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/1h%vitl/ilji£ (Jle.o-ije.iQ- TWELFTH FEDERAL RESERVE DISTRI CT FEDERAL RESERVE BANK OF SAN F R A N C I S C O January 1957 Review of Business C o n d itio n s ................ 2 Financing of Farmers’ Current Expenses By Twelfth District Commercial Banks 4 OF BUSINESS CONDITIONS AS 1956 clo se d , m ost e c o n o m ic in d icators reach ed n ew re co r d levels, alth ou g h the rate o f g r o w th o f bu siness a ctivity d u rin g the year w as n ot as g rea t as it had been in 1955. In du stria l p r o d u c tio n c on tin u ed its u p w a rd tren d in D e cem b er, b u t at a slo w pace. P r o d u c tio n o f capital eq u ip m en t m o v e d to n ew h igh s, an d a u tom ob ile o u tp u t ex p a n d ed . T h e m a n u factu re o f n o n d u r ables in creased after a d ip in N o v e m b e r, but so m e slow n ess w a s ev id en t in the o u tp u t o f h ou seh old du ra bles. N e w co n s tru ctio n con tin u ed to rise slo w ly , p a ced b y n on residen tial bu ildin g. E m p lo y m e n t, a fter seasonal a d ju stm en t, re m a in ed at a pea k level. R etail sales w ere g e n e r ally s tro n g an d w e re m ain tained at the re co rd level reach ed in N o v e m b e r. W h o le s a le p rices co n tin u e d to rise w ith q u ota tion s fo r industrial g o o d s p r o v id in g the im petu s. T h e dem an d fo r cre d it rem ain ed s tro n g and a v era g e yield s o n se cu rities ro se sign ifica n tly fr o m N o v e m b e r to D e cem b er. M o r e o v e r , secu rity m arkets w e re a f fected b y e x p e cta tio n s o f la rg e capital flotation s early in 1957. T h e pattern in this D istrict d id n ot d ep a rt sig n ifica n tly fr o m that in the n ation. E x c e p t fo r a sligh tly stro n g e r em p loy m en t pictu re and a m ore m od era te in crease in ba n k loans, D istrict d ev el op m en ts in D e ce m b e r a p p ea red qu ite sim ilar to th ose in the n ation as a w h ole. T h e com p etition fo r fu n d s in this D istrict w as ev iden t in the re a ction o f banks to the p erm issib le in crease in in terest rates on tim e an d sa vin gs d eposits. D is trict in stitu tion s h o ld in g m o r e than 9 0 p ercen t of m e m b e r ba n k tim e d ep osits raised th eir rates. O v e r 75 p ercen t o f the tim e d ep osits in T w e lfth D is trict m em b er banks w ill d r a w 3 percen t, and at least 17 p ercen t w ill earn 2.5 percen t. A su b stantial n u m b er o f n on m em b er banks a lso re p o r te d in creases in rates p a id on tim e an d sav in gs deposits. Em ploym ent in District continues strong rise o f the past tw o years. U n d e r ly in g th e N o v em b er rise w as e x p a n sio n in the serv ice, p u b lic u tility and tra n sp orta tion , an d m a n u fa ctu rin g indu stries. E a ch o f th ese g r o u p s had substantial in creases betw een O c t o b e r and N o v e m b e r after seasonal ad ju stm en t. M o d e ra te w eak n ess wras ap p aren t in c o n tra ct c o n s tru ctio n an d g o v e r n m en t em p loym en t, w h ich d r o p p e d sligh tly m o r e than season ally. E m p lo y m e n t in oth er n o n a g r i cu ltu ral lines in creased b y a fa ir m a rg in after ad ju stm en t fo r season al fa ctors. T o ta l n o n a g r i cu ltu ral em p loy m en t m a d e a g o o d sh o w in g in N o v e m b e r, bu t the rise after season al a d ju stm en t w as n ot qu ite so stro n g as in som e oth er m on th s in 1956. In c o m p a ris o n w ith N o v e m b e r 1955, the n u m ber o f p eop le at w o r k in D istrict n on fa rm jo b s w as a b ou t 5 p ercen t h igh er. N a tion a lly, h o w e v e r, the g a in w as little m o r e than 2 percen t. In su red u n em p loy m en t also in creased d u rin g N o v e m b e r after season al ad ju stm en t. W it h u n em p loy m en t at lo w levels, a sm all in crease in the n u m b er o f idle w o rk e r s ten ds to h ave a m a rk ed e ffe ct on this series. N o v e m b e r d ev elop m en ts in clu d ed earlier-th an -u su al term in a tion o f can n in g activities becau se o f early h arvests an d a sh arp d r o p in the lu m b er in du stry , w h ich reflected m a r ket c o n d itio n s and, to som e ex ten t, ad verse w eath er. T h e u p sw in g in in su red u n em p loy m en t w as reversed in D ecem b er. A ft e r a llo w in g fo r season al effects, w h ich ten d ed to red u ce u n em p loy m en t ju st b e fo r e the h olid a y s, the n u m ber o f w o rk e r s d ra w in g in su ran ce p a ym en ts fell ba ck to w a rd the O c t o b e r level. O n the basis o f this d eclin e in in su red u n em p loy m en t an d som e p r e lim in a ry em p loy m en t figu res, it ap pears D e c e m b er em p loy m en t again in crea sed o n a season ally a d ju ste d basis. Christm as sa le s pattern at departm ent sto res varies B a sed on w eek ly rep orts b y D istrict d e p a rt m en t stores, C h ristm as sales w e re rath er slow until the wreek p re ce d in g the h olid a y. In the first T o t a l n o n a g r ic u l t u r a l e m p lo y m e n t in th e T w e lfth D istrict d eclin ed b y on ly h alf o f the e x p ected season al a m ou n t betw een O c t o b e r an d c o r d e d b y r e p o rtin g stores ran 2 p ercen t b e lo w N o v e m b e r. O n a sea son ally a d j u sted basis, th ere the c om p a ra b le p e r io d in 1955. In the wreek p r e fo re , em p loy m en t con tin u ed its alm ost u n b rok en ce d in g C h ristm as, sales tu rn ed sh a rp ly u p w a rd 2 seven w eek s o f the season , the d o lla r v o lu m e re January 1957 M O N T H L Y REVI EW and raised the cu m u la tiv e e ig h t-w e e k total sligh t ly a b o v e the y e a r -a g o level. Sales clim b ed stro n g ly again d u rin g C h ristm as w e e k so that the seasonal total w as 2 p ercen t h ig h er than in 1955. S in ce p rices w ere h igh er fo r m o s t item s in late 1956 than in the p r io r y ear, it ap pears that the d olla r g a in in sales m a y n ot h ave resulted in any in crease in ph ysical volu m e. Forest products and residen tial construction show w eakness L u m b e r activity con tin u ed to slip in D e c e m ber becau se o f seasonal fo r ce s an d g en eral w e a k n ess in the m arket. P rice s fo r D o u g la s fir lu m ber, the prin cip al fo r e st p r o d u c t in b oth ph ysical and d olla r v olu m e in this D istrict, re p o rte d ly reached a tw o an d o n e -h a lf y ea r lo w in D ecem b er. D o u g las fir p ly w o o d has also been u n der con sid erable pressu re and the p rice fell to $ 6 7 p er th ou san d square feet fo r qu a rter-in ch sheets. In m id -D e cem ber, h o w e v e r, on e o f the m a jo r p ro d u ce rs an n ou n ced a p rice o f $72, and several oth ers have fo llo w e d . C on stru ction activity con tin u ed g en erally stro n g w ith the e x ce p tio n o f h ou sin g. R eq u ests fo r V A ap praisals fo r h o u s in g loans in this D is trict fell alm ost 6 0 p ercen t fr o m N o v e m b e r to D ecem b er, and the cu m u la tiv e total fo r 1956 w as 50 percen t b e lo w the p re v io u s year. A p p lica tio n s fo r F H A m o rtg a g e s on n ew h om es in creased sligh tly in D e ce m b e r, but the total fo r the year w as o f f alm ost on e-th ird fr o m 1955. Su fficien t tim e has n o t y et elapsed to in dicate w h a t e ffe ct the ch a n ge in rates on F H A in su red m ortg a g es fr o m 4.5 to 5 p ercen t w ill have on loan v olu m e. W eather conditions re ve rse d U n usu al w eath er con d ition s o ften have a d v erse effects u p o n certain areas o f the D istrict, bu t the situ ation so fa r this w in ter has been a com p lete reversa l fr o m a y ea r a g o . In D ecem b er 1955 and Ja n u a ry 1956 la rg e areas o f the D is trict su ffe re d fr o m h eavy rains and flo o d w aters, w hile oth er section s ex p e rie n ce d d r o u g h t c o n d i tions. In con tra st, in late 1956 an d early Ja n u ary o f this year, som e o f the areas su ffe r in g fro m to o m u ch m oistu re the p re v io u s w in te r w e re b e in g pla gu ed b y a la ck o f m oistu re. A s a result, d ro u g h t c o n d itio n s w ere m o r e w id esp rea d and preva iled in section s o f A r iz o n a , U tah , N ev a d a , and C a liforn ia. T h e con tin u a tion o f su bn orm al precip ita tion in ra n gela n d areas such as th ose in A r iz o n a has fo r c e d cattlem en to rely m o r e h ea v ily on ex p en siv e su pplem en tal fe e d in g this w in ter. In som e parts o f the P a c ific N orth w est, p o w er sh ortages h ave o c c u r r e d ; and interru ptible p o w e r users h ave fo u n d it n ecessary to a d ju st their p o w e r pu rch ase p rog ra m s. H o w e v e r , p re s ent w a ter su p p ly foreca sts fo r the C o lu m b ia B a sin, based on re se rv o ir levels an d sn ow packs, in dicate that r u n o ff w ill be near n orm a l d u rin g the sp rin g and su m m er o f 1957. In the sou th ern parts o f the D istrict, o n the oth er hand, w ater levels are b e lo w n orm al. I f p recip ita tion c o n tinues to be unu su ally lo w both in the valleys an d the m ou n tain s in these sections, it m igh t be n ecessary to ration w a ter su pplies in fa rm in g areas later in the year. District bank loans rise in D ecem ber T o ta l loans o f w eek ly rep o rtin g m em ber banks in the D istrict in creased $ 1 3 8 m illion d u rin g the fo u r w eek s en d in g D ecem b er 26, 1956. T h is w as a sligh tly sm aller g a in than w as rep orted in the sam e p e r io d o f the p re v io u s year. C om m ercia l and in dustrial loans a ccou n ted fo r all but a sm all pa rt o f the in crease. R ea l estate loans rose by on ly $3 m illion in the fo u r -w e e k p e r io d and “ oth er lo a n s ,” w h ich in clu d e co n s u m e r len din g, rose $ 1 8 m illion . Sm all d eclin es w e re rep orted fo r loans to a g ricu ltu re and loans fo r pu rch asin g and ca r ry in g secu rities b y p erson s o r firm s oth er than b ro k e rs o r dealers in secu rities. T h e b ro k e r and dealer g r o u p in creased th eir b o r r o w in g by the sam e am ou n t that “ o th e rs” red u ced their use o f cred it to fin an ce secu rities. C om m ercia l and in du strial loans fo llo w e d alm ost the sam e pattern as in 1955. O n the oth er h and, real estate loans rose su bstantially m o r e in D e ce m b e r 1955, b y $ 3 7 m illion , and secu rity an d oth er loans d e clin ed d u rin g the earlier period . T h e ch a n g e in D istrict ba n k cred it in D e ce m b er w as m o r e m od era te as c o m p a re d w ith the n ation than in m ost o f the earlier m on th s o f 1956. D u r in g D ecem b er, the loa n in crease in the D istrict w as r o u g h ly 10 percen t o f the n a tional rise. F o r all 1956 the loa n in crease in the D istrict a ccou n ted f o r m o r e than 2 0 p ercen t o f the national rise and in several m on th s e x ceed ed 3 0 percen t. 3 FEDERAL RESERVE B A N K OF SAN FRANCISCO In the first h alf o f J a n u a ry, a la rg er than usual p o s t-h o lid a y d o w n tu r n in loans occu rre d . T o ta l $ 7 2 m illion o f this d eclin e. D u r in g the secon d w eek o f the m on th , total loans fell b y $31 m il loa n s o f D istrict w eek ly r e p o rtin g m em b er banks fell b y $ 8 8 m illion d u rin g the first w eek o f Janu lion as sm all in creases in real estate, ag ricu ltu ral, an d “ o th e r” loans pa rtially o ffs e t a $ 3 3 m illion d r o p in in du strial an d c o m m e rcia l loa n s and m in o r d eclin es in a g ricu ltu ral loa n s an d se cu ri ties loans. a ry as all ca teg ories e x ce p t a g ricu ltu ral loans sh o w e d d ecrea ses. C om m ercia l an d industrial loans and “ o th e r ” loa n s tog eth er a ccou n ted fo r Financing of Farm ers’ Current Exp en ses by Twelfth District Com m ercial B anks o m m ercia l C banks are the m ost im p ortan t in stitu tional len ders to fa rm ers fo r cu rren t e x pen se p u rp oses. T h e results o f the F ed era l R e serv e S y stem su rv e y o f ba n k len d in g to farm ers in m id -1956 in d icate that loa n s o f this ty p e are also the m o s t im p orta n t ty p e o f ag ricu ltu ral loan held b y c o m m e rcia l banks. T h e y a ccou n ted fo r 43 p ercen t o f the d o lla r v o lu m e o f ou tstan din g farm loa n s h eld b y T w e lfth D istrict com m ercia l banks in m id -1 9 5 6 . C u rren t e x p en se loans are im p orta n t n ot o n ly in term s o f d olla r v olu m e but a lso in term s o f the n u m b er o f b o r r o w e r s . O v e r a th ird o f the fa rm b o r r o w e r s fr o m D istrict banks h ad at least on e ou tsta n d in g cu rren t ex p en se loa n . T h e g r o w in g im p orta n ce o f p r o d u c tio n e x pen ses to a g ricu ltu re is in d ica ted b y the p relim in a ry results o f a stu d y recen tly c om p leted b y the D ep a rtm en t o f A g ricu ltu r e , w h ich in dicate that p r o d u c tio n ex p en ses take m o r e o f the fa r m e r ’s d olla r than b e fo r e the w ar. In line w ith this c o n clu sion is the g r o w th o f D istrict bank len d in g to fa rm ers f o r cu rren t e x p en se p u rp oses, w h ich m o r e than d o u b le d b etw een m id -1 9 4 7 and m id 1956. S in ce cu rre n t e x p en se loa n s are g en era lly c o n sid ered to h ave relatively sh orter m aturities than g ra p h ica lly and fin an cially, it m igh t be ex p e cte d that these system s w o u ld be in a better p osition than sm all unit banks to o ffe r lo n g e r rep ay m en t p e rio d s on fa rm loans. T h e data on fa rm loa n s in the T w e lfth D istrict, w h e re b ra n ch b a n k in g is relatively m u ch m o r e im p orta n t than elsew h ere, ap pear to su p p ort this e x p ecta tion . T h e m a tu rity o f loans, as in dicated b y the relative d istrib u tion o f the ou tstan d in g loan v olu m e, d id ten d to be fo r lo n g e r p eriod s in the T w e lfth D istrict than in the c o u n try as a w h o le rega rd less o f p u rp ose o f loan. M o r e o v e r , dem an d n otes are u sed less freq u en tly in the D istrict than in the n ation. It is this ty p e o f n ote w h ich p oten tia lly p r o v id e s the g rea test d eg ree o f ba n k c o n tro l o v e r the loan p o r tfo lio since the m a tu rity o f the loa n is legally at the d iscretion o f the len der. N ev erth eless, in som e cases there is an in form a l a g reem en t b e tw een the b o r r o w e r and the len d er as to the a p p ro x im a te len gth o f m atu rity. S ix p ercen t o f the d olla r v o lu m e o f all ou tsta n d in g fa rm loans in the D istrict w e re dem an d n otes c o m p a re d w ith 8 p ercen t nationally. T able 1 F I a r m nsu red L o a n s C ad ju stm en ts in th eir loa n p o r tfo lio s fa irly qu ick ly . B eca u se o f the g rea ter d iv ersifica tion in the op era tion s o f b ra n ch ba n k in g system s, both g e o 4 C o m m e r c ia l u rren t B a n k s E xpe n se , T P u rpo ses w e l fth D is t r ic t ( O u t s t a n d in g o n J u n e 3 0 , 1 9 5 6 ) oth er ty p es o f ag ricu ltu ra l loa n s, th ey o ffe r to c o m m e r cia l banks certain ad vantages. B y h av in g a relatively h ig h p r o p o rtio n o f th eir a g ricu l tu ral loa n p o r tfo lio s in the fo r m o f sh ort-term loa n s, banks can , sh ou ld it be n ecessary , m ake fo r M a jo r p u rp ose o f lo a n C u r re n t o p e r a tin g a n d fa m ily liv in g P u r c h a s e o f fe e d e r l i v e s t o c k .............. T o ta l cu rren t A m ount o u t s t a n d in g (in dollars) P ercen t o f d o lla r N u m b e r v o lu m e o f lo a n s A vera ge s iz e o f lo a n (in dollars) 2 4 5 ,5 6 6 ,8 0 1 78 8 3 ,3 6 4 2 ,8 4 3 6 9 ,0 6 9 ,1 3 5 22 6 ,7 3 3 1 0 ,2 5 8 3 1 4 ,6 3 5 ,9 3 6 1 00 9 3 ,0 9 7 3 ,3 8 0 January 1 957 M O N T H L Y REV I E W A s in dicated in T a b le 1, com m ercia l bank loans to farm ers fo r cu rren t ex p en se p u rp oses w ere classified in to tw o c a t e g o r ie s : loans fo r cu rren t o p era tin g an d fa m ily liv in g p u rp oses an d loans fo r the p u rp ose o f p u rch a sin g fe e d e r livestock. M atu rity of Loans C u rren t ex p en se loa n s are g en era lly c o n s id w id e d isp ersion o f d u e dates, ra n g in g fr o m d e m and notes to loans w ith m aturities o f ten years o r m ore. A m o n g the fa cto rs that on e m igh t e x p ect to be associa ted w ith these v a r y in g tim e p eriod s a r e : net w o rth o f b o r r o w e r ; type o f farm op era ted b y the b o r r o w e r ; secu rity u s e d ; and o r ig in o f the n ote, that is, w h eth er the n ote w as a cqu ired b y the bank fr o m a m erch a n t o r dealer ered to h ave sh ort m atu rities. T h e fig u res in o r m ade d irectly to the b o r r o w e r b y the bank. T a b le 2 ba sed on the orig in a l m a tu rity o f the Net worth o f b orrow er T a b le 2 M a t u r it y P e r io d o f F a rm L o a n s fo r C u rre n t E x p en se P u rp oses In su red C o m m e r c ia l B a n k s , T w e l f t h D is t r ic t (O u t s t a n d i n g o n J u n e 3 0 , 1 9 5 6 ) N um ber o f lo a n s A m ount o u ts ta n d in g (Thousands o f dollars) D e m a n d ........................ 1 m o n t h ........................ 3 m o n t h s ..................... 6 m o n t h s ...................... 9 m o n t h s ...................... 1 y e a r ........................... 15 m o n t h s ................... 18 m o n t h s ................... 2 y e a r s ........................... 3 y e a r s ........................... 4 -5 y e a r s ...................... 6 -1 0 y e a r s ................... O v e r 10 y e a r s ........... 6 ,1 5 0 1 ,0 8 8 1 4 ,8 7 2 3 5 ,9 4 8 1 9 ,9 9 9 1 1 ,7 9 8 435 628 644 3 14 589 6 08 23 3 2 ,6 7 4 3 ,0 7 7 2 9 ,3 8 5 8 3 ,4 0 5 6 3 ,3 1 8 8 5 ,0 0 6 1 .8 7 5 2 ,2 1 2 6 ,5 0 3 1 ,4 7 0 1 ,8 1 6 3 ,6 6 7 229 5 ,3 1 3 2 ,8 2 8 1 ,9 7 6 2 ,3 2 0 3 ,3 1 6 7 ,2 0 5 4 ,3 1 0 3 ,5 2 2 1 0 ,0 9 8 4 ,6 8 2 3 ,0 8 3 6 ,0 3 1 9 ,9 5 7 T o t a l ........................... 9 3 ,0 9 7 3 1 4 ,6 3 6 3 ,3 8 0 M a t u r it y 1 p e r io d A v era g e s i z e o f lo a n (in dollars) 1 L o a n s are classified u n d er th e n earest m a tu rity listed — fo r e x a m p le, 5 -m on th a n d 7 -m on th loa n s are in clu d ed w ith 6 -m o n th loans. N o t e : D e t a ils m a y n o t a d d t o to ta ls b eca u se o f rou n d in g . ou tstan d in g cu rren t ex p en se loans h eld b y D is trict banks bear ou t this gen eralization . O v e r 96 p ercen t o f su ch loans had m atu rities o f on e year o r less. T h e m ost usual m a tu rity p e r io d w as six m on th s, w ith o v e r a th ird o f the cu rren t ex p en se loans w ritten to m atu re in this p e rio d o f tim e com p a re d w ith a b ou t 2 0 percen t fo r all loans m ade b y D istrict com m ercia l banks to farm ers. S ix m on th s w as also the m ost c o m m o n m a tu rity p e rio d fo r each o f the c om p on en ts o f the cu rren t ex p en se loa n s ca te g o r y — cu rren t liv in g and p r o du ction ex p en se loans and feed er liv e sto ck p u r chase loans. In ad dition , h o w e v e r, m aturities o f on e y ea r an d dem an d n otes w e re o f relatively grea ter im p orta n ce in the case o f loans fo r p u r chase o f feed er liv estock than fo r cu rren t liv in g and p r o d u c tio n ex p en ses. D esp ite the con cen tra tion o f loans in the m a tu rity p e r io d o f on e y ea r o r less, there w as a T h e net w o rth o f the b o r r o w e r ap peared to have little e ffect o n the m a tu rity p e rio d o f ou tstan din g loans, that is, th ere w as little d iffe re n ce in the relative im p orta n ce o f the distribu tion o f m a tu rities w ith in net w o rth ca te g o rie s.1 O n ly in the case o f d em an d n otes did a sizable d iffe re n ce a p pear. L o a n s o f this ty p e w ere relatively m ore c o m m o n to b o r r o w e r s in the net w o rth g ro u p s ab ov e $ 2 5,00 0. In this net w o rth class, the tim e p e rio d o f the n ote seem ed to be in flu en ced by the type o f fa rm in g en terprise. O p e ra to rs o f m eat anim al farm s and farm s p r o d u c in g “ oth er m a jo r ” c r o p s ,2 such as fru its, nuts, and v egetables, m ost freq u en tly held dem an d notes. S in ce it is not lik ely that banks w o u ld requ ire dem an d notes fr o m b o r r o w e r s w ith su ch h igh net w orth , this con cen tra tion o f d em an d n otes a m on g b o r r o w ers w ith m eat anim al an d oth er m a jo r p rod u ct farm s m a y in dicate b o r r o w e r p referen ce fo r this type o f loan. T h e r e are several reason s w h y such a p referen ce m a y ex ist. F o r instance, the dem and n ote perm its the b o r r o w e r a m a x im u m degree o f flex ib ility in repaym en t o f the loan, w h ich is o f pa rticu la r interest to p ro d u ce rs o f item s su b je c t to rapid p rice flu ctuation s w h ich m ay, in turn, in flu ence the tim e o f m a rk etin g o f the p r o d uct. In feed er cattle op era tion s, fo r ex am ple, there is n o fix e d p e r io d fo r k eep in g cattle on feed. T h e len gth o f the p e r io d is g o v e r n e d by the w eig h t an d finish d esired and the p rices o b tainable fo r v a riou s w eigh ts and gra des. I f p rices ap pear fa v ora b le, the cattle m a y be m arketed so o n e r than an ticip ated at the tim e th ey w ere p la ced on feed. 1 N e t w o rth in th is ca se w as d iv id e d in to three cla s s e s : lo w n e t w orth (u n d e r $ 2 5 ,0 0 0 ) , m ed iu m n et w o rth ( $ 2 5 ,0 0 0 -$ 9 9 ,9 9 9 ), a n d high n et w orth ($ 1 0 0 ,0 0 0 a n d o v e r ). 2 I n c lu d e s those fa rm s w h ere 50 p e r ce n t o r m ore o f th e v a lu e o f p r o d u c ts sold is d eriv ed fr o m a p a rticu la r p r o d u c t or g ro u p o f sim ilar p r o d u c ts su ch as fru it. 5 FEDERAL RESERVE B A N K OF SAN FRANCISCO Type o f farm T able 3 In g en era l, m atu rities o n cu rren t ex p en se loa n s w e re g ea red to the len gth o f the p r o d u c tion p e r io d fo r the c o m m o d ity in volved . L o a n s M of I F a t u r it y a r m n su red L P o a n s Co e r io d s , b y for C m m e r c ia l T ype of u rren t B a n k s E S e c u r it y x p e n se , T w e lfth P , urpo ses D is t r ic t ( O u ts ta n d in g o n J u n e 3 0, 1 9 5 6 ) to b o r r o w e r s w ith farm s that y ie ld in com e o n a rela tively regu la r basis th ro u g h o u t the year, su ch as d a iry in g op era tion s, sh o w e d less v a r i a b ility in the m a tu rity p e r io d than loans to b o r row ers w ith en terp rises su ch as cash U n secu red M a t u r it y p e r io d 2 E n d o rs e d or C h a tte l c o - m a k e r m o rtg a g e (Number o f loans) F arm rea l e sta te grain farm s, w h ere the bu lk o f the in com e is obtain ed in a relatively sh ort p e r io d o f tim e fo llo w in g the h arvest and sale o f the g ra in . T h e r e w as a w elldefin ed g r o u p in g a b ou t the s ix -m o n th m atu rity p e r io d fo r loa n s to b o r r o w e r s en ga ged in the 15 m o n t h s 18 m o n t h s ................... ................... p r o d u c tio n o f m eat an im als o r cash g ra in . T h e m a tu rity p e r io d o f loans to co tto n farm ers, h o w ever, c on cen tra ted at tw o m atu rities— on e peak at n in e m on th s an d a n oth er at tw o years. L o a n s to d a iry and gen eral fa rm ers had n o w ell-d efin ed O v e r 10 y e a r s ........... 3 ,4 1 7 7 68 1 0 ,3 8 7 2 0 ,9 1 4 9 ,0 7 4 5 ,2 1 2 168 201 123 32 25 0 0 102 59 500 1 ,3 7 5 681 436 40 76 25 25 0 0 0 2 ,3 7 0 261 3 ,5 1 2 1 1 ,4 5 5 9 ,0 9 3 5 ,5 9 3 226 350 405 121 25 0 0 48 0 177 354 285 105 0 0 46 136 500 608 23 1 G o v e r n m e n t gu a ra n teed a n d “ o th e r” s e c u r ity n o t in clu d e d . 2 L o a n s are cla ssified und er th e n earest m a tu rity listed— fo r ex a m p le, 5 -m o n th a n d 7 -m on th loa n s a re in clu d e d w ith 6 -m o n th loa n s. peaks fo r loa n m a tu r itie s ; but, fo r b o r r o w e r s w ith g en eral farm s, sh ort m atu rities (o n e year o r le s s ) wyere m o r e c o m m o n than fo r da iry D irect and a cq u ire d loans A s is ev iden t in T a b le 4, m ost cu rren t ex p en se farm ers. loans held by co m m e rcia l banks w e re orig in a lly Security m ade d irectly to the b o r r o w e r an d fe w w e re a c F ifty th ou san d, o r 56 percen t, o f the D istrict q u ired fr o m m erch a n ts o r dea lers in farm su p cu rren t e x p en se loans w e re u n secu red . A m o n g plies. W h e r e th ere w e re a su fficien t n u m b er o f the secu red loans, chattel m o rtg a g e s w e re b y far p u rch a sed loans to m ake m a tu rity p e r io d c o m the m ost c o m m o n type o f secu rity u sed— a cco u n t p a rison s in g fo r 85 p ercen t o f the secu red loans as sh ow n in T a b le 3. Chattel m o rtg a g e loans ten ded to have lo n g e r m atu rities, w ith relatively m o re loans in the n in e-m on th and o n e -y e a r m atu rity ca te g o rie s , than u n secu red and en d orsed loans. O v e r half o f the cu rren t e x p en se loans secu red b y farm real estate had a m a tu rity o f 18 m on th s o r lon g er, w ith m o re than a fou rth o f the total n u m b er fa llin g w ith in the ran ge o f s ix to ten years. T h e s e are lo n g m atu rities fo r cu rren t ex p en se loa n s an d su g gest that p erh a ps som e o f these loa n s w e re m isclassified as to p u rp ose. H o w e v e r , since loans w ere classified a c c o r d in g to the m a jo r w ith th ose loans m a de d ire ctly by banks, it d id n ot ap pear that there w as a g rea t deal o f d iffe re n ce betw een m atu rities fo r d irect an d p u rch a sed loans. F o r n otes secu red b y en d orsem en t, the d istrib u tion o f m a tu rity p e rio d s fo r direct and a cq u ired loans w as quite sim ilar — m o r e so than fo r n otes secu red b y chattel. In the latter case, a cq u ired n otes ten ded to be fo r lo n g e r m atu rity p e riod s, w ith tw o p oin ts o f c o n cen tra tion , the first at on e y ea r an d a n oth er at tw o years. O n the oth er h and, the m a tu rity p e riod s fo r d irect loans secu red by chattel ten ded to con cen tra te a rou n d on e p o in t— s ix m on th s. Size of Current Ex p e n se Loans p u rp o s e o f the loa n , a substantial n u m ber o f them m a y be m u lti-p u rp ose and m a y even in T h e r e w as con sid era b le variation in the size o f clu d e u n d er cu rren t ex p en se loans som e that cu rren t ex p en se loans ou tstan din g. D ire c t loans w ere m ade in pa rt fo r the pu rch ase o f farm real fo r cu rren t ex p en se p u rp oses a v era g ed c o n s id estate. erably la rg er than p u rch a sed loans. T h is d iffe r - 6 January 1957 M O N T H L Y REV I E W T able 4 D ir e c t A a n d I c q u ir e d nsu red C F L a r m o a n s B o m m e r c ia l for C , T a n k s urrent E xpe n se w e lfth D is t r ic t P u rpo ses ( O u t s t a n d in g o n J u n e 3 0 , 1 9 5 6 ) r ----------- T o t a l N u m ber of lo a n s D i r e c t lo a n s . . . A c q u i r e d lo a n s . N o t a s c e r t a in e d T ota l ................ c u r r e n t e x p e n s e -----------> P ercen t o f A m ount n u m b e r o f o u tsta n d in g lo a n s (in dollars) ----------------C u r r e n t o p e r a t in g -------------- .x N u m ber P ercen t o f A m ount of n u m b e r o f o u ts ta n d in g lo a n s lo a n s (in dollars) r — P u r c h a s e o f fe e d e r li v e s t o c k ----N u m ber P ercen t o f A m ount of n u m b e r o f ou tsta n d in g lo a n s lo a n s (in dollars) 9 1 ,8 3 4 1 ,0 8 8 175 9 8 .6 1.2 0 .2 3 1 1 ,6 9 9 ,1 3 9 2 ,7 9 6 ,0 0 2 1 4 0 ,7 9 5 8 5 ,2 5 0 939 175 9 8 .7 1.1 0 .2 2 4 2 ,7 1 4 ,3 2 2 2 ,7 1 1 ,6 8 4 1 4 0 ,7 9 5 6 ,5 8 4 149 0 9 7 .8 2 .2 0 6 8 ,9 8 4 ,8 1 7 8 4 ,3 1 8 0 9 3 ,0 9 7 1 0 0 .0 3 1 4 ,6 3 5 ,9 3 6 8 6 ,3 6 4 1 0 0 .0 2 4 5 ,5 6 6 ,8 0 1 6 ,7 3 3 1 00 .0 6 9 ,0 6 9 ,1 3 5 Type o f farm ence in size c o u ld be attribu ted m a in ly to the m u ch la rg er d irect loans m ade fo r pu rch ase o f In a d d ition to the relationsh ip betw een the feed er liv e sto ck since there w as little d iffe re n ce net w o rth o f the b o r r o w e r and the size o f loan, b etw een the size o f d irect and a cq u ired cu rren t o f secu rity used. the ty p e o f farm op era ted by h im also w as a ssocia ted w ith ch a n g es in the size o f cu rren t ex p en se loans. T h is stem s in part fr o m the d if feren ces in the seasonal pattern o f in com e and fr o m the v a ria tion in the ratio o f fix ed to o p e r ational costs a ssocia ted w ith v a riou s types o f fa rm in g en terprises. T h e r e w as con sid erable N et worth o f b orrow er v ariation in the size o f the av erag e ou tstan din g balance o f loans b y ty p e o f farm a m on g the v a r i T h e net w o rth o f the b o r r o w e r w as o f c o n s id erable im p orta n ce in in flu en cin g the size o f ou s net w o rth g ro u p s. In the g r o u p o f b o r r o w e r s w ith net w o rth s o f $ 2 5 ,0 0 0 and o v er, the largest loans, b oth fo r total cu rren t e x p en se loans and each o f the tw o su b d iv ision s o f this ca teg ory (T a b le 5 ) . B o r r o w e r s w ith a h igh net w orth u su ally operate large farm s and w o u ld be likely to requ ire m o r e fu n d s fo r o p era tin g ex p en ses. a v era g e size o f loan w as to op era tors o f m eat anim al farm s, w hile the sm allest loans w ere to p ou ltry farm ers. P erh a p s large p ou ltry farm ers p r o d u c tio n loans. O th er fa ctors, besides orig in o f loan, w h ich w ere a ssocia ted w ith the changes in the size o f these loans w ere the net w o rth o f the b o r r o w e r , the type o f farm operated by the b o r r o w e r , the in terest rate ch a rg ed , and the type T B of I F a r m nsured L C N orrow er o a n s fo r o m m e r c ia l rely to a g rea ter ex ten t on cred it sou rces oth er than com m ercia l banks, fo r the av erag e balance able et C W 5 orth urrent B a n k s E , T C lasses x pen se w e lfth P urpo ses D is t r ic t ( O u t s t a n d in g J u n e 3 0 , 1 9 5 6 ) P u rch ase o f fe e d e r li v e s t o c k U n d e r $ 3 ,0 0 0 ................................................................ $ 3 ,0 0 0 -$ 9 ,9 9 9 ................................................................ $ 1 0 ,0 0 0 - $ 2 4 ,9 9 9 ........................................................... $ 2 5 ,0 0 0 -$ 9 9 ,9 9 9 ........................................................... $ 1 0 0 ,0 0 0 a n d o v e r ...................................................... N o t a s c e r t a in e d ........................................................... T ota l .............................................................................. A ll C u rren t cu r r e n t o p e r a tin g expen se (in thousands o f dollars) P u rc h a s e o f feed er liv e s t o c k C u rren t o p e r a t in g (in dollars) A ll cu r re n t expense 216 628 2 ,5 7 0 1 7,8 1 7 4 7 ,8 3 9 0 1 ,174 9 ,1 5 4 2 4 ,2 2 0 8 3 ,8 1 7 1 2 7 ,0 9 3 109 1 ,390 9 ,7 8 2 2 6 ,7 9 0 1 0 1 ,6 3 3 1 7 4 ,9 3 2 109 490 1 .026 1,981 6 ,7 1 3 2 7 .6 6 9 0 580 945 9 93 2 ,3 6 5 8 ,6 7 4 624 564 9 49 1 ,043 2 ,6 6 8 1 0,6 78 624 6 9 ,0 6 9 2 4 5 ,5 6 7 3 1 4 ,6 3 6 1 0 ,2 5 8 2 ,8 4 3 3 ,3 8 0 N o t e : D e ta ils m a y n o t ad d to totals beca u se o f rou n din g. 7 FEDERAL RESERVE B A N K on loa n s to p o u ltry fa rm ers in the net w o rth g r o u p o f $ 1 0 ,0 0 0 to $ 2 4 ,9 9 9 w as a m on g the la rg est. A m o n g the sm all farm b o r r o w e r s , the g ro u p w ith net w o rth s o f $ 3 ,0 0 0 o r less, the low est OF SAN FRANCISCO T of I I n terest F ar m nsu red L C R ate o a n s , by fo r C o m m e r c ia l able O 6 r ig in a l urrent B a n k s E , T S iz e of xpe n se w e l fth N P ote , urposes D is t r ic t ( O u ts ta n d in g o n J u n e 30, 1 95 6) a v era g e size loa n s w e re m ade to m eat anim al fa rm ers. T h e ou tsta n d in g balance p er loa n to c o tto n fa rm ers av era g ed largest in the net w o rth ca teg ories u n d er $ 2 5 ,0 0 0 . In gen eral, the a v er age o u tsta n d in g loa n balance to d a iry fa rm ers w as a m o n g the sm allest in each net w o rth ca te g ory. T h e larg est a v era g e size loan ou tstan d in g fo r all net w o rth g r o u p s co m b in e d w as to b o r r o w ers w ith m eat anim al farm s. T h e se b o r r o w e r s a ccou n ted fo r the bu lk o f the d olla r v o lu m e o f loa n s ou tsta n d in g fo r pu rch ase o f feed er liv e stock , 8 0 percen t. M o r e o v e r , w ith in each net w o rth c a te g o r y the feed er liv estock loan v olu m e w as g rea test to o p e ra to rs o f m eat anim al farm s. In a d d ition to o p e ra to rs o f m eat anim al farm s, O r ig in a l s iz e o f n o te U n d e r $ 2 5 0 ........... $ 2 5 0 -$ 4 9 9 ................ $ 5 0 0 -$ 9 9 9 ................ $ 1 ,0 0 0 -$ 1 ,9 9 9 ____ $ 2 ,0 0 0 -$ 4 ,9 9 9 ____ $ 5 ,0 0 0 -$ 9 ,9 9 9 ____ $ 10 ,0 0 0 - $ 2 4 ,9 9 9 . . $ 2 5 ,0 0 0 - $ 9 9 ,9 9 9 . . $ 1 0 0 ,0 0 0 a n d o v e r P u rch ase A ll C u rren t o f fe e d e r cu rren t p r o d u c t io n li v e s t o c k expen se (M ost common annual rate in percent) 8 .0 8 .0 6 .0 6 .0 6 .0 6 .0 6 .0 6 .0 6 .0 7.0 6 .0 7.0 6 .0 6 .0 6 .0 6 .0 6 .0 5 .1 -5 .9 8 .0 8 .0 6 .0 6 .0 6 .0 6 .0 6 .0 6 .0 5 .1 -5 .9 A ll cu rren t expense (A verage rate in percent) 7 .4 7.4 6 .9 6 .5 6 .1 6 .0 5 .8 5.5 5 .4 N o t e : L o a n s w ere classified b y in terest ra tes in to ca te g o rie s o f th e fo llo w in g t y p e s : 4 p e r c e n t; 4 .1 -4 .9 p e r c e n t ; 5 p e r c e n t ; 5 .1 -5 .9 p e r c e n t ; 6 p e r c e n t ; 6 .1 -6 .9 p e r c e n t ; e tc. T h e pattern o f in terest rates as a m o n g d iffe re n t net w o rth g ro u p s, h o w e v e r, is c o m p le x . In terest b o r r o w e r s w ith gen eral farm s an d d a iry farm s rates on sm all loans (u n d e r $ 5 0 0 ) w ere lo w e st also b o r r o w e d qu ite h eavily fo r the p u rp ose o f to b o r r o w e r s in the sm allest net w o rth c a te g o ry , w h ile on la rg er loans in terest rates w e re lo w e st p u rch a sin g feed er liv estock . In term s o f n um ber o f loans, m ore w e re ou tstan d in g to farm ers w ith m eat anim al fa rm s in the $ 2 5 ,0 0 0 to $ 9 9 ,9 9 9 net w o rth class than in an y oth er net w o rth ca te g o ry . T h e loa n v o lu m e fo r cu rren t op e ra tin g and fa m ily liv in g p u rp oses in all net w o rth classes w as greatest to b o r r o w e r s w ith gen eral farm s e x ce p t in the v e ry la rg e net w o rth class o f $ 1 0 0 ,0 0 0 an d o v er. In this net w o rth g ro u p , the loa n v o lu m e w as h eaviest to b o r r o w e r s w ith m eat anim al fa r m s ; but m o r e in d iv id u al loans w e re ou tsta n d in g to c o tto n farm ers. In the lo w est net w o rth g ro u p , $ 3 ,0 0 0 and u n der, the la rg to b o r r o w e r s in the h igh est net w o rth g r o u p ($ 1 0 0 ,0 0 0 and o v e r ) . T h e ex p la n a tion fo r this pattern o f interest rates co u ld be that farm ers in the lo w net w o rth c a te g o r y m ay h ave steady o ff-fa r m em p loy m en t w h ich co u ld be u sed in ev alu atin g the repaym en t ability o f the b o r r o w e r . H e n ce , th eir p rim a ry so u rce o f in com e w o u ld n ot be s u b je ct to a g r i cultural p rice flu ctu a tion s and p r o d u c tio n h az ards. O f the b o r r o w e r s in the lo w e st net w o rth g r o u p w ith loans f o r p u rp oses oth er than the pu rch ase o f farm real estate, 2 7 p ercen t w ere p a rt-tim e farm ers. A s fo r the b o r r o w e r s w ith a h igh net w orth , the effe cts o f in com e risk on est n u m ber o f loans w as ou tstan din g to o p e r repaym en t ability m a y be e x p e cte d to be c o m a tors o f “ oth er m a jo r p r o d u c t” farm s, w h ile in pa ra tiv ely lo w becau se the financial cap a b ility o f the rem ain in g net w o rth ca teg ories m ore loans these b o r r o w e r s w o u ld tend to red u ce th eir d e p en d en ce on cu rren t in com e as a m eans o f r e pa ym en t o f cu rren t e x p en se loans. w e re ou tsta n d in g to fa rm ers w ith g en eral farm s. Interest rates L o a n s fo r cu rren t op e ra tin g an d fa m ily liv in g C h an g es in the size o f the origin a l am ou n t o f cu rren t e x p en se loans w ere a ssocia ted also ten ded to ca rry h ig h er in terest rates as the w ith orig in a l size o f the loa n declin ed , as did loans ch a n g es in in terest rates, as is ev id en t in T a b le 6. fo r the p u rp ose o f p u rch a sin g feed er liv estock . T h is a ssocia tion w as apparent fo r loans fo r all B u t, fo r loans o f com p a ra b le size, th ose to p u r p u rp o s e s and n ot ju s t fo r cu rren t ex p en se loans. chase feed er liv e sto ck w ere m o r e lik ely to ca rry 8 January 1957 M O N T H L Y REV I E W lo w e r interest ch a rg es than loans fo r cu rren t e x pen se pu rp oses. O ve rd u e Notes and U nplanned R en ew als V a ria b ility of In terest R ates in m id -1 9 5 6 , o r a b ou t 9 percen t o f the total n um ber, w e re either o v e rd u e o r had been ren ew ed T h e a v era g e interest rate on cu rren t ex p en se loans ou tstan din g in the D istrict in m i d -1956 w as because o f u n ex p ected circu m stan ces. T h e o u t stan din g balance on these loans totaled $ 4 4 m il 5.9 percen t. It w as in dicated in the p reced in g section dealin g w ith the size o f cu rren t ex p en se lion , 14 percen t o f the total v olu m e o f cu rren t e x loans that the interest rate ch a rg ed v a ried w ith ag ed 60 percen t la rger than that o f all curren t ex p en se loans. U n p la n n ed renew als w ere m ore the origin a l size o f the n ote an d the net w o rth o f the b o r r o w e r . O th e r fa ctors w h ich m a y also be related to interest rates a r e : the ty p e o f secu rity, the ten u re o f the op era tor, and the type o f farm op erated b y the b o r r o w e r . A lth o u g h the ty p e o f secu rity is often c o n s id ered to be associated w ith the in terest rate ch a rg ed , there w as n o con sisten t d iffe re n ce in interest ch a rg es b y type o f secu rity on loans m a de fo r cu rren t ex p en se p u rp oses, after takin g in to a ccou n t the origin a l size o f the note. T h is also w as the case fo r the tw o c om p on en ts o f c u r rent ex p en se loa n s— cu rren t o p era tin g and fa m ily liv in g loans and loans fo r the pu rch ase o f feed er livestock . T e n u r e o f the op era tor, h o w e v e r, did appear to be related to interest rates, p a rticu la rly fo r n otes o f o v e r $5 0 0 . F o r n otes in the sam e size g ro u p , in terest rates w ere g en era lly low est on notes to la n d lord s and w ere som ew h a t h igh er to o w n e r -o p e r a to r s and tenant o r c ro p p e r farm ers. In terest rates on loans to co rp o ra te farm s w ere h igh er than th ose on loans to la n d lord s but w ere lo w e r than rates o n loans to o w n e r -o p e r a to r s and tenant farm ers fo r loans o f $ 2 ,0 0 0 o r m ore. In terest rates also v a ried by ty p e o f farm . O v e r 8 ,0 0 0 cu rren t ex p en se loans ou tstan din g pense loans (T a b le 7 ) ; and the loan size a v e r im portan t in term s o f n u m ber o f loans and dollar v olu m e ou tstan din g than o v erd u e loans, a ccou n t in g fo r o v e r th ree-fou rth s o f their com b in ed o u t stan din g loan v o lu m e and alm ost 8 0 percen t o f the loans. U n p la n n ed renew als w ere used alm ost as freq u en tly as plann ed renew als, the fo rm e r a ccou n tin g fo r 4 6 p ercen t o f the total n um ber o f ren ew ed notes. T h e d olla r v olu m e o f unplan ned renew als w as greatest to b o r r o w e r s w ith m eat anim al farm s w ith net w orth s o f $ 1 0 0 ,0 0 0 and o v er, fo llo w e d closely by b o r r o w e r s w ith general farm s in the sam e net w o rth class. T o g e th e r these tw o types o f b o r r o w e r s a ccou n ted fo r n ot quite h alf the d olla r v olu m e o f such loans but som ew h a t less than 10 percen t o f the n u m ber o f loans. F e e d e r liv e sto ck loans a ccou n ted fo r about 4 0 percen t, in d o lla r term s, o f the unplan ned renew als o f loa n s m ade to op era tors o f m eat anim al farm s in m id -1 9 5 6 . P r ice s fo r fed cattle in the sp rin g o f that y ea r w e re u n fa vora b le and these u nplan ned renew als reflected the delay o f m ark etin gs b y som e feed ers in a n ticip ation o f better p rices later in the year. T h e o v erd u e loan v olu m e w as even m ore c o n centrated than the loan v olu m e o f unplan ned re S p ecia lized farm ers ten ded to pay lo w e r interest new als. A little o v e r 60 percen t o f the o v erd u e rates than gen eral farm ers on loans o f the same loan v olu m e con sisted o f loans to general fa rm size. A m o n g the sp ecia lized typ es o f farm s, the ers w ith a net w o rth o f $ 1 0 0 ,0 0 0 and ov er. M o r e interest rates on loans to op era tors o f “ oth er o v e r, this loan v olu m e w as m ore than three m a jo r p r o d u c t” farm s w e re a m o n g the low est in m on th s o v erd u e and in clu ded n o loans fo r the each size g r o u p o f loans. T h is m a y be an in d ica p u rp ose o f pu rch asin g feed er livestock . O n ly 5 tion o f the in flu ence o f com p etition on the stru c percen t o f the loans w as m ade to these b o r r o w ture o f interest rates as m an y o f such farm ers ers ; con seq u en tly, the a v era g e size o f the loans h ave available to them sou rces o f cred it oth er w as large. than in stitutional len ders, such as p rocessin g U n p la n n ed renew als and o v erd u e loans w ere firm s. L o a n s o f $ 5 0 0 and o v e r to co tto n farm ers n ot con fin ed to b o r r o w e r s w ith any particu lar also ca rried relatively lo w interest rates. ty p e o f farm , but there w as con sid era b le v ariation 9 FEDERAL RESERVE B A N K in th eir relative im p ortan ce. J u d g in g fr o m the o u t OF S A N FRANCISCO total o f $ 1 4 .6 m illion and w as e x ce e d e d o n ly b y b o r r o w e r s w ith g en eral farm s. A b o u t a th ird o f stan d in g loa n v olu m e , these loa n s w ere o f g re a t est im p orta n ce to b o r r o w e r s w ith p ou ltry farm s. T h e r e w ere n o o v e rd u e p ou ltry loans ou tsta n d in g, but u n plan n ed ren ew als w e re v e ry im p o r the d olla r v o lu m e o f u n plan ned ren ew als to o p erators o f m eat anim al farm s c on sisted o f loans m ade fo r the p u rp o s e o f p u rch a sin g feed er liv e tant an d a ccou n ted fo r 25 p ercen t o f the cu rren t stock . T h e s e b o r r o w e r s a ccou n ted fo r w ell o v e r e x p en se loan v o lu m e to p ou ltry p rod u cers. T h e in co m e p osition o f D istrict p o u ltry fa rm ers w as n ot fa v ora b le d u rin g the first part o f 1956. C o m 9 0 percen t o f the d olla r v olu m e o f u n plan n ed re n ew als ou tstan d in g that w ere m ade fo r the p u r p ose o f p u rch a sin g fe e d e r livestock . m ercia l b r o ile r p rices w ere the low est in several Conclusion years, an d e g g p rices w e re at a lo w level. T h is pay ou tsta n d in g cu rren t ex p en se loans. B o r r o w T h e im p orta n ce o f D istrict bank c re d it to farm ers in a ssistin g th em in m eetin g th eir sea ers w ith gen eral fa rm s w ere secon d to o p e r son al ex p en se requ irem en ts is e v id en ced b y the im p aired the a b ility o f p o u ltry p ro d u ce rs to r e $ 3 15 m illion in loa n v o lu m e ou tsta n d in g in m id 1956, a tim e o f y ea r w h en such loa n s are at o r n ear th eir seasonal peak. T h is loa n v o lu m e a tors o f p o u ltry farm s in the relative im p o r ta n ce o f o v e rd u e an d u n plan ned renew als, w h ich a cco u n te d fo r 23 p ercen t o f the ou tstan d in g c u r am ou n ts to a b ou t an eigh th o f the total cu rren t o p e ra tin g e x p en d itu res m a de an n ually b y D is rent e x p en se loa n v olu m e o f these b o rro w e rs. T h e h eaviest ba n k b o r r o w e r s fo r cu rren t e x trict farm o p e ra to rs in recen t years. M o r e o v e r , the relation sh ips presen ted in this article d e m o n strate the c o m p le x ity o f c on sid era tion s in farm len d in g fo r cu rren t ex p e n s e p u rp oses an d s u g g est the valu e o f c o n tin u o u s ap praisal o f farm len d in g pra ctices b y c o m m e rcia l banks. p en se p u rp oses in the D istrict are op era tors o f m eat anim al fa rm s— o v e r a th ird o f the cu rren t e x p en se loan v o lu m e held by banks w as ex ten d ed to such o p era tors. T h e o v e rd u e an d u nplanned ren ew al loan v o lu m e o f these fa rm ers cam e to a T able 7 O verdue an d U n pla n n e d I nsu red R of C u rren t o m m e r c ia l B a n k s e n e w a ls C , T E xp e n se w e lfth L D o a n s — by T ype of F ar m is t r ic t ( O u t s t a n d in g o n J u n e 3 0 , 1 9 5 6 ) T y p e o f fa rm M e a t a n im a l ................................... G e n e r a l ................................................ O t h e r m a jo r p r o d u c t 1 .............. C a s h g r a in ........................................ D a i r y ...................................................... C o t t o n ................................................... P o u lt r y ................................................ T o t a l2 .............................................. C u rren t expense lo a n v o lu m e o u ts ta n d in g (in dollars) O verdue lo a n v o lu m e (in dollars) U n p la n n e d re n e w a l lo a n v o lu m e (in dollars) T ota l ov e rd u e and r e n e w a ls ------------ \ P ercen t o f to ta l cu r r e n t e x p e n s e lo a n s f ------------u n p la n n e d A m ount o u ts ta n d in g (in dollars) 1 1 2 ,0 9 5 ,9 0 2 7 3 ,2 3 0 ,3 6 1 5 9 ,0 8 1 ,9 4 2 3 9 ,7 8 6 ,8 9 7 1 6 ,0 6 8 ,9 7 6 1 1 ,8 2 5 ,8 3 0 1 ,3 4 3 ,7 6 0 2 ,4 5 8 ,5 4 0 7 ,1 9 3 ,6 5 8 4 5 7 ,9 6 3 4 9 4 ,1 5 9 1 0 3 ,1 3 7 5 7 ,5 0 0 0 1 2 ,2 2 9 ,2 7 7 9 ,9 2 5 ,3 2 8 5 ,1 3 2 ,0 5 5 2 ,5 9 7 ,4 3 1 2 ,5 9 5 ,2 5 4 4 2 9 ,2 0 8 3 3 3 ,9 1 2 1 4 ,6 8 7 ,8 1 7 1 7 ,1 1 8 ,9 8 6 5 ,5 9 0 ,0 1 8 3 ,0 9 1 ,5 9 0 2 ,6 9 8 ,3 9 1 4 8 6 ,7 0 8 3 3 3 ,9 1 2 1 3.1 2 3 .4 9 .5 7 .8 1 6 .8 4 .1 2 4 .8 3 1 3 ,4 3 3 ,6 6 8 1 0 ,7 6 4 ,9 5 7 3 3 ,2 4 2 ,4 6 5 4 4 ,0 0 7 ,4 2 2 1 4.0 1 In c lu d e s th ose fa rm s w h ere SO p e r ce n t o r m ore o f th e v alu e o f pr o d u c ts so ld is d eriv ed from a p a rticu la r p r o d u c t o r g ro u p o f sim ila r p r o d u c ts su ch as fr u it. 2 D o e s n o t in clu d e lo a n s to th ose b orrow ers w h ere ty p e o f fa rm w as n ot ascertain ed. 10 M O N T H L Y R EVI EW January 1957 BUSINESS INDEXES— TWELFTH DISTRICT (1947-49 a v e r a g e = 1 0 0 ) T o ta l C a r n o n a g r i T o t a l lo a d in g s c u ltu r a l m f’g E l e c t r ic e m p lo y e m p lo y ( n u m C o p p e r* p o w e r e r)* rts m ent m e n t E x pb o I n d u s t r i a l p r o d u c t io n ( p h y s ic a l v o lu m e ) 1 Year and m o n th Lum ber P e tr o le u m * C r u d e R e fin e d C e m e n t Lead3 W a te rb o rn e f o r e ig n t r a d e 3’ 5 Im p o rts ' 99 102 99 103 112 1 18 121 1 20 127 55 1 00 1 02 97 105 1 20 130 137 134 143 102 52 77 106 100 94 97 100 101 1 00 96 104 30 18 31 99 1 04 98 105 109 114 1 15 113 122 64 42 47 96 103 100 100 113 115 113 113 112 190 110 163 129 86 85 91 186 171 140 131 164 124 72 95 81 98 121 137 157 200 308 260 307 2 06 1 98 130 130 148 149 98 98 1 25 123 112 112 143 164 325 328 199 204 2 19 203 211 215 212 212 209 217 131 132 132 133 1 33 r 134 134 135 135 136 137 149 1 50 1 50 1 50 1 52 153 152 153 153 154 156 107 99 1 03 1 05 1 07 105 102 101 107 1 02 r 100 1 30 124 1 28 131 1 22 1 26 132 131 131 130 132 112 111 112 113 113 1 14 115 114 114 1 15 1 16 136 126 150 175 183 204 215 207 212 354 323 395 397 5 19 427 559 500 459 95 40 71 97 104 100 113 113 116 118 lllr 1 21 r 87 52 67 100 101 99 98 106 107 109 106 106 78 50 63 98 100 103 103 112 116 122 119 122 54 27 56 96 104 100 112 128 124 130 1 33 145 165 72 93 94 105 101 109 89 86 74 70 73 105 17 80 1 06 101 93 1 13 115 1 12 111 101 117 29 26 40 90 101 108 119 136 144 161 172 192 1 955 N ovem ber D ecem b er 1 12 r 1 16 r 106 106 123 120 128 130 67 63 128 119 1956 J an u a ry F ebruary M a rch A p r il M ay June J u ly A u gu st S e p te m b e r O ctob er N ovem ber 1 18 r 1 13 r 112r 1 16r 122r 129r 121r 118 113 109r 113 106 106 105 105 105 105 105 105 104 104 104 130 128 128 122 1 29 1 25 132 1 28 136 128 1 35 135 1 45 1 49 1 60 173 161 160 171 1 68 1 63 70 77 77 82 74 81 75 75 78 81 134 129 131 1 40 1 35 1 35 110 123 122 1 27 r 1 23 1929 1933 1939 1 94 7 1 94 8 1 949 1 95 0 1951 1 952 1 953 1 954 1 95 5 R e ta il D e p ’t s to r e fo o d sa le s p ric e s i« * ( v a lu e ) 2 ’ BANKING AND CREDIT STATISTICS— TWELFTH DISTRICT (a m o n n ts in m illio n s o f d o lla rs ) M e m b e r b a n k re s e rv e s a n d r e la te d it e m s C o n d i t io n it e m s o f a l l m e m b e r b a n k s 0 Year and m o n th U .S . Loans and G o v ’t d is c o u n ts s e c u r itie s T o ta l D em and tim e d e p o s its a d ju s t e d 7 d e p o s it Bank r a te s o n s h o rt-te rm b u s in e s s lo a n s 3 R e serve bank c r e d it 8 _ 2 ,2 3 9 1 ,4 8 6 1 ,9 6 7 6 ,0 3 2 5 ,9 2 5 7 ,0 9 3 7 ,8 6 6 8 ,8 3 9 9 ,2 2 0 9 ,4 1 8 1 1 ,1 2 4 495 720 1 ,4 5 0 6 ,3 6 6 7 ,0 1 6 6 ,4 1 5 6 ,4 6 3 6 ,6 1 9 6 ,6 3 9 7 ,9 4 2 7 ,2 3 9 1 ,2 3 4 951 1 ,9 8 3 8 ,6 5 5 8 ,5 3 6 9 ,2 5 4 9 ,9 3 7 1 0 ,5 2 0 1 0 ,5 1 5 1 1 ,1 9 6 1 1 ,8 6 4 1 ,7 9 0 1 ,6 0 9 2 ,2 6 7 6 ,0 8 7 6 ,2 5 5 6 ,3 0 2 6 ,7 7 7 7 ,5 0 2 7 ,9 9 7 8 ,6 9 9 9 ,1 2 0 3 .2 0 3 .3 5 3 .6 6 3 .9 5 4 .1 4 4 .0 9 4 .1 0 1 95 5 D ecem b er 1 1 ,1 1 5 7 ,2 9 8 1 1 ,8 7 6 9 ,0 8 4 4 .2 5 1956 J an u a ry F ebru ary M a rch A p r il M ay June J u ly A u gu st S e p te m b e r O ctob er N ovem ber D ecem ber 1 1,1 93 1 1 ,3 2 3 1 1 ,4 7 6 1 1 ,6 6 9 1 1 ,8 3 7 1 2 ,0 3 0 1 2 ,1 5 7 1 2 ,1 7 3 1 2 ,4 2 3 1 2 ,3 8 4 1 2 .5 0 4 1 2 ,8 0 4 7 ,1 4 3 6 ,8 1 9 6 ,7 3 1 6 ,7 3 0 6 ,5 6 6 6 ,4 8 2 6 ,3 9 6 6 ,4 3 9 6 ,4 9 1 6 ,4 6 8 6 ,4 3 1 6 ,3 8 3 1 1 ,7 9 4 1 1 ,2 3 3 1 1 ,1 1 2 1 1 ,5 3 0 11 ,1 4 4 1 1 ,2 6 2 11 ,3 9 2 1 1 ,3 5 6 1 1 ,5 8 1 1 1 ,7 4 7 1 1 ,8 6 7 1 2 ,0 7 8 9 ,0 7 0 9 ,0 9 5 9 ,1 0 3 9 ,0 9 9 9 ,1 3 9 9 ,2 9 4 9 ,2 3 3 9 ,2 8 6 9 ,3 0 5 9 ,3 2 6 9 ,2 3 5 9 ,3 5 6 1 92 9 1 93 3 1939 1 94 8 1949 1 95 0 1951 1 95 2 1 95 3 1954 1955 F a c to r s a f f e c t in g re s e rv e s : + + 34 2 2 17 13 39 21 7 14 2 38 + 8 + 84 87 71 82 22 5 6 4 3 5 0 17 — + + + + — + — — 4 .3 4 + + 4 .4 4 + — + + — — 4 .5 7 4 .6 5 C o m m e r c ial!® T re a s u r y 10 0 110 192 + 4 72 930 -1 ,1 4 1 -1 ,5 8 2 -1 ,9 1 2 -3 ,0 7 3 -2 ,4 4 8 -2 ,6 8 5 + + + — + +1 +1 +2 +3 +2 +2 23 1 50 245 4 82 378 1 98 983 265 158 328 7 57 - 434 + 417 — - 322 76 178 270 233 405 143 315 454 417 143 303 + + + + + + + + + + + + 136 95 188 3 71 217 341 240 247 466 312 209 451 M o n e y In c ir c u la tio n 8 _ Bank d e b its In d e x 31 c it ie s 3* u R e s e rv e s 11 (1947-49 = 100)* + 6 18 31 209 65 14 189 132 39 30 100 175 1 85 5 84 2 ,4 2 0 1 ,9 2 4 2 ,0 2 6 2 ,2 6 9 2 ,5 1 4 2 ,5 5 1 2 ,5 0 5 2 ,5 3 0 42 18 30 103 1 02 1 15 132 140 150 1 68 172 + 17 2 ,5 3 0 183 — 99 7 35 7 47 32 8 103 59 2 38 38 2 ,5 5 4 2 ,4 8 8 2 ,5 1 6 2 ,5 7 8 2 ,4 9 8 2 ,4 0 4 2 ,5 1 9 2 ,5 6 5 2 ,6 4 0 2 ,5 4 2 2 ,5 7 9 2 ,6 5 4 188 1 79 183 190 182 186 197 2 01 184 197 197 202 — + — — — + + + — + + + — — — + + 1 A d ju s t e d f o r s e a s o n a l v a r ia t io n , e x c e p t w h e re in d ic a t e d . E x c e p t f o r d e p a r t m e n t s t o r e s t a t is tic s , a ll in d e x e s a re b a s e d u p o n d a t a f r o m o u t s id e s o u r c e s , a s f o l lo w s : lu m b e r , C a lifo r n ia R e d w o o d A s s o c i a t i o n a n d U .S . B u r e a u o f t h e C e n s u s ; p e t r o le u m , c e m e n t , c o p p e r , a n d le a d , U .S . B u r e a u o f M i n e s ; e le c t r i c p o w e r , F e d e r a l P o w e r C o m m i s s i o n ; n o n a g r ic u lt u r a l a n d m a n u fa c t u r in g e m p l o y m e n t , U .S . B u r e a u o f L a b o r S t a t is t ic s a n d c o o p e r a t in g s t a t e a g e n c ie s ; re t a il f o o d p r ic e s , U .S . B u r e a u o f L a b o r S t a t i s t i c s ; c a r lo a d in g s , v a r io u s r a ilr o a d s a n d r a ilr o a d a s s o c ia t io n s ; a n d fo r e ig n t r a d e , U .S . B u r e a u o f t h e C e n s u s . 2 D a i ly a v e r a g e . 3 N o t a d j u s t e d f o r s e a s o n a l v a r ia t io n . 4 L o s A n g e le s , S a n F r a n c is c o , a n d S e a t tle in d e x e s c o m b in e d . 6 C o m m e r c ia l c a r g o o n l y , in p h y s ic a l v o lu m e , f o r L o b A n g e le s , S a n F r a n c is c o , S a n D ie g o , O r e g o n , a n d W a s h i n g t o n c u s t o m s d i s t r ic t s ; s t a r t in g w it h J u ly 1 9 5 0 , “ sp e c ia l c a t e g o r y ” e x p o r t s a r e e x c l u d e d b e c a u s e o f s e c u r i t y re a s o n s . 6 A n n u a l fig u re s a r e a s o f e n d o f y e a r , m o n t h ly fig u re s a s o f la s t W e d n e s d a y in m o n t h . 7 D e m a n d d e p o s it s , e x c l u d i n g in te r b a n k a n d U .S . G o v ’ t d e p o s it s , less c a s h it e m s in p r o c e s s o f c o l le c t io n . M o n t h l y d a t a p a r t ly e s t i m a te d . 3 A v e r a g e r a t e s o n lo a n s m a d e in fiv e m a jo r c it ie s . 9 C h a n g e s fr o m e n d o f p r e v io u s m o n t h o r y e a r . 10 M in u s s ig n in d ic a t e s flo w o f fu n d s o u t o f t h e D i s t r i c t in t h e ca se o f c o m m e r c ia l o p e r a t io n s , a n d e x c e s s o f r e c e ip t s o v e r d is b u r s e m e n ts in t h e ca s e o f T r e a s u r y o p e r a t io n s . 11 E n d o f y e a r a n d e n d o f m o n t h fig u re s . 12 D e b i t s t o t o t a l d e p o s it s e x c e p t in t e r b a n k p r io r t o 1 9 4 2 . D e b i t s t o d e m a n d d e p o s it s e x c e p t U .S . G o v e r n m e n t a n d in t e r b a n k d e p o s it s fr o m 1 9 4 2 . p — P r e lim in a r y . r— R e v is e d . 11
@FedFRASER