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1977 Annual Report Federal Reserve Bank of Philadelphia Contents PRESIDENT'S COMMENTS EXECUTIVE CHANGES ii 3 DIRECTORS 4 OFFICERS STATEMENT OF CONDITION EARNINGS AND EXPENSES ANNUAL OPERATIONS PHAEDRUS 5 7 9 11 12 President's Comments The year 1977 has given me more pleasure and satisfaction than any other since I became President of this Bank at the beginning of the decade. I find particular pleasure in the new vitality that I sense all over the Bank. No doubt part of it comes from getting settled in our new building and we have taken specific steps to improve motivation and enhance career development opportunities. Our officers and employees should feel good about their accomplishments in 1977. With overall quality measures at or near the top of the System scale, it was a very good year for operating departments. Unit costs were affected adversely by heavy overhead and by the slow growth in volume that characterizes the entire region. Nevertheless, when adjustment is made for new building charges, operating efficiency ranks a bit above the average for all Reserve Banks. I want to make special mention of our program to refine and improve services offered to member banks. The first phase was completed in 1977 and resulted in a 35 percent increase in the utilization of check services—mostly by small banks. The next phase involves check services for medium and large banks and cash and U. S. Treasury securities services for all banks. The Bank increased its efforts to inform both borrowers and lenders of their rights and obligations under the Federal Reserve consumer regulations. We also receive consumer complaints against banks and other financial institutions and last year handled over 20 percent of the System total. We invited member banks to hold board meetings in our building and have lunch with us and I am delighted to report that over 40 institutions did so during the year. The invitation still stands and arrangements can be made through our Bank Services Department. Among the other good things in 1 977 were the milestone research on Philadelphia city and school finances, and the Bank's continuing leadership in System projects such as developing Reserve Banks’ performance measures, budget objectives, and long-range automation strategies. Pleased and satisfied I surely am but complacent I am not. I realize the Bank's 1977 record will be very hard to meet or beat in years to come. However, we now have momentum going for us and welcome the challenge. President Executive Changes and Annual Operations Dick Smoot became First Vice President of the Bank in May 1977. He joined the Fed in 1975 as Vice President for operations improvement and later that year also assumed responsibility for cash and fiscal operations. Before coming to Philadelphia Dick was Acting Deputy Director, Bureau of Domestic Commerce. U. S. Department of Commerce, as a participant in the President’s Executive Exchange Program. From 1964 to 1973 he held various management positions with the Ford Motor Company and the Philco-Ford Corporation. Born and raised in Fort Thomas, Kentucky, Dick is a graduate of the University of Colorado and holds a master's degree from the University of Cincinnati. 1 Executive Changes The following changes in the Board of Directors and Official Staff were announced during 1977: John W. Eckman, Chairman and President of Rorer Group Inc.. Fort Washington. Pennsylvania, was redesignated Chairman of the Board of this Bank for 1978. Werner C. Brown, Chairman of Hercules Incorporated, Wilmington, Delaware, was redesignated Deputy Chairman for 1978 and reappointed to a new three-year term as a Class C Director. Wilson M. Brown, Jr., President and Chief Executive Officer of Southeast National Bank of Pennsylvania, Chester, Pennsylvania, was elected a Class A Director by member banks in Electoral Group 1. He succeeds William B. Eagleson, Jr., Chairman of the Board and President of Girard Trust Bank, Philadelphia. Pennsylvania. Member banks in Electoral Group 2 reelected Jack K. Busby a Class B Director. Mr. Busby is Chairman of the Board and Chief Executive Officer of Pennsylvania Power & Light Company, Allentown, Pennsylvania. The Board of Directors named Samuel H. Ballam, Jr., President and Chief Executive Officer of The Fidelity Bank, Philadelphia, Pennsylvania, to be the Third District representative to the Federal Advisory Council for 1978. He succeeds Roger S. Hillas, Chairman of Provident National Bank, Philadelphia, Pennsylvania. Richard L. Smoot became First Vice President of the Bank in May 1977, replacing Mark H. Willes who resigned to become President of the Minneapolis Fed. In June, G. William Metz, Vice President, assumed responsibility for Cash and Fiscal Operations, and Kathleen C. Holmes became Custody Control Officer in the same department. Robert N. Gilmore was promoted, in February, to Automation Planning Officer in the Computer Services Department. At year end, the following official promotions were announced, all effective January 1, 1978: Frederick M. Manning was promoted to Assistant Vice President, and Robert A. Dobie and Edward G. Rutizer were made Examining Officers. Michael J. McGovern was appointed Data Processing and Technical Services Officer, and Donald L. Raiff became Research Officer and Economist. 3 Directors CHAIRMAN John W. Eckman Chairman and President Rorer Group Inc. Fort Washington, Pennsylvania DEPUTY CHAIRMAN Werner C. Brown Chairman Hercules Incorporated Wilmington, Delaware William S. Masland President and Chief Executive Officer C. H. Masland & Sons Carlisle, Pennsylvania Wilson M. Brown, Jr. President and Chief Executive Officer Southeast National Bank of Pennsylvania Chester, Pennsylvania James Patchell President and Chief Executive Officer National Bank and Trust Company of Gloucester County Woodbury, New Jersey Jack K. Busby Chairman and Chief Executive Officer Pennsylvania Power & Light Company Allentown, Pennsylvania Jean Crockett Chairman, Professor of Finance Wharton School University of Pennsylvania Philadelphia, Pennsylvania Harold A. Shaub President and Chief Executive Officer Campbell Soup Company Camden, New Jersey W. J. Smouse President The First National Bank in Bedford Bedford, Pennsylvania MEMBER OF THE FEDERAL ADVISORY COUNCIL Samuel H. Ballam, Jr. President and Chief Executive Officer The Fidelity Bank Philadelphia, Pennsylvania David P. Eastburn, President Richard L. Smoot, First Vice President Konstanty G. Adack, Senior Vice President Edward G. Boehne, Senior Vice President Hugh Chairnoff, Vice President and Lending Officer Thomas K. Desch, Vice President Peter M. DiPlacido, Vice President Richard W. Epps, Vice President James F. Gaylord, Vice President Hiliary H. Holloway, Vice President and General Counsel W. Lee Hoskins, Vice President and Director of Research Ira Kaminow, Vice President and Economic Adviser Alexander A. Kudelich, Vice President Donald J. McAneny, Vice President and General Auditor G. William Metz, Vice President Lawrence C. Murdoch, Jr., Vice President and Secretary Bipin C. Shah, Vice President Evelyn G. Battista, Human Resources Services Officer Jack P. Besse, Assistant Vice President and Assistant Secretary D. Russell Connor, Assistant Vice President Samuel J. Culbert, Jr., Bank Services Officer Robert A. Dobie, Examining Officer Guy H. Edwards, Systems Planning and Development Officer Ronald G. Foley, Cash Operations Officer Robert N. Gilmore, Automation Planning Officer Judith H. Helmuth, Operations Improvement Officer and Assistant Secretary Kathleen C. Holmes, Custody Control Officer Paul E. Kirn, Jr., Assistant Vice President Edwin C. Lodge, Statistical Officer Frederick M. Manning, Assistant Vice President * Robert E. Matthews, Assistant General Auditor Glennie M. Matthewson, II, Assistant Counsel Michael J. McGovern, Data Processing and Technical Services Officer Arthur L. Morath, Jr., Banking Structure Officer Donald J. Mullineaux, Research Officer and Economist Joseph J. Ponczka, Fiscal Operations Officer Donald L. Raiff, Research Officer and Economist Edward G. Rutizer, Examining Officer Lawrence C. Santana, Jr., Assistant Vice President Anita A. Summers, Research Officer and Economist * Ronald D. Watson, Research Officer and Economist Elizabeth S. Webb, Assistant Counsel *On leave January 1, 1978 5 Statement of Condition ASSETS December 31, 1976 December 31, 1977 Gold certificate account.............................. Special drawing rights certificate............... Other cash...................................................... 631,731,900 74,000,000 13,089,874 $ $ 640,643,300 71,000,000 10,609,977 Loans and securities: Discounts and advances.......................... Federal Agency obligations...................... United States Government securities . . . 16,025,000 427,007,000 5,384,085,000 2,900,000 376,945,000 5,174,888,000 Total Loans and Securities................. $5,827,1 17,000 $5,554,733,000 Other assets: Cash items in process of collection . . . . Bank premises........................................... Operating equipment - net...................... All other.................................................... Interdistrict settlement account............... 341,805,306 55,777,044 5,099,415 98,301,018 -389,371,391 206,648,917 55,820,810 2,480,548 121,428,474 -233,154,471 Total Assets......................................... $6,657,550,166 $6,430,210,557 LIABILITIES Note liabilities: Federal Reserve notes............................ . Deposits: Member bank reserve accounts........... U. S. Treasury - general account......... Foreign.................................................... All other.................................................. Total Deposits..................................... . Other liabilities: Deferred availability cash items............. All other.................................................. Total Liabilities................................... . Capital accounts: Capital paid in......................................... Surplus.................................................... Total Liabilities and Capital Accounts . . . $4,936,380,307 $4,724,381,794 891,232,423 451,661,963 11,855,100 34,175,216 763,039,540 584,187,122 10,842,200 60,827,308 $1,388,924,703 $1,418,896,171 183,013,091 60,935,264 149,369,302 51,822,089 $6,569,253,366 $6,344,469,357 44,148,400 44,148,400 42,870,600 42,870,600 $6,657,550,166 $6,430,210,557 Note: Effective January 1, 1977, Federal Reserve notes of other Federal Reserve Banks was netted against Federal Reserve notes. 7 Earnings and Expenses 1977 Current earnings: From U.S. Government securities........... From discounts, advances and miscel laneous sources.................................. 1976 $ 364.810.998 $ 362.014.427 2.012.278 1,773.847 366.823,276 363,788.274 Net expenses: Operating expenses (after deducting re imbursable or recoverable expenses . . . Federal Reserve currency....................... 29.573.053 3.185.166 31.207.563 2.285.792 Total net expenses.............................. 32,758,219 33,493.355 Current net earnings.................................... 334,065.057 330,294.919 2.219,531 1,911.698 1,264.063 2.219,531 3,175.761 2.061.800 1,896.600 2.648.278 6,294.527 11.760 1,153.408 52.212 Total deductions.................................. 11,016,365 3,102,220 Net additions................................................. Net deductions............................................. 8.796.834 Total current earnings.......................... Additions to current net earnings: Profit on sales of U.S. Government se curities (net)........................................... Miscellaneous nonoperating income.... Total additions.................................... Deductions from current net earnings: Assessment for expenses of the Board of Governors............................................. Loss on sales of U.S. Government se curities (net)........................................... Loss on foreign currency transactions. . . Miscellaneous nonoperating expenses . . . Net earnings before payment to U.S. Treasury..................................................... Dividends paid............................................. Paid to U.S. Treasury (interest on Federal Reserve notes).......................................... Transferred to Surplus.................................. 73.541 $ 325.268,223 $ 330.368.461 2.606.405 2.558.833 321,384,018 1.277.800 327.354,578 455.050 $ 325.268.223 $ 330.368.461 Note: Effective January 1. 1977, the assessment for expenses of the Board of Governors was reclassified. 9 Annual Operations OPERATING STATISTICS Millions of dollars Loans to member banks.............................. Currency received and counted................... Coin received and counted.......................... Checks handled: U. S. Government checks........................ Postal money orders................................ All other................................................... Collection items handled: U. S. Government coupons paid........... All other................................................... U. S. Savings Bonds and Savings Notes is sued, exchanged, redeemed................... Other Government securities issued, ex changed, redeemed................................ Transfers of funds........................................ Food stamps redeemed.............................. Securities held in safekeeping: Book-entry form...................................... Definitive form........................................... Thousands of items processed Loans to member banks.............................. Currency received and counted................... Coin received and counted.......................... Checks handled: U. S. Government checks....................... Postal money orders................................ All other................................................... Collection items handled: U. S. Government coupons paid........... All other................................................... U. S. Savings Bonds and Savings Notes issued, exchanged, redeemed................. Other Government securities issued, ex changed, redeemed................................ Transfers of funds........................................ Food stamps redeemed.............................. Securities held in safekeeping: Book-entry form...................................... Definitive form........................................... 1976 1977 $ 7,103 4,143 108 1,018 3,859 101 17,183 251 229,296 19,849 292 205.465 131 48 206 1,705 1,314 1,318 157.413 ,126,759 391 101,723 994,810 389 9,696 3.166 6,437 3,079 1976 1977 774* 445,395 768.198 389* 429,057 740.004 42,572 7,058 581,964 43,734 9,465 552,052 477 89 543 142 21,953 23.181 270 771 105,076 418 660 103,435 70 10 48 10 * Unrounded data BANKING STATISTICS Member banks at year end........................ Nonmember banks at year end................... 1977 236 144 1976 243 145 11 te isfe c,™“sn,smpk',‘-s . *• - The installation, in November 1977. of a monu mental steel sculpture by noted artist. Beverly Pepper, completed the Bank's required public art program for the new building. The abstract sculpture, titled Phaedrus. was put in place north of the building's main entrance on Sixth Street. The week-long project was directed by the artist, who is trained in both engineering and metal work. Phaedrus—a triangular structure pierced with a triangular opening—rises from the vertical plane to a height of 1 7 feet and weighs approximately 1 2 tons. New York-born Beverly Pepper has earned an international reputation in the art world. Her sculp tures, with their characteristic pyramidal shapes, are on display in many cities in the United States and Europe. Phaedrus is the second major work of art com missioned by this Bank for its new building. The first—a 100-foot mobile by the late Alexander Calder—can be seen in the building's east court yard. Both works, which were selected in consultation with a panel of area art experts, were an outgrowth of the sales agreement by which the Bank acquired the building site from the Philadelphia Redevelopment Authority. The land was sold at a favorable price and the Authority stipulated that the Bank spend one percent of the construction cost of the building on original art that is on view to the public.
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