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FEDERAL RESERVE BANK OF RICHMOND MONTHLY REVIEW Bank Deposit Structure 1961-67 Stock Market Indexes District Time and Savings Deposits The Fifth D istrict BANK DEPOSIT STRUCTURE 1961-67 T he 1960’s have witnessed a sharp rise in the d e gree of sophistication with which individuals, busi nesses, and governm ents carry on their financial affairs. T o serve the ever-grow in g and ever-changing demands o f these custom ers, banks of all sizes have had to make num erous adjustments in their opera tions. In some cases adjustments are reflected in changes in the structure and distribution o f bank assets and liabilities. These changes often occu r as banks endeavor to com pete m ore effectively and to render m ore and better services. Since 1960 individuals have becom e increasingly conscious of relative rates o f return fo r various uses o f their money. Businesses similarly have increas ingly used short-term earning assets as substitutes for non-earning cash balances. Governments have had g row in g responsibilities for investing various trust funds wisely. A s the management of cash balances has changed in recent years, the distribution of bank balances am ong different sizes o f banks and am ong different types o f deposits has also changed. This article will review briefly some o f these changes over the period from June 1961 to June 1967, as reflected in data on the distribution o f bank deposits. T he data used are based on June 1961 and June 1967 Condition R eports o f the Board of G overnors of the Federal Reserve System. F or the purposes of this article a distinction will be made between banks and banking organizations. Data on banks will cover all insured com m ercial banks. Data on banking organizations w ill consolidate individual 1 tanks into holding companies wherever possible and exclude uninsured banks. T hus the same banks will be included in each grou p but the data on bank o r ganizations will suggest some o f the effects o f h old ing com pany acquisitions on the distribution of d e posits through the com m ercial banking system. Each of the tw o groups will be broken dow n into per centiles according to the size o f the bank or organiza tion. posits. In one case size is determined by total d e Inform ation about various types o f deposits then will be exam ined for the different size grou p ings. In other cases size will be determined by the amount of the various types o f deposit liabilities o f the banks and organizations. T he article also will include similar inform ation for the Fifth District states. Nationwide Commercial Banking T o ta l d ep o sits of all insured banks rose from $223.6 billion in June 1961 to $358.7 billion in June 1967, an increase of 6 0 .4 % over the six-year span. O ver this period the number o f insured banks grew from 13,127 to 13,526. while the number o f banking organizations encom passing those banks grew from 12,752 to 13,014. T he first table shows that time and savings deposits taken together increased by nearly $100 billion or over 12 1 % , accounting for much the larger part of total deposit grow th. A b ou t $30 billion was added in savings accounts, an increase o f nearly 5 0 % over the six years. T im e deposits, which in June 1961 totaled only $19 billion, soared to nearly $85 billion in June 1967, a gain of m ore than 3 5 0 % . T he sharp rise in time deposits was due prim arily to aggressive marketing of certificates o f deposit by large m oney market banks. Introduced in 1961 as an instrument through which m oney market funds could be channeled through the banking system, the negotiable C D quickly became an effective com petitor with T reasury bills, com m ercial paper, bankers’ acceptances, and other short-term liquid investments. It was made available in several co n venient maturities, mostly up to one year, and sec ondary market m achinery was quickly provided. F o r these and other reasons, the C D has grow n by leaps and bounds. A s a result o f the large grow th in time deposits the com position markedly. some 6 5 % of total deposits has changed In 1961 demand deposits accounted for of total deposits at all insured Com mercial banks. Passbook savings deposits represented another 2 7 % and time deposits only 8 % . B y 1967, however, these three percentages had changed to roughly 5 1 % , 2 5 % , and 2 4 % , respectively. T he trend from demand deposits to time deposits is evident in the accounts of selected depositors. A g gregate nationwide demand deposits o f individuals, partnerships, corporations, the U nited States G ov ernment, and states and political subdivisions repre sented nearly 5 7 % of total deposits in 1961. B y 1967 the share o f these depositor groups had dropped to 4 4 % . Conversely, time deposits of the same groups, excluding deposits accumulated for payment o f personal loans, grew from 7 % to nearly 2 2 % of total deposits, accounting for most of the in crease in total time deposits. F ifth D is tr ic t T o ta l d ep o sits at F ifth D is trict banks grew by almost 7 0 % between 1961 and 1967, nearly 10 percentage points faster than the national rate of increase. Similarly, all other deposit cate gories shown in the first table grew m ore rapidly in the District than in the nation. T im e deposits at D istrict banks advanced from approxim ately 5 % to over 16% of total deposits over this time span, while the share of total D istrict deposits represented by passbook savings recorded only a slight increase. Passbook savings as a share o f total deposits in the nation, on the other hand, declined slightly. T he rate of grow th o f time deposits varied sharply am ong Fifth D istrict states. V irgin ia and N orth Carolina both recorded sizable absolute and per centage gains. In V irgin ia time deposits at insured com m ercial banks grew by $1.1 billion to a $1.2 billion total, an increase o f 1,100% . N orth Carolina showed a $1.0 billion increase to a $1.2 billion total, a 50 0 % increase. A s in the nation, time deposits held by individuals, partnerships, corporations, the Federal Governm ent, and state and local g overn only $0.1 billion increases over the six years. T im e deposits in the D istrict o f Colum bia grew by 3 0 0 % to $0.4 billion. P assbook savings deposits across the District registered 100% increases in M aryland, W est V ir ginia, and the D istrict o f Columbia. T h e share o f total deposits held in such accounts grew by 5 to 10 percentage points in each area, and ranged from 2 5 % in the District of Columbia, to 3 7 % in M a ry land, and 4 0 % in W e st V irgin ia in 1967. G row th rates fo r savings ranged from 5 0 % in South C aro lina, to 5 8 % in V irginia, to 8 3 % in N orth Carolina, but the fraction o f total deposits held in savings ac counts declined slightly in each state to 1 9 % , 3 5 % , and 2 2 % , respectively. Fifth District depositors, meanwhile, follow ed the national pattern in reducing the portion of their total deposits held in demand ac counts. Dem and deposits o f the Federal G overn ment, state and political subdivisions, and individuals, partnerships, and corporations grew m ore rapidly in the District than in the nation (3 9 % to 2 4 % ) but as a per cent of total deposits they declined about in line with national figures. T his general pattern characterized the individual Fifth District states except for South total deposits Carolina where the fraction of of these depositor groups held in demand accounts remained essentially unchanged at about 7 0 % . In contrast to the national experience in the 19611967 period, the num ber of insured com m ercial banks and the number of banking organizations in the D istrict declined. Bank m erger activity was the ments in V irginia and N orth Carolina grew rapidly, chief factor in this decline. with increases of 5 0 0 % recorded in each state. M ary land, South Carolina, and W est V irginia, each with whole, the number of insured com m ercial banks d e $0.1 billion or less in time deposits in 1961, realized not permit branching, was the only District state to clined from 947 to 829. F o r the D istrict as a W est V irginia, which does DEPOSITS Insured Com m ercial Banks (D ollars in Billions) UNITED STATES Am ount ' % of Total Deposits1 FIFTH % Increase DISTRICT % of Total Deposits1 Am ount Total Demand Time Savings IPC, etc.2 Dem and Time^ 1967 1961 1967 1961-1967 1961 1967 223.6 144.2 18.5 60.9 358.7 182.9 84.7 91.1 100.0 64.5 8.3 27.2 100.0 51.0 23.6 25.4 60.4 26.8 357.8 49.6 11.9 7.8 0.6 3.4 20.2 10.8 3.3 6.1 100.0 65.5 5 .0 28.6 100.0 53.5 16.3 30.2 69.7 38.5 450.0 79.4 127.0 15.6 157.7 77.5 56.8 7.0 44.0 21.6 24.2 396.8 7.2 0.6 10.0 3.3 60.5 5.0 49.5 16.3 38.9 450.0 1961 1967 % Increase 1961 1961-1967 iD e m a n d , time. a n d savings deposits a s percentages of total deposits m ay not ad d to 100% due to rounding. 2A lso includes the U. S. Governm ent an d state and local subdivisions. ^Excludes deposits accum ulated fo r paym ent of personal loans. Source: Board of G o vern ors of the Federal Reserve System . 3 which amended its banking code to permit statewide branching through m erger in 1962, recorded the held in the Fifth District, with m ost o f the grow th occurring at the large banks. In South Carolina and W est V irginia, however, increases w ere small sharpest drop in number of insured com m ercial banks of any District state. H old in g com pany consolida and showed no marked pattern o f distribution. In N orth Carolina and V irginia, where m ost o f the D is tions in M aryland, V irginia, and the District o f Columbia were responsible fo r a decline in the D is trict’s time deposit grow th occurred, the top 5 % o f trict’s A similar pattern existed in M aryland although the show an increase in the num ber o f banks. banking organizations, as V irginia, defined in this article, from 943 to 792 over the six years. Distribution of Deposits T h e ch a n g e s d e scrib e d thus far have been accom panied by an equally sig nificant redistribution of deposits am ong bank sizegroups. T his has been true in both the Fifth District and in the nation as a whole. T he size o f the banks surveyed has been determined according to total deposits. L ook in g at the shares of total deposits held by various size-groups of banks across the country, the top 5 % of the banks on the whole saw their share decline between 1961 and 1967 while all the categories below the top 5 % reported increased shares, h ow ever small. T he share o f total deposits held by the top 1 % o f the banks in the nation declined from 50.04 % to 4 9 .8 2 % , but within this category the top 0 .1 % registered a very small increase. T h e top 1 % of banks graded by total deposits ac counted for over 5 2 % of the nearly $70 billion in crease in time deposits at all insured com m ercial banks between 1961 and 1967. M oreover, the e x pansion recorded by the top 1 % o f the banks was about equally divided between the first 0 .1 % , which com prised only 14 banks in both 1961 and 1967, and the next 0 .9 % , which included 119 banks in 1961 and 122 banks in 1967. Further pointing up the importance of large banks, almost 8 0 % o f the grow th in time deposits between 1961 and 1967 was ac counted for by the top 15% of all insured com mercial banks. W h ile the very large banks exhibited the biggest absolute increases in time deposits, they did not al ways have large enough increases to maintain their 1961 share of total time deposits. Despite a $17 bil lion gain, the top 0 .1 % of the nation’s banks saw their share of total time deposits decline from just over 3 0 % in 1961 to just under 2 7 % in 1967. On the other hand, the next largest 0 .9 % of banks e x perienced a small increase in their share o f the total, from 2 4 .5 % to 2 6 % . A s shown in the second table, increases of in shares total time deposits were the banks accounted for m ost o f the total increase. absolute increases w ere not as large as in N orth Carolina and V irginia. In the Fifth D istrict the redistribution o f total deposits over the period tended to be tow ard the larger banks and away from the smaller banks. An exception occurred in W e st V irgin ia w here the top 1% and the next 4 % each experienced a decline o f over one percentage point in their share o f total d e posits while all the categories o f smaller banks in creased their shares. In W est V irgin ia the top 1% of the banks in the state accounted fo r less than 11 % of total deposits in 1967 while in the cases o f M a ry land, N orth Carolina, and South Carolina, the top 1% in each state held between 3 0 % and 4 0 % of total deposits. In V irgin ia the top 1 % held over 2 6 % o f total deposits. T h e low er shares in W e st V irgin ia and V irgin ia are probably due in som e part to the absence o f branch banking in the form er and the relatively recent inauguration o f statewide branching in the latter. T h e absence of branching tends to limit the size of banks and in particular the size o f large, expansion-m inded banks. T h e proportion o f demand deposits held by the top 1% o f the nation’s banks declined between 1961 and 1967 while each of the smaller size-groups o f banks shown in the table registered small percentage in creases in the nation as a whole. L arge banks in the Fifth District, how ever, generally recorded in creased shares of total demand deposits. T h e top 5 % of the banks in each o f M aryland, South C aro lina, and V irgin ia increased their shares, but in W est V irginia the three groups making the top 1 5 % o f that state’s banks each lost part o f their 1961 share. T he share of the top 1 % in N orth Carolina also declined but the shares o f the next 4 % follow in g 1 0 % and the rose. T h e fraction o f total passbook savings deposits held by the top 5 % of the nation’s insured com mercial banks increased from nearly 6 2 % to over 6 4 % over this period, while fo r all other size-groups the fraction declined. T he redistribution o f such deposits in the Fifth D istrict was m ore marked but similarly registered in every other size grou pin g o f varied from state to state. banks except for the tw o smallest classes, which in accounts held by the top 5 % o f the banks in each clude 5 0 % of all insured banks. o f M aryland, N orth Carolina, and V irgin ia rose by T his general pattern o f time deposit grow th also 4 T he proportion o f savings some 11 percentage points. In M aryland this in crease was almost solely accounted for by the top 1% of that state’s banks. In N orth Carolina and V irginia the increase was m ore evenly divided between the top 1 % and the next 4 % . In South Carolina the top 1% category registered a one per centage point decline in its proportion o f savings deposits. T his was the only District state in which the top group experienced such a decline. T he next 4 % category, how ever, registered an increase in its share from 19% to 2 4 % . In W est V irginia the top 5 % o f the banks in the state recorded less than a percentage point increase in their share o f savings deposits. Increases actually were recorded only in the top 1% and the smallest 2 5 % categories. Banking Organizations holding companies in 1961. In 1967 the shares o f various deposit categories held by the top 1 % o f banks and banking organizations w ere the same. T h e next 4 % of organizations in M aryland, however, showed a larger share o f all types o f deposits than did the similar size-group o f banks. M eanwhile, the size-groups com prising the bottom 7 5 % o f M aryland bank organizations registered smaller shares o f d e posits than their bank-group counterparts. Largest Holders of Selected Deposits T h e na tion’s largest banks, as ranked by total deposits, are not always the largest ow ners o f every type o f d e posit. Such differences are apparent upon co m paring the shares of selected deposits held by various In g en era l, th e d istr ib u size-groups of banks as ranked by total deposits with tion of deposits am ong banking organizations, as de the shares o f the same type o f deposit owned by the fined in this article, closely resembled the pattern am ong banks. O ne m ajor distinction was that in largest holders o f that deposit. W h en such a co m parison reveals different shares o f a particular type o f deposit fo r similar size-groups on the same date, both 1961 and 1967 the top 0 .1 % and the next 0 .9 % o f the nation’s banking organizations held larger one can conclude that different banks are included in shares o f all the deposit categories in the first table the tw o groups. than did the corresponding groups o f banks. Several characteristics o f the current structure o f deposits in the nation’s com m ercial banks emerge from the data. In general the largest banks are also F u r thermore the other size-groups com prising smaller organizations generally held smaller shares than the the largest holders of demand deposits. corresponding size-groups o f banks. T h e largest In the Fifth District, three states, N orth C aro banks, however, d o not appear always to be the lina, South Carolina, and W est V irginia, had no largest holders o f time deposits, despite recording the largest increases in time deposits over the 19611967 period. T h e five size-groups com prising the top 2 5 % o f banks each showed larger shares o f time registered holding com panies in either 1961 or 1967. In V irginia a pattern similar to the nation appeared with the top 1 % and the next 4 % of organizations showing larger shares of deposits than correspon d ing categories o f banks over the period. deposits in the ranking by those deposits than in the ranking by total deposits. A pattern similar to time G roupings deposits exists in the savings category where the o f smaller bank organizations in V irginia recorded largest banks have not been the banks with the largest amounts o f savings deposits. Joseph C. Ram age smaller shares than those of corresponding groups o f banks. In M aryland there were no registered PERCENTAGE DISTRIBUTION O F DEPOSITS Insured Com m ercial Banks United States Deposits2 Num ber of B a n ks1 Time Dem and Total o f Banks Savin g s 1961 Top Next Next Next Next Next N ext N ext 0.1% 0.9% 4% 10% 10% 25% 25% 25% 1967 1961 1967 1961 1967 1961 1967 1961 1967 14 119 526 1,313 1,313 3,282 3,282 3,278 . 14 122 542 1,353 1,353 3.382 3,382 3,378 23.87 26.17 19.27 12.02 5.78 7.58 3.71 1.60 23.93 25.89 19.17 12.04 5.86 7.69 3.82 1.61 25.28 28.35 18.62 10.73 5.09 6.79 3.49 1.64 25.14 27.28 18.89 10.95 5.25 7.07 3.69 1.72 30.43 24.46 15.76 9.78 4.89 7.61 4.89 2.17 26.80 26.09 16.06 11.10 5.79 8.03 4.25 1.89 18.61 21.44 21.87 15.76 7.68 9.44 3.93 1.27 18.86 22.93 22.63 15.17 7.12 8.58 3.60 1.12 S f iM liS f lW S iil ^ ;'v' . * 1Ranked by total deposits. 2Colum ns m ay not ad d to 100% due to rounding. Source: Board of G o vern ors of the Federal Reserve System . KJ OMH NCF TCM SBE AK BTT KTC D STOCK M ARKET IN DEXES 67 45 265 213 W h at did the stock market do tod ay? 39 T his ques tion is usually answered with a reference to one of the many indexes that measure market perform ance. A m on g the first such indexes were those com piled by D ow -Jones, which publishes indexes fo r indus 55 78 40 54 & P o o r ’s indexes, which cover many m ore stocks than the D ow -Jon es averages, nevertheless draw similar criticism because their m ethod o f com putation gives greater weight to the large companies. Som e analysts also criticize the inclusion of only N ew Y o rk trials, rails, and utilities as well as a com posite index Stock E xchange stocks in these tw o indexes as well for 65 stocks. Standard & P o o r ’s and the N ew Y o rk Stock E xchange also publish often quoted as in the E xch an ge’s index, but others cite the large indexes which similarly consist of a com posite series along with various com ponent series. In many cases changes accounted fo r by that exchange. indexes also provide breakdowns fo r individual in dustries. Other indexes are published by m ajor newspapers such as T he N e w Y ork T im es and by proportion o f total transactions on registered e x T he makeup of stock indexes varies over time. T he N ew Y o r k Stock E xchange In d ex depends on what stocks are currently listed on the E xchange. other exchanges such as the A m erican Stock E x T he com position o f the D ow -Jon es and Standard & change. T h e first D ow -Jon es Industrial Index, introduced cluded, also changes. on M ay 26, 1896, was an average of the prices of time to time to reflect the overall market better. 12 m ajor stocks of that period. In 1916 the list of Changes may also be necessitated by a com pany stocks was broadened to 20 and in 1928 the number m erging or changing its principal type o f business. was increased to 30, where it stands today. Standard & P o o r ’s present index, begun in 1957 when the older Standard & P o o r ’s indicators were phased out, uses 425 industrial stocks. T he newest o f the three indicators— the N ew Y o rk Stock E xchange In d ex— was inaugurated on July 14, 1966. H istorical data for the series has been provided back to 1939. T h e num ber o f stocks included in different series varies. T he D ow -Jon es indexes, fo r example, use a relatively small number of stocks, many o f which are so-called “ blue chips.” These are usually stocks of large, well-established companies. In contrast, the Standard & P o o r ’s com posite average uses 500 stocks. T h e N ew Y o r k Stock E xchange In dex is considered the m ost comprehensive market indicator. It includes all the com m on stocks listed at any one time on the E xchange, and currently includes over 1,200 com m on stocks. M arket analysts have varying opinions o f the value o f different series. Som e argue that the D ow -Jones averages do not give a true indication o f overall market activity neglected. since many small com panies are Others suggest that the emphasis on the larger com panies is appropriate because the shares of these companies are so w idely held. 6 T he Standard P o o r ’s indexes, with fix ed numbers of stocks in Substitutions are made from V arious methods are used in calculating indexes. Each of the D ow -Jon es averages is derived by adding up the price o f each o f the included stocks and then dividing the total by a specific number. W h en the number o f stocks used in the D ow -Jones Industrial justed automatically fo r stock splits since a decrease A verage was increased in 1928, this divisor was 30. listed or outstanding shares. Since that time the divisor has been changed periodi expresses the total value of outstanding shares as a cally in order to make adjustments fo r stock d ivi percentage of the average market value during the dends, stock splits, and reverse stock splits. period 1941-43. These in price is offset by an increase in the number of Standard & P o o r ’s T he resulting figure is then divided adjustments are made to preserve comparability of by 10, making it much low er than its D ow -Jon es current and past data. counterpart. W h en a stock splits, for e x T he N ew Y o r k Stock E xchan ge In ample, the investor holding the stock usually suffers d ex is expressed in relationship to the average price no loss in the dollar value o f his holdings. o f all listed com m on stocks on D ecem ber 31, 1965. Y et, unless some adjustm ent is allowed for in an index, This the low er price of one share of stock resulting im changes due to new listings or delistings o f stock on mediately from the split will bias the index 011 the the low side. relative positions of the rails and utilities indexes in W h en a split occurs in a stock included index N ew must make adjustm ents Y o rk Stock Exchange. to T he eliminate different in a D ow -Jones list, the divisor is low ered to offset the D ow -Jon es and Standard & P o o r ’s charts su g the dow nw ard shift in the price o f the stock. gest not only different methods o f com putation but If the other market values in the index remain constant, the index stays at the same level. also the use o f different stocks. T he N ew Y o rk M a ry A n n Chappell Stock E xchange and Standard & P o o r ’s indexes use different methods of calculation. T he form er multi plies the price of each stock by the number o f listed shares of the respective stocks. T he latter multiplies DO W -JO N ES STO CK A V ER A G ES Dow -Jones Index the price of each stock used by the number o f out standing shares. In this way these indexes are ad- STANDARD & POOR'S INDEXES Price Index 1941-43 = 10 Source: U. S. Departm ent of Commerce, Survey of Current Business. Source: U. S. Departm ent of Commerce, Survey of Current Business. 7 DISTRICT TIME A N D S A V I N G S DEPOSITS T im e instruments issued by Fifth District banks to individuals and businesses have m ore than tripled in the past three years, while passbook savings ac counts have grow n by only 2 4 .7 % . A t midyear 1968, total time and savings deposits o f individuals, partnerships, and corporations ( I P C ) amounted to $9.7 billion at District com m ercial banks. O f this amount $6.4 billion or 6 5 .8 % was in passbook savings accounts, ownership of which is limited to individuals and nonprofit organizations. T h e remaining portion o f time and savings deposits, IP C , consists prim arily o f certificates of deposit ( C D ’s ) and time deposits, open account. These instruments are evidenced by a written contract, the terms of which differ widely in maturity, denomination, and rate of interest paid. In both m ajor categories of time and savings de posits, IP C , grow th at D istrict banks outpaced na tional rates. O n June 29, 1968 outstandings at insured com m ercial banks in the U nited States amounted to $95.0 billion for passbook savings, up 8 .7 % from m id-1965, and $74.7 billion in other time deposits, IP C , an increase of three-year period. Growth in Tim e Deposits 111.2% during the Dec. June 1965 Dec. June 1966 Dec. o June 1967 1968 N ote: Figures a re percentage changes for each 6-month period. G ro w th in co m m e rcia l bank time deposits depends to a great extent on interest rates paid by banks in relation to rates available to savers in com petitive markets. Evidence o f this is the tremendous spurt in “ other” time d e posits follow in g the D ecem ber ------------ 1 ------------ 1 ________ I ________ I________ ol------------ 1 June 1965 change from Source: Board of G o vernors of the Federal Reserve System , and the Federal Deposit Insurance Corporation. trict banks slowed markedly, from an 8 % increase in the latter half o f 1965 to a 3 % rise in the first half of 1966. T he Regulation O adjustm ent had an 4 y 2% to 5^2% in the m axim um allowable interest even greater effect on passbook savings in the country rate that banks could pay under Regulation Q . as a w hole than in the Fifth District. T his strength was caused partly by individuals switching A t all insured com m ercial banks, passbook savings dropped 2 % in from share capital at savings and loan institutions the first half o f 1966 in contrast to a 6 % rise in the and bank passbook savings to small denomination previous savings certificates offered by com m ercial banks at IP C , which carried a 5 ^ % higher rates. the 4 % ceiling on savings deposits, jum ped 2 7 % in M any businesses also found the in six-m onth period. Other time deposits, ceiling com pared with struments offered by com m ercial banks an attractive the District as well as in the nation in the six months investment since short-term market rates were below follow in g the Regulation Q change. the 5 ^ % ceiling. A nother factor adding to the popularity o f the large denomination CD B y the fall of 1966, short-term rates caught up in ne and passed the rates banks could offer and there was gotiable form was the development o f the secondary a general shift o f C D m oney to other financial in C D market. struments. A s may be seen in the accom panying chart, the grow th o f passbook savings deposits at Fifth D is A s a consequence, other time deposits, IP C , grew at a reduced rate, the level being sustained by the strength o f consum er savings. TYPES OF TIME AND SAVINGS DEPOSITS1 Fifth District Member Banks Y ields on com peting instruments declined in early 1967 and the grow th of com m ercial bank time d e posits picked up tem po. In the first half o f 1967 nationwide time deposits, IP C , excluding passbook savings, increased 2 1 % , not far below the rise in the six months follow in g the Decem ber 1965 ceiling in crease. In the D istrict the 3 1 % grow th was greater than that in the first half o f 1966. B eginning around m id -1967, m oney market rates again m oved up sharply, and by spring o f 1968 passed the historically high levels of the fall o f 1966. O n A pril 19, 1968 the Federal Reserve System ad justed upward the rate ceiling on large denomination time instruments with maturities o f tw o months and longer. A lthough the com petitive position o f n ego tiable C D ’s was im proved, the grow th rate for “ other” time deposits, IP C , at all com m ercial banks remained approxim ately the same as in the preceding six months and in the latter half of 1966. In the District the appreciable slow dow n in the grow th during the second half o f 1967 was follow ed by a fairly sharp increase during the first half o f 1968. T he D istrict increase was at the same rate as during the 1966 period of rapidly rising interest rates. T h e slow dow n in the grow th in passbook savings in the D istrict as well as in the rest o f the country during the first six months of this year suggests that consumers were transferring these funds to in struments with higher yields. T he 2 % rise in the first half o f 1968 was the D istrict’s low est semi annual grow th rate during the period under study. T he less than 1 % rise fo r all com m ercial banks, however, com pares with a decline in the year follow ing the historic D ecem ber 1965 change in Regulation Q . Recent Growth by Type of Deposit R e ce n t su r veys conducted by this Bank also indicate that the slow dow n in the grow th of passbook savings m ay be caused in part by consum ers switching these funds to other types o f time deposits offered by com m ercial banks at higher interest rates. Passbook savings held in D istrict m em ber banks increased $244 m il lion or 5 .8 % during the year ending O ctober 31, 1968. T his com pares with a $523 million, or 3 5 % , rise in time instruments, IP C , of less than $100,000 for this same time period. T h e dollar increase in small denomination certificates of deposit was almost twice that of time deposits, open account, o f less than $100,000. T he latter instruments, however, almost tripled during the period. T his phenomenal grow th was caused in part by the popularity o f the so-called “ golden passbook” accounts which are d i rect alternatives to regular savings deposits. Separate O ctober 31, 1968 Amount Outstanding Ch an g e from October 1967 ($ millions) (per cent) FIFTH DISTRICT Total time a n d savin g s2 Savings deposits Certificates of deposit Less than $100,000 $100,000 or more Negotiable Nonnegotiable Time deposits, open account2 Less than $100,000 Consum er-type3 Other $100,000 or more 7,026.5 4,435.6 2,289.4 1,723.1 566.3 285.5 280.8 301.5 282.5 135.6 146.9 19.0 14.5 5.8 26.8 24.7 33.4 43.8 24.2 116.8 180.5 n.a. n.a. - 50.5 M ARYLAND Total time and savin g s2 S avings deposits Certificates of deposit Less than $100,000 $100,000 or more Negotiable Nonnegotiable Time deposits, open account2 Less than $100,000 Consum er-type3 O ther $100,000 or more 1,000.9 890.1 97.0 73.1 23.9 18.1 5.8 13.8 11.7 6.1 5.6 2.1 10.9 8.1 34.0 51.0 0.4 21.5 - 36.3 102.9 138.8 n.a. n.a. 10.5 DISTRICT O F CO LU M BIA 6.7 0.1 15.7 14.7 16.4 6.9 27.6 42.0 55.4 n.a. n.a. 46.9 Total time and savin g s2 Savings deposits Certificates of deposit Less than $100,000 $100,000 or more Negotiable Nonnegotiable Time deposits, open account2 Less than $100,000 Consum er-type3 Other $100,000 or more 895.6 523.4 337.4 132.7 204.7 101.0 103.7 34.8 33.1 5.5 27.6 1.7 V IR G IN IA Total time and savings* Savings deposits Certificates of deposit Less than $100,000 $100,000 or more Negotiable Nonnegotiable Time deposits, open account2 Less than $100,000 Consum er-type3 Other $100,000 or more 2,751.8 1,637.8 1,028.4 926.3 102.1 63.3 38.8 85.6 78.4 53.9 24.5 7.2 15.1 4.7 30.6 27.2 72.2 163.8 9.9 119.5 222.6 n.a. n.a. - 51.0 679.9 544.4 125.1 111.7 13.4 10.0 3.4 10.4 9.6 1.4 8.2 0.8 12.2 7.5 32.0 29.1 61.4 69.5 41.7 126.1 159.5 n.a. n.a. - 11.1 1,421.1 663.5 632.6 425.3 207.3 93.1 114.2 125.0 117.8 48.3 69.5 7.2 19.6 8.3 23.6 17.2 39.2 57.8 27.0 95.3 154.4 n.a. n.a. - 59.3 277.2 176.4 68.9 54.0 14.9 32.4 9.5 43.2 35.3 81.7 14.9 31.9 31.9 20.4 11.5 81.7 * * - - W EST V IR G IN IA Total time a n d savin g s2 Savings deposits Certificates of deposit Less than $100,000 $100,000 or more Negotiable Nonnegotiable Time deposits, open account2 Less than $100,000 Consum er-type3 O ther $100,000 or more NORTH CA R O LIN A Total time a n d savin g s2 Savings deposits Certificates of deposit Less than $100,000 $100,000 or more Negotiable Nonnegotiable Time deposits, open account2 Less than $100,000 Consum er-type3 Other $100,000 or more SOUTH CA R O LIN A Total tim e a n d savin g s2 Savings deposits Certificates of deposit Less than $100,000 $100,000 or more Negotiable Nonnegotiable Time deposits, open account2 Less than $100,000 Consum er-type3 Other $100,000 or more _ n .a. n.a. d e p o s its of individuals, partnerships, and corporations. 2Exd u d es Christm as savings and other special funds. ^Includes accounts in passbook and statement form , n .a. Not a va ilab le. * Less than $500,000 in O ctober 1967. figures were not collected on these accounts in the O ctober 1967 survey. N egotiable C D ’s issued in d e n o m in a tio n s of passbook” accounts. A s a result, time instruments issued in denominations o f less than $100,000 $100,000 or m ore also m oved up significantly in the year ending O ctober 31, 1968. Outstandings in creased from $198.5 million to $285.5 million, a amounted to over a third of total time and savings, I P C , by O ctober 1968. T h e increase over the year was $252 million or 3 4 % . Im pressive gains were 4 4 % rise. Based on data from the large weekly reporting banks which issue m ost o f these instru made also in C D ’s of $100,000 or m ore, particularly ments, the gain occurred after the A p ril upward ad justm ent in ceiling rates. L arge denomination C D ’s in nonnegotiable form increased 2 4 % , to a $280.8 million level. Large open account time deposits, which play a m inor role in the District, halved over the year to a level of $19 million. Recent Growth by Area In p e rce n ta g e term s, South Carolina member banks made the m ost sig nificant gain in attracting households and businesses. the savings dollar of Total time and savings actively prom oted savings certificates and “ golden those in negotiable form . Rate Structure T h e a c c o m p a n y in g ta b le s h o w s that m ost savings deposits and time instruments, IP C , in denominations o f less than $100,000 were drawing the Regulation Q ceilings o f 4 % and 5 % , respectively. Rates on both o f these types o f d e posits w ere adjusted upward during the year. T he proportion o f the dollar amount of savings deposits at rates over 3 ^ 2% inched further tow ards the 100% level, from 9 4 % on O ctober 31, 1967 to 9 6 % in the current survey. T h e shift to higher rates was deposits, I P C , rose 3 2 % over the year ending O c tober 31, 1968. T he m ost spectacular gain was in highly significant, however, for small denomination time instruments : 9 4 % o f outstandings w ere at banks small denomination open account deposits w hich rose currently offering rates over 4 ^ % , com pared with from $0.2 million to $31.9 million. 85% Regular savings last year. T h e rate adjustm ents were m ost accounts also increased at a rate higher than those dramatic in M aryland, South Carolina, and W est in other District areas. A lthough only a few banks in South Carolina issue large denomination time V irginia. D istrict banks also made significant upward ad justments on rates paid on large denom ination time instruments. In O ctober 1967, over three-fourths of outstandings were at banks offering 5 % or less al instruments, these deposits rose from $8.2 million to $14.9 million, a gain o f 8 2 % . N orth Carolina ranked second am ong District areas in percentage gain in total time and savings deposits, I PC. T h e largest dollar gain was in small denomination C D ’ s and open account deposits which amounted to tw o-fifths o f total time and savings, I PC. Less than half o f the total was in regular pass book accounts. In contrast, approxim ately nine-tenths o f total time and savings, I P C , in M aryland banks was in regular savings accounts and less than one-tenth was though the ceiling rate was 5^ 4 % . In O ctober 1968, 8 0 % of outstandings were at banks paying over 5 % and 3 6 % at 1968, rates ranged from of the large banks paying over 5 ^ % . Since A pril permitted under R egulation Q have 5 ^ % to 6 ^ % , based upon the maturity denom ination instrument. Elisabeth W . A n g le in small denomination time instruments. T hese latter MOST CO M M O N RATES PAID ON NEW DEPOSITS deposits, how ever, made substantial percentage gains Fifth District M em ber Banks over the year. T h e increase in regular savings ac counts also was above the District rate. O ctober 31, 1968 T h e W est V irginia story is similar to that in M aryland. Percentage distribution of d o llar am ount of deposh A Dist. Md. D .C. Va. W .V a . N .C . S.C Savin g s deposits 100.0 100.0 100.0 100.0 100.0 100.0 100. 3.50 or less 3.51-4.00 3.7 96.3 1.1 98.9 .... 100.0 2.7 97.3 16.0 84.0 0.2 99.8 12. 87. 100.0 100.0 100.0 100.0 100.0 100.0 100. 5.7 94.3 21.7 78.3 0.6 99.4 1.6 98.4 55.2 44.8 1.0 99.0 7. 92. $100,000 or more 100.0 100.0 100.0 100.0 100.0 100.0 100. 4.50 or less 4.51-5.00 5.01-5.50 5.51 and over 2.1 17.6 44.1 36.2 18.8 13.5 63.1 4.6 3.2 93.2 3.6 1.5 38.0 21.1 39.4 24.6 75.4 1.2 17.7 6.5 74.6 17. 82. large proportion of the total was in the form o f pass book savings which increased over the year at a higher rate than for the District as a whole. Banks in the D istrict of Columbia issued a greater proportion of total time and savings in large de nomination C D ’s than banks in other District areas. Outstandings of these instruments, how ever, in creased only 16% from O ctober 1967 to O ctober 1968. Regular savings accounts, which only amount to one-half o f total outstandings, remained steady. Time instruments, Less than $100,000 4.50 or less 4.51-5.00 Time instruments, V irgin ia banks, like those in the Carolinas, have 10 i The Fifth Di s t r i ct CREDIT OUTSTANDING TO REAL ESTATE M O R TG A G E LENDERS Commercial bank credit outstanding to real estate mortgage lenders totaled almost $177 million as o f held almost 1 7 % , and life insurance com panies over 5 % . M utual savings banks had none of the credit O ctober 30, 1968 according to a survey o f twentytw o Fifth District weekly reporting banks. T he outstanding and the “ other” category accounted for over 8 % . T he dom inance o f m ortgage companies survey was prom pted by the im portance of the m ort gage market in the overall econom ic picture and by the lack of similar inform ation since a 1959 survey. is due in part to their use as intermediaries by both life insurance com panies and mutual savings banks. These activities increase m ortgage com panies’ credit T he banks in the Federal Reserve panel o f weekly reporting banks account for nearly 9 0 % of all such credit outstanding. needs from com m ercial banks and, at the same time, decrease those o f life insurance companies and Real Estate Mortgage Lenders R eal estate m o rt gage lenders borrow m oney from com m ercial banks Type of Credit in order to finance m ortgages. loans and repurchase agreements. Loans accounted for 8 4 .5 % of the credit outstanding to m ortgage Their profit depends upon the spread between the cost o f their bank credit and the price they charge for a m ortgage minus operating costs. Thus m onetary policy, and partic mutual savings banks. C o m m e rcia l ba n k cre d it is e x tended in tw o form s to real estate m ortgage len d ers: lenders in this survey. T his category included loans secured by the real estate m ortgage loans ow ned by ularly interest rates, play a m ajor role in the m ort the borrow ers as well as loans to real estate m ortgage gage market. In this survey, real estate m ortgage lenders were lenders otherwise secured or unsecured. M ortgage divided into five g r o u p s : life insurance companies, companies were the predom inant borrow ers, account ing for almost 6 9 % o f the loans outstanding. Savings m ortgage companies, savings and loan associations, and loan associations held almost 2 0 % o f the total, mutual savings banks, and “ other” institutions, which included non-life insurance companies and other firms that make or hold substantial amounts o f real estate loans. category accounted fo r the rest. Repurchase agreements made up the remaining M ortgage com panies accounted for almost 7 0 % of com m ercial bank credit outstanding to real estate m ortgage lenders. Savings and loan associations life insurance companies almost 6 % , and the “ other” 15.5% o f the credit extended. These agreements in cluded all m ortgages purchased from the real estate m ortgage lenders and held under a specific com mitment by the borrow er to repurchase the m ort- CREDIT OU TSTAN D IN G TO REAL ESTATE M O R TG A G E LENDERS Fifth District W eekly Reporting Banks* October 30, 1968 Loans Real Estate M ortgage Lenders Life Insurance Com panies M ortage Com panies Savin g s & Loan Associations Repurchase Agreem ents Total Credit ($ Thous.) ($ Thous.) ($ Thous.) 8,781 102,909 1,161 9,942 19,993 122,902 29,537 29,537 M utual Savin g s Banks Other 8,187 6,354 14,541 149,414 27,508 176,922 * Based on tw enty-tw o of the tw enty-five w eekly reporting banks. 11 gages at a specific time. M ortgage companies again led the real estate m ortgage lenders with almost was in the form o f repurchase agreements rather than loans. 7 3 % o f the repurchase agreements outstanding. L ife insurance companies held over 4 % and the rest of Loans to life insurance com panies have accounted for anywhere from 1.9% (N ov em b er 14, 1956) to the repurchase category. 5 .4 % (A u g u st 8, 1956) of the total. T heir re purchase agreements reached their lowest level in this survey at 0 .6 % o f the total but have been as high as 12.9% (A u g u st 10, 19 5 5 ). Loans to savings agreements fell into the Comparison with Previous Surveys “ other” The com position and number o f weekly reporting banks has changed over time, but some com parison between the current survey and previous ones can be made. Of the com m ercial bank credit extended to real estate m ortgage lenders, loans to m ortgage com panies ac counted for over 58% of the total. Repurchase and loan associations have fluctuated from a low o f 3 .8 % (F ebru ary 15, 1956) o f the total credit ou t standing to a high o f 16.7% reported in this survey. Repurchase agreements with savings and loan as sociations have varied from none in the current re port to 4 .6 % of the total on February another 11% o f the total, thus giving m ortgage com Conclusions T o ta l cre d it e x te n d e d to real estate panies 6 9 % of the interim credit extended. In the m ortgage lenders by responding Fifth District weekly past, the m ortgage com pany share of the total has reporting banks totaled almost $177 million in O ctober 1968. In 1959, a similar survey reported agreements with m ortgage companies accounted for varied from 6 3 .8 % on A ugust 13, 1958 to a high o f almost $83 million of such credit outstanding. 7 4 .6 % on February 11, 1959. Mutual savings banks have consistently accounted for very little of com m ercial bank credit to the m ort gage lenders. the O ctober N one of the Fifth District banks in survey reported 15, 1956. extending credit to O ver this period the com position o f the credit extended has remained approxim ately the same. Loans have varied from a low o f 7 7 .9 % (A u g u st 10, 1955) to a high of 9 2 .7 % (F eb ru a ry 11, 1959) of the total and accounted for 8 4 .5 % o f the total in this survey. mutual savings banks and only three times in previous M ortgage com panies continue to be the largest users surveys have they accounted for over 0 .1 % of total o f com m ercial bank credit. credit. In each of the previous instances the credit 12 K atherine M . Chambers