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Mo n t h l y

Re v ie w

F E D E R A L R E S E R V E B A N K O F ATLANTA
Volume X X X V II

Atlanta, Georgia, August 3 1, 1952

F a r m

,

R e a l

S i x t h

E s t a t e
D

i s t r i c t

Banks are financing an increasingly large share of the in­
vestment needed to make District agriculture more efficient
and more rewarding to those who till the soil. Most of this
investment comes from farmers’ own savings, but the 11 6
percent increase in farm loans at District banks from June
1946 to June 19 5 1 reveals the growing importance of the
role played by these institutions.
Although most bankers think of loans in terms of how
the money is to be used and of the general credit-worthiness
of the borrower, rather than in terms of the security taken,
farm loans are commonly classified into two groups— those
secured by mortgages on real estate and those secured in
other ways. Because loans secured by mortgages on real
estate are usually considered long-time investments, state
and national banking laws prescribe specific rules by
which banks must be guided. Out of many years of experi­
ence, bankers and supervisory authorities also have evolved
some general principles or policies in regard to farm real
estate loans that are intended to protect the long-run in­
terests of lenders as well as borrowers.
The Problem
The increased demand for farm real estate loans in the
last few years has created a quandary for many bankers.
If they adhere closely to traditional thinking in regard to
real estate loans, they may fail to provide what they con­
sider to be legitimate credit needs of their communities.
If they attempt to meet all legitimate needs for real estate
credit, they may overstep the boundaries set by the princi­
ples of prudent banking. How this problem is solved has im­
portant implications for the future of agriculture, as well
as for the continuation of bank leadership in this field of
financing.
From the banks’ standpoint, the solution depends partly
upon the answer to the more general question of what
should be the place of real estate loans in the investment
and lending program of a commercial bank. In this coun­
try, the practice of commercial banks with respect to real
estate lending has always run counter to the theory that
banks should extend credit only for short periods and for



L e n d i n g

Number 8

a t

B a n k s

purposes that result in the self-liquidation of the credit.
Even before the passage of the Banking Act of 1865, state
chartered banks were heavily involved in loans on both
farm and urban property. Although these banks have suf­
fered heavy losses on real estate mortgages, they continue
to be important sources of mortgage credit.
National banks were completely barred from mortgage
lending until the passage of the Federal Reserve Act in
19 13 . This act permitted national banks to make loans on
farm property for five years and up to 50 percent of ap­
praisal value with the further provision that the total of
such loans at a bank did not exceed 25 percent of its capital
and surplus or one-third of the time deposits. The authori­
zation was liberalized further in 19 16 , 1927, and 1935, and
at present these banks may lend up to 60 percent of ap­
praisal value for ten years, provided that the instalment
payments are sufficient to amortize at least 40 percent of
the principal within a ten-year period. The total of such
loans cannot exceed the capital and surplus or 60 percent
of the time and savings deposits.
Bankers’ attitudes toward real estate lending, however,
probably have been influenced more by their experiences in
the period between the two world wars than by the re­
strictions imposed by federal and state regulatory authori­
ties. Commercial banks were the principal lenders in the
farm land market boom that occurred during and imme­
diately following World War I. In 1920, banks held 49
percent of the total farm mortgage debt held by all institu­
tional lenders in the United States. The sharp decline in
farm prices in 1920 was accompanied by declines in de­
posits of banks in rural areas and defaults on loans secured
by mortgages on real estate. The immediate cause of many
of the bank failures during the 1920’s was the large in­
vestment in farm real estate mortgages that could not be
liquidated without large losses. Of the 5 ,4 11 banks sus­
pending operations from 19 2 1 through 1929, about 92 per­
cent were in towns of less than 10,000 population where
real estate loans were normally an important part of total
loans.
A lth o u g h b a n k s m a n a g e d to liq u id a te a la rg e s h a re o f

62

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o f th e F ederal R eserve B a n k o f A tla n ta fo r A u g u st 1952

their farm real estate loans during the 1920’s, they still
held 20 percent of the total held by institutional lenders in
1930. The collapse of farm prices in the early thirties
brought about another forced and wholesale liquidation of
farm mortgage indebtedness. Banks in agricultural areas
again had heavy deposit withdrawals and many failed. A
large number of the surviving banks incurred heavy losses
because of the hurried sale of foreclosed real estate. By
1936, banks held only 1 1 percent of the farm mortgage
debt that was held by institutional lenders.
The banks’ experiences with real estate loans, and partic­
ularly farm real estate, indicate that such lending can be
very hazardous. It should be stressed, however, that lending
on real estate was not the only reason for bank failures or
losses. Many other types of loans and investments became
frozen assets. Some bankers in rural areas still believe that
a conservative loan secured by a first mortgage on farm land
is the safest type of loan they make and can cite their loss
experience during the depression to substantiate their judg­
ment.
Although the depression experience does not provide
specific answers to the question of the place of real estate
loans in commercial banks’ lending programs, it does show
that caution with respect to these loans is justified. A ll
banks, therefore, probably will continue to set some upper
limit on the amount of real estate loans held. For national
banks this limit will probably be prescribed by law, and
for state banks it will be based on past experience and
judgment of the lending officers. In any event, it seems
probable that both state and national banks will continue
to have the problem of keeping real estate loans within
reasonable limits.
The increased demand for real estate loans has come
largely since 1946. During the war, construction activity
was at a very low level and relatively little credit was
needed for this purpose. Farm prices and incomes were very
favorable and farmers repaid their farm mortgage loans
rapidly. In spite of the increase in land values brought
about by favorable incomes, farm transfers did not increase
greatly. Many older farm operators continued to farm past
the usual age of retirement and many young men who
ordinarily would have started to farm during this period
were called into the military service.
After the war the deferred demands for real estate credit
began to be felt. In 1946, banks were in an excellent posi­
tion to meet these demands. During the five years ending
January 1, 19 5 1, for example, District banks increased their
holdings of farm real estate loans by approximately 120
percent. Of the total farm mortgage debt held by institu­
tional lenders in 1946, commercial banks had only 19 per­
cent; by 19 5 1, commercial banks had brought their share
to 29 percent.

In addition to what might be termed the normal increase
in demand for real estate credit brought about by the war,
recent adjustments in District agriculture have also in­
creased the demand. These adjustments have consisted large­
ly of a shift toward livestock and an increase in the size of
the average farm business. Both these developments involve
larger amounts of invested capital and an increased demand
for investment or capital credit as distinguished from oper­
ating credit. Although the demand for operating credit has
also grown during this period, there is considerable evidence
that much of this credit is being used for capital or invest­
ment purposes.
Some Exam ples

How the increased demands for real estate credit have
been reflected in the lending activities of District banks
can be illustrated by recent developments at a few selected
banks. The banks used for illustration are located in small
towns in agricultural areas and depend upon agriculture
for a large share of their deposit and loan business.
Bank A experienced the typical rapid rise in deposits
during the war, and in 1946 its deposits nearly reached
the three million dollar mark. At that time, loans amounted
to only 15 percent of total deposits and real estate loans
were only 2 1 percent of time deposits. Real estate loans to
farmers accounted for 89 percent of total real estate loans
outstanding. From 1946 to 19 5 1, all types of loans in­
creased rapidly, and in the latter year loans amounted to
43 percent of total deposits. Total real estate loans were
62 percent of time deposits, slightly in excess of the legal
limit for national banks. Real estate loans were about the
same proportion of total loans in 19 5 1 as in 1946. The
total increase in real estate loans was about evenly divided
between urban and farm loans with the result that farmers
were receiving only 46 percent of the real estate credit
extended in 19 5 1. Time deposits increased during the fiveyear period, but at a much slower rate than real estate loans.
Bank B also had a sharp increase in deposits during the
war and a reduction in loans. By 1946, this three-milliondollar bank had only 12 percent of its deposits loaned out
and total real estate loans were only 30 percent of time
deposits. Real estate loans to farmers accounted for 36
percent of total real estate loans. This bank also had de­
mands for all types of loans after the war and by 19 5 1,
total loans amounted to 5 1 percent of total deposits. Total
real estate loans were 13 2 percent of time deposits, with
farm loans accounting for 56 percent of all real estate
loans. Most of the increase in real estate loans, in other
words, resulted from increased credit demands by farmers.
In contrast to Bank A, this bank had a decline in time
deposits from 1946 to 19 5 1, which also brought it closer
to a point of decision in regard to its real estate loans.
Bank C increased its total loans from 37 percent of total
FARM M O RTGA GE DEBT HELP BY IN STITU TION AL LENDERS
deposits in 1946 to 59 percent in 19 5 1. Here the restricting
influence on real estate loans may stem more from the total
Percent Held by Commercial
Amount, (in Millions of Dollars) ____________ Banks____________
loan and deposit relationship than from the specific in­
_________________ 1940
1946
1951
1940
1946
1951
crease in real estate loans. Real estate loans increased from
A l a b a m . . .a. . . . . . . . . . . . . . . . . . . . . .
5 0 .6
3 8 .4
95 . 1 . 0
5
1 5 .1
2 9 . 1 46 percent of time deposits in 1946 to 72 percent in 19 5 1.
F l o r i d a. . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 . 1
1 6 .3
3 7 .4
1 3 .0
2 0 .1
1 8 .8
G e o r g i a ........................
6 4 .3
4 8 .7
6 5 .2
1 0 .6
1 8 .In contrast5 to Bank B, most of the gain was in urban real
0
3 2 .
L o u i s i a n a ....................
4 1 .3
3 4 .5
4 2 .1
1 4 .7
1 4 .6
2 7
'estate loans. . 2
M is s is s ip p i
..................
7 2 .9
6 0 .8
8 4 .2
1 1 .2
1 1 .3
1
2
At5 . Bank D, 87 ..loans increased from 12 percent of total
T e n n e s s e e
....................
7 0 .0
4 4 .8
6 2 .7
1 6 .9
3
4
4
5
deposits in 1946 0 to 42 percent in 19 5 1. Although real estate
S ix t h
D is t r ic t
S t a t e s ..
3 2 1 .2
2 4 3 .5
3 4 2 .0
1 2 .7
1 8 .9
2 9 .




o f th e F ederal R eserve B a n k o f A tla n ta fo r A u g u st 1952

M o n t h l y R e v ie w

loans increased rapidly during this period, they amounted
to only 43 percent of time deposits in 19 5 1. This favorable
relationship arose largely because time deposits have always
been large in relation to total deposits at this bank. Real
estate loans are about as large a proportion of total loans
and of total deposits at Bank D as at the banks mentioned
earlier.
These case histories show that individual banks have
arrived at a point of decision with respect to their real
estate loans for a variety of reasons. There is no evidence
that any of them had to turn to real estate loans in order
to build up their loan volume. The increases in real estate
loans appear to reflect only the increased demands for this
type of credit. The stronger demand for farm real estate
credit, however, probably is mainly responsible for bankers’
renewed interest in the legal and prudent restraint on real
estate lending.
Bankers in agricultural areas of the District have an
interest in agriculture that goes beyond the mere fulfill­
ment of farmers’ financial needs. Individual bankers and
the state associations, through their agricultural committees
have conducted tours, sponsored credit schools, promoted
farm youth activities, and assisted in the establishment of
marketing facilities for the purpose of helping farmers to
increase their earning power. They have also encouraged
farmers to embark on such projects as pasture improve-

LOANS AND DEPOSITS AT SELECTED BANKS
THOUSANDS OF DO LLARS
I
1 I
1 • 1 I— 1 1 1
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B A N K

3000

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THOUSANDS OF DOLLARS
1----,---- ,----,---- ,---1 i

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1950

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1950

THOUSANDS OF DO LLARS
— I— r

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B A N K

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• ^ ^ • v / o F TIME DEPS.
/ / F A R M R .E . LOANS
• •• •• • • • • • • • • ••••••
............ ................... j,
* A 1 A A A A A "A I — X— T




1000

6 0 % OF
TIM E DEPOSITS

lo a n s/

,.* .—

I ....

63

ment, land clearing, fencing, and the enlargement of live­
stock herds. Often the farmer must borrow part of the
money used for these purposes.
Bankers have met most of these loan demands without
taking a real estate mortgage as security. A survey of farm
loans at District banks in 1950 showed that real estate, or
a combination of collateral that included real estate, was
used on only 9 percent of the loans made and was not used
with any greater frequency on livestock expansion loans
than on crop production loans. Of the money borrowed 27
percent was used to begin or expand livestock enterprises.
Of the livestock expansion loans, 46 percent were made with
some verbal understanding about a renewal. Bankers, in
other words, are now extending large amounts of so-called
“ intermediate” farm credit. As farmers go further into their
livestock expansion program, however, and as the demand
for this type of credit grows, there is a question of whether
banks should have the additional security provided by a
mortgage on the farm. For banks that are approaching their
legal or prudent limit on real estate loans, this is a serious
question.
Because all banks are not subject to the same restrictions,
it is difficult to ascertain just how many banks are nearing
their limit. The current situation at the national banks,
however, may be indicative. On June 30, 19 5 1, about 27
percent of the national banks held real estate loans amount­
ing to 80 percent or more of their legal limit. Of the
national banks with less than 3.5 million dollars of deposits,
38 percent had real estate loans amounting to 80 percent
or more of their legal limit. About one-fourth of the na­
tional banks with deposits of 3.5 million dollars to 10
million had 80 percent or more of their legal limit in real
estate loans. For all national banks with deposits of less
than one million dollars, aggregate real estate loans
amounted to 80 percent of the aggregate legal limit. For
banks with deposits of one million dollars to 3.5 million,
real estate loans amounted to 67 percent of the aggregate
legal limit; and for those with deposits of 3.5 million
dollars to 7 million, the figure was 58 percent at the middle
of 19 5 1.
These figures indicate that about one-fourth of the na­
tional banks are now at a point where they must be con­
cerned about further expansion of their real estate loan
volume. They also show that the problem is concentrated
largely in the smaller banks, which, of course, are the ones
most concerned with farm credit.
Tabulations by type of farming areas indicate that banks
located in areas where farm credit is an important part of
the total loan business are more heavily involved in real
estate loans than are banks in areas where agriculture is less
important. Within farming areas, the tendency for the
smaller banks to be nearer their legal limit on real estate
loans persists.
This does not mean, however, that the smaller banks have
approached their limit primarily because of extensions of
farm credit. Of the banks with deposits of less than 3.5
million dollars and with real estate loans amounting to 80
percent or more of their legal limit, 59 percent had less
than a third of their total real estate loans in farm real
estate loans.

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M o n t h l y R e v ie w

The stricter regulations concerning the aggregate amount
of real estate loans at national banks, compared with state
banks, are reflected in their lower proportion of real estate
loans to total loans and to time deposits. On June 30, 19 5 1,
at banks with deposits of one million to 3.5 million dollars,
for example, real estate loans were 28 percent of total loans
at national banks and 36 percent of the total at state memREAL ESTATE LO AN S AT N A TIO N A L AND STATE MEMBER BA N K S
Deposit Size of Bank (in Millions of Dollars)
73.51.3Less Than
10
7
5
1

REAL ESTATE LOANS

As Percent of Total Loans
National Banks......................
State Members......................
As Percent of Time Deposits
National Banks......................
State Members......................

26
25

28
36

25
34

24
31

48
55

40
65

35
47

30
36

ber banks. For this same size group, real estate loans were
40 percent of time deposits at national banks and 65 percent
of time deposits at state member banks.
Because of large fluctuations in deposits and loan demands
from area to area and from bank to bank within an area,
it is not possible to devise a rigid formula for determining
a prudent limit for real estate loans. If it is assumed, how­
ever, that bankers as a group have been exercising reason­
able caution, the deviation from average ratios of loans to
deposits and of real estate loans to total loans by any par­
ticular bank is a rough measure of how near it is to a
prudent limit. It may be safe to assume that a bank which
is above the average in ratio of loans to deposits and far
above the average in ratio of real estate loans to total loans,
is at or near the limit dictated by prudence. Among District
banks with deposits of 10 million dollars or less, loans
amounted to about 35 percent of deposits, and real estate
loans accounted for 28 percent of all loans. Of the banks
that had more than 35 percent of their deposits loaned out,
8 percent had more than half of their loans in real estate
loans.
Implications
The farm real estate credit situation described here has
at least two important implications. One is that some farm­
ers will have to look beyond their local bank if they con­
tinue to expand their use of this type of credit. The other is
that some bankers may have to devise new policies in regard
to these loans if they are to continue to strengthen the
position of leadership they have assumed in the farm fi­
nancing field.
Although District farmers have other sources of real
estate credit available such as federal agencies, insurance
companies, and individuals, most of them prefer to use
their local bank. The principal reason for this preference
is that banks offer superior service. The banker usually
knows the farmer’s character, financial capacity, farming
ability, and in addition, has a good idea of the value of
the property offered as collateral. As a result, closing and
servicing costs are low and the loan can be closed very
quickly. Since individual banks do not have to follow any
complicated set of rules or regulations prescribed by a



o f th e F ederal R eserve B a n k o f A tla n ta fo r A u g u st 1952
central or national office as is the case with some other in­
stitutional lenders, they can be more flexible in the terms
and conditions of loans granted.
For District farmers, however, the greatest single advan­
tage possessed by banks is that they will lend relatively
small sums for short periods. Most insurance companies, for
example, do not like to make real estate loans for less than
five years or for less than five thousand dollars. Because of
their low costs and flexible arrangements, banks can and do
make this kind of loan with benefits to themselves and to
their customers. Farmers, therefore, have a vital interest in
the continued expansion of real estate lending at commercial
banks.
Since the end of World War II, commercial banks have
achieved a greater position of leadership in farm financing
than at any time in the last 30 years. A skillful handling of
the farm mortgage loan problem is essential if they are to
retain and expand this leadership. It does seem certain, on
the other hand, that the present is a poor time for any re­
laxation of the restrictive and cautious policies followed by
all institutional lenders on farm property during and since
the war. These policies have undoubtedly promoted the fi­
nancial stability of agriculture and have helped prevent a
disastrous farm land boom such as that of the twenties. Fur­
thermore, many farmers are operating on such a high level
of costs that a decline in farm prices coupled with an in­
crease in fixed costs, such as mortgage loan repayments,
could bring serious difficulties.
What is needed are bank lending policies that will con­
tinue to encourage farmers to make capital investments that
will increase their efficiency, that will enable banks to retain
their position of leadership in farm lending, but will also
keep total real estate loans within safe limits. Such a policy
must go beyond the policy that has been followed at most
banks, that is, the meeting of all legitimate credit demands
as they arise. It must provide a definite guide in determin­
ing the kind of loans a bank will make. It should be based
upon the goals that a particular bank wishes to attain and
upon the needs of the community served. A bank, for ex­
ample, that wished to promote the establishment of Grade A
dairies might find it necessary to curtail real estate loans on
urban property and loans for the purchase of farms in order
to have sufficient funds available for the dairy development.
The bank, in other words, would be reserving what might be
termed its real estate lending power for the purpose that its
management believed would make the greatest contribution
to the economic growth of the community.
How well such a policy would work might depend partly
upon the performance of other institutional lenders such as
insurance companies and the federal agencies. The bank, for
example, would be in a much better position to reject an
application for a real estate loan it did not wish to make if
it could send the prospective borrower to a satisfactory
source of credit. In any event, policies with respect to real
estate loans deserve careful consideration by bankers who
are serving agricultural areas. Banks can render the greatest
service to farmers and can use their own resources most
profitably and safely by concentrating on the kind of real
estate loans they are best fitted to make.
B

row n

R.

R

a w l in g s

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o f th e F ederal R eserve B a n k o f A tla n ta fo r A u g u st 1952

65

District Business Conditions
T h e

O u tlo o k

Usually, by the end of summer, member banks in this Dis­
trict find their total loans lower than at the first of the year.
This year, however, their loans outstanding were 67 mil­
lion dollars greater at the end of Ju ly than at the first of
the year. The growth, however, probably did not continue
through August.
Demands for bank credit strong enough to offset seasonal
declines merit attention, if only for possible clues about
future demands. They also merit attention because they
ended the less-than-national increase in loans at District
banks that occurred during 19 5 1.
Of the 2 .1 billion dollars of total loans outstanding at
District member banks at mid-year, about 45 percent were
to commercial and industrial concerns. Consumer loans
accounted for roughly 20 percent of the total, and real
estate loans for about 15 percent. Loans to farmers account­
ed for 4 percent, and other types, including single payment
In 1 9 5 2 , LOANS at District member banks have con­
sistently expanded in contrast with the decline oc­
curring during the corresponding period last y e a r.

loans, made up the remainder. These proportions vary
from bank to bank, of course, with agricultural loans
assuming more importance at the smaller banks; at banks
in cities of less than 2,500, loans to farmers amounted to
37 percent of total loans.
Lending to consumers, security purchasers, and farmers,
however, explains most of this year’s growth in total loans
and the growth from last year. Between the first of the year
and the end of June, total loans increased 70 million dol­
lars; consumer loans increased 30 million dollars; loans
for purchasing or carrying securities, 14 million; loans
to farmers, 10 million; and real estate loans, 9 million.
Single payment loans to individuals of over 3,000 dollars
increased 6 million dollars. Commercial and industrial
loans declined slightly although at the end of June this
year they were 26 million dollars greater than a year ago.
As a rule, small town bankers have been more active in ex­
tending credit than bankers in the larger cities.
During the remainder of this year, retail and wholesale
merchants, the chief business borrowers, will need more




fo r B a n k

C re d it

credit to finance larger inventories and accounts receivable
accompanying increased fall and winter sales. Also credit
demands from many District manufacturers should be great­
er because manufacturing is usually stepped up during the
latter part of the year. Although farm production loans
ordinarily decline in the fall, commodity dealers will prob­
ably need credit to help finance the marketing of crops.
On the basis of past experience, seasonal influences can
be expected to cause about a 7-percent rise in loans out­
standing from the end of August through the end of the year.
A forecast of demands for credit at District banks during
the remainder of the year, however, also requires an an­
alysis of how credit demands arising from changing busi­
ness conditions may add strength or weakness to seasonal
demands.
Trade Credit
Trade demand for working capital credit is, of course,
basically dependent on the sales outlook as forecast by the
businessman. On the basis of seasonal influences, depart­
ment store operators, for example, can safely forecast that
sales and stocks will rise in the last half of the year, where­
as cash receipts in relation to sales will decline. Consumer
purchases at District department stores in December norm­
ally jump about 1 1 0 percent above the Ju ly level. Since
60 cents of each dollar sale is made on credit, working capi­
tal requirements naturally increase. In anticipation of the
greater volume of sales in December, moreover, department
stores add to inventories so that the peak level in November
is usually 14 percent greater than in July.
But the merchant must also consider other factors that
may strengthen or weaken the seasonal pattern, and to some
extent these considerations are based upon his recent exper­
iences. Thus, in determining inventory policy he must con­
sider the level of stocks in relation to sales. Despite steady
The growth in LOANS at SIXTH DISTRICT MEMBER
BANKS from June 1951 to June 1952 has been
greatest in sm aller cities.

66

M o n t h ly

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o f th e F ederal R eserve B a n k o f A tla n ta fo r A u g u st 1952

liquidation, District department store stocks for the first
six months of 1952 averaged higher in relation to sales
than in other postwar years except 19 5 1, which is primarily
because of larger stocks of consumer durables. For non­
durables, which account for 80 percent of department store
sales, the ratio is more in line with the average for 1947-50
than is the ratio for durables. Some accumulation, there­
fore, may be necessary to meet even the seasonal demand.
In addition to credit demands for financing inventories,
the merchant must also consider how his working capital
needs will be influenced by current repayment practices on
the part of his customers. Seasonal changes in repayment
practices are indicated by the relationship between cash
receipts and sales. Cash receipts at District department
stores are generally higher in relation to sales in the first
part of the year because of repayments on credit sales made
during the last part of the preceding year, and lower in the
last half of the year because of the growth in credit sales.
There is, however, another trend apparent in people’s repay­
ment practices that is indicated by the relationship between
cash receipts and stocks and receivables combined. Peaks
and troughs of cash receipts during 19 5 1 and 1952 have
tended to lag only about one month behind corresponding
highs and lows of combined stocks and receivables. In ear­
lier years the lag was somewhat greater.
During 19 5 1, consumers in the District repaid their de­
partment, furniture, and household appliance store instal­
ment debts at an ever increasing pace while taking progress­
ively more time to dispose of charge account obligations at
department stores. In January 19 5 1, instalment accounts at
department stores were outstanding for an average of 13
months; by December the average time was 10 months. At
household appliance stores, the change was even more strik­
ing. In 1952, however, the repayment period began to
lengthen and with the suspension of Regulation W in May,
it probably has risen further, thereby increasing the cash
receipts lag and the demand for credit.
Trade demand for credit during the last half of 1952 un­
doubtedly will rise. Whether this demand will be above or
below seasonal expectations depends on the degree to which
rising needs to carry accounts receivable will be offset by
the probable less-than-seasonal expansion in inventory fi­
nancing.
Industrial Credit
Industrial activity, as indicated by employment figures,
normally becomes stronger in the second half of the year,
particularly in the textile, chemical, apparel, and food pro­
cessing industries. To date, employment in these major Dis­
trict industries has followed, fairly closely, the seasonal
pattern with the exception of the apparel business. Apparel
employment has risen steadily since January, and contraseasonally in April, May, and June. Increasing demands for
credit in these industries during the remainder of 1952 will
probably more than offset declining demands in others,
such as construction and primary metals, which do not
normally show a gain in the last half of the year.
Bank loans, according to limited data, have also followed
this seasonal trend. Industrial credit demands this fall will
depend essentially on the extent to which new orders can
be filled out of current inventories. Since inventories
through May 1952 were still high in relation to sales, a
moderate increase in consumer demand could probably be




S ix th D is tr ic t S ta tis tic s
IN A M N C SH L A S
ST L E T A O N
Report­
ing
No. of
Lenders
Lender
Federal credit unions . . . .
. . 37
State credit unions................. . . 17
Industrial banks...................... . . 10
Industrial loan companies . . . . 11
Small loan companies . . . .
. . 36
Commercial b a n k s .................. . . 33

Outstandings
Percent Change
July 1952 from
July
June
1951
1952
+5
+3
+29
+5
+1
+ 13
+0
+ 13
+2
+14
+3

Volume
Percent Change
July 1952 from
July
June
1952
1951
+52
— 23
— 25
+51
—7
+7
—4
+8
+2
+ 18
+ 46
+0

+10

R T IL FU N U E ST R O A N
EA
R IT R O E PER TIO S
Number
of Stores
Reporting
. . . 134
, . . 118
Instalment and other credit sales . . .
. 118
Accounts receivable, end of month . . . . . 126
. 126
Collections during month .
Inventories,end of month .
Item

Percent Change
July 1952 from
July 1951
June 1952
+29
— 15

—1

—10

+34
+37
+ 18

— 17
+3

+2

—8

+1

W O E L SA E A D IN EN R
H L SA E L S N V TO IES*
Sales
Percent Change
July 1952 from
June
July
Type of
1952
1951
Wholesaler
+23
+4
Automotive supplies . . .
—8
+14
Electrical— Full-line . . .
—2
— 17
“
Wiring supplies
—7
+69
“
Appliances . .
—6
+17
+1
— 19
Industrial supplies . . .
—8
+1
Jew elry..............................
+6
+11
Lumber and bldg. mat’ls .
—12
—0
Plumbing & heating supplies
6
+6
+30
Refrigeration equipment .
+ 12
+7
6
Confectionery....................
+9
+9
10
Drugs and sundries . . .
+20
+4
17
Dry goods..........................
39
+3
+13
Groceries— Full-line . . .
+ 10
+19
“
Specialty lines
10
9
—3
+13
Tobacco products . . . .
-6
+5
15
Miscellaneous..................
162
+1
+11
*Based on U. S. Department of Commerce Figures.
No. of
Firms
Report­
ing
4
3
3
5
7
13
4
7
4

No. of
Firms
Report­
ing
4

Inventories
Percent Change
July 31,1952, from
June 30 July 30
1951
1952
—S
+ 13
+4

+8

—4
—5

3
4
3
3
3
5
3

— 27
— 15
—9

—6
0

+ 21
—5
—3

6

—3
+4
—3
—5

3

12
28

6
6
11
100

+8
—2
—1

—12
+17

—12
—4
+ 17

—21
—5
—4
+ 10
+4

—8

D PA T E T ST R SA E A D IN EN R
E R M N O E L S N V TO IES*

Place
Birmingham......................
Montgomery......................
Jacksonville.....................
St. Petersburg..................
GEO RGIA..............................
Atlanta**.........................

Percent Change
Sales
July 1952 from
Yr.-to-Date
1952June
July
1951
1951
1952
+2
. — 20
+1
—4
+4
. — 21
+ 15
. — 18
+17
+6
— 15
+4
+5
— 14
+12
+7
— 14
+ 12

—12

— 16
. — 14
. — 12
— 17
, — 14
— 24

—20

+10

+6
+ 11
+ 16
+ 10
+7
+32
+13
+2
+9

+2

+4
+9
+ 10
+6

+2

+28

+8

Inventories
July 31,1952, from
July 31
June 30
1951
1952
—3
—1

+2

+i

—5

+2

+1

.
.
—3

—2
—2

+8

—4

+i

—10

+0

—2
+0

— 15

—i
—8
+5
— 25
.
.
+2
— 19
+19
+21
Savannah** ....................... . — 19
—
ii
+9
+3
—8
+ 16
LOUISIANA..........................
—8
+8
+5
+12
Baton Rouge ..................... , — 13
—12
+9
+ 16
+1
New Orleans......................
— 16
+4
+2
— 16
+1
M IS S IS S IP P I......................
— 19
+4
+3
, — 18
+1
.
+2
M eridian**...................... . — 9
+1
—10
+2
+4
+2
TENNESSEE ...................... . — 16
—2
—5
—4
— 24
—5
Bristol-Kingsport.
.
—6
—7
Johnson City** . . ., . — 19
+4
+ 18
Chattanooga.....................
—12
+0
—4
—7
— 15
—7
+0
+9
+9
Nashville........................... . — 21
—8
+7
+1
DISTRICT .......................... , . — 15
+ 10
♦Includes reports from 122 stores throughout the Sixth Federal Reserve District.
**ln order to permit publication of figures for this city, a special sample has been con­
structed which is not confined exclusively to department stores. Figures for any such
non-department stores, however, are not used in computing the District percentage
changes.

M

o n t h l y

R e v ie w

o f th e F e d e r a l R e s e rv e B a n k o f A t la n t a f o r A u g u s t 1 9 5 2

met without a noticeable rise in employment and produc­
tion. On balance, unless there is a sharper increase in de­
mand for textile products than has been apparent so far,
or unless over-all demands for consumer goods rise more
than usual, industrial credit needs probably will be below
seasonal expectations.
Consumer Instalm ent Bank Credit

Throughout most of 1951, commercial banks in the Sixth
District reduced their instalment loans to consumers, partly
because of consumer credit controls and voluntary credit
restraint. Beginning in October 1951, however, the trend
was reversed. Loans to finance automobile purchases ad­
vanced sharply in May and June, following the lifting of
Regulation W, while more moderate gains occurred in each
component of total consumer instalment credit.
Such credit at commercial banks can be expected to rise
in the latter part of the year as is true of instalment
receivables at District department, furniture, and household
appliance stores. The rapid growth in consumer instalment
credit during the last few months has exceeded seasonal
expectations, but it cannot be maintained during the re­
mainder of the year unless the recent high level of purchases
of major consumer durables is continued.
Farm Credit

FARM LOANS NOT SECURED BY REAL ESTATE
Sixth District M em ber Banks
MILLIONS OF DOLLARS

MILLIONS OF DOLLARS

IO
O
80
60
40




JUN.

DEC.

14
99

Sixth District Statistics
CONDITION OF 27 MEMBER BANKS IN LEADING CITIES

(In T
housands of D
ollars)

Item
L a s a d investm
on n
ents—
Total ....................
Lo n
a s—Net.............. .
L a s—Gross............ .
on
C m
om ercial, industrial,
a d agricultural lo n .
n
as
Lo n to b
a s rokers a d
n
dealers in securities .
O lo s for pur­
ther an
chasing or carrying
securities............
R a estate lo s . . .
el
an
Lo s to b n . . . .
an
a ks
O loans...............
ther
Investm
ents—Total . . . .
Bills, certfiicates,
an notes ..............
d
U S bo d ..............
. . ns
O securities...........
ther
R s rv with F. R B
ee e
. ank . ,
C s in vault.................
ah
B
alances with dom
estic
D m n deposits adjusted .
e ad
Tim deposits...............
e
U S G v’t deposits . . . .
. . o
D
eposits of dom ba .
estic nks

A 20
ug.
1952

July 16
1952

A 15
ug.
1951

P
ercent C a g
hne
A
ugust 20,1952, from
ug.
July 16 A 15
1952
1951

2,852,231 2,891,496 2,620,952
1,103,054 1,133,130 1,066,709
1,122,889 1,152,963 1,085,078
627,144 640j555 615,595
13,144
19,077
12,580

—1
—
3
—
3
—
2
—
31

+9
+3
+3
+2
+4

43,939
55,974
35,790
92,108
91,578
89,650
3,514
2,785
10,312
343,040 342,994 321,151
1,749,177 1,758,366 1,554,243
765,055 791,269 683,892
722,105 717,303 643,487
262,017 249,794 226,864
513,458 518,955 481,452
46,989
45,432
43,504
226,346 231,021 215A
519
2,086,327 2,090,876 1,969,881
552,194 5507779 526,043
170,130 211,703
75,695
587,348 586,025 568,972
16,000
24,500
11,750

—
22
+1
+26
+0
—1
—
3
+1
+5
—
1
+3
—
2
—0
+0
—
20
+0
—
35

+23
+3
—
66
+7
+ 13
+ 12
+12
+ 15
+7
+8
+5
+6
+5
+3
+36

*M than 100 percent.
ore

For the last few years, farmers in the Sixth District have
been using increasing amounts of bank credit. This has
been a natural result of rising production costs as well
as of farmers’ efforts to improve their facilities for pro­
duction. The 13-percent gain in total agricultural loans by
District member banks from June 1951 to June 1952 reflects
such demands for credit. The components of agricultural
loans—production loans and farm real estate loans—show
increases of 15 and 5 percent, respectively.
The pronounced seasonal pattern for agricultural pro­
duction loans has consistently varied from a high in June
to a low in December. The pattern for the last 10 years
shows December to be about 23 percent below the June
peak. This highly seasonal demand for loans is strongly
influenced by the District’s row crop agriculture.
When the seasonal variation and long-time trend are
taken into account, the expected volume of production loans
by member banks would be about 70 million dollars in
December 1952—a decline of 21 million dollars from the

20DEC. __ OEC. JUN. OEC. JUN. DEC.
JUN.
14 14
95 96 14
97
14
98

6 7

JUN.

DEC.

15
90

JUN.

DEC.

15
91

- JUN. DEC.
15
92

DEBITS TO INDIVIDUAL BANK ACCOUNTS

(In T
housands of D
ollars)

P
lace
ALABAM
A
Anniston . . .
B ingham . .
irm
D
othan . . .
Gd e . . .
a sd n
M
ontgom . .
ery
Tuscaloosa* . .
FLO ID
R A
Jacksonville . .
G
reater M i*
iam
O
rlando . . .
P sacola . .
en
St. P
etersburg .

P
ercent C a g
hne
July 1952 from Yr.-to-Date
July June July 7 M s. 1952
o
1951 1952 1951 from1951

July
1952

June
1952

.
.
.
.
.
.

28*729
403a
910
16,667
22,137
167,918
88^077
29,044

32,261
419,393
16,428
21,258
168,629
83,919
29,498

26,747
388,426
17,184
21,583
162,379
79,458
27,941

—11
—
4
+1
+4
—0
+5
—
2

+7
+4
—
3
+3
+3
+ 11
+4

+4
+6
—1
+1
+3
+3
—
0

.
.
.
.
.

382,218
319,615
500,400
73,755
48;i23
82a
921
162,630

391,352
321,660
487,699
76,381
48,180
78,004
174,614

332,275
280,867
431,248
63,122
40,426
67,371
143,104

—2
—1
+3
—
3
—0
+6
—7

+ 15
+ 14
+ 16
+ 17
+ 19
+23
+ 14

+5
+8
+9
+8
+ 14
+10
+4

+3
+3
+5
—
7
—
6
—17
+ 10
+0
+2
—
8
+8
+0
+44

+7
+ 13
+23
—
7
+9
+9
+ 24
+ 11
+11
—10
+ 15
+ 12
+5

+7
+5
+15
+2
+10
+4
+ 15
+3
+4
—1
—3
+4
+ 16

—10
+6
—3
+1

+ 12
+9
+ 17
+8

+ 11
+4
+ 13
+8

—1
+4
+3
+4

+8
+ 14
+ 10
+3

+5
+6
+2
+ 23

—1
—2
+4

+1
—
7
+ 15

—1
—
9
+7

+1

+ 10

+6

+2

+ 18

+6

GOG
E R IA
32,842
31,462
33,793
Albany ...........
Atlanta . . . . 1,149,249 1,120,226 1,019,619
77,387
95,390
90,678
A
ugusta . . . .
11,218
12,020
12,051
B
runsw . . .
ick
75,276
80,147
69,055
C bus . . .
olum
4,987
4,121
3,793
E
lberton . . . .
25,603
23,298
20,723
G
ainesville* . . .
12,312
12,355
11,132
Griffin* . . . .
77,499
76,216
70,112
M
acon............
9,927
10,839
11,090
Nwa . . . .
e nn
25,276
23,397
22,018
118,578
118,552
106,298
S va n h . . . .
a na
24j_629
17,081
23,426
Valdosta. . . .
LO
UISIANA
38,941
43,742
48,842
Alexandria* . . .
115,865
112,965
122*863
B Ru e . .
aton o g
53,118
44,011
51,481
L ke C arles . .
a h
812,472
875,938
864,408
N wO an . .
e rle s
M
ISSISSIPPI
17,794
19,294
19,481
H
attiesburg . . .
148,714
163,396
170,045
Jackson . . . .
30,884
30,120
28,181
Meridian. . . .
28,676
28,939
29*784
V
icksburg . . .
TE N S E
NESE
179,154
181,625
178.231
C
hattanooga. . .
124.833
127,041
1337676
Knoxville. . . .
375,641
417,092
4337796
N
ashville . . .
SIXTH D IC
ISTR T
32 Cities. . . . 5,434,452 5,396,520 4,927,828
U ITED S T S
N
TA E
342 C
ities . . . 146,984,000 144,769,000 124,425,000
* N o t included in S ix th D is tric t tota ls.

6 8

M

o n t h l y

R e v ie w

o f th e F e d e r a l R e s e rv e B a n k o f A t la n t a f o r A u g u s t 1 9 5 2

June 1952 peak of 91 million. The probability is, however,
that there will be an estimated 10 percent above normal car­
ryover of loans by District bankers to ease the strain on
farmers whose crops suffered in the drought.
Cotton prices are likely to remain strong throughout the
marketing season this fall, with the result that farmers may
place less cotton under loan with banks. The expected in­
crease in loans outstanding arising from the drought, how­
ever, will more than offset the decline in bank lending on
cotton. Production loans, therefore, probably will not de­
cline to the expected level, based on the long-run trend and
normal seasonal movement.
Farm real estate loans in the District have been increas­
ing at a rate of about 7 percent each year. This rate of in­
crease will probably continue during the remainder of 1952,
but because of seasonal influences real estate loans probably
will decline slightly during the last half of the year.
Total agricultural*loans during the last half of the year
probably will decrease somewhat less than the 23-miliion
dollar decline which might be expected on the basis of
seasonal variation and long-run trends.

Sixth District Indexes
1 9 4 7 -4 9

DEPARTMENT STORE SALES AND STOCKS*

Adjusted**
U
nadjusted
June
July
July
July
June
1952
P
lace
1951
1952
1952
1951
DISTRICT S LE .
A S
138
113r
96
117
90r
115r
135
92
89r
Atlanta1 . . . .
110
122
94
B Ru e . . .
aton o g
88
105
82
102
B ingham . . .
irm
118
86
80
105
129
103
86
C
hattanooga . . .
98
114
Jackson . . . . .
88
135
111
85
108
125
99
91
110
85
Jacksonville . . .
121r
110
88
108r
99
Knoxville . . . .
164
126
99
136
99
.
.
136
116
91
107
86
82
104
86
113
N
ashville . . . .
130
N wO an . . .
e rle s
97
110
87
128
109
89
129
105
99
116
DISTRICT S O K . . . . 129
T CS
132
125
140
121
120
xln order to perm publication of figures for this city, a special sam h s b e con­
it
ple a e n
structed w
hich is not confined exclusively to departm stores. F
ent
igures for any su
ch
non-departm stores, h w ve a not u d in com
ent
o e r, re
se
puting the District Index.
July
1952
. . . 120
. . . 119
. . . 101
. . . 94
. . . 117
. . . 108
. . . 107
. . . 98
. . . 125
. . . 123
. . . 109
. . . 121

Implications

No changes in business conditions likely to greatly reduce
the seasonal increase in the demand for credit at Dis­
trict banks are evident at present. A growing demand for
trade and industrial loans and consumer loans will in all
likelihood offset decreasing credit demands for construction
and farm production expenses, as has been true in the past.
That the total demand for loans during the remainder of
1952 will rise, therefore, is fairly certain.
Many of the factors that have offset the ordinary seasonal
decline during the first part of the year and which might be
expected to augment the demand for loans during the re­
mainder of this year are losing some of their strength.
Because of slow collections, merchants need more credit
to finance a given amount of credit sales, but unless they
r e v e r s e their present inventory policy, they will not need
more than the usual total amount of credit. At banks the
growth in consumer credit, which was greatly responsible
for the growth in total loans this year, resulted chiefly from
the stepped-up buying of consumer durable goods after the
elimination of consumer credit controls. A continuation of
such a rapid rate of sales expansion is at best problematical.
Loans to purchase or carry securities, important in explain­
ing the past growth in total loans at the larger banks, are
more likely to diminish than to increase since most of them
were made to finance nonbank purchases of the Treasury’s
bond issue of July. There has apparently been no movement
to build up inventories on the part of the principal Sixth
District manufacturers.
The strength of other factors can only be tested as the
year progresses. The full effects of the recent drought on
farmers’ ability to pay off production loans, for example,
is still uncertain. Whether or not consumer buying during
the remainder of the year will follow the pattern set in
May and June, when sales were rising more than seasonally,
or that set in July, when sales declined somewhat, will be
an important consideration in establishing inventory poli­
cies during the remainder of the year. Another uncertainty
is whether or not an expansion greater than that experienced
recently by the textile industry will raise credit demands
from this important bank borrower.




100

GASOLINE TAX COLLECTIONS

P
lace
SIX STATES.
A
labam . .
a
Louisiana . .
M
ississippi .
Tne e. .
e n sse

,
,
.
.
.

July
1952
149
. 145
. 150
. 148
155
. 163
. 147

Adjusted**
June
1952
153
145
147
148
164
167
144

July
1952
. 84
. 81
. 86
. 101
. 82

June
1952
104
120
95
117
101

July
1951
101
98
104
87
95

MANUFACTURING EMPLOYMENT

June
P
lace
1952
6S
tates Adj. . 106
6S
tates U
nadj. 105
A
labam . . 93
a
Florida . . ., 114
G
eorgia . . . 111
Louisiana . ., 102
M
ississippi . 110
T n e e . . 107
e n sse

My
a
1952
107
107
105
117
111
100
108
106

June
1951
107
106
105
111
110
99
108
105

CONSUMERS PRICE INDEX***

July
Item
1952
ALL ITEM . . 197
S
F o . . . . 238
od
C
lothing . . 207
F elec.,
uel,
and refrig. 143
H m fur­
oe
nishings . 205
M . . . 175
isc.
P
urchasing
pow of
er
dollar . . . .51

June
1952
195
231
209

July
1951
190
230
210

143
204
175

143
210
166

.51

.53

♦Daily a ra e b sis
ve g a
♦A
♦ djusted for se so a variation
a nl
**♦1935-39 = 100
r R vise
e d

July
1952
146
142
139
143
152
159
148

U
nadjusted
July
June
1952
1951
154
142
151
136
147
132
151
149
167
148
172
159
146
139

ELECTRIC POWER PRODUCTION*

COTTON1 CONSUMPTION*

P
lace
TOTAL. . .
A
labam .
a
G
eorgia . .
M
ississippi
Tne e .
e n sse

July
1951
145
139
142
154
151
164
138

June
1952
SIX S TE . 154
TA S
H
ydro­
g
enerated . 90
Fuel­
generated . 203

M
ay
1952
146
84
202

June
1951
133
89
172

CONSTRUCTION CONTRACTS

P
lace
DISTRICT .
R
esidential
O
ther . .
A
labam .
a
Florida . .
G
eorgia . .
Louisiana .
M
ississippi
Tne e .
e n sse

July
1952
. 235
. 193
. 267
. 220
. 222
. 291
. 160
. 125
. 277

June
1952
246r
192r
287r
193
229
281
166
110
347

July
1951
214
221
208
159
166
215
330
100
286

ANNUAL RATE OF TURNOVER OF
DEMAND DEPOSITS

July
1952
U
nadjusted . . 20.7
Adjusted** . . 21.8
Index** . . . 113.2

June
1952
22.8
23.9r
124.lr

July
1951
22.4
23.6
112.5

CRUDE PETROLEUM PRODUCTION
IN COASTAL LOUISIANA
AND MISSISSIPPI*

July
1952
U
nadjusted . . 134r
Adjusted** . . 134

June
1952
135r
136r

July
1951
128
128