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		Home > Industry Analysis > Research & Analysis > Regional Outlook - National Edition, First Quarter 1999: Regional Perspectives, Region's Economic and Banking Conditions

Regional Outlook - National Edition, First Quarter 1999: Regional Perspectives, Region's Economic and Banking Conditions

Regional Perspectives Atlanta Regional Perspectives Some Atlanta Region real estate markets rank among the nation's most active in terms of new construction. This high activity level remains consistent with the Region's economy, which has outperformed the U.S. economy for much of the decade. Regional concerns about supply and demand imbalances are primarily associated with the larger, more active markets such as Atlanta, Charlotte, and Miami, all of which show large numbers of projects under construction and in the planning stages despite rising vacancy rates. Atlanta's commercial construction remains near historic highs, fueling concern that more space may be coming on line than can be absorbed, particularly in retail and office markets. Annual job growth in Atlanta has fallen from 4.6 percent in early 1998 to 3.1 percent now, slowing in virtually all areas of the economy except for government. Residential construction also continues to rise, with Atlanta ranked highest in the nation in volume of permits issued during the first half of 1998. Construction and development (C&D) lending at metro Atlanta community institutions is significantly higher than in any other market in the Region. Aggregate C&D lending exposure equaled approximately 13 percent of assets in the second quarter of 1998, a level not seen since the late 1980s. In addition to aggregate exposure that is roughly three times the national average, the number of metro Atlanta institutions (28) reporting a C&D concentration above 15 percent of assets is also three times that of any other metropolitan statistical area (MSA) in the nation. Population growth, employment gains, and rising per capita income in Charlotte have fueled demand for new office, retail, industrial, and residential space across the seven-county Charlotte-Gastonia-Rock Hill metropolitan area. Recently, however, the pace of new construction has exceeded absorption in each of these property types, pushing vacancy rates higher. The 21 community institutions headquartered in the Charlotte MSA reported an aggregate C&D loans-to-assets ratio of 5.7 percent in the second quarter, which was above the national average but only about half that reported by Charlotte institutions in the late 1980s. Growth in the Raleigh metropolitan area, though moderating, remains well above the national average. Year-over-year job growth in the third quarter of 1998 was 3.4 percent compared with the national average of 2.6 percent. The Greenville metropolitan area reports job growth of over 3 percent, primarily from its emergent industries. Miami has maintained stable levels of job growth averaging close to 2 percent. The economy remains closely linked to overseas developments through international trade. Retail construction has been the most active market segment; however, net absorptions accounted for only one-third of new completions in the second quarter of 1998. Consequently, the retail vacancy rate rose to 7.6 percent from 6.9 percent in 1997. Absorption continues to outstrip supply in the office market but vacancy rates remain in the double digits. Despite brisk construction activity, Miami's insured community institutions report relatively low C&D lending exposure of 3.1 percent of assets. Orlando remains one of Florida's fastest growing economies, with quarterly year-over-year job growth of almost 5 percent. The Orlando retail market has been among the most active in the nation for regional mall development. Jacksonville's strong economic performance continues. Although job growth moderated slightly in 1998, it remains well above 4 percent. High-tech industrial and software development continues to foster above-average levels of growth in the Northern Virginia area. Year-over-year job growth has averaged over 4 percent during the past several quarters. Rapid growth in these industries has sustained high rates of absorption in the office and industrial markets. Norfolk's economy continues to perform below the national average in terms of job growth. Office and retail construction starts have risen, while industrial construction starts declined by nearly 50 percent from 1997 levels. Commercial starts, up nearly 40 percent during the first half of 1998, are on track to reach their highest level in 10 years. Annual job growth in Birmingham declined to about 2 percent during the first three quarters of 1998. The Decatur, Alabama, metropolitan area is undergoing substantial growth spurred by Boeing's planned building of a large manufacturing facility. Boston Regional Perspectives The Boston Region's insured institutions reported strong results through the third quarter of 1998. Profitability was driven by the nine organizations with over $5 billion in banking assets. Their collective return on assets (ROA) of 1.41 percent as of the third quarter of 1998 is 7 basis points higher than the ROA one year earlier. Gains on the sale of assets at one institution were the primary reason for the increase. The Region's remaining 412 insured institutions posted a collective ROA of 1.05 percent, down from 1.14 percent in the prior year and the lowest level of profitability since the third quarter of 1996. Margin compression is the primary reason for the earnings decline. Asset quality indicators remain generally favorable, but delinquencies and charge-offs are increasing in credit card and consumer portfolios. Commercial loan losses also increased slightly. Credit card loans and commercial loans, sectors evidencing signs of weakness, also have grown rapidly at the Region's larger organizations. Rapid growth has been a precursor to loan problems in the past and bears watching. The Boston Region's economy continued to expand at a moderate pace, with the manufacturing sector acting as the principal drag on job and income growth. In 1997, seasonally adjusted nonfarm employment rose by a monthly average of 15,000 for the Region. This pace slowed during the first 11 months of 1998, with the Region averaging only 7,000 net new jobs per month. A weakened hiring picture in the manufacturing sector caused much of the overall slowing. Seasonally adjusted manufacturing payrolls fell 1.6 percent in New England between year-end 1997 and November 1998. Economic growth may slow in 1999, if the manufacturing sector remains weak. Weakened global consumption and investment resulted in reduced export demand and increased import competition for the Region's manufacturers in 1998. The negative trade picture could have been worse save for a credit crunch in Asia that restrained low-cost exports from flooding into the United States. In addition, significant imbalances in merchandise trade flows led to disruptions in oceanic shipping lines. However, signs in late 1998 pointed to an easing in the Asian credit crunch, while shipping companies adjusted prices and schedules to accommodate the unbalanced trade flows. Given expectations that global demand will remain restrained and that import competition will intensify for U.S. producers, continued weakness in the manufacturing sector's employment picture seems likely this year. This weakness may raise the risk of consumer and business credit default for some local insured institutions in areas of New England with an above average reliance on manufacturing. These institutions already had reported negative trends by mid-1998. Although they represent only 11 percent of the Region's insured institutions (48 institutions with $13 billion in assets), they will likely suffer the first effects of an economic downturn and may be a precursor to other, more widespread problems. Personal bankruptcies in the Region continue to trend upward. Bankruptcies in the Region have increased 75 percent since 1994 despite strong economic expansion. Although the rate of growth has been strong, only Rhode Island exceeds the national filing rate per 1,000 persons. However, a slowdown in the economy could increase rates further, adversely affecting insured institutions that are heavily involved in credit card and consumer loans. Lower interest rates have allowed homeowners to refinance mortgage debt and reduce monthly debt service levels. Many borrowers have consolidated credit card and other consumer debt into mortgage loans, including those with high loan-to-value ratios. Banks and thrifts may be poised to move into these markets because many nonbank lenders have been forced to curtail their lending activities as a result of a liquidity crunch. Although there is little evidence of high loan-to-value mortgage lending or subprime origination in the Region's insured institutions at present, institutions should proceed cautiously if undertaking this type of lending, particularly when economic conditions appear to be softening. Chicago Regional Perspectives The Region's economy showed some signs of weakening toward year-end 1998. Unemployment rates edged up in most states, and output fell in several important manufacturing industries. Meanwhile, low commodity prices trimmed farm income, and farmland prices softened. Such developments raise questions about the strength of the Region's economic growth in the coming year. Many manufacturing industries in the Region are responding to slackening domestic and foreign demand, competitive pressures from imports, or both. Because the manufacturing sector's share of economic activity in this Region is about 50 percent higher than it is nationally, a widespread and sustained weakening among manufacturers could negatively affect many households and communities, with potentially negative implications for their lenders. Partly because of waning strength among some major industries, job growth in the Region slowed to 1.3 percent for the year ending in November, lagging the national gain by a percentage point. Manufacturing employment showed no net gain relative to year-end 1997. Although the Region's unemployment rate remains low, it edged up to 3.9 percent at year-end 1998 from its record low of 3.5 percent in April. Significant price weakness persists in the corn, soybean, and hog markets, and the U.S. Department of Agriculture projects continued weakness this year. This weakness is affecting farmland values in the Region, which fell widely in Illinois and Indiana during the third quarter for the first time since 1986. Meanwhile, 43 percent of bankers responding to a recent survey by the Chicago Federal Reserve Bank indicated that agricultural loan repayments weakened over the past year. Although most of the Region's 500+ farm banks are well capitalized, about 8 percent report both modest earnings (return on assets of 0.91 or less) and reserve coverage of gross loans below 1 percent, which may leave them vulnerable to adverse developments in the farm sector. Although most institutions remain financially strong, some are experiencing problems. Loan delinquencies exceeding 5 percent were reported by 186 institutions (9 percent). However, most of these institutions have relatively strong capital positions. Fifty-eight institutions have composite ratings of 3, 4, or 5, mainly the result of poorly rated management, asset quality, or earnings. Among the 72 unprofitable institutions, 34 have operated for less than five years, 2 are credit card banks, and most of the remainder are small institutions with assets under $100 million. A number of community institutions (those with assets of $1 billion or less) reported rapid loan growth over the past year. Fourteen percent expanded their total loans by over 20 percent, and half of these grew their portfolios by 30 percent or more. Over one-third of the institutions experienced rapid expansion of commercial real estate (CRE) and construction loans. Over half of these institutions also held high concentrations of CRE loans. Although no market in the Region currently shows signs of significant excess space, banks' exposures vary considerably, and local conditions should be monitored for signs of weakening market conditions. Concern arises because CRE projects under way may add new space when the cyclical expansion and demand for space are fading. To the extent that current construction is not preleased, the potentially negative repercussions from a weakening economy on cash flows and owners' repayment abilities are magnified. The pervasiveness of rapid loan growth when economic growth is slowing raises questions about how the loans will perform in coming quarters and whether banks and thrifts are taking appropriate steps now to minimize potential problems. In addition, the Region's banks and thrifts are being affected—and perhaps challenged—by the low and flat interest-rate yield curve and by financial markets' turmoil and volatility during 1998. Dallas Regional Perspectives The Region's insured institutions continue to report strong results through the third quarter of 1998. Aggregate third-quarter return on assets (ROA) of 1.23 percent and net interest margin (NIM) of 4.34 percent were nearly identical to results reported in the third quarter of 1997. New Mexico financial institutions reported an ROA of 0.99 percent at September 30, 1998, down from 1.16 percent at June 30, 1998, and 1.43 percent at September 30, 1997. The primary reason for this decline in profitability is the prospective merger of a large New Mexico bank with an out-of-state bank holding company. The Region's farmers and ranchers experienced the second severe drought in three years this past summer. The drought, combined with generally low commodity prices, raised concern over the continued financial health of agricultural producers and the potential effects on insured institutions that serve them. In the Dallas Region, the drought's effects were most extreme in Texas' high plains, panhandle, and northeast areas and south central Oklahoma, as reported by the Palmer Drought Severity Index. As of the third quarter of 1998, the 111 agricultural banks that serve these areas reported no material effects. However, the full effect of the drought may not yet be evident. The In Focus article in this Regional Outlook identifies the Dallas primary metropolitan statistical area (PMSA) as one of the top ten metro markets in the nation in office, hotel, and apartment construction activity as measured against existing space. The high level of real estate development is not surprising given Dallas' strong economic growth and high levels of in-migration during the 1990s. However, economic growth has decelerated somewhat recently because of the effects of international developments on the Region's high-tech and energy sectors. Recent developments in Latin America and Mexico are likely to slow the Region's export growth further this year. The prospect of slower growth combined with the large numbers of real estate projects in the pipeline increases the potential for overbuilding in the Dallas PMSA. Real estate activity is significant to Dallas Region banks and thrifts, as commercial real estate (CRE) loans averaged 23.7 percent of gross loans as of September 30, 1998, significantly higher than the national average of 16.2 percent. Fifty-four community banks and thrifts headquartered in the Dallas PMSA have significant CRE exposures. CRE exposure for Dallas PMSA institutions has risen in the aggregate by more than 115 percent over the past three years. The two real estate segments that have experienced the highest growth in the Dallas PMSA are the office building and residential markets. Since peaking in the late 1980s and early 1990s at over 25 percent, office vacancy rates in the Dallas PMSA have trended downward to just over 14 percent at year-end 1997. On the basis of large amounts of office space expected to be coming onto the market, CB Commercial projects office vacancy rates in the Dallas PMSA to increase to over 18 percent during the next two years. A substantial amount of real estate investment trust activity has been a major funding source for real estate development in the Dallas PMSA. International trade has become a major growth engine for the Dallas Region this decade. The Region's exports grew 62 percent from 1993 to 1997, with Texas the second-largest U.S. exporter of merchandise in 1997. Mexico is the Region's largest export market, accounting for nearly 30 percent of its exports. The Region's exports showed signs of weakening as 1998 progressed; however, its strong trade relationship with Mexico and Latin America offset weakness in Asian exports. Mexico's economy, however, is expected to slow in 1999, and continued Asian economic weakness suggests that exports in the Region will slow in 1999. Kansas City Regional Perspectives The Region's economy remains fundamentally strong, with a low unemployment rate of 3.5 percent. The Region's economy showed evidence of slowing growth in the second half of 1998, as annualized employment growth in the third quarter slowed to 1.9 percent, compared with 2.4 percent in the first half of the year and 2.4 percent in 1997. This slowing was even more pronounced in the Region's manufacturing sector, which grew only 1.2 percent during third-quarter 1998, compared with 2.2 percent in the first half of 1998 and 1.8 percent in 1997. Community banks in the Region with less than $250 million in assets continue to operate in sound condition. Earnings through the first nine months of 1998 remain solid, with an aggregate return-on-assets ratio of 1.31 percent, with stable margins and moderate provisions for loan losses. Capital levels are strong, and loan loss reserves adequately cover very moderate levels of problem loans. Liquidity, which continues to tighten as loan growth outstrips deposit growth, is still a concern in community banks. The Region's farm economy is expected to continue to endure financial stress in 1999, as farm income is expected to decline. In November 1998 the U.S. Department of Agriculture (USDA) forecasted net farm income for 1998 at $48 billion, down $1.8 billion from 1997 and $5.3 billion less than the record level of 1996. Commodity price forecasts by the USDA suggest that farm income in 1999 will be below the 1998 level. Following significant declines in 1998, prices for each of the major field crops are expected to be even lower in 1999. Near-record yields for corn and soybean crops coupled with weakened export demand resulted in significant accumulation of inventories, thus depressing prices. Continuing low prices in the wheat market present perhaps the greatest risk in the Region's agricultural sectors. Two successive years of large crops in the United States and abroad have resulted in large accumulations of inventories. Hog prices are expected to remain low, but cattle prices should improve. Hog prices have declined more than 35 percent since 1997, and smaller producers unable to meet expenses could be forced out of the industry in increasing numbers. Previously forecasted profitability in the cattle markets did not occur in 1998 because of reduced export demand and a shrinking market share for beef. However, improved pricing is expected in 1999, as analysts predict the smallest cattle herd in 40 years. The financial condition of farmers is expected to deteriorate significantly if prices do not improve in 1999 and 2000. A recent Iowa State University study projected that one-third of the farms in the study would experience financial distress if low prices persisted. The conclusion could apply to much of Minnesota, Missouri, and Nebraska, where corn, soybeans, and hogs are important commodities. Farm banks' asset quality, earnings, and liquidity could be affected if low prices persist. The depressed agricultural economy and falling commodity prices are negatively affecting land prices. Declines in land values have been reported in Iowa, North Dakota, Kansas, Missouri, and Nebraska. Farmland prices have not declined since the mid-1980s. Kansas City's retail real estate sector appears to be in the "oversupply" phase of the real estate cycle. Declining consumer confidence, increasing vacancies, and rising capitalization rates are signs of potential weakening in Kansas City's retail real estate sector. The vacancy rate has risen steadily since 1995, although it still remains below the national average of 7.4 percent. Community banks in the Kansas City area have participated in the recent real estate development, adding nearly $80 million in loans in the past 24 months. These banks may see higher delinquencies and eroding collateral positions as vacancies rise and cash flow falls. Memphis Regional Perspectives The Memphis Region economy is slowing. Only 7,000 nonagricultural jobs were added in the third quarter of 1998, the smallest gain since the 1991 recession. The slowdown in employment growth occurred across most industries, led by job losses in the nondurable manufacturing sector. The Region's agricultural sector has suffered because of low commodity prices and adverse growing conditions. The lower Mississippi Delta states were affected most severely, with lower yields and production reported for most crop types. Because of high ending stocks and weak demand forecasts, prices are expected to remain depressed through 1999 and possibly longer, barring weather-related supply shifts. Southern Louisiana's economy remains vulnerable to weaknesses in the oil sector. The industry has reported layoffs, and more will likely follow if oil prices remain low. While large companies with deep pockets can operate at a loss for prolonged periods, smaller companies that are unable to operate below the typical $14 to $16 per barrel break-even range for a sustained period have an uncertain future. Worldwide demand and consumer buying preferences are contributing to diverging production among the Region's automobile manufacturers. Concern over excess productive capacity in the automobile industry has been magnified by the slowdown in world economic growth. In particular, the slowing of the Japanese and Korean economies and weakness in their currencies have resulted in more of their automobiles being offered at lower relative prices. In addition, low gasoline prices have been partly responsible for a shift in demand away from smaller passenger vehicles produced at Nissan and Saturn plants in Tennessee and toward sports utility vehicles and trucks produced in Kentucky. Banking conditions remain positive, but earnings performance in the third quarter was dampened somewhat by lower net interest margins (NIMs). The average return on assets (ROA) for the quarter was down 5 basis points from both the third quarter of 1997 and the second quarter of 1998 because of lower average NIMs. The decline in NIMs is primarily attributable to the flattening of the yield curve and increased competition. Metropolitan commercial real estate markets in the Region are active, and segments of specific markets may become vulnerable to overbuilding. Some local economies have begun to cool, and demand for commercial space is softening. Additional slowing in local or national economic conditions could lead to greater supply and demand imbalances. In 1997, Nashville reported the highest level of commercial construction starts in over a decade, and this trend continued into 1998. This surge in construction is occurring in all market segments, but slowing office employment growth and declining tourism have led to rising vacancy rates in both the office and hotel market segments. The Memphis office and apartment markets report flattening rental rates resulting from high completion levels and appear vulnerable to overbuilding. The New Orleans hotel market is also weakening. Financial institutions report growing exposure to real estate markets, as average commercial real estate loans have increased to 25.1 percent of total loans. Construction and development loans have risen from an average of 4 percent of total loans at the end of 1991 to 7.2 percent as of September 30, 1998. Anecdotal evidence suggests that commercial real estate underwriting standards have eased in recent years, primarily because of increased competition. Increased lending exposure and generally weaker underwriting standards combined with greater inherent risk in commercial real estate present conditions that managers of insured financial institutions should monitor closely. New York Regional Perspectives The New York Region's economy continued to expand at a moderate but sustained pace. Most areas of the Region are experiencing job growth and low unemployment. In the first three quarters of 1998, the Region added 290,000 new jobs, an increase of 1.4 percent over the same period one year earlier. Yet, as has been the case for several years, the Region's payroll employment growth rate is still only about one-half the nation's rate. Economic crises in Southeast Asia and Russia and their contagion effects continue to affect the U.S. and the Region's economies. Currency devaluations and weakened demand from abroad are taking a toll on American manufacturers that export to Asia and other emerging markets. Trade statistics through October released by the Census Bureau show that manufactured exports from the Region declined from a similar period in 1997. Exports from the rest of the nation were essentially flat. If an economic crisis occurs in Latin America, the Region's exporters could be harmed further. The Region's banks and thrifts reported generally healthy financial conditions in the third quarter of 1998. The Region's average return on assets (ROA) was 1.03 percent, about the same as a year earlier. The average net interest margin (NIM), which fell to 4.05 percent in the third quarter from 4.19 percent a year earlier, continued to narrow as a result of a flat yield curve. However, the yield curve steepened somewhat in the fourth quarter, suggesting that the NIM will stabilize or possibly rise in the next few quarters. The Region's community banks (those with assets of less than $250 million) continue to report weaker earnings, on average, than their larger counterparts. The average ROA among this group was 0.84 percent as of September 30, 1998, almost 50 basis points below the ROA for institutions with assets greater than $250 million. Some major money center banks in the Region reported significant reduction in earnings as a result of global market turmoil. In the first quarter of 1998, significant charge-offs were taken as a result of the Asian financial crisis. Many large banks reported additional credit charge-offs and trading losses in the third quarter resulting from the economic collapse of Russia. Most commercial real estate markets in the Region remain fairly subdued compared with other markets in the United States An analysis by Legg Mason Wood Walker shows little supply and demand stress in the Region's office markets. In a few markets, however, office construction activity has been increasing and rents have been rising as a result of stronger demand. Trends in the Philadelphia area's office market suggest that overbuilding may be possible in the next few years. Through only the second quarter of 1998, office construction surged to 2.2 million square feet, surpassing annual levels since 1992. In the Baltimore area, office construction was up 79 percent annually in the first half of 1998. A recent Lehman Brothers report places Baltimore on a list of markets susceptible to increasing vacancy rates in 1999. In New York City, a strong economy and the lack of major new office construction projects over the past several years have driven vacancy rates to more than a ten-year low, while office rents have skyrocketed. Because of the limited number of new office building completions and the area's strong economy, Wilmington has experienced a decline in office vacancy rates from 24 percent in 1991 to 6.3 percent in the second quarter of 1998. Puerto Rico is recovering from heavy damage caused by Hurricane Georges in September 1998. Caribbean Business estimates that the total amount invested in rebuilding the island's infrastructure could reach $6.5 billion in 1998. Because only 30 to 40 percent of homeowners have hurricane insurance coverage, Puerto Ricans are relying on federal aid to provide relief. The agricultural sector was hard hit, and it will take some time to recultivate lost crops. San Francisco Regional Perspectives Four markets in the Region have experienced significant commercial real estate growth in recent years: Las Vegas, Phoenix, Portland, and Salt Lake City. Community banks with construction and development (C&D) loan concentrations are now more common outside California than they are in California. Community banks in Las Vegas, Salt Lake City, and Portland have especially high exposures to C&D lending. The Las Vegas metropolitan statistical area (MSA) is the most active construction market in hotel, office, and industrial space of the nation's major metropolitan markets. Retail space development also is among the strongest in the nation. Although Las Vegas remains one of the Region's fastest-growing MSAs, the area's growth is heavily dependent on the hotel and gaming sectors, which directly account for over 25 percent of the MSA's employment. The National Real Estate Index (NREI) estimates that in order to absorb the substantial additions to the hotel stock, visitor count must increase significantly by the year 2000, which may not occur given that the annual visitor count through November 1998 has been flat. Las Vegas' office market also may be oversupplied. The NREI attributes the pressure on both rents and vacancy rates from increased office development to speculative construction activity. Vacancy rates of 14.3 percent are well above the national average, having risen for the fourth consecutive year. While several insured depository institutions operate in the Las Vegas MSA, the 11 community banks headquartered in Las Vegas could be harmed most by a slowdown in the area's economy because of their relatively high exposures to C&D lending and their dependence on local real estate markets. Aggregate C&D loans equal 12.7 percent of total community bank assets in the MSA. Preparation for the 2002 Winter Olympics, in conjunction with past growth in the high-technology industry, helped propel Salt Lake City to one of the top three U.S. commercial real estate markets in office, industrial, and hotel development. Despite its past rapid growth, some general economic indicators suggest that Salt Lake City may be slowing down. The pace of economic activity declined markedly in 1998, with job growth slipping to 2.5 percent. Salt Lake City's community banks have the highest exposure to C&D loans of the four metropolitan markets discussed in this article. Although the C&D loan growth rate has slowed from 49 percent for 1996 to less than 1 percent through third-quarter 1998, C&D loans for Salt Lake City community banks remain at a high 15.2 percent of total assets, almost triple the 5.7 percent figure for the Region. Portland's office, hotel, and industrial markets appeared to be at or near the top of the commercial real estate business cycle in 1998. Portland's economy and job growth have been slowing like those of Oregon. Before 1998, Portland's office market had been robust, with a steady rise in new construction activity, rapid absorption of new properties, and declining vacancy rates. However, Coldwell Banker Commercial/Torto Wheaton Research (CBC) notes that, as the economy has begun to slow, Portland's new office supply may begin to outstrip demand. Community banks in the Portland MSA have much higher exposure to construction and commercial real estate lending than do their peers in the Region. C&D loans account for 9.2 percent of their total assets as of September 30, 1998, much higher than the comparable figures of 5.7 and 3.3 percent for the Region and the nation, respectively. The Phoenix MSA is in the top ten nationally in the development of industrial, hotel, and retail space. Strong employment growth in the technology sector over the past decade has made Phoenix susceptible to global developments affecting this industry, and the Asian financial crisis is beginning to affect technology employment. The Phoenix MSA was ranked sixth among the 54 CBC markets in retail space growth from 1990 to 1997. Retail vacancy rates, currently above the national level of 8.1 percent at 10.3 percent, are expected to remain close to this level through the year 2000. Although the 29 community banks in the Phoenix MSA have grown their C&D portfolios significantly in the past several years, their exposure to C&D loans remains well below that of similar-sized institutions in Las Vegas, Salt Lake City, and Portland. Regional Outlook Information Return to Regional Outlook main page