projected ratio of savings to total liabilities (including reserves) which are equal to total assets, to derive total assets at the end of each year from 1960-70.

The proportion of such assets that are represented by mortgage loans has ranged between 81.4 percent in 1951-52 and 83.6 percent in 1959. The approximate midpoint of this narrow range is 82.5 percent. Comparable percentages between the 1959 figure of 83.6 percent and 82.5 percent were projected for 1960-63 and 82.5 percent was projected for later years, to derive the annual net increases in mortgage investments that savings and loan associations would want to make if they continue to pursue the investment portfolio policies of the fifties during the sixties. On this basis, the funds which the savings and loan associations would have available annually for net mortgage investments would increase from about $5.7 billion in 1961 to about $8.3 billion in 1970 (see table 23).

TABLE 23. Savings and loan associations: Net savings inflows and acquisitions of mortgages, 1949-59; projections of net savings inflows and funds available for net mortgage acquisitions, 1960-1970

[Amounts in millions of dollars; current dollars for 1949-59; 1959 dollars for 1960-70]

1949-59: Col. 1: Federal Home Loan Bank Board, chart book No. 5, 1960, p. 6a.

Col. 2: Derived year-to-year changes from col. 1.

Col. 3: Col. 1 as a percentage of col. 4.

Cols. 4 and 5: FHLBB, op. cit., p. 5a.

Col. 6: Col. 5 as a percentage of col. 4.

Col. 7: Derived (year-to-year changes) from col. 4.

1960-70: Col. 1: Derived by adding increase for year (col. 2) to total at end of previous year.

Col. 2: From table 21, line 8.

Col. 3: Projected on basis of 1952-59 data, which show a relatively narrow range of 84.7 to 87.1 for this percentage, or a midpoint of about 86.

Col. 4: Derived from cols. 1 and 3 by setting savings capital equal to 86 percent of total assets. (Col. 4 equals col. 1 divided by 0.86).

Col. 5: Derived by applying projected percentage of total assets in mortgages (col. 6) as a percent of col. 4.

Col. 6: For the years 1950-59, the range had been 81.3 to 83.6 percent. The approximate midpoint, or 82.5 percent was projected for 1964-70, the estimated ratio for 1960 is based on data available for the first 9 months of the year, and 1961, 1962, and 1963 ratios are at points between the 1960 and 1964 ratios to make for a stable transition in the series.

Col. 7: Derived (year-to-year changes) from col. 5.

Mutual savings banks projected funds available for net investments in mortgages and other assets

The distribution of total assets of mutual savings banks is somewhat more complex to project than that of savings and loan associations, since the assets of the savings banks are not as heavily concentrated in mortgages. A procedure similar to that employed in dealing with savings and investments of savings and loan associations, was used, however, to derive a projection of assets of mutual savings banks and their distribution.

The total assets of the mutual savings banks were projected on the basis of the ratio of deposits to total assets in recent years, a ratio which had been very close to 90 percent during almost all of the years of the past decade.49

The percentage of total mutual savings banks assets represented by mortgage loans increased fairly rapidly from about 42 percent in 1951 to about 59 percent in 1956. The increase continued at a somewhat slower pace, reaching a ratio of 64 percent in 1959. A projected gradual increase in the proportion of assets represented by mortgages was projected so that the projected ratio would reach 71 percent in 1970 as compared with about 64 percent at the end of 1959.50 On this basis, the amount that the mutual savings banks would have available for net annual investment in mortgages would range from about $1.6 billion in 1961 to about $2.2 billion in 1970. Insofar as other assets held by mutual savings banks are concerned, during the fifties there was a sharp decline in the amount and in the proportion of total assets represented by Government securities. The amount has tended to level off, however, and the decline in the percentage of assets represented by Government securities has decelerated in recent years. Therefore, holdings of Government securities were projected to show a slight annual increase in the amount of securities held while permitting a decline in the percentage of total assets represented by Government securities from about 18 percent in 1960 to under 12 percent in 1970. This decline in the proportion of assets represented by Government securities would be offset largely by the increase in the proportion of assets represented by mortgages, and to a slight extent by an increase in the proportion represented by corporate and other securities.

The proportion of mutual savings banks assets represented by corporate and other securities has shown a tendency to fluctuate at about 121⁄2 percent, and this proportion has been projected through 1966. The proportion was gradually increased in the last 4 years of the decade, to 13.4 percent in 1970, when the supply of funds would be tight in relation to total credit demand and corporate securities should bear relatively higher yields. The residual of the assets represented by cash and other assets in the projection generally represents about 4 percent of total assets. (See table 24.)

Life insurance companies projected funds available for net investments in mortgages and other assets

The procedure adopted for projection of the total assets of life insurance companies was similar to that used in projecting the total assets of the two types of institutions dealt with previously in this section.

49 The total savings deposits of the mutual savings banks were projected in the same manner as the projection of total savings capital of savings and loan associations described in footnote 47.

50 A relatively sharp increase in the mortgage-to-total assets ratio, from 64.2 to 65.9 percent, between 1959 and 1960 was indicated by data available for part of 1960.

[Amounts in millions of dollars; current dollars for 1950-59; 1959 dollars for 1960-70]

NOTES ON COLUMNS

1950-59: Cols. 1 and 2: National Association of Mutual Savings Banks, "Mutual
Savings Banking, Annual Report, May 1960," tables F-8 and F-10, respectively.

Col. 4: National Association of Mutual Savings Banks, op cit., table F-1 for 1955-59;
Federal Reserve Bulletin, December 1956, p. 1329 for 1954, and December 1954, p. 1269
for 1950-53.

Col. 5: National Association of Mutual Savings Banks, op. cit., table F-20.

Col. 6: Col. 5 as a percent of col. 4.

Col. 7: Derived from col. 5 (year-to-year changes).

Col. 8: National Association of Mutual Savings Banks, op. cit., table F-26, total of
U.S. and State and local government bonds.

Col. 10: National Association of Mutual Savings Banks, op. cit., table F-26, "Corpo

1960-70: Col. 1: Derived by addition of net increase during year (in col. 2).

Col. 3: Projected at 90 percent, the approximate percentage for all years, 1954-59.

Col. 4: Derived from cols. 1 and 3 by setting savings deposits equal to 90 percent of total
liabilities (col. 4 plus col. 1 divided by 0.90).

Col. 5: Derived by applying projected percentage of total assets in mortgages (col. 6)
as a percentage of col. 4.

Col. 6: A residual after subtraction of col.9 and 11 and 4 percent (represented by col. 10)
from 100 percent. Also, influenced by belief that mutual savings would not want to have
more than a little over 70 percent of total assets in mortgages.

Col. 7: Derived from col. 5 (year-to-year changes).

Col. 8: Projected at moderate annual increases but at a relatively slower rate of increase
than the rate of increase in total assets, on the assumption that the mutual savings banks
will wish to decelerate the decline in the proportion of assets held in Government securities
because of the need for a certain proportion of highly liquid assets.

Col. 10: Derived by application of percentage of total assets in corporate and other securities (col. 11) as a percentage of col. 4.

Col. 11: Judgment projection of 12.5 percent, based on experience of recent years.

Col. 12: A residual of col. 4 minus cols. 5, 8, and 10 equal to about 4 percent of total assets (col. 4) approximate ratio of recent years.

In the case of life insurance policy reserves, such reserves accounted for about 85 percent of total assets in the early fifties, but during the years 1954-59 they accounted for between 82.4 percent and 83.9 percent of the total assets of life insurance companies, averaging about 83 percent. A projected ratio of reserves to total assets of 83 percent was used to arrive at the total assets during the years of the 1960 decade.

It should be noted that the life insurance company reserves include the reserves of insured pension funds which have been included as part of the savings in private pension funds (in tables 21 and 22).51 Accumulated policy dividends which are part of the savings in private life insurance (in tables 21 and 22) are also a part of the total assets of life insurance companies."

52

Judgments as to the distribution of assets of life insurance companies are more involved than in the case of mutual savings banks or savings and loan associations due to greater diversity of investments. During the last few years at least two major components of the total life insurance company assets have constituted relatively stable proportions of the total. Mortgages have been between 34 and 35 percent, and corporate securities between 43 and 44 percent of total

assets.

The proportion of total assets represented by Government securities has been declining, but the rate of decline has decelerated markedly in recent years. One proportion of total assets that has been increasing has been the cash and other assets, which includes policy loans. Based on the outlook for various types of credit requirements to be met in the market and the trend in the distribution of life insurance company assets in recent years, it was assumed, first, that there would continue to be a gradual decline in the proportion of total assets represented by Government securities. The projected decline is so moderate, however, that it does not prevent increases in the absolute amount of Government securities held by life insurance companies. In this connection, it should be noted that the life insurance companies hold not only securities of the U.S. Treasury, but also securities that are issued by State and local governments in this country, by provincial governments in Canada and by other foreign national governments.

As projected, the decline in the proportion of Government securities would be offset by very slight increases in the proportion of total assets in mortgages and corporate securities. The proportion invested in corporate securities would increase from about 44 percent in 1959-60 and to about 45 percent in 1970. The proportion invested in mortgages would increase from about 34.5 percent in 1959–60 and to 35.5 percent in 1970. On this basis, the net amount of investment funds that insurance companies would have available annually to place in mortgages would increase from about $2 billion in 1960 to about $3 billion in 1970. The proportion of assets represented by "cash and other assets" was projected at 11.5 percent, about the percentage that prevailed in 1958-59, and this projection permits substantial increases in the amount of this part of total assets. The increases should be sufficient to accommodate any need for additional policy loans. (See table 25.)

51 See appendix table IV-B for division of pension fund assets and reserves between insured and uninsured funds.

52 See appendix table IV-A for reconciliation between the net increase in life insurance policy reserves and the net increase of savings in private life insurance.