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Camera-ready art of "Regional Outlook" (758Kb PDF file - PDF help or hard copy)
In Focus This Quarter
Bank
Earnings: Competitive Pressures and Cyclical
Risks - Intense competition to preserve or
attract business can lead to relaxed underwriting standards and
other changes to risk management practices that can reduce banks'
ability to weather a downturn. As this economic expansion reaches
an advanced age, prudent bankers will evaluate their lending
standards and reserve adequacy with an eye to possible adverse
changes in economic conditions. By Ronald Spieker, Steve
Linehan, George French
Strong
Demand and Financial Innovation Fuel Rebounding Commercial Real
Estate Markets - Commercial real estate markets
in many parts of the United States have rebounded, and commercial
banks are once again actively pursuing lending opportunities. Banks
are not alone, however, as a broader and more competitive financing
market has emerged. Securitization vehicles such as commercial
mortgage-backed securities and real estate investment trusts are
changing how real estate is owned and paid for. By Steven
Burton, Gary Ternullo
Regular Features
Regional Economy - A
review of the San Francisco Region's largest metropolitan areas
reveals several that are growing extremely rapidly, while a few
others are performing relatively poorly. Banks' high and rising
exposure to highly cyclical construction lending in several
metropolitan areas is becoming an area of concern. By Gary C.
Zimmerman
Financial Markets - Bank
holding companies of all sizes have issued trust preferred stock
following the Federal Reserve's decision in October 1996 to count
these tax-advantaged, capital securities toward Tier 1
capital...rating agencies and investment analysts have argued that
trust preferred stock is a weaker form of Tier 1 capital. By
Kathy R. Kalser
Regional Banking -
Favorable performance continues for most banks and thrifts in the
Region...banks and thrifts show that renewed interest in commercial
real estate lending in several areas has occurred as strong
economic growth has reduced vacancy rates and spurred construction
of commercial properties...exposure to higher-risk construction and
commercial real estate loans is near record levels in some areas.
By Catherine I. Phillips-Olsen, Roger Stephens, Millen L.
Simpson
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