Second Annual Report 1934
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74th Congress, 1st Session House Document No: 31 SECOND ANNUAL REPORT of the FEDERAL HOME LOAN BANK BOARD covering operations of the FEDERAL HOME LOAN BANKS THE HOME OWNERS' LOAN CORPORATION THE FEDERAL SAVINGS AND LOAN DIVISION FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION from the date of their creation through December 31, 1934 FEBRUARY 14, 1935.-Referred to the Committee on Banking and Currency and ordered to be printed with illustration UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON: 1935 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis LETTER OF TRANSMITTAL FEDERAL HOME LOAN BANK BOARD, Washington, February 11, 195. SIR: Pursuant to the requirements of section 20 of the Federal Home Loan Bank Act, we have the honor to submit herewith the second annual report of the Federal Home Loan Bank Board covering operations for the year 1934 (a) of the Federal Home Loan Banks, (b) the Home Owners' Loan Corporation, (c) the Federal Savings and Loan Division, and (d) the Federal Savings and Loan Insurance Corporation from organization to December 31, 1934. JOHN H. FAHEY, Chairman. T. D. WEBB, W. F. STEVENSON, FRED W. CATLETT, H. E. HOAGLAND, Members. THE SPEAKER OF THE HOUSE OF REPRESENTATIVES. iM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis SECOND ANNUAL REPORT OF THE FEDERAL HOME LOAN BANK BOARD ON THE OPERATIONS OF THE FEDERAL HOME LOAN BANK SYSTEM FOR THE YEAR 1934 When the Federal Home Loan Bank System closed its 1933 opera tions December 31 it had 2,086 members, consisting mostly of building and loan, homestead associations, and cooperative banks who had subscribed for stock in the Corporation to the amount of $10,908,300. It had loans outstanding to its member corporations of $88,441,854.37, and the United States Treasury had subscribed and paid for $75,745,700 of stock in the Corporation, all of which will appear in the statements hereto appended. The activities of the system were very largely affected by the fact that the Home Owners' Loan Corporation was loaning money to distressed home owners on very liberal terms, and, naturally, many people who otherwise would have been applying to the building ana loan associations for advances applied to the Home Owners' Loan Corporation and thereby reduced the activities of the building and loan associations and of the home loan banks during the year 1934. Many of the Home Owners' Loan bonds were received by member associations and were used directly or indirectly in paying off their borrowings from the banks during the year, thereby directly reducing the business of the banks. At the close of business December 31, 1934, the Home Loan Bank System had 3,068 members who had subscribed for stock to the dollar value of $22,661,400, of which $20,480,100 was fully paid, issued, and outstanding, and the stock subscribed by the Treasury and paid in up to that date was the sum of $81,645,700. Total loans outstanding as at December 31, 1934, equaled $87,258,312.53, of which loans to members equaled $86,651,236.38, loans to affiliated banks equaled $600,000, and loans made direct to home owners $7,076.15. Loans made during the year 1934 aggregated $39,879,886.12 and repay ments amounted to $41,063,427.96, all of which will appear in the financial statement appended hereto. AMENDMENTS TO THE LAW During the year the Congress amended the law in a number of particulars which were designed to make more popular and workable the activities of the System. One amendment reduced the minimum amount of stock that an association could take in becoming a member from $1,500 to $500. Another amendment to section 10 of the act liberalized the amount that could be loaned on amortized home mortgages which were used as collateral by increasing the amount which could be loaned on such mortgage from 60 to 65 percent on the unpaid principal, but in no case was the advance to exceed 50 percent of the value of the real Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 2 ANNUAL REPORT OF FEDERAL HOME LOAN BANK BOARD estate securing the home-mortgage loan, where the loan was on a mortgage which was amortized according to the terms of the act. If secured by a home mortgage not amortized under the terms of the act, the advance permitted was not in excess of 50 percent of the unpaid principal of the home-mortgage loan, and in no case should the amount exceed 40 percent of the value of the real estate securing the home mortgage. Whereas, in the former law it could not exceed 30 percent of the real estate securing the home-mortgage loan which was not amortized. These are the principal amendments liberalizing this particular act. INSURANCE ACT The insurance act was passed which is dealt with herein under the head of Federal Savings and Loan Insurance Corporation, which is embraced in this report. INTEREST RATE During the year it became necessary, in order that the member associations would be able to compete in their business, to give them the right to charge a rate of interest not less than 4 percent, nor more than 5 percent. Formerly it had been fixed at 5 percent except under very special circumstances. With the liberalization that has come about, and with the right of insurance which has been imparted by the insurance act, it is con fidently expected by the Board that the increase in business will be very marked during the coming year. The banks have all but one reached the point where they choose their own directors, and they are paying promptly the assessments for their proportion of the expenses of the Board. EARNINGS AND DIVIDENDS The banks are all earning their expenses and ten of them are paying dividends on their stocks, both to their member associations and to the Treasury of the United States, as shown by the financial state ment attached. The Federal Government is already receiving a substantial return on its paid-in subscription of $81,645,700 for stock of the Federal home-loan banks, as shown by the announcement that dividend payments totalling $1,361,599.98 have been declared as of December 31, 1934, by 10 of the 12 regional Federal home-loan banks, 3 of which the banks of Boston, Winston-Salem, and Los Angeles, represent initial dividends, the other 7 banks having previously begun dividend payments. All dividends recently declared by these ten banks are at the rate of 2 percent annually, except for the dividend paid to member institutions of the Boston bank, which is at the rate of 1 2 percent. The dividend declared by the Los Angeles bank is effective through December 31, 1933. Total dividends paid by the Federal home-loan banks to date amount to $2,622,189.44, of which $2,144,108.34 has been or will be paid to the United States Government, and the balance of $478,081.10 to the members of the banks. Such members are private thrift and home-financing institutions, the present membership numbering 3,068 building and loan associations, mutual savings banks, and life insurance companies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis ANNUAL REPORT OF FEDERAL HOME LOAN BANK BOARD 3 The following table shows the amount of dividends paid as of December 31, 1934, by each of the ten banks concerned. The Federal home-loan banks of Topeka and Portland, the only two regional in stitutions in the system in which dividends have not yet been, declared, are nevertheless operating at a profit, which is being added to surplus pending dividend action. Federal home-loan bank U.S.ernment Gov- Members Total Boston (district no. 1)----------------..........---------------- $145, 715.11 $19, 983.23 $165, 698.34 Newark (district no. 2)--------------------------------115, 945. 21 26, 710. 79 142, 656. 00 Pittsburgh (district no. 3)------------------------------ 127,736.99 22, 521 75 150, 258. 74 Winston-Salem (district no. 4) ----------- ......---------------184, 493.14 50,089. 31 234, 582. 45 Cincinnati (district no. 5)---------------..........--------------. - 128,807. 06 45, 021.33 173, 828. 39 Indianapolis (district no. 6)---------------.........------- ------- 60,493.15 19, 542.83 80,035.98 Chicago (district no. 7)------------------ -------------- 198,821.92 34, 234. 86 233, 056. 78 Des Moines (district no. 8)-----------...-------------------67, 808. 22 12,376. 90 80,185.12 Little Rock (district no. 9)------------.... ------------------ 60, 383. 56 12,155.00 72, 538. 56 Los Angeles (district no. 12) effective Dec. 31, 1933------------ 22, 575. 35 6,184. 27 28, 759. 62 Total dividends payable Dec. 31, 1934---------------.... 1,112, 779. 71 248,820. 27 1, 361, 599.98 PERSONNEL The personnel of the bank board working for the Home Loan Bank System numbers 101, as shown by the statement attached to the report of the Home Owners' Loan Corporation. The following exhibits are attached: Exhibit A: Combined statement as of December 31, 1934. Exhibit B: Statement of profit and loss for year 1934. Exhibit C: Analysis of surplus and reserve, December 31, 1934. Exhibit D: Statement showing Federal home-loan bank districts and States embraced and members of home-loan banks in each. Schedule no. 1: Statement showing Government funds apprqpriated for sub scription to stock of the regional home-loan banks, the amounts allocated to each bank, actual subscriptions made thereunder and total subscriptions and amounts still available for subscription as at December 31.