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e ra l R

•An Econom ic Perspective on the 8th District

District Mining Loses Ground
The Region’s Identity Crisis
Commercial Vacancies—Sign of the Times?



—

THE EIGHTH FEDERAL RESERVE DISTRICT

CONTENTS______________________________________________________________________________

Agriculture
The Changing Role of Mining in the Eighth District....................... .................................................................1
Business
In Search of a Regional Economic Identity........................................................................................................ 5
Banking and Finance
Commercial Real Estate Lending—A Growing Banking R isk ........................................................................ 11
Statistics ............................................................................................................................................................ 14
Pieces of Eight—An Economic Perspective on the 8th District is a quarterly summary of agricultural, banking and
business conditions in the Eighth Federal Reserve District. Single subscriptions are available free of charge by writing:
Research and Public Information Department, Federal Reserve Bank of St. Louis, Post Office Box 442, St. Louis,
MO 63166. The views expressed are not necessarily official positions of the Federal Reserve System.




1

The Changing Role of
Mining in The Eighth
District

Figure 1

U.S. Mining Industry GDP in 1986
1982 Dollars
Metal

By Jeffrey D. Karrenbrock
David Kelly provided research assistance.

T

he Eighth Federal Reserve District is en­
dowed with a variety of mineral deposits. The ex­
traction of these minerals, which are key inputs for
several industries, provides employment opportuni­
ties throughout the District. While the mining in­
dustry is still an important component of the
Eighth District’s economy, its relative economic
contribution has fallen in recent years. Following a
brief discussion of the U.S. mining industry, fig­
ures on the value of economic activity and employ­
ment statistics are used to describe the economic
importance of mining in the Eighth Federal
Reserve District.
80.1%

U.S. Mining Industry
As shown in figure 1, the U.S. mining in­
dustry is dominated by the oil and gas extraction
sector, with coal, nonmetallic1 mining and metal
mining playing smaller roles in determining Gross
Domestic Product (GDP), which is the total value
of the goods and services produced in the United
States during a given year. The mining industry’s
contribution to GDP is small relative to other in­
dustries. In 1986, for example, the mining industry
accounted for 3.2 percent of GDP, while the man­
ufacturing and service industries accounted for
more than 22 percent and 15 percent, respectively.
Throughout the 1960s and early 70s, mining
contributed slightly more than 5 percent of the na­
tion’s GDP, peaking at 5.6 percent in 1970. Since
1970, the contribution of the mining industry has
gradually declined to its current level. Much of
this decline can be traced to slowdowns in oil and
gas extraction. Since 1963, the contribution of oil
and gas extraction to GDP has fallen from 4.7 per­
cent to 2.6 percent in 1986, accounting for more
than 90 percent of the decrease in the mining in­
dustry’s contribution to GDP.
While the mining industry’s percent of GDP
has fallen during the past 20 years, its real con­
tribution has risen. Adjusting for inflation by using
the price level in 1982 as the base, the industry
contributed 15.7 percent more to GDP in 1986



Source: Derived from U.S. Department o f
Commerce, Bureau o f Economic Analysis data

than in 1963. Despite the industry’s real growth,
the relatively faster growth of other sectors of the
economy has made the mining industry a lessimportant contributor to the nation’s economy.
The mining industry’s importance as an em­
ployer has also declined. In 1963 the mining in­
dustry employed about 1.1 percent of all nonagricultural workers. By 1988, this figure had
fallen to 0.7 percent. Nonetheless, in 1988 the in­
dustry employed 100,000 more people than it did
in 1963.

District Mining Industry
An industry’s contribution to a state’s
economy can be described by its contribution to a
state’s Gross State Product (GSP). GSP can be
viewed as the gross market value of the goods and
services produced by a state’s labor, capital and
land net of purchases of intermediate products (i.e.
materials) and services. Similar to the U.S. mining
industry, the District’s mining industry, as shown
in figure 2, is dominated by the energy sectors,

2

Figure 2

District Mining Industry GSP
in 1986
1982 Dollars
Metal

Nonmetallic

1.4%

Source: Derived from U. S. Department o f
Commerce, Bureau o f Economic Analysis data

followed by nonmetallic and metal mining. In con­
trast to the nation, coal mining is relatively more
important than oil and gas extraction.

Similar to the U.S. mining industry, Eighth
District mining is a relatively small and declining
contributor to the value of GSP in the District
(GSP8) (that is, the sum of all seven District
states’ GSPs). In 1986, the mining industry con­
tributed 1.7 percent of GSP8. This compares to
contributions from the manufacturing and service
industries of 26.3 percent and 13.9 percent. The
contribution of the mining industry to the District
economy fell throughout the 1960s and 70s from
its 1963 high of 3.3 percent, experienced a brief
rebound in the early 1980s, and continued its
decline thereafter.
Also following the national trend, the
slowdown in oil and gas extraction has accounted
for a large portion of the District’s decline in min­
ing. Between 1963 and 1986, the oil and gas ex­
traction sector’s contribution to GSP8 fell 1.73
percentage points, while nonmetallic and metal
mining’s contributions also fell slightly. Mean­
while, the coal mining sector has actually in­
creased its contribution to GSP8 from 0.84 percent




to 0.99 percent, and in 1974 coal mining replaced
oil and gas extraction as the most important min­
ing sector in the District.
In contrast to the nation’s mining industry, the
real value of the District’s mining industry’s con­
tribution to GSP8 fell between 1963 and 1986. The
oil and gas extraction sector accounted for all of
the decline as its contribution fell about 60 percent
between 1963 and 1986, while coal mining’s con­
tribution was up about 109 percent. Nonmetallic
and metal mining’s contributions rose less than 1
percent during this period. District mining employ­
ment has also fallen from a post-1963 high of
128,600 in 1979 to 88,000 in 1988. These workers
accounted for about 0.6 percent of total nonagricultural employment in Eighth District states in
1986.
The importance of the mining industry varies
across District states. The 1986 percent of total
GSP contributed by the mining industry and its
sub-sectors in each District state is shown in table
1. Of the seven District states, the mining industry
is most important to Kentucky, where it accounts
for more than 7 percent of the state’s GSP. Ken­
tucky also leads the District in absolute value with
real output (1982 dollars) of more than $3.4 billion
in 1986.
In the remaining District states, Illinois has
the next-largest absolute output in mining;
however, its mining sector only accounts for 1
percent of its GSP. Arkansas’ mining sector, with
a real output about one-third the size of Illinois’,
accounts for more than 2 percent of its GSP.
Similarly, Mississippi’s real output in mining is
smaller than Illinois’, but accounts for more than
3.5 percent of Mississippi’s total GSP. The mining
industry in Indiana, Missouri and Tennessee is
small and relatively less important than in other
District states. The following sections briefly
discuss the importance of the different mining sec­
tors within each District state.

Arkansas Mining
The mining industry’s contribution to Arkan­
sas’ GSP has declined from almost 6 percent in
1963 to 2.3 percent in 1986. All of the mining
sectors experienced relative, as well as absolute,
declines in output. Even though oil and gas extrac­
tion accounted for the majority of the industry’s
decline, it remains the most important mining sec­
tor in Arkansas. Employment in the mining sector
has also fallen from a post-1963 peak of 5,900 in
1982 to 4,200 in 1988. As a percent of total nonagricultural employment, mining employment has
fallen from 1.2 percent in 1963 to 0.5 percent in
1988.

3

Table 1: The Mining Industry’s Contribution to District States’ GSP in 1986

Arkansas
Illinois
Indiana
Kentucky
Mississippi
Missouri
Tennessee

Mining
Industry
as a % of
GSP

Metal
Mining
as a % of
GSP

2.3%
1.0
0.81
7.27
3.79
0.4
0.58

.020/o
0
0
0
0
0.11
0.05

Coal
Mining
as a % of
GSP
0%
0.65
0.59
6.52
0
0.13
0.25

Oil & Gas
Mining
as a % of
GSP

Nonmetal
Mining
as a % of
GSP

Total
GSP
($mill)1

Mining
GSP
($mill)1

2.20/d

0.08%
0.1
0.14
0.21
0.08
0.14
0.19

$ 28,168
183,849
75,924
47,502
27,987
72,629
64,124

$ 647
1,843
615
3,454
1,061
292
371

0.26
0.08
0.55
3.71
0.03
0.1

’ Deflated 1982 Dollars.
SOURCE: U.S. Department of Commerce, Bureau of Economic Analysis.

Nonmetallic mining is Arkansas’ second most
important mining sector. Leading industrial min­
erals in terms of value include bromine, crushed
stone, cement, and construction sand and gravel.
With respect to the metal mining industry, the
third most important sector, actual mining is
limited mainly to bauxite. In 1986, the state rank­
ed first nationally in output of bauxite, bromine
and special silica stone for abrasive products
(oilstones and whetstones) and second in crushed
sandstone.2

Illinois Mining
In contrast to Arkansas where oil and gas ex­
traction is the most important mining sector, coal
is king in Illinois. In 1986, coal mining accounted
for about 65 percent of the mining industry’s total
contribution to state GSP. Similar to other District
states, the importance of mining in Illinois has
fallen in recent years. In 1963, the mining industry
provided 3.3 percent of the state’s GSP, while in
1986 it accounted for about 1 percent. In 1977, the
coal industry replaced the oil and gas extraction
sector as the most important mining sector in the
state. Coal mining has increased in real terms
since 1963, while oil and gas extraction and non­
metallic mining have decreased.
Employment in the Illinois mining industry
has fallen from a post-1963 peak of 31,300 in
1980 to 21,100 in 1988. Mining industry employ­
ment accounts for less than 1 percent of Illinois’
total non-agricultural employment.
In addition to fuel minerals, Illinois also pro­
duces a variety of nonmetallic minerals. Leading
commodities in order of value in 1986 were
crushed stone, portland cement, construction sand
and gravel, industrial sand and lime. Illinois was
the nation’s leading producer of fluorspar, industri­
al sand and tripoli in 1986.



Indiana Mining
The mining industry is small in Indiana rela­
tive to other District states. In 1986, the industry
accounted for less than 1 percent of both Indiana’s
GSP and non-agricultural employment. Since 1963,
mining has never accounted for more than 1.3 per­
cent of the state’s GSP.
While the level of economic activity in mining
has remained relatively stable, the components
have changed substantially. Similar to other Dis­
trict states, oil and gas extraction once dominated
the mining sector. Since 1963, however, the real
output of oil and gas extraction has fallen 78 per­
cent while real coal output has increased 91 per­
cent. Coal production now dominates the Indiana
mining industry and, in 1988, Indiana accounted
for about 3.3 percent of the nation’s coal produc­
tion. Production of nonmetallic minerals has re­
mained relatively constant between 1963 and 1986.
Although small in size, Indiana’s nonmetallic sec­
tor led the nation in shipments of masonry cement
and ranked second in sales of dimension stone in
1986.

Kentucky Mining
Coal mining dominates the mining industry in
Kentucky. In 1986, the mining industry accounted
for 7.3 percent of Kentucky’s GSP; coal mining
alone made up 6.5 percent of the state’s GSP.
Since 1963, coal mining’s contribution to Ken­
tucky’s GSP has increased by about 2 percentage
points, while oil and gas extraction’s contribution
has fallen about 2 percentage points. Kentucky is
the nation’s second-largest producer of coal, ac­
counting for about 16.7 percent of total U.S. coal
production in 1988. The state’s large coal industry
drives the demand for its non-fuel mineral produc­
tion. Construction materials for highways and lime

B
and limestone used as rock dust and in acid mine
drainage neutralization are essential in the trans­
portation and production of coal. Limestone is the
state’s leading non-fuel commodity.
Kentucky’s mining industry employment has
fallen to 36,200 in 1988 from a post-1963 high of
54,500 in 1979. As a percent of total non-agricultural employment, mining employment has fallen
from 4.3 percent in 1963 to 2.7 percent in 1988.

Mississippi Mining
Mississippi’s mining industry is composed of
oil and gas extraction and nonmetallic mineral pro­
duction, with the oil and gas sector accounting for
more than 95 percent of the state’s mining GSP.
Mississippi’s mining sector’s percentage of GSP
has fallen more than any other District state. In
1963, the mining industry accounted for 14 percent
of the state’s GSP. By 1986, this figure had fallen
to 3.8 percent. Both a decline in the oil and gas
sector and an increase in other sectors of the
economy helped to diminish this sector’s role in
Mississippi’s economy. Employment in the mining
industry was up slightly from 1963 levels in 1988,
but down from a post-1963 high of 12,800 in 1981
to 6,300 in 1988. Employment in the mining in­
dustry accounts for about 0.7 percent of nonagricultural employment.
Mississippi is the District’s largest producer
of natural gas, accounting for about 1.1 percent of
total U.S. production in 1987. In Mississippi’s
other important mineral sector, nonmetallic min­
ing, construction activities both within Mississippi
and in adjacent regions determine the output of the
state’s minerals operations. Its leading nonmetallic

9,600 in 1969. Just as in 1963, the mining indus­
try continues to account for less than 1 percent of
the state’s non-agricultural employment.

Tennessee Mining
Unlike most other District states, Tennessee’s
mining industry is not clearly dominated by one
sector. Instead, coal production and nonmetallic
mining share an important role in the industry’s
output, with coal being a bit larger. In 1986, the
industry accounted for 0.6 percent of the state’s
GSP, compared to 0.8 percent in 1963. In terms
of real output, Tenneessee’s mining sector has ac­
tually increased its GSP by about 66.4 percent
since 1963. The industry, however, has fallen off
considerably since the late 1970s, with coal output
declining the most. Employment in the mining in­
dustry fell from a 1978 peak of 10,800 to 6,400 in
1988, accounting for 0.3 percent of total nonagricultural employment in Tennessee.
While Tennessee is a relatively small producer
of energy minerals, it was the nation’s largest pro­
ducer of zinc and the fourth-largest producer of
phosphate rock in 1986. Most of Tennessee’s non­
metallic mining industry is driven by the state’s
construction industry. Construction materials that
were the most important to Tennessee in 1986 in­
cluded crushed stone, sand and gravel, and clays.

Summary

Missouri’s mining industry is the smallest of all
District states in both real terms and as a percent of
total GSP. The mining industry’s contribution to
GSP was about the same in 1986 as it was in 1963,
slightly less than 0.5 percent. In 1986, the most im­
portant mining sector was nonmetallic mineral pro­
duction followed by coal production, metal produc­
tion, and oil and gas extraction. Until 1983, metal
mining was the most important mining sector in the
state. Despite its small size, Missouri’s mining in­
dustry led the nation in the production of lead and
was second in lime production in 1986.
Employment in Missouri’s mining sector stood
at 5,400 in 1988, down from a post-1963 high of

Similar to the United States, a declining
energy sector and growth in other industries has
diminished the relative economic importance of the
mining industry in the District. While fuel
minerals still account for most of the District’s
mining industry, oil and gas extraction has been
replaced by coal production as the most important
mining sector in the District. The importance of
the coal sector is reflected by the fact that District
states produced more than 27 percent of the na­
tion’s coal in 1988. Although not as important in
dollar terms as fuel minerals, District states are
also leading suppliers of other key non-fuel
minerals such as zinc and lead.
The mining industry’s future contribution to the
District’s economy will likely continue to be small,
and will be determined largely by the performance
of the energy sectors. Two factors that will help
determine energy mining’s importance in the District
economy are the future movements of oil and natural
gas prices and the impact of the proposed Clean Air
Act on the coal industry. Current conditions suggest
that the District’s metal mining sectors will continue
to play a minimal role, while nonmetallic mineral
production will continue to be tied to building and
road construction.

1Nonmetallic minerals do not include fuel minerals.
2Some of the information provided about District states’

mineral industries was taken from the U.S. Department
of Interiors 1986 Minerals Yearbook.

commodities include construction sand and gravel,

cement, clays and stone. With respect to clay pro­
duction, Mississippi ranked second nationally in
1986 in output of ball clay and bentonite.

Missouri Mining




5

In Search of a
Regional Economic
Identity
by Thomas B. Mandelbaum
Thomas A. Pollmann provided research assistance.

c

^
areas of the United States have uni­
que regional identities. New England, for example,
is known for its high-tech manufacturing and
tourism; the Great Lake States, for their produc­
tion of cars and capital goods; and the “ oil-patch”
states, for their sizable energy sector. While such
characterizations ignore the diverse realities of
regional economies, they are useful in focusing on
industries that are of particular importance and on
developments that affect those industries.
The Eighth Federal Reserve District lacks a
well-known regional identity. Through comparison
of the relative size of various sectors of the Dist­
rict’s economy with those of the national economy,
this article attempts to identify the region’s eco­
nomic character and describe the broad sectoral
shifts that helped shape its present form.

An Overview, 1963-86
The figure shows the broad changes between
1963 and 1986 in the industrial composition of the
United States, the Eighth District and in four
states. In this article, these four states — Arkan­
sas, Kentucky, Missouri and Tennessee — are used
to represent the District because they dominate
economic activity. For each area, the figure shows
the changing percentages of total economic output,
as measured by Gross State Product, accounted for
by three broad sectors: manufacturing, other goods
production (agriculture, forestry, fisheries, mining
and construction) and services production. Services
production is a broad category including govern­
ment, finance/insurance/real estate, wholesale and
retail trades, transportation/utilities, health, busi­
ness and miscellaneous services.
Throughout the period, the shares of total out­
put contributed by service-producing sectors grad­
ually increased in the United States and in Eighth
District states, a continuation of a trend beginning
in the late 19th century. Meanwhile, the shares of
output accounted for by goods other than manufac­
tured goods diminished, while the manufacturing
share remained either roughly constant (as in the



United States and Kentucky) or expanded (as in
Arkansas, Missouri, Tennessee and the District).
The absence of any decline in manufacturing’s
share of national output is inconsistent with the
widespread belief that the United States suffers
from a serious erosion of its industrial base, some­
times called the “ deindustrialization” of America.
Much of this concern about the manufacturing sec­
tor stems from declining employment trends.
Manufacturing employment declined sharply be­
tween 1979 and the early 1980s in both the nation
and the District and, despite recent growth, has yet
to equal 1979 levels. The share of U.S. wage and
salary employment accounted for by manufacturing
also has declined, dropping from approximately 30
percent to 24 percent between 1963 and 1979, and
to 19 percent in 1986.
Rather than a sign of weakness, however,
these trends reflect manufacturing’s more rapid
productivity growth, which allows it to produce a
steady share of output with a decreasing share of
the workforce. U.S. manufacturing productivity,
measured by real output per hour, grew at a 2.6
percent annual rate between 1963 and 1986, while
productivity in the nonfarm business sector rose at
just a 1.4 percent rate. Previous research suggests
that Eighth District manufacturing productivity
growth has matched that of the nation since the
early 1970s.1
The rapid productivity growth in manufactur­
ing, as well as agriculture, has been a major
source of U.S. consumers’ rising affluence in the
post-war period. It has allowed the price of goods
to fall relative to those of services, indirectly in­
creasing consumers’ real incomes.2 As real in­
comes have risen, consumers have tended to pur­
chase a disproportionately large part of their addi­
tional income on services, rather than agricultural
goods or manufactured products. Thus, the rapid
productivity growth in manufacturing and agri­
culture has indirectly fueled the growth of
services.

Regional Divergence
As the figure shows, the broad structure of
the District economy was similar to the nation’s in
1963. In fact, the largest difference between the
1963 output shares of services, manufactured
goods and other goods was one-half of a percen­
tage point. The regional and national structures
have subsequently diverged, however, with a com­
paratively large District manufacturing sector, and
a correspondingly smaller service-producing sector.
What accounts for this divergence?
The slower growth in the District services
share since 1963 is not because of its slower out­
put growth. As table 1 shows, service-production

6

Figure 1

The Changing Composition of Output 1963-86
PERCENT OF
TO TA L

100

PERCENT OF
U.S.

DISTRICT

ARKANSAS

TOT1 qo

80

60

40

20

1964

70

76

82 86

64

PERCENT OF
TOTAL
KENTUCKY

76

82 86

64

70

76

821986

PERCENT OF
TENNESSEE TO TA L

MISSOURI

100




70

1100

80

60

40

20

1964

70

76

82 86

64

l

l M anufacturing

t

1 Other Goods Production
Services Production

70

76

82

86

64

70

76

82 1986

D
Table 1
Output Growth, Compounded Annual Rates, 1963-86

United States
Eighth District
Arkansas
Kentucky
Missouri
Tennessee

Total

Manufacturing

Other Goods
Production1

Services
Production

3.0%
3.1
3.7
2.7
2.6
4.0

3.2%
4.0
6.1
2.7
3.3
5.2

0.5%
0.5
0.7
1.2
- 0 .6
0.7

3.5%
3.4
4.0
3.2
2.9
4.0

SOURCE: Figures were computed from U.S. Department of Commerce data,
includes agriculture, forestry, fisheries, mining and construction.

output increased at a rate only 0.1 percentage point
slower in the District than in the nation between
1963 and 1986. Thus, the District is enjoying the
rapid service-sector growth experienced in the rest
of the nation. Since the other goods sector and
total output also expanded at similar rates in the
District and the nation, it is the faster-than-national
growth of District manufacturing that is responsi­
ble for the divergence.
As the figure shows, manufacturing increased
its share of output in Arkansas, Missouri and Ten­
nessee since 1963, resulting in a slower shift to­
ward service production than at the national level.
In Arkansas and Tennessee, service-production
growth exceeded the national average, but manu­
facturing grew even faster (see table 1). Kentucky
differs from the nation and the other District states
in that it experienced only a slight narrowing of its
relatively large other goods sector.
To obtain a better understanding of these dif­
ferences, we need to look beyond the three cate­
gories considered so far. The following section ex­
amines the region’s economy at a more disag­
gregated level.

Regional Concentrations
The structural shifts that have taken place in
the District since 1963 have created a region with
a heavier concentration in manufacturing than in
the nation and a correspondingly small serviceproducing sector. Table 2 provides a more detailed
comparison of the industrial composition of the
District and four states in 1986 with the national
economy. The first column lists the percentage
share that each industry contributed to total U.S.
output. To facilitate comparisons with the national
structure, subsequent columns list concentration in­
dexes (CIs) that indicate the relative size of an in­
dustry in the District or state economy compared
with its relative size in the national economy.



A Cl, sometimes called a location quotient, is
computed by calculating the ratio of the percentage
share of total output contributed by a specific sec­
tor in the District or state divided by the percen­
tage share that the sector represents of the nation’s
total output. This ratio is then multiplied by 100.
Thus, if a sector accounts for the same percentage
of District output as it does of U.S. output, the Cl
equals 100. Smaller figures indicate that the in­
dustry is relatively smaller in the regional than the
national economy while CIs larger than 100 in­
dicate a higher regional than national concentra­
tion. Very large CIs (130 or more) are indicated
with bold type while small CIs (70 or less) are
italicized.
The high CIs should be interpreted carefully.
While a high Cl indicates a high concentration
relative to the national average, if the national sec­
tor is small, an industry with with a large Cl may
still only contribute a small portion of the region’s
output. For example, the tobacco industry provided
only 1.625 percent of Kentucky’s output, but be­
cause the national average is 0.19 percent, Ken­
tucky’s tobacco Cl was 855 ([1.625 -5- 0.19]xl00).
To focus on the most important industries, table 2
excludes subsectors that failed to contribute at least
1 percent of the 1986 output of the nation, the
District or one of the four states.

Goods Production
Among the 10 major divisions of the District
economy, the agriculture, forestry and fisheries
sector had the highest relative concentration, evi­
denced by its 139 Cl, while manufacturing was
second with 119. No other division had a concen­
tration substantially above the national average.
Although the District agricultural sector is larger
than at the national level, the mining and construc­
tion sectors are relatively smaller. Thus, the other

8

Table 2
U.S. Industrial Composition and Concentration Indexes for District and States, 1986

Industry

U.S.

District

AR

KY

MO

TN

(percent of total)

Cl

Cl

Cl

Cl

Cl

139
149

270
301

161
173
227
1532

121
129

86
89

13
30
1

18
58
4

89
112
111

330

103
117
104
80

107

132

131

79
125
109
94

72
94
57
113

92
128
115
111
89

Goods Production

Agriculture, forestry, fisheries
Farms
Mining
Coal mining
Oil and gas extraction
Construction
Manufacturing
Durable goods
Lumber and wood products
Primary metals
Fabricated metals
Nonelectrical machinery
Electrical equipment
Transportation equipment
Motor vehicles
Other transportation equipment
Nondurable goods
Food and kindred products
Tobacco products
Apparel and textile products
Paper and allied products
Printing and publishing
Chemicals and allied products
Petroleum and coal products
Rubber and plastic products

2.7%
2.3
3.2
0.4
2.6
4.6
22.1
14.1
0.6
1.0
1.5
4.1
2.3
2.5
1.2
1.3
8.0
1.7
0.2
0.5
0.8
1.1
1.6
0.7
0.7

70

72

370

0

18

86
103
120
106

95
119
110
113
95
112
96
109

144
181
109

82

137

45
52
37
144
207

21

181

14

134
164
218
163
143

285

102
126

94
52

59
167

146
217

172

101
123

110
114

92
103

178
139

225
158

209

21

39

90
123
76
106
85
129

74
96

0
104

139
177
855
157
87
109
95
82

51

258
272
246
114

157

150
125
93
94

136
56

150
143

1

86

90
97
109

275
173

149

156

92

43

21

89

230

119

84
124

Services Production

Transportation and utilities
Transportation
Railroads
Trucking and warehousing
Air transportation
Communication
Utilities and sanitary services
Wholesale trade
Retail trade
Finance, insurance and real estate
Banking
Insurance carriers
Real estate
Other services
Business services
Health services
Legal services
Miscellaneous services
Government
Federal civilian
Federal military
State and local

8.9
3.5
0.5
1.5
0.7
2.6
2.8
7.7
9.8
15.0
1.7
1.0
10.7
15.3
3.5
4.5
1.0
1.5
10.7
2.3
1.3
7.0

120
97
78
91
108
90
118
82
86
87
73
107

51
82
72

120

165

150

61

45

87

84

93

70
97
90

138
71
88
71

43

95

100

69
64

54
46

63
51

94
117
80
89

87

98
99

91
96

136
143
165

120
93
101
108
95
123
97
87
98
94
110
85
78
87
108

49

58

140
176
140
173

90

28
103
115
86
94
85
86
92
82
113

62
65
103

NOTE: Figures were computed from Department of Commerce data. Concentration indexes of 130 or greater
are in bold type while those of 70 or less are in italics.



9

goods sectors accounted for similar shares of Dis­
trict and U.S. output in 1986.
The high District concentration in agriculture,
forestry and fisheries was due to high farm shares
in Arkansas, Kentucky and Missouri. Missouri’s
comparatively large farm output is derived from
soybean and corn production, mainly in the fertile
northern plains, as well as cattle and hog produc­
tion in central and southwestern areas of the state.
The Kentucky farm sector is dominated by two
rather specialized products, tobacco and horses, in­
cluding racing thoroughbreds.
The poultry industry is largely responsible for
Arkansas’ comparatively sizable farm sector (as
well as the state’s large food processing sector).
Poultry production developed in rural Arkansas
where the climates were mild and the land was
less suited to more profitable agriculture pursuits,
such as crop production. Large-scale poultry pro­
cessors became established as they assumed the
role of feed suppliers and provided a guaranteed
market for growers. Besides poultry, the produc­
tion of rice and soybeans in eastern Arkansas is an
important component of the state’s farm sector.
Manufacturing produced 26.5 percent of the
1986 District output, resulting in a Cl of 119, up
from 102 in 1963. The sector is characterized by a
specialization in nondurables. In 1986, the Dis­
trict’s nondurables Cl was 134, about the same
as the 1963 figure. The high concentration of sev­
eral regional nondurables sectors (food processing,
tobacco and paper production) reflects the impor­
tance of regional agriculture and natural resources.
Food processing, with its 164 Cl, is especially im­
portant in determining the nondurables orientation
of District manufacturing. The high CIs in Arkan­
sas, Kentucky and Missouri reflect the importance
of their farm sectors. Beer and whiskey production
in Missouri and Kentucky, respectively, are also
significant factors.

Other nondurables industries in the District
that have high CIs include rubber/plastics and ap­
parel producers. Much of the rubber/plastics out­
put is in the form of tires shipped to vehicle
assembly plants in the region. Apparel makers,
which require large numbers of relatively lowskilled workers, are attracted by the low wages
found in many parts the District.
Growth in durables manufacturing since 1963
was largely responsible for District manufactur­
ing’s increasing share of output and for the jump
in manufacturing’s Cl since 1963. The District
durables Cl rose from just 81 in 1963 to 110 in
1986. Except for the lumber and wood products
sector, for which there was no change, each Dis­
trict durables subsector experienced a substantial
increase in its Cl since 1963. The transportation
equipment sector has become one of the region’s
leading industries, largely due to gains in



Missouri. In addition to extensive motor vehicle
production, also found in Kentucky and Tennessee,
Missouri is a major producer of military aircraft,
mainly by the McDonnell-Douglas Corporation in
St. Louis.
One implication of the District’s comparative­
ly high concentration in durables production, par­
ticularly consumer durables like autos and house­
hold appliances, is that the District economy may
experience a disproportionately severe downturn if
the national economy has a recession. It is also
likely that lumber and wood products, used in
home construction, would be hard hit. Several
other leading District manufacturing sectors, how­
ever, including food processing and military air­
craft, are not particularly sensitive to national
business cycle fluctuations.
Construction and mining were underrepre­
sented in the District economy in 1986 compared
with the nation. While construction’s relative size
was just slightly below the national average, Dis­
trict mining’s Cl indicates the District share is
only 70 percent of the national average of 3.2 per­
cent. Coal mining was comparatively important,
however. The heavy District concentration
stemmed from coal mining’s almost 7 percent con­
tribution to Kentucky’s output.3

Service Production
The relatively small share of serviceproduction in the District economy shown in the
figure is reflected in the generally low CIs of
service-producers in table 2. Among the six major
service-producing sectors, only transportation/
utilities and retail trade have CIs greater than 100.
The strength of the transportation/utilities sector
stems from its transportation subsector, which is
relatively concentrated in each of the states. The
size of rail and trucking reflects the region’s cen­
tral location and extensive interstate highway and
rail systems. Also, air transportation is compara­
tively large in Missouri and Tennessee, largely
because Trans World Airlines and Federal Express
have major hubs in St. Louis and Memphis,
respectively.
The low CIs for the finance, insurance and
real estate and the other services sectors contri­
buted heavily to the low concentration of serviceproduction in the District. Real estate, which ac­
counts for most of the finance, insurance and real
estate sector’s output, was underrepresented in
each of the four states. The District’s other ser­
vices sector is characterized by a relatively large
health services portion, but weaker concentrations
in business, legal and miscellaneous services.

10

The Eighth District economy has experienced
a shift away from agriculture, mining and con­
struction since the early 1960s as both serviceproducing industries and manufacturing account for
growing shares of output. Although the general
structures of the regional and national economies
were quite similar in 1963, by 1986 the District’s
economy was characterized by a relatively small
service-producing sector and relatively large
manufacturing and farming sectors. This reflects
the more rapid regional expansion of manufactur­

ing relative to services and the fact that agricul­
ture, despite declining in a relative sense, has re­
mained more important in the District than in the
nation.
The District has particularly heavy concentra­
tions in the production of motor vehicles, military
aircraft and food products. No industry or re­
source, however, dominates the District’s
economy, so it is difficult to define a unique
regional identity for the District. One benefit of
this region’s economic diversity, however, is that
its economic fortunes are not overly dependent on
a single industry, which could lead to a severe
regional contraction if the industry faltered.

1See Thomas B. Mandelbaum, “ Is Eighth District
Manufacturing Endangered?’’ Federal Reserve Bank of
St. Louis Review (November 1987), p.12.

Economy—Degeneration or Evolution?’’ Federal
Reserve Bank of St. Louis Review (June/July, 1987),
p. 12.

Conclusion

2The U.S. price of goods fell from 136.1 percent of the
price of services in 1964 to to 88.1 percent in 1986. See
Mack Ott, “ The Growing Share of Services in the U.S.



3See the first article in this issue of Pieces of Eight for a
comprehensive look at District mining.

11

that many developers will not meet their debt ser­
vice requirements.
Weak market conditions have caused some of
the region’s banks to reduce their emphasis on
commercial real estate lending. While Texas-type
disasters are unlikely for Eighth District banks,
damage to banks’ earnings are possible. In an ef­
fort to assess risk exposure, this article looks at re­
cent developments in commercial real estate len­
ding for banks in the Eighth Federal Reserve
District.1

Commercial Real
Estate Lending—A
Growing Banking
Risk
by Lynn M. Barry
Thomas A. Pollmann provided research assistance.

D

Recent Developments

eal estate loan problems in Texas,
Oklahoma and other energy states have been wellpublicized. Except in the economically depressed
Southwest, however, commercial real estate lendding has been a profitable activity for banks in re­
cent years, with margins often exceeding those on
traditional business loans. In addition, loan quality
problems have not been widespread. Nonetheless,
lenders and regulators in some regions of the
United States have become concerned by develop­
ments suggesting that loan problems may arise.
High vacancy rates for office buildings, shop­
ping centers, condominiums, apartments and hotels
suggest an oversupply of virtually every type of
commercial real estate. This excess supply has
raised fears that new projects will not generate suf­
ficient income needed to make loan payments and

Similar to bank lending trends nationally, the
Eighth District banking industry has markedly in­
creased its commercial real estate lending in recent
years, partly to offset an exit by corporations from
business loans to commercial paper and other
banking products. For the purposes of this article,
commercial real estate loans include: domestically
booked construction and land development loans,
loans secured by multi-family (five or more)
residential properties and loans secured by nonfarm
nonresidential properties.
As shown in table 1, commercial real estate
loans accounted for 10.04 percent of total District
bank assets at the end of 1988, up from 8.59 per­
cent at the end of 1986. Eighth District banks
boosted their commercial real estate loan holdings
from $9.9 billion in 1986 to $12.4 billion in 1988,
an increase of more than 25 percent.

Table 1
Commercial Real Estate Loans to Total Assets at Eighth District Commercial Banks by Location and Asset
Size (Year-ends 1986 - 1988)

Eighth District
Arkansas
Illinois
Indiana
Kentucky
Mississippi
Missouri
Tennessee

1988

1987

1986

10.04%
10.09
8.16
7.42
7.29
7.34
13.62
10.46

9.57%
10.05
7.57
6.71
7.41
7.39
12.27
10.44

8.59%
9.57
6.51
6.49
6.75
7.75
10.70
8.59

5.42
7.13
8.62
11.78
12.22
10.47

5.08
6.71
8.36
11.55
11.30
10.24

4.79
6.15
8.04
10.14
9.57
9.22

District Banks

< $25 million
$25 million - $50 million
$50 million - $100 million
$100 million - $300 million
$300 million - $1 billion
$1 billion - $10 billion

NOTE: Data are for that portion of the state located within the Eighth District.
SOURCE: FDIC Consolidated Reports of Condition and Income, 1986-1988.




12

Among Eighth District states, Missouri banks
reported the highest dollar volume of commercial
real estate loans. At year-end 1988, these banks
held slightly more than $4.8 billion in commercial
real estate loans. In comparison to 1986 figures,
total commercial real estate loans jumped $1.2
billion, an increase of 33.8 percent. For commer­
cial banks in the District portion of Tennessee,
commercial real estate loans totaled $1.69 billion
in 1988, up 35.2 percent from 1986. Meanwhile,
for commercial banks in Arkansas, commercial
real estate loans totaled $1.87 billion in 1988, an
increase of 8.7 percent from 1986. Commercial
banks in the District portion of Kentucky had com­
mercial real estate holdings of $1.74 billion in
1988, an increase of 20.8 percent from 1986.
Table 1 also shows that at the larger District
banks, commercial real estate lending tends to ac­
count for a larger percentage of their asset base.
For those banks with assets between $300 million
and $1 billion, commercial real estate loans, on
average, accounted for slightly over 12 percent of
total assets in 1988. By the end of 1988, commer­
cial real estate loans accounted for more than 20
percent of total assets at five of the top 20 United
States banks in the commercial real estate lending
field. These top 20 banks increased their holdings
24 percent from 1986 to 1987 and 12 percent from
1987 to 1988.2
As shown in table 2, the largest District banks
(those with assets exceeding $1 billion) increased
their holdings of commercial real estate loans from
$655 million in 1986 to slightly more than $1 billion
in 1988, an increase of more than 58 percent. For
these banks, the nonfarm nonresidential component
of commercial real estate loans rose 85.8 percent,
from $310.6 million in 1986 to $577 million in
1988. Construction loans also rose sharply during
the past few years with volume up 44.8 percent
from 1986 and 28.9 percent from 1987. Multi­
family was the only loan category showing a
decrease in the three years presented in the table,
dropping 9.3 percent from 1986 and 18.8 percent
from 1987.
Table 2
Commercial Real Estate Loans Outstanding at
District Commercial Banks with Assets Between
$1 Billion and $10 Billion (Year-ends 1986 - 1988)

1988
1987
1986

Construction

Multi­
family

Nonfarm
nonresidential

Total

$391.6
303.8
270.5

$67.0
82.5
73.9

$577.0
449.2
310.6

$1,035.6
835.5
655.0

NOTE: Dollar amounts are in millions.
SOURCE: FDIC Consolidated Reports of Condition and
Income, 1986-1988.



Table 3
Nonperforming Real Estate Loans as a Percent
of Total Real Estate Loans Outstanding By Location
and Asset Size1 (Year-ends 1986 - 1988)

United States
Eighth District
Arkansas
Illinois
Indiana
Kentucky
Mississippi
Missouri
Tennessee

1988

1987

1986

2.51%
1.58
2.39
2.05
1.23
1.24
1.19
1.37
1.55

2.89%
1.83
3.26
2.45
1.25
1.57
1.16
1.39
1.48

2.81%
2.17
3.70
2.87
1.62
2.24
1.44
1.43
1.90

1.85
1.74
1.69
1.54
1.37
1.52

2.19
2.07
2.05
1.58
1.82
1.67

2.65
2.61
2.31
1.74
3.21
1.55

District Banks
< $25 million
$25 million - $50 million
$50 million - $100 million
$100 million - $300 million
$300 million - $1 billion
$1 billion - $10 billion

1ln addition to commercial real estate loans, this category in­
cludes loans secured by farmland and loans secured by
one-to-four family residential properties.
NOTE: Data are for that portion of the state located within the
Eighth District.
SOURCE: FDIC Consolidated Reports of Condition and In­
come, 1986-1988.

Loan Quality
Basically, bank real estate loans can be divid­
ed into the following categories: 1) one-to-four
family (residential) permanent mortgages, 2) farm­
land, 3) construction and land development, 4)
nonfarm nonresidential mortgages, and 5) multi­
family mortgages. As previously defined, the com­
mercial component of real estate lending includes
the last three categories.
In terms of default risk, residential mortgages
generally carry the lowest level of risk while con­
struction carries the bulk of the risk associated
with a bank’s real estate loan portfolio. While part
of banks’ construction portfolios are loans to
finance single-family homes, risk in this area is
usually less than on commercial projects.
Commercial mortgage loans also carry risk.
Once construction is complete, and if no long-term
(permanent) take-out loan is available, most banks
reclassify the loan as a commercial mortgage and
grant a semi-permanent loan. These loans have an
average maturity of three years and buy time until
one of the following occurs: (a) full lease of the
project or (b) a permanent loan is established. It is

13

Table 4
Real Estate Loan Losses as a Percent of Total
Real Estate Loans Outstanding by Location and
Asset Size1 (Year-ends 1986 - 1988)

United States
Eighth District
Arkansas
Illinois
Indiana
Kentucky
Mississippi
Missouri
Tennessee

1988

1987

1986

0.37%
0.28
0.52
0.29
0.13
0.23
0.24
0.24
0.23

0.42%
0.32
0.74
0.27
0.18
0.50
0.26
0.16
0.21

0.39%
0.39
0.69
0.66
0.24
0.53
0.34
0.17
0.26

0.29
0.21
0.23
0.22
0.26
0.40

0.38
0.31
0.30
0.31
0.38
0.33

0.66
0.57
0.47
0.38
0.44
0.15

District Banks
< $25 million
$25 million - $50 million
$50 million - $100 million
$100 million - $300 million
$300 million - $1 billion
$1 billion - $10 billion

1ln addition to commercial real estate loans, this category
includes loans secured by farmland and loans secured by
one-to-four family residential properties.
NOTE: Data are for that portion of the state located within
the Eighth District.
SOURCE: FDIC Consolidated Reports of Condition and
Income, 1986-1988.

typical that many commercial mortgage loans are
really commercial business loans with real estate
as collateral.
To measure loan quality, table 3 looks at the
level of nonperforming real estate loans from 1986
to 1988.3 Due to limitations in sorting the data by
type of real estate loan, the following loan quality
statistics are for those five loan categories dis­
cussed above.
At year-end 1988, nonperforming real estate
loans totaled 1.58 percent of all real estate-secured
loans for the District’s 1,285 banks. That was
down from 1.83 percent in 1987 and 2.17 percent1

1The Eighth Federal Reserve District consists of the
following: Arkansas, entire state; Illinois, southern 44
counties; Indiana, southern 24 counties; Kentucky,
western 64 counties; Mississippi, northern 39 counties;
Missouri, eastern and southern 71 counties and the City
of St. Louis; Tennessee, western 21 counties.



in 1986. In comparison to averages for banks
across the United States, Eighth District banks ex­
perienced lower nonperforming rates on real estate
loans. Across virtually every District state, the
ratio of nonperforming real estate loans has declin­
ed since 1986. This also holds true across the
range of asset size categories.
Table 4 looks at District real estate chargeoffs across states as well as charge offs for various
asset categories of District banks. Losses on real
estate loans fell from 0.39 percent of total real
estate loans in 1986 to 0.28 percent in 1988.
Across all asset size categories, except those with
assets between $1 billion and $10 billion, real
estate loan losses have declined from the high
levels reported in 1986. For the largest District
banks, however, real estate loan charge-offs rose
from 0.15 percent of total real estate loans in 1986
to 0.40 percent in 1988. The overall figure for
real estate charge-offs for the largest banks is an
aggregate of relatively high losses on commercial
real estate and relatively low losses on one-to-four
family residential properties.

Conclusion
In terms of potential harm to bank earnings
resulting from higher nonperforming loans and
loan losses, commercial real estate lending is
receiving increased attention by bankers and
regulators. High vacancy rates suggest an excess
supply of commercial real estate in the United
States today, raising fears that new projects will
not generate the income needed to make loan
payments. Eighth District banks are not immune
from this situation as commercial banks have in­
creased their exposure in this type of lending.
While District loan quality statistics do not yet
reveal this problem, at stake are some very large
potential increases in problem loans, especially if
there is an economic slowdown or escalating in­
terest rates.

2American Banker, May 22, 1989.
3Nonperforming loans include those loans greater than
89 days pastdue, nonaccrual and renegotiated loans,




14

Eighth D istrict Business
Level

Compounded Annual Rates of Change
1 /1 9 8 9 -

Payroll Employment (thousands)
United States
District
Arkansas
Little Rock
Kentucky
Louisville
Missouri
St. Louis
Tennessee
Memphis
Manufacturing
Employment (thousands)
United States
District
Arkansas
Kentucky
Missouri
Tennessee
District Nonmanufacturing
Employment (thousands)
Mining
Construction
FIRE2
Transportation3
Services
Trades
Government

11/1989

19881

19871

108,299.0
6,606.6
881.6
242.5
1,387.8
455.9
2,262.6
1,150.3
2,074.6
440.9

2.3%
- 1 .6
0.4
- 0 .3
- 2 .5
- 3 .3
- 1 .2
- 1 .7
- 2 .4
- 2 .6

3.0%
1.4
2.9
2.8
1.7
1.4
1.4
1.1
0.5
1.8

3.3%
2.5
2.8
3.2
3.2
3.1
1.8
1.5
2.7
2.7

2.7%
3.5
2.8
2.0
4.2
3.9
2.6
1.9
4.3
4.8

19,654.3
1,459.4
234.3
281.9
433.1
510.1

-0 .1 %
- 0 .8
- 1 .4
1.9
- 1 .0
- 1 .7

1.5%
1.8
3.5
3.4
1.3
0.5

2.0%
2.6
4.0
4.5
1.3
2.2

0.3%
1.7
3.7
3.4
0.1
1.4

50.7
276.3
337.3
385.6
1,440.8
1,581.1
1,076.9

0.0%
-1 5 .9
- 2 .3
- 2 .0
- 0 .4
- 2 .9
1.0

- 4.9%
- 3 .2
0.5
1.6
2.7
1.4
0.8

- 4.4%
- 1 .4
0.5
3.5
4.5
2.4
1.7

-4 .0 %
3.2
4.1
4.5
5.6
4.4
1.9

IV / 1 9 8 8 -

Real Personal Income4 (billions)
United States
District
Arkansas
Kentucky
Missouri
Tennessee

11/1988-

11/1989

11/1989

1 /1 9 8 9

1 /1 9 8 9

$3,525.2
195.4
26.6
41.2
69.1
58.5

4.1%
8.6
28.2
8.2
6.6
3.5

1 /1 9 8 8 1 /1 9 8 9

4.6%
4.8
9.5
3.3
4.1
4.8

19881

19871

3.2%
2.5
2.5
2.3
2.1
3.3

3.2%
3.1
1.7
2.9
2.3
4.8

1987

1986

6.2%
7.2
8.1
7.2
8.7
6.9
6.3
6.5
6.6
5.7

7.0%
7.8
8.8
6.9
9.3
7.1
6.1
7.0
8.0
6.8

Levels
11/1989

Unemployment Rate
United States
District
Arkansas
Little Rock
Kentucky
Louisville
Missouri
St. Louis
Tennessee
Memphis

5.3%
6.0
8.3
7.2
6.7
5.9
5.2
5.2
5.4
5.2

1 /1 9 8 9

5.2%
6.3
7.2
6.0
7.2
5.6
5.8
5.9
5.8
5.0

1988

5.5%
6.5
7.6
6.4
7.8
6.3
5.7
6.0
5.8
5.1

Note: All data are seasonally adjusted. On this page only, the sum of data from Arkansas, Kentucky, Missouri and Tennessee
is used to represent the District.
1Figures are simple rates of change comparing year-to-year data.
2Finance, Insurance and Real Estate
^Transportation, Communications and Public Utilities
4Annual rate. Data deflated by CPI-U, 1982-84 = 100.

15

U. S. Prices
Level
11/1989

Compounded Annual Rates of Change
1/198911/1989

11/198811/1989

19881

1987’

Consumer Price Index
( 1982 - 8 4 = 100 )

Nonfood
Food

123.5
124.8

6.4%
6.7

4.9%
6.5

4.0%
4.1

3.6%
4.1

147.7
155.7
139.7

- 2.7%
-8 .0
5.0

10.2%
4.7
17.1

8.8%
2.7
18.3

3.1%
5.6
-0 .8

165.0
177.0

5.0%
4.7

6.5%
5.4

6.9%
4.4

1.9%
1.9

Prices Received by Farmers
(1 9 7 7 = 100 )

All Products
Livestock
Crops
Prices Paid by Farmers
(1 9 7 7 = 100 )

Production items
Other items2

Note: Data not seasonally adjusted except for Consumer Price Index.
1Figures are simple rates of change comparing year-to-year data.
2Other items include farmers’ costs for commodities, services, interest, wages and taxes.

Eighth D istrict Banking
Changes in Financial Position for the year ending
March 31, 1989 (by Asset Size)
Less than
$100 million

SELECTED ASSETS
Securities
U.S. Treasury &

agency securities
Other securities
Loans & Leases
Real estate
Commercial1
Consumer
Agriculture
Loan loss reserve
Total Assets
SELECTED LIABILITIES
Deposits

Nontransaction accounts
MMDAs
$100,000 CDs
Demand deposits
Other transaction accounts2
Total Liabilities
Total Equity Capital

-2 .2 %
1.1
-1 4 .7
-2 .3
1.9
56.6
-2 .2
-2 .8
-3 .4
-4 .3
- 4.40/0

-3 .3
-22.1
7.6
-7 .0
-8 .1
-4 .5
-3 .0

$100 million $300 million

19.7%
27.6
-2 7 .0
19.3
23.2
8.5
27.3
37.4
24.2
18.4
18.8%
20.1
-2 .8
20.8
10.2
20.7
18.3
18.5

$300 million $1 billion

More than
$1 billion

10.2%
15.5
-3 5 .6
22.3
40.6
17.6
7.6
. 3.4
24.5
17.0
17.5%
20.2
11.8
21.6
6.4
19.4
17.1
16.3

Note: All figures are simple rates of change comparing year-to-year data. Data are not seasonally adjusted.
includes banker’s acceptances and nonfinancial commercial paper
includes NOW, ATS and telephone and preauthorized transfers




8.0%
10.4
-2 5 .9
4.0
16.8
0.0
-3 .6
- 9 .0
11.6
3.8
5.7%
8.7
8.6
-2 .2
-0 .4
0.6
4.9
8.0

16

Performance Ratios (by Asset Size)
___________ Eighth District___________

EARNINGS AND RETURNS
Annualized Return on Average
Assets
Less than $100 million
$100 million - $300 million
$300 million - $1 billion
$1 billion - $10 billion
More than $10 billion
Agricultural banks
Annualized Return on Average
Equity
Less than $100 million
$100 million - $300 million
$300 million - $1 billion
$1 billion - $10 billion
More than $10 billion
Agricultural banks
Net Interest Margin1
Less than $100 million
$100 million - $300 million
$300 million - $1 billion
$1 billion - $10 billion
More than $10 billion
Agricultural banks
ASSET QUALITY2
Nonperforming Loans3
Less than $100 million
$100 million - $300 million
$300 million - $1 billion
$1 billion - $10 billion
More than $10 billion
Agricultural banks
Loan Loss Reserves
Less than $100 million
$100 million - $300 million
$300 million - $1 billion
$1 billion - $10 billion
More than $10 billion
Agricultural banks
Net Loan Losses4
Less than $100 million
$100 million - $300 million
$300 million - $1 billion
$1 billion - $10 billion
More than $10 billion
Agricultural banks

____________United States
I/87

1/89

I/88

I/87

1/89

1/88

1.14%
1.09
1.14
.90

1.07%
1.04
1.08
.86

1.06%
1.13
.92
.89

.74%
.83
.66
.72
.54
1.00

.70%
.88
.79
.88
.55
.77

1.23

1.15

.99

.94%
1.05
.94
.95
.93
1.15

12.48%
13.25
14.59
13.52

11.91 %
12.69
13.69
13.35

12.02%
14.14
12.02
13.22
—
10.76

10.51%
13.19
13.14
14.58
17.85
12.02

8.51%
10.68
9.54
11.62
12.21
10.78

8.16%
11.56
11.42
13.88
10.31
8.50

4.01 %
3.95
4.09
3.78

4.24%
4.19
4.14
4.08
3.30
4.03

4.29%
4.22
4.27
4.04
3.28
3.97

—

—

12.80
4.01 %
4.04
4.17
3.82

—

—

11.98

3.92

3.84

3.81

4.27%
4.56
4.52
4.27
3.52
4.14

1.70%
1.73
1.52
1.92
—
1.95

2.09%
1.92
1.61
2.46
—
2.64

2.68%
2.14
2.36
2.46
—
3.77

2.87%
1.88
2.28
1.90
4.63
2.50

2.69%
2.23
2.46
2.39
5.31
3.29

3.25%
2.53
2.58
2.58
5.90
4.67

1.48%
1.40
1.38
1.65

1.50%
1.34
1.36
2.15

1.49%
1.32
1.50
1.47

1.52%
1.46
1.63
1.69
3.62
2.12

1.66%
1.55
1.71
1.91
4.36
2.16

1.65%
1.49
1.62
1.54
1.97
2.15

.12%
.12
.16
.19
.20
.09

.16%
.14
.15
.23
.26
.15

.21%
.16
.21
.15
.21
.27

—

—

1.85
.06%
.10
.07
.10

3.92%
3.91
3.98
3.62

—

—

—

1.84
.08%
.08
.08
.19

—

—

1.82
.14%
.13
.17
.15

—

—

—

.04

.08

.20

Note: Agricultural banks are defined as those with 25 percent or more of their total loan portfolio in agriculture loans.
interest income less interest expense as a percent of average earning assets
2Asset quality ratios are calculated as a percent of total loans.
3Nonpeiiorming loans include loans past due more than 89 days, nonaccrual, and restructured loans.
4Loan losses are adjusted for recoveries.




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