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Annual Report 1987 F E D E R A L R E S E R V E B A N K O F R IC H M O N D F e d e r a l R e s e r v e B a n k o f S e v e n t y - T h ir d A n n u a l R e p o r t 3 R ic h m o n d 1987 M e s s a g e fr o m th e C h a ir m a n a n d th e P r e s id e n t 4 M o n e ta ry P o lic y 5 S u p e r v is io n a n d R e g u la tio n 6 F in a n c ia l S e r v ic e s 7 E l e c t r o n i c P a y m e n t s in R e t r o s p e c t 14 D ir e c to r s 16 A d v is o r y C o u n c ils 17 O ffic e r s 18 O p e r a t i n g a n d F i n a n c i a l S t a t i s t ic s ISSN 0164-0798 LIB R A R Y O F C O N G R E S S C A T A L O G C A R D NUM BER: 16-7264 Additional copies ol this Annual Report may be obtained without charge from: P u b lic Services D epartm ent Federal Reserve Bank of R ich m o n d P. O . Box 27622 R ich m o n d , V irg in ia 23261 M e s s a g e fr o m th e C h a ir m a n a n d th e P r e s id e n t ------------- J _ F e d e r a l R e s e r v e S y ste m . In " E l e c t r o n ic P a y m e n ts in R e t r o s p e c t ," S e n io r V ic e P r e s id e n t B ru ce S u m m e r s e x a m in e s th e p a tte r n ■p , a n d e x te n t o f u s e o f e l e c t r o n i c -------- -- f u n d s tra n s fe rs a n d c h a r ts a c o u r s e ^. j •• * ■ V .. 1 fo r th e ir fu tu re. . T h r e e s h o r te r a r t ic le s c o m p l e t e - th e te x tu a l p o r t i o n o f th e r e p o r t. T w o— o n e o n fin a n c ia l s e r v ic e s a n d o n e o n s u p e r v is io n a n d r e g u f x i . la t io n — fo c u s o n th e a p p li c a t io n jSSSriji in * o f e l e c t r o n i c t e c h n o l o g y to B a n k / / Y / fu n c t io n s . T h e th ir d p r e s e n ts a r e v ie w o f m o n e t a r y p o l i c y in 1987, "jjk m m m m * j m *1 III m i a y e a r that h e ld a n u n u s u a l m ix ;J i t . ” > t tu r e o f c h a l l e n g e s fo r S y stem p o li c y m a k e r s . W e h o p e that y o u w ill fin d th e a r t ic le s in te r e s t in g a n d in fo r m a tiv e . Robert P. Black President Leroy T. Canoles, Jr. Chairm an o f the Board O n b e h a lf o f o u r d ir e c t o r s a n d sta ff, w e w is h to th a n k y o u fo r th e e a r e p l e a s e d to p r e s e n t th e 1987 A n n u a l R e p o r t co o p e r a tio n a n d su p p ort you e x t e n d e d to u s t h r o u g h o u t th e y ea r. o f th e F e d e r a l R e s e r v e B a n k o f R ic h m o n d . T h is y e a r w e fe a t u r e a n a r t i c le o n e l e c t r o n i c p a y m e n ts . F or th e p a st fiv e y e a r s at th e F e d e r a l R e s e r v e B a n k o f R ic h m o n d , a s p e c ia l p la n n in g a n d C h a ir m a n o f th e B o a r d m a n a g e m e n t u n it h e a d e d b y First V i c e P r e s id e n t J im m ie M o n h o l lo n has d ir e c t e d d e v e lo p m e n t s in e l e c t r o n i c p a y m e n ts fo r th e e n tir e P r e s id e n t 3 M o n e ta ry A P o lic y d ir e c t ly o n a n u m b e r o f o t h e r s 1987 b e g a n a n d a s it i n d ic a t o r s i n c l u d i n g in fla tio n , p r o g r e s s e d , th e F e d e r a l e c o n o m i c c o n d i t i o n s , a n d th e e x R e s e r v e f a c e d th e c o n c h a n g e rate. t in u in g c h a l l e n g e o f p r o v i d i n g ■ e n o u g h lig u id it y to s u p p o r t a fifth T h r o u g h m o s t o f th e y e a r, th e y e a r o f e c o n o m i c e x p a n s i o n w ith S y s te m s o u g h t to m o d e r a t e a r is e o u t r is k in g a n i n c r e a s e in in fla in in fla t io n e x p e c t a t i o n s th at w a s t io n a r y p r e s s u r e s . A s in o t h e r a p p a r e n t ly t r i g g e r e d b y in c r e a s e s r e c e n t y e a r s , th is ta sk w a s c o m p l i in c o m m o d i t y p r i c e s a n d d e c l i n e s c a t e d b y u n c e r t a in t y o v e r h o w in th e f o r e i g n e x c h a n g e v a lu e o f d e r e g u la t i o n in b a n k in g m a r k e ts t h e d o lla r . T h e s e e x p e c t a t i o n s in h a d d is t o r t e d r e la t io n s h ip s b e t e n s if ie d in la t e s u m m e r , a n d o n tw e e n th e m o n e t a r y a g g r e g a t e s S e p t e m b e r 4 th e F e d e r a l R e s e r v e a n d e c o n o m i c a c tiv ity . B e c a u s e o f r a is e d th e d is c o u n t ra te fr o m 5!/2 th is u n c e r ta in ty , th e F e d e r a l O p e n Senior Vice President A1 Broaddus reports on economic conditions in the aftermath o f the stock market plunge. to 6 p e r c e n t in o r d e r " t o d e a l M a rk e t C o m m it t e e d i d n o t se t a n e f f e c t iv e l y a n d in a t im e ly w a y T h e p r im a r y c o n c e r n o f p o l i c y a n n u a l ta r g e t r a n g e fo r th e M l w ith p o t e n t ia l in fla t io n a r y p r e s s h ift e d a b r u p t ly in O c t o b e r f o l a g g r e g a t e . T h e C o m m it t e e d i d s u r e s ." T h is in c r e a s e w a s th e first lo w in g th e r e c o r d p l u n g e in th e set a n n u a l ta r g e t r a n g e s fo r th e s in c e M a rch 1984. s t o c k m a r k e t. In th e a fte rm a th o f b roa d er M 2 an d M 3 a g g re g a te s, th e c r a s h , th e F e d e r a l R e s e r v e b u t in m a k in g its m o n t h -t o -m o n t h a ff ir m e d " it s r e a d in e s s to s e r v e p o l i c y d e c i s i o n s it a ls o f o c u s e d a s a s o u r c e o f li g u i d it y to s u p p o r t th e e c o n o m i c a n d fin a n c ia l s y s 3 0 -Y E A R T R E A S U R Y B O N D Y IE L D te m ," a n d th e f i n a n c i a l sy ste m s u r (Weekly: January 2, 1987 to December 25,1987) v iv e d w ith o u t m a jo r d is lo c a t io n s . T h e g o a l o f c o n t i n u e d e x p a n s io n in 198 7 w ith o u t a s ig n ific a n t r is e in th e in fla t io n r a te p r o v e d to b e a n a t t a in a b le o n e . T h e e c o n o m y g r e w at a ra te o f a b o u t 4 p e r c e n t , w e ll a b o v e th e c o n s e n s u s fo r e c a s t . T h e p r i c e le v e l r o s e b y a p p r o x i m a t e ly 3^2 t o 4 p e r c e n t . In d u s tr ia l p r o d u c t i o n , w h i c h h a d b e e n v ir tu a lly fla t in 1 9 8 5 a n d 1986, c lim b e d b y r o u g h ly 5 p e rce n t. A s th e y e a r c a m e to a c lo s e , h o w e v e r, th e r e JA N FEB M A R A P R MAY JU N JU L AUG SEP OCT N O V DEC r e m a in e d an u nu su al a m o u n t o f u n c e r t a in t y o v e r th e c o u r s e o f th e e c o n o m y in th e Concern over the possibility of a resurgence in inflation was especially evident in bond yields; which rose sharply in the spring and again in the late summer and early fall. 4 m o n th s to c o m e . S u p e r v is io n a n d R e g u la tio n t w as n ot to o m an y years a g o lo a n d o c u m e n t a t i o n a n d p a r e n t th at it w a s c o m m o n fo r a I h o l d i n g c o m p a n y c a s h flo w a n a ly b a n k 's g e n e r a l b o o k s to b e sis, b u t la t e ly n o s u b je c t h a s b e e n kept o n a h a n d -p o s te d "B o sto n e m p h a s iz e d m o r e th a n th e u s e o f L e d g e r ," a n d fo r th e n o is e o f a n p e rso n a l com p u ters. e a r ly m o d e l p r o o f m a c h in e to b e th e m o s t t a n g i b l e e v i d e n c e o f N ot t o o m a n y y e a r s a g o , e x t e c h n o l o g i c a l p r o g r e s s . E x a m in e r s a m in e r s c a r r i e d la r g e b r ie f c a s e s c o u l d e a s il y t r a c e th e p r o g r e s s io n b u l g i n g w ith w o r k p a p e r s w h e n o f ite m s t h r o u g h fa ir ly e le m e n t a r y th e y e n t e r e d a b a n k . Today, at a c c o u n t i n g s y ste m s. T oday, th e le a st o n e e x a m in e r c a r r ie s a p e r s u b d u e d h u m o f a c o m p u t e r 's c e n t r a l p r o c e s s i n g u n it is e v i d e n c e o f a d r a s tic c h a n g e th at s o n a l c o m p u t e r . T h e c o m p u t e r is Intensive, inform al training sessions help novice examiners develop necessary skills. u s e d to e n te r , a n a ly z e , rev iew , a n d e d it d a ta . In m a n y in s ta n c e s , th e h a s o c c u r r e d in th e w a y b a n k s e x a m in a t io n r e p o r t is p r in t e d o n ly k e e p u p w ith tr a n s a c tio n s . F orm al s c h o o ls a re s p o n s o r e d b y w h e n it is c o m p l e t e d a n d r e a d y th e B o a r d o f G o v e r n o r s a n d th e fo r m a ilin g . T h e s c o p e o f c h a n g e h a s g o n e fa r F e d e r a l F in a n c ia l In s titu tio n s b e y o n d a u t o m a t io n o f a c c o u n t s . E x a m in a tio n C o u n c i l (F F IE C ). In 1 9 8 8 , th e F F IE C w ill e n c o u r a g e In te re st ra te s h a v e b e e n d e r e g G r a d u a t e s c h o o l s o f b a n k in g a n d b a n k s to s u b m it th e ir r e p o r ts o f u la t e d , n e w s e r v ic e s h a v e b e e n s c h o o l s s p o n s o r e d b y sta te b a n k c o n d i t i o n e le c t r o n i c a ll y . It is a d d e d , b a n k s th at w e r e o n c e in in g a s s o c ia t io n s a r e a ls o u s e d e x p o s s i b l e th at e x a m in a t io n r e p o r ts d e p e n d e n t u n its h a v e b e c o m e te n s iv e ly . D u r in g 1 9 8 7 , a p p r o x i w ill s o m e d a y b e s e n t to b a n k s in m a t e ly t h r e e -fo u r t h s o f th e f i e ld th e s a m e fa s h io n . h o l d i n g c o m p a n y a ffilia te s . e x a m in in g fo r c e a tte n d e d o n e or H o w d o e x a m in e r s k e e p a b r e a s t ? m o r e o f th e s e fo r m a l s c h o o ls , a n d T h e r e is n o e a s y a n sw e r, b u t s e n io r p e r s o n n e l s e r v e d as i n tw o k e y w o r d s a r e t r a in in g a n d , s t r u c to r s in s e v e r a l. In a d d it io n , a u to m a t io n . th e E x a m in in g D e p a r t m e n t c o n d u c t e d tw o b a n k h o l d i n g c o m p a n y O n - t h e - j o b t r a in in g r e m a in s th e s c h o o l s at state b a n k in g d e p a r t fo r e m o s t t e a c h e r , fo r th e r e is n o m e n t o f f i c e s fo r jo in t u s e b y s u b s titu te fo r e x p e r i e n c e g a i n e d sta te e x a m in e r s a n d d e p a r t m e n t in th e fi e ld . T h e r a p id ly c h a n g i n g p e r s o n n e l. b a n k in g e n v ir o n m e n t o f to d a y , h o w e v e r , n e c e s s it a t e s a c o m p r e E d u c a t io n is a ls o p r o v i d e d o n a h e n s iv e a n d fo r m a l tr a in in g p r o c o n t in u o u s b a s is b y in fo r m a l d e g r a m fo r b o t h n e w a n d e x p e r i p a r tm e n ta l t r a in in g s e s s io n s . S u b e n c e d e x a m in e r s . je c t s c o v e r e d a r e as d iv e r s e as The personal com puter is a valuable ad junct to both field examinations and office analytical work. 5 I F in a n c ia l S e r v ic e s T h e B a n k 's C u s t o m e r S u p p o r t D e p a r t m e n t h a s a staff d e d i c a t e d to s u p p o r t u s e r s o f o n - l i n e s e r v ic e s . Its m e m b e r s tra in n e w u s e r s , a n s w e r g u e s t io n s , a n d h e lp s o lv e p r o b le m s . T h is g r o u p ta k e s p r i d e in b e i n g r e s p o n s iv e to u s e r g u e s t io n s a n d s e n s it iv e to n e w s e r v ic e n e e d s . C u s to m e r S u p p o rt h o ld s a n n u a l u s e r g r o u p m e e t in g s at v a r io u s lo c a t io n s in th e D is tr ic t to g i v e o n - l i n e u s e r s th e o p p o r tu n ity to e x c h a n g e id e a s , p r o v i d e f e e d b a c k c o n c e r n i n g s e r v ic e s , a n d le a r n a b o u t fu tu r e p la n s . A w id e r a n g e o f s e r v i c e s is a v a il Group meetings foster the exchange of ideas and information between the users of Federal Reserve on-line services and members of the Customer Support staff. a b l e to o n - l i n e c u s t o m e r s , a n d e a c h s e r v i c e w a s d e v e l o p e d w ith th e h e lp o f th e fi n a n c i a l in stitu tio n s th e m s e lv e s . T h e O p e r a t io n s le c t r o n i c s a n d t e l e c o m m u n i b y w ay of p e rso n a l co m p u te rs a n d A d v i s o r y C o m m it t e e , m a d e u p o f c a t i o n c o n t in u e to p la y in o r d in a r y t e l e p h o n e lin e s . A p p r o x i r e p r e s e n ta tiv e s o f f in a n c ia l in stitu c r e a s i n g l y la r g e r o le s in th e m a t e ly 3 0 0 fin a n c ia l in s titu tio n s tio n s t h r o u g h o u t th e Fifth D is trict, F e d e r a l R e s e r v e 's p r o v is io n o f w ere F O X u sers b y y e a r -e n d 1987. p la y s a k e y r o le in th e d e s i g n o f safe, s o u n d , a n d e f f ic ie n t s e r v ic e s A n a d d it i o n a l 100 in s titu tio n s that s e r v ic e s . T h r o u g h th e ir c o m m e n t s that a r e r e s p o n s iv e to c u s t o m e r c u r r e n t ly u s e u n in t e llig e n t t e r m i at m e e t in g s a n d t h e ir p a r t i c i p a n e e d s . In 1987 , th e th ru st w a s o n n a ls fo r fu n d s a n d s e c u r it ie s tr a n s tio n in m a rk e t r e s e a r c h su rv e y s, im p r o v in g th e t e c h n o l o g y fo r p r o fe r s w ill h a v e c o n v e r t e d to p e r m e m b e r s o f th is c o m m it t e e p r o v id i n g o n - l i n e s e r v ic e s , a n d o n son a l c o m p u te r t e c h n o lo g y b y v i d e v a lu a b le a id in id e n t ify in g d e v e l o p i n g m a jo r n e w s e r v i c e e a r ly 1 988. N ow , m a n y s m a lle r s e r v i c e n e e d s a n d im p r o v e m e n t s . o ff e r in g s . in s titu tio n s c a n jo i n th e la r g e r , h ig h - v o lu m e b a n k s th at u s e d ir e c t W h e t h e r it's a fu n d s o r s e c u r it ie s T h e F e d e r a l R e s e r v e p r o v id e s o n c o m p u te r -t o -c o m p u te r c o n n e c t io n s tra n sfe r, in fo r m a t io n r e la t e d to lin e s e r v i c e s b y m e a n s o f th e F O X to o b t a in th e c o n v e n i e n c e , t i m e li c h e c k p re se n tm e n t o r ca sh d e (F e d O n l i n e X c h a n g e ) sy s te m , n e s s , e f f ic ie n c y , w id e r r a n g e o f p o s it s o r o r d e r s , a c c o u n t b a l a n c e w h ic h tra n sm its p a y m e n ts a n d in s e r v ic e s , a n d g r e a t e r s e c u r it y in g u ir ie s , o r r e p o r t o f t r a n s a c fo r m a t io n b e t w e e n th e F e d e r a l o f f e r e d b y o n - li n e s e r v ic e s . tio n s — it's a ll a v a il a b le o v e r th e R e s e r v e a n d f in a n c ia l in s titu tio n s 6 F e d e r a l R e s e r v e 's o n - l i n e n e tw o r k . E le c tr o n ic P a y m e n ts in R e tr o s p e c t B r u c e J. S u m m e r s P a y m e n t S y s te m (C H I P S ). C H IP S n e s s d a y s a fte r th e y a re o r i g i is p r im a r ily u s e d fo r d o ll a r d e n a te d . A C H p a y m e n ts c o n s is t t h e m e in th e t h in k in g o f n o m in a t e d , f o r e i g n e x c h a n g e , a n d p r im a r ily o f s o c i a l s e c u r it y a n d b a n k e r s fo r tw e n ty y e a r s . B e c a u s e in te r n a tio n a l tr a d e p a y m e n ts . T h e s a la r y p a y m e n ts , a n d p r e a u t h o r e l e c t r o n i c fu n d s tr a n s fe r (E F T ) a v e r a g e v a lu e o f a C H I P S p a y iz e d in s u r a n c e p r e m iu m d e b it s . r e p r e s e n t s a b r e a k t h r o u g h in th e m e n t is a b o u t $ 3 .0 m illio n . T h e A C H is a ls o u s e d b y c o r p o n r h e " c a s h le s s a n d c h e c k l e s s ” s o c ie t y h a s b e e n a d o m in a n t p a y m e n t p r o c e s s , m o s t d is c u s s i o n s r a tio n s to c o n c e n t r a t e c a s h b a l o f e l e c t r o n i c p a y m e n ts h a v e d e a lt T h e r e m a in in g EFT s y s te m s a re a n c e s a n d is b e g i n n i n g to b e u s e d o n ly w ith e x p e c t e d fu tu r e d e v e l o p p r i n c i p a l l y c o n s u m e r o r ie n t e d . fo r v e n d o r p a y m e n ts . In co n tr a s t m e n ts . In c o n tr a s t, th is a r t i c le T h e y i n c l u d e th e a u t o m a t e d c l e a r to F e d w ir e a n d C H IP S , th e A C H f o c u s e s o n th e le s s o n s o f th e p a s t. in g h o u s e ( A C H ) , a u t o m a t e d te lle r is p r im a r ily a s m a ll-d o lla r m e c h a T h e r e is n o w e n o u g h e x p e r i e n c e m a c h in e (A T M ), a n d p o in t - o f - s a l e n ism . T h e a v e r a g e v a lu e o f an w ith EFT to p e r m it a m e a n in g fu l (P O S ) s y ste m s. A C H p a y m e n t is a b o u t $ 3 ,3 0 0 , h is t o r ic a l e x a m in a t io n o f th e u s e s v a lu e - d a t e d m e c h a n is m ; that is, a n d o v e r 8 0 p e r c e n t o f a ll A C H a n d s u c c e s s e s of e le c tr o n ic p a y m e n ts s e ttle o n e to tw o b u s i p a y m e n ts h a v e a v a lu e o f $ 1 ,0 0 0 p a y m e n ts . T h e A C H is a o r le ss . Electronic Payments Overview B e fo r e c o n d u c t i n g th is e x a m i n a tio n , it is u s e fu l to r e v ie w th e t y p e s o f e l e c t r o n i c p a y m e n ts that a r e c u r r e n t ly in u se. T h e o ld e s t a n d m o s t m a tu r e EFT s y s te m is F e d w ire , th e F e d e r a l R e s e r v e 's la r g e - d o l l a r fu n d s tr a n s fe r s e r v ic e . F e d w ir e is u s e d fo r t i m e -c r i t ic a l p a y m e n ts , lik e in t e r b a n k p u r c h a s e s a n d s a le s o f o v e r n ig h t fu n d s , r e a l e s ta te c lo s i n g s , a n d so fo r th . T h e a v e r a g e v a lu e o f a F e d w ir e p a y m e n t is a b o u t $ 2 .6 m i l lio n . T h e N e w Y ork C l e a r i n g H o u s e A s s o c ia t i o n a ls o o p e r a t e s a l a r g e - d o l l a r fu n d s tr a n s fe r sy s te m c a l l e d C l e a r i n g H o u s e I n te r b a n k Senior Vice President Bruce J. Summers explains a proposed innovation in Federal Beserve electronic payments to First Vice President Jim m ie B. M onhollon. 7 E lectron ic P aym ents in R etro sp ect A T M n e tw o r k s a r e p r im a r ily u s e d A C H V O L U M E 1977-1986 fo r c a s h w ith d ra w a ls . T h e a v e r a g e A T M t r a n s a c t io n is v e r y s m a ll, a b o u t $ 4 0 p e r t r a n s a c t io n . A T M n e tw o rk s p r o c e s s th e h ig h e s t v o l u m e o f a ll E FT s y s te m s . P O S s y s tem s p e r m it c o n s u m e r s to p a y fo r p u r c h a s e s t h r o u g h d ir e c t d e b it s to th e ir a c c o u n t s . L ik e A T M t r a n s a c tio n s, P O S t r a n s a c t io n s a r e s m a lld o lla r p a y m e n ts , a v e r a g in g a b o u t $ 2 5 p e r t r a n s a c t io n . S o m e P O S sy stem s a r e o n - li n e , r e a l-t im e s y s tem s th at tr a n s fe r fu n d s to th e 100 m e r c h a n t im m e d ia te ly . O t h e r s y s tem s a r e o f f - li n e a n d u s e th e A C H fo r c l e a r i n g . C u r r e n tly , P O S s y s 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 The annual rate of growth in total A C H volume processed by both the Federal Beserve and private operators averaged 25.5 percent in the late 1970s, then slowed to 19.7 percent over the next six years. tem s a r e u s e d p r e d o m in a n t l y b y o il c o m p a n ie s , g r o c e r y c h a in s , a n d c o n v e n i e n c e s to r e s . A b o u t 6 6 m illio n t r a n s a c t io n s w e r e p r o c e s s e d in 1 987. m o d e l s o f th e life c y c l e o f a s e r s u c c e s s e s a n d fa ilu r e s o f e l e c v ic e , th is s ig n a ls a m a tu r e s t a g e t r o n ic p a y m e n ts . th at fo llo w s th e lo w -g r o w th s ta rt u p p e r i o d a n d th e " t a k e - o f f " p e r i o d o f a c c e l e r a t i n g g r o w th . T h e C o m b i n e d , t h e s e e le c t r o n i c p a y m e n t m e c h a n is m s a c c o u n t fo r o n ly 1.2 p e r c e n t s u g g e s t io n of m a tu rity fo r a S ta tic C h e c k S y ste m th e A C H c o m e s a s a s u r p r is e , b e c a u s e th e A C H is t y p ic a l ly v ie w e d o f th e n a tio n 's to ta l n o n c a s h as a n in fa n t s y s te m o n th e t h r e s h p a y m e n ts .1 T h u s , in te r m s o f m a r o ld o f a c c e le r a t in g g row th a n d ket sh a re , E FT h a s n o t f u lf ill e d e x th e m o s t lik e ly s u b s titu te fo r th e p e c t a t io n s th at it w o u l d b e c o m e ch eck . th e w i d e ly a c c e p t e d s u b s titu te fo r p a p e r c h e c k s . F u rth er, E FT v o l L e sso n 1: E F T Is N o t C h a lle n g in g W h y h a s th e o b j e c t i v e o f s i g n i f i u m e g r o w t h ra te s a p p e a r to b e c a n t ly i n c r e a s i n g th e e f f i c i e n c y o f d e c l i n i n g , w ith th e e x c e p t i o n o f th e p a y m e n t s y s te m b y c o n v e r t i n g P O S , w h i c h is a v e r y y o u n g s e r fr o m c h e c k s to e l e c t r o n i c p a y v i c e w ith m a n y a p p li c a t io n s c o n m e n ts n o t b e e n m e t? It is im p o r ta n t to u n d e r s t a n d th e o v e r a ll p a y m e n t s y s te m a n d h o w it a ff e c t s EFT u s a g e . In p a r t ic u la r , it m u st b e r e c o g n i z e d that th e c h e c k s y s te m is itse lf c h a n g i n g . The c o s t s o f h a n d l in g c h e c k s a r e p r o b a b l y fa llin g , s e r v i c e is im p r o v i n g , and c o n s e g u e n tly th e u sers of c h e c k s are p r o b a b ly m ore, n ot le s s , s a tis fie d . s id e r e d p ilo t p r o je c t s . In p a r C on gress ticu la r, as s h o w n o n th e c h a r t, le g i s la t i o n th at r e g u ir e s fu r th e r A C H v o lu m e g r o w t h h a s b e e n s lo w in g s in c e 19 8 0 . In tr a d itio n a l has r e c e n t ly passed im p r o v e m e n t s in th e c h e c k s y s Lessons from the EFT Experience te m . T h e C o m p e t it iv e E g u a lity T h e r e c e n t h is t o r y o f E FT r e v e a ls p r o v e d fu n d s a v a ila b ilit y fo r d e fo u r le s s o n s th a t h e lp e x p la i n th e p o s it o r s o f c h e c k s . T h e p r o c e s s B a n k in g A c t o f 1 9 8 7 m a n d a t e s im 1 Allen N. Berger, "The Economics of Elec tronic Funds Transfer," Board of Governors of the Federal Reserve System, October 2, 1985. E lectron ic P aym ents in R etro sp ect l e a d i n g to th is l e g i s la t i o n h a s T otal c h e c k c o l l e c t i o n flo a t h a s in g th e d e c i s i o n to u s e c h e c k s . a lr e a d y r e s u lt e d in m a jo r e ffo r ts d e c l i n e d in r e c e n t y e a r s , e s p e A b s e n t a c h a n g e in th e l e g a l e n o n th e p a r t o f th e in d u str y , in c ia l l y s in c e th e M o n e t a r y C o n t r o l v ir o n m e n t , th e r e w ill c o n t i n u e to c l u d i n g th e F e d e r a l R e s e r v e a n d A c t o f 1 980 r e g u i r e d th e F e d e r a l b e a s t r o n g d is i n c e n t i v e fo r c o n d e p o s i t o r y in s titu tio n s , t o im p r o v e R e s e r v e to e lim in a t e o r p r i c e a ll v e r t in g to E FT d u e to th e flo a t th e c h e c k r e tu r n ite m p r o c e s s . flo a t in its p a y m e n t o p e r a t io n s . b e n e f it fr o m w r it in g c h e c k s . D a ily a v e r a g e F e d e r a l R e s e r v e I m p r o v e m e n t s in th e c h e c k s y s c h e c k c o l l e c t i o n flo a t h a s b e e n te m w ill c h a l l e n g e e l e c t r o n i c p a y r e d u c e d fr o m a p e a k o f a p p r o x m e n t s u b s titu te s to p r o v i d e b e t t e r im a te ly $ 6 .0 b i l l i o n in 1 979 to a n d m o r e e f f ic ie n t s e r v i c e to e n a b o u t $ 7 0 0 m i lli o n t o $ 8 0 0 m illio n c o u r a g e a m a rk e t-b a se d c o n v e r to d a y . T h is r e d u c t i o n is n o t s u ffi n e w p a y m e n t s e r v ic e s to s u b s t i s io n fr o m th e c h e c k . O v e r th e c ie n t i n - a n d - o f - it s e lf to c h a n g e tu te fo r th e c h e c k . I n d iv id u a ls a r e L e sso n 3 : C o n s u m e r H a b its F a v o r th e U se o f C h e c k s F ew u s e r s a r e a c t iv e ly s e e k in g b e h a v io r a l p a tte r n s , h o w e v e r , b e n o t; fo r th e m th e p a p e r c h e c k fu n d s a v a ila b ilit y w ill e n c o u r a g e c a u s e a n e s t im a t e d $ 1 8 3 b i l l i o n in v e r y t a n g ib l y r e p r e s e n ts e a r n i n g g r e a t e r u s e o f E FT b e c a u s e , as c h e c k p r o c e s s i n g a n d m a il flo a t p o w e r a n d w e a lth . F or in d iv i d u a l s d e s c r i b e d b e lo w , th e w r ite r s o f still e x is t s in th e rest o f th e c h e c k a n d b u s in e s s e s , c h e c k s a ls o s a tisfy c h e c k s s ta n d to l o s e s o m e o f th e s y s te m .3 th e n e e d to c o n t r o l a n d a c c o u n t lo n g ru n, h ow ever, im p r o v e d fo r t r a n s a c t io n s in a m a n n e r th at " b e n e f i t s " o f c h e c k flo a t. T h e F ed era l R e s e r v e h as e x a m in e d is c o n s is t e n t w ith tr a d itio n a l a c th e p o s s ib i li t y o f s h ift in g th e c o s t c o u n t in g a n d b o o k k e e p in g F lo a t Is a P r e r e q u is ite to o f at le a s t p a r t o f th e flo a t a r is in g p r a c tic e s . E F T G ro w th in th e c h e c k c o l l e c t i o n p r o c e s s to L e sso n 2 : R e d u c tio n in C h e c k th e p a y o r b a n k , th a t is, th e in s ti o m e b u s in e s s a n d g o v e r n T h e s a v in g s fr o m u s in g E FT in tu tio n (a n d b y e x t e n s io n th e i n d i m e n ta l e n tit ie s , h o w e v e r , p l a c e o f c h e c k s p r o m i s e to b e s i g v id u a l c h e c k w r ite r ) b e n e f i t i n g h a v e a c t iv e ly s o u g h t o u t n e w n ific a n t . F or e x a m p le , a r e c e n t fr o m c h e c k flo a t. A c c o r d i n g to th e p a y m e n t m e th o d s. T h e g re a t r e li s tu d y h a s s h o w n th at th e c o s t o f U n ifo r m C o m m e r c i a l C o d e ( U C C ) a n c e n o w p l a c e d o n fu n d s tr a n s fe r A C H d ir e c t d e p o s it s m a d e b y th e and its in t e r p r e t a t io n by th e sy s te m s to s u p p o r t m o n e y m a r k e t U. S. g o v e r n m e n t is s ig n i fic a n t l y c o u r t s , h o w e v e r , c o l l e c t i n g in s ti a c t iv it y is a p r o m in e n t e x a m p le . le s s th a n th e c o s t o f m a k in g th e tu tio n s , i n c l u d i n g F e d e r a l R e s e r v e O n l y " i m m e d ia t e " w ir e tr a n s fe r s a m e p a y m e n ts b y c h e c k . B ut, th e B a n k s , a r e p r o v i d i n g s e r v i c e s to s y s te m s h a v e th e s p e e d a n d a u t o lo s s o f th e flo a t b e n e f it t o th e th e c o l l e c t i n g p a r t y a n d h a v e n o m a t io n t o s u p p o r t th e in c r e a s i n g l y U. S. g o v e r n m e n t fr o m u s in g th e r ig h t a c t iv e p a c e o f t r a d in g , e s p e c i a l l y A C H fo r s a la r y a n d b e n e f it p a y pa yor. to assess T hu s, ch arges sou n d to th e e c o n o m ic in n a t io n a l a n d in te r n a tio n a l m e n ts m o r e th a n o ffs e t s th e r e a l a r g u m e n t s n o t w it h s t a n d in g , th e m a r k e ts . In a d d it io n , EFT is b e i n g r e s o u r c e s a v in g s (lo w e r c o s t ) o f c u r r e n t l e g a l fr a m e w o r k a p p a r e n c o u r a g e d fo r c o r p o r a t e p a y u s in g A C H . 2 e n tly d o e s n o t p e r m it a r e d is t r ib u m e n ts a s a n e x t e n s io n o f e ffo r t s to tio n o f flo a t c o s t to th e p a r ty m a k a u t o m a t e m a n u fa c t u r in g a n d in v e n to ry m a n a g em en t. T h e a u to 2 W illia m C. Dudley, A Comparison of Direct Deposit and Check Payment Costs, Staff Studies 141, B oard of G overnors of the Federal Reserve System, N ovem ber 1984. m a t io n o f c o r p o r a t e b ill p a y in g 3 W illia m C . Dudley, "T he Tug-ofWar O ver Float," Morgan Guaranty Survey, D ecem ber is b e i n g " p u l l e d a l o n g " a s p a r t o f 1983, p p . 11-14. th e m u c h la r g e r m o v e m e n t to w a r d 9 E lectron ic P aym ents in R etro sp ect to ta l a u to m a t io n . T h is e x t e r n a l h e c o m p l e x i t y o f th e E FT m o m e n tu m a p p e a r s to b e g re a t p r o c e s s h a s b e c o m e a n is s u e e n o u g h fo r c o m p a n i e s to s e e k I Jk in t h e c a s e o f th e A C H , m e a s u r e o f s u c c e s s fo r e l e c t r o n i c p a y m e n t s is r e la t e d to th e o n e f o r - o n e d is p l a c e m e n t o f c h e c k s b y w h ic h h a s b e c o m e a g e n e r a l p u r e l e c t r o n i c tr a n s fe r s . It is u n r e a s o n b e n e fit s th at c u r r e n t ly e x is t in th e p o s e s y s te m s u p p o r t in g b o t h c o r a b le , h o w e v e r , to e x p e c t a la r g e - c h e c k sy ste m . T h u s , u s e o f n e w p o r a t e a n d c o n s u m e r tr a n sfe rs. s c a l e c o n v e r s i o n fr o m c h e c k s to p a y m e n t m e t h o d s a p p e a r s to d e C o r p o r a t i o n s a c t i v e ly in v o lv e d in e l e c t r o n i c tr a n s fe r s w h e n in s titu p e n d in p a r t o n th e a c c e p t a n c e b oth c o r p o r a te a n d co n su m e r t io n a l a n d b e h a v io r a l fa c t o r s b y c o r p o r a t i o n s a n d in d iv i d u a l s o f tr a n s a c t io n s h a v e b e c o m e c o n c r e a t e a b ia s in fa v o r o f e x is t in g n e w t e c h n o l o g y in t h e o v e r a ll c e r n e d th a t th e A C H is o v e r ly p a y m e n t m e t h o d s . F lo a t in c e n t i v e s c o m p l e x a s a r e su lt o f its b e i n g th at fa v o r c h e c k s , a s w e ll a s c o n w ays to n e g o t ia t e th e lo s s o f flo a t m a n a g e m e n t o f th e ir a ffa irs. m o d i f i e d t o s u p p o r t m a n y d if f e r s u m e r h a b its , s h o u ld b e r e c o g e n t t y p e s o f a p p li c a t io n s . F or e x n iz e d a s h a v in g a n im p o r ta n t i n o f S ta n d a r d s In h ib it th e U se a m p le , a r e c e n t s u r v e y o f c o r p o f l u e n c e o n th e o v e r a ll ra te o f a c o f EFT ra te c a s h m a n a g e r s f o u n d that c e p t a n c e o f e l e c t r o n i c p a y m e n ts . L esso n 4 : C o m p le x ity a n d L a c k S everal s p e c ia liz e d e le c t r o n ic p a y m ent n e tw o r k s have been de v e l o p e d to m e e t th e r e g u ir e m e n t s o f p a r t ic u la r m a r k e t s e g m e n t s . A c e r t a in a m o u n t o f s p e c ia l iz a t i o n , fo l lo w in g th e n a tu ra l d i f f e r e n c e s in b u s in e s s r e g u ir e m e n t s fo r v a r i ou s e le c tr o n ic p a y m en t a p p lic a o v e r tw o -th ir d s o f t h e s e k n o w l e d g e a b l e in d iv i d u a l s fin d th e d i A s a n a lt e r n a t iv e to m a r k e t s h a re , v e r s it y o f a p p l i c a t i o n s fo r w h ic h a m o r e s p e c i f i c m e a s u r e o f th e th e A C H is u s e d to b e s o d a u n t c o n t r ib u t i o n o f E FT to th e p a y in g th a t th e y c a n n o lo n g e r r e a d m e n t p r o c e s s s h o u ld b e a d o p t e d . ily d if fe r e n t ia t e a m o n g t h e m .4 Prescriptions ior the Future tio n s , m a k e s s e n s e . F or e x a m p le , T h e s e fo u r le s s o n s s u g g e s t th e w ir e tr a n s fe r s y s te m s th at s e r v e e le m e n t s o f a p la n fo r m a n a g in g th e m o n e y m a r k e ts , s u c h as F e d - th e fu tu r e o f e l e c t r o n i c p a y m e n ts . w ir e a n d C H I P S , m e e t v e r y d i f F o u r p r e s c r ip t io n s a r e o ff e r e d . c ie n c y s h o u ld be in d iv id u a lly c a t a l o g u e d a n d a s s e s s e d , ta k in g in to a c c o u n t a n y in s titu tio n a l d i s in c e n t i v e s that m u st b e o v e r c o m e . V ie w e d in th is lig h t , th e c u m u l a tiv e e v i d e n c e o f e x p e r i e n c e s , s u c h fe r e n t n e e d s th a n d o A T M a n d P O S sy ste m s that p r o v i d e a lt e r E FT a p p l i c a t i o n s th at o ff e r e n h a n c e d s e r v ic e o r g re a te r e ffi P r e s c r ip tio n 1: R e v is e E x p e c ta a s A C H d ir e c t d e p o s it , c o r p o r a t e n a tiv e s to u s in g c a s h a n d c h e c k s tio n s fo r E F T to R e fle c t In s t i c a s h c o n c e n t r a t io n , a n d m o n e y fo r p u r c h a s e s o f r e la t iv e ly s m a ll t u t io n a l a n d M a r k e t R e a litie s m a r k e t t r a n s a c tio n s , p a in ts a m o r e v a lu e . T h e c u r r e n t s p e c ia l iz a t i o n a m o n g E FT n e tw o r k s b a s e d o n d if f e r e n c e s in b u s in e s s r e g u i r e m e n ts h a s n o t c r e a t e d u n d u e c o m p le x it y fo r d e p o s i t o r y in s titu tio n s p o s it iv e p ic t u r e o f E FT as a s u c M a r k e t s h a r e s h o u ld b e a c c o r d e d c e s s fu l c o n t r ib u t o r to th e p a y m e n t le s s im p o r t a n c e a s a m e a s u r e o f p rocess. s u c c e s s a n d e x p e c t a t i o n s fo r th e c o n v e r s i o n to E FT s h o u ld b e r e v i s e d d o w n w a r d .5 T y p ic a lly , th e o r e n d u s e r s . O n th e c o n tr a r y , a c o n c e r n w ith c o m p l e x i t y h a s a r is e n a s a re su lt o f th e la c k o f s p e c ia liz a t io n . P r e s c r ip tio n 2 : S tre ss In s tit u t io n a l C h a n g e to E n c o u r a g e E F T In s titu tio n a l c h a n g e s that e l i m i 4 Steven F. M aier a n d Larry A. Marks, "A p plica tio ns a n d Models: C ash M anagers' Use of A C H ," Journal o f Cash Management, Septem ber/O ctober 1986, pp. 46-48. n a te a r t ific ia l b a r r ie r s a re a n e c e s s a r y p r e r e g u is it e to th e b r o a d - b a s e d a c c e p t a n c e o f EFT. 5 Jim m ie R. M o n h o llo n a n d Bruce J. Summers, "The Role of the Federal Reserve in the E lec tronic Payments Evolution," Journal of Cash Management, M ay/June 1987, pp. 23-26. 10 E lectron ic P aym ents in R etro sp ect In p a r t ic u la r , la w s a n d r e g u la t io n s s o n a b ly w e ll. F u rth er, th e o r ig i n a l s h o u ld b e e x a m i n e d to d e t e r m in e A C H s tr u c tu r e u s e d fo r r e ta il a p s h o u ld b e fu n d a m e n t a lly r e v ie w e d if c h a n g e s c a n b e m a d e to p e r m it p li c a t io n s a ls o a p p e a r s to m e e t to d e t e r m i n e if t h e c o m p l e x i t y that c h a r g i n g flo a t c o s t s to c h e c k b a s i c u s e r r e g u ir e m e n ts . T o d a y 's a r is e s b y c o m b i n i n g w i d e ly d i f f e r w rite rs. B e c a u s e c h e c k w rite r s c o n c e r n is c e n t e r e d a r o u n d th e in g p a y m e n t s in o n e s y s te m c a n c o n t r o l h o w p a y m e n t s a r e in iti s u p p o r t p r o v i d e d in th e A C H fo r b e red u ced . a te d , c h a r g i n g th e m at le a st p a r t n e w c o r p o r a t e tr a d e p a y m e n ts . t r a n s a c t io n . T h e A C H d e s i g n o f th e c o s t o f c h e c k flo a t w o u ld E ffo rts to s im p lify th e A C H s h o u ld r e d u c e w h a t is p r o b a b l y th e s in g l e ta k e in to a c c o u n t th e p o s s ib i li t y m o st s ig n ific a n t in s titu tio n a l b a r r ie r to u s e o f EFT. T h e A C H c u r r e n t ly s u p p o r t s a w id e ra n g e o f p a y m en t a p p li c a t io n s , i n c l u d i n g s a la r y th a t t h e n e w c o r p o r a t e t r a d e p a y m e n t a p p l i c a t i o n s m ig h t b e s t b e s u p p o r t e d in a s y s te m s e p a r a t e P r e s c r ip tio n 3: S im p lif y E F T a n d p r e a u t h o r iz e d d e b it t r a n s a c If m a r k e t p l a c e c o m p l a in t s a b o u t t io n s th at r e g u ir e little e x p l a n a s im p le r c o n s u m e r a n d c o m m e r c i a l c o m p l e x i t y a r e a g a u g e , th e n " i m t o r y in fo r m a t io n a n d v e n d o r p a y t r a n s a c t io n s . S e p a r a t io n o f p a y m e d i a t e " w ir e tr a n s fe r s y ste m s m e n ts th at m u st fr e g u e n t ly s u p m e n t s y s te m s m a y b e a w a y to a p p e a r to b e d o i n g th e ir j o b r e a p o r t e x t e n s iv e a m o u n ts o f in fo r s im p lif y s e r v i c e s fo r d iffe r e n t m a t io n r e la t in g to th e u n d e r l y in g fr o m th a t d e s i g n e d a n d u s e d fo r c a te g o r ie s o f u sers. S u ch se p a ra t io n m ig h t ta k e th e fo r m o f a n e n t ir e ly d is t in c t set o f fo r m a ts a n d o p e r a t i n g r u le s fo r h i g h l y s p e c i a l i z e d t y p e s o f p a y m e n t s . It is a ls o p o s s i b l e th at s o p h is t i c a t e d c o r p o ra te t r a d e p a y m e n t a p p l i c a t i o n s m a y b e h a n d l e d o n ly b y a s u b s e t o f d e p o s i t o r y in s titu tio n s , ra th e r th a n b e c o m i n g a " u n iv e r s a l s e r v i c e " lik e A C H . P r e s c r ip tio n 4: S tre ss P ro v e n E F T A p p lic a tio n s If o n e a c c e p t s th e p r e s c r ip t io n s fo r p r o m o t i n g p a y m e n t s y s te m e ffic ie n c y c e n te r in g a r o u n d r e v i s e d e x p e c t a t i o n s fo r E FT c o m b i n e d w ith m a jo r in s titu tio n a l a n d s tr u c tu r a l c h a n g e s , t h e n c l e a r l y m u c h w o r k is r e g u ir e d . T h e p r o c e s s o f e f f e c t i n g in s titu tio n a l c h a n g e c o u l d ta k e y e a r s . In th e m e a n t im e , h o w s h o u ld in v e s tm e n t The Federal Reserve's nationw ide com puter and com m unications network uses stateof-the-art technology to process A C H and Fedwire transactions. in E F T b e m a n a g e d to m a x im iz e e c o n o m i c r e tu r n s ? 11 E lectron ic P aym ents in R etro sp ect sh ift in e m p h a s is a w a y fr o m to EFT c a n still b e s t b e m e t b y T h e o b je c t iv e o f e n c o u r a g in g a " e x o t i c " A C H a p p li c a t io n s A f o c u s in g E FT m a r k e t in g e ffo r ts o n m o r e e f f ic ie n t p a y m e n t s y s te m c a n p r o v e n a p p li c a t io n s w h o s e fu ll t o p r o v e n u s e s w o u ld p e r n tia l r e m a in s u n t a p p e d . p o te m it a c o n t i n u e d c o m m it m e n t to b e s t b e m e t b y r e ly i n g o n th e E FT th at is c o n s is t e n t w ith s o u n d Conclusion to p r o v i d e m a r k e t - b a s e d e c o n o m i c b a s e d o n F e d e r a l R e s e r v e e s t i W h e n m e a s u r e d u s in g th e t r a d i m ent m a te s , th e r e is still a v e r y la r g e tio n a l c o n c e p t o f m a r k e t sh a re , c h a n g e s in h o w flo a t c o s ts a re g r o w th in e l e c t r o n i c p a y m e n ts h a s b o r n e . F or n o w , in v e s tm e n t in a n d i z e d p a y m e n t s a n d d i r e c t d e p o s it r e s u lte d in u n f u l fi lle d e x p e c t a p r o m o t i o n o f E FT s h o u ld b e r e A C H s e r v ic e s , w h i c h r e p r e s e n t e d tio n s . Yet, th e r e c e n t h is to r y o f f o c u s e d o n p r o v e n m a rk e ts that ■ b u s in e s s s tra te g y . F or e x a m p le , u n t a p p e d m a r k e t fo r p r e a u t h o r m a r k e t p r o c e s s . T h e fu tu re o f E FT d e p e n d s o n in s titu tio n a l c h a n g e s in c e n t i v e s fo r u s in g b e t t e r p a y te c h n ig u e s , e s p e c ia lly th e o r i g i n a l r e a s o n f o r d e v e l o p i n g EFT s h o w s that in s titu tio n a l c o n d i o ff e r th e g r e a t e s t p o t e n t ia l fo r th e A C H . It is e s t im a t e d th at o n ly tio n s a re la r g e l y r e s p o n s ib l e fo r v o lu m e g r o w t h w ith th e le a st 10 to 12 p e r c e n t o f a ll in s u r a n c e p r e v e n t in g a b r o a d - b a s e d c o n v e r c o m p le x it y . p r e m iu m s a n d 6 to 8 p e r c e n t o f s io n fr o m th e c h e c k . In a d d it io n a ll p a y r o lls a r e m a d e u s in g th e A C H . T h e o b j e c t i v e o f in c r e a s i n g th e e f f i c i e n c y o f th e p a y m e n t to in s titu tio n a l d is i n c e n t i v e s , EFT T h is a p p r o a c h w ill r e su lt in m o r e g r o w th h a s b e e n h u rt in th e 1 980s r e a lis t ic e x p e c t a t i o n s fo r EFT b e c a u s e o f a sh ift in m a r k e t in g s y s te m aw ayo n v e r t t na d itiom a l h e cy s fo c u s b y c fr o m i r g fr o n c p a k m e n t m a r k e ts to e x o t i c n e w m a r kets. F u rth er, b y m i x in g s im p le A C H a p p li c a t io n s w ith s o p h is t i c a t e d c o r p o r a t e tr a d e a p p li c a t io n s in o n e s y s te m , th e E FT p r o c e s s has b e c o m e m o re c o m p le x . 12 g r o w t h a n d a m o r e o r d e r ly e v o lu tio n to e l e c t r o n i c p a y m e n ts . 13 (December 31, 1987) R IC H M O N D CH A IRM A N L e r o y T . C a n o le s , J r. President Kaufman & Canoles Norfolk, Virginia DEPUTY CH AIRM AN R o b e r t A . G e o r g in e President Building & Construction Trades Department AFL-CIO Washington, D.C. R o b e rt F . B a ro n n e r Chairm an of the Board and C hief Executive Officer O ne Valley Bank, N.A. President and C hief Executive Officer One Valley Bancorp of West Virginia, Inc. Charleston, West Virginia T h o m a s B . C o o k e r ly President Broadcast Division Allbritton Communications Washington, D.C. E d w a r d H . C o v e ll President The C ovell Company Easton, Maryland First row: Floyd D. Gottwald, Jr.; Leroy T Canoles, Jr.; Robert A. Georgine; . Hanne M errim an. Second row: Thomas B. Cookerly; Edward H. Covell. Third row: Robert F. Baronner; Chester A. Duke; K. D onald Menefee. C h e s te r A . D u k e President and C hief Executive Officer Marion National Bank Marion, South Carolina F lo y d D . G o t t w a ld , J r. Chairm an of the Board and C hief Executive O fficer Ethyl Corporation Richmond, Virginia FE D E RA L A D V IS O R Y C O U N C IL M EM BER K . D o n a ld M e n e fe e Chairm an of the Board and C hief Executive Officer Madison National Bank Chairm an of the Board and President James Madison Limited Washington, D.C. H a n n e M e r r im a n Washington, D.C. 14 J o h n G . M e d lin , J r. Chairm an, President, and C hief Executive Officer First Wachovia Corporation Winston-Salem, North Carolina B A L T IM O R E CHAIRMAN Gloria L. Johnson Regional Vice President, Director of Stores Bloomingdale's Department Stores Kensington, Maryland John R. Hardesty, Jr. President Preston Energy, Inc. Kingwood, West Virginia H. Grant Hathaway Chairman of the Board Eguitable Bank, N.A. Baltimore, Maryland Raymond V Haysbert, Sr. . President and Chief Executive Officer Parks Sausage Company Baltimore, Maryland Charles W Hoff III . President and Chief Executive Officer Farmers and Mechanics National Bank Frederick, Maryland loseph W. Mosmiller Chairman of the Board Loyola Federal Savings and Loan Association Baltimore, Maryland Thomas R. Shelton President Case Foods, Inc. Salisbury, Maryland CHARLOTTE CHAIRMAN Wallace I. lorgenson President Jefferson-Pilot Communications Company Charlotte, North Carolina (Top Above) Seated: Charles W. Hoff III; H. Grant Hathaway; John R. Hardesty, Jr. Standing: Joseph W. Mosmiller; Thomas R. Shelton. (Bottom Above) Gloria L. Johnson; Raymond V Haysbert, Sr.; Senior . Vice President Robert D. McTeer, Jr. G. Alex Bernhardt President Bernhardt Industries, Inc. Lenoir, North Carolina James E. Bostic, Jr.* Division General Manager Convenience Products Division Georgia-Pacific Corporation Aiken, South Carolina J. Donald Collier President and Chief Executive Officer O rangeburg National Bank Orangeburg, South Carolina James M. Culberson, Jr. Chairman and President The First National Bank of Randolph County Asheboro, North Carolina John A. Hardin Chairman of the Board and President First Federal Savings Bank Rock Hill, South Carolina James G. Lindley Chairman and Chief Executive Officer South Carolina National Corporation Chairman, President, and Chief Executive Officer The South Carolina National Bank C olum bia, South Carolina Seated: G. Alex Bernhardt; Wallace J Jorgenson; James G. Lindley; . Senior Vice President Albert D. Tinkelenberg. Standing: John A. Hardin; James E. Bostic, Jr.; J Donald Collier; James M. Culberson, Jr. . R n fro th Ba in S temer a r b g esig ed m e o rd ep b fte ein tra sfe d o t of th D trict. n rre u e is 15 A d v i s o r y C o u n c i l s (December 31, 1987) S m a ll B u s in e s s O p e r a t io n s A d v is o r y C o m m it te e a n d A g r ic u lt u r e Chairman W alter E Leonard, J . r. Group Vice P resident W achovia B &T st Com ank ru pany, N . .A W inston-Salem N C , orth arolina W illiam E Albert . Vice President and C ashier The F N irst ational B k of B an luefield Bluefield, W V est irginia J Alonzo ose" President W V est irginia Credit U nion League, Inc. Parkersburg, W V est irginia Thom P B as . aker President Investors Savings B k an Richm ond, V irginia Richard L H . all Senior Vice P resident and C ashier The R N iggs ational B k of V an irginia M errifield, V irginia A d v is o r y C o u n c il lam D K es . ing P resident P oinsett Federal Savings and L A oan ssociation Travelers R S est, outh C arolina Chairm an Leon A. D unn, J. r C hairm and P an resident G uardian Corporation R ocky M ount, N Carolina orth Ashpy P Low ore . rim Senior Vice P resident F U irst nion N ational B k of South C an arolina Florence, South C arolina V Chairm ice an J lia M W u . alsh M anaging D irector J lia M W &Sons/Tucker A u . alsh nthony W ashington, D .C. P MM eter . artin E xecutive Vice P resident E quitable B ank, N . .A B ore, M altim aryland W A an atts um M anager A an F um arm W E N Carolina est nd, orth Charles S B m itt . ru m Senior Vice President N N South Carolina CB Colum South Carolina bia, Philip S. C henault Vice President V irginia Credit U nion League Lynchburg, V irginia Joh J M n . orales E xecutive Vice P resident Andrew Federal Credit U s nion Suitland, M aryland M ichael C lark P resident C Insurance Services Com lark pany, Inc. Richm ond, V irginia Richard T Clarke . Vice P resident Am erican Security B ank, N . .A W ashington, D.C. H Jerry Shearer . E xecutive Vice P resident and C ashier Com ercial B k of the South, N (In O m an .A. rganization) Colum South C bia, arolina M arshall N Colebank, J . r. E xecutive Vice President and C ashier The C harleston N ational B k an Charleston, W V est irginia Joh J Sponski n. Group E xecutive O fficer Sovran B k N . an , .A N orfolk, V irginia E Allen F er . ish Secretary-Treasurer W V est irginia S B tate uilding and Construction Trades Council, AFL-CIO C harleston, W V est irginia E ard J Cunningham dw . Senior Vice President Central Carolina B and T st Com ank ru pany, N . .A D urham N Carolina , orth R A. S ith ita m E xecutive Vice P resident W V est irginia Savings League C harleston, W V est irginia John P D . anahy Vice President The N ational B k of W an ashington W ashington, D.C. Loring E T . ilton Senior Vice P resident Colum F Federal Savings &L Association bia irst oan W ashington, D.C. R onald W D . avies Senior Executive Vice P resident M aryland N ational B k an B altim M ore, aryland F G. W . alker P resident R aleigh Federal Savings B k an R aleigh, N C orth arolina W illiam G. D ieter, J r. Executive Vice President Signet B ank-V irginia Richm ond, V irginia R A. W ick ieczorek P resident D istrict of C olum Credit U bia nion League W ashington, D .C. F M C. F . . ralix President m nion South Carolina State E ployees Credit U Colum South Carolina bia, Jam R W es . ilson Vice P resident F C irst arolina Corporate Credit U nion Greensboro, N C orth arolina H arrison G iles Senior Vice President NN N C B ational B of N C ank orth arolina C harlotte, N Carolina orth 16 Jam V M es . cAveney Senior Vice P resident Financial Services D ivision Loyola Federal Savings and L A oan ssociation B ore, M altim aryland M ichael T W . ilson Chief E xecutive O fficer and E xecutive Vice President South B ranch V alley N ational B k an M oorefield, W V est irginia D ickie S C . arter President and Chief E xecutive Officer U rban Service System Corporation s W ashington, D .C. Cecil H G . annon P resident Cecil H G . annon &Sons, Inc. E ,M aston aryland D aniel P H . enson III Senior D eveloper Struever B rothers, Eccles &R ouse B ore, M altim aryland C harles H Ja es II . m P resident C. H Jam &Co. . es C harleston, W V est irginia W illiam E M . asters P resident Perception, Inc. E asley, South C arolina C harles O. S trickler P resident Rocco E terprises; Inc. n H arrisonburg, V irginia Ju D W S lian . iles, r. P resident J D W F s, Inc. . . iles arm F M S ort otte, outh Carolina (December 31, 1987) B altim ore R ich m on d Robert P. B lack, President Robert D. McTeer, Jr., Senior Vice President Jim m ie R. M o n h o llo n , First Vice President R o nald B. D u n c a n , Vice President W illia m E. Pascoe II I, Vice President G e ra ld L. W ils o n , Vice President W e lfo rd S. Farm er, Executive Vice President J. A lfre d B roaddus, Jr., Senior Vice President and Director o / Research Roy L. F auber, Senior Vice President A rth u r V. Myers, Jr., Senior Vice President James D. Reese, Senior Vice President Bruce J. Sum m ers, Senior Vice President James F. Tucker, Senior Vice President J. L ander A llin , Jr., Vice President Fred L. B agw ell, Vice President D an M . Bechter, Vice President Lloyd W . Bostian, Jr., Vice President Timothy Q . C o o k, Vice President W illia m E. C u llis o n , Vice President D onna G . D ancy, Vice President W yatt F. Davis, Vice President G e o rg e B. Evans, Vice President W illia m C . F itzg erald, Associate General Counsel M arvin S. G o o d frie n d , Vice President Robert L. H etzel, Vice President D avid B. H um p hrey , Vice President and John S. F rain, Operations Officer W illia m J. T ig n an e lli, Operations Officer John I. T urnb u ll II, Financial Services Officer C h a r lo t t e A lbert D. T ink e le n be rg , Senior Vice President Sam uel W . Pow ell, Jr., Vice President Robert F. Stratton, Vice President Jefferson A . W alk e r, Vice President W o ody Y. C a in , Assistant Vice President M arsha H. M a larz, Assistant Vice President Francis L. R ic h b o u rg , Assistant Vice President Harry B. Sm ith, Assistant Vice President Payments System Adviser Thomas M . H um p hrey , Vice President W illia m D. M artin III, Vice President and General Counsel Joseph C . R am ag e , Vice President John W . Scott, Vice President R. W ay n e S tancil, Vice President A ndrew L. Tilton, Vice President W alte r A . V arvel, Vice President Jack H. W yatt, Vice President K em per W . Baker, Jr., Assistant Vice President W illia m H. B enner, Assistant Vice President Jackson L. B lan ton, Assistant Vice President W illia m A . B ridenstine, Jr., Assistant General Counsel B radford N. C a rd e n , Assistant Vice President M ich ae l Dotsey, Research Officer Betty M . F ahed, Assistant Vice President Sh aron M . H aley, Assistant Vice President and Secretary A nato li K u prian ov , Research Officer H aro ld T. Lipscom b, Assistant Vice President Yash P. M ehra, Research Officer D a vid L. M e ng le , Research Officer Joseph F. Morrissette, Assistant Vice President M ich ae l W . Newton, Assistant Vice President V irg iniu s H. Rosson, Jr., Assistant Vice President G . R o n a ld Scharr, Assistant Vice President G a ry W . Schem m el, Assistant Vice President Jesse W . Seam ster, Assistant Vice President James R. Slate, Assistant General Counsel Roy H. W e b b , Research Officer B obby D. W y n n , Assistant Vice President F loyd M . D ickin so n, Jr., Examining Officer E ugene W . Johnson, Jr., Examining Officer Thomas P. K ellam , Accounting Officer Edgar A . M a rtin d a le III, Budget and Control Officer Susan Q . M o o re , Personnel Officer Law rence P. Nuckols, Examining Officer M arsha S. Sh u le r, Planning Officer W illia m F. W h ite , Examining Officer H ow ard S. W h ite h e a d , Cash Operations Officer A rthu r J. Zohab, Jr., Examining Officer D a v id B. Ayres, J r . , General Auditor H . Lewis G arre tt, Assistant General Auditor C u lp e p e r John G . Stoides, Senior Vice President James G . D ennis, Assistant Vice President James J. F lo rin III, Assistant Vice President C h a r le s t o n R ich ard L. H opkins, Vice President C o lu m b ia Boyd Z. Eubanks, Vice President 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 D e c e m b e r 31, 1987 D e c e m b e r 31, 1986 G o l d certifica te a cco u n t 9 3 3 .0 0 0 .0 0 0 .0 0 9 5 9 .0 0 0 .0 0 0 .0 0 S p e cia l D ra w in g Rights certifica te a cco u n t 4 6 1 .0 0 0 .0 0 0 .0 0 4 6 1 .0 0 0 .0 0 0 .0 0 A s s e ts : C o in 6 3 ,4 3 4 ,9 4 1 .8 5 8 0 ,8 9 0 ,5 4 6 .7 9 L oans to d e p o sito r y institutions 1 8 1 .2 1 2 .0 0 0 .0 0 2 3 1 .0 0 0 .0 0 0 .0 0 F ed era l a g e n c y ob lig a tion s 6 3 8 ,2 2 2 ,0 1 6 .0 6 6 7 2 ,8 8 7 ,5 94.81 U. S. g o v e rn m e n t securities: Bills 9 ,0 9 9 ,6 7 3 ,1 6 1 .0 9 8 ,9 1 8 ,9 0 0 ,7 0 5 .4 4 N otes 7 ,0 1 1 ,1 0 3 ,7 7 5 .8 1 5 ,8 5 5 ,0 3 1 ,8 5 0 .6 6 B on d s 2 ,3 8 6 ,3 5 9 ,0 5 2 .2 1 2 ,2 1 0 ,8 2 4 ,5 6 9 .4 8 18,497 ,1 3 5 ,9 8 9 .1 1 1 6 ,9 8 4 ,7 5 7 ,1 2 5 .5 8 C a sh item s in p ro c e s s of c o lle c tio n 4 2 1 ,9 5 6 ,9 7 5 .8 7 7 0 0 ,8 3 0 ,0 8 3 .4 9 Bank p rem ises 1 1 1 ,1 3 6 ,1 4 0 .6 0 9 9 ,6 4 0 ,3 9 9 .5 7 Total U. S. gov ern m en t securities F urniture a n d eg u ip m e n t, net O th er assets Interdistrict settlem ent a cco u n t A c c r u e d s e r v ic e in co m e T O T A L A SS E T S 19 ,5 8 4 ,1 1 1 .8 0 2 2 ,2 9 4 ,2 8 4 .8 4 7 6 2 ,8 7 3 ,3 0 8 .7 2 7 3 6 ,5 2 6 ,9 2 0 .6 8 (1 ,7 3 6 ,4 5 4 ,4 3 1 .3 6 ) (1 5 8 ,0 2 1 ,9 4 3 .8 8 ) 4,821,828.. 12 4 ,7 6 6 ,0 5 4 .7 7 $ 2 0 ,3 5 7 ,9 2 2 ,8 8 0 .7 7 $ 2 0 ,7 9 5 ,5 7 1 ,0 6 6 .6 5 $ 1 6 ,5 5 0 ,0 3 3 ,1 5 6 .0 0 $ 1 7 ,1 4 9 ,7 3 0 ,8 7 1 .0 0 2 ,9 0 2 ,1 0 0 ,7 6 8 .5 5 2 ,6 4 4 ,7 3 7 ,5 9 4 .3 4 L ia b i li t ie s : F ed era l R e se rv e notes D ep osits: D ep osito ry institutions F o re ig n 8 ,1 0 0 ,0 0 0 .0 0 7 ,6 5 0 ,0 0 0 .0 0 6 0 ,8 8 5 ,6 8 8 .5 7 4 4 ,6 2 8 ,0 3 5 .0 2 2 ,9 7 1 ,0 8 6 ,4 5 7 .1 2 2 ,6 9 7 ,0 1 5 ,6 2 9 .3 6 D e fe rre d ava ila b ility cash items 3 8 2 ,8 7 4 ,0 7 0 .3 3 5 6 4 ,0 8 1 ,6 3 9 .4 7 O th er liabilities 2 2 6 ,0 8 9 ,3 9 7 .3 2 1 8 2 ,4 4 0 ,026.8 2 2 0 ,1 3 0 ,0 8 3 ,0 8 0 .7 7 2 0 ,5 9 3 ,2 6 8 ,1 6 6 .6 5 C a p ita l p a id in 1 1 3 .9 1 9 .9 0 0 .0 0 1 0 1 .1 5 1 .45 0.00 S u rplu s 1 1 3 .9 1 9 .9 0 0 .0 0 1 0 1 .1 5 1 .45 0.00 $ 2 0 ,3 5 7 ,9 2 2 ,8 8 0 .7 7 $ 2 0 ,7 9 5 ,5 7 1 ,0 6 6 .6 5 O th er Total d e p o sits T O T A L LIABILITIES C a p it a l A c c o u n t s : T O T A L LIABILITIES AN D C A P IT A L A C C O U N T S 18 E A R N IN G S A N D E XPE N SE S E a r n in g s : L oans to d e p o s ito ry institutions Interest o n U. S. g ov ern m en t secu rities F o re ig n cu r re n cie s In co m e from se rv ice s O th er ea rn in g s Total cu rren t ea rn in gs 1987 $ 1 ,7 3 6 ,4 7 4 .6 7 1 ,3 7 4 ,1 3 8 ,0 5 8 .6 3 1 8 ,5 9 2 ,5 9 0 .5 6 5 3 ,2 5 4 ,1 9 6 .4 8 7 5 7 ,8 0 9 .3 9 1986 $ 8 ,6 8 3 ,4 1 8 .5 4 1 ,3 9 3 ,7 9 5 ,9 3 1 .9 3 2 0 ,0 8 1 ,5 9 9 .4 6 5 2 ,0 8 2 ,1 2 2 .8 9 7 9 5 ,7 6 8 .6 8 $ 1 ,4 4 8 ,4 7 9 ,1 2 9 .7 3 $ 1 ,4 7 5 ,4 3 8 ,8 4 1 .5 0 O p e ra tin g e x p e n se s C ost of ea rn in g s cred its 8 5 ,2 2 4 ,5 1 9 .5 5 8 ,2 5 3 ,7 3 7 .3 9 8 2 ,4 3 2 ,1 8 2 .1 7 7 ,8 0 9 ,2 0 1 .4 1 Net e x p e n se s 9 3 ,4 7 8 ,2 5 6 .9 4 9 0 ,2 4 1 ,3 8 3 .5 8 $ 1 ,3 5 5 ,0 0 0 ,8 7 2 .7 9 $ 1 ,3 8 5 ,1 9 7 ,4 5 7 .9 2 3 ,5 3 9 ,9 1 4 .0 2 9 7 ,4 3 0 ,9 5 5 .5 1 5 5 ,8 0 8 .8 0 5 ,7 9 7 ,5 3 6 .0 6 10 0 ,5 0 2 ,1 5 0 .5 7 191,38 2.70 1 0 1 ,0 2 6 ,6 7 8 .3 3 1 0 6 ,4 9 1 ,0 6 9 .3 3 0 1 7 ,4 7 4 .4 4 0 4 ,3 4 6 ,6 0 4 .5 4 1 7 ,4 7 4 .4 4 4 ,3 4 6 ,6 0 4 .5 4 + 1 0 1 ,0 0 9 ,2 0 3 .8 9 + 1 0 2 ,1 4 4 ,4 6 4 .7 9 3 ,4 4 4 ,1 8 5 .7 2 4 ,4 0 5 ,7 0 0 .0 0 1 4 ,9 8 4 ,8 8 7 .0 4 0 5 ,0 1 9 ,1 0 0 .0 0 1 6 ,5 9 5 ,0 1 7 .7 6 $ 1 ,4 3 3 ,1 7 5 ,3 0 3 .9 2 $ 1 ,4 6 5 ,7 2 7 ,8 0 4 .9 5 $ $ E xpenses: C U RREN T NET E A R N IN G S P r o f it a n d L o s s A d d itio n s to cu rren t net ea rn in g s: Profit o n sales of U. S. g o v e rn m en t secu rities (net) Profit o n fo r e ig n e x c h a n g e transactions A ll oth er Total a d d ition s D ed u ctio n s from cu rren t net e a rn in g s: Losses o n fo r e ig n e x c h a n g e transactions A ll oth er Total d e d u c tio n s Net ad d ition s or d e d u c tio n s C ost of u n re im b u rse d T reasury se rv ice s A ssessm en t for e x p e n se s of B oa rd of G o v e r n o r s F ed era l R eserv e cu r r e n c y costs NET EARNINGS BEFORE PAYMENTS TO U .S. TREASURY D is t r ib u t io n o f N e t E a r n in g s D iv id en d s p a id Paym ents to U. S. T reasury (interest on F ederal Reserve notes) T ran sferred to surplus TOTAL 6 ,4 3 1 ,0 0 1 .2 8 1 ,4 1 3 ,9 7 5 ,8 5 2 .6 4 1 2 ,7 6 8 ,4 5 0 .0 0 $ 1 ,4 3 3 ,1 7 5 ,3 0 3 .9 2 5 ,7 9 8 ,9 7 4 .8 3 1 ,4 4 9 ,5 8 9 ,6 3 0 .1 2 1 0 ,3 3 9 ,2 0 0 .0 0 $ 1 ,4 6 5 ,7 2 7 ,8 0 4 .9 5 SURPLUS A C C O U N T B a la n ce at c lo s e of p re v io u s year A d d itio n o f profits for year $ 1 0 1 ,1 5 1 ,4 5 0 .0 0 1 2 ,7 6 8 ,4 5 0 .0 0 $ 9 0 ,8 1 2 ,2 5 0 .0 0 1 0 ,3 3 9 ,2 0 0 .0 0 B A L A N C E A T C L O S E O F CURREN T YEAR $ 1 1 3 ,9 1 9 ,9 0 0 .0 0 $ 1 0 1 ,1 5 1 ,4 5 0 .0 0 C A P I T A L S T O C K A C C O U N T (R epresenting am ount p a id in, w hich is; 50 % of am o u nt subscribed) B a la n ce at c lo s e of p re v io u s year Issu ed d u rin g the year $ $ $ 1 1 3 ,9 1 9 ,9 0 0 .0 0 9 0 ,8 1 2 ,2 5 0 .0 0 1 2 ,1 6 6 ,1 0 0 .0 0 10 2 ,9 7 8 ,3 5 0 .0 0 1 ,8 2 6 ,9 0 0 .0 0 1 1 5 ,0 9 0 ,2 5 0 .0 0 1 ,1 7 0 ,3 5 0 .0 0 C a n c e lle d d u rin g the year B A L A N C E A T C L O S E O F CURREN T YEAR 1 0 1 ,1 5 1 ,4 5 0 .0 0 1 3 ,9 3 8 ,8 0 0 .0 0 $ 1 0 1 ,1 5 1 ,4 5 0 .0 0 S u m m a r y o f O p e r a tio n s O p e r a t io n N um ber A m o u n t ($ th o u s a n d s ) 1987 1986 1987 C u r r e n c y an d c o in p r o c e s s e d : C u r r e n c y r e c e iv e d a n d verified C u rre n cy v e rifie d a n d d estro y e d C o in r e c e iv e d an d v e rifie d 1 .787.276.000 5 3 8 ,4 6 3 ,0 0 0 3 .2 5 4 .1 0 2 .0 0 0 1,531,7 6 3 ,0 0 0 5 9 8 ,2 6 6 ,0 0 0 3 ,3 8 3 ,0 0 0 ,0 0 0 2 2 ,2 9 0 ,7 0 9 3 ,705,281 507 ,2 9 4 19,365,754 4 ,7 8 8 ,9 1 9 513,816 C h e ck s h a n d led : C o m m e r c ia l— p r o c e s s e d * C o m m e r c ia l— p a c k a g e d items U .S . g o v e rn m e n t 1 ,351 ,5 3 2 ,0 0 0 2 7 7 ,9 6 1 ,0 0 0 69 ,0 6 4 ,0 0 0 1,305,6 0 2 ,0 0 0 262,1 6 5 ,0 0 0 71,4 6 8 ,0 0 0 8 8 4 ,1 7 3 ,7 2 7 9 9 ,4 1 2 ,0 0 0 121,768,095 8 3 1,67 4,02 4 9 5 ,46 3,00 0 119,571,103 107,000 164,680 154,000 174,736 81,251 4 51,837 88,504 549,155 10,439,834 3 98,414 11,134,827 358,246 2,339,871 2 ,4 2 5 ,5 7 0 ,4 1 9 3,216,607 2 ,2 5 0 ,0 4 0 ,4 1 3 4 ,3 1 8 ,8 8 6 4 ,2 2 8 ,9 2 2 7 ,6 2 9 ,8 1 0 ,0 0 0 6 ,3 5 4 ,2 1 7 ,0 0 0 181,570,000 190,676,000 840,804 887,483 1,478 2 ,792 6 ,1 6 6 ,7 0 0 2 8,594 ,200 C o lle c tio n s items h a n d le d : U .S . g ov ern m en t c o u p o n s p a id N on cash items U .S . g o v ern m en t secu rities issued, red eem ed , and exch an ged : D efin itive B ook-E ntry F unds transfers sent a n d r e c e iv e d F o o d stam ps r e d e e m e d Loans a d v a n c e d ‘ E x c lu d in g checks on this Bank. O p e r a tin g I te m E x p e n se s A m o u n t ( d o lla r s ) 1987 1986 P erson n el M aterials a n d su p p lies E gu ipm ent S h ip p in g Travel C om m u n ica tion s B u ild in g O th er 5 5 ,7 8 4 ,8 3 4 4 ,3 4 7 ,0 4 4 13,405,628 6 ,4 4 6 ,8 5 8 1,897,198 884,222 9 ,7 8 3 ,8 6 7 5 ,3 8 5 ,0 3 2 5 4 ,1 1 8 ,4 9 0 4 ,1 1 7 ,4 9 0 12,797,856 6 ,5 7 6 ,5 9 3 1,665,257 999,950 9 ,3 4 9 ,9 9 7 4 ,8 8 7 ,9 3 2 R e co v e rie s C on tra e x p e n se S h ared cost d istrib u ted S h ared cost r e c e iv e d - 4 ,6 5 5 ,6 8 3 - 2 2 8 ,8 4 2 -3 ,3 4 2 ,1 3 6 2,794,721 -4 ,0 9 2 ,2 0 1 - 2 0 1 ,8 5 9 - 2 ,9 8 1 ,7 4 9 2 ,8 1 4 ,2 9 9 Total e x p en ses R eim bu rsem en ts 9 2 ,5 0 2 ,7 4 3 - 7 ,2 7 8 ,2 2 3 9 0 ,0 5 2 ,0 5 5 -7 ,6 1 9 ,8 7 3 8 5 ,2 2 4 ,5 2 0 8 2 ,4 3 2 ,1 8 2 Net e x p en ses 20 1986