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m ý m t"Aawds" ý w me rm N After the Monetary Control act was passed in changes required by deregulation at home and 1980 there was a period of planning and then they traveled widely abroad to examine subsidcame the time for implementation. On this iaries of Third District institutions. Our Research Department continued to delve into the economic schedule, 1983 should be a year of accomplishit turned to be for ment and that's exactly what out challenges facing the District and the Nation. Bank Philadelphia. Community outreach has been in the Bank's the Federal Reserve of The Bank as a whole made significant progress mainstream for many years and these efforts toward the goal of matching costs and revenues received particular emphasis in 1983. We haveset from the sale of services during 1983. aside a section of this report to describe our outBringing revenues and costs into balance re- reach program in more detail. I am also pleased that the Third District is sharing quired action on multiple fronts. Costs had to be lowered and were. Quality of service had to be in the national economic recovery. We have the maintained at a minimum and preferably increased. best chance in years to restore noninflationary It was. growth as the "norm. " Monetary policy has an business New products and new were essential. important role to play, but a federal budget moving introduced Special check services were and new convincingly toward balance is critical. I believe that one year provides a foundation for wire transfer and transportation systems were ininstituwhat happens in the next and the Bank's many augurated. During the year, 29 additional tions began depositing checks with us and the accomplishments in 1983 should make it easier number of new customers increased across the for us to meet the major chal lenges that await us in spectrum of our other services. Overall, business 1984 and beyond. volumes grew more than six percent. Price changes were also required. More appropriate fees were charged for a wide variety of services. The Bank priced all its check float by the end of 1983, after we squeezed the level of float down to a minimum through changes in credit Edward G. Boehne President availability and operating improvements. While costs and revenues were a major concern, the Bank's staff scored important accomplishments in other areas during the year. Our Supervision and Regulation people adapted well to the fv. Av-f-ý 3 OPERATIONS The Federal Reserve Bank of Philadelphia provides a variety of services to depository institutions in the Third District. During 1983, we found new ways to expand our services and improve their value to our customers. CHECK SERVICES More than 600 million checks were handled by this Bank in 1983. Processed items increased more than 9 percent to an average of 1.7 million checks a day, and 29 additional institutions began depositing checks with us in 1983. During the year we added new premium options in several of our check programs to provide later deposit hours and better funds availability to our customers. These enhancements were made possible by recent improvements in our processing operations and by a major reorganization of the air transportation network the Fed uses to ship checks around the country. New routes were added and others changed in order to accelerate the movement of checks and provide earlier funds availability. These transportation improvements helped to reduce check float and we also acted to offset some of its other major causes. For example, new crediting and adjustment procedures were introduced for interdistrict and returned checks. Such efforts reduced the level of float in this District from a daily average of about $105 million in the first quarter of the year to less than $10 million a day in the final quarter. By year-end the cost of float which had not been eliminated was incorporated in our check service fees as required by the Monetary Control Act. 4 ACH SERVICES Automated clearing house operations, which process payments electronically, continued their rapid growth in 1983. Commercial transactions registered a major gain of 55 percent while government transactions were up 14 percent. Steps were taken during the year to expand the scope of this service and make it easierto use. For the first time all types of debits and credits were accepted at the nighttime deposit deadline, giving ACH customers greater flexibility and better funds availability. And corporations were permitted to make payments to other firms through ACH facilities. The Federal Reserve feels ACH will become an increasingly important component of our future payments system and continues to explore ways to improve this service. CASH SERVICES In meeting the needs of the region, the Philadelphia Reserve Bank issued more than 823 million pieces of currency and received about $10 billion in cash deposits during 1983. Virtually all of the latter was verified on our new high-speed currency counting equipment. These machines can process 1,200 notes a minute while automatically detecting counterfeits and destroying notes that no longer are fit for circulation. To increase output we added an extended work shift which lengthened the hours of our counting operation by 50 percent. This will help us handle growing cash volumes and, at the same time, improve the quality of currency in circulation. A new wrapped coin service, which was announced in March, met with considerable success. Now depository institutions can order coin either in bulk form or in conveniently wrapped rolls. Smaller depository institutions find this service particularly attractive. FISCAL AND SECURITIES SERVICES Savings Bond activity surged in 1983 as the number of EE Bonds issued by our staff moved past the million mark. This Bank now issues Savings Bonds for some 300 area firms that offer payroll deduction plans for their employees. A new automated bond processing system was installed early in the year and it streamlined operations and provided additional capacity to handle the volume growth. With activity up 35 percent in the year, our book-entry safekeeping service was among the fastest growing operations in the Bank. This popular service gives depository institutions the ability to make deposits, withdrawals, transfers, and other transactions directly to their book-entry account at this Bank. In 1983 the volume of funds transferred overour Fedwire communication network passed the $3 trillion mark. A new automated communication switching system became operational in 1983. The new technology will provide greater operating efficiency and capacity to support increasing wire volumes and services in the future. On-line access to Fedwire was expanded with the addition of 22 new customers, bringing the total to 150 institutions. Several new on-line applications were added to permit customers to submit tenders for new Treasury issues, receive results of Treasury auctions, and send deposit advices for Treasury Tax and Loan Accounts. 5 COMMUNITY OUTREACH This Bank has a long history of community involvement but outreach to its various publics hit a high watermark in 1983. Our community affairs staff worked hard to build new bridges of communication and cooperation between lenders and local community development organizations. During the year our staff visited compliance officers at Third District bank holding companies and called on community leaders in these same cities. In June we convened a special conference on the Community Reinvestment Act and drew more than 150 people with an active interest in the field. Our president feels that a good way to find out about local business conditions is to go and talk with people on the scene. With this in mind he hosts a series of working luncheons before each Federal Open Market Committee meeting. Often in cooperation with a local banker he invites a number of local leaders and they sit down and exchange ideas and information. The Bank encourages its officers and employees to participate in professional, civic and community activities and the number doing so increases year after year. Economists from our Research Department made particular contributions in 1983 with service on business development, technology and tax groups. Our executives and staff are especially active in efforts to revitalize the region's economy. Our people currently lend their management and professional skills to help such diverse organi- 6 ýýY , 3}VýJý' 1' zations as the Community Leadership Seminar Program,the Philadelphia Fellowship Commission, American Red Cross, Pennsylvania Hospital, the Afro-American Historical and Cultural Museum, and the Philadelphia Museum of Art. Several of our executives hold key leadership positions in local professional organizations such as the Bank Administration Institute, American Institute of Banking, and Philadelphia Finance Association which foster continuing education and professional development. Many diverse groups visit the Bank and among our most special guests are senior citizen groups. A typical program might include a lecture, discussion, film, tour, and sometimes lunch. We take as many such groups as we can and there is quite a waiting list. The Bank is committed to promoting economic education in our schools. During the past year our staff conducted many special seminars for area teachers to broaden their understanding of our financial system. We are now working with the local school system to develop a program to teach basic economic principles in the lower grades. And our many business and financial publications, films, and other educational materials are designed to inform and reach a broad segment of the public, as are the numerous speeches given by our officials and staff to business, professional, and service groups. In the spring we reached out to a different audience when we co-sponsored a special economicsand-the-law seminar for federal judges. Judges often are required to adjudicate complicated business and financial disputes and the two-day program focused on current economic developments and principles. The Bank tries hard to maintain good relations with the media. In 1983 we responded to hundreds of requests for information and interviews; we called on editors and reporters around the District; we invited a number of newspeople to informal background luncheons in the Bank; and we conducted well-attended press conferences on topics of regional interest. As a good neighbor, this Bank makes some of thefacilities in its new building availablefor use by selected non-profit organizations. During 1983 more than 80 different groups, ranging from the Boy Scouts of America to the Minority Arts Resource Council, held meetings on our premises. The continuing series of free noontime concerts in our auditorium and art exhibits in the Eastburn Court provided enjoyment to thousands of visitors as well as to our own employees in 1983. 7 EXECUTIVECHANGES Robert M. Landis, partner in the Philadelphia law firm of Dechert, Price & Rhoads, was redesignated Chairman of the Board of the Philadelphia Reserve Bank for 1984. Mr. Landis also was appointed to a new three-year term as a Class C director of the Bank. Nevius M. Curtis, president and chief executive officer of Delmarva Power & Light Company, Wilmington, Delaware,was reappointed Deputy Chairman of the Bank for 1984. Both appointments were made by the Board of Governors of the Federal Reserve System. Member banks elected two new directors in December. John H. Walther, chairman and chief executive officer of New Jersey National Bank, Trenton, New Jersey, was elected a Class A director by large member banks in the District. He succeeded Roger S. Hillas, chairman and president, Provident National Bank in Philadelphia. Carl E. Singley, dean and professor of law, Temple University School of Law in Philadelphia, was elected a Class B director by medium-sized member banks. Mr. Singley succeeded HarryA. Jensen, director and former chief executive officer of Armstrong World Industries, Inc., Lancaster, Pennsylvania. The Board of Directors of the Philadelphia Reserve Bank appointed Raymond J. Dempsey, chairman of the board and president of Fidelity Bank in Philadelphia, to represent the Third District on the Federal Advisory Council in 1984. He succeeded John H. Walther, chairman and chief executive officerof NewJersey National Bank, Trenton, New Jersey, who was a member of the Council from 1981 to 1983. Among the executive changes in 1983, John D. Johnson resigned as executive vice president of the Bank in December to pursue a career in the private sector. He had been in charge of the Bank's service departments: cash, check and fiscal operations. John M. L. Gruenstein was promoted from research officer to vice president and economist in the economic research department where he heads the urban/regional studies section. Malcolm T. Humphrey joined the Bank's official staff in July as systems development and support officer in the computer services department. He is responsible for applications development and maintenance for the Bank's computer support systems. Mary M. Labaree was appointed to the Bank's official staff effective January 1,1984, as operations officer-direct access securities, in the fiscal operations department. After more than 40 years of service, AlexanderA. Kudelich retired as senior vice president in September. BarryJ. Cummings resigned as data communications officer in the computer services department. 9 DIRECTORS Chairman Robert M. Landis, Partner Dechert, Price & Rhoads Philadelphia, Pennsylvania Deputy Chairman Nevius M. Curtis, President and Chief Executive Officer Delmarva Power & Light Company Wilmington, Delaware George E. Bartol, III, Chairman Hunt Manufacturing Company Philadelphia, Pennsylvania JoAnne Brinzey, Cashier and Chief Executive Officer First National Bank at Gallitzin Gallitzin, Pennsylvania Eberhard Faber, IV, Chairman and Chief Executive Officer Eberhard Faber, Inc. Wilkes-Barre, Pennsylvania Richard P. Hauser, Chairman and Chief Executive Officer John Wanamaker Philadelphia, Pennsylvania Douglas E. Johnson, Chairman and President Ocean County National Bank Point Pleasant, New Jersey Carl E. Singley, Dean and Professor of Law Temple University School of Law Philadelphia, Pennsylvania John H. Walther, Chairman and Chief Executive Officer New Jersey National Bank Trenton, New Jersey Member of the Federal Advisory Council Raymond J. Dempsey, Chairman and President Fidelity Bank Philadelphia, Pennsylvania January 2,1984 10 OFFICERS Edward G. Boehne, President Richard L. Smoot, First Vice President Konstanty G. Adack, Executive Vice President Thomas K. Desch, Senior Vice President and Lending Officer Donald F. Doros, Senior Vice President Robert A. Dobie, Assistant Vice President Judith H. Helmuth, Operations Planning and Control Officer Eugene E. Hendrzak, Statistical Officer James F. Gaylord, Senior Vice President Hiliary H. Holloway, Senior Vice President and General Counsel Donald J. Mullineaux, Senior Vice President and Chief Economist William H. Stone, Jr., Senior Vice President Ronald D. Watson, Senior Vice President Malcolm T. Humphrey, Systems Development and Support Officer Jerry Katz, Compensation and Benefits Officer and Assistant Secretary Alan L. Kiel, Staffing and Development Officer Robert H. Klein, Assistant Vice President Mary M. Labaree, Operations Officer - Direct Access Securities Peter M. DiPlacido, Vice President James B. Duffy, Vice President Ronald G. Foley, Vice President Stanley J. Forst, Vice President John M. L. Gruenstein, Vice President and Economist Richard W. Lang, Vice President and Associate Director of Research Donald J. McAneny, Vice President and General Auditor Lawrence C. Murdoch, Jr., Vice President and Secretary Terence B. O'Brien, Vice President Lawrence C. Santana, Jr., Vice President Jack P. Besse, Assistant Vice President James E. Burns, Financial Accounting Officer James M. Cleary, Technical Services Officer Edward J. Coia, Assistant Vice President Thomas B. Lambinus, Budget Officer Frederick M. Manning, Assistant Vice President and Community Affairs Officer Janice M. Moulton, Research Officer and Economist Joseph J. Ponczka, Examining Officer Aris Protopapadakis, Research Officer and Economist Edward G. Rutizer, Examining Officer Louis N. Sanfelice, Assistant Vice President and Assistant Secretary John B. Shaffer, Assistant General Auditor Ronald R. Sheldon, Data Services Officer Charles J. Sullivan, Jr., Assistant Vice President Vish P. Viswanathan, Assistant Vice President Elizabeth S. Webb, Assistant Counsel January 2,1984 11 STATEMENTOF CONDITION ASSETS Gold certificate account Special drawing rights certificates Other cash Loans and securities: Discounts and advances Federal Agency obligations United StatesGovernmentsecurities Total loans and securities Other assets: Cash items in process of collection Bank premises - net Operating equipment - net All other Interdistrict settlement account Total assets December30,1983 December 31,1982 $ 541,000,000 225,000,000 17,578,762 $ 554,000,000 225,000,000 158,300,000 288,405,972 5,022,743,875 100,470,000 297,836,122 4,519,356,629 $5,469,449,847 $4,917,662,751 376,149,904 49,971,600 6,951,642 265,624,218 145,518,490 299,075,089 51,170,428 7,884,894 334,446,700 363,665,237 13,379,786 $7,097,244,463 $6,766,284,885 $5,856,106,598 $5,560,027,923 LIABILITIES & CAPITAL ACCOUNTS Note liabilities: Federal Reserve notes Deposits: Reserve accounts of depository institutions U.S. Treasury - general account Foreign All other Total deposits Other liabilities: Deferred availability cash items All other Total liabilities Capital accounts: Capital paid in Surplus Total liabilities and capital accounts 12 731,869,750 0 6,600,000 12,413,067 $ 750,882,817 815,918,349 0 8,610,000 21,204,701_ $ 845,733,050 268,120,511 80,188,837 172,841,270 68,101,342 $6,955,298,763 $6,646,703,585 70,972,850 70,972,850 59,790,650 59,790,650 $7,097,244,463 $6,766,284,885 I EARNINGS AND EXPENSES 1983 1982 $502,849,580 $524,668,313 17,201,591 17,332,387 28,640,328 14,867,390 $537,383,558 $568,176,031 47,326,691 4,059,102 45,509,325 1,392,678 $ 51,385,793 $ 46,902,003 $485,997,765 $521,274,028 699,610 2,178 2,806,247 631 Currentearnings: From U.S. Government securities From discounts, advances and miscellaneous sources From services to depository institutions Total current earnings Net expenses: Operating expenses (after deducting reimbursable or recoverable expenses) Cost of earnings credits Total net expenses Current net earnings Additions to current net earnings: Gain on sales of Government securities Miscellaneous nonoperating income Total additions $ Deductions from current net earnings: Assessment by the Board of Governors: Board expenditures Federal Reserve currency* Loss on foreign currency transactions Miscellaneous nonoperating expenses 701,788 $ 2,806,878 3,214,900 8,308,678 20,077,085 12,783 2,579,800 4,524,082 6,134,101 46,687 $ 31,613,446 $ 13,284,670 Net deductions $ 30,911,658 $ 10,477,792 Net earnings before payment to U.S. Treasury $455,086,107 $510,796,236 Dividends paid Paid to U.S. Treasury (interest on Federal Reserve notes) Transferred to Surplus, additions $ $ Total deductions 4,024,901 3,393,998 439,879,006 11,182,200 500,598,188 6,804,050 $455,086,107 $510,796,236 *The 1982 Annual Report showed this item as an addition to net expenses. 13 SUMMARY OF OPERATIONS OPERATING STATISTICS MILLIONS OF DOLLARS 1983 Loans to depository institutions Currency received and counted Coin received and counted Checks handled: U.S. Government checks Postal money orders All other Issues, redemptions and exchanges of U.S. Government securities Transfers of funds Food stamps redeemed $ 11,820 10,372 144 1982 $ 20,309 8,923 147 29,102 323 373,814 49,388 306 315,351 1,234,068 3,070,076 482 789,506 2,267,636 443 THOUSANDS OF ITEMS PROCESSED Loans to depository institutions Currency received and counted Coin received and counted Checks handled: U.S. Government Postal money orders All other Issues, redemptions and exchanges of U.S. Government securities Transfers of funds Food stamps redeemed *Unrounded data. FEDERAL RESERVE BANKOF fHILADELI'HIA Ten Independence Mall, Philadelphia, PA 19106 1,987* 863,400 875,000 1,750* 780,200 907,100 30,400 6,300 609,600 34,300 6,200 605,900 13,100 2,100 14,200 2,000 120,800 118,600
@FedFRASER