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Regional Outlook

Camera-ready art of "Regional Outlook": (3,301Kb PDF file - PDF help or hard copy)

In Focus This Quarter

The reluctance of businesses to hire and invest in new equipment has been a significant drag on the economy's progress since the 2001 recession ended. The banking industry, though, has continued to do well and credit quality continues to improve despite a climate of subpar economic growth. However, as signs have pointed to accelerating U.S. economic activity during the third quarter of 2003, long-term interest rates have risen sharply. The recent increase in interest rates may raise certain concerns for some insured institutions, including reduced refinancing demand; asset-extension risk; reduced valuation of mortgage-backed securities and other securities holdings; and more difficulty generating low cost, core deposits, as households seek greater yields than those offered by bank deposits.

By Risk Analysis Staff


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Regional Perspectives

Atlanta—Weak conditions persist among many segments of the commercial real estate sector in most major Southeastern markets. However, because property valuations have not declined, loan quality at insured institutions has weakened only modestly.

Chicago—Information technology advancements have improved access to banking services in the Chicago Region and across the nation. Layered security can mitigate vulnerabilities arising from increasingly complex computer systems.

Dallas—The Region's rural economy is showing signs of life despite a prolonged slump in the agricultural and manufacturing sectors, but recovery is not assured.

Kansas City—Continuing weakness in the aircraft manufacturing sector could begin to have an adverse effect on insured institutions headquartered in the Wichita metropolitan statistical area when extensions to unemployment benefits expire.

New York—Despite ongoing job losses, the Region's insured institutions are performing well, and asset quality remains favorable. Earnings could suffer from a continued weak economy or from interest rate risk inherent in increasing concentrations of long-term assets.

San Francisco—Declining tax revenue could prompt layoffs in the state and local government sector, contribute to municipal bond downgrades, and constrain the volume of municipal deposits, potentially pressuring the asset quality and liquidity of insured institutions.

By Regional Operations Staff

 


Regional Outlook Information
In Focus This Quarter
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Last Updated 08/29/2003 insurance-research@fdic.gov