[Volume XXVII
THE CHICAGO BANKER
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STATE BANK OF CHICAGO			THE FARMERS’ AND MECHANICS’ NATIONAL BANK OF PHILADELPHIA, PA. 427 CHESTNUT STREET Capital - - - $2,000,000.00 Surplus and Profits 1,348,000.00 ORGANIZED JANUARY 17, 1807 Dividends Paid - $12,847,000.00 OFFICERS Howard W. Lewis, President Henry B. Bartow, Cashier John Mason, Transfer Officer Oscar E. Weiss, Assistant Cashier ACCOUNTS OF INDIVIDUALS, FIRMS, AND CORPORATIONS SOLICITED PRESENT NUMBER OF STOCKHOLDERS 930
ESTABLISHED 1879 S. E. Corner La Salle and Washington Streets Capital - - - $1,000,000 Surplus and profits (earned) 1,400,000 Deposits - - . 20,000,000 OFFICERS L. A. GODDARD, President FRANK I. PACKARD, Asst Cashier JOHN R. LINDGREN, Vice-President C. EDWARD CARLSON, Asst. Cashier HENRY A. HAUGAN, Vice-President SAMUEL E. KNECHT, Secretary HENRY S. HENSCHEN, Cashier WILLIAM C. MILLER, Asst. Secretary			
YOUR CHICAGO BUSINESS RESPECTFULLY INVITED			
			
jttL, IN CINCINNATI Wlth Resources of TWENTY-ONE MILLION DOLLARS And every facility for the satisfactory handling of Bank Accounts CORRESPONDENCE INVITED			
Real Estate Mort^a^e Loans as Investments for Savings Deposits
By J. S. Royce, of Terre flaute, Indiana
dwelling property. Second: loans on city property in the business district. Third: loans on farm lands.
In the first case, loans on city dwelling property—in the larger cities where such property has a reasonably fixed value and which is of such character as to be desired by the great mass of purchasers of homes and in communities where the neighborhoods are considered desirable, a loan of from 30 per cent to 40 per cent, and in the best neighborhoods even to 50 per cent, makes a very desirable form of investments.
In the second case, property right in the business district of the large cities is always sought by the best investors and is always readily salable at once when thrown on the market. A loan of 50 per cent on the actual value of such property at a conservative estimate is a very desirable asset, and one on which there is absolutely no hazard.
Last, but possibly the most complex in all its details is the farm loan, and in the making of such loan, close scrutiny and better judgment must be brought into play than of any of the other forms of loans. The land in the first place must have the quality to produce a certain percentage of earnings each year under careful management, and it must be in a community surrounded by good land and a good class of farmers. In deciding these qualities, the inspector must certainly be a close observer of everything growing or that has been grown on the land, and of the people in the community, to enable him to arrive at a conservative estimate of the land.
It is harder to get at the true value of farm lands than any other class of security, because of what people tell you. It is as easy to say the land is worth $100.00 per acre as it is $50.00 per acre, and one has to be very careful and consider the thing from every standpoint and finally arrive at his own conclusion as to the actual value of the security offered.
Any institution which has its mortgage loans placed on property as above set out and carefully passed upon by an inspector who holds
The demand for mortgage loans and the ability to turn them quickly is better now than ever before. Life insurance companies, bonding companies, and private investors are making an active fight for good loans all over the country. When the development is such as makes the real estate values well fixed, it is not hard to sell mortgage loans when those desiring to make investments of their funds are acquainted with the character and ability of the officers of the institution offering such investments for sale.
The fact that the savings are subject to notice before withdrawal and that the opportunity for selling mortgages is better now than ever before, makes them the most desirable investment for savings deposits up to 70 per cent of the total savings deposits in the institution. In New York the law allows savings banks to loan 65 per cent of their deposits on real estate mortgages, but during the panic just gone through, those banks that held the highest percentage of mortgage loans showed the smallest reduction in market value of their securities, while those whose percentage of mortgages were lowest and bonds highest, had the greatest shrinkage in their securities.
The deposits in the savings department do not fluctuate as commercial deposits, and, with the exception of a scare among the depositors, there is little danger of having to raise a large percentage of the deposits in a short time, so that I feel safe in saying, that considered from all points the real estate mortgage loans are the most satisfactory of any class of investments for such deposits. The state of Indiana has a great field in which to place such loans, and in considering them, they should be divided into three classes. First: loans on city
In the early banking in this country, real estate mortgage loans were a type of investment which all banks made, counting on land as the basis for their operation, but'the country and business generally was undeveloped and there was much speculation, and consequently, land values were so unstable that many institutions failed and others had so much loss, that when it came to compiling the national banking laws, the power to make real estate mortgage loans was denied national banks and they were held to commercial and collateral loans of short time duration and to investments of bonds and stocks, which would be quickly convertible in case of emergency.
That the conditions in real estate have undergone a radical change since that time is well proven by the fact, that, at nearly every session in congress—someone introduces a bill to give national banks power to loan on real estate. Formerly, there were vast amounts of fine agricultural lands which were wholly undeveloped and were thought to be worthless. As the country has filled up, all of these lands with the natural resources have been taken up, and land values have become so fixed as to be subject to little fluctuation.
One of the chief objections to mortgage loans being held by banks was—that the loans were usually made from two to five years and that their deposits were payable on demand, and that being the case, they could not realize quickly on such investments, and therefore could not be called quick assets. In trust companies and savings banks, deposits are made and accepted subject to certain conditions or notice before withdrawal, and it is considered that this will give time to realize on such securities.