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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

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