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A review of the Eighth District's banking economy in 1986

  • Agricultural Science
  • Economics


A Review of the Eighth District's Banking Economy in 1986 FEDERAL RESERVE BANK OF ST. LOUIS APRIL 1987 A Review of the Eighth District’s Banking Economy in 1986 Lynn M. Barry uring ayear of continuing economic expansion, banks in the Eighth Federal Reserve District showed moderate earnings improvement in 1986.1 Reported earnings rose at many District banks: profitable invest- ment decisions and lower interest rates, which re. duced the cost of deposit liabilities, more than offset loan losses. Though most institutions are profitable and in good financial condition, agricultural and other credit problems continue to trouble some District banks. Rank failures, while up sharply nationwide, de- clined in the Eighth District. Nationally, 138 banks insured by the Federal Deposit Insurance Corporation (FDIC) failed in 1986, the largest number to fail since the FDIC was formed in 1933. Five banks in the District failed in 1986 compared with six in 1985 — one na- tional bank and four state banks not members of the Federal Reserve System.2 These five banks represent less than 1 percent of the total number ofbanks in the District and had combined total assets of $72.7 million, only 0.2 percent of all District bank assets.3 This article examines the overall condition ofEighth District banks by assessing several measures of bank Lynn M. Batty is an economist at the Federal Reserve Bank of St. Louis. Rosemarie Mueller pmvideciresearch assistance. ‘The Eighth Federal Reserve District consists of the following states and parts of states: Arkansas, entire state; Illinois, southern 44 counties; Indiana, south- em 24 counties; Kentucky, western 64 counties; Mississippi, north- ern 39 counties; Missouri, eastern and southem 71 counties and the City of St. Louis; Tennessee, western 21 counties. 2(Jf the five District commercial bank failures in 1986, three were agricultural banks (banks with more than 25 percent of their total loans to farm borrowers). ‘See Carraro (1986/1987). performance,

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