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To the Banks in the Fourth Federal Reserve District:
We are pleased to present the 1973 Annual Report of the Federal Reserve Bank of Cleveland.
The Federal Reserve System

and this Bank were confronted

with numerous economic and

operating challenges last year.
The nation's output

expanded

throughout

1973, but the rate of expansion fell from an

unsustainably rapid pace early in the year to a slow rate at year-end. Spending for housing and
consumer durables weakened as the year progressed, shortages of materials emerged, productive
capacity

was strained, and inflationary

pressures intensified.

Energy shortages at year-end

further aggravated the price situation and reinforced the slowing in activity that was already
underway.

In the international

area, dollar devaluation,

a turnaround

in the balance of

payments, oil price increases, and the oil embargo were the major economic events in 1973. The
balance of payments

responded favorably

to a combination

of forces. Poor harvests and a

worldwide business boom, together with dollar devaluations, caused a surge in U S. exports,
resulting in a $1.7 billion trade surplus, compared with a deficit of $6.4 billion the previous
year .:
The central economic
proved to be extremely

problem
difficult

domestic and international

in 1973-domestic

and worldwide-was

inflation,

which

to curb. Excess demand in some sectors of the economy,

shortages of food, fuel, and other commodities,

and the controls

program itself, all contributed to the worst year of inflation since the Korean War.
Unsustainable growth

in real activity and increasing inflationary

pressures required the

Federal Reserve to tighten monetary policy in 1973. The System used all of its policy tools: the
discount

rate was raised seven times between December

1972 and August

1973; reserve

requirements were increased once on demand deposits and twice on large certificates of deposit;
and open market operations provided reserves at a slower rate than in 1972. These efforts
slowed the growth of monetary aggregates and, combined with intense demands for credit,
resulted in some of the highest short-term interest rates on record. Money stock (M]) grew 5.7
percent in 1973 after rising 8.7 percent in 1972. Interest rates on large certificates of deposit
and Federal funds, which were near the 5 1/2 percent level as the year began, rose above 10 1/2
percent by late summer, and Treasury bill yields reached 9 percent.
These unusually

high short-term

deposits at thrift institutions

rates prompted

many investors to switch funds from

to marketable securities, especially Treasury issues. The reduced

flow of deposits into the thrift institutions forced them to curtail their mortgage lending during
the second half of the year. This temporary disintermediation

directly touched the Cleveland

Bank. In late August, when short-term rates were at their peak, a Treasury auction of two-year
notes drew bids totaling $55 million from investors in the Cleveland area. Attracted by an 83/8
percent coupon yield, investors jammed the Bank lobby to submit tenders for the notes.

Slower growth of real economic activity and monetary policy actions allowed interest rates
to decline somewhat in the latter part of the year. Despite the moderation in economic activity,
inflation remains a serious problem. The Federal Reserve continues to face the difficult
challenge of choosing a policy designed to minimize the decline in real economic activity,
without aggravating the already intense inflationary situation.
The year 1973 was also important and challenging in the operations of the Bank. It was the
50th year of operation in the Cleveland Bank's historic building, an occasion marked on August
26 by an Open House for employees, their families, and friends. A major operating objective of
the Bank was accomplished this year with implementation

of all four of the District's Regional

Check Processing Centers. The Columbus office had begun accepting checks in December 1972.
The Pittsburgh Branch and Cleveland head office RCPCs were put into operation in January
1973. The fourth RCPC began clearing checks at the Cincinnati Branch early in April. These
new facilities represent one part of the Bank's continuing efforts to modernize the nation's
payments

mechanism.

experimental

Another

was the discussion with bankers in the District about an

point-of-scale payments

network.

These and other innovations move us toward

the goal of a national electronic money transfer system.
Finally, we want to extend our warmest thanks to the many people-directors,
staff of this Bank-who

have contributed

officers, and

their time and effort so generously in 1973 as part of

the Bank's efforts to respond to the many challenges confronting us. We ask for their continued
help in meeting the complex tasks that are ahead.

~a.J~~
CHAIRMAN

OF THE BOARD

THE FEDERAL RESERVE BANK OF CLEVELAND:
Economic Role and Responsibilities
.,

The Federal Reserve Bank of Cleveland is one of twelve
regional banks in the Federal Reserve System. This Bank,
the Branches in Cincinnati and Pittsburgh, and a Regional
Check Processing Office in Columbus serve the Fourth
Federal Reserve District, which includes the State of Ohio,
eastern Kentucky, western Pennsylvania, and northern West
Virginia. Numerous services are provided for banks and
others, Including collecting checks, providing currency and
coin, and acting as fiscal agent for the U. S. Treasury. A
major portion of Bank personnel is devoted to these
operating activities at the four locations. In addition, a
sizable number of employees are engaged in providing
support services at the various facilities.
This Bank also shares in the Federal Reserve System's
responsibilities for monetary policy. All Reserve Bank
presidents regularly attend Federal Open Market Committee meetings with the seven members of the Board of
Governors. The President of the Federal Reserve Bank of
Cleveland is a voting member of the FOMC every other
year-alternating
with the President of the Federal Reserve
Bank of Chicago. The Board of Directors of the Cleveland
Bank is required to establish the Bank's discount rate every
two weeks, subject to approval of the Board of Governors.
Finally, the Bank, through its Examination and Supervision
function, examines state member banks, administers Board
regulations applicable to all member banks, and acts as the
regulatory
supervisor with respect to bank holding
companies in the District.
Each officer and employee makes an important
contribution to the achievement of the Bank's objectives,
and the activities of each department would make an
interesting story. Last year's Annual Report focused on the
evolutionary developments underway in the payments
mechanism and the role of Regional Check Processing
Centers in the District. This year's Annual Report describes
another facet of the Bank's many activities: Research. This
section outlines the role that the professional economists
and support staff have in meeting both Bank and System
responsibilities. The second part is a report on a research
study of manufacturing firm-commercial bank relationships
in Ohio. The study is one example of the Department's
efforts to improve understanding of banking practices and
of the structure of banking markets in the Fourth District.
Broadly stated, Research's general purpose is to gather
information
and conduct
analysis and research in
connection with economic issues and problems related to
the Bank's role in monetary policy and its regulatory and
operating responsibilities. The Research staff, which is
directed by a Vice President and an Assistant Vice
President, includes a number of economists, a statistician,
and other support personnel, including economic analysts,
research assistants,
secretaries,
stenographers,
library
personnel, and publication specialists.
Resources available to Research are utilized in five areas
to fulfill the Department's complex assignments.

1. Monetary Policy Support
Research maintains a flow of information, analysis, and
advisory opinions to the Bank's President in connection
with his monetary policy responsibilities and to the Board
of Directors in support of discount rate activities. Research
also provides a flow of information to Branch Boards of
Directors. Staff economists have a number of economic and
financial research projects underway in the monetary policy
support area. For example, studies of the costs of inflation
and unemployment and the regional impact of monetary
policy are in process.
2. Banking Studies
The Department provides information and analysis and
undertakes research in connection with economic aspects of
the Bank's regulatory and operating responsibilities. In view
of the Bank's and System's broad areas of concern in these
matters, banking studies include financial and operational
activities of the Federal Reserve System, commercial banks,
and nonbank financial institutions. Several projects are in
progress in this area, including studies of Federal Reserve
Bank operations, commercial bank asset and liability
management, and bank holding company activities.
3. Bank Structure Support
Research shares in the responsibility for analyzing bank
merger and bank holding company activities with the Bank
Examination and Supervision Department. The Department
has specific responsibility for information, analysis, and
advisory opinions in areas of competition and public
benefits in connection with each application for a bank
merger or a holding company acquisition.
4. Public Information
The
policy
of the
Bank

Department shares some results of its monetary
support and banking studies with the public as part
System's public information responsibility. Three
publications Economic Commentary, Economic
Review, and Annual Report-and speeches and lectures by
staff personnel are used to accomplish this objective.
5. Library
The Research Department maintains a sizable business
and financial library for the benefit of directors, officers,
and staff of the Bank and the public. Special emphasis is
placed on books, journals,
Government
documents,
periodicals, and other material related to the monetary
policy, regulatory, and operating responsibilities of the
Bank.

*

*

*

The following section of this Annual Report summarizes
findings of a study
of manufacturing
firm-bank
relationships in Ohio. The study is an example of the type
of projects undertaken in Banking Studies.

3

RESEARCH REPORT:
A Proiile oi Manuiacturing Firm-Bank Relationships

INTRODUCfION
In 1969, the Research Department conducted a study of
the banking associations of a large number of manufacturing rums in Ohio. This study was designed to assist
the Bank in its regulatory responsibilities with regard to
bank mergers and holding company acquisitions. Manufacturing firms represent a significant proportion of the
demand for banking services; therefore, this study provided
valuable information on banking activities and markets.
Significant changes have occurred in the economy,
particularly in the financial sector, in the 1969-1973
period. Therefore, a survey was made last year to determine
what changes, if any, had occurred in the way
manufacturers in Ohio viewed their banking associations
and what the implications are for banking markets.
The study's findings are likely to be interesting to a
broad audience. Some bankers may find the conclusions
support basic premises about business-bank relationships.
Others might find some surprises in the results. Corporate
financial officers may also be interested in the profile that
emerged from this inquiry. Others involved in banking
research may find the study to be a base for further
analysis.
The results of both the 1969 and 1973 studies indicate
that relationships between manufacturing firms and banks
in Ohio are unique, local, and stable. Most firms maintain
associations with one or a limited number of banks. They
tend to expand bank affiliations, but seldom terminate an
existing bank relationship. Also, most manufacturing firms,
regardless of size, have strong ties to local or regional
banking markets. Banks in Ohio vary from $500,000 to
over $2 billion in total deposits and appear sufficiently
diverse in size to permit most firms to choose local or
regional banks for some or all of their services. The major
reason for long-term local associations appears to be a
concern with credit availability. There was almost no
evidence that firms chose or would change banks on the
basis of cost of services, or that bank-firm relationships
were altered by interest rate fluctuations in national credit
markets.

THE SAMPLE AND SURVEY QUESTIONNAIRE
The study focused on relationships of Ohio banks to the
full spectrum of corporate customers. Approximately 500
manufacturing firms in Ohio responded with information
that was used to analyze banking relationships in both 1969
and 1973. Firms in the sample were selected as a cross
section of manufacturers in the State in terms of asset size
and type of activity (see Table). Most of the respondents
have less than $100 million in assets, which is representative

4

of manufacturing in Ohio. Less than one percent of the
total number of manufacturers in the State have assets in
excess of this amount. The surveys included some
subsidiaries or divisions of large corporations, and these
firms were asked to indicate the extent to which they chose
banking relationships. Finally, since firms less than four
years old are not represented in the study, only a small
percentage of the respondents have been in existence less
than 10 years.
Questions were asked regarding number and type of
bank or banks used, reasons for selection, location, services
selected, and lending rates. The survey also probed for
factors contributing to changes in firm- bank associations. In
order to provide as much uniformity as possible in the
responses, banks were described in the survey instructions
as principal, alternate, or depository banks. Definitions of
these terms are shown on the next page.

CURRENT PROFILE
OF FIRM-BANK ASSOCIATION
Firms and Their Banks
Results of the 1969 study indicated that a manufacturing firm's relationship with its principal banks was
unique, local, and stable. Uniqueness was demonstrated by
the fact that an overwhelming majority of firms dealt with
a single principal bank. Almost two-thirds of the firms
sampled dealt with only one bank regardless of whether it
was a principal, alternate or depository. The local character
of relationships was highlighted by the predominant
number of firms that preferred banks located in the same
county as the firm. Long-term stability was evidenced by
the fact that nearly 90 percent of the firms were associated
with their principal bank over the firm's life span.
The 1973 study provided an opportunity to determine if
the uniqueness, local orientation, and stability had persisted
over the intervening period. Although there is evidence of
some changes, they were not dramatic. Unique relationships
appear to have declined slightly as fewer firms reported
dealing with only a single principal bank. The number of
firms using two or more principal banks increased in the
four-year period, but the proportion
of firms using
alternate banks remained the same as in 1969. A large
proportion of firms still obtain most banking services
locally. However, some small reduction occurred in the
stability of relationships as fewer firms were associated with
principal banks over a company's life span.
Particular attention was paid to firms that changed
principal banking associations. A number of firms added or
dropped one of their principal banks, but did not alter all

Profile of Manufacturing

Firms in Survey:

1973

Asset Classes
Under
$25,000
Number of
firms

$25,000$100,000

$100,000$500,000

$500,000$1 million

$1 million$5 million

$5 million$25 million

$25 million$100 million

Over $100
million

Total
Responses
488

94

193

56

81

20

11

14

3.9

Percent
of Total

19

19.3

39.5

11.5

16.6

4.1

2.3

2.9

100%

Standard Industrial Classification
Number
firms

of

Percent
of Sample
Total
20
21
22
23
24
25
26
27
28
29

-

20

44
9.0

0.2

22

23

24

25

26

27

28

29

30

31

32

33

34

35

3

21

6

13

14

13

61

23

7

12

3

24

30

81

98

1.2 2.7

2.9

1.4 2.5

0.6

4.9

6.1 16.6 20.1

0.6

2.7 12.5 4.7

Food and kindred products
Tobacco manufacturers
Textile mill products
Apparel and other finished products made from fabrics
Lumber and wood products, except furniture
Furniture and fixtures
Paper and allied products
Printing, publishing and allied industries
Chemicals and allied products
Petroleum refining and related industries

banking relationships. The majority of these manufacturers
added a bank in their respective counties, providing further
evidence of the strength of local ties. One firm added, while
another firm dropped, a bank located in a large money
center. Almost all firms that changed principal banks
switched to another bank in the same county.
Firms that do not have a principal bank located in the
same county are still oriented to the region. Survey results
indicated almost all of these firms banked in a contiguous
county, often in the same metropolitan area. Only 13 firms
in the 1973 sample listed out-of-state banks among their
principal banks, and only two did not have a local or
regional principal bank as well. Nine firms gave out-of-state
banks as alternates in the 1973 survey, which represents a
small decline from the earlier study. These firms were in the
three largest asset classes.
A comparison of the number and size of banks used by
firms of different sizes produced some surprising results.
One-half of the largest non-subsidiary firms used only one
principal bank, which was located in the same county as the
firm. One-half of this group stated that they were
associated with only one alternate bank, and the remaining

30
31
32
33
34
35
36
37
38
39

-

37

38 39

20

9

6

4.1

1.8

36

20

1.2 4.1

Total

488
100%

Rubber and miscellaneous plastics products
Leather and leather products
Stone, clay and glass and concrete products
Primary metal industries
Fabricated metal products, except machinery & transportation
Machinery, except electrical
Electrical and electronic machinery, equipment & supplies
Transportation equipment
Measuring, analyzing and controlling instruments
Miscellaneous manufacturing industries

TYPES OF BANKS AS DEFINED
FOR SURVEY OF MANUFACTURERS
A principal bank is defined as a bank-domestic
or
foreign-that
performs a wide range of banking
services for your firm, particularly with respect to
checking accounts and the initiation of bank credit
arrangements.
An alternate bank is one that provides a few banking
services, but not a wide range of services, for your
firm.
A depository bank is one that serves solely for the
deposit and transfer of funds and does not provide
other banking services.

5

firms used none. Additionally, several large firms dealt with
a principal and an alternate bank in the $10 to $25 million
deposit range. This is somewhat surprising. Conventional
wisdom implies that small firms can be associated with all
size banks, but that large firms must use large banks. Banks
may be able to provide credit accommodations far in excess
of their legal lending limit through participations or
correspondent relationships.
It is evident that some changes have occurred in
firm-bank relationships over time. The associations are
somewhat less unique and stable than the initial study
suggested, but manufacturing
firms remain strongly
oriented to banks in their local region. Banks are interested
in fostering growth of manufacturing and employment
within their banking market, and firms seem increasingly
willing to rely on this mutual advantage.

Banking Services
The 1973 survey indicated that there was a noticeable
increase in the variety of banking services used by firms of
all asset classes. A substantial gain occurred in the number
of firms that obtained term loans from their principal
banks. Other services that showed increased usage were
pension and profit sharing fund management and lock box
services. The 1973 survey also showed that international
banking skills were demanded by a number of firms in all
asset classes, not just large firms. Principal banks are also
providing computer services and wire transfers for several
firms in all but the smallest size class. Responses indicated
that cash management systems, a service first listed in the
1973 questionnaire, can be marketed to firms having less
than $100,000 in assets as well as to larger firms.
Alternate banks are used for a few services, and the
questionnaire attempted to determine reasons for such
selections. A number of firms used alternates for specialized
services, e.g., computer services and international banking,
because such services were not available at principal banks.
Some firms chose alternates because of cost of services or
interest return on funds, but the number was small. An
overwhelming number of respondents attributed the choice
of an alternate to one of two reasons: diversification of
services or convenience of location. In fact, convenience
seemed to be a more important factor in the recent survey
than in the 1969 study. While this could suggest that firms
place a higher value on convenience than previously, the
more likely inference is that more services are available at
convenient locations considering the demand for a greater
variety of services and the local orientation of firms.

"Prime" Borrowing Rate
The 1969 questionnaire asked firms to indicate whether
their most recent borrowing had been "at, above or below"
the prime rate. It was assumed that all firms would
interpret prime rate as the national publicized bank rate
charged the most credit-worthy large customers. However,

6

over 70 percent indicated they had borrowed at or below
prime. The magnitude of the response was puzzling in view
of the size distribution of the firms in the survey. This
raised an obvious question: When firms use the term "prime
rate," are they referring to national prime, a regional prime,
·or the bank's prime for their risk class? The prime rate
question was expanded in the 1973 survey in an attempt to
provide an answer to this question. In addition to indicating
whether firms paid below, at, or above prime, they were
asked to state the rate paid and date of their last short-term
borrowing. These answers were then compared to the
national prime rate that prevailed at the time of their
respective borrowings. (The two tier or "dual prime rate"
was used in the analysis, if the borrowing occurred after
April 16, 1973.) This comparison permitted a verification
of whether or not firms were referring to the national prime
rate when they responded to the question.
Forty-six percent of the firms supplying borrowing
information
demonstrated
they were referring to the
national prime rate. About one-fourth of these firms
borrowed "below" the national prime rate. An equal
number borrowed "at" national prime. Firms of all sizes
were in the "below" and "at" prime groups.
Fifty-four percent of the firms that supplied borrowing
information were not referring to the national prime rate.
Firms in the group that indicated they borrowed "at" the
prime rate were the ones most frequently referring to some
other prime when they answered the question. There was
some tendency for firms with less than $1 million in assets
to be in this "at" prime group. This might be expected
since small firms would be more apt to borrow most of
their funds locally and may have been referring to a
regional or bank prime in their responses. Also, large firms
may obtain part of their short-term funds through the
commercial paper market, so they are focusing on national
conditions. The group that reported they borrowed "above
prime" specified a rate that was equal to or less than the
national prime. Therefore, the prime they were referring to
must have been below the national prime.
Evidence from the 1973 survey lends support to the
view that there are regional markets for corporate banking
services. The fact that such a large percentage of firms think
in terms of either a regional or bank prime for their risk
class indicates that corporate borrowing for many firms
(particularly firms less than $25 million in assets) is not
carried out in a national market. It may be that regional
rates are less volatile than the national rate; therefore, the
positions of the firms relative to the national prime rate will
vary over time. Nevertheless, the local and regional
orientation has implications for commercial bank marketing
strategy as well as for banking structure issues.

FORCES FOR CHANGE
IN BANKING RELATIONSHIPS
Review
Changes in relationships of firms with their respective
banks could result from internal dissatisfaction with current

arrangements-price,
convenience and service-or
from
external solicitation by other banks. The survey results
indicated that firms were generally satisfied with current
banking relationships. Less than one-half the firms reported
they regularly reviewed banking connections. Several firms
indicated they would only review associations when present
arrangements became unsatisfactory. A greater percentage
of large firms than small firms make a regular examination
of their banking connections according to both the 1969
and 1973 results. Large firms generally use a greater
number of banking services and, therefore, would have
more incentive to undertake a regular examination.

Solicitation
Bankers have not been overly aggressive in soliciting new
corporate business, which could partially account for lack
of change in firm-bank relationships. Only 28 percent of
respondents in 1969 and 33 percent in 1973 reported
solicitations by banks other than their principal or
alternates. The corporate banking service most frequently
solicited in both surveys was "checking accounts."
Short-term loans and term loans were the next two services
offered most often.
The concept of regional markets for corporate banking
services is again supported by evidence regarding the
location of soliciting banks. Eighty percent of the solicited
firms in the 1973 survey were contacted by at least one
bank that was located in the same county as the firm. The
vast majority of all banks that had solicited the firms in the
survey were from Ohio. Only slightly more than ten percent
of solicited firms in both 1969 and 1973 were contacted by
banks headquartered outside of the State. (This represents
less than four percent of all firms surveyed.) The two most
frequently mentioned out-of-state locations were New York
and California.

SELECTION OF PRINCIPAL
REASONS AND LOCATION

BANKS:

Reasons
Nearly one-third of the firms in both surveys ranked a
"bank's ability to accommodate borrowings" as the most
important reason for selecting a principal bank. The next
three reasons, ranked in order, are "convenience of bank's
location," "skilled management," and "size of bank." The
reason cited most frequently by firms in both surveys was
"the convenience of bank's location."
The fact that "ability to accommodate borrowing" was
most often ranked first in both surveys indicates that
manufacturing firms are very concerned about a bank's
ability to serve their credit needs. This concern was
expressed by all firms in all asset classes; there was no
greater tendency for either large or small firms to rank this
reason number one. In addition, it is apparent that a sizable

number of all manufacturing firms felt that a principal bank
should be located within a firm's immediate area. These
results indicate respondents have a preference for local and
regional markets for corporate services, with the choice of a
particular bank based primarily on assurance of credit
availabili ty.

Location
Approxima tely two-thirds of the firms in both surveys
indicated they would choose a bank located in the same
city as the firm if they were to change principal banks.
Firms that indicated that they would move to a national or
regional financial center outside of Ohio were large firms.
However, only ten percent of the firms surveyed in 1969
and four percent of those contacted in 1973 indicated they
would make such a change. Generally, if firms were to
change banks, they would stay in the city or county in
which the firm is located.

CONCLUSION
The overall results of the study demonstrate that
manufacturing firms in Ohio maintain an association with
their principal bank or banks over a long period of time.
Firms appear to be primarily concerned with a bank's
ability to meet their credit requirements, which largely
explains the apparent stability. The survey also shows that
firms are strongly oriented to local or regional markets for
banking services. Furthermore, many manufacturers do not
associate their borrowing rate with the national prime rate.
The two major results, stability and local orientation,
seem to confirm the impression that Ohio firms are
primarily concerned
with insuring credit availability
through long-term and local relationships. Most large firms
also use banks in their local or regional Ohio markets,
although in some instances they use out-of-state banks as
well. This local orientation may be the traditional pattern
of "doing business," but it could change with the increasing
use of electronic fund transfer systems. However, it is not
certain that this technological development will totally alter
local relationships if firms' short-term borrowing needs
continue to be met by Ohio banks.
The results of this study may have been influenced by
the time period in which it was conducted. The surveys
were taken during two years of relatively restrictive credit
market conditions, and firms may have been influenced by
this experience.
The results of the study have implications for the
Federal Reserve System's regulatory responsibilities. The
study raises a number of questions about competitive
conditions in banking markets. In addition, it demonstrates
the importance of local or regional markets to most
business customers of banks as well as to individual
customers. This relationship between manufacturing firms
and local banks is important in the analysis of competitive
effects of bank mergers and holding company acquisitions.
Lorraine E. Duro and Robert F. Ware

7

COMPARATIVE STATEMENT OF CONDITION
ASSETS
Dec. 31,1973

Dec. 31,1972

Gold Certificate Reserves

.

$ 826,468,966

$ 884,658,767

Special Drawing Rights Certificates
Federal Reserve Notes of Other Banks
Other Cash

.
.
.

33,000,000
89,057,025
32,268,113

33,000,000
76,473,234
39,446,403

Loans to Member Banks
Federal Agency Obligations - Bought Outright
U. S. Government Securities:
Bills
Notes
Bonds

.
.

95,300,000
148,558,000

193,500,000
98,156,000

.
.
.

2,829,082,000
2,945,259,000
241,443,000

2,220,402,000
2,745,605,000
259,158,000

Total U. S. Government Securities

.

6,015,784,000

5,225,165,000

Total Loans and Securities

.

6,259,642,000

5,516,821,000

.
.
.

445,093,515
26,764,959
66,879,899

596,580,121
27,181,035
87,526,594

.

$7,779,174,477

$7,261,687,154

Cash Items in Process of Collection
Bank Premises
Other Assets
Total Assets

LIABILITIES
Federal Reserve Notes

.

$5,243,462,679

$4,751,683,430

Deposits:
Member Bank - Reserve Accounts
U. S. Treasurer - General Account
Foreign
Other Deposits

.
.
.
.

1,701,443,720
150,623,736
23,660,000
31,522,570

1,552,285,985
143,680,513
26,390,000
20,487,802

.

1,907,250,026

1,742,844,300

.
.

407,347,172
72,458,500

582,343,838
41,226,086

.

$7,630,518,377

$7,118,097 ,654

.
.

74,328,050
74,328,050

71,794,750
71,794,750

.

$7,779,174,477

$7,261,687,154

.

$ 52,880,100

Total Deposits
Deferred Availability Cash Items
Other Liabilities
Total Liabilities

CAPITAL ACCOUNTS
Capital Paid In
Surplus
Total Liabilities and Capital Accounts
Contingent Liability on Acceptances Purchased
for Foreign Correspondents

8

$

16,289,000

COMPARISON OF EARNINGS AND EXPENSES
1972

1973
Total Current Earnings
Net Expenses

.
.

$290,750,352
28,094,398

.

Current Net Earnings

$370,183,112
34,856,286
335,326,826

262,655,954

Additions to Current Net Earnings:
.
.

(2,625,734)
899,838

229,761
97,522

.

(1,725,896)

327,283

.
.

4,314,904
4,904

4,716,952
2,917

.

4,319,808

4,719,869

NET DEDUCTIONS
NET ADDITIONS

.
.

6,045,704
-0-

4,392,586
-0-

Net Earnings before Payments to U. S. Treasury

.

$ 329,281,122

$258,263,368

Dividends Paid
Payments to U. S. Treasury (Interest on F. R. Notes)
Transferred to Surplus

.
.
.

$

$

.

$ 329,281,122

Profit on Sales of U. S. Government Securities (Net)
AllOther
Total Additions
Deductions from Current Net Earnings:
Loss on Foreign Exchange Transactions (Net)
All Other
Total Deductions

Total

:

4,400,130
322,347,692
2,533,300

4,205,725
250,144,793
3,912,850

$258,263,368

DISPOSITION OF GROSS EARNINGS

1973

DIVIDENDS
OPERATING
SURPLUS

EXPENSES

88.5%

87.3%

1.2

TO U. S. TREASURY

1972

1.5

9.6

9.8

0.7

1.4

9

FEDERAL RESERVE BANK OF CLEVELAND
DIRECTORS
Chairman
HORACE A. SHEPARD
Chairman of the Board and Chief Executive Officer
TRW Inc., Cleveland, Ohio
Deputy Chairman
ROBERT E. KIRBY, President
Westinghouse Electric Corporation,
Industry and Defense Company, Pittsburgh, Pa.
EDWARD W. BARKER
Chairman of the Board
and Chief Executive Officer
First National Bank of Middletown
Middletown, Ohio

DAVID L. BRUMBACK, JR.
President
Van Wert National Bank
Van Wert, Ohio

A. BRUCE BOWDEN
Former Vice Chairman of the Board
Mellon Bank, N. A.
Pittsburgh, Pennsylvania

CHARLES Y. LAZARUS
Chairman
The F & R. Lazarus Co.
Columbus, Ohio

DONALD E. NOBLE
Chairman of the Board
and Chief Executive Officer
Rubbermaid Incorporated
Wooster, Ohio
OTIS A. SINGLETARY
President
University of Kentucky
Lexington, Kentucky

RENE C. McPHERSON
Chairman of the Board
and Chief Execu five. Officer
Dana Corporation
Toledo, Ohio
MEMBER, FEDERAL ADVISORY COUNCIL
CLAIR E. FULTZ, Chairman and Chief Executive Officer
Huntington Bancshares Incorporated, Columbus, Ohio
OFFICERS
WILLIS J. WINN, President
WALTER H. MacDONALD, First Vice President
WILLIAM H. HENDRICKS
Senior Vice President

ROBERT G. COURY
Assistant General Counsel

FREDO. KIEL
Senior Vice President

THOMAS E. ORMISTON, JR.
Vice President

JOHN J. ERCEG
Assistant Vice President and Economist

JOHN E. BIRKY
Vice President

LESTER M. SELBY
Vice President and Secretary

ANNE J. ERSTE
Assistant Vice President

GEORGE E. BOOTH, Jr.
Vice President and Cashier

ROBERT E. SHOWALTER
Vice President

FRANK B. KEHRES
Chief Examiner

PAUL BREIDENBACH
Vice President and General Counsel

DONALD G. VINCEL
Vice President

BURTON G. SHUT ACK
Assistant Vice President

ROBERT D. DUGGAN
Vice President

OSCAR H. BEACH, JR.
Assistant Vice President

R. JOSEPH GINNANE
Vice President

MARGRET A. BEEKEL
Assistant Vice President

HAROLD J. SWART
Assistant Vice President
and Assistant Secretary

WILLIAM J. HOCTER
Vice President and Economist

THOMAS J. CALLAHAN
Assistant Vice President

HARRY W. HUNING
Vice Presiden t

GEORGE E. COE
Assistant Vice President

R. THOMAS KING
Vice Presiden t

10

ELFER B. MILLER
General Auditor

PATRICK V. COST
Assistant Vice President

DAVID A. TRUBICA
Assistant Vice President
ROBERT VAN VALKENBURG
Assistant Vice President
VIRGINIA L. WHITMER
Assistant Vice President

CINCINNATI BRANCH
DIRECTORS
Chairman
GRAHAM E. MARX, President and General Manager
The G. A. Gray Company, Cincinnati, Ohio
PAUL W. CHRISTENSEN, JR.,
President
The Cincinnati Gear Company
Cincinnati, Ohio

JOSEPH F. RIPPE
President
The Provident Bank
Cincinnati, Ohio

ROBERT E. HALL
President
The First National Bank
and Trust Company
Troy, Ohio

PHILLIP R. SHRIVER
President
Miami University
Oxford, Ohio

CLAIR F. VOUGH
Vice President
Office Products Division
IBM Corp.
Lexington, Kentucky
E. PAUL WILLIAMS
Chairman of the Board
The Second National Bank
of Ashland
Ashland, Kentucky

OFFICERS
FRED O. KIEL
Senior Vice President
CHARLES A. CERINO
Vice President and Cashier

DAVID F. WEISBROD
Assistant Vice President

DONALD G. BENJAMIN
Assistant Vice President

JERRY S. WILSON
Assistan t.Vice President

PITTSBURGH BRANCH
DIRECTORS
Chairman
DOUGLAS GRYMES, President
Koppers Company, Inc., Pittsburgh, Pennsylvania
ROBINSON F. BARKER
Chairman of the Board
and Chief Executive Officer
PPG Industries, Inc.
Pittsburgh, Pennsylvania

JERRY A. HALVERSON
President
The First National Bank and Trust
Company of Wheeling
Wheeling, West Virginia

MALCOLM E. LAMBING, JR.
President and Chief Executive Officer
The First National Bank of Pennsylvania
Erie, Pennsylvania
CHARLES F. WARD
President
Gallatin National Bank
Uniontown, Pennsylvania

RICHARD M. CYERT
President
Carnegie-Mellon University
Pittsburgh, Pennsylvania
OFFICERS
ROBERT D. DUGGAN
Vice President
SAMUEL G. CAMPBELL
Vice President and Cashier

PAUL E. ANDERSON
Assistant Vice President

WILLIAM R. TAGGART
Assistant Vice President

11