A 53

^^ United States

^i|| Department of

^P^- Agriculture

j_ Economic

Research

Service

Rural

Development

Research Report

Number 47

Do Bank Size and

Metro-Nonmetro

Location Affect Bank

Behavior?

Daniel L Milkove i-c=i ^ -'
Do Bank Size and Metro Nonmetro Location Affect Bank Behavior By

Daniel L Milkove, Economic Development Division, Economic Research

Service, U.S. Department of Agriculture. Rural Development Research

Report No. 47.

Abstract

A bank's lending poHcies and its aggressiveness in attracting large

deposits depend more on the size of the bank's assets than on its rural or

urban location. Many rural banks do take fewer risks than urban banks,

but that's because of the small sizes (value of assets) of many rural

banks, not their locations. The kinds of deposits (6=month money market

certificates and large time deposits) and investments (government

securities and Federal funds) a bank uses, the rate of loan losses^ and its

profitability indicate a bank's aggressiveness and lending policies.

Keywords: Banks, size, metro, nonmetro, risk

Acknowiedgments

Fred K. Hines, James J. Mikesell, and David B. Weisblat commented on

earlier drafts. Catherine A. Agnew, Brenda M= Heggie, and Anita R= Parker

typed different versions of the paper, Sharon A. Jones prepared the

charts, and Linda Hatcher provided editorial assistance.

Washington, DC 20250 April 1985

IN
Sales Information

Additional copies of this report can be purchased fronn the Superintendent

of Documents, U.S. Government Printing Office, Washington, DC 20402.

Ask for Do Bank Size and Metro-Nonmetro Location Affect Bank

Behavior? (RDRR-47). Write to the above address for price and ordering

instructions. For faster service, call the GPO order desk at (202) 783=3238,

and charge your purchase to your VISA, MasterCard, or GPO deposit

account.

Microfiche copies ($4.50 each) can be purchased from the Identification

Section, National Technical Information Service, 5285 Port Royal Road,

Springfield, VA 22161. Ask for Do Bank Size and Metro-Nonmetro Location

Affect Bank Behavior? Enclose check or money order, payable to NTIS.

For additional information, call the NTIS order desk at (703) 487-4780.

The Economic Research Service has no copies for free mailing.

Contents

Page

Summary v

Introduction 1

Data and Methodology 1

indicators of Bank Bafiavior Toward Risk 2

Money Market Certificates and Large Time Deposits ................ 2

Federal Funds and Repurchase Agreements . 3

Security Maturity..................,......_..,.............._ 4

Loan Losses 4

Profits 5

Conclusions , 6

References 7

Appendix Tables 8
Summary

A bank's invesiment policies and its aggressiveness in attracting targe

deposits depend nriore on the size of the bank's assets than on its rurai or

urban location. According to this 1978-81 study, many rural (nonmetro)

banks do take fewer risks than urban (metro) banks, but that's because of

the small sizes, or value of assets, of many rural banks, not their loca=

tions. Similar analysis based on an earlier time period might support the

notion that nonmetro banks are more conservative, but insulation from national money market changes is the apparent reason rather than any in=

nate differences in bank management. Data on money market certificates

show that nonmetro banks adjust when necessary to new circumstances

as fast as metro banks.

The kinds of deposits (6-month money market certificates and large time

deposits) and investments (government securities and Federal funds) a

bank uses, the level of loan losses, and its profitability indicate a bank's

behavior, or aggressiveness, in this study.

Deregulation of the banking industry (largely the elimination of rules that

govern interest rates and other terms on deposit accounts) has intensified

competition for deposits. These and other changes have led some

observers to predict drastic reductions in the number of independent

financial institutions. Will nonmetro banks as a group be able to cope as

financial deregulation proceeds through the balance of the decade? The

simplest answer Indicated by this study is that they will do as well as

metro banks of the same size.

This study supports the following conclusions:

® Nonmetro banks adapt to new circumstances as fast as metro

banks.

^ Large urban banks with over $500 million in assets behave differently from all other banks, metro and nonmetro.

^ Bank preferences for either short- or long-term government

securities are strongly related to bank size.

® Nonmetro banks have a slightly lower rate of bad loans, but the

rate for both metro and nonmetro banks declines as bank size increases, except for the largest banks which, again, appear to be a

distinct group.

• The relationship between profits and conservative banking practices is not clear. Smaller classes of nonmetro banks are profitable, but an explanation of this phenomenon remains an open

question.
Do Bank Size and Metro-Nonmetro

Location Affect Bank Behavior?

Daniel L. Milkove

Introduction

Do bankers in nonnnetropolitan (nonmetro) areas of

the United States behave more conservatively than

their metropolitan (metro) counterparts? In this

report, "conservative" is associated with safer

asset portfolios, reflecting more restrictive lending

policies that either increase the probability of loan

repayment or substitute low-risk government securities for loans, and the absence of aggressive

marketing of high-cost deposit instruments.

This study suggests that behavior actually varies

by size of bank rather than metro or nonmetro

status. Because nonmetro banks are generally

small, there would be a perceived metro-nonmetro

difference in conservatism. Finally, the possible

effects of financial deregulation (largely the

elimination of rules that govern interest rates and

other terms on deposit accounts) on nonmetro

banks are discussed briefly in the context of the

past experience of small metro banks in competing with large metro banks. Deregulation began

in 1978 with the introduction of 6-month money

market certificates. Thus, using data for 1978 and

1981 allows an investigation of how banks reacted

to deregulation but avoids complications resulting

from the recent proliferation of deposit types.

Data and Methodology

This report examines portfolio data for all

U.S. commercial banks insured by the

Federal Deposit Insurance Corporation

(FDIC) and headquartered In the 50 States

and the District of Columbia. Data from the

December 31 Report of Condition and

Report of Income were tabulated for 1978

and 1981 (2, 3).* Banks were placed In 12

groups categorized by asset value (less than

$10 million, $10-$20 million, $20-$50 million,

$50-$100 million, $100-$500 million, and

greater than $500 million) and metro or

nonmetro location of the main office.

Statewide and limited bank branching may

bias the results because all data are consolidated at the headquarters. Weighted

averages of several ratios of portfolio items

were computed by dividing after summing

items over all banks in a group.

Portfolio items indicate the attitude of a

bank toward risk. A bank desiring to

minimize risks will not have an active program of liability management, that is,

Federal fund purchases and negotiable certificates of deposit, to fund an expanded,

riskier, loan portfolio. Conservative banks

will passively market 6-month money market

* italicized numbers m parentheses refer to references

listed in the back of this report.

certificates, sell Federal funds, and concentrate on holding short-term securities. Loan

loss rates should be low because risky

loans are avoided. Because conservative

banks use less leveraging than do more aggressive banks, the return on equity capital

is a better measure of the profit rate than is

the return on assets. For example, suppose

that a formerly conservative bank decides to

purchase Federal funds so that it can make

additional but less profitable loans. The

bank's return on equity increases, that is,

total equity capital is unchanged and net income increases, but its return on assets

declines if profits grow slower than assets

(loans).

Metro banks averaged seven times the

assets of nonmetro banks in 1981, with $224

million and $32.8 million, respectively, per

bank. Yet, metro banks are not always large

and nonmetro banks are not always small.

Disaggregating the data by size of bank

shows that thousands of metro banks are

comparable in size with thousands of nonmetro banks (table 1), Although the metro

distribution is weighted more toward larger

asset holdings (2.8 percent of all bank

assets in nonmetro areas belong to banks of

the largest group in contrast with 72.4 percent in metro areas), 70 percent of all banks

can be matched with a metro-nonmetro

counterpart based on asset size.
Daniel L Milkove

Indicators of Bank Behavior Toward Risk

I examine the following indicators of bank

behavior toward risk by bank size and locaiion:

variation of 6=month money market certificates

and large time deposits, two important types of

interest-sensitive deposits; Federal fund purchases

and sales; maturity distribution of government

securities; rate of loan losses; and bank profitability, or net income as a percentage of total equity

capital.

A discussion of the findings follows. Figures accompanying the text and specific numerical

results quoted in the body of the paper are based

on app, tables 1-5.

Money Market Certificates and Large Time

Deposits

Two important types of interest-sensitive deposits,

6-month money market certificates and large time

deposits, show that nonmetro banks can adapt to

new circumstances as fast as metro banks do and

demonstrate very similar behavior. Higher percentages of total deposits held in money market

certificates or large time deposits indicate greater

willingness to aggressively promote these highcost deposits as a means of maintaining or expanding the bank's supply of loanable funds.

Lower percentages indicate conservative bank

behavior.

Before June 1, 1978, banks relied on time deposits

greater than $100,000 to attract interest-sensitive

deposits. However, the introduction of 6-month

money market certificates on that date provided

banks an additional vehicle for expanding deposits

by offering people of modest wealth an insured,

short-term, high-yield investment. After June 1978,

time deposits of $100,000 or more remained the

most important source of deposits in large banks

with links to corporate money, wealthy individuals,

and other financial institutions. In December 1981,

such deposits accounted for 31.5 percent of all

deposits In the largest banks in contrast to only

9.4 percent for the smallest bank group (app.

table 1).

Large banks in higher Income metro areas have

had greater opportunities to market large time

deposits than have smaller banks, particularly

those in lower income nonmetro areas. Differences in clientele, and not bank behavior, explain these portfolio differences. Variation in the

growth of money market certificates does not Indicate differing bank behavior for the same reason. Part of the potential market for money market

certificates for larger banks is taken up by time

deposits of over $100,000, Therefore, the sum of

money market certificates and large time deposits

is a far better indicator of bank preference for offering interest-sensitive deposits than either

measure taken individually.

The data do not support the hypothesis that the

conservative nature of nonmetro banks is reflected

in a slow adjustment to changing market factors,

as compared with metro banks. During the 4-year

study period, the sum of money market certjflTable 1—Number and total assets of metro and nonmetro banks by bank size, 1981

All counties Metro Nonmetro

Bank size

(miliion dollars)

Number

of

banks

Number

Total

assets

Billion

dollars

Percentage

of total

assets

Percent

Number

of

banks

Total

assets

Percentage

of total

assets

Number

of

banks

Number

Total

assets

Billion

dollars

Percentage

of total

assets

Number

Billion

dollars Percent Percent

Less than 10

10-20

20-50

50-100

100-500

More than 500

2,145

3,294

4,920

2,186

1,470

387

14.4

48.4

159.4

150.2

275.0

1,026.5

0.9

2.9

9.5

9.0

16.4

61.3

556

1,134

1,919

1,156

1.141

378

3.8

16.8

63.5

80.9

223.8

1,018.9

0.3

1.2

4.5

5.7

15.9

72.4

1,589

2,160

3,001

1,030

329

9

10.6

31.8

95.7

69.3

51.3

7.6

4.0

11.9

36.0

26.0

19.3

2.8

AH banks 14,402 1,673.9 100.0 6,284 1,407.7 100.0 8,118 266.3 100.0

Sources: {2, 3).
Bank SizB and Location/Behavior

cates and large time deposits grew rapidly as a

percentage of total deposits and became fairly

uniform both across bank size classes and by

metro-nonmetro categories within a given size

class (fig. 1). While banks may have faced

segmented deposit markets depending on their

size and location, they tailored their portfolios

roughly the same way within their individual constraints. That is, the largest urban banks attracted

more customers with resources sufficient to

deposit $100,000 or more, but the advent of money

market certificates allowed small rural banks to

eventually match the proportion of deposits

characterized by high interest rates and short

maturity.

Nonmetro banks of all sizes, and metro banks also

for that matter, adjusted rapidly over the 1978=81

period, possibly due to the demands of local

customers rather than to aggressive marketing of

money market certificates. Opper found wide variation in the use of money market certificates (5).

Banks with assets below $100 million were ranked

by money market certificates as a percentage of

financial claims. Certificates were 34.1 percent of

financial claims for the highest quartile and only

12.1 percent for the lowest quartile of banks in

1980. The latter group possibly consisted primarily

of Isolated nonmetro banks facing litle competi-^

tion in their local markets. Verification of this

hypothesis requires further analysis that takes into

account bank location and the competitive structure of local banking markets.

Federal Funds and Repurchase Agreements

Federa! fund transactions suggest that very large

urban banks (over $500 million in assets) behave

differently from all other banks, metro and

nonmetro. Net Federal fund purchases, including

net securities sold under repurchase agreements,

were 4.3 percent of assets on December 31, 1981

(app. table 2).^ These positive net purchases can

be attributed primarily to metro banks with over

$500 million in assets, since banks in other

categories were generally aggregate net sellers

(fig. 2). Thus, the Federal funds market should be

^Aggregating net Federal fund purchases across all U.S.

banks can give a positive number because other types of institutions participate in these markets. Savings and loan

associations and foreign banks purchase Federal funds. These

institutions plus corporations, State and local governments,

and the Federal Reserve provide funds to banks through the

repurchase market. See (6) for a more connplete description.

Figure 1 Figure 2

Sum of Money Market Certificates and Large

Time Deposits as a Percentage of Deposits,

1978 and 1981

Percent

10-20 20=50 50-100 100-500

Bank size (miüion doîlars)

More

than

500

Net Federal Fund Purchases as a

Percentage of Total Assets, 1981

Sources: (2, 3).

Less More

than than

10 10^20 20-50 50^100 100^500 500

Bank size (million dollars)

Sources: (2, 3).
Daniel L. Milkove

characterized as a flow of funds from small banks

and other nonbank sources to very large banks,

usually located in large cities, rather than a flow

of funds from nonmetro to metro banks.

Federal fund transactions have lower yields than

loans but also less risk. Sales are a safe investment outlet for passive banks, and purchases are

an alternative to deposits as a source of loanable

funds. Federal fund sales as a percentage of

assets declined with Increasing bank size; conversely, purchases increased (app. table 2). Metro

banks had slightly higher sales than did nonmetro

banks in the same size class, which does not support the hypothesis that nonmetro banks are more

risk averse.

Luckett argued that banks use shortrun changes

in Federal fund purchases to smooth out unexpected deposit and loan flows (4). However, purchases equal to 13.7 percent of assets by the

largest metro banks indicate that targe banks purchase Federal funds to provide a continuing

source of funds to expand loans beyond what the

deposit base alone could support. This helps to

explain how end-of-1981 loans could be 82.3 percent of deposits (not shown) for the largest metro

banks but at most 64 percent for all other bank

groups.

Security Maturity

The maturity distribution of government securities

held in bank portfolios is strongly related to bank

size. An examination of the extremes of the distribution of remaining maturities shows that small

banks prefer short-term securities and large banks

long-term securities. In December 1981, 37.3 percent of government securities held by the smallest

banks had remaining maturities of less than 1

year, while 5.2 percent had remaining maturities

greater than 10 years (app. table 3). Corresponding

figures for the largest banks were 23.1 and 22.2

percent, respectively. For given size classes,

metro-nonmetro differences were small (fig. 3).

Long-term security holdings decreased over the

study period and short-term holdings increased

relative to total government securities held for all

but the largest banks. Such behavior is certainly

rational during a period of high, rapidly varying interest rates. These tabulations suggest that bank

size explains much of the difference in the maturity distribution of bank holdings of government

securities and that metro-nonmetro differences are

not important.

Loan Losses

Evidence based upon the rate of charging off bad

loans is somewhat mixed. A lower rate of bad

loans should reflect overly cautious behavior in

the loan application acceptance procedures of

nonmetro and/or small banks. In almost every Instance, metro-nonmetro comparisons for fixed size

categories showed higher metro values for loan

losses as a percentage of total loans (figs. 4 and

5). On the other hand, except for the over-$500-

million categories, loan losses declined as bank

size grew (app. table 4). The metro=nonmetro gap

nearly disappeared between 1978 and 1981;

however, differences due to size are stilt evident.

Two considerations complicate the Interpretation

of these results. The loan mix varies by category

of bank. Nonmetro banks, for example, are likely

to have greater concentrations of agricultural and

housing loans, and loan loss experience may differ by type of loan. A second difficulty arises from

potential systematic differences in the willingness

or ability of banks to work with delinquent accounts prior to writing off loans.

Figure 3

Government Securities as a Percentage of

Total Government Security Holdings, 1981

Percent

50

Remaining maturities less than 1 year

Nonmetro

Less

than

10 10-20 20-50 50-100 100-500

Bank size (million dollars)

Sources: (2, 3).
Bank Size and Location/Behavior

Figure 4 Figure 5

Loan Losses as a Percentage of

Total Loans, 1978

Less

than

10

Sources; (2, 3).

10-20 20-50 50-100 100-500

Bank size (miiüon dollars)

Loan Losses as a Percentage of

Total Loans, 1981

More

than

10-20 20-50 50=100 100-500 500

Bank size (million dollars)

Sources: (2, 3).

Profits

The sunnnnary profitability nneasure (net inconne as

a percentage of total equity capital) shows the

relative success of various classes of banks. The

expected relationship of profits to conservative

banking practices is not clear. A conservative

bank facing little competition in its market can

very possibly be as profitable as a second bank

forced by intense competition to search for alternative high-cost funding sources and risky lending

opportunities. Nonmetro banks were more profitable in 1981, with net income at 12.9 percent of

equity capital compared with 12.4 percent for

metro banks (app. table 5).

By size class, only the three groups of nonmetro

banks below $50 million in assets significantly exceeded the 1981 profit margins of their metro

counterparts (figs. 6 and 7). The greatest profit

spread occurred for the smallest banks, v^/ith net

income at 11.9 percent of equity capital for

nonmetro but only 5.4 percent for metro. A similar

relationship held for larger banks in 1978, but by

1981, the profitability of large metro and nonmetro

banks was very similar.

The relatively low profits of very small metro

banks are striking. Three possible reasons come

to mind. First, these banks may be located

primarily in nonurban portions of metro counties,

but If this is the reason, why were their profits so

much lower than those of comparable nonmetro

banks? Second, perhaps small metro banks are

mainly new banks that will in time become larger

and more profitable, whereas the smallest

nonmetro banks remain small due to the size of

their local markets.

Finally, the profit data may reflect the impact of

competition from larger banks operating in the

same markets. The competition could force small

metro banks to match deposit and loan interest

rates without the benefit of any scale economies

larger banks may have. This argument implicitly

assumes that small nonmetro banks use market

power from monopoly positions to make up for

their lack of scale economies. Benston found that

the banking industry is characterized by

economies of scale and concluded that ".. .very

small banks probably cannot effectively compete

with large banks, with respect to operating

costs" (7).
Daniel L. Milkove

Figure 6 Figure 7

Net Income as a Percentage of

Totar Equity Capital, 1978

Percent

15

10 —

Nonmetro .^»- \^—zzzz

y"^ ^X*

y ^y^

/\

/ Metro

0 1 1 1 : :l

Less

than

10 10=20 20-50 50-100 100-500

Bank size (miüion dollars)

More

than

500

Sources: (2, 3).

Net Income as a Percentage of

Total Equity Capital, 1981

10-20 20-50 50-100 100-500

Bank size (million dollars)

More

than

500

Sources: (2, 3).

Conclusions

This Study strongly suggests that bank size Is

more innportant than metro or nonmetro location

when attempting to explain elements of bank per--

formance related to risk. A finding that aggregate

metro-nonmetro bank differences are largely due

to the smaii size of most nonmetro banks does

more than say in another way that m.etro and

nonmetro portions of the country are different.

Metro areas contain thousands of small banks

whose performance will be similar to that of

nonmetro banks.

Similar analysis based on an earlier time period

might support the notion that nonmetro banks are

more conservative, but insulation from nationa!

money market changes is the apparent reason

rather than any innate differences in bank

management. Data on money market certificates

shov^ that nonmetro banks adjust when necessary

to new circumstances as fast as do metro banks.

This study did not address the question of

nonmetro bank conservatism in any absolute

sense. They may well be conservative, but then so

are banks generally.

Deregulation of the banking industry has intensified competition for deposits. Savings and loan

associations now have the authority to com,pete

with banks in new areas, such as commercial

loans. The so-=called "nonbank bank loophole"

allows nonfinanciai firms to enter the banking industry, and bank holding companies to set up in

other States subsidiaries which do everything that

banks can do, except make com.mercial loans.

Many States are passing laws which will introduce

interstate branching on at least a regional basis or

permit banks to market formerly prohibited services such as insurance. These and other changes,

going on now or anticipated in the near future,

lead some observers to predict drastic reductions

in the number of independent financial institutions. If local banks face more competition, can

they compete successfully? If not, and they

become branches of national banks, what will this

mean for local businesses and consumers?

Will nonmetro banks as a group be able to cope

as financial deregulation proceeds through the

balance of the decade? The simplest answer in^

dicated by this study is that they will do as well as

metro banks of the same size, particularly in tak-
Bank Size and Location/Behavior

ing the necessary steps to maintain their deposit

base. More critically, can nonmetro banks compete successfully if branching barriers fail? Profit

data (app. table 5) show that metro banks of very

moderate size have so far held their own in com=

petition against large neighbors. However, extremely low profits for metro banks below $10

million in assets raise a potential danger signal. If,

in fact, competition and scale economies explain

this phenomenon, then many small nonmetro

banks may soon find themselves threatened.

Technological developments may expand the

range of both metro and nonmetro banks subject

to significant scale disadvantages in competing

with large banks. On the other hand, technology

may work in the opposite direction; small banks

can join regional automated teller machine (ATM)

networks. As a group, all but the smallest metro

banks seem to have managed to carve out and

hold onto profitable niches among their large

competitors.

References

(1)

(2)

(3)

Benston, George J. "Economies of Scale in

Financial Institutions," Journal of Money,

Credit and Banking, Vol. 4 (May 1972), 312-41.

Federal Reserve System, Board of Governors.

Report of Condition. Dec. 31, 1978 and 1981.

_, Board of Governors. Report of Income. Dec. 31, 1978 and 1981.

(4) Luckett, Dudley G. '^Approaches to Bank Uquidity Management," Economic Review (Mar.

1980), 11-27, Federal Reserve Bank of Kansas

City.

(5) Opper, Barbara Negri. '^Profitability of Insured

Commercial Banks," Federal Reserve Bulletin,

Vol. 67 (Sept. 1981), 657^69.

(6) Stigum, Marcia. Tfie Money Market: Myth,

Reality, and Practice. Homewood IL: Dow

Jones-Irwin, 1978.
Daniel L. Milkova

Appendix table 1—Six-month money market certificates, large time deposits, and their sum as a percentage of

total deposits by bank size and location, 1978 and 1981^

Type of deposit,

location, and year

Money market certificates:

AH counties—

1978

1981

Metro—

1978

1981

Nonmetro—

1978

1981

Large time deposits:

Ali counties—

1978

1981

Metro—

1978

1981

Nonmetro—

1978

1981

Sum:

AM counties —

1978

1981

Metro—

1978

1981

Nonmetro—

1978

1981

Ali

banks

2.2

17.2

2.0

14.7

2.8

28.6

20.1

24.0

22.7

27.0

9.1

10.8

22.3

41.2

24.7

41.7

11.9

39.4

Less ttian

10

1.9

27.8

2.6

22.6

1.7

29.6

6.4

9.4

9.5

14.0

6.4

7.9

8.3

37.2

12.1

36.6

7.1

37.5

Bank size (million dollars)

10-20

2.5

28.5

2.9

23.1

2.3

31.2

7.5

9.9

9.8

13.0

6.3

8.3

10.0

38.4

12J

36.1

8.6

39.5

20-50 50-100

Percent

3.0 3.2

26.8 24.8

3.0 3.0

22.2 22.1

3.0 3.3

29.8 28.0

9.3 12.3

11.4 13.7

10.6 13.2

13.9 15.0

8.4 11.0

9.7 12.1

12.3 15.5

38.2 38.5

13,6 16.2

36=1 37.1

11.4 14.3

39.5 40.1

100=500

2.8

20.6

2.8

19.5

3.0

25.6

16.0

18.0

16.8

19.1

12.4

13.4

18.8

38.6

19.6

38.6

15.4

39.0

More thian

500

1.6

12.0

1.6

11.8

2.4

25.3

27.1

31.5

27.2

31.7

15.4

10.7

28.7

43.5

28.8

43.5

17.8

36.0

^Percentages in every table

before performing divisions.

are weighted averages in trie sense that portfolio items are summed across all banks in that group
Bank Size and Location/Behavior

Appendix table 2—Federal fund purchases (sales) and security sales (purchases) under repurchase agreements as a

percentage of total assets by bank size and location, 1978 and 1981

Federal funds,

location, and year

All

banks

Bank size .(million dollars)

Less than

10 10-20 20-50 50-100 100-500

More than

500

Percent

Purchases:

All counties—

1978 7.2 0.4 0.6 0.9 1.5 4.0 10.9

1981 9.7 .6 1.0 1.4 2.5 5.9 13=6

Metro—

1978 8.4 .7 .9 1.1 1.7 4.3 10.9

1981 11.2 1.0 1.6 1.9 3.0 6.2 13.7

Nonmetro—

1978 1.1 .4 .4 .8 1.3 2.4 2.6

1981 2.1 .5 .7 1.0 2.0 4.9 6.3

Sales:

All counties —

1978 3.8 5.7 4.1 3.3 2.9 3.7 4.1

1981 5.4 10.1 7.9 6.5 5.6 5.9 4.9

Metro—

1978 4.0 6.4 4.3 3.8 3.2 3.9 4.1

1981 5.2 10.9 8.3 6.5 5.8 6.0 4.9

Nonmetro—

1978 3.1 5.5 4.0 2.9 2.4 2.3 1.8

1981 6.1 9.7 7.7 6.4 5.4 5.4 .9

Net:i

All counties1978 3.4 -5.3 -3.5 -2.4 -1.4 .3 6.8

1981 4.3 -9.5 -6.9 -5.1 -3.1 .0 8.7

Metro—

1978 4.4 -5.7 -3.4 -2.7 -1.5 .4 6.8

1981 6.0 -9.9 -6.7 -4.6 -2.8 .2 8.8

Nonmetro—

1978 -2.0 -5.1 -3.6 -2.1 -1.1 .1 .8

1981 -4.0 -9.2 -7.0 -5.4 -3.4 -.5 5.4

^Federal fund purchases minus sales.
Daniel L Milkove

Appendix table 3—Short- and long=term government securities as a percentage of total government securities by

bank size and location, 1978 and 1981

Government securities,

location, and year

All

banks Less than

10 10-20

Bank size (miillon dollars)

20-50 50-100 100=500

More than

500

Percent

Short-term:-

Ail counties—

1978

1981

Metro—

1978

1981

Nonmetro—

1978

1981

Long-term:^

All countres—

1978

1981

Metro—

1978

1981

Nonmetro—

1978

1981

21.5 24.3 20.9 19.3 19.5 21.6 22.7

26.1 37.3 32.3 29.1 28.1 27.0 23.1

22.0 26.5 22.4 19.8 19.9 21.5 22.8

25.2 40.2 34.8 30.3 28.7 26.7 23.1

20.1 23.6 20.3 19.0 18.9 22.2 20.9

28.7 36.5 31.2 28.4 27.4 27.9 25.6

17.2 6.5 9.2 12.0 14.2 15.5 22.2

15.8 5.2 6.7 8.7 10.5 13.4 22.2

18.9 6.8 9.7 12.8 14.6 15.5 22.3

18=1 5.2 6.5 9.4 11.1 13.8 22.4

11.7 6.3 9.0 11.4 13.6 15.5 10.7

9.1 5.2 6.7 8.2 10.0 11.8 13.3

^Represented here by government securities with remaining maturities of less than 1 year.

^Represented here by government securities with remaining maturities of more than 10 years.

Appendix table 4—Loan losses as a percentage of total loans by bank size and location, 1978 and 1981

All

banks

Bank size (mi Ilion dollars)

Location and year Less than More than

10 10-20 20-50 50-100 100-500 500

Percent

Afl counties:

1978 0.50 0-51 0.42 0.41 0.39 0.39 0.59

1981 .57 .74 .65 .57 .52 .50 .59

Metro:

1978 .54 .72 .54 .49 .45 .40 .59

1981 .58 .75 .65 .58 .53 .51 .59

Nonmetro:

1978 .34 .44 .36 .35 .30 .30 .41

1981 .54 .74 .65 .55 .50 .46 .47

10
Bank Size and Location/Behavior

Appendix table 5—Net income as a percentage of equity capital by bank size and location, 1978 and 1981

Location and year Ali

banks

Bank size (milfion dollars)

Less than

10 10-20 20-50 50-100 100-500

More than

500

Percent

All counties:

1978

1981

Metro:

1978

1981

Nonmetro:

1978

1981

12.1 8.4 11.7 12.7 12.8 12.5 12.2

12.5 9.8 12.1 13.1 12.9 12.1 12.4

12.0 4.1 9.6 11.9 12.3 12.3 12.1

12.4 6.4 10.0 12.5 12.9 12.1 12.5

13.0 10.3 12.8 13.3 13.4 13.6 14.1

12.9 11.9 13.3 13.4 12.9 12.2 11.0

11
other Reports of Interest on Rural Issues

Patterns of Change in the Metro and Nonmetro

Labor Force, 1976 82 reveals that nonmetro areas,

particularly farm areas, lagged behind metro

areas in employment growth during the 1976-82

period. This reversed a pattern of faster nonmetro

growth occurring in the late sixties and early

seventies. RDRR-44. December 1984. 28 pp. $2.00,

Order SN: 001-019-00358-8.

Counting Hired Farmworkers: Some Points To

Consider concludes that as many as two-thirds of

the Nation's hired farmworkers may not have

been counted in the 1980 Decennial census farm

labor categories because they were not working

on farms in March when the data were collected.

Data from USDA's 1981 Hired Farm Working Force

Survey suggests that the farm labor census data

are more likely to describe workers employed in

hired farmwork year round. AER-524. December

1984. 16 pp. $1.00. Order SN: 001-019-00367-7.

Distribution of Employment Growth in Nine Kentucky Counties: A Case Study shows that people

moving to a nonmetro area held a disproportionate

share of Jobs in growing business establishments

and of better paying executive jobs. Manufacturing was the study area's major economic driving

force, but the private service sector (which provided services to the manufacturing sector and to

the area's growing population) was an important

contributor to job growth between 1974 and 1979.

RDRR-41. August 1984. 44 pp. $2.25. Order SN:

001-019-00337-5.

Chartbook of NonmetroMetro Trends is a quick

check on metro and nonmetro socioeconomic

trends. It presents colorful charts, tables, maps,

and text tracing differences in population,

employment, income, poverty, housing, and government between nonmetro and metro America.

RDRR-43. September 1984. 48 pp. $2.50. Order SN:

001-019-0035M.

Housing of the Rural Elderly finds that the number of rural elderly households rose 16 percent

between 1974 and 1979 compared with a 10-percent

increase for all U.S. households, based on the

1979 Annual Housing Survey. Most of the U.S.

elderly live in adequate housing, but 27 percent

of the elderly renters and 18 percent of all elderly

living in the South have inadequate housing. In

1979, 15 percent of the rural elderly lived inadequate housing compared with 8 percent of the

urban elderly. RDRR-42. July 1984. 20 pp. $1.50.

Order SN: 001-019-00335-9.

Immigration Reform and Agricultural Labor

assesses effects of recent legislation proposing

that farm employers hire either American workers

or legal foreign workers. Labor-intensive farms,

particularly in vegetable- and fruit-growing States

such as California and Florida, would be most

affected by this legislation. AER-510. April 1984.

36 pp. $2.00. Order SN: 001-000-04411-7.

The Hired Farm Working Force of 1981 examines

characteristics and earnings of about 2.5 million

hired farmworkers 14 years of age and older.

Migrant workers account for only about 5 percent

of all hired farmworkers. Includes over 30 tables.

AER-507. November 1983. 64 pp. $2.00. Order SN:

001-000-04370-6.

A Profile of Female Farmers in America discusses social and economic characteristics of

female farmers, including age, race, size of

household, farm and off-farm income, types of

farms female farmers most frequently run, and

value of agricultural products sold. Although the

number of U.S. farms is dropping, the number of

female farmers is rising. They tend to run smaller

farms and earn less than their male counterparts.

RDRR-45. January 1985. 32 pp. $1.50. Order SN:

001-019-00378-2.
Physicians in Nonmetro Areas During the Seventies shows that the gap between the number of

physicians in nonmetro and metro areas widened

during the seventies, with nonmetro areas lagging by almost 100 physicians per 100,000 population. This report describes availability of physicians in nonmetro areas in light of population

changes and demand for medical care. RDRR-46.

March 1985.28 pp. $1.50. Order SN: 001-019-00380-4.

Farni Population Trends by Farm Characteristics,

1975-80 finds that the number of persons living

on larger farms jumped 67 percent between 1975

and 1980, while smaller and midsize farms

together lost about 20 percent of their population.

Despite the heaviest rates of population loss,

smaller farms still contain about half of the U.S.

farm population. Midsize farms lost about 7 percent of their population during 1975-80 but still

contain nearly 33 percent of the U.S. farm population. Although the number of persons living on

larger farms increased substantially, they only

account for 18 percent of farm residents.

RDRR-40. February 1984. 48 pp. $2.00. Order SN:

001-019-00333-2.

Order these reports from:

Superintendent of Documents

U,S. Government Printing Office

Washington, DC 20402

Specify title and stock number. Make your check or money order payable to Superintendent of Documents. You can charge your purchase to your VISA, MasterCard, or GPO Deposit Account; call GPO's

order desk at (202) 783-3238. No additional charges for postage to domestic addresses; but foreign

addresses, please add 25 percent extra. Bulk discounts available.

A New Periodical of Rural Ideas

For a new perspective on issues facing

rural Annerica, subscribe to Rural Development Perspectives. An eclectic mix of rural

information and ideas, with each article

written in a crisp, nontechnical manner,

generously illustrated with photos, maps,

and charts. RDPalso includes book

reviews, a digest of recent research of note,

and a section of charts and maps measuring various rural conditions. It costs only

$10, and you receive three issues per year,

February, June, and October To subscribe,

send your check or money order to GPO's

address above.

Keep Current on Agricultural and

Economic Research

For further information on reports published by the Economic Research Service,

subscribe to Reports, Reports brings you,

several times a year, descriptive listings

and prices of new publications from ERS.

To get on our free mailing list, send your

name and address to:

Reports-LH

EMS Information

USDA, Room 1470-South

Washington, DC 20250

*Ü.S. GOVERÎIÎ^EHT PRINTÎÎÎG OFFICE: 1985-^60-9^1 î20064