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Monthly F E D E R A L R eview R E S E R V E B A N K Atlanta, Georgia, October 31, 1951 Volume X X X V I O F A T L A N T A Number 10 Structure o f District Mortgage Holdings Financing construction has been particularly signifi cant in credit developments during the postwar period. Mortgage credit, for example, has been used to finance much of the building, especially residential. Last year, the 21 billion dollars of new private construction throughout the United States was accompanied by an increase of over 10 billion dollars in mortgage debt. The majority of all new houses in the District and in other parts of the nation have been bought with mortgages. Only five out of every hundred new houses bought in the Atlanta metropolitan area during the last quarter of 1950, for example, were not mort gaged, according to a recent Government survey. Moreover, mortgage money constituted the greater part of the purchase price in many cases. In the At lanta area, mortgages on 84 percent of the new houses amounted to 75 percent or more of the purchase price. PERCENT DISTRIBUTION OF TOTAL SIXTH DISTRICT MORTGAGE HOLDINGS BY TYPE OF LENDER MAY 3 1, 1951 O 10 20 30 40 50 60 70 80 90 A M u lt i- b illio n D o lla r B u s in e s s W M m m m m S A V IN G S A N D -L O A N A S S O C IA T IO N S IN S U R A N C E C O M P A N IE S 'm /z/M /M C O M M E R C IA L B A N K S M O R TG A G E C O M P A N IE S I C O M M E R C IA L B A N K D EPA R TM EN TS j 1 1 ^ [X ? ] O TH ER R E S ID E N T IA L TRU ST S A V IN G S B A N K S A L L O TH ER FARM * 10 20 30 40 60 70 80 Wide-scale building has been a prominent feature of postwar activity in the Sixth Federal Reserve Dis trict. Contracts awarded for residential building dur ing the five postwar years beginning in 1946 amounted to 2.4 billion dollars, according to F. W. Dodge figures. These contracts amounted to 43 percent of all awards. Total construction contracts in the District during the postwar period averaged 345 percent more than the prewar period 1935-39, whereas the 37 east ern states covered by F. W. Dodge surveys show a gain of only 253 percent. This high level of construction activity, together with current purchasing practices, is evidence that mortgage financing in the District has been substantial and that the resulting mortgages represent a large part of total investment holdings. Despite this evi dence, comprehensive data on the total amount of mortgages held by District investors have not been available heretofore. Statistics recently collected from mortgage lenders in connection with the administra tion of real estate credit controls under Regulation X provide reasonably comprehensive data for the first time. They throw a valuable light on regional charac teristics of mortgage holdings. Mortgage lending in the District is a multi-billion dol lar business, according to the statistics for May 31 of this year. On that date all registered lenders held 2.3 billion dollars in mortgages for their own account. Besides holding their own investments in mortgages, they were servicing those owned by other persons or corporations in the amount of 1.8 billion dollars, part of which may have been included in the total held for their own account. The importance of mortgages held for their own account is evident when their volume is compared with the 2.7 billion dollars in loans of all types outstanding at District commercial banks. Residential mortgages, accounting for 1.9 billion dollars of the total, were over four times as important as mortgages on nonresidential property. Mortgages on farm real estate made up 89 million dollars of the 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 O ctober 1951 90 406-million-dollar total for nonresidential mortgages. Under the provisions of the real estate credit regu lation, all lenders extending credit more than three times in either 1950 or 1951, or in aggregate volume of more than 50,000 dollars a year, were required to register. The data, of course, do not measure the lend ing activity of mortgage lenders but only the amount of mortgages outstanding on May 31 of this year. Nor do they show the total amount owed on mortgages by Sixth District borrowers, since mortgages may be held by lenders located outside the District. W h o H o ld s t h e M o r t g a g e s ? With many different types of investors seeking profit able outlets for their funds, prospective borrowers have a wide range to choose from. Over 3,000 indi viduals or corporations indicated that they either owned or serviced mortgages. Except for commercial banks, individual investors are by far the most numer ous mortgage lenders, but their total holdings are relatively small. On the basis of dollar value, three MORTGAGES HELD AND SERVICED ON M AY 3 1 , 1951, BY SIXTH DISTRICT LENDERS (M illions of Dollars) HELD FOR OWN ACCOUNT NonResidential residential Total Type of Lender S a v in g s a n d lo a n a ssn s . . . I n su ra n ce c o m p a n ie s . . . . C o m m ercia l b a n k s . . . . M o rtg a g e c o m p a n ie s . . . . C o m m ercia l b a n k tru st d e p a r t m e n t s ..................... S a v in g s b a n k s ...................... I n v e s to r s ................................... M o rtg a g e b ro k ers . . . . R e a l e sta te a g e n ts . . . . N o n p r o fit in s titu tio n s . . B u ild er s or d e v e lo p e r s . . I n d iv id u a l tr u ste e or e x e c u to r .............................. S m a ll lo a n c o m p a n ie s . . . D e a le r or co n tr a c to r in h tg ., p lb g ., a ir c o n . e q u ip ., e tc ., or r en o v a tio n a n d r e p a ir s .................................. S a le s fin a n c e c o m p a n ie s . A ll o t h e r s ............................... A ll t y p e s .......................... SERVICED FOR OTHERS 8 7 9 .7 4 8 8 .5 33 7 .2 4 5 .0 54 .1 123.9 2 0 5 .9 .9 93 3 .8 6 1 4 .6 * 543.1 4 5 .9 19.2 9 6 .8 134.5 544.2 27.2 31 .5 14.3 15 .2 13.2 5.7 4.5 9 .4 1.5 2 .0 .4 1.4 .3 .3 3 6 .6 3 2 .9 * 16.3 15.6 14.6 6 .0 4 .8 17.7 1.0 6.3 6 34.6 22 3 .7 ... .3 1.5 .3 .5 .1 2 .0 .4 .2 .1 6 .0 5.0 .2 .1 11.0 . 1,8 7 0 .1 4 0 5 .7 2 ,2 7 7 .9 * .3 1.3 102.3 1,782.2 * I n c lu d e s so m e a m o u n ts fo r w h ic h d e ta ile d b re a k d o w n s a re n o t a v a ila b le . types of lenders hold 92 percent of total mortgages outstanding owned by registrants. Although for the entire country, insurance com panies are the most important holders of real estate mortgages, in this District savings and loan associ ations carry the largest share. Their holdings on the reporting date amounted to 41 percent of the total, compared with 27 percent held by insurance com panies and 24 percent held by commercial banks. MORTGAGES HELD AND SERVICED ON M AY 3 1 , 1951, BY SIXTH DISTRICT LENDERS, BY STATE (M illions of D ollars) FOR OWN ACCOUNT Miss* Tenn.* Ga. La.* Ala. Fla. 6 0 .9 113.1 103.3 2 3 .5 3 2 3 .6 51 .7 96 .2 5.7 2 2 8 .7 30 .9 148.1 1.1 15.2 4 .9 1.7 4 .9 2 .5 6.3 12.4 2 .9 6.6 4.8 .4 5.0 4.1 19.4 2.2 .8 3.1 .5 2 .6 1.8 .5 6.1 .2 4.7 3 3 5 .0 5 1 5 .6 4 4 1 .5 S e r v ic e d fo r o th er s . . ,. 3 45.1 6 1 1 .2 3 8 4 .5 Type of Lender S a v in g s an d lo a n a ssn s. . I n su r a n c e c o m p a n ie s . ,. C o m m e r c ia l b a n k s . . . M o rtg a g e c o m p a n ie s . . C o m m ercia l b a n k tru st d e p a r t m e n t s ................. . S a v in g s b a n k s . . . . , I n v e s t o r s .............................. ! M o rtg a g e b rok ers . . . . R e a l e sta te a g e n ts . . . . N o n p r o fit in stitu tio n s . A ll o t h e r s ....................... . A ll ty p e s fo r ow n a c c o u n t .............................. s.o 185.2 45 .7 66 .3 6.1 34.8 3 6.5 32.5 .1 100.5 336.8 9 6.8 9.5 ** 2.0 ’ *.9 1.0 .3 8 .9 1.1 1.8 2 .7 .4 .2 2^5 31 6 .6 108.3 5 61.0 19 4 .4 7 7 .0 169.9 * T h a t p a r t o f s ta te in c lu d e d in S ix th D is tr ic t. * * L e s s th a n $ 1 0 0 ,0 0 0 . In the field of nonresidential mortgage lending, commercial banks led with 51 percent of total non residential mortgages, followed by insurance com panies with 31 percent, and savings and loan associ ations with 13 percent. District farm mortgages are concentrated in the hands of commercial banks, which hold 84 percent of total farm mortgages. L a r g e a n d S m a ll M o r t g a g e L e n d e r s In the District, the bulk of the mortgages, measured on a dollar basis, is held by the relatively small propor tion of larger lenders. As a corollary, the bulk is held by lenders located in the metropolitan centers. Lenders each of whose total mortgage holdings amounted to 10 million dollars or more constituted less than 2 percent of the total lenders. These large lenders, however, held 48 percent of the dollar volume of the mortgages. Concentration of mortgage holdings in the hands of the larger holders is found in the case of each type of lender. A mortgage borrower is more likely to have his mortgage held by a large lender if he has mortgaged residential property. Moreover, mortgages made on multi-family residences are likely to be so large that they can be handled only by large companies. There is more equal distribution of holdings among the nonresidential mortgage holders. Small commercial banks concentrate their lending in nonresidential mort gages more than do large banks. Even in the non residential field, however, lenders whose individual 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 O ctober 1951 DISTRIBUTION OF SIXTH DISTRICT MORTGAGE HOLDINGS BY SIZE OF TOTAL MORTGAGES OUTSTANDING/ MAY 3 1, 1951 PERCENT OF NUMBER OF LENDERS mortgage assets exceeded 10 million dollars held about 30 percent of the mortgages. The residential mortgage holdings of the savings and loan associations show the least concentration in the hands of the large lenders of the three principal types of lenders. The heaviest concentration is found in the case of insurance companies. Commercial bank holdings are only slightly more concentrated among large lenders than those of savings and loan associ ations. Combined holdings of large lenders, located in the metropolitan centers of the District, constituted 71 percent of the dollar value of mortgage holdings, al though these lenders number only 45 percent of the total. A notable exception to this generalization is found in farm real estate lending. In each District state the bulk of these loans is held outside metropoli tan areas. Since commercial banks as a group are by far the most popular source for this type of mortgage funds, banks in smaller places are the chief source of local farm mortgage lending. Another notable exception to the generalization is that metropolitan area lenders hold a greater propor tion of total residential mortgages than they do of nonresidential mortgages other than farm. Some con centration of residential mortgage holdings in metro 91 DISTRIBUTION OF SIXTH DISTRICT RESIDENTIAL MORTGAGES BY TYPE OF LENDER AND BY SIZE OF TOTAL MORTGAGES OUTSTANDING, MAY 3 1, 1951 PERCENT OF NUMBER OF LENDERS politan areas would be expected because of the amount of residential construction that has taken place there, but in addition, because of the insurance and guarantee provisions of the Federal Housing Admin istration and Veterans Administration, larger institu tional lenders find residential mortgages on property outside their immediate areas attractive. T y p e s o f R e s id e n tia l M o r t g a g e H o ld in g s Lenders hold three types of residential mortgages— those insured by the Federal Housing Administration; those guaranteed by the Veterans Administration; and conventional mortgages, that is, those without any guarantee or insurance provision. The latter are the most important to all lenders as a group in that they made up 60 percent of the total dollar volume of residential mortgages held by all District lenders. Insurance companies and lenders likely to dispose of their loans to other lenders, however, held greater amounts of insured or guaranteed than of conventional mortgages. Metropolitan lenders thus had a greater proportion of the total FHA loans than they had of the total resi dential loans. On the other hand, lenders located in smaller centers held a greater proportion of the loans guaranteed by the VA. 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 O ctober 1951 92 RELATIVE IMPORTANCE OF TYPE OF MORTGAGES HELD FOR OWN ACCOUNT ON MAY 3 1 , 1951, BY PRINCIPAL SIXTH DISTRICT LENDERS P ER C EN T PER CEN T other lenders located in the District. The known insti tutional pattern of lending in the District, however, leads to the conclusion that the bulk of these mort gages is owned by lenders outside the District, many of which are large insurance companies. Because these MORTGAGES HELD AND SERVICED BY SIXTH DISTRICT LENDERS ON MAY 3 1 , 1951, BY METROPOLITAN AREA AND TYPE (Percent Distribution) State and Metropolitan Area* OUTSTANDING FOR OWN ACCOUNT Residential Nonresidential Farm Nonfarm All Types 65 6 6 23 2 1 3 94 39 16 9 36 59 6 6 29 75 2 11 12 . . 100 100 100 100 100 15 33 14 38 4 4 10 82 27 27 11 35 16 32 14 38 41 38 12 9 . . 100 100 100 100 o o A la b a m a B ir m in g h a m ................ 54 6 4 7 29 8 2 1 2 87 38 4 4 20 34 50 5 4 8 33 64 3 7 2 24 . . 100 100 100 100 100 11 66 23 3 6 91 10 60 30 11 64 25 20 49 31 . . 100 100 100 100 100 M iss is sip p i* * , 65 J a c k so n .......................... 35 N o n m e tr o p o lita n . . . . . . 100 3 97 53 47 38 62 77 23 100 100 100 100 16 7 61 16 2 4 26 68 26 2 63 9 18 6 60 16 15 27 45 13 , , 100 100 100 100 100 . . . M o n t g o m e r y ................ N o n m e tr o p o lita n . . . . SAVINGS ANO LOAN A SSN . INSURANCE COMPANIES COM. BANKS A LL O TH ER LEN D ERS A LL TYPES Savings and loan associations in both metropolitan and nonmetropolitan areas showed a decided prefer ence for conventional mortgages. The importance of each type of holding to the principal lenders is shown on the above chart. S e r v ic in g L o a n s fo r O th e r s In a rapidly developing economic area such as the Sixth Federal Reserve District, opportunities for prof itable investment are likely to exceed the region’s available funds. In more mature areas where incomes are higher there is likely to be a surplus of funds seek ing investment outside the area. Moreover, the loca tion of large institutional investors, such as insurance companies, in certain sections of the country causes a concentration of investment funds in leading finan cial centers. This condition is revealed by the comparatively large amount of mortgages being serviced for others by Sixth District lenders. The 1.8 billion dollars re ported in such mortgages was 78 percent as great as the amount reported by lenders for mortgages held for their own account. By way of contrast, in the New York Federal Reserve District, whose financial organi zation differs markedly from that of the Sixth District, mortgages serviced by others amount to a figure less than 10 percent as large as the holdings of mortgages held for their own account by New York District lenders. The data for the Sixth District show neither the ulti mate owners of these serviced mortgages nor where they reside. Some of the loans may be serviced for FOR OTHERS F lo rid a . J a c k s o n v i l l e ................. M i a m i .............................. . . T a m p a -S t. P e te r sb u r g . . N o n m e tr o p o lita n . . . . G e o r g ia . A t l a n t a ........................... A u g u s t a .......................... . C o l u m b u s ...................... S a v a n n a h ...................... N o n m e tr o p o lita n . . . . L o u is ia n a * * B a to n R o u g e ................. N e w O r le a n s ................. . . N o n m e tr o p o lita n . . . . T e n n e ss e e * * . C h a t t a n o o g a ................ K n o x v i l l e ...................... N a s h v i l l e ....................... N o n m e tr o p o lita n . . . . * I n c lu d in g o n e or m ore c o u n tie s as d e fin ed b y th e U . S . B u rea u o f th e C en su s. * * T h a t p o r tio n w ith in th e S ix th D is tr ic t. loans are excluded from the data on loans held for their own account by Sixth District lenders, indebted ness of Sixth District mortgage borrowers to insurance companies is probably understated. The greatest proportion of the servicing of loans is done by three groups of lenders: mortgage brokers or agents, mortgage companies, and real estate agents. Together, they account for nearly nine-tenths of this type of business. On the other hand, lenders in these groups hold but 3 percent of Sixth District loans held for their own account. Many hold no loans for their own account. 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 O ctober 1951 On May 31, 1951, mortgage companies holding only 46 million dollars for their own account were servicing 544 million dollars worth of mortgages. Investors held only 15 million dollars of their own mortgages but were servicing 224 million dollars worth. Mortgage brokers reported figures of 16 mil lion and 635 million dollars, respectively, for the two types of activity. Many real estate agents, mortgage companies, and brokers do not have large amounts of their own funds available for lending. Many serve as loan agents for insurance companies or other large institutional lend ers. If not direct agents, they may be operating for large institutions who have committed themselves to eventually buy a certain amount of mortgages of a specified type. Mortgages held by mortgage companies or brokers, therefore, represent only a temporary inventory until sold to other lenders. Frequently, mort gage companies or brokers secure necessary funds from bank loans to carry the inventory. Mortgages are serviced in both metropolitan and nonmetropolitan areas, with a greater number of the persons or firms servicing loans located outside the District’s principal metropolitan areas. The dollar amount of loans serviced by those in the metropolitan areas, however, is greater than the amount serviced by lenders elsewhere. B a n k The Bank o f Upson, Thomaston , Georgia9 opened October 1, with Charles M . Pasley, Jr., President; J. A . W urst, Executive Vice Presi dent; and Robert P. Cravey, Cashier. Capital I m p lic a t io n s In many instances the data collected in connection with the registration of Sixth District mortgage lenders merely confirm what was already generally known about the structure of real estate mortgage lending. Their special value, therefore, lies in their providing more specific data which emphasize the importance of mortgage lending activity to the District’s economy. One thing emphasized is the great importance of mortgage credit as an outlet for investment funds in this area. The interest on mortgages in the hands of institutions and investors, conservatively estimated on the basis of 4:*/o percent interest, amounts to over 100 million dollars a year. Total interest payments by Sixth District borrowers are, of course, much greater than that, because of the large number of mortgages held by the investors located outside the District. * That the availability of mortgage credit is of great importance to the building industry is obvious. It is perhaps not often recognized that because of the size of both the principal and interest, changes in the amount of mortgages outstanding are likely to have substantial effects on the purchasing power of con sumers. Changes in mortgages outstanding, therefore, are likely to have repercussions outside the immediate field of residential building. The data have emphasized that any complete analy- A n n o u n c e m e n ts For the first tim e in the history o f the Federal Reserve System , the num ber o f banks rem itting at par in the Sixth District exceeds the num ber o f nonpar banks . In each month during 1950 there were approxim ately 14 more par than non par banks . In March 1951, however, the num ber o f par banks had grown until it equaled that o f the nonpar list . B y Septem ber, five more banks in the District were rem itting at par fo r checks drawn on them when received fro m the Federal Reserve Bank than were on the nonpar list . During October, three new ly organized nonm em ber banks opened fo r business in the District and announced that they will rem it at par. 93 stock o f this bank amounts to $150,000 and paidin surplus to $ 3 0 ,0 0 0 . Located in territory served by the Jacksonville Branch o f the Federal Reserve B ank, the South Dade Farmers Bank, Homestead, Florida, opened fo r business October 12. Officers are L. L . Chand ler, President; Robert W . Freitag, Executive Vice President; W alter E . Loper, Cashier; and E d ward A . Van Houten, Assistant Cashier. Capital stock amounts to $150,000 and surplus and un divided profits to $100,000. Also located in Jacksonville Branch territory is the Commercial Bank o f M iam i, M iam i, Flor ida, which opened October 31. H. T. M aroon is President; M. E. Stephens, Executive Vice Presi dent and Cashier; and W. H. Boyette and W. W. Swan, Jr., Assistant Cashiers. Capital stock amounts to $300,000 and surplus and undivided profits to $100,000. 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 O ctober 1951 94 sis of District credit conditions must include a con sideration of mortgage lending. Although changes in total mortgage credit outstanding are likely to take place more slowly than do changes in bank credit, the amount of mortgage credit outstanding in the District is so great that to consider bank lending alone would be a significant omission. Although these generalities probably apply to many other parts of the country as well as to the Sixth Dis trict, one thing the data emphasize applies particularly W h a t Is th e C h e c k Anyone who has occasion to write checks on his bank account must wonder from time to time at the wide spread nature of this way of transferring money from one person to another, persons often residing in widely separated parts of the country. This method of trans ferring funds is used in all but the smaller day-to-day transactions. Over 85 percent of all our business is done by means of bank checks. It is obvious when one stops to think about it that this sort of business must make an enormous amount of work for someone, for all of these hundreds of millions of checks, shuttling back and forth across the country, must eventually find their way to the banks upon which they are drawn. Since there are over 15,000 banks in the country, it is a wonder that so few checks go astray. The rapid and accurate sorting of checks is one of the most fascinating and important operations that keeps our money mechanism running. The ability of banks to handle the fantastic number of checks used in carrying on the nation’s business depends in part on the employment of complicated sorting machines that enable one person to do the work of many. In part, however, it depends on the use of a printed device that is to be seen on many checks, al though not on all. This device is a number in fraction form, printed in the upper right corner of the check. What looks like the numerator of the fraction is called a “transit number,” assigned to the bank by the American Bankers Association. It indicates the city and state in which the bank is located and also designates the particular bank according to the ABA Numerical Key System. The lower part of the fraction, known as the “check to this area. Because of the large amount of mortgage funds secured from outside the District, the avail ability of mortgage credit in the nation’s financial centers is of greater importance to District conditions than if the funds were secured only from District in vestors. Because it is so dependent upon the avail ability of outside credit, there are few other economic activities more senstive to general change in credit conditions than the District construction industry. Charles T. Taylor R o u t i n g S y m b o l ? routing symbol,” is used on all checks collectible through Federal Reserve Banks. Each member bank and any other bank that agrees to remit in full on all checks collected through the Federal Reserve Bank (so-called “par banks”) is assigned such a check rout ing symbol to be used on its printed checks. A speci men check on an imaginary bank is shown below. NO____________ATLANTA, GA______________________ 195---- FIFTH NATIONAL BANK 64-11 "610“ PAY TO THE ORDER OF__________________________________ $_________ ........... ............................................................................ DOLLARS SPECIMEN Each digit in the check routing symbol has a mean ing all its own. The first digit indicates the Federal Reserve District in which the bank is located. In the case of a bank located in the district served by the Federal Reserve Bank of Atlanta, this digit would be 6. In the case of San Francisco it would take two digits to indicate the Federal Reserve District—12. Following the digit indicating the Federal Reserve District comes one that shows the zone in which the bank is located—the zone served by the head office of the Federal Reserve Bank, or a zone served by a branch of the Federal Reserve Bank. The figure 1 shows that the bank lies within head office territory. Branch zones are designated by digits greater than 1, the branches being arranged alphabetically. In the 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 O ctober 1951 Atlanta district there are four branches—Birming ham, Jacksonville, Nashville, and New Orleans. The final digit of the symbol serves to narrow the location of the bank still further. It shows in which part of the head office or branch territory (outside of the reserve cities) the bank is located. If the final digit is 0, this means that the bank is to be found in a city where the Federal Reserve Bank or one of its branches is located and where funds to cover the check are im mediately available. If the symbol read 610, for example, the bank would be located in the Sixth Fed eral Reserve District (6), in territory served by the head office, Atlanta (1), and located in Atlanta itself (0). The following table of numbers used by the Fed eral Reserve Bank of Atlanta illustrates this use of the last digit: 610 Banks located in A tlan ta. 611 B anks in southeastern A labam a served by the head office. 612 B anks in G eorgia ou tsid e o f A tlanta. 613 Banks in C hattanooga served by the head office. 620 Banks in B irm ingham . 621 Banks in A lab am a, ou tsid e o f B irm in gh am but served by the B irm in gh am B ranch. 6 30 B anks in J ack so n v ille. 631 Banks in F lo rid a o u tsid e o f J a ck so n v ille. 640 Banks in N ash v ille. 641 B anks in that part o f T en n essee ly in g w ithin the Sixth D istrict but ou tsid e o f N a sh v ille and C hattanooga. 650 B anks in N ew O rleans. 651 Banks in that part o f A labam a (M o b ile and B aldw in C ou n ties) served b y the N ew O rleans Branch. 652 Banks in that part o f L o u isia n a ly in g w ith in the S ixth D istrict but ou tsid e o f N ew O rleans. 653 Banks in that part o f M ississip p i ly in g w ith in the S ixth D istrict, served by the N ew O rleans B ranch. The usefulness of this device is obvious. Its utility increases, of course, as more and more banks come to use it. The speed, accuracy, and economy with which the collection process is conducted would be greatly increased if its use were universal. Every bank that becomes eligible to use the check routing symbol is therefore doing a favor to itself, to its customers, and to the army of hard-working clerks whose business it is to see that all these millions of checks find their way home. 95 Sixth District Statistics CONDITION OF 27 MEMBER BANKS IN LEADING CITIES (In Thousands of Dollars) Item Loans and investments— Total .................... Loans—Net................. Loans—Gross.............. Commercial, industrial, and agricultural loans . Loans to brokers and dealers in securities Other loans for pur chasing and carrying securities............. Real estate loans . . . Loans to banks . . . . Other loans .............. Investments—Total . . . Bills, certificates, . and notes .............. U. S. bonds.............. Other securities . . . . Reservewith F. R. Banks Cash in v a u lt............. Balances with domestic Demand deposits adjusted Time deposits............. U. S. Gov't deposits . . . Deposits of domestic banks . Oct. 24 1951 Sept. 26 1951 Oct. 25 1950 2,692,311 2,636,195 2,519,270 1,066,156 1,058,839 1,067,223 1,084,751 1,077,294 1,081,315 621,055 613,918 634,791 12,489 11,357 12,172 34,358 34,645 36,122 86,299 87,468 89,807 4,462 9,705 5,154 326,088 320,201 303,269 1,626,155 1,577,356 1,452,047 753,162 707,608 561,227 636,850 640,591 668,033 236,143 229,157 222,787 524,837 473,703 400,324 48,147 43,142 47,013 207,441 213,288 174,742 2,008,949 1,969,855 1,840,400 529,947 527,295 526,237 100,037 105,498 46,081 603,618 550,461 512,933 500 6 ,0 0 0 1 2 ,0 0 0 Percent Change Oct. 24,1951, from Sept. 26 Oct. 25 1951 1950 +2 +1 1 + +1 + 10 — 1 —1 —54 +2 +3 +6 — 1 +3 + 11 —2 —3 +2 +1 —5 + 10 * +7 + —0 0 —2 +3 —5 —4 —13 +8 + 12 +34 —5 +6 +31 +9 + 19 +9 + 1* +18 * *More than 100 percent. DEBITS TO INDIVIDUAL BANK ACCOUNTS (In Thousands of Dollars) Sept. Aug. 1951 1951 Place ALABAMA Anniston . . . . 27,782 27,271 Birmingham . . . 378,905 400,330 Dothan . . . . 18,716 19,171 22,852 22,471 Gadsden . . . . 149,879 151,869 Mobile............ Montgomery . . 95,857 89,912 29,804 29,581 Tuscaloosa*. . . FLORIDA Jacksonville. . . 316,376 334,997 260,978 278,554 Greater Miami* . 388,829 414,177 61,127 63,453 Orlando . . . . Pensacola . . . 39,668 44,250 St. Petersburg . . 66,761 66,268 Tampa............ 141,236 142,350 GEORGIA 32,483 32,839 Albany . . . . 972,068 1,050,885 Atlanta . . . . 87,641 76,860 Augusta . . . . 1 1 ,6 6 8 12,390 Brunswick . . . 73,576 76,779 Columbus . . . 4,823 4,047 Elberton . . . . 24,582 20,448 Gainesville* . . 12,209 13,098 Griffin* . . . . 83,300 81,139 10,494 9,541 Newnan . . . . 22,608 22,275 Rome*............ 111,032 121,412 Savannah . . . . 37,754 15,246 Valdosta . . . . LOUISIANA 39,021 42,348 Alexandria*. . . Baton Rouge . . 100,848 111,115 46,868 46,322 Lake Charles . . NewOrleans . . 807,725 854,312 MISSISSIPPI 19,600 18,679 Hattiesburg. . . 165,615 164,785 Jackson . . . . 30,579 34,627 Meridian . . . . 37,043 Vicksburg . . . 32,173 TENNESSEE Chattanooga . . 175,796 174,223 Knoxville . . . 129,939 130,206 388,674 456,686 Nashville. . . . SIXTH DISTRICT** 4,883,530 5,169,295 *Not included in Sixth District totals. **32 Cities. Percent Change_____ _ . 1951 from . Yr.-to-Date Sept., 9 Months Sept. Aug. Sept. 1951 from 1950 1951 1950 1950 26,340 407,982 16,915 22,509 149,219 98,234 32,245 —2 —5 —2 —2 —1 +7 +1 311,099 — 6 248,993 — 6 363,366 — 6 60,575 —4 39,213 — 10 65,887 +1 138,999 — 1 28,398 — 1 993,811 — 8 71,218 + 14 —6 9,651 +4 68,669 4,813 +19 +20 2 1 ,0 2 1 13,288 +7 74,690 —3 1 0 ,2 2 0 —9 25,209 +1 106,408 —9 12,244 —60 41,782 +9 105,567 —9 46,693 +1 827,781 —5 +5 20,123 162,770 +1 35,437 +13 25,094 —13 164,308 +1 —0 130,886 367,292 —15 4,852,038 — 6 +4 —7 + 11 —0 0 —2 —8 + +2 +5 +7 +1 +1 +1 +2 + 14 —2 +23 + 21 + 12 +0 +17 — 1 +9 —7 — 10 +4 +25 +1 —4 +0 —2 —3 +2 —2 +29 +15 +31 +10 +24 +13 +9 +15 +14 +16 +13 +17 +16 + 12 +30 +16 +34 +29 + 17 +9 +32 + 11 +21 +26 +13 +23 +25 + 21 +8 + 18 +9 +6 +13 +12 + 28 + 15 +7 + 22 —1 +6 +1 +18 + 17 + 15 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 O ctober 1951 96 D is t r ic t B u s in e s s The tempo of District business activity generally quickens at this time of the year. Marketing of agri cultural crops increases trading activity in that it di rects funds toward the District and ordinarily in creases the need for bank credit. Retailers build stocks to meet not only expanded fall demands but antici pated high December sales. After the summer lull, many manufacturing concerns step up operations in response to fall orders. Interest in the fall pick-up this year is running high. After several months of declining consumer de mands and curtailed operations in some fields of man ufacturing, many businessmen are looking for the increased impact of the defense program to bring about a more-than-usual upturn. So far, however, economic indicators for most sec tors of the District economy show that except for those types of economic activity directly influenced by the defense program the seasonal expansion has been less than was expected. Consumers have increased their buying at depart ment, furniture, and household appliance stores less than they do ordinarily and merchants are still reduc ing inventories. The latest figures showed little sign of greater-than-usual fall expansion in most types of manufacturing. Bank loans, although still greater than a year ago, have expanded less than seasonally. De spite a 59-percent increase in the District cotton crop, only a seasonal gain in farmers’ net income is ex pected. The effect of the large increase in cotton pro duction will be offset by higher costs, lower cotton prices, and smaller production of other crops. The effect of the defense program, however, is be coming more apparent. Government borrowing and expenditures are increasing bank deposits and District banks have expanded their Government security hold ings. Nonresidential construction contracts are high, reflecting both industrial and military expansion. Gov ernment payrolls continue to grow. Although it has not had the effect originally expected, the defense program has already made a deep impact upon the Sixth District. R e lu c t a n t C o n s u m e r B u y in g Inventory-laden merchants in the Sixth District shuddered as they compared their summer sales this year with those of 1950. Their feeling of relief that C o n d it io n s summer was over was accompanied by the anticipation that fall would bring a revival in consumer buying. Consumer purchases at department, household appliance, and furniture stores in the June-August period of 1951 were below those of the comparable period of 1950. Department store sales averaged 6 percent less in the three summer months this year; household appliance store buying fell 40 percent; and furniture store, 22 percent. Sales at both household appliance and furniture stores since April 1951 have been below those of the corresponding months of 1950. This movement has continued through September, when buying at furniture stores was down 19 percent from September 1950 and 41 percent at household appliance stores. September department store sales were 5 percent under those of that month last year. Department store data available for the first three weeks in October, however, show sales climbing 11 percent above the comparable weeks of October 1950. In June, July, and August of 1951, consumers spent more at District department stores than in the like period of any other year except 1950. Sales for these months in 1951, for example, were 9 percent greater than those in the comparable period of 1949. These expansions in the dollar volume of sales at department stores, however, as compared to 1949, a more normal year, were caused primarily by rising prices; there was little change in the physical volume of merchan dise sold. Consumer purchases at furniture and house hold appliance stores for these months, on the other hand, were less in 1951 than in either 1950 or 1949. W e a k Fall Pick-up September ushered in a slight increase in purchases at District department stores, but buying at furniture and household appliance stores, dropped below the August volume. August sales, however, both at furniture and at household appliance stores were greater than usual for that time of year. The August rally was probably caused in part by the relaxation of Regulation W, but the effect appears to have been short-lived. Since August, department store sales have shown an upward trend. During that month, sales at report ing stores grew 19 percent from July. The 5-percent September gain over August at District department stores was approximately 9 percent below the normal increase for that month, and data available for the 97 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 O ctober 1951 first three weeks in October reveal a 3-percent rise in sales over the last three weeks in September. The seasonally adjusted index of department store sales changed from 408 in September to an estimated 411 in October. September buying at District furniture stores was 6 percent below that in August and was also less than the volume expected for that month. For three out of six years since 1946, furniture sales rose in September as compared to August. Only at household appliance stores was the 2-percent September decrease approxi mately equal to the normal movement for that month. The prospect of a hike in ex cise taxes, together with the possibility of rationing of scarce raw materials vital to consumer durable goods industries has had, thus far, little effect on purchas ing, either by consumers or by department stores. The seasonally adjusted index of stocks declined steadily from 483 in April 1951 to 429 in September. Department store stocks, although being continu ally reduced were considerably above any other year, including 1950. August 1951 inventories of household textiles, for example, were up 62 percent from last August; muslins and sheetings, 140 percent; men’s and boys’ wear, 14 percent; men’s clothing, 31 per cent; major household appliances, 18 percent; do mestic floor coverings, 12 percent. Merchants, how ever, succeeded in paring stocks of radios, television sets, and phonographs to a level 32 percent below that of August 1950. Department store inventories have decreased in re cent months primarily because merchants did not replenish their stocks. Merchandise receipts at these stores have been below the comparable 1950 levels since May 1951. On a month-to-month basis, outstand ing orders declined 13 percent in August 1951, but jumped in September to a level 29 percent above that of the preceding month. Inventories at District furniture stores also reveal a continued drop from last year. A 44-percent gain in January 1950 had dwindled to 11-percent gain in August. On a month-to-month basis in 1951, stocks climbed steadily from January 1951 through April; since then, they have fallen until in August inventories were 3 percent below those of July. B.A.W. D eclining Inventories Sixth District Statistics INSTALMENT CASH LOANS Lender Federal credit unions . . State credit unions . . . Induhtrial banks . . . . Industrial loan companieh Small loan companies . . Commercial banks . . . No. of Lenders Report ing . 39 17 . 9 . 12 . 34 . 3? Volume Percent Change Sept. 1951 from Aug. Sept. 1951 1950 —18 + 13 —17 —14 —7 —19 —4 + 16 — 11 + 17 —5 — 1 Outstandings Percent Change Sept. 1951 from Aug. Sept. 1951 1950 +0 +6 +9 +1 + 16 +1 +4 +1 +6 +1 —0 —4 RETAIL FURNITURE STORE OPERATIONS Item Total sales............... Instalment and other credit sales Accounts receivable, end of month Collections during month Inventories, end of month Number of Stores Reporting . 120 105 . 105 81 81 . 88 Percent Change September 1951 from August 1951 September 1950 —6 —23 — 10 —4 —5 —25 +1 —9 — 1 —9 — 0 + 11 WHOLESALE SALES AND INVENTORIES* Sales Percent Change No. of o. of Sept. 1951 from N Firms Firms Report Aug. Sept. Report Wholesaler ing 1951 1950 ing Type of 3 +3 Automotive supplies . . + 11 +2 +34 Electrical—Wiring supplies 4 4 4 +26 — 20 “ Appliances . 3 9 —4 —13 4 —5 Industrial supplies . . . . 12 — 11 3 4 —4 —16 3 Lumber and building S -17 —38 materials............ 5 Plumbing and heating 4 + 22 +5 3 5 Confectionery . . . . —1 + 12 9 Drugs and sundries . . —5 +1 . 12 —5 — 10 9 Groceries—Full-line . . . 45 —2 34 +6 “ Specialty lines 10 —1 0 5 Tobacco products . . . . 11 —7 —2 8 Miscellaneous.......... . 11 —4 + 18 11 Total................... . 151 —3 —5 92 *Based on U.S. Department of Commerce figures. Inventories Percent Change Sept. 30,1951, from Aug. 31 Sept. 30 1951 1950 —16 +36 + 77 +44 + 14 +56 +37 +25 —8 —1 + 22 +6 —6 — 1 —3 —4 +1 +4 + 18 —1 + 10 —1 + 16 — 1 +36 + 25 DEPARTMENT STORE SALES AND INVENTORIES* Percent Change Sales Stocks Sept. 30, 1951, from Sept. 1951 from Yr. to Date Aug. Sept. 1951Aug. 31 Sept. 30 1951 Place 1950 1950 1951 1950 ALABAMA ............ + 13 +2 +2 +2 —3 Birmingham . . . . + 17 +2 +1 —7 +1 +9 + 10 Mobile............... +6 Montgomery . . . . +9 — 1 —i —4 +1 —0 FLORIDA ............... —3 +6 +4 +5 +0 Jacksonville . . . . +0 +6 +7 +2 —4 Miami............... —7 +6 +2 +2 Orlando............... +6 +1 + 11 St. Petersburg . . . +5 —6 +8 +3 +io Tampa............... —2 —3 +0 +2 +7 GEORGIA ............... +4 —7 +3 —5 +1 — 12 Atlanta............... +0 — 0 +0 — 11 Augusta............... + 16 + 16 + 16 +0 +7 Columbus............ —1 —3 +6 +5 +7 Macon............... —2 + 15 +7 +7 +1 Rome.................. + 19 — 11 —5 Savannah ............ +7 +5 +9 +7 +2 i LOUISIANA............ —4 —6 —3 —5 —2 Baton Rouge . . . . +7 — 10 — 10 +0 —3 NewOrleans . . . . —7 —6 —2 — 1 —2 MISSISSIPPI . . . . —6 + 17 —3 —1 +2 Jackson ............... + 15 —7 —5 —3 +1 Meridian............ —7 —2 + 21 TENNESSEE . . . . —8 +9 +0 —3 +i —2 +5 —7 —2 +1 Bristol-KingsportJohnson City . . . —5 + 11 +1 Chattanooga . . . . + 20 —8 +0 —6 +i Knoxville............ —7 +4 +2 +3 +7 Nashville............ —8 —2 +5 —6 +1 OTHER CITIES** — 0 +4 +4 +9 +9 DISTRICT............... +5 —4 +2 —2 +1 *Includes reports from 137 stores in the Sixth Federal Reserve District. **When 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. 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 O ctober 1951 98 M a n u fa c tu rin g A ctiv ity By August of each year, a seasonal expansion in man ufacturing, which, in many cases, continues through out the year, generally begins. The greatest increases are most likely to occur in the food processing, ap parel, and textile industries. These industries in the District, however, have failed to follow their customary pattern this year. Furthermore, there was a weakening in aircraft and shipbuilding employment in August. As a result, man ufacturing employment increased only .6 percent, compared with the usual seasonal gain over July of 3 percent. The increase over last August for the Dis trict amounted to one percent. F o o d Processing a n d A p p a r e l August food proc essing employment, which during the past four years has risen approximately 12 percent above that of the previous month, increased only 1.2 percent from the July figure this year, and was down 7.6 percent from August 1950. Apparel manufacturing employment, instead of increasing 7 percent from July to August as usual, declined .3 percent. Furthermore, a fall of 3 percent from August last year was recorded. T extiles Textile employment showed a .2 percent gain this August, compared with the customary 2-percent rise. Other measures of textile activity are aver age weekly hours worked and cotton consumption. During August 1949 and 1950, the average weekly hours put in by a textile worker increased approxi mately 1.8 hours over July. This August the average operator was on the job approximately 1.3 hours less per week. He put in about 4 hours less per week than in August 1950. In 1947, August consumption of cotton in the tex tile industry exceeded that of July by 12 percent and in 1948 by 8 percent. The recovery in 1949 from the mild recession brought the August total up 26 percent from July of that year. In August 1950, consumers’ initial reaction to Korea caused a 19-percent gain. Consumption this August increased 14 percent over July but was 3.5 percent below a year ago. Figures for September show cotton consumption 2 percent below that for August and 5.5 percent under con sumption in September 1950. Month-to-month gains might be expected in industries that are more sensitive T ransportation E q u ip m e n t to defense program orders than they are to seasonal factors. In the transportation equipment sector, how ever, which includes aircraft and shipbuilding, em ployment decreased 8 percent in August, compared with July. Because of previous monthly increases, however, the August 1951 employment figure exceeded that of last August by 11 percent. P aper a n d C h em ica ls Two other industries figured significantly in the increase in total manufacturing employment this August as compared with last. The paper industry reported a gain of 13 percent in the number of workers and the chemical industry added to its forces by 5 percent. Preliminary reports for September indicate that the less-than-seasonal increases in August activity have not been offset. Despite likely gains in chemical and paper employment and those arising from expanding activity in the aircraft industry during the remaining months of the year, it is doubtful that District manu facturing activity in the last quarter will equal that of the corresponding period in 1950. C o n s tr u c tio n C o n t r a c ts Total construction con tracts awarded in August in the District decreased 34 percent from July. When it is noted that in 1948 and 1950 the August total was approximately 5 percent larger than that of July and in 1949 was only 2 per cent smaller, this 34-percent decrease becomes signifi cant. This September, total awards declined 10 percent from August, compared with a 7-percent de crease for the month in 1950, and a one-percent gain in 1949. The 120 million dollars in contracts awarded this August was 16 percent below the 141 million dollars awarded in August 1950. With the nonresidential figure remaining constant at 64.5 million dollars, resi dential awards decreased a substantial 30 percent from the August 1950 amount of 76 million dollars to 54 million in August this year. Total construction contracts awarded decreased 20 percent from 139 million dollars in September 1950 to 107 million in September of this year. Residential awards fell 16 percent and nonresidential contracts were down 30 percent. On the other hand, total construction contracts awarded from January to the end of September this year were 3 percent greater than those awarded dur ing the corresponding period of 1950. The greater 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 O ctober 1951 backlog of incompleted contracts this year is reflected in the high construction employment figures. £ jj ^ B a n k D e p o s its a n d C r e d it Changes in deposits, loans, and investments at District banks during recent months reflect the growing impor tance of the Government’s defense program and the slackening of activity in certain private sectors of the District economy. Contrary to conditions prevailing during the corresponding period last year, credit ex pansion at District member banks has primarily been a result of Government, rather than private, borrowing. Purchasing power available in the form of deposits at District banks ordinarily does not in crease until October. At that time, in addition to an expansion in deposits reflecting a growth in loans, marketing of crops and renewed activity in several manufacturing industries often direct the flow of funds towards District banks. This year total deposits at District member banks increased 115 million dollars in September. Approxi mately a fourth of this amount was in Government deposits but there were increases in other types of deposits as well. Demand deposits adjusted—demand deposits other than interbank and Government—at all District banks increased 10 million dollars this Sep tember. They declined 57 million dollars during that month last year; 63 million in 1949 ; 34 million in 1948; and 26 million in 1947. Further expansions occurred during October according to reports from weekly reporting member banks. In the light of recent trends in loans and in business activity, the best explanation that can be given for this unusual deposit growth is the disbursement of Government funds for the defense program, particu larly in the construction of military facilities and in meeting expanded Government payrolls. Because increased spending has not kept pace with growing deposits, however, the rate of turnover of demand deposits has changed little, aside from normal seasonal fluctuations, from that of previous months. In September the seasonally adjusted index of turn over of business and personal demand deposits at weekly reporting member banks in leading cities was 96 percent of the 1935-39 average, compared with 95 percent for August and 98 percent for September last year. Sixth District Indexes DEPARTMENT STORE SALES* Place DISTRICT . . . Atlanta . . . . Baton Rouge . . Birmingham . . Chattanooga . . Jacksonville . . Knoxville . . . Nashville . . . NewOrleans . . Tampa . . . . Adjusted** Aug. 1951 398 416 345 378 366 344 428 425 384 457 440 409 533 Sept. 1951 408 427 354 428 416 368 434 418 377 458 460 352 521 Sept. 1950 409 466 391 409 437 383 416 417 369 473 480 361 518r Sept. 1951 424 474 393 458 445 434 430 426 430 371 474 373 501 Unadjusted Aug. Sept. 1951 1950 358 426 420 518 304 433 348 437 329 467 317 452 381 412 366 426 334 421 383 343 494 401 355 383 497r 453 Sept. 1951 442 568 360 646 377 Unadjusted Aug. Sept. 1951 1950 437 451r 566 635 356 387 642 691 382 385 DEPARTMENT STORE STOCKS D eposits 99 Place DISTRICT Atlanta . . Birmingham Nashville . NewOrleans Sept. 1951 429 521 343 603 373 . . . . Adjusted** Aug. 1951 441 561 363 636 398 Sept. 1950 438r 583 368 645 381 GASOLINE: TA X COLLECTIONS*** Sept. 1951 269 265 231 241 288 279 . . . 320 Place SIX STATES Alabama . . Georgia . . . Louisiana . . Mississippi . Tennessee . . Adjusted** Aug. Sept. 1951 1950 266 247 266 242 238 217 244 255 284 269 277 246 280 252 COTTON CONSUMPTION* Place TOTAL. . . Alabama . Georgia. . Mississippi Tennessee . . . . . . Sept. 1951 . 160 . 163 . 165 . 102 . 121 Aug. 1951 163 174 164 101 129 Aug. 1951 . 152 . 151 . 141 . 155 . 141 . 152 . 159 July 1951 151 152 140 153r 141 150 157 Unadjusted Aug. Sept. 1951 1950 263 252 268 254 213 231 249 266 287 283 285 254 283 257 ELECTRIC POWER PRODUCTION* Sept. 1950 169r 180r 171 73 132 MANUFACTURING EMPLOYMENT*** Place SIX STATES . Alabama . . Florida. . . Georgia. . . Louisiana. . Mississippi . Tennessee. . Sept. 1951 275 278 227 251 302 288 326 Aug. 1950 150 151 132 154r 140r 152r 158r CONSUMERS PRICE INDEX Sept. Aug. Sept. 1950 1951 1951 Item 181r 191 ALL ITEMS . . 192 216r 231 Food . . . . 233 196r 211 Clothing . . 214 Fuel, elec., 141r 143 and refrig. • 143 Home fur 194r 202 nishings . . 2 0 1 158r 166 Misc. . . . . 165 Purchasing power of .55r .52 dollar . . . .52 *Daily average basis **Adjusted for seasonal variation * * * 1 9 3 9 monthly average = 1 0 0 Other indexes, 1935-39 = 100 r Revised Aug. 1951 SIX STATES ,. . 462 Hydro generated . . 237 Fuel generated . . 756 July 1951 432 245 677 Aug. 1950 408 291 561 CONSTRUCTION CONTRACTS Place DISTRICT . Residential Other . . Alabama . Florida . Georgia . Louisiana . Mississippi Tennessee . . . . . . . . . . . . . . . . . Sept. 1951 527 802 393 352 726 481 616 203 576 Aug. 1951 595r 948r 424r 638 551 322 657 1,335 938 Sept. 1950 686 951 558 858 730 998 606 409 504 ANNUAL RATE OF TURNOVER OF DEMAND DEPOSITS Sept. 1951 Unadjusted . . . 22.8 Adjusted** . . . 23.6 Index** . . . . 95.7 Aug. 1951 20.7 23.4 94.7 Sept. 1950 23.3 24.2r 97.9r CRUDE PETROLEUM PRODUCTION IN COASTAL LOUISIANA AND MISSISSIPPI* Unadjusted . . Adjusted** . . Sept. 1951 377 381 Aug. 1951 369 369 Sept. 1950 351r 354r 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 O ctober 1951 100 Loans In September, for the first time in six months, new borrowings by businesses and individuals were greater than repayments at all member banks. The 20-million-dollar increase in total loans in September, however, was the smallest reported for that month in any postwar year. The greater part of the increase in loans occurred at country banks. Total loans at the end of September were, however, 58 million dollars greater than a year earlier. G o v e rn m e n t S ecu rities In contrast to the less-thanseasonal expansion in private credit, member banks in the District have steadily added to their holdings of Government securities. During September, total hold ings increased 32 million dollars; in the preceding two months these holdings had expanded 122 million dollars. This tendency is quite different from that of the corresponding period in 1950, when banks were reducing their Government security holdings in order to build up reserves to carry their expanding loans. C.T.T. F a ll M a r k e t i n g o f C a s h C r o p s The large seasonal increase in District farm income that occurs in the fall is attributable mainly to the heavy marketing of cash crops. Since cotton is the principal cash crop, the size, price, and rate of mar keting of that crop often determine whether the sea sonal rise in farm income will be larger or smaller than usual. C o tto n C ro p Larger According to the October esti mate, the cotton crop in the District states is 59 per cent larger than last year, but only 5 percent larger than the ten-year average. Current prices received by farmers are about 15 percent below those of last year and large quantities are now entering the Government loan at approximately 32 cents a pound. The present loan value is about 20 percent below the farm price received during the heavy marketing season last year. Although most of the cotton now entering the loan may be redeemed later in the season and sold at higher prices, the net effect of the loan movement is to hold farmers’ receipts from cotton down during the first few months of the marketing season. The wide variations between seasons in the rate at which cotton is marketed are illustrated by the con trast between sales of the 1949 and 1950 crops. By the end of December 1949, Georgia farmers had sold 68 percent of their crop; Alabama farmers, 75 per cent; and Mississippi farmers, 67 percent. In the 1950 crop year, however, sales at the end of December amounted to 95 percent of the crop in Georgia, 93 percent in Alabama, and 90 percent in Mississippi. Prospects for higher prices later in the season ap pear to be good, with the result that the marketing pat tern for the 1951 crop probably will more nearly resemble that of 1949 than that of 1950. Despite the large crop, therefore, the seasonal increase in total marketings attributable to the concentration of cotton sales in the last half of the year may be only slightly larger than normal, if any. O th e r C ash C ro p s S m a ller Production of some other crops that help to create the seasonal rise in cash receipts is below that of last year. Peanut production, for example, is down 17 percent and estimated sweet potato production is down 47 percent. Rice and to bacco production are larger than they were last year, but the size of these crops has little effect upon mar ketings during the last few months of the calendar year. P roduction C o sts H ig h er The extent of the seasonal rise in cash receipts, of course, does not always indi cate the extent of the seasonal rise in net cash income. Production costs reached an all-time high in 1951. From June 1950 to June 1951, farm wage rates in creased 13 percent; marketing prices increased 10 percent; prices of building and fencing supplies went up 14 percent; and prices of motor vehicle supplies advanced 6 percent. The gain in farmers’ net incomes, therefore, is certain to be less than is indicated by the increase in gross receipts. Furthermore, a large part of the nicreased production costs this year has been deferred until the last few months of the year. Farm production loans outstanding at District mem ber banks on June 30 yere 18 percent larger in volume than on the same date in 1950. The near failure of cotton in some areas in 1950 meant that in 1951 farmers had to borrow a larger portion than usual of operating cash. Most of these loans will be repaid during October and November. Increased costs this year, in other words, will be largely concentrated in the last few months of the year. On balance, it appears that the seasonal increase in farmers’ net income in 1951 will not be any greater than usual. B.R.R.
@FedFRASER