View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

1990 Annual Report







Federal Reserve Bank o f Richmond

1 9 9 0

Annual Report




C o n ten ts
Message from the Chairman

3

Reflections on Deposit Insurance

4

Highlights

13

Directors

16

Advisory Councils

18

Operating and Financial Statements

20

Officers

23

ISSN 0164-0798
LIBRA RY O F C O N G R E S S CA TA LO G C A RD NUMBER:

16-7264

Fdra Rse e Bn of R m d P b tio Nme P
e e l e rv a k ich on u lica n u b r: -l
C stru p otog p : A v n Av rtisin
on ction h ra h d a te d e g

Additional copies o f this Annual Report may be obtained without charge from:
P ublic Services D ep artm e nt




Federal Reserve Bank o f R ic h m o n d

P.O . Box 27622

R ic h m o n d , V irginia

23261

Federal Reserve Bank o f Richmond

Message
from the Chairman
ver the past six years, I was
honored to serve as a member and
then chairman o f the board o f
directors o f the Federal Reserve Bank of
Richmond. These several years o f association
with the Bank were a rewarding experience
for me. I cherish the friendships that I have
made with other directors and the members
of the Bank’s staff. I am proud to have been
part o f this nation’s central bank and to have
served with directors who consistently
demonstrated their business and professional
expertise in their reviews o f Bank activities
and in their assessments o f economic
conditions.
I began my tenure as a director on
June 24, 1985. The econom y was in the
middle o f its third year o f growth in what
would turn out to be the longest peacetime
expansion. I ended my service at the close
of 1990 as the expansion slowed and possibly
ended. Although the econom y grew during
most o f the past six years, the financial
system was severely tested. In these som e­
times trying times, our directors made every
effort to act prudently and responsibly in
establishing the discount rate. W e avoided
the temptation to try to fine-tune the
econom y and focused instead on what we
believed should be the System’s primary
goal: long-run price stability.
The last decade ended with some indi­
cation of a resolution o f the crisis in the
savings and loan industry and with the
promise o f world peace. The new7 decade
began with evidence o f spreading prob­
lems in the financial sector and with the




Anne Marie Whittemore

Hanne Merriman

Robert P. Black

D e p u ty C hairm an

C
hairm
an

President

threat o f war. Just as the nation must address the
problems in the international political arena, so must
it also address those in our nation’s banking system.
Changes in the banking structure and financial
safety net are likely in the years ahead. In the next few
pages, the president o f the Bank, Robert P. Black, shares
some o f his thoughts on deposit insurance and its role
in the problems besetting financial institutions. His
thoughts include some proposals for reform. I com ­
mend his reflections on deposit insurance to you.
On behalf o f the directors, I thank you, our con­
stituents, for the support you have given the Bank over
the past year.

Chairman of the Board

3

1990 Annual Report

Reflections on
Deposit Insurance
One of the most important public policy issuesfacing the United States
currently in the area of financial markets is the need for reform of
the nation's deposit insurance system. A number of proposals for
change have been offered, including the proposal announced by
the U Department of the Treasury on February 5, 1991. The
.S.
following article is adapted from an address on the subject by
Robert P. Black, president of the Federal Reserve Bank of Richmond,
before the annual convention of the West Virginia Bankers
Association, July 27, 1990. The views expressed here are not
necessarily those of the Federal Reserve System.

The savings and loan crisis has changed
all this.

No

one

believes that deposit

insurance was the only cause o f the crisis,
and probably only a minority o f those w ho
have studied the crisis think it was the
principal cause. Nonetheless, there is now
widespread agreement am ong those in the
best position to judge that deposit insur­
ance has at least contributed to the thrift
problem .
Deposit insurance is n o w getting a great
deal o f attention. The FIRREA (Financial
Institutions Reform, Recovery, and En­
forcem ent Act o f 1989) law requires the
Treasury Department to prepare a study o f
deposit insurance; the American Bankers
Association has already published a pro­
posal for reforming the deposit insurance
system; and leading newspapers and finan­
cial periodicals currently are filled with
articles about deposit insurance.

I.

F

or many years deposit insurance was
one o f the few instances o f govern­

N a tu re

o f

In su ra n c e

th e

D e p o s it

P r o b le m

H ow did deposit insurance contribute to

ment intervention in the econ om y

ing industry in the future? The response to

idea. Since there was not much debate

this question is that deposit insurance

about deposit insurance, there was little

presents a “ moral hazard” to banks and

discussion o f it.




insurance pose for the commercial bank­

conservatives alike— agreed was a good

4

the thrift crisis and what risks does deposit

that just about everybod y— liberals and

other depository institutions. Moral hazard,

Federal Reserve Bank o f Richmond

as applied to deposit insurance,
means

that

the

managers

of

6 6

a

thrift or a bank may have an incen­

. . . th er e

tive to acquire riskier assets than

a greem en t a m on g

th ey

sh o u ld

b e ca u se

insu red

is n o w

w id e s p r e a d

th e b e s t p o s it io n

depositors— secure in the kn ow l­

th o se

in

to ju d g e

th a t d e p o s it in s u r a n c e h a s

edge that their funds are safe in any

a t le a s t c o n tr ib u te d

event— will not penalize the institu­
tion by withdrawing their funds or

th e

th r ift p r o b le m .

requiring that a risk premium be

to

9 9

added to the rates paid on their
deposits.

The

hazard is all the

greater if, as in too many institu­
tions at present, capital is relatively low so

underpriced in the U.S. eco n o m y because

that

include

deposit insurance reduces the risk premium

managers— have only a m odest amount o f

depository institutions have to pay when

shareholders— w h o

often

their wealth at stake in the institution. It

they com pete for deposits. Loan rates may

seems clear in retrospect that the moral

therefore not reflect adequately the risk

hazard associated with deposit insurance

associated with particular loans. If this is

did in fact play a role in the thrift crisis,

true, too many econom ic resources are be­

although it may not have been the initial

ing drawn to relatively high risk ventures

cause o f the crisis. Specifically, at least

and away from lower-yielding but e co ­

some thrifts invested the deposits entrusted

nom ically more defensible projects. The

to them in highly risky ventures that

apparent excess supply o f office buildings

depositors w ould not have tolerated in the

and condom inium s in many parts o f the

absence o f insurance. With this unfortunate

country currently suggests that there may

experience in mind, com m ercial bankers

have been a significant misallocation o f

obviously need to be aware o f the long­

capital in the United States over the last

term risks that deposit insurance presents

decade. Deposit insurance may have c o n ­

to the banking industry so that they can

tributed to this misallocation. If this c o n ­

work with the appropriate regulators to

jecture is accurate, it is essential to correct

evaluate and avoid these risks.

the problem quickly since America must

Attention must also be given to the

allocate its capital resources as productively

problem s deposit insurance may cause in

as possible to strengthen its com petitive­

the U.S. econ om y as a w hole as well as in

ness in today’s highly

particular

depository

markets.

industries.

Risk may




institutions
be

and

systematically

efficient

world

1990 Annual Report

II.

W a y s
th e

to

D e a l

w ith

out with the bathwater seems especially ap­
propriate

P r o b le m

in

the

con tex t

of

deposit

insurance reform. M oreover, any attempt
The key question, obviously, is: how

to overhaul overnight a system as popular

should we reform the deposit insurance

and extensive as deposit insurance w ould

system? The recommendations that follow

be unwise. A better approach w ould be to

are not necessarily the views o f the Federal

set strategic goals for reform o f the system

Reserve as a w hole although many o f them

and then develop a long-range, phased plan

are held widely in the System. Many also

to achieve these objectives with minimum

correspond to points Chairman Greenspan

disruption. The follow ing recom m enda­

made in his testimony on deposit insurance

tions are in this spirit.

reform on July 12, 1990, before the Senate
Com m ittee

on

Banking,

Housing,

and

Urban Affairs.

A c c e le ra tin g an d Im p r o v in g
R e s o lu tio n P ro c ed u re s

Before considering what reforms should

In dealing with the deposit insurance

be made it should be recognized that

problem ,

whatever problems may be associated with

accelerate

the
the

most

urgent need

resolution

is to

o f what

are

deposit insurance, it has produced signifi­

euphemistically called “ capital-impaired”

cant benefits since its inception back in

institutions: in plain English, insolvent or

the 1930s. In particular, no systemic runs

soon-to-be-insolvent institutions. This is

on

have

the only sure way to protect the deposit

occurred during this period. Every effort

insurance funds and prevent or at least limit

must be made to preserve this benefit.

further potential losses to taxpayers. Tax­

The old adage about not throwing the baby

payers are angry about their potential losses

federally

insured

institutions

from the thrift crisis to date. They have no
stom ach for any further losses.

6 6
... a n y

Accelerating the resolution process and

a tte m p t to

o v e rn ig h t a
p o p u la r a n d

sy stem

b e u n w is e .

9 9




as

e x te n s iv e a s

d e p o s it in s u ra n c e

6

overh au l

w o u ld

protecting the insurance funds, o f course,
are easier said than done. O ne intriguing
proposal for accomplishing this is the
American

Bankers

Association’s

“ final

settlement paym ent” procedure put for­
ward in March o f 1990. Under this pro­
cedure, an insured institution w ould go

Federal Reserve Bank o f Richmond

into FDIC receivership immediately upon
a determination that it was insolvent. On
the next business day the FDIC w ould give
insured depositors access to their full
balances up to $ 1 0 0 , 0 0 0 and settle the
claim s

of

unsecured

uninsured
creditors

depositors
through

a

and
“ final

settlement paym ent,” the amount o f which
w ould be set so that the FDIC w ould break
even over time in its receivership activities.
According to the ABA this amount w ould
be between 85 and 9 5 percent o f uninsured
and unsecured creditor claims. This plan
is appealing because

it w ould

subject

depository institutions to a greater degree
o f healthy market discipline than exists
currently while at the same time giving
uninsured

depositors

and

unsecured

creditors immediate access to most o f their
funds. It w ould also help neutralize the
“ too-big-to-fail” problem if it were applied
consistently and therefore were a credible,
permanent policy know n in advance by
d e p o sito rs,

b o n d h o ld e rs,

and

oth er

creditors. There may be legal or technical
problem s with this approach which have
not surfaced yet, but, apart from

this

possibility, the A B A ’s proposal seem s to
have considerable merit. Any proposal that
holds out a hope o f halting the erosion o f
the

insurance

funds

deserves

serious

consideration.
O ne

particularly

It is well know n that conventional ac­
counting practices based on historical book
values do not always accurately reflect the
true current condition o f an institution.
C on sequ en tly,

som e

econ om ists

and

others have urged the adoption o f market
value accounting in som e form. There
are a lot o f knotty practical problem s
involved in switching to market value
accounting, and the solutions to all these
problem s are not clear yet. Changes along
these lines may have to be considered,
how ever, since it will not be possible
to im prove resolution procedures unless
accurate and timely information on the true

sticky

problem

in­

volved in accelerating the resolution o f
insolvent institutions deserves m ention—
the question o f what accounting system




should be used in determining insolvency.

condition o f insured institutions is avail­
able. If a way can be found to develop




1990 Annual Report

institutions prior to resolution. If so, it
w ould tend to undermine reforms such as
the ABA’s proposal since one o f the prin­
cipal benefits o f these proposals w ould be
the increased depositor discipline it would
stimulate. Therefore, it may be desirable for
the Federal Reserve to reevaluate its ex­
tended credit policies in conjunction with
the larger effort to im prove the deposit in­
surance system. In doing so, it should be
kept in mind that the System can discharge
its lender-of-last-resort duties to a very
substantial extent by supplying liquidity to
the banking system through ordinary open
market operations.

this information, it w ould then be incum ­
bent on the supervisory agencies to review

Stre n g th en in g C apital P o sitio n s
Although

im proving

resolution

pro­

it at least annually for each insured bank

cedures is particularly urgent in order to

in a full in-bank examination.

prevent any further erosion o f the in­

Finally, whatever specific procedures are

surance funds, m ore fundamental reforms

adopted for resolving insolvencies, it is

are also needed. A m ong the m ost im por­

important that the Federal Reserve rein­

tant o f these is an additional strengthening

force them in administering the discount

o f capital positions. Considerable progress

w in dow . In the past the Federal Reserve

in this direction has already been made

has provided extended credit on several

with

occasions to undercapitalized institutions,

capital standards, which are being phased

including som e that may have been insol­

in and will be com pletely in place by the

vent on a market-value basis. This practice

end o f 1992. Nonetheless, a strong argu­

has evolved from the System’s “ lender-of-

ment can be made for even higher capital

la st-re so rt”

standards, as Chairman Greenspan has

resp o n sib ilities

and

has

reflected its desire to help prevent or at
least limit the disruption that may occur
when

individual

institutions

fail.

the

new

international

risk-based

indicated quite forcefully.
Higher capital ratios w ould obviously

The

benefit the deposit insurance system. First,

availability o f extended credit from the

they w ould enlarge the buffer protecting

w indow , however, may facilitate the with­
drawal o f uninsured funds from troubled

Federal Reserve Bank of Richmond

the insurance funds. Second, they
w ou ld reduce the moral hazard in
the system because shareholders
w o u ld have a prop ortion ately
larger interest in an institution and
therefore w ou ld im pose greater
discipline on managers. B eyond
these direct benefits to the insur­
ance system, higher capital ratios
w ou ld make it considerably m ore
likely that banks w ou ld be per­
mitted to engage in a w ider range
o f activities. This is so because the
additional capital buffer w ou ld reduce the
risk that the safety net o f w hich deposit
insurance is a part w ou ld be extended im­
plicitly to these new activities. Smaller
institutions may not find this last argument
o f great interest, but many observers o f the
U.S. banking industry believe firmly that
bank powers must be extended if American
banks are to maintain their com petitive
position in w orld financial markets.
One other argument for increasing bank
capital merits special attention. In the
present situation with relatively low capital
ratios in many banks and, in practice,
som ething approaching full coverage o f all
depositors, the governm ent and the tax­
payer effectively are bearing m ost o f the
risk associated with the depository in­
dustry. The savings and loan debacle has
made both the governm ent and taxpayers
keenly aware o f the nature and full dim en­
sions o f this risk. Consequently, it is likely
that the governm ent will demand in­




6 6
.. . m o re fu n d a m e n ta l

r e fo r m s a r e ... n eed ed .
A m ong

th e m o s t im p o r ta n t

o f t h e s e is a n

a d d itio n a l

s tr e n g th e n in g o f c a p ita l
p o s itio n s .
9 9

creased control and regulatory authority
over banks and other institutions if it is
asked to continue to bear this risk. Some
sharpening o f supervision and regulation
is probably needed in view o f the thrift
problem . But a wholesale increase in
regulatory control and interference w ould
not serve the interests o f either banks or
their customers. The innovative banking
activity that has served the United States
so well in the past w ould be stifled and the
industry w ou ld wither. This is obviously
a strong argument for increasing capital
ratios. For that matter, it is a strong argu­
ment for any change that increases market
and depositor discipline.
In short, there are several solid argu­
ments for raising capital standards, and
Chairman Greenspan stated in his testi­
m ony that the Federal Reserve currently is
developing m ore specific proposals to

9

1990 Annual Report

accom plish this as sm oothly as possible.
Many bankers undoubtedly w ou ld like to
know where they are going to find this
capital and h ow m uch it is going to cost.
Unfortunately, there is no simple answer
to this question. An increased demand by
the banking industry for capital w ould
almost certainly raise its cost, and this in
turn might lead to further structural
changes and possibly slower growth in the
industry. These things d o not sound very
desirable at first, but this kind o f outcom e
might well be a blessing in disguise if, as
is very likely, it w ere to increase the effi­
ciency and therefore the viability o f the
banking industry over the longer haul. In
any event, the alternative o f greater
regulatory control is almost certainly
worse.
It w ould probably be acceptable, in this
regard, to count fully subordinated debt
along with equity capital toward fulfill­
ment o f required capital minimums. Most
independent small and m edium ­
sized institutions probably will
find it less costly, how ever, to at­
tract equity capital than invest­
ment in subordinated debt in the
foreseeable future.
O th er M easures
It has b e e n e m p h a size d
already that the tw o most effec­
tive, practical steps that can be
taken to deal with the problem s
in the deposit insurance system
currently are (1) im proving the

10




procedures for resolving insolvencies and
(2) increasing capital ratios. There are a
number o f other useful measures, h o w ­
ever, that w ou ld com plem ent these tw o
primary reforms.
Im proved supervision clearly w ou ld be
one such step. One o f the great advantages
o f higher capital ratios is that they w ou ld
reduce the pressure for any marked in­
creases in regulation and supervision.
Measured changes in supervisory activity
such as annual in-bank examinations o f
all insured banks, how ever, w ou ld not be
unduly intrusive and w ou ld benefit indi­
vidual institutions as well as regulators.
Another potentially helpful action might be
to introduce a limited form o f risk-based
insurance premiums. Such prem ium s
w ou ld link the price o f insurance paid by
a particular institution (and, indirectly, its
customers) directly to the potential burden
the institution is putting on the insurance
fund and therefore give the institution an

6 6

O n e o f th e g r e a t a d v a n ta g e s
o f h i g h e r c a p i t a l r a t i o s is
th a t th ey w o u ld
p ressu re fo r

r e d u c e th e

any

m a rk ed

i n c r e a s e s in r e g u l a t i o n
a n d s u p e r v is io n .
9 9

Federal Reserve Bank of Richmond

incentive to reduce this burden. It w ould
not be a g o o d idea, how ever, to base these
premiums on a detailed categorization o f
assets according to risk. It is exceedingly
difficult as a practical matter to define and
rank such categories, and attempts might
be made to manipulate the system in order
to direct credit to favored industries.
C onsequently, any differentiation o f
premiums probably should be based
primarily on capital adequacy.
Whatever other reforms may be made
in the insurance system, som e people will
not be satisfied unless action is taken to
reduce the system’s overall coverage from
present levels. These people argue that in
practice the system currently covers virtu­
ally 100 percent o f deposits and a substan­
tial portion o f other unsecured liabilities.
They argue further that this situation and
the subsidization o f risk-taking it entails
will inherently prod u ce a continuing, sig­
nificant misallocation o f resources and
make the e co n o m y correspondingly less
efficient— a condition the nation can ill af­
ford w hen it is lock ed in a global c o m ­
petitive struggle with the highly efficient
Japanese and German econom ies.
This rather fundamental econ om ic argu­
ment for reducing coverage is very per­
suasive. The question is: h ow should it
be accom plished? The ABA proposal dis­
cussed above is one possibility. Another
option, o f course, w ou ld be to reduce the
explicit insurance limit per account from
the current $100,000 to som ething less.




One does not have to be terribly astute to
realize that this w ould be very difficult
to achieve politically. It might also weaken
the com petitive position o f U.S. banks
in international m oney markets. A better
approach might be to enforce the $ 100,000
limit m ore effectively by restricting the
use o f multiple accounts by individual
depositors. This cou ld be done in a
straightforward way using social security
numbers.

Perhaps the most productive way to
limit coverage, how ever, w ou ld be to
introduce— or at least study the possi­
bility o f introducing— som e form o f coinsurance for larger insured accounts.
Coinsurance probably w ou ld be as effec­
tive or nearly as effective in increasing
depositor discipline on institutions as a
reduction in the insurance limit. It also

11

1990 Annual Report

III.

6 6

., . i t w o u ld b e im p o r ta n t
to a n a l y z e c a r e fu lly th e
im p lic a tio n s o f c o in s u r a n c e
fo r

th e c o m p e t it iv e n e s s o f

U .S . d e p o s i t o r y

in s titu tio n s

in w o r l d m a r k e ts .
9 9

w ou ld be easier to sell politically since the
public is n ow well accustom ed to dedu c­
tibles in their autom obile and health in­
surance plans. The public might well
regard a system like this as a fair and
reasonable effort to prevent a recurrence
o f the savings and loan problem . In c o n ­
sidering such a system, h ow ever, it w ould
be important to analyze carefully the im­
plications o f coinsurance for the co m ­
petitiveness o f U.S. depository institutions
in w orld markets.

12




C o n c lu sio n

These com m ents and observations can
be b oiled d ow n to tw o main points. First,
prom pt and meaningful reform o f the
deposit insurance system is needed both
to correct the distortions the present
system has introduced into the e co n o m y
and, m ore urgently, to prevent the savings
and loan disease from spreading to the
com m ercial banking industry. Second,
there are a variety o f feasible options for
reform available. Accelerated resolution
procedures and higher capital ratios are
especially important, and, as indicated
above, a number o f other beneficial
changes could be made to supplement and
reinforce these fundamental reforms. Some
o f these changes may require som e adjust­
ments, both in the Federal Reserve and
other regulatory agencies and in the
banking industry. If the changes are made
carefully and diligently, how ever, Ameri­
can banking and financial markets will
almost certainly be m uch stronger and
m ore efficient in the years ahead.

Federal Reserve Bank of Richmond

1 9 9 0
H ig h lig h ts

P e rs o n n e l

A u to m a tio n and O p e ra tio n s

Ronald B. Duncan was named to replace
Robert D. McTeer, Jr., as officer in charge o f
the Baltimore Branch. Mr. Duncan assumed
his new responsibilities on February 1, 1991,
w hen Mr. M cTeer becam e president o f the
Federal Reserve Bank o f Dallas.

The Baltimore Office offered other Reserve
Banks its on-line settlement for ch eck and
return systems (OSCAR). The Atlanta Bank
began formal acquisition o f the check appli­
cation software; other Reserve Banks also
have show n interest in this system.

First Vice President Jimmie R. M onhollon
was named product director o f a new System
management group that will revitalize the
System’s Functional Cost Analysis Program,
a cost accounting program for depository

The Bank outlined procedures for Fifth
District depository institutions to fo llo w in
the event o f a disaster at the Federal Reserve

institutions. Walter A. Varvel was appointed
as product manager and G eorge L. C ox as
assistant product manager.

Bank o f Richm ond and con d u cted tw o suc­
cessful tests o f plans to m ove critical op er­
ations to the Culpeper Contingency Process­
ing Center.
The Regional Delivery System (RDS),
developed by the U.S. Treasury, was im ple­
mented by the Bank. This new procedure
issues savings bonds at Federal Reserve Banks
rather than at depository institutions.
The Bank im plem ented FLASH-Light— a
new, limited service, electron ic access
method that requires less expensive personal
com puters than the standard FOX network.
The Bank also expanded its electronic
check processing services by enhancing
existing services and b y introducing a new
service, A ccount Total Plus, w hich provides

Ronald B Duncan (left) and Robert D McTeer, Jr.,
.
.
congratulate one another.




13

1990 Annual Report

additional cash management capabilities to
financial institutions.
The pilot site for check truncation in 1985,
the Bank becam e the first in the System to
truncate m ore than one million checks per
m onth. (Check truncation eliminates the
cancelled ch eck in favor o f electronic
records.)
The Bank achieved full cost recovery for
its priced financial services. The quality o f the
Bank’s financial services was well above
System targets and among the best in the
System.
At the request o f the Bank, the Board o f
G overnors enlarged the official territories
served by the Baltimore and Charlotte offices.
Eastern North Carolina was added to Char­
lotte’s territory, and the District o f Columbia
and several counties and cities in northern
Virginia w ere added to Baltimore’s territory.

14




M eetin gs
The Bank sponsored several conferences
on the Comm unity Reinvestment Act. A
conference held in Richmond for senior bank
officials featured a keynote address by Federal
Reserve G overnor John P. LaWare. Confer­
ences held in Maryland, North Carolina and
West Virginia, w hich w ere cosp on sored by
the Bank and state banking associations,
focused on community reinvestment training.
D on Patinkin, one o f the most influential
monetary econom ists o f the postwar period,
was a visiting scholar at the Bank. During his
visit, he gave tw o seminars for Bank e co n ­
omists and guests.
N oted econom ist Martin S. Feldstein ad­
dressed a large group o f business, com m u ­
nity and academic leaders in the Bank’s
auditorium in Richmond. The Bank and three
universities in Richm ond jointly sponsored
Mr. Feldstein’s presentation, the first in a
series o f seminars featuring w ell-know n
speakers on business and financial topics.

Federal Reserve Bank of Richmond




Bank Digest
D irectors/Richm ond
Directors/Baltimore
Directors/Charlotte
Operations Advisory Com m ittee
Small Business and Agriculture Advisory Council
Comparative Financial Statements
Summary o f Operations

16
17
17
18
19
20
22

Officers

23

15

(December 31, 1990)

R. E. Atkinson, Jr.; A. Pierce Stone; Hanne Merriman

Jack C. Smith: John F. McNair III; Anne Marie Whittemore

R ic h m o n d
CHAIRMAN

Henry J. Faison

Hanne M
erriman

President

Retail Business Consultant

W
ashington, D.C.

Faison Associates
Charlotte, North Carolina

DEPUTY CHAIRMAN

C. R H Jr.
. ill,

Anne M Whittemore
arie
Partner

Chairman of the Board and
President

McGuire, Woods,
Battle & Boothe
Richmond, Virginia

M
erchants & M
iners
National Bank
Oak H W Virginia
ill, est

R E Atkinson, Jr.
. .

John F M
. cNair III

Chairman

Director

Dilm Oil Company, Inc.
ar
Florence, South Carolina

Wachovia Bank &
Trust Company, N .
.A
and
The Wachovia Corporation
W
inston-Salem,
North Carolina

Edward H Covell
.
President

The Covell Company
Easton, M
aryland

Jack C. Sm
ith
Chairman of the Board and
Chief Executive Officer

K-VA-T Food Stores, Inc.
Grundy, Virginia
Henry J. Faison; Edward H. Covell; C. R. Hill, Jr.

A Pierce Stone
.
M em b er, Federal
A d v is o r y C o u n c il
Frederick Deane, Jr.
Chairman Emeritus and
Chairman of the Executive Committee

Signet Banking Corporation
Richmond, Virginia
16




Chairman. President, and
Chief Executive Officer

Virginia Community B
ank
Louisa, Virginia

B a ltim o r e

C A MN
H IR A
John R Hardesty, Jr.
.

P en
resid t

Preston Energy, Inc.
Kingwood, W Virginia
est

Gloria L Johnson
.

D u D
ep ty irecto for
r
A m istra n
d in tio

The Baltim M
ore useum of A
rt
Baltim
ore, M
aryland

Richard M Adam
.
s

Joseph W M
. osmiller

United Bankshares, Inc.
Parkersburg, W Virginia
est

Loyola Federal Savings and
Loan Association
Baltim
ore, M
aryland

C a mna d
h ir a n
C ief E ec tiv O er
h x u e ffic

H Grant Hathaway
.

C a m n of th B a
h ir a
e o rd

M
aryland N
ational Bank
Baltim
ore, M
aryland

C a a of th B a
h irm n
e o rd

Thomas R Shelton
.

P en
resid t

Case Foods, Inc.
Salisbury, M
aryland

Raymond V. Haysbert, S
r.

P en a d
resid t n
C iefE ec tiv O
h x u e fficer
Parks Sausage Company
Baltim
ore, M
aryland

Seated: H Ga t H th w y; J h R H rd
. r n a a a ■ o n . a esty, J.
r
J se h W Msm
o p . o iller; R ym d V H ysb S.
a on . a ert, r
Standing: R h r M A a s; G ria L J h so ;
ic a d . d m lo . o n n
To a R Se n
h m s . hlto

C h a rlotte

C A MN
H IR A

David B Jordan
.

P e en
r sid t

P en C ief E ec tiv
resid t, h x u e
O e a dD
ffic r, n irecto
r

Anne M Allen
.

Omni Capital Group, Inc.
and
Home Federal Savings B
ank
Salisbury, North Carolina

W
illiam E M
. asters
Perception, Inc.
Easley, South Carolina

P e en
r sid t

.
Anne Allen & Associates, Inc. Harold D Kingsmore
resid t a d
en n
Greensboro, North Carolina P

C ief O era g O
h p tin fficer

Crandall C Bowles
.

Graniteville Company
Graniteville, South Carolina

The Springs Company
Lancaster, South Carolina

Jam G. Lindley
es

Pe e t
r sid n

Jam M Culberson, Jr.
es .

C a m n a dP e e t
h ir a n r sid n

The F National B of
irst
ank
Randolph County
Asheboro, North Carolina

Ca a a d
h irm n n
C ief E ecu e O
h x tiv fficer
South Carolina National
Corporation

C a a , P en a d
h irm n resid t, n
C ief E ecu e O
h x tiv fficer

South Carolina National B
ank
Columbia, South Carolina

Seated: A n MA n W m . M ste s; Ca d llC B w
n e . lle ; illia E a r r n a . o les
Standing: fa es G L d J m M C lb rso , J
m . in ley; a es . u e n r.;

D vid B J rd n H roldD K g o
a
. o a; a
. in sm re




17

1990 Annual Report

A d v is o r y

C o u n c ils

(December 31, 1990)

O p e r a tio n s A d v is o r y C o m m itte e

C A MN
H IR A
E ec tiv V e P en
x u e ic resid t
W
illiam V. Bunting
Crestar Bank, N
.A.
Richmond, Virginia
W
illiam E Albert
.

V e P en a d C sh
ic resid t n a ier

The F National Bank of Bluefield
irst
Bluefield, West Virginia
Robert Baldwin

S io V e P en
en r ic resid t
Crestar Bank, N
.A.
Washington, D.C.

Robert A Barton, Jr.
.

S io V e P en
en r ic resid t

Perpetual Savings Bank, F.S.B
.
Vienna, Virginia
George E Beckham
.

S io V e P en
en r ic resid t

South Carolina Federal Savings Bank
Columbia, South Carolina
Robert L BeHage

O era n E ecu e O
p tio s x tiv fficer

Sovran Bank, N
.A.
Richmond, Virginia

Vernon D. Conway

V e P en
ic resid t

M
ercantile-Safe Deposit & Trust Company
Baltim
ore, M
aryland
David A Denton
.

V e P en
ic resid t

Investors Savings Bank
Richmond, Virginia

W
alter A Howell
.

E ec tiv V e P en
x u e ic resid t

The Riggs National Bank of W
ashington, D.C.
W
ashington, D.C.
Daniel E Lanier, S
.
r.

V e P en
ic resid t

One Valley Bank
Charleston, W Virginia
est

Kenneth L Richey
.

S io V e P en
en r ic resid t

Citizens & Southern National Bank
of South Carolina
Columbia, South Carolina
Charles C. Schm
itt

E ecu e V e P en
x tiv ic resid t

Ashpy P Lowrimore
.

Loyola Federal Savings and
Loan Association
Glen Burnie, M
aryland

Southern National Bank of South Carolina
Florence, South Carolina

E ecu e V e P en a d C sh r
x tiv ic resid t n a ie

S io V e P en C E ecu e
en r ic resid t— ity x tiv

H.Jerry Shearer

Clement E Medley, Jr.
.

Commercial Bank of the South, N
.A.
Columbia, South Carolina

E ecu e V e P en
x tiv ic resid t

F Federal Savings and Loan Association
irst
of Dunn
Dunn, North Carolina

E ecu e V e P en
x tiv ic resid t

Raymond L Gazelle
.

S io V e P en
en r ic resid t

Douglas R Denton
.

M
aryland National B
ank
Baltim
ore, M
aryland

S io V e P en
en r ic resid t

Citizens Bank of M
aryland
Laurel, M
aryland
Harrison Giles

E ecu e V e P en
x tiv ic resid t

N BN
CN ational Bank of North Carolina
Charlotte, North Carolina
Kenneth L Greear
.

V e P en
ic resid t

United National Bank
Charleston, W Virginia
est
D. C H
. astings

P en a d C ief E ecu e O
resid t n h x tiv fficer

Virginia Bank and Trust Company
Danville, Virginia

18




P en a d C ief E ec tiv O er
resid t n h x u e ffic

Ricky B Nicks
.

First Wachovia Operational Services, Inc.
W
inston-Salem, North Carolina
Richard D Pillow
.

V e P en
ic resid t

Virginia Credit Union League
Lynchburg, Virginia
Charles M Purvis
.

V e P en
ic resid t

F Carolina Corporate Credit Union
irst
Greensboro, North Carolina
Jam W Ricci
es .

P en
resid t

Educational System Employees
s
Federal Credit Union
Bladensburg, M
aryland

Rita A Sm
. ith

West Virginia Savings League
Charleston, W Virginia
est
Thomas J. Strange

V e P en
ic resid t

South Carolina Credit Union League, Inc.
Columbia, South Carolina
Charles E Thomas
.

V e P en
ic resid t

W Virginia Credit Union League, Inc.
est
Parkersburg, W Virginia
est
Rick A Wieczorek
.

P en
resid t

District of Columbia Credit Union League
Washington, D.C.
C. L Wilson III
.

S io V e P en
en r ic resid t

Branch Banking and Trust Company
Wilson, North Carolina

Federal Reserve Bank of Richmond

S m a ll B u s i n e s s a n d A g r i c u l t u r e A d v i s o r y C o u n c i l

C A MN
H IR A
Robert W Stewart, Jr.
.
C a a a d C ief E ecu e O er
h irm n n h x tiv ffic

Engineered Custom Plastics Corporation
Easley, South Carolina

V EC A M N
IC H IR A
Joan H Zimmerman
.
P en
resid t

Southern Shows, Inc.
Charlotte, North Carolina
Leonard A Blackshear
.

P en
resid t

Associated Enterprises, Inc.
Annapolis, M
aryland
C. Champ Clark

On
w er

C C. Clark Farm
.
Chilhowie, Virginia
William M Dickson
.

On
w er

Spring Valley Farm
Ronceverte, W Virginia
est
Michele V. H
agans

P en
resid t

Fort Lincoln New Town Corporation
W
ashington, D.C.




John W H
. ane

P rtn a a er
a er/M n g

Blackwoods Farm
Fort M
otte, South Carolina

Joseph C Jefferds, Jr.
.

C a a , Pesid n a d
h irm n r e t, n
C ief E ec tiv O
h x u e fficer

Jefferds Corporation
Charleston, W Virginia
est
Louise Lynch

P en a d C ief E ec tiv O er
resid t n h x u e ffic
Courtesy Associates, Inc.
W
ashington, D.C.
Robert A Quicke
.

P en a d G era M n g
resid t n en l a a er

Southside Transportation Co. Inc.
Blackstone, Virginia
George B Reeves
.

P en
resid t

Reeves Agricultural Enterprises, Inc.
Chaptico, M
aryland

Joe M W
. illiams

O n p tor
w er/O era

W
illiams Dairy
Olin, North Carolina

19

1990 Annual Report

C o m p a r a tiv e

F in a n c ia l

S ta te m e n ts

C O N D IT IO N
December 31, 1990

December 29, 1989

Assets
Gold certificate account
Special Drawing Rights certificate account
Coin
Loans to depository institutions
Federal agency obligations
U.S. government securities
Bills
Notes
Bonds
Total U.S. government securities
Cash items in process o f collection
Bank premises
Furniture and equipment (n
et)
Other assets
Interdistrict settlement account
Accrued service income
TOTAL ASSETS

$ 1,008,000,000.00
961,000,000.00
105,399,370.81
5,500,000.00
590,231,351.74

$

943,000,000.00
745,000,000.00
78,277,772.64
2,500,000.00
540,738,815.08

10,472,630,017.39
8,507,532,420.48
2,900,468,325.79

8,667,303,585.84
7,573,372,060.47
2,553,731,839.1 1

21,880,630,763.66

18,794,407,485.42

341,348,225.88
122,201,413.95
31,064,976.72
2,892,933,948.51
-5,673,760,517.80
5,122,043-92

533,933,842.12
126,996,552.52
25,404,871.19
2,194,241,892.71
3,701,851,815.94
5,188,047.66

$22,269,671,577.39

$27,691,541,095.28

$18,904,361,212.00

$23,180,117,124.00

2,653,964,940.55
9,300,000.00
15,557,083-89

3,455,840,334.35
8,700,000.00
87,986,717.96

2,678,822,024.44

3,552,527,052.31

118,955,637.30
271,411,903-65

446,638,237.85
233,397,281.12

$21,973,550,777.39

$27,412,679,695.28

148.060.400.00
148.060.400.00

139.430.700.00
139.430.700.00

$22,269,671,577.39

$27,691,541,095.28

Liabilities
Federal Reserve notes
Deposits
Depository institutions
Foreign
Other
Total deposits
Deferred availability cash items
Other liabilities
TOTAL LIABILITIES

Capital Accounts
Capital paid in
Surplus
TOTAL LIABILITIES AND CAPITAL ACCOUNTS

20




Federal Reserve Bank of Richmond

E A R N IN G S A N D E X PEN SE S
1990

1989

Earnings
Loans to depository institutions
FDIC assumed indebtedness
Interest on U.S. government securities
Foreign currencies
Income from services
Other earnings
Total current earnings

$

$

5,208,025.73
14,830,154.07
1,791,699,651.19
160,792,748.66
64,590,429.92
757,144.90
$2,037,878,154.47

1,612,252.18
N
/A
1,624,011,524.12
60,079,567.77
62,099,087.82
748,779.88
$1,748,551,211.77

100,263,888.19
12,372,510.49
112,636,398.68
$1,925,241,755.79

95,066,398.60
12,053,256.92
107,119,655.52
$1,641,431,556.25

5,866,671.72
132,642,248.68
13,033.49
138,521,953.89

1,208,662.07
74,329,418.38
6,538,983.13
82,077,063.58

0
16,063.89
16,063-89
+ 138,505,890.00
6,766,914.72
6,446,700.00
18,507,249.00
$2,032,026,782.07

0
53,115.52
53,115.52
+ 82,023,948.06
2,919,938.22
5,258,200.00
15,253,971.00
$1,700,023,395.09

$

8,693,666.59
2,014,703,415.48
8,629,700.00
$2,032,026,782.07

$

$

$

Expenses
Operating expenses
Cost o f earnings credits
Net expenses
CURRENT NET EARNINGS
Additions to current net earnings
Profit on sales of U.S. government securities (net)
Profit on foreign exchange transactions
All other
Total additions
Deductions from current net earnings
Losses on foreign exchange transactions
All other
Total deductions
Net additions or deductions
Cost o f unreimbursed Treasury services
Assessment for expenses of Board of Governors
Federal Reserve currency costs
NET EARNINGS BEFORE PAYMENTS TO U.S. TREASURY

Distribution o f Net Earnings
Dividends paid
Payments to U.S. Treasury (interest on F
ederal R
eserve notes)
Transferred to surplus
TOTAL

7,902,911.62
1,676,145,633.47
15,974,850.00
$1,700,023,395.09

Surplus Account
Balance at close of previous year
Addition o f profits for year
BALANCE AT CLOSE OF CURRENT YEAR

$

139,430,700.00
8,629,700.00
148,060,400.00

$

123,455,850.00
15,974,850.00
139,430,700.00

Capital StOCk Account (Representing am paid in, which is 50% of am subscribed)
ount
ount
Balance at close o f previous year
Issued during the year

$

139,430,700.00
12,172,000.00
151,602,700.00
3,542,300.00

$

123,455,850.00
18,763,100.00
142,218,950.00
2,788,250.00

$

148,060,400.00

$

139,430,700.00

Cancelled during the year
BALANCE AT CLOSE OF CURRENT YEAR




21

1990 Annual Report

S u m m a ry

o f

O p e r a tio n s

Operation

Number

Amount

($thousands)

1990

1989

1990

Currency and coin processed
Currency received and verified
Currency verified and destroyed
Coin bags received and verified

1.983.165.000
652.908.000
271,156

1,756,230,000
614,044,000
329,468

24,016,852
5,302,701
203,200

22,602,281
5,473,785
248,019

Checks handled
Commercial—processed *
Commercial—packaged items
U.S. government

1.526.891.000
339.774.000
66,707,000

1,457,293,000
295,102,000
66,372,000

1,039,571,000
119.968.000
128.155.000

963,051,688
108,394,000
137,260,000

Collections items handled
U.S. government coupons paid
Noncash items

32,859
126,268

63,174
135,278

10,603
278,658

28,750
383,324

Commercial book-entry
transfers originated

247,973

231,928

1.824.636.000

1,818,399,000

5,471,584

5,230,327

238,973,000

169,121,000

1,129,760

961,097

463

540

16,025,063

4,041,710

Funds transfers sent and received
Food stamps redeemed
Loans advanced

* x d g c e k o th Bn ..
E clu in h c s n is a k

22




1989

9.782.720.000 8,888,053,000

Federal Reserve Bank of Richmond

O ffic e r s

(December 31, 1990)

R ic h m o n d
Robert P Black, P
.
resid t
en
Jimmie R Monhollon, F st V e P
.
ir ic resid t
en
Lloyd W. Bostian, Jr., S io V e P
en r ic resid t
en
J Alfred Broaddus, Jr., S io V e P
.
en r ic resid t a d
en n

D
irecto of Rse r h
r e ac

Roy L Fauber, S io V e P
.
en r ic resid t
en
Joseph C. Ram
age, S io V e P
en r ic resid t
en
Jam D. Reese, S io V e P
es
en r ic resid t
en
Bruce J. Summ S io V e P
ers, en r ic resid t*
en
Fred L Bagwell, V e P
.
ic resid t
en
Dan M Bechter, V e P
.
ic resid t
en
W
illiam H Benner, Jr., V e P
.
ic resid t
en
Timothy Q. Cook, V e P
ic resid t
en
W
illiam E Cullison, V e P
.
ic resid t
en
Donna G. Dancy, V e P
ic resid t
en
W
yatt F Davis, V e P
.
ic resid t
en
M
ichael Dotsey, V e P
ic resid t
en
George B Evans, V e P
.
ic resid t
en
W
illiam C. Fitzgerald, A cia G era C u sel
sso te en l o n
M
arvin S Goodfriend, V e P
.
ic resid t a d
en n

A cia D
sso te irecto of Rse r h
r e ac

Robert L Hetzel, V e P
.
ic resid t
en
David B Humphrey, V e P
.
ic resid t a d
en n

P ym ts S mA viser
a en yste d

Thomas M Humphrey, V e P
.
ic resid t
en
Jam McAfee, V e P
es
ic resid t a d G era C u sel
en n en l o n
Yash P M
. ehra, V e P
ic resid t
en
M
ichael W. Newton, V e P
ic resid t
en
John W Scott, V e P
.
ic resid t
en
Andrew L Tilton, V e P
.
ic resid t
en
W
alter A Varvel, V e P
.
ic resid t
en
Roy H Webb, V e P
.
ic resid t
en

Kemper W Baker, Jr., A
.
ssista t V e P en
n ic resid t
Jackson L Blanton, A
.
ssista t V e P en
n ic resid t
W
illiam A Bridenstine, Jr., A
.
ssista t G era C u sel
n en l o n
Bradford N Carden, A
.
ssista t V e P en
n ic resid t
Betty M Fahed, A
.
ssista t V e P en
n ic resid t
Sharon M H
. aley, A
ssista t V e P en a dS reta
n ic resid t n ec ry
Eugene W. Johnson, Jr., A
ssista t V e P en
n ic resid t
Thomas P Kellam A
.
, ssista t V e P
n ic resid t
en
Anatoli Kuprianov, R rc O
esea h fficer
Harold T. Lipscomb, A
ssista t V e P en
n ic resid t
Edgar A M
. artindale III, A
ssista t V e P en
n ic resid t
David L M
. engle, Rse rc O
e a h fficer
Susan Q. Moore, A
ssista t V e P en
n ic resid t
Joseph F M
. orrissette, A
ssista t V e P en
n ic resid t
Virginius H Rosson, Jr., A
.
ssista t V e P en
n ic resid t
G. Ronald Scharr, A
ssista t V e P en
n ic resid t
Gary W. Schemmel, A
ssista t V e P en
n ic resid t
M
arsha S Shuler, A
.
ssista t V e P en
n ic resid t
Jam R Slate, A
es .
ssista t G era C u sel
n en l o n
W
illiam F White, A
.
ssista t V e P en
n ic resid t
Howard S Whitehead, A
.
ssista t V e P en
n ic resid t
Bobby D Wynn, A
.
ssista t V e P en
n ic resid t
Arthur J Zohab, Jr., A
.
ssista t V e P en
n ic resid t
Malcolm C Alfriend, E a in g O
.
x m in fficer
Whitley K Crane, In rm tio S
.
fo a n ystem O er
s ffic
Floyd M Dickinson, Jr., E a in g O
.
x m in fficer
A. Linwood Gill III, E a in g O
x m in fficer
Jeffrey S Kane, E a in g O
.
x m in fficer
Lawrence P Nuckols, E a in g O
.
x m in fficer
Virginia W Shelor, In rm tio S
.
fo a n ystem O
s fficer
Charlotte L Waldrop, E a in g O
.
x m in fficer

H Lewis Garrett, G era A d r
.
en l u ito
Robert E Wetzel, Jr., A
.
ssista t G era A d r
n en l u ito

B a ltim o r e
Robert D. McTeer, Jr., S io V e P
en r ic resid t
en
Ronald B Duncan, V e P
.
ic resid t
en
W
illiam E Pascoe III, V e P
.
ic resid t
en
John S Frain, A
.
ssista t V e P en
n ic resid t
William J. Tignanelli, A
ssista t V e P en
n ic resid t
John I. Turnbull II, A
ssista t V e P en
n ic resid t
RW
. illiam Ahern, A tom tion O er
u a
ffic
Patricia S Tunstall, O era n O
.
p tio s fficer

C u lp e p e r
John G. Stoides, S io V e P
en r ic resid t
en
Jam J. Florin III, A
es
ssista t V e P en
n ic resid t
Thomas C Judd, A
.
ssista t V e P en
n ic resid t
Julius M
alinowski, Jr., O era n O
p tio s fficer

C h a r lo tte
Albert D. Tinkelenberg, S io V e P
en r ic resid t
en
Sam W. Powell, Jr., V e P
uel
ic resid t
en
Robert F Stratton, V e P
.
ic resid t
en
Jefferson A. W
alker, V e P
ic resid t
en
M
arsha H M
. alarz, A
ssista t V e P en
n ic resid t
Lyle C DeVane, O era n O
.
p tio s fficer
Ronald D. Steele, C e k O era n O
h c p tio s fficer

C o lu m b ia
Woody Y. Cain, V e P
ic resid t
en

C h a r le s to n
Richard L Hopkins, V e P
.
ic resid t
en

* On leave of absence




23

Fifth Federal R
eserve District Offices
R ic h m o n d
701 East Byrd Street
Richmond, Virginia 23219
(804) 697-8000
B altim ore
502 South Sharp Street
Baltimore, Maryland 21201
(301) 576-3300
C h arlotte
530 East Trade Street
Charlotte, North Carolina 28202
(704) 358-2100
C h a rleston
1200 Airport Road
Charleston, West Virginia 25311
(304) 345-8020
C o lu m b ia
1624 Browning Road
Columbia, South Carolina 29202
(803) 772-1940
C u lp e p e r
Mount Pony Road, State Route 658
Culpeper, Virginia 22701
(703) 829-1600