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ANNUAL REPORT 1977/ FEDERAL RESERVE BANK OF RICHMOND

F E D E R A L R E SE R V E
B A N K O F R IC H M O N D

Sixty-third Annual Report 1977

CO NTENTS

P E R S P E C T IV E S O N F IF T H D IS T R IC T B A N K IN G :

1960-1976

Banking Organization and Structure

Balance Sheet Composition
Conclusion
H IG H L IG H T S

14
19
20

S U M M A R Y O F O P E R A T IO N S

C O M P A R A T IV E F IN A N C IA L S T A T E M E N T S

D IR E C T O R S

OFFICERS

T h e cover illu s tr a tio n de p icts the F e d e ra l R e s e rv e B a n k o f R i c h m o n d ’s
o ld a n d n e w h e a d q u a rte rs b u ild in g s .

T h e b u ild in g in the fo r e g r o u n d

has been the B a n k ’s h o m e since 1921.

S o m e tim e in 1978 th e B a n k

w ill m o v e to the n e w b u ild in g s h o w n in the b a c k g r o u n d .

L IB R A R Y

CONGRESS

CATALOG

CARD

NUM BER:

16-7264

A d d it io n a l copies o f th is A n n u a l R e p o r t m a y be o b ta in e d w ith o u t c h a rg e fr o m th e
B a n k a n d P u b lic R e la tio n s D e p a r tm e n t , F e d e r a l R e s e rv e B a n k o f R ic h m o n d ,
P . O . B o x 27622, R ic h m o n d , V ir g in ia

23261.

February 9, 1978

To Our Member Banks:

W e are pleased to present the 1977 Annual Report of the Federal Reserve
Bank of Richmond.

The Report’s feature article discusses changes which

have taken place in Fifth District banking from 1960 through 1976.

The

Report also includes highlights of the year, a summary of operations, com
parative financial statements, and current lists of directors and officers of our
Richmond, Baltimore, Charlotte, Charleston, Columbia, and Culpeper Offices.

On behalf of our directors and staff, we wish to thank you for the
cooperation and support you have extended to us throughout the past year.

Sincerely yours,

Chairman of the Board

President

PERSPECTIVES ON FIFTH DISTRICT BANKING:

i960-1976
The past decade and a half has seen significant
changes in the organization, structure, and bal
ance sheet composition of Fifth District banking.
This article describes major developments that
have occurred in these areas since the early
1960’s.
Some of the factors contributing to
change, such as basic shifts in demand for bank
services and Federal laws and regulations, are
national in scope. Consequently, the pattern of
change in the Fifth District has been similar to
that in the U. S. banking industry as a whole.
In recognition of the similarity between changes
in Fifth District and U. S. banking, measures of
change taken across the entire banking industry are
used in this article as benchmarks against which to
evaluate District developments.
Special regional
factors are used to help explain differences in the
nature and/or degree of banking change in the Dis
trict as compared to the nation. These factors include
regional economic differences and diverging state
laws governing financial activities.
The question of how District banking has evolved
in the period since the early 1960’s is of special
interest today, not only because the changes have
been great but also because the banking environment
may undergo major modifications in the years ahead.
There is, for example, active consideration of Federal
financial legislation having profound significance for
banking. Examples of topics under consideration by
the Congress include expanded thrift industry
powers, N O W accounts, and revision of the GlassSteagall Act and the McFadden Act. The evolution
of the Fifth District banking industry during the
period considered here will influence its response to
possible future legislative changes.
BA N KIN G O RGANIZATION AN D STRUCTURE
Banking is organized under a variety of institu
tional forms, which include unit banking, branch
banking, and group banking (bank holding com
panies). Federal and state banking laws prescribe

the types of organization under which banking can
be conducted, while the actions of regulatory bodies
determine the extent to which expansion is permitted
under any given type. The number, size, and size
distribution of these organizational types are among
the chief determinants of banking structure. Banking
structure reflects the degree of competition existing
in banking markets and this, in turn, affects the
efficiency with which a given market operates [2],
The concept of banking structure is relevant only
when applied to a well-defined market for banking
services. Market definition can be difficult since it
depends on a number of factors including geography,
commuting patterns, and the particular type of service
being examined. When discussing the general array
of banking services offered by a regional grouping of
banks, a conventional simplification is to view bank
ing markets in terms of political subdivisions. This
approach is followed here, with the five Fifth District
states and the District of Columbia taken as repre
senting geographically distinct banking markets.
Common measures of banking market structure
include: (1 ) the number of banks in the market,
with consideration of their status as independent
banks or holding company affiliates; (2 ) the number
of banking offices in the market; (3 ) the extent of
deposit concentration among the largest banking or
ganizations; and (4 ) the absolute size of the banks
operating in the market. Each of these four measures
will be examined in this article. It is becoming in
creasingly important, however, to include nonbank
thrift institutions among the competing firms when
evaluating banking market structure. Since many of
their services are substitutes [8], banks and thrifts
enter into direct competition in a number of product
areas. Therefore, the number, size, and growth of
nonbank thrift institutions will also be reviewed.
Changes in U. S. Banking Organization and
Measures of Banking Structure Between 1960
and 1976, the number of banks in the U. S. has
increased by nine percent and now totals 14,697. As

holding company. From the passage of the Bank
Holding Company Act of 1956, which significantly
expanded the degree of regulation of multibank
holding companies, until 1965, no expansion in these
organizations occurred. Table II shows 47 multibank
holding companies in operation in 1960 with control
over 8.0 percent of total commercial bank deposits.1
Subsequent to 1965, however, bank holding com
pany activity increased substantially. The share of
total deposits controlled by bank holding companies
climbed to 68.1 percent in 1974 before receding
slightly to 66.1 percent in 1976. A recent study [6]
concludes that the bank holding company movement

shown on Table I, this increase is the net result of
new bank formations offsetting mergers and liqui
dations. Although mergers have been numerous, a
significant number of the merged banks have been
converted to branches, thus mitigating the impact of
merger activity on reduction in the number of bank
ing offices. De novo branching has occurred at a
rapid pace and, together with merger-conversions,
has led to a 221 percent increase in the number of
bank branches. A key factor in the increase in
branches, of course, has been the prevalence of state
laws permitting such activity. Currently, 21 states
allow statewide branching, while 15 allow limited
branching. Fourteen states have unit banking laws
that prohibit or severely restrict branching.

1 D a t a o n th e n u m b e r a n d size o f o n e - b an k h o ld in g
c o m p a n ie s are n o t a v a ila b le fo r y e a rs p r io r to 1970. T h e
8.0 p e rc e n t d e p o s it share fig u re , th e re fo re , s o m e w h a t
u n d e rs ta te s the p r o p o r tio n o f d e p o s its c o n tr o lle d b y a ll
b a n k h o ld in g c o m p a n ie s .

Perhaps the most significant organizational de
velopment in commercial banking over the past
decade and a half has been the spread of the bank

Table I

CHANGES IN NUMBER OF COMMERCIAL BANKS AN D BRANCHES
UNITED STATES AND FIFTH FEDERAL RESERVE DISTRICT
1960-1976

All Com m ercial Banks

United
States

Fifth
District

District of
C o lu m b ia

M a r y la n d

North
C a ro lin a

South
C a ro lin a

V ir g in ia

W e st
V irg in ia

N u m b er o f b an ks (12-31-59)

13,486

957

140

192

145

309

159

N e w b an ks form ed

3,602

254

130

M e rge rs an d absorptions

2,239

421

130

156

V o lu n tary liqu idation s and
suspensions
O ther losses
N et ch an ge
N u m b e r o f b an ks (12-31-76)

140

+ 1,211

-169

+ 4

-2 7

-9 9

-5 4

-2 7

+ 34

14,697

788

113

282

193

Branches an d Facilities
N u m b e r o f branches and
facilities (12-31-59)

9,790

1,131

226

452

134

255

20,630

3,005

529

1,115

422

839

Conversions, new facilities
an d replacements

2,356

440

131

166

Branches a n d facilities
discontinued

1,707

216

N e w branches

O ther ga in s

335

Net ch an ge

+ 21,614

+ 3,229

+ 70

+ 563

+ 1 ,1 6 0

+ 466

+ 943

31,404

4,360

134

789

1,612

600

1,198

N um b er o f branches and
facilities (12-31-76)

* Does not include four unm anned drive-in facilities.

Source:

Federal Deposit Insurance Corporation and Federal Reserve Bank of Richmond.

+ 27
27*

Table II

SUM MARY OF BANK HOLDING COMPANIES
U N IT E D ST A T E S A N D FiFTH F E D E R A L R E SER V E D IST R IC T
l 96 0 a n d 1976
Decem ber 31, 1960

A re a

N um b er of
m u ltib an k a
com panies

Num b er
of b anks
controlled

Deposits
controlled
(m illion $)

United States
Fifth District
District o f C o lu m b i a

N o rth C a ro lin a

Sou th C a ro lin a

W e st V irg in ia

Deposits
controlled/
total area
deposits
(percent)

M u ltib a n k

O n e -b a n k

N u m b e r of
b an ks
controlled

298

1,504

3,791

553,649.0

169

31,878.4

62.1

1,904.7

49.0

Deposits
controlled
(million $)

426

18,274.0

8.0

275.5

2.2

156.1

10.2

27.2

1.1

6,833.3

72.1

9,127.0

69.4

V irg in ia

N u m b e r of
com panies

M a r y la n d

Decem ber 31, 1976
Deposits
controlled/
total are a
deposits
(percent)

6
-

92.2

2.8

17b

66.1

2,223.9

50.2

115

11,625.4

78.3

164.1

3.0

a Prior io p a s sa g e o f the 1970 am endm ents to the Bank H o ld in g C o m p a n y Act of 1956, on ly m ultibank h o ld in g com panies were required
to register w ith the Federal Reserve.
^District total does not equal the sum of state figu res because it has been corrected fo r d uplications; that is, holdin g com panies that
have su b sid ia ry b an ks in more than one state are included in the total only once. O n e holdin g co m p an y controls b an ks in the District of
Co lu m b ia, M a r y la n d , an d V irgin ia.
Source:

B oard o f G ov e rn o rs o f the Federal Reserve System a n d Federal Reserve Ban k o f Richmond.

has had procompetitive effects in both banking and
nonbanking markets, and suggests that there has been
an increase in the quantity and quality of services
provided to the public.
There are two distinct divisions within the bank
holding company movement, namely the multibank
holding company and the one-bank holding company.
The one-bank holding company, which was not
brought under regulatory control until passage of the
1970 amendments to the Bank Holding Company
Act, became a popular organizational form in the
later 1960’s. Their number increased rapidly, and
these organizations moved into several types of non
banking activities prohibited to their multibank coun
terparts. The 1970 amendments to the Bank Hold
ing Company Act, however, provided for equal regu
latory treatment of multibank and one-bank holding
companies and set guidelines to be followed by the
Federal Reserve in approving lines of activity which
bank holding companies might enter.2
2 A d e ta ile d d is c u s s io n o f the h is to ric a l d e v e lo p m e n t of
b a n k h o ld in g c o m p a n ie s a n d o f the le g is la tiv e c h a n g e s
b r in g in g th e m u n d e r s u p e rv is o ry c o n tr o l can be fo u n d
in [7].

Over the sixteen year period 1960 to 1976, total
deposits held by U. S. commercial banks have in
creased at an annual rate of 8.4 percent (see Chart
la ). The average commercial bank deposit size has
increased from $17.1 million to $57.1 million (see
Chart lb ). Over the same period total deposits of
insured savings and loan associations rose at an
annual rate of 10.2 percent, while the number of
insured S&L’s declined slightly, from 4,098 to 4,078.
The average deposit size of insured savings and loan
associations grew from $14.3 million in 1960 to $68.0
million in 1976.
Changes in Fifth District Banking Organization
and Structure The number of commercial banks
operating in the Fifth Federal Reserve District has
declined by 18 percent since 1959, to a total of 788
at year-end 1976. This declining trend, shown in
Table I, is in direct contrast to the moderately in
creasing trend that characterized U. S. banking over
that period. The decline in the number of Fifth
District banks has been the result of strong merger
activity, which has been only partially offset by new
bank formations. Branching in the District, however,

Chart la

PERCENTAGE ANNUAL RATE OF CHANGE IN TOTAL DEPOSITS: 1960-1976
COMMERCIAL BANKS AND INSURED SAVING S & LOAN ASSOCIATIONS
U. S. and Fifth Federal Reserve District

Percent
1 5 -------

States

District

C a ro lin a

Co lu m b ia

V irgin ia

C a ro lin a

Ch art 1b

AVERAGE COMMERCIAL BANK AN D INSURED S&L DEPOSIT SIZE: 1960 A N D 1976
U. S. and Fifth Federal Reserve District

$ M illion
2 5 0 -------

C o m m e rcia l B a n k
200

In su re d S&L
19 6 0 A v e r a g e .

150

100
50 —

/ / /*

North
C a ro lin a

V irg in ia

W est
V irgin ia

C h art 2

PERCENTAGE OF TOTAL DEPOSITS HELD BY FIVE LARGEST COMMERCIAL B A N K IN G O RGANIZATIONS
Fifth Federal Reserve District, 1960 AND 1976
Percent

100 --------------------------------------------------------------------------------------------------------------------------------------------------------□

i9 6 0

□

1976

80 -

60-

40-

200District of
C olu m b ia

Source:

M a r y la n d

Federal Reserve Bank of Richmond.

North
C a ro lin a

South
C a ro lin a

V irg in ia

W est
V irgin ia

has followed the expansionary trend reflected in
banking statistics for the nation as a whole, only with
g rea ter strength
Since the end of 1959, there has
been a 285 percent gain in the number of branches.

Consideration of the changing banking organiza
tion of the Fifth District tends to obscure some
important differences between states. In fact, Tables
I and II contain striking contrasts in terms of the
patterns of change that have taken place among the
five Fifth District states and the District of Columbia.
These differences, and the factors underlying them,
help explain changes in bank deposit concentration
among the states, as shown in Chart 2.3

District of Columbia Washington, D. C. consti
tutes a rather special case from the bank structure
standpoint. Its compact geographic limits, metro
politan character, and high degree of nonresident
employment introduce special analytical consider
ations. Washington, D. C. is also unique in that the
laws governing banking, and financial intermediation
more generally defined, are primarily Federal laws
[1], Enforcement of these laws is the responsibility
of Federal authorities, i.e., the Comptroller of the
Currency and the Federal Home Loan Bank Board.
These laws permit unlimited branching throughout
the District of Columbia, and do not prohibit bank
holding company activities.
Sixteen banks operated in the District of Columbia
at year-end 1976, an increase of four since 1960.
While the limited geographic area provides less natu
ral scope for branching than exists in other Fifth
District states, the number of branches nevertheless
increased by 109 percent over this period. The limited
geographic scope, combined with liberal branching
provisions, has tended to discourage holding company
activity. At year-end 1960 one multibank holding
company controlled two banks which held 10.2 per
cent of total deposits in the District of Columbia.
At year-end 1976 the holding company population
included one multibank holding company controlling
only one District of Columbia bank,4 and two onebank holding companies. The banking affiliates of
these companies accounted for nearly half of all
District of Columbia deposits at year-end 1976.
Total District of Columbia commercial bank de
posits increased at an annual rate of 6.0 percent from
1960 to 1976, considerably below that for the entire
Fifth District or the U. S. Nevertheless, in 1976
the average sized District of Columbia bank, at
$242.8 million, was still significantly larger than the
$63.6 million Fifth District average, and the $57.1
million U. S. average as well.
The number of insured S&L’s operating in the
District of Columbia declined substantially between
1960 and 1976, falling from 24 to 16, while total
deposits of these institutions grew at an annual rate
of only 6.5 percent. At year-end 1976 the average
deposit size for District of Columbia insured S&L’s
was $183.9 million. This is by far the largest average
size insured S&L for any Fifth District state.

3 F o r a n a ly tic a l p u rp o se s th e D is t r ic t o f C o lu m b ia w ill
be c o n s id e re d th e e q u iv a le n t o f a state.

4 T h is m u lt ib a n k c o m p a n y als o o w n e d b a n k s in V ir g in ia
a n d M a r y la n d .

Bank holding company formation and expansion,
shown in Table II, has also been quite vigorous in
the Fifth District. Holding company activity in the
District in 1960 was negligible, with only two multi
bank holding companies operating nine subsidiaries
and controlling only about two percent of total bank
deposits in the District. By the end of 1976, 17
multibank and 34 one-bank holding companies oper
ated 169 banking subsidiaries with control over 62
percent of District deposits. Nevertheless, the pro
portion of bank holding company controlled deposits
in the Fifth District still fell short of the proportion
of such deposits measured on a national basis by
about four percentage points.
Deposits held by commercial banks in the Fifth
District, as shown in Chart la, grew at an annual
rate of 9.3 percent from 1960 to 1976, significantly
faster than the national average. Whereas the aver
age sized Fifth District bank in 1960 was, at $13.0
million, smaller than the national average, the reverse
is now true. Chart lb shows that at year-end 1976
the average sized commercial bank in the District,
measured in terms of total deposits, reached $63.6
million. The annual rate of increase in deposits held
by Fifth District insured savings and loan associ
ations since 1960 has been 9.6 percent, somewhat
faster than the commercial bank deposit growth rate.
The number of insured S&L’s has increased slightly,
from 408 to 430, and at year-end 1976 the average
size insured S&L in the Fifth District was $48.1
million. Deposits held in S&L’s totaled $20.7 billion,
roughly 40 percent of the $52.0 billion held in com
mercial banks.

The concentration of deposits in the District of
Columbia has not changed materially between 1960
and 1976. The five largest banking organizations
held 89.5 percent of total banking deposits at the end
of 1976, down from 89.9 percent in 1960.
Deposit concentration figures for the District of
Columbia, it should be noted, may not have the same
significance for bank competition as comparable
figures for other Fifth District states. It is estimated
that half of the District of Columbia’s labor force
resides outside the city limits and has easy access
to the services of many Maryland and Virginia banks
that do not operate in Washington, D. C. Hence
District of Columbia banks clearly compete with these
Maryland and Virginia banks and, from an analytical
standpoint, it is misleading to consider the District of
Columbia boundaries as strictly defining a banking
market. A more realistically defined market would
include with Washington, D. C. its surrounding
metropolitan areas. Accordingly, the 89.5 percent
concentration ratio probably overstates the degree of
deposit concentration in the market in which District
of Columbia banks compete. In fact, a recent study
of Fifth District banking market concentration [10]
taking this broader approach concludes that there
has been a reduction in banking concentration in the
Washington, D. C. Standard Metropolitan Statistical
Area (S M S A ), which includes parts of Maryland
and Virginia, between 1970 and 1976.

total commercial bank deposits under bank holding
company control at year-end 1976 stood at 72.1, the
highest share for any Fifth District state except
Virginia.
The average annual rate of increase in Maryland
commercial bank deposits has been 8.7 percent since
1960. This is the lowest growth rate in the Fifth
District except for Washington, D. C., but, nonethe
less, above the national average. Whereas the aver
age size Maryland commercial bank was only slightly
larger than the average size U. S. bank in 1960, the
difference has widened considerably. At year-end
1976 the average size commercial bank in Maryland
reached $83.8 million.
Total deposits held by insured S&L’s in Maryland
have increased at an annual rate of 8.9 percent since
1960. Also, there has been a slight reduction in the
number of S&L’s, from 80 to 76. Maryland S&L’s,
with an average size of $57.2 million at year-end
1976, now hold $4.3 billion in deposits or roughly 46
percent of those held by banks. Maryland is the only
state in the Fifth District that charters mutual savings
banks, of which there were three at the end of 1976
holding $1.2 billion in total deposits.6 The combined
deposits of insured S&L’s and M SB ’s equaled almost
60 percent of commercial bank deposits at year-end
1976.
The five largest banking organizations operating in
Maryland at year-end 1960 were all commercial
banks without holding company connections. These
institutions collectively held 55 percent of commercial
bank deposits in the state. By 1976 the five largest
banking organizations included two multibank hold
ing companies, two one-bank holding companies, and
one commercial bank without holding company ties,
and these together held 61.5 percent of total deposits
in the state. Mergers and bank holding company
acquisitions appear to have contributed to the in
crease in deposit concentration to an important
extent [3].

Maryland The banking laws of Maryland permit
statewide branching and merger. The code is silent
on the subject of bank holding companies, but bank
holding company formations and acquisitions are
allowed in practice.
The number of commercial banks operating in
Maryland has declined by about 19 percent from
1960 to 1976. Branching activity has been more
vigorous than in the nation at large, but somewhat
slower than the pace set for the entire Fifth District.
Since 1960 the number of branches has increased by
249 percent.
In 1960 only one multibank holding company that
controlled 1.1 percent of statewide bank deposits
operated in Maryland.5 By year-end 1976 the
number of multibank holding companies grew to four
with control over 17 banks. There were, in addition,
eight one-bank holding companies. The percentage of

North Carolina North Carolina banking law
allows branch banking and mergers on a statewide
basis and is silent on the subject of bank holding
companies. Holding companies exist, however, and
are a significant factor in the structure of the state’s
markets for financial services.
Large, but not generally statewide, branch banking

5 T h is m u lt ib a n k c o m p a n y also o w n e d b a n k s in V ir g in ia
a n d W a s h in g t o n , D . C.

6 T h e re is n o p r o v is io n fo r F e d e r a l c h a r te r in g o f m u t u a l
s a v in g s b a n k s .

systems operated in North Carolina well before 1960.
Beginning in the early 1960’s the pattern of branch
ing changed as several of the larger banking organi
zations began to expand their networks throughout
the state. I his movement, although not in conflict
with the letter of the state’s banking law, was in
hibited by the way the law was enforced, however.
The result has been a somewhat unique pattern of
branching and merger activity.
Until the mid-1960’s the North Carolina banking
commission followed a conservative policy with re
spect to the approval of branching applications.
Emphasis was placed upon a provision of the branch
ing code calling for investigation of local market
capacity to support existing and proposed new bank
ing offices. This provision required disapproval of
branch applications that might lead to excessive
competition between, and resulting failure of, banks
within a given local market. As a result, the state
banking commission was reluctant to allow expand
ing banks entry into new markets through de novo
branching [4]. The statewide expansion movement
that began in the early 1960’s, therefore, relied
heavily on branching through merger. There were
192 banks operating in North Carolina in 1960, and
31 new banks began operation between that year and
1976. Over the same period 130 banks were merged
out of existence, resulting in a net reduction of 99
banks. This 52 percent drop in the number of banks
operating in the state was by far the largest such
decline in the Fifth District. The merger activity
that contributed so heavily to this decline was con
centrated in the period 1960-1966.
The pace of de novo branching accelerated sharply
in the later 1960’s. 1,115 new branches were au
thorized between 1960 and 1976, 870 of these after
1966. The 257 percent increase in number of
branches wras somewhat below the Fifth District
average, but still significantly above that of the U. S.
banking industry. There is recent evidence of a shift
by state regulatory authorities back to the earlier
emphasis on local market capacity to support exist
ing banks along with newly proposed branch facilities.
A recent increase in the rate of branch application
denial by the North Carolina banking commission
suggests at least a temporary slowing in de novo
branch expansion.7
7 T he News and Observer, R a le ig h , N . C., N o v e m b e r 24.
1974.

There were no multibank holding companies oper
ating in North Carolina in 1960, and only one, con
trolling 13 banks, in 1976. The combined deposits
controlled by this one multibank holding company
iind nine one-bank holding companies accounted for
69.4 percent of statewide commercial bank deposits
on December 31, 1976.
Developments leading to a greatly reduced number
of banks have profoundly affected the average scale
of operation of the North Carolina banking industry.
Statewide commercial bank deposits grew at an
annual rate of 9.8 percent between 1960 and 1976.
Due to the large reduction in the number of banks,
however, the average size North Carolina commer
cial bank increased at an unusually rapid 14.7 percent
annual rate, from $16.0 million to $142.9 million. At
year-end 1976 the average bank size in North Caro
lina ranked second in the District only to the average
bank size in Washington, D. C.
Insured S&L’s are more numerous in North Caro
lina than in any other state in the Fifth District, al
though their numbers increased only slightly, from
157 in 1960 to 161 in 1976. Total deposits held by
insured S&L’s increased at an average annual rate
of 10.2 percent between 1960 and 1976. Deposits
held in North Carolina insured S&L’s exceeded the
individual totals of all the other Fifth District states
at year-end 1976. At $5.6 billion, these deposits
equaled 43 percent of those held at commercial banks
in the state.
As might be expected from the foregoing summary,
the concentration of bank deposits in North Carolina
has increased noticeably since 1960. The percentage
of total deposits held by the five largest banking
organizations rose from 52.8 in 1960 to 65.0 in 1976.
Whereas all five of the largest organizations in 1960
were commercial banks with no holding company
connections, in 1976 the four largest were one-bank
holding companies. The multibank holding company
form of organization does not appear to have con
tributed to banking concentration in North Carolina
to any significant degree. The evidence suggests,
however, that bank mergers may have been important
in this respect [3].
South Carolina Statewide branching is permitted
by the banking laws of South Carolina, as are bank
mergers. Holding company activity is not addressed
in the banking code but is permitted de facto.

Between 1960 and 1976 there were 75 bank mer
gers in South Carolina and 22 new bank formations.
These developments, along with the loss of one bank
that ceased operation, have resulted in a net decline
of 37 percent from 1960, a percentage decline ex
ceeded only by North Carolina among Fifth District
states. At the same time branch expansion in South
Carolina has been vigorous, with the number of
branches increasing 348 percent. This is the largest
proportionate increase for any state in the District
and almost one and a half times the percentage in
crease in the nation.
The bank holding company movement has not been
as important in South Carolina as in most of the
other Fifth District states. There were no bank
holding companies in the state in 1960, and in 1976
there was only one multibank holding company con
trolling two banks. There were also five one-bank
holding companies operating in 1976.
Together
these holding companies controlled 50.2 percent of
commercial bank deposits.
Commercial bank deposits grew at an annual rate
of 9.6 percent in this period, significantly higher than
the national average and somewhat higher than the
Fifth District average. The large decline in numbers
of banks has led to a rapid 12.9 percent average
annual rate of increase in the average commercial
bank deposit size. At year-end 1976 the average size
of a South Carolina commercial bank stood at $49.2
million, compared to $7.1 million in 1960.
Growth in the thrift industry was very rapid in
South Carolina in the 1960-1976 period. Insured
S&L deposits rose at an annual rate of 11.1 percent,
a rate higher than the national average and exceeded
in the Fifth District only by Virginia. The number
of insured S&L's increased by three to reach 70 in
1976. At year-end 1976 the average deposit size of
South Carolina insured S&L’s stood at $43.6 million.
The concentration of deposits among the five
largest banking organizations rose from 51.3 percent
at year-end 1960 to 61.3 percent at the end of 1976.
The four largest banking organizations in 1976 were
unaffiliated commercial banks, and the fifth largest
was a multibank holding company. This suggests
that the increase in concentration has been primarily
due to mergers [3].
Virginia Early in this century Virginia enacted
banking laws permitting statewide branching, either
de novo or through merger. These provisions were

made more prohibitive in subsequent years, however.
From 1948 to 1962 branching was limited to the
home office city, town or county, while mergers were
restricted to banks located in the home office city or
county and in adjoining counties. Mergers were also
permitted with any banking institution located within
25 miles of the acquiring bank. The law required,
however, that each party to a merger must have been
in operation at least one year. Legislation passed in
1962 substantially liberalized existing banking laws
and led to profound changes in the organization and
structure of Virginia banking.
A primary factor
leading to the 1962 changes was a feeling that laws
restricting expansion placed Virginia banks at a com
petitive disadvantage vis-a-vis larger banks in con
tiguous jurisdictions that allowed unlimited branch
ing [5],
The 1962 changes permitted de novo branching:
(a) within the city or county of the parent bank;
(b ) within cities contiguous to the city or county of
the parent bank; (c ) within counties contiguous to
the city of the parent bank, up to five miles from the
city limits; and (d ) at certain Federal and state
installations. Also, branching through merger was
permitted statewide. The law remains silent on the
subject of bank holding companies, but such activity
has been allowed de jacto.
Virginia banking structure at the beginning of the
1960's was characterized by a large number of small
banks. Enactment of the 1962 legislation led to a
wave of mergers resulting in the disappearance of
many of these small banks. Between 1960 and 1976
a total of 156 mergers occurred. This consolidating
trend was largely offset, however, by the prolifer
ation of newly formed banks, the net result being a
modest nine percent reduction in banks. Although
geographically limited, dc novo branching nonetheless
progressed rapidly, there being a 270 percent gain in
number of branches over the period.
Multibank holding company activity has been more
evident in Virginia than in any other Fifth District
state. This is largely due to the nature of the laws
governing mergers. Briefly, merged banks them
selves become branches of the lead bank in the merger
and therefore lose their ability to expand geographi
cally. Banks acquired by bank holding companies, on
the other hand, retain their de novo branching privi
leges.
The multibank holding company form of
organization has, therefore, offered advantages to
expanding financial institutions unavailable with the

merger technique. The number of multibank holding
companies operating in Virginia has increased from
two in 1960 to 12 in 1976. These 12 multibank hold
ing companies controlled i l l banks and, when com
ating on the same date, accounted for 78.3 percent
of statewide commercial bank deposits. The propor
tion of bank holding company controlled commercial
bank deposits is thus substantially higher than the
national average and the highest in the Fifth District.
The healthy financial climate that supported heavy
new bank formation concurrent with merger and bank
holding company consolidating trends is reflected in
the rate of Virginia's bank deposit growth since 1960.
Commercial bank deposits increased at an annual rate
of 9.9 percent, second in the Fifth District only to
West Virginia and much higher than the national
average. The average size Virginia bank in terms of
deposits is now $52.3 million, which represents a 10.4
percent annual rate of increase from 1960.
While the banking climate in Virginia has been
healthy, that for the thrift industry has been robust.
Total deposits held by insured S&L’s have increased
at an annual rate of 12.5 percent, the fastest growth
rate for any group of financial intermediaries in the
Fifth District, and substantially above the national
average for either banks or S&L’s. Virginia insured
S&L’s have increased in number from 53 in 1960 to
77 in 1976. State law permits S&L’s to branch on
an unlimited geographic basis, and this factor may
have aided Virginia thrifts in their efforts to compete
with commercial banks for deposits [8]. At year-end
1976 the average size for an insured S&L stood at
$52.0 million, approximately the same as that for
commercial banks.
On December 31, 1960, the five largest banking
organizations in Virginia, all commercial banks, ac
counted for 27.7 percent of total deposits.
This
concentration measure subsequently rose to 51.6 per
cent in 1976, the degree of change being the largest
of any state in the Fifth District. All five of the
largest banking organizations are now multibank
holding companies.
External growth, or growth
attributable to mergers and acquisitions, accounted
for two-thirds of the deposit increase at the three
largest Virginia banking organizations between 1961
and 1971. This is the largest proportion of deposit
growth due to external factors for any Fifth District
state [3]. Although the degree of change in concen
tration of bank deposits in Virginia has been larger

than that for any other Fifth District state, the
current concentration percentage of 51.6 percent is
nonetheless relatively low. In fact, among the Fifth
District states it is lower only in West Virginia, the
District’s only unit banking state.
W est Virginia The banking laws of West Virginia
regarding branching, merger, and holding company
activity are among the most restrictive in the nation.
Branching is prohibited, except that banks may open
one deposit-taking facility within 2,000 feet of the
home office location. The change in code allowing
such facilities was passed in 1972. Mergers are not
explicitly prohibited by law, but are approved only
on the condition that the resulting bank operate from
one location only. Until 1975 the banking code did
not deal with the subject of bank holding companies,
and in the early 1970’s two West Virginia banking
groups seeking to form multibank holding companies
obtained a ruling from the State Attorney General
sanctioning their plans. The legislative reaction to
this development was passage of a law in 1975 ex
plicitly prohibiting the formation of multibank hold
ing companies.
As a result of these restrictive legal provisions, the
organization and structure of West Virginia banking
has changed very little since 1960. Only three
mergers occurred, and 27 branch-type facilities were
opened. Demand for bank deposit services has been
quite strong, however, leading to the formation of 37
new banks. The net increase of 34 banks between
1960 and 1976 represents a gain of 21 percent, the
only increase in the Fifth District except for that in
Washington, D. C. Six one-bank holding companies
have been formed since 1960, and at the end of 1976
they controlled three percent of commercial bank
deposits in the state.
Total commercial bank deposits increased at an
annual rate of 10.4 percent between 1960 and 1976,
the fastest rate in the District and far above the
national average. At year-end 1976 the average size
commercial bank in West Virginia was $28.5 million,
the smallest in the Fifth District and only about half
the national average.
Insured S&L’s have not enjoyed the same deposit
growth as have West Virginia commercial banks.
Insured S&L deposits have increased at an annual
rate of 8.7 percent, the lowest rate of increase for any
Fifth District state except Washington, D. C. and
well below the national average. The number of

insured S&L’s has increased from 27 to 30, and the
average deposit size has risen from $7.0 million to
$24.1 million. The rules governing branching by
Federally chartered S&L’s, which are administered
by the Federal Home Loan Bank Board, allow what
amounts to statewide branch expansion. State char
tered West Virginia S&L’s, like banks, are prohibited
from branching [8], It is no surprise, therefore, that
29 of the 30 insured S&L’s operating in the state as
of year-end 1976 were Federally chartered.8 These
29 institutions operated 40 branches and in this
respect held a distinct competitive advantage over
commercial banks and state chartered S&L’s.

BALANCE SHEET COMPOSITION
As financial intermediaries, commercial banks
supply financial services to both providers of funds
and users of funds. Changing patterns of demand
for these financial services have provided part of the
impetus behind the changes in banking organization
and structure discussed earlier. For example, the
trend toward increased numbers of banking offices
and increased bank size evidently have been responses
to growing customer demands for deposit and loan
services. Moreover, consolidation trends leading to
increased concentration have in part resulted from a
desire to achieve the increased scale of operation
needed to service a growing number of large cor
porate customers.
Examination of the bank balance sheet provides
one of the most direct means of viewing changing
patterns of demand for bank services.
Such an
examination is undertaken here through an analysis
of key ratios that explain the changing composition
of bank sources and uses of funds. Bank capital
adequacy, which has attracted increased attention, in
recent years as a result of balance sheet changes, will
also be examined. The influence of the business
cycle on the bank balance sheet is substantial and
may distort long-term, or trend, analysis that is based
on comparison of only two data points. Since the
economy was near a business cycle trough at the end
of 1960, the base point used in these comparisons is
year-end 1962. Year-end 1962 and year-end 1976
are similarly situated in cyclical recoveries.

8 A t year-end 1976 there w e re als o seven sta te c h a rte re d
S & L ’s n o t in s u re d b y the F e d e r a l S a v in g s a n d L o a n
In s u r a n c e C o r p o r a tio n .

Changes in Sources of Funds Deposits, of course,
constitute the fundamental source of the commercial
banking industry’s loanable funds. While deposits
remain vitally important, they have since 1962 de
clined as a proportion of the industry’s total liabilities.
This trend is illustrated in Table III, which shows
that total deposits of all U. S. commercial banks
constituted 96.0 percent of total liabilities in 1962
but only 88.0 percent in 1976. The extent to which
this trend has developed is of interest because it
signals a change in the nature of banking, away from
almost total reliance on deposits toward increasingly
aggressive competition for funds in more interest rate
sensitive markets.
The decline in importance of deposits as a source
of funds has also taken place in the Fifth District,
but not to the extent that it has in banking in general.
Total deposits of Fifth District commercial banks
equaled 97.0 percent of total liabilities in 1962, but
this ratio fell to 92.6 percent in 1976. Thus, District
banks rely upon deposits to a greater extent than do
U. S. banks generally, a condition that also holds for
every state in the District. Only in North Carolina
does the ratio of total deposits to total liabilities fall
below 90 percent. South Carolina and Virginia are
the states that continue to rely most heavily on de
posits as a source of funds.
Important changes have occurred not only with
respect to total deposits, but also with respect to the
makeup of the deposit base. Demand deposits as a
proportion of total deposits at all U. S. commercial
banks have declined dramatically from 62.5 percent
in 1962 to 40.2 percent in 1970, with a symmetrical
increase in the importance of time and savings de
posits. This is also shown in Table III. The trend
toward substitution of time for demand deposits has
been of greater significance in the Fifth District than
in the U. S. While the year-end 1976 ratio of de
mand deposits to total deposits is the same for the
District as for the U. S., the Fifth District ratio
declined from a higher year-end 1962 ratio.
There is a good deal of variety, however, in the
composition of deposits among Fifth District states.
In Washington, D. C. and South Carolina, for ex
ample, demand deposits remain relatively more im
portant than time deposits. North Carolina held a
significantly greater proportion of demand deposits
to total deposits in 1962 than did a number of other
states, but subsequently its ratio has moved closer
to the national and District averages. Developments

Table III

CHANGES IN SOURCES OF FUNDS, 1962 AND 1976c
ALL COMMERCIAL BANKS
UNITED STATES AND FIFTH FEDERAL RESERVE DISTRICT
United
States

M easu re

District of
C o lu m b ia

Fifth
District

M a r y land

N orth
C a ro lin a

South
C a ro lin a

V irgin ia

W e st
V irg in ia

96.0

88.0

97.0

92.6

98.0

93.7

98.3

91.4

94.6

89.7

97.3

94.7

97.3

94.7

98.5

93.2

D em and d e p osits/
Total deposits

62.5

40.2

65.6

40.2

70.3

53.0

65.5

39.9

69.3

41.3

79.8

53.4

56.9

35.7

62.0

31.6

Time & s a v in g s d e p osits/
Total deposits

37.5

59.8

34.4

59.8

29.7

47.0

34.5

60.1

30.7

58.7

20.2

46.6

43.1

64.3

38.0

68.4

18.2

10.6

Total d e p osits/T ota l liabilities

M a n a g e d liab ilities^/
Total liabilities

9.5

10.2

14.3

5.6

8.4

9.5

a Black figures are for Decem ber 28, 1962; green figures are for Decem ber 31, 1976.
^ M a n a g e d liabilities =
Source:

net purchases of Federal funds +

other liabilities fo r borrow ed fu n d s

la rge

n e go tia b le C D 's.

Federal Reserve Ban k o f Richmond.

in Maryland have been roughly parallel to those in
the U. S., while in Virginia demand deposits continue
to play a less important role than is the case in most
other Fifth District states and in the U. S. The mostdramatic change in deposit composition has taken
place in West Virginia. Whereas demand deposits
accounted for nearly two-thirds of total deposits in
1962, they fell to less than one-third of total deposits
in 1976.
The strong credit demands prevailing through the
1960’s and into the 1970’s have encouraged banks to
develop sources of funds supplementing the tradi
tional base deposits. The result has been the wide
spread acceptance of liabilities management, the
practice of relying upon purchased funds such
as large negotiable CD’s and Federal funds, to
support credit expansion. While primarily a large
bank phenomenon, liabilities management is none
theless reflected in consolidated regional balance
sheets. The bottom line of Table III shows managed
liabilities, defined to include net purchases of Federal
funds, the balance sheet item “ other liabilities for
borrowed funds,” and large negotiable CD’s, as a
percent of total liabilities. For all U. S. commercial
banks this proportion at year-end 1976 was 18.2
percent, almost twice the Fifth District average. The
three Fifth District states having the largest average
size commercial banks, Washington, D. C., Mary
land, and North Carolina, each had managed liability
to total liability ratios above the District average.

Negotiable CD’s, which are issued mainly by large
banks, represent the most important source of man
aged funds in the Fifth District. At the same time,
large District banks maintain limited reliance on net
Federal funds purchases as a source of lendable bal
ances. The year-end 1976 balance sheet shows four
Fifth District states, Washington, D. C., South Caro
lina, Virginia, and West Virginia, as net suppliers of
Federal funds. In Maryland and North Carolina,
however, net purchases of Federal funds equaled
about 20 percent of total managed liabilities, con
siderably above the U. S. average of 14 percent.9
Changes in Uses of Funds In the years since
1962 the asset side of the banking industry’s balance
sheet has also undergone significant change. Demand
for bank loans has led to a balance sheet shift in favor
of loans as opposed to other investments, and banks
have attempted to minimize nonearning assets such
9 I t m a y in itia lly a p p e a r c o n f u s in g to s p e a k o f a p o s itiv e
ne t F e d e ra l fu n d s p o s itio n fo r th e b a n k in g in d u s tr y as a
w h o le . T h is is a re s u lt o f t h in k in g o f th e F e d e ra l fu n d s
m a r k e t in the lim ite d t r a d it io n a l sense o f tra n s fe rs o f
reserves, in the fo r m o f d e p o s its a t th e F e d e r a l R e s e rv e ,
b e tw e en c o m m e rc ia l b a n k s . T o d a y , F e d e r a l fu n d s t r a n s
a c tio n s in v o lv e a n u m b e r o f d iffe r e n t ty p e s o f in s titu tio n s ,
in c lu d in g n o n b a n k f in a n c ia l in s t itu t io n s , e.g., s a v in g s a n d
lo a n asso c ia tio n s, a n d
even n o n f in a n c ia l busine sse s.
T ra n s a c tio n s need n o t even g o t h r o u g h a F e d e ra l R e s e rv e
d e p o s it a c c o u n t to be c la s s ifie d as F e d e r a l fu n d s .
T he
b a n k in g in d u s t r y ’s p o s itiv e n e t p o s itio n , th e re fo re , re p re
sents b o r r o w in g s fr o m
n o n b a n k p a r tic ip a n ts in the
m a r k e t fo r F e d e ra l fu n d s .

as cash balances. Fifth District developments along
these lines have roughly paralleled national develop
ments.
As shown in Table IV, banks generally have un
dertaken policies to minimize holdings of nonearning
assets. Cash and due from banks as a percent of
total assets for all commercial banks in the U. S.
declined from 18.2 percent in 1962 to 13.2 percent
in 1976. Cash minimization has been even more
intensively followed in the Fifth District, every state
holding a lower proportion of cash balances to total
assets than the national average at year-end 1976.
This aspect of balance sheet management seems
especially important in West Virginia, cash consti
tuting only 8.4 percent of total assets at year-end
1976.
Total net loans, or total loans adjusted to exclude
valuation reserves against possible loan losses, have
grown more rapidly than securities holdings since
1962. Total net loans equaled 47.2 percent of total
assets at all U. S. banks in 1962, and increased to
51.2 percent of total assets in 1976. The movement
of this ratio for all Fifth District banks has closely
paralleled the movement in the U: S. ratio. Within
the Fifth District, Maryland and Virginia are the
states where loans constitute the largest fraction of
total bank credit. On the other hand, loans play a
substantially less important role in West Virginia
than in the District or in the nation.
A number of changes have developed among the
major types of loans made by commercial banks.
Real estate loans, defined to include all loans secured
by real property, have became much more important
between 1962 and 1976. The ratio of real estate loans
to total gross loans has risen even faster in the Fifth
District than in the nation as a whole. Real estate
loans now account for more than a third of the
average bank loan portfolios in Washington, D. C.,
Maryland, Virginia, and West Virginia.
At the same time, there seems to have been some
decline in importance in business lending relative to
other types of lending, both in the nation and in the
Fifth District.10 At year-end 1976 one-third of all
bank loans on a national basis were made for com
10 T h e d e c lin e s in the n a tio n a l a n d F if t h D is tr ic t c o m
m e rc ia l a n d in d u s t r ia l lo a n to to ta l g ro ss lo a n ra tio s a t
least p a r t ly re fle c t th e u n u s u a lly s tr o n g cy clica l d e p re s
sion in b u s in e s s lo a n s e x is tin g ne ar the end of 1976.
T a k in g th e c y c lic a l fa c to r in to a c c o u n t sug g e sts the
im p o r ta n c e o f c o m m e r c ia l a n d in d u s tr ia l lo ans m a y h av e
r e m a in e d fa ir ly s te a d y o v e r the years.

mercial and industrial purposes, a reduction from
34.1 percent at year-end 1962. One-quarter of all
bank loans in the Fifth District were for commercial
and industrial purposes at year-end 1976, down from
27.1 percent at year-end 1962. Among the Fifth
District states, commercial lending approaches the
importance it has nationally only in North Carolina.
In West Virginia, business lending accounts for an
unusually low portion of the average bank’s portfolio.
Loans to individuals, or consumer loans, have been
and remain much more important to Fifth District
banking than to U. S. banking. In the District such
loans as a percent of total loans have increased
slightly since 1962 and now account for almost onethird of all loans outstanding. For the U. S. banking
industry, loans to individuals remained fairly steady,
between 21 and 22 percent of total gross loans from
1962 through 1976. Washington, D. C. and Virginia
have experienced declines in the relative importance
of consumer lending over the period being considered,
while the other Fifth District states have experienced
increases. The magnitude of the increase has been
especially important in South Carolina, where con
sumer loans now make up over 40 percent of the
loan portfolio.
The involvement of banks in farm lending for
purposes other than acquisition of real estate has
remained steady on a national basis since 1960, oper
ating loans accounting for a little over four percent
of total loans at both year-end 1962 and year-end
1976. In the Fifth District, however, the relative
importance of farm lending has declined from its
initially low 2.2 percent in 1962 to only 1.5 percent
in 1976.
Lending to financial institutions other than banks,
a category that includes R E IT ’s and S&L’s, is not of
major importance in the U. S. as a whole or in the
Fifth District. It should be noted, however, that
such lending is almost twice as important to District
banks as is, for instance, farm lending. Washington,
D. C. banks are heavily involved in lending to non
bank financial institutions. This contrasts sharply
with the West Virginia situation, wThere loans to
financial institutions other than banks were almost
nonexistent at year-end 1976.
A primary method employed by banks to satisfy
secularly increasing loan demand has been liquida
tion of securities. Across the U. S. banking industry
between December 28, 1962 and December 31, 1976,
holdings of securities as a percent of total assets have

declined from 32.2 to 24.2, with a comparable decline
occurring in the Fifth District. Substitution of loans
for securities has been especially strong in Maryland,
where the total securities to total assets ratio fell by
13.5 percentage points. West Virginia banks held
an unusually large proportion of securities to total
assets at year-end 1976.
Within the securities portfolio itself, substitution
of tax-free municipal securities for U. S. Govern
ment securities has been important. These changes
are shown on the bottom two lines of Table IV.
Although still dominant in the banking industry’s
security portfolio, holdings of U. S. Government se
curities nevertheless declined substantially from 69.4
percent of total securities at year-end 1962 to 55.4
percent at year-end 1976. Holdings of municipal
securities rose from 25.9 percent of total securities to
41.9 percent over the same period. This substitution
process has been even stronger in the Fifth District,
so that at year-end 1976 holdings of municipals al
most equaled holdings of U. S. Government securities

in importance. It appears that municipal securities
now play an especially important role in Maryland
and Virginia banking.
Capital Adequacy
Since 1962 banking assets
have grown rapidly, and there have been important
changes in the risk characteristics of these assets.
At the same time, management philosophy at larger
banks has shifted toward the concept of liabilities
management. While these developments have been
important in helping meet the nation’s capital needs,
they have also introduced a new dimension of risk
into banking. As fiduciaries, banks are necessarily
sensitive to changes in risk. The same is true for
regulatory authorities, who are charged with insuring
that banking is conducted in a fundamentally sound
manner. A central issue in consideration of the
soundness of the banking industry is capital adequacy.
Since the early 1960’s the banking industry as a
whole has suffered a decline in the relation between
capital and assets.
This decline is illustrated in

Table IV

CHANGES IN USES OF FUNDS, 1962 AND 1976L
ALL COMMERCIAL BANKS
UNITED STATES AND FIFTH FEDERAL RESERVE DISTRICT

M easure

United
States

Fifth
District

District of
C o lu m b ia

M a ry la n d

N orth
C a ro lin a

South
C a ro lin a

V irg in ia

W e st
V irg in ia

C a sh & due from b a n k s /
Total assets

18.2

13.2

17.4

10.7

17.9

12.6

16.4

10.2

19.7

11.5

18.9

12.2

15.9

10.4

15.6

8.4

N et loans, to ta l/
Total assets

47.2

51.2

46.8

52.5

49.2

49.8

46.1

57.1

47.7

50.4

42.0

50.6

48.7

55.6

40.8

46.2

Real estate lo a n s /
G ro ss loans, total

24.0

27.3

26.5

33.7

27.4

34.1

33.8

39.9

15.8

22.2

20.1

24.6

29.4

38.6

37.4

42.0

Com m ercial & industrial lo a n s/
G ro ss loans, total

34.1

33.4

27.1

25.2

24.0

22.4

24.1

22.4

34.6

33.3

31.4

27.5

25.2

23.5

18.3

16.2

Loans to in d iv id u a ls/
G ro ss loans, total

21.4

21.6

31.4

32.6

26.5

21.0

27.0

28.4

32.3

34.6

32.4

41.2

34.2

31.8

37.1

38.6

4.2

2.2

1.5

0.0

1.9

0.8

2.7

2.6

2.9

2.3

2.9

1.5

1.7

0.8

Farm lo a n s /
G ro ss loans, total
Loans to other fin an cial
in stitu tion s/G ross loans, total

5.9

4.9

5.6

2.8

13.6

6.1

3.0

4.7

2.6

4.2

0.7

3.7

1.8

2.4

0.4

32.2

24.2

33.8

26.6

31.1

26.8

35.5

22.0

30.2

27.0

37.2

28.9

33.5

25.0

41.8

34.5

U. S. G overnm ent securities/
Total securities

69.4

55.4

73.0

49.3

86.7

50.4

73.9

42.2

65.1

52.8

69.5

52.4

70.1

46.8

81.9

52.3

M u n icip a l securities/
Total securities

25.9

41.9

20.5

49.0

10.9

48.0

20.0

56.5

24.5

43.5

22.3

47.3

22.9

52.6

15.5

46.6

Total securities/Total assets

a Black figures are for Decem ber 28, 1962; green figu re s are for Decem ber 31, 1976.
Source:

Federal Reserve Bank o f Richmond.

Table V for two key capital ratios, equity capital to
total assets and equity capital to risk assets.11 The
equity capital to total asset ratio for all U. S. com
mercial banks declined 110111 8.9 percent 011 Decem
ber 28, 1962 to 7.6 nercent on December 31, 1976,
while the equity capital to risk asset ratio declined
from 14.9 percent to 10.4 percent. Similar changes
have occurred in these ratios in the Fifth District
but with differences in degree.
The Fifth District equity capital to total asset
ratio has declined less than the national average.
This indicates that bank assets in the District have
grown faster than capital, but that the historical
capital/asset relationship has been better preserved
in the District than in the nation as a whole. Wash
ington, D. C. departs from the declining pattern,
equity having grown faster than total assets over the
period in question. Consequently, banks in Washing
ton, D. C. averaged an unusually high 9.2 percent
equity capital to total asset ratio on December 31.
1976. All other District states had average equity
capital to total asset ratios above the national norm
on that date except for North Carolina, whose ratio
equaled 7.4 percent.
The decline in the Fifth District equity capital to
risk asset ratio is greater than the decline in the
national average ratio. Nevertheless, the Decem
11 T h e ra tio s a n d th e ir m e a n in g are d e sc ribe d in d etail
in [9],

ber 31, 1976 ratios for the District and the nation
are still quite close. The size of the Fifth District
decline is directly related to unusually sharp reduc
tions in holdings of cash and U. S. Government
securities relative to total assets, both key compon
ents of the risk asset computation. These declines
are shown in Table IV. Maryland and North Caro
lina are the Fifth District states having the lowest
equity capital to risk asset ratios at year-end 1976.
In the years following 1962, senior debt has been
used increasingly by banks to supplement capital
positions. Debt, however, is not a perfect substitute
for equity [9], As a result, bank regulators have
generally not viewed debt on an equal footing with
equity in assessing the adequacy of bank capital. The
extent of debt utilization is shown in the bottom
two lines on Table V.
The average December 31, 1976 equity capital to
total asset ratio for all U. S. banks is raised by 0.5
percentage points to 8.1 percent when senior debt is
included in the computation. The Fifth District ratio
is also increased by 0.5 percentage points, to 8.5 per
cent. Inspection of the equity plus debt ratios by
state shows that the utilization of debt as a capital
account supplement has been very limited in Mary
land and West Virginia, but of somewhat greater
importance in Washington, D. C. and Virginia. In
North Carolina and South Carolina debt has been
utilized to a much greater extent than in the Fifth
District or in the nation as a whole.

Table V

CHANGES IN CAPITALIZATION, 1962 A N D 1976°
ALL COMMERCIAL BANKS
UNITED STATES AND FIFTH FEDERAL RESERVE DISTRICT
United
States

M easu re
Equity ca p ita l^ /T o ta l assets
Equity c a p ita l^ /R isk a sse ts0
Equity capita! ^ +
Total assets

senior debt/'

Equity c a p ita l^ +
Risk a sse tsc

senior d e b t/

0 Black

District of
Co lu m b ia

M a ry l and

c Risk assets =

V irg in ia

W e st
V irg in ia

7.6

9.0

8.0

7.6

9.2

8.9

7.9

8.9

7.4

9.4

8.6

9.0

8.0

10.9

8.7

10.4

15.4

10.5

13.7

12.4

15.5

9.8

14.6

9.9

17.0

11.9

14.8

10.2

21.5

11.7

8.9

8.1

9.0

8.5

7.6

9.5

8.9

8.0

8.9

8.6

9.4

9.2

9.0

8.3

10.9

8.8

14.9

11.0

15.4

11.2

13.7

12.8

15.5

10.0

14.6

11.5

17.0

12.6

14.8

10.6

21.5

12.0

profits, a n d valuatio n

Federal Reserve Ba n k o f Richmond.

South
C a ro lin a

8.9

total assets — cash an d due from b anks —

N orth
C a ro lin a

14.9

figu re s are fo r Decem ber 28, 1962; green figures are for Decem ber 31, 1976.

k In clu des stock, surplus, u ndivided

Source:

Fifth
District

reserves.
U. S. G overn m en t securities.

CONCLUSION
The organization and structure of Fifth District
banking has been significantly influenced since 1960
by deposit growth trends, branching, mergers, - and
bank holding company activity. Changes in these
factors have not been uniform across the five District
states and Washington, D. C., however. Their com
bined effect has been to sharply increase the scale of
banking operations in Maryland and North Carolina,
and to increased deposit concentration in these two
states plus South Carolina and Virginia. Deposit
concentration has declined in West Virginia, and
there is evidence that suggests that this has also
occurred in a broadly defined District of Columbia
banking market.
The Fifth District bank balance sheet has under
gone a number of important changes since 1962, in
cluding changes in sources and uses of funds and in
capital structure. Again, however, the changes have
not been entirely uniform across the five states and
Washington, D. C. Deposits remain more important
as the primary source of funds in District banking
than in U. S. banking, although the composition of
deposit funds is quite similar for the region and the

nation. Important exceptions are the District of
Columbia and South Carolina, where demand de
posits make up an unusually large portion of total
deposits.
Loans have increased in importance
throughout the District, as they have in U. S. bank
ing, but play a smaller part in total bank credit in
West Virginia than in other areas. Real estate and
consumer loans play an unusually strong role in
Fifth District bank lending, except that in North
Carolina real estate loans are of lesser importance
and business loans of greater importance. Invest
ment in securities has declined in importance, al
though Fifth District bank holdings of tax-free mu
nicipal securities have increased in importance.
The ratio of capital to total assets at Fifth District
banks has declined since 1962, but not by as much
as the decline for all U. S. banks. Among the five
District states and Washington, D. C., only North
Carolina had a 1976 capital to total asset ratio lower
than the national average. While debt has been
employed as a capital supplement in the District, its
utilization has been almost entirely limited to North
Carolina and South Carolina.
Bruce J. Summers

References
1.

Broaddus, J. Alfred, Jr. “ Regulations Affecting
Banking Structure in the Fifth District,” Monthly
Review, Federal Reserve Bank of Richmond, (De
cember 1970), pp. 7-11.

.
“ The Banking Structure: What It
Means and Why It Matters,” Monthly Review,
Federal Reserve Bank of Richmond, (November
1971), pp. 2-10.

Farnsworth, Clyde H., Jr.
“ Sources of Bank
Expansion in the Fifth District: Internal and
External Growth,” Monthly Review, Federal Re
serve Bank of Richmond, (June 1973), pp. 2-5.

Haslem, John A. and William A . Longbrake. The
Productive Efficiency of North Carolina Commer
cial Banks. Research Paper 21, Graduate School
of Business Administration, University of North
Carolina at Chapel Hill, February, 1975.

5. Ileo, Michael J. and David C. Parcell. “ Evolution
of the Virginia Banking Structure 1962-1974: The
Effects of the Buck-Holland Bill,” William and
M ary Law Review, (Spring 1975), pp. 567-597.

6. Lawrence, Robert J. and Samuel H. Talley. “ An
Assessment of Bank Holding Companies,” Federal
Reserve Bulletin, (January 1976), pp. 15-21.
7.

Snellings, Aubrey N. “ Recent Trends in Banking,”
1973 A nnual R ep ort. Richmond: Federal Reserve
Bank of Richmond.

Summers, Bruce J. “ Regulations Affecting Com
petition Between Banks and Thrift Institutions in
the Fifth District,” Economic Review, Federal Re
serve Bank of Richmond, (M ay/June 1976), pp.
14-18.

.
“ Bank Capital Adequacy: Perspec
tives and Prospects,” Economic Review, Federal
Reserve Bank of Richmond, (July/August 1977),
pp. 3-8.

10. Yarvel, Walter A . and Suzanne J. Stone. “ Changes
in Banking Concentration in Selected Fifth District
SM SA ’s: 1970-1976,” Economic Review, Federal
Reserve Bank of Richmond, (July/August 1977),
pp. 9-12.

Highlights
Earnings and Capital Accounts

Net earnings

before payments to the Ilnii-pH States Treasury in

creased by $15,729,280.39 to $481,416,026.42 in 1977.
Six percent statutory dividends totaling $3,279,713.59
were paid to Fifth District member banks, and the
sum of $476,974,462.83 was turned over to the
United States Treasury.
Capital stock increased by $1,161,850.00 to
$55,093,750.00 as member banks increased their
stockholdings in this Bank, as required by law,
to reflect the rise in their own capital and surplus
accounts. The Bank’s surplus account increased
$1,161,850.00 to a total of $55,093,750.00.
Discount Rate The Richmond Reserve Bank,
following a decision by its Board of Directors and
approval by the Board of Governors, raised its dis
count rate twice during the year to bring it into
closer alignment with short-term interest rates. On
August 30 the discount rate was raised from 5^4
percent to 5y percent. The rate was further in
creased to 6 percent on October 26.
New Building Program The 26 story new Rich
mond Bank building is now an important feature on
Richmond’s skyline. Although severe weather last
winter hampered construction, work moved ahead
during the balance of the year, and relocation is now
projected for the spring of 1978.

of the plaza slab. All backfilling was finished and
topsoil placed in preparation for landscaping work,
which must be performed in accordance with seasonal
necessities.
An Ai I Committee has been collecting paintings,
prints, and sculpture for the new building. Assisting
the Committee in its selections is an Advisory
Council composed of persons knowledgeable in the
field of art and representing each state in the Fifth
District. The main emphasis in the acquisitions has
been on works created by artists in the Fifth District
or depicting life in this area. Two major pieces of
art are to be a sculpture in the oval pool in front of
the building and several large tapestries to be dis
played in the Bank’s Money Museum.
At Baltimore the space plan prepared by Ford and
Earl Design Associates for the new Branch building
has been approved by the Board of Governors. The
architect, Hellmuth, Obata, and Ivassabaum, soon
will begin preliminary design work on the building,
which will be constructed on an eight acre tract in
the Camden Yards area.

Check Collection Operations The Regional Check
Clearing Center in Charleston, West Virginia be
came fully operational in April 1977 and full check
clearing services were provided to member banks in
W^est Virginia.

During April the building began to assume its
final exterior look as curtain wall and glass instal
lation progressed to the uppermost floors. Perma
nent power was connected in July, which allowed use
of inside elevators and removal of the outside hoist.
Actual completion of the curtain wall, over 200,000
square feet in total, occurred in September.

The Fifth District Automated Clearing House
(A C H ) Exchange Program was initiated in October
1977 with the exchange of items between Richmond
(V A C H A ) and Baltimore (M A C H A ) Offices.
Charlotte (N O R C A C H A ) began participating in
December and Columbia (S O C A C H A ), which began
operations in September, plans to participate in early
1978. After full operation, each ACH will be able to
exchange ACH items with the other Reserve District
A C H ’s. The District exchange is viewed as a logical
step towards eventual interfacing with the developing
nationwide Interregional Exchange.

For the balance of the year, all phases of interior
construction activity continued from below-grade
areas upwards, including installation of over 490,000
linear feet of drywall, over 490,000 square feet of
ceiling tile, light fixtures, sprinkler system, elevators,
kitchen equipment, raised flooring, vault doors, se
curity console, etc. On the exterior, installation of
marble on the lobby level walls and brick on the
retaining wall was completed, as was waterproofing

The Richmond Office is conducting the pilot pro
gram for the System’s Government Check Trunca
tion Project for Burroughs Users. This program
was developed to provide the Treasury Department
with a more efficient system and to facilitate the
investigation of claims of missing or stolen checks.
Under truncation, the Treasury Department will re
ceive a magnetic tape and microfilm copy of the items
instead of the physical checks. The checks will be

sent to a General Services Administration warehouse
for storage. The program will be implemented Sys
temwide by midyear 1978.
The Baltimore Office is serving as a pilot oper
ation for a District project to test Burroughs S I500
equipment for processing rejected cash items. Under
this concept, rejected cash items will be processed
on the S I500 which will be on-line to the Burroughs
4700 computer system.

New Automated Systems A centralized member

bank accounting system was implemented at the
Richmond Office during October. The functional
areas of this system include District member bank
analysis, required reserves, discount and credit, and
Richmond territory reserve accounts. This develop
ment marks a further step toward the goal of cen
tralizing the processing of data but decentralizing the
entering of original information.
Another step toward this goal was the imple
menting of a centralized securities custody system.
This system updates daily deposits and withdrawals,
prints deposit tickets, and processes data for matur
ing coupons on definitive securities and interest and
maturity payments on book entry securities at the
Richmond and Baltimore Offices.
Intradistrict data communication facilities were
augmented in 1977 by implementing a computer-tocomputer interface between the IBM computer at the
Richmond Office and the Burroughs computers at
the Baltimore and Charlotte Offices. This communi
cations capability is scheduled to be extended to the
Columbia and Charleston Offices in 1978.

Other Developments at District Offices On D e
cember 1 the Charlotte Office celebrated its fiftieth
anniversary. When it opened its doors for business
on December 1, 1927, it had only 54 employees.
Today its employees number approximately 400.
During the year the Baltimore Office assumed
responsibility from the U. S. Treasury cash office for
servicing the currency and coin needs of the Wash
ington, D. C. banks. At the same time a coin swap
program among District of Columbia banks was
established. This program provides these banks with
their coin requirements while reducing costs and
work.

Renovation to the Baltimore building provided
expanded and improved quarters for the Cash De
partment as well as major improvements in security
measures.

Federal Reserve Membership
The following
newly chartered banks in the Fifth District opened
for business during 1977 as members of the Federal
Reserve System:
National Banks
Central N ational Bank
M organtow n, W est V irginia

S eptem ber 12

M ountaineer N ational B ank
M organtow n, W est V irginia

D ecem ber 5

State Banks
H eritag e Bank and T rust
N orfolk , V irginia

F eb ru a ry 7

Bank o f G reene
R uckersville, V irginia

S eptem ber 10

The following State-chartered bank converted to
membership in the Federal Reserve System during
1977:
Colonial S tate Bank, Inc.
M arion, South Carolina

M arch 31

The following National bank converted to State
membership in the Federal Reserve System during
1977:
F irst V irginia B ank-M onticello N ation al to
F ir st V irginia B an k-C en tral
Charlottesville, V irg in ia
S ep tem ber i

Changes in Directors
In June, I. E. Killian,
President, Killian Enterprises, Inc., Gibson Island,
Maryland, was elected Chairman of the Baltimore
Board to replace James G. Harlow who resigned as a
member of the Board effective June 30. Catherine B.
Doehler, Senior Vice President, Chesapeake Finan
cial Corporation, a Richmond Board appointee, was
nominated by the Board of Governors to fill the
unexpired portion of Dr. Harlow’s term. Steven
Muller, President, Johns Hopkins University and
Hospital, Baltimore, Maryland, was appointed by the
Richmond Board to complete Mrs. Doehler’s unex
pired term.

Fifth District member banks elected one Class A
and one Class B Director to three-year terms on the
Richmond Board of Directors in the early fall.
Frederic H. Phillips, President, New Bank of Roa
noke, Koanoke, V irginia, wa.s elected ci Clcics A. 13i
rector to succeed James A. Hardison, Jr., Chairman
and President, The First National Bank of Anson
County, Wadesboro, North Carolina, whose term
expired at the end of 1977. Thomas A. Jordan,
Secretary-Treasurer, Stuart Furniture Industries,
Inc., Asheboro, North Carolina, was elected by banks
in Group 2 as a Class B Director to succeed Henry
Clay Hofheimer, II, Chairman of the Board, Virginia
Real Estate Investment Trust, Norfolk, Virginia,
whose term expired December 31, 1977.
The Richmond Board reappointed John T. Fielder,
President, J. B. Ivey and Company, Charlotte, North
Carolina, to a three-year term on the Charlotte
Board. Joseph M. Gough, Jr., President, The First
National Bank of St. Mary’s, Leonardtown, Mary
land, was appointed to a three-year term on the
Baltimore Board to succeed J. Pierre Bernard, Chair
man of the Board, The Annapolis Banking and Trust
Company, Annapolis, Maryland. Pearl C. Brackett,
Assistant/Deputy Manager, Baltimore Regional
Chapter of the American Red Cross, Baltimore,
Maryland, was appointed to fill the unexpired term
on the Baltimore Board of Steven Muller who
resigned to become a member of the Richmond
Board.
The Board of Governors redesignated E. Angus
Powell, Partner, Midlothian Company, Midlothian,
Virginia, as Chairman of the Board and Federal Re
serve Agent for 1978. Maceo A. Sloan, Executive
Vice President, North Carolina Mutual Life Insur
ance Company, Durham, North Carolina, was desig
nated Deputy Chairman of the Board for 1978.
The Board of Governors appointed Steven Muller,
President, Johns Hopkins University and Hospital,
Baltimore, Maryland, to a three-year term on the
Richmond Board, effective January 1, 1978, to suc
ceed E. Craig Wall, Sr., Chairman of the Board,
Canal Industries, Inc., Conway, South Carolina,
whose term expired at the end of 1977.
Catherine B. Doehler, Senior Vice President,
Chesapeake Financial Corporation, Baltimore, Mary
land, was reappointed by the Board of Governors to a
three-year term on the Baltimore Board, effective
January 1, 1978. The Board of Governors also ap

pointed Robert E. Elberson, President, Chief Execu
tive Officer and Director, Hanes Corporation,
Winston-Salem, North Carolina, to a three-year
term on the Charlotte Board. This appointment was
_________

LiiLLuvt j cmLicti y

1 0*70

1\T

TT' 11

i, i ^ / o , lvii. iMuei bon succeeded

Charles F. Benbow, Senior Vice President and Sec
retary, R. J. Reynolds Industries, Inc., WinstonSalem, North Carolina.

Federal Advisory Council The Board of D irec
tors reappointed John H. Lumpkin, Chairman of the
Board and Chief Executive Officer, The South Caro
lina National Bank, Columbia, South Carolina, to a
one-year term beginning January 1, 1978, as the
Fifth Federal Reserve District representative to the
Federal Advisory Council.
The twelve-member
Council, consisting of one member from each of the
Federal Reserve Districts, meets in Washington at
least four times a year with the System’s Board of
Governors to discuss business conditions and other
topics of current interest to the System.

Changes in Official Staff Frank D. Stinnett, Jr.,
Assistant Vice President at the Richmond Office,
was transferred from the Examining Department to
the Bank and Public Relations Department, effective
May 1, 1977. At the Baltimore Office, on July 1,
1977, Ronald B. Duncan, Assistant Vice President,
was moved to Check Operations and Ronald E.
Gould, Assistant Vice President, was assigned to the
Fiscal Agency, General Service, and Bank Security
Departments.
In December it was announced that John F. Rand,
Senior Vice President, will assume overall responsi
bility for the Accounting and Bank Accounts De
partments while retaining supervision over the
Computer Planning, Computer Services, and Data
Processing Departments. Roy L. Fauber, Vice
President, will become the senior officer in Check
Collection in addition to his responsibilities in the
Planning Department. Andrew L. Tilton, Vice
President, will assume responsibility for the General
Service and Protection functions.
Senior super
vision of the Fiscal Agency and Securities Depart
ments will be assigned to Robert D. McTeer, Jr.,
Vice President, who replaces John G. Deitrick, Vice
President, upon his retirement. All changes were
effective January 1, 1978.

Summary of Operations
C heck C learing and C ollection

1977

1976

Dollar amount
Commercial bank checks1 ___________________________________________

550,120,815,000

457,137,732,000

Government checks2 ________________________________________________

64,072,504,000

45,618,757,000

Return item s________________________________________________________

4,102,542,334

4,054,103,000

Commercial bank checks1 _____________ ...____________________________

1,209,527,000

1,117,315,000

Government checks2 ________________________________________________

93,700,000

89,931,000

Return ite m s________________________________________________________

15,273,000

14,062,000

8,244,745,687

6,041,841,600

Number of items

C urrency and Coin
Currency disbursed— Dollar amount _________________________________
Coin disbursed— Dollar amount ______________________________________

248,281,644

247,475,450

Dollar amount of currency destroyed ________________________________

1,837,187,014

1,545,180,000

Dollar amount ______________________________________________________

7,233,020

6,083,385

Number _____________________________________________________________

1,172,906

1,030,829

Total loans made during y e a r ______________________________________

9,641,692,000

542,580,000

Daily average loans outstanding __________________________________

49,124,000

1,844,000

Number of banks borrowing during the year _______________________

228,361,626,042

193,585,937,692

Daily average of currency destroyed

D iscou n t and Credit
Dollar amount

F iscal A g e n c y A ctiv ities
Marketable securities delivered or redeemed
Dollar amount ______________________________________________________
Number _____________________________________________________________

176,240

194,004

Dollar amount ______________________________________________________

74,035,596

88,008,856

Number _____________________________________________________________

242,435

246,020

Dollar amount ____ _________________________________________________

682,451,169

549,761,513

Number _____________________________________________________________

11,626,861

11,529,843

Dollar amount ______________________________________________________

673,909,457

588,349,221

Number _____________________________________________________________

12,970,436

12,730,130

Coupons redeemed

Savings bond and savings note issues

Savings bond and savings note redemptions

T ran sfers of Funds
Dollar amount ________________________________________________________

1,591,637,451,992

1,509,194,852,105

Number ________________________________________________________________

1,516,363

1,280,901

1 E xcluding checks on this Bank.
2 Including postal m oney orders.

Comparative Financial Statements
Condition
A ssets:

Dec. 31, 1977

Gold certifica te account __________ ____________ ________________
Special D ra w in g R ights certificate a c c o u n t ___________________
Coin

____________________________________________________________

981,629,900.00

Dec. 31, 1976
$

991,561,000.00

113.000.000.00

109,000,000.00

27,681,295.92

41,460,877.16

L O A N S A N D SECU R ITIES :

Loans to mem ber banks _____________________________________

13,001,000.00

Federal agen cy obligations _________________________________

654.340.000.00

545,289,000.00

3,397,797.000.00

3,095,913,000.00

U. S. G overnm ent securities:
Bills

_______________________________________________________

C ertificates ________________________________________________
Notes

______________________________________________________

4,129,321 000.00

3.850.362.000.00

Bonds ______________________________________________________

723,388 , 000.00

539,780,000.00

TOTAL U . S. G OV ER N M E N T SECURITIES ____________________________

8,250,506,000.00

7.486.055.000.00

TO TAL LO A N S A N D SECURITIES ______________________________________

8,917,847, 000.00

8.031.344.000.00

Cash items in process o f collection _____________________________

1,866,075. 845.67

1,351,185,988.16

71,968. 780.29

47,904,687.45

Bank prem ises _________________________________________________
Fu rn itu re and operating equipment __________________________

891. 718.61

202,678.13

O ther assets __________________________________ ___ _____________

156,440. 107.38

129,406,238.15

In terdistrict settlem ent account ________________ ___ ___________

246,589, 981.12

27,328,057.32

T O T A L A S S E T S ______ ___ ____________________________

$12,382,124,628.99

$10,729,393,526.37

$ 8,328,960,410.00

$ 7,461,447,170.00

M em ber bank reserves ______________________________________

1,533,774,161.09

1,447,700,425.74

U. S. T reasu rer— general account __________________________

598,066,636.65

725,113,676.62

L ia b ilitie s :
F ederal Reserve notes _________________________________________
d e p o s it s

F oreign

______________________________________________________

15,163,500.00

13,199,200.00

Other _________________________________________________________

56,689,499.31

87.217.621.78

TO TAL DEPOSITS _______ ____ ______________________ _______________________

2,203,693,797.05

2,273,230,924.14

D eferred availability cash items _____________ ________________

1,625,091,801.68

813,940,742.44

Other liabilities ________________________________________________

114,191,120.26

72.910.889.79

12,271,937,128.99

10,621,529,726.37

Capital paid i n __________________________________________________

55.093.750.00

53.931.900.00

Surplus

_________________________________________________________

55.093.750.00

53.931.900.00

T O T A L L IA B IL IT IE S A N D C A P IT A L A C C O U N T S

$12,382,124,628.99

$10,729,393,526.37

T O T A L L IA B IL IT IE S _________________________________
C a p it a l A c c o u n t s :

Earnings and Expenses
EARNINGS:

1977

1976

Loans to mem ber banks __________________________________________________
Interest on U. S. Governm ent securities ________________________________
F oreign currencies _______________________________________________________
Other e a r n in g s ____________________________________________________________

2,841,197.03
541,531,105.55
154,532.17
_______ 53,828.39

108,661.29
515,237,004.75
1,581,130.08
_______ 38,645.07

____________________________________________

544,580,663.14

516,965,441.19

O perating expenses (including depreciation on bank prem ises) after
deducting reimbursem ents received fo r certain F iscal A gen cy and
other expenses __________________________________________ _______________
Cost o f Federal R eserve curren cy ___ ____________________________________

45,617,502.50
5,166,650.66

44,511,710.35
5,724,036.49

_______________________________________________________

50,784,153.16

50,235,746.84

C U R R E N T N E T E A R N IN G S _____________________________________

493.796,509.98

466,729,694.35

2,262,831.82

2,676,195.49
187,601.26

2,262,831.82

2,863,796.75

TOTAL CURRENT EARNINGS

EXPEN SES:

net

expenses

a d d it io n s

to c u r r e n t

net

e a r n in g s :

P r o fit on sales o f U. S. Governm ent securities (n et) ________________
A ll other ______________________________________________________________
total

a d d it io n s

d e d u c t io n s f r o m

_____________________________________________________

cu rren t n e t e a r n in g s :

Loss on sales o f U. S. Governm ent securities (n et) ________________ 3,966,089.57
__________________
Losses on F oreign E xch ange transactions ____________________________
8,051,138.70
1,404,149.62
A ll other ______________________________________________________________
28,887.11
172,595.45
___________________________________________________

12,046,115.38

1,576,745.07

N E T A D D IT IO N S OR D E D U C T IO N S ____________________________

-9 ,7 8 3 ,2 8 3 .5 6

1,287,051.68

Assessm ent fo r expenses o f Board o f G overnors _______________________
N E T E A R N IN G S B E F O R E P A Y M E N T S TO U. S. T R E A S U R Y

2,597,200.00
$481,416,026.42

2,330,000.00
$465,686,746.03

D ividends paid ___________________________________________________________
Paym ents to U. S. T reasu ry (interest on Federal Reserve notes) ____
T ran sferred to surplus __________________________________________________

total

d e d u c t io n s

T O T A L ______________________________________________________________

3,279,713.59
476,974,462.83
1,161,850.00

3,196,167.72
460,343,578.31
2,147,000.00

$481,416,026.42

$465,686,746.03

Balance at close o f previous y e a r _______________________________________
A ddition account o f p ro fits fo r year ____________________________________

$ 53,931,900.00
1,161,850.00

$ 51,784,900.00
2,147,000.00

B A L A N C E A T CLO SE OF C U R R E N T Y E A R ___________________

$ 55,093,750.00

$ 53,931,900.00

S u r p lu s A c c o u n t

C a p ita l S t o c k A c c o u n t
(R epresen ting am ount paid in, w hich is 50% o f amount subscribed)
Balance at close o f previous year _______________________________________
Issued du ring the year __________________________________________________

$ 53,931,900.00
1,927,100.00
55,859,000.00

54,069,750.00

Cancelled during the y e a r ________________________________________________

______ 765,250.00

______ 137,850.00

B A L A N C E A T C LO SE OF C U R R E N T Y E A R ___________________

$ 55,093,750.00

$ 53,931,900.00

$ 51,784,900.00
2,284,850.00

Directors

(D ecem ber 31, 1 977)

E. A n gu s Pow eii ----------------------- Chairman o f the Board and F ed era l R eserv e A g e n t
E. C raig W all, Sr. --------------------- D epu ty Chairm an o f the Board

Class A
J. Owen Cole -----------------------------Chairman o f the Board, F irst N ational Bank o f M aryland
Baltim ore, M aryland
(T erm exp ires D ecem b er 31, 1978)
Jam es A . H ardison, Jr. _________ Chairman and P resid en t, The F irst N ational Bank o f A n son County
W adesboro, N orth Carolina
(Te?'m exp ired D ecem ber 31, 1977)
Succeeded b y :

F rederic H. Phillips
P resid en t
N ew Bank o f Roanoke
R oanoke, V irginia
(T er m exp ires D ecem ber 31, 1980)

F ran k B. R obards, Jr. _________ President, R ock H ill N ational Bank
Rock Hill, South Carolina
(T erm exp ires D ecem ber 31, 1979)

Class B
A n drew L. Clark _______________ President, A n d y Clark F ord, Inc.
Princeton, W est V irginia
(T erm exp ires D ecem b er 31, 1979)
H enry Clay H ofheim er, II

Chairman o f the Board, V irginia Real E sta te In v estm en t T m st
N orfolk, V irgin ia
(T erm exp ired D ecem ber 31, 1977)
Succeeded b y :

Thom as A. Jordan
S ecreta ry-T rea su rer
Stua rt F u rn itu re Industries, Inc.
A sh eb oro, N orth Carolina
(T er m exp ires D ecem ber 31, 1980)

Paul E. R eich ardt ______________ Chairman o f the B oard and C h ief E x ecu tiv e O ffic e r
W ashington Gas L ig h t Com pany
W ashington, D. C.
(T erm exp ires D ecem ber 31, 1978)

Class C
E . A n gu s Pow ell _______________ Partner, M idlothian Com pany
M idlothian, V irginia
(T erm exp ires D ecem ber 31, 1979)
M aceo A . Sloan ___

____________ E xecu tiv e V ice P residen t, N orth Carolina M utual L ife Insurance Co.
Durham, N orth Carolina
(T erm exp ires D ecem ber 31, 1978)

E. C raig W all, Sr. ______________ Chairman o f the Board, Canal Industries, Inc.
Conway, South Carolina
(T erm exp ired D ecem b er 31, 1977)
Succeeded b y :

Steven Muller
P resid en t
The Johns H opkins U n iversity and H ospital
B altim ore, M aryland
(T er m exp ires D ecem ber 31, 1980)

Member of Federal Advisory Council
John H. Lum pkin ______________ Chairman o f the Board and C h ief E x ecu tiv e O ffic e r
The South Carolina N ational Bank
Columbia, South Carolina
(T erm exp ires D ecem b er 31, 1978)

Baltimore
David W . Barton, Jr. __________ President, The B arton-G illet Com pany
Baltim ore, M aryland
(T erm exp ires D ecem ber 31, 1978)
J. Pierre Bernard ______________ Chairman o f the Board, The A nnapolis Banking and T ru st Com pany
Annapolis, M aryland
(T erm expired D ecem ber 31, 1977)
Succeeded b y : Joseph M. Gough, Jr.
P residen t
The F irst N ational Bank o f St. M ary's
Leonardtow n, M aryland
(T erm exp ires D ecem ber 31, 1980)
Catherine B. Doehler __________ Senior V ice President, Chesapeake Financial C orporation
Baltim ore, M aryland
(T erm exp ires D ecem ber 31, 1980)
*1. E. Killian ___________________ President, K illian E n terprises, Inc.
Gibson Island, M aryland
(T erm exp ires D ecem ber 31, 1979)
Steven Muller ___________________Presiden t, The Johns H opkins U n iversity and H ospita l
Baltim ore, Marylayid
(T erm exp ires D ecem ber 31, 1978)
Succeeded b y : Pearl C. Brackett
A ssistan t/ D epu ty M anager
B altim ore R egional C h apter o f A m erica n R ed Cross
Baltim ore, M aryland
(T erm expires D ecem ber 31, 1978)
A. R. Reppert __________________ President, The Union N ational Bank o f C larksburg
C larksbu rg, W est V irginia
(T erm exp ires D ecem ber 31, 1979)
Lacy I. Rice, Jr. __________ .....

P resident, The Old N ational Bank o f M artin sburg
M artin sbu rg, W est V irginia
(T er m exp ires D ecem ber 31, 1979)

Charlotte
Naomi G. Albanese ____________ Dean, School o f H om e Econom ics, U n iversity o f N orth Carolina
G reensboro, N orth Carolina
(T erm exp ires D ecem ber 31, 1979)
W . B. Apple, Jr. ________________ Presiden t, F irst N ational Bank o f Reidsville
Reidsville, N orth Carolina
(T er m exp ires D ecem ber 31, 1979)
Charles F. Benbow _____________Senior V ice P residen t and S ecreta ry, R. J. R eynold s In du stries, Inc.
W inston-Salem , N orth Carolina
(T erm exp ired D ecem ber 31, 1977)
Succeeded b y : Robert E. Elberson
P resident, C h ief E x ecu tiv e O ffic e r and D irecto r
H anes Corporation
W inston-Salem , N orth Carolina
(T erm exp ires D ecem ber 31, 1980)
T. L. Benson

__________________ P residen t, The C onw ay National Bank
Conw ay, South Carolina
(T erm exp ires D ecem ber 31, 1979)

William W . Bruner _____________Chairman and President, F irst National Bank o f South Carolina
Columbia, South Carolina
(T erm expires D ecem ber 31, 1978)
*Robert C. Edwards _____________President, Clemson U niversity
Clemson, South Carolina
(T erm expires D ecem ber 31, 1978)
John T. Fielder ________________ P resident, J. B. Iv ey and Com pany
Charlotte, N orth Carolina
(T erm exp ires D ecem ber 31, 1980)
:!!Branch Board Chairman.

(Janu ary 1, 1978)

R ic h m o n d

Robert Jr\ black, President
George C. Rankin, First Vice President
Welford S. Farmer, Senior Vice President
James Parthemos, Senior Vice President and
Director of Research

Jack H. Wyatt, Assistant Vice President
Robert D. Bouck, Assistant Counsel
James R. Slate, Assistant Counsel
David B. Ayres, Jr., General Auditor
H. Lewis Garrett, Assistant General Auditor

John F. Rand, Senior Vice President
Raymond E. Sanders, Jr., Senior Vice President
Elizabeth W. Angle, Vice President
Lloyd W. Bostian, Jr., Vice President
J. Alfred Broaddus, Jr., Vice President
John G. Deitrick, Vice President
George B. Evans, Vice President
Roy L. Fauber, Vice President
William C. Glover, Vice President
William D. Martin, III, Vice President and
General Counsel
Robert D. McTeer, Jr., Vice President
Arthur V. Myers, Jr., Vice President
Chester D. Porter, Jr., Vice President
Aubrey N. Snellings, Vice President
Andrew L. Tilton, Vice President
James F. Tucker, Vice President
Joseph F. Viverette, Vice President
J. Lander Allin, Jr., Assistant Vice President
Fred L. Bagwell, Assistant Vice President
Jackson L. Blanton, Assistant Vice President
Timothy Q. Cook, Research Officer
William E. Cullison, Research Officer
Wyatt F. Davis, Chief Examiner
William C. Fitzgerald, Assistant General Counsel
John E. Friend, Assistant Vice President
Bradley H. Gunter, Assistant Vice President and
Secretary
Robert B. Hollinger, Jr., Assistant Vice President
John C. Horigan, Assistant Vice President
Thomas M. Humphrey, Research Officer
Hobert D. Pierce, Assistant Vice President
Joseph C. Ramage, Assistant Vice President
Barthonhue W. Reese, Assistant Vice President
James D. Reese, Assistant Vice President
Frank D. Stinnett, Jr., Assistant Vice President
John A. Vaughan, Assistant Vice President
Wilbur C. Wilson, Assistant Vice President

Baltimore
Jimmie R. Monhollon, Senior Vice President
William E. Pascoe, III, Vice President
Gerald L. Wilson, Vice President
Ronald B. Duncan, Assistant Vice President
Ronald E. Gould, Assistant Vice President
Charles P. Kahler, Assistant Vice President
Robert A. Perry, Assistant Vice President
Victor Turyn, Assistant Vice President

Charlotte
Stuart P. Fishburne, Senior Vice President
Thomas E. Snider, Vice President
Winfred W. Keller, Assistant Vice President
0. Louis Martin, Jr., Assistant Vice President
Harry B. Smith, Assistant Vice President
Robert F. Stratton, Assistant Vice President
Jefferson A. Walker, Assistant Vice President
Charleston
Richard L. Hopkins, Assistant Vice President

Columbia
Boyd Z. Eubanks, Vice President
R. Wayne Stancil, Assistant Vice President
Culpeper
John G. Stoides, Vice President
Albert D. Tinkelenberg, Vice President
Dale M. Cunningham, Assistant Vice President
James G. Dennis, Assistant Vice President

Full text of Annual Report of the Federal Reserve Bank of Richmond : Annual Report 1977

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