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d e r a l R e s e r v e B a n k o f A tla n ta ■ 1 In t h i s i s s u e : S a v in g s a n d L oan A s s o c ia t io n s in a C h an g in g E conom y O n e - B a n k H o l d i n g C o m p a n i e s in th e S ou th east D is tr ic t B a n k in g N o t e s D is tric t B u s in e ss C o n d i t i o n s 9 7 2 Savings and Loan Associations in a Changing Economy b y B o y d F. King In stitu tio n s re sp o n d to c h a n g e s in their e n v ir o n m e n t b y a tte m p tin g to arrest so m e c h a n g e s a n d by a d a p t in g to others. W h ile n eith e r typ e o f re sp o n se is a lw a y s en tire ly su c ce ssfu l, an in s titu tio n 's re sp o n se s to c h a n g e p artia lly d e te rm in e w h a t fu n c tio n s that in stitu tio n p e rfo rm s a n d h o w w e ll it p e rfo rm s them . T h e re a ctio n s o f sa v in g s a n d lo a n a sso c ia tio n s in the S o u th e a s t 1 to c h a n g e s in o p e r a tin g c o n d itio n s d u r in g the last d e c a d e are an im p o rta n t d e m o n str a tio n o f in stitu tio n a l re sp o n se to a c h a n g in g e n v ir o n m e n t a n d the effects o f this re sp o n se o n in stitu tio n a l fu n c tio n s. T h is article u ses the ex p e rie n c e o f the S o u th e a st's sa v in g s a n d lo a n a sso c ia tio n s to illu strate the p ro c e ss o f in stitu tio n a l re sp o n se a n d to asse ss the a b ility o f the r e g io n 's sa v in g s a n d lo an a sso c ia tio n s to de al w ith futu re c h a n ge . Rapid G row th in a Favorable Environment: The 1950's A lt h o u g h sa v in g s a n d lo an a sso c ia tio n s existe d in as 1831 a n d in the S o u th e a st as early as 1865, the sa w the in d u stry reb orn in a h e a lth y e n v iro n m e n t. p e rio d a c c o u n t fo r m a n y o f the c h ara cte ristics w ith the 1960's. the U n ite d States as early late 1 9 4 0 's a n d the 1 950's D e v e lo p m e n t s d u r in g this w h ic h the in d u stry b e ga n A t the b e g in n in g o f the 1950's, 277 o f the n a tio n 's 3,894 sa v in g s a n d lo an a sso c ia tio n s w e re lo ca te d in the S o u th e a st. T h e r e g io n 's a sso c ia tio n s h e ld $1.1 'For our purposes here, the Southeast means those states that are either entirely or partly in the Sixth Federai Reserve District: Tennessee, Mississippi, Louisiana, Georgia, Florida, and Alabama. Monthly Review, Vol. LVII, No. 5. Free subscription and additional copies available upon request to the Research Department, Federal Reserve Bank of Atlanta, Atlanta, Georgia 30303. M O N T H L Y R E V IE W SU M M A R Y TABLE 1950 So u th east N um ber of A s s o c i a t i o n s ................................... A sse ts and L ia b ilitie s (billion $): Total A s s e t s .................................................. Mortgage L o a n s ............................................. S avin g s C a p i t a l ............................................. A d van ces from Fed eral Home Loan B a n ks . . . In te re st Earn ed on Mortgages as P ercen t of G ross Operating Incom e . D ividends on S avin g s C ap ital a s Percen t of G ross O perating Incom e . In te re st Earn ed on M ortgages a s P ercen t of Average Mortgage Lo an s . D ividends on Sa vin g s C ap ital a s P ercen t of Average Sa vin g s C ap ital . S o utheast U .S. 277 3,894 416 4.694 509 4.601 . , . . . . 1.1 1.0 1.0 15.5 12.7 12.9 6.7 5.6 6.0 69.3 58.4 60.3 18.7 15.8 16.1 172.0 147.2 142.9 . . .1 .8 .1 2.0 .6 10.5 • . 88.1 85.3 82.8 83.6 83.1 84.4 . . 47.5 54.3 59.9 65.1 60.6 66.7 . . 5.1 4.9 5.7 5.5 6.5 6.4 . . 2.7 2.5 3.9 3.9 5.2 5.1 s a v in g s b a n k s fro m the S o u th e a st a c c o u n ts fo r the larger sh are h e ld b y the r e g io n 's a sso c ia tio n s. M u t u a l sa v in g s b a n k s o p e r a tin g o u ts id e the S o u th e a st h e ld o n e -fo u rth o f the n a tio n 's tim e a n d sa v in g s d e p o sits in 1950. S a v in g s a n d lo an a sso c ia tio n s in the S o u th e a st g r e w ra p id ly d u r in g the Fifties a n d c a p tu re d an in c re a sin g sh are o f sa v in g s a n d residential m o rtg a g e m arkets. T h e ir g ro w th w a s b a se d b o th o n c h a n g e s in the in stitu tio n s th e m se lv e s a n d o n an e n v ir o n m e n t that w a s c o n d u c iv e to the p e rfo rm a n c e o f th e ir tw o p rim a ry fu n c tio n s: p r o v id in g a relatively safe, in te re st-e a rn in g d e p o sito r y fo r a p o rtio n o f the p u b lic 's a c c u m u la te d sa v in g s a n d fin a n c in g the c o n stru c tio n a n d p u rc h a se o f h o u sin g . T h e p o st W o r ld W a r II h o u s in g sh o rta g e in the U. S. e n c o u r a g e d c h a n g e s in the law s g o v e r n in g s a v in g s a n d lo an a sso c ia tio n s a n d in the p ractices o f a sso c ia tio n s. R e fo rm o f d e p o sit in su ra n c e fo r sa v in g s a n d lo an a c c o u n ts w a s the m o st im p o rta n t o f the se c h an ge s. In 1950, C o n g r e s s v o te d to re d u c e the c o st o f this in su ra n c e a n d m a k e it e q u a l to the c o st o f in su ra n c e fo r c o m m e rc ia l b a n k d e p o sits, to d o u b le the m a x im u m c o v e ra g e fo r an in d iv id u a l a c c o u n t to $10,000— an a m o u n t e q u a l to that fo r c o m m e r c ia l b a n k a cc o u n ts, an d to p ro v id e fo r cash p a y m e n ts to d e p o sito rs u p o n liq u id a tio n o f an a sso c ia tio n . T h e se reform s m a d e sa v in g s a c c o u n ts at sa v in g s a n d loan a sso c ia tio n s very sim ila r to tim e a n d sa v in g s 1970 U .S. . a n d m o st o f their lia b ilitie s in sa v in g s a cc o u n ts. T h e r e g io n 's a sso c ia tio n s h e ld a b o u t o n e -th ird o f the total o f tim e a n d sa v in g s d e p o sits o f in d iv id u a ls, p artn e rsh ip s, a n d c o r p o r a tio n s at b a n k s a n d thrift in stitu tio n s in the S o u th e a st; in the n atio n as a w h o le , a sso c ia tio n s h e ld o n ly o n e -fifth o f the n a tio n a l total o f these d e p o sits. A b s e n c e o f m u tu a l b a n k s and , thus, m o re FE D E R A L R ES E R V E BAN K O F A TLA N T A 1960 So utheast . b illio n o f the n a tio n 's $15.5 b illio n o f sa v in g s a n d lo an a sso c ia tio n assets. In the So u th e a st, as in the rest o f the nation, a sso c ia tio n s w e re re q u ire d to h o ld m o st o f their assets in resid en tial m o rtg a g e s d e p o sits at c o m m e r c ia l c o m p e titiv e w ith them . U .S. D u r in g the sa m e p e rio d that d e p o sit in su ra n c e p ro v isio n s w e re b e in g altered, le n d in g p o w e rs o f sa v in g s a n d lo an a sso c ia tio n s w ere b r o a d e n e d a n d m a d e m o re flexible. M a x im u m lim its w ere raised o n in d iv id u a l lo a n s u se d to se cu re a sso c ia tio n b o r r o w in g fro m the Federal H o m e Loan Ban ks; the p ro p o r tio n o f lo a n s that an a sso c ia tio n m ig h t m a k e o n im p ro v e d real estate o th e r than o n e -to -fo u r u n it h o m e s w a s increase d, a n d the re q u ire m e n t that lo a n s b e se cu re d b y p ro p e rty lo ca te d w ith in 50 m ile s o f the a sso c ia tio n w a s lifted in cases in v o lv in g lo a n s se cu re d b y m u ltiu n it resid en ce s o r G o v e r n m e n t -b a c k e d m o rtga ge s. T h e se c h a n g e s w e re a b o o n to sa v in g s a n d loan a sso c ia tio n s. T h e h o u s in g sh o rta g e a n d risin g in c o m e s a n d p o p u la tio n in the S o u th e a st ge n e rate d stro n g h o u s in g d e m a n d in the re g io n d u r in g m o st o f the 1950's. T h is d e m a n d w a s c o n c e n tra te d in the m arke t fo r sin g le -fa m ily h o m e s— a m arke t in w h ic h sa v in g s a n d lo an a sso c ia tio n s sp e c ialize d . T h e a sso c ia tio n s to o k a d v a n ta g e o f their n e w p o w e rs, str o n g h o u s in g d e m a n d , a n d w e a k d e m a n d s fo r cre dit fro m b u sin e sse s a n d g o v e r n m e n ts to increase the share o f the sa v in g s o f the private se cto r o f the e c o n o m y that they fu n n e le d into residential m o rtga ge s. By the e n d o f 1960, sa v in g s a n d lo an a sso c ia tio n s in the S o u th e a st h ad o u td is ta n c e d c o m m e rc ia l b a n k s in the c o m p e titio n fo r tim e a n d sa v in g s d e p o sits. D u r in g the d e ca d e , they had raised their share fro m o n e -th ird to thre e-fifth s o f these d e p o sits at the r e g io n 's b a n k s a n d thrift institutions. In the n atio n as a w h o le , a sso c ia tio n s had a lso raised their share o f tim e a n d sa v in g s d e p o sits at the e x p e n se o f b o th c o m m e r c ia l b a n k s a n d m u tu a l sa v in g s ban ks. R a p id g ro w th a c c o m p a n ie d the d e p o sit share increase at sa v in g s a n d lo an a sso c ia tio n s. T h e r e g io n 's a d d itio n o f 139 a sso c ia tio n s d u r in g the 1 950's a c c o u n te d fo r o n e -six th o f the n a tio n 's increase in asso c iatio n s. A sse ts o f the r e g io n 's a sso c ia tio n s rose b y 500 p erce n t to $6.7 b illio n ; assets o f all o f the n a tio n 's a sso c ia tio n s rose 350 p e rce n t to $69.3 b illio n . 75 N e w P r o b le m s a n d R e s p o n s e s : T h e 1 9 6 0 -1 9 7 0 D e c a d e R a te s o f re tu rn fo r S & L ’s in c re a s e d o th e r ra tes le ss th a n P e rce n t P r o b le m s . A s the h a lc y o n d a y s o f the 1 950's w ere e n d in g , the r e g io n 's sa v in g s a n d lo an a sso c ia tio n s b e g a n to e n c o u n te r sig n ific a n t c h a n g e s in their -8 e n v iro n m e n t. C h a n g e s c o n tin u e d to o c c u r th r o u g h o u t the 1960's, a n d the p ro b le m s that they c a u se d reach e d c lim a x e s w h e n interest rates rose rapidly. S o m e o f these c h a n g e s resulte d fro m rapid gro w th o f sa v in g s a n d lo an a sso c ia tio n s d u r in g the 195 0 's; o th e rs resulte d fro m altered fin a n c in g d e m a n d s o f b u sin e sse s a n d go v e rn m e n ts, e v o lv in g structu re o f h o u s in g a n d m o rtg a g e m arkets, a g g re ssiv e e x p a n sio n b y ba n ks, gre ater a w a re n e ss b y savers o f sa v in g s alternatives, a n d in crease d taxation o f a sso c ia tio n s. In m a n y cases, the sp e c ia liz e d n ature o f the a sso c ia tio n s th e m se lv e s in te n sifie d the p ro b le m s c a u se d by these c h a n g e s a n d im p e d e d a sso c ia tio n s' respon se s. T h e rap id g ro w th o f sa v in g s a n d lo an a sso c ia tio n s in the 1 9 5 0 's re d u c e d the ir g r o w th p o te n tial in the 1960's. T h e a sso c ia tio n s w ere a b le to g r o w rap id ly in the 1 9 5 0's b e c a u se they attracted m a n y savers a w a y fro m c o m p e tito r s fo r sa v in g s d o llars. A s this o c c u rre d , the p o o l o f savers that c o u ld be in d u c e d to sw itc h fro m o th e r sa v in g s o u tle ts -6 - 4 - 2 ’60 I I I I I ’65 I I I I I ’70 c o m p e titio n fo r the sa v in g s o f the p rivate se cto r o f the e c o n o m y . A t the sa m e tim e, the g ro w th o f d e m a n d fo r h o u s in g a n d h o u s in g fin a n c e slac k e n e d . T h e c o m b in a tio n o f e x p a n d in g n o n m o r tg a g e fin a n c in g d e m a n d s a n d sla c k resid en tial m o rtg a g e d e m a n d s raised y ie ld s o n n o n m o r tg a g e fin a n c ia l in stru m e n ts relative to y ie ld s o n resid en tial m o rtga ge s. W h e n this h a p p e n e d , re q u ire m e n ts that b e c a m e sm aller, a n d c o n tin u e d g r o w th o f a sso c ia tio n s b e c a m e in c re a sin g ly d e p e n d e n t on a d d itio n s to sa v in g s b y e x istin g c u sto m e rs. T his sa v in g s a n d lo an a sso c ia tio n s sp e c ia liz e in residential m o rtg a g e s w o r k e d to the a sso c ia tio n s' typ e o f m a rke t p e n e tra tio n in the 1950's w o u ld have lo w e re d the g ro w th rate o f sa v in g s a n d loan d isa d v a n ta g e . R etu rn s o n the assets o f the r e g io n 's a sso c ia tio n s fell relative to returns o n the assets o f o th e r in te rm e d ia rie s— su c h as c o m m e r c ia l a sso c ia tio n s in the 19 60 's eve n if the force s that attracted savers to a sso c ia tio n s h ad re m ain e d u nchanged. T h e se fo rce s d id n o t rem ain u n c h a n g e d , h ow eve r. A s the rate o f g ro w th o f e c o n o m ic a ctivity rose d u r in g the 1960's, b u sin e ss a nd g o v e r n m e n t fin a n c in g n e e d s e x p a n d e d , in c re a sin g T h e g ro w th ra te o f s a v in g s c a p ita l s lo w e d s te a d ily b a n k s— a n d returns o n d ire c tly p u rc h a se d securities. S in c e sa v in g s a n d lo an a sso c ia tio n s d e p e n d e d la rge ly o n e a rn in g s fro m m o r t g a g e s fo r the returns that they p a id to savers, rates p a id o n a sso c ia tio n s' sa v in g s a c c o u n ts rose less ra p id ly than tho se p aid o n sa v in g s d e p o sits at b a n k s a n d on their fin a n c ia l assets. C h a n g e s in fin a n c in g n e e d s w ith in the h o u s in g se cto r a c c o m p a n ie d e x p a n d in g d e m a n d s fo r cre d it o u tsid e the h o u s in g sector. In o th e r p arts o f the cou ntry, after the K o re an W a r, an in c re a sin g p ro p o r tio n o f n e w h o u s in g u nits w a s in m u ltifa m ily structures. T h e 1 9 6 0 's b r o u g h t this n e w e m p h a sis o n m u ltifa m ily h o u s in g to the So u th e a st. T h e p ro p o r tio n o f b u ild in g p e rm its issu e d in the re gio n fo r h o u s in g units in fiv e -o r -m o r e -u n it b u ild in g s rose in each y ear fro m 1960, w h e n it w a s 16.6 percent, to 1969, w h e n it w a s 51.7 percent. (It fell slig h tly in 1970.) L e n d in g o n m u ltifa m ily re sid e n ce s re q u ire d a sso c ia tio n s to d e v e lo p n e w sk ills a n d ex pe rtise in a sse m b lin g , u n d e rw ritin g , a n d s u p e r v is in g la rge r a n d m o re c o m p le x fin a n c in g p a c k a g e s a lo n g w ith gre ater k n o w le d g e o f the m arke t fo r rental h o u sin g . W h ile c o m p e t it io n fo r sa v in g s in c re a se d a n d the structu re o f d e m a n d fo r h o u s in g fin a n c e c h a n g e d , n e w c o m p e t it io n fro m o th e r le n d e rs a ro se 76 M O N T H L Y R E V IE W in the fin a n c in g o f b o th m u ltifa m ily a n d s in g le fa m ily h o u sin g . T h e la rge r f in a n c in g p a c k a g e s re q u ire d b y m u ltifa m ily structu res a n d b y p la n n e d c o m m u n itie s d re w in c re a sin g interest fro m ban ks, in su ra n c e c o m p a n ie s, a n d (in the last half o f the d e ca d e ) real estate in v e stm e n t trusts. E x p an d e d F H A a n d V A p ro g r a m s w ith lo w e r d o w n p a y m e n t r e q u ire m e n ts a n d lo n g e r m atu rities than tho se n o r m a lly o ffe re d b y sa v in g s a n d lo an a sso c ia tio n s d r e w c u sto m e rs fo r s in g le -fa m ily re sid e n ce s o u t o f the sa v in g s a n d lo an a sso c ia tio n s' m arke t fo r c o n v e n tio n a l loans. P r o b le m s cre ated b y these m a jo r c h a n g e s in m a rke ts in w h ic h sa v in g s a n d lo an a sso c ia tio n s o p e ra te d w e re m a g n ifie d d u r in g tw o p e r io d s o f risin g interest rates in the last h a lf o f the Sixties. C h a n g e s re q u irin g rap id a lte ratio n s in o p e r a tio n s jo in e d the c h a n g e s to w h ic h a sso c ia tio n s had be en m a k in g g ra d u a l a d ju stm e n ts. In 1966 a n d a ga in in 1969 a n d early 1970, interest rates w e re b id u p rap id ly in inten se c o m p e t it io n fo r lim ite d credit. In each p e rio d , sh o rt-te rm rates rose m o re ra p id ly than lo n g -te rm rates. B e ca u se the y d e p e n d o n lo n g -te rm assets to p ro v id e the e a rn in gs n e ce ssary to p ay fo r sh o rt-te rm liabilities, b o th o f these p h e n o m e n a p la c e d sa v in g s a n d lo an a sso c ia tio n s in situ a tio n s o f c o n sid e r a b le strain a n d se verely tested their a b ilitie s to r e sp o n d a d e q u ate ly. O n the o n e hand, the a sso c ia tio n s' lo n g -te rm assets p ro v id e d sm all cash f lo w fro m re p ay m e n ts; c o n se q u e n tly , it w a s h ig h e r m o rtg a g e rates or, at w orst, to a v o id sa v in gs o u tflo w s. T h e e x p e rie n ce o f a sso c ia tio n s in A la b a m a in 1966 w a s typical. R e p a y m e n ts o f p rin cip a l o n the m o rtg a g e s he ld b y these a sso c ia tio n s w e re o n ly 11 p erce n t o f the p rin cip al v a lu e o f the m o rtga ge s. A lt h o u g h interest rates on c o n v e n tio n a l m o rtg a g e s o n n e w sin g le -fa m ily h o u s in g rose fro m a m o n th ly ave rage o f 5.81 p erce n t in 1965 to a m o n th ly a ve rag e o f 6.25 p erce n t in 1966, the a sso c ia tio n s w ere a b le to raise the rate o f return earn ed o n their m o rtg a g e p o rtfo lio s o n ly fro m 6.11 p erce n t to 6.15 p erce n t be tw e en 1965 a n d 1966. D u r in g the sa m e p e rio d , they raised the rate o f return p a id o n sa v in g s cap ital fro m 4.25 p erce n t to 4.35 p e rce n t even th o u g h m a x im a on rates p a y a b le o n sa v in g s cap ital w e re im p o s e d in S e p te m b e r o f 1966. T h e a b ility o f sa v in g s a n d lo an a sso c ia tio n s to raise returns to savers w a s further lim ite d b y their n eed to p a y a p o rtio n o f their e a rn in gs o u t in Federal in c o m e taxes. T h is n ee d ste m m e d fro m revision o f tax law s in 1963. T he a sso c ia tio n s' e a rn in gs had be en m a d e te c h n ic a lly su b je c t to the Federal in c o m e tax in 1950, b u t tax re g u la tio n s h ad a llo w e d lo an lo ss reserve w rite -o ffs o f su ch m a g n itu d e that m o st a sso c ia tio n s w ere a b le to report n o taxable in c o m e . In the S ou th e a st, sa v in g s a n d lo an a sso c ia tio n s p a id n o Federal in c o m e taxes in 1950 a n d o n ly $0.2 m illio n , o r .06 o f o n e p o ssib le to sh ift o n ly a sm a ll p e rce n ta ge o f assets p erce n t o f gro ss e a rn in gs in 1960. By 1966, they w e re p a y in g $12.9 m illio n , o r 2 p erce n t o f gro ss in to m o rtg a g e s w ith h ig h e r rates. O n e a rn in gs in Federal in c o m e taxes. In 1969, this the o th e r h a n d , m o st o f the lia b ilitie s o f a sso c ia tio n s w ere p a s s b o o k a c c o u n ts that w e re w ith d r a w a b le on total h ad risen to $26.3 m illio n , o r 3 p erce n t of gro ss earn in gs. A lt h o u g h the p e rce n ta ge o f e a rn in gs d e m a n d . A s interest rates rose, the r e g io n 's a sso c ia tio n s w e re u n d e r p re ssu re to increase rates o f return o n n early all lia b ilitie s in order, at best, effective to b r in g in n e w sa v in g s that c o u ld be lent at c ■ • „ .. g o in g to taxes in 1966 a n d 1969 w a s sm all, the im p o sitio n of Federal in c o m e taxes in 1963 m a rg in a lly re d u c e d the p ro p o r tio n o f e a rn in gs that a sso c ia tio n s c o u ld p ass on to savers. S u c h . . Savings inflows and mortgage originations drooped during 1966 and 1969 P ercen t E f l N et new ■ M o r tg a g e s a v in g s o rig in a tio n s Conventional Mortgage Rate — 800 - 600 - 200 i nr-r- 1966 N ote: 1967 1968 1 9 69 19 70 F ig u r e s a re s e a s o n a lly a d ju s t e d a n d c o v e r th e s ix D is t r ic t s t a t e s . F E D ER A L R ES ER V E BAN K O F A T LA N T A 77 a re d u c tio n w a s sig n ific a n t d u r in g p e r io d s in w h ic h in c e n tiv e to w it h d r a w fu n d s as interest rates rose. c o m p e titio n fo r sa v e rs' d o lla rs w a s intense. S a v in g s a n d lo an a sso c ia tio n s in the re g io n e n la rg e d the v ariety o f their le n d in g d u r in g the d e ca d e . In the early years, the c o n stru c tio n o f a gre ater p r o p o r t io n o f h o m e s in m u ltiu n it T h e p e rfo rm a n c e o f the r e g io n 's sa v in g s a n d lo a n a sso c ia tio n s d u r in g the tw o p e r io d s o f risin g rates s h o w s the se rio u sn e ss o f the ir p ro b le m s. N e t in flo w s o f sa v in g s cap ita l s lo w e d d ra m a tic a lly in b o th p e rio d s. In 1966, after five c o n se c u tiv e years in w h ic h sa v in g s cap ita l in c re a se d b y $1 b illio n , the r e g io n 's a sso c ia tio n s w e re a b le to attract less than $500 m illio n in net n e w sa vin gs. A g a in in 1969, the a s s o c ia t io n s ' net n e w sa v in g s fell, this tim e fro m an a v e ra g e o f $1.2 b illio n in 1967 a n d 1968 to slig h tly m o re than $800 m illio n . In b o th p e rio d s, la rge net sa v in g s o u tflo w s o c c u rre d im m e d ia te ly after q u a rte rly interest cre d itin g. L e n d in g by a sso c ia tio n s a lso d e c lin e d d u r in g structu res a n d the risin g d e m a n d fo r im p ro v e m e n ts in e x istin g s in g le -fa m ily h o m e s b r o u g h t an e x p a n sio n in le n d in g fo r c o n str u c tio n a n d p e rm a n e n t fin a n c in g o f a p a rtm e n ts a n d for h o m e im p ro v e m e n ts. In the later years o f the d e ca d e , these tw o fo rce s w e re jo in e d b y the d e sire o f a sso c ia tio n s to in cre a se the ir cash f lo w fro m lo an rep aym e n ts. A s this o c c u rre d , sh o rt-te rm lo a n s su c h as c o n stru c tio n , h o m e im p ro v e m e n t, a n d p e rso n a l lo a n s w e re e m p h a siz e d . In c r e a sin g the v arie ty o f lo a n s that they m a d e the se p e rio d s. In 1966, the v a lu e o f m o rtg a g e s ex te n d e d b y the r e g io n 's a sso c ia tio n s fell fro m an a ve ra g e o f $2.1 b illio n d u r in g the p re c e d in g three years to $1.8 b illio n . a llo w e d a sso c ia tio n s to r e s p o n d to sh ifts in lo an d e m a n d w ith in the h o u s in g se c to r o f the e c o n o m y a n d g a v e s o m e p ro m is e o f in c r e a sin g their cash flo w . C o n str u c tio n , h o m e im p ro v e m e n t, In 1969 a n d 1970, the v a lu e o f m o rtg a g e s ex te n d e d a n d p e rso n a l lo a n s are sh o rte r-m a tu rity in stru m e n ts a v e ra g e d $2.7 b illio n , w e ll a b o v e the $2.3 b illio n than p e r m a n e n t m o rtg a g e s. T h e ir in c lu sio n in asset p o r tfo lio s in c re a se d cash flo w s fro m m a tu rin g assets, a llo w in g a sso c ia tio n s to take m o re a ve ra g e o f 196 7 a n d 1968; h o w e v e r, d u r in g the last h a lf o f 1969 a n d the first h a lf o f 1970, the p e r io d w h e n sa v in g s o u t f lo w p ro b le m s w e re w o rse , a d v a n ta g e o f risin g interest rates a n d to lim it the v a lu e o f m o rtg a g e s e x te n d e d w a s $2.3 b illio n . the sq u e e z e o n the m a rg in o f interest e a rn in g s Responses. T h e re a ctio n s o f sa v in g s a n d lo an o v e r d iv id e n d s that a c c o m p a n ie d risin g interest rates. T h e se results w e re offset, h o w e v e r, by the 1 9 6 0 's w e re as v a rie d as the p ro b le m s. S o m e ex te n sio n o f the m a tu rity o f p e r m a n e n t lo a n s o f all sorts, a p ra c tic e that the r e g io n 's a sso c ia tio n s re sp o n se s c a m e fro m the in d iv id u a l a sso c ia tio n s; a d o p te d in re sp o n se b o th to c o m p e t it io n o th ers in v o lv e d a ctio n b y the F ederal H o m e Loan B a n k Syste m . Still o th e rs re q u ire d c o o p e r a tio n a m o n g the a sso c ia tio n s, the H o m e Lo an B a n k G o v e r n m e n t -b a c k e d m o rt g a g e s a n d to risin g p rices o f h o u sin g . a sso c ia tio n s to the p r o b le m s that they fa c e d in Syste m , a n d o th e r intere ste d parties to p ress fo r le g isla tio n that a id e d a sso c ia tio n s. T h e r e g io n 's a sso c ia tio n s r e s p o n d e d to m o re inten se c o m p e titio n fo r sa v in g s b y raisin g a ve rag e d iv id e n d rates o n the ir a c c o u n ts fro m 3.85 p e rce n t to 5.17 p e rce n t b e tw e e n 1960 a n d 1970. T h e y a lso e x p a n d e d their m e n u o f sa v in g s in stru m e n ts fro m the p a s s b o o k a c c o u n t to a se le ctio n o f sa v in g s a c c o u n ts a n d certificate s w ith v a ry in g m in im u m b a la n ce s, rates o f return, w ith d r a w a l p ro v isio n s, a n d m aturities. By the e n d o f 1970, a sig n ific a n t p ro p o r tio n (th o u g h b y n o m e a n s a fro m U n d e r p re ssu re to raise d iv id e n d s o n sa v in g s c ap ital d u r in g m o st o f the d e c a d e , sa v in g s a n d lo an a sso c ia tio n s re d u c e d the p ro p o r t io n o f their e a rn in g s g o in g to n o n d iv id e n d u ses a n d p a id a gre ater p ro p o r t io n o f e a r n in g s to sa v in g s a c c o u n t h old ers. B e tw e e n 196 0 a n d 1970, the r e g io n 's a sso c ia tio n s to o k a d v a n ta g e o f e c o n o m ie s o f scale a n d o p e r a tin g in n o v a tio n s to cu t o p e r a tin g e x p e n se s fro m 22 p e rce n t o f g r o s s e a rn in g s to 18 p e rce n t o f gro ss ea rn in gs. D u r in g the sa m e p e rio d , a sso c ia tio n s a lso re d u c e d the p ro p o r t io n o f their g ro ss e a rn in g s a llo c a te d to reserves a n d su rp lu s fro m 18 p e rce n t to 10 percent. S lo w e r asse t g ro w th a llo w e d this d im in u t io n to take p la c e w it h o u t m ajority) o f the sa v in g s cap ita l o f the r e g io n 's a sso c ia tio n s w a s in a c c o u n ts a n d certificates o th e r than the p a s s b o o k a cc o u n t. lo w e r in g the ratio o f reserves a n d su rp lu s to assets o f the r e g io n 's a sso c ia tio n s. E n la r g in g the v ariety o f a c c o u n ts w a s d e sig n e d to m e e t in c re a se d c o m p e titio n fo r sa v in g s a n d D e s p it e all o f the se c h a n g e s, m a n y sa v in g s a n d lo an a sso c ia tio n s in the re g io n re q u ire d o u ts id e aid to ea se the a s s o c ia t io n s ' a d ju stm e n t to risin g interest rates. O f f e r in g a c c o u n ts a n d certificates o f se veral typ e s a llo w e d a sso c ia tio n s to m eet w h e n c o m p e t it io n fo r lim ite d fu n d s b e c a m e intense. O n e im p o rta n t r e sp o n se to the ir p r o b le m s sp e c ific n e e d s o f savers, to c o m p e te w ith a greater n u m b e r o f fin a n c ia l instru m e n ts, a n d to o ffer gre ater returns o n a c c o u n ts w ith lo n g -te rm m aturities. S in c e the certificate s c arried p e n altie s fo r p re m a tu re w ith d ra w a l, their use re d u c e d sa v e rs' 78 c a m e fro m the F ederal H o m e Lo an Banks. T h e se in stitu tio n s in c re a se d the ir b o r r o w in g in the n a tio n 's c ap ita l m a rke ts in o r d e r to p ro v id e a so u rc e o f fu n d s to a sso c ia tio n s e x p e rie n c in g d iffic u lty m a in t a in in g sa v in g s a c c o u n t b a la n c e s a n d m a k in g n e w m o r t g a g e lo an s. T h e r e g io n 's M O N T H L Y R E V IE W a sso c ia tio n s, w h ile c o n tin u in g their h istorical p ra ctice o f b o r r o w in g less than th o se in the rest o f the n ation , in c re a se d their b o r r o w in g d u r in g b o th p e r io d s o f risin g interest rates. In 1966, their d e b t to the Federal H o m e Loan B a n k s rose by $89 m illio n ; in 1969 it rose b y $310 m illio n . that sa v in g s a n d loan a sso c ia tio n s a n d c o m m e rc ia l b a n k s w ere a llo w e d to pay. A g a in , interest g r o u p s in c lu d in g sa v in g s a n d lo an a sso c ia tio n s a n d c o m m e r c ia l b a n k s s o u g h t to lim it c o m p e titio n fo r sa v in gs. T h e y p re sse d the U. S. T re a su ry a n d the p ro b le m o f risin g interest rates fo r sa v in g s a n d lo an a sso c ia tio n s all o v e r the nation. In 1966 F ederal a g e n c ie s to raise the m in im u m d e n o m in a tio n o f T re a su ry b ills a n d o th e r T re asu ry a n d a g e n c y o b lig a tio n s, m a k in g these in stru m e n ts u n a v a ila b le to m a n y savers w ith sm a lle r a cco u n ts. In early 1970, several Federal a g e n c ie s raised the m in im u m d e n o m in a tio n o f their o b lig a tio n s fro m $1,000 to $10,000. T h e T re asu ry fo llo w e d in a n d a g a in in 1969 a n d 1970, sa v in g s a n d lo an a sso c ia tio n s, the Federal H o m e Loan B a n k B oard, February 1970 b y raisin g the m in im u m d e n o m in a tio n o f T re a su ry b ills fro m $1,000 to a n d o th e rs c o n c e rn e d w ith the so lv e n c y o f a sso c ia tio n s a n d the a d e q u a c y o f the n a tio n 's $10,000. A n o th e r im p o rta n t re sp o n se to actual a n d thre ate n e d sa v in g s o u tflo w s w a s the lim ite d su p p r e s sio n o f c o m p e titio n for savin gs. C o m p e t it io n for sa v in g s w a s the m o st o b v io u s m a n ife sta tio n o f h o u s in g s o u g h t to lim it c o m p e titio n fo r savers' fu n d s b y ban ks, the Federal G o v e rn m e n t, a nd Federal a ge n cie s. B a n k c o m p e t it io n fo r sa v in gs, w h ic h h ad b e c o m e m o re a ctive sin ce the early 1960's, in te n sifie d in Results. B e ca u se o f their re sp o n se s to c h a n g e s d u r in g the 1960-1970 d e ca d e , sa v in g s a n d lo an a sso c ia tio n s in the S o u th e a st o ffe re d a larger variety o f b o th lo a n s a n d sa v in g s a c c o u n ts by late 1965 w h e n b a n k re g u la to ry a g e n c ie s a llo w e d b a n k s to raise the interest rates that they p aid the e n d o f 1970. T h e y p a sse d a larger p ro p o rtio n o f e a rn in g s th ro u g h to savers a n d e a rn e d a n d p a id h ig h e r rates o f return. Yet, these a sso c ia tio n s c o n tin u e d to sp e c ia liz e in sh o rt-te rm lia bilitie s fo r tim e certificates o f d e p o sit. Further increase s in y ie ld s o n c o m p e t in g assets h e lp e d to in d u c e a n d lo n g -te rm h o u s in g finance. T h e ir g ro w th rate o v e r the 1960-1970 d e c a d e the b a n k re g u la to ry a g e n c ie s in July o f 1966 to h a rd ly m a tc h e d their g ro w th rate d u r in g the p re c e d in g de ca d e . T h e r e g io n 's a sso c ia tio n s a llo w b a n k s to m a rk e t m u ltip le m a tu rity tim e d e p o sits (ge n e ra lly k n o w n as g o ld e n p a s s b o o k a cc o u n ts). S a v in g s a n d lo an a sso c ia tio n s had d iffic u lty r e s p o n d in g in the m arket. Be tw ee n late 1965 a n d S e p te m b e r 1966, the sa v in g s a n d loan in d u stry s o u g h t re g u lato ry ru lin g s a n d le gisla tio n to lim it c o m m e r c ia l b a n k rate c o m p e titio n on sm a ll d e n o m in a tio n tim e and sa v in g s de p o sits. In S e p te m b e r 1966, C o n g r e s s a d o p te d le gisla tio n that a llo w e d b a n k re g u lato ry a g e n c ie s to set lo w e r rate c e ilin g s o n lo w e r d e n o m in a tio n certificates o f d e p o s it than o n large certificates, g a v e the F D IC p o w e r to set m a x im u m rates p a y a b le o n tim e a n d sa v in g s d e p o sits at in su re d m u tu a l sa v in gs ba n ks, a n d g a v e the Federal H o m e Loan B an k B o a rd p o w e r to set m a x im u m rates p a y a b le on sa v in g s a c c o u n ts at in su re d a sso c ia tio n s. D e b a te in b o th h o u se s o f C o n g r e s s m a d e it clear that it w a s the inten t o f C o n g r e s s that the b a n k re g u la to ry a g e n c ie s a n d the B a n k B o a rd sh o u ld c o o p e ra te in se ttin g m a x im u m rates a n d that the m a x im a a p p lic a b le to sa v in g s a n d lo an a sso c ia tio n s a n d m u tu a l sa v in g s b a n k s s h o u ld be a b o v e tho se a p p lic a b le to c o m m e r c ia l banks. A lt h o u g h c o m p e titio n b e tw e e n sa v in g s o u tstrip p e d th o se in the rest o f the n atio n g ro w th . T h e n u m b e r o f a sso c ia tio n s in the S o u th e a st in c re a se d b y 93 d u r in g the de ca d e , w h ile the n u m b e r in the n atio n as a w h o le de cre ase d b y 93. A sse ts o f the r e g io n 's a sso c ia tio n s g re w b y 173 p e rce n t to $18.7 b illio n . In the n ation, assets g re w 161 percent. A lt h o u g h these gro w th rates are q u ite re sp e ctab le in each case, they are o n ly a b o u t o n e -th ird as large as the gro w th rates o f the p re c e d in g d e cade . In m a in ta in in g their share o f tim e a n d sa v in g s d e p o sits at b a n k s a n d thrift institu tio ns, the r e g io n 's a sso c ia tio n s d id n o t d o as w e ll as a sso c ia tio n s in o th e r parts o f the n ation. T h e ir share o f these d e p o sits in the re g io n b e g a n the d e c a d e at 57 percent, fell to 52 p e rce n t b y the e n d o f 1966 an d to 49 p e rce n t b y the e n d o f 1970. O v e r the 1960-1970 p e rio d , the share o f tim e a n d sa v in g s d e p o sits he ld b y the n a tio n 's sa v in g s a n d lo an a sso c ia tio n s fell o n ly fro m 36 p erce n t to 35 p erce n t; m u tu a l sa v in g s b a n k s ' share fell fro m 22 p erce n t to 17 percent. Future Changes and Responses and lo an a sso c ia tio n s a n d b a n k s w a s lim ite d p rim a rily to a d v e rtis in g a n d p r o m o t io n w h e n interest rates in G e n e ra l o u tlin e s o f s o m e futu re d e v e lo p m e n ts that w ill in flu e n c e sa v in g s a n d lo an a sso c ia tio n s d u r in g the rest o f the 1 9 7 0 's m a y be projected. rose a g a in in 1969 a n d early 1970, sa v in g s an d lo an a sso c ia tio n s e n c o u n te re d interest rate c o m p e titio n fro m o th e r quarters. Large fin a n c in g d e m a n d s b y bu sin e sse s, go v e rn m e n ts, a n d T h e a sso c ia tio n s' p ast record giv e s c lu e s a b o u t their re sp o n se to these c h an ge s. T h e p e rfo rm a n c e Federal o f sa v in g s a n d lo an a sso c ia tio n s in the 1960's a g e n c ie s p ush ed interest rates on sh o rt-te rm fin a n c ia l in stru m e n ts w e ll a b o v e tho se F E D E R A L R ES E R V E BAN K O F A T LA N T A in d ic a te s that they are c a p a b le of su c c e ssfu lly 79 and S & L ’s s h a re of to ta l p riv a te tim e a n d s a v in g s d e p o s its fe ll d u rin g th e S ix tie s P ercen t Sixth District States £ Savm gs and L oan □ C o m m e rc ia l B anks A ssoc. - 60 1950 ii] 1960 U.S. and ^ C o m m e rc ia l L oan B anks a sso c ia tio n s and o th e r lenders. a n d o th e r typ es o f fin a n ce rs, b y lo n g -te rm b o r r o w in g o r sto c k issu es by a sso c ia tio n s w h e re sto c k a sso c ia tio n s exist, o r b y further e x p a n sio n o f the lo n g -te r m a d v a n c e s p ro g r a m o f the Federal H o m e Lo an Banks. A d ju stm e n ts are a lso lik e ly to b e n ecessary in a sso c ia tio n s' le n d in g fo r s in g le -fa m ily h o u sin g . 1970 ^ J sa v in g s am ong M e t h o d s o f c o o p e r a tio n m ig h t b e as fo rm a l a n d p e rm a n e n t as m e rge rs o f a sso c ia tio n s o r the g a th e rin g o f a sso c ia tio n s, o r a sso c ia tio n s a n d o th e r lenders, into h o ld in g c o m p a n ie s o r as in fo rm a l as a d hoc a rra n g e m e n ts m a d e sp e c ific a lly for in d iv id u a l projects. C a p ita l fo r d e v e lo p m e n t a n d c o n stru c tio n o f la rge p ro je cts m ig h t be p ro v id e d b y c o o p e r a tio n b e tw e e n a sso c ia tio n s P e rce n t A ssoc. — 60 S e c o n d a r y m a rke ts fo r c o n v e n t io n a l s in g le -fa m ily lo a n s are n o w d e v e lo p in g . T h e se m a rke ts have b e e n d e s ig n e d to attract m o re in v e sto rs to c o n v e n tio n a l m o rtg a g e s. If the y su c c e e d , w h ic h a p p e a rs likely, m o rt g a g e b a n k in g firm s se em certain to b e c o m e stro n g e r c o m p e tito r s o f a sso c ia tio n s in o r ig in a t in g c o n v e n t io n a l m o rtg a g e s o n s in g le -fa m ily h o u sin g . S u c h c o m p e t it io n m a y lim it a sso c ia tio n s' sh a re o f c o n v e n t io n a l m o rtg a g e s o rig in a te d , b u t it is a lso lik e ly to sh ift b o rro w e rs fro m G o v e r n m e n t -b a c k e d to c o n v e n tio n a l m o rtg a g e s so that c o n v e n tio n a l m o rtg a g e s w ill fin a n c e a gre ater p ro p o r t io n o f s in g le -fa m ily h o u s in g p u rch ases. T h e a b ility o f sa v in g s a n d lo an a sso c ia tio n s Note: Private time and savings deposits include savings capital at savings and loan associations and time deposits of individuals, partnerships, and corporations at commercial and mutual savings banks less large negotiable certificates of deposit at commercial banks. Figures are as of end of year. a d a p t in g to g ra d u a l c h a n g e s b u t that they have o n ly lim ite d a b ility to a d a p t to rap id ch an ge , p artic u larly to rap id interest rate increases. If the 1 9 7 0 's b r in g increase s in p la n n e d u nit d e v e lo p m e n ts, n e w to w n s, c o n d o m in iu m projects, large m u ltifa m ily projects, a n d m a jo r urban re n o v a tio n s, as they are e x p e cte d to do , a sso c ia tio n s w ill n eed to a c q u ire n e w sk ills a n d experience, b ro a d e n furth er the typ es o f fin a n c in g that they do , a n d p u t to ge th e r larger fin a n c in g p ac ka ge s. A s s o c ia t io n s se e m c a p a b le o f c o n tin u in g to a c q u ire the n e w sk ills a n d e x p e rie n c e nee ded . It is to be a n tic ip a te d a lso that their re g u lato rs w ill a llo w th e m the a d d itio n a l p o w e rs n ecessary for use o f the ir n e w skills. A c q u is itio n o f the fu n d s n e e d e d fo r larger a n d m o re c o m p le x fin a n c in g s is likely to be d iffic u lt fo r m a n y in d iv id u a l a sso c ia tio n s. F in a n c in g n e e d s o f in d iv id u a l p ro jects w ill be large, a n d d e v e lo p m e n t cap ital n o t p re se n tly p ro v id e d by a sso c ia tio n s is likely to b e n ecessary. Large r-sized f in a n c in g n e e d s w ill require in c re a sin g c o o p e r a tio n a m o n g in d iv id u a l sa v in g s a n d 80 lo an a sso c ia tio n s to w ith sta n d large interest rate increases, s h o u ld these oc c u r, w it h o u t e n c o u n t e r in g the tro u b le s o f the 1 960's is still restricted b y the m atu rity structu re o f the a s s o c ia t io n s ' assets a n d liabilities. A s s o c ia t io n s c o n tin u e to c o n c e n tra te h e a v ily o n lo n g -te rm assets a n d sh o rt-te rm liabilities. C o n se q u e n tly , they c o n tin u e to b e v u ln e r a b le to risin g interest rates. S o m e re sp o n se s o f the 1 9 6 0 's a n d o th e r p ro je c te d re sp o n se s p ro m is e to d im in is h this vu ln e rab ility , b u t o th e r d e v e lo p m e n ts fo r e s h a d o w m o re c o m p e titio n fo r sa v in g s in tim e s o f rising interest rates. A n a g g re s siv e p ro g r a m o f a d v a n c e s by the Federal H o m e Lo an B a n k Syste m , w id e s p r e a d use o f m o d ifie d m o r t g a g e in stru m e n ts— su c h as the v a ria b le rate m o r t g a g e — that in cre a se e a rn in g s o r cash flo w as o th e r interest rates rise, a n d further d e v e lo p m e n t o f se c o n d a r y m a rke ts for c o n v e n tio n a l h o m e m o rtg a g e s s h o u ld h e lp to m itig a te cash flo w p ro b le m s. C o m p e t it o r s fo r sa v in gs, h o w e v e r, are lik ely to fin d n e w w a y s to in d u c e savers to w it h d r a w fu n d s fro m sa v in g s an d lo an a sso c ia tio n s. O n e la rge b u sin e ss c o r p o r a tio n has a lre a d y se rio u sly stu d ie d p la n s fo r issu in g lo w - d e n o m in a t io n "s a v in g s b o n d s " w h e n fu n d s are d iffic u lt to o b ta in fro m o th e r instru m e nts. T re a su ry o b lig a t io n s o th e r than b ills are still issu e d in $1,000 d e n o m in a tio n s . M u t u a l fu n d s o f fixed in c o m e se cu ritie s are a n o th e r M O N T H L Y R EV IEW p o ssib le so u rc e o f c o m p e titio n fo r savin gs. In the So u th e a st, sa v in g s a n d lo an a sso c ia tio n s h a ve m e t the p ro b le m s that c o n fr o n te d o th e r a sso c ia tio n s in the p ast a n d are likely to d o so in the future. They, like o th e r a sso c ia tio n s, have s h o w n a b ility to a d a p t to g ra d u a l c h an ge . T h ere is n o o b v io u s reason w h y this s h o u ld be differen t in the future. T h e r e g io n 's a sso c ia tio n s are sim ila r in size to th o se e lse w h e re ; c o n se q u e n tly , p r o b le m s c a u se d b y lim ite d resou rces a n d large f in a n c in g n e e d s o n in d iv id u a l p ro jects s h o u ld be n o m o re d iffic u lt for the m to so lv e than for a sso c ia tio n s else w he re . D u r in g the Sixties, the r e g io n 's g ro w th rates o f in c o m e , p o p u la tio n , a n d n u m b e r o f h o u s in g u nits— all three w h ic h e x ce e d e d n atio n a l g ro w th rates— w e re key factors in the a b ility o f the r e g io n 's a sso c ia tio n s to g r o w faster a n d to w ith sta n d risin g interest rates w ith less d a m a g e d o n e . In general, these facto rs are likely to c o n tin u e to d ifferen tiate the r e g io n 's a sso c ia tio n s fro m th o se in the rest o f the n ation a n d to aid their re sp o n se s to c h an ge s. ■ MARCH 22, 1972 THE CITIZENS BANK OF PASCO Bank Announcements Zephryhills, Florida Opened for business as a nonmember. Officers John J. Jenkins, president; and H. E. Johnson, cashier. Capital, $380,000; surplus and other capital funds $380,000. MARCH 24, 1972 THE O R LA N D O N A T IO N A L BANK— WEST MARCH 7, 1972 SOUTHSIDE BANK OF ST. PETERSBURG St. Petersburg, Florida Opened for business as a nonmember. Officers: L. W. Baynard, president; L. G. Limroth, executive vice president; and T. L. Stacy, vice president and cashier. Capital, $350,000, surplus and other capital funds, $350,000. MARCH 18, 1972 CITIZENS & SOUTHERN BANK OF HENRY C O U N TY McDonough, Georgia Opened for business as a nonmember. Officers: Edward J. Korb, president; and Henry P. Bradford, cashier. Capital, $375,000; surplus and other capital funds, $375,000. MARCH 20, 1972 N A T IO N A L BANK OF GRADY C O U N TY Whigham, Georgia Opened for business. Officers: E. L. Chastain, chairman; Agnew Smith, president; Thomas L. Walker, executive vice president and cashier; J. J. Newberry, vice president; and Hilda L. Gray and Mintene Vickers, assistant cashiers. Capital, $200,000; surplus and other capital funds, $102,117. MARCH 20, 1972 D O R A BANKIN G A N D TRUST C O M P A N Y Dora, Alabama Began to remit at par. F E D E R A L R ESER V E BAN K O F A T LA N T A Orlando, Florida Opened for business. Officers: C. Howard McNulty, chairman and president; and J. C. Barfield, Jr., executive vice president and cashier. Capital, $500,000; surplus and other capital funds, $300,000. MARCH 28, 1972 BARNETT BANK OF WEST O R LA N D O Orlando, Florida Opened for business as a nonmember. Officers: C. Lee Maynard, president; Robert L. Barnett, assistant vice president; and Gary L. Mcllhenny, cashier. Capital, $400,000; surplus and other capital funds, $350,000. MARCH 29, 1972 FIDELITY N A T IO N A L BANK Pompano Beach, Florida Opened for business. Officers: Milton N. Weir, Jr., chairman; John H. Weir, vice chairman; Douglas A. Lowrie, president; Anthony P. Beeler, vice president and cashier; and John R. Walker, vice president. Capital, $850,000; surplus and other capital funds, $425,000. MARCH 29, 1972 JACKSON STATE BANK Hollywood, Florida Opened for business as a nonmember. Officers: David L. Cory, president; and Arthur W. Mangan, cashier. Capital, $400,000; surplus and other capital funds, $200,000. (Continued on page 87) 81 One-Bank Holding Companies In the Southeast b y C h a r le s D. Salley N in e t y -o n e c o rp o ra te o rg a n iz a tio n s in the S o u th e a st h a ve recen tly registered u n d e r the 1970 A m e n d m e n t s to the B a n k H o ld in g C o m p a n y A c t — a m e n d m e n ts that are h e a v ily c o n c e rn e d w ith b a n k in g c o m p e titio n . T h is le g isla tio n is relatively new , and , fo r that m atter, so is the ide a that b a n k in g la w s s h o u ld be c o n c e rn e d w ith c o m p e titio n . For m a n y years, b a n k s have o p e ra te d u n d e r the p u r v ie w o f the b a n k in g le g isla tio n o f the early 1930's, w h ic h w a s c o n c e rn e d p rin c ip a lly w ith s ta b iliz in g the c o u n tr y 's b a n k in g system . Sta b ility e n ta ile d the p re v e n tio n o f " o v e r b a n k in g , " w h ic h o c c u r s w h e n there are so m a n y c o m p e t in g b a n k s in an area that s o m e m ig h t b e c o m e w e a k a n d fail. U n d e r this le gisla tio n , charters w e re d iffic u lt to o b ta in , a nd the so u n d , sin g le b a n k w a s the o rd e r o f the d a y in m a n y to w n s. T h is restriction o f c o m p e titio n w as effective in re d u c in g the n u m b e r o f b a n k failu re s a n d so b e c a m e an a c c e p te d part o f A m e r ic a n b a n k in g . D u r in g the 1950's, the re g u la to ry p e n d u lu m b e g a n to s w in g the o th e r w ay. R e stric tio n s o n entry se e m e d to m a k e less se n se — w ith a d w in d lin g n u m b e r o f in d e p e n d e n t b a n k s left b y the w a v e o f in c re a sin g b a n k m e rge rs— a n d se e m e d less n e c e ssary as d e p o s it in su ra n c e c a m e in to ge n e ral force. P u b lic c o n c e rn o v e r the in c re a sin g c o n c e n tra tio n o f fin a n c ia l re so u rc e s g re w a n d resulte d in the B a n k H o ld in g C o m p a n y A c t o f 1956 a n d the B a n k M e r g e r A c t o f 1960. T h e S u p r e m e C o u r t c arried the c o n c e rn fo r c o m p e titio n still further in 1963 w h e n it a p p lie d the antitru st la w s -fo r the first tim e to b a n k m e rge rs in its p iv o ta l P h ila d e lp h ia N a tio n a l B a n k case. T h e e n s u in g c o n tro v e rsy a n d the e n a c tm e n t o f the 1966 A m e n d m e n t s to the B a n k M e r g e r a n d H o ld in g C o m p a n y A c ts fin a lly a c c o r d e d c o m p e t it io n a p rim a ry role in b a n k re g u latio n . T h e se tw o A c ts in c o rp o ra te the a s s u m p tio n that the m o st sa tisfa cto ry w a y to m a in ta in c o m p e titiv e m arke ts in b a n k in g is to re gu late the structu re o f b a n k in g m a rke ts rather than p o lic e the b e h a v io r o f in d iv id u a l ba n ks. T h e M O N T H L Y R E V IE W registration o f o n e -b a n k h o ld in g c o m p a n ie s re q u ire d by the 1970 B a n k H o ld in g C o m p a n y A c t A m e n d m e n ts is the latest e x p a n sio n o f this structu ral a p p r o a c h to re g u la tin g c o m p e titio n . Three Measures of Com petition T h e m o re c o m p e titiv e an industry, the m o re likely it is to p ro d u c e an efficie n t a llo c a tio n o f resou rces a n d a ste a d y stream o f in n o v a tio n — all at lo w e r than m o n o p o ly prices. T h e p re se n c e o f m a n y firm s in the m arke t fo rce s the c o st sa v in g s re su ltin g fro m in n o v a tio n to be p a sse d o n to c o n su m e rs. O n e can m e asu re c o m p e titio n fro m three a n g le s: c o m p e titiv e p e rfo rm a n c e , c o m p e titiv e c o n d u c t, a n d c o m p e titiv e structure. T h e p e rfo rm a n c e m e a su re o f c o m p e titio n lo o k s d ire ctly to p e rfo rm a n c e varia b le s su ch as profits, efficie ncy, a n d t e c h n o lo g ic a l p ro gress. If these are at so c ia lly d e sira b le levels, the c o m p e titio n is d e e m e d " w o r k a b le . " T h e c o n d u c t m e asu re is o n e step re m o v e d . It lo o k s at a firm 's p e rfo rm a n c e as d e te rm in e d in d ire ctly b y the firm 's c o n d u c t. If a firm 's c o n d u c t in its p ric in g a n d o u tp u t d e c is io n s is a n tico m p e titiv e , i.e., if it fixes p rices o r a gree s to lim it p ro d u c tio n , w e p re su m e that the results o n the firm 's p e rfo rm a n c e w ill be a n tico m p e titiv e . T h at is, w e can ex pe ct excess p ro fits a n d re d u c e d e fficie ncy. T h e structu re m e asu re is still a n o th e r step re m o v e d . It asserts a line o f c a u sa tio n r u n n in g first fro m structure, then to c o n d u c t, a n d then to p e rfo rm a n c e . A n in d u stry that d o e s n o t h a ve a c o m p e titiv e structure p ro b a b ly w ill n ot e x h ibit c o m p e titiv e b e h avior. For instance, an in d u stry w ith fe w firm s a nd w ith barriers that p re ven t n e w firm s fro m e n te rin g the m arke t c o u ld le ad to a n ti c o m p e titiv e c o n d u c t su ch as p rice fixing, w h ic h , in turn, c o u ld lead to a rtific ially-in fla te d profits. Problems of Enforcement W h ic h m e asu re o f c o m p e t it io n — p e rfo rm a n c e , c o n d u c t, o r structu re— is u sed d e te rm in e s the m e a n s o f e n fo rc e m e n t. If the e n fo rc e m e n t a g e n c y ju d g e s the level o f c o m p e titio n d ire ctly by the p e rfo rm a n c e varia b le s, these are the v a ria b le s it w ill u su a lly regulate. R e g u la tin g an in d u stry in this w ay, th o u g h , a p p e a rs to alter the e n fo r c e m e n t p o lic y fro m o n e o f p re se rv in g c o m p e titio n to o n e o f re g u la tin g m o n o p o ly . In d e e d , this is the a p p r o a c h ge n e ra lly taken w ith p u b lic utilities. O n e o f the d r a w b a c k s to the p e rfo rm a n c e a p p r o a c h is that it creates m a n y e v id e n c e p ro b le m s. L o w profits, fo r ex am p le, g e n e ra lly in d ic a te a h igh d e gre e o f c o m p e titio n . A n d yet, lo w p ro fits m ig h t ju st as w e ll c o n c e a l an in e fficie n t m o n o p o ly , w h ile h ig h returns m ig h t reflect the p re se n c e o f FE D E R A L R ES E R V E BAN K O F A TLA N T A firm s that are n e w an d su c ce ssfu l c o m p e tito rs in several m arkets. O n the o th e r hand, if the re g u lato ry a g e n c y ju d g e s the level o f c o m p e titio n by a firm 's p rice an d o u tp u t d e c isio n s, i.e., by its c o n d u c t, in ju n c tio n w ill be the n o rm a l m e a n s o f en fo rc e m e n t. T h e antitrust la w s readily id e n tify a n d e n jo in a n ti c o m p e titiv e c o n d u c t, su ch as p re d a to ry p rice c u ttin g to d riv e c o m p e t in g firm s fro m the m arket. S o m e typ es o f c o n d u c t, th o u g h , su ch as tie-in a gre e m e n ts a n d c o n tracts b e tw e e n su p p lie rs a n d dealers, d e stro y c o m p e titio n o n ly w h e n certain c o m p a n ie s e n g a g e in the m in sp e c ific m arke t set tings. T h is se le ctivity requires the re g u lato rs to lo o k at c o n d u c t in in d iv id u a l m arke ts a n d requires the m to use a c a se -b y -c a se analysis. Further m ore, there is n o gu a ra n te e that the in ju n c tio n w ill have the d e sire d effect on p e rfo rm a n c e . A n e n te rp risin g firm can ofte n d e v ise o th e r w a y s to o b ta in its ob jective s. Finally, if the re g u la to ry a g e n c y takes structure as the m e asu re o f c o m p e titio n , the c o m m o n v e h ic le s o f e n fo rc e m e n t are divestiture, m e rge r regu latio n , a nd the e n c o u r a g e m e n t o f n e w firm s e n te rin g the m arket. T h e idea is to p re ven t the c o n c e n tra tio n o f m arke t p o w e r in the h a n d s o f a few firm s. M a r k e t p o w e r is n ecessary in o rd e r to e n g a g e in a n tic o m p e titiv e c o n d u ct. If there is n o su ch p o w e r in the first place, there can be n o q u e s tion o f firm s e x e rc isin g it w ith the intent to h in d e r c o m p e titio n . T h e structure a p p ro a c h has the further a d v a n ta g e o f b e in g a d a p te d m o re readily to g u id e lin e s and, therefore, requ ires a m in im u m o f a d m in istra tiv e resources. Structural Regulation of Holding Companies T h e B a n k H o ld in g C o m p a n y A c t in c o rp o ra te s the structure a p p ro a c h for p re se rv in g c o m p e titio n . It d o e s so partly b e c a u se o f the a d m in istra tiv e a d v a n ta ge s o f structural regu latio n s. M o re o v e r , it takes the structure a p p ro a c h b e c a u se the c o n d u c t a p p ro a c h c a n n o t deal w ith the "v o lu n t a r y " tie-in b e h a v io r to w h ic h the h o ld in g c o m p a n y type o f o r g a n iz a tio n re a d ily le n d s itself. T he p o ssib ility o f tie-in a gre e m e n ts is a p rin cip a l reason w h y the A c t p ro v id e s fo r the se p a ratio n o f b a n k s an d n o n b a n k in g enterprises. T h e A c t in te n d s that this se p a ratio n p re ven t p referential tre atm e nt a n d tie-in a rra n g e m e n ts that w o u ld je o p a rd iz e the b a n k 's so lv e n c y o r result in a c o m p e titiv e a d v a n ta g e fo r the n o n b a n k in g s u b sidiary. For ex am ple, w ith o u t su c h a restriction, g r a n tin g a b a n k lo an m ig h t d e p e n d o n w h e th e r the c u s to m e r p u rc h a se s the h o ld in g c o m p a n y 's in su ra n c e a n d data p ro c e ssin g services. A lt h o u g h the c o n d u c t a p p r o a c h can c o n tro l an ex plicit tie-in, it can d o n o th in g a b o u t a situ a tio n w h e re a c u s to m e r v o lu n ta rily u tilizes the 83 h o ld in g c o m p a n y 's n o n b a n k in g se rvices w ith the T h e c o m p a n y , in an effort to d iv e rsify its h o ld in g s , h o p e o f re c e iv in g fav o re d tre atm e nt in o b ta in in g a loan. For ex am p le , if a h o ld in g c o m p a n y w e re p e rm itte d to o w n a b u ild in g s u p p ly su b sid iary , the c o n stru c tio n lo an c u s to m e r is likely to feel that b e in g g ra n te d a loan m ig h t d e p e n d on w h e th e r he p u rc h a se d m a te ria ls fro m the su b sid iary , an d he w o u ld d o so o f his o w n a cco rd . ge n e ra lly e n g a g e s in s o m e fo rm o f m a n u fa c tu r in g or s h ip p in g as a m a jo r activity a n d o p e ra te s a variety o f u n re la te d m in o r su b sid ia rie s. A m o n g these su b s id ia rie s is a ban k, w h ic h m a y b e either an in v e stm e n t p r o p o s it io n fo r the c o m p a n y , o r a retail b a n k in g facility in te n d e d o n ly to p ro v id e a b a n k in g c o n v e n ie n c e fo r c o m p a n y e m p lo y e e s. S in c e the c o n g lo m e r a t e 's c u s to m e r s are ge n e ra lly in w id e ly se p a rate d g e o g r a p h ic a n d p ro d u c t m arkets, v o lu n ta r y tie -in s w ith the b a n k in g activity are s o m e w h a t less lik ely to occu r. T h e third typ e o f c o m p a n y is p u re ly a b a n k in g o p e ra tio n . T h e re m a y be a m in o r su b s id ia ry that p ro v id e s p ro p e rty m a n a g e m e n t, in su ra n ce , o r data One-Bank Holding Companies T hus, in a structu ral m a n n e r, the B a n k H o ld in g C o m p a n y A c t o f 1956 w a s a im e d at p re v e n tin g tho se v o lu n ta r y restrictions o n c o m p e titio n to o d iffic u lt to sto p in o th e r w ays. T h e A c t did, th o u g h , e x e m p t h o ld in g c o m p a n ie s c o n tr o llin g o n ly o n e ban k, p rim a rily to a v o id the b u rd e n o f re g u la t in g sm all, fa m ily -o w n e d b a n k s that d id not a p p e a r to g o a ga in st the le gisla tio n . By 1969, h ow e v e r, the n u m b e r o f o r g a n iz a tio n s e n jo y in g this e x e m p tio n h ad m u s h r o o m e d to 1,116 and c o n tr o lle d 32 p erce n t o f U.S. b a n k d e p o sits. T h e se o n e -b a n k c o m p a n ie s are o f three m a jo r types. T h e m o st salient, b e c a u se o f its c o n d u c iv e n ess to v o lu n ta ry tie-ins, is the fin a n c ia l c o n g e n e ric . T h is is a c o m p a n y w h o s e m a jo r su b s id ia ry is a large bank. T h e o th e r su b sid ia rie s, w h ic h have c o n sid e r a b ly sm a lle r assets than the bank, e n g a g e in fin a n c ia l a n d a d m in istra tiv e se rvices su ch as real estate a n d m o rtg a g e b ro k e ra ge , fac to rin g, data p ro c e ssin g , le asin g, a n d p ro p e rty m a n a ge m e n t. A se c o n d typ e o f o n e -b a n k h o ld in g c o m p a n y takes the fo rm o f an in d u strial c o n g lo m e ra te . p ro c e ssin g se rvices to the ban k. O fte n , th o u g h , the h o ld in g c o m p a n y h as n o o p e r a tio n a l s ig n i ficance. It m e re ly serves as a c o n v e n ie n t le gal form o f o w n e rsh ip . P u b lic c o n c e rn fo r the sh a rp in c re a se in the n u m b e r o f these o n e -b a n k h o ld in g c o m p a n ie s e x e m p te d fro m the B a n k H o ld in g C o m p a n y A c t p ro m p te d the p a ssa g e o f the A m e n d m e n t s o f 1970. T h e A m e n d m e n t s b r in g all o n e - b a n k h o ld in g c o m p a n ie s u n d e r the A c t 's ju risd ic tio n a n d stru ctu ra lly restrict their a ctivitie s to areas so c lo se ly related to b a n k in g that there w ill b e fe w e r o p p o rtu n itie s fo r v o lu n ta r y tie -in s a n d the a c c o m p a n y in g a n tic o m p e titiv e effects. T h e n e w la w re q u ire d all o n e - b a n k h o ld in g c o m p a n ie s to file a registra tion sta te m e n t b y S e p te m b e r 1971. For the first tim e, w e are n o w in a p o sitio n to k n o w the actu al extent o f o n e b a n k h o ld in g c o m p a n y activity. H y p o th e tic a l O n e -B a n k C o n g e n e r ic 84 M O N T H L Y R EV IEW H y p o t h e t ic a l O n e -B a n k C o n g lo m e r a t e Holding Companies in the Southeast O n e - b a n k h o ld in g c o m p a n ie s in m id-1971 c o n tr o lle d 20 p e rce n t o f total b a n k d e p o sits in the six-state S o u th e a ste rn area. T h is w a s in a d d itio n to the 29 p e rce n t a lre a d y c o n tr o lle d b y registered m u ltib a n k h o ld in g c o m p a n ie s. A b o u t o n e -th ird o f the 91 n e w ly registered c o m p a n ie s e n g a g e so le ly in b a n k in g activitie s (T able 1). Bu t these a c c o u n t fo r a m u c h sm a lle r fractio n o f the d e p o sits in the n e w ly registered catego ry. Fully a n o th e r o n e -th ird are o f the c o n g lo m erate typ e a n d e n g a g e in a ctivitie s r a n g in g fro m r a n c h in g a n d la n d d e v e lo p m e n t to d o c k o p e ra tio n a n d railcar le asin g. M o s t o f the se are n o t large, ho w e v e r. O n ly fo u r c o n g lo m e r a te s h o ld n o n b a n k in g assets in excess o f $40 m illio n . T h e a v e ra g e is c lo se r to $3 m illio n in ve sted in n o n b a n k in g activities, w ith a b a n k in g affiliate in the $25m illio n d e p o sit range. So, a gain , the a m o u n t o f b a n k d e p o sits c o n tr o lle d b y this typ e o f o r g a n iz a tio n d o e s n o t m a k e the c o n g lo m e r a t e the m a jo r fo rm o f c o n tro l o f b a n k in g resources. T h e re m a in in g o n e -th ird o f the n e w registrants are c o n g e n e r ic -ty p e h o ld in g c o m p a n ie s. T h e 30 b a n k s in the c o n g e n e r ic c la ss a c c o u n t fo r a lm o s t 82 p e rce n t o f the d e p o sits c o n tr o lle d b y all o n e b a n k o r g a n iz a tio n s. Se v e n te e n o f these c o n tro l la rge ba n ks, each h o ld in g m o re than $60 m illio n in d e p o sits, a n d th u s m a k e this typ e o f h o ld in g c o m p a n y the m o st sig n ific a n t c a te go ry in term s o f d e p o s it co n tro l. In a d d itio n , the m a jo rity o f these large c o n g e n e r ic s w e re in c o rp o ra te d in the late 1 9 6 0 's a n d h e lp a c c o u n t for the im p e tu s to c lo se the o n e -b a n k lo o p h o le in the B a n k H o ld in g C o m p a n y A ct. FE D E R A L R ES E R V E BAN K O F A TLA N T A Control of Total Bank Deposits b l 1MO One-bank holding companies “ E 3 Multibank holding companies 20.0% H - i p 29.1% 9.1% 8.9% 1965 Note: 1971 Figures cover all banks in entire six-state area. Extent of Bank-Related Activities T a k in g a c lo se r lo o k at the fin a n c ia l c o n g e n e ric o rga n iz a tio n s, it is n o w p o ssib le to id e n tify the m o re c o m m o n areas o f activity p u rsu e d by the n o n b a n k in g su b sid ia rie s o f these larger b a n k in g c o n ce rn s. T h e m o s t fre q u e n t areas se em natural e x te n sio n s o f the p rin cip a l b a n k in g activity a nd are ba n k-re la te d . T h e se are p ro p e rty m a n a g e m e n t o f the b u ild in g that h o u se s the b a n k in g prem ises, data p ro c e ssin g a n d p ay ro ll services, b u sin e ss an d tax c o n su ltin g , m o rtg a g e b a n k in g ,and le n d in g th ro u g h fin a n c e a n d a c c e p ta n c e c o m p a n ie s. T h e se are all activities that the B o a rd o f G o v e rn o r s 85 TABLE Num ber of O n e -B a n k 1 H o ld in g by Type and Bank Com pany O r g a n iz a t io n s D e p o s it S iz e (June 1971) Congeneric $60 m illion or more Com pany Location ....................... Florida . . . . Georgia . . . . Lo uisiana . . O utside the Sixth D istrict Total . . Conglom erate U nder $60 m illion $60 m illion or more 2 4 1 2 U nd er $60 m illio n 3 5 2 ....................... ....................... 2 4 1 . ....................... 1 1 1 2 . ....................... 17 13 4 28 One-Bank H o ld in g C om p an ies (June 1971) 2 6 7 5 8 3 1 3 ....................... 2 U nder $60 m illion 3 11 ....................... . B a n k in g $60 m illion or more 2 2 1 4 4 25 le a sin g e n g a g e d in fre q u e n tly b y a n u m b e r o f Sixth D istric t c o n g e n e ric s. Million $ Conclusion $7,435 $931 $715 Banking j j Conglomerate Congeneric has ruled as c lo se ly a n d p ro p e rly related to b a n k ing, a n d thu s are p e rm issib le activities fo r b a n k h o ld in g c o m p a n ie s .1 A fe w o n e -b a n k c o m p a n ie s op e ra te in o th e r p e rm issib le areas, su ch as in su ra n c e a g e n c y activities, fac to rin g, a n d in v e st in g in sm all b u sin e ss a n d c o m m u n ity d e v e lo p m e n t projects. Le asin g is an area w h e re m a n y c o m p a n ie s are active, b u t it has n o t yet been fu lly d e te rm in e d as c lo se ly related to b a n k in g. C e rta in typ es o f p e rso n a l p ro p e rty le a sin g are p e rm issib le , and several c o m p a n ie s are active in cap ital e q u ip m e n t, b u sin e ss m a c h in e , a n d a u t o m o b ile le asin g. T he A s w e have seen, the c o n c e n tra tio n o f b a n k in g re sou rce s a n d the m ix in g o f b a n k in g a n d c o m m e r c e can p la c e le n d e rs in a p o sitio n to restrain c o m p e titio n th r o u g h re c ip ro c al a gre e m e n ts a n d tie-in con tracts. F urtherm ore , the re g u la to ry tra d itio n o f the 1 930's c o n c e rn e d w ith b a n k in g stab ility has e n c o u r a g e d a b a n k in g stru ctu re w ith m a n y m arke ts that have fe w b a n k in g alternatives. T h e p o ssib ilitie s o f tie -in s are th u s to o n u m e r o u s to p re ven t by a p o lic y o f re g u la tin g the b e h a v io r o f in d iv id u a l ban ks. T h e lin e b e tw e e n p ru d e n t b u s iness b e h a v io r a n d e c o n o m ic c o e rc io n c a n n o t e a sily be d istin g u ish e d fro m afar w ith a g g re g a te statis tics. T h e B a n k H o ld in g C o m p a n y A c t w a s d e sig n e d , instead, to p re ven t the d e v e lo p m e n t o f a b a n k in g structu re c o n d u c iv e to c o e rc iv e c o n d u c t in the first place. It a p p e a rs that the c o n sid e r a b le p e rce n ta ge o f b a n k d e p o sits e x e m p te d fro m the B a n k H o ld in g C o m p a n y A c t — 20 p e rce n t in the Sixth D istric t— su p p o r ts the d e c isio n to c lo se the o n e -b a n k lo o p hole. In a d d itio n , the c o m p a r a tiv e ly recent in c o r p o r a tio n o f the m a jo rity o f this c o n tro l testifies to the tim e lin e ss o f the 1970 A m e n d m ents. B o a rd o f G o v e r n o r s has n ot yet ruled on the p ro p rie ty o f real p ro p e rty le a sin g — a type o f O n the o th e r hand, the actual re gistra tio n o f these c o m p a n ie s has n o t reve ale d so exte nsive an in te rtw in in g o f b a n k in g a n d c o m m e r c e as m a n y 'The nature of these rulings has been discussed in an earlier article, "What is 'Closely Related to Banking'?", this Review, June 1971. ob se rv e rs h ad a n ticip a te d . T h e n o n b a n k in g a ctiv ities o f c o n g lo m e r a t e o n e -b a n k h o ld in g c o m p a n ie s are ex te nsive in term s o f the variety o f these activities. But in term s o f the d e p o s it size o f 86 M O N T H L Y R E V IE W Table 2 B a n k - R e la t e d A c t iv it ie s P e r m is s ib le fo r B a n k H o ld in g C o m p a n ie s —Rulings by the Board of Governors as of May 1972 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. M a k in g loans and operating finance and factorin g com p an ies Operating industrial sa v in gs banks S e rv ic in g loans and m ortgages A c tin g as fiduciary Investm ent and fin an cial advisory services Le asin g of personal property and equipm ent F in a n c in g com m unity developm ent corporations Bookkeeping, billing, payroll, and data p ro ce ssin g services In su ran ce agency and brokerage services A c tin g a s insurer for h olding com pany’s own su b sid iarie s A c t iv it ie s U n d e r C o n s id e r a t io n b y th e B o a r d 1. 2. 3. 4. 5. Investm ent co u n se lin g for investment c om p an ies Property m anagem ent and mineral rights le asin g Arm ored car services In su ran ce underw riting L e a sin g of real property Bank Announcements (Continued from page 81) MARCH 29, 1972 WESTSIDE ATLA N TIC BANK OF O R LAN D O Orlando, Florida Opened for business as a nonmember. Officers: E. C. Simmons, president, Jim W. Matthews, vice president; and David J. Wilson, cashier. Capital $360,000; surplus and other capital funds, $144,000. APRIL 3, 1972 MERCHANTS A N D FARMERS BANK Millport, Alabama Began to remit at par. APRIL 7, 1972 CENTURY N A T IO N A L BANK New Orleans, Louisiana Opened for business. Officers: Joseph M. Con nolly, chairman; Ralph J. Giardina, president; George Allen, vice president and cashier; Adrien Dupuis, vice president; and Nick Bonura, Clarence Braunea, Mrs. Leona Clade, and John Seghers, assistant vice presidents. Capital, $1,000,000; sur plus and other capital funds, $1,000,000. APRIL 19, 1972 BANK OF H O LLY W O O D BEACH the b a n k s in v o lv e d a n d the asset size o f the n o n b a n k in g su b sid ia rie s, these c o n g lo m e r a t e a ctiv ities are relative ly sm a ll-sc a le . M o re o v e r , the a ctivitie s o f the m a jo rity o f large c o n g e n e r ic s a lre a d y fall w e ll w ith in the b a n k -re la te d b o u n d s stip u la te d b y the n e w A m e n d m e n ts . A s to the futu re cou rse, it is p ro b a b le that the la rge r c o n g e n e r ic s w ill b e c o m e m u ltib a n k Hollywood Beach, Florida Opened for business as a nonmember. Officers: Harold E. Shaw, president; Carol R. Owen, execu tive vice president; and William A. Kern, cashier. Capital $900,000; surplus and other capital funds, $315,000. o rg a n iz a tio n s w h e re p e rm itte d b y state law. Several, in fact, h a ve a lre a d y a c q u ire d a d d itio n a l b a n k s sin ce the registration. T h e p ro b a b le a ctio n o f the c o n g lo m e r a t e s is n o t so clear. T h e A m e n d m e n ts still p ro v id e an e x e m p tio n fo r the sm a lle r c o n v e n ie n c e b a n k s o f c o n g lo m e ra te s, a n d these w ill lik e ly c o n tin u e to o p e ra te as su b sid iarie s. A n u m b e r o f c o m p a n ie s, h ow e v e r, still m ig h t h a ve to d iv e st e ither their b a n k in g o r the ir n o n b a n k in g interests b y 1980. In su m m a ry , the d isc lo s u re o f the full stru c ture o f b a n k h o ld in g c o m p a n ie s reveals that the A m e n d m e n t s o f 1970 h ave tu rn e d o u t to be, at least in the S ou th e a st, la rge ly a p ie ce o f p re ven tative le gisla tio n . S u c h a m e asu re in the h a n d s o f the F ederal R ese rve S y ste m s h o u ld g o a lo n g w a y to w a r d p re se rv in g a c o m p e titiv e m a rke t structu re that can se cu re the full p u b lic b e n efits o f an in n o v a tiv e b a n k in g system . ■ FE D E R A L R ES ER V E BAN K O F A T LA N T A 87 B A N K IN G S T A T IS T IC S Billion $ — 30 _ —\2 D E P O S IT S Net Dem and —11 Total D e p o sits: A/ — 8.5 Loans (net) — 7.5 Oj — 5.4 Investm ents* S a v in g s' — 5.0 — 4.6 ii j LATEST MONTH PLOTTED: MARCH Note: All figures are seasonally adjusted and cover all Sixth District member banks. Daily average figures **Figures are for the last Wednesday of each month. S IX T H D IS T R IC T B A N K I N G N O T E S SIXTH DISTRICT MEMBER BANK CONSUMER LOANS % Change D ecem ber 1970 to D ecem ber 1971 Total In stalm ent Loans ...................... . ................................... . Anniston-Gadsden . . . Birmingham ................. . D IS T R IC T + 16 Sin gle Paym ent Lo an s + 18 + + + . + . + . + 19 14 20 23 19 15 + + + + 26 0 53 31 7 10 . . . . . . 14 7 15 20 1 18 + + + + + 24 24 31 21 11 16 . + 21 Jackson .......................... . + 14 Hattiesburg-Laurel-Meridian + 42 Natchez .......................... . + 20 + ALABAM A Dothan .............................. M o b i le .............................. M ontgomery..................... FLO R ID A ................................... J a c k so n v ille .................... Miami .............................. Orlando .......................... Pensacola ..................... Tampa-St. Petersburg + + + + + + Total In stalm ent Lo an s ...................... . + -i A tla n ta .............................. . + Augusta .......................... . C olum b us.......................... . + Macon .............................. . + Savannah ...................... . + South G eorgia................ . — Alexandria-Lake Charles . Baton R o u g e ............. Lafayette-Iberia-Houma New O r l e a n s ................. TEN N ESSEE* M IS S IS S IP P I* ......................... 1 - 2 + 16 - 5 14 20 1 12 7 9 0 + + + + + + + + + + + + 17 38 15 27 10 + 2 + 16 + 6 + 2 + 1 + + + + . + 14 17 19 12 21 + + + + + G EO R G IA L O U I S I A N A * .............................. .............................. Chattanooga ................ K n o x v ille .......................... N a s h v ille .......................... T r i-C itie s.......................... Sin gle Paym ent Lo an s . . . . . . . . . 22 29 27 16 0 12 22 21 22 18 21 8 Note: Figures shown are for trade and banking areas, which include several counties surrounding central cities. Boundaries of some areas do not coincide with state lines. *Trade and banking areas in the Sixth District portion of state. 88 M O N T H L Y R E V IE W D I S T R IC T BAN K S: CO N SU M ER L O A N S C O N T IN U E T O C o n s u m e r s in the S o u th e a st are c o n tin u in g to m a k e h e a v y use o f b a n k credit. In fact, th ro u g h the first h a lf o f A p ril, total c o n s u m e r lo a n s— in sta lm e n t lo a n s a n d sin g le p a y m e n t lo a n s— g re w at an even faster rate than in 1971, a y ear o f a ll-tim e record d o lla r increases. T otal c o n s u m e r lo a n s in cre a se d at an a n n u a l rate o f 23 p erce n t d u r in g the first q uarte r o f 1972, w h ile the a n n u a l rate fo r 1971 w a s 16 p e r cent. R e p o rts th r o u g h M a r c h fro m a rep rese ntative g r o u p o f D istric t ban ks, in c lu d in g n o n m e m b e r in su re d ba n ks, in d ic a te that all c a te go rie s o f c o n su m e r in sta lm e n t lo a n s h a ve m a d e stro n g ga in s th r o u g h o u t the D istrict. P e rson al in sta lm e n t lo an s (u n se cu re d sign a tu re lo an s) a n d repair a n d m o d e r n ization lo a n s registered the stro n g e st gains, each in c re a sin g at an a n n u a l rate o f 10 percent. A u t o m o b ile lo a n s c o n tin u e d to s h o w la rge ga in s, in c re a sin g slig h tly faster than d u r in g c o m p a r a b le m o n th s o f a y ear a go. T h e 1972 p ac e in b a n k a u to fin a n c in g , h o w e v e r, is b e lo w that a c h ie v e d d u r in g the se c o n d h a lf o f 1971. D a ta for 1971 s h o w that c o n s u m e r lo a n s in crease d sh a rp ly at b o th large a n d sm a ll m e m b e r ban ks. In fact, this total d o lla r g ro w th w a s the largest ga in ever a c h ie v e d in the D istrict. C o n s u m e r lo a n s at m e m b e r b a n k s in cre a se d by o v e r $800 m illio n , an a m o u n t three tim e s as gre at as the 1970 increase. In sta lm e n t lo a n s in crease d b y o v e r $500 m illio n , a c c o u n t in g fo r o v e r h alf o f the incre a se in c o n su m e r loan s. A lt h o u g h sin g le p a y m e n t lo a n s a d v a n c e d by a sm a lle r a m o u n t, they d id a ch ie v e r o u g h ly the sa m e p e rce n ta ge gro w th . In sta lm e n t lo an gro w th , la rge ly b e c a u se o f tre m e n d o u s incre a se s in a u t o m o b ile lo a n s b e tw e e n A u g u s t a n d O c to b e r , registered m u c h stro n g e r ga in s in the se c o n d h alf o f 1971 than d u r in g the first half. A u t o m o b ile lo an g a in s ($221 m illio n ) a c c o u n te d fo r ne a rly h a lf o f the increase s in total in sta lm e n t le n d ing. In sta lm e n t lo a n s fo r retail c o n s u m e r g o o d s, p a rtic u la rly m o b ile h o m e loan s, a lso a c c o u n te d fo r a la rge p o rtio n ($198 m illio n ) o f c o n s u m e r in sta lm e n t le n d in g increases. T h e a m o u n t o f in sta lm e n t d e b t p er D istric t c o n s u m e r at in su re d c o m m e r c ia l b a n k s in the D i s trict a lso w e n t up, risin g -from $216 in m id -1 9 7 0 to $240 in m id -1 9 7 1 . N a tio n a lly , it in crease d fro m $225 to $250 d u r in g the sa m e p e riod . W it h in the re g io n , T e n n e sse e ran ked highest, w ith $280 per in d iv id u a l, a n d L o u isia n a the lo w e st, $186. In each state, 1971 figu re s w e re greater than th o se fo r 1970. FE D ER A L R ESER V E BAN K O F A TLA N TA GROW IN S T A L M E N T L O A N S % chg., Dec. '70 to Dec. 71 10 20 I I 30 I Consumer Goods (Mobile Homes) Single Payment Automotive Instalment Other Instalments Repair & Modernization Note: Figures cover all District member banks. T h e a b ility o f c o n su m e r s to su p p o r t a d d itio n a l d e b t a lso increased. A p re lim in a ry e stim a tio n o f per cap ita in c o m e , b a se d o n the first three quarte rs o f 1971, s h o w s that 1971 per c ap ita in c o m e fo r the D i s trict w ill be slig h tly m o re than $3,400, a rise o f $200 ov e r 1970 figures. Per c ap ita sa v in g s (b ased on m id y e a r figu re s) at in su re d c o m m e rc ia l b a n k s also c lim b e d d u r in g 1971 to $353, an increase o f $44 fro m 1970 figures. T h e interaction o f im p ro v e d e c o n o m ic c o n d itio n s an d the P re sid e n t's N e w E c o n o m ic P ro gra m (N EP) p lay e d an im p o rta n t role in s h a p in g c o n s u m e r w ill in g n e ss to a ssu m e a d d itio n a l d e b t d u r in g the latter part o f 1971. T h e p r o p o s e d e lim in a tio n o f the a u to excise tax a n d the te m p o ra ry p rice freeze, w h ic h c o n su m e r s a n ticip a te d w o u ld be re m o v e d d u r in g P hase II, m a d e a u t o m o b ile s an attractive buy. M o r e over, D istric t b a n k s w e re receptive to c o n s u m e r req u ests fo r loan s, sin ce b u sin e ss lo an d e m a n d w as n ot su fficie n tly stro n g e n o u g h to a b so rb the very large tim e a n d sa v in g s d e p o sit g a in s o f 1971. M a n y b a n k s a lso e n c o u r a g e d c o n s u m e r lo a n s b y lo w e rin g interest charges. If recent su rveys are corre ct in c o n c lu d in g that c o n su m e r s have recently b e c o m e freer in their s p e n d in g habits, o n e can ex pe ct c o n su m e r s to c o n tin u e to e x p a n d their use o f b a n k credit. H o w e v e r, an o u tb u rst in. c o n s u m e r cre d it se e m s u n lik e ly w ith o u t a stim u la tin g fo rce o f the m a g n itu d e that Phase I had o n a u to sale s last fall. J O S E P H E. R O S S M A N , JR. 89 Sixth D istrict Statistics Seasonally Adjusted (All d a t a L a t e s t M o n th 1972 S IX T H are indexes, O ne M o n th A go Two M o n th s A go M a n u f a c t u r i n g P a y r o l l s .............................. M a r c h F a r m C a s h R e c e i p t s .........................................F e b . C r o p s ........................................................................F e b . L iv e s to c k ............................................................F e b . I n s t a l m e n t C r e d i t a t B a n k s * ( M il. $ ) N e w L o a n s .......................................................... M a r c h R e p a y m e n ts ......................................................M a r c h 146 144 160 149 145r 142 175 132 143r 126 142 132 134 130 143 130 434 377 425 363 388 351 369 337 I N A N C E A N D B A N K IN G L oans* A ll M e m b e r B a n k s .................................... L arg e B a n k s ...................................................... D e p o s its * A ll M e m b e r B a n k s .................................... L arg e B a n k s ...................................................... B a n k D e b i t s * / * * ................................................ O ne M o n th A go Two M o n th s A go 5 .0 4 1 .1 O ne Y ear A go 5 .3 4 0 .2 F I N A N C E A N D B A N K IN G M e m b e r B a n k L o a n s .................................... M a r c h M e m b e r B a n k D e p o s i t s .............................. M a r c h B a n k D e b i t s * * ...................................................... M a r c h 168 154 167 167 151 168 166 151 169 144 136 139 149 141 143 134 140r 151 138 116 125 109 128 134 102 110 124 124r 109 127r 130r 98 F L O R ID A IN C O M E P R O D U C T IO N N o n f a r m E m p l o y m e n t .................................... M a n u f a c t u r i n g ................................................ N o n d u r a b l e G o o d s .................................. Food ............................................................ T e x t i l e s ...................................................... A p p arel ...................................................... Paper .......................................................... P r in tin g a n d P u b lis h in g . . . C h e m i c a l s ................................................ D u r a b l e G o o d s .......................................... L b r ., W o o d P r o d s . , F u r n . & F ix . S t o n e , C la y , a n d G la s s . . . . P r i m a r y M e t a l s .................................. F a b r ic a te d M e ta ls ........................ M a c h i n e r y ................................................ T r a n s p o r ta tio n E q u ip m e n t . . N o n m a n u fa c tu r in g .................................... C o n s t r u c t i o n .......................................... T r a n s p o r ta tio n .................................... T r a d e ............................................................ F in ., in s ., a n d r e a l e s t . . . . S e r v i c e s .................................................... F e d e r a l G o v e r n m e n t ....................... S ta te a n d L o cal G o v e rn m e n t. . F a rm E m p l o y m e n t .......................................... U n e m p lo y m e n t R a te ( P e r c e n t o f W o r k F o r c e ) ...................... In s u re d U n e m p lo y m e n t ( P e r c e n t o f C o v . E m p . ) ........................ A v g . W e e k l y H r s . in M f g . ( H r s . ) . . . C o n s t r u c t i o n C o n t r a c t s * .............................. R e s i d e n t i a l .......................................................... A ll O t h e r ............................................................ E le c tric P o w e r P r o d u c tio n * * . . . . C o t t o n C o n s u m p t i o n * * .................................. P e t r o l . P r o d , i n C o a s t a l L a . a n d M is s .* * M a n u f a c t u r i n g P r o d u c t i o n ........................ N o n d u ra b le G o o d s .................................... Food .................................................................. T e x t i l e s ............................................................ A p p arel ............................................................ Paper ................................................................. P r in tin g a n d P u b lis h in g . . . . C h e m i c a l s .................................................... D u r a b l e G o o d s ................................................ L u m b e r a n d W o o d .................................. F u r n i t u r e a n d F i x t u r e s ...................... S t o n e , C la y , a n d G la s s . . . . P r i m a r y M e t a l s ........................................ F a b r i c a t e d M e t a l s .................................. N o n e le c tric a l M a c h in e ry . . . . E le c tr ic a l M a c h i n e r y ........................ T r a n s p o r ta tio n E q u ip m e n t . . . L a t e s t M o n th 1972 U n e m p lo y m e n t R a te ( P e r c e n t o f W o r k F o r c e ) ........................ M a r c h A v g . W e e k l y H r s . in M f g . ( H r s . ) . . . M a rc h S P E N D IN G EM PLO Y M EN T AND in d ic a ted o th e rw is e .) O ne Y ear A go D IS T R I C T IN C O M E A N D unless M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h M a rc h 112 M a n u fa c tu rin g P a y r o l l s .............................. M a r c h F a rm C a sh R e c e i p t s .................................... F e b . 116 108 108 105 104 106 109 114 103 107 115 107 108 104 103 106 109 114 104 106 105 116 165 104 119 113 115 118 124 123 104 116 163 103 118 114 116 118 123 123 124 93 124 91 115r 107 108 103r 104r 106r 109r 1 14r 105r 106r r lllr 105 115r 163r 103r 118r 116r 115 118r 123r 123r lO lr 123r 94 M a rc h 4 .4 4 .3 4 .3 4 .8 M a rc h M a rc h M a rc h M a rc h M a rc h D ec. Feb. A p ril Jan . Jan . Jan. Jan . Jan . Jan . Jan . Jan . Jan. Jan . Jan . Jan . Jan . Jan . Jan . Jan . Jan . 2 .4 4 1 .0 193 2 .5 4 0 .9 2 .9 4 0 .4 118 258 2 .5 4 1 .2 172 209 137 168 90 119 258 176 257 269 205 161 267 302 193 181 174 195 250 401 635 398 200 L O U I S IA N A 167 263 289 167 181 171 209 246 373 621 355 IN C O M E 252 386 627 388 177 257 267 204 161 282 300 189 181 174 193 251 384 635 392 M a rc h M a rc h 175 161 170 154 171 157 151 140 M a rc h M a rc h M a rc h 160 143 183 159 143 178 156 141 174 143 132 159 101 112 101 102 112 101 102 108 106 103 103 103 110 112 104 104 97 107 103 111 159 105 115 113 111 114 119 118 100 119 92 EM PLO Y M EN T N o n fa rm E m p l o y m e n t ...................................M a r c h M a n u f a c t u r i n g ................................................ M a r c h N o n m a n u fa c tu r in g .................................... M a r c h C o n s t r u c t i o n ...............................................M a r c h F a r m E m p l o y m e n t .............................................. M a r c h U n e m p lo y m e n t R a te ( P e r c e n t o f W o rk F o r c e ) . . . . M a rc h A v g . W e e k ly H rs . in M fg . ( H r s .) . . . M a rc h F IN A N C E AND 127 132 4 .0 4 1 .0 121 108 128 134 90 4 .6 4 0 .7 B A N K IN G M e m b e r B a n k L o a n s .................................... M a r c h M e m b e r B a n k D e p o s i t s .............................. M a r c h B a n k D e b i t s * * ......................................................M a r c h 191 179 210 190 181 207 188 175 194 165 160 176 145 138 143 129 145 136 133 133 115 105 120 111 92 115 104 115 105 109 115 113 104 117 106 91 G E O R G IA IN C O M E M a n u f a c t u r i n g P a y r o l l s ..............................M a r c h F a rm C ash R e c e i p t s .................................... F e b . EM PLO Y M EN T 222 165 168 88 119 258 224 178 263 272 206 161 291 299 188 182 179 200 211 273 150 169 88 222 222 212 159 263 165 94 129 248 213 171 240 268 N o n fa rm E m p l o y m e n t ...................................M a r c h M a n u f a c t u r i n g ................................................ M a r c h N o n m a n u fa c tu r in g .................................... M a r c h C o n s t r u c t i o n ...............................................M a r c h F a r m E m p l o y m e n t .............................................. M a r c h U n e m p lo y m e n t R a te ( P e r c e n t o f W o rk F o r c e ) . . . . M a rc h A v g . W e e k ly H rs . in M fg . ( H r s .) . . . M a rc h F IN A N C E AND 120 3 .7 4 1 .1 120 3 .7 4 1 .3 3 .4 4 0 .4 B A N K IN G M e m b e r B a n k L o a n s .................................... M a r c h M e m b e r B a n k D e p o s i t s .............................. M a r c h B a n k D e b i t s * * ...................................................... M a r c h M a n u f a c t u r i n g P a y r o l l s .............................. M a r c h F a rm C a s h R e c e i p t s .................................... F e b . 169 143 190 163 141 179 164 141 182 141 129 165 135 138 133r 119 132 109 125 124 109 102 111 94 83 109 109 105 E M PLO Y M EN T N o n fa rm E m p l o y m e n t ...................................M a r c h M a n u f a c t u r i n g ................................................ M a r c h N o n m a n u fa c tu r in g .................................... M a r c h C o n s tru c tio n ........................ M a r c h F a r m E m p l o y m e n t ...............................................M a r c h U n e m p lo y m e n t R a te ( P e r c e n t o f W o rk F o r c e ) . . . . M a rc h A v g . W e e k ly H rs . in M fg . (H r s .) . . . M a rc h F IN A N C E A N D 102 lllr 95 r 83 102r 110 100 106 87 82 6 .5 4 1 .5 6 .5 4 2 .2 . B A N K IN G M e m b e r B a n k L o a n s * .................................... M a r c h M em ber B ank D e p o s its * . . . . M a rc h B a n k D e b i t s * / * * ................................................ M a r c h 152 149 151 149 150 143 152 147 141 139 135 142 160 179 163 208 158 135 139 170 114 119 112 96 96 114 117 114 116 113 105 110 111 100 M IS S IS S IP P I IN C O M E IN C O M E M a n u f a c t u r i n g P a y r o l l s ..............................M a r c h F a r m C a s h R e c e i p t s ........................................ F e b . 146 185 144 182 143 135 135 155 108 107 109 96 89 108 107 108 108 107 108 106 107 106 EM PLO Y M EN T EM PLO Y M EN T N o n fa rm E m p l o y m e n t .................................. M a r c h M a n u f a c t u r i n g ................................................M a r c h N o n m a n u fa c tu r in g .................................... M a r c h C o n s t r u c t i o n .............................................. M a r c h F a rm E m p l o y m e n t .......................................... M a r c h 90 M a n u f a c t u r i n g P a y r o l l s .............................. M a r c h F a rm C a s h R e c e i p t s .................................... F e b . 100 N o n fa rm E m p l o y m e n t ...................................M a r c h M a n u f a c t u r i n g ................................................ M a r c h .................................... M a r c h N o n m a n u fa c tu r in g C o n s t r u c t i o n ...............................................M a r c h F a rm E m p l o y m e n t .......................................... M a r c h 112 109 107 M O N T H L Y R E V IE W Latest Month 1972 One Month Ago Two Months Ago One Year Ago Unemployment Rate (Percent of Work Force) . . . . March 4.0 Avg. Weekly Hrs. in Mfg. (Hrs.) . . . March 40.5 3.8 40.8r 3.8 40.8 5.3 40.3 184 158 171 170 156 177 175 152 166 159 142 158 Manufacturing Payrolls..................March 147 Farm Cash R e c e ip ts .................. Feb. 137 150 133 143r 109 133 128 FINANCE AND BANKING Member Bank L o a n s * ...............March Member Bank D e p o s it s * ............ March Bank D e b it s * / * * ........................March Latest Month 1972 One Month Ago Two Months Ago One Year Ago 114 107 118 131 92 114 107r 118r 136r 94 109 105 112 132 90 3.7 40.7 3.7r 41.0r 4.9 40.1 162 153 158 168 147 154 152 138 149 EMPLOYMENT 115 108 119 125 89 Farm E m p lo y m e n t.....................March Unemployment Rate (Percent of Work Force) . . . . March 3.6 Avg. Weekly Hrs. in Mfg. (Hrs.) . . . March 40.6 TEN NESSEE FINANCE AND BANKING Member Bank L o a n s * ..................March Member Bank D eposits*...............March Bank D e b it s * / * * ........................March **Daily average basis •For Sixth District area only; other totals for entire six states tPreliminary data r-Revised 173 155 161 I.A. Not available Note: Indexes for bank debits, construction con tracts, cotton consum ption, em ploym ent, farm c ash receipts, loans, deposits, petroleum production, and payrolls: 1967 = 100. All other in dexes: 1957-59= 100. Nonfarm employment data for all District states have been adjusted to new bench marks. Sources: Manufacturing production 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 Div., McGraw-Hill Information Systems Co.; 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 ebits to Dem and D eposit Accounts Insured Commercial Banks in the Sixth District (In T h o u s a n d s o f D o lla rs ) Percent Change Feb. 1972 Mar. 1972 Mar. 1971 STANDARD METROPOLITAN STATISTICAL AREAS Birmingham . . Gadsden . . . . Huntsville . . . . M o b i l e ........... Montgomery . . Tuscaloosa . . . 2,802,253 75,696 264,665 916,748 482,690 ’ 57,118 2,669,711 72,655 235,483 762,241 449,549 137,039 2,251,786 + 5 77,350 + 4 250,460 + 12 720,385 +20 461,718 + 7 147,194 + 15 Ft. Lauderdale Hollywood Jacksonville Miami . . . . Orlando . . . Pensacola Tallahassee Tampa—St. Pete. W. Palm Beach 1,650,350 2,969,637 5,332,246 1,275,211 393,172 621,649 3,321,989 909,426 1,528,836 2,722,849 4,799,464 1,083,271 348,994 533,281 2,910,496 837,589 1,422,381 2,320,477 4,927,575 974,813 340,224 278,122 2,641,738 827,834 158,226 10,715,874 413,566 368,139 422,265 438,655 139,753 9,046,327 402,999 .343,635 390,611 395,673 139,130 9,119,636 353,509 335,467 378,339 400,967 +13 +18 + 3 + 7 + 14 + 18 + 17 Alexandria . . Baton Rouge Lafayette . . Lake Charles New Orleans 214,714 1,023,424 216,997 213,334 3,447,343 173,631 947,905 191,654 188,514 2,944,718 181,922 1,010,958 192,213 190,527 3,311,548r +24 + 18 Biloxi—Gulfport Jackson . . . . 193,250 1,012,512 191,928 1,098,629 181,997 1,013,476 +1 +6 - 8-0 Chattanooga Knoxville Nashville 1,088,418 781,253 2,599,000 944,962 638,182 2,325,610 1,016,936 689,276 2,377,620 +22 +12 + 13 + 9 Anniston . . . . Dothan ............ Selma ............ 94,333 125,503 59,808 88,044 118,341 53,331 83,407 108,269 53,218 + 7 + 6 + 12 + 13 +16 + 12 + 13 + 19 + 14 B a r t o w ............ Bradenton . . . Brevard County Daytona Beach Ft. Myers— N. Ft. Myers . 42,722 146,184 251,754 145,014 41,061 132,144 249,280 121,886 40,515 118,838 227,269 113,149 + 4 + 11 + 1 + 19 + 5 +23 + 11 +28 + + + + 202,637 165,852 173,197 +22 + 17 + 15 Albany Atlanta Augusta . Columbus Macon Savannah +2b - 2 + b +2/ + 5 + / + + + + + + 35 3 10 24 14 9 + 8 + 16 + 9 +28 +11 + 8 +18 + 13 +17 +14 + 9 + 24 + 31 + 18 +31 + 28 + 16 + 17 +124 +124 +26 + 23 +10 + 8 +12 +11 + 9 +8 +1 +13 +13 + 13 +12 + 17 + 15 OTHER CENTERS ■Estimated Percent Change Year to Mar. date 1972 3 mos. From 1972 Feb. Mar. from 1972 1971 1971 11 20 11 26 Mar. 1972 180,352 Gainesville . . . Lakeland . . . . 249,715 Monroe County 66,052 Ocala ............ 141,498 St. Augustine . . 30,831 St. Petersburg 793,558 253,853 Sarasota . . . . T a m p a ............ . 1,606,257 Winter Haven . . 134,149 FE D ER A L R ESER V E BAN K O F A TLAN TA Mar. 1971 153,665 222,063 62,673r 129,999 26,536 671,548 231,543 1,405,103 119,757 148,146 210,345 52,542 117,432 26,843 672,181 217,115 1,331,616 111,870 Athens . . Burnswick Dalton . . Elberton Gainesville Griffin . . LaG range . Newnan Rome . . Valdosta 137,813 76,009 154,968 18,781 95,632 51,373 31,987 44,761 116,629 87,548 121,137 70,720 137,195 15,920 95,573 48,680 29,004 37,019 103,715 76,149 172,067 69,049 134,182 16,766 95,573 52,581 27,738 31,999 104,543 74,502 Abbeville Bunkie . . Hammond New Iberia Plaquemine Thibodaux 14,164 9,189 56,046 49,294 14,954 32,033 14,926 7,380 50,581 44,761 13,924 30,110 14,895 8,399 54,149 47,707 13,381 31,966 Hattiesburg . . . . Laurel ............... M e r id ia n ............ Natchez ............ PascagoulaMoss Point . . . Vicksburg . . . . Yazoo City . . . . 102,484 60,989 96,976 47,873 96.242 65,668 89,620 47,633 102,205 59,868 88,780 43,709 121,595 59,357 39,232 119,377 52.243 32,803 101,621 55,898 34,076 105,731 125,481 185,105 115,236 111,819 237,286 B r i s t o l ............... Johnson City . . . Kingsport............ 126,950 153,359 254,531 +17 +12 + 5 + 9 + 16 + 18 + 10 + 14 + 12 +22 +19 +?fi +?0 + 15 + 18 + 17 +21 +20 Year ■Jo date 3 mos. 1972 from 1971 + + + + + + + + + 21 22 24 29 20 23 26 15 22 -20 - 11 +10 + 22 +15 + 17 +12 +0 +0 +6 - 2 +10 + 15 + 20 +20 +40 + 38 +12 +12 + 18 + 14 + 7 + 13 + 18 + 16 + 18 - 5 +25 + + + +11 +10 + 7 +6 +6 - 7 +8 5 9 4 3 +12 +0 +0 +2 + 9 +10 + 2 +20 + 14 + 6 +20 + 15 +20 +10 +22 +37 + 13 + 24 +38 + 7 + 12 . . . . 58,384,204 51,640,711r 50,701,894r +13 +15 + 18 Alabama}: . . . . 6,667,725 Florida? ............ 20,620,512 G e o r g ia } ............ 15,632,573 Louisiana}* . ■ . 6,145,531 Mississippi}* ■ - . 2,420,684 Tennessee}* . . . 6,897,179 6,151,908 5,592,839 + 8 18,405,566r 17,336,047 +12 13,423,170 13,373,587 +16 5,376,027 5,848,416r +14 2,347,463 2,240,752 + 3 5,936,577 6,310,253 +16 +19 +19 +17 +5 +8 +9 + 25 District Total ’ Includes o n ly banks in the Sixth District portion of the state; pa rtially estim ated. Feb. 1972 Mar. 1972 From Feb. Mar. 1972 1971 ’ Partially estim ated. + 22 + 17 N A - N o t available. 91 D istric t B u sin e ss C o n d itio n s The Southeastern economy gathered speed on its ascent trajectory. Increasing thrust from favorable burns in the engines of employment, business loans, residential construction, consumer spending, and farm income overpowered the retro-rocket of lagging nonresidential construction contracts. Nonfarm employment continued its expansion in March. Further g ro w th of m a n u fa c tu r in g jo b s o u t w e ig h e d sm all lo sse s in n o n m a n u fa c tu r in g in d u s tries. M o re o v e r , an e x p a n sio n in o u tp u t o f n o n d u r a b le g o o d s lifted total m a n u fa c tu r in g p ro d u c tio n . C o n s tr u c tio n e m p lo y m e n t a ga in d e c lin e d , th o u g h less than in the p re v io u s m o n th . E m p lo y m e n t in tra n sp o rta tio n a n d c o m m u n ic a tio n s e d g e d d o w n sligh tly, w h ile o th e r n o n m a n u fa c tu r in g se ctors s h o w e d little c h an ge . T h e u n e m p lo y m e n t rate rose sligh tly , re fle ctin g a sh a rp rise in the c iv ilia n la b o r force. Continued strength in business loan demand at the larger District banks during April confirms a pickup in the region's business activity. T h ro u g h the first fo u r m o n th s o f 1972, b u sin e ss lo a n s in cre ase d at m o re than tw ic e the rate ex p e rie n c e d in early 1971. Lo an s a d v a n c e d in all m a jo r c o m m e rc ia l an d in d u strial c a te go rie s ex ce pt tra n sp o rta tio n , c o m m u n ic a tio n , a n d o th e r p u b lic utilities. A c c o r d in g to p re lim in a ry data, c o n s u m e r a n d b u sin e ss tim e an d sa v in g s d e p o sits in A p r il d e c lin e d slig h tly after a near record d e p o sit ga in in the first q u arte r o f the year. Consumer instalment credit at commercial banks continued its hefty expansion in March. C re d it for a u t o m o b ile NOTE: 92 p u rc h a se s sh o w e d the largest gain, th o u g h in sta lm e n t lo a n s in all se cto rs increase d. M a r c h d e p a rtm e n t store sales, w h ic h in c lu d e d the im p o rta n t p re -E aste r p e rio d , w e re robust. Sale s o f d o m e s tic a lly p r o d u c e d cars re m a in e d strong. Farm cash receipts were up 16 percent from a year ago, led by a 30-percent increase in Florida. A v e r a g e p rices received b y farm e rs d r o p p e d o n ly slig h tly in M a r c h , eve n t h o u g h to b a c c o , v e ge tab le , a n d gra p e fru it p rice s d e c lin e d sh a rp ly. M o s t liv e sto c k p rice s a lso ea se d so m e w h a t, b u t p rice s o f e g g s a n d so y b e a n s registe re d s t r o n g ga in s. P re lim i nary da ta fo r A p r il in d ic a te that so y b e a n , e g g, a n d c o tto n p rice s in crease d, w h ile liv e sto c k p rice s stab iliz e d . F arm ers in D istric t states p la n to re d u ce feed grain p r o d u c t io n this y ear b u t w ill e x p a n d c o tto n p ro d u c tio n , p a rtic u la rly in L o u isia n a w h e re a 2 5 -p e rc e n t in cre a se is expe cted . Construction contract activity continued to hold the advances of the past year. R e sid e n tia l c o n trac ts in M a r c h w e re w e ll a b o v e le vels o f a y ear a go . In recent m o n th s, F lo rid a has a c c o u n te d fo r a m a jo r part o f the D istric t's c o n stru c tio n picture. A m p le h o m e m o rtg a g e c re d it c o n tin u e s to b e a vailab le . N o n r e sid e n tia l c o n tra c t activity h as sh o w n little g r o w th o v e r the p ast year, sin c e large m a n u fa c tu r in g a n d e lectric g e n e r a tin g p ro je cts h a ve b e e n fe w a n d far be tw e en . Data on which statements are based have been adjusted whenever possible to eliminate seasonal influences. MONTHLY REVIEW May 1972