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1979AnnualReport
Federal
Reserve
Bankof

Philadelphia

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1979/annualReport
Federal
Reserve
Bankof

Philadelphia
Contents
PRESIDENT'S
EXECUTIVE

CHANGES

ý\

7
8

OFFICERS

9
OF CONDITION

11

EARNINGS AND EXPENSES

13

ANNUAL

15

OPERATIONS

THE DISTRICT ECONOMY
SHOWED STAMINA IN 1979

I

5

DIRECTORS

STATEMENT

f

MESSAGE

17

Messaffe
President's

The decade of the 1970s was significant for
this Bank and satisfying for me personally. I am
particularly pleased by the progress we made in
operations. From 1974 to 1978 the Bank's employment was reduced 16 percent, mostly
through attrition, while the volume of output
increased 25 percent.
Back in 1974, our aggregate unit cost
was in
the last quartile among all Reserve Banks, but by
1977, it had risen to the
second quartile, after
adjustment for building costs. The quality of our
operations improved even more and
we now
rank consistently among the best three Federal
Reserve Districts.
The Bank also
maintained its contributions to
the community through
appropriate research,
meetings and seminars, and
on the System level
we continued to provide leadership in
many
areas including automation, personnel
and consumer affairs.
I believe this
record of success was due to a
combination of factors. New
management techniques and the effective
use of automation
played a major part, but
most important, was
the hard work
and dedication of our officers
and employes.

As the 1980s unfold, we will make every efhave
fort to maintain the improved position we
sluggish
growth
though
relatively
achieved even
in volume is expected for the northeastern part
have exciting
of the nation. In addition, we
communifor
and
expanding automation
plans
banks and
For
member
example,
cation services.
be linked
other financial institutions soon will
will eninto
which
directly
our own computers,
better
and
of
new
a
spectrum
able us to provide
services.
Dwindling membership and the pricing of Reimporserve Bank services are among the most
If
face
today.
a
membership
tant problems we
bill is not enacted, our services to banks will beOn the
come even more important and sensitive.
other hand, if such legislation passes, we will
face many changes in our relationships with
financial
institutions
such as correspondent
banks.
Like the decade just past, the 1980s will preOur task
sent both challenges and opportunities.
is to maintain the spirit, know-how and flexibility to accept the former and take advantage of
the latter.

President
5

Changes
Executive

Council in 1980.
The Board of Governors of the Federal ReAmong the 1979 changes in the Bank's official
serve System took these actions concerning Class
Senior
C Directors in 1979. John W. Eckman, Chairman
staff, John D. Johnson was appointed
Vice President, Operations, with responsibility
and President, Rorer Group Inc., Fort Washingfor cash, check, and fiscal operations. He had
ton, Pennsylvania, was redesignated Chairman of
Board
been Vice President and Manager of the Helena
the
of this Bank for 1980. Werner C.
Brown, Chairman, Hercules Incorporated, WilBranch of the Federal Reserve Bank of Minneamington, Delaware, was renamed Deputy Chairpolis. Donald J. Mullineaux was promoted to
Vice President and Associate Director of Reman, also for 1980. Jean A. Crockett, Chairman
Jr., was promoted
and Professor of Finance, Wharton School,
search, and William H. Stone,
Officer with reUniversity of Pennsylvania, Philadelphia, PennLending
Vice
President
and
to
bank services
for
operations,
sylvania, was appointed to a new three-year term,
credit
sponsibility
D. Watson
beginning January 1,1980, as a Class C Director.
and regulations assistance. Ronald
Planning
Operations
Third District member banks elected three
Vice
President,
moved up to
directors in December. Eberhard Faber, IV,
Analysis and Research.
Chairman and Chief Executive Officer, Eberhard
Three members of the official staff received
Faber Inc., Wilkes Barre, Pennsylvania,
Duffy benew assignments in 1979. James B.
was
H. Helmuth
Judith
elected to a three-year term as a Class B Director
Operations
Officer;
Cash
came
Assistant
by large member banks. He
succeeds William S.
moved to Custody Control Officer; and
Masland, President
Manning
was chosen
Vice President Frederick M.
and Chief Executive Officer,
C. H. Masland & Sons, Carlisle,
force
Pennsylvania.
to head a special Board of Governors task
Harry A. Jensen, President
examinadevelop
commercial
Chief
Executive
a new
and
which will
Officer, Armstrong Cork Company, Lancaster,
tion report format for the Reserve Banks.
Pennsylvania,
Appointed to the Bank's official staff in 1979
was elected a Class B Director by
Processing and
medium-sized member banks. Mr. Jensen
were James M. Cleary, Data
will
J. Forst,
complete the unexpired portion
Stanley
Services
Officer;
Technical
of a term that
ends December 31,1980, and thereafter
Officer; Carol A. Karkut,
Planning
Automation
serve a
new three-year term. He
Services and System Planning Officer; Jerry Katz,
succeeds Jack K. Busby,
retired Chairman
Chief
Executive
Officer,
Compensation and Benefits Officer; William J.
and
Pennsylvania Power
& Light Company, AllenKouser, Data Systems Officer; Thomas J. McCoy,
town, Pennsylvania. Donald J. Seebold, President,
Systems Planning and Development Officer; and
The First National Bank
Danville,
Danville,
P. Viswanathan, Assistant Vice President.
of
Pennsylvania,
was elected to a three-year term as
Evelyn G. Battista, Human Resources Services
a ClassA Director by
folbanks in the
small
member
Officer,
retired from Bank service, and the
District.
lowing officers resigned to accept outside posiThe Directors
of this Bank
tions: Robert N. Gilmore, Ira Kaminow, Michael
B. Eagleson, Jr., Chairman reappointed William
and President, Girard
J. McGovern, James F. Russell, and Anita A.
Bank, Philadelphia, Pennsylvania,
to
Summers.
represent
the Third District
on the Federal Advisory
7

Directors
CHAIRMAN
John W. Eckman
Chairman and President
Rorer Group Inc.
Fort Washington, Pennsylvania
DEPUTY CHAIRMAN
Werner C. Brown
Chairman
Hercules Incorporated
Wilmington, Delaware

John R. Biechler
President and Chief Executive Officer
The Commonwealth National Bank
Harrisburg, Pennsylvania

Jean Crockett
Chairman, Professor of Finance
Wharton School
University of Pennsylvania
Philadelphia, Pennsylvania

Robert H. Deacon
President
The Bank of Mid-Jersey
Bordentown, New Jersey

Eberhard Faber, IV
Chairman and Chief Executive Officer
Eberhard Faber Inc.
Wilkes-Barre, Pennsylvania

Richard P. Hauser
Chairman and Chief Executive Officer
John Wanamaker
Philadelphia, Pennsylvania

Harry A. Jensen
President and Chief Executive Officer
Armstrong Cork Company
Lancaster, Pennsylvania

Donald J. Seebold
President
The First National Bank of Danville
Danville, Pennsylvania

MEMBER OF THE FEDERAL ADVISORY COUNCIL
William B. Eagleson, Jr.
Chairman and President
Girard Bank
Philadelphia, Pennsylvania
B

Officers
David P. Eastburn, President
Richard L. Smoot, First Vice President
Konstanty G. Adack, Senior Vice President
Edward G. Boehne, Senior Vice President
John D. Johnson, Senior Vice President
Thomas K. Desch, Vice President
Peter M. DiPlacido, Vice President
Guy H. Edwards, Vice President
James F. Gaylord, Vice President
Hiliary H. Holloway, Vice President and General Counsel
W. Lee Hoskins, Vice President and Director of Research
Alexander Kudelich, Vice President
Donald J. McAneny, Vice President and General Auditor
G. William Metz, Vice President
Donald J. Mullineaux, Vice President and Associate Director of Research
Lawrence C. Murdoch, Jr., Vice President and Secretary
William H. Stone, Jr., Vice President and Lending Officer
Ronald D. Watson, Vice President
Jack P. Besse,Assistant Vice President and Assistant Secretary
James M. Cleary, Data Processing and Technical Services Officer
D. Russell Connor, Assistant Vice President
Samuel J. Culbert, Jr., Bank Services Officer
Robert A. Dobie, Examining Officer
James B. Duffy, Cash Operations Officer
Ronald G. Foley, Assistant Vice President
Stanley J. Forst, Automation Planning Officer
Judith H. Helmuth, Custody Control Officer and Assistant Secretary
Carol A. Karkut, Services
and System Planning Officer
Jerry Katz, Compensation and Benefits Officer
Paul E. Kirn, Jr., Assistant Vice President
William J. Kouser, Sr., Data Systems Officer
Edwin C. Lodge, Statistical Officer
Frederick M. Manning, Assistant Vice President
Thomas J. McCoy, Systems Planning
and Development Officer
Arthur L. Morath, Jr., Assistant Vice President
Joseph J. Ponczka, Examining Officer
Edward G. Rutizer, Examining Officer
Lawrence C. Santana, Jr., Assistant Vice President
John B. Shaffer, Assistant General Auditor
P. Viswanathan, Assistant Vice President
Elizabeth S. Webb, Assistant Counsel
January 1,1980

9

Condition
Statement
of

ASSETS
December 31,
1978

December 31,
1979
Gold certificate
account ................
Special drawing
rights certificate..........
Other cash
...........................
Loans and securities:
Discounts and
advances
...............
Federal Agency obligations
United States Government ............
securities.....
Total Loans and Securities

.
.
.

.
.
.

924,023,300
91,000,000
20,592,085
15,980,000
392,827,991
5,560,440,512

$ 5,969,248,503

...........

Other assets:
Cash items in process
of collection
Bank premises
.......
.......................
Operating equipment
- net ..............
All other
..............
Interdistrict
.
settlement account
.........
Total Assets
............
...

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..

439,430,599
53,911,345
7,215,181
255,958,396
-739,036,872
$ 7,022,342,537

$

597,958,400
69,000,000
14,807,559
78,873,000
395,432,981
5,483,006,156

$ 5,957,312,137
631,137,721
54,999,804

5,373,497
231,692,499
-637,108,617
$ 6,925,173,000

& CAPITAL

$ 5,456,725,146

$ 5,198,716,050

825,201,283
249,332,927

1,081,420,973
208,072,1 14

12,259,000
45,450,139

$ 1,132,243,349
238,900,700
103,694,442

8,716,100
20,777,289
$ 1,318,986,476
233,938,372
85,933,602

$ 6,931,563,637

$ 6,837,574,500

45,389,450
45,389,450

43,799,250
43,799,250

$ 7,022,342,537

$ 6,925,173,000
11

Earnings

1978

1979

Current earnings:
From U.S. Government securities...............
From discounts, advances and miscellaneous
sources......................................................

486,395,139

$ 420,301,803

13,843,008

4,644,834

Total current earnings..............................

500,238,147

424,946,637

Net expenses:
Operating expenses (after deducting reim­
bursable or recoverable expenses)...........
Federal Reserve currency............................

32,395,257
3,262,654

30,471,978
3,282,514

Total net expenses.....................................

35,657,911

33,754,492

Current net earnings.........................................

464,580,236

391,192,145

Additions to current net earnings:
Miscellaneous nonoperating income...........

222,528

17,798

Total additions.........................................

222,528

17,798

$

Deductions from current net earnings:
Assessment for expenses of the Board of
Governors..................................................
Loss on sales of U.S. Government securities
(net)..........................................................
Loss on foreign currency transactions........
Miscellaneous nonoperating expenses........

2,044,800

2,269,800

7,502,838
149,741
367,681

6,578,886
21,744,327
110,142

Total deductions.......................................

10,065,060

30,703,155

Net deductions..................................................

9,842,532

30,685,357

$

454,737,704

$ 360,506,788

$

2,693,608

Net earnings before payment to U.S.
Treasury ........................................................
Dividends paid....................................................
Paid to U.S. Treasury (interest on Federal
Reserve notes)...............................................
Transferred to Surplus, additions, deduc­
tions (-)..........................................................

$

$

2,634,130

450,453,896

358,221,808

1,590,200

-349,150

454,737,704

$ 360,506,788

13

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 issued,
exchanged, redeemed...................................
Other Government securities issued, exchanged,
redeemed........................................................
Transfers of funds.............................................
Food stamps redeemed.....................................
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 others......................................................
Collection items handled:
U.S. Government coupons paid...................
All other........................................................
U.S. Savings Bonds and Savings Notes issued,
exchanged, redeemed...................................
Other Government securities issued, exchanged,
redeemed........................................................
Transfers of funds.............................................
Food stamps redeemed.....................................

1979

$

23,224
5,560
135

1978
$

12,646
4,667
118

28,924
253
279,491

15,376
250
252,708

95
1,144

146
3,426

1,741

1,376

153,368
1,467,063
313

134,965
1,210,730
367

1979

1978

3,907*
547,979
901,281

3,493
488,400
815,000

34,700
6,200
630,300

33,600
6,600
602,200

350
160

422
157

25,790

22,800

422
1,100
91,300

217
900
101,400

*Unrounded data

BANKING STATISTICS
Member banks at year end................................
Nonmember banks at year end........................

1979

224
144

1978
227
153

15

The DistrictEconomy
ShowedStamina
in 1979

The Third Federal Reserve District has the
problem of being older and colder than the
nation as a whole. We have relatively more manufacturing in our economic mix and many of
these facilities are showing their years. Winter
weather puts us at a disadvantage and high wage
rates are traditional here.
As a result, Third District
growth has tended
to lag behind the nation in
recent decades. Both
economies moved in the same general direction
over business cycles but we seemed to have
deeper recessions
and somewhat lessprosperity.
Some

say this pattern is changing. A number
of older factories have closed
or moved away
in recent years
and, while painful in the short
run, this attrition could help the District in
two
ways. First, it reduces the
overall importance
of manufacturing
in the local economy
and
manufacturing
is particularly
susceptible to recessions. Second, the
plants that remain are
likely to be
newer and more efficient
and thus
better able to
compete.

The year 1979
wasa mixed one for the District
economy, with a recession
ever-lurking but never
really materializing. According
to this Bank's
surveys, manufacturing
fairly strong
activity
was
in the first half
of the year but slipped steadily
in the second. Nevertheless,
personal income in
the Third District
states
grew
substantially
throughout the
entire year. Its rate of increase

but
was not quite up to the national average
here.
inflation
the
rate
then neither was
Rising personal income and declining unem1979 a good year for
ployment helped to make
in June and July
The
lines
District retailers.
gas
hurt but the pain was short-lived and pretty
much confined to suburban shopping centers.
Christmas sales came on strong as shoppers emphasized quality gifts.
Non-residential construction was another high
did particuspot in 1979. The Philadelphia area
larly well with the dollar volume up 75 percent
is a
in the first nine months of the year. There
here
and
at
building
in
construction
boom
office
least eight major projects now are underway in
Housing in the
center city Philadelphia alone.
until October
held
well
District
up surprisingly
began
when scarce, expensive mortgage money
to dampen the industry.
Summer resorts in the mountains and along
the shore had a disappointing year, with one exthat kept
ception. First, it was the gas shortage
But
it
the
weather.
was
people home, and then
in
Atdealing
neither slowed the wheeling and
toward
its
climb
lantic City which continued
new prosperity.
As we enter the 1980s, it appears that the
Third District economy has increased its stamina
If we
by trimming down and diversifying a bit.
decade.
be
it
a
good
keep on this regimen,
should

17


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102