UNITED STATES DEPARTMENT OF AGRI CULTURE Bureau of Agricultural Economics - SALES CONTRACTS AND REAL -ESTATE I WES OE LIFE INSURANCE COMPANIES By •• •' - Harald C. Lars en Senior Agricultural Economist Washington, D. C. March 19UU contests Page Introductory . . . , 1 Life insurance company investments in sales contracts * 2 Distribution of sales contracts "by States 6 Changes in sales contracts "between 19^2 and 19^3, by States 6 Real estate held outright 9 Real estate acquirements and disposals . . 9 Distribution of real estate holdings by States 11 Changes in real estate holdings during 19U2, by States 11 SALES CONTRACTS AND REAL ESTATE INVESTMENTS OF LIFE INSURANCE COMPANIES By Harald C. Laxsen, Senior Agricultural Economist INTRODUCTORY Life insurance companies have, in addition to their primary investment in farm mortgages, a substantial investment represented "by the unpaid prin- cipal of sales contracts owed "by farm purchasers to insurance companies, as well as a significant investment in farms held outright. U Their holdings of such sales contracts are of particular interest, not only "because they are a part of the total long-term debt owed by farmers which is secured by farm real estate hut also because of differences "between such an obligation and a debt owed by farmers which is secured by a long-term real estate mortgage. Under a contract, title to the farm is retained by the seller and the transaction usually calls for a much smaller down payment than an outright sale. With a smaller equity and the lack of title to the purchased farm, the tenure of the farmer may be somewhat less secure during periods of financial stress than it is in the case of a purchased farm even though encumbered by a mortgage. On the other hand, the use of the contract by institutional holders of farm real estate as a method for financing the sale of their farms has made it possible for a large number of buyers to acquire the right to the 'use of farms and to obtain a quasi ownership interest which otherwise might not have been possible without a much larger initial investment by the buyer. If farmers are able to make substantial payments before periods of distress, thereby acquiring larger equities, the extent of ownership security may not vary greatly from that of actual ownership subject to a mortgage. Sales contracts, therefore, have important implications, not alone from the standpoint of the current long-term debt situation and the equities of farmers in their farms but also from the standpoint of the potential future financial distress in agriculture should agriculture again be confronted with a period of low prices and incomes. In addition to the real estate which has been sold by life insurance companies on sales contracts - title to which is still vested in the companies - they also have a substantial investment in real estate held outright. This investment has had a significant influence on the farm-tenure pattern since the early thirties in many areas, and in more recent years has been an active 1/ The amount of unpaid principal of sales contracts owed by farm purchasers to insurance companies on farms sold to them by such companies will in the remainder of the report be referred to as "investments of insurance companies in sales contracts." - 2 - factor in the real estate market. Acquirements of real estate in the depres- sion of the 1930' s dispossessed many farm owners who found it impossible to maintain their mortgage payments. These farms were taken over and leased or operated by insurance. companies; many were substantially rehabilitated. - In the last few years a major part of these farm acquirements has been sold. The disposal of this real estate, together with the constant availability of sub- stantial quantities of other farm real estate owned by life insurance companies on the market, has apparently had a restraining influence of some significance on real estate values. The magnitude and direction of these influences on the real estate mprket are of importance to agriculture now and will be of sig- nificance in the post-war period. Recognition of the significance of investments in agriculture made by life insurance companies prompted a study designed to provide additional and more detailed information on these investments. A companion report^/ deals with the amount, composition, and distribution of insurance-company investments in farm mortgages. LIFE INSURANCE COMPANY IN7ESTISNTS IN SALES CONTRACTS Investments of life insurance companies in real estate sales contracts for January 1, 19^3 are estimated to be $151,14-93,000 (table l) .11 On this same date, their investments in farm-mortgage loans totaled $891,^1,000. Thus there was owed to insurance companies on this date a debt of $1,042,939,000. which was secured by farm real estate in the form either of contracts or of mortgages. Investments of these companies in both sales contracts and mortgages were lower on January 1, 19^3 "than for January 1, 19^2 when they totaled $156,025,000 for sales contracts and $907,lUl,OQO for mortgages, or a total of $1,063,166,000. It may be noted that, for the period I930r^3 (1930 being the earliest date for which such data are available), life insurance company 2/ Farm- Mortgage Investments of Life Insurance Companies. U. S. Bur. Agr. Econ. December 19^3- 3/ The investment figures are the equivalent of "book value" or "admitted asset value" reported by insurance companies. For most sales contracts the "book value" is the same as the unpaid principal of the contract; however, in some contracts the unpaid principal exceeds the book value. This arises if the farm is sold on a contract for a consideration in excess of the established book value. It is a common practice .among insurance companies under these conditions to credit payments on principal to the book value as well as to the sales price. Thus the unpaid principal may be somewhat larger than the book value on some, contracts. For 10 insurance companies holding about 6l percent of the total mortgage loans for all companies, the unpaid principal on sales contracts for January 1, 19^3 w as approximately 15.8 percent larger than, the book value. No doubt this exaggerates the relationship for insurance companies as a whole, but there is little doubt that for this date the book value is somewhat less than the amount of principal owed by farmers on contracts. For earlier years the difference will be considerably smaller than that for January 1, 19^3. as the market in recent years has been unusually favorable and a larger proportion have no doubt been sold above the book value. Before 19^0, the difference would probably be of little significance. - 3 - (Q U 0) ri "1 ta -p U Q f oi «>Cr-\ §o Pjc-I Or-4 o CO r-H o - »— l-'OJ -p o (A -P c o> a -p en « > CO •P r-l o ^ o E-< ■ V I -P ttf)-P CD CO -H U) -paw c:-3 cc" a> «rj o T» » O -P ft) r-M — o mCN infrvD r-i r-s-Tjv-ivo o cm rH Hocxn r-»sOvr> uMrtrvTi-^t o r^ooo r-ico r^o o r~r--s*x> r-~CM 'vf'^o-Ot-irv-ovDvr) cm crv-t cm rH cnjccojuao "^-ocrocxDor-- CM CM CM r-l <-iOO r-"sDvX> lrVfNLTurNn^ CM CM CM CM CM. -p r-l -P TJ CO (0 (l)H .H a> -p a) w ^f| re en rj -p o 01 -p oi o a) a] ^5' c/> :>) OO fr^.rtf^i-H >-l r-l LfNOOO "^dr-r-t rr> O TtCpr^rnCM r-~o <-« cvDvo i — cm r^ooo r-coaoco -^cm r--ov-- -»vo o cm crco cm ltoo o-j ■^j-irMXVD'vX)v£> irxrv^ro'^ CM VD m^ico o r-vo cm cr croo cm r-t r»o ^" cm r^cjxrvD cm r-~a>cMr\0 '-rvo r-i m cm cm cm c^=*Lr\r~--cr\cro cm lcmtn -P 01 -P O ca § o bo -P M O a i a 05 at w .. eflm o 01 a) ID h EH a a C7>CTCOr~> u} r, -p -P in ^ *!S- ;> a Sf^" ^ a w T(D t) aJ U . «J ir\ «o> inooor^»j3'^r-tTTO(roocrooLr«)'£) cmrco ■^j-'^aovvO cro rr-NONOxocxxD r-tCMcor-^-iraDOLfNO CM CM CM CM CM O^ Vl vi vj vJ' «-> r-l C^.^VO CJ^O CM CM ^H »H HHH HVO oSCM CM CM CM n-\r0^j- 'r^rHr^rH^t^rH^r^^t^^r^rMr^r^CSICMCMCMCMCMCMCMCMrHi-lrHrHr-lr-t^l^trH -p o EH o o a 01 .-H 0) o a? ■d bf) o -P o ^i b O a ^4 i^^coX)CM^^^r^rr\,'^"<--««^"tr > or^<--» HCXDOO ^OX> -^^jD r-t r-« vX> irufMTVOOO P—^CTVD CM P«*J0 O "^fCM OIXDCXDr—CMvIXD -"30 f~ ir\T~-r^i-« r-l vj vj 0>-^M5cH -"sfCTMrVH LTVr-ICO I — O^CM r-MD CT>XlGO CT\-^- CM crv-l O CTvT-^^t'^-OO'^hrNrH ^T \x> cr-cr-or^OMrv-itfxo -^tu^cMvX) cm cm o c^.CMcoiTNcr>r->co 0) r-l -« • 2P , cs a ff a E-i cm £.T3 a c^t-tcocrooLrYfv-iOLfNCMvDr---^-i crooncMr^croo r-i -^mcrv-i r~-r^oov£) -^M3 LT\rr> M3CMLTN>-LrCX3CMtrVDv£)r^CMLnCM rHlTNrHCMir\UA.DCOOajr-ir-AX>Cr>roCJ^O^^roJD cx;rHr-vr>cmi^'^rccx>cr>r--rHCMvo avo cm -"^-aNrM^- cm o cr>w-* crco r— r-ico r-r-ico cm r^CM CTT-~J>-CKX> LTVD r-OO r-l CM Lf> ^tCM (TCOKtXD O OC »=^rX) C^tTXXD cr ^o cr'^o^o O CM CM M"0 OXTnCM 0">O r \'^l-CM OOOVUr-l r-l LOLTNjrv^ ITVH (^TOCO 0~OD r-l f^O CM <-l LP> CMLr^cT^cr-r--CT^CMcOl^^r^ «^CMr---r^vjrcr\r--vc>r-M-^jj ^tCMUJcor-cr\cncTMTNCrcrcor >H Or-icMCT-^i-ir\Dr-oocr<5<-i CMor>-oocro r^cMor>->^rtrvDr--oooxjr-iCMrr N ' HrlrtHHHHHrHHtNCMOJCN OCMCMCMCMCMr'-' <^rfXmr^cmo^C»^O r> .or\^(- T d" ,: ^"' , ^t" c^ c^• cr o>o*xr crc^cr x cr>OT>cr-criC3>c) > c>> r^TcMtntv^j - k - » investments in sales contracts were at their maximum on January 1, 19^2, whereas their investments in mortgages decreased from 1928 to 19^0 and then showed an increase for 19^1 and 19^2. It is evident, therefore, that since 1930 sales contracts have "become of increasing ?.inpcrtsnce; and for January 1, 19^3 nccounted for over 15 percent of the combine! total of mortgages and sales-contract obligations owed to insurance companies. The investments in sales contracts "by life insurance companies were relatively large compared with similar investments of the Federal land banks and the Federal Farm Mortgage Corporation (table 2). For January 1, 19*+3i total investments in sales contracts for the Federal land banks totaled $68,477,000 and for the Federal Farm Mortgage Corporation only $lU, 772,000. Investments in sales contracts by life insurance companies were therefore nearly double the combined total for both of these federally sponsored agen- cies. Sales contracts alone for the above federally sponsored agencies, on January 1, 19^3. were about U percent of the total obligations on mortgages and sales contracts compared with 15 percent for insurance companies. The extent to which current debt held by insurance companies and by the Federal land banks and the Federal Farm Mortgage Corporation reflects the sale of real estate is also indicated by the relative amounts of purchase- money mortgages. zJ On January 1, 19^3. pur chase- money mortgages constituted about 17.1 percent of the total loans including sales contracts held by insur- ance companies, but for the above-mentioned federally sponsored agencies, pur chase- money mortgages represented only 2.3 percent of the total outstanding loans, including sales contracts. Both sales contracts and purchase- money mortgages, however, may be transferred to regular mortgages so that the amount of these obligations on any specific date may reflect not only the amount resulting from the sale of farms but also the amount transferred to regular mortgages. It would appear, however, that the lower percentage of sales con- tracts and purchase-money mortgages relative to total loans for the federally sponsored agencies reflects principally fewer farm acquirements from 1930 on and the subsequent policy of earlier farm disposals. The increased importance of real estate sales contracts relative to the total agricultural investment of insurance companies is a result of sub- stantial farm real estate acquirements during the depression period of the early thirties and the methods used by insurance companies in disposing of such real estate. 5/ There are three principal methods of real estate disposal: Sale for cash, sale subject to a purchase-money mortgage, and sale on a con- tract. During 19^-2, about 6.2 percent of the sales of real estate by insurance companies were for cash, 52.6 percent were on sales contracts, and Ul.2 percent were sold subject to a purchase-money mortgage. Substantial sales of real estate in recent years led to a considerable increase in both new contracts and pur chase- money mortgages made. However, with higher farm incomes there have also been larger down payments on farms sold, as well as increased prin- cipal payments on outstanding purchase-»-money mortgages and sales contracts. These higher farm incomes furthermore led to a relatively larger number of U/ Purchase-money mortgages are mortgages which are given by the buyer to the seller of a farm to pay all or a part of the purchase price of the property, jj/ See page 9 for a further discussion of real estate acquirements. - 5 - ,,. . .',••-,;_-„.;. Table 2.- Investne,n.te««^«*he' fe^ral land ca.: :r and , Federal Farm Mortgage Corporation in purchase-money' mortage 6 and sales contracts, ," Januar? r 'i;'-1930-U3 ' .' •<''.';. .'. Federal land "banks ,, . Federal Farm Mortgage >; ■ - •-.*"• Corporation January 1 - Purchase-' •" Sal e s '■' -Purchase- Sales 1 mojveje. : contracts .-;■• '; money contracts 1 mortgages ! < .1 .mortgages j 1 .. . *, "• | 1, jy • .. 1 , 000 .1,000 , 1,000 • dollars ,• dollars dollars 1 _ — , ' dollars ' 1930- •6,193 ,: . 9,21*6 i •■ • 1931 7,39? 12,423 1 , . .=. , 1932 8,815 16 , 204 1933 = 10,027 - 19,633 : 107;1] 1/ 11,828 1/ 23,1*12 r 1935 I 1 *, 3-39 29,17p ^»*— '••- - • 1930 . . 28,195 j 3^.S39 2/ , 2 ., 24' 19^7 ^0,791 m ' 343 ' 1S38 . 37,519 ' ' U6,i31 .710 1.5 1 *! ■ 1939 * . 1 .-^0,675 ' | ^9,362 ! .. r,6iic :: ■ 3,213 '19^0 ..;. : '. 1+2,573 •■ | 54,332 1 -.2-, 971" "; •■ -6,509 19^-1 . ^,709 ! ■59,690 ! •• u,iu 9 - ■[, •-3, : 756 i : 9h-2 • ^8,338' f 67,114 \5'.l25. -1£,'74S 19U3 . — 1 — : 71 ■ — r— 146,3714: • '68,477 '5, .956 ■ j : ., •V i •' 14,772' 1/ As of November 31, 1933 , " 2/ Second 'mortgages only. Farm Credit Administration. farms being sold o.n^pureha.se-money 'mortgages than on sales., contracts. As a consequence., '_/tne amount: of sales contracts outstanding on .January. 1, 1943 fell off nearly 5 mill.i n dollars from that of January 1, ±$%2,' whereas purchase- money mortgages continued to increase. This latter occur red,, furthermore, despite' an increased, .number 'of transfers from purchase-money mortgages to' regular mortgages. With continued high farm .income in 1943 , the trend of sales contracts outstanding may well continue downward as larger numbers of farms sold may : ^e financed on purchase-money mortgages rather than on sales contracts. Furthermore, substantial numbers of- contracts will continue to be paid down anc-. transferred to mortgages. On the other hand, insurance companies may con- tinue to sell a substantial number of farms on contracts because of the some- what higher prices which can be obtained if relatively smaller- down -payments are required, or because the risks assumed will be less where recovery of the pro;oert' r becomes necessary. - 6 - Distribution of Sales Contracts "by States »m t* i m i ■ i mi ■ i i n ■——-!•■■ -■-■■ — i Investments of insurance companies in real estate sales contracts are concentrated to a large degree in Iowa and the surrounding States (fig. l). On January 1, 19^3. over 36 percent were in the State of Iowa alone and over 75 percent were in the States of Iowa, Minnesota, Worth Dakota, South Dakota, braska, Indianr, Missouri, and Illinois. This represents a somewhat greater concentration in these areas than for regular or purchase-money mortgages which were more widely distributed, although somewhat more concentrated in the States to the east and south of Iowa, than were sales contracts. For ox-.nplc, it will be observed from figures 1 and 2 that 3^.2 percent of the sales contracts were in Iowa, but that only 21.6 percent of the purchase- money mortgages were in that State. On the other hand, over a quarter of the contracts were in the States of Minnesota, North Dakota, South Dakota, and Nebraska, whereas only about 11 percent of the purchase-money mortgages were in these States. Contrariwise, about U6 percent of the purchase-money mort- gages were in the States of Illinois, Indiana, Missouri, Kansas, Oklahoma, and Texas, whereas only 18.8 percent of the sales contracts were in these States. C hanges l a Sales Contracts Between 19^2 and 19U3. by States 11 t nun im [■j.i_im_ua_Li_t.__ij- jj__j«jm .■/■ 1 1 ii" n - — The concentration of sales contracts in Iowa and the Great Plains States is further emphasized by the increases in theso States during 19 1 * 2 as opposed to decreases which occurred in most of the other States. §/ In figure 1 it will be observed that the investments of insurance companies in sales contracts in the State of Iowa increased 18. 7 percent between January 1, 19^2 and January 1, I9U3. In North Dakota, the increase was 63.6 percent; in South Dakota, 37.9 percent; in Nebraska, 16.8 percent; and in Kansas, 9-5 percent. Scattered increases occurred in other States but principally in California, Arkansas, and Louisiana. The remaining States showed only slight increases or substantial decreases. The increase in purchase-money mortgages was even greater in the Plains States and in Iowa than was the increase for sales contracts, but there were also numerous increases in areas where sales contracts show substantial de- creases (fig. 2). Thus, in Minnesota there was a decrease of 10.3 percent in . sales contracts and an increase of 35.6 percent in purchase-money mortgages. In Illinois, the difference was even greater. Contracts show a decline of 21.0 percent and purchase-money mortgages an increase of 2k percent. Contracts decreased in Missouri 37. 5 percent, whereas purchase- money mortgages increased 2b.5 percent. On the other hand, California, Arkansas, and Louisiana show an increase in sales contracts during 19^2, whereas the same States show a decrease in pur chase- money mortgages. 6/ Based upon data received from 23 insurance companies holding about 82 per- cent of the total farm-mortgage loans on January 1, 19^3- 7- INVESTMENTS OF LIFE INSURANCE COMPANIES IN SALES CONTRACTS, PERCENTAGE DISTRIBUTION BY STATES, JAN. 1, 1943, AND PERCENTAGE CHANGE, JAN. 1, 1942 -43 PERCENT I I 0.0 to 2.0 2.0 to 4.0 4.0 to 6.0 6.0 to 8.0 8.0 to 10.0 10.0 and over UNITED STATES -2.9 PERCENT * DATA INSUFFICIENT TO BE SIGNIFICANT PERCENT 10.0 and over 9.9 to 0.0 0.0 to 10.0 10.0 to 20.0 20.0 and over U. S. DEPARTMENT OF AGRICULTURE NEC 43415 BUREAU OF AGRICULTURAL ECONOMICS Figure I -8 INVESTMENTS OF LIFE INSURANCE COMPANIES IN PURCHASE-MONEY MORTGAGES,PERCENTAGE DISTRIBUTION BY STATES, JAN. 1, 1943, AND PERCENTAGE CHANGE, JAN. 1, 1942-43 PERCENTAGE DISTRIBUTION PERCENT 0.0 to 2.0 2.0 to 4.0 4.0 to 6.0 6.0 to 8.0 8.0 to 10.0 10.0 and over UNITED STATES 18.1 PERCENT *DATA INSUFFICIENT TO BE SIGNIFICANT PERCENT -10.0 and over - 9.9 to 0.0 0.0 to 10.0 10.0 to 20.0 20.0 and over U. S. DEPARTMENT OF AGRICULTURE NEG 43414 BUREAU OF AGRICULTURAL ECONOMICS FlGUFiE 2 - 9 - REAL ESTATE HELD OUTRIGHT Approximately ^one-fourth of the total agricultural investments of insur- ance companies "on January 1, 19^3 were in real estate" held outright . On this date the investment is estimated to "be about v>336t 2.33, 000 as compared to $^Ul,771.000 a year earlier. U This represents a. reduction of about a fourth during 19^2. Real estate holdings reached a maximum of a'bout $63^,005,000 for January 1, 1937 so that their holdings for January 1, 19^3 were only a'bout 53 percent of that maximum. The amount of real estate now' held, however, would "be a considerably smaller proportion of the total real estate Which has been available for sale. For instance, "between January 1, 1932 and January 1, 1932, total real estate acquirements for lU life insurance companies totaled $583,5^2,000; real estate holdings for these companies now total only $252,855613, or U3 percent. Since January 1, 19^0, the rate of decrease in real estate hold- ings of life insurance companies had increased each year, being 8.7 percent during 19^0, 19.3 percent during 19^1, and 23»9 percent during l9*+2: Just before the agricultural depression of the early thir ties, the in- vestment of insurance companies in real estate was - a* relatively small propor- tion of their total agricultural investment. For January 1,' 1930, real estate held outright was only a'bout U.g percent of the total agricultural investment; As real estate acquirements increased during the next few years as a result of foreclosure and involuntary transfers, and as loan's held decreased both as a result' of these factors and the refinancing of their loans by the federally- - sponsored agenciea, the ratio of real estate held outright to' total agricultural ■invect ants continued to increase. For January 1, 1931, !■* wa's. 5.. 6 percent; a year rater, it wa9 8.6 percent; and "by 1937 » it was. 38'. U percent.. The ratio remained at about this level for 1938 and 1939- With a "better real estate market ~nd fever farm acquirements in the next few. years the ratio declined' to 37.9 percent for 19^0 and 2U.U percent for 19^3- • As of January 1, 19^3» the investment of life insurance companies in real estate held outright represents nearly three- fourths of the total of such holdings by the major institutional lenders (table 3). This investment fur- thermore has in general decreased less rapidly than those of the other agencies. Real estate acquirements and disposals The extent of farm real estate acquirements and disposals in the period 1932-38 .is indicated "by the data for 26 insurance companies submitted to the Temporary National Economic Committee. 8/ Data for these companies showed that in 1932 real estate acquirements amounted to about 6-.^ percent'- of .the. loans: outstanding for these companies at the beginning- of the' year. " -In 1933- and 193^, 7/ The "estimated value of real estate held outright" is based .upon the ."bqpk value." The current market value of- such real estate for I9U3 would ;be some- what in excess of this figure. For 12 companies holding about 72.5 percent of the real estate, the market value of their real estate held outright an Jafiuary 1, 19H3 is estimated to exceed the hook value by 11. 7 percent. In years, for whidh a less favorable market exists, the book value would be clos-er to the-markG't v : value and in some years the book value might be even larger. :\ 8/ Hearings before the Temporary National Economic Committee, 7&th Congress, 3rd Sess., part 10A, Feb. 12, 19UO. - 10 - the ratio increased to 10. 1 percent and 12.9 percent respectively. In "the - succeeding U years, the proportion declined to 11.4 percent in 1935. 9-8 per- cent in 1936, 7.1 percent In 1937. and 5.6 ercent in 1938. On the other hand, real estate sales during' the period 1932-38 were relatively light. In 1932, real estate sales totaled only about k.l percent of the total real estate available for sale in that year. 2/ The proportion of disposals con- tinued to increase in 1933, 1934, ana 1935. reaching 8.8 percent - then fell off in 1936 to 7.9 percent. In 1937 and 1936, 10 and 7.9 percent respectively of the land available for sale were disposed of. In the current period {19UO-U3) acquirements were relatively light, whereas sales were relatively heavy. Table 3.- Acquired farm real estate held by selected lending agencies, January 1," 1930-43 Federal land banks and Real estate r held out- Three State credit agencies 5/ Year Federal Farm Mortgage Corporation right by life insur- ance com- Joint -stock land banks 2/ Insured commercial banks 4/ 1/ panies 2/ 1 1,000 dol. 1,000 dol. 1,000 dol. 1,000 Aol. 1,000 dol. 1930 1931 1932 1933 193^ 29.517 36,865 53,588 83,158 96.632 107,058 123,^03 190,69^ 287.773 428,331 19,685 22,202 37.957 71,741 85,7^0 i 26,860 33.511 39.008 47,454 56,094 1935 1936 1937 1938 1939 96,666 119, 864 13^,75^ 132,038 139,229 558.211 588,761 634,005 612,120 607.358 81,700 78,204 72,781 62,030 53,885 11 7S.166 69.525 56,311 49.143 60 , 270 61,531 68,444 72,040 71,846 19U0 194i 19 U2 19^3 155,237 134,180 91,816 54,757 599.653 547,637 441,772 336,233 46,827 36,172 25,130 18,306 42,045 33.373 22,84l 8/ 19,532 68,324 60,900 53.498 44,145 1_/ Investment. Includes sheriffs' certificates and judgments, but excludes prior liens. Excludes Puerto Rico. 2/. Book value - partially estimated. 3/ Carrying value. Includes sheriffs' certificates and judgments. Real estate held by banks in receivership included at book value. 4/ Book value. ^/ Investment. Department of Rural Credit of Minnesota, Bank of North Dakota, and Rural Credit Board of South Dakota. 6/ Data unavailable . 7/ June 30. 8/ June 30, 1942. 9/ Amount available for sale is the equivalent of the amount of real estate acquirements during the year plus the amount of real estate held outright at the beginning of the year. - 11 - During the period 1932-38, the annual average amount of farm real estate acquired "by the Federal land hanks and the Land Bank Commissioner was equal to ahout 2.0 percent of the average amount of outstanding loans, whereas insurance companies acquired farm real estate to the extent of about 9.1 per- cent of their loans. i?_/ Disposals each year "by the federally sponsored agen- cies, however, averaged ahout 23*0 percent of the real estate available for -sale during the year, whereas insurance companies disposed of an average of 7.5 percent of the real estate available for sale per year. The relatively low real estate acquirements of the federally sponsored agencies reflect sev- eral factors, of which the primary one was the provision of the Emergency Farm Mortgage Act of 1933 and subsequent legislation which authorized the federally sponsored agencies to defer and to extend delinquent obligations of farmers and to receive from the Secretary of the Treasury subscriptions to their paid- in surplus in amounts equal to the amounts of such extensions and deferments. Furthermore, outstanding loans of the federally sponsored agencies increased rapidly during this period as a result of the refinancing by the Federal agencies of many privately held loans, including the distressed insurance company loans. Most of these refinanced loans were put in good standing and had not had as much time thereafter to become delinquent. Difference in the rate of disposal between the lenders was largely one of policy. The federally sponsored agencies have often publicized their policy of not holding acquired real estate longer than necessary, whereas most insurance companies established an organization for the particular purpose of operating their farm real estate during the time needed to rehabilitate the properties and to recover their investment on a more favorable real estate market. Distribution of Real Estate Holdings by States The real estate holdings of insurance companies on January 1, 19^3 were concentrated in general in the same States as their sales contracts, although the concentration of real estate holdings was somewhat greater in South Dakota and Nebraska (fig. 3) • Nearly 6l percent of their total real estate holdings were in these two States and Iowa. With the addition of Minnesota, North Dakota, Missouri, and Kansas, the percentage exceeded 8U percent. The real estate holdings outside the West North Central States, with the exception of Texas, were relatively small and insignificant. Changes in Real Estate Holdings During 19^2, by States From figure 3 it will be observed that in l9*+2 substantial decreases had occurred in the real estate holdings of insurance companies for all of the States where the amount held is significant. In Iowa, where 23-7 percent of such holdings were located, the amount of real estate held decreased 31*2 per- cent. In South Dakota and Nebraska, where 37 percent was held, decreases in holdings were only 12.0 and l6.S percent respectively. Larger decreases occurred in States immediately to the east of Iowa, several being in excess of 50 percent. However, these States contain only a minor portion of the total 10/ Based upon data contained in the annual reports of the Farm Credit Admin- istration. 12 NVESTMENTS OF LIFE INSURANCE COMPANIES IN FARM REAL ESTATE HELD OUTRIGHT,PERCENTAGE DISTRIBUTION BY STATES, JAN. 1, 1943, AND PERCENTAGE CHANGE, JAN. 1, 1942-43 UNITED STATES -23.9 PERCENT * DATA INSUFFICIENT TO BE SIGNIFICANT PERCENT '■y.vl -10.0 and over - 9.9 to 0.0 0.0 to 10.0 10.0 to 20.0 20.0 and over U. S. DEPARTMENT OF AGRICULTURE NEG 43416 BUREAU OF AGRICULTURAL ECONOMICS Figure 3 - 13 - real estate ovmed by insurance companies. Only three States - Iiontana, Mis- sissippi, and Alabama - showed increases but the amount of real estate holding located in these States was so small that a net increase of only a very few farms would make a fairly substantial percentage increase. For instance, the increase of 66.5 percent between January 1, 19^2 and January 1, 19^3 in Mississippi is an increase of from $117, 5^8 to $195,711- Such increases cannot be considered of much significance. 4 Lngs^ f I After five days return to TED ST.'.TES DEPARTMENT CF AGRICULTURE BUREAU CF AGRICULTURAL ECCOIOKICS 5RTNGTOS 25, D. C. OFFICIAL BUSi:."ESS Penalty for private use to avoid ment of postage $300 UNIVERSITY OF FLORIDA 3 1262 08918 7651 DIRECTOR HAROLD MOWRY AGR EXPT STATION 11-12-43 DES GAINESVILLE FLA