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C o n te n ts

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a n d th e P re s id e n t
B a n k in g U n d e r C h a n g in g Rules:
T h e F ifth D istrict S in c e 1 9 70

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H ig h lig h ts o f 1 9 8 8

D ir e c to r s

A d v is o r y C o u n c ils

O ffic e r s

O p e r a tin g a n d F in a n cia l Statistics

ISSN 0164-0798
LIBRARY OF CONGRESS CATALOG CARD NUMBER:

1 6 -7 2 6 4

Federal Reserve Bank of Richmond Publication Number: P-l

Additional copies o f this Annual Report may be obtained without charge from :

Public Services Department

Federal Reserve Bank of Richmond

P. O. Box 27622

Richmond, Virginia 23261

Message from the
Chairman and the President

e a re p le a s e d t o
p re s e n t th e 1 9 8 8
A n n u a l R e p o rt o f th e
F e d e ra l R e s e rv e B a n k
o f R ic h m o n d .
D u r i n g a r e c e n t r e r e a d in g o f t h e
B a n k ’s 1 9 6 4 A n n u a l R e p o r t , w e c a m e
a c ro s s th e s ta te m e n t, “ T h e c h a n g e s
i n t h e c o m m e r c i a l b a n k in g s y s t e m
i n t h e la s t 5 0 y e a r s . . . h a v e b e e n
s w e e p in g . ” I f “ t h e la s t 5 0 y e a r s ”
w e r e c h a n g e d t o “ t h e la s t 18 y e a r s ,”
th e q u o te d s ta te m e n t c o u ld a p p r o p r i
a t e ly b e u s e d t o d e s c r ib e d e v e lo p
m e n t s c o v e r e d i n t h i s y e a r ’s f e a t u r e
a r t ic le , “ B a n k in g U n d e r C h a n g in g
R u le s : T h e F i f t h D i s t r i c t S in c e 1 9 7 0 .”

Robert P. Black
President

Robert A. Georgine
Chairman o f the Board

T h e 1 9 6 4 a r t ic le d e a lt w i t h b o t h s t r u c t u r e a n d f u n c t i o n . T h e 1 9 8 8
a r t ic le d e a ls a lm o s t w h o l l y w i t h s t r u c t u r e , p r i n c i p a l l y b e c a u s e , as
a u t h o r D a v id M e n g le p o i n t s o u t , c o n s t r a in t s o n w h e r e b a n k s m a y
d o b u s in e s s h a v e t o d a t e b e e n r e la x e d m o r e t h a n c o n s t r a in t s o n
w h a t b a n k s m a y s e ll.
A b r i e f s u m m a r y o f h ig h l i g h t s o f 1 9 8 8 im m e d ia t e ly f o l l o w s t h e
f e a t u r e a r t ic le .
O n b e h a l f o f o u r d ir e c t o r s a n d s t a f f , w e w i s h t o e x p r e s s o u r
a p p r e c ia t io n f o r t h e s p l e n d i d c o o p e r a t i o n a n d s u p p o r t y o u
e x t e n d e d t o u s t h r o u g h o u t t h e y e a r.

Chairman o f the B oard

President

Federal Reserve Bank of Richmond

.......................

B a n k in g

U n d e r

T he

F ifth

............ ...............

C h a n g in g
D is tr ic t

R u le s :

S in c e

1 9 7 0

D a v i d L. M e n g l e
Commercial banking has traditionally been one
of the most tightly regulated industries in the
United States. The controversies surrounding the
First and Second Banks of the United States, the
National Bank Act of 1864, the Federal Reserve
System, and federal deposit insurance all attest to
the concern shown with banking throughout our
history. Further, desire to control concentration of
economic power and to keep banking responsive
to local interests led to restrictions on branching and
interstate operations as well as, more recently, antitrust
scrutiny of bank mergers.
Despite the tradition of regulation, the 1980s have seen a call
for at least partial deregulation of banking. Deregulation is aimed
neither at supervision of bank soundness nor at consumer pro
tection measures, but rather at rules that constrain what banks may
sell, where they may sell it, and the interest rates they pay on their
deposits. So far, the largest number of successful deregulatory
efforts have loosened constraints on where banks may do business.
But banking deregulation did not begin in the 1980s. In fact, the
Fifth District provides a case study of how banking laws and regula
tions have evolved since 1970. For example, District commercial
banks have seen changes in bank holding company laws, in branch
ing restrictions, and now in barriers to banking across state lines.
And as the law has evolved, so has the structure of banking
in the District.

anking, like other industries, must be responsive to
both state and federal law But banking’s competitive
structure, unlike that of most other industries, has
been shaped to a large degree by laws that vary among
states. The most important state laws affecting banking
structure in 1970 were branching restrictions. Among the most im
portant federal laws were those governing bank holding companies.

T he

F ifth

D is tr ic t
R e g u la to r y
E n v ir o n m e n t
in

1970

Branching Laws In much of the Fifth District in 1970, banks
could branch without restriction within their states subject only to
approval by their regulators. Specifically, Maryland, North Carolina,
South Carolina, and the District of Columbia allowed statewide
branching. At the other end of the spectrum, West Virginia per
mitted neither branching nor multibank holding companies.

1988 Annual Report

Between the statewide branching states and West Virginia stood
Virginia, which allowed a bank to branch within its home city or
county and within contiguous cities or counties. But the law was
not quite so restrictive as it sounded because a 1 9 6 2 amendment
allowed a bank to expand in two other ways: First, it could merge
with a bank anywhere in Virginia. Second, it could form a bank
holding company which could in turn purchase banks anywhere in
the state. The law actually favored the bank holding company route
over the merger route because a bank acquired by merger would

A ll F ifth
h ad

D is tr ic t sta tes e x c e p t

lib e r a l b r a n c h in g

la w s

W est

V ir g in ia

1970.

generally lose its branching privileges while a bank acquired by a
bank holding company could still branch in its home area. In
practice, then, all Fifth District jurisdictions except West Virginia
had liberal laws regarding expansion of banks within their borders.
But full-service banking stopped at a state’s boundaries. Whatever
a state’s laws regarding expansion within the state, two federal laws
kept a bank from expanding into another state: First, the McFadden
Act of 1927 (as amended in 1933) prohibited national banks from
branching outside their home states. Second, the Douglas Amend
ment to the Bank Holding Company Act of 1956 forbade bank
holding companies to acquire banks in other states unless the
acquiree’s state specifically permitted such acquisition. And in 1970,
no Fifth District state extended the privilege to any other state’s
bank holding companies.
Bank H olding Com pany Laws and Regulations Another
aspect of the 1970 legal environment was the impetus to growth of
bank holding companies even in states permitting statewide branch
ing. For example, a holding company could sell commercial paper
and then pass the proceeds downstream to subsidiary banks. As
interest rates rose in the late 1 9 6 0 s and banks began to face prob
lems raising funds under Regulation Q interest rate constraints, the
holding company route presented an appealing alternative. Further,
until September 1970 funds raised by a holding company and then
passed downstream were not subject to reserve requirements.
There were also differences in how federal law treated different
types of holding companies. Specifically, the Bank Holding Com
pany Act subjected companies owning more than one bank to
regulation by the Federal Reserve but made no provisions for com
panies owning only one bank. One-bank holding companies were
consequently subject to fewer restrictions on activities and product
offerings than were multibank holding companies. Thus there was
incentive to attempt to initiate new financial services in a holding
company subsidiary rather than apply for permission from
regulators to conduct the activity within the bank and risk legal
challenge from those threatened by the competition.

Federal Reserve Bank of Richmond

It became increasingly apparent in the late 1960s that Congress
would bow to the Federal Reserve’s urgings that the one-bank
holding company loophole be closed. Still, the number of onebank holding companies more than doubled between May 1968
and December 1970. Evidently, many banks felt compelled to
switch to the holding company form in hopes they would be
“grandfathered” under any new restrictions.
Thus the structure of Fifth District banking in 1970 reflected two
main aspects of the laws in place at the time: First, multibank

V ir g in ia

w ere a

m ea n s

1970,

m u ltib a n k

o f e x p a n d in g

b o ld in g

a rou n d

c o m p a n ie s

t h e sta te.

holding companies dominated in Virginia where they constituted a
means of expanding throughout the state. But because they were
regulated by the Federal Reserve, their ability to expand into new
financial fields was limited. Second, one-bank holding companies
were important in Maryland, the District of Columbia, and the
Carolinas. Apparently, banks with statewide branching privileges
were in a position to choose an organization form on the basis of
product rather than geographical diversification.

C h a n ges
A fte r

1970

he years following 1970 were a period of rapid
growth for Fifth District banking. While the
number of banks did not necessarily increase in
all states, the number of branches did. Banking
services therefore became more widely available. As

one would expect, the growth occurred during a period of change
in the regulatory environment.
Bank H olding C om pany Act A m endm ents The first signifi
cant change came in December 1970 when Congress amended the
Bank Holding Company Act. The amendments essentially closed
the one-bank holding company loophole by subjecting almost all
bank holding companies to Federal Reserve regulation. In addition,
Congress gave the Board of Governors authority to approve or
deny nonbanking activities on a case-by-case basis subject to the
requirement that activities be “so closely related to banking . . .
as to be a proper incident thereto” and that the anticipated
benefits, such as convenience, competition, and efficiency, out
weigh anticipated costs such as conflicts of interest and increased
concentration.
The initial effect of the new legislation was diversification of
bank holding companies into new financial activities. During the
early 1970s, for example, the Board approved such nonbanking
activities as mortgage banking, factoring, leasing, financial data
processing, and credit life insurance underwriting.

1988 Annual Report

But in the mid-1970s, two sets of events may have helped slow
the entry of bank holding companies into new activities: First, the
failures of two New York banks, Franklin National and Security
National, pointed to the problems faced by banks attempting to
expand without sufficient regard for their capital base. Second,
during the recession of the mid-1970s many banks experienced
problems with their asset portfolios. In particular, some banks that
advised real estate investment trusts (REITs) committed extensive
resources to keeping certain REITs afloat. While bank holding com
panies were ostensibly under no obligation to support the REITs,
the record does show that bank earnings suffered as a result of the
support they did provide.
Consequently, the Board shifted to a “go slow” policy toward
diversification into new activities. But despite the announced policy
of slowing entry into nonbanking activities, there was no reversal
of the movement toward the bank holding company organization
form. O f the one hundred largest banking organizations in the
United States, the number not affiliated with a bank holding com
pany declined from twenty-eight in 1970 to three in 1975, two in
1 9 8 0 , and none by the end of 1 9 8 1 .
Statewide Branching The next significant changes affecting
bank expansion in the Fifth District involved liberalization of
branching laws in two states. The first occurred in Virginia in 1978
when the legislature extended branching privileges (still limited to

B y

1987,

s ta te w id e

a ll F ifth

D is tr ic t sta tes p e r m itte d

b r a n c h in g

a n d

in te r s ta te

b a n k in g .

contiguous jurisdictions) to acquired banks. Under the amended
law, a bank could acquire another bank, turn it into a branch, and
still establish branches in the area of the new branch. In practice,
then, Virginia had adopted statewide branching even though (until
1 9 8 6 ) the letter of the law limited branching to contiguous areas.
By 1979, four of the five largest Virginia bank holding companies
had consolidated their subsidiaries as branches under one bank.
And by 1987 there were 112 fewer banks but 316 more branches
operating in Virginia than there had been a decade earlier.
The other liberalization occurred in West Virginia. In 1982 the
legislature voted to allow branching within a bank’s home county
starting in 1984 and also to permit banks to form multibank
holding companies. The law was loosened again in 1984 to allow
branching in contiguous counties beginning in 1987 and statewide
branching in 1991. But two years later the legislature moved
statewide branching up to 1987. The result is that all Fifth District
states now allow statewide branching.
Interstate Banking The third event of significance to Fifth
District banking structure was the passage by District state legis
latures of laws permitting interstate banking. The first District

Federal Reserve Bank of Richmond

state to enact such a law was South Carolina in 1984. The law pro
vides for regional reciprocal entry, that is, it permits bank holding
companies in the Southeast (defined as Maryland, West Virginia,
Kentucky, Arkansas, and states to their south) to acquire South
Carolina banks and bank holding companies provided their home
DEPOSITS OF SIX LARGEST

states extend the same privileges to South Carolina banking com

FIFTH DISTRICT SUPERREGIONALS

panies. But the law effectively blocks de novo entry by prohibiting

(AS OF DECEMBER 1987)

acquisitions of banks less than five years old.
Similar laws were passed in North Carolina in 1984 and Virginia
in 1985. The Supreme Court gave regional interstate banking a

D E P O S IT S
B A N K S
T H E

H E L D

further boost in June 1985. In Northeast Bancorp v. Board of
Governors the Court upheld the constitutionality of state laws that

O U T S ID E

F IF T H

D IS T R IC T

limit entry to bank holding companies within a specified region.
D E P O S IT S
B A N K S
H O M

H E L D

O U T S ID E
S T A T E S

The principal losers from the decision were the money center
banks, especially those in New York. The winners were regional
banks hoping to build up size before any of their states got around
to allowing money center banks to enter.
The approaches to interstate banking followed by Maryland, the
District of Columbia, and West Virginia differ somewhat from those
of Virginia and the Carolinas. Maryland’s 1985 law now permits
reciprocal interstate entry by banks in most of the Southeast plus
Pennsylvania and Delaware. Other Maryland laws permit bank
holding companies from other states to establish full-service de
novo facilities provided they meet certain capital, investment, and
employment requirements.
In the District of Columbia, a 1985 law permits entry by acqui
sition by bank holding companies from most of the Southeast.
Another law, passed in 1986, allows entry of bank holding com
panies agreeing to provide loans and lines of credit, jobs, and

D E P O S IT S
H E L D
H

O M

W
E

IT H IN

S T A T E S

branches for specified economic development projects and areas.
Finally, a law passed by West Virginia in 1986 allows reciprocal
entry by bank holding companies from anywhere in the nation
subject to the restriction that no company can control more than
2 0 percent of deposits in the state.

F ifth

D is tr ic t

nterstate banking has sired a new breed of banking
animal: the superregional bank holding company, defined
as a bank headquartered outside the traditional money

R a n k in g

T od ay

center cities of New York and Chicago and operating
commercial banks in more than one state. The importance
of the superregionals in the Fifth District is shown by two sta
tistics: First, by the end of 1987 about 44 percent of deposits held
by the six largest Fifth District bank holding companies were in
banks outside their home states. Second, 30 percent of the deposits
held by those six bank holding companies were in banks located in
states outside the District.

1988 Annual Report

The number and location of interstate acquisitions
made by Fifth District bank holding companies appear
in the accompanying table. North Carolina bank
holding companies have looked mostly southward to
South Carolina, Georgia, and Florida. Companies in
Virginia, Maryland, and the District of Columbia have
concentrated on the so-called “Golden Crescent”
region stretching from Baltimore south through
Washington to Richmond and Norfolk. In addition,
two Virginia banks have established a substantial
presence in Tennessee.
Also reflected in the table is the paucity of entry by
bank holding companies from outside the Fifth
District. The only acquisition of a large Fifth District
commercial bank so far has been by a Georgia bank
headquartered in Atlanta.
Why have so few banks entered from outside the
District? One explanation is that regional interstate
banking has limited the pool of entrants. But this does
not explain the lack of entry from other southeastern
states. It is likely that banking laws of neighboring
states have been in good measure responsible. Florida
had unit banking until 1977 and limited branching
until 1980, while Georgia and Tennessee were and still
are limited branching states. In addition, Georgia
restricted multibank holding companies until 1976. In

FIFTH DISTRICT
IN TERSTATE ACQ U ISITIO N S

(AS OF OCTOBER 1988)
ACQUIREE’S STATE
DC |MD VA WV NC SC
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Number of acquisitions equals number of transactions and

contrast, District banks had few legal obstacles to
does not necessarily reflect number of banks acquired. A trans
action is omitted if it does not involve a Fifth District organization.
expansion within their states and thus were in a posi
tion to take advantage of interstate banking when it
became legal.
But the action in Fifth District banking has not been confined to
the superregionals. In West Virginia, banks have established 168
branches and formed 52 bank holding companies since the legis
lature relaxed branching and holding company restrictions. Over
the same period, the number of banks has declined by only 14. In
addition, the ranks of small Fifth District banks (those with less
than $ 1 0 0 million in assets) have been augmented by 18 new banks
in 1985, 24 in 1986, and 21 in 1987. More important, small District
banks’ return on assets has averaged 1.03 percent since 1 9 8 0 com
pared with 0.81 percent for banks with over $1 billion in assets.

ow that the laws governing structure and expansion
within a state have been liberalized in all Fifth Dis
trict jurisdictions, what lies ahead for Fifth District
banks and banking laws? Nationwide interstate bank
ing is one possibility, more de novo entry is another,
and interstate branching is yet one more.

Federal Reserve Bank of Richmond

W h a t N ex t?

Nationwide Interstate Banking As other states catch up with
those in the Southeast in enacting interstate banking laws, it is
reasonable to expect some banks outside the Southeast to show
interest in entering the Fifth District. But what about expansion
outside the Southeast by Fifth District banks? NCNB expanded into
Texas in late 1988 by acquiring an interest in the failed FirstRepublic Corp of Dallas, but no other major expansion of a Fifth
District bank outside the Southeast has yet occurred. Still, one
might argue that it may soon be time to consider opening the
region to entry from the rest of the nation, especially since the
southeastern states are now lagging behind other states in providing
for eventual nationwide entry There are at least two groups of
banks that could benefit from a liberalization of the interstate laws.
First, the superregionals in the Fifth District may start looking at
likely markets outside the region once they have reached their
desired levels of activity within the Southeast. But in many states
they would be frustrated by interstate banking laws that allow
entry only if banks in their own states can enter the acquirer’s state.
So potential acquirers may have incentives to work for abandon
ment of regional in favor of nationwide interstate banking.
A second group, potential acquirees, might also benefit from
nationwide interstate banking. As most of the potential acquirers
within the region find suitable partners, the remaining potential
acquirees might wish to expand the pool of available suitors. Open
ing the Southeast could benefit small- and medium-sized banks in
particular because some superregionals might prefer to enter on a
modest scale rather than to swallow and digest another superregional.
De Novo Entry A further means of opening up interstate bank
ing is by permitting more de novo entry. Most Fifth District inter
state banking laws permit entry only through acquiring an existing
bank. Indeed, blocking de novo entry probably made interstate
banking laws more palatable to bankers by limiting the options of
would-be acquirers and thereby raising acquisition values. But as
merger premiums are bid up by entrants, the de novo option may
become more attractive as an alternative to acquisition. Further,
since restrictions on entry probably lead to less competition for
loans and deposits, consumer advocates may push for liberalized de
novo entry.
Despite advantages to consumers and to banks seeking to enter a
state, it is unlikely that there will be much pressure at the state level
to allow de novo entry. Acquirers come from outside a state and
therefore may not have their interests represented in state legis
latures other than their own. At the same time, banks that would
lose from de novo entry are probably well represented at the state
level. It is more likely that pressure would come at the federal level
if and when Congress were to address interstate banking. In par
ticular, both consumer advocates and superregionals might be
better able to influence the course of legislation in Congress than in
the many state legislatures.

1988 Annual Report

Interstate Branching A final innovation that may someday
come to interstate banking is interstate branching. At present,
neither federal nor state (except Massachusetts) laws permit banks to
branch across state lines. As a result, the superregionals must main
tain separate subsidiary banks for each state. But if the experience
in Virginia is any guide, branching may be a more efficient means
of expansion for many banks. Most Virginia bank holding com
panies consolidated their subsidiaries into branches as soon as the
law allowed it. The superregionals might have incentives to do the
same thing if the law so allowed. Further, consumers might benefit
from interstate branching. Not only would customers have ready
access to their accounts when traveling, but checks could clear
faster if superregionals were to use one set of books rather than the
books of several subsidiaries.
But it is unlikely there will be much pressure for interstate
branching in the immediate future. One obstacle is the question of
jurisdiction over out-of-state branches. That is, if a bank establishes
a branch outside its home state, who regulates the branch? Another
obstacle is that it is simpler to expand by branching than by setting
up subsidiaries. Potential competitors of a superregional might not
be inclined to support any law that would make it easier to com
pete with them. As with de novo entry, the question of interstate
branching might be more appropriately dealt with at the federal
than at the state level.

EVOLUTION OF
FIFTH DISTRICT BANKING

Concluding Com m ent The uncertainty of further liber
alization should not cloud the central fact of the evolu

FUTURE?

tion of Fifth District banking: the substantial reduction
in legal and regulatory obstacles to competition among
banks. Future competition is likely to come from several sources:
First, foreign banks may play an increasing role. Second,
banks may face increased competition from the thrift
industry once the current deposit insurance prob
lems are resolved. Finally, commercial and
nonbank financial corporations are attempt
ing to encroach on commercial banks’ tradi
tional turf just as banks attempt to move beyond
their own. Given such prospects, any attempts
to regulate competition among banks seem

•N

ID E

B A N K I N G

• IN

T E R S T A T E

B R A N

C H

I N

PRESENT
•R

E G I O N A L

IN T E R S T A T E
B A N K I N G

•ST

beside the point. The current trend
toward liberalizing restraints on
interbank competition is likely
to continue unabated.

A T IO N W

IN T E R S T A T E

A T E W

B R A N

C H

ID E
I N

PAST
•

S E G M

E N T E D

B A N K I N G

•L

IT E D

B R A N

C H

I N

As geographical obstacles to bank expansion have fallen, the
level of bank competition has risen.

Federal Reserve Bank of Richmond

H ig h lig h ts

o f

P a y m e n t S y stem

The Payment System Symposium, a conference sponsored by
the Federal Reserve Bank o f Richmond and attended by interna
tionally known experts, was held in Williamsburg, Virginia, on
May 25-26. The symposium focused on three broad issues: effi
ciency in the payments market, risk in the payments process,
and the role o f the Federal Reserve in the payments system.
Three economists from this Bank presented papers. A com pen
dium o f conference proceedings is to be published in 1 9 8 9 .

F u n d s A v a ila b ility

The Expedited Funds Availability Act, enacted by the U.S.
Congress in August 1987, was put into effect under Federal
Reserve Regulation CC on September 1. Thanks to advance
preparations by the Federal Reserve Bank o f Richmond and
Fifth District depository institutions, what might have been a
disruptive adjustment in check clearing was almost a nonevent.

C e n tr a l B a n k in g

Senior Vice President Bruce J. Summers represented the Federal
Reserve System at the Southeast Asia, New Zealand, and
Australia (SEANZA) Central Banking Course, held in Sydney,
Australia, in October and November. The course serves to raise
the level o f training o f central bank cadre in the SEANZA
countries. Traditionally, it also serves to foster relations and
technical cooperation among central banks.

E a r ly R e tir e m e n ts

More than one hundred fifty employees participated in the early
retirement program in effect during 1988. Among those who
retired were many who had more than thirty years o f service,
and some who had more than forty. The retirements o f these
long-service employees marked the passing o f an era: the new
retirees had begun work when some o f the Bank’s first
employees were still on the job.
A number o f the employees lost to early retirement were
officers: J. Allin (Richmond) retired February 1; Jerry W ilson
(Baltimore), May 1; Wayne Stancil (Richmond), June 1; Harry
Smith (Charlotte), July 1; and Boyd Eubanks (Columbia),
December 1. Also participating but remaining in active service
through year-end were David Ayres, Dabney Martin, Art Myers,
Jesse Seamster, and Jack Wyatt o f Richmond; Frank Richbourg
o f Charlotte; and Jim Dennis o f Culpeper.

1988 Annual Report

-,y > §f

.. ' ■•■■■. .

W m m m
- '

■:■:■■■■

Federal Reserve Bank of Richmond

J? A

Seated: Jack C. Smith; Leroy T. Canoles, Jr.; Robert A. Georgine; Edward H. Covell; Thomas B. Cookerly
S ta n d in g : K. Donald Menefee; Hanne Merriman; John F. McNair III; Chester A. Duke

R ic h m o n d

R o bert A. G eo rg in e

Chester A. D uke

President

President and Chief Executive Officer

B u ild in g & C o nstru ctio n
Trades D ep artm e nt
AFL-CIO
W ash in g to n , D .C .

M arion N ational Bank
M arion, South C arolina
Jo h n F. M cN air III

President and Chief Executive Officer
President and Chief Executive Officer

W acho v ia Bank & Trust C o m p a n y , N.A.
an d The W ac ho v ia C o rp oratio n
W inston-Salem, N o rth Carolina

H oneybee, Inc.
N e w Y o rk, N ew Y o rk

K. D o n a ld Menefee

Leroy T. Canoles, Jr.

Chairman o f the Board &
Chief Executive Officer

President

M adison National Bank

DEPUTY CHAIRMAN
H an n e M errim an

K aufm an & Canoles
N o rfo lk, Virginia

Chairman o f the Board & President
James M adison Lim ited
W ashington, D.C .

T ho m as B. C o o ke rly

President

Jack C. Sm ith

Broadcast D ivisio n
A llb ritton C o m m u n ic a tio n s
W ash ing to n, D .C .

Chairman o f the Board and
Chief Executive Officer

E d w a rd H. C o ve ll

President
The C ovell C o m p a n y
Easton, M aryland

K-VA-T F ood Stores, Inc.
G ru n d y , Virginia

B a ltim o r e
CHAIRMAN
Thomas R. Shelton

President
Case Foods, Inc.
Salisbury, Maryland
John R. Hardesty, Jr.

President
Preston Energy, Inc.
Kingwood, West Virginia
H. Grant Hathaway

Chairman of the Board
Equitable 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
Gloria L. Johnson

Deputy Director of Administration
The Baltimore Museum of Art
Baltimore, Maryland
Joseph W. Mosmiller

Chairman of the Board
Loyola Federal Savings and
Loan Association
Baltimore, Maryland

John R. Hardesty, Jr.; Thomas R. Shelton; Joseph W. Mosmiller; H. Grant Hathaway;
Raym ond V. Haysbert, Sr.; Charles W. H o ff III; Gloria L. Johnson

C h a r lo tte
■

G. Alex Bernhardt

President
Bernhardt Industries, Inc.
Lenoir, North Carolina
Anne M. Allen

Vice President
Allen Construction Company
Greensboro, North Carolina
J. Donald Collier

President and Chief Executive Officer
Orangeburg 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
Columbia, South Carolina
William E. Masters

President
Perception, Inc.
Easley, South Carolina

Seated: William E. Masters; Anne M. Allen; James G. Lindley; J. Donald Collier
S ta n d in g : John A. Hardin; G. Alex Bernhardt; James M. Culberson, Jr.

.................. ........... ...... ....... ... ... ........... —
----- ------ ------ ------------------- ■.. .............. ....................
Federal Reserve Bank of Richmond

' ...... ..

...

.'......................T1' "" "

c i l s

(Decem ber 31, 1988)

-i

S m a ll B u s in e s s a n d
A g r ic u ltu r e A d v is o r y C o u n c il

Charles O. Strickler

Leonard A. Blackshear

Cecil H. Gannon

President

Chairman and Chief Executive Officer

Rocco Enterprises, Inc.
Harrisonburg, Virginia

Associated Enterprises, Inc.
Annapolis, Maryland

Cecil H. Gannon & Sons, Inc.
Easton, Maryland

Engineered Custom Plastics Corporation
Easley, South Carolina

Dickie S. Carter

Michele V. Hagans

Julian D. Wiles, Sr.

Michael Clark

President and Chief Executive Officer

President

Urban Service Systems Corporation
Washington, D.C.

Fort Lincoln New Town Corporation
Washington, D.C.

J. D. Wiles Farms, Inc.
Fort Motte, South Carolina

Clark Insurance Services Company, Inc.
Richmond, Virginia
:
Watts Auman

Robert W. Stewart, Jr.

E. Allen Fisher

Charles H. James II

Joan H. Zimmerman

Secretary-Treasurer

Chairman of the Board and Treasurer

President

Auman Farm
West End, North Carolina

West Virginia State Building &
Construction Trades Council
AFL-CIO
Charleston, West Virginia

C. H. James & Co.
Charleston, West Virginia

Southern Shows, Inc.
Charlotte, North Carolina

Manager

Ronald W. Davies

David A. Denton

Clement E. Medley, Jr.

Rita A. Smith

Senior Executive Vice President

Vice President

President and Chief Executive Officer

Executive Vice President

Maryland National Bank
Baltimore, Maryland

Investors Savings Bank
Richmond, Virginia

First Federal Savings and
Loan Association of Dunn
Dunn, North Carolina

West Virginia Savings League
Charleston, West Virginia

William E. Albert

Raymond L. Gazelle

Vice President and Cashier

Vice President

Robert Murphy

Senior Vice President

The First National Bank of Bluefield
Bluefield, West Virginia

Citizens Bank & Trust Company
o f Maryland
Riverdale, Maryland

Executive Vice President
Crestar Bank
Washington, D.C.

Mercantile-Safe Deposit &
Trust Company
Baltimore, Maryland
John J. Sponski

Edward J. Spirko

Jose Alonzo

President

Harrison Giles

Ricky B. Nicks

West Virginia Credit Union League, Inc.
Parkersburg, West Virginia

Senior Vice President

Group Executive Officer

NCNB National Bank of North Carolina
Charlotte, North Carolina

Wachovia Bank & Trust Company, N.A.
Winston-Salem, North Carolina

Sovran Bank, N.A.
Norfolk, Virginia

Senior Vice President

Kenneth L. Greear

Richard D. Pillow

Thomas J. Strange

Perpetual Savings Bank
Alexandria, Virginia

Vice President

United National Bank
Charleston, West Virginia

Virginia Credit Union League
Lynchburg, Virginia

South Carolina Credit Union
League, Inc.
Columbia, South Carolina

Senior Vice President

D. C. Hastings

James W. Ricci

NCNB South Carolina
Columbia, South Carolina

President and Chief Executive Officer

President

Rick A. Wieczorek

Virginia Bank and Trust Company
Danville, Virginia

Educational Systems Employees
Federal Credit Union
Bladensburg, Maryland

President

Robert A. Barton, Jr.

Charles S. Brummitt

William V. Bunting

Executive Vice President
Crestar Bank
Richmond, Virginia

David L. Kot

Vice President

Charles C. Schmitt

American Security Bank, N.A.
Washington, D.C.

Executive Vice President

C. L. Wilson m

Loyola Federal Savings and
Loan Association
Glen Burnie, Maryland

Senior Vice President

H. Jerry Shearer

James R. Wilson

Marshall N. Colebank, Jr.

Executive Vice President and Cashier

Ashpy P. Lowrimore

The Charleston National Bank
Charleston, West Virginia

Senior Vice President—City Executive

District of Columbia Credit Union
League
Washington, D.C.

Southern National Bank
o f South Carolina
Florence, South Carolina

Branch Banking and Trust Company
Wilson, North Carolina

Executive Vice President and Cashier

Vice President

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

First Carolina Corporate Credit Union
Greensboro, North Carolina

1988 Annual Report

Robert P. Black, President
Jim m ie R. M onhollon, First Vice President
W elford S. Farmer, Executive Vice President
J. Alfred Broaddus, Jr., Senior Vice President

and Director of Research
Roy L. Fauber, Senior Vice President
Arthur V. Myers, Jr., Senior Vice President
James D . Reese, Senior Vice President
Bruce J. Summers, Senior Vice President
James F. Tucker, Senior Vice President
Fred L. Bagwell, Vice President
Dan M. Bechter, Vice President
Lloyd W . Bostian, Jr., Vice President
Tim othy Q. Cook, Vice President
W illiam E. Cullison, Vice President
Donna G. Dancy, Vice President
W yatt F. Davis, Vice President
Michael Dotsey, Vice President
George B. Evans, Vice President
W illiam C. Fitzgerald, Associate General Counsel
Marvin S. G oodfriend, Vice President
Robert L. Hetzel, Vice President
David B. Hum phrey, Vice President and

Payments System Adviser
Thomas M. Hum phrey, Vice President
W illiam D. Martin III, Vice President and General Counsel
Joseph C. Ramage, Vice President
Jo h n W . Scott, Vice President
A ndrew L. Tilton, Vice President
W alter A. Varvel, Vice President
Jack H. W yatt, Vice President

Kemper W . Baker, Jr., Assistant Vice President
W illiam H. Benner, Jr., Assistant Vice President
Jackson L. Blanton, Assistant Vice President
W illiam A. Bridenstine, Jr., Assistant General Cou
Bradford N. Carden, Assistant Vice President
Betty M. Fahed, Assistant Vice President
Sharon M. Haley, Assistant Vice President and Secreta,
Eugene W . Johnson, Jr., Assistant Vice President
Thomas P. Kellam, Assistant Vice President
Anatoli Kuprianov, Research Officer
Harold T. Lipscomb, Assistant Vice President
Edgar A. Martindale III, Assistant Vice President
Yash P. Mehra, Research Officer
David L. Mengle, Research Officer
Joseph F. Morrissette, Assistant Vice President
Michael W . Newton, Assistant Vice President
Virginius H. Rosson, Jr., Assistant Vice President
G. Ronald Scharr, Assistant Vice President
Gary W . Schemmel, Assistant Vice President
Jesse W . Seamster, Assistant Vice President
Marsha S. Shuler, Assistant Vice President
James R. Slate, Assistant General Counsel
Roy H. W ebb, Research Officer
W illiam F. W hite, Assistant Vice President
H oward S. W hitehead, Assistant Vice President
Bobby D. W ynn, Assistant Vice President
Arthur J. Zohab, Jr., Assistant Vice President
Malcolm C. Alfriend, Examining Officer
Floyd M. Dickinson, Jr., Examining Officer
Jeffrey S. Kane, Examining Officer
Susan Q . Moore, Personnel Officer
Lawrence P. Nuckols, Examining Officer
Charlotte L. W aldrop, Examining Officer
David B. Ayres, Jr., General Auditor
H. Lewis Garrett, Assistant General Auditor

B a ltim o re

p H

Robert D. McTeer, Jr., Senior Vice President
Ronald B. Duncan, Vice President
W illiam E. Pascoe III, Vice President

Jo h n S. Frain, Assistant Vice President
W illiam J. Tignanelli, Assistant Vice President
Jo h n I. Turnbull II, Financial Services Officer

C h a r lo tte
Albert D. Tinkelenberg, Senior Vice President

W oody Y. Cain, Assistant Vice President
Marsha H. Malarz, Assistant Vice President
Francis L. Richbourg, Assistant Vice President
Lyle C. DeVane, Cash Operations Officer

Richard L. Hopkins, Vice President

W oody Y. Cain, Assistant Vice President, Charlotte

Acting Officer in Charge

Federal Reserve Bank of Richmond

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

1987
Gold certificate account

9 3 3 ,0 0 0 , 0 0 0 . 0 0

Special Drawing Rights certificate account

461.000.000.00

Coin

63,434,941.85

Loans to depository institutions

181.212.000.00

Federal agency obligations

6 3 8 , 2 2 2 ,0 1 6 . 0 6

U.S. government securities
Bills

9,099,673,161.09

Notes

7,011,103,775.81

Bonds

2,386,359,052.21

Total U.S. government securities

18,497,135,989.11

Cash items in process of collection

421,956,975.87

Bank premises

111,136,140.60

Furniture and equipment

19,584,111.80

(net)

Other assets

762,873,308.72

Interdistrict settlement account

(1,736,454,431.36)
4,821,828.12

Accrued service income
TOTAL ASSETS

$20,357,922,880.77

Federal Reserve notes

$16,550,033,156.00

Deposits
Depository institutions

902,100,768.55

Foreign

8 , 1 0 0 ,0 0 0 . 0 0

Other

60,885,688.57
971,086,457.12

Total deposits
Deferred availability cash items

386,779,161.09

382,874,070.33

Other liabilities

242,323,182.82

226,089,397.32

$24,614,394,923.78

520,130,083,080.77

TOTAL LIABILITIES

C a p ita l
A cco u n ts

113.919.900.00
113.919.900.00

E A R N IN G S A N D E X P E N S E S
1987
Loans to depository institutions
Interest on U.S. government securities
Foreign currencies
Income from services
Other earnings_________________________
Total current earnings

i
987,580.03
1,438,247,017.22
16,742,569.69
55,920,614.99
644,234.92

1,736,474.67
1,374,138,058.63
18,592,590.56
53,254,196.48
________ 757,809.39

:i , 512,542,016.85

$1,448,479,129.73

Operating expenses
Cost of earnings credits

85,224,519.55
8,253,737.39

Net expenses__________

93,478,256.94

CURRENT NET EARNINGS

$1,355,000,872.79

Additions to current net earnings
Profit on sales of U.S. government securities (net)
Profit on foreign exchange transactions
All other__________________________________________

3,539,914.02
97,430,955.51
55,808.80

Total additions

101,026,678.33

Deductions from current net earnings
Losses on foreign exchange transactions
All other_________________________________

17.474.44

Total deductions______________________

17.474.44

Net additions or deductions

+ 101,009,203.89

Cost of unreimbursed Treasury services
Assessment for expenses of Board of Governors
Federal Reserve currency costs___________

3,444,185.72
4,405,700.00
14,984,887.04

NET EARNINGS BEFORE
PAYMENTS TO U.S. TREASURY

$1,433,175,303.92

Distribution of Net Earnings
Dividends paid
Payments to U.S. Treasury ( f c S R e s e r v e notes)
Transferred to surplus_______________________

6,431,001.28
1,413,975,852.64
12,768,450.00

TOTAL

S u r p lu s A c c o u n t

$1,433,175,303.92

Balance at close o f previous year
Addition o f profits for year________________

113,919,900.00
9,535,950.00

101,151,450.00
12,768,450.00

BALANCE AT CLOSE OF CURRENT YEAR

123,455,850.00

113,919,900.00

C a p ita l S to ck
A ccou n t

Balance at close of previous year
Issued during the year____________

113,919,900.00
11,028,350.00

101,151,450.00
1 3 ,9 3 8 , 8 0 0 . 0 0

(Representing amount
paid in, which is 50%
of amount subscribed)

Cancelled during the year________
BALANCE AT CLOSE OF CURRENT YEAR

Federal Reserve Bank of Richmond

111

115,090,250.00
1,170,350.00

124,948,250.00
1,492,400.00
$

123,455,850.00

$ 113,919,900.00

m m

8ii|Jp

Ite m s P r o c e s s e d

Currency and coin proces
Currency received and verified
Currency verified and destroye
oin received and verified
ecks handled
ommercial— processed *
ercial— packaged items
overnment
Collections items handled
U.S. government coupons paid
Noncash items
U.S. government securities issued,
redeemed, and exchanged
Definitive
Book-Entry
Funds transfers sent and received
Food stamps redeemed
Loans advanced

Currency and coin processed
Currency received and verified
Currency verified and destroyed
Coin received and verified
Checks handled
Commercial— processed *
Commercial— packaged items
U.S. government
Collections items handled
U.S. government coupons paid
Noncash items
U.S. government securities issued,
redeemed, and exchanged
Definitive
Book-Entry
Funds transfers sent and received
Food stamps redeemed
Loans advanced
* Excluding checks on this Bank.

Full text of Annual Report of the Federal Reserve Bank of Richmond : Annual Report 1988

FRASER