> July, 1932 UNITED STATES DEPARTMENT OF AGRICULTURE Bureau of Agricultural Economics FARM LOANS OF LIFE INSURANCE COMPANIES (A Preliminary Report)!/ UNIV. OP FL LIB. DOCUMENT? DEPT DEPOSITORY By David L. Wickens, Agricultural Economist Division of Agricultural Finance Life insurance companies are the most important source of long-term farm credit. Soon after 1920 these agencies surpassed all other sources in the vol- ume of farm loans held; and in 1928, their estimated holdings comprised nearly 23 per cent of all farm-mortgage credit in the United States. This report presents the volume of outstanding loans in each State, of 226 identical life insurance companies in each year of the 5-year period of 1927 to 1931 (Table 1) and the amount of new loans made in each State by the same companies during each of the years 1927 to 1930. (Table 2.) Outstanding loans of leading companies are given by months since 1923. and weekly invest- ments since 1928 are given. The period 1927-1931 included the turning point in the direction of trend of total long-term farm credit in the United States as well as for life insurance companies, and within these years farm loans from life companies in three- fourths of the States reached a peak from which they have since receded. The 226 companies reporting fcr each year represent 98 per cent of the volume of the admitted assets of all legal reserve life companies in the United States as of 1927 status. Of this number, 180 companies reported having loans on farm real estate. The West North Central, with 108 individual companies having farm loans, had the largest number among geographic divisions, while Texas with 79 companies loaning had the largest number for any cne State. 2/ 1/ This report has been made possible by information received from life insurance companies covering their farm-loan operations. Reports are obtained only from those companies having assets of $100,000 or more. Despite the com tively complete representation of total assets by companies included in this summary, it should not he assumed that the farm loans reported necessarily represent in all ensos a corresponding proportion of farm loans held by al' surance companies. Outstanding loans ar those reported as of December 31 of each year but are here presented as of January 1 of the year following in order to conform to usage of the Bureau of Agricultural Economics with regard to other data on farm credit and with Census practice. Data for the calendar year 1931 were not available when this report was compiled. 2/ Total farm-mortgage credit in each State and the proportions of all such credit provided by all principal lending agencies are presented in Technical Bulletin No. 288. Farm Mortgage Credit. U. S. Department of Agriculture. UNITED STATES DEPARTMENT 07 AGRICULTURE Bureau of Agricultural Economics Table 1. — Fara mortgage loans of life Insurance companies, outstanding January 1. Geographic : Total : companies : reporting : Total : com- : panles : report- f loans :on farm : property : 1927 1 : 1928 • 1929 ■ 1930 division and state :No. : Percent :of all : assetsi- 1931 1 : Percent I Number : 1.000 : dollars : 1,000 : dollars 1,000 dollars 1,000 dollars 1,000 dollars Maine New Hampshire Vermont Massachusetts Rhode Island Connecticut : 37 i 31 :s i 39 : 99 i 99 : 99 : 99 i 99 99 : 1 : 1 : 1 1 : 2 : 4 25 : 11 : 2 : 4 : 22 11 t 2 4 : 22 12 2 4 22 6 2 4 19 6 New England : 52 i 99 4 42 39 40 34 31 New York New Jersey Pennsylvania • 42 ■ 6o • 89 I 99 : 99 : 99 ; I 8 69 : 277 108 44 s 259 ! -56 30 : 194 63 20 183 62 32 170 42 Middle Atlantic • 92 I 99 i 13 454 1 359 287 265 244 Ohio Indiana Illinois Michigan Wisconsin 102 94 113 101 43 : 99 i 99 ■ 98 i 99 99 : 24 : 40 : 44 19 20 : 57.717 : 104,952 : 164.964 1 5.741 : 17.482 : 59.325 : 103,241 : 173.793 6,508 19.380 58,936 99.912 175.920 6.921 21.645 58,687 • 98,186 177.849 6.967 23.087 57.692 96,164 182,106 7.376 23.853 E. N. Central 139 99 I 75 350.856 362.247 363.334 364.776 367.191 Minnesota Iowa Missouri North Dakota South Dakota Nebraska Kansas 89 98 117 65 77 9 4 113 99 • 99 98 99 99 99 99 52 1 • 4 9 62 71 138.500 499,898 149.836 31.172 113,601 148,279 149.356 : 142,092 507.170 : 148,762 : 31,848 116,565 149,308 149.223 141.397 498,449 146,636 31.355 114,912 144,816 145.562 : 137.885 492,401 142,510 30.417 113,460 140.781 144.217 131.134 477.852 135.363 27.655 108.359 133.584 146.340 W. N. Central 155 98 108 1,230,642 1,244,968 :1,223,127 :1, 201, 671 1,160,237 Delaware Maryland Diet.Colvtabia Virginia West Virginia North Carolina South Carolina Georgia Tlorida ~5f 71 77 67 86: 72 53 76 75 99 99 99 99 99 99 99 99 99 2 13 1 16 ll 25 - 26 35 16 73 580 7.993 425 10,902 6,984 36,236 552 1 74 | 589 : 7.641 434 H.067 6.335 33.010 862 653 7.423 474 11.219 6,141 30.553 1.138 46 ' 933 2.711 6.930 489 11.985 6,016 28,288 1.171 49 1.093 2,711 6.627 600 12.557 5.428 25.787 1.121 South Atlantic . 131: 98 59 63.745 60,012 57.652 58,569 55.973 Kentucky Tennessee Alabama Mississippi s4: 85 69 60 99 99 99 .99 23 31 24 27 26.573 39.831 10,508 22.748 26.770 4o,308 9.676 22.560 26.657. 38,986 9.343 22.227 26,106 37.262 8,881 21.463 25.372 35.374 8,394 20.651 X. S. Central 110 99 53 99,660 99.314 97.213 93.712 89.791 Arkansas Louisiana : Oklahoma Texas 91 6o 100: 111: 99 99 99 ■ 98 45 18 17 .79 , 16,632 7.783 76.723 151.094 17.887 8,230 72.617 154.478 18.100 8.549 68.653 157.602 16,048 8,814 66.790 158.890 14.923 8.674 64.733 162.077 W. S. Central lU9 98 99 252.232 253.212 252 , 904 250,542 250,407 Montana Idaho : Wyoming : Colorado : New Mexico : Arizona : Utah : Nevada 53. 89: 4 3 : s V*: 98 99 : 99 99 : 99 99 99 : 99 32 21 : 15 : 42 : 17 8 6 3 9.966 13.232 392: 5.597' 2.482 2.439 !8 9,001: 13.355 388 5.947 2,089 2,558 972 76 9.307 13.492 438 6.077 1.660 2,284 1,068 30 9.594 13.104 380 6.106 1.513 2,113 1.014 81 6.893 11.965 306 6.075 1.333 1.858 890 196 Mountain : 116: 99 : 72 35. 1^7 34,386 34.356 33.905 29.516 Washington : Oregon : California : 6 5 : 85: 99 99 • 99 : 18 : 18 22 20,889 11,581 22.188 21.850 12,627 22.705 22,401 13.471 22.910 23,410 IT, 880 22.571 24.885 13.627 21.871 Pacific 97 99 = 39 54.658 57.182 58.782 59.861 60,383 UNITED STATES : 226: 98 : 180 2,087,436 2,111,719 2.087,695 2.063,335 2,013.823 1_/ Percentage which assets or operating companies. of reporting companies are of assets of all licensed UNITED STATES DEPARTMENT OF AGRICULTURE Bureau of Agricultural Economic* Table 2. — New farm mortgage loans made by life Insurance companies, by years 1/ Geographic division I 1927 t 1928 I929 1930 and state : :1.000 dollars 1,.000 dollars 1.000 dollars 1.000 dollars Maine l New Hampshire 1 Vermont Massachusetts : Rhode Island Connecticut New England New York 12 Ne* Jersey 1 12 Pennsylvania 20 Middle Atlantic 32 : 12 Ohio 7.916 6.677 5,668 5.H9 Indiana : 12,976 : 11.273 : 22,954 10,613 t 9.839 Illinois 24,406 17.983 18,318 Michigan : 1,202 95? : 3.574 ! 770 ! 1,024 Wisconsin 1.261 2.746 2.198 Eaot North Central 49.761 45.437 37,780 36,498 Minnesota 20,009 14,274 8,890 6.432 Iowa : 61.624 : 58,802 i 47,6oU 1 47,055 Missouri 17.112 ! 15.641 11,488 12,111 North Dakota : 4,864 3.33*» 2,922 1.771 South Dakota ! 14,601 : 13.056 8.SU3 ! 8,123 Nebraska 18,827 : 18,508 15.473 : 11.547 Kansas 20,905 : 18.598 17.515 17.671 West North Central 157,942 142,213 U2.735 104,710 Delaware 1 24 — 4 Maryland 204 ! 97 101 1 137 Dlst. Columbia — — 2,711 -. Virginia 675 534 401 t 418 West Virginia 47 P 27 I 188 North Carolina 1.973 1.347 1.879 1.516 South Carolina 7 J 3 689 2,074 995 1 583 Georgia 2,565 2,182 1 1.897 Florida 371 319 213 l6l South Atlantic 6,607 5.167 8,509 4,906 Kentucky 2,488 2.199 1.756 1.872 Tennessee 5.225 3.657 2.973 4U7 2.687 Alabama 821 769 357 Mississippi 2.827 1.830 1.616 1.698 East South Central 11,361 8,455 6,792 6,614 Arkansas 3,968 1,4U 5 2,236 4,793 1.343 1.935 Louisiana : 1.270 871 Oklahoma ; 7.509 7.840 : 7.765 1 7.474 Texas 24.647 ; .21.io3 19.966 17.876 West South Central 37.569 32,504 33.867 28,156 Montana 1.470 1.654 1,482 697 Idaho 2.091 2,261 i 1.433 1,862 Wyoming 20 84 23 22 Colorado : 892 1,014 691 ' 725 New Mexico ! 519 127 1 271 193 Arl zona 582 : 265 i a 757 Utah 237 ■ 207 88 Nevada ■5 — 52 115 Mountain : 5.816 : 5,612 4,181 4.459 Washington i 2.916 2.819 1.964 3.364 3.140 Oregon 2,243 1.902 1.627 California 4.46-5 4.712 3.337 3.725 Pacific 9.624 9.495 8,603 8,492 UNITED STATES 278,682 : 248,915 212, 467 193.847 l/ For number and proportion of companies represented, see Table 1. I/) X Id o o UJ O z < Z) Ld o 6 z in h- O O < o I- cr O cr .< in to Z 5 2 o o o o o o o o o o o tO in -j- m CM 1 U Ul X CD Q 52 H • Z i V Z < (VI z o < o ro w z UJ — 1 — cd — CL f- 00 — X cr o :n D < D o Q Q K Q Ul u. > UJ tr o ro o _l I (T» < Q o > m X — < a < OD CL u < Ul OO < rr Ul 0. o OS 1- O > (0 Ul o 13 UJ Ul X m CD z 10 o < H ^~ K n 5 z en o CO Ul CM -J UJ I en UJ •** ~~m _— CO cd z CM CD < t- a h in a. 0J 2 Z CM 2 cr. < Ul CD O — o — o CO o o cr •> CD CM Ul H en UJ > o — 0- < CD z "* _ _^ < CM to a CC cr z D — < •t — to UJ CM z ' > >- oo a r^ _ o CD -1 CM CD or u — u UJ u. X X u. h H ■a Ul > \~ _l h O < z < Z la => u. cr _ o li> o cr to 2 CD a D z < (0 UJ Q < z 3 O UJ < o H -J X o _l Z H _J CO < o in h z to CM ui h to — < CD o < z a < o Z Ld o Q o < 2 H z 1- < cr < > < Ul H or H cr Ul z 1- < > X o _j 3 U. o o H U cr z o or 1 < _ o > m CM rn < u. _ 3 1 z cr _i CO Ul — o h < 1- h- UJ to 5 X < z cr o Ul o 2 ? 3 Cl or — — i- C3 X X < — > rr 3 O 0. u_ _J u cr Q rr h Z CL l/l < u. < 0. 3 Ld -X. CJ < Outstanding Farm Loans The distribution of the farm-loan business of the companies shows a great predominance in the four central divisions which center on the Mississippi Valley. Approximately 76 per cent of the total farm loans of insurance com- panies is in the North Central States, 58 per cent being in the West North Central division, and 24 per cent in the State of Iowa. For many years the companies have done comparatively little loaning on farm property in the New England and Middle Atlantic States where local supplies of capital are usually in excess of local demands. Outstanding farm loans of insurance companies reached a peak for the country as a whole in the latter part of 1927 and have since declined. (Fig. 1. ) In the West North Central and West South Central Divisions also, the peaks were reached in that year. In New England, Middle Atlantic, and Mountain regions loans have been declining throughout the period covered. Only in two geographic divisions, the East North Central and the Pacific, was the total volume of farm loans held by the companies larger in 1931 than at any previous date. Nine States - Washington, Nevada, Texas, Illinois, Wisconsin, Michigan, West Virginia, North Carolina, and Maryland - had more farm real estate credit from this source than during earlier years. Among the variety of factors that have produced this important reversal in trend of outstanding credit have been the smaller amounts granted on new and renewed loans because of the declining value of farm land, and reduction by payment on principal necessary to bring indebtedness within manageable limits. In addition, considerable amounts of credit have been extinguished through foreclosure or voluntary assignment of title. Farm loans of life insurance companies are made almost exclusively on first-mortgage security, consequently the figures given in Tables 1 and 2 exclude second and other junior liens which have sometimes constituted a con- siderable part of total farm-mortgage credit. New Loans New loans, in which are often included loans renewed, have declined markedly since 1927 when a total of 279,000,000 was reported by the 226 com- panies as compared with 194,000,000 in 1930. New loans during these four years have represented successively smaller proportions of loans outstanding as in- dicated by the percentages, 13.2, 11.9, 10.3, and 9.6. Loans in most geographic divisions have shown the same declining tendency. Only in the Pacific region has the volume of new credit been well sustained. (Table ?.) Weekly Investments in Farm-Mortgage Loans The volume of new investments in farm-mortgage loans declined more than one-half from 1928 to 1932 as indicated by the weekly reports of 25 leading companies representing 69 per cent of the life insurance in force in the United States and Canada. 3/ Weekly purchases at the beginning of this 4-year period averaged well above $3,000,000. but in the early months of 1932 purchases had declined to less than $1,300,000 per week. (Table 3.) 3/ Data from New York Evening Post. 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O CO _l < _l 1 < co o UJ U cj a. < co o UJ cc co o < r- W UJ > z _i - 0- -J (O < CO 2 CM rr cr> o — u z CO - i co r- < Z I — a a I ui V- CO CO < ui > >- Z -J — rr < u ui z < I- Q z z UI < u rr o ui co Q. CTi Ul 1 * r- -J •> a cr a. D < o U Ul O O z o - r- CO a ui ui 2 _l - - r- < U z < < cj z z < QC H a. CO OJ CO _i cr> < — z o « CO UJ < z Ul 3 CO ~3 Table 3. - Average Weekly Investments in Farm Mortgages Amount and proportion 1928 1929 1 1930 1 1931 1932 Amount I 1 (1000 dollars) 1/ 3,130 3,092 2,827 2,011 2/ 1,268 Average per cent of total investments 11.4 10.2. 10.0 -1 7.6 10.6 1/ Last 28 weeks. 2/ First 20 weeks. This decline in advances on farm property, though severe, is approximate- ly proportionate to the reduction in total investments of the companies a result of greatly reduced volume of funds available for investment purposes. Figure 2 shows that while the volume of new farm loans was decreasing vapidly, the percentage of total investments represented by this form of credit declined only slightly and that in 1932 it stood at approximately the same level as in 1931. Heavy demands in the form of policy leans and the irregular receipt of income caused by the business depression have been the chief factors in reducing the amount of funds that the companies have had available for investment. The volume of farm mortgages bought follows a definitely seasonal course, with heavy purchases in the spring and fall months, unless unusual interruptions occur as in the fall of 1929. The proportion of total investments represented by fa '.gages like- wise varies with the season of the year, but has fluctuated about 10 per cent of the total. A more-than-seasonal decline occurred during 1931. but this ground appears to have been regained during the early months of 1932. (Fig. 2.) Outstanding Loans since 1930 The course of outstanding farm mortgage loans by insurance companies for the country as a whole is well indicated by the monthly holdings of 40 leading companies since 1923.4/ During the first half of this 9-year period the holdings of the companies were rising rapidly. After reaching a peak of $1,628,000,000 in the autumn of 1927, the volume of outstanding loans de- clined to $1,477,000,000 in May, 1932. Table 4 presents the holdings of this group of companies by years from 1923 to 1932 and by months from 1930 to 1932. 4/ Association of Life Insurance Presidents: Reports of 40 companies having 82 per cent of the admitted assets of all United States legal reserve companies. - 7 - Table 4. - Total outstanding farm mortgage loans of 40 leading life insurance companies by years 1/ and months . 2/ 1923-1 932. 5/ Year Millions | Year Millions ^^™ 1923 1158 2/ 1 1928 1618 1924 1925 1926 1335 1452 1523 1 ! i 1929 1930 1931 1606 1591 1555 <*= =c 1927 1588 t 1932 1512 u_= =CN Months (1930) (1931) (1932) o o> (millions) (millions) (millions) a: