For banks grouped by size, the rate of net profits on total capital accounts averaged highest for those with deposits of from $1 million to $2 million. The lowest rate, 7.1 percent, was found in the largest size group and, in general, the average rate of net profit was smaller the larger the size group. The differences among banks in the rate of net profit are in part a reflection of differences in the relative capital positions of the banks, but the variation is also related to location and size of bank. MUTUAL SAVINGS BANKS After several years of study by a committee of the National Association of Supervisors of State Banks and the Federal Deposit Insurance Corporation, a new set of forms for gathering data relating to the condition and earnings of insured mutual savings banks was made effective in 1951. These forms were designed principally to secure greater accuracy in the reporting of loss experience and to provide more uniformity of reporting by the banks operating under various State statutes. In many respects the uniform statements represent a departure from previous call report forms. The chief differences between the revised forms and those which have been used in the past are discussed below. Copies of the uniform report of condition and report of income and dividends, as well as detailed instructions for the preparation of the reports, may be obtained from the Division of Research and Statistics of the Corporation. Report of condition. Changes in the report of condition were confined to a revised treatment of the write-down of assets and to more detailed reporting of real estate loans. Direct write-downs (except on abandoned assets) are now reported each year on a cumulative basis and are referred to as "Other asset valuation provisions." Instructions for the preparation of the report of condition suggest that banks establish a continuous accounting control of write-downs of book assets on a basis comparable with prevailing treatment of valuation reserves. In the case of real estate owned, other than bank premises, the amount of write-down is the difference between book value and bank investment cost, the latter being the mortgage principal at acquisition, plus property additions and betterments. On securities the amount of "Other asset valuation provision" is the amount of write-down below par value when bought at a premium, and below cost when bought at a discount (any charge-off of premium is considered as a nonrecurring expense item). Abandonment is considered to be a decision to take no further steps in the collection and protection of the investment and to regard as contingent any possible realization. Such decision is ordinarily ac companied by the write-down of the asset to nominal value and transfer from the asset category to miscellaneous assets. The new statement also shows additional security data and real estate mortgage loans by type of contract. The individual security and loan items are reported gross and the valuation reserves and "Other asset valuation provisions" (direct write-downs, except on abandoned assets) are deducted from the book value of the relevant groups of assets. Report of income and dividends. The objective of the treatment of profit and loss called for in the report is to separate profits and losses actually received or sustained from charges and credits representing merely the adjustment of book value without disposal of the asset. The report further distinguishes between actual realized profits and losses on assets disposed of during the period on which: (a) no previous loss provision had been made; and (b) previous loss provision had been made by valuation reserves or write-downs. By "actual realized profit or loss" is meant the profit or loss based on the amount of "bank investment" (unpaid balance of investment as adjusted only for normal amortization or depreciation). The charge for realized loss at abandonment of an asset is to be made to the profit and loss account or to the "valuation adjustment provisions," whichever is applicable. To accomplish the above objective, all realized losses for which previous loss provision has been made either by establishment of valuation reserves or by direct write-down of assets (except on abandoned assets) are reported in a section entitled "Reconcilement of valuation adjustment provisions." Realized losses (at actual disposition) for which no previous loss provision has been made are reflected in the profit and loss section. Heretofore, loss data on real estate mortgage loans reported to the Corporation have not been complete. When real estate was foreclosed it was transferred to an "Other real estate" account. Losses were thus recorded as real estate losses which actually represented mortgage loan losses. Under the new form "Other real estate" losses are shown separately and can be combined with "Real estate mortgage loan" losses. To eliminate excessive distortion of current operating income and expense a number of items are reported net. Thus, mortgage income is shown net of servicing fees and income on real estate other than bank building is shown after deduction of expenses. Similarly, the expense item "Occupancy, maintenance, etc., of bank premises" is reported net; i.e., after deduction of income from expenses. An "Employee fringe benefit" item has been provided to cover pension, hospitalization and group insurance payments, and other employee benefits. This item is considered significant inasmuch as such benefits are now being provided by a considerable number of banks. "Nonrecurring income" and "Nonrecurring expense" are now shown separately instead of being included with current income and expense. Excess or lump-sum charge-offs of depreciation on fixed assets and of premium on securities and loans are considered as nonrecurring expense and do not affect valuation adjustment provisions. Where lump-sum charge-offs of security premiums have been made or securities are sold before maturity, adjustments to an amortized basis are required for report purposes in order to reflect actual profit or loss. Number, deposits, and assets of all mutual savings banks. Mutual savings banks, unlike most commercial banks, conduct a specialized type of business. Nearly all of their deposits are savings and time deposits, and their loans and investments are largely in long-term obligations. They are organized on the cooperative principle; depositors supply the funds and are the beneficiaries of their operations. Mutual savings banks comprise only 4 percent of all banks in the United States; but they hold 11 percent of total bank deposits and 35 percent of the nation's savings and time deposits. Chart O. PERCENTAGE OF TOTAL BANK DEPOSITS HELD BY MUTUAL SAVINGS BANKS IN STATES HAVING MUTUAL SAVINGS BANKS, DECEMBER 31, 1951 Mutual savings banks are heavily concentrated geographically. All but 17 of the banks are located in the New England and Middle Atlantic States. Within this area the savings banks do a sizeable portion of the total banking business. As shown in Chart O, a fourth to a half of all bank deposits in each of the New England States and New York State were in mutual savings banks. These banks in New England and New York State held three-fourths of the savings and time deposits of all banks in those States. Deposits of all mutual savings banks totaled almost $21 billion at the end of 1951 and their surplus accounts were over $2 billion. Approximately equal amounts of almost $10 billion were invested in real estate loans and United States Government obligations, while holdings of other securities exceeded $2 billion. Assets and liabilities of all mutual savings banks in the United States from 1945 to 1951 are presented in Table 30. Table 30. ASSETS AND LIABILITIES OF MUTUAL SAVINGS BANKS, Asset, liability, or capital account item (Amounts in millions) Dec. 31, Dec. 30, Dec. 31, Dec. 81, Dec. 81, Dec. 31, Dec. 81, 1950 1951 1949 1948 1947 1946 1945 During 1951 there was a noticeable change in type of investment. While deposits and surplus accounts together increased only 5 percent, loans advanced 21 percent, reflecting continued acquisition of real estate mortgages. This was made possible in part by using proceeds from the maturity or sale of United States Government obligations, the banks' holdings of which declined 10 percent during the year. The most pronounced change in 1951 was a 67 percent advance in holdings of obligations of States and their political subdivisions; even so, such holdings comprised less than 1 percent of total assets at the end of 1951. INSURED MUTUAL SAVINGS BANKS Number, deposits, and assets of insured mutual savings banks. During 1951 the number of mutual savings banks insured by the Federal Deposit Insurance Corporation increased by 8 to a total of 202. Four of the newly insured banks were located in Maryland, and one each in Connecticut, Maine, Rhode Island, and Washington. These newly insured banks had deposits of $352 million, accounting for a third of the $1,048 million increase in deposits of insured mutual savings banks during the year. Deposits of all insured mutual savings banks totaled over $15 billion at the end of 1951, comprising 74 percent of deposits in all mutual savings banks. The proportion of mutual savings banks insured by the Corporation varies widely among the States, as shown in Table 31. In eight of the seventeen States having mutual savings banks all of them are insured by the Corporation; in three States, on the contrary, none is insured by the Corporation. Accordingly, comparison of the characteristics of insured mutual savings banks with noninsured mutual savings banks reflects also geographic differences. This factor is particularly applicable to New York State, which has 79 percent of the deposits of insured mutual savings banks; and to Massachusetts, which has 62 percent of the deposits of noninsured mutual savings banks. Table 31. NUMBER AND DEPOSITS OF INSURED AND NONINSURED |