new members. It is significant that in the early years of the Corporation's history, investment income was the most important of these, but, with the growth of the insured membership, premiums have steadily increased until today they are more than double the interest received on investments.

Premiums, paid by institutions at the rate of one-eighth of 1 percent of their share accounts and creditor obligations, amounted to $9,456,079 during 1948. Investment income reached $4,388,170, while admission fees, computed at four one-hundredths of 1 percent of the premium base, amounted to only $40,296.

As the workload of the Corporation has increased over the years, expenses of operation have necessarily risen, but have not grown proportionately to either income or the insured risk. Total administrative expenses amounted to 3.75 percent of operating income during 1948. For chart of organization and functions of the Corporation, see page 103. Of gross expenses of $557,500, salaries of Corporation employees accounted for $308,900. The sum of $156,000 was paid during the year for services of the Home Loan Bank Board and $370 to the Housing and Home Finance Agency. Miscellaneous operating items such as rent, supplies, communications, and audit expense, totaled $55,700. Expenses arising from liquidation activities and past insurance losses amounted to $19,500, and depreciation of equipment reached $17,000. A complete income and expense statement of the Corporation for 1947 and 1948 appears in exhibit 9.

Condition of insured associations

Size. The average size of insured associations is continuing the upward trend evident for some years. At the end of 1948, the average association had assets of $3,721,000, over 10 percent above the average of $3,370,000 a year earlier. As the average size of institutions has risen, the number of insured associations in the larger size groups has proportionately increased. A 3-year comparison of the frequency distribution of insured associations among the various asset size groups may be referred to in exhibit 10.

Assets. The same trends in asset accounts of insured institutions which have been apparent since the end of the war continued during 1948, although at a decelerating rate. Mortgage loan holdings, for example, increased from 77 percent of assets to 79.9 percent during the year, while cash and Government securities dropped from a ratio of 19.8 percent to 16.6 percent of assets.

Total assets grew 14 percent during 1948 to a total of $9,734,000,000. Mortgage loans, which had increased 18 percent during the year, amounted to $7,777,000,000 at year end, and liquid holdings decreased

nearly 5 percent to $1,615,000,000 on December 31. Exhibit 11 offers a comparison of the number and assets of insured associations at the end of 1948 and 1947, by States.

Included in the mortgage loan portfolio of insured associations were $1,886,222,000 of loans insured or guaranteed by the Veterans Administration and an additional $445,115,000 of loans insured by the Federal Housing Administration. About 30 percent of the mortgage loan portfolio, therefore, consisted of insured or guaranteed loans, while the balance were loans of the conventional uninsured type. The composition of the loan portfolio of insured institutions as of December 31, 1948, may be seen in exhibit 12.

Savings. The period since the close of the war has witnessed increasing activity in the savings field. The flow of new savings into insured associations during 1948 was 15 percent greater than the inflow during 1947. On the other hand, withdrawals were 23.4 percent greater during 1948, so that the net inflow was only a fraction of one percent larger than the net increase of 1947.

In dollar amounts, new savings of $3,217,000,000 were received by insured institutions during 1948. After deduction of total withdrawals of $2,242,000,000, the net increase in savings during the year amounted to $975,000,000.

Reserves. One of the best criteria for measuring a financial institution's stability and its capacity to withstand financial shock is its reserve account. The reserves and undivided profits of insured associations, which are available for the absorption of losses arising in the course of business, increased 19 percent during 1948. Insured institutions now hold aggregate reserves and undivided profits of $646,000,000, equivalent to 6.6 percent of assets, while a year earlier the reserve accounts amounted to $543,000,000 or 6.4 percent of assets.

FEDERAL SAVINGS AND LOAN ASSOCIATIONS

Creation of Federal savings and loan associations was authorized by section 5 of the Home Owners' Loan Act of 1933. This section specified that in issuing charters, the Home Loan Bank Board (to which Congress assigned the responsibility for creation, examination, and supervision) must in each instance give "primary consideration to the best practices of local mutual thrift and home-financing institutions in the United States." Federal savings and loan associations are required to raise their own capital in the form of shares or share accounts, which represent private individual savings. No Federal association is permitted to accept deposits and no certificates of indebtedness may be issued except for such borrowed money as may be authorized by regulations of the Board.

The law provides that Federal savings and loan associations may be established either by issuing charters to newly formed groups or to existing State-chartered institutions which qualify by conversion. As of December 31, 1948, a total of 1,485 Federal savings and loan associations were in operation. Of these, 642 represented associations originally organized under Federal charter, the remaining 843 associations having converted from State to Federal charter. At the year end, Federal charters were outstanding in each of the 48 States as well as in the District of Columbia, Alaska, Hawaii, and Puerto Rico. The combined resources of all Federal associations at the end of 1948 amounted to approximately $6,162,000,000, reflecting an increase in total assets of 12.9 percent during the year. The resources of the Federals now account for nearly one-half (47 percent) of the total assets of all institutions of the savings and loan type in the country. During the past year the average size of Federal savings and loan associations increased from $3,694,000 to $4,150,000, or by 12.3 percent.

New Federal associations

During 1948 seven new Federal savings and loan associations were organized and five State-chartered savings and loan associations converted to Federal charter. Among the new Federal associations chartered in 1948 was the First Federal Savings and Loan Association of Puerto Rico, with headquarters in San Juan. Chartering of the Federal in Puerto Rico was the culmination of a prolonged effort of a group of citizens of the islands to provide for their people this form of cooperative organization for the promotion of thrift and home

financing. Of the other Federal associations formed in 1948, one was created by the consolidation of two Federal associations. During the year, three Federal associations ceased to exist by reason of voluntary dissolution, one merged with another insured association, and one reincorporated as a State-chartered insured association. The effect of these changes was a net increase of seven in the number of Federal savings and loan associations during 1948. In addition, five Federal associations received authorization from the Board in 1948 to establish branch offices. As of December 31, 1948, 45 of the 1,485 Federal associations were operating a total of 58 branch offices.

The development and use of branch offices by savings institutions in the United States has never been as aggressive as has been their development and use by commercial banks. As of December 31, 1947, the latest year end for which figures are available, commercial banks, numbering 14,181-State and National-had 4,161 branches, including a few designated statistically as "additional offices." Of these commercial banks, the national banks alone, totaling 5,005, had 1,870 branches.

Savings institutions, on the other hand, had a far smaller number of branches. Figures are not available for State-chartered institutions of the savings and loan type, but mutual savings banks, totaling 533, had 171 branches, and Federal savings and loan associations, totaling at the same time 1,478, had 53 branches, including in their number branches which converted Federal associations operated prior to conversion under the authority of their State charters.

The foregoing figures make clear that on December 31, 1947, all types of commercial banks had approximately 40 branches for every 140 institutions, whereas Federal savings and loan associations had only 5 branches for every 140 associations. In other words, the commercial banks of the country, operating under State and national charters, have roughly 8 times as many branches proportionately as Federal savings and loan associations.

Board policy on branches

The problem of creating branches of Federal associations has been a live one in many quarters throughout 1948. The public recognizes that as a general policy the Board is reluctant to authorize the establishment of a branch by a Federal unless there is clear, substantial evidence of need and large prospective value-a need and value comparable to that required as evidence for the establishment of a new association. Several applications for authority to create branches, which were filed with the Board during the year, have not been acted upon, but are still under consideration.

Without formal expression of policy, the members of the Board have made clear in speeches and conferences their recognition of the point of view of State supervisory authorities whose influence for the most part, in the matter of creating additional branches, has been on the side of extreme caution and restraint. The atmosphere of cooperation and mutual respect which has characterized the relationships between the Board and State supervisory authorities on this subject and other kindred subjects of policy and administration has led to a liberal exchange of information which in itself has been a favorable factor in permitting full, free, and objective examination of varied points of view and prospective reactions. The Board is gratified that it has been able to work in close cooperation with State authorities. It desires both to continue and to improve this relationship. It does not, however, accept the thesis that its judgments or authority are bound by State laws or by the policies of State supervisory authorities with respect to the creation and approval of branch organizations. In its interpretation of Federal statutes, the Board has formed the opinion that to the extent that Congress empowered it to charter Federal associations, it likewise, under the law and for the same reasons and with the same general limitations, gave the Board authority to sanction and approve the creation of branches. Flow of savings

In contrast to the postwar decline in the amount the American people have been able to save out of current income, the flow of individual savings into Federal savings and loan associations continued in record volume during 1948. During the year, savings of the public invested in Federals increased by $642,052,000, or 13.9 percent. This increase which, dollarwise, was the largest annual gain in the 15 year history of Federals, brought total private savings in these institutions to $5,250,821,000, as of December 31, 1948. The number of individuals holding savings accounts in Federals increased from 3,281,000 to 3,669,000 during the year.

Liquidity and reserves

Liquidity and reserves have been important subjects of policy and administration during 1948. Year-end reports reveal that cash and U. S. Government obligations held by all Federal associations amounted to $1,010,229,000, which is equivalent to 16.4 percent of their total assets. During the year liquid assets of this character declined $63,019,000, to a total 5.9 percent below the comparable figure for the preceding year end. General reserves and undivided profits accounts of Federal associations increased from $329,784,000 to $393,114,000. At the close of 1948, such reserve accounts were equivalent to approx