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IN THIS ISSUE: • Southern Mortgage Bankers Eye Housing Prospects • A Little Known M O N T H L Side of Banking Y • When Banks Borrow • Interest Rates Bip as Business Lending Slows R E V I E W • District Business Conditions FEDERAL RESERVE BANK OF A T L A N T A J u ly 1 9 6 7 S o u th e rn E y e M o rtg a g e H o u s in g Developments in the mortgage markets since midMay have raised the question of how much addi tional thrust residential building will provide to the economy in the balance of the year. Lagged but substantial recovery in this large sector of domestic investment had been an important part of the substantial pickup projected for the econ omy in the second half of 1967. Since residential building in the past two decades has tended to counteract main economic swings, a recovery was expected following the economic slowdown in late 1966 and a changed monetary policy facilitating the necessary fi nancial flows to support adjustments. The rapid ity with which capital market yields responded to the initial stages of easing monetary conditions led many observers to expect a shorter lag in housing recovery than in some past periods. This general view seemed even more defensi ble for a number of reasons when applied to the South. Since the beginning of the housing recov ery in late 1960, the South had enjoyed a sub stantial three-year expansion, followed by a vir tually level plateau of two years of home buildM o n th ly Review , Vol. LII, No. 7. Free subscription and additional copies available upon request to the Research Department, Federal Reserve Bank of Atlanta, Atlanta, Georgia 30303. Digitized 90 for FRASER B a n k e rs P ro s p e c ts ing at rates almost as high as in 1963. This con solidation period had allowed intraregional shifts in the pace of new production and in some markets had brought a slowing of output so that growing demand reduced excess housing stocks. Meanwhile, the South had accounted for a con tinuously rising proportion of total housing starts since 1959, when it recorded 33.7 percent. The proportion had risen to 40.5 percent in 1966, and for the eight-year period the region accounted for 36.7 percent of total starts. Population growth higher than the national rate in the 1960’s, together with further indus trialization and rising incomes, had also laid the foundation for resiliency, as well as continued long-term growth, in the South’s effective hous ing demand. Moreover, the quality of housing de manded had also been affected by higher incomes and the emergence of more attainable housing goals among a growing segment of the population. Since large amounts of mortgage funds are imported into the region by mortgage bankers and other financial institutions, it seemed likely that the early and pronounced downswing in yields in the capital markets and the rapid rise in mort gage prices in the secondary market would produce an early housing recovery. This view was further supported by a decline which was rela tively less severe in the South than in the three M O N T H L Y R E V IE W other major regions, although housing starts be gan to fall sharply in all areas early in 1966. Southern housing did indeed follow this gen eral pattern, after reaching a low of 372,000 starts, at a seasonally adjusted annual rate, in October 1966. Thereafter, through April 1967 and with the exception of February, each month’s rate of starts was higher than the previous one. However, a new upturn in capital market rates, particularly in longer maturities that are closely competitive with mortgage yields, had gotten underway in February. Led by long-maturity Treasury securities, the rise was soon joined by corporates and municipals, in spite of continued moves toward monetary ease. By the middle of May heavy supplies of new debt offerings and the prospects for a sharp increase in Treasury borrowings in the second half had pushed most long-term rates sharply higher. As in the down swing in yields in late 1966, these changing yield pressures were quickly transmitted to the mort gage market. Contract rates on conventional mort gages either firmed at previous levels or rose somewhat, while yields on FHA and VA mort gages increased sharply. Because of the importance of adequate sup plies of imported mortgage funds in this District and because mortgage bankers are the principal intermediaries in this flow, this Bank surveyed the changing outlook for housing in late May.* The group of 80 mortgage bankers who responded service almost $6 billion in outstanding mortgages on properties located in Alabama, Florida, Geor gia, Louisiana, Mississippi, and Tennessee. Housing Demand Strengthens Over one-fourth of the 80 respondents, represent ing the majority response in 7 of 27 market areas, stated that housing demand was very strong. An other 55 percent, representing 16 of 27 market areas, reported an improvement. Only 17.5 per cent of respondents in four market areas charac terized housing demand as “about the same as in late 1966” or as “weak,” giving these reasons: Financial factors of R in ses 1. High interest rates and/or discounts . . 21 2. Statements by public officials suggesting that FHA interest rates may be lowered so o n ........................................ 2 3. Unrealistic usury laws ......................... 3 ♦The Bank’s study was part of a larger survey to evaluate changes in the regional network of mortgage banking in the Sixth District. A second article will present the results of this analysis in a forthcoming issue. DigitizedJ Ufor L YFRASER 1967 4. Waiting for lower interest rates .......... 1 5. Sale of existing homes difficult because of high discounts on mortgages.......... 1 Uncertainty due to military factors............. 5 1. Vietnam and impact of military service on young buyers .........................(3) 2. Uncertainty of wartime conditions. . (2) Population factors 1. Lower rate of in-migration..................... 1 2. Slower population growth in 1960’s than in 1950’s ................................................ 1 Other factors 1. High and rising taxes on hom es............. ....1 2. Changes in local property tax impact . . 1 3. Poor political leadership ..................... ... 1 4. Poor public education system ................. 1 5. Bad newspaper reporting—doubt in pur chasers’ minds .................................... 1 6. Low demand or lack of demand for housing, cause unspecified................. 2 Most of the responses dealing with housing demand were based on developments through mid-May, at which time appreciation of the most recent pressures on mortgage rates had not be come widespread. However, in follow-up conver sations between June 1 and June 16, few wished to lower their original evaluations of the strength of demand. In two cases, respondents covering entire states indicated that immediate demand for housing purchases may have strengthened somewhat, as those waiting for lower rates de cided to go ahead with planned purchases. One prominent mortgage banker stated that many potential home buyers have concluded that higher Table I: Strength of Housing Demand in Sixth District States M ark et A reas* S tre n g th of H o u sin g D em an d R e s p o n d e n ts P e rc e n t of P e rc e n t of N um ber T otal N um ber T otal 7 25.9 22 27.5 16 59.2 44 55.0 A bout th e s a m e a s in la te 1966 3 11.1 10 12.5 W eak 1 3.7 4 5.0 Very w e ak 0 0 0 0 T o tal 27 100.0 80 100.0 V ery S tro n g Im p roving R ep o rtin g *ln n in e in s ta n c e s th e r e w e re s p lit r e s p o n s e s fo r th e s a m e m a rk e t a re a . In th e s e c a s e s m a rk e t a r e a s a r e c la ss ifie d on th e b a s is of p lu ra lity of re s p o n s e s . In c a s e s of e q u a l n u m b e r of re s p o n s e s a m o n g th e five c h o ic e s , c la ss ific a tio n w a s m a d e on th e b a s is of s iz e of s e rv ic in g a c c o u n t a n d a r e a s of c o v er a g e of th e re s p o n d e n ts . 91 mortgage rates than those of the early 1960’s are going to persist. He went on to say that, “In one way or another the Federal government will make effective its demand for money to fulfill its programs. Corporate business and municipalities, for a variety of reasons, are in a superior position to absorb a major share of available savings flows. The would-be home buyer who waits for this to change enough to bring mortgage interest rates down may find that housing production costs have risen much more than his potential savings on interests costs.” Improvement in housing demand appears most pronounced in Georgia and Tennessee, where the largest number of “strong demand” market areas was reported. Florida and Louisiana had a smaller number but a majority of market areas enjoying improving demand. Although most of the respondents in Alabama and Mississippi did not say that demand was strong, three individual respondents indicated otherwise. Housing Production Revives Ten respondents, representing 13 percent of the total and a majority opinion in 11 percent of market areas, reported housing starts through April as “far above the first four months of 1966.” Twenty-one respondents in ten or more market areas saw starts as “somewhat above the first four months of 1966,” while 21 reporters in nine market areas indicated housing starts at “about the same level as in the first four months of 1966.” Another group of 21 in five or more markets reported starts as “below the first four months of 1966,” and only two reporters saw Table II: Volume of Housing Production in Sixth District States M arket V olum e of H o u sin g P ro d u c tio n A reas* R e s p o n d e n ts P e rc e n t of P e rc e n t of N um ber T otal N um ber T o tal F a r a b o v e first fo u r m o n th s of 1966 3 S o m e w h a t a b o v e first fo u r m o n th s of 1966 10 37.0 A bout th e s a m e a s 1966 9 33.3 B elow th e first fo u r m o n th s of 1966 5 18.5 21 28.0 F a r below th e first fo u r m o n th s of 1966 T o tal R ep o rtin g 11.1 10 N um ber Financial factors of R e s p o n s e s 1. High interest rates and/or discounts or shortage of money ............................. 16 2. Uncertainty in present money market . . 7 3. Cost and availability of construction money ................................................ 4 4. Basic deficiencies in the mortgage market 2 5. Money is now retightening..................... 2 6. Competition of commercial loans, taking money from singles............................. 1 7. Lack of flexible interest rate on FHAVA’s .................................................... 1 8. Too many Federal controls in the money market ................................................ 1 9. Competition of bond yields ................. 1 Cost factors, other than costs related to finance 1. Rising land, labor, and/or other con struction costs ........................................7 2. Changes in local property taxes ............. 2 3. Builders’ skeptical of profits n o w .............2 4. Builders’ profits disappeared in 1966 . . 1 Other factors 1. Lag in development of new subdivisions and building sites and time needed to gear u p ............................................ 2. Loss of builders who went broke last year .................................................... 3. Oversupply of housing, overbuilding in p a st........................................................ 4. Loss of skilled workers during housing slump .................................................... 5. Smaller builders waiting for further strengthening in the m arket.............. 7 3 2 2 1 13.3 Outlook Good, But Not Boomy 21 28.0 21 2 8.0 Mortgage bankers were asked to comment on their volume of mortgage origination activity through mid-May in contrast to that of the same period last year. In interpreting their replies, it should be borne in mind that housing starts and mortgage origination activities were still at high levels during the 1966 period. Over two-thirds of the mortgage bankers indi cated that their origination activities, which in- 0 0 2 2.7 27 100.0 75 100.0 * S ee fo o tn o te , T a b le I, fo r c la ss ific a tio n m e th o d fo r m a rk e t a r e a s w ith m o re th a n o n e re s p o n d e n t w h e n re s p o n s e s w e re d ifferen t. Digitized 92 for FRASER starts as “far below the first four months of 1966.” Although most of the replies incorporated in Tables I and II were based on activity prior to the sharp rise in FHA-VA yields in mid-May, it appears that a solid groundwork for housing re covery in the District has been laid. The causes of retarded production were given as: M O N T H L Y R E V IE W Chart I: Volume of Origination Activity in 1967 Percent of Respondents 20 40 60 Comparable 1966 Period Far Above Above About the Same Below Far Below Total About the Same or Higher T h ro u g h m id-M ay th e o rig in a tio n a c tiv itie s of a b o u t tw o -th ird s of m o rtg a g e b a n k e r s w e re ru n n in g a t le v e ls a b o u t th e s a m e o r h ig h e r th a n th o s e of e a rly 1966. A c tiv itie s a b o v e th e c o m p a ra b le 1966 p e rio d w e re m o re p re v a le n t a m o n g th e la rg e st firm s o p e ra tin g in e x te n s iv e m a rk e t a re a s . elude inquiries, mortgage applications, forward commitments, construction loans in some cases, and closing of mortgage loans, were near the same or at higher levels than during the same period in 1966. More than 43 percent of the re spondents reported such activities above and 11.2 percent far above the same period in 1966. Less than one-third reported lower origination activity. Approximately the same results were secured when replies from the 20 largest mortgage firms were tabulated separately and weighted by size. The average portfolio of mortgages serviced by this group at the end of 1966 was slightly in excess of $200 million and each serviced over $100 million. Moreover, 18 of the 20 were mul tiple branch operators primarily in entire states or throughout the Southeast. Together they ac counted for over two-thirds of total servicing re ported by the 80 mortgage bankers and for over three-fourths of FHA and VA mortgages. Vir tually all of them originate mortgages without prior commitments, and the same high proportion make construction loans. One or more of these firms are located in each of the six states served by this Bank. Mortgage origination activities of this group of 20 reinforce the expectation of continuing hous ing recovery when the replies are weighted by size of firm. Allowing one point for each $100 million of servicing account, those whose activi ties through mid-May were above those of 1966 amounted to 57.5 percent, while those “about the same as 1966” accounted for only 10 percent. Digitized J Ufor L Y FRASER 1 9 67 Origination activities at levels lower than early 1966 were reported by only 32.5 percent. Firms headquartered in Alabama, Florida, and Georgia were generally enjoying relatively higher levels of origination activity than those in the other District states. Mortgage bankers were asked to project the level of housing production for the balance of the year in their market areas, taking into account the present and expected availability of funds from their investors and the rate of re-entry into production by builders. Of all respondents, 43.7 percent expect the level to be above that of 1966; 41.2 percent, about the same as 1966. Only 15 percent look for the production level to be below that of 1966. As in the case of origination activities, weight ing the responses of the 20 largest mortgage bankers by size of firms produced a somewhat higher percentage expecting continued improve ment. Almost 53 percent anticipate the level of housing production to be above that of 1966; 27.5 percent, about the same as in 1966; but 20 per cent, at a lower level. Also consistent with the pattern of origination activities through mid-May, expectations of higher levels in the last half of 1967 were concentrated in Alabama, Florida, and Georgia. Comments of mortgage bankers responding to this survey reflected rising concern over the recent uptrend in long-term interest rates. Yields on high-grade corporate bonds have already crossed the range in which they become directly competitive with yields on FHA-VA mortgages. Although recent firming of mortgage rates ap pears to have stimulated some potential home Chart II: Level of Housing Expected By the End of 1967 PercentofRespondents i i F o ur-fifths o r m o re of all re s p o n d e n ts e x p e c t th e level of h o u s in g p ro d u c tio n by th e e n d of 1967 to be ru n n in g a b o u t th e s a m e o r a b o v e th e o u tp u t of 1966. Very few firm s a re e x tre m e ly p e s s im is tic , b u t a n u m b e r th in k th is y e a r’s p ro d u c tio n w ill b e below th e 1966 level. 93 buyers to go ahead with purchases, it has con siderably dampened the outlook for rising output of new housing. In some markets the improving flows of funds to conventional lenders has en abled builders to shift from FHA-VA financing to conventional. On balance, however, the South east has long been unable to finance its housing needs from intraregional savings flows. Further recovery of home building will depend greatly on whether builders can find ways to ab sorb cost rises involved in higher discounts on marketable mortgages in the present yield struc ture. It will also depend on the number of build ers who are willing to take the risks of further discount changes between starts and sales. In view of the present uncertainties in the capital markets, few mortgage bankers are in a position to commit themselves for future closings at firm prices. Hiram J. H onea B a n k A n n o u n c e m e n ts The Citizens State Bank, Marianna, Florida, a nonmem ber bank, began to rem it at par on June 8 fo r checks drawn on it when received from the Federal Reserve Bank. On June 10, a newly organized nonm em ber bank, Citizens and Southern Bank of North Fulton, Roswell, Georgia, opened fo r business as a pa r-rem itting bank. Officers are Hugh F. Lane, president; Harold A. Benson, vice president; and Ted A. Murphy, cashier. Capital is Digitized 94 for FRASER $2 00,000; surplus and other ca p ita l funds, $2 00,000. The F irst Bank of M arianna, M arianna, Florida, a nonmember bank, began to rem it at par on June 12. The Bank of Cave Spring, Cave Spring, Georgia, a newly organized nonmember bank, opened on June 15 and began to rem it at par. Officers includ e H. E. Mize, president; H. J. Hedgepeth, executive vice president and cashier; and J. D. Lindsey, vice president. Capital is $50,000; surplus and other ca p ita l funds, $50,000. M O N T H L Y R E V IE W A L ittle K n o w n Most persons look on commercial banks as places to keep their checking or savings accounts and as sources of funds for purchasing an automobile or for meeting other major expenditures. The average person probably knows little about the activities that go on in another service area of his bank—the trust department. Yet, in some cases, the assets administered by trust departments of large commercial banks rival the assets of the banks themselves. As of the end of 1966, trust assets of the 16 large commercial banks for which these data are available totaled almost $4.5 billion. Of this amount, $3.2 billion was held in over 18,000 per sonal accounts and the remainder, $1.3 billion, in 848 corporate trusts. In 1956 total trust assets administered by the same banks totaled $1.6 billion. Not only are trust departments important ad ministrators of assets, they also contribute signif icantly to bank earnings. In 1966, 188 out of the 524 member banks in the District reported income from trust operations. Although some banks had only nominal incomes from this source, trust in come contributed significantly to total bank in come in other cases. Of the 188 banks, 28 re ported income from trust operations of over 5 percent of total income. The 30 large commercial bank trust depart ments included in this Bank’s annual survey of earnings and expenses derive the largest portion of their income from fees on trust accounts. They took in 43 percent of total commissions and fees from that source. Management of estates con tributed 34 percent of their income. Agency ac counts provided 17 percent of trust income in 1966. Pension and profit sharing trusts, important trust activities in other parts of the country, con tributed only 6 percent. Expenses absorbed 89.8 percent of income dur ing 1966. On average, the 30 trust departments reported net earnings before income taxes of 10.2 percent. Net earnings after taxes amounted to 5.4 percent of total commissions and fees, a slightly higher profit rate than the average for all member banks on income from all sources. W. M. D avis S id e o f B a n k in g Trust Departments of Sixth District Commercial Banks 1966 N u m b e r of B a n k s .......................................................................... 30 P e rc e n t of T otal C o m m issio n s and Fees C o m m issio n s a n d fe e s from E s t a t e s ......................................................................................... 34.2 T r u s t s ......................................................................................... 42.7 P e n sio n a n d profit s h a rin g t r u s t s .............................. 6.0 A g e n c i e s .................................................................................... 17.1 T otal c o m m is sio n s a n d f e e s ...................................100.0 T otal e x p e n s e s ........................................................................... 89.8 N et e a r n in g s b e fo re in c o m e t a x e s ...................................+ 1 0 .2 In co m e ta x c h a r g e s ( —) o r c re d its ( + ) ......................... — 4.8 T ru st d e p a r tm e n t n e t e a r n i n g s ..............................+ 5.4 P e rc e n t of T o tal E x p e n ses D irect e x p e n s e s S a la rie s a n d w a g e s O f f i c e r s ..................................................................................... 3 0 .8 E m p lo y ees ........................................................................... 23.7 P e n s io n s a n d r e t i r e m e n t s ............................................. 4.6 P e rso n n e l i n s u r a n c e ............................................................ 1.1 O th e r e x p e n s e s re la te d to s a l a r i e s .............................. 2.5 T otal e x p e n s e s re la te d to s a l a r i e s ......................... 62.7 O c c u p a n c y of q u a r t e r s .................................................. 6.7 F u rn itu re a n d e q u i p m e n t ............................................. 2.1 S ta tio n e ry , s u p p lie s , a n d p o s t a g e .............................. 3.0 T e le p h o n e a n d te le g ra p h ............................................. 1.2 A d v e r t i s i n g ................................................................................ 2.1 D ire c to rs’ a n d tr u s t c o m m itte e f e e s ......................... .7 Legal a n d p ro fe s sio n a l f e e s ............................................. 1.8 P e rio d ica l a n d in v e s tm e n t s e r v i c e s ......................... 1.6 E x a m i n a t i o n s ........................................................................... 1.1 D ata p r o c e s s i n g ...................................................................... 3.5 O th e r d ire c t e x p e n s e s ....................................................... 3.2 T otal d ire c t e x p e n s e s .................................................. 89.7 O v e r h e a d ................................................................................ 10.3 T o tal e x p e n s e s .................................................................100.0 R e la te d ite m s D ollar a m o u n t of to ta l c o m m is s io n s a n d fe e s (th o u s a n d s ) ........................................................... 18,169 D ollar a m o u n t of to ta l e x p e n s e s ( t h o u s a n d s ) .......................................................................... 14,448 * D eposit c re d it a s p e rc e n t of to ta l c o m m issio n s an d f e e s ............................................................................... 20.6 *A verage ra te allo w ed on d e p o s it c r e d i t .................... 3.23 *A verage n u m b e r of o f f i c e r s .............................................12.6 *A verage n u m b e r of e m p l o y e e s ........................................27.0 NOTE: R atio s a re a v e ra g e s of in d iv id u a l b a n k ra tio s. ‘ A verage of in d iv id u a l banks re p o rtin g th is ite m . Copies of the Survey of Earnings and Expenses of Commercial Bank Trust Departments, Sixth Dis trict, 1966, are available upon request to the Research Department of this Bank. J U for L Y FRASER 1967 Digitized 95 W h e n B a n k s Business was brisk at the window but the Federal Reserve agent wasn’t satisfied. “Inasmuch as you have never availed yourself of the rediscount fa cilities of the Federal Reserve Bank of Atlanta,” he wrote to District member banks which were borrowing from other sources, “we are anxious to ascertain if there be any specific reason for you not allowing this institution to serve you in this capacity.” That year, 1915, the infant Reserve bank was reaching out for business to increase its revenues and insure its future. Though the agent was proud that two-thirds of the Sixth District members had used the bank’s services, he wanted to accommo date the others. Think of his reaction if he were to return to Atlanta today and find the number of banks taking advantage of the discount privi lege greatly diminished. His astonishment would doubtlessly turn to disbelief upon learning that we are not sending out letters to drum up more business. The Federal Reserve System’s oldest policy tool has changed greatly in its purpose and ap plication. No longer is discounting the major source of income for Federal Reserve Banks; neither are all member banks necessarily encour aged to borrow. Experience has modified the concept of the proper use of the borrowing privi lege by member banks. Moreover, this concept is an evolving one. Today, recognizing that eco nomic and financial conditions continue to Digitized 96 for FRASER B o rro w change, the System has undertaken a funda mental reappraisal of its lending function to de termine if the discount mechanism again needs alteration. Despite changing views of the role of member bank borrowings, it has always been an important facet of monetary policy. By augmenting reserves, loans from the Federal Reserve System not only aid borrowing banks, but also increase the ability of the banking system to extend credit to its customers. Lately, considerable changes in the volume of borrowings by District banks have occurred. More banks used our discount window in 1966 than in any of the last 30 years. Now borrowings from this bank are almost nil. What is the significance of these abrupt changes? What kinds of banks use the window? Why do they borrow? Why Banks Borrow Each member bank must maintain a balance at a Federal Reserve Bank as a part of its legal re serve requirement. Like ordinary checking ac counts, these bank balances fluctuate with check clearings, currency withdrawals and deposits, and other transactions. Therefore, many factors may reduce a bank’s balance below the minimum re quired level, forcing the bank to repair its reserve position. Likely candidates for causing reserve deficien M O N T H L Y R E V IE W cies include unexpected withdrawals of private or public funds, prolonged adverse clearings as funds are moved from one area to another, seasonal patterns, and increased competition from another financial institution. Since the forces which play upon a bank’s reserve position are only partially predictable, the banker’s response to a reserve de ficiency will depend upon his ability to predict it, his flexibility to meet adverse clearings, and his willingness to use alternative means of adding to his reserves. When a bank’s reserve balance is too low, what are its choices? The banker may borrow from the Federal Reserve Bank, or he may borrow from commercial banks by buying their reserves in the Federal funds market. If he does not wish to borrow the reserves, he can sell Treasury bills or other earning assets or not renew or make new loans as old ones are paid off. Alternately, he may induce other banks or the public to increase their deposit balances. Most likely, he will draw from several sources of funds. Adjusting Reserves Of the major adjustment methods used to replen ish reserves, borrowing from the Federal Reserve System is probably the least popular. With the exception of the early years of the Federal Re serve System, when discounts and advances were actively solicited for revenue, the number of banks not borrowing in a given year has exceeded the number of banks borrowing by at least three to one in this District. In most years the per centage of non-borrowing banks has been much higher, indicating that banks usually prefer to adjust their reserve positions without resorting to the Federal Reserve’s discount window. During periods of strongly rising loan demand, however, alternative sources of funds become more difficult to use. The increase of member banks borrowing in this District in 1966 demon strates very clearly what happens during such a period. Banks were faced with a great demand for loans, and most of them found it difficult to reduce the pace at which loans were being made. M e c h a n ic s o f D is c o u n tin g * Member banks may borrow from a Reserve Bank in two ways. First, they may redis count short-term commercial, industrial, agricultural, or other business paper, with recourse on the borrowing bank. Second, they may give their own promissory notes secured by paper eligible for discounting, by Government securities, or by other satis factory collateral. Borrowings by the first method are called discounts; by the latter, advances. The custom has developed of re ferring to both types of Reserve Bank lend ing as discounting, and the interest charge applicable to such lending is known as the discount rate. Actually, most member bank borrowing has come to be in the form of advances— that is, against notes with Government se curities as collateral. This form of borrow ing is more convenient and time-saving for the bank, because the collateral is free of credit risk, is instantly appraisable as to JULY Digitized for 1967 FRASER value, and can be more readily supplied in large amounts conforming to the borrowing needs of individual banks. M any member banks leave Government securities with their Reserve Bank for safekeeping; this arrangement makes it easy to pledge such securities as collateral when they need to borrow. When a member bank borrows at a Re serve Bank, the proceeds of the loan are added or credited to its reserve balance on deposit at the Reserve Bank. Conversely, when it repays its indebtedness, the amount of repayment is deducted from or charged against its reserve balance. Federal Reserve advances to or discounts for member banks are usually of short maturity—up to 15 days. ♦Board of Governors of the Federal Reserve System. The Federal Reserve System: Purposes and Functions (1963), pp. 40-41. 97 borrowings per bank (a combination of size and It was hard for them to obtain funds from de mand deposit expansion since businessmen and duration of loans) increased from $458 thousand to $603 thousand. With both number of banks householders were in no mood to keep money and average borrowings per bank advancing, bor idle in checking accounts when they could earn rowings climbed to an average $71 million daily, higher returns elsewhere. or nearly double the $37 million per day average M any banks were able to feed the loan ex pansion early in the year by attracting time de borrowings in 1965. posits and curbing investment acquisitions. In the Breaking down the aggregate rise in borrow fall, however, time-deposit growth slowed consid ings reveals different patterns at reserve city and erably, as rates on certificates of deposit reached country banks. Reserve city banks borrowed an their legal maximums and rates on competing average of $40 million per day in 1966, up nearly instruments continued to rise. 50 percent from the previous year’s average. This Other methods of adding to reserves also be occurred, although only one additional reserve came more expensive. An increase in the Federal city bank joined the number of borrowers. Ob funds rate, from 4.32 in December 1965 to 5.53 in viously, daily borrowings per bank rose abruptly. October 1966, made borrowing from other banks Country banks borrowed an average of slightly very costly. Large denomination time certificates more than $31 million per day last year, about of deposits which could be used to induce corpo a fourth less than the daily average of reserve rations to place funds in a bank for 4% percent city borrowings. At this rate country banks were in early 1966 were carrying rates of 5 y2 percent borrowing more than three times as much in 1966 in September. Rising yields on U.S. Government and other se B o r r o w in g s from the F ed e ra l R e se rv e B a n k of A tla n ta in c re a s e d s h a r p ly last curities, as evidenced by an in year, a s h a s been the te n d e n c y in p re v io u s p e rio d s of r is in g cre d it d e m a n d . crease in the short-term Treasury MillionsofDollars bill rate from 4.58 in January 160 — MonthlyAverages to 5.36 in September, meant that —ofDailyBorrowings many securities could be sold only at a loss. C ollectively, these develop ments restricted banks’ freedom to adjust reserves by methods other than borrowing from the Federal Reserve System. In this environment more and more banks turned to the discount window for assistance. Conse quently, Sixth District member bank borrowing increased from M o v e m e n t s in d a ily a v e ra g e b o r r o w in g s ove r th e 195 9 -6 7 p erio d la rg e ly reflect a daily average of $47 million in c h a n g e s in b o rro w in g s per b a n k at re se rv e c ity b a n k s. April to an average $120 million per day in September. D a ily A v e ra g e B o r r o w in g s N u m b e r of B a n k s D a ily A v e ra g e A m o u n t s Borrowing Patterns in 1966 In such a period the growth in borrowing is accompanied by changes in the number of banks borrowing, size of loan, and length of indebtedness. When borrowings rise, these three fac tors tend to move together, re sulting in more banks borrowing larger sums for longer periods. Last year, for example, 117 Dis trict banks borrowed, compared with 80 in 1965. Daily average Digitized 98for FRASER Per B a n k (M illio n s of D o lla rs) 0 1 2 3 I I I I I I 1 R e s e r v e C i t y C o u n tr y 1967* 1966 1965 |_____ Z1 1964 1963 1962 1961 1960 1959 I I I I I I I B o r r o w in g 1 11 11 11 1967* if|Res|erveCityj-^-Country | 1966 | 1 1965 1 1964 J _____1 1963 1.sS 1 1962 ir.f \ J 1961 ■ S 1 1 1960 !$i 1959 I 11 1! 1 I 0 of B o r r o w in g s ( M illio n s of D o lla rs) 20 40 60 80 MONTHLY REVIEW Percent of Sixth District Member Banks Borrowing from the Federal Reserve Bank in 1966 5-10 10-25 (27) 25-50 50-100 100-200 Total Deposits (Millionsof Dollars) NOTE: Number of banks borrowingindicated in parentheses. T h e la rg e r a b a n k ’s d e p o sit size, the m ore in c lin e d it is to b orrow from the Fed e ral R e se rv e B an k. as in 1965. The upsurge in country bank borrow ings, unlike that at reserve city banks, reflected a change in both the number of banks borrowing and the average borrowings per bank. Thirtyseven more country banks borrowed in 1966 than in 1965, and the average per bank more than doubled. This sharp increase in discount activity, dra matic in terms of changes over a year ago, ap pears much less unusual when compared with previous borrowing behavior. Cyclical movements of borrowing indicate that District bankers have generally expanded their indebtedness to the Fed eral Reserve Bank of Atlanta in periods of rising economic activity, repaying loans as the business pace has abated. Despite the greater number of banks borrow ing in 1966, daily average borrowings were ac tually lower than in 1959, the previous peak borrowing year. This came about primarily be cause reserve city banks did not increase their average borrowings per bank to the level reached in 1959. They probably borrowed more from other commercial banks, as indicated by District banks’ greater participation in the Federal funds mar ket in the past six years. Several of our larger JULYfor 1967 Digitized FRASER banks were heavy purchasers of Federal funds last fall. An evaluation of changes in borrowing during the 1959-66 period reveals that the rise in bor rowings at reserve city banks resulted typically from changes in degrees of participation by a set group of banks. At country banks, however, both number of banks borrowing and average borrow ings per bank changed considerably. In one year —1960—a decline in loan size sufficiently out weighed an increase in the number of banks bor rowing, producing an overall decline in the vol ume of bank borrowings. Most small banks do not borrow from the Fed eral Reserve System. In 1966, less than 10 per cent of the member banks with deposits under $5 million received a loan from this Bank. At the other end of the scale, nearly 90 percent of banks with deposits of $200 million and over were borrowers. Since larger banks presumably make more extensive use of the various reserve adjustment techniques, the concentration of bor rowing at larger banks would tend to support the hypothesis that last year’s increase in borrowings resulted primarily from rising costs and falling availability of reserve adjustment by methods other than borrowing from the System. Current Discount Activity When pressures on banks to make loans are less strong—thus far characteristic of 1967—reserve adjustment methods other than borrowing from the Federal Reserve become more feasible and attractive. Federal funds have been trading at about 4 percent and the short-term Treasury bill rate had fallen to 3.4 percent by mid-June. Re flecting these changes, District member bank bor rowings have remained at a low level for the past four months, averaging a very modest $3 million per day. In the most recent month, June, only nine country banks were in debt to the Federal Reserve Bank of Atlanta; daily average borrowings per bank amounted to $363 thousand. No reserve city banks borrowed from mid-May to the end of June. p AUL A_Chowe The Performance of Bank Holding Companies by Robert J. Lawrence (June 1967) is now available from the Board of Governors of the Federal Re serve System, Washington, D.C. 20551. 25 cents per copy; 20 cents per copy in quantities of 10 or more; copies free to government departments, libraries, college and university professors, and graduate students in this field. 99 A s B I n t e r e s t R u s i n e s s L Business customers of large commercial banks in the Sixth District on average paid slightly lower rates in May than three months earlier. The aver age interest rate for all types and sizes of busi nesses was 6.02 percent, compared with 6.19 per cent in February 1967. This slight decline fol lowed a steady rise in rates extending back to 1965. Rates charged on money borrowed by busi nesses, individuals, or governments depend on a great many factors. High on the list of judging an applicant is the risk that his loan will not be repaid. The general credit standing of the busi ness borrower, the type of collateral backing the loan, and the purpose and term of the loan are important factors explaining differences in rates paid by borrowers. In addition, the interest rate charged by banks, like most other prices, depends on the general demand and supply situation in credit markets. When banks run short of funds but customer loan demand stays high, they usually tend to hike their rates. When banks have ample funds and the demand for loans is weak, rates tend to ease off. The latter situation contributed to the drop in rates during the first quarter. The decline coin cided with a moderate weakening in loan demand, as businessmen cut back on the rate at which they were adding to their inventories. They also needed less money for tax payments than earlier in the year. At the same time, banks had more funds to lend, as the Federal Reserve System continued to make reserves available to the bank ing system. As the chart on total loans to busi ness firms by large commercial banks in the Sixth Bank Rates on Short-Term Business Loans (P e rce n t p er a n n u m ) F e b ru a ry 19 6 7 S iz e of loan $ 1 ,0 0 0 -9 ,9 9 9 ......................... $ 1 0 ,0 0 0 -9 9 ,9 99 ...................... $ 1 0 0 ,0 0 0 -4 9 9 ,9 9 9 .................. $ 5 0 0 ,0 0 0 -9 9 9 ,9 9 9 .................. $ 1 0 0 ,0 0 0 ,0 0 0 a n d ove r . . . . A ll s iz e s ............................. .............. 6.61 .............. 6.39 .............. 6.15 .............. 6.04 .............. 5.94 .............. 6.19 May 19 6 7 6.49 6.30 6.00 5.69 5.83 6.02 B a s e d on lo a n s of $ 1 ,0 0 0 or m ore m a d e to b u s in e s s e s d u r in g the first 15 d a y s of the m onth. 100 a t e s D i p e n d i n g S l o w s Business Loans At Large Commercial Banks S ix t h D istric t Billionsof Dollars 2.4 1.2 1964 1965 1966 *Samp!eexpandedtoinclude32banks. District shows, loan demand remained fairly brisk, however, and the decline in rates was moderate. Information on rates charged on business loans is now developed from the reports of 24 large commercial banks in the Sixth District. The banks report the amount, interest rate, and maturity of all business loans that go on their books during the first 15 days of February, May, August, and November. The banks included in the series represent the most prominent business lenders in the District. Prior to February of this year, the information was based on reports from banks in Atlanta and New Orleans only. Large loans tend to carry lower interest rates than small loans since the size of the loan is re lated to the size of the business and consequently to its financial standing. That is, large firms with established credit standing account for much of the large-loan volume. For example, the rate on loans of over $1 million averaged 5.83 percent in May, whereas the rate on the smallest size group, $1,000-10,000 averaged 6.49. Contrary to the general impression, interest rates on business loans at the larger banks in the Southeast are lower than in most areas of the country. In May the southeastern average was fractionally less than at reporting banks in the nation as a whole after account is taken of the size of loan. Banks in only two of the six areas reported lower average rates. W. M. D a v i s MONTHLY REVIEW S i x t h D i s t r i c t S t a t i s t i c s Seasonally Adjusted (All data are indexes, 1957-59 = IOO, unless indicated otherwise.) Latest Month (1967) One Month Ago Two Months Ago One Year Ago Latest Month (1967) SIXTH DISTRICT IN CO M E A N D SP EN D IN G Personal Income, (Mil. $ Ann. Rate) . Apr. Manufacturing P a y r o lls ....................May Farm Cash R e c e ip t s ....................... Apr. C r o p s ....................................... Apr. L iv e sto c k .................................... Apr. Instalment Credit at Banks, *(Mit. $) New L o a n s .................................May R e p a y m e n t s .............................. May 56,941 193 134 115 143 56,726r 56,372r 52,241 186 193 195 149 137 139 146 137 125 153 146 145 293 288 288r 265 295 254 284 259 136 135 165 129 152 115 102 117 125 105 177 136 126 61 135 135 164 129 151 115 104 116r 124 105 176 136 129 61 136 136 166 130 153 116 105 117 125 105 173 136 130 131 133 165 128 150 3.8 3.6 3.5 3.4 One Two Month Months Ago Ago One Year Ago . May . May . May 148 111 90 147 111 83 146 110 88 141 107 91 . May . May 2.7 42.3 2.6 42.6r 2.6 42.4 2.5 42.3 Member Bank L o a n s .................... . May Member Bank D e p o s its ................. . May Bank D e b its ** .............................. . May 259 196 190 256 194 172 2Ei6 189 185 234 176 181 C o n s t r u c t io n ....................... Farm E m p lo y m e n t....................... Unemployment Rate (Percent of Work Force) . . . . Avg. Weekly Hrs. in Mfg., (Hrs.) . . FINANCE AND BA N KIN G PRODUCTION A N D EM PLOYMENT Nonfarm E m p lo y m e n t .....................May .......................... May Manufacturing Apparel .................................May C h e m i c a l s ............................. May Fabricated M e t a l s ....................May F o o d ....................................... May Lbr., Wood Prod., Furn. & Fix. . . May P a p e r .................................... May Primary M e t a l s ....................... May T e x t i l e s .................................May Transportation Equipment . . . May N on m an u factu rin g....................... May C o n s t r u c t io n .......................... May Farm E m p lo y m e n t.......................... May Unemployment Rate (Percent of Work F o r c e ) ............. May Insured Unemployment (Percent of Cov. E m p . ) ................ May Avg. Weekly Hrs. in Mfg., (Hrs.) . . . May Construction C o n t r a c t s * ................ May R e s id e n t ia l.................................May All O t h e r .................................... May Electric Power P ro d u ctio n **............. Mar. Cotton C o n s u m p tio n * * ....................May Petrol. Prod, in Coastal La. and Miss.** May 2.2 40.8 175 143 158 143 113 220 68 2.1 2.1 40.7 138 168 154 141 41.0 159 124 140 146 118 217 120 208 111 106 113 126 105 171 131 127 66 1.6 41.6 163 156 159 134 118 205 252 225 248 228 247 222 232 216 190 169 194 187 173 178 185 170 193 177 161 184 7,436r 172 146 7,417r 175 148 ALABAMA IN CO M E AND SP EN D IN G Personal Income, (Mil. $ Ann. Rate) . Apr. Manufacturing P a y r o lls ....................May Farm Cash R e c e ip t s ....................... Apr. 7,566 177 143 6,964 173 150 PRODUCTION AND EM PLOYM ENT Nonfarm E m p lo y m e n t ....................May M anufacturin g............................. May N on m an u factu rin g....................... May C o n s t r u c t io n .......................... May Farm E m p loy m e n t.......................... May Unemployment Rate (Percent of Work F o r c e ) ............. May Avg. Weekly Hrs. in Mfg., (Hrs.) . . . May 124 122 126 121 63 124 121 125 119r 68 125 123 75 123 126 70 122 126 121 122 4.4 41.1 4.3 40.6r 4.1 41.2 4.2 41.6 237 185 180 232 184 171 234 184 183 216 174 171 -IN A N C E A N D BA N KING Member Bank L o a n s ....................... May Member Bank D e p o s it s....................May Bank D e b its ** .................................May INCO M E AND SPEN DIN G Personal Income, (Mil. $ Ann. Rate) . Apr. 10,960 187 Manufacturing P a y r o lls ................. . May 139 Farm Cash R e c e ip t s .................... . Apr. 10,926r 10,891 r 10,201 191 194 185 150 137 135 PRODUCTION AND EM PLOYM ENT May May May May May 134 130 136 128 49 134 129 136 132 51 1.14 129 137 133 135 132 130 133 140 49 . May 3.4 40.4 3.3 40.0 3.4 4C.4 3.2 41.1 . May . May . May 263 210 208 258 206 186 258 204 215 248 197 197 Personal Income, (Mil. $ Ann. Rate) . Apr. Manufacturing P a y r o lls ................ . May Farm Cash R e c e ip t s .................... . Apr. 8,685 176 150 8,531r 173 138 8,5 S4r 177 147 127 120 129 146 65 127 120r 129 154 58 127 121 129 150 60 12C 112 122 137 7] 4.5 41.6 4.4r 41.8 4.1 42.5 4.2 42.S 227 161 173 222 158 156 220 158 163 21* 15' 16; 4,383r 212 144 4,364r 211 145 137 142 134 133 45 138 145 134 136 51 139 146 1.36 1.47 61 13 14 13' 14 5 5.2 40.4 4.6 40.3r 4.2 40.6 4. 41. 298 220 207 300 220 190 294 224 207 27 21 18 Nonfarm E m p lo y m e n t ................. M anu factu rin g.......................... N o n m a n u fa ctu rin g.................... C o n s t r u c t io n ....................... Farm E m p lo y m e n t....................... Unemployment Rate (Percent of Work Force) . . . . Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . . . . FINANCE AND BA N KIN G Member Bank L o a n s .................... Member Bank D e p o s it s ................. Bank D e b its ** .............................. LOUISIANA INCO M E AND SP EN D IN G FINANCE AND BANKING Member Bank Loans* All B a n k s .................................... May Leading C i t i e s .......................... June Member Bank Deposits* All B a n k s .................................... May Leading C i t i e s .......................... June Bank D e b its * / * * ............................. May GEORGIA FLORIDA IN CO M E AND SP EN D IN G Personal Income, (Mil. $ Ann. Rate) . Apr. 16,079 Manufacturing P a y r o lls ....................May 238 Farm Cash R e c e ip t s ....................... Apr. 125 16,370r 16,095r 14,891 240 241 218 141 126 160 7,761 165 151 PRODUCTION AND EM PLOYM ENT Nonfarm E m p lo y m e n t ................. M anu factu rin g.......................... . May N on m an u factu rin g.................... C o n s t r u c t io n ....................... Farm E m p lo y m e n t....................... Unemployment Rate (Percent of Work Force) . . . . Avg. Weekly Hrs. in Mfg., (Hrs.) . . . May FINA NC E A N D BA N KIN G Member Bank L o a n s * ................. Member Bank D e p o s i t s * ............. Bank D e b it s * / * * .......................... M IS S IS S IP P I IN CO M E AND SP EN D IN G Personal Income, (Mil. $ Ann. Rate) . Apr. Manufacturing P a y r o lls ................. Farm Cash R e c e ip t s .................... 4,507 209 135 4,031 20; 151 PRODUCTION AND EM PLOYM EN T Nonfarm Employment ................. M anu factu rin g.......................... N o n m a n u fa ctu rin g.................... C o n s t r u c t io n ....................... Farm E m p lo y m e n t....................... Unemployment Rate (Percent of Work Force) . . . . Avg. Weekly Hrs. in Mfg., (Hrs.) . . . May FINANCE A N D BA N KING PRODUCTION AND EM PLOYMENT Nonfarm E m p lo y m e n t ....................May M anufacturing..............................May 102 149 155 148 155 147 155 142 148 Member Bank L o a n s * ................. Member Bank D e p o s i t s * ............. Bank D e b it s * / * * .......................... MONTHLY REVIEW Latest Month (1967) One Month Ago Two Months Ago One Year Ago T E N N E S SE E INCO M E AND SP EN D IN G Personal Income, (Mil. $ Ann. Rate) . Apr. Manufacturing P a y r o lls ................... , May Farm Cash R e c e ip t s ......................., Apr. 9,144 188 119 9,080r 189 133 9,041 r 191 127 8,389 185 127 One Latest Month Month (1967) Ago Non m an u factu rin g................ C o n s t r u c t io n .................... Farm E m p lo y m e n t.................... Unemployment Rate (Percent of Work Force) . . . Avg. Weekly Hrs. in Mfg., (Hrs.) . . . May Two Months Ago One Year Ago 133 149 68 133 158r 65 134 159 77 128 153 78 4.3 39.9 4.0 40.0r 3.8 40.0 3.0 41.2 251 182 223 243 178 210 240 173 215 231 172 199 FINANCE A N D BAN KING PRODUCTION AND EMPLOYMENT Nonfarm E m p lo y m e n t .................... May M anu facturin g............................. May 136 142 136 143 138 145 133 142 Member Bank L o a n s * ............. Member Bank Deposits* . . . . Bank D e b its * / * * ....................... *For Sixth District area only. Other totals for entire six states. **Daily average basis. r-Revised. Sources: Personal income estimated by this Bank; nonfarm, mfg. and nonmfg. emp., mfg. payrolls and hours, and unemp., U. S. Dept, of Labor and cooperating state agencies; cotton consumption, U. S. Bureau of Census; construction contracts, F. W. Dodge Corp.; petrol, prod., U. S. Bureau of Mines; industrial use of elec. power, Fed. Power Comm.; farm cash receipts and farm emp., U.S.D.A. Other indexes based on data collected by this Bank. All indexes calculated by this Bank. D e b i t s t o D e m a n d D e p o s i t A c c o u n t s Insured Commercial Banks in the Sixth District (In T h o u s a n d s of D olla rs) Percent Change April 1967 May 1967 STANDARD METROPOLITAN STATISTICAL A REASt 1,439,058 54,005 161,831 472,919 261,977 88,589 l,375,671r 64,389r 178,009r 452,019r 294,900r 86,691 +11 +15 +15 +6 +16 +13 +16 -4 +4 +11 +3 +16 +9 -6 +1 +3 +2 +8 Ft. Lauderdale— 660,286 Hollywood . . . . Jacksonville . . . . 1,542,624 M i a m i .................... 2,284,381 O r l a n d o ................ 575,725 206,202 Pensacola ............. Tallahassee . . . . 153,405 Tampa— St. Petersburg 1,339,764 W. Palm Beach . . . 426,243 664,157 1,368,121 2,187,790r 550,433 185,077 130,164 1,326,211 433,210 599,512r - 1 l,466,975r +13 1,998,891 +4 559,077r +5 186,808r +11 127,345 +18 l,208,012r +1 408,993r - 2 +10 +5 +14 +3 +10 +20 +11 +4 +6 +5 +9 +3 +9 +15 +8 +1 A l b a n y .................... 89,034 Atlanta ................ 4,532,385 306,997 A u g u s t a ................ 219,488 Columbus ............. Macon ................ 257,436 Savannah ............. 286,015 78,292 4,147,120r 266,429 201,852 228,965 244,497 87,327 4,105,070r 264,819r 202,412r 214,710r 238,896r +14 +9 + 15 +9 +12 +17 +2 +10 +16 +8 +20 +20 -2 +7 +13 +9 +11 +10 Baton Rouge . . . . Lafayette ............. Lake Charles . . . . New Orleans . . . . 544,427 114,696 140,438 2,250,552r 469,606r +10 116,723 +18 130,571 +5 2,465,315r +13 +27 +16 +13 +3 +12 +6 +15 +2 578,660r +16 Birmingham . . . . Gadsden ................ H u n t s v i l l e ............. Mobile ................ Montgomery . . . . T u s c a lo o s a ............. Jackson 1,594,742 61,956 185,981 500,144 302,689 100,199 596,576 135,214 146,902 2,547,273 ................ 683,714 Chattanooga . . . . Knoxville ............. Nashville ............. 596,533 469,963 1,717,254 554,743 432,964 l,678,390r A n n is t o n ................ Dothan ................ S e l m a .................... 63,967 64,983 43,619 58,653 58,086 43,395 Bartow ................ B r a d e n t o n ............. Brevard County . . . Daytona Beach . . . Ft. Myers— N. Ft. Myers . . . G a in e s v ille ............. 38,378 70,579 236,397 89,899 80,554 86,797 589,292 Percent Change Year-to-Date 5 mos. May 1967 from 1967 May from May April 1966 1967 1966 1966 May 1967 April 1967 Lakeland . . . . Monroe County . . O c a l a ................ St. Augustine . . St. Petersburg . . S a r a s o t a ............. Tampa ............. Winter Haven . . 119,731 36,608 57,925 19,508 318,595 104,433 700,804 64,103 118,887 36,284 57,198 19,931 358,004 109,309 646,239 61,897 119,818 34,831 53,235 18,481 276,684 102,639 651,373 64,962 +1 +1 +1 -2 -1 1 -4 +8 +4 -0 +5 +9 +6 +15 +2 +8 -1 +2 +4 +5 +5 +9 -1 +5 +1 Athens ............. Brunswick . . . . V a l d o s t a ............. 73,905 40,193 79,008 17,719 73,227 34,507 23,799 25,187 72,473 54,515 65,387 37,495 81,428 14,162 68,302 32,166 20,417 23,852 64,329 50,813 68,985 38,387 85,708 12,720 70,969 32,712 25,603 27,012 71,691 47,233 +13 +7 -3 +25 +7 +7 +17 +6 +13 +7 +7 +5 -8 +39 +3 +5 -7 -7 +1 +15 +8 +4 -5 +18 +6 +7 -4 -5 +2 +12 A b b e v ille ............. Alexandria . . . . Bunkie ............. Hammond . . . . New Iberia . . . . Plaquemine . . . Thibodaux . . . . 10,836 132,229 6,551 42,644 34,414 12,340 22,477 10,220 128,602 5,918 39,276 34,149 10,628 19,868 10,604 114,075 5,609 39,368 34,811 9,827 20,987 +6 +3 +11 +9 +1 +16 +13 +2 +16 +17 +8 -1 +26 +7 +5 +22 +17 +17 -1 +20 +1 Biloxi-Gulfport . . Hattiesburg . . . 105,827 55,126 31,927 69,029 36,344 95,260 53,813 29,963 57,012 34,808 92,555 49,060 32,169 61,365 33,846 +11 +2 +7 +21 +4 +14 +12 -1 +12 +7 +12 +7 -4 +4 +8 56,374 41,294 35,297 46,566 36,755 32,903 48,866 37,876 34,175 +21 +12 +7 +15 +9 +3 +10 +7 +7 60,473 70,789 152,199 66,590 70,231 147,171 +35 +9 +5 +22 +10 +8 +11 +9 +10 +8 +11 +7 +10 +5 +10 +11 +11 +6 +10 +10 +10 +8 +15 +16 +6 +6 +7 +6 +10 +12 E lb e r t o n ............. Gainesville . . . . LaGrange . . . . Newnan ............. + 18 +11 +8 +9 +2 +9 +9 +25 +7 +8 +21 M e r i d i a n ............. N a t c h e z ............. Pascagoula— M oss Point . . . Vicksburg . . . . Yazoo City . . . . 65,276 55,801 38,869 +9 +12 +1 -2 +16 +12 +1 +12 +8 Johnson City . . . Kingsport . . . . 81,461 76,929 159,675 33,118 71,919 198,999 95,025 43,300 48,784 210,534 80,141 +16 -2 +19 -5 -1 1 +45 +12 + 12 -1 +30 +6 +8 SIXTH DISTRICT, Total 30,737,550 74,314 79,351 71,719 76,532 +8 +9 + 12 +13 +5 +9 Alabama^ . . . . F l o r i d a ! ............. G e o r g i a ! ............. Louisiana*t . . . M ississippi*! . . . Tennessee*! . . . 4,015,301 9,250,135 7,536,513 4,260,604 1,452,306 4,222,691 546,247r 429,700r l,371,827r >THER C E N T ERS ‘ Includes only banks in the Sixth District portion of the state. JULY 1967 fPartially estimated. Year-to-Date 5 mos. May 1967 from 1967 May April May from 1966 1967 1966 1966 ^Estimated. 28,443,342r 27,714,822r 3,647,878 8,828,485r 6,858,778r 3,821,577r 1,305,516 3,981,108r 3,640,731r 8,415,517 6,830,352r 3,940,350r l,260,700r 3,627,172r r-Revised. 103 D i s t r i c t B u s i n e s s C o n d i t i o n s As 1967 reached the halfway mark, the momentum of economic activity showed no significant change. Advancing auto sales led gains in the retail sector, and further recovery in residential construction more than offset reduced nonresidential building. Nonfarm employment increased slightly; manufacturing pay rolls acted in reverse. Loan volume at larger banks advanced. Although crop prospects are good, farm cash sales remain below last year’s. Consumer spending increased in May, as indi cated by gains in retail sales. Underlining these advances were increases in repair and moderniza tion loans and bank instalment loans to finance automobiles. However, consumer loans for other purchases and personal loans declined slightly. Residential construction in the Southeast con tinues to recover. Contracts experienced a good increase in May in dollar value, number of dwell ing units, and square footage. The total value of contracts was below that of the first five months of 1966, with indications of further contractions in the gap. Meanwhile, nonresidential building contract volume declined further below that of May 1966. In spite of recent upward pressures on mortgage rates, mortgage bankers in most of the District’s major markets look for continued improvement in housing in the second half of 1967. The number of nonfarm jobs advanced slightly in May; however, more rapid gains in the number of persons available for employment caused the unemployment rate to edge upward. Most of the gain in jobs occurred in the trade and state and 104 local government sectors. In manufacturing, slig;ht declines in jobs and hourly wages more than off set an increase in weekly hours worked. Bankers expecting a June rise in loans were not disappointed, judging by increases at large District banks. The high rate of borrowing for the June 15 tax date matched strong gains of the last two years. Reflecting this strength was a slowing in the acquisition of investments by all banks, though purchases of tax-exempt securities re mained reasonably heavy. Time-deposit growth showed no signs of abating. Cash receipts from farm sales are still lagging behind last year’s pace. Prices for broilers and eggs, the District’s largest source of farm income, are well below last year’s. Cattle prices have remained relatively steady, while hog prices re ceded after a very abrupt increase in May. Most crops are in good condition. Preliminary esti mates indicate that District farmers will plant more acreages in soybeans this year than any other crop. N O T E : D ata on w h ic h s ta te m e n ts a re b a se d h a ve b een a d ju ste d w h e n e v e r p o s s ib le to e lim in a te s e a s o n a l in flue nces. MONTHLY REVIEW