Highlights of Conditions and Trends in 1949

In 1949 the assets of Federal associations and other insured institutions increased from $9,734,000,000 to $11,305,000,000; the number of insured institutions increased from 2,616 to 2,756.

The Supervisory Division's study of lending policies with reference to uninsured and unguaranteed loans made to finance home purchases continued to reflect the policy of directors and management generally to base mortgage loans on long-term values rather than on the inflated prices at which real estate is sometimes currently being sold. Our comprehensive sampling indicates that loans below 65 percent of purchase price represent 67.3 percent of all uninsured and unguaranteed home-purchase lending during 1949 as compared with 64.4 percent in 1948, 61.7 percent in 1947, and 52.6 percent in 1946.

During 1949, the Supervisory Division inaugurated an analysis of examination report data regarding payment performance on mortgage loans. Thus, for the first time were averages as to delinquent loan experience of insured savings and loan associations compiled on a national and Bank District basis. These averages afford supervision a means of measuring and comparing current loan performance and the effectiveness of collection policies in individual institutions. Supervisory emphasis is being given to collections and incipient collection problems. In this connection, the loan-performance test applied in supervisory examinations of insured institutions disclosed that delinquent mortgage loans in 1949 averaged only 1.6 percent of total mortgage loans outstanding.

As of January 1, 1949, 2,390 insured institutions had been classified as to their reserve positions. Of that number, only 697 had reserves and surpluses of less than 5 percent of their net assets. By the end of the year, 174 of those with low reserves had increased their reserves to 5 percent or more, leaving only 523 of this particular group in the low-reserve category.

During the calendar year, 2,535 insured institutions were classified. By reason of substantial increases in savings accounts without a corresponding increase in reserves, some institutions that previously had reserves of at least 5 percent fell below that figure. As of December 31, 1949, all but 618 had reserves and surpluses equal to 5 percent or more of net assets.

In this connection, an amount equal to 19.2 percent of withdrawable capital of all insured institutions at December 31, 1949, was at that date either invested in United States Government obligations or carried as cash, and 29.4 percent of their total mortgage loan investment was represented by loans that were insured or guaranteed under the provisions of the National Housing Act or the Servicemen's Readjustment Act of 1944.

Conservatorships and Receiverships

No conservatorships or receiverships were established or were in existence during 1949.

Participation in Conferences

Throughout 1949 the Board has continued its policy of direct participation with representatives of savings and home financing institutions in discussing subjects of mutual interest. Attendance at conferences carried Board Members into every section of the United States and enabled them to exchange views on such current subjects as trends in savings and home ownership, lending methods and terms, interest and dividend rates, liquidity, reserves, insurance, examinations, management, and legislation. Out of their conferences and observations the Board Members received direct information concerning the points of view and practices of member institutions of the Federal Home Loan Bank System and received also cross sections of evidence and advice as to broad economic, social and political trends and their influences on thrift and home financing. In exchange, the Board Members were able to give direct information concerning their policies and programs and to interpret and clarify points arising from new or revised regulations and charters.

FEDERAL HOME LOAN BANK SYSTEM

The Federal Home Loan Banks, created by act of Congress approved July 22, 1932, constitute a permanent reservoir of credit for their membership which is open to building and loan associations, savings and loan associations, cooperative banks, homestead associations, insurance companies, and savings banks. Eligibility requirements, as defined in section 4 (a) of the Federal Home Loan Bank Act, as amended, provide that each applicant shall be duly organized under the laws of any State or of the United States, be subject to examination and regulation by any State or the United States, and make longterm home mortgage loans. To become eligible as a Bank member, each applicant in the judgment of the Home Loan Bank Board shall be in a sound financial condition so that advances may safely be made to it, and the character of its management and its home financing policy shall be consistent with sound and economical home financing.

There were 3,860 members of the Federal Home Loan Bank System on December 31, 1949, consisting of 3,822 savings and loan associations, 30 savings banks, and 8 insurance companies. This total membership represents a net increase of 91 members during the year, resulting from the admission of 82 State-chartered savings and loan associations, 16 new Federal savings and loan associations, 8 cooperative banks, and 4 savings banks, and the cancellation of 19 memberships through withdrawals. Eight of the withdrawals represent voluntary liquidations, 1 reincorporation, 6 consolidations, and 4 were the result of members' requests. Also 13 State-chartered savings and loan association members changed their status during the year-11 converted to Federal charter, 1 to a mutual savings bank, and 1 to a cooperative bank. As of December 31, 1949, 38 applications for membership were pending.

Functions of the Bank System

The principal function of the Federal Home Loan Banks is to supply funds required by member institutions for the purpose of enabling them to meet the home financing needs in their communities as well as their other legitimate operating requirements. As a result of the establishment of the Federal Home Loan Bank System, thrift and home mortgage financing have been better protected against local and national economic fluctuations, home ownership has been placed on a more secure basis, and the construction of new homes as well as

the improvement of housing conditions generally has been encouraged. The Federal Home Loan Banks have made credit available to their members at moderate rates and in volume more than sufficient for their needs.

The extent to which the Federal Home Loan Banks have functioned as a national credit reservoir is evidenced by the fact that, since they first opened for business on October 15, 1932, to December 31, 1949, the Federal Home Loan Banks (originally 12, now 11 in number) have made advances to home financing institutions totaling $2,942,711,670, of which $2,509,282,520 have been repaid, leaving a balance of $433,429,150 outstanding on the latter date.

Advances and Repayments During 1949

During the year ended December 31, 1949, the Federal Home Loan Banks advanced the sum of $255,662,642. Repayments during the year aggregated $337,249,581. A summary of the lending operations of the Banks, by years, through December 31, 1949, is contained in exhibit 1 which follows this text.

On December 31, 1949, 1,799 member institutions, or 46.6 percent. of the total membership, were borrowers from the Federal Home Loan Banks, as compared with 1,993 member borrowers, or 52.9 percent of the membership, on December 31, 1948.

There was also one nonmember borrower indebted to a Federal Home Loan Bank at the close of the year 1949, the advance to such nonmember borrower representing the first advance of this type since August 1939. The average number of member borrowers during the year 1949 was 1,715, or a decrease of 7.9 percent under the average of 1,863 borrowing members during the preceding calendar year. Number and Percent of Borrowing Members

Of the 1,799 borrowing members, as of December 31, 1949, 761 were Federal savings and loan associations, the outstanding advances to which aggregated $260,226,885 on that date. This amount of outstanding advances represented 4.3 percent of the share accounts. in this type of association. The borrowing members as of the close of the year also included 584 insured State-chartered institutions, the indebtedness of which to the Federal Home Loan Banks totaled $130,114,877, or 3.6 percent of the savings held by this type of institutional member, and 453 noninsured State-chartered associations with advances of $36,862,388, or 2.1 percent of the total savings held by all members of this type. One insurance company member held advances from a Federal Home Loan Bank in the amount of $6,000,000. The nonmember mortgagee, a noninsured savings and loan association, held advances totaling $225,000.

The number and percent of borrowing members as of December 31, 1949, and December 31, 1948, are reflected in the following tabulation:

The secured advances of the Federal Home Loan Banks outstanding on December 31, 1949, amounted to $321,920,182, which represented the borrowings of 1,230 members and one nonmember mortgagee and were 74.3 percent of the total advances outstanding on that date. $202,323,231 of such advances were for terms of more than 1 year. These advances were collateralized by 128,196 home mortgages, the unpaid balances of which aggregated $585,197,549, United States Government obligations having a par value of $67,094,300, and other collateral permitted by the regulations having a face value of $5,987,218. The face value of all such collateral, exclusive of $64,706,000 par value of Federal Home Loan Bank stock representing that portion of members' stock applicable to their loans on which the Banks held a statutory lien as additional collateral, amounted to $658,279,067, or 204 percent of the secured advances, to all of which collateral, exclusive of the Federal Home Loan Bank stock, the Banks had assigned a collateral value of $469,194,014. Unsecured advances aggregating $111,410,968, or 25.7 percent of the total, were outstanding to 751 members on December 31, 1949.

Interest Rates on Advances

Included in this report as exhibit 2 is a statement reflecting the rates of interest charged by the Federal Home Loan Banks on advances to member institutions which were in effect on December 31, 1949, and the interest rates applicable to time deposits of members. Interest rates charged by the Federal Home Loan Banks on advances to members have been considerably reduced since the commencement of their operations in October 1932, at which time interest rates on Federal Home Loan Bank advances ranged from 4 percent to 5