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I RESEARCH LIBRARY I / e- \ - Table of Contents The once agrarian southeastern economy has grown into a diverse machine powered by industries both old and new. Today, the region’s workers may be employed in fields as dive= as financial services tourism, farming or aerospace That diversity is suggested by our cover, which portrays visitors enjoying an amusement parRs parachute ride a millworker dry-finishing upholstery fabric, and employees in a stateoftheart wood products facility prcr ducing structural panels Acnxss the Southeast, new high-tech manufacturing firms are using sophisticated techniques to produce advanced materials and systems for commercial and military customers Traditional employers, such as textile and apparel manufacturers, also are adapting technology to make their products more competitive in world markets In this year‘s annual report, we will look at the evolution of our region’s economy from p i c neering days to today’s era of the Space Shuttle We will also look at how the Federal Reserve Bank of Atlanta-one of 12 regional banks within the Federal Reserve Systemis attempting to serve the financial institutions other businesses and consumers in the Sixth Federal R e serve District as they cope with a changing environment For additional copies, write to: Information Center Federal Reserve Bank of Atlanta P. 0.Box 17 3 1 Atlanta, Georgia 3 0 3 0 1 -1 7 3 1 (404)5 2 1 -8788 From the Boardroom c ....... . 3 Industry in the Southeast: Yesterday, Today and Tomorrow.. ............ .6 After 1983 Recovery District Faces 1984 With Optimism. ............ 10 The Atlanta Fed in the New Environment ... 12 Directors and Officers ..... . 2 0 Branches. .................. 2 2 Financial Statements.. ... . 2 4 r‘ . .4 --*Boardroom Federal Reserve’s 12 regional banks first vice president’s position vacated In a number of ways 1983 was a when Mr. Forrestal assumed the presiWe solidified our ranking during the memorable year for the Federal R e dency. Billy H Hargett another senior serve Bank of Atlanta At the end of year through the persistent efforts of our dedicated staff. the year, a new president and a new vice president was named executive We have been able to ime-cboa;d chairman were ap? ?pointed at the Atlanta Fed prove our efficiency while ensuring that new manage continuing to reduce per1 sonnel a t all six of our ofment was in place as we fices-in Atlanta Binning entered 1984. Robert P. 4 ham, Jacksonville, Miami, Forrestal, a 13-yearveteran Nashville and New Orleans with the Bank and most re cently its first vice president Our employment, which peakwas named president in D e ed at 2,850 in 1975, had cember. John H Weitnauer, been pared to just over 2,000 Jr, formerly the Bank’sdeputy employees by year-end-a 5 chairman, was designated remarkable accomplishment chairman effectiveJanuaq 1, at a time when nearly every 1984. phase of our workload has William F. Ford who had been expanding Since 1975, for instance check-processserved as president since =* ing volume has increased August 1980, resigned in from 1.6 to 1.9billion items September to return to San T Francisco to become presiannually, and the amount of dent of First Nationwide Ficash handled has risen by some 128 percent nancial Corporation and its subsidiary, First Nationwide To alleviate a difficult space e -_Savings problem in Jacksonville we awarded a contract in Octe Mr. Weitnauer, chief execu*; tive officer of the Atlantaber for a new building at based Richway retail chain, that branch to replace the became chairman asWilliam aging facility there We expect A Fickling Jr., who heads that the new buildingwill be Chairman Weitnauer, seated.with President Forrestal and Deputy Chairman Currey. se-gDismct 7 Charter Medical Corporation readyto institutions by the first quarter of ‘aAofMacon, Georgia- ended his four vice president succeeding Arthur H. 1986. years in that position Mr. Weitnauer Kantner, who retired after more than was succeeded as deputy chairman 31 years service Named as new senior The Monetary Control Act of 1980 A by Bradley Currey, Jr., president of vice presidents were H. Terry Smith transformed our way of life-and that Rock-Tenn Company of Norcross, and Charles D. East. Mr. East was of the financial services industry-by Georgia succeeded as b m c h manager in Jackrequiring that Reserve Banks charge r 4 < We would like to express our thanks sonville by James Hawkins previously financial institutions directly forvarto Mr. Ford and to Mr. Fickling for branch manager in New Orleans; Mr. ious services once provided without * their leadership over the past several Hawkins, in turn, was succeeded as an explicit charge In response, the years Both will be remembered here New Orleans’ senior officer by Henry Atlanta Fed has phased in charges for as professionals who lent their conBourgaux At theAtlantaoffice, Wadyn check processing securities and nonsiderable knowledge and experience Bassler was promoted to vice president cash collection, wire transfers net a +to the Atlanta Fed during a pivotal of planning and product development settlements and the automated clear* 9eriod in its history. We are pleased that during 1983 inghouse the Atlanta Fed maintained its high Clearly, the 1980 act encouraged Early in 1984,Senior Vice President standing in performance among the Jack Guynn was promoted to fill the both the Federal Reserve and other 3 6 I ’’ - ’ I - -i 3 I’ financial institutions to serve the public even better. For this reason, we are convinced that our entry into the free market is proving beneficial to both the public and the financial services industry. Other elements also have fueled competition in the financial services marketplace including the entry of nonfinancial firms into business amis that once were the exclusive domain of commercial banks Formal deregulation is also responsible for a measure of that competition, and aggressive financial firms have led the way by pioneering many new services In the Southeast, increased competition has been inspired further by the arrivalof several out-of-statethrift institutions Over the past two years, the Federal Home Loan Bank Board has authorized a few strong thrifts from other states to acquire troubled institutions within the District Some of those recently-arrived organizations have expanded their beachheads by pursuing new ventures that would have been denied to them in more restrictive earlier YeOur District’s financial institutions have responded aggressively to this challenge Most appear to be positioning themselves for the new compe tition- in some caseseven negotiating agreements with potential future mergerpartnem in neghboringstatesto meet the challenge both today and in a hture era of even greater operating freedom. In the broader economy, the new year finds both the nation and the region enjoying a vigorous economic revid Inflation, which surged to a distressing 13.5 percent in 1980 measured by the consumer price index, had cooled to the 3-4 percent range late in 1983.The Federal Reserve has continued to monitor the situation carefully for any evidence that runaway prices might be returning. Unemployment, which peaked at 10.8 percent nationwide in December 1982, had declined below 8 percent by early 1984 as companies continued to r e call furloughed workers in response to reawakening consumer demand Business also has continued to r e vive in the Sixth District-which includes all of Alabama Florida and Georgia.andpartsofLouisiamMissi4 sippi and Tennessee Despite lingering problems, the Southeast clearly is a dynamic region well positioned for the future We will devote further t discussion to that region-the in- 4: dustries that make it tick and its economicoutlook-later in this report, 6 Generally, the banks within our District shared in the benefits of the p national revival. Despite an influx of new nonbankcompetitors most banks have managed to expand their earnings stead@. Savings and loan associations also are joining in the recovery, after suffering through a painful period that began when interest rates rose sharply early in the 1980s Even the failure of several banks =within the District served ultimately to demonstrate the overall stabilityof , the nation’s banking system. In each case, the troubled bank reopened promptly under new ownership a n d through it all, no depositorlost funds To assure a dialogue on the most * effective methods for monitoring the - , ~ ~ Chart 1. U. S. Consumer Price Index Percent Change A- to I I 4 ’ . . - I . I - - . . - . I . I - . .. -‘-”>- - I i d I I i -health of financial institutions, the Bank sponsored a tweday symposium -; on the subject. That symposium brought together securities analysts *tand representatives of various regu’latory agencies including the Federal Resenre,the Federal Deposit Insurance Corporation, the Office of the Comp 51 troller of the Currency and the S e curities and Exchange Commission. Despite generally favorable economic developments, some clouds continue to shadow the recovery, in- cluding hlgh interest rates unemployment the federal budget deficit and the international debt problem. Yet such clouds cannot darken the enthusiasm of the Atlanta Fed or the businesses in our District In 1983, 9 we provided a forum for the exchange -<+ of ideas and views with hundreds of those business people at two major -,conferences and a series of smaller t meetings In March we sponsored a conference on growth industries, focusing on the bAelementsthat allow some firms to prosper even in t@ng economic times We followed that in Septemberwith a conference on the future of the U S 2. payments system. Since 198 1, we have sponsored other conferences on the ‘+ payments system, on the future of the 4financial services industry and on supply-side economics - We also continued the Bank’s “dis, tinguished speaket‘ series and other gatherings that have brought Fed di,rectors and business, academic and Aovernment leaders together to share their perspectives In 1983 our Bank = hosted such speakers as economist Herbert Stein- former chairman of I d 1 C-7 4A the Resident’s Council of Economic Advisers; James C Miller IIL Federal ”hde Commission chairman.AlbertM. Wojnilower, chief economist of First Boston Corporation; Jay W. Forrester of the MassachusettsInstitute of Tech nolo@ Congressmen Newt Gingrich and Bill McCollw Anthony Solomon, president of the Federal Reserve Bank of New York and Peter Sternlight, executive vice president of the New York Fed; General Richard E cavazOS commander of the U S Army Forces Command; and several guests from the internationalcommuni@Alejandm Orfila secreta^^ general of the Organization of American States;J a n Hendrik Lubbers the Dutch ambassador to the United States Sir Oliver Wnght, the British ambassador: Horst Burgard, managing director of t h e DeutscheBanlc andKagechikaMatanQ consul general of Japan. Reston Martin, Federal Reserve Board vice chairman, addressed our directors during a n October joint meeting of our boards at the Miami branch The Atlanta Fed also has tried to keep the business communityadvised of the evolution in the financial industry and other economic trends through two publications, the expanded monthly Economic Review and our semimonthly newsletter, southeasternEkonomiclnsightThe 5 M d s expanded coverage and new ham i n its circulation appfrom about 18,000 early in 1981 to the 28,000 range going into 1984. The newsletter‘s mailing list had p w n to nearly 6,500 at year-end We feel that maintaining a close relationship with our business community is as much our responsibility as performing such traditional services as processing checks and currency. As we continue moving ahead under new leadership through 1984, we hope to maintain this liaison with the business community, just as we expect to continue and expand other initiatives of recent years The Southeast‘s farmers and manufacturers access international markets through the region’s many seaports (p 7). - Industryii II Yesterday! - Through the years, many ~, engines have teamed up b4 to power the southeastern economy. As the region’s 9 people have evolved, so have the endeavors that provided their livelihood In the earliest years o+-European settlement, the I men and women of the I Southeast lived largely off the land. Their efforts J to grow crops to sustain their families spawned an agricultural economy (f that supplies consumers across the nation with such farm products as fruits vegetables grains, sugar, and fibers Their high-quality tobacco, too, 4 found a ready market And their farmyard chickens proved to be the fore runners of multi-million- li dollar poultry and egg industries, their milk cows ’ and pigs the predecessors of large dairy, beef, and pork enterprises The region’s vast pine woods forests, an impor- +. tant source of turpentine soon attracted timbering fms that would grow into today’s huge lumber, pulp and paper industries Its fields produced cotton to feed the looms of t h e h e r ican textile and apparel A industry that emerged with the dawn of the industrial revolution. LATextile and apparel companies, born in northern states soon began a south wardmigrationTheysought rivers that could generate water power to move their * looms and they soughthard-working men and women to operate them Their manufacturingplants ’ . c !-- &’ c1 - - 6 the Southeast: I’oday, and Tomorrow T producing yarn fabric and wearing *apparel, sometimes spawned entire towns that grew into cities Many of those mills continue to provide jobs for southern workers today. * Mining proved to be an earlysource of jobs and revenue from the coal M i n e s of the Appalachian range to ,-$he phosphates dredged from the Florida peninsula Grimy men labored ,”to extract such valued resources as , salt, copper and kaolin. Oil produced wealth in such states as Alabama Louisiana and as America dis-Mississippi * * covered the motor car, and as its industries and utilities grew * into insatiable consumers of # black gold In addition to textile and apparel companies and wood -.p products firms other manufacturing companies that lo**cated in the Southeast early included the steel firms that -,’clustered around rich veins of iron ore in Alabama A major industrial consumer of steel, the automobileindustq opened $,southern plants to tap the source In fact, transportation in general has played a contin3 uing role in the economy of the Southeast The Mississippi and other major rivers early lifelines for the region, bred commercial barge operations that transdi ported shipmentsfrom the Midall the way south to such coastal r west cities as New Orleans. And those waterfront cities-including Jackson<’ ville Savannah and Charleston-grew *.A’ into busy seaports that developed a ,global trade in oceanbornecommerce * Railroads helped spawn southern + cities such as Atlanta and opened relatively inaccessible areas, includa,., ing south Fiorida, to txaveleIs Asphalt m d s began to tie the southern states together in a rudimentary highway * < network helping to broaden the tourist industry from one servingthe wealthy 4 -l few to one catering to the average American. Roadside businesses rang ing from service stations to “motor hotels” sprang up to offer products and services to traveling families A trucking industry took root in the South and became an important factor in transporting the“supp1y genemted by its farms and factories to meet the “demand’ of its consumers Commercial aviation evolved from mail I- ‘ I 6 . biplanes and cropdustingsexvices into safedependableairlineswith growing investments in such cities as Atlanta and Miami. Construction, of course long has been a mainstay of the economy of the Southeast, just as it has contributed to the development of other Sunbelt areastrying to provide housing and support facilitiesfor fast-growing populations The military, too, has been a major force in the region’s economy, generating civilianjobs and channeling millions of dollars into 7 southeastern cities and individual firms holding defense contracts Yet the Southeast was slow to truly diversify its manufacturing sector. Not until recently have the South’s incentives- includinga tempemte climate a political environment that is equally appealing to industry and a work force whose pay remains low by national standards-lured a broad range of industries What’sthe outlookfor coming years? What are the trends that will shape industrial growth over the next fne to seven years? Federal Resewe Bank ofAtlanta economistswho have looked at the Southeast’s trends see changes as dramatic as those that have influenced regional growth in years past Economists see an encouraging future for the region’s disproportionate share of the nation’swood-based manufacturers. In a sense the Southeast is the nation’s“woodbin” Such industries as lumberpre ducts paper and allied p r e ducts, and wooden household and office furniture employ one out of every 20 workers in the Sixth District These six states plus the Carolinas p r e duce about onefourth of the value added by these industries to the nation’s output In the immediate future increasing computerization and mechanization oftasks promise to limit job growthYet wood productsfirmsshould continue to enhance the region’se c e nomic growth and development, since the industry still offers ample o p portunities for the region to exploit Today, for instance much of the Southeast’s raw wood production is shipped to other states or overseasfor additional processing. limiting the region’sgains from its own timber.As the region’s general economy grows an expanding local market is likely to spur the production of semi-finished and finished wood products The outlook for textiles and apparel the region’s other major traditional manufacturingindustries appears less promising-at least from an employment standpoint. Economic conditions for the industry have been depressed prices have saddled them with heavy debts that have bankrupted some and forced others to struggle for survival. Nonethless, Atlanta Fed economists expect that the region’s importance as an agriculture center will grow. The Southeast’s wealth of cultivatable land its i I coal, chemicals and fertilizer as well as farm products What will be tomorrow’s growth sectors? The Atlanta Fed which has researched individual industries and-’ sponsored two major conferences r e j lating to industrial growth prospects ; believes that service industries high Y technology, construction, defense, and exports are areas with appealing growth prospects The nation’s serviceproducing industries have been expanding natiorr + wide and increasing in relative importance for decades Service industries in the Southeast have grown at an even faster pace fueled by the : r continued inmigration of people with Imore money and greater aspirations Serviceindustries nationwide should enjoy the fastest growth of any indus- ; tries through 1990,and it seems likely that the Southeast will gain a dispre portionately highshare of that growth The Bureau of Labor Statistics expects that about three out of four new i ‘ I: - A I A textile plant‘s advanced weft insertion equipment 4 - generally unfavorable for severalyears Back-teback national recessions in the early 1980s cut demand from the automobile and housing industries even as stiffening competition from foreign producers pared the domestic companies’ market share To remain competitivewell-managed American textile and apparel firms have automated their plants or sought out special market niches. By remaining flexible some have been able to respond quickly to changing trends and to avoid markets where they will collide head-on with overseas p r e ducers relying on lower-priced foreign labor. Southeastern textile and a p pare1 firms that continue to prosper obviously will continue to provide jobs- though a declining number because of automation-in small communities that have relied on textile jobs since the turn of the century. What of agriculture, the oldest of the region’s industries? Agriculture, too, has been rocked in recent years Southeastern farmers have been bedeviled by droughts while prolonged growing seasons, and its abundant water supplies should combine to make the region an economically efficient producer of food and feed crops in the future The seaports that serve the region will offer.its farmers ready access to the international markets-markets that are expected to clamor for growing shares of America’s output once economic recovery gets underway in less-developed countries Production of oilseed crops and animal proteins, especially from poultry, is likely to experience the most rapid growth over the coming decade Exporting. in fact should prove a boon to the region’s forest products and mining industries as well as to its farmers The return of healthy growth in Europe Canada and Japan could mean an increase in shipments from southeastern ports-shipments that already account for more than 25 percent of all U.S. waterborne exports Recovery in more developed countriesshould spur exportsof paper, jobs created through the remaining years of the decade will be generated by serviceproducing industries With in this sector, such industries as medical care, tourism, nonprofit organizations and business professional and personal services should achieve-‘ the fastest growth. Florida is likely to profit the most from these industries’ growth, but large cities throughout the region are likely to benefit because of service firms’tendency to cluster in <- 4 urban areas Tourism of course is an important component in the region’s services c sector, attracting visitors from distant cities However, convention markets A may remain soft for some time as new facilities open around the nation to challenge such regional conventiow centers as MiamiBeach, Atlanta New Orleans and Orlando. Hotel occupancies in several of those cities also are likely to be depressed by a dra- 4 matic increase in new hotel construction *, Construction is another industry“ with a seemingly optimistic future r . hi pL c A 8 Like services its growth should be fueled by a continued inmigration into states such as Florida which is prcr jected to welcome more than 250,000 --n newcomers annually over the next fne years A strong construction sector, 4, of course is important to the South* east’s lumber industry. The building trades will provide not only the new 7J.c homes and apartment buildings P , needed to accommodate the late arrivals but the highways bridges and ,- other facilities to handle the growing population ‘‘ The outlook for high technology also appears especially bright in both - “thenation and the Southeast That’s ‘7 important not only because of the jobs that innovative high-tech firms can create but because of their imA pact in helping to revitalize traditional industries The Southeast should increase its share of the technology ,? industry from 7 percent in 1981 to 910 percent in 1990 because of locational advantages In a recent Joint ~ 4 should gain orders, along with munitions factories in Tennessee and maintenance shops in Alabama Although battered by recession and overshadowed by newer industries the Southeast’s so-called “smoke stack” industries are far from dead A recovery in durable goods manufacturing is expected to lead a n expansion of factoIyjobs With economic recovery and growth, states with heavy concentrations of durable goods producers-primarily Alabama Mississippi and Tennessee-could find themselves enjoying their greatest prosperity since 1979. Sustained national economicgrowth should stimulate small business d e velopment in the Southeast even more than in the nation as awhole Growth in the region’s small manufacturing firms already is triple the national rate Because the region offers an attmctive place to live and an expanding market, increasing numbers of men and women have been launching effect on the inmigration of people and jobs. What’s-more, the freespending 35-44 age group is growing even faster in the Southeast than nationwide Favorable demographics should accelerate the sale of automobiles home furnishings and disc r e t i o n q goods and services Health care services should be stimulated as a growing influx of retirees spreads beyond Florida to the mountains of north Georgia and eastern Tennessee and to southern counties ofAlabama In the Sixth District states the proportion of residents over 65 rose nearly 50 percent over the past decade We expect this fast-growing segment to be a strong stimulant to southeastern growth, In summary, the resumption of aboveaverage growth in the Southeast over the remainder of the decade should benefit a mix of industries some old and some new. Job gains look particularly bnght forwhitecollar workers in high-technology and ser- 4 c I I I I I I I I I I I 1 I I 1 I -, Economic Council survey, the South* east ranked most attractive to high- tech firms in labor cost and availability, tax climate and cost of living. It ranked third in another category of A interest to such firms labor produc ” tivity. However, it ranked poorly in the II quality of academic progmns a weakness that hurts the region in its efforts _i to attract research facilities and corporate headquarters In the Sixth District, high-tech firms are clustered in four areas The central Florida strip from Tampa to Melbourne; the Atlanta metropolitan area; c Huntsville Alabama and Knoxville A Oak Ridge Tennessee Much of the region’s high-tech growth will be spurred by DefenseDepartment spenCr 4 ihg on electronic weaponry and surveillance and communication equip ment Defense spending has helped Florida the Southeast’s largest c make technology center and should con- tinue to do so through the 1980s t ** S e o r g i a also should continue to draw its share of defense dollars S h i p + builders in Louisiana and Mississippi % 7 -7 4 ~ * their own businesses rather than moving out of the area searching for work The improved availability of venture capital in the region should speed small-business formations Retailing is another economic area with a promising future in the Southeast. Sustained economic recovery promises to increase real income and spending more in the region than in the nation because of its catalytic 4 9 vice industries with certain areas likely to enjoy the greatest gains Owners and employees in the building trades and retail trades areas also should prosper, as will those dependent on such areas as export trade medical care and tourism. For the region as a whole however, the most profound effect maybe the continuing evolution in the way residents earn their livelihood. After 1983 Recovery District Faces 1984 With Optimism southeastern states found 1983 a year of recovery that generated enough economic momentum to carry the region’sindustries into a second stage of expansion in the new year. Last yeafs rebound inspired by waning inflation and increased consumer spending stimulated southeastern industries ranging from tourism to financial sewices Virtually all sectors of the economy gained strength in the second half of 1983 and crossed the threshold into the new year prepared for further growth Assuming that I consumer a n d business spending keeps fueling the national recovery, regional businesses should continue to stimulate the local economies surrounding those states’military installations and inject millions of dollars into areas producing sophisticated defense hardware, or servingsuch aem space ventures as NASA’s Space Shuttle The benefitsof raivedgrowth should spread broadly across the region. The manufacturingeconomies ofAlabama Mississippi and Tennessee for instance, have begun to experience healthy employment gains in response Chart 2. Commercial Bank Deposits A revival in residential construction, first noted as 1982 drew to a close ir stimulated construction-related industries acrossthe nation. Predictably, +, the region’ssubstantial furniture and carpet manufacturing industries soon i began to expand output to meet the renewed demand generated by con- *sumer spending. The recovery spread quickly, injecting new life into the Southeast’sconcentrations of automobile parts and apparel manufacturing plants Shuttered facilities began to r e y , open and idleemployeeswere _,_ -I summoned back to work Total employment, which F had langLushed through 1982, began to grow again during < t 4 .- 16 L to expand their operat and add staff well into 1 to meet the increasing d e mand. With the Southeast’s e c e nomymusteringkshstrength moving into 1984, the outlookis positivefor the region in the-months ahead, with some states likely to grow at above average rates The states whose economies showed the greatest strength in 1981-1982 also are likely to lead the way this year. Overall,real economicgrowth should settle into a more sustainablepace for the remainder of 1984. The strength of that early surge is reflected by the Commerce Department’s Index of Leading Indicatom which posted 14 consecutive monthly increases before it dipped temporarily in November. Still, there will be standoutswithin the Sixth District, with the strongest rebounds likely in areas that produce goods for consumersand for national defense Of the six states represented in the Sixth Federal Reserve District Florida appears the most likely to set the pace this year. An inflow of new residents and businesses into Florida and Georgia promises to boost spending on housingand consumerdurable goods creatingnewjobsin both states Increased defense spending promises the late spring. That meant Lr rising personal incomes giving men and women more ,s money that they could pump back into the economy. As 1983 ended. both em- ployment and joblessness reflected the recoveds burgeoning strength Employment was showing relatively strong growth while the unemployment rate continued to inch downward Hardhit Alabama, Louisiana and Tennessee continued to experiencejobless rates in double digits late in 1983, but the region’saverage rate had fallen from 9 nearly 1 1 percent at the beginning of the year to about 9 percent by year- *end ~~ to the national recovery. Louisiana’s economy, though, still has some catching up to do because of its heavy dependenceon the petroleum industry and international trade both slow to join in the revival. All four of those harder-hit states should gain from plant reopenings in diverse durable manufacturingi n d w tries and from increased mining activity. Tennessee should continue to profit from a Japanese manufacturer‘s investment in a truckassembly plant and related manufacturing activities in Smyrna near Nashville After suffering the pains of a r e cession that continued through most of 1982, the southeastern economy began to experience a strong upturn during the first half of 1983 with a reawakening of consumer spending. As interest rates stabilized increasingly optimistic consumers began to purchase new homes as well as cars clothing and household goods e 1 . In Florida and Georgia where e c e nomic activityweatheredthe recession relatively well, unemployment had 1 fallen to 7.5 and 6.4 percent, respectively, by year-end Those states’ mix of servicerelated industries had provided some insulation from the unemployment problems that char- c _ acterize the manufacturingdominated 1 economies of neighboring states - .,+ Overall, a second consecutive year of economic expansion promises % continuing reduction in unemployment throughout the Southeast and in the nation, where the rate seems I A 10 likely to continue its decline in the ,coming months A continuation of the national r e * covery this year should boost various \‘ industries in the region. The airline i industry, tourism and convention tmde should grow sharply as the expansion .*A proceeds With the expansion of con* 3 vention facilities in Atlanta the continued lure of Disney Worlds new EFCOTCenter in central Florida and a worlds fair planned for New Orleans ‘4 this could be a banner year for southeastern hospitality indus4 ’ tries The fair in particular 73 should boost tourism in -zI Louisiana as well as in neigh1 boring states some ofwhich i are invest% to capture their q3 * slows or chokes off the recovery, interest rates could be driven up. The hgher rates would depress the interestsensitive automobile and housing industries as well as related industries like carpeting and household a p pliances If the dollar‘s foreign exchange value continues to decline in response to a WideningAmerican merchandise trade deficit the nation’s manufactured exports should grow steadily over the year despite continued stagnation in of summer. What’smore the program hurt merchants who normally supply farmers with equipment and supplies to plant their fields And it hurt livestock producers, forced to cope with sharp increases in feed grain prices driven higher by the government p r o gram and drought For survivors, though, conditions look brighter in 1984.Continued economic recovery and favorable trade developments should increase agricultural exports and generate demand for .farm products Farmers are likely to resume fullscale planting, which would trigger a resurgence in d e mand for seed, fertilizer and equipment-good news for -- -.I r. share of the business pass% through. One cloud on the tourism horizon is the slowdown in the flow of visitors from Latin +> America in response to economic problems in several nations. Those problems south of the border also are reflected by such indicators as aslowdown in Florida’sluxury condominium market and in sluggish international trade Other trouble spots also could gene rate problems for the regional economy in the months ahead. The international trade and energyareas,which declined so dramatically during the recession, continue to lag the recovery of other economic sectors Worldwide recession and a strong U.S dollar reduced trade flows through most of c 1983, including the flow of agricultural and energy products at major in the region. The speed of - .l ports economic recovery worldwide shouid * help shape the vigor of recovery in important coal, phosphate chemical, c r and pulp and paper exports aswell as imports of oil and machinery into the United States *$ , 9 A question mark hanging over that recovery involves the large federal .r. deficit If the federal government’s ‘ need for capital to finance the deficit *. .d t- merchants who suffered during last year‘s acreage reducOn balance the Southeast should grow faster than the national average this year, with the strongest gains in sectors that produce goods for consumers or for national the Latin American market Such a defense Defense spending promises rebound would add to the increased to boost activity at the w o n ’ s numertrade stimulated by reviving global ous plants producing equipment and economic growth. systems for the military. Areas proAnother problem sector, particularly ducing sophisticated hardware should for the Southeast, is agriculture The benefit moist from the spending boom drought across most of the region with Florida a likely beneficiq. last Year left farmers hard Pressed to With the economic outlookgenerally rePY the debts they had accumulated positive, construction and manuduring Several Ye= of adversity. A facturing firms are gearing up for m e r e fin flcnida near Ym-end what they hope will be a second condamaged many Crops and augured secutive year of growth. With the Poorly for the new Year. region’s economy gathering fresh Many farmers found some financial strength early in 1984,plants should relief in 1983 by participating in the continue reopening and the job picgovemment’spayment-in-kind(orPlK) ture should continue to improve in p r o g m which offeredthem products response to the national recovery. from storage in return for their agree While some states can expect to enjoy ment to leave acres fallow. Partici- greater growth than their southeastem pating farmers who received com- neighbors the outlook for the Sixth modities from government storage District as a whole is for a year that were able to sell them at prices inflated will continue the progress achieved by the effects of drought and the PIK in 1983. program. But most farmers weren’t covered and had to watch their income prospects shrivel with the heat 0 0 0 0000 1 11 Mary Jefferson personifiesthe Atlanta Fed's service orientation. The Atlanta The Depositow Institutions Deregulation and Monetary Control Act of 1980-commonly abbreviated as"MCA80-created a new environment with regard to Federal Reserve services to depositow institutions MCA-80 required the Federal Reserve to begin charging for several services previously provided free to member banks For the first time, it also required that Reserve Banks' services be made available to all deposit0 ~y institutions-credit unions savings and loan associations and nonmemberbanks as well as member banks And it opened the door to competition from a number of alternative providers of some of those ser- .a r I i: t 1 i? viCeS I - The Atlanta Fed responded by communicating more closely with depository institutions about their wants and needs for financial services We also have continued our efforts to control costs and improve services For us, the new environment cb has proved to be stimulating and challenging, and we believe that our presence in the market has been equally stimulating and challeng ing to other providers of similar services The ultimate beneflcary is the public re ceiving services of a better quality and at a lower price than otherwise would be possible - ped in the New Environment As we reviewthe Atlanta Fed's achieve ments in the post-MCA-80 era, we are mindful that we owe much to the ,* suggestions offered by our customers , and the pressure provided by our able competitors With the accelerating evolution of 4 . it is not enough banking - *to await technology, developments and react to + them; we must anticipate develop ments and prepare for them. To do i that we have embarked on an ongoing program of strategic planning. Three years ago,we analyzed our operations their strengths and weaknesses as the base from which we must a p -r' proach the future Then we reviewed the opportunities and the hazards inherent in technological change, d e regulation and other factors On that ' basis, we could set goals and draw blueprints to achieve them But such -A' 4 activities-those unrelated to the financial services available to depository institutions These activities include fiscal services to the U. S Treasury: supervision and regulation of banks bank holding companies and international banking facilities administration of the "discountwindow;" and economic research, among others Following is a brief discussion of how this approach affected various areas of the Bank in 1983. plans must be subjected to continual review as developments accelerate d e celerate, or take unexpected turns Even the best plan can become a trap if it is inflexible So, early in 1983 we reviewed our long term goals and objectives for our priced services in light of the changing market demand We first reviewed internal and external trends identified strengths and weaknesses for each of our major services and evaluated the strategic alternatives available We established longterm strategies for product develop ment operations marketing aut@ to match mation and human ~..esources costs and revenues for these priced services as mandated by Congress Later in the year, we developed s u p porting strategies and business plans Essentially the same process was carried out in our planning for other Financial SeMces -- Table 1 Priced Services Volume 1982 1983 I24 Q1 Q2 Q3 Q4 01 02 03 1,650 1,897 2,075 2,331 2,494 2,894 3,316 3,668 24,834 26,390 27,558 28,079 29,441 31,483 26,880 26,886 Check Collection - Average Daily Incoming Items in Thousands 7,336 7,069 6,978 7,625 7,757 7,737 7.567 8,192 Definitive Securities'* - Average Monthly Safekeeping Receipts 13,494 12,147 11,606 11,881 12,285 12,349 12,205 12,386 Noncash** - Total Items Collected 89,747 89,147 94,631 125,428 148,193 206,671 203,500 262,058 Wire Transfer - Average Daily Transfers Originated 10,800 11,313 11,542 12,017 12,011 11,901 11.852 12,271 Automated Clearinghouse - Total Billable Commercial Volume Book-Entry Securities" - Total , .'. 13 HECK COLLECTION. Several new services were offered in 1983. One-MICR Captureprovides a payor bank with a magnetic tape containing the encoded data from each check in a cash letter it receives from u s That bank can then update its customers' accounts without p m cessing the checks, t h u s obtaining account balances much more quickly Another new service-Key A e count Reporting- p m vides a dollar total of checks drawn against specified account num bers. These services greatly facilitate cash management for the payor bank's larger accounts In addition, the deadlines for d e posit of "other f d e d items (thosedrawn on Chart 4. Check Collection Average Daily Volume Thousands 10,000 Total Incoming Checks 8.000 , I offices- in some cases by as much as 9?h hours-and most of our offices alsohaveinstalledasaturdaydeadline extending service to seven days a week Each of our six offices sends repre sentatives into the field to inform potential users about these new services and others, such as our Mixed Cash Letter and Group Sort progmms In addition to bringingincreased check volume into the Fed, these representatives have also brought us valuable feedback-making us aware for example that our Adjustments and R e turn Item services are particularly valued and that many of our helpful employees are singled out for praise. During theyear, the number of corn mercial checks sent to Atlanta Fed offices increased by 6.9 percent The Q2 Q3 5 percent in 1983. Since check collection is by far our largest priced service in terms of staft this contributed substantially to our ability to maintain our position as the Federal Reserve System’s most cost-effective Bank as measured by the System’s own standads By carefuuycontrolling costs and keeping fees for Fed seMces as low as possible we in turn help minimize costs for financial institutions that depend on u s Q4 Q2 Average Daily Volume Q4 large regional bank’s cash concentra- c,tion service for the U. S Treasury’s 4 * G e n d A m u n t FUndsTIansfixsystem This represents a milestone-the first time a Reserve Bank has served as a subcontractor for a major regional bank to provide cash concentration services for the Treasury. -r) In the near future begin re placing the terminals now in use by many of our wire transfer customers considerablv emandine the menu of Fed services availableothrough the * terminals; some additional details follow in the section headed AUTC, t MATION SERVICES 3 Another focus of our efforts in the payments system area is expansion of electronic links to include more,; ACH users A major goal is further development of the broad market for c j which we currently offer ACH services For example, Reserve Banks in 1983 began accepting for deposit all types of ACH items a t the nighttime Ydeposit deadline In addition, a cor-4 porate trade payment program wasa devised and implemented to facilitate the use of the ACH by financial institutions serving large corporate d e f . Chart 5. Wire Transfer Q3 I * ~ Thousands 14,000 12,000 10,ooc 8,OOC 6,000 4,OOC . ~ 1982 largest increase- a remarkable 36 percent-was in out-of-zone items (checksdrawn on institutions located in other Districts or other Branch zones). Despite this volume increase, improved productivity enabled us to re duce our checkcollection staff level by 1983 IRE TRANSFEWACH. We are also combiningtraditionalces to create new ones For example wire tmnsfer and automated clearsemices mghoo~(ACH are being used togethertofacilitate one sently examining several new pricinz structures that will allow Reserve Banks to remain pricecompetitive while also serving users better by 1 differentiating the segments of the ACH market through pricing The ACH+ has the potential to improve the e% + ficiency of the payments system and to facilitate the interbank clearing +, k 14 1 and settlement of electronic payments ECURITIES SERVICES T-4 - Since the implementation of MCA-80, the -4 Atlanta Fed has pur4 sued innovations in 4 the area of securities services. All six of our +‘ offices expanded their definitivesafe keeping service in May 1982 to accom modate securities owned by customers of depositing financial institutions (Definitive securities are in conventional, paper form, as opposed to book-entry securities that exist only as entries in ledgers) In September 1982, we began to offer definitive safekeeping services under a pilot program designed to stimulate volume growth by simplifylngour price s t r u c ture and offering volume discounts Midwest Securities Trust Company began depositing bearer securities with us in May 1983 under a custodial agency agreement This service is tailored to the needs of regional securities depositories At the end of July 1983,we began a pilot program offering a new noncash collection service (Thecollection of noncash items unlike the collection 4 ~ of cash items such as checks requires verification that specific conditions for payment have been met) A Mixed DeposiVFine Sort Program is now Chart 7. Securities Services Thousands 250 200 - Noncash Coupon EI Bookentry Transfers Definitive Receipts 150 100 50 - 0Q1 1982 Q3 Q2 offered in addition to our standard noncash collection service The new program appeals to financial institutions that prefer not to sort their noncash items but rather to deposit a mixture of items payable both locally Chart 6. Automated Clearinghouse Thousands 4,000 I Total Billable Commercial Volume 3,000 2,000 ’ 1,000 I 0 C Q1 1982 Q2 Q3 and in other Federal ReseIve Districts Even with its relaxed sorting require ments the new progmn offers lower prices and improved credit availabiliw. Q4 Q1 1983 Q2 Q3 15 ~4 Q4 Q1 1983 Q2 ~3 ~4 The depositor can have the Fed collect not only local in-zone items but also those payable in other Fed zones The depositor needs only to sort items according to past-due or futuredue maturity. ASH SERVICES. The focus in Cash Services has been on improving the quality of the paper money circulating around the nation Installation of more sensitive “fitness sensors” on theReseIveBanks’hgh-speedcurrency processing equipment began late in 1983 and will be completed soon on all 1 10 of these machines at 35 of the System’s37 offices The Resme Banks collectively invested about $ 1 million to develop the new sensor, which will detect a variety of defects-including transparent tape- that slipped by the earlier sensor. Notes unfit for further circulation will be shredded aut@ matically. Given the volume of s u b standard currency now in circulation, t it may take a year or two to complete the clean-up. In the meantime signs of progress should become visible over coming months, and the occasional problems arising from the use of substandard notes in a u t o mated teller machines will begin to dwindle The Reserve Banks have embarked .Fon a program to develop the second- c Suggesting the diversity of Atlanta Fed activities are Art Raglin and Tina Heaney, operating a communications terminal, and attorney Rebecca Zimmerman, r e viewina court Drecedents for-the knKs Ligal DepartI k I - - - I t. generation currency processing equip ment that will eventually replace the machines in use since 1978. That p future equipment will further improve i the speed and quality control of the (1 currency operation An officer of the Atlanta Fed was selected to head the + task force guiding this new program. Y- Supervision and Regulation P Responding to deregulation and other changes in the financial services industry, our Supervision and Regulation staff directed its efforts in 1983towards reducing the regulatory burden, providing more timely and pertinent information to banks and bank holding companies and increas ing employee productivity. An important contributor to the success of this effort has been the use of micro- and mini-computers both in the office and in the field This has expedited all phases of analysis while reducing on-site examination time and streamlining the preparation of reports of examinationsand application reviews The uniform bank performance re ports together with new examination formats introduced during the year, offer bankers detailed anand industry information that can assist commercial bank managers in today's competitive environment Another achievement in 1983 was an alternate examination agreement with Louisiana adding that state to 16 , ' I I-^ k. 2 $ ~ ' * , v *e the other two Sixth District statesAlabama and Georgia-with which * -4 we have such agreements Under these agreements thestateexaminesabank one year and we examine it the follow1 ing year, cutting the examinaton burden in h d . To provide continuous monitoring for both the state and the ,Fed, examination reports are exc changed -+ ,, 4 J Research 4 Our Research operation received considemble national publicity during the year for its innovative use of micre and mini-computersaswell as telecommuting by the professional staffto incproductivity. Thebasic v function of economic research at a Federal Reserve Bank is to provide current and relevant input to help in the formulation of monetary policy. -$ The new computerapplicationsreduce statisticallag and give our economists ?? access to a wider spectrum of data a A n important byproduct is a wealth ,of economic intelligence that can be 1 shared with bankers other business -"( people and the public through an ambitious publications pmgmm. The keystone of this program is our month ly Economic M e w ,which reaches nearly 30,000 subscribers and has been quoted extensivelyin the nation's press to gain a substantial secondary audience. An emphasis on results has enabled the department to double ' e- both the frequency and the size of the * 'Economic M e w in the past two ,years while improving its readablility and the timeliness and pertinence of + itscontent The professional staffs productivity has been enhanced throughthe privilege of working at home-often with the help of a portable computer-and through a management-by-objective ' program that lets economists and ' /* 'I * g' ' <: Healy performs an elee tronic literature search with David Holmes. Administrative and SupportServices Economists Pamela Whigharn and Charlie Carter confer on regional research project ij UTOMATION SER- 1~ VICES As a key s u p port organization. AUtomation SeMces plays a crucial role in cost- t-, reduction efforts Au- , tomation Services continues to be immersed in a major p+ conversion to new mainframe computer equipment, the implementation fi of new software applications and the installation of an advanced communi-r% cations network To help offset the cost of those efforts Automation Services emphasized productivity enhancement in 1983.Communications p network optimization thorough lease/ purchase analysis on hardware acquisitions and use of new software d e velopment tools produced cost savings of about $330,000during the year. tThrough the development of an Information Center, Automation Services has materially aided the effortP Q k 1; ' _ I - of many other departments to use computers and programs to improve u' operations and cut costs This has given these departments new capa- t; bilities in the areasof word processing e data manipulation and management information r As a part of the continuing evolution of electronic payments systems, the Atlanta Fed soon will begin replacing its extensive terminal network that 'i currentlyserves over320 Sixth District financial institutions A new network fi will be built around microcomputer- * based terminals capable of providing awide range of Fed senices through a single work station. -UMAN FU3SOURCES.a * The Atlanta Fed's o p erations like those of *' any bank are highly labor-intensive. Our ability to decrease staff by 15 percent:: between January 1981 and December 1983, therefore contributed impor- + tantly to our success in reducing ~ ff research analysts participate in setting clear and appropriate goals In addition to providing standards for measuring individual performance, this approach assures that the workat-home privilege will be used only when it helps the professional attain the objectives for which he or she is accountable ~ A 18 costs Our staff reduction, though substantial, was accomplished almost & exclusively through attrition. At the Q same time we have restructured our 7 training and our compensation and benefits programs to develop highperformanceskillsandrewardoutstand A ing performance New approaches to T appraising our staffs performance through goal setting and the use of performance standards were instituted to increase employee involve ment enhance communications and raise Droductivitv. PERAilONS~VEMENT. For manyyears an operationsimprove ment program has been a major element in our effort to improve efficiency.In 1982, the 7 progmm9ssteering committee anour general overhead and support functions-functions that contribute to the cost of all other activities The !\- benefits of this analysis were realized in 1983 throughcombined cost savings 4 Cascading coins illustratethe Atlanta Fed's role in cash services ' I *-' 1 ' .* 1c? and cost avoidances totaling about $1.8 million. The most significant improvements were in the areas of mail, personnel, protection, auditing data systems support, building operations and housekeeping. with the staff reduced by nearly 80 employees _I m c UALITY CONTROL Despite the Atlanta Fed's emphasis on cost control and productivity, we have not lost sight of the fact that x our reputation as an institution and our ability to find -r personal satisfaction in our work d e -- Ypendsimportantly on its quality. A ,qualityassuranceprogmn, established c in December 198 1, remains in place to keep hlgh standards of re~pon~ive ' ness, reliability, and flexibility before our employees at all levels A special ?3 training program was conducted in 1983 to polish the skills of our staff in + providing the services and conducting a the many operations of the Bank As their work is judged by the users of our services the AtlantaFed's reputation will be formed. With todaqts accelerating pace of technological and managerial evolution, the Atlanta Fed is dedicated to meeting the challenge of change and participating actively as a forwardmoving organization. ,t 19 Directors and Officers Board of Directors. 1983 WILLIAM A. FICKLING, J R CHAIRMAN Chairman and Chief Executive, Charter Medical Corporation Macon, Georgia JOHN H WEITNAUER J R DEPUTY CHAIRMAN Chairman and Chief Executive Officer, Richway Atlanta Georgia -+c c c DAN B. ANDREWS President. First National Bank Dickson, Tennessee HAROLD B. BLACH, J R President, Blach’s Inc Birmingham. Alabama GUY W. BO’ITS Chairman of the Board, Barnett Banks of Florida Inc Jacksonville, Florida JANE C. COUSINS President and Chief Executive Officer, Merrill Lynch Realty/Cousins Miami, Florida BERNARD F. SLIGER 1983 Dhectorr Seated left to right are Fickling and Weitnauer. Standing are Cousins Botts, Andrews Willson, Thompson, Blach, and Philip M e , Federal Advisory Council member. Not pictured is director Sliier. President, Florida State University Tallahassee, Florida HORATIO C. THOMPSON 1 HUGH M. WILLSON k President. Citizens National Bank Athens Tennessee Welcome BRADLEY C U m Y , J R MARY W. WALKER President, Rock-Tenn Company, Norcross Georgia has been appointed to a threeyear term on the Board of Directors of this Bank He will serve as Deputy Chairman for 1984. President, The National Bank of Walton County, Monroe Georgia has been elected to a threeyear term on the Board of Directors of this Bank pa- President, Horatio Thompson Investment, Inc Baton Rouge, Louisiana 20 Federal Advisory Council PHILIP F. SEARLE Chairman Sun Banks Inc Orlando, Florida ‘F: L -* Senior Officers HARRY C. SCHIERING General Auditor * ROBERT P. FORRESTAL President JACK G U Y " -+-, First Vice President (lr H. TERRY SMITH Senior Vice President I B.H.WGE'IT Vice President HARRY BRANDT ' W. R CALDWELL LS CHARLES D. EAST 4' Senior Vice President .* a DELMAR HARRISON Vice President and Atlanta Branch Manager ROBERT E. HECK Vice President Corporate Secretary and Assistant to the President 1 Vice President WARDLYN BASSLER Executive Vice President 1 f W. M. DAVIS JOHN R KERR Vice President Senior Vice President DONALDLKOCH Senior Vice President and Director of Research WILLIAM N. COX I11 Vice President and Associate Director of Research ELY S. MATIERI Vice President RICHARD OLIVER Vice President FRANK CRAVEN Vice Resident JOHN M. WALLACE Vice President -1 1983 Management Committee: Seated, left to right, Schiering, Guynn, Koch. Standing, Caldwell, Hargett. Not pictured are East and Smith, who joined the committee in 1984. EDMUND WILLINGHAM Vice President and General Counsel JACK G U Y " First Vice President B. H. HARGE'IT Executive Vice President W. R CALDWELL Senior Vice President CHARLES D. EAST Senior Vice President DONALD L KOCH Senior Vice President and Director of Research HARRY C. SCHIERING General Auditor H. TERRY SMITH Senior Vice President Jacksonville Branch Manager: James D. Hawkins Vice President 11983 Directors I 1383 Directors RICHARDSON HILL J F I SAMUEL CHAIRMAN JOAN W. STEIN CHAIRMAN Chairman, ierties I[nc iEORGE C. =NE, JR President University of AI Birmingham. Alabama G. MACKDOVE President President and Chief Executive Officer, Security First Federal Savings and Loan Association Daytona Beach. Florida AAA Cooper Trans GORDON W. CAMPBELL Chairman, The Amencan Nati Gadsden Alabama Dothan Alabama GRADY GIL Vice Chairman, NCNB National Bank of Fiorida Tampa Florida LEWIS A DOMAN President, Citizens and Peoples National Bank Pensacola Florida I 1 E. F. KEEN, J R Vice Chairman and President. Ellis Banking Corporation IBradenton Florida JEROME P. KEUPER 3 President Florida Institute of Technology Melbourne. Florida E WILLIAM NASH, CLU President, South-Central Operations Prudential Life Insurance Company of America Jacksonville. Florida $7 SIXTH FEDERAL RESERVE DISTRICT Q + & Welcome.. To Incoming Din CARL -. JONES, J R Chairman, President and Chief Executive Officer, Merchants National Bank Mobile Alabama We were saddened in 1983 by the de of New Orleans branch director Thomas G. Rapier. A Jacksonville branch director, Roy G. Green. resigned during the year. i 22 u, Vice President HENRY President and Chief Executive Office] Union Bank & Trust Company Montgomew, - - Alabama MAFUWA M c I V 1 President, EnviroSouth Inc Montgomery, Alabama -E LLWYD ECCLESTONE, J R President and Chief Executive Officer, Atlanta I First National Bank and Trust ComDanv of acksonville -""rdll c . . .... .. ;>, 16,17, 18,19,20,21,2 iia Bureau of Industry and Trade - Cove a Deaartment of Commerce - D. 7. 51 . 5. Julia...St \ \