven district states, the claims load during the first half of the month was about 4 per cent higher than in January and 2 per cent higher than a year ago. The increase from January was considerably larger than that for the nation, but relative to the claims load a year ago the increase was smaller in the district states than nationally. Nonagricultural employment in the five major district cities was below the year-ago levels in Jan uary. The declines ranged from 1 per cent in Memphis and Little Rock to 5 per cent in Louis ville, with St. Louis off 2 per cent and Evansville 4 per cent. Most of the drop was in manufactur ing but other industries also employed fewer work ers. Manufacturing employment was off in all the major district cities except Little Rock, where there was a minor gain from January, 1949. Memphis had the smallest loss (2 per cent), followed by St. Louis and Louisville (5 per cent) and Evansville (8 per cent). INDUSTRY The level of industrial activity in the district in February was little changed from that of January. Construction outlays continued to be the leading factor of support. Coal production remained at about the low January level for most of February and became even more acute when the Progressive Mine Workers went on strike. They had been sup plying a good portion of the fuel requirements, particularly of the St. Louis area. Basic steel out put, not particularly hampered by coal shortages in this area, was at a fairly high level but, due to maintenance shutdowns, averaged slightly below the January rate. Basic lumber production, upheld by construction activity, increased over January. Manufacturing production, in the aggregate, was lower than in the previous month but on a daily average basis activity showed a slight increase. Total electric power consumption by manufac turers in the district's leading industrial areas was 3 per cent below the January level but on a daily average basis showed an 8 per cent increase. Aver age consumption in each of the reporting cities showed gains over January, ranging from 2 per cent in Evansville to 11 per cent in Little Rock. Com pared to a year ago, total consumption was up 5 per cent but Evansville and Louisville reported decreases, the latter being only slight. Manufacturing—Aggregate output of the district’s manufacturing plants in February probably was lower than in January because of the shorter work month. However, the rate of activity remained high, apparently slightly higher than the January level. In the case of the coal shortage, the dis trict’s operations were affected less than those in many of the nation’s other manufacturing areas. Steel— Basic steel operations in the St. Louis area in February were not particularly affected by the coal strike which curtailed production in most of the nation’s steel centers. The slight drop in per cent of capacity operations in this area was due to shutdowns for maintenance and relining of sev eral of the area’s open hearth furnaces. Operations were scheduled at 76 per cent of capacity, three points lower than in January, and four points below February, 1949. Demand for sheet steel climbed as outside consumers sought supplies to replace those curtailed elsewhere by the coal shortage. Lumber—W ith the demand for all kinds of lumber continuing strong, the district’s lumber industry in February operated at a slightly higher level than in the previous month and considerably higher than a year ago. Southern pine production in February averaged 5 per cent higher than in January, and operations of reporting southern hardwood producers were up 3 per cent— to 80 per cent of capacity. Both hardwood and pine operations were nearly 16 per cent higher than a year ago. Whiskey—At the end of February, 32 of Ken tucky’s 60 distilleries were in operation. This was three fewer than a month ago and seven less than a year earlier. There has been relatively little change in output for the past five months. Opera tions have been held at a reduced rate primarily because of increased inventories in warehouses. Whiskey production in Kentucky in January totaled 6.2 million tax gallons, a 5 per cent decrease compared with the 6.5 million gallon output in December, but 26 per cent lower than the 8.3 mil lion gallons produced in January, 1949. Nationally output was not quite 4 per cent below that o f the previous month, but the year-to-year 4rpp was the same as in Kentucky. Shoes— District shoe production in January totaled 7.9 million pairs, according to preliminary estimates. This was 2 per cent lower than the 8.1 million pairs produced in December and only 1 per cent below the January, 1949 output. Production in the nation as a whole fared somewhat better. Output in February was estimated at 38 million C O N S T R U C T IO N B U IL D IN G PERMITS Month ci February N ew Construction N um ber (C ost in Cost thousands) 1950 1949 1950 1949 61 12 Evansville ..... ... $ 190 $ 144 83 59 624 Little Rock... ... 1,038 1,091 Louisville ..... ... 129 162 733 507 ...1,795 2,624 1,285 ... 243 153 2,448 1,273 Feb. Totals.,2,311 893 $4,473 $6,977 $5,885 707 Jan. Totals. ...1,661 $2,723 Repairs, etc. N um ber Cost 1950 1949 1950 1949 ~ 4 3 ~57 30 $ 59 $ 197 147 159 81 54 57 40 63 116 134 176 78 171 168 473 1,038 581 563 $1,290 $ 907 480 445 $ 958 $ 640 IN D U S T R Y C O N S U M P T IO N O F E L E C T R IC IT Y * F eb., Jan., F eb., F eb ., 1950 ( K .W .H . 1950 1950 1949 compared with K .W . H . in thousands) K .W . H . K .W . H . Jan., *50 Feb., ’ 49 Evansville ....... 12,535 11,949 — 2% + 3% Little Rock ... ........ 5,227 5,210 4 ,768 - 0 +10 69,925 Louisville ............. .. 68,853 £ 9,4 3 2 — 2 — 1 Memphis .......... ....... 27,676 28,595 25,722 — 3 + 8 6,389 Pine Bluff ..... ........ 6.157 4,669 — 4 +32 80,221 St. L o u i s .......... — 3 +12 69,629 186,169 Totals .......... ....... 198,367 202,875 — 2% + 7% * Selected industrial customers. L O A D S IN T E R C H A N G E D F O R 25 R A I L R O A D S A T S T . L O U I S First N in e D ays Feb., ’ 50 Jan. ,* 5 0 F e b ., *49 M a r., *50 M a r., *49 2 m o 9.’ S0 2 m os.v49 95,531 99,462 102,274 31,542 194,993 210,329 33,216 Source: Terminal Railroad Association of St. Louis. C R U D E O IL (I n thousands o ! bbls.) Arkansas ...... Indiana ........... ......... Kentucky ...... _____ ....... Total ..... .. P R O D U C T IO N — D A IL Y Feb., 1950 80.0 27.0 25.2 312.5 Jan., 1950 77.2 178.7 27.7 26.5 310.1 Feb., X949 82.7 176.9 22.8 23.6 306.0 AVERAGE February, 1950 compared with Jan., 1950 F e b ., 1949 + 4% — 3% + 1 + 2 — 3 +18 — 5 + 7 + 1% + 2% Page 61 P R O D U C T IO N IN D E X E S C O A L P R O D U C T IO N 1935-39 = 100 IN D E X F eb., '50 Unadjusted Jan., ’ 50 Feb., ’ 49 Feb., ’ 50 57* 105* 165 50* Adjusted___________ Jan., ’ 50 Feb., ’49 90* 144 SH O E P R O D U C T IO N IN D E X 1935-39 = 100 Unadjusted Adjusted_______________ Jan., ’ 50 D ec., ’ 49 Jan., ’ 49 Jan., ’ 50 D ec., ’ 49 Jan., ’ 49 152 154 160 R 149 158 R 157 R * Preliminary. R — R evised.. pairs, 3 per cent above the December total and 12 per cent higher than in January, 1949. Meat Packing—Meat packing operations in the St. Louis area in February declined a little more than seasonally from January to the lowest total since August, 1948. There were 343,000 animals slaughtered under Federal inspection as compared with 475,000 in January and 357,000 a year ago. Again, hog, slaughter accounted for most of the month-to-month decline with a 31 per cent decrease. Slaughter of other animals declined also, ranging from a 7 per cent decrease in killings of calves to a 28 per cent decrease in sheep killings. Compared with a year ago only calf slaughter increased. Coal— District coal output in February dropped to 3.4 million tons as the United Mine Workers’ Union defied the baclc-to-work order. The situation was further aggravated by a strike of Progressive Mine Workers in the latter part of the month. The district suffered relatively less than the nation as a whole, however, due largely to the out put of nonunion mines. Compared with January, output in the district areas dropped 48 per cent, whereas national production was off 57 per cent. Western Kentucky was the one district area with only a small decline. Production there was just 3 per cent below the January total and was 1 per cent larger than in February, 1949. Oil— Crude oil output in the district’s producing areas continued the general upward trend begun in the middle of 1949. Daily average production totaled 313,000 barrels, a 1 per cent gain over the 310,000 barrel January output and 2 per cent higher than the 306,000 barrels produced daily in February, 1949. Output in Illinois and Arkansas, the district’s leading producers, increased over January, offset ting decreases in Indiana and Kentucky. On a year-to-year basis, increases were registered in all states except Arkansas. Nationally, crude oil out put in February increased slightly over January but was 8 per cent lower than a year ago. Construction— On-site construction activities in February were hampered somewhat by weather, although conditions probably were better than aver Page 62 age. In some areas, steel shortages also interrupted on-site work. The backlog of construction, as indi cated by building permit authorizations and contract awards, continued high with February another big month. Building permits authorized in the major district cities were valued at $7.9 million, the largest since 1939. This was a gain of 15 per cent over the January value and 38 per cent over a year ago. The dollar value of contracts awarded in the district for new construction and repairs in Feb ruary remained at a high level, according to F. W . Dodge reports. Awards totaled $37.9 million, 16 per cent below the high January level but 27 per cent higher than in February, 1949. The;re was a considerable drop (22 per cent) in the dollar value of residential awards from the record high January level, and nonresidential awards also were lower (11 per cent). However, both were substantially higher than a year ago. In the St. Louis territory (which includes a large portion of the district) there was an increase in the value of nonresidential contracts due largely to a substantial gain in the value of social and recreational building. The lower value of residential awards reflected a sub stantial decline in contracts for apartment dwell ings and for two-family dwellings. Single-family dwellings built for speculation continued at a high level, totaling slightly above the January volume. TRADE February’s “ unusual” weather combined to make this winter one of the warmest and wettest in years. In the St. Louis area, merchants have had to combat what is reported by the Weather Bureau as the warmest winter since 1931-32. Sales promotions of seasonal merchandise have been washed out by heavy rains. Unseasonably warm weather helped little in selling heavy winter wear in spite of sub stantial markdowns. Promotions featuring spring merchandise have been stymied by snow and sleet storms. Not all of the decline from the sales level of 1949 was the result of the weather. Part of the drop in dollar volume reflects lower prices this year. Despite these difficulties, sales volume reported by most district retailers, except in men’s wear stores, was higher than in January. Sales generally were smaller than last February, with furniture stores being the only line to show an increase. District department store sales moved up season ally from the previous month but were slightly less than in February last year. Seasonally adjusted sales in February were 300 per cent of the 1935-39 average in comparison to 282 per cent in January. Last February, daily sales averaged 310 per cent of those in the base period. St. Louis department store sales declined 4 per cent from January in contrast to the district gain of 5 per cent. St. Louis sales declined from last February by slightly more than the district decline of 3 per cent. The largest drop from last year’s volume occurred in Little Rock, but in Fort Smith and Louisville the decline also was somewhat more than that for the district as a whole. In Evansville, sales were 2 per cent less than last year. An increase from last year’s volume was reported in Springfield, Memphis and Quincy. In the first two months of 1950, district depart ment store sales totaled 3 per cent less than in the same period last year. In Fort Smith and Little Rock the decline was considerably larger and in Louisville and Evansville the decrease was slightly more than the district average. Siales in St. Louis were off, but by a smaller percentage than in the remainder of the district. In Springfield and Quincy sales gained from last year. Department stores’ inventories moved up in Feb ruary, in part reflecting an earlier Easter this year, and were unchanged from those at the end of Feb ruary, 1949. The value of outstanding orders at the end of the month was slightly less than a month earlier but was 8 per cent larger than last year. W om en’s specialty store sales in the month were unchanged from those in January but were 12 per cent less than in February a year ago. Men’s wear store sales were off one-eighth from the previous month and dropped 9 per cent under the volume in February, 1949. Inventories at the end of the month in both types of stores gained from January 31. In comparison to a year ago, inventories were down 6 per cent at men’s wear stores and 8 per cent at women’s specialty stores. Furniture store sales were larger than in the previous month or in February, 1949 but the increase from last year was not as large as that in comparable divisions of department stores. Furniture store sales gained 3 per cent while housefurnishings divisions of department stores gained 16 per cent from last year. Inventories on February 28 at fur niture stores were higher than a month earlier but were 3 per cent under those a year ago. A G R IC U L T U R E Cash farm income in Eighth District states de clined from $6.2 billion in 1948 to $5.5 billion in 1949. The 11 per cent drop was fractionally larger than the national decrease. Larger-than-district or national average declines occurred in Missouri, Indi ana and Tennessee (13, 13 and 15 per cent, respec tively). Farm income in Mississippi was off 10 TRADE D E P A R TM E N T STORES Stocks on H and N et Sales F eb., 1950 compared with ~ Stock Turnover 2 m os. *50 to same Feb. 2 8 /5 0 period comp, with 1949 Feb. 2 8 /4 9 Jan. 1 to Feb. 28 1950 194? 8th F . R . D istrict..... . . + 5 % .56 .56 -0 - % — 3% — 3% .53 — 3 .57 — 8 ... + 12 — 6 .56 .61 — 12 + 9 — 8 .44 .41 — 3 ...+ 6 + 1 + 2 _ 2 .49 .45 — 4 — 7 3 .58 .59 ...+ 7 — 5 — 4 — 1 .58 .57 •St. Louis A r e a 1.. ...— 3 — 4 — 1 - 0_ 4 .58 .57 ...— 4 — 2 -0 .43 — 8 ... + 24 + 5 + 2 . .39 — 3 .59 .63 . . . + 16 + 3 + 2 — 8 — 4 .38 — 11 . . . + 17 .37 * E l Dorado, Fayetteville, Pine B lu ff, A r k .; Harrisburg, M t. Vernon, 111.; N ew A lbany, Vincennes, I n d .; D anville, Hopkinsville, M ayfield, Paducah, K y . ; Chillicothe, M o .; Greenville, M is s .; and Jackson, Tenn. 1 Includes St. Louis, M o . ; A lto n , Belleville, and E ast St. Louis, 111. Outstanding orders of reporting stores at the end of February, 1950 were 8 per cent greater than on the corresponding date a year ago. Percentage of accounts and notes receivable outstanding February 1, 1950 collected during February, by cities: Instalm ent E x cl. Instal. Instalm ent E xcl. Instal. Accounts Accounts Accounts Accounts Fort Smith .................. % 46% Q uincy ................. 18% 54% Little Rock ........ 16 43 St. Louis ........... 18 53 20 48 Other Cities ....... 12 50 Louisville ........... Memphis '.............. 20 39 8th F . R . D ist... 18 48 IN D E X E S OF DEPARTM ENT 8th STORE SALES AND STOCK S Federal Reserve District Feb., 1950 Sales (daily average), unadjusted 9..................... 252 Sales (daily average), seasonally ad ju sted2.... 300 Stocks, unadjusted 8 ..................................................... 289 321 2 D aily Average 1935*3? == 100. * End of M onth Average 1935-39 = 100. S P E C IA L T Y Jan., 1950 232 282 248 288 D ec., 1949 504 330 259 309 F e b .. 1949 261 310 282 313 STORES Stocks Stock N et Sales on H and Turnover F eb., 1950 2 mos. ’ SO Feb. 2 8 /5 0 Jan. 1 to compared with to same comp, with Feb. 28 J a n ./5 0 F e b ./4 9 period *49 Feb. 2 8 /4 9 1950 1949 M en’s Furnishings...,— 12 % — 9% — 7% — 6% .37 .39 Boots and Shoes...... + 2 — 2 — 5 — 5 .56 .55 Percentage of accounts and notes receivable outstanding February 1, 1950 collected during February: 43% B oots and Shoes..............,............. 4 1 % .M en’s Furnishings.................. Trading d ays: February, 1950— 2 4 ; January, 1950— 2 5 ; February, 1949— 24. R E T A IL F U R N IT U R E ST O R E S ** N et Sales Inventories Feb., 1950 Feb., 1950 R atio of compared with compared with Collections J a n ./5 0 F e b ./4 9 J a n ./5 0 F e b ./4 9 F e b ./5 0 F e b ./4 9 22 % + 11 % + 3% + 6% — 3% 25% + 4 + 5 42 44 + 17 + 5 43 + 19 + 4 + 5 + 5 46 — 2 14 16 + 28 + 20 + 1 — 3 14 15 + 27 + 20 + 1 — 9 — 4 — 17 12 17 + 9 Memphis ........ — 5 + 7 17 20 0 + 7 Little Rock .... — 14 16 +29 17 + 12 + 5 Springfield .... # * * * — 16 Fort Smith ----------- — 2 * N ot shown separately due to insufficient coverage, but included in Eighth District totals. 1 In addition to following cities, includes stores in Blytheville and Pine Bluff, Arkansas; Hopkinsville, Owensboro, K en tu ck y; Greenwood, M is sissippi; Hannibal, M issou ri; and Evansville, Indiana. 2 Includes St. Louis, M issou ri; and A lton , Illinois. 3 Includes Louisville, Kentucky ; and N ew Albany, Indiana. * * 40 stores reporting. PERCENTAGE D IS T R IB U T IO N Feb., 1950 Cash Sales ................................... 15% Credit Sales .................. ............... 85 Total Sales ............................... 1 0 0 % OF F U R N IT U R E Jan., 1950, 15% 85 100% ^ SALES F eb., 1949 16% 84 100% Page 63 per cent for the year, but during December, 1949 was 58 per cent less than in December, 1948. In only two states, Arkansas and Illinois, was the decrease less than the national average. Total farm income nationally was $27.5 billion—10 per cent less than in 1948. Prices averaged 13 per cent lower but increased marketings partially offset the lower prices. Crop receipts were $12.6 billion, off 7 per cent, and livestock and livestock product receipts were $14.9 billion, off 12 per cent. Cash receipts in only five states were higher in 1949 than in 1948, and in three states were down 20 per cent or more. Net farm income in the United States declined from $16.7 billion in 1948 to $13.8 billion in 1949. The 17 per cent drop in net farm income in 1949 brings the total decrease since the 1947 postwar peak to 22 per cent. Even so, net realized income in 1949 was higher than for other years except 1946-48, and triple that of a year as late as 1940. But while current income is favorable compared with most any historical base except 1946-48, the 25 per cent reduction over a two-year period un doubtedly has and will have an appreciable effect on the rural areas. More cattle, dairy cows, hogs and chickens were on farms January 1, 1950 than a year earlier. Sheep numbers, however, were down 3 per cent from a year earlier. The percentage increase in cattle numbers was larger in five district states than the increase nationally, with numbers increasing more relatively in Mississippi and Arkansas than in other district states. The number of hogs in the three important district hog-producing states (Illinois, Indiana and Missouri) increased more than the national average. B A N K IN G P R IN C IP A L A S SE T S A N D FE D ER AL R ESERVE BAN K L IA B IL IT IE S O F ST. L O U IS Change from Mar. 15, Feb. 15, M ar. 16, (I n thousands of dollars) 1950 1950 1949 Industrial advances under Sec. 13b...........$ ................. $ ........... $ .............. Other advances and rediscounts.................. 1,898 — 2,101 — 9,774 U . S. securities...................................................... 981,379 + 539 — 180,518 Total earning assets....................................... .$ 983,277 $— 1,562 $— 190,292 Total reserves .......................................................$ 725,909 $— 3,256 $ + 19,559 Total deposits ....................................................... 636,051 — 19,192 — 134,306 4572 — 42,132 F. R . notes in circulation................................. 1,062,112 Industrial commitments under Sec. 13b....$ ................ $— 500 $ . ......... P R IN C IP A L A S SE T S A N D L IA B IL IT IE S W E E K L Y R E P O R T IN G M E M B E R B A N K S E IG H T H F E D E R A L R E S E R V E D IS T R IC T ( I n thousands of dollars) 34 banks reporting Change from M ar. 15, ASSETS 1950 Gross commercial, industrial, and agri cultural loans and open market paper..$ 531,659 Gross loans to brokers and dealers in securities ...... ....................................................... 7,949 Gross loans to others to purchase and carry securities ................................................ 19,946 Gross real estate loans........................................ 196,573 Gross loans to banks........................................... 1,052 Gross other loans (largely consumer credit loans) ................................................................... 218,880 Total ........................................................................$ 976,059 Less reserve for losses.............................. 12,053 N et total loans.................................................. $ 964,006 Treasury bills ......................................................... 55,968 Certificates of indebtedness............................ 180,537 Treasury notes .................................................... 223,522 U . S. bonds and guaranteed obligations.. 658,098 Other securities .................................................... 175,644 Total investments ...........................................$1,293,769 Cash assets .— ....................................................... 781,495 Other assets ............................................................ 26,597 Total assets .......................................................$3,065,867 Feb. 15, 1950 $— 10,685 + M ar. 16, 1949 $— 57,010 + 1,403 1,974 4286 + 3,031 — 15,798 — 1,617 4- 35,606 — 298 — 178 $— 21,370 4* 301 $— 21,671 4* 313 — 29,511 4 -42,463 — 21,573 4- 2,765 $— 5,543 4-20 ,0 3 7 -f 994 $— 6,183 48,958 $— 12,958 42,446 $— 15,404 + 17,941 — 19,534 4 -171,990 — 35,258 4- 46,226 $ + 181,365 — 57,096 I 1,534 $ + 110,399 L IA B IL IT IE S Demand deposits of individuals, partner ships and corporations................................... $1,528,150 $ + 4,415 Interbank deposits ............................................. 656,548 — 10,722 U . S. Government deposits............................ 66,165 — 8,573 Other deposits ....................................................... 124,438 + 6,375 Total demand deposits................................... $2,375,301 $— 8,505 Tim e deposits ....................................................... 488,528 + 1,889 Borrowings ............................................................. 725 — 75 Other liabilities ....................... ............................ 18,030 — 84 Total capital accounts........................................ 183,283 + 592 Total liabilities and capital accounts...... $3,065,867 $— 6,183 $ + 68,381 + 45,962 — 3,761 — 12,292 $ + 98,290 + 8,432 — 6,275 + 2,464 + 7,488 $ + 110,399 Demand deposits, adjusted*............................$1,409,199 $ + 8,930 $+ * Other than interbank and government items on hand or in process of collection deposits, demand 44,597 less cash D E B IT S T O D E P O S IT A C C O U N T S A G R IC U L T U R E ( I n thousands of dollars) C A S H F A R M IN C O M E Jan., 1950 12 month total Jan. to Dec-* 1949 compared with compared with Jan., D ec., 1947 1949 1948 1949 1949 (I n thousands Jan., of dollars) 1950 Arkansas ..$ 23,613 Illinois ..... . 151,100 Indiana ..... . 67,926 Kentucky ... . 112,718 17,677 Mississippi.. Missouri ... . 69,914 Tennessee .. 46,522 T o t a l s ..... .$489,470 *Revised. R E C E IP T S A N D — + — + — — - — 50% 17 6 7 45 13 0 5% — + + + — — 8 + — 1 7% S H IP M E N T S A T Receipts F eb., 1950 .. 80,181 ..237,629 .. 29,053 ,346 ,8 6 3 Page 64 $ 527,607 1,702,943 916,022 527,920 481,312 944,357 426,914 $5,527,075 47% 16 3 18 75 N A T IO N A L Feb., 1950 compared with Jan.,’ 50 F e b .,’ 49 — 14% — 20 — 39 — 21% + + + + 1% 8 8 6% Feb., 1950 25,834 78,668 3,952 108,454 — — — — — — — — 5% 9 13 11 10 13 15 11% + 6% — 11 — 14 — 10 — 2 — 13 — 10 - 10% STOCK YA R D S Shipments Feb., 1950 compared with Jan.,'50 F eb.,’ 49 — 4% __ 7 — 57 — 10% — 7% + 18 + 1 + 10% Feb., 1950 Jan., 1950 Feb., 1949 19,419 $ 22,096 $ E l Dorado, A r k ........... .$ 18,651 33,343 40,204 Fort Sm ith, A rk ......... 32,258 H elena, A r k ................... 5,840 6,726 7,159 105,849 Little R ock, A r k ......... ... 112,130 121,510 27,387 22,540 24,068 Pine B lu ff, A r k ........... Texarkana, A r k .* ....... 8,980 10,828 8,721 Alton , 111....................... 20,304 23,216 21,371 89,488 103,761 93,431 E- St. L .-N a t . S. Y ., 111. .. 25,934 27,806 24,932 Quincy, 111...................... 104,892 113,537 91,133 Evansville, In d ............. 493,199 477,813 Louisville, K y .............. 461,755 32,592 38,891 29,302 Owensboro, K y ........... 12,866 Paducah, K y ................. 14,166 12,854 18,975 24,204 20,108 Greenville, M iss........... 9,805 Cape Girardeau, M o .. 10,924 9,506 7,456 7,928 H annibal, M o ................ 6,276 Jefferson City, M o.... 42,097 56,088 40,021 St. Louis, M o .............. . 1,318,815 1,532,231 1,299,750 9,112 9,219 Sedalia, M o .................... 8,5 68 46,310 52,258 Springfield, M o. ------44,488 16,078 Jackson, Tenn................ 18,967 15,320 495,882 M em phis, Tenn............ . 583,172 464,858 T otals *......................... $2,914,613 $3,338,318 $2,856,437 F eb., 1950 compared with Jan.,’ 50 F e b .,’49 — — — — — — — — — — — — — — — — — — — — — — 12% 17 13 8 18 17 13 14 7 8 6 16 9 22 10 6 25 14 1 11 15 15 — 13% 4% 3 19 T 6 — 6 + 3 — 5 __ 4 + 4 + 15 — 3 + 11 - c l— 6 + 3 + 19 + 5 + 1 + 6 + 4 + 5 + 7 + + + 2% * These figures are for Texarkana, Arkansas only, Total debits for banks in Texarkana, Texas-Arkansas, including banks in the Eleventh District, amounted to $22,885.
@FedFRASER