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Banking & Finance
AN EIGHTH DISTRICT PERSPECTIVE
Winter 1984

1983: A Year Of Recovery And
Deregulation
For banks in the Eighth Federal Reserve District, 1983
was a year of economic recovery and financial deregula­
tion. The economic recovery that began in December
1982 spurred faster growth of loans. The introduction of
money market deposit accounts (MMDAs) in December
1982 and Super NOW accounts the following month
enabled banks to compete with unregulated financial
intermediaries, which led to important shifts in bank
deposits. Although the forces of recovery and deregula­
tion have affected all Eighth District banks, their
impacts have varied across the District and in banks of
different sizes.

Loan Growth Somewhat Faster but
More Disparate in 1983
Total loans at Eighth District banks increased 8 percent
in 1983, compared with 7 percent in 1982. Loan growth in
the three regions of the Eighth District also became more
disparate. Total loan growth actually declined in Region 1
(eastern Missouri and southern Illinois), from 4.3 percent to
2.0 percent, while increasing from 10 percent to 12.6 percent
in Region 2 (Arkansas, northern Mississippi and western
Tennessee) and from 7 percent to about 11 percent in
Region 3 (western Kentucky and southern Indiana). Thus,
the slower growth in Region 1 partially offset the rapid
growth in loan portfolios in the other two regions. Region
1's slower growth was due primarily to a decline of over 7
percent in the loan portfolios of large banks (assets ex­
ceeding $750 million) in that region.
Small banks in the Eighth District (assets
under $750 million) increased their total
loans faster them large banks in 1983. As
shown in the table, small District banks in­
creased total loans 9.7 percent, compared
with 6.3 percent for large District banks.
This same pattern, which was followed
throughout the nation as a whole, is explain­
ed primarily by a more rapid increase in com­
mercial and industrial loans at small




banks. Nationally, these loans increased 9.2 percent at
small banks in 1983, compared with 1.5 percent at large
banks.

Loan Growth
1982

1983
Total loans
(all banks)

U.S.

District

8.3%

U.S.

District

8.1%

7.9%

6.9%

Small banks

11.2

9.7

8.4

6.8

Large banks

5.1

6.3

7.4

7.1

Loan categories
(large banks)
Commercial and
industrial loans

1.5%

2.7 %

12.0%

11.6%

Consumer loans

13.2

22.7

0.7

-3 .5

Real estate loans

6.6

8.3

6.0

3.3

Although loan growth at large Eighth District banks
was slower than at small banks, it was faster than the
average for large U.S. banks. In contrast, the loans of
large District banks grew slightly below
the average rate of large U.S. banks in
1982. The table on this page indicates that
the better performance of the Eighth
District banks was spread across all three
THE
major loan categories (commercial and in­
FEDERAL
RESERVE
dustrial loans, consumer loans, and real
RANK of
estate loans). This difference in perfor­
ST. LOLLS
mance was most pronounced in the case of
consumer loans, which increased about 10

WINTER 1984

FEDERAL RESERVE BANK OF ST. LOUIS

Commercial and Industrial Loan
Growth During Recoveries
(large banks nationwide)
Business Cycle Trough

2/1961
11/1970
3/1975
7/1980
11/1982

Subsequent 12-month growth rate

2.5%
3.0
-11.4
14.7
1.5

percentage points faster than the national average. The
current economic recovery has been described as “ con­
sumer led.” The strength of consumer spending during
this recovery is reflected in the rapid growth of consumer
loans at large banks. In contrast, consumer loans rose a
scant 0.7 percent nationwide during the recession year
1982 and actually declined 3.5 percent in the Eighth
District.
In the case of large banks, the contribution of consumer
loans to the growth of total loans in 1983 was more than
offset by the sharp slowing in the growth of commercial
and industrial loans. Consequently, total loans at large
banks grew more slowly in 1983 than in 1982, both na­
tionwide and in the Eighth District. Just the reverse was
true of small banks, at which commercial and industrial
loans grew at approximately the same rates in both
years.
The sharp drop in the growth rates of commmercial and
industrial loans at large banks does not necessarily mean
that business borrowing slowed in 1983. Business bor­
rows both short- and long-term. Commercial and in­
dustrial loans are short-term borrowing; consequently,
changes in the growth of these loans maybe due to
changes in the mix between short- and long-term business
borrowing. As shown in the table above, the growth of
commercial and industrial loans at large banks nation­
wide has varied considerably over the last five economic
recoveries. Research by this Bank attributed the sharp,
unusual decline in commercial and industrial loans during
the recovery beginning in 1975 to increased long-term
business financing. This occurred again during the first
three quarters of 1983, as business raised a much higher
portion of funds with equity and long-term debt than it
did in 1982.

Deregulation Brings Deposit Shifts
Banks and thrift institutions began offering M M DAs
in December 1982 and Super NOW accounts in the

following month. Free of interest rate ceilings, the new
deposits allowed banks and thrifts to compete for funds
on an equal basis with unregulated financial institutions,
such as money market mutual funds (MMMFs). These ac­
counts were popular both nationwide and in the Eighth
District. At the end of 1983, MMDAs nationwide stood
at about $372 billion and Super NOWs at about $37
billion. Some of the new deposits apparently were
transferred from MMMFs, which declined by more than
$40 billion during 1983; however, the majority came from
other types of deposits at banks and thrift institutions.
The result was a shift in deposit composition at these
institutions.
The table below shows how the deposit composition of
Eighth District banks changed in 1983. In December
1982, M M DAs accounted for 2 percent of large bank
deposits and about 1 percent of small bank deposits. By
December 1983, the shares of MMDAs and Super NOW
accounts combined had risen to 14 percent at large banks

Deposit Composition at Eighth District Banks
Large banks

12/83
MMDAs
Super NOWs
Savings deposits
(other than MMDAs)
Transaction deposits
(other than Super
NOWs)
Time deposits
TOTAL DEPOSITS

11.4%
2.5

12/82
2.0%
—

Small banks

12/83
12.4%
3.6

1.1%
—

5.6

6.6

8.1

10.8

38.5
42.1

41.0
50.5

24.4
51.4

28.5
59.7

100% 100%

100% 100%

and 16 percent at small banks. At both large and small
banks, the proportions of total deposits in savings
deposits (other than MMDAs), transaction deposits
(other than Super NOW accounts), and time deposits
declined in 1983. The total deposits of large Eighth
District banks grew only 5.6 percent in 1983, while the
total deposits of small Eighth District banks grew 13.5
percent. Total deposit growth in both groups of banks
was less than the increase in the percentage shares of
M M DAs and Super NOW accounts. Consequently, the
actual dollar balances of these other deposits, as well as
their percentage shares, declined in 1983.
—Donald M. Brown

Banking & Finance—An Eighth District Perspective is a quarterly summary of banking and
finance conditions in the area served by the Federal Reserve Bank of St. Louis. Single
subscriptions are available free of charge by writing: Research and Public Information Depart­
ment, Federal Reserve Bank of St. Louis, P.O. Box 442, St. Louis, Missouri 63166. Views ex­
pressed are not necessarily official positions of the Federal Reserve System.



12/82

WINTER 1984

FEDERAL RESERVE BANK OF ST. LOUIS

EIGHTH DISTRICT BANKING DATA
DISTRICT

Selected Assets
(billions of dollars)
Total Loans1
Commercial and Industrial2
Consumer2
Real Estate2
Total Investments1
Selected Liabilities1
(billions of dollars)
Total Deposits
Transaction Accounts
Savings Deposits
MMDAs
Time Deposits
Selected Interest Rates3
Super NOW Accounts
St. Louis
Little Rock
Memphis
Louisville
MMDAs
St. Louis
Little Rock
Memphis
Louisville

Percent Change
Same Period
1983

Nov. 1983

Dec. 1983

Jan .1984*

Year-to-Date
1984

$21.87
4.26
2.04
2.13
11.44

$22.13
4.23
2.11
2.17
11.61

$23.44
4.11
2.22
2.24
11.27

5.9%
-2.8
5.2
3.2
-3.0

0.4%
1.5
1.7
1.0
2.5

$33.40
10.94
6.49
4.05
15.97

$34.15
11.31
6.51
4.11
16.33

$35.21
12.06
6.55
4.14
16.60

3.1%
6.7
0.6
0.7
1.6

3.2%
3.5
40.7
291.0
-4.0

Nov. 1983

Dec. 1983

Jan .1984

7.21%
7.32
7.37
7.39

7.20%
7.35
7.31
7.45

7.12%
7.38
7.47
7.35

8.27
8.50
8.18
8.31

8.21
8.56
8.21
8.39

8.09
8.56
8.38
8.34

REGION I
(eastern Missouri and southern Illinois)

Selected Assets1
(billions of dollars)
Total Loans
Total Investments
Selected Liabilities1
(billions of dollars)
Total Deposits
Transaction Accounts
Savings Deposits
MMDAs
Time Deposits




Percent Change
Same Period
Year-to-Date
1984
1983

Nov. 1983

Dec. 1983

Jan .1984*

$ 7.97
4.71

$ 8.10
4.80

$ 8.39
4.63

3.6%
-3.6

-0.9%
2.1

$12.86
4.13
2.18
1.14
6.55

$13.12
4.24
2.20
1.17
6.67

$13.66
4.55
2.24
1.20
6.86

4.1%
7.3
1.8
2.6
2.8

1.6%
2.2
26.0
262.8
-3 .3

3

EIGHTH DISTRICT BANKING DATA
REGION II

Selected Assets1
(billions of dollars)
Total Loans
Total Investments
Selected Liabilities1
(billions of dollars)
Total Deposits
Transaction Accounts
Savings Deposits
MMDAs
Time Deposits

(Arkansas, northern Mississippi, western Tennessee)
______Percent Change
Year-to-Date
Same Period
Nov. 1983
J an .1984*
1984
Dec. 1983
1983
$ 7.59
3.86

$ 7.66
3.90

$ 7.92
3.76

3.4%
-3.6

1.5%
2.5

$11.75
4.01
2.65
1.87
5.08

$11.90
4.15
2.63
1.87
5.12

$12.24
4.42
2.63
1.87
5.19

2.9%
6.5

4.1%
5.2
57.0
313.5
-7.3

0.0
0.0

1.4

REGION III
(western Kentucky and southern Indiana)
Selected Assets1
(billions of dollars)
Total Loans
Total Investments

$ 6.31
2.87

$ 6.37
2.91

$ 7.12
2.88

11.7%
-1.2

0.9%
3.1

Selected Liabilities1
(billions of dollars)
Total Deposits
Transaction Accounts
Savings Deposits
MMDAs
Time Deposits

$ 8.79
2.79
1.66
1.04
4.34

$ 9.13
2.91
1.68
1.07
4.53

$ 9.31
3.09
1.68
1.07
4.55

2.0%
6.2

4.6%
2.9
42.0
282.7
-1.0

NOTE: Data are not seasonally adjusted.

* Three-week estimates
' A sample of weekly reporting member banks
2 Large weekly reporting member banks
3 Most common interest rate paid by a sample of banks as of the last week of each month




0.0
0.0

0.3


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102