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F ederal Reserve Ban k of Dallas DALLAS, TEXAS 75222 Circular No. 78-107 August 17, 1978 CONDITION AND INCOME OF MEMBER BANKS ELEVENTH FEDERAL RESERVE DISTRICT TO ALL MEMBER BANKS IN THE ELEVENTH FEDERAL RESERVE DISTRICT: Member banks in the Eleventh District experienced sharp growth in both loans and deposits in 1977— especially in the last half of the year—as economic activity continued to strengthen. As loan demand picked up, banks shifted a considerable portion of their portfolios away from generally lower-yielding securities— mainly short-term issues of the U.S. Govern ment— into loans. On balance, the rate of increase in total investments was only about half as large as the gain a year earlier. Total deposits increased at the fastest rate since 1972. But the growth in deposits trailed the sharp rise in total loans, and member banks increased their borrowings somewhat. Total loans at member banks rose 14.2 percent last year. Loans to commercial and industrial firms increased $1.5 billion— 16 percent—despite a weak first quarter. Slower growth in profits and moderate growth in inventories and plant and equipment expenditures increased considerably business needs for external financing. Real estate loans at member banks increased nearly $1.3 billion, or 33 percent, last year as District construction activity remained strong. Loans to finance construction and land devel opment projects rose 54 percent and accounted for about half the total increase in real estate lending. But residential mortgages— especially those secured by one-to four-family properties —also rose appreciably. Consumers continued to borrow heavily last year, and their outstanding debt to member banks in the District rose $1.0 billion. About half of the increase reflected the financing of private passenger cars, but the largest percentage growth resulted from expanded use of retail credit cards. District member banks continued to increase their holdings of both U.S. Government securities and municipal obligations in the first half of 1977. Some investment portfolio adjust ments were evident in the second half, however, as business loan demand strengthened con siderably and the outlook for bank profits improved. In the last six months of 1977, member banks liquidated a small volume of U.S. Government securities and acquired a modest amount of municipal issues. Total deposits at member banks in the District expanded 12.1 percent last year, despite a small decline in the first half. The sharpest gain occurred in time deposits—mainly because of a large increase in the volume of large negotiable certificates of deposit outstanding late last year. By that time, market interest had risen to the point that bank rates on most other time and savings deposits were noncompetitive. As loan demand was expanded rapidly, banks found it necessary to bid more aggresively for large CD funds. N et income of member banks in the District rose $79 million to reach $499 million in 1977. That 18.9-percent increase exceeded the 14.2-percent gain in 1976 and was well above the 1.6percent rise in 1975. The sharper growth in income before taxes caused income tax liabilities to increase 39.8 percent last year, in contrast to the 29.3-percent rise a year earlier. Total operating income was up 15.2 percent in 1977— somewhat less than the 17.7-percent growth of the previous year. The lower rate of increase last year mainly reflected a slightly slower growth in loans and a slightly lower average level of business loan rates. Although bank lending rates at the end of 1977 were higher than at any time in the previous year, those rates generally remained lower than the comparable year-earlier level until September. Inter est and dividends on securities rose 10.2 percent last year— or about half as much as in the previous year. The lower growth rate in 1977 reflected both the slowdown in security acqui sitions and the greater reliance on municipal obligations with generally lower pretax yields. Total operating expenses rose 13.7 percent in 1977. That was well below the 18.1-percent increase a year earlier and mainly resulted from slower growth in interest paid on time and savings deposits. With total loans increasing more rapidly than deposits last year, the loan-deposit ratio at member banks in the District rose from 68.2 percent in 1976 to 69.4 percent at the end of 1977. And the ratio of total capital accounts to risk assets declined slightly to 9.0 percent. The number of member banks continued to increase slightly in 1977. Sincerely yours, Ernest T. Baughman President This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) COMPARATIVE STATEMENT OF CONDITION OF MEMBER BANKS ELEVENTH FEDERAL RESERVE DISTRICT (Amounts in thousands of dollars) Dec. 31, 1977p Item June 30, 1977 Dec. 31, 1976 Loans (gross), including overdrafts1 ___________________ 31,050,466 27,758,936 27,186,126 U. S. Treasury se cu ritie s___________________ ____ ______ 4,848,520 4,909,159 4,507,564 Obligations of States and political subdivisions................ - 6,681,543 6,333,905 5,990,192 Other securities (including trading account securities) .... 1,760,799 1,719,784 1,965,486 TOTAL LOANS (GROSS) AND INV EST M E N T S_______44,341,328 40,721,784 39,649,368 Cash and balances due from b a n k s________________ ____ _ 8,445,861 6,666,638 7,862,482 TOTAL ASSETS ________ _____________________ _________________ ______ 54,682,286 49,021,040 48,935,880 Individual — Demand deposits _________________________ 16,033,029 13,504,274 14,475,810 Individual — Time and savings d e p o sits______ __________ 18,465,685 17,017,424 16,333,535 Deposits of U.S. Government __________________ __ ____ 400,795 233,413 244,041 Deposits of States and political subdivisions________ ___ 5,996,531 5,810,811 5,100,247 Deposits of b a n k s __________________________ ___ _______ 3,309,891 2,727,349 3,268,927 Certified and officers’ checks, e t c ............. ...... ................. ........ 511,917 404,443 454,614 39,697,714 39,877,174 TOTAL D E PO SITS________________________ __ ________ 44,717,848 TOTAL CAPITAL ACCOUNTS.............. ............................... 3,717,640 3,561,804 3,357,151 Borrowings from Federal Reserve B a n k __________________________ 23,900 30,300 1,937 4,519,306 4,576,062 All other borrowings _________ ___ _____________________ 4,773,179 Ratio of loans to total d ep osits___________________________________ 69.4% 69.9% 68.2% Ratio of cash and balances due from banks to total d ep osits_____________________ ____ _____________________ 18.9% 16.8% 19.7% Ratio of total capital accounts to risk assets (total assets less Government securities and cash assets) ___________________ 9.0% 9.5% 9.2% Number of member b a n k s__ _____________________________________695 692 688 1 Includes Federal funds sold, p—Preliminary. PRINCIPAL ASSET AND LIABILITY ITEMS OF MEMBER BANKS ELEVENTH FEDERAL RESERVE DISTRICT (In thousands of dollars) Year-end 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977p Total Deposits Total Loans (Gross)1 Total Investments Total Loans (Gross) and Investments Total U.S. Treasury Securities Total Capital Accounts 19,603,344 19,403,693 21,310,875 24,105,203 27,533,316 30,125,994 32,782,571 35,846,988 39,877,174 44,717,848 11,370,944 12,138,578 13,496,198 15,223,814 18,043,657 20,861,033 21,897,329 23,553,994 27,186,126 31,050,466 5,744,992 5,322,856 6,196,825 7,244,416 8,223,521 8,619,969 9,237,983 11,055,096 12,463,242 13,290,862 17,115,936 17,461,434 19,693,023 22,468,230 26,267,178 29,481,002 31,135,312 34,609,090 39,649,368 44,341,328 2,649,477 2,148,747 2,194,238 2,365,542 2,389,335 2,121,498 2,026,000 3,357,495 4,507,564 4,848,520 1,630,114 1,730,892 1,872,565 2,002,638 2,222,533 2,484,022 2,765,183 3,030,562 3,357,151 3,717,640 1 Includes Federal funds sold, p—Preliminary. COMPARATIVE STATEMENT OF INCOME, EXPENSES, AND DIVIDENDS OF MEMBER BANKS ELEVENTH FEDERAL RESERVE DISTRICT (Amounts in thousands of dollars) Item 1976 Net Change 686,598 2,340,938 73,923 192,439 3,293,898 517,698 1,405,644 859,960 2,783,302 69,772 389,927 11,581 29,121 500,401 69,505 174,012 136,636 380,153 510,596 99,793 6,340 2,019 419,162 151,802 687 120,248 39,671 -1,877 646 79,346 19,340 8 1977p Interest and dividends on securities ___ 756,370 Interest and fees on loans 2,730,865 Service charges on deposit accounts ___ 85,504 All other operating income ... . 221,560 TOTAL OPERATING INCOME ___ 3,794,299 Salaries and employee benefits __ 587,203 Interest on time and savings d ep o sits_______________ __ 1,579,656 All other operating expenses _.___ 996,596 ___3,163,455 TOTAL OPERATING EXPENSES _ INCOME BEFORE INCOME TAXES AND 630,844 SECURITIES GAINS OR LOSSES ___ ____________.... Applicable income taxes . ... . ___ 139,464 4,463 _ __ Net securities gains or lo ss e s _______ ________ 2,665 Extraordinary items and other charges or credits __ NET INCOM E____________ .. ___ 498,508 Cash dividends declared___________________ ______ __ 171,142 Number of member b a n k s ______________ ...... 695 p—Preliminary. PRINCIPAL ITEMS OF INCOME, EXPENSES, AND DIVIDENDS OF MEMBER BANKS ELEVENTH FEDERAL RESERVE DISTRICT (Amounts in thousands of dollars) Year Total Operating Income Total Operating Expenses Income before Income Taxes and Securities Gains or Losses Net Income Cash Dividends Declared 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977p 1,035,225 1,250,222 1,408,333 1,508,729 1,687,789 2,246,807 2,859,153 2,798,455 3,293,898 3,794,299 765,580 960,470 1,093,905 1,205,908 1,350,622 1,855,069 2,398,445 2,356,933 2,783,302 3,163,455 269,645 289,752 314,428 302,821 337,167 391,738 460,708 441,522 510,596 630,844 152,949 189,681 219,794 236,796 263,860 302,415 361,217 367,057 419,162 498,508 78,065 72,812 82,034 94,471 95,537 93,171 96,422 139,279 151,802 171,142 p—Preliminary. Number of Member Banks 651 640 634 633 633 642 658 673 687 695 CHANGES IN LOANS AND DEPOSITS AT MEMBER BANKS ELEVENTH FEDERAL RESERVE DISTRICT 20 -------------------------------------------------------------------------------------------- 1967 1969 1971 1973 1975 1977 CHANGES IN OPERATING EXPENSES AND INCOME OF MEMBER BANKS ELEVENTH FEDERAL RESERVE DISTRICT 4 0 --------------------------------------PERCENT CHANG E (Y e a r to Y e a r) 1967 1969 1971 1973 1975 1977
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