New-York tribune., 1920-09-12
Real Estate Mortgages Better Investment Than
Long-Term Bonds, Says Upstate Bank President

"Of late years savings banks which
awoke some years ago to the fact that
mortgages as an asset had many ad-
vantages over bonds have had good rea-
son for congratulation," said David NJ.
Dunning, president of the Auburn Saw
ings Bank, in an address on the rela-
tive value of bonds and mortgages at
the recent annual meeting of the New
York State Savings Bank Association at
Lake Mohonk, N. Y.
CAT the Auburn Savings Bank" con-
tinued Mr.. Dunning, 1--WE have sue
ceeded after some years of arduous
labor in transferring our investments
SO that from 65 per cent of our deposits
invested in bonds some years ago we
now have nearly that percentage in
vested in mortgages, during which time
our deposits have increased from $4,-
100000 to s700O,00O. This result could
hardly have been attained without the
assistance of guaranteed mortgages in
that we cannot too highly commend
these mortgages as an investment for
upstate savings banks in localities
where local mortgage offerings are not
sufficient to meet their requirements.
Some of the advantages that we have
found in guaranteed mortgages for a
small bank are:
"They are liquid in time of trouble
without serious loss. We found this
feature especially desirable during the
troublesome period at the outbreak Of
the World War in 1914.
"The early maturity affords oppor-
tunity for change of interest rate,
thereby enabling bank to keep step
with economic conditions, quite diff
ferent from bonds, especially longtime
bonds.
"The guaranty as to principal and
interest, the attention given to the in
surance and taxes, and the collection of
interest, which is invariably paid when
due, is a great relief to the working
conditions Of our institution.
"At maturity the principal is avail
able for other investment if desired.
We made use Of this feature during the
year 1918, when we desired to invest
in Liberty bonds.
Prefer Real Estate Mortgages
During the year 1919 we sold
largely Of bonds, principally railroad
bonds, and reinvested in guaranteed
mortgages, thereby reversing the
transaction of 1918. holding our own
as to income and improving our in
vestment.
"We are now carrying something
over $2,000,000 in guaranteed mort
cages, we'll distributed as to maturi-
ties, nearly all Of which are netting
US 51a per cent. At the same time we
are not neglecting our local mortgages,
and for the purpose of encouraging
people of moderate means to own their
homes we reserve funds for all loans
of less than $4,000 at per cent.
ave have for years made a speciality
of farm mortgages, both in our own
county and in six adjoining counties,
and are now carrying some $500,OO0 on
farms, which have caused US no loss
in twenty years.
"A gain Of l per cent in income, if
continued during the life of some Of
our bonds, shows most astonishing
result. In 1912, after repeated efforts
to induce our trustees to sell lot Of
longtime bonds, for the purchase of
mortgages, I prepared table with
special reference to the sale Of New
York Central 3h per cent bonds, due
in 1897.
Cost $1,o00,0oo to Carry Bonds
"This table shows that a gain of /
per cent in income on the S1o0, 900.
compounded annually at s per cent, will
amount TO $l2,574 in ten years; to s33,
043 in twenty years; to $'e,3S4 in
thirty years, and to Sl20,664 in forty
years. at which period It has more than
cancelled the principal Of the bonds.
and as maturity Of bonds In eighty-ava
years the gain would be $1,2A2s 600. thus