Regional Outlook in Charts
Nationally, solid economic growth is expected for the rest of 2004, which bodes well for regional economies. More than two years after the recession's end, job growth finally is strengthening. Nevertheless, manufacturing job losses continue to weigh down overall job growth in some of the FDIC Regions. While the FDIC's outlook for banks remains positive, the industry faces some challenges. Among other things, rising interest rates may affect some consumers in high-risk lending segments and could cause stress in certain housing markets where prices have been more volatile than the nation's. Another challenge is high concentrations of commercial real estate—particularly in the San Francisco and Atlanta Regions-coupled with poor market fundamentals. Overall, the banking industry is well positioned to meet these challenges, with earnings and capital levels at or near record levels.
In Focus This Quarter
Does Net Interest Margin Matter to Banks?
Secular forces have contributed to major changes in revenue sources for banks, particularly very large institutions. For these banks, the significance of net interest margin as a performance metric is not what it used to be.
Bank Investment Portfolios: Strong Gains since 2000—Will They Continue?
Given the inverse relationship between bond values and interest rates, gains on securities sold supported strong aggregate bank profitability throughout the recession and subsequent recovery. However, in a rising interest rate environment, higher securities yields may not offset declines in bond values.
Implications of Rural Depopulation in the Great Plains for Community Banks
Banks located in depopulating rural counties reported lower growth rates than banks in growing rural counties. However, some banks have employed strategies to remain successful, despite the unfavorable demographic trends unfolding around them.
