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M u i tii Lv | | | R e v i e w F E D E R A L R E S E R V E BANE OF A T L A N T A Volume XXXV Atlanta, Georgia, November 30, 1950 Number 11 The D istrict’s Growing Investment Market U n d e r w r itin g S ta te a n d L o c a l G o v e r n m e n t S e c u r itie s that the region’s financial resources have grown in the last twenty-five years. In 1924, for example, total resources of all ment. The South needs capital to develop its natural resources, the banks in the six states, which are entirely or partially to build factories and provide working capital for them, to within the Sixth Federal Reserve District, amounted to about develop all types of large and small businesses and to mechan 2.3 billion dollars. By last year the six state total had grown ize and make necessary changes in its agricultural operations. to 9.7 billion, over four times as great as the total for 1924. Often, it is not clearly understood that funds are also Although inflationary developments during World War II needed for the expansion of governmental facilities that in account for much of the growth, the six states’ banking re crease productivity. The South needs more and better school sources grew at a greater-than-national rate. This growth is buildings in which to train its children to become efficient also characteristic of other parts of the South. workers. It needs roads and bridges over which the products Bringing the Investor and Borrower Together of its farms and industries can be hauled and its people trans ported. It needs water and sewer systems to serve its rapidly Adequate banking resources are essential for a local capital expanding rural and urban population. It needs hospitals to market, whether or not the capital is to be used for private or public purposes. Borrowing by state and local governments safeguard the health of its citizens. These government facilities must be paid for out of taxes involves transferring funds from the hands of individual and levied by the state and local governmental units. Conse institutional savers into the hands of those who can use them quently, it might be argued, securing long-term capital to profitably. This function is performed by investment dealers build them should be no problem. A governmental body, how or commercial banks acting as investment dealers. ever, like many private businesses, does not always have THE INVESTM ENT DEALER. An investment dealer is a middle funds available when needed. Sometimes, in a growing com man between the borrower and the investor. Alone, or in con munity, immediate needs far outstrip existing resources, al junction with a syndicate of other investment dealers, he though economic growth may make a public improvement purchases the securities, often on the basis of competitive bid relatively easy to pay for in the future. Moreover, it is ex ding, and resells them to the public. His profit comes from the ceedingly difficult to change tax rates so that they correspond spread between the buying and selling price. Although the term underwriting when strictly defined does not include the to the irregular demands for funds. For these and other reasons, state and local governments, purchase and sale of securities, but only the guarantee of their like private businesses, must frequently finance capital invest sale, it is often used loosely to include both. For the sake of ments by borrowing. Last year the states, cities, counties, simplicity, the broader meaning is used in this discussion. school districts, and other local units in Alabama, Florida, REQUISITES FO R A LO CA L INVESTM ENT M ARKET. At least three Georgia, Louisiana, Mississippi, and Tennessee, which area conditions should be present before investment dealers can is approximately that of the Sixth Federal Reserve District, operate successfully. First, individuals and corporations must borrowed over 300 million dollars, mostly to pay for public have accumulated savings which will provide a market for improvements. This sum, of course, does not measure the full the securities the dealers buy. Indeed, before they bid for the amount spent for these purposes; the total was probably at privilege of selling the securities, many dealers have definite least twice as great. Satisfying the capital needs of state and or fairly definite ideas as to customers for them. local governments thus constitutes an investment problem of A second requisite is sufficient capital or free access to considerable magnitude. bank credit. Although he is acting merely as a middleman, As recently as twenty-five years ago, the South’s financial the dealer needs funds from time to time to carry his inven resources ranked low, compared with those of the rest of the tories just as ordinary retail merchants do. He also needs country. Much of the financing of its capital needs, therefore, funds for the “good-faith” checks which he must put up when came from outside the area. The result, according to some he bids. Moreover, he must be able to obtain the loans at students, has been a scarcity of capital with which to ade relatively low rates. Otherwise, the expense would wipe out quately develop the South’s potentialities. Moreover, it is his small margin between the buying and selling price or he sometimes contended that capital secured from outside the would be unable to compete with dealers financed from the area costs more than that which is available locally. large money centers. Although the credit may be required But, although this condition was true twenty-five years ago, for short periods only, the sums required may be so large have not conditions changed? It is easy to find ample evidence that they can only be provided by large banks. A lm o st every program for raising the South’s income to the J \ . national level points to the need for more capital invest 1 0 6 M o n t h l y R e v ie w o f the F ederal R eserve B a n k o f A tla n ta fo r N o v e m b e r 1950 A third condition essential for successful operation is a were not leaders underwrote another 11 percent. About 37 sufficient volume of security issues to underwrite. Because percent of the total was underwritten exclusively by firms profits on individual issues are relatively modest, the volume located outside the South. Commercial banks underwrote al of securities handled must be fairly large. most a fifth of the total. In addition, several banks were active Financing the capital needs of state and local governments through their investment company affiliates, which were per is similar in many respects to supplying the capital needs of mitted by the banking laws at that time. businesses. A study contrasting the underwriting of twentySIXTH DISTRICT STATE AND L O C A L GOVERNM ENT ISSUES five years ago with that of the present period may, therefore, UNDERWRITTEN ENTIRELY OUTSIDE THE SOUTH, BY STATE help answer the question, Is the South meeting a greater pro portion of its capital needs out of its own resources? The study is limited to the underwriting of the securities of the Sixth District states and their local governmental units. All issues about which information could be secured from published resources have been analyzed for the period 1923 and 1924 and for 1948 and 1949. Two years have been com bined in order to provide somewhat larger samples than would be obtainable from a single year’s experience. Although 1,536 individual security issues of state and local governments have been included in the analysis, it may be well to emphasize that no absolute exactitude can be claimed for the results of the study. Information on some small issues never reaches even the financial press and data on others are scanty and in some cases unreliable. It is believed, however, that the information in an aggregate is such that certain broad generalizations are valid. Underwriting Municipals Twenty-five Years Ago In the early 1920’s, as well as in the present period, states and municipalities were carrying on heavy postwar programs of building roads and schools and making other public im provements. The Sixth District states were no exception. The total amount borrowed in these states in 1923 and 1924 was small by present standards, 191 million dollars, but the num ber of issues of “municipals,” as both state and local issues are called in the investment market, was somewhat greater than the number issued in 1948 and 1949. Small issues, those of less than one million dollars, accounted for approximately 60 percent of the total dollar volume. PREFERENCE FO R SMALLER ISSUES. Southern firms, including those located outside the District states, accounted for the exclusive underwriting of 45 percent of the total dollar vol ume. Syndicates composed predominantly of southern firms, together with firms outside the South, accounted for 7 per cent. Syndicates in which southern firms participated but PURPOSE O F SIXTH DISTRICT STATE AND L O C A L GOVERNM ENT BORROW IN G B K A IN A G E AND SEW ER S 1923-24 ST R E E T S, RO AD S, A N D B R ID G E S 1 9 4 8 -4 9 The Sixth District states and their local governmental units issued securities amounting to 191 million dollars in 1923 and 1924, and to 544 million in 1948 and 1949. In 1923-24, 37 percent of the value of all issues in the Sixth District states was underwritten by investment dealers or banks located outside the South; in 1948-49 the percentage was 12. Sixth District dealers showed a decided preference for the smaller issues. They underwrote 82 percent of the value of issues of less than 100,000 dollars. They were also active in buying larger issues of up to a million dollars, which accounted for 70 percent of the total underwriting. Most of the larger issues, however, went to investment dealers or banks outside the South. e f f e c t O F l i m i t e d RESOURCES. That financial resources were limited was the primary reason for the restriction on dealers’ operations. Limited financial resources may also explain why southern firms at that time did not participate in syndicates with other southern firms to handle the larger issues. Under writing the smaller issues evidently exhausted their resources. With minor exceptions, when larger issues were underwritten, it was generally done entirely by non-southern firms. Non-southern firms were actively competing in the under writing of southern securities, both the large and small gov ernmental units. Many mid-western firms had agents constantly on the road seeking opportunities to underwrite municipals. This practice prevailed especially in Florida. There, where cities were trying to keep up with the land boom, the propor tion underwritten by non-southern firms exceeded that for any other District state. Only a fourth of the value of the issues was underwritten entirely by Florida firms. COSTS TO THE BO R RO W ER . There is no conclusive evidence that the governmental bodies financing the requirements through non-southern firms obtained their money at a lower rate of interest on comparable issues. The median for issues underwritten by firms entirely outside the South was 5.44 percent, despite the greater concentration of the non-southern firms in the longer maturities and larger issues, which, other things being equal, generally earned lower yields. Present Practices in Underwriting Once established, a pattern of underwriting tends to become self-perpetuating. Some dealers become known as specialists M o n t h l y R e v ie w o f th e F ederal R e se rv e B a n k o f A tla n ta fo r N o v e m b e r 1950 in the securities of certain cities, states, or counties. They have a background of knowledge with which to more easily ap praise these borrowers’ securities and also they may even know possible buyers. When organizing a syndicate, the dealer tends to associate with dealers he has worked with before. Investors, on the other hand, often prefer securities of cities or states with which they are familiar because of previous investments. RESEM BLANCE TO P R EV IO U S PATTERN. It is, therefore, not sur prising that the pattern of underwriting for the years 1948-49 bears a close resemblance to the pattern of twenty-five years ago. In many cases, the same firms or their successors are now underwriting the securities of the same borrowers. In spite of the persistence of this historical pattern, however, certain developments point to an increased participation of the South in its own financing. LESS UN DERW RITING EXCLU SIV ELY BY N ON -SO UTH ERN FIRM S. T h e major change in the pattern of underwriting is that a lesser proportion of the securities is underwritten exclusively by non-southern underwriters today; not that a larger propor tion is underwritten exclusively by southern firms. The large issues still attract underwriters from outside the area. The difference is that underwriting them is no longer the exclu sive prerogative of non-southern firms. In fact, in 1948-49, only 13 percent of the value of the total underwriting was done without the participation of southern banks or invest ment dealers. l o w e r COSTS t o s m a l l b o r r o w e r s . Underwriting the small est issues has now become almost exclusively a job for south ern concerns. These firms increased their share of underwriting in each size classification of less than one million dollars. For example, in 1948-49 they underwrote 89 percent of the issues of less than 100,000 dollars, compared with 82 percent twenty-five years earlier. There is rather general agreement among the investment dealers and the bankers that a reduced cost of borrowing to the smaller communities has resulted. Twenty-five years ago, it was not uncommon for a small city to pay a differential of as much as one percent over the cost to the larger city. Such differentials are now infrequent. It cannot be assumed in each case that securities are neces sarily underwritten by dealers in the same area where they are absorbed by investors or vice versa. However, investment dealers base their bids upon their ability to market the securi ties, and the proportion of securities underwritten in a region SIXTH DISTRICT STATE AND L O C A L GOVERN M EN T ISSUES UNDERWRITTEN ENTIRELY IN THE SOUTH, BY SIZE O F ISSUE P E R C E N T OF TOTAL V A L U E L E S S TH AN 100 P E R C E N T OF TO TAL V ALU E IO O 250500250 500 1,000 S IZ E O F IS S U E (T H O U SA N D S OF D O L L A R S ) In 1948-49, s o u th e r n u n d e r w r itin g a c c o u n t e d f o r a le s s th a n o n e m illio n d o ll a r s th a n in 1923-24. M O R E TH AN 1 ,0 0 0 ,0 0 0 la r g e r p o r tio n o f a ll Issues of 1 0 7 is a fair indicator of the demand by investors in that region. GRO W TH IN NUMBER O F i n v e s t m e n t d e a l e r s . The increase in southern underwriting is shown by the growth in the number of active investment dealers other than banks. According to the record of 1923 in the Sixth District states, only 27 firms were active underwriters of state and local government issues. Twenty-five years later the number had grown to 87. Invest ment dealers were doing a larger proportion of the under writing in 1948-49, compared with commercial banks, than they were in the earlier period. The Banking Acts of 1933 and 1935 required member banks to divorce their investment affiliates and limited their underwriting activities to securities which were general obligations of the governmental bodies. On the other hand, there has been an increase in the joint underwriting by banks and investment dealers. M ARKET FOR SECURITIES. Who buys the securities from the dealers and commercial banks? No comprehensive statistical evidence is available, but it is impossible not to get the gen eral impression that there is a substantial local demand for them. Because of their comparatively low yield, an average of about 2.5 percent in 1949, these securities do not appeal greatly to the individual investor of moderate means. But because they are tax exempt, they have special appeal to persons in the high income brackets. The securities also have certain tax attractions for corporations. SOUTHERN PARTICIPATION IN JO IN T UNDERW RITING W ITH N ON SOUTHERN FIRMS, SIXTH DISTRICT STATE AND L O C A L G OVERNM ENT ISSUES, BY SIZE O F ISSUE P E R C E N T OF T O T A L V A L U E PER C EN T OF TO TAL V ALUE 100 80 60 40 20 0 L E S S TH AN 500 5001 ,0 0 0 S IZ E O F 1 ,0 0 0 5 ,0 0 0 1 ,5 0 0 10,0 00 IS S U E (TH O U SA N D S OF D O LL A R S ) M O RE THAN 1 0 ,0 0 0 In r e c e n t y e a r s , s o u th e r n u n d e r w r ite r s h a v e p a r t i c i p a t e d m o r e w ith fir m s o u t s i d e t h e S o u th in t h e u n d e r w r itin g o f t h e la r g e r is s u e s th a n in 1923-24, w h e n m o s t o f t h e l a r g e r is s u e s w e r e u n d e r w r itt e n e n t ir e ly o u t s i d e t h e S o u t h . Securities are generally issued to mature at periodic inter vals until final maturity. Because of a desire for liquidity, banks prefer near-term maturities. There is consequently a rather keen competition for these maturities and this competi tion sometimes explains the organization of a syndicate by large banks who wish to add such securities to their portfolios. Securities issued by special authorities or based upon the revenues of public utility operations usually yield a higher rate than general obligation bonds based upon the full faith and credit of a taxing unit. These revenue bonds have a spe cial attraction for insurance companies, not only in the South but elsewhere, because of the higher yield. They are also bought by trust funds, pension funds, and institutional investors. An example of the diversified demand can be found in the purchasers of a recent fairly large issue of a leading southern city. The near-term maturities were taken by a large New York bank heading the syndicate; some were bought 108 M o n t h l y R e v ie w o f th e F ederal R e se rv e B a n k o f A tla n ta fo r N o v e m b e r 1950 STATE AND LOCAL GOVERNMENT SECURITY ISSUES, SIXTH DISTRICT STATES CLASSIFIED BY SIZE OF ISSUE AND LOCATION AND TYPE OF UNDERWRITER (P e rc e n t o l D ollar Total) Size of Is su e (T h o u sa n d s o i D ollars) T ype a n d L o catio n ox U n d e rw rite r L ess th a n 100 100- 250 2 5 0 - 500 1923-24 1948-49 1923-24 1948-49 Entirely southern Within stats of issue Commercial banks Investment dealers Banks and dealers Other southern states Within and outside state of issue Out-of-state Predominantly southern* Predominantly nonsouthern** Entirejy non-southern*** 500 - 1,000 1923-24 1948-49 1923-24 1948-49 1,000 - 5,000 5,000- 10,000 1923-24 1948-49 1923-24 1948-49 O v e r 10,000 All S izes 1923-24 1948-49 1923-24 1948-49 82 65 29 34 2 17 89 69 20 44 5 20 71 56 24 28 4 15 78 64 8 44 12 14 60 42 21 19 2 18 70 51 4 37 10 19 42 31 17 9 5 11 47 34 3 22 9 13 22 14 8 6 — 8 20 7 1 4 2 13 28 28 _ — 28 — 11 11 — — 11 — — — — — — — — — — — — 45 34 15 14 5 11 27 18 2 11 5 9 1 16 1 7 13 — 2 13 3 7 7 3 1 17 7 1 8 11 10 10 1 7 11 2 9 8 — 13 2 11 14 — — — — — 8 — — — — — — 4 7 7 3 6 8 2 9 100 2 24 100 4 15 100 1 32 100 29 15 100 6 59 100 48 18 100 72 — 100 81 — 100 — — 100 100 — 100 11 37 100 52 13 100 # 17 100 4 16 100 8 43 100 *Syndicates in which southern banks or dealers are the leaders, but including non-southern firms. • ‘ Syndicates in which non-southern banks or dealers are the leaders, but including southern firms. # L e ss than one-half of one percent. ***Includes a few issues for w hich the location of the underw riter is unknown. S o u rce: Federal Reserve Bank of Atlanta classification of information published in T he C om m ercial a n d F in a n c ia l C h ro n ic le and B ond B u y er for 1,536 issues underw ritten in the years 1923, 1924, 1948, 1949. by insurance companies; others by a pension fund; some by a trust fund; and others by a few investors with substantial incomes. Although the issues were underwritten by a syndi cate headed by a New York bank, the greater part of the securities went to southern investors. Continued Need for Additional Capital Increased participation of southern firms in syndicates under writing state and local government securities, an increased underwriting of small issues by southern investment dealers, and an increase in the number of investment dealers have all resulted from the growth in the South’s financial resources. However, it is inevitable that the question will be raised as to why all the underwriting has not been done by southern firms. It is evident that lack of sufficient financial resources is still of prime importance. The investment dealers in one large southern city, for example, consider their area as a “millionIN FLU EN CE O F SIZE O F ISSUE UPON PROPORTION O F TOTAL ISSUES O F SIXTH DISTRICT STATE AND L O C A L G O V ERNMENTS UNDERWRITTEN IN THE SOUTH Issues Underwritten Entirely in the South Total Issues of Over $1,000,000 GEORGIA LOUISIANA MISSISSIPPI SIX STATES 0 20 40 60 P E R C E N T OF T O TA L V A LU E 80 0 20 40 60 80 PERCENT OF TOTAL VALUE Because a greater proportion of the issues were large in 1948-49, southern under writers accounted for a smaller proportion of the total issues than in 1923-24, despite increased underwriting of the smaller issues. dollar market.” They must seek help elsewhere in underwrit ing the larger issues. In other District cities the maximum may be larger or smaller, but there is a point beyond which neither the investment dealer’s own capital nor the bank credit available is sufficient to handle the issues. Moreover, there is a tendency to look for additional resources, not from other parts of the South but from the traditional capital markets. Even within the Sixth District states, there is no central capital market for southern securities. With a few exceptions, most investment dealers limit their operations to their own and a few neighboring states. In general, New Orleans invest ment dealers extend their operations beyond Louisiana into Mississippi and to a lesser degree into Texas. The Georgia investment dealers, in addition to operating in their own state, do some business in Alabama and to a lesser degree in Florida. More general southwide underwriting is done by a few Tennessee dealers. Dealers employ their funds in the areas with which they are most familiar and in which they can operate most efficiently. When dealers from different southern areas band together, they generally do it through a syndicate headed by a non-southern firm. Prestige requires that a syndicate be headed by the firm with the greatest resources. Consequently, although some syn dicates underwriting southern securities may have been or ganized primarily by southern dealers, they are often headed by the northern firms whose resources are almost unlimited, compared with those of southern dealers. Capital Needs Still Outstrip Supply In an expanding economy like that of the South, there is always a greater need for capital investment than can be provided by the savings of its own people. Only when the South has reached economic maturity does it seem likely that it will be able to supply all its capital needs. The economic opportunities of the South inevitably attract capital, which in turn increases the South’s productivity. The greater par ticipation of Southerners in underwriting state and local securities, however, indicates that with increased financial resources, the area can satisfy its capital needs on more favorable terms. Charles T. Taylor M o n t h l y R e v ie w o f th e F ederal R eserve B a n k o f A tla n ta fo r N o v e m b e r 1950 109 Deposit Growth at Mississippi Member Banks e s p it e its recent rapid industrialization, Mississippi de posits in Mississippi and the United States indicate clearly pends more heavily upon agriculture as a source of in the higher level of bank deposits in Mississippi resulting Dcome than do any of the other five states served by the Federalfrom the comparatively high level of farm income. Reserve Bank of Atlanta. The latest United States Department of Commerce income estimates show that almost a third of the state’s income payments to individuals comes directly from agriculture. The ratio for the District is 15 percent. Of the 201 banks in the entire state of Mississippi, only 31 are member banks. This condition does not, however, impose such serious limitations upon the use of member bank deposit figures that they do not indicate the trend of deposits at all banks, particularly in the Sixth District section of Mississippi. The Mississippi territory served by the Federal Reserve Bank of Atlanta through its New Orleans Branch consists of 43 southern counties comprising 55 percent of the state’s total area and containing about 50 percent of the state’s popula tion of 2,171,806. Moreover, the state’s member banks are concentrated there. The 19 member banks in the Sixth District part of Mississippi have about 85 percent of the state’s total member bank de posits and over 60 percent of the total deposits at all banks in that section of the state. In addition, many member banks, especially those in Jackson, do an extensive correspondent business with nonmember banks. The trend of member bank deposits, therefore, represents fairly well the trend of de posits at all banks. The following discussion relates entirely to Mississippi member banks in the Sixth District. Deposit changes at the Mississippi member banks have dif fered markedly from those at member banks throughout the country during three periods in the last thirty years. From 1923 through 1929, deposits were at a comparatively higher level than was true of the country as a whole; there was a more rapid increase in deposits at Mississippi member banks during World War II; and finally, in the three postwar years of 1946, 1947, and 1948 the state’s member bank deposits rose 5 percent, compared with 2 percent for the nation. Agriculture and Bank Deposits From 1924 to 1929, inclusive, Mississippi’s cash farm income averaged 40 percent above the 1935-39 average, whereas national income—both agricultural and nonagricultural— averaged about 30 percent below the 1935-39 average. As is shown in the accompanying chart, the indexes of bank de C H A N G E S IN A N N U A L INDEXES O F MISSISSIPPI'S C A SH FARM IN C O M E AND MEMBER BANK DEPOSITS, 1925-38 [1935-39=100) M EM BER B A N K D E P O S IT S M E M B E R B A N K D E P O S IT S CASH FARM IN C O M E For the prewar years of 1925 through 1938, about 60 percent of the changes in Mississippi member bank deposits was associated with changes in cash farm in come. In the postwar years this relationship was resumed. The differences between the actual changes in bank deposits and tnose computed on the basis of the pre war relationship averaged less than one percent for the years 1946 through 1949. The line on the chart shows the relationship for the prewar period. In fact, in the whole period before 1939, when World War II began to influence the flow of deposits, variations from year to year in member bank deposits were rather closely as sociated with variations in farm income. From 1925 to 1938, inclusive, 60 percent of the variation in annual changes in bank deposits was associated with changes in cash farm in come. The state’s economy did not entirely depend upon ag riculture, but there were very few years when deposits did not change in the same direction as agricultural income. Deposits Up 261 Percent The war brought a greater rate of growth in Mississippi mem ber bank deposits than in those of member banks throughout INDEX O F TOTAL MEMBER BANK DEPOSITS 1935*39*100 1 1 0 M S i x t h D is t r ic t o n t h l y R e v ie w o f th e F ederal R eserve B a n k o f A tla n ta fo r N o v e m b e r 1950 In d e x e s DEPARTMENT STORE SALES* A djusted* U n a d ju ste d P la c e O ct. 1950 S e p t. 1950 O ct. 1949 O ct. 1950 S e p t. 1950 O ct. 1949 DISTRICT.......... A tlanta........... Baton R o u g e. Birm ingham .. Chattanooga. Jackson.......... Jacksonville.. Knoxville---M acon............ Miami........... . M ontgom ery. N ash v ille.. . . New O rleans. Tampa ......... 370 409 370 373 370 353 401 366 328 420 321 401 350 453 409 466 391 409 437 383 416 417 369 473 365 480 361 518r 376 376 414 319 320 364 511 349 307 467 307 394 350 606 449 381 391 389 402 429 381 355 387 353 425 364 462 426 518 433 437 467 452 412 426 421 £83 387 494 383 497r 395 414 427 335 336 415 547 363 332 429 338 418 364 618 DEPARTMENT STORE STOCKS U n a d ju ste d A djusted* P la c e O ct. 1950 S e p t. 1950 O ct. 1949 O ct. 1950 S e p t. 1950 O ct. 1949 DISTRICT........... A tlanta............ Birmingham „ . M ontgom ery.. N ashville........ New O rleans. 456 584 385 444 739 419 438r 583 368 509 645 381 347 462 262 375 519 328 497 678 423 533 813 432 451r 635 387 489 691 385 379 536 288 449 571 338 the country. The 261-percent gain in Mississippi bank de posits between 1939 and the end of 1945, however, was based less on the economic effects of expanded war manufacturing and military training programs than upon a growth in agri cultural income. In 1945, manufacturing pay rolls were 85 million dollars greater than in 1939, and Government pay rolls were 180 million greater. Agricultural income, however, exceeded either of these with a 189-million dollar growth. Postwar Changes The end of war manufacturing and military training pro grams did not, of course, affect Mississippi’s income and bank deposits as much as in other states, but the decline that did occur was accentuated by a decrease in agricultural income. Mississippi was the only state in the District where manufac turing pay rolls were greater in 1946 than in 1945; it was also the only state which had a smaller agricultural income. Bank deposits everywhere were declining in 1946, but those of the Mississippi banks fell at a greater rate than elsewhere. TOTAL DEPOSITS AT MISSISSIPPI MEMBER BANKS Classified by Area P e rc e n t C h a n g e , E nd A rea* 1939-45 GASOLINE TAX COLLECTIONS** U n ad ju ste d A djusted** P la c e SIX SATES... A labam a. . . Florida---G e o rg ia ... L o u isian a.. M ississippi Tennessee. O ct. 1950 S ep t. 1950 O ct. 1949 O ct. 1950 S ep t. 1950 O ct. 1949 255 245 218 247 242 217 255 269 246 252 217 250 243 199 254 296 242 277 252 254 213 266 283 254 257 213 218 176 223 248 213 257 288 238 278 COTTON CONSUMPTION* P la c e TOTAL............ A labam a---G eo rg ia---M ississippi.. T e n n e sse e .. O ct. 1950 S e p t. 1950 O ct. 1949 180 190 180 119 145 168 178 171 73 132 143r 156r 141r 88r 121r P la c e S e p t. 1950 A ug. 1950 S e p t. SIX STATES. Alabama— F lorida........ G eo rg ia---L o u isian a.. Mississippi. T en n essee. 152 154 134 153 143 153 159 150r 151 132r 151 139 150 159 140r 144r 126r 139r 137r 131r 147r CONSUMERS PRICE INDEX O ct. 1950 S e p t. 1950 212 211 ELECTRIC POW ER PRODUCTION* SIX STATES. Hydrogenerated F uel generated S e p t. 1950 A ug. 1950 Sept. 1949 416 408 370 339 291 349 517 561 398 P la c e O ct. 1950 S e p t. 1950 O ct. 1949 D ISTRICT.... R esidential. O th er........... A labam a___ F lorida........ G eo rg ia___ L o u isian a... M ississippi. T e n n e sse e .. 540 850 390 726 549 538 451 514 440 951 558 858 730 998 606 409 504 660 873 557 620 672 528 628 203 934 ANNUAL RATE O F TURNOVER O F DEMAND DEPOSITS O ct. 1949 172 180 ALL ITEMS... 180 203 215r F o o d ........... 212 192 201 C lothing. . . Fuel, elec., 136 138 and refrig. 140 Home fur 182 195 nishings .. 197 155 157 157 Misc........... Purchasing pow er of .58 .56 .56 d o llar........ *Daily average basis ^Adjusted for seasonal variation ***1939 monthly average = 100 Other indexes, 1935-39 = 100 194 226 242 209 CONSTRUCTION CONTRACTS MANUFACTURING EMPLOYMENT*** Item 220 U n ad ju sted ... A djusted**... Index**......... O ct. 1950 S e p t. 1950 O ct. 1949 24.0 23.3 24.3 98.4 20.4 19.4 78.6 22.8 92.5 CRUDE PETROLEUM PRODUCTION IN COASTAL LOUISIANA AND M ISSISSIPPI* U n ad ju sted .. A djusted**... r Revised O ct. 1950 S e p t. 1950 O ct. 1949 336 337 350 353 300r 3Qlr Jackson A rea...................... ■ +299 Jackson............................ +307 Outside Jackson............ +264 Hattiesburg-LaurelMeridian..................... +312 + 121 New Orleans Area (Hancock <£ Harrison Counties, M iss.)........ + 131 M ississippi**...................... +261 Sixth District....................... +254 United States.................... + 163 1945-46 1946-48 of Y ear 1948-49 — 13 — 14 — 9 + 8 + 7 + 16 — — 10 — 3 + + + 19 — 11 — 8 — 9 1939-49 — + 1 2 3 +273 +271 +297 1 1 — — 5 5 +255 + 107 + 11 + 5 + 1 + 2 — — 2 3 0 2 + 199 +231 +228 +151 + + *Areas include several counties surrounding each city. **That part included in the Sixth District. In 1947 and 1948 the greater-than-national rate of deposit growth at the Mississippi banks reflected the pickup in agri cultural income. Mississippi farmers received 533 million dollars for their crops and livestock in 1948, which was 1.8 times as much as in the first postwar year of 1946. In addi tion, other factors were drawing income into the state. Mis sissippi’s petroleum production, mostly in the Sixth District section, expanded from four million barrels in 1940 to 46 million barrels in 1948. The state was also reaping the bene fits of its campaign to balance agriculture with industry; its manufacturing pay rolls in 1948 set a record high. But Mississippi’s agricultural income is still three times as important as its manufacturing income and a decline in cash farm income in 1949 from 1948 brought with it a 3-percent decline in bank deposits. At member banks throughout the country, deposits rose 2 percent. By any standard, deposits at the Mississippi banks are still comparatively high. At the end of 1949, Mississippi deposi tors had 2.3 times as much to their credit as ten years pre viously, whereas deposits at all member banks throughout the country were only 1.5 times as great. This retention of wartime gains is a measure of the progress being made in the development of Mississippi’s economy. C h a r l e s T. T a y l o r This article is the fifth in a series in which deposit trends in the individual Sixth District states are being discussed. M o n t h l y R e v ie w o f the F ederal R eserve B a n k o f A tla n ta fo r N o v e m b e r 1950 District Business S i x t h D is t r ic t 1 1 1 S t a t is t ic s INSTALMENT CASH LOANS Volume Outstandings No. of Percent Change Percent C hange Lenders Lender Oct. 1950 from Oct. 1950 from o n s u m e r s throughout the Sixth District have cut down on Report Sept. Oct. Sept. Oct. ing their buying of durable goods. A reaction to the war-scare 1950 1949 1950 1949' buying following the outbreak of the war in Korea was exFederal credit unions......... —6 44 —1 —1 + 34 State credit u nions............... —35 18 —20 —3 +28 pected, but stricter credit controls may account for some of Industrial b an k s................... —16 11 + 32 +5 + 31 the decline. Incomplete reports for November indicate that Industrial loan co m p an ies.. 11 +6 —9 —1 —6 loan com panies.......... 36 —3 +0 +9 +1 the downward trend begun in October has been intensified. Small Commercial b an k s............... —11 +6 33 + 36 +1 As would be expected, sales have fallen off most at those RETAIL FURNITURE STORE OPERATIONS stores specializing in goods for which there were heavy de Number Percent Change ol Oct. 1950 from mands in preceding months and which are now subject to Item Stores Sept. 1950 Oct. 1949 Reporting credit controls. Sales of the District furniture stores were —29 —23 118 down 23 percent this October and household appliance store Total sa le s...................................... Cash sa le s...................................... 101 —3 +1 sales were about the same as in last October. Instalment and other credit sa le s.. 101 —33 —25 Accounts receivable, end of month — 2 113 + 19 On the other hand, department stores in which furniture, Collections during m onth............... —1 + 11 113 floor coverings and appliances, radios and television sets, and Inventories, end of m onth............... + 10 +23 similar items accounted for a fairly small part of total sales WHOLESALE SALES AND INVENTORIES* Sales Inventories reported that they sold about the same this October as last No. of Percent Change No. of Percent Change October. Appliance sales at the department stores, however, Type of W holesaler Firms Oct. 1950 from Firms Oct. 31,1950, from were down 15 percent. Report Sept. Oct. Report Sept. 30 Oct. 31 ing ing 1949 1950 1950 1949 SALES AT DISTRICT REPORTING STORES Electrical group W iring su p p lie s .. . . Percentage Change, 1950 From Corresponding Months in 1949 3 3 + 10 + 99 —8 +5 A ppliances............. 4 3 —20 + 44 —10 —21 G eneral h a rd w a re ... 11 —5 +22 6 + 10 + 11 Motor Vehicle Departm ent H ousehold Furniture Industrial s u p p lie s ... 12 + 62 3 —4 +6 + 17 Stores Dealers Stores Appliance Jew elry......................... 4 —4 3 —2 +9 +1 Lumber and building — 1 + 3 4 January............ + 12 + 1 m aterials................. 4 —15 + 46 +3 Confectionery........... February.......... +28 + 12 + 19 5 + 35 +3 Drugs and su n d ries.. 8 + 12 +1 +6 +33 March.............. + 17 + 23 Dry g o o d s................... 18 —10 12 +2 +26 + 17 —5 +35 +2 + 27 April................ G roceries +8 + 34 +6 Full-line................... 41 M ay.................. + 17 —1 27 + 12 +3 +8 Specialty lin es........ 14 —3 +7 +5 8 —10 —11 + 34 +6 June.................. + 13 Shoes and other +32 +46 +30 + 34 July.................... footw ear................. —0 3 + 32 + 17 +56 + 16 +49 A ugust............ , , Tobacco p ro d u c ts.. . . 10 —17 6 +0 + 17 —3 M iscellaneous........... + 13 17 —8 +24 14 +2 + 10 + 44 +29 +72 Septem ber----Total............................ —5 154 +20 85 + 3 +9 +0 +39 —23 +0 October............ * Based on U. S. Department of Commerce figures. +2p n.a. n.a. Leveling Off in Sales of Consumer Durable Goods C N ovem ber.. . . Source: Motor vehicle sales: w eighted averages ol Departm ent ol Com m erce data lor lour District areas; other: stores< reporting to this bank. n.a. Not available* p. Preliminary. During the first three weeks of November, department stores sold 4 percent more than they did during the same part of 1949. November reports from a limited number of stores, however, showed sales of durable goods continuing below last year’s level. Television sales, which have been keeping up well despite consumer credit controls, took a dip below last year’s total for the week ended November 18. Although less current reports are available for motor ve hicle dealers, total dollar sales in October and November for new cars were probably well above the corresponding months last year but below the record-breaking months of July and August. New car registrations in the Atlanta metropolitan area were 31 percent greater this October than last October. For the three weeks ending November 18, registrations were 12 percent greater than in the same period last year. Although deliveries to dealers were lower in November 1949 than in the preceding months, they were higher than in either Novem ber 1948 or November 1947. The volume of new instalment loans granted by Sixth Dis trict commercial banks in October was 11 percent less than in September. Although credit granted this October was 6 percent greater than that granted in October last year, the rate of increase from the previous year was lower than that reported for any previous month this year. c .t .t . DEPARTMENT STORE SALES AND INVENTORIES* PERCENT CHANGE Sales Stocks Oct. 1950 Oct. 31, 1950, Place Year to from from Date Sept. Oct. 1950Sept. 30, Oct. 31, 1950 1949 1949 1950 1949 —6 ALABAMA................. +12 +10 +41 —7 Birmingham............ + 17 +8 +47 +9 —4 M obile..................... + 5 + 7 M ontgomery.......... —5 +4 +6 +9 + 19 FLORIDA................... +4 —14 + 44 +11 Jacksonville........... —22 +8 +0 + 32 + 10 Miami...................... —6 +5 + 10 + 63 + 9 —16 O rlando................. —6 +5 St. P etersb u rg ----—12 +9 Tam pa..................... —24 +6 —3 +37 + 15 GEORGIA................. —10 +8 +8 +25 A tlanta................... —10 + 9 + 10 +26 +7 A ugusta................. —11 +2 +6 +21 +8 C olum bus............. —13 + 14 +21 —12 M acon..................... +7 + 14 +7 + ii —11 —2 Rom e....................... +1 —0 Savannah............... + 3i + 18 + 9 + 11 —2 LOUISIANA............... —2 +24 +11 Baton R ouge......... —8 — 9 + 14 + 1 1 —1 New O rleans......... +0 +3 +28 + 12 —6 —2 +22 MISSISSIPPI............. +8 Jackson................... —8 —3 +7 + 18 +9 —3 M eridian................. —9 —1 TENNESSEE............... —10 +5 + 35 + 14 Bristol..................... —4 —10 + 12 +9 +1 Bristol-KingsportJohnson C ity .. . . —9 —4 +1 C hattanooga.......... + 42 —14 + 16 + 18 +7 —7 Knoxville............... +4 +4 +2 —11 + 42 +8 N ashville............... +18 +24 —4 +9 + 10 OTHER CITIES**.... +1 + 32 —5 +0 DISTRICT................... +7 + 10 'In c lu d e s reports from 116 stores throughout the Sixth Federal Reserve District. * W hen fewer than three stores report in a given city, the sales or stocks are grouped together under “ other cities." They are, however, included in state figures.______________________________________________________ 1 1 2 M o n t h l y o f th e F ederal R eserve B a n k o f A tla n ta fo r N o v e m b e r 1950 R e v ie w S ix t h D is t r ic t S t a t is t ic s CONDITION O F 27 MEMBER BANKS IN LEADING CITIES (In T h o u sa n d s of D ollars) P e rc e n t C h a n g e Nov.22,1950,from N ov. 22 1950 O ct. 25 1950 N ov. 23 1949 2,548,228 1,109,543 1,123,751 2,519,270 1,067,223 1,081,315 2,412,158 874,666 885,701 +1 +4 +4 +27 +27 666,869 634,791 531,592 +5 +25 14,112 12,172 8,135 + 16 +73 se c u ritie s ... 35,882 Real estate lo an s............ 91,367 Loans to b an k s............... 5,449 O ther lo an s. . . 310,072 Investm ents—to tal............. 1,438,685 Bills, certificates and n o te s............. 554,875 U. S. B o n d s... 661,157 Other secu rities.............. 222,653 Reserve with F. R. B a n k ... 423,502 Cash in vault 42,224 Balances with domestic b an k s............... 165,360 Demand deposits adjusted 1,821,828 Time d ep o sits. . . 525,895 52,737 U. S. G ov't d ep o sits.......... 556,383 Deposits of dom estic b a n k s. 17,300 Borrow ings........ * More than 100 percent. 36,122 89,807 5,154 303,269 1,452,047 34,712 72,632 3,847 234,783 1,537,492 —1 +2 +6 +2 —1 +3 +26 +42 +32 561,227 668,033 222,787 400,324 43,142 459,207 868,712 209,573 382,813 41,530 —1 —1 -0 +6 —2 +21 174,742 1,840,400 526,237 46,081 512,933 161,010 1,725,926 537,697 48,682 488,786 3,500 —5 Item Loans an d investm ents— Total............... Loans—N et........ Loans—G ro s s ... Commercial, industrial, and agricultural lo an s. Loans to brokers and dealers in se c u ritie s... O ther loans for pur- O ct. 25 N ov. 23 1949 1950 +6 c h a s in g a n d c a rry in g 6,000 —6 —24 +TT +2 +3 —1 —0 + 14 +8* +6 —2 +8 + 14 * DEBITS TO INDIVIDUAL BANK ACCOUNTS (In T h o u sa n d s of D ollars) P e rc e n t C h a n g e O ct. 1950 S e p t. 1950 O ct. 1949 O ct. 1950 from S e p t. 1950 O ct. 1949 Y ear-tod a te 10 m os. 1950 from 1949 ALABAMA Anniston.......... Birm ingham . . . D othan............. G ad sd en .......... M obile............. M ontgom ery... 27,82?I 416,485) 19,44?) 23,91?) 148,54?1 107,185i 26,34C1 407,982! 16,915, 22,50S1 149,219l 98,234 23,03C1 + 6 320,264[ + 2 16,216i +15 20,34C1 + 6 113,607r —0 85,277' +9 + 18 + 31 +26 FLORIDA Jacksonville... Miami............... G reater Miami* O rlando ........... P ensacola........ St. P etersburg. T am pa............. 319,641 263,846> 389,074I 58,614L 38,842! 69,28Gt 131,972* 311,0931 253,10CI 367,473t 60,575, 39,2121 65,887 138,9991 +3 258,711 226,5401 + 4 309,987' +6 47,8201 —3 34,774, —1 54,087' +5 116,452! —5 +24 + 16 + 26 +23 + 12 +28 + 13 + 17 + 15 + 19 +26 GEORGIA A lbany............. A tlanta............. A u g usta........... Brunsw ick ........ C olum bus........ E lberton........... G ainesville*. . . Griffin*............ M acon.............. N ew nan............ Rome*.............. S avannah........ V aldosta.......... 32,061 1,121,301 79,375> 9,258* 68,386> 5,411 23,22?* 15,406> 77,345i 13,461 27,885I 107,316> 12,57-?I 28,398I 993,811 71,218t 11,4681 68 ,66?1 4,812} +13 +13 +11 —19 +25 + 31 +29 +8 13,2865 74,696) 10,226) 25,20?) 106,406! 12,244I 25,738I 856,436i 61,584: 8,559I 57,087' 4,4321 14,804I 11,962I 58,466t 9,00c1 23,84?) 84,506i 11,31/? +3 +57 +29 +32 +50 + 17 +27 + 11 + 13 + 16 + 12 + 11 +27 + 13 +26 + 12 + 18 + 13 + 17 + 12 LOUISIANA Alexandria*. . . Baton R o u g e .. Lake C h a rle s .. New O rle a n s.. 41,61?> 111,59?> 42,116> 849,08/' 41,785> 105:56/' 46,6921 827,781 32,264t —0 103,60?) + 6 35,656i —10 685,51C1 + 3 + 18 +24 MISSISSIPPI H attiesb u rg ... Jackson............ M eridian. .T ... V icksburg........ 20,086> 159,87-4I 33,753! 31,4881 20,1221 162,77C1 35,437 25,094 18,114 138,163 28,950 33,073 —5 +25 + 11 + 16 + 17 —5 + 13 + 13 + 14 TENNESSEE C h attan o o g a.. Knoxville.......... N ashville.......... 166,492 164,308 132,125 ■ 130,886 386,067 367,292 134,343 105,189 299,778 +1 +1 +5 +24 +26 +29 + 14 + 13 + 18 4,076,636 +5 +25 + 14 UNITED STATES. 333 C ities......... 124,855,000 123,222,000 101,834,000 * Not included in Sixth District total. +1 +23 +3 SIXTH DISTRICT 32 C ities........... 5,084,793 21,021 4,857,962 —0 +12 +10 +16 +4 +32 +11 +1 —0 —2 +21 + 30 +20 +20 +22 +29 +8 + 12 + 16 + 15 + 17 +4 + 15 +8 +22 + 19 +0 + 17 —4 +9 + 11 +2 Industry and Employment In October, textile mill activity increased and steel mills continued operations at more than 100 percent of rated capacity. Although coal mining was at about the same rate as in September, construction contracts awarded were in smaller volume. CO NSTRUCTION CO N TRA CTS awarded in the District in October were valued at 109,635,000 dollars, a decrease of 21 percent from September. The October total was 18 percent smaller than the total for October last year, but October 1949 had the largest total ever reported for a peacetime month except one — September 1941. Total awards were down from Sep tember in five District states, the only increase being in Mississippi. October awards were larger than they were a year ago in Alabama, Georgia, and Mississippi, but these increases were more than offset by decreases in the other states. Residential contracts, accounting for 51.3 percent of the total in October, were off 10 percent from September, although there were increases in Alabama, Mississippi, and Tennessee. For the first 10 months of 1950, total awards in the District were 48 percent greater than in that part of 1949; residential awards were up 64 percent; and other contracts 35 percent. For the same period, both total and residential awards were greater than at this time last year in each state. TEXTILE MILL A C T IV IT Y in the District in October, on the basis of the daily average rate of cotton consumed, was at the high est level in four years. Sixth District mills used an average of 15,527 bales of cotton for each business day in October, an increase of 6.7 percent over September and 25.3 percent greater than in October 1949. In the three months of the new cotton year, August through October, the mills used 31.1 percent more cotton than in that period a year ago. Between June and September there was a rise of about 54 percent in mill margins — the spread between the cost of a pound of raw cotton and the price of the finished product. ELECTRIC P O W ER PRO D UCTIO N in the District was up 2 percent further in September; an increase of 16.4 percent over August in hydro-generated power was offset in part by a decrease of 7.8 percent in current generated by the use of fuels. Septem ber output was 12.5 percent greater than it was a year earlier; current produced by use of fuels was 30 percent greater than in September last year; but hydro-generated current was about 3 percent less. Hydro-generated current accounted for 46.2 percent of the total in September this year and for 53.4 percent in September 1949. M A N UFA CTURIN G EM PLOYM ENT increased 1.4 percent further in September and was 8.4 percent greater than in September 1949. Indications point to further gains in October. The Sep tember increase was shared in by each District state, increases ranging from 0.3 percent in Tennessee to 2.7 percent in Louisiana. Compared with September a year ago, the gains ranged from 4.1 percent for Louisiana to 17.1 percent for Mississippi. In the more important industries except food and food products, there were increases in September over August, and there were increases over September 1949 for all groups. In food and food products, seasonal increases in Florida and Louisiana were slightly more than offset by decreases in Alabama, Georgia, Mississippi, and Tennessee. Other groups made gains for the month ranging from 1.1 percent in lumber and wood products and 1.9 percent in textiles to 4 percent each in apparel and in paper and paper products, and 4.9 percent in chemicals. d .e .m .
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