The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
MID-CONTINENT BANKER NORTHERN EDITION (ISSN 0026-296X) APRIL, 1985 in k in g Entering A New Sales Culture? https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis W ho to Sell, W hat to Sell, H ow to Sell . . . Pg. 7 Bank's Employees Know H ow to Se l l . . Pg. 17 Sales Manager: a N ew T itle ............. Pg. 35 Consultants Guide Banks___ Pg. BG/4 Compare For Yourself. How Does Your Current Credit Insurance Company Measure Up lb North Central Life? What What Your North Central Company Life Offers Offers EÍD El □ Ef □ EÍ □ EÍ□ EÍ□ 0□ Ef □ El □ What What Your North Central Company Life Offers Offers Fast, Computerized Claim Settlements Home Office Customer Service Department Insurance Plans That Fit Virtually Every Loan Situation Simple, Automated Premium Reporting System Special Programs for the Large Borrower Computer-based Measurement and Control System to Help You Manage Your Business Nation-wide Toll-free WATS Service Personalized Training For Your Support Personnel Instant, Over-the-phone Rate Calculations For Difficult Loans Simplified Procedures Manuals For Administrative People Instant, Over-the-phone Underwriting approval for over-limit coverages Complimentary Sales Aids, Brochures and Point-Of-Purchase Materials Sales and Insurance Training Programs Designed for Bankers Free Analysis of Your Current Insurance Operations Incentive Plans to Help Increase your Productivity “Captive Company” Capability Professional, Experienced Account Field Representatives No Company, Anywhere in The United States, Can Give Your Bank As Much Help in Running A Smooth, Profitable Credit Insurance Operation As North Central Life https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis America’s #1 Credit Insurance Service Organization North Central Life Insurance Company NORTH CENTRAL LIFE TOWER, 445 MINNESOTA STREET BOX 64139, ST. PAUL, MN 55164 In Minnesota call 800-792-1030 All other states 800-328-9117 Would you love to generate three times the profit of a com mercial loan? Would you love to institute a program that’s predicted to be 60% of the Capital Goods Market by the 1990’s? Are you within arm’s reach of a telephone? If the answers to all three of the above questions is “yes,” then pick up the phone and call (502) 423-7730 . . . but be prepared to fall in love. Because First Lease has a story you’re going to love to hear. First Lease is one of America’s largest equipment leasing consultants. We help independent banks across the coun try set up profitable, in-house leasing departments without a major investment in start-up and maintenance. And First Lease works on a fee basis, so that leasing prof its stay where they belong . . . with our clients. Fall in love in only two days The best way to find out how your bank can start reaping high equipment-leasing profits is to attend a First Lease Two-Day Seminar. In only two days, you’ll get a clear understanding of the pro cedures and huge benefits of equipment leasing. Plus, you’ll discover what it takes to get started and how to negotiate, document and fund an equipment lease transaction. But hurry, First Lease seminar space is limited and fills up fast. To make your reservation or to find out more, call (502) 423-7730 or fill out and mail the attached coupon. Then attend a First Lease seminar, where you’ll sit back, listen and fall in love. Y o u ’l l MC04 p o s in g ! Name FirstLease AND EQUIPMENT CONSULTING CORP. You’ll love leasing! 420 Hurstbourne Lane • Suite 202 Louisville, KY 40222 Digitized for( 502 FRASER ) 423-7730 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Company Name Position/Title Address State Phone CONVENTION CALENDAR April 30-May 3: Bank A dm inistra tio n I n s titu te A c c o u n tin g /F inance C onference, San F rancis co, H yatt Regency San F rancis co. May 1-3: Texas Bankers Association C entennial C onvention, Austin. May 5-7: C onsum er Bankers Asso ciation Bank C onsum er Leasing C onference, St. Louis, M arriott Pavilion. May 5-8: ABA N ational C onference on Real E state Finance, Phoenix, H yatt Regency Phoenix. May 9-11: O klahom a Bankers Asso ciation Annual C onvention, T ul sa, Civic C enter/W illiam s Plaza H otel. May 12-14: Bank M arketing Asso ciation C E O W orkshop, H ilton H ead Island, S. C ., Sea Pines Plantation. May 12-15: Alabama Bankers Asso ciation Annual C onvention, H il ton H ead, S. C ., H yatt on H ilton H ead Island. May 12-17: ABA N ational C o m m er cial L en d in g G rad u ate School, N o rm an , O k la., U n iv e rsity of Oklahoma. May 15-17: Bank A dm inistration In stitu te Bank Tax C onference, W ashington, D. C ., H yatt R e gency W ashington. May 15-17: Kansas Bankers Asso ciation Annual C onvention, Salina, B icentennial C enter. M ay 16-19: M ississip p i B ankers Association A nnual C onvention, Biloxi, H ilton/B roadw ater Beach hotels. May 19-21: ABA W orld Forum of C o n su m e r F in a n c ia l S ervices, N ew York C ity, Vista In te rn a tional H otel. M ay 19-22: T e n n e s s e e B an k ers Association A nnual C onvention, M em phis, Peabody H otel. M ay 22-24: M isso u ri & K ansas B a n k e rs A s s o c ia tio n s M o k an T rust C onference, Kansas City, A lam eda Plaza H otel. May 26-31: Bank M arketing Asso ciation School of T rust/Personal Financial Services/Sales/M arketing, Boulder, Colo., U niversity of Colorado. May 26-31: Bank M arketing Asso c ia tio n E s s e n tia ls o f B ank M a rk e tin g S c h o o l, B o u ld e r, Colo., U niversity of Colorado. MID-CONTINENT BANKER (Incorporating M ID-W ESTERN BANKER) IN TH IS ISSUE Volume 81, No. 4 7 D O N ’T A SK M E : I W A S N ’T H I R E D T O S E L L ! Developing a sales culture fo r your bank 10 T H E B A N K L O B B Y A potential gold mine fo r professional selling 17 A S A L E S -O R IE N T E D B A N K Management-employee cooperation essential 22 E F F E C T I V E S E L L IN G T H R O U G H I N C E N T IV E P L A N N IN G A key to higher profits 24 $ E L L IN G F O R D O L L A R $ Magic and m yth o f sales compensation B G /4 F IN A N C IA L B U Y E R S G U I D E W hat consultants can do fo r banks, thrifts 31 N E W S A B O U T B A N K S /B A N K E R S Promotions, acquisitions, retirements 35 S A L E S M A N A G E R A title that shows a bank is sales driven 40 A P R A C T IC A L A P P R O A C H T O M E R G E R S /A C Q U IS IT IO N S People, regulations, negotiations covered at seminar 58 T H E B A N K IN G S C E N E Selecting management o f ‘nationalized’ institutions Mid-Continent Banker Staff Editorial/Advertising Offices Ralph B. Cox 4 0 8 Olive St., St. Louis, Mo. 6 3 1 0 2 . Tel. 3 1 4 / 4 2 1 -5 4 4 5 . Publisher Lawrence W. Colbert Vice President, Advertising Rosemary McKelvey Editor Jim Fabian Senior Editor John L. Cleveland Assistant to the Publisher Marge Bottiaux Advertising Production Manager Nancy Gilbreath Staff Assistant Shelia Humphrey Subscriptions 4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis April, 1985 MID-CONTINENT BANKER is published monthly by Commerce Publishing Co., 4 0 8 Olive St., St. Louis, Mo. 6 3 1 0 2 . POSTMASTER: Send address changes to MID CONTINENT BANKER at 408 Olive St., St Louis, MO 63102. Printed by The Ovid Bell Press, Inc., Fulton, Mo. Second-class postage paid at St. Louis, Mo., and at additional mailing offices. Subscription rates: Three years $27; two years $20; one year $12. Single copies, $2 .50 each. Foreign subscriptions, 50% additional. Commerce Publications: American Agent & Broker, Club Management, Decor, Life Insur ance Selling, Mid-Continent Banker and The Bank Board Letter. Officers: Donald H. Clark, chairman emeritus, Wesley H. Clark, president and chief executive officer; James T. Poor, executive vice president and secretary; Ralph B. Cox, first vice president and treasurer; Bernard A. Beggan, David A. Baetz, Lawrence W. Colbert and W illiam M. Humberg, vice presidents. MID-CONTINENT BANKER for April, 1985 H ow to listen for needs and sell financial services. L iste n . Your customers are trying to tell you Client Centered Selling (CCS) —Designed specifi cally for selling the highest level financial services, something. They may ask for information on an CCS teaches your salespeople how to build profitable, IRA, certificate or investment account. But what long-term consultative relationships. they’re really saying is, “My financial needs are Sales Leadership System (SLS) —Helps managers changing and I’d like someone to help me make the right decisions.” acquire critical coaching skills that ensure the effectiveness of your selling and service strategies. You can give your people the skills they need to listen effectively, identify customer Every MOHR program is modular in design. That gives you needs and match those needs Please check program interests: □ BDS the flexibility to target training to □ CCS □ SLS to a broad array of services with fit the specific needs of your people three uniquely focused sales and 1 NAM E T IT L E and products. To find out just how management training programs well these programs will work for from MOHR Development. CO M PA N Y you, talk to a MOHR representative. Business Development Skills We know how to listen. For a pro (BDS) —Gives tellers, customer 1 ADDRESS ' gram preview, return the coupon or service representatives and Z IP | 1 C IT Y STATE call Nick Ward at (203) 357-1357. branch calling officers the skills 1 ( ) needed to provide effective cus PH O N E B E S T T IM E T O C A LL Stamford tomer service and selling at the New York 3 0 O ak S treet i , N ic k W ard, V.P. Los Angeles retail level. S ta m fo r d , C o n n e c tic u t S a le s T r a in in g D iv is io n San Francisco ' M O H R D e v e lo p m e n t, Inc. 06905 M C B 485 MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis > m S E l j MOHR Developm ent, Inc. Tampa Chicago 5 Golembe Associates does more than D eposit Appraisals... Mergers and Acquisitions A O . Golembe Associates acts as financial adviser in connec tion with mergers and acquisitions. The firm provides recommendations on the appropriate sale or purchase price for a bank or thrift institution (or its branches) and advises on the structure of the transaction and the process for arriving at the appropriate price. In this context, financial modeling techniques have been developed that enable a buyer or seller to project future income streams under various environmental assumptions. Services include the identification of merger candidates and assist ance with negotiations. The firm has special expertise in structuring bids for distressed depository institutions involving Federal insurance assistance. Golembe Associates routinely prepares applications for mergers and acquisitions on behalf of clients for sub mission to the Federal Reserve Board, FDIC, Office of the Comptroller of the Currency and the Federal Home Loan Bank Board. The firm is an acknowledged leader in developing feasibility studies, assessing competitive and antitrust issues, and evaluating financial, managerial and public benefits considerations. Our 1984 Annual Report contains a description of the firm’s services, clients and staff. Write to us for a copy or call Greg Golembe at /^ /^ \| I (202)337-5550. U W L L l V IJ L IV GOLEMBE ASSOCIATES, INC. • 1025 THOMAS JEFFERSON ST, N.W. • 301 • WASHINGTON, D.C. 20007 6 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for April, 19 8 5 W H O TO SELL? W H A T TO SELL? H O W TO SELL? D on't Ask M E ... I Wasn't Hired to SELL! By RO BER T W . K LO C K A R S Senior Vice President Financial Shares Corp., Chicago T W ASN’T long ago th at I was sitting in front of an old NCR 20-pocket proof m achine, separating d ebits and credits. It seem ed like th e b est way to learn th e banking business. It worked, because I learn ed th e business from th e ground up. E verything, th at is, except how to “sell” m y b ank’s services and products. The industry has changed since my early days in b an k in g, n o t only in term s of technology, b u t also in term s of the public’s p ercep tio n of th e finan cial-services in d u stry . W e ’ve h e a rd enough about d ereg u latio n to m ake our heads spin, b u t its im pact is real, and the com m itm ent to an intern al and external sales program is a necessary elem en t in every b ank’s survival and profit plan. Before we can develop a sales cul tu re, we first have to dism iss th e tra d i tional b elief th at “bankers a re n ’t sales m e n .’’ T he en v iro n m en t of m y first banking job p rovided a “com fortable” level of custom er contact, because the contact was on my term s and in my office. My responsibility was only to “react” to th e cu sto m ers’ needs, not to b e “proactive” in th e m arketplace. Today, banking is on th e threshold of its m ost exciting era. Because of the changes in banking regulations and the in d u stry ’s stru c tu re , th e business is m ore com petitive than ever. O nly the strongest and m ost innovative orga nizations will survive, and sales are providing th e m om entum for today’s banks to be profitable. H istorically, m ost bank m arketing effo rts h a v e fo c u se d on tw o co m m u n ic a tio n s s e g m e n ts: a d v e rtisin g I and public relations. Banks across the country have virtually subsidized local new spapers w ith th e ir advertising dol lars, and on th e public relations side, o fte n h av e d is tr ib u te d an e n d le ss Steps for Sales Effectiveness supply of pens and m atches to prom ote th e ir existence. M any o f to d a y ’s m ost successful banks spend less on m atches and pens and allocate m ore of th eir b u d g et and tim e re so u rc e s to o th e r m ark etin g strategic efforts. T hey are conducting research studies, developing p roduct a n d p r ic in g te c h n iq u e s a n d im p le m e n tin g c o m m u n ic a tio n s, sales and training program s. Banks now n eed to know who th eir audiences are, what products and ser vices will satisfy needs and will sell at a profit in th e ir m arket and how to b est and m ost cost-efficiently deliver the b ank’s m essage to th ese audiences. A fter d e te rm in in g w ho th e audi- MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ences are (research) the products that can be sold to these audiences at a profit (product developm ent and pric ing) a n d th e b e s t c o m m u n ic a tio n alternatives available (advertising and public relations), bank m anagem ent is ready to develop the last — and m ost often overlooked — segm ent of the m arketing mix: th e sales program . In o rd er to maximize th e effective ness of a sales program five steps m ust b e taken: • Total Com m itm ent of M anage ment. The n u m b er one reason m any traditional sales program s have failed goes back to a lack of com m itm ent by th e s e n io r - m a n a g e m e n t te a m . In o rd er to succeed, banks m ust have the total com m itm ent of th e ir boards and senior officers. U nless m anagem ent endorses and supports th e program , results will be non-existent or, at best, m ediocre. T he ultim ate goals of a sales program are to (1.) g en erate profits th rough keeping th e relationships strong and intact; (2.) develop new business from existing accounts through cross-selling efforts; and (3.) open doors to new b u s in e s s fro m le a d s a n d n o n custom ers. • Establish Short- and Long-Term Sales G oals. S h o rt-a n d lo n g -te rm goals should be d eterm in ed through b ra in sto rm in g sessions, w h e re key bank players have th e opportunity to c o n tr ib u te to th e s a le s -p ro g ra m strategy. This process generates ideas and philosophies, and gives partici- 7 Financial Shares Performance Measurement System EMPLOYEES IY EMPLOYEE « 751 BALANCES « 6(1) TOTAL FOR SERVICE BALANCES « • (Z) SERVICE SOLD CHECKING NON SUPER NON SAVINGS INSTALLMENT LOAN ( CREDIT LINE ( CREDIT CARD ( IRA DISCOUNT BROKERAGE CREDIT LIFE 4886 uste 2518 1511 2IIBB) is te ) 16IBB) lisce IME TOTALS: SUMMARY PERSONAL BAKKIN6 1ST NATIONAL BANK APEI FINANCIAL INC 6 3 1 2 2 2 5 5 1 3 16.66 3.33 16.18 1.87 1.88 1.63 1.88 1.88 1.61 1.85 1.87 1.66 2500) 1 2 6.8B ( 1BBB 1 IBB.BB ____ _ ( CUSTOMERS REF BON :! TOTAL NEN CUR i sszr J 4 4 12 4 bb.bb 1 33.33 1 118.16 ( ( 6 !1 6 !1 B ! 16 17 69 9 9 39 7 ! 8 : 38 ! 1 16.66 2 b b .b b 1668 26BBB) 1566) 1 56.88 2 168.16 2 166.68 2 4 6.BB 3 ¿6.68 1 26.16 7586 1 1 33.33 1 11 3b.bb 1BB8B 18808 112168 p a n ts an o p p o rtu n ity to d ev elo p a sense of “ow nership” and com m itm ent to th e sales program . W hen goal setting, ask yourself a few questions regarding your m arket and how to m ost efficiently reach that m arket. In your com m ercial effort, once a year do you call on (1.) all com m ercial custom ers w ith an average of $25,000 or m ore; and/or (2.) all tim e and sav ings accounts of $50,000 or m ore; and/ o r (3.) all c o m m e rc ia l lo an s o v e r $50,000? Some banks even direct th eir calling efforts tow ard com panies w ith ce rta in dollar am ounts of sales p e r year, w hich is particularly effective for leads and cold calls. O n th e retail side, are you able to effectively cross-sell services to new and existing accounts? Do you take the tim e and effort to call custom ers w ith C D s about to m ature and keep that b u sin e ss as w ell as u n c o v e r o th e r financial needs? • Sales and Product K now ledge Training. It is critical that all partici pants receive p ro p er training, both in re g a rd to p ro d u c t k n o w led g e and sales-skills training. Product-know ledge training should focus on custom er benefits to be d e rived through the use of bank products and services. The features of a bank p roduct may describe w hat the p ro d uct is, b u t the benefits describe w hat th e p roduct will do for th e custom er in 2 b b .b b 12 46.88 OPENING DEPOSITS CURRENT NEN TOTAL 34BBB 48866 196466 • (Z) 568 7588 8588) 2666 3 11.88 CUR 1147 BALANCES • t(Z ) 1 56.66 586 b.bb b.bb lb.bb ( THE AUTHOR is a former Kansas banker, having served 14 years w ith banks in McPherson and Lindsborg. For two years he served as one of 21 banking advisors for the ABA, traveling throughout the country as an official spokesperson for the banking industry. Mr. Klockars currently spends his time speaking and training in the sales and management areas, with special emphasis on outside business development and retail sales. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 336B 4666 256B 21.16 11.16 3.33 6.66 31 VSI TOTAL NEN 1634 BALANCES « ! 16B6B ! 22688 ! 78368 ! CREDIT BALANCES NEN CURRENT TOTAL 37586 3756B 113666 11IBB 11688 396BB 26518 26518 74618 TRACKING SALES RESULTS can be done m anually or through software programs such as th e F in an cial Shares' SALES PULSE® sales-m easurem ent program . Program can track employees by depart ment, branch, new accounts, service repre sentatives, etc. te rm s of saving tim e , e n e rg y and money. For exam ple, F D IC insurance is a feature. Safety is th e custom er b e n efit. Sales training is equally im portant to the sales program . Historically, com m ercial lenders w ere told to get out on th e street and start making sales calls an d fro n t-lin e p e rs o n n e l w e re in structed to sim ply persuade custom ers to take advantage of o th er bank p ro d ucts. Because they w ere good bankers and had an in-depth technical know l edge of th eir product, it was assum ed they could sell. E xp erien ce shows otherw ise. B e cause of today’s deregulated environ m e n t an d c o m p e titio n from n o n traditional financial institutions, p e r sonal com m unication, th e ability to uncover custom er needs and selling skills are now m ore im portant than ever. E ven new -accounts rep resen ta tives should be tra in e d to uncover o th er custom er needs and have a goal of selling at least two accounts to each custom er seen. MID-CONTINENT BANKER for April, 19 8 5 • M easure Results. O nce you have established your criterion for custom er a n d n o n - c u s to m e r c alls, s e t- u p a m ethod to track th e results of your call ing effo rts. T rack in g can b e d o n e m anually o r th ro u g h softw are p ro grams such as Financial S hares’ Sales P u lse® sales-m easu rem en t program w hich is designed for new accounts or fin a n c ia l- s e rv ic e r e p r e s e n t a t i v e s . F eedback from a w ell-designed com p u terized or m anual sales-tracking sys tem provides im portant m arketing in form ation and can enhance th e results of your sales effort. • Recognize Sales Perform ers Who Make Calls and firing in N ew Rusiness. In o rd er to recognize those in d i viduals who m eet calling goals and p ro duce new business, a cash-incentive program can be effective. T he in cen tive program should be fair and re l atively sim ple. It should com plem ent, not replace, th e bank’s p re se n t salary stru ctu re and should be designed to rew ard all levels of calling personnel. Profitability Due to Sales The successful and profitable banks of th e 1980s will be th e ones th a t seriously address th e n eed to develop a sales culture. The d ev elo p m en t of an effective sales p rogram takes tim e, m oney and a com m itm ent from senior m anagem ent. As each bank’s sales program con tinues and perform ance is m easured on a regular basis, sales and profit re sults will justify th e bank-w ide p ro gram. • • ► A perfect score would be 60 points (12 X 5 = 60). If the resu lts m easured 50-60 points, the organization probably has a well-developed sales culture. There may be areas in need of attention, but for the most part, the organization is moving in the right direction. A score of40-50 points indi cates there is some movement toward the sales culture, but no doubt many areas need immediate attention. The organiza tion is most probably not seriously commit ted at the senior level. Unless change takes place soon, the organization may have problems in the marketplace in the next five years. A score of below 40 points re flects a bank unprepared for the challeng ing times ahead. There is little if any sales com mitm ent at the senior level, and even the most basic sales programs have not been started or are operating below accept able levels. This organization will likely not be a w inner in the m arketplace unless there is dramatic change soon. MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sales-Quotient Audit The series of questions below will help in assessing the present sales sophistica tion of an organization. Readers will want to rate their own organization on each of the following questions from one (“Not True of My Bank”) to five (“True of My Bank”). Not True of My Bank True of My Bank 1. The organization emphasizes the im portance of selling from top to bottom. The majority of staff mem bers recog nizes the importance of sales to the fu ture of the organization. 1 2 3 4 5 2. Senior officers of line divisions (i.e., lending, retail, corporate, correspon dent, trust, etc.) are accountable for sales results. 1 2 3 4 5 3. Within the organization, there is a de partm en t responsible for developing and im plementing sales strategy. 1 2 3 4 5 4. Every custom er-contact person has a sales or customer relations statem ent as part of his/her job description. 1 2 3 4 5 5. C om m ercial-lending officers, branch managers, trust officers and others are involved in a sales-call program on pros pects as well as customers. The program is producing meaningful results. 1 2 3 4 5 6. The organization has an on-going sales training program. 1 2 3 4 5 7. The organization has developed a pro gram for selling upscale, high-income customers (e.g., a personal or executive banking department). These personnel, through aggressive selling techniques, are calling on attorneys, physicians and other centers of influence. 1 2 3 4 5 8. The organization is developing a prod uct line, priced and packaged com peti tively, to m eet custom ers’ needs in the 1980s. 1 2 3 4 5 9. The organization is taking specific steps to provide sales support to line person nel (e.g., the developm ent of a centralinformation file, packaging of products, creative pricing, sales brochures, etc.) 1 2 3 4 5 10. Cash bonuses and incentives are used regularly as a means of recognition for personnel who achieve sales quotas. 1 2 3 4 5 11. Outstanding sales performance is an im portant criterion for promotion to higher levels. 1 2 3 4 5 12. Prim ary custom er-contact personnel, such as tellers and new-accounts rep re sentatives, are trained in sales and cus tom er relations, and are m easured reg ularly in these areas. 1 2 3 4 5 9 The BANK LOBBY A Potential Gold Mine for Professional Selling By Ben C . Foster ANY years ago w hen E ngland was ho m e to m e, I u sed to search for th e sum m er sun along Spanish Costa Brava coastline. T our ism th ere was expanding rapidly and h ig h-rise h otels u n d e r co n stru ctio n w ere a com m on sight. C onstruction m ethods w ere highly M In the era of banking decon trol, the traditional banking and thrift institutions have been thrust unceremoniously into an environment of burgeoning competition. u n u s u a l. F ir s t a r a t h e r sh ak y fram ework w ould b e constructed. The floors th en w ould be finished, starting from th e top down tow ard th e founda tion. My conviction th at this was not th e b est building tech n iq u e was re in forced by th e periodic disasters w hich occurred. In th e era of banking decontrol, th e traditional banking and th rift in stitu tio n s h av e b e e n th r u s t u n c e re m o n io u s ly in to an e n v ir o n m e n t o f burgeoning com petition. The needs of th e c u sto m e r s u d d e n ly a ssu m e d a m uch larger significance in strategy planning and “m arketing” becam e the key to survival. The author is national sales manager of Ber man Technologies, Inc., based in Char lottesville, Va. The corporation specializes in providing tools for business develop m ent to the financial community, including the use of videotape training programs on consultative selling techniques and stateof-the-art, m icrocom puter software for bank lobbies. 10 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Perhaps because of th e rapid pace of th e changes w hich w ere occurring, th c oeu p le d w ith in e x p e rie n c e in th e realm of sales and m arketing (not to m ention the bankers’ instinctive dis ta s te fo r “ c o m m e rc ia lis m ”), th e arc h ite c ts of th e se new m arketingorien ted banking structures often have b een less than m ethodical and logical in approaching th e ir task. Like the Spanish builders, th ey have b een too eager to fill in th e top floor in th eir haste to com plete th e job before com pleting th e supporting structure. T he purpose of this article is to d e velop a b lu ep rin t to enable a bank to create a m arketing stru ctu re from the g ro u n d up in stead of from th e top down. P erhaps we need to state two basic precepts: 1. A deregulated financial in stitu tion operates in th e same basic fashion as any other nonregulated com m ercial enterprise. 2. Radical changes are necessary w hen a highly regulated en terp rise b e com es d e re g u la te d and e n te rs th e com petitive arena — th e m ost fun dam ental change being in the area of m arketing. If we can agree on these prem ises, we not only have pinpointed where the main changes n eed to occur b u t we can also establish how to m ake them happen. W e can sim ply use th e t r i e d a n d te s te d m a n a g e m en t-b y objectives technique. Since this article is not concerned w ith th e theory of m arket research, le t’s start by assum ing we already have d ecided on w hich segm ent of th e m ar ket on which we are concentrating, the type of financial services we plan to offer to th a t se g m e n t and th a t w e already have an operational place of business. In o th er words, we have an existing custom er base plus new pro s p e c ts w alking into o u r lobby. O u r objective is: To m axim ize the sales o f our financial products with the least expense. Looking at how o th er businesses d e liver th eir goods and services to th eir Radical changes are neces sary when a highly regulated enterprise becomes d e re g ulated and enters the competi tive arena — the most fun damental being in marketing. custom ers, we can see th e re are th ree m ain delivery m ethods: 1. Self service. 2. C lerical-assistance sales. 3. Professional-assistance sales. It is im p o rta n t to reco g n ize th e kinds of operations th at fall into each category. F or instance: 1. Self service includes all vendingm achine sales. 2. Clerical-assistance sales include s u p e r m a r k e ts , m o st d e p a r tm e n t stores, m ost banks. 3. Professional-assistance sales in clude specialty stores, doctors, in su r ance agents. Obviously, these categories are not m utually exclusive; insurance, for in stance, can be and is sold by vending m achines as well as by agents. G enerally speaking, m ost of today’s bankers believe they should be m ov ing out of category # 2 (w here newaccount clerks provide clerical func tions necessary to open accounts) and moving into category # 3 (some are MID-CONTINENT BANKER for April, 19 8 5 LIFE W ITH SECURITY C A N BE BEAUTIFUL MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis S urprised M osler is into design esthetics? D on’t be. We’ve been beautifying branch offices w ith dash and style very su ccess fully for a long time. Talented M osler professionals have w edded beauty and security sm artly in everything from custom designed counters and undercounter steel cabinets, to check desks, coupon booths and much, much more. Even protective partitions th at expose the cheerful openness your cu s tom ers like and give the solid assurance your tellers need. You benefit not only from our hundred plus years in security, but also from our knack of pulling designs beautifully together w ith the broadest splash of textures, surfaces, colors and m aterials you’ve ever seen. Everything we offer, we offer w ith tru e M osler quality. This stem s from people w ith a sense of pride and craft. O ur M osler design team s, facility planners and installers coordinate smoothly and efficiently to produce beautiful spaces for g reater productivity, improved employee morale and office image enhancem ent. Like we say—one source for it all, w ith a w arranty to boot. With Mosler, all is well. W hen you look into our Financial F u rn itu re portfolio, you’ll w ant to tru st M osler w ith all your renovations—as so many arch itects and engineers already do. It’s yours for the asking, toll free, at 1-800-543-4584. In Ohio, (513) 870-1138. Mosler An American-Standard Company_____ ALL IS WELL 11 G uess what's happened to me They’ve been swallowed up. In fact, over the past two years, more than 50 of Florida’s banks have been merged or acquired. Just as easily, you, too, could fall prey to a merger or acquisition. But there is an alternative that can afford you a way not only to survive, but to thrive. That alternative is a franchise with First Interstate Bancorp. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Franchising: the profitable partnership. As a franchisee of First Interstate Bancorp, you’ll have access to the resources of the 8th largest banking organization in the nation with assets of over $45 billion. Together with our franchi sees, we have over 1,100 full-service banking offices in 14 states, mak ing us one of the largest retail banking systems in the country. In addition to size and strength, you’ll gain benefits that only a large bank can offer. For example, you’ll be able to realize savings on a wide range of items, from forms and checks to com puter hardware and software. Plus, you’ll have access to spe cialized services such as mort gage banking, discount brokerage, international trading, and data processing. -, * ■ íB- % H' fr ; -/ V ¿“f * « ,, 3. ' ■' ■ . ■*. /^ / * r than 5 0 of Florida's banks. Most importantly, you’ll still retain local ownership, man agement independence, and control of your bank. Franchising: the proven alternative. Our success in the market place has been proven time and time again. Currently, First Interstate Bancorp has franchise agreements in 8 states, including Colorado, Hawaii, Alaska, Mon https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis tana, Wyoming, Wisconsin, New Mexico and Iowa. Operations in these states represent a total of 41 banks with 116 offices. In 1985, their combined assets will total $4 billion. Find out more about how you can be come part of the First Interstate Bancorp’s successful franchise program by calling John Dean, President, First Interstate System, Inc. (213) 614-3043. Consider franchising. It could make your tomorrow a whole lot easier. First Interstate Bancorp TheFuture in A uto Financing is h ere-H ig h Yield, Low Rish Balloon Note Financing The key to successful marketing of automobiles has long been tied to the willingness and innovation of financial sources to buy, manage and service installment loan contracts and lease contracts at a profit! Cautious consumers faced with higher automobile prices have learned to shop not only for the best car deal, but also for the best “money deal" in an effort to realize lower monthly payments. Some financial institutions have misinterpreted this competition as a signal to cut yields! We believe there’s a better way to improve yields, limit credit risk, increase volume and give consumers the automobile and lower payments they want plus some other optional benefits never before offered. Insured Balloon Note Financing is the automobile future and it’s here today — High yields with limited risk plus an insured balloon note. In addition Balloon Note Insurance can be extended to include new optional cov erages—\.e., Repossesion Insurance which pays the lender’s unamortized balance (Rule of 78’s), in the event of repossession plus Payment Guarantee which makes the car loan payments if the borrower becomes un employed!! Wheelways has already worked with hundreds of financial institutions around the country to assist and guide them in structuring their balloon note program. Let us start working for you. Call or write today for more information and the name of your local representative. W H E E LW A Y S I NSURANCE AND Mail to: WHEELWAYS 308 E. Lancaster Avenue FI NANCI AL Wynnewood, PA 19096-1993 S ERVI CES 215-642-8400 Tell me more about Wheelways Balloon Note Financing Program Name _________________________________________________________________________________ Company Name__________________________________________________________________________ Address_________________________________________________________________________________ City _______________________________________________________ State______ Zip_____________ Phone (Area Code)_______________________________________________________________________ MCB-4/85 14FRASER Digitized for https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for April, 19 8 5 m oving tow ard a com bination of # 1 and #3). This m ove tow ard a “profes sional assistance sale” re p re se n ts a considerable change in philosophy and d e m a n d s a ra d ic a l c h a n g e in th e physical and o perational environm ent. It is this change w hich is proving to be so difficult to accom plish. W e n eed to find out why. B ecause it is always easier to be o b je c tiv e w h e n a d v is in g o th e r s , perhaps we should look for a parallel situation in a field o th er than banking. In this way, our advice can be u n clouded by p rejudice or established practice. L et’s consider th e following scenar io: The ow ner of a pharm acy, w here th e m ajority of th e sales are “over th e c o u n te r ” n o n - p r e s c r ip tio n ite m s , wishes to convert th e pharm acy to a full m edical clinic. The clinic will not b e selling “over th e co u n ter” item s so Banks are moving toward a "professional assistance sale," which represents a consider able change in philosophy and demands a radical change in the bank's physical and oper ational environment. th e re w ill b e no n e e d for c o u n te r clerks. H ow ever, th e ow ner w ould like to utilize th e existing facility and m ain tain th e existing clerks by offering them staff-nurse positions in th e new clinic. O ur task is to advise th e ow ner how to make th e transition. W e m ig h t te ll h im th a t h e can accomplish th e transform ation m erely by rem oving th e pharm acy counters and in stru c tin g th e c o u n te r clerks: “Your job title is still ‘clerk’ b u t instead of selling item s over th e counter, I w ant you to carry out th e functions of staff n u rs e s .” N ot b ein g q u ite sure what this involves, we might advise him to give th e staff nurses som e brochures about th e clinic’s services, w hich they can hand out to th e patients. A lthough we know th at nurses perform lim ited ph y sical ex am in atio n s, w e are n o t going to propose th e purchase of any additional eq uipm ent. W e m ight advise him to stress to his staff nurses th e n eed to convince the patients of th e staff s com petence and d esire to cu re all th e p a tie n ts ’ ail m ents; a total m edical relationship is th e objective. W e m ight also recom m end th at the staff nurses should act as receptionists, bookkeep ers, typists, coffee m akers and trash em ptiers, in addition to th eir nursing duties. O f course, such advice w ould be u n thinkable and yet this is th e way we are attem pting to convert our banking su p e r m a r k e t o p e r a tio n s (th e n ew accounts clerk operating th e checkout register) into th e m ore professional atm osphere of consultative selling. B e fore we try to decide w h eth er the anal ogy is valid, le t’s see if we can give our h y p o th etical pharm acy ow ner some advice on how to create his new clinic stru ctu re from th e ground upw ard: 1. The physical arrangem ents need to be changed. E xam ination room s m ust be provided to resp ect the pa tie n ts’ n eed for privacy. A pleasant waiting area also will be necessary. 2. If th e form er co u n ter clerks are expected to perform th e totally differ e n t function of staff nurses, they will n eed to be individually evaluated to d eterm in e w h eth er they have th e te m p eram ent, th e intellectual capability and the desire to make th e change. To make such a determ ination, it is neces sary to decide exactly w hat the staff n u rse’s duties and responsibilities are. G e n e ra liz a tio n s su ch as “ p e rfo rm physical exam inations” are not good enough. M anagem ent m ust specify ex actly what sort o f examinations are to he made, o f what parts o f the body, fo r what purpose, in what fo rm the results will be presented and what use will be made o f the results. The same detail m ust be applied to describe all the nu rses’ duties. (This d etailed job description not only allows m anagem ent to determ in e th e n eed ed personal characteristics of th e staff nurses but, in th e absence of a sta n d a rd pro fessio n al q u alification, highlights the areas in w hich the for m er coun ter clerks w ould n eed fu rth er training.) 3. B etrain those clerks who have the desire to become sta ff nurses and who m eet the req u ired personal qualifica tio n s an d c h a ra c te ristic s of a staff nurse. 4. Since staff nurses will perform co m p letely d ifferent functions from co u n ter clerks, they should, in th e fu tu re, com e u n d er th e direction of the clinic’s professional m anagem ent, in stead of reporting through adm inistra tive m anagem ent as they once did. 5. H o w e v e r c a p a b le a n d w e ll train ed staff nurses are, they cannot be expected to function efficiently w ith out th e p ro p er tools of the trade. At the very least, they will n eed clinical th e r m o m eters, b lo o d -p re ssu re -te st kits, MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis stethoscopes, etc. 6. Obviously, it will be im portant for patients to have confidence in th e clin ic staff s ability to cure th eir ailm ents. Since first im pressions are m ost im por tant, that initial confidence m ust be created by the environm ent, by a cour teous reception and the professional ism of th e staff nurse who will perform th e prelim in ary exam ination before th e d o ctor ev er becom es involved. C onfidence in the professional capabil ity of th e staff nurse will result from: a. Self confidence of th e staff nurse. b. K nowledge and com petence dis played in perform ing th e job. c. R espect accorded th e staff nurse by doctors and o th er staff. “ O .K .,” you say, “ th o se re c o m m endations may be fine for th e conver sion of th e pharm acy, b u t we haven’t y et d eterm in ed th eir relevance to th e changes th at n eed to take place in th e Banks need to determine ex actly what is the proper role of the new-account staff in the "deregulated" lobby. In short: what does the bank really ex pect of the new-account staff today? lobby of a bank. ” To assess th e validity of th e analogy, we should start at the sam e point as in th e pharm acy example: W e n eed to d eterm in e exactly w hat is th e p ro p er role of our new -account staff in our deregulated bank lobby. W e th en can d eterm in e w h eth er th e change in the role is as radical as th e change from co u n ter clerk in the pharm acy to staff nurse in the clinic. Before deregulation, in 90% of all banks, the new -account staff created th e paperw ork necessary to open an account. Can we define exactly what we expect o f these new-account people today? Sell? Cross-sell? O pen accounts? Establish financial relationships? Fine. But these objectives are about as m eaningful as telling th e potential staff nurses they are expected to “p e r form physical exam inations.” At one end of the scale this m ight m ean a hand on the forehead feeling for signs of fe ver. At the o th er end it m ight m ean a w eek in the hospital for extensive ex am ination and observation. O u r jo b d e fin itio n for th e new - 15 account staff m ust be precise. M aybe it would be som ething like this: 1. F or a prospective new custom er. Examine the prospecfs economic and domestic circum stances. Determine w hat financial services this person currently uses. O bjective: Convince him it will be to his advantage to transfer all of his c u rren t services (w here possible) to this institution. In the light o f the knowledge o f the custom er s fin a n cia l and dom estic situation, determine what services the custom er does not have hut m ight value. O bjective: Provide such additional services to th e m utual b enefit of th e custom er and this institution. 2. F or an existing custom er. Be aware o f the customer’s domestic and econom ic c irc u m sta n c e s. Be aware o f the financial services already used by this customer and potential need fo r additional services. Create opportunities to offer such additional services. O bjective: C onvince th e custom er of the bank’s professional in terest in his financial needs and th e desire and capability to serve those needs effi ciently. This will facilitate th e sale of additional services and enhance cus tom er loyalty. If the form er role of the new -account clerks (vis-a-vis custom ers) was to open accounts and the new function is envis aged to be anything like th e above d e sc rip tio n , th e c h a n g e re q u ir e d to accomplish the transform ation in the lobby is every bit as radical as the change from a pharm acy to a m edical clinic. F or instance, since the titles “newaccount clerk” or “custom er-service rep resen tativ e” clearly give no indica tion of the scope of this position, we had b e tte r devise a nam e that m ore accurately describes the professional n a tu re o f th e fu n ctio n p e rfo rm e d . “C ounseling” is clearly a fundam ental part of the job and therefore the w ord “ c o u n s e lo r” m ig h t logically b e in cluded in the title. Since the counselor w ould no longer b e prim arily a clerical person, th ere w ould be an obvious n eed to change th e reporting stru ctu re for counselors. Exam ining a custom er’s econom ic and dom estic circum stances so as to u n d e rs ta n d his financial n eed s, r e q u ires professional expertise. Since th e clerically o riented “new -accounts clerk” did not have this expertise, the n eed to train this person is ju st as crit ical as th e need to train the pharm acy counter clerk who wishes to becom e a staff nurse. The kind of exam ination also im p o se s sim ila r d e m a n d s for privacy as a physical exam ination. The custom er’s n eed to have confi dence in the professional capabilities of his counselor is no different from the p a tien t’s need to have confidence in th e capability of the staff n urse in the m edical clinic. C reatin g th a t confi dence requires a m ethodology id en ti cal to that described in our pharm acy analogy. Clearly, a counselor is going to give financial advice by d eterm in in g the cu sto m ers’ needs and exploring the options available. Just as th e nurse cannot perform even sim ple physical exam inations w ithout the basic m ed i cal tools, the financial counselor can not investigate the suitability of a vari e ty of re la tiv e ly com plex financial alternatives w ith ju st a pencil and a legal pad. If the counselor is to keep track of the financial relationships the institution has w ith its custom ers, a card-index file is not the m ost efficient m ethod available. In m any banks, m icrocom puters are m iserably under-utilized. The selling area of the lobby is one location w here m icrocom puters can assist in m aking (Continued on page 38) Let’s talk. .. . . . if your ba n k’s earning are n ’t w hat they should be, we believe we can help . . . so, le t’s ta lk! ÆA SWORDS ASSOCIATES. INC. PROFESSIONAL BANKING CONSULTANTS 4900 OAK 16 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SUITE 301 KANSAS CITY, MISSOURI 64112 (816)753-7440 MID-CONTINENT BANKER for April, 1985 A t Central Bank, Lexington, Ky. Management-Employee Cooperation Makes for a Sales-Oriented Bank em ployee learned that th e individual HAT’S one of th e m ost-oftenask e d q u e s tio n s in b u s tlin g had deposited $200,000 at th e branch Lexington, K y., a city w h ere com peti and had told the new -accounts desk to tion am ong financial in stitu tio n s is c re d it th e “ sale” to th e cu sto m erkeen? service specialist who had help ed her. H ere it is: “Do you bank at C entral T h at sale e a rn e d th e specialist th e Bank?” prestigious “golden apple” award. This This q u estio n — and o th ers of a traveling award is given to a different similar n atu re — n etted C en tral Bank e m p lo y e e e v e ry 10 days a n d i t ’s $5.1 million in new deposits in th e first b rought to th e em ployee’s w ork station eight weeks of a year-long sales p rom o personally by hank P resident W ayne tion! L. Smith. W Central Bank Pres. W ayne L. Smith tells employees at bank's sales-promotion kickoff event (I. photo) that $15,00 0 auto he drove into hotel ballroom that evening (r. photo) is top prize in W hat’s th e bank’s secret of success? I t ’s em ployees, led by e n lig h te n e d m a n a g e m e n t th a t is s a le s - c u ltu r e oriented! A m ore enthusiastic group of in d i viduals w ould be difficult to find any w here. C o n sid er th ese exam ples of em ployee dedication to sales: • A custom er-service specialist re ceived a phone call from a new com er to town w ho was in te re ste d in C D rates. The em ployee supplied th e in form ation along w ith a friendly w el com e to L exington. She th e n sug gested th at th e individual deposit h e r funds at a C entral Bank b ranch in h e r neighborhood. A few days later, th e bank's year-long sales effort. At far I. is Pamela Papka, dir. of sales training at bank and coordinator of promotion. Promotion netted bank $5.1 million in new deposits in first eight weeks. • T he payroll clerk in th e bank’s p erso n n el office n o ted th at th e au ditors w ere in th e bank for a few days’ work. Before they finished th e ir job, each auditor had opened an account w ith C en tral because th e clerk had approached them and suggested they move th e ir personal accounts to the bank. This same em ployee — w ho cu r rently is the bank’s top salesperson — convinced th e gentlem an who supplies th e b an k ’s sales aw ards to open an account. E arlier, this em ployee had escorted an individual to a com peting bank and stood outside w hile the indi vidual closed an account. She th en BANKER for April, 1985 DigitizedMID-CONTINENT for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis e sc o rte d th e in d iv id u al to C e n tra l Bank and help ed th e person open a new account there! • An a s s is ta n t b ra n c h m a n a g e r kn ew h e r fa th e r h ad a good sized account at a com peting bank, b u t she always had b een reluctant to ask him to change banks. H e often had said he was very pleased w ith th e service he received from the com petitor. W hen C entral’s sales program started, she approached him and he said, “I was w o n d e rin g w h e n y o u ’d ask m e to switch banks!” H e closed his account at th e com peting bank — an account he had m aintained for 26 years — to take his m oney to C entral. T h e re ’s little d o u b t th a t C en tral Bank is one of the m ost sales-oriented financial institutions in th e nation. But such w asn’t always th e case, according to Mr. Smith, C en tral’s president. Calls com ing into th e bank’s cus to m e r - r e la tio n s d e p a r tm e n t h a d b e e n m o n ito re d fo r so m e tim e . The nature of the com m unications re vealed the bank’s strengths and w eak n esses reg ard in g c u sto m er p e rc e p tions of th e institution. O th er informa- 17 tion also was analyzed. Mr. Sm ith was struck by th e n eed to m ak e C e n tr a l B an k a s a le s -a n d c u sto m e r-o rie n te d in stititu tio n . H e asked his senior-m anagem ent com m it te e to com e up w ith some concepts about how to achieve his goal. O ver a period of two m onths last sum m er, a sales-prom otion was d e veloped internally. Stress was placed on th e se “m u sts” : to p -m an ag em en t suppo rt and m aking th e program as m uch fun as possible, w ith no in te n t to force em ployees to participate. It also was ev id en t th at em ployees n eed ed incentives to encourage them to participate: sales training, pro d u ct know ledge, prizes and a resounding kickoff to get the program off to a roar ing start. N am ed coordinator of th e effort was Pam ela Papka, assistant vice president/m arketing and directo r of sales training. Ms. Papka form ulated a p ro gram th at took bank em ployees out of th e “o rd er-tak er” cultu re and placed them in a “sales re p re se n ta tiv e ” cul ture. She organized a “teaser” publicity cam paign about th e sales prom otion th at was designed to capture em ployee in terest w ithout telling th em ev ery thing about th e prom otion. She felt it w as im p o rta n t to k e e p e m p lo y e e s guessing so th e ir in terest w ould re main keen. A prom otion th em e — “Polishing Your A pple” — was selected and p o st ers and o th er publicity m aterials w ere p re p a re d . E ach em p lo y ee was fu r nished w ith an attractive p o ster th at features a photo of two apples — one red, one gold. C ardboard boxes w ere m a n u f a c tu r e d b e a r in g th e a p p le them e. W hen th ese boxes w ere dis trib u te d to em ployees, each one con tain ed a real apple and a polishing cloth th at carried out th e prom otion th em e of turn in g re d apples into gold ones. P rio r to th e kickoff, b a n k -w id e m eetings w ere held at w hich P resid en t Sm ith gave m otivational talks to e m ployees. E ach m eetin g had a sales th e m e . O n e d e a lt w ith p e rs o n a lpresentation ability, an o th er featured an insurance executive w ho provided sales tips. The kickoff m eeting was a real h a p pening, according to Ms. Papka. Prac tically every one of th e b ank’s 260 e m ployees was p re se n t — a fact th at te s ti fied to th e w illingness of em ployees to participate enthusiastically. The kickoff was th e culm ination of all that had b een building up during th e p rev io u s m onths. T he m eetin g place (a hotel ballroom ) was decorated 18 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis w ith balloons and apples and th ere w ere clowns, music, food and drink. Mr. Sm ith e n te re d the hall driving a re d c o n v ertib le w hich h e la te r an nounced would b e th e grand prize to th e top salesperson during a year-long sales prom otion. A highlight of th e kickoff was a slide show, th e m ajor portion of w hich fea tu re d bank em ployees (what b e tte r way to attract em ployee attention!). The show’s them e was how em ployees could tu rn red apples into gold ones during th e sales prom otion. The sound track stressed th e fact th at em ployees Symbol of Central Bank's salespromotion apple-polishing theme was developed by bank's advertis ing agency and ties in w ith apple posters a p p e a rin g th ro u g h o u t bank. Customer-contact people w ear large buttons bearing this symbol, which shows apple and polishing cloth. could pull off an effective sales cam paign. The show en d ed w ith the slogan “L et It Shine!” “This m eeting cem en ted m anage m e n t’s com m itm ent to em ployees that a change in culture was going on at the b an k ,” Ms. Papka says. Prior to the kickoff, a variety of train ing program s w ere going on and the skeleton for future training was em erg ing. Em ployees w ere divided into 24 sales team s, each w ith a captain who was eith er a contact or non-contact em ployee (some w ere officers, some w ere not). Each group of th ree team s was assigned a senior officer to serve as “c h e e rle a d e r,” all of w hom w orked u n d e r Mr. Sm ith, who was designated “head c h eerlead er.” Team captains participated in twoday sales-training sessions w ith o u t side trainers. C ustom er-service reps and head tellers atten d ed one-day cus tom er-relations sem inars outside the bank. A bank executive officer con d ucted four in-house sessions for all non-contact em ployees. In addition, team captains received a continuous flow of inform ation from Ms. Papka for use at w eek ly sales m e e tin g s th a t started in N ovem ber. An im portant p art of the inform ation was a “product profile” m anual that was distributed to each em ployee. The m anual includes a synopsis of each ser vice the bank offers, including its fea tures, benefits to bank and custom er and an individual to tu rn to for addi tional inform ation. Ms. Papka edited the m anual from m aterial subm itted by d ep artm en t heads. An incentive system was set up that rew ards em ployees for services sold and a software-tracking program was purchased to keep accurate records and provide reports. A contact officer selling a regular checking account w ith a $1,500 m ini m um balance receives 1,000 points. A contact em ployee or non-contact offic e r selling th e same p roduct receives 2,000 points; and a non-contact em ployee receives 4,000 points. Referral cards enable credit to b e posted to the em ployee involved in each sale. Points are exchangeable for m e r chandise at th e end of the prom otion. M erchandise catalogs w ere m ailed to th e hom e of each em ployee. T abula tions of em ployees’ point accum ula tions are posted periodically. To add spice to th e prom otion, q u iz zes are d is tr ib u te d to e m p lo y e e s periodically. Answers to th e questions can be found in the product m anual and em ployees can earn extra points by com pleting the quizzes correctly. At given tim es, certain bank products are treated as “specials, ” w hich m eans em ployees can earn double points for selling these services. At the end of April, the prom otion will reach its first plateau and cash for p o in ts a c c ru e d an d p riz e s w ill b e aw arded. T hese prizes include an all expense trip for two to th e Big Apple — New York City. At the end of 1985, o th er big prizes will be aw arded, in cluding th e $15,000 auto. Top prizes a re d e te rm in e d by d raw in g s from n a m e s o f e m p lo y e e s w h o h a v e achieved a certain point level. Gifts are tax free. Mr. Sm ith sends a personally signed thank-you le tte r to each new custom er. Included in th e le tte r is a q u estion naire asking for the nam e of th e em ployee involved in th e new account. It also asks th e custom er to rate the em p lo y ee c o n c e rn in g h is/h e r p ro d u c t aw areness, courtesy and level of ser vice. All replies go to Mr. Sm ith for personal exam ination. Mr. Sm ith likes to recount success stories associated w ith th e bank’s new MID-CONTINENT BANKER for April, 19 8 5 UNION BRINGS A DISTINGUISHED STATISTIC HOM E TO A RK A N SA S. American Banker The Daily Financial Services Newspaper VOI.. CXI.IX NO. 20-* T u e sd a y . O c to b e r 16, 1984 1 4 9 th Y ear Top 100 Commercial Banks In Servicing of Permanent Mortgages*, Com piled by American Banhfr Copyright 1984 Mortgages Serviced lor investors (b) Total No of Dollar Volume Mortgages 6/30/84 8/30/84 Servicing Rank 6/30/84 No. ol Investors 6/30/84 Excluding GNMA GNMA Pools Pools Servicing Rank 8/30/83 Gam in Rank Total Mortgages Serviced (c) in Dollars 8/30/84 Mortgages Owned by Bank in Dollars 6/30/84 + 1 17,069,000,000 1,193,839,197 14,859,000,000 59.530,152 N.A. 839,923,519 971,969,817 860.898,190 833,000,000 4,942,102,130 947,152,556 675,204,668 N.A. 73,906,776 218,944,929 34,152,437 88,000,000 4,227,747,866 310,423,575 87,854,786 638,827,467 608,993.055 789.000,000 536,954,267 476,890,480 958,381,010 711,955,629 482,359,180 440.762,238 997,706,454 71,462,059 52,082,804 264,000,000 35,182.669 188,741,821 583,183,899 337,549,199 169,498,000 109,613,435 680,058,706 1 2 Bank of Amenca NT&SA, San F ran c is co .................................................. ......... Union National Bank, Little Rock, Ark......................................................... ......... 2,210.000,000 1,134,009,045 51.322 43,153 212 229 47 269 1 3 3 4 5 6 7 8 9 10 Hibernia Bank, San F ran c is co ..................................................................... ......... First National Bank Anchorage Alaska Continental Illinois National Bank & Trust Co . Chicago National Bank of Alaska. Anchorage Citizens Fidelity Bank 4 Trust Co . Louisville. Ky (d) Security Pacific National Bank. Los Angeles Bank of Hawaii, Honolulu ................................. First Tennessee Bank NA. Memphis 1,100,000,000 839 923.519 753.024.8fi8 749.545.434 745.000.000 714.354.465 631.731.861 587.349.882 27,000 11,061 15,427 8.600 17,500 20,158 13,760 15,122 48 23 44 56 79 68 87 54 182 0 4 2 122 48 11 127 2 6 12 5 7 4 11 12 13 14 15 16 17 18 19 20 Continental Bank. Phoenix. Ariz Alaska Mutual Bank. Anchorage Michigan National Bank Oetroit Union Planters National Bank. Memphis. Tenn Equibank PittsDurgn First Hawaiian Bank Honolulu United Jersey Bank. Hackensack. N J Michigan National Bank Lansing National State Bank. Eiizaoetn N J California First Bann. San Francisco 567.365.407 542.736 617 522.000.000 501.771.578 414 800.000 395.197.111 374 406.430 336.974 808 331 148.803 330 987.746 11,821 5,534 15,868 15,401 11,924 7.943 7,723 15,719 11.047 6,560 53 33 51 135 116 114 0 105 43 48 31 0 0 114 1 0 0 0 140 34 + 2 + 7 e 9R 11 68 10r 13 16 * 55 41 15 14 * 23 The American Bankers A ssociation has an nounced that Union National ranks second in the nation among all commercial banks ser vicing mortgage loans. Union is the largest mortgage servicing company in Arkansas—three tim es larger than any com petitor. Union services mortgages in 40 states for more than 44,000 customers. The bank originated more than $400 million in loans in 1983 alone. Total mortgage loans being serviced by Union now stands at $ 1.2 billion, of which 95% are hom e loans. Union’s second place ranking is a remarkable statistic fora Little Rock bank. Union has becom e som ething very important for Arkansas: One of America’s leading banks. Union National Bank OF LITTLE ROCK MEMBER FDIC MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 19 sa le s-c u s to m e r-o rie n ta tio n c u ltu re . W hen th e program was announced in a new s story in th e local p ap er, Mr. Sm ith (who answ ers his own phone) received a call from a local b u siness wom an who told him that, on th e basis of the bank’s effort to change its cul tu re, she was going to take all h e r bu si ness and personal accounts to C entral Bank. H e believes the public is responding to the sales efforts of bank em ployees in a positive m an n er because these same em ployees are in the forefront of com m unity-service activities. F o r in stance, the bank recently adopted a children’s hom e th at was struggling to keep going. E m ployees chipped in to clean up th e prem ises and to purchase a new range for the kitchen (the bank paid half th e cost). E m ployees also re c e n tly p a r tic ip a te d in a b o w lin g tournam en t th at b en efitted the local Big B ro th e rs /S is te rs o rg a n iz a tio n . They w ere responsible for 10% of the to tal funds ra ise d in th e city-w ide tournam ent. C en tral’s em ployees are not shy in assessing the sales program . “It has done m ore for us than anything e lse,’’ says M argie Asseff, assistant vice p resi d e n t at th e Nicholasville Boad Banking C enter. She’s one of the team captains and says em ployees on h e r team are eager to earn points. “This prom otion is p utting the bank’s m oney w here its m outh is,” she says. She likes th e fact that h e r b ran ch ’s em ployees are assigned to two differ e n t team s, w hich heightens com peti tion. Teams m eet every two weeks and captains discuss sales procedures and th e pro d uct m anual’s contents. She ad d s th a t e m p lo y e e en th u sia sm is holding up well. O ne reason for em ployees’ success in sales is th at they are n ’t seen as sales people by custom ers, b u t as people custom ers can trust. O nce em ployees realize that making sales is not a negative or scary thing, they becom e in terested in cross sell ing, she adds. M argaret M cCracken at th e same branch says friends of em ployees are th e best source of new business. She finds th at m any of h e r younger friends Cross-Sell Training/lncentive Program Boosts Employee Professionalism A S U C C E S S F U L cross-sell trainF u rth e rm o re, em ployees considered ing/incentive program that p ro cross selling to be an extra task, one vides bank em ployees w ith a systemthey w ere not fitted to perform b e atic approach to selling and rew ards cause they w eren ’t sales-oriented indi them based on m easurable p erform viduals. ance standards is th e goal of m any bank The training sessions are designed managers. to overcom e these deficiencies, Mr. T h is goal has b e e n a c h ie v e d at Andes says. They include a custom erH am ilton Bank of U p p er E ast T en n es p e rc e p tio n exercise th at establishes see, Johnson City, according to P resi th e fact that custom ers are receptive to den t David B. Ramsay. cross selling efforts and that em ployees The goal established for custom ercan have a positive influence over cus sales representatives and tellers by th e tom er choices regarding new bank ser bank was the sale of 1.8 average addi vices. tional accounts p e r custom er during A nother exercise alerted em ployees the first year of th e program , according to the n ature of obstacles th at would to C. Clifford A ndes, senior vice presiten d to interfere w ith or p rev en t them d e n t/b u s in e s s d e v e lo p m e n t a n d from cross selling effectively. A p ro d m arketing. uct-know ledge session upgraded em A training program was furnished by ployees’ know ledge of bank services. th e b a n k ’s p a re n t, T h ird N ational, A nother training session addressed Nashville. It consists of six 90-m inute th e cross-selling process and the skills sessions. involved. Em ployees w ere taught to P rio r to th e first session, a p r e u n derstand w hat steps to take to close program q u e stio n n a ire was d istrib a sale and how to identify custom er u ted to participating em ployees. P u r needs so th e correct service could be pose of the questionnaire was to assess, recom m ended. on an anonym ous basis, th e level of O th e r sessions h elp ed em ployees product and skill know ledge of em distinguish the features and benefits of ployees. The questionnaire also m ea products. Tellers w ere in structed how sured cross-sell attitudes. to refer custom ers to custom er-sales Tabulation indicated a general lack representatives to open new accounts. of know ledge ab o u t bank products. A post-progress questionnaire was 20 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis have no bank accounts and welcom e h er explanations of how bank services can help th em m ake th e ir finances m ore orderly. She also finds that many people m aintain accounts at banks that pay lower in terest rates than C entral does and these people w elcom e the suggestion to move th eir accounts to C entral. “The interaction and high m orale th e sales p ro m o tio n has g e n e ra te d am ong em ployees w ould be a suffi cient bonus for the bank, even if we d id n ’t sell a dim e of new bu sin ess,” says Barbara A nderson, executive vice p resid en t over the operations group. T h e re was a tim e w h en b an k e m ployees d id n ’t care about im proving the institution’s image. “If we com e as far in the next few years as we have in the past few, we don’t n eed to be afraid of Sears or anybody,” she adds. Ms. Papka and Ms. A nderson agree that the bank’s new sales culture is not the result of deregulation. “But it’s a fo rtu n a te c o in c id e n c e for C e n tra l Bank,” they say! — Jim Fabian, senior editor. adm inistered at th e end of th e training sessions to m e a su re th e in c re a se d p ro d u c t k n o w led g e o f em p lo y e e s. Ninety-five p ercen t of th e questions w ere answ ered correctly, versus 71% on the pre-training questionnaire. T ra in in g p re p a re d em p lo y e e s to cross sell, b u t an incentive aspect of the program m otivated them to work at it! A dollar value was established for each type of product sold by custom erservice representatives. F or instance: a su p e r-N O W ch eck in g acco u n t is w orth $1, an insured m oney-m arket a c c o u n t is w o rth $3 an d a safetydeposit-box sale brings $5. T ellers re ceive $ 1.50 p e r new account o p ened as th e result of th eir cross-selling efforts. T ellers fill o u t c u sto m e r-re ferra l slips w hen a custom er is sent to the new -accounts desk. C u sto m er sales representatives fill out new -service in form ation sheets each tim e an account is opened. All forms are sent to an individual in the bank’s retail division who forwards them to a firm that tab u lates the figures and issues a m onthly report to the bank indicating w hich of th e 13 offices are doing th e b est selling jobs. Seven branches have m anaged to m aintain or exceed th e 1.8 average additional-account goal for th e past several m onths, Mr. Andes says. A total of 9,475 new accounts was o p ened d uring th e first year of the program , according to Mr. Andes. • • MID-CONTINENT BANKER for April, 1985 There's no substitute for finely-tuned investments. hen it comes to investments— long-term or short-term —nothing outperforms quality. And when it comes to quality, no one beats the outstanding track record of United Missouri’s Investment Banking Division. Sound bond portfolio recommendations are our business. They have been since the 1920’s. You can rely on our ability to adapt in this changing financial world. Today and tomorrow, your bond portfolio will benefit from our consistently high standards. Call or write United Missouri Bank today. We've mastered the art of quality. Investment Banking Division UNITED MISSOURI BANK of Kansas City, n.a. Member FDIC United we grow. Together. 10th and Grand o P.O. Box 226 Kansas City, Missouri 64141 o (816) 556-7200 MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 21 A Keyto Higher Profits: Effective SELLING Through Incentive Planning By Bob L. Sellers Chairman, Banking Consultants of America Memphis P salary. The structuring of com pensa ERHAPS no greater challenge will tion and b enefit plans and effective face banking in th e com ing m onths than that of structuring and installingo rganizational fram ew orks m u st be effective sales programs. com bined. Benefits m ust be packaged to create the incentives necessary to T he rapidly increasing in te re st in these program s by com m ercial banks attract, keep, and rew ard top-flight across th e country accurately reflects sales people. In addition, building the cu rren t p ressu re being placed on in p ro p er m anagem ent system to re in creased p ro d u c tiv ity and en h an ced force this new com m itm ent to sales earnings. For larger institutions, finding and hiring qualified and experienced sales personnel may req u ire a com petitive The develop m ent of an salary, b u t for m any sm aller in stitu effective sales organization tions salary alone m ay not be enough to calls for dramatic changes in attract the right people. In m any cases, even a com m issioned salary may not philosophy, recruitment train b e enough to m otivate exp erien ced ing and personnel administra salesm en in th e long run. A dditional tion. benefits m ust be created th at will tie critical em ployees m ore firmly to the institution. F irst and forem ost, bank m anage m ent m ust be com m itted to th e idea of and to guide th e sales effort will be re w a rd in g p e rfo rm a n c e , e v e n if it difficult for m ost banks, given the his m ean s th a t c e rta in sales p o sitio n s torical lack of sales-m anagem ent ex eventually m ight earn m ore than m any p erience in the w hole industry. The traditional executive positions — a fact p ro d u ct mix is changing; m arketing that will not set easily w ith everyone. objectives are changing; custom er seg D e v e lo p m e n t o f an effectiv e sales m entation is m ore complex; and adver o rg an iz a tio n w ith in th e tra d itio n a l tising m ust finally be recognized as m anagem ent of m ost banks calls for SALES SU PPO RT instead of a SALES dram atic changes in philosophy, re SUBSTITUTE. c ru itm e n t, tra in in g an d p e rs o n n e l In light of these changes, m anage adm inistration. m en t m ust find access to th e vital ex The issue clearly is larger than ju st p ertise n eed ed to m ake th e transition from an advertising-oriented culture to th at of a sales-oriented culture. A wise approach likely will entail using The author is chairman and CEO of Bank th e talents of a qualified consultant — ing Consultants of America and chairman of one w ith b o th th e background and First Southern Trust Co. These firms spe track record of accom plishm ent in in cialize in the design, implementation and centive-based plans. The decision to adm inistration of em ployee stock own use a consultant will allow institutions ership plans, executive supplemental in of all sizes to b e tte r u n d erstan d the come plans, earnings-improvement analy essentials and b e tte r organize th e ir sis, pension- and profit-sharing programs, efforts. HC formation and general banking ser No sales organization likely will be vices. 22 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis successful w ithout a com prehensive package of benefits and incentives. Bank executives as well as directors can b e in c lu d e d along w ith calling officers in the incentive stru ctu re of a bank-w ide sales effort, since they all should play an im portant role in the referral and sales process. In its role as consultants to bankers across the country, Banking C onsul tants of America has assisted a n u m b er o f in s titu tio n s in d e s ig n in g , im plem enting, and adm inistering execu tive incentive com pensation program s through use of em ployee stock ow n ership plans (ESOPs), directors defer re d incom e plans (D D I), executive supplem ental incom e plans (ESI) and job evaluation and salary adm inistra tion plans (JESAP). W hile these prog rams may not have b een originally d e signed as incentives, encouraging new legislation favorable to th e form ation of these plans enables them to play a key role in attracting, rew arding and re taining key sales people. B ankers and b u sin e ssm e n retain c o n su lta n ts b e c a u se th ro u g h th em they find the track record, experience an d sp ecializatio n n e e d e d to solve complex problem s. The right consul tan t can bring a higher concentration of expertise to bear on specific p ro b lem s than is feasible for th e client to provide “in h o u se .” T he increasing complexity of the financial-services in d u stry d em an d s m o re p recisio n in m any areas. It is no w onder, th en , that experienced consultants are in heavy dem and. They have seen m ost p ro b lem s before and have th e right back ground to solve them . Q uestions to our clients are often: • W hat do you really w ant to do? • W hy do you w ant to do it? • W hat are you doing now? • W hy do you do it th at way? (Continued on page 57) MID-CONTINENT BANKER for April, 19 8 5 How Financial Energy can help you manage the problems facing bankers today. I.K & V /.tfiÉ V b :- " First National C orrespondent C onsulting Services offers educational and train in g o p p o rtu n itie s that deal w ith the vital issues and problem s you face today. Each “ hands-on” course features experienced in structors fro m First National Bank of Louisville— the region's largest and strongest bank. In a very short tim e, y o u 'll gain inform a tion and refine skills that can help you make yo ur bank stronger and m ore profitable. All eight courses— three are new fo r 1985— earn C o n tin u in g Education Units (CEU's) from the U niversity of Louisville. In a ddition to the courses and seminars, First f. • Wl 0ai*6 !- / 7 National " ' offers o th e r programs: Retail Sales Incentive Program, O ffice r Call Program, IRA Seminar. Each is custom -tailored fo r your bank and your customers. For a presentation o f these programs or in fo rm a tion on any o f o u r services, contact First National. A nd let us p ut the pow er o f Financial Energy to w o rk fo r you. Call C orrespondent C onsulting Services: Direct (502) 581-7741; K entucky WATS (800) 292-2272; In o the r states (800) 821-5789. Put it to w o rk for you. MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 23 SELLING FOR DOLLARS The Magic and Myth of Sales Compensation By jim Schneider SERVICE & SALES SUPPORT GOAL SETTING Copyright 1955, Jim Schneider Group. incentives. O th er organizations have N E O F T H E h o ttest topics in financial in d u stry sales m an expanded com m ercial and real-estate loan volum e, increased key-account agem ent today is pay fo r perform ance. reten tio n and changed mix of products The drive for b e tte r earnings and for sold at m inim al expense w ith incentive a sales culture to replace th e service com pensation. culture of th e past has led reluctant The magic of incentive com pensa financial in stitu tio n s of all sizes to tion is th at you pay only fo r w hat you “lunch w ith th e d ev il.” F or th e first get. The rew ard system directs the tim e, financial-industry em ployees are selling fo r dollars. And th e sim ple idea sales force tow ard w hatever objectives you select. T h ere’s also magic in its of rew arding people in proportion to im pact on sales-force motivation. th eir perform ance is w orking. The key issue in financial-industry The greatest m yth about incentive sales m anagem ent today is th e willing com pensation always has b een th at it ness of th e sales force to sell. The sales is n ’t c o st e ffe c tiv e , t h a t p e o p le forces of m ost financial institutions still shouldn’t be paid to do w hat th e y ’re already paid to do. Now th at financial consist largely of em ployees who w ere institutions can m easure sales p ro d u c not hired as salespeople. tivity m ore precisely, th e n um bers are M ost financial-industry salespeople proving th at incentive com pensation is know w hat they need to do to get reextrem ely cost-effective in generating increm ental sales from existing r e The author is president of Jim Schneider sources. G roup, a sales-m anagem ent and sales F o r ex am p le, a $1 b illio n -d o lla r training consulting firm headquartered in bank in N ew Jersey increased its total Oak Brook, 111. He also is author of a soonproducts cross-sold by over 300% in 18 to-be-released book on selling: The F eel o f m onths w ith the consistent use of sales Success in Selling. O 24 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis suits in selling. But the rew ards for selling a re n ’t great enough to over com e th eir fears about custom er reac tion to the aggressive selling behavior necessary to get results. T hey are con cern ed about being view ed as a sales person rath er than as an executive and they are uncom fortable about a p e r form ance-appraisal system that pays m ore for sales effort than for traditional banking expertise. T he entire rew ard system in finan cial institutions says selling is not im portant. T hat’s why incentives are so pow erful in changing sales behavior quickly. In c e n tiv e co m p en satio n ch anges th e context in w hich em ployees view th e ir jobs. Suddenly, th ey ’re salespeo ple. W ith incentives, th e re ’s reason for selling that outw eighs th e risk, a clear m essage that selling is im portant. The sales force can set goals, keep score a n d b e n o tic e d an d re w a rd e d im mediately for w hat it does. Very sim ply, incentives increase th e willing- MID-CONTINENT BANKER for April, 1985 Rapid transit. Speed. It’s the essential ingredient of intelligent movement of money. It’s also why more correspondents choose the rapid transit system at Commerce. Our day starts with balance reporting at 5:00 A.M. i By 9:00, w e’re on the phone I with customers, advising them I of how much money is immedi' ately available for investment and how much is deferred. Same day available balance reporting coupled with timely information on previous day’s ending ledger balance enables correspondents to manage their funds position accurately and maximize profits. What’s more, we handle exception items, exceptionally fast. O ther banks take weeks to get return items back to you. Our unique post office box and special zip code allow us to handle these items quicker. Fast turnaround on return items means less float as well as minimal risk of em barrassm ent and loss. In addition, we have a special problem-solving team for cash letter adjustments. Our Special Adjustment Staff (S. A.S.) pays quick attention to your problems. If an error has been made in the checks sent to us for clearing, this special team quickly catches the error and adjusts the correspondent for the proper amount. Large dollar adjustments receive immediate priority. Rapid transit at Commerce adds up to the best availability schedule around. If you’d like to plug into our rapid transit system, call your Correspondent Banker at Commerce— now. No one knows the value of time better than Commerce. (816) 234-2000 • 10th & Walnut • Kansas City, MO 64141 BANKER for April, 1985 Digitized MID-CONTINENT for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis §) Commerce Bank MEMBER FDIC 25 ness to sell. The M y th Today th e g reatest m yth about sales c o m p e n s a tio n is th a t it w o rk s for everyone. It doesn’t. A sales-com pensation plan is only as good as th e objectives and sales cli m ate it serves. T h e re ’s no one “rig h t” sales-com pensation system th at works for every organization. As th e diagram on page 24 shows, sales com pensation is p a rt of a larger w eb of sa le s-m a n a g e m e n t activ ity . U sed properly, sales com pensation is an extension of your corporate objec tiv es, re fle c tin g y o u r p rio ritie s for sales volum e, pro d u ct or custom er mix and sales strategy. T hese objectives and th e resulting com pensation p rio ri ties will be different for every orga nization. W h e n a sales-co m p en satio n plan doesn’t work, it’s alm ost always b e cause it’s executed in isolation from the o th e r factors in sales m an ag em en t. O ften, sales com pensation is used as a short-term “d ru g ” to m ask th e n eed for d eep er changes in an organization. T he m ost freq u en t com plaints I h ear about incentive com pensation are th at it brings in th e wrong kind of business or that it’s volume o rien ted ra th e r than profit oriented. T hese criticism s are m ost frequently m entioned in connec tion w ith lending, w h ere bank m ana gers are especially sensitive to th e risks of selling bad loans. Actually, these are n ’t criticism s of incentive com pensation. T hey’re c rit icisms of th e management of incentivecom pensation program s. W h e th e r you’re co ncerned th at th e right deposit products get sold or th at th e right loans get m ade, you can con trol sales-force priorities by controlling w hat you pay for and by providing strong sales supervision and random audits of w hat’s sold. M issteps in sales com pensation can be costly. E ncouraging em ployees to sell th e w ro n g p r o d u c ts can co st thousands of dollars, and paying the sales force too m uch or too little can destroy th e credibility of your entire sales effort. A bank shouldn’t even consider in c e n tiv e s u n til m a n a g e m e n t know s w hat it wants th e sales force to accom plish and until it has in place an in te grated sales clim ate th at will support th e sales force. Sales T rackin g an d R eporting You can ’t rew ard your b e st sales people if you don’t know who they are. You c a n ’t a c c u r a te ly p a y fo r in cremental sales results or estim ate the financial im pact of a sales-com pen26 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis sation program if you don’t know w hat th e sales force is selling now. Sales tracking and reporting is the fir s t step in im p lem en tin g a salescom pensation system. M easu rem en ts are critical to th e sales clim ate because th ey ’re th e basis on w hich all m ajor decisions of sales m an ag em ent are m ade, from salespersonnel decisions to sales-strategy decisions. T hey’re also th e basis for the re w a rd - a n d g o a l-s e ttin g sy ste m s w hich provide th e m otivational drive to the sales clim ate. W hy is a reliable m easu rem en t sys tem always th e last investm ent finan cial institutions are willing to make in t h e i r s a le s -m a n a g e m e n t sy ste m ? W ithout credible sales data, you don’t have a credible sales clim ate. M ost financial institutions extend sales m easurem ent to th e branch- and com m ercial-division level. It has to go deeper, extending to every salesper son, w ith each salesperson having his/ pensation so fast th at you u n d ercu t the financial planning of th e good sales people who are already w ith you. You could lose them . S tudy th e top perform ers on th e sales-tracking system and develop a re c ru itin g and selectio n process th a t correlates sales results w ith personal a ttrib u te s, personality, selling style and “fit” w ith th e organization. “Su p e r s ta r ” salesp eo p le from com m is sioned sales positions in o th er in d u s tries may not fit w ith your organiza tio n ’s sales clim ate at this stage of d e velopm ent. E v e n good sa le sp e o p le c a n ’t b e m otivated to sell until th ey ’ve learned how to sell. Selling for dollars w on’t overcom e selling w ith fear. My experience is th at no am ount of sales incentive will increase sales re sults to peak perform ance levels until salespeople have w orked th rough th eir fears and th eir problem s in selling in classroom sales training or in field A sales-compensation plan is only as good as the objectives and sales climate it serves. There's no one "right" sales compensation-system that works for every organization. h e r own report. B efo re you la u n c h a c o n tin u in g s a le s -c o m p e n s a tio n p ro g ra m , you should have at least th ree m onths of sales d a ta on in d iv id u a l sales e m ployees and several m onths of data w ith a pilot com pensation program . T he stakes are too high not to do it right. R ecruiting, S ales T rain in g a n d Sales C o ach in g If you have the w rong sales people — or u n trained sales people — in key sales positions, th e m otivational im pact of incentive com pensation is ener gized incompetence. R e c r u itin g a n d tr a in in g p e a k perform ance salespeople is th e m ajor responsibility of m ost sales m anagers. W ith o u t a strong sales force, th e m ar ginal im pact of an incentive-com pen sation program on sales is far less than th e im pact of incentives on a strong sales force. In some ways, the financial indus try ’s high tu rnover is an opportunity to upgrade its sales force. A strong sales-com pensation system will attract a different kind of sales force, — a sales force willing to sell. B ut be careful not to increase th e p ro portion of sales incentive to total com coaching o p p o rtu n itie s. W e ’ve had trem endous success in designing sales training around w hat peak perform ers are doing right in each bank’s u n ique sales environm ent. In the presence of strong sales su pervision, incentive com pensation can m otivate salespeople to learn how to sell. Strong sales supervisors can use in centive dollars as a consistent m otivat ing force by rem inding salespeople of th e ir successes and th eir goals. These are the reasons sales-driven com panies hold sales m eetings. In recen t years m ost service orga nizations have cut back th e ir front-line supervision, thinking th ey ’re increas ing th eir profit potential. B ut your big gest m arketing expense is th e m oney you lose w hen your sales force doesn’t sell. W ithout strong sales supervision, a sales force doesn’t sell. M ake the m ost of your sales-com pensation dollars by recruiting a sales force th at can sell and th en give it the support it needs to succeed. G o a l S etting E very salesperson participating in incentive com pensation should also set (Continued on page 54) MID-CONTINENT BANKER for April, 19 8 5 This Four-Volum e M A R K ETIN G LIBRARY Regular Price $60.00 NOW ONLY $42.50 How to Plan, Organize and Conduct an Incentive Campaign . . . M id-C ontinent Banker's newest how -to-do-it manual; a complete guide to procedure in evolving an effective in centive campaign to sell bank services and/or increase bank deposits; 96 pages, 16 illustrations; starts by telling you prem ium terms and the history o f incentives, roams through such topics as trade area studies, tying in w ith cur rent events, getting new business from old customers, m o ti vating staff members and concluding w ith a series of six case histories o f actual bank prom otions th a t obtained ex ceptional results. Regular Price: $ 1 5 .0 0 Profit-Building Ideas for Bank Christmas Promotions. This is NOT a Christmas Club book, although ONE chapter is devoted to Christmas savings p rom otion plans. Other chap ters: selling various bank services during the Holidays: using lobby decorations most e ffectively; helping children at Christmas; remembering employees in Christmas planning; using the "good w ill season" to build bank good w ill; get ting the most benefits from H oliday p u b lic ity ; planning for the Holidays from mid-summer to New Year's. In 80 pages are packed tested Holiday ideas used by banks, big and small, from coast to coast. Regular Price: $ 1 1 .0 0 How to Plan, Organize & Conduct Bank Anniversaries. . . The complete guide to procedure when holding a form al opening, an open house, any kind o f bank celebration; 166 pages, many illustrations; 12 chapters starting w ith “ First Things F irs t," ranging through "A d d a L ittle Pizazz and O om -pah," concluding w ith " Expect the U nexpected"; eight appendices containing actual plans, budgets, programs used by banks in actual celebrations; a com pletely factual, step-by-step how -to-do-it book now in its second printing. Regular Price: $ 2 4 .0 0 M O N E Y B A C K G U A R A N T E E — I f n o t c o m p l e t e l y sa t is fi e d , r e t u r n w i t h i n 10 d a y s f o r f u l l r e f u n d . MID-CONTINENT BANKER 408 Olive, St. Louis, Mo. 63102 Please send us bo oks checked: copies, Bank C e le b ra tio n Book (u copies, Bank P ublicity Book (a $24.00 ea. $10.00 ea. copies, Planning an Incentive C am p aign (a copies, P ro fit-B u ild in g Ideas fo r Xmas (a How to Write Bank Publicity and Get It Published. . . The complete guide to procedure in w ritin g p u b lic ity releases and how to prepare them so th a t newspaper and magazine editors w ill use them ; 61 pages; 12 chapters w ith titles such as " Constructing the News S to ry ," "Placing the News S to ry ," "H andling 'S tic k y ' S itu a tio n s," "Dealing w ith News M edia"; another com pletely factual, step-by-step how-todo-it manual. $15.00 ea. $11.00 ea. S E N D A L L F O U R B O O K S A T T H E LO W PRICE OF $42.50 [ ] Check e n c l o s e d ................................................................................... N a m e ..................................................... T itle B a n k ............................................................... S t r e e t ............................................................... C i ty , State, Z i p ........................................... ( C h e c k s h o u l d a c c o m p a n y o r d e r . We p a y pos ta ge a nd M i s s o u r i b a n k s please i n c l u d e 4 .6 % sales t a x .) h a n d l in g . Regular Price: $ 1 0 .0 0 MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 27 Credit Line for Up-Scale Customers Worth the Effort for Sovran Bank By Kenneth F. Matthews Jr., V ice President, Sovran Bank, Richm ond, Va. P RIVATE Line is a line of credit offered by Sovran Bank to indi viduals for th e ir personal use. It accessed by special checks furnished to th e cu sto m e r se p a ra te and d istin ct from any o th er account held at th e bank. O nce the account is approved, th e ow ner may w ithdraw funds any w here, anytim e, for any purpose by w riting and negotiating one of these checks. A statem ent is re n d e re d m onthly, showing the line, am ount o utstanding, m inim um paym ent, etc. Line limits run from a m inim um of $2,000 to an u n s e c u r e d m ax im u m o f $ 3 0 ,0 0 0 . W hen secured by hom e equity, a line can run as m uch as $100,000. Accounts are priced at a rate equal to Sovran Bank’s prim e rate plus \ lA%. T he rate varies q u arte rly , allow ing b o th b a n k a n d c u s to m e r to en jo y equally th e rise and fall of in te re st rates. W e also charge an annual fee of $15. W e have offered lines of cred it to individuals since 1977 and have e n joyed reasonable success w ith th e se r vice. O ur first effort to prom ote the service was in 1982 w ith a direct-m ail campaign to a half dozen “selected ” m ailing lists. A lthough th e response was not o v erw h elm in g p e rc e n ta g e wise, it gave us th e account base we w ere seeking and th en some. In fact, we opened so m any accounts during those first few m onths th at we w ere hard pressed to cope w ith th e p a p e r work and had to hire a room full of tem poraries to set them up. D uring the past two years, we have not advertised th e account publicly. O ur credit standards are high, and we felt general advertising w ould solicit too m any applications from u n q u al ified prospects. W e hav e, h o w e v e r, successfully obtained new business from two oth er sources. O ne was from our own bank offices. T hro u g h an em ployee sales campaign and norm al w ord of m outh, we acquired m ore accounts th ro u g h out the balance of 1982 than we did w ith th e o rig in a l d ire c t-m a il cam paign. Digitized for28 FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis T he second source of new business th at has proved fruitful in n um bers of isa c c o u n ts is o u r re la tio n s h ip w ith A m erican Express Travel & R elated S e rv ic e s C o. P e o p le a p p ly in g for AM EX Gold Cards are sim ultaneously applying for credit lines w ith a bank. A M E X sends th e se ap p lications to banks offering a credit line th at are lo c a te d n e a r th e ap p lican t or w ith w hom th e applicant has a relationship. W hen we saw that our product was w ell accepted and easily sold, we insti tu te d an annual fee to raise th e profit m argin to a level m ore in line w ith m anagem ent goals. C ustom er defec tions resulting from this change have so far been offset by increased yield potential. To our surprise, both active (lin e w ith a balan ce) an d in a c tiv e a c c o u n ts o b je c te d e q u a lly to th e annual fee. W e had believed or hoped th at only inactive accounts w ould ob je c t to the im position of a fee strongly enough to close out. E ven so, defec tions because of th e fee have b een re l atively few. O u r experience w ith Private Line has b een quite gratifying. W e recov e re d our start-up expenses sooner than expected and show ed a profit earlier th an p ro jected. Now th at a base is established, we will attem p t to expand our m arket share w ith w hat we consid e r an attractiv e p ro d u ct reasonably priced to produce both profit for us and satisfaction for custom ers. Mr. Matthews is officer in charge of Private Line and is responsible for product d e v elo p m en t and en h a n c e m e n ts, cre d it approvals and reviews, product marketing and coordination with other bank depart ments in the delivery of Private Line to customers. In the m onths to com e, w e will con duct a direct-m ail cam paign m easured to analyze results. W e will also run, for th e first tim e, an experim ental m edia advertisem ent to m easure results. As in any product, im proved m ethods and custom er service will be evaluated and re-evaluated. T he real trick to a successful line of cred it is not sim ple by any m eans. Com plex factors affect th e product it self, as well as how it is perceived and received by the public. T he prim ary factor w ould be th e ac q u isitio n of a c o m p u te r system on w hich to run th e product. In addition to th e h ard w are and th e p ro g ram , c o m p e te n t an d d e d ic a te d m a in te nance resources m ust be available. No m atter how well planned at start-up, reasons for change are legion: legisla tive bodies, federal regulators, bank m anagem ent, public taste, econom ic conditions and com petition, to nam e a few. All of these forces com pel m id course correction from tim e to tim e. Flexibility in th e program running the p r o d u c t a n d p ro g ra m m e r/a n a ly s ts dedicated to the service of th at product are m andatory. M an ag em en t’s policy tow ard vol um e and quality of the loan portfolio desired from this service also is an im portant consideration. W e began aim ing the product at high-value profes sionals and the “captains of in d u stry .” O ur experience, how ever, led us to b ro a d e n o u r c u s to m e r b ase la te r, w hile still m aintaining high-quality credits. W ith a system and a philosophy in place, the product m ust be m olded into a m arketable package. Decisions m ust be m ade on rates, term s, limits and so forth. A nother facet is th e docum entation used in establishing loans. Knowledge of m arket-area lending laws and fed er al reg u latio n s com e in to play, and these factors may force modification of the product if not considered th ro u g h out the preparation of the service. Finally, selling th e p roduct comes up. W hen we first opened th e service in 1977, th ere w ere few com petitors. It MID-CONTINENT BANKER for April, 19 8 5 \ See you at the K B A Convention The First Team will be traveling to the KBA Convention in Salina M ay 15, 16, St 17. We look forward to this meeting where we can answer your questions and discuss how our correspondent services can fit into your bank's profit-oriented strategies. See you there! Wichita's Newest Bank for O ver 100 Years. FIRST NATIONAL BANK First National Bank in Wichita Correspondent Bank Division / Box One Wichita, Kansas 67201 / Phone 316-268-1398 Member: FDIC Mike Beck, Kelly Mason, Jim Stanley, and Lauren Kingry. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis rapidly becam e evid en t th at this was the way to len d m oney to certain in d i viduals, and m ore and m ore lenders began to offer op en -en d ed credit lines, both secured and unsecured. W e have conducted rath er ex ten sive training of our staff and loan offic ers because we find they are an excel len t referral source for strong appli cants. It does no good to in terest som e one in the p ro d u ct and th en inform th e individual that he or she has b een d e clined. Selective selling has b een im portant to us. W e have a tte m p te d to portray th e service as one for those w ho are e sta b lish e d — n o t o verly affluent, b u t up-scale. Several pitfalls m ust be avoided in order to m aintain a successful and prof itable line of credit for individuals. If m anag em en t sets unreasonable goals for p ro d u c t grow th, or w ants growth in the secured or th e u n se cured side beyond th at w hich is n a tu r ally attain ab le from th e tra d e area proscribed, one m ight te n d to p u t on credits that don’t m easure up to origi nal standards. Also, thought should be given to th e technical side of th e line to allow for expansion. It is n a tu ra l to fo resee growth and to plan for those increases. But consideration m ust be given to the possibility of m erg er and absorption of another bank’s accounts into your sys tem . T here always will be a small p e r centage of persons in this w orld who are out to defraud a lender. All one can do to avoid these people is to investi gate each application as thoroughly as cost effectiveness perm its. This same investigation also is still th e b est d e fense against those who w ould hand you a big loss even if unintentional. D esp ite the cu rren t tre n d to open personal lines, num erous lenders have experienced less than total joy in the personal line of credit. Being locked in to low ra te s w h ile m a rk e t ra te s soared was th e m ost com m on malady suffered by early entrants into th e p e r sonal-line field. Following closely b e hind on th e list of woes is th e sp ecter of charge-offs. L ines d o n ’t pay dow n w hen in the hands of those who cannot discipline th eir spending. C areless ex tension of open-end credit to m eet a b u d g eted figure, as m entioned before, has caused big grief to m ore than one lender. Personal lines of credit provide one of th e m ost efficient m eans of consum e r lending. The custom er w rites his own loans from his approved com m it m ent. This obviates renew al and red is closure of notes and reapplication for each new extension of credit. If the le n d e r recognizes well in advance that this is not a service for everyone and covers as m any contingencies as possi ble, th e personal line of credit will no dou b t carry an ever-increasing share of consum er credit in the future. • • • First Bank M inneapolis has p ro m oted C. Kirby Scroggins, vice p resi d ent, to head th e retail-banking d e p a r tm e n t an d n a m e d T im o th y D. J o h n s o n v ice p r e s id e n t/r is k - e v a luation-division head. Mr. Scroggins joined th e bank in 1950 and had been branch-adm inistration m anager. Mr. Johnson comes to the bank from M or gan G uaranty T rust, N ew York City, w here he was vice president/projectfinance departm ent. J. S. BAREFOOT Sc ASSOCIATES, INC. Jo Ann Barefoot, formerly Deputy Comptroller of the Currency in Washington, brings fifteen years of experience to helping banks gain the crucial, elusive competitive edge. Our specialists can help you build sound strategy, strong management, and rigorous risk and cost control. ▼Tatch, while the gnomes make paper disappear. T heir secret is the m agic o f Freddie M ac’s MIDANET® II. This system lets your com puter autom atically send m onthly accounting reports to Freddie M ac. The results? Your staff is virtually free from paper work. In fact, it can m ean as m uch as 75% less labor. In addition to the savings in tim e, M ID A N ET II will also m ean far few er errors. G etting Freddie M ac’s M ID A N ET II w orking for you is fast and easy, too. oAll it takes is a call to som eone who know s— a Freddie M ac gnom e. © 1985, FHLMC THE GNOMES 614/224-0281 K N O W sm • Strategic Planning • Low Cost Compliance • Merger Implementation • Loan Review • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Management Consulting Freddie M ac Federal Home Loan Mortgage Corporation Owned by A merica’s Savings Institutions How to wrap up big deals without using paper. THE GNOM ES KNOW m Recently the gnomes of Freddie Mac completed a 54 million dollar mortgage transaction in just nine minutes by eliminating practically all paper work. How’d they do it? By using an f exclusive Freddie Mac computerized system called MIDANET® (Mortgage Information Direct Access Network). ■ This free 't customer service cuts down errors, saves time and trouble and *J fe » reduces paper work. ■ Paper’s fine for wrapping up birthday gifts, but for mortgage transactions, nothing’s finer than MIDANET. Freddie Mac ■ Marketing Communications ■ 1776 G Street, N.W. ■ P.O. Box 37248 m Washington, D.C. 20013-7248 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis © 1985, FH LM C. Freddie M ac Federal Home Loan Mortgage Corporation Owned by A merica’s Savings Institutions Federal Sign. You can trust us w ith the image you want to p ro je ct hether your identification program involves a single location or is national in scope; whether your signage is intended as a market ing tool, to project image-building awareness, or as an advertising medium, Federal Sign’s unmatched resources can help you achieve your goals. W No matter what your business or sign age needs, you can be assured that Federal Sign has met every type of iden tification challenge while protecting the integrity of clients’ business images. Using state-of-the-art materials and advanced construction methods, your Federal signage will project your image through the eighties and beyond. Can you afford to rely on anyone less than the nation’s premier supplier of signage? Austin ........................ Chicago...................... C incinnati.................. Corpus C hristi............ Dallas/Fort Worth . . . . Houston...................... Indianapolis.............. Kansas C ity ................ Knoxville.................... Louisville.................... Milwaukee.................. National Sales............ Oklahoma City............ San Antonio................ San D ie g o .................. St. L o u is .................... https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis (512) 459-2228 (312) 887-6800 (513) 722-1550 (512) 857-2638 (817) 261-2341 (713) 799-1666 (317) 875-5332 (816) 861-4400 (615) 577-1653 (502) 499-0220 (414) 374-7400 (312) 887-6921 (405) 681 -8113 (512) 341 -8223 (619) 481-3211 (314) 371-2000 W -. m Call Toll Free 800-323-7431 FEDERAL SIGN □¡vision Federal Signal Corporation The Marketing-Minded Sign Company Attention Bank CEOs How Does Your Bank “Introduce” the New Director To His New Job? https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis H E N E W L Y E L E C T E D b a n k d ir e c to r p ro b a b ly se e m s o v e rw h e lm e d w ith th e re s p o n s ib ilitie s o f h is n e w jo b a n d th e c o m p le x itie s o f th e b a n k in g sy ste m . So, y o u ’ll w a n t to a c q u a in t h im w ith h is “ n e w c h a ir ” as q u ic k ly a n d as “g e n tly ” as p o ssib le . Y our b a n k u n d o u b te d ly h as a p o rtfo lio o f m a te ria l to h a n d to th e n e w d ire c to r. O u r in s tru c tio n a l fo ld e r, e n title d “B riefin g the N ew B a n k D ire c to r , ” c a n b e a u se fu l a d d itio n to y o u r in tr o d u c to ry m a te ria l. I t is w r itte n b y D r. L ew is E . D a v id s, e d ito r o f T h e B A N K B O A R D L e tte r . “B riefin g th e N ew B a n k D ire c to r ” p ro v id e s th e r e c ip ie n t w ith an o v e rv ie w o f th e d ir e c to r ’s jo b a n d re s p o n s ib ilitie s a n d also offers su g g e s tio n s o n “h o m e w o rk ” a n d “re a d in g ” a ssig n m e n ts th a t w ill b r in g h im q u ic k ly u p -to -d a te in his jo b . T h is 8 -p a g e fo ld e r c o n c lu d e s w ith w h a t th e a u th o r h as te r m e d th e “20 C o m m a n d m e n ts for B an k D ir e c to r s ” s ta rtin g w ith “T h o u sh a lt n o t a tte m p t to u s u r p p re ro g a tiv e s o f m a n a g e m e n t,” a n d e n d in g w ith “T h o u s h a lt s u b m it th y re s ig n a tio n g ra c e fu lly a n d w ith d ig n ity w h e n n o lo n g e r m a k in g a p o sitiv e c o n trib u tio n to th e b a n k .” F o r a F R E E c o p y o f th is fo ld e r, fill in th e c o u p o n b e lo w . Y ou’ll re c e iv e th is p lu s o th e r in fo rm a tio n c o n c e rn in g th e b a n k d ir e c to r ’s jo b th a t can b e u s e fu l to h im a n d , o f c o u rs e , to th e b an k . T r ----------------------------------------------------- 1 I The BANK BOARD Letter | 408 Olive St., St. Louis, M O 63102 | Please send m e a F R E E copy of “Briefing the New Bank D irector along w ith o th er inform ation about The BANK BOARD L etter. | N a m e _________________________T itle ________________________ Bank _______________________________________________________ I Address _____ _______________________________________________ | | City ----------------------------S ta te ______________Z i p ______________ i BG/3 A CONSULTANT . . . What's That? The Banker's "ProfessioAd • Long-Range Strategic Planning • Simplifying IRA Programs Strategic Planning W ill Produce Long-Range Benefits to Bank S TRA TEG IC planning is a process that m ost banks are im plem enting today, m any w ith th e h elp of a consult ing firm. D efining missions and goals and developing a strategy to im p le m ent these goals is th e p ro ced u re in volved, according to one consulting firm, J. S. Barefoot & Associates, C o lum bus, O. A typical client of this firm m ight be an $80-$ 150 m illion bank, in eith e r a rural or urban m arket. This bank p ro b ably has little fo rm al p la n n in g or b u d g e tin g ex p ertise. O n th e o th e r hand, it m ight have a sound annual planning and budgetin g process, b u t believes it lacks th e “big p ic tu re .” O r a typical clien t m ight have a strategic plan — on p ap er — b u t has n o t successfully im p le m e n te d th a t plan. “W e b e g in ,” says Jo Ann Barefoot, p re s id e n t of th e firm , “by p u ttin g togeth er a planning team of top m an agem ent and o th er players, such as the te c h n o lo g y a n d h u m a n - r e s o u r c e s d irecto rs.” This team , Ms. Barefoot says, should include key people who m ight obstruct or u n d erm in e im ple m entation if they do not fully support final decisions. This group works thro u g h a series of m eetings to assess th e bank’s external and internal situation. It th e n builds the foundation for th e bank’s com peti tive strategy. This foundation is a sin gle idea that will drive everything else the bank does. F or exam ple, th e needs of a certain, ta rg e te d m arket m ight drive th e bank’s products, branching strategy, technology, m arketing and so B G /4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis forth. Or, the bank m ight have a strong product around w hich it should d e velop m arkets, distribution and sup p o rt systems. The secret is to choose one starting point from w hich all other decisions will flow. W ith this foundation in place, the bank th en defines its target m arkets and products. T hen, goals are set for size, grow th and profits. At this point, says Ms. Barefoot, the bank holds an off-site planning retreat w here team m em bers propose specific goals and strategies for each key func tion of th e bank: m arketing/product design, distribution, sales, technolo gy, financial m anagem ent, hum an re sources, image and “c u ltu re .” C u ltu re is m ost im portant, accord ing to Ms. Barefoot. It is often the sin g le b e s t to o l for im p le m e n tin g strategy. C ulture refers to the b ank’s basic values and goals. All successful organizations define the sim ple, fun d a m e n ta l qualities th a t m ake them special and consciously instill these in t h e i r e m p lo y e e s . T h e s e e x p lic it efforts, says Ms. Barefoot, to build a sense of identity and pride — a sense th at th e bank is b e tte r than others — can replace vast quantities of p a p e r w ork and controls in getting personnel to carry out the bank’s strategy. T h ro u g h o u t th e s tr a te g y - d e v e l o pm ent process, the role of th e con sulting firm is to provide background in fo rm a tio n , le a d d isc u ssio n s an d w rite up m eeting results. This is fol low ed w ith a w ritten strategic plan and im p le m e n ta tio n p r o c e d u re th a t is com m unicated to all em ployees and • Standardizing • Targeting Markets IRAs Made Simpler Is The Goal of Minnesota Consultant w ith regulations can be a problem , as m ost bank ers know. O ne consulting specialist in retirem en t products — IRAs, Sim pli fied E m ployee Pension plans (SEP) and Keogh plans — has found a specific need for banks to update th e ir IRA plans. U n iv e rs a l P e n s io n s , B ra in e rd , M inn., conducts com pliance reviews for its bank clients, sending in one of its professional staff — an attorney, CPA or consultant. T he review er exam ines form s and p ro c e d u re s u se d in th e bank’s IRA program . The bank’s p ro gram is analyzed and a w ritten rep o rt is provided to m anagem ent noting any deficiencies and recom m ending any changes n eed ed to bring th e bank into com pliance w ith regulations, im prove operations and decrease costs. D uring one recen t review , says a spokesm an for Universal, “we found that a bank was using o utdated legal forms to establish IRAs, failed to give a p ro p e r disclosure statem en t to IRA custom ers and did not file p ro p er reo m p l ia n c e C E D IT O R 'S NOTE — On th e s e p a g e s th e r e a d e r w ill fin d se ve ral the board. e x a m p le s o f cases w h e re th e fin a n This is followed w ith an operational planning process, sem inars for m an agers, planning kits for each unit of the b a n k , ty in g stra te g ic goals in to a fram ew ork so that each bank unit can c ia l consulting firm has b e e n a b le (Continued on page BG/6) to assist a p ro b le m . b a n k w ith These " c a s e a specific h is to rie s " c a m e to us as a resu lt o f a q u e ry e x te n d e d b y this p u b lic a tio n . ForA Wide Range o f Operations • Researching Branch Closings • Maximizing Values for Shareholders ports to th e In tern al R evenue Service. T he IRS, th e U niversal spokesm an noted, does have th e authority to levy substantial fines against a bank for d e ficiencies in an IRA program . U niversal states th at m any banks use as m any as 10 forms to open IRAs, making the process a tim e-consum ing one. Ry suggesting the use of a single docum ent th at consolidates all neces sary forms, U niversal has h e lp e d these banks reduce “p ap er costs” and cleri cal tim e in opening accounts. M any banks now using this system will recognize U niversal’s “IRA Sim plifier I I ,” a p ro ced ure originated by the firm several years ago. • • Maximizing Values For Shareholders During an Acquisition S T A T E W ID E banking had b een d e bated in Louisiana for m any years b ut, as 1984 approached, it ap peared that the legislature w ould finally pass a bill allowing bank holding com panies to acquire banks statew ide. H istorical ly, expansion by banking organizations in the state had b een confined to a single parish (the Louisiana equivalent of a county). As passage of th e bill becam e im m i nent, bankers scram bled to position them selves for th e new environm ent. A k ey g e o g ra p h ic a re a w as N ew O rleans. The “dow ntow n” banks, con fined to O rleans Parish, w ere antic ipating expansion into th e suburban parish es of Jefferson, St. T am m any and St. B ernard. T herefore, banking organizations in th ese parishes w ere considered prim e acquisition targets. It was against this background that G olem be Associates, Inc., a nationally https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis known econom ic and financial consult ing firm, was retained by NBC Bancshares, th e $380-million p aren t com pany of National Bank of C om m erce in Jefferson Parish. G olem be was asked to assist and advise senior m anage m ent of the H C in determ ining the value of th e institution, particularly w ith respect to m aximizing th e sale price in the event of an acquisition. The process of financial valuation is an im portant diagnostic technique. It is critical in assisting m an ag em en t to id en tify stre n g th s and w eaknesses, position th e organization and maxi mize shareholder values. G olem be Associates has developed and refined a variety of valuation te c h n iq u e s. In NBC B an csh ares’ case, th r e e m e th o d s w e re em p lo y e d : A cap ital-asset valuation based on ex p ected dividend perform ance; an in v estm en t valuation based on com para tive p eer-group acquisition ratios; and a net-asset valuation th at recognized b oth th e cu rren t m arket value of tangi ble assets and th e value associated w ith intangibles such as core-deposit rela tionships. In analyzing the results of th e th ree valuation tech n iq u es, G olem be was able to identify areas of possible ea rn ings im provem ents. This had two key results: first, G olem be Associates was a b le to a ssist m a n a g e m e n t in im p le m e n tin g a fo rm a l, lo n g -ra n g e strategic-planning process that w ould serve to fu rth er focus the organiza tio n ’s grow th and developm ent; and, second, certain sectors of th e organiza tion w ere pinpointed as possible tu rn a ro u n d areas in w hich an a c q u ire r could apply its expertise and efficien cies to increase earnings. As a result of both th e valuation re sults and considerable strategic p lan n in g , th e b a n k ’s m a n a g e m e n t and G olem be’s representatives w ere able to en ter th e negotiation process w ith a clear idea of th eir objectives and b a r gaining strengths. In A ugust, 1984, N B C B an cshares a g re e d to b e ac qu ired by the W hitney H olding C o rp ., New O rleans, at a m ultiple of over two tim es book value, th e highest m ultiple paid to date for a Louisiana banking organization. • • Up-Scale Banking: A Popular Target That Needs Careful Aim A RG ETIN G th e up-scale banking m arket appears to be one of the m arketing goals of many banks today. A year-end survey by this publication, for exam ple, in d icated th at 23% of those responding planned to offer ser vices to the up-scale m arket in 1985. An a d d itio n a l 27% in d ic a te d th e y already offered this service. But how to reach this m arket, w hat products to offer, how to price these products appear to be questions that need to be asked and answered. This was the assignm ent given to Strategic Solutions Co., G olden, Colo., by one of its m id-size banking clients. Some interesting facts w ere revealed in its study, according to D iane R. Sauter, senior partner. In o rd e r to research th e m arket, Strategic Solutions utilized confiden tial, in-depth, one-on-one interview s w ith custom ers and prospects. T he groups interview ed: business owners and m anagers, physicians, attorneys and CPAs. T he consultant, on behalf of its client, looked for answers to these two questions: 1. W hat financial-service providers are currently being used and w hat is T B G /5 The Banker's "Professional Adviser" the overall satisfaction level w ith each? and quality of service. The bank had 2. W hat is th e reaction to th e bank’s planned to introduce new products, proposed up-scale service approach — including financial planning and in specifically, relationship m anagem ent v estm en t m anagem ent. and staffing, p ro d u c t line, pricing, 4. H ouse the up-scale d e p artm en t in location and positioning? th e m ezzanine area of th e bank, close T he results of this questioning w ere to everyday lending and deposit func eye openers! T he consultant found that tions, w here cu rren t clients are accus th e majority of th ese professional p eo tom ed to going and w here conveni ple looked elsewhere than th e bank or ence is offered to new custom ers. The savings association for th e ir prim ary bank had planned to use the 10th floor financial services. T he reason for this tru st d ep artm en t until distinctive new a ttitu d e : R e sp o n d e n ts h ad lo n g eroffices could be built. term personal relationships w ith oth er 5. P ut systems in place to allow the financial-service players — prim arily option of com bining all services used th eir attorney or CPA. into a b u n d led relationship price, b u t T h e s e p ro fe s s io n a l p e o p le p e r offer clear prices for each service used. ceiv ed th a t p e rs o n n e l at th e bank 6. Position as a totally new resource, change too often for them to feel com ra th e r than a substitute for or a su p p le fortable discussing a broad range of m en t to c u rren t financial resources. financial services. T hey view ed th eir T hese approaches w ould, th e con prim ary relationship w ith th e bank as sultant recom m ended (and the bank one based on loan needs, w hich, of agreed), help build a successful and course, rep resen ts only a narrow p o r profitable up-scale consum er m arket tion of th e up-scale m arket. relationship. • • M oreover, w ith banks offering an ever-w ider mix of products and se r vices, the targ et audience was suspi cious th at a single individual at th e Mississippi Bank bank w ould have th e expertise neces Standardizes Operations sary to help m ake all th e critical recom m endations n e e d e d by people in th e After Rapid Growth up-scale group. The consultant also studied p roduct lines th at w ould find a level of success, as well as th e im portance of th e physi R A PID grow th of existing facilities, cal location and positioning of the u p de novo expansion and strong scale departm ent. loan dem and created “growing pains’ W hile th e up-scale consum er re p re for G reat S outhern National, Jackson, sents a potentially profitable m arket M ississippi. T he need, according to segm ent for th e bank, th e con su ltan t’s Jam es T. S peed, ch airm an , was to study indicated th at reaching th at m ar standardize operations and “fine tu n e ” ket involves m ore than “ju st offering a th e bank’s organizational and re p o rt fancy office and opening the d o o rs.” ing structure. In addition: define o p er T h e re fo re , th e c o n s u lta n t re c o m atio n al im p ro v e m e n ts w hich could m ended a n u m b er of changes in a con lead to increased profitability. cept that already had b een p lanned by The assignm ent was given to consul th e bank. The following approaches tants P atten, M cC arthy & Associates, w ere suggested: D enver, a firm com prised of experi 1. M aintain th e com m ercial len d er enced bankers, who un d erstan d dayas relationship m anager. Use special to-day m an agem ent and operational issues facing banks today. ists w ith o th er training as backups to G reat S outhern, founded in Quitcustom er-contact staff. T he bank had m an in 1902, b u t now dom iciled in b een planning to m erge tru st and retail ban k in g and cro ss-train e v ery staff Jackson, was o p e ra tin g sev en fullm em b er to serve as an expert rela service b ranches in central, eastern tionship m anager. and s o u th e rn M ississippi. In early 1984, th e bank also was in th e process 2. C o n cen trate on stabilizing and of consolidating five banks it had ac stren g th e n in g c u rre n t relationships. quired or established since early 1976. Use these relationships to assist in new referrals. D uring that period th e bank’s size had ballooned from $27 m illion to $205 3. E m p h asize traditional deposit, m illion, creating th e problem s o u t lo an an d tr u s t b a n k in g p r o d u c ts , lined in th e foregoing paragraph. paying p articular attention to accuracy BG/6 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Patten, M cC arthy quickly identified th ree need ed tasks to accom plish the objectives of C hairm an Speed. 1. A task perceived as having the m ost im m ediate b enefit was im ple m entation of organizational structure changes that would elim inate the over lap in responsibilities that had evolved as th e b an k e x p e rie n c e d its rap id grow th. This, cou p led w ith reco m m endations for centralizing certain o p erations areas, resu lted in th e bank realizing m easurable annual savings in excess of $250,000. 2. A need was identified for tim ely and m eaningful m anagem ent inform a tion. Delays had been experienced in im plem enting a new data-processing system w ith its service-bureau vendor. Targets and responsibilities w ere d e fined and the efficiency of the “conver sion effort” was im proved. 3. A th ird recom m endation was to r e s tr u c tu r e th e b a n k ’s tra d itio n a l accounting system to g enerate both p e rfo rm a n c e-m e a su re m e n t inform a tion and net-profitability inform ation on an individual-service basis. This was accom plished by developing an enhanced chart of accounts w hich p re viously had b een created by the bank. W hile Patten, M cC arthy does not claim full credit for earnings achieved in 1984 (after all, the bank was grow ing), it points w ith p ride to significant results in 1984: after-tax earnings up 57% over 1983. In addition, n et in com e for January, 1985, increased by 120% over that realized for January, 1984. • • Strategic Planning (Continued fro m page BG/4) p rep are strategies, action steps, d ead lin e s an d e s tim a te s o f r e s o u r c e s n eed ed to accom plish goals. N u m eri cal ta rg e ts are se t for p ro d u c tio n o riented units of the bank. O nce all u nits p re p a re o p eratin g plans, a coordination and review p ro cess is organized. B udgeting th en is considered. “T he w o rld ’s b est stra tegic p lan ,” says Ms. Barefoot, “will be ignored if b u d g e t p rio rities conflict w ith the p lan .” As th e plan is im p lem en te d , th e b a n k u su a lly e x p e rie n c e s gro w in g p a in s an d o th e r “ sid e e ffe c ts ” of changes it undertakes. T hese are eval- uated and strategies are reco n sid ered as m ajor problem s are identified. Strategic planning, if followed, can b e successful, says Ms. Barefoot, as she points to one co m m u n ity bank w hose C E O was a strong individual planner. T he problem : his plans and strategies w ere in his own m ind and had not b een com m unicated to bank personn el. It was im p o rtan t, th e re fore, to create a “shared view ” of th e bank’s future th ro u g h o u t th e organiza tion, plus an e x citem en t ab o u t th e changes th e bank was undergoing. T hese w ere the m ajor benefits of a strategic plan for this bank. In ad d i tion, the bank has greatly exceeded previous earnings and volum e records in every area. A nother “success story” involved a $150-m illion savings b an k th a t has tra n s fo rm e d its e lf from a lim ite d service thrift into a m ultiple-product retail bank th at serves an affluent m ar ket w ith high personal service and high technology. E m ployee tu rn o v e r has b een reduced, productivity increased, and th e in stitu tio n has grow n from $150 m illion to $230 m illion in 18 m onths, w hile m aintaining a 6% capi tal ratio. Barefoot & Associates offers o th er consulting services, as do m ost consul tants; b u t they, too, are excited about a new sales-training program th ey soon will be offering to banks. • • Training Guide Offered The ABA is offering a new Audio Visual Resource Guide that’s de scribed as a “one-stop directory to help bankers locate the right AV products for their particular training needs.” Products include films, slides, video, audio cassettes and com puter-aided instruction. The guide includes ABA pro grams, products from other produc ers and distributors and a list of asso ciations and publications that deal with AV materials. Entries cover general banking and finance, bank ruptcy, collection techniques and law, customer information and cus tomer services. Also included are training mate rials on foreclosures, management developm ent, marketing/sales, security, supervisory training and teller training. Each entry provides information about the product’s content, audi ence, time required, format, cost and ordering information. Price of the guide is $35, but ABA members can get it for $20. Request catalog number 297200 from ABA Order Processing, 44-B Industrial Park Circle, Waldorf, MD 20601. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis /\ D elivery-System Problem So lved Candidates for Branch Closings Identified by Consulting Firm F INANCIAL IN STITU TIO N S have retained the services of K. H. Thomas Associates, a Philadelphia consulting firm specializing in delivery system planning, for both individual and systemwide branch/ ATM projects. Typical individual branch and ATM consulting projects, says Dr. K enneth H. Thom as, the com pany’s president, include feasibility analyses, location studies, applications/hearings, perform ance evalua tions and closing analyses. O ftentim es perform ance appraisals are conducted on the offices of an acquisition candidate or on those offices that have b een proposed to be purchased or sw apped to aid m anage m ent in its decision making. The firm ’s systemwide study is known as BRANCHPLAN® System. BRANCHPLAN System is th e firm ’s tradem arked nam e for a twophased analysis of a financial in stitu tio n ’s overall existing and proposed delivery system. The term “b ran ch ” in BRANCHPLAN is broadly defined to include all traditional and electronic delivery-system vehi cles. BRANCHPLAN System is a m odular approach and contains two m ajor subsystem s: 1. Subsystem I — The Branch Perform ance-Evaluation M odel, and 2. Subsystem II — The O ptim al Branch-Location Model. The first subsystem p ertains to a financial institution’s existing deliv ery system and the second is concerned w ith possible additions to it. T hese two subsystem s can be applied individually or sim ultaneously. The purpose of BRANCHPLAN Subsystem I is to analyze the past, p resent and projected perform ance of all existing delivery-system facilities and make recom m endations that will lead to the maximization of th eir profitability. Those offices that have been identified as existing or potential “pro b lem ” or “serious-problem ” branches are singled out for special exam ination. M any alternative strategies for enhancing th e branch perform ance of a particular problem branch, according to Dr. Thomas, are ex am ined in th e context of this study. T hese range from the m aintenance of th e status quo to th e possible closing, sale, or sw apping of a facility. O th er alternative strategies potentially include the m odification of a branch m arketing plan; im proving existing facilities; the addition of electronic or o th er facilities; scaling down a full-service branch to a m ini-branch; or relocating th e branch to a different site in the im m edi ate area or to a different im m ediate area in the prim ary service area. The objective of BRANCHPLAN Subsystem II is to maximize a financial institution’s retu rn on invested capital on any planned deliv ery-system additions. Specific recom m endations as to the optim al location, type and characteristics of proposed de novo branches, p ro prietary and shared ATMs, possible m erger and branch purchase candidates, e tc ., are provided in this study for a five-year planning period in a designated “study are a .” A case study of a BRANCHPLAN Subsystem I and II study com p leted a few years ago by K. H. Thomas Associates for an approxim ate ly $600-million institution w ith 33 offices is sum m arized below. The BRANCHPLAN Subsystem I analysis of the existing office netw ork in this particular case study dem onstrates the point that problem and serious-problem branches have no standard profile that w ould be useful for delivery-system planners. The only common thread to these branches is th eir past, p resen t and projected unprofita- (Continued on page BG/20) BG/7 INCREASED PRODUCTIVITY The Banker's Goal In Long-Range Planning By William D. Miller Marshall and Stevens, Inc. St. Louis banks of th e future will be those th at can deliver th eir services in th e m ost efficient and costeffective m an n er possible. A b ank’s operations and system s — and conse quently its productivity — will be of critical im portance. To effectively com pete and thrive in the com ing years, a bank m ust strategi cally address and plan th e various ele m en ts of its o p e ra tio n s. A “p ie c e m eal” approach will not be effective in m e e tin g lo n g -ra n g e p r o d u c tiv ity needs. The future operational re q u ire m ents of a fully in teg rated financialservices provider m ust be exam ined at a strategic level. As a consultant, I am aware of th e im p o rta n c e p ro g re s s iv e b an k s are placing on increased productivity and developm ent of a long-range p ro d u c tivity plan. Several forces are acting on banks and creating th e n eed for longrange productivity planning: S uccessful • T e c h n o lo g ic a l a d v a n c e s a re com ing ra p id ly and b an k ers n eed to be in a position to an ticipate th e technology’s use, not ju st react to th e changes. • The rapid rise of low-cost, n o n b an k c o m p e tito rs is p u ttin g p ressu re on traditional finan cial in s titu tio n s to c o m p e te m ore aggressively. • D eregulation is allowing banks The author is director of M&S’s Financial Industry Group, whose main function is to serve the unique interests of financial in stitutions. The group specializes in strategic business plans, operations im provement, valuations and appraisals. BG/8 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis to offer m ore services, b u t they m ust be offered at a profitable p ric e , th e re b y n e c e ssita tin g productive operations. • Salaries and related personnel costs are am ong th e fastest ris ing expense item s. T herefore, Productivity planning should address o p era tio n al w e a k nesses and also make full use of new operating technologies. efficient use of the staff is essen tial to long-range profitability. • N on-credit services are becom in g in c re a s in g ly im p o r ta n t sources of revenues, b u t m ust be com petitively priced to be successful and efficiently deliv ere d to be profitable. A re c e n t consulting assignm ent that I m anaged was designed to address the lo n g -ra n g e p ro d u ctiv ity n eed s of a $500-million, tw o-bank holding com pany. The result of this assignm ent was th e d evelopm ent of an action plan for th e b ank’s m anagem ent to follow over th e next th ree years to address o p er ational w eaknesses and position it for m aking full use of new technologies. A few o f th e areas in w hich we found w eaknesses and recom m ended changes w ere as follows: 1. Production Performance and Process Management. W e found th at perform ance stan dards did not exist and tracking q u an ti ty or quality was not possible. W hat little data w ere g athered was done so m anually and infrequently. B e c a u se p e rfo rm a n c e s ta n d a rd s w ere lacking, product cost estim ates w ere inaccurate. M oreover, it was not p o ssib le to assess th e c o s t/b e n e fit ratios of investm ents in autom ation equipm ent. W e recom m ended th e installation of a p ro d u c tio n q u a n tity and q u a lity tracking system. 2. W orkflow. W e uncovered num erous instances of duplications of w ork and rew ork d ue to errors. In the lending dep artm en ts, we recom m ended changes to loan set up procedures that could effectively allow each clerk to set up 15% to 20% m ore loans. W e also reco m m en d ed form changes in construction loans to greatly reduce paperw ork for m inor changes and renewals. 3. Automation of Manual Tasks. N um erous tasks w ere b ein g p e r form ed th at could easily be accom plished on a m icrocom puter. W e rec om m en d ed autom ating safe-depositbox selling, loan-form p re p a ra tio n , loan-check preparation, accounts pay able, officer-call rep o rtin g and su p plies inventory. 4. Facilities. D ue to rapid grow th, w ork groups w ere separated into four buildings. No plans had b een developed to forecast staff, eq u ip m en t and space needs. W e re c o m m e n d e d th a t a lo n g -ra n g e facilities plan be prepared. 5. Organization. W e found n um erous instances of u n clear lines of authority, m ultiple re porting relationships, excessive spans of control and a general lack of com m unications. W e reco m m en d ed re alignm ent of several areas to address these problem s. BEFORE YOU SPEND THOUSANDS IN A NEW VAULT, , 6. Training. W e found training of any type to be n o n -e x is te n t. O u r p rim a ry re c o m m endation was u ser training to m ake use of available c o m p u te r services. T here w ere significant gaps b etw een th e capabilities of th e co m p u ter and th e use of it by operational and m an agerial staff. 7. Documentation. W ritten p rocedures did not exist. As a result, we found identical tasks being perform ed several ways in th e same d ep a rtm e n t. W e re c o m m e n d e d th e d e v e lo p m e n t o f p r o c e d u r e s d o c u m en tatio n (after o p e ra tio n a l p ro c e dures w ere established) in key areas such as loan processing, tru st o p era tions and co m p u ter/user interface. 8. EDP Planning. W e found th at E D P was not con sidering u ser needs. W e m ade recom m endations for an E D P U sers Task Force, a system to set E D P project priorities, and identification of project leaders. W e also reco m m end ed th at a longrange E D P plan be p re p a re d th at con siders new products, capacity, control, custom versus stock software and staff ing. INVESTA FEW MINUTES LEARNING ABOUT VAULT-STOR™ B uilding a new vau lt is a costly proposition. Yet you m ay be facing th is costly addition as new sto ra g e re q u ire m e n ts p u t too m uch p re ssu re on y o u r e x istin g vault. A TEN C O can relieve th a t p re ssu re w ith VA U LT-STO R, a co m p lete line of vau lt sto rag e con cep ts desig n ed to m axim ize available space in y o u r present vau lt. VA U LT-STO R p u ts ev ery available cubic inch of space to w ork th ro u g h a variety of custom -designed sy ste m s...e x p a n d in g vault capacity for a fraction of th e cost of new construction! 9. EDP Operations. W e found th at h ardw are p erfo rm ance was not m onitored and problem s w ere difficult to trace. A system was recom m en d ed to track and re p o rt sys tem s problem s. O th e r reco m m en d a tions ad d ressed problem s we uncov ere d in data-cen ter security, hardw are locations, m aintenance, m icrofilm ing, te lle r-te rm in a l re sp o n se tim es and new uses for existing operating and ap plications systems. T he m ajor value of th e assignm ent was th e identification of problem s th at w ere im pactin g th e c lie n t’s c u rre n t p ro d u c tiv ity , as w ell as th o se th a t w ould adversely affect long-range p ro ductivity. By p u ttin g th e p ro b lem s into focus, th e bank was able to act on th ese problem s before it was too late. • • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mobile shelving is just one of many ways VAULT-STOR puts empty space to work in vaults. In vest a few m inutes before you spend thousands. Call 1-800-643-8004 for your local ATENCO rep resen tativ e, or com plete and m ail th e coupon below for full details. ATENCO Filing Systems; P.O. Box 1267; Atlanta, GA 30301; Attn: Joe Marchisen B G /9 SITU A TIO N ANALYSIS A FIRST STEP IN STRATEGIC P LA N N IN G By Douglas V. Austin and Mark S. Mandula INTRODUCTION: The authors explain that Situation Analysis is a technique they use to assist clients in determining the strengths and weaknesses of an organiza tion. It is used, they say, in order for man agement to determine the strengths and weaknesses of the bank (or any type of busi ness) in order to assist in long-term strategic planning. This article outlines how situation analysis operates, how it can apply to any bank and what kind of results can be expected. T H E FIR ST step in a situation analysis is to review th e organiza tional chart and th e job descriptions of the bank. M any banks do not have cu r ren t job descriptions nor do th ey have an organizational chart. The first step, then, is to analyze job descriptions and to compile accurate job descriptions of the staff and the management. F u r th e r m o r e , an o rg a n iz a tio n a l chart should be developed. This may not be th e chart th e bank thought it had no r th e org an izatio n al ch art it wants; b u t it is th e first step in d e te r m ining the c u rre n t situation. The next phase is to develop a series of questions w hich will be utilized in interview ing m em bers of th e board, senior m anagem ent and selected staff m em bers in o rd er to d eterm in e c u r ren t weaknesses and strengths of th e organization. T hese questions m ust be tailor m ade to th e institution. They are utilized to draw from interview ees in- Dr. Douglas V. Austin is professor of fi nance, College of Business Administration, University of Toledo. He also is president of Douglas Austin & Association, a Toledo financial consulting firm. Mark S. Man dula, a vice president of the firm, has spe cific expertise in strategic planning, valua tion and banking research. BG/10 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis fo rm atio n on th e stre n g th s , w eak nesses and objectives of the organiza tion. Areas to be covered by th e in te r views are extrem ely im portant to the evaluation of the bank’s cu rren t posi tion. They are: 1. The bank’s public image. 2. The expertise of the functional areas. 3. The strengths and w eaknesses of m anagem ent and staff. 4. T h e d irectio n of th e b o ard of directors. 5. The goals and objectives of the bank. 6. The m arketing and advertising effectiveness of th e bank. 7. The leadership of senior m anage m ent and the board. Interview s also are utilized to d e te r m ine com m unication efficiency am ong staff m em bers and th e degree of com m unication betw een m anagem ent and th e board. In addition, analysis should be m ade of the com m ittee structure used by m anagem ent and th e board and its perceived degree of efficiency. Finally, this interview process also will d eterm ine th e perception by m an agem ent and th e board of the prospect for successful operation in th e future and any financial aspects th at m ight p ro m o te or d e te r p ro fitab le o p era tions. Interview s should take place in a confidential m anner. This can be the m ost difficult stage of th e situation analysis. M anagem ent m ay w ish to have interview s done by an outside consulting group in o rd er to ensure confidentiality, b u t at the same tim e e n c o u rag e full disclo su re by in te r viewees. Interview s are designed to em p h a size th e functional areas of the orga nization and to probe for its strengths and w eaknesses. They should not cen te r on personalities and/or individuals. N o n e th e le s s , p e r s o n a l in d iv id u a l situations will arise. Therefore, it is best to use outside objective consul tants to assist in this stage of th e analy sis in order to obtain the b est inform a tion w ith the least possible “political” cost. E very effort should be m ade to keep office politics and personal conflicts out of th e interview s. In terview ees should be inform ed that any com m ents they make will not be listed in th e final report under their names. It should be Interviews are designed to emphasize the functional areas of the organization and to probe for strengths and weak nesses. em phasized that all recom m endations will be a consensus of those in te r viewed. Individual com m ents will not be pinpointed. This is done, of course, to protect interview ees and to encour age a full flow of inform ation. As th e in te rv ie w c o n se n su s d e velops, apparent and latent strengths and weaknesses of the bank will begin to appear to the interview ers. These will be transm itted to the board and senior m an ag em en t th ro u g h a final situation report, accom panied by rec om m endations. It should be noted th at an efficiency rating of each d ep artm en t head, su p er visor or officer will be a by-product of the analysis. Not only will individuals in charge of functional areas respond to th eir own strengths or w eaknesses, b u t at the same tim e they will offer similar com m ents on o th er d ep artm en t heads, senior m anagem ent and board m em - Help Stamp Out Director Liability Risk With These Board-Related Manuals C O R P O R A T E E T H I C S . . . W hat E v e r y is demanding more disclosure fro m all businesses, including banking. Thus, bankers lite ra lly are forced to re-exam ine policies on types o f in form ation th a t can be disclosed p u b licly. The board's disclosure policy can be a major factor in the public's judgm ent o f a bank. The fact th a t a bank is w illin g to discuss . . . or make public . . . any of its actions w ill encourage high stan dards of conduct by the bank staff. This manual (over 200 pages) w ill help directors probe “ g rey"a re a so f business conduct so that directors can establish w ritte n codes fo r their own bank. H hat Every Director Should Know About Conflicts of Interest The Effective Board Audit D ir e c to r Sh o u ld K n o w . $ 2 6 . 0 0 . Society h*r Dtrtcmn mU Offitwn •/ Ftmmmnmi I CORPORATE ETHICS RISK MANAGEMENT BANK BOARD $22 c LOAN POLICY $ 20.50 Q U A N T IT Y P R IC ES 2 - 5 copies — $23.00 ea. 6 - 1 0 copies — $21.50 ea. B O A R D P O L IC Y ON R IS K M A N A G E M E N T . $20.00. This 160-page manual provides the vital inform ation a board needs to form ulate a system to recog nize insurable and uninsurable risks and evaluate and provide fo r them. In cluded are an insurance guideline and checklists to id e n tify and protect direc tors against various risks. Bonus fea ture: A model board policy o f risk management adaptable to the unique situations at any bank. Every member of your bank's board should have a copy! Q U A N T IT Y P R IC ES 2 - 5 copies — $17.50 ea. 6 - 1 0 copies — $16.50 ea. THE E F F E C T IV E BOARD BANK BOARD AND & LOAN (F ourth Edition) Recently o ff the press! This revised and expanded manual enables directors to be a step ahead o f bank regulators by providing current loan and credit p o li cies o f numerous well-managed banks. These policies, adaptable to any bank situation, can aid your bank in estab lishing broad guidelines fo r lending officers. Bonus feature: Loan policy of one o f the nation's major banks, loaded w ith ideas fo r your bank! Remember: A w ritte n loan policy can protect direc tors from lawsuits arising from failure to establish sound lending policies! Order enough copies fo r all your direc tors! $16 $ 1 6 .00 . C O N F L IC T S O F IN T E R E S T .$ 1 6 .0 0 . (Third E dition) C onflicts of Interests presents everything directors and o f f i cers should know about the problem of "c o n flic ts ." It gives examiners'views o f directors' business relationships w ith the bank, examines ethical pitfalls in volving conflicts and details positive actions fo r reducing the potential fo r conflicts. Also included is the Comp tro lle r's ruling on statements of busi ness interests and sample co nflict-ofinterest policies in use by other banks which can be adapted by your board. Q U A N T IT Y P R IC ES Q U A N T IT Y P R IC ES 2 - 5 copies — $13.00 ea. 6 - 1 0 copies — $12.50 ea. 2 - 5 copies — $13.00 ea. 6 - 1 0 copies — $11.50 ea. A U D IT . $22 .00 . This 184-page manual provides comprehensive inform a tio n about the directors' audit functio n . It outlines board participation, selection o f an audit com m ittee and the magnitude of the audit. It provides guidelines fo r an audit com m ittee, deals w ith social re sponsibility and gives insights on en gaging an outside auditor. It includes checklists fo r social responsibilities audits, audit engagement letters and bank audits. No director can afford to be w ith o u t a copy! Q U A N T IT Y PR IC ES 2 - 5 copies — $19.00 ea. 6 - 1 0 copies — $18.00 ea. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE P O L IC Y . THE BANK BOARD LET T E R 4 0 8 Olive St., St. L o u is, M O 6 3 1 0 2 ......... copies, Board Policy on Risk Management ......... copies, The Effective Board A u d it ......... copies, Bank Board & Loan Policy ......... copies, C o n flict o f Interest ......... copies, Corporate Ethics Total Enclosed N a m e ...............................................................................................T itle B ank.......................................................................................................... Street ....................................................................................................... C ity, State, Z ip ....................................................................................... (Please send check w ith order. In Missouri, add 4.6% tax. B G /1 1 Situation Analysis Report 1. Executive Summary 2. Introduction 3. Methodology A. Review of Financial Information B. Interview Questionnaires C. Interview Process D. Other Materials 4. Perception of Public Image A. Management and Board of Directors B. Staff C. Customers D. Shareholders E. Public 5. Comparison of Bank with Bank- and DepositoryInstitution Competitors 6. Marketing and Advertising Appraisal A. Advertising Comparisons B. Marketing Efforts C. Market Research D. Perception by Public 7. Functional Areas of the Banks Appraised A. Lending 1. Commercial and Industrial Lending 2. Installment Lending 3. Mortgage Lending bers. The purpose of this cross-fertilization regarding m an agem ent efficiency is to give senior m anagem ent and the board an objective appraisal of th e bank and to assist in GUIDE YOUR CUSTOMERS TO THE FASTEST SERVICE AVAILABLE WITH . . . HIGH INTENSITY DRIVE-IN SIGNS A C T R O —LIT E SIGNS im m ediately attra ct and direct drivers entering the fa c ility . The e xtra o rd ina rily b rillia n t OPEN/CLOSED or RED/G REEN message even pierces direct sunlight. Stainless steel or statuary bronze finish. Easily installed and maintained. Versatile m ounting. Immediate delivery. Satisfaction Guaranteed! 1351 Jarvis • Dept. 101 • Elk Grove Village, ILL. 60007 • (312) 364-4810 BG/12 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 8. 9. 10. 11. 12. 4. Other Lending Activities 5. Compliance 6. Collections 7. Branch Lending 8. Credit Analysis and Review B. Deposit Taking Activities 1. Operations 2. Customer Oriented Services C. Trust Department 1. Operations 2. Customer Solicitation 3. Administration D. Personnel E. Branch Administration F. Bank Operations G. Senior Management H. Board of Directors I. Accounting J. Auditing K. Special Services, such as discount brokerage L. Committee Structure and Effectiveness Strengths of Bank, Rank by Priority Weakness of Bank, Rank by Priority Communication Strengths and Weaknesses Recommendations — Explicit and Specific Conclusions determ ining w here w eaknesses can be rem edied. The final phase of the analysis is th e rep o rt itself. The report — p rep ared eith er internally or on a consulting basis — will bring forth a consensus of the positive and negative aspects of the bank. It will make recom m endations relating to im provem ent of the w eakest areas, b u t it also will point to existing excellence in certain functional areas or by certain individuals. This rep o rt is designed to assist the board and senior m anagem ent as part of the overall strategic-planning p ro cess. It will help m anagem ent und erstan d strengths and weaknesses and to recognize changes th at should be m ade in order to im prove th e bank’s operation. Keep in m ind th at it is th e final responsibility of the board to d eterm in e what changes m ust be m ade. It has been our experience th at in certain analyses some of the major changes proposed concerned senior m anagem ent. On m ore than one occasion, key m em bers of senior m an agem ent have b een identified as one of th e bank’s major weaknesses. Thus, th ere is a tw o-edged sword to th e analy sis: since it does uncover in co m p eten t and/or weak indi viduals, it becom es a th reat to some m em bers of m anage m ent. T herefore, the board should be aware of the risks as well as rew ards of the situation analysis. T he accom panying chart (Situation Analysis Report) shows th e form at of a recom m ended analysis report. Each bank will w ant to vary this rep o rt form, b u t it does serve as an ideal form at w hich can be subm itted to the board. Obviously, the situation analysis is not a panacea. It does, how ever, provide the board and m anagem ent w ith an objective appraisal of the bank’s strengths and w eak nesses and thus perm its m ore effective strategic planning. The author has utilized this approach as a m eans of gaining a b e tte r understanding of th e bank and recom m ends the procedure highly. In the long run, the situation analysis can save tim e and m oney by pin-pointing both strengths and weaknesses. This can assist m anagem ent in making im m ediate changes that will im prove the overall operation of the bank. • • Cross-Selling New Accounts BONUS BANKING Denver S&L Nets $88 M illion in CDs in 10-Month "Relationship" Program! B ONUS BANKING. A bonus for the custom er and a bonus for the financial institution: W hat could be better? S ilverad o B anking — a D e n v e rbased savings and loan — launched a deposit-building program in S ep tem ber, 1983. It ran for 10 m onths, pulled in $88 million in deposits (69% new m oney), and was so successful th e program had to be abandoned(!) — at least, tem porarily. Bonus Banking re p re se n te d th e first attem p t — at least in th at m arketplace — to cross-sell at th e tim e an account was o p e n e d by offerin g a d d itio n a l am ounts of in terest (basis points) w hen a custom er added o th er services to his acco u n t; e .g ., a fu lly -fu n d e d IRA, checking, d eb it card, autom atic loan paym ents, etc. According to m arketing re p re se n ta tives of Silverado, Bonus Banking was quite sim ple. It was a certificate-ofdeposit program th at rew arded cus tom ers not only for larger deposits, b u t also for additional relationships. So w hy was th e program discon tinued? It fell because of its own suc cess. The program was started w ithout adequate tracking capabilities by data processing. Each account took unusual am ounts of tim e, not only to open b u t to track later as som e custom ers added to th eir original deposits. B ut John L o h m ey er, sen io r vice p re s id e n t/m a r k e tin g , is q u o te d as saying: “W e re going to com e back. I t’s obvious you can’t do it (Bonus Bank ing) w ithout an autom ated sy stem .” pts. — money market checking pts. — debit card pts. — ATM access card pts. — direct deposit pts. — automatic loan payments pts. — safe deposit basis points Silverado prom oted this program in the usual m anner: mass m edia, direct mail, statem en t stuffers, som e te le m arketing by its various branches, custo m e r/h a n d o u ts, em p lo y ee b u tto n s and p ress releases. T elevision was om itted because of its cost. And the results, said D ee Ann Betts, a ssista n t vice p re s id e n t, w e re e n couraging, even though the program 25 pts. — a fully-funded IRA 20 pts. — a money-market account OPEN A CD and earn additional interest when you open other accounts was the theme of the Silverado Banking campaign. Explanatory chart (r.) appeared in all a d v e rtis in g . Cross-selling w as m ade "understandable" to employees under this program, according to Silverado's market ing people. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 15 5 5 10 10 10 100 As explained to S&L m arketing ex ecutives g athered recently in Phoenix, th e Bonus Banking plan was rath er sim ple in its concept. C ustom ers w ere offered a tiered -in terest-rate structure for larger deposits as well as “bonus basis points” w hen they added rela tionships. At th e tim e, Silverado offered th ree six-m onth C D selections — $1,000 (9+2%), $10,000 (9.72%) and $25,000 (9.95%). T he c u sto m er w ould earn additional in terest (up to 1% for each CD) by being aw arded basis points for each additional service added to his C D . F or example: Deposit $1,000 to 9,999 Deposit $10,000 to 24,999 Deposit $25,000 and more Base Interest 9.50%*/9.96%** 9.72%*/10.21%** 9.95%*/10.46%** Bonus Interest up to 1.0% up to 1.0% up to 1.0% 10.50%/11.07% 10.72%/! 1.31% 10.95%/! 1.57% Maximum Interest Rate Rate Annual Yield Annual Yteld Rate Rote Annual Yield Annual Yield Rate Rate Annual Yield Annual Yield 6-Month Bonus Banking Investment Earn Bonus Interest w hen you establish th e fo llo w in g : Fully Funded IRA Minimum initial deposit to a SLIF or SIMF account Minimum initial deposit to a Money M arket Checking account Silverado Banking Card M INIBANK’“ Card ACH Direct Deposits Autom atic Loan Payment Plan Safe Deposit Box + .15% + .05% +.05% +.10% +.10% + .10% TOTAL AVAILABLE BONUS INTEREST + 1.00% + .25% + .20% B G /1 3 was cancelled after 10 m onths, as ex plained above. In th e f irs t 30 d a y s, S ilv e ra d o opened 545 C D accounts; in 90 days, 1,899; and in 10 m onths, 4,902! D eposits in th e first 30 days totaled $8 million; in 90 days, $33 million; and in 10 m onths, $88.7 million. This was done from a deposit base of $218 mil- lion as of S eptem ber, 1983. A lthough Silverado was rolling cer tificates into this program , th e p e r centage of new m oney attracted was equally encouraging: in 30 days, 52%; in 90 days, 66%; and after 10 m onths, 69%. Also encouraging was th e n u m b er of n ew re latio n sh ip s started : A fter 30 Before Launching Sales Program, Plan and Prepare Your Staff L T H O U G H sales program s are hot in banking circles currently, bankers should resist th e tem ptation to ru s h in to n e w p ro g ra m s w ith o u t ad eq u ate planning and p rep aratio n , says W illiam B. Brady, a L ittle Rockbased m arketing consultant to finan cial institutions. A bank’s selling efforts m ust be coor dinated w ith th e in stitu tio n ’s overall m arketing plan and p o tential p erso n nel problem s associated w ith convert ing into a sales-driven organization m ust be anticipated, Mr. Brady says. “Bankers are no different from any one else in th at th ey have a natural fear of selling,” says Mr. Brady, a p a rtn e r in th e firm o f B ra d y /R e in h a rd t & Associates. “E veryone has a built-in fear of having to ask for so m eone’s business. This is a new skill for bank ing. Now, d ue to deregulation, bank personnel have to be able to ask p e o ple, ‘Can I be your banker? And if I can’t be your prim ary banker, can I be your secondary b an k er?’ To Mr. Brady, a form er senior vice p re sid en t-m a rk etin g for F irstS o u th , one of Arkansas’s largest financial in stitutions, selling is th e prim ary m eans banks have for differentiating th e m selves in today’s business clim ate. “N inety p ercen t of th e p eople in this country have n e v e r b e e n asked for th e ir b a n k in g b u s in e s s ,” says M r. Brady. “They are banking w h ere they are for convenience or for a n u m b er of o th er wrong reasons. No one has ever approached them and asked to be th eir b an k er.” But if a sales program is to work, it cannot be im posed on an unrecep tiv e staff, Mr. Brady em phasizes. People are the m ost im portant in g red ien t in any selling program , and a bank has to b e able to o rien t its staff so everyone knows th at selling is an im portant e le m ent of th e ir jobs. “ Jo b d e s c r ip tio n s h a v e to b e changed so th at everyone is aware of th e sales orientation w hen they are A BG/14 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis h ire d ,” he says. “T hey also m ust be m ade aware that th e ir productivity will be m easured and th at th eir com pensa tion will be at least partially based on how m uch new business they bring in .” Any selling program m ust be stru c tu re d so that high producers are re w ard ed and relatively unp ro d u ctiv e p ersonnel go unrew arded, according to Mr. Brady. T he potential rew ards m ust be sufficient to make a significant difference in the lifestyles of th e p e r sonnel involved. O therw ise, th e staff will see th e low incentives as a sign of m an agem ent’s lack of com m itm ent to th e sales program . M r. B rady adds th a t th e system m ust be set up so that sales can be qualified as well as quantified. “Anyone can sell a C D if th e rates are high e n o u g h ,” says Mr. Brady. “But if you can sell a three-m o n th C D th a t’s 60 basis points off th e m arket rate, you’ve done a good job of selling. Bankers have to be able to identify and rew ard new additions to core deposits ra th e r than m oney th a t’s going to leave as soon as the in terest rate ch anges.” Bankers may find, for exam ple, that a sales person who brings $2,000 IRAs into th e bank may ultim ately be dong m ore to aid bank profitability than th e sales rep resentative who brings in a $10,000 C D that may be gone in a few m onths. In fact, Mr. Brady says that bankers should “tu rn on and tu rn o ff’ a sales incentive ju st th e way they w ould a w ater spigot, depending on th e assets th e institution has com ing on stream . “If you find that you have $10 m il lion in 10-year, variable-rate m oney com ing on the books,” he says, “you could stru cture sales incentives so you draw in 10-year, variable-rate m oney. T hen w hen you find th at your ($10 m il lion) b u c k et is filled and you have enough m oney to m atch against that asset, you can turn th e spigot off. ” — John Cleveland, assistant to the pub lisher. days, Silverado had 136 new custom ers and after 10 m onths, 933. The program had several positive aspects, in spite of its being discon tinued: • It m ade “sense to banking p e r sonnel. F or the first tim e Silverado’s contact people really understood the concept of cross-selling and the value of e sta b lish in g a d d itio n al re la tio n ships. • It w elded the S&L’s staff into a b e tte r tu n e d sales force. (The p ro gram , in cid en tally , was a u g m en ted w ith an em ployee-incentive cam paign and as each w eek of th e program w ent by, in c re a se d sales efforts becam e m ore obvious.) • It also forced Silverado to exam ine its account-opening procedure. P re viously, each service had its own ap plication card. This was cum bersom e if, for example, a custom er w ished to enroll in ALL of the services offered. W riting his own nam e, address, etc, eight or nine tim es simply exasperated th e custom er. • It also forced Silverado to exam ine its d ata-p ro cessin g p ro c e d u re s and C IF (central-inform ation file). D ata processing was being handled by a se r vice b u re a u and it is co n ceiv ab le, according to Mr. Lohm eyer, th at inhouse processing could have solved th e program ’s “tracking p ro b lem s.” As Miss Betts explained in Phoenix, “W e forgot the KISS principle — ‘keep it sim ple, stupid. Silverado probably had too m any e le m e n ts in th e “b o n u s” category. Since custom ers, on opening a new account, w ere allowed to retu rn w ithin 30 days to add additional services, th o se “bo n u s acco u n ts h ad to be tra c k e d m an u ally (w ith o u t a dataprocessing plan) and this caused th e program to bog down. Also, Silverado m arketing people b elie v e th ey m ay have b e e n overzealous in prom oting electronic bank ing — ATMs, direct deposit and auto m atic loan p ay m en ts — w ith o u t a pro p er data-processing backup. But prom oting relationship banking was pro p er, according to m arketing director John Lohm eyer. “T he greater n u m b er of accounts a custom er has w ith your institution sim ply ties him m ore closely to that institution, and that was our goal,” he said. Cross sell ing on previous occasions may have been a difficult concept to get across to Silverado em ployees, b u t this program helped them und erstan d the process m ore fully. A nd as M r. L o h m e y e r s ta te d : “ W e re going to g et b a c k .” (W e ll watch for the next round. ) — Ralph B. Cox, publisher. For Mortgage Lenders — How to Reduce Expense on Real-Estate-Owned Insurance By DAVE DUFFY R E C E N T M BA s u rv e y a n 3. Avoid carriers requiring “boardW ell-kept p ro p erties not only show n o u n ced startlin g statistics on in g ” as a w a rra n ty in the policy. b e tte r bu t enable you to enlist the sup len d er foreclosure losses. It was found Boarding can be as expensive as the p o rt of neighbors to keep an eye on the m ortgage lenders lose b etw een $1,000 insurance itself and coverage in most p r o p e r ty . R eal e s ta te a g e n ts , a p to $2,500 on individual foreclosure ac cases, is no longer contingent on this praisers and p roperty m anagers should tions. A m ajor expense, often m ore b e u rg ed to get th e neighbors “in r e q u ir e m e n t. B o a rd in g ty p ic a lly than $1,000 alone, is insurance. makes the p ro perty show poorly and volved.” The sooner th e police or fire O nce a p ro p erty becom es an R EO / d ep artm en t is called, th e sm aller is ORE (Real E state O w ned/O w ned Real y o u r ex p en se, b o th d ire c t and in Estate), generally the lender’s insur Avoid buying annual poli direct. ance p roblem s begin. D u e to th e 6. Require vandalism and malicious severity and frequency of loss, m ost cies . . . Avoid carriers requir mischief (VirM M ) be endorsed to your carriers w ant nothing to do w ith these ing "boarding" . . . Consider dw elling fire coverage. After 30 days of properties. W e’ve had them vandal a property manager . . . Con vacancy, the perils of vandalism , theft, ized , b u r n e d to th e g ro u n d , b u ll and glass are suspended. M ake sure sider higher deductibles. dozed, and yes, even stolen! your fire policy adds at least V&MM. So from a le n d e r’s standpoint, in su r The most severe losses we see are def ance can be ju st an o th er annoyance in initely vandalism and fire. C o m m er th e R E O p a p e rw o rk -a n d -e x p e n s e cial forms have similar restrictions, b u t detracts from the appearance of the dilem m a. T h ere are ways, how ever, to neighborhood. th e form s app licab le are d ifferen t. reduce R E O and abandoned -p ro p erty C onsult your agent or fo rced -o rd er T here are, how ever, circum stances insurance expenses: specialist. to use boarding consistent w ith good 1. A void buying annual policies. ju d g m en t and preserving rates. It is a 7. Analyze your need fo r waterG enerally, rates are relatively high on fact of life that economically distressed damage coverage. W ater-dam age loss vacant p ro p erty . T herefore, to con areas produce the greatest vandalism es also can be significant. C om m on serve cash flow, utilize a m onthly re exposure and losses. T he likelihood of dw elling fire insurance forms are D P I porting form. This enables you to pay loss com pared to your deductible, v er or D P3 (basic perils or all risk) to insure only a pro-rata p rem iu m p e r m onth sus cost of boarding, should be consid REO . The D P I form does not provide rath er than expend an en tire year of ere d in high-risk areas. w ater-dam age coverage. Typical losses p rem iu m up-front. N inety-day poli 4. Consider a property manager on are from a pipe breaking or dishw asher cies and repo rtin g forms have similar “high-value ’’ REO. H igh-value REO overflowing, ruining the carpet and benefits. can be difficult and expensive to in baseboards. The DP3 form provides 2. Incorporate REO insurance into sure. A p roperty m anager or caretaker w ater dam age coverage b u t requires your corporate fire-and-liability pack can convert th e p ro p erty ’s rating basis you to leave the heat on in the building age or loan-servicing-forced-order from vacant to ten an t occupied. For (to avoid pipe freezing) or shut off and program. This enables you to leverage th o se exception cases, we all know drain the w ater supply if th e p roperty less desirable p ro p erty against a m ore highly responsible college students or is vacant. Both of these w arranties are attractive insurance risk. Stand-alone family m em bers of fellow em ployees especially good advice if you are selfREO insurance program s typically are looking to reduce personal expenses insuring w ater dam age u n d er a D P I m ore expensive and fall into th e surform . on a tem porary basis. plus-lines-insurance m arket. 8. C onsider higher d e d u c tib le s. This alternative is not feasible nor advisable for all REO , how ever. High- Typically, the higher the deductible, risk p roperty, as opposed to high-value th e low er the rate. The prem ium sav p ro p e rty , sh o u ld b e professio n ally ings should be w eighed by th e in creased self-insured retention. The author is senior vice president of g u ard ed or b o arded to red u ce p re Also, co n sid e r sp lit d e d u c tib le s. m ium s. C onsult your agent regarding Transamerica Financial Systems and Con Some program s provide a higher van cepts, Orange, Calif. Mr. Duffy is in charge th e im pact of W orkers C om pensation dalism deductible ($500-$l,000) and a of marketing National Hazard Insurance if a p ro p erty m anager is utilized. programs. 5. Get the neighbors on your team. low er all-other-perils deductible. A https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis B G /1 5 9. Don’t forget liability coverage. F ire insurance to cover the loan bal ance is g e n e ra lly fo re m o st on o u r minds. H ow ever, R EO s often are clas sified as an “attractive nuisance, ” invit ing children to explore, play, and even beat security systems. In spite of tre s pass violation, you can be held liable if a person is h u rt on your property. Stand-alone REO liability coverage, owners, landlords and tenants (OL&T) is available for around $65 p e r hom e, p e r year, for $1,000,000 co m b in ed single limits. C o m p a ra b le c o v e ra g e m ay b e obtainable by adding th e R E O sch ed ule to your in stitu tio n ’s fire and liabil ity package. M ake sure you have com prehensive general liability and rep o rt the schedule of R E O at inception of th e policy. P ay m en t and re p o rtin g m ethods differ, b u t m any carriers will allow you to rep o rt new R EO m onthly, quarterly, or on an “audit basis” at th e end of the year. C onsult your agent. 10. For the next two years, depend solely on quality insurance carriers. The insurance industry is extrem ely cyclical. H igh in terest rates open th e u n d erw ritin g floodgates to g en erate m ore cash flow. In te re st rates inev it ably go dow n, ca rrie rs sta rt losing m oney (claims and expenses outw eigh BEEMAK MOLDED HOLDERS For point of purchase sales drafts, credit card appli cations and ad material. Free standing or wall mounted styles. Racks made from any holder with any number of pockets. Manual Pinpoints Products A new product-and-service manu al is credited with eliminating guess work on the part of bank employees about product details at First New ton (la.) National. The manual also makes it possible for bank personnel to give faster ser vice, since they can lay their hands on product information quickly. Each employee has a manual at his/ her workstation. When a bank has numerous types of accounts, all with differing regula tions and charges, it’s difficult to keep them straight, says President E. James Karlin. The manual was produced by Di ane Plumb, customer-service super visor. She designed it for a small-ring binder with removable pages en cased in plastic. The format provides for durability and easy page chang ing when alterations are in order. The manual begins with a list of bank officers, directors, branch loca tions and business hours. Products are listed in groups: checking accounts, savings accounts, retire ment accounts, loans and other ser vices. p re m iu m and in v e stm e n t incom e). R einsurance m arkets tighten. M any carriers are forced to cancel higher risk b u s in e s s (R E O , b a n k e rs b la n k e t bonds, directors and officers liability, etc.) to conserve surplus or face finan cial difficulties. T h e in s u ra n c e in d u s tr y n o w is addressing the afterm ath of a uniquely long cash-flow cycle. The year 1984 was the worst financial year in the en tire history o f insurance. Losses after BP400 BP-803 BP200 BP-100TW C R 800C Call our Toll Free number (800) 421-4393 Dozens o f shapes and sizes available. S ilk screening i f desired. W rite fo r inform ation. SIN C E 1951 BEEM AK " PLASTICS 7424 Santa Monica Boulevard Los Angeles, Ca. 90046 • (213) 876-1770 B G /1 6 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis investm ent incom e are estim ated at $21 billion! W e will see carrier insol vencies in 1985. A. M. B est C o m p a n y p u b lis h e s “B est’s Key Rating G uide” each year to provide financial data and ratings on every m ajor insurance carrier. Loan servicing d ep artm en ts req u ire a m ini m um carrier rating of th eir bo rro w er’s hazard insurance carrier, typically B X or b etter. T he alpha rating d enotes the c a r r ie r ’s g rad e b ased on financial, o p e ra tio n a l and m anagerial factors, c o m p a re d to o th e r in su ra n c e com panies. T he Rom an n u m eral d esig nates th e capital category of th e car rier. A. M. B est’s optim um rating is A + XV. A bsolutely avoid carriers w ith no rating or less than a “B + ” rating. Each cycle produces insolvencies and these carriers have the greatest odds of suf fering from financial instability. R EO is m uch too risky and you may discover you are actually self-insuring or coin suring w ith a weak carrier. Also, con sult your agent to m ake sure “carrier insolvency” coverage is ad ded to your loan service errors and omissions or m ortgage im pairm ent policy to p ro tect your main portfolio. 11. Consult a specialist. Financialinstitution insurance is a field unto it self. Your insurance needs are un iq u e and seldom coincide w ith standard in surance products. T here are several reputable R EO and forced-order specialists th ro u g h out the country. The specialist can p ro vide not only the lowest realistic rates on REO b u t offer m anual and au to m ated options d esig n ed to sim plify your control over these properties. • • • T he ABA has sc h e d u le d its first W e s te rn R eg io n al C o n fe re n c e for C onsum er C red it for April 28-M ay 1 in Seattle. It will run concurrently w ith th e 13th an n u al W e ste rn R egional C onference for Bank C ard M anagers. Both m eetings will feature peer-group and concurrent sessions on industry topics, as w ell as jo in t sessions for those attending both conferences. For inform ation, contact D ebralee N elson at the ABA, 202/467-4057. Bank Sales Culture Meeting Planned for June by BMA A Bank M arketing C olloquium will b e held June 23-28 at th e U niversity of C o lo ra d o , B o u ld e r, by th e B ank M arketing Association. Topic is “Establishing a Sales C u l tu re in Your Bank. ” T he program will include case studies and sessions will b e devoted to w hat a sales cu lture is, w hy it’s n eed ed and how to create one, bank m arketing and sales planning and th e job of bank sales m anagem ent. O th er topics: “R ecruiting and H ir ing and M atching People and Tasks,” “Are Incentives N ecessary in B uilding a B ank S ales E n v ir o n m e n t? ’’ an d “MBO — Joint Goal Setting and In d i vidual Planning for R esults.” T h e colloquium is a first for th e BMA. In future years, it will deal w ith o th er tim ely issues facing bankers, th e BMA says. • “Financial F u tu res,” a w orkshop sponsored by R obert M orris Associ ates, is scheduled for May 15-17 at th e Palm er H ouse, Chicago. I t’s designed to instruct senior com m ercial lenders and loan m anagers how to use financial futures to control and m anage financial risks in com m ercial lending and ex pand th eir options for accom m odating custo m ers. In fo rm atio n is available from RMA R egistrar Jacki W inans, at 215/665-2850. A Development B o a ri How to Create "Ties" For The Bank With Influential Young People By John Donald Wright BOUT 15 years ago, Lakewood Bank (now Allied Lakewood) in Dallas recognized th e n eed to estab lish tie s w ith th e y o u n g m en and w om en in th e com m unity before they becam e strongly — p erh ap s irrev o cably — a ttach ed to a n o th e r bank. H ow could th e bank gain th e ir in terest, utilize th e ir expertise and, at th e same tim e, give them som ething of value th at w ould justify th e ir com m it m ent to th e bank? Colonel B. G. Storey, chairm an at th e tim e, who also was dean of th e law school at S o u th e rn M eth o d ist U n i versity, one of th e nation’s p rem ier attorneys, a w riter and adviser to U. S. presidents, m en tio n ed th e successful use universities have m ade of develop m en t boards. T h ese generally have b een com posed of young, influential graduates. This idea was the beginning of w hat was originally called th e d e velopm ent council. N early e v ery co m m u n ity has in fluential young m en and w om en who have not b een in business long enough to have acquired th e stature th at w ould recom m end them to be m em bers of a bank’s board. M ost of th ese young p e o ple are labeled “com ers yet m any will fail for one reason or an o th er to achieve th e ir full potential. This is one of the hazards of nam ing young and u n p ro v e d m e n an d w o m en to th e board. Also, w hile a bank may recognize the n eed for young people on its board, w henev er a vacancy occurs, generally th ere are several older, m ore experi enced individuals to consider. W hen getting dow n to m easuring qualifica tions, it is seldom th at a person in his/ h e r 30s can be said to be at th at m o m ent the equal in ju d g m e n t and influ ence of a m iddle-aged business or p ro fessional person who has achieved a A https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis position of success in his work and in flu en ce in th e co m m u n ity . C o n se quently, few young people are added to bank boards, because th e im m edi ate re tu rn is not as great, and the risk is higher than that of nam ing an estab lished person. Among the young "comers" in a community are people who, in just a few years, will be the m ayors, civic leaders, heads of businesses, etc. They often can make a great con tribution to a bank. Yet am ong the young “com ers” are people who, in ju st a few years, will be th e m ayors, civic leaders, heads of businesses, people w ith political, so cial and cultural influence and e n tre p ren eu rs who often can make a great contribution to a bank. T he first developm ent board con sisted of six persons. T hey w ere h an d picked from am ong th e m ost prom is ing young people w ith whom the bank had custom er contact — although by no m eans w ere they exclusive custom This article is taken from the book, “The Effective Bank Director,” by John Donald “Don” Wright, Pres., Don Wright Associates, Inc., Dallasbased bank-consulting firm. “The Effective Bank Director” (R1565-2, cloth, $29.95) is available from Reston Publishing Co., 11480 Sunset Hills Rd., Reston, Va. (800/ 336-0338). ers. O ne of the first things m anage m en t sought to do in the developm ent board was to spread th e bank’s geo graphic rep resentation and influence. W e w ere careful to stru ctu re this group so that its contributions to the bank would be w orthw hile in th e m selves. If some of its most oustanding m e m b e rs la te r w e re n a m e d b an k directors, so m uch th e b etter. H ow ev er, the bank should not in any way be lim ited in choosing new directors. So it was im portant that no one look on the d e v e lo p m e n t b o a rd as a tr a in in g ground. O therw ise great disappoint m ents w ould occur. The developm ent board was and is its own thing, sepa rate and im portant in its own right. But how could the developm ent board be m ade som ething of real stature, valu able to its m em bers as well as to the bank? Bank’s Contribution. W e felt that w e m ust do our part first. T hese young m en and w om en are prom ised an in sight into the operation of a financial in stitu tio n and, th ro u g h th a t, into financial aspects of the econom y. At regular m onthly m eetings, w e set out to provide an overall view of w hat the bank did for its com m unity, custom ers, em ployees and stockholders and how it was done. W e regularly gave an analysis of th e cu rren t econom ic situa tion as we saw it and how this influ enced w hat we w ere doing in the len d ing and bond portfolio areas. M ost of these young people seized this opportunity eagerly as som ething that w ould benefit them in th eir busi ness and professional lives. It also gave them added stature in the com m unity. This was augm ented w hen we gave each a wall plaque that could becom e a source of conversation and recognition b e tw e e n d e v e lo p m e n t-b o a rd m e m bers and th eir clients, custom ers and B G /1 7 friends. T hese plaques pro v id ed an opportu n ity for board m em bers to talk ab out th e advantages of banking at Lakewood. B o ards Contribution. W e always w ere candid in saying th e main objec tive of th e d evelopm ent group was to help generate business for our bank by recom m ending the bank w h en ev er a m em ber had an appropriate o p p o rtu n ity . O n m any o ccasions, w e also called on m em bers who had particular expertise in such areas as m ortgage b an k in g , real e sta te or in v e stm e n t banking to advise us on w hat course th e bank should take. They serve to help us in contact w ith our com m unity. W e also have asked the developm ent board to give us can did input. How is th e bank p erceived? W hat should it be doing th at it is not? G en era lly , th e d e v e lo p m e n t b o ard will be m ore openly critical than d irec tors w ould b e u n d e r th e sam e c ir cum stances. D evelo p m en t-b o ard m em b ers are paid a small fee for th e ir attendance at m eetings and, during th e year, p ro v id ed social a c tiv itie s, w hich have b een happy tim es for b oth m em bers and staff. O ver the history of th e d e velopm ent board, half a dozen d irec tors have com e to the senior board Choose among 7 cart & wagon models Antique Popcorn Wagons — the goodwill builders The proven p.r. tool. Sell it at your bank or S & L at 75% profit ...or give it away at 4C per serving. Contact Gold Medal, the nation’s leading manufac turer of funfood equipment, 1-800-543-0862. GOLD MEDAL PRODUCTS CO. s V___ B G /1 8 2001 Dalton Avenue Dept. FBG, Suite 61 Cincinnati, OH 45214 (513) 381-1313 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis from th at group. Each was a known quantity w hen elected. Board Term. From th e beginning, it seem ed desirable to let th e develop m en t board chart its own course. The nam e itself, developm ent board, was changed from developm ent council at th e b o ard ’s suggestion. E stablishing tim e and length of m eetings, proce dure for election of officers, creation of com m ittees (when they w ere needed) and especially setting a suggested te n ure w ere done on recom m endation of m em bers. A person joining th e board is asked to serve two years, w ith offic- Members of the develop ment board have helped us in contacts with the community. W e also have asked the board to give us candid input. . . . How is the bank per ceived? . . . W hat should it be doing that it is not? ers staying for a th ird year. This tim e frame gives good exposure to w hat we are doing, provides us w ith an oppor tunity to bind ourselves to m em bers and th eir future and to utilize th eir influence, b u t does not w ear them out. E arlier, we found that developm entboard m em bers who served year after year ten d ed to lose in terest because they started going back over the same ground. It was im portant to have an established term as a way to recognize th at enough is plenty w ithout hurting any feelings. The d evelopm ent board is one of the m ost p ro d u ctiv e ideas to com e our way. Not only c u rren t m em bers, b u t “graduates” feel a kinship for th e bank. G enerally, we have th e ir loyalty and th e ir business for m any years. T heir effectiveness d epends on selection of outstanding prospects and th e am ount of attention paid to th e m em bers after they are appointed. C ertified public a c co u n tan ts and o th e r professional p e o p le have b e e n am ong th e b e st m em bers. M any m em bers have b e com e am ong our b est custom ers and have o p e n e d o p p o rtu n itie s for th e bank in th eir industries. B ut not all who are selected will w ork or be effective. Probably 25% have not. Those not in terested ten d to disengage of th eir own accord, and lit tle harm is done. The proportion of success has in c re a se d d ram atically w ith m ore careful selection. In co m m u n ity affairs, w h ere th e bank needs support and influence, it has not always b een easy to get help from directors, who already are e n gaged in all they can handle. The d e v e lo p m e n t-b o a rd m e m b e r, on th e o th er hand, is eager to make new con tacts and will atten d luncheons and o ther affairs w hen th e bank needs re p resen tatio n . In som e relations w ith local g o v ernm ents, a d ev elo p m en tboard m em ber can be effective. This is because the developm ent board is cor re c tly p e rc e iv e d as b ro ad ly r e p r e sentative of the w hole com m unity. But, all in all, th e nam e is develop ment board. At a d in n er of outgoing and incom ing m em bers, an accountant who had served on the group for th ree years said: “I am responsible for 27% of th e tru st d ep artm en t’s corporate p e n sion and profit-sharing p lan s.” W hat could be a stronger exam ple of w hat these young people have m eant to us? Like any o th er bank activity, it is good to continue to ask, “Is this w o rth w hile?” If ju st a few m em bers of the d e v e lo p m e n t b o a rd p ro d u c e som e good business, th e board will have m ore than paid its way. B ut m ore than a few should be productive. It is con stantly necessary to cultivate th e d e velopm ent board as a source of pro s pects, referrals and influence. Some good officer or officers should w ork w ith m em bers to keep th eir in terest high. F eedback on board productivity and individual m em bers will help. B ut m any p eripheral benefits can be ob tained as well. Some banks have used developm ent boards to sponsor special activities, such as a m onthly luncheon bringing prospects to th e bank. And, as one C E O pointed out, it is necessary to keep some productivity reports so the m e m b e r can an sw er th e q u e stio n , “How am I doing?” To do this, the m em ber should know w hat is expected of h im . A developm ent board will be p ro d u ctiv e for th e bank and its b oard m em bers in proportion to th e am ount of effort p u t into it. • • • The M issouri V alley C hapter of R obert M orris Associates will hold its S pring C o n feren ce M ay 2-3 at th e A lam eda Plaza H otel, Kansas City. Bankers from a seven-state area are ex p ected to a tte n d th e conference, w hich will be hosted by th e Kansas C ity G roup, one of six in th e M issouri Valley C hapter. C h ap ter p resid en t is R obert C. M atthew s Jr., senior vice p resid en t, C om m erce Bank, Kansas City. Four Fad-Filled Manuals for The Bank Diredor Every Director Should Have a Copy of Each One BOARD REPORTS . . . for The Bank Director $26.00 More effective board meetings begin w ith effective reports. This 200-page manual w ill help you determine the "q u a n tity and q u a lity " o f m o n th ly reports needed by directors so they (and management) can make proper decisions. Included are ex amples o f reports most needed by directors who want to create policies th a t lead to prudent management. Contains in form ation on many topics such as effective re porting. . . reports to shareholders. . . report o f exam ination. . . bank liq u id ity and capital analysis. Manual illustrates various form ats board reports can take. . . from oral to detailed graphic presentation. A u th o r: Dr. Lewis E. Davids. PLANNING THE BOARD MEETING $10.00 This 64-page booklet provides some w orkable agenda, suggestions fo r advance plan ning and also lists types of reports a board should receive m o n th ly and periodically. It emphasizes the need fo r inform ing the board as q u ic k ly and concisely as possible. Contains a chapter o u tlin in g a "w o rk a b le " board meeting, another on visual aids for the board meeting. Also contains a model fo r minutes o f the board, plus sample form s to communicate status o f bank to the board. An excellent "co m p a n io n " to B O A R D R E P O R T S . A u th o r: Dr. Lewis E. Davids. EFFECTIVE SHAREHOLDER MEETINGS $16.00 Before your next shareholder meeting, get ready fo r gadflies, activists and others who may be planning to disrupt your program. Here's h o w to anticipate1damaging incidents, prepare tested countermeasures, turn potential disasters into a plus for your bank. Details include handling o f unusual actions (such as replacing a CEO) — political contributions, laws and regulations directors may u n w ittin g ly break, stock purchases, sales and disclosures, proxy provisions, etc. A checklist of meeting de tails. Promoting attendance. S tockholder proposals. Materials to mail. Agenda and procedural rules.This book is a te s te d "h o w -to "o f Annual Meetings from inception to final reports, including personnel responsible fo r each step. 96 pages o f "m u s t" reading fo r chairmen, directors and officers involved. RESPONSIBILITIES OF BANK DIRECTORS $11.00 This book is right ' fo r today's banking problems. Due to the economic influence banks have on their comm unities, the rapid growth o f HCs and the ever-growing consum er" movement, directors must know what is expected o f them and their bank in terms of responsibilities to depositors, shareholders and the public. This manual examines recent court decisions, investment return, c o n tin u ity o f manage ment, long-range planning, effects o f structural changes on com petition, and more. A u th o r: Raymond Van H outte, president, Tom pkins C ounty Trust Co., Ithica, NY. The BANK BOARD Letter 408 Olive St., St. Louis, MO 63102 QUANTITY PRICES Board Reports 2 - 5 ....................... $23.00 ea. 6 -1 0 ..................... $22.00 ea. Over 10 ............. $21.00 ea. Planning The Board Meeting 2-5 ............................... $8.00 6-10 ............................. $7.50 Over 10 ....................... $7.00 Please send: -------- copies. Board R epo rts -------- copies, Planning M eeting -------- copies, E ffe c tiv e S hareholder M eetings $$_ $- -------- copies, R esp o n sib ilitie s o f D ire cto rs $. -------- T o ta l Enclosed $. Name & T itle _________________________________ Effective Sh arehold er Mtgs. 2-5 ............................. $13.00 6-10 .......................... $ 10.00 Over 1 0 ..................... $ 9.00 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Responsibilities of Directors 2-5 ............................... $9.00 6-10 ................................ $8.00 Over 10 ....................... $7.50 Bank ... S tree t . ________________________________ ________________ C ity , S tate, Z i p ____________ __________________________ (Please send check w ith ord e r. In M issou ri, add 4.6% ta x. B G /1 9 Personal-Banker Enhancement Aim of Center re Sales Thrust personal b anking,” he says, “to d e te r N IN T E N S IV E s a le s - tr a in in g i program to enhance its personal- m ine th e b est m ethods to incorporate banker program is a m ajor th ru st in th eselected aspects of th e ir approaches to our pro g ram .” sales area for C e n te rre B ancorp., St. T he result of th e research was a p e r Louis, for 1985. The program will be sonal-banker training m odel designed system -w ide th ro u g h o u t M issouri. to d eterm in e w hat participants know T he personal-banker program was established at C e n te rre m ore than a and have experienced and to shape this inform ation by adding, deleting or re decade ago, according to T erence G. M cCarthy, vice-presid en t/d irecto r of fin in g it so p a r tic ip a n ts h a v e a fram ew ork of quality and consistency affiliate m ark etin g at th e H C . T he program is designed to “m eet th e com against w hich to m easure th eir skills p lete banking needs of each retail cus and perform ance. T he m odel consists of a p ro b lem to m e r.” solving ex ercise, p re s e n ta tio n of a M r. M cC arthy says th e personalm odel for the req u ired skill, practice b a n k e r pro g ram is m o re im p o rta n t than ever because banking faces in in using th e m odel, coaching and ap creased com petition from a variety of plication of the skill th roughout the program , Mr. M cC arthy says. Role sales-oriented financial institutions. playing also is utilized. C en te rre is developing a standard T h ree levels of personal banker will training program for personal bankers in each of its 19 affiliate banks. Goal of b e established as th e new approach is the program is to provide retail bank im plem ented: • Junior personal bankers to p e r ing staffs w ith p ro d u ct know ledge and sales skills th at will allow th em to d e form basic custom er service, u n d e r su term in e and m eet th e banking needs of pervision by personal bankers. • Personal bankers to provide th e retail custom ers. sp e c tru m of d e p o sit-g a th e rin g and Goals of th e program include: consum er-lending services. • D evelopm ent of a com prehensive • P ersonal financial counselors to and consistent sales-training system designed to m eet th e needs of C e n specialize in new -business dev elo p m ent. T hese individuals are assigned a te rre and its custom ers. • To increase individual p ro d u ctiv b a la n c e of le n d in g a n d d e p o s it gathering responsibilities and w ork to ity and professionalism by ensuring th a t p erso n al b a n k ers have th e in w ard p re d eterm in ed sales objectives. form ation and skills to use C e n te rre ’s T hey are trained as financial planners. P e r s o n a l-b a n k in g tr a in e r s h a v e resources to satisfy cu sto m er n eeds and to develop custom er relationships b e e n appointed and are developing a curriculum and are selecting a salesto th eir full potential. • To develop a sales-m anagem ent training organization. Training is ex system in w hich line m anagers d e p ected to begin in th e th ird q u arter velop th e feedback, m onitoring, re in and will involve about 100 staff m em fo rcem e n t an d te a m -b u ild in g skills bers in the first nine-m onth course. necessary to integ rate selling skills into A dvanced courses will be offered to cover business developm ent, consum daily business practices and activities. M aritz C om m unications G roup con e r lending and financial planning. “W e anticipate th at our netw ork of ducted in -d ep th interview s w ith C e n te rre staff m e m b e rs in six affiliate personal bankers, providing one-stop, banks th at re p re se n t th e dem ographic personal relationship banking, will e n su re th e continuing stren g th of our and geographic m arkets served by th e H C ’s affiliates, Mr. M cC arthy says. In statew ide retail banking system ,” Mr. terv iew s ra n g e d from n ew -acco u n t M cC arthy says. • • clerks and c u sto m er-se rv ic e r e p r e sentatives to supervisors and senior • Tom Horgan has joined Littlew ood, m anagem ent. An analysis of th e in te r Shain & Co., W ayne, Pa., as a senior views provided C e n te rre w ith baseline vice p resident/regional sales m anager inform ation about th e H C ’s p re se n t serving th e u p p e r M idw est and New approach to th e retail m arket as well as E ngland. H e form erly was w ith M as guidance on how to b e tte r m eet cus- te rc a rd International. H arry M iller, R ic h a rd Y oung a n d D o n a ld V an tom er/m arket needs. Slochem have b een elected senior vice “W e also visited o th er banks w ith national reputations for leadership in presidents. A BG/20 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Candidates (Continued fro m page BG/7) The final perform ance ranking of th e 33 offices in this formal analysis con cluded that, w hile seven (or 21%) of them w ere problem branches, five (or 15%) w ere in th e “serious pro b lem ” category, requiring a closing. T here was no com m on profile for th e five offices recom m ended for closing: • T h re e of th e five offices w e re leased and two w ere owned; • T h ree w ere o p en ed d uring th e 1960s, and one each during the 1950s and 1970s; • Total deposits ranged from $5 m il lion to $11 m illion at each branch, for a com bined level of $38 m il lion; • The nu m b er of em ployees in each ranged from four to 11, w ith a total of 33; • The five full-service offices varied in size from 1,400 to 2,900 square feet, for an average of 2,200; • D irect annual operating expenses for salary and benefits, n et occu pancy and o th er expenses ranged from $117,000 to $240,000 for the b ra n c h e s , for a g ra n d to ta l of $828,000; and, • O ne of the five offices was in an inner-city area, one was near an inner-city area and th e rem aining branches w ere in m iddle- or u p per-incom e areas. Several of that in s titu tio n ’s o th e r offices in or near inner-city areas w ere not in th e problem or serious-problem category. Because th ere was no com m on p ro file for th e five “ serious p ro b le m ” branches, some of th e initial feelings and “gut reactions” of senior m anage m ent proved to b e incorrect, says Dr. Thomas. F or exam ple, m any branches th at they felt w ere in this category w ere not; o th er non-locational branch p e rfo rm a n c e d e te rm in a n ts n e e d e d modification. C onversely, some of the b ra n c h e s th a t se n io r m a n a g e m e n t th o u g h t w ere “averag e” perform ers tu rn ed out to b e branch-closing candi dates. “O ur client acted upon our advice,” D r. Thomas states, “and disposed of those five offices in accordance w ith our "branch closing p lan .’ Now, w ith approxim ately two years of experience w ith those five closed branches, that institution is reporting a good overall deposit retention rate of approxim ate ly 75%, well in excess of our conserva- FOR YOUR DIRECTORS — TO HELP THEM HELP YOU N o. 51 B U D G E T I N G , F O R E C A S T I N G and P L A N N IN G Every bank m ust know WHERE it is going and HOW to get there! Manage ment should “ map the course,” but directors should play a role in estab lishing goals. This m anual su p p lie s d ire cto rs w ith tools they need to steer bank policy in the best direction. Chapters help directors establish “ m issions” statem ents, trace stages of a plan ning process. Details HOW to per form financial planning, how to plan for new services . . . how to “forecast.” T echniques used by su ccessfu l banks are included, along w ith sour ces of inform ation and a bibliography of references. Price — $31.00 2-5 copies $27.50 ea. 6-10 copies $26.00 ea. N o. 101 D I R E C T O R S . . . S e l e c t i o n Q u a lifica tio n s , E va lu a tio n a n d R e tire m e n t. This 42- page manual answers key questions concerning director selec tion, retention and retirement. Special section: the prospective director and how he should be expected to c o n tri bute to the bank’s success. Includes a rating chart. Manual also contains a section posing questions that a prospective d irector should ask him self before he .accepts a bank board post. Another section deals w ith the sen sitive nature of director retirem ent. Age can be a guide but not an over riding fa cto r in this decision. CONSUMER Lending Policy A Manual for Directors, Management and No. 2 20 — A N I N V E S T M E N T G U I D E F o r th e B a n k D i r e c t o r This 192-page manual discusses the merits of directors paying closer attention to investment policies. Poorly thought-out-and-executed in vestment policies can place a bank’s capital in jeopardy, particularly during a period of rising interest rates. Should the board “ intrude” upon man agement prerogatives of the CEO in the administration of the investment port folio? No, says the author, However, a written policy, structured around the bank’s deposit and loan “ mix,” can be comforting during rising or falling interest rates. As an aid to management and the board, the author presents numerous in vestment policy statements presently in use by recognized well-run banks. Price — $10.00 Price — $26.00 2-5 copies $8.00 ea. 6-10 copies $7.50 ea. 2-5 copies $23.00 ea. 6-10 copies $20.00 ea. No. 2 10 M A X I M I Z I N G C O R R ESP O N D EN T BANK R E LA T IO N S H IP S D irectors aren’t “ born correspon dent experts, but you can help them catch up in a hurry, and it’s profitable for you to do so. This 100-page manual covers all facets of correspondent banking. Clearings and flo at analysis . . . loan particip a tion s . . . lines of credit . . . foreign exchange, etc. This manual also helps directors APPRAISE correspondent services — to make certain you receive m axim um service at a com petitive price. The manual also discusses several federal regulations, including the con strain ts imposed on “ insider” bank lending by FIRA. A MUST for every bank director. Price — $16.00 2-5 copies $13.00 ea. 6-10 copies $10.00 ea. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis C om m ittee in determ ining the nature of such c o n tra c ts . The a u th o r suggests that “ p erform ance” can and should be the key in rewarding the executive. Charts and w orksheets are included to help the com m ittee arrive at “ fair and equitable” pre requisites as m otivating factors for the bank executive. An aid to w riting a NEW contract or in REVIEWING existing contracts. No. 2 30 — C O N T R A C T S W I T H B A N K EX EC U T IV ES In many banks, salaries, bonuses and fringe benefits of top manage ment are covered by contracts. Since many contracts extend for periods of five years they call for careful con sideration. This 48-page manual discusses the role of the board’s C om pensation Price — $12.00 2-5 copies $9.00 ea. 6-10 copies $8.50 ea. No. 240 — C O N S U M E R L E N D I N G P O LIC Y Bank directors don’t get involved in lending, but they do help formulate con sumer-lending policy. Therefore, they must be familiar with the dramatic in creases in personal bankruptcies and new policies called for. This 208-page manual includes an array of consumer loan policies in force at various-sized banks; provides checklists of topics on installment-credit policy, pro cedures and policy components; model application forms; Federal Reserve reg ulations; cost analysis of consumer op erations, plus a bibliography of reference materials. Price $26.00 2-5 copies $22.00 ea. 6-10 copies $20.00 ea. Please Send These M anagem ent Aids: The BAN K B O A R D L E T T E R 51 _______ copies 101 _______ copies 2 1 0 _______ copies 2 2 0 _______ copies 2 3 0 _______ copies 240 _______ copies $ $ $ $ $ $ -------------------____________ ____________ ____________ ____________ ____________ 4 08 O l i v e S t r e e t S t . L o u i s , M O 6 3 1 02 Name ________________ Ba nk ________________ Ark Boss _____________ ___ (In M issouri add 4.6% tax) Tax $ ___________ TOTALS City __________________ State Zip tively estim ated rate of about 50%. ” The bottom -line im pact of those five closings is q u ite obvious, Dr. Thom as explains. The five closed branches re p resen te d 15% of all of th at in stitu tio n ’s 33 offices, b u t only 7% of all deposits. W ith these closings, th at institution has elim inated 100% of its $828,000 d ir e c t a n n u a l o p e ra tin g e x p e n s e s associated w ith those offices and th e ir 33 em ployees, b u t still retains 75% of the deposit benefits of those offices. T he BRANCHPLAN Subsystem II stu d y th a t was sim ultan eo u sly con ducted for this institution contained v a rio u s re c o m m e n d a tio n s for p ro posed branch and ATM additions of d iffere n t typ es, and m any of th e se have b e e n an d c o n tin u e to b e im plem en ted . “W e believe th at this co m p reh en sive delivery system planning stu d y ,” says Dr. Thom as, “has had som ething to do w ith th e fact th at this institution has had at least a 1% re tu rn on assets for the last several y ears.” • • Shareholders' Queries Booklet Offered by Peat Marwick Q u estio n s likely to b e ask ed by shareholders are outlined in th e 1985 edition of “S hareholders’ Q uestio n s,” published by Peat, M arwick, M itchell & Co. T h e b o o k le t in c lu d e s 314 lik ely questions, including th e following: Are th ere any specific plans for acquisitions in the near future? Is th e com pany a target for a takeover? W hat is th e com pany doing to identify such attem pts? W hat are th e plans to p re v e n t u n friendly takeovers? Peat M arwick has b een publishing shareholders’ questions booklets for 11 years to assist corporate m anagem ent and directors anticipate questions that m ight b e asked by sh areh o ld ers at annual m eetings. A spokesm an said th e CPA firm ex pects questions to focus on th e increas ing possibility of m ergers/acquisitions, the effect of th e c u rre n t econom ic o u t look on c o m p a n y o p e r a tio n s a n d corporate safety p rocedures as w ell as the quality and tim eliness of inform a tion given to shareholders. Copies are available from any Peat Marwick office. • B u n ce C orp. D e n n is K o p p has joined this firm ’s corporate operation in St. Louis as a senior estim ator. H e previously was w ith K ozeny-W agner, Inc., Bank Building C orp. and F ruinC olnon C orp., all in th e St. Louis area. BG/22 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis NEW PRODUCTS • A. Rifkin Co. C ourier sacs w ith clear vinyl side panels are available from this firm. S ee-through panels p erm it users to assure that all m aterial has b een re m oved or to show clearly that th e sac is not transporting cash. Sacs are avail »TELEGUIDE* TELLER DATA TIME!________ LBC. * * » * » » 1 2 3 4 5 6 DATE:____ TIME OPEN TIKE WITH OUST. It OF COST. 60 59 60 60 59 54 42 39 44 43 39 37 31 26 32 37 28 16 AVE. TIKE/ COST. X TIKE BUSY 1.35 1.50 1.37 1.16 1.39 2.31 69 . 9% 66. OX 73.3% 71.6X 66.OX 68.5X TOTAL NUMBER OF CUSTOMERS: 170 AVERAGE TIME WITH CUSTOMERS: 1.43 KIN. TOTAL X TIKE BUSY: 69.31 X ACTRON INC. 1351 JARVIS AVE.. ELK GROVE> II PHONE: (312) 364-4810 able in two sizes and m aterials. O th er styles include fire-shielded and non lock designs. W rite: A. Rifkin C o., 1400 Sans Souci Parkway, P. O. Box 878, W ilkes-Barre, PA 18703 or phone 800/358-7300. 60007 line. P rin ter inform ation is based on tim e spent w ith custom ers rath er than n u m b e r of tran sactio n s co m p leted , e n a b lin g m a n a g e rs /s u p e rv is o rs to arrange teller staffing to m eet custom e r traffic patterns. It also helps in eval u atin g in d iv id u a l te lle r efficiency. W rite: Actron, Inc., 1351 Jarvis Ave., Elk Grove Village, IL 60007. • Security E n gin eered M achinery. This firm has introduced a crosscut d e partm en tal or general-office sh red d er th at perm its users to attach an external bag for tabletop or high-volum e sh red ding or use an optional cabinet for in tern al shred collection. Up to 20 sheets of pap er can be destroyed at a tim e. W rite: Security E n g in eered M achin ery, 5 W alkup D rive, W estboro, MA 01581. • Actron, Inc. This firm offers a new m a n a g e m e n t-in fo rm a tio n p r in to u t that provides a bank w ith data about its teller line. It provides individual teller totals, such as nu m b er of custom ers served, average tim e spent w ith each custom er and percentage of tim e open that tellers w ere busy w ith custom ers. It also gives totals for th e entire teller • Brandt, Inc. The M odel 2751 cu r rency scale now is available. I t’s a com pact unit capable of verifying strapped currency w ithout rem oving th e strap. Suspect straps are identified by “over” and “u n d e r” signals. W rite: B randt, Inc., P. O. Box 200, W atertow n, W I 53094. • Mosler. T hree new electronic secu rity brochures have b een published by this firm. O ne is en titled “M osler Ac cess C ontrol” and describes th e system that adm its em ployees, excludes in truders and grants or denies access to s e n s itiv e a re a s . “ M o sle r C lo se d C ircuit Television” identifies elem ents that may be used in a CCTV system and shows how security specialists can com bine these elem ents to create a CCTV sy stem th a t solves sec u rity problem s. The th ird brochure, “M os le r Life-Safety and S ecu rity ,” illus trates the firm ’s proprietary security com m unications systems. Based on a A 30-Second Story With A Happy Ending, Even Though It Doesn't Begin "Once Upon A Time. . ." “building-block” concept, th e system s may tie to g eth er several security su b sy ste m s, p ro v id in g e a rly w a rn in g alarms against fire, theft, u n authorized e n try an d o th e r situ a tio n s. W rite : M osler, 1561 G rand B lvd., H am ilton, O H 45012. • C u m m in s-A lliso n C orp. A n e w particle-cu t p ap er sh re d d e r is avail able from this firm — th e m odel CA38. The un it m eets g o vernm ent secur ity specifications by producing a p a rti cle size of 1/32" X 1/2". Table top in size, it weighs 74 pounds and is p o rt able w hen placed on an optional stand. I t ’s d e s ig n e d fo r lo w -to -m e d iu m volum e applications. A CA-48 sh re d d er is available for h eavier volum es. W rite: Cum m ins-A llison C orp., 891 F eeh an v ille D r., M t. P ro sp ect, IL 60056. • A utom ation P apers C o ., Inc. A Tyvek® e n v e lo p e c a lle d “ Save-A C ard ” designed to p ro tect bank cus tom ers’ ATM cards has b een ad d ed to this firm ’s line of paper-supply p ro d ucts. E nvelopes can b e custom im p rin ted w ith a b ank’s logo or m essage to correspond to ATM cards and re ceipts. W rite: A utom ation Papers C o., In c ., 6700 G uion R d ., Indianapolis, IN 46268. THE FINANCIAL BUYERS GUIDE To insure your Sim ple Interest loan; including V ariab le Rate, A m erican United Life has designed both Single Prem ium and O utstanding B alan ce Credit Life Insurance programs. Though quite d ifferen t, each plan offers certain benefits. These are cle a rly defined in a concise booklet offered by A U L. To receive your free copy, and other im portant inform ation about the advantages of the A U L Credit Life & Health insurance programs — including tape-to-tape reporting — contact: Bob W hite Regional Vice President Bob Steele Assistant Regional Vice President is published semiannually by Commerce Publishing Co. 408 Olive St., St. Louis, M0 63102 314/421-5445 EDITORIAL STAFF Ralph B. Cox — Publisher Jim Fabian — Editor Rosemary McKelvey — Senior Editor American United Life One American Square P. O. Box 368 Indianapolis, IN 46206 (317) 263-1798 Advertising Production Dept. Marge Bottiaux, Manager 408 Olive St., St. Louis, M0 63102 314/421-5445 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BG/23 InnerLine: News, Rates, Analysis and Information. Now. Increase profits and productivity, with the first interactive, on-line information network designed fo r fin a n cia l executives. Get the Information You Need . . . at your fingertips, without any computer training or experience. InnerLine delivers financial news, performance analyses, rates, regulatory updates, directories, electronic mail, marketing and hedge management strategies, research and much more. Save Tim e and Make M oney. . . InnerLine’s Funds Marketplace™ the eco nomical alternative to money brokers, lists rates on instruments offered by 500 institutions. You make the deals with no “cuts” taken on any transactions. Our Electronic Mail moves messages quickly and confidentially, and American Banker, the industry’s only daily newspaper, arrives at your terminal at 6:00 am (EST). Over 40 easy-to-use services give you everything you need to increase profits and improve productivity. Even if You D on’t Have a Com puter.. We can help you buy or lease the right equipment. Any dial-up terminal can be used. Get All the Facts . . . InnerLine is your best source for news, rates, analysis and information. Find out more with no obligation. Call today, toll-free 1/800/323-1321 In Illinois, please call: 1/800/942-7835 InnerLine: The Financial Information Network™ © 1984 In n erL in e https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ¡nnerune About Banks & Bankers ILLINOIS N ew board mem bers at C ontinental Illinois C orp. and C ontinental Bank, Chicago, are A rchie R. Boe, John H. Johnson and L eonard H. Lavin. Mr. Boe is form er chairm an, Allstate In su r ance C o ., and form er p resid en t, Sears, Roebuck & Co.; Mr. Johnson is presid e n t/p u b lis h e r, Johnson P u b lish in g C o., Inc.; and Mr. Lavin is chairm an/ C E O /p resid en t, A lberto-C ulver Co. M arine Bank, S prin g field , has a p pointed R. D avid Bray to vice presid en t/tru st officer, Ju d ith A. E yres to assistant vice p resid en t and Ronald D. W in in g s to c o m p tro lle r. M r. B ray form erly was w ith a law firm in In d i ana; Ms. E y res jo in e d th e b ank in 1982; and Mr. W inings has b een acting com ptroller since F eb ru ary , 1984. E lm h u rst N a tio n a l h as p ro m o te d D onald G. Adams, D eb ra A. A renson, D o n n a M. P e ltz e r a n d M a ry A. S u ch e rm a n to a ssista n t vice p re s i dents. T hey jo in ed th e bank in 1983, 1980, 1976 and 1977, respectively. D ro v e r s B an k , C h ic a g o , h as a p pointed H ow ard H. E lliott vice president/controller and p rom oted D avid G reen to vice p resid en t/g en eral coun sel. Mr. G reen previously was associ ate general counsel and has b een suc ceeded by Carol A. Gloor, who is new to th e bank. m o te d to s e n io r v ic e p r e s id e n t/ m arketing director at N ational Bank, G reenw ood. H e joined the bank in 1969. Also prom oted w ere W esley R. K lutts to vice p re sid e n t/in v e stm e n t officer and F. R obert Alford and Laura J. C att to assistant vice presidents. ex ecu tiv e vice p re s id e n t, B ankers T rust Co., D es M oines. H e form erly w as p r e s id e n t, P a c k e rs N a tio n a l, Omaha, N eb., and, before that, presi dent/director, Hawkey e Bank, Eldora. H e is a fo rm e r p re s id e n t, O m aha Bankers Association. Commerce America Banking C o., Jef fersonville, has o p ened its first new banking location since th e firm was form ed recently following th e m erger of C itizens Bank and Clark C ounty State. The new banking c en ter is in a redevelopm ent area of Jeffersonville at 14th and Spring streets known as the Com m ons. V alley N ational, D es M oines, has elected H. P eter D e Rosier vice president/co rresp o n d en t banking division and M. Erw in Jansm a vice p resident/ le n d in g d iv is io n . M r. D e R o sie r form erly was vice p re s id e n t/c o rre spondent head at N ational Boulevard B ank, C h ic a g o , a n d M r. Ja n sm a form erly was w ith th e Small Business Adm inistration. IOWA C om m u n ity Savings B ank, E d g ewood, has prom oted Steven A. Brady from vice president/cashier to senior vice p re sid e n t/d ire c to r, Tim Brown from assistant vice p resid en t to vice president/agricultural-loan officer and J a c q u e lin e Jo h n so n from a ssista n t c a s h ie r to c a s h ie r/d a ta -p ro c e s s in g coordinator. Dennis R. Wood has b een appointed Barry F. Sullivan, ch airm an /C E O , F irst Chicago C orp. and F irst N ation al, Chicago, has b een elected to th e board of th e Chicago F e d as a Class A director. His term runs thro u g h 1987. INDIANA James M. O’D w yer has jo in ed Irw in Union, C olum bus, as vice p resid en t/ tru st officer and Jay A. Beam an has b een prom oted to assistant vice p resi dent. Mr. O ’D w yer form erly was w ith P urdue National, Lafayette, and Mr. Beaman joined Irw in U nion in 1977. Gary L. Lindenm ayer has b een proMID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MICHIGAN John A. Simonson has b een appointed executive vice presid en t/ch ief finan cial officer at C om erica, In c ., and Com erica Bank-D etroit. H e has been w ith the corporation since 1969, most re c e n tly as se n io r vice p re s id e n t/ treasurer. In o th er action, D avid A. H oule and Eliot R. Stark have been appointed first vice presidents of the H C, and R obert R. H ebard and James 157 YE A R S OF BANKING AND CONSULTING EXPERIENCE A T YOUR SERVICE__________ Douglas Austin & Associates offers the experience and expertise needed to solve any banking problem. Our professional staff consists of former bank presidents, correspondent bankers and financial consultants to hundreds of banks large and small. Call us to discuss your problems or opportunities. (312) GG4-594G DAA DOUGLAS AUSTIN AND ASSOCIATES, INC. Suite 702, 40 East Delaware Place • Chicago, Illinois 60611 • Lansing • Toledo 31 ACCELERATEDCHECKCOLLECTION https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis FIRST WISCONSIN Side by Side. When your bank clears two million checks a year, top-quality check collection is vital. Dan Heine, president and chief executive officer of the State Bank of Freeport, found the services his bank needed at First Wisconsin. Our accelerated collection dramatically improved availability for the State Bank. And our pricing brings them savings on every item we process. “Working with First Wisconsin has helped us improve profitability,” Dan says. For impressive check collection, come to First Wisconsin. Call us at (414) 765-4459 to find out how our experts can help you streamline operations and increase profitability. You’ll want our stamp next to yours. WHENPERFORMANCECOUNTS. E. Lake w ere nam ed vice presidents. P ro m o tio n s a t th e b a n k in c lu d e d Robert B. Kipp, first vice p resid en t, and H arry M archand, vice p resid en t. G regory E. Hooks was nam ed p resi dent, C om erica Bank-Kentwood. Tony T hom pson has b e e n e le c te d assistan t vice p re s id e n t at F irs t of America Bank-M ichigan, Kalamazoo. H e joined th e bank in 1978. UNIQUELY QUALIFIED MIDWESTERN CONSULTANTS •C om prehensive a n a ly ses to uncover p rio ri ties w h ich m ake more money. •W a y s satisfied cus tom ers use w h ich m u l tip ly results. •H ig h -re tu rn strategies w h ich save your earn ings. •R a p id in-person serv ice w h ich saves your tim e. MINNESOTA Beth R. Taylor has b een elevated to assistant vice p resident/investm ents at In d e p e n d e n t State Bank of M innesota, M inneapolis. She joined th e bank in 1983. Jacquelyn A. Brown has b een p ro m oted to m arketing officer at W estern State, St. Paul. She has been w ith th e bank since 1981 and jo in ed th e m arket ing d ep artm en t in 1982. E d w ard O. H anson Jr. has b e e n nam ed vice president/cashier at M ar q u e tte Bank of C olum bia H eights. H e fo rm erly was au d it officer at F& M M arq u ette National, M inneapolis. Lloyd P. Johnson has b een elected p re s id e n t/C E O /d ire c to r of N orw est C orp., M inneapolis. John W. M orri son continues as chairm an. M r. Jo h n son com es to N orw est from Security Pacific N ational and Security Pacific C o rp ., Los Angeles, w here he was vice chairm an and m em ber of th e office of th e chief executive. H e is a past p re si d e n t of th e California Bankers Associa tion and th e San Francisco C learing H ouse. H e is a M inneapolis native. OHIO Professional Bank Consultants ^ A N K ^ M D E inc Please d ire c t correspo nde nce to: 7 3 4 W est Port Plaza Suite 255 St. Louis, M O 6 3 146 (314) 43 4-88 99 David A. Daberko has b een elected p resid en t BancOhio National, C olum bus. H e continues as executive vice p re sid e n t, N ational C ity C orp. H e joined National C ity Bank, Cleveland, in 1968 and has b een executive vice p resident/corporate banking for both that bank and the H C since 1982. We’d like to make you Captain of Our Design/Build Team. Financial Products has a team of dedicated pro fessionals ready to plan and erect an efficient financial building fo r you. Our architects, construction mana gers and w ork crews over lap efforts under one roof to save you time and money. Making you the captain or decision-m aker of this unique team insures an understanding for your interests, reflected in a top quality building. W e also offer m od ular building programs, a full line of bank equipm ent, as well as Total Turn Key Service. Call or w rite fo r more inform ation. T h e B an k P la n n e rs financial ■ HI p ro d u ctsjn c. 33 0 1 G o l f Rd. Eau Claire, Wisconsin 54701 (715) 835-8160 34 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 'T ::' Robert J. Morgan has b een elected se n io r vice p r e s id e n t/tr u s t in v e s t m ents and chief econom ist at Toledo Trust. H e previously was w ith F irst Source Bank, South Bend, Ind. Roger L. Ricker has b e e n elected senior operations officer at C en tral T rust of N ortheastern Ohio, Canton. H e form erly was operations officer and joined C entral T rust in 1978. Dennis M. Lott has b een nam ed presi d e n t o f B a n c O h io N a tio n a l B ank W ashington C ourt H ouse/G reenfield Area. H e e n te re d banking in 1969 and has been an area p resid en t since 1981. WISCONSIN Steven H. Smith has b een prom oted to senior vice p resid en t, F irst In terstate Corp. of W isconsin, and F irst In te r state Bank, Sheboygan. H e m anages investm ent portfolios for all F irst In terstate banks and is responsible for m o n ey -m ark et and fund-acquisition activities and asset/liability m anage m ent. H e joined th e firm in 1983. Marine Corp., M ilwaukee, has p ro m oted operations d ep artm en t division m anagers Grace M. Larsen, Thom as K. Schober and A. D onald Shadid to vice presidents. T hey joined th e bank in 1958, 1950 and 1979, respectively. G regory M. Marx, vice p re sid e n t, F& M Bank M enom onee, has b e e n appointed to a new position as m an ager, com m ercial-business d ev elo p m ent. The position was created to p ro vide m ore control and d irectio n of m arketing com m ercial loans and ser vices. Mr. Marx joined th e bank in 1983. First Wisconsin National, E au Claire, has p ro m o te d P re s id e n t L loyd O. Johnson to chairm an/C E O and E xecu tive Vice P resident Richard A. H ansen to p resident/chief adm inistrative offic er. Mr. Johnson joined th e bank in 1942 and Mr. H ansen has b een w ith th e bank since 1977. Valley Bank, A ppleton, has prom oted David J. G itter to senior vice president/lending. H e joined th e firm in 1975 and adm inisters th e bank’s com m ercial, re a l-e sta te and co n su m erloan portfolios. V a lley B a n c o r p ., A p p le to n , has nam ed C harm aine M oraga vice p resi d e n t/c o rp o ra te m ark etin g . She has b een w ith the firm for seven years and is responsible for developm ent, im ple m en tatio n and review of co rp o rate w ide m arketing program s and strat egies. MID-CONTINENT BANKER for April, 19 8 5 SALES M A N A G ER : A N ew Title That Reflects Managements' Awareness of Importance of Banks Becoming Sales Driven ALES M ANAGER. T h at’s a re l atively new title in banks. And it’s b een appearing in bank directories in greater n um bers in recen t m onths. W hat is a sales m anager? Usually an individual w ith a strong b ackground in salesm anship who has b een placed in charg e of co o rd in atin g , m o n ito rin g and evaluating sales efforts in a b ank ing organization. But the title stands for m uch m ore — an increasing aw areness of th e fact that banks m ust sell th e ir services to th e corporate and retail sectors. Banks no longer can be co n ten t to have the business com e to them , th ey m ust go out after it. In m any banks, th e concept is so new and startling th at th e dust h asn’t yet settled sufficiently to m ake a ju d g m ent on its success. O th e r banks have h a d th e ir p ro g ra m s in p la c e lo n g enough to have gained a clear view of w hat th e y ’re doing and w here th eir program is headed. S e v e ra l b a n k p ro g ra m s a re d is cussed in this article. * * * H awkeye B ancorp., h ead q u a rte re d in D es M oines, l a ., is a v eteran w hen it com es to a w ell-planned sales effort. O ne reason its program is going so well is that it’s operating in a friendly cli m ate — at least, as far as state banking statutes are concerned. Iowa law p e r m its state-chartered banks to have fullline insurance and real-estate agen cies. H aw keye Bancorp has established w hat it calls “Investor C e n te rs’’ in 30 of its 36 banks. The centers are m odular structures in bank lobbies th at offer in v e stm e n t and insurance services. The centers are m anned by specially train ed p ersonnel h ired by each indi vidual bank. Each of th e banks has its own sales m anager charged w ith coordinating all sales activity in th e bank, including those carried out by In v esto r-C en ter personnel. “The job of the sales m anager is to coordinate the sales efforts of the var ious dep artm ents located in th e bank. A form alized m arketing plan, includ ing cross selling and sales-tracking sys tem s, is a key in g redient to success,’’ says S tep h an L. Jones, senior vice p r e s id e n t/c o r p o r a te d e v e lo p m e n t, H aw keye B ancorp. E ach H aw keye bank offers a w ide array of services to MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis custom ers, including discount bro k er age, m utual funds, sw eep accounts, universal life insurance, IRAs, m unic ipal bonds, p ro p erty/casualty in su r ance and re a l-e sta te sales. H e d e scribes th e In v e sto r C e n te r as th e closest possible alternative to a stock broker right in the bank’s lobby. The sales m anager in each bank is charged w ith form ulating sales goals for his bank. These goals are not dic tated by the H C, b u t are tailored to m eet the needs of each bank’s m arket. B ut H awkeye does m aintain a for mal sales training program at th e H C level. The program features a full-tim e train er and was developed com pletely in-house, Mr. Jones says. It takes all e m p lo y e e s at all H a w k e y e b an k s th ro u g h a train in g cu rricu lu m th a t a lte rn a te s group class sessions and sem inars w ith role playing at the H C w ith individual self-study courses that are done at the local banks. Em ployee sales training program s are coordinated by sales trainers in the individual banks and H aw keye m ain tains a library that circulates video training aids to em ployees. Sales training actually seldom ends for H aw keye em ployees, M r. Jones says. As new products becom e avail able, the H C develops training aids to equip em ployees w ith the know-how to sell the products. Mr. Jones says it hasn’t b een easy to make salespeople out of bankers, b u t resistance is overcom e by such things as sales commissions and quality train ing. H aw keye’s com m ission policy varies by bank. Some of th e larger banks have th eir en tire staffs participating in in centive program s to boost sales. In v es to r C e n te r p e rso n n e l can earn th e m ost significant incentive pay, Mr. Jones says. At some point in th e future, these individuals may be placed on a 100% com m ission basis. H aw keye is pleased w ith th e results of its sales and training efforts, Mr. Jones says. F o r instance: sw eep ac counts are posting excellent retu rn s and discount brokerage, w hich was ex35 pected to be a loss leader, is profitable. R e fe rra ls an d cross se llin g am o n g H aw keye’s various d ep artm en ts and divisions have increased substantially as a resu lt of th e sales-m anagem ent concept. The position of sales-developm ent o ffic e r w as e s ta b lis h e d at F o u rth N a tio n a l, W ic h ita , on J a n u a ry 1, according to K urt D. W atson, vice W ho Is Sales Manager at Small Banks? W ho Else But the Chief Executive! S M A L L E R banks have had sales m anagers for years, b u t th ey often hold the title of p resident/C E O ! W ho is in a b e tte r position to m onitor sales activities at th e ir banks? “W e have an on-going training p ro gram w ithin each d e p a rtm e n t and a com bined training session for our e n tire staff,” says Jam es R. F itzhugh, p re s id e n t, B ank o f R ip le y , T e n n . “Cross selling is stressed in all our training sessions.” Mr. F itzh u g h says incen tiv e p ro grams work well at his bank and the bank has an on-going officer-call p ro gram. Each officer is responsible for calling on 3% of p re se n t and p rospec tive custom ers a m onth. R eports on these calls are m ade at m onthly m e e t ings. Buford H artzell, p re sid e n t, F irst National, M itchell, In d ., m akes good use of his training as a school teacher w hen it comes to getting his people to sell bank services. H e takes advantage of training aids such as videotapes from banking asso ciations, including th e Bank A dm inis tration In stitu te and th e A m erican In stitu te of B anking. H is officer-call program is sales o rien ted and all cus to m ers are c o n ta c te d , n o t ju s t th e largest business firms. Each officer is responsible for one call p e r week. The bank has an insurance agency th at is doing w ell selling p ro p e rty / c a su a lty c o v e ra g e . A d is c o u n tbrokerage service also is doing well, Mr. H artzell says. The biggest sales th ru st at the bank is prior to C hristm as w hen em ployees can earn cash awards for cross selling bank services to custom ers opening C hristm as club accounts. Security Bank, Mt. V ernon, 111., has adapted its hiring policies in o rd er to hire sales-oriented people, says G il b e rt E. Colem an, chairm an/C E O . His bank recently com pleted an in centive program pushing credit-life in surance on installm ent loans. After an e ig h t-m o n th p e r io d , c o m m issio n s w ere d o u b le th o se of th e p revious year! Trips and prizes w ere aw arded to staff people who g en erated th e m ost income. 36 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis F irst National, Fayetteville, Ark., has found that incentives have had a dram atic result on its officer-call p ro gram. Russell D. Kelley, vice president/m arketing director, reports that m onetary awards and vacation trips now are used as incentives. T he bank’s effort to train some em ployees as personal bankers has re sulted in a b e tte r self-image on th e p art of em ployees about th eir ability to sell savings in stru m e n ts and co n su m er loans. “W e feel strongly that banks in the 1980s will have to com pete w ith o ther sales-oriented staffs,” Mr. Kelley says. “W hen hiring customer-contact peo p le, we look for th e outgoing self s ta rte r w ho can recognize a selling situation and is enthusiastic enough to do something about it,” says Thomas G. Brown, executive vice p resid en t, Tri C ity National, Brown D eer, Wis. “W e im press on these people that th e co m p etitiv en ess of financial in stitutions is increasing and th e survi vors will be the banks who hire selfm otivated people who are able to sell th e m any services banks offer th eir c u s to m e r s ,” h e says. R ead in g and attendance at sem inars constitute a vi tal p art of the educational process and training program at Tri City National. Bank officers are encouraged to call on o th er d ep artm en t heads to learn m ore about the services they are sell ing w hen they make calls, Mr. Brown says. T h ey also are e n c o u ra g e d to m ake use of directors as “door o p en e rs” to prospective custom ers. “By using the specific bank expert, th e calling officer lends credibility to him self and d ep th of m anagem ent to th e bank, ” he says. Use of a director is two-fold: it gives the director a b e tte r a p p re c ia tio n of th e calling officer’s ability and gives th e calling officer a natural e n tree to th e otherw ise difficult-to-see decision-m aking prospec tive custom er. Mr. Brown says he believes in sales contests to encourage a com petitive attitu d e and develop p rid e am ong em ployees. H e sees his role as C E O as one of sales m anager as well as c h e e r leader. — Jim Fabian, senior editor. p resid en t/d irecto r of m arketing. F o u rth National, like m ost banks of its size, had long been an operationsdriven institution. W ith assets of $1.3 billion, it is Kansas’ largest bank. In re c e n t years, th e re had b e e n m ore and m ore discussions am ong lo n g -range-planning team m em b ers about the n eed to shift em phasis in o rd er to keep the bank com petitive in a d e r e g u la te d e n v ir o n m e n t. W h ile several o th er steps also w ere taken to respond to sales needs, Mr. W atson em phasized that the appointm ent of a sales m anager was the m ost visible ex pression of the bank’s change in corpo rate attitude. Mr. W atson did not have to look far to find the sales-developm ent officer. H e existed am ong th e business d e velopm ent personnel on Mr. W atson’s ow n staff, in th e p e rso n of B re n t Thom pson. Mr. Thom pson previously had been em ployed as a sales re p re sentative w ith IBM. In that capacity, he had received extensive sales tra in ing and had gained valuable sales ex perience, including th e achievem ent of new divisional sales records. The sales-developm ent officer’s job description calls for Mr. T hom pson to insure effective, efficient use of all re sources of the bank in sales efforts; to create and facilitate an overall sales attitu d e in the bank; to provide m an agem ent direction for all sales efforts in a coordinated, strategic fram ew ork; and to plan, coordinate, m onitor and evaluate all sales functions. H e works w ith the training, planning, p ro duct m anagem ent, advertising and p erso n n el d e p a rtm e n ts to c re a te a saleso riented bank. Mr. Thom pson currently is identify ing the needs of each division, d e te r m ining w hat sales tools are needed. H e ’s learning the strengths and w eak nesses of each area of th e bank, d e te r m in in g if p e rs o n n e l n e e d p ro d u c t tra in in g , k n o w led g e of m o tiv a tio n tech n iq u es an d /o r u p d a te d jo b d e scriptions. Each d ep artm en t will be provided w ith a stru ctu red sales p ro gram. Mr. W atson says that bank m anage m ents increasingly will be looking to th eir m arketing dep artm en ts for direc tion in the future because th e m arket ing function is essential to a bank’s growth. H e adds that a program like F o u rth N ational’s, on a scaled-dow n basis, is feasible for sm aller banks. “I t’s a step all banks will have to face in the deregulated environm ent, he says. “It’s a big job and is breaking new ground, b u t bankers m ust realize that th e new co m p etito rs — th e Sears- MID-CONTINENT BANKER for April, 19 8 5 J ^ o m r ttjm g U n u s u a l a t (Efjesfftrt < rm Sc 3 1 ^ C a c a tto n C entrally located, on the edge of C la yto n ’s business d istrict by Forest Park. 6 m inutes to dow ntow n St. Louis, sports and to u rist attractions. H ig h way 40 and C layton Road. C onvenient to airpo rt via 1-170. J V c c m t t m n ir n t im t s o id English Hostelry, 108 elegant cham bers — some canopy beds and period antiques. C om plim entary coffee & ju ice w ith wake-up. Four story concrete building, sm oke de tectors in hall. fe a tu re s Co-ed health spa — sauna, w h irlp o o l & m u lti-sta tion “ Isokine tic s ” equipm ent for adults only. 5 miles of jo g g in g track adjacent to hotel. O utdoor pool. Aw ard w inning, Old English “ C hesh ire Inn ” breakfast buffet, English special ties fo r lunch and dinner. Fox & Hounds and K in g ’s Arm s Pubs, nightly entertainm ent. S p e c ia l ^ e r t r ic c s D oubledeck Eng lish Buses take dinner guests to sports and theatre events. A chauffeur-driven Rolls Royce fo r special transport. p la te s 4 f [r £ £ P a r k i n g and local phone calls — Health club at no charge. One-Person $61.00 to $67.00 EP Two-Persons $73.00 to $79.00 EP ^ M e e tin g s Sc ^ B a n q u e ts w e spe cialize in m eetings for the V.I.P. who seeks trad ition al elegance. 20-30 people, ideal! PLUS TAX Toll Free 1-800-325-R-E-S-V in Missouri 1-800-392-R-E-S-V 6300 CLAYTON RD., ST. LOUIS, MO 63117 1-314-647-7300 MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 37 D ean W itter and Shearson-A m erican E x p re s s e s — a lre a d y a re sales oriented, by v irtu e of th e ir long-tim e r e ta ilin g e x p e r ie n c e . B anks m u st break through th e anti-sales m ind set th ey ’ve b een operating u n d e r for such a long tim e .” * * * C om m ercial N ational, Tiffin, O ., has established an excellent m arketing track record. Its sales program s have won grand prize awards from th e Ohio B a n k e rs A s s o c ia tio n ’s B u c k e y e M arketing Awards com petition. But, during th e early p art of 1984, m an ag e m e n t realized som eone was n eed ed to devote th e m ajor p art of his/her tim e to m anaging th e b ank’s sales force. A m erger later in th e year b ro u g h t an individual to th e bank who had 15 years of sales experience w ith a m ajor data-processing m anufacturer, accord ing to Peggy A. W agner, vice p re si dent. T hat individual was appointed sales m anager at year end. T he sales m anager’s job description reads as follows: “Has responsibility for direction of activities to prom ote th e g row th of th e com pany and to accom plish m anagem ent’s m arketing objectives of attracting new business and expanding the acceptance and in fluence of the bank. Has responsibility for public relations and advertising program . Participates in p roduct d e v elopm ent and p ricin g .” His responsibilities include form u lating and im plem enting a program for business d evelopm ent and sales p ro m otion from w ithin the bank; studying and evaluating new activities, policies, program s, services, m arkets, etc., re lating to the functions of business d e v e lo p m e n t; p lan n in g , c re a tin g and adm inistering the bank’s advertising program ; and developing and m ain taining a favorable public-relations cli m ate w ith the com m unity, the press and stockholders. The sales m anager cu rren tly is u p d a tin g th e b a n k ’s p ro d u c t m anual. Each em ployee of th e bank will be given a copy of th e m anual for use as a referen ce guide and a self-education tool, Ms. W agner says. * * * T he position of vice p re sid e n t of planning and sales recently was cre a te d at F irst of A m erica Bank-Ann A rbor, Mich. The individual holding this position is a seasoned retail banker and serves on th e bank’s asset/liability c o m m ittee and th e liab ility -p ricin g s u b c o m m itte e , says D o u g la s D . F reeth , executive vice president. Prim ary responsibilities of this in d i v id u a l in c lu d e s e rv in g as b a n k planning coordinator, w hich involves e s ta b lis h in g goals an d s tr a te g ie s , m aintaining a tim etable for th e ir com pletion and serving as chairm an of th e planning and steering com m ittees. H e also is sales m anager for bank w ide calling, w hich involves e sta b lishing goals and objectives for a calling program and tracking its effectiveness. T he calling program includes retail, com m ercial and institutional custom ers. O th er duties include coordinating retail sales and em ployee recognition. “This is a new position in our bank and we will be in terested in m easuring its effect on our organization through th e y e a r,” Mr. F re e th says. “W e are convinced, how ever, th at m ore effec tive sales and m arketing program s . . . w ill b e th e keys to o u r c o n tin u e d grow th and profitability in th e future. ” — Jim Fabian, senior editor. 'Market-Driven' Call Program Started A “M A R K ET-D R IV EN ” officer-call program is being im plem ented at L iberty N ational, O klahom a City, th a t’s designed to increase m arket p en etratio n through th e acquisition of new com m ercial and personal banking relationships, according to W illis J. W heat, executive vice president. O th e r o b je c tiv e s o f th e p ro g ra m in c lu d e im p ro v in g c ro ssdepartm en tal cooperation and referral in term s of developing the max im um p o tential business for new and existing custom ers; including centrally assigned and prioritized prospects; p erm ittin g participation for officers who have consistently dem o n strated th eir sales ability; and assigning officers to team s consistent w ith th e m arket segm ents in which they have b een successful in developing various kinds of new business. Mr. W heat says incentives are based on team production and incen tive paym ents are m ade to team s on a m onthly basis based on newbusiness perform ance. The bank’s existing directo rs’ “C o n trib u to rs” program has b een struc tu red in support of th e new program to p e rm it directors to assist with specific prospective custom ers and in m aking calls. D irectors receive points for business b ro u g h t in thro u g h th e ir efforts. The program is based on a team concept related to specific m arket segm ents, Mr. W heat says. Team s consist of from six to 10 m em bers, w ith each team assigned a specific m arket segm ent. T hem e of th e program is “The Sky Is th e Lim it. ” Team nam es suggest “those brig h t and pow erful p h en o m en a th at are at hom e in th e sky;” nam ely, stars and heavenly bodies. Team nam es also relate to specific m arket segm ents. “The Big D ip p ers” team calls on large com m ercial corporations; “The Titans” deal w ith co rresp o n d en t banks and o th er financial institutions; “The Stars & S tripes” call on g o vernm ent and non-profit organizations; “The M eteors” deal w ith m iddle m arket firms; “The Pro-Stars” contact small businesses; and “The Shooting Stars” deal w ith affluent indi viduals. 38 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Bank Lobby (Continued fro m page 16) dram atic im provem ents in p ro ductiv ity alm ost every hour of every day. T he change from a financial su p er m arket operation to an en v ironm ent w here sophisticated financial products and services are sold in a professional fashion is every bit as radical as the c h a n g e o v e r from a p h a rm a c y to a m edical clinic. To ensure th at th e new m arketing stru ctu re safely reaches the final com pletion stage, it is vital th at w e start w ith a sound foundation and build upw ard from th ere. T he in te n t of this article was to assist in th e creation of that foundation. O ur custom ers are a gold m ine and th e excavation takes place in th e lobby. W hile we seem to be co n ten t to sw eep up w hatever dust may be lying on the surface, o th er m ore en terp risin g golddiggers are tu nneling into our m ine w ithout our know ledge and m aking off w ith a fortune in gold nuggets th at we have not b o th ered to dig for. • • • Christmas Club a Corp. L orraine M cPeek and Gary Jordan have joined th e firm as account executives in the telem arketing d ep artm en t. MID-CONTINENT BANKER for April, 19 8 5 Presenting your best reach to the financial services market. Banking Savings Banks Trust Comj U.S. Treasuries Commercial Finance Companies Pi m Market Accounts Preferred Stock CUNA Bankers Acct ma A naiysi Plannin Commercial Loans Auto Loans Es Inaurane Travelers Cheques Eurobonds Indus nagemen Secondary Market Hedges Calls Reins FDIC Ag Lending Bank Cards DBMS Fixed Asset Home Banking Teller Bill Paying Personnel/Payroll/Pension Teller Staffin Investment Firms Insurance Companies Accounting Internationa Banking Credit Unions Trust Lending Commercial Bank Investments Relationship Banking Cash Management Financial Analysis Consumer Finance Companies Life/Health Money Marke Funds Passbook Accounts NOW Accounts Dividends ARM NAFCU Computing Audits it L< Personal Financial Planning Money Orders Flower Bonds Zero Coupon Bonds Mortgage Insurance Futures Puts Options Ris There’s a new kind of financial industry today — financial services — broader, less structured. And as deregulation and new technology provide diverse opportunities for growth, financial services are being provided by many different players. United States Banker and Financial Computing understand this evolution and provide a unique reach into the vital financial arena. These magazines serve the entire financial industry — banks, thrifts, credit unions, investm ent firms, m ortgage, finance and insurance companies. Each publication reaches executives in the leading financial institutions to provide in-depth, authoritative infor mation on activities affecting the industry as a whole — and on each segm ent of the total industry picture. U.S. Banker is an independent national publication serving top management. Each issue provides commen tary and objective analysis of industry developments as well as face-to-face interviews with financial in dustry leaders. Financial Computing concentrates on practical in formation about computer applications, hardware and software specifically designed for banking and finance. End-users, m anagers and DP executives find in its pages computing solutions — micro, mini or mainframe — for their financial specialty. Use both magazines to effectively influence deci sion making at all levels within financial institutions. Reach the financial services industry with United States Banker and Financial Computing. Cleworth Publishing Co., Inc. One River Road, Cos Cob, CT 06807 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Telephone (203) 661-5000 Call or write for a free media kit on each magazine today. Merger/Acquisition Seminar Stresses Practical Approach process at best. And a deal to purchase H E M E R G E R and acquisition fe assets that d ep en d on people can be ver ram p an t in th e financial in ju st as “iffy” w hen th e people side of stitutions m arketplace in 1984 will be th e deal is ignored, he said. even m ore prev alen t in 1985. Some em ployees are terrified at th e T hat’s th e m essage p re se n te d re th o u g h t of m erg ers or acq u isitio n s c e n tly to p a rtic ip a n ts in th e th ird annual “Bank M erger & Acquisition ending th eir careers. As an exam ple of th e reality of this terro r, Mr. LeC ave Seminar: A Practical A pproach,” p ro identified a senior-m anagem ent em vided for industry m em bers by M em phis State U n iversity and Borod & ployee, who, rath er than deal w ith th e effects of a m erger on his career, took Huggins. Borod & H uggins is a M em phis and W ashington, D .C ., based law his own life. H e left b eh in d a family and a note detailing his reasons. firm that specializes in rep resen tatio n Jeffrey C. Gerrish and Ann W. Langston, How does an institution avoid losing of financial institutions. Borod & Huggins partners, spoke at mergits shirt or ruining a deal because the The sem inar drew industry leaders er/acquisition seminar. people who are p art of th e deal are from across th e M id-South and th e na unhappy? C om m unication and plan tion to hear CPAs, attorneys, a valua ning are th e im portant factors, accord tion expert and a p ersonnel m anager th at allow them to be m ore com peti ing to Mr. LeCave. delve into the structures and pro ce tive. “ C o m m u n ic a tio n h o ld s th e d eal T he shifts will occur, according to d u re s n e c e ssa ry for fin a n c ia l-in sti to g e th e r,” he says. M r. H uggins, because of th e heavily tution survival in th e 1980s. P ersonnel issues in m ergers and ac P eo p le, re g u la tio n s and n e g o tia fra g m e n te d n atu re of th e financialquisitions include: size of th e two orga tions w ere th e m ajor them es covered serv ices in d u stry , lack of sufficient nizations involved, benefits packages n um bers of qualified seniors m anagers in the sem inar. of each in stitu tio n , executive com Stanley M. H uggins, p artn er, Borod and dissatisfactions of p re se n t ow ners. pensation and personnel operations. “Acquisition activity will continue & H uggins, said, “In 1984, m erger Mr. LeC ave offered item s like an activity as a w hole was up 51% during for m any years and will be stim ulated th e first six m onths of th e year com by banking and by non-banking firms, ” “acquisition profile” to assist th e ac qu irin g in stitu tio n in analyzing th e h e said. pared to th e sam e six m onths of 1983. John L. L eC ave, first vice presip e rs o n n e l sid e o f th e a c q u isitio n / O ver th e last th re e years, financialm erger process. services corporations w ere th e m ost d e n t/d ire c to r of personnel, N ational The acquisition profile asks for in active of the m erger sector of th e econ Bank of C om m erce, M em phis, em phasized the im portance of th e “p e o form ation of th e m erger candidate that om y.” includes n u m b er of branches and em Mr. Huggins cited a study th at indi p le ” aspect in an acquisition or m erg er ployees involved; n u m b er of officers; cates th at in 1983, 20% of all new dol situation. “Boards p u t to g eth er deals, b u t the re tir e m e n t p lans; lists of m ed ical, lars gath ered by larg er financial in dental and o ther insurance program s; stitutions w ere th e resu lt of m erg er or p e o p le in v o lv e d in th e d e a ls a re and formal personnel policies of each acquisition activity. H e says it is esti asking, ‘How will it affect us?’ T hat’s organization. m ated that by 1990, 41% of all financial w hy th e first thing to go sour in any Mr. LeCave said em ployee h an d in s titu tio n s u n d e r $100 m illio n in deal to purchase a bank or financial books and personnel m anuals m ust be assets will have sold out to larger in in stitution is th e p eo p le’ p art of the as easily obtained and studied by the d e a l,” he said. stitutions. H e com pared the em ployee part of parties to the deal as are 10-Ks and “T h ere’s a one-in-tw o chance that annual reports. your institution will be p a rt of an ac th e purchase process to a blind date. A After a m erger, th e first to m ove in m arriage after a blind date is an “iffy” q u isitio n or m e rg e r a c tiv ity ,’’ M r. H uggins said. H e told those participating in th e sem inar th at in th e p eriod following In 1984, merger activity as a whole was up 5 1 % deregulation of th e financial services during the first six months of the year compared to the industry, each com petitor m ust m ake strategic moves to reach new com p eti same six months of 1983. Over the last three years, tive positions b ecause th e en v iro n financial-services corporations were the most active of the m en t in which th e institution is o p e ra t merger sector of the economy. in g h as c h a n g e d . M a k in g th o s e changes will req u ire a shift to positions T Digitized for4 0FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for April, 19 8 5 The average price paid for a bank in 1984 was 1.38 times its value, a decline from the higher yields during the earlier waves of merger and acquisition activity in 1982 through 1983. are the h ead h u n ters, he said. A cquir ing com panies should get w ith new em ployees early-on in th e process. “You m ust find your good people and keep them in o rd er to m ake the m erger work. T hey are the individuals who have m ade your acquisition as valuable as it is. G et w ith all your e m ployees. Be honest. T reat them like ad u lts,” Mr. LeC ave said. The new en v iro n m en t will req u ire every institution to have a strategy for expansion. According to Mr. H uggins, th ere will be only th re e positions avail able to institutions: they m ust be an acquirer, an acquiree or be p rep ared to rem ain in d ep en d en t. In d e p e n d e n c e , M r. H u g g in s w arned, does not m ean “a do-nothing a ttitu d e .” “The in d e p e n d e n t status has its pitfalls due to th e m aturing of potential m arkets and th e increase in com peti tio n ,” he said. A decision to rem ain in d e p e n d e n t m ust be based on th e in stitu tio n ’s abil ity to expand its profit m argins and its custom er base and add new profit c e n ters w ithout acquiring an o th er in stitu tion. At th e h e a rt of any strategy, Mr. H uggins said, th e re m ust be a plan that allows th e institution to cope w ith the m arketplace in an organized format. H e w arned th at too m any institutions are devising plans m otivated by fear. “This fear arises from problem s of deregulation, such as th e hig h er costs of funds, th e fear of com petition from o th er institutions invading hom e turf, a lack of high-quality innovative m an agem ent, record bank failures and an underlying w eak trad e b a se ,” he said. In developing a plan void of fear as a m otivator, m anagem ent m ust exam ine th e issue of “co n tro l,” he added. “C ontrol is th e equitable and effi c ie n t balan cin g of th e in te re s t and rights of all shareholders in an in stitu tio n .” In exam ining th e issue of control, m anagem ent m ust ask th ese questions as a guide to planning its strategy: • D o sh a re h o ld e rs have a liq u id m arket for th e ir investm ent? • W hat are th e advantages of a com m on-stock rep urchase by th e holding com pany? • W hat about an E m ployee Stock O w nership Plan (ESOP)? It could p ro vide for liquidity and a m ajor benefit to m anagem ent and em ployees. • W ould it benefit all shareholders or stockholders to have a co m p reh en sive anti-takeover plan to avoid u n w anted suitors? • W ould sale of the institution in the first wave of m ergers be th e b est way to go for all concerned? • Is th e r e an in c e n tiv e plan for senior m anagem ent th at encourages them to consider the best interests of shareholders rath er than ju st the long term interests of senior m anagem ent? John S. Seabold (r.), Borod & Huggins p a rt ner, chats w ith sem inar atte n d e e Craig H eath, dir., First N a t'l, N ew to n , III. In addition to control, an institution m ust be able to raise capital in o rd er to rem ain com petitive and bring th e best price as a m erger or acquisition candi date. “ D eregulation and acquisition p ro gram s have intensified the need for capital resources, b u t sources of capital and th e generation of internal capital have d ec lin ed ,” he said. “According to m o st e x p e rts , th e m a rk e ts c a n n o t accom m odate w idespread issuance of new shares of com m on stock. Thus in stitutions m ust look to o th er in stru m ents as sources of capital. ” T raditional m ethods of capital ac quisition are still useful, he added, b u t th ey m ust be su p p lem en ted in m any cases by new variations on old them es. T hese variations include item s such as a d ju s ta b le p re fe rre d stock, cap ital notes, options, w arrants and stock or d e b t swaps. In the future, Mr. H uggins said, the value of financial institutions will no longer d ep en d on any type of intrinsic value. MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis “Just as w ith any nonregulated com pany, the perform ance of that in stitu tion will be the determ ining factor of its value. The institution will be exact ly w hat m anagem ent and th e o ther stockholders make it,” he said. The average price paid for a bank in 1984 was 1.38 tim es its value, a decline from the higher yields during the ear lier waves of m erger and acquisition activity in 1982 through 1983. The major reason for this decline, according to Mr. H uggins, is the lim ited capital of larger institutions. H e says o th er institutions also are able to get into a m arketplace w ithout buying a com petitor. H e says in some cases it is easier to start a bank than it is to buy one. H ow ever, acquisitions or m ergers still will be the prim ary way m ore com petitors will e n te r th e m arketplace or expand geographic boundaries. A nn W o o ten L an g sto n , p a rtn e r, Borod & H uggins, spoke of th ree m a jo r considerations w hen looking for an acquisition candidate: “Know the play ers, know yourself and create th e best clim ate.” C reatin g th e clim ate for negotia tio n s, acco rd in g to Ms. L an gston, m eans “being reasonable.” “The person who is least reasonable is the one who comes out on th e short end of the stick,” she said. In addition, Ms. Langston observed that p roper docum entation of th e steps to a m erger can be critical to its suc cess. D o c u m e n ta tio n should begin early-on in th e acquisition process. O nce a decision has b een m ade to e n te r into negotiations, a prelim inary agreem ent should be p u t in writing. “The prelim inary docum ent should set forth th e fundam ental issues that require fu rth er negotiation and clar ification,” she added. T h e p re lim in a ry a g re e m e n t w ill serve to highlight any irreconcilable differences surrounding the transac tio n , w ill p re v e n t u n n e c e ssa ry ex p en d itu res of tim e and m oney, she said. O th er things to consider in a le tte r of ag reem ent include: • Tim ing of events surrounding the transaction. • A co n fid en tiality a g re e m e n t to p ro te c t all parties in th e ev en t th e transaction should fail. • D efinitive term s regarding who is to pay expenses in connection w ith the transaction. “A w ritte n d o c u m e n t gives su b stance and validity to a proposed tran s action and a sense of c o m m itm en t w hile not creating a binding obligation of the p arties,” Ms. Langston said. As an exam ple of the steps in con41 ducting m erg er or acquisition negotia tions, Ms. L angston and Jeffrey C. G errish, p artn er, Borod & H uggins, acted out a series of mock negotiating sessions for sem inar participants. E m phasized during th e negotiations was the n eed by each party to disclose as m uch inform ation as was necessary to th e ir p art in th e transaction. F o r th e targ et institution, disclosure included providing m aterial at its location for unsupervised analysis by th e acquiring institu tio n ’s professionals. Item s an acquiring institution may w ant to be on th e lookout for th at arose d u rin g th e n eg o tiatio n s in c lu d e d a s w e e th e a r t- le a s e a r r a n g e m e n t b e tw een a board m em b er of th e target institution and his organization and a p referred custom er of th e targ et in stitutio n and his organization and a p referred custom er of th e targ et in stitu tio n w ith a loan th a t had little chance of being collected. In addition, g o ld e n -p a ra ch u te arra n g e m en ts b e tw e e n s e n io r m a n a g e m e n t o f th e target institution and its board can be an expensive item to an acquirer. Ms. L angston em phasized d u rin g th e negotiations th at th e m anagem ent team th at m ade th e targ et institution successful should be enticed to stay on. At each step of th e negotiating p ro cess, professionals should be b ro u g h t in to re p re se n t th e b est in terests of both parties. T hese professionals in clude CPAs, attorneys, econom ic con sultants, appraisers and brokers. • • Personal Financial Planning Study in Progress at BAI Successful and profitable en try into th e growing m arket for personal finan cial planning services is th e subject of a new research study being conducted by the Bank A dm inistration In stitu te and A rthur D. L ittle, Inc., consulting firm. T he study will serve as a planning/ analytical guide for banks and thrifts in terested in offering personal finan cial planning (PFP) to custom ers. I t’s designed to assist financial institutions in identifying P F P o p p ortunities and in developing effective strategies to offer P F P as a profitable line of b u si ness. Areas to be addressed by th e study include levels and types of personal financial planning services and p ro d ucts th at can be offered profitably by financial institutions, critical factors for successful en try into th e m arket and im plem entation strategies to help e n sure successful m arket en try and posi tion P F P w ith existing services. Study resu lts w ill b e released in June. 42 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Study Tells How to Smooth O ut Merger/Acquisition Proceedings E F IN IN G goals, com m unicating and addressing differences in corporate cultures are basic b u t often overlooked issues involved in success fully m erging financial in stitu tio n s, according to a new study. T he study was co n d ucted for the ABA by E rn st & W hinney (E&W) and is titled Implementing Mergers and D Acquisitions in the Financial Services Industry. I t’s available from the ABA. T he study is based on interview s w ith m ore than 80 executives whose in stitu tio n s have b e e n involved in m ergers or acquisitions. It serves as a guide to design effective im plem enta tion program s to en sure that m ergers m eet objectives established by those involved. “People negotiating a m erg er tend to becom e so involved in the ‘thrilling’ issues that they som etim es u n in te n tio n ally ig n o re th e less glam orous b u t still im p o rta n t im p le m e n ta tio n issues,” said G eorge J. Beck, E& W p a rtn e r and national director of finan cial services industries. “In the deal making process, executives te n d to b e com e carried away by the excitem ent and assum e th at basic people concerns will ‘fall into p lace.’ ” he added. Included in th e book are approaches for th e im p lem en tatio n fram ew ork, p la n n in g to ach iev e m e rg e r goals, co rp o rate c u ltu re , h u m an reso u rce systems and m anagem ent, service d e livery and support system s, and finan cial m anagem ent. A significant finding of th e project, according to Mr. Beck, is th at m any m ergers are im p lem en ted poorly b e cau se e x ecu tiv es in v o lv ed b eco m e overly concerned about details and, in so d o in g , o fte n lo se sig h t o f th e strategic reasons for m erging. These include expanding p roduct capabilities and su p p lem en tin g hum an or te c h nological resources. Executives who im p le m e n t m ost su ccessfu lly base th eir approach on such driving forces. Mr. Beck em phasized, “M ergers that a c h ie v e th e ir goals h a v e a w e llthought-out plan from th e very b eg in ning and keep those goals in p ersp ec tive th roughout im p lem en tatio n .” T he book reveals how various im ple m e n ta tio n p ro b le m s hav e re s u lte d w hen an acquiring bank’s m anagem ent failed to com m unicate — or miscomm unicated — m erger-im plem entation objectives. “F or in stan ce,” Mr. Beck continued, “telling em ployees of an ac q u ired bank not to w orry — th at every- thing will rem ain the sam e after th e m erger — may m ean different things to the acquiring and th e acquired. In reality, ‘keeping everything th e sam e’ rarely hap p en s, and executives can place them selves in the position of lat e r reversing th e ir statem ents. “ O u r discussions w ith executives w ere very frank,” said Mr. Beck. “T he executives’ advice and th e experience of our consultants w ere su p p lem en ted by thorough research to supply the m ajor foundation for th e book. ” “T h ree types of m erg ers and ac quisitions w ere exam ined for th e p ro j ect: b an k /b an k , b a n k /n o n b a n k and nonbank/bank. T he categories w ere fu rth e r su b d iv id ed into m erg ers of equals, acquisitions of small banks by larg er banks or bank holding com panies, acquisitions of tro u b le d in stitutions and unfriendly acquisitions. T he book explains how each type of m e rg e r affects th e im p le m e n ta tio n process. It also includes exam ples of checklists and questionnaires th at can be tailored to help institutions apply techniques developed from th e study. Copies of th e book are available by contacting the ABA, O rd er Processing D e p a rtm e n t, 44-B In d u s tria l P ark D rive, W aldorf, M D 20601. The te le phone nu m b er is 202/467-4118. • • Accounting System Guide Published by BAI A new, eight-volum e edition of the F inancial In fo rm a tio n System f o r Community Banks has b een released by the Bank A dm inistration Institute. The system provides step-by-step in struction for im plem enting a contem porary basic accounting system that can be tailored to the needs of any com m unity bank, accom m odating fu tu re expansion and changes, the BAI says. T he system utilizes and adapts a bank’s p resen t data files and can be installed by in-house staff. Practical h e lp is p ro v id e d , in c lu d in g w o rk sheets, m odels, sam ple rep o rts and graphs, definitions, checklists and d e tailed procedures. The eight volum es deal w ith th e fol low ing topics: a ch art of accounts, financial reporting, m anagem ent re porting, cost accounting, b u d g etin g and p ro fit p la n n in g , re sp o n sib ility acco u n tin g , a sse t/lia b ility m an ag e m e n t and th e co m m u n ity b a n k e r’s guide to m icro-com puters. MID-CONTINENT BANKER for April, 19 8 5 NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES BUSINESS REPLY MAIL FIRST CLASS PERMIT NO. 2 5 8 2 ST. LOUIS, MO 63119 POSTAGE W ILL BE PAID BY ADDRESSEE 109 W. LO C K W O O D S U IT E 218 ST. LO U IS , MO 6 31 19 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I'd like details on h o w HORIZONS 6 0 can help us a ttra c t g the fa st-g ro w in g senior citizens m arket in our com m unity. 1 N A M E ____________________________________________________________ TITLE ____________________________________________________________ | N AM E OF IN S T IT U T IO N ___________________________________________ ADDRESS ________________________________________________________ CITY & S T A T E _________________________________________________ ZIP TELEPHONE NUMBER ( https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis “The Horizons 60 Club is the best program we have ever undertaken in our bank over our 36-year history.” Gordon M. White, Vice-President—Marketing Merchants & Farmers Bank West Helena, Arkansas “It is the best public relations program we have ever conducted,” continues Mr. White, “and as a result, has helped not only retain those deposits that we had, but also has helped to substantially increase our present deposits. “We realize that we could have developed our own Senior Citizens program, but after one full year we are extremely thankful that we ch ose to becom e a part of HORIZONS 6 0 . Your expertise, support and guidance have been instrumental in our su cc ess. “The benefits we have received as part of HORIZONS 6 0 far outweigh the cost. We wholeheartedly recomm end this course of action to anyone who is considering a Senior Citizens program in their bank.” HORIZONS 6 0 thanks Mr. White for th ese kind words. And if you would like details on how the HORIZONS 6 0 program can help your bank, too, attract the fast-growing 6 0 + market, write or phone us today. Sooner or later one bank in your community is going to capture the major share of this profitable market. Shouldn’t it be yours? MID-CONTINENT RANKER f6r April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 43 At Pittsburgh National— Making Loan Process Easier for Consum ers Boosts Bank's Business ITTSBU RG H NATIONAL had a problem in 1983. W idely swinging in terest rates began to stabilize ju st w hen Pennsylvania was raising its low usury ceilings — two factors th at com bined to reverse th e bank’s prevailing passiveness tow ard d irect consum er lending. The bank resp o n d ed by d e veloping a new product, hom e-equity loans, w ith a supporting ad program to build up its consum er-loan business. But this effort fell far short of th e mark. O ne year later, th e p roblem was solved, because P ittsb u rg h National got to th e root of it. T ogether w ith K e tc h u m A d v e rtis in g , th e b a n k un d erto o k a u n iq u e m arketing p ro gram that began w ith a study of con sum er perceptions. W hat we found is this: C onsum ers are uncom fortable about borrow ing, b ecau se th e y lack in fo rm atio n and th ey ’re confused. The two firms p ro ceeded w ith a strategy of providing consu m ers w ith straig h tfo rw ard in formation and guidance to m ake them m ore co m fortable d u rin g th e loanapplication process. The result: con sum er-loan grow th not only m et its 1984 objective, b u t ex ceed ed it by By James V. Ficco o p p o rtu n ity,” says R obert B ernardini, advertising m anager. P ittsb u rg h N ational and K etchum started the m arketing effort by estab lishing research objectives: • To identify consum er appeals and inhibitors associated w ith borrow ing and identify attitudes tow ard th e ap plication process and various lending institutions. • To obtain consum er reaction to altern ativ e ad v ertisin g positions for loans. • To obtain this inform ation quick lyT h e fo cu s-g ro u p -m ark et-research tech n iq u e was chosen because it could p ro v id e in fo rm atio n fast. W e co n d u cted th ree groups — two groups of hom e ow ners over 25 years of age, w ith household incom es over $25,000, and a th ird group also having second m ort- 100% . The bank’s 1984 objective was to in crease its January-June loan business 30% over the same period in 1983. But m anagem ent qualified th e m arketing effort w ith a n u m b er of strategic deci sions: C redit standards w ould rem ain high to m aintain P ittsburgh N ational’s 1983 record of having th e low est ratio of nonperform ing consum er loans of any Pennsylvania bank, and w hile in terest rates w ould rem ain com petitive, healthy re tu rn on assets w ould rem ain the abiding objective. So, rath er than com pete on superior cred it ease and pricing, another advantage had to be found. “W hen we looked at im provem ents we could make in how we talk about lo an s, w e fo u n d o u r c o m p e titiv e 44 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Looking a t new spaper ads about Pitts burgh Nat'I's retail-lo an program are (I. to r.): Robert Bernardini, v .p ./a d v . mgr. of bank; Frederick J. Eisenreich, bank's v.p./asst. m gr., consumer loan adm inistration; and James V. Ficco, author of accom panying article and v .p ./a c c o u n t s u p e rv is o r, K etch um Advertising/Pittsburgh. gages. F ro m th e ir d iscussions, w e m ade several im p o rtan t discoveries about consum er attitudes: • C onsum ers view loans simply as th e m eans to purchase som ething they can’t afford w ith available cash. The im plication: The bank could not hope to increase dem and for loans through m arketing efforts. It w ould have to try for a larger share of the existing loan m arket at the expense of com petitors. • Most consum ers are uncom fort able w ith one or m ore aspects of the loan-application process. In freq u en t borrow ers are intim idated, especially by the prospect of rejection, and even frequent, successful applicants resen t a loan office sitting in ju d g m en t over them . All believe criteria used to eval uate th eir applications are secret and arbitrary. T hey’re uncertain about a loan’s cost and how m uch they can afford to borrow. M any are confused about w hat kind of loan is best for th eir needs. • M any consum ers, even freq u en t borrow ers, are uncom fortable w ith the whole idea of borrowing. T hey feel it’s necessary to justify borrow ing in term s of satisfying needs rath er than wants. M any who resen t a loan officer’s ju d g m en t of credit-w orthiness value that ju d g m e n t as a controlling influence th at saves them from excessive debt. W hile banks are perceived as having to u gher credit standards than o th er financial institutions, som etim es these high standards are view ed positively. • M uch consum er discom fort w ith borrow ing is rooted in lack of inform a tion ab out th e ap plication process, borrow ing cost and borrow ing options. C onsum ers believe this inform ation is unavailable in one place for review at th eir leisure before they go in to apply for a loan. To capitalize on these consum er atti tudes, a com m unications position was developed. “P ittsburgh N ational is the bank that helps consum ers feel m ore MID-CONTINENT BANKER for April, 19 8 5 com fortable during th e process of ap plying for a lo an .” But before com m unicating w ith consum ers to address confusion and lack of know ledge about borrow ing, th e bank began com m uni cating w ith its own loan officers. “ F o r years m aking loans had not been a top p rio rity ,” says Mr. B ernar dini. “Now we w ere asking them to becom e loan-inform ation experts. So we had to m ake th e m arketing objec tives clear and refresh officers’ skills. W e had to help them feel m ore com fortable.” A m u lti- s te p p ro g ra m w as d e v elo p ed . B ranch-sales quo tas w ere established and in centives provided for outstanding efforts. To kick off the m arketing effort, N ed Randall, senior vice presid en t, com m unity banking, o u tlin e d th e b a n k ’s c o n su m er-lo an objectives and review ed branch quotas and incentives at a branch-m anager m eeting. T hen branch m anagers received a le tte r from Tom O ’B rien, bank chair man, w hich reaffirm ed th e im portance of consum er lending. W ith th e le tte r was an inform ation kit th at contained tools to help platform people accom plish th e ir sales objectives: a detailed review of loan products and lending policies; guidelines for recom m ending the best loan option for th e b o rro w er’s n eed ; com m on con su m er q uestions and fears w ith guidelines for address ing them ; a copy of the new spaper and m edia schedule to dem o n strate th e scope of com m unications support; and a wool scarf e m b ro id e re d w ith th e bank’s logo to em phasize th e bank’s com m itm ent to making branch people feel com fortable about making loans. T h is in c e n tiv e a n d in fo rm a tio n p ro g ram was u n u su a lly successful, according to F red E isenreich, product m anager, consum er lending. “The acid test is th e program ’s abil ity to m otivate branch loan officers to take an en trep ren u rial a ttitu d e ,” he says. “Q uite a few of the branches d e v e lo p e d th e ir ow n m in i-in c e n tiv e p ro g ram s and cu sto m er-so licitatio n cam paigns.” O nce platform people had b een p re p a r e d , c o n s u m e r c o m m u n ic a tio n s could begin. A four-page, full-sized, p r e p r i n t e d n e w s p a p e r in s e r t was placed in th e P ittsburgh m etro new s pap er and in nine suburban new spa pers. W hile a m ulti-page in sert is com m on for re ta ile rs, it was u n p re c e d en ted for banking in th e P ittsburgh m arket. “ W e w a n te d to do s o m e th in g dram atic, som ething that established our position quickly and p re e m p te d th e co m p etition,” says Mr. B ernardi- ni. W h ile r e ta il a d v e rtis in g in s e rts serve as a product listing, “How to feel m ore com fortable w ith th e uncom fort able process of applying for a loan” serves as a consum er guide. T he first section, “Know th e u n k n o w n s,” d escrib ed P ittsb u rg h N a tio n al’s credit-application-evaluation criteria, including indentifying a max im um debt/incom e ratio and a w ork sheet to help prospective borrow ers figure out th eir own ratios. Section two, “W hen you m eet w ith our loan officer, expect a pleasant su r p ris e ,” ad d ressed consum er re s e n t m en t or fear that loan officers n e e d lessly ask tough, personal or e m b ar rassing q u estio n s, advising re a d e rs th at P ittsburgh National officers ask questions to help d eterm in e w hat kind of loan best suits th e ir needs. T h e fin a l s e c tio n , “ W h y you sh o uldn’t choose a loan a lo n e,” d e scribed the kinds of loans available at th e bank, including th eir features, in terest rates, benefits and a chart to help readers estim ate m onthly pay m ents for various loan am ounts, and reaffirm ed the need to review borrow ing options w ith a P ittsburgh N ational banker. C o m m u n ity -b a n k in g p e r s o n n e l w o rrie d th a t co n su m e r in te r e s t in Designed for the busy executive — The n atio n ’s newest and m ost com prehensive Financial Institutions Directory is now available. M cFadden’s new Savings D irectory when com bined w ith its Am erican Bank Directory becomes a handy 3-volume directory of Am erican Financial Institutions. Each listing contains: city, population, m ailing address, mem berships, phone numbers, top o ffice rs/title s, financial data and much more! COMPLETE DIRECTORY — American Financial Institutions — Yes, I want all the n atio n ’s top financial in s titu tio n s in one com plete directory: □ Send m e _______ copies of the current AFI @ $180 ea. □ Enter standing order for each Spring AFI @ $145 ea. □ Enter standing order for each Spring AFI @ $130 ea. and stand ing order for Fall American Bank Directory @ $75 ea. (plus shipping and handling) SAVINGS DIRECTORY — American Savings Directory — Yes, I want to add this volume to my library to include savings and loans, m utual sav ings banks, m ajor credit unions and money m arket funds. □ Send m e _______ copies of the current ASD @ $75 ea. □ Enter standing order for each W inter ASD @ $60 ea. □ Enter standing order for each W inter ASD @ $60 ea. and stand ing order for Fall American Bank Directory @ $95 ea. (plus shipping and handling) □ SEND ME MORE INFORMATION PLACE YOUR ORDER TODAY! Mail to: McFadden Business Publications, 6195 Crooked Creek Rd., Norcross, GA 30092. COMPANY NAME ADDRESS MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis STATE ZIP 45 Award Jewelry: Because It’s N ot Merely the Thought That Counts. A pat on the back, or even a bonus check is not enough. These days, you need something of lasting value to show appreciation to your employees. Award jewelry items are gifts worth the keeping and the wearing. Send the attached coupon for more information on how we can provide a lasting incentive program for those superior achievers in your •• »,. ; « y / *' T e rry fo rn / 2033 Oak Industrial Dr. N.E. Grand Rapids, MI 49505 1-800-253-0882 Toll Free □ I’d like to know more about award programs. □ Our company logo or my business card is attached. Please send sample artwork and a no-obligation quote on an: □ Award Ring Program □ Emblem Jewelry Program □ Please call—I have some questions. N am e Title Firm A ddress C ity/State/Z ip T elephone N um ber 46 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 485 :. * < loans was too low to w arrant this kind of in -d e p th inform ative advertising, b u t not for long. “At first, we w ere afraid no one w ould b o th er to read all th is,” says Mr. E isenreich. “But w hen branch people told m e custom ers w ere walking in w ith th e in se rt tu ck ed u n d e r th e ir a rm s a n d o p e n in g c h e c k - c re d it accounts, I knew a lot of people w ere reading every word. ” “O th er positive response to th e in sert was even m ore u n ex p ected ,” adds M r. B ernardini. “An accountant called and asked for 50 copies to give to his clients as an inform ation source.” A fter th e new spaper ad ran a n u m b e r of tim es over a tw o-m onth period, a 12-page four-color in se rt v ersion app eared in local editions of national m agazines, including Reader s Digest and TV Guide. The m agazine inserts w ere bound into th e publication w ith a p erforated strip to p erm it easy rem ov al and encourage saving for future ref erence. “The insert really stood o u t,” says Mr. B ernardini. “No way you could pick up an issue w ithout seeing it. W e think people will hold onto our insert for m onths, like they did w ith Shell A n sw e r books th a t p ro v id e d safe driving tip s.” Fractional-page new spaper and fullp ag e m agazine ads m ain ta in e d th e p ro g ra m ’s in fo rm a tio n a l to n e w ith headlines like “How a Loan Can H elp You Build for Your F u tu re ” and “A Short C ourse in Financing an E d u ca tio n .” Each ad briefly review s borrow ing options available and reaffirms the a d v a n ta g e s of se e in g a P itts b u rg h N ational banker in choosing th e b est o n e . B adio c o m m e rc ia ls w e re d e veloped to support th e strategy. W hile the m arketing program ex c e e d e d its c o n s u m e r-lo a n -g ro w th objectives, it produced o th er tangible results as well. “W e succeeded not only in selling m ore loans, b u t also in b e tte r m eeting o u r c u s to m e r s ’ n e e d s ,’’ says M r. E isenreich. “W e w ere able to direct a lot of people tow ard open -en d ed cred it. T hat’s b e tte r for us, of course, b ut c u sto m e rs w e re really en th u sia stic about getting into it.” T here are no formulas for m arketing success in retail banking. B ut success does re q u ire m any of th e elem ents p re se n t in this campaign: • Identifying a relevant and m oti vating com m unications position that addresses the consum er’s real needs. T hat m eans realistically assessing your pro d u ct — its price, availability, deliv ery m echanism s and features — from your m arket’s point of view as well as the bank’s. O nly by questioning con sum ers about th e ir p ercep tio n s can you gain confidence in your assess m ent. Focus-group testing, albeit an im perfect tool for gauging consum er attitudes, was invaluable for develop ing this p ro g ra m ’s com m unications position. • Making sure your position is sup portable. In this case, that req u ired giving branch people tools to contrib u te to and fulfill our com m unications prom ise and developing an in teg rated c o m m u n ic a tio n s p ac k a g e th a t a d dressed branch-personnel needs. • D e v e lo p in g u n iq u e , p o w e rfu l com m unications th at m ake a strong im p ressio n on y o u r a u d ien ce. You can’t take your au dience’s attention for granted. Once you’ve identified your position, you m ust establish it w ith som ething that breaks through com m unications clutter. In this program , th e insert form at for advertising and th e three-dim ensional inform ation kit for th e b ran ch m an ag er p erfo rm ed well. • Having a healthy resp ect for the intelligence and taste of your m arket and m aking a com m itm ent to discover exciting ways to relate p roduct fea tures to that m arket’s needs. This is th e m ost fundam ental ele m ent, because it’s th e source of all th e activities that m ake a m arketing effort successful. • • • National Bank of D etroit has ap pointed Bruce E. N yberg and Thomas A. E th ier first vice p residents in th e w estern m etropolitan region and m id w est banking divisions, respectively. V incent A. V atalaro was ap p o in ted vice p re sid e n t/in fo rm a tio n -p ro ce ssing. Industry Investment Needs Topic of AmeriTrust Study A m eriTrust C orp., C leveland, has com m issioned a study of th e invest m e n t n e e d s of th e M id -A m e ric a n econom y over the next decade. The stu d y also w ill ex p lo re how th e se needs can be m et. The study is expected to provide a detailed analysis of financing req u ired by both m ature and em erging indus tries to enable them to com pete suc cessfully in national and w orld m ar kets. It will be conducted by SRI In te r national, Inc. In addition, th e study will evaluate th e capability of c u rren tly available financing sources and recom m end ac tions req u ired in both private and p u b lic sectors to satisfy th e region’s capital needs. A late sum m er com pletion date has b een set. MID-CONTINENT BANKER for April, 1 9 8 5 Financial-Services Supermarket Takes Shape in Kentucky Town OST BANKERS dream of th eir th e law was changed, Mr. D uncan lost institution achieving th e goal of little tim e in m aking application to C om m unity H olding C om becom ing th e “financial su p erm arkestablish et” of its trad e area. T hey see w hat n o n pany, w hich acquired Inez D eposit Bank and now has an application p e n d bank retailers have done and yearn to ing w ith th e F ed to acquire 40% of be able to com pete on an equal footing. nearby F irst National, Louisa, Ky. Since deregulation of th e financialMr. D uncan has high expectations services in dustry hasn’t yet arrived at th e point w here bank ers’ dream s are for continued grow th of th e HC. H e ’s realities, it’s necessary for them to use looking forward to th e day regulations th eir im aginations to devise arran g e w ill p e rm it th e H C to acq u ire th e C om m unity Financial C en ter, so h e ’ll m ents th at enable th e ir institutions to have his financial superm arket u n d er b e as com petitive as possible, given one roof. cu rren t restrictions. Few bankers have used th e ir im aginations as effectively as R obert M. D u n c a n , p r e s id e n t/C E O at $55m illion-asset Inez (Ky.) D eposit Bank. Mr. D uncan’s dream s are taking tangi Robert M . D uncan, b le form in his b a n k ’s C o m m u n ity pres./CEO, Inez (Ky.) Financial C enter. D e p o s it B a n k , is T he ce n te r is located ju st a few doors seeing his dream of down Main S treet from th e bank in the b an k becom ing f i small m ountain com m unity (popula n a n c ia l s u p e rm a r tion: 600) in eastern K entucky. The ket coming true. cen ter houses services th e bank can’t offer u n d e r its own roof at this tim e, including real estate and tax p re p a ra tion. It also offers services th e bank form erly offered u n d e r its own roof: H e has high expectations for con in su ran c e an d d isc o u n t b ro k e ra g e . tin u ed deregulation of th e financialT he insurance agency was m oved to services industry. H e expects au th o r th e cen te r to elim inate any appearance ization for banks to offer insurance and of coercion a loan custom er m ight feel re a l-e sta te services as d ereg u latio n about purchasing insurance from th e continues. bank as a qualifier for obtaining a loan. “I ’d rath er things w ere left alo n e,” Few , if any, towns the size of Inez h e says. “T hey’re not going to be and have financial centers. The C om m u w e recognize that. T hat’s w hy we re n ity F in a n c ia l C e n te r re fle c ts M r. trying to adapt to th e changes.” D uncan’s vision of banking of th e fu In one sense, insurance and real ture. This vision of full-service banking estate services are n ’t new to Inez D e is so broad th at he w ould like to add a posit Bank. Insurance services have credit union and a small loan office in b e e n offered by th e bank’s loan d e p a rt th e future. m en t for some tim e and the bank also His vision springs from his view of had served as an informal broker of real banking today as being in th e same estate because it was a central g ath er position th e horse-draw n carriage in ing place for buyers and sellers. dustry was w hen autos w ere invented. B ut Mr. D uncan sees th e C om m u H e doesn’t w ant his bank to becom e nity Financial C en ter as taking finan obsolete by not taking advantage of cial services a step further. The realnew opportunities as they com e along. estate agency is a small operation at Since becom ing C E O of th e bank in p resen t, b u t it has m et its 1984 sales 1981, Mr. D uncan has seen the in stitu goals and has one principal broker and tio n ’s assets grow steadily. H e sees four sales agents. T he only o th er realassets of $100 million by 1990 if th e estate agency in th e county has in rate of grow th continues. creased its advertising and taken a d e U ntil last year, K entucky banking fensive position. laws proh ib ited H C form ations. After The insurance agency is th e co rn er M MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis stone of the cen ter and accounts for m ost walk-in traffic. A bout a q u arter of th e agency’s 1,800 custom ers p refer to pay th eir prem ium s in person, provid ing am ple opportunity for cross selling of services, such as incom e-tax p re p a ration. T he cen ter is connected to th e bank only in that Mr. D uncan and o ther bank officers have positions in both the bank and the center. The bank also owns the building in w hich th e c en ter is located. The bank’s m arketing d irec to r han d les th e disco u n t-b ro k erag e service and the bank’s treasu rer h an dles th e tax-preparation service. Mr. D uncan says his concept of the C o m m unity Financial C e n te r could inspire o ther small-town banks to take steps to p rep are them selves for the new financial m arket the industry is about to enter. — Jim Fabian, senior editor. THE SHOW OFF M Gets the Word Out to m a k e y o u r S e rv ic e s T h e Talk o f th e Tow n Choice of 8 option panels Send for Brochure KINGSLEY DEPOSITORY COMPANY P. O . B o x 2731 P o m o n a , C a lifo rn ia 917 69 -2 7 3 1 47 Benefits of Equipment Leasing: Another Tool to Bring in Business! advertisem ents in th e loan d ep artm en t and lobby have spread th e w ord about th e leasing service. W hen custom ers becom e aware of th e service, they con clude that the bank is able to handle m ore of th e ir financial n eed s, M r. F eh renbach says. Leasing has enabled th e bank to p rev en t split credits, b e cause it perm its farm ers to finance both th eir operation lines and th e ir e q u ip m e n t at th e bank. F o rm erly , they leased eq u ip m en t from dealers. “Leasing’s prim ary attraction to th e agriculture sector is its low cost,” Mr. F e h re n b a c h says. “ B ecause of low com m odity prices and high in terest rates, th e strong dollar and the weak export m arket, farm ers no longer have th e gigantic tax appetites they once did. By trading off the investm ent-tax credit and depreciation to th e bank, farm ers can receive lower-cost funding and can conserve cash — yet still b e n efit from im proved technology of new equipm ent. “Virtually all farm ers are looking for ways to im prove th eir cash flows and they see leasing as a m ajor way to do it. Sale of existing eq u ip m en t usually p ro Q U IP M E N T leasing is view ed as “Leasing has caused m e to becom e “a n o th e r a lte rn a tiv e or tool to aw are of the n eed to explore the use to allow us to structure an optim um soluw hich th e eq u ip m en t will be p u t and tio n to th e in d iv id u a l c u s to m e r ’s th e trem endous im pact this has on the n eeds” by D an J. F eh ren b ach , vice e q u ip m e n t’s v alu e,” he says. president, Bank of W estern Indiana, F o r example: If a tractor is being Covington. p urchased by a farm er to be used on By offering leasing, th e bank is p rov 500 acres he owns and he will be the ing to its custom ers th at it is honing its only operator, the tracto r’s value at the financial-services skills, he says. L eas en d of five years will differ greatly from ing shows that th e bank is investing th at of a similar tractor purchased by a w hatever tim e and m oney it takes to business en tity th at uses it to farm stay cu rren t about th e latest develop 1,800 acres p e r year on a custom basis m ents th at can im pact th e financial and has th ree h ired m en operating it. situations of custom ers. Leasing also makes Mr. F eh ren b ach Mr. F ehren b ach also cites th e b e n q u estio n th e en v iro n m en t in w hich efits of th e tax-sheltering aspect of leas eq u ip m en t will be used. A tractor w ith ing. M ost b an k s u tiliz e m u n ic ip a l a loader used to load fertilizer will w ear bonds, econom ic-developm ent bonds out faster than one not so used, a factor or industrial-revenue bonds for a large th at affects its value at th e end of the part of th eir tax planning, he says. This lease. has b een extrem ely difficult for his bank because it’s a fairly new in stitu tion (founded in 1976), w hich makes it subject to g reater earnings fluctuations than m ore established banks. "W e have been able to approach agri-businesses and “Leasing helps us greatly because the tax benefits w ear off or decline af farmers regarding the benefits leasing provides in the te r 30 to 36 m o n th s,” he says. “Also, area of increased cash flow. The result has been several we frequently receive b e tte r rates of new customers." retu rn from leases than from m unici pals. By utilizing both vehicles, we don’t have all our eggs in one basket. ” The bank also benefits from profits from residual assum ptions on leased equipm ent. T hat’s providing th e bank H e says this increased aw areness vides sufficient funds to make th e ini is selective about th e types of leases it has h e lp e d refin e th e skills of th e tial lease paym ent and still inject funds e n te rs into and avoids th e ty p e of b a n k ’s co m m ercial-len d in g officers, back into th e ir o p eratio n , allow ing eq uipm en t th a t’s likely to d epreciate causing them to adopt m ore realistic them to borrow less and reduce in rapidly and doesn’t have a good sec a ttitu d e s ab o u t c o llateral valu e on te re st costs.” ondary m arket, Mr. F eh ren b ach says. eq u ip m en t taken for loans and leases. T h e $ 5 2 -m illio n -a s s e t b a n k has H e is pleased w ith the 3% to 4% Leasing has b rought new custom ers offered leasing for a little m ore than differential leases yield over norm al to th e bank because o th er banks in the th ree years. In early M arch, 21 leases comm ercial-loan rates. Because of the w ere on the books w ith a dollar value of area don’t offer th e service. bank’s tax stru ctu re, it’s b e tte r able to T he bank recently e n te re d into an $1.2 m illion. Leasing volum e is ex utilize investm ent-tax cred it and d e ag reem en t w ith a m edical facility that pected to increase as th e service b e preciation to receive a b e tte r value or p referred to lease its eq u ip m en t rath er com es b e tte r known. retu rn than w ould th e firm or farm er than buy it because it d id n ’t w ant to get T he bank uses the services of F irst leasing th e eq uipm ent. into a dispute w ith federal agencies L e a se & E q u ip m e n t C o n s u ltin g “A nother invaluable b enefit of leas re g a rd in g re im b u rs e m e n t form ulas C orp., Louisville, and expects to con ing is th e greater aw areness it creates and depreciation treatm en t on ow ned tinue its relationship for th e foresee in the m ind of th e le n d e r regarding all equ ip m en t. Leasing enabled th e facil able future. “W e’d have to increase our volum e aspects of a transaction, ” Mr. F e h re n ity to establish a tru e cost, th ereb y from 10 to 15 tim es before we could go bach says. W hen h e ’s involved w ith a avoiding any dispute. lease, he m u st b e aw are of m oney “W e have b een able to approach it alo n e,” Mr. F eh ren b ach says. — Jim costs, th e am ount and effect of the inagri-businesses and farm ers regarding Fabian, senior editor. th e b enefits leasing provides in th e vestm ent-tax cred it and who will be • M anufacturers National, D etroit, receiving it, th e am ount and effect of a re a of in c re a se d cash flo w ,” M r. has nam ed R obert C. Klann vice presidepreciation, tim ing of paym ent of the F eh ren b ach says. “The result has b een dent/national division. H e jo in ed the goods and any residual value assum p several new cu stom ers.” bank in 1976 • tion being set. S tatem ent stuffers and point-of-sale E 48 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for April, 198 5 Stem Named President Of Minneapolis Fed Cut the Cost of Bank Merger Analysis Gary H. Stern is th e new p resid en t of the M inneapolis F ed, succeeding G erald Corrigan, who left th e position to becom e p resid en t of th e N ew York F ed on January 1. Mr. Stern form erly was senior vice p resid en t/d irecto r of research at the M inneapolis F e d and jo in ed th e bank in January, 1982. H e also served as chief financial officer, senior officer for p u b lic -in fo rm a tio n a n d p e r s o n n e l functions and as chairm an of th e agri cultural-issues council. H e ’s a m em b er of the M innesota governor’s council of econom ic advis ers, has served on th e board of the M innesota Econom ics Association and was a m em b er of th e governor’s com mission on wood products. H e has served on a n u m b er of F ed S y stem s u b c o m m itte e s a n d task forces, including several dealing with pricing-policy issues, and as chairm an of the task force on paym ent-system risk. P rio r to jo in in g th e M inneapolis F ed , he was sen io r eco n o m ist and account m anager for A. Gary Shilling & Co., N ew York City. H e also held positions in th e research d ep artm en t at the New York Fed. A complete merger analysis, economic and legal, used to take hundreds of hours and cost thousands o f dollars. Now there's a software system so cost efficient you can afford a full analysis o f a dozen What Ifs. 2AB™ does in minutes the complex calculations and re-calculations that used to take days or weeks o f costly pro fessional time. Managing a suc cessful merger is a big job —but it's just become a lot less expensive. Call today fo r more information. 1-800-438-5014 ANALEX INCORPORATED 1901 Chapel Hill Road □ Durham , NC Program operates on IBM-PC or compatible machines. INTRODUCING . . . “ BANKING/M ARKETING & ADVERTISING ’8 4 REPORT” " B A N K I N G / M A R K E T I N G & A D V E R T I S I N G ' 8 4 R E P O R T (BANK/M AR) is the new annual m arketing report that provides you w ith an up close report on the banking industry. " B A N K / M A R " is your com plete m arketing reference report! It gives you a look at the leading bank institutions and the leading advertisers w ith in the banking industry. The report also provides you w ith some close-up profiles o f banks — in clu d in g th e ir finan cial data, m arketing data, corporate personnel and more! Subscribe N O W and receive your copy o f " B A N K / M A R " for $ 3 3 9 . 0 0 ! A nd, if yo u 're not satisfied, sim ply return your report w ith in ten (10) days for a refund. SUBSCRIBE T O D A Y ! ! ! (Enclosed is my check for $339.00 for the " B A N K /M A R " report). NAME _________________________________________________________ T ITLE___________________________ INSTITUTION/FIRM ______________________________________________________________________________ ADDRESS _______________________________________________________________________________________ CITY ________________________________________ STATE__________ _ _ ____ _ Z IP ______________________ Return to: GRAHAM COMMUNICATIONS, INC. Dept. BN K -11 P.O. Box 888255 Atlanta, Georgia 30338 MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 49 Independents Support Ag Relief, Loophole Closing at Convention provide fu rth er assurance th at smallth e door m ust be closed to such u n in F R E E Z E on fed eral spending, and m edium -sized agricultural banks urg en t supp o rt for th e agricul tentional loopholes “that u n d ercu t the can m eet tem porary liquidity re q u ire safety and soundness of the banking tural sector, a defence of th e Douglas m ents that m ight arise in accom m odat am en d m en t and closing of th e non in d u stry .” H e also called for an end to ing the needs of th eir farm borrow ers bank loophole w ere called for by b ank non-thrifts. over the forthcom ing planting and p ro “O ur concern is steadily intensify ers attending th e annual convention of duction cycle. th e In d e p e n d e n t Bankers Association in g ,” Mr. Volcker said, referring to the Mr. Volcker said the great bulk of of Am erica (IBAA) last m onth in San nonbank loophole. “W hat we n eed is a these banks are not faced w ith serious Antonio. new and fresh statem en t of congres liquidity problem s at this tim e, b u t the These topics w ere am ong 45 policy sional policies. W e re reluctant to see positions taken by delegates at th e con vention. F u rth e r views on the issues w ere p ro v id ed by W ashington n o t ables such as F ed C hairm an Paul VolcChairman Volcker again supported the IBAA's con ker; H ouse M ajority L eader Jam es C. W right (D .,Tex.); U. S. Senator Thad tinuing efforts to close the nonbank loophole by stating C ochran (R .,M iss.); R e p re se n ta tiv e that the door must be closed to such unintentional Charles R oem er (D .,L a.); R ep resen ta loopholes "that undercut the safety and soundness of the tive M orris K. Udall (D .,A riz.); and M ontana G overnor T ed Schw inden. banking industry." W hile recognizing th at th e business of banking is becom ing m ore com plex and com petitive, in d e p e n d e n t bank ers in attendance approached th e asso c ia tio n ’s n e w p o lic y a g e n d a w ith in te rs ta te b anking th ro u g h th e ex stop-gap m easure is th ere in case they optim ism . The IBAA had its largest ploitation of a loophole. ” need it. convention tu rn o u t in several years, R epresentative R oem er said he was C o n c e rn a b o u t th e a g ric u ltu ra l w ith about 2,300 registrants. The asso optim istic Congress will act to close situation occupied a significant portion ciation also has reached a record high th e loophole. “W e m ight approach the of the association’s agenda, w ith the in m e m b e rs , w ith 7 ,7 0 0 m e m b e r loophole closing w ith an eye to getting IBAA moving away from the Reagan banks in 49 states, a n et increase of it d o n e ,” he said. “I think we w ill.” A d m in is tra tio n ’s fre e -m a rk e t a g ri m ore than 700 banks in th e past year. Mr. Volcker’s appearance coincided cultural policies. A convention resolu Chairm an Volcker again su pported w ith an announcem ent by th e F ed of a tion w arned th at “unless corrective ac the IBAA’s continuing efforts to close tw o-part m odification of its seasonal tion is taken, this growing farm crisis the nonbank loophole by stating th at cred it program . The m easure w ould threatens to engulf not only tens of thousands of efficient farm producers, b u t also h u n d r e d s of a g ric u ltu ra l banks, the Farm C red it System , agri b u s in e s s a n d o th e r ‘m ain s t r e e t ’ businesses in hu n d red s of rural com m unities. . . . ” O utgoing IBAA P resid en t Jack King N e w IB A A officers said th e association will continue its pose in front of A la lobbying efforts for agricultural legisla mo in San Antonio: (from I.) Charles L. tion focusing on m edium -sized com V a n A rs d a le , treas.; m ercial farms and including federal T h o m a s H. O ls o n , price supports for basic com m odities. v .p .; A . J. K in g , T he price supports are n e ed ed to shore ch.; B. F. Backlund, u p sagging farm c o lla te ra l v alu es, p re s .; C h a rle s T. w hich continue to hin d er farm ers’ d e b t D o yle , p re s .-e le c t; a n d K e n n e th A . repaym ent abilities. Mr. King is chair G uenther, e.v.p. m an, F irst Security Bank, Kalispell, M ont. R epresentative W right said farm ers should be help ed by th e governm ent. F o r C ontinental Bank and C hrysler C orp., “W e threw th e lifeline o u t,” he A 50 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MID-CONTINENT BANKER for April, 198 5 Fact-Filled Manuals for The Bank Director Every Director Should Have a Copy of Each One B O A R D R E P O R T S . . . for The Bank Director $26.00 More effective board meetings begin w ith effective reports. This 200-page manual w ill help you determine the "quantity and q u a lity" of monthly reports needed by directors so they (and management) can make proper decisions. Included are ex amples of reports most needed by directors who want to create policies that lead to prudent management. Contains information on many topics such as effective re porting. . . reports to shareholders. . . report of examination. . . bank liquidity and capital analysis. Manual illustrates various formats board reports can take. . . from oral to detailed graphic presentation. Author: Dr. Lewis E. Davids. P LA N N IN G T H E B O A R D M E E T IN G $10.00 This 64-page booklet provides some workable agenda, suggestions for advance plan ning and also lists types of reports a board should receive monthly and periodically. It emphasizes the need for informing the board as quickly and concisely as possible. Contains a chapter outlining a "w orkable" board meeting, another on visual aids for the board meeting. Also contains a model for minutes of the board, plus sample forms to communicate status of bank to the board. An excellent "com panion" to B O A R D R E P O R T S . Author: Dr. Lewis E. Davids. E F F E C T I V E S H A R E H O L D E R M E E T IN G S $16.00 Before your next shareholder meeting, get ready for gadflies, activists and others who may be planning to disrupt your program. Here's h o w to anticipate damaging incidents, prepare tested countermeasures, turn potential disasters into a plus for your bank. Details include handling of unusual actions (such as replacing a CEO) — political contributions, laws and regulations directors may unw ittingly break, stock purchases, sales and disclosures, proxy provisions, etc. A checklist of meeting de tails. Promoting attendance. Stockholder proposals. Materials to mail. Agenda and procedural rules.This book is a tested"how -to"of Annual Meetings from inception to final reports, including personnel responsible for each step. 96 pages of "m ust” reading for chairmen, directors and officers involved. R E S P O N S IB IL IT IE S O F B A N K D IR E C T O R S $11.00 This book is "rig h t" for today's banking problems. Due to the economic influence banks have on their communities, the rapid growth of HCs and the ever-growing "consumer” movement, directors must know what is expected of them and their bank in terms of responsibilities to depositors, shareholders and the public. This manual examines recent court decisions, investment return, continuity of manage ment, long-range planning, effects of structural changes on competition, and more. Author: Raymond Van Houtte, president, Tompkins County Trust Co., Ithica, NY. The BANK BOARD Letter 408 Olive St., St. Louis, MO 63102 Q U A N T IT Y PR IC ES Board Reports Planning The Board Meeting 2 - 5 ....................... $23.00 ea. 6 -1 0 ..................... $22.00 ea. Over 10 ............. $21.00 ea. 2-5 ............................... $8.00 6-10 ............................. $7.50 Over 10 ....................... $7.00 Please send: ------- copies. Board Reports $_____________ ...... copies. Planning Meeting $______________ ____ copies, Effective ShareholderMeetings $__________ ■ _ copies. Responsibilities ofDirectors $_____________ . —_ Total Enclosed $_____________ | _ Name & T itle _________________________________________ Effective Sh arehold er Mtgs. R esponsibilities of Directors 2-5 ............................. $13.00 2-5 ............................... $9.00 6-10 ............................. $8.00 Over 10 ....................... $7.50 6-10 .............................. $ 10.00 Over 10 ..................... $ 9.00 MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Bank____________________________________________________ ' Street_______________________________________________ _ I’ City, State, Z ip ________________________________________ !■ (Please send check with order. In Missouri, add 4.6% tax.) *mm — — — .1 51 said. “I think th e sam e thing ought to apply to th e family farm .” Senator C ochran said C ongress is n o t g o in g to “ r u b b e r s ta m p ” th e Reagan A dm inistration’s farm legisla tion. H e also said he favors basic com m odity supports. “I believe in some d egree of basic com m odity supports and incom e p ro tec tio n ,” Mr. Cochran said. “I think we can provide this help w ithout an open-en d ed program provided by th e federal g o v ern m en t.” G overnor Schw inden p red icted dire results if th e Reagan A dm inistration’s farm program is ap p ro v ed by C o n gress. The Reagan plan “w ould p u t r u ral A m erica on a steep glide path to w ard d isaster.” H e added th e govern https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis m en t should be willing and able to help th e farm economy. “Financially, it is in th e b est in terest of A m erica to h e lp ,” Mr. Schw inden said. The IBAA took strong exceptions to th e policy of the Am erican Bankers A s s o c ia tio n , w h ic h “ in e x tric a b ly li n k e d ” c lo sin g o f th e n o n b a n k loophole w ith geographic expansion. T he IBAA condem ned th e ABA p ro posal th at w ould autom atically trigger n ationw ide banking for those states opting for regional banking. D eleg ates to th e convention also p re s s e d for a c tio n on th e fe d e ra l b u d g et deficit by calling for an im m ediate spending freeze followed by a reduction in the deficit. The associa How to get maximum investment portfolio performance with minimum management expense. Sure, you’d like to make your investment portfolio work harder, but you just don’t have the time. And creating more overhead is out of the question. Here’s how a growing list of banks like yours are getting maximum performance with minimum time and expense: Financial Institutions Investment Services. Financial Services is a registered investment advisory firm specializing in total investment services for community banks. Our strong team of professionals combined with our unique state-of-the-art communica tions system can satisfy all of your invest ment needs. So, you continue to make all the decisions, we do all the work, and your investment portfolio becomes as efficient as those of the larger institutions in your market. W ithout their overhead. For more information, write or call for our brochure. FINANCIAL INSTITUTIONS INVESTMENT SERVICES 6750 Antioch Road, Suite 200, Merriam, Kansas 66204 National: 1-800-243-4555 Kansas: 1-800-232-0207 tio n ’s resolution said th e deficit has led to high real in terest rates that have been disastrous for two of th e most productive sectors of th e U. S. econ o m y — small business and agriculture. M r. Volcker said th e federal b u d g et deficit m ust be brought u n d e r control to stabilize the U. S. econom y and assure long-term growth. R ep resen ta tive Udall chided the Reagan A dm inis tratio n ’s deficit-reduction techniques. The president, he said, simply w on’t allow most item s in the b u d g et to be cut. F or exam ple, m ilitary spending is off limits for potential spending cuts. “You’re left w ith about 25% of th e b u d g et th a t’s up for grabs to c u t,” Mr. Udall said. Mr. Volcker asked th e in d e p en d en t bankers to contact th eir legislators in W ashington, since C ongress is th e key to battling the deficit problem . T urning to the trade association’s in te rn a l business, th e IBAA’s bylaw s w ere revised at the convention to con form m ore to corporate organizational structure. Along w ith the revision, the n u m b er and size of the association’s co m m ittees w ere increased. A new m a rk e tin g c o m m itte e a n d b a n k services com m ittee w ere added and a m ajor new advertising cam paign for in d ep en d en t banks was unveiled. A rule also was changed to allow a state w ith five m em b er in d e p e n d e n t banks to elect a state director. New officers elected at th e conven tion are: p resid en t, B. F. Backlund, p r e s id e n t, B a rto n v ille (111.) B ank; p re s id e n t-e le c t, C h arles T. D oyle, C E O , G u lf N a tio n a l, T exas C ity , Texas; vice p re s id e n t, T hom as H. Olson, p resid en t, Lisco (Neb.) State; and treasurer, C harles L. VanArsdale, president, Bank of Castile, N ew York. Software Guarantee Offered A six -m o n th m o n e y -b a c k -sa t isfactio n g u a ra n te e has b e e n announced by Berman Technologies for its Cross-Sell Manager sales auto mation software/training products. The guarantee is believed to be the first of its kind in the financialsoftware industry. Cross-Sell Manager includes sales skills training for platform person nel, PC software for services selling and custom ized financial p ro jec tions, prospect records for followup and sales m easurem ent with man agement reporting. The Charlottesville, Va., firm also offers on-site assistance for institu tions im plementing the system. F o r in fo rm a tio n , call 800-4BERMAN. MID-CONTINENT BANKER for April, 19 8 5 FOR YOUR DIRECTORS — TO HELP THEM HELP YOU No. 51 BUDGETING, FORECASTING and PLANNING Every bank m ust know WHERE it is going and HOW to get there! Manage ment should “ map the course,” but directors should play a role in estab lishing goals. This m anual su p p lie s d ire c to rs w ith to ols they need to steer bank policy in the best direction. Chapters help d irectors establish “ m issio ns” statem ents, trace stages of a plan ning process. Details HOW to per form financial planning, how to plan for new services . . . how to “forecast.” CONSUMER Lending Policy Techniques used by su ccessfu l banks are included, along w ith sour ces of inform ation and a bibliography of references. Price — $31.00 2-5 copies $27.50 ea. 6-10 copies $26.00 ea. No. 101 DIRECTORS . . . Selection Qualifications, Evaluation and Retirement. This 42- page manual answers key questions concerning director selec tion, retention and retirement. Special section: the prospective director and how he should be expected to co n tri bute to the bank’s success. Includes a rating chart. Manual also contains a section posing questions that a prospective d irector should ask him self before he accepts a bank board post. Another section deals w ith the sen sitive nature of d irector retirem ent. Age can be a guide but not an over riding fa cto r in this decision. Manual for Directors, Management and A No. 220 — AN INVESTMENT GUIDE For the Bank Director This 192-page manual discusses the merits of directors paying closer attention to investment policies. Poorly thought-out-and-executed in vestment policies can place a bank’s capital in jeopardy, particularly during a period of rising interest rates. Should the board “ intrude” upon man agement prerogatives of the CEO in the administration of the investment port folio? No, says the author, However, a written policy, structured around the bank’s deposit and loan “ mix,” can be comforting during rising or falling interest rates. As an aid to management and the board, the author presents numerous in vestment policy statements presently in use by recognized well-run banks. Price — $10.00 Price — $26.00 2-5 copies $8.00 ea. 6-10 copies $7.50 ea. 2-5 copies $23.00 ea. 6-10 copies $20.00 ea. No. 210 MAXIMIZING CORRESPONDENT BANK RELATIONSHIPS D irectors aren’t “ born correspon dent experts, but you can help them catch up in a hurry, and it’s profitable for you to do so. This 100-page manual covers all facets of correspondent banking. Clearings and flo a t analysis . . . loan p articip a tion s . . . lines of c r e d it. . . foreign exchange, etc. This manual also helps directors APPRAISE correspondent services — to make certain you receive maximum service at a com petitive price. The manual also discusses several federal regulations, including the con strain ts imposed on “ insider” bank lending by FIRA. A MUST for every bank director. Price — $16.00 2-5 copies $13.00 ea. 6-10 copies $10.00 ea. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis No. 230 — CONTRACTS WITH BANK EXECUTIVES In many banks, salaries, bonuses and fringe benefits of top manage ment are covered by contracts. Since many contracts extend for periods of five years they call for careful con sideration. This 48-page manual discusses the role of the board’s Com pensation C om m ittee in determ ining the nature of such c o n tra c ts . The a u th o r suggests th at “ p erform ance” can and should be the key in rewarding the executive. Charts and w orksheets are included to help the com m ittee arrive at “ fa ir and equitable” pre requisites as m otivating factors for the bank executive. An aid to w riting a NEW contract or in REVIEWING existing contracts. Price — $12.00 2-5 copies $9.00 ea. 6-10 copies $8'.50 ea. No. 240 — CONSUMER LENDING POLICY Bank directors don’t get involved in lending, but they do help formulate con sumer-lending policy. Therefore, they must be familiar with the dramatic in creases in personal bankruptcies and new policies called for. This 208-page manual includes an array of consumer loan policies in force at various-sized banks; provides checklists of topics on installment-credit policy, pro cedures and policy components; model application forms; Federal Reserve reg ulations; cost analysis of consumer op erations, plus a bibliography of reference materials. Price $26.00 2-5 copies $22.00 ea. 6-10 copies $20.00 ea. Please Send These M anagem ent Aids: 51 _______ copies 101 _______ copies 2 1 0 _______ copies 2 2 0 _______ copies 2 3 0 _______ copies 2 4 0 _______ copies $ $ $ $ $ $ ____________ ____________ ____________ ____________ ____________ ____________ (In M issouri add 4.6% tax) Tax $ ___________ TOTAL $ The BANK BOARD LETTER 408 Olive Street St. Louis, MO 63102 Name __________________ Bank __________________ Address ________________ C ity ___________________ State Zip individual incentives, w ith team in M a n a g in g the R ew ard System S ellin g for D o lla rs (Continued fro m page 26) negotiated sales goals w ith his/h er su pervisor. To be m otivating, th ese goals can’t be th e sam e for everyone. Annual sales goals are not im m edi ate enough to be m otivating. Break them down into m anageable, bite-size goals th a t m o st e m p lo y e e s can achieve. Salespeople lose m otivation if th eir goals seem unreachable or if they seem too easy. Too often goals are set only on total deposits and loans, b oth of w hich are strongly affected by factors outside the salesperson’s control, such as changes in in terest rates, com petition or p ro m otional support. W e strongly recom m end th at you also set goals on issues that are sales specific, such as average nu m b er of p roducts sold p e r sale, re ferrals or portfolio growth. O ne bank w hich has had exceptional success w ith sales incentives pays its branch staff $1 for each pro d u ct sold, $2 for each pro d u ct sold if th e salesper son sells two or m ore products and $3 p e r product sold if th e salesperson also m eets his negotiated sales goals for th e m onth. A nother m yth in sales com pensation is th at m oney is th e only rew ard in the sales-com pensation program . M oney is th e driving force, b u t m oney th a t’s paid out also is a symbol of recognition and achievem ent. In m any well m anaged sales-com p e n sa tio n p ro g ram s, actu al dollars paid out are surprisingly small. The recognition asp ects of rew ard p ro grams account for the balance of the impact. Before you design your rew ard sys tem , first ask your sales force w hat it b e lie v e s are sig nificant rew ard s. I guarantee you’ll be surprised by the answers. H ere are a few things w e’ve learned th at m ake sales-com pensation systems m ore powerful: • Follow th e experience of salesdriv en com panies such as IBM and M ary Kay C osm etics and stru c tu re your program so everyone in th e sales force can earn som ething, b u t in sm all e r proportion com pared to th e b est perform ers. • See that your high perform ers are rew arded extra for stretching th e m selv es to ex cep tio n al p erfo rm an ce. T hey produce m ost of your results. • Your prim ary incentives m ust be centives as a supplem ent. • C o m p e n sa te sales s u p e rv iso rs w ith sales overrides to m otivate them to do w hat you w ant them to do — coach th eir sales force to b e tte r re sults. • M ake y o u r p a y o u ts fr e q u e n t enough to be m otivating, m onthly if possible. • Base your system on dollars, not points. • Use spot rew ards to rew ard o u t standing sales results th at fall outside th e basic s tru c tu re of th e program (e.g ., a m illion-dollar deposit). • If you can’t find th e dollars to fund a sales-com pensation program , create an incentive pool from a share of p ro jected salary increases and reallocate those dollars on the basis of perform ance. Selling for dollars is h ere to stay. Incentive com pensation for salespeo ple w orks. But not every financial in stitution will have a good re tu rn on its investm ent. T he organizations th at will convert selling for dollars into increases in n et incom e are th e ones th at will drive th e ir sales-com pensation system w ith corporate objectives and create an in teg rated sales clim ate th at supports th e ir sales force. As you p u t your sales system in place, I wish you th e feel of success! • National City C orp., C leveland, has appointed W illis L. Else and Patrick D. W alsh senior vice presidents. Mr. Else is responsible for operations at National C ity Bank, C leveland, and B ancO hio N ational, C olum bus, and Mr. W alsh has sim ilar responsibility for data processing in both cities. Freedom C lassic Sponsored EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) Let our team of experienced specialists solve the ESOP puzzle for you. For a descriptive brochure and other information, call (901) 682-0611 or write: • BANKING CONSULTANTS OF AMERICA 6584 Poplar Avenue • Memphis, TN 38138-9990 Other Offices: San Francisco, Dallas, Washington, D.C. 54 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis F irst of A m erica Bank C o rp ., Kalamazoo, is sponsoring the “First of A m erica F reed o m C lassic,” a national sporting event that com bines bicycle touring and critérium bicycle racing. C ritérium bicycle races will be held in Kalamazoo on June 30 and D etroit on July 4, sanctioned by the U. S. C y clin g F e d e ra tio n . T he purse totals more than $22,000 and teams and racers from throughout the nation are expected to partici pate. A statewide bike tour will begin June 17 in Sault Ste. Marie and end July 4 in Detroit. Objective of the event is to pro mote the HC and Michigan’s tourist o p p o r tu n itie s , says W illiam F. Smith, First of America vice president/marketing director. MID-CONTINENT BANKER for April, 19 8 5 A tte n tio n B a n k C E O s: How Does Your Bank “Introduce” the New D irector To His New Job? H E N E W L Y E L E C T E D b a n k d ir e c to r p ro b a b ly s e e m s o v e rw h e lm e d w ith th e re s p o n s ib ilitie s o f h is n e w jo b a n d th e c o m p le x itie s o f th e b a n k in g sy ste m . So, y o u ’ll w a n t to a c q u a in t h im w ith h is “n e w c h a ir ” as q u ic k ly a n d as “g e n tly ” as p o ssib le . Y o u r b a n k u n d o u b te d ly h as a p o rtfo lio o f m a te ria l to h a n d to th e n e w d ire c to r. O u r in s tru c tio n a l fo ld e r, e n title d “B riefin g the N ew B a n k D ire c to r ,” can b e a u se fu l a d d itio n to y o u r in tr o d u c to ry m a te ria l. I t is w r itte n b y D r. L ew is E . D a v id s, e d ito r o f T h e B A N K B O A R D L e tte r . “B riefin g the N ew B a n k D irec to r p ro v id e s th e re c ip ie n t w ith an o v e rv ie w o f th e d ir e c to r ’s jo b a n d re s p o n s ib ilitie s a n d also offers su g g e s tio n s o n “h o m e w o rk ” a n d “ r e a d in g ” a s sig n m e n ts th a t w ill b r in g h im q u ic k ly u p - to -d a te in his jo b . T h is 8 -p a g e fo ld e r c o n c lu d e s w ith w h a t th e a u th o r has te r m e d th e “ 20 C o m m a n d m e n ts for B an k D ir e c to r s ” s ta rtin g w ith “T h o u sh a lt n o t a tte m p t to u s u rp p re ro g a tiv e s o f m a n a g e m e n t,” a n d e n d in g w ith “T h o u s h a lt s u b m it th y re s ig n a tio n g ra c e fu lly a n d w ith d ig n ity w h e n n o lo n g e r m a k in g a p o sitiv e c o n trib u tio n to th e b a n k .” F o r a F R E E c o p y o f th is fo ld e r, fill in th e c o u p o n b e lo w . Y ou’ll re c e iv e th is p lu s o th e r in fo rm a tio n c o n c e rn in g th e b a n k d ir e c to r ’s jo b th a t can b e u s e fu l to h im a n d , o f c o u rs e , to th e b an k . T r---------------------------------- 1 I T h e BANK BO A RD L e tte r I 408 Olive St., St. Louis, MO 63102 | | Please send m e a F R E E copy of “Briefing the New Bank D irector along w ith o th er inform ation about The BANK BOARD L etter. | N a m e _________________________T i tle ________________________ ■ Bank _______________________________________________________ j Address ____________________________________________________ (;■ I C i t y __________________ S ta te ______________ Z i p ______________ MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis | 55 Reciprocal Interstate Banking Supported by Indiana Bankers R e c ip ro c a l in te rs ta te b a n k in g is overw helm ingly su pported by Indiana b a n k e rs, acco rd in g to a su rv ey by Coopers & L ybrand and th e Chicago Corp. S e v e n ty -th re e p e rc e n t o f survey participants support reciprocal bank ing w ith n eighboring states, one provi sion of banking legislation being con sid ere d by th e In d ia n a leg islatu re. Forty-four p ercen t of Indiana banks participated in th e survey; 95% of re spondents w ere C E O s. Som e re stric tio n s for out-of-state banks enterin g th e Indiana m arket are favored by half of those polled. R e stricting deposit totals and lim iting the n u m b e r of banks th a t could be ac q u ire d w e re p rovisions m ost often cited by respondents. H alf of those responding indicated they expect to acquire or be acquired if legislation passes allowing statew ide m ultibank H C s and reciprocal in te r state banking. The typical C E O expects to sell con trol of his organization for 1.37 tim es book, b u t expects to buy for 1.13 tim es book, a price range th a t’s in line w ith o ther m id-w estern states. FACED WITH DISPOSING OF FORECLOSED BUSINESS COLLATERAL? Bankers Liquidation Report will connect you with buying prospects for all types of business equipment, inventories, even complete businesses. A low cost listing in The Report will be seen by thousands of businessmen and entreprenuers each month. Effective recovery means the best possible price for the collateral with the least time and effort by bank personnel. Bankers Liquidation Report will help you meet this end. Our optional reader inquiry service will provide names and phone numbers of prospective buyers, while shielding your bank from inconvenience and unnecessary publicity. For further information about our service, or to order a listing, contact: BANKERS LIQUIDATION REPORT 6440 Flying Cloud Drive Eden Prairie, Minnesota 55344 (612) 829-0213 56 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis M ore than 25% of the respondents in d ic a te d th ey have taken steps to align th eir institutions w ith o th er in state banks in anticipation of passage of e n a b lin g leg islatio n . S lightly m ore than 25% have taken defensive m ea sures, indicating they expect acquisi tion activity to increase and w ant to retain control of th e ir negotiating posi tions, w h eth er they ultim ately becom e buyers or sellers. Six p ercen t of responding bankers in d ic a te d th a t o u t-o f-s ta te b a n k s already have approached them . • Index to Advertisers AgriCareers, Inc...................................................... 57 American Bank Directory ..................................... 45 AmSouth Bank, N.A., Birmingham, Ala...............32-I Analex .................................................................... 49 Austin & Associates, Inc., Douglas .................... 31 Bank-Aide, Inc........................................................ 34 Bank Board Letter ....................... 34F, 51, 53, 55 Bank of Prattville, Ala......................................... 32H Bankers Liquidation Report ................................. 56 Banking Consultants of America ......................... 54 Barefoot & Assoc., Inc., J. S................................. 30 Boatmen's National Bank, St. Louis ................. 60 Bunce Corp........................................................... 34N Centerre Bank, St. L o u is ................................... 34M Cheshire Inn & Lodge ........................................... 37 Commerce Bank, Kansas City ............................. 25 Commercial National Bank, Kansas City, Kan. 34E Dunhill Personnel Agency ................................... 57 32G Executive Planning Group, Inc........................... D avid s (Continued fro m page 58) th e steps these federal agencies should take. T h ere is a chart in one of th e m ajor fed eral reg u lato ry agencies h e a d e d “D I” (days to insolvency). W hile the calculation isn’t perfect, it’s a good forecaster of financial institutions that w ill be taken over w ithin a certain p eriod of tim e. T h ere’s no reason w hy reg u lato rs co u ld n ’t advertise in th e business m edia for candidates to help w o rk o u t u n n a m e d situ a tio n s th a t a re n ’t m ergeable and that insurance corporations expect to nationalize. I ’m not sure that I w ould like th e agencies them selves to pick th e executives, b e c au se of th e ir p rio r p o litic iz a tio n . Selection probably could b e handled by a nonpartisan blue-ribbon panel of qualified individuals. It would be in th e public in terest to m aintain a data bank of financial executives who could be tap p ed for situations req uiring im m ediate infusions of sound m anagerial talent. T he sad situation is th at often both th e banking and thrift industries ten d to lose sight of the g reatest good for the greatest nu m b er by bickering am ong them selves rath er than supporting a m ove to get federal regulators out of th e com m ercial end of the finance in dustry. A bank board official has said: “T he g overnm ent has too large an invest m en t th e re (in Talman) to give up total c o n tro l at this p o in t.” T h e official d id n ’t say, how ever, th at in a dem ocra cy th e re historically has b een a strong aversion to governm ent control of not only financial institutions b u t o th e r types of business. Ask yourself: If Talm an has to go to th e F S L IC o r th e F H L R B fo r em ergency help, will it receive exactly th e same treatm en t as a financial in stitution that isn’t nationalized? • • Federal Home Loan Mortgage Corp.............. 30-30A Financial Institutions Investments ..................... 52 Financial Placements .......................................... 57 Financial Products, Inc.......................................... 34 First Interstate Bancorp................................... 12-13 First Lease & Equipment Consulting ................... 3 First National Bank, Louisville ........................... 23 First National Bank, Tulsa ..................................... 2 First National Bank, Wichita ............................... 29 First Wisconsin National Bank, Milwaukee .. 32-33 Fourth National Bank, Wichita ......................... 34-1 Golembe Associates, Inc.......................................... 6 Graham Communications, Inc........... ................... 49 Hagan & Associates, Tom ................................... 57 Hancock Bank, Gulfport, Miss............................ 32K Hattier, Sanford & Reynolr ............................... 32M Hill/Crawford & Lanford, Inc................................ 34J Horizons 60 .......................................................... 43 Hutchinson (Kan.) National Bank ................... 34A Industrial Life Insurance Co................................ 32F Kansas State Bank, Wichita ............................. 34D Kingsley D epository............................................... 47 Liberty National Bank, Oklahoma City .................. 2 McPherson (Kan.) Bank ..................................... 34F MPA Systems ...................................................... 32F Mercantile Bancorp., St. L o u is ......................... 34K Mid-Continent B anke r........................................... 27 Mohr Development, Inc............................................ 5 Money Maker ...................................................... 32E Mosler, An American Standard Co........................ 11 North Central Life Insurance Co.............................. 2 Parker North American Corp.................................. 59 Security State Bank, Great Bend, Kan................. 34B Southwest National Bank, W ic h ita ................... 34C Stifel, Nicolaus & Co., Inc.................................. 34G Swords Associates, Inc........................................... 16 Terryberry Co........................................................... 46 Thorn/Alvis/Welch, Inc.......................................... 32J Union National Bank, Little R o c k ....................... United Missouri Bank, Kansas City ................... United Oklahoma Bank, Oklahoma City ............ United States Banker ........................................... 19 21 33 39 Wheelways ............................................................ 14 Whitney National Bank, New Orleans .............. 32A Financial Buyers Guide Index Actron, Inc........................................................ BG/12 American United Life Insurance Co.............. BG/23 Atlantic Envelope Co.......................................... BG/9 Bank Board Letter . . . BG/3, BG/11, BG/19, BG/21 Beemak Plastics ............................................. BG/16 Federal Sign ...................................................... BG/2 Gold Medal Products Co.................................. BG/18 Innerline .......................................................... BG/24 MID-CONTINENT BANKER for April, 1 9 8 5 Effective Selling (Continued fro m page 22) As P e te r D ru ck er often says, “W e in m an ag e m e n t, ch arg ed w ith th e r e sponsibility for directing our in stitu tions, m ust continue to ask ourselves two questions: • Are we doing things right? • Are we doing th e right things?” S o lu tio n s d e r iv e d fro m th e s e answ ers often are com plex, som etim es Ag Banking Personnel (Nationwide) Let us help you. Call the ag lending personnel specialists without cost or obligation. Confidential. Employers pay us to hire the best. even innovative, b u t always th e result of a cooperative effort to m eet a spe cific corporate need. The w hole th ru st of our approach is to concentrate on th e future, not the past; on stren g th s, not w eaknesses; a n d on p e o p le , n o t sy ste m s. W e em phasize objectives, strategies and c o n trib u tio n s. T h e rig h t q u e stio n s often are sim ple to ask, and yet the solutions difficult to face. W e w ork on th e assum ption that in m ost cases the answ ers are already th ere. Only the execution needs to be refined. • • BANK POSITIONS Commi Loan — 3 bank chain AgriLoan — 2nd ofcr $30MM bank Jr. Insti Loan — suburban bank President — small suburban bank Commi Loan — $100MM suburban Commi Loan — VP $200MM suburban Sr. AgriLoan — $35MM rural bank Loan Review/Compliance — holding co. $40K $35K $18K $45K $30K $40K $34K $0pen Many additional opportunities available in midwestern states. All inquiries confidential Jean 515/263-9598 if no answer, 712/779-3567 Massena, Iowa 50853 Linda 515/394-5827 New Hampton, IA 50659 aqn careers, inc. _J • F&M M arquette N ational, M in neapolis, has a p p o in te d P atrick L. Stotesbery to head its newly created trust-services group. H e continues as se n io r vice p re s id e n t in ch arg e of strategic planning. A lbert J. Colianni Jr. has b een nam ed vice p resid en t and head of th e new ly created financial group. H e m anages the controllership division of the bank and of banks affili ated w ith th e p aren t, Bank Shares, Inc. Mr. Colianni form erly was w ith U nited Consulting C orp., M inneapo lis. AG BANKING PERSONNEL SPECIALISTS TOM HAGAN & ASSOCIATES of KANSAS CITY PO, Box 12346 2024 Swift North Kansas City. MO 64116 816/474-6874 SERVING THE BANKING INDUSTRY SINCE 1970 . Banking Career Specialists You can benefit from these rela tionships — plus the m any years of bank-related experience of these two men — by using our specialized employment service. Financial Placem ents is built on a history of strong relationships b e tw e e n b a n k e r s a n d B ank N ew s' publications. Dunhill Personnel System. The System that puts bankers in their places. The right people in the right places keep the world of finance and banking on a steady course. The Dunhill Personnel System places the right professionals in the right banking positions, nationwide. Our National System will recruit qualified professionals to fill the position, and we can also coordinate the real estate and physical moving needs of your new employee. Call the Dunhill Personnel Agency of Fayetteville and let the System work for you. Mike Wall Manager Larry Vohs Consultant Call us! W e can h elp find the rig h t p e rso n or the rig h t position. F IN A N C IA L PLACEM ENTS a division of BANK NEWS Dunhill Personnel Agency of Fayetteville, Inc. P.O. Box 1570 Rogers, Arkansas 72757 (501) 636-8578 MID-CONTINENT BANKER for April, 1985 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 912 Baltimore K ansas City, M O 64105 8 1 6 -4 2 1 -7 9 4 1 57 THE BANKING SCENE By Dr. LEWIS E. DAVIDS Professor of Finance Southern Illinois University, Carbondale Selecting Management of Nationalized' Institutions H E F E D E R A L Savings & Loan party in pow er at th e tim e of th e selec Insurance C orp. (FSLIC) recently tion. announced th at it was replacing top F u rth erm o re, although we can cre m an ag em en t at th e larg est g o v ern ate the devices to get to the moon and have done so w ithin a decade, m any m e n t-o p e ra te d th rift, th e tro u b le d Talm an H om e F ed eral Savings & Loan bankruptcies are lasting an in o rdinate ly long tim e. M any suspect this is b e Association of Chicago. I t’s not news to learn th at m any tro u cause tru stees are quite com fortable bled banks and S&Ls are getting new w ith th e ir rem u n e ra tio n and fringe to p m a n a g e m e n ts. H o w e v e r, it is b e n e fits, although often th ey have n e w sw o rth y w h e n th e F S L IC a n nounces rem oval of an individual it placed as chairm an of th e institution ju st two years before. T he selection apparently was not a good one. R ather than a clean separation, how ever, the The track record of judicial form er chairm an has b een appointed appointments of trustees in special a d v ise r to th e asso ciatio n ’s board and new top m anagem ent. bankruptcies tends to show A spokesm an for th e F ed eral H om e that individuals selected by Loan Bank Board (FH LBB) said the board’s feeling was not one of dissatis regulators to replace existing faction w ith the association’s chairm an m anagements have certain b u t that “nothing m uch was h a p p e n characteristics: Either they are ing” u n d er his leadership th at w ould restore Talm an to a m ore stable finan attorneys or are active in the cial footing. political party in power at the The question can be raised that, if time of the selection. nothing was happening, w hy should th e in d iv id u al b e re ta in e d in w hat obviously is a high-paying position at th e S&L? T alm an ’s new ch airm an form erly was chairm an of th e Illinois C om m erce very little background in the industry Comm ission and special counsel to the of w hich th eir tro ubled firm is a part. governor of Illinois. T he new presiThe “nationalization” of C ontinental den t/C E O m ost recen tly was p re si d en t of th e F ed eral R eserve Bank of Bank, Chicago, probably is not the last St. Louis. So far as I have b een able to tim e an in su red financial institution determ in e, th e re has b een no public will be taken over by eith er th e FSL IC ity about how th e FH L B B and the or th e F D IC . FSL IC arrived at th e ir selection deci N ew m anagerial appointees may be sions and how m any candidates w ere resp ected attorneys and form er high considered for th e two positions. governm ent officials, b u t the way they should be appointed should be m ore in I t’s natural and norm al for situations th e public domain. such as this to b eco m e politicized. To illu strate: I t ’s th e practice in F o r e x a m p le , th e tra c k re c o rd o f judicial ap p o in tm en ts of tru ste e s in academ ia that if a position is not to be bankruptcies tends to show th at in d i filled in tern ally , eq u al o p p o rtu n ity viduals selected by regulators to re will be p resen ted for candidates for the place existing m anagem ents have c e r position. So, we advertise for candi dates in th e business press. tain characteristics: E ith e r th ey are P art of this tre n d in academ ia was attorneys or are active in th e political T 58 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis initiated by the federal governm ent th ro u g h ru les p ro m u lg a te d by th e Office of E qual O pportunity. I have no know ledge of th e n u m b er o f in d iv id u a ls c o n s id e r e d b y th e F SL IC as candidates for top m anage m en t at Talm an, b u t I am convinced th at th ere are hu n d red s of financial ex ecutives w ith th e capability to handle th at position. It doesn’t appear th at th e FSL IC conducted th e type of objective and d isinterested search th at the govern m en t itself tries to force on corpora tions and academ ic institutions. The cynical read er will say, “T h at’s politics. ” Politics influence m any deci sions, b u t that doesn’t m ean th e re isn’t a less political way of dealing w ith a growing problem . R ecent court decisions support th e right of federal insuring agencies to issu e c e a s e -a n d -d e s is t o rd e rs an d orders of rem oval of officers and direc tors from financial institutions. I agree w ith this right w here th ere is evidence of unsound banking practices on the p art of these individuals. But I am con tinually am azed to learn of th e n u m b er of bank officers who have b een found guilty and served sentences, yet have w ound up in influential positions in financial institutions. O ne glaring ex am ple: individuals who w ere indicted for unsound banking practices relevant to the B utcher financial em pire col lapse in T en n essee w ho previously w ere found guilty of sim ilar actions in o th er institutions. O n th e positive side, executives of both th e F D IC and F SL IC have in d i cated th eir desire to get out of th e con flict-of-interest position of being both re g u la to r an d d e te rm in a to r of top m anagem ent of nationalized in stitu tions. If I w ere in th eir place, I w ould feel the same way. Isn ’t th ere a b e tte r way of handling th e situation of politi cal in flu e n c e in d e te rm in in g w ho serves on th e boards of broken finan cial institutions? I think th ere is and I propose in broad brush strokes some of (Continued on page 56) MID-CONTINENT BANKER for April, 1 9 8 5 LET’S FACE IT... A PNA EQUIPMENT LEASE WILL KEEP YOUR PRESIDENTS WORKING HARDER FOR YOU. Lincoln, H am ilton, Jack so n an d th e re s t of our fo u n d in g fa th e rs a re g re a t p eo p le to h av e on your team . But, only if th e y ’re w o rking th e ir tails off for you. If th e s e p re s id e n tial a s s e ts a re tie d u p in b an k in g e q u ip m e n t p u r c h a se s, th e y ’ve lo st th e ir clout. A s a financial in stitu tio n , your in v e n to ry is capital. W hy d e p le te th a t in v en to ry by in v e s tin g in d e p re c ia tin g a s s e ts like b an k in g eq u ip m e n t? You’re ju s t co n v ertin g dol la rs — e a rn in g a s s e ts on your b a lan ce s h e e t — an d re p la c ing th e m w ith n o n -earn in g a s s e ts . As a resu lt, y o u ’re faced w ith a n im p o rta n t d eci sion. To p u rc h a s e or le a se your e q u ip m e n t re q u ire m en ts. W e’d like to h elp you m ake th e rig h t decision, an d w e h av e th e rig h t c re d e n tia ls to do ju s t th a t. O ur re p u ta tio n for efficiency, th e b e s t ra te s, e a s e of d o cu m en tatio n , an d resp o n siv e service is w ell k n o w n th ro u g h o u t th e industry. Since w e le a se exclu sively to b a n k s a n d th rifts, our staff h a s a th o ro u g h u n d e r s ta n d ing of financial in stitu tio n s an d th e ir e q u ip m e n t re q u ire m e n ts. We can b e a b ig help to you in convincing m a n a g e m e n t of th e a d v a n ta g e s of le asin g over p u rc h a se . A nd th a t could tra n s la te into an in ta c t p ro g ra m ra th e r th a n a pilot p ro g ram . W hy d o n ’t you call one of our sev en PNA R egional Of fices n atio n w id e? W e’ll sh o w you h o w to r e n t our cap ital a n d k e e p yours w o rk in g harder. Ü PN A 9 We m ake leasing m ake sense.™ Parker North American Corporation 840 N e w p o r t C e n te r D rive, N e w p o rt B each , CA 92660 • (714) 760-0131 A tla n ta (404) 9 5 2 -6469 • B o sto n (617) 4 2 3-9066 • D allas (214) 239-7658 • H a rtfo rd (203) 275-6520 N o r th e r n N e w E n g la n d (603) 880-7220 • S an F ra n c is c o (415) 938-6440 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - ; ^ BOATMEN'S... 157 YEARS • OF TR A D ITIO N https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis üy i ¡l^ll ijim Im m ljp
@FedFRASER