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The FederalRikerve


Bank of St Louis


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
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




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
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.


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
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
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.

advances promote
greater efficiencies
in domestic auto

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-


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
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
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-


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.



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.


.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

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
planned for f 9 8 6 .


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


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
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
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.




Monitoring the
of over 6 0 0 bank
holding companies
is no easy task.
Making the Job
somewhat easier is
who handles the
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
These reports are
then used to supplement field

The strength of our
financial system is in
its contribution to the
credit needs of our
communities, both
large and small.



To many Eighth District financiai institutions. Jack Kuebel
is the Federal Reserve Bank of St.
Louis. One of the
Bank's five customer
representatives. Jack spends
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
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


,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.




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.



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
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
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.



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
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
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
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



For many District
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
monitors c/ieclr shipments and acts as
that we contribute
to the reduction of

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.

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.

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.

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
his staff of four in
the Bank's Information Center. Dennis'
Job is to provide
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


statement of Condition

(in thousands of dollars)

Gold certificate account
Special Drawing Rights certificate account
Loans to depository institutions
Federal agency obligations
U.S. Government securities
Total securities
Cash items in process of collection
Bank premises (net)
Other assets
Interdistrict settlement account
Federal Reserve notes
Depository institutions
Total deposits
Deferred availability cash items
Other liabilities
Capital Accounts
Capital paid in

December 31,

December 31,















$ 921,154

$ 592,699















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

$ 2,816

$ 5,252

Current Expenses
Current operating expenses
Less expenses reimbursed
Current net operating expenses
Cost of earnings credits
Current net expenses

$ 55,859
$ 49,792
$ 54,780

$ 54,506
$ 49,067
$ 54,684


$ 36,738



$ 36,153

$ 12,280
$ 12,732

Assessment by Board of Governors:
Federal Reserve currency costs
Total assessment

$ 2,188
$ 7,602


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)
$ 53,723

$ (2,524)
$ 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



$ 7,285


Summary of Operations

Number Handled
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
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:
18,644,000 12,786,000
U.S. government
14,565,000 12,970,000
Collection items handled:
U.S. government
coupons paid
All other
Issues, redemptions, &
exchanges of U.S.
government securities:
Book entry



Dollar Amount(thousands)

















Federal Reserve Bank of St. Louis

Senior Management
Thomas C. Melzer
President and Chief Executive
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


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
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
Joan P. Cronin
Vice President,
Deputy General Counsel
and Assistant Secretary
Credit and Community
Randall G. Sumner
Vice President
Harold E. Slingerland
Credit Officer

Research and Public

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

Information Systems
James R. Kennedy
Vice President
Jerome J. McGunnigle
Assistant Vice President
John P. Merker
Assistant Vice President
Frances E. Sibley
Systems Officer
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
Michael E. Trebing
Research Officer
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