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PALLAS
Federal Reserve Bank of Dallas

June 1983

Texas S&Ls Increase Construction
Financing With New Deposits
The new in ve stm en t pow ers
authorized for federally-chartered sav­
ings and loan associations (S&Ls) in
the Garn-St Germain Depository In­
stitutions Act of 1982 had no impact on
the asset powers of most S&Ls in
Texas. The Garn-St Germain Act en­
abled federal thrifts to engage in com­
mercial lending and broadened their
scope for real estate lending. Invest­
ment powers of state-chartered S&Ls
in Texas exceed those given to federal
S&Ls in this legislation. In fact, these
Texas institutions were the model for
the new asset powers. But the money
market deposit accounts (MMDAs)
created in the Garn-St Germain Act
have been responsible for very large in­
creases in deposits at Texas S&Ls,
enabling them to help finance the
housing recovery here and to increase
their role in the construction financing
market.

Broad Asset Powers of StateChartered S&Ls in Texas
Of the 284 S&Ls in Texas, 231 are
state-chartered. These institutions
control 80 percent of the assets held by
Texas S&Ls, and they can participate
directly in all areas of real estate
development, including the taking of
equity positions in projects they
finance. Although state-chartered
S&Ls in Texas have had the authority
to make commercial, consumer, inven­

tory, agricultural, and oil and gas loans
since 1974, real estate remains their
primary area of investment. S&Ls in
Texas are becoming more involved in
construction financing —particularly
of income-producing properties—than
S&Ls in the rest of the United States. In
the first three months of the year, onehalf of the volume of loans closed by
S&Ls in Texas financed construction,

compared with one-quarter at the rest
of the nation’s S&Ls.
The MMDAs authorized in the GarnSt Germain Act have considerably
boosted the liquidity of all S&Ls. The
MMDAs became available on Decem­
ber 15, 1982. In the first quarter, Texas
S&Ls recorded $3 billion in net new
savings, compared with $400 million in
(Continued on back page)

A Good Year for District Bank Holding Companies
Large bank holding companies in
the Eleventh District were strong per­
formers again in 1982. The combined
net income of the District’s eleven
largest holding companies rose 15 per­
cent over 1981. As measured by return
on average assets, four Texas bank
holding companies ranked as the na­
tion’s most profitable large banking
organizations. Several factors con­
tributed to this strength. The spread
between the average yield on assets
over average cost of funds widened.
Together with a large growth in assets,
this worked to raise net interest in­
come. Rising noninterest income and
diminished tax liabilities resulted in an
increase in net income. In contrast,
performance in the first quarter of 1983
indicates that the current year may not
be as promising.
Total assets of the eleven largest

holding companies grew 15 percent in
1982, which was nearly double the
average rate of the 25 largest banking
organizations in the nation. This
growth was comprised of an $11 billion
increase in loans and an increase of $4
billion in investment securities. The in­
crease in assets was funded almost
entirely by time deposit growth. Total
deposits grew 15 percent in 1982,
mainly from an $11 billion increase in
time and savings deposits. Demand
deposits declined $1 billion.
The net income of the 11 largest
bank holding companies rose by $129
million. This increase was primarily
due to the banks’ investment in
municipal bonds and other tax-exempt
s e c u ritie s , w hich reduced tax
liabilities. Income before taxes and
security transactions increased by
(Continued on back page)

ELEVENTH DISTRICT CREDIT CONDITIONS
1982
(12 months)

1981
(12 months)

Change*

Change*

Change*

ALL MEMBER BANKS
T o ta l L o a n G r o w t h ...........
T o ta l D e p o s it G ro w th . . . .

1983
(3 months)
(Percent)

(Percent)

(M illions $)

11,208.8
9,979.3

23.4
16.6

11,485.9
10,550.0

19.4
15.1

11,088.4
9,753.4

17.4
13.3

25.8
45.4
20.7
-8 .4

4,881.2
3,363.3
1,353.1
158.6

18.9
23.1
31.0
9.1

4,657.1
2,514.5
1,909.7
173.9

16.8
15.9
41.2
10.0

LARG E W E E K LY REPO RTING B A N K S
T o ta l L o a n s .........................
5,305.7
4,543.5
B u s in e s s .........................
747.6
Real E s t a t e .....................
- 1 6 0 .3
C o n s u m e r .......................

(Percent)

(Millions $)

(Millions $)

For 1981 and 1982, dollar and percent changes were calculated comparing fourth quarter averages to the fourth quarter of the
previous year. For the first three months of 1983, dollar and percent changes were calculated comparing the first quarter average to
the previous year's first quarter average. Quarterly averages were calculated using weekly reporting bank data.

NEW LOAN COMMITMENTS
AT FSLIC-INSURED S&L’S: TEXAS

LOANS CLOSED FOR CONSTRUCTION
AND PURCHASE OF REAL ESTATE
AT FSLIC-INSURED S&L’S: TEXAS

SOURCE: Federal Home Loan Bank Board.

SOURCE: Federal Home Loan Bank Board.

DISTRICT BRIEFS
• Residential construction is strong. More than
90,000 permits were taken out in the first four
months of this year.
• Occupancy rates of retail shopping centers are
very high—around 95 percent in many places.
Construction in this sector is proceeding at a
strong pace.
• Department store sales in some cities in the
District are up significantly on a year-over-year
basis, but Houston and El Paso continue to
post declines.
• Economic activity along the Mexican border re­
mains depressed. Unemployment rates in many
border towns exceed 15 percent.
• Employment is rising in the constructionrelated manufacturing sector, including the
stone, clay, and glass Industry and lumber and
wood products.

UNEMPLOYMENT RATE
r-

HOUSING PERMITS: TEXAS

12 PERCENT ---------------------

I

1981

I

• Employment and production in oilfield equip­
ment manufacturing continue to decline. In
Texas, March employment in this industry was
45 percent below its level one year ago.
• Increased demand by businesses and con­
sumers has stimulated manufacturing produc­
tion of electronic and electrical equipment.
• District agriculture is faring better. The index of
prices received by farmers and ranchers de­
clined very slightly in May, after posting strong
increases since November.
• The outlook for drilling in this District is mildly
optimistic. The rig count appears to have
bottomed out. Bid values for drilling sites in
the Gulf of Mexico, at $3.5 billion, represent
the highest lease sale on record. That should
foreshadow a pick-up in offshore drilling
activity.

(SEASONALLY ADJUSTED)

1982

I

1983

1. Louisiana, New Mexico, Oklahoma, and Texas.
SOURCES: U. S. Department of Labor, Bureau of Labor Statistics.
Texas Employment Commission.

SOURCES: U. S. Department of Commerce, Bureau of the Census.

CONSUMER PRICE INDEX

NON RESIDENTIAL CONSTRUCTION
CONTRACTS: TEXAS

I—

r-

15 PERCENT’ ------------------------

-

I

1981

I

1982

I

1. Percent change from same month in previous year.
SOURCE: U. S. Department of Labor, Bureau of Labor Statistics.

1983

18 THOUSAND SQUARE FEET -------------------

4

'

1

9

8

1

I

SOURCE: F. W. Dodge, McGraw-Hill, Inc.

1982

I

1983

Texas S&Ls (cent.)
the same period last year.

Large Increases in Loans
The volume of construction loans
closed by Texas S&Ls tripled in the
first quarter from the same period last
year. Sixty percent of this loan volume
financed the construction of incomeproducing properties, compared with
28 percent in last year’s first quarter.
Income-producing properties include
apartment buildings, office buildings,
and retail shopping space. The volume
of loans for single-family home and
condominium construction is up
substantially, but such loans now ac­
count for a smaller share of S&L’s con­
struction lending.
Texas S&Ls closed about $1.3 billion
in loans for real estate purchases in
the first quarter, doubling their volume
of purchase loans on a year-over-year
basis. About two-thirds of this amount
financed single-family home pur­

chases. But because most new mort­
gage loans are being sold in the secon­
dary market, the $26 billion mortgage
portfolio of Texas S&Ls has remained
essentially unchanged since last
year’s first quarter. S&L loan participa­
tions and holdings of mortgage-backed
securities increased 20 percent in the
same interval, to $3.7 billion.
—Bronwyn Brock

A Good Year (cont.)
less than 4 percent over 1981 figures.
The spread of average yield on earn­
ing assets over the average cost of
funds widened by 60 basis points. This
accounted for 30 percent of the $410
million increase in net interest income.
Falling interest rates moderated in­
creases in both total interest income
and expense. Noninterest income rose

$155 million in 1982. Service charges
on deposit accounts, a component of
noninterest income, became more im­
portant in 1982 with the increase in
deposit deregulation.
The rise in income occurred despite
increases in nonperforming assets in
1982. Nonperforming assets as a
percentage of loans and “ other real
estate’’ rose from just over 1 percent in
1981 to nearly 2.5 percent in 1982. The
recession, foreign-loan problems, and
the depressed energy industry were
the major causes of this increase.
The outlook for 1983 initially ap­
pears less encouraging. First quarter
reports of the four largest bank holding
companies in the District indicate
slower asset growth and lower net in­
come. Nonperforming assets con­
tinued to increase. Hence, the relative
performance of District banks may
decline somewhat.
—Robert Clair

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