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FEDB

'RESERVE BANK.

RICHMOND

September 1956

RATIOS OF MEMBER BANK LOANS TO:

Also In This Issue - - -

M

ember bank loans move higher . . . .
raise some important questions.

and

The article

on page 3 describes some of these developments
and discusses problems in store for commercial
bankers.




W hat Keeps Farm Land Values U p ? ___Page
Fifth District Member Banks . . .
Record Breaking Earnings in the
First H a l f ____________________________ Page
Business Conditions and Prospects _____Page
Fifth District Statistical Data ______ __Page

5

6
8
10

Federal Reserve Bank of Richmond

F

D

if t h

T

is t r ic t

r e n d s

NEW PASSENGER CAR REGISTRATIONS

COTTON CONSUMPTION

225

225

140

140

fr 1

120
175
100
125

'i\h

/

120
100

V
V

80
75

^A
'V

/\

80

60

60

(Seasonally Adjusted)
(1947-1949*100)

0
1948

1949

1950

1951

1952

1953

1954

1955

0

1

1948

1956

1949

1950

1951

1952

1953

1954

<

t .M I II I II ..

1955

1956

New passenger automobile registrations in June declined 2 % from
May to a level 17% below a year ago. First-half registrations were
down 5 % . Two states and the District of Columbia for July showed
a 3 % increase over June but were 15% under last year.

Cotton consumption in July in Fifth District mills did not decline
by normal seasonal proportions. Consequently, the average daily
adjusted index for July rose 3% from June, was 1% higher than
a year ago, and seven months’ consumption was 4% above last year.

BITUMINOUS COAL PRODUCTION

ELECTRIC POWER PRODUCTION

150

150

120 :

120

90 •

90

60

60
30

30
(Average Daily)
(1947-1949* 100)

0
1948

1949

1950

1951

1952

1953

1954

1955

0
1956

The steel strike hurt bituminous coal operations in this District
substantially during July when average daily output dropped 19%
from June to a level 15% under a year ago. Seven months’ output,
however, was 13% larger than last year.

Electric power production in June was at an all-time high level
in this District after taking account of seasonal factors. June
output was 1% higher than May and 6% higher than a year ago.
Output in the first half-year was 8% larger than a year ago.

VALUE OF G I. HOME LOANS
.

CIGARETTE PRODUCTION
Thousands of Dollars

140
120

Thousondsof Dollars

140

120

100

4

A
A

1 KtAA r
V

aA ft

\r

100
80
60

60
(Sea*sonally Adju sted)
(194 7-1949* 1
C

1948

1949

1950

1951

1952

1953

1954

1955

1956

Production of cigarettes in this District in June was 6 % smaller
than in May but at the same level as a year ago. First-half figures
were up 5 % . Virginia output in July was 7% above a year ago.




• Prior to Septerrtoer 1953, "approved" loans, thereafter “closed" loons

The number of GI home loans closed in June dropped 6 % from
May, was down 25% from June 1955, and the first half-year was
down 13% . The dollar amount of loans in June was down 7%
from May and 21% from June 1955; the first half-year was down
11%.

September 1956

Member Bank Loans Move Higher . . .

And Raise Some Important Questions
at the expense of secondary reserves, however, problems
may arise quickly unless its loan structure is such that
it provides an adequate return flow of funds to meet
liquidity needs.

happening to commercial bank loans ? Ask
almost any commercial bank officer or student
of banking and the chances are the recent widespread
growth of loans will be cited. Odds are not even, how­
ever, that a conclusive answer as to the significance of
the increases will be forthcoming— the analysts differ
sharply on this point. Some view the trend with con­
siderable alarm, obviously feeling that the relatively
rapid loan expansion of the current era means greater
risk to the lender and a dangerous weakening in banks’
liquidity positions. Others, just as sincerely, find little
to be disturbed about in this
expansive credit trend and
even feel that banks might
extend their percentages up­
ward without creating seri­
ous difficulties for them­
selves or contributing to the
inflationary trend that w or­
ries many of those who look
ahead.
Because these increasing
ratios are so interesting—
and so potentially significant
for the banking system—
this article will attempt to
place them in perspective so
that their meaning can, per­
haps, be judged more ac­
curately. There can be, of
course, no “ correct” ratio since banks differ so widely
in their operations that ratios can normally be expected
to vary from place to place, from bank to bank, and
from time to time. The ratio prevailing at any partic­
ular bank reflects past experience, the needs of its com ­
munity, the character of its deposits, its cash and capital
positions, the nature of its loans and investments, its
analysis of future trends, and the economic philosophy
of its management.
h a t 's

A second danger inherent in rising loan percentages
involves the increased chances of losses— for loans
obviously are subject to greater risk of default than are
most bank investments. The extent of this risk clearly
depends not only upon the proportion of loans to other
assets but also upon the quality of the advances made.
The conclusion to be drawn is that increasing loan per­
centages, while suggesting
some movement away from
liquidity and safety, never­
theless must be interpreted
carefully in the light of oth­
er developments in t h e
banks’ capital and assets
structures.
Even though the loandeposit ratio is commonly
used in discussing changing
loan patterns, more empha­
sis is placed in the remain­
ing analysis upon the loanasset ratio because it is felt
the latter ratio is more
significant. W here the loandeposit ratio is used there
is a tendency to lapse into
thinking of the bank’s “ liquidity cushion” as approxi­
mately the difference between 100% and the bank’s
loan-deposit ratio. For example, if the loan-deposit
ratio is 70% , the temptation is to view the bank as
having liquid assets of only 30% of deposits less the
percentage in fixed assets and long-term investments.
Actually, the liquid assets will constitute a greater per­
centage of deposits since total assets are always more
than 100% of deposits because of the existence of other
liabilities and capital accounts.

Increasing Loan Percentages A s Danger Signals
Recent Trends in the Fifth District

Although many analysts do not feel that present loan
percentages are too high, most agree that loan percent­
ages could become too high. There are, in fact, two
danger zones into which a bank can move by concentrat­
ing too heavily on loans: first, since loans are generally
the most illiquid of a bank’s earning assets, an increased
loan percentage may create liquidity problems— the in­
ability to convert deposits upon demand. If the bank
maintains adequate primary and secondary reserves and
expands its loans through compressing its long-term
investments, or through increased capital, it creates for
itself no liquidity problems. If the expansion occurs



The accompanying chart comparing loan to asset
ratios for the call dates of June 30, 1955 and 1956, re­
veals clearly the sharp uptrend in loan percentages
among Fifth District member banks within this period.
A t the low end of the scale, 20.1% of the banks on the
June 1955 call date had loan-asset ratios of less than
30% . By June 1956, the percentage had fallen to
15.9%. Differences were even greater at the upper end
of the scale where the percentage of banks with loan
ratios of more than 50% climbed from a 1955 figure of

A 3 Y

Federal Reserve Bank of Richmond

7.7% to a 1956 figure of 13.9%. A few banks increased
their ratios to even more than 60% .
There has also been a definite increase in the “ typical”
or most frequent loan-asset ratio. In mid-’ 55, the “ typi­
cal” ratio was shared equally by the 30-40% and the
40-50% ranges, each of which contained 36.1% of the
banks. By m id-’56, the largest percentage of the banks
— 40.6% — had loan ratios of 40-50% and only 29.6%
had ratios of 30-40% . In interpreting these percent­
ages, it should be remembered throughout that these
are June figures and consequently differ from those dur­
ing other seasons of the year.
Various methods were employed by individual banks
to effectuate these increases, but comparison of the
District figures on the two dates suggests that most
banks expanded loans at the expense of government
securities. This was certainly true of the increase in
the ratio of total Fifth District loans to total Fifth Dis­
trict assets. It does not mean that most of the funds
for loan expansion came from the sale or “ run off” of
government securities. Actually, most of the volume
came from deposit increases— over $263 million as com­
pared with $150 million from reduced government se­
curity holdings. Increases in capital stock, surplus, and
borrowings from the Federal Reserve and other lenders
also substantially increased loanable funds.
How, then, could the reduction in government securi­
ty holdings have been most important in increasing the
loan percentages? The answer to this paradox lies in
the fact that loan-asset ratios cannot increase unless
there is a decrease in the ratio of some other asset or
assets to total resources. If the loan-asset ratio of a
bank is to remain constant, then the bank must increase
the volume of its loans in the same proportion as the
increase in its total assets. The same is true if it is to
keep the percentage of its government securities or the
percentage of any other asset constant. Am ong Fifth
District member banks, however, the funds were so dis­
tributed that the percentage of loans rose from 37.2%
in 1955 to 39.7% in 1956 while the percentage of gov­
ernment securities was allowed to fall from 32.2% to
29.0% . Since there was little change in other assets
(with the exception of “ cash assets” which increased
slightly from 22.5% to 2 3 .1 % ) the fall in the govern­
ment security-asset ratio obviously accounted for the
increases in the loan-asset and cash-asset ratios.
Some Historical Relationships

The cover chart uncovers some interesting, and per­
haps forgotten, relationships in banking history. Despite
recent increases, present loan-asset and loan-deposit
ratios are much below those of the early years of the
Federal Reserve System. On June 30, 1919, the first
date for which comparable ratios could be computed,
Fifth District member bank loan-asset and loan-deposit



ratios stood at 52.1% and 73.0% , respectively, as com ­
pared with 1956 ratios of 39.7% and 43.6% . These
high ratios continued, sometimes rising and sometimes
falling, until 1929 when they dropped sharply following
the market crash. They rose again slightly in 1935,
reversed direction in 1938, and dropped to lows of
13.2 and 14.0% by 1945. A t the end of W orld W ar
II a marked upward trend began and has continued
rather steadily until the present time. Ratios for all
member banks have followed a quite similar pattern,
generally running slightly below Fifth District percent­
ages before the early 1940’s and predominantly above
them since then.
Most of these variations can be easily explained.
Before 1930 loan ratios were extremely high because
a lack of sufficient short-term investments forced banks
to depend mainly upon call loans to satisfy liquidity
needs. Low percentages of the depressed 1930’s nat­
urally resulted from light loan demand, the banks’ pru­
dent increases in cash assets, and the need for invest­
ments in order to provide income. The still lower waryear percentages can be explained by low loan demand,
heavy excess reserves, and tremendous expansion in
bank-held Federal debt. The sharp postwar increases
have come largely from increasing loan demands which
have favored reduced investments and expanded loans,
particularly in years of rising interest rates.
Some Important Questions

H ow far should a banker allow loan ratios to rise if
loan pressures continue to mount? Can he afford to
turn away customers to other banks or nonbank lend­
ers? H ow dangerous would his asset position become
for a given expansion in loans? Should he take ad­
vantage of current high earnings to float new stock
issues? These are interesting and difficult questions
with potentially different answers for every bank. In
view of their importance, however, the prudent banker
will take bearings on his position and plot his course in
case loan demands become more intense. Such an ap­
praisal might very well reveal a possibility of increasing
profits and better satisfying community needs through
loan expansion. For others the answer might be quite
different.
There is also no easy answer as to how far loan ratios
would rise under heavy demands. Much, of course,
would depend on monetary policy. If the Federal R e­
serve System were to follow a relatively easy money
policy, there would probably be little increase in loan
percentages. On the other hand, if inflationary pres­
sures grewr and dictated a tight money policy, percent­
ages might rise further although the rise eventually
would be limited by loan “ rationing” resulting from the
banks’ unwillingness to undergo further risk. A ug­
mented interest rates could also be expected to aid in
the loan curtailing process.

1 4 1
*

September 1956

District Farm Income -An Outlook Analysis
iiE District farm income picture— as snapped in
mid-August— does not look quite as good as it was
in 1955. There will, to be sure, be exceptions. Dairy­
men, poultrymen with commercial laying flocks, peanut,
peach and apple producers seem likely to take in more
cash in ’56 than in ’ 55. Also included in this group
will be those who took heavy crop losses last year due
to hurricane winds and heavy rains.

W ith increased acreage (allotments were raised be­
cause of the short supply of Virginia-type peanuts) and
weather more favorable for production, the District’s
1956 peanut crop may be one-third larger than in ’ 55.
Yields are running around three bags per acre above last
year, and quality is better. The basic loan rate for
Virginias is up. R esult: indications of substantial im­
provement in peanut growers’ income.

On what factual situations— and conjectures— are,
then, somewhat smaller total farm income figures— for
the year 1956— based? T o begin with, farmers’ cash
income for the first five months was nearly 3% below
the same period in ’ 55 and income from livestock was
down more than that from crops. Normally, only little
more than one-fifth of total District cash farm income—
about two-fifths of all livestock receipts, and one-seventh
of all income from crops— is received by the end of May.
In addition, District farmers on a yearly basis customari­
ly receive $2 of cash income from livestock for every
$3 they obtain from crops.

On the livestock side of the picture, it now appears
that total income from all sources will be down from
last year, though not as much as that from crops. In­
come from eggs and dairy products are likely exceptions
to the expected decline elsewhere.

r

W ith larger sales and higher prices, income from
dairy products should be well above those in 1955.
Both total milk production and production per cow are
running ahead of a year ago. And the increase in sup­
port prices for butter and manufacturing milk should
have an upward influence on market prices.
W here regular income checks are dependent on poul­
try and eggs, those in the egg business appear to be
headed for a neat gain, while those raising broilers will
get smaller checks. Thus far in 1956 District egg pro­
duction has been 3% larger than last year. Egg prices
have averaged about 4 cents per dozen higher, and poul­
try prophets expect the yearly average will also exceed
1955. Broiler prices, on the other hand, have been a
substantial 6 cents lower than a year earlier. Mean­
while, broiler chicks hatched and chick placements have
been well above last year. Prospective large supplies
would seem to head off any substantial price increase,
and increased production will not offset the lower prices.

In this District significant facts are that 42 cents of
each dollar of farm income come from tobacco and cot­
ton and tobacco produces more cash for farmers than
any other commodity. W hen one looks at these two
prime commodities and notes that decreased production
of both is inevitable (due primarily to cuts in acreage),
he is seeing most of the argument for lower total in­
come this year. In addition, lower support prices for
cotton— about $12 per bale under last year’s— must also
be considered an income-depressing factor.
Grounds for Conjecture

From U S D A ’s Crop Production Report, we have in­
dications of 1956 crop prospects as of August 1. If we
use these estimates and assume that prices this year will
bear the same relationship to loan levels as in 1955, we
have a fair basis for comparing income from crops.
The District’s tobacco farmers seem certain to have
less “ folding money” this year than last. Maryland
tobacco growers, in fact, have received 5% less income
from their 1955 crop (sold in 1956) than from the crop
sold last year. Tobacco producers in the flue-cured
areas are in for a bigger cut, however. W ith acreage
down by 11%, due to reductions in allotments, and
yields somewhat lower, production is expected to be
14% below last year. Burley, fire-cured, and suncured crops are, however, larger and could bring in
more money.
Cotton farmers, faced with reduced acreage allotments
and lower yields, are expecting this year’s crop to be
7% smaller than in 1955. These indications, coupled
with the $12 per bale lower loan rate, will undoubtedly
reduce cotton income considerably.



Less cash also seems to be in store for the cattle
raisers. The number of cows and heifers 2 years old
and older on January 1 and the anticipated calf crop
indicate that marketings this year will be lower unless
there is considerable net liquidation. Prices during the
first half of the year were well below 1955. Fed cattle
prices turned upward in July and appear likely to retain
most or all of this increase. Large further advances are
not expected, however.
On the basis of the number of pigs saved, District
farmers this year have slightly more pigs old enough
to be converted into ham, bacon, or chops. The larger
marketings, however, appear certain to fall far short of
offsetting the reduced prices received this year.
W hile much can happen— weatherwise and otherwise
— to upset some of the above assumptions, the projec­
tions, covering commodities that produce 80% of all
cash farm income, seem to indicate a slight slippage in
this year’s farm income.

A 5 V

Federal Reserve Bank of Richmond

Fifth District Member Banks . . .

Record-Breaking Earnings in the First Half
in record levels of business activity,
Fifth District member banks established a new halfyear earnings high in 1956. Gross earnings amounted
to $135.2 million, more than 12% above the figure for
the first half of 1955. Higher gross income this year
reflected both increased loan volume and higher average
rates of return on loans and securities.
a r tic ip a tin g

P

Earnings Came Predominantly From Loans . . .

Loans and discounts continued to provide the bulk of
District member banks’ earnings, accounting for 60%
of the total in the first half of 1956. Even though total
loans advanced at a slower pace over the first six months
of this year than in the same period last year, the
amount outstanding on June 30, 1956 was 11.5%
greater than on June 30, 1955. The 5.161% (average
annual rate) return on loans outstanding in the first
half compared with 5.031% in the same period last year.
Practically all classes of borrowers increased their
loans in the first half of 1956. W hile credit extended
consumers, business borrowers, and purchasers of real
estate did not grow as rapidly as in the first six months
of 1955, the increase accounted for the major portion
of this year’s over-all rise. All types of consumer loans
rose in the first six months of the current year, but the
rise in automobile instalment paper, the largest single
component of total consumer instalment loans, was not
as pronounced this year as last and accounted predomi­
nantly for the smaller increase in total consumer bor­
rowing. Real estate and business loans rose at about
half the rate of last year’s increase. Loans to farmers,
which are generally heavier in Spring and early Sum­
mer, advanced at a much faster rate this year than last.
. . . But Earnings From Securities W ere at a High
Level

Holdings of U. S. Government securities declined by
7.1% over the first half, and the amount outstanding on
June 30 was 6% below that on the comparable year-ago
date. Higher rates of return on these securities, how­
ever, lifted their contribution 5% above first-half 1955.
The average annual rate of return on Governments for
the January-June period was 2.297% as against 2.038%
for the same months last year. U. S. Government se­
curities accounted for one-fifth of total earnings. All
other earnings— interest and dividends on securities
other than U. S. Government, service charges, trust de­
partment operations, safe deposit box rentals, and oth­
ers— also accounted for a fifth of total earnings and were
more than 10% above last year.
N et Current Earnings W ere High . . .

Net current earnings, before adjustments for losses



and recoveries and income taxes, continued to move
upward. Operating expenses of District member banks
rose appreciably over last year although the increase was
not as much as that in total earnings. For the first
half, total current expenses were up $8.8 million, or
12%, over the first six months of 1955. Gross earn­
ings this year, however, were $15.0 million (1 2 .4 % )
higher than in 1955, with the result that net earnings,
up $6.2 million, were 13.1% above last year’s figure.
. . . But Net Profits Did N ot Keep Pace . . .

Net profits after taxes, while gaining slightly over
previous mid-years, showed only about half the rate of
increase in the first six months of this year over the
same period last year as that shown for net current
earnings. The small increase in net profits was largely
due to smaller profits and recoveries as against larger
losses and charge-offs reported by member banks.
E A R N IN G A SSETS
Fifth District Member Banks
(Dollars in millions)
% Change
June 30,
1956p
Loans and investments 6,005.4
Loans— net
_ __
3,167.3
Reserves .......................
40.8
Loans— gross ___ _ 3,208.1
Real estate loans:
On farm la n d __
61.3
On residential
property
537.7
On other proper­
ties ............ .
202.9
Loans to banks __
19.2
Loans to brokers and
dealers in securi­
ties ____________
42.0
Other loans for pur­
chasing or carry­
ing securities __
73.1
Loans to farmers ..
86.6
Commercial and in­
dustrial loans __ 1,111.0
Instalment loans to
individuals:
Retail automobile
paper _________
296.8
Other retail pa­
per ____ _______
86.8
Repair and mod­
ernization loans
58.7
Other instalment
loans _______
138.5
Single payment
loans
..
_____
368.5
All other lo a n s ___
125.0
U. S. Government Se­
curities ___________ 2,311.2
Treasury bills
104.9
Treasury certifi­
cates of indebted­
ness
____
34.7
Treasury notes
520.9
U. S. nonmarketable bonds ____
99.4
Other U . S. bonds—
5 years or less _
512.9
Other U. S. bonds—
over 5 years ___
1,038.4
Other securities*
52G.9

June 30,
1955r
5,808.6
2,843.3
34.1
2,877.4

First Half
1956

First Half
1955

_

—
+
+
+

1.0
4.4
6.5
4.4

+
+
+

0.1
7.7
3.3
7.6

59.6

+

2.0

+

9.6

501.2

+

4.3

+

3.3

196.6
13.1

+
0.1
+ 262.3

+ 14.3
+ 178.7

34.8

+

+

90.9
91.4

— 26.6
+ 23.9

— 9.3
+ 13.5

961.3

+

+

5.2

237.6

+

8.1

+

20.6

80.1

+

5.9

+

5.4

53.2

+

4.6

_

0.7

134.8

+

4.8

+

7.1

330.5
92.2

+
-

9.2
0.6

7.7
+
-1- 24.9

15.1

3.3

2,461.4
100.0

7.1
— 33.7

32.1
610.9

— 58.1
— 3.0

139.6

— 24.2

409.2

—

4.5

1,169.6
503.9

—
-

0.3
3.6

p Preliminary.
r Revised.
* Includes U. S. guaranteed obligations.
Note: May not add to totals because of rounding.

16.8

_

7.7
_ 44.1
— 79.6
+ 11.4

_
_
+

3.7
18.5
2.9
0.1

September 1956

During the first half of 1956, District member banks
reduced their Government security holdings in order
to obtain funds to meet a growing loan demand. Be­
cause of conditions prevailing in the Government se­
curities markets, these sales frequently resulted in losses
to the banks. Such losses, and to some extent the
building up of valuation reserves on loans, resulted in
a reduction of current earnings. Taxes for the first
six months of 1956 were only slightly higher than for
the corresponding period of 1955.

E A R N IN G S A N D E X P E N S E S
Fifth District Member Banks
(Dollars in thousands)
First Half
1956p

First Half
1955r

%
Change

Earnings
Interest and dividends on U. S.
Government obligations ______
Interest and discounts on loans ..
All other earnings ________________

27,605
80,745
26,870

26,296
69,590
24,363

+ 5.0
+ 16.0
+ 10.3

Total earnings from current
operations _____________________

135,220

120,249

+ 12.4

Expenses
Total current operating expenses

82,015

73,227

+ 12.0

53,205
Net current earnings ____________
Recoveries, transfers from reserves,
2,208
and profits --------------------------------Losses, charge-offs, and transfers
8,354
to valuation reserves ---------- —

47,022

+ 13.1

Profits before income taxes -------Taxes on net income -------------------

47,059
21,814

44,590
20,998

+
+

. . . A n d Retained Earnings Fell B elow the 1954
R ecord

Net profits ---------------------------------Cash dividends declared -------------Net profits after dividends ----------

25,245
9,538
15,707

23,592
8,631
14,961

+ 7.0
+ 10.5
+ 5.0

Cash dividends to stockholders amounted to more
than one-third of the first six months’ net profits, a
proportion slightly higher than first-half 1955 and much
higher than first-half 1954 when less than a third of net
profits was paid out in dividends. Fifth District mem­
ber banks retained 62% of their net profits in the cur­
rent six months’ period. This was one percentage

p Preliminary,
r Revised.

Net profits realized by Fifth District member banks
on their current half-year’s operations were equal to an
annual rate of 8.45% on total capital accounts— a shade
lower than the 8.49% realized in the same period last
year.

4,191

—47.3

6,623

+ 26.1
5.5
3.9

point less than that retained last year. Due partly to
these retained earnings, stockholders’ equity in total
assets rose to 7.65% as of June 30, 1956 as against
7.38% on June 30, 1955.

A SSETS A N D L IA B IL IT IE S
F IF T H D IS T R IC T M E M B E R B A N K S BY S TATES
June 30, 1956p
(Dollars in Millions)
Fifth District
ASSETS
Loans and investments _________________
Loans and discounts (including over­
drafts ) _________ __________ _________
U. S. Government obligations (direct
and guaranteed) ____________________
Other securities ________________________
Reserves, cash, and bank balances ______
Reserves with Federal Reserve Bank
Cash in vault _________ _______________
Balances with banks _ ___ __________
Cash items in process of collection ___
Other Assets ...... ..............................................
Total Assets ...........................................
LIABILITIES
Demand deposits ------ ---------- -------- _ —
Individuals, partnerships, and corpo­
rations _________ _____________________
U. S. Government _______________ ______
States and political subdivisions _____
Banks _____ ____ ____ _______ _____
Certified and officers’ checks, etc. ____
Time deposits ____________________________
Individuals, partnerships, and corpo­
rations ...... _ _ _____ ______ _ ______
U. S. Government and postal savings _
_
States and political subdivisions ____
Banks_____ _ - _ -------------- - - - -----------Total deposits -------------- . ------- — . . —
Borrowings _________ ___ _____ _________
Other liabilities __________________________
Total Liabilities ___________________
Total Capital Accounts ___________
Total Liabilities and Capital Ac­
counts ----------------------------------------Demand deposits adjusted ________________
Number of banks ________________________

W . Va.

N. C.

S. C.

1,824.0

629.2

991.8

435.8

6,005.4

5,808.6

535.1

1,023.3

274.5

597.8

205.6

3,167.3

2,843.3

411.9
63.4
321.8
187.0
19.7
49.1
66.0
24.8
1,357.0

637.8
162.9
489.1
200.6
39.5
116.4
132.6
37.9
2,351.0

306.0
48.7
189.8
74.7
17.5
66.7
30.9
10.4
829.4

303.4
90.6
370.0
131.8
16.8
70.5
150.9
19.3
1,381.1

184.7
45.5
142.8
54.3
11.3
46.2
31.0
7.4
586.0

2,312.6
525.5
1,841.6
808.5
126.1
414.3
492.7
122.1
7,969.0

2,462.8
502.5
1,721.9
745.7
155.5
392.0
428.7
112.4
7,642.9

Md.

D. C.

Va.

1,114.2

1,010.4

531.0
468.8
114.4
328.1
160.1
21.2
65.4
81.4
22.3
1,464.6

June 30, 1955r

1,032.1

979.8

1,377.5

545.8

1,003.4

466.0

5,404.5

5,206.9

767.8
49.7
119.4
88.3
6.9
314.4

857.5
28.6
.1
64.7
28.9
268.1

1,045.3
51.2
104.9
149.7
26.4
764.3

411.1
17.8
57.5
42.0
17.4
205.2

692.5
38.8
82.8
153.8
35.5
232.9

356.4
17.5
62.6
16.4
13.1
74.2

4,130.6
203.5
427.3
514.9
128.2
1,859.2

3,996.2
203.0
422.4
477.3
108.1
1,793.7

297.9
6.2
10.2

238.1
15.7

203.6
.7
.7
.3
751.0
.4
4.3
755.7
73.7

168.6
4.4
58.2
1.7
1,236.3
15.7
23.4
1,275.4
105.7

68.3
5.1
.5
.3
540.2
4.9
545.1
40.9

1,662.1
51.4
128.1
17.6
7,263.7
25.3
70.7
7,359.6
609.4

1,596.6
60.4
115.8
20.8
7,000.5
14.3
64.0
7,078.9
564.1

829.4
455.1
100

1,381.1
659.9
54

586.0
401.1
33

7,969.0
4,193.4
473

7,642.9
4,097.9
477

1,346.4
.9
9.2
1,356.5
108.1

14.3
1,247.9
.9
9.7
1,258.5
98.5

685.6
19.2
58.5
1.0
2,141.8
7.5
19.2
2,168.5
182.5

1,464.6
812.8
70

1,357.0
820.6
13

2,351.0
1,043.9
203

p Preliminary.
r Revised.
Note: May not add to totals because of rounding.




June 30, 1956

i 7 y

Federal Reserve Bank of Richmond

Business Conditions and Prospects
h e Fifth District’s economy during July showed
distinctly mixed movements. The steel strike sub­
stantially hurt bituminous coal output, but despite the
tightness in structural steel supplies, construction con­
tract awards were strong. The trade level evinced both
strength and ease. Industrial operations, based on in­
complete reports, did likewise. Outside the direct in­
fluence of the steel strike, changes in the employment
level apparently were limited to normal seasonal pro­
portions.
W hile total deposits of the member banks declined,
time deposits rose. Mutual savings bank deposits in
Maryland continued to rise, and somewhat surprisingly,
purchases of U. S. Savings Bonds were higher during
the month. But over-all economic activity in the Dis­
trict was reflected in the fact that bank debits for July
achieved a new high. And, in late August, business and
consumer loans, reflecting the exuberance on the na­
tional scene currently exhibited by both entrepreneur
and consumer, touched levels never before recorded.

T

Manufacturing

Man-hours in all manufacturing industries of the
Carolinas during July were down 1.4% from June, a
smaller decline than last year. Durable goods manhours were off a slender 0.9% from June to July, while
nondurable goods man-hours declined 1.7% which was
considerably above last year. Increased man-hours be­
tween June and July occurred in furniture, fabricated
metals, machinery, food, and seamless hosiery. Other
industries showed declines ranging from 0.9% to 2.5% .
The tobacco industry’s end-of-season operations de­
clined 4.4% .
Apparently, reduction in home building has not had
a commensurate effect on the lumber industry for July
man-hours in the Carolinas were down only 2.3% from
June and 4.9% from a year ago. The furniture indus­
try, in a downward trend for some months, reversed
direction during July by 0.5% . In textiles, man-hours
were down 1.7% from June to July (a less than sea­
sonal decline) and were 4.2% smaller than a year ago.
Broad woven fabrics were off 1.9% from June to July,
while yarn and thread slipped 1.1%. In man-hours,
however, broadwoven fabrics were 4.1% under a year
ago, and yarn and thread were off 8.5% . Full-fashioned hosiery continued its downward trend and ended
July 1.1% under a year ago. Seamless hosiery, how­
ever, rose 2.3% during the month and was 1.1% ahead
of a year ago. In the paper industries man-hours
slipped 2.5% during the month and were 0.9% smaller
than a year ago.
Construction

Total construction contract awards in July moved



contra-seasonally— the adjusted level was up 17% from
June and 9% ahead of July 1955; and the cumulative
loss for seven months was 10% from last year. In
this major sector strength came from public works and
utilities, which rose 78% (adjusted basis) from June
to July, 142% from July 1955 to July 1956, and showed
a seven months’ total up 29% from a year ago. Here
July awards were at an all-time high level, well above
any previous month. This is the only major segment
of the construction industry to show awards for the
seven months’ period ahead of a year ago. By con­
trast, nonresidential totals were down 16% and residentials were down 17%.
Apartments and hotels, manufacturing buildings, and
“ other” nonresidential awards showed adjusted in­
creases from June to July, while those for commercial
construction and one- and two-family houses decreased
substantially during the month. Awards for commer­
cial buildings in July were back to the level of late 1953,
while those for one- and two-family houses were lowest
since September 1953. Since April strength has been
shown in nonresidential contract awards other than
commercial, manufacturing, and educational. The May,
June, and July level of these awards is back near the
peak established early in 1955.
The areas of strength in construction awards were
those where structural steel requirements are greatest,
and it remains to be seen how much delayed steel de­
livery will retard completion of these projects.
Textiles

Cotton consumption (after seasonal correction) rose
3% from June to July, leaving July 1% and the first
seven months 4 % ahead of a year ago. Meanwhile,
adjusted cotton spindle hours rose 6 % , were 1% ahead
of a year ago, and for the first seven months were up
4% over 1955.
National shipments of rayon and acetate rose 5%
from June to July but were still 14% under a year a g o ;
for seven months they were 12% under last year.
Filament yarn shipments in July were 21% under a
year ago, while staple and tow shipments were up 2 % .
Operations in synthetic weaving mills have been on a
four-day week for the most part since April. W ith
production still apparently out of line with demand,
most large weavers planned a complete shutdown for
the week following Labor Day.
New business
industry in such
pillowcases, and
main, there has

has been written in the cotton textile
items as carded broadcloth, sheets and
some industrial fabrics; but in the
been very little forward coverage in

September 1956

/f& flM A //(& M 6U JL

most items and hopes for a sharp post-Labor Day up­
turn are still high.
Trade
The mixed trends in retail trade are presumably re­
lated to the relatively cool Summer and its influence on
major household appliance sales. Department store
sales (seasonally adjusted) established a new District
high in July— up 4% from June, 3% from a year ago,
and the seven months’ total was 5% over last year.
Sales were strong in women’s and misses’ coats and
suits, floor coverings, radios and television. The chief
weakness was in major household appliances, probably
accounted for by loss of sales of air conditioners and
fans. Total sales of appliance stores (without seasonal
correction) were 3% under July last year, though
seven months’ sales were 7% above a year ago.
Department store inventories were down 2% (after
seasonal correction) from June to July but were still
8% above July 1955. Outstanding orders (adjusted)
dropped 13% during the month but were 11% higher
than a year ago.

twenty-state decline of 13%.
New commercial car registrations rose 34% in North
Carolina but dropped 14% each in W est Virginia and
the District of Columbia. The three-state figure was
16% under a year ago compared with a twenty-state
figure of 11% , while the seven months’ total for the
District states was up 5% compared with a gain of 4%
in twenty states.
Banking
Total assets of Fifth District member banks declined
modestly ($60 million) from June to July. Loans and
investments were off $16 million and reserves, cash,
and bank balances declined $45 million. Compared
with a year ago, however, total assets were up $224
million, loans and investments were up $163 million,
and reserves, cash, and bank balances were up $51 mil­
lion. Loans and investments eased off because U. S.
Government obligations declined $22 million and other
securities were off $1 million, offset in part by a rise of
$6 million in loans and discounts. The $45 million
June to July decline in reserves, cash, and bank bal­
ances came mainly from $27 million less in balances
held with domestic banks and $18 million less in cash
items in process of collection.

Sales of retail furniture stores were off 1% (after
seasonal correction) from June to July, but July was
5% under the all-time peak established in July a year
ago. Sales, however, were not far below the 1956
highs established in April and May, and seven months’
totals were 7% above a year ago. Furniture store in­
ventories (corrected) rose 1% during July but were
1% smaller than in July 1955.

Total
slightly
million,
posits.
demand

New passenger automobile registrations rose 4% in
North Carolina, 1% in Virginia, and 13% in the Dis­
trict of Columbia from June to July. In the three areas,
however, sales were 15% and the seven months’ total
was 9% under a year ago. The 15% decline compares
with 20% in twenty states reporting in August for July,
and the 9% seven months’ figure compares with the

Bank debits in reporting cities of the District rose
6% (after seasonal correction). The month was a
sharp 11% above July 1955 and the seven months’ total
was also up 11%. Business and consumer loans of
the weekly reporting banks were at all-time high levels
in late August, while real estate loans were showing a
sagging tendency.




i 9 y

deposits of member banks in July were off
($38 million). Demand deposits slipped $54
offset in part by a $16 million rise in time de­
Deposits of banks rose $13 million, while other
deposits dropped $67 million. 4

Federal Reserve Bank of Richmond

F if t h

D is t r ic t

S t a t is t ic a l

F U R N IT U R E SA L E S*
(Based on Dollar Value)
Percentage change with correspond­
ing period a year ago
July 1956
7 Mos. 1956
STATES
Maryland ________ ... . _________
+ 7
+ 2
Dist. of Columbia .......... . . _____
+ 4
+ 11
— 1
Virginia . . . ___ .. .
. _________
+ 3
West Virginia __________ . . __ ..
+ 12
+ 2
North Carolina ____ ____ _______
— 8
+ 7
—20
South C a ro lin a _ _________________
_
+ 1
0
District ........ ......... ........ ._
+ 4
+
+
+
+
+
as

July
1956
Baltimore ____ $ 4,378,855
Cumberland ....
108,595
449,850
F red erick____
Hagerstown
61,685
S a lis b u ry ____
68,487

July
1955

7 Months
1956

7 Months
1955

$ 8,334,200
81,050
431,800
108,525
65,780

$ 31,492,438
1,037,100
3,801,760
806,510
1,282,005

$ 62,944,422
984,341
1,974,975
1,552,785
1,312,056

Stocks on
July 31, 1956
compared with
July 31, June 30,
1955
1956
— 7
— 9

+ 2

+21

+ 3
— 4

— 7
— 13

+ 19

0

— 3
+35

+10

+ 1

+11

+ 2
+ 1

+10

+27

— 3
+ 5
— 10
— 4
— 5

+22

NA
+21
+12

NA

Virginia
Danville _____
Hampton ____
Hopewell ____ _
Lynchburg ___
Newport News
Norfolk ______
Petersburg ___
Portsmouth ....
Richmond ____
Roanoke______
Staunton _____
W a rw ic k _____

461,328
421,491
134,999
799,620
97,229
2,741,193
582,000
315,155
2,209,306
1,117,772
328,750
622,435

472,823
1,622,345
231,139
619,690
138,820
878,393
948,000
1,276,070
1,042,170
1,066,437
256,790
1,002,941

5,169,919
4,969,222
1,504,657
6,675,555
1,304,495
17,426,893
2,022,050
3,507,084
17,772,859
13,842,587
1,785,339
4,749,795

4,283,107
10,148,248
2,240,775
6,822,208
1,400,321
8,227,845
2,694,400
3,070,785
13,770,119
7,576,561
1,923,095
7,487,726

1,068,833
148,481
353,590

598,860
190,824
468,711

5,477,204
1,339,173
2,909,365

4,002,275
1,254,288
4,142,779

North Carolina
Asheville_____
Charlotte ____
Durham _____
G asto n ia_____
Greensboro ___
High Point ....
Raleigh ______
Rocky Mount ..
Salisbury ____
Wilson ___ ____
Winston-Salem

1,335,284
2,208,166
1,135,928
544,300
1,414,567
530,480
1,453,432
190,108
95,150
385,200
779,267

216,997
2,929,035
1,036,679
585,150
948,796
495,487
2,062,153
357,485
44,397
523,300
901,798

4,693,105
19,618,705
5,661,788
3,917,200
10,258,592
3,643,089
7,906,600
2,136,522
1,440,100
3,178,653
9,192,258

1,874,077
18,104,593
7,994,936
4,772,850
6,781,743
4,707,351
13,437,501
2,246,671
843,775
2,374,575
8,213,001

South Carolina
Charleston ___
Columbia _____
G reenville____
Spartanburg __

2
4
3
6
3
well as

W H O LE SA LE TRADE

LINES
Auto supplies ______________
Electrical, electronic and
appliance goods __________ — 6
Hardware, plumbing, and
— 3
heating go od s____________
Machinery equipment sup­
plies _______________ ___ ___ + 2 3
Drugs, chemicals, allied
products__________________ + 1 4
Dry g o o d s __________________ + 1 3
Grocery, confectionery,
m e a t s ____________________
— 1
Paper and its products____ + 1 9
Tobacco products __________ + 3
Miscellaneous _______________ + 1 7
District t o t a l __________— + 8

B U IL D IN G P E R M IT F IG U R E S

West Virginia
C h arleston___
Clarksburg ___
Huntington __

IN D IV ID U AL CITIES
Baltimore, Md.
. .... .. . . . __
+ 7
Washington, D. C. . . ___________
+ 11
Richmond, Va. ____________________
+ 9
— 1
Charleston, W . Va. . . . . ________
Greenville, S. C. __________________
— 10
* Data from furniture departments of department stores
furniture stores.

Sales in
July 1956
compared with
July
June
1955
1956
+13
—46

data

228,264
582,559
407,480
209,777

223,517
636,964
572,588
443,239

2,313,488
6,634,139
4,144,441
3,229,965

1,899,294
5,057,081
4,766,600
1,579,929

5,476,327
$37,289,280

33,259,389
$250,104,044

49,574,727
$282,041,815

Dist. of Columbia
Washington _
6,457,732
District Totals ..$34,427,348

N A Not available.
Source: Bureau of the Census, Department of Commerce.

F IF T H D IS T R IC T IN D E X E S
D E P A R T M E N T ST O R E O P E R A T IO N S
(Figures show percentage changes)
Other
Rich. Balt.
Wash. Cities
Sales, July ’56 vs July ’55 _
Sales, 7 Mos. ending July 31,
’56 vs 7 Mos. ending July
31, *55 -------------------------------

0

+

Stocks, July 31, ’56 vs ’55 _
Outstanding orders,
July 31, ’56 vs ’5 5 ----- -----

5

+ 1

Seasonally Adjusted: 1947-1949 = 100
Dist.
Totals

0

+ 1

0

+ 3

+ 7

+

+ 5

+ 7

+14

+ 18

+ 12

+

+

+27

+ 11

+

6

7

+

6

6

Open account receivables, July
1, collected in July ’56 -----

27.5

46.8

42.3

36.3

39.3

Instalment receivables, July
1, collected in July ’56 __

11.9

13.8

12.5

14.8

13.2

D.C.

Va.

Md.
Sales, July ’56 vs July
’5 5 ___________________




+ 1 +1

July
1956

W .V a.

N.C.

S.C.

+ 4

— 3

— 2

New passenger car registra­
tion* ____________ _____________
Bank debits
...............................
Bituminous coal production*__
Construction contracts ________
Business failures— number . _ ...
Cigarette production
. _____
Cotton spindle hours ..................
Department store sales ...
Electric power production
Manufacturing employm ent*__
Furniture store sales
Life insurance sales -----

191
82
267
333
126
140
125
223

* Not seasonally adjusted,
r Revised.
Back figures available on request.

{ 10 j*

June
1956

July
1955

% Chg.—
Latest Mo.
Y r.
Prev.
Mo.
Ago

168
180
103r
229r
280
101
119
134
200
111
126
228

190r
172
97r
246
226
97
125
136r
194
109r
132
187

— 2
+ 6
—20
+ 17
+ 19
— 6
+ 6
+ 4
+ 1
0
— 1
— 2

— 17
+ 11
— 15
+ 9
+47
0
+ 1
+ 3
+ 6
+ 2
— 5
+ 19

ffa/oswL

September 1956

F

if t h

D

is t r ic t

B

D E B IT S TO D E M A N D D E P O SIT A C C O U N T S*
(000 omitted)
1956
1955
1956
1955
July
July
7 Months
7 Months
Dist. of Columbia
$1,496,286 $1,315,904 $10,485,530 $ 9,312,203
Washington ___
Maryland
Baltimore _ ____
1,739,077
1,550,938
12,166,883
10,931,584
32,457
25,968
Cumberland ____
194,471
176,775
Frederick _____
25,186
21,857
181,408
162,414
Hagerstown ____
51,426
49,630
336,671
305,858
Salisbury** ____
38,392
33,674
254,136
234,674
Total 4 Cities
1,848,146
1,648,393
12,879,433
11,576,631
North Carolina
Asheville _ _
_
74,546
67,270
509,776
461,789
Charlotte _ _ .
425,368
380,817
3,088,146
2,807,067
Durham ________
88,408
88,710
603,415
571,821
Greensboro _____
168,895
159,393
1,131,804
1,028,150
High Point**
51,155
48,394
385,287
347,149
Kinston ________
22,354
23,480
155,706
156,995
Raleigh ............... .
233,533
186,089
1,639,858
1,473,337
Wilmington ____
54,307
53,339
374,352
366,861
Wilson _________
20,319
21,019
146,631
139,782
W inston-Salem
178,386
157,107
1,330,509
1,177,076
Total 9 Cities
1,137,224
1,266,116
8,980,197
8,182,878
South Carolina
Charleston _____
92,575
83,378
645,843
580,958
Columbia ______
187,060
194,557
1,366,825
1,258,373
Greenville ______
132,415
122,911
998,000
888,270
Spartanburg
68,932
60,073
489,616
450,591
Total 4 Cities
480,982
460,919
3,500,284
3,178,192
Virginia
Charlottesville
38,259
37,680
269,546
257,142
Danville________ _ _
39,321
35,770
295,556
268,283
Lynchburg _____
59,116
52,501
429,705
375,501
Newport News
62,416
54,917
439,792
384,729
Norfolk
323,340
293,334
2,179,665
2,010,597
Petersburg**
26,022
30,433
201,585
214,874
Portsmouth
37,897
34,693
264,388
251,665
636,584
Richmond ______
731,492
4,875,363
4,532,187
Roanoke _______
158,757
138,338
1,078,899
905,433
1,450,598
1,283,817
9,832,914
Total 8 Cities
8,985,537
W est Virginia
53,488
43,205
395,543
308,429
Bluefield ... __ ..
Charleston _____
170,190
166,548
1,262,586
1,178,672
283,794
Clarksburg ____
39,199
36,958
251,153
80,692r
83,659
599,461
556,343r
Huntington ___
35,994
Parkersburg
36,266
256,462
226,136
363,669r
Total 5 Cities
382,530
2,797,846
2,520,733r
District Totals _____ $6,924,658 $6,209,926r $48,476,204 $43,756,174r
* Interbank and U. S. Government accounts excluded.
** Not included in District Totals,
r Revised.




a n k in g

S

t a t is t ic 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
(000 omitted)
Change in Amount from
Aug. 15,
July 18,
Aug. 10,
1956
1956
1955

Items

Total Loans ____________________ $1,840,320**
Bus. & Agric. ________________
842,069
Real Estate Loans ___________
333,901
All Other Loans ___________ _
690,620

+

8,639
9,746
1,160
5

+169,860
+ 92,998
+
4,228
+ 76,661

Total Security Holdings ______ 1,638,068
U. S. Treasury Bills _________
43,956
U. S. Treasury Certificates__
54,201
U. S. Treasury Notes ________
306,986
U. S. Treasury Bonds ________
967,046
Other Bonds, Stocks & Secur.
265,879

+ 41,566
— 2,803
+ 43,631
+ 13,859
— 12,244
—
877

— 91,010
— 13,096
+ 26,822
— 45,820
— 54,458
— 4,458

Cash Items in Process of Col. _
Due from B a n k s________________
Currency and C o in ____________ .
Reserve with F. R. B a n k s____
Other Assets ___________________

+

376,203
170,707*
74,490
515,888
72,384

+
—
+

+

27,401
2,072

+ 79,107
— 4,370
— 3,940
+
9,787
+
2,717
+162,151

Total Assets _________________$4,688,060

+

4,552
35,758
1,354
40,722

Total Demand Deposits _______ $3,508,614

+

24,475

Deposits
Deposits
Deposits
Deposits
Certified

of
of
of
of
&

Individuals ._____ 2,618,275
U. S. Government
131,278
State & Local Gov.
207,418
Banks ___________
489,877*
Officers’ Checks ..
61,766

+

+ 118,963

— 10,125
+ 26,488
+
5,000
— 1,434
+
4,546

+
+
+
+
+

55,787
35,018
13,476
9,272
5,410

766,200
689,805
76,395

1,153
337
816

+

11,079
7,061
4,018

Liabilities for Borrowed Money
23,650
51,728
All Other Liabilities___________
Capital Accounts ______________
337,868
Total Liabilities _____________ $4,688,060

9,100
5,571
2,729
40,722

Total Time Deposits ___________
Deposits of Individuals ______
Other Time Deposits _______

* Net figures, reciprocal balances being eliminated.
** Less losses for bad debts.

{ ii y

4,150
9,314
+ 26,945
+ 162,151

+





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102