Full text of Economic Review (Federal Reserve Bank of Atlanta) : May 1972, Volume 57, Number 5

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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