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II 1113 - A~ R~4t Federal Reserve Bank of San Francisco From the Boardroom 2 Building Bridges 4 Highlights of 1993 19 -ed era l Reserve Bank Directors 26 of San Francisco APR - 8 1994 LIBRARY The Federal Reserve Bank of San Francisco is one of twelve regional Reserve Banks which, together with the Board of Govemors in Washington, D.C., comprise the nation's central bank. As the nation's central bank, the Federal Reserve is responsible for making and carrying out our nation's monetary policy. It also is a bank regulatory agency, a provider of wholesale-priced banking services, and the fiscal agent for the Vnited States Treasury. The Federal Reserve Bank of San Francisco serves the Twelfth Federal Reserve District, which includes the nine western states -- Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Vtah and Washington -- quam, American Samoa, and the Northern Mariana Islands. To serve this expansive region, the San Francisco Reserve Bank has five offices: the headquarters in San Francisco, and offices in Los Angeles, Portland, Salt Lake City, and Seattle. Each office provides financial services to the public and banking institutions in its locale. 1 FROf1 THE gOARDROOf1 Seated, from left, Judith M . Runstad, Deputy Chairman. and James A . V ohs, Chairman. Standing, from left, Patrick K. Barron, First Vice President, and Robert T. Parry, President. T he Community Reinvestment Act (CRA) calls for financial institutions to iden tify and meet the credit needs of their local communities, including low- and moderate-income neighborhoods. For those of us living in the Twelfth District, community reinvestment has become particularly significant during the 1990s as banks look for new markets in an increasingly competitive environment and the western economy continues to be challenged by broad-based economic problems. During these difficult economic times, it's easy to lose sight of how the long-term strength and growth of our regional economy depends on the health of our local communities and their ability to create new jobs and increase incomes. Our region's prosperity was founded on small business growth and community development at the local level. Yet, for some of our local communities, particularly low- and moderate income areas, ready access to credit for housing, small business, and community development needs has been limited for some time. These limitations have been compounded by the fact that many segments of our low- and moderate- income communities are unable to qualify for loans in conventional credit markets. In passing CRA, Congress reaffirmed the fundamental role banks play in the economic well-being of all segments of the communities they serve. To meet the challenge of providing credit to underserved markets, many Twelfth District banks are working with local community and government organizations to leverage resources and share risk to bridge the lending gap unfilled by conventional credit markets. 2 In this Report, along with providing an overview of CRA, we profile how banks in our District are contributing to public/private partnerships to meet their CRA obligations and open new markets. We also focus on the important role the Federal Reserve and our Community Affairs staff playas a catalyst for bringing public/private partners together and in providing banks with guidance and information on CRA and fair lending-related issues. This Report also highlights the Bank's performance in achieving its fundamental objectives during the past year. Regulatory changes and rapidly changing technology are reshaping the wholesale banking arena in which we operate. To meet the challenges presented by this dynamic environment, we continue to enhance the quality, safety, and efficiency of our payments system and to develop innovative financial services and products to assist financial institutions and their customers. The supervision and regulation of state-chartered member banks and bank holding companies is another critical area of responsibility for our Bank. Our goals in this area continue to be to maintain a safe and sound banking system and to ensure compliance with CRA and other fair lending legislation so that all of our Twelfth District constituencies have equal access to credit. We would like to extend our thanks and appreciation to our Twelfth District directors for their invaluable counsel during 1993. The Directors' independent assessment of economic and financial conditions throughout our nine western states is critical to the formulation of monetary policy. We also would like to express our sincere thanks and appreciation to those directors who completed their terms of service during 1993: On the San Francisco Head Office Board, John N. Nordstrom (Co-Chairman, Nordstrom, lnc., Seattle, WA); on the Los Angeles Branch Board, former Chairman, Donald q. Phelps, (Chancellor, Los Angeles Commu nity College District, Los Angeles, CAli on the Portland Branch Board, Stephen C, Kimball (Chairman, President and CEO, Baker Boyer Bancorp, Walla Walla WA); on the Salt Lake City Branch Board, H. Roger Boyer (Chairman of the Board, The Boyer Company, Salt Lake City, VT), Curtis H. Eaton (Vice President, Manager; Community Banking Area First Security Bank of Idaho, N.A., Twin Falls, ID), and Virginia P. Kelson (Partner Ralston Consulting Group. Salt Lake City, VT); and, on the Seattle Branch Board, B.R. Beeksma (Chairman of the Board, InterWest Savings Bank, Oak Harbor, WA). ~T7 James A. Vohs Chairman Robert T. Parry President 3 gUfL1)fNG ERf1)G£S COM M V N llY REINVESTMENT IN THE TWELFfH DISTRICT "W e simply cannot as a nation tolerate unfair and illegal activity that puts some of our citizens at a disadvantage as they try to participate in the credit markets." -Alan Greenspan Chairman, Federal Reserve Board of Govemors 4 In 1977 Congress passed the Community community groups and bankers alike. This Reinvestment Act (CRA) directing banks and dissension sparked a major reform effort thrift institutions to help meet the credit during 1993 that centered around providing needs of all segments of the communities examiners with objective standards for they serve, including low- and moderate measuring a bank's lending to low- and income neighborhoods. Among Congress' moderate-income areas. Under the proposed aims in passing the law was stemming the plan, the new measures consider the ratio of practice of redlining, which was perceived as a lender's market share of loans in low- and one of the causes of economic deterioration moderate-income census tracts to its overall in our nation's inner cities. market share of loans made in its entire service area. Less stringent guidelines would CRA requires each of the four federal banking be applied to banks with less than $250 regulators to encourage financial institutions million in assets. The proposed regulations, to help meet the credit needs of all segments set to be finalized during 1994, do not alter of their delineated communities, consistent current public disclosure requirements. with safe and sound banking practices. Vagueness in the original legislation has tended to give financial institutions consider able flexibility in creating CRA programs and BVILDINC/ COMMVNITY PARTNERSHIPS loan products which best suit their expertise and the credit needs of their communities. A growing trend in successful community CRA does not require institutions to offer reinvestment programs is the formation of specific types or amounts of credit to fulfill local economic partnerships that bridge the their CRA obligations. The financial institu lending gap in conventional credit markets tions covered by CRA are federally-insured to finance affordable housing and small commercial banks, savings banks, and businesses in low- and moderate-income savings associations. Credit unions are areas. These partnerships are comprised of exempt from CRA. government agencies, community groups, and banks that contribute their business CRA has been amended and strengthened expertise, pool capital, and share risk to since its passage in 1977. A significant make financing community development and change requiring banks to make their CRA affordable housing projects possible. Neither performance evaluations and ratings available the public nor the private sector can to the public was included in the Financial singlehandedly underwrite these projects Institutions Reform, Recovery, and Enforce because of their complexity, higher degree of ment Act of 1989 (FIRREA). Public disclosure risk, and failure to conform to conventional requirements, which took effect on July 1, underwriting standards. Throughout the 1990, were instrumental in paving the way Twelfth District, banks are joining with for greater public scrutiny and community community and government organizations to involvement in the CRA process. build local partnerships and develop creative strategies for financing unmet housing, Since its inception , CRA's overall lack of business, and community credit needs. This specificity has stirred dissatisfaction among is a complex task given the divergent needs 5 of our nine state region, the largest in the depending upon the housing needs of their Federal Reserve System. California, with 32 communities. million people, is the most highly populated, culturally diverse state in the nation. Lending consortia provide banks with safe and sound lending opportunities to meet Twelfth District banks are contributing to their CRA obligations by allowing them to local partnerships in a number of ways. contribute to projects they can't underwrite Some banks have united to form multi-bank on their own. This is especially true for lending consortia which pool funds to small- to medium-sized banks which may not provide long-term mortgage financing for have the funds or specialized knowledge to affordable housing in low-and moderate directly finance these complex loans. In a income areas. Some lending consortia also lending consortium, each bank's risk is finance construction and renovation loans, proportional to its share in the loan pool. ASSESSfNQ eRA PERfORMANCE Each institution covered by CRA must have: Periodic CRA examination by its supervisory agency evaluating such performance factors as whether the institution has identified the credit needs of its delineated community, marketed products to aU segments, participated in community development projects, and engaged in discriminatory lending or other illegal credit practices. The examination results in the bank's CRA Performance Evaluation and Rating. CRA Statement delineating the geographic community it serves, loan products offered, and its CRA notice. Public File containing current CRA Performance Evaluation and Rating, CRA Statement, and any written comments received from the public regarding its CRA performance. CRA performance is considered by the Federal Reserve or other agency when an institution applies to: alter its business through a merger or acquisition, branch expansion, or office relocation, obtain federal deposit insurance; fonn a bank or savings association holding company. A bank's CRA Performance Rating does not, in any way, reflect its financial condition. 6 Multi-bank lending consortia have helped Joining a multi-bank lending consortium is finance a wide range of affordable rental not the only way a bank may participate in units across the District including single the community development process. Many room occupancy housing in urban areas, banks have established their own specialized senior and "special needs" hous ing, and community lending programs which work in housing for low-income farmworkers and concert with government and community other low- and moderate- income families . funding to provide interest rate subsidies , In many of our District states, consortia also blended rate loans, and loan guarantees are contributing funds to help make the which reduce the borrower's cost while dream of home ownership a reality for low providing an acceptable level of risk for the income families, single-parent households, contributing bank. the disabled, the elderly, and other underserved groups. One Twelfth District institution, BankAmerica Corporation, has taken its specialized Along with contributing financing to under lending program a step further to form its write affordable housing projects, some own community development bank -- one of lending consortia are working with local only a handfu l in the nation. Established in community and government organizations to 1990, Bank of America Community Develop finance small business and community ment Bank (BACDB) has worked with other development credit needs. Most start-up public/private partners to finance affordab le businesses and community development housing and community and business pro jects are insufficiently capita lized and lack development projects in almost all of our the necessary collateral to qualify for loans nine district states. in the conventional credit market. bridge the lending gap to finance housing BACDB has helped with on-site childcare for low-income families Small business and community deve lopment in San Diego, provide emergency loans to credit programs under CRA are those which small business owners in the aftermath of directly benefit underserved markets and the South Central Los Angeles riots, and disenfranchised populations to help contribute construction and long-t erm stimulate job creation and promote economic financing for a Native American outpatient self-sufficiency. Working in partnership with medical care facility. community organizations, banks -- indepen dently or as members of consortia -- help To help meet the need for longer-term small meet the credit needs of these "nontradi business loans in their communities, some tional" borrowers through financing small banks have become specialists in making businesses, investing in job skills and Small Business Administration (SBA) training programs, or fund ing community guaranteed loans . Guaranteed loans are daycare and healthcare programs. Banks readily sold in the secondary market also provide real estate financing for the replenishing a bank's sources of financing so acquisition or renovation of community that it can continue to make loans in its service facilities such as healthcare clinics, local communities. To contribute as equity childcare centers, and job training agencies. investors in small businesses and community service organizations, some banks have 7 BRID(jIN(j THE · . LENDIN(j (jAP P ublic /private partnerships are successfu lly bridging the lending gap in conventional credit markets. Bridging this gap requires financial contributions from each partner -- wh ether launching a small business or funding community development or affordable housing. For example, to complete an affordable housing project from the ground up requires an average of six financing partners. Palo Verde Gardens, a new senior citizens rental housing development recently completed in N evada is a prime example of how the public, private, and community sectors come together to bridge the lending gap. The project targets senior citizens at 55 percent or less of the median income for Clark County, N evada. Palo Verde Gardens originated through the efforts of three public/private partners which serve as owners/sponsors of the apartment complex. The H enderson Association for Senior Citizens H ousing, a N evada nonprofit corporation whose mission is to develop affordable housing for senior citizens, was the nonprofit sponsor. Henderson Association also has partial own ership in the development to ensure long-term maintenance and affordability. The for-profit sponsor was CO M CAL Investments Ltd.. a California limited partnership, which provided the development and construction expertise to formulate the project. Various corporate and private investors served as limited partners to contribute substantial equity dollars to the project in exchange for majority ownership and the tax credit benefits. The land purchase and building construction were made possible by the contributions of six more public/private partners. The City of H enderson and Clark County each contributed Community Development Block Grants (CDBCi) funds toward one-half of the land acquisition. Bank of America Community Development Bank (BACDB) was the construction lender while the Nevada Community Reinvestment Corporation (NCRCL a 19-bank lending consortium, was the long-term permanent mortgage lender. The Housing Authority of Clark County is the Property Manager and Rental Agent and the Nevada State Hous ing Division administers the Low Income Housing Tax Credit program. This innovative public/private partnership successfully bridged the lending gap to build a 60-unit much-needed, affordable housing complex for Nevada senior citizens. 8 formed their own community development using flexible underwriting at below market corporations (CDCs) or have joined multi interest rates. bank CDCs. foundations, charitable organizations, RLF funds come from financial institutions, and other corporate and individual donors which provide grant RESPONDINCj TO THE NEED monies or loans. Community organizations are the backbone For larger loans, UHF helps nonprofit of successful community reinvestment. They developers obtain below market rate perma are the grassroot link to identifying the nent and interim loans from conventional unmet credit needs of our Twelfth District lenders by providing technical assistance in communities. Along with contributing packaging loans. financing, some community organizations risk while financing short- and medium-term provide the specialized knowledge needed to loans, UHF has brought institutions together package these complex loans within safe and to form multi-bank mortgage banking pools. sound lending guidelines. The Low Income Other creative financing strategies include a Housing Fund (UHF) is one such organization mortgage guarantee program and an working to help at-risk communities in our expiring use program to help tenant groups District. Established in 1984, UHF is a non and non profits purchase government insured profit, nongovernmental financial institution properties. To help institutions share headquartered in San Francisco with branch offices in Los Angeles and New York. UHF has helped form public/private partner ships to tackle inner-city homelessness in UHF's founding belief is that decent and San Francisco, provide transitional housing secure housing for all of our citizens is one for women recovering from substance abuse of the most basic human rights . UHF's mis in Portland, and fund construction loans for sion is to increase access to capital in low low-income home buyers in California and income communities to provide adequate, Arizona . UHF is one of many nonprofit affordable housing for all Americans, particu community organizations in the Twelfth larly those who have been greatly ignored in District working to give our communities the the past -- low-income families, the elderly opportunity to grow. living on fixed-incomes, the homeless, single mothers, farmworkers , and peop le with special housing needs. LAY IN Cj TH E FOUNDATION Through its direct lending program and as a Small businesses form the economic fabric loan packager, UHF has developed numerous of our communities, creating new jo bs and innovative financing strategies which bridge income to help communities flo urish and the lending gap to bring nonprofit deve lopers become self-sufficient. Typically, banks do and financial instit ut ions together. UHF's not finance small business loa ns under financing tools include a Revolving Loan $50,000 Fund (R LF) which provides direct, short-term the necessary collateral and investment loans to nonprofit housing developers capital to qualify for financi ng. Enter and most start-up businesses lack 9 HOH£10 OW!)J H ome ownership is a key ingredient in breaking the poverty cycle and revitalizing depressed areas. Often it lays the foundation for economic self-sufficiency and growth, both for the home owners and the community. Low-income families in Arizona are getting the chance to experience this first-hand through the Home to Own program, a publici private partnership that provides mortgage financing for low-income home buyers. The two-year pilot program, which began accepting applications in September 1993, is funded through an alliance of community and business organizations along with the Federal National Mortgage Association (FANNIE MAE) and First Interstate Bank of Arizona, the long-term mortgage lender in the project. The Arizona Multi-bank Community Development Corporation, another contributing partner, has invested $500,000 in the project to help cover down payment and closing costs for the low-income borrowers. Home to Own bridges the lending gap by offering low-income working families and special needs populations, who are unable to qualify under conventional underwriting guidelines, a chance to break out of the poverty cycle. Modeled after First Interstate's affordable housing program, Home to Own plans to make the dream of home ownership a reality for 250 Arizona families with its initial loan pool of $10 million. Housing counseling for eligible borrowers covering all aspects of the loan process is an essential element of Home ot Own to reach very low-income families. Special populations served by the program include minority households, single parent households, the elderly and disabled, along with other low income families. Once the pilot program is completed, the alliance hopes to launch similar community-business partnerships throughout the Southwest. 10 microlending, an almost century old, little peer-support, business assistance program known practice of lending small, sometimes where loan payments are collected and the minuscule, amounts of money to help low new micro-entrepreneurs receive technical income and other "nontraditional" borrowers assistance. Another important goal of UMLF's launch their entrepreneurial dreams. program is to assist entrepreneurs in build ing their capacity to qualify for conventional "Who wants to loan money to a single financing as their businesses expand. parent who has no job and is more than 45 years old?" The answer to this question UMLF's willingness to take a chance on posed by Marjorie Ball, a Utah Marjorie Ball enabled her to finance some of Microenterprise Loan Fund (UMLF) borrower, the basic ingredients -- a copier, laser is obvious -- no one. This single mother's printer, and marketing catalog -- to plight is a common theme among UMLF loan successfully launch her craft pattern applicants. They're all hardworking, capable business. UMLF's loan also increased individuals, unwilling to be victimized by Marjorie's potential for expanding her six the ir circumstances, yet unable to obtain person business. Whether launching a conventional financing. cottage industry such as Marjorie's or advancing a line of credit for a fast -growing UMLF is one of a growing number of Twelfth start-up, multi-bank consortia such as UMLF District multi-bank lending consortia are successfully bridging the lending gap to organized to fill this gap. Twenty-two bring jobs back into our Twelfth District financial institutions loaned $500,000 to communities. fund UMLF's initial loan pool. Other publici private partners joined these institutions to For most women participating in the Coali help finance a loan loss reserve fund . Fifty tion for Womens' Economic Development percent of each lender's share of a UMLF (CWED) microlending program, the chance to loan is guaranteed through the loan loss pursue self-employment is a necessity, not reserve fund to provide an additional risk an option. CWED is a Twelfth District non buffer beyond the lender's participation in profit community microlending program that the loan pool. targets low-income women. Founded in 1988 in response to the alarming increase in Although UMLF does not require borrowers poverty rates among women and children in to have collateral, invest capital or even the Los Angeles region, CWED's program have a spotless credit history, they must be provides business training, technical able to demonstrate their abilities through a assistance, and financ ing to low-income well-conceived business plan. UMLF's credit women who want to become self-sufficient committee, composed primarily of bankers through self-employment. CWED is modeled and small business owners , reviews and after successful microlending programs which considers each loan application . Borrowers have their roots in Latin America, receive a maximum of $10 ,000. Bangladesh, and India where self-employ ment programs have substantially A central element of UMLF's program is empowered women and increased their mandatory attendance by each borrower in a incomes. While women are the primary 11 participants in the program, CWED began Loan Fund, by providing technical assistance offering assistance to men in 1992 . and training on credit management and small business development to program CWED's technical assistance programs - parti cipants, and through volunteering on offered in Spanish and English -- include CWED's advisory committee. "hands-on" micro -business workshops focusing on fundamental business skills and For CWED borrowers, a small loan can make developing a business plan. a big difference -- the prospect for a Once cert ified through attending workshops and operating doubling of income with the purchase of a a micro -business for six months, program street vendor's cart approved by the county participants may join a Solidarity Circle to health department, the opportunity to receive a loan from CWED's Revolving Loan become a licensed family daycare provider or Fund. the chance to expand a catering service based on a sound business plan. CWED and Solidarity Circles are peer-lending and programs like it in the Twelfth District do not support groups of five start-up entrepreneurs. pretend to offer an easy solution to Circles help engender success because of the revitalizing our urban and rural communities. way they are organized. Loans are extended Although not the answer for all women, within the group two at a time, with group self-employment can offer a hand up from consensus determining the order of the loan poverty for those who have the motivation recipients. If someone is late with a payment and drive to try to beat the odds to achieve or defaults on a loan, it is the responsibility financial independence. of the circle members to cover the late payment and/or the full amount of the loan. Circles also provide the entrepreneurs with much-needed support and sharing of expertise as they nurture their businesses. When a circle loan is paid, many women opt to apply for a second loan either through the circle or through CWED's individual loan program. Some of the business owners move on to become " bankable" in more conventional credit markets to further expand their businesses. CWED's Revolving Loan Fund is capitalized through grants and loans from various private and public sou rces. Loans for start-up microenterprises range from $500 to $5,000 while loans for existing microbusinesses range from $5 ,001 to $25,000. Banks can contribute to CWED in a number of ways - through direct contributions to the Revolv ing The Role of the Federal Reserve and Community Affairs "To exclude segments of our society from fundamental economic opportunities, such as business or home ownership, is to rob our institutions and our economy of growth potentia1." -lohn P. LaWare, member, Federal Reserve Board of Governors Community Affairs Staff, headed by Assistant Vice President Kelly Walsh. Seated, C. Jane Shock and Kelly Walsh. Standing, from left, John Byrd, H. Fred M endez and June Yambao. The Federal Reserve is charged with examin increased dramatically with the heightened ing state banks, that are members of the public interest in CRA resulting from the Federa l Reserve System, for compliance with public disclosure of CRA evaluations. CRA. CRA also mandates the Federal Demand for guidance also has grown Reserve to "encourage" institutions to meet markedly as the scarcity of public funding for the local credit needs of all segments of community development has put increasing their communities . pressure on financial institutions to meet these needs. In 1981, to fulfill this role, the Federal Reserve's Board of Governors established a The Twelfth District's Community Affairs Community Affairs Department in each of the Department sponsors numerous conferences 12 Reserve Banks to provide financial and regional seminars, including an annual institutions with guidance and information on CRA conference, to help educate bankers CRA-related issues. This advisory role and community development profess ionals. 13 Another workshop targeting bank directors Act (FHA) . To provide technical assistance in and executive offi cers provides guidance and th is area, our Community Affairs Depart ment training on the top-down approach to manag sponsors fair lending workshops throughout ing a CRA program . the Dist rict. The w orkshops cove r th e ten recommended guidelines for fair lend ing th at CRA is one of four interrelated fair lending are incl uded in the Federal Reserve laws. To comply wit h CRA, banks often must pu blicat ion, "Clo sing the Gap." also meet the requirem ents of the other fair atten dees also hear from bankers who have lendi ng laws w hich include: the Home Mort esta blished successful fair len ding programs. Seminar gage Disclosure Act (HMDA), the Equal Credit Opportunity Act (ECOA), and the Fair Housing El ~~'~~: Tk~'~~ '7)~ J.~~ --",- - ,,,,",",,,,,,,--,,,,,--= T he Ca liforn ia Community Reinvestment Corporation (CCRC) has helped El Sueno lmposible -- decent affordable housing -- become a reality for hundreds of very low-income families across California. Th e driving force behind this monumental effort is the Civic Center Barrio Housing Corporation, a San ta Ana-based nonprofit community housing organization which rose up in response to the displacement of 400 of these families from a Santa Ana barrio. Founded in 1977, the organization has grown from developing a few dozen hous ing units concentrated in southern California to over 1200 affordable housin g locations across the state since its partnership with CCRC in 1989. CCRC strong ly believes in the soundness of Civic Center's grassroots organizing approach which empowers residents, giving them a vested interest in their new homes an d communities. This empow erment has a spill-over effect, launching education, employm ent, childcare, and other revitalization endeavors. Along with contributing permanent, long-term mort gage financing for affordable apartment complexes, CCRC has helped Civic Center form partnerships with housing devel opers and investors to provide financial backing for economic development projects such as childcare facilities and job training. Civic Center hasn't stopped dreaming. Future plans include forming an economic developm ent corporation to launch small businesses in very low-income communities across the state. 14 Providing this kind of training is critical in agencies, the Twelfth District also publishes light of recent HMDA amendments that a newsletter to fulfill this important role. require lenders to report the gender, race, Distributed quarterly, "Community and income level of all home mortgage Investments" serves as an information applicants. Previously, lenders were only network for showcasing premier community required to report the number, dollar reinvestment projects that have been amount, and location of mortgage loans they implemented through local public/private made each year. As reported widely by the partnerships. Bankers and community news media, HMDA disclosures often have groups often use these premier projects as shown disparate lending patterns along racial models for their own CRA partnership efforts. lines. These disclosures have triggered "Community Investments" also provides strong responses from community groups - updated information and training on CRA and by the banking industry itself -- seeking and fair lending-related issues . ways to eliminate disparate lending patterns. To help banks identify prospective To encourage economic development, the community investment opportunities and Twelfth District's Community Affairs local community groups to work with, Com Department cosponsors workshops with munity Affairs publishes Community Needs community development groups to target Assessment profiles of cities and specific communities and populations. One communities within the Twelfth District. The such workshop, "Increasing Lending on profiles provide a review and analysis of the Indian Reservations Through the Use of economic conditions and demographic Credit Enhancements," is organized in characteristics of the profiled community. conjunction with the Institute for American They also contain a detailed description of Indian Entrepreneurial Education and the affordable housing and economic develop Federal Reserve Bank of Kansas City. This ment organizations and public sector hands-on workshop is designed to help agencies that are available for lender institutions address unmet credit needs on participation in meeting CRA obligations and reservations. Historically, even though viable community credit needs. To date, Community investment opportunities exist , reservations Needs Assessment profiles have been have had limited access to capital due to the produced for ten major cities within the scarcity of local financial institutions. Banks Twelfth District. The profile for the South also have been reluctant to provide small Central Los Angeles business and affordable housing financing to direct response to the civil disturbances that reservations because of unfamiliarity with occurred in the area in 1992. region was compiled in tribal laws and court systems. One of our Community Affairs Department's most important roles is serving as a catalyst BANKINCj ON OVR COMMVNITIES in the formation of partnerships. While Community Affairs conferences provide many The concept of public/private participation at opportunities for bankers to meet with the local level is an inherent element of the community organizations and government regional structure of the Federal Reserve 15 WHAT 15 THE DEVELOPMENT FliND' T he Development Fund is a San Francisco-based national leader in the develop ment of innovative model financing programs to support affordable housing and community economic development for low- and moderate- income communities. Founded in 1963, the Development Fund is one of the oldest nonprofit affordable housing and community development support organizations in the nation. The Development Fund's pioneering model programs include the concept of the com munity reinvestment corporation (CRC), a large-scale financing program for affordable housing development, and the Reverse Annuity Mortgage Program (RAM), which is designed to help low- and moderate- income older adults borrow against the equity in their homes. The Development Fund works with various public/private partners and financial institutions to design and create the model programs and to demonstrate their effectiveness. Once established, the programs are then transferred to other nonprofit organizations for long-term management. The Development Fund's RAM model program has been extensively replicated in many states. This home equity conversion program allows older adults -- who often struggle to meet expenses while living on fixed incomes -- to increase their monthly income by borrowing against the equity in their homes. John Trauth, Executive Director of the Development Fund, originally conceived the CRC concept as a practical strategy to address both the critical need for affordable hous ing and the limitations banks face in financing these types of complex projects. A CRC is a nonprofit multi-bank lending consortium specifically formulated to provide long term mortgage financing for multi-family affordable housing developments. Joining a CRC allows banks to pool funds and share risk so they can safely participate in financ ing affordable housing projects and meet their Community Reinvestment Act (CRA) obligations at the same time. Many banks are unable to independently underwrite long-term mortgage loans due to their higher degree of interest rate risk. Beginning in 1989, the Development Fund worked in partnership with the Federal Reserve Bank of San Francisco to create the California Community Reinvestment Corporation (CCRC) which has served as a model to establish CRCs in four other Twelfth District states -- Hawaii (1990), Washington (1991), Nevada (199£), and Idaho (1993). Two CRCs have been created in Rorida based on the CCRC prototype. To meet the critical need for financing community and small business development, the Development Fund and 5£ California banks are creating the Community Economic Development Lending Initiative (CEDLI) which is being launched in partnership with the Federal Reserve Bank of San Francisco. CEDLI also may serve as a model for other states striving to expand the role of private capital in community development activities. 16 System and the unique role played by each and moderate- income families. Federal Reserve Banks' boards of directors. As with all Federal Reserve Banks, the The Twelfth District's Community Affairs composition of the Twelfth District Bank 's Department plays a role in building local five boards of directors -- at its San Francisco CRA partnerships through its active head office and four branches -- extends participation in the formation of statewide beyond banking to include representation multi-bank lending consortia. In 1989, our from the business, agricultural, and Community Affairs Department joined forces community sectors. Directors playa key role with The Development Fund to form the in the formulation of monetary policy by California Community Reinvestment providing an assessment of the current Corporation (CCRC). CCRC, a nonprofit economic and financial conditions shaping mortgage banking corporation, is a our region. consortium of 58 California banks which pool Board member representives from community economic development funds to provide permanent, fixed rate, long organizations also help keep our Bank's term loans for affordable, low-income, multi executive and community affairs staff family rental housing projects throughout the apprised of community development issues. state of California. To date, CCRe's revolving loan pool of over $200 million has enabled Currently, there are three Twelfth District community developers to finance 44 housing board members rep resenting commun ity projects throughout California. Thirty-two of economic development corporations. Anita E. the 44 CCRC loans have either been sold or Landecker, Regional Vice President, Local are in the process of being sold on the Initiatives Support Corporation (L1SC), chairs secondary mortgage market to allow CCRC to our Los Angeles Branch Board. replenish its pool and provide a revolving L1SC is a national nonprofit community development source of funding for new projects. support corporation -- the largest in the nation -- that provides financing, training, During 1993, our Community Affairs and technical assistance to community-based Department worked with The Development developers undertaking affordable housing Fund to plan the Community Economic and economic development projects to revi Development Lending Initiative (CEDLI). Stil l talize their neighborhoods. Cynthia A. in its formative stages, CEDLI is targeted to Parker, a member of our San Francisco Head be a mu lti-bank lending consortium which Office Board, is the Executive Director of will provide loans to small businesses, Anchorage Neighborhood Housing Services minority-owned firms, and microbusiness Inc. (NHS). Constance G. Hogland, Executive enterprises in California communities that are Director of Boise NHS, sits on our Salt Lake unable to obtain credit in the traditional City Branch Board. The Anchorage and Boise credit market. CEDLI also will provide tech NHSs are locally-based community develop nical assistance to help borrowers success ment corporations (CDCs) that are affiliates fully manage their businesses and meet their of the NeighborWorks national network. debt ob ligations. CEDLI's task force, which These two CDCs form partners hips with consists of California bankers and comm unity financial institutions and are involved in the production of affordable housing for low- leaders, plans to work over the next year to create and implement the lending program. 17 Management Committee (From left) Patrick K. Barron, First Vice President and Chief Operating Officer Michael J. Murray, Senior Vice President, Administration Robert T. Parry, President and Chief Executive Officer Thomas D. Thomson, Executive Vice President, Central Bank Functions 18 of information to permit quick identi fication of checks that must be returned unpaid. This reduces the risk of loss to the deposit ing bank and its customers . The District also OPERATIONS AND FINANCIAL SERVICES introduced a new check "truncation" service, whereby our five offices wil l ret ain a paying institution's checks and provide photocopies Bank consolidation and regulatory change are of any of its items on request. This service altering the face of the financial services eliminates check transportation and reduces industry in the Twelfth Federal Reserve check processing requirements considerably. District and along w ith it, the kinds of payments services financial institutions need . To extend the benefits of electronic present In 1993 the Twelfth Dist rict met the challenge ment to checks that paying institutions to provide innovative and highly automated receive directly from collecting institutions, services by upgrading the automation infra our District developed a group of "present structure of our ope rations, int roducing ment point" services . With the implementa several new services, and continuing to tion of the Same-Day Settlement provisions improve service quality, reliability and of Regulation CC in January 1994, paying efficiency. banks are likely to see a significant increase in the number of direct presentments because "same-day settlement" gives collect CHECK SERVICES ing banks the right to present checks directly and receive payment the same day. Our The changing needs of financial institutions new " presentment po in t" services are have had a tremendous impact on check designed to help paying institutions manage clearing services. Increasingly, institutions this increase in direct presentments and are demanding electronic services that speed continue to take advantage of our payor the flow of payment information and mini bank services by designating one of our mize the number of times a check must be Federal Reserve offices as an alternative processed. presentment point. To promote the electron ic collection of checks The Twelfth District also introduced an and to meet this growing demand for elec electronic adjustment service in 1993. This tronic services, the District added several new service accelerates the resolution of errors by products to its line of electronic "Payor enabling institutions to initiate and track Bank" services, including MICR-Link Plus. adjustment cases electronically. The new This electronic presentment service enables service is available via direct computer the paying financial institution to post interface or Fedline -- an integrated, personal cleared checks to its customers' accounts computer-based software package that directly from t ransm itted files contain ing the provides access to a variety of Federal payment information from the checks' "MICR" Reserve services. line. It decreases the amount of processing the institution must do and speeds the flow 19 To support our product and service enhance depositing and receiving work. This new ments and provide for more effective cost system sets the stage for the eventual control, we upgraded our check processing System-wide consolidation and centralization automation infrastructure. Also , our District of ACH processing. piloted a prototype medium -speed check imaging system to explore ways to speed During the year, all ACH support and pro collection and meet future check processing cessing functions were consolidated at our requirements through the capture, storage San Francisco head office to increase produc and retrieval of digitized images of checks. tivity and cost control. At the same time, the District maintained very high levels of customer service, including an on-time ELECTRONIC PAYMENTS delivery rate of 100 percent for both the number and dollar value of ACH items. A major initiative in electronic payments was the successful transfer of computer process 1993 also marked the conversion to the all ing for the Fedwire large-dollar funds transfer electronic commercial ACH, which provides system and the Book-Entry securities transfer for faster and more reliable delivery of items. system to a consolidated processing site in To speed the return of unpaid items, more Richmond, VA. The move was the culmination over, our District instituted a new automated of months of tes ting -- to ensure that con voice response system which enables smaller trols and performance would be acceptable institutions to send information via touch in the new environment and that disaster tone telephone. This voice response system recovery capabilities were adequate. significantly reduces costs and potential errors for the institutions that had been This effort was part of the first phase of a using the paper-based return service . Federal Reserve System plan to consolidate all mainframe computer processing at three sites -- East Rutherford, New Jersey; Rich FUNDS TRANSFER mond, Virginia; and Dallas, Texas. Consolida tion will centralize the computer processing For the seventh straight year, both full-day operations of the Federal Reserve System 's and critical hours availability for the Fedwire key electronic payments services (including, eventually, the ACH service), thereby improv service -- at 99.99 percent and 100 percent, respectively -- exceeded service quality ing reliability, expanding customer service standards established for the Federal capabilities and promoting greater efficiency. Reserve System. During the year our District continued to A UTOMATED CLEAR/N Ci H OUSE work closely with financial institutions to improve their disaster recovery capabilities, During the year, we implemented Fed ACH including the security aspects of t hei r '93, a new processing system that offers financial institutions and their customers greater flexibility and expanded hours for contingency arrangements. To assist finan 20 cial institutions during crises, we developed a database conta ining each institution's recovery plans and worked with them to test CASH SERVICES their capabilities. As part of a multi-year plan to upgrade Cash Services automation, our District undertook SECURITIES AND FISCAL SERVICES three major initiatives in 1993. Successful implementation of the Cash Automation A major milestone for Securities Services in System, an advanced system to integrate 1993 was the successFul implementation cash ordering, operating and accounting of TMPS, the new Treasury securities functions, was a key part of this plan. automated auction processing system for This system automates all aspects of cash primary government securities dealers. By operations, including balancing and combining on-line, automated access to the reporting, to provide for more effective auction process with back-end processing of control and more efficient operations. orders, this new system speeds the auction process while reducing errors and improving Along with the implementation of the Cash monitoring capabilities. Automation System, we also enhanced the cash services module of Fedline to include 1993 also marked the beginning phases of deposit notification and updated cash order the transfer of the Twelfth District's Savings ing functions. For institutions that do not Bond operations to the Federal Reserve Bank have Fedline access, the District introduced of Kansas City, one of five new regional FedFone, an automated voice response Savings Bond processing sites. system that enables them to order cash and The eventual transfer of all Federal Reserve Savings Bond send inFormation quickly and efficiently. operations to one of these sites will reduce costs and enhance operating efficiencies in The Material Handling System, an automated the System's fiscal agency services . storage and retrieval system for container ized valuables, that will be installed in our Providing high-quality customer service two largest offices -- Los Angeles and San continued to be a priority in 1993. To Francisco -- in 1994, also was completed expedite our response to requests and during the year. This system will improve questions from depository institutions and operating efficiency by interfacing with the the public, we established a special customer Cash Automation System and providing service unit in our San Francisco office. state-of-the-art inventory management, Equipped with computerized databases and automated vault operations, and expanded automated processing systems, this new unit vault capacity. is capable of quickly handling and tracking any aspect of financial institutions' and the Finally, as part of a System-wide, multi-year public's fiscal agency transactions. plan to upgrade currency processing equip ment, the District began installing new, second-generation machines during 1993. These machines will increase currency throughput, enhance counterfeit detection capabilities, and, because they will be linked 21 to the Cash Automation System, provide for this year, including programs on the func more effective monitoring of deposit quality. tions of the National Information Center banking database, new Daylight Overdraft requirements, and an educational program PUBLIC INFORMATION about money for grade school audiences. Media outreach efforts focused on expanding A record number of eight Money and Bank awareness and understanding of the Federal ing workshops were held for teachers, Reserve System and banking and economic including the first ever held in Alaska and developments in our region. Hawaii. A comprehen Educational programs and products sive media visitation program -- including were strengthened through the introduction newspapers, business journals, wire services, of a newsletter for teachers produced in and television and radio stations -- was cooperation with state councils on econom conducted in Idaho, Oregon and western ics education in our District. "What is Washington . Bank senior management held Money?" a computer-animated video and news briefings with editors and reporters high school curriculum unit, was completed from various newspapers. The Bank for free distribution to schools nat ionwide. president held briefings and provided New Monetary and Fiscal Policy computer economic analyses following speeches in simulations and teacher materials also were Boise, San Diego, Portland and Salt Lake completed during 1993 for free distribution. City. Community reinvestment was spotlighted in ECONOMIC RESEARCH the Los Angeles region through the branch's role in organizing press and media coverage Economic Research focused on important for the newly formed Southern California topics relevant to Federal Reserve monetary, Business Development Corporation -- the regulatory, and regional policy analyses first multibank community development during 1993 and in the years ahead. For corporation established in L.A. Coverage example, macroeconomic studies examined also heightened overall awareness of issues such as the effectiveness of various Community Reinvestment Act (CRA) programs Monetary Policy indicators, business cycle and requirements. behavior in the U.s., and output losses associated with the Fed's efforts to reduce In December 1993, Fed-in-Print, the index to inflation. Banking studies looked at deposit Federal Reserve System economic publica insurance reform , bank capital regulatory tions became available on the Internet. This issues, fair lending laws, problem real estate is the result of efforts by the Research Library loans, and the role of banks in short-term working together with other Reserve Bank lending. Regional analyses focused on water libraries to enhance public access to Federal policies and income dispersion in the U.S. Reserve economic research. while research on our District economy took a look at western mining, the defense and The Audiovisual staff produced several major System, District and other agency projects 22 aerospace industries, and the spill-over western states. SVPERV ISIO N , REqVLATION, AND CREDIT Our Center for Pacific Basin Monetary and During the year, Reserve Bank examiners Economic Studies continued its role in pro conducted a total of 63 examinations of moting central bank cooperation across the commercial banks. Weakening fi nancial Pacific Basin and enha ncing pub lic awareness conditions prompted for mal superviso ry of t he region' s mo netary and econom ic po licy acti ons against four ban ks, informal actions issues through its net work of internat ional against six banks, and the assessment of researchers, international conferences, sta ff civil money penalties against one bank . research, and pub lications. 1993 Pacific Supervisory acti ons est ablis hed against two Basin research included studies wh ich exam banks in previo us years were li ft ed while ined monetary and exchange rate po li cies in another action was upgraded from a fo rmal Japan, Korea, Taiwan, and Australia. The to an informal action because of significantly Center's research is published in t he Pacific improved conditions. effects of the California economy on other Basin Research Abstracts and the Center Working Paper Series. Other international The San Francisco Reserve Bank continued research focused on international capital to actively counter the impact of the weak mobility and current account imbalances. ened Ca lifornia economy on the Twelfth District banking industry as a whole. All Public awareness of relevant policy issues bank holding com panies (BHCs) in the and economic developments was heightened Dist rict were mo nit ored regu larly and any through the dissemination of current Re deteriorating trends were prompt ly reviewed search publications incl uding the Week ly with supervisory action t aken, if necessary. Letter which analyzes topical economic issues Eighty-eight corrective action plans, of and is widely distributed among the general varying degrees of severity, were issued to public as well as business and academic holdin g companies in 1993 -- an increase of readers. 30 since year-end 1992. The substantial Regional data and information covering economic developments in the increase in this area largely reflects the Twe lfth District states was conveyed through diffi culties faced by some California holding Western Economic Developments, published companies, particularly in the southern twice quarterly. Fedviews, a monthly video portion of the state whe re econ omic program, updated current issues and the conditions have been mo re adverse and economic outlook using an interview format. prolonged. Public outreach efforts also included 68 At year-end, domestic app lication fi lings speeches t o community and business totaled 211 -- an increase of almost 50 groups within the District. Add itio nally, staff percent fro m the 143 fil ings durin g 1992. economists contribute d their expertise at Appli cat ions to form bank holding companies Money and Banking Wor kshops held for and for membership in the Federal Reserve educators t hroughout t he Dist rict. System accoun ted for a majo r port ion of the increase. As a result of applications 23 approved, we extended our supervisory examination tools to determine whether or purview over 20 new banks and three not banks are meeting their fair lending nonbanking companies . obligations. Of particular note was the San Francisco Compliance Unit's role in spear There were 148 agencies and branches of heading a three-day Interagency Lending foreign banks, 23 Edge corporation offices, Discrimination Seminar for examiners from all and 45 representative offices in our District four federal regulatory agencies. This by year-end 1993. Of these , the International seminar will be used as a model for Unit examined 94 agencies and branches, l6 developing discrimination analysis training Edge Act offices and all 45 representative for compliance examiners throughout the offices. Supervisory actions were levied Federal Reserve System. against 8 institutions which included one written agreement and one cease and desist During 1993, 62 depository institutions order. International applications totaled eight borrowed from the discount window in 1993 compared to 19 filings during 1992. compared to 78 institutions during 1992. A The substantial difference resulted from the total of 470 loans were extended du ring th e passage of the Foreign Bank Supervision year compared to 910 in 1992, with most Enhancement Act of 1991 which prompted a institutions borrowing on an overnight basis large number of filings immediately following for temporary adjustment needs. its passage. held $27 .9 billion in collateral accounts at Our Bank year-end . Credit staff continue to be Our Compliance exam iners continue to extens ively involved in a wide range of risk operate in an expanding, dynamic regulatory managment programs designed to quickly environment. identify and alleviate our Bank's exposure to Significant accomplishments included the development of a new training guide designed to assist examiners in monitoring banks for compliance with REG DD, the new regulation which imp lements the Truth in Savings Act. Fair lending practices, especially related to the Home Mortgage Disclosure Act (HMDA) and the Community Reinvestment Act (CRA) , remain a major focus of compliance efforts. To active ly address these areas, compliance examiners participated in numerous fair lending training programs and developed enhanced 24 excessive risk and potential loss. Branch Operations Seated, E. Ronald Liggett, Senior V ice President, Northern Region Standing, from left, O ordon R.(j. W erkema, Senior Vice President, Seattle, and A ndrea P. Wolcott, Vice President, Salt Lake City. John F. M oore, Senior Vice President, Los A ngeles, was not ava ilable for the photogra ph. Volume (in thousands) 1991 199 2 1993 3,599,575 436,226 3,758 ,533 604,544 4, 069,9 35 65 1.348 2,902 216 686 3.0 24 150 766 3,02 6 113 702 3, 027,6 85 78,0 13 33,221 2,97 8 ,582 7 6 ,7 81 33.49 6 2,994,5 7 2 73,64 8 3 2. 709 18.245 345 ,458 19.4 16 380 ,44 8 19,9 62 406. 220 866 97 9 10 78 48 3 64 Custody Services Cash Services Currency notes paid into circulation Food stamp coupons processed Securities Services Savings Bonds original issues Other Treasury original issues Book-Entry securit ies processed Payments Services Check Services Commercial checks collected Government checks processed Return items processed Electronic payments services Wire transfers processed Automated clearinghouse transactions processed Discounts and Advances Total discounts and advances* Number of financial institutions accommodated* * Whole number (not in tho usands) 25 F~~t-WW~g~~~ S~F~ g~~lJ~1)~M Chairman of the Board and Federal Reserve Agent James A. Vohs Chairman and CEO (Retired) Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals Oakland, California Carl J. Schmitt Chairman and CEO Vniversity National Bank & Trust Company Palo Alto, California William E. B. Siart President First Interstate Bancorp Los Angeles, California Deputy Chair Judith M. Runstad Partner Foster, Pepper s Shefelman Seattle, Washington E. Kay Stepp Fonner President and Chief Operating Officer Portland General Electric Portland, Oregon Gary (j. Michael Chainnan and CEO Albertson's, Inc. Boise, Idaho William L. Tooley Chairman Tooley & Company, Investment Builders Los Angeles, California Richard L. Mount Chairman. President and CEO Saratoga Bancorp Saratoga, California *** . Cynthia A. Parker Executive Director Anchorage Neighborhood Housing Services, Inc. Anchorage, Alaska 26 Federal Advisory Council President and Twelfth District Member Richard M. Rosenberg Chairman and CEO Bank of America San Francisco, California fA,4A~g~ gi)~ i)~ 1)~M Chair of the Board Anita E. Landecker Western Regional Vice President Local Initiatives Support Corporation Los Angeles, California William S. Randall CEO, Southwest Region First Interstate Bank Phoenix, Arizona Anne L. Evans Chairman Evans Hotels San Diego, California Steven R. Sensenbach President and CEO Vineyard National Bank Rancho Cucamonga, California Antonia Hernandez President and General Counsel Mexican American Legal Defenseand Educational Fund Los Angeles, California Thomas L. Stevens, Jr. President Los Angeles Trade Technical College Los Angeles, California David L. Moore President Western Growers Assn . Irvine, California 27 p~~, .g~ gI1Mi.fJ~ 7)~M Chairman of the Board William A, Hilliard Editor The Oregonian Portland, Oregon . (jerry B, Cameron • Vice Chairman and CEO . v.s. Bancorp Portland, Oregon Stuart H . Compton Chairman PioneerTrust Bank, N.A. Salem, Oregon Cecil W. Drinkward President and CEO Hoffman Corporation Portland, Oregon 28 Elizabeth K. Johnson President TransWestem, Inc. . Scappoose, Oregon Ross R. Runkel Professor of Law Willamelte Vniversity Salem, Oregon Carol A . Whipple Owner/Manager Rocking C Ranch Elkton, Oregon SJ:t~C~E~ El1~;~1)~M Chairman of the Board Gerald R. Sherratt President Southern Utah University Cedar City, Utah Nancy Mortensen Vice President-Marketing Zions Cooperative Mercantile Institution Salt Lake City, Vtah Richard E. Davis President and CEO Salt Lake Convention s Visitors Bureau Salt Lake City, Vtah Daniel R. Nelson Chairman and CEO West One Bancorp Boise, Idaho Constance Ct. H ogland Executive Director Boise N eighborhood Housing Services, Inc. Boise, Idaho Roy C. Nelson President Bank of Utah Ogden, Utah June M. Morris Chief Executive Officer Morris Air Corporation Salt Lake City, Utah / , .; :/ .. ~ 29 Seatle, g~ « < < gl1~ 11~ 1)~M Chairman of the Board George F. Russell, Jr. Chairman Frank Russell Company Tacoma, Washington IG_~:--' Emilie A. Adams President and CEO Better Business Bureau Foundation Seattle, Washington Thomas E. Cleveland Chairman and CEO Enterprise Bank of Bellevue Bellevue, Washington Tomio Moriguchi President Vwajimaya, Inc. Seattle, Washington 30 Constance L. Proctor Partner Alston, Courtnage, MacAulay & Proctor Seattle, Washington John V Rindlaub Chairman and CEO Seafirst Corporation Seattle, Washington William R. Wiley Senior Vice President, Battelle Memorial Institute; Director Battelle/Pacific Northwest Division; and Director, V.s . Department of Energy, Pacific Northwest Laboratory Richland, Washington Chairman Donald Butler Chairman Agrolink Corp. Tucson, Arizona Vice Chairman David Nimkin Executive Director Utah Small Business Development Center Salt Lake City, Utah Bailey S. Barnard President Heller First Capital Corp. San Francisco, California Barry Baszile President Baszile Metals Service Los Angeles, California Karla S. Chambers Vice President Stahlbush Island Farms, Inc. Corvallis, Oregon Robert D. Fay Vice President and Operations Manager M s R Enterprise Grandview, Washington Nancy y. Learned President Learned-Mahn, Inc. Boise, Idaho Peter H. Parra Executive Director Employers' Training Resource Bakersfield, California Walter F. Payne, Jr. President and Chief Executive Officer Blue Diamond Growers Sacramento, California Leslie Tang Schilling President L.TD.D., Inc. San Francisco, California Peter H . van Oppen President and Chief Executive Officer Interpoint Redmond, Washington Henry J. Voss Secretary California Department of Food and Agriculture Sacramento, California 31 c~~£- ~ ~~ · A~~ (Thousands of Dollars) Assets Decembe r 31, 1993 199 2 Gold certifi cat e account Special draw in g right s cert ficat e account... Ot her cash . . . 1,39 2,000 9 04. 000 60. 625 1.299.000 9 0 4.000 97,7 68 Loans to depository insti t utions . 0 69,000 Federal Agency obligations . 54 1.5 12 616.150 Unit ed States Government securiti es: Bills Notes Bonds . . . 18.7 22.081 15.419,200 4. 619.77 5 16,141• 240 13.45 2,997 3.988 .47 8 Total Unit ed States Governme nt securit ies Tot al loa ns and secur itie s . . 38,7 61,056 39.3 02,5 68 33. 582 ,7 15 34. 267 .86 5 Item s in pro cess of collect io n Bank premises Ope rati ng equi pment. . . . 1,554,9 0 4 150•87 6 31.7 4 6 1.349. 22 6 14 6. 243 30.845 Other asset s: Denom in at ed in foreign curre ncies All ot her . . 3,295,07 2 862,84 4 2,7 2 3. 618 63 6, 3 2 5 Int erdist rict sett lement accou nt . (12.121.6 51) 2,133,707 Tota l assets . 35.43 2 .9 8 4 43,5 88.597 Federal Reserve Not es . 26,322,759 35,878 .38 4 Depo sit s: Total depo sit ory in stitu tion s-reserve accounts Foreign Oth er deposi ts Tota l deposits . . . . 6.7 9 0, 73 0 20.5 0 3 21.320 6.8 3 2.55 3 5.4 66, 39 2 17,597 5,866 5.4 89. 85 5 Deferred credit items Other lia bil iti es .. . 1.016.233 27 1•68 9 1.107,5 31 212,237 Tot al liabiliti es .. 34.443 ,234 4 2 •688.0 07 Liabilities Capital Accounts Capita l paid i n Surplus . .. 45 0•295 45 0•295 Total liabilit ies and capital accou nts .. 43,5 88,597 32 E~~ E~ (Thousands of Dollars) December 31, Current Earnings Discounts and advances United States Government securities Foreign currencies Income from services All other 1993 . .. . . . Total current earnings 834 1,943,930 182,225 86,37 0 622 199 2 682 1,916,003 269,109 91,162 1,126 2,278,082 . Current Expenses Total current expenses Less: reimbursement for certain fiscal agency and other expenses Net expenses Cost of earnings credits Current net earnings .. 190.474 182,321 .. . 15,584 174,890 15,121 167,200 . 19,800 21,243 .. 2,0 19,29 1 2,089,639 Profit and Loss Additions to current net earnings Profit on prior period adjustments Profit on sales of United States Government securities (net) Profit on foreign exchange transactions (net) All other Total additions . . . . 4,5 0 3 39,161 8,198 51,862 13,353 Deductions from current net earnings Loss on sales of United States Government securities (net) Loss on foreign exchange transactions (net) All other Total deductions . .. . . 0 61,817 61,817 136,565 283 136,848 Net additions (+) or deductions (-) .. 0,955) (123.495) Cost of unreimbursed Treasury services .. (4,260) (4,099) (20,69 2) (44,506) (16.4 23) (36,604) Assessments by Board of Governors Board expenditures Federal Reserve currency costs Net earnings before payments to the United States Treasury Dividends paid Payments to the United States Treasury (interest on Federal Reserve Notes) Transferred to surplus Surplus, January 1. Surplus, December 31 . . . 5 . . 1,939,87 8 28,75 8 1,909,018 23,04 2 . 1,866,540 1,77 1,329 . 44,580 450,295 494,875 114,647 335,648 45 0,295 .. .. 33 Robert T. Parry Presid ent and Chie f Execut ive Offi cer Pat rick K. Barro n First Vice Preside nt and Chie f Opera t ing Office r Centra l Ba nk Fu ncti o n s Thom as D. Thomson Executive Vice President Cent ral Bank Funct ions Eco n omi c Rese ar ch Jack H. Beebe Senior Vice President and Director of Research John P. Judd Vice Presid en t and Asso ciat e Directo r of Resea rch Frede rick T. Furlo ng Vice Preside nt Banki ng an d Regio nal Studies Reuven Glick Assist ant Vice Preside nt Internat io nal Stud ies Adr ian W. Throop Research Offi cer Dom estic Macroeco nomi c Studies Bharat Treha n Research Offi cer Domest ic Macroeconomic Studi es Mark Levon ian Research Office r Banking and Regional St udi es Supervisio n , Regulation an d Credi t Euge ne A. Thom as Senio r Vice President Sup ervision, Regulation and Credit Merle S. Bor chert Vice President Ban k Exami nations 34 Terry S. Schwa kopf Vice President Banking Supervisio n W. Gord o n Smit h Vice Preside nt Credit and Consumer Affairs Kenn eth R. Binni ng Director BHC and International Regulation Harold H. Blum Dir ector Banking and Trust Supervision Donald R. Lieb Director Cred it and Risk Manage ment Way ne L. Rickar ds Director Banki ng and Consu mer Regulat io n James M. Barn es Assist ant Vice Preside nt Multin ational, Regional and Community Bank Supervisi on , S.F. Richard S. Campos Assistant Vice Preside nt BHC Supervis ion Rober t e. Johnson Assistant Vice President Regional and Commun ity Bank Supe rvisio n, L.A. Thomas P. McGrath Assistant Vice President Regional and Commun ity Ban k Supervision , S.L.e. Phi lip M. Ryan Assista nt Vice Preside nt Inte rnational Supe rvision W. Starr Seegm ille r Assistant Vice Presid ent Trust Kelly K. Walsh Assi stant Vice President Community Affairs David M. Vandre Assistant Vice President District Compliance and Special Exam inat ions Thomas J. Backer Exami ni ng Officer BHC Inspectio ns, L.A. Rack Fukuh ara Managi ng Offi cer Supervision, Regulat io n and Credi t Lelia M. Jones Exam ini ng Officer Consumer Compl iance Gary P. Palmer Financial Analysi s Officer G. Ross Varoz Examining Officer BHC Inspe ct ions, S.L.e. Dale L. Vaughn Exami ning Officer Int erna tion al Exam inat ions, L.A. David W. Walker Exami ni ng Offi cer International Exam inat ions, S.F. George T. Westerman Applications Offi cer Law Robert D. Mu lford Vice President and General Counsel Doug las R. Shaw Vice President and Counsel Kenneth M. Kinoshita Associate General Counsel Pub lic In for ma ti o n Robert L. Fienbe rg Vice Presi de nt and Direct or of Pub li c Info rmat io n Om b u d sm an Jane M. Waterman Ombudsman Adm inistration Michael J. Murray Senio r Vice Preside nt Adm inist ratio n e. Kenn et h Arno ld Vice Preside nt Dist rict Security Elizabet h K. Christe nsen Vice Preside nt Corporate Planning and Financial Control William K. Gint er Vice President Building and Property Man agement Sall ie H. Weissinger Vice President Corporate Personne l Susan G. Port erfiel d Directo r Comp ensation and Benefi ts Sylvia A. Cunningham Assis tant Vice President Financial Planni ng and Cont rol Deborah S. Jackson-Duke Assistant Vice President Automa tion and Pay roll James J. Tenge Assistant Vice President Ad min ist rativ e Services Thom as R. Thaanum Assista nt Vice President Acco unt ing Bank and Treasury Services John W. Gleaso n Senio r Vice Preside nt Bank and Treasury Services Daw n S. Block Assista nt Vice Preside nt Cash Services Susan A. Sut herland Assista nt Vice Preside nt Securities Services Com p ute r Services and Elect ro nic Pay m ents Laurence Washtien Senior Vice President Computer Services and Electronic Payments Patrick Tong Vice President Computer Operations, Network Support Services, Data Security, and Contingency Planning Nancy Emerson Director Applicat ions Systems John Y. C. Lin Director Systems and Communicatio nS/FinanciaI Administration Paige Birdsall Assistant Vice President Electronic Payments John S. Hsaio Assistant Vice President Applications Systems, Mainframe Consolidatio n Paym ent s and Su pport Servic es Sara K. Garrison Senior Vice President Payments and Suppo rt Services Barbara J. Contini Vice President Electronic Access Patricia A. Welch Vice President Stat istics Eliot E. Giuili Director Statistical Reports and Reserves Admini strati on Stephen A. Kaufman Assistant Vice President Adj ustment and Support Services Douglas O. Knudsen Assistant Vice President Business Development Ellsworth E. Lund Assistant Vice President Technical Resources and CALL/BHC Rep orts Ga il G. Quarles Assistant Vice President Elect ronic Access Beverly-Ann Hawkins Automation Resou rces Officer Elizabeth M. O'Shea Payments Services Officer Secretary's Office Elizabeth R. Masten Vice President and Secretary of t he Board Audit Vacant General Auditor Bruce H. Thompson Director/Ass istant General Audito r Charles O. Bowden Assistant Vice President Southern Region S. Jean Hinrichs Assistant Vice President Audit Gary G. Hoeth Assistant Vice Presiden t Northern Region Peter K. C. Hsieh Assistant Vice President Audit D. Kerry Webb Vice President and Assistant Branch Manager Mark W. Fishback Director Materials Handling System Project David C. Albo Assistant Vice President Cash Operations (CVCS) and Shipping and Receiving Darcy J. Coulter Assistant Vice President Cash Administ ration, Securities Services, End User Computi ng Brent M. Duxbury Assistant Vice President Admini strative Services Robin A. Rockwood Assistant Vice President Business Development and Elect ronic Product Support Rachel A. Romero Assistant Vice Pres ident Payments Services Mary T. Rector Administrativ e Officer Pers0 nneI/FP&C Salt Lake City Bran ch Andrea P. Wolcott Vice President in Charge and District Business Development Coordinator Gerald R. Dalling Assistant Vice President Administrative, Cash and Securities Services A. Kenneth Ridd Assistant Vice President Business Development, Technical Services and Public Information, Dist rict Business Development Product Manager Jed W. Bodily Payments Services Officer Seatt le Branch Gordon Werkema Senior Vice President in Charge and District Product Coordinator for Checks Gale P. Ansell Assistant Vice President Branch Services Northern Regio n Bra nch Jimmy F. Kamada Assistant Vice Pres ident Cu stody Services E. Ronald Liggett Senior Vice President Northern Regio n and District Quality Cont rol Coordinato r Kenneth L. Peterson Assistant Vice President Payments Services and Chairman, Check Officers Group Po rtl an d Branch Bran ch Ope rati o ns Los Angel es Branch Dean C. Gonnerman Assistant Vice Pres ident Business Development and Public Information John F. Moore Senio r Vice President in Cha rge and District Product Coordinato r for Cash Robert D. Long Assistant Vice President Branch and Custody Services Sean J. Rodriguez Vice President Administration Mary E. Monroe Assistant Vice Pres ident Payments Services 35 . San Francisco Office P.O. Box 7702 San Francisco, California 94120 Salt Lake City Branch P.O. Box 30780 Salt Lake City, Vtah 84125 Los Angeles Branch P.O. Box 2077, Terminal Annex Los Angeles, California 90051 Seattle Branch P.O. Box 3567, Terminal Annex Seattle, Washington 98124 Portland Branch P.O. Box 3436 Portland, Oregon 97208 This Report was produced by Karen Flamme and written by Lynden Beale with contributions from Barbara Bennett, Corporate Planning. Design and illustra tion by William Rosenthal. Color photography by Paul Schulz. 36 Federal Reserve Bank of San Francisco P.O. Box 7702 San Francisco, California 94120 Bulk Rate Mail V. S. Postage -Paid Permit No. 752 San Francisco, Calif.