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Annual
Report
Federal Reserve
Bank

of Philadelphia

Contents
ý' President'sMessage
ExecutiveChanges

4

..............................

6

...............................

Directors
...............

8

........................

Officers
........................................
1981: A Year
of Change, Challenge and Opportunity
Statement

of Condition

Earnings
and Expenses
Annual

Operations

8

.....

10

............................

12

............................

13

...............................

14

Annual
Report
Federal Reserve
Bank
of Philadelphia

President's Messalt

When I became president early in 1981 1inherited a strong organ
zation. The Bank had a first-rate group of people from top manage
We
ment through the ranks and its facilities were modern and efficient.
were in good shape to face changes, challenges and opportunities aa
we got a full measure of all three as the year unfolded.
Among the changes were new leadership both in the Bank andon
the national level. While the changes I made in the Bank were morel
style than in substance, the new Administration in Washington brough
sweeping changes in economic and social policies. The role of thr
Bank in the District changed rather dramatically as it stepped out intG
the marketplace and engaged in cost and quality competition as
provider of services to financial institutions.
This new status as a competitor, the result of the Monetary Contrc
Act, created the Bank's most important challenges of 1981 We hadto
.
price many of our services ranging from wire transfer to check collet
tion and this required making difficult policy decisions and sol""n
complex operating problems. And, of course, once one become
competitor the challenge is to be a successful one.
,
The MCA made the Bank's services available to many new tYPesc
institutions such as credit unions and savings and loan associations
and we felt challenged to reach out and communicate with moretharý
1
1,500 potential new customers.
61
Nineteen-eighty-one was a year of record-high interest rates

One
this createda numberof differenttypes of challengesforthis Bank.

4

was to sharpen our research input to the formation of monetary policy]
another was to discuss and explain policy at public forums aroundthl(
District; and still another was to accommodate the large number(
savers who lined up to buy high-yielding securities at our tellers
windows. The level of rates had a particular impact on thrift institution
and we instituted new discount window procedures to help therm
In 1981 1saw the opportunity for the Bank to make its opemök lý
more cost efficient and to make itself a better place in which to
ý`
saw the opportunity
o
to increase our knowledge of the regional econ00j
and to expand our influence in the Federal Reserve System. Final
saw the opportunity, in both our traditional central bank role and ino
th
new role as a service provider, to make the financial mechanism of

Third District
work better and the regional economy function more
Smoothly.
Now as a new year begins I must say that I am proud and pleased
about the way the Bank met the changes, challenges and opportunities
of 1981. My congratulations and thanks to all who helped.

ný

President

5

Executive Clrlc, Ir ges

i

The Federal ReserveBoard of Governors in December announcedthe
appointment of Dr. Jean A. Crockett as chairman of the board of this Bank
I
She is the first woman to hold this post and also is chairman of the financ
department and professorof financeat the Wharton School of the Universi
of Pennsylvania.
At the same time, Robert M. Landis, Esquire, partner in the Philadelph
law firm of Dechert, Price& Rhoads,was appointed deputy chairman.Bot
appointments are for 1982.
d

The Board of Governors also named George E. Bartol, III, chairman an
toal
chief executive officer of Hunt Manufacturing Company in Philadelphia,
b`
three-year term as a Class C director of this Bank. He fills the seat vacated
John W. Eckman, chairman and chief executive officer of Rorer Group Inc.,
Fort Washington, Pennsylvania, whose term as a director expired at yeat
10
end. Mr. Eckman also served as chairman of this Bank from 1977
1981.

Douglas E. Johnson and Richard P. Hauserwere elected to this Bank
board in December.Mr. Johnson, chairman and presidentof Oceancounty
National Bank, Point Pleasant,New Jersey,was elected a ClassA directorb0
medium-sized member banks. Mr. Hauser, chairman and chief eXecutN
officer of John Wanamakerin Philadelphia,was electedto a secondtermas
Class B director by small member banks.
Od
The directors of this Bank reappointed John H. Walther, chairmana
chief executiveofficer of New Jersey National Bank, Trenton, New Jersey,
represent the Third District on the FederalAdvisory Council in
I
fficlý

The board of directors approved a number of changes in the Bank'so
ofed
staff during 1981. Konstanty G. Adack and John D. Johnson were promotd'
to the newly created position of executive vice president. Mr. Adack is
charge of accounting, computer services, and general administrativeý
services. Mr. Johnson heads cash, check, and fiscal operations.
h,
Six new senior vice presidents also were named: Thomas K. pescF)
supervision and regulation; Guy W. Edwards, computer services; JamesP
Gaylord, human resources; Hiliary H. Holloway, legal division; Alexander
Kudelich, check operations: and Donald J. Mullineaux, economic researc
department.
and
Ronald G. Foley was promoted to vice president in fiscal operations
Lawrence C. Santana, Jr., was named vice president of
administrative services. Robert A. Dobie became assistant vice president,
I
residersr

the supervision and regulation department.

6

,.,,,nin9'
Among the new assignments in the official staff, Frederick M. _
Md';
',
pd

assistant vice president, assumed responsibility for commercial

Consumer compliance examinations and community affairs in the
ClePartment
of supervision and regulation, and Judith H. Helmuth became
°Perationsplanning and control officer.

New appointments to the Bank's
official staff during the year were: Edward
J" Coia,
data
securities operations
officer; Barry K. Cummings,
Communications
officer; Donald F. Doros, applications development officer;
Robert
H. Klein, electronic payments officer; Louis Sanfelice, bank services
°fficer;
and Charles J. Sullivan, Jr., payments support officer.
David P. Eastburn
retired as president of the Bank in January, and Samuel
J" Culbert,
bank services officer, retired in June. Arthur L. Morath and Robert
S. Kishel
resigned to accept positions elsewhere.

Or.Jean A. Crockett, the first
woman director in the history of the Federal
Reserve
Bank of Philadelphia, became its first woman chairman effective
January1,1982.
Her appointment was made by the Boardof Governorsof
theFederal
ReserveSystem. A ClassC director since 1977, Dr. Crockett
Served deputy
as
chairmanof the Bankin 1981.
For
nearly 30 years, Dr.
Crockett
has been a member
of the faculty of the
Wharton
School of the
o h/ersity
Pennsylvania,
of
where
she
currently is professOr
of finance and chairman
of the finance departA career economist,
orCrockett
her
"defgraduate,received
master's

d doctoral degrees in
economics
from the Unity
holds of Chicago and

a master's degree in
mathematics
from the
ýiVefsity
of Colorado.
She
has
articles written numerous
tlealing and publications
With consumption,
aving
and investment.

Jean A. Crockett

7

Directors
CHAIRMAN
Jean A. Crockett, Chairman, Professorof Finance
Wharton School, Universityof Pennsylvania
Philadelphia, Pennsylvania
DEPUTY CHAIRMAN
Robert M. Landis, Partner
Dechert, Price & Rhoads
Philadelphia, Pennsylvania
George E. Bartol, III, Chairman and Chief Executive Officer
Hunt Manufacturing Company

Officers
Edward G. Boehne
President
Richard L. Smoot
First Vice President
Konstanty G. Adack
ExecutiveVice President
John D. Johnson
ExecutiveVice President

Philadelphia,Pennsylvania
EberhardFaber, IV, Chairman and Chief Executive Officer
EberhardFaber Inc.
Wilkes-Barre, Pennsylvania
Richard P. Hauser, Chairmanand Chief ExecutiveOfficer
John Wanamaker
Philadelphia, Pennsylvania
Roger S. Hillas, Chairman and President
The Provident National Bank
Philadelphia, Pennsylvania
Harry A. Jensen, President and Chief Executive Officer
Armstrong World Industries, Inc.

Lancaster, Pennsylvania
Douglas E. Johnson, Chairmanand President
Ocean County National Bank
Point Pleasant, New Jersey
Donald J. Seebold, President

Thomas K. Desch
Senior Vice President
Guy H. Edwards
Senior Vice President
James F. Gaylord
Senior Vice President
Hiliary H. Holloway
Senior Vice President and
General Counsel

AlexanderA. Kudelich
Senior Vice President
Donald J. Mullineaux
Senior Vice Presidentand
Chief Economist

The First National Bank of Danville
Danville, Pennsylvania

8

MEMBER OF THE FEDERAL ADVISORY COUNCIL
John H. Walther, Chairman
New Jersey National Bank
Trenton, New Jersey

Peter M. DiPlacido
Vice President
Ronald G. Foley
Vice President

DonaldJ. McAneny

Vice President
and
GeneralAuditor

Lawrence
C. Murdoch, Jr.
Vice President
and Secretary

LawrenceC. Santana,
Jr.
VicePresident
William

H. Stone, Jr.

\ice President
and LendingOfficer
Ronald
D. Watson
VicePresident
JackP.
Besse
Assistant
James

Vice President

M. Cleary

Data
Processingand
Technical
Services Officer
Edward
J. Coia
Securities
Operations Officer
0" Russell
ASs'stantConnor
Vice President
pätä
CorCummings
munications Officer

James B. Duffy

J Janice M. Moulton

Assistant Vice President

Research Officer and Economist

Stanley J. Forst

Joseph J. Ponczka
ExaminingOfficer

Automation Planning Officer

John M. L. Gruenstein
ResearchOfficer and Economist

I Aris Protopapadakis
ResearchOfficer and Economist
Edward G. Rutizer
Examining Officer

Judith H. Helmuth
Operations Planning and
Control Officer and
Assistant Secretary

Louis N. Sanfelice
BankServicesOfficer

Jerry Katz
Compensationand BenefitsOfficer

John B. Shaffer
Assistant General Auditor

Alan L. Kiel
Staffing and DevelopmentOfficer
Paul E. Kim, Jr.
Assistant Vice President

Robert H. Klein
Electronic PaymentsOfficer

Charles J. Sullivan, Jr.
Payments Support Officer
I
i
P. Viswanathan
Assistant Vice President

ElizabethS. Webb
Assistant Counsel

Richard W. Lang
ResearchOfficer and Economist
Edwin C. Lodge
Statistical Officer

A. Dobie
eben
sistant

Vice President

I Ocnald
F. Doros
'ý00lications
Development Officer

Frederick M. Manning
Assistant Vice President,
Community Affairs Officer
and Assistant Secretary

January 1.1982

9

1

1-1

1981:A Year n Change, Cha11
January

April

...

This Bank implemented new pricing
procedures for its wire transfer and
net settlement services. Fees for
check collection and automated
clearing house services went into
effect on schedule in August, and in
October for securities and noncash
collection services.

First vice president Richard L.
Smoot attended the year's first
meeting of the System's fivemember Pricing Policy Committee.
As a member of this Committee
and as chairman of the Conference
of First Vice President's Committee
on Management Systems and Support Services he and key members
of his staff were instrumental in
developing new procedures to
implement the MCA directives.

February..

10

.

Edward G. Boehne assumed the
presidency of this Bank on February
1 following the retirement of David
P. Eastburn. His election in December capped a three-month search
by our board of directors. Ed had
been senior vice president and chief
economist of the Bank.

A long-range program to increase
the efficiency of our cash operations
began with the installation of the
first automated, high-speed currency
counter. By year-end four high-speed
counters were in use. Each machine
can count and package paper currency at an optimum rate of 1,000
notes a minute, while at the same
time detecting counterfeits and
destroying, on-line, notes that do
not meet fitness standards.

...

Special operations seminars were
the
begun in cities throughout
banks
in
instruct
the
new'
District to
pricing procedures for our services"
Changes in Truth-in-Lending regu'
lations as well as on-going regu'
latory developments were reviewed
in riatail at a series of 14 workshop`'

benefit of
banks

mamhar
and nonmember
Tha Rank's 36th annual

series

0

f

field conferences for bankers and
bank directors also began in April. I

May...
T.....
ý. +.. ýý.
IJ
QI I04l.
LIV.ý. +ý

II

March...
Thirteen depository
institutions
established on-line communications
with our Fed Wire facilities during
the first quarter of the year. This
enabled them to originate and
execute funds transfers directly via
Ninety-one
computer terminal.
institutions had this capability by
year-end an increase of 55, or more
than 1 50 percent, for the year.

-i. IQYY i T--Irv
ýn
IIII
.. GI

-,

1

CPrlI
-e

rities issues reached a peak an
continued at high levels throughov`
this year of record-high
in e,_
rates. Our fiscal personnel handle" %
more than 66,000 individual app''
cations to buy new Treasury bill '
notes, and bonds during 1981.

1
June...
flur

sacuritias-safakaaninn

functOr

adopted a new automated secure
transfer system. This service alto
banks that are on-line to exea&te
trades, withdrawals and other tra
Öf
actions directly to their portfolio r
Treasury and Government ager+
securities held in safekeeping W rt
us. By the end of the year eij
institutions were trading securitio,
on-line.

I

(

ý
ý

Ige,& Opportu nity
July...

TheBank's
computer facilitieswere
upgraded significantly
with the
installation
of a new Amdahl comPuterand by
an increase in the
capacityof our
existing computer
processing
equipment. Both the
'mPlementation MCA
of
programs
and volume
growth created this
need.

August...
Check
processing volumes dropped
sharplyfollowing
the introduction
of Pricing
for our check collection
services.
This decline in activity was
only
Partiallyoffset by large increases
the presentment
of checks in
Arforted
tleOOsitingsealed packages as
institutions shifted to
costly collection serices.

Anew
borrowing
rate for providing
Xtended
credit at the discount
endow
was established. The
tended
help credit program is designed
meet special funding needs
ýf
' eligible depository
institutions.

September..

.

We announced a number of improvements in our check services to
meet the changing needs of the
institutions we serve. Deadlines for
depositing checks in the schedule
deposit program were staggered to
1: 00 a. m., 2: 00 a. m., and 3: 00
a. m. to give banks additional processing time for the first-pass sort.
The 12: 01 a. m. RCPC service area
was expanded to include the entire
Third District, and a new interdistrict group sort service was introduced.

November..

.

This Bank received its operational
ratings for the first half of the year.
Our overall operational quality
ranked in the top third of all Reserve
District Banks. Increases in our
aggregate unit costs were kept well
below the System average which
helped raise the Bank's unit cost
standing three places.

December...
The Board of Governors named
Jean A. Crockett to succeed John
W. Eckman as chairman of our
board of directors effective January
1. Dr. Crockett is the first woman to
serve in this capacity.

October...
The Bank opened new lines of
communication with financial institutions when it called the first
meetings of its four advisory boards
which represent nonmember commercial banks, mutual savings
banks, savings and loan associations, and credit unions. By early
December members of each board
had met with officials of this Bank
to exchange views and discuss
issues of mutual concern. Future
meetings are scheduled on a semiannual basis.

A new bank examination program
was adopted in New Jersey. Each
half of
year this Bank will examine
banks
the
and
the state member
the
other
state banking authorities
half, and the groups will be switched
improve
annually. The idea is to
efficiency and provide cost savings
to both the regulators and the banks
being examined.

11

Statement of Condition
ASSETS

December 31,1981

December 31,19

Gold certificate account
........................
Special drawing rights certificate
..................
Other cash
..................................
Loans and securities:
Discounts and advances
......................
Federal Agency obligations
....................
United States Government securities
.............

$

$

Total Loans and Securities

531,000.000
141,000,000
19.063.240

S 5,111,149,293

560,000,000
121,000,000
18,768,495

54,540,000
379,421,423
5,179,43 849 I

213.165.000
326,573,208
4,571,411,085

..................

g4

$ 5,613,394.272

Other assets:
Cash items in process of collection
..............
Bank premises - net
.........................
Operating equipment - net
....................
All other
..................................
Interdistrict settlement account
.................

Total Assets

399,777,506
51,583,442
8,238,242
321,476,223

............................

424,699,793
52,815,268
6,587,996
339,405,368

-255.365.925

-836,87

S 6,327,922,021

$6 299,79
ý1

1

LIABILITIES & CAPITAL
Note liabilities:
Federal Reservenotes

S 5,287,526,407

........................

Deposits:
Reserve accounts of depository institutions
.......
U. S. Treasury - general account
...............
Foreign
...................................
All other
..................................

ýi

664,584,428

.
.

Total Deposits

S

...........................

686,367,108

$ 6,207,886,980

121

`New category

S 6,327,922,021
..

599,058-85y

S 6,221,948,821

52,986,600
52,986,600

Earnings credits available to depository institutions*

$

237,066"883
8
95,857,06

Capital paid in
..............................
Surplus
...................................

..........

ii
13,8ß4'u3
ý
9,51ý

159,161,850
88,893,456

Capital accounts:

Total Liabilities and Capital Accounts

575,649,41

0
12,122,000
9,660.680

Other liabilities:
Deferred availability cash items
.................
All other
..................................
Total Liabilities

S 5,275,904"202

S

39,268

!I;

1yp
45,954'
45,954"ý
'
$ 6,299.795ý28o

,Earnings & Expenses
.ii
Current
earnings:
From U.S. Government
securities ...............
Fromdiscounts,
advances and miscellaneous
sources
4
.................................
From

ý
ý:

services to depository institutions*

$

..........

Total current
earnings ....................

.

1981

1980

549,249,289

$

554,382,814

32,967,007
5,626,703

36,128,609

587,842,999

590,51 1,423

41,171,010
3,968,335

36,833,895
3,361,000

45,139,345

40,194,895

542,703,654

550,316,528

458,269

3,748,629
9,319

458,269

3,757,948

2,402,000
174,136

2,428,200

4,874,159
11,627,690
142,963

9,141,236

19,220,948

11,983,234

18,762,679

8.225,286

Net
expenses:
°Perating
expenses (after deducting reimbursable
or recoverable expenses)
....................
Federal Reserve
currency
......................
Total
net expenses
.............
.

Current
net earnings

(I

'tlditionsto
current net earnings:
Gain

1I
i
I

on foreign
Miscellaneous currency transactions ............
nonoperating income .............
Total
additions
..............
.

tductionsfrom
Assessment current net earnings:
for expenses of the Board of
Governors
Earnings
.. _.......
.
credits used by depository institutions*
Loss
.
on sales of U.S. Government securities
(net)

1

i!
ýi
ý

loss
on foreign currency transactions
Miscellaneous
...........
nonoperating expenses
............

Total deductions

1,yetdeductions

NetearninQS
--_.

11

.........................

.

.

...............................
before
"'

navmant
''
, .......

to IIS
......
...

Troaa
...........,
irv

.......

413,798

523,940,975

$

542,091,242

2,798.462

$

2,649.084

Divide
ids S"Treasury
aitlto

Reserve
notes).
raesferred
. .......
.............
to Surplus, additions
.................

tNý$
v" category

$

.................
(interest on Federal

.

538,877,458
564,700

514,1 10,063
7,032,450
523,940,975

$

542,091,242

13

I

Annual Operations
OPERATING STATISTICS

Loans to depository institutions ...................
Currency received and counted ...................
Coin received and counted ......................
Checks handled:
U. S. Government checks......................
Postal money orders ........................
All other
..................................
Collection items handled:
U. S. Government coupons paid ................
All other
..................................
U. S. Savings Bonds and Savings Notes issued,
exchanged, redeemed ........................
Other Government securities issued, exchanged,
redeemed .................................
Transfersof funds
.............................
Food stamps redeemed.........................

$

17,192
7,572
142

$

58,544
6,317
136i
37,212
281

44,420
301
342,785

299-0p3

89
1,611

1,521

1,673

2,011

203,418
1,806,570
440

168,530
1,577,011
338

g0

1
1981

1960

Loans to depository institutions ...................
Currency received and counted
...................
Coin received and counted ......................
Checks handled:

2,351 *
688,500
891.800

1,850
620,600
8

U.S. Government checks
......................
Postal money orders .........................
All other ..................................
Collection items handled:
U.S. Government coupons paid ................
All other
..................................
U.S. Savings Bonds and Savings Notes issued,
exchanged, redeemed ........................
Other Government securities issued, exchanged,
redeemed .................................
Transfers of funds
.............................
Food stamps redeemed.........................

33,900
6,200
540,700

33"600
6,50
658,000

THOUSANDS OF ITEMS PROCESSED

14

1980

1981

MILLIONS OF DOLLARS

*Unrounded data

400
400
18,500
300
1.600
134,900

400
400
24,100
300
1,300
99,000


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102