1

1998
FEDERAL
RESERVE
BANK
OF
PHILADELPHIA
ANNUAL
REPORT
The Switch
To Electronic Payments
2
3
The Switch to Electronic Payments
ExecutiveLetters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
TheSwitchto Electronic Payments
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
AutomatedClearinghouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FedLine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Financial Electronic Data Interchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ElectronicCheckPresentment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Boardof Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
AdvisoryCouncils. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . insert
4
A A
A AA
sI writethis, thecurrent economic
expansionentersitsninthyear. It
isalreadythelongest peacetimeex-
pansioninour history, and I believeit
still hasa long runahead.
Eachphaseof thisexpansionhasbrought itsownchallenges. In
1998, it wasrespondingto international economic weakness, and
investors growingconcernabout exposureto risk. TheFedmoved
decisivelyto reduceshort-terminterest rates, restoringconfidenceto
financial marketsandhelpingsustaina healthypaceof economic
activityintheU.S. Theyear endedwiththeeconomyturningina solid
performanceandgoodprospectsfor continuedgrowth. If thereisone
thingour recent experiencehasdemonstrated, it ishowsmall theworld
hasbecome. Instantaneousglobal communicationisa reality.
Financial market activityflowscontinuouslyaroundtheworldinwhat
amountsto a 24-hour businessday. Andthedigital technologythat
makesall of thispossiblewill continueto transformcommerceandtheworldwideeconomyintheyearsahead.
Whileelectronic capabilitiesarestill expanding, andthepossibilitiesareexciting, wearefacedwiththeprospect
of adaptingto rapidandongoingchange. Weat theFedareverymuchawareof thisinour roleasa provider
of paymentsservices. Whileweseemoreandmoremoneymovingelectronically, wealso knowthat peoplestill
payfor most thingsincashor bycheck. Thispresentsuswitha significant challenge: helpingthepayments
systemachievetheefficiencyandconvenienceofferedbyelectronicswithout compromisingtheconfidenceand
comfort peoplehavewithmoretraditional meansof payment.
Earlyin1998, theFedreaffirmeditscommitment to workwithpaymentsproviders, largeandsmall, oldandnew,
to movedecisivelytowardelectronic payments. Asyouwill seeinthisreport, theFederal ReserveBankof
Philadelphia andthedepositoryinstitutionsintheThirdDistrict areactivelyengagedinbringingabout this
transition.
ExecutiveLetters
President
5
A A
A AA
nimportant part of theFederal
Reservesmissionisto ensurethat
thenationspaymentssystemevolvesto
meet theneedsof a dynamic economy.
Oneof thereasonsCongresscreated the
Fed backin1913 wasto help establisha
coherent national systemfor clearing
checks. Today, our priorityisfostering an
orderlytransitionfromsuchpaper-based
systemsto electronic payments.
Actually, themovement to electronic paymentshasbeenunderwayfor
sometime. Someelectronic services, suchasdirect deposit of payrolls,
havecaught onandarequitecommon. Nowit seemsthat electronic
paymentsarepoisedfor rapidexpansioninmanymoreareas. Thebasic infrastructureisinplaceandnewcapabili-
tiesarebeingdeveloped.
What wemust do nowisfamiliarizepeoplewithelectronic payments, buildpeoplesconfidenceinthem, andin-
creasetheir awarenessof thepossibilitiestheyoffer. It isnot upto theFedto choosetheparticular constellationof
paymentsservicesthat emerges. That will bedecidedinthemarketplacebybanksandother serviceproviders, in
consultationwithconsumersandbusinesses. Our jobisto createa positiveenvironment for that process.
That iswhyweat theFederal ReserveBankof Philadelphia arecommittedto quality, innovation, andresponsiveness
intheservicesweprovidefor our depositoryinstitutioncustomers. Wewant to helpthempositionthemselvesto offer
thefinest andmost progressivepaymentsto their customersintheThirdDistrict andacrossthecountry.
First Vice President
6
Since the installation of a newAccounts P Since the installation of a newAccounts P Since the installation of a newAccounts P Since the installation of a newAccounts P Since the installation of a newAccounts Payable ayable ayable ayable ayable
systemin1997, thePhiladelphiaF systemin1997, thePhiladelphiaF systemin1997, thePhiladelphiaF systemin1997, thePhiladelphiaF systemin1997, thePhiladelphiaFedhasencour edhasencour edhasencour edhasencour edhasencour- -- --
aged vendors to convert fromcheck payment to aged vendors to convert fromcheck payment to aged vendors to convert fromcheck payment to aged vendors to convert fromcheck payment to aged vendors to convert fromcheck payment to
direct deposit. F direct deposit. F direct deposit. F direct deposit. F direct deposit. Fifty ifty ifty ifty ifty-two percent switched in the -two percent switched in the -two percent switched in the -two percent switched in the -two percent switched in the
program program program program programs first year s first year s first year s first year s first year. In the Accounting Depart . In the Accounting Depart . In the Accounting Depart . In the Accounting Depart . In the Accounting Depart- -- --
ment, Lisa A. Irwin (right), expense coordinator ment, Lisa A. Irwin (right), expense coordinator ment, Lisa A. Irwin (right), expense coordinator ment, Lisa A. Irwin (right), expense coordinator ment, Lisa A. Irwin (right), expense coordinator, ,, ,,
and Angelin T and Angelin T and Angelin T and Angelin T and Angelin T. Cunningham, Accounts P . Cunningham, Accounts P . Cunningham, Accounts P . Cunningham, Accounts P . Cunningham, Accounts Payable ayable ayable ayable ayable
clerk, compare the work involved. W clerk, compare the work involved. W clerk, compare the work involved. W clerk, compare the work involved. W clerk, compare the work involved. With direct ith direct ith direct ith direct ith direct
deposit there are no checks to print out or tear deposit there are no checks to print out or tear deposit there are no checks to print out or tear deposit there are no checks to print out or tear deposit there are no checks to print out or tear
off off off off off, just a letter notifying the vendor of a pay , just a letter notifying the vendor of a pay , just a letter notifying the vendor of a pay , just a letter notifying the vendor of a pay , just a letter notifying the vendor of a pay- -- --
ment. Halving the number of vendors paid by ment. Halving the number of vendors paid by ment. Halving the number of vendors paid by ment. Halving the number of vendors paid by ment. Halving the number of vendors paid by
check has reduced thetimeCunninghamspends check has reduced thetimeCunninghamspends check has reduced thetimeCunninghamspends check has reduced thetimeCunninghamspends check has reduced thetimeCunninghamspends
preparing outgoing mail from two hours to 30 preparing outgoing mail from two hours to 30 preparing outgoing mail from two hours to 30 preparing outgoing mail from two hours to 30 preparing outgoing mail from two hours to 30
minutes every other day minutes every other day minutes every other day minutes every other day minutes every other day. In addition to vendor . In addition to vendor . In addition to vendor . In addition to vendor . In addition to vendor
invoices, theF invoices, theF invoices, theF invoices, theF invoices, theFedalsopaysemployeepayroll taxes edalsopaysemployeepayroll taxes edalsopaysemployeepayroll taxes edalsopaysemployeepayroll taxes edalsopaysemployeepayroll taxes
byelectronic funds transfer byelectronic funds transfer byelectronic funds transfer byelectronic funds transfer byelectronic funds transfer. .. ..
7
T T
T TT
hepaymentssystemischanging. Therearenewwaysto
exchangemoney, and theydont involvethefamiliar crinkle
of cashor checks. Thepaymentssystemisbecoming electronic.
Amanufacturer withfacilities across the state taps a keyboard and her payroll
is done. Onpayday, the funds are waitinginemployees accounts as soonas
banks open...
Ahomeowner looks at the calendar andknows his mortgage payment is onits
way, automatically...
Atraveler about to board a plane calls her bankto paya last-minute bill...
Acollegestudent, latefor class, leaves his dormroomwithout money, but
easilypurchases coffee withhis student identificationcard.
Theseincreasinglyfamiliarexamplesdemonstrate
justhowpluggedinpaymentshavebecome. Direct
deposithasmadepaychecksathingof thepastformany
of us. Agrowingnumber of uspaybillswithoutwriting
checksor lickingstamps. Moreof usmakepurchases
withtheswipeof acard.
Will paper moneydisappear completely?
Probablynot. But electronic transactionsaregaining,
mostlybecauseof thespeedandconveniencetheyoffer.
TheFederal Reserve particularlytheFederal Reserve
Bankof Philadelphia isdoingseveral thingsto smooth
thetransitionfrompaper to electronic payments.
Electronic transfersactuallyhavebeenaround
for quitea while. TheFederal Reservehasbeenmoving
large-dollar transactionsfor banksandthegovernment
over itsFedwirenetworksincethe1920s. What isnewis
theviabilityof electronic transfersona broadscale, for
everydaytransactions. Newcomputingandtelecommu-
nicationstechnologiesaremakingmovinginformation
andmoney easier andcheaper all thetime.
Improvingtechnologyisonlyonepartof thestory.
E-paymentsmighthaveremainedinvisibletothegeneral
publicexceptforonething: UncleSamdecidedtobank
electronically. In1996, Congressenactedlegislation
requiringmostfederal paymentstobemadeelectronically,
includingthingssuchasSocial Security, federal pensions,
andveteransbenefits.
For thefederal government, cost isa primary
incentive. Eache-payment saves41 centscompared
withissuinga check. Becauseof thevolumeof pay-
mentsmadebythefederal government, useof
e-paymentsisexpectedto save$500 millionover five
years, andthat benefitsnot onlythegovernment but
everyonewho paystaxes.
Electronicpaymentsoffer other, moreimmediate
advantagesto therest of us. Theyreducefraud, since
theyarelessvulnerabletotheft, forgery, andcounterfeit-
ing. Besidesbeingsafer, transferringfundselectronicallyis
alsomoreconvenient. E-paymentsarenotsubjectto
delaysassociatedwithmailingandcollectiontime.
Introduction
8
Recipientscandirecte-paymentstooneormoreaccounts
astheyavoidbanklines, andtheycanaccesstheir
depositsearlier, all of whichenablesthemtomanagetheir
moneymoreefficiently.
Evenwiththeseclearadvantages, thereare
several challengestowinningwideacceptancefor
electronicpayments.
Initially, peopleneedto
bemadeawareof what
theyare. Theyneedto
beinformedof the
benefits. Andtheymust
becomeusedtohandling
financeselectronically.
Perhapsthemost
significantchallenge,
however, istheinclusion
intheelectroniceconomy
of some10million
Americanswhodonot
havebankaccounts.
All of theseissuesmust
beaddressedif electronic
moneyistoachievethe
sameaccessibilityand
integrityasexistingforms
of currency.
Thisiswherethe
Federal Reservebecomes
involved in the transition
toelectronicpayments. Partof ourmissionistoensurethat
thenationspaymentsystemisefficient, reliable, secure, and
accessible. TheFeditselfprocesses25percentofall checks
writtenintheU.S. and80percentof all e-payments.
In1997, acommitteeheadedbyFedVice-
ChairmanAliceRivlinthoroughlyreassessedourroleasa
paymentprocessor. Afterconsultingabroadarrayof
financial institutions, businesses, consumergroups, trade
associations, andpaymentsexperts, theRivlinCommittee
laidouttheFedstrategyforsmoothingtheswitchtoan
electroniceconomy.
Foremostamongthecommitteesrecommenda-
tionswasthattheFedcontinuetoimprovetheefficiency,
effectiveness, andconvenienceof bothitscheckclearing
andautomatedclearinghouseservices, andensureaccess
totheseservicesforall
depositoryinstitutions.
Equallyimportant,
thecommitteeempha-
sizedthattheFedshould
workactivelywith
paymentsprovidersand
userstomovethe
paymentssystemforward,
fromcreatinggreater
publicawareness, to
providingeducationand
trainingforbankers, to
encouragingcreative
partnershipsbetween
banksandbusinesses.
Essentially, the
RivlinCommitteedirected
theFedtohelpmovethe
paymentssystemtoward
electronicsthrougha
two-prongedapproach:
bycontinuingtoadopt
newtechnologies
internallyandbyworkingwiththosewhoprovideanduse
paymentsservices.
AttheFederal Reserve, thetransitiontoelectronic
paymentsinvolvesfourservices: AutomatedClearing-
house; FedLine; Financial ElectronicDataInterchange;
andElectronicCheckPresentment. AttheFederal Reserve
Bankof Philadelphia, weareworkingwithThirdDistrict
depositoryinstitutionsandotherstoexpandtheuseof
theseservices.
EFT99: UNCLESAMGOESELECTRONIC
What: What: What: What: What: In1996Congressformallyendorsedthefederal
governmentsusageof electronicpaymentswiththepas-
sageof theDebtCollectionImprovementAct, commonly
knownas EFT99 (for electronic fund transfers by1999).
Thelawrequiresthat whenever possible, federal depart-
mentsandagenciesmakepaymentselectronically.
Why: Why: Why: Why: Why: Electronicpaymentsaresafer, moreconvenient,
andlessexpensivethanchecks. E-paymentsalsogreatly
reducetheopportunityfor theft, forgery, andcounterfeit-
ing problemsthat cost thegovernment $65 millionin
anaverageyear.
Who: Who: Who: Who: Who: Almost everyone who receives a payment from
the federal government is affected. EFT99 has meant a
quick introductionto direct deposit for millions of Social
Securityrecipients, federal retirees, veterans, andvendors
who do businesswiththefederal government.
How: How: How: How: How: Thoughthefederal governmenthasscaledback
its original goal for EFT99 that 100 percent of pay-
mentsbemadeelectronicallyby1999muchprogress
has beenmade. Bythe end of 1998, 75 percent of the
one billion payments made by the federal government
annuallywerebeingmadeelectronically.
9
L L
L LL
ike checks, electronic payments must be settled. Automated
Clearinghouse (ACH) is the mechanismthrough which elec-
tronic payments are debited and credited. ACH, established in
1972 through the joint effort of the Fed and the private sector,
specializes in low-dollar transactions, the kind for which many
people still write checks.
salaryorretirementbenefitsistheirfirstcontactwith
electronicpayments.
Employersfinddirect deposit to bea less
expensive, moresecurewayof handlingpayroll, particu-
larlyfor employeeswho aregeographicallydispersed. In
1997, 725,000 employersgaveworkerstheoptionof
havingtheir paydepositeddirectly. TheNational
AutomatedClearinghouseAssociationindicatesthat
about half of payroll paymentsintheUnitedStatesare
madeelectronically. Thanksto theimpetusof federal
legislation, 95percentoffederal governmentworkerswere
paidbydirectdepositbymid-1997.
AutomatedClearinghouse
T TT TTomL omL omL omL omLombardo and Steve Hart, ombardo and Steve Hart, ombardo and Steve Hart, ombardo and Steve Hart, ombardo and Steve Hart,
managers in the Philadelphia F managers in the Philadelphia F managers in the Philadelphia F managers in the Philadelphia F managers in the Philadelphia Feds eds eds eds eds
R RR RRetail P etail P etail P etail P etail Payments and Business ayments and Business ayments and Business ayments and Business ayments and Business
Development departments, criss Development departments, criss Development departments, criss Development departments, criss Development departments, criss- -- --
crossed the Third District during crossed the Third District during crossed the Third District during crossed the Third District during crossed the Third District during
1998 to discuss automated clear 1998 to discuss automated clear 1998 to discuss automated clear 1998 to discuss automated clear 1998 to discuss automated clear- -- --
inghouse services with bankers. inghouse services with bankers. inghouse services with bankers. inghouse services with bankers. inghouse services with bankers.
L LL LLast fall, Hart (left) and L ast fall, Hart (left) and L ast fall, Hart (left) and L ast fall, Hart (left) and L ast fall, Hart (left) and Lombardo ombardo ombardo ombardo ombardo
(second fromleft) were invited to (second fromleft) were invited to (second fromleft) were invited to (second fromleft) were invited to (second fromleft) were invited to
talk about A talk about A talk about A talk about A talk about ACH operations and CH operations and CH operations and CH operations and CH operations and
marketing at Delaware National marketing at Delaware National marketing at Delaware National marketing at Delaware National marketing at Delaware National
Bank in Georgetown, DE Bank in Georgetown, DE Bank in Georgetown, DE Bank in Georgetown, DE Bank in Georgetown, DE, where , where , where , where , where
management was preparing to management was preparing to management was preparing to management was preparing to management was preparing to
institute direct deposit and other institute direct deposit and other institute direct deposit and other institute direct deposit and other institute direct deposit and other
A AA AACH services. CH services. CH services. CH services. CH services.
And, thoughpeoplestill write65billionchecksa
year, electronicpaymentsaregrowingcurrentlythey
number about fivebilliona year. At present, most ACH
paymentsinvolvebusinesses: thereal potential for
growthlieswithconsumers. If individuals mortgage,
utility, insurance, andother recurringpaymentswere
madeelectronically, ACHusagewouldskyrocket.
DirectDepositIsBestKnown
Most ACHtransactionscanbecategorizedas
direct depositsor direct payments. Direct deposit, byfar
thebetterknown, referstotheautomaticdepositof funds
intobankaccounts. Formostpeople, thedirectdepositof
10
DirectPaymentHasMostPotential
Direct payment istheflipsideof direct deposit. Here, bankcustomers
paybillsthroughelectronic account withdrawals. Thesecanbeinitiatedbythe
account holder or bya creditor theaccount holder authorizes. For example, a
homeowner canauthorizehismortgagecompanyto initiatedirect paymentson
a designateddayeachmonth. Thehomeowner receivesa statement, but does
not haveto takeanyactionto paythebill. Whendirect paymentsareinitiated
bycustomers, however, thecustomer receivesa statement of theamount due
andthenhasto releasethefundsbytelephoneor computer.
Growthof direct payment hasbeenslowcomparedwithdirect
deposit, inpart becauseof consumers reluctanceto allowcreditorsto dipinto
their accounts. That reluctancehasledcompaniesto refinedirect payment,
enablingcustomersto questionbillsbeforepayment takesplace, to delayor
stopdirect payments, andto makepartial paymentsif theywish.
Direct payment offersmanyadvantages. Consumersareassuredof
payingright ontimewithout checksor stamps. Theycanalso useautomatic
fundtransfersfor other purposes, suchassavingandinvestment. For busi-
nesses, receivingdirect paymentsimprovescashflow, reducesdelinquencies,
andrepresentsa conveniencethat canattract andretaincustomers. Busi-
nessesthat paytheir ownbillsthroughdirect payment takeadvantageof the
FYI
Half of all payroll paymentsare
nowmadebydirectdeposit.
(NACHA)
Sixoutof 10householdsreceive
atleastonepaymentthrough
directdeposit. Threeoutof 10
householdsmakeatleastone
directpaymentamonth. (Federal
ReserveBankof St. Louis)
Ninety-ninepercentof consumers
saytheyunderstanddirectdeposit
well. (Federal ReserveBankof St.
Louissurvey)
TheACHCustomer ServiceUnit,
(215) 574-3798, cantraceitems,
remakefiles, researchbalance
problems, andprovidetechnical
assistance. Itoperatesfrom
Sunday, 5:30p.m. throughFriday,
11p.m.
Processing a loan payment made
by check or coupon costs a bank
35 cents, while a loan payment
madebyACHdirectpaymentcosts
3cents. (NACHA)
One-on-onevisitspermittedmorepersonalizeddiscussion. DelawareNational alreadyhada FedLineconnection
andwasreceivingACHitemsfromtheFed, but wantedto originateACHpaymentsto enhancecorporateservices.
There, SteveHart andTomLombardo talkedabout testing, selectinga client for a pilot program, riskissues, and
legal questions.
11
sameconvenienceandcost savings
individualsenjoy. TheFederal Reserve
Bankof Philadelphia nowpaysmost of its
supplierselectronically.
In1997, consumerspaid283
millionbillselectronically, anincreaseof
150 percent from1996. Inall, about a
billiondirect paymentsaremadeeach
year, andtheNational AutomatedClear-
inghouseAssociationestimatesthat the
potential couldbeasmanyas20 billion.
FedEncouragesAdoptionof ACH
Recognizingtheefficiencyof
electronic paymentsandtheir market
potential, theFederal Reserveactively
supportstheadoptionof electronic
paymentsbyfinancial institutionsandtheir
corporateandindividual customers. To
facilitatetheadoptionof ACHintheThird
District, thePhiladelphia Fedprovides
information, technical assistance, and
training.
Beginningin1997, thebank
presenteda seriesof interactiveworkshops
onACHthroughout theThirdDistrict.
Morethan300 bankersattendedthe
workshops, conductedbyRetail Payments
Manager ThomasLombardo andBusinessDevelopment
Manager StephenG. Hart, who outlinedtherequire-
mentsfor anACHoperationandofferedsuggestionsfor
marketingit to customers. Hart andLombardos
presentationsemployeda flexible, informal approachin
whichcontent wasdrivenbyparticipants concerns, so
that thebankersgot exactlytheinformationtheywanted.
Theworkshopscontinuedinto 1998 and
generatedenoughinterest to warrant a seriesof follow-
upvisitsto individual institutions. Lombardo andHart
JimThorpeSchool Districtemploy JimThorpeSchool Districtemploy JimThorpeSchool Districtemploy JimThorpeSchool Districtemploy JimThorpeSchool Districtemploy- -- --
ees may live 30 miles from their ees may live 30 miles from their ees may live 30 miles from their ees may live 30 miles from their ees may live 30 miles from their
schools, making direct deposit a schools, making direct deposit a schools, making direct deposit a schools, making direct deposit a schools, making direct deposit a
real convenience in bad weather real convenience in bad weather real convenience in bad weather real convenience in bad weather real convenience in bad weather
and during the summer months. and during the summer months. and during the summer months. and during the summer months. and during the summer months.
F FF FFrom right, P rom right, P rom right, P rom right, P rom right, Peter R eter R eter R eter R eter Roberts, execu- oberts, execu- oberts, execu- oberts, execu- oberts, execu-
tivevicepresidentandchief execu- tivevicepresidentandchief execu- tivevicepresidentandchief execu- tivevicepresidentandchief execu- tivevicepresidentandchief execu-
tive officer tive officer tive officer tive officer tive officer, J im Thorpe National , J im Thorpe National , J im Thorpe National , J im Thorpe National , J im Thorpe National
Bank; Sally Smith, debit process Bank; Sally Smith, debit process Bank; Sally Smith, debit process Bank; Sally Smith, debit process Bank; Sally Smith, debit process- -- --
ingmanager ingmanager ingmanager ingmanager ingmanager, JimThorpeNational; , JimThorpeNational; , JimThorpeNational; , JimThorpeNational; , JimThorpeNational;
W WW WWilliamMcElmoyle, businessman- illiamMcElmoyle, businessman- illiamMcElmoyle, businessman- illiamMcElmoyle, businessman- illiamMcElmoyle, businessman-
ager ager ager ager ager, Jim Thorpe School District; , Jim Thorpe School District; , Jim Thorpe School District; , Jim Thorpe School District; , Jim Thorpe School District;
T TT TTomL omL omL omL omLombardo; and Steve Hart. ombardo; and Steve Hart. ombardo; and Steve Hart. ombardo; and Steve Hart. ombardo; and Steve Hart.
talkedone-on-onewithpeoplerangingfromchief
executiveofficersto thestaff who wouldimplement ACH,
answeringtheir questionsandaddressingtheir concerns.
Combinedwiththefederal governments
initiative, thePhiladelphia Fedsactivitiesto buildinterest
haveboostedthegrowthof ACHintheThirdDistrict. In
1998, ACHoriginationshereincreased20 percent,
comparedwitha 16 percent risein1997, makingACH
thefastest growingmethodof payment intheDistrict, as
it isacrossthenation.
12
F F
F FF
edLine is the connection for Automated Clearinghouse
(ACH) and all other electronic transactionsbetweentheFed-
eral Reserveand depositoryinstitutions. Sincethemid-1980s,
FedLinespersonal computer-based softwarehaslinked banks
directlyto Fed computers, and serviceshaveexpanded rapidly.
FedLine
Fedtocheckprocessingerrors, andrequestadjustments.
Manybusinessessubmit federal withholdingtaxpay-
mentsbyFedLineaswell.
FedLineisanoptional service; institutionsgain
accessbypayinga monthlyconnectioncost of $75, an
amount that isquicklymadeupinsavingsontransaction
fees. Besidesbeinganeconomical alternative, FedLine
isflexibleandsecure. Institutionsselect just theservices
theyneed, andall transmissionsareprotectedby
DoingFedBusinessElectronically
Initially, FedLinewasa conduit for theelectronic
transfer of fundsandsecuritiesamongFederal Reserve
Districts, theU.S. Treasury, andfinancial institutions. This
continuesto beoneof itsprimaryfunctions. ACH
transactionsalso travel over FedLine, asdo U.S. Savings
Bondorders. FedLineisalso a channel of communica-
tionbetweentheFedanditscustomers: banksorder
currency, sendnotificationof incomingdeposits, alert the
Tawana Smithand Albert A. Primusassist callersto theFedLineHelp Desk. Thedeskaverages30 to 40 callsdaily, a
figurethatcandoubleduringpeakperiods. TheHelpDeskoperatesMondaythroughFriday, 8a.m. to5:30p.m., and
canbereachedat (215) 574-6262.
13
encryptedlanguage
anda password
system. Currently,
morethan300
financial institutionsin
theThirdDistrict
maintaina total of
425 FedLineconnec-
tions. Of those, 44
institutionsalso havea
computer interface
connectionto the
Philadelphia Fed, a
higher-speedlinkto
handlelarger transac-
tionvolumes.
Efficient, Economical, andSecure
FedLineisa sourceof valuablestatementsand
reportsfor banks, whichtheycanuseto verifytransac-
tions, reconcileaccounts, updaterecords, andmore
efficientlymanageFedbusiness. For example, when
institutionstransmit currencyordersanddeposit notices
over FedLine, theyreceiveprintedacknowledgements
withinsecondsof transmission, providinginstant confir-
mation. Other reportsareavailableovernight, avoiding
thedelaysto whichphysical deliveriesaresubject. These
includetheReserveAccount Statement, a dailyrecordof
aninstitutionsFedaccounts, andtheMonthlyBilling
Statement, usedto trackservicefees. TheAccount
BalanceMonitoringService, anon-lineinquiryfunction,
helpsbanksavoidoverdraftsonFedaccounts.
SupportServicesMakeFedLineUser-Friendly
Accessibilityhasbeenkeyto FedLinessuccess,
andthat istheresponsibilityof FedLineSupport, a 12-
member staff ledbyDawnKarlyn. Thesearethepeople
who helpnewusersget connectedandlearnhowto use
TheFedLineandElectronicAccessSupportmanagementteam
includes (fromleft): Supervisor Berthienna E. Ogden; Man-
ager Dawn Karlyn; Coordinator Sal Giafaglione; Vice Presi-
dent JayBowman; andSupervisor Jennifer I. Wellington.
FedLine, who helpexperiencedcustomerssolveproblems
andexpandtheir skills, andwho respondto technical
challengesandemergingissues, suchaspreparations
for theyear 2000.
FedLineusertrainingisprovidedinmanyformatsand
locations. Newusers and those who want to learn
moreaboutFedLineapplicationscanattendfull- and
half-daysessionsconductedbytrainerslikeMargarette
C. Taylor(left). PeriodicconferenceshelpFedLinecus-
tomersstaycurrent onpertinent issues.
14
E E
E EE
ncryptionkeepselectronic transactionssecure so secure
that evenrecipientsmaynot becertainwhat paymentsrep-
resent. Thoughfundstransfersusuallyareaccompanied by
documentation, it iswrittenina standardized coded language
knownasfinancial electronic data interchange(EDI), which
scramblesinformationso well that whenpaymentsreachtheir
intended destination, bankersand their customersmaynot be
ableto decipher theexplanatorymessages.
Financial ElectronicDataInterchange
TakingthePaperOutof Paperwork
Thatswhyelectronic transactionshaverequired
a paper trail of documentation. Last fall, however, the
Federal Reservehelpedbankscrackthecodeon-line.
Specializedsoftwareto translatefinancial EDI wasmade
availablebytheFed, so that thepeopleat either endof
electronic transactionsunderstandwhatsgoingonas
well asthecomputersdo.
Withfinancial EDI software, filesreceivedover
anyelectronic connectionto theFedcanbetranslated
andcopiedto paper, disk, or another electronic file,
enablingrecipientsto seenot onlypayment amounts, but
anyaccompanyingdocumentation, includinginvoices,
shippingdata, billingrecords, andpurchaseorders.
Bankscanusefinancial EDI to provideadditional
informationto customerswho receiveor makepayments
throughAutomatedClearinghouse, FedLine, or any
electronicmedium.
Financial EDI softwareisavailableat no
additional chargeto all banksthat haveanelectronic
connectionto theFederal Reserve. Trainingandsoftware
updatesareincludedininstitutions monthlyelectronic
accessfee.
15
E E
E EE
lectronic Check Presentment (ECP) bridgesthegap between
paper and electronic transactions. WithECP, a payment
initiated bypaper checkmovesahead electronically. Thecheck,
having served itspurpose, canfollowtheelectronic information,
besent to storage, or bedisposed of altogether. Thecheck
writer receivesmoretimelyaccount balanceinformationfromhis
or her bank. Thebankachieveslower processing costs, acceler-
atesvalidationand correctionof rejected items, and reduces
exposureto fraud.
ElectronicCheckPresentment
Imaging savesMaryC. Martin
(left), operations specialist at
Sterling Bank, Mount Laurel,
NJ, two to three hours a day.
Martin is responsible for re-
searching unposted items, a
task made much easier when
she refers to computer images
of checksinsteadof thechecks
themselves. Here, shereviews
a list of unposted items with
Deborah P. Williams, Sterling
operations manager, and
RaymondJ. Liebof LegatoSoft-
ware, who developed the soft-
ware that allows the banks
computer systemto work with
informationfromtheFed.
WhentheFedsortsincomingchecks, itroutinely
capturestheinformationencodedat thebottom: the
bankidentificationnumber, customer account number,
andthedollar amount. WithECP, thisdata isforwarded
electronicallytothebankonwhichthecheckisdrawn.
Transmissionof checkinformation, whichconstitutes
legal presentment, takesplacebynineinthemorning
after thecheckisreceivedbytheFed. Thisallowspaying
16
bankstobeginprocessingearlierthanphysical present-
ment wouldpermit howmuchearlier dependsona
bankslocation, but it canbeasmuchasfivehours
sooner for institutionslocatedat theedgesof theThird
District.
Earlier postingenablespayingbanksto provide
moreaccurateaccount informationto customers, so that
theycanbetter managetheir funds. Fraudulent and
insufficient-fundsitemsareidentifiedearlier, providing
extra lossprotectionthroughout thepayment system.
Checksarereturnedto payingbanksafter electronic
presentment, usuallylaterthesameday.
Inadditionto beingfaster, ECPismoreaccurate
thanmanual checkclearance. Theencodedlineat the
bottomof checksisreadautomatically, avoidingre-
keyingerrors. Becausedata issent electronically, there
areno delaysdueto misdirectionor transportation
problems. ECPalso reducespaper handlingfor paying
banks, freesuppersonnel andequipment, andlowers
processingcosts. In1997, about 14 percent of the
checksprocessedbytheFederal Reservewerepresented
electronically.
ECPCUSTOMERPROFILE
STERLING BANK STERLING BANK STERLING BANK STERLING BANK STERLING BANK
Description: Description: Description: Description: Description: SterlingBank, a communitybankwith$100 millioninassets, islocatedinMount Laurel, NJ, about 15
milesfromPhiladelphia.
F FF FFed Service: ed Service: ed Service: ed Service: ed Service: Electronic CheckPresentment withImaging
Experience: Experience: Experience: Experience: Experience: SterlingBankhasusedelectronic checkpresentment sinceAugust 1995 andaddedimaginginJune
1998.
Beforetheyusedimaging, thestaff at thebankhadto manuallysearchthroughthe2,000 cancelled
checksreceiveddailyfromthePhiladelphia Fedfor thosethat werenot postedbecauseof unreadable
account numbersor other problems. Locating, inspecting, andresolvingunpostedcheckstooktwo to
threehourseveryday.
Withimaging, eachbatchof checksreturnedbytheFedisaccompaniedbya CD-ROMcontaining
clear, digital imagesof everycheck. Imagesof unpostedcheckscanbeaccessedeasilyfromtheCD-
ROMandmanipulatedonscreen: theycanbeenlarged, reversed, turnedontheir endsto inspect
endorsements. Theprocessnowtakesminutes, rather thanhours.
WhentheCD-ROMandchecksarriveat Sterling, custom-designedsoftwarecomparestheelectronic
presentment file(sent thepreviousdayandusedto chargecustomer accounts) withtheCDfile, to
determineif anychargeditemsaremissing. Asmissingandunposteditemsareresolved, customer
accountsareadjustedto reflect current balances.
Benefits: Benefits: Benefits: Benefits: Benefits: Faster resolutionof unposteditems
Earlier awarenessof missingitems
Checkcopiesavailablein5 minutesfromCD-ROM, comparedwith24 to 48 hoursfor microfilm
copies
Consistentlyclear images
17
Approximately
763 millionchecks
beingclearedthrough
thePhiladelphia Fed
werepresentedelec-
tronically 11 percent
of checkshandled.
ImagingShrinksPaper
Handling
Imaging, an
enhancementof ECP,
hasthepotential to
makecancelledchecks
disappear. Adigitized
pictureof eachcheckis
producedandassigned
anidentification
number for easy
reference. Images, whicharejust asclear asoriginals,
canbeprovidedto banksintheir choiceof formats, with
CD-ROMbeingthemost common. Thecompleteimage
includingthefront andbackof theoriginal check
canbeviewedon-screenandcanalso beenlargedand
rotatedfor a closer lookat endorsements, theencoded
strip, or anyother part of thecheck.
SterlingBankinMount Laurel, NJ, isoneof the
Philadelphia Fedsimagingcustomers. Eachmorning,
theFedsendsSterlinganaverageof 2,000 checks
drawnonSterlingaccountsanda CD-ROMcontaining
thecorrespondingimages. Sterlinghasalreadycharged
thechecksto customer accountsthepreviousday, when
theFedpresentedthemelectronically. Theimagesare
usedto resolveunposteditems. Onebyone, theitems
areinspectedon-screen, a processthat takestwo or
threehourslessthanmanual retrieval wouldhave.
For SterlingBank, imagingreducespaper
handlingandprocessing, makescheckarchivingand
retrieval muchmoreefficient, andspeedsaccountadjust-
ments. Inaddition, imagingeliminatesthetimeand
expenseof creatingamicrofilmreferencefile, anoperation
thatrequiredcheckstobesentoutof thebankfor aday
ormore. ThoughSterlingonlyusesimaginginternallyat
thispoint, itcouldextendtheservicetocustomers,
substitutingpagesof checkimagesinaccountstatements
forcancelledchecks.
TruncationEliminatesPaper
If ECPstripsinformationfromchecks, and
imagingtransformstheminto digitizedpicturesacces-
siblebycomputer, isthepaper checknecessaryat all?
Perhapsnot, whichmakestruncationthenext stepinthe
evolutionfrompaper to electronic payments.
Truncation, another ECPenhancement, has
beenavailableat thePhiladelphia Fedsince1989 but
hasnot beenwidelyused, at least not yet. If youwerea
customer of a bankthat truncatedchecksat theFed, you
R RR RRobert J obert J obert J obert J obert J. V . V . V . V . Vanderslice, president and chief operating officer of P anderslice, president and chief operating officer of P anderslice, president and chief operating officer of P anderslice, president and chief operating officer of P anderslice, president and chief operating officer of Pennsville National Bank, ennsville National Bank, ennsville National Bank, ennsville National Bank, ennsville National Bank,
discussesenhancementsto thebank discussesenhancementsto thebank discussesenhancementsto thebank discussesenhancementsto thebank discussesenhancementsto thebankselectroniccheckpresentmentservicewithJanetRizzo, selectroniccheckpresentmentservicewithJanetRizzo, selectroniccheckpresentmentservicewithJanetRizzo, selectroniccheckpresentmentservicewithJanetRizzo, selectroniccheckpresentmentservicewithJanetRizzo,
Philadelphia F Philadelphia F Philadelphia F Philadelphia F Philadelphia Fed senior account manager ed senior account manager ed senior account manager ed senior account manager ed senior account manager. V . V . V . V . Vanderslice says that he expects paper checks anderslice says that he expects paper checks anderslice says that he expects paper checks anderslice says that he expects paper checks anderslice says that he expects paper checks
to virtuallydisappear during his career to virtuallydisappear during his career to virtuallydisappear during his career to virtuallydisappear during his career to virtuallydisappear during his career, and at his institution, at least, that expectation may , and at his institution, at least, that expectation may , and at his institution, at least, that expectation may , and at his institution, at least, that expectation may , and at his institution, at least, that expectation may
not be so far not be so far not be so far not be so far not be so far-fetched: two -fetched: two -fetched: two -fetched: two -fetched: two-thirds of P -thirds of P -thirds of P -thirds of P -thirds of Pennsvilles consumer checking account customers no ennsvilles consumer checking account customers no ennsvilles consumer checking account customers no ennsvilles consumer checking account customers no ennsvilles consumer checking account customers no
longer receive cancelled checks with their statements. longer receive cancelled checks with their statements. longer receive cancelled checks with their statements. longer receive cancelled checks with their statements. longer receive cancelled checks with their statements.
18
wouldnot seeyour checkafter youput it inthemail, and
your bankwouldnot seeit at all. Whenchecksflowinto
theFedandaretruncated, theonlythingthat flowsout is
theinformationrecordedonthem. Fromthat point, the
transactionisstrictlyelectronic: settlement takesplace,
andcheckimagesaremadeandsent to thepaying
bank, wheretheyarestoredfor thenext sevenyears.
Thepaper documentsareheldat theFedfor 90 days
andthendestroyed.
Someinstitutions, however, usetruncation
internally, offeringcustomerstheoptionof receiving
account statementswithout checks. At Pennsville
National BankinPennsville, NJ, for example, 65 to 70
ECPCUSTOMERPROFILE
PENNSVILLE NA PENNSVILLE NA PENNSVILLE NA PENNSVILLE NA PENNSVILLE NATIONAL BANK TIONAL BANK TIONAL BANK TIONAL BANK TIONAL BANK
Description: Description: Description: Description: Description: Pennsville National Bank, a community bank with
$126.5 million in deposits, is located in Pennsville,
NJ, approximately60 milesfromPhiladelphia.
F FF FFed Service: ed Service: ed Service: ed Service: ed Service: ElectronicCheckPresentment
Experience: Experience: Experience: Experience: Experience: PennsvilleBankwasoneof thefirstinstitutionsinthe
Third District to use electronic check presentment
(ECP), beginning in June 1995. ECP enables the
bank to receive check clearance information by
9a.m. threeto fivehoursearlier thanwithphysi-
cal presentment. Asaresult, accountupdates
andothernecessaryworkareeasilycompleted
within a regular business day, preventing the
needfor a night shift.
Benefits: Benefits: Benefits: Benefits: Benefits: Transmissionreceivedat start of business,
rather thaninmid-afternoon
Current balancesavailablesooner for
customers
No needfor a secondshift to process
information
No delaysdueto deliveryproblems, such
asbadweather or heavytraffic
percentof consumeraccountholdershaveoptednotto
receivecancelledchecks. Thedocumentsareheldat the
bankfor therequired90 days, but all inquiriesare
handledusingmicrofilmimages, whichareretainedby
thebankfor years. Incontrast to what might beex-
pected, Pennsvillecustomersdont missreceiving
cancelledchecks theyappreciatenot havingto store
stacksof paper.
ECPShapesthePaymentsFuture
Without a doubt, Electronic CheckPresentment
makescheckprocessingmoreefficient byshort-circuiting
theroleof paper. Combinedwithimagingandtrunca-
tion, ECPcaneasethetransitionto pay-
mentsthat arecompletelyelectronic.
However, becauseECPimprovesthecheck
systemwithout eliminatingpaper, it could
also forestall theconversionto completely
electronic fundstransfers. TheFedis
monitoringhowECPisusedandmayadapt
itsproduct offeringsif necessary, to ensure
that thistechnologyservesasa bridge, not
asa barrier, to theevolutionof thepayments
system.
FYI
ThePhiladelphia FedhasofferedECP
since1996andcurrentlyhas17
customers.
Imaginghasbeenavailablefromthe
PhiladelphiaFedsince1997. Atpresent,
two ThirdDistrictbanksusethisservice.
19
N N
N NN
ewtechnologies are making global communication and
commercecontinuousand instantaneous. Thisprocess
will undoubtedlyaffect thepaymentssystem. For banks, busi-
nesses, and individualsalike, electronic paymentsprovide
greater speed, convenience, and reliabilityintransferring funds.
Theyalso bring moreefficient moneymanagement, easier and
moretimelybill payment, and lesstimespent ontherepetitive
tasksof cashing checks, preparing bills, and updating records.
Conclusion
Nomatterhowuseful technological changeis, it
must wait for peopleto catchup. For thisreason, the
switchto electronic paymentswill beevolutionary, rather
thanrevolutionary. Eventually, wewill all become
comfortablewiththeworkingsof direct deposit and
payment. Andtheshift will accelerateasyoungpeople
who havegrownupwithcomputers, ATMs, andthe
Internet moveinto theeconomic mainstream. The
processisinevitable, but thepacewill begradual.
Other challengeslieahead. Privacyconcerns
andquestionsabout thesecurityof electronic transac-
tionshaveyet to befullyaddressed. Accessto electronic
transactionsmust somehowbeextendedto thosewhose
circumstanceskeepthemout of thefinancial main-
stream.
Clearly, paymentssystemproviderswill operate
bothpaper andelectronic systemsfor theforeseeable
future.
TheFederal Reserveintendsto facilitatethe
switchto electronic paymentsthrougheducation,
technical assistance, andconsultationwithother pay-
mentssystemproviders, financial institutions, andthe
public. At thesametime, theFediscommittedto
improvingtheeffectivenessof existingformsof payment
andto ensuringtheintegrityandaccessibilityof all
methodsof payment, oldandnew.
20
ChairmanJoanCarter(left), President&Chief
Operating Officer, UM Holdings Ltd.,
Haddonfield, N.J., and Deputy Chairman
Charisse R. Lillie, Partner, Ballard Spahr
Andrews&Ingersoll, Philadelphia, Pa.
DavidB. Lee(left), President&Chief
ExecutiveOfficer, OmegaBank, Na-
tional Association, StateCollege, Pa.,
andRobertD. Burris, President&Chief
ExecutiveOfficer, BurrisFoods, Inc.,
Milford, Del.
Boardof Directors
21
AlbertB. Murry(left), President
and Chief Executive Officer,
LebanonValleyFarmersBank,
Lebanon, Pa., with J. Richard
J ones (center), President &
Chief Executive Officer, Insig-
nia/ESG Jackson-Cross, Phila-
delphia, Pa., & Howard E.
Cosgrove, Chairman &Chief
Executive Officer, Conectiv,
Wilmington, Del.
GlennA. Schaeffer
(left), President,
Pennsylvania Building
andConstruction
TradesCouncil,
Harrisburg, Pa., and
HarryElwell, III,
President andChief
ExecutiveOfficer, First
National Bankof
Absecon, Absecon, N.J.
22
Officers
I I
I II
In 1998, numerous promotions and administrative changes
took place among the official staff. WilliamA. Bonifield, Jr.,
was appointed Senior Vice President and Manager of the Cash/
Fiscal Product Office. In the Legal Department, Jeanette Paladino
became Assistant Vice President and Counsel and Stephen J.
Smith was appointed Assistant Counsel. Mary DeHaven (Dede)
Myers joined the Bank as Vice President and Community Affairs
Officer in the Community and Consumer Affairs Department. In
the Supervision, Regulation, and Credit Department, John J.
Deibel was promoted to Vice President, Elisabeth C. Videira-
Dzeng was appointed International Examinations Officer, and
WilliamL. Gaunt joined the Bank as Assistant Vice President.
Edward G. Boehne Edward G. Boehne Edward G. Boehne Edward G. Boehne Edward G. Boehne
President
W WW WWilliam H illiam H illiam H illiam H illiam H. Stone, J r . Stone, J r . Stone, J r . Stone, J r . Stone, J r. .. ..
First VicePresident
Donald F Donald F Donald F Donald F Donald F. Doros . Doros . Doros . Doros . Doros
ExecutiveVicePresident
W WW WWilliam A. Bonifield, J r illiam A. Bonifield, J r illiam A. Bonifield, J r illiam A. Bonifield, J r illiam A. Bonifield, J r. .. ..
SeniorVicePresidentandManager
Cash/Fiscal ProductOffice
Michael E Michael E Michael E Michael E Michael E. Collins . Collins . Collins . Collins . Collins
Senior VicePresident
andLendingOfficer
Richard W Richard W Richard W Richard W Richard W. L . L . L . L . Lang ang ang ang ang
Senior VicePresident and
Director of Research
R RR RRonald B onald B onald B onald B onald B. L . L . L . L . Lankford ankford ankford ankford ankford
Senior VicePresident
D DD DD. Blake P . Blake P . Blake P . Blake P . Blake Prichard richard richard richard richard
SeniorVicePresident
Milissa M. T Milissa M. T Milissa M. T Milissa M. T Milissa M. Tadeo adeo adeo adeo adeo
Senior VicePresident
J JJ JJ. W . W . W . W . Warren Bowman, Jr arren Bowman, Jr arren Bowman, Jr arren Bowman, Jr arren Bowman, Jr. .. ..
VicePresident
R RR RRobert J obert J obert J obert J obert J . Bucco . Bucco . Bucco . Bucco . Bucco
VicePresident
Gerard A. Callanan Gerard A. Callanan Gerard A. Callanan Gerard A. Callanan Gerard A. Callanan
VicePresident andDiscount Officer
Theodore M. Crone Theodore M. Crone Theodore M. Crone Theodore M. Crone Theodore M. Crone
VicePresident andEconomist
John J John J John J John J John J. Deibel . Deibel . Deibel . Deibel . Deibel
VicePresident
P PP PPatrick L atrick L atrick L atrick L atrick L. Donahue . Donahue . Donahue . Donahue . Donahue
VicePresident
W WW WWilliamEvans, Jr illiamEvans, Jr illiamEvans, Jr illiamEvans, Jr illiamEvans, Jr. .. ..
VicePresident
23
Joanna H Joanna H Joanna H Joanna H Joanna H. F . F . F . F . Frodin rodin rodin rodin rodin
VicePresident
Arun K Arun K Arun K Arun K Arun K. Jain . Jain . Jain . Jain . Jain
VicePresident
Jerry K Jerry K Jerry K Jerry K Jerry Katz atz atz atz atz
VicePresident
HenryT HenryT HenryT HenryT HenryT. K . K . K . K . Kern ern ern ern ern
VicePresident
Edward M. Mahon Edward M. Mahon Edward M. Mahon Edward M. Mahon Edward M. Mahon
VicePresident andGeneral Counsel
L LL LLoretta J oretta J oretta J oretta J oretta J. Mester . Mester . Mester . Mester . Mester
VicePresident andEconomist
Stephen A. Meyer Stephen A. Meyer Stephen A. Meyer Stephen A. Meyer Stephen A. Meyer
VicePresident and
AssociateDirector of Research
MaryDeHaven Myers MaryDeHaven Myers MaryDeHaven Myers MaryDeHaven Myers MaryDeHaven Myers
VicePresident and
CommunityAffairsOfficer
L LL LLouis N ouis N ouis N ouis N ouis N. Sanfelice . Sanfelice . Sanfelice . Sanfelice . Sanfelice
VicePresident
John B John B John B John B John B. Shaffer . Shaffer . Shaffer . Shaffer . Shaffer
VicePresident andGeneral Auditor
Herbert E Herbert E Herbert E Herbert E Herbert E. T . T . T . T . Taylor aylor aylor aylor aylor
VicePresident andSecretary
Vish P Vish P Vish P Vish P Vish P. Viswanathan . Viswanathan . Viswanathan . Viswanathan . Viswanathan
VicePresidentand
Cash/Fiscal ProductOfficer
Eileen P Eileen P Eileen P Eileen P Eileen P. Adezio . Adezio . Adezio . Adezio . Adezio
Assistant VicePresident
John G John G John G John G John G. Bell . Bell . Bell . Bell . Bell
AssistantVicePresident
Shirley L. Coker Shirley L. Coker Shirley L. Coker Shirley L. Coker Shirley L. Coker
AssistantVicePresidentandCounsel
Dean Croushore Dean Croushore Dean Croushore Dean Croushore Dean Croushore
Assistant VicePresident
andEconomist
Donna L Donna L Donna L Donna L Donna L. F . F . F . F . Franco ranco ranco ranco ranco
BudgetOfficer
W WW WWilliamL illiamL illiamL illiamL illiamL. Gaunt . Gaunt . Gaunt . Gaunt . Gaunt
Assistant VicePresident
John V John V John V John V John V. Heelan . Heelan . Heelan . Heelan . Heelan
International ExaminationsOfficer
MaryAnn Hood MaryAnn Hood MaryAnn Hood MaryAnn Hood MaryAnn Hood
Assistant VicePresident
Howard M. James, Jr Howard M. James, Jr Howard M. James, Jr Howard M. James, Jr Howard M. James, Jr. .. ..
SupportServicesOfficer
Alan L Alan L Alan L Alan L Alan L. Kiel . Kiel . Kiel . Kiel . Kiel
Assistant VicePresident
Linda K Linda K Linda K Linda K Linda K. Kirson . Kirson . Kirson . Kirson . Kirson
TreasuryServicesOfficer
Thomas P Thomas P Thomas P Thomas P Thomas P. L . L . L . L . Lambinus ambinus ambinus ambinus ambinus
Assistant VicePresident
Joseph L Joseph L Joseph L Joseph L Joseph L. McCann . McCann . McCann . McCann . McCann
AdministrativeServicesOfficer
andSecurityOfficer
Alice J Alice J Alice J Alice J Alice J . Menzano . Menzano . Menzano . Menzano . Menzano
AssistantVicePresidentand
Cash/Fiscal ProductOfficer
Edward Morrison Edward Morrison Edward Morrison Edward Morrison Edward Morrison
OperationsOfficer
Camille M. Ochman Camille M. Ochman Camille M. Ochman Camille M. Ochman Camille M. Ochman
AssistantVicePresident
J eanette P J eanette P J eanette P J eanette P J eanette Paladino aladino aladino aladino aladino
AssistantVicePresidentandCounsel
A. Reed Raymond, III A. Reed Raymond, III A. Reed Raymond, III A. Reed Raymond, III A. Reed Raymond, III
Assistant VicePresident and
ExaminationReviewOfficer
P PP PPatrick M. R atrick M. R atrick M. R atrick M. R atrick M. Regan egan egan egan egan
Assistant VicePresident and
InformationSecurityOfficer
Richard A. Sheaffer Richard A. Sheaffer Richard A. Sheaffer Richard A. Sheaffer Richard A. Sheaffer
Assistant VicePresident
R RR RRonald R. Sheldon onald R. Sheldon onald R. Sheldon onald R. Sheldon onald R. Sheldon
Assistant VicePresident
Stephen J Stephen J Stephen J Stephen J Stephen J. Smith . Smith . Smith . Smith . Smith
Assistant Counsel
Marie Tkaczyk Marie Tkaczyk Marie Tkaczyk Marie Tkaczyk Marie Tkaczyk
Assistant VicePresident
Sharon N Sharon N Sharon N Sharon N Sharon N. T . T . T . T . Tomlinson omlinson omlinson omlinson omlinson
Assistant VicePresident and
PlanningOfficer and
Assistant Secretary
Richard A. V Richard A. V Richard A. V Richard A. V Richard A. Valente alente alente alente alente
Assistant General Auditor
Elisabeth C. Videira-Dzeng Elisabeth C. Videira-Dzeng Elisabeth C. Videira-Dzeng Elisabeth C. Videira-Dzeng Elisabeth C. Videira-Dzeng
International ExaminationsOfficer
Bernard M. W Bernard M. W Bernard M. W Bernard M. W Bernard M. Wennemer ennemer ennemer ennemer ennemer
Assistant VicePresident
AnthonyJ AnthonyJ AnthonyJ AnthonyJ AnthonyJ. White . White . White . White . White
Financial ServicesOfficer
Michael P Michael P Michael P Michael P Michael P. Zamulinsky . Zamulinsky . Zamulinsky . Zamulinsky . Zamulinsky
AssistantVicePresident
24
CommunityBankCouncil
Thomas F Thomas F Thomas F Thomas F Thomas F. R . R . R . R . Robinson obinson obinson obinson obinson
President &CEO
Malvern Federal Savings
Bank
Paoli, PA
R RR RRolf A olf A olf A olf A olf A. Stensrud . Stensrud . Stensrud . Stensrud . Stensrud
President &CEO
First Republic Bank
Philadelphia, PA
John R. Stranford John R. Stranford John R. Stranford John R. Stranford John R. Stranford
President &CEO
Third Federal Savings Bank
Newtown, PA
Earl F Earl F Earl F Earl F Earl F. Sutton . Sutton . Sutton . Sutton . Sutton
President &CEO
Shore CommunityBank
Toms River, NJ
W WW WW. Jack W . Jack W . Jack W . Jack W . Jack Wallie allie allie allie allie
President &CEO
East Stroudsburg Savings
Association
Stroudsburg, PA
R RR RRobert C. Wheeler obert C. Wheeler obert C. Wheeler obert C. Wheeler obert C. Wheeler
Chairman
Grange National Bank
Tunkhannock, PA
CHAIR CHAIR CHAIR CHAIR CHAIR
R RR RRonald L onald L onald L onald L onald L. Hankey . Hankey . Hankey . Hankey . Hankey
President &CEO
Adams CountyNational Bank
Gettysburg, PA
DEPUTY CHAIR DEPUTY CHAIR DEPUTY CHAIR DEPUTY CHAIR DEPUTY CHAIR
Jay M. F Jay M. F Jay M. F Jay M. F Jay M. Ford ord ord ord ord
President &CEO
Crest Savings Bank, SLA
Wildwood Crest, NJ
Gary N Gary N Gary N Gary N Gary N. Gieringer . Gieringer . Gieringer . Gieringer . Gieringer
Chairman &CEO
Patriot Bank
Pottstown, PA
Thomas L Thomas L Thomas L Thomas L Thomas L. Gray . Gray . Gray . Gray . Gray
President &CEO
Carnegie Bank N.A.
Princeton, NJ
Barbara C. Jarvis Barbara C. Jarvis Barbara C. Jarvis Barbara C. Jarvis Barbara C. Jarvis
President &CEO
TheFeltonBank
Felton, DE
Gerald A Gerald A Gerald A Gerald A Gerald A. Nau . Nau . Nau . Nau . Nau
President &CEO
Great ValleySavings Bank
Reading, PA
CommunityBankCouncil members(fromleft): JayM. Ford,
GeraldA. Nau, RonaldL. Hankey, andRobertC. Wheeler
CreditUnionAdvisoryCouncil members(fromleft): StevenD. Schlundt, JohnD. Buchinski,
DavidF. LaSala, JohnP. Kebles, FrancisR. Muto, GaryH. Penrose, WilliamJ. Lavage,
Ignacio I. Morales
CreditUnionCouncil
CHAIR CHAIR CHAIR CHAIR CHAIR
F FF FFrancis R. Muto rancis R. Muto rancis R. Muto rancis R. Muto rancis R. Muto
Manager &CEO
Peoples First Credit Union
Allentown, PA
DEPUTY CHAIR DEPUTY CHAIR DEPUTY CHAIR DEPUTY CHAIR DEPUTY CHAIR
W WW WWilliamJ illiamJ illiamJ illiamJ illiamJ. L . L . L . L . Lavage avage avage avage avage
President &CEO
Service First FCU
Danville, PA
John D John D John D John D John D. Buchinski . Buchinski . Buchinski . Buchinski . Buchinski
President &CEO
Wheatland FCU
Lancaster, PA
James E James E James E James E James E. Everhart, Jr . Everhart, Jr . Everhart, Jr . Everhart, Jr . Everhart, Jr. .. ..
Manager
Louviers FCU
Newark, DE
Mary Jane Griffith Mary Jane Griffith Mary Jane Griffith Mary Jane Griffith Mary Jane Griffith
Vice President/CFO
So. JerseyFederal CreditUnion
Deptford, NJ
Anthony R. Hinds Anthony R. Hinds Anthony R. Hinds Anthony R. Hinds Anthony R. Hinds
CEO
DPLFederal Credit Union
Newark, DE
John P John P John P John P John P. K . K . K . K . Kebles ebles ebles ebles ebles
CEO
Choice One FCU
Wilkes-Barre, PA
AdvisoryCouncils
25
David G David G David G David G David G. K . K . K . K . Keffer effer effer effer effer
CEO/Manager
Cornerstone FCU
Carlisle, PA
David F David F David F David F David F. L . L . L . L . LaSala aSala aSala aSala aSala
Executive Vice President
Benchmark Federal Credit
Union
West Chester, PA
Ignacio I. Morales Ignacio I. Morales Ignacio I. Morales Ignacio I. Morales Ignacio I. Morales
Manager
Borinquen Federal Credit
Union
Philadelphia, PA
Gary H Gary H Gary H Gary H Gary H. P . P . P . P . Penrose enrose enrose enrose enrose
President &CEO
Mercer CountyTeachers
Federal Credit Union
Hamilton, NJ
Steven D Steven D Steven D Steven D Steven D. Schlundt . Schlundt . Schlundt . Schlundt . Schlundt
President &CEO
Atlantic CityFiremens FCU
Northfield, NJ
Small Business&AgricultureCouncil members(fromleft): DennisE. Duffy, StevenJ. Shotz, JoanR. Henderson, Peter Bylone,
RodneyL. Metzler, Art Daube, ThomasK. Leidy, CaryS. Borish, Della L. Clark, PhilipB. Mitman, W. GregoryWood
CHAIR CHAIR CHAIR CHAIR CHAIR
Art Daube Art Daube Art Daube Art Daube Art Daube
VicePresident &General
Manager
WBRE-TV
Wilkes-Barre, PA
DEPUTY CHAIR DEPUTY CHAIR DEPUTY CHAIR DEPUTY CHAIR DEPUTY CHAIR
R RR RRodney L odney L odney L odney L odney L. Metzler . Metzler . Metzler . Metzler . Metzler
Owner
PleasantviewFarms
Martinsburg, PA
Cary S Cary S Cary S Cary S Cary S. Borish . Borish . Borish . Borish . Borish
Co-President
Marathon Grill
Philadelphia, PA
P PP PPeter Bylone eter Bylone eter Bylone eter Bylone eter Bylone
Manager
Vineland Produce Auction
Vineland, NJ
Small Business&AgricultureCouncil
Della L Della L Della L Della L Della L. Clark . Clark . Clark . Clark . Clark
Director
West Philadelphia Enterprise
Center
Philadelphia, PA
Dennis E Dennis E Dennis E Dennis E Dennis E. Duffy . Duffy . Duffy . Duffy . Duffy
President, Duffy, Dolcy&
McManus
Absecon, NJ
R RR RRobert J obert J obert J obert J obert J. Edmunds . Edmunds . Edmunds . Edmunds . Edmunds
President
Edmunds &Associates, Inc.
Northfield, NJ
Joan R. Henderson Joan R. Henderson Joan R. Henderson Joan R. Henderson Joan R. Henderson
President
J.R. Henderson &Associates
Lancaster, PA
Thomas K Thomas K Thomas K Thomas K Thomas K. L . L . L . L . Leidy eidy eidy eidy eidy
President &Chairman
Leidys, Inc.
Souderton, PA
Philip B Philip B Philip B Philip B Philip B. Mitman . Mitman . Mitman . Mitman . Mitman
Owner
Bixlers Jewelers, Inc.
Easton, PA
David R. Rice David R. Rice David R. Rice David R. Rice David R. Rice
President
Rice Fruit Company
Gardners, PA
Steven J Steven J Steven J Steven J Steven J. Shotz . Shotz . Shotz . Shotz . Shotz
President
QuantumGroup
Wilmington, DE
W WW WW. Gregory W . Gregory W . Gregory W . Gregory W . Gregory Wood ood ood ood ood
President
Hocher Manufacturing
Company, Inc.
Rehoboth Beach, DE
26
OperatingStatistics
1998 1998 1998 1998 1998 1998 1998 1998 1998 1998 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997
V VV VVolume olume olume olume olume Dollar V Dollar V Dollar V Dollar V Dollar Value alue alue alue alue V VV VVolume olume olume olume olume Dollar V Dollar V Dollar V Dollar V Dollar Value alue alue alue alue
SERVICES T SERVICES T SERVICES T SERVICES T SERVICES TO DEPOSIT O DEPOSIT O DEPOSIT O DEPOSIT O DEPOSITOR OR OR OR ORY INSTITUTIONS Y INSTITUTIONS Y INSTITUTIONS Y INSTITUTIONS Y INSTITUTIONS
WireTransfer of Funds 7.9 milliontransfers $23.2 trillion 7.2 milliontransfers $19.8 trillion
ACH:
Government 220.2 millionitems $269.7 billion 161.7 millionitems $215.8 billion
Commercial 136.4 millionitems $391.1 billion 126.5 millionitems $331.0 billion
Checkprocessing:
U.S. Government 37.3 millionchecks $38.2 billion 23.1 millionchecks $23.8 billion
All other 909.5 millionchecks $1,338.4 billion 831.3 millionchecks $1,181.2 billion
Cashoperations:
Currencyprocessed 1,360.4 millionnotes $21.4 billion 1,110.6 millionnotes $17.9 billion
Coinprocessed 55.1 thousand bags $6.5 million 143.2 thousand bags $69.3 million
Loansto depository
institutions 212 loans $314 million 326 loans $766 million
SERVICES T SERVICES T SERVICES T SERVICES T SERVICES TO U O U O U O U O U.S .S .S .S .S. TREASUR . TREASUR . TREASUR . TREASUR . TREASURY YY YY
Electronicbook-entry
transfers 1.5 milliontransfers $19.9 trillion 1.6 milliontransfers $21.3 trillion
Foodcoupons
processed 91.6 millioncoupons $484.3 million 139.1 millioncoupons $718.6 million
T T
T TT
hepaceandpatternof Bankoperationsin1998reflectedthe
trendtowardelectronic paymentsandother shiftsinpaymentspro-
cessing.
Thevolumeof ACH transactionsprocessed increased dramaticallyin
1998, asit hasineachof thepast threeyears. Meanwhile, thevolumeof
foodstampsprocesseddeclinedastheAgricultureDepartmentsassis-
tanceprogramhasmoved into electronics.
Commercial checkprocessing volumesroseasongoing consolidationin
theDistrict bankingindustryshiftedprocessingdemands, at least tempo-
rarily. TheBanksgovernment checkprocessing volumesalso roseasthe
result of consolidationof operationswithintheFedsystem.
Greater relianceonarmored carriersto redistributecoinsincirculation
bothincreasedtheefficiencyof thedistributionnetworkandreducedthe
volumeof coinsprocessedat theBank.