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RESERVE BANKOF PHILADELPHIA THEFEDERAL ANNUALREP0RT1990 AN ow ORAL HISTORY OF THE YEAR. ..ý, . Adw ýýý P I ýro jý -ý. ý ý r º- ý ableOf Contents President'sLetter Two ............................................................................................................................... Introduction Four ....................................................................................................................................... The New RegionalDelivery System Five ................................................................................................. ContingencyPlanning Six ......................................................................................................................... Supervisionand Regulation- The International Perspective Seven ..................................................... CommunityReinvestmentAct Eight ......................................................................................................... Implementationof the Bank's New Check System Nine ........................................................................ Data Security Ten ...................................................................................................................................... Electronic FundsTransferServices............................................................................................... Eleven Twelve Quality Assurance ........................................................................................................................ Thirteen Renovationof the Check AdministrationArea.......................................................................... The RegionalEconomy Fourteen ............................................................................................................. Sixteen De Novo Banking in The Third District ...................................................................................... Eighteen Board of Directors ...................................................................................................................... Nineteen Officers ....................................................................................................................................... Twenty-One Advisory Councils................................................................................................................ Twenty-Two Statementof Condition........................................................................................................ Twenty-Three Earningsand Expenses..................................................................................................... Operating Statistics.............................................................................................................. Twenty-Four resident'sLetter TheFederal Reserve thedifferent manyhats.Theyrepresent wears inwhichweoperate spheres andinclude monetary policy,cash,check bankexamination, regulation, andelectronic payments, consumer TheFederal Reserve protection, andcommunity alsoserves affairs. as thegovernment's itschecking mainbank,keeping accounts andhelningto handle itsIOUs. ThustheFederal Reserve BankofPhiladelphia isa multi-faceted Wehavepeople organization. withawidevariety ofskillsandexperienceauditors andeconomists, managers and mechanics, clerksandcarpenters, evendoctors andlawyers. Wehavea Board thatincludes ofDirectors bankers, business people, andcommunity fromallsortsof leaders.Ourstaffcomes backgrounds-ethnic, geographical, and educational. Someofouremployees cookfood,some teachwhileotherskeepbooks, conduct outside meetings or program Mostall ofthembringa sense andpride ofdetermination computers. totheirwork. State-of-the inmanyareas artautomation supports ourpeople themtotransfer or prepare payrolls at enabling money, clearchecks Electronics linkourstaffto otherinstitutions, astounding speeds. theworld. largeandsmall,around theDistrictandaround in1990. ManyoftheBank's werenoteworthy accomplishments froma number Forthisreport, ofdifferent people areas weselected during themtotell,in theirownwords, whathappened andasked theyear. including Youwill hearfrommanyactivities ournewcontingency theBank's functions essential planning onkeeping effort.Itfocuses 2 running shouldsomecatastrophe occurtoourbuilding, computers or We've beenthrough theplanning elsewhere. andtestingandtheprogramnowis operational. Qualityisouroperational watchword, andwehavehadspecial fora number programs qualityimprovement ofyears.In1990,teams DirectDepartments weresetupintheAccounting andTreasury and byyear's goodresults wereevident end. Banks to make theirCommunity andthriftswererequired Actratings Reinvestment begunafter publicforallexaminations July1,1990.Thisraised a number ofquestions, andwereached out ina variety thisBankis producing ofways.Inaddition, withanswers to explain aSystem movie ratings andotherCRAmatters. Thenational during1990andbyyearendwas economy slowed Inresponse, the tobeina recession. generally acknowledged Federal Reserve eased policyusingallthreeofitsmajorinstruments. Through thekeyfederal fundsratewas openmarket operations times.Reserve requirements werelowered reduced several selectively thediscount ratewasreduced. andin December Although theseactions tooffsetweakness inthe weredesigned thecurrent policymakers alsohadto lookbeyond economy, needfor lag,andwemustbe ease.Monetary policyoperates withasignificant lestexcessive stimulation created nowlingersintothenext concerned inflation. recovery whenit wouldservetoincrease Edward G.Boehne 3 Introduction Mostannual tellaboutthemajorevents ofthe reports different hereis pastyearandsodoesthisone.What's thatthewordscomefromthepeople onthescene. Throughout theyear,theyachieved goalswithuncomdirection promising andwill,preparing usfora more technologically eraof complex andhighlysophisticated banking. Asyouturnthepages ofour"oralhistory" you'llfind fromthepeople to stories andcomments whoworked FirstVicePresident 4 meetthosegoals. People fromeverylevelofouroperations spoke in franklyaboutwhathappened intheirworkplaces 1990.Thestoriesarefrank,oftenserious andattimes humorous. Let'shearwhattheyhavetosay... he NewRegionalDeliverySystem Spring,1990-A majorchangein thewayU.S. SavingsBondsarehandledtookplacein theThirdDistrict.UndertheTreasury's System(RDS)program, newRegionalDelivery financialinstitutionsin Pennsylvania * Theycanonly stoppedissuingsavingsbonds. andsubmitthemto theFedfor processing. acceptordersandpayments intheSavings Consequently, BondDivision hadtoadapt toacompletely ourpeople newwayofdoingbusiness. Annie Ward,FiscalOfficer Wereallyhad "Oh,yes. Ourwholebusiness changed. We down together andput anoperation. hadto writ: sit procedures, rewriteprocedures.Wehadto controlour problemstr work,andwedid thatverywellconsidering poppedup. It wasdifficultat times,but wegotthrough Mary Beth Butkus, Manager "Ourcustomers hadto adaptto a fairlyradicalchange butthanksto theeffortsof ourcustomers andthecoopera" tionof ourstaff,thetransitionwentverysmoothly. Customer ServiceLiaisonOpeialor Tammie Kaminsky,Coordinator Wedefinitely haveaninteresting situationaroundhere It'sabsolutely duringtheholidays.EvenHalloween! howmanypeopleboughtbondsfor giftsaround amazing October 31. / imaginethesamewill happenthisyear. Dayorat Whether it's Halloween, LaborDay,Veteran's Christmas the holidays, everybody needs - around " a bond! JacquelynJames, DataEntryClerk "RDSreallypulledus together asa team. Mary Davidson,Supervisor "Flexibilitywasthethingthatweneeded mostduringthe training,to beableto stopandstartatanymoment,to go direction.lt's still the fromentering to verifying,to change biggestneedandvirtuethatanRDSdataentryoperator canhave. "Thestatesof NewJerseyandDelaware forconversion toRDSby theSpringo11991 arescheduled 5 Contingency Planning OneoftheBank's hightoitscustomers isto provide majorcommitments reliable, disruption. Asaresult, qualityelectronic payments services, without significant be fully to deal wemust prepared withacrisis,suchasaserious outage computer In1990ourcontingency or lossofthebuilding, andensure aprompt recovery. fordisaster concentrated planning people onthemanylevelsoftesting readiness. Alan Kiel, AssistantVicePresident and Contingency PlanningOfficer 'Surprise!A surprisetestthatis.It wascarriedouton October1,andrequiredthemobi' computer lizationof fivecriticalapplications, operations andtechnical supportto ourtwo sites.It wasa longnight,but we recovery weresatisfiedwiththeresults.Theoperationswererecovered to pointof failureand thisis absolutely ,. crucialin a realdisaster. (Securities Jack Kelly, Manager Division) "It'sa majoraccomplishment to beableto fullyreconcilewithourcustomers aftera disOur testing aster. contingency covered all the in bases, and theeventof therealthing,we'd comeprettycloseto a full recovery... Melita Saunders, FiscalOperations Assistant "Theworldcantstopforsix hours:we'vegot to keepthesecurities movingandthebusinessgoing. RonSheldon, AssistantVicePresident and Officer DataSystems "It won'tcomebackto biteyou...everytime wehaveasurprisetest,it givesusa chance to fix aglitch,andin therealdisaster,we've " got it covered. ' (Funds,Securities, ACH.Treasury-Direct IAS) andAccounting 6 Tom0 Malley,Emergency Operations Assistant, keeping oneanother postedon latestcontingency plans. AlanKiel f Supervision andRegulation-The International Perspective increasAstheglobalmarketplace theworldbecome changes andcountries around inglyinterdependent, S&R teamalsobegins to facesomemajor ourinternational banks Among themweremore toexamine, challenges. procedures morecomplex time in lands far from home. andmore I SteveHoffman, VicePresident of International Examinations "Whileona recentexamin Brazil,/ reallybeganto havean for thejob theFederal Reserve System doesin appreciation controllinginflationin ourcountry.Thisreallyhit home when,whilewaitingfor a flightbackto the U.S.,wedecided to havea drinkat theairportcafe.Bythetimeweordereda secondround,thepricehadgoneup! Whenthathappens, timeto get outof thecountry. " you knowit's definitely Elisabeth Videira-Dzeng,Assistant Examiner "Intheinternational areaof S&Rweareprimarilyresponsiblefor theexamination of subsidiaries of Edge Corporations. Wedetermine based whichonesto examine ontheirsize,howsignificanttheyareto theoverallorganitheyhaveproblems.Theteam zationandwhether to theseinternational is important to our approach exams function,andtogetherwedecidewherethebiggestproblemsare,andwhichareasof thesesubsidiaries needto be targeted. As theglobalscenechanges, theproblemsthese bankshavechange too." John Deibel, International Examinations Officer "In ourarea,manyof us spend25percentof theyearaway fromhome- for threeandfourweeks at a time. Thatby itselfcanbea realchallenge! " TomTweedale,Supervising Examiner 'All of usarerecognizing thatthere'smoreandmore beingpaidto theexposures attention of largebanksthat comeby wayof theirinternational operations. Consequently, we'vereallyneededtostepup ourinternationalinvolvement.We've invested a lot moreeffortand humanresources to ensurethatthesubsidiaries weare forabroadareoperating responsible as soundlyasthe here." onesweexamine Community Reinvestment Act tothepublic.This Banks theirCRAratings available andthriftsnowmustmake toallexaminations applies started afterlastJulyfirstandisoneof requirement incommunity reinvestment procedures madein1990. several majorchanges Community Theyadded andour uptoabusyyearforbothourexaminers Department. Affairs Jc, E] Examiner JohnFields,Senior "ThenewCRAlegislationhascaused many of thebanksto takea closelookat their internal practices.It'sgiventhema chance In manycasesit's to reviewtheirmethods. andthe reallybroughtthecommunities to coordinate bankstogether effortsin determiningthecreditneedsof thosecommuni" tiesin whichthebanksoperate. 8 ,., [iJl'Piä JO1IIiS Bonita Jones, Supervising Examiner Thebasicpurposeof theCRAlegislation wasto prohibitbanksfromredliningin certainurbanareas,andto ensurethatthecredit needsof therespective communities were met. Thepublicdisclosure of theCRAratit better.Thebanks ingsimplyenforces definitive evidence of their mustnowshow A lot the banks performance. of needour helpto interprettherules,tojust helpthem CRA." alongin understanding %:2'1"': " FredManning, VicePresident and Community AffairsOfficer I thinkthestageis beingsetfor meaningful by involvement in community revitalization districtbanks.Morepeoplearepaying to thesubjectof CRA,andthenew attention legislationthatwentinto effectlastsummer. There thatbankers area lot of questions We've beenout to have need answered. there,givingspeeches to manygroups, theirquestions, answering andtakingcalls, closeto 4,000callson CRAalone!We'rethe information link nowas bankers learnwhat CRAlegislation requiresof them,andhow theyneedto goaboutmakingchanges. " mplementationof the Bank'sNewCheckSystem During1990,thisBankcontinued workona majornewsystemwhichwill improve through'91and everyfacetof checkprocessing.Theimplementation will continue '92. Someof theparticipants tell usabouttheeffortbehindthetransition. i Development EdMorrison, Systems Officer "Oneof themajorreasonsfor replacing thecurrent systemis to improveourabilityto offerimproved " qualityandservicesto ourcustomers. ArunJain, Check PlanningOfficer Its newarchitecture thatwill - newtechnology positionus to takeadvantage of futuretechnolothatwill enhance gy. We'vedesigned something " everyaspectof ourcheckprocessing. John Hampton,SectionHead Wecollaborated a lot of effort,andtalent.I hadinput in thewholeprocessandthatmademefeelgreat." Ron Lowicki, SectionHead Anytransitionis alwaysa concern.But.fromwhatI've impresseenso far,thewholeprocessis beinghandled involved peoplefromeverylevelof sively.Management in itsdiscussion CheckOperations andplannings knows everybody essentially gnat:n ,"7ctable.and less to moreor what expect. _ .... ...: ýI..,.., . ,. Data Security TheBank Reserve System treatinformation andtheFederal collected andgenerated We focus high level intheconduct ofourbusiness asanasset. a ofattention onthe protection oftheinformation assets usedtosupport andoperate ourBank.Wewant financial loss through fraud, toeliminate thepossibility of malicious penetration or Wedothisbyimplementing DataSecurity careless operation. policies andproceintotheday-to-day duresthatareintegrated operations oftheBank. Bill Evans, VicePresident Services of Computer TheBankcontinued to emphasize theimportance of DataSecurity in 1990. Recognizing operations our rolein thepayments mechanism andtheconfidence in Fed by financial the theBank placed the community, strivesto achievethehighestlevelsof DataSecurity possibleto protectourinformation assets.Our thevalueofprotectingour employees understand information assets.TheBankhasa DataSecurity Administration staffthatmetregularlywiththeBanks departments andconducted securityawareness proThe the future be grams. challenge of will maintaining duringrapid ourcurrenthighlevelof DataSecurity " technological in advances computing capabilities. AlannaKelton, DataSecurity Administrator Establishing DataSecuritycontrols theappropriate a greatdealof meticulous ,equires attention.The Administration puta operating areasandDataSecurity of of hardworkintotheDataSecurity programin 1990 d expectto continuethisin thefuture." DataSecurity Ed Vine, Manager, Administration H .e di. u A anila oftheirlatestfindingsto Bili Evans (standing). 10 l'e hada longlistof initiativesto achieve thispast ar. I'm happywiththe waywecarriedoutjustabout e,erything.Oneof theimportant aspectsof ourjob is have in the technical *r; we projectsat : eparticipation theBank.Wemakesurethatall of theseeffortsmeet for theprotectionof information.Our ourrequirements development the of management guidefor information securitywasa bigplusfor us. Thismanualcontains thesafeguards by whichtheFederal Reserve System " protectsits dataassets. Electronic FundsTransferServices transferring Every day,over$50billionpasses through ourBankelectronically, payments amongFederal In1990,we Reserve Banks, institutions, in asafe,efficient depository manner. andgovernment agencies impressive in Electronic Funds improved thereliability andexperienced growth our of oursystems PCproduct Transfer Many "Fedline, " Federal Reserve toaccess avariety services. customers use a of in 1990,anditsservice Ourexperience Fedline menu expanded. withthegrowth services. wasimproved EFTcanexpect in thecoming in service inFedline hasgivenusaflavorofthetrends years. volumes JeannineButcavage, Manager, Funds Transfer/Fedline Support Thesystemsthatmovebillionsof dollarseach dayneedto bereliable.Theymustbeableto recoverfromanysortof problemincludingfires Lastyearwemadea number andearthquakes. of procedural andtechnical to improve changes ourabilityto restoreservicelevelsin theevent of aproblem." TomLombardo,Manager, ACH "Manycorporations areseeingthatACHproto paper-based videsanefficientalternative payments, andas such,we'veseensignificant " growthin ourACHbusiness. CassSheerer, SectionHead Thespeedat whichtransactions occurin our lt's important thatwekeep areais phenomenal. alertandbeprepared to handleallsituations withlittleadvanced notice." .: 'i J rl'1S. Lice Clerk,TomLombardo, CassSheerer andJeannine Butcavage collaborate on an EFTproject. Bob Bucco, VicePresident, Electronic Funds Transfer Services Suzan. L, aýla'. isý.eFi. consultswith BobBucco. "Theyear1990wasoneof growthandimprovmentWeare thesmallestFedgeographically, but wearemovingup FundsTransfer businessquicklyin termsof ourElectronic to be,providinghigh es. Ourchallenge was,andcontinues is involvedwithmanyothqualityservices.Ourdepartment erareasof theBankbecause the of Fedline productwhich Through Fedline, wesupport. we'veassistedtheFiscalarea Delivery System'initiativethatautomatwiththeir'Regional the Savings Bonds edportionsof process.Similarly,EFT Department workedcloselywiththeAccounting to automate thedeliveryof accounting to ourcustomers. We, statements in turn,receive invaluable supportfrommanyareasof the Bank,especially CSD." 11 Qualiry Assurance In 1990,twodepartments, Treasury DirectandAccounting, formedofficial 100percent "qualityimprovement" teams.Thegoalwasto encourage participationoftheworkforcein qualityimprovements. Officer,Treasury Direct Hank Kern, Operations to geteverybody involved, "Wewanted andmakethemfeel important thattheircontributions to are us.Anysuggestion take theemployees comeup with,we underconsideration sincethesearethepeoplewhoareclosestto thework." BarbaraBagby, Secretary, Treasury Direct "People tendto put forthamuchbettereffortwhenthey haveinputin determining whatit takesto maketheirjob moreefficient.You're notjust anisolatedworker. You're for an invaluable partof a team.Thisis essential " employee morale. Barry Pitfs, Supervisor, Treasury Direct Directis to processrein"Oneof thefunctionsin Treasury forms for securities.Theycanberejected request vestment for anynumberof reasons, andthenaresentbackfor Theproblemis thatsomeof thesecurities resubmission. are closeto maturity,buttheywouldbemixedin withtheother Sooneday,aclerksuggested thousands of blueenvelopes. for theexception items,so get cherry colored envelopes we they'llstandoutandgetprocessed immediately. Thiswasa realwinner. " a Jere:? O` Cv e'yr. R, i. recieýV Q&Ateams'progress with Steven P. Cohen. StevenP. Cohen,VicePresident andController, Accounting "Ourgoalwasto havefull employee participation - working towarda common goalto improvethequalityof workin their areas.I'm impressed withmanyof theideasourpeople cameup with,andtheyreallydoseemto enjoywhatthey Denlýe N,'els! doa lotmore. " Clerk EvelynRyant,General Accounting 'Asa teamleader,/ reallylearnedaboutwhatpeopleneed. Wediscussproblemsandstriveto meetreasonable goals. Andmostimportantly, youneverfeelalone.Honestyis a " majorkeyto thesuccess of thisprogram. Denise Weist, SeniorReportAnalyst,Accounting "It'simportant to meetregularly,to keepthemomentum to keepyourteammembers and postedwithnew goingideas,developments " andresponses. 12 Bar,) Pats(standing) o:. recantrc aovas. enovationof the CheckAdministrationArea Administration thisyear Amajorrenovation areawascompleted ofourCheck in ordertobetterutilizespace amoreefficient andpleasant work andprovide fortheemployees. area JerryG,c` 22},Moore anoEarsLaR-egetting ; raseoneof renovations -ier way Jerry Groff, FacilitiesSpace Planner RoyMoore, BuildingSuperintendent Earl LaRue,Supervisor, ElectricalServices "Oneof ourmajoraccomplishments wasmovingthe Automated Clearing HouseDepartment out of theadministrationarea.It's nowmuchmoreaccessible sincewe it closerto thebuildingcore.Theentireareais relocated / moreefficient. muchcleaner,nicer,andhopefully, thinktheemployees feeltheyaremorea partof theteam but "Therenovations werenecessary, wesuredomakea lot of noise. Trying to avoidthatis a majorfeat.As aresult, wehadto domuchof theworkwhenthe peoplearen'tthere.Andthatmeans andafterhours.It justgoes weekends the territory. " with "There's a greatdealof planningthatgoesintoany likethis.It startswiththearchitects majorrenovation then andengineers, I getit andmakethenecessary Welookat thebigpicture notjust that changes. that area needswork. Wehaveto makesurethat we'vegot consistency andthatit worksin relation to otherareasof thebank.Andthebiggestthing wehaveto beconsiderate of theworkersof thoseareas." thantheydidpreviously. " 13 he RegionalEconomy TheResearch Department themajor ofthisBankclosely monitors oftheThirdDistrict economy, compiling andanalyzing sectors data. One important regional ofthestaff'ssenioreconomists 1990 brought discusses to theThirdDistricteconomy and what inthisdecade. whatwecanexpect M. Crone,Assistant VicePresident Theodore andEconomist / thought fortheeighth As theyearbegan, yearofeconomic wewereheaded growthin thenationandin theThirdDistrict./ wasnotalonein thisbelief.Wegot hadclearly offtoa goodstart,butbyyear'sendtheeconomy stumbled. Were there Sure.Factory jobshadbeendeclinanyearlysignsofweakness? Fed'ssurvey ingforsometime,andrespondents tothePhiladelphia ofmanufacturershadbeenreporting decreases in output.Theconstruction industry wasalso bothcommercial contracts andhousing weak; startswere below 1989 levels. running Theservice-producing industries, whichforthepast yearshadkepttheregional economy growing seven industries faltered, thegoods when showed signsby thattheywouldnotbepickinguptheslack mid-year in 1990. Thefinalblowto theeconomywasa sharpdropin confidence afterIraqsinvasionof Kuwait. consumer Retailers feltthebruntof theslowdownduringtheholidayseasonassalesfellbelowthepreviousyear'slevels. InourDistricttheeconomic hadamajorimpactonstateandlocal slowdown finances. Lagging taxrevenues totheCityofPhiladelphia's fiscal contributed in NewJersey taxreceipts crisis.Andlower-than-expected andPennsylvania haveleftthosestates withsignificant revenue shortfalls. When turnupagain?Mostanalysts anticipate willtheeconomy a resumption by ofgrowth mid-1991. however, Changing demographics, willhaveamajoreffectonthepaceof lookfortheeconomy in thenext growth, andwecanexpect a different economic 10years. WorldWarII andthesubsequent Because drop erafollowing ofthebaby-boom 1972and1978, thepopulation in thenumber andlaborforce ofbirthsbetween willgrowmoreslowlyin the1990s. 14 Certain than regions ofthecountry willbeaffected morebythe"birth-dearth" in Pennsylvania, NewJersey, others.Combined population growth andDelaware, forexample, thenational laborforcegrowth rate.Thisarea's willlagfarbehind thanthenation's.Overall, laborforcegrowthin the willalsobeslower annual threeDistrict is projected tobelessthanonepercent. states combined Wein theResearch Department howthese trendswill arerepeatedly asked in theregion.Asthenumber tothelaborforce affectbusinesses ofnewentrants difficulty in fillingentry-level shrinks, employers willexperience particular and part-time positions.Withtheirlargerpart-time workforces, retailers especially hardfornewemployees. willhavetosearch Housing, There too,willbeaffected. willbeless because in the1990s there ofa needfornewhomes Annual Growth Rateof the LaborForce willbefewer 3 peoplein theagegroup25to34,the buytheirfirsthome. yearswhenmostpeople Ona brighternote,thechangingdemographics of the1990swillhelpsomesegments of the economy, suchasautos.Thefastest-growing groupin the1990swillbethe35-to-54-year-olds, typicallythegroupthatbuysthemostnewcars. 2.5 2.5 2 1.6 1.5 1 1.0 1.2 1.2 0.9 Also,baby-boomers a large willbeproviding between the poolofmature, 0.5 experienced workers agesof45and54. Theirworkexperience should 0 helpraiseproductivity. US ThreeDistrict States Howwillthesedemographic ofthe changes 1990s well-being? affecttheregion's economic Although jobgrowthwillbeslower,unemploytorisetothehighlevels mentratesarenotexpected is expected toprovide jobs enough oftheearly1980s.Theregion's economy laborforce.Increased tofullyemploy theslower-growing productivity should Third District do Bythese the should well alsoraiserealincomes. measures, in the1990s. " 0.8 1.1 0.7 PA NJ N 1980s' Acr,al N 1990sProjected 15 DNovo Bankingin the Third District e it maybe Withthenumber in thelastdecade, ofbankmergers andclosures bothherein the hardtobelieve thatnewbanks to open.However, continue " ThirdDistrictandin thenation, thegrowth "de the to of novos, termused describe banks lessthanfiveyearsold,hasbeenimpressively prolific. ThomasK. Desch,SeniorVicePresident, Supervision & Regulation "Since1985,74 havebeenchartered in the newbanks ThirdDistrict.Infact,thisfive-year totalactually thenumber thatopened in the exceeds ofdenovos 50-year previous period! Their isn'tbadeither,considering performance thatsince1985, onlya singleThirdDistrictdenovo hasfailed.Notsurprisingly, thecrisisin thefinancial industry hasoften tended toobscure in banking anypositiveorsignificant evolution - and bymanyin thosecommunities yet,theirarrivalis welcomed where theyopen. Ofcourse, basicelements thereareseveral forthemtosucnecessary ceed, suchasa soundmanagement style,andanabilitytomake goodcredit decisions, is another important among otherthings.A healthy economy factorthatcan'tbeoverlooked. Sowhydonewbanks in lightofallthebankfailures? open- especially When deregulation institutions began, offinancial weallknewthata lotof didn'tanticipate consolidations wouldtakeplace.However, wecertainly largenumbers toreplace thosethat ofnewbanks comingintoexistence According tonewbankcharter thereasons theyopen applications, merged. havebecome quiteclear. Firstof all, thelargerexistinglocalbanksareperceived to havehada to devotelessandlessattention to smallercustomers' tendency needs, businesses. In this they fill ideal thoseof small case, an especially niche, Secondly, andonethatreallybenefitsthecommunity wheretheyoperate. therearestaffreductions atmergedinstitutionsthatservetoprovideaready Manyofthese bankersin themarketplace. supplyof available experienced bankers areseniorlenderswhohaveloyalclientsfollowingthemto new sourcesof fundsandcustomized services. 16 to banking makeit appear Finally,thearrivalofintrastate andinterstate Asa result, investment opportunities. investors thatbanks serveasvaluable has "seed" money hundreds since1985, ofmillionsofdollarsofinvestor tostartbanks. beenmade tolocalentrepreneurs available they oftotalassets, Whilenewbanks onlyasmallpercentage represent However, in ourcommunities. function mostdefinitely serveanimportant because theyareespecially pronetomistheydorequire special attention thatnew mustworktoensure takesin theformative regulators years.Thus, institutions aspossible.IntheThirdDistrict, andsafely operate assoundly this therehasbeenonlyonefailurein thelastfiveyears.Hopefully, " exemplary record canbemaintained. III iio iI i «_. i -A `ý. ýý; -- ý-------) ý.:. .ý......,. ii CE, iA[ ` ý ý ,-ý 1-' -ý_ ---- ;- {r,.. ý'4 ý_:.. \`I---- I-.JT wiF ;: -ý ý -\ , EýýIE rIe.u5 11 . ,y l oE«a. n_--'_ _..,.-ý"; n ý/Y = ;`'ýo ýý.. ý\ . ý`^ i `> ' x. , =c _A_ !ýi 7-.-- `ti l. uGip ýý 1 Locationof NewBanks 0 National StateMember StateNonmember 17 Board of Directors Peter A.Benoliel, Chemical Corp.,wasreappointed chairman ofQuaker aschairboard In January the the Federal Reserve Bank Philadelphia for 1990. manof of of DavidW.Huggins, RMSTechnologies, Inc.,tookofficeasa ClassB president, director, Carl Singley, Esquire, A. McCullough, succeeding E. chairman andSamuel Meridian Bank became Class A director, andchiefexecutive officerof a succeeding George A.Butler, thenchairman andchiefexecutive officerofFirstPennsylvania Bank,N.A. LaterintheyearDeputy Chairman Gunnar E.Sarsten, chairman, president and Engineers & Constructors Inc.andGaryE.Burl, chiefexecutive officerofUnited Delaware National Bank,resigned fromtheboard. H.Bernard Lynch, president, BankofWyoming president andchiefexecutive officerofTheFirstNational was Class A director, Mr.Burl. elected a succeeding Chairman PeterA. Benoliel Chairman Corp. QuakerChemical Conshohocken, PA Constantinos I. Costalas Chairman, President and Officer ChiefExecutive Glendale NationalBankof NewJersey Voorhees, NJ DavidW Huggins President RMS Technologies, Inc. Marlton,NJ H.BernardLynch President Officer andChiefExecutive TheFirstNationalBankof Wyoming Wyoming, DE 18 SamuelA. McCullough Chairman Officer andChiefExecutive MeridianBank Reading, PA JaneG.Pepper President ThePennsylvania Horticultural Society Philadelphia, PA NicholasRiso Executive VicePresident AholdU.S.A. Harrisburg, PA CharlesF Seymour Chairman Co. Jackson-Cross Philadelphia, PA Officers SeniorVicePresident In1990,Edward J. Coiawasnamed with forTreasury Direct responsibility andtheFiscalDepartment to Senior VicePresident andPeterM.DiPlacido waspromoted Operations. Robert J.Buccomoved uptoVice ofCheck Jr. Services; WilliamEvans, President Funds ofElectronic Services M. became VicePresident ofComputer andStephen Hoffman VicePresident of International wasappointed Examinations. toVicePresident JerryKatz of waspromoted Vice Human Resources; Frederick M.Manning wasnamed M.Tadeo President Community Affairs Milissa moved and of In in theCashDepartment. otherofficial uptoVicePresident Assistant Vice Gerard Callanan to A. changes, waspromoted ShirleyL.Coker President wasnamed ofBudget andPlanning; to Assistant Counsel; Michael E.Collinswaspromoted Examination JohnJ. Deibel became Review Officer; Jr. Robert N.Downes, International Examinations Officer and VicePresident Assistant and wasappointed ofApplications Vice Assistant Surveillance. Frank E.Eisel, Jr.wasnamed President Check Operations; Arun Jain in wasappointed Planning officerin chargeof thenewCheckSystemProject; Officerin the HenryT.Kernwaspromoted to Operations Treasury DirectDepartment; CamilleM. Ochman wasappointVice President in Check Operations; PatrickM. Assistant ed Regan to Assistant VicePresident waspromoted andTechnical Officer; Sherrill Shaffer Assistant Vice Services wasappointed President RonaldR.Sheldonwasnamed andEconomist; VicePresident Officer;Herbert E. Assistant andDataSystems Taylormovedupto Assistant VicePresident Assistant and SharonN.Tomlinson Secretary; to Assistant waspromoted VicePresident A. Valente of HumanResources andRichard Fiscal became AuditOfficer.AnnieR.Wardwasappointed Officer;Bernard M. Wennemer Assistant Vice wasappointed Commercial Examinations Anthony J. White President of and to Financial Services Officer. waspromoted Inchanges Assistant VicePresident ofofficialassignment, Kiel Quality AlanL. assumed forboth responsibility and Contingency Planning Vice President John B. Shaffer and Administrative Services Department. totheGeneral returned Stephen A. Meyer VicePresident Directorof Research andAssociate Edward G. Boehne President Robert J. Bucco President Vice William H.Stone, Jr. FirstVicePresident Jr. J. Warren Bowman, VicePresident DonaldF.Doros Executive VicePresident Steven P.Cohen VicePresident JamesF.Gaylord Executive VicePresident RobertA. Dobie VicePresident Edward J. Coia SeniorVicePresident WilliamEvans,Jr. VicePresident Benjamin L. Nadola VicePresident Thomas K.Desch SeniorVicePresident andLendingOfficer JoannaH. Frodin VicePresident LouisN.Sanfelice VicePresident PeterM. DiPlacido SeniorVicePresident RichardW.Lang SeniorVicePresident andDirectorof Research RonaldB. Lankford SeniorVicePresident Manager Product andCheck M.Hoffman Stephen VicePresident JerryKatz VicePresident M.Mahon Edward VicePresident andGeneral Counsel M. Manning Frederick VicePresident AffairsOfficer andCommunity DonaldJ. McAneny VicePresident Auditor andGeneral Lawrence C.Murdoch,Jr. VicePresident andSecretary JohnB. Shaffer VicePresident MilissaM. Tadeo VicePresident VishP. Viswanathan DeputyCheckProductManager Gerard A. Callanan AssistantVicePresident andPlanningOfficer ShirleyL. Coker AssistantCounsel MichaelE.Collins Examination ReviewOfficer Theodore M. Crone AssistantVicePresident andEconomist JohnJ. Deibel International Examination Officer PatrickL. Donahue AssistantVicePresident Robert N.Downes, Jr. Assistant VicePresident Jr. FrankE.Eiset, Assistant VicePresident E.Hendrzak Eugene Assistant VicePresident ArunJain PlanningOfficer HenryT.Kern Officer Operations MarieTkaczyk Assistant VicePresident AlanL. Kiel Assistant VicePresident SharonN. Tomlinson AssistantVicePresident MaryM. Labaree Assistant General Auditor AnnieR. Ward FiscalOfficer Thomas P.Lambinus AssistantVicePresident S. Webb Elizabeth AssistantCounsel EdwardMorrison Systems Development Officer M. Wennemer Bernard AssistantVicePresident CamilleM. Ochman AssistantVicePresident AnthonyJ. White Services Officer Financial PatrickM. Regan AssistantVicePresident Richard A. Valente Officer Audit Edward G.Rutizer Assistant VicePresident SherrillShaffer Assistant VicePresident andEconomist Richard A.Sheaffer Assistant VicePresident RonaldR.Sheldon AssistantVicePresident Herbert E. Taylor AssistantVicePresident andAssistantSecretary 20 Advisory Councils to exchange TheBank's fouradvisory councils meetregularly withseniorofficers The1990members important information oftheadvisory problems. anddiscuss listed below. councils are Credit Union Advisory Council Community Bank Council Advisory Chairwoman Teresa C. Trudeau Southwest Germantown FederalCreditUnion Chairman Dennis W.DiLazzero Minotola National Bank DeputyChairwoman RitaL. Masselle IMD FederalCreditUnion ElisaP.Alexeeve Trenton Auto Workers FederalCreditUnion MartinJ. Banecker President Campbell Employees FederalCreditUnion WilliamComrey Pennsylvania Central FederalCreditUnion RobertW.Edmondson AtlanticEmployees FederalCreditUnion AliceR.Gift Rohm& HaasDel-Val CreditUnion MarvinJones DowJonesEmployees FederalCreditUnion JohnH. Marsh JelloEmployees FederalCreditUnion ShirleeNicolino MerckSharp& Dohme FederalCreditUnion DeputyChairman J. LaMaina, Jr. Lawrence Farmers Bankand Trust Company of Hanover Gerard M. Banmiller Bank Community National ofNewJersey AdolphF. Calovi SunNationalBank Small Business/ Agriculture Advisory Council ThriftInstitutions AdvisoryCouncil Chairman WalterP.Lomax LomaxHealthSystems VirgilP. Moir,Ill Progress Federal Savings Bank, DeputyChairman Gottfried Schweidler Woodrite, Inc. DeputyChairman Stephen D. Miller FirstHomeSavingsBank MarilynAbabio Paragon Uniforms RonaldW.Bevan Delaware SavingsBank,FBS CharlesC.Bylone Vineland Produce Auction PearlH.Brown Gloucester CountyFederal SavingsBank Jr. WilliamW.Carlough, DonaldClark ClarkSeedCompany BankofNew TheFirstNational Jersey/Salem WilliamJ. Gordy GordyFarms Robert E.Dickerson Baltimore TrustCompany E.Holtzhauser Thomas Holtzhauser Farms JaneC.Diebert SchuylkillHavenTrustCo. CynthiaHudson Waterfront Corporation AgnesJones National Bankof TheGrange County Susquehanna Eleanor Marquisee ArdenFilms& Video FrankKaminski, Jr. Independent Bank Pennsylvania H.BernardLynch TheFirstNationalBankof Wyoming Mazzei Robert Bank Constitution MelvinPankuch BlueBallNationalBank HaroldSchuler HaroldSchulerFarms Chairman SLA FrankM. Calletta EmpireSavingsBank,SLA RonaldA. Goerner Doylestown FederalSavings Loan Association and CarlF.Gregory ThirdFederalSavings andLoan Association I. Maximilian Martin Berean Savings Association LarryR. Weaver Farm Weaver JamesD.Potts FidelitySavingsandLoan Association of BucksCounty AbramS. Zeiset ZeisetFarms JackW.Shader, Sr. HarrisSavings Association Gregory L. Walker Huntingdon SavingsandLoan Association JoAnneSimpson ChrycoNewark FederalCreditUnion FrankWielga Pennsylvania StateEmployees CreditUnion 21 Statement of Condition ASSETS Goldcertificate account Special drawing rightscertificates Other cash- coin Loans andsecurities: Discounts andadvances Federal agency obligations U.S.government securities Totalloansandsecurities Other assets: Cashitemsin process ofcollection Bankpremises-net Operating equipment-net All other Interdistrict settlement account Totalassets DECEMBER 31,1990 DECEMBER 31,1989 $ 384,000,000 319,000,000 30,928,799 $ 400,000,000 247,000,000 33,396,947 24,375,000 184,681,067 45,427,000 188,280,688 6,846,363,252 $ 7,055,419,319 527,316,353 44,951,528 15,521,947 6,544,053,928 $ 6,777,761,616 442,143,977 45,870,427 10,354,006 1,778,717,181 862,235,410 1,631,609,702 (701,622,953) $ 9,307,124,695 $10,597,479,564 $ 7,077,839,408 $ 7,703,029,054 LIABILITIES ANDCAPITAL ACCOUNTS Noteliabilities: Federal Reserve notes Deposits: Reserve institutions accounts of depository U.S. Treasury account - general Foreign All other Totaldeposits 1,773,896,908 0 6,750,000 1,712,685 $ 1,782,359,593 1,942,863,835 0 7,350,000 38,169,346 $1,988,383,181 132,244,127 84,333,567 619,328,657 86,780,872 Otherliabilities: Deferred availability cashitems All other Totalliabilities Capital accounts: Capital paidin Surplus Totalliabilitiesandcapital $ 9,076,776,695 115,174,000 115,174,000 $ 9,307,124,695 $10,397,521,764 99,978,900 99,978,900 $10,597,479,564 Earnings and Expenses 1990 Current earnings: $ 577,158,997 119,715,469 34,801,129 1989 $731,675,595 $ 572,880,876 53,384,917 33,690,691 $ 659,956,484 Netexpenses: Operating (afterdeducting reimbursable expenses) expenses Costof earnings credits Totalnetexpenses 71,613,230 12,304,551 $ 83,917,781 60,132,759 10,190,699 $ 70,323,458 Currentnetearnings $ 647,757,814 $ 589,633,026 1,832,900 96,272,600 3,128 $ 98,108,628 374,603 62,602,870 3,555 $ 62,981,028 FromU.S. government securities Fromdiscounts, advances andmiscellaneous sources Fromservicesto depository institutions Totalcurrent earnings Additionsto currentnetearnings: Gainonsales of government securities Gainonforeigncurrency transactions Miscellaneous income nonoperating Totaladditions Deductions fromcurrent netearnings: Assessment bytheBoard ofGovernors: Board expenditures Federal Reserve currency Miscellaneous nonoperating expenses Totaldeductions 4,531,200 6,150,167 14,620,193* $ 25,301,560 $ 13,438,078 Netadditions/(deductions) $ 72,807,068 $ 49,542,950 Netearnings before toU.S.Treasury payment $720,564,882 $ 639,175,976 $ 6,268,895 699,100,887 15,195,100 $ 6,070,853 635,905,173 (2,800,050) $720,564,882 $ 639,175,976 4,339,100 5,051,423 4,047,555* Distribution ofearnings: Dividends paid Reserve PaidtoU.S.Treasury (interest notes) onFederal Transferred to/(from) surplus Netearnings * Includes Treasury nonreimbursed services Operating Statistics 1990 Millionsofdollars Loans institutions to depository Currency received andcounted Coinreceived andcounted Checks handled: U.S.government All other Issues, redemptions andexchanges of U.S.government securities Transfers offunds Foodstamps redeemed $ 4,172 12,448 179 1989 $ 6,265 13,182 176 29,205 1,109,841 28,191 1,032,200 4,745,465 18,478,987 564 3,623,004 14,199,500 392 1,469* 1,078,620 239 1,965* 1,122,300 234 26,440 1,053,180 27,790 985,360 16,986 5,045 114,788 18,370 4,900 78,200 Thousands of itemsprocessed Loans to depository institutions Currency received andcounted Coinreceived andcounted Checks handled: U.S.government All other Issues, redemptions andexchanges of U.S.government securities Transfers offunds Foodstamps redeemed data 'Unrounded Designby NGSAssociates Photography by H.MarkWeidman Textandprojectcoordination Mancini by Rossana Printingby theFederal Bankof Philadelphia Reserve