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National Edition of Regional Outlook, Third Quarter 2000

Regional Perspectives Atlanta Regional Perspectives The expansion of the high-tech industry has represented a key component of the economic momentum in many Atlanta Region metropolitan areas. A perception that high-tech growth is the key to guaranteed, rapid, and sustained economic development may be emerging. The addition of over one-quarter million new, high-paying, high-tech jobs to the Atlanta Region during the 1990s has undoubtedly helped fuel economic growth. The higher incomes have helped boost demand for local goods and services, including real estate development, generating a positive spillover effect in the rest of the economy. However, factors could coalesce and make it problematic for the high-tech industry to continue its strong performance. Slower economic growth could result in declining real estate absorption or weakening credit quality if layoffs occurred. Lenders should be aware that, as growth becomes more dependent on high-tech development, setbacks in the industry could reverberate throughout the rest of the economy and potentially affect insured institutions' asset quality. De novo bank activity in the Southwest Florida market increases. The analysis presented in Atlanta Regional Outlook, first quarter 2000, suggested that economic and demographic growth and industry mergers and acquisitions (M&As) are correlated with the incidence of new bank charters. Southwest Florida's population increased significantly with the addition of approximately 300,000 new residents during the 1990s. The area's average annual population growth of 2.2 percent from 1990 to 1999 was one-half percentage point above the average for Florida and over twice that of the nation. M&A activity has been robust, as 27 of the 41 insured institutions headquartered in the area in 1991 have been acquired. A majority--22 institutions--have been acquired by out-of-state banking organizations. During the 1990s, 25 new institutions were chartered in Southwest Florida, including six in 1999. As of fourth quarter 1999, a total of 39 community institutions, each with assets less than $1 billion, were headquartered in Southwest Florida. Over 60 percent of these insured financial institutions, accounting for 33 percent or $1.7 billion of the area's total assets, have never experienced an economic downturn. The rapid pace of new institution openings and the large number of merger transactions have changed the competitive landscape for deposits in Southwest Florida. The M&A activity has resulted in out-of-state acquirers holding more than 73 percent of deposits in Southwest Florida, compared with only 42 percent in 1991. The preponderance of out-of-state institutions may affect competitive aspects of the local market through the types of services and products offered and differences in corporate cultures. In general, the new entrants to the market have pursued different lending strategies than have established players. The differences may result because established firms may have long-standing customer relationships, gained a reputation, or developed a niche or a risk preference that results in domination of certain segments of the local lending market. Alternatively, differences in loan portfolio structure could derive from new firms trying to reach the break-even point more quickly by focusing on originating larger or higher-yielding loans. For example, a majority of the non-recession-tested institutions are engaged more heavily in construction and development lending. Anecdotal reports also suggest that new entrants are engaging in out-of-territory lending by purchasing loan participations or establishing loan production offices outside Southwest Florida because of intense lending competition. Given the preponderance of real estate-related lending among new entrants, continued expansion and absorption in local real estate markets may be critical to the prospects of Southwest Florida's non-recession-tested banks. Despite recent strong performance, Southwest Florida's economy and, consequently, real estate markets are not without risk. A weaker real estate market combined with greater competition in the local banking industry, as new entrants increase, could affect institution earnings. In addition to the risks facing the Southwest Florida real estate market, the local banking industry may face challenges simply by virtue of the pace of new institution chartering activity--is the market deep enough for these new entrants to gain market share at reasonable costs? Boston Regional Perspectives The Boston Region continued to experience healthy job growth through the first six months of 2000. Labor markets generally continued to tighten. The Region's 1999 per capita income growth again exceeded the nation's. The Region's insured institutions continue to report stable conditions. Excluding credit card specialists, the aggregate return on assets for the Region's banks in first quarter 2000 was up modestly from the prior year. Net interest margins of larger institutions (assets greater than $1 billion) continued to decline, while margins at smaller institutions remained relatively flat. Core deposits as a percentage of assets continued to decline for all asset categories in the Region's insured institutions. Commercial and industrial lending continues to be brisk and widespread. The Region's insured institutions report relatively high levels of capital; however, aggregate capital ratios have been declining in publicly held institutions. The trend of declining capital ratios bears watching given that some indicators of risk are increasing and new risks are emerging. One indicator of heightened credit risk is the increase in the ratio of risk-weighted assets to assets. Two factors appear to contribute to the higher level of risk-weighted assets. First, the mix of assets that insured institutions maintain on the balance sheet is evolving away from lower-risk residential loans and U.S. Treasury and government agency securities. Second, growth in two off-balance-sheet items may be raising the level of risk-.weighted assets. These items are increases in unfunded commitments and increasing levels of asset securitization. Other factors affecting capital adequacy include rising interest rate risk; funding pressures; regulatory changes; certain advancements in technology that may jeopardize future earnings growth; shrinking loan loss reserve levels; and the expansion into new business ventures, such as insurance and securities underwriting and sales. In the past few years, large public institutions have adopted a greater degree of operating leverage to improve shareholder returns. This strategy has improved short-term equity returns during the current period of prosperity but may exacerbate poor returns during a period of financial hardship. In New England the general surge in equity valuations in the latter half of the 1990s most likely significantly boosted household income, wealth, and business hiring and investment. This linkage could pose a risk to the Region's economic growth in the event of a significant, sustained market correction. Many U.S. households have enjoyed increased employment opportunities, income (through higher pay, bonuses, and stock options), and investment gains thanks to the rising stock market. Appreciation in home equity has also benefited household wealth. These factors likely have led to increased consumer spending. The strong stock market also has boosted business spending and investment by providing many firms with a lower cost of capital, decreased pension funding costs, and increased product demand. For example, certain industries, such as securities/asset management, usually increase employment and pay concurrent with any escalation in equity markets. Others, such as information technology, rely to a great extent on equity gains or venture capital funding to support ongoing operations. Growth at these companies is also financed primarily through equity. Most insured institutions in the Region have very modest exposure to highly valued equity markets, either in terms of directly held equities or through merchant banking operations. However, should the Region's economy falter because of weakness in the stock market, consumer and business credit lines could be negatively affected. Yet any such weakness would likely need to be severe, prolonged, and accompanied by other significant factors (such as a national recession) in order to result in an outright recession in the Region's economy. Also of concern is that some homes and commercial properties currently may be experiencing levels of valuation that are sustainable only under a scenario of strong equity markets. Thus, property values could fall abruptly should a severe correction in equity markets occur that results in significant job or income losses by employees at area financial services or information technology firms. Chicago Regional Perspectives Despite rising interest rates, economic conditions remained healthy at midyear 2000, and activity in some industries strengthened in the past year. Growth in the Midwest Manufacturing Index1 accelerated after mid-1999 despite rising interest rates. Meanwhile, the Region's 3.7 percent unemployment rate hovered near its record low. Banks and thrifts in the Region reported median loan growth of 11 percent during the year ending March 31, 2000. 1 The Midwest Manufacturing Index is compiled by the Federal Reserve Bank of Chicago to reflect activity in manufacturing industries important in the Region's economy. Recent conditions, however, do not mean that the Region's economy has become noticeably less sensitive to interest rates. Rather, other factors apparently tempered the effect of rising interest rates through mid-2000: About half of the recent increase in interest rates merely reversed the 1998 decline during a period of financial market turmoil. The results of tighter monetary policy may be slow to manifest themselves. The economy's strength in early 2000 may reflect the tail end of stimulus from interest rate reductions in 1998. Conversely, the effect of a 50-basis-point increase in short-term rates in mid-May 2000 may not yet be evident. Interest rates are not the sole driver of economic growth. To date, for example, the dampening effect of rising interest rates may have been mitigated by continuing job growth and reviving foreign demand for the Region's output. Consumer confidence in the Region has continued to rise, suggesting that interest rate increases have not seriously crimped households' purchasing power or attitudes. Although the Region weathered rising interest rates without slowing significantly through mid-2000, it remains more vulnerable than elsewhere in the country to manufacturing sector weakness, which could be triggered by rising rates and financing costs. The Region is more diversified than it was 15 years ago, but the manufacturing sector remains relatively more dominant in the Chicago Region than in other parts of the nation. Liquidity management is becoming increasingly important in the Chicago Region. Aggregate loan-to-asset levels and noncore funding are increasing, leading to declining liquidity trends. Insured institutions are reporting lower levels of marketable and short-term securities, while time deposits have trended toward shorter maturities. Borrowings and brokered deposits have increased, and unused commitment levels have risen. Profitability declines may continue to pressure institutions to operate with lower liquidity levels. Although the number remains historically low, recent examination information has shown an increase in the number of institutions with weak liquidity ratings. The number of relatively new institutions that have weak liquidity ratings has risen as well. Institutions that are maintaining less liquidity are exposed to the possibility that potential financial difficulties, such as asset quality or earnings problems, will be exacerbated. There is now an increasing likelihood that liquidity problems may move to the forefront. Federal Home Loan Bank (FHLB) advances have grown at a rapid rate in the Region and appear poised for continued strong growth. The Gramm-Leach-Bliley Act broadened access to the FHLB system for institutions with less than $500 million in assets. As a result, nearly all institutions in the Region will be eligible for membership in the FHLB. In light of recent liquidity trends, maintenance of unencumbered liquid assets and communication with funding sources are becoming more important. Institutions that rely on noncore funding should be aware of the potential for heightened reputation risk because many noncore funding sources are volatile and susceptible to withdrawal when signals point to financial difficulties. If a bank's reputation is tarnished, the availability of unpledged securities or other marketable assets will become increasingly important. These "name neutral" assets may prove an important source of funds for institutions with liquidity problems. Dallas Regional Perspectives The robust high-tech sector of the 1990s contributed significantly to strong employment and economic growth in the Region's leading high-tech metropolitan statistical areas (MSAs). However, the volatility of technology stock prices, typified by wide swings in the NASDAQ earlier this spring, suggests that the high-tech sector, like other sectors, is vulnerable to fluctuations in the overall economy. What constitutes a high-tech center? The Milken Institute's July 1999 study "America's High-Tech Economy" identified five Dallas Region MSAs--Dallas, Albuquerque, Denver, Austin, and Houston--as ranking among the top 25 high-tech metropolitan areas in the nation, based on concentrations and relative growth rates of high-tech industries. These five high-tech metropolitan areas have outperformed the United States in almost every economic indicator going back five and ten years. Of the five MSAs, Albuquerque is perhaps the most vulnerable to a downturn in the high-tech sector because of its large concentration of information technology industries, the federal government's huge presence in and around Albuquerque, and the MSA's dependence on foreign trade. Austin's economy, like Albuquerque's, is home to a large concentration of high-tech industries and is also vulnerable to a downturn in the high-tech sector. A lack of venture capital funding, a sustained stock market correction, and the drying up of the initial public offering market could affect Austin's high-tech economy adversely. Denver's vulnerability to a high-tech downturn is similar to Austin's. High-tech industries employ over 90,000 Denver workers, or about 8 percent of nonfarm employment (1998), producing $8.9 billion in output in 1992 dollars, nearly 13 percent of the MSA's total output. A greater degree of sensitivity to swings in the money and capital markets, in addition to a thriving financial services industry that is closely linked to financial market conditions, increases the vulnerability of the Denver MSA to a high-tech downturn accompanied by a prolonged bear market. Although Houston is home to a rapidly growing high-tech sector, the energy industry continues to dominate the local economy. Consequently, a prolonged downturn in the national economy or in oil prices is likely to have a greater negative effect on Houston's economy than would a high-tech recession. Dallas has the most diversified high-tech base in the Region. This diversity makes the probability of a high-tech recession alone pulling down the Dallas economy somewhat remote. However, a national recession could result in a sharper and more protracted recession for the Dallas metropolitan area because of the increased sensitivity of high-tech output to declines in national output. Implications for insured institutions in high-tech markets. Bank data suggest a close connection between the robust economic activity within the Region's high-tech MSAs and insured institutions' balance-sheet growth. Insured financial institutions with assets less than $1 billion headquartered in these MSAs showed substantial loan growth rates over the past five years, with loan portfolios placing greater emphasis on historically riskier forms of lending (e.g., construction and development and commercial real estate). This rapid loan growth and greater exposure to historically riskier areas of lending could elevate the overall credit risk profile of these institutions, particularly in the event of a high-tech downturn or a slowing of the economy. At the same time, large out-of-area banks are capturing greater market share. As the presence of large out-of-area institutions becomes more prominent in these high-tech MSAs, small banks and thrifts could experience increased competition that would have implications for profitability levels. Kansas City Regional Perspectives U.S. farm policy: which direction after 2002? Bankers who participated in the FDIC's Agricultural Bankers' Roundtable in Kansas City in March 2000 were unanimous in their opinion that federal government supplemental payments to farmers and federal crop insurance were crucial to maintaining the financial health of farm borrowers in 1998 and 1999. The United States Department of Agriculture's forecast suggests this will be true again in 2000, as government payments are projected to be nearly half of net farm income. In 2002, the current farm policy legislation, known as the Federal Agriculture Improvement and Reform (FAIR) Act of 1996, will expire, and Congress must write a new farm bill. Before passage of the 1996 FAIR Act, the farm program included a system of deficiency payments for major crops. The 1996 legislation introduced a number of fundamental changes in farm policy, including: decoupling program payments from most production decisions, thereby ending the practice of paying farmers deficiency payments when prices of commodities fell below target prices; eliminating federal authority to control the supply of program commodities by limiting planted acreage; and establishing a schedule of fixed income support payments known as "production flexibility payments," based on farmers' historical pattern of production, that would be phased out during the 1996-2002 period. If proponents of the FAIR Act saw it as a phase-out of the government's support of agriculture, events since 1996 have worked against that intention. Responding to declining farm incomes, Congress has passed emergency supplemental legislation in each of the past three years. While federal farm policy has often been justified as a means of protecting the health of small farms, the continuing significant decline in the farm population suggests that the strategy has had little long-term effect on the continuing out-migration from farms. The goal of improving farm incomes relative to urban incomes may no longer be as relevant as it was when income support programs were instituted. In the 1920s, the standard of living of farm people was significantly below that of urban dwellers. Today, however, although there is considerable disparity across farm producers, average incomes of farm households generally equal or exceed those of nonfarm households, and the wealth of farm households averages several times that of all households. International trade issues will continue to constrain the direction of U.S. farm policy. Trade discussions are complicated by conflicts between the stated goals of domestic farm policy and the objectives of improving the conditions of international trade policy. Most countries follow policies that benefit their own farmers but cause significant distortions in international agricultural markets. The other major issue affecting the future direction of U.S. farm policy is the evolving relationship between rural development and agricultural policy. Farmers now make up only a small minority of the population of rural areas, so some analysts see the need for a rural development policy separate from agricultural policy. Possible directions of U.S. farm policy. Many analysts believe that three scenarios are possible. Under one scenario, the market-oriented features of the FAIR Act would be retained, a schedule would be set for ending any remaining payments to export crop producers, and permanent farm program legislation would be repealed. However, if commodity prices are low during the 2000-2002 period, a significant retreat from the framework of the 1996 FAIR Act is possible. This second approach could restore past techniques of intervention, including target prices, increased use of export subsidies, and resurrection of supply control authority. A third scenario would retain the core reforms of the FAIR Act, including the end of deficiency payments and supply controls, but extend or enhance a variety of intervention strategies. These could include increased reliance on crop insurance, expansion of the Conservation Reservation Program, targeting aid to farmers based on their incomes instead of crop production, and integrating agricultural policy with a broader program of rural development. Memphis Regional Perspectives Memphis Region employment growth continues to lag that of the nation. Although job growth accelerated slightly during the first half of 2000, the Region's 1.7 percent gain is well below the nation's 2.4 percent annual job growth rate. Arkansas and Kentucky report strong employment growth driven by the construction and service sectors. Kentucky also benefited from growth in automobile industry employment, but these gains may have peaked as higher interest rates and high gasoline prices point to a potential slowing of automobile sales. Louisiana's economy continues to be constrained by retrenchment in the oil and gas industry. Despite a sharp upturn in oil prices since early 1999 and an increase in the number of operating oil rigs in 1999, employment growth in Louisiana's energy sector has remained flat as companies have tried to reduce expenses by eliminating administrative jobs. Although gasoline prices are currently high and likely will remain so in the near future, oil industry employment may continue to decline as cost cutting and consolidation in the industry persist. Real estate markets throughout the Region are in transition. Population and employment growth, increasing income and wealth levels, along with an environment of low interest rates, contributed to booming residential development in the late 1990s. Likewise, a strong economy and expanding labor markets fueled growth in commercial real estate. Although overall construction activity in the Region remains fairly robust by historical standards, development is beginning to slow as interest rates have risen and demand has begun to wane. Even as construction activity has begun to moderate, many banks and thrifts in the Memphis Region continue to grow construction loan portfolios aggressively. Construction loans constituted the fastest-growing segment of loan portfolios at community banks and thrifts (those with total assets of less than $1 billion) over the preceding three years. Furthermore, growth in construction loans for the 12-month period ending March 31, 2000, a period including 9 months of rising interest rates and slowing real estate development, was higher than in either of the preceding two years (see Chart 1). Chart 1 [D] Community bank exposure to construction and development lending at the end of the first quarter of 2000 was almost double the exposure levels reported by these banks immediately prior to the 1990-91 recession. Not surprisingly, exposure is highest among community banks headquartered in metropolitan areas. Community banks in Baton Rouge, Memphis, and Nashville, in particular, reported average aggregate construction loan exposure well above levels reported in other metropolitan areas in the nation. Exposure levels in the Memphis metropolitan area were the third highest among all metropolitan areas nationwide, behind only Atlanta and Portland. Although slight deterioration has occurred recently, construction loan credit quality remains favorable. Also, construction credit underwriting standards are considered much stronger than in prior periods of robust real estate activity, such as that preceding the 1980s real estate crisis. One common theme for both periods, however, is intense competition among lenders. Construction lending is generally considered the most complex and labor-intensive type of lending performed by most community banks and can represent the greatest degree of risk. Prudent management must evaluate credit standards continuously and adjust to changing economic and market conditions. Although asset quality indicators remain strong, the high volume of recent construction loan originations and growing exposure at community banks during a period of generally slowing real estate markets are cause for some concern. New York Regional Perspectives Buoyed by a strong economy, employment levels continued to rise as the Region entered the new millennium. Between the first quarters of 1999 and 2000, approximately 373,000 new jobs were created in the Region, an increase of 1.7 percent. The Region now has surpassed, by a considerable margin, the employment peak attained prior to the recession of the early 1990s. Although the nation added jobs more quickly over the same period, at 2.3 percent, several areas of the Region are experiencing tighter labor markets than the nation. Many of these areas, particularly suburban counties surrounding major cities, experienced unemployment rates below 3.5 percent, approximately a point below the national average of 4.4 percent during the first quarter of 2000.1 1 For purposes of comparison, county and national unemployment rates are not seasonally adjusted. The Region's insured institutions2 reported sound financial conditions in the first quarter of 2000, exhibiting higher levels of profitability, favorable credit quality, and stable capital ratios, compared with the same period one year earlier. While the average return on assets (ROA) improved for the Region's large, medium, and small institutions compared with the first quarter of 1999, factors contributing to improved profitability differed according to asset size. Large banks benefited from increased noninterest income, while small banks reported higher net interest margins. Commercial and industrial loan portfolios in the Region's banks, however, showed modest signs of credit quality deterioration. 2 Excludes banks in operation less than three years, credit card banks, and five special-purpose banks. The Region's banks showed signs of strained liquidity as more institutions reported securities depreciation and deposit outflow. Furthermore, the number of the Region's commercial banks that reported the combination of securities depreciation, deposit outflow, and yearly loan growth of greater than 5 percent also increased. Depending on the degree of depreciation and liquidity needs, banks may use alternative methods to offset deposit outflow while funding loan demand. Banks with securities depreciation may be inclined to counter deposit outflow by raising deposit rates or increasing borrowings, rather than selling securities at a loss. As alternative funding options are considered, assumptions underlying banks' asset/liability management models should reflect changes in market conditions, core deposit behavior, and funding strategies. In contrast to the late 1980s, the Region's office markets are experiencing stable or declining office vacancy rates and limited new construction. In the 1980s, high levels of inflation stimulated a wave of speculative demand for commercial real estate, and the office sector experienced an unprecedented building boom. The recession of the early 1990s hit the Region's real estate markets harder than other parts of the nation, in part because new office construction and vacancy rates were climbing as the Region's economy started to contract. Despite a recent resurgence of office construction in the Region, the amount of new office space added in the 1990s is substantially less than the amount developed in the 1980s. New office construction between 1995 and 1999 totaled only 16 percent of the construction between 1986 and 1990. Furthermore, vacancy rates are declining in most of the Region's cities, both large and small. As a result, the Region's commercial real estate (CRE) markets appear better positioned today to weather an economic downturn than a decade ago. While the Region's banks on average reported sound CRE credit quality measures in the first quarter of 2000, a larger share of banks reported a concentration in CRE loans. Small banks (with assets less than $500 million) represented almost three-quarters of the Region's banks that reported at least 20 percent of total assets as CRE loans as of March 31, 2000. In some of the Region's cities, small banks that specialize in CRE lending have increased their proportion of CRE loans to assets to levels above those reported prior to the 1990-91 recession. Smaller banks with more localized exposure to CRE markets may be more susceptible to softness in local economies or problems in specific industry segments, such as the Internet or health care. As banks expand CRE portfolios, lenders should be vigilant in monitoring economic conditions that could affect CRE loan quality. San Francisco Regional Perspectives The San Francisco Region's nonfarm payroll employment growth continued to outpace the nation's during the first five months of 2000. However, performance of the Region's industry sectors has been mixed. Construction sector employment growth has been strong, with most activity occurring in commercial and residential projects. High-tech manufacturing employment in the Region has slowed; many of the job losses have occurred in the aerospace industry. In Washington and California, Boeing alone laid off 35,000 employees between midyear 1998 and midyear 2000. While California's agricultural sector is performing well, some of the Rocky Mountain states--particularly Montana--are experiencing very dry conditions. The Region's international trade outlook is improving as export volume has grown recently. The Region's strong economy is reflected in insured institutions' robust earnings and loan growth and good asset quality. Combined annualized return on assets (ROA) for first quarter 2000 was 1.35 percent, slightly lower than performance over the past four quarters. Net interest margins held steady or increased for a large majority of the Region's institutions during the first quarter compared with one year earlier. Asset quality was strong, as evidenced by the total past-due loan ratio of 1.69 percent and loan charge-off levels, which were essentially unchanged from prior periods. Loan portfolios at the Region's institutions have grown rapidly, particularly in the commercial real estate (CRE) category. The median ratio of CRE loans to total assets was almost 25 percent at the end of first quarter 2000, compared with less than 20 percent one year earlier. Construction and development (C&D) lending as a share of total assets, which increased at all but 15 percent of the Region's institutions, was a primary driver of this increase. The Region's high-tech sector has created jobs, contributed to gains in the Region's exports, and stimulated growth in commercial and residential housing markets. Between 1993 and 1998, the high-tech sector created approximately 304,000 jobs, primarily in California, Washington, Oregon, and Arizona. Several of the largest high-tech companies in the nation, including Intel, Microsoft, Hewlett-Packard, Sun Microsystems, and Oracle, are located in the Region. While many of the Region's states are leaders in the high-tech sector, 13 metropolitan statistical areas (MSAs) report particularly strong concentrations of high-tech activity: San Francisco, San Jose, Oakland, Santa Rosa, Santa Cruz, Sacramento, Ventura, Orange County, and San Diego in California as well as Phoenix, AZ; Boise, ID; Seattle, WA; and Portland, OR. These MSAs report higher levels of venture capital issuance, per capita personal income growth, and residential and commercial real estate activity than do other MSAs in the Region. The Region's 13 high-tech MSAs accounted for nearly 45 percent (about $9 billion) of all high-tech venture capital issued nationwide from first quarter 1999 through first quarter 2000; most of the financing is in the San Francisco Bay Area and Seattle MSAs. Companies receiving financing are concentrated in the software, networking, and telecommunications subsectors. While high levels of venture capital provide a means for continued growth in payrolls or business expansion, this situation may link the financial success of firms in these areas more closely with the performance of the stock market. Currently, economic indicators suggest that the Region's high-tech MSAs are thriving. Higher-paying technology jobs and generous stock option compensation contributed to growth in per capita personal income in high-tech MSAs that has exceeded growth in non-high-tech MSAs since 1996. Growth in the high-tech sector has also affected the Region's residential housing markets: median home prices and housing permit issuance have increased more rapidly in the 13 high-tech MSAs since 1993. Commercial real estate markets in high-tech MSAs experienced higher rents and construction levels and lower vacancy rates in recent years as a result of new high-tech business growth. Although few of the Region's insured institutions lend directly to large high-tech companies, many operate in at least one of the high-tech MSAs. In recent years, institutions in high-tech MSAs have increased concentrations in CRE and C&D lending, traditionally higher-risk forms of lending. Growth in these loan types has outpaced the national rate each year since 1997. Institutions in high-tech MSAs reported lower ROA levels, in part because of higher premises and salary expenses. However, stronger reported asset quality among banks in the Region's high-tech MSAs may mitigate any heightened levels of risk. Regional Outlook Information Return to National Edition main page Return to Regional Outlook main page