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The FederalRikerve m^: Bank of St Louis THE FEDERAL RESERVE RANK of ST. LOUIS Annual Report 1985 Federal Reserve Bank of St. Louis Post Office Box 442 St. Louis, Missouri 63166 Little Rock Branch Post Office Box 1261 Little Rock, Arkansas 72203 Louisville Branch Post Office Box 32710 Louisville, Kentucky 40232 Memphis Branch Post Office Box 407 Memphis, Tennessee 38101 http://fraser.stlouisfed.org/ is^M?^0f.tSim^-^ Federal Reserve Bank of St. Louis The Federal Heserve Bank of St. Louis J one of 12 regional Federal Reserve Banks in the United States, serves the Eighth Federal Reserve District. The Eighth District comprises the state of Arkansas and parts of Illinois, Indiana, Kentucky, MiS' sissippi, Missouri and Tennessee. In addition to the head office in St. Louis, there are three branch offices located in Little Rock, Louisville and Memphis. President's I Message n June 1985, when I assumed the presidency of the Federal Reserve Bank of St. Louis, I was impressed to find an institution possessing a unique character, one derived not only from its contribution to economic thought, but also from the traditions of the Federal Reserve System and the responsibilities with which it has been entrusted. I found a staff that takes pride in the Bank and exemplifies our distinctive corporate culture. Discharging many governmental fijnctions, yet required by recent legislation to submit its major operations to the discipline of the marketplace, the Bank, through its staff, exhibits a high dedication to public service combined with a willingness to reexamine and innovate wherever it is possible to provide services that will help the Thomas C. Melzer (left), president, and W. L Hadley Griffin, chairman of the board. nation's financial system fianction more smoothly. Our commitment to serving the changing needs of the District was evident in new programs initiated in 1985. Early in the year, we established an 11-member advisory council, consisting of farmers and businessmen from around the District, to voice the concerns of agriculture and small business. In addition, we hosted seminars in St. Louis and Little Rock that discussed the various guidelines for investing prudendy in repurchase agreements using U.S. government securities. Our Community Affairs Office began a series of seminars in December to assist banks and holding companies in devising ways to meet community credit needs. As part of this effort, we are compiling and publishing a catalog—to be distributed in 1986—of the hundreds of federal and state programs for fiinding community redevelopment projects. Though not a new program in 1985, our ongoing commitment to improving the payments mechanism also received a great deal of attention over the year. Many of the Bank's activities in 1985 are covered in detail in the report that follows. Among the initiatives I consider particularly worthy of attention, however, is the implementation of the initial phases of a Districtwide training program for managers and employees. This program includes a longrange managerial development plan, as well as managerial and employee career development seminars. In 1986, we intend to expand these activities with programs on customer awareness, leadership and productivity improvement training. In addition, we will begin a college recruiting program to ensure that we continue to attract top-notch employees. By providing opportunities for our employees to grow personally and to develop a deeper understanding of central banking, we hope to promote the kind of job dedication that will also enhance our relations with our various constituencies. nce again an outstanding group of directors guided the Bank through the year of public service. We were saddened by the death in June of Patricia W. Shaw, president and chief executive officer. Universal Life Insurance Company, Memphis, Tennessee, who had served ably on the board of directors at the Memphis Branch, one year as chairman. We wish to express our gratitude to several other directors whose terms expired at the end of the year: Donald L. Hunt, St. Louis; D. Eugene Fortson and Shirley J. R. Pine, Little Rock; and Henry F. Frigon, Louisville. O We would also like to welcome back four directors who were either reappointed or reelected to new terms: Robert J. Sweeney and Robert L. Virgil, Jr., St. Louis; Allan S. Hanks, Louisville; and William H. Brandon, Jr., Memphis. New directors joining us in 1986 are: Paul K. Reynolds, St. Louis; Robert C. Connor and James R. Rodgers, Little Rock; Lois H. Gray, Louisville; and Katherine Hinds Smythe, Memphis. Of the few official changes over the year, two deserve special mention: Jean M. Lovati was promoted to vice president in charge of the Marketing Division, and W. Howard Wells was promoted to assistant vice president at the Louisville Branch. Against a background of an economy in its third year of expansion, continuing crises in the farm sector, large trade deficits and radical changes in financial legislation either adopted or under consideration, the needs of the Eighth Federal Reserve District continued to change in 1985. The Bank's success in meeting those changes derives from a staff that exhibits the universal characteristics of success: integrity, innovation, and dedication. We are proud of the people who constitute the Federal Reserve Bank of St. Louis. To underscore this pride, the description of our activities on the following pages is augmented by a focus on a handful of employees who typify our determination to maintain and improve our corporate culture, strengthening in the process our ties to all those whom we serve. Thomas C. Melzer President and Chief Executive Officer January 31, 1986 The Economy and Monetary Mike Belongia The St. Louis Fed encourages basic economic research and a vigorous exchange of economic ideas. As our speciaiist on agriculture, senior economist Nlilie Beiongia is part of this effort. Independently and in cooperation with his colleagues, Mike did research in 1985 on farmland values, agricultural exports, interest rate risk, budget deficits and monetary aggregates. Such research, which appears in the Bank's Review, also aids the Bank president in evaluating monetary policy recommendations. Technological advances promote greater efficiencies in domestic auto production. he U.S. economy in 1985 continued to expand following the 1981-82 recession. After two years of very strong growth, the economy slowed substantially in the first half of 1985, then resumed a slightly faster expansion in the second half Real GNP, the inflation-adjusted measure of output of goods and services, grew at a 2.7 percent annual rate in the last two quarters of the year, close to the average real growth since World War II. The expansion, however, has not been evenly distributed. Producers of raw materials and some areas of manufacturing exhibited virtually no growth, while the construction industry and service industries had an excellent year. Despite fears that the expiration of foreign car import quotas would adversely affect U.S. auto producers, they sold 8.2 million units in 1985, compared with average annual sales of 7.4 million units in the previous two years. Particularly noteworthy was the strong performance of U.S. employment. Despite strong growth in the labor force, the econ- Policy omy was able to provide sufficient opportunities to employ the new entrants into the job market, as well as maintain employment for existing workers. The percentage of the noninstitutionalized population between the ages of 16 and 65 that are employed rose to over 60 percent, which equals or exceeds the previous employment peaks since 1945. As a result, real disposable personal income rose slightly, ending the year at $10,468 per person. Meanwhile, unemployment declined to 6.9 percent. Inflation, measured by the GNP deflator, averaged around 3.3 percent, the lowest inflation rate since 1967. The decline in inflation was evident in lower interest rates. Corporate AAA bond rates fell from 12 percent in December 1984 to 10 percent at the end of the year; the three-month Treasury bill rate declined from 8 to 7 percent over the same period. In response to lower interest rates, growth in employment and higher incomes, consumer borrowing and spending continued ^ at high levels. On the other hand, the increase in investment in plant and equipment was substantially below its growth rate from 1983 to 1984. While total loans continued to grow at a rapid pace, business loans at commercial banks, after a sharp spurt in February, increased only modestly for the year. everal areas of economic activity remained matters of concern. Federal government expenditures continued to rise faster than revenues, producing an estimated deficit of $197 billion for the calendar year. The passage of the Gramm-Rudman bill raised the probability that deficits may decline in the future, but the magnitude of this decline still remains subject to speculation. The United States continued to be the most desired place for investors of the world as foreign investment in U.S. assets remained at a high level. Meanwhile, U.S. residents preferred to invest at home rather than abroad. The resultant increase in the demand for and decrease in the supply of dollars in world- S wide markets maintained a generally high price for the dollar in terms of foreign currencies. The value of the dollar reached its peak in February. In late September, the "Group of Five" nations—France, Germany, Japan, the United Kingdom, and the United States—agreed to intervene in foreign exchange markets to depress the value of the dollar which had already fallen 12 percent from the peak in February to that time. For the entire year, the dollar declined 16 percent. Nevertheless, the dollar's value was sufficiently high to keep U.S. exports of goods and services from rising and induce a large increase in imports; as a result, the merchandise account deficit rose to $148 billion. While this deficit apparently had little effect on total employment in 1985, it accounted for the uneven economic growth among various sectors of the economy. The agricultural sector has suffered a multitude of setbacks. Agricultural subsidies both here and abroad resulted in continuing overproduction of agricultural products in the face of falling prices. Thus, real farm income has declined from 1984 despite generally excellent harvests. With the decline in inflationary expectations and falling agricultural product prices, land values declined as well, jeopardizing the collateral underlying the bulk of farm credit. Monetary policy actions during 1985 were directed toward continuing the economic expansion. M l growth for the year was 11.6 percent. This growth was substantially above the initial M l range of 4 percent to 7 percent announced in February, as well as the rebased and widened (3 to 8 percent) M l range announced in July. M2 and M3, on the other hand, remained within their initially announced growth paths. The discount rate was reduced from 8 percent to 7.5 percent in May; the federal funds rate declined about 30 basis points during the year, ending at around 8 percent in December. Kathy Hovis Money growth. Bank loans. Bank deposIts. Interest rates. The list goes on. At the Fed, these and other Important figures originate more often than not with Kathy HovIs, lead analyst on the Research Department's monetary and financial data desk. Kathy collects, manipulates and constructs the data series that appear In the Bank's popular periodicals, U.S. Financial Data and Monetary Ti-ends. Currently the data desk fields about 300 telephone requests for data a week. The District Dorothy Jones Whether they call it ROTA, the FR 2900, or the "Report of Transaction Accounts, " most District institutions are familiar with the Fed's weekly deposit report. Many of these institutions are also acquainted with senior data analyst Dorothy Jones. Dorothy is responsible for processing and editing important Eighth District deposit data that the Federal Reserve Board uses to measure the nation's money supply. Her aim is to assist institutions in completing the reports as timely and painlessly as possible. Economy .he Eighth Federal Reserve District shares the diversity of the U.S. economy; moreover, through product trade, commodity flows and migration, it is enmeshed with economic activity at a national level. It is no surprise, then, that the moderate growth in the District economy in 1985 was characterized by strong growth in retail sales and weakness in manufacturing and agriculture. Across District states, however, economic conditions varied more widely as greater emphasis on specific industries either helped or hindered their individual performances relative to District and national averages. Personal income in the District, for example, advanced at a pace slightly less than the national gain. This increase, however, encompasses the strong growth in Tennessee and the weaker performance in Kentucky. The state-by-state discrepancies in personal income ultimately reflect the diversity of performance among key industries and the states that rely more heavily on a narrow and more cyclically sensitive industrial base. Employment in the textile and apparel industries, which accounts for a larger share of total employment in the District than in the United States, for example, fell more than 6 percent in 1985. While the effects of greater competition from textile and apparel imports were felt nationally, the impacts were particularly severe in states like Tennessee, which employs 5 percent of its nonagricultural work force in the industry. Employment in leather products, especially shoes, and the electric and nonelectric equipment industries, also saw employment decline sharply. Strong employment in other sectors, however, verified the dynamic adjustments taking place in the District economy. Employment in services, of course, reflected national trends and expanded at a 3.1 percent rate. But even within the manufacturing sector, industries such as transportation equipment, and especially motor vehicles and equipment, exhibited strong employment growth. Missouri ranks second only to Michigan in the assembly of automobiles. With per capita income in the District paralleling national gains, retail sales grew at a rate near 6 percent, only slightly less than the national pace. Especially robust were automobile sales, which benefited from widespread financing promotions, and purchases of large appliances. Performance by the District's banks also echoed most of the national headlines. Generally wider margins between the cost of funds and yields on loans and other assets helped large banks increase their profitability in 1985. Smaller banks, however, saw stable or declining profitability. Where profitability did not improve, larger loan losses and allocations to loan loss reserves were primarily responsible. The move toward interstate banking also proceeded apace in 1985 as most District states introduced legislation that would open their borders, in varying degrees, to banks from other states. Record harvests for most crops brought some relief to many Eighth District farmers. With the increases in yields more than offsetting price declines, many farmers realized net incomes higher than they had anticipated. Despite these higher incomes, however, many farmers still experienced financial stress because their asset base continued to erode; average land values fell 12 percent in the year ending April 1985. More recent figures, scheduled for release in early 1986, are expected to show further declines in land values, which will hinder the ability of farmers to secure new credit. Knowing that the District economy will be pulled along national trends gives rise to expectations of moderate overall growth and a continuing realignment of the composition of both output and employment by District industries. Moreover, despite the long-standing decline in manufacturing as a whole, some industries and firms in the District will expand as they find profitable niches in specialized areas of the marketplace. Lynn Barry Though economic trends in the District typically reflect the trends in the United States, specific sectors sometimes march to a different beat. Economist Lynn Barry, whose specialty Is Eighth District baniting, analyzes these trends and, along with two colleagues, publishes her findings In the Bank's regional publications on agriculture, banking and business. Lynn spends much of her time establishing valuable contacts around the District to assist her in tracking local economic trends. Since late 1982, nonresidential construction in the District has been booming. Bank and Bank Holding Company Sue Lacey In a banking environment undergoing deregulation, the task of the Fed's commercial bank examiners becomes ever more crucial. That's where assistant examiner Sue Lacey comes in. Unlike most examiners. Sue spends only about 2 0 percent of her time on the road, using her background in education instead to develop special programs for Fed examiners. Currently, Sue conducts a three-week orientation program for incoming examiners and has seminars on writing and presentation skills planned for f 9 8 6 . D uring a year of continuing economic expansion, banks showed moderate earnings improvement in 1985. Although the number of problem banks increased. District depository institutions, in general, appear healthier than they were one year ago. Though most institutions today are profitable and in good condition, agricultural credit problems continue to plague some District organizations. Other pockets of difficulty are centered in nonperforming loans to real estate, energy, transportation and manufacturing export concerns—long-term loans that have not improved significantly during the economic recovery. In all, six District banks failed in 1985, five state nonmember banks and one national bank. The trend of the past few years toward bank merger and acquisition continued in the District this year. Fueling this trend were liberalized branching laws, passed in Missouri, that permit banks to merge into contiguous counties. Another trend, the merger of large bank holding companies, also continued to increase in the District. The most significant recent development in District banking, however, has been the expansion of interstate banking. Following the lead of Kentucky, which enacted a regional interstate banking law in 1984, Tennessee, Indiana, and—at year-end—Illinois all followed suit. Thus, four of the seven states in the District now have laws on the books that, with certain restrictions, allow banks to acquire or be acquired by banks from other states. Missouri's legislature did not pass interstate banking bills that were introduced in 1984 and 1985, but the issue is expected to come up again in 1986. The ultimate result of such legislation appears to be larger but fewer banking organizations, as preliminary evidence shows a wave of acquisitions in states with such laws. Districtwide, the rate of bank holding company acquisitions and formations is down somewhat from its peak in 1983. The number of holding companies increased from Supervision 564 at the end of 1984 to 617 at the end of 1985, a 9 percent increase. While the new interstate banking laws should boost the number of holding company applications, this figure will be contained as the number of banks not already owned by a holding company continues to diminish. Currently, about two-thirds of the banks in the Eighth District are owned by holding companies. Thus, expectations are that the number of holding companies will continue to increase during 1986, but the rate of their formation should decline. In addition to the trend to interstate banking, the biggest news for depository institutions was the October 1985 announcement by the Federal Reserve of two new policies designed to strengthen the Fed's supervision of institutions for which we have primary federal supervisory responsibility. The new policies 1) increase the frequency and broaden the scope of Federal Reserve examinations of state member banks and inspections of bank holding companies and 2) strengthen the procedures for reporting deficiencies to bank management and boards of directors. he first policy means that all state member banks will be examined annually by either the Federal Reserve or the appropriate state supervisor. Also, many bank holding companies will be inspected at least once a year, and those with significant problems will be inspected more frequently. The second policy 1) establishes criteria for which examination and inspection findings require follow-up meetings with the organization's board of directors; 2) requires that a summary report of these findings be provided to each director of an institution with a problem or a developing problem; and 3) requires that Reserve Bank officials, at times including the president, become involved in presenting the examination's findings to the board of directors. Both policies have common objectives: to help prevent the development of problems at banking organizations and to enhance the effectiveness of the Fed in identifying and dealing with problems that do develop. In May, the Federal Reserve announced a payments system risk policy, to become effective in March 1986, that calls upon banks to take voluntary steps to reduce, control and monitor daylight overdrafts. To assist institutions in this venture, we hosted seminars in nine locations around the District that recommended ways to reduce the possibility of a settlement failure yet ensure the continued smooth operation of the payments system. T Michael Kraemer Monitoring the financial condition of over 6 0 0 bank holding companies is no easy task. Making the Job somewhat easier is assistant examiner Michael Kraemer, who handles the annual financial report, or Y-6, that each District holding company files with the Fed. Michael assists holding companies by telephone in completing these reports and reviews the work of several Bank analysts in interpreting the financial figures. These reports are then used to supplement field inspections. The strength of our financial system is in its contribution to the credit needs of our communities, both large and small. Jack Kuebel To many Eighth District financiai institutions. Jack Kuebel is the Federal Reserve Bank of St. Louis. One of the Bank's five customer service representatives. Jack spends over three-quarters of his time on the road visiting banks, savings and loans, and credit unions, primarily in Illinois and northern IVIissouri. Jack's job? To match our financial services with District institution needs and to ensure that these services are performed to the highest standards. In 1985, Jack made nearly 400 visits to District institutions. I ,n providing high-quality financial services to Eighth District institutions, the Bank concentrated its efforts in 1985 on the electronic delivery of services. Whether in check processing, securities or the traditional electronic services, the expansion of electronic delivery was a major commitment over the year, as it will be for some time to come. In addition, we continued our efforts to improve the payments mechanism and recover our costs of providing services as mandated by the Monetary Control Act of 1980. Automated Clearinghouse (ACH) ACH, once again the fastest-growing Fed service, increased its volume approximately 30 percent in 1985. A new feature of this service is a state-of-the-art electronic data delivery system, called an ACH data link, that connects the customer directly to the Fed's computer. The ACH data link is a quicker, more reliable and more convenient method of transmitting and receiving ACH payment information than the traditional courier delivery of magnetic tapes or paper listings. Funds Transfer The volume of fiinds transfers rose once again, from 2.8 million transactions in 1984 to 3.1 million in 1985. In part, this volume increase resulted from the expansion of the number of direct, computer-to-computer hook-ups for financial institutions. The number of customers using FEDNET, our popular dial-up fiinds transfer network, also increased in 1985, this year by about 50 customers. Several FEDNET enhancements were made over the year that made the service more convenient to use. One time-saving device allows customers to format any standard, recurring wires and store them for ftiture use. Later, the customer can recall the recurring wire format, enter just the variable information, and process as usual. Another new feature for 1985 provides for the same-day correction of rejected wire transfers. If our computer rejects a wire for editing or formatting reasons, customers can use this software innovation to call up the wire on the entry screen, correct only the error, and process as usual. This improves upon the previous need to re-key the entire wire. A third new FEDNET feature assists customers in complying with the Federal Reserve's new notification requirements for largedollar check return items. FEDNET can now be used as a vehicle to notify the bank of first deposit of any large-dollar checks being returned. This year, FEDNET customers who have leased their terminals from us for over a year were offered the option to purchase their equipment and receive credit for their previous lease payments. As of October, over 40 percent of eligible institutions had taken advantage of this offer. Larger institutions, connected to the Fed via a leased IBM 3270 terminal, were also offered a purchase option. Check Processing The biggest news in check processing in 1985 was the advent of a new program—the Accelerated Return Item Service (A.R.I.S.)— which was created to help depository institu- tions reduce the cost, time and labor involved in handling returned checks. After successfully piloting this program from mid-1984 to mid-198 5, we introduced this service to interested customers in the St. Louis zone. A.R.l.S. automatically reclears small-dollar checks that are returned, reducing the average number of return items a customer handles by about 40 percent and leading to faster hinds availability. The Eighth District is the first in the Federal Reserve System to offer this service. In 1986, we will investigate expanding A.R.l.S. to the branch areas. In September, the Little Rock office became the site for a new group sort service that collects out-of-District checks at a lower price. Little Rock institutions using this service can avail themselves of predominantly one-day availability at 36 of the largest outof-District collection points in the country. A major enhancement to the Bank's MlCRsort payor bank service was piloted in 1985. This new MlCRsort feature provides electronic delivery of critical account information via the data link connections initially established for ACH. With this service enhancement, MlCRsort customers will be able to accelerate the reporting of important, timecritical cash management information to their largest corporate clients. On October 1, the Fed began offering a new menu of services designed to assist institutions in complying with the recently amended Regulation J, which established notification requirements for financial institutions returning large-dollar checks. The Fed now offers three notification options that will help institutions provide information on large unpaid checks quickly, conveniently and cost-effectively. A final change in the check area in 1985 was the expansion of the boundaries of the St. Louis City check collection zone to reflect more accurately our current metropolitan business area. This expansion provided depositors with an additional eight hours in which to collect funds in the metropolitan area. Since this was a major change for the affected institutions, operational changes were made in stages over the first half of the year. Cathy Often Though we haven't yet reached the checkless society, analysts tell us we're headed in that direction. To assist District institutions in the transition to the electronics age, Cathy Otten and her staff of seven in the Bank's wire room handle funds transfers for off-line customers within the Eighth District and inform them of any incoming transfers to their accounts. Cathy's area also acts as back-up for on-line customers experiencing computer failure. Advances in electronics provide for speedier and more accurate communications among financial institutions. Savannah Curry For many District institutions, receiving their Fed cash ietters on time and in good shape is the most important business of the day. As senior anaiyst in the Payments Division, Savannah Curry is the Banlt's iiaison between our customers and the couriers that transport these cash letters. Savannah monitors c/ieclr shipments and acts as troubleshooter for any transportation problems, ensuring that we contribute to the reduction of float. Securities Since the implementation of the Monetary Control Act of 1980, the Fed has provided book-entry transfer services for Treasury securities. On October 1, 1985, an important change occurred when we began providing these same services as fiscal agent for the U.S. Treasury. As a result of this change, the Treasury became responsible for setting prices for such services. For the most part, this was good news for depository institutions, as the announced transaction fees were lower, and the account maintenance fee and per-issue fee for Treasury securities were eliminated. On the other hand, the Treasury now collects its fees on a daily instead of monthly basis, which requires institutions to monitor more closely their account balances with the Fed. To assist customers in managing their accounts, the Fed developed a special daily report that provides detailed information on their Treasury activity and charges. Casii Last year, more than 480 million pieces of currency, with a total dollar value of $5.4 billion, were processed and delivered to District depository institutions. To continue to provide high-quality currency in circulation, we installed more sophisticated sensors in each of our high-speed currency sorting machines in 1985. These sensors improve the accuracy and performance of the machines in detecting notes that are stuck together, the wrong denomination in a run, or damaged. Automation To support its priced and non-priced services, the Fed's long-range automation program called for extensive software enhancements designed to advance electronic communications between the Fed and our customers. In addition, in response to customer requests, we developed in 1985 a redesigned billing statement for our customers that incorporates two major changes. For small-volume customers, we will ehminate much of the paperwork by sending monthly statements of their charges instead of the previous weekly advices. In a second change, we will relieve the larger correspondent banks of the burden of handling individual statements for each of their respondents. Instead, the Fed will take care of forwarding the individual statements to the respondents. Correspondents will receive their own statements, along with a summary sheet of their respondents' charges. These new billing statements, which are also easier to read and reconcile, are scheduled for use in April 1986. In addition, as part of a Systemwide effort to establish disaster contingency plans, the St. Louis Fed developed and tested a plan to limit the disruption of normal Federal Reserve banking services in the event of various disaster scenarios. The Systemwide plan in 1985 calls for a contingency processing center that will act as a back-up data center for any Fed district that experiences a computer outage. In the Eighth District, a relocation center also was established to act as headquarters in the event the St. Louis office becomes disabled. In another important area, the Fed has begun to address the financial community's concern for the safety, privacy and integrity of electronically transmitted payment messages. By the end of 1987, the Federal Reserve System intends to have "encryption" capabilities for all of its Fedwire system connections. Our ultimate goal is to ensure that each transaction sent between Fed offices and financial institutions reaches its destination without modification. Dennis Brommelhorst Computers, many of us will agree, don't always do what we asir them to do. Making sense of computers for many Bank employees is Dennis Brommelhorst and his staff of four in the Bank's Information Center. Dennis' Job is to provide assistance, consultation and training in the new field of "end user" computing. The goal, of course, is faster, more accurate and more efficient services for our customers. The expansion of computer facilities goes hand in hand with the development of new financial services. statement of Condition (in thousands of dollars) Assets Gold certificate account Special Drawing Rights certificate account Coin Loans to depository institutions Securities: Federal agency obligations U.S. Government securities Total securities Cash items in process of collection Bank premises (net) Other assets Interdistrict settlement account TOTAL ASSETS Liabilities Federal Reserve notes Deposits: Depository institutions Foreign Other Total deposits Deferred availability cash items Other liabilities TOTAL LIABILITIES Capital Accounts Capital paid in Surplus TOTAL CAPITAL ACCOUNTS TOTAL LIABILITIES AND CAPITAL ACCOUNTS December 31, 1985 December 31, 1984 $357,000 157,000 26,321 15,130 $357,000 170,000 23,901 34,280 238,863 5,161,926 240,673 4,567,795 $5,400,789 $4,808,468 828,659 18,054 310,512 487,132 688,274 16,864 202,524 357,149 $7,600,597 $6,658,460 $5,795,779 $5,245,595 896,078 4,200 20,876 575,526 4,050 13,123 $ 921,154 $ 592,699 710,143 66,075 652,733 75,539 $7,493,151 $6,566,566 $ 53,723 53,723 $ 45,947 45,947 $ 107,446 $ 91,894 $7,600,597 $6,658,460 Income and Expenses ( in thousands of dollars) Current Income Interest on loans to depository institutions Interest on government securities Earnings on foreign currency Revenue from priced services All other income Total current income 1985 $ 2,816 485,323 6,398 28,018 438 $522,993 1984 $ 5,252 474,800 5,872 28,681 415 $515,020 Current Expenses Current operating expenses Less expenses reimbursed Current net operating expenses Cost of earnings credits Current net expenses CURRENT NET INCOME $ 55,859 (6,067) $ 49,792 4,988 $ 54,780 $468,213 $ 54,506 (5,439) $ 49,067 5,617 $ 54,684 $460,336 $ 2,852 33,881 5 $ 36,738 $ $ 0 585 $ 585 $ 36,153 $ 12,280 452 $ 12,732 $(11,342) Assessment by Board of Governors: Expenditures Federal Reserve currency costs Total assessment NET INCOME AVAILABLE FOR DISTRIBUTION $ 2,188 5,414 $ 7,602 $496,764 $ Distribution of Net Income Dividends paid Payments to the U.S. Treasury (Interest on F.R. notes) Transferred to surplus Surplus, January 1 Surplus, December 31 $ (2,935) (486,053) 7,776 45,947 $ 53,723 $ (2,524) (433,360) 5,825 40,122 $ 45,947 Profit and Loss Additions to current net income: Profit on sales of government securities (net) Profit on foreign exchange transactions (net) All other additions Total additions Deductions from current net income: Loss on foreign exchange transactions (net) All other deductions Total deductions Net additions or deductions $ 1,388 0 2 1,390 2,246 5,039 $ 7,285 $441,709 Summary of Operations Number Handled 1985 1984 Currency received & counted 480,286,000 474,433,000 Coin received & counted.. . 788,544,000 713,397,000 Food stamps redeemed 166,627,000 186,838,000 Transfers of flinds 3,137,600 2,838,784 Checks handled: U.S. government checks. . . 34,832,000 34,458,000 Postal money orders 130,078,000 118,795,000 All other 541,273,000 532,987,000 ACH items handled: Commercial 18,644,000 12,786,000 U.S. government 14,565,000 12,970,000 Collection items handled: U.S. government coupons paid 170,000 210,000 All other 362,440 323,148 Issues, redemptions, & exchanges of U.S. government securities: Definitive 6,986,000 6,771,944 Book entry 243,840 252,559 Loans 1,282 1,944 Dollar Amount(thousands) 1985 1984 5,386,400 99,400 706,800 4,474,600 182,200 581,007 2,880,549,000 2,630,490,000 27,891,700 9,485,700 308,787,500 27,448,400 8,093,000 335,816,500 115,974,000 7,952,000 78,665,600 6,210,300 112,000 676,100 120,037 485,900 2,641,200 508,676,700 1,814,800 436,637,400 2,857,900 5,400,000 Officers Federal Reserve Bank of St. Louis Senior Management Thomas C. Melzer President and Chief Executive Officer Joseph P. Garbarini First Vice President and Chief Operating Officer Member Banks Charles R. Halbrook Vice President Jerome R. Rodgers Assistant Vice President Harold H. Rieker Supervisory Officer Valuables Processing Michael T. Moriarty Vice President Edward R. Schott Assistant Vice President Darwin W. Stephens Assistant Vice President Administration Legal and Credit Ben C. Wade Senior Vice President Financial Services Martha L. Ferine Vice President and Controller John W. Druelinger Assistant Vice President Leslie F. Schmeding Assistant Vice President Human Resources Patricia A. Tarbutton Vice President Judie A. Courtney Human Resources Officer Marketing Jean M. Lovati Vice President Kristi D. Short Marketir^ Officer Support Services William J. Sneed Vice President Gregory S. Pusczek General Services Officer F Garland Russell, Jr. Senior Vice President, General Counsel and Secretary Joan P. Cronin Vice President, Deputy General Counsel and Assistant Secretary Credit and Community Affairs Randall G. Sumner Vice President Harold E. Slingerland Credit Officer Research and Public Information Audit Richard E. Kay General Auditor Michael A. Aguera Audit Officer Robert R. Long Audit Officer Banking Supervision and Regulation Harold E. Uthoff Senior Vice President Bank Holding Companies Delmer D. Weisz Vice President Harry L. Rea Assistant Vice President Dennis W. Blase Supervisory Officer Operations Information Systems James R. Kennedy Vice President Jerome J. McGunnigle Assistant Vice President John P. Merker Assistant Vice President Frances E. Sibley Systems Officer Payments Robert W. Thomas Vice President Walter W. Jacobs Assistant Vice President Robert J. Taylor Assistant Vice President Jerry J. Calton Operations Officer Roger D. Smith Operations Officer Anatol B. Balbach Senior Vice President Economic Analysis Albert E. Burger Vice President ICeith M. Carlson Assistant Vice President R. Alton Gilbert Assistant Vice President John A. Tatom Assistant Vice President Dallas S. Batten Research Officer Rik W. Hafer Research Officer Public Information Ruth A. Bryant Vice President Statistics Michael E. Trebing Research Officer Support Hillar}' B. Debenport Research Officer Little Rock Branch John F Breen Vice President and Manager David T Rcnnie Assistant Vice President Louisville Branch James F Conrad Vice President and Manager George E. Reiter, Jr. Assistant Vice President W. Howard Wells Assistant Vice President Memphis Branch Paul I. Black, Jr. Vice President and Manager Anthony C. Cremerius, Jr. Assistant Vice President